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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
CALIFORNIA ENERGY COMPANY, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 1-9874 94-2213782
(STATE OR OTHER (COMMISSION FILE NUMBER) (IRS EMPLOYER
JURISDICTION OF INCORPORATION) IDENTIFICATION NO.)
10831 OLD MILL ROAD, OMAHA, NEBRASKA 68154
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (402) 330-8900
NOT APPLICABLE
(FORMER NAME OR FORMER ADDRESS, IF CHANGED FROM LAST REPORT)
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ITEM 5. OTHER EVENTS
On December 5, 1994, California Energy Company, Inc., a Delaware
corporation (the "Registrant"), CE Acquisition Company, Inc., a Delaware
corporation and a wholly owned subsidiary of the Registrant (the
"Purchaser"), and Magma Power Company, a Nevada corporation ("Magma"),
executed an Agreement and Plan of Merger, dated as of December 5, 1994 (the
"Merger Agreement"), pursuant to which the Purchaser has commenced the Offer
(as defined below) and, as soon as practicable after consummation of the
Offer, will merge with and into Magma (the "Merger"). Magma will survive the
Merger and become a wholly-owned subsidiary of the Registrant.
Pursuant to the Merger Agreement, on December 9, 1994, the Registrant and
the Purchaser commenced a tender offer (the "Offer") to purchase 12,400,000
shares of common stock, par value $0.10 per share, of Magma (the "Shares"),
for $39.00 per Share, net to the seller in cash, without interest thereon.
The 12,400,000 Shares sought pursuant to the Offer constitute approximately
51% of the Shares on a fully diluted basis. The Offer will expire at 12:00
midnight, New York City time, on Monday, January 9, 1995, unless the Offer is
extended.
Upon the effectiveness of the Merger, each outstanding Share (other than
Shares held by the Registrant and the Purchaser) will be converted in the
Merger into the right to receive, at the option of the Registrant, (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 common stock, par value $0.0675 per share, of the
Registrant (the "Registrant 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 (as defined in the Merger Agreement) less (y) $39.00
multiplied by the number of Shares owned by Registrant 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 the
Registrant 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 the Registrant 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 the Registrant
and any of its affiliates). The "Average Closing Price" shall mean the
average closing price of Registrant Common Stock on the New York Stock
Exchange 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 (such proviso being the "Collar Provision").
The foregoing formula for determining the consideration to be paid in the
Merger was determined so that (i) if CECI determines to pay the Merger
Consideration with a combination of cash and CECI Common Stock, the
consideration paid by CECI in the Offer and the Merger would consist, on a
blended basis, of $28.50 per Share in cash and $10.50 per Share in market
value of CECI Common Stock, based on the Average Closing Price and subject to
the Collar Provision, and (ii) if CECI determines to pay only cash
consideration in the Merger, the blended consideration paid by CECI in the
Offer and the Merger would be $38.75 per Share. The consideration to be paid
in the Offer and the Merger, including the terms of the Collar Provision, was
negotiated on an arms' length basis between CECI and the Company. The purpose
of the Collar Provision is to limit the number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price is less than
$14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73.
The Purchaser estimates that the total amount of funds required to
purchase all Shares sought pursuant to the Offer will be approximately $483.6
million. The Purchaser estimates that approximately an additional $212.5
million will be required to effectuate the Merger or, if CECI elects to pay
only cash consideration in the Merger, approximately an additional $463
million will be required.
1
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On December 9, 1994, the Purchaser filed a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1") relating to the Offer with the
Securities and Exchange Commission pursuant to Rule 14d-3 under the
Securities Exchange Act of 1934, as amended, a copy of which is attached
hereto as Exhibit 99.1. The foregoing description is qualified in its
entirety by reference to the Offer to Purchase, dated December 9, 1994, which
appears as Exhibit (a)(1) to the Schedule 14D-1, and the Merger Agreement,
which appears as Exhibit (c)(3) to the Schedule 14D-1, both of which are
hereby incorporated herein by reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial statements of businesses acquired: None.
(b) Pro forma financial information: None.
(c) Exhibits:
99.1 Tender Offer Statement on Schedule 14D-1 filed with the
Securities and Exchange Commission on December 9, 1994 pursuant
to the Securities Exchange Act of 1934, as amended.
2
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SIGNATURES
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 hereunto duly authorized.
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
Name: Steven A. McArthur
Title: Senior Vice President, General
Counsel and Secretary
December 9, 1994
3
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EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT PAGE
- ----------- ---------------------------------------------------------------------------------- --------
<S> <C>
99.1 Tender Offer Statement on Schedule 14D-1 filed with the Securities and Exchange
Commission on December 9, 1994 pursuant to the Securities Exchange Act of 1934, as
amended.
</TABLE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-1
(TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
MAGMA POWER COMPANY
(Subject Company)
CALIFORNIA ENERGY COMPANY, INC.
CE ACQUISITION COMPANY, INC.
(Bidders)
COMMON STOCK, PAR VALUE $0.10 PER SHARE
(Title of Class of Securities)
94-2213782
(CUSIP Number of Class of Securities)
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALIFORNIA ENERGY COMPANY, INC.
10831 OLD MILL ROAD
OMAHA, NEBRASKA 68194
(402) 330-8900
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Copies to:
PETER J. HANLON, ESQ.
MICHAEL A. SCHWARTZ, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
CALCULATION OF FILING FEE
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Transaction Amount of
Valuation* Filing Fee**
- -------------------------------------------------------------------------------
<S> <C>
$483,600,000 $96,720
- -------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating the filing fee only. This calculation assumes
the purchase of 12,400,000 shares of Common Stock, par value $0.10 per
share, of Magma Power Company at $39.00 net per share in cash.
** The amount of the filing fee, calculated in accordance with Rule 0-11(d)
under the Securities Exchange Act of 1934, equals 1/50 of one percent of
the aggregate value of cash offered by CE Acquisition Company, Inc. for
such number of shares.
[ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the form
or schedule and date of its filing.
Amount Previously Paid: Not Applicable Filing Party: Not Applicable
Form or Registration No.: Not Applicable Date Filed: Not Applicable
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<PAGE>
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<TABLE>
<CAPTION>
<S> <C>
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons
California Energy Company, Inc.: 94-2213782
2) Check the Appropriate Box if a Member of a Group
(a) ...........................................................
(b) ............................................................
3) SEC Use Only .....................................................
4) Sources of Funds ............... WC, BK..............................
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items 2(e) or 2(f)........................................
6) Citizenship or Place of Organization .......... DE .......... ..........
7) Aggregate Amount Beneficially Owned by Each Reporting Person .... 200,000 ....
8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares .............
9) Percent of Class Represented by Amount in Row (7) .......... 0.8% ..........
10) Type of Reporting Person.............. CO ............................
</TABLE>
2
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<PAGE>
<TABLE>
<CAPTION>
<S> <C>
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons
CE Acquisition Company, Inc.: (applied for)
2) Check the Appropriate Box if a Member of a Group
(a) ................... X ......................................
(b) ...........................................................
3) SEC Use Only .....................................................
4) Sources of Funds............... WC, BK ..............................
5) Check if Disclosure of Legal Proceedings is Required
Pursuant to Items .................................................
6) Citizenship or Place of Organization .......... DE .......... ..........
7) Aggregate Amount Beneficially Owned by Each Reporting Person .... 200,000 ....
8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares .............
9) Percent of Class Represented by Amount in Row (7) .......... 0.8% ..........
10) Type of Reporting Person..................... CO .....................
</TABLE>
3
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ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Magma Power Company, a Nevada
corporation (the "Company"), which has its principal executive offices at
4365 Executive Drive, Suite 900, San Diego, California 92121.
(b) This Tender Offer Statement on Schedule 14D-1 relates to an offer by
CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a
wholly owned subsidiary of California Energy Company, Inc. ("CECI"), to
purchase 12,400,000 shares of common stock, par value $0.10 per share (the
"Shares"), of the Company at $39.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in the Offer to Purchase, dated December 9, 1994 (the "Offer to
Purchase") and the related Letter of Transmittal (which together with the
Offer to Purchase constitutes the "Offer"), copies of which are attached
hereto as Exhibits (a)(1) and (a)(2), respectively. The information set forth
in the Introduction to the Offer to Purchase is incorporated herein by
reference.
(c) The information concerning the principal market for, and the prices
of, the Shares set forth in Section 6 "Price Range of Shares; Dividends" of
the Offer to Purchase is incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d), (g) The information set forth in the Introduction and Section 9
"Certain Information Concerning the Purchaser and CECI" of the Offer to
Purchase and Schedule I thereto is incorporated herein by reference.
(e)-(f) During the last five years, neither the Purchaser, CECI nor any
persons controlling the Purchaser, nor, to the best of Purchaser's knowledge,
any of the persons listed on Schedule I to the Offer to Purchase, has during
the last five years (i) been convicted in a criminal proceeding (excluding
traffic violations or similar misdemeanors) or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and
as a result of such proceeding was or is subject to a judgment, decree or
final order enjoining future violations of, or prohibiting activities subject
to, federal or state securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS
WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 "Certain Information
Concerning the Purchaser and CECI", Section 10 "Background of the Offer;
Contacts with the Company" and Section 11 "Purpose of the Offer; the Merger
Agreement" of the Offer to Purchase is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 13 "Source and Amount of
Funds" of the Offer to Purchase is incorporated herein by reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(e) The information set forth in the Introduction and Section 11
"Purpose of the Offer; the Merger Agreement" and Section 10 "Background of
the Offer; Contacts with the Company" of the Offer to Purchase is
incorporated herein by reference.
(f)-(g) The information set forth in Section 7 "Effect of the Offer on the
Market for the Shares and Exchange Act Registration" of the Offer to Purchase
is incorporated herein by reference.
4
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ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) The information set forth in the Introduction and Section 9 "Certain
Information Concerning the Purchaser and CECI" of the Offer to Purchase is
incorporated herein by reference.
(b) None.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in the Introduction and Section 9 "Certain
Information Concerning the Purchaser and CECI", Section 11 "Purpose of the
Offer; the Merger Agreement" and Section 12 "Certain Conditions of the Offer"
of the Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in the Introduction and Section 16 "Fees and
Expenses" of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 "Certain Information Concerning the
Purchaser and CECI" of the Offer to Purchase is incorporated herein by
reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) None.
(b) and (c) The information set forth in the Introduction and Section 15
"Certain Legal Matters" of the Offer to Purchase is incorporated herein by
reference.
(d) The information set forth in Section 7 "Effect of the Offer on the
Market for the Shares and Exchange Act Registration", Section 12 "Certain
Conditions of the Offer" and Section 15 "Certain Legal Matters" of the Offer
to Purchase is incorporated herein by reference.
(e) The information set forth in Section 15 "Certain Legal Matters" of the
Offer to Purchase is incorporated herein by reference.
(f) The information set forth in the Offer to Purchase and the Letter of
Transmittal, copies of which are attached hereto as Exhibits (a)(1) and
(a)(2), respectively, is incorporated herein by reference in its entirety.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<CAPTION>
<S> <C>
(a)(1) Offer to Purchase, dated December 9, 1994.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to their
Clients.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9.
(a)(7) Form of Summary Advertisement, dated December 9, 1994.
(a)(8) Text of Press Release issued by California Energy Company, Inc. and Magma Power Company dated
December 5, 1994.
(a)(9) Text of Press Release issued by California Energy Company, Inc. dated December 9, 1994.
5
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<PAGE>
(b)(1) Commitment Letter, dated October 25, 1994, to California Energy Company, Inc. and CE Acquisition
Company, Inc. from Credit Suisse.
(c)(1) Engagement Letter, dated September 18, 1994, between California Energy Company, Inc. and Gleacher
& Co. Inc.
(c)(2) Engagement Letter, dated September 27, 1994, between California Energy Company, Inc. and Lehman
Brothers Inc.
(c)(3) Agreement and Plan of Merger, dated as of December 5, 1994, among California Energy Company,
Inc., CE Acquisition Company, Inc. and Magma Power Company.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
6
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SIGNATURES
After due inquiry and to the best of my knowledge and belief, I certify
that the information set forth in this statement is true, complete and
correct.
Dated: December 9, 1994
CE ACQUISITION COMPANY, INC.
By: /s/ Steven A. McArthur
------------------------------
Steven A. McArthur, Esq.
Senior Vice President
General Counsel and Secretary
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
------------------------------
Steven A. McArthur, Esq.
Senior Vice President
General Counsel and Secretary
7
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EXHIBIT INDEX
<TABLE>
<CAPTION>
PAGE NO. IN
SEQUENTIALLY NUMBERED
EXHIBIT NO. DESCRIPTION SCHEDULE
- ----------- ------------------------------------------------------------------------ ------------------------
<S> <C> <C>
(a)(1) Offer to Purchase, dated December 9, 1994.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other
Nominees to their Clients.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9.
(a)(7) Form of Summary Advertisement, dated December 9, 1994.
(a)(8) Text of Press Release issued by California Energy Company, Inc. and Magma
Power Company dated December 5, 1994
(a)(9) Text of Press Release issued by California Energy Company, Inc. dated December
9, 1994.
(b)(1) Commitment Letter, dated October 25, 1994, to California Energy Company, Inc.
and CE Acquisition Company, Inc. from Credit Suisse.
(c)(1) Engagement Letter, dated September 18, 1994, between California Energy Company,
Inc. and Gleacher & Co. Inc.
(c)(2) Engagement Letter, dated September 27, 1994, between California Energy Company,
Inc. and Lehman Brothers Inc.
(c)(3) Agreement and Plan of Merger, dated as of December 5, 1994, among California
Energy Company, Inc., CE Acquisition Company, Inc. and Magma Power Company.
(d) None.
(e) Not Applicable.
(f) None.
</TABLE>
<PAGE>
OFFER TO PURCHASE FOR CASH
12,400,000 SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
AT
$39.00 NET PER SHARE
BY
CE ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALIFORNIA ENERGY COMPANY, INC.
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995,
UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF MAGMA POWER COMPANY (THE "COMPANY"), BY
UNANIMOUS VOTE OF THOSE PRESENT, HAS DETERMINED THAT THE OFFER AND MERGER
DESCRIBED HEREIN ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND
ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT
STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY OWNED BY THE PURCHASER,
REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED
BASIS, AND (2) THE PURCHASER BEING SATISFIED THAT IT HAS OBTAINED FINANCING
SUFFICIENT TO ENABLE IT TO CONSUMMATE THE OFFER. THE OFFER IS ALSO SUBJECT TO
CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 12.
IMPORTANT
On December 5, 1994, California Energy Company, Inc., the Purchaser and
the Company entered into an Agreement and Plan of Merger, which provides,
among other things, that as promptly as practicable following consummation of
the Offer the Purchaser will effect a merger between the Company and the
Purchaser. See Section 11.
Any stockholder desiring to tender all or any portion of his Shares should
either (1) complete and sign the enclosed Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, have his signature thereon guaranteed if required by Instruction
1 of the Letter of Transmittal and mail or deliver the Letter of Transmittal
or such facsimile with his certificates evidencing his Shares and any other
required documents to the Depositary, or follow the procedure for book-entry
transfer of Shares set forth in Section 4, or (2) request his broker, dealer,
commercial bank, trust company or other nominee to effect the transaction for
him. Stockholders having Shares registered in the name of a broker, dealer,
commercial bank, trust company or other nominee must contact such broker,
dealer, commercial bank, trust company or other nominee if they desire to
tender their Shares so registered. A stockholder who desires to accept the
Offer and tender Shares and whose certificates for such Shares are not
immediately available should tender such Shares by following the procedures
for guaranteed delivery set forth in Section 4.
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective address and telephone
number set forth on the back cover of this Offer to Purchase. Requests for
additional copies of this Offer to Purchase, the Letter of Transmittal and
other tender offer materials may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies.
The Dealer Manager for the Offer is:
GLEACHER & CO. INC.
December 9, 1994
<PAGE>
CAPITAL PRINTING SYSTEMS]
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TABLE OF CONTENTS
<TABLE>
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PAGE
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<S> <C> <C>
INTRODUCTION 1
THE TENDER OFFER 2
1. Terms of the Offer; Expiration Date; Proration ................................... 2
2. Acceptance for Payment and Payment for Shares .................................... 4
3. Withdrawal Rights ................................................................ 5
4. Procedure for Tendering Shares ................................................... 6
5. Certain Federal Income Tax Consequences .......................................... 8
6. Price Range of Shares; Dividends ................................................. 9
7. Effect of the Offer on the Market for the Shares and Exchange Act Registration .. 10
8. Certain Information Concerning the Company ....................................... 10
9. Certain Information Concerning the Purchaser and CECI ............................ 12
10. Background of the Offer; Contacts with the Company ............................... 13
11. Purpose of the Offer; the Merger Agreement ....................................... 16
12. Certain Conditions of the Offer .................................................. 26
13. Source and Amount of Funds ....................................................... 27
14. Dividends and Distributions ...................................................... 28
15. Certain Legal Matters ............................................................ 28
16. Fees and Expenses ................................................................ 32
17. Miscellaneous .................................................................... 32
Schedule I --Directors and Executive Officers of the Purchaser, CECI and PKS S-1
</TABLE>
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To All Holders of Shares of Common
Stock of Magma Power Company:
INTRODUCTION
CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and
a wholly owned subsidiary of California Energy Company, Inc., a Delaware
corporation ("CECI"), hereby offers to purchase 12,400,000 shares of Common
Stock, par value $0.10 per share ("Shares"), of Magma Power Company, a Nevada
corporation (the "Company"), at $39.00 per Share, net to the seller in cash,
without interest thereon, upon the terms and subject to the conditions set
forth in this Offer to Purchase and in the related Letter of Transmittal
(which together constitute the "Offer"). The 12,400,000 Shares sought
pursuant to the Offer constitute approximately 51% of the Shares on a fully
diluted basis. Tendering stockholders will not be obliged to pay brokerage
fees or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser
pursuant to the Offer. The Purchaser will pay all charges and expenses of
Gleacher & Co. Inc. (the "Dealer Manager"), Lehman Brothers Inc. ("Lehman"),
IBJ Schroder Bank & Trust Company (the "Depositary") and MacKenzie Partners,
Inc. (the "Information Agent") incurred in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY'S BOARD"), BY
UNANIMOUS VOTE OF THOSE PRESENT, HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS,
HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT
THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. GOLDMAN SACHS & CO.
("GOLDMAN SACHS") HAS DELIVERED ITS ORAL OPINION (WHICH IT SUBSEQUENTLY
CONFIRMED IN WRITING) TO THE COMPANY'S BOARD THAT, AS OF DECEMBER 5, 1994,
THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF THE SHARES IN THE OFFER
AND THE MERGER (AS DEFINED BELOW), TAKEN AS A UNITARY TRANSACTION, IS FAIR TO
THE HOLDERS OF SHARES RECEIVING SUCH CONSIDERATION (OTHER THAN CECI AND ITS
AFFILIATES).
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn before the expiration of the Offer that number of
Shares which, together with Shares beneficially owned by the Purchaser,
represents at least a majority of the Shares outstanding on a fully diluted
basis (such condition being referred to as the "Minimum Tender Condition"),
and (2) the Purchaser being satisfied that it has obtained financing
sufficient to enable it to consummate the Offer (such condition being
referred to as the "Financing Condition"). See Section 12.
CECI, the Purchaser and the Company have entered into an Agreement and
Plan of Merger, dated as of December 5, 1994 (the "Merger Agreement"),
providing for, among other things, the Offer and the Merger. Pursuant to the
Merger Agreement, the Purchaser will, as soon as practicable following
consummation of the Offer, consummate a merger (the "Merger") with the
Company. In the Merger, each outstanding Share (other than Shares held by
CECI, the Purchaser or any other direct or indirect subsidiary of CECI,
Shares held in the treasury of the Company and Shares held by stockholders
who properly exercise dissenters' rights under the Nevada General Corporation
Law (the "NGCL")) will be converted into the right to receive, at CECI's
option, either (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 common stock, par value
$0.0675 per share, of CECI ("CECI 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 (as defined below) less (y) $39.00 multiplied by the number of
Shares owned by CECI 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 CECI 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
CECI 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 CECI and any of its affiliates). The "Average Closing
Price" shall mean the average closing price of CECI Common Stock on the New
York Stock Exchange (the "NYSE") during the 15 consecutive trading days
ending on the fifth
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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 (such proviso being referred to herein as the
"Collar Provision").
The foregoing formula for determining the consideration to be paid in the
Merger was determined so that (i) if CECI determines to pay the Merger
Consideration with a combination of cash and CECI Common Stock, the
consideration paid by CECI in the Offer and the Merger would consist, on a
blended basis, of $28.50 per Share in cash and $10.50 per Share in market
value of CECI Common Stock, based on the Average Closing Price and subject to
the Collar Provision, and (ii) if CECI determines to pay only cash
consideration in the Merger, the blended consideration paid by CECI in the
Offer and the Merger would be $38.75 per Share. The consideration to be paid
in the Offer and the Merger, including the terms of the Collar Provision, was
negotiated on an arms' length basis between CECI and the Company. The purpose
of the Collar Provision is to limit the number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price is less than
$14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73.
The Purchaser estimates that the total amount of funds required to
purchase all Shares sought pursuant to the Offer will be approximately $483.6
million. The Purchaser estimates that approximately an additional $212.5
million will be required to effectuate the Merger or, if CECI elects to pay
only cash consideration in the Merger, approximately an additional $463
million will be required. The Purchaser will obtain such funds through
borrowings from commercial banks and other financial institutions; through a
capital contribution by CECI from CECI's general corporate funds, which at
September 30, 1994 aggregated $316.3 million; and, if the Purchaser elects to
pay only cash consideration in the Merger, through a public offering or
private placement of CECI Common Stock or other equity securities of CECI. It
is CECI's current intention to pay the Merger Consideration solely in cash,
although such intention is subject to change based on market conditions and
other factors. The Purchaser anticipates that approximately one-half of the
cash required to purchase Shares pursuant to the Offer and the Merger will be
provided through a secured bank credit facility on terms and conditions to be
determined. See Section 13.
Certain other conditions to consummation of the Offer are described in
Section 12. The Purchaser expressly reserves the right to waive any one or
more of the conditions to the Offer. See Section 12.
THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT
INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
THE TENDER OFFER
1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. On December 5, 1994,
CECI, the Purchaser and the Company announced that they had signed the Merger
Agreement and that the Purchaser would commence the Offer. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any extension or amendment), the
Purchaser will accept for payment and pay for an aggregate of 12,400,000
Shares (or such greater number of Shares as the Purchaser may elect to accept
for payment and pay for pursuant to the Offer) tendered on or before the
Expiration Date (as defined below) and not theretofore withdrawn in
accordance with Section 3. The term "Expiration Date" means 12:00 Midnight,
New York City time, on Monday, January 9, 1995, unless and until the
Purchaser, in its sole discretion, shall have extended the period of time for
which the Offer is open, in which event the term "Expiration Date" shall mean
the latest time and date at which the Offer, as so extended by the Purchaser,
shall expire. For purposes of the Offer, a "business day" means any day other
than a Saturday, Sunday or federal holiday and consists of the time period
from 12:01 A.M. through 12:00 Midnight, New York City time. Pursuant to the
Merger Agreement, the Purchaser is required to use its best efforts to
consummate the Offer as promptly as practicable and, if the Expiration Date
is extended beyond February 28, 1995, the Company has the right to terminate
the Merger Agreement and, pursuant to the Standstill Agreement (as defined
below), to require the Purchaser to terminate the Offer and refrain from
purchasing Shares for a period of three years. See Section 11.
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Consummation of the Offer is conditioned upon, among other things,
satisfaction of the Minimum Tender Condition and the Financing Condition. If
any or all of such conditions or any or all of the other conditions set forth
in Section 12 are not satisfied on or prior to the Expiration Date, the
Purchaser may elect to (i) extend the Offer and retain all tendered Shares
until the expiration of the Offer, as extended, subject to the terms of the
Offer (including any rights of the stockholders to withdraw their Shares),
(ii) terminate the Offer and not accept for payment any Shares and return all
tendered Shares to tendering stockholders or (iii) waive any or all other
conditions and, subject to complying with applicable rules and regulations of
the Securities and Exchange Commission (the "Commission"), accept for payment
all Shares validly tendered and not withdrawn.
If more than 12,400,000 Shares shall be properly tendered on or prior to
the Expiration Date and not withdrawn, and the acquisition of such number of
Shares satisfies the Minimum Tender Condition, the Purchaser will, upon the
terms and subject to the conditions of the Offer, purchase 12,400,000 Shares
on a pro rata basis (with adjustments to avoid purchases of fractional
Shares) based upon the number of Shares properly tendered on or prior to the
Expiration Date and not withdrawn. If exactly 12,400,000 Shares are properly
tendered on or prior to the Expiration Date and not withdrawn, and the
acquisition of such number of Shares satisfies the Minimum Tender Condition,
the Purchaser will, upon the terms and subject to the conditions of the
Offer, accept for payment and purchase all such Shares so tendered. If fewer
than 12,400,000 Shares shall have been properly tendered on or prior to the
Expiration Date and not withdrawn and the number of Shares so tendered and
not withdrawn shall not have satisfied the Minimum Tender Condition, the
Purchaser may (i) terminate the Offer and return all tendered Shares to
tendering shareholders, (ii) extend the Offer and retain all such Shares
until the expiration of the Offer, as extended, subject to the terms of the
Offer (including any rights of stockholders to withdraw their Shares), or
(iii) waive the Minimum Tender Condition and purchase all properly tendered
Shares. See Section 12.
Due to the difficulty of determining the precise number of Shares properly
tendered and not withdrawn, if proration is required the Purchaser does not
expect to announce the final results of proration or pay for any Shares until
at least seven Nasdaq National Market ("NNM") trading days after the
Expiration Date. Preliminary results of proration will be announced by press
release as promptly as practicable after the Expiration Date. Holders of
Shares may obtain such preliminary information when it becomes available from
the Information Agent and may be able to obtain such information from their
brokers.
The Purchaser expressly reserves the right, in its sole judgment, at any
time or from time to time, and regardless of whether any of the events set
forth in Section 12 shall have occurred or shall have been determined by the
Purchaser to have occurred, (i) to extend the period of time during which the
Offer is open and thereby delay acceptance for payment of, and the payment
for, any Shares, by giving oral or written notice of such extension to the
Depositary and (ii) to amend the Offer in any respect (but only, in the case
of an amendment that decreases the consideration to be paid in the Offer or
imposes additional conditions from those set forth in Section 12, with the
consent of the Company) by giving oral or written notice of such amendment to
the Depositary. The rights reserved by the Purchaser in this paragraph are in
addition to the Purchaser's rights to terminate the Offer pursuant to Section
12. Any such extension, amendment or termination will be followed as promptly
as practicable by public announcement thereof, such announcement in the case
of an extension to be issued not later than 9:00 A.M., New York City time, on
the next business day after the previously scheduled Expiration Date. The
manner in which the Purchaser will make such public announcement may, if
appropriate, be limited to a release to the Dow Jones News Service. The
reservation by the Purchaser of the right to delay acceptance for payment of
or payment for any Shares is subject to the provisions of applicable law,
which require that the Purchaser pay the consideration offered or return the
Shares deposited by or on behalf of stockholders promptly after termination
or withdrawal of the Offer.
If the Purchaser decides to increase or decrease the consideration to be
paid in the Offer, or to increase or decrease the number of Shares being
sought (other than an increase in the number of Shares being sought that does
not exceed 2% of the number of Shares outstanding), and if at the time that
notice of such increase or decrease is first published, sent or given to
holders of Shares in the manner specified
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above, the Offer is scheduled to expire at any time earlier than the
expiration of a period ending on the tenth business day from, and including,
the date that such notice is first so published, sent or given, the Offer
will be extended until the expiration of such period of ten business days. If
the Purchaser waives any material condition to the Offer (including the
Minimum Tender Condition), or amends the Offer in any other material respect,
the Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required to comply with the Commission's
interpretation of Rules 14d-4(c) and 14d-6(d) under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"). The minimum period during which
an offer must remain open following material changes in the terms of the
offer or information concerning the offer, other than a change in price or a
change in percentage of securities sought, will depend upon the facts and
circumstances, including the relative materiality of the change in terms or
information.
Pursuant to the Merger Agreement, the Company will promptly furnish CECI
and the Purchaser 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 will promptly furnish CECI
and the Purchaser with such additional information, including updated lists
of stockholders, mailing labels and security position listings, and such
other information and assistance as CECI and the Purchaser and their agents
may reasonably request for the purpose of communicating the Offer to the
record and beneficial holders of Shares.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended
or amended, the terms and conditions of any such extension or amendment), the
Purchaser will accept for payment, and will pay for, Shares validly tendered
before the Expiration Date and not properly withdrawn in accordance with
Section 3 (including Shares validly tendered and not withdrawn during any
extension of the Offer, if the Offer is extended, subject to the terms and
conditions of such extension) as soon as practicable after the Expiration
Date. In addition, the Purchaser expressly reserves the right, in its sole
discretion, to delay the acceptance for payment of or payment for Shares in
order to comply, in whole or in part, with any other applicable law. Any such
delays will be effected in compliance with Rule 14e-1(c) under the Exchange
Act (relating to the Purchaser's obligation to pay for or return tendered
Shares promptly after the termination or withdrawal of the Offer).
