Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934
Date of Report (Date of earliest event reported) August 11, 1998
CalEnergy Company, Inc.
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
302 South 36th Street, Suite 400, Omaha, Nebraska 68131
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (402) 341-4500
N/A
(Former name or former address, if changed since last report)
Item 5. Other Events.
On August 12, 1998, the Registrant announced that it had entered
into an Agreement and Plan of Merger with MidAmerican Energy
Holdings Company ("MidAmerican"), pursuant to which the
Registrant agreed (i) to pay $27.15 in cash for each outstanding
share of MidAmerican common stock (valuing MidAmerican at
approximately $4 billion, including $1.4 billion of debt and
preferred stock which will remain outstanding at MidAmerican) in
a merger, pursuant to which MidAmerican will become a wholly
owned subsidiary of the Registrant, and (ii) to reincorporate in
the State of Iowa and be renamed MidAmerican Energy Holdings
Company. Closing of the transaction is subject to the approval
of the shareholders of both companies and the obtaining of
certain regulatory approvals. Copies of the Agreement and Plan
of Merger and the Registrant's press release announcing the
Agreement are filed herewith as Exhibits 99.1 and 99.2,
respectively, and are incorporated herein by reference.
Certain information included in this report contains forward-
looking statements made pursuant to the Private Securities
Litigation Reform Act of 1995 ("Reform Act"). Such statements
are based on current expectations and involve a number of known
and unknown risks and uncertainties that could cause the actual
results and performance of the Registrant to differ materially
from any expected future results or performance, expressed or
implied, by the forward-looking statements. In connection with
the safe harbor provisions of the Reform Act, the Registrant has
identified important factors that could cause actual results to
differ materially from such expectations, including development
uncertainty, operating uncertainty, acquisition uncertainty,
uncertainties relating to doing business outside of the United
States, uncertainties relating to geothermal resources,
uncertainties relating to domestic and international (and in
particular, Indonesian) economic and political conditions and
uncertainties regarding the impact of regulations, changes in
government policy, industry deregulation and competition.
Reference is made to all of the Registrant's SEC filings,
including the Registrant's Report on Form 8-K dated March 6,
1998, incorporated herein by reference, for a description of such
factors. The Company assumes no responsibility to update forward-
looking information contained herein.
Item 7. Financial Statements and Exhibits.
(c) Exhibits:
The following exhibits are filed as part of this report:
99.1 Agreement and Plan of Merger, dated as of August
11, 1998, by and among the Registrant, MidAmerican
Energy Holdings Company, Maverick Reincorporation Sub,
Inc. and MAVH Inc.
99.2 Press Release of the Registrant, dated August 12, 1998.
SIGNATURE
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
CALENERGY COMPANY, INC.
By: /s/ Douglas L. Anderson
Douglas L. Anderson
Assistant General Counsel and
Assistant Secretary
Dated: August 12, 1998
Exhibit Index
Exhibit No. Description
99.1 Agreement and Plan of Merger, dated as of August 11,
1998, by and among the Registrant, MidAmerican Energy
Holdings Company, Maverick Reincorporation Sub, Inc.
and MAVH Inc.
99.2 Press Release of the Registrant, dated August 12, 1998.
AGREEMENT AND PLAN OF MERGER
among
CALENERGY COMPANY, INC.,
MAVERICK REINCORPORATION SUB, INC.,
MIDAMERICAN ENERGY HOLDINGS COMPANY
and
MAVH INC.
__________________________
Dated as of August 11, 1998
__________________________
TABLE OF CONTENTS
Page
ARTICLE I. THE MERGER 1
Section 1.1. The Merger. 1
Section 1.2. Effective Time. 2
Section 1.3. Effect of the Merger 2
Section 1.4. Subsequent Actions. 2
Section 1.5. Articles of Incorporation; By-Laws. 2
Section 1.6. Reincorporation 3
ARTICLE II. TREATMENT OF SHARES 3
Section 2.1. Conversion of Securities. 3
Section 2.2. Dissenting Shares. 3
Section 2.3. Surrender of Shares; Stock Transfer Books. 4
Section 2.4. MidAmerican Option Plan. 6
ARTICLE III. THE CLOSING 7
Section 3.1. Closing 7
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF MAVERICK AND
MERGER SUB 7
Section 4.1. Organization and Qualification 7
Section 4.2. Subsidiaries 8
Section 4.3. Capitalization 9
Section 4.4. Authority; Non-Contravention; Statutory
Approvals; Compliance 9
Section 4.5. Reports and Financial Statements 12
Section 4.6. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities 12
Section 4.7. Litigation 13
Section 4.8. Joint Proxy Statement 13
Section 4.9. Tax Matters 14
Section 4.10. Employee Matters; ERISA 17
Section 4.11. Environmental Protection 21
Section 4.12. Regulation as a Utility 24
Section 4.13. Vote Required 24
Section 4.14. Insurance 24
Section 4.15. Opinions of Financial Advisors 24
Section 4.16. Brokers 25
Section 4.17. Financing Arrangements. 25
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF HAWK 25
Section 5.1. Organization and Qualification 25
Section 5.2. Subsidiaries 26
Section 5.3. Capitalization 26
Section 5.4. Authority; Non-Contravention; Statutory
Approvals; Compliance 28
Section 5.5. Reports and Financial Statements 30
Section 5.6. Absence of Certain Changes or Events;
Absence of Undisclosed Liabilities 30
Section 5.7. Litigation 31
Section 5.8. Joint Proxy Statement 31
Section 5.9. Tax Matters 32
Section 5.10. Employee Matters; ERISA 35
Section 5.11. Environmental Protection 39
Section 5.12. Regulation as a Utility 41
Section 5.13. Vote Required 41
Section 5.14. Insurance 41
Section 5.15. Opinion of Financial Advisor 41
Section 5.16. Brokers 41
Section 5.17. Non-Applicability of Certain Provisions
of Iowa Act 42
Section 5.18. MidAmerican Rights Agreement 42
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER 42
Section 6.1. Conduct of Business by MidAmerican Pending
the Merger 42
Section 6.2. Conduct of Business by CalEnergy Pending
the Merger 45
Section 6.3. Additional Covenants by MidAmerican and
CalEnergy Pending the Merger 47
ARTICLE VII. ADDITIONAL AGREEMENTS 48
Section 7.1. Access to Information 48
Section 7.2. Joint Proxy Statement 49
Section 7.3. Regulatory Approvals and Other Matters. 50
Section 7.4. Stockholder Approvals 50
Section 7.5. Directors' and Officers' Indemnification 51
Section 7.6. Disclosure Schedules 53
Section 7.7. Public Announcements 53
Section 7.8. No Solicitations 53
Section 7.9. Expenses 55
Section 7.10. Board of Directors 55
Section 7.11. Consulting Agreement 56
Section 7.12. Current Employment Arrangements 56
Section 7.13. Post-Merger Operations and Workforce
Matters 56
Section 7.14. Name of Parent 57
Section 7.15. Contributions to Rabbi Trusts 57
ARTICLE VIII. CONDITIONS 57
Section 8.1. Conditions to Each Party's Obligation to
Effect the Merger 57
Section 8.2. Conditions to Obligation of MidAmerican to
Effect the Merger 58
Section 8.3. Conditions to Obligation of CalEnergy,
Parent and Merger Sub to Effect the
Merger 59
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER 61
Section 9.1. Termination 61
Section 9.2. Effect of Termination 64
Section 9.3. Termination Fee; Expenses 64
Section 9.4. Amendment 66
Section 9.5. Waiver 66
ARTICLE X. GENERAL PROVISIONS 67
Section 10.1. Non-Survival; Effect of Representations
and Warranties 67
Section 10.2. Brokers 67
Section 10.3. Notices 67
Section 10.4. Miscellaneous 68
Section 10.5. Interpretation 68
Section 10.6. Counterparts; Effect 68
Section 10.7. Enforcement 68
Section 10.8. Parties in Interest 69
Section 10.9. Further Assurances 69
Section 10.10. Waiver of Jury Trial 70
Section 10.11. Certain Definitions 70
EXHIBIT A Consulting Agreement
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 11, 1998
(this "Agreement"), among CalEnergy Company, Inc., a Delaware
corporation ("CalEnergy"), MidAmerican Energy Holdings Company,
an Iowa corporation ("MidAmerican"), Maverick Reincorporation
Sub, Inc., an Iowa corporation which is a wholly-owned subsidiary
of CalEnergy ("Reincorporation Sub"), and MAVH Inc., an Iowa
corporation which is, directly or indirectly, a wholly-owned
subsidiary of CalEnergy ("Merger Sub").
W I T N E S S E T H :
WHEREAS, the Boards of Directors of CalEnergy and
MidAmerican each have determined that the acquisition of
MidAmerican by CalEnergy is in the best interests of each of its
companies' stockholders and employees and, in the case of
MidAmerican, those customers and communities served by
MidAmerican; and
WHEREAS, in furtherance thereof, the Boards of Directors of
CalEnergy, Reincorporation Sub, MidAmerican and Merger Sub have
approved the business combination transaction provided for in
this Agreement, pursuant to which Merger Sub will merge with and
into MidAmerican, with MidAmerican being the surviving
corporation, in accordance with the Iowa Business Corporation Act
(the "Iowa Act") and upon the terms and subject to the conditions
set forth in this Agreement (such transaction is referred to as
the "Merger"), as a result of which Parent (as defined below)
will own, directly or indirectly through a wholly owned
subsidiary, all of the outstanding shares (the "Shares") of
common stock, no par value, of MidAmerican ("MidAmerican Common
Stock").
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained
herein, the parties hereto, intending to be legally bound hereby,
agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in
Section 1.2) and upon the terms and subject to the conditions of
this Agreement and the Iowa Act, Merger Sub shall be merged with
and into MidAmerican, the separate corporate existence of Merger
Sub shall cease, and MidAmerican shall continue as the surviving
corporation (sometimes hereinafter referred to as the "Surviving
Corporation").
Section 1.2. Effective Time. On the Closing Date (as defined
in Section 3.1), a certificate of merger complying with the
requirements of the Iowa Act shall be executed and filed by
MidAmerican and Merger Sub with the Secretary of State of Iowa.
The Merger shall become effective on the date on which the
certificate of merger is duly filed with the Secretary of State
of Iowa or at such time as is specified in the certificate of
merger (the "Effective Time").
Section 1.3. Effect of the Merger. At the Effective Time, the
effect of the Merger shall be as provided in the applicable
provisions of the Iowa Act. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, powers and franchises of
MidAmerican and Merger Sub shall vest in the Surviving
Corporation, and all debts, liabilities and duties of MidAmerican
and Merger Sub shall become the debts, liabilities and duties of
the Surviving Corporation.
Section 1.4. Subsequent Actions. If, at any time after the
Effective Time, the Surviving Corporation shall consider or be
advised that any deeds, bills of sale, assignments, assurances or
any other actions or things are necessary or desirable to vest,
perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of
the rights, properties or assets of either of MidAmerican or
Merger Sub acquired or to be acquired by the Surviving
Corporation as a result of, or in connection with, the Merger or
otherwise to carry out this Agreement, the officers and directors
of the Surviving Corporation shall be authorized to execute and
deliver, in the name and on behalf of either MidAmerican or
Merger Sub, all such deeds, bills of sale, assignments and
assurances and to take and do, in the name and on behalf of each
of such corporations or otherwise, all such other actions and
things as may be necessary or desirable to vest, perfect or
confirm any and all right, title and interest in, to and under
such rights, properties or assets in the Surviving Corporation or
otherwise to carry out this Agreement.
Section 1.5. Articles of Incorporation; By-Laws.
(a) Unless otherwise determined by CalEnergy prior to the
Effective Time, at the Effective Time the Articles of
Incorporation of Merger Sub, as in effect immediately prior to
the Effective Time, shall be the Articles of Incorporation of the
Surviving Corporation until thereafter amended as provided by law
and such Articles of Incorporation.
(b) The By-Laws of Merger Sub, as in effect immediately prior
to the Effective Time, shall be the By-Laws of the Surviving
Corporation until thereafter amended as provided by law, the
Articles of Incorporation of the Surviving Corporation and such
By-Laws.
Section 1.6. Reincorporation. CalEnergy shall take such
actions, including making all necessary filings in the States of
Iowa and Delaware, to effect, immediately prior to the Effective
Time, the reincorporation of CalEnergy (the "Reincorporation") by
a merger of CalEnergy with and into Reincorporation Sub, which
shall be the surviving corporation in such merger ("Parent") and
shall succeed to all of the rights, obligations and liabilities
of CalEnergy.
ARTICLE II.
TREATMENT OF SHARES
Section 2.1. Conversion of Securities. At the Effective Time,
by virtue of the Merger and without any action on the part of
Merger Sub, MidAmerican or the holder of any of the following
securities:
(a) Each Share, together with the associated purchase rights
("MidAmerican Rights") under the MidAmerican Rights Agreement (as
defined in Section 5.18), issued and outstanding immediately
prior to the Effective Time (other than any Shares to be canceled
pursuant to Section 2.1(b) and any Dissenting Shares (as defined
in Section 2.2(a)) shall be canceled and extinguished and be
converted into the right to receive $27.15 (the "Per Share
Amount") in cash payable to the holder thereof, without interest,
upon surrender of the certificate representing such Share.
Throughout this Agreement, the term "Shares" refers to the Shares
together with the associated MidAmerican Rights.
(b) Each Share held in the treasury of MidAmerican and each
Share owned by Parent or any direct or indirect Subsidiary (as
defined below) of Parent or of MidAmerican immediately prior to
the Effective Time shall be canceled and extinguished, and no
payment or other consideration shall be made with respect
thereto.
(c) Each share of common stock, no par value, of Merger Sub
issued and outstanding immediately prior to the Effective Time
shall thereafter represent one validly issued, fully paid and
nonassessable share of common stock, no par value, of the
Surviving Corporation.
Section 2.2. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the
contrary, any Shares held by a holder who has demanded and
perfected his demand for appraisal of his Shares in accordance
with Section 1302 of the Iowa Act and as of the Effective Time
has neither effectively withdrawn nor lost his right to such
appraisal ("Dissenting Shares"), shall not be converted into or
represent a right to receive cash pursuant to Section 2.1, but
the holder thereof shall be entitled to only such rights in
respect thereof as are granted by Section 1302 of the Iowa Act.
(b) Notwithstanding the provisions of subsection (a) of this
Section, if any holder of Shares who demands appraisal of his
Shares under the Iowa Act shall effectively withdraw or lose
(through failure to perfect or otherwise) his right to appraisal,
then as of the Effective Time or the occurrence of such event,
whichever later occurs, such holder's Shares shall automatically
be converted into and represent only the right to receive cash as
provided in Section 2.1(a), without interest thereon, upon
surrender of the certificate or certificates representing such
Shares.
(c) MidAmerican shall give CalEnergy or Parent, as the case
may be, (i) prompt notice of any written demands for appraisal or
payment of the fair value of any Shares, withdrawals of such
demands, and any other instruments served pursuant to the Iowa
Act received by MidAmerican and (ii) the opportunity to direct
all negotiations and proceedings with respect to demands for
appraisal under the Iowa Act. MidAmerican shall not voluntarily
make any payment with respect to any demands for appraisal and
shall not, except with the prior written consent of CalEnergy,
settle or offer to settle any such demands.
Section 2.3. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, MidAmerican shall designate a
bank or trust company to act as agent for the holders of Shares
(the "Exchange Agent") to receive the funds necessary to make the
payments contemplated by Section 2.1. At the Effective Time,
Parent shall deposit, or cause to be deposited, in trust with the
Exchange Agent for the benefit of holders of Shares, the
aggregate consideration to which such holders shall be entitled
at the Effective Time pursuant to Section 2.1.
(b) Each holder of a certificate or certificates representing
any Shares canceled upon the Merger pursuant to Section 2.1(a)
may thereafter surrender such certificate or certificates to the
Exchange Agent, as agent for such holder, to effect the surrender
of such certificate or certificates on such holder's behalf for a
period ending six months after the Effective Time. Parent agrees
that promptly after the Effective Time it shall cause the
distribution to holders of record of Shares as of the Effective
Time of appropriate materials to facilitate such surrender. Upon
the surrender of certificates representing the Shares, Parent
shall cause the Exchange Agent to pay the holder of such
certificates in exchange therefor cash in an amount equal to the
Per Share Amount multiplied by the number of Shares represented
by such certificate, plus the amount of dividends or other
distributions with a record date prior to the Effective Time, if
any, remaining unpaid with respect to the Shares represented by
such certificate immediately prior to the Effective Time. Until
so surrendered, each such certificate (other than certificates
representing Dissenting Shares and certificates representing
Shares canceled pursuant to Section 2.1(b)) shall represent
solely the right to receive the aggregate Per Share Amount
relating thereto, subject, however, to Parent's obligation (if
any) to pay any dividends or make any other distributions with a
record date prior to the Effective Time which may have been
declared by MidAmerican on the shares of MidAmerican Common Stock
in accordance with the terms of this Agreement on or prior to the
date of this Agreement and which remain unpaid at the Effective
Time.
(c) If payment of cash in respect of canceled Shares is to be
made to a Person other than the Person in whose name a
surrendered certificate or instrument is registered, it shall be
a condition to such payment that the certificate or instrument so
surrendered shall be properly endorsed or shall be otherwise in
proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by
reason of such payment in a name other than that of the
registered holder of the certificate or instrument surrendered or
shall have established to the satisfaction of Parent or the
Exchange Agent that such tax either has been paid or is not
payable.
(d) At the Effective Time, the stock transfer books of
MidAmerican shall be closed and there shall not be any further
registration of transfer of any shares of capital stock
thereafter on the records of MidAmerican. From and after the
Effective Time, the holders of certificates evidencing ownership
of the Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares,
except as otherwise provided for herein or by applicable law.
If, after the Effective Time, certificates for Shares are
presented to the Surviving Corporation, they shall be canceled
and exchanged for cash as provided in Section 2.1(a). No
interest shall accrue or be paid on any cash payable upon the
surrender of a certificate or certificates which immediately
prior to the Effective Time represented outstanding Shares.
(e) Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to Parent all
cash (including any interest received with respect thereto),
certificates and other documents in its possession relating to
the transactions contemplated hereby, and the Exchange Agent's
duties shall terminate. Thereafter, each holder of a certificate
representing Shares (other than certificates representing
Dissenting Shares and certificates representing Shares canceled
pursuant to Section 2.1(b)) shall be entitled to look to the
Surviving Corporation (subject to applicable abandoned property,
escheat and similar laws) only as general creditors thereof with
respect to the aggregate Per Share Amount payable upon due
surrender of their certificates, without any interest or
dividends thereon. Notwithstanding the foregoing, neither
Parent, the Surviving Corporation nor the Exchange Agent shall be
liable to any holder of a certificate representing Shares for the
Per Share Amount delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) The Per Share Amount paid in the Merger shall be net to
the holder of Shares in cash, subject to reduction only for any
applicable federal back-up withholding or, as set forth in
Section 2.3(c), stock transfer taxes payable by such holder.
Section 2.4. MidAmerican Option Plan.
(a) CalEnergy or, as the case may be, Parent shall take all
actions necessary to provide that, upon consummation of the
Merger, each then outstanding option to purchase shares of
MidAmerican Common Stock or stock appreciation right representing
the right (contingent or other) to purchase shares of MidAmerican
Common Stock or, following the Merger, of shares of common stock,
no par value, of Parent ("Parent Common Stock), or grant of
performance shares representing the right (contingent or other)
to purchase shares of MidAmerican Common Stock or, following the
Merger, of Parent Common Stock, or other similar interest
(collectively, the "MidAmerican Options") whether granted under
MidAmerican's 1995 Long-Term Incentive Plan (the "MidAmerican
Option Plan") or under any other plan or arrangement, whether or
not then exercisable or vested, all of which, together with the
applicable exercise prices, are disclosed in Section 5.10(a) of
the MidAmerican Disclosure Schedule (or as otherwise permitted
from and after the date of this Agreement pursuant to Section
6.1(c)) shall be assumed by Parent at the Effective Time (except
in the case of performance shares of MidAmerican, which will be
paid the Per Share Amount at the Effective Time), and each such
MidAmerican Option shall become an option to purchase the number
of shares of Parent Common Stock rounded to the nearest whole
number (a "MidAmerican Substitute Option") equal to the number of
shares of MidAmerican Common Stock subject to such MidAmerican
Option multiplied by the number (the "Exchange Ratio") determined
by dividing the Per Share Amount by the CalEnergy Share Price (as
defined below). The "CalEnergy Share Price" shall be equal to
the average of the closing prices of the common stock, par value
$0.0675 per share, of CalEnergy ("CalEnergy Common Stock), on the
New York Stock Exchange Composite Transaction Reporting System,
as reported in The Wall Street Journal, for the 20 trading days
immediately preceding the second trading day prior to the
Effective Time. The per share exercise price for each
MidAmerican Substitute Option shall be the current exercise price
per share of MidAmerican Common Stock divided by the Exchange
Ratio (rounded up to the nearest full cent), and each MidAmerican
Substitute Option otherwise shall be subject, in all material
respects, to the other terms and conditions of the original
MidAmerican Option to which it relates.
(b) Prior to the Effective Time, MidAmerican shall take
such actions as are necessary under applicable law and the
applicable agreements and the MidAmerican Option Plan to ensure
that each outstanding MidAmerican Option shall, from and after
the Effective Time, represent only the right to purchase, upon
exercise, shares of Parent Common Stock.
(c) As soon as reasonably practicable after the Effective
Time, Parent shall cause to be included under a registration
statement on Form S-8 of Parent all shares of Parent Common Stock
which are subject to MidAmerican Substitute Options, and shall
maintain the effectiveness of such registration statement until
all such MidAmerican Substitute Options have been exercised,
expired or forfeited.
ARTICLE III.
