<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): December 5, 1994
MAGMA POWER COMPANY
- - --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 0-10533 95-3694478
- - --------------------------------------------------------------------------------
(State or other (Commission (I.R.S. Employer
jurisdiction of File Number) Identification No.)
incorporation)
4365 Executive Drive, Suite 900, San Diego, CA 92121
- - ---------------------------------------------- ---------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code: (619) 622-7800
--------------
- - --------------------------------------------------------------------------------
(Former name or former address, if changed since last report.)
<PAGE>
Item 5. Other Events.
- - ---------------------
On December 5, 1994, Magma Power Company (the "Company") and California
Energy Company, Inc. ("California Energy") entered into a definitive merger
agreement, attached hereto as Exhibit 2. The Company and California Energy
issued a joint press release announcing the merger agreement on December 5,
1994, attached hereto as Exhibit 99.
2
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Item 7. Financial Statements and Exhibits.
- - ------------------------------------------
Description
-----------
Exhibit 2 Agreement and Plan of Merger, dated as of December 5, 1994,
among California Energy Company, Inc., CE Acquisition
Company, Inc. and Magma Power Company.
Exhibit 99 Joint Press Release of California Energy Company, Inc. and
Magma Power Company, dated December 5, 1994.
3
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
MAGMA POWER COMPANY
By: /s/ Jon R. Peele
-------------------------------------
Name: Jon R. Peele
Title: Executive Vice President
Date: December 9, 1994
4
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
- - ----------- -----------
2 Agreement and Plan of Merger, dated as of
December 5, 1994, among California Energy
Company Inc., CE Acquisition Company, Inc. and
Magma Power Company.
99 Joint Press Release of California Energy
Company, Inc. and Magma Power Company, dated
December 5, 1994.
<PAGE>
FINAL CONFORMED COPY
--------------------
CALIFORNIA ENERGY COMPANY, INC.,
CE ACQUISITION COMPANY, INC.
and
MAGMA POWER COMPANY
AGREEMENT AND PLAN OF MERGER
Dated as of December 5, 1994
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TABLE OF CONTENTS
<TABLE>
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SECTION PAGE
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ARTICLE I
THE TENDER OFFER
SECTION 1.01. The Offer........................................... 2
SECTION 1.02. Company Action...................................... 3
SECTION 1.03. Directors........................................... 4
ARTICLE II
THE MERGER
SECTION 2.01. The Merger.......................................... 5
SECTION 2.02. Effective Time...................................... 5
SECTION 2.03. Effect of the Merger................................ 6
SECTION 2.04. Subsequent Actions.................................. 6
SECTION 2.05. Certificate of Incorporation; By-Laws; Directors
and Officers........................................ 6
SECTION 2.06. Merger Consideration................................ 7
SECTION 2.07. Dissenting Company Common Stock..................... 8
SECTION 2.08. Surrender of Company Common Stock; Stock
Transfer Books...................................... 8
SECTION 2.09. No Fractional Shares................................ 10
SECTION 2.10. Stock Options; Deferred Stock....................... 10
SECTION 2.11. Dividends; Transfer Taxes........................... 11
SECTION 2.12. Stockholders' Meetings.............................. 11
SECTION 2.13. Board Nominees; Assistance in Consummation of the
Merger.............................................. 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
SECTION 3.01. Corporate Organization; Subsidiaries................ 12
SECTION 3.02. Certificate of Incorporation and By-Laws............ 13
SECTION 3.03. Capitalization...................................... 13
SECTION 3.04. Authority Relative to this Agreement................ 14
SECTION 3.05. No Conflict; Required Filings and Consents.......... 14
SECTION 3.06. SEC Filings; Financial Statements................... 15
SECTION 3.08. Title to Property................................... 17
SECTION 3.09. Litigation.......................................... 17
SECTION 3.10. Financing Arrangements.............................. 17
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SECTION 3.11. No Prior Activities.................................. 17
SECTION 3.12. Brokers.............................................. 17
SECTION 3.13. Information in Disclosure Documents; Registration
Statement; Etc....................................... 17
SECTION 3.14. Conduct of Business.................................. 18
SECTION 3.15. Environment.......................................... 18
SECTION 3.16. Energy Regulatory Status............................. 19
SECTION 3.17. Employee Benefit Plans; Labor Matters................ 19
SECTION 3.18. Insurance............................................ 21
SECTION 3.19. Taxes................................................ 21
SECTION 3.20. Trademarks, Licenses, Patents and Copyrights......... 22
SECTION 3.21. Related Party Transactions........................... 22
SECTION 3.22. Status of Development and Construction Projects...... 23
SECTION 3.23. Status of Operating Projects......................... 23
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 4.01. Corporate Organization; Subsidiaries................. 24
SECTION 4.02. Articles of Incorporation and Bylaws................. 25
SECTION 4.03. Capitalization....................................... 25
SECTION 4.04. Authority Relative to this Agreement................. 26
SECTION 4.05. No Conflict; Required Filings and Consents........... 26
SECTION 4.06. SEC Filings; Financial Statements.................... 27
SECTION 4.07. Absence of Certain Changes or Events................. 28
SECTION 4.08. Title to Property.................................... 29
SECTION 4.09. Litigation........................................... 29
SECTION 4.10. Information in Disclosure Documents.................. 30
SECTION 4.11. Fairness Opinion..................................... 30
SECTION 4.12. Brokers.............................................. 30
SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement
Amendment............................................ 30
SECTION 4.14. Conduct of Business.................................. 31
SECTION 4.15. Environment.......................................... 31
SECTION 4.16. Energy Regulatory Status............................. 31
SECTION 4.17. Employee Benefit Plans; Labor Matters................ 32
SECTION 4.18. Insurance............................................ 34
SECTION 4.19. Taxes................................................ 34
SECTION 4.20. Trademarks, Licenses, Patents and Copyrights......... 35
SECTION 4.21. Related Party Transactions........................... 35
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SECTION 4.22. Status of Development and Construction Projects.......... 35
SECTION 4.23. Status of Operating Projects............................. 36
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Acquisition Proposals.................................... 36
SECTION 5.02. Conduct of Business by the Parties Pending the Merger.... 37
SECTION 5.03. No Shopping.............................................. 40
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement/Proxy Statement................... 41
SECTION 6.02. Stock Exchange Listing................................... 42
SECTION 6.03. Additional Agreements.................................... 42
SECTION 6.04. Notification of Certain Matters.......................... 42
SECTION 6.05. Access to Information.................................... 42
SECTION 6.06. Public Announcements..................................... 43
SECTION 6.07. Best Efforts; Cooperation................................ 43
SECTION 6.08. Agreement to Defend and Indemnify........................ 43
SECTION 6.09. Disposition of Litigation................................ 44
SECTION 6.10. Employee Benefits........................................ 45
SECTION 6.11. Certain Action of Parent and Merger Sub.................. 46
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to
Effect the Merger........................................ 46
SECTION 7.02. Additional Conditions to Obligations of
the Company.............................................. 47
SECTION 7.03. Additional Conditions to Obligations of
Parent and Merger Sub.................................... 47
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination.............................................. 48
SECTION 8.02. Effect of Termination.................................... 49
SECTION 8.03. Agreement Termination Fee................................ 49
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SECTION 8.04. Offer Fee........................................... 50
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties
and Agreements...................................... 51
SECTION 9.02. Notices...... .................................. 51
SECTION 9.03. Expenses............................................ 52
SECTION 9.04. Certain Definitions................................. 52
SECTION 9.05. Headings............................................ 52
SECTION 9.06. Severability........................................ 52
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries...... 52
SECTION 9.08. Waiver.............................................. 53
SECTION 9.09. Amendment........................................... 53
SECTION 9.10. Assignment.......................................... 53
SECTION 9.12. Counterparts........................................ 53
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Annex I
iv
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of December 5, 1994 (this
"Agreement"), among CALIFORNIA ENERGY COMPANY, INC., a Delaware corporation
- - ----------
("Parent"), CE ACQUISITION COMPANY, INC., a Delaware corporation and a wholly
- - --------
owned subsidiary of Parent ("Merger Sub"), and MAGMA POWER COMPANY, a Nevada
----------
corporation (the "Company").
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W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company
have each approved the acquisition of the Company by Parent upon the terms and
subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance thereof, it is proposed that Merger Sub will
make a cash tender offer (the "Offer") to acquire 12,400,000 shares of the
-----
issued and outstanding common stock, $0.10 par value, of the Company, including
the associated Preferred Stock purchase rights (the "Rights") issued pursuant to
------
the Rights Agreement dated October 6, 1994 between the Company and Chemical
Trust Company of California, as Rights Agent (the "Rights Agreement") (the
----------------
"Company Common Stock"; all issued and outstanding shares of Company Common
- - ---------------------
Stock and the associated Rights being hereinafter collectively referred to as
the "Shares") for $39.00 per Share, or such higher price as may be paid in the
------
Offer (the "Per Share Cash Amount"), net to the seller in cash, subject to (i)
---------------------
there being validly tendered and not withdrawn before the expiration of the
Offer that number of Shares which, together with Shares beneficially owned by
Merger Sub, represents at least a majority of the Shares outstanding on a fully
diluted basis (the "Minimum Tender Condition") and (ii) Merger Sub having
------------------------
obtained sufficient financing to enable it to consummate the Offer (the
"Financing Condition");
- - --------------------
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of the Company and Merger Sub have each approved the merger (the
"Merger") of Merger Sub with and into the Company following completion of the
- - -------
Offer in accordance with the General Corporation Law of the State of Delaware
("Delaware Law") and the General Corporation Law of the State of Nevada ("Nevada
- - -------------- ------
Law") and upon the terms and subject to the conditions set forth in this
- - ---
Agreement; and
WHEREAS, the Board of Directors of the Company has resolved to
recommend acceptance of the Offer and the Merger to the holders of Shares and
has determined that the consideration to be paid for each Share in the Offer and
the Merger is fair to the holders of such Shares;
NOW, THEREFORE, in consideration of the foregoing and the mutual
covenants and agreements herein contained, and intending to be legally bound
hereby, Parent, Merger Sub and the Company hereby agree as follows:
<PAGE>
2
ARTICLE I
THE TENDER OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not
---------
have been terminated in accordance with Section 8.01 hereof and none of the
events set forth in Annex I hereto shall have occurred or be existing, Parent
shall cause Merger Sub to, and Merger Sub shall, commence the Offer as promptly
as practicable, but in no event later than five business days after the date
hereof. The obligation of Parent to accept for payment any Shares tendered
shall be subject to the satisfaction of the conditions set forth in Annex I,
including the Minimum Tender Condition. Parent expressly reserves the right to
waive any such condition, to increase the price per Share payable in the Offer,
or to make any other changes in the terms and conditions of the Offer (provided
that no change may be made that decreases the price per Share payable in the
Offer or that imposes additional conditions to the Offer from those set forth in
Annex I hereto). Merger Sub covenants and agrees that, subject to the terms and
conditions of this Agreement, unless the Company otherwise consents in writing,
Merger Sub will accept for payment and pay for Shares as soon as it is permitted
to do so under applicable law. The Per Share Cash Amount shall be net to the
seller in cash, subject to reduction only for any applicable Federal back-up
withholding or stock transfer taxes payable by the seller. The Company agrees
that no Shares held by the Company or any of its subsidiaries (as hereinafter
defined) will be tendered pursuant to the Offer.
(b) The Offer shall be made by means of an offer to purchase (the
"Offer to Purchase") having the conditions and provisions set forth in Annex I
- - ------------------
hereto. As soon as practicable on the date the Offer is commenced, Parent and
Merger Sub shall file with the Securities and Exchange Commission (the "SEC") a
---
Tender Offer Statement on Schedule 14D-1 (together with all amendments and
supplements thereto, the "Schedule 14D-1") with respect to the Offer. The
--------------
Schedule 14D-1 will comply in all material respects with the provisions of, and
satisfy in all material respects the requirements of, such Schedule 14D-1 and
all applicable Federal securities laws and will contain (including as an
exhibit) or incorporate by reference the Offer to Purchase (or portions thereof)
and forms of the related letter of transmittal (which documents, together with
any supplements or amendments thereto, and any other SEC schedule or form that
is filed in connection with the Offer and related transactions, are referred to
collectively herein as the "Offer Documents"). Each of Parent, Merger Sub and
---------------
the Company represents and warrants that the information provided and to be
provided by it and/or by its auditors, attorneys, financial advisors or other
consultants or advisors specifically for use in the Schedule 14D-1 and the Offer
Documents on the date filed with the SEC and on the date first published, sent
or given to the Company's stockholders shall not contain any untrue statement of
a material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of Parent,
Merger Sub and the Company agrees promptly to correct any
<PAGE>
3
information provided by it for use in the Schedule 14D-1 or the Offer Documents
if and to the extent that it shall have become false or misleading in any
material respect and to supplement the information provided by it specifically
for use in the Schedule 14D-1 or the Offer Documents to include any information
that shall become necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading, and Parent and
Merger Sub further agree to take all steps necessary to cause the Schedule 14D-
1, as so corrected or supplemented, to be filed with the SEC and the Offer
Documents, as so corrected or supplemented, to be disseminated to holders of
Shares, in each case as and to the extent required by applicable Federal
securities laws. The Company and its counsel shall be given the right to review
and comment on the Schedule 14D-1 before filing with the SEC.
SECTION 1.02. Company Action. (a) The Company hereby approves of
--------------
and consents to the Offer and represents and warrants that the Board of
Directors of the Company, at a meeting duly called and held on December 5, 1994,
at which a majority of the Directors were present, duly approved and adopted
this Agreement and the transactions contemplated hereby, including the Offer and
the Merger, recommended that the stockholders of the Company accept the Offer
and tender their Shares pursuant to the Offer, and determined that this
Agreement and the transactions contemplated hereby, including the Offer and the
Merger, are fair to and in the best interests of the stockholders of the
Company. The Company further represents that Goldman, Sachs & Co. ("Goldman
-------
Sachs") has rendered to the Board of Directors of the Company its opinion as of
- - -----
December 5, 1994, to the effect that the consideration to be received by the
stockholders of the Company pursuant to the Offer and the Merger is fair to such
stockholders (other than Parent and its affiliates).
(b) The Company hereby agrees to file with the SEC, as promptly as
practicable after the filing by Parent and Merger Sub of the Schedule 14D-1 with
respect to the Offer, a Tender Offer Solicitation/Recommendation Statement on
Schedule 14D-9 (together with any amendments or supplements thereto, the
"Schedule 14D-9") that will comply in all material respects with the provisions
- - ---------------
of all applicable Federal securities laws. The Company agrees to mail such
Schedule 14D-9 to the stockholders of the Company promptly after the
commencement of the Offer. The Schedule 14D-9 and the Offer Documents shall
contain the recommendations of the Board of Directors of the Company described
in Section 1.02(a) hereof. The Schedule 14D-9, on the date filed with the SEC
and on the date first published, sent or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to written information
supplied by Parent or Merger Sub specifically for inclusion in the Schedule 14D-
9. The Company agrees promptly to correct the Schedule 14D-9 if and to the
extent that it shall become false or misleading in any material respect, and
each of Parent and Merger Sub, with respect to written information supplied by
it specifically for use in the
<PAGE>
4
Schedule 14D-9, shall promptly notify the Company of any required corrections of
such information and cooperate with the Company with respect to correcting such
information and to supplement the information contained in the Schedule 14D-9 to
include any information that shall become necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, and the Company shall take all steps necessary to cause the
Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the
Company's stockholders to the extent required by applicable Federal securities
laws. Parent and Merger Sub, and their counsel, shall be given an opportunity
to review and comment on the Schedule 14D-9 before filing with the SEC.
(c) In connection with the Offer, the Company shall promptly upon
execution of this Agreement furnish Parent and Merger Sub with mailing labels
containing the names and addresses of all record holders of Shares and security
position listings of Shares held in stock depositories, each as of a recent
date, and shall promptly furnish Parent and Merger Sub with such additional
information, including updated lists of stockholders, mailing labels and
security position listings, and such other information and assistance as Parent
and Merger Sub or their agents may reasonably request for the purpose of
communicating the Offer to the record and beneficial holders of Shares.
