-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, A4vOTkzUdK1a4pAtnItSZdeGG/t2/p7FuF18QfW6YqstPdtPTLI+av/iCzAiTKin lRHkEiLO4We4kpbQl4SywA== 0000950136-94-000225.txt : 19941212 0000950136-94-000225.hdr.sgml : 19941212 ACCESSION NUMBER: 0000950136-94-000225 CONFORMED SUBMISSION TYPE: SC 14D1 PUBLIC DOCUMENT COUNT: 14 FILED AS OF DATE: 19941209 SROS: NONE GROUP MEMBERS: CALIFORNIA ENERGY CO INC GROUP MEMBERS: CE ACQUISITION COMPANY, INC. SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: MAGMA POWER CO /NV/ CENTRAL INDEX KEY: 0000355878 STANDARD INDUSTRIAL CLASSIFICATION: COGENERATION SERVICES & SMALL POWER PRODUCERS [4991] IRS NUMBER: 953694478 STATE OF INCORPORATION: NV FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 SEC ACT: 1934 Act SEC FILE NUMBER: 005-33882 FILM NUMBER: 94564027 BUSINESS ADDRESS: STREET 1: 4365 EXECUTIVE DR STE 900 CITY: SAN DIEGO STATE: CA ZIP: 92121 BUSINESS PHONE: 6196227800 MAIL ADDRESS: STREET 1: 4365 EXECUTIVE DR STE 900 CITY: SAN DIEGO STATE: CA ZIP: 92121 FORMER COMPANY: FORMER CONFORMED NAME: MAGMA DEVELOPMENT CORP DATE OF NAME CHANGE: 19820519 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: CALIFORNIA ENERGY CO INC CENTRAL INDEX KEY: 0000720556 STANDARD INDUSTRIAL CLASSIFICATION: STEAM & AIR CONDITIONING SUPPLY [4961] IRS NUMBER: 942213782 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 14D1 BUSINESS ADDRESS: STREET 1: 10831 OLD MILL RD STE 900 CITY: OMAHA STATE: NE ZIP: 68194 BUSINESS PHONE: 4023308900 MAIL ADDRESS: STREET 1: 10831 OLD MILL ROAD CITY: OMAHA STATE: NE ZIP: 68154 SC 14D1 1 SCHEDULE 14D-1 =============================================================================== SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 14D-1 (TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1) OF THE SECURITIES EXCHANGE ACT OF 1934) MAGMA POWER COMPANY (Subject Company) CALIFORNIA ENERGY COMPANY, INC. CE ACQUISITION COMPANY, INC. (Bidders) COMMON STOCK, PAR VALUE $0.10 PER SHARE (Title of Class of Securities) 94-2213782 (CUSIP Number of Class of Securities) STEVEN A. MCARTHUR, ESQ. SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY CALIFORNIA ENERGY COMPANY, INC. 10831 OLD MILL ROAD OMAHA, NEBRASKA 68194 (402) 330-8900 (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications on Behalf of Bidder) Copies to: PETER J. HANLON, ESQ. MICHAEL A. SCHWARTZ, ESQ. WILLKIE FARR & GALLAGHER ONE CITICORP CENTER 153 EAST 53RD STREET NEW YORK, NEW YORK 10022 (212) 821-8000 CALCULATION OF FILING FEE
- ------------------------------------------------------------------------------- Transaction Amount of Valuation* Filing Fee** - ------------------------------------------------------------------------------- $483,600,000 $96,720 - -------------------------------------------------------------------------------
* For purposes of calculating the filing fee only. This calculation assumes the purchase of 12,400,000 shares of Common Stock, par value $0.10 per share, of Magma Power Company at $39.00 net per share in cash. ** The amount of the filing fee, calculated in accordance with Rule 0-11(d) under the Securities Exchange Act of 1934, equals 1/50 of one percent of the aggregate value of cash offered by CE Acquisition Company, Inc. for such number of shares. [ ] Check box if any part of the fee is offset as provided by Rule 0-11(a)(2) and identify the filing with which the offsetting fee was previously paid. Identify the previous filing by registration statement number, or the form or schedule and date of its filing. Amount Previously Paid: Not Applicable Filing Party: Not Applicable Form or Registration No.: Not Applicable Date Filed: Not Applicable ===============================================================================
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons California Energy Company, Inc.: 94-2213782 2) Check the Appropriate Box if a Member of a Group (a) ........................................................... (b) ............................................................ 3) SEC Use Only ..................................................... 4) Sources of Funds ............... WC, BK.............................. 5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items 2(e) or 2(f)........................................ 6) Citizenship or Place of Organization .......... DE .......... .......... 7) Aggregate Amount Beneficially Owned by Each Reporting Person .... 200,000 .... 8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares ............. 9) Percent of Class Represented by Amount in Row (7) .......... 0.8% .......... 10) Type of Reporting Person.............. CO ............................
2
1) Names of Reporting Persons S.S. or I.R.S. Identification Nos. of Above Persons CE Acquisition Company, Inc.: (applied for) 2) Check the Appropriate Box if a Member of a Group (a) ................... X ...................................... (b) ........................................................... 3) SEC Use Only ..................................................... 4) Sources of Funds............... WC, BK .............................. 5) Check if Disclosure of Legal Proceedings is Required Pursuant to Items ................................................. 6) Citizenship or Place of Organization .......... DE .......... .......... 7) Aggregate Amount Beneficially Owned by Each Reporting Person .... 200,000 .... 8) Check if the Aggregate Amount in Row (7) Excludes Certain Shares ............. 9) Percent of Class Represented by Amount in Row (7) .......... 0.8% .......... 10) Type of Reporting Person..................... CO .....................
3 ITEM 1. SECURITY AND SUBJECT COMPANY. (a) The name of the subject company is Magma Power Company, a Nevada corporation (the "Company"), which has its principal executive offices at 4365 Executive Drive, Suite 900, San Diego, California 92121. (b) This Tender Offer Statement on Schedule 14D-1 relates to an offer by CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc. ("CECI"), to purchase 12,400,000 shares of common stock, par value $0.10 per share (the "Shares"), of the Company at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase") and the related Letter of Transmittal (which together with the Offer to Purchase constitutes the "Offer"), copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively. The information set forth in the Introduction to the Offer to Purchase is incorporated herein by reference. (c) The information concerning the principal market for, and the prices of, the Shares set forth in Section 6 "Price Range of Shares; Dividends" of the Offer to Purchase is incorporated herein by reference. ITEM 2. IDENTITY AND BACKGROUND. (a)-(d), (g) The information set forth in the Introduction and Section 9 "Certain Information Concerning the Purchaser and CECI" of the Offer to Purchase and Schedule I thereto is incorporated herein by reference. (e)-(f) During the last five years, neither the Purchaser, CECI nor any persons controlling the Purchaser, nor, to the best of Purchaser's knowledge, any of the persons listed on Schedule I to the Offer to Purchase, has during the last five years (i) been convicted in a criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) been a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting activities subject to, federal or state securities laws or finding any violation of such laws. ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY. (a)-(b) The information set forth in Section 9 "Certain Information Concerning the Purchaser and CECI", Section 10 "Background of the Offer; Contacts with the Company" and Section 11 "Purpose of the Offer; the Merger Agreement" of the Offer to Purchase is incorporated herein by reference. ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION. (a)-(b) The information set forth in Section 13 "Source and Amount of Funds" of the Offer to Purchase is incorporated herein by reference. (c) Not applicable. ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER. (a)-(e) The information set forth in the Introduction and Section 11 "Purpose of the Offer; the Merger Agreement" and Section 10 "Background of the Offer; Contacts with the Company" of the Offer to Purchase is incorporated herein by reference. (f)-(g) The information set forth in Section 7 "Effect of the Offer on the Market for the Shares and Exchange Act Registration" of the Offer to Purchase is incorporated herein by reference. 4 ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY. (a) The information set forth in the Introduction and Section 9 "Certain Information Concerning the Purchaser and CECI" of the Offer to Purchase is incorporated herein by reference. (b) None. ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO THE SUBJECT COMPANY'S SECURITIES. The information set forth in the Introduction and Section 9 "Certain Information Concerning the Purchaser and CECI", Section 11 "Purpose of the Offer; the Merger Agreement" and Section 12 "Certain Conditions of the Offer" of the Offer to Purchase is incorporated herein by reference. ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED. The information set forth in the Introduction and Section 16 "Fees and Expenses" of the Offer to Purchase is incorporated herein by reference. ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS. The information set forth in Section 9 "Certain Information Concerning the Purchaser and CECI" of the Offer to Purchase is incorporated herein by reference. ITEM 10. ADDITIONAL INFORMATION. (a) None. (b) and (c) The information set forth in the Introduction and Section 15 "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (d) The information set forth in Section 7 "Effect of the Offer on the Market for the Shares and Exchange Act Registration", Section 12 "Certain Conditions of the Offer" and Section 15 "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (e) The information set forth in Section 15 "Certain Legal Matters" of the Offer to Purchase is incorporated herein by reference. (f) The information set forth in the Offer to Purchase and the Letter of Transmittal, copies of which are attached hereto as Exhibits (a)(1) and (a)(2), respectively, is incorporated herein by reference in its entirety. ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
(a)(1) Offer to Purchase, dated December 9, 1994. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to their Clients. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement, dated December 9, 1994. (a)(8) Text of Press Release issued by California Energy Company, Inc. and Magma Power Company dated December 5, 1994. (a)(9) Text of Press Release issued by California Energy Company, Inc. dated December 9, 1994. 5 (b)(1) Commitment Letter, dated October 25, 1994, to California Energy Company, Inc. and CE Acquisition Company, Inc. from Credit Suisse. (c)(1) Engagement Letter, dated September 18, 1994, between California Energy Company, Inc. and Gleacher & Co. Inc. (c)(2) Engagement Letter, dated September 27, 1994, between California Energy Company, Inc. and Lehman Brothers Inc. (c)(3) Agreement and Plan of Merger, dated as of December 5, 1994, among California Energy Company, Inc., CE Acquisition Company, Inc. and Magma Power Company. (d) None. (e) Not Applicable. (f) None.
6 SIGNATURES After due inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: December 9, 1994 CE ACQUISITION COMPANY, INC. By: /s/ Steven A. McArthur ------------------------------ Steven A. McArthur, Esq. Senior Vice President General Counsel and Secretary CALIFORNIA ENERGY COMPANY, INC. By: /s/ Steven A. McArthur ------------------------------ Steven A. McArthur, Esq. Senior Vice President General Counsel and Secretary 7 EXHIBIT INDEX
PAGE NO. IN SEQUENTIALLY NUMBERED EXHIBIT NO. DESCRIPTION SCHEDULE - ----------- ------------------------------------------------------------------------ ------------------------ (a)(1) Offer to Purchase, dated December 9, 1994. (a)(2) Letter of Transmittal. (a)(3) Notice of Guaranteed Delivery. (a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees. (a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees to their Clients. (a)(6) Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9. (a)(7) Form of Summary Advertisement, dated December 9, 1994. (a)(8) Text of Press Release issued by California Energy Company, Inc. and Magma Power Company dated December 5, 1994 (a)(9) Text of Press Release issued by California Energy Company, Inc. dated December 9, 1994. (b)(1) Commitment Letter, dated October 25, 1994, to California Energy Company, Inc. and CE Acquisition Company, Inc. from Credit Suisse. (c)(1) Engagement Letter, dated September 18, 1994, between California Energy Company, Inc. and Gleacher & Co. Inc. (c)(2) Engagement Letter, dated September 27, 1994, between California Energy Company, Inc. and Lehman Brothers Inc. (c)(3) Agreement and Plan of Merger, dated as of December 5, 1994, among California Energy Company, Inc., CE Acquisition Company, Inc. and Magma Power Company. (d) None. (e) Not Applicable. (f) None.
EX-99.(A)(1) 2 OFFER TO PURCHASE OFFER TO PURCHASE FOR CASH 12,400,000 SHARES OF COMMON STOCK OF MAGMA POWER COMPANY AT $39.00 NET PER SHARE BY CE ACQUISITION COMPANY, INC. A WHOLLY OWNED SUBSIDIARY OF CALIFORNIA ENERGY COMPANY, INC. THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF MAGMA POWER COMPANY (THE "COMPANY"), BY UNANIMOUS VOTE OF THOSE PRESENT, HAS DETERMINED THAT THE OFFER AND MERGER DESCRIBED HEREIN ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY OWNED BY THE PURCHASER, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS, AND (2) THE PURCHASER BEING SATISFIED THAT IT HAS OBTAINED FINANCING SUFFICIENT TO ENABLE IT TO CONSUMMATE THE OFFER. THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS. SEE SECTION 12. IMPORTANT On December 5, 1994, California Energy Company, Inc., the Purchaser and the Company entered into an Agreement and Plan of Merger, which provides, among other things, that as promptly as practicable following consummation of the Offer the Purchaser will effect a merger between the Company and the Purchaser. See Section 11. Any stockholder desiring to tender all or any portion of his Shares should either (1) complete and sign the enclosed Letter of Transmittal or a facsimile thereof in accordance with the instructions in the Letter of Transmittal, have his signature thereon guaranteed if required by Instruction 1 of the Letter of Transmittal and mail or deliver the Letter of Transmittal or such facsimile with his certificates evidencing his Shares and any other required documents to the Depositary, or follow the procedure for book-entry transfer of Shares set forth in Section 4, or (2) request his broker, dealer, commercial bank, trust company or other nominee to effect the transaction for him. Stockholders having Shares registered in the name of a broker, dealer, commercial bank, trust company or other nominee must contact such broker, dealer, commercial bank, trust company or other nominee if they desire to tender their Shares so registered. A stockholder who desires to accept the Offer and tender Shares and whose certificates for such Shares are not immediately available should tender such Shares by following the procedures for guaranteed delivery set forth in Section 4. Questions and requests for assistance may be directed to the Information Agent or to the Dealer Manager at their respective address and telephone number set forth on the back cover of this Offer to Purchase. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. The Dealer Manager for the Offer is: GLEACHER & CO. INC. December 9, 1994 TABLE OF CONTENTS
PAGE -------- INTRODUCTION 1 THE TENDER OFFER 2 1. Terms of the Offer; Expiration Date; Proration ................................... 2 2. Acceptance for Payment and Payment for Shares .................................... 4 3. Withdrawal Rights ................................................................ 5 4. Procedure for Tendering Shares ................................................... 6 5. Certain Federal Income Tax Consequences .......................................... 8 6. Price Range of Shares; Dividends ................................................. 9 7. Effect of the Offer on the Market for the Shares and Exchange Act Registration .. 10 8. Certain Information Concerning the Company ....................................... 10 9. Certain Information Concerning the Purchaser and CECI ............................ 12 10. Background of the Offer; Contacts with the Company ............................... 13 11. Purpose of the Offer; the Merger Agreement ....................................... 16 12. Certain Conditions of the Offer .................................................. 26 13. Source and Amount of Funds ....................................................... 27 14. Dividends and Distributions ...................................................... 28 15. Certain Legal Matters ............................................................ 28 16. Fees and Expenses ................................................................ 32 17. Miscellaneous .................................................................... 32 Schedule I --Directors and Executive Officers of the Purchaser, CECI and PKS S-1
To All Holders of Shares of Common Stock of Magma Power Company: INTRODUCTION CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc., a Delaware corporation ("CECI"), hereby offers to purchase 12,400,000 shares of Common Stock, par value $0.10 per share ("Shares"), of Magma Power Company, a Nevada corporation (the "Company"), at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in this Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"). The 12,400,000 Shares sought pursuant to the Offer constitute approximately 51% of the Shares on a fully diluted basis. Tendering stockholders will not be obliged to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares by the Purchaser pursuant to the Offer. The Purchaser will pay all charges and expenses of Gleacher & Co. Inc. (the "Dealer Manager"), Lehman Brothers Inc. ("Lehman"), IBJ Schroder Bank & Trust Company (the "Depositary") and MacKenzie Partners, Inc. (the "Information Agent") incurred in connection with the Offer. THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY'S BOARD"), BY UNANIMOUS VOTE OF THOSE PRESENT, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. GOLDMAN SACHS & CO. ("GOLDMAN SACHS") HAS DELIVERED ITS ORAL OPINION (WHICH IT SUBSEQUENTLY CONFIRMED IN WRITING) TO THE COMPANY'S BOARD THAT, AS OF DECEMBER 5, 1994, THE CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF THE SHARES IN THE OFFER AND THE MERGER (AS DEFINED BELOW), TAKEN AS A UNITARY TRANSACTION, IS FAIR TO THE HOLDERS OF SHARES RECEIVING SUCH CONSIDERATION (OTHER THAN CECI AND ITS AFFILIATES). The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn before the expiration of the Offer that number of Shares which, together with Shares beneficially owned by the Purchaser, represents at least a majority of the Shares outstanding on a fully diluted basis (such condition being referred to as the "Minimum Tender Condition"), and (2) the Purchaser being satisfied that it has obtained financing sufficient to enable it to consummate the Offer (such condition being referred to as the "Financing Condition"). See Section 12. CECI, the Purchaser and the Company have entered into an Agreement and Plan of Merger, dated as of December 5, 1994 (the "Merger Agreement"), providing for, among other things, the Offer and the Merger. Pursuant to the Merger Agreement, the Purchaser will, as soon as practicable following consummation of the Offer, consummate a merger (the "Merger") with the Company. In the Merger, each outstanding Share (other than Shares held by CECI, the Purchaser or any other direct or indirect subsidiary of CECI, Shares held in the treasury of the Company and Shares held by stockholders who properly exercise dissenters' rights under the Nevada General Corporation Law (the "NGCL")) will be converted into the right to receive, at CECI's option, either (i) the All Cash Component Amount (as defined below), net in cash, without interest thereon, or (ii) both (A) the Mixed Cash Component Amount (as defined below), net in cash, without interest thereon, and (B) the number of fully paid and nonassessable shares of common stock, par value $0.0675 per share, of CECI ("CECI Common Stock") equal to the quotient of (I) $39.00 less (II) the Mixed Cash Component Amount divided by the Average Closing Price (as defined below) (the All Cash Component Amount or (ii)(A) and (ii)(B), collectively, as applicable, being the "Merger Consideration"). The "Mixed Cash Component Amount" shall mean an amount equal to the quotient of (A) (x) $28.50 multiplied by the number of Shares outstanding at the Effective Time (as defined below) less (y) $39.00 multiplied by the number of Shares owned by CECI and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by CECI and any of its affiliates). The "All Cash Component Amount" shall mean an amount equal to the quotient of (A) (x) $38.75 multiplied by the number of Shares outstanding at the Effective Time less (y) $39.00 multiplied by the number of Shares owned by CECI and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by CECI and any of its affiliates). The "Average Closing Price" shall mean the average closing price of CECI Common Stock on the New York Stock Exchange (the "NYSE") during the 15 consecutive trading days ending on the fifth 1 business day prior to the Effective Time; provided, however, that if such average closing price exceeds $18.73, the Average Closing Price shall be $18.73, and if such average closing price is less than $14.27, the Average Closing Price shall be $14.27 (such proviso being referred to herein as the "Collar Provision"). The foregoing formula for determining the consideration to be paid in the Merger was determined so that (i) if CECI determines to pay the Merger Consideration with a combination of cash and CECI Common Stock, the consideration paid by CECI in the Offer and the Merger would consist, on a blended basis, of $28.50 per Share in cash and $10.50 per Share in market value of CECI Common Stock, based on the Average Closing Price and subject to the Collar Provision, and (ii) if CECI determines to pay only cash consideration in the Merger, the blended consideration paid by CECI in the Offer and the Merger would be $38.75 per Share. The consideration to be paid in the Offer and the Merger, including the terms of the Collar Provision, was negotiated on an arms' length basis between CECI and the Company. The purpose of the Collar Provision is to limit the number of shares of CECI Common Stock required to be issued in the Merger if the Average Closing Price is less than $14.27 and to establish a minimum number of shares of CECI Common Stock required to be issued in the Merger if the Average Closing Price exceeds $18.73. The Purchaser estimates that the total amount of funds required to purchase all Shares sought pursuant to the Offer will be approximately $483.6 million. The Purchaser estimates that approximately an additional $212.5 million will be required to effectuate the Merger or, if CECI elects to pay only cash consideration in the Merger, approximately an additional $463 million will be required. The Purchaser will obtain such funds through borrowings from commercial banks and other financial institutions; through a capital contribution by CECI from CECI's general corporate funds, which at September 30, 1994 aggregated $316.3 million; and, if the Purchaser elects to pay only cash consideration in the Merger, through a public offering or private placement of CECI Common Stock or other equity securities of CECI. It is CECI's current intention to pay the Merger Consideration solely in cash, although such intention is subject to change based on market conditions and other factors. The Purchaser anticipates that approximately one-half of the cash required to purchase Shares pursuant to the Offer and the Merger will be provided through a secured bank credit facility on terms and conditions to be determined. See Section 13. Certain other conditions to consummation of the Offer are described in Section 12. The Purchaser expressly reserves the right to waive any one or more of the conditions to the Offer. See Section 12. THIS OFFER TO PURCHASE AND THE LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. THE TENDER OFFER 1. TERMS OF THE OFFER; EXPIRATION DATE; PRORATION. On December 5, 1994, CECI, the Purchaser and the Company announced that they had signed the Merger Agreement and that the Purchaser would commence the Offer. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any extension or amendment), the Purchaser will accept for payment and pay for an aggregate of 12,400,000 Shares (or such greater number of Shares as the Purchaser may elect to accept for payment and pay for pursuant to the Offer) tendered on or before the Expiration Date (as defined below) and not theretofore withdrawn in accordance with Section 3. The term "Expiration Date" means 12:00 Midnight, New York City time, on Monday, January 9, 1995, unless and until the Purchaser, in its sole discretion, shall have extended the period of time for which the Offer is open, in which event the term "Expiration Date" shall mean the latest time and date at which the Offer, as so extended by the Purchaser, shall expire. For purposes of the Offer, a "business day" means any day other than a Saturday, Sunday or federal holiday and consists of the time period from 12:01 A.M. through 12:00 Midnight, New York City time. Pursuant to the Merger Agreement, the Purchaser is required to use its best efforts to consummate the Offer as promptly as practicable and, if the Expiration Date is extended beyond February 28, 1995, the Company has the right to terminate the Merger Agreement and, pursuant to the Standstill Agreement (as defined below), to require the Purchaser to terminate the Offer and refrain from purchasing Shares for a period of three years. See Section 11. 