The per Share consideration paid to any stockholder pursuant to the Offer
will be the highest per Share consideration paid to any other stockholder
pursuant to the Offer. In all cases, payment for Shares accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares (or timely confirmation (a
"Book-Entry Confirmation") of the book-entry transfer of such Shares into the
Depositary's account at The Depository Trust Company, Midwest Securities
Trust Company or Philadelphia Depository Trust Company (collectively, the
"Book-Entry Transfer Facilities")), pursuant to the procedures set forth in
Section 4, (ii) a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, or an Agent's
Message (as defined below) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by a Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such
Book-Entry Transfer Facility tendering the Shares, that such participant has
received and agrees to be bound by the terms of the Letter of Transmittal and
that the Purchaser may enforce such agreement against the participant.
Payment for Shares accepted for payment pursuant to the Offer may be
delayed in the event of proration due to the difficulty of determining the
number of Shares validly tendered and not withdrawn. See Section 1.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares properly tendered to the Purchaser
and not withdrawn, if, as and when the Purchaser gives oral or written notice
to the Depositary of its acceptance for payment of the tenders of such
Shares.
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Payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price therefor with the Depositary, which will act as
agent for the tendering stockholders for purposes of receiving payment from
the Purchaser and transmitting payment to tendering stockholders. UNDER NO
CIRCUMSTANCE WILL THE PURCHASER PAY INTEREST ON THE PURCHASE PRICE FOR THE
SHARES, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason (including because of proration)
or are not paid for because of invalid tender, or if certificates are
submitted representing more Shares than are tendered, certificates
representing unpurchased or untendered Shares will be returned, without
expense to the tendering stockholder (or, in the case of Shares tendered by
book-entry transfer of such Shares into the Depositary's account at a
Book-Entry Transfer Facility as described in Section 4, such Shares will be
credited to an account maintained within such Book-Entry Transfer Facility),
as soon as practicable following the expiration, termination or withdrawal of
the Offer and determination of the final results of proration.
As required by Commission rules, if the Purchaser were to vary the terms
of the Offer by increasing the consideration to be paid per Share, the
Purchaser will pay such increased consideration for all Shares purchased
pursuant to the Offer, whether or not such Shares have been tendered prior to
such increase in consideration.
The Purchaser reserves the right to transfer or assign, in whole or from
time to time in part, to one or more direct or indirect subsidiaries of CECI,
the right to purchase all or any portion of the Shares tendered pursuant to
the Offer, but any such transfer or assignment will not relieve the Purchaser
of its obligations under the Offer and will in no way prejudice the rights of
tendering stockholders to receive payment for Shares validly tendered and
accepted for payment pursuant to the Offer.
3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3,
tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered
pursuant to the Offer may be withdrawn at any time before the Expiration Date
and, unless theretofore accepted for payment by the Purchaser as provided
herein, may also be withdrawn at any time after February 6, 1995.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered pursuant to the Offer is delayed, or if the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth herein, the Depositary
may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and
such Shares may not be withdrawn except to the extent that the tendering
stockholder is entitled to and duly exercises withdrawal rights as described
in this Section 3. Any such delay will be accompanied by an extension of the
Offer to the extent required by law.
In order for a withdrawal to be effective, a written, telegraphic or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase. Any notice of withdrawal must specify the name of the person
having tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and, if certificates for Shares have been tendered, the name of the
registered holder of Shares as set forth in the tendered certificate, if
different from that of the person who tendered such Shares. If certificates
for Shares ("Certificates") have been delivered or otherwise identified to
the Depositary, then, before the physical release of such Certificates, the
serial numbers shown on such Certificates must be submitted to the Depositary
and the signatures on the notice of withdrawal must be guaranteed by a firm
which is a bank, broker, dealer, credit union, savings association or other
entity which is a member in good standing of the Securities Transfer Agent's
Medallion Program (collectively, "Eligible Institutions"), unless such Shares
have been tendered for the account of an Eligible Institution. If Shares have
been delivered pursuant to the procedures for book-entry delivery as set
forth in Section 4, any notice of withdrawal must also specify the name and
the number of the account at the appropriate Book-Entry Transfer Facility to
be credited with the withdrawn Shares and otherwise comply with such
Book-Entry Transfer Facility's procedures. Withdrawal of tenders of Shares
may not be rescinded, and any Shares properly withdrawn will be deemed not to
be validly tendered for purposes of the Offer. Withdrawn Shares may, however,
be retendered by repeating one of the procedures described in Section 4 at
any time before the Expiration Date.
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All questions as to the form and validity (including time of receipt) of
any notice of withdrawal will be determined by the Purchaser, in its sole
discretion, whose determination shall be final and binding. None of the
Purchaser, CECI, the Dealer Manager, the Depositary, the Information Agent or
any other person will be under any duty to give notification of any defects
or irregularities in any notice of withdrawal or will incur any liability for
failure to give any such notification.
4. PROCEDURE FOR TENDERING SHARES. To tender Shares validly pursuant to
the Offer, a stockholder must cause a properly completed and duly executed
Letter of Transmittal (or facsimile thereof), with any required signature
guarantees, or an Agent's Message in connection with a book-entry delivery of
Shares, and any other required documents, to be received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase
and must either cause certificates for tendered Shares to be received by the
Depositary at one of such addresses or cause such Shares to be delivered
pursuant to the procedures for book-entry delivery set forth below (and a
Book-Entry Confirmation to be received by the Depositary), in each case
before the Expiration Date, or (in lieu of the foregoing) such stockholder
must comply with the guaranteed delivery procedure set forth below.
The Depositary will establish accounts with respect to the Shares at the
Book-Entry Transfer Facilities for purposes of the Offer within two business
days after the date of this Offer to Purchase. Any financial institution that
is a participant in any of the Book-Entry Transfer Facilities' systems may
make book-entry delivery of the Shares by causing such Book-Entry Transfer
Facility to transfer such Shares into the Depositary's account in accordance
with such Book-Entry Transfer Facility's procedure for such transfer.
However, although delivery of Shares may be effected through book-entry
transfer into the Depositary's account at a Book-Entry Transfer Facility, the
Letter of Transmittal (or facsimile thereof), properly completed and duly
executed, with any required signature guarantees, or an Agent's Message in
connection with a book-entry delivery of Shares, and any other required
documents, must, in any case, be transmitted to and received by the
Depositary at one of its addresses set forth on the back cover of this Offer
to Purchase before the Expiration Date, or the tendering stockholder must
comply with the guaranteed delivery procedure described below.
DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH
SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY
TO THE DEPOSITARY.
Signatures on all Letters of Transmittal must be guaranteed by an Eligible
Institution, except in cases where Shares are tendered (i) by registered
holders of Shares (which term includes any participant in a Book-Entry
Transfer Facility whose name appears on a security position listing as the
owner of the Shares) who has not completed either the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on
the Letter of Transmittal or (ii) for the account of an Eligible Institution.
See Instruction 1 of the Letter of Transmittal. If the Certificates are
registered in the name of a person other than the signer of the Letter of
Transmittal, or if payment is to be made to a person other than the
registered owner of the Certificates surrendered, then the Certificates must
be endorsed or accompanied by duly executed stock powers, in either case
signed exactly as the name or names of the registered owner or owners appear
on the Certificates, with the signature(s) on the Certificates or stock
powers guaranteed as aforesaid. See Instruction 5 of the Letter of
Transmittal.
THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER
REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER
FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND
DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY.
IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED,
PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ENSURE TIMELY DELIVERY.
UNLESS AN EXEMPTION APPLIES UNDER THE APPLICABLE LAW AND REGULATIONS
CONCERNING "BACKUP WITHHOLDING" OF FEDERAL INCOME TAX, THE DEPOSITARY WILL BE
REQUIRED TO WITHHOLD, AND WILL WITHHOLD, 31% OF THE GROSS PROCEEDS OTHERWISE
PAYABLE TO A STOCKHOLDER OR OTHER PAYEE WITH RESPECT TO SHARES PURCHASED
PURSUANT TO THE OFFER IF THE STOCKHOLDER DOES NOT PROVIDE HIS TAXPAYER
IDENTIFICATION NUMBER (SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFICATION
NUMBER) AND CERTIFY THAT SUCH NUMBER IS CORRECT. EACH TENDERING STOCKHOLDER
SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL, SO AS TO PROVIDE THE
INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING, UNLESS
AN APPLICABLE EXEMPTION EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO THE
PURCHASER AND THE DEPOSITARY.
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If a stockholder desires to tender Shares pursuant to the Offer and such
stockholder's Certificates are not immediately available or such stockholder
cannot deliver the Certificates and all other required documents to the
Depositary before the Expiration Date, such Shares may nevertheless be
tendered, provided that all of the following conditions are satisfied:
(a) such tender is made by or through an Eligible Institution; and
(b) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, is received
by the Depositary, as provided below, on or before the Expiration Date;
and
(c) the certificates for all tendered Shares, in proper form for
transfer (or a Book-Entry Confirmation), together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof)
with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message) and all other documents required by the
Letter of Transmittal are received by the Depositary within six NNM
trading days after the date of execution of such Notice of Guaranteed
Delivery to the Depositary.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted
by telegram, facsimile transmission or mail to the Depositary and must
include a guarantee by an Eligible Institution in the form set forth in the
Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) Certificates, or a Book-Entry Confirmation of such Shares,
(ii) a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) (or, in the case of a book-entry transfer, an Agent's
Message) and (iii) any other documents required by the Letter of Transmittal.
Accordingly, payment might not be made to all tendering stockholders at the
same time, and will depend upon when Certificates or Book-Entry Confirmations
of such Shares are received by the Depositary.
By executing a Letter of Transmittal as set forth above, the tendering
stockholder irrevocably appoints designees of the Purchaser, and each of
them, as his attorneys-in-fact and proxies, in the manner set forth in the
Letter of Transmittal, each with full power of substitution, to the full
extent of such stockholder's rights with respect to the Shares tendered by
such stockholder and accepted for payment by the Purchaser and with respect
to any and all other Shares or other securities issued or issuable in respect
of such Shares on or after the date of this Offer to Purchase. All such
powers of attorney and proxies shall be considered irrevocable and coupled
with an interest in the tendered Shares. Such appointment will be effective
when, and only to the extent that, the Purchaser accepts such Shares for
payment. Upon such appointment, all prior proxies given by such stockholder
will be revoked, and no subsequent proxies may be given by such stockholder
(and if given, will not be deemed effective). The Purchaser's designees will
be empowered, among other things, to exercise all voting and other rights of
such stockholder as they in their sole discretion may deem proper at any
annual, special or adjourned meeting of the stockholders of the Company or
any consent in lieu of any such meeting or otherwise. The Purchaser reserves
the right to require that, in order for the Shares to be deemed validly
tendered, immediately upon the Purchaser's acceptance for payment of such
Shares, the Purchaser must be able to exercise full voting and other rights
of a record and beneficial holder with respect thereto.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance for payment of any tender of Shares will be
determined by the Purchaser, in its sole discretion, whose determination
shall be final and binding. The Purchaser reserves the absolute right to
reject any and all tenders determined by it not to be in proper form or the
acceptance for payment of which may, in the opinion of its counsel, be
unlawful. The Purchaser also reserves the absolute right to waive any of the
conditions of the Offer or any defect or irregularity in the tender of any
Shares of any particular stockholder whether or not similar defects or
irregularities are waived in the case of other stockholders. None of the
Purchaser, CECI, the Depositary, the Dealer Manager, the Information Agent or
any other person will be under any duty to give notification of any defects
or irregularities in tenders or shall incur any liability for failure to give
any such notification. The Purchaser's interpretation of the terms and
conditions of the Offer (including the Letter of Transmittal and of the
instructions thereto) will be final and binding.
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The valid tender of Shares pursuant to one of the procedures described
above will constitute the tendering stockholder's acceptance of the terms and
conditions of the Offer. The Purchaser's acceptance for payment of Shares
tendered pursuant to the Offer will constitute a binding agreement between
the tendering stockholder and the Purchaser upon the terms and subject to the
conditions of the Offer.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary is a
general discussion of the material federal income tax consequences to
stockholders of the Company who tender their Shares pursuant to the Offer.
The discussion is based upon the Internal Revenue Code of 1986, as amended
(the "Code"), applicable Treasury regulations thereunder, administrative
procedures, rulings and decisions in effect on the date hereof, all of which
are subject to change (possibly with retroactive effect) by legislation,
administrative action or judicial decision. No ruling has or will be
requested from the Internal Revenue Service (the "Service") regarding the
anticipated tax consequences described herein. The discussion set forth below
does not discuss all aspects of federal income taxation that may be relevant
to a particular stockholder in light of his personal investment circumstances
or to certain types of stockholders subject to special treatment under the
federal income tax laws (for example, tax-exempt organizations, foreign
corporations and individuals who have received Shares as compensation or who
are not citizens or residents of the United States) and does not discuss any
aspect of state, local or foreign taxation. The discussion is limited to
those stockholders who hold the Shares as capital assets (generally, property
held for investment) within the meaning of Section 1221 of the Code.
STOCKHOLDERS SHOULD CONSULT THEIR INDIVIDUAL TAX ADVISORS CONCERNING THE
SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
Exchange of Shares for Cash. The exchange of Shares by tendering
stockholders will be a taxable event for federal income tax purposes, and may
also be a taxable transaction under applicable state, local and foreign tax
laws. A tendering stockholder will generally recognize gain or loss equal to
the difference between the amount of cash received by the stockholder
pursuant to the Offer and the aggregate tax basis in the Shares tendered by
the stockholder and purchased pursuant to the Offer. Gain or loss will be
calculated separately for each block of Shares tendered by the stockholder
and purchased pursuant to the Offer.
Gain or loss recognized by a tendering stockholder will be capital gain or
loss if the Shares at the Expiration Date are held as capital assets. Such
capital gain or loss will be classified as a long-term capital gain or loss
to the extent that the tendered Shares have a holding period of more than one
year at the time of their purchase pursuant to the Offer. Long-term capital
gains recognized by a tendering individual stockholder will be subject to tax
at a maximum marginal federal rate of 28%. Short-term capital gains
recognized by a tendering individual stockholder will be subject to tax at a
maximum marginal federal rate of 39.6%. Net capital gains recognized by a
tendering corporate stockholder will be subject to tax at a maximum marginal
federal rate of 35%.
Tax Effects of the Merger. As described in Section 11 of this Offer to
Purchase, each outstanding Share (other than Shares held by CECI, the
Purchaser or any other direct or indirect subsidiary of CECI, Shares held in
the treasury of the Company and Shares held by stockholders who properly
exercise dissenters' rights under the NGCL) will be converted in the Merger
into the right to receive, at the option of CECI, either (i) a combination of
cash and CECI Common Stock (the "Mixed Cash Option") such that the
consideration paid by CECI in the Offer and the Merger would consist, on a
blended basis, of $28.50 per Share in cash and $10.50 per Share in market
value of CECI Common Stock, based on the Average Closing Price and subject to
the Collar Provision, or (ii) cash (the "All Cash Option") such that the
blended consideration paid by CECI in the Offer and the Merger would be
$38.75 per Share. See Section 11. The Merger will be a taxable transaction
for federal income tax purposes. If the All Cash Option is selected by CECI,
a stockholder exchanging Shares for cash pursuant to the Merger will
recognize gain or loss in the Merger equal to the difference between the
amount of cash received by the stockholder in the Merger and the aggregate
tax basis in the Shares exchanged pursuant to the Merger. Gain or loss will
be calculated separately for each block of Shares exchanged. If the Mixed
Cash Option is selected by CECI, a stockholder exchanging Shares for cash and
CECI Common Stock pursuant to the Merger will recognize gain or loss in the
Merger equal to the difference between (i) the sum of the cash and the fair
market value of the CECI Common Stock received in the Merger and (ii) the
holders' adjusted tax basis
8
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<PAGE>
for the Shares exchanged pursuant to the Merger. As with the All Cash Option,
gain or loss will be calculated separately for each block of Shares
exchanged. A holder's tax basis in the CECI Common Stock received pursuant to
the Merger will equal the fair market value of such CECI Common Stock as of
the Effective Time, and the holder's holding period for such CECI Common
Stock will commence as of the Effective Time. For tax purposes, the fair
market value of the CECI Common Stock will be determined as of the Effective
Time and, whether or not the Collar Provision is applicable, may differ from
the Average Closing Price used for purposes of determining the number of
Shares to be issued in the Merger.
Backup Withholding. To prevent "backup withholding" of federal income tax
on payments of cash to a stockholder of the Company who exchanges Shares for
cash in the Offer, a stockholder of the Company must, unless an exception
applies under the applicable law and regulations, provide the payor of such
cash with such stockholder's correct taxpayer identification number ("TIN")
on a Substitute Form W-9 and certify under penalties of perjury that such
number is correct and that such stockholder is not subject to backup
withholding. A Substitute Form W-9 is included in the Letter of Transmittal.
If the correct TIN and certifications are not provided, a $50 penalty may be
imposed on a stockholder of the Company by the Service, and cash received by
such stockholder in exchange for Shares in the Offer may be subject to backup
withholding at the rate of 31%. Amounts paid as backup withholding do not
constitute an additional tax and would be allowable as a credit against the
stockholder's federal income tax liability.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are quoted on the NNM. The
following table sets forth, for the periods indicated, the reported high and
low sales prices per Share, and the amount of cash dividends paid per Share
for each such period. The information for the fiscal years ended December 31,
1991, 1992 and 1993 is derived from the Company's Annual Reports on Form 10-K
for the fiscal years ended December 31, 1992 and 1993. The information for
subsequent periods is derived from information reported in published
financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ----- -----------
<S> <C> <C> <C>
Fiscal Year Ended December 31, 1991:
First Quarter ............................ $32 $ 22 1/2 -0-
Second Quarter ........................... 34 1/2 28 1/2 -0-
Third Quarter ............................ 30 22 3/4 -0-
Fourth Quarter ........................... 27 1/2 23 1/4 -0-
Fiscal Year Ended December 31, 1992:
First Quarter ............................ 27 1/4 21 -0-
Second Quarter ........................... 25 3/4 19 1/4 -0-
Third Quarter ............................ 24 3/4 19 3/4 -0-
Fourth Quarter ........................... 32 1/4 19 3/4 -0-
Fiscal Year Ended December 31, 1993:
First Quarter ............................ 40 30 3/4 -0-
Second Quarter ........................... 41 1/2 30 3/4 -0-
Third Quarter ............................ 39 29 3/4 -0-
Fourth Quarter ........................... 40 1/2 30 -0-
Fiscal Year Ending December 31, 1994:
First Quarter ............................ 35 1/4 30 3/4 -0-
Second Quarter ........................... 33 1/4 28 -0-
Third Quarter ............................ 35 1/4 26 1/2 -0-
Fourth Quarter (through December 8, 1994) 38 34 -0-
</TABLE>
On December 2, 1994, the last full trading day prior to CECI's issuance of
the press release announcing its intention to commence the Offer, the
reported closing sale price per Share on the NNM was $35.50. On September 19,
1994, the day of CECI's issuance of its press release announcing the
9
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<PAGE>
transmission of a letter to the Company containing a proposal to acquire the
Company in a transaction in which stockholders would receive cash and shares
of CECI Common Stock having a combined cash and market value of $35 per
Share, the reported closing sale price per Share on the NNM was $27.50. The
Offer represents a 42% premium over the reported closing sale price per Share
on September 19, 1994. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET
QUOTATION FOR THE SHARES.
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES AND EXCHANGE ACT
REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the
number of Shares that might otherwise trade publicly and may reduce the
number of holders of Shares, which could adversely affect the liquidity and
market value of the remaining Shares held by the public.
After consummation of the Offer, the Shares may no longer meet the
requirements of the National Association of Securities Dealers, Inc. (the
"NASD") for continued inclusion on NNM, which require that an issuer have at
least 200,000 held shares, held by at least 400 stockholders or 300
stockholders of round lots, with a market value of $1 million and have net
tangible assets of at least either $2 million or $4 million, depending on
profitability levels during the issuer's four most recent fiscal years. If
NNM were to cease to publish quotations for the Shares, it is possible that
the Shares would continue to trade in the over-the-counter market and that
price or other quotations would be reported by other sources. The extent of
the public market for the Shares and the availability of such quotations
would depend, however, upon such factors as the number of stockholders and/or
the aggregate market value of such securities remaining at such time, the
interest in maintaining a market in the Shares on the part of securities
firms, the possible termination of registration under the Exchange Act as
described below, and other factors. The Purchaser cannot predict whether the
reduction in the number of Shares that might otherwise trade publicly would
have an adverse or beneficial effect on the market price for, or
marketability of, the Shares or whether it would cause future market prices
to be greater or lesser than the Offer price.
The Shares are currently "margin securities" under the rules of the Board
of Governors of the Federal Reserve System (the "Federal Reserve Board"),
which has the effect, among other things, of allowing brokers to extend
credit on the collateral of such securities for the purpose of buying,
carrying, or trading in securities ("purpose loans"). Depending upon factors
similar to those described above regarding NNM quotations, the securities
might no longer constitute "margin securities" for the purposes of the
Federal Reserve Board's margin regulations and therefore could no longer be
used as collateral for purpose loans made by brokers. In addition, if
registration of the Shares under the Exchange Act were terminated, the Shares
would no longer constitute "margin securities."
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the
Commission if the outstanding Shares are not listed on a national securities
exchange and there are fewer than 300 holders of record of the Shares. The
termination of the registration of the Shares under the Exchange Act would
substantially reduce the information required to be furnished by the Company
to holders of the Shares and would make certain of the provisions of the
Exchange Act, such as the short-swing profit recovery provisions of Section
16(b), the requirement of furnishing a proxy statement in connection with
stockholders' meetings and the requirements of Rule 13e-3 under the Exchange
Act with respect to "going private" transactions, no longer applicable to the
Shares. Furthermore, "affiliates" of the Company and persons holding
"restricted securities" of the Company may be deprived of the ability to
dispose of the securities pursuant to Rule 144 under the Securities Act of
1933, as amended. If registration of the securities under the Exchange Act
were terminated, the securities would no longer be "margin securities" or
eligible for NNM reporting. The Purchaser intends to seek to cause the
Company to terminate the registration of the Shares under the Exchange Act as
soon as practicable after consummation of the Offer.
8. CERTAIN INFORMATION CONCERNING THE COMPANY. According to the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the
"1993 10-K"), the Company is a Nevada corporation with its principal
executive offices located at 4365 Executive Drive, Suite 900, San Diego,
California 92121. According to the 1993 10-K, the Company is principally
engaged in the generation of electricity from geothermal resources, and in
the acquisition of, exploration for and development of geothermal resources.
10
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<PAGE>
Set forth below is certain summary consolidated financial information with
respect to the Company derived from the information contained in the 1993
10-K and each of the Company's Quarterly Reports on Form 10-Q for the
quarters ended September 30, 1993 and September 30, 1994. More comprehensive
financial information is included in reports and other documents filed with
the Commission, and the following summary is qualified in its entirety by
reference to such reports and other documents and all financial information
(including any related notes) contained therein. Such reports and other
documents may be examined and copies may be obtained in the manner set forth
below.
MAGMA POWER COMPANY
CONSOLIDATED SUMMARY FINANCIAL DATA
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR NINE MONTHS ENDED
ENDED DECEMBER 31, SEPTEMBER 30,
--------------------------------- ----------------------
1991 1992 1993 1993 1994
--------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Total revenues ................ $94,891 $108,966 $167,138 $124,781 $146,104
Operating revenues(1) ......... 84,135 100,313 162,943 121,146 142,238
Income from operations ........ 41,204 49,667 74,913 57,957 67,915
Cumulative effect of change in
accounting principle ......... -- 17,833 -- -- --
Net income .................... 33,941 54,191 52,135 39,469 46,843
Net income per share (assuming
no dilution) ................. 1.44 2.36(2) 2.17 1.64 1.95
Weighted average common shares
outstanding (assuming no
dilution) .................... 23,611 22,936 24,063 24,037 24,017
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
-------------------- ----------------------
1992 1993 1993 1994
--------- --------- ----------- ---------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital ........ $ 74,524 $ 69,719 $(65,114) $ 90,378
Total assets ........... 396,650 611,311 598,265 630,422
Non-current liabilities 95,689 211,896 98,292 186,689
Stockholders' equity .. 282,260 351,918 324,792 395,286
Book value per share 12.28 14.67 14.05 16.44
</TABLE>
(1) Operating revenues exclude interest and other income.
(2) Income per share, assuming no dilution, before cumulative effect of
change in accounting principle, was $1.59.
Except where otherwise stated, the information concerning the Company and
its affiliates contained in this Offer to Purchase has been taken from or
based upon publicly available documents and records on file with the
Commission and other public sources. Although neither the Purchaser, CECI,
the Dealer Manager, Lehman nor the Information Agent has any knowledge that
would indicate that any statements contained herein based on such documents
and records are untrue, none of the Purchaser, CECI, the Dealer Manager,
Lehman or the Information Agent takes responsibility for the accuracy or
completeness of the information contained in such documents and records, or
for any failure by the Company to disclose events which may have occurred or
may affect the significance or accuracy of any such information but which are
unknown to the Purchaser, CECI, the Dealer Manager, Lehman or the Information
Agent.
The Company is subject to the informational filing requirements of the
Exchange Act and in accordance therewith is obliged to file reports and other
information with the Commission relating to its
11
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<PAGE>
business, financial condition and other matters. Information, as of
particular dates, concerning the Company's directors and officers, their
remuneration, stock options granted to them, the principal holders of the
Company's securities, any material interests of such persons in transactions
with the Company and other matters is required to be disclosed in proxy
statements distributed to the Company's stockholders and filed with the
Commission. Such reports, proxy statements and other information may be
inspected at the public reference facilities of the Commission at 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the regional offices of the
Commission at Northwestern Atrium Center, 500 West Madison Street, Suite
1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New
York, New York 10048. Copies may be obtained, by mail, upon payment of the
Commission's customary charges, by writing to its principal office at 450
Fifth Street, N.W., Washington, D.C. 20549. In addition, such material should
also be available for inspection at the National Association of Securities
Dealers, Inc., 1735 K Street, NW, Washington, D.C. 20006.
9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND CECI. CECI, together
with its subsidiaries, is primarily engaged in the exploration for and
development of geothermal resources and the development, ownership and
operation of environmentally responsible independent power production
facilities worldwide utilizing geothermal resources or other energy sources,
such as hydroelectric, natural gas, oil and coal. CECI was an early
participant in the domestic independent power market and is now one of the
largest geothermal power producers in the United States. CECI is also
actively pursuing opportunities in the international independent power
market. For the year ended December 31, 1993 and the nine months ended
September 30, 1994, CECI had revenues of $149.3 million and $139.2 million,
respectively, and net income of $47.2 million and $29.4 million,
respectively. As of September 30, 1994, CECI had cash and short-term
investments of $316.3 million.
Kiewit Energy Company ("Kiewit Energy"), a wholly owned subsidiary of PKS,
is an approximate 43% stockholder (on a fully-diluted basis) in CECI. PKS, a
Delaware corporation, is a large employee-owned company which had
approximately $2.2 billion in revenues in 1993 from its interests in
construction, mining, energy and telecommunications. PKS is one of the
largest construction companies in North America and has been in the
construction business since 1884. PKS is a joint venture participant in a
number of CECI's international private power projects.
The principal executive offices of the Purchaser and CECI are located at
10831 Old Mill Road, Omaha, Nebraska 68154 and their telephone number is
(402) 330-8900. The Purchaser is a wholly owned subsidiary of CECI and has
not conducted any business except in connection with the Offer. CECI and the
Purchaser were incorporated in 1971 and 1994, respectively, under the laws of
the State of Delaware. The principal executive offices of PKS are located at
1000 Kiewit Plaza, Omaha, Nebraska 68131, and its telephone number is (402)
342-2052. PKS was incorporated in 1941 under the laws of the State of
Delaware.
12
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CALIFORNIA ENERGY COMPANY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
DECEMBER 31, SEPTEMBER 30,
---------------------------------- ----------------------
1991 1992 1993 1993 1994
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Sales of electricity and steam $106,184 $117,342 $132,059 $101,046 $117,208
Interest and other income .... 9,379 10,187 17,194 12,294 21,980
Cumulative effect of change in
accounting principle ......... -- -- 4,100 4,100 --
Extraordinary item ............ -- (4,991) -- -- (2,007)
Net income .................... 26,582 33,819 47,174 38,911 29,392
Net income available to common
shares ....................... 26,582 29,544 42,544 35,482 25,681
Net income per share .......... .75 .79(1) 1.11(2) .92(2) .70(1)
Sales of electricity and steam 106,184 117,342 132,059 101,046 117,208
Average number of shares
outstanding .................. 35,471 37,495 38,485 38,436 36,174
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, SEPTEMBER 30,
---------------------- ------------------------
1992 1993 1993 1994
---------- ---------- ---------- ------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Total assets ............................ $580,550 $715,984 $710,659 $1,087,064
Total liabilities ...................... 336,272 425,393 425,827 825,273
Stockholders' equity .................... 168,764 211,503 206,675 179,660
</TABLE>
(1) Income per share, before extraordinary item, was $.92 and $.77 for the
periods ended December 31, 1992, and September 30, 1994, respectively.
(2) Income per share, before cumulative effect of change in accounting
principle, was $1.00 and $.81 for the periods ended December 31, 1993
and September 30, 1994, respectively.
Except as set forth in this Offer to Purchase, none of the Purchaser,
CECI, PKS or, to the best knowledge of the Purchaser, any of the persons
listed in Schedule I hereto, or any associate or majority-owned subsidiary of
such persons, beneficially owns any equity security of the Company, and none
of the Purchaser, CECI, PKS or, to the best knowledge of the Purchaser, any
of the other persons referred to above, or any of the respective directors,
executive officers or subsidiaries of any of the foregoing, has effected any
transaction in any equity security of the Company during the past 60 days.
