SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act 1934
DATE OF REPORT JANUARY_11, 2000
(Date of earliest event reported)
MIDAMERICAN ENERGY COMPANY
(Exact name of registrant as specified in its charter)
IOWA 1-11505 42-1425214
(State or other (Commission File (IRS Employer
jurisdiction of Number) Identification No.)
incorporation or
organization)
666 GRAND AVENUE DES MOINES, IA 50309
(Address of principal executive offices) Zip Code
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (515) 242-4300
N/A
(Former name or former address, if changed since last report)
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ITEM 5. OTHER EVENTS.
On October 25, 1999, the Registrants indirect parent, MidAmerican
Energy Holdings Company (the "Parent"), announced that it had entered into an
Agreement and Plan of Merger, dated as of October 24, 1999 (the "Merger
Agreement"), with entities formed by an investor group including Berkshire
Hathaway Inc., Mr. Walter Scott, Jr. and Mr. David L. Sokol. Pursuant to the
Merger Agreement, the investor group's acquisition vehicle, Teton Acquisition
Corp., will be merged with and into the Parent, with the Parent as the surviving
corporation in the merger, and holders of the Parent's common stock will have
the right to receive $35.05 per share in cash, without interest.
SHAREHOLDER AND OTHER APPROVALS
Consummation of the transactions contemplated by the Merger Agreement
is subject to the approval of the holders of a majority of the outstanding
shares of the Parent's common stock and other customary conditions, including
the regulatory requirements described below, all of which have been obtained or
are presently expected to be obtained by the Registrant by no later than March
31, 2000. The special meeting of Shareholders of the Parent to consider the
merger proposal is scheduled for January 27, 2000.
HART-SCOTT-RODINO
The Hart-Scott-Rodino Act provides that transactions such as
the merger may not be completed until certain information has been
submitted to the Antitrust Division of the Department of Justice and
the Federal Trade Commission and specified waiting period requirements
have been satisfied. Notice of early termination of the waiting period
was granted by the FTC on November 29, 1999.
FEDERAL POWER ACT
Section 203 of the Federal Power Act provides that no public
utility shall sell or otherwise dispose of its jurisdictional
facilities or directly or indirectly merge or consolidate such
facilities with those of any other person or acquire any security of
any other public utility without first obtaining authorization from the
FERC. On December 15, 1999, the Registrant received FERC approval of
the merger under Section 203 of the Federal Power Act.
IOWA PUBLIC UTILITY REGULATION
Iowa law provides that a merger or consolidation of the whole
or any substantial part of a public utility's assets shall not take
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place if the Iowa Utilities Board (the "IUB") disapproves. On November
12, 1999, the Registrant, the Parent, Teton Formation and Teton
Acquisition Corp. filed an application with the IUB for its order
permitting the merger to occur. Iowa law provides that the application
will be deemed approved unless the IUB disapproves the merger within 90
days after the filing of the application, unless such time period is
extended by the IUB, for good cause shown, for an additional period not
to exceed 90 days. Iowa law further provides that the IUB cannot
disapprove the merger without providing for a notice and opportunity
for hearing. On December 16, 1999, the IUB issued a procedural order
extending the initial 90-day period for an additional 90 days. The
hearing is presently scheduled for February 16, 2000, and the IUB has
indicated in its order that it presently intends to issue its final
order by no later than March 31, 2000.
ILLINOIS PUBLIC UTILITY REGULATION
Under Illinois law, the Registrant will seek (subject to
certain reservations of rights) the approval of the Illinois Commerce
Commission ("ICC") for the gas utility portion of the merger and file
certain information regarding the electric utility portion of the
merger with the ICC. The Registrant believes that the merger qualifies
for expedited treatment under the ICC approval and hearing process
which, under statute, could otherwise take 11 months. In two recent
merger proceedings, including the merger of CalEnergy with MidAmerican,
expedited treatment was granted and approval was obtained within three
months. On November 15, 1999, the Registrant and Parent filed an
application with the ICC and a hearing was held on December 22, 1999.
PUBLIC UTILITY HOLDING COMPANY ACT OF 1935
The transaction is not subject to approval by the SEC under
the Public Utility Holding Company Act of 1935. Following the effective
time of the merger, the Registrant and the Parent will continue to
claim an exemption from registration under Section (3)(a)(1) of the
1935 Act pursuant to Rule 2 because after the merger both the
Registrant and Parent will be organized in, and conduct the utility
operations substantially in, the State of Iowa and will be
predominantly intrastate in character in the same manner as it is
today. The completion of the merger is conditioned on the receipt by
the members of the investor group of evidence reasonably satisfactory
to them that neither they nor any of their affiliates will be subject
to regulation as a registered public utility holding company under the
1935 Act.
NUCLEAR REGULATORY COMMISSION REGULATION
The Registrant is a non-operating 25% owner of Quad Cities
Nuclear Generating Station Units 1 and 2, which are referred to
collectively as "Quad Cities". The remaining interests in the two units
are owned and operated by Commonwealth Edison Company. On November 16,
1999, the Registrant (through Commonwealth Edison) submitted an
<PAGE>
application to the NRC pursuant to 10 C.F.R. 50.80 for formal NRC
consent of the indirect transfer of control.
EUROPEAN/U.K. COMPETITION FILINGS
Under Regulation (EEC) No. 4064/89 of the Council of the
European Union, as amended (the "EC Merger Regulation"), a
concentration (as defined in the EC Merger Regulation) which has a
Community dimension may not be completed until the European Commission
has granted its approval or such approval has been deemed to have been
granted. On November 9, 1999, the Merger Task Force of the European
Commission expressed its view that the merger is not subject to the
prior approval requirements of the EC Merger Regulation.
Certain notifications and undertakings may be required to be
made to the UK electricity and gas regulator (OFGEM) in connection with
the transaction and notifications are currently in the process of being
submitted. The merger may be subject to review under the U.K. merger
control rules pursuant to the Fair Trading Act of 1973. Based on advice
of U.K. counsel, the Registrant believes that a referral to the U.K.
Competition Commission for detailed review would be unlikely.
OTHER REGULATORY MATTERS
The Registrant has obtained from various regulatory
authorities franchises, permits and licenses which may need to be
renewed, replaced or transferred as a result of the merger. Approvals,
consents or notifications may be required in connection with such
renewals, replacements or transfers.
Regulatory commissions of states where the Registrant operates
may intervene in the federal regulatory proceedings. In addition, these
regulatory commissions regulate the rates charged to utility customers
within their jurisdictions. In approving rates, each state may take
into account savings, if any, resulting from, and other effects of, the
merger.
The Registrant is not aware of any material governmental or
regulatory approvals or actions that may be required for completion of
the merger other than as described above. If any other governmental or
regulatory approval or action is or becomes required, the Registrant
currently believes that the Parent would seek that additional approval
or action.
Certain information included in this release contains forward-looking
statements made pursuant to the Private Securities Litigation Reform Act of 1995
("Reform Act"). Such statements are based on current expectations and involve a
number of known and unknown risks and uncertainties that could cause the actual
<PAGE>
results and performance of the Company to differ materially from any expected
future results or performance, expressed or implied, by the forward-looking
statements. In connection with the safe harbor provisions of the Reform Act, the
Company has identified important factors that could cause actual results to
differ materially from such expectations, including development uncertainty,
operating uncertainty, acquisition uncertainty, uncertainties relating to doing
business outside of the Unites States, uncertainties relating to geothermal
resources, uncertainties relating to domestic and international (and in
particular Indonesian) economic and political conditions and uncertainties
regarding the impact of regulations, changes in government policy, industry
deregulation and competition. Reference is made to all of the Company's SEC
filings, including the Company's Report on Form 8-K dated March 26, 1999,
incorporated herein by reference, for a description of such factors. The Company
assumes no responsibility to update forward-looking information contained
herein.
A copy of the Merger Agreement is filed herewith as Exhibit 99.1, and
is incorporated herein by reference. The description of the Merger Agreement set
forth herein is qualified in its entirety by reference to the provisions of the
Merger Agreement.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits.
99.1 Agreement and Plan of Merger, dated as of October 24, 1999, by and
among MidAmerican Energy Holdings Company, Teton Formation L.L.C. and Teton
Acquisition Corp.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
MIDAMERICAN ENERGY COMPANY
DATED: JANUARY 11, 2000 BY: /S/ DOUGLAS L. ANDERSON
-------------------------------
Douglas L. Anderson
Assistant Secretary
<PAGE>
EXHIBIT INDEX
EXHIBIT DESCRIPTION
99.1 Agreement and Plan of Merger, dated as of October 24, 1999, by and
among MidAmerican Energy Holdings Company, Teton Formation L.L.C. and Teton
Acquisition Corp.
Exhibit 99.1
APPENDIX A
EXECUTION COPY
AGREEMENT AND PLAN OF MERGER
by and among
MIDAMERICAN ENERGY HOLDINGS COMPANY,
TETON FORMATION L.L.C.
and
TETON ACQUISITION CORP.
Dated as of October 24, 1999
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I.
THE MERGER
Section 1.1. The Merger A-1
Section 1.2. Effective Time A-1
Section 1.3. Effect of the Merger A-1
Section 1.4. Subsequent Actions A-1
Section 1.5. Articles of Incorporation; By-Laws; Officers and Directors A-2
ARTICLE II. TREATMENT OF SHARES
Section 2.1. Conversion of Securities A-2
Section 2.2. Dissenting Shares A-3
Section 2.3. Surrender of Shares; Stock Transfer Books A-3
Section 2.4. Options Under Company Stock Plans A-4
ARTICLE III. THE CLOSING
Section 3.1. Closing A-5
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1. Organization and Qualification A-5
Section 4.2. Subsidiaries A-5
Section 4.3. Capitalization A-6
Section 4.4. Authority; Non-Contravention; Statutory Approvals; Compliance A-6
Section 4.5. Reports and Financial Statements A-8
Section 4.6. Absence of Certain Changes or Events; Absence of
Undisclosed Liabilities A-8
Section 4.7. Litigation A-8
Section 4.8. Proxy Statement A-9
Section 4.9. Tax Matters A-9
Section 4.10. Employee Matters; ERISA A-11
Section 4.11. Environmental Protection A-14
Section 4.12. Regulation as a Utility A-16
Section 4.13. Vote Required A-16
Section 4.14. Insurance A-16
Section 4.15. Opinions of Financial Advisers A-16
Section 4.16. Brokers A-16
Section 4.17. Non-Applicability of Certain Provisions of Iowa Act A-16
Section 4.18. Company Rights Agreement A-16
Section 4.19. Year 2000 Compliance A-17
Section 4.20. Board Recommendation A-17
Section 4.21. Investment Company and Investment Advisory Matters A-17
ARTICLE V. REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Section 5.1. Organization A-17
Section 5.2. Authority; Non-Contravention; Statutory Approvals A-17
Section 5.3. Proxy Statement A-18
Section 5.4. Brokers A-18
<PAGE>
Section 5.5. Financing A-18
Section 5.6. Sale of the Company A-18
Section 5.7. Share Ownership A-19
Section 5.8. Regulation Under the 1935 Act A-19
Section 5.9. Investor Agreements A-19
ARTICLE VI. CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by the Company Pending the Merger A-19
Section 6.2.Conduct of Business by Parent and Merger Sub Pending the Merger A-21
Section 6.3. Additional Covenants by the Company and Parent
Pending the Merger A-22
ARTICLE VII. ADDITIONAL AGREEMENTS
Section 7.1. Access to Information A-22
Section 7.2. Proxy Statement and Schedule 13E-3 A-23
Section 7.3. Regulatory Approvals and Other Matters A-23
Section 7.4. Shareholder Approval A-23
Section 7.5. Directors' and Officers' Indemnification A-24
Section 7.6. Disclosure Schedules A-25
Section 7.7. Public Announcements A-25
Section 7.8. No Solicitations A-25
Section 7.9. Expenses A-26
Section 7.10. Third Party Standstill Agreements A-26
Section 7.11. Takeover Statutes A-27
Section 7.12. Subscription Agreements A-27
Section 7.13. Employee Benefits Matters A-27
ARTICLE VIII. CONDITIONS
Section 8.1. Conditions to Each Party's Obligation to Effect the Merger A-28
Section 8.2. Conditions to Obligation of the Company to Effect the Merger A-28
Section 8.3. Conditions to Obligation of Parent and Merger Sub to
Effect the Merger A-28
ARTICLE IX. TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination A-30
Section 9.2. Effect of Termination A-31
Section 9.3. Termination Fee; Expenses A-31
Section 9.4. Amendment A-32
Section 9.5. Waiver A-32
ARTICLE X. GENERAL PROVISIONS
Section 10.1. Non-Survival; Effect of Representations and Warranties A-33
Section 10.2. Notices A-33
Section 10.3. Miscellaneous A-33
Section 10.4. Interpretation A-34
Section 10.5. Counterparts; Effect A-34
Section 10.6. Enforcement A-34
Section 10.7. Parties in Interest A-34
Section 10.8. Further Assurances A-35
Section 10.9. Waiver of Jury Trial A-35
Section 10.10. Certain Definitions A-35
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of October 24, 1999 (this
"Agreement"), by and among MidAmerican Energy Holdings Company, an Iowa
corporation (the "Company"), Teton Formation L.L.C., an Iowa limited liability
company ("Parent"), and Teton Acquisition Corp., an Iowa corporation and a
wholly owned subsidiary of Parent ("Merger Sub").
W I T N E S S E T H:
WHEREAS, the Investors (as defined in Section 5.5) desire to acquire
the entire equity interest in the Company and have formed Parent and Merger Sub
for the purpose of effecting such transaction; and
WHEREAS, the Boards of Directors of the Company and Merger Sub have
each approved, and deem advisable and in the best interests of their respective
shareholders, and the Company, Parent and Merger Sub have approved, the merger
of Merger Sub with and into the Company, with the Company being the surviving
corporation, in accordance with the Iowa Business Corporation Act (the "Iowa
Act") and upon the terms and subject to the conditions set forth in this
Agreement (such transaction is referred to as the "Merger"), as a result of
which the former shareholders of Merger Sub as of the effective time of the
Merger will own all of the outstanding capital stock of the Company.
NOW, THEREFORE, in consideration of the premises and the
representations, warranties, covenants and agreements contained herein, the
parties hereto, intending to be legally bound hereby, agree as follows:
ARTICLE I.
THE MERGER
Section 1.1. The Merger. At the Effective Time (as defined in Section
1.2) and upon the terms and subject to the conditions of this Agreement and the
Iowa Act, Merger Sub shall be merged with and into the Company, the separate
corporate existence of Merger Sub shall cease, and the Company shall continue as
the surviving corporation (sometimes hereinafter referred to as the "Surviving
Corporation").
Section 1.2. Effective Time. On the Closing Date (as defined in Section
3.1), articles of merger complying with the requirements of the Iowa Act shall
be executed and filed by the Company and Merger Sub with the Secretary of State
of Iowa. The Merger shall become effective on the date on which the articles of
merger are duly filed with the Secretary of State of Iowa or at such later time
as is mutually agreed by the parties and specified in the articles of merger
(the "Effective Time").
Section 1.3. Effect of the Merger. At the Effective Time, the effect of
the Merger shall be as provided in the applicable provisions of the Iowa Act.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Merger Sub shall vest in the Surviving Corporation, and all
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debts, liabilities and duties of the Company and Merger Sub shall become the
debts, liabilities and duties of the Surviving Corporation.
Section 1.4. Subsequent Actions. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any deeds,
bills of sale, assignments, assurances or any other actions or things are
necessary or desirable to vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties or assets of, and assume the liabilities of, either of the
Company or Merger Sub acquired or to be acquired by the Surviving Corporation as
a result of, or in connection with, the Merger or otherwise to carry out this
Agreement, the officers and directors of the Surviving Corporation shall be
authorized to execute and deliver, in the name and on behalf of either the
Company or Merger Sub, all such deeds, bills of sale, assignments and assurances
and to take and do, in the name and on behalf of each of such corporations or
otherwise, all such other actions and things as may be necessary or desirable to
vest, perfect or confirm any and all right, title and interest in, to and under
such rights, properties or assets in, and the assumption of the liabilities of,
the Surviving Corporation or otherwise to carry out this Agreement.
Section 1.5. Articles of Incorporation; By-Laws; Officers and Directors.
(a) Unless otherwise determined by Parent prior to the Effective Time,
at the Effective Time the Articles of Incorporation of Merger Sub, as in effect
immediately prior to the Effective Time, shall be the Restated Articles of
Incorporation of the Surviving Corporation until thereafter amended as provided
by law and such Restated Articles of Incorporation.
(b) Unless otherwise determined by Parent prior to the Effective Time,
the By-Laws of Merger Sub, as in effect immediately prior to the Effective Time,
shall be the Restated By-Laws of the Surviving Corporation until thereafter
amended as provided by law, the Restated Articles of Incorporation of the
Surviving Corporation and such Restated By-Laws.
