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Securities and Exchange Commission
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(A)
of the Securities Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
CALENERGY COMPANY, INC.
- - - - -------------------------------------------------------------------------------
(Name of Registrant as Specified in its Charter)
- - - - -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules
14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction
applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing Party:
(4) Date Filed:
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[logo]
CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
April 5, 1996
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
CalEnergy Company, Inc. to be held at The Joslyn Art Museum, 2200 Dodge
Street, Omaha, Nebraska on May 16, 1996 at 9:00 A.M., local time.
The following matters will be considered and acted upon at the Annual
Meeting: (i) election to the Board of Directors of the Company of four Class
I Directors and one Class II Director; (ii) approval and ratification of (a)
an extension to the term of the Amended and Restated 1986 Employee Stock
Option Plan (which would otherwise expire in 1996) to be known as the 1996
Employee Stock Option Plan; (b) certain technical amendments to update the
plan, and (c) authorizing the issuance of up to an additional 739,165 option
shares under the plan, (iii) ratification of the appointment by the Board of
Directors of Deloitte & Touche LLP as auditors of the Company for the 1996
fiscal year; and (iv) transaction of such other business as may properly come
before the meeting.
Information concerning the matters to be considered and voted upon at the
Annual Meeting is set forth in the attached Notice of Annual Meeting and
Proxy Statement. We encourage you to review the attached material carefully
and to sign, date and return the enclosed proxy card in the enclosed postage
paid envelope. Each proxy is revocable and will not affect your right to vote
in person if you attend the meeting.
Sincerely,
/s/ David L. Sokol
David L. Sokol
Chairman of the Board
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[logo]
CALENERGY COMPANY, INC.
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 16, 1996
To The Stockholders of CalEnergy Company, Inc.:
Notice is hereby given that the Annual Meeting of Stockholders of
CalEnergy Company, Inc. will be held at The Joslyn Art Museum, 2200 Dodge
Street, Omaha, Nebraska on May 16, 1996 at 9:00 A.M. local time for the
following purposes:
1. To elect to the Board of Directors of the Company four Class I
Directors (with terms expiring at the 1999 annual meeting) and one Class
II Director (with a term expiring at the 1997 annual meeting);
2. To approve and ratify (a) an extension to the term of the Amended
and Restated 1986 Employee Stock Option Plan, (which would otherwise
expire in 1996) to be known as the 1996 Employee Stock Option Plan; (b)
certain technical amendments to update the plan; and (c) authorizing the
issuance of up to an additional 739,165 option shares under the plan;
3. To ratify the appointment by the Board of Directors of Deloitte &
Touche LLP as auditors of the Company for fiscal year 1996; and
4. To act upon such other matters as may properly come before the
meeting.
All Stockholders of record at the close of business on March 26, 1995 are
entitled to vote at the Annual Meeting.
To ensure that your shares are represented, you are urged to please fill
in, sign, date and return the enclosed proxy card promptly in the enclosed
postage paid envelope. You may revoke your proxy at any time before it is
voted at the Annual Meeting. If you attend the meeting, you may vote your
shares in person.
Please date your proxy card and sign it exactly as your name appears on
the proxy card.
By Order of the Board of Directors
/s/ David L. Sokol
David L. Sokol
Chairman of the Board
April 5, 1996
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CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NE 68131
-------------------
PROXY STATEMENT
APRIL 5, 1996
-------------------
ANNUAL MEETING OF STOCKHOLDERS
May 16, 1996
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SOLICITATION AND VOTING
This Proxy Statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies on behalf of the Board of Directors (the
"Board") of CalEnergy Company, Inc., formerly California Energy Company, Inc.
(the "Company") to be voted at the Annual Meeting of Stockholders to be held
on May 16, 1996, or any adjournment thereof (the "Annual Meeting"). This
Proxy Statement, the Notice of Annual Meeting and the accompanying Proxy are
being mailed to Stockholders on or about April 15, 1996.
The Voting Stock of the Company (the "Voting Stock") consists of the
Common Stock of the Company, $0.0675 par value (the "Common Stock"), which
was outstanding on the record date. Holders of the Common Stock will vote as
a single class at the Annual Meeting. Each share of Common Stock will be
entitled to one vote on all matters presented at the Annual Meeting.
The close of business on March 26, 1996 is the Record Date (the "Record
Date") for determining holders of the outstanding Voting Stock (the
"Stockholders") entitled to vote at the Annual Meeting. On the Record Date,
51,984,080 shares of Common Stock were outstanding.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for the
election of nominees as Directors of the Company. The approval of a majority
of the Voting Stock present in person or by proxy, and entitled to vote, at
the Annual Meeting is required for approval of both Proposal 2 (amendment of
Stock Option Plan) and Proposal 3 (ratification of selection of Independent
Auditors). A quorum equal to a majority of the outstanding Voting Stock must
be present in person or by proxy at the Annual Meeting in order to elect
Directors and consider Proposals 2 and 3.
All shares of Voting Stock represented by properly executed proxies which
are returned and not revoked will be voted in accordance with the
instructions, if any, given therein. If no instructions are provided in a
proxy, it will be voted FOR the Board's nominees for Director, FOR the
approval of Proposals 2 and 3 and in accordance with the proxy-holders' best
judgment as to any other matters raised at the Annual Meeting. Abstentions
and broker non-votes will be counted as shares present for purposes of
establishing a quorum with respect to the proposals with respect to which
they apply. Abstention votes will be counted as votes against the proposals
with respect to which they apply. Broker non-votes will not be considered as
either for or against votes with respect to the proposals to which they
apply. The proxy is revocable and any Stockholder who executes a proxy may
revoke it at any time before it is voted by delivering to the Secretary of
the Company a written statement revoking the proxy, by executing and
delivering to the Secretary of the Company a later dated proxy or by voting
in person at the Annual Meeting.
Expenses in connection with this solicitation of proxies will be paid by
the Company. Upon request, the Company will reimburse brokers, dealers, banks
or similar entities acting as nominees for reasonable expenses incurred in
forwarding copies of these proxy materials to the beneficial owners of shares
which
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such persons hold of record. The Company has engaged MacKenzie Partners,
Inc. to solicit proxies for the Annual Meeting for a fee of approximately
$10,000, plus reimbursement of reasonable expenses. In addition, solicitation
of proxies may be made through the mail, in person and by facsimile and
telephone by certain directors, officers and regular employees of the
Company.
PROPOSAL 1
ELECTION OF DIRECTORS
The Board currently consists of eleven members divided into three classes
serving staggered three-year terms. The Board has unanimously nominated
Judith E. Ayres, Richard K. Davidson, David L. Sokol and David E. Wit for
election at the Annual Meeting as Class I Directors, with terms expiring at
the 1999 annual meeting of Stockholders.
In addition, Bernard W. Reznicek, who was appointed to a vacancy on the
Board as a Class II Director in 1995 was unanimously nominated by the Board
for election at the Annual Meeting as a Class II Director, with a term
expiring at the 1997 annual meeting of Stockholders.
Ms. Ayres and Messrs. Davidson, Reznicek, Sokol and Wit have consented to
serve if elected. If a nominee becomes unable to serve if elected, proxies
will be voted for such other person, if any, as the Board may nominate, or
the Board may be reduced in size accordingly. The Board knows of no reason
why any nominee will be unable to serve if elected.
The approval of a plurality of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for election
of the nominees as directors. A quorum equal to the majority of the
outstanding Voting Stock must be present in person or by proxy at the Annual
Meeting in order to elect directors. If no instructions are provided in a
proxy, it will be voted FOR the Board's nominees for directors.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR THE ABOVE-NAMED
NOMINEES.
BOARD OF DIRECTORS
In addition to the above-named current and nominated Directors, the Board
includes the following six persons, each for a term expiring at the annual
meeting in the year indicated:
<TABLE>
<CAPTION>
YEAR OF EXPIRATION
NAME CLASS OF TERM
- - - - ----------------- ----------- ------------------
<S> <C> <C>
Edgar D. Aronson Class II 1997
Ben Holt Class II 1997
Richard R. Jaros Class II 1997
James Q. Crowe Class III 1998
Walter Scott, Jr. Class III 1998
John R. Shiner Class III 1998
</TABLE>
During 1995, the Board met four times and took action by unanimous written
consent once.
The Board has an Audit Committee, a Compensation Committee, an
Environmental Committee, an Executive Committee, a Nominating Committee, and
a Stock Option Committee.
AUDIT COMMITTEE
The Audit Committee (Messrs. Jaros, Aronson and Wit) is empowered to
recommend to the Board independent public accounting firms for selection as
auditors of the Company; to make recommendations to the Board on auditing
matters; to examine and make recommendations concerning the scope of audits;
and to review the terms of transactions between the Company and related
entities. The Audit Committee met four times during 1995.
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COMPENSATION COMMITTEE
The Compensation Committee (Messrs. Aronson, Jaros, Shiner and Wit) is
authorized to make recommendations to the Board with respect to executive
salaries and bonuses and directors' compensation. The Compensation Committee
met six times during 1995.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Mr. Jaros served as President of the Company from January 8, 1992 until
April 19, 1993 and served as Chairman of the Company from April 19, 1993
until May 5, 1994. Mr. Jaros serves on the Board of the Company as a nominee
of Kiewit Energy Company ("Kiewit Energy") under an agreement entered into in
connection with Kiewit Energy's investment in the Company in early 1991. Mr.
Jaros also owns Peter Kiewit Sons' Inc. ("Kiewit") stock. Kiewit Energy is a
wholly owned subsidiary of Kiewit. See "Certain Transactions and
Relationships -- Transactions with Kiewit and its Affiliates." Messrs.
Aronson, Shiner and Wit have not been employees of the Company or otherwise
participated in activities constituting compensation committee interlocks or
insider participation requiring disclosure under this caption.
ENVIRONMENTAL COMMITTEE
The Environmental Committee (Ms. Ayres and Messrs. Aronson, Holt, Jaros
and Shiner) addresses issues and provides advice concerning environmental
regulations and compliance. The Environmental Committee met four times during
1995.
EXECUTIVE COMMITTEE
The Executive Committee (Messrs. Sokol, Davidson, Jaros and Scott) was
established to act for the Board in between regularly scheduled Board
meetings. The Executive Committee met once during 1995.
NOMINATING COMMITTEE
The Nominating Committee (Ms. Ayres and Messrs. Davidson, Sokol and Jaros)
was established to provide the Board with advice regarding potential nominees
to the Board. The Nominating Committee met once during 1995. The Nominating
Committee will consider qualified nominees recommended by holders in the
aggregate of 5% or more of the Voting Stock. The Nominating Committee is
under no obligation, however, to nominate any person so recommended. The
Nominating Committee is not presently considering any nominations to the
Board.
STOCK OPTION COMMITTEE
The Stock Option Committee (Messrs. Jaros, Crowe and Scott) was
established to provide disinterested administration of the Company's Stock
Option Plan pursuant to the requirements of the SEC's Rule 16b-3. The Stock
Option Committee acted by written consent six times during 1995.
