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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
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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:
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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
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Magma Power Company, a Nevada corporation
("Magma" or the "Company"), and the address of its principal executive offices
is 4365 Executive Drive, Suite 900, San Diego, California 92121. The title of
the class of equity securities to which this statement relates is the Common
Stock, par value $0.10 per share, of Magma (the "Shares"), including the
associated rights (the "Rights") to purchase shares of Series A Preferred
Stock, par value $0.10 per share, of Magma to be issued pursuant to the Rights
Agreement, dated October 6, 1994, between Magma and Chemical Trust Company of
California, as Rights Agent (the "Rights Agreement"). Unless the context
otherwise requires, all references herein to the Shares shall include the
associated Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the tender offer disclosed in a Tender Offer
Statement on Schedule 14D-1 dated October 6, 1994, as amended through the date
hereof (the "Schedule 14D-1"), 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" or "Parent"),
to purchase 12,400,000 Shares at a price of $35 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 (the "Offer to Purchase"), as amended through
the date hereof, and the related Letter of Transmittal and any supplement
thereto (which together constitute the "Offer").
According to the Schedule 14D-1, the address of the principal executive
offices of California Energy is 10831 Old Mill Road, Omaha, Nebraska 68194.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of Magma, which is the person filing this statement,
are set forth in Item 1 above.
(b) Certain contracts, agreements, arrangements or understandings between
Magma and certain of its directors, executive officers and affiliates are
described the sections entitled "Compensation of Directors", "Executive
Compensation", "Certain Relationships and Related Transactions" and "Agenda
Item 2: Approval of the 1994 Equity Participation Plan" in Magma's Proxy
Statement dated May 11, 1994 for Magma's 1994 Annual Meeting of Stockholders
(the "1994 Annual Meeting Proxy Statement"). These sections of the 1994 Annual
Meeting Proxy Statement are filed as Exhibit 1 hereto and are incorporated
herein by reference.
SEVERANCE AGREEMENTS WITH OFFICERS OF THE COMPANY
In November 1993 the Compensation Committee of the Board of Directors of
Magma (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 into "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.
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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").
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.
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
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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 filed as Exhibits 2 and 3 respectively, and are
incorporated herein by reference.
INDEMNIFICATION AGREEMENTS
At its September 20 meeting, the Magma Board authorized the Company to enter
into indemnity agreements with each member of the Magma Board. At that meeting
the form of indemnification agreement previously prepared by the Company's
counsel was presented to each member of the Magma Board, and each member of the
Magma Board executed an indemnification agreement.
The indemnification agreements supplement the protections afforded to the
Company's directors under the Company's articles and bylaws primarily by
providing for mandatory advancement of expenses in certain cases. In general,
the indemnification agreements provide for the Company to indemnify the
directors against expenses, judgments, fines, penalties, ERISA excise taxes and
amounts paid in settlement arising in connection with third party proceedings
and proceedings by or in the right of the Company against any director relating
to his services to the Company if such director acted in good faith and in a
manner such director reasonably believed to be in or not opposed to the best
interests of the Company, and, with respect to criminal proceedings, had no
reasonable cause to believe his behavior was unlawful.
The foregoing description of the indemnification agreements is qualified in
its entirety by reference to the form of agreement, a copy of which is filed as
Exhibit 4 and is incorporated herein by reference.
Except as set forth above, to the best knowledge of the Company, there are no
material contracts, agreements, arrangements or understandings or any actual or
potential conflicts of interest, between the Company, its executive officers,
directors or affiliates, on the one hand, and California Energy, or its
executive officers, directors or affiliates, on the other hand.
BACKGROUND
In May 1991, representatives of California Energy and the Company entered
into discussions to explore the possibility of combining the companies, and the
two companies exchanged certain information concerning their respective
businesses for the purpose of considering a business combination or other
acquisition transaction. The information provided to California Energy included
confidential information about Magma supplied under a confidentiality
agreement. At the end of May 1991, the discussions were terminated as a result
of the inability of the parties to reach agreement concerning price and certain
other terms.
In the summer of 1991, a then member of the Magma Board conducted
unauthorized discussions with representatives of California Energy in an
attempt to revive the failed transaction of the spring. These discussions were
immediately terminated when the Magma Board became aware of them; the
responsible Magma director promptly resigned. California Energy then brought
suit against Magma seeking reimbursement of expenses on the theory that Magma
had not acted in good faith. This suit was dismissed with prejudice in late
1992 without any payments by Magma.
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In August 1993, Mr. David Sokol, who had been appointed President and Chief
Executive Officer of California Energy in April of 1993, contacted Mr.
Pankratz, then Chairman and Chief Executive Officer of the Company, to request
a meeting. At a meeting in San Diego in September 1993, Mr. Sokol and Mr.
Steven A. McArthur, Senior Vice President, General Counsel and Secretary of
California Energy, and Messrs. Pankratz and Peele and Mr. Ralph W. Boeker,
President of the Company, discussed principally the possibility of joint
venturing or other cooperation in respect of certain pending power development
projects in the Philippines. Mr. Sokol also shared with Mr. Boeker and Mr.
Pankratz his views as to the possible strategic and cost benefits that could
follow from consolidation in the independent power industry, and, in
particular, a combination of the Company and California Energy. Mr. Boeker and
Mr. Pankratz expressed the view that they did not agree with Mr. Sokol's
analysis and questioned its underlying assumptions.
In addition, at the August meeting California Energy suggested to the Company
that it consider utilizing Peter Kiewit Sons', Inc. ("Kiewit") as the Company's
general contractor in respect of the Company's pending projects in the
Philippines. The Company's management agreed to meet with Kiewit regarding its
possible role as a contractor in the Philippines. The meeting between the
Company and Kiewit was held in the fall of 1993. No agreements or
understandings were reached with Kiewit, and no further discussions were held
in respect of using Kiewit, as the Company's general contractor.
In January 1994, Mr. Sokol contacted Mr. Pankratz again by telephone to try
to arrange another meeting. At Mr. Pankratz's suggestion, Mr. Sokol was asked
to contact Mr. Boeker, the President and recently appointed Chief Executive
Officer of the Company, to discuss a meeting. In an April 1994 telephone
conversation between Mr. Sokol and Mr. Boeker, the possibility of cooperation
with respect to international joint ventures between the companies and other
possible synergies between the companies were generally discussed. No
agreements or understandings were reached, and Mr. Boeker again questioned the
validity of Mr. Sokol's synergy assumptions.
In June 1994, Mr. Sokol proposed a meeting with Messrs. Pankratz and Boeker
to discuss a possible combination of Magma and California Energy. Although
Magma originally agreed to meet on August 11, 1994 with Mr. Sokol to hear his
views, Magma cancelled this meeting as a result of reports that had been
received by Mr. Boeker which indicated that certain California Energy
representatives were making various misrepresentations about Magma to its
overseas partners regarding Magma's Malitbog project in the Philippines.
On September 15, 1994, Mr. Sokol contacted a member of the Magma Board in an
effort to determine whether the Company had an interest in discussing a
negotiated combination of the companies in the near future. The director stated
that he would ask the Company's management to respond directly to Mr. Sokol's
inquiry. Later that same day, Messrs. Pankratz and Boeker called Mr. Sokol and
advised him that they had no interest in meeting with Mr. Sokol until mid-
November after the closing of the Malitbog financing.
On September 19, 1994, Mr. Sokol delivered to Messrs. Pankratz and Boeker and
released publicly a letter in which California Energy made a proposal (the
"Initial Proposal") to acquire Magma Power for $25 a Share in cash and $10 a
Share in California Energy common stock and threatened to proceed in a hostile
manner unless Magma promptly responded to the Initial Proposal.
On September 19 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.
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.
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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.
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
representatives 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 caused the Purchaser to commence the
Offer. In the Offer to Purchase, the Purchaser states that California Energy is
seeking to negotiate a definitive acquisition agreement pursuant to which the
Purchaser would, as soon as practicable following consummation of the Offer,
consummate a merger or other business combination (the "Back-End Merger") with
the Company. In the Offer to Purchase, the Purchaser states that in the Back-
End Merger each remaining Share would be converted into the right to receive
cash and shares of California Energy common stock. The Offer to Purchase
implies, but does not explicitly state, that the amount of cash available in
the Back-End Merger would be approximately $15.00 per share. The Offer and the
Back-End Merger are collectively referred to herein as the "CE Proposal".
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(A) THE MAGMA BOARD HAS UNANIMOUSLY DETERMINED THAT THE OFFER IS NOT IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY. THE MAGMA BOARD UNANIMOUSLY
RECOMMENDS THAT ALL HOLDERS OF SHARES REJECT THE OFFER AND NOT TENDER THEIR
SHARES PURSUANT TO THE OFFER.
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A copy of a letter to stockholders communicating the Magma Board's
recommendation and a form of press release announcing such recommendation are
filed as Exhibits 5 and 6 hereto, respectively, and are incorporated herein by
reference.
(b) 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.
At the October 10, 1994 board meeting the Magma Board, after careful
consideration, unanimously voted to reject the Offer. Accordingly, the Magma
Board unanimously recommends that the Company'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 Back-End 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 opinion of Goldman Sachs that the consideration provided for in
the Offer is inadequate.
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(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 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).
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Goldman Sachs to render financial advisory services
to the Company with respect to the Offer and such other matters as may be
agreed upon by the Company and Goldman Sachs. 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 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.
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The Company has retained Georgeson & Co., Inc. ("Georgeson") to assist the
Company in connection with the Offer and related matters. Such firm will
receive customary compensation for its services and reimbursement of out-of-
pocket expenses in connection therewith. The Company has agreed to indemnify
Georgeson against certain liabilities in connection with their engagement,
including certain liabilities under the federal securities law.
The Company has retained Kekst & Co. ("Kekst") as a public relations advisor
in connection with the Offer and the merger. Such firm will receive customary
compensation for its services and reimbursement of out-of-pocket costs in
connection therewith. The Company has agreed to indemnify Kekst against certain
liabilities in connection with their engagement, including certain liabilities
under the federal securities law.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations
or recommendations to stockholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for transactions in the Shares described below, there have been no
transactions in Shares which where effected during the past 60 days by the
Company, or to the best knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company.
DOW TRANSACTIONS
On September 12, 1994, The Dow Chemical Company ("Dow") sold 857,143 Shares
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 from Garantia for an exercise price of $24,214,289.75.
The Option was acquired in consideration of $150,000. On September 30, 1994,
Dow exercised the Option in full and reacquired the 857,143 shares from
Garantia for $24,214,289.75.
(b) To the best of the Company's knowledge, none of the Company's executive
officers, directors, affiliates or subsidiaries presently intends to tender any
Shares to the Purchaser pursuant to the Offer or sell any Shares that are held
of record or beneficially by such persons. Dow, the R.C. McCabe Foundation and
the executive officers and directors of the Company, which collectively hold
33% of the outstanding Shares, have informed the Company that they do not
intend to tender their respective Shares into the Offer. Dow beneficially owns
approximately 21% of the Company's outstanding common stock. Of the 21%
beneficially owned by Dow, 16% is held in escrow to satisfy certain exchange
rights under an existing Dow note indenture. To the extent that note holders
were to exercise their exchange rights, Dow's ownership interest in the Company
would decrease. The notes are currently exchangeable by the holders at any
time; the exchange ratio for the notes is currently 26.667 Shares for each
$1,000 principal amount.
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ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above in item 3 or in item 4(b) above, the Company is
not engaged in any negotiations in response to the Offer which relate to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in item 3(b) there are no transactions, Magma Board
resolutions, agreements in principle or signed contracts in response to the
Offer that relate to or would result in one or more of the events referred to
in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
AMENDMENT OF BYLAWS
At its meeting on October 2 and 3, 1994, the Board of Directors of the
Company amended the Company's Bylaws to eliminate the ability of the Company's
stockholders to act by written consent. The Bylaw Amendment did not affect the
ability of stockholders to take action at a properly called special or annual
meeting. A copy of the Bylaw Amendment is filed as Exhibit 7 hereto and is
incorporated herein by reference.
PREFERRED SHARES RIGHTS AGREEMENT
On October 3, 1994, the Board of Directors of the Company declared a dividend
of one preferred share purchase right (a "Right") for each outstanding Share.
The dividend is payable on October 14, 1994 (the "Record Date") to stockholders
of record as the close of business on that date. Each Right entitles the
registered holder to purchase from the Company one one-thousandth of a share of
Series A Preferred Stock, $.10 par value, of the Company (the "Preferred
Shares"), subject to adjustment, at a price of $125.00 per share, subject to
adjustment (the "Purchase Price"). The description and terms of the Rights are
set forth in the Rights Agreement.
The following is a general description only and is qualified in its entirety
by the Rights Agreement, a copy of which is filed as Exhibit 8 hereto and is
incorporated herein by reference. All undefined capitalized terms used in the
discussion below are used as defined in the Rights Agreement.
Initially, the Rights will attach to all certificates representing shares of
outstanding Company Common Stock, and no separate Rights Certificates will be
distributed. The Rights will separate from the Company Common Stock and the
Distribution Date will occur upon the earlier of (i) 10 business days following
a public announcement (the date of such announcement being the "Stock
Acquisition Date") that a person or group of affiliated or associated persons
(other than the Company, any Subsidiary of the Company or any employee
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benefit plan of the Company or such Subsidiary) (an "Acquiring Person") has
acquired, obtained the right to acquire or otherwise obtained beneficial
ownership of 10% or more of the then outstanding shares of Company Common Stock
(or if a current holder of 10% or more of the outstanding shares of Company
Common Stock has acquired, obtained the right to acquire or otherwise obtained
beneficial ownership of an additional 4% of the Company Common Stock), and (ii)
10 business days (or such later date as may be determined by action of the
independent members of the Board of Directors prior to such time as any person
becomes an Acquiring Person) following the commencement of a tender offer or
exchange offer that would result in a person or group beneficially owning 20%
or more of the then outstanding shares of Company Common Stock. Until the
Distribution Date, (i) the Rights will be evidenced by Company Common Stock
certificates and will be transferred with and only with such Company Common
Stock certificates, (ii) new Company Common Stock certificates issued after
October 14, 1994 (also including shares distributed from Treasury) will contain
a notation incorporating the Rights Agreement by reference and (iii) the
surrender for transfer of any certificates representing outstanding Company
Common Stock will also constitute the transfer of the Rights associated with
the Company Common Stock represented by such certificates.
The Rights are not exercisable until the Distribution Date and will expire at
the close of business on the tenth anniversary of the Rights Agreement unless
earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates will
be mailed to holders of record of Company Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and shares of Company Common Stock shall remain
outstanding, (ii) a Person becomes the beneficial owner of 10% or more of the
then outstanding shares of Company Common Stock (or an additional 4% in the
case of current 10% holders), (iii) an Acquiring Person engages in one or more
"self-dealing" transactions as set forth in the Rights Agreement, or (iv)
during such time as there is an Acquiring Person, an event occurs which results
in such Acquiring Person's ownership interest being increased by more than 1%
by means of a reverse stock split or recapitalization), then, in each such
case, each holder of a Right will thereafter have the right to receive, upon
exercise, Units of Preferred Stock (or, in certain circumstances, Company
Common Stock, cash, property or other securities of the Company) having a value
equal to two times the exercise price of the Right. The exercise price is the
Purchase Price multiplied by the number of Units of Preferred Stock issuable
upon exercise of a Right prior to the events described in this paragraph.
Notwithstanding any of the foregoing, following the occurrence of any of the
events set forth in this paragraph, all Rights that are, or (under certain
circumstances specified in the Rights Agreement) were, beneficially owned by
any Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition Date, (i) the
Company is acquired in a merger or other business combination transaction and
the Company is not the surviving corporation (other than a merger described in
the preceding paragraph), (ii) any Person consolidates or merges with the
Company and all or part of the Company Common Stock is converted or exchanged
for securities, cash or property of any other Person or (iii) 50% or more of
the Company's assets or earning power is sold or transferred, each holder of a
Right (except Rights which previously have been voided as described above)
shall thereafter have the right to receive, upon exercise, common stock of the
Acquiring Person having a value equal to two times the exercise price of the
Right.
The Purchase Price payable, and the number of Units of Preferred Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the
current market price of the Preferred Stock, or (iii) upon the distribution to
the holders of the Preferred Stock of evidences of indebtedness or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
11
<PAGE>
With certain exceptions, no adjustment in the Purchase Price will be required
until cumulative adjustments amount to at least 1% of the Purchase Price. The
Company is not required to issue fractional Units. In lieu thereof, an
adjustment in cash may be made based on the market price of the Preferred Stock
prior to the date of exercise.
At any time until ten business days following the Stock Acquisition Date, a
majority of the Independent Directors may redeem the Rights in whole, but not
in part, at a price of $.01 per Right (the "Redemption Price"), payable, at the
election of such majority of the Independent Directors, in cash or shares of
Company Common Stock. Immediately upon the action of a majority of Independent
Directors ordering the redemption of the Rights, the Rights will terminate and
the only right of the holders of Rights will be to receive the Redemption
Price.
Until a Right is exercised, the holder thereof, as such, will have no rights
as a stockholder of the Company, including, without limitation, the right to
vote or to receive dividends. While the distribution of the Rights will not be
taxable to stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended at any time
prior to the Distribution Date. After the Distribution Date, the provisions of
the Rights Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
however, that no amendment to adjust the time period governing redemption shall
be made at such time as the Rights are not redeemable.
A total of 50,000 shares of Preferred Stock will be reserved for issuance
upon exercise of the Rights. The Units of Preferred Stock that may be acquired
upon exercise of the Rights will be nonredeemable and subordinate to any other
shares of preferred stock that may be issued by the Company.
Each Unit of Preferred Stock will have a minimum preferential quarterly
dividend rate of $.01 per Unit but will, in any event, be entitled to a
dividend equal to the per share dividend declared on the Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred Stock will
receive a preferred liquidation payment equal to the greater of $125 per Unit
and the per share amount paid in respect of a share of Company Common Stock.
Each Unit of Preferred Stock will have one vote, voting together with the
Company Common Stock.
In the event of any merger, consolidation or other transaction in which
shares of Company Common Stock are exchanged, each Unit of Preferred Stock will
be entitled to receive the per share amount paid in respect of each share of
Company Common Stock.
The rights of holders of the Preferred Stock to dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right should approximate the economic value
of one share of Company Common Stock.
NEVADA TAKEOVER LEGISLATION
Sections 78.411 - 78.444 of the General Corporation Law of Nevada (the
"Business Combination Statute") makes it more difficult to effect certain
transactions between a corporation and a person or group who or which owns 10%
or more of the corporation's outstanding voting stock (including any rights to
acquire stock pursuant to an option, warrant, agreement, arrangement or
understanding, or upon the exercise of conversion or exchange rights, and stock
with respect to which the person has voting rights only), or is an affiliate or
associate of the corporation and was the owner of 10% or more of such voting
stock at any time within three years immediately prior to the date in question.
The legislation prevents, for a period of three
12
<PAGE>
years following the date that a stockholder became a holder of 10% or more of
the corporation's outstanding voting stock, the following types of transactions
between the corporation and the 10% stockholder (unless certain conditions,
described below, are met):
(i) Any merger or consolidation;
(ii) Any sale, lease, exchange, mortgage, pledge, transfer or other
disposition having an aggregate market value equal to 5 percent or more of
the aggregate market value of all the assets of the corporation, or 5
percent or more of the aggregate market value of all the outstanding shares
of the corporation or representing 10 percent or more of the earning power
or net income of the corporation;
(iii) The issuance or transfer by the corporation of any shares of the
corporation that have an aggregate market value equal to 5 percent or more
of the aggregate market value of all the outstanding shares of the
corporation to stockholders except under the exercise of warrants or rights
to purchase shares offered, or a dividend or distribution paid or made, pro
rata to all stockholders of the corporation;
(iv) The adoption of any plan or proposal for the liquidation or
dissolution of the corporation proposed by, or under any agreement,
arrangement or understanding, whether or not in writing, with, the
interested stockholder;
(v) Any reclassification of securities, recapitalization, merger or
consolidation or other transaction which has the effect, directly or
indirectly, of increasing the proportionate share of the outstanding shares
owned by the interested stockholder; and
(vi) Any receipt by the interested stockholder of the benefit, except
proportionately as a stockholder of the corporation, of any loan or other
financial assistance or any tax credit or other tax advantage provided by
or through the corporation.
The three-year ban does not apply if either the proposed transactions or the
transaction by which the 10% stockholder became a 10% stockholder is approved
by the board of directors of the corporation prior to the date such stockholder
became a 10% stockholder.
A corporation may, at its option, exclude itself from the coverage of the
Business Combination Statute by providing in its articles of incorporation at
any time to exempt itself from coverage, provided that an articles amendment
cannot become effective until 18 months after such amendment is adopted and is
inapplicable to a 10% stockholder which obtained its shares prior to the
effective date of such amendment. The Certificate of Incorporation of the
Company does not contain a provision "opting out" of the coverage of the
Business Combination Statute.
Unless, the Board of Directors approves the Offer prior to its consummation,
California Energy will be unable to effect a merger with the Company for a
period of three years from the consummation of the Offer and would be prevented
from engaging in certain transactions by the Business Combination Statute.
The foregoing description of the Business Combination Statute is qualified in
its entirety by reference to the General Corporation Law of Nevada.
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 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.
13
<PAGE>
A copy of the Magma Complaint is filed as Exhibit 9 hereto and is
incorporated herein by reference. The foregoing description of the Magma
Complaint is qualified in its entirety by reference by the Magma Complaint.
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.
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 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.
Copies of the California Stockholder Complaint and the Nevada Stockholder
Complaint are filed as Exhibits 10 and 11, hereto, respectively and are
incorporated herein by reference. The foregoing description of the Complaints
is qualified in its entirety by reference to the Complaints.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
Exhibit 1 -- Excerpts from the Company's Proxy Statement dated May 11, 1994
for its 1994 Annual Meeting of Stockholders.
Exhibit 2 -- Form of Change in Control Agreement I.
Exhibit 3 -- Form of Change in Control Agreement II.
Exhibit 4 -- Form of Indemnification Agreement.
Exhibit 5 -- Letter to Stockholders of the Company.*
Exhibit 6 -- Press Release of the Company, dated October 10, 1994.*
Exhibit 7 -- Amendment, dated October 3, 1994, to the Bylaws of the
Company.
Exhibit 8 -- Rights Agreement, dated October 6, 1994, between the Company
and Chemical Trust Company of California, as Rights Agent.
Exhibit 9 -- The Magma Complaint.
Exhibit 10 -- The California Stockholder Complaint.
Exhibit 11 -- The Nevada Stockholder Complaint.
- --------
* Included in copies mailed to stockholders.
14
<PAGE>
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
/s/ Jon R. Peele
By:__________________________________
Name: Jon R. Peele
Title: Executive Vice President,
Secretary and General
Counsel
Dated: October 11, 1994
15
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBITS
-------- ---
<C> <S> <C>
Exhibit 1 --Excerpts from the Company's Proxy Statement dated May 11,
1994 for its 1994 Annual Meeting of Shareholders.
Exhibit 2 --Form of Change in Control Agreement I.
Exhibit 3 --Form of Change in Control Agreement II.
Exhibit 4 --Form of Indemnification Agreement.
Exhibit 5 --Letter to Stockholders of the Company.
Exhibit 6 --Press Release of the Company, dated October 10, 1994.
Exhibit 7 --Amendment, dated October 3, 1994 to the Bylaws of the
Company.
Exhibit 8 --Rights Agreement, dated October 6, 1994, between the
Company and Chemical Trust Company of California, as Rights
Agent.
Exhibit 9 --The Magma Complaint.
Exhibit 10 --The California Stockholder Complaint.
Exhibit 11 --The Nevada Stockholder Complaint.
</TABLE>
<PAGE>
EXHIBIT 99.1
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 Section 240.14a-11(c) or Section 240.14a-12
MAGMA POWER COMPANY
------------------------------------------------
(Name of Registrant as Specified in its Charter)
MAGMA POWER COMPANY
------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(j)(2).
[_] $500 per each party to the contrary pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
-----------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration statement number, or the Form or Schedule and the
date of its filing:
1) Amount Previously Paid: __________________________________________
2) Form, Schedule or Registration No.: ______________________________
3) Filing Party: ____________________________________________________
4) Date Filed: ______________________________________________________
<PAGE>
MAGMA POWER COMPANY
4365 EXECUTIVE DRIVE, SUITE 900
SAN DIEGO, CALIFORNIA 92121
May 11, 1994
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Magma Power Company. The Annual Meeting will be held on Tuesday, June 21, 1994
at 10:30 a.m. at the Marriott-La Jolla, 4240 La Jolla Village Drive, San Diego,
California 92037.
The matters on the agenda for the meeting are set forth in the attached
Notice of Annual Meeting of Stockholders. In addition to the agenda items, there
will be a report on operations and ample opportunity for questions.
We hope you can attend the meeting. Whether or not you can attend, it is
important that you sign, date and return your proxy as soon as possible. If you
decide to attend the meeting, you may vote in person if you desire, even if you
have previously mailed your proxy card. Your vote, regardless of the number of
shares you own, is important. We urge you to indicate your approval by voting
FOR the matters indicated in the attached Notice of Annual Meeting of
Stockholders.
On behalf of the Board of Directors, we thank you for your cooperation.
Sincerely,
/s/ PAUL M. PANKRATZ
Paul M. Pankratz
Chairman of the Board
<PAGE>
MAGMA POWER COMPANY
4365 EXECUTIVE DRIVE, SUITE 900
SAN DIEGO, CALIFORNIA 92121
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
JUNE 21, 1994
----------------
Notice is hereby given that the Annual Meeting of Stockholders of Magma
Power Company (the "Company") will be held on Tuesday, June 21, 1994 at 10:30
a.m. at the Marriott-La Jolla, 4240 La Jolla Village Drive, San Diego,
California 92037, for the following purposes:
1. To elect three members of the Board of Directors of the Company (the
"Board") to serve for the terms indicated in the attached Proxy Statement;
2. To consider and vote upon a proposal to approve the 1994 Equity
Participation Plan of Magma Power Company;
3. To consider and vote upon a proposal to ratify the selection of Coopers
& Lybrand as the Company's auditors for the fiscal year ending December 31,
1994; and
4. To transact such other business as may properly come before the meeting
or any adjournment thereof.
The close of business on April 25, 1994 has been fixed as the Record Date
for the determination of stockholders entitled to receive notice of, and to vote
at, the Annual Meeting and any adjournment thereof. Only stockholders of record
at the close of business on the Record Date are entitled to such notice and to
vote at the Annual Meeting.
All stockholders are cordially invited to attend the Annual Meeting. WHETHER
OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, PLEASE SIGN, DATE AND MAIL THE
ENCLOSED PROXY CARD IN THE ENCLOSED POSTAGE PAID, ADDRESSED ENVELOPE. NO
ADDITIONAL POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. IF YOU ATTEND THE
MEETING, YOU MAY VOTE IN PERSON EVEN THOUGH YOU HAVE PREVIOUSLY SENT IN YOUR
PROXY.
THE ANNUAL REPORT OF THE COMPANY FOR THE YEAR ENDED DECEMBER 31, 1993
ACCOMPANIES THIS PROXY STATEMENT. STOCKHOLDERS MAY OBTAIN WITHOUT CHARGE A COPY
OF THE COMPANY'S ANNUAL REPORT ON FORM 10-K (WITHOUT EXHIBITS), FOR THE YEAR
ENDED DECEMBER 31, 1993, AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION,
BY WRITING TO SHAREHOLDER RELATIONS, MAGMA POWER COMPANY, 4365 EXECUTIVE DRIVE,
SUITE 900, SAN DIEGO, CALIFORNIA 92121.
By Order of the Board,
/s/ JON R. PEELE
Jon R. Peele,
Secretary
San Diego, California
May 11, 1994
<PAGE>
MAGMA POWER COMPANY
4365 EXECUTIVE DRIVE, SUITE 900
SAN DIEGO, CALIFORNIA 92121
----------------
PROXY STATEMENT
----------------
ANNUAL MEETING OF STOCKHOLDERS
JUNE 21, 1994
----------------
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to stockholders of Magma Power
Company, a Nevada corporation ("Magma" or the "Company"), in connection with the
solicitation by the Board of Directors of the Company (the "Board") of proxies
to be voted at the 1994 Annual Meeting of Stockholders (the "Annual Meeting") at
the time and the place and for the purposes set forth in the attached Notice of
Annual Meeting. This Proxy Statement and the related form of proxy attached
hereto are being mailed to stockholders on or about May 11, 1994.
All voting rights are vested exclusively in the holders of the Company's
common stock, par value $.10 per share (the "Common Stock"). Only stockholders
of record as of the close of business on April 25, 1994 (the "Record Date") are
entitled to receive notice of, and to vote at, the Annual Meeting. The shares of
Common Stock represented by a proxy will be voted as specified therein at the
Annual Meeting to the extent that the proxy is properly executed and returned.
Any stockholder giving a proxy has the right to revoke it by written notice to
the Secretary of the Company at any time prior to the voting and, if present at
the Annual Meeting, may vote in person whether or not he has previously given a
proxy.
The cost of the solicitation of proxies will be paid by the Company. In
addition to solicitation of proxies by use of the mails, directors, officers and
employees of the Company may, without additional compensation, solicit proxies
personally, by telephone or by other appropriate means. The Company will request
banks, brokerage houses and other custodians, nominees or fiduciaries holding
shares of Common Stock in their names for others to send proxy materials to, and
obtain proxies from, their principals, and the Company will reimburse such
banks, brokerage houses and other custodians, nominees or fiduciaries for their
reasonable expenses in so doing.
CERTAIN SHAREHOLDINGS
As of April 15, 1994, the Company had outstanding a total of 24,011,379
shares of Common Stock, each share of which is entitled to one vote. The
presence, either in person or by proxy, of persons entitled to vote a majority
of the outstanding Common Stock is necessary to constitute a quorum for the
transaction of business at the Annual Meeting.
At the Company's 1993 Annual Meeting, approximately 88% of the outstanding
Common Stock was represented and participated in the election of directors.
<PAGE>
The following table sets forth, as of April 15, 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 Securities Exchange Act of 1934, as amended (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 and
nominee to 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.
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF PERCENTAGE
NAME AND ADDRESS OF BENEFICIAL 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. McCebe Foundation 2,752,641(5) 11.5%
7624 S. Painter Ave., Suite A
Whittier, CA 90602-2313
Firstar Investment Research & Management
Company 2,280,800 9.5%
777 E. Wisconsin Ave.
Milwaukee, WI 53202
James D. Shepard 221,134(6) *
Paul M. Pankratz 66,100(7) *
Jon R. Peele 19,500(8) *
Wallace C. Dieckmann 17,159(9) *
Kenneth J. Kerr 16,000(10) *
Thomas C. Hinrichs 15,951(11) *
Ralph W. Boeker 15,000(12) *
Trond Aschehoug 12,450(13) *
Louis A. Simpson 10,000 *
John D. Roach 1,000 *
Roger L. Kesseler 200 *
Directors and executive officers as a group
(15 persons) 394,494(14) 1.6%(15)
</TABLE>
- --------
* Represents less than one percent.
(1) Except as otherwise indicated, the address of each of the persons 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 April 15, 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.
(3) Unless otherwise noted, the number of shares of Common Stock outstanding for
this purpose is 24,011,379.
2
<PAGE>
(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. James D. 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. Includes 5,000 shares of Common Stock
initially promised to Mr. Shepard by the Board in 1987 in connection
with his resignation as an employee of the Company; such shares vested
and were issued to Mr. Shepard on his 55th birthday in August 1993.
(7) Includes Mr. Pankratz' options to purchase 66,000 shares of Common Stock.
(8) Includes 4,500 shares of Deferred Stock which are expected to be granted
following the Annual Stockholders Meeting if and to the extent that the
1994 Equity Participation Plan is approved. Such Deferred Shares will be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such shares or receive dividends until
vested. Also includes Mr. Peele's options to purchase 15,000 shares of
Common Stock.
(9) Includes 6,000 shares of Deferred Stock which are expected to be granted
following the Annual Stockholders Meeting if and to the extent that the
1994 Equity Participation Plan is approved. Such Deferred Shares will be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such shares or receive dividends until
vested. Also includes Mr. Dieckmann's options to purchase 11,159 shares of
Common Stock.
(10) Includes 9,000 shares of Deferred Stock which are expected to be granted
following the Annual Stockholders Meeting if and to the extent that the
1994 Equity Participation Plan is approved. Such Deferred Shares will be
subject to vesting requirements based on continuing employment. Also
includes 1,000 shares of Deferred Stock which are 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.
(11) Includes 6,000 shares of Deferred Stock which are expected to be granted
following the Annual Stockholders Meeting if and to the extent that the
1994 Equity Participation Plan is approved. Such Deferred Shares will be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such shares or receive dividends until
vested. Also includes Mr. Hinrichs' options to purchase 4,084 shares of
Common Stock.
(12) 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 10,000 shares of Common Stock.
(13) Includes 7,200 shares of Deferred Stock which are expected to be granted
following the Annual Stockholders Meeting if and to the extent that the
1994 Equity Participation Plan is approved. Such Deferred Shares will be
subject to vesting requirements based on continuing employment. Also
includes 2,100 shares of Deferred Stock which are subject to vesting
requirements. The holder of such Deferred Stock is not entitled to vote
or receive dividends until vested. Also includes Mr. Aschehoug's options
to purchase 3,000 shares of Common Stock.
3
<PAGE>
(14) Includes 32,700 shares of Deferred Stock held by all directors and
officers as a group, which are expected to be granted following the
Annual Stockholders Meeting if and to the extent that the 1994
Equity Participation Plan is approved. Also includes 6,100 shares of
outstanding Deferred Stock. Also includes options to purchase
114,243 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.
(15) Includes the 38,800 shares of Deferred Stock and the options to purchase
114,243 shares referred to in Note 14 above. The number of outstanding
shares of Common Stock for this purpose is 24,164,422.
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 Proxy Statement any failure to
file such reports by such dates during 1993. All of such filing requirements
were satisfied during such period.
AGENDA ITEM 1: ELECTION OF DIRECTORS
The Board is divided into three classes. The terms of the directors in
each class expire at the annual meeting in the years listed on the chart
below. Except as expressly noted below, each director was elected to the
Board at the annual meeting three years prior to the applicable expiration
date listed below.
<TABLE>
<CAPTION>
CLASS III
CLASS 1 DIRECTORS CLASS II DIRECTORS DIRECTORS
- ----------------- ------------------ -----------------
<S> <C> <C>
1994 1995 1996
Lester L. Coleman* Ralph W. Boeker* Roger L. Kesseler
William R. Knee Thomas C. Hinrichs Bent Petersen
John D. Roach* Paul M. Pankratz J. Pedro Reinhard
James D. Shepard Louis A. Simpson*
</TABLE>
- -----------
* Mr. Simpson became a director on March 30, 1994, filling a
Class III seat created by the Board as of such date.
Mr. Coleman became a director on March 30, 1994, filling the
vacancy of Mr. B. C. McCabe, Jr. who resigned as a Director
on January 12, 1994. Mr. Roach became a director on
January 11, 1994, filling the vacancy of Mr. Arnold L. Johnson
who resigned on December 3, 1993. Mr. Boeker became a director
on March 1, 1993.
In accordance with the recommendation of the Nomination Committee, the Board
has nominated Messrs. Coleman, Knee and Roach for re-election as directors in
Class I to serve for three-year terms which expire at the annual meeting in 1997
and until their successors are elected and qualified unless they shall earlier
resign, become disqualified or disabled, or shall otherwise be removed. The
Company's Bylaws (Article II, Section 3) provides a mechanism by which a
qualified stockholder of the Company may, subject to the giving of a proper and
timely notice to the Secretary of the Company, make nominations of persons for
election to the Board at any meeting of the stockholders at which directors are
to be elected by the stockholders. No such notice has been received by the
Company for the 1994 Annual Meeting. THE BOARD UNANIMOUSLY RECOMMENDS THAT
STOCKHOLDERS VOTE FOR EACH OF THE THREE NOMINEES.