2 Consummation of the Offer is conditioned upon, among other things, satisfaction of the Minimum Tender Condition and the Financing Condition. If any or all of such conditions or any or all of the other conditions set forth in Section 12 are not satisfied on or prior to the Expiration Date, the Purchaser may elect to (i) extend the Offer and retain all tendered Shares until the expiration of the Offer, as extended, subject to the terms of the Offer (including any rights of the stockholders to withdraw their Shares), (ii) terminate the Offer and not accept for payment any Shares and return all tendered Shares to tendering stockholders or (iii) waive any or all other conditions and, subject to complying with applicable rules and regulations of the Securities and Exchange Commission (the "Commission"), accept for payment all Shares validly tendered and not withdrawn. If more than 12,400,000 Shares shall be properly tendered on or prior to the Expiration Date and not withdrawn, and the acquisition of such number of Shares satisfies the Minimum Tender Condition, the Purchaser will, upon the terms and subject to the conditions of the Offer, purchase 12,400,000 Shares on a pro rata basis (with adjustments to avoid purchases of fractional Shares) based upon the number of Shares properly tendered on or prior to the Expiration Date and not withdrawn. If exactly 12,400,000 Shares are properly tendered on or prior to the Expiration Date and not withdrawn, and the acquisition of such number of Shares satisfies the Minimum Tender Condition, the Purchaser will, upon the terms and subject to the conditions of the Offer, accept for payment and purchase all such Shares so tendered. If fewer than 12,400,000 Shares shall have been properly tendered on or prior to the Expiration Date and not withdrawn and the number of Shares so tendered and not withdrawn shall not have satisfied the Minimum Tender Condition, the Purchaser may (i) terminate the Offer and return all tendered Shares to tendering shareholders, (ii) extend the Offer and retain all such Shares until the expiration of the Offer, as extended, subject to the terms of the Offer (including any rights of stockholders to withdraw their Shares), or (iii) waive the Minimum Tender Condition and purchase all properly tendered Shares. See Section 12. Due to the difficulty of determining the precise number of Shares properly tendered and not withdrawn, if proration is required the Purchaser does not expect to announce the final results of proration or pay for any Shares until at least seven Nasdaq National Market ("NNM") trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information when it becomes available from the Information Agent and may be able to obtain such information from their brokers. The Purchaser expressly reserves the right, in its sole judgment, at any time or from time to time, and regardless of whether any of the events set forth in Section 12 shall have occurred or shall have been determined by the Purchaser to have occurred, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary and (ii) to amend the Offer in any respect (but only, in the case of an amendment that decreases the consideration to be paid in the Offer or imposes additional conditions from those set forth in Section 12, with the consent of the Company) by giving oral or written notice of such amendment to the Depositary. The rights reserved by the Purchaser in this paragraph are in addition to the Purchaser's rights to terminate the Offer pursuant to Section 12. Any such extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be issued not later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date. The manner in which the Purchaser will make such public announcement may, if appropriate, be limited to a release to the Dow Jones News Service. The reservation by the Purchaser of the right to delay acceptance for payment of or payment for any Shares is subject to the provisions of applicable law, which require that the Purchaser pay the consideration offered or return the Shares deposited by or on behalf of stockholders promptly after termination or withdrawal of the Offer. If the Purchaser decides to increase or decrease the consideration to be paid in the Offer, or to increase or decrease the number of Shares being sought (other than an increase in the number of Shares being sought that does not exceed 2% of the number of Shares outstanding), and if at the time that notice of such increase or decrease is first published, sent or given to holders of Shares in the manner specified 3 above, the Offer is scheduled to expire at any time earlier than the expiration of a period ending on the tenth business day from, and including, the date that such notice is first so published, sent or given, the Offer will be extended until the expiration of such period of ten business days. If the Purchaser waives any material condition to the Offer (including the Minimum Tender Condition), or amends the Offer in any other material respect, the Purchaser will extend the Offer and disseminate additional tender offer materials to the extent required to comply with the Commission's interpretation of Rules 14d-4(c) and 14d-6(d) under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The minimum period during which an offer must remain open following material changes in the terms of the offer or information concerning the offer, other than a change in price or a change in percentage of securities sought, will depend upon the facts and circumstances, including the relative materiality of the change in terms or information. Pursuant to the Merger Agreement, the Company will promptly furnish CECI and the Purchaser with mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories, each as of a recent date, and will promptly furnish CECI and the Purchaser with such additional information, including updated lists of stockholders, mailing labels and security position listings, and such other information and assistance as CECI and the Purchaser and their agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Shares. 2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject to the conditions of the Offer (including, if the Offer is extended or amended, the terms and conditions of any such extension or amendment), the Purchaser will accept for payment, and will pay for, Shares validly tendered before the Expiration Date and not properly withdrawn in accordance with Section 3 (including Shares validly tendered and not withdrawn during any extension of the Offer, if the Offer is extended, subject to the terms and conditions of such extension) as soon as practicable after the Expiration Date. In addition, the Purchaser expressly reserves the right, in its sole discretion, to delay the acceptance for payment of or payment for Shares in order to comply, in whole or in part, with any other applicable law. Any such delays will be effected in compliance with Rule 14e-1(c) under the Exchange Act (relating to the Purchaser's obligation to pay for or return tendered Shares promptly after the termination or withdrawal of the Offer). The per Share consideration paid to any stockholder pursuant to the Offer will be the highest per Share consideration paid to any other stockholder pursuant to the Offer. In all cases, payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares (or timely confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities")), pursuant to the procedures set forth in Section 4, (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, or an Agent's Message (as defined below) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. The term "Agent's Message" means a message, transmitted by a Book-Entry Transfer Facility to, and received by, the Depositary and forming a part of a Book-Entry Confirmation, which states that such Book-Entry Transfer Facility has received an express acknowledgment from the participant in such Book-Entry Transfer Facility tendering the Shares, that such participant has received and agrees to be bound by the terms of the Letter of Transmittal and that the Purchaser may enforce such agreement against the participant. Payment for Shares accepted for payment pursuant to the Offer may be delayed in the event of proration due to the difficulty of determining the number of Shares validly tendered and not withdrawn. See Section 1. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares properly tendered to the Purchaser and not withdrawn, if, as and when the Purchaser gives oral or written notice to the Depositary of its acceptance for payment of the tenders of such Shares. 4 Payment for Shares accepted for payment pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for the tendering stockholders for purposes of receiving payment from the Purchaser and transmitting payment to tendering stockholders. UNDER NO CIRCUMSTANCE WILL THE PURCHASER PAY INTEREST ON THE PURCHASE PRICE FOR THE SHARES, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT. If any tendered Shares are not accepted for payment pursuant to the terms and conditions of the Offer for any reason (including because of proration) or are not paid for because of invalid tender, or if certificates are submitted representing more Shares than are tendered, certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares tendered by book-entry transfer of such Shares into the Depositary's account at a Book-Entry Transfer Facility as described in Section 4, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as soon as practicable following the expiration, termination or withdrawal of the Offer and determination of the final results of proration. As required by Commission rules, if the Purchaser were to vary the terms of the Offer by increasing the consideration to be paid per Share, the Purchaser will pay such increased consideration for all Shares purchased pursuant to the Offer, whether or not such Shares have been tendered prior to such increase in consideration. The Purchaser reserves the right to transfer or assign, in whole or from time to time in part, to one or more direct or indirect subsidiaries of CECI, the right to purchase all or any portion of the Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer and will in no way prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. 3. WITHDRAWAL RIGHTS. Except as otherwise provided in this Section 3, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time before the Expiration Date and, unless theretofore accepted for payment by the Purchaser as provided herein, may also be withdrawn at any time after February 6, 1995. If, for any reason whatsoever, acceptance for payment of any Shares tendered pursuant to the Offer is delayed, or if the Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to the Purchaser's rights set forth herein, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares, and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in this Section 3. Any such delay will be accompanied by an extension of the Offer to the extent required by law. In order for a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase. Any notice of withdrawal must specify the name of the person having tendered the Shares to be withdrawn, the number of Shares to be withdrawn and, if certificates for Shares have been tendered, the name of the registered holder of Shares as set forth in the tendered certificate, if different from that of the person who tendered such Shares. If certificates for Shares ("Certificates") have been delivered or otherwise identified to the Depositary, then, before the physical release of such Certificates, the serial numbers shown on such Certificates must be submitted to the Depositary and the signatures on the notice of withdrawal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agent's Medallion Program (collectively, "Eligible Institutions"), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been delivered pursuant to the procedures for book-entry delivery as set forth in Section 4, any notice of withdrawal must also specify the name and the number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawal of tenders of Shares may not be rescinded, and any Shares properly withdrawn will be deemed not to be validly tendered for purposes of the Offer. Withdrawn Shares may, however, be retendered by repeating one of the procedures described in Section 4 at any time before the Expiration Date. 5 All questions as to the form and validity (including time of receipt) of any notice of withdrawal will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding. None of the Purchaser, CECI, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in any notice of withdrawal or will incur any liability for failure to give any such notification. 4. PROCEDURE FOR TENDERING SHARES. To tender Shares validly pursuant to the Offer, a stockholder must cause a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, to be received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase and must either cause certificates for tendered Shares to be received by the Depositary at one of such addresses or cause such Shares to be delivered pursuant to the procedures for book-entry delivery set forth below (and a Book-Entry Confirmation to be received by the Depositary), in each case before the Expiration Date, or (in lieu of the foregoing) such stockholder must comply with the guaranteed delivery procedure set forth below. The Depositary will establish accounts with respect to the Shares at the Book-Entry Transfer Facilities for purposes of the Offer within two business days after the date of this Offer to Purchase. Any financial institution that is a participant in any of the Book-Entry Transfer Facilities' systems may make book-entry delivery of the Shares by causing such Book-Entry Transfer Facility to transfer such Shares into the Depositary's account in accordance with such Book-Entry Transfer Facility's procedure for such transfer. However, although delivery of Shares may be effected through book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility, the Letter of Transmittal (or facsimile thereof), properly completed and duly executed, with any required signature guarantees, or an Agent's Message in connection with a book-entry delivery of Shares, and any other required documents, must, in any case, be transmitted to and received by the Depositary at one of its addresses set forth on the back cover of this Offer to Purchase before the Expiration Date, or the tendering stockholder must comply with the guaranteed delivery procedure described below. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY IN ACCORDANCE WITH SUCH BOOK-ENTRY TRANSFER FACILITY'S PROCEDURES DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. Signatures on all Letters of Transmittal must be guaranteed by an Eligible Institution, except in cases where Shares are tendered (i) by registered holders of Shares (which term includes any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of the Shares) who has not completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the Letter of Transmittal or (ii) for the account of an Eligible Institution. See Instruction 1 of the Letter of Transmittal. If the Certificates are registered in the name of a person other than the signer of the Letter of Transmittal, or if payment is to be made to a person other than the registered owner of the Certificates surrendered, then the Certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the Certificates, with the signature(s) on the Certificates or stock powers guaranteed as aforesaid. See Instruction 5 of the Letter of Transmittal. THE METHOD OF DELIVERY OF SHARES, THE LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER, AND DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. UNLESS AN EXEMPTION APPLIES UNDER THE APPLICABLE LAW AND REGULATIONS CONCERNING "BACKUP WITHHOLDING" OF FEDERAL INCOME TAX, THE DEPOSITARY WILL BE REQUIRED TO WITHHOLD, AND WILL WITHHOLD, 31% OF THE GROSS PROCEEDS OTHERWISE PAYABLE TO A STOCKHOLDER OR OTHER PAYEE WITH RESPECT TO SHARES PURCHASED PURSUANT TO THE OFFER IF THE STOCKHOLDER DOES NOT PROVIDE HIS TAXPAYER IDENTIFICATION NUMBER (SOCIAL SECURITY NUMBER OR EMPLOYER IDENTIFICATION NUMBER) AND CERTIFY THAT SUCH NUMBER IS CORRECT. EACH TENDERING STOCKHOLDER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL, SO AS TO PROVIDE THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING, UNLESS AN APPLICABLE EXEMPTION EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO THE PURCHASER AND THE DEPOSITARY. 6 If a stockholder desires to tender Shares pursuant to the Offer and such stockholder's Certificates are not immediately available or such stockholder cannot deliver the Certificates and all other required documents to the Depositary before the Expiration Date, such Shares may nevertheless be tendered, provided that all of the following conditions are satisfied: (a) such tender is made by or through an Eligible Institution; and (b) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, is received by the Depositary, as provided below, on or before the Expiration Date; and (c) the certificates for all tendered Shares, in proper form for transfer (or a Book-Entry Confirmation), together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message) and all other documents required by the Letter of Transmittal are received by the Depositary within six NNM trading days after the date of execution of such Notice of Guaranteed Delivery to the Depositary. The Notice of Guaranteed Delivery may be delivered by hand or transmitted by telegram, facsimile transmission or mail to the Depositary and must include a guarantee by an Eligible Institution in the form set forth in the Notice of Guaranteed Delivery. In all cases, payment for Shares tendered and accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) Certificates, or a Book-Entry Confirmation of such Shares, (ii) a properly completed and duly executed Letter of Transmittal (or facsimile thereof) (or, in the case of a book-entry transfer, an Agent's Message) and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment might not be made to all tendering stockholders at the same time, and will depend upon when Certificates or Book-Entry Confirmations of such Shares are received by the Depositary. By executing a Letter of Transmittal as set forth above, the tendering stockholder irrevocably appoints designees of the Purchaser, and each of them, as his attorneys-in-fact and proxies, in the manner set forth in the Letter of Transmittal, each with full power of substitution, to the full extent of such stockholder's rights with respect to the Shares tendered by such stockholder and accepted for payment by the Purchaser and with respect to any and all other Shares or other securities issued or issuable in respect of such Shares on or after the date of this Offer to Purchase. All such powers of attorney and proxies shall be considered irrevocable and coupled with an interest in the tendered Shares. Such appointment will be effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Upon such appointment, all prior proxies given by such stockholder will be revoked, and no subsequent proxies may be given by such stockholder (and if given, will not be deemed effective). The Purchaser's designees will be empowered, among other things, to exercise all voting and other rights of such stockholder as they in their sole discretion may deem proper at any annual, special or adjourned meeting of the stockholders of the Company or any consent in lieu of any such meeting or otherwise. The Purchaser reserves the right to require that, in order for the Shares to be deemed validly tendered, immediately upon the Purchaser's acceptance for payment of such Shares, the Purchaser must be able to exercise full voting and other rights of a record and beneficial holder with respect thereto. All questions as to the validity, form, eligibility (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in proper form or the acceptance for payment of which may, in the opinion of its counsel, be unlawful. The Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. None of the Purchaser, CECI, the Depositary, the Dealer Manager, the Information Agent or any other person will be under any duty to give notification of any defects or irregularities in tenders or shall incur any liability for failure to give any such notification. The Purchaser's interpretation of the terms and conditions of the Offer (including the Letter of Transmittal and of the instructions thereto) will be final and binding. 7 The valid tender of Shares pursuant to one of the procedures described above will constitute the tendering stockholder's acceptance of the terms and conditions of the Offer. The Purchaser's acceptance for payment of Shares tendered pursuant to the Offer will constitute a binding agreement between the tendering stockholder and the Purchaser upon the terms and subject to the conditions of the Offer. 5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following summary is a general discussion of the material federal income tax consequences to stockholders of the Company who tender their Shares pursuant to the Offer. The discussion is based upon the Internal Revenue Code of 1986, as amended (the "Code"), applicable Treasury regulations thereunder, administrative procedures, rulings and decisions in effect on the date hereof, all of which are subject to change (possibly with retroactive effect) by legislation, administrative action or judicial decision. No ruling has or will be requested from the Internal Revenue Service (the "Service") regarding the anticipated tax consequences described herein. The discussion set forth below does not discuss all aspects of federal income taxation that may be relevant to a particular stockholder in light of his personal investment circumstances or to certain types of stockholders subject to special treatment under the federal income tax laws (for example, tax-exempt organizations, foreign corporations and individuals who have received Shares as compensation or who are not citizens or residents of the United States) and does not discuss any aspect of state, local or foreign taxation. The discussion is limited to those stockholders who hold the Shares as capital assets (generally, property held for investment) within the meaning of Section 1221 of the Code. STOCKHOLDERS SHOULD CONSULT THEIR INDIVIDUAL TAX ADVISORS CONCERNING THE SPECIFIC TAX CONSEQUENCES OF THE OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS. Exchange of Shares for Cash. The exchange of Shares by tendering stockholders will be a taxable event for federal income tax purposes, and may also be a taxable transaction under applicable state, local and foreign tax laws. A tendering stockholder will generally recognize gain or loss equal to the difference between the amount of cash received by the stockholder pursuant to the Offer and the aggregate tax basis in the Shares tendered by the stockholder and purchased pursuant to the Offer. Gain or loss will be calculated separately for each block of Shares tendered by the stockholder and purchased pursuant to the Offer. Gain or loss recognized by a tendering stockholder will be capital gain or loss if the Shares at the Expiration Date are held as capital assets. Such capital gain or loss will be classified as a long-term capital gain or loss to the extent that the tendered Shares have a holding period of more than one year at the time of their purchase pursuant to the Offer. Long-term capital gains recognized by a tendering individual stockholder will be subject to tax at a maximum marginal federal rate of 28%. Short-term capital gains recognized by a tendering individual stockholder will be subject to tax at a maximum marginal federal rate of 39.6%. Net capital gains recognized by a tendering corporate stockholder will be subject to tax at a maximum marginal federal rate of 35%. Tax Effects of the Merger. As described in Section 11 of this Offer to Purchase, each outstanding Share (other than Shares held by CECI, the Purchaser or any other direct or indirect subsidiary of CECI, Shares held in the treasury of the Company and Shares held by stockholders who properly exercise dissenters' rights under the NGCL) will be converted in the Merger into the right to receive, at the option of CECI, either (i) a combination of cash and CECI Common Stock (the "Mixed Cash Option") such that the consideration paid by CECI in the Offer and the Merger would consist, on a blended basis, of $28.50 per Share in cash and $10.50 per Share in market value of CECI Common Stock, based on the Average Closing Price and subject to the Collar Provision, or (ii) cash (the "All Cash Option") such that the blended consideration paid by CECI in the Offer and the Merger would be $38.75 per Share. See Section 11. The Merger will be a taxable transaction for federal income tax purposes. If the All Cash Option is selected by CECI, a stockholder exchanging Shares for cash pursuant to the Merger will recognize gain or loss in the Merger equal to the difference between the amount of cash received by the stockholder in the Merger and the aggregate tax basis in the Shares exchanged pursuant to the Merger. Gain or loss will be calculated separately for each block of Shares exchanged. If the Mixed Cash Option is selected by CECI, a stockholder exchanging Shares for cash and CECI Common Stock pursuant to the Merger will recognize gain or loss in the Merger equal to the difference between (i) the sum of the cash and the fair market value of the CECI Common Stock received in the Merger and (ii) the holders' adjusted tax basis 8 for the Shares exchanged pursuant to the Merger. As with the All Cash Option, gain or loss will be calculated separately for each block of Shares exchanged. A holder's tax basis in the CECI Common Stock received pursuant to the Merger will equal the fair market value of such CECI Common Stock as of the Effective Time, and the holder's holding period for such CECI Common Stock will commence as of the Effective Time. For tax purposes, the fair market value of the CECI Common Stock will be determined as of the Effective Time and, whether or not the Collar Provision is applicable, may differ from the Average Closing Price used for purposes of determining the number of Shares to be issued in the Merger. Backup Withholding. To prevent "backup withholding" of federal income tax on payments of cash to a stockholder of the Company who exchanges Shares for cash in the Offer, a stockholder of the Company must, unless an exception applies under the applicable law and regulations, provide the payor of such cash with such stockholder's correct taxpayer identification number ("TIN") on a Substitute Form W-9 and certify under penalties of perjury that such number is correct and that such stockholder is not subject to backup withholding. A Substitute Form W-9 is included in the Letter of Transmittal. If the correct TIN and certifications are not provided, a $50 penalty may be imposed on a stockholder of the Company by the Service, and cash received by such stockholder in exchange for Shares in the Offer may be subject to backup withholding at the rate of 31%. Amounts paid as backup withholding do not constitute an additional tax and would be allowable as a credit against the stockholder's federal income tax liability. 6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are quoted on the NNM. The following table sets forth, for the periods indicated, the reported high and low sales prices per Share, and the amount of cash dividends paid per Share for each such period. The information for the fiscal years ended December 31, 1991, 1992 and 1993 is derived from the Company's Annual Reports on Form 10-K for the fiscal years ended December 31, 1992 and 1993. The information for subsequent periods is derived from information reported in published financial sources.
