UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [x]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[x] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Sect. 240.14a-11(c) or Sect. 240.14a-12
KENETECH CORPORATION
(Name of Registrant as Specified In Its Charter)
Board of Directors
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
[x] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or 04
14a-6(j)(2).
[ ] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
1) Title of each class of securities to which transaction applies:
2) Aggregate number of securities to which transaction applies:
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:
4) Proposed maximum aggregate value of transaction:
Set forth the amount on which the filing fee is calculated and state
how it was determined.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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<PAGE>
KENETECH CORPORATION
500 SANSOME STREET
SAN FRANCISCO, CALIFORNIA 94111
July 1, 1996
Dear Stockholder:
Enclosed you will find your 1996 Proxy, Proxy Statement and Notice of
Annual Meeting of Stockholders of KENETECH Corporation. Please review this
material and then complete, execute and date the enclosed Proxy and promptly
return it in the enclosed self-addressed postage-prepaid envelope in time for
the annual meeting in August. It will be held on Wednesday, August 7, 1996,
at 10:00 A.M., at KENETECH's offices, 6952 Preston Avenue, Livermore,
California. We hope you can attend.
We ask that you (1) elect this year's three nominees to the Board of
Directors for three year terms, and (2) ratify the Board of Director's
appointment of KPMG/Peat Marwick LLP as the Company's independent auditors
for the 1996 fiscal year.
Also enclosed is your copy of the Company's 1995 Annual Report.
We welcome any comments you have and hope to see you at the annual
meeting.
WHETHER OR NOT YOU INTEND TO ATTEND THE ANNUAL MEETING, PLEASE READ THE
PROXY STATEMENT AND COMPLETE, EXECUTE, DATE AND RETURN THE ENCLOSED PROXY AS
SOON AS POSSIBLE. THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND THAT YOU
VOTE IN FAVOR OF ALL PROPOSALS.
Very truly yours,
Mark D. Lerdal
President and
Chief Executive Officer
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<PAGE>
KENETECH CORPORATION
500 Sansome Street, Suite 300
San Francisco, CA 94111
NOTICE OF 1996 ANNUAL MEETING OF STOCKHOLDERS
Wednesday, August 7, 1996
10:00 A.M.
TO THE STOCKHOLDERS:
The Annual Meeting of Stockholders of KENETECH Corporation (the
"Company") will be held at KENETECH's offices, 6952 Preston Avenue,
Livermore, California, on Wednesday, August 7, 1996, at 10:00 A.M., for the
purpose of:
1. Electing three directors as Class III Directors of the Company to
hold office for three-year terms;
2. Ratifying the Board of Director's appointment of independent
auditors to audit the financial statements of the Company for the 1996 fiscal
year; and
3. Acting upon all other matters which may properly come before the
meeting.
Stockholders of record at the close of business on June 10, 1996 are
entitled to notice of, and to vote at, the meeting and any one or more
adjournments or postponements thereof. A list of such stockholders will be
available at the time and place of the meeting and, during the ten days prior
to the meeting, at the office of the Secretary of the Company, 500 Sansome
Street, Suite 300, San Francisco, California, 94111.
By Order of the Board of Directors
Dianne P. Urhausen
Secretary
San Francisco, California
July 1, 1996
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<PAGE>
KENETECH CORPORATION
500 Sansome Street
San Francisco, California 94111
PROXY STATEMENT
ANNUAL MEETING - 10:00 A.M., AUGUST 7, 1996
INFORMATION REGARDING DATE, TIME AND PLACE OF MEETING, AND PROXIES
This Proxy Statement is furnished in connection with the solicitation
of proxies by the Board of Directors of KENETECH Corporation (the "Company"),
to be voted at the Annual Meeting of Stockholders at 10:00 A.M., Pacific
Daylight Time, on Wednesday, August 7, 1996 and at any and all adjournments
or postponements thereof. Such Annual Meeting will be held at the Company's
offices, 6952 Preston Avenue, Livermore, California.
Solicitation of proxies by mail (including the mailing of the Proxy
Statement and the accompanying form of proxy to stockholders) is expected to
commence on or about July 1, 1996 and the cost thereof will be borne by the
Company. In addition to such solicitation by mail, some of the directors,
officers and regular employees of the Company may, without extra
compensation, solicit proxies by telephone, telegraph and personal
interview. Arrangements will be made with brokerage houses, custodians,
nominees and other fiduciaries to send proxy material to their principals and
they will be reimbursed by the Company for postage and clerical expense in
doing so. The Company may retain at its expense a proxy solicitation firm to
assist it in soliciting proxies.
Votes cast by proxy or in person at the Annual Meeting will be
tabulated by the election inspectors appointed for the meeting and will
determine whether or not a quorum is present. The election inspectors will
treat abstentions as shares that are present and entitled to vote for
purposes of determining the presence of a quorum, but as unvoted for purposes
of determining the approval of any matter submitted to the stockholders for a
vote as to which any abstention is indicated. Shares as to which proxies
have been executed and not revoked will be voted as specified in the
proxies. If no specification is made, the shares will be voted (1) "FOR" the
election of the nominees for Class III Directors; and (2) "FOR" the
ratification of the appointment of KPMG/Peat Marwick LLP as the independent
auditors for the Company for the fiscal year ending December 31, 1996. If a
broker indicates on the proxy that it does not have discretionary authority
as to certain shares to vote on a particular matter, those shares will not be
considered as present and entitled to vote with respect to that matter.
Proxies may be revoked at any time prior to the exercise thereof by
filing with the secretary of the company at the company's executive offices a
written revocation. Instruction cards for beneficial holders may be revoked
in accordance with any separate directions or arrangements applicable thereto.
The principal executive offices of the Company are located at 500
Sansome Street, Suite 300, San Francisco, California 94111.
VOTING SECURITIES
The securities of the Company entitled to be voted at the meeting consist
of shares of its Common Stock $0.0001 par value ("Common Stock") and shares of
its Preferred Redeemable Increased Dividend Equity Securities, 8 1/4% PRIDES,
Convertible Preferred Stock, stated value $1,012.50 per share ("PRIDES"). Only
stockholders of record at the close of business on June 10, 1996 (the "Record
Date") will be entitled to receive notice of and to vote at the annual meeting.
Assuming a quorum is present in person or by proxy, the affirmative vote of a
majority of the votes represented is required for election of Directors.
Common Stock. Each share of Common Stock is entitled to one vote on
all matters. On the Record Date, 36,826,098 shares of Common Stock were
issued and outstanding.
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<PAGE>
PRIDES. All shares of PRIDES are deposited with and held of record by
ChaseMellon Shareholder Services, L.L.C. ("ChaseMellon"), as Depositary (the
"Depositary"). Beneficial ownership of the shares of PRIDES, however, is
held in the form of Depositary Shares for which depositary receipts are
issued in lieu of stock certificates. Each Depositary Share represents 1/50
of a share of PRIDES. On the Record Date, 102,492 shares of PRIDES,
representing 5,124,600 Depositary Shares were issued and outstanding. Each
Depositary Share is entitled to 4/5 of a vote. Each record holder of a
Depositary Share on the Record Date is entitled to instruct ChaseMellon, as
Depositary, as to the exercise of the voting rights pertaining to the number
of shares of PRIDES represented by such holder's Depositary Shares. Pursuant
to the Deposit Agreement, dated as of May 5, 1994 (the "Deposit Agreement"),
among the Company, ChaseMellon and the holders of Depositary Shares, the
Depositary will endeavor, insofar as practical, to vote the number of shares
of PRIDES represented by the holders of Depositary Shares in accordance with
their instructions. Each holder of Depositary Shares may revoke any
instruction to the Depositary at any time prior to the second business day
immediately preceding the date of the Annual Meeting by giving written notice
to the Depositary. The Depositary will abstain from voting shares of PRIDES
to the extent it does not receive specific written voting instruction from
the record holders of Depositary Shares.