The Board does not contemplate that any of its proposed nominees to the
Board listed above will become unavailable for any reason, but if such
unavailability should occur prior to the Annual Meeting, it is intended that
proxies will be voted for the election of those persons, if any, as shall be
designated by the Board as replacement nominees.
4
<PAGE>
BOARD AND NOMINEE BIOGRAPHICAL INFORMATION
Set forth below are the ages (as of the Record Date) and biographical
information for each member of the Board and nominee thereto.
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 of March 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 based in Dallas,
Texas. 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, 57, 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 in January 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. In 1990, Mr. Petersen retired from Coopers &
Lybrand and, since then, has been a private investor and independent
businessman.
J. Pedro Reinhard, 48, 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.
5
<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 Walnut Creek, California
based building products company. 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, 55, 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 a Washington, D.C. based insurance company. 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., is providing 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, April 25, 1994, 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 to executive officers under the 1987 Stock Option Plan
and under the 1994 Equity Participation Plan (if and to the extent approved).
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.
6
<PAGE>
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 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.
7
<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, 50, 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.
8
<PAGE>
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 1992 N/A N/A N/A N/A N/A N/A
Executive 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 1992 N/A N/A N/A N/A N/A N/A
North 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 are expected to be granted to Messrs. Peele, Aschehoug and
Dieckmann following the Annual Stockholders Meeting if and to the extent
that the 1994 Equity Participation Plan is approved.
(4) There are currently no SARs outstanding.
9
<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:
EMPLOYEE
RETIREMENT EMPLOYEES' EXECUTIVE
SAVINGS PENSION SUPPLEMENTAL
NAME PLAN PLAN PLAN
---- ---------- -------- ------------
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
(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 the 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 $404,858 associated with Mr. Boeker's relocation to Southern
California from Midland, Michigan.
(13) Includes amounts paid to Dow for Mr. Aschehoug as a "leased employee" from
Dow. Mr. Aschehoug became an employee of the Company on July 1, 1993.
Excludes options granted to Mr. Aschehoug prior to his becoming an employee
of the Company.
(14) Represents the value on the grant date of 2,100 shares of Company Deferred
Stock granted to Mr. Aschehoug in conjunction with his employment on July
1, 1993.
10
<PAGE>
OPTION GRANT TABLE
The following table presents information about options granted to Mr.
Pankratz and to the Company's four other most highly compensated executive
officers as of December 31, 1993.
OPTION/SAR GRANTS IN LAST FISCAL YEAR(1)
<TABLE>
GRANT DATE
PRESENT
INDIVIDUAL GRANTS VALUE
- ------------------------------------------------------------------------------------------------- ----------
NUMBER OF
SECURITIES % OF TOTAL
UNDERLYING OPTIONS/SARS GRANT
OPTIONS/ GRANTED TO EXERCISE DATE
SARS ALL OR BASE MARKET GRANT DATE
GRANTED EMPLOYEES IN PRICE PRICE EXPIRATION PRESENT
NAME (#)(1) FISCAL YEAR ($/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
Trund Aschehoug........... 0 0% -- -- -- $ 0
Wallace C. Dieckmann...... 0 0% -- -- -- $ 0
- --------
</TABLE>
(1) There are currently no SARs outstanding.
(2) Those 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.
11
<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 YEAR AND FY-END OPTION/SAR VALUES
<TABLE>
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.
12
<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
if the 1994 Equity Participation Plan is approved by the Company's stockholders.
EMPLOYMENT CONTRACTS AND TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
On January 20, 1992, the Company entered into an arrangement with
Paul M. Pankratz in connection with his initial employment with the Company.
This arrangement provides for the payment of one year's base salary and the
immediate vesting of all previously unvested stock options held by
Mr. Pankratz in the event that Mr. Pankratz' employment with the Company
should be terminated without cause after a change-in-control. This agreement
is scheduled to terminate January 31, 1995. See "Compensation Committee
Report on Executive Compensation" below.
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.
- ----------
* 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.
13
<PAGE>
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 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
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<PAGE>
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.
15
<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.
<TABLE>
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
<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 $122 $136 $132
12/31/90 $144 $100 $129 $100
12/31/91 $157 $129 $193 $129
12/30/92 $205 $113 $216 $113
12/31/93 $224 $118 $246 $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.
16
<PAGE>
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 Option Surrender. In October 1993 the Company acquired at a discount
Dow's option to purchase two million shares of Magma Common Stock. Magma
purchased the options for 857,143 shares of newly issued and unregistered shares
of its stock. 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 has agreed not to sell the newly
issued shares before September 30, 1994. 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. Following the transaction, 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 Securities and Exchange Commission 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
17
<PAGE>
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.
AGENDA ITEM 2: APPROVAL OF THE 1994 EQUITY PARTICIPATION
PLAN
DESCRIPTION OF THE 1994 EQUITY PARTICIPATION PLAN
In April 1994 the Company's Board of Directors adopted the 1994 Equity
Participation Plan of Magma Power Company (the "1994 Plan"). The 1994 Plan
succeeds the Company's Stock Option Plan of 1987 (the "1987 Plan"), which
covered 1,000,000 shares of the Company's Common Stock and was adopted by the
Board of Directors and then approved by the stockholders in 1987.
The principal purposes of the 1994 Plan are to provide incentives for
officers, key employees and consultants of the Company and its subsidiaries
through granting of options, restricted stock and other awards, thereby
stimulating their personal and active interest in the Company's development and
financial success, and inducing them to remain in the Company's employ. In
addition to grants and awards made to officers, employees or consultants, the
1994 Plan provides for the granting of options or stock to the Company's
non-employee directors in lieu of directors' fees (if any), as described in
further detail below.
Under the 1994 Plan, 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. As of December 31, 1993,
under the 1987 Plan, a total of 598,250 shares were subject to outstanding stock
options held by approximately 77 officers and key employees and only 57,081
shares remained available for the grant of new stock options or SARs under the
1987 Plan. On March 31, 1994, the closing price of a share of the Company's
Common Stock on the NASDAQ National Market System was $32.25.
The shares available under the 1994 Plan upon exercise of stock options,
SARs and other awards, and for issuance as restricted or deferred stock, may be
either previously unissued shares or treasury shares, and may be equity
securities of the Company other than Common Stock. The 1994 Plan provides for
appropriate adjustments in the number and kind of shares subject to the 1994
Plan and to outstanding grants thereunder in the event of a stock split, stock
dividend or certain other types of recapitalizations, including restructurings.
If any portion of a stock option, SAR or other award terminates or lapses
unexercised, or is cancelled upon grant of a new option, SAR or other award
(which may be at a higher or lower exercise price than the option, SAR or other
award so cancelled), the shares which were subject to the unexercised portion of
such option, SAR or other award, will continue to be available for issuance
under the 1994 Plan.
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<PAGE>
The principal features of the 1994 Plan are summarized below, but the
summary is qualified in its entirety by reference to the 1994 Plan itself, which
is available upon request from the Company.
Administration
The 1994 Plan is administered by the Compensation Committee or a
subcommittee thereof (referred to herein as the "Committee"), consisting of at
least two members of the Board, none of whom is an officer or employee of the
Company, and each of whom is a "disinterested person" as defined by Rule 16b-3.
The Committee is authorized to select from among the eligible employees and
consultants the individuals to whom options, SARs, restricted stock purchase
rights and other awards are to be granted and to determine the number of shares
to be subject thereto and the terms and conditions thereof, consistent with the
1994 Plan. The Committee is also authorized to adopt, amend and rescind rules
relating to the administration of the 1994 Plan.
Payment for Shares
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.
Amendment and Termination
Amendments of the 1994 Plan to increase the number of shares as to which
options, SARs, restricted stock and other awards may be granted (except for
adjustments resulting from stock splits and the like) require the approval of
the Company's stockholders. In all other respects the 1994 Plan can be amended,
modified, suspended or terminated by the Committee, unless such action would
otherwise require stockholder approval as a matter of applicable law, regulation
or rule. Amendments of the 1994 Plan will not, without the consent of the
participant, affect such person's rights under an award previously granted,
unless the award itself otherwise expressly so provides. No termination date is
specified for the 1994 Plan.
Eligibility
Options, SARs, restricted stock and other awards under the 1994 Plan may be
granted to individuals who are then officers or other employees of the Company
or any of its present or future subsidiaries and who are determined by the
Committee to be key employees. Such awards also may be granted to consultants of
the Company selected by the Committee for participation in the 1994 Plan.
Approximately 77 officers and other employees are currently eligible to
participate in the 1994 Plan. More than one option, SAR, restricted stock grant
or other award may be granted to a key employee or consultant, but the aggregate
fair market value (determined at the time of grant) of shares with respect to
which an Incentive Stock Option is first exercisable by an optionee (i.e.
"vests") during any calendar year cannot exceed $100,000.
19
<PAGE>
Non-employee directors of the Company are eligible to participate in the
Plan pursuant to Plan provisions which allow such directors to elect to receive
options or stock in lieu of directors' fees, as described below.
Awards under the 1994 Plan
The 1994 Plan provides that the Committee may grant or issue stock options,
SARs, restricted stock, deferred stock, dividend equivalents, performance
awards, stock payments and other stock related benefits, or any combination
thereof. 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.
Nonqualified stock options ("NQSOs") will provide for the right to purchase
Common Stock at a specified price which may be less than fair market value on
the date of grant (but not less than par value), and usually will become
exercisable (in the discretion of the Committee) in one or more installments
after the grant date. NQSOs may be granted for any term specified by the
Committee.
Director stock options are NQSOs granted to non-employee directors of the
Company who have elected in advance to receive such options in lieu of
directors' fees. The difference between the exercise price of such options and
the fair market value of the underlying Common Stock on the grant date will
equal the amount of directors' fees which the non-employee director has elected
to forgo. Alternatively, the Board may permit a non-employee director to receive
shares of Common Stock directly in lieu of directors' fees.
Incentive stock options, if granted, will be designed to comply with the
provisions of the Code and will be subject to restrictions contained in the
Code, including exercise prices equal to at least 100% of fair market value of
Common Stock on the grant date and a ten year restriction on their term, but may
be subsequently modified to disqualify them from treatment as an incentive stock
option. Incentive stock options may be granted only to employees.
Restricted stock may be sold to participants at various prices (but not
below par value) and made subject to such restrictions as may be determined by
the Committee. Restricted stock, typically, may be repurchased by the Company at
the original purchase price if the conditions or restrictions are not met. In
general, restricted stock may not be sold, or otherwise transferred or
hypothecated, until restrictions are removed or expire. Purchasers of restricted
stock, unlike recipients of options, will have voting rights and will receive
dividends prior to the time when the restrictions lapse.
Deferred stock may be awarded to participants, typically without payment of
consideration, but subject to vesting conditions based on continued employment
or on performance criteria established by the Committee. Like restricted stock,
deferred stock may not be sold, or otherwise transferred or hypothecated, until
vesting conditions are removed or expire. Unlike restricted stock, deferred
stock will not be issued until the deferred stock award has vested, and
recipients of deferred stock generally will have no voting or dividend rights
prior to the time when vesting conditions are satisfied.
Stock appreciation rights may be granted in connection with stock options
or other awards, or separately. SARs granted by the Committee in connection with
stock options or other awards typically will provide for payments to the holder
based upon increases in the price of the Company's Common Stock over the
exercise price of the related option or other awards, but alternatively may be
based upon criteria such as book value. There are no restrictions specified in
the 1994 Plan on the exercise of SARs or the amount of gain realizable
therefrom, although they can be imposed by the Committee in the SAR agreements.
The Committee may elect to pay SARs in cash or in Common Stock or in a
combination of cash and Common Stock.
20
<PAGE>
Dividend equivalents may be credited to a participant in the 1994 Plan. They
represent the value of the dividends per share paid by the Company, calculated
with reference to the number of shares covered by the stock options, SARs or
other awards held by the participant.
Performance awards may be granted by the Committee on an individual or group
basis. Generally, these awards will be based upon specific agreements and may be
paid in cash or in Common Stock or in a combination of cash and Common Stock.
Performance awards may include "phantom" stock awards that provide for payments
based upon increases in the price of the Company's Common Stock over a
predetermined period. Performance awards may also include bonuses which may be
granted by the Committee on an individual or group basis and which may be
payable in cash or in Common Stock or in a combination of cash and Common Stock.
Stock payments may be authorized by the Committee in the form of shares of
Common Stock or an option or other right to purchase Common Stock as part of a
deferred compensation arrangement in lieu of all or any part of compensation,
including bonuses, that would otherwise be payable to a key employee or
consultant in cash.
Miscellaneous Provisions
Options and other rights to acquire Common Stock of the Company granted
under the 1994 Plan may provide for their termination upon dissolution or
liquidation of the Company, the merger or consolidation of the Company into
another corporation, the acquisition by another corporation of all or
substantially all of the Company's assets, or the acquisition by another
corporation of 80% or more of the Company's then outstanding voting stock; but
in such event the Committee may also give optionees and other grantees the right
to exercise their outstanding options or rights in full during some period
prior to such event, even though the options or rights have not yet become fully
exercisable. Options and other rights granted under the 1994 Plan may provide
that in the event of a "change in control" of the Company (as defined in the
option or grant agreement) all previously unexercisable options and rights
become immediately exercisable unless such options and rights, or portions
thereof, are determined by the Committee to constitute, when exercised, "excess
parachute payments" (as defined in Section 280G of the Code). If any option or
other right does not contain such limitation, and its exercisability is
accelerated upon a change in control, it is possible that an optionee may be
liable for an excise tax on the amount attributable to such acceleration (and
any other payments made in connection with such change in control).
The 1994 Plan specifies that the Company may make loans to Plan participants
to enable them to exercise options, purchase shares or realize the benefits of
other awards granted under the Plan. The terms and conditions of such loans, if
any are made, are to be set by the Committee.
In consideration of the granting of a stock option, SAR, dividend
equivalent, performance award, stock payment, or right to receive restricted or
deferred stock, the employee or consultant must agree in the written agreement
embodying such award to remain in the employ of, or to continue as a consultant
for, the Company or a subsidiary of the Company for at least one year after the
award is granted.
The dates on which options or other awards under the 1994 Plan first become
exercisable and on which they expire will be set forth in individual stock
options or other agreements setting forth the terms of the awards. Such
agreements generally will provide that options and other awards expire upon
termination of the optionee's status as an employee, consultant or director,
although the Committee may provide that such options continue to be exercisable
following a termination without cause, or following a change in control of
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<PAGE>
the Company, or because of the grantee's retirement, death, disability or
otherwise. Similarly, restricted stock granted under the 1994 Plan which has
not vested generally will be subject to repurchase by the Company in the
event of the grantee's termination of employment or consultancy, although
the Committee may make exceptions, based on the reason for termination or
on other factors, in the terms of an individual restricted stock agreement.
No option, SAR or other right to acquire Common Stock granted under the
1994 Plan may be assigned or transferred by the grantee, except by will or
the laws of intestate succession, although the shares underlying such rights
may be transferred if all applicable restrictions have lapsed. During the
lifetime of the holder of any option or right, the option or right may be
exercised only by the holder.
The Company requires participants to discharge withholding tax obligations
in connection with the exercise of any option or other right granted under the
1994 Plan, or the lapse of restrictions on restricted stock, as a condition to
the issuance or delivery of stock or payment of other compensation pursuant
thereto. Shares held by or to be issued to a participant may also be used to
discharge tax withholding obligations related to exercise of options or
receipt of other awards, subject to the discretion of the Committee to
disapprove such use. In addition, the Committee may grant to employees a cash
bonus in the amount of any tax related to awards.
FEDERAL INCOME TAX CONSEQUENCES
The tax consequences of the 1994 Plan under current federal law are
summarized in the following discussion which deals with the general tax
principles applicable to the 1994 Plan, and is intended for general
information only. In addition, the tax consequences described below are
subject to the limitation of the 1993 Omnibus Budget Reconciliation Act
("OBRA"), as discussed in further detail below. Alternative minimum tax
and state and local income taxes are not discussed, and may vary
depending on individual circumstances and from locality to locality.
Nonqualified Stock Options. For Federal income tax purposes, the recipient
of NQSOs granted under the 1994 Plan will not have taxable income upon the
grant of the option, nor will the Company then be entitled to any deduction.
Generally, upon exercise of NQSOs the optionee will realize ordinary income,
and the Company will be entitled to a deduction, in an amount equal to the
difference between the option exercise price and the fair market value of the
stock at the date of exercise. An optionee's basis in the stock for purposes
of determining his gain or loss on his subsequent disposition of the shares
generally will be the fair market value of the stock on the date of exercise
of the NQSO. Special rules are applicable to NQSOs granted to directors in
lieu of directors' fees, as discussed below under "Director Elections."
Incentive Stock Options. There is no taxable income to an employee when an
ISO is granted to him or when that option is exercised; however, the amount by
which the fair market value of the shares at the time of exercise exceeds the
option price will be an "item of tax preference" for the optionee. Gain
realized by an optionee upon sale of stock issued on exercise of an ISO is
taxable at capital gains rates, and no tax deduction is available to the
Company, unless the optionee disposes of the shares within two years after the
date of grant of the option or within one year of the date the shares were
transferred to the optionee. In such event the difference between the option
exercise price and the fair market value of the shares on the date of the
option's exercise will be taxed at ordinary income rates, and the Company will
be entitled to a deduction to the extent the employee must recognize ordinary
income. An ISO exercised more than three months after an
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<PAGE>
optionee's retirement from employment, other than by reason of death or
disability, will be taxed as an NQSO, with the optionee deemed to have received
income upon such exercise taxable at ordinary income rates. The Company will be
entitled to a tax deduction equal to the ordinary income, if any, realized by
the optionee.
Stock Appreciation Rights. No taxable income is realized upon the receipt of
an SAR, but upon exercise of the SAR the fair market value of the shares (or
cash in lieu of shares) received must be treated as compensation taxable as
ordinary income to the recipient in the year of such exercise. The Company will
be entitled to a deduction for compensation paid in the same amount which the
recipient realized as ordinary income.
Restricted Stock and Deferred Stock. An employee to whom restricted or
deferred stock is issued will not have taxable income upon issuance and the
Company will not then be entitled to a deduction, unless in the case of
restricted stock an election is made under Section 83(b) of the Code. However,
when restrictions on shares of restricted stock lapse, such that the shares are
no longer subject to repurchase by the Company, the employee will realize
ordinary income and the Company will be entitled to a deduction in an amount
equal to the fair market value of the shares at the date such restrictions
lapse, less the purchase price therefor. Similarly, when deferred stock vests
and is issued to the employee, the employee will realize ordinary income and
the Company will be entitled to a deduction in an amount equal to the fair
market value of the shares at the date of issuance. If an election is made
under Section 83(b) with respect to restricted stock, the employee will
realize ordinary income at the date of issuance equal to the difference
between the fair market value of the shares at that date less the purchase
price therefor and the Company will be entitled to a deduction in the same
amount. The Code does not permit a Section 83(b) election to be made with
respect to deferred stock.
Dividend Equivalents. A recipient of a dividend equivalent award will not
realize taxable income at the time of grant, and the Company will not be
entitled to a deduction at that time. When a dividend equivalent is paid,
the participant will recognize ordinary income, and the Company will be
entitled to a corresponding deduction.
Performance Awards. A participant who has been granted a performance award
will not realize taxable income at the time of grant, and the Company will not
be entitled to a deduction at that time. When an award is paid, whether in
cash or Common Stock, the participant will have ordinary income, and the
Company will be entitled to a corresponding deduction.
Stock Payments. A participant who receives a stock payment in lieu of a
cash payment that would otherwise have been made will be taxed as if the cash
payment had been received, and the Company will have a deduction in the same
amount.
Deferred Compensation. Participants who defer compensation generally will
recognize no income, gain or loss for federal income tax purposes when
nonqualified stock options are granted in lieu of amounts otherwise payable,
and the Company will not be entitled to a deduction at that time. When and
to the extent options are exercised, the ordinary rules regarding nonqualified
stock options outlined above will apply.
Director Elections. A director who elects to receive NQSOs in lieu of
directors' fees will be subject to the foregoing rules described above under
"Nonqualified Stock Options," and will not realize income until the date of
exercise, if his or her election to receive NQSOs is properly made in advance
of the time he or she renders the services to which the option grant relates.
A director who does not make such election in advance of rendering services,
or a director who elects to receive shares of Common Stock rather than NQSOs,
will realize ordinary income upon the date of grant.
23
<PAGE>
Effect of 1993 Omnibus Budget Reconciliation Act ("OBRA") on the 1994 Plan.
Under OBRA, which became law in August 1993, income tax deductions of
publicly-traded companies may be limited to the extent total compensation
(including base salary, annual bonus, stock option exercises and non-qualified
benefits paid in 1994 and thereafter) for certain executive officers exceeds $1
million (less the amount of any "excess parachute payments" as defined in
Section 280G of the Code) in any one year. However, under OBRA, the deduction
limit does not apply to certain "performance-based" compensation established by
an independent compensation committee which conforms to certain restrictive
conditions stated under the Code and related regulations. Because the Company
currently does not expect to pay total compensation to any one executive officer
in excess of $1 million per year, the Company is not seeking to conform the 1994
Plan to the restrictive conditions of the OBRA legislation and related
regulations.
REASONS FOR ADOPTION OF THE 1994 PLAN
The 1987 Plan currently provides that 1,000,000 shares of Common Stock are
authorized for issuance. As of December 31, 1993, approximately 57,081 shares
remained available for future awards under the 1987 Plan. Also on that date,
options held by approximately 77 officers and key employees and covering
approximately 598,250 shares were outstanding under the 1987 Plan, of which
approximately 216,249 were exercisable. The Board of Directors has determined
that it is advisable to continue to provide stock-based incentive compensation
to the Company's key employees and consultants, thereby continuing to align the
interests of such employees and consultants with those of the stockholders, and
that awards under the 1994 Plan are an effective means of providing such
compensation. In addition, the Board has determined that it is advisable to
provide non-employee directors of the Company with the opportunity to convert
their regular cash directors' fees into stock-based incentive compensation. The
Board recommends that the 1994 Plan be adopted, and that 1,000,000 shares of
Common Stock be reserved for issuance on exercise of options and other awards
thereunder.
REQUIRED VOTE FOR APPROVAL AND RECOMMENDATION OF THE BOARD OF DIRECTORS
The affirmative vote of a majority of the shares present or represented
and entitled to vote at the Annual Meeting is required to approve the 1994 Plan.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR APPROVAL OF THE 1994
PLAN.
AGENDA ITEM 3: RATIFICATION OF THE SELECTION OF
INDEPENDENT PUBLIC ACCOUNTANTS
The Board has selected Coopers & Lybrand to audit the Company's financial
statements for the year ending December 31, 1994. Coopers & Lybrand has acted as
the Company's independent public accountants since 1981. In accordance with the
resolution of the Board, this selection is being presented to stockholders for
ratification at the Annual Meeting. The Company has been advised that neither
Coopers & Lybrand nor any of its partners hold any direct or indirect financial
interest in the securities of the Company or its subsidiaries, nor has Coopers &
Lybrand or any of its partners had any connection, except as auditors, with the
Company or its subsidiaries during the past three years, except that Bent
Petersen, a director of the Company and a member of the Audit Committee, is a
retired managing partner of the San Diego office of Coopers & Lybrand.
Representatives of Coopers & Lybrand are expected to be present at the Annual
Meeting. At such meeting, such representatives will have the opportunity to make
a statement if they desire to do so, and are expected to be available to respond
to appropriate questions. THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THE
PROPOSAL TO RATIFY ITS SELECTION OF COOPERS & LYBRAND AS THE COMPANY'S AUDITORS
FOR THE FISCAL YEAR ENDING DECEMBER 31, 1994.
24
<PAGE>
VOTING SECURITIES
All voting rights are vested exclusively in the holders of Common Stock, and
only stockholders of record as of the Record Date are entitled to receive
notice of, and to vote at, the Annual Meeting.
Pursuant to Nevada law and the Bylaws, a plurality of the votes represented
and entitled to vote at an Annual Meeting at which a quorum is present will be
sufficient to elect a director of the Company. Pursuant to Nevada law, in order
for Agenda Item 2 (proposal to adopt the 1994 Plan) and Agenda Item 3
(ratification of accountants), to be approved, holders of a majority of the
shares of Common Stock present (either in person or by proxy) at a meeting at
which a quorum is present must vote such shares in favor of such proposals.
Pursuant to Nevada law and the Bylaws, all other matters brought to a
stockholder vote at an Annual Meeting at which a quorum is present will be
decided by a majority of the stock represented and entitled to vote at such
meeting. Proxies that are signed but left blank (i) will be counted as shares
that are present and entitled to vote for purposes of establishing a quorum and
(ii) will, as to a particular proposal, be treated as voted in accordance with
the recommendations of the Board. Proxies that expressly indicate an abstention
as to a particular proposal and broker non-votes (i) will be counted as shares
that are present and entitled to vote for purposes of establishing a quorum and
(ii) will, as to a particular proposal, be treated as not voted. Based on the
foregoing, abstentions and broker non-votes (a) will not affect Agenda Item 1
(the election of directors) and (ii) will have the same effect as votes against
the proposal set forth in Agenda Item 2 (proposal to adopt the 1994 Plan) and
Agenda Item 3 (ratification of accountants).
STOCKHOLDER PROPOSALS
The Company's Bylaws (Article I, Section 10) provide a mechanism by which a
qualified stockholder of the Company may, subject to the giving of a proper and
timely notice to the Secretary of the Company, submit proposals for
consideration at an annual meeting of stockholders. No such notice has been
received by the Company for the 1994 Annual Meeting.
Any notice of a qualified stockholder submitting a proposal for the 1995
Annual Meeting of Stockholders of the Company must be in proper form and be
received by the Secretary of the Company no later than February 21, 1995.
OTHER MATTERS
The Company knows of no other matters to be brought before the Annual
Meeting. However, if any other matters should properly come before the Annual
Meeting, the persons named in the enclosed proxy will vote all proxies given to
such persons in accordance with their best judgment on such matters.
By Order of the Board,
/s/ JON R. PEELE
Jon R. Peele,
Secretary
San Diego, California May 11, 1994
25
<PAGE>
- -----------------------------------------------------------------------------
PROXY MAGMA POWER COMPANY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 21, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL M. PANKRATZ and JON R. PEELE, or
either of them, attorneys and proxies to represent the undersigned, with
power of substitution, to appear and to vote all of the shares of stock of
MAGMA POWER COMPANY (the "Company") which the undersigned would be
entitled to vote if personally present at the Annual Meeting of Stockholders
of the Company to be held on Tuesday, June 21, 1994 at 10:30 a.m. at the
Marriott-La Jolla, 4240 La Jolla Village Drive, San Diego, California 92037
and any adjournment thereof.
(1) Election of Directors
[_] FOR all nominees listed [_] WITHHOLD AUTHORITY to vote
(except as marked to the for nominees listed below
contrary below)
Lester L. Coleman, William R. Knee and John D. Roach
INSTRUCTION--To withhold authority to vote for any individual nominee, write
the nominee's name in the space provided below:
- -----------------------------------------------------------------------------
(2) Approval of the adoption of the 1994 Equity Participation Plan of the
Company.
[_] FOR [_] AGAINST [_] ABSTAIN
(3) Ratification of the selection of Coopers & Lybrand as the Company's
auditors for the fiscal year ending December 31, 1994.
[_] FOR [_] AGAINST [_] ABSTAIN
(4) The undersigned confers upon the proxies hereby appointed discretion to
act upon such other business as may properly come before such meeting,
or any adjournment thereof.
UNMARKED PROXIES SHALL BE VOTED IN FAVOR OF EACH OF THE FOREGOING MATTERS
UNLESS SPECIFIED TO THE CONTRARY.
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Receipt of copies of the Annual Report to Stockholders, the Notice of the
Annual Meeting of Stockholders and the Proxy Statement dated May 11, 1994 is
hereby acknowledged.
Dated: ______________________________, 1994
--------------------------------------------
(Signature of Stockholder)
--------------------------------------------
(Signature of Stockholder)
Please date and sign exactly as name appears
on this proxy. Joint owners should each sign.
If the signer is a corporation, please sign
full corporate name by a duly authorized
officer. Executors and trustees should give
full title as such.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE U.S.A.
- -----------------------------------------------------------------------------
<PAGE>
PROXY
MAGMA POWER COMPANY
ANNUAL MEETING OF STOCKHOLDERS, JUNE 21, 1994
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS
The undersigned hereby appoints PAUL M. PANKRATZ and JON R. PEELE, or either
of them, attorneys and proxies to represent the undersigned, with power of
substitution, to appear and vote all of the shares of stock of MAGMA POWER
COMPANY (the "Company") which the undersigned would be entitled to vote if
personally present at the Annual Meeting of Stockholders of the Company to be
held on Tuesday, June 21, 1994 at 10:30 a.m. at the Marriott-La Jolla, 4240 La
Jolla Village Drive, San Diego, California 92037, and any adjournment thereof.
<PAGE>
UNMARKED PROXIES SHALL BE VOTED IN FAVOR OF EACH OF THE FOLLOWING MATTERS
UNLESS SPECIFIED TO THE CONTRARY.
I PLAN TO ATTEND
MEETING
[_] [_]
---------- ---------
ACCOUNT COMMON
NUMBER STOCK
- --------------------------------------------------------------------------------
ITEM 1. ELECTION OF DIRECTORS: Lester L. Coleman, William R. Knee and John D.
Roach
FOR all nominees listed (except WITHHOLD AUTHORITY to
as marked to the contrary vote for all nominees
at right) listed above.
[_] [_]
(INSTRUCTION: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided below.)
- --------------------------------------------------------------------------------
ITEM 2. Approval of the adoption of the 1994 Equity Participation Plan of the
Company:
FOR AGAINST ABSTAIN
[_] [_] [_]
ITEM 3. Ratification of the selection of Coopers & Lybrand as the Company's
auditors for the fiscal year ending December 31, 1994:
FOR AGAINST ABSTAIN
[_] [_] [_]
- --------------------------------------------------------------------------------
ITEM 4. The undersigned confers upon the proxies hereby appointed discretion to
act upon such other business as may properly come before such meeting, or any
adjournment thereof.
Receipt of copies of the Annual Report to Stockholders, the Notice of the Annual
Meeting of Stockholders and the Proxy Statement dated May 11, 1994, is hereby
acknowledged.
Dated: , 1994
--------------------------------------------------------------------
- --------------------------------------------------------------------------------
(Signature of Stockholder)
- --------------------------------------------------------------------------------
(Signature of Stockholder)
PLEASE DATE AND SIGN EXACTLY AS YOUR NAME APPEARS ON THIS PROXY. JOINT OWNERS
SHOULD EACH SIGN. IF THE SIGNER IS A CORPORATION, PLEASE SIGN FULL CORPORATE
NAME BY DULY AUTHORIZED OFFICER. EXECUTORS AND TRUSTEES, ETC. SHOULD GIVE FULL
TITLE AS SUCH.
PLEASE RETURN THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH REQUIRES NO
POSTAGE IF MAILED IN THE U.S.A.
<PAGE>
EXHIBIT 99.2
MAGMA POWER COMPANY
CHANGE IN CONTROL AGREEMENT
The AGREEMENT, dated September __, 1994, is made by and between _________
________________ (hereinafter referred to as the "Executive") and MAGMA POWER
COMPANY (the "Company"), a Nevada corporation.
RECITALS
--------
A. The Board of Directors of the Company (the "Board of Directors") has
determined that it is in the best interest of the Company's shareholders that
appropriate steps should be taken to reinforce and encourage the continued
dedication of the Executive to the Executive's assigned duties without
distraction in case of potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company.
B. In order to induce the Executive to remain in the employ of the Company
and to induce the Executive to give the Executive's continued attention and
dedication to the Executive's assigned duties in the event of a Change in
Control of the Company, the Company desires to provide the Executive with
certain benefits and inducements, as set forth herein.
C. The Executive covenants to perform the Executive's assigned duties with
continued attention, zeal and dedication in the event of a Change in Control of
the Company.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
-----------
Whenever the following terms are used below in this Agreement, they shall
have the meaning specified below, and no other, unless the context clearly
indicates to the contrary. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.
Section 1.1 - Auditors.
"Auditors" shall mean Coopers & Lybrand, or an independent certified public
accounting firm that is duly selected by the Board of Directors and is
acceptable to the Executive.
Section 1.2 - Board of Directors.
"Board of Directors" shall have the meaning provided in the first recital
of this Agreement.
Section 1.3 - Cause.
"Cause" shall mean termination of employment with the Company because of (i)
conviction of a crime involving moral turpitude, (ii) theft or embezzlement of
property from the Company or (iii) willful misconduct or willful failure
substantially to perform the duties of his or her position, provided that the
individual shall have received written notice from the Board of the specific
acts of misconduct or failures to perform and such acts or failure shall have
continued after receipt of such notice.
Section 1.4 - Change in Control.
A "Change in Control" shall be deemed to have occurred in the event of (i)
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's outstanding capital stock, (ii) within any
two-year period, the majority of the members of the Board were to be comprised
of individuals other than those who were members at the beginning of such
Page 2 of 12
<PAGE>
period, unless the members elected during such period were approved by a
majority of the Board in office immediately prior to the beginning of such
period, (iii) all or substantially all of the Company's assets are sold as
an entirety to any person or related group of persons or (iv) 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.
Section 1.5 - Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.6 - Company.
"Company" shall mean Magma Power Company, a Nevada corporation, its
subsidiaries and affiliates, and any successor to its business, whether direct
or indirect, by purchase of securities, merger, consolidation, purchase of all
or substantially all of the Company's assets or otherwise.
Section 1.7 - Date of Termination.
"Date of Termination" shall mean (i) in the case of the Executive's
termination of employment by the Company for Disability, thirty days after
Notice of Termination is given, provided that the Executive shall not have
returned to the performance of the Executive's assigned duties on a full-time
basis during such thirty-day period; or (ii) in the case of termination of
the Executive's employment by the Company for Cause or termination by the
Executive for Good Reason or termination for any other reason, the date
specified in the Notice of Termination, which date shall not be less than
thirty days after the date such Notice of Termination is given.
Section 1.8 - Disability.
"Disability" shall mean absence from performance of assigned duties for
the Company on a full-time basis for six consecutive calendar months as a
result of incapacity due to
Page 3 of 12
<PAGE>
medically documented physical or mental illness; provided that the Executive
shall not have returned to the full-time performance of the Executive's duties
within 30 calendar days of actual receipt of written Notice of Termination
for the reason of Disability. Such Notice of Termination may not be given
prior to the expiration of the six month period of Disability.
Section 1.9 - Executive.
"Executive" shall have the meaning provided in the first paragraph of
this Agreement.
Section 1.10 - Good Reason.
"Good Reason" shall mean the occurrence of any of the following events
without the Executive's express written consent:
(a) the assignment to the Executive of duties inconsistent with the
Executive's position and status as an executive of the Company
immediately prior to a Change in Control, or a substantial adverse
alteration in the nature or status of the Executive's responsibilities
as ____________________ of the Company from those in effect immediately
prior to a Change in Control (other than any such alteration primarily
attributable to the fact that the Company, at the time of such
alteration, is no longer a publicly-held company); or
(b) a reduction by the Company in the Executive's base salary or
targeted bonuses payable under the Company's Management Incentive Plan
("MIP") or other executive bonus plan or arrangement as in effect
immediately prior to the occurrence of a Change in Control or as the
same may be increased from time to time during the term of this
Agreement; or
(c) any purported termination of the employment of the Executive by
the Company which is not effected according to the requirements of a
Notice of Termination as defined in Section 1.11 herein; or
(d) in the case that Executive is assigned to the Company's principal
executive office immediately prior to the Change in Control, a
relocation of the Company's principal executive office more than 50 miles
from its prior location or
Page 4 of 12
<PAGE>
the assignment of the Executive to a location other than the Company's
principal executive office; in the case that Executive is assigned to
a location other than the Company's principal executive office
immediately prior to the Change in Control, assignment of the Executive
to a location more than 50 miles from the Executive's prior location.