SECTION 1.03. Directors. (a) Promptly upon the purchase by Merger
---------
Sub of a majority of the outstanding Shares pursuant to the Offer, and from time
to time thereafter as Shares are acquired by Merger Sub, Merger Sub shall be
entitled, subject to compliance with Section 14(f) of the Securities Exchange
Act of 1934 (the "Exchange Act"), to designate such number of directors, rounded
------------
to the nearest whole number (any number ending with .5 being rounded to the next
highest whole number), on the Board of Directors of the Company as will give
Merger Sub representation on the Board of Directors equal to that number of
directors which equals the product of the total number of directors on the Board
of Directors (giving effect to the directors appointed or elected pursuant to
this sentence and including current directors serving as officers of the
Company) multiplied by the percentage that the aggregate number of Shares
beneficially owned by Merger Sub or any affiliate of Merger Sub (including for
purposes of this Section 1.03 such Shares as are accepted for payment pursuant
to the Offer, but excluding Shares held by the Company or any of its affiliates)
bears to the number of Shares outstanding, but in no event less than a majority
of the entire Board of Directors of the Company (regardless of vacancies). At
such times, the Company will also cause (i) each committee of the Board of
Directors, (ii) if requested by Merger Sub, the board of directors of each of
the Company's Subsidiaries (as defined below) and (iii) if requested by Merger
Sub, each committee of such board to include persons designated by Merger Sub
constituting the same percentage of each such committee or board as Merger Sub's
designees are of the Board of Directors. The Company shall, upon request by
Merger Sub, promptly increase the size of the Board of Directors or exercise its
best efforts to secure the resignations of such number of directors as is
necessary to enable Merger Sub designees to be elected to the Board of Directors
and shall cause
<PAGE>
5
Merger Sub's designees to be so elected; provided, however, that such
-------- -------
resignations shall not cause the number of Disinterested Directors (as defined
below) to be less than two. Subject to applicable law, the Company shall
promptly take all action necessary pursuant to Section 14(f) of the Exchange Act
and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under
this Section 1.03 and shall include in the Schedule 14D-9 mailed to stockholders
promptly after the commencement of the Offer (or an amendment thereof or an
information statement pursuant to Rule 14f-1 if Merger Sub has not theretofore
designated directors) such information with respect to the Company and its
officers and directors as is required under Section 14(f) and Rule 14f-1 in
order to fulfill its obligations under this Section 1.03. Parent and Merger Sub
will supply the Company and be solely responsible for any information with
respect to itself and its nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
(b) Following the election or appointment of Parent's designees
pursuant to this Section 1.03 and prior to the Effective Time, any amendment of
this Agreement or the Restated Articles of Incorporation or Restated Bylaws of
the Company, any termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the obligations or other
acts of Parent or Merger Sub or waiver of any of the Company's rights hereunder,
and any other consent or action by the Board of Directors hereunder, will
require the concurrence of a majority (which shall be at least two) of the
directors of the Company then in office who are not designees of Parent or
Merger Sub (the "Disinterested Directors").
-----------------------
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. At the Effective Time and subject to and
----------
upon the terms and conditions of this Agreement, Delaware Law and Nevada Law,
Merger Sub shall be merged with and into the Company, the separate corporate
existence of Merger Sub shall cease, and the Company shall continue as the
surviving corporation. The Company as the surviving corporation after the
Merger hereinafter sometimes is referred to as the "Surviving Corporation".
---------------------
SECTION 2.02. Effective Time. As promptly as practicable after the
--------------
satisfaction or waiver of the conditions set forth in Article VII, the parties
hereto shall cause the Merger to be consummated by filing this Agreement or a
Certificate of Merger with the Secretary of State of the State of Delaware and
the Secretary of State of the State of Nevada, in such form as required by, and
executed in accordance with the relevant provisions of, Delaware Law and Nevada
Law, respectively (the time of such later filing being the "Effective Time").
--------------
Prior to such filings, a closing shall be held at the offices of Willkie Farr &
Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022,
or
<PAGE>
6
such other place as the parties shall agree, for the purpose of confirming the
satisfaction or waiver of the conditions set forth in Article VII.
SECTION 2.03. Effect of the Merger. At the Effective Time, the
--------------------
effect of the Merger shall be as provided in the applicable provisions of
Delaware Law and Nevada Law. Without limiting the generality of the foregoing,
and subject thereto, at the Effective Time all the property, rights, privileges,
powers and franchises of the Company and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company and Merger Sub
shall become the debts, liabilities and duties of the Surviving Corporation.
SECTION 2.04. Subsequent Actions. If, at any time after the
------------------
Effective Time, the Surviving Corporation shall consider or be advised that any
deeds, bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of either of the Company or Merger Sub acquired or
to be acquired by the Surviving Corporation as a result of, or in connection
with, the Merger or otherwise to carry out this Agreement, the officers and
directors of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either the Company or Merger Sub, all such
deeds, bills of sale, assignments and assurances and to take and do, in the name
and on behalf of each of such corporations or otherwise, all such other actions
and things as may be necessary or desirable to vest, perfect or confirm any and
all right, title and interest in, to and under such rights, properties or assets
of the Surviving Corporation or otherwise to carry out this Agreement.
SECTION 2.05. Certificate of Incorporation; By-Laws; Directors and
----------------------------------------------------
Officers. (a) Unless otherwise determined by Parent before the Effective Time,
- - --------
at the Effective Time the Certificate of Incorporation of Merger Sub, as in
effect immediately before the Effective Time, shall be the Articles of
Incorporation of the Surviving Corporation until thereafter amended as permitted
by law and such Articles of Incorporation; provided, however, that Article One
-------- -------
of the Articles of Incorporation of the Surviving Corporation shall be amended
to read as follows: "FIRST: The name of the corporation is Magma Power
Company".
(b) The By-Laws of Merger Sub, as in effect immediately before the
Effective Time, shall be the By-Laws of the Surviving Corporation until
thereafter amended as permitted by law, the Articles of Incorporation of the
Surviving Corporation and such By-Laws.
(c) The directors of Merger Sub immediately before the Effective Time
will be the initial directors of the Surviving Corporation, and the officers of
the Company immediately before the Effective Time will be the initial officers
of the Surviving
<PAGE>
7
Corporation, in each case until their successors are elected or appointed and
qualified. If, at the Effective Time, a vacancy shall exist on the Board of
Directors or in any office of the Surviving Corporation, such vacancy may
thereafter be filled in the manner provided by law or the By-laws of Merger Sub.
SECTION 2.06. Merger Consideration. At the Effective Time, by virtue
--------------------
of the Merger and without any action on the part of Merger Sub, the Company or
the holder of any of the following securities:
(a) All Shares which are held by the Company or any subsidiary of the
Company, and any Shares owned by Parent, Merger Sub or any other subsidiary of
Parent, shall cease to be outstanding, shall be canceled and retired without
payment of any consideration therefor and shall cease to exist.
(b) Subject to Section 2.09, each remaining outstanding Share shall be
converted in the Merger into the right to receive that amount of cash and that
number of shares of common stock, par value $0.0675 per share, of Parent (the
"Parent Common Stock") equal to, at the option of Parent, (i) the All Cash
- - --------------------
Component Amount (as defined below), net in cash, without interest thereon, or
(ii) both (A) the Mixed Cash Component Amount (as defined below), net in cash,
without interest thereon, and (B) the number of fully paid and nonassessable
shares of Parent Common Stock equal to the quotient of (I) $39.00 less (II) the
Mixed Cash Component Amount divided by the Average Closing Price (as defined
below) (the All Cash Component Amount or (ii)(A) and (ii)(B), collectively, as
applicable, being the "Merger Consideration"). The "Mixed Cash Component
-------------------- --------------------
Amount" shall mean an amount equal to the quotient of (A) (x) $28.50 multiplied
- - ------
by the number of Shares outstanding at the Effective Time less (y) $39.00
multiplied by the number of Shares owned by Parent and any of its affiliates
immediately prior to the Effective Time, divided by (B) the number of Shares
outstanding at the Effective Time (other than Shares owned by Parent and any of
its affiliates). The "All Cash Component Amount" shall mean an amount equal to
-------------------------
the quotient of (A) (x) $38.75 multiplied by the number of Shares outstanding at
the Effective Time less (y) $39.00 multiplied by the number of Shares owned by
Parent and any of its affiliates immediately prior to the Effective Time,
divided by (B) the number of Shares outstanding at the Effective Time (other
than Shares owned by Parent and any of its affiliates). The "Average Closing
---------------
Price" shall mean the average closing price of Parent Common Stock on the New
- - -----
York Stock Exchange (the "NYSE") during the 15 consecutive trading days ending
----
on the fifth business day prior to the Effective Time; provided, however, that
-------- -------
if such average closing price exceeds $18.73, the Average Closing Price shall be
$18.73, and if such average closing price is less than $14.27, the Average
Closing Price shall be $14.27.
(c) All Shares to be converted into the right to receive the Merger
Consideration pursuant to this Section 2.06 shall cease to be outstanding, shall
be canceled
<PAGE>
8
and retired and shall cease to exist, and each holder of a certificate
representing any such Shares shall thereafter cease to have any rights with
respect to such shares, except the right to receive for each of the Shares, upon
the surrender of such certificate in accordance with Section 2.08, the Merger
Consideration and cash in lieu of fractional shares of Parent Common Stock as
contemplated by Section 2.09.
(d) Each issued and outstanding share of capital stock of Merger Sub
shall be converted into and become one fully paid and nonassessable share of
common stock, $.01 par value, of the Surviving Corporation.
SECTION 2.07. Dissenting Company Common Stock. (a) Notwithstanding
-------------------------------
any provision of this Agreement to the contrary, any Shares held by a holder who
has demanded and perfected his demand for appraisal of his shares of Company
Common Stock in accordance with Nevada Law and as of the Effective Time has
neither effectively withdrawn nor lost his right to such appraisal ("Dissenting
----------
Shares") shall not be converted into or represent a right to receive the Merger
- - ------
Consideration pursuant to Section 2.06(b), but the holder thereof shall be
entitled to only such rights as are granted by Nevada Law.
(b) Notwithstanding the provisions of subsection (a) of this Section
2.07, if any holder of shares of Company Common Stock who demands appraisal of
his shares under Nevada Law shall effectively withdraw or lose (through failure
to perfect or otherwise) his right to appraisal, then, as of the Effective Time
or the occurrence of such event, whichever later occurs, such holder's shares of
Company Common Stock shall automatically be converted into and represent only
the right to receive the Merger Consideration as provided in Section 2.06(b),
without interest thereon, upon surrender of the certificate or certificates
representing such shares of Company Common Stock.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Company Common Stock,
withdrawals of such demands, and any other instruments served pursuant to Nevada
Law received by the Company and (ii) the opportunity to direct all negotiations
and proceedings with respect to demands for appraisal under Nevada Law. The
Company shall not voluntarily make any payment with respect to any demands for
appraisal and shall not, except with the prior written consent of Parent, settle
or offer to settle any such demands.
SECTION 2.08. Surrender of Company Common Stock; Stock Transfer
-------------------------------------------------
Books. (a) Before the Effective Time, the Company and Parent shall designate a
- - -----
bank or trust company to act as agent for the holders of Company Common Stock
(the "Exchange Agent") to receive the funds and securities necessary to make the
--------------
payments contemplated by Section 2.06. Such funds shall be invested by the
Exchange Agent as directed by the Surviving Corporation, provided that such
investments shall be in obligations of or guaranteed by the United States of
America or of any agency thereof and backed by the full
<PAGE>
9
faith and credit of the United States of America, in commercial paper
obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or
Standard & Poor's Corporation, respectively, or in deposit accounts,
certificates of deposit or banker's acceptances of, repurchase or reverse
repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $200 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise).
(b) Each holder of a certificate or certificates representing any
outstanding shares of Company Common Stock ("Certificates") canceled upon the
------------
Merger pursuant to Section 2.06(b) may thereafter surrender such Certificate or
Certificates to the Exchange Agent, as agent for such holder, to effect the
surrender of such Certificate or Certificates on such holder's behalf for a
period ending one year after the Effective Time.
Any portion of the Merger Consideration which remains unclaimed by the
former stockholders of the Company for one year after the Effective Time shall
be delivered to Parent, upon demand of Parent. Parent agrees that promptly
after the Effective Time it shall cause the distribution to holders of record of
Company Common Stock as of the Effective Time appropriate materials to
facilitate such surrender, including (i) a form of letter of transmittal (which
shall specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent) and (ii) instructions for use in effecting the surrender of the
Certificates for payment therefor. Upon surrender of Certificates for
cancellation to the Exchange Agent, together with such letter of transmittal
duly executed and any other required documents, the holder of such Certificates
shall be entitled to receive for each of the shares of Company Common Stock
represented by such Certificates the Merger Consideration and the Certificates
so surrendered shall forthwith be canceled. Until so surrendered, Certificates
shall represent solely the right to receive the Merger Consideration and any
cash in lieu of fractional shares of Parent Common Stock as contemplated by
Section 2.09 with respect to each of the shares contemplated thereby.
(c) If payment of the Merger Consideration in respect of canceled
Shares is to be made to a person other than the person in whose name a
surrendered Certificate or instrument is registered, it shall be a condition to
such payment that the Certificate or instrument so surrendered shall be properly
endorsed or shall be otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the registered holder of the
Certificate or instrument surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either has been paid or
is not payable.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and there shall not be any
further registration
<PAGE>
10
of transfers of Shares thereafter on the records of the Company. If, after the
Effective Time, Certificates are presented to the Surviving Corporation, they
shall be canceled and exchanged for the Merger Consideration as provided in
Section 2.06(b). No interest shall accrue or be paid on any cash payable upon
the surrender of a Certificate or Certificates which immediately before the
Effective Time represented outstanding shares of Company Common Stock.
SECTION 2.09. No Fractional Shares. No Certificates or scrip
--------------------
representing less than one share of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates representing shares of Company Common
Stock pursuant to Section 2.06(b). In lieu of any such fractional share, each
holder of Shares who would otherwise have been entitled to a fraction of a share
of Parent Common Stock upon surrender of Certificates for exchange pursuant to
Section 2.06(b) shall be paid upon such surrender cash (without interest) in an
amount equal to such holder's proportionate interest in the net proceeds from
the sale or sales in the open market by the Exchange Agent, on behalf of all
such holders, of the aggregate fractional Parent Common Stock issued pursuant to
this Section 2.09. As soon as practicable following the Effective Time the
Exchange Agent shall determine the excess of (i) the number of full shares of
Parent Common Stock delivered to the Exchange Agent by Parent over (ii) the
aggregate number of full shares of Parent Common Stock to be distributed to
holders of Company Common Stock (such excess being herein called the "Excess
------
Shares"), and the Exchange Agent, as agent for the former holders of Company
- - ------
Common Stock, shall sell the Excess Shares at the prevailing prices on the NYSE.
The sale of the Excess Shares by the Exchange Agent shall be executed on the
NYSE and shall be executed in round lots to the extent practicable. The
Exchange Agent shall deduct from the proceeds of the sale of the Excess Shares
all commissions, transfer taxes and other reasonable out-of-pocket transaction
costs, including any expenses of the Exchange Agent, incurred in connection with
such sale of Excess Shares. Until the net proceeds of such sale have been
distributed to the former stockholders of the Company, the Exchange Agent will
hold such proceeds in trust for such former stockholders. As soon as
practicable after the determination of the amount of cash to be paid to former
stockholders of the Company in lieu of any fractional interests, the Exchange
Agent shall make available in accordance with this Agreement such amounts to
such former stockholders.
SECTION 2.10. Stock Options; Deferred Stock. Immediately prior to
-----------------------------
the Effective Time, (a) each unexpired and unexercised option to purchase Shares
(each, a "Company Option"), under the Company's 1987 Stock Option Plan and 1994
--------------
Equity Participation Plan (collectively, the "Company Stock Option Plans"),
--------------------------
whether or not then exercisable, shall be cancelled by the Company, and each
holder of a cancelled Company Option shall be entitled to receive at the
Effective Time or as soon as practicable thereafter from the Company in
consideration for the cancellation of such Company Option an amount in cash
equal to the product of (i) the number of Shares previously subject to such
Company Option and (ii) the excess, if any, of the Per Share Cash Amount or, if
the election
<PAGE>
11
contemplated by Section 2.06(b)(i) has been made by Parent, $38.75, over the
exercise price per Share previously subject to such Company Option, and (b) each
outstanding unvested share of deferred stock under the Company's 1994 Equity
Participation Plan or otherwise identified on Schedule 4.03 (each, a "Deferred
------------- --------
Share") shall be cancelled by the Company, and each holder of a cancelled
- - -----
Deferred Share shall be entitled to receive at the Effective Time or as soon as
practicable thereafter from the Company in consideration for the cancellation of
such Deferred Share an amount in cash equal to the Per Share Cash Amount or, if
the election contemplated by Section 2.06(b)(i) has been made by Parent, $38.75.
SECTION 2.11. Dividends; Transfer Taxes. No dividends or other
-------------------------
distributions that are declared or made on Parent Common Stock will be paid to
persons entitled to receive certificates representing Parent Common Stock
pursuant to this Agreement until such persons surrender their Certificates
representing Company Common Stock. Upon such surrender, there shall be paid to
the person in whose name the certificates representing such Parent Common Stock
shall be issued any dividends or other distributions that shall have become
payable with respect to such Parent Common Stock in respect of a record date
after the Effective Time. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. Neither the
Exchange Agent nor any party hereto shall be liable to a holder of Shares for
any shares of Parent Common Stock or dividends thereon delivered to a public
official pursuant to any applicable escheat laws.
SECTION 2.12. Stockholders' Meetings. (a) The Company shall take
----------------------
all action necessary, in accordance with applicable law and its Articles of
Incorporation and Bylaws, to convene a special meeting of the holders of Shares
(the "Company Meeting") as promptly as practicable after consummation of the
---------------
Offer for the purpose of considering and taking action upon this Agreement and
the Merger. The stockholder vote required for approval of the Merger will be no
greater than that set forth in Nevada Law. The Board of Directors of the
Company will recommend that holders of Shares vote in favor of and approve the
Merger. The Company will use its best efforts to solicit from stockholders of
the Company proxies in favor of the Merger and will take all other action
necessary or, in the reasonable opinion of Parent, advisable to secure any vote
of stockholders required by Nevada Law to effect the Merger. At the Company
Meeting, all of the Shares then owned by Parent, Merger Sub, or any other
subsidiary of Parent, or with respect to which Parent, Merger Sub, or any other
subsidiary of Parent holds the power to direct the voting, will be voted in
favor of approval of the Merger and adoption of this Agreement.
