<PAGE>
Exhibit 99(a)(5)(G)
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ROBERT L. KOHLS and LOUISE A. :
KOHLS, :
:
Plaintiffs, :
v. : Civil Action No. 17762-NC
:
ANGUS M. DUTHIE, MARK D. :
LERDAL, GERALD R. ALDERSON, :
and CHARLES CHRISTENSON, :
:
Defendants, and :
:
KENETECH CORPORATION, :
:
Nominal Defendant. :
NOTICE OF MOTION
----------------
TO: Charles F, Richards, Esq. Todd C. Schiltz, Esq.
Raymond DiCamillo, Esq. Wolf Block Schorr & Solis-Cohen LLP
Richards, Layton & Finger 920 King Street
One Rodney Square Suite 300
Wilmington, DE 19801 Wilmington, DE 19801
PLEASE TAKE NOTICE that the attached Motion for Leave to File Second
Amended and Supplemental Complaint will be presented to the Court at a time to
be set by the Court
MORRIS, JAMES, HITCHENS & WILLIAMS LLP
Date: November 9, 2000 /s/ Edward M McNally
- --------------------------------------
Edward M McNally (#614)
Stephanie M. Tarabicos (#3442)
222 Delaware Avenue - 10th Fl.
P.O. Box 2306
Wilmington, Delaware 19899
(302) 888-6800
Attorneys for Plaintiffs
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ROBERT L. KOHLS and LOUISE A. :
KOHLS, :
:
Plaintiffs, :
v. : Civil Action No. 17762-NC
:
ANGUS M. DUTHIE, MARK D. LERDAL, :
GERALD R. ALDERSON, :
and CHARLES CHRISTENSON, :
:
Defendants, and :
:
KENETECH CORPORATION, :
:
Nominal Defendant. :
MOTION FOR LEAVE TO FILE SECOND AMENDED
AND SUPPLEMENTAL COMPLAINT
---------------------------------------
Plaintiffs, Robert L. Kohls and Louise A. Kohls ("Kohls") hereby move
this Court for an order permitting plaintiffs to serve and file the attached
Second Amended and Supplemental Complaint (Exhibit A). The redlined copy
(Exhibit B) showing the changes from the First Amended Complaint is also
attached hereto.
MORRIS, JAMES HITCHENS & WILLIAMS LLP
/s/ Edward M. McNally
------------------------------------
Edward M. McNally (#614)
Stephanie M. Tarabicos (#3442)
222 Delaware Avenue - 10th Fl.
P.O. Box 2306
Wilmington, Delaware 19899
(302) 888-6800
DATE: November 9 2000 Attorneys for Plaintiffs
-
<PAGE>
IN THE COURT OF CHANCERY OF THE STATE OF DELAWARE
IN AND FOR NEW CASTLE COUNTY
ROBERT L. KOHLS and LOUISE A. :
KOHLS, :
:
Plaintiffs, :
v. : Civil Action No. 17762-NC
:
ANGUS M. DUTHIE, MARK D. :
LERDAL, GERALD R. ALDERSON, :
CHARLES CHRISTENSON, :
MICHAEL D. WINN, GERALD R. :
MORGAN, JR., and KENETECH :
CORPORATION, :
:
Defendants. :
SECOND AMENDED AND SUPPLEMENTAL COMPLAINT
-----------------------------------------
Plaintiffs, Robert L. Kohls and Louise A. Kohls (collectively
"Plaintiffs"), by and through their attorneys, allege as follows:
NATURE OF THE FIRST CAUSE OF ACTION
-----------------------------------
1. KENETECH Corporation ("KENETECH" or the "Corporation") is a
corporation organized and existing under the laws of the State of Delaware.
Incorporated on February 25, 1986, under its original name, USW, Inc., the
Corporation was the parent holding company of KENETECH Windpower, Inc. (formerly
U.S. Windpower, Inc.). With its subsidiaries, the Corporation had historically
participated in developing, constructing, financing, operating, managing and
selling independent power projects and manufactured wind turbines.
<PAGE>
DEMAND EXCUSED ALLEGATIONS
--------------------------
2. This first cause of action is brought derivatively on behalf of
KENETECH to enforce the rights of KENETECH to acquire 12,865,458 shares of
KENETECH's common stock for nominal consideration.
