UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
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:
[x] Preliminary Proxy Statement
[ ] Confidential, for use of the Commission Only (as permitted
by Rule 14a-6(e)(2))
[ ] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
KENETECH CORPORATION
(Name of Registrant as Specified in its Charter)
_________________________
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[x] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1)and 0-11.
(1) Title of each class of securities to which transaction
applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11 (set forth the
amount on which the filing fee is calculated and state how
it was determined):
(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] 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:
<PAGE>
KENETECH CORPORATION
500 SANSOME STREET
SAN FRANCISCO, CALIFORNIA 94111
2000 Annual Meeting of Stockholders
July 20, 2000
Dear Stockholder:
Enclosed you will find your 2000 Proxy, Proxy Statement and Notice of
Annual Meeting of Stockholders of KENETECH Corporation, a Delaware 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 on Wednesday, August 23, 2000, at 10:00
A.M. The Annual Meeting will be held at the Park Hyatt San Francisco, 333
Battery Street, San Francisco, California.
For the reasons set forth in the attached Proxy Statement, we ask that you
(1) elect this year's two nominees to the Board of Directors; (2) vote to amend
the Restated Certificate of Incorporation of the Company to eliminate the
Company's Series U Preferred Stock; (3) vote to amend the Restated Certificate
of Incorporation of the Company to effect a one-for-ten reverse stock split of
the issued and outstanding shares of the Company's common stock, $0.0001 par
value; (4) vote to amend the Restated Certificate of Incorporation of the
Company to decrease the number of authorized shares of the Company's common
stock, $0.0001 par value, from 110,000,000 to 11,000,000 and decrease the number
of authorized shares of the Company's preferred stock, par value $0.01, from
10,000,000 to 1,000,000; and (5) ratify the Board of Directors' appointment of
KPMG LLP as the Company's independent auditors for the 2000 fiscal year.
Also enclosed is your copy of the Company's 1999 Annual Report on Form
10-K.
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. SUBMITTING YOUR PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN
PERSON IF YOU ATTEND THE MEETING. 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
<PAGE>
KENETECH CORPORATION
500 Sansome Street, Suite 410
San Francisco, CA 94111
NOTICE OF 2000 ANNUAL MEETING OF STOCKHOLDERS
Wednesday, August 23, 2000
10:00 A.M.
TO OUR STOCKHOLDERS:
The Annual Meeting of Stockholders of KENETECH Corporation, a Delaware
corporation (the "Company"), will be held at the Park Hyatt San Francisco, 333
Battery Street, San Francisco, California, on Wednesday, August 23, 2000, at
10:00 A.M., local time, for the purpose of:
1. Electing two Class I Directors of the Company to hold office for
three-year terms;
2. Considering and voting upon a proposal to amend the Restated Certificate
of Incorporation of the Company to eliminate the Company's Series U Preferred
Stock;
3. Considering and voting upon a proposal to amend the Restated Certificate
of Incorporation of the Company to effect a one-for-ten reverse stock split of
the issued and outstanding shares of the Company's common stock, $0.0001 par
value;
4. Considering and voting upon a proposal to amend the Restated Certificate
of Incorporation of the Company to decrease the number of authorized shares of
the Company's common stock, $0.0001 par value, from 110,000,000 to 11,000,000
and decrease the number of authorized shares of the Company's preferred stock,
par value $0.01, from 10,000,000 to 1,000,000;
5. Ratifying the Board of Directors' appointment of independent auditors to
audit the financial statements of the Company for the 2000 fiscal year; and
6. Acting upon all other matters which may properly come before the meeting
or any adjournments or postponements thereof.
Stockholders of record at the close of business on June 26, 2000 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 410, San Francisco, California 94111.
By Order of the Board of Directors
Dianne P. Urhausen
Vice President and Secretary
San Francisco, California
July 20, 2000
<PAGE>
KENETECH CORPORATION
500 Sansome Street
San Francisco, California 94111
PROXY STATEMENT
ANNUAL MEETING - 10:00 A.M., WEDNESDAY, AUGUST 23, 2000
Date, Time and Place of Meeting, Principal Executive Offices, Proxies and
Solicitation
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 23, 2000 and at any and all adjournments or
postponements thereof. Such Annual Meeting will be held at the Park Hyatt San
Francisco, 333 Battery Street, San Francisco, California.
The principal executive offices of the Company are located at 500 Sansome
Street, Suite 410, San Francisco, California 94111.
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 20, 2000. Costs of solicitation, including
preparation, assembly, printing and mailing of this Proxy Statement, the Proxy
and any other information furnished to the stockholders, 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 or personal interview. The Company will,
upon request, reimburse the reasonable charges and expenses of brokerage houses
or other nominees or fiduciaries for forwarding proxy materials to, and
obtaining authority to execute proxies from, beneficial owners for whose account
they hold shares of common stock of the Company. The Company may retain, at its
expense, a proxy solicitation firm to assist it in soliciting proxies.
Annual Report
An annual report on Form 10-K for the fiscal year ended December 31, 1999
is enclosed with this Proxy Statement.
Voting Stock
The securities of the Company entitled to be voted at the Annual Meeting
consist of shares of its common stock, $0.0001 par value ("Common Stock"). Only
stockholders of record at the close of business on June 26, 2000 (the "Record
Date") will be entitled to receive notice of and to vote at the Annual Meeting.
There are differing voting requirements for the various proposals. Assuming a
quorum is present in person or by proxy, Directors will be elected by a
plurality of the votes of the shares present in person or represented by proxy
at the Annual Meeting and entitled to vote in the election of directors. The
affirmative vote of a majority of the outstanding shares of the Company entitled
to vote thereon is required for the approval of Proposals 2, 3, and 4. The
affirmative vote of a majority of shares present in person or represented by
proxy at the Annual Meeting and entitled to vote on the matter is required for
the approval of Proposal 5. Each share of Common Stock is entitled to one vote
on each proposal that comes before the stockholders at the Annual Meeting. On
the Record Date, 32,960,664 shares of Common Stock were issued and outstanding.
Page 1
<PAGE>
Voting Procedures
Stockholders may vote in person or by proxy at the Annual Meeting. In order
for any business to be conducted, holders of more than 50% of the shares
entitled to vote must be represented at the meeting, either in person or by
proxy. If a quorum is not present, the holders of a majority of the shares
present in person or represented by proxy at the meeting, and entitled to vote
at the meeting, may adjourn the meeting to another time and/or place. When a
meeting is adjourned to another time and place, notice need not be given of the
adjourned meeting if the time and place thereof are announced at the meeting at
which the adjournment is taken. At the adjourned meeting, the Company may
transact any business which might have been transacted at the original meeting.
If the adjournment is for more than 30 days, or if after the adjournment a new
record date is fixed for the adjourned meeting, a notice of the adjourned
meeting will be given to each stockholder of record entitled to vote at the
meeting.
Votes cast by proxy or in person at the Annual Meeting will be tabulated
and certified by the election inspector appointed for the meeting and the
election inspector will determine whether or not a quorum is present. Shares as
to which proxies have been properly executed and returned 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 I Director; (2)
"FOR" the amendment of the Restated Certificate of Incorporation of the Company
to eliminate the Company's Series U Preferred Stock; (3) "FOR" the amendment of
the Restated Certificate of Incorporation of the Company to effect a one-for-ten
reverse stock split of the issued and outstanding shares of the Company's Common
Stock; (4) "FOR" the amendment of the Restated Certificate of Incorporation of
the Company to decrease the number of authorized shares of the Company's Common
Stock from 110,000,000 to 11,000,000 and decrease the number of authorized
shares of the Company's preferred stock, par value $0.01 (the "Preferred Stock")
from 10,000,000 to 1,000,000; and (5) "FOR" the ratification of the appointment
of KPMG LLP as the independent auditors for the Company for the fiscal year
ending December 31, 2000. The Board of Directors knows of no additional matters
that will be presented for consideration at the Annual Meeting. Execution of a
proxy, however, confers on the designated proxyholders discretionary authority
to vote the shares on such other business, if any, that may properly come before
the Annual Meeting or any adjournments thereof.
Proxies that are submitted by brokers as holders of record and that do not
indicate a vote for some of the proposals, because the brokers have not received
instructions from their customers or other beneficial owners on how to vote on
those proposals and do not have discretionary voting authority, are called
"broker non-votes." In accordance with Delaware law, abstentions, votes withheld
with respect to the election of one or more nominees as Directors and broker
non-votes will be counted as present at the Annual Meeting for the purpose of
determining whether a quorum is present. Broker non-votes and instructions to
withhold authority to vote for one or both of the nominees will result in those
nominees receiving fewer votes, but will not reduce the number of votes
otherwise received by the nominees or otherwise affect the election of such
nominees.
For purposes of determining approval of a matter presented at the Annual
Meeting, abstentions will be deemed present and entitled to vote and will,
therefore, have the same legal effect as a vote "against" a matter presented at
the meeting. Broker non-votes will be deemed not entitled to vote on a matter at
the Annual Meeting as to which the non-vote is indicated. Therefore, a broker
non-vote will have no legal effect on any matter requiring the affirmative vote
of a plurality of the votes cast or of a majority of the shares present in
person or by proxy and entitled to vote on the subject matter, and will have the
same legal effect as a vote "against" any other matter presented at the meeting
which requires approval by a majority of the outstanding shares entitled to vote
on the matter.
Revocability of Proxies
If you attend the Annual Meeting, you may vote in person, regardless of
whether you have submitted a Proxy. Presence at the Annual Meeting, by itself,
however, will not result in the revocation of a Proxy. Proxies may be revoked at
any time prior to the exercise thereof by filing with the Secretary of the
Company, at the Company's principal executive offices, a signed written
revocation or by submitting a later-dated Proxy.
Page 2
<PAGE>
PROPOSAL 1
ELECTION OF DIRECTORS
The Restated Certificate of Incorporation, as amended to date, of the
Company ("Restated Certificate") and Restated Bylaws, as amended to date (the
"Bylaws"), of the Company provide for a classified Board of Directors. The
Company's Board of Directors is separated into three classes, and the Directors
in each class are elected to serve for three-year terms, and until their
respective successors are duly elected and qualified. The Board of Directors
currently consists of two Class I Directors, one Class II Director and one Class
III Director. Following the 2000 Annual Meeting of Stockholders, the terms of
the Class I Directors expire at the annual meeting of stockholders to be held in
2003, the term of the Class II Director expires at the annual meeting of
stockholders to be held in 2001 and the term of the Class III Director expires
at the annual meeting of stockholders to be held in 2002.