(c) Unless otherwise determined by Parent prior to the Effective Time,
the officers of Merger Sub in office at the Effective Time shall be and
constitute the officers of the Surviving Corporation, each holding the same
office in the Surviving Corporation as he or she held in Merger Sub for the
terms elected and/or until their respective successors shall be elected or
appointed and qualified.
(d) Unless otherwise determined by Parent prior to the Effective Time,
the directors of Merger Sub in office at the Effective Time shall be and
constitute the directors of the Surviving Corporation, each holding the same
directorship in the Surviving Corporation as he or she held in Merger Sub for
the terms elected and/or until their respective successors shall be elected or
appointed and qualified.
ARTICLE II.
TREATMENT OF SHARES
Section 2.1. Conversion of Securities. At the Effective Time, by virtue
of the Merger and without any action on the part of Parent, the Company, Merger
Sub or the holder of any of the following securities:
<PAGE>
(a) Each share (collectively, the "Shares") of common stock, no par
value, of the Company ("Company Common Stock"), together with the associated
purchase rights ("Company Rights") under the Company Rights Agreement (as
defined in Section 4.18), issued and outstanding immediately prior to the
Effective Time (other than any Shares to be canceled pursuant to Section 2.1(b)
and any Dissenting Shares (as defined in Section 2.2(a)) shall be canceled and
extinguished and be converted into the right to receive $35.05 (the "Per Share
Amount"), in cash payable to the holder thereof, without interest, upon
surrender of the certificate representing such Share in accordance with Section
2.3. Throughout this Agreement, the term "Shares" refers to the shares of
Company Common Stock together with the associated Company Rights.
(b) Each Share held in the treasury of the Company and each Share owned
by Parent, Merger Sub or any direct or indirect Subsidiary (as defined in
Section 4.1) of Parent, Merger Sub or the Company (other than Shares held in
trust accounts, managed accounts, custodial accounts and the like that are
beneficially owned by third parties) immediately prior to the Effective Time
shall be canceled and extinguished, and no payment or other consideration shall
be made with respect thereto.
(c) Each share of common stock, no par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time shall thereafter represent
one validly issued, fully paid and nonassessable share of common stock, no par
value, of the Surviving Corporation. Each share of Zero Coupon Convertible
Preferred Stock of Merger Sub issued and outstanding immediately prior to the
Effective Time shall thereafter represent one validly issued, fully paid and
nonassessable share of Zero Coupon Convertible Preferred Stock of the Surviving
Corporation.
Section 2.2. Dissenting Shares.
(a) Notwithstanding any provision of this Agreement to the contrary,
any Shares held by a holder who has demanded and perfected his demand for
appraisal of his Shares in accordance with Section 1302 of the Iowa Act and as
of the Effective Time has neither effectively withdrawn nor lost his right to
such appraisal ("Dissenting Shares"), shall not be converted into or represent a
right to receive cash pursuant to Section 2.1, but the holder thereof shall be
entitled to only such rights in respect thereof as are granted by Section 1302
of the Iowa Act.
(b) Notwithstanding the provisions of subsection (a) of this Section
2.2, if any holder of Shares who demands appraisal of his Shares under the Iowa
Act shall effectively withdraw or lose (through failure to perfect or otherwise)
his right to appraisal, then as of the Effective Time or the occurrence of such
event, whichever later occurs, such holder's Shares shall automatically be
converted into and represent only the right to receive cash as provided in
Section 2.1(a), without interest thereon, upon surrender of the certificate or
certificates representing such Shares in accordance with Section 2.3.
(c) The Company shall give Parent (i) prompt notice of any written
demands for appraisal or payment of the fair value of any Shares, withdrawals of
such demands, and any other instruments served pursuant to the Iowa Act received
by the Company and (ii) the opportunity to direct all negotiations and
proceedings with respect to demands for appraisal under the Iowa Act. The
Company shall not voluntarily make any payment with respect to any demands for
<PAGE>
appraisal and shall not, except with the prior written consent of Parent, settle
or offer to settle any such demands.
Section 2.3. Surrender of Shares; Stock Transfer Books.
(a) Prior to the Effective Time, the Company shall designate a bank or
trust company to act as agent for the holders of Shares (the "Exchange Agent")
to receive the funds necessary to make the payments contemplated by Section 2.1.
At the Effective Time, Parent or Merger Sub shall deposit, or cause to be
deposited (including from available cash balances at the Company), in trust with
the Exchange Agent for the benefit of holders of Shares, the aggregate
consideration to which such holders shall be entitled at the Effective Time
pursuant to Section 2.1.
(b) Each holder of a certificate or certificates representing any
Shares canceled upon the Merger pursuant to Section 2.1(a) may thereafter
surrender such certificate or certificates to the Exchange Agent, as agent for
such holder, to effect the surrender of such certificate or certificates on such
holder's behalf for a period ending one year after the Effective Time. Parent
and Merger Sub agree that as promptly as practicable after the Effective Time
the Surviving Corporation shall cause the distribution to holders of record of
Shares as of the Effective Time of appropriate materials to facilitate such
surrender. Upon the surrender of certificates representing the Shares, the
Surviving Corporation shall cause the Exchange Agent to pay the holder of such
certificates in exchange therefor cash in an amount equal to the Per Share
Amount multiplied by the number of Shares represented by such certificate. Until
so surrendered, each such certificate (other than certificates representing
Dissenting Shares and certificates representing Shares canceled pursuant to
Section 2.1(b)) shall represent solely the right to receive the aggregate Per
Share Amount relating thereto.
(c) If payment of cash in respect of canceled Shares is to be made to a
Person other than the Person in whose name a surrendered certificate or
instrument is registered, it shall be a condition to such payment that the
certificate or instrument so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the Person requesting such
payment shall have paid any transfer and other taxes required by reason of such
payment in a name other than that of the registered holder of the certificate or
instrument surrendered or shall have established to the satisfaction of the
Surviving Corporation or the Exchange Agent that such tax either has been paid
or is not payable.
(d) At the Effective Time, the stock transfer books of the Company
shall be closed and there shall not be any further registration of transfer of
any shares of capital stock thereafter on the records of the Company. From and
after the Effective Time, the holders of certificates evidencing ownership of
the Shares outstanding immediately prior to the Effective Time shall cease to
have any rights with respect to such Shares, except as otherwise provided for
herein or by applicable law. If, after the Effective Time, certificates for
Shares are presented to the Surviving Corporation, they shall be canceled and
exchanged for cash as provided in Section 2.1(a) and Sections 2.3(b) and (c). No
interest shall accrue or be paid on any cash payable upon the surrender of a
certificate or certificates which immediately prior to the Effective Time
represented outstanding Shares.
(e) Promptly following the date which is one year after the Effective
Time, the Exchange Agent shall deliver to the Surviving Corporation all cash
(including any interest received with respect thereto), certificates and other
documents in its possession relating to the transactions contemplated hereby,
and the Exchange Agent's duties shall terminate. Thereafter, each holder of a
certificate representing Shares (other than certificates representing Dissenting
Shares and certificates representing Shares canceled pursuant to Section 2.1(b))
shall be entitled to look only to the Surviving Corporation (subject to
applicable abandoned property, escheat and similar laws) and only as general
creditors thereof with respect to the aggregate Per Share Amount payable upon
due surrender of their certificates, without any interest or dividends thereon.
Notwithstanding the foregoing, neither Parent, the Surviving Corporation nor the
Exchange Agent shall be liable to any holder of a certificate representing
Shares for the Per Share Amount delivered to a public official pursuant to any
applicable abandoned property, escheat or similar law.
(f) The Per Share Amount paid in the Merger shall be net to the holder
of Shares in cash, subject to reduction only for any applicable federal back-up
withholding or, as set forth in Section 2.3(c), stock transfer taxes payable by
such holder.
Section 2.4. Options Under Company Stock Plans.
(a) Except as provided in Section 2.4(b), the Company shall take all
actions necessary to provide that, immediately prior to the Effective Time, (x)
each outstanding option to acquire shares of Company Common Stock (the "Company
Options") granted under any of the Company Stock Plans (as defined in Section
4.3), whether or not then exercisable or vested, shall become fully exercisable
and vested, (y) each Company Option which is then outstanding shall be canceled
and (z) in consideration of such cancellation, and except to the extent that
Parent and the holder of any such Company Option otherwise agree in writing, the
Company (or, at Parent's option, Parent or the Surviving Corporation) shall pay
in cash to such holders of Company Options an amount in respect thereof equal to
the product of (A) the excess, if any, for each Company Option, of the Per Share
Amount over the per share exercise price thereof and (B) the number of shares of
Company Common Stock subject thereto (such payment to be net of applicable
withholding taxes); provided that the foregoing shall not require any action
which violates the Company Stock Plans.
(b) Certain Company Options held by certain members or former members
of Company management, as Parent shall notify the Company in writing prior to
the Effective Time, shall become fully exercisable and vested immediately prior
to the Effective Time and shall thereafter remain exercisable in accordance with
their terms and any other terms which are agreed to in writing between Parent
and such holders.
(c) Except as provided in Section 2.4(b) or as otherwise agreed to in
writing by the parties to this Agreement, the Company shall use all reasonable
efforts to ensure that following the Effective Time no holder of Company Options
or any participant in the Company Stock Plans or any other such plans, programs
or arrangements shall have any right thereunder to acquire any equity securities
(or any interests therein) of the Company, the Surviving Corporation or any
Subsidiary thereof.
ARTICLE III.
THE CLOSING
Section 3.1. Closing. The closing of the Merger (the "Closing") shall
take place at the offices of Willkie Farr & Gallagher, 787 Seventh Avenue, New
<PAGE>
York, New York, 10019 at 10:00 A.M., New York time, on the second business day
immediately following the date on which the last of the conditions set forth in
Article VIII hereof is fulfilled or waived, or at such other time, date and
place as Parent and the Company shall mutually agree (the "Closing Date").
ARTICLE IV.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Merger Sub as
follows:
Section 4.1. Organization and Qualification. The Company and each of
the Company Subsidiaries and, to the knowledge of the Company, each of the
Company Joint Ventures is a corporation or other entity duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has all requisite power and authority and has
been duly authorized by all necessary approvals and orders to own, lease and
operate its assets and properties and to carry on its business as it is now
being conducted and is duly qualified and in good standing to do business in
each jurisdiction in which the nature of its business or the ownership or
leasing of its assets and properties makes such qualification necessary other
than in such jurisdictions where the failure to so qualify and be in good
standing, when taken together with all other such failures, would not have a
material adverse effect on the business, operations, properties, assets,
financial condition, Company Prospects (as defined below) or the results of
operations of the Company and the Company Subsidiaries taken as a whole or on
the consummation of the transactions contemplated by this Agreement (to the
extent such adverse effect does not arise from (i) general economic conditions
or (ii) the securities markets generally) (any such material adverse effect, a
"Company Material Adverse Effect"). The term "Subsidiary" of a Person shall mean
any corporation or other entity (including partnerships and other business
associations and joint ventures) in which such Person directly or indirectly
owns at least a majority of the voting power represented by the outstanding
capital stock or other voting securities or interests having voting power under
ordinary circumstances to elect a majority of the directors or similar members
of the governing body, or otherwise to direct the management and policies, of
such corporation or entity, and the term "Company Subsidiary" shall mean a
Subsidiary of the Company. The term "Joint Venture" of a Person shall mean any
corporation or other entity (including partnerships and other business
associations and joint ventures) in which such Person directly or indirectly
owns an equity interest that is less than a majority of any class of the
outstanding voting securities or equity of any such entity, other than equity
interests in entities in which such Person does not control the operations and
does not appoint at least 50% of the board of directors (or comparable governing
body), and the term "Company Joint Venture" shall mean a Joint Venture of the
Company. The term "Company Prospects" shall mean the prospects of the Company
and the Company Subsidiaries, taken as a whole, but only as they may be affected
by statutory or regulatory changes (whether relating to utility, environmental
or other statutory or regulatory matters) or by expropriation events.
Section 4.2. Subsidiaries. Section 4.2 of the Company Disclosure
Schedule delivered by the Company to Parent prior to the execution of this
Agreement (the "Company Disclosure Schedule") sets forth a list of all the
Company Subsidiaries and the Company Joint Ventures, including the name of each
such entity, a brief description of the principal line or lines of business
conducted by each such entity and the interest of the Company and the Company
Subsidiaries therein. Each of the Company and MidAmerican Funding, LLC
("MidAmerican Funding") is a "public utility holding company" (as defined in the
Public Utility Holding Company Act of 1935, as amended (the "1935 Act")) exempt
<PAGE>
from all provisions (other than Section 9(a)(2)) of the 1935 Act, pursuant to
Section 3(a)(1) in accordance with Rule 2 of the 1935 Act, and MidAmerican
Energy Company ("MidAmerican Utility") is a "public utility company" within the
meaning of Section 2(a)(5) of the 1935 Act. With the exception of MidAmerican
Utility and MidAmerican Funding, no Company Subsidiary or Company Joint Venture
is a "holding company" or a "public utility company" within the meaning of
Sections 2(a)(7) and 2(a)(5) of the 1935 Act, respectively, nor, except with
respect to their relationship with the Company and MidAmerican Funding, are any
of such entities an "affiliate" or a "subsidiary company" of a holding company
within the meaning of Sections 2(a)(11) and 2(a)(8) of the 1935 Act,
respectively. Except as set forth in Section 4.2 of the Company Disclosure
Schedule, (i) all of the issued and outstanding shares of capital stock of each
Company Subsidiary are validly issued, fully paid, nonassessable and free of
preemptive rights and are owned, directly or indirectly, by the Company, free
and clear of any liens, claims, encumbrances, security interests, charges and
options of any nature whatsoever, and (ii) there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating the Company or any Company Subsidiary to issue, deliver or
sell, pledge, grant a security interest or encumber, or cause to be issued,
delivered or sold, pledged or encumbered or a security interest to be granted
on, shares of capital stock of any Company Subsidiary or obligating the Company
or any Company Subsidiary to grant, extend or enter into any such agreement or
commitment.
Section 4.3. Capitalization. The authorized capital stock of the
Company consists of 180,000,000 shares of Company Common Stock and 2,000,000
shares of preferred stock, no par value, none of which preferred stock is
outstanding. As of the close of business on October 22, 1999, (i) 59,877,313
shares of Company Common Stock are outstanding, (ii) not more than 7,156,363
shares of Company Common Stock are reserved for issuance pursuant to the
Company's existing stock option agreements and plans and its 1994 Employee Stock
Purchase Plan and 401(k) Savings Plan (such agreements and plans, collectively,
the "Company Stock Plans"), (iii) 23,102,187 shares of Company Common Stock are
held by the Company in its treasury or by its wholly owned Subsidiaries, and
(iv) except as set forth in Section 4.3 of the Company Disclosure Schedule, no
bonds, debentures, notes or other indebtedness having the right to vote (or
convertible into securities having the right to vote) on any matters on which
shareholders may vote ("Voting Debt") is issued or outstanding. All of the
issued and outstanding shares of Company Common Stock are validly issued, fully
paid, nonassessable and free of preemptive rights. As of the date of this
Agreement, except as set forth in Section 4.3 of the Company Disclosure Schedule
or as may be provided by the Company Stock Plans, there are no outstanding
subscriptions, options, calls, contracts, voting trusts, proxies or other
pledges, security interests, encumbrances, commitments, understandings,
restrictions, arrangements, rights or warrants, including any right of
conversion or exchange under any outstanding security, instrument or other
agreement, obligating the Company to issue, deliver or sell, pledge, grant a
security interest or encumber, or cause to be issued, delivered or sold, pledged
or encumbered or a security interest to be granted on, shares of capital stock
or any Voting Debt of the Company or obligating the Company to grant, extend or
enter into any such agreement or commitment.
Section 4.4. Authority; Non-Contravention; Statutory Approvals; Compliance.
<PAGE>
(a) Authority. The Company has all requisite power and authority to
enter into this Agreement and, subject to the receipt of the Company
Shareholders' Approval (as defined in Section 4.13) and the Company Required
Statutory Approvals (as defined in Section 4.4(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by the Company of the transactions contemplated hereby have
been duly authorized by all necessary corporate action on the part of the
Company, subject to obtaining the Company Shareholders' Approval. This Agreement
has been duly and validly executed and delivered by the Company, and, assuming
the due authorization, execution and delivery hereof by the other signatories
hereto, this Agreement constitutes the valid and binding obligation of the
Company enforceable against it in accordance with its terms, subject, as to
enforceability, to bankruptcy, insolvency, reorganization and other laws of
general applicability relating to or affecting creditors' rights and to general
principles of equity.