3. Plaintiffs are excused from making a demand under Rule 23.1. The
reasons that such a demand is excused include:
(a) This action arises out of the decision of the individual
defendants Christenson, Duthie, Lerdal and Alderson (the "Original Defendants"),
who were then the sole members of the board of directors (the "Board") of
KENETECH, to cause KENETECH not to purchase 12,865,458 shares of its common
stock (the "Stock") for a total purchase price of $1,000 when at the time the
Stock was available for KENETECH's purchase in December, 1997. That Stock was
trading for approximately $.065 per share and thus had a market value of
approximately $800,000. (The Stock now trades for over $.60 a share and has a
market value of over $8.2 million). The Original Defendants were aware the Stock
would be sold and that the price would be nominal. No valid exercise of business
judgment supported the Original Defendants' decision not to have KENETECH
acquire that Stock at that time for $1,000.
(b) The Stock was instead acquired by defendant Lerdal who, as a
result, has an interest in preserving that transaction from attack and is
therefore disqualified from considering a demand that KENETECH bring this action
in its own behalf.
(c) Defendant Christenson is also disqualified from considering a
demand that he bring this action because he is liable for breaching his
fiduciary duty to KENETECH in connection with the purchase of the Stock. Neither
the business judgment rule nor the director
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exculpation provisions in the KENETECH certificate of incorporation protect
Christenson from this liability because he did not act in good faith in this
matter and in doing so favored Lerdal over KENETECH in breach of Christenson's
duty of loyalty. Christenson did not act in good faith because:
(i) He failed to obtain competent legal, financial or
accounting advice that KENETECH should not buy the stock; and
(ii) The reasons offered by Lerdal to justify his taking the
Stock from KENETECH were false on their face and could not have been believed by
Christenson. Thus:
(1) Lerdal claimed that KENETECH was insolvent, but
Christenson knew at the time the Stock was purchased on December 29, 1997 that,
because the EcoElectrica project had obtained construction financing on December
15, 1997, KENETECH's interest in EcoElectrica was worth much more than the $19.5
million book value at September 27, 1997, that was reported on the Form 10Q
filed on November 7, 1997 with the Securities and Exchange Commission ("SEC").
Indeed, Defendant Alderson has testified under oath that he informed the Board
at a meeting in June 1997 that values of $150 million and $200 million for
KENETECH'S interest in EcoElectrica, expressed in an analysis presented to the
Board, "were still low" and that Defendant Duthie agreed with that comment. (An
offer to purchase KENETECH's interest in EcoElectrica was received in July 1998
for an amount in excess of $237 million and its interest was ultimately sold in
December 1998 for $252 million). As a result, all of the Original Defendants,
including specifically Christenson and Lerdal, knew that the fair value of
KENETECH's interest in EcoElectrica in December 1997 exceeded $200 million. The
Original Defendants also were aware that if the reported book value of
EcoElectrica
3
<PAGE>
was adjusted to reflect its fair value, the $180.5 million difference ($200
million minus $19.5 million) was sufficient to make KENETECH solvent by more
than $48 million at the time of Lerdal's purchase of the Stock in December 1997,
based on the Form 10Q filed in November 1997 (as confirmed by the subsequent
filing on Form 10K for December 31, 1997).
(2) Lerdal claimed that the terms of the Senior Notes
prevented KENETECH from purchasing the Stock, but Christenson knew that the
Senior Notes were already in default for failure to pay millions of dollars in
interest and the Senior Notes holders had permitted KENETECH to pay over $1
million in bonuses to KENETECH's officers because they knew that they would be
paid in full when EcoElectrica was sold and therefore would not have objected to
paying $1,000 to buy the Stock; and
(3) Lerdal claimed the PRIDES Certificate of Designations
precluded it from purchasing the Stock, but Christenson knew that the PRIDES, as
a contingent defensive measure, would have favored KENETECH purchasing the Stock
had KENETECH disclosed to them that the Company intended to involuntarily
convert the PRIDES into common stock in less than five months, rather than meet
its obligations to the PRIDES under the Certificate of Designations, consistent
with the winding up that was then underway.