Current Directors and Nominees
The terms of the Company's Class I Directors will expire at the 2000 Annual
Meeting of Stockholders. The Board of Directors has nominated Charles
Christenson and Michael D. Winn for reelection as Class I Directors. If Mr.
Christenson and Mr. Winn are elected, each will serve as a Class I Director with
a three-year term to expire at the annual meeting of stockholders to be held in
2003 and until his successor is elected and qualified or until his earlier
resignation or removal.
The nominees have consented to serve if elected, and at the date of this
Proxy Statement, the Company has no reason to believe that either of the named
nominees will be unable to act. The Directors will be elected by a plurality of
the votes of the shares present in person or represented by proxy at the meeting
and entitled to vote in the election of directors. Unless otherwise directed,
the persons named as proxies intend to vote for the election of the nominees.
Proxies cannot be voted for a greater number of persons than the two named
nominees.
Set forth below is certain information concerning the Company's current
Directors and nominees to the Board of Directors:
Name Age Position(s) with Company
Charles Christenson 69 Director
Mark D. Lerdal 41 President, Chief Executive Officer
and Director
Gerald R. Morgan, Jr. 37 Director
Michael D. Winn 37 Director
Biographical Information
The Company was formed in 1986 as a holding company for KENETECH Windpower,
Inc. (formerly, U.S. Windpower, Inc.). References to the Company are, prior to
1986, references to KENETECH Windpower, Inc.
CHARLES CHRISTENSON
Mr. 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 the Company since January 1980. He is also a
director of Profile Technologies, Inc., a public company. 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 I Director.
Page 3
<PAGE>
MARK D. LERDAL
Mr. Lerdal has served as a Director of the Company since March 1996 and as Chief
Executive Officer and President since April 1996. He was elected as Chairman of
the Board of Directors in August 1999. He served as Vice President and General
Counsel of the Company from April 1992 until March 1996. He received his A.B.
from Stanford University and his J.D. from Northwestern University School of
Law. He is a Class III Director.
GERALD R. MORGAN, JR.
Mr. Morgan has served as a Director of the Company since August 1999. He is the
Chief Operating Officer of Francisco Partners, L.P., a private partnership
focused on technology buyouts. Previously, Mr. Morgan served in various
capacities for Security Capital Group and affiliates, including Senior Vice
President, Corporate Finance, and Chief Financial Officer for Security Capital
European Realty. He received his B.S. from Stanford University and his M.B.A
from Stanford University Graduate School of Business. He is a Class II Director.
MICHAEL D. WINN
Mr. Winn has served as a Director of the Company since November 1999. He is the
President and a Director of Terrasearch Inc., a financial consulting company. He
is also a Director and Officer of Sanu Resources Inc., a mineral exploration
company, and a Manager of MDW Associates, LLC, a private investment partnership.
Prior to forming Terrasearch Inc., he was a financial analyst for a Southern
California based brokerage firm covering the oil and gas sector. He received his
B.S. from the University of Southern California. He is a Class I Director.
Mark D. Lerdal was a director and executive officer of KENETECH Windpower,
Inc. (a wholly-owned subsidiary of the Company) within the two-year period prior
to KENETECH Windpower, Inc.'s chapter 11 filing on May 29, 1996 in the United
States Bankruptcy Court. In addition, Charles Christenson is a named defendant
in a class action filed against the Company, certain of its former officers and
directors and Mr. Christenson, in the United States District Court for the
Northern District of California, alleging federal securities laws violations.
Charles Christenson and Mark D. Lerdal are named defendants in an action
purportedly filed as a class action against the Company, certain of its former
directors, Mr. Christenson and Mr. Lerdal in the Delaware Chancery Court,
alleging, among other things, breach of fiduciary duty in connection with the
conversion of the Company's former Preferred Redeemable Increased Dividend
Equity SecuritiesSM, 8-1/4% PRIDESSM, Convertible Preferred Stock, par value
$.01, and in an action purportedly filed as a derivative action against the
Company, certain of its former directors, Mr. Christenson and Mr. Lerdal in the
Delaware Chancery Court, alleging, among other things, the taking of a corporate
opportunity in connection with the purchase of Common Stock by Mr. Lerdal in
December 1997.
Board Meetings and Committees
Regular meetings of the Board of Directors of the Company are conducted
approximately four times each year. From time to time special meetings of the
Board of Directors are conducted as required. The Board of Directors held six
meetings and acted once by unanimous written consent during the fiscal year
ending December 31, 1999. During fiscal 1999, each Director then in office
attended 75% or more of the aggregate of (i) the total number of meetings of the
Board of Directors, and (ii) the total number of meetings held by all committees
of the Board on which he served.
Page 4
<PAGE>
The Board of Directors has a standing Audit Committee and Compensation
Committee.
The Audit Committee was comprised of Charles Christenson and Angus M.
Duthie (1) from January 1, 1999 until August 18, 1999. Gerald R. Morgan was
elected to the Audit Committee on August 18, 1999 and Michael D. Winn was
elected to the Audit Committee on November 23, 1999 and each served on the
Committee for the remainder of the fiscal year ending December 31, 1999. It is
expected that Mr. Christenson and Mr. Winn will remain on the Audit Committee
with Mr. Morgan if re-elected to the Board of Directors at the Annual Meeting.
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 met twice during the
fiscal year ending December 31, 1999.
The Compensation Committee was comprised of Messrs. Christenson and Duthie
from January 1, 1999 until August 18, 1999. Gerald R. Morgan was elected to the
Compensation Committee on August 18, 1999 and Michael D. Winn was elected to the
Compensation Committee on November 23, 1999 and each served on the Committee for
the remainder of the fiscal year ending December 31, 1999. It is expected that
Mr. Christenson and Mr. Winn will remain on the Compensation Committee with Mr.
Morgan if re-elected to the Board of Directors at the Annual Meeting. The
Compensation Committee is responsible for determining the compensation for the
Company's management and establishing compensation policies for the Company's
employees generally. The Compensation Committee also administers the Company's
stock option plan. The Compensation Committee did not meet during the fiscal
year ending December 31, 1999. The Compensation Committee did meet in January
2000 and approved certain bonuses for the 1998 and 1999 fiscal years. For more
information regarding executive compensation, see "Report of the Compensation
Committee on Executive Compensation."
Executive Officers
Set forth below are the names, ages, 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
Mark D. Lerdal 41 President, Chief Executive Officer and
Director
Andrew M. Langtry 38 Corporate Controller and Chief
Accounting Officer
Dianne P. Urhausen 42 Vice President, General Counsel and
Corporate Secretary
MARK D. LERDAL
Mr. Lerdal has served as a Director of the Company since March 1996 and as Chief
Executive Officer and President since April 1996. He was elected as Chairman of
the Board of Directors in August 1999. He served as Vice President and General
Counsel of the Company from April 1992 until March 1996. He received his A.B.
from Stanford University and his J.D. from Northwestern University School of
Law. He is a Class III Director.
--------
1 Mr. Duthie did not stand for re-election to the Board of Directions at the
1999 Annual Meeting of Stockholders.
Page 5
<PAGE>
ANDREW M. LANGTRY
Mr. Langtry has served as Corporate Controller and Chief Accounting Officer of
the Company since March 2000. He served as Tax Director of the Company from
April 1996 to March 2000. Prior to that, he served as Tax Manager of the Company
from July 1993 to April 1996. He received his B.S. from California State
University at Hayward. Mr. Langtry is a CPA licensed in California.
DIANNE P. URHAUSEN
Ms. Urhausen has served as Vice President, Corporate Secretary, and General
Counsel of the Company since August 1998. She served as Administrative Counsel
and Corporate Secretary from August 1995 to August 1998. Prior to that, she was
an Associate at the law firm of Thelen, Marrin, Johnson & Bridges. She received
her B.A. from St. Mary's College of California and her J.D. from the University
of San Francisco.
Executive Compensation
Directors
Each Director of the Company receives a quarterly retainer of $6,000 (see
also footnote 1 to Summary Compensation Table).
The Company reimburses Directors for their reasonable expenses associated
with attending Board of Directors meetings and provides the Directors with
liability insurance with respect to their activities as directors of the
Company.
Executive Officers
The following table sets forth, for the fiscal years ended December 31,
1999, 1998, and 1997, all compensation, for services rendered in all capacities
to the Company, awarded to, earned by or paid to (i) the Chief Executive Officer
during 1999, (ii) the most highly compensated executive officers of the Company
in addition to the Chief Executive Officer who were serving as executive
officers at the end of 1999, and (iii) the two former executive officers of the
Company for whom disclosure would have been provided but for the fact such
individuals were not serving as executive officers of the Company at December
31, 1999.
Page 6
<PAGE>
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
================================================================================================================
Long-Term
Compensation All Other Compensation
Annual Compensation Awards ($)(3)(4)
------------------------------------------- ------------ ----------------------
Securities
Other Annual Underlying
Name Compensation Options
Principal Position Year Salary Bonus ($)(1) (#)(2)
========================== ---- --------- --------- ------------ ------------ ----------------------
<S> <C> <C> <C> <C> <C> <C>
Mark D. Lerdal 1999 $ 423,861 $ 350,000(5) $ 24,000 - $ 1,152
Chairman of the Board, 1998 $ 443,189 $ 250,000(5) $ 23,500 - $ 1,152
Chief Executive Officer, 1997 $ 401,295 $ 250,000 $ 21,500 - $ 1,165,071
and President
========================== ---- --------- ---------- ----------- ------------ ----------------------
Michael U. Alvarez (6) 1999 $ 214,377 $ 191,360 - - $ -
Vice President, Chief 1998 $ 382,005 $2,887,980 - - $ 1,388
Financial Officer and 1997 $ 351,134 $ 364,920 - - $ 1,388
Assistant Secretary
========================== ---- --------- ---------- ----------- ------------ ----------------------
Andrew M. Langtry 1999 $ 106,226 $ 49,750 - - $ -
Corporate Controller 1998 $ 88,125 $ 22,263 - - $ -
and Chief Accounting 1997 $ 103,275 $ 10,000 - - $ -
Officer
========================== ---- --------- ---------- ----------- ------------ ----------------------
Dianne P. Urhausen 1999 $ 129,249 $ 160,000 - - -
Vice President, 1998 $ 132,548 $ 40,000 - - -
Corporate Secretary 1997 $ 75,243 $ 37,901 - - -
and General Counsel
========================== ---- --------- ---------- ----------- ------------ ----------------------
Mervin E. Werth (6) 1999 $ 38,522 $ 331,250 - - $ 31,250
Controller, Chief 1998 $ 139,645 $ 100,000 - - -
Accounting Officer and 1997 $ 125,405 $ - - - -
Asst. Treasurer
========================== ---- --------- ---------- ----------- ------------ ----------------------
(1) Includes $24,000 in 1999, $23,500 in 1998, and $21,500 in 1997 for director's fees for Mark D. Lerdal.