Except as otherwise stated in this Offer to Purchase, (i) there have not
been any contacts, transactions or negotiations between the Purchaser, CECI,
PKS or, to the best knowledge of the Purchaser, any of the persons listed in
Schedule I hereto, on the one hand, and the Company or any of its directors,
officers or affiliates, on the other hand, concerning a merger, consolidation
or acquisition, a tender offer or other acquisition of securities, an
election of directors, or a sale or other transfer of a material amount of
assets, or that are otherwise required to be disclosed pursuant to the rules
and regulations of the Commission, and (ii) none of the Purchaser, CECI, PKS
or, to the best knowledge of the Purchaser, any of the persons listed in
Schedule I hereto has any contract, arrangement, understanding or
relationship with any person with respect to any securities of the Company.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In May 1991,
representatives of CECI and the Company entered into discussions and meetings
to explore the possibility of combining the companies, and the two companies
exchanged certain information concerning their respective businesses
13
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<PAGE>
for the purpose of considering such a business combination or other
acquisition transaction. At the end of May 1991, the discussions were
terminated as a result of the inability of the parties to reach agreement
concerning price and certain other terms.
In August 1991, the Company's representatives contacted CECI for the
purpose of again exploring the possibility of combining the companies. In
September 1991, a number of conversations between CECI's and the Company's
representatives were held regarding a possible merger of the Company with and
into CECI. Based upon those conversations, on September 26, 1991, after
receiving the approval of CECI's Executive Committee, CECI transmitted a
proposed letter of intent to the Company. The proposed letter of intent
contemplated a consensual merger of the Company with and into CECI. Pursuant
to the proposed merger, each outstanding Share would have been exchanged for
approximately two shares of CECI Common Stock in a transaction accounted for
on a pooling of interests basis. Such a transaction would have represented a
value of $30.25 for each Share (approximately a 20% premium to the
then-prevailing market price) based upon the then current market values of
the respective companies' common stocks.
Upon its receipt of the proposed letter of intent, the Company indicated
to CECI that the proposal would be considered and, after certain discussions
by representatives of the parties in the intervening days, on October 2,
1991, the Company advised CECI that the Company's Board had considered CECI's
proposal and that the Company had no interest in pursuing the proposed
pooling of interests combination transaction.
In August 1993, David L. Sokol, the Chairman, Chief Executive Officer and
President of CECI, contacted Paul M. Pankratz, then Chairman and Chief
Executive Officer of the Company in order to propose a meeting to discuss
various matters of mutual interest. At a meeting in San Diego in September
1993, Mr. Sokol and Steven A. McArthur, Senior Vice President, General
Counsel and Secretary of CECI, and Mr. Pankratz, Ralph W. Boeker, President
of the Company, and Jon R. Peele, Executive Vice President and General
Counsel of the Company, discussed principally the possibility of joint
venturing or other cooperation in respect of certain pending power
development projects in the Philippines and the possible sharing of legal
costs and information in respect of certain domestic regulatory proceedings
in which the companies had a common interest. During the course of those
discussions, Mr. Sokol suggested to the Company's management that such
potential cost savings were illustrative of certain of the synergies that a
combination of the companies could achieve. However, no agreements or
understandings were reached between CECI and the Company as a result of these
discussions. In addition, at that meeting CECI suggested to the Company that
it consider utilizing PKS as the Company's general contractor in respect of
the Company's pending projects in the Philippines. The Company's management
agreed to meet with PKS regarding its possible role as a contractor in the
Philippines. The meeting between the Company and PKS was held in the fall of
1993, but no agreements or understandings were reached with PKS and no
further discussions were held in respect of such matters.
In January 1994, Mr. Sokol again contacted Mr. Pankratz by telephone in an
effort to resume the foregoing discussions and, at Mr. Pankratz's suggestion,
Mr. Sokol was asked to contact Mr. Boeker, the President and recently
appointed Chief Executive Officer of the Company, to discuss these matters
further. In an April 1994 telephone conversation between Mr. Sokol and Mr.
Boeker, the possibility of cooperation with respect to international joint
ventures between the companies and other possible synergies between the
companies were again generally discussed, but no agreements or understandings
were reached. At Mr. Boeker's suggestion, it was tentatively agreed that they
would resume their discussions in July 1994.
On or about June 20, 1994, Mr. Sokol contacted Mr. Boeker and proposed a
meeting between members of management of the two companies to discuss the
possible combination of CECI and the Company.
On August 9, 1994, Mr. Sokol was advised that Mr. Boeker had declined a
scheduled August 11 meeting, and that the Company's decision to cancel was
principally due to the desire of the Company's management to dedicate their
full attention to the pending financing of the Company's Malitbog project in
the Philippines. Accordingly, Mr. Boeker suggested that he would schedule a
meeting with Mr. Sokol toward the end of September 1994, which is when the
Company expected to close the financing.
14
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<PAGE>
On September 15, 1994, Mr. Sokol contacted a member of the Company's
Board, in an effort to determine whether the Company had a serious interest
in discussing a negotiated combination of the companies within a time frame
that would recognize CECI's desire to make certain decisions regarding the
strategic direction it wished to pursue in the changing global marketplace.
The director stated that he was aware of certain of the past discussions
between the companies, but would ask the Company's management to respond
directly to Mr. Sokol's inquiry.
Later that same day, Messrs. Pankratz and Boeker called Mr. Sokol and
advised him that the closing of the financing for the Company's Malitbog
project had been delayed and was expected to occur on or about November 18,
1994 and suggested that they would be available to meet with Mr. Sokol
shortly after the closing of such financing. Mr. Sokol stated that CECI was
considering a number of strategic alternatives, including a possible
combination with the Company, and that CECI's strategic planning had reached
a stage where a prompt decision concerning entering into negotiations
regarding any possible combination with the Company was required. Mr. Sokol
further stated his belief that it was unnecessary to wait until after the
closing of the Malitbog financing because CECI was prepared to negotiate in
good faith on a basis that would value the Company as though such financing
had closed. Messrs. Boeker and Pankratz reiterated that they would agree to
meet only after the Malitbog closing and Mr. Sokol concluded the call by
reiterating CECI's need to act upon certain of its strategic alternatives on
a prompt basis.
On September 19, 1994, Mr. Sokol wrote to Messrs. Pankratz and Boeker
proposing to acquire all outstanding Shares for $35 per Share comprised of
$25.00 in cash and $10.00 in market value of CECI Common Stock. On September
20, 1994, Mr. Pankratz responded that the Company's Board would consider the
proposal and respond after completion of its evaluation.
During the week of September 19, 1994, representatives of CECI contacted
management of The Dow Chemical Company ("Dow"), the beneficial owner of
approximately 21% of the Shares, to determine Dow's reaction to CECI's
proposal of September 19, 1994. The CECI representatives were told Dow was
evaluating the Offer. During the week of September 26, 1994, CECI's financial
representatives contacted management of Dow to inquire as to the
circumstances surrounding a recent sale by Dow of 857,143 Shares for $28.25
per Share and an associated option agreement to acquire such Shares at the
same price, which Dow had reported in filings with the Commission, and in
particular whether any impediments existed to Dow's ability to freely dispose
of such Shares and whether any structural changes to CECI's merger proposal
would be helpful in this regard. Dow reported that it was considering such
issues in the context of CECI's proposal.
On September 28, 1994, after telephone discussions between CECI's
financial advisors and the Company's financial advisors regarding CECI's
request to arrange a meeting between the parties, Messrs. Sokol and McArthur,
together with representatives from CECI's financial advisors, met with
representatives from the Company's financial advisor in order to introduce
CECI and to further elaborate and answer questions with respect to the
details of CECI's proposal. CECI provided the representatives from the
Company's financial advisors with copies of a draft merger agreement for
review by the Company's Board.
On October 3, 1994, the Company's financial advisors informed CECI's
financial advisors that the Company's Board had authorized the Company to
enter into a "poison pill" Rights Plan (the "Rights Agreement") at its Board
meeting which concluded on such date, but that the Company's Board had also
authorized the Company's financial advisors to meet with CECI's financial
advisors as soon as possible and, accordingly, a meeting was scheduled for
the morning of October 4, 1994. CECI subsequently learned through press
reports that the Company had amended its Bylaws to require that stockholder
action occur only at a regular or special meeting of stockholders rather than
by way of a written consent solicitation and that the Company also had filed
a complaint against CECI seeking a declaratory judgment that (i) the
Company's Board had properly discharged its fiduciary duties in adopting the
Rights Agreement and an amendment to the Company's Bylaws and, accordingly,
such agreement and amendment were valid and binding, and (ii) the Merger
Moratorium Statute (as defined below) is valid and not in violation of the
Commerce Clause and Supremacy Clause of the United States Constitution.
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On October 4, 1994, at the meeting between CECI's financial advisors and
the Company's financial advisors, the Company's financial advisors summarized
the actions taken at the Company's Board meeting held on October 2, 1994 and
October 3, 1994, and indicated that although the Company's Board had not
rejected CECI's proposal, the Company's Board would prefer that CECI withdraw
its merger proposal. The Company's financial advisors then indicated that the
Company's Board believed that CECI's proposed price was too low and
referenced the Company's future opportunities but declined to provide any
specific information or financial analysis indicating what price the
Company's Board would consider favorably with respect to a sale of the
Company or as to why CECI's proposed price did not correctly value the
Company's businesses.
In light of the defensive actions taken by the Company, on October 6, 1994
the Purchaser commenced a cash tender offer for 12,400,000 Shares at $35 per
Share (the "Previous Offer").
On October 11, 1994, the Company filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 (the "Previous
Schedule 14D-9") pursuant to the Exchange Act, which included the
recommendation of the Company's Board that the Company's stockholders reject
the Previous Offer.
On October 13, 1994, CECI announced the filing of a preliminary proxy
statement with the Commission pursuant to the Exchange Act in order to
solicit written requests from the Company's stockholders for the call of a
Special Meeting of the Company's stockholders (the "Special Meeting"). The
purpose of the Special Meeting was to provide the Company's stockholders the
opportunity to consider and vote on CECI's proposals which, if approved,
would help facilitate consummation of the Previous Offer.
On October 21, 1994, the Purchaser increased the price per Share to be
paid in the Previous Offer to $38.50 per Share. On October 31, 1994, CECI
learned that the Company's Board had again recommended that its stockholders
reject the Previous Offer.
On November 1, 1994, CECI announced that it had put its best offer on the
table and that it intended to withdraw its acquisition proposal if it had not
signed a merger agreement with the Company or received sufficient written
requests to call the Special Meeting by December 2, 1994. Throughout November
1994, CECI solicited written consents for the call of the Special Meeting,
which solicitation was actively opposed by the Company.
As of the close of business on December 2, 1994, CECI had neither entered
into a merger agreement with the Company nor received sufficient written
requests to call the Special Meeting. Consequently, CECI announced by press
release, and Mr. Sokol placed telephone calls to Messrs. Pankratz and Boeker
and to a representative of Dow to advise them, that CECI had withdrawn its
acquisition proposal and had terminated the Previous Offer. As a result of
these telephone conversations, and follow up telephone conversations among
the parties and their advisors, CECI and the Company arranged to meet the
following day in New York to explore the possibility of a negotiated
acquisition of the Company by CECI.
From December 3, 1994 through the morning of December 5, 1994,
representatives of CECI and the Company, together with their legal and
financial advisors, met to negotiate the terms of a proposed acquisition of
the Company by CECI. The Company's Board met to consider and approve the
Merger Agreement and the transactions contemplated thereby on December 4 and
5, 1994. Following continued negotiations regarding the definitive
agreements, the Merger Agreement was signed on the morning of December 5,
1994.
11. PURPOSE OF THE OFFER; THE MERGER AGREEMENT.
General. The purpose of the Offer is to acquire majority control of the
Company as the first step in the acquisition of the entire equity interest in
the Company. The purpose of the Merger is to acquire all Shares not
beneficially owned by the Purchaser following consummation of the Offer.
Pursuant to the Merger Agreement, CECI, the Purchaser and the Company have
agreed to effectuate the Merger in accordance with the provisions of the
Merger Agreement as promptly as practicable following consummation of the
Offer. Following is a description of the material terms of the Merger
Agreement.
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The Offer and the Merger. The Merger Agreement provides for the making of
the Offer by the Purchaser upon the terms and subject to the conditions set
forth in this Offer to Purchase. The Merger Agreement further provides that
as promptly as practicable after the satisfaction or waiver of the conditions
described below (the "Effective Time"), the Purchaser will be merged with and
into the Company, with the Company continuing as the surviving corporation
following the Merger (the "Surviving Corporation"). As a result of the
Merger, the Company will become a wholly owned subsidiary of CECI. In
addition, the directors of the Purchaser immediately prior to the Effective
Time will become 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 Corporation, in each case until their
successors are duly elected or appointed and qualified.
Conditions to the Obligations of Each Party to Effect the Merger.
Consummation of the Merger is subject to certain conditions, including (i)
the purchase of Shares pursuant to the Offer, (ii) approval and adoption of
the Merger and the Merger Agreement by the requisite vote of the Company's
stockholders, (iii) approval of the issuance of CECI Common Stock in order to
effectuate the Merger by the requisite vote of CECI's stockholders, (iv) the
CECI Common Stock issuable to the Company's stockholders in the Merger having
been authorized for listing on the NYSE upon official notice of issuance, (v)
the registration statement to be filed with the Commission by CECI on Form
S-4 under the Securities Act for the purpose of registering the shares of
CECI Common Stock to be issued in the Merger shall have become effective in
accordance with the provisions of the Securities Act and no stop order
suspending such effectiveness shall have been issued by the Commission and
remain in effect, and (vi) that there shall not be in effect (a) any
judgment, decree or order issued by any Federal, state or local court of
competent jurisdiction, or (b) 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 (a) or (b)
prohibits the consummation of the Merger or makes such consummation illegal.
The Merger Consideration. In the Merger, each outstanding Share (other
than Shares held by CECI, the Purchaser or any other direct or indirect
subsidiary of CECI, Shares held in the treasury of the Company and Shares
held by stockholders who properly exercise dissenters' rights under the
NGCL), will be converted into the right to receive, at CECI's option, either
(i) the All Cash Component Amount, net in cash, without interest thereon, or
(ii) both (A) the Mixed Cash Component Amount, net in cash, without interest
thereon, and (B) the number of fully paid and nonassessable shares of CECI
Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash
Component Amount divided by the Average Closing Price.
The foregoing formula for determining the consideration to be paid in the
Merger was determined so that (i) if CECI determines to pay the Merger
Consideration with a combination of cash and CECI Common Stock, the
consideration paid by CECI in the Offer and the Merger would consist, on a
blended basis, of $28.50 per Share in cash and $10.50 per Share in market
value of CECI Common Stock, based on the Average Closing Price and subject to
the Collar Provision, and (ii) if CECI determines to pay only cash
consideration in the Merger, the blended consideration paid by CECI in the
Offer and the Merger would be $38.75 per Share. The consideration to be paid
in the Offer and the Merger, including the terms of the Collar Provision, was
negotiated on an arms' length basis between CECI and the Company. The purpose
of the Collar Provision is to limit the number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price is less than
$14.27 and to establish a minimum number of shares of CECI Common Stock
required to be issued in the Merger if the Average Closing Price exceeds
$18.73. It is CECI's current intention to pay the Merger Consideration solely
in cash, although such intention is subject to change based on market
conditions and other factors.
Company Stock Options. Each option outstanding immediately prior to the
Effective Time under the Company Stock Option Plans (as defined in the Merger
Agreement), whether or not then exercisable, shall be cancelled by the
Company and, in exchange therefor, each holder of any such option shall be
entitled to receive from the Company at the Effective Time, or as soon as
practicable thereafter, an amount in cash equal to the product of (x) the
number of Shares previously subject to such option and (y) the excess, if
any, of $39.00 or, if CECI has elected the All Cash Component Amount, $38.75,
over the exercise price per Share previously applicable to such option. Each
unvested share of deferred stock
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under the Company's 1994 Equity Participation Plan (as defined in the Merger
Agreement) or as otherwise described in the Company Disclosure Schedule (as
defined in the Merger Agreement) outstanding immediately prior to the
Effective Time (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 an
amount in cash equal to $39.00 or, if CECI has elected the All Cash Component
Amount, $38.75.
Board Representation. The Merger Agreement provides that, subsequent to
consummation of the Offer, the Purchaser will be entitled to that percentage
of the number of seats on the Company's Board (rounded to the nearest whole
seat) as reflects the percentage of the outstanding Shares then owned by the
Purchaser, but in no event less than a majority of the entire Board of
Directors of the Company (regardless of vacancies). In order to provide the
Purchaser with such representation on the Company's Board, the Company may be
required to increase the size of the Company's Board or to secure the
resignation of one or more directors; provided, however, that such
resignations will not cause the number of Disinterested Directors (as defined
below) to be less than two. If the Purchaser acquires Shares pursuant to the
Offer and determines to obtain majority representation on the Company's
Board, the Company will be required to send to stockholders the information
required by Rule 14f-1 under the Exchange Act, and CECI and the Purchaser
will be required to furnish to the Company all such information with respect
to itself and its directors, officers and affiliates. Following the election
or appointment of the Purchaser's nominees and prior to the Effective Time,
any amendment of the Merger Agreement or the Company's Articles of
Incorporation or Bylaws, any termination of the Merger Agreement by the
Company, any extension by the Company of the time for the performance of any
of the obligations or other acts of CECI or the Purchaser, or waiver of any
of the Company's rights under the Merger Agreement, and any other consent or
action of the Company's Board under the Merger Agreement 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 CECI or the Purchaser
("Disinterested Directors").
CECI has agreed to use its best efforts to nominate and cause up to two
nominees of the Company to be elected or appointed as members of CECI's Board
of Directors.
Other Proposals. The Merger Agreement further provides that neither the
Company nor any of its subsidiaries, or any of their respective directors,
officers, agents, financial advisors or otherwise may, directly or
indirectly, solicit, initiate or knowingly encourage the 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. The Company's Board 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 Company's Board determines in 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 the Merger Agreement. "Competing Transaction" shall mean any
of the following involving the Company or any of its subsidiaries: (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 its
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 benefical 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.
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The Company has agreed to notify CECI immediately if any inquiries 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.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties of the parties thereto, including
representations by each of the Company and CECI as to the absence of certain
changes or events concerning its business, compliance with law, approval of
the Offer and the Merger by the Company for purposes of certain Nevada
antitakeover statutes, energy regulatory status, environment, employee
benefit plans, insurance, taxes, related party transactions, the status of
development and construction projects and the status of operating projects.
Certain Covenants of the Company, CECI and the Purchaser. The Company has
agreed that, prior to the Effective Time, unless CECI shall otherwise consent
in writing and except as is otherwise permitted by the Merger Agreement, 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. Except as contemplated by
the Merger Agreement, the Company has agreed that neither it nor any of its
subsidiaries will, prior to the Effective Time, directly or indirectly, do
any of the following without the prior written consent of CECI: (a) (i)
issue, sell, pledge, dispose of, encumber, authorize, or propose the
issuance, sale, pledge, disposition, encumbrance or authorization of any
Shares or shares of 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 Shares previously reserved for
issuance as disclosed in Section 4.03 of the Merger Agreement); (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 (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, 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; (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
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 obligation which is 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 (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
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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 Shares pursuant to the Offer and other than
pursuant to the Merger Agreement, take any action to cause the shares of its
common stock to cease to be listed on the NNM; (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; (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 the foregoing: (i) the Company may close the financing of
its Malitbog project without the prior consent of CECI provided that CECI has
been given the opportunity to review the relevant financing documents and the
Company has given CECI 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 CECI; (iii) the Company may
make planned capital and operational expenditures with respect to its
Malitbog project, without the consent of CECI; (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 CECI and CECI's consent; (v) the Company may honor all
existing contractual obligations relating to projects in operation or
construction without the consent of CECI; 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
CECI and CECI's consent.
CECI has agreed that, prior to the Effective Time, unless the All Cash
Component election has been made or unless the Company shall otherwise
consent in writing, and except as is otherwise permitted by the Merger
Agreement, neither CECI nor any of the CECI 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 CECI Common Stock
previously reserved for issuance as disclosed in Section 3.03 of the Merger
Agreement) 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 CECI to exercise the All Cash Component election; (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 (a); (b) in the case of CECI,
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.
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Access to Information. The Merger Agreement provides that through the
Effective Time, each of CECI 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. All information
obtained by CECI or the Company is required to be kept confidential in
accordance with confidentiality agreements dated December 4, 1994 entered
into between CECI and the Company.
Employee Benefits. The Merger Agreement provides that CECI 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 December 5, 1994 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, 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 December 5, 1994 with respect to the bonus plans and arrangements of the
Company and its subsidiaries. For a period of one year commencing on the
Effective Time, CECI 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 (as defined
in the Merger Agreement) (other than equity-based plans and bonus plans) as
in effect immediately prior to the Effective Date. 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. CECI 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 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. With respect to each employee of the
Company (other than employees of the Company which are parties to a "change
in control" or "severance" agreement) who is, within the one year period
following the closing of the Offer, either (i) terminated without cause or
(ii) terminated as a result of a reduction in force, CECI 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 year's targeted bonus
for such employee, payable in twelve equal installments over the twelve
months following such termination; or (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 year's 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 CECI 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 foregoing severance payments and simultaneously
receive any severance payments under the Company's severance policy described
in the first two sentences of this paragraph.
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Disposition of Pending Litigation. The Merger Agreement provides that the
parties will jointly file a stipulation of dismissal without prejudice of, or
take other reasonable steps necessary to terminate without prejudice, the
action entitled Magma Power Company 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, CECI and the
Purchaser, with each party bearing its own costs and attorneys' fees.
Amendment. The Merger Agreement may be amended by action taken by CECI and
the Purchaser, and by action taken by or on behalf of the Company's Board at
any time before the Effective Time; provided, however, that, after approval
of the Merger by the 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.
Termination. The Merger Agreement provides that it may be terminated at
any time before the Effective Time in the following circumstances: (a) by
mutual consent of the Boards of Directors of CECI and the Company; or (b) by
the Company or CECI if the Offer shall not have been consummated by February
28, 1995; or (c) by the Company or CECI if the Effective Time shall not have
occurred on or prior to September 30, 1995; or (d) by either CECI 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 shall use their best efforts to lift), in each case permanently
restraining, enjoining or otherwise prohibiting the transactions contemplated
by the Merger Agreement and such order, decree, ruling or other action shall
have become final and nonappealable; or (e) by CECI if (i) the Company's
Board withdraws, modifies or changes its recommendation of the Merger
Agreement or any of the transactions contemplated thereby or shall have
resolved to do any of the foregoing or (ii) the Company's Board 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 the Merger
Agreement; or (f) by CECI 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 of, more
than 10% of the Shares; or (g) by the Company or CECI if (i) a corporation,
partnership, person or other entity or group shall have made a bona fide
offer that the Company's Board 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 CECI or any affiliate of CECI, shall have become the beneficial owner of
more than 50% of the then outstanding Shares; or (h) by either CECI or the
Company if the other party shall have breached the Merger Agreement 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.
Termination Fee For CECI. The Merger Agreement provides that if it is
terminated pursuant to clauses (e) or (g) or terminated by CECI pursuant to
clause (h) of the preceding paragraph, the Company will be required to pay
CECI a termination fee of $8,000,000 plus CECI's actual documented
out-of-pocket expenses incurred since September 13, 1994 in connection with
the Merger Agreement and the transactions contemplated thereby, including,
without limitation, legal and professional fees and expenses.
Termination Fee For The Company. The Merger Agreement provides that if by
December 19, 1994, CECI has not delivered to the Company either a revised
Commitment Letter (as defined below) or definitive loan documentation
reflecting the financing contemplated by such Commitment Letter which, in
each case, (i) does not contain any due diligence conditions regarding CECI
and the Company and its subsidiaries and (ii) has 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) of the definition provided below)
contained in the Merger Agreement with
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respect to CECI and the Company, then CECI will be required to pay the
Company a termination fee of $8,000,000 if (i) the Offer expires or is
terminated without the Purchaser having accepted for payment the Shares
tendered pursuant thereto or (ii) the Merger Agreement is terminated by
either CECI or the Company because the Offer has not been consummated by
February 28, 1995 ((i) and (ii) collectively, the "Offer Termination
Events"); provided, however, that the $8,000,000 termination fee will not be
required to be paid if failure to consummate 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 the Merger Agreement and CECI shall have terminated the Merger
Agreement pursuant to clause (h) of the paragraph entitled "Termination"
above; or (iii) generally accepted accounting principles would require a
restatement of the Company's audited financial statements contained in the
Company SEC Reports (as defined in the Merger Agreement).
When used in connection with CECI and the Purchaser, the term "Material
Adverse Effect" means any change or effect, when taken together with all
other adverse changes and effects relating to CECI or the Purchaser, 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
CECI and its 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 CECI or any CECI
subsidiary or by which any property or asset of CECI or any CECI subsidiary
is bound, (ii) a failure to receive any contract for which CECI or any CECI
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 CECI or a CECI subsidiary has under development,
other than any such loss resulting from a breach by CECI of the
representations and warranties set forth in Section 3.22 or 3.23 of the
Merger Agreement (relating to the status of CECI's development and
construction projects and its operating projects), (iv) a failure to close
any public or private financing of any project in which CECI or any CECI
subsidiary owns a direct or indirect interest or (v) the termination of the
employment of any employee, officer, director or consultant of CECI or any
CECI subsidiary.
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 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 of the Merger Agreement (relating to the
status of the Company's development and construction projects and its
operating projects), (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 representations
and warranties set forth in Section 4.22 or 4.23 of the Merger Agreement
(relating to the status of the Company's development and construction
projects and its operating projects)), or (vii) the termination of the
employment of any employee, officer, director or consultant of the Company or
any subsidiary.
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Miscellaneous. The Merger Agreement contains customary indemnification
provisions pursuant to which the directors, officers, employees, fiduciaries
and agents of the Company and its subsidiaries are required to be indemnified
to the fullest extent permitted by applicable law, and regardless of whether
the Merger becomes effective, by the Company and, after the Effective Time,
by the Surviving Corporation and CECI, from costs or expenses (including
attorney's fees), judgments, fines, losses, claims, damages, and liabilities
and amounts paid in settlement in connection with any claim, action, suit,
proceeding or investigation arising out of or pertaining to the transactions
contemplated by the Merger Agreement, including liabilities under the
securities laws in connection with the Merger. In addition, except as set
forth above, all costs and expenses incurred in connection with the Merger
Agreement and the transactions contemplated thereby will be paid by the party
incurring such costs and expenses.
The foregoing description of the Merger Agreement is qualified in its
entirety by reference to the text of the Merger Agreement, which has been
filed by the Purchaser and CECI as Exhibit (c)(3) to the Tender Offer
Statement on Schedule 14D-1 of the Purchaser and CECI filed with the
Commission in connection with the Offer (the "Schedule 14D-1"). Such Exhibit
may be examined, and copies may be obtained, in the manner set forth in
Section 8 of the Offer to Purchase (except that it will not be available at
the regional offices of the Commission).
Confidentiality and Standstill Agreements. CECI and the Company have
entered into a confidentiality agreement, dated December 4, 1994, pursuant to
which CECI has agreed to maintain the confidentiality of proprietary
information that may be disclosed to CECI and its representatives in
connection with the transactions contemplated by the Merger Agreement. In
addition, CECI and the Company have entered into a standstill agreement,
dated December 5, 1994 (the "Standstill Agreement"), pursuant to which CECI
has agreed that neither CECI nor any of its subsidiaries will, for a period
of three years from December 5, 1994, among other things, acquire any
securities of the Company or participate in any proxy solicitation with
respect to voting securities of the Company, except in connection with the
Offer and the Merger or a tender offer for all Shares at a price no less than
$38.75 per Share net to the seller in cash.
Required Vote. The Purchaser intends to vote all Shares held by it
following consummation of the Offer in favor of the Merger. Accordingly, if
the Purchaser acquires a majority of the outstanding Shares pursuant to the
Offer or otherwise, it will, under Nevada law as currently in effect, have
sufficient Shares to approve the Merger without the affirmative vote of any
other stockholder.
Dissenters' and Related Rights. Holders of Shares do not have appraisal
rights as a result of the Offer. However, in the event the Merger is
consummated, any Shares held by a holder who has demanded and perfected such
holder's demand for appraisal of such holder's Shares in accordance with the
NGCL and as of the Effective Time has neither effectively withdrawn nor lost
such holder's right to such appraisal will not be converted into or represent
a right to receive the consideration pursuant to the Merger Agreement, but
the holder thereof shall be entitled to only such rights as are granted by
the NGCL. If any holder of Shares who demands appraisal of such holder's
shares under the NGCL shall effectively withdraw or lose (through failure to
perfect or otherwise) such holder's right to appraisal, then as of the
Effective Time or the occurrence of such event, whichever later occurs, such
holder's Shares shall automatically be converted into and represent only the
right to receive the consideration pursuant to the Merger Agreement, without
interest thereon, upon surrender of the certificate or certificates
representing such Shares.
The Company will give CECI (i) prompt notice of any written demands for
appraisal or payment of the fair value of any Shares, and withdrawals of such
demands, and (ii) the opportunity to direct all negotiations and proceedings
with respect to demands for appraisal under the NGCL. The Company shall not
voluntarily make any payment with respect to any demands for appraisal and
will not, except with the prior written consent of CECI, settle or offer to
settle any such demands.
The Purchaser cannot make any representation as to the outcome of such
appraisal of fair value as determined by the Nevada courts in connection with
the Merger, and stockholders should recognize that such an appraisal could
result in a determination of a value higher or lower than, or equivalent to,
the
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consideration per Share provided in the Offer. In an appraisal proceeding,
moreover, the Purchaser may argue that for purposes of such proceeding the
fair value of the Shares in connection with the Merger is less than the
consideration per Share provided in the Offer.