THE CLOSING
Section 3.1. Closing. The closing of the Merger (the
"Closing") shall take place at the offices of Willkie Farr &
Gallagher, 787 Seventh Avenue, New York, New York, 10019 at 10:00
A.M., New York time, on the second business day immediately
following the date on which the last of the conditions set forth
in Article VIII hereof is fulfilled or waived, or at such other
time, date and place as CalEnergy and MidAmerican shall mutually
agree (the "Closing Date").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF MAVERICK AND MERGER SUB
CalEnergy and Merger Sub hereby represent and warrant to
MidAmerican as follows:
Section 4.1. Organization and Qualification. CalEnergy
and each of the CalEnergy Subsidiaries and, to the knowledge of
CalEnergy, each of the CalEnergy Joint Ventures is a corporation
or other entity duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has all requisite power and authority and has been
duly authorized by all necessary approvals and orders to own,
lease and operate its assets and properties and to carry on its
business as it is now being conducted and is duly qualified and
in good standing to do business in each jurisdiction in which the
nature of its business or the ownership or leasing of its assets
and properties makes such qualification necessary other than in
such jurisdictions where the failure to so qualify and be in good
standing, when taken together with all other such failures, would
not have a material adverse effect on the business, operations,
properties, assets, condition (financial or other), prospects or
the results of operations of CalEnergy and the CalEnergy
Subsidiaries taken as a whole or on the consummation of the
transactions contemplated by this Agreement (any such material
adverse effect, a "CalEnergy Material Adverse Effect"). The term
"Subsidiary" of a Person shall mean any corporation or other
entity (including partnerships and other business associations
and joint ventures) in which such Person directly or indirectly
owns at least a majority of the voting power represented by the
outstanding capital stock or other voting securities or interests
having voting power under ordinary circumstances to elect a
majority of the directors or similar members of the governing
body, or otherwise to direct the management and policies, of such
corporation or entity, and the term "CalEnergy Subsidiary" shall
mean a Subsidiary of CalEnergy. The term "Joint Venture" of a
Person shall mean any corporation or other entity (including
partnerships and other business associations and joint ventures)
in which such Person directly or indirectly owns an equity
interest that is less than a majority of any class of the
outstanding voting securities or equity of any such entity, other
than equity interests held for passive investment purposes which
are less than 5% of any class of the outstanding voting
securities or equity of any such entity, and the term "CalEnergy
Joint Venture" shall mean a Joint Venture of CalEnergy.
Section 4.2. Subsidiaries. Section 4.2 of the CalEnergy
Disclosure Schedule delivered by CalEnergy to MidAmerican prior
to the execution of this Agreement (the "CalEnergy Disclosure
Schedule") sets forth a list of all the CalEnergy Subsidiaries
and the CalEnergy Joint Ventures, including the name of each such
entity, a brief description of the principal line or lines of
business conducted by each such entity and the interest of
CalEnergy and the CalEnergy Subsidiaries therein. Except as set
forth in Section 4.2 of the CalEnergy Disclosure Schedule,
neither CalEnergy nor any of the CalEnergy Subsidiaries nor any
of the CalEnergy Joint Ventures is a "holding company," a
"subsidiary company" of a holding company or an "affiliate" of a
holding company within the meaning of Section 2(a)(7), 2(a)(8) or
2(a)(11) of the Public Utility Holding Company Act of 1935, as
amended (the "1935 Act"), respectively, and none of such entities
is a "public utility company" within the meaning of Section
2(a)(5) of the 1935 Act. Except as set forth in Section 4.2 of
the CalEnergy Disclosure Schedule, (i) all of the issued and
outstanding shares of capital stock of each CalEnergy Subsidiary
are validly issued, fully paid, nonassessable and free of
preemptive rights and to the extent owned, directly or
indirectly, by CalEnergy, are owned free and clear of any liens,
claims, encumbrances, security interests, charges and options of
any nature whatsoever ("Liens") and (ii) there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies
or other pledges, security interests, encumbrances, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating
CalEnergy or any CalEnergy Subsidiary to issue, deliver or sell,
pledge, grant a security interest or encumber, or cause to be
issued, delivered or sold, pledged or encumbered or a security
interest to be granted on, shares of capital stock of any
CalEnergy Subsidiary or obligating CalEnergy or any CalEnergy
Subsidiary to grant, extend or enter into any such agreement or
commitment.
Section 4.3. Capitalization. The authorized capital stock
of CalEnergy consists of 180,000,000 shares of CalEnergy Common
Stock and 2,000,000 shares of preferred stock, no par value, none
of which preferred stock is outstanding. As of the close of
business on the date of this Agreement, (i) 59,531,007 shares of
CalEnergy Common Stock are outstanding, (ii) not more than
5,837,838 shares of CalEnergy Common Stock are reserved for
issuance pursuant to CalEnergy's existing stock option agreements
and plans and its 1994 Employee Stock Purchase Plan and 401(k)
Savings Plan (such agreements and plans, collectively, the
"CalEnergy Stock Plans"), (iii) 23,448,493 shares of CalEnergy
Common Stock are held by CalEnergy in its treasury or by its
wholly owned Subsidiaries, and (iv) except as set forth in
Section 4.3 of the CalEnergy Disclosure Schedule, no bonds,
debentures, notes or other indebtedness having the right to vote
(or convertible into securities having the right to vote) on any
matters on which stockholders may vote ("Voting Debt") is issued
or outstanding. All of the issued and outstanding shares of
CalEnergy Common Stock are validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date of
this Agreement, except as set forth in Section 4.3 of the
CalEnergy Disclosure Schedule or as may be provided by the
CalEnergy Stock Plans, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies, or other
pledges, security interests, encumbrances, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating
CalEnergy or any CalEnergy Subsidiary to issue, deliver or sell,
pledge, grant a security interest or encumber, or cause to be
issued, delivered or sold, pledged or encumbered or a security
interest to be granted on, shares of capital stock or any Voting
Debt of CalEnergy or obligating CalEnergy or any CalEnergy
Subsidiary to grant, extend or enter into any such agreement or
commitment.
Section 4.4. Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. CalEnergy, Reincorporation Sub and Merger Sub
have all requisite power and authority to enter into this
Agreement and, subject to the receipt of the CalEnergy
Stockholders' Approval (as defined in Section 4.13) and the
CalEnergy Required Statutory Approvals (as defined in Section
4.4(c)), to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement and the consummation by
CalEnergy, Reincorporation Sub and Merger Sub of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of CalEnergy and Merger Sub, subject
to obtaining the CalEnergy Stockholders' Approval. This
Agreement has been duly and validly executed and delivered by
CalEnergy, Reincorporation Sub and Merger Sub, and, assuming the
due authorization, execution and delivery hereof by MidAmerican,
this Agreement constitutes the valid and binding obligation of
each of CalEnergy, Reincorporation Sub and Merger Sub enforceable
against each of them in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and
other laws of general applicability relating to or affecting
creditors' rights and to general principles of equity.
(b) Non-Contravention. The execution and delivery of this
Agreement by CalEnergy, Reincorporation Sub and Merger Sub do
not, and the consummation of the transactions contemplated hereby
will not, in any respect, violate, conflict with or result in a
breach of any provision of, or constitute a default (with or
without notice or lapse of time or both) under, or result in the
termination or modification of, or accelerate the performance
required by, or result in a right of termination, cancellation or
acceleration of any obligation or the loss of a benefit under, or
result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties or assets of CalEnergy or
any of the CalEnergy Subsidiaries or the CalEnergy Joint Ventures
(any such violation, conflict, breach, default, right of
termination, modification, cancellation or acceleration, loss or
creation, is referred to herein as a "Violation" with respect to
CalEnergy, and such term when used in Article V shall have a
correlative meaning with respect to MidAmerican) pursuant to any
provisions of (i) the certificate or articles of incorporation,
by-laws or similar governing documents of CalEnergy or any of the
CalEnergy Subsidiaries or the CalEnergy Joint Ventures, (ii)
subject to obtaining the CalEnergy Required Statutory Approvals
and the receipt of the CalEnergy Stockholders' Approval, any
statute, law, ordinance, rule, regulation, judgment, decree,
order, injunction, writ, permit or license of any Governmental
Authority (as defined in Section 4.2(c)) applicable to CalEnergy
or any of the CalEnergy Subsidiaries or the CalEnergy Joint
Ventures or any of their respective properties or assets or (iii)
subject to obtaining the third-party consents set forth in
Section 4.4(b) of the CalEnergy Disclosure Schedule (the
"CalEnergy Required Consents"), any note, bond, mortgage,
indenture, deed of trust, license, franchise, permit, concession,
contract, lease or other instrument, obligation or agreement of
any kind to which CalEnergy or any of the CalEnergy Subsidiaries
or the CalEnergy Joint Ventures is a party or by which it or any
of its properties or assets may be bound or affected, excluding
from the foregoing clauses (ii) and (iii) such Violations which
would not, in the aggregate, have a CalEnergy Material Adverse
Effect.
(c) Statutory Approvals. Except as described in Section
4.4(c) of the CalEnergy Disclosure Schedule, no declaration,
filing or registration with, or notice to or authorization,
consent or approval of, any court, federal, state, local or
foreign governmental or regulatory body (including a stock
exchange or other self-regulatory body) or authority (each, a
"Governmental Authority") is necessary for the execution and
delivery of this Agreement by CalEnergy, Reincorporation Sub and
Merger Sub or the consummation by CalEnergy, Reincorporation Sub
and Merger Sub of the transactions contemplated hereby (the
"CalEnergy Required Statutory Approvals," it being understood
that references in this Agreement to "obtaining" such CalEnergy
Required Statutory Approvals shall mean making such declarations,
filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section 4.4(d) or 4.11
of the CalEnergy Disclosure Schedule or as disclosed in the
CalEnergy SEC Reports (as defined in Section 4.5) filed as of the
date of this Agreement, neither CalEnergy nor any of the
CalEnergy Subsidiaries nor, to the knowledge of CalEnergy, any
CalEnergy Joint Venture is in violation of, is, to the knowledge
of CalEnergy, under investigation with respect to any violation
of, or has been given notice or been charged with any violation
of, any law, statute, order, rule, regulation, ordinance or
judgment (including, without limitation, any applicable
environmental law, ordinance or regulation) of any Governmental
Authority, except for violations which individually or in the
aggregate do not, and insofar as reasonably can be foreseen will
not, have a CalEnergy Material Adverse Effect. Except as set
forth in Section 4.4(d) or 4.11 of the CalEnergy Disclosure
Schedule, CalEnergy and the CalEnergy Subsidiaries and, to the
knowledge of CalEnergy, the CalEnergy Joint Ventures have all
permits, licenses, franchises and other governmental
authorizations, consents and approvals necessary to conduct their
businesses as presently conducted which are material to the
operation of the businesses of CalEnergy and the CalEnergy
Subsidiaries. Except as set forth in Section 4.4(d) of the
CalEnergy Disclosure Schedule, CalEnergy and each of the
CalEnergy Subsidiaries and, to the knowledge of CalEnergy,
CalEnergy Joint Ventures is not in breach or violation of or in
default in the performance or observance of any term or provision
of, and no event has occurred which, with lapse of time or action
by a third party, could result in a default by CalEnergy or any
CalEnergy Subsidiary or, to the knowledge of CalEnergy, any
CalEnergy Joint Venture under (i) its certificate or articles of
incorporation, by-laws or other organizational document or (ii)
any contract, commitment, agreement, indenture, mortgage, loan
agreement, note, lease, bond, license, approval or other
instrument to which it is a party or by which CalEnergy or any
CalEnergy Subsidiary or any CalEnergy Joint Venture is bound or
to which any of its property is subject, except in the case of
clause (ii) above, for violations, breaches or defaults which
individually or in the aggregate do not, and insofar as
reasonably can be foreseen will not, have a CalEnergy Material
Adverse Effect.
Section 4.5. Reports and Financial Statements. The
filings required to be made by CalEnergy and the CalEnergy
Subsidiaries under the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Public Utility Regulatory
Policies Act of 1978 ("PURPA"), the 1935 Act and state, municipal
and other local laws, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits,
amendments and supplements appertaining thereto, have been filed
with the Securities and Exchange Commission (the "SEC") or the
Federal Energy Regulatory Commission (the "FERC"), or other
appropriate Governmental Authorities, as the case may be, and
complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statutes and
the rules and regulations thereunder. CalEnergy has made
available to MidAmerican a true and complete copy of each report,
schedule, registration statement and definitive proxy statement
and all amendments thereto filed with the SEC by CalEnergy or any
CalEnergy Subsidiary (or their predecessors) pursuant to the
requirements of the Securities Act or Exchange Act since January
1, 1996 (as such documents have since the time of their filing
been amended, the "CalEnergy SEC Reports"). As of their
respective dates, the CalEnergy SEC Reports did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements
of CalEnergy included in the CalEnergy SEC Reports (collectively,
the "CalEnergy Financial Statements") have been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis ("GAAP") (except as may be indicated
therein or in the notes thereto) and fairly present the financial
position of CalEnergy, as of the dates thereof and the results of
their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial
statements, to normal, recurring audit adjustments. True,
accurate and complete copies of the articles of incorporation and
by-laws of CalEnergy, as in effect on the date of this Agreement,
are included (or incorporated by reference) in the CalEnergy SEC
Reports.
Section 4.6. Absence of Certain Changes or Events; Absence
of Undisclosed Liabilities.
(a) Absence of Certain Changes or Events. Except as
set forth in Section 4.6(a) of the CalEnergy Disclosure Schedule
or as disclosed in the CalEnergy SEC Reports filed prior to the
date of this Agreement, since December 31, 1997, CalEnergy and
each of the CalEnergy Subsidiaries, and, to the knowledge of
CalEnergy, each of the CalEnergy Joint Ventures, have conducted
their business only in the ordinary course of business consistent
with past practice and there has not been, and no fact or
condition exists which would have or, insofar as reasonably can
be foreseen, could have, a CalEnergy Material Adverse Effect.
(b) Absence of Undisclosed Liabilities. Neither
CalEnergy nor any CalEnergy Subsidiary, nor, to the knowledge of
CalEnergy, any CalEnergy Joint Venture, has any liabilities or
obligations (whether absolute, accrued, contingent or otherwise
and including, without limitation, margin loans) of a nature
required by GAAP to be reflected in a consolidated corporate
balance sheet, except liabilities, obligations or contingencies
which are accrued or reserved against in the consolidated
financial statements of CalEnergy or reflected in the notes
thereto for the year ended December 31, 1997, or which were
incurred after December 31, 1997 in the ordinary course of
business and would not, in the aggregate, have a CalEnergy
Material Adverse Effect.
Section 4.7. Litigation. Except as set forth in Section
4.7 or 4.11 of the CalEnergy Disclosure Schedule or as disclosed
in the CalEnergy SEC Reports filed prior to the date of this
Agreement, (a) there are no claims, suits, actions or proceedings
by any Governmental Authority or any arbitrator, pending or, to
the knowledge of CalEnergy, threatened, nor are there, to the
knowledge of CalEnergy, any investigations or reviews by any
Governmental Authority or any arbitrator pending or threatened
against, relating to or affecting CalEnergy or any of the
CalEnergy Subsidiaries or, to the knowledge of CalEnergy, the
CalEnergy Joint Ventures, (b) there have not been any significant
developments since December 31, 1997 with respect to such
disclosed claims, suits, actions, proceedings, investigations or
reviews and (c) there are no judgments, decrees, injunctions,
rules or orders of any Governmental Authority or any arbitrator
applicable to CalEnergy or any of the CalEnergy Subsidiaries or,
to the knowledge of CalEnergy, applicable to any of the CalEnergy
Joint Ventures, which, when taken together with any other
nondisclosures described in clauses (a), (b) or (c), insofar as
reasonably can be foreseen, could, if determined adversely, have
a CalEnergy Material Adverse Effect.
Section 4.8. Joint Proxy Statement. None of the information
supplied by CalEnergy, Reincorporation Sub or Merger Sub, their
officers, directors, representatives, agents or employees (the
"Purchaser Information"), for inclusion in the Joint Proxy
Statement (as defined in Section 5.8), or in any amendments
thereof or supplements thereto, will, on the date the Joint Proxy
Statement is first mailed to stockholders, at the time of the
MidAmerican Meeting (as defined below) and at the time of the
CalEnergy Meeting (as defined below) or at the Effective Time
(giving effect to any documents incorporated by reference
therein), contain any statement which, at such time and in light
of the circumstances under which it will be made, will be false
or misleading with respect to any material fact, or will omit to
state any material fact necessary in order to make the statements
therein not false or misleading or necessary to correct any
statement in any earlier communication with respect to the
solicitation of proxies for the MidAmerican Meeting or the
CalEnergy Meeting which has become false or misleading.
Notwithstanding the foregoing, CalEnergy and Merger Sub do not
make any representation or warranty with respect to any
information that has been supplied by MidAmerican or its
accountants, counsel or other authorized representatives for use
in any of the foregoing documents.
Section 4.9. Tax Matters. "Taxes," as used in this
Agreement, means any federal, state, county, local or foreign
taxes, charges, fees, levies or other assessments, including all
net income, gross income, sales and use, ad valorem, transfer,
gains, profits, excise, franchise, real and personal property,
gross receipt, capital stock, production, business and
occupation, disability, employment, payroll, license, estimated,
stamp, custom duties, severance or withholding taxes or charges
imposed by any governmental entity, and includes any interest and
penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination,
settlement or litigation of any Tax liability. "Tax Return," as
used in this Agreement, means a report, return or other
information required to be supplied to a governmental entity with
respect to Taxes including, without limitation, where permitted
or required, combined or consolidated returns for any group of
entities that includes CalEnergy or any CalEnergy Subsidiary or
MidAmerican or any MidAmerican Subsidiary, as the case may be.
(a) Filing of Timely Tax Returns. CalEnergy and each of the
CalEnergy Subsidiaries have filed (or there has been filed on
their behalf) all Tax Returns required to be filed by each of
them under applicable law. All such Tax Returns were and are in
all material respects true, complete and correct and filed on a
timely basis.
(b) Payment of Taxes. CalEnergy and each of the CalEnergy
Subsidiaries have, within the time and in the manner prescribed
by law, paid (and until the Closing Date will pay within the time
and in the manner prescribed by law) all Taxes that are currently
due and payable, except for those contested in good faith and for
which adequate reserves have been taken.
(c) Tax Reserves. CalEnergy and the CalEnergy Subsidiaries
have established (and until the Closing Date will maintain) on
their books and records reserves which adequately reflect its
estimate of the amounts required to pay all Taxes in accordance
with GAAP (or, with respect to foreign CalEnergy Subsidiaries, of
the applicable foreign generally accepted accounting principles).
(d) Tax Liens. There are no Tax liens upon the assets of
CalEnergy or any of the CalEnergy Subsidiaries except liens for
Taxes not yet due.
(e) Withholding Taxes. CalEnergy and each of the CalEnergy
Subsidiaries have complied (and until the Closing Date will
comply) in all material respects with the provisions of the
Internal Revenue Code of 1986, as amended (the "Code") (or, with
respect to foreign CalEnergy Subsidiaries, the comparable
applicable foreign law), relating to the payment and withholding
of Taxes, including, without limitation, the withholding and
reporting requirements under Code Sections 1441 through 1464,
3401 through 3406 and 6041 through 6049, as well as similar
provisions under any other laws, and have, within the time and in
the manner prescribed by law, withheld from employee wages and
paid over to the proper governmental authorities all amounts
required.
(f) Extensions of Time For Filing Tax Returns. Except as set
forth in Section 4.9(f) of the CalEnergy Disclosure Schedule,
neither CalEnergy nor any of the CalEnergy Subsidiaries has
requested any extension of time within which to file any Tax
Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Except as set forth in
Section 4.9(g) of the CalEnergy Disclosure Schedule, neither
CalEnergy nor any of the CalEnergy Subsidiaries has executed any
outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as
disclosed in Section 4.9(h) of the CalEnergy Disclosure Schedule,
the statute of limitations for the assessment of all Taxes has
expired for all applicable Tax Returns of CalEnergy and the
CalEnergy Subsidiaries or those Tax Returns have been examined
by the appropriate taxing authorities for all tax periods ending
before the date of this Agreement, and no deficiency for any
Taxes has been proposed, asserted or assessed against CalEnergy
or any of the CalEnergy Subsidiaries that has not been resolved
and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as
set forth in Section 4.9(i) of the CalEnergy Disclosure Schedule,
no audits or other administrative proceedings or court
proceedings are presently pending, or, to the knowledge of
CalEnergy, threatened, with regard to any Taxes or Tax Returns of
CalEnergy or any of the CalEnergy Subsidiaries.
(j) Powers of Attorney. Except as set forth in Section 4.9(j)
of the CalEnergy Disclosure Schedule, no power of attorney
currently in force has been granted by CalEnergy or any of the
CalEnergy Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Neither CalEnergy nor any of the CalEnergy
Subsidiaries has received or requested a Tax Ruling (as defined
below) or entered into a Closing Agreement (as defined below),
with any taxing authority that would have a continuing adverse
effect after the Closing Date. "Tax Ruling," as used in this
Agreement, shall mean a written ruling of a taxing authority
relating to Taxes. "Closing Agreement," as used in this
agreement, shall mean a written and legally binding agreement
with a taxing authority relating to Taxes.
(l) Availability of Tax Returns. CalEnergy has made available
to MidAmerican complete and accurate copies of (i) all federal
and state income Tax Returns for open years, and any amendments
thereto, filed by CalEnergy or any of the CalEnergy Subsidiaries,
(ii) all audit reports or written proposed adjustments (whether
formal or informal) received from any taxing authority relating
to any Tax Return filed by CalEnergy or any of the CalEnergy
Subsidiaries and (iii) any Tax Ruling or request for a Tax Ruling
applicable to CalEnergy or any of the CalEnergy Subsidiaries and
Closing Agreements entered into by CalEnergy or any of the
CalEnergy Subsidiaries.
(m) Tax Sharing Agreements. Except as disclosed in Section
4.9(m) of the CalEnergy Disclosure Schedule, neither CalEnergy
nor any CalEnergy Subsidiary is a party to any agreement relating
to allocating or sharing of Taxes.
(n) Code Section 341(F). Neither CalEnergy nor any of the
CalEnergy Subsidiaries has filed (or will file prior to the
Closing) a consent pursuant to Code Section 341(f) or has agreed
to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as that term is defined in Code Section
341(f)(4)), owned by CalEnergy or any of the CalEnergy
Subsidiaries.
(o) Code Section 168. Except as set forth in Section 4.9(o)
of the CalEnergy Disclosure Schedule, no property of CalEnergy or
any of the CalEnergy Subsidiaries is property that CalEnergy or
any CalEnergy Subsidiary or any party to this transaction is or
will be required to treat as being owned by another person
pursuant to the provisions of Code Section 168(f)(8) (as in
effect prior to its amendment by the Tax Reform Act of 1986) or
is "tax-exempt use property" within the meaning of Code Section
168(h).
(p) Code Section 481 Adjustments. Except as set forth in
Section 4.9(p) of the CalEnergy Disclosure Schedule, neither
CalEnergy nor any of the CalEnergy Subsidiaries is required to
include in income for any tax period ending after the date hereof
any adjustment pursuant to Code Section 481(a) by reason of a
voluntary change in accounting method initiated by CalEnergy or
any of the CalEnergy Subsidiaries, and, to the knowledge of
CalEnergy, the Internal Revenue Service ("IRS") has not proposed
any such adjustment or change in accounting method.
(q) Acquisition Indebtedness. Except as set forth in Section
4.9(q) of the CalEnergy Disclosure Schedule, no indebtedness of
CalEnergy or any of the CalEnergy Subsidiaries is "corporate
acquisition indebtedness" within the meaning of Code Section
279(b).