(b) Parent shall take all action necessary, unless Parent has elected
the All Cash Component under Section 2.06(b)(i), in accordance with applicable
law and its Certificate of Incorporation and Bylaws, to convene a special
meeting of the holders of Parent Common Stock (the "Parent Meeting") as promptly
--------------
as practicable after consummation of the Offer for the purpose of considering
and taking action to (i) authorize the issuance of Parent Common Stock pursuant
to the Merger under the applicable guidelines of the NYSE
<PAGE>
12
(the "Parent Share Proposal") and (ii) authorize the increase of the authorized
---------------------
Parent Common Stock from 60,000,000 shares to no more than 80,000,000 shares or
such greater number of shares as shall be required to issue the Parent Common
Stock in the Merger. The Board of Directors of Parent will (i) recommend that
holders of Parent Common Stock vote in favor of and approve the Parent Share
Proposal at the Parent Meeting and (ii) recommend that holders of Parent Common
Stock vote in favor of and approve an amendment to its Certificate of
Incorporation increasing the authorized Parent Common Stock from 60,000,000
shares to no more than 80,000,000 shares or such greater number of shares as
shall be required to issue the Parent Common Stock in the Merger (the "Charter
-------
Amendment"). Parent will use its reasonable best efforts to solicit from
- - ---------
stockholders of Parent proxies in favor of the Parent Share Proposal and the
Charter Amendment and will take all other action necessary or, in the reasonable
opinion of the Company, advisable to secure any vote of stockholders required by
Delaware Law to effect the Merger.
SECTION 2.13. Board Nominees; Assistance in Consummation of the
-------------------------------------------------
Merger. (a) Parent will nominate and use its best efforts to cause up to two
- - ------
nominees of the Company designated in writing to Parent prior to the closing of
the Merger to be elected or appointed as members of the Board of Directors of
Parent.
(b) Each of Parent, Merger Sub and the Company shall provide all
reasonable assistance to, and shall cooperate with, each other to bring about
the consummation of the Offer and the Merger as soon as possible in accordance
with the terms and conditions of this Agreement. Parent shall cause Merger Sub
to perform all of its obligations in connection with this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PARENT
AND MERGER SUB
Except as set forth on the Parent Disclosure Schedule previously
delivered by Parent to the Company (the "Parent Disclosure Schedule"), Parent
--------------------------
and Merger Sub hereby jointly and severally represent and warrant to the Company
as follows:
SECTION 3.01. Corporate Organization; Subsidiaries. Each of Parent
------------------------------------
and the Parent Subsidiaries (as defined below) is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
incorporation and has the requisite corporate power and authority and any
necessary governmental authority to own, operate or lease the properties that it
purports to own, operate or lease and to carry on its business as it is now
being conducted, and is duly qualified as a foreign corporation to do business,
and is in good standing, in each jurisdiction where the character of its
properties owned, operated or leased or the nature of its activities makes such
qualification necessary,
<PAGE>
13
except for such failure which, when taken together with all other such failures,
would not have a Material Adverse Effect (as defined below) on Parent and Merger
Sub. The term "Parent Subsidiary" means any corporation, partnership, joint
-----------------
venture or other legal entity of which Parent (either alone or through or
together with any other Parent Subsidiary) owns, directly or indirectly, 50% or
more of the stock or other equity interests, or owns, directly or indirectly,
interests such that the holders are generally entitled to vote for the election
of 50% of the board of directors or other governing body, of such corporation,
partnership, joint venture or other legal entity. When used in connection with
Parent and Merger Sub, the term "Material Adverse Effect" means any change or
-----------------------
effect, when taken together with all other adverse changes and effects relating
to Parent or Merger Sub, which are not individually or in the aggregate deemed
to have a Material Adverse Effect, that is or is reasonably likely to be
materially adverse to the business, operations, properties, condition (financial
or otherwise), assets or liabilities (including, without limitation, contingent
liabilities) of Parent and the Parent Subsidiaries taken as a whole; provided,
--------
however, that the occurrence of any or all of the following shall not constitute
- - -------
a Material Adverse Effect: (i) any change in any law applicable to Parent or
any Parent Subsidiary or by which any property or asset of Parent or any Parent
Subsidiary is bound, (ii) a failure to receive any contract for which Parent or
any Parent Subsidiary has submitted or will submit a competitive bid, (iii) the
loss of any contract or arrangement (whether by revocation, lapse or invalidity)
with respect to a project that Parent or a Parent Subsidiary has under
development other than any such loss resulting from a breach by Parent of the
representations and warranties set forth in Section 3.22 or 3.23 hereof, (iv) a
failure to close any public or private financing of any project in which Parent
or any Parent Subsidiary owns a direct or indirect interest or (v) the
termination of the employment of any employee, officer, director or consultant
of Parent or any Parent Subsidiary.
SECTION 3.02. Certificate of Incorporation and By-Laws. Parent has
----------------------------------------
heretofore furnished to the Company a complete and correct copy of Parent's and
Merger Sub's Certificates of Incorporation and By-Laws, each as amended to the
date hereof. Such Certificates of Incorporation and By-Laws are in full force
and effect. Neither Parent nor Merger Sub is in violation of any of the
provisions of its Certificate of Incorporation or By-laws or equivalent
organizational documents.
SECTION 3.03. Capitalization. As of the date hereof, the authorized
--------------
capital stock of Parent consists of 60,000,000 shares of Parent Common Stock and
1,000,000 shares of preferred stock ("Parent Preferred Stock"). As of September
----------------------
30, 1994, (i) 35,649,278 shares of Parent Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable and
3,816,686 shares of Parent Common Stock held in treasury, (ii) 1,247 shares of
Series C Redeemable Preferred Stock of Parent were outstanding and 3,529,252
shares of Parent Common Stock reserved for issuance upon conversion of such
shares of Series C Redeemable Preferred Stock, (iii) there were 3,541,166 shares
of Parent Common Stock reserved for issuance pursuant to options granted
<PAGE>
14
under Parent's 1986 Stock Option Plan (the "Parent Stock Option Plan"), (iv)
------------------------
there were 6,064,154 shares of Parent Common Stock reserved for issuance under
options other than those granted under the Parent Stock Option Plan, and (v)
4,444,444 shares of Parent Common Stock reserved for issuance pursuant to the 5%
Convertible Subordinated Debentures due July 31, 2000 of Parent . There has
been no material change in the capitalization of Parent since September 30,
1994. All of the outstanding shares of Parent Common Stock have been duly
authorized and validly issued and are fully paid and nonassessable and free of
preemptive rights or other similar obligations. Except as set forth in this
Section 3.03 or on Schedule 3.03, there are not, as of the date hereof, any
-------------
outstanding or authorized subscriptions, options, warrants, convertible
securities, calls, rights, commitments to issue or any other agreements of any
character relating to the issued or unissued capital stock or other securities
of Parent to which Parent is party or by which Parent is bound obligating Parent
to issue, deliver, or sell, or cause to be issued, delivered or sold, additional
shares of capital stock of Parent or obligating Parent to grant, extend or enter
into any subscription, option, warrant, call, right, commitment or other such
agreement. All the outstanding capital stock or partnership or other equity
interest of each of the Parent Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable and, except as disclosed on Schedule 3.01, is owned
-------------
by Parent or a Parent Subsidiary free and clear of any liens, security
interests, pledges, agreements, claims, charges or encumbrances of any nature
whatsoever. There are no existing options, calls or commitments of any
character relating to the issued or unissued capital stock or other securities
of any Parent Subsidiary. Except for the Parent Subsidiaries and except as
previously disclosed in the Parent SEC Reports (as defined below), Parent does
not directly or indirectly own a 50% or greater equity interest in any other
corporation, partnership, joint venture or other business association or entity.
SECTION 3.04. Authority Relative to this Agreement. The execution
------------------------------------
and delivery of this Agreement by Parent and Merger Sub and the consummation by
Parent and Merger Sub of the transactions contemplated hereby (the
"Transactions") have been duly authorized by all necessary corporate action on
------------
the part of Parent and Merger Sub and by Parent as the sole stockholder of
Merger Sub, and no other corporate proceeding is necessary for the execution and
delivery of this Agreement by Parent or Merger Sub, the performance by Parent or
Merger Sub of their obligations hereunder and the consummation by Parent or
Merger Sub of the transactions contemplated hereby. This Agreement has been duly
executed and delivered by Parent and Merger Sub and constitutes a legal, valid
and binding obligation of each, enforceable against each of them in accordance
with its terms.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by Parent and Merger Sub do not, and
the performance of this Agreement by Parent and Merger Sub will not, (i)
conflict with or violate any law, regulation, court order, judgment or decree
applicable to Parent or any Parent Subsidiary or by which any of their property
is bound or affected, (ii) violate or conflict with either the Certificate of
Incorporation or By-Laws of either Parent or any Parent
<PAGE>
15
Subsidiary, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or assets of Parent or
any Parent Subsidiary pursuant to, any contract, instrument, permit, license or
franchise to which Parent or any Parent Subsidiary is a party or by which Parent
or any Parent Subsidiary or any of their property is bound or affected, except
in the case of (i) or (iii) for conflicts, violations, breaches or defaults
that, in the aggregate, would not have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Securities Act
of 1933, as amended (the "Securities Act"), the Exchange Act, "blue sky" laws of
--------------
various states, the New York Stock Exchange, Inc. and filing and recordation of
appropriate merger documents as required by Delaware Law and Nevada Law, neither
Parent nor Merger Sub is required to submit any notice, report or other filing
with any governmental authority, domestic or foreign, in connection with the
execution, delivery or performance of this Agreement or the consummation of the
transactions contemplated hereby. Except as aforesaid, no waiver, consent,
approval or authorization of any governmental or regulatory authority, domestic
or foreign, is required to be obtained or made by either Parent or Merger Sub in
connection with its execution, delivery or performance of this Agreement.
SECTION 3.06. SEC Filings; Financial Statements. (a) Parent has
---------------------------------
filed all forms, reports and documents required to be filed with the SEC since
January 1, 1992, and has heretofore delivered (or made available) to the
Company, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for
the fiscal years ended December 31, 1993 and December 31, 1992, respectively,
(ii) all proxy statements relating to the Company's meetings of stockholders
(whether annual or special) held since January 1, 1992, and (iii) all other
reports or registration statements (including Quarterly Reports on Form 10-Q)
filed by Parent with the SEC since January 1, 1992 (collectively, the "Parent
------
SEC Reports"). The Parent SEC Reports (i) were prepared in all material
- - -----------
respects in accordance with the requirements of the Securities Act or the
Exchange Act, as the case may be, and (ii) did not at the time they were filed
contain any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under that they were made, not
misleading. No Parent Subsidiary is required to file any statements or reports
with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the Parent SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly present the consolidated
financial position of Parent and the Parent Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of Parent and the Parent Subsidiaries for the
<PAGE>
16
periods indicated, except that the unaudited interim financial statements were
or are subject to normal and recurring year-end adjustments which were not or
are not expected to be material in amount.
(c) Except as reflected or reserved against in the consolidated
financial statements contained in the Parent SEC Reports, and except as set
forth on Schedule 3.06, Parent and the Parent Subsidiaries have no liabilities
-------------
of any nature (whether accrued, absolute, contingent or otherwise) that in the
aggregate could have a Material Adverse Effect or any bonds, debentures, notes,
letters of credit or other indebtedness (including guarantees) for any amount
greater than $1,000,000. Since September 30, 1994, neither Parent nor any of
the Parent Subsidiaries has incurred any liabilities material to Parent and the
Parent Subsidiaries taken as a whole, except (i) liabilities incurred in the
ordinary course of business and consistent with past practice, (ii) liabilities
incurred in connection with or as a result of the Offer or the Merger or (iii)
liabilities disclosed on Schedule 3.06.
-------------
SECTION 3.07. Absence of Certain Changes or Events. Since September
------------------------------------
30, 1994, except as contemplated in this Agreement or as specifically disclosed
in the Parent SEC Reports or the Tender Offer Statement on Schedule 14D-1 that
was originally filed by Parent and Merger Sub with the SEC on October 6, 1994
(as amended to the date hereof) (the "Previous 14D-1") or as appears on Schedule
-------------- --------
3.07, there has not been:
- - ----
(a) any Material Adverse Effect;
(b) any redemption or other acquisition of Parent Common Stock by
Parent or any of the Parent Subsidiaries (other than pursuant to a plan of
repurchase under Rule 10b-18 of the Exchange Act) or any declaration or
payment of any dividend or other distribution in cash, stock or property
with respect to Parent Common Stock;
(c) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business or as contemplated by this Agreement; or
(d) any change by Parent in accounting principles or methods except
insofar as such change may have been required by a change in generally
accepted accounting principles and disclosed in the Parent SEC Reports.
Since September 30, 1994, except as disclosed on Schedule 3.07, the Previous
-------------
14D-1 or in the Parent SEC Reports, Parent and the Parent Subsidiaries have
conducted their business only in the ordinary course and in a manner consistent
with past practice and have not made any material change in the conduct of the
business or operations of Parent and the Parent Subsidiaries taken as a whole.
<PAGE>
17
SECTION 3.08. Title to Property. Parent and the Parent Subsidiaries
-----------------
have good and marketable title, or valid leasehold rights in the case of leased
property, to all real property and all personal property purported to be owned
or leased by them, except where the failure to have such title or rights would
not have a Material Adverse Effect.
SECTION 3.09. Litigation. Except as disclosed in the Parent SEC
----------
Reports, the Previous 14D-1, or as disclosed on Schedule 3.09, there are no
-------------
claims, actions, suits, proceedings or investigations pending or, to the best
knowledge of Parent, threatened against Parent or any of the Parent
Subsidiaries, or any properties or rights of Parent or any of the Parent
Subsidiaries, before any court, administrative, governmental or regulatory
authority or body, domestic or foreign, which are reasonably likely, in the
aggregate, to have a Material Adverse Effect or would, and are reasonably likely
to, prevent or delay the performance of this Agreement. As of the date hereof,
neither Parent nor any of the Parent Subsidiaries nor any of their property is
subject to any order, judgment, injunction or decree having a Material Adverse
Effect.
SECTION 3.10. Financing Arrangements. Parent and Merger Sub have
----------------------
obtained a commitment letter from Credit Suisse with respect to the financing
for the Offer and the Merger (the "Commitment Letter"). The Commitment Letter
-----------------
is in full force and effect on the date of this Agreement, and Parent and Merger
Sub know of no reason why the financing contemplated by the Commitment Letter
will not be consummated in accordance with its terms.
SECTION 3.11. No Prior Activities. Except for obligations or
-------------------
liabilities incurred in connection with its incorporation or organization or the
negotiation and consummation of this Agreement and the transactions contemplated
hereby (including any financing), Merger Sub has not incurred any obligations or
liabilities, and has not engaged in any business or activities of any type or
kind whatsoever or entered into any agreements or arrangements with any person
or entity.
SECTION 3.12. Brokers. No broker, finder or investment banker (other
-------
than Gleacher & Co. Inc. ("Gleacher") and Lehman Brothers Inc. ("Lehman
-------- ------
Brothers")) is entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Merger Sub.
SECTION 3.13. Information in Disclosure Documents; Registration
-------------------------------------------------
Statement; Etc. None of the information supplied by Parent or Merger Sub for
- - ---------------
inclusion in (i) the Registration Statement to be filed with the SEC by Parent
on Form S-4 under the Securities Act for the purpose of registering the shares
of Parent Common Stock to be issued in the Merger (the "Registration Statement")
----------------------
and (ii) the joint prospectus/proxy statement of the Company and Parent (the
"Proxy Statement") required to be mailed to the stockholders of
- - ----------------
<PAGE>
18
the Company and Parent in connection with the Merger will, in the case of the
Proxy Statement or any amendments or supplements thereto, at the time of the
mailing of the Proxy Statement and any amendments or supplements thereto, and at
the time of the Parent Meeting to be held in connection with the Merger, or, in
the case of the Registration Statement, at the time it becomes effective and at
the Effective Time, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they are
made, not misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act and the rules
and regulations thereunder.
SECTION 3.14. Conduct of Business. Except as disclosed in Schedule
------------------- --------
3.14 hereto, the business of Parent and each of the Parent Subsidiaries is not
- - ----
being conducted in default or violation of any term, condition or provision of
(i) its respective Articles of Incorporation or Bylaws or similar organizational
documents, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease or other instrument or agreement of any kind to which Parent or any of the
Parent Subsidiaries is now a party or by which Parent or any of the Parent
Subsidiaries or any of their respective properties or assets may be bound, or
(iii) any Federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to Parent or
any of the Parent Subsidiaries, except, with respect to the foregoing clauses
(ii) and (iii), defaults or violations that would not, individually or in the
aggregate, have a Material Adverse Effect.
SECTION 3.15. Environment. (a) As used herein, the term
-----------
"Environmental Laws" means all Federal, state, local or foreign laws relating to
- - -------------------
pollution or protection of human health or the environment (including, without
limitation, ambient air, surface water, groundwater, land surface or subsurface
strata), including, without limitation, laws relating to emissions, discharges,
releases or threatened releases of chemicals, pollutants, contaminants, or
industrial, toxic or hazardous substances or wastes into the environment, or
otherwise relating to the manufacture, processing, distribution, use, treatment,
storage, disposal, transport or handling of chemicals, pollutants, contaminants,
or industrial, toxic or hazardous substances or wastes, as well as all
authorizations, codes, decrees, demands or demand letters, injunctions,
judgments, licenses, notices or notice letters, orders, permits, plans or
regulations issued, entered, promulgated or approved thereunder.
(b) Except as disclosed on Schedule 3.15 hereto, to the knowledge of
-------------
Parent there are, with respect to Parent or any of the Parent Subsidiaries, or
any real property currently or formerly owned, leased, or otherwise used by
Parent or any of the Parent Subsidiaries, no past or present violations of
Environmental Laws, releases of any material into the environment, actions,
activities, circumstances, conditions, events,
<PAGE>
19
incidents, or contractual obligations which may give rise to any common law or
other legal liability, including, without limitation, liability under the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980
("CERCLA") or similar state or local laws, which liabilities, either
- - --------
individually or in the aggregate, would have a Material Adverse Effect.