HIGH LOW DIVIDENDS ------ ----- ----------- Fiscal Year Ended December 31, 1991: First Quarter ............................ $32 $ 22 1/2 -0- Second Quarter ........................... 34 1/2 28 1/2 -0- Third Quarter ............................ 30 22 3/4 -0- Fourth Quarter ........................... 27 1/2 23 1/4 -0- Fiscal Year Ended December 31, 1992: First Quarter ............................ 27 1/4 21 -0- Second Quarter ........................... 25 3/4 19 1/4 -0- Third Quarter ............................ 24 3/4 19 3/4 -0- Fourth Quarter ........................... 32 1/4 19 3/4 -0- Fiscal Year Ended December 31, 1993: First Quarter ............................ 40 30 3/4 -0- Second Quarter ........................... 41 1/2 30 3/4 -0- Third Quarter ............................ 39 29 3/4 -0- Fourth Quarter ........................... 40 1/2 30 -0- Fiscal Year Ending December 31, 1994: First Quarter ............................ 35 1/4 30 3/4 -0- Second Quarter ........................... 33 1/4 28 -0- Third Quarter ............................ 35 1/4 26 1/2 -0- Fourth Quarter (through December 8, 1994) 38 34 -0-
On December 2, 1994, the last full trading day prior to CECI's issuance of the press release announcing its intention to commence the Offer, the reported closing sale price per Share on the NNM was $35.50. On September 19, 1994, the day of CECI's issuance of its press release announcing the 9 transmission of a letter to the Company containing a proposal to acquire the Company in a transaction in which stockholders would receive cash and shares of CECI Common Stock having a combined cash and market value of $35 per Share, the reported closing sale price per Share on the NNM was $27.50. The Offer represents a 42% premium over the reported closing sale price per Share on September 19, 1994. STOCKHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES. 7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES AND EXCHANGE ACT REGISTRATION. The purchase of Shares pursuant to the Offer will reduce the number of Shares that might otherwise trade publicly and may reduce the number of holders of Shares, which could adversely affect the liquidity and market value of the remaining Shares held by the public. After consummation of the Offer, the Shares may no longer meet the requirements of the National Association of Securities Dealers, Inc. (the "NASD") for continued inclusion on NNM, which require that an issuer have at least 200,000 held shares, held by at least 400 stockholders or 300 stockholders of round lots, with a market value of $1 million and have net tangible assets of at least either $2 million or $4 million, depending on profitability levels during the issuer's four most recent fiscal years. If NNM were to cease to publish quotations for the Shares, it is possible that the Shares would continue to trade in the over-the-counter market and that price or other quotations would be reported by other sources. The extent of the public market for the Shares and the availability of such quotations would depend, however, upon such factors as the number of stockholders and/or the aggregate market value of such securities remaining at such time, the interest in maintaining a market in the Shares on the part of securities firms, the possible termination of registration under the Exchange Act as described below, and other factors. The Purchaser cannot predict whether the reduction in the number of Shares that might otherwise trade publicly would have an adverse or beneficial effect on the market price for, or marketability of, the Shares or whether it would cause future market prices to be greater or lesser than the Offer price. The Shares are currently "margin securities" under the rules of the Board of Governors of the Federal Reserve System (the "Federal Reserve Board"), which has the effect, among other things, of allowing brokers to extend credit on the collateral of such securities for the purpose of buying, carrying, or trading in securities ("purpose loans"). Depending upon factors similar to those described above regarding NNM quotations, the securities might no longer constitute "margin securities" for the purposes of the Federal Reserve Board's margin regulations and therefore could no longer be used as collateral for purpose loans made by brokers. In addition, if registration of the Shares under the Exchange Act were terminated, the Shares would no longer constitute "margin securities." The Shares are currently registered under the Exchange Act. Such registration may be terminated upon application of the Company to the Commission if the outstanding Shares are not listed on a national securities exchange and there are fewer than 300 holders of record of the Shares. The termination of the registration of the Shares under the Exchange Act would substantially reduce the information required to be furnished by the Company to holders of the Shares and would make certain of the provisions of the Exchange Act, such as the short-swing profit recovery provisions of Section 16(b), the requirement of furnishing a proxy statement in connection with stockholders' meetings and the requirements of Rule 13e-3 under the Exchange Act with respect to "going private" transactions, no longer applicable to the Shares. Furthermore, "affiliates" of the Company and persons holding "restricted securities" of the Company may be deprived of the ability to dispose of the securities pursuant to Rule 144 under the Securities Act of 1933, as amended. If registration of the securities under the Exchange Act were terminated, the securities would no longer be "margin securities" or eligible for NNM reporting. The Purchaser intends to seek to cause the Company to terminate the registration of the Shares under the Exchange Act as soon as practicable after consummation of the Offer. 8. CERTAIN INFORMATION CONCERNING THE COMPANY. According to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993 (the "1993 10-K"), the Company is a Nevada corporation with its principal executive offices located at 4365 Executive Drive, Suite 900, San Diego, California 92121. According to the 1993 10-K, the Company is principally engaged in the generation of electricity from geothermal resources, and in the acquisition of, exploration for and development of geothermal resources. 10 Set forth below is certain summary consolidated financial information with respect to the Company derived from the information contained in the 1993 10-K and each of the Company's Quarterly Reports on Form 10-Q for the quarters ended September 30, 1993 and September 30, 1994. More comprehensive financial information is included in reports and other documents filed with the Commission, and the following summary is qualified in its entirety by reference to such reports and other documents and all financial information (including any related notes) contained therein. Such reports and other documents may be examined and copies may be obtained in the manner set forth below. MAGMA POWER COMPANY CONSOLIDATED SUMMARY FINANCIAL DATA (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR NINE MONTHS ENDED ENDED DECEMBER 31, SEPTEMBER 30, --------------------------------- ---------------------- 1991 1992 1993 1993 1994 --------- ---------- ---------- ---------- ---------- INCOME STATEMENT DATA: Total revenues ................ $94,891 $108,966 $167,138 $124,781 $146,104 Operating revenues(1) ......... 84,135 100,313 162,943 121,146 142,238 Income from operations ........ 41,204 49,667 74,913 57,957 67,915 Cumulative effect of change in accounting principle ......... -- 17,833 -- -- -- Net income .................... 33,941 54,191 52,135 39,469 46,843 Net income per share (assuming no dilution) ................. 1.44 2.36(2) 2.17 1.64 1.95 Weighted average common shares outstanding (assuming no dilution) .................... 23,611 22,936 24,063 24,037 24,017
DECEMBER 31, SEPTEMBER 30, -------------------- ---------------------- 1992 1993 1993 1994 --------- --------- ----------- --------- BALANCE SHEET DATA: Working capital ........ $ 74,524 $ 69,719 $(65,114) $ 90,378 Total assets ........... 396,650 611,311 598,265 630,422 Non-current liabilities 95,689 211,896 98,292 186,689 Stockholders' equity .. 282,260 351,918 324,792 395,286 Book value per share 12.28 14.67 14.05 16.44
(1) Operating revenues exclude interest and other income. (2) Income per share, assuming no dilution, before cumulative effect of change in accounting principle, was $1.59. Except where otherwise stated, the information concerning the Company and its affiliates contained in this Offer to Purchase has been taken from or based upon publicly available documents and records on file with the Commission and other public sources. Although neither the Purchaser, CECI, the Dealer Manager, Lehman nor the Information Agent has any knowledge that would indicate that any statements contained herein based on such documents and records are untrue, none of the Purchaser, CECI, the Dealer Manager, Lehman or the Information Agent takes responsibility for the accuracy or completeness of the information contained in such documents and records, or for any failure by the Company to disclose events which may have occurred or may affect the significance or accuracy of any such information but which are unknown to the Purchaser, CECI, the Dealer Manager, Lehman or the Information Agent. The Company is subject to the informational filing requirements of the Exchange Act and in accordance therewith is obliged to file reports and other information with the Commission relating to its 11 business, financial condition and other matters. Information, as of particular dates, concerning the Company's directors and officers, their remuneration, stock options granted to them, the principal holders of the Company's securities, any material interests of such persons in transactions with the Company and other matters is required to be disclosed in proxy statements distributed to the Company's stockholders and filed with the Commission. Such reports, proxy statements and other information may be inspected at the public reference facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the regional offices of the Commission at Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven World Trade Center, Suite 1300, New York, New York 10048. Copies may be obtained, by mail, upon payment of the Commission's customary charges, by writing to its principal office at 450 Fifth Street, N.W., Washington, D.C. 20549. In addition, such material should also be available for inspection at the National Association of Securities Dealers, Inc., 1735 K Street, NW, Washington, D.C. 20006. 9. CERTAIN INFORMATION CONCERNING THE PURCHASER AND CECI. CECI, together with its subsidiaries, is primarily engaged in the exploration for and development of geothermal resources and the development, ownership and operation of environmentally responsible independent power production facilities worldwide utilizing geothermal resources or other energy sources, such as hydroelectric, natural gas, oil and coal. CECI was an early participant in the domestic independent power market and is now one of the largest geothermal power producers in the United States. CECI is also actively pursuing opportunities in the international independent power market. For the year ended December 31, 1993 and the nine months ended September 30, 1994, CECI had revenues of $149.3 million and $139.2 million, respectively, and net income of $47.2 million and $29.4 million, respectively. As of September 30, 1994, CECI had cash and short-term investments of $316.3 million. Kiewit Energy Company ("Kiewit Energy"), a wholly owned subsidiary of PKS, is an approximate 43% stockholder (on a fully-diluted basis) in CECI. PKS, a Delaware corporation, is a large employee-owned company which had approximately $2.2 billion in revenues in 1993 from its interests in construction, mining, energy and telecommunications. PKS is one of the largest construction companies in North America and has been in the construction business since 1884. PKS is a joint venture participant in a number of CECI's international private power projects. The principal executive offices of the Purchaser and CECI are located at 10831 Old Mill Road, Omaha, Nebraska 68154 and their telephone number is (402) 330-8900. The Purchaser is a wholly owned subsidiary of CECI and has not conducted any business except in connection with the Offer. CECI and the Purchaser were incorporated in 1971 and 1994, respectively, under the laws of the State of Delaware. The principal executive offices of PKS are located at 1000 Kiewit Plaza, Omaha, Nebraska 68131, and its telephone number is (402) 342-2052. PKS was incorporated in 1941 under the laws of the State of Delaware. 12 CALIFORNIA ENERGY COMPANY, INC. SELECTED CONSOLIDATED FINANCIAL DATA (DOLLARS AND SHARES IN THOUSANDS, EXCEPT PER SHARE DATA)
FISCAL YEAR ENDED NINE MONTHS ENDED DECEMBER 31, SEPTEMBER 30, ---------------------------------- ---------------------- 1991 1992 1993 1993 1994 ---------- ---------- ---------- ---------- ---------- STATEMENT OF OPERATIONS DATA: Sales of electricity and steam $106,184 $117,342 $132,059 $101,046 $117,208 Interest and other income .... 9,379 10,187 17,194 12,294 21,980 Cumulative effect of change in accounting principle ......... -- -- 4,100 4,100 -- Extraordinary item ............ -- (4,991) -- -- (2,007) Net income .................... 26,582 33,819 47,174 38,911 29,392 Net income available to common shares ....................... 26,582 29,544 42,544 35,482 25,681 Net income per share .......... .75 .79(1) 1.11(2) .92(2) .70(1) Sales of electricity and steam 106,184 117,342 132,059 101,046 117,208 Average number of shares outstanding .................. 35,471 37,495 38,485 38,436 36,174
DECEMBER 31, SEPTEMBER 30, ---------------------- ------------------------ 1992 1993 1993 1994 ---------- ---------- ---------- ------------ BALANCE SHEET DATA: Total assets ............................ $580,550 $715,984 $710,659 $1,087,064 Total liabilities ...................... 336,272 425,393 425,827 825,273 Stockholders' equity .................... 168,764 211,503 206,675 179,660
(1) Income per share, before extraordinary item, was $.92 and $.77 for the periods ended December 31, 1992, and September 30, 1994, respectively. (2) Income per share, before cumulative effect of change in accounting principle, was $1.00 and $.81 for the periods ended December 31, 1993 and September 30, 1994, respectively. Except as set forth in this Offer to Purchase, none of the Purchaser, CECI, PKS or, to the best knowledge of the Purchaser, any of the persons listed in Schedule I hereto, or any associate or majority-owned subsidiary of such persons, beneficially owns any equity security of the Company, and none of the Purchaser, CECI, PKS or, to the best knowledge of the Purchaser, any of the other persons referred to above, or any of the respective directors, executive officers or subsidiaries of any of the foregoing, has effected any transaction in any equity security of the Company during the past 60 days. Except as otherwise stated in this Offer to Purchase, (i) there have not been any contacts, transactions or negotiations between the Purchaser, CECI, PKS or, to the best knowledge of the Purchaser, any of the persons listed in Schedule I hereto, on the one hand, and the Company or any of its directors, officers or affiliates, on the other hand, concerning a merger, consolidation or acquisition, a tender offer or other acquisition of securities, an election of directors, or a sale or other transfer of a material amount of assets, or that are otherwise required to be disclosed pursuant to the rules and regulations of the Commission, and (ii) none of the Purchaser, CECI, PKS or, to the best knowledge of the Purchaser, any of the persons listed in Schedule I hereto has any contract, arrangement, understanding or relationship with any person with respect to any securities of the Company. 10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. In May 1991, representatives of CECI and the Company entered into discussions and meetings to explore the possibility of combining the companies, and the two companies exchanged certain information concerning their respective businesses 13 for the purpose of considering such a business combination or other acquisition transaction. At the end of May 1991, the discussions were terminated as a result of the inability of the parties to reach agreement concerning price and certain other terms. In August 1991, the Company's representatives contacted CECI for the purpose of again exploring the possibility of combining the companies. In September 1991, a number of conversations between CECI's and the Company's representatives were held regarding a possible merger of the Company with and into CECI. Based upon those conversations, on September 26, 1991, after receiving the approval of CECI's Executive Committee, CECI transmitted a proposed letter of intent to the Company. The proposed letter of intent contemplated a consensual merger of the Company with and into CECI. Pursuant to the proposed merger, each outstanding Share would have been exchanged for approximately two shares of CECI Common Stock in a transaction accounted for on a pooling of interests basis. Such a transaction would have represented a value of $30.25 for each Share (approximately a 20% premium to the then-prevailing market price) based upon the then current market values of the respective companies' common stocks. Upon its receipt of the proposed letter of intent, the Company indicated to CECI that the proposal would be considered and, after certain discussions by representatives of the parties in the intervening days, on October 2, 1991, the Company advised CECI that the Company's Board had considered CECI's proposal and that the Company had no interest in pursuing the proposed pooling of interests combination transaction. In August 1993, David L. Sokol, the Chairman, Chief Executive Officer and President of CECI, contacted Paul M. Pankratz, then Chairman and Chief Executive Officer of the Company in order to propose a meeting to discuss various matters of mutual interest. At a meeting in San Diego in September 1993, Mr. Sokol and Steven A. McArthur, Senior Vice President, General Counsel and Secretary of CECI, and Mr. Pankratz, Ralph W. Boeker, President of the Company, and Jon R. Peele, Executive Vice President and General Counsel of the Company, discussed principally the possibility of joint venturing or other cooperation in respect of certain pending power development projects in the Philippines and the possible sharing of legal costs and information in respect of certain domestic regulatory proceedings in which the companies had a common interest. During the course of those discussions, Mr. Sokol suggested to the Company's management that such potential cost savings were illustrative of certain of the synergies that a combination of the companies could achieve. However, no agreements or understandings were reached between CECI and the Company as a result of these discussions. In addition, at that meeting CECI suggested to the Company that it consider utilizing PKS as the Company's general contractor in respect of the Company's pending projects in the Philippines. The Company's management agreed to meet with PKS regarding its possible role as a contractor in the Philippines. The meeting between the Company and PKS was held in the fall of 1993, but no agreements or understandings were reached with PKS and no further discussions were held in respect of such matters. In January 1994, Mr. Sokol again contacted Mr. Pankratz by telephone in an effort to resume the foregoing discussions and, at Mr. Pankratz's suggestion, Mr. Sokol was asked to contact Mr. Boeker, the President and recently appointed Chief Executive Officer of the Company, to discuss these matters further. In an April 1994 telephone conversation between Mr. Sokol and Mr. Boeker, the possibility of cooperation with respect to international joint ventures between the companies and other possible synergies between the companies were again generally discussed, but no agreements or understandings were reached. At Mr. Boeker's suggestion, it was tentatively agreed that they would resume their discussions in July 1994. On or about June 20, 1994, Mr. Sokol contacted Mr. Boeker and proposed a meeting between members of management of the two companies to discuss the possible combination of CECI and the Company. On August 9, 1994, Mr. Sokol was advised that Mr. Boeker had declined a scheduled August 11 meeting, and that the Company's decision to cancel was principally due to the desire of the Company's management to dedicate their full attention to the pending financing of the Company's Malitbog project in the Philippines. Accordingly, Mr. Boeker suggested that he would schedule a meeting with Mr. Sokol toward the end of September 1994, which is when the Company expected to close the financing. 14 On September 15, 1994, Mr. Sokol contacted a member of the Company's Board, in an effort to determine whether the Company had a serious interest in discussing a negotiated combination of the companies within a time frame that would recognize CECI's desire to make certain decisions regarding the strategic direction it wished to pursue in the changing global marketplace. The director stated that he was aware of certain of the past discussions between the companies, but would ask the Company's management to respond directly to Mr. Sokol's inquiry. Later that same day, Messrs. Pankratz and Boeker called Mr. Sokol and advised him that the closing of the financing for the Company's Malitbog project had been delayed and was expected to occur on or about November 18, 1994 and suggested that they would be available to meet with Mr. Sokol shortly after the closing of such financing. Mr. Sokol stated that CECI was considering a number of strategic alternatives, including a possible combination with the Company, and that CECI's strategic planning had reached a stage where a prompt decision concerning entering into negotiations regarding any possible combination with the Company was required. Mr. Sokol further stated his belief that it was unnecessary to wait until after the closing of the Malitbog financing because CECI was prepared to negotiate in good faith on a basis that would value the Company as though such financing had closed. Messrs. Boeker and Pankratz reiterated that they would agree to meet only after the Malitbog closing and Mr. Sokol concluded the call by reiterating CECI's need to act upon certain of its strategic alternatives on a prompt basis. On September 19, 1994, Mr. Sokol wrote to Messrs. Pankratz and Boeker proposing to acquire all outstanding Shares for $35 per Share comprised of $25.00 in cash and $10.00 in market value of CECI Common Stock. On September 20, 1994, Mr. Pankratz responded that the Company's Board would consider the proposal and respond after completion of its evaluation. During the week of September 19, 1994, representatives of CECI contacted management of The Dow Chemical Company ("Dow"), the beneficial owner of approximately 21% of the Shares, to determine Dow's reaction to CECI's proposal of September 19, 1994. The CECI representatives were told Dow was evaluating the Offer. During the week of September 26, 1994, CECI's financial representatives contacted management of Dow to inquire as to the circumstances surrounding a recent sale by Dow of 857,143 Shares for $28.25 per Share and an associated option agreement to acquire such Shares at the same price, which Dow had reported in filings with the Commission, and in particular whether any impediments existed to Dow's ability to freely dispose of such Shares and whether any structural changes to CECI's merger proposal would be helpful in this regard. Dow reported that it was considering such issues in the context of CECI's proposal. On September 28, 1994, after telephone discussions between CECI's financial advisors and the Company's financial advisors regarding CECI's request to arrange a meeting between the parties, Messrs. Sokol and McArthur, together with representatives from CECI's financial advisors, met with representatives from the Company's financial advisor in order to introduce CECI and to further elaborate and answer questions with respect to the details of CECI's proposal. CECI provided the representatives from the Company's financial advisors with copies of a draft merger agreement for review by the Company's Board. On October 3, 1994, the Company's financial advisors informed CECI's financial advisors that the Company's Board had authorized the Company to enter into a "poison pill" Rights Plan (the "Rights Agreement") at its Board meeting which concluded on such date, but that the Company's Board had also authorized the Company's financial advisors to meet with CECI's financial advisors as soon as possible and, accordingly, a meeting was scheduled for the morning of October 4, 1994. CECI subsequently learned through press reports that the Company had amended its Bylaws to require that stockholder action occur only at a regular or special meeting of stockholders rather than by way of a written consent solicitation and that the Company also had filed a complaint against CECI seeking a declaratory judgment that (i) the Company's Board had properly discharged its fiduciary duties in adopting the Rights Agreement and an amendment to the Company's Bylaws and, accordingly, such agreement and amendment were valid and binding, and (ii) the Merger Moratorium Statute (as defined below) is valid and not in violation of the Commerce Clause and Supremacy Clause of the United States Constitution. 