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation, as amended to date, and
Restated Bylaws of the Company, as amended to date, provide for a classified
Board of Directors. A classified board is one on which the directors are
divided into classes and only one class is elected each year. The Company's
Board is divided into three classes, each having a different initial term of
office. Thereafter, each Director is elected for a term of three years. At
a Special Meeting of Stockholders held August 19, 1993, seven Directors of
the Company were elected in classes designated as Class I, Class II and Class
III, respectively.
Two vacancies on the Board of Directors were created by the
resignations of Mark J. Laskow and Lawrence M. Wagner effective June 3,
1996. Nominees have not been nominated to fill such vacancies because at the
Annual Meeting of the Board of Directors following the Annual Meeting of
Stockholders a resolution will be presented to the Board of Directors to
reduce the number of members to five. Proxies cannot be voted for a greater
number of persons than the three named nominees.
Currently the only Class I Director is Mr. Alderson; Mr. Wagner was a
Class I Director until his resignation. The term of office of a Class I
Director will expire at the 1997 Annual Meeting of Stockholders. At such
meeting, a Class I Director will be elected for a full term of three years.
Currently the only Class II Director is Mr. Pifer; Mr. Laskow was a
Class II Director until his resignation. The term of office of a Class II
Director will expire at the 1998 Annual Meeting of Stockholders. At such
meeting, a Class II Director will be elected for a full term of three years.
Currently the Class III Directors are Mr. Christenson, Mr. Duthie and
Mr. Lerdal. The term of office of the Class III Directors expires at the
1996 Annual Meeting of Stockholders and at such meeting Class III Directors
will be elected for a full term of three years.
Mr. Christenson, Mr. Duthie and Mr. Lerdal have been nominated by the
Board of Directors to be elected as Class III Directors at the 1996 Annual
Meeting of Stockholders. The nominees have consented to serve if elected,
and at the date of this Proxy Statement, the Company has no reason to believe
that any of the named nominees will be unable to act. Unless otherwise
directed, the persons named as proxies intend to vote for the election of the
nominees.
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<PAGE>
Set forth below is certain information concerning the Directors of the
Company (including the three nominees).
Name Age Position(s) with Company
Gerald R. Alderson 49 Director
Charles Christenson 65 Director
Angus M. Duthie 56 Chairman of the Board of Directors
Mark D. Lerdal 37 President, Chief Executive Officer and Director
Howard W. Pifer III 54 Director
BIOGRAPHICAL INFORMATION
KENETECH Corporation, a Delaware corporation, was formed in 1986 as a
holding company of KENETECH Windpower, Inc. (formerly, U.S. Windpower,
Inc.). References to KENETECH are, prior to 1986, references to KENETECH
Windpower, Inc.
Gerald R. Alderson has served as a Director of KENETECH since September
1983 and served as Chairman of the Board from March 16, 1995 until March 27,
1996. He served as KENETECH's President and Chief Executive Officer from
August 1981 until October 1995 and December 1995, respectively. He received
his B.A. from Occidental College and his M.B.A. from the Harvard University
Graduate School of Business Administration. He is a Class I Director with
his term expiring at the 1997 Annual Meeting of Stockholders.
Charles Christenson is the Royal Little Professor of Business
Administration, Emeritus, at the Harvard University Graduate School of
Business Administration and has served as a Director of KENETECH since
January 1980. In the past, he was Deputy for Management Systems in the
Office of the Assistant Secretary of the Air Force, and held a variety of
teaching and administrative positions at the Harvard University Graduate
School of Business Administration. He received his B.S. from Cornell
University and his M.B.A. and D.B.A. from Harvard University. He is a Class
III Director with his term expiring at the 1996 Annual Meeting of
Stockholders.
Angus M. Duthie is a general partner of Prince Ventures and has served
as a Director of KENETECH since December 1980. He was elected as Chairman of
the Board of KENETECH on March 27, 1996. Prince Ventures manages various
capital funds, in all of which F.H. Prince & Co., Inc. is a significant
investor. F.H. Prince & Co., Inc. is a privately held corporation with
business interests in real estate, as well as investments, both private and
public. Mr. Duthie is a Director of Occupational Health + Rehabilitation,
Inc. Mr. Duthie holds a B.A. from Miami University (Ohio). He is a Class
III Director with his term expiring at the 1996 Annual Meeting of
Stockholders.
Mark D. Lerdal was elected a Director of KENETECH on March 27, 1996 and
Chief Executive Officer and President on April 1, 1996. He served as Vice
President and General Counsel of KENETECH from April 1992 until March 1996.
From April 1990 to March 1992 he served as Vice President and Counsel of
KENETECH Energy Systems, Inc. He received his A.B. from Stanford University
and his J.D. from Northwestern University School of Law. He is a Class III
Director with his term expiring at the 1996 Annual Meeting of Stockholders.
Howard W. Pifer III has served as a Director of KENETECH since August
1986. A founder of Putnam, Hayes & Bartlett, Inc. ("PHB"), he served as its
Chief Executive from 1976 to 1991 and currently serves as its Chairman. He
continues to assist PHB's clients on a full-time basis, both in the United
States and worldwide. Dr. Pifer received a B.S. in chemical engineering, an
M.S. in industrial administration and a Ph.D. in economics from Carnegie
Mellon University. He is a Class II Director with his term expiring at the
1998 Annual Meeting of Stockholders.
BOARD MEETINGS AND COMMITTEES
Regular meetings of the Board of Directors of the Company are conducted
six times each year. From time to time special meetings of the Board of
Directors are conducted as required. The Board of Directors held 11 meetings
during the fiscal year ending December 31, 1995. Each Director attended 75%
or more of the aggregate number of meetings of the Board of Directors (during
the period he was a Director) and the committees of which he was a member
(during the period which he served on such committee).
6
<PAGE>
The Audit Committee was comprised of Messrs. Christenson, Duthie,
Laskow (until April 6, 1995) and Wagner during the fiscal year ending
December 31, 1995. The Audit Committee is currently comprised of Messrs.
Christenson and Duthie. The functions performed by the Audit Committee
include annually recommending to the Board of Directors the appointment of
the independent auditors of the Company; reviewing the purpose, scope and
general extent of the services of the independent auditors, their procedures
and their fees; reviewing with the independent auditors the results of their
annual audit, including any matters that the independent auditors bring to
the attention of the Audit Committee; and reviewing with those responsible
for managing the internal audit function of the Company the scope of their
procedures, reports and recommendations, and other significant aspects of
their functioning, including any matters that the personnel responsible for
managing the internal audit function bring to the attention of the Audit
Committee. The Audit Committee held six meetings during the fiscal year
ending December 31, 1995.
The Compensation Committee was comprised of Messrs. Charren (retired
from the Board of Directors March 16, 1995), Hutchinson (resigned from the
Board of Directors December 22, 1995), Laskow and Pifer during the fiscal
year ending December 31, 1995. The Compensation Committee is currently
comprised of Messr. Duthie. The functions performed by the Compensation
Committee include those identified in the Board Compensation Committee Report
on Executive Compensation. The Compensation Committee held six meetings
during the fiscal year ending December 31, 1995.
The Nominating Committee was comprised of Messrs. Christenson (until
May 25, 1995), Duthie, Hutchinson, Laskow and Pifer during the fiscal year
ending December 31, 1995. The Nominating Committee is currently comprised of
Messrs. Christenson, Duthie and Pifer. The functions performed by the
Nominating Committee include proposing and nominating directors to the Board
of Directors of the Company. The Nominating Committee did not hold any
meeting during the fiscal year ending December 31, 1995. The Nominating
Committee will not consider nominees recommended by stockholders at the 1996
Annual Meeting since pursuant to the By-laws of the Company, to be property
brought before an annual meeting, nominations for the election of directors
by stockholders must be received by the Secretary of the Company not less
than 90 days prior to the meeting.