SECTION 3.16. Energy Regulatory Status. (a) Each of the operational
------------------------
electric generation facilities ("Plants") owned in whole or part, directly or
------
indirectly by: (i) Parent, or (ii) any legal entity in which Parent directly or
indirectly owns more than 50% of the voting stock or other equity interest,
including any partnership in which Parent has an interest, is a "qualifying
small power production facility" ("Small Power QF"), as such term is defined in
--------------
the Federal Power Act, as amended ("FPA"), and the regulations thereunder, and
---
has continuously been in compliance with the requirements for being a Small
Power QF since it commenced sales of electricity.
(b) The owner of each of the Plants under development by Parent or any
Parent Subsidiary and located in the United States will, no later than the date
operations commence, either qualify as a "qualifying small power producer" or an
"exempt wholesale generator" ("EWOG"), as such terms are defined in FPA, the
----
regulations under the FPA, and the Public Utility Holding Company Act of 1935,
as amended ("PUHCA").
-----
(c) The owner of each of the Plants under development by Parent or any
Parent Subsidiary and located outside the United States will, no later than the
date operations commence, either qualify as an EWOG or a "foreign utility
company", as such term is defined under PUHCA and the regulations thereunder.
(d) Neither Parent nor any "affiliate" of Parent is a "public utility
company" or a "public utility holding company", as such terms are defined in
PUHCA and the regulations thereunder, a "public utility" as defined in the FPA
and the regulations thereunder, or subject to regulations by any state public
utilities commission or similar state regulatory body.
(e) Each of the Plants obtained any necessary certificates or permits
from state regulatory authorities for construction of each of the operational
Plants and associated transmission equipment owned by the owners of such Plant,
and each other entity constructing, owning or operating any of the foregoing has
obtained each required certificate or permit.
SECTION 3.17. Employee Benefit Plans; Labor Matters. (a) With
-------------------------------------
respect to each U.S. or foreign employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as defined
---------------------
in Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA")) and any executive
-----
<PAGE>
20
compensation arrangement, whether or not funded, maintained or contributed to by
Parent or any Parent Subsidiary, or with respect to which Parent or any Parent
Subsidiary could incur liability under Section 4069, 4212(c) or 4204 of ERISA,
as well as any employee benefit plan that is subject to Section 412 of the Code
or Title IV of ERISA and which is maintained or contributed to by any other
trade or business (whether or not incorporated) which is treated as a single
employer with Parent under Section 414(b), (c), (m) or (o) of the Code (each
such trade or business being referred to herein as a "Code Affiliate") (the
--------------
"Parent Benefit Plans"), Parent has made available to the Company a true and
- - ---------------------
correct copy of (i) the most recent annual report (Form 5500) filed with the
Internal Revenue Service (the "IRS"), (ii) such Parent Benefit Plan, (iii) each
---
trust agreement relating to such Parent Benefit Plan, (iv) the most recent
summary plan description for each Parent Benefit Plan for which a summary plan
description is required, (v) the most recent actuarial report or valuation
relating to a Parent Benefit Plan subject to Title IV of ERISA, if any, (vi) the
most recent determination letter, if any, issued by the IRS with respect to any
Parent Benefit Plan qualified under Section 401(a) of the Code and (vii) the
most recent annual and periodic accounting of related plan assets, if any.
(b) With respect to the Parent Benefit Plans, no event has occurred
and, to the knowledge of Parent, there exists no condition or set of
circumstances, in connection with which Parent or any Parent Subsidiary could be
subject to any liability under the terms of such Parent Benefit Plans, ERISA,
the Code or any other applicable Law which would have a Material Adverse Effect.
No claim has been asserted or, to the knowledge of Parent, threatened, by the
IRS, the Department of Labor or any participant of a Parent Benefit Plan that
Parent or any Parent Subsidiary has, with respect to any Parent Benefit Plan,
engaged in or been a party to any "prohibited transaction," as such term is
defined in Section 4975 of the Code and Section 406 of ERISA, which would result
in the imposition of either a penalty assessed pursuant to Section 502(i) of
ERISA or a tax imposed by section 4975 of the Code, in each case applicable to
Parent, any Parent Subsidiary or any Parent Benefit Plan. Each Parent Benefit
Plan intended to qualify under Section 401(a) of the Code does so qualify, and
the trusts created thereunder are exempt from tax under Section 501(a) of the
Code, and each such Parent Benefit Plan will be amended in the manner required
by the Code by December 31, 1994, and has been or will be submitted to the IRS
on or prior to March 31, 1995 for a determination letter confirming that such
Parent Benefit Plan meets the currently applicable requirements for
qualification and exemption from taxation under Section 401(a) and 501(a) of the
Code. No Parent Benefit Plan has plan assets invested in any insurance company
which is or has been in insolvency proceedings within the last 3 years. No
Parent Benefit Plan subject to Section 412 of the Code has incurred any
"accumulated funding deficiency" (as defined in ERISA), whether or not waived.
Neither Parent nor any of the Parent Subsidiaries or Code Affiliates has at any
time since 1987 maintained or contributed to any Parent Benefit Plan, including
without limitation any "multiemployer plan" (as defined in Section 3(37) of
ERISA), which (i) is a "defined benefit plan" (as defined in Section 414(j) of
the Code) or (ii) is subject to Title IV of ERISA.
<PAGE>
21
(c) Except as set forth in Schedule 3.17, neither Parent nor any
-------------
Parent Subsidiary is a party to any collective bargaining or other labor union
contract applicable to persons employed by Parent or any Parent Subsidiary, no
collective bargaining agreement is being negotiated by Parent or any Parent
Subsidiary and neither Parent nor any Parent Subsidiary knows of any activities
or proceedings of any labor union to organize any of their respective employees.
As of the date hereof, (i) Parent and all of the Parent Subsidiaries are in
compliance in all material respects with all applicable laws relating to
employment and employment practices, wages, hours, and terms and conditions of
employment, (ii) there are no material charges with respect to or relating to
Parent or any of the Parent Subsidiaries pending before the Equal Employment
Opportunity Commission or any state, local or foreign agency responsible for the
prevention of unlawful employment practices, and (iii) there is no labor
dispute, strike or work stoppage against Parent or any Parent Subsidiary pending
or, to Parent's knowledge, threatened which may interfere with the respective
business activities of Parent or the Parent Subsidiaries, except where such non-
compliance, charge, dispute, strike or work stoppage would not have a Material
Adverse Effect. As of the date hereof, to the knowledge of Parent, none of
Parent or any Parent Subsidiary, or their respective representatives or
employees, has committed any unfair labor practices in connection with the
operation of the respective businesses of Parent or the Parent Subsidiaries, and
there is no charge or complaint against Parent or the Parent Subsidiaries by the
National Labor Relations Board or any comparable state agency pending or
threatened in writing, except where such unfair labor practice, charge or
complaint would not have a Material Adverse Effect.
SECTION 3.18. Insurance. The insurance policies in force at the date
---------
hereof, with respect to the assets, properties or operations of each of Parent
and the Parent Subsidiaries are set forth on Schedule 3.18 and are in full force
-------------
and effect with reputable insurers in such amounts and insure against such
losses and risks (including product liability) as are customary to protect the
properties and business of each of Parent and Parent Subsidiaries.
SECTION 3.19. Taxes. (a) Except as set forth in Schedule 3.19, and
----- -------------
except as would not, either individually or in the aggregate, have a Material
Adverse Effect, (i) Parent and each of the Parent Subsidiaries have timely filed
with the appropriate governmental authorities all Tax Returns (as defined below)
required to be filed by or with respect to the Company and each of the
Subsidiaries or their respective operations or assets, and such Tax Returns are
true, correct and complete in all material respects and (ii) all Taxes (as
defined below) shown to be due on such Tax Returns, all Taxes required to be
paid on an estimated or installment basis, and all Taxes required to be withheld
with respect to the Parent or any of the Parent Subsidiaries or their respective
operations or assets have been timely paid or, if applicable, withheld and paid
to the appropriate taxing authority in the manner provided by law, except in
each case for such Taxes which are not material in the aggregate.
<PAGE>
22
(b) Neither Parent nor any of the Parent Subsidiaries has filed a
consent to the application of Section 341(f) of the Code.
(c) No indebtedness of the Parent or any of the Parent Subsidiaries is
"corporate acquisition indebtedness" within the meaning of Section 279(b) of the
Code.
(d) For purposes of this Agreement, "Taxes" means all taxes, charges,
-----
fees, levies or other assessments imposed by any United States Federal, state,
or local taxing authority or by any foreign taxing authority, including, but not
limited to, income, gross receipts, excise, property, sales, use transfer,
payroll, license, ad valorem, value added, withholding, social security,
license, ad valorem, value added, withholding, social security, national
insurance (or other similar contributions or payments), franchises, estimated,
severance, stamp, and other taxes (including any interest, fines, penalties or
additions attributable to or imposed on or with respect to any such taxes,
charges, fees, levies or other assessments).
(e) For purposes of this Agreement, "Tax Return" means any return,
----------
report, information return or other document (including any related or
supporting information and, where applicable, profit and loss accounts and
balance sheets) with respect to Taxes.
SECTION 3.20. Trademarks, Licenses, Patents and Copyrights. Except
--------------------------------------------
as set forth on Schedule 3.20, Parent or the Parent Subsidiaries own or possess
-------------
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material to, its
business as currently being conducted and are unaware of any assertions or
claims challenging the validity of any of the foregoing which are reasonably
likely to have a Material Adverse Effect; and, to the best knowledge of Parent,
the conduct of Parent's business as now conducted or proposed to be conducted
does not and will not conflict with any patents, patent rights, licenses,
trademarks, trademark rights, trade names, trade name rights or copyrights of
others known to the Parent or the Parent Subsidiaries in any way reasonably
likely to have a Material Adverse Effect. No material infringement of any
proprietary right owned by or licensed by or to Parent or any of the Parent
Subsidiaries is known to Parent or any Parent Subsidiary which is reasonably
likely to have a Material Adverse Effect.
SECTION 3.21. Related Party Transactions. Except as is set forth in
--------------------------
the Parent SEC Reports and the Previous 14D-1, to the knowledge of Parent,
Schedule 3.21 sets forth the material transactions since September 1, 1994
- - -------------
between Parent and the Parent Subsidiaries on the one hand, and (i) an officer
or director of Parent or any of the Parent Subsidiaries, (ii) a record or
beneficial owner of five percent (5%) or more of the Parent Common Stock, or
(iii) an affiliate of any such officer, director or beneficial owner, on the
<PAGE>
23
other hand, other than payment of compensation for services rendered to the
Parent and the Parent Subsidiaries in the ordinary course of business.
SECTION 3.22. Status of Development and Construction Projects. To
-----------------------------------------------
Parent's knowledge, except as specifically disclosed on Schedule 3.22, the
-------------
following statements, as applicable, are true and correct as of the date hereof,
with respect to each of the following development and construction projects:
Upper Mahiao 120 MW and Mahanagdong 180 MW:
(i) There is no pending or threatened revocation or loss of such project
award, whether as a result of government action or otherwise;
(ii) The executed power sales contract and construction contract for such
project is in full force and effect and there is no oral or written threat
to its validity, whether as a result of government action or otherwise;
(iii) For any project with an executed construction contract, the
estimated total capital cost for construction of such project (without
well-field development expenses), including any existing or expected change
orders, is set forth on Schedule 3.22;
-------------
(iv) The joint venture or partnership or similar agreements with local
partners or contractors are in full force and effect and the Parent's
percentage equity ownership pursuant to such contracts are as set forth on
Schedule 3.22, and there is no threat of loss or invalidity to such
-------------
contracts, whether as a result of consummating this transaction or
otherwise;
(v) The status of the financing and political risk insurance arrangements
for each such project is set forth on Schedule 3.22; and
-------------
(vi) Parent has not taken any actions which violate the Foreign Corrupt
Practices Act ("FCPA") and is not aware of any actions taken by foreign
----
Parent Subsidiaries or local partners which if taken by a U.S. company
would constitute a violation of the FCPA.
SECTION 3.23. Status of Operating Projects. To Parent's knowledge,
----------------------------
as of the date hereof, with respect to each operating project, except as set
forth on Schedule 3.23:
-------------
(i) Parent is not aware of any event or occurrence which would create a
material impairment to the operating performance or a material increase in
operating expenses or material non-compliance with regulatory or
contractual requirements;
<PAGE>
24
(ii) Parent and any of the Parent Subsidiaries or joint ventures has not
changed in any material adverse respect such project's operating,
maintenance reserves or procedures; and
(iii) Parent is not aware of any events which, with lapse of time or
otherwise could reasonably be expected to result in a material impairment
to the project's operating performance or a material increase in operating
expenses or material non-compliance with regulatory or contractual
requirements.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as set forth on the Company Disclosure Schedule previously
delivered by the Company to Parent (the "Company Disclosure Schedule"), the
---------------------------
Company hereby represents and warrants to Parent and Merger Sub as follows:
SECTION 4.01. Corporate Organization; Subsidiaries. Each of the
------------------------------------
Company and its Subsidiaries is a corporation duly organized, validly existing
and in good standing under the laws of the jurisdiction of its incorporation and
has the requisite corporate power and authority and any material necessary
governmental authority to own, operate or lease the properties that it purports
to own, operate or lease and to carry on its business as it is now being
conducted, and is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its properties
owned, operated or leased or the nature of its activities makes such
qualification necessary, except for such failure which, when taken together with
all other such failures, would not have a Material Adverse Effect (as defined
below) on the Company. The term "Subsidiary" means any corporation,
----------
partnership, joint venture or other legal entity of which the Company or, if the
context requires, the Surviving Corporation (either alone or through or together
with any other Subsidiary) owns, directly or indirectly, 50% or more of the
stock or other equity interests, or owns, directly or indirectly, interests such
that the holders are generally entitled to vote for the election of 50% of the
board of directors or other governing body, of such corporation, partnership,
joint venture or other legal entity. When used in connection with the Company
or any of its Subsidiaries, the term "Material Adverse Effect" means any change
-----------------------
or effect, when taken together with all other adverse changes and effects
relating to the Company and its Subsidiaries, that is or is reasonably likely to
be materially adverse to the business, operations, properties, condition
(financial or otherwise), assets or liabilities (including, without limitation,
contingent liabilities) of the Company and the Subsidiaries taken as a whole;
provided, however, that the occurrence of any or all of the following shall not
- - -------- -------
constitute a Material Adverse Effect: (i) any change in any law applicable to
the Company or any Subsidiary or by which any property or asset of the Company
or any
<PAGE>
25
Subsidiary is bound, (ii) a failure to receive any contract or award for which
the Company or any Subsidiary has submitted or will submit a competitive bid,
(iii) the loss of any contract or arrangement (whether by revocation, lapse or
invalidity) with respect to a project that the Company or any Subsidiary has
under development, other than any such loss related to the Malitbog project or
Fish Lake project and other than any such loss resulting from a breach by the
Company of the representations and warranties set forth in Sections 4.22 and
4.23 hereof, (iv) an unfavorable ruling by the California Public Utilities
Commission with respect to the Company's California plants under the pending
Biennial Resource Plan Update, (v) a loss of, or unfavorable ruling in, the
Company's pending litigation against Southern California Edison Company, but
only insofar as such litigation seeks to increase the energy price payable for
deliveries over nameplate capacity and not insofar as any unfavorable ruling
affects the validity or enforceability of any contract subject thereto or the
enforceability of any material term thereof, (vi) a failure to close any public
or private financing of any project in which the Company or any Subsidiary owns
a direct or indirect interest (other than as a result of a loss with respect to
the Malitbog project or the Fish Lake project or as a result of a breach by the
Company of the representation and warranties set forth in Section 4.22 or 4.23
hereof), or (vii) the termination of the employment of any employee, officer,
director or consultant of the Company or any Subsidiary. A true and complete
list of all the Subsidiaries, together with the jurisdiction of incorporation or
formation of each Subsidiary is set forth in Schedule 4.01 hereto.
-------------
SECTION 4.02. Articles of Incorporation and Bylaws. The Company has
------------------------------------
heretofore furnished to Parent a complete and correct copy of the Articles of
Incorporation and Bylaws or equivalent organizational documents, each as amended
to the date hereof, of the Company, and the Company has made available to Parent
such documents with respect to all Subsidiaries. Such Articles of
Incorporation, Bylaws and equivalent organizational documents are in full force
and effect. Neither the Company nor any Subsidiary is in violation of any of
the provisions of its Articles of Incorporation or Bylaws or equivalent
organizational documents.
SECTION 4.03. Capitalization. As of the date hereof, the authorized
--------------
capital stock of the Company consists of 30,000,000 shares of Company Common
Stock and 1,000,000 shares of preferred stock ("Company Preferred Stock"). As
-----------------------
of September 30, 1994, 24,042,915 shares of Company Common Stock were issued and
outstanding, all of which were validly issued, fully paid and nonassessable, and
no shares of Company Preferred Stock were outstanding. As of December 1, 1994,
there were 582,478 shares of Company Common Stock reserved for issuance pursuant
to options and deferred stock awards granted under the Stock Option Plans or
otherwise identified on Schedule 4.03, and there were 996,943 shares of Company
-------------
Common Stock reserved for future issuance under the Stock Option Plans. There
have been no material changes in the capitalization of the Company since
September 30, 1994. Schedule 4.03 separately identifies as of December 1, 1994
-------------
the option holders, the number of shares subject to each option held, the
exercise
<PAGE>
26
prices, vesting schedules and expiration dates of the outstanding options
granted under the Stock Option Plans. All of the outstanding shares of Company
Common Stock have been duly authorized and validly issued and are fully paid and
nonassessable and free of preemptive rights or other similar obligations.