15 On October 4, 1994, at the meeting between CECI's financial advisors and the Company's financial advisors, the Company's financial advisors summarized the actions taken at the Company's Board meeting held on October 2, 1994 and October 3, 1994, and indicated that although the Company's Board had not rejected CECI's proposal, the Company's Board would prefer that CECI withdraw its merger proposal. The Company's financial advisors then indicated that the Company's Board believed that CECI's proposed price was too low and referenced the Company's future opportunities but declined to provide any specific information or financial analysis indicating what price the Company's Board would consider favorably with respect to a sale of the Company or as to why CECI's proposed price did not correctly value the Company's businesses. In light of the defensive actions taken by the Company, on October 6, 1994 the Purchaser commenced a cash tender offer for 12,400,000 Shares at $35 per Share (the "Previous Offer"). On October 11, 1994, the Company filed with the Commission a Solicitation/Recommendation Statement on Schedule 14D-9 (the "Previous Schedule 14D-9") pursuant to the Exchange Act, which included the recommendation of the Company's Board that the Company's stockholders reject the Previous Offer. On October 13, 1994, CECI announced the filing of a preliminary proxy statement with the Commission pursuant to the Exchange Act in order to solicit written requests from the Company's stockholders for the call of a Special Meeting of the Company's stockholders (the "Special Meeting"). The purpose of the Special Meeting was to provide the Company's stockholders the opportunity to consider and vote on CECI's proposals which, if approved, would help facilitate consummation of the Previous Offer. On October 21, 1994, the Purchaser increased the price per Share to be paid in the Previous Offer to $38.50 per Share. On October 31, 1994, CECI learned that the Company's Board had again recommended that its stockholders reject the Previous Offer. On November 1, 1994, CECI announced that it had put its best offer on the table and that it intended to withdraw its acquisition proposal if it had not signed a merger agreement with the Company or received sufficient written requests to call the Special Meeting by December 2, 1994. Throughout November 1994, CECI solicited written consents for the call of the Special Meeting, which solicitation was actively opposed by the Company. As of the close of business on December 2, 1994, CECI had neither entered into a merger agreement with the Company nor received sufficient written requests to call the Special Meeting. Consequently, CECI announced by press release, and Mr. Sokol placed telephone calls to Messrs. Pankratz and Boeker and to a representative of Dow to advise them, that CECI had withdrawn its acquisition proposal and had terminated the Previous Offer. As a result of these telephone conversations, and follow up telephone conversations among the parties and their advisors, CECI and the Company arranged to meet the following day in New York to explore the possibility of a negotiated acquisition of the Company by CECI. From December 3, 1994 through the morning of December 5, 1994, representatives of CECI and the Company, together with their legal and financial advisors, met to negotiate the terms of a proposed acquisition of the Company by CECI. The Company's Board met to consider and approve the Merger Agreement and the transactions contemplated thereby on December 4 and 5, 1994. Following continued negotiations regarding the definitive agreements, the Merger Agreement was signed on the morning of December 5, 1994. 11. PURPOSE OF THE OFFER; THE MERGER AGREEMENT. General. The purpose of the Offer is to acquire majority control of the Company as the first step in the acquisition of the entire equity interest in the Company. The purpose of the Merger is to acquire all Shares not beneficially owned by the Purchaser following consummation of the Offer. Pursuant to the Merger Agreement, CECI, the Purchaser and the Company have agreed to effectuate the Merger in accordance with the provisions of the Merger Agreement as promptly as practicable following consummation of the Offer. Following is a description of the material terms of the Merger Agreement. 16 The Offer and the Merger. The Merger Agreement provides for the making of the Offer by the Purchaser upon the terms and subject to the conditions set forth in this Offer to Purchase. The Merger Agreement further provides that as promptly as practicable after the satisfaction or waiver of the conditions described below (the "Effective Time"), the Purchaser will be merged with and into the Company, with the Company continuing as the surviving corporation following the Merger (the "Surviving Corporation"). As a result of the Merger, the Company will become a wholly owned subsidiary of CECI. In addition, the directors of the Purchaser immediately prior to the Effective Time will become the initial directors of the Surviving Corporation, and the officers of the Company immediately before the Effective Time will be the initial officers of the Surviving Corporation, in each case until their successors are duly elected or appointed and qualified. Conditions to the Obligations of Each Party to Effect the Merger. Consummation of the Merger is subject to certain conditions, including (i) the purchase of Shares pursuant to the Offer, (ii) approval and adoption of the Merger and the Merger Agreement by the requisite vote of the Company's stockholders, (iii) approval of the issuance of CECI Common Stock in order to effectuate the Merger by the requisite vote of CECI's stockholders, (iv) the CECI Common Stock issuable to the Company's stockholders in the Merger having been authorized for listing on the NYSE upon official notice of issuance, (v) the registration statement to be filed with the Commission by CECI on Form S-4 under the Securities Act for the purpose of registering the shares of CECI Common Stock to be issued in the Merger shall have become effective in accordance with the provisions of the Securities Act and no stop order suspending such effectiveness shall have been issued by the Commission and remain in effect, and (vi) that there shall not be in effect (a) any judgment, decree or order issued by any Federal, state or local court of competent jurisdiction, or (b) any statute, rule or regulation enacted or promulgated by any Federal, state, local or legislative, administrative or regulatory body of competent jurisdiction, that in either of cases (a) or (b) prohibits the consummation of the Merger or makes such consummation illegal. The Merger Consideration. In the Merger, each outstanding Share (other than Shares held by CECI, the Purchaser or any other direct or indirect subsidiary of CECI, Shares held in the treasury of the Company and Shares held by stockholders who properly exercise dissenters' rights under the NGCL), will be converted into the right to receive, at CECI's option, either (i) the All Cash Component Amount, net in cash, without interest thereon, or (ii) both (A) the Mixed Cash Component Amount, net in cash, without interest thereon, and (B) the number of fully paid and nonassessable shares of CECI Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash Component Amount divided by the Average Closing Price. The foregoing formula for determining the consideration to be paid in the Merger was determined so that (i) if CECI determines to pay the Merger Consideration with a combination of cash and CECI Common Stock, the consideration paid by CECI in the Offer and the Merger would consist, on a blended basis, of $28.50 per Share in cash and $10.50 per Share in market value of CECI Common Stock, based on the Average Closing Price and subject to the Collar Provision, and (ii) if CECI determines to pay only cash consideration in the Merger, the blended consideration paid by CECI in the Offer and the Merger would be $38.75 per Share. The consideration to be paid in the Offer and the Merger, including the terms of the Collar Provision, was negotiated on an arms' length basis between CECI and the Company. The purpose of the Collar Provision is to limit the number of shares of CECI Common Stock required to be issued in the Merger if the Average Closing Price is less than $14.27 and to establish a minimum number of shares of CECI Common Stock required to be issued in the Merger if the Average Closing Price exceeds $18.73. It is CECI's current intention to pay the Merger Consideration solely in cash, although such intention is subject to change based on market conditions and other factors. Company Stock Options. Each option outstanding immediately prior to the Effective Time under the Company Stock Option Plans (as defined in the Merger Agreement), whether or not then exercisable, shall be cancelled by the Company and, in exchange therefor, each holder of any such option shall be entitled to receive from the Company at the Effective Time, or as soon as practicable thereafter, an amount in cash equal to the product of (x) the number of Shares previously subject to such option and (y) the excess, if any, of $39.00 or, if CECI has elected the All Cash Component Amount, $38.75, over the exercise price per Share previously applicable to such option. Each unvested share of deferred stock 17 under the Company's 1994 Equity Participation Plan (as defined in the Merger Agreement) or as otherwise described in the Company Disclosure Schedule (as defined in the Merger Agreement) outstanding immediately prior to the Effective Time (each, a "Deferred Share") shall be cancelled by the Company and each holder of a cancelled Deferred Share shall be entitled to receive at the Effective Time or as soon as practicable thereafter from the Company an amount in cash equal to $39.00 or, if CECI has elected the All Cash Component Amount, $38.75. Board Representation. The Merger Agreement provides that, subsequent to consummation of the Offer, the Purchaser will be entitled to that percentage of the number of seats on the Company's Board (rounded to the nearest whole seat) as reflects the percentage of the outstanding Shares then owned by the Purchaser, but in no event less than a majority of the entire Board of Directors of the Company (regardless of vacancies). In order to provide the Purchaser with such representation on the Company's Board, the Company may be required to increase the size of the Company's Board or to secure the resignation of one or more directors; provided, however, that such resignations will not cause the number of Disinterested Directors (as defined below) to be less than two. If the Purchaser acquires Shares pursuant to the Offer and determines to obtain majority representation on the Company's Board, the Company will be required to send to stockholders the information required by Rule 14f-1 under the Exchange Act, and CECI and the Purchaser will be required to furnish to the Company all such information with respect to itself and its directors, officers and affiliates. Following the election or appointment of the Purchaser's nominees and prior to the Effective Time, any amendment of the Merger Agreement or the Company's Articles of Incorporation or Bylaws, any termination of the Merger Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of CECI or the Purchaser, or waiver of any of the Company's rights under the Merger Agreement, and any other consent or action of the Company's Board under the Merger Agreement will require the concurrence of a majority (which shall be at least two) of the directors of the Company then in office who are not designees of CECI or the Purchaser ("Disinterested Directors"). CECI has agreed to use its best efforts to nominate and cause up to two nominees of the Company to be elected or appointed as members of CECI's Board of Directors. Other Proposals. The Merger Agreement further provides that neither the Company nor any of its subsidiaries, or any of their respective directors, officers, agents, financial advisors or otherwise may, directly or indirectly, solicit, initiate or knowingly encourage the submission of proposals or offers from any person relating to any Competing Transaction (as defined below), or participate in any negotiations regarding, or furnish to any other person any information (except for information which has been previously publicly disseminated by the Company in the ordinary course of business) with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. The Company's Board may (i) review and act upon (which actions may include, without limitation, providing confidential information, negotiating a transaction and entering into an agreement for a transaction) an unsolicited proposal by any other person relating to any of the transactions referred to in the preceding sentence, if the Company's Board determines in good faith, after consultation with and based upon the advice of its financial and legal advisors, that failing to review and act upon such proposal would constitute a breach of fiduciary duty, and (ii) comply with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or exchange offer, and such review, conduct or compliance will not violate the Merger Agreement. "Competing Transaction" shall mean any of the following involving the Company or any of its subsidiaries: (i) any merger, consolidation, share exchange, business combination, or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 50% or more of the assets of the Company and its subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 50% or more of the Shares or the filing of a registration statement under the Securities Act in connection therewith; (iv) any person having acquired beneficial ownership or the right to acquire beneficial ownership of, or any "group" (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) having been formed which beneficially owns or has the right to acquire benefical ownership of, 50% or more of the Shares; or (v) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. 18 The Company has agreed to notify CECI immediately if any inquiries are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Company, in each case in connection with any acquisition, business combination or purchase of all or any significant portion of the assets of, or any equity interest in, the Company or any subsidiary. Representations and Warranties. The Merger Agreement contains customary representations and warranties of the parties thereto, including representations by each of the Company and CECI as to the absence of certain changes or events concerning its business, compliance with law, approval of the Offer and the Merger by the Company for purposes of certain Nevada antitakeover statutes, energy regulatory status, environment, employee benefit plans, insurance, taxes, related party transactions, the status of development and construction projects and the status of operating projects. Certain Covenants of the Company, CECI and the Purchaser. The Company has agreed that, prior to the Effective Time, unless CECI shall otherwise consent in writing and except as is otherwise permitted by the Merger Agreement, the businesses of the Company and its subsidiaries shall be conducted only in, and the Company and its subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company will use its best efforts to preserve substantially intact its business organization, to keep available the services of its present officers, employees and consultants and to preserve its present relationships with customers, suppliers and other persons with which it or any of its subsidiaries has significant business relations. Except as contemplated by the Merger Agreement, the Company has agreed that neither it nor any of its subsidiaries will, prior to the Effective Time, directly or indirectly, do any of the following without the prior written consent of CECI: (a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose the issuance, sale, pledge, disposition, encumbrance or authorization of any Shares or shares of its subsidiaries' capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries' capital stock, or any other ownership interest (except with respect to Shares previously reserved for issuance as disclosed in Section 4.03 of the Merger Agreement); (ii) amend or propose to amend its articles of incorporation or bylaws or equivalent organizational documents; (iii) split, combine or reclassify any of its outstanding common stock, or declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise with respect to the common stock; (iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire any shares of its capital stock, except in the performance of its obligations under existing employee plans; or (v) authorize or propose or enter into any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this section (a); (b) (i) acquire (by merger, consolidation, or acquisition of stock, partnership interests or assets) any corporation, partnership or other business organization or division thereof or any other interests in operating properties; (ii) except in the ordinary course of business and in a manner consistent with past practices, sell, pledge, lease, transfer, dispose of, or encumber or authorize or propose the sale, pledge, lease, transfer, disposition or encumbrance of any of its or its subsidiaries' assets (including intangible assets); (iii) create, incur, assume or guarantee any indebtedness or other similar obligation, or enter into any contract or agreement, except in the ordinary course of business and consistent with past practice; (iv) enter into any new line of business or make any bid or enter into any commitment in respect of any new or proposed projects; (v) prepay or refinance any part of the principal or interest of any existing indebtedness before the due date thereof; (vi) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity, except for endorsements in the ordinary course of business in connection with the deposit of items for collection; (vii) make any loans, advances or capital contributions to or investments in any person or entity; (viii) waive, release, grant or transfer any rights of value or modify or change in any material respect any existing license, material lease or commitment; (ix) make or commit to or guarantee any single capital expenditure or obligation which is not consistent with past practice and currently budgeted; or (x) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this section (b); (c) take any action other than in the ordinary course of business and in a manner consistent with past practice (none of which actions shall be unreasonable or unusual) with respect to the grant of any severance or termination pay (otherwise than pursuant to policies of the Company or any of its subsidiaries in effect on November 30, 1994) or with respect to any increase of benefits payable under its severance or 19 termination pay policies in effect on November 30, 1994; (d) make any payments (except in the ordinary course of business and in amounts and in a manner consistent with past practice) under any of its employee plans to any of its or its subsidiaries' employees, independent contractors or consultants, enter into any new employee plan, any new employment or consulting agreement, grant or establish any new awards under such plan or agreement, or adopt or otherwise amend any of the foregoing; (e) take any action except in the ordinary course of business and in a manner consistent with past practice (none of which actions shall be unreasonable or unusual) with respect to accounting policies or procedures (including without limitation its procedures with respect to the payment of accounts payable); (f) before the purchase of Shares pursuant to the Offer and other than pursuant to the Merger Agreement, take any action to cause the shares of its common stock to cease to be listed on the NNM; (g) cause or permit any of their current insurance (or reinsurance) policies to be cancelled or terminated or any of the coverage thereunder to lapse, unless forthwith upon notice of such termination, cancellation or lapse, the Company or such subsidiary used its best efforts to obtain commercially reasonable replacement policies from the same or comparable insurers providing coverage which is the same as or comparable to that provided under the cancelled, terminated or lapsed policies; (h) enter into any agreement or transaction with any affiliate of the Company upon terms and conditions less favorable to the Company or such affiliate than could be obtained on an arm's length basis, except for agreements or transactions in the ordinary course of business and consistent with past practice; (i) settle any material pending litigation; or (j) enter into any oral or written agreement, contract, commitment, arrangement or understanding with respect to any of the foregoing. Notwithstanding the foregoing: (i) the Company may close the financing of its Malitbog project without the prior consent of CECI provided that CECI has been given the opportunity to review the relevant financing documents and the Company has given CECI at least two days prior notice of the anticipated closing date; (ii) the Company may make and commit to ordinary course budgeted operational capital and other expenditures relating to projects in operation or construction without the consent of CECI; (iii) the Company may make planned capital and operational expenditures with respect to its Malitbog project, without the consent of CECI; (iv) the Company will not make any capital or other expenditures in excess of $500,000 in the aggregate with respect to its Nevada Power Pumped Storage contract, its Alto Peak contract and any other contract related to a development project without prior consultation with CECI and CECI's consent; (v) the Company may honor all existing contractual obligations relating to projects in operation or construction without the consent of CECI; and (vi) the Company will not incur any additional indebtedness (secured or unsecured) or make new project or capital commitments in excess of $1,000,000 without prior consultation with CECI and CECI's consent. CECI has agreed that, prior to the Effective Time, unless the All Cash Component election has been made or unless the Company shall otherwise consent in writing, and except as is otherwise permitted by the Merger Agreement, neither CECI nor any of the CECI Subsidiaries shall, directly or indirectly, do any of the following: (a) (i) issue or sell, or propose the issuance or sale of, any shares of its or its subsidiaries' capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries' capital stock, or any other ownership interest (except with respect to CECI Common Stock previously reserved for issuance as disclosed in Section 3.03 of the Merger Agreement) if (A) the proceeds of any such issuance or sale ("Proceeds") exceed $50,000,000, and (B) such Proceeds are not applied, if necessary, so as to allow CECI to exercise the All Cash Component election; (ii) split, combine or reclassify any of its outstanding common stock, or declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise with respect to the common stock; (iii) redeem, purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire any shares of its capital stock, except in the performance of its obligations under existing employee plans or pursuant to a repurchase program under Rule 10b-18 promulgated under the Exchange Act; or (iv) authorize or propose or enter into any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this section (a); (b) in the case of CECI, merge or consolidate with or into another person or engage in a recapitalization or other similar extraordinary business transaction; (c) make any material change in accounting policies, other than as required by generally accepted accounting principles; or (d) enter into any oral or written agreement, contract, commitment, arrangement or understanding with respect to any of the foregoing. 