The Minimum Tender Condition. The Minimum Tender Condition requires that
the number of Shares tendered and not withdrawn before the expiration of the
Offer, together with the Shares beneficially owned by the Purchaser,
represent at least a majority of the Shares outstanding on a fully diluted
basis. According to the Merger Agreement, as of September 30, 1994, there
were 24,042,915 Shares outstanding. According to the Merger Agreement, as of
December 2, 1994, there were 582,478 Shares reserved for issuance pursuant to
options and deferred stock awards under the Stock Option Plans (as defined in
the Merger Agreement), or otherwise described in the Company Disclosure
Schedule, and there were 996,943 Shares reserved for future issuance under
the Stock Option Plans. The Purchaser beneficially owns 200,000 Shares,
representing, based on information in the Merger Agreement, approximately 1%
of the outstanding Shares and approximately 1% of the outstanding Shares on a
fully diluted basis, in each case excluding treasury shares. The Shares
beneficially owned by the Purchaser and CECI were acquired in open market
purchases. For purposes of the Offer, "fully diluted basis" assumes that all
outstanding stock options and deferred stock awards are presently
exercisable.
Based on the foregoing and assuming no additional Shares or rights to
acquire Shares have been issued since September 30, 1994 (other than Shares
issued pursuant to the exercise of the stock options referred to above and
deferred stock options), if the Purchaser purchases 12,400,000 Shares (the
"Minimum Number of Shares") pursuant to the Offer, the Minimum Tender
Condition would be satisfied. The Purchaser is only seeking to purchase the
Minimum Number of Shares pursuant to the Offer. If for any reason the
purchase of 12,400,000 Shares pursuant to the Offer would not satisfy the
Minimum Tender Condition, the Purchaser may elect, subject to complying with
applicable rules and regulations of the Commission, (i) to purchase
additional Shares in the Offer such that the aggregate number of Shares
purchased pursuant to the Offer would satisfy the Minimum Tender Condition,
(ii) to terminate the Offer, not accept for payment any Shares and return all
tendered Shares to tendering stockholders or (iii) to waive or reduce the
Minimum Tender Condition and waive any or all other conditions and accept for
payment all Shares validly tendered and not withdrawn.
Rule 13e-3. The Merger will have to comply with any applicable federal
law. The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under
certain circumstances be applicable to the Merger. However, Rule 13e-3 would
be inapplicable if (i) the Shares are deregistered under the Exchange Act
prior to the Merger or other business combination or (ii) the Merger or other
business combination is consummated within one year after the purchase of the
Shares pursuant to the Offer and the amount paid per Share in the Merger or
other business combination is at least equal to the amount paid per Share in
the Offer. If applicable, Rule 13e-3 requires, among other things, that
certain financial information concerning the fairness of the proposed
transaction and the consideration offered to minority stockholders in such
transaction be filed with the Commission and disclosed to stockholders prior
to consummation of the transaction.
Plans for the Company. In connection with the Offer, CECI and the
Purchaser have reviewed, and will continue to review, on the basis of
publicly available information, various possible business strategies that
they might consider in the event that the Purchaser acquires control of the
Company, whether pursuant to the Offer or otherwise. In addition, CECI and
the Purchaser intend to conduct a detailed review of the Company and its
assets, corporate structure, dividend policy, capitalization, operations,
properties, policies, management and personnel and consider and determine
what, if any, changes would be desirable in light of the circumstances which
then exist. Such strategies could include, among other things, changes in the
Company's business, corporate structure, certificate of incorporation,
Bylaws, capitalization, management or dividend policy. The Purchaser will not
be able to effect any such changes or transactions until it has purchased
Shares pursuant to the Offer and obtained control of the Company's Board.
Except as indicated in this Offer to Purchase, the Purchaser has no
present plans or proposals which relate to or would result in an
extraordinary corporate transaction, such as a merger, reorganization,
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liquidation, relocation of operations, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure or business or the composition of the
Company's Board or the Company's management or personnel.
12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, the Purchaser 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 the Purchaser, 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 (ii) on or after December 9, 1994 and at or before the
acceptance of 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 the Purchaser or any other
affiliates of CECI, the consummation by the Purchaser of the Merger or
seeking to obtain material damages, (ii) seeking to prohibit the ownership
or operation by the Purchaser of all or any material portion of the
business or assets of the Company and its subsidiaries or of the
Purchaser, or to compel the Purchaser to dispose of or hold separately all
or any material portion of the business or assets of the Purchaser or the
Company or any of its subsidiaries or seeking to impose any material
limitation on the ability of the Purchaser or any other affiliates of CECI
to conduct their business or own such assets, (iii) seeking to impose or
confirm limitations on the ability of the Purchaser or any other
affiliates of CECI 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 the
Purchaser or any other affiliates of CECI of any Shares, or (v) seeking
any material diminution in the benefits expected to be derived by the
Purchaser or any affiliates of CECI 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 the Purchaser 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 the Purchaser 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 or proposed to acquire
beneficial ownership of more than 20% of any class or series of capital
stock 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 Commission on December 5, 1994, (ii) any such
person, entity or group which before December 5, 1994 had filed such a
Schedule with the Commission, 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 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, the foregoing condition
shall be inapplicable.
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(d) the Company shall have failed to comply in any material respect
with 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 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 CECI or the Purchaser in any such case,
and regardless of the circumstances (including any action or inaction by CECI
and the Purchaser) giving rise to any such condition, makes it inadvisable to
proceed with the Offer and/or with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of CECI and the
Purchaser and may be asserted by CECI or the Purchaser or may be waived by
CECI or the Purchaser in whole or in part at any time and from time to time
in its sole discretion.
13. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to purchase all Shares sought pursuant to the Offer
will be approximately $483.6 million. The Purchaser estimates that
approximately an additional $212.5 million will be required to effectuate the
Merger or, if CECI elects to pay only cash consideration in the Merger,
approximately an additional $463 million will be required. The Purchaser will
obtain such funds through borrowings from commercial banks and other
financial institutions; through a capital contribution by CECI from CECI's
general corporate funds, which at September 30, 1994 aggregated $316.3
million; and, if the Purchaser elects to pay only cash consideration in the
Merger, through a public offering or private placement of CECI Common Stock
or other equity securities of CECI. It is CECI's current intention to pay the
Merger Consideration solely in cash, although such intention is subject to
change based on market conditions and other factors.
The Purchaser anticipates that approximately one-half of the cash required
to purchase Shares pursuant to the Offer and the Merger will be provided
through a secured bank credit facility on terms and conditions to be
determined. CECI has received a fully underwritten financing commitment
letter from Credit Suisse (the "Commitment Letter") which states that Credit
Suisse will provide, on specified terms and subject to customary conditions,
up to $500,000,000 in secured bank financing in connection with the Offer and
the Merger. Such funds, together with a portion of CECI's general corporate
funds, will be sufficient to pay the cash portion of the consideration for
the Offer and the Merger and related expenses.
The Commitment Letter contemplates (i) a facility of up to $250,000,000 to
capitalize the Purchaser for the purpose of financing the Offer (the "Tender
Facility") and (ii) facilities of up to $500,000,000 for, among other things,
refinancing the Tender Facility and effectuating the Merger (the "Merger
Facilities" and, together with the Tender Facility, the "Facilities").
The term of the Tender Facility will be 12 months, extendible for a term
of up to three years from the initial funding at the mutual consent of CECI
and Credit Suisse. The Tender Facility will be a margin loan collateralized
by the Shares purchased pursuant to the Offer and subject to Regulation U
promulgated under the Exchange Act.
The Merger Facilities will be composed of (i) up to a 6-year amortizing
term loan ("Term Loan A") in an expected amount of up to $500,000,000 less
the amount of Term Loan B (as defined below) and (ii) up to a 8-year
amortizing term loan ("Term Loan B") in an expected amount not to be less
than $150,000,000. The Merger Facilities are to be amortized from internally
generated funds of the Company and will be secured by an assignment and
pledge of the stock of the Company and all unencumbered assets of the
Company.
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Interest on loans borrowed under the Facilities will be payable at spreads
of 2.50% above LIBOR (adjusted for reserves) or 1.25% above Base Rate for
loans under the Tender Facility, 2.50% above LIBOR (adjusted for reserves) or
1.50% above Base Rate for Term Loan A, and 3.00% above LIBOR (adjusted for
reserves) or 2.00% above Base Rate for Term Loan B. CECI may elect to incur
loans at either LIBOR or Base Rate.
Credit Suisse's commitment to provide the Facilities is subject to certain
customary conditions, including without limitation (a) a capital investment
in the Purchaser in an amount and form satisfactory to Credit Suisse, (b) the
absence of certain material adverse changes and (c) Credit Suisse's
satisfaction with its due diligence with respect to CECI and the Company.
The definitive documentation relating to the Facilities will contain
representations, warranties, covenants, events of default and conditions
customary for transactions of this size and type.
CECI has agreed to pay certain fees to Credit Suisse with respect to the
Facilities which, in the aggregate, are not material to the transactions
described herein.
The foregoing description of the Commitment Letter is qualified in its
entirety by reference to the text thereof filed as Exhibit (b)(1) to the
Schedule 14D-1 of the Purchaser and CECI filed with the Commission in
connection with the Offer, copies of which may be obtained from the offices
of the Commission in the manner set forth in Section 8 of the Offer to
Purchase (except that such information will not be available at the regional
offices of the Commission). When definitive agreements relating to the
Facilities are executed, copies will be filed as exhibits to amendments to
the Schedule 14D-1.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of this Offer to
Purchase, the Company should split, combine or otherwise change the Shares or
its capitalization, or shall disclose that it has taken any such action,
then, subject to the provisions of Section 12, the Purchaser may, in its sole
judgment, make such adjustments as it deems appropriate to reflect such
split, combination or other change in the purchase price and the other terms
of the Offer (including, without limitation, the number and type of
securities offered to be purchased, the amounts payable therefor and the fees
payable hereunder).
If, on or after the date of this Offer to Purchase, the Company should
declare or pay any cash or stock dividend or other distribution on or issue
any rights with respect to the Shares, payable or distributable to
stockholders of record on a date before the transfer to the name of the
Purchaser or its nominee or transferee on the Company's stock transfer
records of the Shares accepted for payment pursuant to the Offer, then,
subject to the provisions of Section 12, (i) the purchase price per Share
payable by the Purchaser pursuant to the Offer will be reduced by the amount
of any such cash dividend or cash distribution and (ii) the whole of any such
non-cash dividend, distribution or right will be received and held by the
tendering stockholder for the account of the Purchaser and shall be required
to be promptly remitted and transferred by each tendering stockholder to the
Depositary for the account of the Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance, the Purchaser will be
entitled to all rights and privileges as owner of any such non-cash dividend,
distribution or right and may withhold the entire purchase price or deduct
from the purchase price the amount or value thereof, as determined by the
Purchaser in its sole discretion.
The Company has agreed in the Merger Agreement not to take any of the
foregoing actions without the prior written consent of CECI.
15. CERTAIN LEGAL MATTERS. Except as otherwise disclosed herein, on the
basis of an examination of publicly available filings with respect to the
Company, the Purchaser is not aware of any licenses or other regulatory
permits which appear to be material to the business of the Company and which
might be adversely affected by the acquisition of Shares by the Purchaser
pursuant to the Offer or of any approval or other action by any governmental,
administrative or regulatory agency or authority which would be required for
the acquisition or ownership of Shares by the Purchaser as contemplated
herein. Should any such approval or other action be required, it is currently
contemplated that such approval or action would be sought. The Purchaser is
unable to predict whether it may determine that it is required to delay the
acceptance for payment of Shares pursuant to the Offer pending such approval
or other action. There cannot be any assurance that any such approval or
other action, if needed, would be obtained without
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substantial conditions or that adverse consequences might not result to the
Company's business or that certain parts of the Company's business might not
have to be disposed of if such approvals were not obtained or such other
actions were not taken, any of which could cause the Purchaser to elect to
terminate the Offer pursuant to Section 12.
Pending Litigation. On October 3, 1994, the Company filed a complaint
entitled Magma Power Company v. California Energy Company, Inc., Case No.
CV-N-94-06160, against CECI in the Second Judicial District Court of the
State of Nevada in and for the County of Washoe. The complaint seeks a
declaratory judgment that (i) the Company's Board properly discharged its
fiduciary obligations in adopting the Rights Agreement and an amendment to
the Company's Bylaws and, accordingly, such documents were valid and binding,
and (ii) the Merger Moratorium Statute is valid and not in violation of the
Commerce Clause and Supremacy Clause of the United States Constitution. CECI
removed this action to the United States District Court for the District of
Nevada (Case No. CV-N-94-00719-DWH).
On October 17, 1994, CECI filed its answer and counterclaims in response
to the Company's complaint. The counterclaims name the Purchaser as an
additional counterclaim plaintiff and the Company's directors as counterclaim
defendants in addition to the Company. CECI's counterclaims seek primarily:
(i) a declaratory judgment that certain actions taken by the Company,
including the amendment to the Company's Bylaws purporting to preclude the
Company stockholders from taking action by written consent, and
implementation of its "poison pill" Rights Agreement, are void and ultra
vires, and constitute a breach of fiduciary duty by the Company's Board; (ii)
an injunction requiring the Company's Board to rescind the amendment to the
Company's Bylaws which purports to eliminate the power of stockholders to act
by written consent, the "golden parachute" severance agreements granted to 15
members of the Company's management and the indemnification agreements
granted to each member of the Company's Board; (iii) an injunction enjoining
the operation of the "poison pill" Rights Agreement and directing the
Company's Board to redeem the "Rights" provided for in that Agreement; (iv) a
declaratory judgment that the Merger Moratorium Statute is unconstitutional
under the Supremacy Clause and the Commerce Clause of the United States
Constitution; (v) an injunction enjoining the Company's Board from invoking
the terms of the Merger Moratorium Statute or otherwise obstructing the
Offer; and (vi) an injunction requiring the Company to correct all false and
misleading statements in the Previous Schedule 14D-9 and the amendments
thereto.
On October 17, 1994, the Company filed an amended complaint, which, in
addition to the relief requested in its original complaint, seeks (i)
declaratory and injunctive relief with respect to certain purportedly false
and misleading disclosures in CECI's and the Purchaser's Schedule 14D-1 and
the Offer to Purchase therein; and (ii) declaratory and injunctive relief
with respect to certain allegedly false and misleading statements made in
CECI's preliminary Request Solicitation Statement filed with the Commission
pursuant to Section 14(a) of the Exchange Act on October 13, 1994.
On October 19, 1994, CECI and the Purchaser filed their answer to the
Company's amended complaint and amended their counterclaims which, in
addition to the relief requested in the original counterclaims, seek an
injunction requiring the Company to correct additional false and misleading
statements reflected in an amendment to its Schedule 14D-9 and in other
statements made by the Company.
On October 25, 1994, CECI and the Purchaser filed their second amended
counterclaims which, in addition to the relief requested in the original and
amended counterclaims, seek an injunction requiring the Company to refrain
from (i) taking actions to damage its international development projects,
including the Karaha project, or (ii) taking other actions designed to waste
corporate assets and block the Offer and the Merger.
On December 8, 1994, the parties to the action filed a stipulation and
joint motion requesting that the Court stay all proceedings in the action.
The Merger Agreement provides that the parties will hereafter request that
the Court dismiss the action without prejudice.
On September 20, 1994, William Steiner, a stockholder of the Company,
filed a class action complaint entitled William Steiner, et al. v. Paul M.
Pankratz, et al., Case No. 680986, against the Company and its
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directors in the Superior Court of the State of California in and for the
County of San Diego, alleging, among other things, that the Company's
stockholders have been, and continue to be, deprived of the opportunity to
fully realize the benefits of their investment in the Company as a result of
the directors' refusal to properly consider CECI's offer for the Company,
which actions are alleged to constitute unfair dealing and a breach of
fiduciary duty. As relief, the complaint seeks an order directing the
Company's directors to carry out their fiduciary duties to the Company's
stockholders by cooperating fully with CECI or any other entity making a bona
fide offer for the Company, as well as damages and costs. On December 2,
1994, defendants in William Steiner filed a motion to stay the proceedings in
this case in light of the parallel litigation pending in the Nevada courts.
On October 4, 1994, Charles Miller, a stockholder of the Company, filed a
class action complaint entitled Charles Miller, et al. v. Magma Power
Company, et al., Case No. CV94-06187, against the Company, its directors and
The Dow Chemical Company in the Second Judicial District Court of the State
of Nevada in and for the County of Washoe, alleging, among other things, that
the defendants' unwillingness to seriously consider CECI's proposal to
acquire the Company and its implementation of defensive measures constitute
breaches of the fiduciary duty owed to the Company's stockholders. As relief,
the complaint seeks a declaration that defendants have breached their
fiduciary duties, an order directing the defendants to fairly evaluate
alternatives designed to maximize value for the Company's stockholders, and
an injunction with respect to the implementation of the Company's "poison
pill" or other defensive measures, as well as damages and costs.
On November 2, 1994, the plaintiffs in Charles Miller voluntarily
dismissed their state court action, in favor of bringing an action in the
United Stated District Court for the District of Nevada.
On October 28, 1994, stockholders William Steiner and Charles Miller filed
a class action complaint entitled William Steiner and Charles Miller v. Magma
Power Co., Case No. CV-N-94-773-ECR, against the Company, its directors and
The Dow Chemical Company, in the United States District Court for the
District of Nevada, alleging essentially the same facts as in the two
previously filed stockholder litigations. As relief, the complaint seeks an
order directing the defendants to fairly evaluate alternatives designed to
maximize shareholder value, an injunction with respect to implementation of
the Company's Poison Pill, declaration that the Company has violated Sections
14(d) and 14(e) of the Exchange Act, and an injunction barring the defendants
from engaging in any solicitations in opposition to CECI until they comply
with the provisions of the Exchange Act, as well as damages and costs. On
November 18, 1994, the court granted a motion by the plaintiffs in Steiner
and Miller to consolidate this action for all pretrial purposes with Magma
Power Company v. California Energy Company, Inc, et al.
State Takeover Laws. The Company is incorporated under the laws of the
State of Nevada. In connection with its approval of the Offer and the Merger,
the Company's Board acted to render inapplicable to the Offer and the Merger
Sections 78.378 through 78.3793, inclusive (the "Control Share Statute"), and
Sections 78.411 through 78.444, inclusive (the "Merger Moratorium Statute"),
of the NGCL, which, under certain circumstances, could have, among other
things, (i) precluded CECI and the Purchaser from voting Shares purchased
pursuant to the Offer and (ii) prevented CECI and the Purchaser from
consummating the Merger for a period of at least three years following the
purchase of Shares pursuant to the Offer.
A number of states (including Nevada) have adopted laws and regulations
containing restrictions that apply to offers to acquire securities of
corporations which are incorporated and/or have assets, stockholders and/or
conduct business therein. In 1982, the United States Supreme Court in Edgar
v. Mite Corp. invalidated on constitutional grounds the Illinois Business
Takeovers Statute which, as a matter of state securities law, imposed
procedural requirements of additional filings, a waiting period and a
fairness hearing on tender offers, on the ground that the requirements
imposed by the state takeover statute which made takeovers of corporations
meeting certain requirements more difficult, conflicted with federal law. The
reasoning in that decision is likely to apply to other state takeover
statutes that purport to impose similar requirements on the Offer.
In 1987, the United States Supreme Court in CTS Corp. v. Dynamics Corp. of
America held that the State of Indiana could, as a matter of corporate law
and, in particular, those aspects of corporate law
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concerning corporate governance, constitutionally disqualify a potential
acquiror from voting on the affairs of a target corporation, without the
prior approval of a majority vote of those stockholders of the corporation
who had no interest in the acquisition and who were neither officers nor
directors and employees of the corporation, provided that such laws were
applicable only to Indiana corporations. (The Control Share Statute, which
has been rendered inapplicable to the Offer by the Company's Board, is
substantially similar to the statute upheld in CTS Corp.) Subsequently,
certain United States District Courts have ruled that state takeover
statutes, even of the type upheld in CTS Corp., are unconstitutional insofar
as they apply to corporations incorporated outside that state. In TLX
Acquisition Corp. v. Telex Corp., a United States District Court in Oklahoma
ruled that Oklahoma takeover statutes were unconstitutional insofar as they
applied to corporations incorporated outside Oklahoma in that they would
subject such corporations to inconsistent regulations. Similarly in Tyson
Foods, Inc. v. McReynolds, a United States District Court in Tennessee ruled
that four Tennessee takeover statutes were unconstitutional as they applied
to corporations incorporated outside Tennessee. This decision was affirmed by
the United States Court of Appeals for the Sixth Circuit. The reasoning of
these cases may indicate that application of the takeover statutes of states
other than Nevada to the Offer could be unconstitutional.
Various states, including Nevada, also have enacted merger moratorium
statutes that regulate the circumstances under which a corporation may merge
or enter into other business combinations with an acquiror of certain
percentages of their outstanding stock. In Amanda Acquisition Corp. v.
Universal Foods Corp., the United States Court of Appeals for the Seventh
Circuit held that the state of Wisconsin could, as a matter of state law,
prohibit for a period of three years, a Wisconsin corporation from entering
into certain business combinations, including a merger, with a holder of 10%
or more of the outstanding stock of the corporation, unless the corporation's
Board of Directors had approved the transaction prior to the time the
acquiror purchased its 10% interest in the corporation. Certiorari to the
United States Supreme Court was denied. (The Merger Moratorium Statute, which
has been rendered inapplicable to the Merger by the Company's Board, is
substantially similar to the statute upheld in Amanda Acquisition Corp.)
The Company and certain of its subsidiaries conduct business in a number
of states throughout the United States, some of which have enacted takeover
statutes. The Purchaser does not know whether any or all of these statutes
will by their terms apply to the Offer. To the extent that state takeover
statutes and regulations purport to apply to the Offer and the Merger, and
contain provisions that impose requirements that conflict with the United
States Constitution or conflict with the federal securities laws applicable
to the Offer and the Merger, the Purchaser believes that such statutes and
regulations are unconstitutional and/or preempted by federal law. Should the
Company, any government agency or official or any other person seek to apply
any such statute to the Offer, the Purchaser will take such action as then
appears desirable and may contest the validity of such statutes and the
application of such statutes to the Offer in appropriate judicial or
administrative proceedings. If it is asserted that one or more state takeover
laws is applicable to the Offer and an appropriate court does not determine
that it is inapplicable or invalid as applied to the Offer, the Purchaser may
be required to file certain information with, or receive approvals from, the
relevant state authorities, and, if enjoined, the Purchaser may be unable to
purchase Shares tendered pursuant to the Offer or may be delayed in
consummating the Offer. In the circumstances described above, the Purchaser
may not be obliged to purchase any Shares tendered. See Section 12.
Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended (the "HSR Act"), certain acquisition transactions may not be
consummated unless certain information has been furnished to the Federal
Trade Commission ("FTC") and the Antitrust Division of the Department of
Justice (the "Antitrust Division") and certain waiting period requirements
have been satisfied. As a result of termination of the HSR Act waiting period
in connection with the Previous Offer, no waiting period is required in
connection with the Offer.
The Antitrust Division, the FTC and state authorities frequently
scrutinize the legality under the antitrust laws of transactions such as the
acquisition of Shares pursuant to the Offer. At any time before or after the
consummation of any of such transactions, the Antitrust Division, the FTC or
state authorities could take such action under the antitrust laws as it deems
necessary or desirable in the public interest,
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including seeking to enjoin the purchase of Shares pursuant to the Offer or
otherwise or the consummation of the Merger, or seeking the divestiture of
Shares acquired by the Purchaser or the divestiture of substantial assets of
the Company. Private parties may also seek to take action under the antitrust
laws. The Purchaser believes that the acquisition of Shares pursuant to the
Offer will not violate the antitrust laws. However, and notwithstanding
termination of the HSR Act waiting period in connection with the Previous
Offer, there can not be any assurance that a challenge to the Offer on
antitrust grounds will not be made, or if such a challenge is made, what the
result will be. See Section 12 for certain conditions of the Offer, including
conditions with respect to injunctions and certain governmental actions.
16. FEES AND EXPENSES. Gleacher & Co. Inc. ("Gleacher") is acting as
financial advisor to the Purchaser and CECI in connection with the
transactions described in this Offer, as Dealer Manager for the Offer and as
co-arranger of the debt financing. Lehman Brothers Inc. ("Lehman") is also
acting as financial advisor to the Purchaser and CECI and as co-arranger of
the debt financing.
CECI has agreed to pay Gleacher a fee of (a) $250,000 payable upon the
public announcement of an offer to acquire at least 50.1% of the Shares; (b)
$500,000 payable 45 calendar days after the commencement of a tender or
exchange offer, assuming the offer is outstanding at such time; and (c)
$4,000,000 payable upon completion of the direct or indirect acquisition by
CECI, whether alone or in partnership with another company, by merger,
acquisition of securities, or otherwise, of 50.1% or more of the equity
securities of the Company. Any fees payable in (a) or (b) above will be
credited against the fee described in (c). CECI has also agreed to pay
Gleacher a fee equal to .25% of the principal amount of debt financing
arranged in connection with such acquisition. Gleacher will also be
reimbursed for its out-of-pocket expenses in connection with its engagement
in connection with the Offer, including the reasonable fees and expenses of
its counsel. CECI has also agreed to indemnify Gleacher and certain related
persons against certain losses, claims, damages or liabilities and expenses
in connection with the Offer, including certain liabilities under the federal
securities laws.
CECI has agreed to pay Lehman a fee of $1,000,000 payable upon the
completion of the direct or indirect acquisition by CECI (whether alone or in
partnership with another company, by merger, acquisition of securities, or
otherwise), of 50.1% or more of the equity securities of the Company or any
of the businesses or assets of the Company. CECI has also agreed to pay
Lehman a fee equal to .25% of the principal amount of debt financing arranged
in connection with such acquisition. CECI has also agreed to indemnify Lehman
and certain related persons against certain losses, claims, damages or
liabilities and expenses in connection with the Offer, including certain
liabilities under the federal securities laws.
MacKenzie Partners, Inc. has been retained by the Purchaser to act as the
Information Agent in connection with the Offer. The Information Agent may
contact holders of Shares by mail, telephone, facsimile, telegraph and
personal interviews and may request brokers, dealers and other nominee
stockholders to forward materials relating to the Offer to beneficial owners
of Shares. The Information Agent will receive reasonable and customary
compensation for its services, will be reimbursed for certain reasonable
out-of-pocket expenses and will be indemnified against certain liabilities
and expenses in connection therewith, including certain liabilities under the
federal securities laws.
In addition, IBJ Schroder Bank & Trust Company has been retained as the
Depositary. The Depositary has not been retained to make solicitations or
recommendations in its role as Depositary. The Depositary will receive
reasonable and customary compensation for its services, will be reimbursed
for certain reasonable out-of-pocket expenses and will be indemnified against
certain liabilities and expenses in connection therewith, including certain
liabilities under the federal securities laws.
Neither CECI nor the Purchaser will pay any fees or commissions to any
broker or dealer or other person (other than the Dealer Manager and
Information Agent) for soliciting tenders of Shares pursuant to the Offer.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
the Purchaser for customary mailing and handling expenses incurred by them in
forwarding offering materials to their customers.
17. MISCELLANEOUS. The Offer is being made to all holders of Shares. The
Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to a state statute.
If the Purchaser becomes aware of any state where the making of the Offer is
so prohibited, the Purchaser will make a good faith effort to comply with any
such statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, the Purchaser cannot comply with any
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applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction the securities, blue sky or other laws of which require the
Offer to be made by a licensed broker or dealer, the Offer shall be deemed to
be made on behalf of the Purchaser by Gleacher or one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
The Purchaser has filed with the Commission the Schedule 14D-1, pursuant
to Rule 14d-3 under the Exchange Act, furnishing certain additional
information with respect to the Offer, and may file amendments thereto. Such
Statement and any amendments thereto, including exhibits, may be examined and
copies may be obtained from the principal office of the Commission in
Washington, D.C. in the manner set forth in Section 8 of this Offer to
Purchase.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Offer to
Purchase or in the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
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SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS
OF THE PURCHASER, CECI AND PKS
The following information sets forth the name, business address and
present principal occupation and five year employment history of each of the
directors and executive officers of the Purchaser, CECI and PKS. Each of the
directors and executive officers is a citizen of the United States. Unless
otherwise indicated, the business address of (i) each of the directors and
executive Officers of CECI and the Purchaser named below is 10831 Old Mill
Road, Omaha, Nebraska 68154 and (ii) each of the directors and executive
officers of PKS named below is 1000 Kiewit Plaza, Omaha, Nebraska 68131.
Although information is provided herein with respect to PKS, by furnishing
such information CECI is expressing no view with respect to whether or not
PKS may be deemed to be a control person of CECI.