(b) Non-Contravention. The execution and delivery of this Agreement by
the Company do not, and the consummation of the transactions contemplated hereby
will not, in any respect, violate, conflict with or result in a breach of any
provision of, or constitute a default (with or without notice or lapse of time
or both) under, or result in the termination or modification of, or accelerate
the performance required by, or result in a right of termination, cancellation
or acceleration of any obligation or the loss of a benefit under, or result in
the creation of any lien, security interest, charge or encumbrance upon any of
the agreements, properties or assets of the Company or any of the Company
Subsidiaries or the Company Joint Ventures (any such violation, conflict,
breach, default, right of termination, modification, cancellation or
acceleration, loss or creation, is referred to herein as a "Violation" with
respect to the Company, and such term when used in Article V shall have a
correlative meaning with respect to Parent and Merger Sub) pursuant to any
provisions of (i) the articles of incorporation, by-laws or similar governing
documents of the Company or any of the Company Subsidiaries or the Company Joint
Ventures, (ii) subject to obtaining the Company Required Statutory Approvals and
the receipt of the Company Shareholders' Approval, any statute, law, ordinance,
rule, regulation, judgment, decree, order, injunction, writ, permit or license
of any court, federal, state, local or foreign governmental or regulatory body
(including a stock exchange or other self-regulatory body) or authority (each, a
"Governmental Authority") applicable to the Company or any of the Company
Subsidiaries or the Company Joint Ventures or any of their respective properties
or assets or (iii) subject to obtaining the third-party consents set forth in
Section 4.4(b) of the Company Disclosure Schedule (the "Company Required
Consents"), any note, bond, mortgage, indenture, deed of trust, license,
franchise, permit, concession, contract, lease or other instrument, obligation
or agreement of any kind to which the Company or any of the Company Subsidiaries
or the Company Joint Ventures is a party or by which it or any of its properties
or assets may be bound or affected, excluding from the foregoing clauses (ii)
and (iii) such Violations which would not, in the aggregate, have a Company
Material Adverse Effect.
(c) Statutory Approvals. Except as set forth in Section 4.4(c) of the
Company Disclosure Schedule, no declaration, filing or registration with, or
notice to or authorization, consent or approval of, any Governmental Authority
is necessary for the execution and delivery of this Agreement by the Company or
the consummation by the Company of the transactions contemplated hereby (the
"Company Required Statutory Approvals," it being understood that references in
this Agreement to "obtaining" such Company Required Statutory Approvals shall
mean making such declarations, filings or registrations; giving such notices;
obtaining such authorizations, consents or approvals; and having such waiting
periods expire as are necessary to avoid a violation of law).
<PAGE>
(d) Compliance. Except as set forth in Section 4.4(d) or 4.11 of the
Company Disclosure Schedule or as disclosed in the Company SEC Reports (as
defined in Section 4.5) filed as of the date of this Agreement, neither the
Company nor any of the Company Subsidiaries nor, to the knowledge of the
Company, any Company Joint Venture is in violation of, is, to the knowledge of
the Company, under investigation with respect to any violation of, or has been
given notice or been charged with any violation of, any law, statute, order,
rule, regulation, ordinance or judgment (including, without limitation, any
applicable environmental law, ordinance or regulation) of any Governmental
Authority, except for violations which individually or in the aggregate do not,
and would not reasonably be expected to, have a Company Material Adverse Effect.
Except as set forth in Section 4.4(d) or 4.11 of the Company Disclosure
Schedule, the Company and the Company Subsidiaries and, to the knowledge of the
Company, the Company Joint Ventures have all permits, licenses, franchises and
other governmental authorizations, consents and approvals necessary to conduct
their businesses as presently conducted which are material to the operation of
the businesses of the Company and the Company Subsidiaries. Except as set forth
in Section 4.4(d) of the Company Disclosure Schedule, the Company and each of
the Company Subsidiaries and, to the knowledge of the Company, Company Joint
Ventures is not in breach or violation of or in default in the performance or
observance of any term or provision of, and no event has occurred which, with
lapse of time or action by a third party, could result in a default by the
Company or any Company Subsidiary or, to the knowledge of the Company, any
Company Joint Venture under (i) its articles of incorporation, by-laws or other
organizational document or (ii) any contract, commitment, agreement, indenture,
mortgage, loan agreement, note, lease, bond, license, approval or other
instrument to which it is a party or by which the Company or any Company
Subsidiary or any Company Joint Venture is bound or to which any of its property
is subject, except in the case of clause (ii) above, for violations, breaches or
defaults which individually or in the aggregate do not, and would not reasonably
be expected to, have a Company Material Adverse Effect.
Section 4.5. Reports and Financial Statements. The filings required to
be made by the Company and the Company Subsidiaries under the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the 1935 Act, the Public Utility Regulatory
Policies Act of 1978 ("PURPA"), the Federal Power Act (the "Power Act") and
applicable state, municipal, local and other laws, including franchise and
public utility laws and regulations, including all forms, statements, reports,
agreements (oral or written) and all documents, exhibits, amendments and
supplements appertaining thereto, have been filed with the Securities and
Exchange Commission (the "SEC"), the Federal Energy Regulatory Commission (the
"FERC"), and the appropriate Iowa, Illinois, South Dakota, Nebraska or other
appropriate Governmental Authorities, as the case may be, and complied, as of
their respective dates, in all material respects with all applicable
requirements of the appropriate statutes and the rules and regulations
thereunder. The Company has made available to Parent a true and complete copy of
each report, schedule, registration statement and definitive proxy statement and
all amendments thereto filed with the SEC by the Company or any Company
Subsidiary (or their predecessors, including, without limitation, CalEnergy
Company, Inc.) pursuant to the requirements of the Securities Act or Exchange
Act since January 1, 1999 (as such documents have since the time of their filing
been amended, the "Company SEC Reports"). As of their respective dates, the
Company SEC Reports did not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. The audited consolidated financial statements and
<PAGE>
unaudited interim financial statements of the Company and MidAmerican Utility
included in the Company SEC Reports (collectively, the "Company Financial
Statements") have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis ("GAAP") (except as may be indicated
therein or in the notes thereto) and fairly present the financial position of
the Company and MidAmerican Utility, as the case may be, as of the dates thereof
and the results of their operations and cash flows for the periods then ended,
subject, in the case of the unaudited interim financial statements, to normal,
recurring audit adjustments. True, accurate and complete copies of the articles
of incorporation and by-laws of the Company and MidAmerican Utility, as in
effect on the date of this Agreement, are included (or incorporated by
reference) in the Company SEC Reports.
Section 4.6. Absence of Certain Changes or Events; Absence of Undisclosed
Liabilities.
(a) Absence of Certain Changes or Events. Except as set forth in
Section 4.6(a) of the Company Disclosure Schedule or as disclosed in the Company
SEC Reports filed prior to the date of this Agreement, since December 31, 1998,
the Company and each of the Company Subsidiaries and, to the knowledge of the
Company, each of the Company Joint Ventures, have conducted their business only
in the ordinary course of business consistent with past practice and there has
not been, and no fact or condition exists which would have, or could reasonably
be expected to have, a Company Material Adverse Effect.
(b) Absence of Undisclosed Liabilities. Neither the Company nor any
Company Subsidiary, nor, to the knowledge of the Company, any Company Joint
Venture, has any liabilities or obligations (whether absolute, accrued,
contingent or otherwise and including, without limitation, margin loans) of a
nature required by GAAP to be reflected in a consolidated corporate balance
sheet, except liabilities, obligations or contingencies which are accrued or
reserved against in the consolidated financial statements of the Company and
MidAmerican Utility or reflected in the notes thereto for the year ended
December 31, 1998, or which were incurred after December 31, 1998 in the
ordinary course of business and would not, in the aggregate, have a Company
Material Adverse Effect.
Section 4.7. Litigation. Except as set forth in Section 4.7 or 4.11 of
the Company Disclosure Schedule or as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, (a) there are no claims, suits, actions or
proceedings by any Governmental Authority or any arbitrator, pending or, to the
knowledge of the Company, threatened, nor are there, to the knowledge of the
Company, any investigations or reviews by any Governmental Authority or any
arbitrator pending or threatened against, relating to or affecting the Company
or any of the Company Subsidiaries or, to the knowledge of the Company, the
Company Joint Ventures, (b) there have not been any significant developments
since December 31, 1998 with respect to such disclosed claims, suits, actions,
proceedings, investigations or reviews and (c) there are no judgments, decrees,
injunctions, rules or orders of any Governmental Authority or any arbitrator
applicable to the Company or any of the Company Subsidiaries or, to the
knowledge of the Company, applicable to any of the Company Joint Ventures,
which, when taken together with any other nondisclosures described in clauses
(a), (b) or (c), could reasonably be expected to have a Company Material Adverse
Effect.
Section 4.8. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion or incorporation by
reference in the proxy statement in definitive form ("Proxy Statement") relating
<PAGE>
to the Company Meeting (as defined in Section 7.4(a)) will, at the date mailed
to shareholders of the Company or at the time of the Company Meeting (giving
effect to any documents incorporated by reference therein), include any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading or necessary to correct any statement in any
earlier authorized communication with respect to the solicitation of proxies on
behalf of the Company for the Company Meeting which has become false or
misleading. Notwithstanding the foregoing, the Company does not make any
representation or warranty with respect to any information that has been
supplied by Parent, Merger Sub or their affiliates (other than the Company and
the Company Subsidiaries), accountants, counsel or other authorized
representatives for use in any of the foregoing documents. The Proxy Statement
will comply as to form in all material respects with the provisions of
applicable federal securities law.
Section 4.9. Tax Matters. "Taxes," as used in this Agreement, means any
federal, state, county, local or foreign taxes, charges, fees, levies or other
assessments, including all net income, gross income, sales and use, ad valorem,
transfer, gains, profits, excise, franchise, real and personal property, gross
receipt, capital stock, production, business and occupation, disability,
employment, payroll, license, estimated, stamp, custom duties, severance or
withholding taxes or charges imposed by any governmental entity, and includes
any interest and penalties (civil or criminal) on or additions to any such taxes
and any expenses incurred in connection with the determination, settlement or
litigation of any Tax liability. "Tax Return," as used in this Agreement, means
a report, return or other information required to be supplied to a governmental
entity with respect to Taxes including, without limitation, where permitted or
required, combined or consolidated returns for any group of entities that
includes the Company or any Company Subsidiary.
(a) Filing of Timely Tax Returns. The Company and each of the Company
Subsidiaries have filed (or there has been filed on their behalf) all material
Tax Returns required to be filed by each of them under applicable law. All such
Tax Returns were and are in all material respects true, complete and correct and
filed on a timely basis.
(b) Payment of Taxes. The Company and each of the Company Subsidiaries
have, within the time and in the manner prescribed by law, paid (and until the
Closing Date will pay within the time and in the manner prescribed by law) all
Taxes that are currently due and payable, except for those contested in good
faith and for which adequate reserves have been taken.
(c) Tax Reserves. The Company and the Company Subsidiaries have
established (and until the Closing Date will maintain) on their books and
records reserves which adequately reflect its estimate of the amounts required
to pay all Taxes in accordance with GAAP.
(d) Tax Liens. There are no Tax liens upon any material assets of the
Company or any of the Company Subsidiaries except liens for Taxes not yet due.
(e) Withholding Taxes. The Company and each of the Company Subsidiaries
have complied (and until the Closing Date will comply) in all material respects
with the provisions of the Internal Revenue Code of 1986, as amended (the
"Code"), relating to the payment and withholding of Taxes, including, without
limitation, the withholding and reporting requirements under Code Sections 1441
through 1464, 3401 through 3406 and 6041 through 6049, as well as similar
provisions under any other laws, and have, within the time and in the manner
<PAGE>
prescribed by law, withheld from employee wages and paid over to the proper
governmental authorities all amounts required.
(f) Extensions of Time For Filing Tax Returns. Except as set forth in
Section 4.9(f) of the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries has requested any extension of time within which to
file any Tax Return, which Tax Return has not since been timely filed.
(g) Waivers of Statute of Limitations. Except as set forth in Section
4.9(g) of the Company Disclosure Schedule, neither the Company nor any of the
Company Subsidiaries has executed any outstanding waivers or comparable consents
regarding the application of the statute of limitations with respect to any
Taxes or Tax Returns.
(h) Expiration of Statute of Limitations. Except as disclosed in
Section 4.9(h) of the Company Disclosure Schedule, the statute of limitations
for the assessment of all Taxes has expired for all applicable Tax Returns of
the Company and the Company Subsidiaries or those Tax Returns have been examined
by the appropriate taxing authorities for all tax periods ending before the date
of this Agreement, and no deficiency for any Taxes has been proposed, asserted
or assessed against The Company or any of the Company Subsidiaries that has not
been resolved and paid in full.
(i) Audit, Administrative and Court Proceedings. Except as disclosed in
Section 4.9(i) of the Company Disclosure Schedule, no audits or other
administrative proceedings or court proceedings are presently pending, or, to
the knowledge of the Company, threatened, with regard to any Taxes or Tax
Returns of the Company or any of the Company Subsidiaries.
(j) Tax Rulings. Neither the Company nor any of the Company
Subsidiaries has received or requested a Tax Ruling (as defined below) or
entered into a Closing Agreement (as defined below), with any taxing authority
that would have a continuing adverse effect after the Closing Date. "Tax
Ruling," as used in this Agreement, shall mean a written ruling of a taxing
authority relating to Taxes. "Closing Agreement," as used in this agreement,
shall mean a written and legally binding agreement with a taxing authority
relating to Taxes.
(k) Availability of Tax Returns. The Company has made available to
Parent, where requested by Parent, complete and accurate copies of (i) all
federal and state income Tax Returns for open years, and any amendments thereto,
filed by the Company or any of the Company Subsidiaries, (ii) all audit reports
or written proposed adjustments (whether formal or informal) received from any
taxing authority relating to any Tax Return filed by the Company or any of the
Company Subsidiaries and (iii) any Tax Ruling or request for a Tax Ruling
applicable to the Company or any of the Company Subsidiaries and Closing
Agreements entered into by the Company or any of the Company Subsidiaries.
(l) Tax Sharing Agreements. Except as disclosed in Section 4.9(l) of
the Company Disclosure Schedule, neither the Company nor any Company Subsidiary
is a party to any agreement relating to allocating or sharing of Taxes.
(m) Code Section 341(F). Neither the Company nor any of the Company
Subsidiaries has filed (or will file prior to the Closing) a consent pursuant to
Code Section 341(f) or has agreed to have Code Section 341(f)(2) apply to any
<PAGE>
disposition of a subsection (f) asset (as that term is defined in Code Section
341(f)(4)), owned by the Company or any of the Company Subsidiaries.
(n) Code Section 168. Except as set forth in Section 4.9(n) of the
Company Disclosure Schedule, no property of the Company or any of the Company
Subsidiaries is property that the Company or any Company Subsidiary or any party
to this transaction is or will be required to treat as being owned by another
person pursuant to the provisions of Code Section 168(f)(8) (as in effect prior
to its amendment by the Tax Reform Act of 1986) or is "tax-exempt use property"
within the meaning of Code Section 168(h).
(o) Code Section 481 Adjustments. Except as set forth in Section 4.9(o)
of the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries is required to include in income for any tax period ending after
the date hereof any adjustment pursuant to Code Section 481(a) by reason of a
voluntary change in accounting method initiated by the Company or any of the
Company Subsidiaries, and, to the knowledge of the Company, the Internal Revenue
Service ("IRS") has not proposed any such adjustment or change in accounting
method.
(p) Consolidated Tax Returns. Except as disclosed in Section 4.9(p) of
the Company Disclosure Schedule, neither the Company nor any of the Company
Subsidiaries has ever been a member of an affiliated group of corporations
(within the meaning of Code Section 1504(a)) filing consolidated returns, other
than the affiliated group of which the Company is the common parent.
(q) 5% Foreign Shareholders. To the Company's knowledge, based on
Schedule 13D and 13G filings with the SEC with respect to the Company, no
foreign person owns, as of the date of this Agreement, 5% or more of the
outstanding shares of Company Common Stock.
Section 4.10. Employee Matters; ERISA.
(a) Benefit Plans. Section 4.10(a) of the Company Disclosure Schedule
contains a true and complete list of each employee benefit plan, practice,
program or arrangement currently sponsored, maintained or contributed to by the
Company or any of the Company Subsidiaries for the benefit of employees, former
employees or directors and their beneficiaries in respect of services provided
to any such entity, including, but not limited to, any employee benefit plans
within the meaning of Section 3(3) of Employee Retirement Income Security Act of
1974, as amended ("ERISA"), employee pension benefit plan, program, arrangement
or agreement, any health, medical, welfare, disability, life insurance, bonus,
option, stock appreciation plan, performance stock plan, restricted stock plan,
deferred compensation plan, retiree benefits plan, severance pay and other
employee benefit or fringe benefit plan and any employment, consulting,
non-compete, severance or change in control agreement (collectively, the
"Company Benefit Plans"), together with, for any option, stock appreciation
plan, performance stock plan, restricted stock plan, deferred compensation plan
and supplemental retirement plan, the amounts or benefits granted or payable
under each, as of September 30, 1999 and as of the Effective Time (assuming no
termination of employment as of such times), and exercise prices regarding
Company Options or other securities which represent the right (contingent or
other) to purchase or receive shares of Company Common Stock or, following the
Merger, of Surviving Corporation Common Stock. For the purposes of this Section
4.10, the term "Company" shall be deemed to include predecessors thereof.