INFORMATION REGARDING NOMINEES FOR ELECTION AS DIRECTORS,
AND DIRECTORS CONTINUING IN OFFICE:
EDGAR D. ARONSON, 61. Mr. Aronson has been a director of the Company since
April 1983. In December 1994, Mr. Aronson became Chairman of Oakes,
Fitzwilliams & Co., Inc., the corporate general partner of Oakes,
Fitzwilliams, L.P., Securities Broker/Dealer and NASD member. 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, 51. Ms. Ayres has been a director of the Company since July
1990. Since 1990, 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 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.
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JAMES Q. CROWE, 46. Mr. Crowe has been a director of the Company since March
1991. Mr. Crowe is Chairman and Chief Executive Officer of MFS Communications
Company, Inc. ("MFS"). Prior to assuming his current position in 1991, Mr.
Crowe was President of Kiewit Industrial Company, a subsidiary of Kiewit.
Before joining Kiewit Industrial Company in 1986, Mr. Crowe was Group Vice
President, Power Group at Morrison-Knudsen Corporation. In 1994 Mr. Crowe
became a director of Kiewit. Mr. Crowe is a director of C-TEC Corporation, a
publicly traded company in which Kiewit holds a majority ownership interest.
RICHARD K. DAVIDSON, 54. Mr. Davidson was appointed a director of the
Company in March 1993. Mr. Davidson, President of Union Pacific Corporation
and a director of the Corporation since May 1994, has been Chairman of Union
Pacific Railroad since September 1991. Mr. Davidson became part of Union
Pacific Railroad when it merged with the Missouri Pacific and the Western
Pacific Railroads in 1982. He was promoted to Vice President-Operations of
Union Pacific Railroad in 1986, Executive Vice President-Operations in 1989,
and served in that capacity until his appointment as President and Chief
Executive Officer on August 7, 1991; and seven weeks later Mr. Davidson was
named Chairman and Chief Executive Officer.
BEN HOLT, 82. Mr. Holt has been a director of the Company since September
1993. Mr. Holt is the founder, and was Chairman and Chief Executive Officer
of CE Holt Co., formerly The Ben Holt Co., an engineering firm located in
Pasadena, California, which the Company acquired in September 1993. Mr. Holt
retired as Chairman and CEO of CE Holt Co. in December 1993 and is currently
a consultant to the Company.
RICHARD R. JAROS, 44. Mr. Jaros has been a director of the Company since
March 1991. Mr. Jaros served as President and Chief Operating Officer of the
Company from January 8, 1992 to April 19, 1993 and as Chairman of the Board
from April 19, 1993 to May 1994. Mr. Jaros is currently an Executive Vice
President, Chief Financial Officer and a director of Kiewit. From 1990 until
January 8, 1992, Mr. Jaros served as a Vice President to Kiewit. Mr. Jaros
serves as a director of MFS and C-TEC Corporation, a publicly traded company
in which Kiewit holds a majority ownership interest.
BERNARD W. REZNICEK, 59. Mr. Reznicek was appointed a director of the
Company in May 1995. In July 1994 he became Dean, College of Business
Administration at Creighton University. Prior to that, Mr. Reznicek was the
Chairman, President and Chief Executive Officer of Boston Edison Company from
1987 to 1994 and was the President and Chief Executive Officer of the Omaha
Public Power District from 1981 to 1987. Mr. Reznicek has served on the Board
of Directors of Stone & Webster, Incorporated since September 1995, State
Street Boston Corporation since 1991, Boston Edison Company since 1987 and
Guarantee Life Companies Inc. since 1986.
WALTER SCOTT, JR., 64. Mr. Scott has been a director of the Company since
June 1991. Mr. Scott was the Chairman and Chief Executive Officer of the
Company from January 8, 1992 until April 19, 1993. Mr. Scott is Chairman and
President of Kiewit, a position he has held since 1979. Mr. Scott is a
director of Berkshire Hathaway, Inc., Burlington Resources, Inc., ConAgra,
Inc., Valmont Industries, Inc., MFS and C-TEC Corporation, a publicly traded
company in which Kiewit holds a majority ownership interest.
JOHN R. SHINER, 52. Mr. Shiner was elected as a director of the Company in
May 1995. He joined the law firm of Morrison & Foerster in 1993, where he is
a partner resident in the Los Angeles office. Prior to that time, he was a
partner in the law firm of Baker & McKenzie. Mr. Shiner has practiced law in
Los Angeles since 1968, specializing in litigation and consultation with the
senior management and Boards of closely held and public corporations.
DAVID L. SOKOL, 39. Chairman of the Board of Directors and Chief Executive
Officer. Mr. Sokol has been CEO since April 19, 1993 and served as President
of the Company from April 19, 1993 until January 21, 1995. He has been
Chairman of the Board of Directors since May 1994. Mr. Sokol has been a
director of the Company since March 1991. Formerly, Mr. Sokol was Chairman,
President and Chief Executive Officer of the Company from February 1991 until
January 1992. 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
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November 1990 until February 1991, Mr. Sokol was the President and Chief
Executive Officer of Kiewit Energy, the largest stockholder of the Company
and a wholly owned subsidiary of Kiewit. From 1983 to November 1990, Mr.
Sokol was the President and Chief Executive Officer of Ogden Projects, Inc.
DAVID E. WIT, 34. Mr. Wit has been a director of the Company since April
1987. He is 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.
INFORMATION REGARDING DIRECTORS EMERITUS:
EVERETT B. LAYBOURNE, 84. Mr. Laybourne retired as a Board member and was
elected Director-Emeritus in May 1995 after serving as a director of the
Company since May 1988. For many years he served as counsel for a number of
major publicly-held corporations. He also presently serves as 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.
BARTON W. SHACKELFORD, 75. Mr. Shackelford retired as a Board member and was
elected Director-Emeritus in May 1995 after serving as a director of the
Company 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.
PROPOSAL 2
RATIFICATION AND APPROVAL OF AMENDED STOCK OPTION PLAN
The Board has unanimously approved and recommended to the Stockholders (i)
an extension to the Company's Amended and Restated 1986 Stock Option Plan
(which would otherwise expire in 1996) to be named the 1996 Employee Stock
Option Plan (the "Plan") (ii) making certain technical amendments to update
the Plan and (iii) authorizing the issuance of up to an additional 739,165
shares under the Plan. Currently, as of the Record Date, only 260,835 shares
were available for issuance under the Plan. A summary description of the
Plan, as amended by the Board and as proposed to be approved and ratified by
stockholders is set forth below. The entire text of the Plan, as it is
amended by the Board, is attached as Exhibit A to this proxy statement.
SUMMARY
DESCRIPTION OF 1996
STOCK OPTION PLAN
Effective as of March 26, 1996, the Board of Directors of the Company
adopted the CalEnergy Company, Inc. 1996 Stock Option Plan (the "Plan") which
consisted of an extension of the term of and certain amendments to the
Company's Amended and Restated 1986 Stock Option Plan. The Plan as so revised
currently provides for the future issuance from time to time, as may be
authorized by the Committee (as defined below) of up to a maximum of 1
million shares of common stock of the Company pursuant to options to be
granted to employees, officers, directors, consultants and independent
contractors of the Company, which amount represents options to purchase
approximately 1.9% of the Company's outstanding shares of Common Stock as of
the Record Date. The Plan is substantially similar to, and replaces, the
Company's Amended and Restated 1986 Stock Option Plan which would otherwise
expire in 1996. The Plan provides for the grant of both non-qualified stock
options ("NQSOs") and incentive stock options ("ISOs") designed to meet the
requirements of Section 422 of the Internal Revenue Code of 1986, as amended
(the "Code"). The purpose of the Plan is to provide to directors, officers,
other employees, consultants and independent contractors an incentive to
acquire or increase their proprietary interests in the success of the Company
and thereby more strongly align their interests with those of stockholders
generally.
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The Plan will be administered by a committee of the Board of Directors
consisting of two or more Board members, appointed by the Board, who are not
officers of the Company (the "Committee"). The Committee has the discretion
to designate one or more subcommittees, including for purposes of Section
162(m) of the Code (discussed below under "Federal Income Tax Consequences").
The Plan provides for automatic annual nonqualified option grants of 1,000
shares to each member of the Committee immediately following each annual
meeting of stockholders of the Company. The exercise price of options granted
to Committee members will be the fair market value of the Company's Common
Stock on the date of grant. Grants to members of the Committee will vest
immediately and be exercisable for a period of ten years from the date of
grant. Committee members may not receive option grants under the Plan other
than these automatic nonqualified option grants.
The Committee has broad discretion, subject to the terms of the Plan to
determine the persons (other than Committee members) entitled to receive
options, the terms and conditions thereof, including vesting (and accelerated
vesting of outstanding options), and the number of shares for which such
options may be granted. The Committee also has discretion to determine the
nature of the consideration to be paid upon the exercise of any option or
right to purchase stock granted under the Plan; provided that such
consideration shall generally, in the case of options at the discretion of
the Committee, consist of cash or, in the discretion of the Company (pursuant
to procedures adopted from time to time by the Committee) consist of (i)
shares of the Company's Common Stock, including the withholding of Shares
otherwise deliverable to an optionee upon exercise of the option; (ii) an
irrevocable direction to a broker to sell shares of the Company's Common
Stock and deliver all or a portion of the proceeds to the Company in payment
of the exercise price; (iii) a promissory note; or (iv) any combination of
the foregoing items (i) through (iii); provided that the Company shall have
no obligation to accept any form of consideration other than cash.
The maximum term of an option granted under the Plan is ten years (five
years in the case of an ISO granted to an employee who, at the time of the
grant, holds 10% or more of the Company's outstanding Common Stock ("10%
Shareholder")). The aggregate fair market value, on the date of grant, of the
stock for which ISOs are exercisable for the first time by an employee during
any calendar year may not exceed $100,000. The exercise price of ISOs granted
under the Plan must be not less than the fair market value of the Common
Stock at the date of grant (not less than 110% of fair market value in the
case of an option granted to a 10% Shareholder); the exercise price of NQSOs
(other than an option automatically granted to a Committee member) is
determined by the Committee at the time of the option grant but cannot be
less than 85% of the fair market value at the time of grant.
Under the Plan, an optionee who terminates employment with the Company may
exercise ISOs for a period of three months after termination of employment
(but not beyond the option period) for the number of shares vested on the
date of termination. If an optionee becomes disabled, as determined by the
Company, or dies while an employee of the Company, any ISOs held by the
optionee will continue in effect and may be exercised in accordance with
their terms for the number of shares vested on the date of disability or
death for a period of twelve months from the date of the optionee's
disability or death (but not beyond the option period). In the case of NQSOs,
if an optionee ceases to be an employee or director of the Company, the NQSOs
held by the optionee will continue in effect and may be exercised in
accordance with their terms (but not beyond the option period) for the number
of shares vested on the date of such cessation. Notwithstanding the
foregoing, if the termination of an optionee's position as a director,
officer or employee of the Company is for gross misconduct, his or her
options under the Plan will be canceled and the optionee will have no right
to exercise any part of those options after such termination.