(r) Intercompany Transactions. Except as set forth in Section
4.9(r) of the CalEnergy Disclosure Schedule, neither CalEnergy
nor any of the CalEnergy Subsidiaries has engaged in any
intercompany transactions within the meaning of Treasury
Regulations 1.1502-13 or -14 or Temporary Treasury Regulation
Section 1.1502-13T or -14T for which any income or gain remains
unrecognized as of the close of the last taxable year prior to
the Closing Date, and no excess loss account within the meaning
of Treasury Regulation Section 1.1502-14, -19 or -32 exists with
respect to CalEnergy or any of the CalEnergy Subsidiaries.
(s) Code Section 280G. Except as set forth in Section 4.9(s)
of the CalEnergy Disclosure Schedule, neither CalEnergy nor any
of the CalEnergy Subsidiaries is a party to any agreement,
contract or arrangement that could reasonably be expected to
result, on account of the transactions contemplated hereunder,
separately or in the aggregate, in the payment of "excess
parachute payments" within the meaning of Code Section 280G or
any amount that may not be fully deductible by reason of
application of Section 162(m) of the Code.
(t) Consolidated Tax Returns. Except as set forth in Section
4.9(t) of the CalEnergy Disclosure Schedule, neither CalEnergy
nor any of the CalEnergy Subsidiaries has ever been a member of
an affiliated group of corporations (within the meaning of Code
Section 1504(a)) filing consolidated returns, other than the
affiliated group of which CalEnergy is the common parent.
(u) Code Section 338 Elections. Except as set forth in
Section 4.9(u) of the CalEnergy Disclosure Schedule, no election
under Code Section 338 (or any predecessor provision) has been
made by or with respect to CalEnergy or any of the CalEnergy
Subsidiaries or any of their respective assets or properties.
(v) 5% Foreign Stockholders. To CalEnergy's knowledge, based
on Schedule 13D and 13G filings with the SEC with respect to
CalEnergy, no foreign person owns, as of the date of this
Agreement, 5% or more of the outstanding shares of CalEnergy
Common Stock.
Section 4.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the CalEnergy
Disclosure Schedule contains a true and complete list of each
employee benefit plan, practice, program or arrangement currently
sponsored, maintained or contributed to by CalEnergy or any of
the CalEnergy Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries in respect of
services provided to any such entity, including, but not limited
to, any employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), employee pension benefit plan, program,
arrangement or agreement, any health, medical, welfare,
disability, life insurance, bonus, option, stock appreciation
plan, performance stock plan, restricted stock plan, deferred
compensation plan, retiree benefits plan, severance pay and other
employee benefit or fringe benefit plan and any employment,
consulting, non-compete, severance or change in control agreement
(collectively, the "CalEnergy Benefit Plans"), together with, for
any option, stock appreciation plan, performance stock plan,
restricted stock plan, deferred compensation plan and
supplemental retirement plan, the current amounts or benefits
granted or payable under each and reasonable details (including
exercise prices) regarding the CalEnergy Options or other
securities which represent the right (contingent or other) to
purchase or receive shares of CalEnergy Common Stock or,
following the Merger, of Parent Common Stock. For the purposes
of this Section 4.10, the term "CalEnergy" shall be deemed to
include predecessors thereof.
Contributions. Except as set forth in Section 4.10(b)
of the CalEnergy Disclosure Schedule, all material contributions
and other payments required to be made by CalEnergy or any of the
CalEnergy Subsidiaries to any CalEnergy Benefit Plan (or to any
person pursuant to the terms thereof) have been timely made or
the amount of such payment or contribution obligation has been
reflected in the CalEnergy Financial Statements. Except as set
forth in Section 4.10(b) of the CalEnergy Disclosure Schedule,
(i) the current value of all accrued benefits under any CalEnergy
Benefit Plan which is a defined benefit plan did not, as of the
date of the most recent actuarial valuation for such plan, exceed
the then current value of the assets of such plan, based on the
actuarial assumptions set forth in such valuation for calculating
the minimum funding requirements of Code Section 412, which
actuarial assumptions and calculations have been provided to
MidAmerican prior to the date of this Agreement, and
(ii) neither CalEnergy nor any entity which is or ever has been
considered as a single employer together with CalEnergy pursuant
to Section 414 of the Code contributes, or has contributed,
during the eight-year period immediately prior to the date of
this Agreement, to a multiemployer plan (as defined in Section
3(37) of ERISA), or has any liability under ERISA Section 4203 or
Section 4205 in respect of any such plan.
(b) Qualification; Compliance. Except as set forth in
Section 4.10(c) of the CalEnergy Disclosure Schedule, each of the
CalEnergy Benefit Plans intended to be "qualified" within the
meaning of Section 401(a) of the Code has been determined by the
IRS to be so qualified, and, to the knowledge of CalEnergy, no
circumstances exist that are reasonably expected by CalEnergy to
result in the revocation of any such determination. CalEnergy
and each of the CalEnergy Subsidiaries are in compliance in all
material respects with, and each CalEnergy Benefit Plan is and
has been operated in all material respects in compliance with the
terms thereof and all applicable laws, rules and regulations
governing such plan, including, without limitation, ERISA and the
Code. Each CalEnergy Benefit Plan intended to provide for the
deferral of income, the reduction of salary or other compensation
or to afford other income tax benefits complies with the
requirements of the applicable provisions of the Code or other
laws, rules and regulations required to provide such income tax
benefits.
(c) Liabilities. With respect to the CalEnergy Benefit
Plans individually and in the aggregate, there are no actions,
suits, claims pending or, to the knowledge of CalEnergy,
threatened and no event has occurred, and, to the knowledge of
CalEnergy, there exists no condition or set of circumstances that
could subject CalEnergy or any of the CalEnergy Subsidiaries to
any liability arising under the Code, ERISA or any other
applicable law (including, without limitation, any liability of
any kind whatsoever, whether direct or indirect, contingent,
inchoate or otherwise, to any such plan or the Pension Benefit
Guaranty Corporation (the "PBGC"), or under any indemnity
agreement to which CalEnergy or any of the CalEnergy Subsidiaries
is a party, in each such case, which liability, individually or
in the aggregate, could reasonably be expected to have a
CalEnergy Material Adverse Effect.
(d) Welfare Plans. Except as set forth in Section 4.10(e)
of the CalEnergy Disclosure Schedule, none of the CalEnergy
Benefit Plans that are "welfare plans", within the meaning of
Section 3(1) of ERISA, provides for any benefits payable to or on
behalf of any employee or director after termination of
employment or service, as the case may be, other than elective
continuation required pursuant to Code Section 4980B or coverage
which expires at the end of the calendar month following such
event. Each such plan that is a "group health plan" (as defined
in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance
that would not, or insofar as reasonably can be determined could
not, give rise to a CalEnergy Material Adverse Effect.
(e) Documents Made Available. CalEnergy has made available
to MidAmerican a true and correct copy of each collective
bargaining agreement to which CalEnergy or any of the CalEnergy
Subsidiaries is a party or under which CalEnergy or any of the
CalEnergy Subsidiaries has obligations, and with respect to each
CalEnergy Benefit Plan, to the extent applicable, (i) such plan
and summary plan description (including all amendments to each
such document), (ii) the most recent annual report filed with the
IRS, (iii) each related trust agreement, insurance contract,
service provider or investment management agreement (including
all amendments to each such document), (iv) the most recent
determination of the IRS with respect to the qualified status of
such plan, (v) the most recent actuarial report or valuation and
(vi) all material employee communications.
(f) Payments Resulting from Merger and Other Severance
Payments. Except as set forth in Section 4.10(g) of the
CalEnergy Disclosure Schedule or as specifically provided for in
this Agreement, (i) the announcement or consummation of any
transaction contemplated by this Agreement will not (either alone
or upon the occurrence of any additional or further acts or
events, including, without limitation, termination of employment)
result in any (A) payment (whether of severance pay or otherwise)
becoming due from CalEnergy or any of the CalEnergy Subsidiaries
to any officer, employee, former employee or director thereof or
to the trustee under any "rabbi trust" or similar arrangement or
(B) benefit being established or becoming accelerated, vested or
payable under any CalEnergy Benefit Plan and (ii) neither
CalEnergy nor any of the CalEnergy Subsidiaries is a party to (A)
any management, employment, deferred compensation, severance
(including any payment, right or benefit resulting from a change
in control), bonus or other contract for personal services with
any officer, director or employee, (B) any consulting contract
with any person who prior to entering into such contract was a
director or officer of CalEnergy or any of the CalEnergy
Subsidiaries or (C) any material plan, agreement, arrangement or
understanding similar to the foregoing.
(g) Labor Agreements. As of the date hereof, except as set
forth in Section 4.10(h) of the CalEnergy Disclosure Schedule,
neither CalEnergy nor any of the CalEnergy Subsidiaries is a
party to any collective bargaining agreement or other labor
agreement with any union or labor organization. To the knowledge
of CalEnergy, as of the date hereof, there is no current union
representation question involving employees of CalEnergy or any
of the CalEnergy Subsidiaries, nor does CalEnergy know of any
activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any such
employees. Except as set forth in Section 4.10(h) of the
CalEnergy Disclosure Schedule, (i) there is no unfair labor
practice, employment discrimination or other complaint against
CalEnergy or any of the CalEnergy Subsidiaries pending or, to the
knowledge of CalEnergy, threatened, which has or could reasonably
be expected to have a CalEnergy Material Adverse Effect, (ii)
there is no strike, dispute, slowdown, work stoppage or lockout
pending, or, to the knowledge of CalEnergy, threatened, against
or involving CalEnergy or any of the CalEnergy Subsidiaries which
has or could reasonably be expected to have, a CalEnergy Material
Adverse Effect and (iii) there is no proceeding, claim, suit,
action or governmental investigation pending or, to the knowledge
of CalEnergy, threatened, in respect of which any director,
officer, employee or agent of CalEnergy or any of the CalEnergy
Subsidiaries is or may be entitled to claim indemnification from
CalEnergy pursuant to their respective articles of incorporation
or by-laws. Except as set forth in Section 4.10(h) of the
CalEnergy Disclosure Schedule, CalEnergy and the CalEnergy
Subsidiaries have complied in all material respects with all laws
relating to the employment of labor, including without limitation
any provisions thereof relating to wages, hours, collective
bargaining and the payment of social security and similar taxes,
and no person has, to the knowledge of CalEnergy, asserted that
CalEnergy or any of the CalEnergy Subsidiaries is liable in any
material amount for any arrears of wages or any taxes or
penalties for failure to comply with any of the foregoing.
Section 4.11. Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all
administrative, regulatory or judicial actions, suits,
demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or
violation (written or oral) by any person or entity
(including any Governmental Authority) alleging potential
liability (including, without limitation, potential
responsibility for or liability for enforcement,
investigatory costs, cleanup costs, spent fuel or waste
disposal costs, decommissioning costs, governmental response
costs, removal costs, remediation costs, natural resources
damages, property damages, personal injuries or penalties)
arising out of, based on or resulting from (A) the presence,
Release or threatened Release into the environment of any
Hazardous Materials at any location in which CalEnergy or
any of the CalEnergy Subsidiaries (for purposes of this
Section 4.11) has an economic or ownership interest or in
which MidAmerican or any of the MidAmerican Subsidiaries
(for purposes of Section 5.11) has an economic or ownership
interest, whether or not owned, operated, leased or managed
by CalEnergy or any of the CalEnergy Subsidiaries or
CalEnergy Joint Ventures (for purposes of this Section 4.11)
or by MidAmerican or any of the MidAmerican Subsidiaries or
MidAmerican Joint Ventures (for purposes of Section 5.11);
or (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or (C) any and
all claims by any third party seeking damages, contribution,
indemnification, cost recovery, compensation or injunctive
relief resulting from the presence or Release of any
Hazardous Materials.
(ii) "Environmental Laws" means all applicable federal,
state and local laws, rules, regulations, ordinances,
orders, directives and any binding judicial or
administrative interpretation thereof, and regulatory common
law and equitable doctrines relating to pollution, the
environment (including, without limitation, indoor or
ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health or safety
as it relates to the environment including, without
limitation, those relating to Releases or threatened
Releases of Hazardous Materials, or otherwise relating to
the manufacture, generation, processing, distribution, use,
treatment, storage, disposal, transport or handling of
Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or
petroleum products, radioactive materials, asbestos in any
form that is or could become friable, urea formaldehyde foam
insulation and transformers or other equipment that contain
dielectric fluid containing polychlorinated biphenyls; (B)
any chemicals, materials or substances which are now defined
as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely
hazardous wastes," "restricted hazardous wastes," "toxic
substances," "toxic pollutants" or words of similar import;
under any Environmental Law and (C) any other chemical,
material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law
in a jurisdiction in which CalEnergy or any of the CalEnergy
Subsidiaries or CalEnergy Joint Ventures (for purposes of
this Section 4.11) operates or in which MidAmerican or any
of the MidAmerican Subsidiaries or MidAmerican Joint
Ventures (for purposes of Section 5.11) operates.
(iv) "Release" means any release, spill, emission,
leaking, injection, deposit, disposal, discharge, dispersal,
leaching or migration into the atmosphere, soil, surface
water, groundwater or property.
(b) Compliance. Except as set forth in Section 4.11(b) of the
CalEnergy Disclosure Schedule, CalEnergy and each of the
CalEnergy Subsidiaries and, to the knowledge of CalEnergy, the
CalEnergy Joint Ventures are in compliance with all applicable
Environmental Laws except where the failure to so comply would
not have a CalEnergy Material Adverse Effect, and neither
CalEnergy nor any of the CalEnergy Subsidiaries has received any
communication (written or oral), from any person or Governmental
Authority that alleges that CalEnergy or any of the CalEnergy
Subsidiaries or the CalEnergy Joint Ventures is not in such
compliance with applicable Environmental Laws. To the knowledge
of CalEnergy, compliance with all applicable Environmental Laws
will not require CalEnergy or any CalEnergy Subsidiary or, to the
knowledge of CalEnergy, any CalEnergy Joint Venture to incur
costs beyond that currently budgeted in the five CalEnergy fiscal
years beginning with January 1, 1998 (as disclosed to MidAmerican
prior to the date of this Agreement) that will be reasonably
likely to result in a CalEnergy Material Adverse Effect,
including but not limited to the costs of CalEnergy and CalEnergy
Subsidiary and CalEnergy Joint Venture pollution control
equipment required or reasonably contemplated to be required in
the future.
(c) Environmental Permits. Except as set forth in Section
4.11(c) of the CalEnergy Disclosure Schedule, CalEnergy and each
of the CalEnergy Subsidiaries and, to the knowledge of CalEnergy,
the CalEnergy Joint Ventures, have obtained or has applied for
all permits, registrations and governmental authorizations
required under any Environmental Law (collectively, the
"Environmental Permits") necessary for the construction of its
facilities or the conduct of its operations except where the
failure to so obtain would not have a CalEnergy Material Adverse
Effect, and all such Environmental Permits are in good standing
or, where applicable, a renewal application has been timely filed
and is pending agency approval, and CalEnergy and the CalEnergy
Subsidiaries and, to the knowledge of CalEnergy, the CalEnergy
Joint Ventures are in compliance with all terms and conditions of
all Environmental Permits necessary for the construction of its
facilities or the conduct of its operations, except where the
failure to so comply, in the aggregate, would not have a
CalEnergy Material Adverse Effect.
(d) Environmental Claims. Except as set forth in Section
4.11(d) of the CalEnergy Disclosure Schedule, there is no
Environmental Claim pending (or, to the knowledge of CalEnergy,
threatened) (A) against CalEnergy or any of the CalEnergy
Subsidiaries or, to the knowledge of CalEnergy, any of the
CalEnergy Joint Ventures, (B) to the knowledge of CalEnergy,
against any person or entity whose liability for any
Environmental Claim CalEnergy or any of the CalEnergy
Subsidiaries or, to the knowledge of CalEnergy, any of the
CalEnergy Joint Ventures has or may have retained or assumed
either contractually or by operation of law, or (C) against any
real or personal property or operations which CalEnergy or any of
the CalEnergy Subsidiaries or, to the knowledge of CalEnergy, any
of the CalEnergy Joint Ventures owns, leases or manages, in whole
or in part, which, if adversely determined, would have, in the
aggregate, a CalEnergy Material Adverse Effect.
(e) Releases. Except as set forth in Section 4.11(e) of the
CalEnergy Disclosure Schedule, CalEnergy has no knowledge of any
Releases of any Hazardous Material that would be reasonably
likely to form the basis of any Environmental Claim against
CalEnergy or any of the CalEnergy Subsidiaries or the CalEnergy
Joint Ventures, or against any person or entity whose liability
for any Environmental Claim CalEnergy or any of the CalEnergy
Subsidiaries or the CalEnergy Joint Ventures has or may have
retained or assumed either contractually or by operation of law
except for any Environmental Claim which would not have, in the
aggregate, a CalEnergy Material Adverse Effect.
(f) Predecessors. Except as set forth in Section 4.11(f) of
the CalEnergy Disclosure Schedule, CalEnergy has no knowledge,
with respect to any predecessor of CalEnergy or any of the
CalEnergy Subsidiaries or the CalEnergy Joint Ventures, of any
Environmental Claim pending or threatened, or of any Release of
Hazardous Materials that would be reasonably likely to form the
basis of any Environmental Claim, which, if determined adversely
could reasonably be expected to require payments of $20 million
or more or which could reasonably be expected to have a CalEnergy
Material Adverse Effect.
(g) Disclosure. CalEnergy has disclosed in writing to
MidAmerican all material facts which CalEnergy reasonably
believes form the basis of an Environmental Claim which could
have a CalEnergy Material Adverse Effect arising from (i) the
cost of CalEnergy pollution control equipment (including, without
limitation, upgrades and other modifications to existing
equipment) currently required or reasonably contemplated to be
required in the future, (ii) current remediation costs or costs
to CalEnergy or any of the CalEnergy Subsidiaries for remediation
reasonably contemplated to be required in the future or (iii) any
other environmental matter affecting CalEnergy or any of the
CalEnergy Subsidiaries.
(h) Cost Estimates. To CalEnergy's knowledge, no
environmental matter set forth in the CalEnergy SEC Reports or
the CalEnergy Disclosure Schedule could reasonably be expected to
exceed the cost estimates provided in the CalEnergy SEC Reports
by an amount that individually or in the aggregate could
reasonably be expected to have a CalEnergy Material Adverse
Effect.
Section 4.12. Regulation as a Utility. Except as set forth
in Section 4.12 of the CalEnergy Disclosure Schedule, neither
CalEnergy nor any "subsidiary company" or "affiliate" (as each
such term is defined in the 1935 Act) of CalEnergy is subject to
regulation as a public utility or public service company (or
similar designation) by the FERC or any municipality, locality,
state in the United States or any foreign country.
Section 4.13. Vote Required. The approval of the
Reincorporation by the affirmative vote of a majority of the
votes entitled to be cast by holders of shares of CalEnergy
Common Stock (the "CalEnergy Stockholders' Approval") is the only
vote of the holders of any class or series of the capital stock
of CalEnergy or any of the CalEnergy Subsidiaries that is
required to approve this Agreement, the Merger and the other
transactions contemplated hereby.
Section 4.14. Insurance. Except as set forth in Section
4.14 of the CalEnergy Disclosure Schedule, CalEnergy and each of
the CalEnergy Subsidiaries is, and has been continuously since
January 1, 1996, insured with financially responsible insurers in
such amounts and against such risks and losses as are customary
in all material respects for companies conducting the business as
conducted by CalEnergy and the CalEnergy Subsidiaries during such
time period. Neither CalEnergy nor any of the CalEnergy
Subsidiaries has received any notice of cancellation or
termination with respect to any material insurance policy of
CalEnergy or any of the CalEnergy Subsidiaries. The insurance
policies of CalEnergy and each of the CalEnergy Subsidiaries are
valid and enforceable policies in all material respects.
Section 4.15. Opinions of Financial Advisors. CalEnergy
has obtained the opinions of Credit Suisse First Boston
Corporation ("CSFB") and Lehman Brothers Inc. ("Lehman"), dated
the date of this Agreement, to the effect that, as of the date
thereof, the Per Share Amount to be paid to holders of
MidAmerican Common Stock pursuant to this Agreement is fair from
a financial point of view to CalEnergy.
Section 4.16. Brokers. No broker, finder or investment
banker (other than CSFB and Lehman) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of CalEnergy.
CalEnergy has heretofore furnished to MidAmerican a complete and
correct copy of all agreements between CalEnergy and each of CSFB
and Lehman, respectively, pursuant to which such firms would be
entitled to any payment relating to the Merger.
Section 4.17. Financing Arrangements. CalEnergy has
received "highly confident letters" from CSFB and Lehman to
arrange, subject to the conditions set forth therein, sufficient
debt and/or equity financing to permit Parent to purchase all of
the shares of MidAmerican Common Stock pursuant to the Merger.
Copies of such letters have been heretofore furnished to
MidAmerican by CalEnergy.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF HAWK
MidAmerican hereby represents and warrants to CalEnergy and
Merger Sub as follows:
Section 5.1. Organization and Qualification. MidAmerican
and each of the MidAmerican Subsidiaries and, to the knowledge of
MidAmerican, each of the MidAmerican Joint Ventures is a
corporation or other entity duly organized, validly existing and
in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and
authority and has been duly authorized by all necessary approvals
and orders to own, lease and operate its assets and properties
and to carry on its business as it is now being conducted and is
duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership
or leasing of its assets and properties makes such qualification
necessary other than in such jurisdictions where the failure to
so qualify and be in good standing, when taken together with all
other such failures, would not have a material adverse effect on
the business, operations, properties, assets, condition
(financial or other), prospects or the results of operations of
MidAmerican and the MidAmerican Subsidiaries taken as a whole or
on the consummation of the transactions contemplated by this
Agreement (any such material adverse effect, a "MidAmerican
Material Adverse Effect"). The term "MidAmerican Subsidiary"
shall mean a Subsidiary of MidAmerican, and the term "MidAmerican
Joint Venture" shall mean a Joint Venture of MidAmerican.
Section 5.2. Subsidiaries. Section 5.2 of the MidAmerican
Disclosure Schedule delivered by MidAmerican to CalEnergy prior
to the execution of this Agreement (the "MidAmerican Disclosure
Schedule") sets forth a list of all the MidAmerican Subsidiaries
and the MidAmerican Joint Ventures, including the name of each
such entity, a brief description of the principal line or lines
of business conducted by each such entity and the interest of
MidAmerican and the MidAmerican Subsidiaries therein.