<PAGE>
(b) Contributions. Except as set forth in Section 4.10(b) of the
Company Disclosure Schedule, all material contributions and other payments
required to be made by the Company or any of the Company Subsidiaries to any
Company Benefit Plan (or to any person pursuant to the terms thereof) have been
timely made or the amount of such payment or contribution obligation has been
reflected in the Company Financial Statements. Except as set forth in Section
4.10(b) of the Company Disclosure Schedule, (i) the current value of all accrued
benefits under any Company Benefit Plan which is a defined benefit plan did not,
as of the date of the most recent actuarial valuation for such plan, exceed the
then current value of the assets of such plan, based on the actuarial
assumptions set forth in such valuation for calculating the minimum funding
requirements of Code Section 412, which actuarial assumptions and calculations
have been provided to Parent prior to the date of this Agreement, and (ii)
neither the Company nor any Company Subsidiary contributes or has contributed,
during the six-year period immediately prior to the date of this Agreement, to a
multiemployer plan (as defined in Section 3(37) of ERISA), or has any liability
under ERISA Section 4203 or Section 4205 in respect of any such plan.
(c) Qualification; Compliance. Except as set forth in Section 4.10(c)
of the Company Disclosure Schedule, each of the Company Benefit Plans intended
to be "qualified" within the meaning of Section 401(a) of the Code has been
determined by the IRS to be so qualified, and, to the knowledge of the Company,
no circumstances exist that are reasonably expected by the Company to result in
the revocation of any such determination. The Company and each of the Company
Subsidiaries are in compliance in all material respects with, and each Company
Benefit Plan is and has been operated in all material respects in compliance
with the terms thereof and all applicable laws, rules and regulations governing
such plan, including, without limitation, ERISA and the Code. Each Company
Benefit Plan intended to provide for the deferral of income, the reduction of
salary or other compensation or to afford other income tax benefits is
reasonably designed to comply with the requirements of the applicable provisions
of the Code or other laws, rules and regulations required to provide such income
tax benefits.
(d) Liabilities. With respect to the Company Benefit Plans individually
and in the aggregate, there are no actions, suits, claims pending or, to the
knowledge of the Company, threatened, and, to the knowledge of the Company, no
event has occurred that could reasonably be expected to subject the Company or
any of the Company Subsidiaries to any liability arising under the Code, ERISA
or any other applicable law (including, without limitation, any liability of any
kind whatsoever, whether direct or indirect, contingent, inchoate or otherwise,
to any such plan or the Pension Benefit Guaranty Corporation (the "PBGC")), or
under any indemnity agreement to which the Company or any of the Company
Subsidiaries is a party, in each such case, which liability, individually or in
the aggregate, could reasonably be expected to have a Company Material Adverse
Effect.
(e) Welfare Plans. Except as set forth in Section 4.10(e) of the
Company Disclosure Schedule, none of the Company Benefit Plans that are "welfare
plans", within the meaning of Section 3(1) of ERISA, provides for any benefits
payable to or on behalf of any employee or director after termination of
employment or service, as the case may be, other than elective continuation
required pursuant to Code Section 4980B or coverage which expires at the end of
the calendar month following such event. Each such plan that is a "group health
plan" (as defined in Code Section 4980B(g)) has been operated in compliance with
Code Section 4980B at all times, except for any non-compliance that could not
reasonably be expected to give rise to a Company Material Adverse Effect.
<PAGE>
(f) Documents Made Available. The Company has made available to Parent
a true and correct copy of each collective bargaining agreement to which the
Company or any of the Company Subsidiaries is a party or under which the Company
or any of the Company Subsidiaries has obligations, and with respect to each
Company Benefit Plan, to the extent applicable, (i) such plan and summary plan
description (including all amendments to each such document), (ii) the most
recent annual report filed with the IRS, (iii) each related trust agreement,
insurance contract, service provider or investment management agreement
(including all amendments to each such document), (iv) the most recent
determination of the IRS with respect to the qualified status of such plan and
(v) the most recent actuarial report or valuation.
(g) Payments Resulting from Merger and Other Severance Payments. Except
as set forth in Section 4.10(g) of the Company Disclosure Schedule or as
specifically provided for in this Agreement, the announcement or consummation of
any transaction contemplated by this Agreement will not (either alone or upon
the occurrence of any additional or further acts or events, including, without
limitation, termination of employment) result, as of September 30, 1999 or as of
the Effective Time, in any (A) payment (whether of severance pay or otherwise)
becoming due from the Company or any of the Company Subsidiaries to any officer,
employee, former employee or director thereof or to the trustee under any "rabbi
trust" or similar arrangement or (B) benefit being established or becoming
accelerated, vested or payable under any Company Benefit Plan.
(h) Labor Agreements. As of the date hereof, except as set forth in
Section 4.10(h) of the Company Disclosure Schedule, neither the Company nor any
of the Company Subsidiaries is a party to any collective bargaining agreement or
other labor agreement with any union or labor organization. Except as set forth
in Section 4.10(h) of the Company Disclosure Schedule, to the knowledge of the
Company, as of the date hereof, there is no current union representation
question involving employees of the Company or any of the Company Subsidiaries,
nor does the Company know of any activity or proceeding of any labor
organization (or representative thereof) or employee group to organize any such
employees. Except as set forth in Section 4.10(h) of the Company Disclosure
Schedule, (i) there is no unfair labor practice, employment discrimination or
other complaint against the Company or any of the Company Subsidiaries pending
or, to the knowledge of the Company, threatened, which has or could reasonably
be expected to have a Company Material Adverse Effect, (ii) there is no strike,
dispute, slowdown, work stoppage or lockout pending, or, to the knowledge of the
Company, threatened, against or involving the Company or any of the Company
Subsidiaries which has or could reasonably be expected to have, a Company
Material Adverse Effect and (iii) there is no proceeding, claim, suit, action or
governmental investigation pending or, to the knowledge of the Company,
threatened, in respect of which any director, officer, employee or agent of the
Company or any of the Company Subsidiaries is or may be entitled to claim
indemnification from the Company pursuant to their respective articles of
incorporation or by-laws or as provided in the Indemnification Agreements listed
in Section 4.10(h) of the Company Disclosure Schedule. Except as set forth in
Section 4.10(h) of the Company Disclosure Schedule, the Company and the Company
Subsidiaries have complied in all material respects with all laws relating to
the employment of labor, including without limitation any provisions thereof
relating to wages, hours, collective bargaining and the payment of social
security and similar taxes, and no person has, to the knowledge of the Company,
asserted that the Company or any of the Company Subsidiaries is liable in any
<PAGE>
material amount for any arrears of wages or any taxes or penalties for failure
to comply with any of the foregoing.
(i) Parachute Payments. Section 4.10(i) of the Company Disclosure
Schedule sets forth (1) the name of each officer of the Company and the
President of each of MidAmerican Utility and the Company's U.K. utility
Subsidiary who, in connection with the transactions contemplated with this
Agreement, will receive, or will or may become entitled to receive in the future
or upon termination of such person's employment, any payments (including without
limitation accelerated vesting of Company Options or other equity-based awards)
which could reasonably be expected to constitute "excess parachute payments"
with respect to such person within the meaning of Section 280G of the Code
("Excess Parachute Payments"), and (2) with respect to each such person, the
maximum amount of Excess Parachute Payments which could reasonably be expected
to be so received (determined in accordance with proposed regulations of the IRS
promulgated under Section 280G of the Code).
(j) Section 162(m). Except as set forth in Section 4.10(j) of the
Company Disclosure Schedule, no payments to any executive officer of the Company
or any Company Subsidiaries will fail to be deductible for Federal income tax
purposes by reason of the deduction limit imposed under Section 162(m) of the
Code. Section 4.10(j) of the Company Disclosure Schedule sets forth the name of
each executive officer who will receive compensation which may not be fully
deductible by reason of the application of Section 162(m), and a reasonable
estimate of the amount of such potentially nondeductible compensation.
(k) Changes in Compensation, Benefits Since September 30, 1999. Except
as specifically described in Section 4.10(k) of the Company Disclosure Schedule,
since September 30, 1999, the Company has not, nor has any of the Company
Subsidiaries, (i) entered into, adopted or amended or increased the amount or
accelerated the payment or vesting of any benefit or amount payable under, any
employee benefit plan or other contract, agreement, commitment, arrangement,
plan, trust, fund or policy maintained by, contributed to or entered into by the
Company or any of the Company Subsidiaries (including, without limitation, the
Company Benefit Plans set forth in Section 4.10(a) of the Company Disclosure
Schedule, as in effect on September 30, 1999) or increased, or entered into any
contract, agreement, commitment or arrangement to increase in any manner, the
compensation or fringe benefits, or otherwise to extend, expand or enhance the
engagement, employment or any related rights, of any director, officer or other
employee of the Company or any of the Company Subsidiaries, except pursuant to
binding legal commitments existing on September 30, 1999 and specifically
identified in Section 4.10(a) of the Company Disclosure Schedule and except for
normal increases in the ordinary course of business consistent with past
practice that, in the aggregate, did not result in a material increase in
benefits or compensation expense to the Company or any of the Company
Subsidiaries; (ii) entered into or amended any employment, severance, pension,
deferred compensation or special pay arrangement with respect to the termination
of employment or other similar contract, agreement or arrangement with (A) any
director or officer or (B) other employee other than in the ordinary course of
business consistent with past practice; or (iii) deposited into any trust
(including any "rabbi trust") amounts in respect of any employee benefit
obligations or obligations to directors other than transfers into trusts (other
than a rabbi or other trust with respect to any non-qualified deferred
compensation) in accordance with past practice or pursuant to binding legal
agreements existing on September 30, 1999.
<PAGE>
Section 4.11. Environmental Protection.
(a) Definitions. As used in this Agreement:
(i) "Environmental Claim" means any and all administrative, regulatory
or judicial actions, suits, demands, demand letters, directives, claims, liens,
investigations, proceedings or notices of noncompliance or violation (written or
oral) by any person or entity (including any Governmental Authority) alleging
potential liability (including, without limitation, potential responsibility for
or liability for enforcement, investigatory costs, cleanup costs, spent fuel or
waste disposal costs, decommissioning costs, governmental response costs,
removal costs, remediation costs, natural resources damages, property damages,
personal injuries or penalties) arising out of, based on or resulting from (A)
the presence, Release or threatened Release into the environment of any
Hazardous Materials at any location in which the Company or any of the Company
Subsidiaries has an economic or ownership interest, whether or not owned,
operated, leased or managed by the Company or any of the Company Subsidiaries or
Company Joint; or (B) circumstances forming the basis of any violation or
alleged violation of any Environmental Law or (C) any and all claims by any
third party seeking damages, contribution, indemnification, cost recovery,
compensation or injunctive relief resulting from the presence or Release of any
Hazardous Materials.
(ii) "Environmental Laws" means all applicable federal, state and local
laws, rules, regulations, ordinances, orders, directives and any binding
judicial or administrative interpretation thereof, and regulatory common law and
equitable doctrines relating to pollution, the environment (including, without
limitation, indoor or ambient air, surface water, groundwater, land surface or
subsurface strata) or protection of human health or safety as it relates to the
environment including, without limitation, those relating to Releases or
threatened Releases of Hazardous Materials, or otherwise relating to the
manufacture, generation, processing, distribution, use, treatment, storage,
disposal, transport or handling of Hazardous Materials.
(iii) "Hazardous Materials" means (A) any petroleum or petroleum
products, radioactive materials, asbestos in any form that is or could become
friable, urea formaldehyde foam insulation and transformers or other equipment
that contain dielectric fluid containing polychlorinated biphenyls; (B) any
chemicals, materials or substances which are now defined as or included in the
definition of "hazardous substances," "hazardous wastes," "hazardous materials,"
"extremely hazardous wastes," "restricted hazardous wastes," "toxic substances,"
"toxic pollutants" or words of similar import; under any Environmental Law and
(C) any other chemical, material, substance or waste, exposure to which is now
prohibited, limited or regulated under any Environmental Law in a jurisdiction
in which the Company or any of the Company Subsidiaries or Company Joint
Ventures operates.
(iv) "Release" means any release, spill, emission, leaking, injection,
deposit, disposal, discharge, dispersal, leaching or migration into the
atmosphere, soil, surface water, groundwater or property.
(b) Compliance. Except as set forth in Section 4.11(b) of the Company
Disclosure Schedule, the Company and each of the Company Subsidiaries and, to
the knowledge of the Company, the Company Joint Ventures are in compliance with
all applicable Environmental Laws except where the failure to so comply would
not have a Company Material Adverse Effect, and neither the Company nor any of
<PAGE>
the Company Subsidiaries has received any communication (written or oral), from
any person or Governmental Authority that alleges that the Company or any of the
Company Subsidiaries or the Company Joint Ventures is not in such compliance
with applicable Environmental Laws. To the knowledge of the Company, compliance
with all applicable Environmental Laws will not require the Company or any
Company Subsidiary or, to the knowledge of the Company, any Company Joint
Venture to incur costs that will be reasonably likely to result in a Company
Material Adverse Effect, including but not limited to the costs of the Company
and Company Subsidiary and Company Joint Venture pollution control equipment
required or reasonably contemplated to be required in the future.
(c) Environmental Permits. Except as set forth in Section 4.11(c) of
the Company Disclosure Schedule, the Company and each of the Company
Subsidiaries and, to the knowledge of the Company, the Company Joint Ventures,
have obtained or has applied for all permits, registrations and governmental
authorizations required under any Environmental Law (collectively, the
"Environmental Permits") necessary for the construction of its facilities or the
conduct of its operations except where the failure to so obtain would not have a
Company Material Adverse Effect, and all such Environmental Permits are in good
standing or, where applicable, a renewal application has been timely filed and
is pending agency approval, and the Company and the Company Subsidiaries and, to
the knowledge of the Company, the Company Joint Ventures are in compliance with
all terms and conditions of all Environmental Permits necessary for the
construction of its facilities or the conduct of its operations, except where
the failure to so comply, in the aggregate, would not have a Company Material
Adverse Effect.
(d) Environmental Claims. Except as set forth in Section 4.11(d) of the
Company Disclosure Schedule, there is no Environmental Claim pending (or, to the
knowledge of the Company, threatened) (A) against the Company or any of the
Company Subsidiaries or, to the knowledge of the Company, any of the Company
Joint Ventures, (B) to the knowledge of the Company, against any person or
entity whose liability for any Environmental Claim the Company or any of the
Company Subsidiaries or, to the knowledge of the Company, any of the Company
Joint Ventures has or may have retained or assumed either contractually or by
operation of law, or (C) against any real or personal property or operations
which the Company or any of the Company Subsidiaries or, to the knowledge of the
Company, any of the Company Joint Ventures owns, leases or manages, in whole or
in part, which would reasonably be expected to have, in the aggregate, a Company
Material Adverse Effect.
(e) Releases. Except as set forth in Section 4.11(e) of the Company
Disclosure Schedule, the Company has no knowledge of any Releases of any
Hazardous Material that would be reasonably likely to form the basis of any
Environmental Claim against the Company or any of the Company Subsidiaries or
the Company Joint Ventures, or against any person or entity whose liability for
any Environmental Claim the Company or any of the Company Subsidiaries or the
Company Joint Ventures has or may have retained or assumed either contractually
or by operation of law except for any Environmental Claim which would not have,
in the aggregate, a Company Material Adverse Effect.
(f) Predecessors. Except as set forth in Section 4.11(f) of the Company
Disclosure Schedule, the Company has no knowledge, with respect to any
predecessor of the Company or any of the Company Subsidiaries or the Company
Joint Ventures, of any Environmental Claim pending or threatened, or of any
Release of Hazardous Materials that would be reasonably likely to form the basis
of any Environmental Claim, which, if determined adversely could reasonably be
<PAGE>
expected to require payments of $20 million or more or which could reasonably be
expected to have a Company Material Adverse Effect.
(g) Disclosure. The Company has disclosed in writing to Parent all
material facts which the Company reasonably believes form the basis of an
Environmental Claim which could have a Company Material Adverse Effect arising
from (i) the cost of the Company pollution control equipment (including, without
limitation, upgrades and other modifications to existing equipment) currently
required or reasonably contemplated to be required in the future, (ii) current
remediation costs or costs to the Company or any of the Company Subsidiaries for
remediation reasonably contemplated to be required in the future or (iii) any
other environmental matter affecting the Company or any of the Company
Subsidiaries.
(h) Cost Estimates. To the Company's knowledge, no environmental matter
set forth in the Company SEC Reports or the Company Disclosure Schedule could
reasonably be expected to exceed the cost estimates provided in the Company SEC
Reports by an amount that individually or in the aggregate could reasonably be
expected to have a Company Material Adverse Effect.