Except as set forth in this Section 4.03 or on Schedule 4.03, there are not, as
-------------
of the date hereof, any outstanding or authorized subscriptions, options,
warrants, convertible securities, calls, rights, commitments to issue or any
other agreements of any character relating to the issued or unissued capital
stock or other securities of the Company to which the Company is party or by
which the Company is bound obligating the Company to issue, deliver, or sell, or
cause to be issued, delivered or sold, additional shares of capital stock of the
Company or obligating the Company to grant, extend or enter into any
subscription, option, warrant, call, right, commitment or other such agreement.
All the outstanding capital stock or partnership or other equity interest of
each of the Subsidiaries is duly authorized, validly issued, fully paid and
nonassessable and, except as disclosed on Schedule 4.01, is owned by the Company
-------------
or a Subsidiary free and clear of any liens, security interests, pledges,
agreements, claims, charges or encumbrances of any nature whatsoever. There are
no existing options, calls or commitments of any character relating to the
issued or unissued capital stock or other securities of any Subsidiary. Except
for the Subsidiaries and except as previously disclosed to Parent on the
Disclosure Schedule and in the Company SEC Reports (as defined below), the
Company does not directly or indirectly own a 50% or greater equity interest in
any other corporation, partnership, joint venture or other business association
or entity.
SECTION 4.04. Authority Relative to this Agreement. The Company has
------------------------------------
the necessary corporate power and authority to enter into this Agreement and,
subject to obtaining any necessary stockholder approval of the Merger, to carry
out its obligations hereunder. The execution and delivery of this Agreement by
the Company and the consummation by the Company of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on the part
of the Company, subject to the approval of the Merger by the Company's
stockholders in accordance with Nevada Law. This Agreement has been duly
executed and delivered by the Company and constitutes a legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms.
SECTION 4.05. No Conflict; Required Filings and Consents. (a) The
------------------------------------------
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate any law, regulation, court order, judgment or decree applicable to the
Company or any of the Subsidiaries or by which its or any of their property is
bound or affected, (ii) violate or conflict with the Certificate of
Incorporation or Bylaws or equivalent organizational documents of the Company or
any Subsidiary, or (iii) result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination or cancellation of, or result in the
creation of a lien or
<PAGE>
27
encumbrance on any of the properties or assets of the Company or any of the
Subsidiaries pursuant to, any contract, instrument, permit, license or franchise
to which the Company or any of the Subsidiaries is a party or by which the
Company or any of the Subsidiaries or its or any of their property is bound or
affected, except as set forth on Schedule 4.05 and except in the case of (i) or
-------------
(iii) for conflicts, violations, breaches or defaults which, in the aggregate,
would not have a Material Adverse Effect.
(b) Except for applicable requirements, if any, of the Exchange Act
and filing and recordation of appropriate merger or other documents as required
by Nevada Law, and except for any notice, filings, authorizations, consents or
approvals which are required because of the regulatory status of the Company or
any of its Subsidiaries or facts specifically applicable to them, and except as
set forth on Schedule 4.05, the Company is not required to submit any notice,
-------------
report or other filing with any governmental authority, domestic or foreign, in
connection with the execution, delivery or performance of this Agreement.
Except as aforesaid, no waiver, consent, approval or authorization of any
governmental or regulatory authority, domestic or foreign, is required to be
obtained or made by the Company in connection with its execution, delivery or
performance of this Agreement.
SECTION 4.06. SEC Filings; Financial Statements. (a) The Company
---------------------------------
has filed all forms, reports and documents required to be filed with the SEC
since January 1, 1992, and has heretofore delivered (or made available) to
Parent, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for
the fiscal years ended December 31, 1993 and December 31, 1992, respectively,
(ii) all proxy statements relating to the Company's meetings of stockholders
(whether annual or special) held since January 1, 1992, and (iii) all other
reports or registration statements (including Quarterly Reports on Form 10-Q)
filed by the Company with the SEC since January 1, 1992 (collectively, the
"Company SEC Reports"). The Company SEC Reports (i) were prepared in all
- - --------------------
material respects in accordance with the requirements of the Securities Act, or
the Exchange Act, as the case may be and (ii) did not at the time they were
filed contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. No Subsidiary is required to file any statements or
reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act.
(b) The consolidated financial statements contained in the Company SEC
Reports have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods involved (except
as may be indicated in the notes thereto) and fairly present the consolidated
financial position of the Company and its Subsidiaries as at the respective
dates thereof and the consolidated results of operations and changes in
financial position of the Company and its Subsidiaries for the periods
indicated, except that the unaudited interim financial statements were or are
subject to normal
<PAGE>
28
and recurring year-end adjustments which were not or are not expected to be
material in amount.
(c) Except as reflected or reserved against in the consolidated
financial statements contained in the Company SEC Reports, and except as set
forth on Schedule 4.06, the Company and its Subsidiaries have no liabilities of
-------------
any nature (whether accrued, absolute, contingent or otherwise) which in the
aggregate could have a Material Adverse Effect or any bonds, debentures, notes,
letters of credit or other indebtedness (including guarantees) for any amount
greater than $1,000,000. Since September 30, 1994, neither the Company nor any
of the Subsidiaries has incurred any liabilities material to the Company and the
Subsidiaries taken as a whole, except (i) liabilities incurred in the ordinary
course of business and consistent with past practice, (ii) liabilities incurred
in connection with or as a result of the Offer or the Merger or (iii)
liabilities disclosed on Schedule 4.06.
-------------
SECTION 4.07. Absence of Certain Changes or Events. Since September
------------------------------------
30, 1994, except as contemplated in this Agreement or as specifically disclosed
in the Company SEC Reports or the Tender Offer Solicitation/Recommendation
Statement on Schedule 14D-9 that was originally filed by the Company with the
SEC on October 11, 1994 with respect to Parent's previous tender offer (as
amended to the date hereof) (the "Previous 14D-9"), or as appears on Schedule
-------------- --------
4.07, there has not been:
- - ----
(a) any Material Adverse Effect;
(b) any redemption or other acquisition of Company Common Stock by the
Company or any of the Subsidiaries or any declaration or payment of any
dividend or other distribution in cash, stock or property with respect to
Company Common Stock;
(c) any entry into any material commitment or transaction (including,
without limitation, any borrowing or capital expenditure) other than in the
ordinary course of business or as contemplated by this Agreement;
(d) any transfer of, or rights granted under, any material leases,
licenses, agreements, patents, trademarks, trade names or copyrights other
than those transferred or granted in the ordinary course of business and
consistent with past practice;
(e) any mortgage, pledge, security interest or imposition of lien or
other encumbrance on any asset of the Company or any of the Subsidiaries
that when viewed in the aggregate with all such other encumbrances is
material to the business, financial condition or operations of the Company
and the Subsidiaries taken as a whole; or
<PAGE>
29
(f) any change by the Company in accounting principles or methods
except insofar as such change may have been required by a change in
generally accepted accounting principles and disclosed in the Company SEC
Reports.
Since September 30, 1994, except as disclosed on Schedule 4.07, in the Company
-------------
SEC Reports or the Previous 14D-9, the Company and its Subsidiaries have
conducted their business only in the ordinary course and in a manner consistent
with past practice and have not made any material change in the conduct of the
business or operations of the Company and its Subsidiaries taken as a whole.
Without limiting the generality of the foregoing, the Company has not, since
such date, except for the contracts referred to in the Company SEC Reports or as
disclosed on Schedule 4.07 or in the Previous 14D-9, made any changes in
-------------
executive compensation levels (other than increases in the ordinary course of
business and consistent with past practice) or in the manner in which other
employees of the Company or the Subsidiaries are compensated, paid or agreed to
pay any pension, retirement allowance or other employee benefit not required or
permitted by the terms of any plan, agreement or arrangement existing on such
date to any director, officer or employee, whether past or present, or committed
itself to any collective bargaining agreement (except for renewals of existing
collective bargaining agreements) or to any additional pension, profit-sharing,
bonus, incentive, deferred compensation, stock purchase, stock option, stock
appreciation right, group insurance, severance pay, retirement or other employee
benefit plan, agreement or arrangement, or to any employment or consulting
agreement with or for the benefit of any person, or to amend any of such plans
or any of such agreements in existence on such date.
SECTION 4.08. Title to Property. The Company and its Subsidiaries
-----------------
have good and marketable title, or valid leasehold rights in the case of leased
property, to all real property and all personal property purported to be owned
or leased by them, except where the failure to have such title or right would
not have a Material Adverse Effect. There are no material mechanics',
materialmen's, laborers', employees', suppliers' or other liens arising by
operation of law on any of the Company's properties.
SECTION 4.09. Litigation. Except as disclosed in the Company SEC
----------
Reports, the Previous 14D-9 or as disclosed on Schedule 4.09, there are no
-------------
claims, actions, suits, proceedings or investigations pending or, to the best
knowledge of the Company, threatened against the Company or any of its
Subsidiaries, or any properties or rights of the Company or any of its
Subsidiaries, before any court, administrative, governmental or regulatory
authority or body, domestic or foreign, which are reasonably likely, in the
aggregate, to have a Material Adverse Effect or would, and are reasonably likely
to, prevent or delay the performance of this Agreement. As of the date hereof,
neither the Company nor any of its Subsidiaries nor any of their property is
subject to any order, judgment, injunction or decree, having a Material Adverse
Effect.
<PAGE>
30
SECTION 4.10. Information in Disclosure Documents. None of the
-----------------------------------
information with respect to the Company or its Subsidiaries to be included or
incorporated by reference in the Proxy Statement or the Registration Statement
will, in the case of the Proxy Statement or any amendments or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the Company Meeting to be held in
connection with the Merger, or, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading. The Proxy Statement
will comply as to form in all material respects with the provisions of the
Exchange Act and the rules and regulations thereunder.
SECTION 4.11. Fairness Opinion. The Company has received the opinion
----------------
of Goldman Sachs, to the effect that the consideration to be received by the
Company's stockholders pursuant to the Offer and the Merger is fair to the
stockholders of the Company (other than Parent and its affiliates).
SECTION 4.12. Brokers. No broker, finder or investment banker (other
-------
than Goldman Sachs) is entitled to any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by and on behalf of the Company. The Company has
heretofore furnished to Parent true and complete information concerning the
financial arrangements between the Company and Goldman Sachs, pursuant to which
such firm would be entitled to any payment as a result of the transactions
contemplated hereunder.
SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement
--------------------------------------------------
Amendment. (a) As of the date hereof and at all times on or prior to the
- - ---------
Effective Time, Sections 78.378 through 78.3793, inclusive, and Sections 78.411
through 78.444, inclusive, of Nevada Law are, and shall be, inapplicable to the
Offer, the Merger and the transactions contemplated by this Agreement including,
without limitation, the pledge of the shares of Company Common Stock acquired in
the Offer to the lending institutions providing the financing for the Offer, and
the transfer of such shares upon the exercise of remedies under the applicable
agreements. The Company has heretofore delivered to Parent a complete and
correct copy of the resolutions of the Board of Directors of the Company to the
effect that such sections of Nevada Law are, and shall be, inapplicable to the
Offer, the Merger and the transactions contemplated by this Agreement.
(b) The Board of Directors of the Company has taken all necessary
action with respect to the Rights Agreement, such that none of the execution or
delivery of this Agreement, the purchase of Shares pursuant to the Offer, the
exchange of the Shares for the shares of Parent Common Stock and cash in
accordance with this Agreement or any transaction contemplated by this agreement
will cause (A) the rights (the "Rights") issued
<PAGE>
31
pursuant to the Rights Agreement to become exercisable under the Rights
Agreement, (B) Parent, Merger Sub and any of their associates or affiliates (as
such terms are defined in the Rights Agreement) to be deemed an "Acquiring
Person" (as defined in the Rights Agreement), or (C) the "Stock Acquisition
Date" or "Distribution Date" (as such terms are defined in the Rights Agreement)
to occur upon any such event.
SECTION 4.14. Conduct of Business. Except as disclosed in Schedule
------------------- --------
4.14 hereto, the business of the Company and each of the Subsidiaries is not
- - ----
being conducted in default or violation of any term, condition or provision of
(i) its respective Articles of Incorporation or Bylaws or similar organizational
documents, or (ii) any note, bond, mortgage, indenture, contract, agreement,
lease or other instrument or agreement of any kind to which the Company or any
of the Subsidiaries is now a party or by which the Company or any of the
Subsidiaries or any of their respective properties or assets may be bound, or
(iii) any Federal, state, local or foreign statute, law, ordinance, rule,
regulation, judgment, decree, order, concession, grant, franchise, permit or
license or other governmental authorization or approval applicable to the
Company or any of the Subsidiaries, except, with respect to the foregoing
clauses (ii) and (iii), defaults or violations that would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 4.15. Environment. Except as disclosed on Schedule 4.15
----------- -------------
hereto, to the knowledge of the Company, there are, with respect to the Company
or any of its Subsidiaries, or any real property currently or formerly owned,
leased, or otherwise used by the Company or any of its Subsidiaries, no past or
present violations of Environmental Laws, releases of any material into the
environment, actions, activities, circumstances, conditions, events, incidents,
or contractual obligations which may give rise to any common law or other legal
liability, including, without limitation, liability under CERCLA or similar
state or local laws, which liabilities, either individually or in the aggregate,
would have a Material Adverse Effect.
SECTION 4.16. Energy Regulatory Status. (a) Each of the Plants
------------------------
owned in whole or part, directly or indirectly by: (i) the Company or (ii) any
legal entity in which the Company directly or indirectly owns 50% or greater of
the voting stock or other equity interest, including any partnership in which
the Company has an interest, is a Small Power QF, as such term is defined in the
FPA, and the regulations thereunder, and has continuously been in compliance
with the requirements for being a Small Power QF since it commenced sales of
electricity.
(b) The owner of each of the Plants under development by the Company
or any Subsidiary and located in the United States will, no later than the date
operations commence, either qualify as a "qualifying small power producer" or an
EWOG, as such terms are defined in the FPA, the regulations under the FPA, and
the PUHCA.
<PAGE>
32
(c) The owner of each of the Plants under development by the Company
or any Subsidiary and located outside the United States will, no later than the
date operations commence, either qualify as an EWOG or a "foreign utility
company", as such term is defined under PUHCA and the regulations thereunder.
(d) Neither the Company nor any "affiliate" of the Company is a
"public utility company" or a "public utility holding company", as such terms
are defined in PUHCA and the regulations thereunder, a "public utility" as
defined in the FPA and the regulations thereunder, or subject to regulations by
any state public utilities commission or similar state regulatory body.
(e) Each of the Plants obtained any necessary certificates or permits
from state regulatory authorities for construction of each of the operational
Plants and associated transmission equipment owned by the owners of the Plant,
and each other entity constructing, owning or operating any of the foregoing has
obtained each required certificate or permit.
SECTION 4.17. Employee Benefit Plans; Labor Matters. (a) With
-------------------------------------
respect to each U.S. or foreign employee benefit plan, program, arrangement and
contract (including, without limitation, any "employee benefit plan", as defined
---------------------
in Section 3(3) of ERISA) and any executive compensation arrangement, whether or
not funded, maintained or contributed to by the Company or any of its
Subsidiaries, or with respect to which the Company or any of its Subsidiaries
could incur liability under Section 4069, 4212(c) or 4204 of ERISA, as well as
any employee benefit plan that is subject to Section 412 of the Code or Title IV
of ERISA and which is maintained or contributed to by any other trade or
business (whether or not incorporated) which is treated as a single employer
with the Company under Section 414(b), (c), (m) or (o) of the Code (each such
trade or business being referred to herein as a "Code Affiliate") (the "Company
-------------- -------
Benefit Plans"), the Company has made available to Parent a true and correct
- - -------------
copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii)
such Company Benefit Plan, (iii) each trust agreement relating to such Company
Benefit Plan, (iv) the most recent summary plan description for each Company
Benefit Plan for which a summary plan description is required, (v) the most
recent actuarial report or valuation relating to a Company Benefit Plan subject
to Title IV of ERISA, if any, (vi) the most recent determination letter, if any,
issued by the IRS with respect to any Company Benefit Plan qualified under
Section 401(a) of the Code and (vii) the most recent annual and periodic
accounting of related plan assets, if any.
(b) With respect to the Company Benefit Plans, no event has occurred
and, to the knowledge of the Company, there exists no condition or set of
circumstances in connection with which the Company or any of its Subsidiaries
could be subject to any liability under the terms of such Company Benefit Plans,
ERISA, the Code or any other applicable Law which would have a Material Adverse
Effect. No claim has been asserted, or, to the knowledge of the Company,
threatened by the IRS, the Department of Labor or
<PAGE>
33
any participant of a Company Benefit Plan that the Company or any of the
Subsidiaries has, with respect to any Company Benefit Plan, engaged in or been a
party to any "prohibited transaction", as such term is defined in Section 4975
of the Code and Section 406 of ERISA, which could result in the imposition of
either a penalty assessed pursuant to Section 502 of ERISA or a tax imposed by
Section 4975 of the Code, in each case applicable to the Company, any Subsidiary
or any Company Benefit Plan. Each Company Benefit Plan intended to qualify
under Section 401(a) of the Code does so qualify, and the trusts created
thereunder are exempt from tax under Section 501(a) of the Code, and each such
Company Benefit Plan will be amended in the manner required by the Code by
December 31, 1994, and has been or will be submitted to the IRS on or prior to
March 31, 1995 for a determination letter confirming that such Company Benefit
Plan meets the currently applicable requirements for qualification and exemption
from taxation under Sections 401(a) and 501(a) of the Code. No Company Benefit
Plan has plan assets invested in any insurance company which is or has been in
insolvency proceedings within the last 3 years. No Company Benefit Plan subject
to Section 412 of the Code has incurred any "accumulated funding deficiency" (as
defined in ERISA), whether or not waived. Neither the Company nor any of its
Subsidiaries or Code Affiliates has at any time since 1987 maintained or
contributed to any Company Benefit Plan, including without limitation any
"multiemployer plan" (as defined in Section 3(37) of ERISA), which (i) is a
"defined benefit plan", (as defined in Section 414(j) of the Code) or (ii) is
subject to Title IV of ERISA.