DIRECTORS AND EXECUTIVE OFFICERS OF CECI
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------- ----- --------------------------------------------------
<S> <C> <C>
David L. Sokol ....... 38 President and Chief Executive Officer, Chairman of the
Board of Directors, Director
Thomas R. Mason ...... 50 Senior Vice President, Engineering, Construction and
Operations
Steven A. McArthur .. 36 Senior Vice President, General Counsel and Secretary
Donald M. O'Shei, Sr. 60 Senior Vice President, Asia Division
John G. Sylvia ....... 35 Senior Vice President, Chief Financial Officer and
Treasurer
Gregory E. Abel ...... 32 Vice President, Chief Accounting Officer and Controller
Edward F. Bazemore .. 57 Vice President, Human Resources
David W. Cox ......... 38 Vice President, Legislative and Regulatory Affairs
Vincent B. Fesmire .. 53 Vice President, Development and Implementation
David P. Maystrick .. 43 Vice President, Construction
Dale R. Schuster .... 42 Vice President, Administration
Edgar D. Aronson .... 59 Director
Judith E. Ayres ...... 49 Director
James Q. Crowe ....... 44 Director
Richard K. Davidson . 52 Director
Ben Holt ............. 80 Director
Richard R. Jaros .... 42 Director
Everett B. Laybourne 82 Director
Herbert L. Oakes, Jr. 47 Director
Walter Scott, Jr. ... 62 Director
Barton W. Shackelford 73 Director
David E. Wit ......... 32 Director
</TABLE>
David L. Sokol, 38, Chairman of the Board of Directors, President and
Chief Executive Officer. Mr. Sokol has served as President and Chief
Executive Officer of CECI since April 19, 1993, as Chairman of the Board of
Directors since May 5, 1994 and has been a director of CECI since March 1991.
Formerly, Mr. Sokol was Chairman, President and Chief Executive Officer of
CECI from February 1991 until January 1992. Mr. Sokol has served as Chairman,
President and Chief Executive Officer of the Purchaser since its formation on
September 22, 1994. Mr. Sokol was the President and Chief Operating Officer
of, and a director of, JWP, Inc., from January 27, 1992 to October 1, 1992.
From November 1990 until February 1991, Mr. Sokol was the President and Chief
Executive Officer of Kiewit Energy Company, the largest stockholder of CECI
and a wholly owned subsidiary of PKS. From 1983 to November 1990, Mr. Sokol
was the President and Chief Executive Officer of Ogden Projects, Inc.
S-1
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Thomas R. Mason, 50, Senior Vice President, Engineering, Construction and
Operations. Mr. Mason joined CECI in March 1991. From October 1989 to March
1991, Mr. Mason was Vice President and General Manager of Kiewit Energy
Company. Mr. Mason acted as a consultant in the energy field from June 1988
to October 1989. Prior to that, Mr. Mason was Director of Marketing for
Energy Factors, Inc., a non-utility developer of power facilities.
Steven A. McArthur, 36, Senior Vice President, General Counsel and
Secretary. Mr. McArthur joined CECI in February 1991. Mr. McArthur has served
as a director, Senior Vice President, General Counsel and Secretary of the
Purchaser since its formation on September 22, 1994. From 1988 to 1991 he was
an attorney in the Corporate Finance Group at Shearman & Sterling in San
Francisco. From 1984 to 1988 he was an attorney in the Corporate Finance
Group at Winthrop, Stimson, Putnam & Roberts in New York.
Donald M. O'Shei, Sr., 60, Senior Vice President, Asia Division and
President, CE International, Ltd. General O'Shei was in charge of engineering
and operations for CECI from October 1988 until October 1991. He rejoined
CECI as a Vice President in August 1992. Previously he was President and
Chief Executive Officer of AWD Technologies, Inc., a hazardous waste
remediation firm, and President and General Manager of its predecessor
company, Atkinson-Woodward Clyde. He was a brigadier general in the U.S. Army
prior to joining the Guy F. Atkinson Co. in 1982 as Director of Corporate
Planning and Development.
John G. Sylvia, 35, Senior Vice President, Chief Financial Officer and
Treasurer. Mr. Sylvia joined CECI in 1988. Mr. Sylvia has served as a
director, Senior Vice President, Chief Financial Officer and Treasurer of the
Purchaser since its formation on September 22, 1994. From 1985 to 1988, Mr.
Sylvia was a Vice President in the San Francisco office of the Royal Bank of
Canada, with responsibility for corporate and capital markets banking. From
1986 to 1990, Mr. Sylvia served as an Adjunct Professor of Applied Economics
at the University of San Francisco. From 1982 to 1985, Mr. Sylvia was a Vice
President with Bank of America.
Gregory E. Abel, 32, Vice President, Chief Accounting Officer and
Controller. Mr. Abel joined CECI in 1992. Mr. Abel is a Chartered Accountant
and from 1984 to 1992 he was employed by Price Waterhouse. As a Manager in
the San Francisco office of Price Waterhouse, he was responsible for clients
in the energy industry.
Edward F. Bazemore, 57, Vice President, Human Resources. Mr. Bazemore
joined CECI in July 1991. From 1989 to 1991, he was Vice President, Human
Resources, at Ogden Projects, Inc. in New Jersey. Prior to that, Mr. Bazemore
was Director of Human Resources for Ricoh Corporation, also in New Jersey.
Previously, he was Director of Industrial Relations for Scripto, Inc. in
Atlanta, Georgia.
David W. Cox, 38, Vice President, Legislative and Regulatory Affairs. Mr.
Cox joined CECI in 1990. From 1987 to 1990 Mr. Cox was a Vice President with
Bank of America N.T. & S.A. in the Consumer Technology and Finance Group.
From 1984 to 1987, Mr. Cox held a variety of management positions at First
Interstate Bank.
Vincent B. Fesmire, 53, Vice President, Development and Implementation.
Mr. Fesmire joined the Company in October 1993. Prior to joining CECI, Mr.
Fesmire was employed for 19 years with Stone & Webster, an engineering firm,
serving in various management level capacities with an expertise in
geothermal design engineering.
David P. Maystrick, 43, Vice President, Construction. Mr. Maystrick joined
the Company in April 1994. From 1978 to 1994, Mr. Maystrick was employed as
Senior Project Manager with HDR Engineering, Inc. and was responsible for
implementing and monitoring several full service contracts to design, to
construct, and to operate electric and steam generating facilities. From 1974
to 1977, Mr. Maystrick was a design engineer of fossil fuel and nuclear power
plants at Gibbs & Hill, Inc.
Dale R. Schuster, 42, Vice President, Administration. Mr. Schuster joined
CECI in July 1994. From 1991 until joining CECI, he was Senior Vice President
and General Manager of AutoInfo, Inc., a software development and information
systems company, and prior to that, Vice President and General Manager of
ValCom, Inc.
S-2
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Edgar D. Aronson, 59. Mr. Aronson has been a director of CECI since April
1983. Mr. Aronson founded EDACO Inc., a private venture capital company, in
1981, and has been President of EDACO since that time. Prior to that, Mr.
Aronson was Chairman, Dillon, Read International from 1979 to 1981 and a
General Partner in charge of the International Department at Salomon Brothers
Inc from 1973 to 1979.
Judith E. Ayres, 49. Ms. Ayres has been a director of CECI since July
1990. Since 1989 Ms. Ayres has been Principal of The Environmental Group, an
environmental consulting firm in San Francisco, California. From 1988 to
1989, Ms. Ayres was a Vice President/Principal of William D. Ruckelshaus
Associates, an environmental consulting firm. From 1983 to 1988 Ms. Ayres was
the Regional Administrator of Region 9 (Arizona, California, Hawaii, Nevada
and the Western Pacific Islands) of the United States Environmental
Protection Agency.
James Q. Crowe, 44. Mr. Crowe has been a director of CECI since March
1991. Mr. Crowe is Chairman and Chief Executive Officer of MFS Communications
Company, Inc., a publicly traded company in which PKS holds a majority
ownership interest. Prior to assuming his current position in 1991, Mr. Crowe
was President of Kiewit Industrial Company, a [major] subsidiary of PKS.
Before joining Kiewit Industrial Company in 1986, Mr. Crowe was Group Vice
President, Power Group at Morrison-Knudsen Corporation. Mr. Crowe is a
director of C-TEC Corporation, a publicly traded company in which PKS holds a
majority ownership interest.
Richard K. Davidson, 52. Mr. Davidson was appointed a director of CECI in
March 1993. Mr. Davidson has been Chairman and Chief Executive Officer of
Union Pacific Railroad since 1991. From 1989 to 1991 he was Executive Vice
President--Operations of Union Pacific Railroad, and from 1986 to 1989 he was
Vice President--Operations of Union Pacific Railroad. Mr. Davidson is also a
director of FirsTier Financial, Inc., Chicago & Northwestern Holdings
Corporation and Missouri Pacific Railroad Company.
Ben Holt, 80. Mr. Holt has been a director of CECI since September 1993.
Mr. Holt is the founder, and was Chairman and Chief Executive Officer, of The
Ben Holt Co., an engineering firm located in Pasadena, California, which CECI
acquired in September 1993. Mr. Holt retired as Chairman and CEO of The Ben
Holt Co. in December 1993 and is currently a consultant to CECI. Mr. Holt is
a beneficial owner of 3,763 Shares, representing less than 1% of the
outstanding Shares.
Richard R. Jaros, 42. Mr. Jaros has been a director of CECI since March
1991. Mr. Jaros served as Chairman of the Board from April 19, 1993 to May 5,
1994 and served as President and Chief Operating Officer of CECI from January
8, 1992 to April 19, 1993. From 1990 until January 8, 1992, Mr. Jaros served
as a Vice President of PKS and is currently an Executive Vice President and a
director of PKS. Mr. Jaros serves as a director of MFS Communications
Company, Inc. and C-TEC Corporation, both of which are publicly traded
companies in which PKS holds a majority ownership interest. From 1986 to
1990, Mr. Jaros served as a Vice President for Mergers and Acquisitions for
Kiewit Holdings, a subsidiary of PKS.
Everett B. Laybourne, 82. Mr. Laybourne has been a director of CECI since
May 1988. For many years he served as counsel for a number of major
publicly-held corporations. He also presently serves as a Vice President and
Trustee of The Ralph M. Parsons Foundation and as National Board Chairman of
WAIF, Inc. From 1969 to 1988, Mr. Laybourne was senior partner in the law
firm of MacDonald, Halsted & Laybourne in Los Angeles, California, whose
successor firm was Baker & McKenzie to which he acted for five years in an of
counsel capacity. He continues in the practice of law in Los Angeles.
Herbert L. Oakes, Jr., 47. Mr. Oakes has been a director of CECI since
October 1987. In 1982, Mr. Oakes founded and became President of H.L. Oakes &
Co., Inc., a corporate advisor and dealer in securities. From 1988 to the
present, Mr. Oakes has served as a Managing Director of Oakes, Fitzwilliams,
Co., Limited, a member of the Securities and Futures Authority Limited and
The London Stock Exchange. Mr. Oakes is a director of Shared Technologies,
Inc., Harcor Energy Inc. and New World Power Corporation.
Walter Scott, Jr., 62. Mr. Scott has been a director of CECI since June
1991. Mr. Scott was the Chairman and Chief Executive Officer of CECI from
January 8, 1992 until April 19, 1993. Mr. Scott is
S-3
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<PAGE>
Chairman and President of PKS, a position he has held since 1979. Mr. Scott
is a director of Berkshire Hathaway, Inc., Burlington Resources, Inc.,
ConAgra, Inc., FirsTier Financial, Inc., and Valmont Industries, Inc. Mr.
Scott also serves as a director of MFS Communications Company, Inc. and C-TEC
Corporation, both publicly traded companies in which PKS holds a majority
ownership interest.
Barton W. Shackelford, 73. Mr. Shackelford has been a director of CECI
since June 1986. Mr. Shackelford served as President and a director of
Pacific Gas & Electric Company from 1979 until his retirement in 1985. He is
a director of Harding Associates, Inc.
David E. Wit, 32. Mr. Wit has been a director of CECI since April 1987. He
is co-founder and Co-Chief Executive Officer of Logicat, Inc., a software
development/publishing firm. Prior to working at Logicat, Inc. Mr. Wit worked
at E.M. Warburg, Pincus & Company, where he analyzed seed-stage financing and
technology investments.
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
The names of each director of the Purchaser are set forth below. The other
required information with respect to each such person is set forth under
"Directors and Executive Officers of CECI" above.
<TABLE>
<CAPTION>
NAME AGE
------------------ -----
<S> <C>
David L. Sokol ............................... 38
Steven A. McArthur ............................ 36
John G. Sylvia ................................ 35
</TABLE>
All current executive officers of CECI hold the same offices at the
Purchaser. See "Directors and Executive Officers of CECI" above.
DIRECTORS AND EXECUTIVE OFFICERS OF PKS
Richard W. Colf, 51. Mr. Colf became a director of PKS in 1994. Mr. Colf
has been a director of Kiewit Construction Group Inc. since 1992 and a Vice
President of Kiewit Pacific since 1987.
James Q. Crowe (see "Directors and Executive Officers of CECI" above).
Robert B. Daugherty, 72. Mr. Daugherty has been a director of PKS since
1986. He serves as Chairman of the Board of Valmont Industries, Inc. and is a
director of KN Energy, Inc. Mr. Daugherty's business address is 8805 Indian
Hill Drive, Guarantee Centre, Suite 225, Omaha, Nebraska 68114.
Richard Geary, 59. Mr. Geary has been a director of PKS since 1988. Mr.
Geary is employed as an Executive Vice President of KCG and President of
Kiewit Pacific Co., a subsidiary of PKS.
Bruce E. Grewcock, 40. Mr. Grewcock became a director of PKS in 1994. Mr.
Grewcock has been President (since 1992), a Senior Vice President
(1992-1992), and a Vice President (1987-1991) of Kiewit Mining Group Inc., a
subsidiary of PKS.
Charles M. Harper, 66. Mr. Harper has been a director of PKS since 1986.
Mr. Harper is the Chairman of the Board and Chief Executive Officer of RJR
Nabisco Holdings Corp. and formerly served as the Chairman of the Board of
ConAgra, Inc. Mr. Harper's business address is One Central Park Plaza, Suite
1500, Omaha, Nebraska 68102.
Richard R. Jaros (see "Directors and Executive Officers of CECI" above).
Robert E. Julian 55. Mr. Julian has been a director since 1987, Executive
Vice President-Chief Financial Officer of PKS since 1991 and Vice
President-Chief Financial Officer of PKS from 1989 to 1991. Mr. Julian was
Vice President-Chief Financial Officer of PKS from 1984 to 1991. Mr. Julian
is a director of Kiewit Diversified Group Inc., a wholly owned subsidiary of
PKS ("KDG"). In addition, Mr. Julian has been a director of MFS
Communications Company since January 1992 and of C-TEC Corporation since
December 1993.
Leonard W. Kearney, 53. Mr. Kearney has been a director of PKS since 1989.
He is the President of Kiewit Construction Company and Kiewit Western Co. and
a Vice President of KDG.
S-4
<PAGE>
<PAGE>
Peter Kiewit, Jr., 68. Mr. Kiewit has been a director of PKS since 1966
and is Of Counsel to the law firm of Gallagher & Kennedy, Phoenix, Arizona.
Walter Scott (see "Directors and Executive Officers of CECI" above).
Kenneth E. Stinson, 52. Mr. Stinson has been an Executive Vice President
of PKS since 1991 and a director of PKS since 1987. He formerly served as a
Vice President of PKS. He has been the President of Kiewit Construction Group
Inc., an affiliate of PKS ("KCG"), since 1992 and a director of such company
since 1986. In addition, Mr. Stinson served as President of Kiewit Coal
Properties Inc., an affiliate of PKS from 1989 to 1992 and a director of such
company since prior to 1988. Mr. Stinson is also a director of KDG, MFS
Communications Company, Inc. and C-TEC Corporation.
George B. Toll, Jr., 58. Mr. Toll is a director of PKS and serves as an
Executive Vice President of KDG.
S-5
<PAGE>
<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The Letter
of Transmittal and certificates for Shares and any other required documents
should be sent or delivered by each stockholder or his broker, dealer,
commercial bank, trust company or other nominee to the Depositary at one of
its addresses set forth below:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Telephone Number: (212) 858-2103
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile: By Hand or
P.O. Box 84 (212) 858-2611 Overnight Delivery:
Bowling Green Station Attn: Reorganization One State Street
New York, New York 10274-0084 Operations Department New York, New York 10004
Attn: Reorganization Operations Attn: Reorganization
Department Operations Department
Confirm Facsimile by
Telephone: (212) 858-2103
</TABLE>
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager at their respective addresses and telephone
numbers set forth below. Requests for additional copies of this Offer to
Purchase, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or to brokers, dealers, commercial banks or
trust companies.
The Information Agent for the Offer is:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Collect)
or
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
GLEACHER & CO. INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4206
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
AT
$39.00 NET PER SHARE
PURSUANT TO THE OFFER TO PURCHASE
DATED DECEMBER 9, 1994
BY
CE ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALIFORNIA ENERGY COMPANY, INC.
- -------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995,
UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Telephone Number:
(212) 858-2103
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: Facsimile Number: By Hand or Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization Operations New York, New York 10004
New York, New York 10274-0084 Department Attn: Reorganization Operations
Attn: Reorganization Operations Department
Department
Confirm Facsimile by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN
THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
<PAGE>
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by stockholders either if
certificates for Shares ("Share Certificates") are to be forwarded herewith
or if delivery is to be made by book-entry transfer to the account maintained
by the IBJ Schroder Bank & Trust Company (the "Depositary") at The Depository
Trust Company ("DTC"), Midwest Securities Trust Company ("MSTC") or
Philadelphia Depository Trust Company ("PHDTC") (collectively, the
"Book-Entry Transfer Facilities") pursuant to the procedures set forth in
Section 4 of the Offer to Purchase, dated December 9, 1994 (the "Offer to
Purchase"), of CE Acquisition Company, Inc., a Delaware corporation (the
"Purchaser") and a wholly owned subsidiary of California Energy Company,
Inc., a Delaware corporation ("CECI").
If a stockholder desires to accept the Offer and tender Shares pursuant to
the Offer and such stockholder's Share Certificates are not immediately
available or time will not permit all required documents to reach the
Depositary prior to the expiration of the Offer (the "Expiration Date"), or
the procedures for book-entry transfer cannot be completed on a timely basis,
such Shares may nevertheless be tendered if the guaranteed delivery
procedures set forth in Section 4 of the Offer to Purchase are followed. See
Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING
INSTRUCTIONS CAREFULLY.
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ---------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED
HOLDER(S) (PLEASE FILL IN, IF BLANK) SHARE CERTIFICATE(S) TENDERED (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- -------------------------------------------- -----------------------------------------------------------------------------
TOTAL NUMBER OF SHARES
SHARE CERTIFICATE REPRESENTED BY SHARE NUMBER OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
------------------------ ---------------------------- ---------------------
<S> <C> <C> <C>
------------------------ ---------------------------- ---------------------
------------------------ ---------------------------- ---------------------
------------------------ ---------------------------- ---------------------
------------------------ ---------------------------- ---------------------
TOTAL SHARES:
- -------------------------------------------- ------------------------ ---------------------------- ---------------------
* Need not be completed by stockholders tendering by book-entry transfer.
** Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See
Instruction 4.
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER
FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution
---------------------------------------------------------------------------
Check box of Book-Entry Transfer Facility:
[ ] DTC [ ] MSTC [ ] PHDTC
Account Number
---------------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s)
--------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery
--------------------------------------------------------------------------
Window Ticket Number (If Any)
--------------------------------------------------------------------------
Name of Institution which Guaranteed Delivery
--------------------------------------------------------------------------
If delivery is by book-entry transfer, check one box:
[ ] DTC [ ] MSTC [ ] PHDTC
PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY
<PAGE>
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS.
Ladies and Gentlemen:
The undersigned hereby tenders to CE Acquisition Company, Inc., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of California
Energy Company, Inc., a Delaware corporation ("CECI"), the above described
shares of common stock, par value $0.10 per share (the "Shares"), of Magma
Power Company, a Nevada corporation (the "Company"), pursuant to the
Purchaser's offer to purchase 12,400,000 Shares at a price of $39.00 per
Share, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase, dated
December 9, 1994 (the "Offer to Purchase") (receipt of which is hereby
acknowledged) and in this Letter of Transmittal (which together with the
Offer to Purchase constitutes the "Offer"). The undersigned understands that
the Purchaser reserves the right to transfer or assign, in whole and from
time to time in part, to one or more direct or indirect subsidiaries of CECI,
the right to purchase Shares tendered pursuant to the Offer, but any such
transfer or assignment will not relieve the Purchaser of its obligations
under the Offer or prejudice the rights of tendering stockholders to receive
payment for Shares validly tendered and accepted for payment pursuant to the
Offer.
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to, or upon
the order of, the Purchaser all right, title and interest in and to all the
Shares that are being tendered hereby and that are being accepted for
purchase pursuant to the Offer (and any and all dividends, distributions,
stock splits, other Shares, rights or other securities issued or issuable in
respect of the Shares on or after December 9, 1994) which are payable or
distributable to stockholders of record on a date prior to the transfer into
the name of the Purchaser or its nominees or transferees on the Company's
stock transfer records of the Shares purchased pursuant to the Offer (a
"Distribution"), and irrevocably constitutes and appoints the Depositary the
true and lawful attorney-in-fact and proxy of the undersigned with respect to
such Shares (and any dividends, distributions, other Shares, rights or
securities, including Distributions) with full power of substitution and
resubstitution (such power of attorney being deemed to be an irrevocable
power coupled with an interest), to (a) deliver certificates for such Shares
(and any such dividends, distributions, other Shares, rights or securities,
including Distributions), or transfer ownership of such Shares on the account
books maintained by a Book-Entry Transfer Facility, together in either such
case with all accompanying evidences of transfer and authenticity, to or upon
the order of the Purchaser upon receipt by the Depositary, as the
undersigned's agent, of the purchase price (adjusted, if appropriate, as
provided in the Offer to Purchase), (b) present such Shares (and any
dividends, distributions, other Shares, rights or securities, including
Distributions) for transfer on the books of the Company and (c) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares (and any such dividends, distributions, other Shares, rights or
securities, including Distributions), all in accordance with the terms of the
Offer.
<PAGE>
The undersigned hereby irrevocably appoints David L. Sokol, Steven A.
McArthur and John G. Sylvia and each of them, or any other designees of the
Purchaser, the attorneys-in-fact and proxies of the undersigned, each with
full power of substitution and resubstitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to vote or act
by written consent in such manner as each such attorney and proxy or his
substitute shall in his sole discretion deem proper, and otherwise to act
with respect to all the Shares tendered hereby that have been accepted for
payment by the Purchaser prior to the time of such vote or action (and any
and all non-cash dividends, distributions, other Shares, rights or securities
issued or issuable in respect thereof on or after December 9, 1994), at any
meeting of stockholders (whether regular or special and whether or not an
adjourned meeting) of the Company, or consent in lieu of any such meeting, or
otherwise. All such powers of attorney and proxies are irrevocable and
coupled with an interest in the tendered Shares and are granted in
consideration of, and are effective when, and only to the extent that, the
Purchaser accepts such Shares for payment. Such acceptance for payment shall
revoke any other proxies granted by the undersigned at any time with respect
to such Shares (and any such non-cash dividends, distributions, other Shares,
rights or other securities, including Distributions) and no subsequent
proxies or written consents will be given (and if given will be deemed not to
be effective) with respect thereto by the undersigned.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all dividends, distributions, other Shares,
rights or other securities issued or issuable in respect thereof, including
Distributions, on or after December 9, 1994) and that, when the same are
accepted for payment by the Purchaser, the Purchaser will acquire good and
unencumbered title thereto, free and clear of all pledges, liens,
restrictions, charges, proxies and encumbrances and the same will not be
subject to any adverse claim.
<PAGE>
<PAGE>
Upon request, the undersigned will execute and deliver any additional
documents deemed by the Depositary or the Purchaser to be necessary or
desirable to complete the sale, assignment and transfer of the Shares
tendered hereby (and any and all dividends, distributions, such other Shares,
rights or other securities, including Distributions). In addition, the
undersigned shall promptly remit and transfer to the Depositary for the
account of the Purchaser any and all other Shares or other securities,
including Distributions, issued to the undersigned on or after December 9,
1994 in respect of Shares tendered hereby, accompanied by appropriate
documentation of transfer, and, pending such remittance or appropriate
assurance thereof, the Purchaser shall be entitled to all rights and
privileges as owner of any such other Shares or other securities and may
withhold the entire consideration or deduct from the consideration the amount
or value thereof, as determined by the Purchaser in its sole discretion.
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or
incapacity of the undersigned and any obligation of the undersigned hereunder
shall be binding upon the successors, assigns, heirs, executors,
administrators and legal and personal representatives of the undersigned.
Except as stated in the Offer to Purchase and the Letter of Transmittal, this
tender is irrevocable. The undersigned understands that tenders of Shares
pursuant to any one of the procedures described in the Offer to Purchase and
in the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions of
the Offer.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment in the name(s) of the
registered holder(s) appearing under "Description of Shares Tendered."
Similarly, unless otherwise indicated under "Special Delivery Instructions,"
please mail the check for the purchase price and/or return any certificates
for Shares not tendered or accepted for payment (and accompanying documents,
as appropriate) to the registered holder(s) appearing under "Description of
Shares Tendered" at the address shown below the undersigned's signature. If
both the Special Delivery Instructions and the Special Payment Instructions
are completed, please issue the check for the purchase price, and/or return
any certificates for Shares not tendered or accepted for payment in the name
of, and deliver said certificates and check and return such certificates to,
the person or persons so indicated. Stockholders delivering Shares by
book-entry transfer may request that any Shares not accepted for payment be
returned by crediting such account maintained at a Book-Entry Transfer
Facility as such stockholder may designate by making an appropriate entry
under "Special Payment Instructions." The undersigned recognizes that the
Purchaser has no obligation pursuant to the Special Payment Instructions to
transfer any Shares from the name of the registered holder thereof if the
Purchaser does not accept for payment any of the Shares so tendered.
<PAGE>
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be issued
in the name of someone other than the undersigned, or if the Shares delivered
by book-entry transfer which are not purchased are to be returned by credit
to an account maintained at a Book-Entry Transfer Facility other than that
designated above.
Issue [ ] check [ ] Certificate(s) to:
Name
- -----------------------------------------------------------------------------
(Please Print)
Address
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Include Zip Code)
- -----------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9 on the reverse hereof)
[ ] Credit unpurchased Shares delivered by
book-entry transfer to the Book-Entry Transfer
Facility account set forth below:
Check appropriate box:
[ ] DTC [ ] MSTC [ ] PHDTC
- -----------------------------------------------------------------------------
(Account Number)
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certificates for Shares not tendered or not purchased
and/or the check for the purchase price of Shares purchased are to be sent to
someone other than the undersigned, or to the undersigned at an address other
than that shown above.
Mail [ ] check [ ] Certificate(s) to:
Name
- -----------------------------------------------------------------------------
(Please Print)
Address
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Include Zip Code)
- -----------------------------------------------------------------------------
(Tax Identification or Social Security No.)
(See Substitute Form W-9 on the reverse hereof)
<PAGE>
<PAGE>
STOCKHOLDERS SIGN HERE
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
SIGNATURE(S) OF OWNER(S)
DATED: _____________
IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
Share Certificate(s) on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, agents, officers of corporations or others
acting in a fiduciary or representative capacity, please provide the
following information. See Instruction 5.)
Name(s):
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Please Print)
Capacity (full title):
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
(Including Zip Code)
Area Code and Telephone Number:
- -----------------------------------------------------------------------------
Tax Identification or Social Security Number:
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(See Instructions 1 and 5 to determine if required.)
Authorized Signature:
- -----------------------------------------------------------------------------
Name:
- -----------------------------------------------------------------------------
Name of Firm:
- -----------------------------------------------------------------------------
Title:
- -----------------------------------------------------------------------------
Address:
- -----------------------------------------------------------------------------
Area Code and Telephone Number:
- -----------------------------------------------------------------------------
Dated:
- -----------------------------------------------------------------------------
<PAGE>
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required (i) if this Letter of Transmittal is signed by the
registered holder of the Shares (which term, for the purposes of this
document, shall include any participant in a Book-Entry Transfer Facility
whose name appears on a security position listing as the owner of Shares)
tendered herewith, unless such holder has completed either the box entitled
"Special Payment Instructions" or the box entitled "Special Delivery
Instructions" on the reverse hereof or (ii) if such Shares are to be tendered
for the account of a bank, broker, dealer, credit union, savings association
or other entity which is a member in good standing of the Securities Transfer
Agent's Medallion Program (collectively, "Eligible Institutions"). In all
other cases, all signatures on the Letter of Transmittal must be guaranteed
by an Eligible Institution. If the Share Certificates are registered in the
name of a person other than the signer of this Letter of Transmittal, or
payment of the purchase price is to be made or certificates for unpurchased
Shares are to be issued or returned to a person other than the registered
owner, then the tendered certificates must be endorsed or accompanied by duly
executed stock powers, in either case signed exactly as the name or names of
the registered owner or owners appear on the certificates, with the
signatures on the certificates or stock powers guaranteed by an Eligible
Institution. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by stockholders either if certificates are to
be forwarded herewith or if tenders of Shares are to be made pursuant to the
procedures for delivery by book-entry transfer set forth in the Offer to
Purchase. Certificates for all physically tendered Shares, or timely
confirmation of any book-entry transfer into the Depositary's accounts at
DTC, MSTC or PHDTC or Shares tendered by book-entry transfer, as the case may
be, as well as a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) with any required signature guarantees, or an Agent's
Message in the case of a book-entry delivery, and any other documents
required by this Letter of Transmittal, must be received by the Depositary at
one of its addresses set forth herein on or prior to the Expiration Date (as
defined in the Offer to Purchase). Stockholders whose Share Certificates are
not immediately available, or who cannot deliver their certificates and all
other required documents to the Depositary on or prior to the Expiration Date
or who cannot complete the procedures for delivery by book-entry transfer on
a timely basis may tender their Shares by properly completing and duly
executing the Notice of Guaranteed Delivery pursuant to the guaranteed
delivery procedure set forth in the Offer to Purchase. Pursuant to such
procedure: (i) such tender must be made by or through an Eligible
Institution, (ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form provided by the Purchaser, must be
received by the Depositary on or before the Expiration Date and (iii) the
certificates for all tendered Shares or confirmation of any book-entry
transfer into the Depositary's account at DTC, MSTC or PHDTC of Shares
tendered by book-entry transfer, as the case may be, together with a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) with
any required signature guarantees (or, in the case of a book-entry transfer,
an Agent's Message (as defined in the Offer to Purchase)), and all other
documents required by this Letter of Transmittal, must be received by the
Depositary within six Nasdaq National Market ("NNM") trading days after the
date of execution of such Notice of Guaranteed Delivery to the Depositary, as
provided in the Offer to Purchase. If Share Certificates are forwarded
separately to the Depositary, a properly completed and duly executed Letter
of Transmittal (or a facsimile thereof) must accompany each such delivery.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER
AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering stockholders, by execution
of this Letter of Transmittal (or facsimile thereof), waive any right to
receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a
separate signed schedule attached hereto.