Section 4.12. Regulation as a Utility. MidAmerican Utility is regulated
as a public utility by the FERC and in the States of Illinois, Iowa, Nebraska
and South Dakota and in no other state. Except as set forth in the preceding
sentence or Section 4.12 of the Company Disclosure Schedule, neither the Company
nor any "subsidiary company" or "affiliate" (as each such term is defined in the
1935 Act) of the Company is subject to regulation as a public utility or public
service company (or similar designation) by the FERC or any municipality,
locality, state in the United States or any foreign country.
Section 4.13. Vote Required. The approval of the Merger by the
affirmative vote of a majority of the votes entitled to be cast by holders of
Company Common Stock (the "Company Shareholders' Approval") is the only vote of
the holders of any class or series of the securities of the Company or any of
the Company Subsidiaries required to approve this Agreement, the Merger and the
other transactions contemplated hereby.
Section 4.14. Insurance. Except as set forth in Section 4.14 of the
Company Disclosure Schedule, the Company and each of the Company Subsidiaries
is, and has been continuously since January 1, 1998, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary in all material respects for companies conducting the business as
conducted by the Company and the Company Subsidiaries during such time period.
Neither the Company nor any of the Company Subsidiaries has received any notice
of cancellation or termination with respect to any material insurance policy of
the Company or any of the Company Subsidiaries. The insurance policies of the
Company and each of the Company Subsidiaries are valid and enforceable policies
in all material respects.
Section 4.15. Opinions of Financial Advisers. The Company has obtained
the opinions of Warburg Dillon Read LLC ("Dillon Read") and Lehman Brothers Inc.
("Lehman"), each dated as of the date of this Agreement, to the effect that, as
of the date hereof, the Per Share Amount to be paid to holders of Company Common
Stock (other than the Investors) pursuant to this Agreement is fair from a
financial point of view to such holders. True and correct copies of such
opinions have been provided by the Company to Parent.
<PAGE>
Section 4.16. Brokers. No broker, finder or investment banker (other
than Dillon Read and Lehman) is entitled to any brokerage, finder's or other fee
or commission in connection with the Merger based upon arrangements made by or
on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and each of
Dillon Read and Lehman, pursuant to which each such firm would be entitled to
any payment relating to the Merger. The fees payable under such agreements and
any other brokerage, finder's or other fee or commission payable in connection
with the Merger based upon arrangements made by or on behalf of the Company do
not exceed $11 million in the aggregate.
Section 4.17. Non-Applicability of Certain Provisions of Iowa Act. None
of the business combination provisions of Section 1110 of the Iowa Act or any
similar provisions of the Iowa Act, the articles of incorporation or by-laws of
the Company are applicable to the transactions contemplated by this Agreement
because such provisions do not apply by their terms or because any required
approvals of the Board of Directors of the Company have been obtained.
Section 4.18. Company Rights Agreement. Prior to the date of this
Agreement, the Company has delivered to Parent and its counsel a true and
complete copy of the Amended and Restated Rights Agreement, dated as of
September 14, 1999, between ChaseMellon Shareholder Services, L.L.C., as Rights
Agent, and the Company (the "Company Rights Agreement") in effect as of the date
hereof, and has authorized all necessary action (and promptly after the date of
this Agreement and prior to the Closing Date, will have taken all necessary
action), including amending the Company Rights Plan, such that the consummation
of the transactions contemplated by this Agreement will not result in the
separation of the Company Rights from the Shares, the Company Rights becoming
non-redeemable, the Rights associated with Shares beneficially owned by the
Investors (or their affiliates or associates) becoming void or voidable, or the
triggering of any right or entitlement of shareholders of the Company under the
Company Rights Agreement or any similar agreement to which the Company or any of
its affiliates is a party.
Section 4.19. Year 2000 Compliance. The Company and the Company
Subsidiaries have put into effect reasonable and customary practices and
programs to be Year 2000 Compliant (as defined below)) designed to enable all
material software, hardware and equipment (including microprocessors) that are
owned or utilized by the Company or any of the Company Subsidiaries in the
operations of its or their respective business to be capable, by December 31,
1999, of accounting for all calculations using a century and date sensitive
algorithm for the year 2000 and the fact that the year 2000 is a leap year and
to otherwise continue to function without any material interruption caused by
the occurrence of the year 2000 (such capabilities are herein referred to as
being "Year 2000 Compliant").
Section 4.20. Board Recommendation. The Board of Directors of the
Company, at a meeting duly called and held, has by unanimous vote of those
directors present (who constituted all of the directors then in office other
than David L. Sokol, Walter Scott, Jr. and Bernard W. Reznicek, who did not
participate in such deliberations or vote due to their status as, and/or
affiliation with, one of the Investors) (i) determined that this Agreement, the
Merger and the other transaction contemplated hereby are fair to and in the best
interests of the shareholders of the Company, and (ii) resolved to recommend
that the holders of Company Common Stock approve this Agreement, the Merger and
the other transactions contemplated hereby.
<PAGE>
Section 4.21. Investment Company and Investment Advisory Matters.
Neither the Company nor any of the Company Subsidiaries is an "investment
company" as defined in the Investment Company Act of 1940, as amended. Neither
the Company nor any of the Company Subsidiaries is an "investment advisor" as
defined in the Investment Advisers Act of 1940, as amended, or conducts
activities of or controls an "investment adviser" as defined therein, whether or
not registered under such Act.
ARTICLE V.
REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB
Parent and Merger Sub hereby represent and warrant to the Company as
follows:
Section 5.1. Organization. Parent is a limited liability company duly
organized, validly existing and in good standing under the laws of its
jurisdiction of organization. Merger Sub is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Parent and Merger Sub were organized solely for the purposes of
consummating the Merger and the other transactions contemplated by this
Agreement and taking action with respect thereto. Except for obligations or
liabilities incurred in connection with the transactions contemplated by this
Agreement or in connection with their organization, at the Effective Time
neither Parent nor Merger Sub will have incurred any obligations or liabilities
or engaged in any business activities of any kind.
Section 5.2. Authority; Non-Contravention; Statutory Approvals.
(a) Authority. Parent and Merger Sub have all requisite power and
authority to enter into this Agreement and, subject to the Parent Required
Statutory Approvals (as defined in Section 5.2(c)), to consummate the
transactions contemplated hereby. The execution and delivery of this Agreement
and the consummation by Parent and Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary limited liability company
action on the part of Parent and all necessary corporate action on the part of
Merger Sub. This Agreement has been duly and validly executed and delivered by
Parent and Merger Sub, and, assuming the due authorization, execution and
delivery hereof by the Company, this Agreement constitutes the valid and binding
obligation of each of Parent and Merger Sub enforceable against them in
accordance with its terms, subject, as to enforceability, to bankruptcy,
insolvency, reorganization and other laws of general applicability relating to
or affecting creditors' rights and to general principles of equity.
(b) Non-Contravention. The execution and delivery of this Agreement by
Parent and Merger Sub do not, and the consummation of the transactions
contemplated hereby will not, result in a Violation pursuant to any provisions
of (i) the articles of formation or operating agreement of Parent or the
articles of incorporation or by-laws of Merger Sub, (ii) subject to obtaining
the Parent Required Statutory Approvals, any statute, law, ordinance, rule,
regulation, judgment, decree, order, injunction, writ, permit or license of any
Governmental Authority applicable to Parent or Merger Sub or any of their
properties or assets or (iii) any note, bond, mortgage, indenture, deed of
trust, license, franchise, permit, concession, contract, lease or other
instrument, obligation or agreement of any kind to which Parent or Merger Sub is
a party or by which it or any of its properties or assets may be bound or
affected, excluding from the foregoing clauses (ii) and (iii) such Violations
which would not, in the aggregate, have a material adverse effect on the ability
<PAGE>
of Parent or Merger Sub to consummate the transactions contemplated by this
Agreement (any such material adverse effect, a "Parent Material Adverse
Effect").
(c) Statutory Approvals. Except as described in Section 5.2(c) of the
Parent Disclosure Schedule delivered by Parent to the Company prior to the
execution of this Agreement (the "Parent Disclosure Schedule"), no declaration,
filing or registration with, or notice to or authorization, consent or approval
of, any Governmental Authority is necessary for the execution and delivery of
this Agreement by Parent and Merger Sub or the consummation by Parent and Merger
Sub of the transactions contemplated hereby (the "Parent Required Statutory
Approvals"), it being understood that references in this Agreement to
"obtaining" Parent Required Statutory Approvals shall mean making such
declarations, filings or registrations; giving such notices; obtaining such
authorizations, consents or approvals; and having such waiting periods expire as
are necessary to avoid a violation of law).
Section 5.3. Proxy Statement. None of the information supplied by
Parent or Merger Sub, or their officers, directors, representatives, agents or
employees, for inclusion in the Proxy Statement, or in any amendments thereof or
supplements thereto, will, on the date the Proxy Statement is first mailed to
shareholders or at the time of the Company Meeting (giving effect to any
documents incorporated by reference therein), contain any statement which, at
such time and in light of the circumstances under which it will be made, will be
false or misleading with respect to any material fact, or will omit to state any
material fact necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier communication
with respect to the solicitation of proxies for the Company Meeting which has
become false or misleading.
Section 5.4. Brokers. No broker, finder or investment banker (other
than Credit Suisse First Boston ("CSFB")) is entitled to any brokerage, finder's
or other fee or commission in connection with the Merger based upon arrangements
made by or on behalf of Parent or Merger Sub. Parent has heretofore furnished to
the Company a complete and correct copy of all agreements between Parent or
Merger Sub and CSFB, pursuant to which such firm would be entitled to any
payment relating to the Merger.
Section 5.5. Financing. Merger Sub has, on or prior to the date hereof,
entered into subscription agreements, dated as of the date of this Agreement,
with each of David L. Sokol, Walter Scott, Jr. and Berkshire Hathaway Inc.
(collectively, the "Subscription Agreements"), pursuant to which the subscribers
thereunder (the "Investors") have agreed, on the terms and subject to the
conditions contained in the Subscription Agreements, to provide an aggregate of
$2.352 billion to Merger Sub in cash and/or shares of Common Stock or options to
purchase shares of Common Stock (valued for these purposes at the Per Share
Amount) in exchange for securities of Merger Sub. Merger Sub has furnished true
and correct copies of the Subscription Agreements to the Company.
Section 5.6. Sale of the Company. Neither Parent nor Merger Sub nor any
of their affiliates has any agreement, understanding or any present intention
(i) to sell the Company or any material part of the Company (other than the
purchase of securities of Merger Sub by (A) one or more subsidiaries of
Berkshire Hathaway Inc. which are consolidated with Berkshire Hathaway Inc. for
financial accounting purposes, in accordance with the Subscription Agreement
with Berkshire Hathaway Inc. and (B) the Scott Family Entities (as defined in
<PAGE>
the Subscription Agreement with Walter Scott, Jr.), in accordance with the
Subscription Agreement with Walter Scott, Jr.) or (ii) enter into, or cause the
Company to enter into, any extraordinary transaction.
Section 5.7. Share Ownership. Section 5.7 of the Parent Disclosure
Schedule sets forth the number of shares of Company Common Stock beneficially
owned, as of the date of this Agreement, by each of Parent and Merger Sub and
their respective Subsidiaries and affiliates, either individually or as part of
a group for purposes of Rule 13d-3 under the Exchange Act.
Section 5.8. Regulation Under the 1935 Act. Neither Parent nor Merger
Sub is a "public utility company" or a "holding company" (as each such term is
defined in the 1935 Act), and neither Parent nor Merger Sub is a "subsidiary
company" or "affiliate" (as each such term is defined in the 1935 Act) of a
"public utility company" or "holding company," in each case, without giving
effect to the Merger.
Section 5.9. Investor Agreements. Except (i) for the Subscription
Agreements and the other agreements contemplated thereby, (ii) as would not
reasonably be expected to have a Parent Material Adverse Effect and (iii) except
as set forth in Section 5.9 of the Parent Disclosure Schedule, there are no
governance, voting or similar agreements among the Investors relating to Parent,
Merger Sub or the Company.
ARTICLE VI.
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1. Conduct of Business by the Company Pending the Merger. The
Company covenants and agrees, as to itself and each of the Company Subsidiaries,
that after the date of this Agreement and prior to the Effective Time or earlier
termination of this Agreement, except as expressly contemplated or permitted in
this Agreement, or to the extent Parent shall have otherwise consented in
writing, which decision regarding consent shall be made as soon as reasonably
practicable (it being understood that if a particular activity is permissible as
a result of its being disclosed and, where applicable, approved in writing by
Parent under any one of the Section 6.1 subsections of the Company Disclosure
Schedule, that activity will not be prohibited under any of the subsections of
Section 6.1):
(a) Ordinary Course of Business. The Company shall, and shall cause the
Company Subsidiaries to, carry on their respective businesses in the usual,
regular and ordinary course in substantially the same manner as heretofore
conducted and use their commercially reasonable efforts to preserve intact their
present business organizations and goodwill, preserve the goodwill and
relationships with customers, suppliers and others having business dealings with
them and, subject to prudent management of workforce needs and ongoing or
planned programs relating to downsizing, re-engineering and similar matters,
keep available the services of their present officers and employees to the end
that their goodwill and ongoing businesses shall not be impaired in any material
respect at the Effective Time. Except as set forth in Section 6.1(a) of the
Company Disclosure Schedule, the Company shall not, nor shall the Company permit
any of the Company Subsidiaries to, (i) enter into a new line of business
involving any material investment of assets or resources or any material
exposure to liability or loss to the Company and the Company Subsidiaries taken
as a whole, or (ii) acquire, or agree to acquire, by merger or consolidation
with, or by purchase or otherwise, a substantial equity interest in or a
substantial portion of the assets of, any business or any corporation,
<PAGE>
partnership, association or other business organization or division thereof, or
otherwise acquire or agree to acquire any assets (other than equipment, fuel,
supplies and similar items or for capital expenditures, in each case, in the
ordinary course of business consistent with past practice); provided, however,
that notwithstanding the above, the Company or any of the Company Subsidiaries
may enter into a new line of business or make such an other acquisition to the
extent the investment or other acquisition, as the case may be (which shall
include the amount of equity invested plus the amount of indebtedness incurred,
assumed or otherwise owed by or with recourse to the Company or any Company
Subsidiary (other than the entity being acquired or in which the investment is
made or any special purpose entity formed in connection with such investment or
other acquisition)), in a new line of business or acquisition, as the case may
be, does not exceed, together with all other such investments and other
acquisitions made from and after the date of this Agreement, $100 million in the
aggregate; and provided, further, that no such investment shall be made in, and
no such other acquisition shall consist of, any common equity securities of any
U.S. gas or electric utility company.
(b) Dividends. The Company shall not, nor shall the Company permit any
of the Company Subsidiaries to, (i) declare or pay any dividends on or make
other distributions in respect of any of their capital stock other than (A) to
the Company or its wholly owned Subsidiaries and (B) dividends required to be
paid on any outstanding preferred stock of the Company or its Subsidiaries in
accordance with the terms of the preferred stocks identified in Section 6.1(b)
of the Company Disclosure Schedule; or (ii) split, combine, reclassify, redeem
or repurchase any of their capital stock or issue or authorize or propose the
issuance of any other securities in respect of, in lieu of, or in substitution
for, shares of their capital stock.
(c) Issuance of Securities. Except as described in Section 6.1(c) of
the Company Disclosure Schedule, the Company shall not, nor shall the Company
permit any of the Company Subsidiaries to, issue, agree to issue, deliver, sell,
award, pledge, dispose of or otherwise encumber or authorize or propose the
issuance, delivery, sale, award, pledge, grant of a security interest, disposal
or other encumbrance of, any shares of their capital stock of any class or any
securities convertible into or exchangeable for, or any rights, warrants or
options to acquire, any such shares or convertible or exchangeable securities,
other than (i) issuances by a wholly owned Subsidiary of its capital stock to
its direct or indirect parent and (ii) issuances of shares of Company Common
Stock after the date of this Agreement pursuant to Company Options and other
Company convertible securities, in each case existing as of the date hereof and
as identified in Section 4.10(a) of the Company Disclosure Schedule.
(d) Indebtedness. Except as set forth in Section 6.1(d) of the Company
Disclosure Schedule, the Company shall not, nor shall the Company permit any of
the Company Subsidiaries to, incur or guarantee any indebtedness (including any
debt borrowed or guaranteed or otherwise assumed including, without limitation,
the issuance of debt securities or warrants or rights to acquire debt) or enter
into any "keep well" or indemnity or other agreement to maintain any financial
statement condition of another Person or enter into any arrangement having the
economic effect of any of the foregoing other than (i) indebtedness or
guarantees or "keep well" or other agreements incurred in the ordinary course of
business consistent with past practice (including refinancings, the issuance of
commercial paper or the use of existing or replacement credit facilities or
hedging activities), (ii) arrangements between the Company and wholly owned
Company Subsidiaries or among wholly owned Company Subsidiaries, (iii) in
connection with the refunding or defeasance of existing indebtedness that
<PAGE>
becomes due in accordance with its terms before the Effective Time, or (iv) as
may be necessary in connection with investments or acquisitions permitted by
Section 6.1(a).