The vesting of an option will be accelerated immediately without any
further action upon any of the following events: (i) the acquisition of more
than 50% of the voting power of the Company by any person, (ii) a change in
the composition of the members of the Board over a three-year period or less
to include a majority of persons not serving on the Board at the beginning of
the period or nominated by such persons, or (iii) approval by the Company's
stockholders of (A) a merger or consolidation in which the Company is not the
surviving entity, (B) the sale of all or substantially all of the assets of
the Company, or (C) any reverse merger in which the Company is the surviving
entity in which holders of the Company's voting securities prior to the
merger do not own at least 50% of the voting power in the Company immediately
after the merger.
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The number of shares subject to the Plan and to options granted under the
Plan and the exercise price of outstanding options are subject to adjustment
by the Committee in the event of increases or decreases in the number of
outstanding shares of Common Stock through stock splits, stock dividends,
reclassifications of the outstanding capital stock and similar events.
Options granted under the Plan will generally be nontransferable by the
optionee.
Except for the provisions relating to the grant of options to Committee
members, the Plan may be amended at any time by the Board, although certain
amendments require stockholder approval. The Board may not amend the Plan's
automatic grant provisions for Committee members more than once in any six
month period except as required to comply with the requirements of the
Internal Revenue Code. The Plan will terminate ten years after its adoption
by the Company unless earlier terminated by the Board.
The Plan, as it relates to grants of options to Committee members and
executive officers of the Company, is designed to comply with Rule 16b-3 of
the Securities Exchange Act of 1934. Certain provisions of the Plan,
including the requirement that Committee members receive options only under
the Plan's automatic grant feature, limitations on transferability of
options, and the automatic grant provisions applicable to Committee members,
have been included in the Plan solely because of Rule 16b-3's requirements.
In the event that Rule 16b-3 is amended to delete one or more of these
requirements, the Plan may be amended by the Board, without shareholder
approval, to delete those provisions of the Plan no longer required by Rule
16b-3.
FEDERAL INCOME TAX CONSEQUENCES
Incentive Stock Options. If an option under the Plan is treated as an ISO,
the optionee generally recognizes no regular taxable income as the result of
the grant or exercise of the option. However, an amount equal to the
difference between the fair market value of the stock on the date of exercise
and the exercise price is classified as an item of alternative minimum
taxable income in the year of exercise for purposes of the alternative
minimum tax.
The Company will not be allowed a deduction for federal income tax
purposes in connection with the grant or exercise of an ISO, regardless of
the applicability of the alternative minimum tax to the optionee. The Company
will be entitled to a deduction, however, to the extent that ordinary income
is recognized by the optionee upon a disqualifying disposition (see below).
Upon a sale or exchange of the shares at least two years after the grant
of an ISO and one year after exercise of the option, gain or loss will be
recognized by the optionee equal to the difference between the sale price and
the exercise price. Such gain or loss will be characterized for federal
income tax purposes as long-term capital gain or loss. The Company is not
entitled to any deduction under these circumstances.
If an optionee disposes of shares acquired upon issuance of an ISO prior
to completion of either of the above holding periods, the optionee will have
made a "disqualifying disposition" of the shares. In such event, the optionee
will recognize ordinary income at the time of disposition equal to the
difference between the exercise price and the lower of the fair market value
of the stock at the date of the option exercise or the sale price of the
stock. The Company generally will be entitled to a deduction in the same
amount as the ordinary income recognized by the optionee on a disqualifying
disposition if the optionee's total compensation is deemed reasonable in
amount.
The optionee also will recognize capital gain or loss on such
disqualifying disposition in an amount equal to the difference between (i)
the amount realized by the optionee upon such disqualifying disposition of
the stock and (ii) the exercise price, increased by the total amount of
ordinary income, if any, recognized by the optionee upon such disqualifying
disposition (as described in the second sentence of the preceding paragraph).
Any such capital gain or loss resulting from a disqualifying disposition of
shares acquired upon exercise of an ISO will be long-term capital gain or
loss if the shares with respect to which such gain or loss is realized have
been held for more than twelve months.
NQSOs. An optionee generally recognizes no taxable income as the result of
the grant of an NQSO, assuming that the option does not have a readily
ascertainable fair market value at the time it is granted
7
<PAGE>
(which is usually the case with plans of this type). Upon exercise of an
NQSO, an optionee will normally recognize ordinary compensation income for
federal tax purposes equal to the excess, if any, of the then fair market
value of the shares over the exercise price. Optionees who are employees will
be subject to withholding with respect to income recognized upon exercise of
a NQSO.
The Company will be entitled to a tax deduction to the extent and in the
year that ordinary income is recognized by the exercising optionee, so long
as the optionee's total compensation is deemed reasonable in amount.
Upon the sale of shares acquired pursuant to the exercise of an NQSO, any
difference between the sale price and the fair market value of the shares on
the date of exercise will be treated as capital gain or loss and will qualify
for long-term capital gain or loss treatment if the shares have been held for
more than twelve months.
Section 162(m) of the Code. Under Section 162(m) of the Code, compensation
paid in any year to any of the Company's five most highly compensated
executive officers is potentially nondeductible by the Company to the extent
that it exceeds $1,000,000. However, certain "performance-based compensation"
is exempt from the $1,000,000 cap on deductibility.
The Plan contains provisions designed to enable grants of options to the
Company's five most highly compensated executive officers to qualify as
"performance-based compensation" provided that the option grants: (i) are
made by a committee of the Board of Directors consisting solely of two or
more "outside directors" (as that term is specially defined for purposes of
Section 162(m)) and (ii) have a per share option exercise price at least
equal to the per share fair market value (on the grant date) of the stock
subject to the option. The Committee will determine whether any such
qualifying grants are to be made. In addition, the maximum number of shares
with respect to which options may be granted to any individual per calendar
year under the Plan cannot exceed 1,000,000 shares.
The approval of a majority of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for approval
of Proposal 2. A quorum equal to the majority of the outstanding Voting Stock
must be present in person or by proxy at the Annual Meeting in order to vote
on Proposal 2. If no instructions are provided in a proxy, it will be voted
FOR the approval of Proposal 2.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL 3
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Proposal 3 is to ratify the appointment of Deloitte & Touche LLP as the
Company's independent auditors.
The Board, upon the recommendation of the Audit Committee, has unanimously
appointed Deloitte & Touche LLP as the independent accounting firm engaged to
audit the financial statements of the Company for the 1996 fiscal year.
Deloitte & Touche LLP acted in that capacity for the 1995 fiscal year. A
representative of Deloitte & Touche LLP is expected to be present at the
Annual Meeting and will be available to respond to questions and may make a
statement if desired.
The approval of a majority of the Voting Stock present in person or by
proxy, and entitled to vote, at the Annual Meeting is required for approval
of Proposal 3. A quorum equal to the majority of the outstanding Voting Stock
must be present in person or by proxy at the Annual Meeting in order to vote
on Proposal 3. If no instructions are provided in a proxy, it will be voted
FOR the approval of Proposal 3.
THE BOARD UNANIMOUSLY RECOMMENDS A VOTE FOR THIS PROPOSAL.
OTHER MATTERS
The Board knows of no other matters which are likely to be brought before
the Annual Meeting. However, if any other matters are brought before the
Annual Meeting, the proxy-holders will vote proxies granted by Stockholders
in accordance with their best judgment.
8
<PAGE>
SECURITY OWNERSHIP OF SIGNIFICANT STOCKHOLDERS AND MANAGEMENT
The following table sets forth certain information with respect to all
Stockholders known by the Company to beneficially own more than 5% of either
class of the Voting Stock, and certain information with respect to the
beneficial ownership of each director and the five most highly compensated
executive officers of the Company (and all directors and executive officers
of the Company, as a group) of Common Stock. All information is as of March
26, 1996, unless otherwise indicated.
<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME (AND ADDRESS IF REQUIRED) BENEFICIALLY PERCENTAGE OF
OF BENEFICIAL OWNER OWNED (1) CLASS (1)
- - - - ------------------------------------- ---------------- ---------------
<S> <C> <C>
COMMON STOCK:
Kiewit Energy Company (2) ............ 20,140,727 33.68%
The Capital Group Companies Inc. (3).. 3,066,680 5.82%
Edgar D. Aronson ..................... 41,000 0.08%
Judith E. Ayres ...................... 60,500 0.12%
James Q. Crowe ....................... 10,100 0.02%
Richard K. Davidson .................. 40,000 0.08%
Ben Holt ............................. 171,351 0.33%
Richard R. Jaros ..................... 406,155 0.78%
Bernard W. Reznicek .................. 11,600 0.02%
Walter Scott, Jr. .................... 10,100 0.02%
John R. Shiner ....................... 11,000 0.02%
David L. Sokol ....................... 1,005,539 1.92%
David E. Wit (4) ..................... 47,875 0.09%
Thomas R. Mason ...................... 153,194 0.29%
Steven A. McArthur ................... 155,498 0.30%
Donald M. O'Shei, Sr. ................ 93,784 0.18%
John G. Sylvia ....................... 138,267 0.27%
All directors and executive officers
as a group (16 persons) ............. 2,355,963 4.39%
</TABLE>
- - - - ---------------
(1) Includes shares which the listed beneficial owner is deemed to have the
right to acquire beneficial ownership under Rule 13d-3(d) under the
Securities Exchange Act, including, among other things, shares which
the listed beneficial owner has the right to acquire within 60 days.
(2) Includes the 12,322,312 shares of Common Stock Kiewit Energy Company
held on February 29, 1996 the date of Amendment No. 12 to their
Schedule 13D, options to purchase an additional 4,289,163 shares of
Common Stock and 3,529,252 shares of Common Stock issuable upon
conversion of the 9.5% convertible subordinated debentures due 2003
held by Kiewit Energy.
(3) According to a Schedule 13F filed by such parties February 9, 1996.
Certain operating subsidiaries of The Capital Group Companies, Inc.,
exercised investment discretion over various institutional accounts
which held 3,066,680 shares of the Company. Capital Guardian Trust
Company, a bank, and one of such operating companies, exercised
investment discretion over 1,765,330 of said shares. Capital Research
and Management Company, and Capital International, Inc., registered
investment advisers, and Capital International Limited, and Capital
International S.A., other operating subsidiaries, had investment
discretion with respect to approximately 1,219,440, 11,460, 20,000 and
48,440 shares, respectively.
(4) Includes 3,748 shares held jointly with his spouse.
9
<PAGE>
COMPENSATION COMMITTEE REPORT
The Company's executive compensation is determined by the Compensation
Committee of the Board. The Compensation Committee usually meets from time to
time during the year as may be required and at least once a year in December,
at which time salaries with respect to the next fiscal year, and bonuses with
respect to the nearly completed year are determined, as well as making
recommendations to the Stock Option Committee for stock option or, if
applicable, restricted stock grants as long-term incentive compensation and
making other determinations or recommendations with respect to employee
benefit plans and related matters.