MidAmerican is a "public utility holding company" (as defined in
the 1935 Act) exempt from all provisions (other than Section
9(a)(2)) of the 1935 Act, pursuant to Section 3(a)(1) in
accordance with Rule 2 of the 1935 Act, and MidAmerican Energy
Company ("MidAmerican Utility") is a "public utility company"
within the meaning of Section 2(a)(5) of the 1935 Act. With the
exception of MidAmerican Utility, no MidAmerican Subsidiary or
MidAmerican Joint Venture is a "holding company" or a "public
utility company" within the meaning of Sections 2(a)(7) and
2(a)(5) of the 1935 Act, respectively, nor, except with respect
to their relationship with MidAmerican, are any of such entities
an "affiliate" or a "subsidiary company" of a holding company
within the meaning of Sections 2(a)(11) and 2(a)(8) of the 1935
Act, respectively. Except as set forth in Section 5.2 of the
MidAmerican Disclosure Schedule, (i) all of the issued and
outstanding shares of capital stock of each MidAmerican
Subsidiary are validly issued, fully paid, nonassessable and free
of preemptive rights and to the extent owned, directly or
indirectly, by MidAmerican, are owned free and clear of any
Liens, and (ii) there are no outstanding subscriptions, options,
calls, contracts, voting trusts, proxies or other pledges,
security interests, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any
right of conversion or exchange under any outstanding security,
instrument or other agreement, obligating MidAmerican or any
MidAmerican Subsidiary to issue, deliver or sell, pledge, grant a
security interest or encumber, or cause to be issued, delivered
or sold, pledged or encumbered or a security interest to be
granted on, shares of capital stock of any MidAmerican Subsidiary
or obligating MidAmerican or any MidAmerican Subsidiary to grant,
extend or enter into any such agreement or commitment.
Section 5.3. Capitalization.
(a) MidAmerican. The authorized capital stock of
MidAmerican consists of 350,000,000 shares of MidAmerican Common
Stock and 100,000,000 shares of preferred stock, no par value,
none of which preferred stock is outstanding. As of the close of
business on the date of this Agreement, (i) 94,541,813 shares of
MidAmerican Common Stock are outstanding, (ii) no shares of
MidAmerican Common Stock are reserved for issuance pursuant to
the MidAmerican Stock Option Plan, (iii) 437,131 shares of
MidAmerican Common Stock are held by MidAmerican in its treasury
or by its wholly owned Subsidiaries, and (iv) no Voting Debt is
issued or outstanding. All of the issued and outstanding shares
of MidAmerican Common Stock are validly issued, fully paid,
nonassessable and free of preemptive rights. As of the date of
this Agreement, except as set forth in Section 5.3(a) of the
MidAmerican Disclosure Schedule or as may be provided by the
MidAmerican Option Plan, there are no outstanding subscriptions,
options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances, commitments,
understandings, restrictions, arrangements, rights or warrants,
including any right of conversion or exchange under any
outstanding security, instrument or other agreement, obligating
MidAmerican or any MidAmerican Subsidiary to issue, deliver or
sell, pledge, grant a security interest or encumber, or cause to
be issued, delivered or sold, pledged or encumbered or a security
interest to be granted on, shares of capital stock or any Voting
Debt of MidAmerican or obligating MidAmerican or any MidAmerican
Subsidiary to grant, extend or enter into any such agreement or
commitment.
(b) MidAmerican Utility. The authorized capital stock
of MidAmerican Utility consists of 350,000,000 shares of common
stock and 100,000,000 shares of preferred stock, no par value
("MidAmerican Utility Preferred Stock"), consisting of 49,458
shares of $3.30 Series MidAmerican Utility Preferred Stock
("$3.30 Series"), 38,305 shares of $3.75 Series MidAmerican
Utility Preferred Stock ("$3.75 Series"), 32,630 shares of $3.90
Series MidAmerican Utility Preferred Stock ("$3.90 Series"),
47,362 shares of $4.20 Series MidAmerican Utility Preferred Stock
("$4.20 Series"), 49,945 shares of $4.35 Series MidAmerican
Utility Preferred Stock ("$4.35 Series"), 50,000 shares of $4.40
Series MidAmerican Utility Preferred Stock ("$4.40 Series"),
49,898 shares of $4.80 Series MidAmerican Utility Preferred Stock
("$4.80 Series"), 100,000 shares of $5.25 Series MidAmerican
Utility Preferred Stock ("$5.25 Series") and 400,000 shares of
$7.80 Series MidAmerican Utility Preferred Stock ("$7.80
Series"). As of the close of business on the date of this
Agreement, (i) 70,980,203 shares of MidAmerican Utility Common
Stock are outstanding, all of which are owned by MidAmerican free
and clear of any Liens, (ii) 49,458 $3.30 Series shares, 38,305
$3.75 Series shares, 32,630 $3.90 Series shares, 47,362 $4.20
Series shares, 49,945 $4.35 Series shares, 50,000 $4.40 Series
shares, 49,898 $4.80 Series shares, 100,000 $5.25 Series shares
and 400,000 $7.80 Series shares were issued and outstanding and
(iii) no Voting Debt is issued or outstanding. All of the issued
and outstanding shares of MidAmerican Utility capital stock are
validly issued, fully paid, nonassessable and free of preemptive
rights. As of the date of this Agreement, except as set forth in
Section 5.3(b) of the MidAmerican Disclosure Schedule, there are
no outstanding subscriptions, options, calls, contracts, voting
trusts, proxies or other pledges, security interests,
encumbrances, commitments, understandings, restrictions,
arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument
or other agreement, obligating MidAmerican or any MidAmerican
Subsidiary to issue, deliver or sell, pledge, grant a security
interest or encumber, or cause to be issued, delivered or sold,
pledged or encumbered or a security interest to be granted on,
shares of capital stock or any Voting Debt of MidAmerican Utility
or obligating MidAmerican or any MidAmerican Subsidiary to grant,
extend or enter into any such agreement or commitment.
Section 5.4. Authority; Non-Contravention; Statutory
Approvals; Compliance.
(a) Authority. MidAmerican has all requisite power and
authority to enter into this Agreement and, subject to the
receipt of the MidAmerican Stockholders' Approval (as defined in
Section 5.13) and the MidAmerican Required Statutory Approvals
(as defined in Section 5.4(c)), to consummate the transactions
contemplated hereby. The execution and delivery of this
Agreement and the consummation by MidAmerican of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of MidAmerican, subject to obtaining
the MidAmerican Stockholders' Approval. This Agreement has been
duly and validly executed and delivered by MidAmerican, and,
assuming the due authorization, execution and delivery hereof by
the other signatories hereto, this Agreement constitutes the
valid and binding obligation of MidAmerican enforceable against
it in accordance with its terms, subject, as to enforceability,
to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights
and to general principles of equity.
(b) Non-Contravention. The execution and delivery of this
Agreement by MidAmerican do not, and the consummation of the
transactions contemplated hereby will not, result in a Violation
pursuant to any provisions of (i) the articles of incorporation,
by-laws or similar governing documents of MidAmerican or any of
the MidAmerican Subsidiaries or the MidAmerican Joint Ventures,
(ii) subject to obtaining the MidAmerican Required Statutory
Approvals and the receipt of the MidAmerican Stockholders'
Approval, any statute, law, ordinance, rule, regulation,
judgment, decree, order, injunction, writ, permit or license of
any Governmental Authority applicable to MidAmerican or any of
the MidAmerican Subsidiaries or the MidAmerican Joint Ventures or
any of their respective properties or assets or (iii) subject to
obtaining the third-party consents set forth in Section 5.4(b) of
the MidAmerican Disclosure Schedule (the "MidAmerican Required
Consents"), any note, bond, mortgage, indenture, deed of trust,
license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which
MidAmerican or any of the MidAmerican Subsidiaries or the
MidAmerican Joint Ventures is a party or by which it or any of
its properties or assets may be bound or affected, excluding from
the foregoing clauses (ii) and (iii) such Violations which would
not, in the aggregate, have a MidAmerican Material Adverse
Effect.
(c) Statutory Approvals. Except as described in Section
5.4(c) of the MidAmerican Disclosure Schedule, no declaration,
filing or registration with, or notice to or authorization,
consent or approval of, any Governmental Authority is necessary
for the execution and delivery of this Agreement by MidAmerican
or the consummation by MidAmerican of the transactions
contemplated hereby (the "MidAmerican Required Statutory
Approvals," it being understood that references in this Agreement
to "obtaining" such MidAmerican Required Statutory Approvals
shall mean making such declarations, filings or registrations;
giving such notices; obtaining such authorizations, consents or
approvals; and having such waiting periods expire as are
necessary to avoid a violation of law).
(d) Compliance. Except as set forth in Section 5.4(d) or 5.11
of the MidAmerican Disclosure Schedule or as disclosed in the
MidAmerican SEC Reports (as defined in Section 5.5) filed as of
the date of this Agreement, neither MidAmerican nor any of the
MidAmerican Subsidiaries nor, to the knowledge of MidAmerican,
any MidAmerican Joint Venture is in violation of, is, to the
knowledge of MidAmerican, under investigation with respect to any
violation of, or has been given notice or been charged with any
violation of, any law, statute, order, rule, regulation,
ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any
Governmental Authority, except for violations which individually
or in the aggregate do not, and insofar as reasonably can be
foreseen will not, have a MidAmerican Material Adverse Effect.
Except as set forth in Section 5.4(d) or 5.11 of the MidAmerican
Disclosure Schedule, MidAmerican and the MidAmerican Subsidiaries
and, to the knowledge of MidAmerican, the MidAmerican Joint
Ventures have all permits, licenses, franchises and other
governmental authorizations, consents and approvals necessary to
conduct their businesses as presently conducted which are
material to the operation of the businesses of MidAmerican and
the MidAmerican Subsidiaries. Except as set forth in Section
5.4(d) of the MidAmerican Disclosure Schedule, MidAmerican and
each of the MidAmerican Subsidiaries and, to the knowledge of
MidAmerican, MidAmerican Joint Ventures is not in breach or
violation of or in default in the performance or observance of
any term or provision of, and no event has occurred which, with
lapse of time or action by a third party, could result in a
default by MidAmerican or any MidAmerican Subsidiary or, to the
knowledge of MidAmerican, any MidAmerican Joint Venture under
(i) its articles of incorporation, by-laws or other
organizational document or (ii) any contract, commitment,
agreement, indenture, mortgage, loan agreement, note, lease,
bond, license, approval or other instrument to which it is a
party or by which MidAmerican or any MidAmerican Subsidiary or
any MidAmerican Joint Venture is bound or to which any of its
property is subject, except in the case of clause (ii) above, for
violations, breaches or defaults which individually or in the
aggregate do not, and insofar as reasonably can be foreseen will
not, have a MidAmerican Material Adverse Effect.
Section 5.5. Reports and Financial Statements. The
filings required to be made by MidAmerican and the MidAmerican
Subsidiaries under the Securities Act, the Exchange Act, the 1935
Act, the Federal Power Act (the "Power Act") and applicable
state, municipal, local and other laws, including franchise and
public utility laws and regulations, including all forms,
statements, reports, agreements (oral or written) and all
documents, exhibits, amendments and supplements appertaining
thereto, have been filed with the SEC, the FERC and the
appropriate Iowa, Illinois, South Dakota, Nebraska or other
appropriate Governmental Authorities, as the case may be, and
complied, as of their respective dates, in all material respects
with all applicable requirements of the appropriate statutes and
the rules and regulations thereunder. MidAmerican has made
available to CalEnergy a true and complete copy of each report,
schedule, registration statement and definitive proxy statement
and all amendments thereto filed with the SEC by MidAmerican or
any MidAmerican Subsidiary (or their predecessors) pursuant to
the requirements of the Securities Act or Exchange Act since
January 1, 1996 (as such documents have since the time of their
filing been amended, the "MidAmerican SEC Reports"). As of their
respective dates, the MidAmerican SEC Reports did not contain any
untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading. The audited consolidated
financial statements and unaudited interim financial statements
of MidAmerican and MidAmerican Utility included in the
MidAmerican SEC Reports (collectively, the "MidAmerican Financial
Statements") have been prepared in accordance with GAAP applied
on a consistent basis (except as may be indicated therein or in
the notes thereto) and fairly present the financial position of
MidAmerican and MidAmerican Utility, as the case may be, as of
the dates thereof and the results of their operations and cash
flows for the periods then ended, subject, in the case of the
unaudited interim financial statements, to normal, recurring
audit adjustments. True, accurate and complete copies of the
articles of incorporation and by-laws of MidAmerican and
MidAmerican Utility, as in effect on the date of this Agreement,
are included (or incorporated by reference) in the MidAmerican
SEC Reports.
Section 5.6. Absence of Certain Changes or Events; Absence
of Undisclosed Liabilities.
(a) Absence of Certain Changes or Events. Except as
set forth in Section 5.6(a) of the MidAmerican Disclosure
Schedule or as disclosed in the MidAmerican SEC Reports filed
prior to the date of this Agreement, since December 31, 1997,
MidAmerican and each of the MidAmerican Subsidiaries and, to the
knowledge of MidAmerican, each of the MidAmerican Joint Ventures,
have conducted their business only in the ordinary course of
business consistent with past practice and there has not been,
and no fact or condition exists which would have or, insofar as
reasonably can be foreseen, could have, a MidAmerican Material
Adverse Effect.
(b) Absence of Undisclosed Liabilities. Neither
MidAmerican nor any MidAmerican Subsidiary, nor, to the knowledge
of MidAmerican, any MidAmerican Joint Venture, has any
liabilities or obligations (whether absolute, accrued, contingent
or otherwise and including, without limitation, margin loans) of
a nature required by GAAP to be reflected in a consolidated
corporate balance sheet, except liabilities, obligations or
contingencies which are accrued or reserved against in the
consolidated financial statements of MidAmerican and MidAmerican
Utility or reflected in the notes thereto for the year ended
December 31, 1997, or which were incurred after December 31,
1997 in the ordinary course of business and would not, in the
aggregate, have a MidAmerican Material Adverse Effect.
Section 5.7. Litigation. Except as set forth in Section
5.7 or 5.11 of the MidAmerican Disclosure Schedule or as
disclosed in the MidAmerican SEC Reports filed prior to the date
of this Agreement, (a) there are no claims, suits, actions or
proceedings by any Governmental Authority or any arbitrator,
pending or, to the knowledge of MidAmerican, threatened, nor are
there, to the knowledge of MidAmerican, any investigations or
reviews by any Governmental Authority or any arbitrator pending
or threatened against, relating to or affecting MidAmerican or
any of the MidAmerican Subsidiaries or, to the knowledge of
MidAmerican, the MidAmerican Joint Ventures, (b) there have not
been any significant developments since December 31, 1997 with
respect to such disclosed claims, suits, actions, proceedings,
investigations or reviews and (c) there are no judgments,
decrees, injunctions, rules or orders of any Governmental
Authority or any arbitrator applicable to MidAmerican or any of
the MidAmerican Subsidiaries or, to the knowledge of MidAmerican,
applicable to any of the MidAmerican Joint Ventures, which, when
taken together with any other nondisclosures described in clauses
(a), (b) or (c), insofar as reasonably can be foreseen, could, if
determined adversely, have a MidAmerican Material Adverse Effect.
Section 5.8. Joint Proxy Statement. None of the
information supplied or to be supplied by or on behalf of
MidAmerican for inclusion or incorporation by reference in the
joint proxy statement in definitive form relating to the meetings
of CalEnergy and MidAmerican stockholders to be held in
connection with the Merger and the other transactions
contemplated hereby ("Joint Proxy Statement") will, at the dates
mailed to stockholders of CalEnergy and MidAmerican and at the
times of the meetings of such stockholders to be held in
connection with the Merger and the other transactions
contemplated hereby, include any untrue statement of a material
fact or omit to state any material fact necessary in order to
make the statements therein, in light of the circumstances under
which they are made, not misleading. Notwithstanding the
foregoing, MidAmerican does not make any representation or
warranty with respect to any information that has been supplied
by any of CalEnergy, Reincorporation Sub or Merger Sub or their
accountants, counsel or other authorized representatives for use
in any of the foregoing documents. The Joint Proxy Statement
will comply as to form in all material respects with the
provisions of applicable federal securities law.
Section 5.9. Tax Matters.
(a) Filing of Timely Tax Returns. MidAmerican and each of the
MidAmerican Subsidiaries have filed (or there has been filed on
their behalf) all Tax Returns required to be filed by each of
them under applicable law. All such Tax Returns were and are in
all material respects true, complete and correct and filed on a
timely basis.
(b) Payment of Taxes. MidAmerican and each of the MidAmerican
Subsidiaries have, within the time and in the manner prescribed
by law, paid (and until the Closing Date will pay within the time
and in the manner prescribed by law) all Taxes that are currently
due and payable, except for those contested in good faith and for
which adequate reserves have been taken.
(c) Tax Reserves. MidAmerican and the MidAmerican
Subsidiaries have established (and until the Closing Date will
maintain) on their books and records reserves which adequately
reflect its estimate of the amounts required to pay all Taxes in
accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon the assets of
MidAmerican or any of the MidAmerican Subsidiaries except liens
for Taxes not yet due.
(e) Withholding Taxes. MidAmerican and each of the
MidAmerican Subsidiaries have complied (and until the Closing
Date will comply) in all material respects with the provisions of
the Code relating to the payment and withholding of Taxes,
including, without limitation, the withholding and reporting
requirements under Code Sections 1441 through 1464, 3401 through
3406 and 6041 through 6049, as well as similar provisions under
any other laws, and have, within the time and in the manner
prescribed by law, withheld from employee wages and paid over to
the proper governmental authorities all amounts required.
(f) Extensions of Time For Filing Tax Returns. Except as set
forth in Section 5.9(f) of the MidAmerican Disclosure Schedule,
neither MidAmerican nor any of the MidAmerican Subsidiaries has
requested any extension of time within which to file any Tax
Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Except as set forth in
Section 5.9(g) of the MidAmerican Disclosure Schedule, neither
MidAmerican nor any of the MidAmerican Subsidiaries has executed
any outstanding waivers or comparable consents regarding the
application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as
disclosed in Section 5.9(h) of the MidAmerican Disclosure
Schedule, the statute of limitations for the assessment of all
Taxes has expired for all applicable Tax Returns of MidAmerican
and the MidAmerican Subsidiaries or those Tax Returns have been
examined by the appropriate taxing authorities for all tax
periods ending before the date of this Agreement, and no
deficiency for any Taxes has been proposed, asserted or assessed
against MidAmerican or any of the MidAmerican Subsidiaries that
has not been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as
disclosed in Section 5.9(i) of the MidAmerican Disclosure
Schedule, no audits or other administrative proceedings or court
proceedings are presently pending, or, to the knowledge of
MidAmerican, threatened, with regard to any Taxes or Tax Returns
of MidAmerican or any of the MidAmerican Subsidiaries.
(j) Powers of Attorney. Except as disclosed in Section 5.9(j)
of the MidAmerican Disclosure Schedule, no power of attorney
currently in force has been granted by MidAmerican or any of the
MidAmerican Subsidiaries concerning any Tax matter.
(k) Tax Rulings. Neither MidAmerican nor any of the
MidAmerican Subsidiaries has received or requested a Tax Ruling
or entered into a Closing Agreement, with any taxing authority
that would have a continuing adverse effect after the Closing
Date.
(l) Availability of Tax Returns. MidAmerican has made
available to CalEnergy complete and accurate copies of (i) all
federal and state income Tax Returns for open years, and any
amendments thereto, filed by MidAmerican or any of the
MidAmerican Subsidiaries, (ii) all audit reports or written
proposed adjustments (whether formal or informal) received from
any taxing authority relating to any Tax Return filed by
MidAmerican or any of the MidAmerican Subsidiaries and (iii) any
Tax Ruling or request for a Tax Ruling applicable to MidAmerican
or any of the MidAmerican Subsidiaries and Closing Agreements
entered into by MidAmerican or any of the MidAmerican
Subsidiaries.
(m) Tax Sharing Agreements. Except as disclosed in Section
5.9(m) of the MidAmerican Disclosure Schedule, neither
MidAmerican nor any MidAmerican Subsidiary is a party to any
agreement relating to allocating or sharing of Taxes.
(n) Code Section 341(F). Neither MidAmerican nor any of the
MidAmerican Subsidiaries has filed (or will file prior to the
Closing) a consent pursuant to Code Section 341(f) or has agreed
to have Code Section 341(f)(2) apply to any disposition of a
subsection (f) asset (as that term is defined in Code Section
341(f)(4)), owned by MidAmerican or any of the MidAmerican
Subsidiaries.
(o) Code Section 168. Except as set forth in Section 5.9(o)
of the MidAmerican Disclosure Schedule, no property of
MidAmerican or any of the MidAmerican Subsidiaries is property
that MidAmerican or any MidAmerican Subsidiary or any party to
this transaction is or will be required to treat as being owned
by another person pursuant to the provisions of Code Section
168(f)(8) (as in effect prior to its amendment by the Tax Reform
Act of 1986) or is "tax-exempt use property" within the meaning
of Code Section 168(h).
(p) Code Section 481 Adjustments. Except as set forth in
Section 5.9(p) of the MidAmerican Disclosure Schedule, neither
MidAmerican nor any of the MidAmerican Subsidiaries is required
to include in income for any tax period ending after the date
hereof any adjustment pursuant to Code Section 481(a) by reason
of a voluntary change in accounting method initiated by
MidAmerican or any of the MidAmerican Subsidiaries, and, to the
knowledge of MidAmerican, the IRS has not proposed any such
adjustment or change in accounting method.
(q) Acquisition Indebtedness. Except as set forth in Section
5.9(q) of the MidAmerican Disclosure Schedule, no indebtedness of
MidAmerican or any of the MidAmerican Subsidiaries is "corporate
acquisition indebtedness" within the meaning of Code Section
279(b).
(r) Intercompany Transactions. Except as set forth in Section
5.9(r) of the MidAmerican Disclosure Schedule, neither
MidAmerican nor any of the MidAmerican Subsidiaries has engaged
in any intercompany transactions within the meaning of Treasury
Regulations 1.1502-13 or -14 or Temporary Treasury Regulation
Section 1.1502-13T or -14T for which any income or gain remains
unrecognized as of the close of the last taxable year prior to
the Closing Date, and no excess loss account within the meaning
of Treasury Regulation Section 1.1502-14, -19 or -32 exists with
respect to MidAmerican or any of the MidAmerican Subsidiaries.
(s) Consolidated Tax Returns. Except as disclosed in Section
5.9(s) of the MidAmerican Disclosure Schedule, neither
MidAmerican nor any of the MidAmerican Subsidiaries has ever been
a member of an affiliated group of corporations (within the
meaning of Code Section 1504(a)) filing consolidated returns,
other than the affiliated group of which MidAmerican is the
common parent.
(t) Code Section 338 Elections. Except as set forth in
Section 5.9(t) of the MidAmerican Disclosure Schedule, no
election under Code Section 338 (or any predecessor provision)
has been made by or with respect to MidAmerican or any of the
MidAmerican Subsidiaries or any of their respective assets or
properties.