EXECUTIVE OFFICERS
Set forth below are the names and titles of, and certain information
regarding, executive officers of the Company as of the date of this Proxy
Statement. Officers are selected by the Board of Directors from time to time
and hold office until a successor is duly elected and qualified or until his
or her earlier death, resignation or removal.
Name Age Position(s) with Company
Michael U. Alvarez 40 Vice President
Joel M. Canino 56 Chief Executive Officer of CNF Industries
James J. Eisen 40 Vice President and General Counsel
Michael A. Haas 32 Vice President
Steven A. Kern 46 President of KENETECH Windpower
Mark D. Lerdal 37 President, Chief Executive Officer and Director
Nicholas H. Politan 34 Vice President and Chief Financial Officer
Michael U. Alvarez has served as Vice President of KENETECH since July
1994 and as Vice President of KENETECH Windpower, Inc. since May 1993. He
served as Vice President of KENETECH Energy Systems, Inc. from September
1991 to December 1993 and as its President since December 1993. Prior to
joining KENETECH Energy Systems, Inc., he was a partner at the law firm of
Thelen, Marrin, Johnson & Bridges. He received his B.A. and J.D. from the
University of Virginia.
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Joel M. Canino served as an Executive Vice President of KENETECH from
May 1989 until November 1995. He served as President of CNF Industries, Inc.
from April 1984 until November 1995 and as its Chief Executive Officer since
November 1995.
James J. Eisen was elected Vice President and General Counsel of
KENETECH on April 12, 1996. He served as General Counsel of KENETECH
Windpower, Inc. from 1992 until April 1996 and as Counsel from 1986 to 1992.
He received his two Bachelor of Science degrees from MIT and his J.D. degree
from New York University School of Law.
Michael A. Haas was elected Vice President of KENETECH on April 12,
1996. He served as Managing Director for KENETECH International Ltd. from
May 1994 to April 1996 and as Director of International Projects for KENETECH
from June 1993 to May 1994. Prior to June 1993, he served in various
management positions for KENETECH Windpower, Inc., including Manager of
Engineering, Director of Engineering and Maintenance and General Manager,
56-100 Division.
Steven A. Kern was elected President of KENETECH Windpower on April 12,
1996. He served as Senior Vice President of KENETECH Windpower from July
1994 to April 1996 and as Vice President of Operations and Maintenance from
January 1993 to July 1994. He has served as President of KENETECH Facilities
Management, Inc. since January 1995. Prior to joining KENETECH Windpower, he
was General Manager of ALCOA Composites. He received his B.S. from Alfred
University College of Ceramics.
Mark D. Lerdal was elected a Director of KENETECH on March 27, 1996 and
Chief Executive Officer and President on April 1, 1996. He served as Vice
President and General Counsel of KENETECH from April 1992 until March 1996.
From April 1990 to March 1992 he served as Vice President and Counsel of
KENETECH Energy Systems, Inc. He received his A.B. from Stanford University
and his J.D. from Northwestern University School of Law.
Nicholas H. Politan was elected Vice President and Chief Financial
Officer of KENETECH on April 12, 1996. He has served as Vice President of
KENETECH Energy Systems, Inc. since March 1995 and as Vice President and
Chief Financial Officer of KENETECH Windpower from August 1995 and April
1996, respectively. From September 1992 until March 1995 he served as Counsel
of KENETECH Energy Systems, Inc. Prior to joining KENETECH Energy Systems,
Inc., he was an associate at Heller, Ehrman, White & McAuliffe. He received
his B.A. from Duke University and his J.D. from Stanford Law School.
EXECUTIVE COMPENSATION
Directors
Each Director receives an annual retainer of $18,000 plus a $500 fee
for each board meeting attended. In addition, each Director who serves on
any of the Audit Committee, the Nominating Committee or the Compensation
Committee receives a meeting fee of $500 for attending any meeting of such
Committees not held in conjunction with a meeting of the Board of Directors.
Under the Automatic Option Grant Program of the Company, each person
who was a director at the time of the Company's initial public offering
received at the commencement of such offering, and each new Director
thereafter will receive at the time he or she becomes a director, an
automatic option to purchase 5,000 shares of Common Stock at 100% of the fair
market value on the date of grant. In addition, at each annual stockholders'
meeting, each person who has been a director for at least six months has been
and will be granted an option to purchase 1,000 shares of Common Stock. See
"Stock Plans" below.
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<PAGE>
Executive Officers
The following table sets forth, for the fiscal years ending December
31, 1995, 1994 and 1993, all compensation paid to (i) all individuals serving
as Chief Executive Officer during 1995, (ii) the four most highly compensated
executive officers of the Company in addition to the Chief Executive Officer
who were serving as executive officers at the end of 1995, and (iii) the two
former executive officers of the Company for whom disclosure would have been
provided but for the fact that such individuals were not serving as executive
officers at the end of 1995.
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
======================== ============================================ ============== ==============
Annual Compensation Long-Term All Other
Compensation Compensation
Name and Principal Awards ($)
------- ---------- ---------- -------------- -------------- --------------
Year Salary($) Bonus($) Other Annual Securities
Compensation Underlying
($)(1) Options(#)(2)
<S> <C> <C> <C> <C> <C> <C>
------------------------ ------- ---------- ---------- -------------- -------------- --------------
Richard D.Saunders 1995 $150,000 - - -
President and Chief 1994 - - - -
Executive Officer
(resigned April 1, 1996)
------------------------ ------- ---------- ---------- -------------- -------------- --------------
Gerald R. Alderson 1995 $519,226 $50,000 $22,500 1,000
Chairman of the Board 1994 $450,881 - $22,000 1,000
Chief Executive Officer 1993 $363,986 $195,000 $57,500 305,000
(resigned 3/27/96 and
12/07/95, respectively)
------------------------ ------- ---------- ---------- -------------- -------------- --------------
Joel M. Canino 1995 $350,877 $175,000 - -
Chief Executive Officer 1994 $350,877 $175,000(3) $58,238
CNF Industries, Inc. 1993 $308,220 $350,000 - 150,000
------------------------ ------- ---------- ---------- -------------- -------------- --------------
Michael U. Alvarez 1995 $225,729 $170,000 - -
Vice President 1994 $209,412 $20,000 - -
1993 $193,123 $200,000 - 60,000
------------------------ ------- ---------- ---------- -------------- -------------- --------------
William F. Griffin, Jr. 1995 $200,640 $36,000 -
President CNF 1994 $175,560 $96,000 -
Industries and CNF 1993 $163,020 $204,000 25,000
Constructors, Inc
------------------------ ------- ---------- ---------- -------------- -------------- -------------
Ralph B. Muse 1995 $294,761 - $300,563 50,000(4) $350,000(5)
Chief Operating Officer 1994 - - - -
(resigned 11/30/95) 1993 - - - -
------------------------ ------- ---------- ---------- -------------- -------------- --------------
Jean-Yves Dexmier 1995 $188,104 - - 150,000(4) $250,000(6)
Chief Financial Officer 1994 - - - -
(resigned 10/12/95) 1993 - - -
======================== ======= ========== ========== ============== ============== ==============
<FN>
----------------
(1) Includes $22,500, $22,000 and $22,500 in 1995, 1994 and 1993,
respectively, for director's fees and $35,000 in 1993 for
reimbursement of housing expenses for Gerald R. Alderson; $23,238
in relocation expenses and $35,000 in housing differential for
Joel Canino in 1994; and $300,563 in relocation expenses for
Ralph B. Muse in 1995.
(2) Shares of Common Stock subject to stock options granted during
the fiscal year. No stock appreciation rights were granted
during 1995, 1994 or 1993.
(3) Mr. Canino was paid a guaranteed bonus pursuant to his employment
contract.
(4) These options were automatically canceled upon resignation.
(5) Mr. Muse will receive severance payments totaling $350,000 in
1995 and 1996 (paid in 24 equal semi-monthly installments
beginning December 1995).
(6) Mr. Dexmier received a lump sum severance payment of $250,000 in
1995.