The Compensation Committee believes that compensation of the Company's key
executives should be sufficient to attract and retain highly qualified and
productive personnel and also to provide meaningful incentives for enhanced
productivity and superior performance. It is the policy of the Company that
the three primary components of the Company's total compensation package
(salary, bonus and stock options or, if applicable, restricted stock) will be
considered in the aggregate in determining the amount of any one component.
The Company seeks to reward achievement of long and short-term individual
performance goals, viewed in the context of both individual power or other
infrastructure project and Company performance. However, given the unique
nature of each independent development project (particularly considering the
context of the different legal, regulatory, financial, accounting, tax,
political and cultural systems, issues and structures found in various
countries in which the Company develops projects internationally) and the
resulting flexible adaptation required in the duties and tasks performed by
the Company's key executives, the Compensation Committee's criteria for
assessing executive performance in any year is inherently subjective and not
subject to specific enumeration of factors, relative weighting or formulae
calculations. The Company did not specifically use any companies in the same
industry as a basis for comparison when establishing executive compensation.
During 1995, the Company's executive compensation generally included a
base salary, a cash bonus and long-term incentive compensation in the form of
stock options awarded under the Company's Employee Option Plan, or, if
applicable, restricted stock, all dependent on subjective evaluations of
performance as noted above. The cash bonus compensation of executives is
designed to compensate executives for the Compensation Committee's assessment
of superior performance and meritorious and diligent individual efforts, and
such assessments usually relate to individual and unique projects and, in
part, also recognize the individual executive's level of commitment
(demonstrated by subjective factors) to the Company's long-term success. The
long term incentive option grants recommended by the Compensation Committee
and implemented by the Stock Option Committee or, if applicable, restricted
stock are intended to align the interests of employees and Stockholders and
thereby to motivate executives as equity owners to contribute at superior
levels in the future and to allow them to share in increased value developed
for Stockholders generally.
The Company's Chairman and Chief Executive Officer, David Sokol, has an
existing employment agreement with the Company which was amended pursuant to
Committee action in August 1995 to extend the term (which otherwise would
have expired in April 1996) for five (5) years and to increase the salary and
minimum bonus provisions. As amended, Mr. Sokol's employment agreement
provides for a base salary of $500,000 per annum and a minimum annual bonus
of $400,000. The employment contract also provides for the payment of three
years base salary and minimum bonus in the event of termination without
cause.
At its November 1995 meeting, the Compensation Committee determined to
award Mr. Sokol a cash bonus of $700,000 and recommended that the Company
make a grant of 500,000 shares of restricted stock (to vest over five years)
to Mr. Sokol in order to reflect Mr. Sokol's superior performance and
significant accomplishments during the year. In addition, at the Compensation
Committee's December 1995 meeting other executives received salary increases,
cash bonuses and recommendations for stock option grants commensurate with
the Compensation Committee's subjective assessment of their relative
individual performance.
In reviewing Mr. Sokol's compensation, the Compensation Committee
subjectively considered Mr. Sokol's significant contribution to the
management of the Company during the year, including successfully
10
<PAGE>
negotiating, structuring, financing and consummating the strategic Magma
Power Company acquisition, which resulted in the Company becoming the largest
independent geothermal power company in the world and in connection
therewith, the successful issuance of 16,670,000 shares of the Company's
common stock and $200,000,000 principal amount of the Company's 9 7/8 %
Limited Recourse Senior Secured Notes Due 2003; as well as the Company
successfully closing the $475,000,000 Salton Sea Project financing and
commencing construction of the 40 MW Salton Sea Expansion and pH Modification
Projects, the Company's successful financial closing and commencement of
construction of its new Philippine project (the 150 MW Casecnan combined
hydroelectric and irrigation project), the significant progress of the
Company's drilling, permitting and development efforts on the Dieng, Patuha
and Bali Projects in Indonesia, the Company's other promising project
development activities and achievement of record electrical production levels
at the Coso Project. Mr. Sokol contributed very significantly to these
achievements and the Company's current success, and the Compensation
Committee believes his overall compensation was wholly justified and
moreover, expressly approved of by Kiewit Energy, the Company's largest
Stockholder (holding approximately 34% of the Company's Voting Stock on the
Record Date, on a fully diluted basis). Section 162(m) of the Internal
Revenue Code, enacted in 1993, generally disallows a tax deduction to public
companies for compensation over $1 million paid to the chief executive or any
of the four other most highly compensated executive officers. However,
certain compensation meeting a tax law definition of "performance-based" is
generally exempt from this deduction limit. The Company does not currently
intend to qualify cash compensation paid to executive officers for
deductibility under Section 162(m). Further, in general, the Company does not
currently have a policy that requires or encourages the Committee to qualify
other types of compensation awarded to executive officers for deductibility
under Section 162(m). However, as discussed above under "Proposal 2 --
Amendment of Stock Option Plan -- Federal Income Tax Consequences," the
Company has included provisions in the 1996 Stock Option Plan designed to
enable option grants made to executive officers affected by Section 162(m) to
qualify as "performance-based" compensation if the Committee determines that
it is appropriate to make such qualifying grants.
COMPENSATION COMMITTEE
Edgar D. Aronson
Richard R. Jaros
John R. Shiner
David E. Wit
11
<PAGE>
PERFORMANCE GRAPH
The following performance graph shall not be deemed to be incorporated by
reference by any general statement incorporating by reference this Proxy
Statement into any filing under the Securities Act of 1933 or the Securities
Exchange Act of 1934, except to the extent that the Company specifically
incorporates such information by reference, and shall not otherwise be deemed
filed under such Acts.
The following graph compares the yearly percentage change in the
cumulative total return on the Company's Common Stock with the cumulative
total return assuming reinvestment of dividends of (1) the S&P 400 Index, (2)
the S&P Utilities Index and (3) an index of comparable peer issuers
constructed by the Company. The index of comparable peer issuers is composed
of AES Corp., Destec Energy Inc., Enron Global Power and Pipelines, L.L. C.
and Sithe Energies, Inc. during the periods that each company has been
publicly traded.
1990 1991 1992 1993 1994 1995
- - - - -----------------------------------------------------------------------------
CalEnergy Company, Inc. 100 182 200 221 187 223
- - - - -----------------------------------------------------------------------------
Comparables 100 109 90 101 80 88
- - - - -----------------------------------------------------------------------------
S&P 400 100 131 138 151 157 210
- - - - -----------------------------------------------------------------------------
S&P Utilities 100 115 124 142 131 183
- - - - -----------------------------------------------------------------------------
12
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth the compensation of the Company's five most
highly compensated executive officers who were employed as of the last day in
1995. Information is provided regarding these individuals for the last three
fiscal years during which they were executive officers of the Company, if
applicable.
<TABLE>
<CAPTION>
BONUS SECURITIES
---------------------- OTHER ANNUAL RESTRICTED UNDERLYING ALL OTHER
NAME AND YEAR ENDED SALARY CASH STOCK (2) COMPENSATION STOCK AWARDS OPTIONS COMPENSATION (6)
PRINCIPAL POSITIONS DECEMBER 31, ($) ($) ($) ($) $ (#) $
- - - - ------------------- ------------ ------ ----- --------- ------------ ------------ ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
David L. Sokol (1) 1995 436,388 854,025 $1,280,000 0 $3,840,000(2)(3) 0 4,429
Chairman and 1994 350,000 612,482 0 0 0 1,000,000(4) 3,472
Chief Executive 1993 246,794 350,000 0 0 0 0 2,800
Officer
Thomas R. Mason 1995 198,675 326,116 0 0 0 30,000 5,344
President and 1994 169,359 100,949 0 0 0 75,000 3,472
Chief Operating 1993 164,359 30,000 0 0 0 5,000 3,398
Officer
Steven A. McArthur 1995 162,800 315,789 0 0 0 0 3,809
Senior Vice 1994 156,538 119,915 0 0 0 110,000 3,472
President, 1993 156,538 70,000 0 0 0 10,000 3,398
General Counsel
and Secretary
Donald M. O'Shei, Sr. 1995 166,400 163,637 0 47,822(5) 0 0 7,150
Senior Vice 1994 160,000 111,852 0 0 0 75,000 3,472
President 1993 160,000 50,000 0 0 0 5,000 3,398
John G. Sylvia 1995 156,467 301,242 0 0 0 0 3,793
Senior Vice 1994 138,782 112,670 0 0 0 100,000 3,472
President, Chef 1993 130,449 45,000 0 0 0 10,000 2,216
Financial Officer
and Treasurer
</TABLE>
- - - - ---------------
(1) Mr. Sokol's compensation for 1993 commenced on April 19, 1993.
(2) On November 29, 1995 Mr. Sokol relinquished vested options for 500,000
shares of the Company's common stock having a per share exercise price
of $19.00 in exchange for 500,000 shares of restricted stock, 125,000
shares of which vested on the date of grant with the remaining 375,000
shares vesting at the rate of 6,250 shares per month over 60 months
beginning December 1995. The 125,000 immediately vested shares are
reflected in the bonus (stock) column with the remaining 375,000 shares
reflected in the restricted stock column. The dollar amount for the
125,000 share award shown as a bonus was calculated by multiplying the
closing market price of the Company's common stock on the date of the
exchange times the number of bonus shares ($2,375,000), less the option
relinquishment cost on that date ($1,095,000) of options to purchase
125,000 shares relinquished by Mr. Sokol. The option relinquishment
cost was calculated using the standard Black-Scholes option pricing
model. The dollar amount for the 375,000 share award shown as
restricted stock was calculated by multiplying the closing market price
of the Company's common stock on the date of the exchange times the
number of restricted shares ($7,125,000), less the option
relinquishment cost as calculated pursuant to the preceding sentence
($3,285,000) of options for 375,000 shares relinquished by Mr. Sokol.
The 500,000 options relinquished by Mr. Sokol had a potential
realizable value as of 12/31/94 (as reported in the Company's 1994
Proxy Statement) of $5,974,498, assuming a 5% annualized stock price
appreciation rate for the 10-year option term, and $15,140,553,
assuming a 10% annualized stock price appreciation rate for the 10-year
option term.
(3) As of December 31, 1995, Mr. Sokol held 368,750 shares of unvested
restricted stock with a dollar value, based on the closing price of the
Company's common stock on December 29, 1995 (the last preceding trading
date), of $7,190,625, without deducting the option relinquishment cost
($4,380,000) calculated pursuant to the standard Black-Scholes option
pricing model reflected in footnote 2 above. If dividends are paid on
the Company's common stock, dividends will be paid on the restricted
stock at the same rate.
(4) 500,000 of these options were relinquished in connection with the
500,000 share restricted stock grant in 1995. See footnote 2.
(5) Consists of compensation for expatriate work assignment.
(6) 401(K) Plan contributions and group term life insurance premiums.