Section 1.11 - Notice of Termination.
"Notice of Termination" shall mean a notice, in writing, to the Executive
from the Company or to the Company from the Executive, which indicates the
specific termination provision enumerated in this Agreement relied upon, and
which sets forth in reasonable detail the facts and circumstances alleged to
provide a basis for termination of the Executive's employment by the Company
or by the Executive. Such notice must be communicated to the Executive in
accordance with Section 4.3 herein.
Section 1.12 - Retirement.
"Retirement" shall mean termination of the Executive's employment on or
after the date on which the Executive terminates in accordance with any
retirement agreement/plan entered into between the Executive and the Company.
Section 1.13 - Tax Counsel.
"Tax Counsel" shall mean legal counsel, selected by the Auditors and which
is acceptable to the Executive, for the purpose of rendering legal advice and
services on tax issues arising under this Agreement.
Section 1.14 - Termination Period.
"Termination Period" shall mean the period beginning fifteen days prior to
the occurrence of a Change in Control and ending twenty-four (24) months
following the date of any such occurrence.
Page 5 of 12
<PAGE>
ARTICLE II
TERM
----
This Agreement shall be effective commencing on the date indicated in the
first paragraph of this Agreement and shall continue in effect through December
31, 1997; provided, however, that this initial term may be extended in the sole
discretion of the Compensation Committee of the Board of Directors; and
provided, further, that if a Change in Control shall have occurred during the
term of this Agreement, then this Agreement shall continue in effect for the
lesser of (i) the end of the Termination Period, or (ii) a period ending on the
date of the Retirement of the Executive.
ARTICLE III
BENEFITS AND COMPENSATION
-------------------------
Section 3.1 - When Benefits Payable.
No benefits shall be payable under this Agreement and the provisions of this
Agreement shall be of no force or effect unless there shall have been a Change
in Control, and the Executive's employment with the Company shall have been
terminated within two years after the Change in Control during the term of this
Agreement. If such a Change in Control has occurred and the Executive's
employment with the Company is terminated within two years after the Change in
Control during the term of this Agreement, unless such termination is (i)
because of the death of the Executive, or (ii) by the Executive other than for
Good Reason, the Executive shall be entitled to the benefits enumerated in this
Article 3 no later than 30 days from the Date of Termination, under the
conditions imposed herein. The Executive's rights to the benefits enumerated
under this Article III, and the specific type of benefits to be received, shall
be determined and shall vest upon delivery of the applicable Notice of
Termination, and no event that occurs thereafter (including Executive's death or
disability) shall affect Executive's entitlement to, or the type of, benefits
hereunder. All benefits under this Article III shall be paid within thirty days
of the applicable Date of Termination.
Page 6 of 12
<PAGE>
Section 3.2 - Benefits Upon Disability.
During any period within the term of this Agreement that the Executive is or
becomes subject to a Disability, the Executive shall continue to receive the
Executive's full base compensation and other benefits at the rate then in effect
until the Executive's employment is terminated pursuant to Section 1.11 herein.
After termination for Disability, benefits accruing to the Executive shall be
determined in accordance with the Company's disability policy as in effect
immediately prior to any Change in Control.
Section 3.3 - Benefits Upon Termination for Cause.
In the event that the Executive's employment with the Company is terminated
for Cause, the Executive shall receive the Executive's full base compensation as
earned through the Date of Termination at the rate in effect at the time Notice
of Termination is given. Following payment of said amount, the Company shall
have no further obligations to the Executive under this Agreement.
Section 3.4 - Benefits Upon Retirement.
In the event that the Executive's employment with the Company is terminated
by reason of the Executive's Retirement, the Executive shall be entitled to the
benefits under the Company's regular retirement program, or, if a separate
retirement agreement has been entered into between the Executive and the
Company, benefits shall be provided according to the terms of that agreement.
Section 3.5 - Benefits Upon Termination Other Than For Cause, Retirement or
Disability; or Termination For Good Reason.
In the event that the employment of the Executive shall be terminated during
the term of this Agreement (i) by the Company for any reason other than for
Cause, Disability or Retirement within two years after the occurrence of such
Change in Control or (ii) by the Executive for Good Reason within two years
after the occurrence of such Change in Control, then
(a) the Executive shall be entitled to receive: (I) the Executive's full
base compensation as earned through the Date of Termination at the rate in
effect at the time
Page 7 of 12
<PAGE>
Notice of Termination is given; (II) for a 24-month period after such
termination (or such lesser number of months up to the date of the
Executive's Retirement), group health insurance coverage for the Executive
and his or her dependents substantially the same as that in effect
immediately prior to the Change in Control but increased to the extent that
such benefits were increased following the Change in Control; and (III) a
lump sum payment (the "Severance Payment") from the Company to the Executive
of a dollar amount equal to 200% of the sum of (x) base salary of the
Executive for the twelve month period immediately preceding the Change in
Control (if the Executive has not been employed by the Company for twelve
months, this portion of the Severance Payment shall be equal to 100% of the
annualized base compensation of the Executive during the period for which
the Executive has been employed with the Company) and (y) 100% of both
halves of his or her targeted bonus payable under the Company's MIP or other
executive bonus plan then in effect; and
(b) all deferred shares or similar securities of the Company and all
options to purchase securities of the Company then held by the Executive
shall be immediately vested and exercisable, without regard to whether such
shares or options are vested or exercisable at such time pursuant to the
terms of the documents under which such shares or options were granted;
provided that if such Change in Control is to be accomplished through a
tender offer or an exchange offer, such shares or options shall be vested
and exercisable for a period of time that shall permit the Executive to
tender such shares and/or the shares received upon the exercise of the
options in such tender or exchange offer.
Section 3.6 - Tax Deductibility of Benefit Payments.
In the event that any payment or benefit received or to be received by the
Executive in connection with the termination of the Executive's employment
pursuant to the terms of this Agreement would not be deductible (in whole or in
part) by the Company as a result of the operation of Section 280G of the Code,
the amount of the Severance Payment shall be reduced (but not below zero) until
no portion of the Severance Payment is not deductible as a result of Section
280G of the Code. For purposes of this section, the value of any non-cash
benefit or any deferred cash payment to which the Executive is entitled
hereunder shall be determined by the Auditors in
Page 8 of 12
<PAGE>
accordance with Sections 280G(d)(3) and 280G(d)(4) of the Code. If such a
reduction is deemed necessary, the nature and extent of such reductions
shall be determined by the Auditors with the advice and assistance of the
Tax Counsel, and such determination shall be binding and conclusive,
provided that the Auditors and Tax Counsel consult with the Executive prior
to the final determination, and use their best efforts to ensure that the
final determination comports with the Executive's wishes to the greatest
extent possible. In connection with such determinations, the Executive
shall be entitled to waive any benefit the receipt of which otherwise
would require a reduction in the amount of the Severance Payment under
this Section 3.5.
Section 3.7 - Underpayment of the Severance Payment.
In the event that the initial determination of the Auditors and Tax Counsel
results in a payment to the Executive of a smaller Severance Payment than the
Executive was actually entitled to receive (as determined by the Auditors and
Tax Counsel based on controlling precedent), such underpayment shall be
promptly disbursed to the Executive or for the Executive's benefit together
with interest at the highest rate that will not cause such interest payments
not to be deductible as a result of Section 280G of the Code.
Section 3.8 - Legal Fees and Expenses.
If, following termination of the employment of the Executive within two
years after a Change in Control, the Executive shall incur any legal fees or
expenses as a result of the termination of the Executive's employment
(including any such fees or expenses incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement), the Company shall pay or reimburse the Executive
for all such fees or expenses.
Section 3.9 - No Mitigation.
The Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Agreement be
reduced or offset by any compensation
Page 9 of 12
<PAGE>
earned by the Executive as a result of employment by another employer or by
retirement benefits after the Date of Termination or otherwise.
ARTICLE IV
MISCELLANEOUS
Section 4.1 - Successors; Binding Agreement.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of
the business and/or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken
place. The failure of the Company to obtain such assumption agreement prior
to the effectiveness of any such succession shall be a breach of this
Agreement and shall entitle the Executive to compensation from the Company
in the same amount and on the same terms as the Executive would be entitled
to hereunder if the Executive had terminated the Executive's employment for
Good Reason, except that for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the
Date of Termination.
Section 4.2 - Successors and Assigns.
This Agreement shall inure to the benefit of, and be enforceable by, the
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees of the Executive. If the Executive
should die within two years after a Change in Control and during the term of
this Agreement and while any amount would still be payable to the Executive
hereunder if the Executive had continued to live, all such amounts, unless
otherwise provided herein, shall be paid in accordance with the terms of
this Agreement to the Executive's devisee, legatee or other designee or if
there is no such designee, to the Executive's estate.
Section 4.3 - Notice.
Notices and all communications provided for in this Agreement shall be in
writing and shall be deemed to have been received when delivered or mailed
by United States registered
Page 10 of 12
<PAGE>
mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth at the end of this Agreement, provided
that all notices to the Company shall be directed to the attention of
the Board of Directors with a copy to the Secretary of the Company, or
to such other address as either party may have furnished to the other
in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
Section 4.4 - No Waiver.
No provision of this Agreement may be modified, waived or discharged
unless in writing and signed by the Executive and such officer of the
Company as may be specifically designated or authorized by the Board of
Directors or by a Committee of the Board of Directors. No waiver by
either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to
be performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time.
Section 4.5 - Entire Agreement.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party
which are not expressly set forth in this Agreement and this Agreement
constitutes the entire agreement of the parties.
Section 4.6 - Controlling Law.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of California.
Section 4.7 - Invalid Provision.
The invalidity or unenforceability of any provisions of this Agreement
shall not affect the validity or enforceability of any other provision of
this Agreement, which shall remain in full force and effect.
Page 11 of 12
<PAGE>
Section 4.8 - Counterparts.
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original, and all such counterparts together shall constitute
but one and the same instrument.
Section 4.9 - The Executive's Employment by the Company.
Nothing contained in this Agreement (i) obligates the Company or any
subsidiary of the Company to employ the Executive in any capacity whatsoever,
or (ii) prohibits or restricts the Company (or any such subsidiary) from
terminating the employment, if any, of the Executive at any time or for any
reason whatsoever, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
MAGMA POWER COMPANY, a Nevada Corporation
By: ______________________________________
President and Chief Executive Officer
By: ______________________________________
Secretary of the Corporation
Address:
4365 Executive Drive, Suite 900
San Diego, California 92121
EXECUTIVE
__________________________________________
Address:
__________________________________________
__________________________________________
__________________________________________
Page 12 of 12
<PAGE>
EXHIBIT 99.3
MAGMA POWER COMPANY
CHANGE IN CONTROL AGREEMENT
This AGREEMENT, date September __, 1994, is made by and between,
_________________, (hereinafter referred to as the "Executive") and MAGMA POWER
COMPANY (the "Company"), a Nevada corporation.
RECITALS
A. The Board of Directors of the Company (the "Board of Directors") has
determined that it is in the best interest of the Company's shareholders that
appropriate steps should be taken to reinforce and encourage the continued
dedication of the Executive to the Executive's assigned duties without
distraction in case of potentially disturbing circumstances arising from the
possibility of a Change in Control of the Company.
B. In order to induce the Executive to remain in the employ of the Company
and to induce the Executive to give the Executive's continued attention and
dedication to the Executive's assigned duties in the event of a Change in
Control of the Company, the Company desires to provide the Executive with
certain benefits and inducements, as set forth herein.
C. The Executive covenants to perform the Executive's assigned duties with
continued attention, zeal and dedication in the event of a Change in Control of
the Company.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual covenants herein contained
and other good and valuable consideration, receipt of which is hereby
acknowledged, the Company and the Executive do hereby agree as follows:
<PAGE>
ARTICLE I
DEFINITIONS
Whenever the following terms are used below in this Agreement, they shall
have the meaning specified below, and no other, unless the context clearly
indicates to the contrary. The masculine pronoun shall include the feminine and
neuter, and the singular the plural, where the context so indicates.
Section 1.1-Auditors.
"Auditors" shall mean Coopers & Lybrand, or an independent certified public
accounting firm that is duly selected by the Board of Directors and is
acceptable to the Executive.
Section 1.2-Board of Directors.
"Board of Directors" shall have the meaning provided in the first recital of
this Agreement.
Section 1.3-Cause.
"Cause" shall mean termination of employment with the Company because of (i)
conviction of a crime involving moral turpitude, (ii) theft or embezzlement of
property from the Company or (iii) willful misconduct or willful failure
substantially to perform the duties of his or her position, provided that the
individual shall have received written notice from the Board of the specific
acts of misconduct or failures to perform and such acts or failure shall have
continued after receipt of such notice.
Section 1.4-Change in Control.
A "Change in Control" shall be deemed to have occurred in the event of (i)
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's outstanding capital stock, (ii) within any
two-year period, the majority of the members of the Board were to be comprised
of individuals other than those who were members at the beginning of such
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<PAGE>
period, unless the members elected during such period were approved by a
majority of the Board in office immediately prior to the beginning of such
period, (iii) all or substantially all of the Company's assets are sold as an
entirety to any person or related group of persons or (iv) 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.
Section 1.5-Code.
"Code" shall mean the Internal Revenue Code of 1986, as amended.
Section 1.6-Company.
"Company" shall mean Magma Power Company, a Nevada corporation, its
subsidiaries and affiliates, and any successor to its business, whether direct
or indirect, by purchase of securities, merger, consolidation, purchase of all
or substantially all of the Company's assets or otherwise.
Section 1.7-Date of Termination.
"Date of Termination" shall mean (i) in the case of the Executive's
termination of employment by the Company for Disability, thirty days after
Notice of Termination is given, provided that the Executive shall not have
returned to the performance of the Executive's assigned duties on a full-time
basis during such thirty-day period; or (ii) in the case of termination of the
Executive's employment by the Company for Cause or termination by the Executive
for Good Reason or termination for any other reason, the date specified in the
Notice of Termination, which date shall not be less than thirty days after the
date such Notice of Termination is given.
Section 1.8-Disability.
"Disability" shall mean absence from performance of assigned duties for the
Company on a full-time basis for six consecutive calendar months as a result of
incapacity due to
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<PAGE>
medically documented physical or mental illness; provided that the Executive
shall not have returned to the full-time performance of the Executive's duties
within 30 calendar days of actual receipt of written Notice of Termination for
the reason of Disability. Such Notice of Termination may not be given prior to
the expiration of the six month period of Disability.
Section 1.9-Executive.
"Executive" shall have the meaning provided in the first paragraph of this
Agreement.
Section 1.10-Good Reason.
"Good Reason" shall mean the occurrence of any of the following events
without the Executive's express written consent:
(a) the assignment to the Executive of duties inconsistent with the
Executive's position and status as an executive of the Company immediately
prior to a Change in Control, or a substantial adverse alteration in the
nature or status of the Executive's responsibilities as _______________ of
the Company from those in effect immediately prior to a Change in Control
(other than any such alteration primarily attributable to the fact that the
Company, at the time of such alteration, is no longer a publicly-held
company); or
(b) a reduction by the Company in the Executive's base salary or
targeted bonuses payable under the Company's Management Incentive Plan
("MIP") or other executive bonus plan or arrangement as in effect
immediately prior to the occurrence of a Change in Control or as the same
may be increased from time to time during the term of this Agreement; or
(c) any purported termination of the employment of the Executive by the
Company which is not effected according to the requirements of a Notice of
Termination as defined in Section 1.11 herein; or
(d) in the case that Executive is assigned to the Company's principal
executive office immediately prior to the Change in Control, a relocation of
the Company's principal executive office more than 50 miles from its prior
location or the assignment of
Page 4 of 12
<PAGE>
the Executive to a location other than the Company's principal executive
office; in the case that Executive is assigned to a location other than the
Company's principal executive office immediately prior to the Change in
Control, assignment of the Executive to a location more than 50 miles from
the Executive's prior location.
Section 1.11-Notice of Termination.
"Notice of Termination" shall mean a notice, in writing, to the Executive
from the Company or to the Company from the Executive, which indicates the
specific termination provision enumerated in this Agreement relied upon, and
which sets forth in reasonable detail the facts and circumstances alleged to
provide a basis for termination of the Executive's employment by the Company or
by the Executive. Such notice must be communicated to the Executive in
accordance with Section 4.3 herein.
Section 1.12-Retirement.
"Retirement" shall mean termination of the Executive's employment on or
after the date on which the Executive terminates in accordance with any
retirement agreement/plan entered into between the Executive and the Company.
Section 1.13-Tax Counsel.
"Tax Counsel" shall mean legal counsel, selected by the Auditors and which
is acceptable to the Executive, for the purpose of rendering legal advice and
services on tax issues arising under this Agreement.
Section 1.14-Termination Period.
"Termination Period" shall mean the period beginning fifteen days prior to
the occurrence of a Change in Control and ending twenty-four (24) months
following the date of any such occurrence.
Page 5 of 12
<PAGE>
ARTICLE II
TERM
This Agreement shall be effective commencing on the date indicated in the
first paragraph of this Agreement and shall continue in effect through December
31, 1997; provided, however, that this initial term may be extended in the sole
discretion of the Compensation Committee of the Board of Directors; and
provided, further, that if a Change in Control shall have occurred during the
term of this Agreement, then this Agreement shall continue in effect for the
lesser of (i) the end of the Termination Period, or (ii) a period ending on the
date of the Retirement of the Executive.
ARTICLE III
BENEFITS AND COMPENSATION
Section 3.1-When Benefits Payable.
No benefits shall be payable under this Agreement and the provisions of this
Agreement shall be of no force or effect unless there shall have been a Change
in Control, and the Executive's employment with the Company shall have been
terminated within two year after the Change in Control during the term of this
Agreement. If such a Change in Control has occurred and the Executive's
employment with the Company is terminated within two years after the Change in
Control during the term of this Agreement, unless such termination is (i)
because of the death of the Executive, or (ii) by the Executive other than for
Good Reason, the Executive shall be entitled to the benefits enumerated in this
Article 3 no later than 30 days from the Date of Termination, under the
conditions imposed herein. The Executive's rights to the benefits enumerated
under this Article III, and the specific type of benefits to be received, shall
be determined and shall vest upon delivery of the applicable Notice of
Termination, and no event that occurs thereafter (including Executive's death or
disability) shall affect Executive's entitlement to, or the type of, benefits
hereunder. All benefits under this Article III shall be paid within thirty days
of the applicable Date of Termination.
Page 6 of 12
<PAGE>
Section 3.2-Benefits Upon Disability.
During any period within the term of this Agreement that the Executive is or
becomes subject to a Disability, the Executive shall continue to receive the
Executive's full base compensation and other benefits at the rate then in effect
until the Executive's employment is terminated pursuant to Section 1.11 herein.
After termination for Disability, benefits accruing to the Executive shall be
determined in accordance with the Company's disability policy as in effect
immediately prior to any Change in Control.
Section 3.3-Benefits Upon Termination for Cause.
In the event that the Executive's employment with the Company is terminated
for Cause, the Executive shall receive the Executive's full base compensation as
earned through the Date of Termination at the rate in effect at the time Notice
of Termination is given. Following payment of said amount, the Company shall
have no further obligations to the Executive under this Agreement.
Section 3.4-Benefits Upon Retirement.
In the event that the Executive's employment with the Company is terminated
by reason of the Executive's Retirement, the Executive shall be entitled to the
benefits under the Company's regular retirement program, or, if a separate
retirement agreement has been entered into between the Executive and the
Company, benefits shall be provided according to the terms of that agreement.
Section 3.5-Benefits Upon Termination Other Than For Cause, Retirement or
Disability; or Termination For Good Reason.
In the event that the employment of the Executive shall be terminated during
the term of this Agreement (i) by the Company for any reason other than for
Cause, Disability or Retirement within two years after the occurrence of such
Change in Control or (ii) by the Executive for Good Reason within two years
after the occurrence of such Change in Control, then
(a) the Executive shall be entitled to receive: (I) the Executive's full
base compensation as earned through the Date of Termination at the rate in
effect at the time
Page 7 of 12
<PAGE>
Notice of Termination is given; (II) for a 12-month period after such
termination (or such lesser number of months up to the date of the
Executive's Retirement), group health insurance coverage for the Executive
and his or her dependents substantially the same as that in effect
immediately prior to the Change in Control but increased to the extent that
such benefits were increased following the Change in Control; and (III) a
lump sum payment (the "Severance Payment") from the Company to the Executive
of a dollar amount equal to 100% of the sum of (x) base salary of the
Executive for the twelve month period immediately preceding the Change in
Control (if the Executive has not been employed by the Company for twelve
months, this portion of the Severance Payment shall be equal to 100% of the
annualized base compensation of the Executive during the period for which
the Executive has been employed with the Company) and (y) 100% of both
halves of his or her targeted bonus payable under the Company's MIP or other
executive bonus plan then in effect; and
(b) all deferred shares or similar securities of the Company and all
options to purchase securities of the Company then held by the Executive
shall be immediately vested and exercisable, without regard to whether such
shares or options are vested or exercisable at such time pursuant to the
terms of the documents under which such shares or options were granted;
provided that if such Change in Control is to be accomplished through a
tender offer or an exchange offer, such shares or options shall be vested
and exercisable for a period of time that shall permit the Executive to
tender such shares and/or the shares received upon the exercise of the
options in such tender or exchange offer.
Section 3.6-Tax Deductibility of Benefit Payments.
In the event that any payment or benefit received or to be received by the
Executive in connection with the termination of the Executive's employment
pursuant to the terms of this Agreement would not be deductible (in whole or in
part) by the Company as a result of the operation of Section 280G of the Code,
the amount of the Severance Payment shall be reduced (but not below zero) until
no portion of the Severance Payment is not deductible as a result of Section
280G of the Code. For purposes of this section, the value of any non-cash
benefit or any deferred cash payment to which the Executive is entitled
hereunder shall be determined by the Auditors in
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<PAGE>
accordance with Sections 280G(d)(3) and 280G(d)(4) of the Code. If such a
reduction is deemed necessary, the nature and extent of such reductions shall be
determined by the Auditors with the advice and assistance of the Tax Counsel,
and such determination shall be binding and conclusive, provided that the
Auditors and Tax Counsel consult with the Executive prior to the final
determination, and use their best efforts to ensure that the final determination
comports with the Executive's wishes to the greatest extent possible. In
connection with such determinations, the Executive shall be entitled to waive
any benefit the receipt of which otherwise would require a reduction in the
amount of the Severance Payment under this Section 3.5.
Section 3.7-Underpayment of the Severance Payment.
In the event that the initial determination of the Auditors and Tax Counsel
results in a payment to the Executive of a smaller Severance Payment than the
Executive was actually entitled to receive (as determined by the Auditors and
Tax Counsel based on controlling precedent), such underpayment shall be promptly
disbursed to the Executive or for the Executive's benefit together with interest
at the highest rate that will not cause such interest payments not to be
deductible as a result of Section 280G of the Code.
Section 3.8-Legal Fees and Expenses.
If, following termination of the employment of the Executive within two
years after a Change in Control, the Executive shall incur any legal fees or
expenses as a result of the termination of the Executive's employment
(including any such fees or expenses incurred in contesting or disputing any
such termination or in seeking to obtain or enforce any right or benefit
provided by this Agreement), the Company shall pay or reimburse the Executive
for all such fees or expenses.
Section 3.9-No Mitigation.
The Executive shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment or benefit provided for in this Agreement be
reduced or offset by any compensation
Page 9 of 12
<PAGE>
earned by the Executive as a result of employment by another or by retirement
benefits after the Date of Termination or otherwise.
ARTICLE IV
MISCELLANEOUS
Section 4.1-Successors: Binding Agreement.
The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. The failure of
the Company to obtain such assumption agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation from the Company in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive had
terminated the Executive's employment for Good Reason, except that for purposes
of implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination.
Section 4.2-Successors and Assigns.
This Agreement shall inure to the benefit of, and be enforceable by, the
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees of the Executive. If the Executive should
die within two years after a Change in Control and during the term of this
Agreement and while any amount would still be payable to the Executive hereunder
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the Executive's devisee, legatee or other designee or if there is no such
designee, to the Executive's estate.
Section 4.3-Notice.
Notices and all communications provided for in this Agreement shall be in
writing and shall be deemed to have been received when delivered or mailed by
United States registered
Page 10 of 12
<PAGE>
mail, return receipt requested, postage prepaid, addressed to the respective
addresses set forth at the end of this Agreement, provided that all notices to
the Company shall be directed to the attention of the Board of Directors with a
copy to the Secretary of the Company, or to such other address as either party
may have furnished to the other in writing in accordance herewith, except that
notice of change of address shall be effective only upon receipt.
Section 4.4-No Waiver.
No provision of this Agreement may be modified, waived or discharged unless
in writing and signed by the Executive and such officer of the Company as may be
specifically designated or authorized by the Board of Directors or by a
Committee of the Board of Directors. No waiver by either party hereto at any
time of any breach by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be performed by such other party
shall be deemed a waiver of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time.
Section 4.5-Entire Agreement.
No agreements or representations, oral or otherwise, express or implied,
with respect to the subject matter hereof have been made by either party which
are not expressly set forth in this Agreement and this Agreement constitutes the
entire agreement of the parties.
Section 4.6-Controlling Law.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the State of California.
Section 4.7-Invalid Provision.
The invalidity or unenforceability of any provisions of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.
Page 11 of 12
<PAGE>
Section 4.8-Counterparts.
This Agreement may be executed in several counterparts, each of which shall
be deemed to be an original, and all such counterparts together shall constitute
but one and the same instrument.
Section 4.9-The Executive's Employment by the Company.
Nothing contained in this Agreement (i) obligates the Company or any
subsidiary of the Company to employ the Executive in any capacity whatsoever, or
(ii) prohibits or restricts the Company (or any such subsidiary) from
terminating the employment, if any, of the Executive at any time or for any
reason whatsoever, with or without cause.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first set forth above.
MAGMA POWER COMPANY, a Nevada Corporation
By:______________________________________
President and Chief Executive Officer
By:______________________________________
Secretary of the Corporation
Address:
4365 Executive Drive, Suite 900
San Diego, California 92121
EXECUTIVE
_________________________________________
Address:
_________________________________________
_________________________________________
_________________________________________
Page 12 of 12
<PAGE>
EXHIBIT 99.4
INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("Agreement") is made as of this ____ day
of ________, 1994 by and between Magma Power Company, a Nevada corporation
(the "Company") and ________________________ ("Indemnitee").
WHEREAS, highly competent persons are becoming more reluctant to serve
publicly-held corporations as directors unless they are provided with
adequate protection through insurance or adequate indemnification against
inordinate risks of claims and actions against them arising out of their
service to and activities on behalf of the corporation; and
WHEREAS, the current impracticability of obtaining adequate insurance and
the uncertainties relating to indemnification have increased the difficulty
of attracting and retaining such persons;
WHEREAS, the Board of Directors of the Company has determined that the
inability to attract and retain such persons is detrimental to the best
interests of the Company's stockholders and that the Company should act to
assure such persons that there will be increased certainty of such protection
in the future; and
WHEREAS, Indemnitee is willing to serve and continue to serve as a
director of the Company on the condition that he be so indemnified;
NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:
1. Indemnification.
(a) Third Party Proceedings. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director of the Company or any subsidiary of the Company, by reason of any
action or inaction on the part of Indemnitee while a director of the Company
or any subsidiary of the Company, by reason of the fact that the Indemnitee is
or was an officer of the Company or any subsidiary of the Company, or by
reason of the fact that Indemnitee is or was serving at the request of the
Company as a director of another corporation or other enterprise, against
expenses (including without limitation attorneys' fees, disbursements and
retainers, accounting and witness fees, travel and deposition costs,
expenses of investigations, judicial or administrative proceedings or appeals
actually and reasonably incurred by him in connection with the defense or
settlement thereof), judgments, fines, penalties, excise taxes under the
Employee Retirement Income Security Act of 1974, as amended ("ERISA") and
amounts paid in settlement (if such settlement is approved in advance by the
Company, which approval shall not be unreasonably withheld) actually and
reasonably incurred by Indemnitee in connection with such action or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in the best interests of the Company,
or, with respect to any criminal action or proceeding, had no reasonable cause
to believe that Indemnitee's conduct was unlawful.
(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding
by or in the right of the Company or any subsidiary of the Company to
procure a judgment in its favor by reason of the fact that Indemnitee is or
was a director of the Company or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while a director of the
Company or any
<PAGE>
subsidiary of the Company, by reason of the fact that the Indemnitee is or was
an officer of the Company or any subsidiary of the Company, or by reason of the
fact that Indemnitee is or was serving at the request of the Company as a
director of another corporation or other enterprise, against expenses (including
without limitation attorneys' fees, disbursements and retainers, accounts and
witness fees, travel and deposition costs, expenses of investigation, judicial
or administrative proceedings, or appeals actually and reasonably incurred by
him in connection with the defense or settlement thereof) and, to the fullest
extent permitted by law, amounts paid in settlement, in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense or
settlement of such action or proceeding if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in or not opposed to the best
interests of the Company and its shareholders, except that no indemnification
shall be made in respect of any claim, issue or matter as to which Indemnitee
shall have been adjudged to be liable to the Company in the performance of
Indemnitee's duty to the Company and its shareholders unless and only to the
extent that the court in which such action or proceeding is or was pending shall
determine upon application that, in view of all the circumstances of the case,
Indemnitee is fairly and reasonably entitled to indemnity for expenses and then
only to the extent that the court shall determine.
2. Agreement to Serve. Indemnitee agrees to continue to serve as a director
of the Company and/or the Company's subsidiaries, as the case may be, so long as
he is duly appointed or elected and qualified in accordance with the applicable
provisions of the By-laws of the Company or any subsidiary of the Company or
until such time as he tenders his registration in writing. Nothing contained in
this Agreement is intended to create in Indemnitee any right to continued
employment.
3. Expenses; Indemnification Procedure.
(a) Advancement of Expenses. The Company shall advance all expenses incurred
by Indemnitee in connection with the investigation, defense, settlement or
appeal of any civil or criminal action or proceeding referenced herein (but only
amounts actually paid in settlement of any such action or proceeding).
Indemnitee hereby undertakes to repay such amounts advanced only if, and to the
extent that, it shall ultimately be determined that Indemnitee is not entitled
to be indemnified by the Company as authorized hereby. The advances to be made
hereunder shall be paid by the Company to Indemnitee within twenty (20) days
following delivery of a written request therefor by Indemnitee to the Company.
(b) Notice/Cooperation by Indemnitee. Indemnitee shall give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the President of the Company at the address
shown on the signature page of this Agreement (or such other address as the
Company shall designate in writing to the Indemnitee). Notice shall be deemed
received three business days after the date postmarked if sent by domestic
certified or registered mail, properly addressed; otherwise notice shall be
deemed received when such notice shall actually be received by the Company. The
omission to so notify the Company will not relieve the Company from any
liability which it may have under this Agreement or otherwise. In addition,
Indemnitee shall give the Company such information and cooperation as it may
reasonably require and as shall be within Indemnitee's power.
(c) Procedure. Any indemnification under this Agreement, other than pursuant
to Section 4, shall be made no later than 45 days after receipt by the Company
of the written request of Indemnitee, accompanied by substantiating
documentation, unless a determination is made within said 45-day period by (1)
the Board of Directors by a majority vote of a quorum consisting of directors
who are or were not parties to such Proceeding, or (2) independent legal counsel
in a written opinion (which counsel shall be appointed if such quorum is not
obtainable), that Indemnitee has not met the relevant standards for
indemnification set forth herein.
In the event the Company does not indemnify Indemnitee within such 45-day
period, whether or not the Company (including its Board of Directors or
independent legal counsel) has made a determination that
2
<PAGE>
Indemnitee has not met the applicable standard of conduct, Indemnitee may at any
time thereafter bring suit against the Company to recover the unpaid amount in
any court of competent jurisdiction. The burden of proving by clear and
convincing evidence that indemnification is not appropriate shall be on the
Company. Neither the failure of the Company (including its Board of Directors or
independent legal counsel) to have made a determination prior to the
commencement of such action that indemnification is proper in the circumstances
because Indemnitee has met the applicable standard of conduct, nor an actual
determination by the Company (including its Board of Directors or independent
legal counsel) that Indemnitee has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that Indemnitee has not
met the applicable standard of conduct. Indemnitee's expenses reasonably
incurred in connection with successfully establishing his right to
indemnification hereunder, in whole or in part, shall also be indemnified by the
Company.
(d) Notice to Insurers. If, at the time of receipt of a notice of a claim
pursuant to Section 3(b) hereof, the Company has director and officer liability
insurance in effect, the Company shall give prompt notice of the commencement of
such proceeding to the insurers in accordance with the procedures set forth in
the respective policies. The Company shall thereafter take all necessary or
desirable action to cause such insurers to pay, on behalf of the Indemnitee, all
amounts payable as a result of such proceeding in accordance with the terms of
such policies.
4. Additional Indemnification Rights; Nonexclusivity.
(a) Scope. Notwithstanding any other provision of this Agreement, the
Company agrees to indemnify the Indemnitee to the fullest extent permitted by
law, notwithstanding that such indemnification is not specifically authorized by
the other provisions of this Agreement, the Company's or any subsidiary's
Articles of Incorporation, the Company's or any subsidiary's Bylaws or by
statute. In the event of any change, after the date of this Agreement, in any
applicable law, statute or rule which expands the right of a Nevada
corporation to indemnify a member of its board of directors, such changes shall
be, ipso facto, within the purview of Indemnitee's rights and Company's
obligations, under this Agreement. In the event of any change in any applicable
law, statute or rule which narrows the right of a Nevada corporation to
indemnify a member of its Board of Directors, such changes, to the extent not
otherwise required by such law, statute or rule to be applied to this Agreement
shall have no effect on this Agreement or the parties' rights and obligations
hereunder.
(b) Nonexclusivity. The indemnification provided by this Agreement shall not
be deemed exclusive of any rights to which Indemnitee may be entitled under the
Company's Articles of Incorporation, its Bylaws, any agreement, any vote of
shareholders or disinterested directors, the General Corporation Law of the
State of Nevada, or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action or
other covered proceeding.
5. Partial Indemnification. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
judgments, fines, penalties, ERISA excise taxes or amounts paid in settlement
actually or reasonably incurred by him in any civil or criminal action or
proceeding, or the settlement thereof, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such judgments, fines, penalties, ERISA excise taxes or amounts paid in
settlement to which Indemnitee is entitled and shall indemnify Indemnitee for
100% of the expenses (including without limitation attorneys' fees,
disbursements and retainers, accounting and witness fees, travel and deposition
costs, expenses of investigations, judicial or administrative proceedings or
appeals) actually and reasonably incurred by him in connection with the defense
of any such civil or criminal action or proceeding.
3
<PAGE>
6. Mutual Acknowledgment. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors under this Agreement or otherwise.
Indemnitee understands and acknowledges that the Company has undertaken or may
be required in the future to undertake with the Securities and Exchange
Commission to submit the question of indemnification to a court in certain
circumstances for a determination of the Company's right under public policy to
indemnify Indemnitee.
7. Directors' and Officers' Liability Insurance. The Company shall, from
time to time, make the good faith determination whether or not it is practicable
for the Company to obtain and maintain a policy or policies of insurance with
reputable insurance companies providing the officers and directors of the
Company with coverage for losses from wrongful acts, or to ensure the Company's
performance of its indemnification obligations under this Agreement. Among
other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, or if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit.