(e) Compensation, Benefits. Except as may be required by applicable
law, as specifically set forth in Section 6.1(e) of the Company Disclosure
Schedule or as contemplated by this Agreement, the Company shall not, nor shall
the Company permit any of the Company Subsidiaries to, (i) enter into, adopt or
amend or increase the amount or accelerate the payment or vesting of any benefit
or amount payable under, any employee benefit plan or other contract, agreement,
commitment, arrangement, plan, trust, fund or policy maintained by, contributed
to or entered into by the Company or any of the Company Subsidiaries (including,
without limitation, the Company Benefit Plans set forth in Section 4.10(a) of
the Company Disclosure Schedule, as in effect on September 30, 1999) or
increase, or enter into any contract, agreement, commitment or arrangement to
increase in any manner, the compensation or fringe benefits, or otherwise to
extend, expand or enhance the engagement, employment or any related rights, of
any director, officer or other employee of the Company or any of the Company
Subsidiaries, except pursuant to binding legal commitments existing on September
30, 1999 and specifically identified in Section 4.10(a) of the Company
Disclosure Schedule and except for normal increases in the ordinary course of
business consistent with past practice that, in the aggregate, do not result in
a material increase in benefits or compensation expense to the Company or any of
the Company Subsidiaries; (ii) enter into or amend any employment, severance,
pension, deferred compensation or special pay arrangement with respect to the
termination of employment or other similar contract, agreement or arrangement
with (A) any director or officer or (B) other employee other than in the
ordinary course of business consistent with past practice; or (iii) deposit into
any trust (including any "rabbi trust") amounts in respect of any employee
benefit obligations or obligations to directors; provided that transfers into
any trust, other than a rabbi or other trust with respect to any non-qualified
deferred compensation, may be made in accordance with past practice or pursuant
to legally binding agreements in effect on September 30, 1999.
(f) 1935 Act. The Company shall not, nor shall the Company permit any
of the Company Subsidiaries to, except as required or contemplated by this
Agreement, engage in any activities (i) which would cause a change in its
status, or that of the Company Subsidiaries, under the 1935 Act, including any
action or inaction that would cause the prior approval of the SEC under the 1935
Act to be required for the consummation of the Merger and the other transactions
contemplated hereby, or (ii) that would impair the ability of the Company,
MidAmerican Funding, Parent or the Surviving Corporation or any Subsidiary of
Surviving Corporation to claim an exemption as of right under Rule 2 of the 1935
Act following the Merger or (iii) that would subject Parent or any affiliate
(within the meaning of Section 2(a)(11) of the 1935 Act) of Parent or any of the
Investor Entities (as defined in Section 6.2(b)) to regulation as a registered
holding company under such Act following the Merger.
(g) Tax-Exempt Status. The Company shall not, nor shall the Company
permit any Company Subsidiary to, take any action that would likely jeopardize
the qualification of the Company's or any Company Subsidiary's outstanding
revenue bonds which qualify as of the date hereof under Section 142(a) of the
Code as "exempt facility bonds" or as tax-exempt industrial development bonds
under Section 103(b)(4) of the Internal Revenue Code of 1954, as amended, prior
to the Tax Reform Act of 1986.
<PAGE>
Section 6.2. Conduct of Business by Parent and Merger Sub Pending the
Merger. Each of Parent and Merger Sub covenant and agree that after the date of
this Agreement and prior to the Effective Time or earlier termination of this
Agreement, except as expressly contemplated or permitted in this Agreement, or
to the extent the Company shall have otherwise consented in writing, which
decision regarding consent shall be made as soon as reasonably practicable (it
being understood that if a particular activity is permissible as a result of its
being disclosed and, where applicable, approved in writing by the Company under
any one of the Section 6.2 subsections of the Parent Disclosure Schedule, that
activity will not be prohibited under any of the subsections of Section 6.2):
(a) Limited Business Activities. Except for obligations or liabilities
incurred in connection with the transactions contemplated by this Agreement or
in connection with their organization, neither Parent nor Merger Sub shall incur
any obligations or liabilities or engage in any business activities of any kind.
(b) 1935 Act. Neither Parent nor Merger Sub shall, except as required
or contemplated by this Agreement, engage in any activities (i) which would
cause a change in its status under the 1935 Act, including any action or
inaction that would cause the prior approval of the SEC under the 1935 Act to be
required for the consummation of the Merger and the other transactions
contemplated hereby, (ii) that would impair the ability of the Company,
MidAmerican Funding, Parent or Merger Sub to claim an exemption as of right
under Rule 2 of the 1935 Act following the Merger or (iii) that would subject
Parent or any affiliate (within the meaning of Section 2(a)(11) of the 1935 Act)
of Parent to regulation as a registered holding company under such Act following
the Merger; provided that, notwithstanding anything contained in this Agreement
to the contrary, in no event shall Parent or Merger Sub or any affiliate (within
the meaning of Section 2(a)(11) of the 1935 Act) of either such entity or any of
Berkshire Hathaway Inc., any subsidiary of Berkshire Hathaway Inc., any Scott
Family Entity or any entity controlled by either David L. Sokol or Walter Scott,
Jr. (all such persons and entities, collectively, the "Investor Entities") be
required to restructure their capitalization or amend any of their existing
shareholder arrangements in order to permit Parent and Merger Sub to qualify for
an exemption from the requirement to register as a holding company under such
Act following the Merger or in order to ensure that none of Parent, Merger Sub
or Parent's affiliates (within the meaning of Section 2(a)(11) of the 1935 Act)
or any Investor Entity will become subject to regulation as a registered holding
company under such Act following the Merger.
Section 6.3. Additional Covenants by the Company and Parent Pending the
Merger. Each of Parent and the Company covenants and agrees, each as to itself
and each of its Subsidiaries, that after the date of this Agreement and prior to
the Effective Time or earlier termination of this Agreement, except as expressly
contemplated or permitted in this Agreement, or to the extent the other parties
hereto shall otherwise consent in writing, which decision regarding consent
shall be made as soon as reasonably practicable:
(a) Cooperation, Notification. Each party shall (i) confer on a regular
and frequent basis with one or more representatives of the other party to
discuss, subject to applicable law, material operational matters and the general
status of the Company's ongoing operations, (ii) promptly advise the other party
of any change or event which has had, or would reasonably be expected to result
in, a Company Material Adverse Effect or a Parent Material Adverse Effect, as
the case may be, and (iii) pursuant to Section 7.3, promptly provide the other
party with copies of all filings made by such party or any of its Subsidiaries
<PAGE>
with any state or federal court, administrative agency, commission or other
Governmental Authority. In addition, the Company shall promptly notify Parent of
any significant changes in the Company's business, properties, assets, financial
condition or results of operations or in the Company Prospects.
(b) No Breach, Etc. Each of the parties shall not, nor shall it permit
any of its Subsidiaries to, take any action that would or is reasonably likely
to result in a material breach of any provision of this Agreement or in any of
its representations and warranties set forth in this Agreement being untrue on
and as of the Closing Date.
ARTICLE VII.
ADDITIONAL AGREEMENTS
Section 7.1. Access to Information. Upon reasonable notice, the Company
shall, and shall cause the Company Subsidiaries to, afford to the officers,
directors, employees, accountants, counsel, investment bankers, financial
advisors and other representatives of Parent (collectively, "Representatives")
reasonable access, during normal business hours throughout the period prior to
the Effective Time, to all of its properties, books, contracts, commitments,
records and other information (including, but not limited to, Tax Returns) and,
during such period, each of the parties hereto shall, and shall cause its
Subsidiaries to, furnish promptly to the other party access to each significant
report, schedule and other document filed or received by it or any of its
Subsidiaries pursuant to the requirements of federal or state securities laws or
filed with or sent to the SEC, the FERC, the public utility commission of any
State, the Nuclear Regulatory Commission, the Department of Labor, the
Immigration and Naturalization Service, the Environmental Protection Agency
(state, local and federal), the IRS, the Department of Justice, the Federal
Trade Commission, or any other federal, state or foreign regulatory agency or
commission or other Governmental Authority. In addition, during such period, the
Company shall, and shall cause the Company Subsidiaries to, furnish promptly to
Parent and Merger Sub access to all information concerning the Company, the
Company Subsidiaries, directors, officers and shareholders, properties,
facilities or operations owned, operated or otherwise controlled by the Company,
or if not so owned, operated or controlled, which properties, facilities or
operations that the Company may nonetheless obtain access to through the
exercise of reasonable diligence, and such other matters as may be reasonably
requested by Parent in connection with any filings, applications or approvals
required or contemplated by this Agreement or for any other reason related to
the transactions contemplated by this Agreement. Parent shall, and shall cause
its Subsidiaries and Representatives (other than its Representatives who have
entered into separate confidentiality agreements with the Company) to, hold in
strict confidence all documents and information concerning the Company furnished
to it in connection with the transactions contemplated by this Agreement in
accordance with the Confidentiality Agreement, dated as of October 1, 1999,
between David L. Sokol and the Company (the "Confidentiality Agreement").
Section 7.2. Proxy Statement and Schedule 13E-3.
(a) The Company shall prepare, in consultation with Parent, the Proxy
Statement and shall file the Proxy Statement with the SEC as soon as is
reasonably practicable after the date of this Agreement and shall use all
reasonable efforts to respond to comments from the SEC and to cause the Proxy
Statement to be mailed to the Company's shareholders at the earliest practicable
time. The Company will not mail, amend or supplement the Proxy Statement unless
<PAGE>
the Proxy Statement or any amendment or supplement thereof is satisfactory in
content to Parent in the exercise of its reasonable judgment.
(b) As soon as practicable after the date of this Agreement, Parent and
the Company shall file with the SEC, and shall use all reasonable efforts to
cause any of their respective affiliates engaging in this transaction to file
with the SEC, a Rule 13e-3 Transaction Statement on Schedule 13E-3 (the
"Schedule 13E-3 Transaction Statement") with respect to the Merger. Each of the
parties hereto agrees to use all reasonable efforts to cooperate and to provide
each other with such information as any of such parties may reasonably request
in connection with the preparation of the Proxy Statement and the Schedule 13E-3
Transaction Statement.
(c) Each party hereto agrees promptly to supplement, update and correct
any information provided by it for use in the Proxy Statement and the Schedule
13E-3 Transaction Statement if and to the extent that such information is or
shall have become incomplete, false or misleading.
Section 7.3. Regulatory Approvals and Other Matters.
(a) HSR Filings. Each party hereto shall file or cause to be filed with
the Federal Trade Commission and the Department of Justice any notifications
required to be filed under the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended (the "HSR Act"), and the rules and regulations promulgated
thereunder with respect to the transactions contemplated hereby. Such parties
will use all reasonable efforts to coordinate such filings and any responses
thereto, to make such filings promptly and to respond promptly to any requests
for additional information made by either of such agencies.
(b) Other Approvals. Each party hereto shall cooperate and use all
reasonable efforts to promptly prepare and file all necessary documentation, to
effect all necessary applications, notices, petitions, filings and other
documents, and to use all reasonable efforts to obtain all necessary permits,
consents, approvals and authorizations of all Governmental Authorities and all
other persons necessary or advisable to consummate the transactions contemplated
hereby, including, without limitation, the Company Required Statutory Approvals,
the Parent Required Statutory Approvals and the Company Required Consents (and
any concurrent or related rate filings, if any). Parent and the Company agree
that they will consult with each other with respect to the obtaining of all such
necessary or advisable permits, consents, approvals and authorizations of
Governmental Authorities; provided, however, that it is agreed that the Company
shall have primary responsibility for the preparation and filing of any
applications with state public utility commissions for approval of the Merger.
Each of Parent and the Company shall have the right to review and approve in
advance drafts of all such necessary applications, notices, petitions, filings
and other documents made or prepared in connection with the transactions
contemplated by this Agreement, which approval shall not be unreasonably
withheld or delayed. The Company shall promptly notify Parent of any failure or
prospective failure to obtain any such consents and shall provide copies of all
Company Required Consents obtained by the Company to Parent.
Section 7.4. Shareholder Approval.
(a) Approval of Company Shareholders. The Company shall, as soon as
reasonably practicable after the date of this Agreement, (i) take all steps
necessary to duly call, give notice of, convene and hold a meeting of its
<PAGE>
shareholders (the "Company Meeting"), as promptly as practicable after the date
of this Agreement, for the purpose of securing the Company Shareholders'
Approval, (ii) distribute to its shareholders the Proxy Statement in accordance
with applicable federal and state law and with its articles of incorporation and
by-laws, (iii) subject to the fiduciary duties of its Board of Directors,
recommend to its shareholders the approval of the Merger, this Agreement and the
transactions contemplated hereby and (iv) cooperate and consult with Parent with
respect to each of the foregoing matters.
(b) Meeting Date. The Company shall duly call and give notice of the
Company Meeting, and shall commence distribution of the Proxy Statement to its
shareholders, within five business days after the clearance of the Proxy
Statement by the staff of the SEC (or after the expiration of the ten calendar
day period after filing the preliminary proxy statement with the SEC if the
staff of the SEC has not commented on or otherwise notified the Company within
such ten day period of the staff's intent to review and comment on the
preliminary proxy statement).
Section 7.5. Directors' and Officers' Indemnification.
(a) Indemnification. From and after the Effective Time, the Surviving
Corporation shall, to the fullest extent not prohibited by applicable law,
indemnify, defend and hold harmless each person who is now, or has been at any
time prior to the date hereof, or who becomes prior to the Effective Time, an
officer or director of any of the parties hereto (each an "Indemnified Party"
and collectively, the "Indemnified Parties") against all losses, expenses
(including reasonable attorney's fees and expenses), claims, damages or
liabilities or, subject to the proviso of the next succeeding sentence, amounts
paid in settlement, arising out of actions or omissions occurring at or prior to
the Effective Time that, in whole or in part, (i) are based on or arising out of
the fact that such person is or was a director or officer of such party or (ii)
arise out of or pertain to the transactions contemplated by this Agreement (the
"Indemnified Liabilities"). In the event of any such loss, expense, claim,
damage or liability (whether or not arising prior to the Effective Time), (i)
the Surviving Corporation shall pay the reasonable fees and expenses of counsel
for the Indemnified Parties selected by the Indemnified Parties, which counsel
may also serve as counsel to the Surviving Corporation (unless there is a
conflict between the positions of the Surviving Corporation and the Indemnified
Parties on any significant issue) and which counsel shall be reasonably
satisfactory to the Surviving Corporation (which consent shall not be
unreasonably withheld), promptly after statements therefor are received and
otherwise advance to such Indemnified Party upon request reimbursement of
documented expenses reasonably incurred, in either case to the extent not
prohibited by the Iowa Act, (ii) the Surviving Corporation will cooperate in the
defense of any such matter and (iii) any determination required to be made with
respect to whether an Indemnified Party's conduct complies with the standards
set forth under the Iowa Act and the articles of incorporation or by-laws of the
Company shall be made by independent counsel mutually acceptable to the
Surviving Corporation and the Indemnified Party (the "Independent Counsel");
provided, however, that the Surviving Corporation shall not be liable for any
settlement effected without its written consent (which consent shall not be
unreasonably withheld). The Indemnified Parties as a group may retain only one
law firm with respect to each related matter except to the extent there is, in
the opinion of the Independent Counsel, under applicable standards of
professional conduct, a conflict on any significant issue between positions of
such Indemnified Party and any other Indemnified Party or Indemnified Parties.
(b) Insurance. For a period of six years after the Effective Time, the
Surviving Corporation shall cause to be maintained in effect policies of
<PAGE>
directors' and officers' liability insurance maintained by the Company;
provided, that the Surviving Corporation may substitute therefor policies of at
least the same coverage containing terms that are no less advantageous with
respect to matters occurring prior to the Effective Time to the extent such
liability insurance can be maintained annually at a cost to the Surviving
Corporation not greater than 200 percent of the current annual premiums for such
directors' and officers' liability insurance, which existing premium costs are
disclosed on Schedule 7.5(b) of the Company Disclosure Schedule; provided,
further, that if such insurance cannot be so maintained or obtained at such
cost, the Surviving Corporation shall maintain or obtain as much of such
insurance for the Company as can be so maintained or obtained at a cost equal to
200 percent of the current annual premiums of the Company for its directors' and
officers' liability insurance.
(c) Successors. In the event the Surviving Corporation or any of its
successors or assigns (i) consolidates with or merges into any other person or
entity and shall not be the continuing or surviving corporation or entity of
such consolidation or merger or (ii) transfers all or substantially all of its
properties and assets to any person or entity, then and in either such case,
proper provisions shall be made so that the successors and assigns of the
Surviving Corporation shall assume the obligations set forth in this Section
7.5.
(d) Survival of Indemnification. To the fullest extent not prohibited
by law, from and after the Effective Time, all rights to indemnification as of
the date hereof in favor of the employees, agents, directors and officers of
Parent, the Company and its Subsidiaries with respect to their activities as
such prior to the Effective Time, as provided in their respective articles of
incorporation and by-laws in effect on the date of this Agreement, shall survive
the Merger and shall continue in full force and effect for a period of not less
than six years from the Effective Time.