13
<PAGE>
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth options granted to each of the named
executive officers of the Company during 1995:
<TABLE>
<CAPTION>
POTENTIAL REALIZED
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
% OF TOTAL PRICE APPRECIATION
INDIVIDUAL GRANTS OPTIONS FOR OPTION TERM (1)
SECURITIES UNDERLYING GRANTED TO EXERCISE ----------------------
OPTIONS GRANTED AND EMPLOYEES IN PRICE EXPIRATION 5% 10%
NAME DATE OF GRANT (#) FISCAL YEAR ($/SHARE) DATE ($) ($)
- - - - --------------------- --------------------- -------------- ---------- ------------ ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol 0 0 0 0 0 0
Thomas R. Mason 2/24/95-30,000(2) 7.57% $17.00 2/23/2005 $320,736 $812,809
Steven A. McArthur 0 0 0 0 0 0
Donald M. O'Shei, Sr. 0 0 0 0 0 0
John G. Sylvia 0 0 0 0 0 0
</TABLE>
- - - - ------------
(1) As required by the Securities and Exchange Commission ("SEC"),
potential values stated are based on the prescribed assumption that the
Company's Common Stock will appreciate in value from the date of grant
to the end of the option term (ten years from the date of grant) at
annualized rates of 5% and 10% (total appreciation of 63% and 159%) ,
respectively, and therefore are not intended to forecast possible
future appreciation, if any, in the price of the Company's Common
Stock. The total of all stock options granted to employees, including
executive officers, during fiscal 1995 was approximately .78% of total
shares outstanding during the year. Accordingly, the potential value of
such options for all optionees under the prescribed assumptions is
approximately .78% of the potential realizable value of all
shareholders for the same period under the same assumptions. As an
alternative to the assumed potential realizable values stated above,
SEC rules would permit stating the present value of such options at the
date of grant. Methods of computing present value suggested by
different authorities can produce significantly different results.
Moreover, since stock options granted by the Company are not
transferable, there are no objective criteria by which any computation
of present value can be verified. Consequently, the Company's
management does not believe there is a reliable method of computing the
present value of such stock options and that all assumptions as to
annualized appreciation rates are inherently speculative.
(2) 6,000 shares exercisable immediately and 500 shares exercisable on the
last day of each month commencing on February 28, 1995.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION VALUES
The following table sets forth the option exercises and the value of
in-the-money unexercised options held by each of the named executive officers
of the Company at December 31, 1995, calculated as being equal to the
difference between the exercise price of the options and the closing price of
the Company's Common Stock on the New York Stock Exchange of $19.50 per share
on December 29, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED OPTIONS VALUE OF UNEXERCISED
SHARES HELD AT FY END IN-THE-MONEY OPTIONS AT FY END
ACQUIRED ON VALUE ------------------------------ -------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- - - - ---- ----------- ---------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
David L. Sokol ........ 0 0 453,125 46,875 $328,125(1) $ 46,875
Thomas R. Mason ....... 0 0 128,412 66,588 $545,179 $195,021
Steven A. McArthur ... 0 0 135,640 64,360 $574,067 $176,533
Donald M. O'Shei, Sr. 0 0 85,945 43,616 $534,150 $126,912
John G. Sylvia ........ 0 0 120,529 58,216 $811,512 $158,110
</TABLE>
- - - - ------------
(1) As a condition to the 500,000 share restricted stock award to Mr. Sokol
reflected in the Summary Compensation Table, Mr. Sokol was required to
relinquish vested but unexercised options to purchase 500,000 shares of
Common Stock.
14
<PAGE>
COMPENSATION OF DIRECTORS
For 1996, directors who are not employees of the Company will be paid an
annual retainer fee of $15,000 and a fee of $500 per day for attendance at
Board and Committee meetings. Directors who are employees of the Company will
not receive such fees. All directors are reimbursed for their expenses
incurred in attending Board meetings.
TERMINATION OF EMPLOYMENT ARRANGEMENTS
Under the terms of his employment contract, Mr. Sokol is entitled to
receive three times his base salary and minimum bonus in the event of the
termination of his employment by the Company other than for cause. Under the
terms of separate employment agreements between Mr. O'Shei Sr. and the
Company and Mr. Mason and the Company, each of Mr. O'Shei Sr. and Mr. Mason
is entitled to receive two times his base salary and average incentive
bonuses for the prior two years in the event of the termination of his
employment by the Company other than for cause. In addition, Mr. O'Shei Sr.
is entitled to a lump sum payment of $70,000 if he resides overseas at the
time of his termination. If such persons were terminated without cause, Mr.
Sokol, Mr. O'Shei Sr. and Mr. Mason would currently be paid approximately
$2,700,000, $678,289 and $827,000, respectively.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
The Company and Kiewit Energy are parties to a stock purchase agreement
and related agreements, dated as of February 18, 1991, as amended pursuant to
which in 1991 Kiewit Energy purchased 4,000,000 shares of Common Stock at
$7.25 per share and received options to buy 3,000,000 shares of Common Stock
at a price of $9.00 per share exercisable over three years, and an additional
3,000,000 shares of Common Stock at a price of $12.00 per share exercisable
over five years (subject to customary adjustments).
In connection with such stock purchase, the Company and Kiewit Energy also
entered into certain other agreements pursuant to which, among other things,
(i) Kiewit Energy and its affiliates agreed, subject to certain conditions,
not to acquire more than 34% of the outstanding Common Stock (as amended to
49% below, the "Standstill Percentage") for a five-year period, (ii) Kiewit
Energy became entitled to nominate at least three of the Company's directors
and (iii) Kiewit Energy agreed that Kiewit and its affiliates would present
to the Company any opportunity to acquire, develop, operate or own a
geothermal resource or geothermal power plant. The Standstill Percentage
provision expired on February 20, 1996. Messrs. Crowe, Jaros and Scott are
the current Board nominees of Kiewit Energy.
On June 19, 1991, the Board approved a number of amendments to the stock
purchase agreement and the related agreements. Pursuant to such amendments,
among other things, Kiewit Energy agreed to exercise options to acquire
1,500,000 shares of Common Stock at $9.00 per share, providing the Company
with $13.5 million in cash. The Company also extended the term of the $9.00
and $12.00 options to seven years, modified certain of the other terms of
these options, granted to Kiewit Energy an option to acquire an additional
1,000,000 shares of the outstanding Common Stock at a price of $11.625 per
share exercisable over ten years (the closing price for the shares on the
American Stock Exchange on June 18, 1991), and increased the Standstill
Percentage from 34% to 49%. On May 12, 1994, the Company and Kiewit Energy
agreed to a final antidilution adjustment pursuant to the stock options with
Kiewit Energy resulting in an additional 289,163 shares of Common Stock being
subject to purchase under the $12.00 option. In February 1996, Kiewit Energy
exercised its remaining $9.00 options and acquired 1,500,000 shares of Common
Stock, providing the Company with $13.5 million in cash.
The Company entered into a joint venture agreement with two subsidiaries
of Kiewit, Kiewit Diversified Group, Inc. and Kiewit Construction Group,
Inc., on December 14, 1993. The agreement provides a framework for the joint
development of power projects located outside the United States. Pursuant to
this Joint Venture Agreement, Kiewit, through its affiliate Kiewit Energy
International (Bermuda) Ltd., is contributing 50% of the equity requirements
for and otherwise participating in the ownership of the Company's Mahanagdong
Project Company, CE Luzon Geothermal Power Company,
15
<PAGE>
Inc. and in the ownership of the Company's Casecnan Project Company, CE
Casecnan Water and Energy Company, Inc., in the Philippines on an equal
equity basis with the Company.
Affiliates of the Company and Kiewit have also entered into joint venture
agreements with respect to the construction of the Mahanagdong Project. CE
Luzon Geothermal Power Company, Inc. executed a First Amended and Restated
Construction Contract dated as of June 30, 1994 with Kiewit/Holt Philippines,
L.P. Kiewit/Holt Philippines, L.P. is a Nebraska limited partnership between
Kiewit Industrial Co. ("KIC"), a wholly owned affiliate of Kiewit and The Ben
Holt Co. ("BHC") a wholly owned subsidiary of the Company. KIC has an 80%
interest in Kiewit/Holt Philippines, L.P. and BHC owns the remaining 20%
interest in the construction joint venture. CE Luzon Geothermal Power
Company, Inc. also executed a First Amended and Restated Design, Engineering
and Equipment Supply Contract with Gilbert/CBE, L.P. Gilbert/CBE, L.P. is a
Nebraska limited partnership owned 80% by Gilbert Industrial Co. (a wholly
owned affiliate of Kiewit) and 20% owned by CBE Engineering Co. (a wholly
owned subsidiary of the Company). The Company contemplates that similar
equity and construction joint venture arrangements with Kiewit will be
negotiated with respect to certain of its projects in Indonesia and elsewhere
internationally.
Mr. Scott, a director of the Company, is also the Chairman and President
of Kiewit, a director of Kiewit and owns Kiewit stock. Mr. Crowe, a director
of the Company, is the Chairman and President of MFS, a director of Kiewit
and owns Kiewit's common stock. Mr. Jaros, a director of the Company, is an
officer and director of Kiewit and also owns Kiewit's common stock.
Mr. Holt, a director of the Company, provides consulting and other
services to the Company for an annual fee of $75,000 pursuant to the terms of
a consulting agreement which expires in 1998. The Company believes the terms
of this consulting agreement are comparable to those in similar transactions
with unaffiliated third parties.
The Company retained the law firm of Morrison & Foerster in 1995. John R.
Shiner, a director of the Company, is a partner in the Los Angeles office of
Morrison & Foerster. The Company paid Morrison & Foerster a total of
approximately $1,236,000 in legal fees in 1995. The Company believes that the
fees payable to Morrison & Foerster are comparable to fees that would be
payable in similar transactions with unaffiliated third parties.
STOCKHOLDER PROPOSALS
Any proposal which a stockholder intends to present at the 1997 annual
meeting of stockholders must be received by the Company no later than January
16, 1997 in order to be considered for inclusion in the proxy statement
relating to such meeting. Any such proposals should be directed to the
Secretary, CalEnergy Company, Inc., 302 South 36th Street, Suite 400, Omaha,
Nebraska 68131.
By Order of the Board of Directors
/s/ David L. Sokol
------------------
David L. Sokol
Chairman of the Board
April 5, 1996
Omaha, Nebraska
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EXHIBIT A
CALENERGY COMPANY, INC.
1996 STOCK OPTION PLAN
SECTION 1. PURPOSE.
The purpose of the Plan is to offer selected employees, directors,
consultants and independent contractors an opportunity to acquire a
proprietary interest in the success of the Company, or to increase such
interest, by purchasing Shares of the Company's Common Stock. The Plan
provides for the grant of Options to purchase Shares in the form of
Nonstatutory Options as well as ISOs intended to qualify under Section 422 of
the Code. This Plan restates and amends the Amended and Restated 1986 Stock
Option Plan of the Company ("1986 Stock Option Plan").
