<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14D-l
TENDER OFFER STATEMENT PURSUANT TO SECTION
14(d)(1) OF THE SECURITIES EXCHANGE ACT OF 1934
SHERIDAN ENERGY, INC.
-----------------------------------------------------------------------
(Name of Subject Company)
CPN SHERIDAN, INC.
CALPINE CORPORATION
-----------------------------------------------------------------------
(Bidder)
COMMON STOCK, PAR VALUE $.01 PER SHARE
-----------------------------------------------------------------------
(Title of Class of Securities)
823764 10 5
-----------------------------------------------------------------------
(CUSIP Number of Class of Securities)
ANN B. CURTIS
CPN SHERIDAN, INC.
c/o CALPINE CORPORATION
50 WEST SAN FERNANDO STREET
SAN JOSE, CA 95113
TELEPHONE: (408) 995-5115
-----------------------------------------------------------------------
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
COPIES TO:
WILLIAM R. COLLINS, ESQ.
HOWARD, SMITH & LEVIN LLP
1330 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019
TELEPHONE: (212) 841-1000
-----------------------------------------------------------------------
<PAGE> 2
CALCULATION OF FILING FEE
================================================================================
TRANSACTION VALUATION* AMOUNT OF FILING FEE
- ---------------------- --------------------
$37,035,735 $7,408
* Estimated for purposes of calculating the amount of filing fee only. The
amount assumes the purchase of 6,733,770 Shares of common stock (the "Shares"),
par value $.01 per Share, at a price per Share of $5.50 in cash.
/ / Check box if any part of the fee is offset as provided by Rule 0-11(a)(2)
and identify the filing with which the offsetting fee was previously paid.
Identify the previous filing by registration statement number, or the Form or
Schedule and the date of its filing.
Amount Previously Paid: None.
Form or Registration No.: Not applicable.
Filing Party: Not applicable.
Date Filed: Not applicable.
================================================================================
<PAGE> 3
14D-1
CUSIP No. 823764 10 5
1) Name of Reporting Persons: CPN Sheridan, Inc.
S.S. or I.R.S. Identification Nos. of Above Person: 77-0521272
- --------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions).
[ ] (a)
[ ] (b)
- --------------------------------------------------------------------------------
3) SEC Use Only
- --------------------------------------------------------------------------------
4) Sources of Funds (See Instructions). AF, WC
- --------------------------------------------------------------------------------
5) [ ] Check if Disclosure of Legal Proceedings is Required pursuant to
Items 2(e) or 2(f).
- --------------------------------------------------------------------------------
6) Citizenship or Place of Organization.
Delaware
- --------------------------------------------------------------------------------
7) Aggregate Amount Beneficially Owned by Each Reporting Person.
4,067,537*
- --------------------------------------------------------------------------------
8) [ ] Check if the Aggregate Amount in Row 7 Excludes Certain Shares.
- --------------------------------------------------------------------------------
9) Percent of Class Represented by Amount in Row 7.
Approximately 53.5% based on the outstanding shares as of August 25, 1999*
- --------------------------------------------------------------------------------
10) Type of Reporting Person (See Instructions).
CO
<PAGE> 4
14D-1
CUSIP No. 823764 10 5
1) Name of Reporting Persons: Calpine Corporation
S.S. or I.R.S. Identification Nos. of Above Person: 77-0498817
- --------------------------------------------------------------------------------
2) Check the Appropriate Box if a Member of a Group (See Instructions).
[ ] (a)
[ ] (b)
- --------------------------------------------------------------------------------
3) SEC Use Only
- --------------------------------------------------------------------------------
4) Sources of Funds (See Instructions). AF, WC, BK
- --------------------------------------------------------------------------------
5) [ ] Check if Disclosure of Legal Proceedings is Required pursuant to
Items 2(e) or 2(f).
- --------------------------------------------------------------------------------
6) Citizenship or Place of Organization.
Delaware
- --------------------------------------------------------------------------------
7) Aggregate Amount Beneficially Owned by Each Reporting Person.
4,067,537*
- --------------------------------------------------------------------------------
8) [ ] Check if the Aggregate Amount in Row 7 Excludes Certain Shares.
- --------------------------------------------------------------------------------
9) Percent of Class Represented by Amount in Row 7.
Approximately 53.5% based on the outstanding shares as of August 25, 1999*
- --------------------------------------------------------------------------------
10) Type of Reporting Person (See Instructions).
CO
* Calpine Corporation ("Calpine"), CPN Sheridan, Inc. ("Merger Subsidiary") and
certain stockholders of the subject company have entered into an Agreement,
dated as of August 25, 1999 (the "Stockholder Agreement"), pursuant to which
such stockholders granted to Merger Subsidiary an irrevocable option (the "Stock
Option") to purchase, subject to certain conditions, for a price of $5.50 per
share, or to cause to be tendered pursuant to the tender offer described in this
statement (the "Offer"), an aggregate of up to 3,492,537 outstanding shares of
common stock, par value $.01 per share (the "Shares"), of Sheridan Energy, Inc.,
up to an additional 425,000 Shares issuable upon exercise of outstanding stock
options and up to an additional 150,000 Shares issuable upon exercise of the
outstanding warrants (collectively, the "Stockholder Option Shares"). The
Stockholder Option Shares represent approximately 53.5% of the Company's fully
diluted outstanding Shares. Merger Subsidiary's option to purchase the
Stockholder Option Shares is reflected in Rows 7 and 9 of each of the tables
above. Subject to satisfaction of certain conditions (including the commencement
of the Offer), the Stock Option is exercisable by Merger Subsidiary at any time
until the 20th business day following termination of the Merger Agreement. Under
the Stockholder Agreement, each such Stockholder granted an irrevocable proxy to
Merger Subsidiary to vote in favor of the Merger Agreement and certain related
matters, subject as aforesaid. The Stockholder Agreement is described more fully
in Section 11 ("Purpose of the Offer; Merger Agreement; Stockholder Agreement;
Appraisal Rights") of the Offer to Purchase, dated August 31, 1999.
<PAGE> 5
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Sheridan Energy, Inc.,
a Delaware corporation (the "Company"), and the address of its principal
executive offices is 1000 Louisiana, Suite 800, Houston, Texas 77002.
(b) This Statement on Schedule 14D-1 relates to the offer by
Merger Subsidiary (defined below) to purchase all outstanding shares of Common
Stock, par value $.01 per share (the "Shares"), of the Company at $5.50 per
Share, net to the seller in cash, upon the terms and subject to the conditions
set forth in the Offer to Purchase (the "Offer to Purchase") and in the related
Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1)
and (a)(2) (which, together with any amendments or supplements thereto,
collectively constitute the "Offer"). The information set forth in the
Introduction to the Offer to Purchase (the "Introduction") is incorporated
herein by reference.
(c) The information set forth in Section 6 ("Price Range of
Shares; Dividends") of the Offer to Purchase is incorporated herein by
reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Tender Offer Statement on Schedule 14D-1
is filed by CPN Sheridan, Inc., a Delaware corporation ("Merger Subsidiary"),
and Calpine Corporation, a Delaware corporation, ("Calpine"). Merger Subsidiary
is a wholly-owned subsidiary of Calpine. Information concerning the principal
business and the addresses of the principal offices of Merger Subsidiary and
Calpine is set forth in Section 8 ("Certain Information Concerning Merger
Subsidiary and Calpine") of the Offer to Purchase, and is incorporated herein by
reference. The names, business addresses, present principal occupations or
employments, material occupations, positions, offices or employment during the
last five years and citizenship of the directors and executive officers of
Merger Subsidiary and Calpine are set forth in Schedule I to the Offer to
Purchase and are incorporated herein by reference.
(e) and (f) None of Merger Subsidiary, Calpine or, to the best
knowledge of such corporations, any of the persons listed on Schedule I to the
Offer of Purchase, has during the last five years (i) been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
(ii) been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction and as a result of such proceeding was or is subject to a
judgment, decree or final order enjoining future violations of, or prohibiting
activities subject to, Federal or state securities laws or finding any violation
of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT
COMPANY.
(a) and (b) The information set forth in (i) the Introduction,
Section 8 ("Certain Information Concerning Merger Subsidiary and Calpine"),
Section 10 ("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company"), Section 11 ("Purpose of the Offer; Merger
Agreement; Stockholder Agreement; Appraisal Rights") and Schedule I to the Offer
to
-2-
<PAGE> 6
Purchase, (ii) the Agreement and Plan of Merger, dated as of August 25, 1999
(the "Merger Agreement"), among the Company, Calpine and Merger Subsidiary, a
copy of which is attached as Exhibit (c)(1) hereto, (iii) the Stockholder
Agreement, dated as of August 25, 1999 (the "Stockholder Agreement"), among the
Merger Subsidiary and the stockholders of the Company named therein, a copy of
which is attached as Exhibit (c)(2) hereto and (iv) the Confidentiality
Agreement, dated June 15, 1999 (the "Confidentiality Agreement"), between
Calpine and the Company, a copy of which is attached as Exhibit (c)(3) hereto,
respectively, is incorporated herein by reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a) and (b) The information set forth in Section 9 ("Source
and Amount of Funds") of the Offer to Purchase is incorporated herein by
reference.
(c) Not applicable.
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE
BIDDER.
(a)-(e) The information set forth in the Introduction and
Section 11 ("Purpose of the Offer; Merger Agreement; Stockholder Agreement;
Appraisal Rights") of the Offer to Purchase is incorporated herein by reference.
(f) and (g) The information set forth in Section 12 ("Effect
of the Offer on the Market for the Shares; Stock Quotations, Registration Under
the Exchange Act") of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a) and (b) The information set forth in (i) the Introduction,
Section 8 ("Certain Information Concerning Merger Subsidiary and Calpine"),
Section 10 ("Background of the Offer; Past Contacts, Transactions or
Negotiations with the Company"), Section 11 ("Purpose of the Offer; Merger
Agreement; Stockholder Agreement; Appraisal Rights"), Schedule I of the Offer to
Purchase, (ii) the Merger Agreement, and (iii) the Stockholder Agreement,
respectively, is incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in (i) the Introduction, Section 8
("Certain Information Concerning Merger Subsidiary and Calpine"), Section 10
("Background of the Offer; Past Contacts, Transactions or Negotiations with the
Company") and Section 11 ("Purpose of the Offer; Merger Agreement; Stockholder
Agreement; Appraisal Rights") of the Offer to Purchase, (ii) the Merger
Agreement, (iii) the Stockholder Agreement and (iv) the Confidentiality
Agreement, respectively, is incorporated herein by reference.
-3-
<PAGE> 7
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 17 ("Fees and Expenses")
of the Offer to Purchase is incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 8 ("Certain Information
Concerning Merger Subsidiary and Calpine") of the Offer to Purchase, and such
information and the consolidated financial statements of Calpine in Calpine's
Annual Report on Form 10-KSB for the year ended December 31, 1998 and Quarterly
Report on Form 10-QSB for the six months ended June 30, 1999, respectively, are
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 8 ("Certain
Information Concerning Merger Subsidiary and Calpine") and Section 11 ("Purpose
of the Offer; Merger Agreement; Stockholder Agreement; Appraisal Rights") of the
Offer to Purchase is incorporated herein by reference.
(b)-(d) The information set forth in Section 16 ("Certain
Legal Matters; Regulatory Approvals") of the Offer to Purchase is incorporated
herein by reference.
(e) None.
(f) The information set forth in (i) the Offer to Purchase,
(ii) the Letter of Transmittal, (iii) the Merger Agreement, (iv) the Stockholder
Agreement and the Confidentiality Agreement, respectively, is incorporated
herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase dated August 31, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers,
Commercial Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release issued by Calpine dated August 25, 1999.
(a)(7) Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9.
-4-
<PAGE> 8
(a)(8) Form of summary advertisement dated August 31, 1999.
(a)(9) Text of press release issued by Calpine dated August 31, 1999.
(b)(1) Credit Agreement, dated as of September 25, 1996, among
Calpine and the Bank of Nova Scotia (previously filed as an
exhibit to Calpine's Current Report on Form 8-K dated May 1,
1996 and incorporated herein by reference).
(c)(1) Agreement and Plan of Merger, dated as of August 25, 1999,
among the Company, Calpine and Merger Subsidiary.
(c)(2) Stockholder Agreement, dated as of August 25, 1999, among
Merger Subsidiary, Calpine and the stockholders of the Company
named therein.
(c)(3) Confidentiality Agreement, dated June 15, 1999, between
Calpine and the Company.
(d) None.
(e) Not applicable.
(f) None.
-5-
<PAGE> 9
SIGNATURE
After due inquiry and to the best of my knowledge and belief,
the undersigned certifies that the information set forth in this statement is
true, complete and correct.
Dated: August 31, 1999
CPN SHERIDAN, INC.
By: /s/ Ann B. Curtis
----------------------------------------------
Name: Ann B. Curtis
Title: Vice President, Chief Financial Officer
and Secretary
CALPINE CORPORATION
By: /s/ Ann B. Curtis
----------------------------------------------
Name: Ann B. Curtis
Title: Executive Vice President
-6-
<PAGE> 10
EXHIBIT INDEX
Exhibit
Number Exhibit Name
- ------ ------------
(a)(1) Offer to Purchase dated August 31, 1999.
(a)(2) Form of Letter of Transmittal.
(a)(3) Form of Notice of Guaranteed Delivery.
(a)(4) Form of Letter to Brokers, Dealers, Commercial Banks, Trust Companies
and Other Nominees.
(a)(5) Form of Letter to Clients for use by Brokers, Dealers, Commercial
Banks, Trust Companies and Other Nominees.
(a)(6) Text of press release issued by Calpine dated August 25, 1999.
(a)(7) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(8) Form of summary advertisement dated August 31, 1999.
(a)(9) Text of press release issued by Calpine dated August 31, 1999.
(b)(1) Credit Agreement, dated as of September 25, 1996, among Calpine and the
Bank of Nova Scotia (previously filed as an exhibit to Calpine's
Current Report on Form 8-K dated May 1, 1996 and incorporated herein by
reference).
(c)(1) Agreement and Plan of Merger, dated as of August 25, 1999 among the
Company, Calpine and Merger Subsidiary.
(c)(2) Stockholder Agreement, dated as of August 25, 1999, among Merger
Subsidiary, Calpine and the stockholders of the Company named therein.
(c)(3) Confidentiality Agreement, dated June 15, 1999, between Calpine and the
Company.
(d) None.
(e) Not applicable.
(f) None.
-7-
<PAGE> 1
Exhibit 99 (a)(1)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
AT
$5.50 NET PER SHARE
BY
CPN SHERIDAN, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALPINE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, SEPTEMBER 28, 1999, UNLESS THE OFFER IS EXTENDED.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE AND NOT WITHDRAWN A NUMBER OF SHARES OF COMMON
STOCK, PAR VALUE $.01 PER SHARE (THE "SHARES"), OF SHERIDAN ENERGY, INC. (THE
"COMPANY") WHICH, TOGETHER WITH THE SHARES THEN OWNED BY CPN SHERIDAN, INC.
("MERGER SUBSIDIARY") AND CALPINE CORPORATION ("CALPINE"), WOULD REPRESENT AT
LEAST A MAJORITY OF THE TOTAL NUMBER OF OUTSTANDING SHARES ON A FULLY DILUTED
BASIS.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT THE
OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT (DEFINED BELOW)
ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS OF THE COMPANY, HAS
UNANIMOUSLY APPROVED THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER
AGREEMENT AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF THE COMPANY ACCEPT
THE OFFER AND TENDER THEIR SHARES.
-------------------------------------
Any stockholder desiring to tender Shares should either (i) complete and
sign the Letter of Transmittal (or a facsimile thereof) in accordance with the
instructions in the Letter of Transmittal and deliver it with the certificate(s)
representing such tendered Shares and all other required documents to the
Depositary or follow the procedure for book-entry tender of Shares set forth in
Section 3 or (ii) request such stockholder's broker, dealer, commercial bank,
trust company or other nominee to effect the transaction for such stockholder. A
stockholder having Shares registered in the name of a broker, dealer, commercial
bank, trust company or other nominee must contact such person if such
stockholder desires to tender such Shares. Any stockholder who desires to tender
Shares and whose certificate(s) representing such Shares are not immediately
available, or who cannot comply with the procedure for book-entry transfer on a
timely basis, may tender such Shares pursuant to the guaranteed delivery
procedure set forth in Section 3.
Questions and requests for assistance or additional copies of this
Offer to Purchase or the Letter of Transmittal may be directed to the
Information Agent at its addresses and telephone numbers specified on the back
cover of this Offer to Purchase.
-------------------------------------
THE INFORMATION AGENT FOR THE OFFER IS:
D.F. King & Co., Inc.
August 31, 1999
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION............................................................................................ 1
1. Terms of the Offer............................................................................... 3
2. Acceptance for Payment and Payment............................................................... 5
3. Procedure for Tendering Shares................................................................... 6
4. Withdrawal Rights................................................................................ 9
5. Certain Tax Consequences......................................................................... 9
6. Price Range of Shares; Dividends................................................................. 11
7. Certain Information Concerning the Company....................................................... 12
8. Certain Information Concerning Merger Subsidiary and Calpine..................................... 14
9. Source and Amount of Funds....................................................................... 16
10. Background of the Offer; Past Contacts, Transactions or Negotiations with
the Company...................................................................................... 17
11. Purpose of the Offer; Merger Agreement; Stockholder Agreement; Appraisal Rights.................. 19
12. Effect of the Offer on the Market for the Shares; Stock Quotations; Registration under
the Exchange Act................................................................................. 33
13. Dividends and Distributions...................................................................... 34
14. Extension of Tender Period; Termination; Amendment............................................... 34
15. Certain Conditions of the Offer.................................................................. 36
16. Certain Legal Matters; Regulatory Approvals...................................................... 39
17. Fees and Expenses................................................................................ 41
18. Miscellaneous.................................................................................... 41
Schedule I Information Concerning the Directors and Executive Officers
of Calpine and Merger Subsidiary...................................................... I-1
</TABLE>
<PAGE> 3
To the Holders of Common Stock of
Sheridan Energy, Inc.:
INTRODUCTION
CPN Sheridan, Inc., a Delaware corporation ("Merger Subsidiary") and a
wholly owned subsidiary of Calpine Corporation ("Calpine"), hereby offers to
purchase all outstanding shares of Common Stock, par value $.01 per share (the
"Shares"), of Sheridan Energy, Inc., a Delaware corporation (the "Company"), at
$5.50 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in this Offer to Purchase and in the related Letter of
Transmittal (which, together with any amendments or supplements hereto or
thereto, collectively constitute the "Offer"). Tendering stockholders of the
Company (the stockholders of the Company are referred to herein as the
"Stockholders") will not be obligated to pay brokerage fees or commissions or,
except as set forth in the Letter of Transmittal, transfer taxes on the purchase
of Shares pursuant to the Offer. Calpine will pay all charges and expenses of
American Stock Transfer & Trust Company (the "Depositary") and D.F.
King & Co., Inc. (the "Information Agent") in connection with the Offer.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY DETERMINED THAT
THE OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT ARE FAIR TO,
AND IN THE BEST INTERESTS OF, THE STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE
OFFER AND THE TRANSACTIONS CONTEMPLATED BY THE MERGER AGREEMENT, AND UNANIMOUSLY
RECOMMENDS THAT THE STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES.
PURSUANT TO THE MERGER AGREEMENT, THE COMPANY HAS REPRESENTED TO
CALPINE THAT DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION ("FINANCIAL
ADVISOR" OR "DLJ"), THE COMPANY'S FINANCIAL ADVISOR, HAS DELIVERED TO THE
COMPANY'S BOARD OF DIRECTORS ITS OPINION TO THE EFFECT THAT THE $5.50 PER SHARE
TO BE PAID IN THE OFFER AND THE MERGER (DEFINED BELOW) IS FAIR TO THE HOLDERS OF
THE SHARES FROM A FINANCIAL POINT OF VIEW. THE OPINION OF THE FINANCIAL ADVISOR
IS TO BE SET FORTH IN FULL IN THE COMPANY'S SOLICITATION/RECOMMENDATION
STATEMENT ON SCHEDULE 14D-9, TO BE FILED BY THE COMPANY AND MAILED TO
STOCKHOLDERS IF NOT MAILED HEREWITH. STOCKHOLDERS ARE URGED TO READ THIS OPINION
IN ITS ENTIRETY.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED BY THE EXPIRATION DATE (DEFINED BELOW) AND NOT WITHDRAWN A NUMBER OF
SHARES WHICH, TOGETHER WITH THE SHARES THEN OWNED BY CALPINE AND MERGER
SUBSIDIARY, WOULD REPRESENT AT LEAST A MAJORITY OF THE TOTAL NUMBER OF
OUTSTANDING SHARES, ASSUMING THE EXERCISE OF ALL OUTSTANDING OPTIONS, RIGHTS AND
CONVERTIBLE SECURITIES (IF ANY) AND THE ISSUANCE OF ALL SHARES THAT THE COMPANY
IS OBLIGATED TO ISSUE (SUCH TOTAL NUMBER OF OUTSTANDING SHARES BEING HEREINAFTER
REFERRED TO AS THE "FULLY DILUTED SHARES") (THE "MINIMUM CONDITION"). SEE
SECTION 15, WHICH SETS FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Company has represented to Calpine in the Merger Agreement that, as
of August 25, 1999, there were (i) 6,733,770 Shares issued and outstanding, (ii)
1,139,556.25 shares of Preferred Stock, par value $.01 per share, of the Company
(the "Preferred Stock") issued and outstanding, (iii) 725,500 Shares reserved
for issuance upon the exercise of stock options outstanding under various
Company stock option plans and (iv) 150,000 Shares reserved for issuance upon
exercise of outstanding warrants (the "Warrants") to purchase additional Shares.
Based upon the foregoing, as of August 25, 1999, there
<PAGE> 4
were approximately 7,609,270 Fully Diluted Shares. Calpine owns no Shares of
record, but Merger Subsidiary has the right to direct the tender in connection
with the Offer of up to 4,067,537 Shares pursuant to an agreement with certain
Stockholders, as more specifically described in Section 11. Accordingly, Calpine
believes that the Minimum Condition would be satisfied (based on the foregoing
assumptions) if the Shares referred to in the immediately preceding sentence are
validly tendered pursuant to the Offer and not withdrawn.
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of August 25, 1999 (the "Merger Agreement"), among the Company, Calpine
and Merger Subsidiary, which has been unanimously approved by the Company's
Board of Directors. The Merger Agreement provides, among other things, that,
after consummation of the Offer, and after satisfaction or waiver of all
conditions to the Merger, Merger Subsidiary will be merged into the Company (the
"Merger"), with the Company continuing as the surviving corporation (the
"Surviving Corporation"). Pursuant to the Merger Agreement, at the effective
time of the Merger (the "Effective Time"), each outstanding Share (other than
Shares owned by Calpine, Merger Subsidiary or any subsidiary of either of them
or held by the Company as treasury stock (which shall be canceled) or by
Stockholders exercising appraisal rights under Delaware Law (defined below))
will be converted into the right to receive $5.50 in cash or any higher price
paid for each Share in the Offer, without interest. If the Minimum Condition is
satisfied and Merger Subsidiary purchases Shares pursuant to the Offer, Merger
Subsidiary will have the power to approve the Merger without the affirmative
vote of any other Stockholder. In the event that Merger Subsidiary owns 90% or
more of the Shares then outstanding, the "short-form" merger provisions of the
Delaware General Corporation Act ("Delaware Law") would permit the Merger to
occur without a meeting or a vote of the Stockholders. See Section 11.
Calpine, Merger Subsidiary and certain Stockholders have entered into
an Agreement, dated as of August 25, 1999 (the "Stockholder Agreement"),
pursuant to which such Stockholders granted to Merger Subsidiary an irrevocable
option (the "Stock Option") to purchase, subject to certain conditions, for a
price of $5.50 per Share, or to cause to be tendered pursuant to the Offer, an
aggregate of up to 3,492,537 outstanding Shares, up to an additional 425,000
Shares issuable under outstanding employee and director stock options and up to
an additional 150,000 Shares issuable upon exercise of the outstanding Warrants
(collectively, the "Stockholder Option Shares"). The Stockholder Option Shares
represent approximately 53.5% of the Fully Diluted Shares. Subject to
satisfaction of certain conditions (including the commencement of the Offer),
the Stock Option is exercisable by Merger Subsidiary at any time until the 20th
business day following termination of the Merger Agreement. Under the
Stockholder Agreement, each such Stockholder granted an irrevocable proxy to
Merger Subsidiary to vote in favor of the Merger Agreement and certain related
matters, subject as aforesaid. As a result of the Stockholder Agreement, Calpine
and Merger Subsidiary may be deemed to be the beneficial owner of the
Stockholder Option Shares. The Stockholder Agreement also provides that,
promptly after the consummation of the Offer, Merger Subsidiary will purchase,
or cause the Company to purchase and redeem, all of the outstanding Preferred
Stock at a price per share of Preferred Stock equal to $10.10, plus accrued and
unpaid dividends thereon (whether or not declared). All of the outstanding
Preferred Stock is owned by one of the Stockholders which is a party to the
Stockholder Agreement.
-2-
<PAGE> 5
Upon consummation of the Offer, each outstanding stock option under the
Company's various stock option plans (whether vested or unvested) will be
canceled and each option holder will receive cash from the Company based on the
Offer price. See Section 11.
Upon acceptance for payment by Merger Subsidiary of such number of
Shares which satisfies the Minimum Condition, Calpine is entitled, pursuant to
the Merger Agreement, to designate the number of directors, rounded up to the
next whole number, on the Company's Board of Directors that equals the product
of (i) the total number of directors on the Company's Board of Directors and
(ii) the percentage that the number of Shares owned by Calpine or Merger
Subsidiary (including Shares accepted for payment) bears to the total number of
Shares outstanding, and the Company shall take all necessary action to cause
Calpine's designees to be elected or appointed to the Company's Board of
Directors; provided that, prior to the Effective Time, the Company's Board of
Directors shall always have one member who is neither a designee nor an
affiliate of Calpine or Merger Subsidiary nor an employee of the Company (an
"Independent Director"). No action proposed to be taken by the Company to (i)
amend or terminate the Merger Agreement or the certificate of incorporation or
by-laws of the Company or (ii) waive any action required to be taken by Calpine
or Merger Subsidiary or any rights of the Company under the Merger Agreement
shall be effective without the approval of the Independent Director.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER
Upon the terms and subject to the conditions set forth in the Offer,
Merger Subsidiary will accept for payment and purchase, at the time and in the
manner set forth in Section 2, all Shares that are validly tendered by the
Expiration Date and not withdrawn as provided in Section 4. The term "Expiration
Date" shall mean 12:00 Midnight, New York City time, on September 28, 1999,
unless Merger Subsidiary shall have extended the period of time for which the
Offer is open, in which event the term "Expiration Date" shall mean the latest
time and date at which the Offer, as so extended by Merger Subsidiary, shall
expire.
The Offer is subject to certain conditions set forth in Section 15,
including satisfaction of the Minimum Condition. If any such condition is not
satisfied, Merger Subsidiary may, except as otherwise described below, (i)
terminate the Offer and return all tendered Shares to tendering Stockholders,
(ii) extend the Offer and, subject to withdrawal rights as set forth in Section
4, retain all such Shares until the expiration of the Offer as so extended,
(iii) waive such condition (except the Minimum Condition) and, subject to any
requirement to extend the period of time during which the Offer is open,
purchase all Shares validly tendered by the Expiration Date and not withdrawn or
(iv) delay acceptance for payment or payment for Shares, subject to applicable
law, until satisfaction or waiver of the conditions to the Offer. For a
description of Merger Subsidiary's right (or, in certain circumstances,
obligation) to extend the period of time during which the Offer is open and to
amend, delay or terminate the Offer, see Section 14. Merger Subsidiary
acknowledges that Rule 14e-1(c) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), requires Merger
-3-
<PAGE> 6
Subsidiary to pay the consideration offered or return the Shares tendered
promptly after the termination or withdrawal of the Offer.
Pursuant to the Merger Agreement, Calpine and Merger Subsidiary
expressly reserve the right to waive any of the conditions to the Offer and to
make any change in the terms or conditions of the Offer; provided that, without
the prior written consent of the Company, no change may be made which (i)
changes the form of consideration to be paid in the Offer, (ii) decreases the
price per Share or the number of Shares being sought in the Offer, (iii) imposes
conditions to the Offer in addition to those expressly set forth in the Merger
Agreement, (iv) changes or waives the Minimum Condition, (v) extends the Offer
(except as set forth in the Merger Agreement) or (vi) makes any other change to
any condition to the Offer set forth in the Merger Agreement which is materially
adverse to the holders of Shares.
Any extension, delay in payment, amendment or termination of the Offer
will be followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Without limiting the manner in which Merger Subsidiary may
choose to make any public announcement, subject to applicable law (including
Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act which require that
material changes be promptly disseminated to stockholders in a manner reasonably
designed to inform them of such changes), Merger Subsidiary shall have no
obligation (except as otherwise required by applicable law) to advertise
publicly or otherwise communicate any such public announcement other than by
issuing a release to the Dow Jones News Service.
Subject to the Merger Agreement, if Merger Subsidiary makes any
material change in the terms of the Offer or the information concerning the
Offer, or waives any condition to the Offer that results in a material change to
the circumstances of the Offer, Merger Subsidiary will disseminate additional
tender offer materials and extend the Offer to the extent required to comply
with Rules 14d-4(c), 14d-6(d) and 14e-1 under the Exchange Act. The Securities
and Exchange Commission (the "Commission") has interpreted such rules to
prescribe that the minimum period during which an offer must remain open
following material changes in the terms of the offer or information concerning
the offer, other than a change in price or a change in percentage of securities
sought, will depend upon the facts and circumstances, including the relative
materiality of the terms or information changed. With respect to a change in
price or a change in the percentage of securities sought, a minimum period of
ten business days may be required to allow for adequate dissemination to
stockholders and investor response. As used in this Offer to Purchase, "business
day" means any day other than a Saturday, Sunday or a federal holiday and shall
consist of the time period from 12:01 a.m. through 12:00 midnight, New York City
time.
The Company has provided Merger Subsidiary with the Company's
stockholder list and security position listings for the purpose of disseminating
the Offer to holders of Shares. This Offer to Purchase and the related Letter of
Transmittal will be mailed to record holders of Shares and will be furnished to
brokers, banks and similar persons whose names, or the names of whose nominees,
appear on the stockholder list or, if applicable, who are listed as participants
in a clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
-4-
<PAGE> 7
2. ACCEPTANCE FOR PAYMENT AND PAYMENT.
Subject to the terms of the Offer and the satisfaction (or waiver to
the extent permitted by the Merger Agreement) of all the conditions to the
Offer, Merger Subsidiary shall accept for payment all Shares validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after the
expiration of the Offer and shall pay for all such Shares promptly after
acceptance. Merger Subsidiary may, without the consent of the Company, (i)
extend the Offer if, at the scheduled Expiration Date, any of the conditions to
the Offer have not been satisfied or waived, until such time as such conditions
are satisfied or waived, (ii) extend the Offer for a period of time of not more
than 20 business days beyond the initial Expiration Date, if on the date of such
extension less than 90% of the Fully Diluted Shares have been validly tendered
and not withdrawn and (iii) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Commission or the staff
applicable to the Offer. In addition, under certain circumstances, Merger
Subsidiary may be required under the Merger Agreement to extend the Offer. See
Section 11. For a description of Merger Subsidiary's right to terminate the
Offer (subject to the terms of the Merger Agreement) and not accept for payment
or pay for Shares or to delay acceptance for payment or payment for Shares, see
Section 14.
For purposes of the Offer, Merger Subsidiary shall be deemed to have
accepted for payment tendered Shares when, and if, Merger Subsidiary gives oral
or written notice to the Depositary of its acceptance of the tenders of such
Shares. In all cases, upon the terms and subject to the conditions of the Offer,
payment for Shares accepted for payment pursuant to the Offer will be made by
deposit of the purchase price with the Depositary, which will act as agent for
the tendering Stockholders for the purpose of receiving payments from Merger
Subsidiary and transmitting such payments to tendering Stockholders.
In all cases, payment for Shares accepted for payment pursuant to the
Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares (or of a confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Shares into the Depositary's account at the
Book-Entry Transfer Facility (defined in Section 3)), (ii) a properly completed
and duly executed Letter of Transmittal (or facsimile thereof) or an Agent's
Message (defined below) in connection with a book-entry transfer and (iii) any
other required documents. Accordingly, payment may be made to tendering
Stockholders at different times if delivery of the Shares and other required
documents occur at different times. For a description of the procedure for
tendering Shares pursuant to the Offer, see Section 3. Under no circumstances
will interest be paid by Merger Subsidiary on the consideration paid for Shares
pursuant to the Offer, regardless of any delay in making such payment.
The term "Agent's Message" means a message, transmitted by the
Book-Entry Transfer Facility to, and received by, the Depositary and forming a
part of a Book-Entry Confirmation, which states that the Book-Entry Transfer
Facility has received an express acknowledgment from the participant in the
Book-Entry Transfer Facility tendering the Shares which are the subject of such
Book-Entry Confirmation, that such participant has received and agrees to be
bound by the terms of the Letter of Transmittal and that Merger Subsidiary may
enforce such agreement against such participant.
-5-
<PAGE> 8
If Merger Subsidiary increases the consideration to be paid for Shares
pursuant to the Offer, Merger Subsidiary will pay such increased consideration
for all Shares purchased pursuant to the Offer.
Merger Subsidiary reserves the right to transfer or assign, in whole or
from time to time in part, to one or more of Calpine or any of its wholly owned
subsidiaries, the right to purchase Shares tendered pursuant to the Offer, but
any such transfer or assignment will not relieve Merger Subsidiary of its
obligations under the Offer or prejudice the rights of tendering Stockholders to
receive payment for Shares validly tendered and accepted for payment pursuant to
the Offer.
If any tendered Shares are not purchased pursuant to the Offer for any
reason, or if certificates are submitted for more Shares than are tendered,
certificates for such unpurchased or untendered Shares will be returned (or, in
the case of Shares tendered by book-entry transfer, such Shares will be credited
to an account maintained at the Book-Entry Transfer Facility), without expense
to the tendering Stockholder, as promptly as practicable following the
expiration or termination of the Offer.
3. PROCEDURE FOR TENDERING SHARES.
To tender Shares pursuant to the Offer, either (i) a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), or an Agent's
Message in connection with a book-entry transfer of such Shares, and any other
documents required by the Letter of Transmittal must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (a) certificates for such Shares to be tendered must be
received by the Depositary at one of such addresses or (b) such Shares must be
delivered pursuant to the procedures for book-entry transfer described below
(and a Book-Entry Confirmation received by the Depositary), in each case by the
Expiration Date, or (ii) the guaranteed delivery procedure described below must
be complied with.
The Depositary will establish an account with respect to the Shares at
the Depository Trust Company (the "Book-Entry Transfer Facility") for purposes
of the Offer within two business days after the date of this Offer to Purchase,
and any financial institution that is a participant in the system of the
Book-Entry Transfer Facility may make delivery of Shares by causing the
Book-Entry Transfer Facility to transfer such Shares into the Depositary's
account in accordance with the procedures of the Book-Entry Transfer Facility.
However, although delivery of Shares may be effected through book-entry
transfer, the Letter of Transmittal (or facsimile thereof), or an Agent's
Message in connection with such book-entry transfer, and any other required
documents must, in any case, be received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase by the
Expiration Date, or the guaranteed delivery procedure described below must be
complied with. Delivery of the Letter of Transmittal and any other required
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary.
-6-
<PAGE> 9
Except as otherwise provided below, all signatures on a Letter of
Transmittal must be guaranteed by a bank, broker, dealer, credit union, savings
association or other entity that is a member of a recognized Medallion Program
approved by The Securities Transfer Association, Inc. (an "Eligible
Institution"). Signatures on a Letter of Transmittal need not be guaranteed (i)
if the Letter of Transmittal is signed by the registered holder of the Shares
tendered therewith and such holder has not completed the box entitled "Special
Payment Instructions" or the box entitled "Special Delivery Instructions" on the
Letter of Transmittal or (ii) if such Shares are tendered for the account of an
Eligible Institution. See Instructions 1 and 5 of the Letter of Transmittal.
If the certificates representing Shares are registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made to, or certificates for unpurchased Shares are to be issued or returned
to, a person other than the registered holder, then the tendered certificates
must be endorsed or accompanied by appropriate stock powers, signed exactly as
the name or names of the registered holder or holders appear on the
certificates, with the signatures on the certificates or stock powers guaranteed
by an Eligible Institution as provided in the Letter of Transmittal. See
Instructions 1 and 5 of the Letter of Transmittal.
If the certificates representing Shares are forwarded separately to the
Depositary, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) must accompany each such delivery.
If a Stockholder desires to tender Shares pursuant to the Offer and
cannot deliver such Shares and all other required documents to the Depositary by
the Expiration Date, or such Stockholder cannot complete the procedure for
delivery by book-entry transfer on a timely basis, such Shares may nevertheless
be tendered if all of the following conditions are met:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of
Guaranteed Delivery, substantially in the form provided by Merger
Subsidiary, is received by the Depositary (as provided below) by the
Expiration Date; and
(iii) the certificates for all physically delivered Shares (or
a Book-Entry Confirmation of all Shares delivered electronically), as
well as a properly completed and duly executed Letter of Transmittal
(or facsimile thereof) (or, in the case of a book-entry transfer, an
Agent's Message) and any other documents required by the Letter of
Transmittal, are received by the Depositary within three National
Association of Securities Dealers Inc. trading days on the Nasdaq
National Market System after the date of execution of the Notice of
Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
facsimile transmission or mailed to the Depositary and must include a guarantee
by an Eligible Institution in the form set forth in such Notice.
-7-
<PAGE> 10
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
In all cases, payment for Shares tendered and accepted for payment
pursuant to the Offer will be made only after timely receipt by the Depositary
of the certificates for such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
Under the federal income tax laws, the Depositary will be required to
withhold 31% of the amount of any payments made to certain Stockholders pursuant
to the Offer. In order to avoid such backup withholding, each tendering
Stockholder must provide the Depositary with such Stockholder's correct taxpayer
identification number and certify that such Stockholder is not subject to such
backup withholding by completing the Substitute Form W-9 included in the Letter
of Transmittal (or, in the case of a foreign individual, a Form W-8 which may be
obtained from the Depositary).
By executing a Letter of Transmittal, a tendering Stockholder
irrevocably appoints designees of Merger Subsidiary as such Stockholder's
proxies in the manner set forth in the Letter of Transmittal to the full extent
of such Stockholder's rights with respect to the Shares tendered by such
Stockholder and accepted for payment by Merger Subsidiary (and any and all other
Shares or other securities issued or issuable in respect of such Shares on or
after August 25, 1999). All such proxies shall be considered coupled with an
interest in the tendered Shares. Such appointment is effective only upon the
acceptance for payment of such Shares by Merger Subsidiary. Upon such acceptance
for payment, all prior proxies and consents granted by such Stockholder with
respect to such Shares and other securities will, without further action, be
revoked, and no subsequent proxies may be given nor subsequent written consents
executed by such Stockholder (and, if given or executed, will not be deemed to
be effective). Such designees of Merger Subsidiary will be empowered to exercise
all voting and other rights of such Stockholder as they, in their sole
discretion, may deem proper at any annual, special or adjourned meeting of the
Company's stockholders, by written consent or otherwise. Merger Subsidiary
reserves the right to require that, in order for Shares to be validly tendered,
immediately upon Merger Subsidiary's acceptance for payment of such Shares,
Merger Subsidiary is able to exercise full voting rights with respect to such
Shares and other securities (including voting at any meeting of stockholders
then scheduled or acting by written consent without a meeting).
All questions as to the form of documents and the validity, eligibility
(including time of receipt) and acceptance for payment of any tender of Shares
will be determined by Merger Subsidiary, in its sole discretion, which
determination shall be final and binding on all parties. Merger Subsidiary
reserves the absolute right to reject any or all tenders of Shares determined by
it not to be in proper form or the acceptance for payment of or payment for
which may, in the opinion of Merger Subsidiary's counsel, be unlawful. Merger
Subsidiary also reserves the absolute right to waive any defect or irregularity
in any tender of Shares, whether or not similar defects or irregularities are
waived
-8-
<PAGE> 11
in the case of any other tender of Shares. None of Merger Subsidiary, Calpine,
the Depositary, the Information Agent or any other person will be under any duty
to give notification of any defect or irregularity in tenders or incur any
liability for failure to give any such notification. Merger Subsidiary's
interpretation of the terms and conditions of the Offer (including the Letter of
Transmittal and the instructions thereto) will be final and binding.
The acceptance for payment of Shares tendered pursuant to any one of
the procedures described above will constitute an agreement between the
tendering Stockholder and Merger Subsidiary upon the terms and subject to the
conditions of the Offer.
4. WITHDRAWAL RIGHTS.
Tenders of Shares made pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date. Thereafter, such tenders are irrevocable,
except that they may be withdrawn on or after October 29, 1999 unless
theretofore accepted for payment as provided in this Offer to Purchase. If
Merger Subsidiary extends the period of time during which the Offer is open, is
delayed in accepting for payment or paying for Shares or is unable to accept for
payment or pay for Shares pursuant to the Offer for any reason, then, without
prejudice to Merger Subsidiary's rights under the Offer, the Depositary may, on
behalf of Merger Subsidiary, retain all Shares tendered, and such Shares may not
be withdrawn except as otherwise provided in this Section 4.
For a withdrawal to be effective, a written or facsimile transmission
notice of withdrawal must be timely received by the Depositary at one of its
addresses set forth on the back cover of this Offer to Purchase and must specify
the name of the person who tendered the Shares to be withdrawn and the number of
Shares to be withdrawn. If the Shares to be withdrawn have been delivered to the
Depositary, a signed notice of withdrawal with (except in the case of Shares
tendered by an Eligible Institution) signatures guaranteed by an Eligible
Institution must be submitted prior to the release of such Shares. In addition,
such notice must specify, in the case of Shares tendered by delivery of
certificates, the name of the registered holder (if different from that of the
tendering Stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in Section 3 at
any time prior to the Expiration Date.
All questions as to the form and validity (including time of receipt)
of any notice of withdrawal will be determined by Merger Subsidiary, in its sole
discretion, which determination shall be final and binding. None of Merger
Subsidiary, Calpine, the Depositary, the Information Agent or any other person
will be under any duty to give notification of any defect or irregularity in any
notice of withdrawal or incur any liability for failure to give any such
notification.