(c) Except as set forth in Schedule 4.17, (i) neither the Company nor
-------------
any of its Subsidiaries is a party to any collective bargaining or other labor
union contract applicable to persons employed by the Company or its
Subsidiaries, (ii) no collective bargaining agreement is being negotiated by the
Company or any of its Subsidiaries and (iii) neither the Company nor any of its
Subsidiaries knows of any activities or proceedings of any labor union to
organize any of their respective employees. As of the date hereof, the Company
and all of its Subsidiaries are in compliance in all material respects with all
applicable laws relating to employment and employment practices, wages, hours,
and terms and conditions of employment, there are no material charges with
respect to or relating to the Company or any of its Subsidiaries pending before
the Equal Employment Opportunity Commission or any state, local or foreign
agency responsible for the prevention of unlawful employment practices, and
there is no labor dispute, strike or work stoppage against the Company or any of
its Subsidiaries pending or, to the Company's knowledge, threatened which may
interfere with the respective business activities of the Company or its
Subsidiaries, except where such noncompliance, charge, dispute, strike or work
stoppage would not have a Material Adverse Effect. As of the date hereof, to
the knowledge of the Company, none of the Company or any of its Subsidiaries, or
their respective representatives or employees, has committed any unfair labor
practices in connection with the operation of the respective businesses of the
Company or its Subsidiaries, and there is no charge or complaint against the
Company or its Subsidiaries by the National Labor Relations Board or
<PAGE>
34
any comparable state agency pending or threatened in writing, except where such
unfair labor practice, charge or complaint would not have a Material Adverse
Effect.
(d) The Company has made available to Parent (i) copies of all
employment agreements with officers of the Company and its Subsidiaries; (ii)
copies of all severance agreements, programs and policies of the Company with or
relating to its employees; and (iii) copies of all plans, programs, agreements
and other arrangements of the Company with or relating to its employees which
contain change in control provisions (which plans, programs, agreements and
arrangements are set forth in Schedule 4.17 or have been disclosed in the
Company SEC Reports or the Previous 14D-9).
(e) Except as provided in Schedule 4.17 or as otherwise required by
-------------
Law, no Company Benefit Plan provides retiree medical or retiree life insurance
benefits to any person.
SECTION 4.18. Insurance. The insurance policies in force at the date
---------
hereof, with respect to the assets, properties or operations of each of the
Company and the Subsidiaries are set forth on Schedule 4.18 and are in full
-------------
force and effect with reputable insurers in such amounts and insure against such
losses and risks (including product liability) as are customary to protect the
properties and businesses of each of the Company and the Subsidiaries.
SECTION 4.19. Taxes. (a) Except as set forth in Schedule 4.19, and
----- -------------
except as would not, either individually or in the aggregate, have a Material
Adverse Effect, (i) the Company and each of the Subsidiaries have timely filed
with the appropriate governmental authorities all Tax Returns (as defined below)
required to be filed by or with respect to the Company and each of the
Subsidiaries or their respective operations or assets, and such Tax Returns are
true, correct and complete in all material respects and (ii) all Taxes shown to
be due on such Tax Returns and all Taxes required to be withheld with respect to
the Company or any of the Subsidiaries or their respective operations or assets
have been timely paid or, if applicable, withheld and paid to the appropriate
taxing authority in the manner provided by law, except in each case for such
Taxes which are not material in the aggregate.
(b) Neither the Company nor any of the Subsidiaries has filed a
consent to the application of Section 341(f) of the Code.
(c) Except as set forth on Schedule 4.19, no property of either of the
-------------
Company or any of the Subsidiaries is "tax exempt use property" within the
meaning of Section 168(h) of the Code or property that either of the Company or
any of the Subsidiaries will be required to treat as being owned by another
person pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as
amended, in effect immediately before the enactment of the Tax Reform Act of
1986.
<PAGE>
35
SECTION 4.20. Trademarks, Licenses, Patents and Copyrights. Except
--------------------------------------------
as set forth on Schedule 4.20, the Company or the Subsidiaries own or possess
-------------
adequate licenses or other valid rights to use all patents, patent rights,
trademarks, trademark rights, trade names, trade name rights and proprietary
information used or held for use in connection with, and material to, its
business as currently being conducted and are unaware of any assertions or
claims challenging the validity of any of the foregoing which are reasonably
likely to have a Material Adverse Effect; and, to the best knowledge of the
Company, the conduct of the Company's business as now conducted or proposed to
be conducted does not and will not conflict with any patents, patent rights,
licenses, trademarks, trademark rights, trade names, trade name rights or
copyrights of others known to the Company or the Subsidiaries in any way
reasonably likely to have a Material Adverse Effect. No material infringement
of any proprietary right owned by or licensed by or to the Company or any of the
Subsidiaries is known to the Company or any Subsidiary which is reasonably
likely to have a Material Adverse Effect.
SECTION 4.21. Related Party Transactions. Except as is set forth in
--------------------------
the Company SEC Reports or in the Previous 14D-9, to the Company's knowledge,
Schedule 4.21 sets forth the material transaction since September 1, 1994
- - -------------
between the Company and its Subsidiaries, on the one hand, and (i) an officer or
director of the Company or any of its Subsidiaries, (ii) a record or beneficial
owner of five percent (5%) or more of Company Common Stock, or (iii) an
affiliate of any such officer, director or beneficial owner, on the other hand,
other than payment of compensation for services rendered to the Company and its
Subsidiaries in the ordinary course of business.
SECTION 4.22. Status of Development and Construction Projects. To
-----------------------------------------------
the Company's knowledge, except as specifically disclosed on Schedule 4.22, the
following statements, as applicable, are true and correct as of the date hereof
with respect to each of the following development and construction projects:
(Malitbog 231 MW, Alto Peak 70 MW, Fish Lake 16 MW and 20MW Salton Sea Unit 1
expansion):
(i) There is no pending or threatened revocation or loss of such project
award, whether as a result of government action or otherwise;
(ii) The executed power sales contract and construction contract for such
project is in full force and effect and there is no oral or written threat
to its validity, whether as a result of government action or otherwise;
(iii) For any project with an executed construction contract, the
estimated total capital cost for construction of such project (without
well-field development expenses), including any existing or expected change
orders is set forth on Schedule 4.22;
-------------
<PAGE>
36
(iv) The joint venture or partnership or similar agreements with local
partners or contractors are in full force and effect, and the Company's
percentage equity ownership pursuant to such contracts is as set forth on
Schedule 4.22, and there is no threat of loss or invalidity to such
-------------
contracts, whether as a result of consummating this transaction or
otherwise;
(v) The status of the financing and political risk insurance arrangements
for each such project is set forth on Schedule 4.22; and
-------------
(vi) The Company has not taken any actions which violate the FCPA and is
not aware of any actions taken by foreign Subsidiaries or local partners
which if taken by a U.S. company would constitute a violation of the FCPA.
SECTION 4.23. Status of Operating Projects. With respect to each
----------------------------
operating project, except as set forth on Schedule 4.23:
-------------
(i) The Company is not aware of any event or occurrence which would
create a material impairment to the operating performance or a material
increase in operating expenses or material non-compliance with regulatory
or contractual requirements;
(ii) The Company and any of its Subsidiaries or joint ventures have not
changed in any material adverse respect such project's operating,
maintenance reserves or procedures; and
(iii) The Company is not aware of any events which, with lapse of time or
otherwise, could reasonably be expected to result in a material impairment
to the project's operating performance or a material increase in operating
expenses or material non-compliance with regulatory or contractual
requirements.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Acquisition Proposals. The Company will notify Parent
---------------------
immediately if any inquiries or proposals are received by, any information is
requested from, or any negotiations or discussions are sought to be initiated or
continued with the Company, in each case in connection with any acquisition,
business combination or purchase of all or any significant portion of the assets
of, or any equity interest in, the Company or any Subsidiary. The Company shall
provide a copy of any such written inquiries or proposals to Parent immediately
after receipt thereof and thereafter keep Parent and Merger Sub promptly advised
of any development with respect thereto.
<PAGE>
37
SECTION 5.02. Conduct of Business by the Parties Pending the Merger.
-----------------------------------------------------
(I) The Company covenants and agrees that, between the date of this Agreement
and the Effective Time, unless Parent shall otherwise consent in writing and
except as is otherwise permitted hereby, the businesses of the Company and its
Subsidiaries shall be conducted only in, and the Company and its Subsidiaries
shall not take any action except in, the ordinary course of business and in a
manner consistent with past practice; and the Company will use its best efforts
to preserve substantially intact its business organization, to keep available
the services of its present officers, employees and consultants and to preserve
its present relationships with customers, suppliers and other persons with which
it or any of its subsidiaries has significant business relations. By way of
amplification and not limitation, except as contemplated by this Agreement,
neither the Company nor any of its Subsidiaries shall, between the date of this
Agreement and the Effective Time, directly or indirectly, do any of the
following without the prior written consent of Parent:
(a) (i) issue, sell, pledge, dispose of, encumber, authorize, or
propose the issuance, sale, pledge, disposition, encumbrance or
authorization of any shares of its or its subsidiaries' capital stock of
any class, or any options, warrants, convertible securities or other rights
of any kind to acquire any shares of its or its subsidiaries' capital
stock, or any other ownership interest (except with respect to Company
Common Stock previously reserved for issuance as disclosed in Section 4.03
hereof); (ii) amend or propose to amend its articles of incorporation or
bylaws or equivalent organizational documents; (iii) split, combine or
reclassify any of its outstanding common stock, or declare, set aside or
pay any dividend or distribution payable in cash, stock, property or
otherwise with respect to the common stock; (iv) redeem, purchase or
otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations
under existing employee plans; or (v) authorize or propose or enter into
any contract, agreement, commitment or arrangement with respect to any of
the matters set forth in this Section 5.02(I)(a);
(b) (i) acquire (by merger, consolidation, or acquisition of stock,
partnership interests or assets) any corporation, partnership or other
business organization or division thereof or any other interests in
operating properties; (ii) except in the ordinary course of business and in
a manner consistent with past practices, and except as set forth on
Schedule 5.02(I)(b), sell, pledge, lease, transfer, dispose of, or encumber
-------------------
or authorize or propose the sale, pledge, lease, transfer disposition or
encumbrance of any of its or its Subsidiaries' assets (including intangible
assets); (iii) create, incur, assume or guarantee any indebtedness or other
similar obligation, or enter into any contract or agreement, except in the
ordinary course of business and consistent with past practice, and except
as set forth on Schedule 5.02(I)(b); (iv) enter into any new line of
-------------------
business or make any bid or enter into any commitment in respect of any new
or proposed projects; (v) prepay or
<PAGE>
38
refinance any part of the principal or interest of any existing
indebtedness before the due date thereof; (vi) assume, guarantee, endorse
or otherwise become liable or responsible (whether directly, contingently
or otherwise) for the obligations of any other person or entity, except for
endorsements in the ordinary course of business in connection with the
deposit of items for collection; (vii) make any loans, advances or capital
contributions to or investments in any person or entity; (viii) waive,
release, grant or transfer any rights of value or modify or change in any
material respect any existing license, material lease or commitment; (ix)
make or commit to or guarantee any single capital expenditure or
obligations which are not consistent with past practice and currently
budgeted; or (x) enter into or amend any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
5.02(I)(b);
(c) take any action other than in the ordinary course of business and
in a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to the grant of any severance or
termination pay (otherwise than pursuant to policies of the Company or any
of its Subsidiaries in effect on November 30, 1994) or with respect to any
increase of benefits payable under its severance or termination pay
policies in effect on November 30, 1994;
(d) make any payments (except in the ordinary course of business and
in amounts and in a manner consistent with past practice) under any of its
employee plans to any of its or its subsidiaries' employees, independent
contractors or consultants, enter into any new employee plan, any new
employment or consulting agreement, grant or establish any new awards under
such plan or agreement, or adopt or otherwise amend any of the foregoing;
(e) take any action except in the ordinary course of business and in
a manner consistent with past practice (none of which actions shall be
unreasonable or unusual) with respect to accounting policies or procedures
(including without limitation its procedures with respect to the payment of
accounts payable);
(f) before the purchase of Company Common Stock pursuant to the Offer
and other than pursuant to this Agreement, take any action to cause the
shares of its common stock to cease to be listed on the Nasdaq National
Market;
(g) cause or permit any of their current insurance (or reinsurance)
policies to be cancelled or terminated or any of the coverage thereunder to
lapse, unless forthwith upon notice of such termination, cancellation or
lapse, the Company or such Subsidiary used its best efforts to obtain
commercially reasonable replacement policies from the same or comparable
insurers providing coverage which is the same as or comparable to that
provided under the cancelled, terminated or lapsed policies;
<PAGE>
39
(h) enter into any agreement or transaction with any affiliate of the
Company upon terms and conditions less favorable to the Company or such
affiliate than could be obtained on an arm's length basis, except for
agreements or transactions in the ordinary course of business and
consistent with past practice;
(i) settle any material pending litigation; or
(j) enter into any oral or written agreement, contract, commitment,
arrangement or understanding with respect to any of the foregoing.
Notwithstanding any other term or provision of this Section 5.02(I):
(i) the Company may close the financing of its Maltibog project
without the prior consent of Parent provided that Parent has been
--------
given the opportunity to review the relevant financing documents and
Company has given Parent at least two days' prior notice of the
anticipated closing date;
(ii) the Company may make and commit to ordinary course budgeted
operational capital and other expenditures relating to projects in
operation or construction without the consent of Parent;
(iii) the Company may make planned capital and operational
expenditures with respect to its Maltibog project, without the consent
of Parent;
(iv) the Company will not make any capital or other expenditures
in excess of $500,000 in the aggregate with respect to its Nevada
Power Pumped Storage contract, its Alto Peak contract and any other
contract related to a development project without prior consultation
with Parent and Parent's consent;
(v) the Company may honor all existing contractual obligations
relating to projects in operation or construction without the consent
of Parent; and
(vi) the Company will not incur any additional indebtedness
(secured or unsecured) or make new project or capital commitments in
excess of $1,000,000 without prior consultation with Parent and
Parent's consent.
(II) Parent covenants and agrees that, between the date of this
Agreement and the Effective Time (unless the election contemplated by Section
2.06(b)(i) has been made), unless the Company shall otherwise consent in writing
and except as is otherwise permitted
<PAGE>
40
hereby, neither Parent nor any of the Parent Subsidiaries shall, directly or
indirectly, do any of the following:
(a) (i) issue or sell, or propose the issuance or sale of, any
shares of its or its subsidiaries' capital stock of any class, or any
options, warrants, convertible securities or other rights of any kind to
acquire any shares of its or its subsidiaries' capital stock, or any other
ownership interest (except with respect to Parent Common Stock previously
reserved for issuance as disclosed in Section 3.03 hereof) if (A) the
proceeds of any such issuance or sale ("Proceeds") exceed $50,000,000, and
--------
(B) such Proceeds are not applied, if necessary, so as to allow Parent to
exercise the election contemplated by Section 2.06(b)(i); (ii) split,
combine or reclassify any of its outstanding common stock, or declare, set
aside or pay any dividend or distribution payable in cash, stock, property
or otherwise with respect to the common stock; (iii) redeem, purchase or
otherwise acquire or offer to redeem, purchase or otherwise acquire any
shares of its capital stock, except in the performance of its obligations
under existing employee plans or pursuant to a repurchase program under
Rule 10b-18 promulgated under the Exchange Act; or (iv) authorize or
propose or enter into any contract, agreement, commitment or arrangement
with respect to any of the matters set forth in this Section 5.02(II)(a);
(b) in the case of Parent, merge or consolidate with or into another
person or engage in a recapitalization or other similar extraordinary
business transaction;
(c) make any material change in accounting policies, other than as
required by generally accepted accounting principles; or
(d) enter into any oral or written agreement, contract, commitment,
arrangement or understanding with respect to any of the foregoing.