SECTION 2. DEFINITIONS.
(a) "Board of Directors" shall mean the Board of Directors of the Company,
as constituted from time to time.
(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(c) "Committee" shall mean a committee of the Board of Directors, as
described in Section 3(a).
(d) "Common Stock" shall mean the Common Stock of the Company, $0.0675 par
value.
(e) "Company" shall mean CalEnergy Company, Inc., a Delaware corporation.
(f) "Employee" shall mean any individual who is (i) a common-law employee
of the Company or of a Subsidiary, or a member of the Board of Directors, or
(ii) a consultant or independent contractor who performs services for the
Company or a Subsidiary. Service as a consultant or independent contractor
shall be considered employment for all purposes of the Plan except the second
sentence of Section 5(a).
(g) "Exercise Price" shall mean the amount for which one Share may be
purchased upon exercise of an Option, as specified by the Committee in the
applicable Stock Option Agreement.
(h) "Fair Market Value" shall mean the fair market value of a Share, as
determined by the Committee in its sole discretion. Such determination shall
be conclusive and binding on all persons. The "Fair Market Value" shall be
the mean between the highest and lowest reported sale price for one Share as
reported on the New York Stock Exchange or such other national securities
exchange or automated trading system on which the Company's Shares are listed
and traded on the date in question, and if there is no such sale on the date
in question then the "Fair Market Value" shall be the mean between the
highest and lowest reported sale price for one Share on the last preceding
date for which such quotation exists. Notwithstanding the foregoing, if the
Board of Directors determines that the quotations from the New York Stock
Exchange or such other national securities exchange or automated trading
system on which the Company's Shares are listed and traded do not accurately
reflect the Fair Market Value of the Shares, then the Fair Market Value shall
be determined by the Board of Directors or the Committee in its sole
discretion.
(i) "ISO" shall mean an incentive stock option described in section 422(b)
of the Code.
(j) "Nonstatutory Option" shall mean a stock option other than an ISO.
(k) "Option" shall mean an ISO or Nonstatutory Option granted under the
Plan permitting the holder to purchase shares.
(l) "Optionee" shall mean an individual who holds on Option.
(m) "Plan" shall mean this CalEnergy Company, Inc. 1996 Stock Option Plan
as it amends and restates the 1986 Stock Option Plan.
(n) "Rule 16b-3" shall mean Rule 16b-3, promulgated under the Securities
Exchange Act of 1934, as amended.
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(o) "Service" shall mean service as an Employee.
(p) "Share" shall mean one share of Common Stock, as adjusted in
accordance with Section 9 (if applicable).
(q) "Stock Option Agreement" shall mean the written agreement between the
Company and an Optionee which contains the terms, conditions and restrictions
pertaining to his or her Option, and which incorporates the terms of this
Plan by reference.
(r) "Subsidiary" shall mean any corporation, if the Company and/or more
other Subsidiaries own more than 50% of the total combined voting power of
all classes of outstanding stock of such corporation or any partnership if
the Company and one or more other Subsidiaries own more than 50% of the
combined equity interests in such partnership. A corporation or partnership
that attains the status of a Subsidiary on a date after the adoption of the
Plan shall be considered a Subsidiary commencing as of such date.
SECTION 3. ADMINISTRATION.
(a) Committee Membership. The Plan shall be administered by the Committee,
which shall consist of members of the Board of Directors. The Committee shall
consist of at least two members, and shall be appointed by the Board of
Directors. The Committee members shall be directors who, during the one year
prior to service as a member of the Committee, did not receive a
discretionary grant or award of Shares or other equity securities under this
Plan or any other plan of the Company or a Subsidiary, unless such grant or
award allows the director to remain a disinterested person for purposes of
Rule 16b-3(c)(2). Any grant made pursuant to Section 7 of this Plan to a
director shall not be deemed a discretionary grant under the preceding
sentence, and shall not prohibit that director from serving as a Committee
member. If no Committee has been appointed, the entire Board of Directors
shall constitute the Committee. The Committee shall have the authority to
designate one or more subcommittees to act for such purposes as the Committee
shall determine, including a subcommittee that consists solely of two or more
"outside directors" (within the meaning of Section 162(m) of the Code) for
purposes of making grants of options to executives affected by Section
162(m).
(b) Committee Procedures. The Board of Directors shall designate one of
the members of the Committee as chairman. The Committee may hold meetings at
such times and places as it shall determine. The Committee may meet by
conference telephone or similar communications equipment that allows all
persons participating in the meeting to hear and speak to each other, and
participation in such a meeting shall constitute presence in person at the
meeting. The acts of a majority of the Committee members present at meetings
at which a quorum exists, or acts reduced to or approved in writing by all
Committee members, shall be valid acts of the Committee.
(c) Committee Responsibilities. Subject to the provisions of the Plan, and
with due regard to recommendations of the compensation committee of the Board
of Directors, the Committee shall have full authority and discretion to take
the following actions:
(i) To interpret the Plan and to apply its provisions;
(ii) To adopt, amend or rescind rules, procedures and forms relating
to the Plan;
(iii) To authorize any person to execute, on behalf of the Company,
any instrument required to carry out the purposes of the Plan;
(iv) To determine when Options are to be granted under the Plan;
(v) To select the Optionees;
(vi) To determine the number of Shares to be made subject to each
Option;
(vii) To prescribe the terms and conditions of each Option, including
(without limitation) the Exercise Price, to determine whether such Option
is to be classified as an ISO or as a Nonstatutory Option, and to specify
the provisions of the Stock Option Agreement relating to such Option;
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(viii) To amend any outstanding Stock Option Agreement, subject to
applicable legal restrictions and to the consent of the Optionee who
entered into such agreement;
(ix) To prescribe the consideration for the grant of each Option under
the Plan and to determine the sufficiency of such consideration; and
(x) To take any other actions deemed necessary or advisable for the
administration of the Plan.
Notwithstanding the foregoing, the Committee shall not exercise any
discretionary functions with respect to Options granted pursuant to Section 7
of this Plan that would cause a member of the Committee to lose his or her
status as a disinterested person for purposes of Rule 16b-3. All decisions,
interpretations and other actions of the Committee shall be final and binding
on all Optionees and all persons deriving their rights from an Optionee. No
member of the Committee shall be liable for any action that he or she has
taken or has failed to take in good faith with respect to the Plan or any
Option granted under the Plan.
SECTION 4. STOCK SUBJECT TO PLAN
(a) Basic Limitation. Shares offered under the Plan shall be authorized
but unissued Shares or Treasury Shares. The aggregate number of Shares
available for grants after April 3, 1996 to Employees under the Plan shall
not exceed 1,000,000 Shares, subject to adjustment pursuant to Section 9. The
number of Shares which are subject to Options outstanding at any time under
the Plan shall not exceed the number of Shares which then remain available
for issuance under the Plan. The Company, during the term of the Plan, shall
at all times reserve and keep available sufficient Shares to satisfy the
requirements of the Plan.
(b) Additional Shares. In the event that any outstanding Option for any
reason expires or is canceled or otherwise terminated, the Shares allocable
to the unexercised portion of such Option or other right shall again be
available for the purposes of the Plan.
(c) Special Limitation. The maximum number of Shares with respect to which
Options may be granted to any individual per calendar year under this Plan
cannot exceed 1,000,000 Shares.
SECTION 5. ELIGIBILITY FOR DISCRETIONARY GRANTS.
(a) General Rule. Only Employees, as defined in Section 2(f), shall be
eligible for the grant of Options by the Committee. Only individuals who are
employed as common-law employees by the Company or a Subsidiary shall be
eligible for the grant of ISOs; provided, however, that individuals who are
employed by a Subsidiary that is a partnership shall not be eligible for the
grant of ISOs. Members of the Committee shall not be eligible for the
discretionary grant of Options under the Plan.
(b) Ten-Percent Shareholders. An Employee who owns more than 10 percent of
the total combined voting power of all classes of outstanding stock of the
Company or any of its Subsidiaries shall not be eligible for the grant of an
ISO unless (i) the Exercise Price is at least 110 percent of the Fair Market
Value of a Share on the date of grant, and (ii) the ISO by its terms is not
exercisable after the expiration of five years from the date of grant.
(c) Attribution Rules. For purposes of Subsection (b) above, in
determining stock ownership, an Employee shall be deemed to own the stock
owned, directly or indirectly, by or for his or her brothers, sisters,
spouse, ancestors and lineal descendants. Stock owned, directly or
indirectly, by or for a corporation, partnership, estate or trust shall be
deemed to be owned proportionately by or for its shareholders, partners or
beneficiaries. Stock with respect to which such Employee holds an option
shall not be counted.
(d) Outstanding Stock. For purposes of Subsection (b) above, "outstanding
stock" shall include all stock actually issued and outstanding immediately
after the grant. "Outstanding stock" shall not include shares authorized for
issuance under outstanding options held by the Employee or any other person.
(e) Limit on ISOs. Notwithstanding any other provision of the Plan to the
contrary, any ISO granted under the Plan will be treated as a Nonstatutory
Option to the extent that the aggregate Fair
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Market Value (determined as of the date the ISO is granted) of the Shares
exercisable by any Optionee for the first time during any calendar year
exceeds $100,000.
SECTION 6. TERMS AND CONDITIONS OF DISCRETIONARY GRANTS OF OPTIONS.
(a) Stock Option Agreement. Each Option granted under the Plan shall be
evidenced by a Stock Option Agreement between the Optionee and the Company
which incorporates the terms of the Plan by reference. Options granted under
the Plan shall be subject to all applicable terms and conditions of the Plan
and may be subject to any other terms and conditions which are not
inconsistent with the Plan and which the Committee deems appropriate for
inclusion in a Stock Option Agreement. The provisions of the various Stock
Option Agreements entered into under the Plan need not be identical.
(b) Number of Shares. Each Stock Option Agreement shall specify the number
of Shares that are subject to the Option and shall provide for the adjustment
of such number in accordance with Section 9. The Stock Option Agreement shall
also specify whether the Option is an ISO or a Nonstatutory Option.
(c) Exercise Price. Each Stock Option Agreement shall specify the Exercise
Price. The Exercise Price of an ISO shall not be less than 100 percent of the
Fair Market Value of a Share on the date of grant. The Exercise Price of a
Nonstatutory Option shall not be less than 85 percent of the Fair Market
Value of a Share on the date of grant. Employees owning more than ten percent
of the total combined voting power of all classes of outstanding stock of the
Company shall also be subject to the restrictions contained in Section 5(b).
Subject to the preceding two sentences, the Exercise Price under any Option
shall be determined by the Committee in its sole discretion. The Exercise
Price shall be payable in a form described in Section 8.
(d) Withholding Taxes. As a condition to the exercise of an Option, the
Optionee shall make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with such exercise. The Optionee
shall also make such arrangements as the Committee may require for the
satisfaction of any federal, state, local or foreign withholding tax
obligations that may arise in connection with the disposition of Shares
acquired by exercising an Option.