5. CERTAIN TAX CONSEQUENCES.
This summary sets forth the material anticipated Federal income tax
consequences to
-9-
<PAGE> 12
Stockholders of their disposition of Shares pursuant to the Offer and the
Merger. The summary is based on the provisions of the Internal Revenue Code of
1986, as amended (the "Code"), the Treasury regulations promulgated thereunder,
and administrative and judicial interpretations thereof, all as currently in
effect. Such laws or interpretations may differ on the date of the consummation
of the Offer or at the Effective Time, and relevant facts may also differ. The
summary does not address any foreign, state or local tax consequences, nor does
it address estate or gift tax considerations. Neither the consummation of the
Offer nor the effectiveness of the Merger is conditioned upon the receipt of any
ruling from the Internal Revenue Service or any opinion of counsel as to tax
matters.
This summary is for general information only. The tax treatment of each
Stockholder will depend in part upon his particular situation. Special tax
consequences not described below may be applicable to particular classes of
taxpayers, including financial institutions, pension funds, mutual funds,
broker-dealers, persons who are not citizens or residents of the United States
or who are foreign corporations, foreign partnerships or foreign estates or
trusts, Stockholders who own actually or constructively (under certain
attribution rules contained in the Code) 5% or more of the Shares, Stockholders
who acquired their Shares through the exercise of an employee stock option or
otherwise as compensation, and persons who receive payments in respect of
options to acquire Shares. ALL STOCKHOLDERS SHOULD CONSULT WITH THEIR OWN TAX
ADVISERS AS TO THE PARTICULAR TAX CONSEQUENCES OF THE OFFER AND THE MERGER TO
THEM, INCLUDING THE APPLICABILITY AND EFFECT OF ANY STATE, LOCAL AND FOREIGN TAX
LAWS.
Sales of Shares by Stockholders pursuant to the Offer (or the Merger)
will be taxable transactions for Federal income tax purposes and may also be
taxable transactions under applicable state, local, foreign and other tax laws.
In general, a Stockholder will recognize gain or loss equal to the
difference between the tax basis of such Stockholder's Shares and the amount of
cash received in exchange for the Shares. This gain or loss will be capital gain
or loss if the Shares are capital assets in the hands of the Stockholder and
will be long-term capital gain or loss if the holding period for the Shares is
more than 12 months as of the date of the sale of such Shares.
-10-
<PAGE> 13
6. PRICE RANGE OF SHARES; DIVIDENDS.
The Shares are traded on the Nasdaq SmallCap Market under the symbol
"SHDN." The following table sets forth, on a per share basis for the periods
shown, the range of high and low sales prices of the Shares as set forth in the
Company 10-K (as defined below) for the years ended 1997 and 1998 and as
reported by IDD Information Services for other quotations.
<TABLE>
<CAPTION>
YEAR ENDING 1999: HIGH LOW
----------------- ---- ---
<S> <C> <C>
First Quarter $3.75 $2.87
Second Quarter $3.62 $2.50
Third Quarter (Through August 24, 1999) $4.00 $3.00
YEAR ENDED 1998:
First Quarter $6.25 $3.50
Second Quarter $5.62 $3.00
Third Quarter $4.00 $2.37
Fourth Quarter $5.12 $2.50
YEAR ENDED 1997:
First Quarter $ * $ *
Second Quarter $ * $ *
Third Quarter $3.62 $2.25
Fourth Quarter $8.31 $3.50
</TABLE>
- -------------------------
* No reported trading activity for the period noted.
On August 24, 1999, the last day of trading prior to the issuance by
Calpine of a press release announcing the execution of the Merger Agreement, the
last sale price on the Nasdaq SmallCap Market was $4.00 per Share. On August 30,
1999, the last day of trading prior to the commencement of the Offer, the last
sale price on the Nasdaq SmallCap Market was $5.39 per Share. STOCKHOLDERS ARE
URGED TO OBTAIN CURRENT MARKET QUOTATIONS FOR THE SHARES.
As reported by the Company, the Company has not paid any dividends on
its Common Stock. As of December 31, 1998, according to the Company's Annual
Report on Form 10-KSB for its fiscal year ended December 31, 1998 (the "Company
10-K"), there were approximately 2,300 holders of record of outstanding Shares.
-11-
<PAGE> 14
7. CERTAIN INFORMATION CONCERNING THE COMPANY.
The Company is a Delaware corporation with its principal executive
offices located at 1000 Louisiana, Suite 800, Houston, Texas 77002.
According to the Company 10-K, the Company is a domestic independent
energy company engaged in the exploration and production of oil and natural gas.
The Company's core properties and operations are in the Sacramento Basin of
California and South Texas. The Company is also engaged in intrastate natural
gas gathering and treating.
The following selected consolidated financial data relating to the
Company and its subsidiaries has been taken or derived from the audited
financial statements contained in the Company 10-K and the unaudited financial
statements contained in the Company's Quarterly Report on Form 10-QSB for the
six months ended June 30, 1999. More comprehensive financial information is
included in the Company 10-K, such Quarterly Report and the other documents
filed by the Company with the Commission, and the financial data set forth below
is qualified in its entirety by reference to such reports and other documents
including the financial statements (and any related notes) contained therein.
Such reports and other documents may be examined and copies may be obtained from
the offices of the Commission in the manner set forth below.
-12-
<PAGE> 15
SHERIDAN ENERGY, INC.
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
STATEMENT OF OPERATIONS DATA DECEMBER 31, JUNE 30,
---------------------------------------- ------------------------
(UNAUDITED)
1998 1997 1996 1999 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total revenues $ 19,831 $ 7,327 $ 5,445 $ 13,242 $ 9,369
Operating income (loss) (6,027) (1,154) (331) 1,027 (1,128)
Net income (loss) (10,599) (1,867) 10,435 (1,346) (2,296)
Net loss per Share -- Basic (1.78) (2.51) (2.00) (0.44) (0.44)
Shares used in per share
calculation -- Basic 6,731 4,365 4,406 6,731 6,731
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA AT JUNE 30, 1999 AT DECEMBER 31, 1998
---------------- --------------------
(UNAUDITED)
<S> <C> <C>
Cash and cash equivalents $ 714 $ 639
Working capital (4,671) (4,769)
Total assets 115,431 68,877
Long-term debt, less current
portion 64,200 31,950
Total stockholders' equity 7,624 10,384
</TABLE>
The information concerning the Company contained herein has been taken
from or is based upon reports and other documents on file with the Commission or
otherwise publicly available. Although Calpine and Merger Subsidiary do not have
any knowledge that would indicate that any statements contained herein based
upon such reports and documents are untrue, Calpine and Merger Subsidiary do not
take any responsibility for the accuracy or completeness of the information
contained in such reports and other documents or for any failure by the Company
to disclose events that may have occurred and may affect the significance or
accuracy of any such information but that are unknown to Calpine or Merger
Subsidiary.
The Company is subject to the informational requirements of the
Exchange Act and files periodic reports, proxy statements and other information
with the Commission relating to its business, financial condition and other
matters. The Company is required to disclose in such proxy statements certain
information, as of particular dates, concerning the Company's directors and
officers, their remuneration, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons in
transactions with the Company. Such reports,
-13-
<PAGE> 16
proxy statements and other information may be inspected at the public reference
facilities maintained by the Commissioner at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and should also be available for inspection and
copying at the regional offices of the Commission in New York (Seven World Trade
Center, New York, New York 10048) and Chicago (500 West Madison Street (Suite
1400), Chicago, Illinois 60661). Copies of such material can also be obtained
from the Public Reference Section of the Commission in Washington, D.C., at
prescribed rates. The Commission maintains a Web site (http://www.sec.gov) on
the Internet that contains reports, proxy statements and other information
regarding issuers that file electronically with the Commission.
8. CERTAIN INFORMATION CONCERNING MERGER SUBSIDIARY AND CALPINE.
Merger Subsidiary, a Delaware corporation and a wholly owned subsidiary
of Calpine, was organized to acquire the Company and has not conducted any
unrelated activities since its organization on August 23, 1999.
Calpine, a Delaware corporation, is a leading independent power company
engaged in the development, acquisition, ownership and operation of power
generation facilities and the sale of electricity predominantly in the United
States.
The principal executive offices of Calpine and Merger Subsidiary are
located at 50 West Fernando Street, San Jose, California 95113. The name, age,
business address, present principal occupation or employment, five-year
employment history and citizenship of each director and executive officer of
Merger Subsidiary and Calpine are set forth in Schedule I hereto.
The following selected consolidated financial data relating to Calpine
and its subsidiaries has been taken or derived from the audited financial
statements contained in Calpine's Annual Report on Form 10-K for the year ended
December 31, 1998 and the unaudited financial statements contained in Calpine's
Quarterly Report on Form 10-Q for the six months ended June 30, 1999. More
comprehensive financial information is included in such Annual Report, such
Quarterly Report and the other documents filed by Calpine with the Commission,
and the financial data set forth below is qualified in its entirety by reference
to such reports and other documents including the financial statements (and any
related notes) contained therein. Such reports and other documents may be
examined and copies may be obtained from the offices of the Commission in the
same manner as set forth with respect to the Company in Section 7.
-14-
<PAGE> 17
CALPINE CORPORATION
SELECTED CONSOLIDATED FINANCIAL DATA
(In thousands, except per share data)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS ENDED
INCOME STATEMENT DATA DECEMBER 31, JUNE 30,
-------------------------------------- -----------------------
(UNAUDITED)
1998 1997 1996 1999 1998
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total revenue $555,948 $276,321 $214,554 $336,590 $196,742
Income from Operations 146,676 97,187 66,791 73,208 46,455
Net income 45,678 34,699 18,692 21,410 8,569
Net income per common 2.27 1.74 1.45 0.90 0.43
share-basic
Net income per common 2.16 1.65 1.26 0.85 0.41
share-diluted
</TABLE>
<TABLE>
<CAPTION>
BALANCE SHEET DATA AT JUNE 30, 1999 AT DECEMBER 31, 1998
---------------- --------------------
(UNAUDITED)
<S> <C> <C>
Working capital $ 346,429 $ 86,924
Total assets 2,549,750 1,728,946
Non-recourse project financing -- 5,450
(current)
Non-recourse project financing -- 114,190
(long-term)
Senior notes 1,551,750 951,750
Stockholders' equity 514,127 286,966
</TABLE>
Calpine is subject to the informational requirements of the Exchange
Act and files periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Calpine is required to disclose in such proxy statements certain information, as
of particular dates, concerning its directors and officers, their remuneration,
stock options granted to them, the principal holders of its securities and any
material interests of such persons in transactions with Calpine. Such reports,
proxy statements and other information should be available for inspection and
copying at the offices of the Commission in the same manner as set forth with
respect to the Company in Section 7.
On January 25, 1999, Calpine entered into an arrangement with Sheridan
California Energy, Inc. ("SCEI"), a subsidiary of the Company, pursuant to which
Calpine, through a subsidiary, contributed $15 million in cash to SCEI in
exchange for (i) a 20% common equity interest in SCEI and (ii) $13 million of
seven-year redeemable non-voting preferred stock of SCEI. The preferred stock
provides for cash dividends of $0.70 payable annually (a 14.0% annual rate) or,
at the discretion of SCEI, dividends may be paid in kind in an amount equal to
.07 additional shares for
-15-
<PAGE> 18
each outstanding share of preferred stock. The proceeds of the financing were
used by SCEI to acquire certain Sacramento Basin, California properties (the
"Sacramento Basin Properties") from the Amerada Hess Corporation. The Company in
such transaction contributed $3 million in cash and $4.6 million of seismic data
and oil and gas producing assets in California in exchange for a 80% common
equity interest in SCEI. In connection with such transaction, Calpine, through a
subsidiary, entered into a Gas Purchase Sale Agreement with the Company which
provides that substantially all of the natural gas produced at the Sacramento
Basin Properties will be sold to Calpine. From April 1, 1999 through July 31,
1999, Calpine paid the Company approximately $4.9 million for natural gas under
such agreement.
Except as described in this Offer to Purchase, neither Calpine, Merger
Subsidiary nor, to their knowledge, any of the persons listed in Schedule I or
any associate or majority-owned subsidiary of any of the foregoing, beneficially
owns or has the right to acquire any equity securities of the Company, nor has
Calpine, Merger Subsidiary or, to their knowledge, any of the persons or
entities referred to above or any of the respective executive officers,
directors or subsidiaries of any of the foregoing, effected any transaction in
the equity securities of the Company during the past 60 days.
Except as described in this Offer to Purchase, neither Calpine, Merger
Subsidiary nor, to their knowledge, any of the persons listed in Schedule I, has
any contract, arrangement, understanding or relationship with any other person
with respect to any securities of the Company, including, but not limited to,
any contract, arrangement, understanding or relationship concerning the transfer
or the voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guaranties of loans, guaranties against loss or the
giving or withholding of proxies.
Except as described in this Offer to Purchase, there have been no
contacts, negotiations or transactions between Calpine, Merger Subsidiary or any
other subsidiary of Calpine or, to their knowledge, any of the persons listed in
Schedule I, on the one hand, and the Company or its affiliates, on the other
hand, concerning a merger, consolidation or acquisition, a tender offer or other
acquisition of securities, an election of directors, or a sale or other transfer
of a material amount of assets.
Except as described in this Offer to Purchase, none of Calpine, Merger
Subsidiary, any other subsidiary of Calpine, or, to their knowledge, any of the
persons listed in Schedule I, has had any business relationship or transaction
with the Company or any of its executive officers, directors or affiliates that
would require disclosure pursuant to the rules and regulations of the
Commission.
9. SOURCE AND AMOUNT OF FUNDS.
The total amount of funds required by Merger Subsidiary to purchase
Shares pursuant to the Offer and the Merger, refinance, if necessary, certain
indebtedness of the Company and its subsidiaries, purchase the outstanding
Preferred Stock, and pay related fees and expenses is expected to be
approximately $64 million. Merger Subsidiary will obtain all funds needed for
the Offer and the Merger from Calpine by means of a capital contribution, loan
or a combination thereof. Calpine
-16-
<PAGE> 19
will obtain such funds (i) from its general corporate funds and/or (ii) by
borrowing under its existing Credit Agreement, dated as of September 25, 1996,
as amended as of May 15, 1998 (as amended, the "Credit Agreement"), among
Calpine, as borrower, the banks and other financial institutions party thereto,
as lenders, and the Bank of Nova Scotia, as agent. The Credit Agreement provides
for borrowings of up to an aggregate of $100,000,000 of loans on an unsecured
basis. Borrowings under the Credit Agreement bear interest at the Bank of Nova
Scotia's base rate plus an applicable margin or at LIBOR plus an applicable
margin. The Credit Agreement includes customary covenants including financial
covenants. Merger Subsidiary has not conditioned the Offer on obtaining
financing.
As of August 30, 1999, Calpine had (i) approximately $250 million in
cash, cash equivalents and marketable securities and (ii) availability to borrow
up to an additional $79 million of loans under the Credit Agreement.
The foregoing summary of the source and amount of funds is qualified in
its entirety by reference to the text of the Credit Agreement, a copy of which
is filed as an exhibit to Calpine's Current Report on Form 8-K, dated May 1,
1996, filed with the Commission and is incorporated in this Offer to Purchase by
reference and may be inspected in the same manner as set forth with respect to
the Company in Section 7.
Although no definitive plan or arrangement for repayment of borrowings
under the Credit Agreement have been made, Calpine anticipates such borrowings
will be repaid with internally generated funds (including, if the Merger is
accomplished, those of the Company) and from other sources which may include the
proceeds of future bank refinancings or the public or private sale of debt or
equity securities. No decision has been made concerning the method Calpine will
use to repay the borrowings under the Credit Agreement. Such decision will be
made based on Calpine's review from time to time of the advisability of
particular actions, as well as prevailing interest rates, financial and other
economic conditions and such other factors as Calpine may deem appropriate.
10. BACKGROUND OF THE OFFER; PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH
THE COMPANY.
As described above in Section 8, in January 1999, Calpine made an
investment in, and agreed to purchase natural gas from, SCEI, a subsidiary of
the Company. SCEI used the proceeds of the investment and other funds to
purchase the Sacramento Basin Properties.
Following the January 1999 investment in SCEI, John T. King, Vice
President-Business Development of Calpine, had several discussions with B.A.
Berilgen, the President and Chief Executive Officer of the Company, about the
Company's capitalization and prospects for growth. During these discussions, Mr.
King inquired as to whether the Company would be interested in discussing a
possible business combination transaction. Mr. Berilgen encouraged Mr. King to
discuss the possibility of a transaction directly with Jeffrey E. Susskind, the
Chairman of the Board of Directors of the Company.
-17-
<PAGE> 20
On May 21, 1999, on behalf of Calpine, Mr. King sent a letter to Mr.
Susskind expressing an interest to meet and discuss Calpine's interest in the
Company. On May 24, 1999, Mr. King and Mr. Susskind met in Houston, Texas. At
such meeting, Mr. King indicated that Calpine desired to evaluate further a
possible business combination with the Company at a price of $4.00 per Share.
Mr. Susskind indicated that he was not satisfied with Calpine's valuation, but
expressed interest in further discussions and indicated that the Company would
be willing to provide Calpine with an opportunity to conduct preliminary due
diligence with respect to the Company.
Calpine and the Company entered into a confidentiality agreement dated
as of June 15, 1999 (the "Confidentiality Agreement"). Following execution of
the Confidentiality Agreement, the Company provided Calpine with certain due
diligence materials including information relating to the Company's natural gas
reserves. In addition, on June 10, 1999, Mr. Susskind, along with D. Bradley
Dunn, a director of the Company, made a presentation to certain members of
Calpine's management at Calpine's offices in San Jose, California regarding the
Company's views on valuation.
On July 2, 1999, Mr. King sent a letter to Mr. Susskind that contained
a revised proposal to enter into a business combination transaction with the
Company at a price of $5.00 per Share. Following the July 2 letter, Mr. King was
informed that the Company had engaged DLJ as the Company's exclusive financial
advisor in connection with a possible transaction. Mr. Berilgen then informed
Mr. King that the Company intended to explore a sale opportunity with another
party.
Approximately one week later, Mr. King received telephone calls from
both Mr. Berilgen and a representative of DLJ indicating an opportunity for
Calpine to make a revised proposal to acquire the Company. On August 11, 1999,
Mr. King sent a letter to B.A. Berilgen containing Calpine's final offer to
acquire the Company at a $5.50 per Share cash price. On August 12, 1999, a DLJ
representative informed Mr. King that the Company was prepared to negotiate
definitive agreements for the proposed transaction.
During the week of August 16, 1999 through the morning of August 25,
representatives of Calpine, including its legal advisor, negotiated with
representatives of the Company, including its legal advisor, regarding terms of
a definitive merger agreement and conducted detailed due diligence. During this
time, representatives of Calpine also negotiated with representatives of the
Stockholders party to the Stockholder Agreement regarding the terms of the
Stockholder Agreement. These negotiations included a meeting in Houston, Texas
on Friday, August 20, 1999 attended by representatives of Calpine and of the
Company and, to finalize the definitive agreements, a subsequent meeting of
representatives of both companies in Houston, Texas on Tuesday, August 24, 1999.
Final negotiations continued into the early morning of Wednesday, August 25. At
the conclusion of such negotiations, the Merger Agreement and the Stockholder
Agreement were executed. At approximately 9:00 a.m., New York City time, on
Wednesday, August 25, 1999, Calpine and the Company issued separate press
releases announcing the transaction.
-18-
<PAGE> 21
11. PURPOSE OF THE OFFER; MERGER AGREEMENT; STOCKHOLDER AGREEMENT; APPRAISAL
RIGHTS.
The purpose of the Offer is to acquire control of, and the entire
equity interest in, the Company. Following the Offer, Calpine and Merger
Subsidiary intend to acquire any remaining equity interest in the Company not
acquired in the Offer by consummating the Merger.
The Merger Agreement. The following description of the Merger Agreement
is qualified in its entirety by reference to the text of such agreement, a copy
of which is attached as an exhibit to the Tender Offer Statement on Schedule
14D-1 ("Schedule 14D-1") filed by Calpine and Merger Subsidiary with the
Commission in connection with the Offer, is incorporated in this Offer to
Purchase by reference and may be inspected in the same manner as set forth with
respect to the Company in Section 7.
The Offer. The Merger Agreement provides for the making of the Offer.
The obligation of Merger Subsidiary to accept for payment or pay for Shares is
subject to the satisfaction of the Minimum Condition and certain other
conditions that are described in Section 15 hereof. Pursuant to the Merger
Agreement, Calpine and Merger Subsidiary expressly reserve the right to waive
the conditions to the Offer and to make any change in the terms or conditions of
the Offer; provided that, without the prior written consent of the Company, no
change may be made which (i) changes the form of consideration to be paid, (ii)
decreases the price per Share or the number of Shares sought in the Offer, (iii)
imposes conditions to the Offer in addition to those set forth in the Merger
Agreement, (iv) changes or waives the Minimum Condition, (v) extends the Offer
(except as set forth in the Merger Agreement) or (vi) makes any other change to
any condition to the Offer set forth in the Merger Agreement which is materially
adverse to the holders of Shares. Notwithstanding the foregoing, the Merger
Agreement also provides that Merger Subsidiary may, without the consent of the
Company, (i) extend the Offer, if at any scheduled expiration date of the Offer
any of the conditions to merger Subsidiary's obligation to purchase Shares
pursuant to the Offer have not been satisfied or waived, until such time as such
conditions are satisfied or waived, (ii) extend the Offer for a period of not
more than 20 business days beyond the initial Expiration Date, if on the date of
such extension less than 90% of the Fully Diluted Shares have been validly
tendered and not properly withdrawn pursuant to the Offer and (iii) extend the
Offer for any period required by any rule, regulation, interpretation or
position of the Commission or the staff thereof applicable to the Offer. Calpine
and Merger Subsidiary have also agreed in the Merger Agreement that if all of
the conditions to Merger Subsidiary's obligation to purchase Shares pursuant to
the Offer are not satisfied on any scheduled expiration date of the Offer then,
provided that all such conditions are reasonably capable of being satisfied,
Merger Subsidiary shall extend the Offer from time to time in increments of a
least five business days each until the earliest to occur of (x) the
satisfaction or waiver of the Minimum Condition or such other condition, (y) the
termination of the Merger Agreement in accordance with its terms and (z)
December 1, 1999. Subject to the terms of the Offer in the Merger Agreement and
the satisfaction (or waiver to the extent permitted by the Merger Agreement) of
the conditions of the Offer, Merger Subsidiary shall accept for payment all
Shares validly tendered and not withdrawn pursuant to the Offer as soon as
practicable after the applicable expiration of the Offer.
Consideration to be Paid in the Merger. The Merger Agreement provides
that, following the purchase of Shares pursuant to the Offer and upon the terms
(but subject to the conditions) set forth
-19-
<PAGE> 22
in the Merger Agreement, Merger Subsidiary will be merged with and into the
Company (the "Merger"), with the Company continuing as the surviving corporation
(the "Surviving Corporation"). In the Merger, (i) each Share held by the Company
as treasury stock or owned by Calpine, Merger Subsidiary or any subsidiary of
either of them immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto; (ii) each share of common stock of
Merger Subsidiary outstanding immediately prior to the Effective Time shall be
converted into and become one share of common stock of the Surviving corporation
with the same rights, powers and privileges as the shares so converted and shall
constitute the only outstanding shares of capital stock of the Surviving
Corporation; and (iii) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in the Merger Agreement with respect to
Shares as to which appraisal rights have been exercised, be converted into the
right to receive $5.50 in cash or any higher price paid for each Share in the
Offer, without interest. The Merger Agreement provides that the Merger will be
consummated as soon as practicable after satisfaction of or, to the extent
permitted thereunder, waiver of the conditions to the Merger and shall become
effective at such time as the certificate of merger is duly filed with the
Secretary of State of the State of Delaware or, with the consent of the
Independent Directors referred to below, at such later time as is specified in
the certificate of merger.
Board Representation. The Merger Agreement provides that, effective
upon acceptance for payment by Merger Subsidiary of the Shares tendered pursuant
to the Offer, Calpine shall be entitled to designate the number of directors,
rounded up to the next whole number, on the Company's Board of Directors that
equals the product of (i) the total number of directors on the Company's Board
of Directors (giving effect to the election of any additional directors pursuant
to the Merger Agreement) and (ii) the percentage that the number of Shares owned
by Calpine or Merger Subsidiary (including Shares accepted for payment) bears to
the total number of Shares outstanding. The Company has agreed that it will take
all action necessary to cause Calpine's designees to be elected or appointed to
the Company's Board of Directors, including, without limitation, increasing the
number of directors or seeking and accepting resignations of incumbent directors
or both; provided that, prior to the Effective Time, the Company's Board of
Directors shall always have one member who is neither a designee nor an
affiliate of Calpine or Merger Subsidiary nor an employee of the Company (an
"Independent Director"). If the number of Independent Directors is reduced below
one for any reason prior to the Effective Time, the departing Independent
Director shall be entitled to designate a person to fill such vacancy. No action
proposed to be taken by the Company to (i) amend or terminate the Merger
Agreement or the certificate of incorporation or by-laws of the Company or (ii)
waive any action required to be taken by Calpine or Merger Subsidiary under the
Merger Agreement or any rights of the Company under the Merger Agreement shall
be effective without the approval of the Independent Director. At such times,
the Company will use its best efforts to cause individuals designated by Calpine
to constitute the same percentage as such individuals represent on the Company's
Board of Directors of (i) each committee of the Board, (ii) each board of
directors of each subsidiary and (iii) each committee of each such board.
The Merger Agreement provides that, from and after the Effective Time,
the directors and officers of Merger Subsidiary at the Effective Time will be
the initial directors and officers of the Surviving Corporation, each to hold
office until his or her respective successors are duly elected or appointed and
qualified in accordance with applicable law. Pursuant to the Merger Agreement,
the by-laws of Merger Subsidiary, as in effect at the Effective Time, will be
the by-laws of the Surviving
-20-
<PAGE> 23
Corporation until amended in accordance with applicable law, and the certificate
of incorporation of Merger Subsidiary, as in effect at the Effective Time, will
be the certificate of incorporation of the Surviving Corporation until amended
in accordance with applicable law, except that the name of the Surviving
Corporation shall be changed to the name of the Company.
Stockholder Meeting. The Merger Agreement provides that, if required by
applicable law, the Company will call a meeting of its Stockholders to be held
as soon as reasonably practicable following Merger Subsidiary's acquisition of
Shares in the Offer for the purpose of voting on the approval and adoption of
the Merger Agreement and the Merger. Under the Merger Agreement, at any such
meeting, Calpine has agreed to make a quorum and to vote all Shares acquired in
the Offer or otherwise beneficially owned by it in favor of adoption of the
Merger Agreement.
If the Minimum Condition is satisfied pursuant to the Offer, Merger
Subsidiary will hold at least a majority of the outstanding Shares on a Fully
Diluted Basis and will be able to assure that the requisite number of
affirmative votes in favor of approval and adoption of the Merger Agreement will
be received, even if no other Stockholder votes in favor thereof. If Merger
Subsidiary obtains at least 90% of the outstanding Shares, it may effect the
Merger without any notice to and without the authorization of the Stockholders
of the Company pursuant to the "short-form" merger provisions of Delaware Law.
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto. These include
representations and warranties of the Company with respect to corporate
existence and power, corporate authorization, governmental authorization,
non-contravention, capitalization, subsidiaries, Commission filings, financial
statements, absence of certain changes, undisclosed liabilities, litigation,
taxes, employee benefits, brokers, compliance with laws, contracts and debt
instruments, environmental, intellectual property and technology and other
matters.
Calpine and Merger Subsidiary have also made certain representations
and warranties with respect to corporate existence and power, corporate
authorization, governmental authorization, non-contravention, disclosure
documents, brokers and other matters.
Conduct of Business Pending the Merger. The Company has agreed that,
during the period from the date of the Merger Agreement to the Effective Time,
the Company will, and will cause its subsidiaries to, carry on their respective
businesses in the ordinary course in substantially the same manner as
theretofore conducted and, to the extent consistent therewith, use all
commercially reasonable efforts to preserve intact their current business
organizations, keep available the services of their current officers and
employees and preserve their relationships with customers, suppliers, licensors,
licensees, distributors and others having business dealings with them to the end
that their goodwill and ongoing business shall be unimpaired at the Effective
Time. The Company has further agreed that, during the period from the date of
the Merger Agreement to the Effective Time, the Company will not, and will not
permit any of its subsidiaries to, without the prior written approval of Calpine
(which determination by Calpine will not be unreasonably delayed), (i)(a)
declare, set aside or pay any dividends on, or make any other distributions in
respect of, any of its capital stock, other than dividends and distributions by
any direct or indirect wholly owned subsidiary of the Company to its parent, (b)
split, combine or reclassify any of its capital stock or issue or authorize the
issuance
-21-
<PAGE> 24
of any other securities in respect of, in lieu of or in substitution for shares
of its capital stock or (c) purchase, redeem or otherwise acquire any shares of
capital stock of the Company or any of its subsidiaries or any other securities
thereof or any rights, warrants or options to acquire any such shares or other
securities (other than in connection with the exercise of Company Options
(defined below)); (ii) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
Shares upon the exercise of Company Options; (iii) amend its certificate of
incorporation, by-laws or other comparable charter or organizational documents;
(iv) except as provided in the Merger Agreement, acquire or agree to acquire
(including, without limitation, by merger, consolidation, or acquisitions of
stock or assets) any business including through the acquisition of any interest
in any corporation, partnership, limited liability company, joint venture,
association or other business organization or division thereof; (v) except as
provided in the Merger Agreement, mortgage or otherwise encumber or subject to
any lien or, except in the ordinary course of business consistent with past
practice and pursuant to existing contracts or commitments, sell, lease,
license, transfer or otherwise dispose of any of the Company's intellectual
property rights or any other material properties or assets; (vi) except as
provided in the Merger Agreement, make or agree to make any new capital
expenditures in excess of $500,000; (vii) make any material tax election (unless
required by law) or settle or compromise any material income tax liability;
(viii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge or satisfaction, in the ordinary course of business
consistent with past practice and in accordance with their terms, or waive the
benefits of, or agree to modify in any manner, any confidentiality, standstill
or similar agreement to which the Company or any of its subsidiaries is a party;
(ix) commence a lawsuit other than (a) for the routine collection of bills or
(b) in such cases where the Company in good faith determines that the failure to
commence suit would result in a material impairment of a valuable aspect of the
Company's business, provided that the Company consults with Calpine prior to
filing such suit; (x) (a) enter into or amend any employment or severance
agreement or similar arrangements, (b) make any determination as to amounts
payable under any plan, arrangement or agreement, providing for discretionary
incentive compensation or bonus to any officer, director, employee or
independent contractor of the Company or any of its subsidiaries or (c) enter
into, adopt, or amend any agreement, arrangement, or benefit plan so as to
increase the liability (whether or not contingent) of the Company or Calpine or
any of their subsidiaries in respect of compensation or benefits except as may
be required by law; (xi) incur any additional indebtedness other than borrowings
under the Company's senior bank credit facilities as in effect of the date of
the Merger Agreement; (xii) authorize any of, or commit or agree to take any of,
the foregoing actions; or (xiii) take or agree or commit to take any action that
would make representation or warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time; or (xiv)
omit or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
Access to Information. Subject to the terms of the Confidentiality
Agreement, the Company has agreed (i) to give Calpine and its representatives
access (during normal business hours and upon reasonable notice) to the offices,
properties, books and records, of the Company and its subsidiaries, (ii) to
furnish Calpine and its representatives with such other information concerning
its business,
-22-
<PAGE> 25
properties and personnel as such persons may reasonably request, (iii) to give
Calpine and its representatives full access (during normal business hours and
upon reasonable notice) to all abstracts of title, title opinions, title files,
ownership maps, lease files, assignments, division orders, check vouchers and
payment statements as the same may be in existence and in possession of the
Company and (iv) to give Calpine and its representatives full access (during
normal business hours and at their actual location) to all accounting, revenue,
marketing, transportation, processing, environmental, geological, geophysical,
production and engineering books, records and data in possession of the Company,
except such records or data which Company is prevented by contractual
obligations with third parties from disclosing, in which case Company will
inform Calpine of the existence of such records, the parties thereto and the
subject matter of such records.
HSR Act Filings; Efforts. Pursuant to the Merger Agreement, each of
Calpine and the Company has agreed, if applicable, to (i) promptly make or cause
to be made the filings required of such party or any of its subsidiaries under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the
rules and regulations thereunder (the "HSR Act") with respect to the
transactions contemplated by the Merger Agreement, (ii) comply at the earliest
practicable date with any request under the HSR Act for additional information,
documents, or other material received by such party or any of its subsidiaries
from any Governmental Entity (defined below) in respect of such filings or such
transactions and (iii) cooperate with the other party in connection with any
such filing and in connection with resolving any investigation or other inquiry
of any such agency or other Governmental Entity under any Antitrust Laws
(defined below) with respect to any such filing or any such transaction. Each of
Calpine and the Company has agreed, pursuant to the Merger Agreement, to
promptly inform the other of any communication with, and any proposed
understanding, undertaking, or agreement with, any Governmental Entity regarding
any such filings or any such transaction. The Merger Agreement prohibits both
Calpine and the Company from participating in any meeting with any Governmental
Entity in respect of any such filings, investigation, or other inquiry without
giving the other notice of the meeting and, to the extent permitted by such
Governmental Entity, the opportunity to attend and participate. "Governmental
Entity" means any federal, state or local government or any court,
administrative or regulatory agency or commission or other governmental
authority or agency, domestic or foreign.
Each of Calpine and the Company has agreed, pursuant to the Merger
Agreement, to use all commercially reasonable efforts to resolve such
objections, if any, as may be asserted by any Governmental Entity with respect
to the transactions contemplated by the Merger Agreement under the HSR Act, the
Sherman Act, as amended, the Clayton Act, as amended, the Federal Trade
Commission Act, as amended, and any other Federal, state or foreign statutes,
rules, regulations, orders or decrees that are designed to prohibit, restrict or
regulate actions having the purpose or effect of monopolization or restraint of
trade (collectively, "Antitrust Laws"). In connection therewith, if any
administrative or judicial action or proceeding is instituted (or threatened to
be instituted) challenging any transaction contemplated by the Merger Agreement
as violative of any Antitrust Law, and, if by mutual agreement, Calpine and the
Company decide that litigation is in their best interests, each of Calpine and
the Company have agreed, pursuant to the Merger Agreement, to cooperate and use
all reasonable efforts vigorously to contest and resist any such action or
proceeding and to have vacated, lifted, reversed, or overturned any decree,
judgment, injunction or other order, whether temporary, preliminary or
permanent, that is in effect and that prohibits, prevents, or restricts
consummation of the Merger or any such other transactions. Pursuant
-23-
<PAGE> 26
to the Merger Agreement, each of Calpine and the Company have agreed to use all
commercially reasonable efforts to take such action as may be required to cause
the expiration of the notice periods under the HSR Act or other Antitrust Laws
with respect to such transactions as promptly as possible after the execution of
the Merger Agreement.
Each of Calpine and the Company has agreed, pursuant to the Merger
Agreement, to use all commercially reasonable efforts to take, or cause to be
taken, all actions, and to do, or cause to be done, and to assist and cooperate
with the other party in doing, all things necessary, proper or advisable to
consummate and make effective, in the most expeditious manner practicable, the
Offer, the Merger and the other transactions contemplated by the Merger
Agreement.
Notwithstanding the foregoing, the Merger Agreement provides that (i)
neither Calpine nor any of its subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, (ii) neither Calpine nor
any of its subsidiaries shall be required to take or agree to take any other
action or agree to any limitation that could reasonably be expected to have an
adverse effect on the business, assets, financial condition, results of
operations or prospects of Calpine and its subsidiaries or of Calpine combined
with the Surviving Corporation after the Effective Time, (iii) neither the
Company nor its subsidiaries shall be required to divest any of their respective
businesses, product lines or assets, or to take or agree to take any other
action or agree to any limitation that could reasonably be expected to have a
Material Adverse Effect (as defined in Section 15), (iv) no party shall be
required to agree to the imposition of, or to comply with, any condition,
obligation or restriction on Calpine or any of its subsidiaries or on the
Surviving Corporation or any of its subsidiaries of the type described in clause
(a) or (b) of Section 15 of this Offer and (v) neither Calpine nor Merger
Subsidiary shall be required to waive any of the conditions to the Offer
described in Section 15 of this Offer or any of the conditions to the Merger
described in this Section 11.
The Merger Agreement provides that the Company will give prompt notice
to Calpine of (i) any material representation or warranty made by it contained
in the Merger Agreement becoming untrue or inaccurate in any material respect,
(ii) upon the Company's obtaining knowledge thereof, any representation or
warranty made by it contained in the Merger Agreement and not covered by clause
(i) above becoming untrue or inaccurate in any material respect, or (iii) the
failure by it to comply with or satisfy in any respect any covenant, condition
or agreement to be complied with or satisfied by it under the Merger Agreement;
provided, however, that no such notification shall affect the representations,
warranties, covenants or agreements of the parties or the conditions to the
obligations of the parties under the Merger Agreement.
The Merger Agreement provides that the Company will give prompt notice
to Calpine, and Calpine or Merger Subsidiary will give prompt notice to the
Company of (i) any notice or other communication from any person alleging that
the consent of such person is or may be required in connection with the
transactions contemplated by the Merger Agreement; (ii) any notice or other
communication from any Governmental Entity in connection with the transactions
contemplated by the Merger Agreement; and (iii) any actions, suits, claims,
investigations or proceedings commenced or, to the best of its knowledge
threatened against, relating to or involving or otherwise affecting it or any of
its subsidiaries which, if pending on the date of the Merger Agreement would
have been
-24-
<PAGE> 27
required to have been disclosed pursuant to the representations and warranties
of the Company or which relate to the consummation of the transactions
contemplated by the Merger Agreement.
Stock Options. The Merger Agreement provides that, upon acceptance for
payment of Shares pursuant to the Offer, each outstanding Company Option,
whether vested or unvested, shall be canceled, and each holder of any such
option shall be paid by the Company promptly after the acceptance for payment of
Shares pursuant to the Offer for each such option an amount determined by
multiplying (i) the excess, if any, of $5.50 per Share over the applicable
exercise price of such option by (ii) the number of Shares such holder could
have purchased had such holder exercised such option in full immediately prior
to the acceptance for payment of Shares pursuant to the Offer (as if such
Company Option was exercisable in full). Notwithstanding any other provisions of
the Merger Agreement, immediately after the acceptance for payment of Shares
pursuant to the Offer no Company Options will remain outstanding. "Company
Option" means any option granted, whether or not exercisable, and not exercised
or expired, to a current or former employee, director or independent contractor
of the Company or any of its subsidiaries or any predecessor thereof to purchase
Shares pursuant to any stock option, stock bonus, stock award, or stock purchase
plan, program, or arrangement of the Company or any of its subsidiaries or any
predecessor thereof or any other contract or agreement entered into by the
Company or any of its subsidiaries.
Pursuant to the Merger Agreement and as soon as practicable following
the date of the Merger Agreement, the Company has agreed to use its commercially
reasonable efforts to (i) obtain any consents from holders of Company Options
and (ii) make any amendments to the terms of such stock option or compensation
plans or arrangements that, in the case of either clauses (i) or (ii), are
necessary to give effect to the transactions contemplated by the Merger
Agreement. Notwithstanding any other provision of the Merger Agreement, payment
may be withheld in respect of any Company Option until necessary consents are
obtained. All amounts payable pursuant to the Merger Agreement in respect of
Company Options will be subject to, and reduced by, any required withholding of
taxes and will be paid without interest.
Other Offers. Pursuant to the Merger Agreement, the Company has agreed
that, until the termination of the Merger Agreement, the Company and its
subsidiaries will not, and will not authorize or permit the officers, directors,
employees or other agents of the Company and its subsidiaries to, directly or
indirectly, (i) take any action to solicit, initiate or encourage any
Acquisition Proposal (defined below) or (ii) subject to the fiduciary duties of
the Board of Directors under applicable law, as advised by counsel to the
Company, and in response to an unsolicited request that has been submitted to
the Company's Board of Directors and determined to be a Superior Acquisition
Proposal (defined below), engage in negotiations with, or disclose any nonpublic
information relating to the Company or any of its subsidiaries or afford access
to the properties, books or records of the Company or any of its subsidiaries
to, any person that has advised the Company or otherwise publicized the fact
that it may be considering making, or that has made, an Acquisition Proposal;
provided, the foregoing does not prohibit the Company's Board of Directors from
taking and disclosing to the Company's stockholders a position with respect to a
tender offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange
Act. The Company has agreed to promptly notify Calpine after receipt of any
Acquisition Proposal or any indication that any person is considering making an
Acquisition Proposal or any request for nonpublic information relating to the
Company or any of its subsidiaries or for access to the properties, books or
records of
-25-
<PAGE> 28
the Company or any of its subsidiaries by any person that has advised the
Company that it may be considering making, or that has made, an Acquisition
Proposal and will keep Calpine fully informed of the status and details of any
such Acquisition Proposal, indication or request. "Acquisition Proposal" means
any offer or proposal for, or any indication of interest in, a merger or other
business combination involving the Company or any of its subsidiaries or the
acquisition of any significant equity interest in, or a significant portion of
the assets of, the Company or any of its subsidiaries, other than the
transactions contemplated by the Merger Agreement; and "Superior Acquisition
Proposal" means an Acquisition Proposal which a majority of the Company's
disinterested directors determines in its good faith judgment (after receiving
the advice of the Company's independent financial advisor) to be more favorable
to the Company's stockholders than the Offer or the Merger, and for which
financing, to the extent required, is then committed or which a majority of the
Company's disinterested directors reasonably believes will be available when
required.
Agreement with respect to Director and Officer Indemnification and
Insurance. Pursuant to the Merger Agreement, Calpine will cause the Surviving
Corporation to indemnify and hold harmless the present and former officers,
directors, employees and agents of the Company (the "Indemnified Parties") in
respect of acts or omissions occurring on or prior to the Effective Time to the
extent provided under the Company's certificate of incorporation and by-laws in
effect on the date of the Merger Agreement, provided that such indemnification
shall be subject to any limitation imposed from time to time under applicable
law. Calpine has further agreed that for three years after the Effective Time,
Calpine will cause the Surviving Corporation to use its best efforts to provide
officers' and directors' liability insurance in respect of acts or omissions
occurring on or prior to the Effective Time covering each such person currently
covered by the Company's officers' and directors' liability insurance policy on
terms substantially similar to those of such policy in effect on the date of the
Merger Agreement, provided that, in satisfying its obligation Calpine shall not
be obligated to cause the Surviving Corporation to pay premiums in excess of
150% of the amount per annum the Company paid in its last full fiscal year,
which amount has been disclosed to Calpine, and if the Surviving Corporation is
unable to obtain the insurance required by the Merger Agreement, it shall obtain
as much comparable insurance as possible for an annual premium equal to such
maximum amount. Without limitation of the foregoing, in the event any such
Indemnified Party is or becomes involved in any capacity in any action,
proceeding or investigation in connection with any matter relating to the
Merger, the Offer or the Merger Agreement occurring on or prior to the Effective
Time, Calpine shall cause the Surviving Corporation to pay as incurred such
Indemnified Party's reasonable legal and other expenses (including the cost of
any investigation and preparation) incurred in connection therewith. Calpine
will ensure that, at all relevant times, the Surviving Corporation will have
access to sufficient funds to fulfill its obligations, as to the Indemnified
Parties, pursuant to the Merger Agreement.