8. Severability. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to perform
its obligations under this Agreement shall not constitute a breach of this
Agreement. The provisions of this Agreement shall be severable as provided in
this Section 8. If this Agreement or any portion hereof shall be invalidated on
any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. Exceptions. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:
(a) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement, under any provision of the Articles of Incorporation or the
Bylaws of the Company or under or any of the Nevada General Corporation Law,
but such indemnification or advancement of expenses may be provided by the
Company in specific cases if the Board of Directors has approved the
initiation or bringing of such suit; or
(b) Lack of Good Faith. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
or
(c) Insured Claims. To indemnify Indemnitee for expenses or liabilities
of any type whatsoever (including, but not limited to: judgments, fines,
penalties or ERISA excise taxes, and amounts paid in settlement) which have
been paid directly to Indemnitee by an insurance carrier under a policy of
directors' and officers' liability maintained by the Company; or
(d) Claims Under Section 16(b). To indemnify Indemnitee for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar provisions of any federal, state or local
statutory law; or
4
<PAGE>
(e) To indemnify the Indemnitee for any expenses or liabilities of any
type whatsoever (including but not limited to: judgments, fines, penalties
or ERISA excise taxes and amounts paid in settlement) for which the
Indemnitee has been or is indemnified by the Company otherwise than pursuant
to this Agreement.
10. Effectiveness of Agreement. This Agreement shall be effective as of the
date set forth on the first page and will apply to acts or omissions of
Indemnitee which occurred prior to such date if Indemnitee was a director of
the Company at the time such act or omission occurred.
11. Construction of Certain Phrases. For purposes of this Agreement,
references to the "Company" shall include, in addition to the resulting
corporation, any constituent corporation (including any constituent of a
constituent) absorbed in a consolidation or merger with, if its separate
existence had continued, would have had power and authority to indemnify its
directors so that if Indemnitee is or was a director of such constituent
corporation, or is or was serving at the request of such constituent corporation
as a director of another corporation or other enterprise, Indemnitee shall stand
in the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
12. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
13. Successors and Assigns. This Agreement shall be binding upon the Company
and its successors and assigns, and shall inure to the benefit of Indemnitee
and Indemnitee's estate, heirs, legal representatives and assigns.
14. Attorneys' Fees. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement or to enforce
or interpret any of the terms of this Agreement, Indemnitee shall be entitled
to be paid all court costs and expenses, including attorneys' fees, incurred
by Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court determines that each of the Indemnitee's material defenses
to such action were made in bad faith or were frivolous.
15. Notice. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of
such receipt, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked. Addresses
for notice to either party are as shown on the signature page of this Agreement,
or as subsequently modified by written notice.
16. Consent to Jurisdiction. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Nevada for
all purposes in connection with any action or proceeding which arises out of or
relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of Nevada.
17. Choice of Law. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Nevada as applied to
contracts between Nevada residents entered into and to be performed entirely
within Nevada.
5
<PAGE>
18. Subrogation. In the event of any payment under this Agreement to or
on behalf of the Indemnitee, the Company shall be subrogated to the extent
of such payment to all of the rights of recovery of the Indemnitees against
any person, firm, corporation or other entity (other than the Company) and
the Indemnitee shall execute all papers requested by the Company and shall
do any and all things that may be necessary or desirable to secure such
rights for the Company, including the execution of such documents necessary
or desirable to enable the Company to effectively bring suit to enforce
such rights.
19. Subject Matter and Parties. The intended purpose of this Agreement is
to provide for indemnification and advancement of expenses, and this Agreement
is not intended to affect any other aspect of any relationship between the
Indemnitee and the Company and is not intended to and shall not create any
rights in any person as a third party beneficiary hereunder.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
Magma Power Company
4365 Executive Drive, Suite 900
San Diego, CA 92121
By: _____________________________
Title: _____________________________
AGREED TO AND ACCEPTED:
INDEMNITEE:
- -----------------------------------
(type name)
- -----------------------------------
(signature)
- -----------------------------------
- -----------------------------------
(address)
6
<PAGE>
EXHIBIT 99.5
[LETTERHEAD OF MAGMA POWER COMPANY]
October 11, 1994
Dear Fellow Magma Stockholder:
On October 6, 1994, California Energy Company commenced an unsolicited tender
offer to purchase 12,400,000 shares (approximately 51%) of Magma Power's
outstanding common stock. The California Energy offer states that it is the
first step of a plan to acquire 100% of Magma and merge it with California
Energy in a transaction in which the remaining shares will receive a mix of
cash and shares of California Energy.
After extensive analysis and for the reasons set forth below and in the
accompanying statement on Schedule 14D-9, your Board of Directors has
unanimously determined that the California Energy offer is not in the best
interests of Magma's stockholders.
YOUR BOARD STRONGLY RECOMMENDS THAT YOU REJECT THE OFFER AND NOT TENDER YOUR
SHARES TO CALIFORNIA ENERGY.
BACKGROUND
The public statements of California Energy have implied that our two
companies have been engaged over the past three years in sporadic negotiations
about a business combination transaction. Let us set the record straight. Three
years ago the two companies held brief and unproductive negotiations on this
topic. No authorized negotiations have taken place since then. The record is
set forth in full in the section entitled "Background" in the accompanying
Schedule 14D-9 which we urge you to read in its entirety.
AN INDEPENDENT MAGMA WILL PRODUCE GREATER VALUE
In arriving at its recommendation, your Board carefully reviewed Magma's
business, financial condition and future prospects. This review process
demonstrated and reaffirmed the Board's conviction that an independent Magma
will best serve its stockholders by creating greater long-term value for
stockholders than a sale of Magma pursuant to the California Energy offer.
Over the past several years, Magma has emerged as an internationally
recognized leader in the development of renewable power from geothermal energy
based on a strong balance sheet, disciplined focus on core objectives,
management expertise and outstanding resource management. We fully expect a
bright and profitable future for Magma to emerge from our strategy to grow by
expanding our existing domestic operations, building our international
opportunities and capitalizing on our outstanding technological, financial and
competitive position. Your Board firmly believes that the benefits of Magma's
existing projects and initiatives have not yet been fully reflected in the
market -- they certainly are not reflected in California Energy's offer.
OPPORTUNISTIC OFFER
Your Board believes that California Energy's offer is an opportunistic
attempt by a highly-leveraged company to acquire Magma at a price that your
Board of Directors has determined to be inadequate and less attractive to Magma
and its stockholders than remaining independent.
In making its offer at this time, California Energy is trying to buy Magma at
a bargain price that does not remotely reflect Magma's intrinsic value and the
long-term strategic promise of which California Energy is well aware. In
effect, California Energy hopes to finance its partial acquisition off the
strength of Magma's
<PAGE>
balance sheet in order to purchase Magma at a time that is most advantageous to
California Energy and deprive Magma stockholders of their current stake in
Magma's bright future.
HIGHLY CONDITIONAL OFFER
California Energy's offer is highly conditional. It is conditioned upon:
.obtaining at least $300 million of "secured" debt financing. No source for
this financing has been identified by California Energy, but its
financial advisor has stated that it "believes" financing can be
arranged "on a timely basis";
.obtaining the approval of California Energy's stockholders who according
to the California Energy offer will meet, at the earliest, in mid-
November 1994;
.entering into a merger agreement approved by your Board of Directors;
.the offer not adversely affecting any material contract rights of Magma;
and
.nine additional conditions.
COERCIVE OFFER
The California Energy offer provides all cash of $35 per share to Magma
stockholders who tender, while providing a mix of cash (approximately $15 per
share) and California Energy common stock to those who do not tender and
receive consideration through a back-end merger. The effect of this structure
is to coerce stockholders to surrender their shares in Magma for an inadequate
price, leading to a back-end merger in which stockholders would be left with
shares in an even more highly leveraged California Energy--a company that will
be burdened by high debt service at a time when it will need free cash to
invest in the future. The California Energy offer does not afford any
protection to Magma stockholders for future risk associated with an ownership
interest in such a highly-leveraged entity.
OTHER FACTORS
In making its recommendation, your Board took into account a number of
factors other than those listed above, including the opinion of Goldman, Sachs
& Co. that the consideration provided for in the California Energy offer is
inadequate. In addition, your Board took into account and considered the
interests of certain customers and partners of Magma, and the effect that the
offer might have on the combined businesses of Magma and California Energy.
Your Board is dedicated to serving your interest. We do not believe that it
is in your interest to sacrifice the results of Magma's prudent and successful
strategy and the wealth of assets that constitute Magma's bright and promising
future for the illusory promises of California Energy's offer.
Please read carefully the enclosed Schedule 14D-9 and press release which
describe in depth your Board's recommendation and other important matters.
Be assured that your Board and management will continue to act with your best
interests in mind.
We greatly appreciate your continued support and encouragement.
Sincerely,
Paul M. Pankratz Ralph W. Boeker
Chairman President and C.E.O.
<PAGE>
EXHIBIT 99.6
[LETTERHEAD OF MAGMA POWER COMPANY]
FOR IMMEDIATE RELEASE CONTACT: THOMAS DAVIES
ANDREA
BERGOFIN
KEKST &
COMPANY
(212) 593-2655
(619) 622-7800
MAGMA BOARD RECOMMENDS REJECTION
OF CALIFORNIA ENERGY TENDER OFFER
San Diego, CA October 10, 1994--Magma Power Company's (NASDAQ: MGMA) board of
directors today unanimously determined that California Energy Company's
unsolicited tender offer to purchase approximately 51 percent of Magma Power's
outstanding common stock is not in the best interests of Magma stockholders.
Accordingly, Magma's board today recommended that Magma stockholders reject the
offer and not tender their shares to California Energy.
Ralph Boeker, president and chief executive officer of Magma, said: "The
board believes that California Energy's offer is an opportunistic attempt by a
highly leveraged company to acquire Magma at a price that the board of
directors has determined to be inadequate and less attractive to Magma and its
stockholders than remaining independent."
In rejecting the offer, Magma's board also considered a variety of other
factors, including:
(i) the coercive nature of the California Energy offer, which provides
all cash at $35 per share to Magma stockholders who tender, while providing
a mix of cash (approximately $15 per share) and California Energy common
stock to those who do not tender and receive consideration through a back-
end merger, and,
(ii) the highly conditional nature of the California Energy offer which
is contingent on, among other things, obtaining financing, California
Energy stockholder approval and a friendly merger agreement.
Mr. Boeker added: "In making its offer at this time, California Energy is
trying to buy Magma at a bargain price that does not remotely reflect Magma's
intrinsic value and long-term strategic promise of which California Energy is
well aware. In effect, California Energy hopes to finance its partial
acquisition off the strength of Magma's balance sheet in order to purchase
Magma at a time that is most advantageous to California Energy and deprive
Magma stockholders of their current stake in Magma's bright future.
"The board believes that a careful review of California Energy's offer
clearly reveals that it is highly conditional and not in Magma stockholders'
best interests. The effect of limiting the offer to 51 percent of Magma's
common stock is to coerce stockholders to surrender their shares in Magma for
an inadequate price, leading to a back-end merger in which stockholders would
be left with shares in an even more highly leveraged California Energy--a
company that will be burdened by high debt service at a time when it will need
free cash to invest in the future. The California Energy offer does not offer
any protection to Magma stockholders for future risk associated with an
ownership interest in such a highly-leveraged entity," Mr. Boeker continued.
Paul Pankratz, chairman of the board of Magma, said: "Over the past several
years, Magma has emerged as an internationally recognized leader in the
development of renewable power from geothermal energy owing to its strong
balance sheet, disciplined focus on core objectives, management expertise and
outstanding resource management. The board firmly believes that the benefits of
Magma's existing projects and initiatives as well as its future opportunities
have not yet been fully reflected in the market--and certainly are not
reflected in California Energy's offer.
<PAGE>
"We fully expect a bright and profitable future for Magma to emerge from our
strategy to grow by expanding our existing domestic operations, building our
international opportunities, and capitalizing on our outstanding technological,
financial and competitive position," Mr. Pankratz concluded.
In arriving at its recommendation, the board carefully reviewed Magma's
business, financial condition and future prospects as well as the opinion of
its independent financial advisor, Goldman, Sachs & Co., that the offer was
inadequate. Among other things, the board took into account and considered the
interests of certain customers and partners of Magma, and the effect that the
offer might have on the combined businesses of Magma and California Energy.
Mr. Pankratz said: "Magma's board is dedicated to serving its stockholders'
interests which the board does not believe are best served by sacrificing the
results of Magma's prudent and successful strategy and the wealth of assets
that constitute the company's bright and promising future for the illusory
promises, and real burdens, of California Energy's offer."
Magma will file a formal response with the Securities and Exchange Commission
on Tuesday, October 11 and mail the response and a letter from the company to
its stockholders. In the letter, Magma will refute the impression created by
California Energy's public statements that the two companies have been engaged
in negotiations about a business combination at any time over the last two
years.
In response and with respect to the California Energy offer, Magma's board of
directors also deferred the "distribution date" under its Shareholders Rights
Plan until the earlier of (i) when the Magma board so determines or (ii) when
California Energy acquires 10 percent of Magma's stock.
Magma Power Company is a leader in the geothermal industry. The company
currently operates seven geothermal power plants in Southern California on
geothermal leaseholds and fee interests held by the company, and holds
additional geothermal leasehold and fee interests in other parts of California
and Nevada. Magma is also currently constructing three power plants in the
Philippines with a total capacity of 231 MW.
<PAGE>
EXHIBIT 99.7
October 6, 1994
Amendments to Bylaws
of
Magma Power Company
RESOLVED, that Article I, Section 9, of the Bylaws of this Corporation
shall be amended to read:
SECTION 9. No Consent of Stockholders in Lieu of Meeting. To the fullest
---------------------------------------------
extent permitted by law, and notwithstanding anything in these Bylaws expressly
or impliedly to the contrary, any action required or permitted to be taken by
the stockholders must be effected at a duly called annual or special meeting of
the stockholders and may not be effected by any consent in writing of the
stockholders.
RESOLVED FURTHER, that Article IV, Section 5, of the Bylaws of this
Corporation shall be amended to read:
SECTION 5. Record Date. In order that the Corporation may determine
-----------
the stockholders entitled to notice of or to vote at any meeting of stockholders
or any adjournment thereof, or entitled to receive payment of any dividend or
other distribution or allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of stock or for the
purpose of any other lawful action, the Board may fix, in advance, a record
date, which shall not be more than 60 days nor less than 10 days before the date
of such meeting, nor more than 60 days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of such meeting;
provided, however, that the Board may fix a new record date for such
- -------- -------
adjourned meeting.
<PAGE>
EXHIBIT 99.8
- --------------------------------------------------------------------------------
MAGMA POWER COMPANY
and
CHEMICAL TRUST COMPANY OF CALIFORNIA
Rights Agent
- --------------------------------------------------------------------------------
Rights Agreement
Dated as of October 6, 1994
- --------------------------------------------------------------------------------
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SECTION 1. Certain Definitions............................ 1
SECTION 2. Appointment of Rights Agent.................... 4
SECTION 3. Issue of Rights Certificates................... 4
SECTION 4. Form of Rights Certificates.................... 5
SECTION 5. Countersignature and Registration.............. 6
SECTION 6. Transfer, Split Up, Combination and Exchange
of Rights Certificates;
Mutilated, Destroyed, Lost or Stolen Rights
Certificates................................... 7
SECTION 7. Exercise of Rights; Purchase Price; Expiration
Date of Rights................................. 7
SECTION 8. Cancellation and Destruction of Rights
Certificates................................... 9
SECTION 9. Reservation and Availability of Capital Stock.. 10
SECTION 10. Preferred Stock Record Date.................... 11
SECTION 11. Adjustment of Purchase Price, Number and Kind
of Shares or Number of Rights................. 11
SECTION 12. Certificate of Adjusted Purchase Price or
Number of Shares............................... 20
SECTION 13. Consolidation, Merger or Sale or Transfer of
Assets or Earning Power....................... 20
SECTION 14. Fractional Rights and Fractional Shares........ 23
SECTION 15. Rights of Action............................... 24
SECTION 16. Agreement of Rights Holders.................... 24
SECTION 17. Rights Certificate Holder Not Deemed a
Shareholder.................................... 25
SECTION 18. Concerning the Rights Agent.................... 25
SECTION 19. Merger or Consolidation or Change of Name of
Rights Agent................................... 26
SECTION 20. Duties of Rights Agent......................... 26
SECTION 21. Change of Rights Agent......................... 29
SECTION 22. Issuance of New Rights Certificates............ 29
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 23. Redemption and Termination..................... 30
SECTION 24. Notice of Certain Events....................... 30
SECTION 25. Notices........................................ 31
SECTION 26. Supplements and Amendments..................... 32
SECTION 27. Successors..................................... 32
SECTION 28. Determinations and Actions by the Board of
Directors, etc................................. 33
SECTION 29. Benefits of this Agreement..................... 33
SECTION 30. Severability................................... 33
SECTION 31. Governing Law.................................. 33
SECTION 32. Counterparts................................... 34
SECTION 33. Descriptive Headings........................... 34
SECTION 34. Exchange....................................... 34
</TABLE>
ii
<PAGE>
RIGHTS AGREEMENT
----------------
RIGHTS AGREEMENT, dated as of October 6, 1994 (the "Agreement"),
---------
between Magma Power Company, a Nevada corporation (the "Company"), and Chemical
-------
Trust Company of California, a California Corporation (the "Rights Agent").
------------
WHEREAS, effective October 3, 1994 (the "Rights Dividend Declaration
---------------------------
Date"), the Board of Directors of the Company authorized and declared a
- ----
distribution of one Right for each share of common stock, par value $.10 per
share, of the Company (the "Company Common Stock") outstanding at the Close of
--------------------
Business on October 14, 1994 (the "Record Date"), and has authorized the
-----------
issuance of one Right (as such number may hereinafter be adjusted pursuant
hereto) for each share of Company Common Stock issued between the Record Date
(whether originally issued or delivered from the Company's treasury) and, except
as otherwise provided in Section 22, the Distribution Date, each Right initially
representing the right to purchase upon the terms and subject to the conditions
hereinafter set forth one Unit of Series A Preferred Stock (the "Rights");
------
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein set forth, the parties hereby agree as follows:
SECTION 1. Certain Definitions. For purposes of this Agreement, the
-------------------
following terms have the meanings indicated:
(a) "Acquiring Person" shall mean any Person (other than the
----------------
Company, any Subsidiary of the Company, any employee benefit plan
maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity) which shall be
the Beneficial Owner of 10% or more of the shares of Company Common Stock
then outstanding; provided, however, that neither The Dow Chemical Company
-------- -------
nor The B.C. McCabe Foundation shall be an Acquiring Person unless and
until such stockholder becomes the Beneficial Owner of 4% or more of the
outstanding shares of Company Common Stock in addition to the number of
shares such stockholder beneficially owns at the time such stockholder
becomes the Beneficial Owner of such additional shares and the aggregate
---
number of shares of Company Common Stock beneficially owned by such
stockholder is 10% or more of the shares of Company Common Stock
outstanding.
(b) "Affiliate" and "Associate" shall have the respective meanings
--------- ---------
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
------------
as in effect on the date hereof.
(c) A Person shall be deemed the "Beneficial Owner" of, and shall be
----------------
deemed to "beneficially own", any securities:
(i) of which such Person or any of such Person's Affiliates or
Associates is considered to be a "beneficial owner" under Rule 13d-3
of the General Rules and Regulations under the Exchange Act (the
"Exchange Act Regulations") as in effect on the date hereof;
-------------------------
provided, however, that a Person shall not be deemed the "Beneficial
-------- -------
Owner" of, or to "beneficially own", any securities
<PAGE>
2
under this subparagraph (i) as a result of an agreement, arrangement
or understanding to vote such securities if such agreement,
arrangement or understanding (A) arises solely from a revocable proxy
given in response to a proxy or consent solicitation made pursuant
to, and in accordance with, the applicable provisions of the Exchange
Act and the Exchange Act Regulations, and (B) is not reportable by
such Person on Schedule 13D under the Exchange Act (or any comparable
or successor report);
(ii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate of such other Person)
with which such Person (or any of such Person's Affiliates or
Associates) has any agreement, arrangement or understanding (whether
or not in writing), for the purpose of acquiring, holding, voting
(except pursuant to a revocable proxy as described in the proviso to
subparagraph (i) of this paragraph (c)) or disposing of such
securities; or
(iii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether
such right is exercisable immediately or only after the passage of
time or upon the satisfaction of conditions) pursuant to any
agreement, arrangement or understanding (whether or not in writing)
or upon the exercise of conversion rights, exchange rights, rights,
warrants or options, or otherwise; provided, however, that under this
-------- -------
paragraph (c) a Person shall not be deemed the "Beneficial Owner" of,
or to "beneficially own", (A) securities tendered pursuant to a
tender or exchange offer made in accordance with Exchange Act
Regulations by such Person or any of such Person's Affiliates or
Associates until such tendered securities are accepted for purchase
or exchange, (B) securities that may be issued upon exercise of
Rights at any time prior to the occurrence of a Triggering Event, or
(C) securities that may be issued upon exercise of Rights from and
after the occurrence of a Triggering Event, which Rights were
acquired by such Person or any of such Person's Affiliates or
Associates prior to the Distribution Date or pursuant to Section 3(c)
or Section 22 hereof (the "Original Rights") or pursuant to Section
---------------
11(i) hereof in connection with an adjustment made with respect to
any Original Rights.
(d) "Business Day" shall mean any day other than a Saturday, Sunday
------------
or a day on which banking institutions in New York City are authorized or
obligated by law or executive order to close.
(e) "Close of Business" on any given date shall mean 5:00 P.M., New
-----------------
York City time, on such date; provided, however, that if such date is not a
-------- -------
Business Day it shall mean 5:00 P.M., New York City time, on the next
succeeding Business Day.
(f) "Common Stock" of any Person other than the Company shall mean
------------
the capital stock of such Person with the greatest voting power, or, if
such Person shall have
<PAGE>
3
no capital stock, the equity securities or other equity interest having
power to control or direct the management of such Person.
(g) "Company Common Stock" has the meaning set forth in the Whereas
--------------------
Clause.
(h) "Distribution Date" has the meaning set forth in Section 3(a).
-----------------
(i) "Expiration Date" has the meaning set forth in Section 7(a).
---------------
(j) "Independent Director" shall mean a member of the Board of
--------------------
Directors of the Company who is not, and has never been, an officer or
employee of the Company, who is not an Acquiring Person or an Affiliate or
Associate of an Acquiring Person or a representative or nominee of an
Acquiring Person or of any such Affiliate or Associate, and who either (i)
was a member of the Board of Directors of the Company prior to the date
hereof or (ii) subsequently became a director of the Company and whose
election or nomination for election is approved or recommended by a vote of
a majority of the Board of Directors of the Company, which majority
includes a majority of the Independent Directors then on the Board of
Directors.
(k) "Person" shall mean any individual, partnership, firm,
------
corporation, association, trust, unincorporated organization or other
entity, as well as any syndicate or group deemed to be a person under
Section 14(d)(2) of the Exchange Act.
(l) "Preferred Stock" shall mean the Series A Preferred Stock, par
---------------
value $.10 per share, of the Company having the voting powers, designation,
preferences and relative, participating, optional or other special rights
and qualifications, limitations and restrictions described in the
Certificate of Designations set forth as Exhibit C hereto.
(m) "Purchase Price" has the meaning set forth in Section 7(b).
--------------
(n) "Record Date" has the meaning set forth in the Whereas Clause.
-----------
(o) "Right" has the meaning set forth in the Whereas Clause.
-----
(p) "Rights Certificate" has the meaning set forth in Section 3(a).
------------------
(q) "Rights Dividend Declaration Date" has the meaning set forth in
--------------------------------
the Whereas Clause.
(r) "Section 11(a)(ii) Event" shall mean any event described in
-----------------------
Section 11(a)(ii)(A), (B) or (C) hereof.
(s) "Section 13 Event" shall mean any event described in clause (x),
----------------
(y) or (z) of Section 13(a) hereof.
<PAGE>
4
(t) "Stock Acquisition Date" shall mean the first date of public
----------------------
announcement (including, without limitation, the filing of any report
pursuant to Section 13(d) of the Exchange Act) by the Company or an
Acquiring Person that an Acquiring Person has become such.
(u) "Subsidiary" shall mean, with reference to any Person, any other
----------
Person of which an amount of voting securities or equity interests
sufficient to elect at least a majority of the directors or equivalent
governing body of such other Person is beneficially owned, directly or
indirectly, by such Person, or otherwise controlled by such first-mentioned
Person.
(v) "Summary of Rights" has the meaning set forth in Section 3(b).
-----------------
(w) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
----------------
Section 13 Event.
(x) "Unit" has the meaning set forth in Section 7(b).
----
SECTION 2. Appointment of Rights Agent. The Company hereby appoints
---------------------------
the Rights Agent to act as agent for the Company in accordance with the terms
and conditions hereof, and the Rights Agent hereby accepts such appointment.
With the consent of the Rights Agent, the Company may from time to time appoint
such co-rights agents as it may deem necessary or desirable.
SECTION 3. Issue of Rights Certificates. (a) Until the earlier of
----------------------------
(i) the Close of Business on the tenth Business Day after the Stock Acquisition
Date, and (ii) the Close of Business on the tenth Business Day (or such later
date as may be determined by action of a majority of the Independent Directors
prior to such time) after the date that a tender or exchange offer by any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan maintained by the Company or any of its Subsidiaries or any trustee or
fiduciary with respect to such plan acting in such capacity) is first published
or sent or given within the meaning of Rule 14d-4(a) of the Exchange Act
Regulations or any successor rule, if upon consummation thereof such Person
would be the Beneficial Owner of 20% or more of the shares of Company Common
Stock then outstanding (the earlier of (i) and (ii) above being the
"Distribution Date"), (x) the Rights will be evidenced (subject to the
- ------------------
provisions of paragraph (b) of this Section 3) by the certificates for shares of
Company Common Stock registered in the names of the holders of shares of Company
Common Stock as of and subsequent to the Record Date (which certificates for
shares of Company Common Stock shall be deemed also to be certificates for
Rights) and not by separate certificates, and (y) the Rights will be
transferable only in connection with the transfer of the underlying shares of
Company Common Stock (including a transfer to the Company). As soon as
practicable after the Distribution Date, the Rights Agent will send by first-
class, insured, postage prepaid mail, to each record holder of shares of Company
Common Stock as of the Close of Business on the Distribution Date, at the
address of such holder shown on the records of the Company, one or more rights
certificates, in substantially the form of Exhibit A hereto (the "Rights
------
Certificates"), evidencing one Right for each share of Company Common Stock so
- ------------
held, subject to adjustment as provided herein.
<PAGE>
5
In the event that an adjustment in the number of Rights per share of Company
Common Stock has been made pursuant to Section 11(p) hereof, at the time of
distribution of the Rights Certificates, the Company may make the necessary and
appropriate rounding adjustments (in accordance with Section 14(a) hereof) so
that Rights Certificates representing only whole numbers of Rights are
distributed and cash is paid in lieu of any fractional Rights. As of and after
the Distribution Date, the Rights will be evidenced solely by such Rights
Certificates.
(b) As promptly as practicable following the Record Date, the Company
will send a copy of a Summary of Rights to Purchase Preferred Stock, in a form
which may be appended to certificates that represent shares of Company Common
Stock, in substantially the form attached hereto as Exhibit B (the "Summary of
----------
Rights"), by first-class, postage prepaid mail, to each record holder of shares
- ------
of Company Common Stock as of the Close of Business on the Record Date, at the
address of such holder shown on the records of the Company.
(c) Rights shall, without any further action, be issued in respect of
all shares of Company Common Stock which are issued (including any shares of
Company Common Stock held in treasury) after the Record Date but prior to the
earlier of the Distribution Date and the Expiration Date. Certificates,
representing such shares of Company Common Stock, issued after the Record Date
shall bear the following legend:
"This certificate also evidences and entitles the holder hereof to
certain Rights as set forth in the Rights Agreement between Magma Power
Company (the "Company") and Chemical Trust Company of California (the
"Rights Agent") dated as of October 6, 1994 (the "Rights Agreement"), the
------------- ----------------
terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal office of the stock transfer
administration office of the Rights Agent. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be evidenced by
separate certificates and will no longer be evidenced by this certificate.
The Company will mail to the holder of this certificate a copy of the
Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to, or held
by, any Person who is, was or becomes an Acquiring Person or any Affiliate
or Associate thereof (as such terms are defined in the Rights Agreement),
whether currently held by or on behalf of such Person or by any subsequent
holder, may become null and void." With respect to certificates
representing shares of Company Common Stock (whether or not such
certificates include the foregoing legend or have appended to them the
Summary of Rights), until the earlier of the Distribution Date and the
Expiration Date, the Rights associated with the shares of Company Common
Stock represented by such certificates shall be evidenced by such
certificates alone and registered holders of the shares of Company Common
Stock shall also be the registered holders of the associated Rights, and
the transfer of any of such certificates shall also constitute the transfer
of the Rights associated with the shares of Company Common Stock
represented by such certificates.
SECTION 4. Form of Rights Certificates. (a) The Rights Certificates
---------------------------
(and the forms of election to purchase, assignment and certificate to be printed
on the reverse thereof) shall each be substantially in the form set forth in
Exhibit A hereto and may have such marks
<PAGE>
6
of identification or designation and such legends, summaries or endorsements
printed thereon as the Company may deem appropriate and as are not inconsistent
with the provisions of this Agreement, or as may be required to comply with any
applicable law or any rule or regulation thereunder or with any rule or
regulation of any stock exchange or automated quotation system on which the
Rights may from time to time be listed or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of Units of Preferred
Stock as shall be set forth therein at the price set forth therein, but the
amount and type of securities, cash or other assets that may be acquired upon
the exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant hereto that represents
Rights beneficially owned by: (i) an Acquiring Person or any Associate or
Affiliate of an Acquiring Person, (ii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee after the
Acquiring Person becomes such, or (iii) a transferee of an Acquiring Person (or
of any such Associate or Affiliate) which becomes a transferee prior to or
concurrently with the Acquiring Person becoming such and which receives such
Rights pursuant to either (A) a transfer (whether or not for consideration) from
the Acquiring Person (or any such Associate or Affiliate) to holders of equity
interests in such Acquiring Person (or such Associate or Affiliate) or to any
Person with whom such Acquiring Person (or such Associate or Affiliate) has any
continuing agreement, arrangement or understanding regarding either the
transferred Rights, shares of Company Common Stock or the Company or (B) a
transfer which a majority of the Independent Directors has determined to be part
of a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of Section 7(e) hereof shall, upon the written direction of a
majority of the Independent Directors, contain (to the extent feasible) the
following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person (as such terms are defined in
the Rights Agreement). Accordingly, this Rights Certificate and the Rights
represented hereby may become null and void in the circumstances specified
in Section 7(e) of such Agreement.
SECTION 5. Countersignature and Registration. (a) Rights
---------------------------------
Certificates shall be executed on behalf of the Company by its Chairman of the
Board, the President or one of its Vice Presidents under its corporate seal
reproduced thereon attested by its Secretary, Treasurer or one of its Assistant
Secretaries. The signature of any of these officers on the Rights Certificates
may be manual or facsimile. Rights Certificates bearing the manual or facsimile
signatures of the individuals who were at any time the proper officers of the
Company shall bind the Company, notwithstanding that such individuals or any of
them have ceased to hold such offices prior to the countersignature of such
Rights Certificates or did not hold such offices at the date of such Rights
Certificates. No Rights Certificate shall be entitled to any benefit under this
Agreement or be valid for any purpose unless there appears on such Rights
Certificate a countersignature duly executed by the Rights Agent by manual
signature of an authorized signatory, and such countersignature upon any Rights
Certificate shall be conclusive evidence,
<PAGE>
7
and the only evidence, that such Rights Certificate has been duly countersigned
as required hereunder.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its office designated for surrender of Rights Certificates
upon exercise or transfer, books for registration and transfer of the Rights
Certificates issued hereunder. Such books shall show the name and address of
each holder of the Rights Certificates, the number of Rights evidenced on its
face by each Rights Certificate and the date of each Rights Certificate.
SECTION 6. Transfer, Split Up, Combination and Exchange of Rights
------------------------------------------------------
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates. (a)
- ----------------------------------------------------------------------
Subject to the provisions of Sections 4(b), 7(e) and 14 hereof, at any time
after the Close of Business on the Distribution Date, and at or prior to the
Close of Business on the Expiration Date, any Rights Certificate or Certificates
may be transferred, split up, combined or exchanged for another Rights
Certificate or Certificates, entitling the registered holder to purchase a like
number of Units of Preferred Stock (or, following a Triggering Event, other
securities, cash or other assets, as the case may be) as the Rights Certificate
or Certificates surrendered then entitled such holder to purchase. Any
registered holder desiring to transfer, split up, combine or exchange any Rights
Certificate or Certificates shall make such request in writing delivered to the
Rights Agent, and shall surrender the Rights Certificate or Certificates to be
transferred, split up, combined or exchanged at the office of the Rights Agent
designated for such purpose. Neither the Rights Agent nor the Company shall be
obligated to take any action whatsoever with respect to the transfer of any such
surrendered Rights Certificate until the registered holder shall have completed
and executed the certificate set forth in the form of assignment on the reverse
side of such Rights Certificate and shall have provided such additional evidence
of the identity of the Beneficial Owner (or former Beneficial Owner) of the
Rights represented by such Rights Certificate or Affiliates or Associates
thereof as the Company shall reasonably request; whereupon the Rights Agent
shall, subject to the provisions of Section 4(b), Section 7(e) and Section 14
hereof, countersign and deliver to the Person entitled thereto a Rights
Certificate or Rights Certificates, as the case may be, as so requested. The
Company may require payment of a sum sufficient to cover any tax or governmental
charge that may be imposed in connection with any transfer, split up,
combination or exchange of Rights Certificates.
(b) If a Rights Certificate shall be mutilated, lost, stolen or
destroyed, upon request by the registered holder of the Rights represented
thereby and upon payment to the Company and the Rights Agent of all reasonable
expenses incident thereto, there shall be issued, in exchange for and upon
cancellation of the mutilated Rights Certificate, or in substitution for the
lost, stolen or destroyed Rights Certificate, a new Rights Certificate, in
substantially the form of the prior Rights Certificate, of like tenor and
representing the equivalent number of Rights, but, in the case of loss, theft or
destruction, only upon receipt of evidence satisfactory to the Company and the
Rights Agent of such loss, theft or destruction of such Rights Certificate and,
if requested by the Company or the Rights Agent, indemnity also satisfactory to
it.
SECTION 7. Exercise of Rights; Purchase Price; Expiration Date of
------------------------------------------------------
Rights. (a) Prior to the earlier of (i) the Close of Business on the tenth
- ------
anniversary hereof (the "Final Expiration Date"), and (ii) the time at which the
---------------------
Rights are redeemed as provided in Section 23
<PAGE>
8
hereof (the earlier of (i) and (ii) being the "Expiration Date"), the registered
---------------
holder of any Rights Certificate may, subject to the provisions of Sections 7(e)
and 9(c) hereof, exercise the Rights evidenced thereby in whole or in part at
any time after the Distribution Date upon surrender of the Rights Certificate,
with the form of election to purchase and the certificate on the reverse side
thereof duly executed, to the Rights Agent at the office of the Rights Agent
designated for such purpose, together with payment of the aggregate Purchase
Price (as hereinafter defined) for the number of Units of Preferred Stock (or,
following a Triggering Event, other securities, cash or other assets, as the
case may be) for which such surrendered Rights are then exercisable.
(b) The purchase price for each one one-thousandth of a share (each
such one one-thousandth of a share being a "Unit") of Preferred Stock upon
----
exercise of Rights shall be $125, subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof (such purchase price, as so adjusted,
being the "Purchase Price"), and shall be payable in accordance with paragraph
--------------
(c) below.