20 Access to Information. The Merger Agreement provides that through the Effective Time, each of CECI and the Company shall, and shall cause their respective subsidiaries, officers, directors, employees, auditors, attorneys and agents to, afford the officers, employees, auditors, attorneys and agents of the other party (the "Respective Representatives") complete access at all reasonable times and on reasonable notice to its officers, employees, agents, accountants, properties, offices and other facilities and to all books and records, and shall furnish such Respective Representatives with all financial, operating and other data and information and all information relating to the regulatory status of its plants (whether held by it, a subsidiary, or agents thereof) as the other party, through its officers, employees, agents or accountants, may reasonably request. All information obtained by CECI or the Company is required to be kept confidential in accordance with confidentiality agreements dated December 4, 1994 entered into between CECI and the Company. Employee Benefits. The Merger Agreement provides that CECI shall cause the Surviving Corporation and its subsidiaries to (x) honor all employment, change in control, deferred compensation, pension, retirement and severance agreements in effect on December 5, 1994 between the Company or one of its subsidiaries and any employee of the Company or one of its subsidiaries, or maintained for the benefit of any employee of the Company or one of its subsidiaries, and (y) honor all bonus determinations for the fiscal year ending December 31, 1994 made by the Company or any of its subsidiaries prior to December 5, 1994 with respect to the bonus plans and arrangements of the Company and its subsidiaries. For a period of one year commencing on the Effective Time, CECI shall cause the Surviving Corporation to provide active employees of the Company and its subsidiaries with benefits (including, without limitation, welfare benefits) that are no less favorable, taken as a whole, than the benefits provided under the Company Benefit Plans (as defined in the Merger Agreement) (other than equity-based plans and bonus plans) as in effect immediately prior to the Effective Date. To the extent that service is relevant for eligibility, vesting or benefit calculations or allowances (including, without limitation, entitlements to vacation and sick days) under any plan or arrangement maintained in order to provide the benefits described in the preceding sentence, such plan or arrangement shall credit employees for service on or prior to the Effective Time with the Company or any of its subsidiaries. CECI shall as promptly as practicable after the Effective Time cause the Surviving Corporation to (or the Company may prior to the Effective Time) amend each demand note made in favor of the Company by an employee of the Company or one of its subsidiaries to provide that (x) such demand note will not be repayable on demand from the Company and (y) upon the involuntary termination without cause of the employment of such employee, all sums owed under such demand note shall be payable in equal quarterly installments over a period of not less than 36 months. With respect to each employee of the Company (other than employees of the Company which are parties to a "change in control" or "severance" agreement) who is, within the one year period following the closing of the Offer, either (i) terminated without cause or (ii) terminated as a result of a reduction in force, CECI shall cause the Surviving Corporation to make the following payments: (1) if, upon the effective date of such employee's termination, such employee has less than one year's service with the Company, a payment equal to three months base salary plus an amount equal to one-fourth of the prior year's targeted bonus for such employee, payable in twelve equal installments over the twelve months following such termination; or (2) if, upon the effective date of such employee's termination, such employee has one year or more of service with the Company, a payment equal to six months base salary plus an amount equal to one-fourth of the prior year's targeted bonus for each such employee, payable in twelve equal installments over the twelve months following such termination. For the purposes of subclauses (1) and (2), if an employee was not eligible for a bonus in the referenced prior year, then the targeted bonus for the current year shall be used. An employee shall not be eligible for the payments specified in subclauses (1) or (2) if such employee's termination relates to a reduction in force referred to subclause (ii) above and such employee has been offered a comparable position (in terms of compensation) by CECI at any location; provided, however, that no such amounts referenced in (1) and (2) will be payable if, in the good faith determination of the Company, the employee's job performance did not merit continued employment or offer of relocation to a comparable position. An employee may not receive the foregoing severance payments and simultaneously receive any severance payments under the Company's severance policy described in the first two sentences of this paragraph. 21 Disposition of Pending Litigation. The Merger Agreement provides that the parties will jointly file a stipulation of dismissal without prejudice of, or take other reasonable steps necessary to terminate without prejudice, the action entitled Magma Power Company v. California Energy Company, Inc., et al., Case No. CV-N-94-00719-DWH, pending in the United States District Court for the District of Nevada, including any and all claims and counterclaims asserted against the Company, its directors, its officers, CECI and the Purchaser, with each party bearing its own costs and attorneys' fees. Amendment. The Merger Agreement may be amended by action taken by CECI and the Purchaser, and by action taken by or on behalf of the Company's Board at any time before the Effective Time; provided, however, that, after approval of the Merger by the stockholders of the Company, no amendment may be made which would materially adversely impact the interests of the Company's stockholders or reduce the amount or change the type of consideration into which each Share will be converted upon consummation of the Merger. Termination. The Merger Agreement provides that it may be terminated at any time before the Effective Time in the following circumstances: (a) by mutual consent of the Boards of Directors of CECI and the Company; or (b) by the Company or CECI if the Offer shall not have been consummated by February 28, 1995; or (c) by the Company or CECI if the Effective Time shall not have occurred on or prior to September 30, 1995; or (d) by either CECI or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto shall use their best efforts to lift), in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by the Merger Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or (e) by CECI if (i) the Company's Board withdraws, modifies or changes its recommendation of the Merger Agreement or any of the transactions contemplated thereby or shall have resolved to do any of the foregoing or (ii) the Company's Board recommends to the holders of Shares any proposal with respect to a merger, consolidation, share exchange or similar transaction involving the Company or any of its Subsidiaries, other than the transactions contemplated by the Merger Agreement; or (f) by CECI if, without the Company's consent, any person has acquired beneficial ownership or the right to acquire beneficial ownership of or any "group" (as defined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) has been formed which beneficially owns, or has the right to acquire beneficial ownership of, more than 10% of the Shares; or (g) by the Company or CECI if (i) a corporation, partnership, person or other entity or group shall have made a bona fide offer that the Company's Board determines in its good faith judgment and in the exercise of its fiduciary duties, after consultation with and based upon the advice of its financial and legal advisors, is more favorable to the Company's stockholders than the Offer and the Merger or (ii) any person (including, without limitation, the Company or any affiliate thereof), other than CECI or any affiliate of CECI, shall have become the beneficial owner of more than 50% of the then outstanding Shares; or (h) by either CECI or the Company if the other party shall have breached the Merger Agreement in any material respect and such breach continues for a period of ten days after the receipt of notice of the breach from the nonbreaching party. Termination Fee For CECI. The Merger Agreement provides that if it is terminated pursuant to clauses (e) or (g) or terminated by CECI pursuant to clause (h) of the preceding paragraph, the Company will be required to pay CECI a termination fee of $8,000,000 plus CECI's actual documented out-of-pocket expenses incurred since September 13, 1994 in connection with the Merger Agreement and the transactions contemplated thereby, including, without limitation, legal and professional fees and expenses. Termination Fee For The Company. The Merger Agreement provides that if by December 19, 1994, CECI has not delivered to the Company either a revised Commitment Letter (as defined below) or definitive loan documentation reflecting the financing contemplated by such Commitment Letter which, in each case, (i) does not contain any due diligence conditions regarding CECI and the Company and its subsidiaries and (ii) has a definition of "material adverse effect" and/or "material adverse change" that substantially conforms in all material respects with the definition of Material Adverse Effect (other than as provided in subclause (i) of the definition provided below) contained in the Merger Agreement with 22 respect to CECI and the Company, then CECI will be required to pay the Company a termination fee of $8,000,000 if (i) the Offer expires or is terminated without the Purchaser having accepted for payment the Shares tendered pursuant thereto or (ii) the Merger Agreement is terminated by either CECI or the Company because the Offer has not been consummated by February 28, 1995 ((i) and (ii) collectively, the "Offer Termination Events"); provided, however, that the $8,000,000 termination fee will not be required to be paid if failure to consummate the Offer results from one or more of the following: (i) a Material Adverse Effect with respect to the Company shall exist or shall have occurred and be continuing on or prior to the relevant Offer Termination Event; (ii) the Company shall have materially breached the Merger Agreement and CECI shall have terminated the Merger Agreement pursuant to clause (h) of the paragraph entitled "Termination" above; or (iii) generally accepted accounting principles would require a restatement of the Company's audited financial statements contained in the Company SEC Reports (as defined in the Merger Agreement). When used in connection with CECI and the Purchaser, the term "Material Adverse Effect" means any change or effect, when taken together with all other adverse changes and effects relating to CECI or the Purchaser, which are not individually or in the aggregate deemed to have a Material Adverse Effect, that is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of CECI and its subsidiaries taken as a whole; provided, however, that the occurrence of any or all of the following shall not constitute a Material Adverse Effect: (i) any change in any law applicable to CECI or any CECI subsidiary or by which any property or asset of CECI or any CECI subsidiary is bound, (ii) a failure to receive any contract for which CECI or any CECI subsidiary has submitted or will submit a competitive bid, (iii) the loss of any contract or arrangement (whether by revocation, lapse or invalidity) with respect to a project that CECI or a CECI subsidiary has under development, other than any such loss resulting from a breach by CECI of the representations and warranties set forth in Section 3.22 or 3.23 of the Merger Agreement (relating to the status of CECI's development and construction projects and its operating projects), (iv) a failure to close any public or private financing of any project in which CECI or any CECI subsidiary owns a direct or indirect interest or (v) the termination of the employment of any employee, officer, director or consultant of CECI or any CECI subsidiary. When used in connection with the Company or any of its subsidiaries, the term "Material Adverse Effect" means any change or effect, when taken together with all other adverse changes and effects relating to the Company and its subsidiaries, that is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of the Company and the subsidiaries taken as a whole; provided, however, that the occurrence of any or all of the following shall not constitute a Material Adverse Effect: (i) any change in any law applicable to the Company or any subsidiary or by which any property or asset of the Company or any subsidiary is bound, (ii) a failure to receive any contract or award for which the Company or any subsidiary has submitted or will submit a competitive bid, (iii) the loss of any contract or arrangement (whether by revocation, lapse or invalidity) with respect to a project that the Company or any subsidiary has under development, other than any such loss related to the Malitbog project or Fish Lake project and other than any such loss resulting from a breach by the Company of the representations and warranties set forth in Sections 4.22 and 4.23 of the Merger Agreement (relating to the status of the Company's development and construction projects and its operating projects), (iv) an unfavorable ruling by the California Public Utilities Commission with respect to the Company's California plants under the pending Biennial Resource Plan Update, (v) a loss of, or unfavorable ruling in, the Company's pending litigation against Southern California Edison Company, but only insofar as such litigation seeks to increase the energy price payable for deliveries over nameplate capacity and not insofar as any unfavorable ruling affects the validity or enforceability of any contract subject thereto or the enforceability of any material term thereof, (vi) a failure to close any public or private financing of any project in which the Company or any subsidiary owns a direct or indirect interest (other than as a result of a loss with respect to the Malitbog project or the Fish Lake project or as a result of a breach by the Company of the representations and warranties set forth in Section 4.22 or 4.23 of the Merger Agreement (relating to the status of the Company's development and construction projects and its operating projects)), or (vii) the termination of the employment of any employee, officer, director or consultant of the Company or any subsidiary. 23 Miscellaneous. The Merger Agreement contains customary indemnification provisions pursuant to which the directors, officers, employees, fiduciaries and agents of the Company and its subsidiaries are required to be indemnified to the fullest extent permitted by applicable law, and regardless of whether the Merger becomes effective, by the Company and, after the Effective Time, by the Surviving Corporation and CECI, from costs or expenses (including attorney's fees), judgments, fines, losses, claims, damages, and liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation arising out of or pertaining to the transactions contemplated by the Merger Agreement, including liabilities under the securities laws in connection with the Merger. In addition, except as set forth above, all costs and expenses incurred in connection with the Merger Agreement and the transactions contemplated thereby will be paid by the party incurring such costs and expenses. The foregoing description of the Merger Agreement is qualified in its entirety by reference to the text of the Merger Agreement, which has been filed by the Purchaser and CECI as Exhibit (c)(3) to the Tender Offer Statement on Schedule 14D-1 of the Purchaser and CECI filed with the Commission in connection with the Offer (the "Schedule 14D-1"). Such Exhibit may be examined, and copies may be obtained, in the manner set forth in Section 8 of the Offer to Purchase (except that it will not be available at the regional offices of the Commission). Confidentiality and Standstill Agreements. CECI and the Company have entered into a confidentiality agreement, dated December 4, 1994, pursuant to which CECI has agreed to maintain the confidentiality of proprietary information that may be disclosed to CECI and its representatives in connection with the transactions contemplated by the Merger Agreement. In addition, CECI and the Company have entered into a standstill agreement, dated December 5, 1994 (the "Standstill Agreement"), pursuant to which CECI has agreed that neither CECI nor any of its subsidiaries will, for a period of three years from December 5, 1994, among other things, acquire any securities of the Company or participate in any proxy solicitation with respect to voting securities of the Company, except in connection with the Offer and the Merger or a tender offer for all Shares at a price no less than $38.75 per Share net to the seller in cash. Required Vote. The Purchaser intends to vote all Shares held by it following consummation of the Offer in favor of the Merger. Accordingly, if the Purchaser acquires a majority of the outstanding Shares pursuant to the Offer or otherwise, it will, under Nevada law as currently in effect, have sufficient Shares to approve the Merger without the affirmative vote of any other stockholder. Dissenters' and Related Rights. Holders of Shares do not have appraisal rights as a result of the Offer. However, in the event the Merger is consummated, any Shares held by a holder who has demanded and perfected such holder's demand for appraisal of such holder's Shares in accordance with the NGCL and as of the Effective Time has neither effectively withdrawn nor lost such holder's right to such appraisal will not be converted into or represent a right to receive the consideration pursuant to the Merger Agreement, but the holder thereof shall be entitled to only such rights as are granted by the NGCL. If any holder of Shares who demands appraisal of such holder's shares under the NGCL shall effectively withdraw or lose (through failure to perfect or otherwise) such holder's 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 the consideration pursuant to the Merger Agreement, without interest thereon, upon surrender of the certificate or certificates representing such Shares. The Company will give CECI (i) prompt notice of any written demands for appraisal or payment of the fair value of any Shares, and withdrawals of such demands, and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under the NGCL. The Company shall not voluntarily make any payment with respect to any demands for appraisal and will not, except with the prior written consent of CECI, settle or offer to settle any such demands. The Purchaser cannot make any representation as to the outcome of such appraisal of fair value as determined by the Nevada courts in connection with the Merger, and stockholders should recognize that such an appraisal could result in a determination of a value higher or lower than, or equivalent to, the 24 consideration per Share provided in the Offer. In an appraisal proceeding, moreover, the Purchaser may argue that for purposes of such proceeding the fair value of the Shares in connection with the Merger is less than the consideration per Share provided in the Offer. The Minimum Tender Condition. The Minimum Tender Condition requires that the number of Shares tendered and not withdrawn before the expiration of the Offer, together with the Shares beneficially owned by the Purchaser, represent at least a majority of the Shares outstanding on a fully diluted basis. According to the Merger Agreement, as of September 30, 1994, there were 24,042,915 Shares outstanding. According to the Merger Agreement, as of December 2, 1994, there were 582,478 Shares reserved for issuance pursuant to options and deferred stock awards under the Stock Option Plans (as defined in the Merger Agreement), or otherwise described in the Company Disclosure Schedule, and there were 996,943 Shares reserved for future issuance under the Stock Option Plans. The Purchaser beneficially owns 200,000 Shares, representing, based on information in the Merger Agreement, approximately 1% of the outstanding Shares and approximately 1% of the outstanding Shares on a fully diluted basis, in each case excluding treasury shares. The Shares beneficially owned by the Purchaser and CECI were acquired in open market purchases. For purposes of the Offer, "fully diluted basis" assumes that all outstanding stock options and deferred stock awards are presently exercisable. Based on the foregoing and assuming no additional Shares or rights to acquire Shares have been issued since September 30, 1994 (other than Shares issued pursuant to the exercise of the stock options referred to above and deferred stock options), if the Purchaser purchases 12,400,000 Shares (the "Minimum Number of Shares") pursuant to the Offer, the Minimum Tender Condition would be satisfied. The Purchaser is only seeking to purchase the Minimum Number of Shares pursuant to the Offer. If for any reason the purchase of 12,400,000 Shares pursuant to the Offer would not satisfy the Minimum Tender Condition, the Purchaser may elect, subject to complying with applicable rules and regulations of the Commission, (i) to purchase additional Shares in the Offer such that the aggregate number of Shares purchased pursuant to the Offer would satisfy the Minimum Tender Condition, (ii) to terminate the Offer, not accept for payment any Shares and return all tendered Shares to tendering stockholders or (iii) to waive or reduce the Minimum Tender Condition and waive any or all other conditions and accept for payment all Shares validly tendered and not withdrawn. Rule 13e-3. The Merger will have to comply with any applicable federal law. The Commission has adopted Rule 13e-3 under the Exchange Act which is applicable to certain "going private" transactions and which may under certain circumstances be applicable to the Merger. However, Rule 13e-3 would be inapplicable if (i) the Shares are deregistered under the Exchange Act prior to the Merger or other business combination or (ii) the Merger or other business combination is consummated within one year after the purchase of the Shares pursuant to the Offer and the amount paid per Share in the Merger or other business combination is at least equal to the amount paid per Share in the Offer. If applicable, Rule 13e-3 requires, among other things, that certain financial information concerning the fairness of the proposed transaction and the consideration offered to minority stockholders in such transaction be filed with the Commission and disclosed to stockholders prior to consummation of the transaction. Plans for the Company. In connection with the Offer, CECI and the Purchaser have reviewed, and will continue to review, on the basis of publicly available information, various possible business strategies that they might consider in the event that the Purchaser acquires control of the Company, whether pursuant to the Offer or otherwise. In addition, CECI and the Purchaser intend to conduct a detailed review of the Company and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management and personnel and consider and determine what, if any, changes would be desirable in light of the circumstances which then exist. Such strategies could include, among other things, changes in the Company's business, corporate structure, certificate of incorporation, Bylaws, capitalization, management or dividend policy. The Purchaser will not be able to effect any such changes or transactions until it has purchased Shares pursuant to the Offer and obtained control of the Company's Board. Except as indicated in this Offer to Purchase, the Purchaser has no present plans or proposals which relate to or would result in an extraordinary corporate transaction, such as a merger, reorganization, 25 liquidation, relocation of operations, or sale or transfer of assets, involving the Company or any of its subsidiaries, or any material changes in the Company's corporate structure or business or the composition of the Company's Board or the Company's management or personnel. 12. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision of the Offer, the Purchaser shall not be required to accept for payment or pay for, or may delay the acceptance for payment of or payment for, tendered Shares, or may, in the sole discretion of the Purchaser, terminate or amend the Offer as to any Shares not then paid for if (i) at the Expiration Date the Minimum Tender Condition or the Financing Condition shall not have been satisfied or (ii) on or after December 9, 1994 and at or before the acceptance of payment for any of such Shares, any of the following events shall occur: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by the Purchaser or any other affiliates of CECI, the consummation by the Purchaser of the Merger or seeking to obtain material damages, (ii) seeking to prohibit the ownership or operation by the Purchaser of all or any material portion of the business or assets of the Company and its subsidiaries or of the Purchaser, or to compel the Purchaser to dispose of or hold separately all or any material portion of the business or assets of the Purchaser or the Company or any of its subsidiaries or seeking to impose any material limitation on the ability of the Purchaser or any other affiliates of CECI to conduct their business or own such assets, (iii) seeking to impose or confirm limitations on the ability of the Purchaser or any other affiliates of CECI effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired by any such person on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by the Purchaser or any other affiliates of CECI of any Shares, or (v) seeking any material diminution in the benefits expected to be derived by the Purchaser or any affiliates of CECI as a result of the transactions contemplated by the Offer or the Merger. (b) there shall be any action taken, or any statute, rule, regulation, interpretation, judgment, order or injunction, enacted, enforced, promulgated, amended, issued or deemed applicable (i) to the Purchaser or (ii) to the Offer or the Merger by any court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer or to the Merger, which might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) it shall have been publicly disclosed or the Purchaser shall have otherwise learned that (i) any person, entity (including the Company or any of its subsidiaries) or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired or proposed to acquire beneficial ownership of more than 20% of any class or series of capital stock of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of more than 20% or any class or series of capital stock of the Company (including the Shares) other than acquisitions for bona fide arbitrage purposes only and except as disclosed in a Schedule 13D or 13G on file with the Commission on December 5, 1994, (ii) any such person, entity or group which before December 5, 1994 had filed such a Schedule with the Commission, has acquired or proposes to acquire, through the acquisition of stock, the formation of a group or otherwise, beneficial ownership of an additional 5% or more of any class or series of capital stock of the Company (including the Shares), or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of an additional 5% or more of any class or series of capital stock of the Company (including the Shares); provided, however, that if such person or group acquired the Shares without the Company's consent and the Company has not taken any action under its Rights Plan to exempt such acquisition from the terms thereof, the foregoing condition shall be inapplicable. 