(4) Furthermore, the failure of the Board to cause KENETECH
to take advantage of a corporate opportunity to acquire one-third of KENETECH's
common stock for $1,000, merely because such a purchase might violate technical
covenants in the instruments governing the Senior Notes and the PRIDES, would
have been a breach of its fiduciary duty under well-established case law in
Delaware.
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(d) As a result of the foregoing, there is not a majority of the
Board of Directors of KENETECH qualified to consider a demand to bring this
action.
4. Plaintiffs seek relief to protect the Corporation and its
stockholders from the unlawful and inequitable conduct of the Original
Defendants, and to enforce the right of KENETECH to acquire its Stock.
5. The Plaintiffs lack an adequate remedy at law.
THE PARTIES
-----------
6. Plaintiffs, Robert L. Kohls and Louise A. Kohls, are, and at all
times relevant to the actions complained of here were, stockholders of KENETECH.
7. Defendant Mark D. Lerdal ("Lerdal") has been a director, as well
as President and Chief Executive officer of the Corporation from 1996. For the
years 1996, 1997 and 1998, he received aggregate cash compensation in excess of
$3 million, including a cash severance payment in 1997 of $1,163,919, even
though he had not been terminated by the Board.
8. Defendant Gerald R. Alderson ("Alderson") was a director of the
Corporation. He also is a former Chairman of the Board of Directors and former
President and Chief Executive Officer. In 1996, Mr. Alderson received over $1.1
million of cash compensation, including a $965,000 severance payment upon his
resignation as Chief Executive Officer.
9. Defendant Angus M. Duthie ("Duthie") was the Chairman of the
Board of Directors and a member of the Board when the actions complained of
occurred.
10. Defendant Charles Christenson ("Christenson") is a director of
the Corporation and was a member of the Board when the actions complained of
occurred.
5
<PAGE>
11. Together the Original Defendants constituted the entire Board of
Directors of the Corporation in December, 1997. Each of those Original
Defendants had been a director of the Corporation continuously since at least
August 1996.
FACTUAL ALLEGATIONS TO FIRST CAUSE OF ACTION
--------------------------------------------
12. On or about October of 1997, Lerdal was advised that a
stockholder of KENETECH, Hillman Company, was shopping the Stock and was going
to sell the Stock in 1997. Thereafter, the other Original Defendants were also
advised that the Stock was for sale and considered jointly purchasing it. Duthie
was persuaded by Lerdal to permit Lerdal to buy the Stock alone and the other
Original Defendants agreed.
13. Lerdal acquired thereafter the 12,865,458 shares of the
Corporation at a bargain price. The transaction closed on December 29, 1997,
after which 1,500,000 shares were placed in an irrevocable trust for his
children. The remaining 11,365,458 shares owned by Lerdal as a result of the
December 29, 1997 purchase and options to acquire 46,000 shares, represent 27%
of the Corporation's outstanding common stock. Together with his children, Mr.
Lerdal now controls approximately 35% of the Corporation's stock whose stock
market value at the close of trading on February 18, 2000 was over $8.2 million
and for which Lerdal paid only $1,000 on December 29, 1997.
14. The purchase of the Stock was an opportunity that KENETECH was
able to undertake. KENETECH had a capital surplus from which to purchase the
Stock, taking into account the fair value of its assets.
15. The purchase of the Stock by Lerdal constituted the taking of a
corporate opportunity that belonged to KENETECH. The Original Defendants were
aware that Lerdal was
6
<PAGE>
acquiring the Stock. By acquiescing in that breach of fiduciary duty by Lerdal,
Original Defendants other than Lerdal aided and abetted his breach.
WHEREFORE, Plaintiffs respectfully request that this Court grant
relief and enter judgment in their favor and against the Original Defendants,
and enter orders:
A. Declaring and adjudging that the purchase of the Stock
constituted the taking of a corporate opportunity and is null and void;
B. Requiring Lerdal to transfer the Stock to KENETECH for the
nominal consideration he paid;
C. To the extent that the Stock may not be transferred to KENETECH,
awarding KENETECH damages for the fair value of the Stock and holding the
Original Defendants jointly and severally liable for those damages; and,
D. Awarding Plaintiffs legal fees, costs of suit and such other
relief as the Court may deem to be equitable and just.