Section 7.6. Disclosure Schedules. On or before the date hereof, (i)
Parent has delivered to the Company the Parent Disclosure Schedule, accompanied
by a certificate signed by an officer of Parent stating the Parent Disclosure
Schedule has been delivered pursuant to this Section 7.6 and (ii) the Company
has delivered to Parent the Company Disclosure Schedule, accompanied by a
certificate signed by the chief financial officer of the Company stating the
Company Disclosure Schedule has been delivered pursuant to this Section 7.6. The
Parent Disclosure Schedule and the Company Disclosure Schedule are collectively
referred to herein as the "Disclosure Schedules." The Disclosure Schedules shall
be deemed to constitute an integral part of this Agreement and to modify the
respective representations, warranties, covenants or agreements of the parties
hereto contained herein to the extent that such representations, warranties,
covenants or agreements expressly refer to the Disclosure Schedules. Anything to
the contrary contained herein or in the Disclosure Schedules notwithstanding,
any and all statements, representations, warranties or disclosures set forth in
the Disclosure Schedules delivered on or before the date hereof shall be deemed
to have been made on and as of the date hereof. From time to time prior to the
Closing, the parties shall promptly supplement or amend the Disclosure Schedules
with respect to any matter, condition or occurrence hereafter arising affecting
the representations and warranties contained herein which, if existing or
occurring at the date of this Agreement, would have been required to be set
forth or described in the Disclosure Schedules pertaining to the parties'
representations and warranties contained herein. No supplement or amendment
shall be deemed to cure any breach of any representation or warranty made in
this Agreement or have any effect for the purpose of determining satisfaction of
the conditions set forth in Section 8.2(b) or 8.3(b).
<PAGE>
Section 7.7. Public Announcements. Subject to each party's disclosure
obligations imposed by law or regulation, Parent and the Company will cooperate
with each other in the development and distribution of all news releases and
other public information disclosures with respect to this Agreement or any of
the transactions contemplated hereby and shall not issue any public announcement
or statement with respect hereto or thereto without the consent of the other
party (which consent shall not be unreasonably withheld and which decision
regarding consent shall be made as soon as reasonably practicable).
Section 7.8. No Solicitations. From and after the date hereof, the
Company will not, and will not authorize or permit any of its Representatives
to, directly or indirectly, (i) solicit, initiate or encourage (including by way
of furnishing information) or take any other action to facilitate any inquiries
or the making of any proposal which constitutes or may reasonably be expected to
lead to an Acquisition Proposal (as defined below), (ii) enter into any
agreement with respect to any Acquisition Proposal or (iii) in the event of an
unsolicited written Acquisition Proposal, engage in negotiations or discussions
with, or provide any information or data to, any Person (other than to Parent,
any of its affiliates or Representatives and except for information which has
been previously publicly disseminated by the parties) relating to any
Acquisition Proposal; provided, however, that nothing contained in this Section
7.8 or any other provision hereof shall prohibit the Company or its Board of
Directors from (i) taking and disclosing to its shareholders a position with
respect to a tender or an exchange offer by a third party pursuant to Rules
14d-9 and 14e-2 promulgated under the Exchange Act or (ii) making such
disclosure to its shareholders as, in good faith judgment of its Board of
Directors, after consultation with outside counsel, is required under applicable
law.
Without limiting the foregoing, it is understood that any violation of
the restrictions set forth in the preceding sentence by an executive officer of
the Company or any investment banker, attorney or other Representative of the
Company, whether or not such person is purporting to act on behalf of the
Company or otherwise, shall be deemed to be a breach of this Section 7.8 by the
Company. Notwithstanding any other provision hereof, the Company may (i) at any
time prior to the time its shareholders shall have voted to approve this
Agreement, engage in discussions or negotiations with a third party who (without
any solicitation, initiation, encouragement, discussion or negotiation (except
as permitted by Section 7.8), directly or indirectly, by or with the Company or
its Representatives after the date hereof) seeks to initiate such discussions or
negotiations and may furnish such third party information concerning the Company
and its business, properties and assets if, and only if, (A)(w) the third party
has first made an Acquisition Proposal that is reasonably expected to be more
favorable to the Company's shareholders than the Merger, taking into account all
legal, regulatory, timing and financial aspects of the Merger and of the
Acquisition Proposal, including the degree of certainty of financing therefor,
(x) the Acquisition Proposal is reasonably capable of being completed (as
determined in good faith by the Company's Board of Directors after consultation
with its financial advisors and outside counsel), (y) the third party has
demonstrated that financing for the Acquisition Proposal is reasonably likely to
be obtained (as determined in good faith by the Company's Board of Directors
after consultation with its financial advisors) and (z) its Board of Directors
shall have concluded in good faith, after considering applicable provisions of
state law and after consultation with outside counsel, that a failure to do so
could reasonably be expected to constitute a breach by its Board of Directors of
its fiduciary duties to its shareholders under applicable law and (B) prior to
furnishing such information to or entering into discussions or negotiations with
such person or entity, the Company (x) provides prompt notice to Parent to the
effect that it is furnishing information to or entering into discussions or
<PAGE>
negotiations with such person or entity and (y) receives from such person an
executed confidentiality agreement substantially similar to the Confidentiality
Agreement, together with its written acknowledgment and agreement to pay at
closing the termination and other fees set forth in Section 9.3 if such
Acquisition Proposal is consummated or any other Acquisition Proposal is
consummated with such party or any of its affiliates, and (ii) comply with Rule
14e-2 promulgated under the Exchange Act with regard to a tender or exchange
offer. The Company shall immediately cease and terminate any existing
solicitation, initiation, encouragement, activity, discussion or negotiation
with any parties conducted heretofore by the Company or its Representatives with
respect to the foregoing. The Company shall notify Parent hereto orally and in
writing of any such inquiries, offers or proposals (including, without
limitation, the material terms and conditions of any such proposal and the
identity of the person making it), within 24 hours of the receipt thereof, shall
keep Parent informed of the status and details of any such inquiry, offer or
proposal, and shall give Parent three business days' advance notice of any
agreement (specifying the material terms and conditions thereof) to be entered
into with or any information to be supplied to any person making such inquiry,
offer or proposal.
The term "Acquisition Proposal" shall mean a written proposal or offer
(other than by Parent or Merger Sub) for a tender or exchange offer, merger,
consolidation or other business combination involving the Company or any
material Company Subsidiary or any proposal to acquire in any manner a
substantial equity interest in or a substantial portion of the assets of the
Company or any material Company Subsidiary, other than the transactions
contemplated by this Agreement. As used in this Section, "Board of Directors"
includes any committee thereof.
Section 7.9. Expenses. Subject to Section 9.3, all costs and expenses
incurred in connection with this Agreement and the transactions contemplated
hereby shall be paid by the party incurring such expenses.
Section 7.10. Third Party Standstill Agreements. During the period from
the date of this Agreement through the Effective Time, neither the Company nor
any of its Subsidiaries shall terminate, amend, modify or waive any material
provision of any confidentiality or standstill agreement to which it is a party.
During such period, the Company and its Subsidiaries shall enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreement, including, but not limited to, by obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court having jurisdiction.
Section 7.11. Takeover Statutes. If any "business combination," "fair
price," "moratorium," "control stock acquisition" or other form of antitakeover
statute or regulation shall become applicable to the Merger or the transactions
contemplated hereby, the Company and the members of the Board of Directors of
the Company shall grant such approvals and take such actions as are reasonably
necessary so that the Merger or the transactions contemplated hereby may be
consummated as promptly as practicable on the terms contemplated hereby and
otherwise act to eliminate or minimize the effects of such statute or regulation
on the Merger or the transactions contemplated hereby.
Section 7.12. Subscription Agreements. Parent and Merger Sub agree that
they will not, without the prior consent of the Company, enter into any
amendment to, or modification or waiver of, any of the Subscription Agreements
if such amendment, modification or waiver would (i) reduce the aggregate amount
<PAGE>
of funds committed under the Subscription Agreements, (ii) add additional
conditions to the consummation of the transactions contemplated by the
Subscription Agreements or (iii) have a material adverse effect on or delay the
receipt of any of the Parent Statutory Approvals or the consummation of the
Merger. Parent and Merger Sub shall enforce to the fullest extent permitted
under applicable law, the provisions of Subscription Agreements, including but
not limited to obtaining injunctions to enforce specifically the terms and
provisions thereof in any court having jurisdiction. Parent and Merger Sub shall
use all reasonable efforts to fulfill all of their obligations under the
Subscription Agreements and to cause all conditions to funding under the
Subscription Agreements (other than conditions to funding that are conditions to
consummation of the Merger under this Agreement) to be fulfilled as promptly as
reasonably practicable. Parent and Merger Sub shall give the Company prompt
written notice of (i) any material breach or threatened material breach by any
party of the terms or provisions of the Subscription Agreements, (ii) any
termination or threatened termination of any of the Subscription Agreements or
(iii) any exercise or threatened exercise of any condition under any of the
Subscription Agreements.
Section 7.13. Employee Benefits Matters. (a) Except to the extent
necessary to avoid duplication of benefits, the Surviving Corporation shall give
Company Employees full credit for purposes of eligibility and vesting under any
employee benefit plans or arrangements maintained by the Surviving Corporation
or any of its Subsidiaries in which such employees are eligible to participate
for such employees' service with the Company and its Subsidiaries to the same
extent recognized by the Company and its Subsidiaries immediately prior to the
Effective Time. The Surviving Corporation shall (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to Company Employees under
any welfare plan that such employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already in
effect with respect to such employees and that have not been satisfied as of the
Effective Time under any welfare plan maintained for the Company Employees
immediately prior to the Effective Time, and (ii) provide each Company Employee
with credit for any co-payments and deductibles paid prior to the Effective Time
in satisfying any applicable deductible or out-of-pocket requirements under any
welfare plans that such employees are eligible to participate in after the
Effective Time.
(b) The Surviving Corporation shall comply with the terms of all
Company Benefit Plans.
(c) The Company shall take all such steps as may be reasonably required
to cause the transactions contemplated by Article II hereof and any other
dispositions of the Company equity securities (including derivative securities)
in connection with this Agreement by each individual who is a director or
officer of the Company to be exempt under Rule 16b-3 promulgated under the
Exchange Act, such steps to be taken in accordance with the No-Action Letter
dated January 12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher &
Flom LLP.
ARTICLE VIII.
CONDITIONS
Section 8.1. Conditions to Each Party's Obligation to Effect the
Merger. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction on or prior to the Closing Date of the following
conditions, except, to the extent permitted by applicable law, that such
conditions may be waived in writing pursuant to Section 9.5 by the joint action
of the parties hereto:
<PAGE>
(a) Shareholder Approval. The Company Shareholders' Approval shall have
been obtained.
(b) No Injunction. No temporary restraining order or preliminary or
permanent injunction or other order by any federal or state court preventing
consummation of the Merger or the other transactions contemplated hereby shall
have been issued and be continuing in effect, and the Merger and the other
transactions contemplated hereby shall not have been prohibited under any
applicable federal or state law or regulation; provided, however, that the
parties hereto shall use all reasonable efforts to have any such order,
injunction, or prohibition vacated.
(c) Statutory Approvals. The Company Required Statutory Approvals and
the Parent Required Statutory Approvals shall have been obtained at or prior to
the Effective Time, such approvals shall have become Final Orders (as defined
below) and such Final Orders shall not impose terms or conditions which, in the
aggregate, would have, or could reasonably be expected to have, a Company
Material Adverse Effect or a Parent Material Adverse Effect, or which would be
materially inconsistent with the agreements of the parties contained herein. The
term "Final Order" shall mean action by the relevant regulatory authority which
has not been reversed, stayed, enjoined, set aside, annulled or suspended, with
respect to which any waiting period prescribed by law before the transactions
contemplated hereby may be consummated has expired, and as to which all
conditions to the consummation of such transactions prescribed by law,
regulation or order have been satisfied.
(d) HSR Act. All applicable waiting periods under the HSR Act shall
have expired or been terminated.
Section 8.2. Conditions to Obligation of the Company to Effect the
Merger. The obligation of the Company to effect the Merger shall be further
subject to the satisfaction, on or prior to the Closing Date, of the following
conditions, except as may be waived by the Company in writing pursuant to
Section 9.5:
(a) Performance of Obligations of Parent and Merger Sub. Parent and
Merger Sub will have performed in all material respects their agreements and
covenants contained in or contemplated by this Agreement, which are required to
be performed by them at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of Parent and Merger Sub set forth in Article V of this Agreement shall be true
and correct, unless the failure of such representations and warranties to be so
true and correct, in the aggregate, have not had and would not reasonably be
expected to have a Parent Material Adverse Effect (ignoring, for purposes of
this Section 8.2(b), any materiality standard expressly included in such
representations or warranties) as of the date hereof (or, to the extent such
representations and warranties speak as of an earlier or later date, as of such
earlier or later date) and as of the Closing Date (except to the extent such
representations and warranties speak as of an earlier or later date) as if made
on and as of the Closing Date, except as otherwise contemplated by this
Agreement.
(c) Closing Certificates. The Company shall have received a certificate
signed by the managing member of Parent, dated the Closing Date, to the effect
<PAGE>
that, to the best of such person's knowledge, the conditions set forth in
Section 8.2(a) and Section 8.2(b) have been satisfied.
(d) Legal Opinions as to Corporate and Regulatory Matters. The Company
shall have received the opinions of (i) Willkie Farr & Gallagher, Parent's
special counsel, in form and substance customary for transactions of this type
and reasonably satisfactory to the Company, dated the Effective Time, as to the
authorization, validity and enforceability of this Agreement and (ii) LeBoeuf,
Lamb, Greene & MacRae, L.L.P., Parent's special regulatory counsel, in form and
substance customary for transactions of this type and reasonably satisfactory to
the Company, dated the Effective Time, as to certain regulatory matters,
including that all regulatory approvals, permits and consents have been
obtained; provided, that such firms may reasonably rely on local counsel
(including local counsel as to local regulatory matters) as to matters of local
law.
Section 8.3. Conditions to Obligation of Parent and Merger Sub to
Effect the Merger. The obligation of Parent and Merger Sub to effect the Merger
shall be further subject to the satisfaction, on or prior to the Closing Date,
of the following conditions, except as may be waived by Parent in writing
pursuant to Section 9.5:
(a) Performance of Obligations of the Company. The Company (and/or
appropriate Company Subsidiaries) will have performed in all material respects
its agreements and covenants contained in or contemplated by this Agreement
which are required to be performed by it at or prior to the Effective Time.
(b) Representations and Warranties. The representations and warranties
of the Company set forth in this Agreement shall be true and correct, unless the
failure of such representations and warranties to be so true and correct, in the
aggregate, have not had and would not reasonably be expected to have a Company
Material Adverse Effect (ignoring, for purposes of this Section 8.3(b), any
materiality standard expressly included in such representations or warranties)
as of the date hereof (or, to the extent such representations and warranties
speak as of an earlier or later date, as of such earlier or later date) and as
of the Closing Date (except to the extent such representations and warranties
speak as of an earlier or later date) as if made on and as of the Closing Date,
except as otherwise contemplated by this Agreement.
(c) Company Material Adverse Effect. No Company Material Adverse Effect
shall have occurred and there shall exist no fact or circumstance that would or,
insofar as reasonably can be foreseen, could have a Company Material Adverse
Effect.
(d) Company Required Consents. The Company Required Consents shall have
been obtained.
(e) Insurance Matters. The condition regarding certain insurance
matters set forth in Section 8.3(e) of the Parent Disclosure Schedule shall have
been satisfied.
(f) Closing Certificates. Parent shall have received a certificate
signed by the chief executive officer and the chief financial officer of the
Company, dated the Closing Date, to the effect that, to the best of such
officers' knowledge, the conditions set forth in Sections 8.3(a), (b), (c), (d)
and (e) have been satisfied.
<PAGE>
(g) 1935 Act Status. The Investors shall have received evidence
reasonably satisfactory to them that neither they nor any of their affiliates
(within the meaning of Section 2(a)(11) of the 1935 Act) nor any other of the
Investor Entities will be subject to regulation as a registered holding company
under the 1935 Act following the Merger; provided, that the Investors shall have
used all commercially reasonable efforts to obtain such evidence, subject to the
proviso in Section 6.2(b).
(h) Legal Opinions as to Corporate and Regulatory Matters. Parent shall
have received the opinions of (i) Dorsey and Whitney LLP, the Company's special
Iowa counsel, in form and substance customary for transactions of this type and
reasonably satisfactory to Parent, dated the Effective Time, as to the
authorization, validity and enforceability of this Agreement and (ii) LeBoeuf,
Lamb, Greene & MacRae, L.L.P., the Company's special regulatory counsel, in form
and substance customary for transactions of this type and reasonably
satisfactory to Parent, dated the Effective Time, as to certain regulatory
matters, including that all regulatory approvals, permits and consents have been
obtained; provided, that LeBoeuf, Lamb, Greene & MacRae, L.L.P. may reasonably
rely on local counsel (including local counsel as to local regulatory matters)
as to matters of local law.