26 (d) the Company shall have failed to comply in any material respect with any of its obligations under the Agreement or any representation or warranty of the Company in such Agreement shall not be true and correct in any material respect and such failure to comply or be true and correct shall have a Material Adverse Effect; (e) a Material Adverse Effect with respect to the Company shall have occurred; (f) this Agreement shall have been terminated in accordance with its terms; or (g) the Company's Board shall have withdrawn, modified or amended in any unfavorable respect its recommendation of the Offer or shall have resolved to do so or shall have entered into an agreement with a third party with respect to a Competing Transaction; which, in the good faith judgment of CECI or the Purchaser in any such case, and regardless of the circumstances (including any action or inaction by CECI and the Purchaser) giving rise to any such condition, makes it inadvisable to proceed with the Offer and/or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of CECI and the Purchaser and may be asserted by CECI or the Purchaser or may be waived by CECI or the Purchaser in whole or in part at any time and from time to time in its sole discretion. 13. SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total amount of funds required to purchase all Shares sought pursuant to the Offer will be approximately $483.6 million. The Purchaser estimates that approximately an additional $212.5 million will be required to effectuate the Merger or, if CECI elects to pay only cash consideration in the Merger, approximately an additional $463 million will be required. The Purchaser will obtain such funds through borrowings from commercial banks and other financial institutions; through a capital contribution by CECI from CECI's general corporate funds, which at September 30, 1994 aggregated $316.3 million; and, if the Purchaser elects to pay only cash consideration in the Merger, through a public offering or private placement of CECI Common Stock or other equity securities of CECI. It is CECI's current intention to pay the Merger Consideration solely in cash, although such intention is subject to change based on market conditions and other factors. The Purchaser anticipates that approximately one-half of the cash required to purchase Shares pursuant to the Offer and the Merger will be provided through a secured bank credit facility on terms and conditions to be determined. CECI has received a fully underwritten financing commitment letter from Credit Suisse (the "Commitment Letter") which states that Credit Suisse will provide, on specified terms and subject to customary conditions, up to $500,000,000 in secured bank financing in connection with the Offer and the Merger. Such funds, together with a portion of CECI's general corporate funds, will be sufficient to pay the cash portion of the consideration for the Offer and the Merger and related expenses. The Commitment Letter contemplates (i) a facility of up to $250,000,000 to capitalize the Purchaser for the purpose of financing the Offer (the "Tender Facility") and (ii) facilities of up to $500,000,000 for, among other things, refinancing the Tender Facility and effectuating the Merger (the "Merger Facilities" and, together with the Tender Facility, the "Facilities"). The term of the Tender Facility will be 12 months, extendible for a term of up to three years from the initial funding at the mutual consent of CECI and Credit Suisse. The Tender Facility will be a margin loan collateralized by the Shares purchased pursuant to the Offer and subject to Regulation U promulgated under the Exchange Act. The Merger Facilities will be composed of (i) up to a 6-year amortizing term loan ("Term Loan A") in an expected amount of up to $500,000,000 less the amount of Term Loan B (as defined below) and (ii) up to a 8-year amortizing term loan ("Term Loan B") in an expected amount not to be less than $150,000,000. The Merger Facilities are to be amortized from internally generated funds of the Company and will be secured by an assignment and pledge of the stock of the Company and all unencumbered assets of the Company. 27 Interest on loans borrowed under the Facilities will be payable at spreads of 2.50% above LIBOR (adjusted for reserves) or 1.25% above Base Rate for loans under the Tender Facility, 2.50% above LIBOR (adjusted for reserves) or 1.50% above Base Rate for Term Loan A, and 3.00% above LIBOR (adjusted for reserves) or 2.00% above Base Rate for Term Loan B. CECI may elect to incur loans at either LIBOR or Base Rate. Credit Suisse's commitment to provide the Facilities is subject to certain customary conditions, including without limitation (a) a capital investment in the Purchaser in an amount and form satisfactory to Credit Suisse, (b) the absence of certain material adverse changes and (c) Credit Suisse's satisfaction with its due diligence with respect to CECI and the Company. The definitive documentation relating to the Facilities will contain representations, warranties, covenants, events of default and conditions customary for transactions of this size and type. CECI has agreed to pay certain fees to Credit Suisse with respect to the Facilities which, in the aggregate, are not material to the transactions described herein. The foregoing description of the Commitment Letter is qualified in its entirety by reference to the text thereof filed as Exhibit (b)(1) to the Schedule 14D-1 of the Purchaser and CECI filed with the Commission in connection with the Offer, copies of which may be obtained from the offices of the Commission in the manner set forth in Section 8 of the Offer to Purchase (except that such information will not be available at the regional offices of the Commission). When definitive agreements relating to the Facilities are executed, copies will be filed as exhibits to amendments to the Schedule 14D-1. 14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of this Offer to Purchase, the Company should split, combine or otherwise change the Shares or its capitalization, or shall disclose that it has taken any such action, then, subject to the provisions of Section 12, the Purchaser may, in its sole judgment, make such adjustments as it deems appropriate to reflect such split, combination or other change in the purchase price and the other terms of the Offer (including, without limitation, the number and type of securities offered to be purchased, the amounts payable therefor and the fees payable hereunder). If, on or after the date of this Offer to Purchase, the Company should declare or pay any cash or stock dividend or other distribution on or issue any rights with respect to the Shares, payable or distributable to stockholders of record on a date before the transfer to the name of the Purchaser or its nominee or transferee on the Company's stock transfer records of the Shares accepted for payment pursuant to the Offer, then, subject to the provisions of Section 12, (i) the purchase price per Share payable by the Purchaser pursuant to the Offer will be reduced by the amount of any such cash dividend or cash distribution and (ii) the whole of any such non-cash dividend, distribution or right will be received and held by the tendering stockholder for the account of the Purchaser and shall be required to be promptly remitted and transferred by each tendering stockholder to the Depositary for the account of the Purchaser, accompanied by appropriate documentation of transfer. Pending such remittance, the Purchaser will be entitled to all rights and privileges as owner of any such non-cash dividend, distribution or right and may withhold the entire purchase price or deduct from the purchase price the amount or value thereof, as determined by the Purchaser in its sole discretion. The Company has agreed in the Merger Agreement not to take any of the foregoing actions without the prior written consent of CECI. 15. CERTAIN LEGAL MATTERS. Except as otherwise disclosed herein, on the basis of an examination of publicly available filings with respect to the Company, the Purchaser is not aware of any licenses or other regulatory permits which appear to be material to the business of the Company and which might be adversely affected by the acquisition of Shares by the Purchaser pursuant to the Offer or of any approval or other action by any governmental, administrative or regulatory agency or authority which would be required for the acquisition or ownership of Shares by the Purchaser as contemplated herein. Should any such approval or other action be required, it is currently contemplated that such approval or action would be sought. The Purchaser is unable to predict whether it may determine that it is required to delay the acceptance for payment of Shares pursuant to the Offer pending such approval or other action. There cannot be any assurance that any such approval or other action, if needed, would be obtained without 28 substantial conditions or that adverse consequences might not result to the Company's business or that certain parts of the Company's business might not have to be disposed of if such approvals were not obtained or such other actions were not taken, any of which could cause the Purchaser to elect to terminate the Offer pursuant to Section 12. Pending Litigation. On October 3, 1994, the Company filed a complaint entitled Magma Power Company v. California Energy Company, Inc., Case No. CV-N-94-06160, against CECI in the Second Judicial District Court of the State of Nevada in and for the County of Washoe. The complaint seeks a declaratory judgment that (i) the Company's Board properly discharged its fiduciary obligations in adopting the Rights Agreement and an amendment to the Company's Bylaws and, accordingly, such documents were valid and binding, and (ii) the Merger Moratorium Statute is valid and not in violation of the Commerce Clause and Supremacy Clause of the United States Constitution. CECI removed this action to the United States District Court for the District of Nevada (Case No. CV-N-94-00719-DWH). On October 17, 1994, CECI filed its answer and counterclaims in response to the Company's complaint. The counterclaims name the Purchaser as an additional counterclaim plaintiff and the Company's directors as counterclaim defendants in addition to the Company. CECI's counterclaims seek primarily: (i) a declaratory judgment that certain actions taken by the Company, including the amendment to the Company's Bylaws purporting to preclude the Company stockholders from taking action by written consent, and implementation of its "poison pill" Rights Agreement, are void and ultra vires, and constitute a breach of fiduciary duty by the Company's Board; (ii) an injunction requiring the Company's Board to rescind the amendment to the Company's Bylaws which purports to eliminate the power of stockholders to act by written consent, the "golden parachute" severance agreements granted to 15 members of the Company's management and the indemnification agreements granted to each member of the Company's Board; (iii) an injunction enjoining the operation of the "poison pill" Rights Agreement and directing the Company's Board to redeem the "Rights" provided for in that Agreement; (iv) a declaratory judgment that the Merger Moratorium Statute is unconstitutional under the Supremacy Clause and the Commerce Clause of the United States Constitution; (v) an injunction enjoining the Company's Board from invoking the terms of the Merger Moratorium Statute or otherwise obstructing the Offer; and (vi) an injunction requiring the Company to correct all false and misleading statements in the Previous Schedule 14D-9 and the amendments thereto. On October 17, 1994, the Company filed an amended complaint, which, in addition to the relief requested in its original complaint, seeks (i) declaratory and injunctive relief with respect to certain purportedly false and misleading disclosures in CECI's and the Purchaser's Schedule 14D-1 and the Offer to Purchase therein; and (ii) declaratory and injunctive relief with respect to certain allegedly false and misleading statements made in CECI's preliminary Request Solicitation Statement filed with the Commission pursuant to Section 14(a) of the Exchange Act on October 13, 1994. On October 19, 1994, CECI and the Purchaser filed their answer to the Company's amended complaint and amended their counterclaims which, in addition to the relief requested in the original counterclaims, seek an injunction requiring the Company to correct additional false and misleading statements reflected in an amendment to its Schedule 14D-9 and in other statements made by the Company. On October 25, 1994, CECI and the Purchaser filed their second amended counterclaims which, in addition to the relief requested in the original and amended counterclaims, seek an injunction requiring the Company to refrain from (i) taking actions to damage its international development projects, including the Karaha project, or (ii) taking other actions designed to waste corporate assets and block the Offer and the Merger. On December 8, 1994, the parties to the action filed a stipulation and joint motion requesting that the Court stay all proceedings in the action. The Merger Agreement provides that the parties will hereafter request that the Court dismiss the action without prejudice. On September 20, 1994, William Steiner, a stockholder of the Company, filed a class action complaint entitled William Steiner, et al. v. Paul M. Pankratz, et al., Case No. 680986, against the Company and its 29 directors in the Superior Court of the State of California in and for the County of San Diego, alleging, among other things, that the Company's stockholders have been, and continue to be, deprived of the opportunity to fully realize the benefits of their investment in the Company as a result of the directors' refusal to properly consider CECI's offer for the Company, which actions are alleged to constitute unfair dealing and a breach of fiduciary duty. As relief, the complaint seeks an order directing the Company's directors to carry out their fiduciary duties to the Company's stockholders by cooperating fully with CECI or any other entity making a bona fide offer for the Company, as well as damages and costs. On December 2, 1994, defendants in William Steiner filed a motion to stay the proceedings in this case in light of the parallel litigation pending in the Nevada courts. On October 4, 1994, Charles Miller, a stockholder of the Company, filed a class action complaint entitled Charles Miller, et al. v. Magma Power Company, et al., Case No. CV94-06187, against the Company, its directors and The Dow Chemical Company in the Second Judicial District Court of the State of Nevada in and for the County of Washoe, alleging, among other things, that the defendants' unwillingness to seriously consider CECI's proposal to acquire the Company and its implementation of defensive measures constitute breaches of the fiduciary duty owed to the Company's stockholders. As relief, the complaint seeks a declaration that defendants have breached their fiduciary duties, an order directing the defendants to fairly evaluate alternatives designed to maximize value for the Company's stockholders, and an injunction with respect to the implementation of the Company's "poison pill" or other defensive measures, as well as damages and costs. On November 2, 1994, the plaintiffs in Charles Miller voluntarily dismissed their state court action, in favor of bringing an action in the United Stated District Court for the District of Nevada. On October 28, 1994, stockholders William Steiner and Charles Miller filed a class action complaint entitled William Steiner and Charles Miller v. Magma Power Co., Case No. CV-N-94-773-ECR, against the Company, its directors and The Dow Chemical Company, in the United States District Court for the District of Nevada, alleging essentially the same facts as in the two previously filed stockholder litigations. As relief, the complaint seeks an order directing the defendants to fairly evaluate alternatives designed to maximize shareholder value, an injunction with respect to implementation of the Company's Poison Pill, declaration that the Company has violated Sections 14(d) and 14(e) of the Exchange Act, and an injunction barring the defendants from engaging in any solicitations in opposition to CECI until they comply with the provisions of the Exchange Act, as well as damages and costs. On November 18, 1994, the court granted a motion by the plaintiffs in Steiner and Miller to consolidate this action for all pretrial purposes with Magma Power Company v. California Energy Company, Inc, et al. State Takeover Laws. The Company is incorporated under the laws of the State of Nevada. In connection with its approval of the Offer and the Merger, the Company's Board acted to render inapplicable to the Offer and the Merger Sections 78.378 through 78.3793, inclusive (the "Control Share Statute"), and Sections 78.411 through 78.444, inclusive (the "Merger Moratorium Statute"), of the NGCL, which, under certain circumstances, could have, among other things, (i) precluded CECI and the Purchaser from voting Shares purchased pursuant to the Offer and (ii) prevented CECI and the Purchaser from consummating the Merger for a period of at least three years following the purchase of Shares pursuant to the Offer. A number of states (including Nevada) have adopted laws and regulations containing restrictions that apply to offers to acquire securities of corporations which are incorporated and/or have assets, stockholders and/or conduct business therein. In 1982, the United States Supreme Court in Edgar v. Mite Corp. invalidated on constitutional grounds the Illinois Business Takeovers Statute which, as a matter of state securities law, imposed procedural requirements of additional filings, a waiting period and a fairness hearing on tender offers, on the ground that the requirements imposed by the state takeover statute which made takeovers of corporations meeting certain requirements more difficult, conflicted with federal law. The reasoning in that decision is likely to apply to other state takeover statutes that purport to impose similar requirements on the Offer. In 1987, the United States Supreme Court in CTS Corp. v. Dynamics Corp. of America held that the State of Indiana could, as a matter of corporate law and, in particular, those aspects of corporate law 30 concerning corporate governance, constitutionally disqualify a potential acquiror from voting on the affairs of a target corporation, without the prior approval of a majority vote of those stockholders of the corporation who had no interest in the acquisition and who were neither officers nor directors and employees of the corporation, provided that such laws were applicable only to Indiana corporations. (The Control Share Statute, which has been rendered inapplicable to the Offer by the Company's Board, is substantially similar to the statute upheld in CTS Corp.) Subsequently, certain United States District Courts have ruled that state takeover statutes, even of the type upheld in CTS Corp., are unconstitutional insofar as they apply to corporations incorporated outside that state. In TLX Acquisition Corp. v. Telex Corp., a United States District Court in Oklahoma ruled that Oklahoma takeover statutes were unconstitutional insofar as they applied to corporations incorporated outside Oklahoma in that they would subject such corporations to inconsistent regulations. Similarly in Tyson Foods, Inc. v. McReynolds, a United States District Court in Tennessee ruled that four Tennessee takeover statutes were unconstitutional as they applied to corporations incorporated outside Tennessee. This decision was affirmed by the United States Court of Appeals for the Sixth Circuit. The reasoning of these cases may indicate that application of the takeover statutes of states other than Nevada to the Offer could be unconstitutional. Various states, including Nevada, also have enacted merger moratorium statutes that regulate the circumstances under which a corporation may merge or enter into other business combinations with an acquiror of certain percentages of their outstanding stock. In Amanda Acquisition Corp. v. Universal Foods Corp., the United States Court of Appeals for the Seventh Circuit held that the state of Wisconsin could, as a matter of state law, prohibit for a period of three years, a Wisconsin corporation from entering into certain business combinations, including a merger, with a holder of 10% or more of the outstanding stock of the corporation, unless the corporation's Board of Directors had approved the transaction prior to the time the acquiror purchased its 10% interest in the corporation. Certiorari to the United States Supreme Court was denied. (The Merger Moratorium Statute, which has been rendered inapplicable to the Merger by the Company's Board, is substantially similar to the statute upheld in Amanda Acquisition Corp.) The Company and certain of its subsidiaries conduct business in a number of states throughout the United States, some of which have enacted takeover statutes. The Purchaser does not know whether any or all of these statutes will by their terms apply to the Offer. To the extent that state takeover statutes and regulations purport to apply to the Offer and the Merger, and contain provisions that impose requirements that conflict with the United States Constitution or conflict with the federal securities laws applicable to the Offer and the Merger, the Purchaser believes that such statutes and regulations are unconstitutional and/or preempted by federal law. Should the Company, any government agency or official or any other person seek to apply any such statute to the Offer, the Purchaser will take such action as then appears desirable and may contest the validity of such statutes and the application of such statutes to the Offer in appropriate judicial or administrative proceedings. If it is asserted that one or more state takeover laws is applicable to the Offer and an appropriate court does not determine that it is inapplicable or invalid as applied to the Offer, the Purchaser may be required to file certain information with, or receive approvals from, the relevant state authorities, and, if enjoined, the Purchaser may be unable to purchase Shares tendered pursuant to the Offer or may be delayed in consummating the Offer. In the circumstances described above, the Purchaser may not be obliged to purchase any Shares tendered. See Section 12. Antitrust. Under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act"), certain acquisition transactions may not be consummated unless certain information has been furnished to the Federal Trade Commission ("FTC") and the Antitrust Division of the Department of Justice (the "Antitrust Division") and certain waiting period requirements have been satisfied. As a result of termination of the HSR Act waiting period in connection with the Previous Offer, no waiting period is required in connection with the Offer. The Antitrust Division, the FTC and state authorities frequently scrutinize the legality under the antitrust laws of transactions such as the acquisition of Shares pursuant to the Offer. At any time before or after the consummation of any of such transactions, the Antitrust Division, the FTC or state authorities could take such action under the antitrust laws as it deems necessary or desirable in the public interest, 31 including seeking to enjoin the purchase of Shares pursuant to the Offer or otherwise or the consummation of the Merger, or seeking the divestiture of Shares acquired by the Purchaser or the divestiture of substantial assets of the Company. Private parties may also seek to take action under the antitrust laws. The Purchaser believes that the acquisition of Shares pursuant to the Offer will not violate the antitrust laws. However, and notwithstanding termination of the HSR Act waiting period in connection with the Previous Offer, there can not be any assurance that a challenge to the Offer on antitrust grounds will not be made, or if such a challenge is made, what the result will be. See Section 12 for certain conditions of the Offer, including conditions with respect to injunctions and certain governmental actions. 