(e) Exercisability. Each Stock Option Agreement shall specify the date
when all or any installment of the Option is to become exercisable. The
vesting of any Option shall be determined by the Committee at its sole
discretion. A Stock Option Agreement may provide for accelerated
exercisability in the event of the Optionee's death, disability or retirement
or other events, and the Committee shall have the power to accelerate the
exerciseability of any outstanding Option. In addition, all outstanding
Options shall, without any further action, immediately become fully vested
and exercisable (i) upon approval by the Company's stockholders of (A) the
dissolution of the Company, (B) a merger or consolidation of the Company
where the Company is not the surviving corporation, except for a transaction
the principal purpose of which is to change the state in which the Company is
incorporated, (C) a reverse merger in which the Company survives as an entity
but in which securities possessing more than 50 percent of the total combined
voting power of the Company's securities are transferred to a person or
persons different from those who hold such securities immediately prior to
the merger or (D) the sale or other disposition of all or substantially all
of the Company's assets, (ii) the direct or indirect acquisition by any
person or related group of persons (other than an acquisition from or by the
Company or by a Company-sponsored employee benefit plan or by a person that
directly or indirectly controls, is controlled by, or is under common control
with, the Company) of beneficial ownership (within the meaning of Rule 13d-3
of the Securities Exchange Act of 1934, as amended) of securities possessing
more than 50 percent of the total combined voting power of the Company's
outstanding voting securities; or (iii) a change in the composition of the
Board of Directors over a period of thirty-six (36) months or less such that
a majority of the Board members cease, by reason of one or more contested
elections for Board membership or by one or more actions by written consent
of stockholders, to be comprised of individuals who either (A) have been
Board members continuously since the beginning of such period or (B) have
been elected or nominated for election as Board members during such period by
at least a majority of the Board members described in clause (A) who were
still in office at the time such election or nomination was approved by the
Board. If the Optionee fails to exercise any Option that has become fully
vested and exercisable
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pursuant to the terms of clauses (i)(A), (B) or (C) by the time the
dissolution, merger or consolidation or disposition of assets becomes
effective, the Option shall terminate and become null and void.
(f) Term. The Stock Option Agreement shall specify the term of the Option.
The term shall not exceed 10 years from the date of grant, except as
otherwise provided in Section 5(b). Subject to the preceding sentence, the
Committee at its sole discretion shall determine the expiration date of an
Option.
(g) Nontransferability. An Option may be exercised during the lifetime of
the Optionee only by the Optionee or his or her guardian or legal
representative. The preceding sentence shall be applied as to ISOs in a
manner consistent with their qualification of ISOs under the Code and the
regulations thereunder. Unless permissible under rule 16b-3 and authorized by
the Committee, no Option or interest therein may be transferred, assigned,
pledged or hypothecated by the Optionee during his or her lifetime, whether
by operation of law or otherwise, or be made subject to execution, attachment
or similar process, other than by will or by the laws of descent and
distribution.
(h) Termination of Service (Except by Death or Disability). In the case of
an ISO granted under the Plan, if an Optionee's Service terminates for any
reason other than his or her death or disability, then his or her ISO(s)
shall expire on the earlier of the following occasions:
(i) The expiration date determined pursuant to Subsection (f) above;
or
(ii) The date three months after the termination of his or her Service
for any reason.
The Optionee may exercise all or part of his or her ISO(s) at any time
before the expiration of such ISO(s) under the preceding sentence, but only
to the extent that such ISO(s) had become vested and exercisable before his
or her Service terminated or became vested and exercisable as a result of the
termination. The balance of such ISO(s) shall lapse when the Optionee's
Service terminates.
In the case of a Nonstatutory Option granted under the Plan, if an
Optionee's Service terminates for any reason other than his or her death,
disability or gross misconduct, then his or her Nonstatutory Option(s) shall
expire on the expiration date determined pursuant to Subsection (f) above.
The Optionee may exercise all or part of his or her Nonstatutory Option(s) at
any time before the expiration of such Nonstatutory Option(s) under the
preceding sentence, but only to the extent that such Nonstatutory Option(s)
had become vested and exercisable before his or her Service terminated or
became vested and exercisable as a result of the termination. The balance of
such Nonstatutory Option(s) shall lapse when the Optionee's Service
terminates.
(i) Leaves of Absence. For purposes of Subsection (h) above, Service shall
be deemed to continue while the Optionee is on military leave, sick leave or
other bona fide leave of absence (as determined by the Committee). The
foregoing notwithstanding, in the case of an ISO granted under the Plan,
Service shall not be deemed to continue beyond the first 90 days of such
leave, unless the Optionee's reemployment rights are guaranteed by statute or
by contract.
(j) Death or Disability of Optionee. In the case of an ISO granted under
the Plan, if an Optionee dies or becomes disabled (as determined by the
Company in its sole discretion) while he or she is in Service (or after
termination of his or her Service but before the expiration of his or her
ISO(s)), then his or her ISO(s) shall expire on the earlier of the following
dates:
(i) The expiration date determined pursuant to Subsection (f) above,
or
(ii) The date twelve months after his or her death or disability.
All or part of the Optionee's ISO(s) may be exercised at any time before
the expiration of such ISO(s) under the preceding sentence by the Optionee,
the executors or administrators of his or her estate or by any person who has
acquired such ISO(s) directly from him or her by bequest or inheritance, but
only to the extent that such ISO(s) had become vested and exercisable before
his or her death or disability or became vested and exercisable as a result
of his or her death or disability. The balance of such ISO(s) shall lapse
when the Optionee dies or becomes disabled.
In the case of a Nonstatutory Option granted under the Plan, if an
Optionee dies or becomes disabled while he or she is in Service (or after
termination of his or her service but before the expiration of his or
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her Nonstatutory Option(s)), then his or her Nonstatutory Option(s) shall
expire on the expiration date determined pursuant to Subsection (f) above.
All or part of the Optionee's Nonstatutory Option(s) may be exercised at any
time before the expiration of such Nonstatutory Option(s) under the preceding
sentence by the Optionee, the executors or administrators or his or her
estate, or by any person who has acquired such Nonstatutory Option(s)
directly from him or her by bequest or inheritance, but only to the extent
that such Nonstatutory Option(s) had become vested and exercisable before his
or her death or disability or became vested and exercisable as a result or
his or her death or disability. The balance of such Nonstatutory Option(s)
shall lapse when the Optionee dies or becomes disabled.
(k) Termination for Gross Misconduct. If an Optionee's Service is
terminated by reason of the Optionee's gross misconduct, any Option,
including the vested but unexercised portion of the Option, shall cease to be
exercisable, and the Optionee shall have no right to exercise any part of the
Option after such termination. As used herein "gross misconduct" means that
the Optionee has been convicted of a felony (or enters a plea of nolo
contendere thereto) or has engaged in unfair competition with the Company or
a Subsidiary, induced any customer of the Company or a Subsidiary to breach
any contract with the Company or a Subsidiary, made any authorized disclosure
of any of the secrets or confidential information of the Company or a
Subsidiary, committed an act of embezzlement, fraud or theft with respect to
the property of the Company or a Subsidiary, or engaged in conduct which is
not in good faith and which directly results in material loss, damage or
injury to the business, reputation or employees of the Company or a
Subsidiary. The Board or the Committee shall determine whether the Optionee's
employment is terminated by reason of gross misconduct. In making such
determination the Board or the Committee shall act fairly and give the
Optionee an opportunity to be heard and present evidence on his or her
behalf.
(l) No Rights as a Shareholder. An Optionee, or a transferee of an
Optionee, shall have no rights as a shareholder with respect to any Shares
covered by his or her Option until the date of the issuance of a stock
certificate for such Shares.
(m) Modification, Extension and Assumption of Options. Within the
limitations of the Plan, the Committee may modify, extend or assume
outstanding Options, including the Exercise Price thereof, or may accept the
cancellation of outstanding Options (whether granted by the Company or
another issuer) in return for the grant of new Options for the same or a
different number of Shares and at the same or a different Exercise Price. The
foregoing notwithstanding, no modification of an Option shall, without the
consent of the Optionee, impair his or her rights or increase his or her
obligations under such Option.
(n) Restrictions on Transfer of Shares. Any Shares issued upon exercise of
an Option shall be subject to such special forfeiture conditions, rights of
repurchase, rights of first refusal and other transfer restrictions as the
Committee may determine. Such restrictions shall be set forth in the
applicable Stock Option Agreement and shall apply in addition to any
restrictions that may apply to holders of Shares generally.
SECTION 7. FORMULA AWARD PROGRAM FOR COMMITTEE MEMBERS
Immediately following shareholder approval of the amendments to and
restatement of the 1986 Stock Option Plan contained herein, and immediately
following each annual meeting of shareholders thereafter, each Committee
member shall be granted a Nonstatutory Option to purchase 1,000 Shares. The
price of the Nonstatutory Options shall be equal to 100% of the Fair Market
Value of the Shares subject to the Nonstatutory Option at the time of grant.
Such Nonstatutory Options shall vest immediately, and shall be exercisable
for a period of ten years from the date of grant. In all other respects such
Nonstatutory Options shall be subject to the same terms and conditions
governing other Nonstatutory Options granted pursuant to the Plan.
SECTION 8. PAYMENT FOR SHARES.
(a) General Rule. The entire Exercise Price of Shares issued under the
Plan shall be payable in lawful money of the United States of America at the
time when such Shares are purchased, except that, pursuant to procedures
adopted from time to time by the Committee, the Company in its discretion may
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accept consideration as provided in Subsections (b), (c), (d) or (e) below;
provided that, the Company shall have no obligation to accept any form of
consideration other than cash.
(b) Surrender of Stock. To the extent that a Stock Option Agreement so
provides or in the discretion of the Company pursuant to Committee providing
as aforesaid, payment may be made all or in part with Shares which have
already been owned by the Optionee or his or her representative and which are
surrendered to the Company in good form for transfer or with Shares withheld
from the Shares otherwise deliverable to the Optionee upon exercise of the
Option. Such Shares shall be valued at their Fair Market Value on the date
when the Option is exercised.
(c) Stock Withholding. To the extent that a Stock Option Agreement so
provides, the Optionee may pay for the Shares by providing written direction
to the Company to withhold from the number of Shares to be issued on exercise
of the Option a number of Shares having a Fair Market Value equal to the
aggregate Exercise Price for such Shares. In addition, to the extent that a
Stock Option Agreement so provides, any tax withholding obligation attendant
to the exercise of an Option may be satisfied by the Company or the
Optionee's employer withholding Shares otherwise deliverable to the Optionee.
In the event that the Exercise Price or a tax withholding obligation is so
satisfied by Shares withheld from the Shares to be issued upon exercise of an
option, the Committee may provide for the issuance to the Optionee of an
additional option, with terms substantially the same as the Stock Option
Agreement under which the Option was exercised, entitling the Optionee to
purchase additional shares of Stock equal to the number of shares so withheld
but at an exercise price equal to the Fair Market Value of the Shares on the
grant date of the new Option; provided, however, that no such additional
Options may be granted with respect to options granted pursuant to Section 7
above.