(c) As promptly as practicable following the occurrence of the
Distribution Date, the Company shall deposit with a corporation in good standing
organized under the laws of the United States or any State of the United States,
which is authorized under such laws to exercise corporate trust or stock
transfer powers and is subject to supervision or examination by federal or state
authority (such institution being the "Depositary Agent"), certificates
----------------
representing the shares of Preferred Stock that may be acquired upon exercise of
the Rights and shall cause such Depositary Agent to enter into an agreement
pursuant to which the Depositary Agent shall issue receipts representing
interests in the shares of Preferred Stock so deposited. Upon receipt of a
Rights Certificate representing exercisable Rights, with the form of election to
purchase and the certificate duly executed, accompanied by payment, with respect
to each Right so exercised, of the Purchase Price for the Units of Preferred
Stock (or, following a Triggering Event, other securities, cash or other assets,
as the case may be) to be purchased thereby as set forth below and an amount
equal to any applicable transfer tax or evidence satisfactory to the Company of
payment of such tax, the Rights Agent shall, subject to Section 20(k) hereof,
thereupon promptly (i) requisition from the Depositary Agent depositary receipts
representing such number of Units of Preferred Stock as are to be purchased and
the Company will direct the Depositary Agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such depositary receipts, cause the same to be delivered to or upon the order of
the registered holder of such Rights Certificate, registered in such name or
names as may be designated by such holder, and (iv) after receipt thereof,
deliver such cash, if any, to or upon the order of the registered holder of such
Rights Certificate. In the event that the Company is obligated to issue Company
Common Stock, other securities of the Company, pay cash and/or distribute other
property pursuant to Section 11(a) hereof, the Company will make all
arrangements necessary so that such Company Common Stock, other securities, cash
and/or other property are available for distribution by the Rights Agent, if and
when appropriate. The payment of the Purchase Price (as such amount may be
reduced pursuant to Section 11(a)(iii) hereof) may be made in cash or by
certified or bank check or money order payable to the order of the Company.
<PAGE>
9
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing the Rights remaining unexercised shall be issued by the Rights Agent
and delivered to, or upon the order of, the registered holder of such Rights
Certificate, registered in such name or names as may be designated by such
holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of any Section 11(a)(ii) Event, any Rights
beneficially owned by (i) an Acquiring Person or an Associate or Affiliate of an
Acquiring Person, (ii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee after the Acquiring Person
becomes such, or (iii) a transferee of an Acquiring Person (or of any such
Associate or Affiliate) which becomes a transferee prior to or concurrently with
the Acquiring Person becoming such and which receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person (or any such Associate or Affiliate) to holders of equity interests in
such Acquiring Person (or any such Associate or Affiliate) or to any Person with
whom the Acquiring Person (or such Associate or Affiliate) has any continuing
agreement, arrangement or understanding regarding the transferred Rights, shares
of Company Common Stock or the Company or (B) a transfer which a majority of the
Independent Directors has determined to be part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall be null and void without any further action, and no holder
of such Rights shall have any rights whatsoever with respect to such Rights,
whether under any provision of this Agreement or otherwise. The Company shall
use all reasonable efforts to ensure that the provisions of this Section 7(e)
and Section 4(b) hereof are complied with, but shall have no liability to any
holder of Rights or any other Person as a result of its failure to make any
determination under this Section 7(e) or such Section 4(b) with respect to an
Acquiring Person or its Affiliates, Associates or transferees.
(f) Notwithstanding anything in this Agreement or any Rights
Certificate to the contrary, neither the Rights Agent nor the Company shall be
obligated to undertake any action with respect to a registered holder upon the
occurrence of any purported exercise by such registered holder unless such
registered holder shall have (i) completed and executed the certificate
following the form of election to purchase set forth on the reverse side of the
Rights Certificate surrendered for such exercise, and (ii) provided such
additional evidence of the identity of the Beneficial Owner (or former
Beneficial Owner) of the Rights represented by such Rights Certificate or
Affiliates or Associates thereof as the Company shall reasonably request.
SECTION 8. Cancellation and Destruction of Rights Certificates. All
---------------------------------------------------
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
this Agreement. The Company shall deliver to the Rights Agent for cancellation
and retirement, and the Rights Agent shall so cancel and retire, any Rights
Certificates acquired by the Company otherwise than upon the exercise thereof.
The Rights Agent shall deliver all cancelled Rights Certificates to the Company,
or shall, at the written request of the Company, destroy such
<PAGE>
10
cancelled Rights Certificates, and in such case shall deliver a certificate of
destruction thereof to the Company.
SECTION 9. Reservation and Availability of Capital Stock. (a) The
---------------------------------------------
Company shall at all times prior to the Expiration Date cause to be reserved and
kept available, out of its authorized and unissued shares of Preferred Stock,
the number of shares of Preferred Stock that, as provided in this Agreement,
will be sufficient to permit the exercise in full of all outstanding Rights.
Upon the occurrence of any events resulting in an increase in the aggregate
number of shares of Preferred Stock (or other equity securities of the Company)
issuable upon exercise of all outstanding Rights above the number then reserved,
the Company shall make appropriate increases in the number of shares so
reserved.
(b) If the shares of Preferred Stock to be issued and delivered upon
the exercise of the Rights may be listed on any national securities exchange,
the Company shall during the period from the Distribution Date through the
Expiration Date use its best efforts to cause all securities reserved for such
issuance to be listed on such exchange upon official notice of issuance upon
such exercise.
(c) The Company shall use its best efforts (i) as soon as practicable
following the occurrence of a Section 11(a)(ii) Event and a determination by the
Company in accordance with Section 11(a)(iii) hereof of the consideration to be
delivered by the Company upon exercise of the Rights or, if so required by law,
as soon as practicable following the Distribution Date (such date being the
"Registration Date"), to file a registration statement on an appropriate form
- ------------------
under the Securities Act of 1933, as amended (the "Securities Act"), with
--------------
respect to the securities that may be acquired upon exercise of the Rights (the
"Registration Statement"), (ii) to cause the Registration Statement to become
----------------------
effective as soon as practicable after such filing, (iii) to cause the
Registration Statement to continue to be effective (and to include a prospectus
complying with the requirements of the Securities Act) until the earlier of (A)
the date as of which the Rights are no longer exercisable for the securities
covered by the Registration Statement, and (B) the Expiration Date and (iv) to
take as soon as practicable following the Registration Date such action as may
be required to ensure that any acquisition of securities upon exercise of the
Rights complies with any applicable state securities or "blue sky" laws.
(d) The Company shall take such action as may be necessary to ensure
that all shares of Preferred Stock (and, following the occurrence of a
Triggering Event, any other securities that may be delivered upon exercise of
Rights) shall be, at the time of delivery of the certificates or depositary
receipts for such securities, duly and validly authorized and issued and fully
paid and non-assessable.
(e) The Company shall pay any documentary, stamp or transfer tax
imposed in connection with the issuance or delivery of the Rights Certificates
or upon the exercise of Rights; provided, however, the Company shall not be
-------- -------
required to pay any such tax imposed in connection with the issuance or delivery
of Units of Preferred Stock, or any certificates or depositary receipts for such
Units of Preferred Stock (or, following the occurrence of a Triggering Event,
any other securities, cash or assets, as the case may be) to any person other
than the registered holder of the Rights Certificates evidencing the Rights
surrendered for
<PAGE>
11
exercise. The Company shall not be required to issue or deliver any
certificates or depositary receipts for Units of Preferred Stock (or, following
the occurrence of a Triggering Event, any other securities, cash or assets, as
the case may be) to, or in a name other than that of, the registered holder upon
the exercise of any Rights until any such tax shall have been paid (any such tax
being payable by the holder of such Rights Certificate at the time of surrender)
or until it has been established to the Company's satisfaction that no such tax
is due.
SECTION 10. Preferred Stock Record Date. Each Person in whose name
---------------------------
any certificate for Units of Preferred Stock (or, following the occurrence of a
Triggering Event, other securities) is issued upon the exercise of Rights shall
for all purposes be deemed to have become the holder of record of the Units of
Preferred Stock (or, following the occurrence of a Triggering Event, other
securities) represented thereby on, and such certificate shall be dated, the
date upon which the Rights Certificate evidencing such Rights was duly
surrendered and payment of the Purchase Price (and any applicable transfer
taxes) was made; provided, however, that if the date of such surrender and
-------- -------
payment is a date upon which the Preferred Stock (or, following the occurrence
of a Triggering Event, other securities) transfer books of the Company are
closed, such Person shall be deemed to have become the record holder of such
securities on, and such certificate shall be dated, the next succeeding Business
Day on which the Preferred Stock (or, following the occurrence of a Triggering
Event, other securities) transfer books of the Company are open and, further
-------
provided, however, that if delivery of Units of Preferred Stock is delayed
- -------- -------
pursuant to Section 9(c) hereof, such Persons shall be deemed to have become the
record holders of such Units of Preferred Stock only when such Units first
become deliverable. Prior to the exercise of the Rights evidenced thereby, the
holder of a Rights Certificate shall not be entitled to any rights of a
stockholder of the Company with respect to securities for which the Rights shall
be exercisable, including, without limitation, the right to vote, to receive
dividends or other distributions or to exercise any preemptive rights, and shall
not be entitled to receive any notice of any proceedings of the Company, except
as provided herein.
SECTION 11. Adjustment of Purchase Price, Number and Kind of Shares
-------------------------------------------------------
or Number of Rights. The Purchase Price, the number and kind of securities
- -------------------
covered by each Right and the number of Rights outstanding are subject to
adjustment from time to time as provided in this Section 11.
(a) (i) In the event the Company shall at any time after the date
of this Agreement (A) declare a dividend on the Preferred Stock payable in
shares of Preferred Stock, (B) subdivide the outstanding Preferred Stock,
(C) combine the outstanding Preferred Stock into a smaller number of
shares, or (D) issue any shares of its capital stock in a reclassification
of the Preferred Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), except as otherwise provided in this Section 11(a),
the Purchase Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date upon exercise of
the Rights, shall be proportionately adjusted so that the holder of any
Right exercised after such time shall be entitled to receive, upon payment
of the Purchase Price then in
<PAGE>
12
effect, the aggregate number and kind of shares of Preferred Stock or
capital stock, as the case may be, which, if such Right had been exercised
immediately prior to such date, such holder would have owned upon such
exercise and been entitled to receive by virtue of such dividend,
subdivision, combination or reclassification. If an event occurs which
would require an adjustment under both this Section 11(a)(i) and Section
11(a)(ii) hereof, the adjustment provided for in this Section 11(a)(i)
shall be in addition to, and shall be made prior to, any adjustment
required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Acquiring Person or any Associate or Affiliate of any
Acquiring Person, at any time after the date of this Agreement,
directly or indirectly, (1) shall merge into the Company or otherwise
combine with the Company and the Company shall be the continuing or
surviving corporation of such merger or combination and Company
Common Stock shall remain outstanding and unchanged, (2) shall, in
one transaction or a series of transactions, transfer any assets to
the Company or to any of its Subsidiaries in exchange (in whole or in
part) for shares of Company Common Stock, for other equity securities
of the Company or any such Subsidiary, or for securities exercisable
for or convertible into shares of equity securities of the Company or
any of its Subsidiaries (whether Company Common Stock or otherwise)
or otherwise obtain from the Company or any of its Subsidiaries, with
or without consideration, any additional shares of such equity
securities or securities exercisable for or convertible into such
equity securities (other than pursuant to a pro rata distribution to
all holders of Company Common Stock), (3) shall sell, purchase,
lease, exchange, mortgage, pledge, transfer or otherwise acquire or
dispose of, in one transaction or a series of transactions, to, from
or with the Company or any of its Subsidiaries or any employee
benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such
capacity, assets (including securities) on terms and conditions less
favorable to the Company or such Subsidiary or plan than those that
could have been obtained in arm's-length negotiations with an
unaffiliated third party, other than pursuant to a transaction set
forth in Section 13(a) hereof, (4) shall sell, purchase, lease,
exchange, mortgage, pledge, transfer or otherwise acquire or dispose
of, in one transaction or a series of transactions, to, from or with
the Company or any of the Company's Subsidiaries or any employee
benefit plan maintained by the Company or any of its Subsidiaries or
any trustee or fiduciary with respect to such plan acting in such
capacity (other than transactions, if any, consistent with those
engaged in, as of the date hereof, by the Company and such Acquiring
Person or such Associate or Affiliate), assets (including securities)
having an aggregate fair market value of more than $5,000,000, other
than pursuant to a transaction set forth in Section 13(a) hereof, (5)
shall sell, purchase, lease, exchange, mortgage, pledge, transfer or
otherwise acquire or dispose of, in one transaction or a series of
transactions, to, from or with the Company or any of its Subsidiaries
or any employee benefit plan maintained by the Company or any of its
Subsidiaries or any trustee
<PAGE>
13
or fiduciary with respect to such plan acting in such capacity, any
material trademark or material service mark, other than pursuant to a
transaction set forth in Section 13(a) hereof, (6) shall receive, or
any designee, agent or representative of such Acquiring Person or any
Affiliate or Associate of such Acquiring Person shall receive, any
compensation from the Company or any of its Subsidiaries other than
compensation for full-time employment as a regular employee at rates
in accordance with the Company's (or its Subsidiaries') past
practices, or (7) shall receive the benefit, directly or indirectly
(except proportionately as a holder of Company Common Stock or as
required by law or governmental regulation), of any loans, advances,
guarantees, pledges or other financial assistance or any tax credits
or other tax advantage provided by the Company or any of its
Subsidiaries or any employee benefit plan maintained by the Company
or any of its Subsidiaries or any trustee or fiduciary with respect
to such plan acting in such capacity; or
(B) any Person (other than the Company, any Subsidiary of the
Company, any employee benefit plan maintained by the Company or any
of its Subsidiaries or any trustee or fiduciary with respect to such
plan acting in such capacity) shall become the Beneficial Owner of
10% or more of the shares of Company Common Stock then outstanding,
other than pursuant to any transaction set forth in Section 13(a)
hereof; or
(C) during such time as there is an Acquiring Person, there
shall be any reclassification of securities (including any reverse
stock split), or recapitalization of the Company, or any merger or
consolidation of the Company with any of its Subsidiaries or any
other transaction or series of transactions involving the Company or
any of its Subsidiaries, other than a transaction or transactions to
which the provisions of Section 13(a) apply (whether or not with or
into or otherwise involving an Acquiring Person), which has the
effect, directly or indirectly, of increasing by more than 1% the
proportionate share of the outstanding shares of any class of equity
securities of the Company or any of its Subsidiaries that is directly
or indirectly beneficially owned by any Acquiring Person or any
Associate or Affiliate of any Acquiring Person;
then, immediately upon the date of the occurrence of an event
----
described in Section 11(a)(ii)(A)-(C) hereof (a "Section 11(a)(ii)
-----------------
Event"), proper provision shall be made so that each holder of a
-----
Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof at the
then current Purchase Price in accordance with the terms of this
Agreement, in lieu of the number of Units of Preferred Stock for
which a Right was exercisable immediately prior to the first
occurrence of a Section 11(a)(ii) Event, such number of Units of
Preferred Stock as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of Units of
Preferred Stock for which a Right was exercisable immediately prior
to the first occurrence of a Section 11(a)(ii) Event (such product
thereafter
<PAGE>
14
being, for all purposes of this Agreement other than Section 13
hereof, the "Purchase Price"), and (y) dividing that product by 50%
--------------
of the then current market price (determined pursuant to Section
11(d) hereof) per Unit of Preferred Stock on the date of such first
occurrence (such Units of Preferred Stock being the "Adjustment
----------
Shares").
------
(iii) In the event that the number of shares of Preferred Stock
which are authorized by the Company's Articles of Incorporation but not
outstanding or reserved for issuance for purposes other than upon exercise
of the Rights is not sufficient to permit the exercise in full of the
Rights in accordance with the foregoing subparagraph (ii) of this Section
11(a), the Company, by the vote of a majority of the Independent Directors,
shall: (A) determine the excess of (1) the value of the Adjustment Shares
issuable upon the exercise of a Right (the "Current Value") over (2) the
-------------
Purchase Price (such excess being the "Spread"), and (B) with respect to
------
each Right, make adequate provision to substitute for such Adjustment
Shares, upon payment of the applicable Purchase Price, (1) cash, (2) a
reduction in the Purchase Price, (3) Company Common Stock or other equity
securities of the Company (including, without limitation, shares, or units
of shares, of preferred stock (such other shares being "preferred stock
---------------
equivalents")), (4) debt securities of the Company, (5) other assets, or
-----------
(6) any combination of the foregoing, having an aggregate value equal to
the Current Value, where such aggregate value has been determined by a
majority of the Independent Directors, after receiving advice from a
nationally recognized investment banking firm; provided, however, that if
-------- -------
the Company shall not have made adequate provision to deliver value
pursuant to clause (B) above within thirty days following the later of (x)
the first occurrence of a Section 11(a)(ii) Event and (y) the date on which
the Company's right of redemption pursuant to Section 23(a) expires (the
later of (x) and (y) being referred to herein as the "Section 11(a)(iii)
------------------
Trigger Date"), then the Company shall be obligated to deliver, upon the
------------
surrender for exercise of a Right and without requiring payment of the
Purchase Price, Units of Preferred Stock (to the extent available) and
then, if necessary, cash, which Units of Preferred Stock and/or cash shall
have an aggregate value equal to the Spread. To the extent that the
Company determines that some action need be taken pursuant to the first
sentence of this Section 11(a)(iii), the Company shall provide, subject to
Section 7(e) hereof, that such action shall apply uniformly to all
outstanding Rights. For purposes of this Section 11(a)(iii), the value of
a Unit of Preferred Stock shall be the current market price (as determined
pursuant to Section 11(d) hereof) per Unit of Preferred Stock on the
Section 11(a)(iii) Trigger Date and the value of any preferred stock
equivalent shall be deemed to have the same value as the Preferred Stock on
such date.
(b) In case the Company shall fix a record date for the issuance of
rights, options or warrants to all holders of Preferred Stock entitling
them to subscribe for or purchase (for a period expiring within forty-five
calendar days after such record date) shares of Preferred Stock (or shares
having substantially the same rights, privileges and preferences as shares
of Preferred Stock ("Equivalent Preferred Stock")) or securities
--------------------------
convertible into Preferred Stock or Equivalent Preferred Stock at a price
per share of Preferred Stock or per share of Equivalent Preferred Stock (or
having a conversion price
<PAGE>
15
per share, if a security convertible into Preferred Stock or Equivalent
Preferred Stock) less than the current market price (as determined pursuant
to Section 11(d) hereof) per share of Preferred Stock on such record date,
the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to
such record date by a fraction, the numerator of which shall be the sum of
the number of shares of Preferred Stock outstanding on such record date
plus the number of shares of Preferred Stock which the aggregate offering
price of the total number of shares of Preferred Stock and/or Equivalent
Preferred Stock so to be offered (and/or the aggregate initial conversion
price of the convertible securities so to be offered) would purchase at
such current market price, and the denominator of which shall be the number
of shares of Preferred Stock outstanding on such record date plus the
number of additional shares of Preferred Stock and/or Equivalent Preferred
Stock to be offered for subscription or purchase (or into which the
convertible securities so to be offered are initially convertible). In
case such subscription price may be paid by delivery of consideration part
or all of which may be in a form other than cash, the value of such
consideration shall be as determined in good faith by a majority of the
Independent Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights
Agent and the holders of the Rights. Shares of Preferred Stock owned by or
held for the account of the Company or any Subsidiary shall not be deemed
outstanding for the purpose of any such computation. Such adjustment shall
be made successively whenever such a record date is fixed, and in the event
that such rights or warrants are not so issued, the Purchase Price shall be
adjusted to be the Purchase Price which would then be in effect if such
record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution
to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Company is the continuing corporation) of evidences of indebtedness, cash
(other than a regular quarterly cash dividend paid out of funds legally
available therefor), assets (other than a dividend payable in shares of
Preferred Stock, but including any dividend payable in stock other than
Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect
after such record date shall be determined by multiplying the Purchase
Price in effect immediately prior to such record date by a fraction, the
numerator of which shall be the current market price (as determined
pursuant to Section 11(d) hereof) per share of Preferred Stock on such
record date less the fair market value (as determined in good faith by a
majority of the Independent Directors, whose determination shall be
described in a statement filed with the Rights Agent and shall be binding
on the Rights Agent and the holder of the Rights) of the cash, assets or
evidences of indebtedness so to be distributed or of such subscription
rights or warrants distributable in respect of a share of Preferred Stock
and the denominator of which shall be such current market price (as
determined pursuant to Section 11(d) hereof) per share of Preferred Stock.
Such adjustments shall be made successively whenever such a record date is
fixed, and in the event that such distribution is not so made, the Purchase
Price shall be adjusted to be the Purchase Price which would have been in
effect if such record date had not been fixed.
<PAGE>
16
(d) (i) For the purpose of any computation hereunder, the "current market
price" per share of Company Common Stock or Common Stock on any date shall
be deemed to be the average of the daily closing prices per share of such
shares for the ten consecutive Trading Days (as such term is hereinafter
defined) immediately prior to such date; provided, however, if prior to the
-------- -------
expiration of such requisite ten Trading Day period the issuer announces
either (A) a dividend or distribution on such shares payable in such shares
or securities convertible into such shares (other than the Rights), or (B)
any subdivision, combination or reclassification of such shares, then,
following the ex-dividend date for such dividend or the record date for
such subdivision, as the case may be, the "current market price" shall be
properly adjusted to take into account such event. The closing price for
each day shall be, if the shares are listed and admitted to trading on a
national securities exchange, as reported in the principal consolidated
transaction reporting system with respect to securities listed on the
principal national securities exchange on which such shares are listed or
admitted to trading or, if such shares are not listed or admitted to
trading on any national securities exchange, the last quoted price or, if
not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the Nasdaq Stock Market ("Nasdaq")
or such other system then in use, or, if on any such date such shares are
not quoted by any such organization, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in
such shares selected by a majority of the Independent Directors. If on any
such date no market maker is making a market in such shares, the fair value
of such shares on such date as determined in good faith by a majority of
the Independent Directors shall be used. If such shares are not publicly
held or not so listed or traded, "current market price" per share shall
mean the fair value per share as determined in good faith by a majority of
the Independent Directors, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all
purposes. The term "Trading Day" shall mean, if such shares are listed or
-----------
admitted to trading on any national securities exchange, a day on which the
principal national securities exchange on which such shares are listed or
admitted to trading is open for the transaction of business or, if such
shares are not so listed or admitted, a Business Day.
(ii) For the purpose of any computation hereunder, the "current market
price" per share of Preferred Stock shall be determined in the same manner
as set forth above for Company Common Stock in clause (i) of this Section
11(d) (other than the fourth sentence thereof). If the current market
price per share of Preferred Stock cannot be determined in the manner
provided above or if the Preferred Stock is not publicly held or listed or
traded in a manner described in clause (i) of this Section 11(d), the
"current market price" per share of Preferred Stock shall be conclusively
deemed to be an amount equal to 1,000 (as such amount may be appropriately
adjusted for such events as stock splits, stock dividends and
recapitalizations with respect to Company Common Stock occurring after the
date of this Agreement) multiplied by the current market price per share of
Company Common Stock. If neither Company Common Stock nor Preferred Stock
is publicly held or so listed or traded, "current market price" per share
of the Preferred Stock shall mean the fair value per share as determined in
good faith by a majority of the Independent Directors whose determination
shall be described in a statement filed with the Rights Agent and shall be
binding on the Rights Agent and the
<PAGE>
17
holders of the Rights. For all purposes of this Agreement, the "current
market price" of a Unit of Preferred Stock shall be equal to the "current
market price" of one share of Preferred Stock divided by 1,000.
(e) Anything herein to the contrary notwithstanding, no adjustment
in the Purchase Price shall be required unless such adjustment would
require an increase or decrease of at least 1% in the Purchase Price;
provided, however, that any adjustments which by reason of this Section
-------- -------
11(e) are not required to be made shall be carried forward and taken into
account in any subsequent adjustment. All calculations under this Section
11 shall be made to the nearest cent or to the nearest one-thousandth of a
share of Company Common Stock or Common Stock or other share or ten-
thousandth of a share of Preferred Stock, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i)
three years from the date of the transaction which mandates such adjustment
and (ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section
11(a)(ii) or 13(a) hereof, the holder of any Right thereafter exercised
shall become entitled to receive any shares of capital stock other than
Preferred Stock, thereafter the number of such other shares so receivable
upon exercise of any Right and the Purchase Price thereof shall be subject
to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to the Preferred
Stock contained in Sections 11(a), (b), (c), (d), (e), (g), (h), (i), (j),
(k), (l) and (m), and the provisions of Sections 7, 9, 10, 13 and 14 hereof
with respect to the Preferred Stock shall apply on like terms to any such
other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of Units of Preferred
Stock (or other securities or amount of cash or combination thereof) that
may be acquired from time to time hereunder upon exercise of the Rights,
all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of
the calculations made in Sections 11(b) and (c), each Right outstanding
immediately prior to the making of such adjustment shall thereafter
evidence the right to purchase, at the adjusted Purchase Price, that number
of Units of Preferred Stock (calculated to the nearest one ten-thousandth
of a Unit) obtained by (i) multiplying (x) the number of Units of Preferred
Stock covered by a Right immediately prior to this adjustment by (y) the
Purchase Price in effect immediately prior to such adjustment of the
Purchase Price and (ii) dividing the product so obtained by the Purchase
Price in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any
adjustment in the number of Units of Preferred Stock that may be acquired
upon the exercise of a Right. Each of
<PAGE>
18
the Rights outstanding after the adjustment in the number of Rights shall
be exercisable for the number of Units of Preferred Stock for which a Right
was exercisable immediately prior to such adjustment. Each Right held of
record prior to such adjustment of the number of Rights shall become that
number of Rights (calculated to the nearest ten-thousandth) obtained by
dividing the Purchase Price in effect immediately prior to adjustment of
the Purchase Price by the Purchase Price in effect immediately after
adjustment of the Purchase Price. The Company shall make a public
announcement of its election to adjust the number of Rights, indicating the
record date for the adjustment, and, if known at the time, the amount of
the adjustment to be made. This record date may be the date on which the
Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten days later than the
date of such public announcement. If Rights Certificates have been issued,
upon each adjustment of the number of Rights pursuant to this Section
11(i), the Company shall, as promptly as practicable, cause to be
distributed to holders of record of Rights Certificates on such record date
Rights Certificates evidencing, subject to Section 14 hereof, the
additional Rights to which such holders shall be entitled as a result of
such adjustment, or, at the option of the Company, shall cause to be
distributed to such holders of record in substitution and replacement for
the Rights Certificates held by such holders prior to the date of
adjustment, and upon surrender thereof, if required by the Company, new
Rights Certificates evidencing all the Rights to which such holders shall
be entitled after such adjustment. Rights Certificates to be so
distributed shall be issued, executed and countersigned in the manner
provided for herein (and may bear, at the option of the Company, the
adjusted Purchase Price) and shall be registered in the names of the
holders of record of Rights Certificates on the record date specified in
the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price
or the number of Units of Preferred Stock issuable upon the exercise of the
Rights, the Rights Certificates theretofore and thereafter issued may
continue to express the Purchase Price per Unit and the number of Units of
Preferred Stock which were expressed in the Initial Rights Certificates
issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then par value of the number of Units of
Preferred Stock issuable upon exercise of the Rights, the Company shall
take any corporate action which may, in the opinion of its counsel, be
necessary in order that the Company may validly and legally issue such
fully paid and non-assessable number of Units of Preferred Stock at such
adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for
a specified event, the Company may elect to defer until the occurrence of
such event the issuance to the holder of any Right exercised after such
record date of that number of Units of Preferred Stock and shares of other
capital stock or securities of the Company, if any, issuable upon such
exercise over and above the number of Units of Preferred Stock and shares
of other capital stock or securities of the Company, if any, issuable upon
such exercise on the
<PAGE>
19
basis of the Purchase Price in effect prior to such adjustment; provided,
--------
however, that the Company shall deliver to such holder a due bill or other
-------
appropriate instrument evidencing such holder's right to receive such
additional shares (fractional or otherwise) or securities upon the
occurrence of the event requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and
to the extent that in their good faith judgment a majority of the
Independent Directors shall determine to be advisable in order that any (i)
consolidation or subdivision of the Preferred Stock, (ii) issuance wholly
for cash of any shares of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of shares of Preferred Stock or
securities which by their terms are convertible into or exchangeable for
shares of Preferred Stock, (iv) stock dividends or (v) issuance of rights,
options or warrants referred to in this Section 11, hereafter made by the
Company to holders of its Preferred Stock, shall not be taxable to such
holders or shall reduce the taxes payable by such holders.
(n) The Company shall not, at any time after the Distribution Date,
(i) consolidate with any other Person (other than a Subsidiary of the
Company in a transaction which complies with Section 11(o) hereof), (ii)
merge with or into any other Person (other than a Subsidiary of the Company
in a transaction which complies with Section 11(o) hereof), or (iii) sell
or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and
its Subsidiaries (taken as a whole) to any other Person or Persons (other
than the Company and/or any of its Subsidiaries in one or more transactions
each of which complies with Section 11(o) hereof), if (x) at the time of or
immediately after such consolidation, merger or sale there are any rights,
warrants or other instruments or securities outstanding or agreements in
effect which would substantially diminish or otherwise eliminate the
benefits intended to be afforded by the Rights or (y) prior to,
simultaneously with or immediately after such consolidation, merger or
sale, the Person which constitutes, or would constitute, the "Principal
Party" for purposes of Section 13(a) hereof shall have distributed or
otherwise transferred to its shareholders or other persons holding an
equity interest in such Person Rights previously owned by such Person or
any of its Affiliates and Associates; provided, however, this Section 11(n)
-------- -------
shall not affect the ability of any Subsidiary of the Company to
consolidate with, merge with or into, or sell or transfer assets or earning
power to, any other Subsidiary of the Company.
(o) After the Distribution Date, the Company shall not, except as
permitted by Section 23 or Section 26 hereof, take (or permit any
Subsidiary to take) any action if at the time such action is taken it is
reasonably foreseeable that such action will diminish substantially or
otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in
the event that the Company shall at any time after the Rights Dividend
Declaration Date and prior
<PAGE>
20
to the Distribution Date (i) declare a dividend on the outstanding shares
of Company Common Stock payable in shares of Company Common Stock, (ii)
subdivide the outstanding shares of Company Common Stock, (iii) combine the
outstanding shares of Company Common Stock into a smaller number of shares,
or (iv) issue any shares of its capital stock in a reclassification of
Company Common Stock (including any such reclassification in connection
with a consolidation or merger in which the Company is the continuing or
surviving corporation), the number of Rights associated with each share of
Company Common Stock then outstanding, or issued or delivered thereafter
but prior to the Distribution Date, shall be proportionately adjusted so
that the number of Rights thereafter associated with each share of Company
Common Stock following any such event shall equal the result obtained by
multiplying the number of Rights associated with each share of Company
Common Stock immediately prior to such event by a fraction the numerator of
which shall be the total number of shares of Company Common Stock
outstanding immediately prior to the occurrence of the event and the
denominator of which shall be the total number of shares of Company Common
Stock outstanding immediately following the occurrence of such event.
SECTION 12. Certificate of Adjusted Purchase Price or Number of
---------------------------------------------------
Shares. Whenever an adjustment is made as provided in Section 11 or Section 13
- ------
hereof, the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Company Common Stock, a copy of such certificate, and
(c) mail a brief summary thereof to each holder of a Rights Certificate (or, if
prior to the Distribution Date, to each holder of a certificate representing
shares of Company Common Stock) in accordance with Section 25 hereof. The
Rights Agent shall be fully protected in relying on any such certificate and on
any adjustment therein contained and shall not be deemed to have knowledge of
any such adjustment unless and until it shall have received such certificate.
SECTION 13. Consolidation, Merger or Sale or Transfer of Assets or
------------------------------------------------------
Earning Power. (a) In the event that, following the Stock Acquisition Date,
- -------------
directly or indirectly, either (x) the Company shall consolidate with, or merge
with and into, any other Person (other than a Subsidiary of the Company in a
transaction which complies with Section 11(o) hereof), and the Company shall not
be the continuing or surviving corporation of such consolidation or merger, (y)
any Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof) shall consolidate with, or merge with or
into, the Company, and the Company shall be the continuing or surviving
corporation of such consolidation or merger and, in connection with such
consolidation or merger, all or part of the outstanding shares of Company Common
Stock shall be converted into or exchanged for stock or other securities of any
other Person or cash or any other property, or (z) the Company shall sell or
otherwise transfer (or one or more of its Subsidiaries shall sell or otherwise
transfer) to any Person or Persons (other than the Company or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), in one or more transactions, assets or earning power aggregating
more than 50% of the assets or earning power of the Company and its Subsidiaries
(taken as a whole) (any such event being a "Section 13 Event"), then, and in
----------------
each such case, proper provision shall be made so that: (i) each holder of a
Right, except as provided in
<PAGE>
21
Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at the then current Purchase Price, such number of validly
authorized and issued, fully paid and non-assessable shares of Common Stock of
the Principal Party (as such term is hereinafter defined), which shares shall
not be subject to any liens, encumbrances, rights of first refusal, transfer
restrictions or other adverse claims, as shall be equal to the result obtained
by (1) multiplying the then current Purchase Price by the number of Units of
Preferred Stock for which a Right is exercisable immediately prior to the first
occurrence of a Section 13 Event (or, if a Section 11(a)(ii) Event has occurred
prior to the first occurrence of a Section 13 Event, multiplying the number of
such Units for which a Right would be exercisable hereunder but for the
occurrence of such Section 11(a)(ii) Event by the Purchase Price which would be
in effect hereunder but for such first occurrence) and (2) dividing that product
(which, following the first occurrence of a Section 13 Event, shall be the
"Purchase Price" for all purposes of this Agreement) by 50% of the current
market price (determined pursuant to Section 11(d) hereof) per share of the
Common Stock of such Principal Party on the date of consummation of such Section
13 Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Company pursuant to this Agreement; (iii) the term "Company" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of Section 11 hereof shall apply only to such
Principal Party following the first occurrence of a Section 13 Event; (iv) such
Principal Party shall take such steps (including, but not limited to, the
reservation of a sufficient number of shares of its Common Stock) in connection
with the consummation of any such transaction as may be necessary to ensure that
the provisions of this Agreement shall thereafter be applicable to its shares of
Common Stock thereafter deliverable upon the exercise of the Rights; and (v) the
provisions of Section 11(a)(ii) hereof shall be of no further effect following
the first occurrence of any Section 13 Event.