4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY
BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any
certificate submitted are to be tendered, fill in the number of Shares which
are to be tendered in the box
<PAGE>
<PAGE>
entitled "Number of Shares Tendered." In such case, new certificate(s) for
the remainder of the Shares that were evidenced by old certificate(s) will be
sent to the registered holder, unless otherwise provided in the boxes
entitled "Special Payment Instructions" or "Special Delivery Instructions" on
this Letter of Transmittal, as soon as practicable after the Expiration Date.
All Shares represented by certificates delivered to the Depositary will be
deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. (a)
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, the signature(s) must correspond exactly with the
name(s) as written on the face of the certificate(s) without alteration,
enlargement or any change whatsoever.
(b) If any of the Shares tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
(c) If any tendered Shares are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of
certificates.
(d) If this Letter of Transmittal or any certificates or stock powers are
signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or
representative capacity, such person should so indicate when signing, and
proper evidence satisfactory to the Purchaser of such person's authority so
to act must be submitted.
(e) When this Letter of Transmittal is signed by the registered holder(s)
of the Shares listed and transmitted hereby, no endorsements of certificates
or separate stock powers are required unless payment is to be made to, or
certificates for Shares not tendered or purchased are to be issued in the
name of, a person other than the registered holder(s). Signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution
(unless signed by an Eligible Institution).
(f) If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares listed, the certificates must be endorsed
or accompanied by appropriate stock powers, in either case signed exactly as
the name or names of the registered holder(s) appear on the certificates.
Signatures on such certificates or stock powers must be guaranteed by an
Eligible Institution (unless signed by an Eligible Institution).
6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the
Purchaser will pay or cause to be paid any stock transfer taxes with respect
to the transfer and sale of purchased Shares to it or its order pursuant to
the Offer. If payment of the purchase price is to be made to, or if
certificates for Shares not tendered or purchased are to be registered in the
name of, any person other than the registered holder, or if tendered
certificates are registered in the name of any person other than the
person(s) signing this Letter of Transmittal, the amount of any stock
transfer taxes (whether imposed on the registered holder or such other
person) payable on account of the transfer to such person will be deducted
from the purchase price unless satisfactory evidence of the payment of such
taxes or exemption therefrom is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER
OF TRANSMITTAL.
<PAGE>
7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued
in the name of, and/or certificates for unpurchased Shares are to be returned
to, a person other than the signer of this Letter of Transmittal or if a
check is to be sent and/or certificates for unpurchased Shares are to be
returned to someone other than the signer of this Letter of Transmittal or to
an address other than that shown above, the appropriate boxes on this Letter
of Transmittal should be completed. Stockholders tendering Shares by
book-entry transfer may request that the Shares not purchased be credited to
such account maintained at a Book-Entry Transfer Facility as such stockholder
may designate hereon. If no such instructions are given, such Shares not
purchased will be returned by crediting the account at a Book-Entry Transfer
Facility designated above. See Instruction 1.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance
may be directed to, or additional copies of the Offer to Purchase and the
Letter of Transmittal may be obtained from, either the Information Agent or
the Dealer Manager at their respective address set forth below or from your
broker, dealer, commercial bank or trust company.
9. IRREGULARITIES. All questions as to the validity (including time of
receipt) and acceptance for payment of any tender of Shares will be
determined by the Purchaser, in its sole discretion, whose determination
shall be final and binding. The Purchaser reserves the absolute right to
reject any and all tenders determined by it not to be in the appropriate form
or the acceptance for purchase of which may, in the opinion of its counsel,
be unlawful. As set forth in the Offer to Purchase,
<PAGE>
<PAGE>
the Purchaser also reserves the absolute right to waive any of the conditions
of the Offer or any defect or irregularity in the tender of any Shares of any
particular stockholder whether or not similar defects or irregularities are
waived in the case of other stockholders. The Purchaser's interpretations of
the terms and conditions of the Offer (including these instructions) will be
final and binding. Unless waived, any defects or irregularities must be cured
within such time as the Purchaser shall determine. None of the Purchaser, the
Dealer Manager, the Depositary, the Information Agent or any other person
will be under any duty to give notice of any defects or irregularities in
tenders or shall incur any liability for failure to give any such
notification. Tenders shall not be deemed to have been made until all defects
and irregularities have been cured or waived.
10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under federal income tax
laws, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below and certify under
penalties of perjury that such number is correct and that such stockholder is
not subject to backup withholding. If the Depositary is not provided with the
correct TIN and certifications are not provided, the Internal Revenue Service
may subject the stockholder or other payee to a $50 penalty. In addition,
payments that are made to such stockholder or other payee with respect to
Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain stockholders (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, the stockholder must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form
W-8 can be obtained from the Depositary. See the enclosed "Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9" for
more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the stockholder or other payee must also complete the Certificate of
Awaiting Taxpayer Identification Number below in order to avoid backup
withholding. Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the
Depositary will withhold 31% of all payments made prior to the time a
properly certified TIN is provided to the Depositary. The stockholder is
required to give the Depositary the TIN (e.g., social security number or
employer identification number) of the record owner of the Shares or of the
last transferee appearing on the transfers attached to, or endorsed on, the
Shares. If the Shares are in more than one name or are not in the name of the
actual owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on
which number to report.
11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s)
representing Shares has been lost, destroyed or stolen, the stockholder
should promptly notify the Information Agent. The stockholder will then be
instructed as to the steps that must be taken in order to replace the
certificate(s). This Letter of Transmittal and related documents cannot be
processed until the procedures for replacing lost or destroyed certificates
have been followed.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) OR AN
AGENT'S MESSAGE, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE.
<PAGE>
<PAGE>
TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS
(SEE INSTRUCTION 10)
<TABLE>
<CAPTION>
<S> <C> <C>
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY
SUBSTITUTE Form W-9 PART 1 --PLEASE PROVIDE YOUR TIN IN THE Social security number
BOX AT RIGHT AND CERTIFY BY SIGNING AND OR ______________________________
DATING BELOW Employer identification number
-------------------------------------------------------------------------------------------
Department of PART 2 --CERTIFICATION --UNDER PENALTIES OF PERJURY, I CERTIFY THAT:
the Treasury (1) The number shown on this form is my correct Taxpayer Identification Number (or I
Internal Revenue Service am waiting for a number to be issued to me); and
PAYER'S REQUEST FOR TAXPAYER (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I
IDENTIFICATION NUMBER (TIN) have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup
withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has
notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in part 2 above if you have been
notified by the IRS that you are subject to backup withholding because of under-reporting
interest or dividends on your tax return. However, if after being notified by the IRS that you
were subject to backup withholding you received another notification from the IRS stating that
you are no longer subject to backup withholding, do not cross out item (2).
----------------------------------------------------------------------------------------
SIGNATURE ................ DATE ................ PART 3
NAME (Please Print)............................... Awaiting TIN -- [ ]
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP
WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE
REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
<PAGE>
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3
OF SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (i) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or
(ii) I intend to mail or deliver an application in the near future. I
understand that if I do not provide a taxpayer identification number within
60 days, 31% of all reportable payments made to me thereafter will be
withheld until I provide a number.
Signature .................................... Date ............
Name (Please Print) .............................................
FACSIMILE COPIES OF THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND
DULY EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR
SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH
STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST
COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH
ABOVE.
<PAGE>
<PAGE>
Questions and requests for assistance may be directed to the Information
Agent or to the Dealer Manager as set forth below. Requests for additional
copies of the Offer to Purchase, Letter of Transmittal and other tender offer
materials may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
The Information Agent for the Offer is:
MACKENZIE
PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (call collect)
OR
CALL TOLL FREE (800) 322-2885
The Dealer Manager for the Offer is:
GLEACHER & CO. INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4206
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
As set forth in Section 4 of the Offer to Purchase, dated December 9, 1994
(the "Offer to Purchase"), this Notice of Guaranteed Delivery or one
substantially equivalent hereto must be used to accept the Offer (as defined
below) if certificates representing shares of common stock, par value $0.10
per share (the "Shares"), of Magma Power Company, a Nevada corporation (the
"Company"), are not immediately available or time will not permit all
required documents to reach IBJ Schroder Bank & Trust Company (the
"Depositary") on or prior to the Expiration Date (as defined in the Offer to
Purchase), or the procedures for delivery by book-entry transfer cannot be
completed on a timely basis. This Notice of Guaranteed Delivery may be
delivered by hand or sent by telegram, facsimile transmission or mail to the
Depositary.
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Telephone Number:
(212) 858-2103
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: Facsimile Number: By Hand or Overnight Delivery:
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization Operations New York, New York 10004
New York, New York 10274-0084 Department Attn: Reorganization Operations
Attn: Reorganization Operations Department
Department
Confirm Facsimile by Telephone:
(212) 858-2103
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION
TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID
DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an "Eligible Institution" under the instructions thereto (see
Instructions 1 and 5 of the Letter of Transmittal), such signature guarantee
must appear on the applicable space provided in the signature box on the
Letter of Transmittal.
<PAGE>
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to CE Acquisition Company, Inc., a Delaware
corporation, upon the terms and subject to the conditions set forth in the
Offer to Purchase and in the related Letter of Transmittal (which together
constitute the "Offer"), receipt of which is hereby acknowledged, the number
of Shares indicated below pursuant to the guaranteed delivery procedure set
forth in Section 4 of the Offer to Purchase.
<TABLE>
<CAPTION>
<S> <C>
Number of Shares: Dated:
- -------------------------------------------- ---------------------------------------
Certificate No(s). (if available): Name(s) of Record Holder(s):
- --------------------------------------------- ---------------------------------------
- --------------------------------------------- ---------------------------------------
- --------------------------------------------- Address(es):
---------------------------------------
If Shares will be tendered by book- ---------------------------------------
entry transfer, check one box: Area Code and Telephone Number(s):
[ ] The Depository Trust Company ---------------------------------------
[ ] Midwest Securities Trust Company
Signature(s):
---------------------------------------
[ ] Philadelphia Depository Trust Company
Account Number: ---------------------------------------
--------------------------------------------
</TABLE>
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a firm that is a bank, broker, dealer, credit union,
savings association or other entity which is a member in good standing of the
Securities Transfer Agent's Medallion Program, hereby (a) represents that the
tender of Shares effected hereby complies with Rule 14e-4 under the
Securities Exchange Act of 1934 and (b) guarantees to deliver to the
Depositary, at one of its addresses set forth above, the certificates
representing all tendered Shares, in proper form for transfer, or
confirmation of a book-entry transfer of such Shares, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase) in the case of book-entry delivery, and any
other documents required by the Letter of Transmittal within six Nasdaq
National Market ("NNM") trading days after the date of execution of this
Notice of Guaranteed Delivery.
<TABLE>
<CAPTION>
<S> <C> <C>
Name of Firm:
- ---------------------- -------------------------
Authorized Signature
Name:
Address: -------------------------
- ---------------------- Please type or print
- ----------------------- Date:
Zip Code -------------------------
Area Code and
Telephone Number:
- ----------------------
</TABLE>
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED
DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF
TRANSMITTAL.
<PAGE>
GLEACHER & CO. INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4206
OFFER TO PURCHASE FOR CASH
12,400,000 SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
AT
$39.00 NET PER SHARE
BY
CE ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALIFORNIA ENERGY COMPANY, INC.
- -------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995,
UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
December 9, 1994
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by CE ACQUISITION COMPANY, INC., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of California
Energy Company, Inc. ("CECI"), to act as the Dealer Manager in connection
with its offer to purchase 12,400,000 shares of common stock, par value $0.10
per share (the "Shares"), of Magma Power Company, a Nevada corporation (the
"Company") at $39.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer
to Purchase, dated December 9, 1994 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer")
enclosed herewith.
The Offer is conditioned upon, among other things, (1) there being validly
tendered and not withdrawn before the expiration of the Offer that number of
Shares which, together with Shares beneficially owned by the Purchaser,
represents at least a majority of the Shares outstanding on a fully diluted
basis, and (2) the Purchaser being satisfied that it has obtained financing
sufficient to enable it to consummate the Offer.
Please furnish copies of the enclosed materials to those of your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee.
Enclosed herewith for your information and for forwarding to your clients
for whose accounts you hold Shares registered in your name or in the name of
your nominee are copies of the following documents:
1. The Offer to Purchase, dated December 9, 1994;
2. The Letter of Transmittal for your use and for the information of
your clients. Facsimile copies of the Letter of Transmittal may be used to
tender Shares;
3. A Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or if such
certificates and all other required documents cannot be delivered to the
Depositary before the expiration of the Offer or if the procedures for
book-entry transfer cannot be completed on a timely basis;
<PAGE>
<PAGE>
4. A printed form of letter which may be sent to your clients for
whose account you hold Shares registered in your name or in the name of
your nominee, with space provided for obtaining such clients' instructions
with regard to the Offer;
5. Guidelines of the Internal Revenue Service for Certification of
Taxpayer Identification Number on Substitute Form W-9; and
6. A return envelope addressed to the Depositary.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE. THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9,
1995, UNLESS THE OFFER IS EXTENDED.
In order to accept the Offer, (i) a duly executed and properly completed
Letter of Transmittal with any required signature guarantees or any Agent's
Message (as defined in the Offer to Purchase), or other documentation should
be sent to the Depositary, and (ii) either certificates representing the
tendered Shares should be delivered to the Depositary or such Shares should
be tendered by book-entry transfer into the Depositary's account maintained
at one of the Book-Entry Transfer Facilities (as defined in the Offer to
Purchase), all in accordance with the instructions set forth in the Letter of
Transmittal and the Offer to Purchase.
If holders of Shares wish to tender, but it is impractical for them to
forward their certificates for such Shares or other required documentation on
or prior to the expiration of the Offer or to comply with the book-entry
transfer procedures on a timely basis, a tender may be effected by following
the guaranteed delivery procedures specified in Section 4 of the accompanying
Offer to Purchase.
The Purchaser will not pay any commissions or fees to any broker, dealer
or other person (other than the Dealer Manager and the Information Agent, as
described in the Offer to Purchase) for soliciting tenders of Shares pursuant
to the Offer. The Purchaser will, however, upon request, reimburse you for
customary clerical and mailing expenses incurred by you in forwarding any of
the enclosed materials to your clients. The Purchaser will pay or cause to be
paid any stock transfer taxes payable on the transfer of Shares to it, except
as otherwise provided in Instruction 6 of the enclosed Letter of Transmittal.
Any questions or requests for assistance may be directed to the
Information Agent or to the Dealer Manager at its address and telephone
number set forth on the back cover of the Offer to Purchase. Requests for
additional copies of the Offer to Purchase, the Letter of Transmittal and
other tender offer materials may be directed to the Information Agent or to
brokers, dealers, commercial banks or trust companies.
Very truly yours,
GLEACHER & CO. INC.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU
OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, CECI, THE DEALER MANAGER, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM OR
AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT
ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED
DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN.
<PAGE>
OFFER TO PURCHASE FOR CASH
12,400,000 SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
AT
$39.00 NET PER SHARE
BY
CE ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALIFORNIA ENERGY COMPANY, INC.
- -------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995,
UNLESS THE OFFER IS EXTENDED.
- -------------------------------------------------------------------------------
December 9, 1994
To Our Clients:
Enclosed for your consideration is an Offer to Purchase, dated December 9,
1994 (the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer") relating to an offer by CE Acquisition
Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned
subsidiary of California Energy Company, Inc. ("CECI"), to purchase
12,400,000 shares of common stock, par value $0.10 per share (the "Shares"),
of Magma Power Company, a Nevada corporation (the "Company"), at $39.00 per
Share, net to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer.
Holders of Shares whose certificates for such Shares ("Share
Certificates") are not immediately available or who cannot deliver their
Share Certificates and all other required documents to the Depositary on or
prior to the Expiration Date, or who cannot complete the procedures for
book-entry transfer on a timely basis, must tender their Shares according to
the guaranteed delivery procedures set forth in Section 4 of the Offer to
Purchase.
THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES
CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO
YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR
INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR
YOUR ACCOUNT. ACCORDINGLY, WE REQUIRE INSTRUCTIONS AS TO WHETHER YOU WISH TO
TENDER ANY OR ALL OF SUCH SHARES HELD BY US FOR YOUR ACCOUNT, UPON THE TERMS
AND SUBJECT TO THE CONDITIONS SET FORTH IN THE OFFER.
Please note the following:
1. The Purchaser is offering to purchase 12,400,000 Shares at $39.00
per Share, net to the seller in cash, without interest thereon, upon the
terms and subject to the conditions set forth in the Offer.
2. The Offer, the proration period and withdrawal rights will expire
at 12:00 Midnight, New York City time, on Monday, January 9, 1995, unless
the Offer is extended.
3. The Offer is conditioned upon, among other things, (1) there being
validly tendered and not withdrawn before the expiration of the Offer that
number of Shares which, together with Shares beneficially owned by the
Purchaser, represents at least a majority of the Shares outstanding on a
fully diluted basis, and (2) the Purchaser being satisfied that it has
obtained financing sufficient to enable it to consummate the Offer. The
Offer is also subject to certain other terms and conditions.
<PAGE>
<PAGE>
4. Tendering stockholders will not be obligated to pay brokerage fees
or commissions or, except as set forth in Instruction 6 of the Letter of
Transmittal, stock transfer taxes on the purchase of Shares pursuant to
the Offer.
5. Payment for Shares accepted for payment pursuant to the Offer will
be made only after timely receipt by the Depositary of (i) certificates
for such Shares or timely confirmation of the book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company,
Midwest Securities Trust Company or Philadelphia Depository Trust Company
(collectively, the "Book-Entry Transfer Facilities"), pursuant to the
procedures set forth in Section 4 of the Offer to Purchase, (ii) the
Letter of Transmittal (or a facsimile thereof), properly completed and
duly executed, with any required signature guarantees or an Agent's
Message (as defined in the Offer to Purchase) (as described in Section 4
of the Offer to Purchase) in connection with a book-entry transfer, and
(iii) any other documents required by the Letter of Transmittal.
Accordingly, payment may not be made to all tendering stockholders at the
same time depending upon when certificates for, or confirmations of
book-entry transfer of, such Shares into the Depositary's account at a
Book-Entry Transfer Facility are actually received by the Depositary.
If you wish to have us tender any or all of the Shares held by us for your
account, please so instruct us by completing, executing and returning to us
the instruction form contained in this letter. If you authorize a tender of
your Shares, all such Shares will be tendered unless otherwise indicated in
such instruction form. Please forward your instructions to us in ample time
to permit us to submit a tender on your behalf prior to the expiration of the
Offer. The Letter of Transmittal is furnished to you for your information
only and cannot be used by you to tender Shares held by us for your account.
The Purchaser is not aware of any state where the making of the Offer is
prohibited by administrative or judicial action pursuant to state statute. If
the Purchaser becomes aware of any state where the making of the Offer is so
prohibited, the Purchaser will make a good faith effort to comply with any
such statute or seek to have such statute declared inapplicable to the Offer.
If, after such good faith effort, the Purchaser cannot comply with any
applicable statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such states. In those
jurisdictions where the laws require the Offer to be made by a licensed
broker or dealer, the Offer is being made on behalf of the Purchaser by
Gleacher & Co. Inc. or one or more registered brokers or dealers that are
licensed under the laws of such jurisdiction.
<PAGE>
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH
12,400,000 SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), and the
related Letter of Transmittal (which together constitute the "Offer")
relating to the offer by CE Acquisition Company, Inc., a Delaware corporation
(the "Purchaser") and wholly owned subsidiary of California Energy Company,
Inc. ("CECI"), to purchase 12,400,000 shares of common stock, par value $0.10
per share (the "Shares"), of Magma Power Company, a Nevada corporation, at
$39.00 per Share, net to the seller in cash, without interest thereon, upon
the terms and subject to the conditions set forth in the Offer to Purchase
and in the related Letter of Transmittal.
This will instruct you to tender to the Purchaser the number of Shares
indicated below (or if no number is indicated below, all Shares) which are
held by you for the account of the undersigned, upon the terms and subject to
the conditions set forth in the Offer.
Dated: _______________
Number of Shares to be Tendered
_______________Shares
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Signature(s)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Print Name(s)
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
- -----------------------------------------------------------------------------
Print Address
- -----------------------------------------------------------------------------
Area Code and Telephone Number
- -----------------------------------------------------------------------------
Tax Identification or Social Security Number
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER--Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated
by only one hyphen: i.e., 00-0000000. The table below will help determine the
number to give the payer.
<TABLE>
<CAPTION>
GIVE THE SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------- ----------------------------
<S> <C>
1. An individual's account The individual
2. Two or more individuals The actual owner of
(joint account) the account or, if
combined funds, any
one of the individuals (1)
3. Husband and wife (joint account) The actual owner of the
account or, if joint funds,
either person (2)
4. Custodian account of a minor The minor (2)
(Uniform Gift to Minors Act)
5. Adult and minor (joint account) The adult or, if the minor
is the only contributor,
the minor (1)
6. Account in the name of guardian or The ward, minor, or
committee for a designated ward, incompetent person (3)
minor, or incompetent person
7. a. The usual revocable savings The grantor-trustee (1)
trust account (grantor is also
trustee)
b. So-called trust account that is The actual owner (1)
not a legal or valid trust under
State law
8. Sole proprietorship account The owner (4)
<CAPTION>
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- --------------------------------------- ----------------------------
9. A valid trust, estate, or pension Legal entity (Do not furnish
trust the identifying number of the
personal representative or
trustee unless the legal entity
itself is not designated in the
account title.) (5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held in the The partnership
name of the business
13. Association, club, or other The organization
tax-exempt organization
14. A broker or registered nominee The broker or nominee
15. Account with the Department The public entity
of Agriculture in the name of a
public entity (such as a State
or local government, school
district, or prison) that
receives agricultural program
payments
- --------------------------------------- ----------------------------
</TABLE>
<PAGE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security
number.
(3) Circle the ward's, minor's, or incompetent person's name and furnish
such person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or
Form SS-4, Application for Employer Identification Number, at the local
office of the Social Security Administration or the Internal Revenue Service
and apply for a number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments
including the following:
o A corporation.
o A financial institution.
o An organization exempt from tax under section 501(a), or an individual
retirement plan.
o The United States or any agency or instrumentality thereof.
o A State, the District of Columbia, a possession of the United
States, or any subdivision or instrumentality thereof.
o A foreign government, a political subdivision of a foreign
government, or agency or instrumentality thereof.
o An international organization or any agency or instrumentality
thereof.
o A registered dealer in securities or commodities registered
in the U.S. or a possession of the U.S.
o A real estate investment trust.
o A common trust fund operated by a bank under section
584(a).
o An exempt charitable remainder trust, or a non-exempt
trust described in section 4947(a)(1).
o An entity registered at all times under the
Investment Company Act of 1940.
o A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
o Payments to nonresident aliens subject to withholding under section 1441.
o Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
o Payments of patronage dividends where the amount received is not paid
in money.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
o Payments of interest on obligations issued by individuals.
NOTE: You may be subject to backup withholding if this interest is $600 or
more and is paid in the course of the payer's trade or business and you
have not provided your correct taxpayer identification number to the payer.
<PAGE>
o Payments of tax-exempt interest (including exempt interest dividends
under section 852).
o Payments described in section 6049(b)(5) to nonresident aliens.
o Payments on tax-free covenant bonds under section 1451.
o Payments made by certain foreign organizations.
o Payments made to a nominee.
Exempt payees described above should file Form W-9 to avoid possible
erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR
TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND
RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE
DIVIDENDS. ALSO SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends
that are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Beginning January 1, 1993,
payers must generally withhold 31% of taxable interest, dividends, and
certain other payments to a payee who does not furnish a taxpayer
identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you
fail to furnish your taxpayer identification number to a payer, you are
subject to a penalty of $50 for each such failure unless your failure is due
to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you
make a false statement with no reasonable basis which results in no
imposition of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
<PAGE>
This announcement is neither an offer to purchase nor a
solicitation of an offer to sell Shares. The Offer is made solely
by the Offer to Purchase dated December 9, 1994 and the related Letter of
Transmittal and is being made to all holders of Shares. The Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of Shares
in any jurisdiction in which the making of the Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. In any
jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be
deemed to be made on behalf of CE Acquisition Company, Inc.
by Gleacher & Co. Inc. or one or more registered brokers or dealers
licensed under the laws of such jurisdiction.
NOTICE OF OFFER TO PURCHASE FOR CASH
12,400,000 SHARES OF COMMON STOCK
OF
MAGMA POWER COMPANY
AT
$39.00 NET PER SHARE
BY
CE ACQUISITION COMPANY, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALIFORNIA ENERGY COMPANY, INC.
CE Acquisition Company, Inc., a Delaware corporation (the
``Purchaser'') and a wholly owned subsidiary of California Energy
Company, Inc., a Delaware corporation (``CECI''), hereby offers to purchase
12,400,000 shares of Common Stock, par value $0.10 per share (the
``Shares''), of Magma Power Company (the ``Company''), a Nevada corporation, at
a price of $39.00 per Share, net to the seller in cash, without interest
thereon, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated December 9, 1994 (the ``Offer to Purchase'') and in
the related Letter of Transmittal (which together constitute the ``Offer'').
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS
WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF THOSE
PRESENT, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE
BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND
THE MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING
VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE
OFFER THAT NUMBER OF SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY
OWNED BY THE PURCHASER, REPRESENTS AT LEAST A MAJORITY OF THE
SHARES OUTSTANDING ON A FULLY DILUTED BASIS (SUCH CONDITION BEING REFERRED TO
AS THE ``MINIMUM TENDER CONDITION''), AND (2) THE PURCHASER BEING
SATISFIED THAT IT HAS OBTAINED FINANCING SUFFICIENT TO ENABLE IT TO CONSUMMATE
THE OFFER.
The purpose of the Offer is to acquire majority control of the
Company as the first step in the acquisition of the entire equity
interest in the Company. On December 5, 1994, CECI and the Company entered into
an Agreement and Plan of Merger (the ``Merger Agreement'') pursuant to
which the Company will, as soon as practicable following consummation of the
Offer, consummate a merger (the ``Merger'') with the Purchaser.
In the Merger, each remaining outstanding Share (other than Shares
held by CECI, the Purchaser or any other direct or indirect wholly
owned subsidiary of CECI, Shares held in the treasury of the Company and
Shares held by stockholders who properly exercise dissenters'
rights under the Nevada General Corporation Law (the ``NGCL'')) will be
converted into the right to receive, at the option of CECI, (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 CECI 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 (as defined in the Merger
Agreement) less (y) $39.00 multiplied by the number of Shares owned by CECI 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 CECI and any of its affiliates). The ``All Cash
<PAGE>
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 CECI 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 CECI and any of its affiliates). The ``Average Closing Price'' shall
mean the average closing price of shares of common stock, par value $0.0675 per
share, of CECI (the ``CECI Common Stock'') on the New York Stock Exchange
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.
The Purchaser expressly reserves the right, in its sole judgment,
at any time or from time to time and regardless of whether any of
the events set forth in Section 12 of the Offer to Purchase shall have occurred
or shall have been determined by the Purchaser to have occurred, (i)
to extend the period of time during which the Offer is open and thereby delay
acceptance for payment of, and the payment for, any Shares, by
giving oral or written notice of such extension to the Depositary (as defined
in the Offer to Purchase) and (ii) subject to the terms of the Merger
Agreement, to amend the Offer in any respect by giving oral or written notice
of such amendment to the Depositary. Any such extension, amendment or
termination will be followed as promptly as practicable by public announcement
thereof, such announcement in the case of an extension to be issued not
later than 9:00 A.M., New York City time, on the next business day after the
previously scheduled Expiration Date (as defined in the Offer to
Purchase). During any such extension, all Shares previously tendered and not
withdrawn will remain subject to the Offer, subject to the right of a
tendering stockholder to withdraw such stockholder's Shares.
If more than 12,400,000 Shares shall be properly tendered on or
prior to the Expiration Date and not withdrawn in accordance with
Section 3 of the Offer to Purchase, and the acquisition of such number of
Shares satisfies the Minimum Tender Condition, the Purchaser will, upon
the terms and subject to the conditions of the Offer, purchase 12,400,000
Shares on a pro rata basis (with adjustments to avoid purchases of
fractional Shares) based upon the number of Shares properly tendered on or
prior to the Expiration Date and not withdrawn. If exactly 12,400,000 Shares
are properly tendered on or prior to the Expiration Date and not withdrawn, and
the acquisition of such number of Shares satisfies the Minimum
Tender Condition, the Purchaser will, upon the terms and subject to the
conditions of the Offer, accept for payment and purchase all such
Shares so tendered. If fewer than 12,400,000 Shares shall have been properly
tendered on or prior to the Expiration Date and not withdrawn, and
the number of Shares so tendered and not withdrawn shall not have satisfied the
Minimum Tender Condition, the Purchaser may, subject to the terms
of the Merger Agreement, (i) terminate the Offer and return all tendered
Shares to tendering stockholders, (ii) extend the Offer and retain all
such Shares until the expiration of the Offer, as extended, subject to the
terms of the Offer (including any rights of stockholders to withdraw their
Shares), or (iii) waive the Minimum Tender Condition and purchase all properly
tendered Shares. Due to the difficulty of determining the precise number of
Shares properly tendered and not withdrawn, if proration is required, the
Purchaser does not expect to announce the final results of proration or pay
for any Shares until at least seven Nasdaq National Market trading days after
the Expiration Date. Preliminary results of proration will be announced
by press release as promptly as practicable after the Expiration Date.