(u) 5% Foreign Stockholders. To MidAmerican's knowledge,
based on Schedule 13D and 13G filings with the SEC with respect
to MidAmerican, no foreign person owns, as of the date of this
Agreement, 5% or more of the outstanding shares of MidAmerican
Common Stock.
Section 5.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 5.10(a) of the MidAmerican
Disclosure Schedule contains a true and complete list of each
employee benefit plan, practice, program or arrangement currently
sponsored, maintained or contributed to by MidAmerican or any of
the MidAmerican Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries in respect of
services provided to any such entity, including, but not limited
to, any employee benefit plans within the meaning of Section 3(3)
of ERISA, employee pension benefit plan, program, arrangement or
agreement, any health, medical, welfare, disability, life
insurance, bonus, option, stock appreciation plan, performance
stock plan, restricted stock plan, deferred compensation plan,
retiree benefits plan, severance pay and other employee benefit
or fringe benefit plan and any employment, consulting, non-
compete, severance or change in control agreement (collectively,
the "MidAmerican Benefit Plans"), together with, for any option,
stock appreciation plan, performance stock plan, restricted stock
plan, deferred compensation plan and supplemental retirement
plan, the current amounts or benefits granted or payable under
each and reasonable details (including exercise prices) regarding
the MidAmerican Options or other securities which represent the
right (contingent or other) to purchase or receive shares of
MidAmerican Common Stock or, following the Merger, of Parent
Common Stock. For the purposes of this Section 5.10, the term
"MidAmerican" shall be deemed to include predecessors thereof.
(b) Contributions. Except as set forth in Section 5.10(b)
of the MidAmerican Disclosure Schedule, all material
contributions and other payments required to be made by
MidAmerican or any of the MidAmerican Subsidiaries to any
MidAmerican Benefit Plan (or to any person pursuant to the terms
thereof) have been timely made or the amount of such payment or
contribution obligation has been reflected in the MidAmerican
Financial Statements. Except as set forth in Section 5.10(b) of
the MidAmerican Disclosure Schedule, (i) the current value of all
accrued benefits under any MidAmerican Benefit Plan which is a
defined benefit plan did not, as of the date of the most recent
actuarial valuation for such plan, exceed the then current value
of the assets of such plan, based on the actuarial assumptions
set forth in such valuation for calculating the minimum funding
requirements of Code Section 412, which actuarial assumptions and
calculations have been provided to CalEnergy prior to the date of
this Agreement, and (ii) neither MidAmerican nor any entity which
is or ever has been considered as a single employer together with
MidAmerican or MidAmerican Utility pursuant to Section 414 of the
Code contributes or has contributed, during the eight-year period
immediately prior to the date of this Agreement, to a
multiemployer plan (as defined in Section 3(37) of ERISA), or has
any liability under ERISA Section 4203 or Section 4205 in respect
of any such plan.
(c) Qualification; Compliance. Except as set forth in
Section 5.10(c) of the MidAmerican Disclosure Schedule, each of
the MidAmerican Benefit Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by
the IRS to be so qualified, and, to the knowledge of MidAmerican,
no circumstances exist that are reasonably expected by
MidAmerican to result in the revocation of any such
determination. MidAmerican and each of the MidAmerican
Subsidiaries are in compliance in all material respects with, and
each MidAmerican Benefit Plan is and has been operated in all
material respects in compliance with the terms thereof and all
applicable laws, rules and regulations governing such plan,
including, without limitation, ERISA and the Code. Each
MidAmerican Benefit Plan intended to provide for the deferral of
income, the reduction of salary or other compensation or to
afford other income tax benefits complies with the requirements
of the applicable provisions of the Code or other laws, rules and
regulations required to provide such income tax benefits.
(d) Liabilities. With respect to the MidAmerican Benefit
Plans individually and in the aggregate, there are no actions,
suits, claims pending or, to the knowledge of MidAmerican,
threatened and no event has occurred, and, to the knowledge of
MidAmerican, there exists no condition or set of circumstances
that could subject MidAmerican or any of the MidAmerican
Subsidiaries to any liability arising under the Code, ERISA or
any other applicable law (including, without limitation, any
liability of any kind whatsoever, whether direct or indirect,
contingent, inchoate or otherwise, to any such plan or the PBGC,
or under any indemnity agreement to which MidAmerican or any of
the MidAmerican Subsidiaries is a party, in each such case, which
liability, individually or in the aggregate, could reasonably be
expected to have a MidAmerican Material Adverse Effect.
(e) Welfare Plans. Except as set forth in Section 5.10(e)
of the MidAmerican Disclosure Schedule, none of the MidAmerican
Benefit Plans that are "welfare plans", within the meaning of
Section 3(1) of ERISA, provides for any benefits payable to or on
behalf of any employee or director after termination of
employment or service, as the case may be, other than elective
continuation required pursuant to Code Section 4980B or coverage
which expires at the end of the calendar month following such
event. Each such plan that is a "group health plan" (as defined
in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance
that would not, or insofar as reasonably can be determined could
not, give rise to a MidAmerican Material Adverse Effect.
(f) Documents Made Available. MidAmerican has made
available to CalEnergy a true and correct copy of each collective
bargaining agreement to which MidAmerican or any of the
MidAmerican Subsidiaries is a party or under which MidAmerican or
any of the MidAmerican Subsidiaries has obligations, and with
respect to each MidAmerican Benefit Plan, to the extent
applicable, (i) such plan and summary plan description (including
all amendments to each such document), (ii) the most recent
annual report filed with the IRS, (iii) each related trust
agreement, insurance contract, service provider or investment
management agreement (including all amendments to each such
document), (iv) the most recent determination of the IRS with
respect to the qualified status of such plan, (v) the most recent
actuarial report or valuation and (vi) all material employee
communications.
(g) Payments Resulting from Merger and Other Severance
Payments. Except as set forth in Section 5.10(g) of the
MidAmerican Disclosure Schedule or as specifically provided for
in this Agreement, (i) the announcement or consummation of any
transaction contemplated by this Agreement will not (either alone
or upon the occurrence of any additional or further acts or
events, including, without limitation, termination of employment)
result in any (A) payment (whether of severance pay or otherwise)
becoming due from MidAmerican or any of the MidAmerican
Subsidiaries to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or
similar arrangement or (B) benefit being established or becoming
accelerated, vested or payable under any MidAmerican Benefit Plan
and (ii) neither MidAmerican nor any of the MidAmerican
Subsidiaries is a party to (A) any management, employment,
deferred compensation, severance (including any payment, right or
benefit resulting from a change in control), bonus or other
contract for personal services with any officer, director or
employee, (B) any consulting contract with any person who prior
to entering into such contract was a director or officer of
MidAmerican or any of the MidAmerican Subsidiaries or (C) any
material plan, agreement, arrangement or understanding similar to
the foregoing.
(h) Labor Agreements. As of the date hereof, except as set
forth in Section 5.10(h) of the MidAmerican Disclosure Schedule,
neither MidAmerican nor any of the MidAmerican Subsidiaries is a
party to any collective bargaining agreement or other labor
agreement with any union or labor organization. To the knowledge
of MidAmerican, as of the date hereof, there is no current union
representation question involving employees of MidAmerican or any
of the MidAmerican Subsidiaries, nor does MidAmerican know of any
activity or proceeding of any labor organization (or
representative thereof) or employee group to organize any such
employees. Except as set forth in Section 5.10(h) of the
MidAmerican Disclosure Schedule, (i) there is no unfair labor
practice, employment discrimination or other complaint against
MidAmerican or any of the MidAmerican Subsidiaries pending or, to
the knowledge of MidAmerican, threatened, which has or could
reasonably be expected to have a MidAmerican Material Adverse
Effect, (ii) there is no strike, dispute, slowdown, work stoppage
or lockout pending, or, to the knowledge of MidAmerican,
threatened, against or involving MidAmerican or any of the
MidAmerican Subsidiaries which has or could reasonably be
expected to have, a MidAmerican Material Adverse Effect and (iii)
there is no proceeding, claim, suit, action or governmental
investigation pending or, to the knowledge of MidAmerican,
threatened, in respect of which any director, officer, employee
or agent of MidAmerican or any of the MidAmerican Subsidiaries is
or may be entitled to claim indemnification from MidAmerican
pursuant to their respective articles of incorporation or by-laws
or as provided in the Indemnification Agreements listed in
Section 5.10(h) of the MidAmerican Disclosure Schedule. Except
as set forth in Section 5.10(h) of the MidAmerican Disclosure
Schedule, MidAmerican and the MidAmerican Subsidiaries have,
complied in all material respects with all laws relating to the
employment of labor, including without limitation any provisions
thereof relating to wages, hours, collective bargaining and the
payment of social security and similar taxes, and no person has,
to the knowledge of MidAmerican, asserted that MidAmerican or any
of the MidAmerican Subsidiaries is liable in any material amount
for any arrears of wages or any taxes or penalties for failure to
comply with any of the foregoing.
(i) Parachute Payments. Section 5.10(i) of the MidAmerican
Disclosure Schedule sets forth (1) the name of each employee,
former employee or other person who is or was providing services
to MidAmerican or any MidAmerican Subsidiaries and who, in
connection with the transactions contemplated with this
Agreement, will receive, or will or may become entitled to
receive in the future or upon termination of such person's
employment, any payments (including without limitation
accelerated vesting of MidAmerican Options or other equity-based
awards) which could reasonably be expected to constitute "excess
parachute payments" with respect to such person within the
meaning of Section 280G of the Code ("Excess Parachute
Payments"), (2) with respect to each such person, the maximum
amount of Excess Parachute Payments which could reasonably be
expected to be so received (determined in accordance with
proposed regulations of the IRS promulgated under Section 280G of
the Code), and (3) with respect to each person who is entitled to
receive a "gross-up payment" in respect of excise taxes imposed
on such Excess Parachute Payments under Section 4999 of the Code,
a reasonable estimate of the amount of such gross-up payment.
(j) Section 162(m). Except as set forth in Section 5.10(j)
of the MidAmerican Disclosure Schedule, no payments to any
executive officer of MidAmerican or any MidAmerican Subsidiaries
will fail to be deductible for Federal income tax purposes by
reason of the deduction limit imposed under Section 162(m) of the
Code. Section 5.10(j) of the MidAmerican Disclosure Schedule
sets forth the name of each executive officer who will receive
compensation which may not be fully deductible by reason of the
application of Section 162(m), and a reasonable estimate of the
amount of such potentially nondeductible compensation.
Section 5.11. Environmental Protection.
(a) Compliance. Except as set forth in Section 5.11(a) of the
MidAmerican Disclosure Schedule, MidAmerican and each of the
MidAmerican Subsidiaries and, to the knowledge of MidAmerican,
the MidAmerican Joint Ventures are in compliance with all
applicable Environmental Laws except where the failure to so
comply would not have a MidAmerican Material Adverse Effect, and
neither MidAmerican nor any of the MidAmerican Subsidiaries has
received any communication (written or oral), from any person or
Governmental Authority that alleges that MidAmerican or any of
the MidAmerican Subsidiaries or the MidAmerican Joint Ventures is
not in such compliance with applicable Environmental Laws. To
the knowledge of MidAmerican, compliance with all applicable
Environmental Laws will not require MidAmerican or any
MidAmerican Subsidiary or, to the knowledge of MidAmerican, any
MidAmerican Joint Venture to incur costs beyond that currently
budgeted in the five MidAmerican fiscal years beginning with
January 1, 1998 (as disclosed to CalEnergy prior to the date of
this Agreement) that will be reasonably likely to result in a
MidAmerican Material Adverse Effect, including but not limited to
the costs of MidAmerican and MidAmerican Subsidiary and
MidAmerican Joint Venture pollution control equipment required or
reasonably contemplated to be required in the future.
(b) Environmental Permits. Except as set forth in Section
5.11(b) of the MidAmerican Disclosure Schedule, MidAmerican and
each of the MidAmerican Subsidiaries and, to the knowledge of
MidAmerican, the MidAmerican Joint Ventures, have obtained or has
applied for all Environmental Permits necessary for the
construction of its facilities or the conduct of its operations
except where the failure to so obtain would not have a
MidAmerican Material Adverse Effect, and all such Environmental
Permits are in good standing or, where applicable, a renewal
application has been timely filed and is pending agency approval,
and MidAmerican and the MidAmerican Subsidiaries and, to the
knowledge of MidAmerican, the MidAmerican Joint Ventures are in
compliance with all terms and conditions of all Environmental
Permits necessary for the construction of its facilities or the
conduct of its operations, except where the failure to so comply,
in the aggregate, would not have a MidAmerican Material Adverse
Effect.
(c) Environmental Claims. Except as set forth in Section
5.11(c) of the MidAmerican Disclosure Schedule, there is no
Environmental Claim pending (or, to the knowledge of MidAmerican,
threatened) (A) against MidAmerican or any of the MidAmerican
Subsidiaries or, to the knowledge of MidAmerican, any of the
MidAmerican Joint Ventures, (B) to the knowledge of MidAmerican,
against any person or entity whose liability for any
Environmental Claim MidAmerican or any of the MidAmerican
Subsidiaries or, to the knowledge of MidAmerican, any of the
MidAmerican Joint Ventures has or may have retained or assumed
either contractually or by operation of law, or (C) against any
real or personal property or operations which MidAmerican or any
of the MidAmerican Subsidiaries or, to the knowledge of
MidAmerican, any of the MidAmerican Joint Ventures owns, leases
or manages, in whole or in part, which, if adversely determined,
would have, in the aggregate, a MidAmerican Material Adverse
Effect.
(d) Releases. Except as set forth in Section 5.11(d) of the
MidAmerican Disclosure Schedule, MidAmerican has no knowledge of
any Releases of any Hazardous Material that would be reasonably
likely to form the basis of any Environmental Claim against
MidAmerican or any of the MidAmerican Subsidiaries or the
MidAmerican Joint Ventures, or against any person or entity whose
liability for any Environmental Claim MidAmerican or any of the
MidAmerican Subsidiaries or the MidAmerican Joint Ventures has or
may have retained or assumed either contractually or by operation
of law except for any Environmental Claim which would not have,
in the aggregate, a MidAmerican Material Adverse Effect.
(e) Predecessors. Except as set forth in Section 5.11(e) of
the MidAmerican Disclosure Schedule, MidAmerican has no
knowledge, with respect to any predecessor of MidAmerican or any
of the MidAmerican Subsidiaries or the MidAmerican Joint
Ventures, of any Environmental Claim pending or threatened, or of
any Release of Hazardous Materials that would be reasonably
likely to form the basis of any Environmental Claim, which, if
determined adversely could reasonably be expected to require
payments of $20 million or more or which could reasonably be
expected to have a MidAmerican Material Adverse Effect.
(f) Disclosure. MidAmerican has disclosed in writing to
CalEnergy all material facts which MidAmerican reasonably
believes form the basis of an Environmental Claim which could
have a MidAmerican Material Adverse Effect arising from (i) the
cost of MidAmerican pollution control equipment (including,
without limitation, upgrades and other modifications to existing
equipment) currently required or reasonably contemplated to be
required in the future, (ii) current remediation costs or costs
to MidAmerican or any of the MidAmerican Subsidiaries for
remediation reasonably contemplated to be required in the future
or (iii) any other environmental matter affecting MidAmerican or
any of the MidAmerican Subsidiaries.
(g) Cost Estimates. To MidAmerican's knowledge, no
environmental matter set forth in the MidAmerican SEC Reports or
the MidAmerican Disclosure Schedule could reasonably be expected
to exceed the cost estimates provided in the MidAmerican SEC
Reports by an amount that individually or in the aggregate could
reasonably be expected to have a MidAmerican Material Adverse
Effect.
Section 5.12. Regulation as a Utility. MidAmerican Utility
is regulated as a public utility by the FERC and in the States of
Illinois, Iowa, Nebraska and South Dakota and in no other state.
Except as set forth in the preceding sentence or Section 5.12 of
the MidAmerican Disclosure Schedule, neither MidAmerican nor any
"subsidiary company" or "affiliate" (as each such term is defined
in the 1935 Act) of MidAmerican is subject to regulation as a
public utility or public service company (or similar designation)
by the FERC or any municipality, locality, state in the United
States or any foreign country. MidAmerican is an exempt holding
company under Section 3(a)(1) of the 1935 Act.
Section 5.13. Vote Required. The approval of the Merger by
the affirmative vote of a majority of the votes entitled to be
cast by holders of MidAmerican Common Stock (the "MidAmerican
Stockholders' Approval") is the only vote of the holders of any
class or series of the capital stock of MidAmerican or any of the
MidAmerican Subsidiaries required to approve this Agreement, the
Merger and the other transactions contemplated hereby.
Section 5.14. Insurance. Except as set forth in Section
5.14 of the MidAmerican Disclosure Schedule, MidAmerican and each
of the MidAmerican Subsidiaries is, and has been continuously
since January 1, 1996, insured with financially responsible
insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the
business as conducted by MidAmerican and the MidAmerican
Subsidiaries during such time period. Neither MidAmerican nor
any of the MidAmerican Subsidiaries has received any notice of
cancellation or termination with respect to any material
insurance policy of MidAmerican or any of the MidAmerican
Subsidiaries. The insurance policies of MidAmerican and each of
the MidAmerican Subsidiaries are valid and enforceable policies
in all material respects.
Section 5.15. Opinion of Financial Advisor. MidAmerican
has obtained the opinion of Warburg Dillon Read & Co., LLC
("Dillon Read"), dated the date of this Agreement, to the effect
that, as of the date thereof, the Per Share Amount to be paid to
holders of MidAmerican Common Stock pursuant to this Agreement is
fair from a financial point of view to the holders of MidAmerican
Common Stock.
Section 5.16. Brokers. No broker, finder or investment
banker (other than Dillon Read) is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger
based upon arrangements made by or on behalf of MidAmerican.
MidAmerican has heretofore furnished to CalEnergy a complete and
correct copy of all agreements between MidAmerican and Dillon
Read, pursuant to which such firm would be entitled to any
payment relating to the Merger.
Section 5.17. Non-Applicability of Certain Provisions of
Iowa Act. None of the business combination provisions of Section
1109 of the Iowa Act or any similar provisions of the Iowa Act,
the articles of incorporation or by-laws of MidAmerican are
applicable to the transactions contemplated by this Agreement
because such provisions do not apply by their terms or because
any required approvals of the Board of Directors of MidAmerican
have been obtained.
Section 5.18. MidAmerican Rights Agreement. Prior to the
date of this Agreement, MidAmerican has delivered to CalEnergy
and its counsel a true and complete copy of the Shareholder
Rights Agreement, dated December 18, 1996, between Continental
Stock Transfer and Trust Company and MidAmerican (the
"MidAmerican Rights Agreement") in effect as of the date hereof,
and the consummation of the transactions contemplated by this
Agreement will not result in the triggering of any right or
entitlement of stockholders of MidAmerican under the MidAmerican
Rights Agreement or any similar agreement to which MidAmerican or
any of its affiliates is a party.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by MidAmerican Pending
the Merger. MidAmerican covenants and agrees, as to itself and
each of the MidAmerican Subsidiaries, that after the date of this
Agreement and prior to the Effective Time or earlier termination
of this Agreement, except as expressly contemplated or permitted
in this Agreement, or to the extent CalEnergy shall have
otherwise consented in writing, which decision regarding consent
shall be made as soon as reasonably practicable (it being
understood that if a particular activity is permissible as a
result of its being disclosed and, where applicable, approved in
writing by CalEnergy under any one of the Section 6.1 subsections
of the MidAmerican Disclosure Schedule, that activity will not be
prohibited under any of the subsections of Section 6.1):
(a) Ordinary Course of Business. MidAmerican shall, and shall
cause the MidAmerican Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all
commercially reasonable efforts to preserve intact their present
business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having
business dealings with them and, subject to prudent management of
workforce needs and ongoing or planned programs relating to
downsizing, re-engineering and similar matters, keep available
the services of their present officers and employees to the end
that their goodwill and ongoing businesses shall not be impaired
in any material respect at the Effective Time. Except as set
forth in Section 6.1(a) of the MidAmerican Disclosure Schedule,
MidAmerican shall not, nor shall MidAmerican permit any of the
MidAmerican Subsidiaries to, (i) enter into a new line of
business involving any material investment of assets or resources
or any material exposure to liability or loss to MidAmerican and
the MidAmerican Subsidiaries taken as a whole, or (ii) acquire,
or agree to acquire, by merger or consolidation with, or by
purchase or otherwise, a substantial equity interest in or a
substantial portion of the assets of, any business or any
corporation, partnership, association or other business
organization or division thereof, or otherwise acquire or agree
to acquire any assets (other than equipment, fuel, supplies and
similar items or for capital expenditures, in each case, in the
ordinary course of business consistent with past practice);
provided, however, that notwithstanding the above, MidAmerican or
any of the MidAmerican Subsidiaries may enter into a new line of
business or make such an other acquisition to the extent the
investment or other acquisition, as the case may be (which shall
include the amount of equity invested plus the amount of
indebtedness incurred, assumed or otherwise owed by or with
recourse to MidAmerican or any MidAmerican Subsidiary (other than
the entity being acquired or in which the investment is made or
any special purpose entity formed in connection with such
investment or other acquisition)), in a new line of business or
acquisition, as the case may be, does not exceed, together will
all other such investments and other acquisitions made from and
after the date of this Agreement, $100 million in the aggregate;
and provided, further, that no such investment shall be made in,
and no such other acquisition shall consist of, any common equity
securities of any U.S. gas or electric utility company.
(b) Dividends. MidAmerican shall not, nor shall MidAmerican
permit any of the MidAmerican Subsidiaries to, (i) declare or pay
any dividends on or make other distributions in respect of any of
their capital stock other than (A) to MidAmerican or its wholly
owned Subsidiaries, (B) dividends required to be paid on any
MidAmerican Utility Preferred Stock in accordance with the terms
thereof and (C) regular quarterly dividends on MidAmerican Common
Stock with respect to the fiscal quarters ending prior to the
Effective Date, with usual record and payment dates not in excess
of 100% of the average quarterly dividend for the four quarterly
dividend payments immediately preceding the date hereof with
respect thereto and (D) a special dividend on MidAmerican Common
Stock with respect to the quarter in which the Effective Date
occurs with a record date on or prior to the Effective Date,
which does not exceed an amount equal to $0.30 multiplied by a
fraction, the numerator of which is the number of days in such
quarter prior to the Effective Date, and the denominator of which
is the total number of days in such fiscal quarter; or (ii)
split, combine or reclassify any of their capital stock or issue
or authorize or propose the issuance of any other securities in
respect of, in lieu of, or in substitution for, shares of their
capital stock.