16. FEES AND EXPENSES. Gleacher & Co. Inc. ("Gleacher") is acting as financial advisor to the Purchaser and CECI in connection with the transactions described in this Offer, as Dealer Manager for the Offer and as co-arranger of the debt financing. Lehman Brothers Inc. ("Lehman") is also acting as financial advisor to the Purchaser and CECI and as co-arranger of the debt financing. CECI has agreed to pay Gleacher a fee of (a) $250,000 payable upon the public announcement of an offer to acquire at least 50.1% of the Shares; (b) $500,000 payable 45 calendar days after the commencement of a tender or exchange offer, assuming the offer is outstanding at such time; and (c) $4,000,000 payable upon completion of the direct or indirect acquisition by CECI, whether alone or in partnership with another company, by merger, acquisition of securities, or otherwise, of 50.1% or more of the equity securities of the Company. Any fees payable in (a) or (b) above will be credited against the fee described in (c). CECI has also agreed to pay Gleacher a fee equal to .25% of the principal amount of debt financing arranged in connection with such acquisition. Gleacher will also be reimbursed for its out-of-pocket expenses in connection with its engagement in connection with the Offer, including the reasonable fees and expenses of its counsel. CECI has also agreed to indemnify Gleacher and certain related persons against certain losses, claims, damages or liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. CECI has agreed to pay Lehman a fee of $1,000,000 payable upon the completion of the direct or indirect acquisition by CECI (whether alone or in partnership with another company, by merger, acquisition of securities, or otherwise), of 50.1% or more of the equity securities of the Company or any of the businesses or assets of the Company. CECI has also agreed to pay Lehman a fee equal to .25% of the principal amount of debt financing arranged in connection with such acquisition. CECI has also agreed to indemnify Lehman and certain related persons against certain losses, claims, damages or liabilities and expenses in connection with the Offer, including certain liabilities under the federal securities laws. MacKenzie Partners, Inc. has been retained by the Purchaser to act as the Information Agent in connection with the Offer. The Information Agent may contact holders of Shares by mail, telephone, facsimile, telegraph and personal interviews and may request brokers, dealers and other nominee stockholders to forward materials relating to the Offer to beneficial owners of Shares. The Information Agent will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. In addition, IBJ Schroder Bank & Trust Company has been retained as the Depositary. The Depositary has not been retained to make solicitations or recommendations in its role as Depositary. The Depositary will receive reasonable and customary compensation for its services, will be reimbursed for certain reasonable out-of-pocket expenses and will be indemnified against certain liabilities and expenses in connection therewith, including certain liabilities under the federal securities laws. Neither CECI nor the Purchaser will pay any fees or commissions to any broker or dealer or other person (other than the Dealer Manager and Information Agent) for soliciting tenders of Shares pursuant to the Offer. Brokers, dealers, commercial banks and trust companies will be reimbursed by the Purchaser for customary mailing and handling expenses incurred by them in forwarding offering materials to their customers. 17. MISCELLANEOUS. The Offer is being made to all holders of Shares. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to a state statute. If the Purchaser becomes aware of any state where the making of the Offer is so prohibited, the Purchaser will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any 32 applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such state. In any jurisdiction the securities, blue sky or other laws of which require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of the Purchaser by Gleacher or one or more registered brokers or dealers licensed under the laws of such jurisdiction. The Purchaser has filed with the Commission the Schedule 14D-1, pursuant to Rule 14d-3 under the Exchange Act, furnishing certain additional information with respect to the Offer, and may file amendments thereto. Such Statement and any amendments thereto, including exhibits, may be examined and copies may be obtained from the principal office of the Commission in Washington, D.C. in the manner set forth in Section 8 of this Offer to Purchase. No person has been authorized to give any information or make any representation on behalf of the Purchaser not contained in this Offer to Purchase or in the Letter of Transmittal and, if given or made, such information or representation must not be relied upon as having been authorized. 33 SCHEDULE I DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER, CECI AND PKS The following information sets forth the name, business address and present principal occupation and five year employment history of each of the directors and executive officers of the Purchaser, CECI and PKS. Each of the directors and executive officers is a citizen of the United States. Unless otherwise indicated, the business address of (i) each of the directors and executive Officers of CECI and the Purchaser named below is 10831 Old Mill Road, Omaha, Nebraska 68154 and (ii) each of the directors and executive officers of PKS named below is 1000 Kiewit Plaza, Omaha, Nebraska 68131. Although information is provided herein with respect to PKS, by furnishing such information CECI is expressing no view with respect to whether or not PKS may be deemed to be a control person of CECI. DIRECTORS AND EXECUTIVE OFFICERS OF CECI
NAME AGE POSITION - --------------------- ----- -------------------------------------------------- David L. Sokol ....... 38 President and Chief Executive Officer, Chairman of the Board of Directors, Director Thomas R. Mason ...... 50 Senior Vice President, Engineering, Construction and Operations Steven A. McArthur .. 36 Senior Vice President, General Counsel and Secretary Donald M. O'Shei, Sr. 60 Senior Vice President, Asia Division John G. Sylvia ....... 35 Senior Vice President, Chief Financial Officer and Treasurer Gregory E. Abel ...... 32 Vice President, Chief Accounting Officer and Controller Edward F. Bazemore .. 57 Vice President, Human Resources David W. Cox ......... 38 Vice President, Legislative and Regulatory Affairs Vincent B. Fesmire .. 53 Vice President, Development and Implementation David P. Maystrick .. 43 Vice President, Construction Dale R. Schuster .... 42 Vice President, Administration Edgar D. Aronson .... 59 Director Judith E. Ayres ...... 49 Director James Q. Crowe ....... 44 Director Richard K. Davidson . 52 Director Ben Holt ............. 80 Director Richard R. Jaros .... 42 Director Everett B. Laybourne 82 Director Herbert L. Oakes, Jr. 47 Director Walter Scott, Jr. ... 62 Director Barton W. Shackelford 73 Director David E. Wit ......... 32 Director
David L. Sokol, 38, Chairman of the Board of Directors, President and Chief Executive Officer. Mr. Sokol has served as President and Chief Executive Officer of CECI since April 19, 1993, as Chairman of the Board of Directors since May 5, 1994 and has been a director of CECI since March 1991. Formerly, Mr. Sokol was Chairman, President and Chief Executive Officer of CECI from February 1991 until January 1992. Mr. Sokol has served as Chairman, President and Chief Executive Officer of the Purchaser since its formation on September 22, 1994. Mr. Sokol was the President and Chief Operating Officer of, and a director of, JWP, Inc., from January 27, 1992 to October 1, 1992. From November 1990 until February 1991, Mr. Sokol was the President and Chief Executive Officer of Kiewit Energy Company, the largest stockholder of CECI and a wholly owned subsidiary of PKS. From 1983 to November 1990, Mr. Sokol was the President and Chief Executive Officer of Ogden Projects, Inc. S-1 Thomas R. Mason, 50, Senior Vice President, Engineering, Construction and Operations. Mr. Mason joined CECI in March 1991. From October 1989 to March 1991, Mr. Mason was Vice President and General Manager of Kiewit Energy Company. Mr. Mason acted as a consultant in the energy field from June 1988 to October 1989. Prior to that, Mr. Mason was Director of Marketing for Energy Factors, Inc., a non-utility developer of power facilities. Steven A. McArthur, 36, Senior Vice President, General Counsel and Secretary. Mr. McArthur joined CECI in February 1991. Mr. McArthur has served as a director, Senior Vice President, General Counsel and Secretary of the Purchaser since its formation on September 22, 1994. From 1988 to 1991 he was an attorney in the Corporate Finance Group at Shearman & Sterling in San Francisco. From 1984 to 1988 he was an attorney in the Corporate Finance Group at Winthrop, Stimson, Putnam & Roberts in New York. Donald M. O'Shei, Sr., 60, Senior Vice President, Asia Division and President, CE International, Ltd. General O'Shei was in charge of engineering and operations for CECI from October 1988 until October 1991. He rejoined CECI as a Vice President in August 1992. Previously he was President and Chief Executive Officer of AWD Technologies, Inc., a hazardous waste remediation firm, and President and General Manager of its predecessor company, Atkinson-Woodward Clyde. He was a brigadier general in the U.S. Army prior to joining the Guy F. Atkinson Co. in 1982 as Director of Corporate Planning and Development. John G. Sylvia, 35, Senior Vice President, Chief Financial Officer and Treasurer. Mr. Sylvia joined CECI in 1988. Mr. Sylvia has served as a director, Senior Vice President, Chief Financial Officer and Treasurer of the Purchaser since its formation on September 22, 1994. From 1985 to 1988, Mr. Sylvia was a Vice President in the San Francisco office of the Royal Bank of Canada, with responsibility for corporate and capital markets banking. From 1986 to 1990, Mr. Sylvia served as an Adjunct Professor of Applied Economics at the University of San Francisco. From 1982 to 1985, Mr. Sylvia was a Vice President with Bank of America. Gregory E. Abel, 32, Vice President, Chief Accounting Officer and Controller. Mr. Abel joined CECI in 1992. Mr. Abel is a Chartered Accountant and from 1984 to 1992 he was employed by Price Waterhouse. As a Manager in the San Francisco office of Price Waterhouse, he was responsible for clients in the energy industry. Edward F. Bazemore, 57, Vice President, Human Resources. Mr. Bazemore joined CECI in July 1991. From 1989 to 1991, he was Vice President, Human Resources, at Ogden Projects, Inc. in New Jersey. Prior to that, Mr. Bazemore was Director of Human Resources for Ricoh Corporation, also in New Jersey. Previously, he was Director of Industrial Relations for Scripto, Inc. in Atlanta, Georgia. David W. Cox, 38, Vice President, Legislative and Regulatory Affairs. Mr. Cox joined CECI in 1990. From 1987 to 1990 Mr. Cox was a Vice President with Bank of America N.T. & S.A. in the Consumer Technology and Finance Group. From 1984 to 1987, Mr. Cox held a variety of management positions at First Interstate Bank. Vincent B. Fesmire, 53, Vice President, Development and Implementation. Mr. Fesmire joined the Company in October 1993. Prior to joining CECI, Mr. Fesmire was employed for 19 years with Stone & Webster, an engineering firm, serving in various management level capacities with an expertise in geothermal design engineering. David P. Maystrick, 43, Vice President, Construction. Mr. Maystrick joined the Company in April 1994. From 1978 to 1994, Mr. Maystrick was employed as Senior Project Manager with HDR Engineering, Inc. and was responsible for implementing and monitoring several full service contracts to design, to construct, and to operate electric and steam generating facilities. From 1974 to 1977, Mr. Maystrick was a design engineer of fossil fuel and nuclear power plants at Gibbs & Hill, Inc. Dale R. Schuster, 42, Vice President, Administration. Mr. Schuster joined CECI in July 1994. From 1991 until joining CECI, he was Senior Vice President and General Manager of AutoInfo, Inc., a software development and information systems company, and prior to that, Vice President and General Manager of ValCom, Inc. S-2 Edgar D. Aronson, 59. Mr. Aronson has been a director of CECI since April 1983. Mr. Aronson founded EDACO Inc., a private venture capital company, in 1981, and has been President of EDACO since that time. Prior to that, Mr. Aronson was Chairman, Dillon, Read International from 1979 to 1981 and a General Partner in charge of the International Department at Salomon Brothers Inc from 1973 to 1979. Judith E. Ayres, 49. Ms. Ayres has been a director of CECI since July 1990. Since 1989 Ms. Ayres has been Principal of The Environmental Group, an environmental consulting firm in San Francisco, California. From 1988 to 1989, Ms. Ayres was a Vice President/Principal of William D. Ruckelshaus Associates, an environmental consulting firm. From 1983 to 1988 Ms. Ayres was the Regional Administrator of Region 9 (Arizona, California, Hawaii, Nevada and the Western Pacific Islands) of the United States Environmental Protection Agency. James Q. Crowe, 44. Mr. Crowe has been a director of CECI since March 1991. Mr. Crowe is Chairman and Chief Executive Officer of MFS Communications Company, Inc., a publicly traded company in which PKS holds a majority ownership interest. Prior to assuming his current position in 1991, Mr. Crowe was President of Kiewit Industrial Company, a [major] subsidiary of PKS. Before joining Kiewit Industrial Company in 1986, Mr. Crowe was Group Vice President, Power Group at Morrison-Knudsen Corporation. Mr. Crowe is a director of C-TEC Corporation, a publicly traded company in which PKS holds a majority ownership interest. Richard K. Davidson, 52. Mr. Davidson was appointed a director of CECI in March 1993. Mr. Davidson has been Chairman and Chief Executive Officer of Union Pacific Railroad since 1991. From 1989 to 1991 he was Executive Vice President--Operations of Union Pacific Railroad, and from 1986 to 1989 he was Vice President--Operations of Union Pacific Railroad. Mr. Davidson is also a director of FirsTier Financial, Inc., Chicago & Northwestern Holdings Corporation and Missouri Pacific Railroad Company. Ben Holt, 80. Mr. Holt has been a director of CECI since September 1993. Mr. Holt is the founder, and was Chairman and Chief Executive Officer, of The Ben Holt Co., an engineering firm located in Pasadena, California, which CECI acquired in September 1993. Mr. Holt retired as Chairman and CEO of The Ben Holt Co. in December 1993 and is currently a consultant to CECI. Mr. Holt is a beneficial owner of 3,763 Shares, representing less than 1% of the outstanding Shares. Richard R. Jaros, 42. Mr. Jaros has been a director of CECI since March 1991. Mr. Jaros served as Chairman of the Board from April 19, 1993 to May 5, 1994 and served as President and Chief Operating Officer of CECI from January 8, 1992 to April 19, 1993. From 1990 until January 8, 1992, Mr. Jaros served as a Vice President of PKS and is currently an Executive Vice President and a director of PKS. Mr. Jaros serves as a director of MFS Communications Company, Inc. and C-TEC Corporation, both of which are publicly traded companies in which PKS holds a majority ownership interest. From 1986 to 1990, Mr. Jaros served as a Vice President for Mergers and Acquisitions for Kiewit Holdings, a subsidiary of PKS. Everett B. Laybourne, 82. Mr. Laybourne has been a director of CECI since May 1988. For many years he served as counsel for a number of major publicly-held corporations. He also presently serves as a Vice President and Trustee of The Ralph M. Parsons Foundation and as National Board Chairman of WAIF, Inc. From 1969 to 1988, Mr. Laybourne was senior partner in the law firm of MacDonald, Halsted & Laybourne in Los Angeles, California, whose successor firm was Baker & McKenzie to which he acted for five years in an of counsel capacity. He continues in the practice of law in Los Angeles. Herbert L. Oakes, Jr., 47. Mr. Oakes has been a director of CECI since October 1987. In 1982, Mr. Oakes founded and became President of H.L. Oakes & Co., Inc., a corporate advisor and dealer in securities. From 1988 to the present, Mr. Oakes has served as a Managing Director of Oakes, Fitzwilliams, Co., Limited, a member of the Securities and Futures Authority Limited and The London Stock Exchange. Mr. Oakes is a director of Shared Technologies, Inc., Harcor Energy Inc. and New World Power Corporation. Walter Scott, Jr., 62. Mr. Scott has been a director of CECI since June 1991. Mr. Scott was the Chairman and Chief Executive Officer of CECI from January 8, 1992 until April 19, 1993. Mr. Scott is S-3 Chairman and President of PKS, a position he has held since 1979. Mr. Scott is a director of Berkshire Hathaway, Inc., Burlington Resources, Inc., ConAgra, Inc., FirsTier Financial, Inc., and Valmont Industries, Inc. Mr. Scott also serves as a director of MFS Communications Company, Inc. and C-TEC Corporation, both publicly traded companies in which PKS holds a majority ownership interest. Barton W. Shackelford, 73. Mr. Shackelford has been a director of CECI since June 1986. Mr. Shackelford served as President and a director of Pacific Gas & Electric Company from 1979 until his retirement in 1985. He is a director of Harding Associates, Inc. David E. Wit, 32. Mr. Wit has been a director of CECI since April 1987. He is co-founder and Co-Chief Executive Officer of Logicat, Inc., a software development/publishing firm. Prior to working at Logicat, Inc. Mr. Wit worked at E.M. Warburg, Pincus & Company, where he analyzed seed-stage financing and technology investments. DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER The names of each director of the Purchaser are set forth below. The other required information with respect to each such person is set forth under "Directors and Executive Officers of CECI" above.
NAME AGE ------------------ ----- David L. Sokol ............................... 38 Steven A. McArthur ............................ 36 John G. Sylvia ................................ 35
All current executive officers of CECI hold the same offices at the Purchaser. See "Directors and Executive Officers of CECI" above. DIRECTORS AND EXECUTIVE OFFICERS OF PKS Richard W. Colf, 51. Mr. Colf became a director of PKS in 1994. Mr. Colf has been a director of Kiewit Construction Group Inc. since 1992 and a Vice President of Kiewit Pacific since 1987. James Q. Crowe (see "Directors and Executive Officers of CECI" above). Robert B. Daugherty, 72. Mr. Daugherty has been a director of PKS since 1986. He serves as Chairman of the Board of Valmont Industries, Inc. and is a director of KN Energy, Inc. Mr. Daugherty's business address is 8805 Indian Hill Drive, Guarantee Centre, Suite 225, Omaha, Nebraska 68114. Richard Geary, 59. Mr. Geary has been a director of PKS since 1988. Mr. Geary is employed as an Executive Vice President of KCG and President of Kiewit Pacific Co., a subsidiary of PKS. Bruce E. Grewcock, 40. Mr. Grewcock became a director of PKS in 1994. Mr. Grewcock has been President (since 1992), a Senior Vice President (1992-1992), and a Vice President (1987-1991) of Kiewit Mining Group Inc., a subsidiary of PKS. Charles M. Harper, 66. Mr. Harper has been a director of PKS since 1986. Mr. Harper is the Chairman of the Board and Chief Executive Officer of RJR Nabisco Holdings Corp. and formerly served as the Chairman of the Board of ConAgra, Inc. Mr. Harper's business address is One Central Park Plaza, Suite 1500, Omaha, Nebraska 68102. Richard R. Jaros (see "Directors and Executive Officers of CECI" above). Robert E. Julian 55. Mr. Julian has been a director since 1987, Executive Vice President-Chief Financial Officer of PKS since 1991 and Vice President-Chief Financial Officer of PKS from 1989 to 1991. Mr. Julian was Vice President-Chief Financial Officer of PKS from 1984 to 1991. Mr. Julian is a director of Kiewit Diversified Group Inc., a wholly owned subsidiary of PKS ("KDG"). In addition, Mr. Julian has been a director of MFS Communications Company since January 1992 and of C-TEC Corporation since December 1993. Leonard W. Kearney, 53. Mr. Kearney has been a director of PKS since 1989. He is the President of Kiewit Construction Company and Kiewit Western Co. and a Vice President of KDG. S-4 Peter Kiewit, Jr., 68. Mr. Kiewit has been a director of PKS since 1966 and is Of Counsel to the law firm of Gallagher & Kennedy, Phoenix, Arizona. Walter Scott (see "Directors and Executive Officers of CECI" above). Kenneth E. Stinson, 52. Mr. Stinson has been an Executive Vice President of PKS since 1991 and a director of PKS since 1987. He formerly served as a Vice President of PKS. He has been the President of Kiewit Construction Group Inc., an affiliate of PKS ("KCG"), since 1992 and a director of such company since 1986. In addition, Mr. Stinson served as President of Kiewit Coal Properties Inc., an affiliate of PKS from 1989 to 1992 and a director of such company since prior to 1988. Mr. Stinson is also a director of KDG, MFS Communications Company, Inc. and C-TEC Corporation. George B. Toll, Jr., 58. Mr. Toll is a director of PKS and serves as an Executive Vice President of KDG. S-5 Facsimile copies of the Letter of Transmittal will be accepted. The Letter of Transmittal and certificates for Shares and any other required documents should be sent or delivered by each stockholder or his broker, dealer, commercial bank, trust company or other nominee to the Depositary at one of its addresses set forth below: The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY Telephone Number: (212) 858-2103
By Mail: By Facsimile: By Hand or P.O. Box 84 (212) 858-2611 Overnight Delivery: Bowling Green Station Attn: Reorganization One State Street New York, New York 10274-0084 Operations Department New York, New York 10004 Attn: Reorganization Operations Attn: Reorganization Department Operations Department Confirm Facsimile by Telephone: (212) 858-2103
Questions and requests for assistance may be directed to the Information Agent or to the Dealer Manager at their respective addresses and telephone numbers set forth below. Requests for additional copies of this Offer to Purchase, the Letter of Transmittal and other tender offer materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Collect) or CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: GLEACHER & CO. INC. 660 Madison Avenue New York, New York 10021 (212) 418-4206 EX-99.(A)(2) 3 LETTER OF TRANSMITTAL LETTER OF TRANSMITTAL TO TENDER SHARES OF COMMON STOCK OF MAGMA POWER COMPANY AT $39.00 NET PER SHARE PURSUANT TO THE OFFER TO PURCHASE DATED DECEMBER 9, 1994 BY CE ACQUISITION COMPANY, INC. A WHOLLY OWNED SUBSIDIARY OF CALIFORNIA ENERGY COMPANY, INC. - ------------------------------------------------------------------------------- THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. - ------------------------------------------------------------------------------- The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY Telephone Number: (212) 858-2103
By Mail: Facsimile Number: By Hand or Overnight Delivery: P.O. Box 84 (212) 858-2611 One State Street Bowling Green Station Attn: Reorganization Operations New York, New York 10004 New York, New York 10274-0084 Department Attn: Reorganization Operations Attn: Reorganization Operations Department Department Confirm Facsimile by Telephone: (212) 858-2103
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN THE ONE LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED. This Letter of Transmittal is to be completed by stockholders either if certificates for Shares ("Share Certificates") are to be forwarded herewith or if delivery is to be made by book-entry transfer to the account maintained by the IBJ Schroder Bank & Trust Company (the "Depositary") at The Depository Trust Company ("DTC"), Midwest Securities Trust Company ("MSTC") or Philadelphia Depository Trust Company ("PHDTC") (collectively, the "Book-Entry Transfer Facilities") pursuant to the procedures set forth in Section 4 of the Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), of CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc., a Delaware corporation ("CECI"). If a stockholder desires to accept the Offer and tender Shares pursuant to the Offer and such stockholder's Share Certificates are not immediately available or time will not permit all required documents to reach the Depositary prior to the expiration of the Offer (the "Expiration Date"), or the procedures for book-entry transfer cannot be completed on a timely basis, such Shares may nevertheless be tendered if the guaranteed delivery procedures set forth in Section 4 of the Offer to Purchase are followed. See Instruction 2. DELIVERY OF DOCUMENTS TO A BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY. NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY.