(b) "Principal Party" shall mean:
---------------
(i) in the case of any transaction described in clause (x) or
(y) of the first sentence of Section 13(a), (A) the Person that is
the issuer of any securities into which shares of Company Common
Stock are converted in such merger or consolidation, or, if there is
more than one such issuer, the issuer of Common Stock that has the
highest aggregate current market price (determined pursuant to
Section 11(d) hereof) and (B) if no securities are so issued, the
Person that is the other party to such merger or consolidation, or,
if there is more than one such Person, the Person the Common Stock of
which has the highest aggregate current market price (determined
pursuant to Section 11(d) hereof); and
(ii) in the case of any transaction described in clause (z) of
the first sentence of Section 13(a), the Person that is the party
receiving the largest portion of the assets or earning power
transferred pursuant to such transaction or transactions, or, if each
Person that is a party to such transaction or transactions receives
the same portion of the assets or earning power transferred pursuant
to such transaction or transactions or if the Person receiving the
largest portion of the assets or earning power cannot be determined,
whichever Person the Common Stock of which has the highest aggregate
current market price
<PAGE>
22
(determined pursuant to Section 11(d) hereof); provided, however,
-------- -------
that in any such case, (1) if the Common Stock of such Person is not
at such time and has not been continuously over the preceding twelve-
month period registered under Section 12 of the Exchange Act
("Registered Common Stock"), or such Person is not a corporation, and
-------------------------
such Person is a direct or indirect Subsidiary of another Person that
has Registered Common Stock outstanding, "Principal Party" shall
refer to such other Person; (2) if the Common Stock of such Person is
not Registered Common Stock or such Person is not a corporation, and
such Person is a direct or indirect Subsidiary of another Person but
is not a direct or indirect Subsidiary of another Person which has
Registered Common Stock outstanding, "Principal Party" shall refer to
the ultimate parent entity of such first-mentioned Person; (3) if the
Common Stock of such Person is not Registered Common Stock or such
Person is not a corporation, and such Person is directly or
indirectly controlled by more than one Person, and one or more of
such other Persons has Registered Common Stock outstanding,
"Principal Party" shall refer to whichever of such other Persons is
the issuer of the Registered Common Stock having the highest
aggregate current market price (determined pursuant to Section 11(d)
hereof); and (4) if the Common Stock of such Person is not Registered
Common Stock or such Person is not a corporation, and such Person is
directly or indirectly controlled by more than one Person, and none
of such other Persons have Registered Common Stock outstanding,
"Principal Party" shall refer to whichever ultimate parent entity is
the corporation having the greatest shareholders equity or, if no
such ultimate parent entity is a corporation, shall refer to
whichever ultimate parent entity is the entity having the greatest
net assets.
(c) The Company shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
authorized shares of its Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13, and unless prior thereto the Company and such Principal Party shall
have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section l3
and further providing that the Principal Party will:
(i) (A) file on an appropriate form, as soon as practicable
following the execution of such agreement, a registration statement
under the Securities Act with respect to the Common Stock that may be
acquired upon exercise of the Rights, (B) cause such registration
statement to remain effective (and to include a prospectus complying
with the requirements of the Securities Act) until the Expiration
Date, and (C) as soon as practicable following the execution of such
agreement, take such action as may be required to ensure that any
acquisition of such Common Stock upon the exercise of the Rights
complies with any applicable state security or "blue sky" laws; and
<PAGE>
23
(ii) deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which
comply in all respects with the requirements for registration on Form
10 under the Exchange Act.
(d) In case the Principal Party which is to be a party to a
transaction referred to in this Section 13 has a provision in any of its
authorized securities or in its Certificate of Incorporation or By-laws or other
instrument governing its corporate affairs, which provision would have the
effect of (i) causing such Principal Party to issue, in connection with, or as a
consequence of, the consummation of a transaction referred to in this Section
13, shares of Common Stock of such Principal Party at less than the then current
market price per share (determined pursuant to Section 11(d) hereof) or
securities exercisable for, or convertible into, Common Stock of such Principal
Party at less than such then current market price (other than to holders of
Rights pursuant to this Section 13) or (ii) providing for any special payment,
tax or similar provisions in connection with the issuance of the Common Stock of
such Principal Party pursuant to the provisions of this Section 13; then, in
such event, the Company shall not consummate any such transaction unless prior
thereto the Company and such Principal Party shall have executed and delivered
to the Rights Agent a supplemental agreement providing that the provision in
question of such Principal Party shall have been cancelled, waived or amended,
or that the authorized securities shall be redeemed, so that the applicable
provision will have no effect in connection with, or as a consequence of, the
consummation of the proposed transaction.
(e) The provisions of this Section 13 shall similarly apply to
successive mergers or consolidations or sales or other transfers. In the event
that a Section 13 Event shall occur at any time after the occurrence of a
Section 11(a)(ii) Event, the Rights which have not theretofore been exercised
shall thereafter become exercisable in the manner described in Section 13(a).
SECTION 14. Fractional Rights and Fractional Shares. (a) The
---------------------------------------
Company shall not be required to issue fractions of Rights or to distribute
Rights Certificates which evidence fractional Rights. In lieu of such
fractional Rights, there shall be paid to the Persons to which such fractional
Rights would otherwise be issuable, an amount in cash equal to such fraction of
the market value of a whole Right. For purposes of this Section l4(a), the
market value of a whole Right shall be the closing price of the Rights for the
Trading Day immediately prior to the date on which such fractional Rights would
have been otherwise issuable. The closing price of the Rights for any day shall
be, if the Rights are listed or admitted to trading on a national securities
exchange, as reported in the principal consolidated transaction reporting system
with respect to securities listed on the principal national securities exchange
on which the Rights are listed or admitted to trading or, if the Rights are not
listed or admitted to trading on any national securities exchange, the last
quoted price or, if not so quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by Nasdaq or such other
system then in use or, if on any such date the Rights are not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by a majority
of the Independent Directors. If on any such date no such market maker is
making a market in the Rights, the fair value of the Rights on such date as
determined in good faith by a majority of the Independent
<PAGE>
24
Directors shall be used and such determination shall be described in a statement
filed with the Rights Agent and the holders of the Rights.
(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence such fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of such fractional shares of Preferred Stock
that are not integral multiples of one one-thousandth of a share, the Company
may pay to the registered holders of Rights Certificates at the time such Rights
are exercised as herein provided an amount in cash equal to the same fraction of
the then current market price of a share of Preferred Stock on the day of
exercise, determined in accordance with Section 11(d) hereof.
(c) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
SECTION 15. Rights of Action. All rights of action in respect of
----------------
this Agreement, other than rights of action vested in the Rights Agent pursuant
to Section 18 hereof, are vested in the respective registered holders of the
Rights Certificates (and, prior to the Distribution Date, the registered holders
of certificates representing shares of Company Common Stock); and any registered
holder of a Rights Certificate (or, prior to the Distribution Date, of a
certificate representing shares of Company Common Stock), without the consent of
the Rights Agent or of the holder of any other Rights Certificate (or, prior to
the Distribution Date, of a certificate representing shares of Company Common
Stock), may, in his own behalf and for his own benefit, enforce, and may
institute and maintain any suit, action or proceeding against the Company or any
other Person to enforce, or otherwise act in respect of, his right to exercise
the Rights evidenced by such Rights Certificate in the manner provided in such
Rights Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of Rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and shall be entitled to specific performance of the
obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
SECTION 16. Agreement of Rights Holders. Every holder of a Right by
---------------------------
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of Company Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent if surrendered
at the office of the Rights Agent designated for such purposes, duly
endorsed or accompanied by a proper instrument of transfer and with the
appropriate forms and certificates duly executed;
<PAGE>
25
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Company
Common Stock certificate) is registered as the absolute owner thereof and
of the Rights evidenced thereby (notwithstanding any notations of ownership
or writing on the Rights Certificates or the associated Company Common
Stock certificate made by anyone other than the Company or the Rights
Agent) for all purposes whatsoever, and neither the Company nor the Rights
Agent, subject to the last sentence of Section 7(e) hereof, shall be
affected by any notice to the contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any
holder of a Right or any other Person as a result of its inability to
perform any of its obligations under this Agreement by reason of any
preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation;
provided, however, the Company must use its best efforts to have any such
-------- -------
order, decree or ruling lifted or otherwise overturned as promptly as
practicable.
SECTION 17. Rights Certificate Holder Not Deemed a Stockholder. No
--------------------------------------------------
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of shares of
Preferred Stock or any other securities of the Company which may at any time be
issuable on the exercise of the Rights represented thereby, nor shall anything
contained herein or in any Rights Certificate be construed to confer upon the
holder of any Rights Certificate, as such, any of the rights of a stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or, except as provided in Section 24 hereof, to
receive notice of meetings or other actions affecting stockholders, or to
receive dividends or subscription rights, or otherwise, until the Right or
Rights evidenced by such Rights Certificate shall have been exercised in
accordance with the provisions hereof.
SECTION 18. Concerning the Rights Agent. (a) The Company agrees to
---------------------------
pay to the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses, including reasonable fees and disbursements of its counsel, incurred
in connection with the execution and administration of this Agreement and the
exercise and performance of its duties hereunder. The Company shall indemnify
the Rights Agent for, and hold it harmless against, any loss, liability, or
expense, incurred without negligence, bad faith or willful misconduct on the
part of the Rights Agent, for anything done or omitted by the Rights Agent in
connection with the acceptance and administration of this Agreement, including
the costs and expenses of defending against any claim of liability hereunder.
<PAGE>
26
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Preferred Stock or for other securities of the
Company, instrument of assignment or transfer, power of attorney, endorsement,
affidavit, letter, notice, direction, consent, certificate, statement or other
paper or document believed by it to be genuine and to have been signed, executed
and, where necessary, verified or acknowledged by the proper Person or Persons.
Anything in this Agreement to the contrary notwithstanding, in no event shall
the Rights Agent be liable for special, indirect or consequential loss or damage
of any kind whatsoever (including but not limited to lost profits), even if the
Rights Agent has been advised of the likelihood of such loss or damage and
regardless of the form of the action.
SECTION 19. Merger or Consolidation or Change of Name of Rights
---------------------------------------------------
Agent. (a) Any corporation into which the Rights Agent or any successor Rights
- -----
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
corporate trust or shareholder services businesses of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any document or any further act on
the part of any of the parties hereto; provided, however, that such corporation
-------- -------
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
SECTION 20. Duties of Rights Agent. The Rights Agent undertakes the
----------------------
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be
legal counsel for the Company), and the opinion of such counsel shall be
full and complete authorization and protection to the Rights Agent as to
any action taken or omitted by it in good faith and in accordance with such
opinion.
(b) Whenever in the performance of its duties under this Agreement
the Rights Agent shall deem it necessary or desirable that any fact or
matter (including, without
<PAGE>
27
limitation, the identity of any Acquiring Person and the determination of
"current market price") be proved or established by the Company prior to
taking or suffering any action hereunder, such fact or matter (unless other
evidence in respect thereof be specified herein) may be deemed to be
conclusively proved and established by a certificate signed by the Chairman
of the Board, the President, any Vice President, the Treasurer, any
Assistant Treasurer, the Secretary or any Assistant Secretary of the
Company and delivered to the Rights Agent; provided, however, that so long
-------- -------
as any Person is an Acquiring Person hereunder, such certificate shall be
signed and delivered by a majority of the Independent Directors; and such
certificate shall be full authorization to the Rights Agent for any action
taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the
Rights Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not have any responsibility for the
validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or for the validity or execution
of any Rights Certificate (except its countersignature thereof); nor shall
it be responsible for any breach by the Company of any covenant or failure
by the Company to satisfy conditions contained in this Agreement or in any
Rights Certificate; nor shall it be responsible for any adjustment required
under the provisions of Section 11 or Section 13 hereof or for the manner,
method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with
respect to the exercise of Rights evidenced by Rights Certificates after
receipt by the Rights Agent of the certificate describing any such
adjustment contemplated by Section 12); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or any other securities to be
issued pursuant to this Agreement or any Rights Certificate or as to
whether any shares of Preferred Stock or any other securities will, when so
issued, be validly authorized and issued, fully paid and non-assessable.
(f) The Company shall perform, execute, acknowledge and deliver or
cause to be performed, executed, acknowledged and delivered all such
further acts, instruments and assurances as may reasonably be required by
the Rights Agent for the performance by the Rights Agent of its duties
under this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from
the Chairman of the Board, the President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer or any Assistant
Treasurer of the Company, and to apply to such officers for advice or
<PAGE>
28
instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance
with instructions of any such officer; provided, however, that so long as
-------- -------
any Person is an Acquiring Person hereunder, the Rights Agent shall accept
such instructions and advice only from a majority of the Independent
Directors and shall not be liable for any action taken or suffered to be
taken by it in good faith in accordance with such instructions of the
majority of the Independent Directors. Any application by the Rights Agent
for written instructions from the Company may, at the option of the Rights
Agent, set forth in writing any action proposed to be taken or omitted by
the Rights Agent under this Rights Agreement and the date on and/or after
which such action shall be taken or such omission shall be effective. The
Rights Agent shall not be liable for any action taken by, or omission of,
the Rights Agent in accordance with a proposal included in any such
application on or after the date specified in such application (which date
shall not be less than five Business Days after the date any such officer
of the Company actually receives such application, unless any such officer
shall have consented in writing to an earlier date) unless, prior to taking
any such action (or the effective date in the case of an omission), the
Rights Agent shall have received written instructions in response to such
application specifying the action to be taken or omitted.
(h) The Rights Agent and any shareholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or
other securities of the Company or become pecuniarily interested in any
transaction in which the Company may be interested, or contract with or
lend money to the Company or otherwise act as fully and freely as though it
were not Rights Agent under this Agreement. Nothing herein shall preclude
the Rights Agent from acting in any other capacity for the Company or for
any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or
by or through its attorneys or agents.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in
the performance of any of its duties or in the exercise of its rights
hereunder if the Rights Agent shall have reasonable grounds for believing
that repayment of such funds or adequate indemnification against such risk
or liability is not reasonably assured to it.
(k) If, with respect to any Rights Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form
of assignment or form of election to purchase, as the case may be, has
either not been completed, not signed or indicates an affirmative response
to clause 1 and/or 2 thereof, the Rights Agent shall not take any further
action with respect to such requested exercise or transfer without first
consulting with the Company. If such certificate has been completed and
signed and shows a negative response to clauses 1 and 2 of such
certificate, unless previously instructed otherwise in writing by the
Company (which instructions may impose on the Rights Agent additional
ministerial responsibilities, but no discretionary responsibilities),
<PAGE>
29
the Rights Agent may assume without further inquiry that the Rights
Certificate is not owned by a person described in Section 4(b) or Section
7(e) hereof and shall not be charged with any knowledge to the contrary.
SECTION 21. Change of Rights Agent. The Rights Agent or any
----------------------
successor Rights Agent may resign and be discharged from its duties under this
Agreement upon thirty days' prior notice in writing mailed to the Company, and
to each transfer agent of the Preferred Stock and the Company Common Stock, by
registered or certified mail, and to the holders of the Rights Certificates by
first-class mail. The Company may remove the Rights Agent or any successor
Rights Agent upon thirty days' prior notice in writing, mailed to the Rights
Agent or successor Rights Agent, as the case may be, and to each transfer agent
of the Preferred Stock and the Company Common Stock, by registered or certified
mail, and to the holders of the Rights Certificates by first-class mail. If the
Rights Agent shall resign or be removed or shall otherwise become incapable of
acting, the Company shall appoint a successor to the Rights Agent. If the
Company shall fail to make such appointment within a period of thirty days after
giving notice of such removal or after it has been notified in writing of such
resignation or incapacity by the resigning or incapacitated Rights Agent or by
the holder of a Rights Certificate (who shall, with such notice, submit his
Rights Certificate for inspection by the Company), then any registered holder of
any Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether
appointed by the Company or by such a court, shall be (a) a corporation
organized and doing business under the laws of the United States or any state of
the United States in good standing, shall be authorized to do business as a
banking institution in the State of New York, shall be authorized under such
laws to exercise corporate trust or stock transfer powers, shall be subject to
supervision or examination by federal or state authorities and shall have at the
time of its appointment as Rights Agent a combined capital and surplus of at
least $100,000,000 or (b) an Affiliate of a corporation described in clause (a).
After appointment, the successor Rights Agent shall be vested with the same
powers, rights, duties and responsibilities as if it had been originally named
as Rights Agent without further act or deed; but the predecessor Rights Agent
shall deliver and transfer to the successor Rights Agent any property at the
time held by it hereunder, and execute and deliver any further assurance,
conveyance, act or deed necessary for the purpose. Not later than the effective
date of any such appointment, the Company shall file notice thereof in writing
with the predecessor Rights Agent and each transfer agent of the Preferred Stock
and the Company Common Stock, and mail a notice thereof in writing to the
registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent.
SECTION 22. Issuance of New Rights Certificates. Notwithstanding any
-----------------------------------
of the provisions of this Agreement or the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by a majority of the Independent Directors to reflect any
adjustment or change made in accordance with the provisions of this Agreement in
the Purchase Price or the number or kind or class of shares or other securities
or property that may be acquired under the Rights Certificates. In addition, in
connection with the issuance or sale of shares of Company Common Stock following
the Distribution Date and prior to the Expiration Date, the Company (a) shall,
with respect to shares
<PAGE>
30
of Company Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities hereinafter issued by the Company, and (b)
may, in any other case, if deemed necessary or appropriate by a majority of the
Independent Directors, issue Rights Certificates representing the appropriate
number of Rights in connection with such issuance or sale; provided, however,
-------- -------
that (i) no such Rights Certificate shall be issued if, and to the extent that,
the Company shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Company or the
person to whom such Rights Certificate would be issued, and (ii) no such Rights
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.
SECTION 23. Redemption and Termination. (a) Subject to Section 30
--------------------------
hereof, the Company may, at its option, by action of a majority of the
Independent Directors, at any time prior to the earlier of (i) the Close of
Business on the tenth Business Day following the Stock Acquisition Date or (ii)
the Final Expiration Date, redeem all but not less than all of the then
outstanding Rights at a redemption price of $.01 per Right, as such amount may
be appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date hereof (such redemption price being the
"Redemption Price"), and the Company may, at its option, by action of a majority
- -----------------
of the Independent Directors, pay the Redemption Price either in shares of
Company Common Stock (based on the "current market price", as defined in Section
11(d) hereof, of the shares of Company Common Stock at the time of redemption)
or cash.
(b) Immediately upon the action of a majority of the Independent
Directors ordering the redemption of the Rights, evidence of which shall be
filed with the Rights Agent, and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of a majority of the Independent
Directors ordering the redemption of the Rights, the Company shall give notice
of such redemption to the Rights Agent and the holders of the then outstanding
Rights by mailing such notice to all such holders at each holder's last address
as it appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the transfer agent for Company
Common Stock. Any notice which is mailed in the manner herein provided shall be
deemed given, whether or not the holder receives the notice. Each such notice
of redemption will state the method by which the payment of the Redemption Price
will be made.
SECTION 24. Notice of Certain Events. (a) In case the Company shall
------------------------
propose, at any time after the Distribution Date, (i) to pay any dividend
payable in stock of any class to the holders of Preferred Stock or to make any
other distribution to the holders of Preferred Stock (other than a regular
quarterly cash dividend paid out of funds legally available therefor), (ii) to
offer to the holders of Preferred Stock rights or warrants to subscribe for or
to purchase any additional shares of Preferred Stock or shares of stock of any
class or any other securities, rights or options, (iii) to effect any
reclassification of its Preferred Stock (other than a reclassification involving
only the subdivision of outstanding shares of Preferred Stock), (iv) to effect
any consolidation or merger into or with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), or to effect any sale
<PAGE>
31
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one or more transactions, of more than 50% of the
assets or earning power of the Company and its Subsidiaries (taken as a whole)
to any other Person or Persons (other than the Company and/or any of its
Subsidiaries in one or more transactions each of which complies with Section
11(o) hereof), or (v) to effect the liquidation, dissolution or winding up of
the Company, then, in each such case, the Company shall give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 25
hereof, a notice of such proposed action, which shall specify the record date
for the purposes of such stock dividend, distribution of rights or warrants, or
the date on which such reclassification, consolidation, merger, sale, transfer,
liquidation, dissolution, or winding up is to take place and the date of
participation therein by the holders of the shares of Preferred Stock, if any
such date is to be fixed, and such notice shall be so given in the case of any
action covered by clause (i) or (ii) above at least twenty (20) days prior to
the record date for determining holders of the shares of Preferred Stock for
purposes of such action, and in the case of any such other action, at least
twenty (20) days prior to the date of the taking of such proposed action or the
date of participation therein by the holders of the shares of Preferred Stock
whichever shall be the earlier; provided, however, no such notice shall be
-------- -------
required pursuant to this Section 24, if any Subsidiary of the Company effects a
consolidation or merger with or into, or effects a sale or other transfer of
assets or earnings power to, any other Subsidiary of the Company.
(b) In case any Section 11(a)(ii) Event hereof shall occur, then, in
any such case, (i) the Company shall as soon as practicable thereafter give to
each holder of a Rights Certificate, to the extent feasible and in accordance
with Section 25 hereof, a notice of the occurrence of such event, which shall
specify the event and the consequences of the event to holders of Rights under
Section 11(a)(ii) hereof.
SECTION 25. Notices. All notices and other communications provided
-------
for hereunder shall, unless otherwise stated herein, be in writing (including by
telex, telegram or cable) and mailed or sent or delivered, if to the Company, at
its address at:
Magma Power Company
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: President
Fax: (619) 622-7822
<PAGE>
32
and if to the Rights Agent, at its address at:
Chemical Trust Company of California
300 South Grand Avenue, Fourth Floor
Los Angeles, CA 90071
Attention: Mr. Ian Gass
Fax: (213) 617-9046
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Company Common Stock) shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Company.
SECTION 26. Supplements and Amendments. Prior to the Distribution
--------------------------
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Company Common Stock. From and after the Distribution
Date and subject to the penultimate sentence of this Section 26, the Company and
the Rights Agent shall, if the Company so directs, supplement or amend this
Agreement without the approval of any holders of Rights Certificates in order
(i) to cure any ambiguity, (ii) to correct or supplement any provision contained
herein which may be defective or inconsistent with any other provisions herein,
(iii) to shorten or lengthen any time period hereunder, or (iv) to change or
supplement the provisions hereunder in any manner which the Company may deem
necessary or desirable and which shall not adversely affect the interests of the
holders of Rights Certificates (other than an Acquiring Person or an Affiliate
or Associate of an Acquiring Person); provided, however, that this Agreement may
-------- -------
not be supplemented or amended to lengthen, pursuant to clause (iii) of this
sentence, (A) subject to Section 30 hereof, a time period relating to when the
Rights may be redeemed at such time as the Rights are not then redeemable, or
(B) any other time period unless such lengthening is for the purpose of
protecting, enhancing or clarifying the rights of, and/or the benefits to, the
holders of Rights. Upon the delivery of a certificate from an appropriate
officer of the Company or, so long as any Person is an Acquiring Person
hereunder, from the majority of the Independent Directors which states that the
proposed supplement or amendment is in compliance with the terms of this Section
26, the Rights Agent shall execute such supplement or amendment.
Notwithstanding anything contained in this Agreement to the contrary, no
supplement or amendment shall be made which changes the Redemption Price, the
Purchase Price, the Expiration Date or the number of Units of Preferred Stock
for which a Right is exercisable without the approval of a majority of the
Independent Directors. Prior to the Distribution Date, the interests of the
holders of Rights shall be deemed coincident with the interests of the holders
of Company Common Stock.
SECTION 27. Successors. All the covenants and provisions of this
----------
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
<PAGE>
33
SECTION 28. Determinations and Actions by the Board of Directors, etc.
----------------------------------------------------------
For all purposes of this Agreement, any calculation of the number of shares of
Company Common Stock outstanding at any particular time, including for purposes
of determining the particular percentage of such outstanding shares of Company
Common Stock of which any Person is the Beneficial Owner, shall be made in
accordance with the last sentence of Rule 13d-3(d)(1)(i) of the Exchange Act
Regulations as in effect on the date hereof. Except as otherwise specifically
provided herein, the Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power (i) to interpret the provisions of this
Agreement, and (ii) to make all determinations deemed necessary or advisable for
the administration of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
or by a majority of the Independent Directors in good faith shall (x) be final,
conclusive and binding on the Company, the Rights Agent, the holders of the
Rights and all other parties, and (y) not subject the Board or any member
thereof to any liability to the holders of the Rights.
SECTION 29. Benefits of this Agreement. Nothing in this Agreement
--------------------------
shall be construed to give to any Person other than the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock) any
legal or equitable right, remedy or claim under this Agreement; but this
Agreement shall be for the sole and exclusive benefit of the Company, the Rights
Agent and the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of shares of Company Common Stock).
SECTION 30. Severability. If any term, provision, covenant or
------------
restriction of this Agreement is held by a court of competent jurisdiction or
other authority to be invalid, void or unenforceable, the remainder of the
terms, provisions, covenants and restrictions of this Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
- -------- -------
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and a majority of the
Independent Directors determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement and the Rights shall not then be redeemable, the right
of redemption set forth in Section 23 hereof shall be reinstated and shall not
expire until the Close of Business on the tenth Business Day following the date
of such determination by a majority of the Independent Directors.
SECTION 31. Governing Law. This Agreement, each Right and each Rights
-------------
Certificate issued hereunder shall be governed by, and construed in accordance
with, the laws of the State of Nevada applicable to contracts executed in and to
be performed entirely in such State; provided, however, that Sections 18, 19,
-------- -------
20 and 21 hereof shall be governed by, and construed in accordance with, the
laws of the State of California.
<PAGE>
34
SECTION 32. Counterparts. This Agreement may be executed (including
------------
by facsimile) in one or more counterparts, and by the different parties hereto
in separate counterparts, each of which when executed shall be deemed to be an
original, but all of which taken together shall constitute one and the same
instrument.
SECTION 33. Descriptive Headings. The headings contained in this
--------------------
Agreement are for descriptive purposes only and shall not affect in any way the
meaning or interpretation of this Agreement.
SECTION 34. Exchange. (a) The Company may at any time prior to the
--------
Distribution Date, upon resolution of a majority of the Independent Directors,
exchange all or part of the then outstanding and exerciseable Rights (which
shall not include Rights that have become void pursuant to Section 7(e) hereof)
for Units of Preferred Stock at an exchange ratio specified in the following
sentence, as appropriately adjusted to reflect any stock split, stock dividend
or similar transaction occurring after the date hereof. Subject to such
adjustment, each Right may be exchanged for that number of Units of Preferred
Stock obtained by dividing the Adjustment Spread (as defined below) by the then
current market price (determined pursuant to Section 11(d) hereof) per Unit of
Preferred Stock on the earlier of (i) the date on which any Person becomes an
Acquiring Person and (ii) the date on which a tender or exchange offer by any
Person (other than the Company, any Subsidiary of the Company, any employee
benefit plan maintained by the Company or any of its Subsidiaries or any trustee
or fiduciary with respect to such plan acting in such capacity) is first
published or sent or given within the meaning of Rule 14d-4(a) of the Exchange
Act Regulations or any successor rule, if upon consummation thereof such Person
would be the Beneficial Owner of 20% or more of the shares of Company Common
Stock then outstanding (such exchange ratio being the "Exchange Ratio"). The
--------------
"Adjustment Spread" shall equal (x) the aggregate market price on the date of
- ------------------
such event of the number of Adjustment Shares determined pursuant to Section
11(a)(ii), minus (y) the Purchase Price.
(b) Immediately upon the action of a majority of the Independent
Directors ordering the exchange of any Rights pursuant to Section 34(a) and
without any further action and without any notice, the right to exercise such
Rights shall terminate and the only right thereafter of a holder of such Rights
shall be to receive that number of Units of Preferred Stock equal to the number
of such Rights held by such holder multiplied by the Exchange Ratio. The
Company shall promptly give public notice of any such exchange; provided,
--------
however, that the failure to give, or any defect in, such notice shall not
- -------
affect the validity of such exchange. The Company promptly shall mail a notice
of any such exchange to all of the holders of such Rights at their last
addresses as they appear upon the registry books of the Rights Agent. Any
notice which is mailed in the manner herein provided shall be deemed given,
whether or not the holder receives the notice. Each such notice of exchange
shall state the method by which the exchange of Units of Preferred Stock for
Rights will be effected and, in the event of any partial exchange, the number of
Rights which will be exchanged. Any partial exchange shall be effected pro rata
based on the number of Rights (other than Rights which have become void pursuant
to the provisions of Section 7(e) hereof) held by each holder of Rights.
<PAGE>
35
(c) In the event that the number of shares of Preferred Stock which
are authorized by the Company's Certificate of Incorpration but not outstanding
or reserved for issuance for purposes other than upon exercise of the Rights are
not sufficient to permit any exchange of Rights as contemplated in accordance
with this Section 34, the Company shall take all such action as may be necessary
to authorize additional shares of Preferred Stock for issuance upon exchange of
the Rights or make adequate provision to subsititute (1) cash, (2) Company
Common Stock or other equity securities of the Company, (3) debt securities of
the Company, (4) other assets, or (5) any combination of the foregoing, having
an aggregate value equal to the Adjustment Spread, where such aggregate value
has been determined by a majority of the Independent Directors.
(d) The Company shall not be required to issue fractions of Units of
Preferred Stock or to distribute certificates which evidence fractional Units.
In lieu of fractional Units, the Company may pay to the registered holders of
Rights Certificates at the time such Rights are exchanged as herein provided an
amount in cash equal to the same fraction of the current market price
(determined pursuant to Section 11(d) hereof) of one Unit of Preferred Stock.
<PAGE>
36
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed, all as of the date first above written.
ATTEST: MAGMA POWER COMPANY
/s/ Jon R. Peele /s/ Paul M. Pankratz
By ________________________________ By ________________________________
Name: Jon R. Peele Name: Paul M. Pankratz
Title: Secretary Title: Chairman
ATTEST: CHEMICAL TRUST COMPANY
OF CALIFORNIA
/s/ Ian D. Gass /s/ Sharon D. Magidson
By ________________________________ By __________________________________
Name: Ian D. Gas Name: Sharon D. Magidson
Title: Assistant Vice President Title: Vice President
<PAGE>
EXHIBIT A
---------
[Form of Rights Certificate]
Certificate No. ___________________ Rights
NOT EXERCISABLE AFTER THE EXPIRATION DATE (AS DEFINED IN THE RIGHTS AGREEMENT
REFERRED TO BELOW). THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE
COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES (SPECIFIED IN THE RIGHTS AGREEMENT), RIGHTS BENEFICIALLY OWNED BY
ACQUIRING PERSONS (AS DEFINED IN THE RIGHTS AGREEMENT) OR ANY SUBSEQUENT HOLDER
OF SUCH RIGHTS MAY BECOME NULL AND VOID.
Rights Certificate
MAGMA POWER COMPANY
This certifies that _____________________, or registered assigns, is
the registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms and conditions of
the Rights Agreement dated as of October 6, 1994 (the "Rights Agreement"; terms
----------------
defined therein are used herein with the same meaning unless otherwise defined
herein) between Magma Power Company, a Nevada corporation (the "Company"), and
-------
Chemical Trust Company of California as Rights Agent (which term shall include
any successor Rights Agent under the Rights Agreement), to purchase from the
Company at any time after the Distribution Date and prior to the Expiration Date
at the office of the Rights Agent, one one-thousandth of a fully paid and non-
assessable share of Series A Preferred Stock, par value $.10 per share (the
"Preferred Stock"), of the Company at the Purchase Price initially of $125 per
- ----------------
one one-thousandth share (each such one one-thousandth of a share being a
"Unit") of Preferred Stock, upon presentation and surrender of this Rights
----
Certificate with the Election to Purchase and related certificate duly executed.
The number of Rights evidenced by this Rights Certificate (and the number of
Units which may be purchased upon exercise thereof) set forth above, and the
Purchase Price per Unit set forth above shall be subject to adjustment in
certain events as provided in the Rights Agreement.
Upon the occurrence of a Section 11(a)(ii) Event, if the Rights
evidenced by this Rights Certificate are beneficially owned by an Acquiring
Person or an Affiliate or Associate of any such Acquiring Person or, under
certain circumstances described in the Rights Agreement, a transferee of any
such Acquiring Person, Associate or Affiliate, such Rights shall become null and
void and no holder hereof shall have any right with respect to such Rights from
and after the occurrence of such Section 11(a)(ii) Event.
In certain circumstances described in the Rights Agreement, the rights
evidenced hereby may entitle the registered holder thereof to purchase capital
stock of an entity other than
<PAGE>
2
the Company or receive common stock, cash or other assets, all as provided in
the Rights Agreement.
This Rights Certificate is subject to all of the terms and conditions
of the Rights Agreement, which terms and conditions are hereby incorporated
herein by reference and made a part hereof and to which Rights Agreement
reference is hereby made for a full description of the rights, limitations of
rights, obligations, duties and immunities hereunder of the Rights Agent, the
Company and the holders of the Rights Certificates. Copies of the Rights
Agreement are on file at the principal office of the Company and are available
from the Company upon written request.
This Rights Certificate, with or without other Rights Certificates,
upon surrender at the office of the Rights Agent designated for such purpose,
may be exchanged for another Rights Certificate or Rights Certificates of like
tenor and date evidencing an aggregate number of Rights equal to the aggregate
number of Rights evidenced by the Rights Certificate or Rights Certificates
surrendered. If this Rights Certificate shall be exercised in part, the
registered holder shall be entitled to receive, upon surrender hereof, another
Rights Certificate or Rights Certificates for the number of whole Rights not
exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced
by this Certificate may be redeemed by the Company under certain circumstances
at its option at a redemption price of $.01 per Right, payable at the Company's
option in cash or in common stock of the Company, subject to adjustment in
certain events as provided in the Rights Agreement.
No fractional shares of Preferred Stock will be issued upon the
exercise of any Right or Rights evidenced hereby (other than fractions which are
integral multiples of one one-thousandth of a share of Preferred Stock), but in
lieu thereof a cash payment will be made, as provided in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be entitled to
vote or receive dividends or be deemed for any purpose the holder of Preferred
Stock or of any other securities which may at any time be issuable on the
exercise hereof, nor shall anything contained in the Rights Agreement or herein
be construed to confer upon the holder hereof, as such, any of the rights of a
shareholder of the Company or any right to vote for the election of directors or
upon any matter submitted to shareholders at any meeting thereof, or to give or
withhold consent to any corporate action, or to receive notice of meetings or
other actions affecting shareholders (except as provided in the Rights
Agreement), or to receive dividends or subscription rights, or
<PAGE>
3
otherwise, until the Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any
purpose until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company.
Dated as of _______ __, 199_.
MAGMA POWER COMPANY
By __________________________________ By __________________________________
Name: Name:
Title: Title:
Countersigned:
CHEMICAL TRUST COMPANY OF CALIFORNIA, as
Rights Agent
By __________________________________
Name:
Title:
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
------------------
(To be executed by the registered holder if
such holder desires to transfer the
Rights Certificate.)
FOR VALUE RECEIVED --------------------------------------------------
hereby sells, assigns and transfers unto ----------------------
- --------------------------------------------------------------------------------
(Please print name and address of transferee)
- --------------------------------------------------------------------------------
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ----------------- Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated: ____________ __, 199_
___________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned
and transferred by or on behalf of a Person who is or was an Acquiring Person or
an Affiliate or Associate of any such Acquiring Person (as such terms are
defined pursuant to the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned, it
[ ] did [ ] did not acquire the Rights evidenced by this Rights Certificate
from any Person who is, was or subsequently became an Acquiring Person or an
Affiliate or Associate of an Acquiring Person.
Dated: _____________ __, 199_ _____________________________
Signature
Signature Guaranteed:
--------------------------------------------------------------
NOTICE
------
The signature to the foregoing Assignment and Certificate must
correspond to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signatures must be guaranteed by an approved eligible financial
institution acceptable to the Rights Agent in its sole discretion or by a
participant in the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Program.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE>
FORM OF ELECTION TO PURCHASE
----------------------------
(To be executed if the registered holder
desires to exercise Rights represented
by the Rights Certificate.)
To: MAGMA POWER COMPANY
The undersigned hereby irrevocably elects to exercise ------------
Rights represented by this Rights Certificate to purchase the Units of Preferred
Stock issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person or other property which may be issuable upon the
exercise of the Rights) and requests that certificates for such Units be issued
in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert social security
or other identifying number: ------------------------------
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
- --------------------------------------------------------------------------------
(Please print name and address)
- --------------------------------------------------------------------------------
Please insert social security
or other identifying number: ----------------------------
Dated: _________ __, 199_
____________________________
Signature
Signature Guaranteed:
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes
that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are
not beneficially owned by an Acquiring Person or an Affiliate or an Associate
thereof (as defined in the Rights Agreement); and
(2) after due inquiry and to the best knowledge of the undersigned,
the undersigned [ ] did [ ] did not acquire the Rights evidenced by this
Rights Certificate from any person who is, was or subsequently became an
Acquiring Person or an Affiliate or Associate thereof.