(2) Shares of Common Stock subject to stock options granted during the fiscal year. No stock appreciation
rights were granted during 1999, 1998 or 1997.
(3) Includes $1,152 for 1999, 1998, and 1997 for insurance premiums paid by the Company with respect to
term life insurance for the benefit of Mark D. Lerdal and $1,388 in 1998 and 1997 for the benefit of
Michael U. Alvarez, respectively, and a pre-paid severance payment in 1997 of $1,163,919 for Mark D.
Lerdal. Also includes a severance payment of $31,250 for Mr. Werth in 1999.
(4) Mr. Lerdal, Mr. Werth, the other defendants (including Mr. Christenson) and the Company are jointly
represented by the same respective counsel in (i) a class action filed against the Company, certain of
its former officers and directors and Mr. Christenson, in the United States District Court for the
Northern District of California, alleging federal securities laws violations, (ii) an action purportedly
filed as a class action against the Company, certain of its former directors, Mr. Christenson and Mr.
Lerdal in the Delaware Chancery Court, alleging, among other things, breach of fiduciary duty in
connection with the conversion of the Company's former Preferred Redeemable Increased Dividend Equity
SecuritiesSM, 8-1/4% PRIDESSM, Convertible Preferred Stock, par value $.01, and (iii) an action
purportedly filed as a derivative action against the Company, certain of its former directors, Mr.
Christenson and Mr. Lerdal in the Delaware Chancery Court, alleging, among other things, the taking of
a corporate opportunity in connection with the purchase of Common Stock by Mr. Lerdal in December 1997.
A portion of such counsel's legal fees have been paid by the Company, however, such fees have not been
apportioned among the individual defendants.
(5) Includes a bonus of $350,000 earned for 1999 and $250,000 earned for 1998 for Mr. Lerdal. Such bonuses
were approved by the Board of Directors and paid in 2000.
(6) Mr. Alvarez's employment agreement expired March 23, 1999 and Mr. Werth entered into a separation
agreement effective March 31, 1999.
</TABLE>
No options or stock appreciation rights were awarded to the Chief Executive
Officer or the named executive officers of the Company during the fiscal year
ended December 31, 1999.
Page 7
<PAGE>
The following table sets forth information concerning option exercises and
option holdings for the fiscal year ending December 31, 1999, with respect to
the Chief Executive Officer and the named executive officers of the Company. No
stock appreciation rights were outstanding during such fiscal year.
Aggregated Option Exercises in Last Fiscal Year and
Fiscal Year-End Option Values
<TABLE>
<CAPTION>
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
==================================================================================================================
Number of Securities Value of Unexercised
Shares Underlying Unexercised Options In-the-Money Options
Acquired on Value At Fiscal Year-End At Fiscal Year-End
Name Exercise (#) Realized ($) Exercisable/Unexercisable (1) Exercisable/Unexercisable (2)
=================== ------------ ------------ ------------------------------ -----------------------------
<S> <C> <C> <C> <C>
Mark D. Lerdal - - -/500,000 -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Michael U. Alvarez - - -/- -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Andrew M. Langtry - - -/- -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Dianne P. Urhausen - - -/- -/-
=================== ------------ ------------ ------------------------------ -----------------------------
Mervin E. Werth - - -/- -/-
=================== ------------ ------------ ------------------------------ -----------------------------
(1) Mr. Alvarez's employment agreement expired March 23, 1999 and Mr. Werth
entered into a separation agreement effective March 31, 1999. All options
held by such persons had expired as of December 31, 1999.
(2) The exercise price of all options exceeds the market price of the
underlying shares at December 31, 1999.
</TABLE>
Stock Plans
The 1993 Option Plan (described below) and the 1993 Employee Stock Purchase
Plan (the "Purchase Plan") were implemented in September 1993. The Purchase Plan
was discontinued following the August 1996 semi-annual purchase date. No Options
have been granted under the 1993 Option Plan since 1996.
The Company has registered shares of Common Stock reserved for issuance
under the 1993 Option Plan thus permitting the resale of such shares by
non-affiliates in the public market without restriction under the Securities Act
of 1933.
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 were automatically 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 (this part of the plan
has been discontinued); 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 422
of the Internal Revenue Code of 1986, as amended, or non-statutory options not
intended to satisfy such requirements. All grants under the Automatic Option
Grant Program were 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.
Page 8
<PAGE>
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 was, at the time he or she
became a director, to 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 had been a director for at least six
months was to be granted an option to purchase 1,000 shares of Common Stock. No
grants under the Automatic Option Grant Program have been made since 1995, the
program has been discontinued and all grants previously awarded have terminated.
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 have maximum terms of ten years measured from the grant date.
Options are not assignable or transferable other than by will or by the laws of
inheritance following the optionee's death, and only the optionee may during the
optionee's lifetime, exercise the option. The optionee does 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 all events terminate on June 20, 2003.
All of the Company's employees are eligible to participate in the
Discretionary Option 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.
Page 9
<PAGE>
Employment Contracts, Termination of Employment and Change-In-Control
Arrangements
The Company's 1993 Option Plan contains provisions pursuant to which all
outstanding options granted under that plan will become fully vested and
immediately exercisable upon certain changes of control and related events (see
discussion above).
The Company and certain direct or indirect wholly-owned subsidiaries
entered into an Employment Agreement with Mr. Alvarez that became effective
December 1, 1997 (such agreement superseded Mr. Alvarez's prior employment
agreement). The Employment Agreement provided that Mr. Alvarez was to be
employed (unless terminated for cause) at his annual base salary of $350,000
until the later of (i) December 31, 1998, (ii) 90 days following the sale of the
Company's indirectly owned 50% equity interest in a partnership that owns a
gas-fired cogeneration facility of approximately 540 MW located in Penuelas,
Puerto Rico and other associated contract rights (collectively, the
"EcoElectrica Project"), or (iii) the date on which all payments under the
Agreement had been made. Accordingly, Mr. Alvarez's Employment Agreement expired
March 23, 1999. Under the terms of the Employment Agreement, Mr. Alvarez was
paid a bonus in 1997 upon the closing of the construction financing for the
EcoElectrica Project, and a bonus in 1998 from the proceeds of the sale of the
Company's indirectly owned 50% equity interest in the EcoElectrica Project (see
Summary Compensation Table). Mr. Alvarez also received a bonus in 1999 from the
proceeds of the sale of the Company's indirect interest in a wood-fired project
located in Chateaugay, New York (the "Chateaugay Project") and other bonuses in
1997 and 1998 from the proceeds of the sale of certain other assets of KENETECH
Energy Systems, Inc, a wholly-owned subsidiary of the Company (see Summary
Compensation Table).
The Company entered into an Employment Agreement with Mr. Lerdal on April
1, 1996. Mr. Lerdal's initial employment period ran for a period of three years
ending March 31, 1999 and the Agreement was then automatically renewed for a
one-year period. Pursuant to the terms and conditions of the Agreement, Mr.
Lerdal (i) received a bonus of $100,000 upon execution of the Agreement, (ii)
received an annual base salary of $400,000, (iii) was eligible to receive an
annual bonus of up to 25% of his base salary, and (iv) earned additional bonuses
of $450,000 upon the occurrence of certain stated objectives. All of the
objective payments have been earned including the $250,000 paid as a bonus in
1997. In the event of Mr. Lerdal's involuntary termination (other than for
cause) including non-renewal of the employment period, he would receive a
severance payment equal to two years base salary plus health care and life
insurance coverage for an additional two years. In the event of Mr. Lerdal's
involuntary termination or resignation within six months of a Change in Control,
Mr. Lerdal would receive a lump sum payment equal to one year's salary in
addition to the payments set forth in the immediately preceding sentence. The
severance provisions of the Agreement were paid in March 1997. Mr. Lerdal gave
the Company notice of his intent not to renew the Agreement and the Agreement
expired by its terms on March 31, 2000. Effective April 1, 2000, Mr. Lerdal
became an at-will employee of the Company with an annual base salary of
$250,000.
The Company and Mr. Langtry entered into a Retention Agreement on April 1,
1999 that provided that Mr. Langtry would be paid his annual base salary of
$95,000 until the Agreement expired on September 30, 1999. Under the terms of
the Agreement, after September 30, 1999, Mr. Langtry continued to be employed by
the Company as an at will employee, his annual base salary was raised to
$120,000 and he was paid a bonus in the amount of $36,250 on December 31,1999
(see also Summary Compensation Table). If Mr. Langtry is discharged (other than
as a result of a termination for cause) he will receive a lump sum severance
payment in the amount of $72,500.
Ms. Urhausen and the Company entered into an Employment Agreement on
December 22, 1998 that provided that Ms. Urhausen was to be employed (unless
terminated for cause) at her annual base salary of $160,000 for the one-year
period beginning January 1, 1999. Under the terms of the Employment Agreement,
if Ms. Urhausen's employment with the Company ceased for any reason during the
term of the Agreement she was to receive a lump sum severance payment equal to
$160,000 and if Ms. Urhausen's employment did not cease she was to receive a
quarterly payment. Since Ms. Urhausen remained employed by the Company, on each
of March 31, June 30, September 30 and December 31, 1999, she received a
quarterly payment of $40,000 and the severance payment was reduced by each such
payment (see Summary Compensation Table).
Page 10
<PAGE>
Mr. Werth and the Company entered into a retention incentive agreement in
1998 pursuant to which Mr. Werth received a quarterly bonus (see Summary
Compensation Table). Pursuant to the terms of a Separation Agreement and Mutual
Release entered into by the Company and Mr. Werth as of March 31, 1999, upon
mutual agreement of Mr. Werth and the Company, Mr. Werth's employment with the
Company terminated effective March 31, 1999 and he received a lump sum payment
of $281,250 consisting of a bonus payment, severance and accrued vacation.