SECOND CAUSE OF ACTION
----------------------
16. The allegations of paragraphs 1-15 are incorporated herein by
reference.
ADDITIONAL PARTIES
------------------
17. Defendant Michael D. Winn ("Winn") is a director of KENETECH.
Winn is the president, sole director and stockholder of Terrasearch, Inc., a
consulting company that is paid $225,000 per year plus expenses by KENETECH.
Terrasearch has also received warrants to purchase 500,000 shares of KENETECH
common stock (the "Winn Warrants"). The annual fees and Winn Warrants are a
material part of Winn's compensation. The continued employment of Winn is
subject to Lerdal's control as KENETECH's President.
7
<PAGE>
18. Defendant Gerald R. Morgan, Jr. ("Morgan") is a director of
KENETECH. Morgan is the Chief Operating Officer of Francisco Partners L.P. in
which KENETECH has invested $840,000 and has agreed to invest $5 million. The
KENETECH investment in Francisco Partners is subject to the control of Lerdal as
KENETECH's President and is now a material investment to Francisco Partners and
hence to Morgan.
THE BACKGROUND FACTS
--------------------
19. On or about October 27, 2000, KENETECH publically announced that
it had entered into a series of agreements under which KC Holding Corporation
("KC Holdings") would make a tender offer for all the outstanding stock of
KENETECH, except that held by Lerdal (the "Public Stock"), at $1.04 per share
(the "Tender Offer").
20. The Tender Offer is to be followed by a cash out merger with KC
Merger Corp. (the "Merger") under which those holders of Public Stock who do not
accept the Tender Offer will be eliminated as stockholders of KENETECH, in
return for a cash payment of $1.04 per share or, if they so choose, appraisal
rights.
21. The Tender Offer is to be funded by ValueAct Capital Partners
L.P. ("VAC") investing approximately $21 million in KC Holdings in return for
65% of the stock of KC Holdings. The other 35% of the stock of KC Holdings is to
be issued to Lerdal in return for all of his stock in KENETECH which currently
is approximately 35% of the outstanding stock of KENETECH.
22. Following the Tender Offer and Merger, KENETECH and, indirectly,
all its assets will become 100% owned by KC Holdings and KC Merger Corp. will
cease to exist. As a result,
8
<PAGE>
through their ownership of KC Holdings, VAC will own 65% of KENETECH and Lerdal
will own the other 35% of KENETECH.
THE UNFAIR TRANSACTION
----------------------
23. The Tender Offer and the Merger (together the "Cash Out
Transactions") are the result of an unfair process, and will constitute an
unfair transaction to the holders of the KENETECH Public Stock.
24. The process whereby the Cash Out Transactions were agreed to by
KENETECH was unfair in at least the following respects:
(a) The Cash Out Transactions were negotiated by a so-called
"Special Committee" that consisted of defendant Christenson and Morgan. Because
the Cash Out Transactions would eliminate the standing of the plaintiffs Kohls
to bring a derivative action (the "Derivative Suit") against defendant
Christenson, he had a personal interest in concluding the Cash Out Transactions
that differed from the interests of the public stockholders. As a result, the
Cash Out Transactions were not the product of an arms-length negotiations, but
constituted a self-dealing transaction.
(b) The Cash Out Transactions provide a unique benefit to Lerdal
in the form of a "roll over" of his investment in KENETECH. Morgan is subject to
Lerdal's decision on whether to continue funding for Francisco Partners and in
that sense had an interest in carrying out the Cash Out Transactions to please
Lerdal.
(c) The cash out price of $1.04 was the product of an analysis
(the "Valuation") by Houlihan Lokey Howard & Zukin Financial Advisors, Inc.