Other Agreements. Calpine has agreed that it will take all action
necessary to cause Merger Subsidiary to perform its obligations under the Merger
Agreement and to consummate the Offer and the Merger on the terms and conditions
set forth in the Merger Agreement.
Except as otherwise provided in the Merger Agreement, Calpine has
agreed to honor (or to cause the Surviving Corporation to honor) in accordance
with their terms all Company employee benefit plans previously delivered to
Calpine and all accrued benefits vested thereunder; it being understood and
agreed that nothing in this sentence shall prevent Calpine or the Surviving
-26-
<PAGE> 29
Corporation from terminating any such Company benefit plan in accordance with
its terms. The Merger Agreement also provides that in the event that Calpine
shall merge any Company benefit plan with any Company benefit plan of Calpine or
otherwise modify any benefit plan, prior service with the Company will be
counted for purposes of employee eligibility, seniority and vesting under such
benefit plan, and any pre-existing condition shall be waived for each employee
so long as such employee has had medical coverage under the applicable benefit
plan for a least six months immediately prior to the Effective Time.
Conditions to the Merger. Pursuant to the Merger Agreement, the
respective obligations of each party to consummate the Merger are subject to the
satisfaction of the following conditions: (i) Calpine or Merger Subsidiary shall
have purchased Shares in an amount equal to at least the Minimum Condition
pursuant to the Offer, (ii) if required by applicable law, the adoption of the
Merger Agreement by the Stockholders of the Company in accordance with Delaware
Law, (iii) no provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Merger; (iv)
any applicable waiting period under the HSR Act relating to the Merger shall
have expired and (v) other than filing the certificate of merger in accordance
with Delaware Law, all consents required to permit the consummation of the
Merger shall have been filed, occurred or been obtained (other than those the
failure to file, occur or obtain, in the aggregate, could not reasonably be
expected to have a Material Adverse Effect or prevent or materially delay the
consummation of the Merger).
Termination. The Merger Agreement may be terminated and the Merger may
be abandoned at any time prior to the Effective Time (notwithstanding any
approval of the Merger Agreement by the Stockholders of the Company) (i) by
mutual written consent of the Company and Calpine, (ii) by either the Company or
Calpine, if there shall be any law or regulation that makes consummation of the
Merger illegal or otherwise prohibited or if any judgement, injunction, order or
decree enjoining Calpine or the Company from consummating the Merger is entered
and such judgment, injunction, order or decree shall become final and
nonappealable, (iii) by either the Company or Calpine (provided that Calpine
shall not be entitled to terminate the Merger Agreement pursuant to this
sub-clause (iii) as a result of its breach of the Merger Agreement), (x) if
Calpine or Merger Subsidiary shall have failed to commence the Offer within five
business days following the date of the announcement of the Merger Agreement,
(y) if Calpine or Merger Subsidiary shall not have purchased any Shares pursuant
to the Offer prior to December 1, 1999 or (z) the Offer shall have been
terminated without Calpine or Merger Subsidiary having purchased any Shares
pursuant to the Offer, (iv) by Calpine upon the occurrence of any Trigger Event
described in clauses (i) through (iii) under the heading "Fees and Expenses"
below, (v) by the Company, upon the occurrence of any Trigger Event described in
clause (i) under the heading "Fees and Expenses" below and (vi) by either the
Company or Calpine, if the Merger has not been consummated by June 30, 2000
(provided that the party seeking to terminate the Merger Agreement shall not
have breached its obligations under the Merger Agreement in any material
respect).
Fees and Expenses. Each party to the Merger Agreement has agreed to pay
its own fees and expenses and there are no provisions for payment by the Company
of the fees and expenses of Calpine or Merger Subsidiary or vice versa or at any
time prior to the consummation of the Offer as if made at and as of such time,
if the Merger Agreement is terminated, except as stated below. The Company has
agreed to pay Calpine a fee in immediately available funds equal to $2,000,000
-27-
<PAGE> 30
promptly, but in no event later than one business day, after the termination of
the Merger Agreement as a result of the occurrence of any of the events set
forth below (a "Trigger Event"): (i) the Company shall have entered into, or
shall have publicly announced its intention to enter into, an agreement or an
agreement in principle with respect to any Acquisition Proposal, (ii) any
representation or warranty made by the Company in, or pursuant to, the Merger
Agreement that is qualified as to materiality shall not have been true and
correct when made or at any time prior to the consummation of the Offer as if
made at and as of such time, or any representation or warranty made by the
Company in, or pursuant to, the Merger Agreement that is not so qualified shall
not have been true and correct in all material respects when made or at any time
prior to the consummation of the Offer as if made at and as of such time, or the
Company shall have failed to observe or perform in any material respect any of
its obligations under the Merger Agreement; provided that it shall not be a
Trigger Event unless (x) the breaches of the representations and warranties
without regard to any materiality qualifier or threshold, and failure to perform
or breach of any obligation, individually or in the aggregate, have had or could
reasonably be expected to have a Material Adverse Effect and (y) with respect to
breaches of representations and warranties, such breaches in significant part
were intentional; provided further that it shall not be a Trigger Event if (1)
such breaches and failures to perform are reasonably capable of being cured by
December 1, 1999, (2) the Company diligently pursues such cure beginning as soon
as it obtains knowledge of such breaches and failures to perform and (3) the
Company cures all of such breaches and failures to perform that have given rise
to the Trigger Event by December 1, 1999; or (iii) the Board of Directors of the
Company (or any special committee thereof) shall have withdrawn or materially
modified in a manner adverse to Calpine or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or the Merger Agreement or its approval
of the entry by Calpine and Merger Subsidiary into the Stockholder Agreement, in
any such case whether or not such withdrawal or modification is required by the
fiduciary duties of the Company's Board of Directors (or any special committee
thereof).
Appraisal Rights. Stockholders do not have dissenters' rights as a
result of the Offer. However, if the Merger is consummated, Stockholders at the
time of the Merger who do not vote in favor of or consent in writing to the
Merger will have the right under Delaware Law to dissent and demand appraisal of
their Shares in accordance with Section 262 of Delaware Law.
Under Delaware Law, dissenting stockholders who comply with the
applicable statutory procedures will be entitled to receive a judicial
determination of the fair value of their Shares (exclusive of any element of
value arising from the accomplishment or expectation of the Merger) and to
receive payment of such fair value in cash, together with a fair rate of
interest, if any. Any such judicial determination of the fair value of the
Shares could be based upon considerations other than or in addition to the price
paid in the Offer (or the Merger) and the market value of the Shares.
Stockholders should recognize that the value so determined could be higher or
lower than the price per Share paid pursuant to the Offer or the Merger.
Moreover, Calpine or Merger Subsidiary may argue in an appraisal proceeding
that, for purposes of such a proceeding, the fair value of the Shares is less
than the price paid in the Offer (or the Merger).
-28-
<PAGE> 31
THE FOREGOING SUMMARY OF THE RIGHTS OF DISSENTING STOCKHOLDERS DOES NOT
PURPORT TO BE A COMPLETE STATEMENT OF PROCEDURES TO BE FOLLOWED BY STOCKHOLDERS
DESIRING TO EXERCISE THEIR DISSENTERS' RIGHTS.
Stockholder Agreement. The following description of the Agreement (the
"Stockholder Agreement") dated as of August 25, 1999 among Calpine, Merger
Subsidiary and the Stockholders named therein (each, a "Principal Stockholder")
is qualified in its entirety by reference to the text of such agreement, a copy
of which is attached as an exhibit to the Schedule 14D-1, is incorporated in
this Offer to Purchase by reference and may be inspected in the same manner as
set forth with respect to the Company in Section 7. The Principal Stockholders
include affiliates of Enron Corporation, Jeffrey E. Susskind, the Chairman of
the Board of Directors of the Company, B.A. Berilgen, the President and Chief
Executive Officer of the Company, and certain other executive officers of the
Company.
Grant of Stock Option. Under the Stockholder Agreement, each Principal
Stockholder has granted Merger Subsidiary an irrevocable option (the "Stock
Option") to purchase, subject to the terms and conditions set forth in the
Stockholder Agreement, for a price of $5.50 per Share in cash, or to cause to be
tendered pursuant to the Offer, such Principal Stockholder's Shares. In
addition, if the price to be paid by Merger Subsidiary pursuant to the Offer is
increased, the purchase price payable upon exercise of the Stock Option shall
similarly be increased. The Stockholder Agreement also provides that the number
and kind of Shares subject to the Stock Option and the purchase price therefor
shall be appropriately and equitably adjusted in the event of changes in the
Company's capital stock.
Exercise of Option. Subject to the terms of the Stockholder Agreement,
Merger Subsidiary has the right to exercise the Stock Option, in whole but not
in part, at any time up to the 20th business day after the termination of the
Merger Agreement in accordance with the terms thereof if, but only if, the
termination of the Merger Agreement did not result from the material breach
thereof by Merger Subsidiary or Calpine.
Agreement to Tender. Each Principal Stockholder has agreed, in the
Stockholder Agreement, upon receipt of written instructions from Merger
Subsidiary, to deliver to the Depositary (i) a Letter of Transmittal with
respect to such Principal Stockholder's Shares complying with the terms of the
Offer together with instructions directing the Depositary to make payment for
such Shares directly to the Principal Stockholder (but if such Shares are not
accepted for payment or are withdrawn and are to be returned pursuant to the
Offer, to return such Shares to such Principal Stockholder whereupon they shall
continue to be held by such Principal Stockholder subject to the terms and
conditions of the Stockholder Agreement), (ii) the certificates evidencing such
Principal Stockholder's Shares and (iii) all other documents or instruments
required to be delivered pursuant to the terms of the Offer. Notwithstanding
anything to the contrary set forth in the Stockholder Agreement, no Principal
Stockholder shall be required to tender such Principal Stockholder's Shares in
the Offer if the per Share consideration to be paid by Merger Subsidiary
pursuant to the Offer is less than $5.50 per Share in cash.
Conditions. The Principal Stockholders' obligations to sell their
Shares (other than by tendering pursuant to the Offer) under the Stockholder
Agreement are subject to the satisfaction of
-29-
<PAGE> 32
the following conditions: (i) the representations and warranties of Merger
Subsidiary set forth in the Stockholder Agreement shall be true and correct in
all material respects on the date of sale as if made on such date, (ii) if
applicable, all waiting periods under the HSR Act to the exercise of the Stock
Option shall have expired or been terminated, (iii) there shall be no
preliminary or permanent injunction or other order, decree or ruling issued by a
court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, nor any statute, rule, regulation or order
promulgated or enacted by any governmental authority, prohibiting or otherwise
restraining such exercise of the Stock Option and (iv) Merger Subsidiary shall
have commenced the Offer.
No Shopping. Each Principal Stockholder has further agreed to not,
directly or indirectly, solicit, initiate or encourage (or authorize any person
to solicit) any inquiry, proposal or offer from any person to acquire the
business, property or capital stock of the Company, or any direct or indirect
subsidiary thereof, or any acquisition of a substantial equity interest in, or a
substantial amount of assets of, the Company or any direct or indirect
subsidiary thereof, whether by merger, purchase of assets, tender offer or other
transaction (a "Business Combination Proposal") or, subject to a Principal
Stockholder's fiduciary duty as a director of the Company, if applicable, as
further provided in the Merger Agreement participate in any discussion or
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or participate in,
facilitate or encourage any effort or attempt by any other person to make or
seek any Business Combination Proposal. Each Principal Stockholder agreed to
promptly advise Merger Subsidiary of the terms of any communication it may
receive relating to a Business Combination Proposal if a representative of such
Principal Stockholder having direct working knowledge of the Stockholder
Agreement has knowledge of such communications.
Proxy. In entering into the Stockholder Agreement, each Principal
Stockholder granted Merger Subsidiary a proxy to vote or consent at every
annual, special or adjourned meeting, or solicitation of consents, of the
Stockholders of the Company (i) in favor of the adoption of the Merger Agreement
and the Stockholder Agreement and approval of the Merger and the other
transactions contemplated by the Merger Agreement and Stockholder Agreement,
(ii) against any proposal for any recapitalization, merger, sale of assets or
other business combination between the Company and any person or entity (other
than the Merger) or any other action or agreement that would result in a breach
of any covenant, representation or warranty or any other obligation or agreement
of the Company under the Merger Agreement not being fulfilled and (iii) in favor
of any other matter relating to consummation of the transactions contemplated by
the Merger Agreement and the Stockholder Agreement. Each Stockholder also agreed
to cause such Principal Stockholder's Shares that are outstanding and owned by
it beneficially to be voted in accordance with the foregoing. The proxy granted
under the Stockholder Agreement is irrevocable, but such proxy will be revoked
upon the earlier of (i) termination of the Stockholder Agreement in accordance
with its terms and (ii) the purchase of the Principal Stockholder Shares
pursuant to the Offer.
Pursuant to the Stockholder Agreement, the Principal Stockholders
granted Merger Subsidiary an option to purchase, subject to certain conditions,
for a price of $5.50 per Share, or to cause to be tendered pursuant to the
Offer, an aggregate of up to 3,492,537 outstanding Shares, up to an additional
425,000 Shares issuable upon exercise of outstanding stock options and up to an
additional 150,000 shares issuable upon exercise of the outstanding Warrants.
Assuming that the
-30-
<PAGE> 33
full amount of Shares that are subject to the Stockholder Agreement are validly
tendered and not withdrawn pursuant to a directive from Merger Subsidiary, no
additional Shares would be required to be tendered under the Offer in order to
satisfy the Minimum Condition (assuming the number of Fully Diluted Shares set
forth in the Introduction hereto).
Preferred Stock and Warrants. Enron Capital & Trade Resources Corp., a
Principal Stockholder which holds all of the issued and outstanding Preferred
Stock of the Company, has agreed, in the Stockholder Agreement, to sell and
transfer to the Company, and the Merger Subsidiary has agreed to purchase or to
cause the Company to purchase and redeem, all of the shares of Preferred Stock,
at a price per share of Preferred Stock equal to $10.10, plus all accrued and
unpaid dividends thereon (whether or not declared), promptly (but in no event
more than one business day) following the consummation of the Offer. In
addition, Joint Energy Development Investments Limited Partnership, a Principal
Stockholder which holds all of the outstanding Warrants, has agreed, in the
Stockholder Agreement, to transfer and surrender to the Company for cancellation
for no additional consideration all of the Warrants, promptly (but in no event
more than one business day) following consummation of the Offer; provided that,
if Merger Subsidiary increases the consideration per Share to be paid pursuant
to the Offer to an amount that exceeds the exercise price of the Warrants,
Merger Subsidiary shall pay, or cause the Company to pay, to such Principal
Stockholder an amount equal to the aggregate net in the money value of such
Warrants, in connection with the transfer and surrender thereof. If Merger
Subsidiary exercises the Stock Option, at the closing of the acquisition of the
Principal Stockholders' Shares, Merger Subsidiary shall purchase from the
relevant Principal Stockholder, and such Principal Stockholder will sell to
Merger Subsidiary, all of the shares of Preferred Stock, at a price per share of
Preferred Stock equal to $10.10, plus all accrued and unpaid dividends thereon
(whether or not declared).
Delaware Law. The Merger would have to comply with other applicable
procedural and substantive requirements of Delaware Law.
The Company is incorporated under the laws of the State of Delaware,
which has adopted certain laws regarding business combinations. In general,
Section 203 of Delaware Law prevents an "interested stockholder" (generally, a
stockholder owning 15% or more of a corporation's outstanding voting stock or an
affiliate or associate thereof) from engaging in a "business combination"
(defined to include a merger and certain other transactions) with a Delaware
corporation for a period of three years following the time that such stockholder
became an interested stockholder unless (i) prior to such time the corporation's
board of directors approved either the business combination or the transaction
which resulted in such stockholder becoming an interested stockholder, (ii) upon
consummation of the transaction which resulted in such stockholder becoming an
interested stockholder, the interested stockholder owned at least 85% of the
corporation's voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (iii) at or subsequent to
such time the business combination is approved by the corporation's board of
directors and authorized at an annual or special meeting of stockholders, and
not by written consent, by the affirmative vote of at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder. The Board of
Directors of the Company has approved the Merger Agreement and the Stockholder
Agreement and the transactions contemplated thereby, including the Offer and the
-31-
<PAGE> 34
Merger, for purposes of Section 203. Accordingly, the restrictions of Section
203 do not apply to the transactions contemplated by this Offer to Purchase.
Other Matters. Any merger or other similar business combination
proposed by Calpine would also have to comply with any applicable Federal law.
In particular, the Commission has adopted Rule 13e-3 under the Exchange Act
which is applicable to certain "going private" transactions. Calpine believes
that Rule 13e-3 will not be applicable to the Merger unless the Merger is
consummated more than one year after termination of the Offer or if an
alternative merger transaction were to provide for stockholders to receive
consideration for their Shares in an amount less than the price per Share paid
pursuant to the Offer. If applicable, Rule 13e-3 would require, among other
things, that certain financial information concerning the Company and certain
information relating to the fairness of the proposed transaction and the
consideration offered to minority stockholders in such a transaction be filed
with the Commission and distributed to such stockholders prior to consummation
of the transaction.
If for any reason the Merger is not consummated, Calpine and Merger
Subsidiary will evaluate their alternatives. Such alternatives could include
purchasing additional Shares in the open market, in privately negotiated
transactions, in another tender or exchange offer or otherwise, or taking no
further action to acquire additional Shares. Any additional purchases of Shares
could be at a price greater or less than the price to be paid for Shares in the
Offer and could be for cash or other consideration. Alternatively, Merger
Subsidiary may sell or otherwise dispose of any or all Shares acquired pursuant
to the Offer or otherwise. Such transactions may be effected on terms and at
prices then determined by Calpine or Merger Subsidiary, which may vary from the
price to be paid for Shares in the Offer.
Calpine intends to conduct a review of the Company and its assets,
corporate structure, dividend policy, capitalization, operations, properties and
policies and to consider, subject to the terms of the Merger Agreement, what, if
any, changes would be desirable in light of the circumstances then existing, and
reserves the right to take such actions or effect such changes as it deems
desirable. Such changes could include changes in the Company's business,
operations, corporate structure, capitalization, Board of Directors, policies or
dividend policy.
Except as otherwise described in this Offer to Purchase, Calpine and
Merger Subsidiary have no current plans or proposals that would relate to, or
result in, any extraordinary corporate transaction involving the Company, such
as a merger, reorganization or liquidation involving the Company or any of its
subsidiaries, a sale or transfer of a material amount of assets of the Company
or any of its subsidiaries, any material change in the Company's capitalization
or dividend policy or any other material change in the Company's business,
corporate structure, Board of Directors or management.
-32-
<PAGE> 35
12. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATIONS;
REGISTRATION UNDER THE EXCHANGE ACT.
The purchase of Shares pursuant to the Offer will reduce the number of
Shares that might otherwise trade publicly and may reduce the number of holders
of Shares, which could adversely affect the liquidity and market value of the
remaining Shares held by Stockholders other than Calpine or Merger Subsidiary.
Calpine cannot predict whether the reduction in the number of Shares that might
otherwise trade publicly would have an adverse or beneficial effect on the
market price for or marketability of the Shares or whether it would cause future
market prices to be greater or less than the Offer price.
Depending upon the number of Shares purchased pursuant to the Offer,
the Shares may no longer meet the standards for continued inclusion on the
Nasdaq SmallCap Market. If, as a result of the purchase of Shares pursuant to
the Offer, the Shares no longer meet the standards for continued inclusion on
the Nasdaq SmallCap Market, the market for the Shares could be adversely
affected.
The extent of the public market for the Shares and availability of
quotations therefor would, however, depend upon such factors as the number of
holders and/or the aggregate market value of the publicly-held Shares at such
time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act and other factors.
The Shares are currently "margin securities" under the regulations of
the Board of Governors of the Federal Reserve System (the "Federal Reserve
Board"), which has the effect, among other things, of allowing brokers to extend
credit on the collateral of such Shares. Depending upon factors similar to those
described above regarding listing and market quotations, the Shares might no
longer constitute "margin securities" for the purposes of the Federal Reserve
Board's margin regulations and, therefore, could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application of the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
less than 300 holders of record. Termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain of the provisions of the Exchange Act, such as the short-swing
profit recovery provisions of Section 16(b), the requirement of furnishing a
proxy or information statement in connection with stockholder action and the
related requirement of an annual report to stockholders and the requirements of
Rule 13e-3 under the Exchange Act with respect to "going private" transactions,
no longer applicable to the Shares. Furthermore, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 or 144A promulgated
under the Securities Act of 1933, as amended. If registration of the Shares
under the Exchange Act were terminated, the Shares would no longer be "margin
securities" or eligible for Nasdaq reporting. Merger Subsidiary intends to seek
to cause the Company to terminate registration of the Shares under the Exchange
Act as soon after consummation of the Offer as the requirements for termination
of registration of the Shares are met.
-33-
<PAGE> 36
13. DIVIDENDS AND DISTRIBUTIONS.
If on or after August 25, 1999, the Company should (notwithstanding the
fact that the following actions may be prohibited under the Merger Agreement)
(i) split, combine or otherwise change the Shares or its capitalization, (ii)
acquire or otherwise cause a reduction in the number of outstanding Shares or
(iii) issue or sell any additional Shares (other than Shares issued pursuant to
and in accordance with the terms in effect on August 25, 1999 of employee stock
options outstanding prior to such date), shares of any other class or series of
capital stock, other voting securities or any securities convertible into, or
options, rights, or warrants, conditional or otherwise, to acquire, any of the
foregoing, then, without prejudice to Merger Subsidiary's rights under Section
15, Merger Subsidiary may, in its sole discretion, make such adjustments in the
purchase price and other terms of the Offer as it deems appropriate including
the number or type of securities to be purchased.
If, on or after August 25, 1999, the Company should (notwithstanding
the fact that the following actions are prohibited under the Merger Agreement)
declare or pay any dividend on the Shares or any distribution with respect to
the Shares (including the issuance of additional Shares or other securities or
rights to purchase of any securities) that is payable or distributable to
Stockholders of record on a date prior to the transfer to the name of Merger
Subsidiary or its nominee or transferee on the Company's stock transfer records
of the Shares purchased pursuant to the Offer, then, without prejudice to Merger
Subsidiary's rights under Section 15, (i) the purchase price per Share payable
by Merger Subsidiary pursuant to the Offer may be reduced to the extent of any
such cash dividend or distribution and (ii) the whole of any such non-cash
dividend or distribution to be received by the tendering Stockholders will (a)
be received and held by the tendering Stockholders for the account of Merger
Subsidiary and will be required to be promptly remitted and transferred by each
tendering Stockholder to the Depositary for the account of Merger Subsidiary,
accompanied by appropriate documentation of transfer, or (b) at the direction of
Merger Subsidiary, be exercised for the benefit of Merger Subsidiary, in which
case the proceeds of such exercise will promptly be remitted to Merger
Subsidiary. Pending such remittance and subject to applicable law, Merger
Subsidiary will be entitled to all rights and privileges as owner of any such
non-cash dividend or distribution or proceeds thereof and may withhold the
entire purchase price or deduct from the purchase price the amount or value
thereof, as determined by Merger Subsidiary in its sole discretion.
14. EXTENSION OF TENDER PERIOD; TERMINATION; AMENDMENT.
Merger Subsidiary reserves the right, at any time or from time to time,
(i) to extend the Offer if, at the scheduled Expiration Date, any of the
conditions to the Offer have not been satisfied or waived, until such time as
such conditions are satisfied or waived, and for a further period of time as
described below in this paragraph, in any case by giving oral or written notice
of such extension to the Depositary and by making a public announcement of such
extension or (ii) except to the extent otherwise provided in the Merger
Agreement, to amend the Offer in any respect by making a public announcement of
such amendment. There can be no assurance that Merger Subsidiary will exercise
its right to extend or amend the Offer. Subject to the terms of the Offer and
the satisfaction (or
-34-
<PAGE> 37
waiver to the extent permitted by the Merger Agreement) of the conditions to the
Offer, Merger Subsidiary shall accept for payment all Shares validly tendered
and not withdrawn pursuant to the Offer as soon as practicable after the
expiration of the Offer and shall pay for all such Shares promptly after
acceptance; provided, that Merger Subsidiary may, without the consent of the
Company, extend the Offer for a period of time of not more than 20 business days
beyond the initial Expiration Date if on the date of such extension less than
90% of the Fully Diluted Shares have been validly tendered and not withdrawn.
Under certain circumstances Merger Subsidiary may be required under the Merger
Agreement to extend the Offer. See Section 11 for a description of such
provisions of the Merger Agreement.
If Merger Subsidiary shall decide, in its sole discretion, subject to
the terms of the Merger Agreement, to increase the consideration to be paid for
Shares pursuant to the Offer and the Offer is scheduled to expire at any time
before the expiration of a period of 10 business days from, and including, the
date that notice of such increase is first published, sent or given in the
manner specified below, the Offer will be extended until the expiration of such
period of 10 business days. If Merger Subsidiary makes a material change in the
terms of the Offer (other than a change in price or percentage of securities
sought) or in the information concerning the Offer, or waives a material
condition of the Offer, Merger Subsidiary will extend the Offer, if required by
applicable law, for a period sufficient to allow stockholders to consider the
amended terms of the Offer.
Merger Subsidiary also reserves the right, in its sole discretion,
subject to the terms of the Merger Agreement, in the event any of the conditions
specified in Section 15 shall not have been satisfied and so long as Shares have
not theretofore been accepted for payment, to delay (except as otherwise
required by applicable law and the rules of the Commission including Rule 14e-1)
acceptance for payment of or payment for Shares or to terminate the Offer and
not accept for payment or pay for Shares.
If Merger Subsidiary extends the period of time during which the Offer
is open, is delayed in accepting for payment or paying for Shares or is unable
to accept for payment or pay for Shares pursuant to the Offer for any reason,
then, without prejudice to Merger Subsidiary's rights under the Offer, the
Depositary may, on behalf of Merger Subsidiary, retain all Shares tendered, and
such Shares may not be withdrawn except as otherwise provided in Section 4. The
reservation by Merger Subsidiary of the right to delay acceptance for payment of
or payment for Shares is subject to applicable law, which requires that Merger
Subsidiary pay the consideration offered or return the Shares deposited by or on
behalf of Stockholders promptly after the termination or withdrawal of the
Offer.
Any extension, termination or amendment of the Offer will be followed
as promptly as practicable by a public announcement thereof. In the case of an
extension of the Offer, Merger Subsidiary will make a public announcement of
such extension no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the manner
in which Merger Subsidiary may choose to make any public announcement, Merger
Subsidiary will have no obligation (except as otherwise required by applicable
law) to publish, advertise or otherwise communicate any such public announcement
other than by making a release to the Dow Jones News Service.
-35-
<PAGE> 38
15. CERTAIN CONDITIONS OF THE OFFER.
Notwithstanding any other provision of the Offer, Calpine and Merger
Subsidiary shall not be required to accept for payment or (subject to any
applicable rules and regulations of the Commission, including Rule 14e-1(c)
under the Exchange Act (relating to Merger Subsidiary's obligation to pay for or
return tendered Shares after the termination or withdrawal of the Offer)) pay
for any Shares, and may terminate the Offer, if by the expiration of the Offer,
the Minimum Condition shall not have been satisfied, or at any time on or after
August 25, 1999 and prior to the acceptance for payment of Shares pursuant to
the Offer, any of the following conditions exist:
(a) there shall be instituted or pending any action or
proceeding by any Governmental Entity or by any other person, domestic
or foreign, before any Governmental Entity or arbitrator, (i)
challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all
the Shares by Calpine or Merger Subsidiary or the consummation by
Calpine or Merger Subsidiary of the Merger, seeking to obtain material
damages or otherwise directly or indirectly relating to the
transactions contemplated by the Stockholder Agreement, the Merger
Agreement, the Offer or the Merger, (ii) seeking to restrain or
prohibit Calpine's or Merger Subsidiary's ownership or operation (or
that of their respective subsidiaries or affiliates) of all or any
material portion of the business or assets of the Company or any of its
subsidiaries or of Calpine and its subsidiaries or to compel Calpine or
any of its subsidiaries or affiliates to dispose of or hold separate
all or any material portion of the business or assets of the Company or
any of its subsidiaries or of Calpine and its subsidiaries, (iii)
seeking to impose material limitations on the ability of Calpine or any
of its subsidiaries or affiliates effectively to exercise full rights
of ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Calpine or any of its subsidiaries
or affiliates on all matters properly presented to the Company's
stockholders, (iv) seeking to require divestiture by Calpine or any of
its subsidiaries or affiliates of any Shares or (v) that otherwise, in
the judgment of Calpine, is likely to materially adversely affect the
business, assets, liabilities, operations, condition (financial or
otherwise), results of operations or prospects of the Company or any of
its subsidiaries, or Calpine and its subsidiaries, taken as a whole; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Stockholder Agreement,
the Merger Agreement, the Offer or the Merger, by any Governmental
Entity or arbitrator (other than the application of the waiting period
provisions of the HSR Act to the Stockholder Agreement, the Merger
Agreement, the Offer or the Merger), that, in the reasonable judgment
of Calpine, is substantially likely, directly or indirectly, to result
in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
(c) any change shall have occurred (or any development shall
have occurred involving a prospective change) in the business, assets,
liabilities, financial condition,
-36-
<PAGE> 39
capitalization, operations, results of operations or prospects of the
Company and its subsidiaries taken as a whole that, in the reasonable
judgment of Calpine, is or is likely to be materially adverse to the
Company and its subsidiaries taken as a whole or Calpine shall have
become aware of any facts that, in the reasonable judgment of Calpine
have or are likely to have or result in a Material Adverse Effect
(defined below); or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange or in the NASDAQ over-the-counter market in the United
States that lasts or has lasted for at least two full consecutive
trading days, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
any material limitation (whether or not mandatory) by any Governmental
Entity on the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly
involving the United States which would reasonably be expected to have
a Material Adverse Effect or prevent (or materially delay) the
consummation of the Offer or (v) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material
acceleration or worsening thereof; or
(e) a tender or exchange offer for some or all of the Shares
shall have been publicly proposed to be made or shall have been made by
another person, or it shall have been publicly disclosed or Calpine
shall have otherwise learned that (i) any person or "group" (defined in
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed
to acquire beneficial ownership of more than 50% of any class or series
of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall
have been granted any option, right or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 50% of any
class or series of capital stock of the Company (including the Shares)
or (ii) any person shall have filed a Notification and Report Form
under the HSR Act or made a public announcement reflecting an intent to
acquire the Company or any of its subsidiaries or any assets or
securities of the Company or any of its subsidiaries; or
(f) any consent (other than the filing of a certificate of
merger or approval by the stockholders of the Company of the Merger (if
required by Delaware Law)) required to be filed, occurred or been
obtained by the Company or any of its subsidiaries or Calpine or any of
its subsidiaries (including Merger Subsidiary) in connection with the
execution and delivery of the Merger Agreement, the Offer and the
consummation of the transactions contemplated by the Merger Agreement
shall not have been filed, occurred or been obtained (other than any
such consents the failure to file, occur or obtain in the aggregate,
could not reasonably be expected to (i) have a Material Adverse Effect
or (ii) prevent or materially delay the consummation of the Offer or
the Merger); or
(g) the Company shall have breached or failed to perform in
any material respect any of its covenants or agreements under the
Merger Agreement, or any of the representations and warranties of the
Company set forth in the Merger Agreement that is qualified as to
materiality shall not be true when made or at any time prior to the
-37-
<PAGE> 40
consummation of the Offer as if made at and as of such time or any of
the representations and warranties set forth in the Merger Agreement
that is not so qualified shall not be true in any material respect when
made or at any time prior to consummation of the Offer as if made at
and as of such time; provided that this condition shall not be deemed
to exist unless, in the reasonable judgment of Calpine, such breaches
or failures to perform any covenant, obligation or agreement, and any
breach of representation or warranty without regard to any materiality
qualifier or threshold, individually or in the aggregate, has had or
could reasonably be expected to have a Material Adverse Effect; or
(h) any party to the Stockholder Agreement (other than Merger
Subsidiary or Calpine) shall have breached or failed to perform in any
material respect any of its agreements under the Stockholder Agreement
or any of the representations and warranties of any such party set
forth in the Stockholder Agreement shall not be true in any material
respect, in each case, when made or at any time prior to the
consummation of the Offer as if made at and as of such time, or the
Stockholder Agreement shall have been invalidated or terminated with
respect to any Shares subject thereto; or
(i) the Merger Agreement or the Stockholder Agreement shall
have been terminated in accordance with its terms; or
(j) the Board of Directors of the Company (or any special
committee thereof) shall have withdrawn or materially modified in a
manner adverse to Calpine or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or the Merger Agreement or its
approval of the entry by Calpine and Merger Subsidiary into the
Stockholder Agreement; or
(k) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or
agreement in principle with respect to any Acquisition Proposal;
which, in the judgment of Calpine in any such case, and regardless of the
circumstances (including any action or omission by Calpine or Merger Subsidiary)
giving rise to any such condition, makes it inadvisable to proceed with such
acceptance for payment or payment. The term "Material Adverse Effect" means a
material adverse effect on (a) the assets, liabilities, condition (financial or
otherwise), business, properties, results of operations or prospects of the
Company and its subsidiaries taken as a whole or (b) the consummation of the
transactions contemplated hereby; provided that occurrences or events resulting
from (i) changes in the prices of oil, gas, natural gas liquids or other
hydrocarbon products, (ii) changes in general economic conditions, including
general stock market conditions and interest rate changes or (iii) the adverse
determination of any pending litigation disclosed in the disclosure schedule to
the Merger Agreement shall in each case be excluded from consideration for
purposes of the effect of an occurrence or event on the Company and its
subsidiaries taken as a whole.
The foregoing conditions are for the sole benefit of Calpine and Merger
Subsidiary and may be asserted by Calpine in its sole discretion regardless of
the circumstances (including any action or omission by Calpine or Merger
Subsidiary) giving rise to any such condition or (other than the
-38-
<PAGE> 41
Minimum Condition) may be waived by Calpine and Merger Subsidiary in their
discretion in whole at any time or in part from time to time. The failure by
Calpine or Merger Subsidiary at any time to exercise its rights under any of the
foregoing conditions shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Any determination by Calpine concerning the events described
above will be final and binding upon all parties.
Notwithstanding anything to the contrary set forth in the Offer to
Purchase, in response to any condition to the Offer not being satisfied, Merger
Subsidiary may not upon expiration of the Offer (and without extending the
period of time for which the Offer is open) delay acceptance for payment or
payment for Shares until such time as such condition is satisfied or waived;
provided that, subject to the applicable regulations of the Commission, Merger
Subsidiary reserves the right (subject to the terms of the Merger Agreement), at
any time and from time to time, to delay acceptance for payment of, or,
regardless of whether such Shares were theretofore accepted for payment, pay
for, any Shares in order to comply with applicable law.
16. CERTAIN LEGAL MATTERS; REGULATORY APPROVALS.
General. Except as set forth in this Section 16, based on its
examination of publicly available information filed by the Company with the
Commission and other publicly available information concerning the Company,
Merger Subsidiary is not aware of any license or regulatory permit that appears
to be material to the Company's business that might be adversely affected by
Merger Subsidiary's acquisition of Shares as contemplated herein or of any
approval or other action by any government or governmental authority or agency,
domestic or foreign, that would be required for the acquisition or ownership of
Shares by Merger Subsidiary or Calpine as contemplated herein. Should any such
approval or other action be required, it is currently contemplated that, except
as described below under "State Takeover Statutes", such approval or other
action will be sought. However, there is no current intent to delay the purchase
of Shares tendered pursuant to the Offer pending the outcome of any such matter.
There can be no assurance that any such approval or other action, if needed,
would be obtained or would be obtained without substantial conditions or that if
such approvals were not obtained or such other actions were not taken adverse
consequences might not result to the Company's business or certain parts of the
Company's business might not have to be disposed of, any of which could cause
Merger Subsidiary to elect to terminate the Offer without the purchase of Shares
thereunder. Merger Subsidiary's obligation under the Offer to accept for payment
and pay for Shares is subject to certain conditions. See Section 15.
State Takeover Statutes. A number of states have adopted laws which, to
varying degrees, seek to regulate attempts to acquire corporations that are
incorporated in, or have substantial connections with, the state. The Company,
directly or through subsidiaries, conducts business in a number of states
throughout the United States, some of which have enacted such laws. Based on
publicly available information concerning the Company, Calpine does not believe
that any of these laws will, by their terms, apply to the Offer or the Merger.
-39-
<PAGE> 42
In addition, the constitutional validity of state statutes regulating
acquisition attempts has been the subject of considerable litigation. In its
1982 decision in Edgar v. MITE Corp., the Supreme Court of the United States
invalidated an Illinois law that, among other things, gave Illinois officials
authority to block a tender offer for any corporation having certain defined
connections with the state. In 1987, however, the Supreme Court upheld an
Indiana law that prevented acquirors of a controlling stake in certain Indiana
corporations from voting the acquired shares until the other stockholders had
approved the acquisition. The Court distinguished between state statutes that
affect acquisitions of entities incorporated outside the state and those that
address the internal governance, including the scope and exercise of stockholder
voting rights, of in-state corporations. While the lower federal courts have
relied on a similar distinction in subsequent cases, the precise extent to which
an individual state may regulate acquisitions of out-of-state corporations
remains unclear.
If any government official or third party should seek to apply any
state takeover law to the Offer or the Merger, Calpine will take such action as
then appears desirable, which action may include challenging the applicability
or validity of such statute in appropriate court proceedings. In the event it is
asserted that one or more state takeover statutes is applicable to the Offer or
the Merger and an appropriate court does not determine that it is inapplicable
or invalid as applied to the Offer or the Merger, Calpine or Merger Subsidiary
might be required to file certain information with, or to receive approvals
from, the relevant state authorities or holders of Shares, and Merger Subsidiary
might be unable to accept for payment or pay for Shares tendered pursuant to the
Offer, or be delayed in continuing or consummating the Offer or the Merger. In
such case, Merger Subsidiary may not be obligated to accept for payment or pay
for any tendered Shares. See Section 15.
Antitrust. The transaction is exempt from the pre-merger notification
and waiting period required by the Hart-Scott-Rodino Antitrust Improvements Act
of 1976.
Margin Credit Regulations. Federal Reserve Board Regulations T, U and X
(the "Margin Credit Regulations") restrict the extension or maintenance of
credit for the purpose of buying or maintaining margin stock, if the credit is
secured directly or indirectly thereby. Any borrowings under the Credit
Agreement will not be directly secured by a pledge of the Shares. In addition,
Calpine and Merger Subsidiary believe that such borrowings will not be
"indirectly secured" within the meaning of the Margin Credit Regulations, as
interpreted. Accordingly, Calpine and Merger Subsidiary believe that the Margin
Credit Regulations are not applicable to any borrowings under the Credit
Agreement.
-40-
<PAGE> 43
17. FEES AND EXPENSES.
Merger Subsidiary has retained D.F. King & Co., Inc., to act as the
Information Agent and American Stock Transfer & Trust Company to act as the
Depositary in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telegraph and personal interviews
and may request brokers, dealers and other nominee stockholders to forward
materials relating to the Offer to beneficial owners. The Information Agent and
the Depositary each will receive reasonable and customary compensation for their
respective services, will be reimbursed for certain reasonable out-of-pocket
expenses and will be indemnified against certain liabilities in connection
therewith, including certain liabilities under the federal securities laws.
Merger Subsidiary will not pay any fees or commissions to any broker or
dealer or any other person (other than the Information Agent and the Depositary)
for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers,
commercial banks and trust companies will, upon request, be reimbursed by Merger
Subsidiary for reasonable and necessary costs and expenses incurred by them in
forwarding materials to their customers.
18. MISCELLANEOUS.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction. However, Merger Subsidiary may, in its discretion, take such
action as it may deem necessary to make the Offer in any such jurisdiction and
extend the Offer to holders of Shares in such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF MERGER SUBSIDIARY NOT CONTAINED IN THIS OFFER TO
PURCHASE OR IN THE LETTER OF TRANSMITTAL AND, IF GIVEN OR MADE, SUCH INFORMATION
OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Merger Subsidiary has filed with the Commission a Tender Offer
Statement on Schedule 14D-l, together with exhibits, pursuant to Rule 14d-3 of
the General Rules and Regulations under the Exchange Act, furnishing certain
additional information with respect to the Offer. The Schedule 14D-l and any
amendments thereto, including exhibits, may be examined and copies may be
obtained from the offices of the Commission in the manner set forth with respect
to the Company in Section 7 of this Offer to Purchase (except that such
information will not be available at the regional offices of the Commission).
CPN Sheridan, Inc.
-41-
<PAGE> 44
SCHEDULE I
INFORMATION CONCERNING THE DIRECTORS AND EXECUTIVE
OFFICERS OF CALPINE AND MERGER SUBSIDIARY
1. DIRECTORS AND EXECUTIVE OFFICERS OF CALPINE. The following table sets forth
the name, age, business address and present principal occupation or employment,
and material occupations, positions, offices or employments for the past five
years of each director and executive officer of Calpine. Each such person is a
citizen of the United States of America. Unless otherwise indicated below, the
business address of each person is c/o Calpine Corporation, 50 West San Fernando
Street, San Jose, California, 95113. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to employment with Calpine.
<TABLE>
<CAPTION>
Present Principal Occupation
Name and or Employment; Material Positions
Business Address Age Held During Past Five Years
---------------- --- ---------------------------
<S> <C> <C>
Peter Cartwright..................... 69 Director of Calpine since 1984, Chairman of the Board
since September 1996, President and Chief Executive
Officer since 1984.
Ann B. Curtis........................ 48 Director of Calpine since September 1996 and Executive
Vice President since August 1998. From September 1992
until August 1998, Ms. Curtis was Senior Vice President.
Jeffrey E. Garten.................... 52 Director of Calpine since January 1997. Dean of the Yale
Dean, School of Management School of Management and William S. Beinecke Professor in
Yale University the Practice of International Trade and Finance since
Box 208200 November 1995. From November 1993 to October 1995, Mr.
New Haven, CT. 06520-8200 Garten served as Undersecretary of Commerce of
International Trade.