(c) Issuance of Securities. Except as described in Section
6.1(c) of the MidAmerican Disclosure Schedule, MidAmerican shall
not, nor shall MidAmerican permit any of the MidAmerican
Subsidiaries to, issue, agree to issue, deliver, sell, award,
pledge, dispose of or otherwise encumber or authorize or propose
the issuance, delivery, sale, award, pledge, grant of a security
interest, disposal or other encumbrance of, any shares of their
capital stock of any class or any securities convertible into or
exchangeable for, or any rights, warrants or options to acquire,
any such shares or convertible or exchangeable securities, other
than (i) issuances by a wholly owned Subsidiary of its capital
stock to its direct or indirect parent and (ii) issuances of
shares of MidAmerican Common Stock after the date of this
Agreement pursuant to MidAmerican Options existing as of the date
hereof, as identified in Section 5.10(a) of the MidAmerican
Disclosure Schedule.
(d) Indebtedness. Except as set forth in Section 6.1(d) of
the MidAmerican Disclosure Schedule, MidAmerican shall not, nor
shall MidAmerican permit any of the MidAmerican Subsidiaries to,
incur or guarantee any indebtedness (including any debt borrowed
or guaranteed or otherwise assumed including, without limitation,
the issuance of debt securities or warrants or rights to acquire
debt) or enter into any "keep well" or indemnity or other
agreement to maintain any financial statement condition of
another Person or enter into any arrangement having the economic
effect of any of the foregoing other than (i) indebtedness or
guarantees or "keep well" or other agreements incurred in the
ordinary course of business consistent with past practice
(including refinancings, the issuance of commercial paper or the
use of existing or replacement credit facilities or hedging
activities), (ii) arrangements between MidAmerican and wholly
owned MidAmerican Subsidiaries or among wholly owned MidAmerican
Subsidiaries, (iii) in connection with the refunding or
defeasance of existing indebtedness, or (iv) as may be necessary
in connection with investments or acquisitions permitted by
Section 6.1(a).
(e) Compensation, Benefits. Except as set forth in Section
6.1(e) of the MidAmerican Disclosure Schedule, as may be required
by applicable law or as contemplated by this Agreement,
MidAmerican shall not, nor shall MidAmerican permit any of the
MidAmerican Subsidiaries to, (i) enter into, adopt or amend or
increase the amount or accelerate the payment or vesting of any
benefit or amount payable under, any employee benefit plan or
other contract, agreement, commitment, arrangement, plan, trust,
fund or policy maintained by, contributed to or entered into by
MidAmerican or any of the MidAmerican Subsidiaries (including,
without limitation, the MidAmerican Benefit Plans set forth in
Section 5.10(a) of the MidAmerican Disclosure Schedule) or
increase, or enter into any contract, agreement, commitment or
arrangement to increase in any manner, the compensation or fringe
benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any director,
officer or other employee of MidAmerican or any of the
MidAmerican Subsidiaries, except pursuant to binding legal
commitments existing on the date of this Agreement and
specifically identified in Section 5.10(a) of the MidAmerican
Disclosure Schedule and except for normal increases in the
ordinary course of business consistent with past practice that,
in the aggregate, do not result in a material increase in
benefits or compensation expense to MidAmerican or any of the
MidAmerican Subsidiaries; (ii) enter into or amend any
employment, severance, pension, deferred compensation or special
pay arrangement with respect to the termination of employment or
other similar contract, agreement or arrangement with any
director or officer or other employee other than in the ordinary
course of business consistent with past practice; or (iii)
deposit into any trust (including any "rabbi trust") amounts in
respect of any employee benefit obligations or obligations to
directors; provided that transfers into any trust, other than a
rabbi or other trust with respect to any non-qualified deferred
compensation, may be made in accordance with past practice.
(f) 1935 Act. MidAmerican shall not, nor shall MidAmerican
permit any of the MidAmerican Subsidiaries to, except as required
or contemplated by this Agreement, engage in any activities which
would cause a change in its status, or that of the MidAmerican
Subsidiaries, under the 1935 Act, or that would impair the
ability of MidAmerican or Parent or any Subsidiary of Parent to
claim an exemption as of right under Rule 2 of the 1935 Act or
that would subject CalEnergy or any CalEnergy Subsidiary to
regulation under such Act (other than under Section 9(a)(2) or as
an exempt holding company under Section 3(a)(1) under such Act),
following the Merger and the Reincorporation.
(g) Third-Party Consents. MidAmerican shall, and shall cause
the MidAmerican Subsidiaries to, use all commercially reasonable
efforts to obtain all MidAmerican Required Consents. MidAmerican
shall promptly notify CalEnergy of any failure or prospective
failure to obtain any such consents and shall provide copies of
all MidAmerican Required Consents obtained by MidAmerican to
CalEnergy.
(h) Tax-Exempt Status. MidAmerican shall not, nor shall
MidAmerican permit any MidAmerican Subsidiary to, take any action
that would likely jeopardize the qualification of MidAmerican's
outstanding revenue bonds which qualify as of the date hereof
under Section 142(a) of the Code as "exempt facility bonds" or as
tax-exempt industrial development bonds under Section 103(b)(4)
of the Internal Revenue Code of 1954, as amended, prior to the
Tax Reform Act of 1986.
Section 6.2. Conduct of Business by CalEnergy Pending the
Merger. CalEnergy covenants and agrees, as to itself and each of
the CalEnergy Subsidiaries, that after the date of this Agreement
and prior to the Effective Time or earlier termination of this
Agreement, except as expressly contemplated or permitted in this
Agreement, or to the extent MidAmerican shall have otherwise
consented in writing, which decision regarding consent shall be
made as soon as reasonably practicable (it being understood that
if a particular activity is permissible as a result of its being
disclosed and, where applicable, approved in writing by
MidAmerican under any one of the Section 6.2 subsections of the
CalEnergy Disclosure Schedule, that activity will not be
prohibited under any of the subsections of Section 6.2):
(a) Ordinary Course of Business. CalEnergy shall, and shall
cause the CalEnergy Subsidiaries to, carry on their respective
businesses in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and use all
commercially reasonable efforts to preserve intact their present
business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having
business dealings with them and, subject to prudent management of
workforce needs and ongoing or planned programs relating to
downsizing, re-engineering and similar matters, keep available
the services of their present officers and employees to the end
that their goodwill and ongoing businesses shall not be impaired
in any material respect at the Effective Time. Except as set
forth in Section 6.2(a) of the CalEnergy Disclosure Schedule,
CalEnergy shall not, nor shall CalEnergy permit any of the
CalEnergy Subsidiaries to, (i) enter into a new line of business
involving any material investment of assets or resources or any
material exposure to liability or loss to CalEnergy and the
CalEnergy Subsidiaries taken as a whole, or (ii) acquire, or
agree to acquire, by merger or consolidation with, or by purchase
or otherwise, a substantial equity interest in or a substantial
portion of the assets of, any business or any corporation,
partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any
assets (other than equipment, fuel, supplies and similar items or
for capital expenditures, in each case, in the ordinary course of
business consistent with past practice); provided, however, that
notwithstanding the above, CalEnergy or any of the CalEnergy
Subsidiaries may enter into a new line of business or make such
an other acquisition to the extent the investment or other
acquisition, as the case may be (which shall include the amount
of equity invested plus the amount of indebtedness incurred,
assumed or otherwise owed by or with recourse to CalEnergy or any
CalEnergy Subsidiary (other than the entity being acquired or in
which the investment is made or any special purpose entity formed
in connection with such investment or other acquisition)), in a
new line of business or acquisition, as the case may be, does not
exceed, together will all other such investments and other
acquisitions made from and after the date of this Agreement, $500
million in the aggregate; and provided, further, that no such
investment shall be made in, and no such other acquisition shall
consist of, any common equity securities of any U.S. gas or
electric utility company.
(b) Indebtedness. Except as contemplated by this Agreement,
CalEnergy shall not, nor shall CalEnergy permit any of the
CalEnergy Subsidiaries to, incur or guarantee any indebtedness
(including any debt borrowed or guaranteed or otherwise assumed
including, without limitation, the issuance of debt securities or
warrants or rights to acquire debt) or enter into any "keep well"
or indemnity or other agreement to maintain any financial
statement condition of another Person or enter into any
arrangement having the economic effect of any of the foregoing
other than (i) indebtedness or guarantees or "keep well" or other
agreements incurred in the ordinary course of business consistent
with past practice (including refinancings, the issuance of
commercial paper or the use of existing or replacement credit
facilities or hedging activities), (ii) arrangements between
CalEnergy and wholly owned CalEnergy Subsidiaries or among wholly
owned CalEnergy Subsidiaries, (iii) in connection with the
refunding or defeasance of existing indebtedness, or (iv) as may
be necessary in connection with investments or acquisitions
permitted by Section 6.2(a) or in connection with the financing
of the transactions contemplated hereby.
(c) 1935 Act. CalEnergy shall not, nor shall CalEnergy permit
any of the CalEnergy Subsidiaries to, except as required or
contemplated by this Agreement, engage in any activities which
would cause a change in its status, or that of the CalEnergy
Subsidiaries, under the 1935 Act that would impair the ability of
MidAmerican or Parent or any Subsidiary of Parent to claim an
exemption as of right under Rule 2 of the 1935 Act or that would
subject CalEnergy or any CalEnergy Subsidiary to regulation under
such Act(other than under Section 9(a)(2) or as an exempt holding
company under Section 3(a)(1) under such Act), following the
Merger and the Reincorporation.
(d) Third-Party Consents. CalEnergy shall, and shall cause the
CalEnergy Subsidiaries to, use all commercially reasonable
efforts to obtain all CalEnergy Required Consents. CalEnergy
shall promptly notify MidAmerican of any failure or prospective
failure to obtain any such consents and, if requested by
MidAmerican, shall provide copies of all CalEnergy Required
Consents obtained by CalEnergy to MidAmerican.
Section 6.3. Additional Covenants by MidAmerican and
CalEnergy Pending the Merger. Each of CalEnergy and MidAmerican
covenants and agrees, each as to itself and each of its
Subsidiaries, that after the date of this Agreement and prior to
the Effective Time or earlier termination of this Agreement,
except as expressly contemplated or permitted in this Agreement,
or to the extent the other parties hereto shall otherwise consent
in writing, which decision regarding consent shall be made as
soon as reasonably practicable:
(a) Cooperation, Notification. Each party shall (i) confer on
a regular and frequent basis with one or more representatives of
the other parties to discuss, subject to applicable law, material
operational matters and the general status of its ongoing
operations, (ii) promptly notify the other party of any
significant changes in its business, properties, assets,
condition (financial or other), results of operations or
prospects, (iii) promptly advise the other party of any change or
event which has had or, insofar as reasonably can be foreseen, is
reasonably likely to result in a MidAmerican Material Adverse
Effect or a CalEnergy Material Adverse Effect, as the case may
be, and (iv) pursuant to Section 7.3, promptly provide the other
party with copies of all filings made by such party or any of its
Subsidiaries with any state or federal court, administrative
agency, commission or other Governmental Authority.
(b) No Breach, Etc. Each of the parties shall not, nor shall
it permit any of its Subsidiaries to, take any action that would
or is reasonably likely to result in a material breach of any
provision of this Agreement or in any of its representations and
warranties set forth in this Agreement being untrue on and as of
the Closing Date.
ARTICLE VII.
ADDITIONAL AGREEMENTS
Section 7.1. Access to Information. Upon reasonable notice,
MidAmerican shall, and shall cause the MidAmerican Subsidiaries
to, afford to the officers, directors, employees, accountants,
counsel, investment bankers, financial advisors and other
representatives of CalEnergy (collectively, "Representatives")
reasonable access, during normal business hours throughout the
period prior to the Effective Time, to all of its properties,
books, contracts, commitments, records and other information
(including, but not limited to, Tax Returns) and, during such
period, MidAmerican shall, and shall cause the MidAmerican
Subsidiaries to, furnish promptly to CalEnergy (i) access to each
significant report, schedule and other document filed or received
by it or any of the MidAmerican Subsidiaries pursuant to the
requirements of federal or state securities laws or filed with or
sent to the SEC, the FERC, the public utility commission of any
State, the Nuclear Regulatory Commission, the Department of
Labor, the Immigration and Naturalization Service, the
Environmental Protection Agency (state, local and federal), the
IRS, the Department of Justice, the Federal Trade Commission, or
any other federal or state regulatory agency or commission or
other Governmental Authority and (ii) access to all information
concerning MidAmerican, the MidAmerican Subsidiaries, directors,
officers and stockholders, properties, facilities or operations
owned, operated or otherwise controlled by MidAmerican, or if not
so owned, operated or controlled, which properties, facilities or
operations that MidAmerican may nonetheless obtain access to
through the exercise of reasonable diligence, and such other
matters as may be reasonably requested by CalEnergy in connection
with any filings, applications or approvals required or
contemplated by this Agreement or for any other reason related to
the transactions contemplated by this Agreement. CalEnergy
shall, from time to time at the request of MidAmerican, discuss
its financing arrangements for the Merger with MidAmerican and
shall furnish promptly to MidAmerican such information concerning
its financial condition, together with final drafts of its
financing arrangements for the Merger. Subject to the following
sentence, such information provided to MidAmerican may be shown
to MidAmerican's investment bankers and financial advisors. Each
party shall, and shall cause its subsidiaries and Representatives
to, hold in strict confidence all documents and information
concerning the other furnished to it in connection with the
transactions contemplated by this Agreement in accordance with
the Confidentiality Agreement, dated as of June 3, 1998, between
CalEnergy and MidAmerican (the "Confidentiality Agreement").
Section 7.2. Joint Proxy Statement.
(a) Preparation and Filing. The parties will prepare and file
with the SEC as soon as reasonably practicable after the date of
this Agreement the Joint Proxy Statement. Each of the parties
hereto shall furnish all information concerning itself which is
required or customary for inclusion in the Joint Proxy Statement.
The information provided by or on behalf of any party hereto for
use in the Joint Proxy Statement shall be true and correct in all
material respects without omission of any material fact which is
required to make such information not false or misleading. No
representation, covenant or agreement is made by any party hereto
with respect to information supplied by any other party for
inclusion in the Joint Proxy Statement.
(b) Opinions of Financial Advisers. It shall be a condition to
the mailing of the Joint Proxy Statement to the stockholders of
CalEnergy and MidAmerican that (i) CalEnergy shall have received
the opinions of CSFB and Lehman, dated the date of the Joint
Proxy Statement, to the effect that, as of the date thereof, the
Per Share Amount to be paid to holders of MidAmerican Common
Stock pursuant to this Agreement is fair from a financial point
of view to CalEnergy and (ii) MidAmerican shall have received the
opinion of Dillon Read, dated the date of the Joint Proxy
Statement, to the effect that, as of the date thereof, the Per
Share Amount to be paid to holders of MidAmerican Common Stock is
fair from a financial point of view to the holders of MidAmerican
Common Stock.
(c) Amendments or Supplements. No amendment or supplement to
the Joint Proxy Statement will be made without the approval of
all parties. Each party will advise the others, promptly after
it receives notice thereof, of any request by the SEC for
amendment of the Joint Proxy Statement or comments thereon and
responses thereto or requests by the SEC for additional
information.
Section 7.3. Regulatory Approvals and Other Matters.
(a) HSR Filings. Each party hereto shall file or cause to be
filed with the Federal Trade Commission and the Department of
Justice any notifications required to be filed under the Hart-
Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), and the rules and regulations promulgated thereunder
with respect to the transactions contemplated hereby. Such
parties will use all commercially reasonable efforts to
coordinate such filings and any responses thereto, to make such
filings promptly and to respond promptly to any requests for
additional information made by either of such agencies.
(b) Other Approvals. Each party hereto shall cooperate and
use its best efforts to promptly prepare and file all necessary
documentation, to effect all necessary applications, notices,
petitions, filings and other documents, and to use all
commercially reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental
Authorities and all other persons necessary or advisable to
consummate the transactions contemplated hereby, including,
without limitation, the CalEnergy Required Statutory Approvals,
the MidAmerican Required Statutory Approvals, the CalEnergy
Required Consents and the MidAmerican Required Consents (and any
concurrent or related rate filings, if any). CalEnergy and
MidAmerican agree that they will consult with each other with
respect to the obtaining of all such necessary or advisable
permits, consents, approvals and authorizations of Governmental
Authorities; provided, however, that it is agreed that
MidAmerican shall have primary responsibility for the preparation
and filing of any applications with state public utility
commissions for approval of the Merger. Each of CalEnergy and
MidAmerican shall have the right to review and approve in advance
drafts of all such necessary applications, notices, petitions,
filings and other documents made or prepared in connection with
the transactions contemplated by this Agreement, which approval
shall not be unreasonably withheld or delayed.
(c) NYSE Listing. Each party hereto shall use its best
efforts to list on the NYSE, upon official notice of issuance,
the shares of Parent Common Stock to be issued pursuant to the
Reincorporation.
Section 7.4. Stockholder Approvals.
(a) Approval of MidAmerican Stockholders. MidAmerican shall,
as soon as reasonably practicable after the date of this
Agreement, (i) take all steps necessary to duly call, give notice
of, convene and hold a meeting of its stockholders (the
"MidAmerican Meeting") for the purpose of securing the
MidAmerican Stockholders' Approval, (ii) distribute to its
stockholders the Joint Proxy Statement in accordance with
applicable federal and state law and with its Articles of
Incorporation and By-Laws, (iii) subject to the fiduciary duties
of its Board of Directors, recommend to its stockholders the
approval of the Merger, this Agreement and the transactions
contemplated hereby and (iv) cooperate and consult with CalEnergy
with respect to each of the foregoing matters.
(b) Approval of CalEnergy Stockholders. CalEnergy shall, as
soon as reasonably practicable after the date of this Agreement,
(i) take all steps necessary to duly call, give notice of,
convene and hold a meeting of its stockholders (the "CalEnergy
Meeting") for the purpose of securing the CalEnergy Stockholders'
Approval and (ii) distribute to its stockholders the Joint Proxy
Statement in accordance with applicable federal and state law and
with its Restated Certificate of Incorporation and By-Laws, (iii)
subject to the fiduciary duties of its Board of Directors,
recommend to its stockholders the approval of the
Reincorporation, this Agreement and the transactions contemplated
hereby and (iv) cooperate and consult with MidAmerican with
respect to each of the foregoing matters.
(c) Meeting Date. The MidAmerican Meeting for the purpose of
securing the MidAmerican Stockholders' Approval and the CalEnergy
Meeting for the purpose of securing the CalEnergy Stockholders'
Approval shall be held on such date or dates as CalEnergy and
MidAmerican shall mutually determine.
Section 7.5. Directors' and Officers' Indemnification.
(a) Indemnification. From and after the Effective Time,
Parent shall, to the fullest extent not prohibited by applicable
law, indemnify, defend and hold harmless each person who is now,
or has been at any time prior to the date hereof, or who becomes
prior to the Effective Time, an officer or director of any of the
parties hereto (each an "Indemnified Party" and collectively, the
"Indemnified Parties") against all losses, expenses (including
reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding
sentence, amounts paid in settlement, arising out of actions or
omissions occurring at or prior to the Effective Time that are,
in whole or in part, based on or arising out of the fact that
such person is or was a director or officer of such party arising
out of or pertaining to the transactions contemplated by this
Agreement (the "Indemnified Liabilities"). In the event of any
such loss, expense, claim, damage or liability (whether or not
arising prior to the Effective Time), (i) Parent shall pay the
reasonable fees and expenses of counsel for the Indemnified
Parties selected by Parent, which counsel may also serve as
counsel to Parent and which counsel shall be reasonably
satisfactory to the Indemnified Parties (which consent shall not
be unreasonably withheld), promptly after statements therefor are
received and otherwise advance to such Indemnified Party upon
request reimbursement of documented expenses reasonably incurred,
in either case to the extent not prohibited by the Iowa Act, (ii)
Parent will cooperate in the defense of any such matter and (iii)
any determination required to be made with respect to whether an
Indemnified Party's conduct complies with the standards set forth
under the Iowa Act and the articles of incorporation or by-laws
of MidAmerican shall be made by independent counsel mutually
acceptable to Parent and the Indemnified Party (the "Independent
Counsel"); provided, however, that Parent shall not be liable for
any settlement effected without its written consent (which
consent shall not be unreasonably withheld). The Indemnified
Parties as a group may retain only one law firm with respect to
each related matter except to the extent there is, in the written
opinion of the Independent Counsel, under applicable standards of
professional conduct, a conflict on any significant issue between
positions of such Indemnified Party and any other Indemnified
Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective
Time, Parent shall cause to be maintained in effect policies of
directors' and officers' liability insurance maintained by
MidAmerican; provided, that Parent may substitute therefor
policies of at least the same coverage containing terms that are
no less advantageous with respect to matters occurring prior to
the Effective Time to the extent such liability insurance can be
maintained annually at a cost to Parent not greater than 200
percent of the current annual premiums for such directors' and
officers' liability insurance, which existing premium costs are
disclosed on Schedule 7.5(b) of the MidAmerican Disclosure
Schedule; provided, further, that if such insurance cannot be so
maintained or obtained at such cost, Parent shall maintain or
obtain as much of such insurance for MidAmerican as can be so
maintained or obtained at a cost equal to 200 percent of the
current annual premiums of MidAmerican for its directors' and
officers' liability insurance.
(c) Successors. In the event Parent or any of its successors
or assigns (i) consolidates with or merges into any other person
or entity and shall not be the continuing or surviving
corporation or entity of such consolidation or merger or (ii)
transfers all or substantially all of its properties and assets
to any person or entity, then and in either such case, proper
provisions shall be made so that the successors and assigns of
Parent shall assume the obligations set forth in this Section
7.5.
(d) Survival of Indemnification. To the fullest extent not
prohibited by law, from and after the Effective Time, all rights
to indemnification as of the date hereof in favor of the
employees, agents, directors and officers of CalEnergy,
MidAmerican and their respective Subsidiaries with respect to
their activities as such prior to the Effective Time, as provided
in their respective articles of incorporation and by-laws in
effect on the date thereof, shall survive the Merger and shall
continue in full force and effect for a period of not less than
six years from the Effective Time.