</FN>
</TABLE>
9
<PAGE>
The following table sets forth all options awarded to the Chief
Executive Officer and the named executive officers of the Company during the
fiscal year ending December 31, 1995. No stock appreciation rights were
granted during 1995.
<TABLE>
OPTION GRANTS IN LAST FISCAL YEAR
<CAPTION>
=============================================================================================
Potential Realizable
Value at Assumed Annual
Rates of Stock Price
Appreciation for Option
Individual Grants Term (1)
============= ============= ============= ============ ============ ============ ============
Number of % of Total
Securities Options
Under-lying Granted to
Options Employees in Exercise Expiration
Name Granted (#) Fiscal Year Price ($) Date 5% ($) 10% ($)
============= ============= ============= ============ ============ ============ ============
<S> <C> <C> <C> <C> <C> <C>
Richard D. - - - - - -
Saunders
- - ------------- ------------- ------------- ------------ ------------ ------------ ------------
Gerald R. 1,000 0.4237% $10.63 2005 $6,682 $16,934
Alderson
- - ------------- ------------ -------------- ------------ ------------ ------------ ------------
Joel M. - - - - - -
Canino
- - ------------- ----------- --------------- ------------ ------------ ------------ ------------
Michael U. - - - - - -
Alvarez
- - ------------- ----------- --------------- ------------ ------------ ------------ ------------
William F. - - - - - -
Griffin, Jr.
- - ------------- ----------- --------------- ------------ ------------ ------------ ------------
Ralph B. 50,000 21.1864% $15.50 (2) (2) (2)
Muse
- - ------------- ----------- --------------- ------------ ------------ ------------ ------------
Jean-Yves 150,000 63.5593% $11.50 (2) (2) (2)
Dexmier
============= =========== =============== ============ ============ ============ ============
<FN>
- - ------------
(1) There is no assurance provided to any executive officer or any
other holder of the Company's securities that the actual stock
price appreciation over the 10-year option term will be at the
assumed 5% and 10% levels or at any other defined level. Unless
the market price of the Common Stock does in fact appreciate over
the option term, no value will be realized from the option grants
made to the executive officers.
(2) These options were automatically canceled upon resignation.
</FN>
</TABLE>
The following table sets forth information concerning option exercises
and option holdings for the fiscal year ending December 31, 1995, with
respect to the Chief Executive Officer and the named executive officers of
the Company. No stock appreciation rights were outstanding during such
fiscal year.
<TABLE>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<CAPTION>
================================================================================================================
Number of Securities
Underlying Unexercised
Options at Fiscal Year-
Shares End Value Unexercised In-the-Money
Acquired on Value Exercisable/ Options at Fiscal Year-End
Name Exercise (#) Realized ($) Unexercisable Exercisable/Unexercisable(1)
======================= ============== ============== ========================= ================================
<S> <C> <C> <C> <C>
Richard D. Saunders - - - / - -
- - ----------------------- -------------- -------------- ------------------------- --------------------------------
Gerald R. Alderson - - 261,000/276,000 $11,250/ -
- - ----------------------- -------------- -------------- ------------------------- --------------------------------
Joel M. Canino - - 170,000/130,000 - / -
- - ----------------------- -------------- -------------- ------------------------- --------------------------------
Michael U. Alvarez - - 90,000/70,000 - / -
- - ----------------------- -------------- -------------- ------------------------- --------------------------------
William F. Griffin, Jr. - - 0/25,000 - / -
- - ----------------------- -------------- -------------- ------------------------- --------------------------------
Ralph B. Muse - - - / - - / -
- - ----------------------- -------------- -------------- ------------------------ --------------------------------
Jean-Yves Dexmier - - - / - - / -
======================= ============== ============== ========================= =================================
<FN>
(1) Market price of shares at December 31, 1995 ($1.625) less exercise price.
</FN>
</TABLE>
10
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1995, Messrs. Charren, Hutchinson, Laskow and Pifer served as
members of the Compensation Committee of the Company. Mr. Duthie was
appointed to the Compensation Committee on January 30, 1996. Mr. Pifer
resigned from the Committee on January 30, 1996. None of the members have
ever been officers or employees of the Company. Mr. Alderson and Mr. Saunders
may have attended meetings of the committee, but neither was present during
deliberations or discussions regarding his own compensation.
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors reviews,
recommends and approves the compensation arrangements for senior management
of the Company (including the executive officers named in the Summary
Compensation Table above), with respect to salaries, bonuses and grants of
options to purchase shares of Common Stock under the Company's 1993 Stock
Option/Stock Issuance Plan (the "1993 Option Plan").
Cash Based Compensation
Base Salary. Prior to 1995, executive compensation was subjective and
was determined by the Chief Executive Officer in conjunction with the
Compensation Committee. During 1995 the Company hired several senior
executives and used survey information to determine their salaries. The
Company also began using survey information to determine the base salary of
other employees.
Bonus. Individual bonus awards for the fiscal year are based on a
combination of Company-wide and individual performance goals for the fiscal
year. The amount of any bonus is also limited to a percentage of the
executive's base salary. Considerations include individual performance and
the performance of the areas of the Company for which the executive officer
has managerial responsibility. After assessment of the individual
performance goals, the overall Company performance is overlaid on individual
achievement to determine the bonus to be paid to the executive. For 1995,
the Compensation Committee determined that Company performance did not meet
its expectations and accordingly determined that bonus payments should be
eliminated or reduced substantially for most of the senior executives, except
in the case of guaranteed bonuses. Late in 1995 it became clear to
management of the Company and the Compensation Committee that certain
incentives were necessary to retain key individuals. The Company executed
contracts with those individuals which provide for the payment of bonuses
upon the completion of certain events.
Other Compensation. The Company makes a contribution to all employees'
401(k) accounts, based on attainment of certain goals limiting costs of the
health plan and goals set for the elimination of lost time injuries. At the
beginning of each year, a cost per employee goal is set for the health plan
and a ratio of lost time accidents to total hours worked goal is also set.
If the first goal is met, the savings per employee is contributed to each
employee's 401(k) account. If the second goal is met, the first contribution
is doubled. During 1995 each of the Company's employees, including each of
the named executive officers and the Chief Executive Officer, if eligible,
received $510 pursuant to such plan.
In 1993 the Compensation Committee adopted a provision which allows
matching of each employee's contribution to the 401(k) Plan. The Company
will match up to 50% of an employee's contributions with a cap at 2% of the
employee's base compensation. At the beginning of each year, the
Compensation Committee will determine whether the upcoming year is eligible
for a match, and if so, determine the parameters and goals which the Company
must achieve to determine whether a payment will be made to each individual's
401(k) account. The Committee determined that no match would be paid in 1995
pursuant to this provision and that 1996 will not be eligible for such a
match.
11
<PAGE>
Compensation of the Chief Executive Officer. Mr. Alderson's
compensation was based on the same factors as the other executives. His base
salary was to be adjusted every two years and was last adjusted in July
1995. In determining Mr. Alderson's base salary and bonus potential, the
Compensation Committee attempted to determine at what level compensation
would be set for a replacement for Mr. Alderson. In 1995, Mr. Alderson was
eligible for a bonus payment of 100% of his base salary. For 1995, the
Committee elected to pay him a bonus of $50,000 in consideration of a change
in his employment duties.
Mr. Saunders was hired as Chief Executive Officer in December, 1995.
His compensation was determined as part of a negotiation between his firm
GGG, Inc. and the Company. The Company surveyed other firms doing work
similar to GGG, Inc. to determine that the amount paid was reasonable.
Stock Option Grants
Stock options are the principal vehicle for the payment of long term
compensation and are granted pursuant to the Company's 1993 Option Plan
administered by the Compensation Committee. This component of compensation
is intended to recruit and to retain executives and motivate them to improve
stock market performance. Stock options are granted from time to time to
members of management based primarily on the individual's potential
contribution and past performance. They are granted at the prevailing market
rates and will have value only if the Company's stock price increases.