(i) Company Options. Except as otherwise agreed by Parent in writing as
provided in Section 2.4, all Company Options under the Company Stock Plans shall
have been validly cancelled and none shall remain outstanding no later than the
Effective Time, and no holder of Company Options or any participant in the
Company Stock Plans or any other Company Benefit Plan shall have any right
thereunder to acquire any equity securities or interests therein of the Company,
the Surviving Corporation or any of their respective Subsidiaries.
(j) Dissenting Shares. Holders of not more than ten percent (10%) of
the outstanding shares of Company Common Stock shall have perfected such
holder's right to dissent in accordance with the applicable provisions of the
Iowa Act and shall not have withdrawn or lost such rights.
ARTICLE IX.
TERMINATION, AMENDMENT AND WAIVER
Section 9.1. Termination. This Agreement may be terminated at any time
prior to the Closing Date, whether before or after the Company Shareholders'
Approval has been obtained:
(a) by mutual written consent of Parent and the Board of Directors of
the Company;
(b) by any party hereto, by written notice to the other, if the
Effective Time shall not have occurred on or before April 30, 2000; provided,
that such date shall automatically be changed to July 31, 2000 if on April 30,
2000 the conditions set forth in Section 8.1(c) and/or 8.3(g) have not been
satisfied or waived and the other conditions to the consummation of the
transactions contemplated hereby are then capable of being satisfied, and the
approvals required by Section 8.1(c) and/or 8.3(g), as the case may be, which
have not yet been obtained are being pursued with diligence; and provided,
further, that the right to terminate this Agreement under this Section 9.1(b)
shall not be available to any party whose failure to fulfill any obligation
under this Agreement has been the cause of, or resulted in, the failure of the
Effective Time to occur on or before such date;
<PAGE>
(c) by any party hereto, by written notice to the other party, if the
Company Shareholders' Approval shall not have been obtained at a duly held the
Company Meeting, including any adjournments thereof;
(d) by any party hereto, after consultation with outside counsel, if
any state or federal law, order, rule or regulation is adopted or issued, which
has the effect of prohibiting the Merger, or by any party hereto, if any court
of competent jurisdiction in the United States or any State shall have issued an
order, judgment or decree permanently restraining, enjoining or otherwise
prohibiting the Merger, and such order, judgment or decree shall have become
final and nonappealable; provided, that such terminating party shall have
complied with its obligations pursuant to Section 10.8.
(e) by the Company, upon three business days' prior notice to Parent
if, as a result of an Acquisition Proposal described in clauses (A)(w), (x) and
(y) of the second paragraph of Section 7.8, (i) the Board of Directors of the
Company shall have concluded in good faith, after considering applicable
provisions of state law and after consultation with outside counsel, that their
fiduciary duties could reasonably require that such Acquisition Proposal be
accepted; (ii) the Company shall have complied with all its obligations under
Sections 7.4 and 7.8; (iii) the person making the Acquisition Proposal shall
have acknowledged and agreed in writing to pay or cause to be paid the
termination and other fees set forth in Section 9.3 if such Acquisition Proposal
is consummated or any other Acquisition Proposal is consummated with such person
or any of its affiliates and (iv) during the three business days prior to any
such termination, the Company shall, and shall cause its respective financial
and legal advisors to, in good faith seek to negotiate with Parent to make such
adjustments in the terms and conditions of this Agreement as would enable the
Company to proceed with the transactions contemplated herein;
(f) by Parent, by written notice to the Company, if (i)(A) there shall
have been any breach of any representation or warranty, or any non-willful
breach of any covenant or agreement, of the Company hereunder, other than such
breaches, which, together with any other such breaches, has not had and would
not reasonably be expected to have a Company Material Adverse Effect, or (B)
there shall have been any material breach (if willful) of any covenant or
agreement of the Company hereunder and, in case of each of clauses (A) and (B)
above, such breach shall not have been remedied within twenty days after receipt
by the Company of notice in writing from Parent, specifying the nature of such
breach and requesting that it be remedied and provided, that, any materiality
standard expressly included in such representations, warranties, covenants or
agreements shall be ignored for purposes of this Section 9.1(f)(i); or (ii) the
Board of Directors of the Company (A) shall withdraw or modify in any manner
adverse to Parent its approval of this Agreement and the transactions
contemplated hereby or its recommendation to its shareholders regarding the
approval of this Agreement, (B) shall fail to reaffirm such approval or
recommendation within five business days after a written request therefor of
Parent (unless such request is made during the last seven business days
immediately prior to the Company Meeting, in which case, such reaffirmation
shall fail to be made within two business days after the request), (C) shall
approve or recommend any Acquisition Proposal or (D) shall resolve to take any
of the actions specified in clause (A), (B) or (C);
<PAGE>
(g) by the Company, by written notice to Parent, if (A) there shall
have been any breach of any representation or warranty, or any non-willful
breach of any covenant or agreement, of Parent or Merger Sub hereunder, other
than such breaches, which, together with any other such breaches, has not had
and would not reasonably be expected to have a Parent Material Adverse Effect,
or (B) there shall have been any material breach (if willful) of any covenant or
agreement of Parent or Merger Sub hereunder (which shall be deemed to include,
for this purpose only, the failure of Parent and Merger Sub to deposit, or cause
to be deposited (including from available cash balances at the Company), the
cash to the Exchange Agent required pursuant to Section 2.3(a), assuming all
other conditions to Closing have been satisfied or otherwise waived in writing
by Parent), and, in case of each of clauses (A) and (B) above, such breach shall
not have been remedied within twenty days after receipt by Parent of notice in
writing from the Company, specifying the nature of such breach and requesting
that it be remedied and provided, that, any materiality standard expressly
included in such representations, warranties, covenants or agreements shall be
ignored for purposes of this Section 9.1(g);
(h) by the Company if any of the Subscription Agreements shall have
been terminated at any time when Parent would not be entitled to terminate this
Agreement pursuant to Section 9.1(b), (c), (d) or (f) and, within ten (10)
business days after any such termination, such Subscription Agreement shall not
have been replaced with another Subscription Agreement with such Investor or
another Investor and containing terms at least as favorable to Merger Sub as the
terminated Subscription Agreement; provided, that, following any such
replacement, Berkshire Hathaway Inc. shall own (including ownership through one
or more subsidiaries of Berkshire Hathaway Inc. which are consolidated with
Berkshire Hathaway Inc. for financial accounting purposes) at least 70% of the
equity (determined by reference to economic interest) in the Surviving
Corporation upon consummation of the Merger.
Section 9.2. Effect of Termination. In the event of termination of this
Agreement by either the Company or Parent pursuant to Section 9.1, there shall
be no liability on the part of either Parent or the Company or their respective
officers, members or directors hereunder, except as provided in Section 7.9 and
9.3 and except that the agreement contained in the last sentence of Section 7.1
shall survive the termination.
Section 9.3. Termination Fee; Expenses.
(a) Termination and Expense Fees. If this Agreement (i) is terminated
by Parent pursuant to Section 9.1(f)(ii), or (ii) is terminated by the Company
pursuant to Section 9.1(e), then the Company shall pay to Parent promptly (but
not later than five business days after such notice is given or received by the
Company pursuant to Section 9.1(f)(ii) or 9.1(e)) a termination fee equal to $40
million in cash plus an additional $8 million in cash (the "Expense Amount")
constituting reimbursement of expenses and fees incurred or to be incurred by
Parent or Merger Sub in connection with or related to the Merger and the
transactions contemplated by this Agreement, without any requirement that Parent
or Merger Sub account for actual expenses. If (i) this Agreement is terminated
pursuant to Section 9.1(b), 9.1(c) or 9.1(f)(i) and (ii) at the time of such
termination, there shall have been an Acquisition Proposal made by a third party
which, at the time of such termination, shall not have been (x) rejected by the
Company and its Board of Directors and (y) withdrawn by the third party and
(iii) within eighteen months of any such termination, the Company or its
affiliate becomes a subsidiary or part of such third party or a subsidiary or
part of an affiliate of such third party, or merges with or into the third party
<PAGE>
or a subsidiary or affiliate of the third party or enters into a definitive
agreement to consummate an Acquisition Proposal with such third party or
affiliate thereof, then the Company shall pay to Parent, at the closing of the
transaction (and as a condition to the closing) in which the Company or its
affiliate becomes such a subsidiary or part of such other person or the closing
of such Acquisition Proposal occurs, a termination fee equal to $40 million in
cash plus (unless the Expense Amount is paid pursuant to the following sentence)
the Expense Amount. If this Agreement is terminated pursuant to (i) Section
9.1(b) due to any failure to satisfy any of the conditions set forth in Sections
8.1(b), 8.1(c) or 8.3 (other than 8.3(g)), or (ii) Section 9.1(d) or Section
9.1(f)(i), the Company shall pay to Parent promptly (but not later than five
business days after such notice of termination is given or received by the
Company) the Expense Amount.
(b) If this Agreement is terminated by the Company, by written notice
to Parent, due to the failure of Parent and Merger Sub to deposit, or cause to
be deposited (including from available cash balances at the Company), the cash
to the Exchange Agent required pursuant to Section 2.3(a) at a time when all
conditions to Parent's obligation to close have been satisfied or otherwise
waived in writing by Parent, then Parent shall pay to the Company a termination
fee of $40 million, plus additional damages (but only if and to the extent
proven) in an amount not to exceed $40 million.
(c) Expenses. The parties agree that the agreements contained in this
Section 9.3 are an integral part of the transactions contemplated by this
Agreement and constitute liquidated damages and not a penalty. Notwithstanding
anything to the contrary contained in this Section 9.3, if one party fails to
promptly pay to the other any fee or expense due under this Section 9.3, in
addition to any amounts paid or payable pursuant to such Section, the defaulting
party shall pay the costs and expenses (including legal fees and expenses) in
connection with any action, including the filing of any lawsuit or other legal
action, taken to collect payment, together with interest on the amount of any
unpaid fee at the publicly announced prime rate of Citibank, N.A. from the date
such fee was required to be paid.
(d) Limitation Of Fees. Notwithstanding anything herein to the
contrary, if any Investor (x) would, upon consummation of the Merger, become
subject to regulation as a public utility holding company required to register
under the 1935 Act and (y) solely as a result thereof, this Agreement is
terminated, then no fees under this Section 9.3 shall be payable by the Company.
Section 9.4. Amendment. This Agreement may be amended by Parent and the
Boards of Directors of the Company and Merger Sub, at any time before or after
the Company Shareholders' Approval has been obtained and prior to the Effective
Time, but after such Approval has been obtained, no such amendment shall (a)
alter or change the Per Share Amount or (b) alter or change any of the terms and
conditions of this Agreement if any of the alterations or changes, alone or in
the aggregate, would materially adversely affect the rights of holders of
Company Common Stock. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto.
Section 9.5. Waiver. At any time prior to the Effective Time, the
parties hereto may (a) extend the time for the performance of any of the
obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with any of the
agreements or conditions contained herein, to the extent permitted by applicable
<PAGE>
law. Any agreement on the part of a party hereto to any such extension or waiver
shall be valid if set forth in an instrument in writing signed on behalf of such
party.
ARTICLE X.
GENERAL PROVISIONS
Section 10.1. Non-Survival; Effect of Representations and Warranties.
No representations or warranties in this Agreement shall survive the Effective
Time, except as otherwise provided in this Agreement.
Section 10.2. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given (a) when delivered personally, (b)
when sent by reputable overnight courier service or (c) when telecopied (which
is confirmed by copy sent within one business day by a reputable overnight
courier service) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(i) If to Parent or Merger Sub, to:
Teton Formation L.L.C.
c/o MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50309
Attn: Chief Executive Officer
Telecopy: (515) 242-4031
Telephone: (515) 242-4300
with copies to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, New York 10019
Attn: Peter J. Hanlon
Telecopy: (212) 728-8111
Telephone: (212) 728-8000
Munger, Tolles & Olson LLP
355 South Grand Avenue
Los Angeles, CA 90071,
Attn: Robert E. Denham
Telecopy: (213) 687-3702
Telephone: (213) 683-9100
Fraser, Stryker, Vaughn, Meusey, Olson, Boyer & Bloch, P.C.
500 Energy Plaza
409 South 17th Street
Omaha, Nebraska 68102
Attn: John K. Boyer
Telecopy: (402) 341-8290
Telephone: (402) 341-6000
and
<PAGE>
LeBoeuf, Lamb, Greene & MacRae, L.L.P.
125 West 55th Street
New York, New York 10019
Attn: Douglas W. Hawes
Telecopy: (212) 424-8500
Telephone: (212) 424-8000
(ii) if to the Company, to:
MidAmerican Energy Holdings Company
666 Grand Avenue
Des Moines, Iowa 50309
Attn: General Counsel
Telecopy: (515) 242-4080
Telephone: (515) 242-4300
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attn: Alan C. Myers
Telecopy: (212) 735-2000
Telephone: (212) 735-3000
Section 10.3. Miscellaneous. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, among the parties, or any of them, with respect to the subject
matter hereof (other than the Confidentiality Agreement), (b) shall not be
assigned by operation of law or otherwise and (c) shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts executed in and to be fully performed in such State, without giving
effect to its conflicts of law rules or principles and except to the extent the
provisions of this Agreement (including the documents or instruments referred to
herein) are expressly governed by or derive their authority from the Iowa Act.
Section 10.4. Interpretation. When a reference is made in this
Agreement to Sections or Exhibits, such reference shall be to a Section or
Exhibit of this Agreement, respectively, unless otherwise indicated. The table
of contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include," "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
Section 10.5. Counterparts; Effect. This Agreement may be executed in
one or more counterparts, each of which shall be deemed to be an original, but
all of which shall constitute one and the same agreement.
Section 10.6. 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
<PAGE>
the terms and provisions of this Agreement in any court of the United States
located in the State of New York or in New York state court, this being in
addition to any other remedy to which they are entitled at law or in equity. In
addition, each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New York or
any New York state court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement, (b) agrees that it
will not attempt to deny such personal jurisdiction by motion or other request
for leave from any such court and (c) agrees that it will not bring any action
relating to this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal or state court sitting in the State
of New York.
Section 10.7. Parties in Interest. This Agreement shall be binding upon
and inure solely to the benefit of each party hereto, and, except for rights of
Indemnified Parties as set forth in Section 7.5, nothing in this Agreement,
express or implied, is intended to confer upon any other person any rights or
remedies of any nature whatsoever under or by reason of this Agreement.
Section 10.8. Further Assurances. Each party will execute such further
documents and instruments and take such further actions as may reasonably be
requested by any other party in order to consummate the Merger in accordance
with the terms hereof.
Section 10.9. Waiver of Jury Trial. Each party to this Agreement
waives, to the fullest extent permitted by applicable law, any right it may have
to a trial by jury in respect of any action, suit or proceeding arising out of
or relating to this Agreement.
Section 10.10. Certain Definitions. The term "affiliate," except where
otherwise defined herein, shall mean, as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person. The term "control" (including, with its correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise).
IN WITNESS WHEREOF, the Company, Parent and Merger Sub have caused this
Agreement as of the date first written above to be signed by their respective
officers thereunto duly authorized.
MIDAMERICAN ENERGY HOLDINGS COMPANY
By: /s/ Steven A. McArthur
Name: Steven A. McArthur
Title: Senior Vice President
TETON FORMATION L.L.C.
By: /s/ David L. Sokol
Name: David L. Sokol
Title: Managing Member
TETON ACQUISITION CORP.
By: /s/ David L. Sokol
Name: David L. Sokol
Title: Chief Executive Officer & President
<PAGE>
INDEX OF PRINCIPAL TERMS
TERM PAGE
Acquisition Proposal
Agreement
Board of Directors
Closing
Closing Date
Code
Company
Company Benefit Plans
Company Common Stock
Company Disclosure Schedule
Company Financial Statements
Company Material Adverse Effect
Company Meeting Company Options
Company Required Consents
Company Required Statutory Approvals
Company Rights
Company Rights Agreement
Company SEC Reports
Company Stock Plans
Confidentiality Agreement
CSFB
Dillon Read
Dissenting Shares
Effective Time
Environmental Permits
ERISA
Excess Parachute Payments
Exchange Act
Exchange Agent
Expense Amount
FERC
GAAP
Governmental Authority
HSR Act
Indemnified Liabilities
Indemnified Parties
Indemnified Party
Independent Counsel
Investor Entities
Investors
Iowa Act
IRS
<PAGE>
Lehman
Merger
Merger Sub
MidAmerican Funding
MidAmerican Utility
Parent
Parent Disclosure Schedule
Parent Material Adverse Effect
Parent Required Statutory Approvals
PBGC
Per Share Amount
Power Act
Proxy Statement
PURPA
Representatives
Schedule 13E-3 Transaction Statement
SEC
Securities Act
Shares
Subscription Agreements
Surviving Corporation
Violation
Voting Debt
Year 2000 Compliant A-17