Holders of Shares may obtain such preliminary information when it
becomes available from the Information Agent and may be able to obtain such
information from their brokers.
For purposes of the Offer, the Purchaser will be deemed to have
accepted for payment, and thereby purchased, Shares validly
tendered and not withdrawn as, if and when the Purchaser gives oral or written
notice to the Depositary of the Purchaser's acceptance of such
Shares for payment pursuant to the Offer. In all cases, upon the terms and
subject to the conditions of the Offer, payment for Shares
purchased pursuant to the Offer will be made by deposit of the purchase price
therefor with the Depositary, which will act as agent for tendering
stockholders for the purpose of receiving payment from the Purchaser and
transmitting payment to validly tendering stockholders. Under no circumstances
will interest on the purchase price for Shares be paid by the Purchaser
by reason of any delay in making such payment or for any other
reason. In all cases, payment for Shares purchased pursuant to the Offer will
be made only after timely receipt by the Depositary of (a) certificates for
such Shares (``Certificates'') or a book-entry confirmation of the book-entry
transfer of such Shares and into the Depositary's account at the
Depository Trust Company, the Midwest Securities Trust Company or the
Philadelphia Depository Trust Company (collectively, the ``Book-Entry Transfer
Facilities''), pursuant to the procedures set forth in the Offer to Purchase,
(b) a Letter of Transmittal (or facsimile thereof) properly completed
and duly executed, with any required signature guarantees, or an Agent's
Message (as defined in the Offer to Purchase) in connection with a book-entry
transfer, and (c) any other documents required by such Letter of Transmittal.
If, for any reason whatsoever, acceptance for payment of any Shares
tendered to the Offer is delayed, or if the Purchaser is unable to
accept for payment or pay for Shares tendered pursuant to the Offer, then,
without prejudice to the Purchaser's rights set forth in the Offer
to Purchase, the Depositary may, nevertheless, on behalf of the Purchaser,
retain tendered Shares and such Shares may not be withdrawn except to the
extent that the tendering stockholder is entitled to and duly exercises
withdrawal rights as described in Section 3 of the Offer to
Purchase. Any such delay will be by an extension of the Offer to the extent
<PAGE>
required by law.
If certain events occur, the Purchaser will not be obligated to
accept for payment or pay for any Shares tendered pursuant to the
Offer. If any tendered Shares are not purchased pursuant to the Offer for any
reason (including because of proration) or are not paid for because
of invalid tender, or if Certificates are submitted representing more Shares
than are tendered, Certificates representing unpurchased or untendered
Shares will be returned, without expense to the tendering stockholder (or, in
the case of Shares delivered by book-entry transfer into the
Depositary's account at a Book-Entry Transfer Facility pursuant to the
procedures set forth in Section 4 of the Offer to Purchase, such Shares will be
credited to an account maintained within such Book-Entry Transfer Facility), as
soon as practicable following the expiration, termination or withdrawal of the
Offer and determination of the final results of proration.
Except as otherwise provided in Section 3 of the Offer to Purchase,
tenders of Shares made pursuant to the Offer are irrevocable.
Shares tendered pursuant to the Offer may be withdrawn at any time prior
to 12:00 Midnight, New York City time, on Monday, January 9, 1995
(or if the Purchaser shall have extended the period of time for which the
Offer is open, at the latest time and date at which the Offer, as
so extended by the Purchaser, shall expire) and, unless theretofore accepted
for payment and paid for by the Purchaser pursuant to the Offer, may
also be withdrawn at any time after February 6, 1995. In order for a withdrawal
to be effective, a written, telegraphic or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses
set forth on the back cover of the Offer to Purchase. Any notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn, and if Certificates for Shares
have been tendered, the name of the registered holder of the Shares
as set forth in the tendered Certificate, if different from that of
the person who tendered such Shares. If Certificates for Shares have been
delivered or otherwise identified to the Depositary, then prior to
the physical release of such Certificates, the serial numbers shown on such
Certificates evidencing the Shares to be withdrawn must be
submitted to the Depositary and the signature on the notice of withdrawal must
be guaranteed by a firm which is a bank, broker, dealer, credit union,
savings association or other entity that is a member in good standing of
the Securities Transfer Agent's Medallion Program (an ``Eligible
Institution''), unless such Shares have been tendered for the account of an
Eligible Institution. If Shares have been tendered pursuant to the
procedures for book-entry transfer set forth in Section 4 of the Offer to
Purchase, any notice of withdrawal must also specify the name and number of the
account at the appropriate Book-Entry Transfer Facility to be credited with the
withdrawn Shares and otherwise comply with such Book-Entry Transfer
Facility's procedures. Withdrawal of tenders of Shares may not be rescinded,
and any Shares properly withdrawn will be deemed not to be validly
tendered for purposes of the Offer. Withdrawn Shares may, however,
be retendered by repeating one of the procedures in Section 4 of
the Offer to Purchase at any time before the Expiration Date. The Purchaser, in
its sole judgment, will determine all questions as to the form and
validity (including time of receipt) of notices of withdrawal, and such
determination will be final and binding. Any Shares properly
withdrawn will be deemed not validly tendered for the purposes of the Offer,
but may be retendered at any subsequent time prior to the Expiration Date by
following the procedures described in Section 3 of the Offer to Purchase.
The information required to be disclosed by Rule 14d-6(e)(1)(vii)
of the General Rules and Regulations under the Securities Exchange
Act of 1934 is contained in the Offer to Purchase and is incorporated
herein by reference.
Pursuant to the Merger Agreement, the Company will furnish CECI and
the Purchaser with mailing labels containing the names and
addresses of all record holders of Shares and security position listings of
Shares held in stock depositories. Upon compliance by the Company,
the Offer to Purchase, the related Letter of Transmittal and other relevant
materials will be mailed to record holders of Shares and will be
furnished to brokers, dealers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the
stockholder list, or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY
DECISION IS MADE WITH RESPECT TO THE OFFER.
Questions and requests for assistance may be directed to the
Information Agent or the Dealer Manager at their respective
addresses and telephone numbers set forth below. Requests for copies of the
Offer to Purchase, the Letter of Transmittal and other related materials
may be directed to the Information Agent or to brokers, dealers,
commercial banks or trust companies.
The Information Agent for the Offer is:
[LOGO]
156 Fifth Avenue
New York, New York 10010
<PAGE>
(212) 929-5500 (Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Manager for the Offer is:
GLEACHER & CO. INC.
660 Madison Avenue
New York, New York 10021
(212) 418-4206
December 9, 1994
<PAGE>
[Letterhead of MacKenzie Partners, Inc.]
CONTACT FOR
CALIFORNIA ENERGY:
David L. Sokol, Chairman & CEO
Dale R. Schuster, Vice President
California Energy Company, Inc.
(402) 330-8900
or
Mark H. Harnett
MacKenzie Partners, Inc.
(212) 929-5877
or
CONTACT FOR MAGMA POWER:
Thomas J. Davies
Andrea Bergofin
Kekst & Co.
(212) 593-2655
FOR IMMEDIATE RELEASE:
CALIFORNIA ENERGY AND MAGMA POWER REACH
MERGER AGREEMENT AT $39 PER SHARE
OMAHA, NE, and SAN DIEGO, CA, December 5, 1994 -- California
Energy Company, Inc. (NYSE, PSE, LSE: CE) and Magma Power Company
(NASDAQ:MGMA) today announced that they had 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
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 the valid tender
of shares representing a majority of the voting power of Magma,
funding of financing, and other customary closing conditions. In
- more -
<PAGE>
CALIFORNIA ENERGY/MAGMA POWER
December 5, 1994
page 2
addition, the merger (though not the tender) is conditioned, if
California Energy shares are to be issued, on approval of
California Energy 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.
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."
California Energy Company is an international developer owner and
operator of geothermal and other environmentally responsible
- more -
<PAGE>
CALIFORNIA ENERGY/MAGMA POWER
December 5, 1994
page 3
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 power plants in
Southern California and 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.
# # #
<PAGE>
[Letterhead of MacKenzie Partners, Inc.]
News Release
CONTACTS:
David L. Sokol, Chairman & CEO
Dale R. Schuster, Vice President
California Energy Company, Inc.
(402) 330-8900
or
Mark H. Harnett
MacKenzie Partners, Inc.
(212) 929-5877
FOR IMMEDIATE RELEASE:
CALIFORNIA ENERGY COMMENCES $39 PER SHARE CASH TENDER OFFER
FOR A MAJORITY OF MAGMA POWER'S COMMON STOCK;
Magma's Board Recommends Stockholders Tender
OMAHA, NE, December 9, 1994 -- California Energy Company, Inc.
(NYSE, PSE, LSE: CE) announced today that it has commenced a cash
tender offer for 12,400,000 shares, or approximately 51% of the
common stock, of Magma Power Company (NASDAQ:MGMA) at a price of
$39 net per share.
The offer is due to expire at midnight, New York City time, on
January 9, 1995 and, if oversubscribed, will be pro-rated. As soon
as practicable thereafter, California Energy will complete the
acquisition of all remaining Magma 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
California Energy's option, approximately $38.50 per share in cash.
It is California Energy's present intention to pay the merger
consideration solely in cash, although such intention is based on
expected market conditions and other factors which may change.
As previously announced, the Magma Board of Directors, by the
unanimous vote of those present, has determined that the terms of
the offer and merger are fair to, and in the best interest of
Magma's stockholders and recommends that stockholders tender their
Magma shares into California Energy's tender offer.
The tender offer is subject to, among other things, there being
validly tendered, together with shares beneficially owned by
California Energy, a majority of the outstanding shares of Magma,
the funding of financing and other customary conditions.
Following the merger, the combined companies will have projected
annual revenues in excess of $400 million, its facilities will
produce in excess of 545 MW of power and will have an additional
530 MW 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.
- more -
<PAGE>
CALIFORNIA ENERGY/MAGMA POWER
December 9, 1994
page 2
California Energy Company is a leading international developer,
owner and operator of geothermal and other environmentally
responsible power generation facilities. Its six existing
facilities currently produce in excess of 325 MW of power with an
additional 300 MW under construction and 970 MW under contract.
Magma Power Company, which has approximately 24,046,000 shares
outstanding, 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 if 231 MW.
# # #
EXHIBIT (b)(1)
[Letterhead of Credit Suisse]
Credit Suisse
Tower 49
12 East 49th Street
New York, New York
October 25, 1994
Mr. John G. Sylvia
Senior Vice President and
Chief Financial Officer
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68155
Dear Mr. Sylvia:
You have advised Credit Suisse (the "Bank") that CE Acquisition
Company, Inc., a newly formed Delaware corporation ("Newco") and a subsidiary
of California Energy Company, Inc. ("CECI"), has offered to acquire through a
tender offer (the "Tender Offer") 51% of the outstanding shares of common stock
of Magma Power Company, a Nevada corporation ("Magma") and will enter into a
merger with Magma (the "Merger").
Pursuant to your request, we are pleased to inform you that we
hereby commit (i) to underwrite the financing of the Tender Offer in the
principal amount of up to $250,000,000 (the "Tender Facility") and (ii) to
underwrite the financing of the Merger in the principal amount of up to
$500,000,000 (the "Merger Facility"), in each case on the terms and conditions
described in the attached term sheets (the "Term Sheets"). This commitment is
subject to (i) the preparation, execution and delivery of mutually acceptable
loan and security documentation incorporating substantially the terms and
conditions outlined in the Term Sheets, (ii) the absence of a material adverse
change in the financial condition or operations of CECI or Magma and (iii) the
Bank's satisfaction with its due diligence with respect to CECI and Magma.
<PAGE>
It is understood that, as provided in the Term Sheets, the Bank
will act as Agent for the Tender Facility and the Merger Facility, with the
right to syndicate the Tender Facility and Merger Facility to additional
lending institutions.
CECI and Newco acknowledge their joint and several obligation
to pay fees and expenses as described in the Term Sheets and as otherwise
agreed to by the Bank, Newco and CECI.
CECI and Newco each jointly and severally hereby agrees to
indemnify and hold harmless the Bank and each other lending institution that
may participate in the Tender Facility or the Merger Facility, their respective
affiliates and each of their respective directors, officers, employees, agents
and advisors (each, an "Indemnified Party"), from and against any and all
claims, damages, liabilities (including for securities liabilities), losses and
expenses, including without limitation, fees, expenses and disbursements of
counsel, which may be incurred by or asserted against an Indemnified Party in
connection with the Bank's commitment or participation in the transactions
contemplated hereby, this letter, the Tender Facility, the Merger Facility, the
Tender Offer, the Merger or any related matter or any investigation, litigation
or proceeding in connection therewith and whether or not the Tender Offer, the
Merger or the financing herein contemplated is consummated, except to the
extent such claim, damage, loss, liability or expenses is found in a final non-
appealable judgment by a court of competent jurisdiction to have resulted from
such Indemnified Party's own gross negligence or willful misconduct.
In further consideration of the commitment of the Bank
hereunder, and recognizing that in connection herewith the Bank is incurring
out-of-pocket costs and expenses, CECI and Newco each jointly and severally
agrees to reimburse the Bank for all out-of-pocket costs and expenses
(including fees and disbursements of outside counsel for the Bank), incurred or
sustained by the Bank in connection with the transactions contemplated hereby
whether or not such transactions occur and whether incurred before or after the
execution by CECI and Newco of this letter.
Please evidence your acceptance of the Term Sheets and the
other matters referred to herein by signing in the space provided below and
returning a copy of this letter to us on or before October 25, 1994, the date
on which the
<PAGE>
Bank's commitment set forth above (if not accepted prior thereto) will expire.
Very truly yours,
CREDIT SUISSE
By: /s/ Scott E. Zoellner
Name: Scott E. Zoellner
Title: Associate
By: /s/ Peter R. Nardin
Name: Peter R. Nardin
Title: Member of Senior
Management
Accepted this 25th day
of October, 1994
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer
CE ACQUISITION COMPANY, INC.
By: /s/ John G. Sylvia
Name: John G. Sylvia
Title: Senior Vice President and
Chief Financial Officer
<PAGE>
<TABLE>
CONFIDENTIAL
California Energy Company
SUMMARY OF TERMS AND CONDITIONS
UP TO $250,000,000 TENDER OFFER FACILITY
<S> <C>
Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent.
Agent/Arranger/
Underwriter: Credit Suisse
Lenders: The Agent and any other financial institutions to which the facility may be syndicated by
the Agent.
Facility: Up to a $250,000,000 12-month tender offer facility (the "Facility") subject to
Regulation U and renewable/extendable for a term of up to three-years from initial
funding at the mutual consent of both the Borrower and Lenders.
Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco"), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target"). A condition of the tender will be the execution and
delivery of a definitive merger agreement between Newco and the Target (the "Merger
Agreement Condition"), although that condition may be waived by the Borrower as
contemplated in the Offer to Purchase of the Borrower and Newco dated October 6,
1994, as it may be amended, (the "Offer to Purchase") under the caption "The Merger
Agreement Condition." No material amendment to the Offer to Purchase shall be
effective for purposes of this term sheet without the prior written consent of the Bank.
If the Merger Agreement Condition is not waived, the form of the merger agreement
shall be satisfactory to the Agent. Funds provided by the Facility will be advanced by
the Borrower to Newco to purchase a secured note of Newco (the "Newco Secured
Tender Note"). The proceeds from the sale of the Newco Secured Tender Note will be
used, together with the Borrower's capital investment in Newco and other available
moneys which will be in an amount and form satisfactory to the Agent, to purchase the
tendered stock of the Target, and to pay related fees and costs of the transaction. The
economic terms of the Newco Secured Tender Note will mirror the terms of the Facility.
Borrowing Options: Adjusted LIBOR and Base Rate.
<PAGE>
CONFIDENTIAL
California Energy Company
"Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%)
of the rates offered to the reference Lenders in the London interbank market for deposits
in an amount and maturity corresponding to the interest period for the advance. LIBOR
will be adjusted for reserves and other regulatory requirements, as appropriate.
"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.
Applicable
Interest Margins: LIBOR + 2.50%
Base Rate + 1.25%
Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.
Interest on LIBOR loan segments will be payable in arrears (i) at the end of each
applicable interest period and (ii) in the case of any interest period longer than three
months, every three months during such period. Interest on LIBOR loan segments will
be calculated on the basis of the actual number of days elapsed over a 360 day year.
Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall
be maintained as Base Rate loan segments effective in the case of LIBOR loan segments
at the end of each then existing period.
Scheduled
Amortization: The Facility will not be subject to a scheduled amortization prior to its maturity.
Mandatory
Prepayments: Subject to mandatory prepayment as a whole in connection with (i) any sale of any of the
ownership interest of the Target by Newco; (ii) a permanent injunction of the merger
between Newco and the Target; and (iii) the closing of the merger between Newco and
the Target. Subject to mandatory prepayment in part in an amount equal to the proceeds
of any dividends, loans, advances or other distributions from Target to Newco or from
Newco to Borrower.
Optional
Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount
without premium or penalty other than payment of applicable "breakage" costs on LIBOR
loan segments. Required notice to the Agent will be (i) one Business Day prior to the
date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to
the date of prepayment of any LIBOR loan segment.
<PAGE>
CONFIDENTIAL
California Energy Company
Application of
Prepayments: All principal reductions shall be permanent. Prepayments will be applied first to Base
Rate loan segments and then to LIBOR loan segments. The prepayment of LIBOR loan
segments will be subject to the payment of "breakage" costs if the date of prepayment
is not the last day of an interest period unless, at the option of the Borrower, the
prepayment amount is escrowed with the Agent and invested in United States Treasury
Securities to the last day of the applicable interest period.
Security: The Facility will be secured by an assignment and a pledge of the Newco Secured Tender
Note, including the Target stock pledged as security thereunder in form satisfactory to
Agent. Payments on the collateral will be paid directly to the Agent, as collateral agent
for the Lenders. The Borrower will provide for the payment of interest on the Facility
in a manner satisfactory to the Agent. The Facility will be non-recourse to the Borrower,
and the Lenders will agree to make an appropriate election under Section 1111(b) of the
Bankruptcy Code to continue such non-recourse status in any proceeding involving
Borrower as Debtor under the Bankruptcy Code.
Representations and
Warranties at
Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:
1. Corporate organization, existence and power.
2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.
3. The financial information of the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).
4. No material adverse change in the Borrower, Newco and their material subsidiaries
(to the best knowledge of Borrower based upon information available to it in the
case of Target and its subsidiaries).
5. No material litigation (other than litigation to which Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in Section 15 of the Offer to Purchase (the "Magma Litigation")).
6. Absence of default(s) or Event of Default(s).
<PAGE>
CONFIDENTIAL
California Energy Company
7. Compliance with ERISA (to the best knowledge of Borrower based upon
information available to it in the case of Target and its subsidiaries).
8. Regulatory approvals, consents, filings and compliance with laws.
9. Existence, incorporation etc. of subsidiaries.
10. Environmental compliance.
11. Not an investment company.
12. Full disclosure.
13. Payment of taxes.
14. Adequate insurance.
Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
effective at the Merger, to insure Alto Peak and Malitbog equity commitments and
ownership interest in Alto Peak and Malitbog satisfactory to Agent, no waiver of Tender
Offer Conditions that are deemed material by Agent (other than the Merger Agreement
Condition as contemplated by the Offer to Purchase) without the prior written consent of
the Bank, receipt of appropriate certificates and legal opinions, accuracy of
representations and warranties, absence of defaults and material litigation (excluding the
Magma Litigation), evidence of authority, receipt of required governmental approvals,
consents and filings of all persons, compliance with laws (including without limitation,
environmental, labor and ERISA), absence of material adverse change in the Borrower,
Newco, the Target and their respective subsidiaries, satisfactory due diligence by the
Agent customary with tender offer facilities and payment of fees.
Covenants: Those customarily found in a credit facility of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of unaudited (quarterly) and
audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, monthly delivery of an officer's certificate, in form and substance
reasonably satisfactory to the Agent, certifying the absence of (i) a material adverse
<PAGE>
CONFIDENTIAL
California Energy Company
change in the financial condition or operations of the Borrower and its subsidiaries, taken
as a whole, or (ii) a material adverse change in the financial condition or operations of
Newco and its subsidiaries, taken as a whole (and, in either case, which could reasonably
be expected to materially impact the ability of the Borrower to service the Facility or the
ability of the Agent on behalf of the Lenders to realize upon the collateral securing the
Facility), and other customary financial reporting requirements as any Lender may
reasonably requests; and without limitation, the following restrictions and limitations
(subject to such baskets and exceptions as the parties may agree):
1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.
2. Limitation on guaranties by Newco and Borrower.
3. Limitation on mergers and sales of assets.
4. Limitation on investment in other persons.
5. Prohibition on restricted payments.
6. Maintenance of ownership of Newco and all subsidiaries.
7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.
8. Limitation on dividends from Newco to Borrower unless the proceeds are used to
pay down the Facility in amounts to be agreed upon.
9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facility
in amounts to be agreed upon.
10. Restrictions on change in nature of business, except as contemplated by the Merger.
Appropriate language modifications will be made to cover situations where Borrower is
unable to control the Target; provided that in all events the Lenders shall receive the
protections intended to be received from these covenants.
Financial Covenants: Those customarily found in a Regulation U credit facility of similar nature or as may be
appropriate for this transaction.
Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, permanent injunction of the merger contemplated by the
<PAGE>
CONFIDENTIAL
California Energy Company
Merger Agreement Condition; breach of representation or warranty in any material
respect; default in any covenant or financial covenant; material cross default; bankruptcy;
insolvency; change of control (except under circumstances mutually satisfactory to the
parties); certain ERISA defaults; the failure to pay one or more final judgments
aggregating more than a specified threshold to be mutually agreed; failure to make a
payment in connection with the Facility when due; and pledge agreement shall cease to
be in full force and effect or the Borrower shall so assert.
Cost and Yield
Protection: Standard provisions for illegality, inability to determine rate, indemnification for
breakage of LIBOR funding and increased costs or reduced return, including those arising
from reserve requirements, taxes and capital requirements; provided that increased costs
may be applied retroactively for a maximum of 90 days preceding written notice to the
Borrower and will not be more, in the case of any participant, than the applicable
fronting Lender would have been entitled to claim.
Assignments and
Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld, provided that the consent of the Borrower will not be required for assignments
among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and
(ii) to sell participations in all or a part of their loans or commitments with the
transferability of voting rights limited to principal, rate, fees and term. The Borrower
shall not be responsible for the costs and expenses of syndication of the Facility except
as provided under "Expenses" below.
Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facility and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facility.
Increased Costs/
Changed
Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased costs, and
funding losses and shall provide for all payments to be made free and clear of taxes.
<PAGE>
CONFIDENTIAL
California Energy Company
Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the transactions and the enforcement of the Agent's and/or
Lenders' rights and remedies with respect to the loan documents, or the Borrower's use
of loan proceeds or the commitments, in each case including but not limited to attorneys'
fees and settlement costs whether or not the transaction contemplated herein is
consummated.
Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facility except for any
such expenses in connection with the syndication by the Agent of the Facility to any
entity that becomes a lender on the closing of the Facility or within 90 days thereafter.
Governing Law: The State of New York.
<PAGE>
CONFIDENTIAL
California Energy Company
SUMMARY OF TERMS AND CONDITIONS
UP TO $500,000,000 IN MERGER FACILITIES
Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent
Agent/Arranger/
Underwriter: Credit Suisse
Lenders: The Agent and any other financial institutions to be arranged by the Agent.
Facilities: Up to $500,000,000 in credit facilities (the "Facilities") composed of:
(i) Up to a 6-year amortizing term loan ("Term Loan A") in an expected amount of
up to $500,000,000 less the amount of the Term Loan B and
(ii) Up to an 8-year amortizing term loan ("Term Loan B") in an expected amount not
to be less than $150,000,000.
Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned
subsidiary ("Newco", which term shall also include the surviving corporation in the
Merger (as defined below)), for the purpose of tendering for 51% of the stock of Magma
Power Company (the "Target") and entering into a merger with the Target (the
"Merger"). Funds provided by the Facilities will be advanced by the Borrower to Newco
to purchase a secured term note of Newco (the "Newco Secured Term Note"). The
proceeds from the sale of the Newco Secured Term Note will be used, together with the
Borrower's capital investment in Newco, which will be in an amount and form
satisfactory to the Agent, adequate provision of working capital and other available
moneys, to fund the merger consideration payable in connection with the Merger, to
refinance the Borrower's Tender Offer Facility by repaying its earlier advance to Newco
to purchase the tendered stock of the Target evidenced by the Newco Secured Tender
Note, to repay or acquire certain existing debt of the Target and to pay related fees and
costs of the transaction. The economic terms of the Newco Secured Term Note will
mirror the terms of the Facilities. Upon consummation of the Merger, the Target shall
expressly assume the obligations of Newco under the Newco Secured Term Note.
<PAGE>
CONFIDENTIAL
California Energy Company
Borrowing Options: Adjusted LIBOR and Base Rate.
"Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%)
of the rates offered to the reference Lenders in the London interbank market for deposits
in an amount and maturity corresponding to the interest period for the advance. LIBOR
will be adjusted for reserves and other regulatory requirements, as appropriate.
"Base Rate" means the higher of the Agent's prime rate or the federal funds rate +
0.50% per annum.
Applicable
Interest Margins: Term Loan A: LIBOR + 2.50%
Base Rate + 1.50%
Term Loan B: LIBOR + 3.00%
Base Rate + 2.00%
Computation of
Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated
on the basis of the actual number of days elapsed over a 365/366 day year.
Interest on LIBOR loan segments will be payable in arrears (i) at the end of each
applicable interest period and (ii) in the case of any interest period longer than three
months, every three months during such period. Interest on LIBOR loan segments will
be calculated on the basis of the actual number of days elapsed over a 360 day year.
Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall
be maintained as Base Rate loan segments effective in the case of LIBOR loan segments
at the end of each then existing period.
Total annual amortization in accordance with the following table, with payments to be
made semi-annually (the amount and timing of actual semi-annual payments to be
determined after review of cash flows):
<PAGE>
CONFIDENTIAL
California Energy Company
Term Loan A Term Loan B
Scheduled Annual Annual
Amortization: Year Amortization Year Amortization
1 $20,000,000 1 $0
2 $30,000,000 2 $0
3 $50,000,000 3 $0
4 $75,000,000 4 $0
5 $80,000,000 5 $0
6 $95,000,000 6 $0
------------
7 $75,000,000
Total $350,000,000 8 $75,000,000
------------
Total $150,000,000
Mandatory
Prepayments: From the excess cash flow and capital transactions of Newco, including without limitation
cash proceeds of asset sales and refinancing, on terms to be mutually agreed. Also from
any other monies received from Newco other than through the Newco Secured Term
Note except as mutually agreed to by the parties.
Optional
Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount
without premium or penalty other than payment of applicable "breakage" costs on LIBOR
loan segments. Required notice to the Agent will be (i) one Business Day prior to the
date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to
the date of prepayment of any LIBOR loan segment.
Application of
Prepayments: Mandatory prepayments will be applied pro rata to each remaining mandatory
amortization payment under the Facilities. All principal reductions shall be permanent.
Prepayments will be applied first to Base Rate loan segments and then to LIBOR loan
segments. The prepayment of LIBOR loan segments will be subject to the payment of
"breakage" costs if the date of prepayment is not the last day of an interest period unless,
at the option of the Borrower, the prepayment amount is escrowed with the Agent and
invested in United States Treasury Securities to the last day of the applicable interest
period. Optional prepayments will be applied in a manner to be agreed.
Security: The Facilities will be secured by an assignment and pledge of the stock of Target and all
other unencumbered assets of Target and its subsidiaries securing the Newco Secured
Term Note. The Facilities will be non-recourse to the Borrower and the Lenders will
<PAGE>
CONFIDENTIAL
California Energy Company
agree to make an appropriate election under Section 1111(b) of the Bankruptcy Code to
continue such non-recourse status in any proceeding involving the Borrower as Debtor
under the Bankruptcy Code.
Representations and
Warranties: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, the following:
1. Corporate organization, existence and power including the merger of Newco and
the Target and all related transactions.
2. Corporate and government authorization, no contravention, legality, validity,
binding effect and enforceability of all documentation related to this transaction.
3. The financial information of the Borrower, Newco and their material subsidiaries.
4. No material adverse change in the Borrower, Newco and their material subsidiaries.
5. No material litigation (other than litigation to which the Target is a party and which
is described in the Target's Form 10-K for the year ended December 31, 1993 and
as described in the Offer to Purchase (the "Offer to Purchase") of the Borrower
and Newco dated October 6, 1994, as it may be amended (the "Magma
Litigation")). No material amendments to the Offer to Purchase shall be effective
for purposes of this term sheet without the prior written consent of the Bank.