Typically the grants vest in five equal annual installments. Other than the
grant made to Mr. Alderson as a director under the Automatic Option Grant
Program and to Ralph B. Muse and Jean-Yves Dexmier, no grants were made to
the other named executive officers of the Company during 1995.
Angus M. Duthie
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND SEVERANCE ARRANGEMENTS
Messrs. Alvarez, Canino and Griffin are currently under employment
contracts. Messrs. Dexmier, Muse and Saunders were formerly under employment
contracts or severance agreements.
KENETECH Energy Systems, Inc. entered into an Employment Agreement with
Mr. Alvarez on January 1, 1996. Pursuant to the Agreement, Mr. Alvarez will
(i) continue to be employed by KENETECH Energy Systems, Inc., in his current
capacity for a period of one year at his annual base salary of $350,000
(unless terminated for cause), (ii) be eligible to participate in the
executive incentive bonus program (as described in the compensation committee
report), and (iii) be eligible to earn an additional bonus of 100% of his
base salary, as well as certain other bonuses, upon the occurrence of certain
stated objectives. In the event of a Change in Control, Mr. Alvarez will
receive a lump sum payment equal to his annual base salary.
KENETECH entered into an Employment Agreement with Mr. Canino on
December 1, 1994. Pursuant to the Agreement, Mr. Canino will (i) receive a
minimum annual base salary of $350,000 (the amount to be reviewed every two
years), (ii) be entitled to a guaranteed bonus of $175,000 per calendar year,
and (iii) participate in the executive incentive bonus program and be
eligible to earn an annual bonus of up to 50% of his base salary based on his
individual performance and the Company's profitability. Mr. Canino's
employment period runs through December 31, 1998. In addition, the Company
agreed to purchase Mr. Canino's residence for $1,320,000 upon the expiration
of his employment period or 45 days after Mr. Canino gives notice of his
intention to sell the residence to the Company. KENETECH paid Mr. Canino
$500,000 of such purchase price during 1994. In addition, KENETECH executed
a Promissory Note in the amount of $820,000 payable upon the completion of
the sale of Mr. Canino's personal residence to the Company.
CNF Industries, Inc. entered into an Employment Agreement with Mr.
Griffin on January 1, 1996. Pursuant to the Agreement, Mr. Griffin will (i)
continue to be employed by CNF Industries, Inc. in his current capacity for a
period of one year at his annual base salary (unless terminated for cause),
and (ii) be eligible to earn a bonus of 100% of his base salary upon the
occurrence of certain stated objectives. In the event of a Change in
Control, Mr. Griffin will receive a lump sum payment equal to his annual base
salary.
12
<PAGE>
KENETECH entered into an agreement with GGG Inc., dated November 1,
1995, that provided that GGG Inc. would be paid $50,000 per month for the
services of Mr. Saunders as President and Chief Executive Officer. KENETECH
and GGG Inc. entered into a new agreement, dated April 2, 1996, which
provided that GGG Inc. would be paid $50,000 per month for the services of
Mr. Saunders as a consultant to the Company. This agreement has been
terminated.
KENETECH entered into an Employment Agreement with Mr. Muse on January
23, 1995. Pursuant to the Agreement, Mr. Muse was to have (i) received a
minimum annual base salary of $350,000 (the amount to be reviewed every two
years), and (ii) participated in the executive incentive bonus program and be
eligible to earn an annual bonus of up to 30% of base salary based on his
individual performance and the Company's profitability. Mr. Muse's contract
provided that if he were involuntarily terminated other than for cause prior
to December 31, 1997, he would be paid an amount equal to his current base
salary for one year. Mr. Muse was also provided a relocation package to
cover his out-of-pocket expenses for his relocation from Houston, Texas to
California and was provided with a housing allowance to adjust for the
difference in housing costs between the San Francisco Bay Area and Houston,
Texas. Mr. Muse was paid $300,563 in relocation expenses in 1995 and will
receive semi-monthly severance payments totaling $350,000 in 1996.
KENETECH entered into a Separation Agreement and Mutual Release with
Mr. Dexmier on October 12, 1995. Pursuant to the Agreement, Mr. Dexmier
received a single lump sum payment of $250,000 upon his resignation.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, 1994, the Company agreed to purchase Mr. Canino's
personal residence upon the expiration of his employment contract (December
31, 1998) or 45 days after Mr. Canino gives notice of his intention to sell
such residence to the Company, whichever is earlier. The purchase price will
be $1,320,000 which is the price Mr. Canino paid when he originally purchased
the residence. The Company paid Mr. Canino $500,000 and executed a note,
payable at the closing of the sale of the residence to the Company. The note
bears interest at 4.5%.
On April 20, 1995, Ralph B. Muse executed a promissory note payable to
the Company in the principal amount of $250,000. The note evidenced a loan
by the Company to Mr. Muse to assist him in making a down payment on a
residence in the Bay Area upon his relocation from Houston, Texas. The note
bears interest at 4.5% and is payable on November 30, 1996, the one-year
anniversary of Mr. Muse's resignation from the Company.
13
<PAGE>
PERFORMANCE GRAPH
The following performance graph reflects the cumulative total
stockholders' return on Common Stock as compared with the cumulative total
return of the Nasdaq Stock Market Index, the Nasdaq Non-Financial Index and
the S&P Midcap 400 Index. The graph assumes a $100 investment in Common
Stock of the Company beginning on September 22, 1993 and a $100 investment in
each of the indices beginning on August 31, 1993 and ending December 31,
1995. The graph also assumes that any dividends were reinvested. The
Company chose the S&P Midcap 400 Index because it does not believe it can
reasonably identify a peer group. In addition, there are no public companies
with a similar scope of business as the Company.
<TABLE>
COMPARISON OF 27 MONTH CUMULATIVE TOTAL RETURN
<CAPTION>
================================== ========== ========== ========== ==========
9/22/93 12/31/93 12/31/94 12/31/95
================================== ========== ========== ========== ==========
<S> <C> <C> <C> <C>
KENETECH Corporation 100 120 86 10
- - ---------------------------------- ---------- ---------- ---------- ----------
Nasdaq Stock Market - US Index 100 105 103 145
- - ---------------------------------- ---------- ---------- ---------- ----------
S & P Midcap 400 Index 100 104 100 131
- - ---------------------------------- ---------- ---------- ---------- ----------
Nasdaq Non-Financial Index 100 106 101 139
================================== ========== ========== ========== ==========
</TABLE>
14
<PAGE>
STOCK PLANS
The 1993 Option Plan and the 1993 Stock Purchase Plan (the "Purchase
Plan") were implemented in September 1993.
The Company has registered shares of Common Stock reserved for issuance
under the 1993 Option Plan and the 1993 Stock Purchase Plan, thus permitting
the resale of such shares by non-affiliates in the public market without
restriction under the Securities Act of 1933.
The 1993 Option Plan
Under the 1993 Option Plan, key employees (including officers),
consultants to the Company and directors are provided an opportunity to
acquire equity interests in the Company. The 1993 Option Plan contains three
separate components: (i) a Discretionary Option Grant Program, under which
key employees (including officers) and consultants may be granted options to
purchase shares of Common Stock at an exercise price not less than 85% of the
fair market value of such shares on the grant date; (ii) an Automatic Option
Grant Program, under which option grants will automatically be made at
periodic intervals to directors to purchase shares of Common Stock at an
exercise price equal to 100% of the fair market value of the option shares on
the grant date; and (iii) a Stock Issuance Program, under which eligible
individuals may be issued shares of Common Stock directly, either through the
immediate purchase of the shares (at fair market value or at discounts of up
to 15%) or as a bonus tied to the performance of services or the Company's
attainment of prescribed milestones. The options granted under the
Discretionary Option Grant Program may be either incentive stock options
designed to meet the requirements of Section 42 of the Internal Revenue Code
of 1986, as amended (the "Code"), or non-statutory options not intended to
satisfy such requirements. All grants under the Automatic Option Grant
Program will be non-statutory options. Options may be granted or shares
issued in the Discretionary Option Grant and Stock Issuance Programs to
eligible individuals in the employ or service of the Company or any parent or
subsidiary corporation now or subsequently existing.