SECTION 5.03. No Shopping. The Company and its Subsidiaries will
-----------
not, directly or indirectly, through any officer, director, agent, financial
adviser or otherwise, solicit, initiate or encourage submission of proposals or
offers from any person relating to any Competing Transaction (as defined below),
or participate in any negotiations regarding, or furnish to any other person any
information (except for information which has been previously publicly
disseminated by the Company in the ordinary course of business) with respect to,
or otherwise cooperate in any way with, or assist or participate in, facilitate
or encourage, any effort or attempt by any other person to do or seek any of the
foregoing. Notwithstanding the foregoing, the parties hereby agree that the
Board of Directors of the Company may (i) review and act upon (which actions may
include, without limitation, providing confidential information, negotiating a
transaction and entering into an agreement for a transaction) an unsolicited
proposal by any other person relating to any of the transactions referred to in
the preceding sentence, if the Board of Directors determines in
<PAGE>
41
good faith, after consultation with and based upon the advice of its financial
and legal advisors, that failing to review and act upon such proposal would
constitute a breach of fiduciary duty and (ii) comply with Rule 14e-2
promulgated under the Exchange Act with regard to a tender or exchange offer,
and such review, conduct or compliance will not violate this Section 5.03. For
purposes of this Agreement, "Competing Transaction" shall mean any of the
---------------------
following involving the Company or any Subsidiary: (i) any merger,
consolidation, share exchange, business combination, or other similar
transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other
disposition of 50% or more of the assets of the Company and the Subsidiaries,
taken as a whole, in a single transaction or series of transactions; (iii) any
tender offer or exchange offer for 50% or more of the Shares or the filing of a
registration statement under the Securities Act in connection therewith; (iv)
any person having acquired beneficial ownership or the right to acquire
beneficial ownership of, or any "group" (as such term is defined under Section
-----
13(d) of the Exchange Act and the rules and regulations promulgated thereunder)
having been formed which beneficially owns or has the right to acquire
beneficial ownership of, 50% or more of the Shares; or (v) any public
announcement of a proposal, plan or intention to do any of the foregoing or any
agreement to engage in any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Registration Statement/Proxy Statement. (a) As
--------------------------------------
promptly as practicable after the consummation of the Offer, the Company and
Parent shall prepare and file with the SEC preliminary proxy materials which
shall constitute the preliminary Proxy Statement and a preliminary prospectus
with respect to the Parent Common Stock to be issued in connection with the
Merger. As promptly as practicable after comments are received from the SEC
with respect to such preliminary materials and after the furnishing by the
Company and Parent of all information required to be contained therein, the
Company shall file with the SEC the definitive Proxy Statement and Parent shall
file with the SEC the Registration Statement (which shall include the definitive
Proxy Statement), and Parent and the Company shall use their best efforts to
cause the Registration Statement to become effective and to mail the definitive
Proxy Statement to their respective stockholders as soon thereafter as
practicable.
(b) Parent and the Company shall make all necessary filings with
respect to the Merger and the Parent Share Proposal under the Securities Act and
the Exchange Act and the rules and regulations thereunder, under applicable blue
sky or similar securities laws and the New York Stock Exchange, Inc. and shall
use all reasonable efforts to obtain required approvals and clearances with
respect thereto.
<PAGE>
42
SECTION 6.02. Stock Exchange Listing. Parent shall use its best
----------------------
efforts to list on the NYSE, upon official notice of issuance, the Parent Common
Stock to be issued pursuant to the Merger.
SECTION 6.03. Additional Agreements. The Company, Parent and Merger
---------------------
Sub will each comply in all material respects with all applicable laws and with
all applicable rules and regulations of any governmental authority in connection
with its respective execution, delivery and performance of this Agreement and
the transactions contemplated hereby. Each of the parties hereto agrees to use
all reasonable efforts to obtain in a timely manner all necessary waivers,
consents and approvals and to effect all necessary registrations and filings,
and to use all reasonable efforts to take, or cause to be taken, all other
actions and to do, or cause to be done, all other things necessary, proper or
advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement.
SECTION 6.04. Notification of Certain Matters. The Company shall
-------------------------------
give prompt notice to Parent, and Parent shall give prompt notice to the
Company, of (i) the occurrence or non-occurrence of any event whose occurrence
or non-occurrence would be likely to cause any representation or warranty
contained in this Agreement to be untrue or inaccurate in any material respect
at any time from the date hereof to the Effective Time and (ii) any material
failure of the Company, Parent or Merger Sub, as the case may be, or any
officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that the delivery of any notice pursuant to this
-------- -------
Section 6.04 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
SECTION 6.05. Access to Information. (a) From the date hereof to
---------------------
the Effective Time, each of Parent and the Company shall, and shall cause their
respective subsidiaries, officers, directors, employees, auditors, attorneys and
agents to, afford the officers, employees, auditors, attorneys and agents of the
other party (the "Respective Representatives") complete access at all reasonable
--------------------------
times and on reasonable notice to its officers, employees, agents, accountants,
properties, offices and other facilities and to all books and records, and shall
furnish such Respective Representatives with all financial, operating and other
data and information and all information relating to the regulatory status of
its Plants (whether held by it, a subsidiary, or agents thereof) as the other
party, through its officers, employees, agents or accountants, may reasonably
request.
(b) All information obtained by Parent or the Company pursuant to this
Section 6.05 shall be kept confidential in accordance with the confidentiality
agreements dated December 4, 1994 between Parent and the Company.
<PAGE>
43
(c) In the event of the termination of this Agreement, each of Parent
and the Company shall, and shall cause its affiliates to, return promptly every
document furnished to them by the other party or its Respective Representatives
in connection with the transactions contemplated hereby and any copies thereof
which may have been made, and shall cause its Respective Representatives to whom
such documents were furnished promptly to return such documents and any copies
thereof any of them may have made, other than documents filed with the
Commission or otherwise publicly available.
SECTION 6.06. Public Announcements. Parent and the Company shall
--------------------
consult with each other before issuing any press release or otherwise making any
public statements with respect to the Merger and shall not issue any such press
release or make any such public statement before such consultation, except as
may be required by law.
SECTION 6.07. Best Efforts; Cooperation. Upon the terms and subject
-------------------------
to the conditions hereof, each of the parties hereto agrees to use its best
efforts to take or cause to be taken all actions and to do or cause to be done
all things necessary, proper or advisable to consummate the transactions
contemplated by this Agreement and shall use its best efforts to obtain all
necessary waivers, consents and approvals, and to effect all necessary filings
under the Exchange Act. The parties shall cooperate in responding to inquiries
from, and making presentations to, regulatory authorities.
SECTION 6.08. Agreement to Defend and Indemnify. (a) If any action,
---------------------------------
suit, proceeding or investigation relating hereto or to the transactions
contemplated hereby is commenced, whether before or after the Effective Time,
the parties hereto agree to cooperate and use their best efforts to defend
against and respond thereto. It is understood and agreed that, subject to the
limitations, if any, on indemnification contained in applicable law, the Company
shall, to the fullest extent permitted under applicable law and regardless of
whether the Merger becomes effective, indemnify and hold harmless, and after the
Effective Time, the Surviving Corporation and Parent shall, to the fullest
extent permitted under applicable law, indemnify and hold harmless, each
director, officer, employee, fiduciary and agent of the Company or any
Subsidiary and their respective subsidiaries and controlled affiliates,
including, without limitation, officers and directors serving as such on the
date hereof (collectively, the "Indemnified Parties"), from and against any
-------------------
costs or expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and amounts paid in settlement in connection with any
claim, action, suit, proceeding or investigation arising out of or pertaining to
any of the transactions contemplated hereby, including without limitation
liabilities arising under the Securities Act or the Exchange Act in connection
with the Merger. Parent shall cause the Surviving Corporation to continue in
effect the indemnification provisions currently provided (or provisions that are
no less favorable to the Indemnified Parties than those currently provided) by
the Articles of Incorporation, Bylaws or any written indemnification agreement
of the Company for a period of not less than six years following the Effective
Time. This Section shall survive the consummation of the
<PAGE>
44
Merger. This covenant shall survive any termination of this Agreement pursuant
to Section 8.01 hereof. Notwithstanding Section 9.07 hereof, this Section is
intended to be for the benefit of and to grant third party rights to Indemnified
Parties whether or not parties to this Agreement, and each of the Indemnified
Parties shall be entitled to enforce the covenants contained herein.
(b) Parent shall cause to be maintained in effect for not less than
three years after the Effective Time the current policies of directors' and
officers' liability insurance maintained by the Company and its Subsidiaries
with respect to matters occurring prior to the Effective Time; provided,
--------
however, that Parent may substitute therefor its current policies or other
- - -------
policies of at least the same coverage containing terms and conditions which are
no less advantageous to the Indemnified Parties; provided, however, that in no
-------- -------
event shall Parent be required to expend pursuant to this Section 6.08(b) more
than an amount equal to 125% of current annual premiums paid by the Company for
such insurance.
(c) If Parent, the Surviving Corporation or any of either of their
successors or assigns (i) consolidates with or merges into any other person and
shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person, then and in each such case, proper
provision shall be made so that the successors and assigns of Parent or
Surviving Corporation assume the obligations set forth in this Section 6.08.
SECTION 6.09. Disposition of Litigation. (a) The parties agree to
-------------------------
file jointly a stipulation of dismissal without prejudice, or take other
reasonable steps necessary to terminate without prejudice, the action entitled
Magma Power Company, et al. v. California Energy Company, Inc., et al., Case No.
- - ----------------------------------------------------------------------
CV-N-94-00719-DWH pending in the United States District Court for the District
of Nevada, including any and all claims and counterclaims asserted against the
Company, its directors, its officers, Parent and Merger Sub, with each party
bearing its own costs and attorneys' fees. The Company agrees that it will not
settle any litigation currently pending, or commenced after the date hereof,
against the Company or any of its directors by any stockholder of the Company
relating to the Offer or this Agreement, without the prior written consent of
Parent.
(b) The Company will not voluntarily cooperate with any third party
that has sought or may hereafter seek to restrain or prohibit or otherwise
oppose the Offer or the Merger and will cooperate with Parent and Merger Sub to
resist any such effort to restrain or prohibit or otherwise oppose the Offer or
the Merger, unless failing to so cooperate with such third party or cooperating
with Parent or Merger Sub, as the case may be, would constitute a breach of
fiduciary duty of the Board of Directors of the Company or otherwise violate any
applicable law or rules.
<PAGE>
45
SECTION 6.10. Employee Benefits. (a) Parent shall cause the
-----------------
Surviving Corporation and its Subsidiaries to (x) honor all employment, change
in control, deferred compensation, pension, retirement and severance agreements
in effect on the date hereof between the Company or one of its Subsidiaries and
any employee of the Company or one of its Subsidiaries, or maintained for the
benefit of any employee of the Company or one of its Subsidiaries, all of which
have been made available to Parent, and (y) honor all bonus determinations for
the fiscal year ending December 31, 1994 made by the Company or any of its
Subsidiaries prior to the date hereof with respect to the bonus plans and
arrangements of the Company and its Subsidiaries.
(b) For a period of one year commencing on the Effective Time,
Parent shall cause the Surviving Corporation to provide active employees of the
Company and its Subsidiaries with benefits (including, without limitation,
welfare benefits) that are no less favorable, taken as a whole, than the
benefits provided under the Company Benefit Plans (other than equity-based plans
and bonus plans) as in effect immediately prior to the Effective Time. To the
extent that service is relevant for eligibility, vesting or benefit calculations
or allowances (including, without limitation, entitlements to vacation and sick
days) under any plan or arrangement maintained in order to provide the benefits
described in the preceding sentence, such plan or arrangement shall credit
employees for service on or prior to the Effective Time with the Company or any
of its Subsidiaries.
(c) Parent shall as promptly as practicable after the Effective Time
cause the Surviving Corporation to (or the Company may prior to the Effective
Time) amend each demand note made in favor of the Company by an employee of the
Company or one of its Subsidiaries (each of which has been made available to
Parent) to provide that (x) such demand note will not be repayable on demand
from the Company and (y) upon the involuntary termination without cause of the
employment of such employee, all sums owed under such demand note shall be
payable in equal quarterly installments over a period of not less than 36
months.
(d) With respect to each employee of the Company (other than employees
of the Company which are parties to a "change in control" or "severance"
agreements referred to in the Previous 14D-9) who is, within the one year period
following the closing of the Offering, either (i) terminated without cause or
(ii) terminated as a result of a reduction in force, Parent shall cause the
Surviving Corporation to make the following payments:
(1) if, upon the effective date of such employee's termination,
such employee has less than one year's service with the Company, a
payment equal to three months base salary plus an amount equal to one-
fourth of the prior years targeted bonus for such employee, payable in
twelve equal installments over the twelve months following such
termination; or
<PAGE>
46
(2) if, upon the effective date of such employee's termination, such
employee has one year or more of service with the company, a payment
equal to six months base salary plus an amount equal to one-fourth of
the prior years targeted bonus for each such employee, payable in
twelve equal installments over the twelve months following such
termination.
For the purposes of subclauses (1) and (2), if an employee was not
eligible for a bonus in the referenced prior year, then the targeted bonus for
the current year shall be used. An employee shall not be eligible for the
payments specified in subclauses (1) or (2) if such employee's termination
relates to a reduction in force referred to subclause (ii) above and such
employee has been offered a comparable position (in terms of compensation) by
Parent at any location; provided however, that no such amounts referenced in (1)
-------- -------
and (2) will be payable if, in the good faith determination of the Company, the
employee's job performance did not merit continued employment or offer of
relocation to a comparable position. An employee may not receive the severance
payments contemplated by this Section 6.10(d) and also receive any severance
payments under the Company's severance policy covered by Sections 6.10(a) and
(b) and identified on a schedule hereto.
SECTION 6.11. Certain Action of Parent and Merger Sub. Promptly
---------------------------------------
following the execution of this Agreement, Parent and Merger Sub shall suspend
their solicitation of requests for the call of a special meeting of the
Company's stockholders and their solicitation of proxies to elect nominees to
the Company's Board of Directors.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.01. Conditions to Obligation of Each Party to Effect the
----------------------------------------------------
Merger. The respective obligations of each party to effect the Merger shall be
- - ------
subject to the following conditions:
(a) Offer. Parent shall have made, or caused to be made, the Offer
-----
and shall have purchased, or caused to be purchased, Shares pursuant to the
Offer;
(b) Company Stockholder Approval. This Agreement and the transactions
----------------------------
contemplated hereby shall have been approved and adopted by the requisite vote
of the holders of the Company Common Stock.
(c) Parent Stockholder Approval. The Parent Share Proposal shall have
---------------------------
been approved by the requisite vote of the holders of Parent Common Stock.
<PAGE>
47
(d) Stock Exchange Listing. The Parent Common Stock issuable in the
----------------------
Merger shall have been authorized for listing on the NYSE upon official notice
of issuance.
(e) Effectiveness of Registration Statement. The Registration
---------------------------------------
Statement shall have become effective in accordance with the provisions of the
Securities Act. No stop order suspending the effectiveness of the Registration
Statement shall have been issued by the Commission and remain in effect.
(f) No Prohibition. There shall not be in effect (i) any judgment
--------------
decree or order issued by any Federal, state or local court of competent
jurisdiction, or (ii) any statute, rule or regulation enacted or promulgated by
any Federal, state, local or legislative, administrative or regulatory body of
competent jurisdiction, that in either of cases (i) or (ii) prohibits the
consummation of the Merger or makes such consummation illegal.
SECTION 7.02. Additional Conditions to Obligations of the Company.
---------------------------------------------------
The obligation of the Company to effect the Merger is also subject to the
fulfillment of the following conditions:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Parent and Merger Sub contained in this Agreement shall be
true and correct in all material respects on the date hereof and shall also
be true and correct in all material respects on and as of the Effective
Time, except for changes contemplated by this Agreement, with the same
force and effect as if made on and as of the Effective Time, except to the
extent that the failure of such representations and warranties to be so
true and correct, individually and in the aggregate, does not have a
Material Adverse Effect; provided, however, that any inaccuracy of a
-------- -------
representation or warranty, on the date hereof or at the Effective Time,
shall not result in the non-satisfaction of this Section 7.02(a) unless any
such inaccuracy or inaccuracies, either (i) individually or in the
aggregate, constitute facts or circumstances having a Material Adverse
Effect (it being understood that such facts or circumstances shall be
deemed to be so constituted if the particular representation or warranty
which is inaccurate contains a Material Adverse Effect standard) or (ii)
are clearly intentional misrepresentations; and
(b) Agreements, Conditions and Covenants. Parent and Merger Sub shall
------------------------------------
have performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by them on or before the Effective Time.
SECTION 7.03. Additional Conditions to Obligations of Parent and
--------------------------------------------------
Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are
- - ----------
also subject to the following conditions:
<PAGE>
48
(a) Representations and Warranties. The representations and warranties of
------------------------------
the Company contained in this Agreement shall be true and correct in all
material respects on the date hereof and shall also be true and correct in
all material respects on and as of the Effective Time, except for changes
contemplated by this Agreement, with the same force and effect as if made
on and as of the Effective Time, except to the extent that the failure of
such representations and warranties to be so true and correct, individually
and in the aggregate, does to have a Material Adverse Effect; provided,
--------
however that any inaccuracy of a representation or warranty, on the date
-------
hereof or at the Effective Time, shall not result in the non-satisfaction
of this Section 7.03(a) unless any such inaccuracy or inaccuracies, either
(i) individually or in the aggregate, constitute facts or circumstances
having a Material Adverse Effect (it being understood that such facts or
circumstances shall be deemed to be so constituted if the particular
representation or warranty which is inaccurate contains a Material Adverse
Effect standard) or (ii) are clearly intentional misrepresentations; and
(b) Agreements; Conditions and Covenants. The Company shall have
------------------------------------
performed or complied in all material respects with all agreements,
conditions and covenants required by this Agreement to be performed or
complied with by it on or before the Effective Time.