Susan C. Schwab...................... 44 Director of Calpine since January 1997. Dean of the
Dean, School of Public Affairs School of Public Affairs at the University of Maryland
University of Maryland since August 1995. From July 1993 to August 1995, Dr.
Room 2101 Van Munching Hall Schwab served as Director, Corporate Business Development
College Park, MD 20742 at Motorola, Inc.
</TABLE>
I-1
<PAGE> 45
<TABLE>
<S> <C> <C>
George J. Stathakis.................. 68 Director of Calpine since September 1996 and Senior
Advisor since December 1994. Mr. Stathakis has been
providing financial, business and management
advisory services to numerous corporations
since 1985. Chairman of the Board and Chief
Executive Officer of Ramtron International
Corporation, and advanced technology
semiconductor company, from 1990 to 1994.
John O. Wilson....................... 60 Director of Calpine since January 1997. Senior Research
Senior Research Fellow Fellow, Berkeley Roundtable on the International Economy
Berkeley Roundtable on the and Executive Vice President and Chief Economist, SDR
International Economy (BRIE) Capital Management, Inc. since January 1999. Mr. Wilson
2234 Piedmont Avenue served as Executive Vice President and Chief Economist at
University of California, Berkeley Bank of America from August 1984 to January 1999.
Berkeley, CA 94720
V. Orville Wright..................... 78 Director of Calpine since January 1997. Mr. Wright served
in various positions with MCI Communications Corp.,
including Vice Chairman and Co-Chief Executive
Officer from 1988 to 1991, Vice Chairman and
Chief Executive Officer from 1985 to 1987, and
President and Chief Operating Officer from
1975 to 1985.
Robert D. Kelly...................... 41 Senior Vice President - Finance of Calpine since January
1998. Vice President - Finance from April 1994 to January
1998.
</TABLE>
I-2
<PAGE> 46
2. DIRECTORS AND EXECUTIVE OFFICERS OF MERGER SUBSIDIARY. The following table
sets forth the name, age, business address and present principal occupation or
employment, and material occupations, positions, offices or employments for the
past five years of each director and executive officer of Calpine. Each such
person is a citizen of the United States of America. Unless otherwise indicated
below, the business address of each person is c/o Calpine Corporation, 50 West
San Fernando Street, San Jose, California, 95113. Unless otherwise indicated,
each occupation set forth opposite an individual's name refers to employment
with Calpine.
<TABLE>
<CAPTION>
Present Principal Occupation
Name and or Employment; Material Positions
Business Address Age Held During Past Five Years
---------------- --- ---------------------------
<S> <C> <C>
Peter Cartwright................ 69 Chairman of Board, President and Chief Executive Officer of
Merger Subsidiary since its incorporation on August 23,
1999. Director of Calpine since 1984, Chairman of the Board
of Calpine since September 1996, President and Chief
Executive Officer of Calpine since 1984.
Ann B. Curtis................... 48 Vice President, Chief Financial Officer and Secretary of
Merger Subsidiary since its incorporation on August 23,
1999. Director of Calpine since September 1996 and Executive
Vice President of Calpine since August 1998. From September
1992 until August 1998, Ms. Curtis was Senior Vice President
of Calpine.
Thomas R. Mason................. 55 Executive Vice President of Merger Subsidiary since its
incorporation on August 23, 1999. Executive Vice President of
Calpine since August 1998. From March 1998 until August 1998,
Mr. Mason was Senior Vice President of Calpine. Prior to
joining Calpine, Mr. Mason was President and Chief Operating
Officer of CalEnergy Operating Services, Inc., a wholly-owned
subsidiary of MidAmerican Energy Holdings Company.
John T. King.................... 34 Vice President of Merger Subsidiary since its incorporation
on August 23, 1999. Vice President-Business Development
since September 1997 and employee of Calpine since February
1995. From 1994 to February 1995, Mr. King was Chief
Operating Officer of Charter Media, Inc.
Robert D. Kelly................. 41 Vice President of Merger Subsidiary since its incorporation
on August 23, 1999. Senior Vice President-Finance of
Calpine since January 1998 and Vice President-Finance from
April 1994 to January 1998.
</TABLE>
I-3
<PAGE> 47
<TABLE>
<S> <C> <C>
Charles B. Clark, Jr............ 51 Controller of Merger Subsidiary since its incorporation on
August 23, 1999. Vice President and Corporate Controller of
Calpine since May 1999. From February 1999 to April 1999,
Director of Business Services for Geysers, Calpine
Corporation. From March 1998 to November 1998, Mr. Clark was
Chief Financial Officer of Hobbs Group, LLC. From February
1997 to February 1998, Mr. Clark was Senior Vice
President-Finance and Administration of CNF Industries, Inc.
and from May 1988 to January 1997, Mr. Clark was Vice
President and Chief Financial Officer of Century Contractors
West, Inc. (a predecessor of CNF Industries, Inc.).
Lisa M. Bodensteiner............ 37 Assistant Secretary of Merger Subsidiary since its
incorporation on August 23, 1999. Vice President and
General Counsel of Calpine since April 1999. From February
1998 to March 1999, Ms. Bodensteiner was Calpine's
Assistant General Counsel and from February 1996 to
February 1998 was Associate Counsel. Prior to joining
Calpine, Ms. Bodensteiner was an attorney for Thelen,
Marrin, Johnson & Bridges (now Thelen, Reid & Priest).
</TABLE>
None of the executive officers and directors of Calpine or Merger
Subsidiary currently is a director of, or holds any position with, the Company
or any of its subsidiaries. To the knowledge of Calpine and Merger Subsidiary,
none of Calpine's or Merger Subsidiary's directors, executive officers,
affiliates or associates beneficially owns any equity securities, or rights to
acquire any equity securities, of the Company and none has been involved in any
transactions with the Company or any of its directors, executive officers,
affiliates or associates which are required to be disclosed pursuant to the
rules and regulations of the Commission.
I-4
<PAGE> 48
Facsimile copies of the Letter of Transmittal will be accepted. The
Letter of Transmittal, certificates for Shares and any other required documents
should be sent to the Depositary at one of the addresses set forth below:
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
40 Wall Street, 46th Floor (Eligible Institutions Only) 40 Wall Street, 46th Floor
New York, NY 10005 (718) 234-5001 New York, NY 10005
(Attention: Reorganization (Attention: Reorganization
Department) Department)
</TABLE>
Confirm by Telephone:
(718) 921-8200
For Information Call:
(718) 921-8200
Questions or requests for assistance or additional copies of this Offer
to Purchase and the Letter of Transmittal may be directed to the Information
Agent at the address and telephone numbers set forth below. Stockholders may
also contact their broker, dealer, commercial bank or trust company for
assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers call: (212) 269-5550
All others call toll-free: (800) 848-3094
<PAGE> 1
EXHIBIT 99(a)(2)
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED AUGUST 31, 1999
BY
CPN SHERIDAN, INC.
A WHOLLY OWNED SUBSIDIARY OF
CALPINE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON TUESDAY, SEPTEMBER 28, 1999,
UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
40 Wall Street, 46th Floor (Eligible Institutions Only) 40 Wall Street, 46th Floor
New York, NY 10005 (718) 234-5001 New York, NY 10005
(Attention: Reorganization (Attention: Reorganization
Department) Confirm by Telephone: Department)
(718) 921-8200
For Information Call:
(718) 921-8200
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE TRANSMISSION OTHER THAN AS SET FORTH
ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates
representing Shares (defined below) are to be forwarded with this Letter of
Transmittal or, unless an Agent's Message (defined in Section 2 of the Offer to
Purchase) is utilized, if delivery of Shares is to be made by book-entry
transfer to the Depositary's account at The Depository Trust Company ("DTC" or
the "Book-Entry Transfer Facility") pursuant to the procedure set forth in
Section 3 of the Offer to Purchase.
Stockholders who cannot deliver certificates for their Shares or who cannot
deliver confirmation of the book-entry transfer of their Shares into the
Depositary's account at the Book-Entry Transfer Facility (a "Book-Entry
Confirmation") and all other documents required by this Letter of Transmittal to
the Depositary by the Expiration Date (defined in Section 1 of the Offer to
Purchase) must tender their Shares pursuant to the guaranteed delivery procedure
set forth in Section 3 of the Offer to Purchase. See Instruction 2. Delivery of
documents to the Book-Entry Transfer Facility does not constitute delivery to
the Depositary.
<PAGE> 2
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- ------------------------------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) SHARES TENDERED
APPEAR(S) ON CERTIFICATE(S)) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES TOTAL NUMBER
CERTIFICATE REPRESENTED BY OF SHARES
NUMBER(S)(1) CERTIFICATE(S)(1) TENDERED(2)
<S> <C> <C> <C>
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
------------------------------------------------------
Total Shares
- ------------------------------------------------------------------------------------------------------------------------
(1) Need not be completed by stockholders tendering by book-entry transfer.
(2) Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See Instruction
4.
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ ACCOMPANYING INSTRUCTIONS CAREFULLY
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO
THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE
THE FOLLOWING:
Name of Tendering Institution
-----------------------------------------------------------------------------
DTC Account Number
-----------------------------------------------------------------------------
Transaction Code Number
-----------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Owner(s):
-----------------------------------------------------------------------------
Date of Execution of Notice of Guaranteed Delivery:
--------------------------------------------------------------------
Name of Institution that Guaranteed Delivery:
---------------------------------------------------------------------------
If delivery is by book-entry transfer, give the following:
DTC Account Number
---------------------------------------------------------------------------
Transaction Code Number
---------------------------------------------------------------------------
2
<PAGE> 3
Ladies and Gentlemen:
The undersigned hereby tenders to CPN Sheridan, Inc., a Delaware
corporation ("Merger Subsidiary") and a wholly owned subsidiary of Calpine
Corporation, a Delaware corporation ("Calpine"), the above described shares of
Common Stock (the "Shares"), par value $.01 per share, of Sheridan Energy, Inc.,
a Delaware corporation (the "Company"), pursuant to Merger Subsidiary's offer to
purchase all outstanding Shares at a price of $5.50 per Share, net to the seller
in cash, upon the terms and subject to the conditions set forth in the Offer to
Purchase dated August 31, 1999 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in this Letter of Transmittal (which, together with any
amendments or supplements thereto or hereto, collectively constitute the
"Offer"). Merger Subsidiary reserves the right to transfer or assign, in whole
or from time to time in part, to one or more of Calpine or any of its
wholly-owned subsidiaries the right to purchase Shares tendered pursuant to the
Offer.
Subject to and effective upon acceptance for payment of the Shares tendered
herewith in accordance with the terms and subject to the conditions of the
Offer, the undersigned hereby sells, assigns, and transfers to, or upon the
order of, Merger Subsidiary all right, title and interest in and to all the
Shares that are being tendered hereby (and any and all other Shares or other
securities issued or issuable in respect thereof on or after August 25, 1999)
and irrevocably constitutes and appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares (and
all such other Shares or securities), with full power of substitution (such
power of attorney being deemed to be an irrevocable power coupled with an
interest), to (a) deliver certificates for such Shares (and all such other
Shares or securities), or transfer ownership of such Shares (and all such other
Shares or securities) on the account books maintained by the Book-Entry Transfer
Facility, together, in either such case with all accompanying evidences of
transfer and authenticity, to or upon the order of Merger Subsidiary, (b)
present such Shares (and all such other Shares or securities) for transfer on
the books of the Company and (c) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares (and all such other Shares or
securities), all in accordance with the terms of the Offer.
If, on or after August 25, 1999, the Company should declare or pay any cash
or stock dividend or other distribution on or issue any rights with respect to
the Shares, payable or distributable to stockholders of record on a date before
the transfer to the name of Merger Subsidiary or its nominee or transferee on
the Company's stock transfer records of the Shares accepted for payment pursuant
to the Offer, then, subject to the provisions of the Offer to Purchase, (i) the
purchase price per Share payable by Merger Subsidiary pursuant to the Offer will
be reduced by the amount of any such cash dividend or cash distribution and (ii)
the whole of any such non-cash dividend, distribution or right will be received
and held by the tendering stockholder for the account of Merger Subsidiary and
shall be required to be promptly remitted and transferred by each tendering
stockholder to the Depositary for the account of Merger Subsidiary, accompanied
by appropriate documentation of transfer. Pending such remittance, Merger
Subsidiary will be entitled to all rights and privileges as owner of any such
non-cash dividend, distribution or right and may withhold the entire purchase
price or deduct from the purchase price the amount of value thereof, as
determined by Merger Subsidiary in its sole discretion.
The undersigned hereby irrevocably appoints John T. King, Thomas R. Mason
and Lisa M. Bodensteiner, and each of them, and any other designees of Merger
Subsidiary as the attorneys and proxies of the undersigned, each with full power
of substitution, to exercise all voting and other rights of the undersigned in
such manner as each such attorney and proxy or its substitute shall in its sole
discretion deem proper with respect to, to execute any written consent
concerning any matter as each such attorney and proxy or its substitute shall in
its sole discretion deem proper with respect to, and to otherwise act as such
attorney and proxy or its substitute shall in its sole discretion deem proper
with respect to, all of the Shares tendered hereby which have been accepted for
payment by Merger Subsidiary prior to the time of any vote or other action (and
any and all other Shares or other securities issued or issuable in respect
thereof on or after August 25, 1999), at any meeting of stockholders of the
Company (whether annual or special and whether or not an adjourned meeting), by
written consent or otherwise. This proxy is irrevocable and is granted in
consideration of, and is effective upon, the acceptance for payment of such
Shares by Merger Subsidiary in accordance with the terms of the Offer. Such
acceptance for payment shall revoke any other proxy or written consent granted
by the undersigned at any time with respect to such Shares (and all such other
Shares or securities), and no subsequent proxies will be given or written
consents will be executed by the undersigned (and if given or executed, will not
be deemed to be effective). The undersigned acknowledges that in order for
Shares to be deemed validly tendered, immediately upon the acceptance for
3
<PAGE> 4
payment of such Shares, Merger Subsidiary or Merger Subsidiary's designee must
be able to exercise full voting and other rights of a record and beneficial
holder with respect to such Shares.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby (and any and all other Shares or other securities issued or
issuable in respect thereof on or after August 25, 1999), that the undersigned
own(s) the Shares tendered hereby within the meaning of Rule 14e-4 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"), that
such tender of Shares complies with Rule 14e-4 under the Exchange Act, and that
when the same are accepted for payment by Merger Subsidiary, Merger Subsidiary
will acquire good and unencumbered title thereto, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claims.
The undersigned will, upon request, execute and deliver any additional documents
deemed by the Depositary or Merger Subsidiary to be necessary or desirable to
complete the sale, assignment and transfer of the Shares tendered hereby (and
all such other Shares or securities).
All authority herein conferred or agreed to be conferred in this Letter of
Transmittal shall not be affected by, and shall survive, the death or incapacity
of the undersigned, and any obligation of the undersigned hereunder shall be
binding upon the heirs, personal representatives, successors, assigns,
administrators, trustees in bankruptcy, personal and legal representatives of
the undersigned. Except as stated in the Offer, this tender is irrevocable,
provided that Shares tendered pursuant to the Offer may be withdrawn at any time
prior to the Expiration Date or at any time on or after October 29, 1999, unless
theretofore accepted for payment.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in Section 3 of the Offer to Purchase and in the
instructions hereto will constitute a binding agreement between the undersigned
and Merger Subsidiary upon the terms and subject to the conditions of the Offer.
The undersigned recognizes that under certain circumstances set forth in the
Offer to Purchase, Merger Subsidiary may not be required to accept for payment
any Shares tendered hereby.
Unless otherwise indicated under "Special Payment Instructions", please
issue the check for the purchase price of any Shares purchased, and/or return
any certificates for Shares not tendered or not accepted for payment, in the
name(s) of the registered holder(s) appearing under "Description of Shares
Tendered" (and, in the case of Shares tendered by book-entry transfer, by credit
to the account at the Book-Entry Transfer Facility). Similarly, unless otherwise
indicated under "Special Delivery Instructions", please mail the check for the
purchase price of any Shares purchased and any certificates for Shares not
tendered or not accepted for payment (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing under
"Description of Shares Tendered" shown below the undersigned's signature(s). In
the event that both "Special Payment Instructions" and "Special Delivery
Instructions" are completed, please issue the check for the purchase price of
any Shares purchased and return any certificates for Shares not tendered or not
accepted for payment (and accompanying documents, as appropriate) in the name(s)
of, and mail said check and any certificates (and accompanying documents, as
appropriate) to, the person(s) so indicated. The undersigned recognizes that
Merger Subsidiary has no obligation, pursuant to the "Special Payment
Instructions", to transfer any Shares from the name of the registered holder(s)
thereof if Merger Subsidiary does not accept for payment any of the Shares so
tendered.
4
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or certificates for Shares not tendered or not purchased are to
be issued in the name of someone other than the undersigned.
Issue check and/or certificates to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 5 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or certificates for Shares not tendered or not purchased are to
be mailed to someone other than the undersigned or to the undersigned at
an address other than that shown above.
Mail check and/or certificates to:
Name
----------------------------------------------------
(PLEASE PRINT)
Address
--------------------------------------------------
------------------------------------------------------------
(INCLUDE ZIP CODE)
------------------------------------------------------------
(TAXPAYER IDENTIFICATION OR
SOCIAL SECURITY NO.)
------------------------------------------------------------
5
<PAGE> 6
IMPORTANT
SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 BELOW)
-----------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S) OF SHARES
-----------------------------------------------------------------------------
Dated:
------------------------------ , 1999
(Must be signed by registered holder(s) exactly as name(s) appear(s) on
stock certificate(s) or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by a trustee, executor, administrator,
guardian, attorney-in-fact, agent, officer of a corporation or other person
acting in a fiduciary or representative capacity, please provide the following
information. See Instruction 5.)
Name(s)
-----------------------------------------------------------------------------
(PLEASE PRINT)
-----------------------------------------------------------------------------
Capacity (full title) (See Instruction 5)
----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.
-----------------------------------------------------------------------------
Tax Identification or Social Security No.:
---------------------------------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED -- SEE INSTRUCTIONS 1 AND 5)
Authorized Signature
-----------------------------------------------------------------------------
Name
-----------------------------------------------------------------------------
Name of Firm
-----------------------------------------------------------------------------
Address
-----------------------------------------------------------------------------
-----------------------------------------------------------------------------
(INCLUDE ZIP CODE)
Area Code and Telephone No.
-----------------------------------------------------------------------------
Dated:
------------------------------ , 1999
6
<PAGE> 7
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. Except as otherwise provided below, all
signatures on this Letter of Transmittal must be guaranteed by a bank, broker,
dealer, credit union, savings association or other entity that is a member of a
recognized Medallion Program approved by The Securities Transfer Association,
Inc. (an "Eligible Institution"). Signatures on this Letter of Transmittal need
not be guaranteed (a) if this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) tendered herewith and
such holder(s) have not completed the instruction entitled "Special Payment
Instructions" on this Letter of Transmittal or (b) if such Shares are tendered
for the account of an Eligible Institution. In all other cases, all signatures
on this Letter of Transmittal must be guaranteed by an Eligible Institution. See
Instruction 5.
2. Delivery of Letter of Transmittal and Shares. This Letter of
Transmittal is to be used either if certificates are to be forwarded herewith
or, unless an Agent's Message is utilized, if delivery of Shares is to be made
by book-entry transfer pursuant to the procedure set forth in Section 3 of the
Offer to Purchase. Certificates for all physically delivered Shares, or a
Book-Entry Confirmation of all Shares delivered electronically, as the case may
be, as well as a properly completed and duly executed Letter of Transmittal (or
facsimile thereof) or, in connection with a book-entry transfer, an Agent's
Message, and any other documents required by this Letter of Transmittal, must be
received by the Depositary at one of its addresses set forth on the front page
of this Letter of Transmittal by the Expiration Date. If a stockholder's
certificate for Shares is not immediately available or time will not permit all
required documents to reach the Depositary by the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, such
stockholder's Shares may nevertheless be tendered pursuant to the guaranteed
delivery procedure set forth in Section 3 of the Offer to Purchase. Pursuant to
such procedure: (a) such tender must be made by or through an Eligible
Institution, (b) a properly completed and duly executed Notice of Guaranteed
Delivery substantially in the form provided by Merger Subsidiary must be
received by the Depositary by the Expiration Date and (c) the certificates for
all physically delivered Shares, or a Book-Entry Confirmation, as well as a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) (or, in the case of a book-entry delivery, an Agent's Message) and any
other documents required by this Letter of Transmittal, must be received by the
Depositary within three Nasdaq National Market trading days after the date of
execution of such Notice of Guaranteed Delivery, all as provided in Section 3 of
the Offer to Purchase.
THE METHOD OF DELIVERY OF SHARES AND ALL OTHER REQUIRED DOCUMENTS,
INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION
AND RISK OF THE TENDERING STOCKHOLDER, AND THE DELIVERY WILL BE DEEMED MADE ONLY
WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF CERTIFICATES FOR SHARES ARE SENT BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
No alternative, conditional or contingent tenders will be accepted, and no
fractional Shares will be purchased. By executing this Letter of Transmittal (or
facsimile thereof), the tendering stockholder waives any right to receive any
notice of the acceptance for payment of the Shares.
3. Inadequate Space. If the space provided herein is inadequate, the
certificate numbers and/or the number of Shares should be listed on a separate
schedule attached hereto.
4. Partial Tenders (not applicable to stockholders who tender by
book-entry transfer). If fewer than all the Shares represented by any
certificate delivered to the Depositary are to be tendered, fill in the number
of Shares which are to be tendered in the box entitled "Number of Shares
Tendered". In such case, a new certificate for the remainder of the Shares
represented by the old certificate will be sent to the person(s) signing this
Letter of Transmittal, unless otherwise provided in the appropriate box on this
Letter of Transmittal, as promptly as practicable following the expiration or
termination of the Offer. All Shares represented by certificates delivered to
the Depositary will be deemed to have been tendered unless otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
7
<PAGE> 8
If any of the Shares tendered hereby is held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in different names on
different certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal as there are different registrations of
certificates.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of certificates or separate stock powers
are required unless payment of the purchase price is to be made, or Shares not
tendered or not purchased are to be returned, in the name of any person other
than the registered holder(s). Signatures on any such certificates or stock
powers must be guaranteed by an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, certificates must be
endorsed or accompanied by appropriate stock powers, in either case, signed
exactly as the name(s) of the registered holder(s) appear(s) on the certificates
for such Shares. Signature(s) on any such certificates or stock powers must be
guaranteed by an Eligible Institution.
If this Letter of Transmittal or any certificate or stock power is signed
by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a
corporation or other person acting in a fiduciary or representative capacity,
such person should so indicate when signing, and proper evidence satisfactory to
Merger Subsidiary of the authority of such person so to act must be submitted.
6. Stock Transfer Taxes. Except as set forth in this Instruction 6,
Merger Subsidiary will pay any stock transfer taxes with respect to the sale and
transfer of purchased Shares to it or its order pursuant to the Offer. If,
however, payment of the purchase price is to be made to, or Shares not tendered
or not purchased are to be registered in the name of, any person other than the
registered holder(s), or if tendered certificates are registered in the name of
any person other than the person(s) signing this Letter of Transmittal, the
amount of any stock transfer taxes (whether imposed on the registered holder(s),
such other person or otherwise) payable on account of the transfer to such
person will be deducted from the purchase price unless satisfactory evidence of
the payment of such taxes, or exemption therefrom, is submitted.
EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR
TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF
TRANSMITTAL.
7. Special Payment and Delivery Instructions. If the check for the
purchase price of any Shares purchased is to be issued, or any Shares not
tendered or not purchased are to be returned, in the name of a person other than
the person(s) signing this Letter of Transmittal or if the check or any
certificates for Shares not tendered or not purchased are to be mailed to
someone other than the person(s) signing this Letter of Transmittal or to the
person(s) signing this Letter of Transmittal at an address other than that shown
above, the appropriate boxes on this Letter of Transmittal should be completed.
8. Waiver of Conditions. Subject to the terms of the Offer, Merger
Subsidiary reserves the absolute right in its sole discretion to waive any of
the specified conditions of the Offer (other than the Minimum Condition), in
whole or in part, in the case of any Shares tendered.
9. 31% Backup Withholding; Substitute Form W-9. Under U.S. Federal income
tax law, a stockholder whose tendered Shares are accepted for payment is
required to provide the Depositary with such stockholder's correct taxpayer
identification number ("TIN") on Substitute Form W-9 below. If the Depositary is
not provided with the correct TIN, the Internal Revenue Service may subject the
stockholder or other payee to a $50 penalty. In addition, payments that are made
to such stockholder or other payee with respect to Shares purchased pursuant to
the Offer may be subject to 31% backup withholding.
Certain stockholders (including among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, the stockholder must submit a Form W-8, signed under penalties of
perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Depositary. See the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Depositary is required to withhold 31%
of any such payments made to the stockholder or other payee. Backup withholding
is not an additional tax. Rather, the tax liability of persons subject to
8
<PAGE> 9
backup withholding will be reduced by the amount of tax withheld. If withholding
results in an overpayment of taxes, a refund may be obtained from the Internal
Revenue Service, provided that the required information is given to the Internal
Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
tendering stockholder has not been issued a TIN and has applied for a TIN or
intends to apply for a TIN in the near future. If the box in Part 3 is checked,
the stockholder or other payee must also complete the Certificate of Awaiting
Taxpayer Identification Number below in order to avoid backup withholding.
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Depositary will
withhold 31% on all payments made prior to the time a properly certified
Taxpayer Identification Number is provided to the Depositary. However, such
amounts will be refunded to such Stockholder if a Taxpayer Identification Number
is provided to the Depositary within 60 days.
The stockholder is required to give the Depositary the TIN (e.g., social
security number or employer identification number) of the record owner of the
Shares or of the last transferee appearing on the transfers attached to, or
endorsed on, the Shares. If the Shares are in more than one name or are not in
the name of the actual owner, consult the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for additional
guidance on which number to report.
10. Requests for Assistance or Additional Copies. Requests for assistance
or additional copies of the Offer to Purchase and this Letter of Transmittal may
be obtained from the Information Agent at its address or telephone number set
forth below. Questions may be directed to the Information Agent.
11. Lost, Destroyed or Stolen Certificates. If any certificate
representing Shares has been lost, destroyed or stolen, the stockholder should
promptly notify the Depositary. The stockholder will then be instructed as to
the steps that must be taken in order to replace the certificate(s). This Letter
of Transmittal and related documents cannot be processed until the procedures
for replacing lost or destroyed certificates have been followed.
12. Acceptance of Tendered Shares. Upon the terms and subject to the
conditions of the Offer, Merger Subsidiary will have accepted for payment (and
thereby purchased) Shares validly tendered and not withdrawn when, as and if
Merger Subsidiary gives oral or written notice to the Depositary of its
acceptance of the tenders of such Shares pursuant to the Offer.
13. Withdrawal Rights. Tendered Shares may be withdrawn only pursuant to
the procedure set forth in Section 4 of the Offer to Purchase.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE COPY HEREOF OR, IN
THE CASE OF A BOOK-ENTRY DELIVERY, AN AGENT'S MESSAGE (TOGETHER WITH
CERTIFICATES FOR, OR A BOOK-ENTRY CONFIRMATION WITH RESPECT TO, TENDERED SHARES
WITH ANY REQUIRED SIGNATURE GUARANTEES AND ALL OTHER REQUIRED DOCUMENTS) MUST BE
RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE
RECEIVED BY THE DEPOSITARY, BY THE EXPIRATION DATE.
9
<PAGE> 10
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
PAYOR'S NAME: AMERICAN STOCK TRANSFER & TRUST COMPANY
- ---------------------------------------------------------------------------------------------------------------------------
SUBSTITUTE Part 1 - PLEASE PROVIDE YOUR TIN IN THE BOX AT Social Security Number or
RIGHT AND CERTIFY BY SIGNING AND DATING BELOW. Employer Identification Number
FORM W-9 -------------------------------
DEPARTMENT OF THE TREASURY
INTERNAL REVENUE SERVICE
------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
PAYER'S REQUEST FOR TAXPAYER Part 2 -- Certification -- Under penalties of perjury, I certify that:
IDENTIFICATION NUMBER (1) The number shown on this form is my correct Taxpayer Identification Number (or I
("TIN") am waiting for a number to be issued to me) and
(2) I am not subject to backup withholding because: (a) I am exempt from backup
withholding, or (b) I have not been notified by the Internal Revenue Service (the
"IRS") that I am subject to backup withholding as a result of a failure to report
all interest or dividends, or (c) the IRS has notified me that I am no longer
subject to backup withholding.
Certification Instructions -- You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to backup withholding because
of under-reporting interest or dividends on your tax return. However, if after
being notified by the IRS that you were subject to backup withholding you received
another notification from the IRS that you are no longer subject to backup
withholding, do not cross out such Item (2).
---------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C> <C>
SIGNATURE -------------------- DATE------------, 1999 Part 3 -- Awaiting TIN
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN
PART 3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office, or (2)
I intend to mail or deliver the application in the near future. I understand
that if I do not provide a taxpayer identification number by the time of
payment, 31% of all reportable payments made to me will be withheld, but that
such amounts will be refunded to me if I then provide a Taxpayer Identification
Number within sixty (60) days.
Signature ----------------------------------------------- Date -----------, 1999
10
<PAGE> 11
The Depositary for the Offer is
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
40 Wall Street, 46th Floor (Eligible Institutions Only) 40 Wall Street, 46th Floor
New York, NY 10005 (718) 234-5001 New York, NY 10005
(Attention: Reorganization (Attention: Reorganization
Department) Department)
</TABLE>
Confirm by Telephone:
(718) 921-8200
For Information Call:
(718) 921-8200
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, NY 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll-Free: (800)-848-3094
<PAGE> 1
Exhibit 99 (a)(3)
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
This Notice of Guaranteed Delivery, or one substantially in
the form hereof, must be used to accept the Offer (defined below) if (i)
certificates representing shares of Common Stock (the "Shares"), par value $.01
per share, of Sheridan Energy, Inc., a Delaware corporation (the "Company") are
not immediately available, (ii) the procedure for book-entry transfer cannot be
completed on a timely basis or (iii) time will not permit all required documents
to reach American Stock Transfer & Trust Company (the "Depositary") prior to the
expiration of the Offer. This Notice of Guaranteed Delivery may be delivered by
hand, facsimile transmission or mail to the Depositary. See Section 3 of the
Offer to Purchase.
The Depositary for the Offer is:
AMERICAN STOCK TRANSFER & TRUST COMPANY
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile Transmission: By Hand/Overnight Delivery:
40 Wall Street, 46th Floor (Eligible Institutions Only) 40 Wall Street, 46th Floor
New York, NY 10005 (718) 234-5001 New York, NY 10005
(Attention: Reorganization Department) (Attention: Reorganization
Confirm by Telephone: Department)
(718) 921-8200
For Information Call:
(718) 921-8200
</TABLE>
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS, OR TRANSMISSION OF INSTRUCTIONS VIA
FACSIMILE TRANSMISSION, OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A
VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A LETTER
OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE INSTITUTION" UNDER
THE INSTRUCTIONS THERETO, SUCH SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE
SPACE PROVIDED IN THE SIGNATURE BOX ON THE APPROPRIATE LETTER OF TRANSMITTAL.
<PAGE> 2
Ladies and Gentlemen:
The undersigned hereby tenders to CPN Sheridan, Inc., a
Delaware corporation and a wholly owned subsidiary of Calpine Corporation, a
Delaware corporation, upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated August 31, 1999 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with any supplements or
amendments thereto, collectively constitute the "Offer"), receipt of which is
hereby acknowledged, the number of shares of Common Stock (the "Shares"), par
value $.01 per share, of Sheridan Energy, Inc., a Delaware corporation,
specified below, pursuant to the guaranteed delivery procedure set forth in
Section 3 of the Offer to Purchase.
Number of Shares and Certificate No(s) Name(s) of Record Holder(s):
(if available):
- ---------------------------------- -----------------------------------
- ---------------------------------- -----------------------------------
(Please type or print)
Address(es):
-----------------------
-----------------------------------
(Zip Code)
Area Code
[ ] Check here if Shares will be and Tel. No.:
tendered by book-entry transfer. ----------------------
(Daytime telephone
number)
DTC Account Number: Signature(s):
--------------- ----------------------
Dated: , 1999 -----------------------------------
-------------------------
<PAGE> 3
GUARANTEE
(Not to be used for signature guarantee)
The undersigned, an Eligible Institution (defined in Section 3
of the Offer to Purchase), hereby (i) represents that the tender of shares
effected hereby complies with Rule 14e-4 under the Securities Exchange Act of
1934, as amended and (ii) guarantees delivery to the Depositary, at one of its
addresses set forth above, of certificates representing the Shares tendered
hereby, in proper form for transfer, or a confirmation of a book-entry transfer
of such Shares into the Depositary's account at the Book-Entry Transfer Facility
(defined in Section 3 of the Offer to Purchase), in either case together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof) or, in the case of a book-entry transfer, an Agent's Message (defined
in Section 2 of the Offer to Purchase), together with any other documents
required by the Letter of Transmittal, all within three Nasdaq National Market
trading days after the date hereof.
Name of Firm:
---------------------- -----------------------------------
(Authorized Signature)
Address:
--------------------------- Name:
------------------------------
(Please type or print)
- -----------------------------------
(Zip Code) Title:
-----------------------------
Area Code and
Tel. No.: Date: , 1999
------------------------ ----------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE. CERTIFICATES
SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE> 1
Exhibit 99 (a)(4)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
AT
$5.50 NET PER SHARE
BY
CPN SHERIDAN, INC.
a wholly owned subsidiary of
CALPINE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME,
ON TUESDAY, SEPTEMBER 28, 1999, UNLESS THE OFFER IS EXTENDED.
August 31, 1999
To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees:
We are enclosing the material listed below in connection with
the offer by CPN Sheridan, Inc., a Delaware corporation ("Merger Subsidiary")
and a wholly owned subsidiary of Calpine Corporation, a Delaware corporation, to
purchase all outstanding shares of Common Stock (the "Shares"), par value $.01
per share, of Sheridan Energy, Inc., a Delaware corporation, at $5.50 per Share,
net to the seller in cash, upon the terms and subject to the conditions set
forth in Merger Subsidiary's Offer to Purchase, dated August 31, 1999 (the
"Offer to Purchase"), and the related Letter of Transmittal (which, together
with any supplements or amendments thereto, collectively constitute the
"Offer").
For your information and for forwarding to your clients for
whom you hold Shares registered in your name or in the name of your nominee, we
are enclosing the following documents:
1. The Offer to Purchase;
2. The Letter of Transmittal for your use and for the
information of your clients; Facsimile copies of the
Letter of Transmittal may be used to Tender Shares;
3. The Notice of Guaranteed Delivery to be used to
accept the Offer if the Shares and all other required
documents cannot be delivered to the Depositary by
the Expiration Date (defined in Section 1 of the
Offer to Purchase) or if the procedure for book-entry
transfer cannot be completed by the Expiration Date;
4. A form of letter which may be sent to your clients
for whose accounts you hold Shares registered in your
name or in the name of your nominee, with space
provided for obtaining such clients' instructions
with regard to the Offer;
<PAGE> 2
5. The Letter to Stockholders of the Company from the
Chairman of the Board, accompanied by the Company's
Solicitation/Recommendation Statement on Schedule
14D-9.
6. Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9
providing information relating to backup federal
income tax withholding; and
7. Return envelope addressed to American Stock Transfer
& Trust Company, the Depositary.
WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE.
PLEASE NOTE THAT THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON TUESDAY, SEPTEMBER 28, 1999, UNLESS THE OFFER IS EXTENDED.
In order to take advantage of the Offer, (i) a properly
completed and duly executed Letter of Transmittal (or facsimile thereof) or an
Agent's Message (defined in Section 2 of the Offer to Purchase) in connection
with a book-entry delivery of Shares, and all other required documents should be
sent to the Depositary, and (ii) either certificates representing the tendered
Shares should be delivered to the Depositary, or such Shares should be tendered
by book-entry transfer into the Depositary's account maintained at the
Book-Entry Transfer Facility (described in Section 3 of the Offer to Purchase),
all in accordance with the instructions set forth in the Letter of Transmittal
and the Offer to Purchase.
Merger Subsidiary will not pay any fees or commissions to any
broker or dealer or other person (other than the Information Agent and the
Depositary as described in the Offer to Purchase) for soliciting tenders of
Shares pursuant to the Offer. Merger Subsidiary will, however, upon request,
reimburse brokers, dealers, commercial banks and trust companies for reasonable
and necessary costs and expenses incurred by them in forwarding materials to
their customers. Merger Subsidiary will pay all stock transfer taxes applicable
to its purchase of Shares pursuant to the Offer, subject to Instruction 6 of the
Letter of Transmittal.
Any inquiries you may have with respect to the Offer should be
addressed to, and additional copies of the enclosed materials may be obtained
from, the Information Agent at the addresses and telephone numbers set forth on
the back cover of the Offer to Purchase.
Very truly yours,
CPN Sheridan, Inc.
NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU THE
AGENT OF CPN SHERIDAN, INC., CALPINE CORPORATION, THE INFORMATION AGENT OR THE
DEPOSITARY OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON
TO USE ANY DOCUMENT OR MAKE ANY STATEMENT ON BEHALF OF ANY OF THEM IN CONNECTION
WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED
THEREIN.
-2-
<PAGE> 1
Exhibit 99 (a)(5)
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
AT
$5.50 NET PER SHARE
BY
CPN SHERIDAN, INC.
a wholly owned subsidiary of
CALPINE CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, SEPTEMBER 28, 1999, UNLESS THE OFFER IS EXTENDED.
To Our Clients:
Enclosed for your consideration are the Offer to Purchase, dated August
31, 1999, (the "Offer to Purchase"), and the related Letter of Transmittal
(which, together with any amendments or supplements thereto, collectively
constitute the "Offer") relating to an offer by CPN Sheridan, Inc., a Delaware
corporation ("Merger Subsidiary") and a wholly owned subsidiary of Calpine
Corporation, a Delaware corporation ("Calpine"), to purchase all outstanding
shares of Common Stock (the "Shares"), par value $.01 per share, of Sheridan
Energy, Inc., a Delaware corporation (the "Company") at a purchase price of
$5.50 per Share, net to the seller in cash, upon the terms and subject to the
conditions set forth in the Offer. Holders of Shares whose certificates for such
Shares are not immediately available or who cannot deliver their certificates
and all other required documents to the Depositary, or complete the procedure
for book-entry transfer set forth in Section 3 of the Offer to Purchase, prior
to the Expiration Date (defined in Section 1 of the Offer to Purchase) must
tender their Shares according to the guaranteed delivery procedures set forth in
Section 3 of the Offer to Purchase.
WE ARE THE HOLDER OF RECORD OF SHARES HELD FOR YOUR ACCOUNT. A TENDER OF
SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR
INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION
ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. We
request instructions as to whether you wish us to tender any or all of the
Shares held by us for your account, upon the terms and subject to the conditions
set forth in the Offer.
Your attention is directed to the following:
1. The tender price is $5.50 per Share, net to you in cash without
interest thereon, upon the terms and subject to the conditions set forth in the
Offer.
<PAGE> 2
2. The Board of Directors of the Company has unanimously determined that
the Offer and the transactions contemplated by the Merger Agreement (defined in
the Introduction to the Offer to Purchase) are fair to, and in the best
interests of, the stockholders of the Company, has unanimously approved the
Offer and the transactions contemplated by the Merger Agreement, and unanimously
recommends that the stockholders of the Company accept the Offer and tender
their Shares.
3. The Offer and withdrawal rights expire at 12:00 Midnight, New York City
time, on Tuesday, September 28, 1999, unless the Offer is extended. In all
cases, payment for Shares accepted for payment pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares (or a confirmation of a book-entry transfer of such Shares as described
in Section 2 of the Offer to Purchase), (ii) a properly completed and duly
executed Letter of Transmittal (or facsimile thereof) or an Agent's Message
(defined in Section 2 of the Offer to Purchase) in connection with a book-entry
transfer and (iii) any other documents required by the Letter of Transmittal.
4. The Offer is conditioned upon, among other things, there being validly
tendered by the Expiration Date and not withdrawn a number of Shares which,
together with the Shares then owned by Merger Subsidiary and Calpine, would
represent at least a majority of the Fully Diluted Shares (defined in the
Introduction to the Offer to Purchase).
5. Merger Subsidiary will pay any stock transfer taxes applicable to the
sale of Shares to Merger Subsidiary pursuant to the Offer, except as otherwise
provided in Instruction 6 of the Letter of Transmittal.
6. The Offer is made for all of the outstanding Shares.
If you wish to have us tender any or all of your Shares, please so
instruct us by completing, executing, detaching and returning to us the
instruction form on the detachable part hereof. An envelope to return your
instructions to us is enclosed. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise specified on the detachable part
hereof. Your instructions should be forwarded promptly to permit us to submit a
tender on your behalf by the expiration of the Offer. If you do not instruct us
to tender your Shares, they will not be tendered.
The Offer is not being made to, nor will tenders be accepted from or on
behalf of, holders of Shares in any jurisdiction in which the making of the
Offer or acceptance thereof would not be in compliance with the laws of such
jurisdiction.
-2-
<PAGE> 3
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OUTSTANDING SHARES OF COMMON STOCK
OF
SHERIDAN ENERGY, INC.
BY
CPN SHERIDAN, INC.
The undersigned acknowledge(s) receipt of your letter and the enclosed
Offer to Purchase, dated August 31, 1999, and the related Letter of Transmittal,
relating to the offer by CPN Sheridan, Inc., a Delaware corporation and a wholly
owned subsidiary of Calpine Corporation, a Delaware corporation, to purchase all
outstanding shares of Common Stock (the "Shares"), par value $.01 per share, of
Sheridan Energy, Inc., a Delaware corporation.
The undersigned instructs you to tender the number of Shares indicated
below held by you for the account of the undersigned, upon the terms and subject
to the conditions set forth in such Offer to Purchase and the related Letter of
Transmittal.
Dated: _________________, 1999 SIGN HERE
_____________________________________
Number of Shares (Signatures)
to be Tendered:
______ Shares* _____________________________________
Please Print Name(s)
_____________________________________
Address______________________________
_____________________________________
Include Zip Code
Area Code and
Telephone No._________________________
Taxpayer Identification
or Social Security No.________________
_____________________________________
__________________________
* Unless otherwise indicated, it will be assumed that all Shares held by
us for your account are to be tendered.
<PAGE> 1
Exhibit 99 (a)(6)
CALPINE CORPORATION TO ACQUIRE SHERIDAN ENERGY, INC.
CALPINE TO ADD 148 bcf OF PROVEN GAS RESERVES
SAN JOSE, CALIF. - August 25, 1999 - Calpine Corporation [NYSE:CPN], a leading
U.S. power company, today announced it has entered into an agreement with
Houston, Texas-based Sheridan Energy, Inc. [Nasdaq Small Cap Market:Shdn]
(Sheridan), a natural gas exploration and production company, to acquire
Sheridan through a $41 million cash tender offer.