Limitation of Liability and Indemnification
The Restated Certificate limits, to the maximum extent permitted by
Delaware law, the personal liability of directors for monetary damages for
breach of their fiduciary duties as a director. Delaware law does not permit a
corporation to eliminate a director's duty of care, nor does it permit
elimination of liability for monetary damages for breach of a director's duty of
loyalty. Further, the provisions of the Restated Certificate have no effect on
the availability of equitable remedies such as injunction or rescission for a
breach of a director's duty of care. The Company's Bylaws provide that the
Company shall indemnify its officers and directors and may indemnify its
employees and other agents to the fullest extent permitted by law. Some current
and former directors and officers of the Company have entered into employment
agreements or severance agreements that provide that the indemnification
provisions for directors and officers under the Company's Bylaws (to the maximum
extent permitted by law) and/or insurance coverage will be extended to such
director or officer following termination of his or her employment with respect
to matters occurring during his or her employment period.
Section 145 of the Delaware General Corporation Law generally provides that
a corporation may indemnify a director, officer, employee or agent made a party
to an action by reason of the fact that he was director, officer, employee or
agent of the corporation or was serving at the request of the corporation as a
director, officer, employee or agent of another enterprise against expenses
actually and reasonably incurred by him in connection with such action, if he
acted in good faith and in a manner he reasonably believed to be in, or not
opposed to, the best interests of the corporation and, with respect to any
criminal action, had no reasonable cause to believe was unlawful.
Insofar as the liability of directors for monetary damages for breach of
fiduciary duty of care under state law may be limited as aforesaid, such
limitations do not apply to liabilities of directors under federal securities
laws.
Insofar as the Company's Restated Certificate or Bylaws provide for
indemnification of directors, officers and persons controlling the Company
against certain liabilities as aforesaid, it is the opinion of the staff of the
SEC that such indemnification is against public policy as applied to liabilities
under federal securities laws and is therefore unenforceable. In accordance with
such position of the staff, no indemnification is available to directors,
officers or controlling persons for liabilities under federal securities laws.
In December 1995, the Company entered into indemnification agreements with
certain of its directors and officers whereby the Company agreed to indemnify
such directors and officers, subject to the exceptions set forth therein, to the
fullest extent permitted by the Delaware General Corporation Law and the Bylaws
of the Company and against expenses incurred by such directors or officers in
connection with any liability which he or she may incur in his or her capacity
as such. The Company also provides Directors and Officers liability insurance
and reimbursement insurance policies for its officers and directors covering
liability arising out of their actions in such capacities.
Indemnification may be required or permitted in litigation involving
directors or officers of the Company in connection with the class action filed
against the Company, certain of its former officers and directors and Mr.
Christenson, in the United States District Court for the Northern District of
California, alleging federal securities laws violations, in an action
purportedly filed as a class action against the Company, certain of its former
directors, Mr. Christenson and Mr. Lerdal in the Delaware Chancery Court,
alleging, among other things, breach of fiduciary duty in connection with the
conversion of the Company's former Preferred Redeemable Increased Dividend
Equity SecuritiesSM, 8-1/4% PRIDESSM, Convertible Preferred Stock, par value
$.01, and an action purportedly filed as a derivative action against the
Company, certain of its former directors, Mr. Christenson and Mr. Lerdal in the
Delaware Chancery Court, alleging, among other things, the taking of a corporate
opportunity in connection with the purchase of Common Stock by Mr. Lerdal in
December 1997.
Page 11
<PAGE>
Compensation Committee Interlocks and Insider Participation
The Compensation Committee was comprised of Messrs. Christenson and Duthie
from January 1, 1999 until August 18, 1999. Gerald R. Morgan was elected to the
Compensation Committee on August 18, 1999 and Michael D. Winn was elected to the
Compensation Committee on November 23, 1999 and each served on the Committee for
the remainder of the fiscal year ending December 31, 1999. No member of the
Compensation Committee has ever been an officer or employee of the Company. Mr.
Lerdal and Ms. Urhausen may have attended meetings of the Committee, but were
not present during deliberations or discussions regarding his or her own
compensation. No interlocking relationship exists between the members of the
Company's Board of Directors or Compensation Committee and the board of
directors or compensation committee of any other company, nor has any such
interlocking relationship existed in the past.
Certain Relationships and Related Transactions
Mr. Winn is the president, sole director and sole stockholder of
Terrasearch, Inc. Terrasearch entered into a Consulting Agreement with the
Company on January 1, 2000. Pursuant to the terms of the Consulting Agreement,
Terrasearch will be paid a yearly fee of $225,000, plus expenses, through
December 31, 2000 for providing consulting or financial services in connection
with the identification of a merger partner or company or business for the
Company to acquire. The Agreement will automatically renew for a one-year period
unless either party gives notice of its intent not to renew. In connection with
the Consulting Agreement, the Company also issued Terrasearch warrants to
purchase up to 500,000 shares of Common Stock of the Company at an exercise
price of $1.00 per share. The warrants become exercisable on January 1, 2002 and
expire December 31, 2005.
Mr. Morgan is the Chief Operating Officer of Francisco Partners, L.P., a
partnership formed to make private information technology buy-out investments.
In April 2000, the Company agreed to invest $5 million over the next four years
in Francisco Partners, L.P.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Board of Directors reviews, recommends
and approves the compensation arrangements for management of the Company with
respect to salaries, bonuses and grants of options to purchase shares of Common
Stock under the Company's 1993 Option Plan.
Cash Based Compensation
All of the executives listed in the Summary Compensation Table except Mr.
Werth had employment contracts with the Company for all or a portion of 1999.
The contracts were negotiated by the Chief Executive Officer of the Company and
approved by the Compensation Committee. The Company had survey information from
previous years that it used to determine the base salary of the executives. Some
of the bonus awards for 1998 and 1999 were payable by formula included in the
contracts. The contracts enumerated certain payments when certain events
occurred. The most significant event in 1998 was the sale of the Company's
indirect interest in the EcoElectrica Project and in 1999 the sale of the
Company"s indirect interest in the Chateaugay Project. The bonus payments were
based on a percentage of the proceeds received from the sale of such projects.
Page 12
<PAGE>
Compensation of the Chief Executive Officer
Mr. Lerdal and the Company were parties to an employment agreement that
expired March 31, 2000. The initial term was for a period of three years and was
subject to renewal periods of one year. The agreement was renewed once and was
in effect for the 1999 fiscal year. Mr. Lerdal's base salary of $400,000 per
year and bonus opportunities were set forth in such employment agreement. The
Compensation Committee is the sole determinant of whether, and in what amount,
any bonuses are to be paid to Mr. Lerdal. In January 2000, the Compensation
approved a bonus of $350,000 earned for 1999 and $250,000 earned for 1998. Such
bonuses were paid based on a report prepared by Arthur Andersen LLP which
analyzed the compensation paid to Mr. Lerdal in 1999 and the payment of a bonus
to Mr. Lerdal for 1998 and 1999 in light of the nature of the services provided
by Mr. Lerdal and market competitive pay practices.
The rational and criteria for paying bonuses to Mr. Lerdal for 1998 and
1999 included, among other things: the successful disposition of several assets,
including the sale of the Company's indirectly held 50% interest in the
EcoElectrica Project in December 1998; the substantial reduction of the
Company's debt, including the satisfaction and discharge of the Company's Senior
Secured Notes and all accrued interest in December 1998 and the payment in full
of the accrued and unpaid dividends in April 1999 on the Company's formerly
outstanding Preferred Redeemable Increased Dividend Equity SecuritiesSM, 8-1/4%
PRIDESSM, Convertible Preferred Stock; the successful outcome in several
litigation matters involving the Company and its subsidiaries; the increase in
the intrinsic value of the Company over the last two years; the identification
and investment by the Company in new development projects; and the substantial
completion of the KENETECH Windpower, Inc. bankruptcy.
Stock Option Grants
Historically, stock option grants were the principal vehicle for the
payment of long term compensation to the Company's employees. No grants have
been made to any of the Company's employees since 1996 because the value of the
Company's stock has been too uncertain to either retain employees or reward them
for their efforts.
Charles Christenson
Gerald R. Morgan, Jr.
Michael D. Winn
Performance Graph
The following performance graph reflects the cumulative total stockholders'
return on the Common Stock as compared with the cumulative total return of the
Nasdaq Stock Market (U.S.) Index, the Russell 2000 Index, the Nasdaq Financial
Index, the S&P Midcap 400 Index and the S&P Energy Sector Index. The graph
assumes a $100 investment in Common Stock of the Company and a $100 investment
in each of the indices beginning on December 31, 1994 and ending December 31,
1999. The graph also assumes that any dividends were reinvested. The Company
chose the indices included in the performance graph because it does not believe
it can reasonably identify a peer group. In addition, there are no public
companies known to the Company with a similar scope of business as the Company.
<TABLE>
COMPARISON OF FIVE-YEAR CUMULATIVE TOTAL RETURN
[CHART]
END OF FISCAL YEAR
12/94 12/95 12/96 12/97 12/98 12/99
<S> <C> <C> <C> <C> <C> <C>
KENETECH Corporation 100.00 11.30 0.35 0.45 1.81 4.03
Nasdaq Stock Market (U.S.) 100.00 141.33 173.90 213.07 300.43 557.58
Russell 2000 100.00 127.49 154.73 203.91 190.76 187.92
Nasdaq Financial 100.00 145.68 187.03 286.10 277.70 277.35
S&P Midcap 400 100.00 130.94 156.08 206.43 236.21 270.99
S&P Energy Sector 100.00 130.77 164.48 206.00 207.11 254.16
</TABLE>
Page 13
<PAGE>
Securities Ownership of Certain Beneficial Owners and Management
The following table sets forth certain information to the knowledge of the
Company regarding the beneficial ownership of the Company's Common Stock as of
June 30, 2000 for (i) each person known to the Company beneficially to own 5% or
more of the outstanding shares of its Common Stock, (ii) each of the Company's
directors, the Chief Executive Officer and the named executive officers, and
(iii) all directors and executive officers as a group. The table is based upon
information supplied to the Company by its officers, directors and principal
stockholders. Except as otherwise indicated, the Company believes that the
beneficial owners of the Common Stock 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>
Number of Shares
Name of Of Common Stock Percentage of
Beneficial Owners (1) Beneficially Owned (2) Shares Outstanding (3)
<S> <C> <C>
Mark D. Lerdal 11,365,458 34.5%
500 Sansome Street, San Francisco, CA
Charles Christenson 67,000 *(4)
Gerald R. Morgan, Jr. 170,000 *
Michael D. Winn 50,000 *
Andrew M. Langtry 0 *
Dianne P. Urhausen 35,000 *
Michael U. Alvarez (5) 1,441 *
Mervin E. Werth (5) 0 *
All directors and executive officers as a 11,688,899 35.5%
group (including former executive officers
who are named executive officers) (8
persons)
</TABLE>
(1) Information for beneficial owners of 5% or more of the Company's Common
Stock is reported from and as of the date of such owner's latest Schedule
13D or 13G (as amended) provided to the Company.