Under the Automatic Option Grant Program, each person who was a
director at the time of the Company's initial public offering, received at
the commencement of such offering, and each new director thereafter will, at
the time he or she becomes a director, receive an automatic option grant for
5,000 shares of Common Stock. In addition, at each annual stockholders'
meeting, beginning with the 1994 annual meeting, each person who has been a
director for at least six months was and will be granted an option to
purchase 1,000 shares of Common Stock. If more than 50% of the outstanding
Common Stock were to be acquired in a hostile tender offer, each option
granted under the Automatic Option Grant Program that has been outstanding
for at least six months will be automatically converted into the right to
receive from the Company the excess of the tender offer price over the option
price.
A total of 6,688,020 shares of Common Stock were originally reserved
for issuance over the ten year term of the 1993 Option Plan.
Options will have maximum terms of ten years measured from the grant
date. Options will not be assignable or transferable other than by will or
by the laws of inheritance following the optionee's death, and the option
may, during the optionee's lifetime, be exercised only by the optionee. The
optionee will not have any stockholder rights with respect to the option
shares until the option is exercised and the option price is paid for the
purchased shares. Individuals holding shares under the Stock Issuance
Program will, however, have full stockholder rights with respect to those
shares, whether the shares are vested or unvested. The Plan Administrator
under the 1993 Option Plan has the authority to cancel outstanding options
under the Discretionary Option Grant Program (including options incorporated
from the Predecessor Plan) in return for the grant of new options for the
same or a different number of shares with an exercise price based on the
lower fair market value of the Common Stock on the new grant date. The Board
of Directors may terminate the 1993 Option Plan at any time, and the 1993
Option Plan will in any event terminate on June 20, 2003.
15
<PAGE>
All of the Company's employees are eligible to participate in the
Discretionary Grant Program. Non-employee directors are not eligible to
participate in the Discretionary Option Grant and Stock Issuance Programs.
If the Company is acquired by merger, consolidation or asset sale, or
there is a hostile change in control of the Company, each option granted
under the Discretionary Option Grant Program will automatically accelerate in
full, and all unvested shares under the Stock Issuance Program will
immediately vest.
The Purchase Plan
Each full-time employee who is customarily employed by the Company or
any participating subsidiary corporation on a basis requiring more than 20
hours of service per week for more than five months per calendar year is,
upon completion of 90 days of employment, eligible to participate in the
Purchase Plan for one or more offering periods. The Purchase Plan is
intended to be an "employee stock purchase plan" within the meaning of
Section 423 of the Code.
The Purchase Plan will be implemented in a series of successive
offering periods, each with a maximum duration of twenty-four (24) months.
At the time that an employee becomes eligible to participate in the Purchase
Plan, he or she will be granted a right to acquire shares of Common Stock at
semi-annual intervals over the remainder of the offering period then in
effect. The purchase dates will occur on the last business day of February
and August each year, and all payroll deductions collected from the
participants for the period ending with each such semi-annual purchase date
will automatically be applied to the purchase of Common Stock.
The purchase price per share for any offering period will be 85% of the
lower of (i) the fair market value of the Common Stock on the start date of
the offering period (or, if a participant joins the Purchase Plan after the
start date of an offering period, on the date of the participant's entry into
the Purchase Plan, provided that such amount is not less than the fair market
value of the Common Stock on the start date of the offering period), and (ii)
the fair market value on the semi-annual purchase date. The fair market
value of the Common Stock on any relevant date under the Purchase Plan will
be the closing selling price of the Common Stock on the date in question, as
quoted on the Nasdaq National Market.
No participant may purchase more than $25,000 worth of Common Stock
(based on the fair market value of the Common Stock on the start date of the
offering period (or the participant's entry into the Purchase Plan, if later)
for each calendar year the participant's purchase right remains outstanding.
In addition, no participant may purchase more than 2,000 shares of Common
Stock in any semi-annual period.
The Board of Directors may amend or terminate the Purchase Plan
immediately after the close of any semi-annual period of participation, and
the Purchase Plan will in any event terminate on the last business day of
February 2003.
16
<PAGE>
SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following tables sets forth certain information regarding the
beneficial ownership of the Company's Common Stock and Depositary Shares as
of June 10, 1996(1) for (i) each person known to the Company beneficially to
own 5% or more of the outstanding shares, (ii) each of the Company's
directors, (iii) all individuals serving as Chief Executive Officer during
1995, (iv) the four most highly compensated executive officers of the Company
in addition to the Chief Executive Officer who were serving as executive
officers at the end of 1995, (v) the two former executive officers of the
Company for whom disclosure would have been provided but for the fact that
such individuals were not serving as executive officers at the end of 1995,
and (vi) all directors and current executive officers as a group. Except as
otherwise indicated, the Company believes that the beneficial owners of the
Common Stock and Depositary Shares listed below, based on information
furnished by such owners, have sole investment and voting power with respect
to such shares, subject to community property laws where applicable.
<TABLE>
Common Stock
<CAPTION>
Shares of Common Stock Percentage of Common
Beneficial Owners Beneficially Owned (2) Stock Outstanding
==================================== ========================== ==========================
<S> <C> <C>
Affiliates of The Hillman Company
824 Market Street, Suite 900
Wilmington, Delaware 12,864,879(3) 34.93%
State of Wisconsin Investment Board
P.O. Box 7842
Madison, WI 53707 3,572,800 9.70%
F.H. Prince & Co., Inc.
10 South Wacker Drive
Chicago, Illinois 60606 2,817,695 7.65%
The Prudential Insurance Company
of America
Prudential Plaza
Newark, N.J. 07102-3777 2,423,319(4) 6.51%
Gerald R. Alderson 353,000 *(5)
Charles Christenson 67,000 *
Angus M. Duthie 59,720 *
Mark D. Lerdal 43,245 *
Howard W. Pifer III 51,166 1/2(6) *
Michael U. Alvarez 91,441 0.25%
Joel M. Canino 410,000 1.11%
Jean-Yves Dexmier 0
William F. Griffin, Jr. 169,545 0.46%
Ralph B. Muse 0
Richard D. Saunders 20,000 0.054%
All directors and executive
officers as a group (15 persons) 1,352,312 1/2 3.67%
<FN>
17
<PAGE>
__________________________
(1) Information for beneficial owners of 5% or more of the Company's stock
is reported from and as of the date of such owner's Schedule 13G.
(2) Except as otherwise specifically noted, the number of shares stated as
being owned beneficially includes (a) all options under which persons
could acquire common stock currently and within 60 days following June
10, 1996 (i.e., Gerald R. Alderson (261,000 shares), Charles
Christenson (47,000 shares), Angus M. Duthie (47,000 shares), Mark D.
Lerdal (6,000 shares), Howard W. Pifer (47,000 shares), Michael U.
Alvarez (90,000 shares), Joel M. Canino (170,000 shares) and all
directors and officers as a group (699,200 shares)), (b) shares
believed by the Company to be held beneficially by spouses, minor
children and grandchildren, and (c) shares of common stock obtainable
upon conversion of Depositary Shares. The inclusion of shares herein,
however, does not constitute an admission that the persons named as
stockholders are direct or indirect beneficial owners of such shares.
(3) Includes 12,368,940 shares owned by HCC Investments, Inc. ("HCC"),
12,131 shares owned by Hillman Properties West, Inc. ("HPW"), 403,000
shares owned by Hillman 1984 Limited Partnership ("H84LP") and 80,808
shares owned by the HLH Trust (as described below). HCC and HPW (the
sole general partner of H84LP) are private investment companies owned
by The Hillman Company, a firm engaged in diversified investments and
operations which is controlled by a trust for the benefit of Henry L.