Calpine will offer to purchase all outstanding shares of Sheridan's common stock
for $5.50 per share. Subject to customary conditions, the companies expect to
complete the tender offer in September 1999.
Sheridan's oil and gas properties are located in northern California and the
Gulf Coast region, including 148 billion cubic feet equivalent of proven
reserves, of which 90 percent are natural gas.
These reserves are located in strategic markets where Calpine is developing
low-cost natural gas supplies and proprietary pipeline systems in support of its
highly efficient, natural gas-fired power plants. These fully integrated
regional systems will provide Calpine with the flexibility to respond quickly
and cost effectively to changing market conditions.
In January 1999, Calpine acquired a 20 percent interest in Sheridan's northern
California properties through an investment in Sheridan California Energy, Inc.,
an affiliate of Sheridan.
"Sheridan is a strategic addition to Calpine's fuel capabilities and brings to
Calpine a wealth of expertise in every facet of gas exploration and
development," said Tom Mason, Calpine executive vice president. "In addition,
Sheridan's portfolio of proven gas reserves will further strengthen our
'wellhead-to-burner tip' fuel program, giving Calpine a stronger competitive
advantage as energy markets across the country deregulate."
The Boards of Directors of Calpine and Sheridan have approved the transaction.
In addition, certain Sheridan shareholders have agreed to tender their shares,
representing an aggregate of approximately 51 percent of the outstanding shares,
to Calpine.
Calpine Corporation is national power company dedicated to providing customers
with reliable and competitively priced electricity and thermal energy. Calpine
currently has approximately 8,500 megawatts of capacity in operation, under
construction or in announced development in 12 states - enough energy to power
eight and a half million households.
Calpine has headquarters in San Jose, Calif., with regional offices in Houston,
Texas; Pleasanton, Calif.; and Boston, Mass. The company was founded in 1984 and
is publicly traded on the New
<PAGE> 2
York Stock Exchange under the symbol CPN. To learn more about Calpine, visit its
website at www.calpine.com.
The matters discussed in this news release may be considered "forward looking"
statements within the meaning of Section 27A of the Securities and Exchange Act
of 1993, as amended, and Section 21E of the Securities Exchange Act of 1934, as
amended. Such statements include declarations regarding the intent, belief or
current expectations of the Company and its management. Prospective investors
are cautioned that any such forward-looking statements are not guarantees of
future performance and involve a number of risks and uncertainties; actual
results could differ materially from those indicated by such forward-looking
statements. Among the important factors that could cause results to differ
materially from those indicated by such forward-looking statements are: (i) that
the information is of a preliminary nature and may be subject to further
adjustments, (ii) risks associated with tender offers and mergers, (iii) changes
in government regulation, (iv) general operating risks, (v) the dependence on
third parties, (vi) the dependence on senior management, (vii) the successful
exploitation of an oil or gas resource that ultimately depends upon the geology
of the resource, the total amount and cost to develop recoverable reserves, and
operational factors relating to the extraction of natural gas, and (viii) other
risks identified from time to time in the Company's reports and registration
statements filed with the Securities and Exchange Commission.
Contact:
Calpine Corporation, San Jose
- - Katherine Potter, (408) 995-5115 Ext. 1168
Public Relations
- - Rick Barraza, (408) 995-5115 Ext. 1125
Investor Relations
<PAGE> 1
Exhibit 99 (a)(7)
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. -- Social Security numbers have nine digits separated by two hyphens:
i.e. 000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the number
to give the payer.
<TABLE>
<CAPTION>
- ---------------------------------------------------------- --------------------------------------------------------
Give the name and Give the name and
For this type of account: SOCIAL SECURITY number For this type of account: EMPLOYER IDENTIFICATION
of -- number of --
- ---------------------------------------------------------- --------------------------------------------------------
<S> <C> <C> <C>
1. An individual's account The individual 6. A valid trust, estate The legal entity (Do
or pension trust not furnish the
2. Two or more individuals The actual owner of the identifying number of
(joint account) account or, if combined the personal
funds, any one of the representative or
individuals(1) trustee unless the
legal entity itself is
3. Custodian account of a The minor(2) not designated in the
minor (Uniform Gift to account title.)(4)
Minors Act)
7. Corporate account The corporation
4. (a) The usual revocable The grantor-trustee(1) 8. Religious, charitable, The organization
savings trust account or educational
(grantor is also trustee) organization account
(b) So-called trust The actual owner(1) 9. Partnership The partnership
account that is not a
legal or valid trust 10. Association, club, or The organization
under State law other tax-exempt
organization
5. Sole proprietorship The owner(3)
account 11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of
Agriculture in the
name of a public
entity (such as a
State or local
government, school
district, or prison)
that receives
agricultural program
payments
13. Sole proprietorship The owner(3)
account
- ---------------------------------------------------------- ---------------------------------------------------------
</TABLE>
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's social security number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Identification Number.
(4) List first and circle the name of the legal trust, estate, or pension
trust.
NOTE: If no name is circled when there is more than one name, the number will be
considered to be that of the first name listed.
<PAGE> 2
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
PAGE 2
OBTAINING A NUMBER
If you don't have a taxpayer identification number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on ALL payments include the
following:
- - A corporation.
- - A financial institution.
- - An organization exempt from tax under section 501(a), or an individual
retirement plan or a custodial account under Section 403(b)(7).
- - The United States or any agency or instrumentality thereof.
- - A State, the District of Columbia, a possession of the United States, or
any subdivision or instrumentality thereof.
- - A foreign government, a political subdivision of a foreign government, or
any agency or instrumentality thereof.
- - An international organization or any agency, or instrumentality thereof.
- - A registered dealer in securities or commodities registered in the U.S. or
a possession of the U.S.
- - A real estate investment trust.
- - A common trust fund operated by a bank under section 584(a).
- - An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- - An entity registered at all times under the Investment Company Act of
1940.
- - A foreign central bank of issue.
- - A futures commission merchant registered with the Commodity Futures
Trading Commission.
- - A middleman known in the investment community as a nominee or listed in
the most recent publication of the American Society of Corporate
Secretaries, Inc. Nominee List.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- - Payments to nonresident aliens subject to withholding under section 1441.
- - Payments to partnerships not engaged in a trade or business in the U.S.
and which have at least one nonresident partner.
- - Payments of patronage dividends where the amount received is not paid in
money.
- - Payments made by certain foreign organizations.
Payments of interest not generally subject to backup withholding include the
following:
- - Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct taxpayer identification number to the payer.
- - Payments of tax-exempt interest (including exempt-interest dividends under
section 852).
- - Payments described in section 6049(b)(5) to non-resident aliens.
- - Payments on tax-free covenant bonds under section 1451.
- - Payments made by certain foreign organizations.
- - Mortgage interest paid to an individual.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO
THE PAYER. IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments, other than interest, dividends, and patronage dividends, that
are not subject to information reporting, are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045, and 6050A.
PRIVACY ACT NOTICE -- Section 6109 requires most recipients of dividend,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Payers must generally withhold 31% of taxable
interest, dividend, and certain other payments to a payee who does not furnish a
taxpayer identification number to a payer. Certain penalties may also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER -- If you fail
to furnish your taxpayer identification number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING -- If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION -- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE
SERVICE.
<PAGE> 1
Exhibit 99(a)(8)
This announcement is neither an offer to purchase nor a solicitation of an offer
to sell Shares. The Offer is made solely by the Offer to Purchase dated August
31, 1999 and the related Letter of Transmittal and any amendments or supplements
thereto and is being made to all holders of Shares. The Offer is not being made
to, nor will tenders be accepted from or on behalf of, holders of Shares in any
jurisdiction in which the making of the Offer or acceptance thereof would not be
in compliance with the laws of such jurisdiction. In any jurisdiction where the
securities, blue sky or other laws require that the Offer be made by a licensed
broker or dealer, the Offer shall be deemed to be made on behalf of Merger
Subsidiary by one or more registered brokers licensed under the laws of such
jurisdiction.
Notice of Offer to Purchase for Cash
All Outstanding Shares of Common Stock
of
Sheridan Energy, Inc.
at
$5.50 Net Per Share
by
CPN Sheridan, Inc.
a wholly owned subsidiary of
Calpine Corporation
CPN Sheridan, Inc., a Delaware corporation ("Merger Subsidiary") and a wholly
owned subsidiary of Calpine Corporation, a Delaware corporation ("Calpine"), is
offering to purchase all outstanding shares of Common Stock, par value $.01 per
share (the "Shares"), of Sheridan Energy, Inc., a Delaware corporation (the
"Company"), at $5.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase dated August 31,
1999 (the "Offer to Purchase") and in the related Letter of Transmittal (which,
together with any amendments or supplements thereto, collectively constitute the
"Offer"). Tendering stockholders of the Company will not be obligated to pay
brokerage fees or commissions or, except as set forth in the Letter of
Transmittal, transfer taxes on the purchase of Shares pursuant to the Offer.
THE OFFER AND WITHDRAWAL RIGHTS EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON
TUESDAY, SEPTEMBER 28, 1999, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly tendered
by the expiration of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Calpine and Merger Subsidiary, would
represent at least a majority of the total number of outstanding Shares on a
fully diluted basis.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated as of
August 25, 1999 (the "Merger Agreement"), among the Company, Calpine and Merger
Subsidiary, which has been unanimously approved by the Company's Board of
Directors. The Merger Agreement provides, among other things, that, after
consummation of the Offer, and after satisfaction or waiver of all conditions to
the Merger (defined below) set forth in the Merger Agreement, Merger Subsidiary
will be merged into the Company (the "Merger"), with the Company continuing as
the surviving corporation. Pursuant to the Merger Agreement, at the effective
time of the Merger (the "Effective Time"), each outstanding Share (other than
Shares owned by Calpine, Merger Subsidiary or any subsidiary of either of them
or held by the Company as treasury stock (which shall be canceled) or by
stockholders exercising appraisal rights under the Delaware General Corporation
Law) will be converted into the right to receive $5.50 in cash or any higher
price paid for each Share in the Offer, without interest.
The Board of Directors of the Company has unanimously determined that the Offer
and the transactions contemplated by the Merger Agreement are fair to, and in
the best interests of, the stockholders of the Company, has unanimously approved
the Offer and the transactions contemplated by the Merger Agreement and
unanimously recommends that the stockholders of the Company accept the Offer and
tender their Shares.
The term "Expiration Date" means 12:00 midnight, New York City time, on Tuesday,
September 28, 1999; unless Merger Subsidiary shall have extended the period of
time for which the Offer is open, in which event the term "Expiration Date"
shall mean the latest time and date at which the Offer, as so extended by Merger
Subsidiary, will expire. Merger Subsidiary may, without the consent of the
Company, (i) extend the Offer, if at any scheduled Expiration Date any of the
conditions set forth in Section 15 of the Offer to Purchase have not been
satisfied or waived, until such time as such conditions are satisfied or waived,
(ii) extend the Offer for a period of not more than 20 business days beyond the
initial Expiration Date, if on the date of such extension less than 90% of the
Shares on a fully diluted basis have been validly tendered and not withdrawn
pursuant to the Offer and (iii) extend the Offer for any period required by any
rule, regulation, interpretation or position of the Securities and Exchange
Commission or the staff applicable to the Offer. Under certain circumstances,
Merger Subsidiary is required to extend the Offer as described in Section 11 of
the Offer to Purchase. Any such extension will be followed as promptly as
practicable by public announcement thereof, such announcement to be made no
later than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date.
For purposes of the Offer, Merger Subsidiary shall be deemed to have accepted
for payment tendered Shares when, and if, Merger Subsidiary gives oral or
written notice to American Stock Transfer & Trust Company (the "Depositary") of
its acceptance of the tenders of such Shares. In all cases, payment for Shares
accepted for payment pursuant to the Offer will be made only after timely
receipt by the Depositary of (i) certificates for such Shares (or of a
confirmation of a book-entry transfer of such Shares into the Depositary's
account at the Book-Entry Transfer Facility (defined in the Offer to Purchase)),
(ii) a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) or an Agent's Message (defined in the Offer to Purchase) in connection
with a book-entry transfer and (iii) any other required documents. Under no
circumstance will interest be paid on the purchase price to be paid by Merger
Subsidiary for such Shares, regardless of any extension of the Offer or any
delay in making such payment.
Tenders of Shares made pursuant to the Offer may be withdrawn at any time prior
to the expiration of the Offer. Thereafter, such tenders are irrevocable, except
that they may be withdrawn on or after October 29, 1999, unless theretofore
accepted for payment as provided in the Offer to Purchase. If Merger Subsidiary
extends the period of time during which the Offer is open, is delayed in
accepting for payment or paying for Shares or is unable to accept for payment or
pay for Shares pursuant to the Offer for any reason, then, without prejudice to
Merger Subsidiary's rights under the Offer, the Depositary may, on behalf of
Merger Subsidiary, retain all Shares tendered, and such Shares may not be
withdrawn except as otherwise provided in the Offer to Purchase. For a
withdrawal to be effective, a written or facsimile transmission notice of
withdrawal must be timely received by the Depositary at one of its addresses set
forth in the Offer to Purchase and must specify the name of the person who
tendered the Shares to be withdrawn and the number of Shares to be withdrawn. If
the Shares to be withdrawn have been delivered to the Depositary, a signed
notice of withdrawal with (except in the case of Shares tendered by an Eligible
Institution (defined in the Offer to Purchase)) signatures guaranteed by an
Eligible Institution must be submitted prior to the release of such Shares. In
addition, such notice must specify, in the case of Shares tendered by delivery
of certificates, the name of the registered holder (if different from that of
the tendering stockholder) and the serial numbers shown on the particular
certificates evidencing the Shares to be withdrawn or, in the case of Shares
tendered by book-entry transfer, the name and number of the account at the
Book-Entry Transfer Facility to be credited with the withdrawn Shares.
Withdrawals may not be rescinded, and Shares withdrawn will thereafter be deemed
not validly tendered for purposes of the Offer. However, withdrawn Shares may be
retendered by again following one of the procedures described in the Offer to
Purchase at any time prior to the expiration of the Offer.
The information required to be disclosed by paragraph (e)(1)(vii) of Rule 14d-6
of the General Rules and Regulations under the Securities Exchange Act of 1934,
as amended, is contained in the Offer to Purchase and is incorporated herein by
reference.
The Company has provided Merger Subsidiary with the Company's stockholder list
and security position listings for the purpose of disseminating the Offer to
holders of Shares. The Offer to Purchase and the related Letter of Transmittal
will be mailed to record holders of Shares and will be furnished to brokers,
banks and similar persons whose names, or the names of whose nominees, appear on
the stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing for subsequent transmittal to
beneficial owners of Shares.
The Offer to Purchase and the related Letter of Transmittal contain important
information which should be read carefully before any decision is made with
respect to the Offer.
Questions and requests for copies of the Offer to Purchase and the related
Letter of Transmittal and other tender offer materials may be directed to the
Information Agent as set forth below, and copies will be furnished promptly at
Merger Subsidiary's expense. No fees or commissions will be payable by Merger
Subsidiary to brokers, dealers or other persons (other than the Information
Agent) for soliciting tenders of Shares pursuant to the Offer.
The Information Agent is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect (212) 269-5550
All Others Call Toll Free (800) 848-3094
August 31, 1999
<PAGE> 1
Exhibit 99 (a)(9)
CALPINE CORPORATION COMMENCES TENDER OFFER FOR SHERIDAN ENERGY, INC.
SAN JOSE, CALIF. - August 31, 1999 - Calpine Corporation (NYSE:CPN), a leading
U.S. power company, today announced that CPN Sheridan, Inc., a wholly-owned
subsidiary of Calpine, commenced a tender offer today for all of the outstanding
shares of Sheridan Energy, Inc. (Nasdaq SmallCap Market:SHDN) common stock, at a
price of $5.50 per share, net to the seller in cash.
The offer is being made pursuant to the Agreement and Plan of Merger dated as of
August 25, 1999 among Calpine, CPN Sheridan, Inc. and Sheridan. The offer is
conditioned, among other things, upon a number of shares being tendered and not
withdrawn such that, upon consummation of the offer, Calpine and its affiliates
will beneficially own in the aggregate not less than a majority of the shares on
a fully diluted basis. The offer will expire at 12:00 midnight, New York City
time, on Tuesday, September 28, 1999, unless the offer is extended.
The Boards of Directors of Calpine and Sheridan have approved the transaction.
In addition, certain Sheridan shareholders have agreed to tender their shares,
representing an aggregate of approximately 51 percent of the outstanding shares,
to Calpine.
The information agent for the offer is D.F. King & Co., Inc., 77 Water Street,
20th Floor, New York, NY, 10005, telephone (212) 929-5500.
Sheridan's oil and gas properties are located in northern California and the
Gulf Coast region, including 148 billion cubic feet equivalent of proven
reserves, of which 90 percent are natural gas.
Calpine is a national power company dedicated to providing customers with
reliable and competitively priced electricity and thermal energy. Calpine
currently has approximately 8,900 megawatts of capacity in operation, pending
acquisition, under construction or in announced development in 14 states -
enough energy to power nearly nine million households. Calpine has headquarters
in San Jose, Calif., with regional offices in Houston, Texas; Pleasanton,
Calif.; and Boston, Mass. The company was founded in 1984 and is publicly traded
on the New York Stock Exchange under the symbol CPN. To learn more about
Calpine, visit its website at www.calpine.com
<PAGE> 2
Calpine Corporation, San Jose
- - Katherine Potter, (408) 995-5115 Ext. 1168
Public Relations
- - Rick Barraza, (408) 995-5115 Ext. 1125
Investor Relations
<PAGE> 1
Exhibit 99 (c)(1)
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
dated as of
August 25, 1999
among
SHERIDAN ENERGY, INC.,
CALPINE CORPORATION,
and
CPN SHERIDAN, INC.
- --------------------------------------------------------------------------------
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Introduction......................................................................................................1
ARTICLE I
The Offer
SECTION 1.1. The Offer...........................................................................................1
SECTION 1.2. Company Action......................................................................................3
SECTION 1.3. Directors...........................................................................................3
ARTICLE II
The Merger
SECTION 2.1. The Merger..........................................................................................4
SECTION 2.2. Conversion of Shares................................................................................5
SECTION 2.3. Surrender and Payment...............................................................................5
SECTION 2.4. Dissenting Shares...................................................................................6
SECTION 2.5. Stock Options.......................................................................................6
ARTICLE III
The Surviving Corporation
SECTION 3.1. Certificate of Incorporation........................................................................7
SECTION 3.2. Bylaws..............................................................................................7
SECTION 3.3. Directors and Officers..............................................................................7
ARTICLE IV
Representations and Warranties
SECTION 4.1. Representations and Warranties of the Company.......................................................8
(a) Organization, Standing and Corporate Power..............................................................8
(b) Subsidiaries............................................................................................8
(c) Capital Structure.......................................................................................8
(d) Authority; Noncontravention.............................................................................9
(e) SEC Documents; Financial Statements; No Undisclosed Liabilities........................................10
(f) Disclosure Documents...................................................................................11
(g) Absence of Certain Changes or Events...................................................................11
(h) Litigation.............................................................................................12
(i) Absence of Changes in Stock or Benefit Plans...........................................................13
(j) Participation and Coverage in Benefit Plans............................................................13
</TABLE>
<PAGE> 3
<TABLE>
<CAPTION>
Page
----
<S> <C>
(k) ERISA Compliance.......................................................................................13
(l) Taxes..................................................................................................14
(m) State Takeover Statutes................................................................................15
(n) Brokers; Schedule of Fees and Expenses.................................................................16
(o) Permits; Compliance with Laws..........................................................................16
(p) Contracts; Debt Instruments............................................................................16
(q) Opinion of Financial Advisor...........................................................................18
(r) Interests of Officers and Directors....................................................................18
(s) Technology.............................................................................................18
(t) Change of Control......................................................................................19
(u) Environmental..........................................................................................19
(v) Title to Properties....................................................................................20
(w) Other Obligations......................................................................................21
(x) Public Utility Holding Company Act; Non-Utility Status.................................................22
(y) Year 2000..............................................................................................22
(z) Insurance..............................................................................................23
(aa) Disclosure.............................................................................................23
SECTION 4.2. Representations and Warranties of Parent and Merger Subsidiary.....................................23
(a) Organization, Standing and Corporate Power.............................................................23
(b) Authority; Noncontravention............................................................................23
(c) Disclosure Documents...................................................................................24
(d) Brokers................................................................................................24
ARTICLE V
Covenants of the Company
SECTION 5.1. Conduct of Business................................................................................25
SECTION 5.2. Stockholder Meeting; Proxy Material................................................................26
SECTION 5.3. Access to Information..............................................................................27
SECTION 5.4. Other Offers.......................................................................................27
SECTION 5.5. State Takeover Statutes............................................................................28
ARTICLE VI
Covenants of Parent
SECTION 6.1. Obligations of Merger Subsidiary...................................................................28
SECTION 6.2. Voting of Shares...................................................................................28
SECTION 6.3. Director and Officer Liability.....................................................................28
SECTION 6.4. Employees..........................................................................................29
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE VII
Covenants of Parent and the Company
SECTION 7.1. HSR Act Filings; Reasonable Efforts; Notification..................................................29
SECTION 7.2. Public Announcements...............................................................................31
ARTICLE VIII
Conditions to the Merger
SECTION 8.1. Conditions to the Obligations of Each Party........................................................31
ARTICLE IX
Termination
SECTION 9.1. Termination........................................................................................32
SECTION 9.2. Effect of Termination..............................................................................33
ARTICLE X
Miscellaneous
SECTION 10.1. Notices...........................................................................................33
SECTION 10.2. Survival of Representations and Warranties........................................................34
SECTION 10.3. Amendments; No Waivers............................................................................34
SECTION 10.4. Fees and Expenses.................................................................................34
SECTION 10.5. Successors and Assigns............................................................................35
SECTION 10.6. Governing Law.....................................................................................35
SECTION 10.7. Counterparts; Effectiveness; Interpretation.......................................................36
SECTION 10.8. Enforcement.......................................................................................36
SECTION 10.9. Severability......................................................................................36
SECTION 10.10. Entire Agreement; No Third Party Beneficiaries...................................................36
SECTION 10.11. Standstill.......................................................................................36
</TABLE>
-iii-
<PAGE> 5
AGREEMENT AND PLAN OF MERGER, dated as of August 25, 1999
(this "Agreement"), among SHERIDAN ENERGY, INC., a Delaware
corporation (the "Company"), CALPINE CORPORATION, a Delaware
corporation ("Parent"), and CPN SHERIDAN, INC., a Delaware
corporation and a wholly owned subsidiary of Parent ("Merger
Subsidiary").
INTRODUCTION
WHEREAS, the respective Boards of Directors of the Company,
Parent and Merger Subsidiary have determined that it is advisable and in the
best interests of their respective stockholders for Parent to acquire the
Company upon the terms and subject to the conditions set forth herein;
WHEREAS, the Company, Parent and Merger Subsidiary desire to
make certain representations, warranties, covenants and agreements in connection
with this Agreement;
WHEREAS, in furtherance of such acquisition, Parent proposes
to cause Merger Subsidiary to make the Offer (defined in Section 1.1) to
purchase all of the issued and outstanding shares of common stock, par value
$.01 per share, of the Company upon the terms and subject to the conditions of
this Agreement, and the Board of Directors of the Company (the "Board" or the
"Board of Directors") has unanimously approved the Offer and recommended that
the stockholders of the Company accept the Offer; and
WHEREAS, the respective Boards of Directors of the Company,
Parent and Merger Subsidiary have deemed advisable and have approved the Offer
and the Merger (defined in Section 2.1) of Merger Subsidiary with and into the
Company upon the terms and subject to the conditions set forth in this
Agreement;
NOW, THEREFORE, in consideration of the representations,
warranties and agreements herein contained, and subject to the terms and
conditions herein contained, the parties hereto do hereby agree as follows:
ARTICLE I
THE OFFER
SECTION 1.1. The Offer. (a) Provided that nothing shall have
occurred that would result in a failure to satisfy any of the conditions set
forth in Annex I hereto, Merger Subsidiary shall, as promptly as practicable
after the date hereof, but in no event later than one business day (as defined
in Rule 14b-1(c)(6) promulgated under the Securities and Exchange Act of 1934,
as amended (the "Exchange Act")) following the execution of this Agreement,
issue a public announcement of the execution of this Agreement and as promptly
as practicable thereafter, but in no event later than five business days
following such public announcement, commence an offer (the "Offer") to purchase
all of the outstanding shares of common stock, par value $.01 per share (the
"Shares"), of the Company at a price of $5.50 per Share, net to the seller in
cash. The initial expiration date (the "Initial Expiration Date") of the Offer
shall be 20 business days following the
<PAGE> 6
commencement of the Offer. The Offer shall be subject to the condition that
there shall be validly tendered in accordance with the terms of the Offer prior
to the expiration date of the Offer and not withdrawn a number of Shares which,
together with the Shares then owned by Parent and Merger Subsidiary, represents
at least a majority of the total number of outstanding Shares, assuming the
exercise of all outstanding options, rights and convertible securities (if any)
and the issuance of all Shares that the Company is obligated to issue (such
total number of outstanding Shares being hereinafter referred to as the "Fully
Diluted Shares") (the "Minimum Condition") and to the other conditions set forth
in Annex I hereto. Parent and Merger Subsidiary expressly reserve the right to
waive the conditions to the Offer and to make any change in the terms or
conditions of the Offer; provided that, without the prior written consent of the
Company, no change may be made which (i) except as provided in the next
sentence, extends the Offer, (ii) changes the form of consideration to be paid,
(iii) decreases the price per Share or the number of Shares sought in the Offer,
(iv) imposes conditions to the Offer in addition to those set forth in Annex I,
(v) changes or waives the Minimum Condition, or (vi) makes any other change to
any condition to the Offer set forth in Annex I which is materially adverse to
the holders of Shares. Notwithstanding the foregoing, Merger Subsidiary may,
without the consent of the Company, (i) extend the Offer, if at any scheduled
expiration date of the Offer any of the conditions to Merger Subsidiary's
obligation to purchase Shares pursuant to the Offer shall not be satisfied or
waived, until such time as such conditions are satisfied or waived, (ii) extend
the Offer for a period of not more than 20 business days beyond the Initial
Expiration Date, if on the date of such extension less than 90% of the Fully
Diluted Shares have been validly tendered and not properly withdrawn pursuant to
the Offer, and (iii) extend the Offer for any period required by any rule,
regulation, interpretation or position of the Securities and Exchange Commission
(the "SEC") or the staff thereof applicable to the Offer. Parent and Merger
Subsidiary agree that if all of the conditions to Merger Subsidiary's obligation
to purchase Shares pursuant to the Offer are not satisfied on any scheduled
expiration date of the Offer then, provided that all such conditions are
reasonably capable of being satisfied, Merger Subsidiary shall extend the Offer
from time to time in increments of at least five business days each until the
earliest to occur of (x) the satisfaction or waiver of the Minimum Condition or
such other condition, (y) the termination of this Agreement in accordance with
its terms and (z) December 1, 1999. Subject to the terms of the Offer in this
Agreement and the satisfaction (or waiver to the extent permitted by this
Agreement) of the conditions of the Offer, Merger Subsidiary shall accept for
payment all Shares validly tendered and not withdrawn pursuant to the Offer as
soon as practicable after the applicable expiration of the Offer.
(b) As soon as practicable on the date of commencement of the
Offer, Parent and Merger Subsidiary shall (i) file with the SEC a Tender Offer
Statement on Schedule 14D-l with respect to the Offer which will contain the
offer to purchase and form of the related letter of transmittal (together with
any supplements or amendments thereto, collectively the "Offer Documents") and
(ii) cause the Offer Documents to be disseminated to holders of Shares. Parent,
Merger Subsidiary and the Company each agrees promptly to correct any
information provided by it for use in the Offer Documents if and to the extent
that it shall have become false or misleading in any material respect. Parent
and Merger Subsidiary agree to take all steps necessary to cause the Offer
Documents as so corrected to be filed with the SEC and to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. Parent and Merger Subsidiary agree to provide the
Company and its counsel in writing with any comments Parent, Merger Subsidiary
or their counsel receive from the SEC or its staff with respect to the Offer
Documents, promptly after receipt of such comments. The Company and its counsel
shall be given a
-2-
<PAGE> 7
reasonable opportunity to review and comment upon the Offer Documents and all
amendments and supplements thereto prior to their filing with the SEC.
SECTION 1.2. Company Action. (a) The Company hereby consents
to the Offer and represents that its Board of Directors, at a meeting duly
called and held, has (i) unanimously determined that this Agreement and the
transactions contemplated hereby, including the Offer and the Merger (defined
below in Section 2.1), and the Stockholder Option Agreement, dated as of August
25, 1999 (the "Stockholder Option Agreement"), among the stockholders of the
Company that are named therein ("Stockholders") and Merger Subsidiary, and the
transactions contemplated thereby, are fair to and in the best interest of the
Company's stockholders, (ii) unanimously approved this Agreement and the
transactions contemplated hereby, including the Offer and the Merger, and the
Stockholder Option Agreement and the transactions contemplated thereby, which
approval satisfies in full the requirements of Section 203 of the General
Corporation Law of the State of Delaware (the "Delaware Law"), and (iii)
unanimously resolved to recommend acceptance of the Offer and approval and
adoption of this Agreement and the Merger by its stockholders. The Company
further represents that Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") has delivered to the Company's Board of Directors its opinion that the
consideration to be paid in the Offer and the Merger is fair to the holders of
Shares from a financial point of view. The Company has been advised that each of
its directors and executive officers presently intend either to tender their
Shares pursuant to the Offer or to vote in favor of the Merger. The Company will
promptly furnish Parent and Merger Subsidiary with a list of its stockholders,
mailing labels and any available listing or computer file containing the names
and addresses of all record holders of Shares and lists of securities positions
of Shares held in stock depositories, in each case as of the most recent
practicable date, and will provide to Parent and Merger Subsidiary such
additional information (including, without limitation, updated lists of
stockholders, mailing labels and lists of securities positions) and such other
assistance as Parent or Merger Subsidiary may reasonably request in connection
with the Offer.
(b) As soon as practicable on the day that the Offer is
commenced the Company will file with the SEC and disseminate to holders of
Shares a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Schedule
14D-9") which shall reflect the recommendations of the Company's Board of
Directors referred to above, subject to the fiduciary duties of the Board of
Directors of the Company as advised by Winstead Sechrest & Minick P.C., counsel
to the Company. The Company, Parent and Merger Subsidiary each agrees promptly
to correct any information provided by it for use in the Schedule 14D-9 if and
to the extent that it shall have become false or misleading in any material
respect. The Company agrees to take all steps necessary to cause the Schedule
14D-9 as so corrected to be filed with the SEC and to be disseminated to holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. Parent and its counsel shall be given an opportunity to review
and comment on the Schedule 14D-9 prior to its being filed with the SEC.
SECTION 1.3. Directors. (a) Effective upon the acceptance for
payment by Merger Subsidiary of the Shares tendered pursuant to the Offer,
Parent shall be entitled to designate the number of directors, rounded up to the
next whole number, on the Company's Board of Directors that equals the product
of (i) the total number of directors on the Company's Board of Directors (giving
effect to the election of any additional directors pursuant to this Section) and
(ii) the percentage that the number of Shares owned by Parent or Merger
Subsidiary (including Shares
-3-
<PAGE> 8
accepted for payment) bears to the total number of Shares outstanding, and the
Company shall take all action necessary to cause Parent's designees to be
elected or appointed to the Company's Board of Directors, including, without
limitation, increasing the number of directors, or seeking and accepting
resignations of incumbent directors, or both; provided that, prior to the
Effective Time (defined below in Section 2.1), the Company's Board of Directors
shall always have one member who is neither a designee nor an affiliate of
Parent or Merger Subsidiary nor an employee of the Company (an "Independent
Director"). If the number of Independent Directors is reduced below one for any
reason prior to the Effective Time the departing Independent Director shall be
entitled to designate a person to fill such vacancy. No action proposed to be
taken by the Company to (i) amend or terminate this Agreement or the certificate
of incorporation or by-laws of the Company or (ii) waive any action required to
be taken by Parent or Merger Subsidiary hereunder or any rights of the Company
hereunder shall be effective without the approval of the Independent Director.
At such times, the Company will use its best efforts to cause individuals
designated by Parent to constitute the same percentage as such individuals
represent on the Company's Board of Directors of (x) each committee of the
Board, (y) each board of directors of each subsidiary (defined below in Section
4.1(a)) and (z) each committee of each such board.
(b) The Company's obligations to appoint designees to the
Board of Directors shall be subject to Section 14(f) of the Exchange Act
(defined below in Section 4.1(d)) and Rule 14f-l promulgated thereunder. The
Company shall promptly take all actions required pursuant to Section 14(f) and
Rule 14f-l in order to fulfill its obligations under this Section 1.3 and shall
include in the Schedule 14D-9 such information with respect to the Company and
its officers and directors as is required under Section 14(f) and Rule 14f-l to
fulfill its obligations under this Section 1.3. Parent will supply to the
Company in writing and be solely responsible for any information with respect to
itself and its nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
ARTICLE II
THE MERGER
SECTION 2.1. The Merger. (a) At the Effective Time, Merger
Subsidiary shall be merged (the "Merger") with and into the Company in
accordance with Delaware Law, whereupon the separate existence of Merger
Subsidiary shall cease, and the Company shall be the surviving corporation (the
"Surviving Corporation").
(b) As soon as practicable after satisfaction of or, to the
extent permitted hereunder, waiver of all conditions to the Merger, the Company
and Merger Subsidiary will file a certificate of merger with the Secretary of
State of the State of Delaware and make all other filings or recordings required
by Delaware Law in connection with the Merger. The Merger shall become effective
at such time as the certificate of merger is duly filed with the Secretary of
State of the State of Delaware or, with the consent of the Independent Director,
at such later time as is specified in the certificate of merger (the "Effective
Time").
(c) From and after the Effective Time, the Surviving
Corporation shall possess all the rights, privileges, powers and franchises and
be subject to all of the restrictions, disabilities and duties of the Company
and Merger Subsidiary, all as provided under Delaware Law.
-4-
<PAGE> 9
SECTION 2.2. Conversion of Shares. At the Effective Time:
(a) each Share held by the Company as treasury stock or owned
by Parent, Merger Subsidiary or any subsidiary of either of them
immediately prior to the Effective Time shall be canceled, and no
payment shall be made with respect thereto;
(b) each share of common stock of Merger Subsidiary
outstanding immediately prior to the Effective Time shall be converted
into and become one share of common stock of the Surviving Corporation
with the same rights, powers and privileges as the shares so converted
and shall constitute the only outstanding shares of capital stock of
the Surviving Corporation; and
(c) each Share outstanding immediately prior to the Effective
Time shall, except as otherwise provided in Section 2.2(a) or as
provided in Section 2.4 with respect to Shares as to which appraisal
rights have been exercised, be converted into the right to receive
$5.50 in cash or any higher price paid for each Share in the Offer,
without interest (the "Merger Consideration").
SECTION 2.3. Surrender and Payment. (a) Prior to the Effective
Time, Parent shall appoint a bank or trust company (the "Exchange Agent") for
the purpose of exchanging certificates representing Shares for the Merger
Consideration. Parent will make available to the Exchange Agent, as needed, the
Merger Consideration to be paid in respect of the Shares (the "Exchange Fund").
For purposes of determining the Merger Consideration to be made available,
Parent shall assume that no holder of Shares will perfect his right to appraisal
of his Shares. Promptly after the Effective Time, Parent will send, or will
cause the Exchange Agent to send, to each holder of Shares at the Effective Time
a letter of transmittal for use in such exchange (which shall specify that the
delivery shall be effected, and risk of loss and title shall pass, only upon
proper delivery of the certificates representing Shares to the Exchange Agent).
The Exchange Agent shall, pursuant to irrevocable instructions, make the
payments provided in this Section 2.3. The Exchange Fund shall not be used for
any other purpose, except as provided in this Agreement.
(b) Each holder of Shares that have been converted into a
right to receive the Merger Consideration, upon surrender to the Exchange Agent
of a certificate or certificates representing such Shares, together with a
properly completed letter of transmittal covering such Shares, and such other
documents as shall be reasonably requested, will be entitled to receive the
Merger Consideration payable in respect of such Shares. Until so surrendered,
each such certificate shall, after the Effective Time, represent for all
purposes, only the right to receive such Merger Consideration.
(c) If any portion of the Merger Consideration is to be paid
to a person other than the registered holder of the Shares represented by the
certificate or certificates surrendered in exchange therefor, it shall be a
condition to such payment that the certificate or certificates so surrendered
shall be properly endorsed or otherwise be in proper form for transfer and that
the person requesting such payment shall pay to the Exchange Agent any transfer
or other taxes required as a result of such payment to a person other than the
registered holder of such Shares or establish to the satisfaction of the
Exchange Agent that such tax has been paid or is not payable. For purposes of
-5-
<PAGE> 10
this Agreement, "person" means an individual, a corporation, a partnership, a
limited liability company, an association, a trust or any other entity or
organization, including a government or political subdivision or any agency or
instrumentality thereof.
(d) After the Effective Time, there shall be no further
registration of transfers of Shares. If, after the Effective Time, certificates
representing Shares are presented to the Surviving Corporation, they shall be
canceled and exchanged for the consideration provided for, and in accordance
with the procedures set forth, in this Article II.
(e) Any portion of the Exchange Fund made available to the
Exchange Agent pursuant to Section 2.3(a) that remains unclaimed by the holders
of Shares six months after the Effective Time shall be returned to Parent, upon
demand, and any such holder who has not exchanged his Shares for the Merger
Consideration in accordance with this Section 2.3 prior to that time shall
thereafter look only to Parent for payment of the Merger Consideration in
respect of his Shares. Notwithstanding the foregoing, Parent shall not be liable
to any holder of Shares for any amount paid to a public official pursuant to
applicable abandoned property laws. Any amounts remaining unclaimed by holders
of Shares immediately prior to such time as such amounts would otherwise escheat
to or become property of any governmental entity shall, to the extent permitted
by applicable law, become the property of Parent, free and clear of any claims
or interest of any person previously entitled thereto.
(f) Any portion of the Merger Consideration made available to
the Exchange Agent pursuant to Section 2.3(a) to pay for Shares for which
appraisal rights have been perfected shall be returned to Parent, upon demand.
SECTION 2.4. Dissenting Shares. Notwithstanding Section 2.2,
Shares outstanding immediately prior to the Effective Time and held by a holder
who has not voted in favor of the Merger or consented thereto in writing and who
has demanded appraisal for such Shares in accordance with Delaware Law shall not
be converted into a right to receive the Merger Consideration, unless such
holder fails to perfect or withdraws or otherwise loses his right to appraisal.
If after the Effective Time such holder fails to perfect or withdraws or loses
his right to appraisal, such Shares shall be treated as if they had been
converted as of the Effective Time into a right to receive the Merger
Consideration. The Company shall give Parent prompt notice of any demands
received by the Company for appraisal of Shares, and Parent shall have the right
to participate in all negotiations and proceedings with respect to such demands.
The Company shall not, except with the prior written consent of Parent, make any
payment with respect to, or settle or offer to settle, any such demands.
SECTION 2.5. Stock Options. (a) Upon acceptance for payment of
Shares pursuant to the Offer, each outstanding Company Option (defined below),
whether vested or unvested, shall be canceled, and each holder of any such
option shall be paid by the Company promptly after the acceptance for payment of
Shares pursuant to the Offer for each such option an amount determined by
multiplying (i) the excess, if any, of $5.50 per Share over the applicable
exercise price of such option by (ii) the number of Shares such holder could
have purchased had such holder exercised such option in full immediately prior
to the acceptance for payment of Shares pursuant to the Offer (as if such
Company Option was exercisable in full). Notwithstanding any other provisions of
this Agreement, immediately after the acceptance for payment of Shares pursuant
to the Offer no
-6-
<PAGE> 11
Company Options will remain outstanding. "Company Option" means any option
granted, whether or not exercisable, and not exercised or expired, to a current
or former employee, director or independent contractor of the Company or any of
its subsidiaries or any predecessor thereof to purchase Shares pursuant to any
stock option, stock bonus, stock award, or stock purchase plan, program, or
arrangement of the Company or any of its subsidiaries or any predecessor thereof
(collectively, the "Stock Plans") or any other contract or agreement entered
into by the Company any of its subsidiaries.
(b) As soon as practicable following the date of this
Agreement, the Company shall use its commercially reasonable efforts to (i)
obtain any consents from holders of Company Options and (ii) make any amendments
to the terms of such stock option or compensation plans or arrangements that, in
the case of either clauses (i) or (ii), are necessary to give effect to the
transactions contemplated by Section 2.5(a). Notwithstanding any other provision
of this Section 2.5, payment may be withheld in respect of any Company Option
until necessary consents are obtained. All amounts payable pursuant to this
Section 2.5 shall be subject to, and reduced by, any required withholding of
taxes and shall be paid without interest.
(c) The parties hereto acknowledge that consummation of the
Offer shall constitute a "change in control" pursuant to the terms of, and for
purposes of, the employment agreements and each of the Company's outstanding
stock option plans, preferred stock designations, warrant agreements and any
other agreements, in each case which are listed in Section 2.5(c) of the
Disclosure Schedule (defined below in Section 4.1(b)).
ARTICLE III
THE SURVIVING CORPORATION
SECTION 3.1. Certificate of Incorporation. The certificate of
incorporation of Merger Subsidiary in effect at the Effective Time shall be the
certificate of incorporation of the Surviving Corporation until amended in
accordance with applicable law, except that the name of the Surviving
Corporation shall be changed to the name of the Company.
SECTION 3.2. Bylaws. The bylaws of Merger Subsidiary in effect
at the Effective Time shall be the bylaws of the Surviving Corporation until
amended in accordance with applicable law.
SECTION 3.3. Directors and Officers. From and after the
Effective Time, until successors are duly elected or appointed and qualified in
accordance with applicable law, (i) the directors of Merger Subsidiary at the
Effective Time shall be the directors of the Surviving Corporation, and (ii) the
officers of the Merger Subsidiary at the Effective Time shall be the officers of
the Surviving Corporation.
-7-
<PAGE> 12
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.1. Representations and Warranties of the Company.