(d) Promissory Note. To the extent that a Stock Option Agreement so
provides, and subject to the approval of the Committee, the Optionee may pay
for the Shares to be issued on exercise of the Option in a combination of
cash and a promissory note equal in value to the aggregate Exercise Price for
the Shares.
(e) Broker's Cashless Exercise. To the extent a Stock Option Agreement so
provides, the Optionee may pay for the Shares to be issued on exercise of the
Option by delivery on a form acceptable to the Committee of an irrevocable
direction to a securities broker approved by the Committee to sell Shares
acquired upon exercise of an Option and deliver all or a portion of the
proceeds to the Company in payment of the Exercise Price.
(f) Combination of Payment Methods. To the extent that a Stock Option
Agreement so provides, and subject to the approval of the Committee, the
Optionee may pay for the Shares to be issued on exercise of the Option in a
combination of any of the methods outlined in Subsections (a), (b), (c), (d)
or (e) above equal in value to the aggregate Exercise Price for the Shares.
SECTION 9. ADJUSTMENT OF SHARES.
(a) General. In the event of a stock split, a declaration of a dividend
payable in Shares, a declaration of a dividend payable in a form other than
Shares in an amount that has a material effect on the value of Shares, a
combination or consolidation of the outstanding Stock into a lesser number of
Shares, a recapitalization or a reclassification, or a change in the shares
as a result of a merger or reorganization or a similar occurrence, the
Committee (or the Board of Directors in the case of a Nonstatutory Option
granted under Section 7) shall make appropriate adjustments in one or more of
(i) the number of Shares available for future grants under Section 5, (ii)
the number of Shares covered by each outstanding Option or (iii) the Exercise
Price under each outstanding Option, so that the Plan and Options remain
substantially the same as before such change.
(b) Reservation of Rights. Except as provided in this Section 9, an
Optionee shall have no rights by reason of (i) any subdivision or
consolidation of shares of stock of any class, (ii) the payment of any
dividend or (iii) any other increase or decrease in the number of shares of
stock of any class. Any issue by the Company of shares of stock of any class,
or securities convertible into shares of stock of any class, shall not
affect, and no adjustment by reason thereof shall be made with respect to,
the number or Exercise Price of Shares subject to an Option. The grant of an
Option pursuant to the Plan shall not affect
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in any way the right or power of the Company to make adjustment,
reclassifications, reorganizations or changes of its capital or business
structure, to merge or consolidate or to dissolve, liquidate, sell or
transfer all or any part of its business or assets.
SECTION 10. LEGAL REQUIREMENTS; RULE 16B-3.
(a) Shares shall not be issued under the Plan unless the issuance and
delivery of such Shares complies with (or is exempt from) all applicable
requirements of law, including (without limitation) the Securities Act of
1933, as amended, the rules and regulations promulgated thereunder, state
securities laws and regulations, and the regulations of any stock exchange or
over the counter market on which the Company's securities may then be traded.
(b) With respect to persons subject to Section 16 of the Securities
Exchange Act of 1934 ("Insiders"), transactions under the Plan are intended
to comply with all applicable conditions of Rule 16b-3. To the extent any
provision of the Plan or action by the Committee fails to so comply, it shall
be deemed null and void, to the extent permitted by law and deemed advisable
by the Committee. Moreover, in the event the Plan does not include a
provision required by Rule 16b-3 to be stated therein, such provision shall
be deemed automatically to be incorporated by reference into the Plan insofar
as Insiders are concerned.
(c) If, subsequent to the Board of Directors' adoption of the Plan, Rule
16b-3 is amended to delete any of the Rule 16b-3 requirements addressed by
the provisions of the Plan governing grants or awards to Insiders, the Board
of Directors may amend the Plan without shareholder approval (unless such
approval is required by Rule 16b-3 as so amended) to delete or otherwise
amend any such provisions no longer required for grants of options under the
Plan to Insiders to be exempt from Section 16(b) liability under the Exchange
Act.
SECTION 11. NO EMPLOYMENT RIGHTS.
No provision of the Plan, nor any right or Option granted under the Plan,
shall be construed to give any person any right to become, to be treated as,
or to remain an Employee. The Company and its Subsidiaries reserve the right
to terminate any person's Service at any time and for any reason.
SECTION 12. DURATION AND AMENDMENTS.
(a) Term of the Plan. The amendments to and restatement of the 1986 Stock
Option Plan, as set forth herein, shall become effective on the date of its
adoption by the Board of Directors, subject to the approval of the Company's
shareholders. In the event that the shareholders fail to approve this
amendment and restatement of the 1986 Stock Option Plan within 12 months
after its adoption by the Board of Directors, any Option grants made pursuant
to the terms of this Plan after April 3, 1996 shall be null and void, and no
additional Option grants shall be made under the terms of this amended and
restated Plan after such date. The Plan shall terminate automatically on
April 3, 2006, and may be terminated on any earlier date pursuant to
Subsection (b) below.
(b) Right to Amend or Terminate the Plan. The Board of Directors may
amend, suspend or terminate the Plan at any time and for any reason;
provided, however, that, except as provided in Sections 9 and 10, any
amendment of the Plan which increases the number of Shares available for
issuance under the Plan, which materially changes the class of persons who
are eligible for the grant of Options, or which materially increases the
benefits accruing to Optionees under the Plan, shall be subject to the
approval of the Company's shareholders. Shareholder approval shall not be
required for any other amendment of the Plan except as required by applicable
state and federal law, including Rule 16b-3. Notwithstanding the foregoing,
the Board of Directors shall not amend the terms of Section 7 of the Plan
more than once in any six month period, except to comply with the
requirements of the Code.
(c) Effect of Amendment or Termination. No Shares shall be issued or sold
under the Plan after the termination thereof, except upon exercise of an
Option granted prior to such termination. The termination of the Plan, or any
amendment thereof, shall not affect any Share previously issued or any Option
previously granted under the Plan.
A-8
<PAGE>
SECTION 13. STOCK OPTION AGREEMENTS.
(a) In General. A Stock Option Agreement shall be governed by the
provisions of this Section 13 in addition to any other requirements provided
for in the Stock Option Agreement and the Plan.
(b) Notice. Any notice required by the terms of a Stock Option Agreement
shall be given in writing and shall be deemed effective upon personal
delivery or upon deposit with the United States Postal Service, by registered
or certified mail with postage and fees prepaid and addressed to the party
entitled to such notice.
(c) Entire Agreement: Amendments. A Stock Option Agreement constitutes the
entire contract between the parties with regard to the Option subject to the
Stock Option Agreement, and may be amended only by a writing signed by the
parties to the Stock Option Agreement.
(d) Choice of Law. A Stock Option Agreement shall be governed by, and
construed in accordance with, the laws of the State of Nebraska, as such laws
are applied to contracts entered into and performed in such State.
SECTION 14. EXECUTION.
To record the amendments to and restatement of the 1986 Stock Option Plan
effected through the adoption of this Plan by the Board of Directors
effective as of March 26, 1996, the Company has caused its authorized officer
to execute the same.
CalEnergy Company, Inc.
By: _____________________
Steven A. McArthur
Senior Vice President and
General Counsel
A-9
<PAGE>
[LOGO]
PROXY SOLICITATION
CALENERGY COMPANY, INC.
PROXY SOLICITIED ON BEHALF OF THE BOARD OF DIRECTORS
OF THE COMPANY FOR ANNUAL MEETING MAY 16, 1996
The undersigned hereby appoints David L. Sokol, Thomas
R. Mason, John G. Sylvia and Steven A. McArthur, or any
one of them, with full power of substitution, attorneys
and proxies of the undersigned, to represent the
undersigned and vote all shares of Common Stock, par
value $.0675, of CalEnergy Company, Inc., which the
undersigned would be entitled to vote if personally
P present at the annual meeting of Stockholders to be held
R at The Joslyn Art Museum, 2200 Dodge Street, Omaha,
O Nebraska on May 16, 1996 at 9:00 a.m., local time, and
X any adjournments thereof, on all matters coming before
Y said meeting and in the following manner:
COMMENTS/ADDRESS CHANGE: PLEASE MARK COMMENT/ADDRESS BOX ON REVERSE SIDE
(Continued and to be signed on the other side)
FOLD AND DETACH HERE
<PAGE>
[X] Please mark
your votes
like this in blue
or black ink
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR ALL NOMINEES" IN ITEM 1
AND "FOR" ITEMS 2 AND 3
1.ELECTION OF
DIRECTORS:
JUDITH E. AYRES
RICHARD K. DAVIDSON
BERNARD W. REZNICEK
DAVID L. SOKOL
DAVID E. WIT
WITHHOLD
FOR all authority to
Nominees vote for all nominees
[ ] [ ]
WITHHELD for the following only: [Write the name of
the nominee(s) in the space below.]
2. PROPOSAL TO APPROVE AND RATIFY (a) AN EXTENSION TO THE TERM OF THE AMENDED
AND RESTATED 1986 EMPLOYEE STOCK OPTION PLAN (WHICH WOULD OTHERWISE EXPIRE
IN 1996) TO BE KNOWN AS THE 1996 EMPLOYEE STOCK OPTION PLAN; (b) CERTAIN
TECHNICAL AMENDMENTS TO UPDATE THE PLAN; AND (c) AUTHORIZING THE ISSUANCE OF
UP TO AN ADDITIONAL 739,165 SHARES UNDER THE PLAN
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. PROPOSAL TO APPROVE THE APPOINTMENT OF
DELOITTE & TOUCHE, CERTIFIED PUBLIC
ACCOUNTANTS, AS THE COMPANY'S AUDITORS FOR FISCAL
YEAR 1996.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND MEETING [ ]
COMMENTS/ADDRESS CHANGE [ ]
Please mark this box if you have
written comments/address change
on the reverse side.
WHEN THIS PROXY IS PROPERLY EXECUTED AND RETURNED, THE SHARES IT REPRESENTS WILL
BE VOTED AT THE MEETING IN ACCORDANCE WITH THE CHOICES SPECIFIED ABOVE. IF A
CHOICE IS NOT SPECIFIED, THIS PROXY WILL BE VOTED TO APPROVE THAT PROPOSAL FOR
WHICH NO CHOICE IS INDICATED.
Please mark, date, sign and return your proxy promptly in the enclosed
envelope, which requires no postage if mailed in the United States.
Signature(s) Date
- - - - -----------------------------------------------------------------------------
Please sign above exactly as your name or names appear hereon. Joint owners
should each sign personally. Corporate proxies should be signed in full
corporate name by an authorized officer. Fiduciaries should give full titles
as such. PLEASE MARK, DATE, SIGN, AND MAIL PROMPTLY IN THE POSTAGE-PAID
ENVELOPE ENCLOSED.
FOLD AND DETACH HERE