("Houlihan Lokey"). In doing the Valuation, Houlihan Lokey: (1) was asked to
assume that the Derivative Suit had no
9
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value to KENETECH, (2) did not contact the plaintiffs in the Derivative suit to
determine the factual basis for that suit, (3) failed to take into account that
the Derivative Suit is scheduled to go to trial in April 2000, and (4) failed to
conduct an independent evaluation of the $10.3 million "deferred benefit for
deconsolidated losses" ("Deferred Tax Benefit"), a purported liability of
KENETECH equal to over 20% of its assets. These assumptions and failures to
investigate were improper and that was known to the members of the Special
Committee who, in turn, knew or should have known that as a result the Valuation
was incorrect and should not be utilized.
(d) The Houlihan Lokey Valuation presumed that a $10 million Deferred
Tax Benefit reserve should be taken into account in determining the net asset
value of KENETECH by deducting that amount (or a $4 million present value set
for that reserve), when at least Christenson had been previously advised that
this reserve was unnecessary. Thus, Christenson knew the Valuation was
materially incorrect and should not be utilized.
(e) The amount that VAC agreed to pay for the Public Stock was the
product of a calculation that took into account the 35% interest in KC Holdings
that Lerdal had previously insisted he receive in return for conveying his 35%
of KENETECH to KC Holdings and the other compensation Lerdal demanded from VAC,
including a $250,000 annual salary and additional bonus. The result was to
depress the amount VAC was willing to pay for the Public Stock.
25. As a result of the foregoing, the Cash Out Transactions will cause the
public stockholders to receive less than they would have received had the
negotiating process been fair.
26. The Cash Out Transactions constitute an unfair price for the Public
Stock. The $1.04 is unfair because:
10
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(a) KENETECH has a value of approximately $37 million based upon the
asset valuation range of $45.1 to $50.5 million when the deductions for the non-
existent Deferred Tax Benefit and unrealized excessive "overhead costs" are
eliminated. The Cash Out Transactions propose to pay only $21 million for the
Public Stock when, as 65% of KENETECH, that Stock is worth between $25.6 and
$26.6 million, just based on the Houlihan Lokey Valuation as properly adjusted.
(b) The $1.04 per share price is based on Lerdal owning 11,365,458
million shares of KENETECH. In fact, Lerdal does not have valid title to those
shares which rightfully belong to KENETECH. Lerdal also transferred 1.5 million
shares to a trust for his children. Title to these shares also is in question,
and, when returned to KENETECH, would result in even higher values for the
public shares. When the 11.4 million Lerdal shares are excluded even under the
unadjusted Valuation, the Public Stock is worth between $1.48 and $1.73 per
share. On an adjusted basis, the Public Stock is worth between $1.91 and $2.06
per share. See Exhibit "A".
27. The Offer states that if "the Merger is consummated, then the
plaintiffs may lose standing to pursue the "Derivative Suit, but" the cause of
action would not be extinguished." In fact, defendants Lerdal, Christenson, Winn
and Morgan have already decided to dismiss the Derivative Suit if they obtain
the power to do so and Lerdal has an understanding with KC Holdings that after
the Cash Out Transactions the Derivative Suit will not be pursued. Moreover, the
Offer does not disclose that a primary purpose of doing the Cash Out
Transactions at this time and before the April, 2001 trial of the Derivative
Suit is to prevent plaintiffs from obtaining any recovery in the Derivative
Suit.
11
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28. The Cash Out Transactions are being proposed to the public
stockholders of KENETECH by means of an Offer to Purchase and a Form 14D send by
KENETECH (which together with the exhibits attached thereto constitutes the
"Offer").
29. The Offer contains material misstatements and fails to include
information necessary to make the statements made not misleading. These
misstatements and failures to disclose include:
(a) The Offer fails to adequately disclose that Christenson has a
personal interest in approving the Cash Out Transactions to have the Derivative
Suit dismissed;
(b) The Offer fails to disclose that if the Derivative Suit is
successful, Lerdal will not own stock in KENETECH and as a result the value of
the Public Stock under even the Houlihan Lokey Valuation will be substantially
increased;
(c) The Offer fails to disclose that the Merger may depend upon
the KENETECH stock Lerdal claims to hold being voted in favor of the Cash Out
Transactions while Lerdal has no right to vote those shares;
(d) The Offer states the $1.04 cash out price was "based on the
extended arm's length negotiations with" KC Holdings when, in fact those
negotiations were not "arm's length" because Christenson and Morgan had a
personal reason to sell that was not in the interests of KENETECH and the public
stockholders; and,
(e) The Offer states a range of value for the $10.3 million
Deferred Tax Benefit reserve of between $4.1 and S4.7 million when there is no
reasonable basis for any material liability.