(c) Funding. Parent and/or Merger Sub shall have received the
-------
proceeds of the financing contemplated by Section 3.10 hereof.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated at any
-----------
time before the Effective Time:
(a) By mutual consent of the Boards of Directors of Parent and the
Company; or
(b) By the Company or Parent if the Offer shall not have been
consummated by February 28, 1995; or
(c) By the Company or Parent if the Effective Time shall not have
occurred on or prior to September 30, 1995; or
(d) By either Parent or the Company if a court of competent
jurisdiction or governmental, regulatory or administrative agency or commission
shall have issued an order, decree or ruling or taken any other action (which
order, decree or ruling the parties hereto
<PAGE>
49
shall use their best efforts to lift), in each case permanently restraining,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement and such order, decree, ruling or other action shall have become final
and nonappealable; or
(e) By Parent if (i) the Board of Directors of the Company withdraws,
modifies or changes its recommendation of this Agreement or any of the
transactions contemplated by this Agreement or shall have resolved to do any of
the foregoing, or (ii) the Board of Directors of the Company recommends to the
holders of Shares any proposal with respect to a merger, consolidation, share
exchange or similar transaction involving the Company or any of its
Subsidiaries, other than the transactions contemplated by this Agreement; or
(f) By Parent if, without the Company's consent, any person has
acquired beneficial ownership or the right to acquire beneficial ownership of or
any "group" (as defined under Section 13(d) of the Exchange Act and the rules
and regulations promulgated thereunder) has been formed which beneficially owns,
or has the right to acquire "beneficial ownership" (as defined in the Rights
Agreement) of, more than 10% of the Shares; or
(g) By the Company or Parent if (i) a corporation, partnership, person
or other entity or group shall have made a bona fide offer that the Board of
Directors of the Company determines in its good faith judgment and in the
exercise of its fiduciary duties, after consultation with and based upon the
advice of its financial and legal advisors, is more favorable to the Company's
stockholders than the Offer and the Merger or (ii) any person (including,
without limitation, the Company or any affiliate thereof), other than Parent or
any affiliate of Parent, shall have become the beneficial owner of more than 50%
of the then outstanding Shares; or
(h) By either Parent or the Company if the other party shall have
breached this Agreement hereunder in any material respect and such breach
continues for a period of ten days after the receipt of notice of the breach
from the nonbreaching party.
SECTION 8.02. Effect of Termination. In the event of termination of
---------------------
this Agreement as provided in Section 8.01 hereof, this Agreement shall
forthwith become void and there shall be no liability on the part of Parent,
Merger Sub or the Company, except (i) as set forth in Sections 8.03, 8.04 and
9.01 hereof, and (ii) nothing herein shall relieve any party from liability for
any willful breach hereof.
SECTION 8.03. Agreement Termination Fee. (a) If this Agreement is
-------------------------
terminated pursuant to Section 8.01(e) or (g) or terminated by Parent pursuant
to Section 8.01(h), the Company shall pay Parent a fee of $8,000,000 plus
Parent's actual documented out-of-pocket expenses incurred since September 13,
1994 in connection with this Agreement
<PAGE>
50
and the transactions contemplated hereby (including the previous offer referred
to in the Previous 14D-9), including, without limitation legal and professional
fees and expenses.
(b) Any payment required to be made pursuant to Section 8.03(a) shall
be made not later than one business day after termination of this Agreement and
shall be made by wire transfer of immediately available funds to an account
designated by Parent.
SECTION 8.04. Offer Fee. (a) If, by December 19, 1994, Parent has
---------
not delivered to the Company either a revised Commitment Letter or definitive
loan documentation reflecting the financing contemplated by such Commitment
Letter which, in each case (i) do not contain any due diligence conditions
regarding Parent and the Company and its Subsidiaries and (ii) have a definition
of "material adverse effect" and/or "material adverse change" that substantially
conforms in all material respects with the definition of Material Adverse Effect
(other than as provided in subclause (i) thereof) contained herein with respect
to Parent and the Company, then Parent shall owe the Company a fee of $8,000,000
payable in accordance with and to the extent provided in subsection (b) below.
(b) The $8,000,000 fee referred to in Section 8.04(a) shall be paid by
Parent to the Company only upon (i) termination or expiration of the Offer
without Merger Sub having accepted for payment the shares tendered pursuant
thereto or (ii) termination of this Agreement pursuant to Section 8.01(b)
(collectively, the "Offer Termination Events") unless failure to close the Offer
------------------------
results from one or more of the following:
(i) A Material Adverse Effect with respect to the Company
shall exist or shall have occurred and be continuing on or prior to
the relevant Offer Termination Event;
(ii) The Company shall have materially breached this Agreement
and Parent shall have terminated this Agreement under Section 8.01(h),
in each case on or prior to the relevant Offer Termination Event; or
(iii) Generally accepted accounting principles would require a
restatement of the Company's audited financial statements contained in
the Company SEC Reports.
(c) Any payment required to be made pursuant to Section 8.04 shall be
made not later than one business day after the occurrence of an Offer
Termination Event and shall be made by wire transfer of immediately available
funds to an account designated by the Company.
<PAGE>
51
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
-----------------------------------------------
Agreements. The representations, warranties and agreements in this Agreement
- - ----------
shall terminate at the Effective Time or the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Article I and Section 6.08 shall survive the Effective Time
indefinitely and those set forth in Sections 6.05(b), 6.05(c), 6.10 and 9.03
shall survive termination indefinitely.
SECTION 9.02. Notices. All notices and other communications given or
-------
made pursuant hereto shall be in writing and shall be deemed to have been duly
given or made as of the date delivered or mailed if delivered personally or
mailed by registered or certified mail (postage prepaid, return receipt
requested) to the parties at the following addresses (or at such other address
for a party as shall be specified by like notice, except that notices of changes
of address shall be effective upon receipt):
(a) if to Parent or Merger Sub
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
Attention: Steven A. McArthur, Esq.
with a copy to:
Willkie Farr & Gallagher
One Citicorp Center
153 East 53rd Street
New York, New York 10022
Attention: Peter J. Hanlon, Esq.
(b) if to the Company:
Magma Power Company
4365 Executive Drive, Suite 900
San Diego, California 92121
Attention: Jon R. Peele, Esq.
with a copy to:
Shearman & Sterling
<PAGE>
52
555 California Street
San Francisco, California 94104
Attention: Michael J. Kennedy, Esq.
SECTION 9.03. Expenses. Except as is provided in Section 8.03
--------
hereof, all costs and expenses incurred in connection with this Agreement and
the transactions contemplated hereby shall be paid by the party incurring such
costs and expenses.
SECTION 9.04. Certain Definitions. For purposes of this Agreement,
-------------------
the term: (a) "affiliate" of a person means a person that directly or
---------
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, the first mentioned person;
(b) "control" (including the terms "controlled by" and "under common
------- ------------- ------------
control with") means the possession, direct or indirect, of the power to direct
- - ------------
or cause the direction of the management and policies of a person, whether
through the ownership of stock, as trustee or executor, by contract or credit
arrangement or otherwise; and
(c) "person" means an individual, corporation, partnership,
------
association, trust or any unincorporated organization.
SECTION 9.05. Headings. The headings contained in this Agreement are
--------
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.06. Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
adverse to any party. Upon such determination that any term or other provision
is invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner to the end
that transactions contemplated hereby are fulfilled to the maximum extent
possible.
SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersedes any and all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof and, except as otherwise
expressly provided herein and for the provisions of Sections 2.10, 6.05 and 6.10
hereof, is not intended to confer upon any other person any rights or remedies
hereunder.
<PAGE>
53
SECTION 9.08. Waiver. At any time before the Effective Time, any
------
party hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein. Any agreement on the part of a party
hereto to any such extension or waiver shall be valid only as against such party
and only if set forth in an instrument in writing signed by such party.
SECTION 9.09. Amendment. This Agreement may be amended by the
---------
parties hereto by action taken by Parent and Merger Sub, and by action taken by
or on behalf of the Company's Board of Directors at any time before the
Effective Time, provided, however, that, after approval of the Merger by the
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stockholders of the Company, no amendment may be made which would materially
adversely impact the interests of the Company's stockholders or reduce the
amount or change the type of consideration into which each Share will be
converted upon consummation of the Merger. This Agreement may not be amended
except by an instrument in writing signed by the parties hereto.
SECTION 9.10. Assignment. This Agreement shall not be assigned by
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operation of law or otherwise, except that Parent and Merger Sub may assign all
or any of their rights hereunder to any affiliate of Parent provided that no
such assignment shall relieve the assigning party of its obligations hereunder.
SECTION 9.11. Governing Law. This Agreement shall be governed by,
-------------
and construed in accordance with, the internal laws of the State of Delaware.
SECTION 9.12. Counterparts. This Agreement may be executed in one or
------------
more counterparts and by facsimile, 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 shall constitute one and the same agreement.
<PAGE>
54
IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused
this Agreement to be executed as of the date first written above by their
respective officers thereunto duly authorized.
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ DAVID L. SOKOL
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Name: David L. Sokol
Title: Chairman, President and
Chief Executive Officer
CE ACQUISITION COMPANY, INC.
By: /s/ DAVID L. SOKOL
----------------------------------------------
Name: David L. Sokol
Title: Chairman, President and
Chief Executive Officer
MAGMA POWER COMPANY
By: /s/ RALPH W. BOEKER
----------------------------------------------
Name: Ralph W. Boeker
Title: President and Chief Executive
Officer
<PAGE>
ANNEX I
CONDITIONS TO THE OFFER
Notwithstanding any other provision of the Offer, Merger Sub shall not be
required to accept for payment or pay for, or may delay the acceptance for
payment of or payment for, tendered Shares, or may, in the sole discretion of
Merger Sub, terminate or amend the Offer as to any Shares not then paid for if
(i) at the Expiration Date the Minimum Tender Condition or the Financing
Condition shall not have been satisfied or waived, or (ii) on or after December
9, 1994, and at or before the acceptance for payment for any of such Shares, any
of the following events shall occur:
(a) there shall be instituted or pending any action or proceeding by
any government or governmental authority or agency, domestic or foreign, or by
any other person, domestic or foreign, before any court or governmental
authority or agency, domestic or foreign, (i) challenging or seeking to make
illegal, to delay or otherwise directly or indirectly to restrain or prohibit
the making of the Offer, the acceptance for payment of or payment for some of or
all the Shares by Merger Sub or any other affiliate of Parent, the consummation
by Merger Sub of the Merger or seeking to obtain material damages, (ii) seeking
to prohibit the ownership or operation by Merger Sub of all or any material
portion of the business or assets of the Company and its subsidiaries or of
Merger Sub, or to compel Merger Sub to dispose of or hold separately all or any
material portion of the business or assets of Merger Sub or the Company or any
of its subsidiaries or seeking to impose any material limitation on the ability
of Merger Sub or any other affiliates of Parent to conduct their business or own
such assets, (iii) seeking to impose or confirm limitations on the ability of
Merger Sub or any other affiliates of Parent effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to vote any
Shares acquired by any such person on all matters properly presented to the
Company's stockholders, (iv) seeking to require divestiture by Merger Sub or any
other affiliates of Parent of any Shares, or (v) seeking any material diminution
in the benefits expected to be derived by Merger Sub or any other affiliates of
Parent as a result of the transactions contemplated by the Offer or the Merger;
(b) there shall be any action taken, or any statute, rule, regulation,
interpretation, judgment, order or injunction enacted, enforced, promulgated,
amended, issued or deemed applicable (i) to Merger Sub or (ii) to the Offer or
the Merger by any court, government or governmental, administrative or
regulatory authority or agency, domestic or foreign, other than the routine
application of the waiting period provisions of the HSR Act to the Offer or to
the Merger, which might, directly or indirectly, result in any of the
consequences referred to in clauses (i) through (v) of paragraph (a) above;
(c) it shall have been publicly disclosed or Merger Sub shall have
otherwise learned that (i) any person, entity (including the Company or any of
its subsidiaries) or "group" (within the meaning of Section 13(d)(3) of the
Exchange Act) shall have acquired beneficial ownership of more than 20% of any
class or series of capital stock
I-1
<PAGE>
of the Company (including the Shares), through the acquisition of stock, the
formation of a group or otherwise, or shall have been granted any right, option
or warrant, conditional or otherwise, to acquire beneficial ownership of more
than 20% or any class or series of capital stock of the Company (including the
Shares) other than acquisitions for bona fide arbitrage purposes only and except
as disclosed in a Schedule 13D or 13G on file with the SEC on December 5, 1994
or (ii) any such person, entity or group which before December 5, 1994, had
filed such a Schedule with the SEC has acquired or proposes to acquire, through
the acquisition of stock, the formation of a group or otherwise, beneficial
ownership of an additional 5% or more of any class or series of capital stock of
the Company (including the Shares), or shall have been granted any right, option
or warrant, conditional or otherwise, to acquire beneficial ownership of an
additional 5% or more of any class or series of capital stock of the Company
(including the Shares); provided, however, that if such person or group acquired
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the shares without the Company's consent and the Company has not taken any
action under its Rights Plan to exempt such acquisition from the terms thereof,
then the foregoing condition shall be inapplicable;
(d) the Company shall have failed to comply with in any material
respect any of its obligations under the Agreement or any representation or
warranty of the Company in such Agreement shall not be true and correct in any
material respect and such failure to comply or be true and correct shall have a
Material Adverse Effect;
(e) a Material Adverse Effect with respect to the Company shall have
occurred;
(f) this Agreement shall have been terminated in accordance with its
terms; or
(g) the Company's Board of Directors shall have withdrawn, modified
or amended in any unfavorable respect its recommendation of the Offer or shall
have resolved to do so or shall have entered into an agreement with a third
party with respect to a Competing Transaction;
which, in the good faith judgment of Parent and Merger Sub with respect to each
and every matter referred to above and regardless of the circumstances
(including any action or inaction by Parent or Merger Sub) giving rise to any
such condition, makes it inadvisable to proceed with the Offer or with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent and Merger
Sub and may be asserted by Parent or Merger Sub or may be waived by Parent or
Merger Sub in whole or in part at any time and from time to time in its sole
discretion.
I-2
<PAGE>
FOR IMMEDIATE RELEASE
Contact:
For California Energy
David L. Sokol - Chairman and Chief Executive Officer (402) 330-8900
Mark H. Harnett, MacKenzie Partners (212) 929-5500
Contact:
For Magma Power
Thomas Davies, Kekst & Co. (212) 593-2655
Andrea Bergofin, Kekst & Co.
CALIFORNIA ENERGY AND MAGMA POWER REACH
MERGER AGREEMENT AT $39 PER SHARE
Omaha, Nebraska and San Diego, California, December 5, 1994 - California
Energy Company, Inc. (NYSE, PSE, LSE: CE) and Magma Power Company (NASDAQ: MGMA)
today announced that they have entered into a definitive merger agreement which
provides for Magma shareholders to receive a price of $39 net per share in a
combination of $28.50 in cash and $10.50 in market value of California Energy
common stock, or approximately $950 million in aggregate value on a fully
diluted basis.
Pursuant to the terms of the agreement, California Energy will commence no
later than Friday, December 9 a cash tender offer for a majority of Magma's
common stock at $39 per share in cash. The tender offer will remain open for 20
days, and if over-subscribed, will be pro-rated. As soon as practicable
thereafter, California Energy will complete the acquisition of all remaining
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<PAGE>
shares in a second step merger transaction by issuing for each Magma share a
combination of cash and California Energy common shares totalling $39, or, at
its option, approximately $38.50 per share in cash. If California Energy stock
is to be received in the merger, the number of shares to be issued will be
increased or decreased by up to 13.5% based on the difference between $16.50 and
the average daily closing price of California Energy during the fifteen trading
days ending on the fifth business day prior to the consummation of the merger.
California Energy's tender offer is subject to valid tender of shares
representing a majority of the voting power of Magma, funding of financing, and
other customary closing conditions. In addition, the merger (though not the
tender) is conditioned, if California Energy shares are to be issued, on
approval of California Energy's shareholders. Under the agreement, Magma has
agreed to render Magma's shareholders rights plan inapplicable to the tender
offer and merger and to waive applicable Nevada anti-takeover statutes. The
Hart-Scott-Rodino antitrust waiting period has expired with respect to the
transaction. The parties have also agreed to terminate all litigation between
them.
The agreement has been approved by the Boards of Directors of both
companies. Magma Power's Board has determined, after thoroughly exploring
alternatives in consultation with its independent financial advisors, that the
terms of the offer and merger are fair to, and in the best interests of, its
stockholders and recommends that stockholders tender their Magma shares into
California Energy's tender offer.
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Following the merger, the combined companies will have projected annual
revenues in excess of $400 million, its facilities will produce in excess of
545MW of power and will have an additional 530MW of power under construction.
The combined companies will constitute the largest independent geothermal power
company in the world with operations in the U.S., Philippines and Indonesia.
David L. Sokol, Chairman and Chief Executive Officer of California Energy,
said: "The combination of our two organizations creates a geothermal company
with unparalleled technical, geological, developmental and operational skills.
We fully believe that this merger will accelerate the achievement of our
strategic objectives and will enhance our international expansion efforts. We
welcome the family of talented Magma employees onto our team and we anticipate a
smooth transition."
Paul Pankratz, Chairman of Magma, said: "We believe this transaction
reflects Magma's inherent strengths and outstanding prospects. The combined
company will be the largest and most technically advanced global competitor in
the geothermal energy industry -- well positioned to capitalize on growth
opportunities worldwide.
Ralph Boeker, President and Chief Executive Officer of Magma, said: "Magma
brings excellent people, technology and projects into this combination. We look
forward to working with California Energy to ensure the success of this great
combined company."
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California Energy Company is an international developer, owner and operator
of geothermal and other environmentally responsible power generation facilities.
Its six existing facilities currently produce in excess of 325MW of power with
an additional 300MW under construction.
Magma Power Company is a leader in the geothermal industry. The company
currently operates seven geothermal plants in Southern California on geothermal
leaseholds and fee interests in other parts of California and Nevada. Magma is
also currently constructing a power plant in the Philippines with a total
capacity of 231MW.
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