(2) Except as otherwise specifically noted, the number of shares stated as
being beneficially owned includes (a) all options under which officers or
directors could acquire common stock currently and within 60 days following
June 30, 2000, (i.e., Charles Christenson (47,000 shares) and all directors
and officers as a group (47,000 shares)), and (b) shares believed by the
Company to be held beneficially by spouses. 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) The percentages are calculated based on the number of outstanding shares of
Common Stock on June 30, 2000, excluding the shares held by the Company
pursuant to its stock repurchase program.
(4) * Does not exceed one percent of the class so owned.
(5) Mr. Alvarez's employment agreement expired March 23, 1999 and Mr. Werth
entered into a separation agreement effective March 31, 1999.
Page 14
<PAGE>
PROPOSAL 2
AMEND THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
TO ELIMINATE THE COMPANY'S SERIES U PREFERRED STOCK
The Board of Directors has authorized, subject to stockholder approval, the
amendment of the Company's Restated Certificate of Incorporation to eliminate
the Company's Series U Preferred Stock. The applicable provisions in the
Restated Certificate provide that if a holder of shares of the Company's Common
Stock becomes an Electric Utility Interest (as defined below), each share of
Common Stock held by such holder shall be automatically and immediately
converted into one share of Series U Preferred Stock of the Company without
further action either by the holder or by the Company. Upon conversion, the
holder of the converted stock shall not be recognized as a holder of Common
Stock for any purpose whatsoever, including, but not limited to, the right to
vote such shares of Common Stock or to receive dividends or other distributions
in respect thereof, if any, but such stockholder shall thereafter be recognized
as a holder of Series U Preferred Stock. The Restated Certificate also provides,
among other things, that the Series U Preferred Stock can be redeemed, at any
time and from time to time, by the Company and any attempted sale, transfer,
assignment, conveyance, pledge or other disposition of any share of the
Company's Common Stock to any Electric Utility Interest shall be null and void
ab initio.
For the purposes of the Restated Certificate, the term "Electric Utility
Interest" means an electric utility or utilities or an electric utility holding
company or companies, or any affiliate of either, in each case as those terms
are utilized by the Federal Energy Regulatory Commission ("FERC") in regulations
or orders implementing the Public Utility Regulatory Policies Act of 1978, as
amended, and its successors, and the regulations promulgated thereunder
("PURPA"), if such entity's interest in the Company would be a utility interest
for the purposes of 18 C.F.R. Section 292.206.
Reasons for Elimination of the Company's Series U Preferred Stock
The Restated Certificate creating the Series U Preferred Stock and
prohibiting stock ownership by Electric Utility Interests was filed at the time
of the Company's initial public offering in September 1993 and at that time the
Company operated as a holding company participating through its subsidiaries in
the electric utility market by developing, owning and operating wind powered
electric powerplants and independent power projects. The operations of the
Company at that time were primarily conducted in the United States. The Restated
Certificate was designed and adopted to meet the criteria necessary for the
Company's projects to qualify as "qualifying facilities" under PURPA. PURPA
provided "qualifying facilities" with important exemptions from substantial
federal and state legislation, including, among other things, regulation as
public utilities, and provided certain other benefits. Loss of qualifying
facility status by any one of the Company's projects could have caused the
Company to become a public utility holding company, thereby causing many of the
Company"s other projects to lose their qualifying status and become subject to
such regulation. Ownership of the Company by an Electric Utility Interest could
have also limited the Company's ability to sell interests in the projects it
developed to Electric Utility Interests and still retain "qualifying facility"
status.
Beginning in 1995 the Company experienced severe liquidity constraints. In
an effort to relieve such constraints, the Company undertook to sell its assets.
As of December 31, 1999, the Company had disposed of substantially all its
operating assets which included its interests in all of the wind powered
electric powerplants and independent power projects that it had owned and/or
developed. Although the Company is currently pursuing new development of
independent power projects, the Restated Certificate contains provisions related
to the Series U Preferred Stock which have no application in light of the
Company's present operations and it is no longer necessary to prohibit ownership
of the Company by Electric Utility Interests. The Company believes that it is in
the best interests of the stockholders and the Company to amend the Restated
Certificate to remove and eliminate all provisions relating to the Company's
Series U Preferred Stock thereby allowing any entity to own stock in the
Company.
Page 15
<PAGE>
If the elimination of the Series U Preferred Stock is approved by the
stockholders, the Restated Certificate will be amended as described herein and
as set forth in the form of Certificate of Amendment to the Restated Certificate
of Incorporation of the Company attached hereto as Exhibit A.
Effects of the Elimination of the Series U Preferred Stock
The Company believes that there will be no effect on the Common Stock or
the Preferred Stock resulting from the elimination of the Series U Preferred
Stock. No shares of the Series U Preferred Stock have ever been issued and
accordingly there are no holders of Series U Preferred Stock.
Vote Required and Board of Directors' Recommendation
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY TO
ELIMINATE THE COMPANY'S SERIES U PREFERRED STOCK.
Page 16
<PAGE>
PROPOSAL 3
AMEND THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
TO EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT OF THE ISSUED AND
OUTSTANDING SHARES OF THE COMPANY'S COMMON STOCK
The Board of Directors has authorized, subject to stockholder approval, the
amendment of the Company's Restated Certificate of Incorporation to effect a
one-for-ten reverse stock split (the "Reverse Split") of the Common Stock. The
Reverse Split would affect the Company's currently issued and outstanding Common
Stock. In addition, all currently outstanding stock options and warrants to
purchase Common Stock would be subject to the one-for-ten adjustment and
reduction in the number of shares of Common Stock subject to acquisition through
exercise or conversion thereof. Such adjustments, under the terms of each
convertible security, would also include adjustments to the exercise and
conversion prices thereof to maintain economic parity with the position held
prior to the Reverse Split. The number of "Rights" (created under the Rights
Agreement, dated as of May 4, 1999, between the Company and ChaseMellon
Shareholder Services, L.L.C., as Rights Agent) associated with each share of
Common Stock then outstanding will also be proportionately adjusted.
The proposed Reverse Split will not itself alter the number of shares of
Common Stock authorized for issuance, however, there is a separate proposal (see
Proposal 4) in this Proxy Statement that would authorize the decrease of the
number of authorized shares of Common Stock in the same ratio as the Reverse
Split and would therefore decrease the authorized number from 110,000,000 to
11,000,000. There will be no change in the par value of the Company's Common
Stock. Information concerning the capitalization of the Company, provided
elsewhere in this Proxy Statement, does not give effect to the proposed Reverse
Split unless specifically noted. The Board of Directors believes that action to
reduce the number of outstanding shares of the Company's Common Stock would be
in the best interests of the Company and its stockholders.
The Reverse Split will take effect, if at all, after it is approved by the
stockholders of the Company, on the date of filing of the certificate of
amendment of the Restated Certificate of Incorporation of the Company with the
Secretary of State of the State of Delaware (the "Effective Date"). On the
Effective Date, all outstanding shares of Common Stock held by each holder of
record on such date will be automatically reclassified as and converted into 0.1
of a share of Common Stock, without any further action on the part of the
Company's stockholders. No fractional shares will be issued.
If the Reverse Split is approved by the stockholders and implemented by the
Board of Directors, the Restated Certificate will be amended as described herein
and as set forth in the form of Certificate of Amendment to the Restated
Certificate of Incorporation of the Company attached hereto as Exhibit B.
In determining when or if the Board will implement the Reverse Split, the
Board of Directors may consider a variety of factors, including, but not limited
to, overall trends in the stock market, recent changes and anticipated trends in
the per share market price of the Common Stock, business developments and the
Company's actual and projected financial performance. The Board of Directors may
abandon the Reverse Split before or after the Annual Meeting, without further
action by the stockholders, and not file the proposed amendment to the Restated
Certificate of Incorporation of the Company if at any time the Board determines,
in its sole discretion, that the proposed Reverse Split would not be in the best
interests of the Company and its stockholders. Presently, the Board and
management of the Company intend to effect the Reverse Split as soon as
practicable subsequent to receiving the requisite stockholder approval.
Reasons for the One-For-Ten Reverse Split
The primary reasons for the one-for-ten reverse stock split are to: (i)
increase the liquidity of the shares by lowering the commissions on stock
trades; (ii) consolidate the issued capital of the Company; and (iii) facilitate
the potential eligibility of the Common Stock for a future listing on an
exchange or quotation on Nasdaq.
Page 17
<PAGE>
A projected benefit of the Reverse Split would be the potential substantial
reduction in the transaction costs associated with trading in the Company's
Common Stock. In most cases, trading costs include both "brokers" trading
commissions and the "indirect cost" of "dealer markup," that is, the difference
between the buying and selling prices of dealers in a given stock (the "bid-ask
spread"). Such dealers would be OTC Bulletin Board or "Pink Sheet" market
makers, as opposed to retail brokerage firms such as Charles Schwab & Co. or
Merrill Lynch. The economic costs of dealer markup are disproportionately high
with respect to low-priced stocks as a proportion of such stocks' market price,
adversely affecting investors. Trading commissions also tend to exact a larger
proportion of the investment made in such stocks, because such commissions are
calculated by and large as a function of the number of shares traded more so
than in accordance with the relative price per share. The result, again, is that
persons transacting in stocks which are disproportionately low-priced in
relation to the economic value underlying the shares tend to be, in effect,
penalized, which reduces investor acceptance of such stocks.
The Board of Directors believes that a reduction in the number of shares of
Common Stock outstanding resulting in a decrease in trading commissions, without
any corresponding material alteration in the economic composition of the Company
or the relative interests of the stockholders would thus likely enhance the
public and institutional perception of the Company's Common Stock and thus
increase investor interest. However, no assurance can be given that the market
price of the Common Stock will increase in direct proportion to the ratio of the
Reverse Split, that any such increase will be sustained for a significant period
or that trading commissions will be lowered. A failure of the stock's trading
price to completely reflect the mathematics of the Reverse Split would result in
a reduction in the market value of the Company's securities.