12
<PAGE>
30. The Cash Out Transactions and Offer were approved by defendants
Lerdal, Christenson, Winn and Morgan, and that constitutes a breach of their
fiduciary duties of loyalty and candor.
CLASS ACTION ALLEGATIONS
------------------------
31. The Kohls bring this count of a complaint pursuant to Rule 23 of the
Rules of the Court of Chancery on behalf of themselves and all other persons who
own common stock of KENETECH on November 4, 2000.
32. This count of the Complaint is maintainable as a class action. The
Class is so numerous that joinder of all members is impractical. There are
several hundred stockholders of KENETECH who are geographically disbursed
throughout the United States.
33. There are questions of law and fact which are common to the Class and
which predominate over questions affecting any individual Class member. The
common questions include the following:
(a) whether the Cash Out Transactions are the product of a fair
process and are providing a fair price to the stockholders of KENETECH, and
(b) whether the Offer materials that describe the transactions
contain any misrepresentations or fail to disclose material facts which are
necessary for the disclosures that have been made to not be misleading.
34. The Kohls are committed to prosecuting this Count and have retained
competent counsel experienced in litigation of this nature. The Kohls claims
are typical of the claims of other members of the Class. Accordingly, the Kohls
are adequate representatives of the Class and will fairly and adequately protect
the interests of the Class.
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35. Defendants have acted on grounds generally applicable to the Class
with respect to the matters complained of herein, thereby making appropriate the
relief sought with respect to the Class as a whole. Prosecution of separate
actions would create the risk of inconsistent or varying adjudications which
would establish incomparable standards of conduct for the defendants, or
adjudications which would as a practical matter be dispositive of the interests
of the other members of the Class.
36. The plaintiffs do not have an adequate remedy at law. Demanding
appraisal rights is not an adequate remedy, because it will not cure the unfair
process employed to set the terms of the Cash Out Transactions and will not cure
the materially false statements made in the Offer which will have the effect of
inducing KENETECH shareholders to accept $1.04 per share and not demand
appraisal rights.
WHEREFORE, plaintiffs pray that:
1. A preliminary injunction be issued after a hearing enjoining the
consummation of the Merger Agreement on its scheduled December 8, 2000 date;
2. A permanent injunction be entered prohibiting the consummation of the
Merger Agreement; and
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3. Plaintiffs be awarded their attorneys' fees, costs, and other
expenses.
MORRIS, JAMES, HITCHENS & WILLIAMS LLP
/s/ Edward M. McNally
--------------------------------------
Edward M. McNally (#614)
Stephanie M. Tarabicos (#3442)
222 Delaware Avenue 10/th/ Fl.
P.O. Box 2306
Wilmington, Delaware 19899
(302) 888-6800
Attorneys for Plaintiffs
DATE: November 9, 2000
15
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Calculation of KWND Public Share Values
---------------------------------------
11/9/2000 7:11 Low High
--- ----
Adj Net Asset Value* $ 30,452 $ 35,666
Deferred Benefit for Decon. Sub. Losses* $ 4,741 $ 4,073
Forecast Present Value of Overhead Costs* $ 5,514 $ 4,154
Estimated Actual Present Value of Overhead Costs** ($1,360) ($1,360)
---------- ----------
Readjusted Value $ 39,347 $ 42,533
Public's shares*** 20,604,71 20,604,71
---------- ----------
Adjusted value of public's shares $ 1.91 $ 2.06
65% of Readjusted Value $ 25,576 $ 27,646
Value of shares excluding lerdal's shares
when using Adj net asset value $ 1.48 $ 1.73
* Per Houlihan Lokey
** assumes difference between low and high end of range would approximate the
actual cost
*** Lerdal's 11,365,458 shares for this purpose exclude an additional 1.5
million shares he transferred to a trust for his children which arguably
should be returned to Kenetech and excluded from the above calculation.