The Company represents and warrants to Parent and Merger Subsidiary as follows:
(a) Organization, Standing and Corporate Power. Each of the
Company and each of its subsidiaries is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
incorporated and has the requisite corporate power and authority to carry on its
business as now being conducted. Each of the Company and each of its
subsidiaries is duly qualified or licensed to do business and is in good
standing in each jurisdiction in which the nature of its business or the
ownership or leasing of its properties makes such qualification or licensing
necessary, other than in such jurisdictions where the failure to be so qualified
or licensed (individually or in the aggregate) could not reasonably be expected
to have a Material Adverse Effect (defined below). The Company has made
available to Parent complete and correct copies of its certificate of
incorporation and by-laws and the certificates of incorporation and by-laws of
its subsidiaries, in each case as amended to the date of this Agreement. For
purposes of this Agreement, a "subsidiary" of any person means another person,
an amount of the voting securities, other voting ownership or voting partnership
interests of which is sufficient to elect at least a majority of its Board of
Directors or other governing body (or, if there are no such voting interests,
50% or more of the equity interests of which) is owned directly or indirectly by
such first person. For the purposes hereof, "Material Adverse Effect" means a
material adverse effect on (a) the assets, liabilities, condition (financial or
otherwise), business, properties, results of operations or prospects of the
Company and its subsidiaries taken as a whole or (b) the consummation of the
transactions contemplated hereby; provided that occurrences or events resulting
from (i) changes in the prices of oil, gas, natural gas liquids or other
hydrocarbon products, (ii) changes in general economic conditions, including
general stock market conditions and interest rate changes, or (iii) the adverse
determination of any pending litigation disclosed in the Disclosure Schedule
shall in each case be excluded from consideration for purposes of the effect of
an occurrence or event on the Company and its subsidiaries taken as a whole.
(b) Subsidiaries. Section 4.1(b) of the disclosure schedule
delivered by the Company to Parent and Merger Subsidiary prior to the execution
of this Agreement (the "Disclosure Schedule") lists each subsidiary of the
Company and its respective jurisdiction of incorporation. Except as disclosed in
Section 4.1(b) of the Disclosure Schedule, all the outstanding shares of capital
stock of each such subsidiary have been validly issued and are fully paid and
nonassessable and are owned by the Company, by another subsidiary of the Company
or by the Company and another such subsidiary, free and clear of all pledges,
claims, liens, charges, encumbrances and security interests of any kind or
nature whatsoever (collectively, "Liens") and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock). Except for the capital stock of its
subsidiaries, the Company does not own, directly or indirectly, any capital
stock or other ownership interest in any person except as disclosed in Section
4.1(b) of the Disclosure Schedule.
(c) Capital Structure. The authorized capital stock of the
Company consists of 20,000,000 Shares and 5,000,000 shares of Preferred Stock,
par value $.01 per share ("Preferred
-8-
<PAGE> 13
Stock") of the Company. As of the date of this Agreement, (i) 6,733,770 Shares
were issued and outstanding, (ii) no Shares were held by the Company in its
treasury or by any of the Company's subsidiaries, (iii) 1,139,556.25 shares of
Preferred Stock were issued and outstanding, (iv) 725,500 Shares were reserved
for issuance pursuant to the outstanding Company Options, and (v) 150,000 Shares
were reserved for issuance upon exercise of warrants to purchase Shares
disclosed in Section 4.1(c) of the Disclosure Schedule (the "Warrants"). All
outstanding shares of capital stock of the Company are, and all shares which may
be issued pursuant to the Stock Plans will be, when issued, duly authorized,
validly issued, fully paid and nonassessable and not subject to preemptive
rights. Except as set forth in Section 4.1(c) of the Disclosure Schedule, there
are not any bonds, debentures, notes or other indebtedness or securities of the
Company having the right to vote (or convertible into, or exchangeable for,
securities having the right to vote) on any matters on which shareholders of the
Company may vote. Except as set forth above and in Section 4.1(c) of the
Disclosure Schedule, there are not any securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which the Company or any of its subsidiaries is a party or by which any of them
is bound obligating the Company or any of its subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of the Company or of any of its subsidiaries or
obligating the Company or any of its subsidiaries to issue, grant, extend or
enter into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. Except as set forth in Section 4.1(c) of
the Disclosure Schedule, there are no outstanding rights, commitments,
agreements, arrangements or undertakings of any kind obligating the Company or
any of its subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock or other voting securities of the Company or any of its
subsidiaries or any securities of the type described in the two immediately
preceding sentences. The Company has delivered to Parent complete and correct
copies of the Stock Plans and all forms of Company Options. Section 4.1(c) of
the Disclosure Schedule sets forth a complete and accurate list of all Company
Options and Warrants outstanding as of the date of this Agreement and the
exercise price of each outstanding Company Option and Warrant.
(d) Authority; Noncontravention. The Company has the requisite
corporate power and authority to enter into this Agreement and, except for any
required approval by the Company's stockholders in connection with the
consummation of the Merger, to consummate the transactions contemplated by this
Agreement. The execution and delivery of this Agreement by the Company and the
consummation by the Company of the transactions contemplated by this Agreement
have been duly authorized by all necessary corporate action on the part of the
Company, except for any required approval by the Company's stockholders in
connection with the consummation of the Merger. This Agreement has been duly
executed and delivered by the Company and, assuming this Agreement constitutes a
valid and binding agreement of Parent and Merger Subsidiary, constitutes a valid
and binding obligation of the Company, enforceable against the Company in
accordance with its terms, except to the extent that enforceability may be
limited by applicable bankruptcy, reorganization, insolvency, moratorium or
other laws affecting the enforcement of creditors' rights generally and by
general principles of equity, regardless of whether such enforceability in
considered in a proceeding in equity or at law. The execution and delivery of
this Agreement does not, and the consummation of the transactions contemplated
by this Agreement and compliance with the provisions of this Agreement will not,
conflict with, or result in any violation of, or default (with or without notice
or lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of any Lien upon any of the properties or
assets of the Company or any of its
-9-
<PAGE> 14
subsidiaries under, (i) the Certificate of Incorporation or By-Laws of the
Company or the comparable charter or organizational documents of any of its
subsidiaries, (ii) any loan or credit agreement, note, bond, mortgage,
indenture, lease or other agreement, instrument, permit, concession, franchise
or license applicable to the Company or any of its subsidiaries or their
respective properties or assets or (iii) subject to the governmental filings and
other matters referred to in the following sentence, any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to the Company or
any of its subsidiaries or their respective properties or assets other than, in
the case of clause (ii) or (iii) above, any such conflicts, violations,
defaults, rights or Liens that individually or in the aggregate could not
reasonably be expected to (A) have a Material Adverse Effect, (B) impair the
ability of the Company to perform its obligations under this Agreement or (C)
prevent or materially delay consummation of any of the transactions contemplated
by this Agreement. No consent, approval, order or authorization of, or
registration, declaration or filing with or exemption by (collectively,
"Consents") any federal, state or local government or any court, administrative
or regulatory agency or commission or other governmental authority or agency,
domestic or foreign (a "Governmental Entity"), is required by or with respect to
the Company or any of its subsidiaries in connection with the execution and
delivery of this Agreement by the Company or the consummation by the Company of
the transactions contemplated by this Agreement, except for (i) the filing of a
certificate of merger in accordance with Delaware Law and appropriate documents
with the relevant authorities of other states in which the Company is qualified
to do business, (ii) the filing of a premerger notification and report form by
the Company under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended, and the rules and regulations thereunder (the "HSR Act"), (iii)
compliance with any applicable requirements of the Exchange Act, (iv) such
notices, filings and consents as may be required under relevant state property
transfer or environmental laws, and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as to which the failure
to obtain or make could not reasonably be expected to (x) have a Material
Adverse Effect or (y) prevent or materially delay the consummation of any of the
transactions contemplated by this Agreement.
(e) SEC Documents; Financial Statements; No Undisclosed
Liabilities. The Company has filed all required reports, schedules, forms,
statements and other documents with the SEC since January 1, 1997 (the "SEC
Documents"). As of their respective dates, the SEC Documents complied in all
material respects with the requirements of the Securities Act of 1933, as
amended, and the rules and regulations thereunder (the "Securities Act"), or the
Exchange Act, as the case may be, applicable to such SEC Documents, and none of
the SEC Documents contained any untrue statement of a material fact or omitted
to state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
SEC Documents (the "Financial Statements") comply as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with respect thereto, have been prepared in accordance
with generally accepted accounting principles (except, in the case of unaudited
statements, as permitted by Form 10-QSB of the SEC) applied on a consistent
basis during the periods involved (except as may be indicated in the notes
thereto) and fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, in the case of unaudited statements, to normal,
recurring year-end audit adjustments). Except as set forth in the Company Filed
SEC Documents (defined below in Section 4.1(g)) or in Section 4.1(e), (g) or (h)
of the Disclosure Schedule, neither the Company nor any of its subsidiaries has
any liabilities or obligations of any nature (whether accrued, absolute,
-10-
<PAGE> 15
contingent or otherwise) and there is no existing condition, situation or set of
circumstances which are required by generally accepted accounting principles to
be set forth on a consolidated balance sheet of the Company and its consolidated
subsidiaries or in the notes thereto, except for liabilities which, individually
or in the aggregate, could not reasonably be expected to have a Material Adverse
Effect.
(f) Disclosure Documents. (i) Each document required to be
filed by the Company with the SEC in connection with the transactions
contemplated by this Agreement (the "Company Disclosure Documents"), including,
without limitation, the Schedule 14D-9, the proxy or information statement of
the Company (the "Company Proxy Statement"), if any, to be filed with the SEC in
connection with the Merger, and any amendments or supplements thereto will, when
filed, comply as to form in all material respects with the applicable
requirements of the Exchange Act.
(ii) At the time the Company Proxy Statement or any amendment
or supplement thereto is first mailed to stockholders of the Company, and at the
time such stockholders vote on adoption of this Agreement, the Company Proxy
Statement, as supplemented or amended, if applicable, will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. At the time of the filing of any
Company Disclosure Document other than the Company Proxy Statement and at the
time of any distribution thereof, such Company Disclosure Document will not
contain any untrue statement of a material fact or omit to state a material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 4.1(f)(ii) will not apply to statements
or omissions included in the Company Disclosure Documents based upon information
furnished to the Company in writing by Parent or Merger Subsidiary specifically
for use therein.
(iii) The information with respect to the Company or any
subsidiary that the Company furnishes to Parent or Merger Subsidiary in writing
specifically for use in the Offer Documents will not, at the time of the filing
thereof, at the time of any distribution thereof and at the time of the
consummation of the Offer, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(g) Absence of Certain Changes or Events. Except as disclosed
in the SEC Documents filed and publicly available prior to the date of this
Agreement (the "Company Filed SEC Documents") or in Section 4.1(g) of the
Disclosure Schedule, since December 31, 1998, the Company has conducted its
business only in the ordinary course consistent with past practice, and there
has not been (i) any event, occurrence or development of a state of
circumstances which has had or could reasonably be expected to have a Material
Adverse Effect, (ii) any declaration, setting aside or payment of any dividend
or other distribution (whether in cash, stock or property) with respect to any
of the Company's capital stock or any repurchase, redemption or other
acquisition by the Company or any of its subsidiaries of any outstanding shares
of capital stock or other securities of the Company or any of its subsidiaries,
(iii) any split, combination or reclassification of any of its capital stock or
any issuance or the authorization of any issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock, (iv)
(A) any granting by the Company or any of its subsidiaries to any current or
former director, officer or employee of the Company or any
-11-
<PAGE> 16
of its subsidiaries of any increase in compensation or benefits, except in the
ordinary course of business consistent with past practice, (B) any granting by
the Company or any of its subsidiaries to any such director, officer or employee
of any increase in severance or termination pay (including the acceleration in
the exercisability of Company Options or in the vesting of Shares (or other
property) or the provision of any tax gross-up), except as was required under
employment, severance or termination agreements or plans in effect as of
December 31, 1998 which individually or in the aggregate could reasonably be
expected to have a Material Adverse Effect, or (C) any entry by the Company or
any of its subsidiaries into any employment, deferred compensation, severance or
termination agreement with any such current or former director, officer or
employee, except in the ordinary course of business consistent with past
practice, (v) any damage, destruction or loss, whether or not covered by
insurance, that has had or could have a Material Adverse Effect, (vi) any change
in accounting methods, principles or practices by the Company or any of its
subsidiaries, except insofar as may have been required by a change in generally
accepted accounting principles, (vii) any amendment of any material term of any
outstanding security of the Company or any of its subsidiaries, (viii) any
incurrence, assumption or guarantee by the Company or any of its subsidiaries of
any material indebtedness for borrowed money other than in the ordinary course
of business consistent with past practice, but in no event in the amount of more
than $250,000 in the aggregate, (ix) any creation or assumption by the Company
or any of its subsidiaries of any Lien on any asset other than in the ordinary
course of business consistent with past practice, but in no event in the amount
of more than $250,000 for any one transaction or $500,000 in the aggregate, (x)
any making of any loan, advance or capital contributions to or investment in any
person other than (A) made in the ordinary course of business consistent with
past practice, but in no event in the amount of more than $100,000 for any one
transaction or $150,000 in the aggregate and (B) investments in cash equivalents
made in the ordinary course of business consistent with past practice, (xi) any
transaction or commitment made, or any contract or agreement entered into, by
the Company or any of its subsidiaries relating to its assets or business
(including the acquisition or disposition of any assets or the merger or
consolidation with any person) or any relinquishment by the Company or any of
its subsidiaries of any contract or other right, in either case, material to the
Company or any of its subsidiaries, other than transactions and commitments in
the ordinary course of business consistent with past practice and those
contemplated by this Agreement, but in no event representing commitments on
behalf of the Company or any of its subsidiaries of more than $250,000 for any
transaction or $500,000 for any series of transactions, (xii) any material labor
dispute, other than routine individual grievances, or any activity or proceeding
by a labor union or representative thereof to organize any employees of the
Company or any of its subsidiaries, which employees were not subject to a
collective bargaining agreement at December 31, 1998, or any material lockouts,
strikes, slowdowns, work stoppages or threats thereof by or with respect to such
employees or (xiii) any agreement, commitment, arrangement or undertaking by the
Company or any of its subsidiaries to perform any action described in clauses
(i) through (xii).
(h) Litigation. Except as disclosed in the Company Filed SEC
Documents or Section 4.1(h) of the Disclosure Schedule, there is no suit, action
or proceeding pending or, to the knowledge of the Company, threatened against or
affecting the Company or any of its subsidiaries that, individually or in the
aggregate, could reasonably be expected to (i) have a Material Adverse Effect,
(ii) impair the ability of the Company to perform its obligations under this
Agreement or (iii) prevent or materially delay the consummation of the Offer,
the Merger or any of the other transactions contemplated by this Agreement, nor
is there any judgment, decree, injunction, rule or order of any Governmental
Entity or arbitrator outstanding against the Company or any of its
-12-
<PAGE> 17
subsidiaries having, or which, insofar as reasonably can be foreseen, in the
future would have, any such effect. Section 4.1(h) of the Disclosure Schedule
sets forth, with respect to any pending suit, action or proceeding to which the
Company or any its subsidiaries is a party and which involves claims which could
reasonably be expected to exceed $25,000, the forum, the parties thereto, the
subject matter thereof and the amount of damages claimed.
(i) Absence of Changes in Stock or Benefit Plans. Except as
disclosed in Section 4.1(i) or (g) of the Disclosure Schedule, since December
31, 1998, there has not been (i) any acceleration, amendment or change of the
period of exercisability or vesting of any Company Options or restricted stock,
stock bonus or other awards under the Stock Plans or any other options to
purchase Shares or stock of any subsidiary of the Company (including any
discretionary acceleration of the exercise periods or vesting by the Company's
Board of Directors or any committee thereof or any other persons administering a
Stock Plan) or authorization of cash payments in exchange for any Company
Options, restricted stock, stock bonus or other awards granted under any of such
Stock Plans or any other options to purchase Shares as stock of any subsidiary
of the Company or (ii) any adoption or amendment by the Company or any of its
subsidiaries of any collective bargaining agreement or any bonus, pension,
profit sharing, deferred compensation, incentive compensation, stock ownership,
stock purchase, stock option, phantom stock, stock appreciation right,
retirement, vacation, severance, disability, death benefit, hospitalization,
medical, workers' compensation, disability, supplementary unemployment benefits,
or other plan, arrangement or understanding (whether or not legally binding) or
any employment agreement providing compensation or benefits to any current or
former employee, officer, director or independent contractor of the Company or
any of its subsidiaries or any beneficiary thereof or entered into, maintained
or contributed to, as the case may be, by the Company or any of its subsidiaries
(collectively, "Benefit Plans") other than immaterial amendments to any such
Benefit Plan. Section 4.1(i) of the Disclosure Schedule sets forth for each of
the five most highly compensated employees of the Company, the aggregate maximum
amount of all termination, severance or other similar benefits to which such
employee is entitled in connection with the Merger and the other transactions
contemplated by this Agreement.
(j) Participation and Coverage in Benefit Plans. There has
been no adoption of, or amendment to, or change in employee participation or
coverage under, or written interpretation or announcement (whether or not
written) by the Company or any of its subsidiaries relating to, any Benefit
Plans which would increase materially the expense of maintaining such Benefit
Plans above the level of the expense incurred in respect thereof for the fiscal
year ended on December 31, 1998.
(k) ERISA Compliance. (i) Section 4.1(k) of the Disclosure
Schedule contains a list and brief description of all "employee pension benefit
plans" (defined in Section 3(2) of the Employee Retirement Income Security Act
of 1974, as amended ("ERISA")), "employee welfare benefit plans" (defined in
Section 3(l) of ERISA) and all other Benefit Plans maintained, or contributed
to, by the Company or any of its subsidiaries or ERISA affiliates (defined
below) for the benefit of any current or former employees, officers or directors
of the Company or any of its subsidiaries or ERISA affiliates or under which the
Company or any of its subsidiaries or ERISA affiliates has any liability. The
Company has made available to Parent complete and correct copies of (A) each
Benefit Plan (or, in the case of any unwritten Benefit Plans, descriptions
thereof) and all amendments thereto and written interpretations thereof, (B) the
most recent annual report on Form 5500 filed with the Internal Revenue Service
with respect to each Benefit Plan (if any such report was required), (C) the
most recent summary plan description for each Benefit Plan for which such
summary plan description is required
-13-
<PAGE> 18
and (D) each trust agreement and group annuity or insurance contract relating to
any Benefit Plan. For purposes of this Agreement, "ERISA affiliate" of the
Company means any person which, together with the Company or any of its
subsidiaries, would be treated as a single employer under Section 414 of the
Code. The only Benefit Plans which individually or collectively would constitute
an "employee pension benefit plan" defined in Section 3(2) of ERISA (the
"Pension Plans") are identified as such in Section 4.1(k) of the Disclosure
Schedule.
(ii) Each Benefit Plan has been maintained and administered in
compliance in all material respects with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations,
and is, to the extent required by applicable law or contract, fully funded
without having any deficit or unfunded actuarial liability. Any Benefit Plan
intended to be qualified under Section 401(a) of the Code has been determined by
the Internal Revenue Service to be so qualified and nothing has occurred to
cause the loss of such qualified status.
(iii) No Benefit Plan is covered by Title IV of ERISA or
Section 412 of the Code. Neither the Company nor any of its subsidiaries has
incurred or expects to incur any liability under Title IV of ERISA or any
liability or penalty under Section 4975 or 4980B of the Code or Section 502(i)
of ERISA.
(iv) There are no pending or anticipated material claims
against or otherwise involving any of the Benefit Plans and no suit, action or
other litigation (excluding claims for benefits incurred in the ordinary course
of Benefit Plan activities) has been brought against or with respect to any
Benefit Plan.
(v) All material contributions, reserves or premium payments,
required to be made as of the date hereof to or with respect to the Benefit
Plans have been made or provided for.
(vi) Except as required by law, neither the Company nor any of
its subsidiaries has any obligations for post-retirement or post-termination
health and life benefits under any Benefit Plan.
(l) Taxes. As used in this Agreement, "tax" or "taxes" shall
include all Federal, state, local and foreign income, property, sales, excise
and other taxes, tariffs or governmental charges or assessments of any nature
whatsoever as well as any interest, penalties and additions thereto.
(i) Except as set forth in Section 4.1(l) of the Disclosure
Schedule, the Company and each of its subsidiaries have timely filed all tax
returns, statements, reports and forms required to be filed with any tax
authority and in accordance with all applicable laws (other than a failure in an
immaterial matter). All such tax returns are correct and complete in all
respects. Except as set forth in Section 4.1(l) of the Disclosure Schedule, the
Company and each of its subsidiaries have paid (or the Company has paid on its
behalf) all taxes required to be paid by it, and the most recent financial
statements contained in the Company Filed SEC Documents reflect an adequate
reserve for all taxes payable by the Company and its subsidiaries for all
taxable periods and portions thereof through the date of such financial
statements. There are no Liens on any of the assets of the Company or any of its
subsidiaries that arose in connection with any failure (or alleged failure) to
pay any tax.
-14-
<PAGE> 19
(ii) The Company and each of its subsidiaries has withheld and
timely paid all taxes required to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.
(iii) Neither the Company nor any of its subsidiaries expects
any authority to assess any additional taxes against the Company or any of its
subsidiaries for any period for which tax returns have been filed. Except as set
forth in Section 4.1(l) of the Disclosure Schedule, no dispute or claim
concerning any tax liability of the Company or any of its subsidiaries has been
proposed or claimed in writing by any authority. The Company has provided Parent
with a list of all Federal, state, local, and foreign income tax returns filed
with respect to the Company and any of its subsidiaries for taxable periods
ended on or after December 31, 1995, indicating those tax returns that have been
audited, and indicating those tax returns that currently are the subject of
audit. The Company has made available to Parent correct and complete copies of
all its Federal income tax returns, and examination reports, and statements of
deficiencies assessed against or agreed to by the Company and any of its
subsidiaries since December 31, 1995.
(iv) Neither the Company nor any of its subsidiaries has
waived any statute of limitations in respect of taxes or agreed to any extension
of time with respect to a tax assessment or deficiency.
(v) Neither the Company nor any of its subsidiaries has filed
a consent pursuant to Section 341(f) of the Code concerning collapsible
corporations. Except as set forth in Section 4.1(l) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to any tax allocation
or sharing agreement. Neither the Company nor any of its subsidiaries has any
liability for the taxes of any person (other than the Company and any of its
subsidiaries that is currently a member of the Company's affiliated group filing
a consolidated federal income tax return) under Treas. Reg. Section 1.1502-6 (or
any similar provision of state, local, or foreign law), as a transferee or
successor, by contract, or otherwise.
(vi) As of the date of the most recent financial statements
included in the Company Filed SEC Documents, the unpaid taxes of the Company and
its subsidiaries did not exceed the liability for taxes (rather than any reserve
for deferred taxes established to reflect timing differences between book and
tax income) set forth on the face of such financial statements.
(vii) Neither the Company nor any of its subsidiaries is
required to include in income any adjustment pursuant to Section 481(a) of the
Code (or similar provisions of other law or regulations) in its current or in
any future taxable period by reason of a change in accounting method; nor does
the Company or any of its subsidiaries have any knowledge that the Internal
Revenue Service (or other taxing authority) has proposed or is considering
proposing, any such change in accounting method. Neither the Company nor any of
its subsidiaries is a party to any agreement, contract, or arrangement that,
individually or collectively, could give rise to the payment of any amount
(whether in cash or property, including Company Stock) that would not be
deductible pursuant to the terms of Sections 162(a)(1), 162(m), 162(n) or 280G
of the Code.
(m) State Takeover Statutes. The Board of Directors of the
Company has approved the Offer, the Merger, the Stockholder Option Agreement and
this Agreement, and such approval is sufficient to render inapplicable to the
Offer, the Merger, the Stockholder Option
-15-
<PAGE> 20
Agreement, this Agreement, and the transactions contemplated hereby or thereby,
the provisions of Section 203 of Delaware Law. To the Company's knowledge, no
other "fair price", "moratorium", "control share acquisition", or other
anti-takeover statute or similar statute or regulation, applies or purports to
apply to the Offer, the Merger, the Stockholder Option Agreement, this
Agreement, or any of the transactions contemplated hereby or thereby.
(n) Brokers; Schedule of Fees and Expenses. No broker,
investment banker, financial advisor or other person, other than DLJ, the fees
and expenses of which will be paid by the Company (and a copy of whose
engagement letter and a calculation of the fees that would be due thereunder has
been provided to Parent), is entitled to any broker's, finder's, financial
advisor's or other similar fee or commission in connection with the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company or any of its subsidiaries. No such engagement letter obligates the
Company to continue to use the services or pay fees or expenses in connection
with any future transaction.
(o) Permits; Compliance with Laws. Each of the Company and its
subsidiaries has in effect all federal, state, local and foreign governmental
approvals, authorizations, certificates, filings, franchises, licenses, notices,
permits and rights ("Permits") necessary for it to own, lease or operate its
properties and assets and to carry on its business as now conducted, and there
has occurred no default under any such Permit, except for the absence of Permits
and for defaults under Permits which absence or defaults, individually or in the
aggregate, could not reasonably be expected to have a Material Adverse Effect.
The Company and its subsidiaries have been, and are, in compliance in all
material respects with all applicable statutes, laws, ordinances, regulations,
rules, judgments, decrees or orders of any Governmental Entity, and neither the
Company nor any of its subsidiaries has received any notice from any
Governmental Entity or any other person that either the Company or any of its
subsidiaries is in violation of, or has violated, in any material respect any
applicable statutes, laws, ordinances, regulations, rules, judgments, decrees or
orders.
(p) Contracts; Debt Instruments; Leases. (i) Except as
otherwise disclosed in Section 4.1(p)(i)(A)-(F) of the Disclosure Schedule,
neither the Company nor any of its subsidiaries is a party to or subject to:
(A) any union contract, or any employment consulting,
severance, termination, or indemnification agreement, contract or
arrangement providing for future payments, written or oral, with any
current or former officer, consultant, director or employee which (1)
exceeds $25,000 per annum or (2) requires aggregate annual payments or
total payments over the life of such agreement, contract or arrangement
to such current or former officer, consultant, director or employee in
excess of $25,000 or $50,000, respectively, and is not terminable by it
or its subsidiary on 30 days' notice or less without penalty or
obligation to make payments related to such termination;
(B) any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of
revenues that nets the Company $500,000 per annum or more of revenues;
(C) any lease for real or personal property (including mineral
leases (other than oil or gas leases)), "non-HBP" leases, take-or-pay
arrangements, recoupment arrangements,
-16-
<PAGE> 21
Fixed Price Contracts (as defined below in Section 4.1(w)(ii)),
agreements for the sale or production of Hydrocarbons (as defined below
in Section 4.1(w)(iii)), gas gathering agreements, gas treatment
agreements, gas compression agreements, transportation agreements,
agreements to purchase pipes, facilities or equipment or other
contracts or agreements relating to the Company's or any of its
subsidiaries' Oil and Gas Interests (as defined below in Section
4.1(w)(i));
(D) any material agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment which has not been
terminated or performed in its entirety and not renewed which may be,
by its terms, terminated, impaired or adversely affected by reason of
the execution of this Agreement, the closing of the Offer or the
Merger, or the consummation of the transactions contemplated hereby;
(E) any agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment that materially limits
the freedom of the Company or any subsidiary of the Company to compete
in any line of business or with any person or in any geographic area or
which would so materially limit the freedom of the Company or any
subsidiary of the Company after the Effective Time; or
(F) any other agreement, contract, policy, license, Permit,
document, instrument, arrangement or commitment not made in the
ordinary course of business which is material to the Company or any of
its subsidiaries.
(ii) All contracts, policies, agreements, leases, licenses,
Permits, documents, instruments, arrangements and other commitments listed in
Section 4.1(p)(i)(A)-(F) and Section 4.1(p)(iv) of the Disclosure Schedule or
otherwise disclosed in the Company Filed SEC Documents are valid and binding
agreements of the Company or a subsidiary of the Company and are in full force
and effect, except to the extent that enforceability may be limited by
applicable bankruptcy, reorganization, insolvency, moratorium or other laws
affecting the enforcement of creditors' rights generally and by general
principles of equity, regardless of whether such enforceability in considered in
a proceeding in equity or at law, and, except as set forth in Section 4.1(p) of
the Disclosure Schedule, neither the Company, any of its subsidiaries nor, to
the knowledge of the Company, any other party thereto, is in default in any
material respect under the terms of any such contract, plan, arrangement,
agreement, lease, license, Permit, instrument or other commitment.
(iii) Except as set forth in Section 4.1(p) of the Disclosure
Schedule, neither the Company nor any subsidiary of the Company is in default in
any material respect under the terms of any exclusive license or distribution
agreement or arrangement, true and complete copies or descriptions of all of
which have been made available to Parent. To the knowledge of the Company, none
of the parties to any of the contracts identified pursuant to the immediately
proceeding sentence, in Section 4.1(p)(i)(A)-(F) of the Disclosure Schedule or
otherwise disclosed in the Company Filed SEC Documents has terminated, or in any
way expressed an intent to materially reduce or terminate the amount of, its
business with the Company or any of its subsidiaries in the future.
(iv) Set forth in Section 4.1(p)(iv) of the Disclosure
Schedule is (A) a list of all loan or credit agreements, notes, bonds,
mortgages, indentures and other agreements and instruments
-17-
<PAGE> 22
pursuant to which any indebtedness of the Company or any of its subsidiaries in
an aggregate principal amount in excess of $100,000 is outstanding or may be
incurred and (B) the respective principal amounts currently outstanding
thereunder. For purposes of this Section 4.1(p)(iv), "indebtedness" shall mean,
with respect to any person, without duplication, (A) all obligations of such
person for borrowed money, or with respect to deposits or advances of any kind
to such person, (B) all obligations of such person evidenced by bonds,
debentures, notes or similar instruments, (C) all obligations of such person
upon which interest charges are customarily paid, (D) all obligations of such
person under conditional sale or other title retention agreements relating to
property purchased by such person, (E) all obligations of such person issued or
assumed as the deferred purchase price of property or services (excluding
obligations of such person to creditors for raw materials, inventory, services
and supplies incurred in the ordinary course of such person's business), (F) all
capitalized lease obligations of such person, (G) all obligations of others
secured by any Lien on property or assets owned or acquired by such person,
whether or not the obligations secured thereby have been assumed, (H) all
obligations of such person under interest rate or currency swap transactions
(valued at the termination value thereof), (I) all letters of credit issued for
the account of such person (excluding letters of credit issued for the benefit
of suppliers to support accounts payable to suppliers incurred in the ordinary
course of business), (J) all obligations of such person to purchase securities
(or other property) which arises out of or in connection with the sale of the
same or substantially similar securities or property, and (K) all guarantees and
arrangements having the economic effect of a guarantee of such person of any
indebtedness of any other person.
(q) Opinion of Financial Advisor. The Company has received the
opinion of DLJ, dated the date hereof, a copy of which has been or, within two
business days of the date hereof, will be provided to Parent, to the effect
that, as of such date, the consideration to be paid in the Offer and the Merger
is fair to the Company's stockholders from a financial point of view.
(r) Interests of Officers and Directors. None of the Company's
or any of its subsidiaries' officers or directors has any interest in any
property, real or personal, tangible or intangible, including inventions,
patents, copyrights, trademarks, trade names, trade secrets or know-how, used in
or pertaining to the business of the Company or that of its subsidiaries, or any
supplier, distributor or customer of the Company or any of its subsidiaries,
except for the normal rights of a stockholder and rights under existing Benefit
Plans and Stock Plans.
(s) Technology. (i) Except as set forth in Section 4.1(s)(i)
of the Disclosure Schedule, the Company exclusively owns, or is licensed to use,
without restriction, the rights to all patents, trademarks, trade names, service
marks, copyrights and any applications therefor, inventories, technology, trade
secrets, know-how, 3-D seismic data, computer software programs or applications
and tangible or intangible proprietary information or material that in any
material respect are used or proposed to be used in the business of the Company
and any of its subsidiaries as currently conducted or proposed to be conducted
(the "Company Intellectual Property Rights"). Section 4.1(s)(i) of the
Disclosure Schedule lists: (A) all patents, trademarks, trade names, service
marks, registered and unregistered copyrights, and any applications therefor
included in the Company Intellectual Property Rights; (B) all licenses and other
agreements to which the Company or any of its subsidiaries is a party and
pursuant to which the Company or any of its subsidiaries is authorized to use
any Company Intellectual Property Right, and includes the identities of the
parties thereto, a description of the nature and subject matter thereof, the
applicable royalty and the term thereof; and (C) all 3-D seismic data included
in the Company Intellectual Property Rights. Neither the Company nor any of its
subsidiaries
-18-
<PAGE> 23
is, or as a result of the execution, delivery or performance of the Company's
obligations hereunder will be, in violation in any material respect of, or lose
any rights (other than immaterial rights) pursuant to, any license or agreement
described in Section 4.1(s) of the Disclosure Schedule.
(ii) No claims with respect to the Company Intellectual
Property Rights have been asserted or, to the knowledge of the Company, are
threatened by any person nor does the Company or any subsidiary of the Company
know of any valid grounds for any bona fide claims (A) to the effect that the
manufacture, sale or use of any product or process as now used or offered or
proposed for use or sale by the Company or any subsidiary of the Company
infringes on any copyright, trade secret, patent or other intellectual property
right of any person, (B) against the use by the Company or any subsidiary of the
Company of any Company Intellectual Property Rights, or (C) challenging the
ownership, validity or effectiveness of any of the Company Intellectual Property
Rights. All granted and issued patents and all registered trademarks and service
marks listed in Section 4.1(s) of the Disclosure Schedule and all copyrights
held by the Company or any of its subsidiaries are valid, enforceable and
subsisting. To the Company's knowledge, there has not been and there is not any
material unauthorized use, infringement or misappropriation of any of the
Company Intellectual Property Rights by any third party, employee or former
employee.
(t) Change of Control. Except as disclosed in Section 2.5(c),
4.1(i) or 4.1(t) of the Disclosure Schedule, the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby and
thereby will not (i) result in any payment (including severance, unemployment
compensation, tax gross-up, bonus or otherwise) becoming due to any current or
former director, employee or independent contractor of the Company or any of its
subsidiaries, from the Company or any of its subsidiaries under any Stock Plan,
Benefit Plan, agreement or otherwise, (ii) materially increase any benefits
otherwise payable under any Stock Plan, Benefit Plan, agreement or otherwise or
(iii) result in the acceleration of the time of payment, exercise or vesting of
any such benefits, in each case, that could reasonably be expected to have a
Material Adverse Effect.
(u) Environmental. Except as set forth in Section 4.1(u) of
the Disclosure Schedule, (i) the businesses as presently or formerly engaged in
by the Company and its subsidiaries are and have been conducted in compliance in
all material respects with all applicable Environmental Laws (defined below),
including having all permits, licenses and other approvals and authorizations,
during the time the Company (or such subsidiary) engaged in such businesses,
(ii) the properties presently or formerly owned or operated by the Company or
any subsidiary of the Company (including soil, groundwater or surface water on,
under or adjacent to the properties, and buildings thereon) ("Company
Properties") do not contain any Hazardous Substance (defined below) other than
as permitted under applicable Environmental Laws, (iii) neither the Company nor
any subsidiary of the Company has received any notices, demand letters or
requests for information from any federal, state, local or foreign governmental
entity or any third party indicating that the Company or any subsidiary of the
Company may be in violation of, or liable under, any Environmental Law in
connection with the ownership or operation of the Company's or any of its
subsidiaries' businesses, (iv) there are no civil, criminal or administrative
actions, suits, demands, claims, hearings, investigations or proceedings pending
or threatened against the Company or any subsidiary of the Company with respect
to the Company or any subsidiary of the Company or the Company Properties
relating to any violation, or alleged violation, of any Environmental Law, (v)
no reports have been filed, or are required to be filed, by the Company or any
subsidiary of the Company concerning the release of any Hazardous Substance or
the threatened or actual violation of any Environmental Law on or at Company
Properties, (vi) no Hazardous Substance
-19-
<PAGE> 24
has been disposed of, transferred, released or transported from any Company
Property during the time such Company Property was owned or operated by the
Company or any subsidiary of the Company, other than as permitted under
applicable Environmental Law, (vii) there have been no environmental
investigations, studies, audits, tests, reviews or other analyses conducted by
or which are in the possession of the Company or any subsidiary of the Company
relating to the Company or any subsidiary of the Company or the Company
Properties which have not been delivered to Parent prior to the date hereof,
(viii) there are no underground storage tanks on, in or under any of the Company
Properties and no underground storage tanks have been closed or removed from any
Company Properties while such Company Property was in the ownership of the
Company or any subsidiary of the Company, (ix) there is no asbestos present in
any Company Property presently owned or operated by the Company or any
subsidiary of the Company, and no asbestos has been removed from any Company
Property while such Company Property was owned or operated by the Company or any
subsidiary of the Company, (x) none of the Company Properties has been used at
any time by the Company or any subsidiary of the Company as a sanitary landfill
or hazardous waste disposal site, and (xi) neither the Company nor any
subsidiary of the Company has incurred, and none of the Company Properties are
presently subject to, any liabilities (fixed or contingent) relating to any
suit, settlement, court order, administrative order, judgment or claim asserted
or arising under any Environmental Law.
"Environmental Law" means (i) any federal, state, foreign and
local law, statute, ordinance, rule, regulation, code, license, permit,
authorization, approval, consent, legal doctrine, order, judgment,
decree, injunction, requirement or agreement with any governmental
entity, (A) relating to the protection, preservation or restoration of
the environment (including air, water vapor, surface water,
groundwater, drinking water supply, surface land, subsurface land,
plant and animal life or any other natural resource), or to human
health or safety or (B) relating to the exposure to, or the use,
storage, recycling, treatment, generation, transportation, processing,
handling, labeling, production, release or disposal of, Hazardous
Substances, in each case as amended and as now or hereafter in effect
and (ii) any common law or equitable doctrine (including injunctive
relief) that may impose liability or obligations for injuries or
damages due to, or threatened as a result of, the presence of or
exposure to any Hazardous Substance.
"Hazardous Substance" means any substance presently or
hereafter listed, defined, designated or classified as hazardous,
toxic, radioactive or dangerous, or otherwise regulated, under any
Environmental Law, whether by type or by quantity, including any
substance containing any such substance as a component. The term
"Hazardous Substance" includes any toxic waste, pollutant, contaminant,
hazardous substance, toxic substance, hazardous waste, special waste,
industrial substance or petroleum or any derivative or by-product
thereof, radon, radioactive material, asbestos, asbestos containing
material, urea formaldehyde foam insulation, lead and polychlorinated
biphenyl.
(v) Title to Properties. Except as set forth in Section 4.1(v)
of the Disclosure Schedule, (i) each of the Company and its subsidiaries has
good and indefeasible title to, or valid leasehold interests in, all its
properties and assets (including all oil and gas interests), free and clear of
all Liens, except for defects in title, easements, restrictive covenants and
similar encumbrances or impediments that, in the aggregate, do not and will not
materially interfere with the use of the properties or assets subject thereto or
affected thereby or otherwise materially impair business operations at such
properties;
-20-
<PAGE> 25
(ii) each of the Company and its subsidiaries has complied in
all material respects with the terms of all leases to which it is a party and
under which it is in occupancy, and all such leases are in full force and effect
and each of the Company and each of its subsidiaries enjoys peaceful and
undisturbed possession under all such leases;
(iii) all royalties, rentals, shut-in gas payments and other
payments due with respect to the Company's and its subsidiaries' Oil and Gas
Interests (as defined in Section 4.1(w)(i)) have been properly and timely paid,
except (A) for payments held in suspense for title or other reasons which are
customary in the industry and which will not result in grounds for cancellation
of the Company's or its subsidiaries' rights in such Oil and Gas Interests and
(B) such failures as would not have a Material Adverse Effect; and
(iv) neither the Company nor any of its subsidiaries is in
default (and there exists no event or circumstance which with notice or the
passage of time or both could constitute a default by the Company or its
Subsidiaries) under the terms of any leases, farmout agreements or other
contracts or agreements respecting the Company's or its subsidiaries' Oil and
Gas Interests which could (A) interfere in any material respect with the
operation or use thereof, (B) prevent the Company or its subsidiaries from
receiving the proceeds of production attributable to their interest therein, (C)
result in cancellation of the Company's interest therein, or (D) impair the
value of the Company's or its subsidiaries' interest therein.
(w) Other Obligations. (i) Except as set forth in Section 4.1
(w) of the Disclosure Schedule, (i) none of the Company's or its subsidiaries'
Oil and Gas Interests are subject to any contract or agreement providing for
recoupment of sums paid in respect of take or pay gas purchase contracts or
other similar provision such that the owner of such assets will not receive the
full amount of revenue from the sale of production attributable to the ownership
interest therein; and (ii) there exists no imbalance regarding production taken
or marketed from such assets or any portion thereof which could result in (1) a
portion of the interest in production therefrom to be taken or delivered after
the Effective Time without the Company or any of its subsidiaries receiving
payment therefor and at the price it would have received absent such imbalance;
(2) the Company or any of its subsidiaries, after the Effective Time, being
obligated to make payment to any person or entity as a result of such imbalance;
or (3) production being shut-in or curtailed after the Effective Time due to
non-compliance with allowables, production quotas, proration rules or similar
orders or regulations of any governmental authorities. "Oil and Gas Interests"
means direct and indirect interests in and rights with respect to oil, gas,
helium, carbon dioxide, mineral, and related properties and assets of any kind
and nature, direct or indirect, including leasehold, working, royalty and
overriding royalty interests, production payments, operating rights, net profit
interests, other non-working interests, and non-operating interests.
(ii) Except as disclosed in Section 4.1(w) of the Disclosure
Schedule, none of the Company and its subsidiaries engages in any natural gas or
other futures or options trading or is a party to any price swaps, hedges,
futures or similar instruments. Section 4.1(w) of the Disclosure Schedule
discloses a true and correct statement of the position, as of the date hereof,
of the Company and its subsidiaries with respect to obligations under Fixed
Price Contracts (including, with respect to each Fixed Price Contract, location
of delivery and variations in the obligation to take or deliver)
-21-
<PAGE> 26
and related Hydrocarbon (as defined in Section 4.1(w)(iii)) price swaps, hedges,
futures or similar instruments to which the Company or any of its subsidiaries
is a party and that are material to the Company. "Fixed Price Contracts" shall
mean any contracts, commitments or agreements for the purchase or sale of
Hydrocarbons (x) having a remaining term of more than sixty (60) days, wherein
the purchase or sale price thereunder throughout part of the remaining life of
such contract, commitment or agreement is a fixed amount or an amount that is
otherwise reasonably determinable as of the date hereof pursuant to the terms of
such contract, commitment or agreement, or (y) which has been hedged with
futures contracts or otherwise; provided, however, that the term Fixed Price
Contracts will not include any contract, commitment or agreement under which the
purchase or sales price throughout the remaining life of the contract,
commitment or agreement is based on a market responsive reference price for a
Hydrocarbon.