The Board also believes that the current low per share price of the Common
Stock may have a negative effect on the price and marketability of existing
shares and the potential ability of the Company to raise capital by issuing
additional shares of Common Stock or other securities convertible into Common
Stock or to undertake merger or acquisition transactions. Reasons for these
effects include internal policies and practices of certain institutional
investors which prevent or tend to discourage the purchase of low-priced stocks,
the fact that many brokerage houses do not permit low-priced stocks to be used
as collateral for margin accounts or to be purchased on margin and a variety of
brokerage house policies and practices which tend to discourage individual
brokers within those firms from dealing in or recommending low-priced stocks.
The Board believes that the Reverse Split, and the expected resulting increased
price level, may enhance investor interest in the Common Stock and may help the
investment community realize the underlying value of the Common Stock. However,
even if the Reverse Split is implemented, there can be no assurance that
brokerage firms will be more inclined to recommend the Common Stock or that
institutional investors will be more inclined to invest in the Common Stock. If
the market value of the Common Stock does not adjust proportionately, a
significant loss of stockholder value could result.
The Common Stock is currently quoted on the over-the-counter market. The
Company believes the Reverse Split may facilitate the possible future compliance
with the listing criteria established by Nasdaq regarding the minimum bid price
of listed securities. For initial inclusion on the Nasdaq National Market, the
minimum bid price per share is required to be at least $5.00.
In addition, because the Common Stock is not listed on Nasdaq and presently
trades at less than $5.00 per share, trading in the Common Stock is also subject
to the requirements of certain rules promulgated under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), which require additional
disclosure by brokers or dealers in connection with any trades involving a stock
defined as a "penny stock" (generally, any non-Nasdaq equity security that has a
market price of less than $5.00 per share, subject to certain exceptions).
Because the Company's Common Stock is presently classified as a "penny stock,"
prior to effectuating any trade in the Common Stock, a broker or dealer is
required under such Exchange Act rules to make a suitability determination as to
such proposed purchaser of the Common Stock and to receive a written agreement,
meeting certain requirements, prior to effectuating any transaction in the
Common Stock. The additional burdens imposed upon brokers or dealers by such
requirements could discourage brokers or dealers from effecting transactions in
the Common Stock, which may limit the market liquidity of the Common Stock and
the ability of investors to trade the Common Stock.
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There can be no assurance, however, that approval of the Reverse Split will
succeed in raising the bid price of the Common Stock above $5.00 per share, that
such minimum price, if achieved, would be maintained, or that even if Nasdaq's
minimum bid price requirements were satisfied, the Common Stock would not be
eligible for listing by the Nasdaq for other reasons.
Effects of the One-For-Ten Reverse Stock Split
The Company is currently authorized to issue a maximum of 110,000,000
shares of Common Stock. As of the Record Date, there were 32,960,664 shares of
Common Stock issued and outstanding. Although the number of authorized shares of
Common Stock will not change as a result of the Reverse Split (but see Proposal
4), the number of shares of Common Stock issued and outstanding will be reduced
to a number that will be approximately equal to the number of shares of Common
Stock issued and outstanding immediately prior to the effectiveness of the
Reverse Split, divided by ten. In addition, on the Effective Date each option
and warrant to purchase Common Stock and any other convertible security
outstanding on the Effective Date will be adjusted so that the number of shares
of Common Stock issuable upon their exercise shall be divided by ten and the
exercise price of each option and warrant shall be multiplied by ten. No
fractional shares will be issued upon the Reverse Split.
With the exception of the number of shares issued and outstanding, the
rights and preferences of the shares of Common Stock prior and subsequent to the
Reverse Split, will remain the same. It is not anticipated that the financial
condition of the Company, the percentage ownership of management, the number of
the Company's stockholders, or any aspect of the Company's business would
materially change as a result of the Reverse Split.
Except for the negligible effect that the Company believes may result from
the payment of cash for fractional shares as described below, each stockholder
will hold the same percentage of Common Stock outstanding immediately following
the one-for-ten reverse stock split as each stockholder did immediately prior to
the Reverse Split. The Reverse Split would not affect the voting rights or other
rights of the holders of Common Stock or the rights of holders of any
convertible securities. The Reverse Split will also have no effect on the
Company's preferred stock, of which no shares are issued and outstanding.
By decreasing by ten times the number of outstanding shares of the Common
Stock, the Reverse Split may adversely affect the liquidity of the market for
the Common Stock by making it more difficult for holders of common stock to sell
their shares. The Board of Directors believes that, if it occurs, this effect
would be offset by the positive effect on liquidity which would likely result if
the Company were able to list shares of Common Stock on a national market system
and/or lower the trading commissions.
The one-for-ten reverse stock split will also result in some stockholders
owning "odd lots" of less than 100 shares of Common Stock. Brokerage commissions
and other costs of transactions in odd lots may be higher, particularly on a
per-share basis, than the cost of transactions in even multiples of 100 shares.
Even though a reverse stock split, by itself, does not impact a
corporation's assets or prospects, reverse splits can result in a decrease in
the aggregate market value of a corporation's equity capital. The Board of
Directors, however, believes that the likelihood that the trading price of each
share of the Common Stock will increase and the resulting benefits offset this
risk. However, there can be no assurance that the market price of the Common
Stock immediately after the Reverse Split will be approximately ten times the
market price of the Common shares immediately before the Reverse Split or that
any increased market price can be maintained for any period of time after the
Reverse Split.
Effect on Registration
The Common Stock is currently registered under Section 12(g) of the
Exchange Act, and as a result, the Company is subject to the periodic reporting
and other requirements of the Exchange Act. The Company does not believe that
the Reverse Split will affect the registration of the Common Stock under the
Exchange Act.
Accounting Effects of the Reverse Split
Following the Effective Date, the par value of the Company's Common Stock
will remain at $0.0001 per share. As a result, the Company's stated capital will
be reduced and capital in excess of par value (paid-in capital) increased
accordingly. Stockholders' equity will remain unchanged.
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Exchange of Stock Certificates
Beginning on the Effective Date, each certificate representing shares of
the Company's Common Stock will be deemed for all corporate purposes to evidence
ownership of as many shares of post-reverse split Common Stock after applying
the split factor and otherwise making adjustments for fractional shares as
described below.
The Company will instruct its transfer agent (ChaseMellon Shareholder
Services) to act as its exchange agent (the "Exchange Agent") in implementing
the exchange of certificates representing outstanding Common Stock. As soon as
practicable after the Effective Date, the Company will send letters of
transmittal to all stockholders of record on the Effective Date for use in
transmitting stock certificates ("Old Certificates") to the Exchange Agent.
Fractional shares of Common Stock will not be issued as a result of the Reverse
Split. Upon proper completion and execution of the letter of transmittal and
return thereof to the Exchange Agent, together with the Old Certificates, each
stockholder who holds of record fewer than ten shares of Common Stock on the
Effective Date will receive cash in the amount to which he or she is entitled
(as specified below) and the interest of such stockholder in the Company will
thereby be terminated. Holders of record of ten or more shares on the Effective
Date will receive new certificates ("New Certificates") representing the number
of whole shares of Common Stock into which their shares of Common Stock have
been converted as a result of the Reverse Split. Holders of record of ten or
more shares on the Effective Date whose shares are not evenly divisible by ten
will receive cash in the amount to which they are entitled in lieu of any
fractional shares. Until a stockholder forwards a completed letter of
transmittal, together with the Old Certificates to the Exchange Agent and
receives in return a New Certificate, such stockholders' Common Stock shall be
deemed equal to the number of whole shares of Common Stock to which such
stockholder is entitled as a result of the Reverse Split. Old Certificates
should not be sent to the Company and should not be sent to the Exchange Agent
before receipt of the letter of transmittal from the Company.
If Common Stock is held on a stockholder's behalf by a broker, bank or
other nominee, the adjustment of such position will be handled in accordance
with the procedures of The Depository Trust Company.
Fractional Shares
No fractional shares of Common Stock will be issued in connection with the
foregoing reclassification of shares of Common Stock. In lieu thereof, upon
surrender after the Effective Date of a certificate formerly representing shares
of Common Stock issued and outstanding immediately prior to the Effective Date,
the Company will pay to the holder of the certificate an amount in cash (without
interest) equal to the product obtained by multiplying (a) the fraction of a
share of Common Stock to which such holder (after taking into account all shares
of Common Stock held immediately prior to the Effective Date by such holder)
would otherwise be entitled to, by (b) the closing sale price per share of
Common Stock as quoted on The OTC Bulletin Board on the last trading date prior
to the Effective Date, by (c) ten.
Federal Income Tax Consequences of the Reverse Split
THE FOLLOWING DISCUSSION IS NOT TAX ADVICE. EACH STOCKHOLDER SHOULD CONSULT HIS
OR HER OWN TAX ADVISOR WITH RESPECT TO THE CONSEQUENCES OF THE REVERSE SPLIT.
Page 20
<PAGE>
The following is a summary of the material anticipated federal income tax
consequences of the Reverse Split to stockholders of the Company. The following
discussion is based upon present federal tax law and does not purport to be a
complete discussion of such consequences for all stockholders in all
circumstances, nor does it address state, local or foreign tax consequences or
considerations. This summary is based on the provisions of the Internal Revenue
Code of 1986, as amended (the "Code"), the Treasury Department Regulations
issued pursuant thereto, and published rulings and court decisions in effect as
of the date hereof, all of which are subject to change. This summary does not
take into account possible changes in such laws or interpretations, including
amendments to the Code, applicable statutes, regulations and proposed
regulations or changes in judicial or administrative rulings, some of which may
have retroactive effect. The federal income tax consequences of the Reverse
Split will vary among stockholders depending upon whether they receive (i)
solely cash for their shares, (ii) solely New Certificates, or (iii) New
Certificates plus cash for fractional shares, in exchange for Old Certificates.