Section 7.6. Disclosure Schedules. On or before the date
hereof, (i) CalEnergy has delivered to MidAmerican the CalEnergy
Disclosure Schedule, accompanied by a certificate signed by the
chief financial officer of CalEnergy stating the CalEnergy
Disclosure Schedule has been delivered pursuant to this Section
7.6 and (ii) MidAmerican has delivered to CalEnergy the
MidAmerican Disclosure Schedule, accompanied by a certificate
signed by the chief financial officer of MidAmerican stating the
MidAmerican Disclosure Schedule has been delivered pursuant to
this Section 7.6. The CalEnergy Disclosure Schedule and the
MidAmerican Disclosure Schedule are collectively referred to
herein as the "Disclosure Schedules." The Disclosure Schedules
shall be deemed to constitute an integral part of this Agreement
and to modify the respective representations, warranties,
covenants or agreements of the parties hereto contained herein to
the extent that such representations, warranties, covenants or
agreements expressly refer to the Disclosure Schedules. Anything
to the contrary contained herein or in the Disclosure Schedules
notwithstanding, any and all statements, representations,
warranties or disclosures set forth in the Disclosure Schedules
delivered on or before the date hereof shall be deemed to have
been made on and as of the date hereof. From time to time prior
to the Closing, the parties shall promptly supplement or amend
the Disclosure Schedules with respect to any matter, condition or
occurrence hereafter arising which, if existing or occurring at
the date of this Agreement, would have been required to be set
forth or described in the Disclosure Schedules. No supplement or
amendment shall be deemed to cure any breach of any
representation or warranty made in this Agreement or have any
effect for the purpose of determining satisfaction of the
conditions set forth in Section 8.2(b) or Section 8.3(b).
Section 7.7. Public Announcements. Subject to each party's
disclosure obligations imposed by law or regulation, CalEnergy
and MidAmerican will cooperate with each other in the development
and distribution of all news releases and other public
information disclosures with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any
public announcement or statement with respect hereto or thereto
without the consent of the other party (which consent shall not
be unreasonably withheld and which decision regarding consent
shall be made as soon as reasonably practicable).
Section 7.8. No Solicitations. From and after the date
hereof, each party hereto will not, and will not authorize or
permit any of its respective Representatives to, directly or
indirectly, (i) solicit, initiate or encourage (including by way
of furnishing information) or take any other action to facilitate
any inquiries or the making of any proposal which constitutes or
may reasonably be expected to lead to an Acquisition Proposal (as
defined below), (ii) enter into any agreement with respect to any
Acquisition Proposal or (iii) in the event of an unsolicited
written Acquisition Proposal, engage in negotiations or
discussions with, or provide any information or data to, any
Person (other than to the parties hereto, any of their affiliates
or Representatives and except for information which has been
previously publicly disseminated by the parties) relating to any
Acquisition Proposal; provided, however, that nothing contained
in this Section 7.8 or any other provision hereof shall prohibit
such party or its Board of Directors from (i) taking and
disclosing to its stockholders a position with respect to a
tender or an exchange offer by a third party pursuant to Rules
14D-9 and 14e-2 promulgated under the Exchange Act or (ii) making
such disclosure to its stockholders as, in good faith judgment of
its Board of Directors, after receiving advice from outside
counsel, is required under applicable law.
Without limiting the foregoing, it is understood that
any violation of the restrictions set forth in the preceding
sentence by an executive officer of such party or any investment
banker, attorney or other Representative of such party, whether
or not such person is purporting to act on behalf of such party
or otherwise, shall be deemed to be a breach of this Section 7.8
by such party. Notwithstanding any other provision hereof, each
party hereto may (i) at any time prior to the time its
stockholders shall have voted to approve this Agreement, engage
in discussions or negotiations with a third party who (without
any solicitation, initiation, encouragement, discussion or
negotiation, directly or indirectly, by or with such party or its
Representatives after the date hereof) seeks to initiate such
discussions or negotiations and may furnish such third party
information concerning such party and its business, properties
and assets if, and only to the extent that, (A)(x) in the case of
an Acquisition Proposal for MidAmerican, the third party has
first made an Acquisition Proposal that is financially superior
to the Merger, (y) the third party has demonstrated that
financing for the Acquisition Proposal is reasonably likely to be
obtained (as determined in good faith in each case by such
party's Board of Directors after consultation with its financial
advisors) and (z) its Board of Directors shall have concluded in
good faith, after considering applicable provisions of state law
and on the basis of a written opinion of outside counsel, that a
failure to do so could reasonably be expected to constitute a
breach by its Board of Directors of its fiduciary duties to its
stockholders under applicable law and (B) prior to furnishing
such information to or entering into discussions or negotiations
with such person or entity, such party (x) provides prompt notice
to the other party to the effect that it is furnishing
information to or entering into discussions or negotiations with
such person or entity and (y) receives from such person an
executed confidentiality agreement in reasonably customary form,
together with its written acknowledgment and agreement to pay the
termination and other fees set forth in Section 9.3 if such
Acquisition Proposal is consummated or any other Acquisition
Proposal is consummated with such party or any of its affiliates,
and (ii) comply with Rule 14e-2 promulgated under the Exchange
Act with regard to a tender or exchange offer. Each party shall
immediately cease and terminate any existing solicitation,
initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by such party or its
Representatives with respect to the foregoing. Each party shall
notify the other party hereto orally and in writing of any such
inquiries, offers or proposals (including, without limitation,
the terms and conditions of any such proposal and the identity of
the person making it), within 24 hours of the receipt thereof,
shall keep such other party informed of the status and details of
any such inquiry, offer or proposal, and shall give such other
party five days' advance notice of any agreement to be entered
into with or any information to be supplied to any person making
such inquiry, offer or proposal.
The term "Acquisition Proposal" shall mean a proposal or
offer (other than by another party hereto) for a tender or
exchange offer, merger, consolidation or other business
combination involving the party or any material Subsidiary of the
party or any proposal to acquire in any manner a substantial
equity interest in or a substantial portion of the assets of the
party or any material Subsidiary of the party, other than the
transactions contemplated by this Agreement and except for
arrangements made by CalEnergy in connection with the financing
of and the consummation of the transactions contemplated hereby.
Section 7.9. Expenses. Subject to Section 9.3, all costs and
expenses incurred in connection with this Agreement and the
transactions contemplated hereby shall be paid by the party
incurring such expenses, except that those expenses incurred in
connection with printing the Joint Proxy Statement, as well as
the filing fee relating thereto, shall be paid 50% by MidAmerican
and 50% by CalEnergy.
Section 7.10. Board of Directors.
(a) Initial Composition. The initial number of directors
comprising the Board of Directors of Parent at the Effective Time
shall be 15 persons, (i) 11 of whom shall be designated by
CalEnergy prior to the Effective Time and (ii) four of whom shall
be MidAmerican Designees (as defined below). The "MidAmerican
Designees" shall be Stanley J. Bright plus three other persons
designated by MidAmerican who, as of the date of this Agreement,
are on the Board of Directors of MidAmerican.
(b) Initial Board Committees. The initial committees of
the Board of Directors of Parent at the Effective Time shall be
as follows: Executive, Compensation, Nominating, Environmental
and Audit. At the Effective Time, Stanley J. Bright shall become
a member of such Executive Committee of Parent's Board of
Directors.
(c) Resignations of Directors and Officers. At or prior to
the Effective Time, MidAmerican shall obtain the resignation of
each director and officer of MidAmerican and any MidAmerican
Subsidiary, if so requested by CalEnergy.
Section 7.11. Consulting Agreement. On or prior to the
Effective Time, Parent shall enter into a consulting agreement
(the "Consulting Agreement") with Stanley J. Bright,
substantially in the form of Exhibit A attached hereto.
Section 7.12. Current Employment Arrangements. Except as
provided in the Consulting Agreement, the Surviving Corporation
and its subsidiaries shall after the Effective Time honor,
without modification, all contracts, agreements, collective
bargaining agreements and commitments of the parties prior to the
date hereof which apply to any current or former employee or
current or former director of the parties hereto; provided,
however, that this undertaking is not intended to prevent the
Surviving Corporation from enforcing such contracts, agreements,
collective bargaining agreements and commitments in accordance
with their terms, including, without limitation, any reserved
right to amend, modify, suspend, revoke or terminate any such
contract, agreement, collective bargaining agreement or
commitment; and provided, further, that, at or prior to the
Effective Time, MidAmerican shall have used its reasonable best
efforts to obtain waivers of any and all requirements for a
letter of credit under any indemnity agreement or similar
arrangement between any officer or director of MidAmerican or any
MidAmerican Subsidiary who is such on the Closing Date and any
such entity.
Section 7.13. Post-Merger Operations and Workforce Matters.
(a) Following the Effective Time, Parent shall maintain its
corporate headquarters (excluding the principal office of the
Chairman of the Board and Chief Executive Officer and related
functions) and the corporate functions designated on Schedule I
hereto in Des Moines, Iowa. This provision shall not be modified
unless and until the terms of such modification are approved by a
vote of eighty percent (80%) of the members of the Board of
Directors of Parent.
(b) Workforce Matters. Subject to compliance with applicable
law and obligations under applicable collective bargaining
agreements, for a period of two (2) years following the Effective
Time, any reductions in workforce in respect of employees of
Parent or any of its Subsidiaries shall be made on a fair and
equitable basis, in light of the circumstances and the objectives
to be achieved, giving consideration to previous work history,
job experience, qualifications and business needs without regard
to whether employment prior to the Effective Time was with
MidAmerican or its Subsidiaries or CalEnergy or its Subsidiaries,
and any employees whose employment is terminated or jobs are
eliminated by Parent or any of its Subsidiaries during such
period shall be entitled to participate on such a fair and
equitable basis in the job opportunity and employment placement
programs, if any, offered by Parent or any of its Subsidiaries.
However, no provision contained in this Section 7.13(b) shall be
deemed to constitute an employment contract between Parent and
any individual, or a waiver of Parent's right to discharge any
employee at any time, with or without cause.
Section 7.14. Name of Parent. Immediately after the
Effective Time, Parent shall file an amendment to its articles of
incorporation to change its name to MidAmerican Energy Holdings
Company.
Section 7.15. Contributions to Rabbi Trusts. Prior to the
Effective Time, MidAmerican shall contribute to the rabbi trusts
maintained by MidAmerican or its Subsidiaries for its various
supplemental retirement plans, deferred compensation plans and
incentive compensation plans (the "Rabbi Trusts") the principal
sum of $12,000,000. Thereafter, at or prior to the end of each
of the first three years commencing with the year in which the
Closing occurs, Parent shall contribute or cause to be
contributed to the Rabbi Trusts the principal sum of $8,000,000.
ARTICLE VIII.
CONDITIONS
Section 8.1. Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect
the Merger shall be subject to the satisfaction on or prior to
the Closing Date of the following conditions, except, to the
extent permitted by applicable law, that such conditions may be
waived in writing pursuant to Section 9.5 by the joint action of
the parties hereto:
(a) Stockholder Approvals. The MidAmerican Stockholders'
Approval and the CalEnergy Stockholders' Approval shall have been
obtained.
(b) No Injunction. No temporary restraining order or
preliminary or permanent injunction or other order by any federal
or state court preventing consummation of the Merger shall have
been issued and be continuing in effect, and the Merger and the
other transactions contemplated hereby shall not have been
prohibited under any applicable federal or state law or regulation.
(c) Statutory Approvals. The CalEnergy Required Statutory
Approvals and the MidAmerican Required Statutory Approvals shall
have been obtained at or prior to the Effective Time, such
approvals shall have become Final Orders (as defined below) and
such Final Orders shall not impose terms or conditions which, in
the aggregate, would have, or insofar as reasonably can be
foreseen, could have, a CalEnergy Material Adverse Effect or a
MidAmerican Material Adverse Effect, or which would be materially
inconsistent with the agreements of the parties contained herein.
The term "Final Order" shall mean action by the relevant
regulatory authority which has not been reversed, stayed,
enjoined, set aside, annulled or suspended, with respect to which
any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to
which all conditions to the consummation of such transactions
prescribed by law, regulation or order have been satisfied.
(d) HSR Act. All applicable waiting periods under the HSR
Act shall have expired or been terminated.
Section 8.2. Conditions to Obligation of MidAmerican to Effect
the Merger. The obligation of MidAmerican to effect the Merger
shall be further subject to the satisfaction, on or prior to the
Closing Date, of the following conditions, except as may be
waived by MidAmerican in writing pursuant to Section 9.5:
(a) Performance of Obligations of CalEnergy and Parent.
CalEnergy and Parent (and/or appropriate CalEnergy and Parent
Subsidiaries) will have performed in all material respects its
agreements and covenants contained in or contemplated by this
Agreement, which are required to be performed by it at or prior
to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of CalEnergy set forth in Sections 4.1, 4.4(a),
4.4(b), 4.4(c), 4.8, 4.13, 4.15 and 4.17 of this Agreement shall
be true and correct in all material respects (or where any
statement in a representation or warranty expressly includes a
standard of materiality, such statement shall be true and correct
in all respects) as of the date hereof (except to the extent such
representations and warranties speak as of an earlier or later
date) and as of the Closing Date as if made on and as of the
Closing Date, except as otherwise contemplated by this Agreement.
(c) Closing Certificates. MidAmerican shall have received a
certificate signed by the chief executive officer and the chief
financial officer of Parent, dated the Closing Date, to the
effect that, to the best of such officers' knowledge, the
conditions set forth in Section 8.2(a) and Section 8.2(b) have
been satisfied.
(d) Legal Opinions as to Corporate and Regulatory Matters.
MidAmerican shall have received the opinions of (i) Willkie Farr
& Gallagher, Parent's special counsel, in form and substance
customary for transactions of this type and reasonably
satisfactory to MidAmerican, dated the Effective Time, as to the
authorization, validity and enforceability of this Agreement and
(ii) Akin, Gump, Strauss, Hauer & Feld, L.L.P., Parent's special
regulatory counsel, in form and substance customary for
transactions of this type and reasonably satisfactory to
MidAmerican, dated the Effective Time, as to certain regulatory
matters, including that all regulatory approvals, permits and
consents have been obtained; provided, that such firms may
reasonably rely on local counsel as to matters of local law.
(e) Consulting Agreement. Parent shall have duly executed and
delivered the Consulting Agreement of Stanley J. Bright, and such
agreement shall be in full force and effect.
Section 8.3. Conditions to Obligation of CalEnergy, Parent and
Merger Sub to Effect the Merger. The obligation of CalEnergy,
Parent and Merger Sub to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of
the following conditions, except as may be waived by CalEnergy in
writing pursuant to Section 9.5:
(a) Performance of Obligations of MidAmerican. MidAmerican
(and/or appropriate MidAmerican Subsidiaries) will have performed
in all material respects its agreements and covenants contained
in or contemplated by this Agreement which are required to be
performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and
warranties of MidAmerican set forth in this Agreement shall be
true and correct in all material respects (or where any statement
in a representation or warranty expressly includes a standard of
materiality, such statement shall be true and correct in all
respects) as of the date hereof (except to the extent such
representations and warranties speak as of an earlier or later
date) and as of the Closing Date as if made on and as of the
Closing Date, except as otherwise contemplated by this Agreement.
(c) MidAmerican Material Adverse Effect. No MidAmerican
Material Adverse Effect shall have occurred and there shall exist
no fact or circumstance that would or, insofar as reasonably can
be foreseen, could have a MidAmerican Material Adverse Effect.
(d) MidAmerican Required Consents. The MidAmerican Required
Consents shall have been obtained.
(e) Closing Certificates. Parent shall have received a
certificate signed by the chief executive officer and the chief
financial officer of MidAmerican, dated the Closing Date, to the
effect that, to the best of such officers' knowledge, the
conditions set forth in Sections 8.3(a), (b), (c) and (d) have
been satisfied.
(f) CalEnergy Required Consents. The CalEnergy Required
Consents shall have been obtained.
(g) Legal Opinion as to Corporate and Regulatory Matters. Parent
shall have received an opinion of LeBoeuf, Lamb, Greene & MacRae,
L.L.P., MidAmerican's special counsel, in form and substance customary
for transactions of this type and reasonably satisfactory to Parent,
dated the Effective Time, as to the authorization, validity and
enforceability of this Agreement and as to certain regulatory matters,
including that all regulatory approvals, permits and consents have
been obtained; provided, that such firm may reasonably rely on local
counsel as to matters of local law.
(h) Consulting Agreement. Stanley J. Bright shall have
duly executed and delivered his Consulting Agreement, and such
agreement shall be in full force and effect.
(i) Listing Of Shares of Parent Common Stock. The shares of
Parent Common Stock issuable in the Reincorporation shall have
been approved for listing on the NYSE upon official notice of
issuance.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at
any time prior to the Closing Date, whether before or after
approval by the stockholders of the respective parties hereto
contemplated by this Agreement:
(a) by mutual written consent of the Boards of Directors of
MidAmerican and CalEnergy;
(b) by any party hereto, by written notice to the other, if
the Effective Time shall not have occurred on or before March 31,
1999; provided, that such date shall automatically be changed to
December 31, 1999 if on March 31, 1999 the condition set forth in
Section 8.1(c) has not been satisfied or waived and the other
conditions to the consummation of the transactions contemplated
hereby are then capable of being satisfied, and the approvals
required by Section 8.1(c) which have not yet been obtained are
being pursued with diligence; and provided, further, that the
right to terminate this Agreement under this Section 9.1(b) shall
not be available to any party whose failure to fulfill any
obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or
before such date;
(c) by any party hereto, by written notice to the other party,
if the CalEnergy Stockholders' Approval shall not have been
obtained at a duly held CalEnergy Meeting, including any
adjournments thereof; or the MidAmerican Stockholders' Approval
shall not have been obtained at a duly held MidAmerican Meeting,
including any adjournments thereof;
(d) by any party hereto, if any state or federal law, order,
rule or regulation is adopted or issued, which has the effect, as
supported by the written opinion of outside counsel for such
party, of prohibiting either the Merger or the Reincorporation,
or by any party hereto, if any court of competent jurisdiction in
the United States or any State shall have issued an order,
judgment or decree permanently restraining, enjoining or
otherwise prohibiting either the Merger or the Reincorporation,
and such order, judgment or decree shall have become final and
nonappealable; provided, that such terminating party shall have
complied with its obligations pursuant to Section 10.9;
(e) by CalEnergy, upon two days' prior notice to MidAmerican,
if, as a result of an Acquisition Proposal for CalEnergy, the
Board of Directors of CalEnergy determines in good faith that
their fiduciary obligations under applicable law require that
such Acquisition Proposal be accepted; provided, however, that
(i) the Board of Directors of CalEnergy shall have been advised
in writing by outside counsel that notwithstanding a binding
commitment to consummate an agreement of the nature of this
Agreement entered into in the proper exercise of their applicable
fiduciary duties, such fiduciary duties could also reasonably be
expected to require the directors to reconsider such commitment
as a result of such Acquisition Proposal; (ii) the person making
the Acquisition Proposal shall have acknowledged and agreed in
writing to pay the termination and other fees set forth in
Section 9.3 if such Acquisition Proposal is consummated or any
other Acquisition Proposal is consummated with such person or any
of its affiliates and (iii) prior to any such termination,
CalEnergy shall, and shall cause its respective financial and
legal advisors to, negotiate with MidAmerican to make such
adjustments in the terms and conditions of this Agreement as
would enable CalEnergy to proceed with the transactions
contemplated herein; provided, further, that CalEnergy and
MidAmerican acknowledge and affirm that notwithstanding anything
in this Section 9.1(e) to the contrary, the parties hereto intend
this Agreement to be an exclusive agreement and, accordingly,
nothing in this Agreement is intended to constitute a
solicitation of an Acquisition Proposal, it being acknowledged
and agreed that any such Acquisition Proposal would interfere
with the strategic advantages and benefits which the parties
expect to derive from the Merger;
(f) by MidAmerican, upon two days' prior notice to CalEnergy
if, as a result of an Acquisition Proposal for MidAmerican, the
Board of Directors of MidAmerican determines in good faith that
their fiduciary obligations under applicable law require that
such Acquisition Proposal be accepted; provided, however, that
(i) the Board of Directors of MidAmerican shall have been advised
in writing by outside counsel that notwithstanding a binding
commitment to consummate an agreement of the nature of this
Agreement entered into in the proper exercise of their applicable
fiduciary duties, such fiduciary duties could also reasonably be
expected to require the directors to reconsider such commitment
as a result of such Acquisition Proposal; (ii) the person making
the Acquisition Proposal shall have acknowledged and agreed in
writing to pay the termination and other fees set forth in
Section 9.3 if such Acquisition Proposal is consummated or any
other Acquisition Proposal is consummated with such person or any
of its affiliates and (iii) prior to any such termination,
MidAmerican shall, and shall cause its respective financial and
legal advisors to, negotiate with CalEnergy to make such
adjustments in the terms and conditions of this Agreement as
would enable MidAmerican to proceed with the transactions
contemplated herein; provided, further, that CalEnergy and
MidAmerican acknowledge and affirm that notwithstanding anything
in this Section 9.1(f) to the contrary, the parties hereto intend
this Agreement to be an exclusive agreement and, accordingly,
nothing in this Agreement is intended to constitute a
solicitation of an Acquisition Proposal, it being acknowledged
and agreed that any such Acquisition Proposal would interfere
with the strategic advantages and benefits which the parties
expect to derive from the Merger;
(g) by CalEnergy, by written notice to MidAmerican, if (i)
there shall have been any material breach of any representation
or warranty, or any material breach of any covenant or
agreement, of MidAmerican hereunder, and such breach shall not
have been remedied within twenty days after receipt by
MidAmerican of notice in writing from CalEnergy, specifying the
nature of such breach and requesting that it be remedied; or (ii)
the Board of Directors of MidAmerican (A) shall withdraw or
modify in any manner adverse to CalEnergy its approval of this
Agreement and the transactions contemplated hereby or its
recommendation to its stockholders regarding the approval of this
Agreement, (B) shall fail to reaffirm such approval or
recommendation upon the request of CalEnergy, (C) shall approve
or recommend any Acquisition Proposal or (D) shall resolve to
take any of the actions specified in clause (A), (B) or (C);
provided, however, that CalEnergy and MidAmerican acknowledge and
affirm that notwithstanding anything in this Section 9.1(g)(ii)
to the contrary, the parties hereto intend this Agreement to be
an exclusive agreement and, accordingly, nothing in this
Agreement is intended to constitute a solicitation of an
Acquisition Proposal, it being acknowledged and agreed that any
such offer or proposal would interfere with the strategic
advantages and benefits which the parties expect to derive from
the Merger;
(h) by MidAmerican, by written notice to CalEnergy, if (i)
there shall have been any material breach of any representation
or warranty contained in Sections 4.1, 4.4(a), 4.4(b), 4.4(c),
4.8, 4.13, 4.15 and 4.17, or any material breach of any covenant
or agreement (which shall be deemed to include, for this purpose
only, the failure of CalEnergy to deliver the cash to the
Exchange Agent pursuant to Section 2.3(a), assuming all other
conditions to Closing have been satisfied or otherwise waived in
writing by CalEnergy), of CalEnergy hereunder, and such breach
shall not have been remedied within twenty days after receipt by
CalEnergy of notice in writing from MidAmerican, specifying the
nature of such breach and requesting that it be remedied; or (ii)
the Board of Directors of CalEnergy (A) shall withdraw or modify
in any manner adverse to MidAmerican its approval of this
Agreement and the transactions contemplated hereby or its
recommendation to its stockholders regarding the approval of this
Agreement, (B) shall fail to reaffirm such approval or
recommendation upon the request of MidAmerican, (C) shall approve
or recommend any Acquisition Proposal or (D) shall resolve to
take any of the actions specified in clause (A), (B) or (C);
provided, however, that CalEnergy and MidAmerican acknowledge and
affirm that notwithstanding anything in this Section 9.1(h)(ii)
to the contrary, the parties hereto intend this Agreement to be
an exclusive agreement and, accordingly, nothing in this
Agreement is intended to constitute a solicitation of an offer or
proposal for an Acquisition Proposal, it being acknowledged and
agreed that any such offer or proposal would interfere with the
strategic advantages and benefits which the parties expect to
derive from the Merger.