6. Absence of default(s) or Event of Default(s).
7. Compliance with ERISA.
8. Regulatory approvals, consents, filings and compliance with laws.
9. Existence, incorporation etc. of subsidiaries.
10. Environmental compliance.
11. Not an investment company.
12. Full disclosure.
13. Payment of taxes.
<PAGE>
CONFIDENTIAL
California Energy Company
14. Adequate insurance.
Conditions Precedent
to Closing: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, a capital investment in Newco in an amount and form
satisfactory to the Agent, provision for an adequate level of working capital, provisions
to insure Alto Peak and Malitbog equity commitments and ownership interest in Alto
Peak and Malitbog satisfactory to the Agent, receipt of appropriate certificates and legal
opinions, accuracy of representations and warranties, absence of defaults and material
litigation (excluding the Magma Litigation), evidence of authority, receipt of required
governmental approvals, consents and filings of all persons, consummation of the merger
pursuant to a definitive merger agreement between Newco and the Target satisfactory to
Agent, compliance with laws (including without limitation, environmental, labor and
ERISA), absence of material adverse change in the Borrower, Newco, the Target and
their respective subsidiaries (in each case, taken as a whole), satisfactory due diligence
by the Agent and payment of fees.
Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and its subsidiaries, as applicable,
including, without limitation, covenants regarding compliance with laws (including
ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence,
visitation rights, keeping of books, maintenance of properties, use of proceeds, margin
stock, transactions with affiliates, notice of defaults, delivery of the unaudited (quarterly)
and audited (annual) financial statements of the Borrower, Newco and its significant
subsidiaries, quarterly delivery with financial statements of an officer's certificate, in
form and substance reasonably satisfactory to the Agent, certifying the absence of (i) a
material adverse change in the financial condition or operations of the Borrower and its
subsidiaries, taken as a whole, or (ii) a material adverse change in the financial condition
or operations of Newco and its subsidiaries, taken as a whole (and, in either case, which
could reasonably be expected to materially impact the ability of Borrower to service the
Facilities or the ability of the Agent on behalf of the Lenders to realize upon the
collateral securing the Facilities), and other customary financial reporting requirements
as any Lender may reasonably request; and without limitation, the following restrictions
and limitations (subject to such baskets and exceptions as the parties may agree):
1. Negative pledge of all stock and unencumbered assets of Newco and its
subsidiaries.
2. Limitation on guaranties by Newco and its subsidiaries.
<PAGE>
CONFIDENTIAL
California Energy Company
3. Limitation on mergers and sales of assets by Newco and its subsidiaries.
4. Limitation on investment in other persons by Newco and its subsidiaries.
5. Prohibition on restricted payments by Newco and its subsidiaries.
6. Maintenance of ownership of Newco and all subsidiaries.
7. Prohibition on incurrence of additional debt at Newco and its subsidiaries.
8. Limitation on dividends on Newco stock to Borrower unless proceeds used to pay
down the Facilities in amounts to be agreed upon.
9. Limitation on the up-streaming of any assets or funds from Newco and its
subsidiaries to the Borrower unless the proceeds are used to pay down the Facilities
in amounts to be agreed upon.
10. Restrictions on change in nature of business.
11. Limitation on amendments to the merger agreement.
Financial Covenants: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to Newco and, as applicable, its subsidiaries including,
without limitation, the following:
1. Minimum interest coverage ratio.
2. Maximum leverage ratio.
3. Minimum operating cash flow.
Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate
to this transaction with respect to the Borrower and, as applicable, its subsidiaries
including, without limitation, breach of representation or warranty in any material
respect; default in any covenant or financial covenant; permanent injunction of the
Merger; material cross default with respect to Newco and its subsidiaries; payment
default under any other agreement to which the Borrower is a party involving
indebtedness in excess of $50,000,000, or other default under any such agreement
resulting in acceleration which is not rescinded within 30 days; bankruptcy; insolvency;
change of control (except under circumstances mutually satisfactory to the parties);
certain ERISA defaults (which in the case of the Borrower shall only include such
<PAGE>
CONFIDENTIAL
California Energy Company
defaults as the Agent determines to materially adversely affect the collateral for the
Facilities); the failure to pay one or more final judgments aggregating more than a
specified threshold to be mutually agreed; failure to make a payment in connection with
the Facilities when due; pledge agreement shall cease to be in full force and effect or the
Borrower shall so assert.
Cost and Yield
Protection: Standard provisions for illegality, inability to determine rate, indemnification for
breakage of LIBOR funding and increased costs or reduced return, including those arising
from reserve requirements, taxes and capital requirements; provided that increased costs
may be applied retroactively for a maximum of 90 days preceding written notice to the
Borrower and will not be more, in the case of any participant, than the applicable
fronting Lender would have been entitled to claim.
Assignments and
Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the
consent of the Borrower and the Agent, which consent shall not be unreasonably
withheld, provided that the consent of the Borrower will not be required for assignments
among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and
(ii) to sell participations in all or a part of their loans or commitments with the
transferability of voting rights limited to principal, rate, fees and term. The Borrower
shall not be responsible for the costs and expenses of syndication of the Facilities except
as provided under "Expenses" below.
Waivers
and Amendments: With the exception of decreases in interest rates or fees, increases in commitment
amounts, extension of maturities and times for payment, changes in funding and yield
protections and indemnities, changes in sharing provisions among Lenders, changes in
several nature of the obligations of the Lenders, changes in the percentage of the Lenders
necessary to act, assignment by the Borrower of rights or obligations under any of the
documentation for the Facilities and release of the pledged collateral (which shall require
consent of all the Lenders), amendments to and waivers of provisions of the loan
documents shall be made or given by Lenders holding a majority of commitments under
the Facilities.
Increased Costs/
Changed
Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of
unavailability of funding, illegality, capital adequacy requirements, increased costs, and
funding losses and shall provide for all payments to be made free and clear of taxes.
<PAGE>
CONFIDENTIAL
California Energy Company
Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements relating to the enforcement of the Agent's and/or Lenders' rights and
remedies with respect to the loan documents, or the Borrower's use of loan proceeds or
the commitments, in each case including but not limited to attorneys' fees and settlement
costs whether or not the transaction contemplated herein is consummated.
Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to
this transaction pursuant to a schedule to be agreed to by the parties and any subsequent
amendments or waivers; provided, however, that the Borrower shall not be liable for any
such expenses incurred in connection with the syndication of the Facilities except for any
such expenses in connection with the syndication by the Agent of the Facilities to any
entity that becomes a lender on the closing of the Facilities or within 90 days thereafter.
Governing Law: The State of New York.
</TABLE>
Exhibit 99.(c)(1)
Gleacher & Co., Inc.
660 Madison Avenue
New York, NY 10021
September 18, 1994
PERSONAL AND CONFIDENTIAL
Mr. David L. Sokol
Chairman, President,
Chief Executive Officer
California Energy Company, Inc.
10831 Old Mill Road
Omaha, NE 68154
Dear David:
This letter will confirm that California Energy Company, Inc.
(the "Company") has engaged Gleacher & Co. Inc. ("Gleacher &
Co.") to act as financial advisor in connection with the possible
acquisition of Magma Power Company ("Magma").
The Assignment
During the term of its engagement hereunder, Gleacher & Co. will
act as lead Dealer Manager in connection with any offer and will
provide the Company with financial advice and assistance in
connection with the proposed transaction, including advice and
assistance with respect to defining objectives, structuring and
planning the transaction, performing valuation analysis,
negotiating the transaction and conducting due diligence, as
requested by the Company.
Gleacher & Co.'s compensation is as follows:
(a) A fee of $250,000 payable upon the public announcement of an
offer to acquire at least 50.1% of the common stock of
Magma;
(b) An additional fee of $500,000 payable 45 calendar days after
the commencement of a tender or exchange offer, assuming the
offer is outstanding at such time;
(c) A fee of $4,000,000 payable upon the completion of the
direct or indirect acquisition by the Company, either alone
or in partnership with another company, by merger,
<PAGE>
California Energy Company, Inc.
September 18, 1994
Page 2
acquisition of securities, or otherwise, of 50.1% or more of
the equity securities of Magma. Any fees payable in (a) and
(b) above will be credited against such fee.
The Company also engages Gleacher & Co. (together with Lehman
Brothers) to advise on arranging debt financing for the
transaction. The Company will pay to Gleacher & Co. a fee equal
to 0.25% of the principal amount of debt directly arranged by the
Lehman Brothers and Gleacher & Co. team in the transaction.
Other Matters
In addition to any fees that may be payable to Gleacher & Co.,
the Company agrees to reimburse Gleacher & Co. for all reasonable
travel and other reasonable out-of-pocket expenses incurred in
connection with Gleacher & Co.'s engagement hereunder, including
all reasonable fees and disbursements of Gleacher & Co.'s legal
counsel and any other professional advisors.
Gleacher & Co. shall provide reasonable documentation with
respect to out-of-pocket expenses and obtain the Company's
approval before incurring significant costs in connection with
attorneys and other professional advisors. Gleacher & Co. will
consult with the Company before selecting attorneys and other
professional advisors.
In connection with the foregoing and for no additional
compensation, Gleacher & Co. will, upon request, render a
fairness opinion, or opinions, which may be in such form as
Gleacher & Co. shall determine and may be qualified in such a
manner as Gleacher & Co. deems appropriate.
The Company recognizes and confirms that in advising the Company
in completing its engagement hereunder, Gleacher & Co. will be
using and relying on non-public data, material and other
information furnished to Gleacher & Co. by the Company. It is
understood that in performing this engagement Gleacher & Co. may
reasonably rely upon any information so supplied without
independent verification. Gleacher & Co. will hold in confidence
all non-public information received from the Company and will not
use such information in a manner adverse to the Company, or for
any purpose not contemplated by this letter or otherwise required
by law. Upon the Company's request, Gleacher & Co. will promptly
return or destroy all such information and all copies thereof and
will confirm to the Company in writing that Gleacher & Co. has
complied with the requirements of this sentence.
The Company acknowledges that all advice given by Gleacher & Co.
<PAGE>
California Energy Company, Inc.
September 18, 1994
Page 3
in connection with its engagement hereunder is intended solely
for the benefit and use of the management and Board of Directors
of the Company in considering any transaction to which such
advice relates and, except as may be required by applicable law,
the Company agrees that no such advice shall be used for any
other purpose or be reproduced, disseminated, quoted or referred
to at any time, in any manner or for any purpose, nor shall any
public references to Gleacher & Co. be made by or on behalf of
the Company, in each case without Gleacher & Co.'s prior written
consent which shall not be unreasonably withheld. The foregoing
shall not prohibit the Company from disclosing any such advice or
opinions to the extent such disclosure may be required by law,
provided that the Company shall notify Gleacher & Co. prior to
any such disclosure and, if time permits and Gleacher & Co. so
desires, offer Gleacher & Co. an opportunity to comment on such
disclosure and/or take appropriate steps to preserve the
confidentiality of such matters.
The Company recognizes that Gleacher & Co. has been retained only
by the Company and that its engagement is not deemed to be on
behalf of and is not intended to confer rights upon any other
shareholder of the Company, or any other person not a party
hereto as against Gleacher & Co. or any of its affiliates, the
respective limited and general partners, directors, officers,
agents and employees of Gleacher & Co. or its affiliates or each
other person, if any, controlling either of Gleacher & Co. or any
of its affiliates. Unless otherwise expressly stated in writing
by Gleacher & Co., no one other than the Company, is authorized
to rely upon this engagement of Gleacher & Co. or any statements
or conduct by Gleacher & Co.
In connection with matters described in this letter, the Company
and Gleacher & Co. have entered into a separate letter agreement,
dated the date hereof, providing for indemnification,
contribution and reimbursement of Gleacher & Co. and certain
other individuals and entities.
Any right to trial by jury with respect to any claim or action
arising out of this agreement or conduct in connection with the
engagement is hereby waived by the parties hereto and their
affiliates. This agreement shall be deemed made in New York.
This agreement and all controversies arising from or related to
performance under this agreement shall be governed by the laws of
the state of New York, without regard to such state's rules
concerning conflicts of laws. All controversies arising from or
related to performance under this agreement shall be adjudicated
in State or Federal court within the State of New York.
<PAGE>
California Energy Company, Inc.
September 18, 1994
Page 4
Gleacher & Co. may assign its rights and obligations under this
letter agreement to any partnership of which Gleacher & Co. is
the general partner or to any other entity which succeeds to the
business of Gleacher & Co. so long as Mr. Eric J. Gleacher is a
partner or principal of the successor entity, in each case,
without the consent of the Company. The Company shall not be
obligated to pay Gleacher & Co. any additional fees pursuant to
this agreement as a result of such assignment. The provisions of
this agreement (including the attached letter agreement) shall be
binding upon and inure to the benefit of any successors, assigns,
heirs and personal representatives of the Company and Gleacher &
Co.
Gleacher & Co.'s services hereunder may be terminated with or
without cause by the Company or by Gleacher & Co. at any time.
Upon termination, this agreement shall have no further force or
effect except that (i) any fees earned or payable pursuant to
this letter agreement as of the date of termination and any out-
of-pocket expenses incurred by Gleacher & Co. prior to the date
of termination shall be paid or reimbursed in accordance with the
terms of this agreement; (ii) in the case of termination by the
Company, Gleacher & Co. shall be entitled to any fees that would
otherwise be payable pursuant to this letter agreement for any
acquisition of control transaction involving the Company and
Magma Power effected within one year of such termination, and
(iii) the indemnity, contribution and other provisions as
contained in the attached letter agreement shall continue to
apply notwithstanding termination.
Gleacher & Co. is pleased to accept this engagement and looks
forward to working with the Company on this important
transaction. Please confirm that the foregoing is in accordance
<PAGE>
California Energy Company, Inc.
September 18, 1994
Page 5
with the Company's understanding by signing and returning to
Gleacher & Co. the enclosed duplicate of this letter.
Very truly yours,
GLEACHER & CO.
/s/ James Goodwin
------------------
James Goodwin
Managing Director
Accepted and Agreed to:
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ David L. Sokol
------------------
David L. Sokol
Chairman, President, Chief
Executive Officer
<PAGE>
Gleacher & Co. Inc.
667 Madison Avenue
New York, New York 10021
Gentlemen:
In connection with the activities of Gleacher & Co. Inc.
("Gleacher & Co.") pursuant to a letter agreement, dated as of
the date hereof, between California Energy Company, Inc. (The
"Company") and Gleacher & Co., as the same may be amended from
time to time, including without limitation any activities of
Gleacher & Co. in connection with any transaction contemplated by
such letter agreement, whether occurring before, at or after the
date hereof, the Company agrees for a period of six years from
the date of termination of Gleacher & Co.'s engagement hereunder,
to indemnify and hold harmless Gleacher & Co. and its affiliates,
the respective limited and general partners, directors, officers,
agents and employees of Gleacher & Co. and its affiliates and
each other person, if any, controlling Gleacher & Co. or any of
its affiliates (hereinafter collectively referred to as the
"indemnified parties"), to the full extent lawful, from and
against any losses, damages, liabilities, expenses or claims (or
actions in respect thereof, including, without limitation,
shareholder and derivative actions) related to or otherwise
arising out of such engagement or Gleacher & Co.'s role in
connection therewith, relating to an action commenced within six
years following the termination of Gleacher & Co.'s engagement
and will undertake the legal defense of any indemnified party
(with counsel, which may be outside counsel to the Company,
reasonably acceptable to such indemnified party) and reimburse
any indemnified party for all other reasonable expenses as they
are incurred by any indemnified party in connection with
investigating, preparing or defending any claim, action,
proceeding or investigation, in connection with pending or
threatened litigation to which any indemnified party is or may be
made a party, arising in connection with or related to Gleacher &
Co.'s engagement or Gleacher & Co.'s role in connection
therewith. If, in the written opinion of counsel to any
indemnified party, there is a significant potential for a
conflict of interest between any of the indemnified parties and
the Company, then the Company will pay the reasonable fees and
expenses of one national and local separate counsel acting for
all such indemnified parties. For any action commenced after
three years from the date of termination of Gleacher & Co.'s
engagement, Gleacher & Co. will contribute up to $500,000 to the
costs of defending such action. The Company will not, however,
be responsible for any losses, damages, liabilities, expenses or
claims to the extent they are finally judicially determined to
have resulted from any indemnified party's bad faith or gross
negligence. The Company also agrees that no indemnified party
<PAGE>
Gleacher & Co. Inc.
September 23, 1994
Page 2
will have any liability (whether direct or indirect, in contract,
tort or otherwise) to the Company for or in connection with such
engagement except to the extent that any such liability for
losses, damages, liabilities, expenses or claims incurred by the
Company result from such indemnified party's bad faith or gross
negligence.
In the event that the foregoing indemnity is unavailable to any
indemnified party for any reason or insufficient to hold any
indemnified party harmless, then the Company agrees to contribute
to any such losses, damages, liabilities, expenses, claims or
actions and will do so in such proportion as is appropriate to
reflect the relative benefits received (or anticipated to be
received) by, and the relative fault of, the indemnified parties,
on the one hand, and the Company and the Company's
securityholders, on the other, as well as any other relevant
equitable considerations, from any actual or proposed
transaction. The Company and Gleacher & Co. agree that it would
not be just and equitable if contribution were determined by pro
rata allocation or by any other method of allocation which does
not take account of the equitable considerations referred to
above.
The Company agrees that it will not, without the prior written
consent of Gleacher & Co., which consent shall not be
unreasonably withheld, settle or compromise or consent to the
entry of any judgment with respect to any pending or threatened
claim, action, suit or proceeding in respect of which
indemnification or contribution may be sought hereunder (whether
or not Gleacher & Co. is an actual or potential party to such
claim or action) unless such settlement, compromise or consent
includes an unconditional release of Gleacher & Co. from all
liability arising out of such claim, action, suit or proceeding
unless the claims not released relate to the bad faith or gross
negligence of any indemnified party.
The foregoing agreement shall be in addition to any rights that
any indemnified party may have at common law or otherwise, and
shall be in addition to any liability which the Company may
otherwise have. The Company hereby consents to personal
jurisdiction, service and venue in any court in which any claim
which is subject to this agreement is brought against Gleacher &
Co. or the Company. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO
ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT IS WAIVED.
Gleacher & Co. may assign its rights and obligations under this
letter agreement to any partnership of which Gleacher & Co. is
the general partner or to any other entity, of which Eric J.
Gleacher is a partner or principal, which succeeds to the
<PAGE>
Gleacher & Co. Inc.
September 23, 1994
Page 3
business of Gleacher & Co., in each case, without the consent of
the Company. This agreement shall remain in full force and
effect following the completion or termination of Gleacher &
Co.'s engagement and shall be binding upon and inure to the
benefit of any successors, assigns, heirs and personal
representatives of the Company and any indemnified party.
Very truly yours, Accepted:
CALIFORNIA ENERGY COMPANY, INC. GLEACHER & CO. INC.
By: /s/David L. Sokol By: /s/James Goodwin
----------------- ----------------
Date: September 19, 1994 Date: September 18, 1994
------------------ ------------------
Exhibit 99.(c)(2)
LEHMAN BROTHERS
September 27, 1994
California Energy Company, Inc.
10831 Old Mill Road
Omaha, Nebraska 68154
Attention: Mr. David L. Sokol
Chairman, President and Chief Executive Officer
Dear David:
This letter agreement (this "Agreement") will confirm
the understanding and agreement between Lehman Brothers Inc.
("Lehman Brothers") and California Energy Company, Inc. (the
"Company" or "CEC"):
1. The Company hereby engages Lehman Brothers to
render financial advisory services to the Company
concerning its acquisition of Magma Power Company
("Magma").
2. Lehman Brothers hereby accepts the engagement and,
in that connection, agrees to:
(a) provide advisory services, in conjunction
with Gleacher and Company ("Gleacher"),
including general business and financial
analysis, transaction feasibility analysis
and pricing of the prospective acquisition of
Magma; and
(b) assist, in conjunction with Gleacher, in
corporate capital planning for such
acquisition, including the identification of
commercial bank acquisition financing, and
assist in the arrangement of such financing.
3. For purposes of this Agreement, an "acquisition"
of Magma shall mean any transaction or series or
combination of transactions, other than in the
ordinary course of business, whereby, directly or
indirectly, control of a majority equity interest
in Magma or any of its businesses or assets is
transferred to the Company or any of its
1
<PAGE>
affiliates for consideration, including, without
limitation, a sale or exchange of capital stock or
assets, a merger or consolidation, a tender or
exchange offer, a leveraged buy-out, or any
similar transaction.
4. The term of Lehman Brothers' engagement hereunder
shall extend from the date hereof until terminated
as set forth below. Subject to the provisions of
paragraphs 5 through 14, which shall survive any
termination of this Agreement, either party may
terminate Lehman Brothers' engagement hereunder at
any time by giving the other party at least 10
days' prior written notice.
5. As compensation for the services rendered by
Lehman Brothers hereunder, the Company shall pay
Lehman Brothers as follows:
(a) If an acquisition of Magma occurs either
(i) during the term of Lehman Brothers
engagement hereunder, or
(ii) at any time during a period of six
months following the effective date of
termination of Lehman Brothers'
engagement hereunder
then the Company shall pay to Lehman Brothers a
financial advisory fee equal to $1,000,000,
payable at the closing of such acquisition.
(b) In conjunction with such acquisition, Lehman
Brothers will also act as the lead arranger
for the placement of any commercial bank
financing necessary for the Company to
complete the acquisition. In consideration
thereof, the Company will pay Lehman Brothers
a fee equal to one quarter of 1% (0.25%) of
the total principal amount of any such
commercial bank financing arranged by Lehman
Brothers and Gleacher. Compensation which is
payable pursuant to this subparagraph (b)
shall be paid by the Company upon the closing
of the acquisition; provided, however, that
the aggregate compensation payable to Lehman
Brothers under this Agreement shall not
exceed $2,250,000.
6. The Company shall:
2
<PAGE>
(a) indemnify Lehman Brothers and hold it
harmless against any and all losses, claims,
damages or liabilities to which Lehman
Brothers may become subject arising in any
manner out of or in connection with the
rendering of services by Lehman Brothers
hereunder, except to the extent it is finally
judicially determined that such losses,
claims, damages or liabilities resulted from
the negligence or willful misconduct of
Lehman Brothers; and
(b) subject to the Company's right to assume
Lehman's legal defense pursuant to the
following paragraph, reimburse Lehman
Brothers promptly for any legal or other
expenses reasonably incurred by it in
connection with investigating, preparing to
defend or defending, or providing evidence in
or preparing to serve or serving as a witness
with respect to, any lawsuits,
investigations, claims or other proceedings
arising in any manner out of or in connection
with the rendering of services by Lehman
Brothers hereunder (including, without
limitation, in connection with the
enforcement of this Agreement and the
indemnification obligations set forth
herein); provided, however, that in the event
a final judicial determination is made to the
effect specified in subparagraph 6(a) above,
Lehman Brothers will promptly remit to the
Company any amounts reimbursed under this
subparagraph 6(b); and provided further that,
with respect to claims made after three years
from the date hereof, Lehman brothers shall
contribute $50,000 to the defense thereof.
The Company agrees that the indemnification and
reimbursement commitments set forth in this
paragraph 6 shall apply whether or not Lehman
Brothers is a formal party to any such lawsuits,
claims or other proceedings and that such
commitments shall extend upon the terms set forth
in this paragraph to any controlling person,
affiliate, director, officer, employee or agent of
Lehman Brothers (each, with Lehman Brothers, an
"Indemnified Person"). The Company further agrees
that, without Lehman Brothers' prior written
consent, which consent will not be unreasonably
withheld, it will not enter into any settlement of
a lawsuit, claim or other proceeding arising out
3
<PAGE>
of the transactions contemplated by this Agreement
unless such settlement includes an explicit and
unconditional release from the party bringing such
lawsuit, claim or other proceeding of all
Indemnified Persons, except to the extent the
claims not released relate to Lehman Brothers'
negligence or willful misconduct.
If indemnification is to be sought hereunder by an
Indemnified Person, then such Indemnified Person
shall notify the Company of the commencement of
any action or proceeding in respect thereof;
provided, however, that the failure so to notify
the Company shall not relieve the Company of any
liability that it may have to such Indemnified
Person pursuant to this paragraph 6 except to the
extent the Company has been prejudiced in any
material respect by such failure or from any
liability that it may have to such Indemnified
Person other than pursuant to this paragraph 6.
Notwithstanding the above, following such
notification, the Company may elect in writing to
assume the defense of such action or proceeding,
and, upon such election, it shall not be liable
for any legal costs subsequently incurred by such
Indemnified Person (other than reasonable costs of
investigation or providing evidence) in connection
therewith, unless (i) the Company has failed to
provide counsel reasonably satisfactory to such
Indemnified Person in a timely manner, (ii)
counsel which has been provided by the Company
reasonably determines that its representation of
such Indemnified Person would present it with a
conflict of interest or (iii) outside counsel to
the Indemnified Person provides a written opinion
that there is a significant potential for a
conflict of interest. In connection with any one
action or proceeding, the Company shall not be
responsible for the fees and expenses of more than
one separate law firm in any one jurisdiction for
all Indemnified Persons.
7. The Company and Lehman Brothers agree that if any
indemnification or reimbursement sought pursuant
to the preceding paragraph 6 is judicially
determined to be unavailable for a reason other
than the negligence or willful misconduct of
Lehman Brothers, then, whether or not Lehman
Brothers is the Indemnified Person, the Company
and Lehman Brothers shall contribute to the
losses, claims, damages, liabilities and expenses
for which such indemnification or reimbursement is
4
<PAGE>
held unavailable (i) in such proportion as is
appropriate to reflect the relative benefits to
the Company on the one hand, and Lehman Brothers
on the other hand, in connection with the
transactions to which such indemnification or
reimbursement relates, or (ii) if the allocation
provided by clause (i) above is judicially
determined not to be permitted, in such proportion
as is appropriate to reflect not only the relative
benefits referred to in clause (i) but also the
relative faults of the Company on the one hand,
and Lehman brothers on the other hand, as well as
any other equitable considerations; provided,
however, that in no event shall the amount to be
contributed by Lehman Brothers pursuant to this
paragraph exceed the amount of the fees actually
received by Lehman Brothers hereunder.
8. Except as contemplated by the terms hereof or as
required by applicable law or pursuant to an order
entered or subpoena issued by a court of competent
jurisdiction, Lehman Brothers shall keep
confidential all material non-public information
provided to it by the Company, and shall not
disclose such information to any third party,
other than to such of its employees and advisors
as Lehman Brothers determines to have a need to
know.
9. Except as required by applicable law, any advice
to be provided by Lehman Brothers under this
Agreement shall not be disclosed publicly or made
available to third parties without the prior
approval of Lehman Brothers, which approval shall
not be unreasonably withheld, and accordingly such
advice shall not be relied upon by any person or
entity other than the Company.
10. The Company agrees that Lehman Brothers has the
right following the closing of an acquisition to
place advertisements in financial and other
newspapers and journals at its own expense
describing its services to the Company hereunder,
provided that Lehman Brothers will submit a copy
of any such advertisements to the Company for its
prior approval, which approval shall not be
unreasonably withheld.
11. The Company and Lehman Brothers each represent to
the other that, except for Gleacher, there is no
other person or entity that is entitled to a
finder's fee or any type of brokerage commission
5
<PAGE>
in connection with the transactions contemplated
by this Agreement as a result of any agreement or
understanding with it.
12. Nothing in this Agreement, express or implied, is
intended to confer or does confer on any person or
entity other than the parties hereto or their
respective successors and assigns, and to the
extent expressly set forth herein, the Indemnified
Persons, any rights or remedies under or by reason
of this Agreement or as a result of the services
to be rendered by Lehman Brothers hereunder. The
Company further agrees that neither Lehman
Brothers nor any of its controlling persons,
affiliates, directors, officers, employees or
agents shall have any liability to the Company or
any person asserting claims on behalf of or in
right of the Company for any losses, claims,
damages, liabilities or expenses arising out of or
relating to this Agreement or the services to be
rendered by Lehman Brothers hereunder, except to
the extent it is finally judicially determined
that such losses, claims, damages, liabilities or
expenses resulted from the negligence or willful
misconduct of Lehman Brothers.
13. The invalidity or unenforceability of any
provision of this Agreement shall not affect the
validity or enforceability of any other provisions
of this Agreement, which shall remain in full
force and effect.
14. This Agreement may not be amended or modified
except in writing signed by each of the parties
and shall be governed by and construed and
enforced in accordance with the laws of the State
of New York. Any right to trial by jury with
respect to any lawsuit, claim or other proceeding
arising out of or relating to this Agreement or
the services to be rendered by Lehman Brothers
hereunder is expressly and irrevocably waived.
If the foregoing correctly sets forth the understanding
and agreement between Lehman Brothers and the Company, please so
indicate in the space provided for that purpose below, whereupon
6
<PAGE>
this letter shall constitute a binding agreement as of the date
hereof.
LEHMAN BROTHERS INC.
By: /s/ Joseph G. Sauvage
----------------------
Managing Director
AGREED:
CALIFORNIA ENERGY COMPANY, INC.
By: /s/ David L. Sokol
-------------------
Name: David L. Sokol
Title: Chairman, President and
Chief Executive Officer
7
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
<PAGE>
TABLE OF CONTENTS
SECTION PAGE
- ------- ----
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
i
<PAGE>
SECTION PAGE
- ------- ----
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
ii
<PAGE>
SECTION PAGE
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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
iii
<PAGE>
SECTION PAGE
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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
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").
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.
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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.
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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
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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;
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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
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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
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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
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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
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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.
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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
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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.
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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
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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.
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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;
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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.
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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
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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;
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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
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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
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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.
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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.
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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:
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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.
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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
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
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.
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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
--------------------------------
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. Bocker
--------------------------------
Name: Ralph W. Bocker
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 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.
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