No ruling from the Internal Revenue Service nor opinion of counsel will be
sought or obtained regarding the federal income tax consequences to the
stockholders of the Company as a result of the Reverse Split. Accordingly, each
stockholder is encouraged to consult such stockholder's own tax advisor
regarding the specific tax consequences of the Reverse Split to such
stockholder. The Company believes that because the Reverse Split is not part of
a plan to periodically increase stockholders' proportionate interest in the
assets or earnings and profits of the Company, and because the cash payment in
lieu of fractional shares represents a mechanical rounding rather than
separately bargained for consideration, the proposed Reverse Split will have the
following federal income tax effects:
1). A stockholder will not recognize taxable gain or loss on the receipt of New
Certificates in exchange for Old Certificates in the Reverse Split. In the
aggregate, a stockholder's basis in the Common Stock represented by New
Certificates will equal his or her basis in the shares of Common Stock
represented by Old Certificates exchanged therefor (but not including the
basis of any shares of Common Stock represented by Old Certificates to
which a fractional share interest in Common Stock represented by a New
Certificate is attributable), and such stockholder's holding period for the
New Certificates will include the holding period for the Old Certificates
if the shares of Common Stock represented by such certificates are capital
assets in the hands of such stockholder.
2). To the extent that a stockholder receives cash in the Reverse Split in lieu
of the issuance of a fractional share by the Company (whether or not in
addition to receiving New Certificates in exchange for Old Certificates),
such stockholder will generally be treated as having received a fractional
interest in a share of Common Stock represented by a New Certificate which
is then redeemed by the Company. A stockholder who receives only cash
generally will recognize taxable gain or loss, as the case may be, equal to
the difference, if any, between the amount of cash received and such
stockholders' aggregate basis in the pre-Reverse Split share of Common
Stock to which such fractional share interest is attributable. If such
shares are a capital asset in the hands of such stockholder, the gain or
loss will be long-term gain or loss if the shares were held for more than
one year. Stockholders who receive cash in addition to New Certificates
generally will be treated as having received a distribution essentially
equivalent to a dividend, the taxability of which is yet to be determined.
3). The Company believes that the proposed Reverse Split will qualify as a
"recapitalization" under Section 368(a)(1)(E) of the Code. As a result, the
Company will not recognize any gain or loss as a result of the proposed
Reverse Split.
Special taxation and withholding rules may apply to any stockholder that is
a nonresident alien or a foreign corporation. Those rules are beyond the scope
of this discussion. Stockholders will be required to provide their social
security or other taxpayer identification numbers (or, in some instances,
certain other information) to the Exchange Agent in connection with the Reverse
Split to avoid backup withholding requirements that might otherwise apply. See
"Exchange of Stock Certificates." The letter of transmittal will require each
stockholder to deliver such information when the Common Stock certificates are
surrendered following the Effective Date. Failure to provide such information
may result in backup withholding.
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No Dissenter's Rights
Under the Delaware General Corporation Law, stockholders of the Company are
not entitled to any rights of appraisal or dissenters' rights in connection with
the adoption of the Reverse Split proposal.
Vote Required and Board of Directors' Recommendation
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO EFFECT
A ONE-FOR-TEN REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING SHARES OF THE
COMPANY'S COMMON STOCK.
PROPOSAL 4
AMEND THE RESTATED CERTIFICATE OF INCORPORATION OF THE COMPANY
TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF
THE COMPANY'S COMMON STOCK FROM 110,000,000 TO 11,000,000
AND DECREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S
PREFERRED STOCK FROM 10,000,000 TO 1,000,000
The Board of Directors has authorized, subject to stockholder approval, the
amendment of the Company's Restated Certificate of Incorporation to decrease the
number of authorized shares of the Company's Common Stock from 110,000,000 to
11,000,000 and decrease the number of authorized shares of the Company's
Preferred Stock from 10,000,000 to 1,000,000. The decrease in the number of
authorized shares is in direct proportion to the Reverse Split under Proposal 3.
If the stockholders at the Annual Meeting do not approve Proposal 3, the Board
will abandon this Proposal 4 and will not amend the Restated Certificate of
Incorporation of the Company to decrease the number of authorized shares of
either the Common Stock or the Preferred Stock.
The Board of Directors may abandon the proposal to decrease the number of
authorized shares of the Common Stock and the Preferred Stock before or after
the Annual Meeting, without further action by the stockholders, and not file the
proposed amendment to the Restated Certificate of Incorporation of the Company
if at any time the Board determines, in its sole discretion, that the proposed
decrease in authorized shares would not be in the best interests of the Company
and its stockholders.
The Board of Directors has adopted the resolutions approving the amendment
of the Restated Certificate to decrease the number of authorized shares of
Common Stock and Preferred Stock in order to avoid a substantial increase in the
annual franchise tax payable by the Company to the State of Delaware that will
result from the Reverse Split. By proportionally decreasing the number of
authorized shares, the Company will avoid the substantial increase in the
Delaware franchise tax.
Decreasing the number of authorized shares of Common Stock and Preferred
Stock will not impair the capital of existing stockholders in any way. Although
the approval of this Proposal 4 will decrease the number of shares of authorized
capital stock, it will not result in any change in the relative voting power
among stockholders nor their percentage ownership of the Company. The rights and
preferences of shares of the Common Stock and the Preferred Stock and the rights
and preferences of holders of any convertible securities prior and subsequent to
the decrease in authorized shares, will remain the same.
If the decrease in the number of authorized shares of the Common Stock and
the Preferred Stock is approved by the stockholders and implemented by the Board
of Directors, the Restated Certificate will be amended as described herein and
as set forth in the form of the Certificate of Amendment to the Restated
Certificate of Incorporation of the Company attached hereto as Exhibit C.
Vote Required and Board of Directors' Recommendation
Approval of this proposal requires the affirmative vote of a majority of
the outstanding shares of the Company entitled to vote thereon.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO AMEND THE COMPANY'S RESTATED CERTIFICATE OF INCORPORATION TO
DECREASE THE NUMBER OF AUTHORIZED SHARES OF THE COMPANY'S COMMON STOCK FROM
110,000,000 TO 11,000,000 AND DECREASE THE NUMBER OF AUTHORIZED SHARES OF THE
COMPANY'S PREFERRED STOCK FROM 10,000,000 TO 1,000,000.
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<PAGE>
PROPOSAL 5
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 LLP ("KPMG") to audit the Company's financial statements for the
current fiscal year ending December 31, 2000. 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 from stockholders present at the meeting.
If the foregoing recommendation is rejected or if KPMG declines to act or
otherwise becomes incapable of acting or if its appointment is otherwise
discontinued, the Board of Directors will appoint other independent auditors
whose appointment for any period subsequent to the 2000 Annual Meeting of
Stockholders shall be subject to ratification by the stockholders.
Vote Required and Board of Directors' Recommendation Approval of this
proposal requires the affirmative vote of a majority of the votes present or
represented by proxy and entitled to vote on the matter at the Annual Meeting.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE "FOR" APPROVAL OF THIS
PROPOSAL TO RATIFY THE APPOINTMENT OF KPMG AS THE COMPANY'S INDEPENDENT AUDITORS
FOR FISCAL YEAR 2000.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act 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 ("SEC").
Executive officers, directors and persons owning more than ten percent of the
Company's stock are required by the SEC's 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
persons, the Company believes that, during the fiscal year ended December 31,
1999, all filing requirements applicable to its executive officers, directors
and owners of more than ten percent of the Company's stock were complied with on
a timely basis.
Nomination and Stockholder Proposal Deadline for 2001 Annual Stockholders
Meeting
Any stockholder proposal intended to be presented at the next Annual
Meeting of Stockholders pursuant to Rule 14a-8 of Regulation 14A of the proxy
rules of the Securities and Exchange Commission ("Rule 14a-8"), 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 March 22, 2001, unless the Company notifies the stockholders
otherwise. Any such proposal must comply with Rule 14a-8. Written requests for
inclusion should be addressed to Corporate Secretary, KENETECH Corporation, 500
Sansome Street, Suite 410, San Francisco, California 94111.
To be timely, any nominations for the election of directors or stockholder
proposals submitted outside Rule 14a-8 must be delivered or mailed to and
received by the Secretary of the Company not less than 90 days prior to the 2001
Annual Meeting; provided, however, that in the event that less than 100 days
notice or prior public disclosure of the date of the meeting is given or made to
stockholders, notice by the stockholder to be timely must be so received not
later than the close of business on the tenth day following the day on which
such notice of the date of the meeting was mailed or such public disclosure was
made. Such nomination or proposal must be made in accordance with the
provisions, requirements and procedures set forth in the Company's Bylaws.
Stockholder List
The Company will maintain at its principal executive offices at 500 Sansome
Street, Suite 410, San Francisco, California, a list of the stockholders that
are entitled to vote at the Annual Meeting. The list will be open for
examination by any stockholder, for purposes germane to the meeting, during
ordinary business hours for a period of 10 days prior to the meeting. The list
will also be available for examination at the Annual Meeting.
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<PAGE>
Annual Report and Form 10-K
The 1999 Annual Report of the Company, in the form of the Company's Annual
Report on Form 10-K for the fiscal year ending December 31, 1999, has been
mailed with this Proxy Statement to stockholders of record on the Record Date.
In addition, the EDGAR version of such report is available at the World Wide Web
site of the Securities and Exchange Commission (www.sec.gov).
Contacting the Transfer Agent
Any stockholder inquiries to the Company's transfer agent, ChaseMellon
Shareholder Services, may be directed to 800-356-2017 or to ChaseMellon's World
Wide Web site (www.chasemellon.com).
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
Vice President and Secretary
San Francisco, California
July 20, 2000
Page 24
<PAGE>
APPENDIX A
PROXY
KENETECH CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS FOR THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON WEDNESDAY, AUGUST 23, 2000
The undersigned hereby appoints Dianne P. Urhausen and Mark D. Lerdal, 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 the Park Hyatt San Francisco, 333 Battery
Street, San Francisco, California, on Wednesday, August 23, 2000, at 10:00 A.M.,
local time, and at any one or more adjournments or postponements thereof, with
all 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, FOR THE AMENDMENT OF THE
RESTATED CERTIFICATE OF INCORPORATION TO ELIMINATE THE SERIES U PREFERRED STOCK
IN PROPOSAL 2, FOR THE AMENDMENT OF THE RESTATED CERTIFICATE OF INCORPORATION TO
EFFECT A ONE-FOR-TEN REVERSE STOCK SPLIT OF THE ISSUED AND OUTSTANDING SHARES OF
COMMON STOCK IN PROPOSAL 3, FOR THE AMENDMENT OF THE RESTATED CERTIFICATE OF
INCORPORATION TO DECREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND
PREFERRED STOCK IN PROPOSAL 4 AND FOR THE RATIFICATION OF THE APPOINTMENT OF THE
INDEPENDENT AUDITORS LISTED IN PROPOSAL 5 AND AS MORE SPECIFICALLY DESCRIBED IN
THE PROXY STATEMENT OF KENETECH CORPORATION DATED JULY 20, 2000. IF SPECIFIC
INSTRUCTIONS ARE INDICATED, THIS PROXY WILL BE VOTED IN ACCORDANCE THEREWITH.