Dated: _________ __, 199_ ___________________________
Signature
Signature Guaranteed:
--------------------------------------------------------------
NOTICE
------
The signature in the foregoing Election to Purchase and Certificate
must conform to the name as written upon the face of this Rights Certificate in
every particular, without alteration or enlargement or any change whatsoever.
Signatures must be guaranteed by an approved eligible financial
institution acceptable to the Rights Agent in its sole discretion or by a
participant in the Securities Transfer Agents Medallion Program, the Stock
Exchange Medallion Program or the New York Stock Exchange Medallion Program.
In the event the certification set forth above is not completed, the
Company will deem the beneficial owner of the Rights evidenced by this Rights
Certificate to be an Acquiring Person or an Affiliate or Associate thereof (as
defined in the Rights Agreement) and, in the case of an Assignment, will affix a
legend to that effect on any Rights Certificates issued in exchange for this
Rights Certificate.
<PAGE>
EXHIBIT B
---------
SUMMARY OF RIGHTS TO PURCHASE
PREFERRED STOCK
On October 3, 1994, the Board of Directors of Magma Power Company (the
"Company") declared a distribution of one Right for each outstanding share of
- --------
Common Stock, par value $.10 per share (the "Company Common Stock"), to
--------------------
stockholders of record at the close of business on October 14, 1994 (the "Record
------
Date") and for each share of Company Common Stock issued (including shares
- ----
distributed from Treasury) by the Company thereafter and prior to the
Distribution Date. Each Right entitles the registered holder, subject to the
terms of the Rights Agreement (as defined below), to purchase from the Company
one one-thousandth of a share (a "Unit") of Series A Preferred Stock, par value
----
$.10 per share (the "Preferred Stock"), at a Purchase Price of $125 per Unit,
---------------
subject to adjustment. The Purchase Price is payable in cash or by certified or
bank check or money order payable to the order of the Company. The description
and terms of the Rights are set forth in a Rights Agreement between the Company
and Chemical Trust Company of California as Rights Agent (the "Rights
------
Agreement").
Copies of the Rights Agreement and the Certificate of Designation for the
Preferred Stock have been filed with the Securities and Exchange Commission as
exhibits to a Registration Statement on Form 8-A dated October 7, 1994 (the
"Form 8-A"). Copies of the Rights Agreement and the Certificate of Designation
- ---------
are available free of charge from the Company. This summary description of the
Rights and the Preferred Stock does not purport to be complete and is qualified
in its entirety by reference to all the provisions of the Rights Agreement and
the Certificate of Designation, including the definitions therein of certain
terms, which Rights Agreement and Certificate of Designation are incorporated
herein by reference.
<PAGE>
2
The Rights Agreement
- --------------------
Initially, the Rights will attach to all certificates representing shares
of outstanding Company Common Stock, and no separate Rights Certificates will be
distributed. The Rights will separate from the Company Common Stock and the
"Distribution Date" will occur upon the earlier of (i) 10 business days
following a public announcement (the date of such announcement being the "Stock
-----
Acquisition Date") that a person or group of affiliated or associated persons
- ----------------
(other than the Company, any subsidiary of the Company or any employee benefit
plan of the Company or such subsidiary) (an "Acquiring Person") has acquired,
----------------
obtained the right to acquire, or otherwise obtained beneficial ownership of 10%
or more of the then outstanding shares of Company Common Stock (or if certain
current holders of 10% or more of the outstanding shares of Company Common Stock
have acquired, obtained the right to acquire or otherwise obtained beneficial
ownership of an additional 4% of the Company Common Stock), and (ii) 10 business
days (or such later date as may be determined by action of the Board of
Directors prior to such time as any person becomes an Acquiring Person)
following the commencement of a tender offer or exchange offer that would result
in a person or group beneficially owning 20% or more of the then outstanding
shares of Company Common Stock. Until the Distribution Date, (i) the Rights will
be evidenced by Company Common Stock certificates and will be transferred with
and only with such Company Common Stock certificates, (ii) new Company Common
Stock certificates issued after the Record Date (also including shares
distributed from Treasury) will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of any certificates
representing outstanding Company Common Stock will also constitute the transfer
of the Rights associated with the Company Common Stock represented by such
certificates.
The Rights are not exercisable until the Distribution Date and will expire
at the close of business on the tenth anniversary of the Rights Agreement unless
earlier redeemed by the Company as described below.
As soon as practicable after the Distribution Date, Rights Certificates
will be mailed to holders of record of Company Common Stock as of the close of
business on the Distribution Date and, thereafter, the separate Rights
Certificates alone will represent the Rights.
In the event that (i) the Company is the surviving corporation in a merger
with an Acquiring Person and shares of Company Common Stock shall remain
outstanding, (ii) a Person becomes the beneficial owner of 10% or more of the
then outstanding shares of Company Common Stock (or an additional 4% in the case
of certain current 10% holders), (iii) an Acquiring Person engages in one or
more "self-dealing" transactions as set forth in the Rights Agreement, or (iv)
during such time as there is an Acquiring Person, an event occurs which results
in such Acquiring Person's ownership interest being increased by more than 1%
(e.g., by means of a reverse stock split or recapitalization), then, in each
---- ----
such case, each holder of a Right will thereafter have the right to receive,
upon exercise, Units of Preferred Stock (or, in certain
<PAGE>
3
circumstances, Company Common Stock, cash, property or other securities of the
Company) having a value equal to two times the exercise price of the Right. The
exercise price is the Purchase Price multiplied by the number of Units of
Preferred Stock issuable upon exercise of a Right prior to the events described
in this paragraph. Notwithstanding any of the foregoing, following the
occurrence of any of the events set forth in this paragraph, all Rights that
are, or (under certain circumstances specified in the Rights Agreement) were,
beneficially owned by any Acquiring Person will be null and void.
In the event that, at any time following the Stock Acquisition Date, (i)
the Company is acquired in a merger or other business combination transaction
and the Company is not the surviving corporation (other than a merger described
in the preceding paragraph), (ii) any Person consolidates or merges with the
Company and all or part of the Company Common Stock is converted or exchanged
for securities, cash or property of any other Person or (iii) 50% or more of the
Company's assets or earning power is sold or transferred, each holder of a Right
(except Rights which previously have been voided as described above) shall
thereafter have the right to receive, upon exercise, common stock of the
Acquiring Person having a value equal to two times the exercise price of the
Right.
The Purchase Price payable, and the number of Units of Preferred Stock
issuable, upon exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on, or a
subdivision, combination or reclassification of, the Preferred Stock, (ii) if
holders of the Preferred Stock are granted certain rights or warrants to
subscribe for Preferred Stock or convertible securities at less than the current
market price of the Preferred Stock, or (iii) upon the distribution to the
holders of the Preferred Stock of evidences of indebtedness, cash or assets
(excluding regular quarterly cash dividends) or of subscription rights or
warrants (other than those referred to above).
With certain exceptions, no adjustment in the Purchase Price will be
required until cumulative adjustments amount to at least 1% of the Purchase
Price. The Company is not required to issue fractional Units. In lieu thereof,
an adjustment in cash may be made based on the market price of the Preferred
Stock prior to the date of exercise.
At any time until ten business days following the Stock Acquisition Date, a
majority of the Independent Directors may redeem the Rights in whole, but not in
part, at a price of $.01 per Right (subject to adjustment in certain events)
(the "Redemption Price") payable, at the election of such majority of the
----------------
Independent Directors, in cash or shares of Company Common Stock. Immediately
upon the action of a majority of the Independent Directors ordering the
redemption of the Rights, the Rights will terminate and the only right of the
holders of Rights will be to receive the Redemption Price.
Until a Right is exercised, the holder thereof, as such, will have no
rights as a stockholder of the Company, including, without limitation, the right
to vote or to receive
<PAGE>
4
dividends. While the distribution of the Rights will not be taxable to
stockholders or to the Company, stockholders may, depending upon the
circumstances, recognize taxable income in the event that the Rights become
exercisable for Units of Preferred Stock (or other consideration).
Any of the provisions of the Rights Agreement may be amended without the
approval of the holders of Company Common Stock at any time prior to the
Distribution Date. After the Distribution Date, the provisions of the Rights
Agreement may be amended in order to cure any ambiguity, defect or
inconsistency, to make changes which do not adversely affect the interests of
holders of Rights (excluding the interests of any Acquiring Person), or to
shorten or lengthen any time period under the Rights Agreement; provided,
--------
however, that no amendment to adjust the time period governing redemption shall
- -------
be made at such time as the Rights are not redeemable.
Description of Preferred Stock
- ------------------------------
The Units of Preferred Stock that may be acquired upon exercise of the
Rights will be nonredeemable and subordinate to any other shares of preferred
stock that may be issued by the Company.
Each Unit of Preferred Stock will have a minimum preferential quarterly
dividend of $.01 per Unit or any higher per share dividend declared on the
Company Common Stock.
In the event of liquidation, the holder of a Unit of Preferred Stock will
receive a preferred liquidation payment equal to the greater of $125 per Unit
and the per share amount paid in respect of a share of Company Common Stock.
Each Unit of Preferred Stock will have one vote, voting together with the
Company Common Stock.
In the event of any merger, consolidation or other transaction in which
shares of Company Common Stock are exchanged, each Unit of Preferred Stock will
be entitled to receive the per share amount paid in respect of each share of
Company Common Stock.
The rights of holders of the Preferred Stock to dividends, liquidation and
voting, and in the event of mergers and consolidations, are protected by
customary antidilution provisions.
Because of the nature of the Preferred Stock's dividend, liquidation and
voting rights, the economic value of one Unit of Preferred Stock that may be
acquired upon the exercise of each Right should approximate the economic value
of one share of Company Common Stock.
<PAGE>
File No. 6828-81
EXHIBIT C
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MAGMA POWER COMPANY
CERTIFICATE OF DESIGNATION
OF THE VOTING POWERS, DESIGNATION,
PREFERENCES AND RELATIVE, PARTICIPATING,
OPTIONAL OR OTHER SPECIAL RIGHTS AND QUALIFICATIONS,
LIMITATIONS AND RESTRICTIONS OF THE
SERIES A PREFERRED STOCK
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Pursuant to Section 78.195 of the
Nevada Revised Statutes
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We, Ralph W. Boeker and Jon R. Peele, President and Secretary,
respectively, of Magma Power Company, a corporation organized and existing under
Chapter 78 of the Nevada Revised Statutes of the State of Nevada (the
"Corporation"), DO HEREBY CERTIFY:
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that, pursuant to authority conferred upon the Board of Directors of
the Corporation by its Articles of Incorporation (the "Articles"), and, pursuant
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to the provisions of Section 78.035, 78.195 and 78.196 of the Nevada Revised
Statutes, said Board of Directors, at a duly called meeting held on October 3,
1994, at which a quorum was present and acted throughout, adopted the following
resolution, which resolution remains in full force and effect on the date hereof
creating a series of 50,000 shares of Preferred Stock having a par value of $.10
per share, designated as Series A Preferred Stock (the "Series A Preferred
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Stock") out of the class of 1,000,000 shares of preferred stock of the par value
of $.10 per share (the "Preferred Stock"):
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RESOLVED, that pursuant to the authority vested in the Board of Directors in
accordance with the provisions of its Restated Articles of Incorporation, the
Board of Directors does hereby create, authorize and provide for 50,000 shares
of its authorized Preferred Stock to be designated and issued as the Series A
Preferred Stock, having the voting powers, designation, relative, participating,
optional and other special rights, preferences and qualifications, limitations
and restrictions that are set forth as follows:
1. Dividends and Distributions. (A) Subject to the prior
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and superior rights of the holders of any shares of any other series of
Preferred Stock or any other shares of preferred stock of the Corporation
ranking prior and superior to the shares of Series A
<PAGE>
Preferred Stock with respect to dividends, each holder of one one-thousandth
(1/1000) of a share (a "Unit") of Series A Preferred Stock shall be entitled to
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receive, when, as and if declared by the Board of Directors out of funds legally
available for that purpose, (i) quarterly dividends payable in cash on the last
day of April, July, October and February in each year (each such date being a
"Quarterly Dividend Payment Date"), commencing on the first Quarterly Dividend
Payment Date after the first issuance of such Unit of Series A Preferred Stock,
in an amount per Unit (rounded to the nearest cent) equal to the greater of (a)
$.01 or (b) subject to the provision for adjustment hereinafter set forth, the
aggregate per share amount of all cash dividends declared on shares of the
Common Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since the first
issuance of a Unit of Series A Preferred Stock, and (ii) subject to the
provision for adjustment hereinafter set forth, quarterly distributions (payable
in kind) on each Quarterly Dividend Payment Date in an amount per Unit equal to
the aggregate per share amount of all non-cash dividends or other distributions
(other than a dividend payable in shares of Common Stock or a subdivision of the
outstanding shares of Common Stock, by reclassification or otherwise) declared
on shares of Common Stock since the immediately preceding Quarterly Dividend
Payment Date, or with respect to the first Quarterly Dividend Payment Date,
since the first issuance of a Unit of Series A Preferred Stock. In the event
that the Corporation shall at any time after
October 3, 1994 (the "Rights Declaration Date") (i) declare any dividend on
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outstanding shares of Common Stock payable in shares of Common Stock, (ii)
subdivide outstanding shares of Common Stock or (iii) combine outstanding shares
of Common Stock into a smaller number of shares, then in each such case the
amount to which the holder of a Unit of Series A Preferred Stock was entitled
immediately prior to such event pursuant to the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator of which shall
be the number of shares of Common Stock that are outstanding immediately after
such event and the denominator of which shall be the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution on Units
of Series A Preferred Stock as provided in paragraph (A) above immediately after
it declares a dividend or distribution on the shares of Common Stock (other than
a dividend payable in shares of Common Stock); provided, however, that, in the
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event no dividend or distribution shall have been declared on the Common Stock
during the period between any Quarterly Dividend Payment Date and the next
subsequent Quarterly Dividend Payment Date, a dividend of $.01 per Unit on the
Series A Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and shall be cumulative on each
outstanding Unit of Series A Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issuance of such Unit of Series A Preferred
Stock, unless the date of issuance of such Unit is prior to the record date for
the first Quarterly Dividend Payment Date, in which case, dividends on such Unit
shall begin to accrue from the date of issuance of such Unit, or unless the date
of issuance is a Quarterly Dividend Payment Date or is a
<PAGE>
date after the record date for the determination of holders of Units of Series A
Preferred Stock entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall not bear interest. Dividends paid on Units of
Series A Preferred Stock in an amount less than the aggregate amount of all such
dividends at the time accrued and payable on such Units shall be allocated pro
rata on a unit-by-unit basis among all Units of Series A Preferred Stock at the
time outstanding. The Board of Directors may fix a record date for the
determination of holders of Units of Series A Preferred Stock entitled to
receive payment of a dividend or distribution declared thereon, which record
date shall be no more than 30 days prior to the date fixed for the payment
thereof.
2. Voting Rights. The holders of Units of Series A
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Preferred Stock shall have the following voting rights:
(A) Subject to the provision for adjustment hereinafter set forth,
each Unit of Series A Preferred Stock shall entitle the holder thereof to one
vote on all matters submitted to a vote of the stockholders of the Corporation.
In the event the Corporation shall at any time after the Rights Declaration Date
(i) declare any dividend on outstanding shares of Common Stock payable in shares
of Common Stock, (ii) subdivide outstanding shares of Common Stock or (iii)
combine the outstanding shares of Common Stock into a smaller number of shares,
then in each such case the number of votes per Unit to which holders of Units of
Series A Preferred Stock were entitled immediately prior to such event shall be
adjusted by multiplying such number by a fraction the numerator of which shall
be the number of shares of Common Stock outstanding immediately after such event
and the denominator of which shall be the number of shares of Common Stock that
were outstanding immediately prior to such event.
(B) Except as otherwise provided herein, in the Articles of
Incorporation or by law, the holders of Units of Series A Preferred Stock and
the holders of shares of Common Stock shall vote together as one class on all
matters submitted to a vote of stockholders of the Corporation, and such holders
shall have no special voting rights and their consents shall not be required for
taking any corporate action.
3. Certain Restrictions. (A) Whenever quarterly dividends or other
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dividends or distributions payable on Units of Series A Preferred Stock as
provided herein are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on outstanding Units of
Series A Preferred Stock shall have been paid in full, the Corporation shall not
(i) declare or pay dividends on, make any other distributions on, or
redeem or purchase or otherwise acquire for consideration any shares of
junior stock;
(ii) declare or pay dividends on or make any other distributions on
any shares
<PAGE>
of parity stock, except dividends paid ratably on Units of Series A
Preferred Stock and shares of all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of such Units and all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for consideration
shares of any parity stock, provided, however, that the Corporation may at
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any time redeem, purchase or otherwise acquire shares of any such parity
stock in exchange for shares of any junior stock;
(iv) purchase or otherwise acquire for consideration any Units of
Series A Preferred Stock, except in accordance with a purchase offer made
in writing or by publication (as determined by the Board of Directors) to
all holders of such Units.
(B) The Corporation shall not permit any subsidiary of the Corporation
to purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) this Section 3,
purchase or otherwise acquire such shares at such time and in such manner.
4. Reacquired Shares. Any Units of Series A Preferred Stock
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purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
Units shall, upon their cancellation, become authorized but unissued Units of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
5. Liquidation, Dissolution or Winding Up. (A) Upon any voluntary
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or involuntary liquidation, dissolution or winding up of the Corporation, no
distribution shall be made (i) to the holders of shares of junior stock unless
the holders of Units of Series A Preferred Stock shall have received, subject to
adjustment as hereinafter provided in paragraph (B), the greater of either (a)
$125 per Unit plus an amount equal to accrued and unpaid dividends and
distributions thereon, whether or not earned or declared, to the date of such
payment, or (b) the amount equal to the aggregate per share amount to be
distributed to holders of shares of Common Stock, or (ii) to the holders of
shares of parity stock, unless simultaneously therewith distributions are made
ratably on Units of Series A Preferred Stock and all other shares of such parity
stock in proportion to the total amounts to which the holders of Units of Series
A Preferred Stock are entitled under clause (i)(a) of this sentence and to which
the holders of shares of such parity stock are entitled, in each case upon such
liquidation, dissolution or winding up.
(B) In the event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on outstanding shares of Common Stock
payable in shares of Common Stock, (ii) subdivide outstanding shares of Common
Stock, or (iii) combine outstanding shares of Common Stock into a smaller number
of shares, then in each
<PAGE>
such case the aggregate amount to which holders of Units of Series A Preferred
Stock were entitled immediately prior to such event pursuant to clause (i)(b) of
paragraph (A) of this Section 5 shall be adjusted by multiplying such amount by
a fraction the numerator of which shall be the number of shares of Common Stock
that are outstanding immediately after such event and the denominator of which
shall be the number of shares of Common Stock that were outstanding immediately
prior to such event.
6. Consolidation, Merger, etc. In case the Corporation shall enter
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into any consolidation, merger, combination or other transaction in which the
shares of common stock are exchanged for or converted into other stock or
securities, cash and/or any other property, then in any such case Units of
Series A Preferred Stock shall at the same time be similarly exchanged for or
converted into an amount per Unit (subject to the provision for adjustment
hereinafter set forth) equal to the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may be, into which or
for which each share of Common Stock is converted or exchanged. In the event
the Corporation shall at any time after the Rights Declaration Date (i) declare
any dividend on outstanding shares of Common Stock payable in shares of Common
Stock, (ii) subdivide outstanding shares of Common Stock, or (iii) combine
outstanding Common Stock into a smaller number of shares, then in each such case
the amount set forth in the immediately preceding sentence with respect to the
exchange or conversion of Units of Series A Preferred Stock shall be adjusted by
multiplying such amount by a fraction the numerator of which shall be the number
of shares of Common Stock that are outstanding immediately after such event and
the denominator of which shall be the number of shares of Common Stock that were
outstanding immediately prior to such event.
7. Redemption. The Units of Series A Preferred Stock shall not be
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redeemable.
8. Ranking. The Units of Series A Preferred Stock shall rank junior
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to all other series of the Preferred Stock and to any other class of preferred
stock that hereafter may be issued by the Corporation as to the payment of
dividends and the distribution of assets, unless the terms of any such series or
class shall provide otherwise.
9. Fractional Shares. The Series A Preferred Stock may be issued in
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Units or other fractions of a share, which Units or fractions shall entitle the
holder, in proportion to such holder's units or fractional shares, to exercise
voting rights, receive dividends, participate in distributions and to have the
benefit of all other rights of holders of Series A Preferred Stock.
10. Certain Definitions. As used in this resolution with respect to
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the Series A Preferred Stock, the following terms shall have the following
meanings:
(A) The term "Common Stock" shall mean the class of stock designated
as the common stock, par value $.10 per share, of the Corporation at the date
hereof or any
<PAGE>
other class of stock resulting from successive changes or reclassification of
the common stock.
(B) The term "junior stock" (i) as used in Section 3 shall mean the
Common Stock and any other class or series of capital stock of the Corporation
hereafter authorized or issued over which the Series A Preferred Stock has
preference or priority as to the payment of dividends and (ii) as used in
Section 5, shall mean the Common Stock and any other class or series of capital
stock of the Corporation over which the Series A Preferred Stock has preference
or priority in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
(C) The term "parity stock" (i) as used in Section 3 shall mean any
class or series of stock of the Corporation hereafter authorized or issued
ranking pari passu with the Series A Preferred Stock as to dividends and (ii) as
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used in Section 5, shall mean any class or series of capital stock ranking pari
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passu with the Series A Preferred Stock in the distribution of assets on any
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liquidation, dissolution or winding up.
IN WITNESS WHEREOF, Magma Power Company has caused this Certificate to
be signed by its President and Chief Executive Officer and its Secretary this
4th day of October, 1994.
MAGMA POWER COMPANY
/s/ Ralph W. Boeker
By ______________________________
Ralph W. Boeker
President
/s/ Jon R. Peele
By ______________________________
Jon R. Peele
Secretary
Acknowledged:
<PAGE>
State of California
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County of San Diego
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On October 4, 1994 before me, Cheryl Ciabattini, Notary Public
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DATE NAME, TITLE OF OFFICER
E.G. "Jane Doe, Notary Public"
Ralph W. Boeker and Jon R. Peele
personally appeared --------------------------------
NAME(S) OF SIGNERS(S)
/x/ personally known to me - OR - / / proved to me on the basis of satisfactory
evidence to be the person(s) whose
name(s) is/are subscribed to the within
instrument and acknowledged to me that
he/she/they exectued the same in
his/her/their authorized capacity(ies),
and that by his/her/their signature(s)
on the instrument the person(s), or the
entity upon behalf of which the
person(s) acted, exectued the
instrument.
[Seal of the CHERYL CIABATTINI
state of Comm. # 1004889
California] NOTARY PUBLIC WITNESS my hand and official seal
CALIFORNIA
San Diego County
My Comm. Expires /s/ Cheryl Ciabattini
Sept. 26, 1997 -------------------------------
SIGNATURE OF NOTARY
- ------------------------------------OPTIONAL-----------------------------------
Though the data below is not required by law, it may prove valuable to persons
relying on the document and could prevent fraudulent reattachment of this form.
CAPACITY CLAIMED BY SIGNER DESCRIPTION OF ATTACHED DOCUMENT
/ / INDIVIDUAL
/X/ CORPORATE OFFICER Magma Power Company
Certificate of Designation
President and Executive Vice President ---------------------------------
- ---------------------------------------- TITLE OR TYPE OF DOCUMENT
TITLE(S)
/ / PARTNER(S) / / LIMITED
/ / GENERAL Six (6)
---------------------------------
/ / ATTORNEY-IN-FACT NUMBER OF PAGES
/ / TRUSTEE(S)
/ / GUARDIAN/CONSERVATOR
/ / OTHER:
------------------------------ October 4, 1994
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----------------------------------- DATE OF DOCUMENT
SIGNER IS REPRESENTING:
NAME OF PERSON(S) OR ENTITY(IES)
Magma Power Company none
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SIGNER(S) OTHER THAN NAMES ABOVE
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C 1993 NATIONAL NOTARY ASSOCIATION x 8236 Remmet Ave., P.O. Box 7184 x
Canoga Park, CA 91309-7184
<PAGE>
EXHIBIT 99.9
Case No.: CV94-06160
Dept. No.: 8
Jackson
IN THE SECOND JUDICIAL DISTRICT COURT FOR THE STATE OF NEVADA
IN AND FOR THE COUNTY OF WASHOE
MAGMA POWER COMPANY, )
a Nevada corporation, )
)
Plaintiff, )
)
v. ) COMPLAINT FOR
) DECLARATORY RELIEF
CALIFORNIA ENERGY COMPANY, INC., ) ------------------
a Delaware corporation, )
)
Defendant. )
)
)
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<PAGE>
Plaintiff Magma Power Co. ("Magma"), through its undersigned counsel,
alleges as follows:
NATURE OF THE CASE
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1. This is a Complaint for declaratory relief pursuant to the Declaratory
Judgments Uniform Act, Nev. Rev. Stat. (SS) 30.010-.160, seeking to uphold the
constitutionality of provisions of the Nevada General Corporation Law applicable
to unsolicited takeover bids for Nevada corporations, and to uphold the
measured, carefully considered action of Magma and its Board of Directors (the
"Board") to protect Magma's shareholders in response to an unsolicited offer
made by defendant California Energy Company, Inc. ("California Energy") and the
partial tender offer California Energy has threatened to commence.
2. The Nevada statutory provisions pertaining to business combinations,
Nev. Rev. Stat. (ss) 78.411-.444 ("Combinations with Interested Shareholders")
(hereinafter the "Business Combination Law"), reflect the Nevada Legislature's
intent to protect the shareholders of Nevada corporations from combinations with
persons or entities who have not obtained the advance approval of a
corporation's board. The Business Combination Law prohibits certain combinations
between a Nevada corporation and any "interested shareholder," defined in
general to include any person who acquires 10% of a Nevada corporation's stock,
for a three-year period unless the "interested shareholder" has obtained the
advance approval of the corporation's board of directors. These provisions are
intended, among other things, to prevent bidders from effectuating combinations
that the Board has determined are not in the best interests of the company and
its shareholders, as well as in the interests of the company's employees,
customers, suppliers and other constituents.
JURISDICTION AND VENUE
----------------------
3. This Court has jurisdiction over this action pursuant to Nev. Const.
Art. 6, (S) 6. Declaratory relief is authorized by the Declaratory Judgments
Uniform Act.
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<PAGE>
Nev. Rev. Stat. (SS) 30.010-.160. Venne is proper in Washoe County pursuant to
Nev. Rev. Stat (S) 13.040.
PARTIES
4. Plaintiff Magma is a Nevada corporation doing business in, among other
locations, the states of Nevada and California and in certain foreign countries,
including those along the Pacific Rim. Magma is principally engaged in the
generation of electricity from geothermal resources, and in the acquisition of,
exploration for and development of geothermal resources. Geothermal energy is a
clean, renewable and sustainable energy source compared to fossil fuel-based
energy sources. Magma's common stock is traded on the NASDAQ Stock Exchange
under the symbol "MGMA." In the recent past, Magma's common stock has traded
at $41.50 per share, and certain analysts have placed values on Magma's common
stock in excess of that amount. Magma's principal executive offices are located
at 4365 Executive Drive, Suite 900, San Diego, California 92121.
5. Defendant California Energy is a Delaware corporation doing business in
Nevada, Utah and California, among other states, and in certain Pacific Rim
countries. California Energy is primarily engaged in the ownership and operation
of geothermal resources, and the ownership and operation of independent power
production facilities utilizing geothermal resources and other energy sources.
California Energy's common stock is traded on the New York Stock Exchange.
Pacific Stock and London Stock Exchange under the symbol "CE." California
Energy's principal executive offices are located at 10831 Old Mill Road, Omaha,
Nebraska 68154.
THE UNSOLICITED OFFER TO ACQUIRE MAGMA
6. On September 19, 1994, California Energy delivered to Magma an unsolicited
"bear hug" letter declaring its intention to acquire the outstanding shares of
Magma common stock for a purported figure of $35 per share, consisting of $25 in
cash and
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<PAGE>
securities of California Energy supposedly valued at $10 per share. While
purportedly expressing California Energy's desire that the proposed transaction
be consummated amicably. California Energy warned that it was reserving its
right to approach Magma's shareholders directly with a tender offer and/or a
consent solicitation if Magma failed to "respond to this proposal promptly." At
that time, California Energy provided no other information concerning its
unsolicited offer, including the effect a combination of the two entities would
have on Magma, its shareholders, employees and operations, the effect it would
have on Magma's long-term strategic plan and the benefits to shareholders
flowing from such plan, the impact the proposed transaction would have on
Magma's existing business and prospects, both domestically and overseas, the
sources of information upon which California Energy had relied in making its
proposal, and the sources and certainty of California Energy's ability to
finance its proposal, among many other materials facts necessary to evaluate
California Energy's offer.
7. Promptly after receipt of the unsolicited offer, Magma retained the
investment banking firm of Goldman Sachs & Co. as well as outside legal advisors
to assist it and its Board in analyzing the proposal and its impact on Magma,
its shareholders and other constituencies. As that analysis was being
undertaken, California Energy repeated its intentions and sought to rush Magma
into making a rushed and indiscriminate decision concerning California Energy's
unsolicited bid. While purporting to reiterate California Energy's desire to
proceed amicably, California Energy unequivocally stated its intention to "move
forward" and to "take this matter directly to Magma's shareholders." California
Energy also repeated its threat to commence a tender offer for Magma's shares
during the week of October 3, 1994 regardless of Magma's Board's evaluation and
regardless of the best interests of Magma's shareholders, employees, business
operations and strategic plan.
8. The members of Magma's Board, who have been in consultation with Magma's
senior management and its financial and legal advisors since California Energy's
September 19 "bear hug" letter, convened a special meeting of the Board on
October 2 and October 3, 1994. The Board engaged in extensive discussion and
consideration of California
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<PAGE>
Energy's proposal, and received thorough presentations from its financial and
legal advisors. In light of that evaluation, the threats posed to Magma and its
shareholders by California Energy's partial tender offer proposal, the need to
have the opportunity to evaluate properly and fully the best interests of Magma
and its shareholders under various alternatives, including remaining independent
and managing Magma in accordance with its long-term business plan, the Board
took steps carefully designed to protect shareholders from inappropriate or
coercive partial tender offers, such as the one California Energy has
threatened to commence, as well as other abusive tactics that might be used in
an attempt to gain control of Magma without paying all shareholders a fair price
for their shares.
9. First, the Board adopted a Stockholder Rights Plan which provides for
the distribution of rights to Magma's shareholders. Under the Plan, if a person
or group acquires beneficial ownership of 10% or more of Magma's outstanding
common stock, or commences a tender offer for 20% or more of Magma's shares, the
holders of the rights (generally all Magma shareholders except the person or
group acquiring beneficial ownership of 10% or more of Magma's outstanding
common stock or who has commenced the tender offer) will be, unless the Board
within ten days thereafter otherwise determines, entitled to purchase Magma
securities (a newly issued share of Series A Preferred Stock) in an amount equal
to twice the exercise price of the rights ($125). In a subsequent merger with
the 10% stockholder, holders of rights would be entitled to purchase common
stock of the 10% stockholder in an amount equal to twice the exercise price of
the rights ($125). The rights, which are redeemable under certain circumstances,
including Board approval of a transaction, are designed to provide the Board, in
the discharge of its fiduciary duties, with sufficient time to evaluate the
alternatives and to guard against coercive, partial tender offers and other
abusive tactics that might be used in an attempt to gain control of Magma.
Because the Stockholder Rights Plan makes any hostile acquisition of Magma
substantially more expensive if the rights are triggered, the effect of the
Stockholder Rights Plan is to encourage suitors to negotiate with Magma's Board,
and to discourage suitors who make coercive or abusive bids that are contrary to
Magma's long-term interests and that of its shareholders. In
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<PAGE>
short, the Stockholder Rights Plan will not prevent takeovers, but is designed
to deter coercive takeover tactics. A Stockholder Rights Plan is expressly
authorized and permitted by Nevada Corporate Law, e.g., Nevada General
Corporation Law (S) 78.350(3).
10. Second, the Board voted to amend Magma's by-laws to require that
shareholder action occur only at a regular or special meeting of shareholders
rather than by way of written consent solicitation (the "By-Law Amendment").
The purpose of this provision is to ensure that shareholders take action only
on a fully-informed basis; the provision does not eliminate the power of Magma's
shareholders to call a special meeting.
11. Because the Nevada Business Combination Law and the actions of Magma's
Board may serve as an obstacle to California Energy's forthcoming partial tender
offer, Magma anticipates that California Energy will seek to nullify the actions
taken by the Board and to attack the constitutionality of Nevada's Business
Combination Law.
FIRST CLAIM FOR RELIEF
(Declaratory Relief)
12. Magma incorporates by reference paragraphs 1 through 11 inclusive, as
though fully set forth herein.
13. Magma is informed and believes that California Energy will imminently
file suit seeking declaratory and injunctive relief against the application and
enforcement of the Business Combination Law, the provisions of which would,
inter alia, otherwise prohibit any combination of Magma with California Energy
not approved by Magma's Board for a period of three years from the date such
tender offer is consummated, on the ground that the Nevada statute constitutes
an undue burden upon interstate commerce and is therefore in conflict with the
Commerce Clause of the United States Constitution, Art. I, (S) 8 cl. 3. Magma
contends that the Nevada statute is--like similar statutes that have been upheld
in other states--valid and binding upon California Energy with respect to the
proposed transaction.
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<PAGE>
14. An actual controversy has arisen and therefore now exists between Magma
and California Energy concerning the validity of Nev. Rev. Stat.
(S)(S) 78.411-.444.
SECOND CLAIM FOR RELIEF
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(Declaratory Relief)
--------------------
15. Magma incorporates by reference paragraphs 1 through 14 inclusive, as
though fully set forth herein.
16. Magma is informed and believes that California Energy will imminently
file suit seeking declaratory and injunctive relief against the application and
enforcement of the Business Combination Law on the ground that the Nevada
statute conflicts with the purposes of a federal statute regulating tender
offers, the Williams Act, 15 U.S.C. (S)(S) 78m(d)-(e), 78n(d)-(f), and alleging
that the Nevada statute is therefore invalid under the Supremacy Clause of the
United States Constitution, Art. VI, cl. 2. Magma contends that the Nevada
statute is -- like similar statutes that have been upheld in other states --
valid and binding upon California Energy with respect to the proposed
transaction.
17. An actual controversy has arisen and therefore now exists between Magma
and California Energy concerning the validity of Nev. Rev. Stat.
(S)(S) 78.411-.444.
THIRD CLAIM FOR RELIEF
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(Declaratory Relief)
--------------------
18. Magma incorporates by reference paragraphs 1 through 17 inclusive, as
though fully set forth herein.
19. Magma is informed and believes that California Energy will imminently
file suit seeking declaratory and injunctive relief against the application and
enforcement of the Stockholder Rights Plan and By-Law Amendment adopted by
Magma's Board, or seeking to require Magma to redeem the Stockholder Rights
Plan, on the ground that they were adopted and/or not redeemed by the Board in
violation of its fiduciary obligations to Magma. Magma contends that the
Stockholder Rights Plan and By-Law Amendment have been adopted and will be used
consistent with its Board's fiduciary duties to act in the best
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<PAGE>
interests of the shareholders of Magma, as well as in the interests of other
constituencies, including employees, customers and suppliers, which the Board
may consider under Nev. Rev. Stat. (S) 78.138.