(iii) Neither the Company nor any of its subsidiaries has
entered into, or is a party to, or has any obligations under, any contract for
the purchase of Hydrocarbons or other property or services that require payment
to be made by the Company or its subsidiaries regardless of whether or not
delivery is ever made of such Hydrocarbons or other property or services.
"Hydrocarbons" shall mean crude oil, natural gas, natural gas liquids and other
hydrocarbons produced from crude oil or natural gas.
(x) Public Utility Holding Company Act; Non-Utility Status.
Except as set forth in Section 4.1(x) of the Disclosure Schedule, (i) neither
the Company nor any of its subsidiaries is a "holding company" or a "subsidiary
company" of a "holding company" or an "affiliate" of a "holding company" as such
terms are defined in the Public Utility Holding Company Act of 1935, as amended;
(ii) neither the Company nor any of its subsidiaries is a regulated utility
under the laws of any state; (iii) no claim or complaint to the effect that the
Company or any of its subsidiaries is a regulated utility under the laws of any
state has been made to the Company or any of its subsidiaries or by or, to the
knowledge of the Company, to any public utilities commission of any state; and
(iv) neither the Company nor any of its subsidiaries has offered pipeline
service or gas transportation services to the general public or to any
significant segment thereof or has dedicated its pipelines or related facilities
in any manner to public use. Section 4.1(x) of the Disclosure Schedule discloses
all persons or entities for whom gas has been transported by the Company or any
of its subsidiaries.
(y) Year 2000. Except as disclosed in Section 4.1(y) of the
Disclosure Schedule, all of the MIS Systems (other than immaterial Systems),
fuel operations and the Facilities (other than immaterial Facilities) are, or
prior to December 31, 1999 are reasonably expected to be, Year 2000 Compliant.
To the knowledge of the Company, all material vendors of products or services to
the Company and its subsidiaries will continue to furnish its products or
services to the Company and its subsidiaries (other than immaterial products and
services) without interruption or material delay, on and after January 1, 2000
and such products and services are Year 2000 compliant. Section 4.1(y) of the
Disclosure Schedule sets forth a list of all vendor and supplier Year 2000
compliance certificates received by the Company. "Year 2000 Compliant" means
that (i) the MIS Systems accurately process, provide and/or receive all
date/time data (including calculating, comparing, sequencing, processing and
outputting) within, from, into, and between centuries (including the twentieth
and twenty-first centuries and the years 1999 and 2000), including leap year
calculations, and (ii) neither the performance nor the functionality nor the
Company's or any of its subsidiaries' provision of the products, services, and
other item(s) at issue will be affected by any dates/times prior to, on, after,
or spanning January 1, 2000. "Facilities" means any facilities or equipment used
by the Company or
-22-
<PAGE> 27
any of its subsidiaries' in any location, including HVAC systems, mechanical
systems, elevators, security systems, fire suppression systems,
telecommunications systems, and equipment, whether or not owned by the Company
or any of its subsidiaries. "MIS Systems" means any computer software and
systems (including hardware, firmware, operating system software, utilities, and
applications software) used in the ordinary course of business by or on behalf
of the Company or any of its subsidiaries, including the Company's or any of its
subsidiaries' payroll, accounting, billing/receivables, inventory, asset
tracking, customer service, human resources, and e-mail systems.
(z) Insurance. Schedule 4.1(z) of the Disclosure Schedule
contains a true and complete list of all insurance policies held by either the
Company or any of its subsidiaries. All such policies held by the Company or its
subsidiaries, are in full force and effect and all related premiums have been
paid to date. To the knowledge of the Company, there are no pending or
threatened disputes or communications with or from any insurance carrier denying
or disputing any claim or regarding cancellation or nonrenewal of any such
policy.
(aa) Disclosure. No representation or warranty of the Company
contained in this Agreement, and no statement contained in the Disclosure
Schedule, contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statement contained herein or therein, in
light of the circumstances under which they were made, not misleading.
SECTION 4.2. Representations and Warranties of Parent and
Merger Subsidiary. Parent and Merger Subsidiary represent and warrant to the
Company as follows:
(a) Organization, Standing and Corporate Power. Each of Parent
and Merger Subsidiary is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware and has the requisite
corporate power and authority to carry on its business as now being conducted.
(b) Authority; Noncontravention. Parent and Merger Subsidiary
have all requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated by this Agreement. The execution
and delivery of this Agreement and the consummation of the transactions
contemplated by this Agreement have been duly authorized by all necessary
corporate action on the part of Parent and Merger Subsidiary. This Agreement has
been duly executed and delivered by Parent and Merger Subsidiary and, assuming
this Agreement constitutes a valid and binding agreement of the Company,
constitutes a valid and binding obligation of such party, enforceable against
such party in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, reorganization,
insolvency, moratorium or other laws affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law. The execution
and delivery of this Agreement do not, and the consummation of the transactions
contemplated by this Agreement and compliance with the provisions of this
Agreement will not, conflict with, or result in any violation of, or default
(with or without notice or lapse of time, or both) under, or give rise to a
right of termination, cancellation or acceleration of any obligation or to loss
of a material benefit under, or result in the creation of any Lien upon any of
the properties or assets of Parent or any of its subsidiaries under, (i) the
certificate of incorporation or by-laws of Parent or Merger Subsidiary or the
comparable charter or organizational documents of any other subsidiary of
-23-
<PAGE> 28
Parent, (ii) any loan or credit agreement, note, bond, mortgage, indenture,
lease or other agreement, instrument, permit, concession, franchise or license
applicable to Parent or Merger Subsidiary or their respective properties or
assets or (iii) subject to the governmental filings and other matters referred
to in the following sentence, any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Parent, Merger Subsidiary or any
other subsidiary of Parent or their respective properties or assets, other than,
in the case of clause (ii) or (iii), any such conflicts, violations, defaults,
rights or Liens that individually or in the aggregate would not (A) have a
material adverse effect on Parent or any of its subsidiaries, (B) impair the
ability of Parent and Merger Subsidiary to perform their respective obligations
under this Agreement or (C) prevent the consummation of any of the transactions
contemplated by this Agreement. No Consent is required by or with respect to
Parent, Merger Subsidiary or any other subsidiary of Parent in connection with
the execution and delivery of this Agreement or the consummation by Parent or
Merger Subsidiary, as the case may be, of any of the transactions contemplated
by this Agreement, except for (i) the filing of a certificate of merger in
accordance with Delaware Law and appropriate documents with the relevant
authorities of other states in which the Company is qualified to do business,
(ii) the filing of a premerger notification and report form under the HSR Act,
(iii) compliance with any applicable requirements of the Exchange Act, (iv) such
notices, filings and consents as may be required under relevant state property
transfer or environmental laws and (v) such other consents, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
the laws of any foreign country in which the Company or any of its subsidiaries
conducts any business or owns any property or assets.
(c) Disclosure Documents. (i) The information with respect to
Parent and its subsidiaries that Parent furnishes to the Company in writing
specifically for use in any Company Disclosure Document will not contain any
untrue statement of a material fact or omit to state any material fact necessary
in order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading (A) in the case of the Company Proxy
Statement at the time the Company Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company, at the time the
stockholders vote on adoption of this Agreement and at the Effective Time, and
(B) in the case of any Company Disclosure Document other than the Company Proxy
Statement, at the time of the filing thereof and at the time of any distribution
thereof.
(ii) The Offer Documents, when filed, will comply as to form
in all material respects with the applicable requirements of the Exchange Act
and will not at the time of the filing thereof, at the time of any distribution
thereof or at the time of consummation of the Offer, contain any untrue
statement of a material fact or omit to state any material fact necessary to
make the statements made therein, in the light of the circumstances under which
they were made, not misleading, provided, that this representation and warranty
will not apply to statements or omissions in the Offer Documents based upon
information furnished to Parent or Merger Subsidiary in writing by the Company
specifically for use therein.
(d) Brokers. No broker, investment banker, financial advisor
or other person is entitled to any broker's, finder's, financial advisor's or
other similar fee or commission in connection with the transactions contemplated
by this Agreement based upon arrangements made by or on behalf of Parent or
Merger Subsidiary.
-24-
<PAGE> 29
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.1. Conduct of Business. During the period from the
date of this Agreement to the Effective Time, the Company shall, and shall cause
its subsidiaries to, carry on their respective businesses in the ordinary course
in substantially the same manner as heretofore conducted and, to the extent
consistent therewith, use all commercially reasonable efforts to preserve intact
their current business organizations, keep available the services of their
current officers and employees and preserve their relationships with customers,
suppliers, licensors, licensees, distributors and others having business
dealings with them to the end that their goodwill and ongoing business shall be
unimpaired at the Effective Time. Without limiting the generality of the
foregoing, during the period from the date of this Agreement to the Effective
Time, the Company shall not, and shall not permit any of its subsidiaries to,
without the prior written approval of Parent (which determination by Parent
shall not be unreasonably delayed):
(a) (i) declare, set aside or pay any dividends on, or make
any other distributions in respect of, any of its capital stock, other than
dividends and distributions by any direct or indirect wholly owned subsidiary of
the Company to its parent, (ii) split, combine or reclassify any of its capital
stock or issue or authorize the issuance of any other securities in respect of,
in lieu of or in substitution for shares of its capital stock or (iii) purchase,
redeem or otherwise acquire any shares of capital stock of the Company or any of
its subsidiaries or any other securities thereof or any rights, warrants or
options to acquire any such shares or other securities (other than in connection
with the exercise of Company Options);
(b) issue, deliver, sell, pledge or otherwise encumber any
shares of its capital stock, any other voting securities or any securities
convertible into, or any rights, warrants or options to acquire, any such
shares, voting securities or convertible securities (other than the issuance of
Shares upon the exercise of Company Options);
(c) amend its certificate of incorporation, by-laws or other
comparable charter or organizational documents;
(d) except as set forth in Section 5.1(d) of the Disclosure
Schedule, acquire or agree to acquire (including, without limitation, by merger,
consolidation or acquisitions of stock or assets) any business, including
through the acquisition of any interest in any corporation, partnership, limited
liability company, joint venture, association or other business organization or
division thereof;
(e) mortgage or otherwise encumber or subject to any Lien or,
except in the ordinary course of business consistent with past practice and
pursuant to existing contracts or commitments, sell, lease, license, transfer or
otherwise dispose of any of the Company Intellectual Property Rights or any
other material properties or assets, except as disclosed in Section 5.1(e) of
the Disclosure Schedule;
-25-
<PAGE> 30
(f) except as set forth in Section 5.1(f) of the Disclosure
Schedule, make or agree to make any new capital expenditures in excess of
$500,000;
(g) make any material tax election (unless required by law) or
settle or compromise any material income tax liability;
(h) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the ordinary
course of business consistent with past practice and in accordance with their
terms, or waive the benefits of, or agree to modify in any manner, any
confidentiality, standstill or similar agreement to which the Company or any of
its subsidiaries is a party;
(i) commence a lawsuit other than (i) for the routine
collection of bills or (ii) in such cases where the Company in good faith
determines that the failure to commence suit would result in a material
impairment of a valuable aspect of the Company's business, provided that the
Company consults with Parent prior to filing such suit;
(j) (i) enter into or amend any employment or severance
agreement or similar arrangements, (ii) make any determination as to amounts
payable under any plan, arrangement, or agreement, providing for discretionary
incentive compensation or bonus to any officer, director, employee or
independent contractor of the Company or any of its subsidiaries or (iii) enter
into, adopt, or amend any agreement, arrangement, or Benefit Plan so as to
increase the liability (whether or not contingent) of the Company or the Parent
or any of their subsidiaries in respect of compensation or benefits except as
may be required by law;
(k) incur any additional indebtedness (as defined in Section
4.1(p)(iv)) other than borrowings under the Company's senior bank credit
facilities as in effect on the date hereof; or
(l) authorize any of, or commit or agree to take any of, the
foregoing actions; or
(m) (i) take or agree or commit to take any action that would
make any representation or warranty of the Company hereunder inaccurate in any
material respect at, or as of any time prior to, the Effective Time or (ii) omit
or agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time.
SECTION 5.2. Stockholder Meeting; Proxy Material. The Company
shall cause a meeting of its stockholders (the "Company Stockholder Meeting") to
be duly called and held as soon as reasonably practicable following Merger
Subsidiary's acquisition of Shares in the Offer for the purpose of voting on the
approval and adoption of this Agreement and the Merger unless a vote of
stockholders of the Company is not required by Delaware Law. The Directors of
the Company shall, subject to their fiduciary duties as advised by Winstead
Sechrest & Minick P.C., counsel to the Company, recommend approval and adoption
of this Agreement and the Merger by the Company's stockholders. In connection
with such meeting, the Company (i) will promptly prepare and file with the SEC,
will use its best efforts to have cleared by the SEC and will thereafter mail to
its stockholders as promptly as practicable the Company Proxy Statement and all
other proxy materials for such meeting, (ii) subject to the fiduciary duties of
the Board of Directors of the Company as
-26-
<PAGE> 31
advised by Winstead Sechrest & Minick P.C., counsel to the Company, will use its
best efforts to obtain the necessary approvals by its stockholders of this
Agreement and the transactions contemplated hereby and (iii) will otherwise
comply with all legal requirements applicable to such meeting.
SECTION 5.3. Access to Information. Subject to the terms of
that certain Confidentiality Agreement dated June 15, 1999, (a) from the date
hereof until the Effective Time, the Company shall, and shall cause each of its
subsidiaries to, give Parent, its counsel, financial advisors, auditors and
other authorized representatives full access (during normal business hours and
upon reasonable notice) to the offices, properties, books and records of the
Company and the subsidiaries, will furnish to Parent, its counsel, financial
advisors, auditors and other authorized representatives all their respective
properties, books, contracts, commitments, personnel and records and, during
such period, the Company shall, and shall cause each of its subsidiaries to,
furnish (i) a copy of each report, schedule, registration statement and other
document filed by it during such period pursuant to the requirements of Federal
or state securities laws, (ii) a copy of each tax return, report and information
statement filed by it during such period, and (iii) all other information
concerning its business, assets, properties and personnel (including financial
and operating data) as such persons may reasonably request and will instruct the
Company's employees, counsel and financial advisors to cooperate with Parent in
its investigation of the business of the Company and the subsidiaries; provided
that no investigation pursuant to this Section 5.3 shall affect any
representation or warranty given by the Company hereunder.
(b) from the date hereof until the Effective Time, the Company
will give Parent, its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours and upon reasonable
notice) to all abstracts of title, title opinions, title files, ownership maps,
lease files, assignments, division orders, check vouchers and payment statements
as the same may now be in existence and in the possession of the Company.
(c) from the date hereof until the Effective Time, the Company
will give Parent, its counsel, financial advisors, auditors and other authorized
representatives full access (during normal business hours at their actual
location) to all accounting, revenue, marketing, transportation, processing,
environmental, geological, geophysical, production and engineering books,
records and data in possession of Company, except such records or data which
Company is prevented by contractual obligations with third parties from
disclosing; provided that in the event Seller is prohibited from making files or
records available because of provisions of third party agreements, then Company
shall inform Parent of the existence of such records, the parties thereto and
the subject matter of such records.
SECTION 5.4. Other Offers. Until the termination of this
Agreement, the Company and its subsidiaries will not, and will not authorize or
permit the officers, directors, employees or other agents of the Company and its
subsidiaries to, directly or indirectly, (i) take any action to solicit,
initiate or encourage any Acquisition Proposal (defined below) or (ii) subject
to the fiduciary duties of the Board of Directors under applicable law, as
advised by Winstead Sechrest & Minick P.C., counsel to the Company, and in
response to an unsolicited request that has been submitted to the Company's
Board of Directors and determined to be a Superior Acquisition Proposal (defined
below), engage in negotiations with, or disclose any nonpublic information
relating to the Company or any of its subsidiaries or afford access to the
properties, books or records of the Company or any
-27-
<PAGE> 32
of its subsidiaries to, any person that has advised the Company that it may be
considering making, or that has made, an Acquisition Proposal, provided, nothing
herein shall prohibit the Company's Board of Directors from taking and
disclosing to the Company's stockholders a position with respect to a tender
offer pursuant to Rules 14d-9 and 14e-2 promulgated under the Exchange Act. The
Company will promptly notify Parent after receipt of any Acquisition Proposal or
any indication that any person is considering making an Acquisition Proposal or
any request for nonpublic information relating to the Company or any of its
subsidiaries or for access to the properties, books or records of the Company or
any of its subsidiaries by any person that has advised the Company that it may
be considering making, or that has made, an Acquisition Proposal and will keep
Parent fully informed of the status and details of any such Acquisition
Proposal, notice or request. For purposes of this Agreement, "Acquisition
Proposal" means any offer or proposal for, or any indication of interest in, a
merger or other business combination involving the Company or any of its
subsidiaries or the acquisition of any significant equity interest in, or a
significant portion of the assets of, the Company or any of its subsidiaries,
other than the transactions contemplated by this Agreement. "Superior
Acquisition Proposal" means an acquisition proposal which a majority of the
Company's disinterested directors determines in its good faith judgment (after
receiving the advice of the Company's independent financial advisor) to be more
favorable to the Company's stockholders than the Offer or the Merger, and for
which financing, to the extent required, is then committed or which a majority
of the Company's disinterested directors reasonably believes will be available
when required. For purposes of this Section 5.4, direct or indirect ownership of
Shares shall not by itself cause a director to not be deemed to be
disinterested.
SECTION 5.5. State Takeover Statutes. If any "fair price",
"control share acquisition", "moratorium" or other anti-takeover statute, or
similar statute or regulation shall become applicable to this Agreement, the
Stockholder Option Agreement or any of the transactions contemplated hereby or
thereby, including, without limitation, the Offer or the Merger, the Company and
its Board of Directors shall take all action necessary to ensure that the Offer,
the Merger and the other transactions contemplated hereby and thereby, may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise to minimize the effect of such statute or regulation on the Offer, the
Merger and the other transactions contemplated hereby or thereby.
ARTICLE VI
COVENANTS OF PARENT
Parent agrees that:
SECTION 6.1. Obligations of Merger Subsidiary. Parent will
take all action necessary to cause Merger Subsidiary to perform its obligations
under this Agreement and to consummate the Offer and the Merger on the terms and
conditions set forth in this Agreement.
SECTION 6.2. Voting of Shares. Parent agrees to make a quorum
and vote all Shares acquired in the Offer or otherwise beneficially owned by it
in favor of adoption of this Agreement at the Company Stockholder Meeting.
SECTION 6.3. Director and Officer Liability. Parent will cause
the Surviving Corporation to indemnify and hold harmless the present and former
officers, directors, employees
-28-
<PAGE> 33
and agents of the Company (the "Indemnified Parties") in respect of acts or
omissions occurring on or prior to the Effective Time to the extent provided
under the Company's certificate of incorporation and bylaws in effect on the
date hereof; provided that such indemnification shall be subject to any
limitation imposed from time to time under applicable law. For three years after
the Effective Time, Parent will cause the Surviving Corporation to use its best
efforts to provide officers' and directors' liability insurance in respect of
acts or omissions occurring on or prior to the Effective Time covering each such
person currently covered by the Company's officers' and directors' liability
insurance policy on terms substantially similar to those of such policy in
effect on the date hereof, provided that in satisfying its obligation under this
Section, Parent shall not be obligated to cause the Surviving Corporation to pay
premiums in excess of 150% of the amount per annum the Company paid in its last
full fiscal year, which amount has been disclosed to Parent, and if the
Surviving Corporation is unable to obtain the insurance required by this Section
6.3, it shall obtain as much comparable insurance as possible for an annual
premium equal to such maximum amount. Without limitation of the foregoing, in
the event any such Indemnified Party is or becomes involved in any capacity in
any action, proceeding or investigation in connection with any matter relating
to the Merger, the Offer or this Agreement occurring on or prior to the
Effective Time, Parent shall cause the Surviving Corporation to pay as incurred
such Indemnified Party's reasonable legal and other expenses (including the cost
of any investigation and preparation) incurred in connection therewith. Parent
shall ensure that, at all relevant times, the Surviving Corporation will have
access to sufficient funds to fulfill its obligations pursuant to this Section
6.3.
SECTION 6.4. Employees. Parent agrees to honor (or cause the
Surviving Corporation to honor) in accordance with their terms all Benefit Plans
previously delivered to Parent and all accrued benefits vested thereunder; it
being understood and agreed that nothing in this Section 6.4 shall prevent
Parent from terminating any such Benefit Plan in accordance with its terms. For
purposes of this Section 6.4, any Benefit Plan that is a Company Filed SEC
Document shall be deemed to have been delivered to Parent. In the event that
Parent shall merge any Benefit Plan with any benefit plan of Parent or otherwise
modify any Benefit Plan, prior service with the Company will be counted for
purposes of employee eligibility, seniority and vesting under such benefit plan,
and any pre-existing condition shall be waived for each employee so long as such
employee has had medical coverage under the applicable Benefit Plan for at least
six months immediately prior to the Effective Time.
ARTICLE VII
COVENANTS OF PARENT AND THE COMPANY
The parties hereto agree that:
SECTION 7.1. HSR Act Filings; Reasonable Efforts;
Notification. (a) Each of Parent and the Company shall, if applicable, (i)
promptly make or cause to be made the filings required of such party or any of
its subsidiaries under the HSR Act with respect to the transactions contemplated
by this Agreement, (ii) comply at the earliest practicable date with any request
under the HSR Act for additional information, documents, or other material
received by such party or any of its subsidiaries from the Federal Trade
Commission or the Department of Justice or any other Governmental Entity in
respect of such filings or such transactions, and (iii) cooperate with the other
party in connection with any such filing and in connection with resolving any
investigation or other
-29-
<PAGE> 34
inquiry of any such agency or other Governmental Entity under any Antitrust Laws
(defined below) with respect to any such filing or any such transaction. Each
party shall promptly inform the other party of any communication with, and any
proposed understanding, undertaking, or agreement with, any Governmental Entity
regarding any such filings or any such transaction. Neither party shall
participate in any meeting with any Governmental Entity in respect of any such
filings, investigation, or other inquiry without giving the other party notice
of the meeting and, to the extent permitted by such Governmental Entity, the
opportunity to attend and participate.
(b) Each of Parent and the Company shall use all commercially
reasonable efforts to resolve such objections, if any, as may be asserted by any
Governmental Entity with respect to the transactions contemplated by this
Agreement under the HSR Act, the Sherman Act, as amended, the Clayton Act, as
amended, the Federal Trade Commission Act, as amended, and any other Federal,
state or foreign statutes, rules, regulations, orders or decrees that are
designed to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade (collectively, "Antitrust Laws"). In
connection therewith, if any administrative or judicial action or proceeding is
instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Antitrust Law, and, if by
mutual agreement, Parent and the Company decide that litigation is in their best
interests, each of Parent and the Company shall cooperate and use all reasonable
efforts vigorously to contest and resist any such action or proceeding and to
have vacated, lifted, reversed, or overturned any decree, judgment, injunction
or other order, whether temporary, preliminary or permanent (each an "Order"),
that is in effect and that prohibits, prevents, or restricts consummation of any
such transaction. Each of Parent and the Company shall use all commercially
reasonable efforts to take such action as may be required to cause the
expiration of the notice periods under the HSR Act or other Antitrust Laws with
respect to such transactions as promptly as possible after the execution of this
Agreement.
(c) Each of the parties agrees to use all commercially
reasonable efforts to take, or cause to be taken, all actions, and to do, or
cause to be done, and to assist and cooperate with the other parties in doing,
all things necessary, proper or advisable to consummate and make effective, in
the most expeditious manner practicable, the Offer, the Merger, and the other
transactions contemplated by this Agreement, including (i) the obtaining of all
other necessary actions or nonactions, waivers, consents and approvals from
Governmental Entities and the making of all other necessary registrations and
filings (including other filings with Governmental Entities, if any), (ii) the
obtaining of all necessary consents, approvals or waivers from third parties,
(iii) the preparation of the Company Disclosure Documents and the Offer
Documents, and (iv) the execution and delivery of any additional instruments
necessary to consummate the transactions contemplated by, and to fully carry out
the purposes of, this Agreement.
(d) Notwithstanding anything to the contrary in Section
7.1(a), (b) or (c), (i) neither Parent nor any of its subsidiaries shall be
required to divest any of their respective businesses, product lines or assets,
or to take or agree to take any other action or agree to any limitation that
could reasonably be expected to have a material adverse effect on the business,
assets, financial condition, results of operations or prospects of Parent or any
of its subsidiaries or the Surviving Corporation after the Effective Time, (ii)
neither the Company nor its subsidiaries shall be required to divest any of
their respective businesses, product lines or assets, or to take or agree to
take any other action or agree to any limitation that could reasonably be
expected to have a Material Adverse Effect, (iii) no party shall be required to
agree to the imposition of, or to comply with, any condition,
-30-
<PAGE> 35
obligation or restriction on Parent or any of its subsidiaries or on the
Surviving Corporation or any of its subsidiaries of the type referred to in
clause (a) or (b) of Annex I and (iv) neither Parent nor Merger Subsidiary shall
be required to waive any of the conditions to the Offer set forth in Annex I or
any of the conditions to the Merger set forth in Section VIII.
(e) The Company shall give prompt notice to Parent of (i) any
material representation or warranty made by it contained in this Agreement
becoming untrue or inaccurate in any material respect, (ii) upon the Company's
obtaining knowledge thereof, any representation or warranty made by it contained
in this Agreement and not covered by clause (i) above becoming untrue or
inaccurate in any material respect, or (iii) the failure by it to comply with or
satisfy in any respect any covenant, condition or agreement to be complied with
or satisfied by it under this Agreement; provided, however, that no such
notification shall affect the representations, warranties, covenants or
agreements of the parties or the conditions to the obligations of the parties
under this Agreement.
(f) The Company shall give prompt notice to Parent, and Parent
or Merger Subsidiary shall give prompt notice to the Company, of:
(i) any notice or other communication from any person alleging
that the consent of such person is or may be required in connection
with the transactions contemplated by this Agreement;
(ii) any notice or other communication from any Governmental
Entity in connection with the transactions contemplated by this
Agreement; and
(iii) any actions, suits, claims, investigations or
proceedings commenced or, to the best of its knowledge threatened
against, relating to or involving or otherwise affecting it or any of
its subsidiaries which, if pending on the date of this Agreement would
have been required to have been disclosed pursuant to Section 4.1(g),
4.1(h), 4.1(k) or 4.1(l) or which relate to the consummation of the
transactions contemplated by this Agreement.
SECTION 7.2. Public Announcements. Parent and Merger
Subsidiary, on the one hand, and the Company, on the other hand, will consult
with each other before issuing, and provide each other the opportunity to review
and comment upon, any press release or other public statements with respect to
the transactions contemplated by this Agreement and the Stockholder Option
Agreement, including the Offer and the Merger, and shall not issue any such
press release or make any such public statement prior to such consultation.
ARTICLE VIII
CONDITIONS TO THE MERGER
SECTION 8.1. Conditions to the Obligations of Each Party. The
obligations of the Company, Parent and Merger Subsidiary to consummate the
Merger are subject to the satisfaction of the following conditions:
-31-
<PAGE> 36
(i) if required by Delaware Law, this Agreement shall have
been adopted by the stockholders of the Company in accordance with such
Law;
(ii) any applicable waiting period under the HSR Act relating
to the Merger shall have expired;
(iii) no provision of any applicable law or regulation and no
judgment, injunction, order or decree shall prohibit the consummation
of the Merger;
(iv) Parent or Merger Subsidiary shall have purchased Shares
in an amount equal to at least the Minimum Condition pursuant to the
Offer; and
(v) other than the filing of the certificate of merger in
accordance with Delaware Law, all Consents required to permit the
consummation of the Merger including those set forth in Sections 4.1(d)
and 4.2(b) shall have been filed, occurred or been obtained (other than
any such Consents the failure to file, occur or obtain, in the
aggregate, could not reasonably be expected to (i) have a Material
Adverse Effect or (ii) prevent or materially delay the consummation of
the Merger).
ARTICLE IX
TERMINATION
SECTION 9.1. Termination. This Agreement may be terminated and
the Merger may be abandoned at any time prior to the Effective Time
(notwithstanding any approval of this Agreement by the stockholders of the
Company):
(i) by mutual written consent of the Company and Parent;
(ii) by either the Company or Parent, if the Merger has not
been consummated by June 30, 2000 (provided that the party seeking to
terminate the Agreement shall not have breached its obligations under
this Agreement in any material respect);
(iii) by either the Company or Parent, if there shall be any
law or regulation that makes consummation of the Merger illegal or
otherwise prohibited or if any judgment, injunction, order or decree
enjoining Parent or the Company from consummating the Merger is entered
and such judgment, injunction, order or decree shall become final and
nonappealable;
(iv) by either the Company or Parent (provided that Parent
shall not be entitled to terminate this Agreement pursuant to this
clause (iv) as a result of its breach of this Agreement), (x) if Parent
or Merger Subsidiary shall have failed to commence the Offer within
five business days following the date of the announcement of this
Agreement, (y) if Parent or Merger Subsidiary shall not have purchased
any Shares pursuant to the Offer prior to December 1, 1999 or (z) the
Offer shall have been terminated without Parent or Merger Subsidiary
having purchased any Shares pursuant to the Offer;
-32-
<PAGE> 37
(v) by Parent, upon the occurrence of any Trigger Event
described in clauses (i) through (iii) of Section 10.4(b); or
(vi) by the Company, upon the occurrence of any Trigger Event
described in clause (i) of Section 10.4(b).
SECTION 9.2. Effect of Termination. If this Agreement is
terminated pursuant to Section 9.1, this Agreement shall become void and of no
effect with no liability on the part of any party hereto or their respective
officers and directors, except that the agreements contained in Sections 10.4
and 10.6 shall survive the termination hereof and except to the extent that such
termination results from the material breach by a party of any representations,
warranties, covenants or agreements set forth in this Agreement.
ARTICLE X
MISCELLANEOUS
SECTION 10.1. Notices. All notices, requests and other
communications to any party hereunder shall be in writing (including telecopy or
similar writing) and shall be given,
if to Parent or Merger Subsidiary, to:
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Telecopy: 408-995-0505
Attention: John T. King
with a copy (which shall not constitute notice) to:
Howard, Smith & Levin LLP
1330 Avenue of the Americas
New York, New York 10019
Telecopy: (212) 841-1010
Attention: William R. Collins
if to the Company, to:
Sheridan Energy, Inc.
1000 Louisiana
Suite 800
Houston, Texas 77002
Telecopy: 713-651-3056
Attention: Michael A. Gerlich
-33-
<PAGE> 38
with a copy (which shall not constitute notice) to:
Winstead Sechrest & Minick P.C.
910 Travis, Suite 2400
Houston, Texas 77002
Telecopy: 713-650-2400
Attention: Arthur S. Berner
or such other address or telecopy number as such party may hereafter specify for
the purpose by notice to the other parties hereto. Each such notice, request or
other communication shall be effective when delivered at the address specified
in this Section.
SECTION 10.2. Survival of Representations and Warranties. The
representations and warranties and agreements contained herein and in any
certificate or other writing delivered pursuant hereto shall not survive the
Effective Time or the termination of this Agreement except for the
representations, warranties and agreements set forth in Sections 10.4 and 10.6.
SECTION 10.3. Amendments; No Waivers. (a) Any provision of
this Agreement may be amended or waived prior to the Effective Time if, and only
if, such amendment or waiver is in writing and signed, in the case of an
amendment, by the Company, Parent and Merger Subsidiary or in the case of a
waiver, by the party against whom the waiver is to be effective; provided that
after the adoption of this Agreement by the stockholders of the Company, no such
amendment or waiver shall, without the further approval of such stockholders,
alter or change (i) the amount or kind of consideration to be received in
exchange for any shares of capital stock of the Company, (ii) any term of the
certificate of incorporation of the Surviving Corporation or (iii) any of the
terms or conditions of this Agreement if such alteration or change would
adversely affect the holders of any shares of capital stock of the Company.
(b) No failure or delay by any party in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
SECTION 10.4. Fees and Expenses. (a) Except as otherwise
provided in this Section, all costs and expenses incurred in connection with
this Agreement shall be paid by the party incurring such cost or expense.
(b) The Company agrees to pay the Parent a fee in immediately
available funds, promptly, but in no event later than one business day, after
the termination of this Agreement as a result of the occurrence of any of the
events set forth below (a "Trigger Event") in an amount equal to $2,000,000 in
the case of the occurrence of a Trigger Event described below:
(i) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or an
agreement in principle with respect to any Acquisition Proposal;
-34-
<PAGE> 39
(ii) any representation or warranty made by the Company in, or
pursuant to, this Agreement that is qualified as to materiality shall
not have been true and correct when made or at any time prior to the
consummation of the Offer as if made at and as of such time, or any
representation or warranty made by the Company in, or pursuant to, this
Agreement that is not so qualified shall not have been true and correct
in all material respects when made or at any time prior to the
consummation of the Offer as if made at and as of such time, or the
Company shall have failed to observe or perform in any material respect
any of its obligations under this Agreement; provided that it shall not
be a Trigger Event unless (x) the breaches of the representations and
warranties without regard to any materiality qualifier or threshold,
and failure to perform or breach of any obligation, individually or in
the aggregate, have had or could reasonably be expected to have or
result in a Material Adverse Effect and (y) with respect to breaches of
representations and warranties, such breaches in significant part were
intentional; provided further that it shall not be a Trigger Event if
(1) such breaches and failures to perform are reasonably capable of
being cured by December 1, 1999, (2) the Company diligently pursues
such cure beginning as soon as it obtains knowledge of such breaches
and failures to perform, and (3) the Company cures all of such breaches
and failures to perform that have given rise to the Trigger Event by
December 1, 1999; or
(iii) the Board of Directors of the Company (or any special
committee thereof) shall have withdrawn or materially modified in a
manner adverse to Parent or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or this Agreement or its
approval of the entry by Parent and Merger Subsidiary into the
Stockholder Option Agreement, in any such case whether or not such
withdrawal or modification is required by the fiduciary duties of the
Board of Directors (or any special committee thereof).
If (x) this Agreement is terminated as a result of the occurrence of the Trigger
Events described in clauses (i) and (iii) above, (y) prior to such termination
the Company was in material compliance with its obligations set forth herein,
and (z) the Company has paid to Parent the fee described in this Section
10.4(b), the Company shall have no further obligation or liability to Parent or
Merger Subsidiary hereunder.
SECTION 10.5. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto except that Merger
Subsidiary may transfer or assign, in whole or from time to time in part, to one
or more of Parent or any of its wholly-owned subsidiaries, the right to purchase
Shares pursuant to the Offer, but any such transfer or assignment will not
relieve Merger Subsidiary of its obligations under the Offer or prejudice the
rights of tendering stockholders to receive payment for Shares validly tendered
and accepted for payment pursuant to the Offer.
SECTION 10.6. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Delaware, without
giving effect to the principles of conflicts of laws thereof.
-35-
<PAGE> 40
SECTION 10.7. Counterparts; Effectiveness; Interpretation.
This Agreement may be signed in any number of counterparts, each of which shall
be an original, with the same effect as if the signatures thereto and hereto
were upon the same instrument. This Agreement shall become effective when each
party hereto shall have received counterparts hereof signed by all of the other
parties hereto. When a reference is made in this Agreement to a Section, such
reference shall be to a Section of this Agreement unless otherwise indicated.
The table of contents and headings contained in this Agreement are for reference
purposes only and shall not affect in any way the meaning or interpretation of
this Agreement. Whenever the words "include", "includes" or "including" are used
in this Agreement, they shall be deemed to be followed by the words "without
limitation". Any representation or warranty in this Agreement which is expressed
as made to the Company's knowledge or to the knowledge of the Company means the
knowledge, after reasonable investigation and due inquiry, of the directors and
executive officers of the Company.
SECTION 10.8. Enforcement. The parties agree that irreparable
damage would occur in the event that any of the provisions of this Agreement
were not performed in accordance with their specific terms or were otherwise
breached. It is accordingly agreed that the parties shall be entitled to an
injunction or injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any court of the
United States or any state having jurisdiction, this being in addition to any
other remedy to which they are entitled at law or in equity.
SECTION 10.9. Severability. If any term or other provision of
this Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other conditions and provisions of this Agreement
shall nevertheless remain in full force and effect. Upon such determination that
any term other provision is invalid, illegal or incapable of being enforced, the
parties hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible to the fullest
extent permitted by applicable law in an acceptable manner to the end that the
transactions contemplated hereby are fulfilled to the extent possible.
SECTION 10.10. Entire Agreement; No Third Party Beneficiaries.
This Agreement (including the Disclosure Schedule) and, subject to Section 10.11
hereof, the Confidentiality Agreement dated as of June 15, 1999 (the
"Confidentiality Agreement") between Parent and the Company (a) constitute the
entire agreement and supersede all prior agreements and understandings, both
written and oral, among the parties hereto with respect to the subject matter
hereof, and (b) are not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder other than rights to indemnity
under Section 6.3.
SECTION 10.11. Standstill. If (x) this Agreement is terminated
by either Parent or the Company in accordance with the terms of Section 9.1(i),
(iii) or (iv), (y) such termination was not related to the material breach by
the Company of any of its representations, warranties, covenants or agreements
set forth herein, and (z) Merger Subsidiary fails to exercise the Option
(defined in the Stockholder Option Agreement) prior to the expiration thereof,
neither Parent, Merger Subsidiary nor any subsidiary of either of them shall for
a period of two years following such expiration (i) acquire, offer to acquire or
agree to acquire directly or indirectly by purchase or otherwise any voting
securities of the Company, (ii) make or in any way participate directly or
indirectly, in any "solicitation" of "proxies" to vote (in such terms as used in
the proxy rules of the SEC) or seek to advise or influence any person or entity
with respect to the voting of any voting securities of the
-36-
<PAGE> 41
Company, (iii) form, join or in any way participate in a "group" within the
meaning of Section 13(d)(iv) of the Exchange Act with respect to any voting
securities of the Company or (iv) otherwise act alone or in concert with others
to seek to control or influence the management, Board of Directors, or policies
of the Company. Notwithstanding anything to the contrary set forth herein, as of
the date of this Agreement, Section 9 of the Confidentiality Agreement is hereby
terminated and of no further force or effect.
-37-
<PAGE> 42
The parties hereto have caused this Agreement to be duly
executed by their respective authorized officers as of the day and year first
above written.
SHERIDAN ENERGY, INC.
By: /s/ B.A. Berilgen
------------------------------
Name: B.A. Berilgen
Title: President and CEO
CALPINE CORPORATION
By: /s/ John T. King
------------------------------
Name: John T. King
Title: Vice-President - Business Development
CPN SHERIDAN, INC.
By: /s/ John T. King
------------------------------
Name: John T. King
Title: Vice-President - Business Development
-38-
<PAGE> 43
ANNEX I
Notwithstanding any other provision of the Offer, Parent and
Merger Subsidiary shall not be required to accept for payment or (subject to any
applicable rules and regulations of the SEC, including Rule 14e-1(c) under the
Exchange Act (relating to Merger Subsidiary's obligation to pay for or return
tendered Shares after the termination or withdrawal of the Offer)) to pay for
any Shares, and may terminate the Offer, if (i) by the expiration of the Offer,
the Minimum Condition shall not have been satisfied, or (ii) at any time on or
after August 25, 1999 and prior to the acceptance for payment of Shares pursuant
to the Offer, any of the following conditions exist:
(a) there shall be instituted or pending any action or
proceeding by any Governmental Entity or by any other person, domestic
or foreign, before any Governmental Entity or arbitrator, (i)
challenging or seeking to make illegal, to delay materially or
otherwise directly or indirectly to restrain or prohibit the making of
the Offer, the acceptance for payment of or payment for some of or all
the Shares by Parent or Merger Subsidiary or the consummation by Parent
or Merger Subsidiary of the Merger, seeking to obtain material damages
or otherwise directly or indirectly relating to the transactions
contemplated by the Stockholder Option Agreement, this Agreement, the
Offer or the Merger, (ii) seeking to restrain or prohibit Parent's or
Merger Subsidiary's ownership or operation (or that of their respective
subsidiaries or affiliates) of all or any material portion of the
business or assets of the Company or any of its subsidiaries or of
Parent and its subsidiaries or to compel Parent or any of its
subsidiaries or affiliates to dispose of or hold separate all or any
material portion of the business or assets of the Company or any of its
subsidiaries or of Parent and its subsidiaries (iii) seeking to impose
material limitations on the ability of Parent or any of its
subsidiaries or affiliates effectively to exercise full rights of
ownership of the Shares, including, without limitation, the right to
vote any Shares acquired or owned by Parent or any of its subsidiaries
or affiliates on all matters properly presented to the Company's
stockholders, (iv) seeking to require divestiture by Parent or any of
its subsidiaries or affiliates of any Shares, or (v) that otherwise, in
the judgment of Parent, is likely to materially adversely affect the
business, assets, liabilities, operations, condition (financial or
otherwise), results of operations or prospects of the Company or any of
its subsidiaries, or Parent and its subsidiaries, taken as a whole; or
(b) there shall be any action taken, or any statute, rule,
regulation, injunction, order or decree proposed, enacted, enforced,
promulgated, issued or deemed applicable to the Stockholder Option
Agreement, this Agreement, the Offer or the Merger, by any Governmental
Entity or arbitrator (other than the application of the waiting period
provisions of the HSR Act to the Stockholder Option Agreement, this
Agreement, the Offer or the Merger), that, in the reasonable judgment
of Parent, is substantially likely, directly or indirectly, to result
in any of the consequences referred to in clauses (i) through (v) of
paragraph (a) above; or
<PAGE> 44
(c) any change shall have occurred (or any development shall
have occurred involving a prospective change) in the business, assets,
liabilities, financial condition, capitalization, operations, results
of operations or prospects of the Company and its subsidiaries taken as
a whole that, in the reasonable judgment of Parent, is or is likely to
be materially adverse to the Company and its subsidiaries taken as a
whole or Parent shall have become aware of any facts that, in the
reasonable judgment of Parent, have or are likely to have or result in
a Material Adverse Effect; or
(d) there shall have occurred (i) any general suspension of
trading in, or limitation on prices for, securities on the New York
Stock Exchange or in the NASDAQ over-the-counter market in the United
States that lasts or has lasted for at least two full consecutive
trading days, (ii) a declaration of a general banking moratorium or any
suspension of payments in respect of banks in the United States, (iii)
any material limitation (whether or not mandatory) by any Governmental
Entity on the extension of credit by banks or other lending
institutions, (iv) a commencement of a war or armed hostilities or
other national or international calamity directly or indirectly
involving the United States which would reasonably be expected to have
a Material Adverse Effect or prevent (or materially delay) the
consummation of the Offer or (v) in the case of any of the foregoing
existing at the time of commencement of the Offer, a material
acceleration or worsening thereof; or
(e) a tender or exchange offer for some or all of the Shares
shall have been publicly proposed to be made or shall have been made by
another person, or it shall have been publicly disclosed or Parent
shall have otherwise learned that (i) any person or "group" (defined in
Section 13(d)(3) of the Exchange Act) shall have acquired or proposed
to acquire beneficial ownership of more than 50% of any class or series
of capital stock of the Company (including the Shares), through the
acquisition of stock, the formation of a group or otherwise, or shall
have been granted any option, right or warrant, conditional or
otherwise, to acquire beneficial ownership of more than 50% of any
class or series of capital stock of the Company (including the Shares)
or (ii) any person shall have filed a Notification and Report Form
under the HSR Act or made a public announcement reflecting an intent to
acquire the Company or any of its subsidiaries or any assets or
securities of the Company or any of its subsidiaries; or
(f) any Consent (other than the filing of certificate of
merger or approval by the stockholders of the Company of the Merger (if
required by Delaware law)) required to be filed, occurred or been
obtained by the Company or any of its subsidiaries or Parent of any of
its subsidiaries (including Merger Subsidiary) in connection with the
execution and delivery of this Agreement, the Offer and the
consummation of the transactions contemplated by this Agreement shall
not have been filed, occurred or been obtained (other than any such
Consents the failure to file, occur or obtain in the aggregate, could
not reasonably be expected to (i) have a
-2-
<PAGE> 45
Material Adverse Effect or (ii) prevent or materially delay the
consummation of the Offer or the Merger); or
(g) the Company shall have breached or failed to perform in
any material respect any of its covenants or agreements under this
Agreement, or any of the representations and warranties of the Company
set forth in this Agreement that is qualified as to materiality shall
not be true when made or at any time prior to consummation of the Offer
as if made at and as of such time, or any of the representations and
warranties set forth in this Agreement that is not so qualified shall
not be true in any material respect when made or at any time prior to
the consummation of the Offer as if made at and as of such time;
provided that this condition shall not be deemed to exist unless, in
the reasonable judgment of Parent, such breaches or failures to perform
any covenant, obligation or agreement, and any breach of representation
or warranty without regard to any materiality qualifier or threshold,
individually or in the aggregate, has had or could reasonably be
expected to have a Material Adverse Effect; or
(h) any party to the Stockholder Option Agreement (other than
Merger Subsidiary or Parent) shall have breached or failed to perform
in any material respect any of its agreements under the Stockholder
Option Agreement or any of the representations and warranties of any
such party set forth in the Stockholder Option Agreement shall not be
true in any material respect, in each case, when made or at any time
prior to the consummation of the Offer as if made at and as of such
time, or the Stockholder Option Agreement shall have been invalidated
or terminated with respect to any Shares subject thereto; or
(i) this Agreement or the Stockholder Option Agreement shall
have been terminated in accordance with its terms; or
(j) the Board of Directors of the Company (or any special
committee thereof) shall have withdrawn or materially modified in a
manner adverse to Parent or Merger Subsidiary its approval or
recommendation of the Offer, the Merger or this Agreement or its
approval of the entry by Parent and Merger Subsidiary into the Stock
Option Agreement; or
(k) the Company shall have entered into, or shall have
publicly announced its intention to enter into, an agreement or
agreement in principle with respect to any Acquisition Proposal;
which, in the judgment of Parent in any such case, and regardless of the
circumstances (including any action or omission by Parent or Merger Subsidiary)
giving rise to any such condition, makes it inadvisable to proceed with such
acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Parent
and Merger Subsidiary and may be asserted by Parent in its sole discretion
regardless of the circumstances (including any action or omission by Parent or
Merger Subsidiary) giving rise to any such condition or (other than the
-3-
<PAGE> 46
Minimum Condition) may be waived by Parent and Merger Subsidiary in their
discretion in whole at any time or in part from time to time. The failure by
Parent or Merger Subsidiary at any time to exercise its rights under any of the
foregoing conditions shall not be deemed a waiver of any such right; the waiver
of any such right with respect to particular facts and circumstances shall not
be deemed a waiver with respect to any other facts and circumstances, and each
such right shall be deemed an ongoing right which may be asserted at any time or
from time to time. Any determination by Parent concerning the events described
in this Section will be final and binding upon all parties.