Section 9.2. Effect of Termination. In the event of
termination of this Agreement by either MidAmerican or CalEnergy
pursuant to Section 9.1, there shall be no liability on the part
of either CalEnergy or MidAmerican or their respective officers
or directors hereunder, except as provided in Section 7.9 and 9.3
and except that the agreement contained in the last sentence of
Section 7.1 shall survive the termination.
Section 9.3. Termination Fee; Expenses.
(a) Termination Fee. If this Agreement (i) is terminated at
such time that this Agreement is terminable pursuant to one of
Section 9.1(g)(i) or Section 9.1(h)(i) (other than in
circumstances described in Section 9.3(c)) but not the other
(provided, that, for purposes of this Section 9.3 only,
representations and warranties made by MidAmerican with respect
to each of the Quad Cities Station nuclear generation facility
and the Ottumwa Unit coal burning generation facility shall be
deemed to be made to MidAmerican's knowledge), (ii) is terminated
pursuant to Section 9.1(e) or Section 9.1(f) or (iii) is
terminated by MidAmerican pursuant to Section 9.1(b) at any time
on or after December 31, 1999 when the only approval required by
Section 8.1(c) which has not yet been obtained is the CalEnergy
Required Statutory Approval described in Section 4.4(c)(ii) of
the CalEnergy Disclosure Schedule and the other conditions to the
consummation of the transactions contemplated by this Agreement
are then capable of being satisfied, then (A) in the event of
such a termination pursuant to Section 9.1(f) or Section
9.1(g)(i), MidAmerican shall pay to CalEnergy, and (B) in the
event of such a termination pursuant to Section 9.1(e), Section
9.1(h)(i) or Section 9.1(b), CalEnergy shall pay to MidAmerican,
promptly (but not later than five business days after such notice
is received pursuant to Section 9.1(g)(i), Section 9.1(h)(i) or
Section 9.1(b) or is given pursuant to Section 9.1(e) or Section
9.1(f)) an amount equal to $35 million in cash if required to be
paid by CalEnergy and $35 million in cash if required to be paid
by MidAmerican, plus in each case cash in an amount equal to all
documented out-of-pocket expenses and fees incurred by the other
party (including, without limitation, fees and expenses payable
to all legal, accounting, financial, public relations and other
professional advisors arising out of, in connection with or
related to the Merger or the transactions contemplated by this
Agreement) not in excess of $10 million.
(b) Additional Termination Fees. If (i) this Agreement (w) is
terminated by any party pursuant to Section 9.1(e) or Section
9.1(f), (x) is terminated following a failure of the stockholders
of MidAmerican or CalEnergy to grant the necessary approvals
described in Section 4.13 or Section 5.13, (y) is terminated as a
result of such party's material breach of Section 7.4 or (z) is
terminated pursuant to Section 9.1(g)(i) or Section 9.1(h)(i) as
a result of such party's breach, and (ii) at the time of such
termination or prior to the meeting of such party's stockholders
there shall have been an Acquisition Proposal involving, such
party or its affiliates which at the time of such termination or
of the meeting of such party's stockholders shall not have been
(x) rejected by such party and its Board of Directors and (y)
withdrawn by the third-party and (iii) within two years of any
such termination described in clause (i) above, the party or its
affiliate which is the target of the Acquisition Proposal
("Target Party") becomes a subsidiary or part of such offeror or
a subsidiary or part of an affiliate of such offeror, or merges
with or into the offeror or a subsidiary or affiliate of the
offeror or enters into a definitive agreement to consummate an
Acquisition Proposal with such offeror or affiliate thereof, then
(A) in the event MidAmerican or one of its affiliates is the
Target Party, MidAmerican shall pay to CalEnergy and (B) in the
event CalEnergy or one of its affiliates is the Target Party,
CalEnergy shall pay to MidAmerican, at the closing of the
transaction (and as a condition to the closing) in which such
Target Party becomes such a subsidiary or part of such other
person or the closing of such Acquisition Proposal occurs, an
additional termination fee equal to $60 million in cash if
required to be paid by CalEnergy and $60 million in cash if
required to be paid by MidAmerican.
(c) If this Agreement is terminated by MidAmerican, by written
notice to CalEnergy, due to the failure of CalEnergy to deliver
the amount of cash to the Exchange Agent required pursuant to
Section 2.3(a) at a time when all conditions to CalEnergy's
obligation to close have been satisfied or otherwise waived in
writing by CalEnergy, then CalEnergy shall pay to MidAmerican a
termination fee of $60 million; provided, however, that CalEnergy
shall have no liability under this Section 9.3(c) (or for any
breach of covenant pursuant to Section 9.3(a)) as a result of
such failure if such failure is the direct result of the
inability of CalEnergy to finance the transaction because of the
occurrence of any significant disruptions or material adverse
changes (i) in the market for new issues of senior debt
securities, credit facilities or common, preferred or equity-
linked securities by a company having financial characteristics
similar to those of CalEnergy or a holding company for
MidAmerican, respectively, as of the date of this Agreement, or
(ii) in the financial or capital markets in general which make it
impracticable for a company having financial characteristics
similar to those of CalEnergy or a holding company for
MidAmerican, respectively, as of the date of this Agreement, to
finance a transaction of the size and nature as that contemplated
hereunder on commercially reasonable financing terms that are
available as of the date of such financing.
(d) Expenses. The parties agree that the agreements
contained in this Section 9.3 are an integral part of the
transactions contemplated by this Agreement and constitute
liquidated damages and not a penalty. Notwithstanding anything
to the contrary contained in this Section 9.3, if one party fails
to promptly pay to the other any fee or expense due under this
Section 9.3, in addition to any amounts paid or payable pursuant
to such Section, the defaulting party shall pay the costs and
expenses (including legal fees and expenses) in connection with
any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the
amount of any unpaid fee at the publicly announced prime rate of
Citibank, N.A. from the date such fee was required to be paid.
(e) Limitation Of Fees. Notwithstanding anything herein to
the contrary, the aggregate amount payable by MidAmerican
pursuant to Sections 9.3(a) and (b) and (c) shall not exceed $95
million and the aggregate amount payable by CalEnergy pursuant to
Sections 9.3(a), (b) and (c) shall not exceed $95 million, in
each case, plus expenses, as provided in Section 9.3(a).
Section 9.4. Amendment. This Agreement may be amended by
the Boards of Directors of the parties hereto, at any time before
or after approval hereof by the stockholders of MidAmerican and
CalEnergy and prior to the Effective Time, but after such
approvals, no such amendment shall (a) alter or change the Per
Share Amount under Article II or (b) alter or change any of the
terms and conditions of this Agreement if any of the alterations
or changes, alone or in the aggregate, would materially adversely
affect the rights of holders of MidAmerican Common Stock or
CalEnergy Common Stock, except for alterations or changes that
could otherwise be adopted by the Board of Directors of
MidAmerican or CalEnergy, without the further approval of such
stockholders, as applicable. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of
the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective
Time, the parties hereto may (a) extend the time for the
performance of any of the obligations or other acts of the other
parties hereto, (b) waive any inaccuracies in the representations
and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein, to the extent
permitted by applicable law. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid if
set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. Non-Survival; Effect of Representations and
Warranties. No representations or warranties in this Agreement
shall survive the Effective Time, except as otherwise provided in
this Agreement.
Section 10.2. Brokers. CalEnergy represents and warrants that,
except for CSFB and Lehman whose fees have been disclosed to
MidAmerican prior to the date of this Agreement, no broker,
finder or investment banker is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger
or the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of CalEnergy. MidAmerican
represents and warrants that, except for Dillon Read, whose fees
have been disclosed to CalEnergy prior to the date of this
Agreement, no broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of
MidAmerican.
Section 10.3. Notices. All notices and other communications
hereunder shall be in writing and shall be deemed given (a) when
delivered personally, (b) when sent by reputable overnight
courier service or (c) when telecopied (which is confirmed by
copy sent within one business day by a reputable overnight
courier service) to the parties at the following addresses (or at
such other address for a party as shall be specified by like
notice):
(i) If to CalEnergy or Merger Sub, to:
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Attn: Chief Executive Officer
Telecopy: (402) 345-9318
Telephone: (402) 341-4500
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attn: Peter J. Hanlon, Esq.
Telecopy: (212) 728-8111
Telephone: (212) 728-8000
and
(ii) if to MidAmerican, to:
MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50306-9244
Attn: Chief Executive Officer
Telecopy: (515) 281-2216
Telephone: (515) 242-4300
with a copy to:
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: Douglas W. Hawes, Esq.
Telecopy: (212) 424-8500
Telephone: (212) 424-8000
Section 10.4. Miscellaneous. This Agreement (a) constitutes the
entire agreement and supersedes all other prior agreements and
understandings, both written and oral, among the parties, or any
of them, with respect to the subject matter hereof (other than
the Confidentiality Agreement), (b) shall not be assigned by
operation of law or otherwise and (c) shall be governed by and
construed in accordance with the laws of the State of Delaware
applicable to contracts executed in and to be fully performed in
such State, without giving effect to its conflicts of law rules
or principles and except to the extent the provisions of this
Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from
the Iowa Act.
Section 10.5. Interpretation. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a
Section or Exhibit of this Agreement, respectively, unless
otherwise indicated. The table of contents and headings
contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation."
Section 10.6. Counterparts; Effect. This Agreement may be
executed in one or more counterparts, each of which shall be
deemed to be an original, but all of which shall constitute one
and the same agreement.
Section 10.7. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly
agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any
court of the United States located in the State of New York or in
New York state court, this being in addition to any other remedy
to which they are entitled at law or in equity. In addition, each
of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State
of New York or any New York state court in the event any dispute
arises out of this Agreement or any of the transactions
contemplated by this Agreement, (b) agrees that it will not
attempt to deny such personal jurisdiction by motion or other
request for leave from any such court and (c) agrees that it will
not bring any action relating to this Agreement or any of the
transactions contemplated by this Agreement in any court other
than a federal or state court sitting in the State of New York.
Section 10.8. Parties in Interest. This Agreement shall be
binding upon and inure solely to the benefit of each party
hereto, and, except for rights of Indemnified Parties as set
forth in Section 7.5, nothing in this Agreement, express or
implied, is intended to confer upon any other person any rights
or remedies of any nature whatsoever under or by reason of this
Agreement.
Section 10.9. Further Assurances. Each party will execute such
further documents and instruments and take such further actions
as may reasonably be requested by any other party in order to
consummate the Merger and the Reincorporation in accordance with
the terms hereof. CalEnergy and MidAmerican expressly
acknowledge that, although it is their current intention to
effect a business combination among themselves by means of the
Merger and the Reincorporation, it may be preferable for
CalEnergy and MidAmerican to effectuate such a business
combination by means of an alternative structure in light of the
conditions set forth in Sections 8.1(c) and 8.3(d) and (f).
Accordingly, if the only conditions to the parties' obligations
to consummate the Merger and the Reincorporation which are not
satisfied or waived are receipt of CalEnergy Required Consents,
CalEnergy Required Statutory Approvals, MidAmerican Required
Consents and MidAmerican Required Statutory Approvals that, in
the reasonable judgment of MidAmerican or CalEnergy, would be
rendered unnecessary by adoption of an alternative structure that
otherwise substantially preserves for CalEnergy and MidAmerican
the economic benefits of the Merger and the Reincorporation,
MidAmerican or CalEnergy, as the case may be, shall notify the
other of such judgment no later than 5:00 p.m. Central Time on
March 31, 1999 and thereafter the parties shall use their best
efforts to effect a business combination among themselves by
means of a structure other than the Merger and the
Reincorporation that so preserves such benefits; provided, that
all material third party and Governmental Authority declarations,
filings, registrations, notices, authorizations, consents or
approvals necessary for the effectuation of such alternative
business combination shall have been obtained and all other
conditions to the parties' obligations to consummate the Merger
and the Reincorporation, as applied to such alternative
business combination, shall have been satisfied or waived.
Section 10.10. Waiver Of Jury Trial. Each party to this
Agreement waives, to the fullest extent permitted by applicable
law, any right it may have to a trial by jury in respect of any
action, suit or proceeding arising out of or relating to this
Agreement.
Section 10.11. Certain Definitions. The term "affiliate," except
where otherwise defined herein, shall mean, as to any Person, any
other Person which directly or indirectly controls, or is under
common control with, or is controlled by, such Person. The term
"control" (including, with its correlative meanings, "controlled
by" and "under common control with") shall mean possession,
directly or indirectly, of power to direct or cause the direction
of management or policies (whether through ownership of
securities or partnership or other ownership interests, by
contract or otherwise).
IN WITNESS WHEREOF, CalEnergy, MidAmerican, Reincorporation
Sub and Merger Sub have caused this Agreement as of the date
first written above to be signed by their respective officers
thereunto duly authorized.
CALENERGY COMPANY, INC.
By:/s/ David L. Sokol
Name: David L. Sokol
Title: Chairman and Chief
Executive Officer
MIDAMERICAN ENERGY HOLDINGS COMPANY
By:/s/ Stanley J. Bright
Name: Stanley J. Bright
Title: Chairman, President and
Chief Executive Officer
MAVH INC.
By:/s/ David L. Sokol
Name: David L. Sokol
Title: Chairman and Chief
Executive Officer
MAVERICK REINCORPORATION SUB, INC.
By:/s/ David L. Sokol
Name: David L. Sokol
Title: Chairman and Chief
Executive Officer
INDEX OF DEFINED TERMS
Term Page
1935 Act 8
Acquisition Proposal 55
affiliate 69
Agreement 1
CalEnergy 1, 18
CalEnergy Benefit Plans 17
CalEnergy Common Stock 6
CalEnergy Disclosure Schedule 8
CalEnergy Financial Statements 12
CalEnergy Joint Venture 8
CalEnergy Material Adverse Effect 7
CalEnergy Meeting 51
CalEnergy Required Consents 10
CalEnergy Required Statutory Approvals 10
CalEnergy SEC Reports 12
CalEnergy Share Price 6
CalEnergy Stock Plans 9
CalEnergy Stockholders' Approval 24
CalEnergy Subsidiary 8
Closing 7
Closing Agreement 15
Closing Date 7
Code 14
Confidentiality Agreement 49
Consulting Agreement 55
control 69
CSFB 24
Dillon Read 41
Disclosure Schedules 53
Dissenting Shares 3
Effective Time 2
Environmental Claim 21
Environmental Laws 21
Environmental Permits 22
ERISA 17
Excess Parachute Payments 38
Exchange Act 11
Exchange Agent 4
Exchange Ratio 6
FERC 12
Final Order 57
GAAP 12
Governmental Authority 10
Hazardous Materials 21
HSR Act 50
Indemnified Liabilities 51
Indemnified Parties 51
Indemnified Party 51
Independent Counsel 51
Iowa Act 1
IRS 16
Joint Proxy Statement 31
Joint Venture 8
Lehman 24
Liens 8
Merger 1
Merger Sub 1
MidAmerican 1
MidAmerican Benefit Plans 35
MidAmerican Common Stock 1
MidAmerican Disclosure Schedule 25
MidAmerican Financial Statements 30
MidAmerican Joint Venture 25
MidAmerican Material Adverse Effect 25
MidAmerican Meeting 50
MidAmerican Option Plan 6
MidAmerican Options 6
MidAmerican Required Consents 28
MidAmerican Required Statutory Approvals 28
MidAmerican Rights 3
MidAmerican Rights Agreement 42
MidAmerican SEC Reports 30
MidAmerican Stockholders' Approval 41
MidAmerican Subsidiary 25
MidAmerican Utility 26
MidAmerican Utility Preferred Stock 27
Parent 3
Parent Common Stock 6
PBGC 19
Per Share Amount 3
Power Act 29
Purchaser Information 13
PURPA 11
Reincorporation 3
Reincorporation Sub 1
Release 22
Representatives 48
SEC 12
Securities Act 11
Shares 1, 3
Subsidiary 7
Surviving Corporation 1
Target Party 64
Tax Return 14
Tax Ruling 15
Taxes 14
Violation 10
Voting Debt 9
For Immediate Release
CalEnergy and MidAmerican Announce Merger and
600 MW Merchant Plant Opportunity
DES MOINES, IOWA, AUGUST 12, 1998 --- The Boards of CalEnergy
Company, Inc. ("CalEnergy") (NYSE: CE) and MidAmerican Energy
Holdings Company ("MidAmerican") (NYSE: MEC) today announced
that they have approved a definitive merger agreement, details of
which are as follows:
O CalEnergy will pay $27.15 in cash for each MidAmerican
common share outstanding, valuing MidAmerican at approximately
$4.0 billion, including $1.4 billion of debt and preferred stock
which will remain outstanding at MidAmerican as a result of this
transaction.
O MidAmerican will become a wholly owned subsidiary of
CalEnergy.
O The combined enterprise will have total assets of $11.8
billion, total annual revenues of approximately $5 billion and
will serve over 3.3 million retail customers. CalEnergy expects
the transaction to be accretive to its earnings in the first full
year of combined operations.
O CalEnergy will reincorporate in the State of Iowa and be
renamed MidAmerican Energy Holdings Company. The company's
corporate headquarters will be located in Des Moines, Iowa;
however, the office of the Chairman will remain in Omaha,
Nebraska to focus on strategic planning, mergers and
acquisitions, and global development.
O David Sokol, the current Chairman and Chief Executive
Officer of CalEnergy, will continue in this role in the combined
enterprise. Stanley Bright, the current Chairman, President and
Chief Executive Officer of MidAmerican will become Vice Chairman
of the Board and a member of its Executive Committee.
O Heading the parent company from the Des Moines headquarters
will be Greg Abel. He will serve as President and Chief
Operating Officer for the combined entity.
The proposed transaction combines MidAmerican, a leading regional
provider of low-cost energy and related services that serves
approximately 1.3 million electric and gas customers in Iowa and
three neighboring states, with CalEnergy, a global energy company
that manages and owns power generation facilities and other
energy assets in the United States, Asia and Europe and supplies
and distributes electricity and gas to 2.0 million customers in
the United Kingdom.
-more-
CalEnergy/MidAmerican Energy
August 12, 1998
Page -2-
Commenting on the transaction, David Sokol said: "In merging our
companies, we are combining two leaders in complementary markets
to create a balanced and powerful company. MidAmerican brings a
management team with U.S. utility market knowledge and expertise
in coal-fired generation, call center operations, customer
service and distribution processes, as well as a portfolio of low-
cost and efficient operating assets. When combined with
CalEnergy's successful track record in operating a regional gas
and electric utility in the U.K.'s deregulated environment, and
its history of aggressive growth in energy markets throughout the
world, we have created a formidable competitor in the
deregulating energy markets of the U.S. and beyond.
"I am delighted that we have reached an agreement with a company
that is not only our neighbor geographically, but also shares
similar beliefs in the value of excellent and innovative service
for our customers and manages an extraordinary team of employees.
I am also personally very excited about having the talented and
dedicated group of employees at MidAmerican join our team."
Stan Bright said: "This partnership preserves the character of
MidAmerican to the benefit of our employees, our customers and
our communities. We are combining two excellent management teams
and expect no significant personnel changes because there are few
duplicative positions between our companies, and we are not
merging utility operations. Our personnel and facilities in
Sioux City, Davenport and Des Moines will remain integral to our
success in the future."
Bright added: "This adds the scale and expertise that will make
us significantly stronger and even more capable of delivering on
our promises to our customers to provide them with excellent
service at the best possible value. Through this transaction we
will move closer to our goal of regional leadership, while we are
part of a fast-growing global energy enterprise. It is a great
deal for our customers, our employees and for our midwest
region."
The merger agreement is subject to approval by the shareholders
of both companies and the following regulatory agencies: the
Federal Energy Regulatory Commission, the Nuclear Regulatory
Commission and the Iowa Utilities Board. A filing will also be
made with the Federal Trade Commission and Department of Justice
under the Hart-Scott Rodino Antitrust Improvements Act.
Completion of the merger is expected to occur the first quarter
of 1999.
In a related development, the companies announced they had signed
a letter of intent to pursue development of a 600 megawatt gas-
fired power plant, which would sell power on a merchant basis
into Illinois and other markets. David Sokol stated: "This
provides an excellent concrete example of the benefits of
bringing these two companies together. We can immediately
combine MidAmerican's local permitting and regional energy
trading expertise with CalEnergy's generation development and
construction expertise, to pursue opportunities from existing
available sites as the midwest power market deregulates."
CalEnergy was advised by Credit Suisse First Boston Corp. and
Lehman Brothers Inc. and MidAmerican was advised by Warburg
Dillon Read LLC.
-more-
CalEnergy/MidAmerican Energy
August 12, 1998
Page -3-
CalEnergy is a global energy company that manages and owns
interests in over 5,000 net megawatts of power generation
facilities in operation, construction and development worldwide.
Through its U.K. subsidiary, CalEnergy supplies and distributes
electricity and gas to 2.0 million customers in the United
Kingdom. CalEnergy produces energy from diversified fuel sources
including geothermal, natural gas and hydroelectric. CalEnergy
conducts business in the U.S., U.K., Philippines, Indonesia,
Poland and Australia, and employs more than 4,200 people
worldwide. In the year ended December 31, 1997, CalEnergy
generated revenues of over $2.2 billion and had assets of
approximately $7.5 billion. CalEnergy's headquarters are based
in Omaha, Nebraska. Information about CalEnergy is available on
the Internet at http://www.calenergy.com.
MidAmerican, Iowa's largest energy company, provides electric
service to 648,000 customers and natural gas service to 619,000
customers in Iowa, Illinois, Nebraska and South Dakota. Company
headquarters are in Des Moines, Iowa. Information about
MidAmerican is available on the Internet at
http://www.midamerican.com.
Press Contacts:
MidAmerican Energy Holdings Company
Kevin Waetke, Media Relations Manager (515) 281-2785
Ron Giaier, Vice President and Treasurer (515) 242-4303
CalEnergy Company, Inc.
Patti McAtee, Director, Corporate Communications (402)231-1519
Craig Allen, Manager, Investor Relations (402)231-1673
Lucas van Praag, Brunswick - London Office 011-44-171-404-5959
Tiffany Markofsky, Brunswick - New York Office (212)333-3810
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