(Continued, and to be signed on the other side)
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<PAGE>
Please mark
[ X ] your votes
as this
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE NOMINEES FOR DIRECTOR LISTED
BELOW
1. To elect two directors as Class I Directors to hold office for three-year
terms.
WITHHOLD
FOR FOR ALL
[ ] [ ]
Charles Christenson Michael D. Winn
FOR both nominees listed above (except as indicated to the contrary).
WITHHOLD AUTHORITY to vote for both 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 ELIMINATION OF THE SERIES U
PREFERRED STOCK.
2. To amend the Restated Certificate of Incorporation to eliminate the Series
U Preferred Stock.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ONE-FOR-TEN REVERSE STOCK
SPLIT.
3. To amend the Restated Certificate of Incorporation to effect a one-for-ten
reverse stock split of the issued and outstanding shares of the Company's
common stock, $0.0001 par value.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE DECREASE IN THE NUMBER OF
AUTHORIZED SHARES OF COMMON STOCK AND PREFERRED STOCK.
4. To amend the Restated Certificate of Incorporation to decrease the number
of authorized shares of common stock, $0.0001 par value, from 110,000,000
to 11,000,000 and decrease the number of authorized shares of preferred
stock, par value $0.01, from 10,000,000 to 1,000,000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE RATIFICATION OF THE INDEPENDENT
AUDITORS.
5. 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.
Signature(s) ____________________________ Date _________________
NOTE: Please vote, date and promptly return this proxy in the enclosed return
envelope which is postage prepaid if mailed in the United States.
FOLD AND DETACH HERE
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<PAGE>
EXHIBIT A TO PROXY STATEMENT
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION FILED SEPTEMBER 27, 1993
OF
KENETECH CORPORATION
_________________
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware.
KENETECH Corporation (herein called the "Corporation" or the "Company"), a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation at a regular meeting
duly called and held on April 19, 2000 at which a quorum was at all times
present and acting, unanimously adopted resolutions proposing and declaring
advisable the following Amendment to the Restated Certificate of
Incorporation of the Corporation filed September 27, 1993 and directed that
said amendment be considered and submitted to a vote at the next annual
meeting of the stockholders of the Corporation:
RESOLVED: That the Restated Certificate of Incorporation of the Company be
amended by deleting Section 4.2 of Article 4 in its entirety.
RESOLVED
FURTHER: That the Restated Certificate of Incorporation of the Company be
amended by revising Section 4.4 of Article 4 to read in its
entirety as follows:
4.4 Dividends. Subject to any preferential rights granted to
any series of Preferred Stock, the holders of shares of the
Common Stock shall be entitled to receive dividends, out of the
funds of the Corporation legally available therefor, at the rate
and at the time or times, whether cumulative or noncumulative, as
may be provided by the Board of Directors. The holders of shares
of Preferred Stock shall be entitled to receive dividends to the
extent provided by the Board of Directors in designating the
particular series of Preferred Stock.
RESOLVED
FURTHER: That the Restated Certificate of Incorporation of the Company be
amended by revising Section 4.5 of Article 4 to read in its
entirety as follows:
4.5 Voting Rights of Preferred Stock. The voting rights of
the holders of shares of a series of Preferred Stock shall be as
set forth in the certificate or statement of rights and
preferences of such series.
RESOLVED
FURTHER: That the Restated Certificate of Incorporation of the Company be
amended by deleting each of Section 4.6 and Section 4.7 of
Article 4 in its entirety.
RESOLVED
FURTHER: That the Restated Certificate of Incorporation of the Company be
amended by deleting Article 11 in its entirety.
Page 27
<PAGE>
RESOLVED
FURTHER: That the Restated Certificate of Incorporation of the Company be
amended by revising Article 14 to read in its entirety as
follows:
The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by
statute, and all rights conferred upon stockholders herein are
granted subject to this reservation. Notwithstanding any other
provision of this Restated Certificate of Incorporation or any
provision of law which might otherwise permit a lesser vote or no
vote, but in addition to any affirmative vote of the holders of
the capital stock required by law or this Restated Certificate of
Incorporation, the affirmative vote of the holders of at least
two-thirds (2/3) of the combined voting power of all of the
then-outstanding shares of the Corporation entitled to vote shall
be required to alter, amend or repeal Articles THIRTEEN OR
FOURTEEN or any provision thereof, unless such amendment shall be
approved by a majority of the directors of the Corporation not
affiliated or associated with any person or entity holding (or
which has announced an intention to obtain) 25% or more of the
voting power of the Corporation's outstanding capital stock.
SECOND: That said amendment was thereafter duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware by the holders of a majority of the outstanding shares entitled to
vote thereon acting at the Annual Meeting duly called and held August 23,
2000.
IN WITNESS WHEREOF, KENETECH Corporation has caused this Certificate
to be signed by it duly authorized officer on this _____ day of
_______________, 2000.
KENETECH Corporation
By:
Name:
Title:
[SEAL]
Page 28
<PAGE>
EXHIBIT B TO PROXY STATEMENT
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION FILED SEPTEMBER 27, 1993
OF
KENETECH CORPORATION
_________________
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware.
KENETECH Corporation (herein called the "Corporation" or the
"Company"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation at a regular meeting
duly called and held on April 19, 2000 at which a quorum was at all times
present and acting, unanimously adopted a resolution proposing and
declaring advisable the following Amendment to the Restated Certificate of
Incorporation of the Corporation filed September 27, 1993 and directed that
said amendment be considered and submitted to a vote at the next annual
meeting of the stockholders of the Corporation:
RESOLVED: That the Restated Certificate of Incorporation of the Company be
amended by adding to Article 4 the following:
Reclassification of Common Stock. Upon this Certificate of
Amendment becoming effective in accordance with the General
Corporation Law of the State of Delaware (the "Effective Time"),
each share of Common Stock, par value $0.0001 per share, of the
Corporation ("Old Common Stock") issued and outstanding
immediately prior to the Effective Time shall be automatically
reclassified as and converted into 0.1 of a validly issued, fully
paid and nonassessable share of Common Stock, par value $0.0001
per share, of the Corporation ("New Common Stock").
Notwithstanding the immediately preceding sentence, no fractional
shares of New Common Stock shall be issued in connection with the
foregoing reclassification of shares of Old Common Stock. In lieu
thereof, upon surrender after the Effective Time of a certificate
formerly representing shares of Old Common Stock, the Corporation
shall pay to the holder of the certificate an amount in cash
(without interest) equal to the product obtained by multiplying
(a) the fraction of a share of New Common Stock to which such
holder (after taking into account all shares of Old Common Stock
held immediately prior to the Effective Time by such holder)
would otherwise be entitled to, by (b) the closing sale price per
share of Old Common Stock of the Corporation as quoted on The OTC
Bulletin Board on the last trading date prior to the date on
which the Effective Time occurs, by (c) ten.
Each stock certificate that, immediately prior to the Effective
Time, represented shares of Old Common Stock shall, from and
after the Effective Time, automatically and without the necessity
of presenting the same for exchange, represent that number of
shares of New Common Stock into which the shares of Old Common
Stock represented by such certificate shall have been
reclassified (as well as the right to receive cash in lieu of
fractional shares of New Common Stock), provided, however, that
each person of record holding a certificate that represented
shares of Old Common Stock shall receive, upon surrender of such
certificate, a new certificate evidencing and representing the
number of shares of New Common Stock into which the shares of Old
Common Stock represented by such certificate shall have been
reclassified.
SECOND: That said amendment was thereafter duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware by the holders of a majority of the outstanding shares entitled to
vote thereon acting at the Annual Meeting duly called and held August 23,
2000.
IN WITNESS WHEREOF, KENETECH Corporation has caused this Certificate
to be signed by it duly authorized officer on this _____ day of
_______________, 2000.
KENETECH Corporation
By:
Name:
Title:
[SEAL]
Page 29
<PAGE>
EXHIBIT C TO PROXY STATEMENT
CERTIFICATE OF AMENDMENT
TO THE
RESTATED CERTIFICATE OF INCORPORATION FILED SEPTEMBER 27, 1993
OF
KENETECH CORPORATION
_________________
Pursuant to Section 242 of the General
Corporation Law of the State of Delaware.
KENETECH Corporation (herein called the "Corporation" or the
"Company"), a corporation organized and existing under and by virtue of the
General Corporation Law of the State of Delaware, does hereby certify:
FIRST: That the Board of Directors of the Corporation at a regular meeting
duly called and held on April 19, 2000 at which a quorum was at all times
present and acting, unanimously adopted a resolution proposing and
declaring advisable the following Amendment to the Restated Certificate of
Incorporation of the Corporation filed September 27, 1993 and directed that
said amendment be considered and submitted to a vote at the next annual
meeting of the stockholders of the Corporation:
RESOLVED: That Article 4.1 of the Restated Certificate of Incorporation of
the Company be amended to read as follows:
4.1 Authorized Stock. The Corporation is authorized to issue a total
of Tweleve Million (12,000,000) shares of capital stock divided into two
classes of stock, denominated Common Stock and Preferred Stock. The Common
Stock shall have a par value of $0.0001 per share, and the Preferred Stock
shall have a par value of $0.01 per share. The total number of shares of
Common Stock which the Corporation is authorized to issue is Eleven Million
(11,000,000), and the number of shares of Preferred Stock which the
Corporation is authorized to issue is One Million (1,000,000), which shares
shall be undesignated as to series.
SECOND: That said amendment was thereafter duly adopted in accordance with the
provisions of Section 242 of the General Corporation Law of the State of
Delaware by the holders of a majority of the outstanding shares entitled to
vote thereon acting at the Annual Meeting duly called and held August 23,
2000.
IN WITNESS WHEREOF, KENETECH Corporation has caused this Certificate
to be signed by it duly authorized officer on this _____ day of
_______________, 2000.
KENETECH Corporation
By:
Name:
Title:
[SEAL]
Page 30