Hillman (the "HLH Trust"). The Trustees of the HLH Trust are Henry L.
Hillman, Elsie Hilliard Hillman and C.G. Grenfenstette (the "HLH
Trustees"). The HLH Trustees share voting and investment power with
respect to the shares held of record by HCC and H84LP.
(4) Includes 370,319 shares obtainable upon conversion of the Company's 81/4%
Preferred Redeemable Increased Dividend Equity Securities. The
Prudential Insurance Company of America ("Prudential") may have shared
power to vote or shared power to dispose of such shares which are held
for the benefit of Prudential's clients, by its separate accounts,
externally managed accounts, registered investment companies and/or
other affiliates. Prudential reports the combined holdings of these
entities for the purpose of administrative convenience.
(5) Does not exceed one percent of the class so owned.
(6) Includes 4166 1/2 shares obtainable upon conversion of 5,000 Depositary
Shares of the Company's 8 1/4% Preferred Redeemable Increased Dividend
Equity ecurities.
</FN>
</TABLE>
<TABLE>
PRIDES
<CAPTION>
Depositary Shares of Percentage of
PRIDES PRIDES
Beneficial Owners Beneficially Owned Outstanding
==================================== ========================== ==========================
<S> <C> <C>
The Prudential Insurance
Company of America
Prudential Plaza
Newark, NJ 07102-3777 444,400 8.67%
Howard W. Pifer III 5,000 *(1)
<FN>
__________________________
(1) Does not exceed one percent of the class so owned.
</FN>
</TABLE>
18
<PAGE>
REGISTRATION RIGHTS
The beneficial holders (or their transferees) of approximately
14,056,000 shares of Common Stock, are entitled to certain rights with
respect to the registration of such shares under the Securities Act of 1933
(the "Securities Act"). Under the terms of the Registration Rights
Agreements dated as of June 28, 1985 (the "Registration Rights Agreement"),
between the Company and such holders, if the Company proposes to register any
of its securities under the Securities Act, either for its own account or the
account of other security holders exercising registration rights, such
holders are entitled to notice of such registration and are entitled to
include shares of such Common Stock therein; provided, among other
conditions, that the underwriters of any offering have the right to limit the
number of shares included in such registration. In addition, for a period of
eight years after September 21, 1993, the date of the Company's initial
public offering of its Common Stock, a holder or holders of an aggregate of
40% or more of the shares subject to such registration rights may require the
Company on not more than six occasions to file a registration statement under
the Securities Act with respect to their shares of Common Stock.
Additionally, parties to the Stock Purchase Agreement dated as of June
30, 1992, and the Note Purchase Agreement dated as of June 25, 1992 (the
"Notes"), are entitled to notice of any registration of Common Stock proposed
by the Company, either for its own account or the account of other security
holders exercising registration rights, and, are entitled to include shares
of the Common Stock which they own by virtue of the conversion of the
preferred stock and/or Notes obtained pursuant to such agreements, subject to
(i) the underwriters' limitations, and (ii) in the case of a secondary
offering on behalf of holders of registration rights pursuant to the
Registration Rights Agreement, the consent of the holders of such rights. The
parties to such agreements are also given the right to require the Company to
register their shares of Common Stock, but may exercise such right not more
than once every two years.
DISAGREEMENTS WITH PUBLIC ACCOUNTANTS
As previously disclosed in the Company's Form 8-K dated May 11, 1995
and the Company's Form 10-K for the fiscal year ending December 31, 1995, the
auditor client relationship between the Company and Deloitte & Touche, LLP
("Deloitte & Touche") ceased on May 11, 1995. On such date, the Company
informed Deloitte & Touche that the Audit Committee of the Board of Directors
recommended that Deloitte & Touche be dismissed. On the same day, the
Company received a letter from Deloitte & Touche stating that it had resigned
as the Company's auditor. The reports prepared by Deloitte & Touche for each
of the fiscal years 1993 and 1994 did not contain an adverse opinion or
disclaimer of opinion and were not qualified or modified as to uncertainty,
audit scope or accounting principles.
During the Company's fiscal years ending December 31, 1993 and 1994 and
through May 11, 1995, the Company had three disagreements with Deloitte &
Touche as follows:
The first occurred in the first quarter of 1993 and concerned the
revenue recognition for the sale of a limited partnership interest in a
wholly-owned limited partnership that constructed a wood burning power plant.
Initially, the Company had recorded 100% of the revenue and related income,
but also retained an option to purchase 49% of the limited partnership.
Deloitte & Touche advised the Company that in their opinion, the retention of
an option would result in the deferral of revenue and related income on this
transaction. The Company restructured the transaction so that it did not
retain an option to repurchase an interest in the partnership. Deloitte &
Touche and the Company then agreed on the treatment of the transaction.
The second disagreement occurred in March of 1995 related to the
Company's 1994 consolidated financial statements with respect to the method
of revenue recognition used on long-term contracts for the sale of wind
turbines and associated services entered into in November and December of
1994. The Company proposed to recognize revenue on the
percentage-of-completion cost-to-cost basis and issued its preliminary
earnings report for 1994 on that basis, with the understanding that Deloitte
& Touche considered this method acceptable. In late March 1995, upon
completion of its audit, Deloitte & Touche notified the Company that it did
not agree with the original treatment. The Company adopted the
percentage-of-completion units-of-delivery method which was acceptable to
Deloitte & Touche.
19
<PAGE>
The third disagreement occurred in the first quarter of 1995 related to
the Company's acquisition of a business. The Company proposed to recognize
all the revenues and expenses related to the acquired business during the
first quarter of 1995 because the acquisition was based upon the year-end
balance sheet and the Company's management had participated in the day-to-day
operations of the acquired business. Deloitte & Touche advised the Company
that the purchase method of accounting required that only the revenues and
expenses from the actual date of the closing of the business combination
should be recorded. The Company adopted Deloitte & Touche's recommended
treatment.
During each of the two fiscal years ended December 31, 1993 and 1994
and through May 11, 1995, the Company had one reportable event. As of May 11,
1995, the documentation provided to corroborate the representation made by
the Company's management supporting certain Windplant sales recorded under
the percentage-of-completion cost-to-cost method for the 13 weeks ended April
1, 1995 was incomplete. As a result, and because of the cessation of the
audit relationship, Deloitte & Touche was unable to reach a conclusion as to
the recording of revenue and income for the transaction.
This includes information as to all disagreements and reportable events
through the date hereof. The Audit Committee of the Board of Directors
discussed the subject matter of all three disagreements and the reportable
event with Deloitte & Touche. In addition, the Company has authorized
Deloitte & Touche to respond fully to the inquiries of any successor
accountant concerning the subject matter of each of such disagreement.
On May 11, 1995, Deloitte & Touche notified the Securities and Exchange
Commission that the client-auditor relationship between the Company and
Deloitte & Touche had ceased and by letter dated May 17, 1995, notified the
Commission that Deloitte & Touche had read and agreed with the comments in
Item 4 of the Company's Form 8-K.
On June 9, 1995, the Company engaged KPMG Peat Marwick LLP as its
principal accountant to audit the Company's financial statements.
RATIFICATION OF APPOINTMENT OF INDEPENDENT PUBLIC ACCOUNTANTS
Subject to ratification by the stockholders at the Annual Meeting, the
Audit Committee has recommended to the Board of Directors, and the Board of
Directors has approved, the appointment of the independent public accounting
firm of KPMG/Peat Marwick LLP ("KPMG") to audit the Company's financial
statements for the current fiscal year ending December 31, 1996. It is
expected that a representative of KPMG will be present at the Annual Meeting,
will have the opportunity to make a statement if he or she so desires and
will be available to respond to appropriate questions.
If the foregoing recommendation is rejected or if KPMG declines to act
or otherwise becomes incapable of acting or if their appointment is otherwise
discontinued, the Board of Directors will appoint other independent auditors
whose appointment for any period subsequent to the 1996 Annual Meeting of
Stockholders shall be subject to ratification by the stockholders at that
meeting.