20. An actual controversy has arisen and therefore now exists between
Magma and California Energy concerning the Stockholder Rights Plan and the
By-Law Amendment.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff prays for judgment against defendant as follows:
(a) For a declaratory judgment that the Stockholder Rights Plan and
By-Law Amendment are valid and binding;
(b) For a declaratory judgment that the Business Combination Law,
Nev. Rev. Stat. (SS) 78.411-.444, is valid and not in violation of the
Commerce Clause of the United States Constitution, Art. I, (S) 8, cl. 3;
(c) For a declaratory judgment that the Business Combination Law,
Nev. Rev. Stat. (SS) 78.411-.444, is valid and not in violation of the
Supremacy Clause of the United States Constitution, Art. VI, cl. 2;
(e) For costs of suit and reasonable attorneys' fees; and
COMPLAINT FOR -7-
DECLARATORY RELIEF
<PAGE>
(e) For such other relief as the Court may deem just and proper.
Dated: October 3, 1994 Respectfully submitted,
JONES, JONES, CLOSE & BROWN,
CHTD.
/s/ M. CELESTE LUCE
----------------------------------
M. CELESTE LUCE
290 South Arlington Avenue, #200
Reno, Nevada 89501
Telephone: (702) 322-3811
Dean S. Krystowski
Patrick D. Robbins
David L. Anderson
M.J. Tony Paikeday
SHEARMAN & STERLING
555 California Street, 20th Floor
San Francisco, California 94104
Telephone: (415) 616-1100
Attorneys for Plaintiff Magma
Power Company
COMPLAINT FOR -8-
DECLARATORY RELIEF
<PAGE>
EXHIBIT 99.10
LIONEL Z. GLANCY #134180
LAW OFFICES OF LIONEL Z. GLANCY
1299 Ocean Avenue
Suite 323
Santa Monica, California 90401
(310) 319-3277
ANDREW D. FRIEDMAN, ESQ.
WECHSLER SKIRNICK HARWOOD
HALEBIAN & FEFFER
555 Madison Avenue
New York, New York 10022
(212) 935-7400
Attorneys for Class Plaintiff
WILLIAM STEINER
SUPERIOR COURT OF THE STATE OF CALIFORNIA
FOR THE COUNTY OF SAN DIEGO
WILLIAM STEINER, on behalf of ) Case No.
himself and all others similarly )
situated, ) (FILING BY FACSIMILE)
) CLASS ACTION COMPLAINT
)
Plaintiff, ) JURY TRIAL DEMANDED
)
v. )
)
PAUL M. PANKRATZ, RALPH W. BOEKER, )
LESTER L. COLEMAN, JOHN D. ROACH, )
THOMAS C. HINRICHS, ROGER L. )
KESSELER, WILLIAM R. KNEE, BENT )
PETERSEN, J. PEDRO REINHARD, JAMES )
D. SHEPARD, LOUIS A. SIMPSON, and )
MAGMA POWER CO., a Nevada )
corporation, )
)
Defendants. )
__________________________________ )
Plaintiff, by his attorneys, for his class action complaint against
defendants, alleges upon personal knowledge with respect to his own acts, and
upon information and belief based upon, inter alia, the investigation of counsel
as to all other allegations herein, as follows:
<PAGE>
NATURE OF THE ACTION
--------------------
1. This is a stockholders' class action lawsuit brought on behalf of the
public stockholders of Magma Power Co. ("Magma Power" or the "Company") who have
been, and continue to be, deprived of the opportunity to realize fully the
benefits of their investment in Magma Power. The individual defendants have
wrongfully refused to properly consider a bona fide offer for the Company from
California Energy Co. ("California Energy") and, therefore, have wrongfully
entrenched themselves in their positions of control. The individual defendants'
actions were, and are, unreasonable in relation to any perceived threat posed by
California Energy's offer. The individual defendants are using their fiduciary
positions of control over Magma Power to thwart others in their legitimate
attempts to acquire the Company, and, therefore, their actions constitute unfair
dealing and a breach of fiduciary duty to maximize shareholder value.
THE PARTIES
-----------
2. Plaintiff William Steiner is, and at all relevant times was, the owner of
shares of common stock of Magma Power.
3. Magma Power is a corporation duly organized and existing under the laws
of the State of Nevada. The Company and its subsidiaries are engaged in the
exploration for, and development of, geothermal resources and the use of such
resources to generate electricity, including the development
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and operation of geothermal power plants. Magma Power maintains its principal
executive offices at 4365 Executive Drive, San Diego, California 92121. Magma
Power has approximately 24 million shares of common stock outstanding and
approximately 2,260 stockholders of record. Magma Power's stock trades on the
NASDAQ National Market System.
4. Defendant Paul M. Pankratz ("Pankratz") is the Chairman of the Board of
Directors of Magma Power. In 1993, Pankratz received from Magma Power $722,164
in cash compensation.
5. Defendant Ralph W. Boeker ("Boeker") is a director and the President and
Chief Executive Officer of Magma Power. In 1993, Boeker received from Magma
Power $1,177,228 in cash compensation.
6. Defendants Lester L. Coleman, John D. Roach, Thomas C. Hinrichs, Roger L.
Kesseler, William R. Knee, Bent Petersen, J. Pedro Reinhard, James D. Shepard,
and Louis A. Simpson are directors of Magma Power.
7. The defendants named in paragraphs 4 through 6 are hereinafter referred
to as the "Individual Defendants."
8. Because of their positions as officers/directors of the Company, the
Individual Defendants owe a fiduciary duty of loyalty and due care to plaintiff
and the other members of the class.
9. Each defendant herein is sued individually as a conspirator and aider and
abettor, as well as in his/her capacity as an officer and/or director of the
Company, and the liability of each arises from the fact that he or she has
3
<PAGE>
engaged in all or part of the unlawful acts, plans, schemes, or transactions
complained of herein.
10. By virtue of the acts and conduct alleged herein, the Individual
Defendants, who control the actions of Magma Power, have breached and are
breaching their fiduciary duties to Magma Power's public shareholders.
CLASS ACTION ALLEGATIONS
------------------------
11. Plaintiff brings this lawsuit pursuant to California Code of Civil
Procedure, Section 382 on his own behalf and as a class action on behalf of all
shareholders of Magma Power (except defendants herein and any person, firm,
trust, corporation or other entity related to, controlled by or affiliated with
any of the defendants) and their successors in interest (the "Class").
12. This action is properly maintainable as a class action.
13. The Class of shareholders for whose benefit this action is brought is so
numerous that joinder of all Class members is impracticable. Magma Power has
over 24 million shares of common stock outstanding, owned by more than 2,260
record shareholders. Members of the Class are scattered throughout the United
States.
14. There are questions of law and fact common to members of the Class that
predominate over any questions affecting only individual members. The common
questions include, inter alia, whether:
a. defendants have breached their fiduciary
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<PAGE>
duties owed by them to plaintiff and other members of the Class by failing and
refusing to attempt in good faith to maximize shareholder value in the sale of
Magma Power;
b. defendants have entrenched themselves in office and deprived Magma
Power's public shareholders of the maximum value of their holdings;
c. defendants have breached or aided and abetted the breach of the
fiduciary duties owed by them to plaintiff and other members of the Class;
d. defendants engaged in a plan and scheme to thwart and reject bona
fide offers from third parties, including California Energy; and
e. plaintiff and the other members of the Class are being and will
continue to be injured by the wrongful conduct alleged herein and, if so,
what is the proper remedy and/or measure of damages.
15. The claims of plaintiff are typical of the claims of other members of
the Class and plaintiff has no interests that are adverse or antagonistic to the
interests of the Class.
16. Plaintiff is committed to the vigorous prosecution of this action and
has retained competent counsel experienced in litigation of this nature.
Accordingly, plaintiff is an adequate representative of the Class and will
fairly and adequately protect the interests of the Class.
17. Plaintiff anticipates that there will not be any difficulty in the
management of this litigation as a class action.
5
<PAGE>
18. For the reasons stated herein, a class action is superior to other
available methods for the fair and efficient adjudication of this action and the
claims asserted herein.
SUBSTANTIVE ALLEGATIONS
19. By the acts, transactions, and courses of conduct alleged herein,
defendants, individually and as part of a common plan and scheme and/or by
aiding and abetting one another in total disregard of their fiduciary duties,
are attempting to deprive plaintiff and the Class unfairly of the opportunity to
maximize the value of their investment in Magma Power.
20. On September 19, 1994, after the close of trading, California Energy
announced that it had sent a letter to defendants Pankratz and Boeker proposing
the acquisition of Magma Power for approximately $840 million. Under the offer,
Magma Power shareholders would receive $25 per share in cash and California
Energy stock worth $10 per share in market value. The offer represents a premium
of approximately 22% over the closing price of Magma Power stock on September
19, 1994 of $27.50 per share.
21. According to the WALL STREET JOURNAL and the DOW JONES NEW WIRE, the two
companies have been discussing a possible business combination during the past
12 months. In fact, according to California Energy's proposal letter, as
recently as Thursday, September 15, 1994, defendants Pankratz and Boeker spoke
with David L. Sokol, Chairman, President and Chief Executive Officer of
California Energy, to discuss a
6
<PAGE>
business combination of the two companies. These overtures bore no fruit.
22. Notwithstanding the apparent synergies of a business combination,
defendants, during the past 12 months of overtures, have resisted the
negotiation or execution of a definitive merger agreement and, as noted in the
proposal letter, have sought to "move slowly in this matter." However, because
of defendants' recalcitrance, California Energy could wait no longer for
defendants to consider seriously their overtures for a business combination of
the two companies.
23. California Energy stressed that it wished to effect the transaction
"amicably." In that regard, Sokol offered to meet with defendants to discuss and
"negotiate in good faith all aspects of [California Energy's] proposal."
Financing the transaction would not, according to Sokol and its financial
advisor, be a problem.
24. Despite the significant value to Magma Power shareholders, defendants
have indicated they do not intend to fairly consider the offer nor act with
regard to the fiduciary duty they owe Magma Power's shareholders to fully inform
themselves about a business combination with California Energy.
25. Defendants owe fundamental fiduciary obligations to Magma Power's
shareholders to take all necessary and appropriate steps to maximize the value
of their shares. In addition, the Individual Defendants have the responsibility
to act independently so that the interests of Magma Power's public stockholders
will be protected, to seriously consider all bona fide offers for Magma Power,
and to conduct fair and active
7
<PAGE>
bidding procedures or other mechanisms for checking the market to assure that
the highest possible price is achieved. Further, the directors of Magma Power
must adequately ensure that no conflict of interest exists between the
Individual Defendants' own interests and their fiduciary obligations to maximize
stockholder value or, if such conflicts exist, to insure that all such conflicts
will be resolved in the best interests of the Company's shareholders.
26. Magma Power represents a highly attractive acquisition candidate.
Defendants' recalcitrance to negotiate a definitive merger agreement in the past
and their current resistance to seriously consider and promptly act upon
California Energy's formal offer, have no valid business purpose, and simply
evidences their disregard for the attractive premium being offered to Magma
Power's shareholders. Defendants' conduct would deprive Magma Power's public
shareholders of the very substantial control premium which California Energy is
prepared to pay or of the enhanced premium that further negotiation or exposure
of Magma Power to the market could provide.
27. Because defendants dominate and control the business and corporate
affairs of Magma Power and because they are in possession of private corporate
information concerning Magma Power's assets, businesses and future prospects,
there exists an imbalance and disparity of knowledge of economic power between
defendants and the public shareholders of Magma Power. This discrepancy makes it
grossly and inherently unfair for defendants to entrench themselves at the
expense of its
8
<PAGE>
public shareholders.
28. The Individual Defendants have breached their fiduciary and other
common law duties owed to plaintiff and the other members of the Class in that
they have not and are not exercising independent business judgment and have
acted and are acting to the detriment of the Class.
29. The Individual Defendants were and are under a duty to:
a. fully inform themselves before taking, or agreeing to refrain from
taking, action;
b. elicit, promote, consider and evaluate reasonable and bona fide
offers for the Company, including California Energy's overtures and offer;
c. act in the interests of the equity owners and other constituencies of
the Company;
d. refrain from acting in their own personal self-interest or in the
personal interest of other Board members;
f. maximize shareholder value;
g. obtain the best financial and other terms when the Company, or
control of the Company, is for sale or the Company's independent existence
will be materially altered by a transaction; and
i. act in accordance with their fiduciary duties of care and loyalty.
30. In connection with the conduct described herein,
9
<PAGE>
the Individual Defendants breached the fiduciary duties identified above.
Defendants have failed and/or refused to take those steps necessary to ensure
that Magma Power's shareholders will receive maximum value for their shares of
Magma Power stock. Defendants have thus refused to seriously consider California
Energy's previous overtures and the pending offer, and have failed to announce
any active auction or open bidding procedures best calculated to maximize
shareholder value in selling the Company.
31. The Individual Defendants are acting to entrench themselves in their
offices and positions and maintain their substantial salaries and perquisites,
all at the expense and to the detriment of the public shareholders of Magma
Power.
32. By the acts, transactions and courses of conduct alleged herein, the
Individual Defendants, individually and as part of a common plan and scheme in
breach of their fiduciary duties and obligations, are attempting unfairly to
deprive plaintiff and the other members of the Class of the premium they could
realize in an acquisition transaction and to ensure continuance of their
positions as directors and officers, all to the detriment of Magma Power and its
public shareholders. The Individual Defendants have been engaged in a wrongful
effort to entrench themselves in their offices and positions of control and
prevent the acquisition of Magma Power, except on terms which would further
their own personal interests.
33. As a result of the actions of the Individual Defendants, plaintiff and
the other members of the Class have been and will be damaged in that they have
not and will not
10
<PAGE>
receive their fair proportion of the value of Magma Power's assets and
businesses and/or have been and will be prevented from obtaining a fair and
adequate price for their shares of Magma Power's common stock.
34. Plaintiff seeks preliminary and permanent injunctive relief and
declaratory relief preventing defendants from inequitably and unlawfully
depriving plaintiff and the Class of their rights to realize a full and fair
value for their stock at a substantial premium over the market price, by
unlawfully entrenching themselves in their positions of control, and to compel
defendants to carry out their fiduciary duties to maximize shareholder value.
35. Only through the exercise of this Court's equitable powers can plaintiff
be fully protected from the immediate and irreparable injury which defendants'
actions threaten to inflict. Defendants are precluding the shareholders'
enjoyment of the full economic value of their investment by failing to proceed
expeditiously and in good faith to evaluate and pursue a premium acquisition
proposal which would provide cash and stock for all shares at a very attractive
price.
36. Unless enjoined by the Court, defendants will continue to breach their
fiduciary duties owed to plaintiff and the members of the Class, and/or aid and
abet and participate in such breaches of duty, and will prevent the sale of
Magma Power at a substantial premium, all to the irreparable harm of plaintiffs
and other members of the Class.
37. Plaintiff and the Class have no adequate remedy
11
<PAGE>
at law.
WHEREFORE, plaintiff demands judgment as follows:
(a) Declaring this to be a proper class action and certifying plaintiff as a
class representative;
(b) Ordering the Individual Defendants to carry out their fiduciary duties
to plaintiffs and the other members of the Class by announcing their intention
to:
(i) cooperate fully with any entity or person, including California
Energy, having a bona fide interest in proposing any transactions that would
maximize shareholder value, including but not limited to, a merger or
acquisition of Magma Power;
(ii) immediately undertake an appropriate evaluation of Magma Power's
worth as a merger/acquisition candidate;
(iii) take all appropriate steps to enhance Magma Power's value and
attractiveness as a merger/acquisition candidate;
(iv) take all appropriate steps to effectively expose Magma Power to the
marketplace in an effort to create an active auction of the Company;
(v) act independently so that the interests of the Company's public
shareholders will be protected; and
(vi) adequately ensure that no conflicts of interest exist between the
Individual Defendants' own interest and their fiduciary obligation to
maximize shareholder value or, in the event such conflicts exist, to ensure
that all
12
<PAGE>
conflicts of interest are resolved in the best interests of the public
shareholders of Magma Power;
(c) Ordering the Individual Defendants, jointly and severally to account to
plaintiff and the Class for all damages suffered and to be suffered by them as a
result of the acts and transactions alleged herein;
(e) Awarding plaintiff the costs and disbursements of this action, including
a reasonable allowance for plaintiff's attorneys' and experts' fees; and
(f) Granting such other and further relief as may be just and proper.
Dated: September 20, 1994
LIONEL Z. GLANCY, ESQ.
By: /s/ Lionel Z. Glancy
-----------------------------
LAW OFFICES OF LIONEL Z. GLANCY
1299 Ocean Avenue
Suite 323
Santa Monica, California 90401
(310) 319-3277
Of Counsel:
WECHSLER SKIRNICK HARWOOD
HALEBIAN & FEFFER
555 Madison Avenue
New York, New York 10022
(212) 935-7400
13
<PAGE>
SUPERIOR COURT OF CALIFORNIA, COUNTY OF SAN DIEGO
INDEPENDENT CALENDAR CLERK
P.O. Box 128
220 W. Broadway
San Diego, CA 92112-4104
TO:
- --------------------------------------------------------------------------------
|
WILLIAM STEINER | Case No.: 680986
Plaintiff(s) |
| NOTICE OF CASE ASSIGNMENT
vs. |
| Judge: LAWRENCE KAPILOFF
PAUL M. PANKRATZ | Department: 36 AT HOME SAVINGS TOWER
Defendant(s) | Phone: 685-6026
|
- --------------------------------------------------------------------------------
COMPLAINT FILED 09/20/94
IT IS THE DUTY OF EACH PLAINTIFF (AND CROSS-COMPLAINANT) TO SERVE A COPY OF THIS
NOTICE WITH THE COMPLAINT (AND CROSS-COMPLAINT).
ALL COUNSEL WILL BE EXPECTED TO BE FAMILIAR WITH LOCAL RULES OF COURT WHICH HAVE
BEEN PUBLISHED AS DIVISION II, AND WILL BE STRICTLY ENFORCED.
TIME STANDARDS: The following timeframes apply to general civil cases and must
be adhered to unless you have requested and been granted an extension of time.
General civil consists of all cases except: Appeals from the lower court, small
claims appeals and petitions.
COMPLAINTS: Complaints must be served on all named defendants, and a CERTIFICATE
OF SERVICE (SUPCT CIV-345) filed within 60 days of filing. This is a mandatory
document and may not be substituted by the filing of any other document. (Rule
1.4)
DEFENDANT'S APPEARANCE: Defendant must generally appear within 30 days of
service of the complaint. (Plaintiff may stipulate to no more than a 15 day
extension which must be in writing and filed with the Court.) (Rule 1.5)
DEFAULT: If the defendant has not generally appeared and no extension has been
granted, the plaintiff must enter default within 45 days of the service of
complaint. (Rule 1.5)
CASE MANAGEMENT CONFERENCE: A Case Management Conference will be set within 150
days of filing the complaint.
THE COURT ENCOURAGES YOU TO CONSIDER UTILIZING VARIOUS ALTERNATIVES TO
LITIGATION, INCLUDING MEDIATION AND ARBITRATION, PRIOR TO THE CASE MANAGEMENT
CONFERENCE. MEDIATION SERVICES ARE AVAILABLE UNDER THE DISPUTE RESOLUTION
PROGRAMS ACT THROUGH SAN DIEGO MEDIATION CENTER (619) 295-0203. THERE IS NO
CHARGE FOR THE FIRST FOUR HOUR SESSION. MEDIATION SERVICES ARE ALSO AVAILABLE
THROUGH OTHER ORGANIZATIONS FOR A FEE.
YOU MAY ALSO BE ORDERED TO PARTICIPATE IN MEDIATION OR ARBITRATION PURSUANT TO
CCP 1775 OR 1141.10 AT THE CASE MANAGEMENT CONFERENCE. THE $150 FEE FOR THESE
SERVICES WILL BE PAID BY THE COURT IF ALL PARTIES HAVE APPEARED IN THE CASE AND
STIPULATE TO AN AVAILABLE MEDIATOR/ARBITRATOR ON THE COURT'S LISTS OF PROVIDERS
LOCATED IN THE ARBITRATION DEPARTMENT AT EACH COURT LOCATION. THE CASE
MANAGEMENT CONFERENCE WILL BE CANCELLED IF YOU FILE FORM SUPCT CIV-357 OR 358
AT LEAST 10 DAYS PRIOR TO THAT HEARING.
Dated: 09/20/94
ASG-NOTICE OF CASE ASSIGNMENT
SUPCT CIV-721 (Rev 7-94)
<PAGE>
EXHIBIT 99.11
Case No. CV 94-06187
Dept. No. 5
IN THE SECOND JUDICIAL DISTRICT OF THE STATE OF NEVADA
IN AND FOR THE COUNTY OF WASHOE
CHARLES MILLER, On Behalf
of Himself and All Others
Similarly Situated,
Plaintiff,
vs. CLASS ACTION COMPLAINT
MAGMA POWER COMPANY,
THE DOW CHEMICAL COMPANY,
LESTER L. COLEMAN, WILLIAM
R. KNEE, JOHN D. ROACH,
RALPH W. BOEKER, THOMAS C.
HINRICHS, PAUL M. PANKRATZ,
JAMES D. SHEPARD, ROGER L.
KESSELER, BENT PETERSEN,
J. PEDRO REINHARD, and
LOUIS A. SIMPSON,
Defendants.
_______________________________
Plaintiff alleges upon information and belief as follows:
THE PARTIES
1. Plaintiff is and has been at all times relevant hereto the owner of
shares of the common stock of Magma Power Company ("Magma" or the "Company").
2. Magma is a corporation organized and existing under the laws of the State
of Nevada, with its principal place of business at 4365 Executive Drive, Suite
900, San
1
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Diego, California 92121. Magma is principally engaged in the generation of
electricity from geothermal resources, and in the acquisition of, exploration
for and development of geothermal resources. Magma had, as of February 17, 1994,
over 24 million shares of common stock outstanding.
3. Defendant Dow maintains its principal place of business in Midland,
Michigan. Five out of the eleven members of the Magma Board of Directors were or
are presently officers and/or directors of Dow. By virtue of its stock
ownership, and the fact that many of the key officers and/or directors of Magma
are or were employed by Dow, Dow is a controlling shareholder of Magma; as such,
Dow is in a fiduciary relationship with plaintiff and other public shareholders
of Magma and owes plaintiff and other members of the Class (defined below) the
highest obligations of good faith, fair dealing, loyalty and the utmost candor.
4. (a) Defendant Ralph W. Boeker ("Boeker") is and was since March 1, 1993,
President and a director, and, as of January, 1994, Chief Executive Officer of
the Company. Boeker was employed by Dow from 1959 through March 1993, where he
served in various executive capacities, including Group Vice President and was a
member of the Operating Board of Dow Chemical U.S.A. and the Dow Management
Committee.
(b) Defendant Thomas C. Hinrichs ("Hinrichs") is and has been at all
relevant times Vice President of Magma and a director.
(c) Defendant Roger L. Kesseler ("Kesseler") is and has been at all
relevant times a director of Magma. Additionally, Kesseler serves as Controller
and a Vice President of Dow.
(d) Defendant William R. Knee ("Knee") is and was at all relevant times a
director of Magma and Director of Technology Centers for Dow.
<PAGE>
(e) Defendant Paul M. Pankratz ("Pankratz") was, until March, 1993,
Chairman, President and Chief Executive Officer of Magma, and currently serves
as Chairman of the Board of the Company. Pankratz also served in various
capacities at Dow from 1957 util 1992.
(f) Defendant J. Pedro Reinhard ("Reinhard") is a director of Magma and
serves as Treasurer and a Vice President of Dow.
(g) Defendant James D. Shepard ("Shepard") is and has been a director of
Magma, a former Vice President and Treasurer of Magma, and is co-trustee of
the B.C. McCabe Living Trust and B.C. McCabe Foundation. Shepard also serves as
a shareholder relations consultant to the Company.
(h) Defendant Louis A. Simpson ("Simpson") is and was at all relevent
times a director of the Company and also serves on the board of Salomon, Inc.,
an entity which has provided financial advisory and underwriting services to
Magma in the past.
(i) Defendants Lester L. Coleman ("Coleman"), Bent Petersen ("Petersen")
and John D. Roach ("Roach") are and have been at all relevant times directors of
Magma.
5. The defendants named in paragraph 4 above ("Individual Defendants") owe
their allegiance to Dow who, as Magma's controlling shareholder, is responsible
for their relationship and positions on Magma's Board, and for the accompanying
benefits and remuneration they receive as a result of their Magma board
positions. Thus, the Individual Defendants are incapable of placing the
interests of Magma's minority stockholders over that of Dow.
3
<PAGE>
6. The Individual Defendants are in a fiduciary relationship with plaintiff
and the other public stockholders of Magma and owe to plaintiff and other
members of the Class the highest obligations of good faith, fair dealing and
full disclosure.
CLASS ACTION ALLEGATIONS
7. Plaintiff brings this action on his own behalf and as a class action, on
behalf of all public stockholders of Magma, and their successors in interest,
who are or will be threatened with injury arising from defendants' actions as
more fully described herein (the "Class"). Excluded from the Class are
defendants herein and any person, firm, trust, corporation, or other entity
related to or affiliated with any of the defendants.
8. This action is properly maintainable as a class action.
9. The Class is so numerous that joinder of all members is impracticable.
There are approximately 24 million shares of Magma outstanding and traded.
Members of the Class are located throughout the United States. Magma's stock
trades on the New York Stock Exchange.
10. There are questions of law and fact which are common to the Class and
which predominate over questions affecting any individual Class member.
11. A class action is superior to other methods for the fair and efficient
adjudication of the claims herein asserted and no unusual difficulties are
likely to be encountered in the management of this class action,. The likelihood
of individual class members prosecuting separate claims is remote.
12. Plaintiff is committed to prosecuting this action and has retained
competent counsel experienced in litigation of this nature. The claims of
plaintiff are typical of the claims of other members of the Class and plaintiff
has the same interests as the other
4
<PAGE>
members of the Class. Accordingly, plaintiff is an adequate representative of
the Class and will fairly and adequately protect the interests of the Class.
13. Plaintiff anticipates that there will not be any difficulty in the
management of this litigation.
FACTUAL BACKGROUND
------------------
14. On or about September 19, 1994, California Energy Co. ("CEC") reported
through the financial news wire services that it had transmitted a letter to
Magma proposing the acquisition of Magma by CEC for approximately $840 million.
Pursuant to the offer, Magma shareholders would receive $25 cash per share and
CEC stock valued at $10 per share market value.
15. According to the letter transmitted by CEC to Magma, as reported by The
Wall Street Journal and Dow Jones news wire, the two companies had discussed a
possible business combination over the preceding 12 months, and had spoken just
days prior to the transmission of the CEC letter.
16. The terms of the CEC letter indicated that CEC desired to effectuate a
"friendly" transaction and, to that end, offered to meet with the Individual
Defendants to negotiate in good faith all aspects of the CEC proposal.
17. A combination of Magma and CEC would be beneficial; both companies
have, in recent years, focused on developing interests in the Philippines and
other parts of Southeast Asia.
18. In response, on September 20, 1994, Magma transmitted a brief letter to
CEC Chairman David Sokol which stated that the Company would consider CEC's
offer in "due course". Thereafter, on September 22, 1994, Magma announced that
it retained
5
<PAGE>
Goldman, Sachs & Co. and Shearman & Sterling as financial and legal advisors to
review CEC's offer.
19. However, less than two weeks later, on October 3, 1994 Magma announced
that the Individual Defendants adopted a stockholder rights plan (commonly
referred to as a "poison pill") which entitles each stockholder to buy one
one-thousandth of a newly issued share of Series A Preferred Stock at an
exercise price of $125.00. The rights will be triggered if a person or group
acquires beneficial ownership of 10% or more of the Company's outstanding common
stock or commences a lender or exchange offer, upon consummation of which the
person or group would beneficially own 20% or more of the Company's outstanding
common stock. The effect of the poison pill is to make a disfavored takeover
prohibitively expensive.
20. Magma stated that the poison pill is designed to guard against partial
tender offers, such as that contemplated by CEC, and other "abusive tactics"
that might be used to gain control of Magma without paying its public
stockholders a fair price.
21. On October 3, 1994, Magma also announced that its Board (i.e. the
Individual Defendants) amended the Company's by-laws "to remove the ability of
stockholders to act by written consent." Pursuant to a consent solicitation,
board members can be replaced by the written consent of holders representing a
majority of Magma's total outstanding shares.
22. Additionally, on October 3, 1994, Magma filed suit against CEC in a
Nevada state court seeking a declaration that a Nevada law barring business
combination transactions between a target company and any interested shareholder
for three years, unless the interested shareholder obtains advance approval of
the Board, be declared
6
<PAGE>
valid and binding upon CEC. The suit also seeks a declaration that Magma acted
properly in adopting the poison pill and amending the by-laws.
23. On October 4, 1994, CEC announced it was offering $35 per share for 51%
of Magma; if that offer was accepted it would trigger the poison pill.
24. It is clear that the true motives of the actions taken by defendants is
to maintain defendants' absolute power to dictate the Company's destiny. In this
regard, Dow, Magma's controlling shareholder, currently has numerous contracts
and agreements with Magma, including (a) a 1993 Technical Services Agreement,
pursuant to which Dow has agreed to provide technical services for the Company's
geothermal power plants until January 1, 2000, and for which it will be paid
$550,000 in 1994; and (b) a 1994 Engineering and Construction Management
Services Agreement, pursuant to which Dow Engineering Company provides
engineering, procurement and construction management services to Magma. These
and other present and future arrangements between Dow and Magma are threatened
by the possibility of CEC acquiring control of Magma.
25. The actions of the defendants constitute a gross misuse of corporate
assets to subsidize the entrenchment of corporate officers and directors.
26. The defendants' unwillingness to seriously consider CEC's offer, and the
defensive mechanisms they have thrown up against it, stem from their attempt to
entrench themselves in their positions of control of the Company, and to
continue to reap the very generous economic benefits resulting from their
continued control of the Company.
<PAGE>
CLAIM FOR RELIEF
BREACH OF FIDUCIARY DUTY
------------------------
27. It is apparent from the reflexive negative reactions of the defendants
to CEC's offer for the Company, their failure to seriously negotiate with CEC
for an even higher price for the shareholders' stock than the substantial amount
being offered, and their implementation of defensive measures designed to make
impossible any unfriendly bid, no matter how generous, that defendants have
forsaken the interests of Magma's stockholders in maximizing stockholder values
to further their own interests in entrenching present management or avoiding tax
consequences adverse to them personally.
28. As members of the Board of Directors of Magma, the Individual Defendants
owe its stockholders certain fiduciary duties. These duties include the highest
obligations of due care, good faith, loyalty and candor. The Individual
Defendants have breached, are breaching, and will continue to breach their
fiduciary duties by at least the following:
(a) By embarking on a scheme of entrenchment pursuant to which they have
made decisions on matters of corporate control based on the benefits those
decisions will confer on themselves, incumbent management and their
affiliates. Actions, including the adoption of the poison pill and the
amendment to the by-laws, have been taken and are being considered in this
regard without adequate consideration of the interests of other stockholders
to the detriment of Class members;
(b) By failing to respond in a reasonable and informed manner to CEC's
announcement regarding its proposed acquisition of the Company and CEC's
willingness to negotiate; and
<PAGE>
(c) By failing to inform themselves as to other potential acquirors for
the Company so as to maximize stockholder value.
29. Defendants' adoption of the poison pill, the amendment to the by-laws
and institution of litigation against CEC, while refusing to negotiate with CEC
or to pursue other beneficial alternatives for stockholders, are not reasonable
responses to any perceived threat to the Company posed by CEC and constitute a
breach of the Individual Defendants' fiduciary duties owed to plaintiff and the
other members of the Class.
30. At all times herein mentioned, the Individual Defendants were
fiduciaries and owed fiduciary duties to plaintiff and all of the stockholders
of Magma, including, but not limited to, the obligation to adequately consider
in a timely and on an informed basis, any proposal made by CEC, as well as all
other reasonable tender and/or other offers from third parties, not to put their
own self-interests and personal considerations ahead of the interests of the
stockholders, and to make corporate decisions in good faith. By virtue of their
actions described above, the defendants have displayed their predisposition and
determination to reject and thwart tender and/or other offers and proposals by
third paries for enhanced stockholder value, as well as to squander corporate
assets in order to solidify their control of the Corporation (through the
institution of defensive litigation), so as to preserve and protect their own
emoluments and positions with the Company, all in violation of their fiduciary
duties, and to the detriment of the stockholders of the Company.
31. By virtue of the acts and conduct alleged herein, the defendants,
including Dow, are carrying out a preconceived plan to entrench themselves in
office and to thwart a potential acquisition of the Company, as well as a fair
and open auction of the Company that could maximize stockholder value, and
instead have acted to protect their
<PAGE>
own personal financial interests at the expense of plaintiff and other members
of the Class. As a result of the steps taken by the defendants to thwart a
takeover, including adoption of the poison pill, the by-law amendment and
litigation against CEC, plaintiff and the Class have been and will continue to
be damaged.
32. Dow, as a controlling shareholder, owes the same or similar fiduciary
duties to plaintiff and the Individual Defendants, and has breached those duties
by virtue of the actions taken above, or aided and abetted such breaches.
33. By reason of the foregoing acts, practices and courses of conduct,
defendants have failed to use ordinary care and diligence in the exercise of
their fiduciary obligations toward plaintiff and the other Magma stockholders.
34. Unless enjoined by this Court, defendants will continue to breach their
fiduciary duties owed to plaintiff and the other members of the Class and may
benefit themselves in their corporate offices, all to the irreparable harm of
the Class, as aforesaid.
35. Plaintiff and the other members of the Class have no adequate remedy at
law.
PRAYER FOR RELIEF
-----------------
WHEREFORE, plaintiff demands judgment as follows:
1. Declaring that this action is properly maintainable as a class action,
and certifying plaintiff as a class representative;
2. Declaring that defendants and each of them have committed a gross abuse
of trust and have breached their fiduciary duties to plaintiff and the other
members of the Class;
<PAGE>
3. Directing the defendants to carry out their fiduciary duties to plaintiff
and the other members of the Class by announcing their intention to:
(a) Undertake an appropriate evaluation of alternatives designed to
maximize value for Magma's public stockholders;
(b) Adequately ensure that no conflicts of interests exist between
defendants' own interest and their fiduciary obligation to the public
stockholders or, if such conflicts exist, to ensure that all the conflicts
would be resolved in the best interests of Magma's public stockholders; and
(c) Act independently, by, among other things, appointing a
disinterested committee so that the interests of Magma's public stockholders
would be protected, or alternatively, appointing a shareholder committee to
review all bona fide offers;
4. Granting injunctive relief with respect to the implementation of the
poison pill until Magma adequately considers all proposals;
5. Requiring the defendants to redeem, if appropriate, the poison pill in a
manner designed to maximize stockholder value;
6. Enjoining defendants from erecting any unlawful barriers to the
acquisition of the Company by any third party which would make Magma less
attractive as an acquisition candidate;
7. Awarding plaintiff and the Class compensatory and/or rescissory damages;
8. Awarding plaintiff and the Class the costs and disbursements of this
action, including reasonable attorneys' and experts' fees; and
<PAGE>
9. Granting such other and further relief as this Court may deem just and
proper.
DATED: October 4, 1994
ANDERSON, PEARL, HARDESTY,
LYLE, MURPHY & BENNETT
/s/ James W. Hardesty
---------------------------------
JAMES W. HARDESTY
245 East Liberty St, 3rd Floor
P.O. Box 21150
Reno, NV 89515-1150
Telephone: 702/348-5000
MILBERG WEISS BERSHAD
HYNES & LERACH
WILLIAM S. LERACH
PATRICK J. COUGHLIN
600 West Broadway, Suite 1800
San Diego, CA 92101
Telephone: 619/231-1058
GOODKIND LABATON RUDOFF
& SUCHAROW
JONATHAN M. PLASSE
EMILY C. KOMLOSSY
100 Park Avenue, 12th Floor
New York, NY 10017
Telephone: 212/907-0700
Attorneys for Plaintiff