-4-
<PAGE> 1
Exhibit 99 (c)(2)
AGREEMENT, dated as of August 25, 1999, among CPN SHERIDAN,
INC., a Delaware corporation ("Buyer"), CALPINE CORPORATION, a
Delaware corporation ("Parent") and the parent of Buyer, and
the holders (the "Stockholders") of the shares of common
stock, $0.01 par value (the "Shares"), of SHERIDAN ENERGY,
INC., a Delaware corporation (the "Company"), listed on the
signature pages hereof.
In order to induce Buyer and certain of its affiliates to
enter into an agreement and plan of merger, dated as of the date hereof (the
"Merger Agreement"), with the Company, Buyer has requested the Stockholders, and
the Stockholders have agreed, to enter into this Agreement.
The parties hereto agree as follows:
ARTICLE I
STOCK OPTION
SECTION 1.1. Grant of Stock Option. Subject to the terms and
conditions set forth herein, each of the Stockholders hereby grants to Buyer an
irrevocable option (collectively, the "Option") to purchase the number of shares
opposite such Stockholder's name on the signature pages hereto and any
additional Shares acquired by such Stockholder in any capacity (whether by
exercise of options, warrants or rights, the conversion or exchange of
convertible or exchangeable securities or by means of a purchase, dividend,
distribution or otherwise) (such "Stockholder's Shares" and, collectively, the
"Stockholder Shares") at a purchase price of $5.50 per Stockholder Share (as
adjusted pursuant to Section 1.6, the "Purchase Price").
SECTION 1.2. Exercise of Option. (a) Subject to the conditions
set forth in Section 1.5 hereof, the Option may be exercised by Buyer, in whole
but not in part, at any time after the date hereof and prior to the 20th
business day after the termination of the Merger Agreement in accordance with
the terms thereof if, but only if, the termination of the Merger Agreement did
not result from the material breach thereof by Buyer or Parent. In the event
Buyer wishes to exercise the Option other than pursuant to the Offer (as defined
in the Merger Agreement), Buyer shall send a written notice (the "Exercise
Notice") to the Stockholders stating that it will purchase pursuant to such
exercise all of the Stockholder Shares and the place, the date (not less than
one nor more than five business days from the date of the Exercise Notice) and
the time for the closing of such purchase; provided that such date and time may
be earlier than one day after the Exercise Notice if reasonably practicable. The
closing of the purchase of the Stockholder Shares pursuant to this Section
1.2(a) (the "Closing") shall take place at the place, on the date and at the
time designated by Buyer in its Exercise Notice, provided that if, at the date
of the Closing herein provided for, the conditions set forth in Section 1.5(ii)
or (iii) shall not have been satisfied (or waived), Buyer may postpone the
Closing until a date within five
<PAGE> 2
business days after such conditions are satisfied but in no event to a date
beyond June 30, 2000; provided further that, if (1) Buyer exercises the Option
and postpones the Closing on account of the condition set forth in Section
1.5(iii) not being satisfied and (2) a governmental entity has issued a final,
nonappealable permanent injunction prohibiting exercise of the Option or the
condition set forth in subclause (y) of Section 1.5(iii) exists, Buyer may not
further postpone the Closing and the Option shall automatically terminate.
(b) Buyer shall not be under any obligation to deliver any
Exercise Notice and may allow the Option to terminate without purchasing any
Stockholder Shares hereunder; provided however that once Buyer has delivered to
the Stockholders an Exercise Notice, subject to the terms and conditions of this
Agreement, Buyer shall be bound to effect the purchase as described in such
Exercise Notice.
SECTION 1.3. Closing. At the Closing, (a) each Stockholder
shall deliver to Buyer (in accordance with Buyer's instructions) a certificate
or certificates (the "Certificates") representing all of such Stockholder's
Shares, duly endorsed or accompanied by stock powers duly executed in blank and
(b) Buyer shall pay to such Stockholder, by wire transfer in immediately
available funds to the account such Stockholder specifies in writing no less
than two business days prior to the Closing, an amount equal to (i) the number
of such Stockholder's Shares being purchased at such Closing multiplied by (ii)
the Purchase Price (the "Purchase Amount").
SECTION 1.4. Agreement to Tender. Each of the Stockholders
hereby agrees to validly tender (or cause the record owner of such shares to
validly tender) in the Offer (defined in the Merger Agreement) within 20 days of
the receipt of Buyer's offer to purchase relating to the Offer such
Stockholder's Shares. Upon receipt of written instructions from the Buyer, each
Stockholder shall promptly deliver to the depositary (the "Depositary")
designated in the Offer (i) a letter of transmittal with respect to such
Stockholder's Shares complying with the terms of the Offer together with
instructions directing the Depositary to make payment for such Shares directly
to the Stockholder (but if such Shares are not accepted for payment or are
withdrawn and are to be returned pursuant to the Offer, to return such Shares to
such Stockholder whereupon they shall continue to be held by such Stockholder
subject to the terms and conditions of this Agreement), (ii) the Certificates
representing such Stockholder's Shares and (iii) all other documents or
instruments required to be delivered pursuant to the terms of the Offer (such
documents in clauses (i) through (iii) collectively being hereinafter referred
to as the "Tender Documents"). No tender pursuant to this Section 1.4 will
excuse any of the obligations of the Stockholders hereunder. Notwithstanding
anything to the contrary set forth herein, no Stockholder shall be required to
tender such Stockholder's Shares in the Offer if the per Share consideration to
be paid by Buyer pursuant to the Offer is less than $5.50 per Share in cash.
SECTION 1.5. Conditions. The obligation of each Stockholder to
sell such Stockholder's Shares at any Closing is subject to the following
conditions:
(i) The representations and warranties of Buyer contained in
Article IV shall be true and correct in all material respects on the
date thereof as if made on such date;
-2-
<PAGE> 3
(ii) If applicable, all waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and
the rules and regulations promulgated thereunder (the "HSR Act")
applicable to such exercise of the Option shall have expired or been
terminated;
(iii) (x) There shall be no preliminary or permanent
injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, (y) nor any statute, rule,
regulation or order promulgated or enacted by any governmental
authority, prohibiting or otherwise restraining such exercise of the
Option; and
(iv) The Buyer shall have commenced the Offer.
SECTION 1.6. Adjustment Upon Changes in Capitalization or
Merger. (a) In the event of any change in the Company's capital stock by reason
of stock dividends, stock splits, mergers, consolidations, recapitalizations,
combinations, conversions, exchanges of shares, extraordinary or liquidating
dividends, or other changes in the corporate or capital structure of the Company
which would have the effect of diluting or changing the Buyer's rights
hereunder, the number and kind of shares or securities subject to the Option and
the purchase price per Stockholder Share (but not the total purchase price)
shall be appropriately and equitably adjusted so that the Buyer shall receive
upon exercise of the Option the number and class of shares or other securities
or property that the Buyer would have received in respect of the Stockholder
Shares purchasable upon exercise of the Option if the Option had been exercised
immediately prior to such event. Each Stockholder shall take such steps in
connection with such consolidation, merger, liquidation or other such action as
may be necessary to assure that the provisions hereof shall thereafter apply as
nearly as possible to any securities or property thereafter deliverable upon
exercise of the Option.
(b) In the event the consideration per Share to be paid by
Buyer pursuant to the Offer is increased, the Purchase Price shall be similarly
increased and in the event the Closing hereunder shall have occurred, Buyer
shall promptly pay to each Stockholder the product of the amount of such
increase in the Purchase Price multiplied by the number of such Stockholder's
Shares as to which the Option has been exercised.
ARTICLE II
GRANT OF PROXY
SECTION 2.1. Proxy. Each Stockholder hereby revokes any and
all previous proxies granted with respect to such Stockholder's Shares. Each
Stockholder, by this Agreement, with respect to such Stockholder's Shares, does
hereby constitute and appoint Buyer, or any nominee of Buyer, with full power of
substitution, as its true and lawful attorney and proxy, for and in its name,
place and stead, to vote each of such Stockholder's Shares as its proxy, at
every annual, special or adjourned meeting, or solicitation of consents, of the
stockholders of the Company (including the right to sign its name (as
stockholder) to any consent, certificate or other document relating to the
Company that the law of the State of
-3-
<PAGE> 4
Delaware may permit or require) (i) in favor of the adoption of the Merger
Agreement and this Agreement and approval of the Merger and the other
transactions contemplated hereby and by the Merger Agreement, (ii) against any
proposal for any recapitalization, merger, sale of assets or other business
combination between the Company and any person or entity (other than the Merger)
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement not being fulfilled, and (iii) in favor of any other
matter relating to consummation of the transactions contemplated by the Merger
Agreement and this Agreement. Each Stockholder further agrees to cause such
Stockholder's Shares that are outstanding and owned by it beneficially to be
voted in accordance with the foregoing. The proxy granted by each Stockholder
pursuant to this Article II is irrevocable and is granted in consideration of
Buyer's entering into this Agreement and the Merger Agreement; provided,
however, that such proxy shall be revoked upon the earlier of (i) termination of
this Agreement in accordance with its terms and (ii) the purchase of the
Stockholder Shares pursuant to the Offer.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each of the Stockholders severally represents and warrants to
the Buyer that:
SECTION 3.1. Valid Title. Such Stockholder is the sole, true,
lawful and beneficial owner of such Stockholder's Shares with no restrictions on
such Stockholder's voting rights or rights of disposition pertaining thereto. At
any Closing, such Stockholder will convey good and valid title to such
Stockholder's Shares being purchased free and clear of any and all claims,
liens, charges, encumbrances and security interests. None of such Stockholder's
Shares is subject to any voting trust or other agreement or arrangement with
respect to the voting of such Shares (other than, to the extent applicable to
such Stockholder, the Shareholders' Agreement dated as of December 15, 1997
among the Company and certain of the Stockholders).
SECTION 3.2. Non-Contravention. The execution, delivery and
performance by such Stockholder of this Agreement and the consummation of the
transactions contemplated hereby (i) are within such Stockholder's powers, have
been duly authorized by all necessary action (including any consultation,
approval or other action by or with any other person), (ii) require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority (except as required under the HSR Act), and (iii) do not and will not
contravene or constitute a default under, or give rise to a right of
termination, cancellation or acceleration of any right or obligation of such
Stockholder or to a loss of any benefit of such Stockholder under, any provision
of applicable law or regulation or of any agreement, judgment, injunction,
order, decree, or other instrument binding on such Stockholder or result in the
imposition of any lien on any asset of such Stockholder except, in the case of
clause (iii) above, any such contraventions, defaults, rights, losses or liens
that, individually or in the aggregate, could not reasonably be expected to (A)
have a material adverse effect on such Stockholder, (B) impair the ability of
such Stockholder to perform its obligations hereunder or (C) prevent or
materially delay the consummation of any of the transactions contemplated
hereby.
-4-
<PAGE> 5
SECTION 3.3. Binding Effect. This Agreement has been duly
executed and delivered by such Stockholder and is the valid and binding
agreement of such Stockholder, enforceable against such Stockholder in
accordance with its terms, except as enforcement may be limited by bankruptcy,
insolvency, moratorium or other similar laws relating to creditors' rights
generally. If this Agreement is being executed in a representative or fiduciary
capacity, the person signing this Agreement has full power and authority to
enter into and perform such Agreement.
SECTION 3.4. Total Shares. Such Stockholder is the record and
Beneficial Owner of the number of Shares, the number of shares of Preferred
Stock (defined in the Merger Agreement) and the number of Warrants (defined in
the Merger Agreement) set forth next to such Stockholder's name on the signature
pages hereto. Such Shares, such shares of Preferred Stock and such Warrants
constitute all of the Shares, all of the shares of Preferred Stock and all of
the Warrants owned of record or Beneficially Owned by such Stockholder. Except
as set forth on such signature pages, neither such Stockholder nor any
beneficial owner or owners of such Stockholder's Shares own any options to
purchase or rights to subscribe for or otherwise acquire any securities of the
Company. Each Stockholder has sole voting power and sole power to issue
instructions with respect to the matters set forth in Article II of this
Agreement, sole power of disposition, sole power of conversion, sole power to
demand appraisal rights and sole power to agree to all of the matters set forth
in this Agreement, in each case with respect to all of the Shares, and, to the
extent applicable, all shares of Preferred Stock and all Warrants, beneficially
owned by such Stockholder with no limitations, qualifications or restrictions on
such rights, subject to applicable securities laws and the terms of this
Agreement. The terms "Beneficially Own" or "Beneficial Ownership" with respect
to any securities shall mean having "beneficial ownership" of such securities as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934, as
amended.
SECTION 3.5. Finder's Fees. No investment banker, broker or
finder is entitled to a commission or fee from Buyer or the Company in respect
of this Agreement based upon any arrangement or agreement made by or on behalf
of such Stockholder.
ARTICLE IV
REPRESENTATIONS AND
WARRANTIES OF BUYER AND PARENT
Each of Parent and Buyer represents and warrants to each of
the Stockholders:
SECTION 4.1. Corporate Power and Authority. Such entity has
all requisite corporate power and authority to enter into this Agreement and to
perform its obligations hereunder. The execution, delivery and performance by
such entity of this Agreement and the consummation by such entity of the
transactions contemplated hereby have been duly authorized by the board of
directors of such entity and no other corporate action on the part of such
entity is necessary to authorize the execution, delivery or performance by such
entity of this Agreement and the consummation by such entity of the transactions
contemplated hereby. This Agreement has been duly executed and delivered by such
entity and is a valid and binding agreement of such
-5-
<PAGE> 6
entity, enforceable against it in accordance with its terms, except as
enforcement may be limited by bankruptcy, insolvency, moratorium or other
similar laws relating to creditors' rights generally.
SECTION 4.2. Acquisition for Buyer's Account. The Stockholder
Shares to be acquired upon exercise of the Option will be acquired by Buyer for
its own account and not with a view to the public distribution thereof and will
not be transferred except in compliance with the Securities Act of 1933, as
amended, and other applicable securities laws. Parent and Buyer acknowledge and
agree that no Stockholder has or is making any representations or warranties
concerning the Company, including by reason of such Stockholder's execution of
this Agreement or otherwise.
ARTICLE V
COVENANTS OF THE STOCKHOLDERS
Each of the Stockholders hereby covenants and agrees that:
SECTION 5.1. No Proxies for or Encumbrances on Stockholder
Shares. Except pursuant to the terms of this Agreement, such Stockholder shall
not, without the prior written consent of Buyer, directly or indirectly, (i)
grant any proxies or enter into any voting trust or other agreement or
arrangement with respect to the voting of any Shares or (ii) acquire, sell,
assign, transfer, encumber or otherwise dispose of, or enter into any contract,
option or other arrangement or understanding with respect to the direct or
indirect acquisition or sale, assignment, transfer, encumbrance or other
disposition of, any Shares, any shares of Preferred Stock or any Warrants during
the term of this Agreement. Such Stockholder shall not seek or solicit any such
acquisition or sale, assignment, transfer, encumbrance or other disposition or
any such contract, option or other arrangement or assignment or understanding
and agrees to notify Buyer promptly and to provide all details requested by
Buyer if (x) such Stockholder shall be approached or solicited, directly or
indirectly, by any person with respect to any of the foregoing and (y) a
representative of such Stockholder having direct working knowledge of this
Agreement has knowledge of such third party approach or solicitation.
SECTION 5.2. No Shopping. Such Stockholder shall not directly
or indirectly (i) solicit, initiate or encourage (or authorize any person to
solicit, initiate or encourage) any inquiry, proposal or offer from any person
to acquire the business, property or capital stock of the Company or any direct
or indirect subsidiary thereof, or any acquisition of a substantial equity
interest in, or a substantial amount of the assets of, the Company or any direct
or indirect subsidiary thereof, whether by merger, purchase of assets, tender
offer or other transaction or (ii) subject to the fiduciary duties under
applicable law of such Stockholder as a director of the Company (if such
Stockholder is such a director), participate in any discussion or negotiations
regarding, or furnish to any other person any information with respect to, or
otherwise cooperate in any way with, or participate in, facilitate or encourage
any effort or attempt by any other person to do or seek any of the foregoing.
Such Stockholder shall promptly advise Buyer of the terms of any communications
it may receive relating to any of the foregoing if a representative of
-6-
<PAGE> 7
such Stockholder having direct working knowledge of this Agreement has knowledge
of such communications.
SECTION 5.3. Conduct of Stockholders. Such Stockholder will
not (i) take, agree or commit to take any action that would make any
representation and warranty of such Stockholder hereunder inaccurate in any
respect as of any time prior to the termination of this Agreement or (ii) omit,
or agree or commit to omit, to take any commercially reasonable action necessary
to prevent any such representation or warranty from being inaccurate in any
respect at any such time.
SECTION 5.4. Disclosure. Each Stockholder hereby permits Buyer
to publish and disclose in the offer documents and, if approval of the Company's
shareholders is required under applicable law, a proxy statement (including all
documents and schedules filed with the SEC) their identity and ownership of the
Shares and the nature of their commitments, arrangements and understandings
under this Agreement.
SECTION 5.5. Preferred Stock; Warrants. Such Stockholder will
sell and transfer, and the Buyer agrees to purchase or to cause the Company to
purchase and redeem, all of the shares of Preferred Stock, if any, owned of
record or Beneficially Owned by such Stockholder, at a price per share of
Preferred Stock equal to $10.10, plus all accrued and unpaid dividends thereon
(whether or not declared), promptly (but in no event more than one business day)
following the consummation of the Offer. In addition, such Stockholder will
transfer and surrender to the Company for cancellation for no additional
consideration all of the Warrants, if any, owned of record or Beneficially Owned
by such Stockholder, promptly (but in no event more than one business day)
following consummation of the Offer; provided that, if Buyer increases the
consideration per Share to be paid pursuant to the Offer to an amount that
exceeds the exercise price of the Warrants, Buyer shall pay, or cause the
Company to pay, to such Stockholder an amount equal to the aggregate net in the
money value of such Warrants, in connection with the transfer and surrender
thereof. If Buyer exercises the Option, at the Closing and in addition to
purchasing such Stockholder's Shares, Buyer shall purchase from such
Stockholder, and such Stockholder shall sell to Buyer, simultaneously with the
purchase of such Stockholder's Shares, all of the shares of Preferred Stock, if
any, owned of record or Beneficially Owned by such Stockholder, at a price per
share of Preferred Stock equal to $10.10, plus all accrued and unpaid dividends
thereon (whether or not declared).
ARTICLE VI
MISCELLANEOUS
SECTION 6.1. Expenses. All costs and expenses incurred in
connection with this Agreement shall be paid by the party incurring such cost or
expense.
SECTION 6.2. Further Assurances. In the event the Buyer
exercises the Option, the Buyer and the Stockholders will each execute and
deliver or cause to be executed and delivered all further documents and
instruments and use its commercially reasonable efforts to secure such consents
and take all such further action as may be reasonably necessary in order to
-7-
<PAGE> 8
consummate the transactions contemplated hereby or to enable the Buyer and any
assignee to exercise and enjoy all benefits and rights of the Stockholders with
respect to the Option and the Stockholder Shares.
SECTION 6.3. Additional Agreements. Subject to the terms and
conditions of this Agreement, each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all action and to
do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations and which may be required under any agreements,
contracts, commitments, instruments, understandings, arrangements or
restrictions of any kind to which such party is a party or by which such party
is governed or bound, to consummate and make effective the transactions
contemplated by this Agreement.
SECTION 6.4. Specific Performance. The parties hereto agree
that the Buyer may be irreparably damaged if for any reason any Stockholder
failed to sell such Stockholder's Shares (or other securities deliverable
pursuant to Section 1.5 or Section 5.5) upon exercise of the Option or to
perform any of its other obligations under this Agreement, and that the Buyer
would not have an adequate remedy at law for money damages in such event.
Accordingly, the Buyer shall be entitled to specific performance and injunctive
and other equitable relief to enforce the performance of this Agreement by each
Stockholder. This provision is without prejudice to any other rights that the
Buyer may have against any Stockholder for any failure to perform its
obligations under this Agreement.
SECTION 6.5. Notices. All notices, requests, claims, demands
and other communications hereunder shall be deemed to have been duly given when
delivered in person, by telecopy, or by registered or certified mail (postage
prepaid, return receipt requested) to such party at its address set forth on the
signature page hereto.
SECTION 6.6. Survival of Representations and Warranties. All
representations and warranties contained in this Agreement shall survive
delivery of and payment for the Stockholder Shares.
SECTION 6.7. Amendments. This Agreement may not be modified,
amended, altered or supplemented, except upon the execution and delivery of a
written agreement executed by the parties hereto.
SECTION 6.8. Successors and Assigns. The provisions of this
Agreement shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns, provided that Buyer may assign its
rights and obligations to any affiliate of Buyer and provided, further, that no
Stockholder may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the Buyer.
SECTION 6.9. Governing Law. This Agreement shall be construed
in accordance with and governed by the law of the State of Delaware without
giving effect to the principles of conflicts of laws thereof.
-8-
<PAGE> 9
SECTION 6.10. Obligations of Buyer. Parent will take all
action necessary to cause Buyer to perform its obligations hereunder and, if the
Option is exercised, to consummate the purchase by Buyer of the Stockholder
Shares on the terms and conditions set forth in this Agreement.
SECTION 6.11. Counterparts; Effectiveness; Termination. This
Agreement may be signed in any number of counterparts, each of which shall be an
original, with the same effect as if the signatures thereto and hereto were upon
the same instrument. This Agreement shall become effective when each party
hereto shall have received counterparts hereof signed by all of the other
parties hereto. This Agreement shall terminate and be of no further force or
effect upon the earlier of (i) the twentieth business day following the
termination of the Merger Agreement unless the Option has been properly
exercised on or prior to such date, and (ii) December 31, 1999 unless the Option
has been properly exercised prior to such date.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-9-
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the day and year first above written.
CALPINE CORPORATION
By: /s/ John T. King
---------------------------------------
Name: John T. King
Title: Vice-President - Business Development
50 West San Fernando Street
San Jose, CA 95113
Attention: John King
Fax: (408) 995-0505
CPN SHERIDAN, INC.
By: /s/ John T. King
---------------------------------------
Name: John T. King
Title: Vice-President - Business Development
50 West San Fernando Street
San Jose, CA 95113
Attention: John King
Fax: (408) 995-0505
<TABLE>
<CAPTION>
Preferred
Shares Options Stock Warrants THE SUSSKIND FAMILY TRUST
- ------ ------- ----- -------- -------------------------
<S> <C> <C> <C> <C>
1,000,037 - - -
By: /s/ Jeffrey E. Susskind, Trustee
--------------------------------
Name: Jeffrey E. Susskind
By: /s/ Janis Susskind, Trustee
--------------------------------
Name: Janis Susskind
282 N. Saltair Ave.
Los Angeles, CA 90049
Attention: Jeffrey E. Susskind
and Janis Susskind
Fax: (310) 472-9567
</TABLE>
-10-
<PAGE> 11
<TABLE>
<CAPTION>
Preferred JOINT ENERGY DEVELOPMENT INVESTMENTS
Shares Options Stock Warrants LIMITED PARTNERSHIP
- ------ ------- ----- -------- -------------------
<S> <C> <C> <C> <C>
850,000* 150,000*
By: Enron Capital Management
Limited Partnership, its General Partner
By: Enron Capital Corp., its General Partner
By: /s/ William W. Brown
--------------------------------
Name: William W. Brown
Title: Vice President
1400 Smith Street
Houston, TX 77002
Attention: Donna M. Lowry
Fax: (713) 646-4039
(*) Includes 382,500 shares and 67,500 Warrants held of record by JEDI
Hydrocarbon Investments I Limited Partnership ("JEDI Hydrocarbon"), which
has been dissolved. All assets of JEDI Hydrocarbon, including such Shares
and Warrants, were transferred to Joint Energy Development Investments
Limited Partnership upon JEDI Hydrocarbon's dissolution.
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
Preferred SUNDANCE ASSETS, L.P.
Shares Options Stock Warrants
- ------ ------- ----- --------
<S> <C> <C> <C> <C>
1,600,000* 1,139,586.25* By: Ponderosa Assets, L.P., its General Partner
By: Enron Ponderosa Management Holdings,
Inc., its General Partner
By: /s/ William W. Brown
----------------------------------
Name: William W. Brown
Title: Vice President
1400 Smith Street
Houston, TX 77002
Attention: Donna M. Lowry
Fax: (713) 646-4039
ENRON CAPITAL & TRADE RESOURCES CORP.
By: /s/ Douglas B. Dunn
----------------------------------
Name: Douglas B. Dunn
Title: Vice President
1400 Smith Street
Houston, TX 77002
Attention: Donna M. Lowry
Fax: (713) 646-4039
</TABLE>
(*) These shares and the Preferred Stock are beneficially owned by Sundance
Assets, L.P. and are owned of record by Enron Capital & Trade Resources
Corp.
-12-
<PAGE> 13
<TABLE>
<CAPTION>
Preferred
Shares Options Stock Warrants
- ------ ------- ----- --------
<S> <C> <C> <C> <C>
25,000 60,000 - - /s/ Michael A. Gerlich
----------------------
Name: Michael A. Gerlich
1000 Louisiana, Suite 800
Houston, TX 77002
Attention: Michael A. Gerlich
Fax: (713) 651-3056
</TABLE>
<TABLE>
<CAPTION>
Preferred
Shares Options Stock Warrants
- ------ ------- ----- --------
<S> <C> <C> <C> <C>
13,000 300,000 - - /s/ B.A. Berilgen
-----------------
Name: B.A. Berilgen
1000 Louisiana, Suite 800
Houston, TX 77002
Attention: B.A. Berilgen
Fax: (713) 651-3056
</TABLE>
<TABLE>
<CAPTION>
Preferred
Shares Options Stock Warrants
- ------ ------- ----- --------
<S> <C> <C> <C> <C>
4,500 40,000 - - /s/ Charles F. Chambers
-----------------------
Name: Charles F. Chambers
1000 Louisiana, Suite 800
Houston, TX 77002
Attention: Charles F. Chambers
Fax: (713) 651-3056
</TABLE>
<TABLE>
<CAPTION>
Preferred
Shares Options Stock Warrants
- ------ ------- ----- --------
<S> <C> <C> <C> <C>
- 25,000 - - /s/ Jeffrey E. Susskind
-----------------------
Name: Jeffrey E. Susskind
282 N. Saltair Ave.
Los Angeles, CA 90049
Attention: Jeffrey E. Susskind
Fax: (310) 472-9517
</TABLE>
-13-
<PAGE> 1
Exhibit 99 (c)(3)
SHERIDAN ENERGY, INC.
1000 LOUISIANA, SUITE 800
HOUSTON, TEXAS 77002
June 15, 1999
PERSONAL AND CONFIDENTIAL
Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: President
Re: Confidentiality Agreement
Gentlemen:
In connection with the consideration by Calpine Corporation, a Delaware
corporation ("Calpine"), and Sheridan Energy, Inc., a Delaware corporation
("SEI") of a possible transaction involving the acquisition by Calpine of all of
the capital stock of SEI, SEI may disclose certain information relating to their
businesses which is proprietary, confidential and not otherwise publicly
available. Such proprietary and confidential information may include, but is not
limited to, financial data, business strategies, ideas, concepts, customer
lists, vendor lists, development plans for new or improved products or
processes, data, formulae, techniques, designs, know-how, photographs, plans,
drawings, specifications, samples, test specimens, reports, price lists,
findings, studies, inventions, reserves, oil and gas exploration and development
prospects, and product sales prices (the "Confidential Information").
In consideration of the furnishing of the information as contemplated
in this letter agreement (the "Agreement"), the parties hereto agree to the
following:
1. Calpine agrees to treat any Confidential Information concerning SEI
delivered in connection with this Agreement or otherwise obtained (whether in
written, oral or any other form and whether prepared by SEI, its advisors, or
otherwise) in accordance with the provisions of this Agreement, and Calpine
agrees to take or abstain from taking certain other actions as set forth herein.
Such Confidential Information, along with all analyses, compilations, data,
studies or other documents prepared by Calpine based in whole or in part on the
Confidential Information provided by SEI, is collectively referred to as the
"Evaluation Material." The term "Evaluation Material" shall not include
information that (i) is already in Calpine's possession as reflected by its
written records, provided that such information is not known by Calpine to be
subject to another confidentiality agreement with, or other obligation of
secrecy to, SEI or another party, or (ii) is or becomes generally available to
the public other than as a result of a
<PAGE> 2
Calpine Corporation
June 15, 1999
Page 2
disclosure by Calpine or its directors, officers, employees, agents or advisors,
or (iii) becomes available to Calpine on a non-confidential basis from a source
other than SEI or its directors, officers, employees, agents or advisors,
provided that such source is not known by Calpine to be bound by a
confidentiality agreement with or other obligation of secrecy to Calpine or
another party.
2. Calpine agrees that the Evaluation Material made available to it
will be used solely for the purpose of evaluating a possible transaction between
SEI and Calpine, and that such information shall be kept confidential and shall
not be disclosed in whole or in part by Calpine or permitted by Calpine to be
used in any manner adverse or detrimental to SEI. Calpine further agrees not to,
directly or indirectly, use, sell, lease, license or otherwise commercially use
the Evaluation Material, unless express, prior written authorization is obtained
from the Board of Directors of SEI. Notwithstanding the foregoing, the
Evaluation Material may be disclosed to Calpine's directors, officers,
employees, agents, advisors and representatives of such advisors (the persons to
whom such disclosure is permissible being collectively called "Representatives")
who need to know such information for the sole purpose of evaluating any
possible transaction between SEI and Calpine (it being understood that prior to
the receipt of any Evaluation Material by Representatives of Calpine, such
Representatives shall be informed by Calpine of the confidential nature of such
information and directed by Calpine to treat such information confidentially,
and such Representatives shall agree, in writing, to comply with and be bound by
the confidentiality provisions of this Agreement), and are approved on behalf of
SEI by Jeffrey E. Susskind (the "SEI Contact"). In addition, without the prior
written consent of SEI, Calpine will not, and will direct its Representatives
not to (i) copy or otherwise reproduce for, or distribute to, third parties
(except for copying or other reproduction for, or distribution to, those of its
Representatives directly involved in the confidential review of the Evaluation
Material) any Evaluation Material, and (ii) disclose to any person, other than
the foregoing Representatives, by any means (including but not limited to any
press release or other public dissemination) any of the following: the fact that
the Evaluation Material has been made available to it or that discussions or
negotiations are taking place concerning a possible transaction between SEI and
Calpine, or any of the terms, conditions or other facts with respect to any such
possible transaction, including the status thereof, except as may be required by
U.S. securities laws or other applicable laws. Calpine agrees to be responsible
for any breach of this Agreement by its Representatives. All requests by Calpine
or Calpine's Representatives for Evaluation Material, meetings with SEI
personnel, or inspection of SEI's properties shall be made to the SEI Contact.
As used herein, the Calpine "Contact" shall be the President of Calpine.
3. In the event that Calpine or any of its Representatives is requested
or required as part of a legal or administrative proceeding by oral questions,
interrogatories, requests for information or documents, subpoena, civil
investigative demands or similar processes to disclose any Evaluation Material
or any of the matters set forth herein (to the extent such matters are not
<PAGE> 3
Calpine Corporation
June 15, 1999
Page 3
then publicly known or available), it is agreed that Calpine will (a) provide
SEI with prompt written notice of such request(s) and the documents or
information requested so that SEI may seek an appropriate protective order at
its expense and/or waive Calpine's compliance with the provisions of this
Agreement, and (b) consult with SEI as to the advisability of taking legally
available steps to resist or narrow such request. It is further agreed that if
in the absence of a protective order or the receipt of a written waiver from
SEI, Calpine is nonetheless compelled to disclose any of the Evaluation Material
or others matters set forth in this Agreement to any tribunal or else stand
liable for contempt or suffer other censure or penalty, Calpine agrees to
disclose to such tribunal only such Evaluation Material as is legally required,
which disclosure shall be without liability hereunder; provided however, that
Calpine shall give written notice of the Evaluation Material or other matters to
be so disclosed as far in advance of its disclosure as is practicable and shall
use reasonable efforts to obtain an order or other reliable assurance that
confidential treatment will be given to such portion of the Evaluation Material
or other matters required to be disclosed.
4. Calpine acknowledges that neither SEI nor any of its Representatives
has made or are making any representation or warranty as to the accuracy or
completeness of the Evaluation Material provided, and Calpine acknowledges that
only those specific representations and warranties that may be expressly made in
a definitive agreement regarding the contemplated transaction (when, as and if
any is executed, and subject to such limitations and restrictions as may be
specified in such definitive agreement) shall have any legal effect. Calpine
understands and agrees that neither SEI nor any of its Representatives shall
have any liabilities to Calpine or any of its Representatives pursuant to this
Agreement based on any inaccuracies, omissions or misstatements contained in, or
inadequacies of, the Evaluation Material.
5. SEI and Calpine each agrees that either party shall have the right,
at any time, in its sole discretion without giving any reason therefor, to
terminate discussions with the other concerning a possible transaction. In the
event of such termination or upon SEI's request, as may be indicated in a
writing (a "Request") delivered by SEI to Calpine, Calpine shall promptly
collect from all of its Representatives all written Evaluation Material
regarding SEI and either (1) deliver such materials to SEI, or (2) destroy such
materials, without retaining any copies, extracts or other reproductions in
whole or in part of such written material, and further, shall cause written
certification by an authorized officer of Calpine of the delivery or destruction
of the materials to be delivered to SEI no later than ten (10) business days
following delivery of the Request by SEI. In addition to the foregoing, all
documents, memoranda, notes and other writings whatsoever prepared by Calpine or
its Representatives based on the information in the Evaluation Material provided
to Calpine shall be destroyed, and such destruction shall be certified in
writing to SEI by an authorized officer of Calpine supervising such destruction.
6. SEI and Calpine each agrees that unless and until a definitive
agreement between
<PAGE> 4
Calpine Corporation
June 15, 1999
Page 4
SEI and Calpine regarding any transaction has been executed and delivered, the
parties hereto will be under no legal obligation of any kind whatsoever with
respect to such a transaction by virtue of this or other written or oral
expression by them or by any of their directors, officers, employees, agents or
any other Representatives thereof except, in the case of this Agreement, for the
matters specifically agreed to herein.
7. Without the prior written consent of the other party's Contact, for
a period of six months from the date of this Agreement, no party will employ the
other party's employees; provided, that neither party shall be prohibited from
(i) employing any such person who is engaged in secretarial or clerical work or
(ii) conducting generalized solicitations for employees and hiring such person
(except persons employed by SEI in executive endeavors) identified through such
means.
8. Calpine hereby acknowledge that it is aware, and it will advise its
Representatives who are informed as to the matters which are the subject of this
Agreement, that the United States securities laws prohibit any person who has
received from an issuer material, non-public information concerning the matters
which are the subject of this Agreement from purchasing or selling the
securities of such issuer or from communicating such information to any other
person under circumstances in which it is reasonably foreseeable that such
person is likely to purchase or sell such securities.
9. Calpine agrees that for a period of two years from the date hereof,
neither it nor any Affiliate (as that term is defined in Rule 405 under the
Securities Act of 1933) of Calpine (regardless of whether such person or entity
is an Affiliate on the date hereof) will (i) acquire, offer to acquire, or agree
to acquire, directly or indirectly, by purchase or otherwise, any voting
securities or direct or indirect rights or options to acquire any voting
securities of SEI, (ii) make, or in any way participate, directly or indirectly,
in any "solicitation" of "proxies" to vote (as such terms are used in the proxy
rules of the Securities and Exchange Commission), or seek to advise or influence
any person or entity with respect to the voting of any voting securities of SEI,
(iii) form, join or in any way participate in a "group" within the meaning of
Section 13(d)(3) of the Securities Exchange Act of 1934 with respect to any
voting securities of SEI, or (iv) otherwise act, alone or in the concert with
others, to seek to control or influence the management, board of directors or
policies of SEI. Notwithstanding the foregoing, Calpine may take any and all
actions in connection with its rights associated with the interests it holds in
Sheridan California Energy, Inc. ("SCEI"). Nothing in this Agreement is intended
to modify such rights or interests in SCEI.
10. Calpine agrees to indemnify and hold SEI harmless for any damages,
loss, cost or liability (including legal fees and the cost of enforcing this
indemnity) arising out of or resulting from any unauthorized use or disclosure
by Calpine or its Representatives of Evaluation Material
<PAGE> 5
Calpine Corporation
June 15, 1999
Page 5
or other violation of this Agreement. In addition, because an award of money
damages (whether pursuant to the foregoing sentence or otherwise) would be
inadequate for any breach of this Agreement by Calpine or its Representatives
and any such breach would cause SEI irreparable harm, Calpine agrees that in the
event of any breach or threatened breach of this Agreement, SEI shall also be
entitled, without the requirements of posting a bond or other security, to
equitable relief, including injunctive relief and specific performance. Such
remedies shall not be the exclusive remedies for any breach of this Agreement
but shall be in addition to all other remedies available at law or equity to the
non-breaching party.
11. If any provision of this Agreement is held to be illegal, invalid,
or unenforceable under any applicable laws, the legality, validity, and
enforceability of the remaining provisions of this Agreement shall not be
affected thereby, and in lieu of such illegal, invalid, or unenforceable
provision, there shall be added automatically as a part of this Agreement a
provision as similar in terms to such illegal, invalid, or unenforceable
provision as may be possible and be legal, valid, and enforceable. This
Agreement constitutes the entire agreement of the parties with respect to the
subject matter hereof and no provision hereof may be amended, modified or waived
except by a written agreement signed by the party against whom enforcement or
any amendment, modification or waiver is sought. This Agreement may be executed
in any number of counterparts, all of which shall be considered one and the same
instrument.
12. All notices required or permitted to be given hereunder shall be
personally delivered, sent by overnight courier or delivery service, or by
telefax to the parties as follows, or to such other address or telefax number as
may be subsequently provided:
If to SEI: Sheridan Energy, Inc.
1000 Louisiana, Suite 800
Houston, Texas 77002
Attention: Jeffrey E. Susskind
If to Calpine: Calpine Corporation
50 West San Fernando Street
San Jose, California 95113
Attention: General Counsel
13. This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware, without regard to conflict of laws.
EFFECTIVE AS OF THE DATE FIRST WRITTEN ABOVE.
<PAGE> 6
Calpine Corporation
June 15, 1999
Page 6
SHERIDAN ENERGY, INC.
By: /s/ Jeffrey Susskind
-------------------------------
Name: Jeffrey Susskind
-----------------------------
Title: Chairman of the Board
-----------------------------
ACCEPTED AND AGREED:
CALPINE CORPORATION
By: /s/ John T. King
------------------------------
Name: John T. King
------------------------------
Title: Vice-President - Business Development
-------------------------------------