THE BOARD OF DIRECTORS URGES ALL STOCKHOLDERS, REGARDLESS OF THE NUMBER OF
SHARES HELD BY THEM, TO VOTE THEIR SHARES IN FAVOR OF RATIFICATION OF THE
APPOINTMENT OF KPMG AS THE COMPANY'S INDEPENDENT AUDITORS.
COMPLIANCE WITH SECTION 16(a)OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 and regulations of
the Securities and Exchange Commission thereunder require the Company's
executive officers and directors and persons who own more than ten percent of
the Company's stock, as well as certain affiliates of such persons, to file
initial reports of ownership and changes in ownership with the Securities and
Exchange Commission and Nasdaq. Executive officers, directors and persons
owning more than ten percent of the Company's stock are required by the
Securities and Exchange Commission regulations to furnish the Company with
copies of all Section 16(a) forms they file. Based solely on its review of
the copies of Forms 3, 4 and 5 and amendments thereto received by the Company
and written representations that no other reports were required for those
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persons, the Company believes that, during the fiscal year ending December
31, 1995, all filing requirements applicable to its executive officers,
directors and owners of more than ten percent of the Company's stock were
complied with; except that Stanley Charren, former Chairman of the Board of
Directors of the Company, filed two late reports, covering an aggregate of
four transactions occurring after he resigned from the Board of Directors.
The reports were filed once he became aware of the requirement to report
certain transactions occurring after his resignation.
STOCKHOLDER PROPOSAL DEADLINE FOR 1997 ANNUAL STOCKHOLDERS MEETING
Any stockholder proposal intended to be presented at the next Annual
Meeting of Stockholders (to be held for the fiscal year ending December 31,
1996) must be in writing and received at the Company's principal executive
offices for inclusion in the Company's proxy statement and form of proxy
relating to such meeting not later than May 9, 1997. Any such proposal must
comply with Rule 14a-8 of Regulation 14A of the proxy rules of the Securities
and Exchange Commission.
ANNUAL REPORT AND FORM 10-K
The 1995 Annual Report of the Company, in the form of the Company's
Form 10-K for the fiscal year ending December 31, 1995, has been mailed with
this Proxy Statement to stockholders of record on the Record Date. The 1995
Annual Report includes, among other things, a Financial Review Section (with
certain Selected Consolidated Financial Data, a discussion of Results of
Operations, and a discussion of Liquidity and Capital Resources), Condensed
Consolidated Statements of Operations, Condensed Consolidated Balance Sheets,
a Condensed Consolidated Statement of Cash Flows, a Report of Management and
an Independent Auditors' Report. A copy of the Company's Report on Form 10-K
for the year ending December 31, 1995, including the financial statements and
the financial statement schedules, as filed with the Securities and Exchange
Commission, is available to stockholders without charge upon written request
to: William E. Klitgaard, Treasurer, Investor Relations, KENETECH
Corporation, 6952 Preston Avenue, Livermore, California, 94111.
OTHER MATTERS THAT MAY COME BEFORE THE MEETING
As of this date, the Company is not aware that any matters are to be
presented for action at the meeting other than those referred to in the
Notice of Annual Meeting, but the proxy form sent herewith, if executed and
returned, gives discretionary authority with respect to any other matters
that may come before the meeting.
By Order of the Board of Directors,
Dianne P. Urhausen
Secretary
San Francisco, California
July 1, 1996
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APPENDIX A
PROXY KENETECH CORPORATION PROXY
INSTRUCTION CARD SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 7, 1996
The undersigned hereby instructs Chemical Trust Company of California, as
Depositary under and with respect to the Depositary Shares credited to the
account of the undersigned, each representing 1/50 of a share of the Preferred
Redeemable Increased Dividend Equity Securities, 8 1/4 % PRIDES, Convertible
Preferred Stock ("PRIDES"), and the depositary receipts issued in connection
with such Depositary Shares, to vote, as indicated on the other side of this
card, such Depositary Shares at the Annual Meeting of Shareholders of KENETECH
Corporation to be held at KENETECH'S offices, 6952 Preston Avenue, Livermore,
California, on Wednesday, August 7, 1996, at 10:00 A.M., local time, and at any
one or more adjournments or postponements thereof, with all the powers that the
undersigned would possess if personally present, with discretionary authority as
to any and all other matters that may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS INSTRUCTION CARD WILL BE
VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR THE RATIFICATION OF THE
APPOINTMENT OF THE INDEPENDENT AUDITORS LISTED IN PROPOSAL 2 AND AS MORE
SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT OF KENETECH CORPORATION DATED JULY
1, 1996. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS INSTRUCTION CARD WILL BE
VOTED IN ACCORDANCE THEREWITH.
Please mark
[ X ] your votes
______________________ as this
Preferred (Depositary Shares)
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW
1. To elect three directors as Class III Directors
to hold office for three year terms.
WITHHOLD
Class III Nominees: FOR FOR ALL
Charles Christenson, [ ] [ ]
Angus M. Duthie and Mark D. Lerdal
FOR all nominees listed above
(except as indicated to the contrary).
WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
--------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
INDEPENDENT AUDITORS.
2. To ratify the appointment of the Independent Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING. [ ]
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians and attorneys-in-fact
should add their titles. If signer is a corporation, please give full
corporate name and have a duly authorized officer sign, stating title. If
signer is a partnership, please sign in partnership name by authorized
person.
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APPENDIX B
PROXY KENETECH CORPORATION PROXY
PROXY SOLICITED BY THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 7, 1996
The undersigned hereby appoints James J. Eisen and Nicholas H. Politan, and
each of them as attorneys and proxies of the undersigned, with full power and
substitution, to vote all of the shares of stock of KENETECH Corporation which
the undersigned may be entitled to vote at the Annual Meeting of Stockholders of
KENETECH Corporation to be held at KENETECH's offices, 6952 Preston Avenue,
Livermore, California, on Wednesday, August 7, 1996, at 10:00 A.M., local time,
and at any one or more adjournments or postponements thereof, with all the
powers that the undersigned would possess if personally present, upon and in
respect of the following matters and in accordance with the following
instructions, with discretionary authority as to any and all other matters that
may properly come before the meeting.
UNLESS A CONTRARY DIRECTION IS INDICATED, THIS PROXY, WHEN PROPERLY
EXECUTED, WILL BE VOTED FOR THE NOMINEES LISTED IN PROPOSAL 1 AND FOR THE
RATIFICATION OF THE APPOINTMENT OF THE INDEPENDENT AUDITORS LISTED IN PROPOSAL 2
AND AS MORE SPECIFICALLY DESCRIBED IN THE PROXY STATEMENT OF KENETECH
CORPORATION DATED JULY 1, 1996. IF SPECIFIC INSTRUCTIONS ARE INDICATED, THIS
PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
Please mark
[ X ] your votes
_________________ as this
Common
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW
1. To elect three directors as Class III Directors
to hold office for three year terms.
WITHHOLD
Class III Nominees: FOR FOR ALL
Charles Christenson, [ ] [ ]
Angus M. Duthie and Mark D. Lerdal
FOR all nominees listed above
(except as indicated to the contrary).
WITHHOLD AUTHORITY to vote for all nominees listed above.
INSTRUCTIONS: To withhold authority to vote for any individual nominee,
write that nominee's name in the space provided below:
--------------------------------------------------------------------------
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE
INDEPENDENT AUDITORS.
2. To ratify the appointment of the Independent Auditors.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
I PLAN TO ATTEND THE MEETING. [ ]
Please sign exactly as your name appears hereon. If the stock is
registered in the names of two or more persons, each should sign.
Executors, administrators, trustees, guardians and attorneys-in-fact
should add their titles. If signer is a corporation, please give full
corporate name and have a duly authorized officer sign, stating title. If
signer is a partnership, please sign in partnership name by authorized
person.
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