DESCRIPTION OF SHARES TENDERED - --------------------------------------------------------------------------------------------------------------------------- NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) (PLEASE FILL IN, IF BLANK) SHARE CERTIFICATE(S) TENDERED (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY) - -------------------------------------------- ----------------------------------------------------------------------------- TOTAL NUMBER OF SHARES SHARE CERTIFICATE REPRESENTED BY SHARE NUMBER OF SHARES NUMBER(S)* CERTIFICATE(S)* TENDERED** ------------------------ ---------------------------- --------------------- ------------------------ ---------------------------- --------------------- ------------------------ ---------------------------- --------------------- ------------------------ ---------------------------- --------------------- ------------------------ ---------------------------- --------------------- TOTAL SHARES: - -------------------------------------------- ------------------------ ---------------------------- --------------------- * Need not be completed by stockholders tendering by book-entry transfer. ** Unless otherwise indicated, it will be assumed that all Shares described above are being tendered. See Instruction 4. - -----------------------------------------------------------------------------------------------------------------
[ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO THE ACCOUNT MAINTAINED BY THE DEPOSITARY WITH A BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING: Name of Tendering Institution --------------------------------------------------------------------------- Check box of Book-Entry Transfer Facility: [ ] DTC [ ] MSTC [ ] PHDTC Account Number --------------------------------------------------------------------------- Transaction Code Number --------------------------------------------------------------------------- [ ] CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE FOLLOWING: Name(s) of Registered Owner(s) -------------------------------------------------------------------------- Date of Execution of Notice of Guaranteed Delivery -------------------------------------------------------------------------- Window Ticket Number (If Any) -------------------------------------------------------------------------- Name of Institution which Guaranteed Delivery -------------------------------------------------------------------------- If delivery is by book-entry transfer, check one box: [ ] DTC [ ] MSTC [ ] PHDTC PLEASE ENCLOSE A PHOTOCOPY OF SUCH NOTICE OF GUARANTEED DELIVERY NOTE: SIGNATURES MUST BE PROVIDED BELOW. PLEASE READ CAREFULLY THE ACCOMPANYING INSTRUCTIONS. Ladies and Gentlemen: The undersigned hereby tenders to CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc., a Delaware corporation ("CECI"), the above described shares of common stock, par value $0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation (the "Company"), pursuant to the Purchaser's offer to purchase 12,400,000 Shares at a price of $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase") (receipt of which is hereby acknowledged) and in this Letter of Transmittal (which together with the Offer to Purchase constitutes the "Offer"). The undersigned understands that the Purchaser reserves the right to transfer or assign, in whole and from time to time in part, to one or more direct or indirect subsidiaries of CECI, the right to purchase Shares tendered pursuant to the Offer, but any such transfer or assignment will not relieve the Purchaser of its obligations under the Offer or prejudice the rights of tendering stockholders to receive payment for Shares validly tendered and accepted for payment pursuant to the Offer. Subject to, and effective upon, acceptance for payment of the Shares tendered herewith in accordance with the terms and subject to the conditions of the Offer, the undersigned hereby sells, assigns and transfers to, or upon the order of, the Purchaser all right, title and interest in and to all the Shares that are being tendered hereby and that are being accepted for purchase pursuant to the Offer (and any and all dividends, distributions, stock splits, other Shares, rights or other securities issued or issuable in respect of the Shares on or after December 9, 1994) which are payable or distributable to stockholders of record on a date prior to the transfer into the name of the Purchaser or its nominees or transferees on the Company's stock transfer records of the Shares purchased pursuant to the Offer (a "Distribution"), and irrevocably constitutes and appoints the Depositary the true and lawful attorney-in-fact and proxy of the undersigned with respect to such Shares (and any dividends, distributions, other Shares, rights or securities, including Distributions) with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to (a) deliver certificates for such Shares (and any such dividends, distributions, other Shares, rights or securities, including Distributions), or transfer ownership of such Shares on the account books maintained by a Book-Entry Transfer Facility, together in either such case with all accompanying evidences of transfer and authenticity, to or upon the order of the Purchaser upon receipt by the Depositary, as the undersigned's agent, of the purchase price (adjusted, if appropriate, as provided in the Offer to Purchase), (b) present such Shares (and any dividends, distributions, other Shares, rights or securities, including Distributions) for transfer on the books of the Company and (c) receive all benefits and otherwise exercise all rights of beneficial ownership of such Shares (and any such dividends, distributions, other Shares, rights or securities, including Distributions), all in accordance with the terms of the Offer. The undersigned hereby irrevocably appoints David L. Sokol, Steven A. McArthur and John G. Sylvia and each of them, or any other designees of the Purchaser, the attorneys-in-fact and proxies of the undersigned, each with full power of substitution and resubstitution (such power of attorney being deemed to be an irrevocable power coupled with an interest), to vote or act by written consent in such manner as each such attorney and proxy or his substitute shall in his sole discretion deem proper, and otherwise to act with respect to all the Shares tendered hereby that have been accepted for payment by the Purchaser prior to the time of such vote or action (and any and all non-cash dividends, distributions, other Shares, rights or securities issued or issuable in respect thereof on or after December 9, 1994), at any meeting of stockholders (whether regular or special and whether or not an adjourned meeting) of the Company, or consent in lieu of any such meeting, or otherwise. All such powers of attorney and proxies are irrevocable and coupled with an interest in the tendered Shares and are granted in consideration of, and are effective when, and only to the extent that, the Purchaser accepts such Shares for payment. Such acceptance for payment shall revoke any other proxies granted by the undersigned at any time with respect to such Shares (and any such non-cash dividends, distributions, other Shares, rights or other securities, including Distributions) and no subsequent proxies or written consents will be given (and if given will be deemed not to be effective) with respect thereto by the undersigned. The undersigned hereby represents and warrants that the undersigned has full power and authority to tender, sell, assign and transfer the Shares tendered hereby (and any and all dividends, distributions, other Shares, rights or other securities issued or issuable in respect thereof, including Distributions, on or after December 9, 1994) and that, when the same are accepted for payment by the Purchaser, the Purchaser will acquire good and unencumbered title thereto, free and clear of all pledges, liens, restrictions, charges, proxies and encumbrances and the same will not be subject to any adverse claim. Upon request, the undersigned will execute and deliver any additional documents deemed by the Depositary or the Purchaser to be necessary or desirable to complete the sale, assignment and transfer of the Shares tendered hereby (and any and all dividends, distributions, such other Shares, rights or other securities, including Distributions). In addition, the undersigned shall promptly remit and transfer to the Depositary for the account of the Purchaser any and all other Shares or other securities, including Distributions, issued to the undersigned on or after December 9, 1994 in respect of Shares tendered hereby, accompanied by appropriate documentation of transfer, and, pending such remittance or appropriate assurance thereof, the Purchaser shall be entitled to all rights and privileges as owner of any such other Shares or other securities and may withhold the entire consideration or deduct from the consideration the amount or value thereof, as determined by the Purchaser in its sole discretion. All authority herein conferred or agreed to be conferred in this Letter of Transmittal shall not be affected by, and shall survive, the death or incapacity of the undersigned and any obligation of the undersigned hereunder shall be binding upon the successors, assigns, heirs, executors, administrators and legal and personal representatives of the undersigned. Except as stated in the Offer to Purchase and the Letter of Transmittal, this tender is irrevocable. The undersigned understands that tenders of Shares pursuant to any one of the procedures described in the Offer to Purchase and in the instructions hereto will constitute a binding agreement between the undersigned and the Purchaser upon the terms and subject to the conditions of the Offer. Unless otherwise indicated herein under "Special Payment Instructions," please issue the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment in the name(s) of the registered holder(s) appearing under "Description of Shares Tendered." Similarly, unless otherwise indicated under "Special Delivery Instructions," please mail the check for the purchase price and/or return any certificates for Shares not tendered or accepted for payment (and accompanying documents, as appropriate) to the registered holder(s) appearing under "Description of Shares Tendered" at the address shown below the undersigned's signature. If both the Special Delivery Instructions and the Special Payment Instructions are completed, please issue the check for the purchase price, and/or return any certificates for Shares not tendered or accepted for payment in the name of, and deliver said certificates and check and return such certificates to, the person or persons so indicated. Stockholders delivering Shares by book-entry transfer may request that any Shares not accepted for payment be returned by crediting such account maintained at a Book-Entry Transfer Facility as such stockholder may designate by making an appropriate entry under "Special Payment Instructions." The undersigned recognizes that the Purchaser has no obligation pursuant to the Special Payment Instructions to transfer any Shares from the name of the registered holder thereof if the Purchaser does not accept for payment any of the Shares so tendered. SPECIAL PAYMENT INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be issued in the name of someone other than the undersigned, or if the Shares delivered by book-entry transfer which are not purchased are to be returned by credit to an account maintained at a Book-Entry Transfer Facility other than that designated above. Issue [ ] check [ ] Certificate(s) to: Name - ----------------------------------------------------------------------------- (Please Print) Address - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- (Include Zip Code) - ----------------------------------------------------------------------------- (Tax Identification or Social Security No.) (See Substitute Form W-9 on the reverse hereof) [ ] Credit unpurchased Shares delivered by book-entry transfer to the Book-Entry Transfer Facility account set forth below: Check appropriate box: [ ] DTC [ ] MSTC [ ] PHDTC - ----------------------------------------------------------------------------- (Account Number) SPECIAL DELIVERY INSTRUCTIONS (SEE INSTRUCTIONS 1, 5, 6 AND 7) To be completed ONLY if certificates for Shares not tendered or not purchased and/or the check for the purchase price of Shares purchased are to be sent to someone other than the undersigned, or to the undersigned at an address other than that shown above. Mail [ ] check [ ] Certificate(s) to: Name - ----------------------------------------------------------------------------- (Please Print) Address - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- (Include Zip Code) - ----------------------------------------------------------------------------- (Tax Identification or Social Security No.) (See Substitute Form W-9 on the reverse hereof) STOCKHOLDERS SIGN HERE - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- SIGNATURE(S) OF OWNER(S) DATED: _____________ IMPORTANT: COMPLETE AND SIGN THE SUBSTITUTE FORM W-9 (Must be signed by registered holder(s) exactly as name(s) appear(s) on Share Certificate(s) on a security position listing or by person(s) authorized to become registered holder(s) by certificates and documents transmitted herewith. If signature is by trustees, executors, administrators, guardians, attorneys-in-fact, agents, officers of corporations or others acting in a fiduciary or representative capacity, please provide the following information. See Instruction 5.) Name(s): - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- (Please Print) Capacity (full title): - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Address: - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- (Including Zip Code) Area Code and Telephone Number: - ----------------------------------------------------------------------------- Tax Identification or Social Security Number: - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- GUARANTEE OF SIGNATURE(S) (See Instructions 1 and 5 to determine if required.) Authorized Signature: - ----------------------------------------------------------------------------- Name: - ----------------------------------------------------------------------------- Name of Firm: - ----------------------------------------------------------------------------- Title: - ----------------------------------------------------------------------------- Address: - ----------------------------------------------------------------------------- Area Code and Telephone Number: - ----------------------------------------------------------------------------- Dated: - ----------------------------------------------------------------------------- INSTRUCTIONS FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER 1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of Transmittal is required (i) if this Letter of Transmittal is signed by the registered holder of the Shares (which term, for the purposes of this document, shall include any participant in a Book-Entry Transfer Facility whose name appears on a security position listing as the owner of Shares) tendered herewith, unless such holder has completed either the box entitled "Special Payment Instructions" or the box entitled "Special Delivery Instructions" on the reverse hereof or (ii) if such Shares are to be tendered for the account of a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agent's Medallion Program (collectively, "Eligible Institutions"). In all other cases, all signatures on the Letter of Transmittal must be guaranteed by an Eligible Institution. If the Share Certificates are registered in the name of a person other than the signer of this Letter of Transmittal, or payment of the purchase price is to be made or certificates for unpurchased Shares are to be issued or returned to a person other than the registered owner, then the tendered certificates must be endorsed or accompanied by duly executed stock powers, in either case signed exactly as the name or names of the registered owner or owners appear on the certificates, with the signatures on the certificates or stock powers guaranteed by an Eligible Institution. See Instruction 5. 2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of Transmittal is to be completed by stockholders either if certificates are to be forwarded herewith or if tenders of Shares are to be made pursuant to the procedures for delivery by book-entry transfer set forth in the Offer to Purchase. Certificates for all physically tendered Shares, or timely confirmation of any book-entry transfer into the Depositary's accounts at DTC, MSTC or PHDTC or Shares tendered by book-entry transfer, as the case may be, as well as a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees, or an Agent's Message in the case of a book-entry delivery, and any other documents required by this Letter of Transmittal, must be received by the Depositary at one of its addresses set forth herein on or prior to the Expiration Date (as defined in the Offer to Purchase). Stockholders whose Share Certificates are not immediately available, or who cannot deliver their certificates and all other required documents to the Depositary on or prior to the Expiration Date or who cannot complete the procedures for delivery by book-entry transfer on a timely basis may tender their Shares by properly completing and duly executing the Notice of Guaranteed Delivery pursuant to the guaranteed delivery procedure set forth in the Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by or through an Eligible Institution, (ii) a properly completed and duly executed Notice of Guaranteed Delivery, substantially in the form provided by the Purchaser, must be received by the Depositary on or before the Expiration Date and (iii) the certificates for all tendered Shares or confirmation of any book-entry transfer into the Depositary's account at DTC, MSTC or PHDTC of Shares tendered by book-entry transfer, as the case may be, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof) with any required signature guarantees (or, in the case of a book-entry transfer, an Agent's Message (as defined in the Offer to Purchase)), and all other documents required by this Letter of Transmittal, must be received by the Depositary within six Nasdaq National Market ("NNM") trading days after the date of execution of such Notice of Guaranteed Delivery to the Depositary, as provided in the Offer to Purchase. If Share Certificates are forwarded separately to the Depositary, a properly completed and duly executed Letter of Transmittal (or a facsimile thereof) must accompany each such delivery. THE METHOD OF DELIVERY OF SHARE CERTIFICATES, THIS LETTER OF TRANSMITTAL AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH A BOOK-ENTRY TRANSFER FACILITY, IS AT THE OPTION AND RISK OF THE TENDERING STOCKHOLDER AND, EXCEPT AS OTHERWISE PROVIDED IN THIS INSTRUCTION 2, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY. No alternative, conditional or contingent tenders will be accepted and no fractional Shares will be purchased. All tendering stockholders, by execution of this Letter of Transmittal (or facsimile thereof), waive any right to receive any notice of the acceptance of their Shares for payment. 3. INADEQUATE SPACE. If the space provided herein is inadequate, the certificate numbers and/or the number of Shares should be listed on a separate signed schedule attached hereto. 4. PARTIAL TENDERS (NOT APPLICABLE TO STOCKHOLDERS WHO TENDER BY BOOK-ENTRY TRANSFER). If fewer than all the Shares evidenced by any certificate submitted are to be tendered, fill in the number of Shares which are to be tendered in the box entitled "Number of Shares Tendered." In such case, new certificate(s) for the remainder of the Shares that were evidenced by old certificate(s) will be sent to the registered holder, unless otherwise provided in the boxes entitled "Special Payment Instructions" or "Special Delivery Instructions" on this Letter of Transmittal, as soon as practicable after the Expiration Date. All Shares represented by certificates delivered to the Depositary will be deemed to have been tendered unless otherwise indicated. 5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. (a) If this Letter of Transmittal is signed by the registered holder(s) of the Shares tendered hereby, the signature(s) must correspond exactly with the name(s) as written on the face of the certificate(s) without alteration, enlargement or any change whatsoever. (b) If any of the Shares tendered hereby are owned of record by two or more joint owners, all such owners must sign this Letter of Transmittal. (c) If any tendered Shares are registered in different names on several certificates, it will be necessary to complete, sign and submit as many separate Letters of Transmittal as there are different registrations of certificates. (d) If this Letter of Transmittal or any certificates or stock powers are signed by a trustee, executor, administrator, guardian, attorney-in-fact, officer of a corporation or other person acting in a fiduciary or representative capacity, such person should so indicate when signing, and proper evidence satisfactory to the Purchaser of such person's authority so to act must be submitted. (e) When this Letter of Transmittal is signed by the registered holder(s) of the Shares listed and transmitted hereby, no endorsements of certificates or separate stock powers are required unless payment is to be made to, or certificates for Shares not tendered or purchased are to be issued in the name of, a person other than the registered holder(s). Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). (f) If this Letter of Transmittal is signed by a person other than the registered holder(s) of the Shares listed, the certificates must be endorsed or accompanied by appropriate stock powers, in either case signed exactly as the name or names of the registered holder(s) appear on the certificates. Signatures on such certificates or stock powers must be guaranteed by an Eligible Institution (unless signed by an Eligible Institution). 6. STOCK TRANSFER TAXES. Except as set forth in this Instruction 6, the Purchaser will pay or cause to be paid any stock transfer taxes with respect to the transfer and sale of purchased Shares to it or its order pursuant to the Offer. If payment of the purchase price is to be made to, or if certificates for Shares not tendered or purchased are to be registered in the name of, any person other than the registered holder, or if tendered certificates are registered in the name of any person other than the person(s) signing this Letter of Transmittal, the amount of any stock transfer taxes (whether imposed on the registered holder or such other person) payable on account of the transfer to such person will be deducted from the purchase price unless satisfactory evidence of the payment of such taxes or exemption therefrom is submitted. EXCEPT AS PROVIDED IN THIS INSTRUCTION 6, IT WILL NOT BE NECESSARY FOR TRANSFER TAX STAMPS TO BE AFFIXED TO THE CERTIFICATES LISTED IN THIS LETTER OF TRANSMITTAL. 7. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check is to be issued in the name of, and/or certificates for unpurchased Shares are to be returned to, a person other than the signer of this Letter of Transmittal or if a check is to be sent and/or certificates for unpurchased Shares are to be returned to someone other than the signer of this Letter of Transmittal or to an address other than that shown above, the appropriate boxes on this Letter of Transmittal should be completed. Stockholders tendering Shares by book-entry transfer may request that the Shares not purchased be credited to such account maintained at a Book-Entry Transfer Facility as such stockholder may designate hereon. If no such instructions are given, such Shares not purchased will be returned by crediting the account at a Book-Entry Transfer Facility designated above. See Instruction 1. 8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Requests for assistance may be directed to, or additional copies of the Offer to Purchase and the Letter of Transmittal may be obtained from, either the Information Agent or the Dealer Manager at their respective address set forth below or from your broker, dealer, commercial bank or trust company. 9. IRREGULARITIES. All questions as to the validity (including time of receipt) and acceptance for payment of any tender of Shares will be determined by the Purchaser, in its sole discretion, whose determination shall be final and binding. The Purchaser reserves the absolute right to reject any and all tenders determined by it not to be in the appropriate form or the acceptance for purchase of which may, in the opinion of its counsel, be unlawful. As set forth in the Offer to Purchase, the Purchaser also reserves the absolute right to waive any of the conditions of the Offer or any defect or irregularity in the tender of any Shares of any particular stockholder whether or not similar defects or irregularities are waived in the case of other stockholders. The Purchaser's interpretations of the terms and conditions of the Offer (including these instructions) will be final and binding. Unless waived, any defects or irregularities must be cured within such time as the Purchaser shall determine. None of the Purchaser, the Dealer Manager, the Depositary, the Information Agent or any other person will be under any duty to give notice of any defects or irregularities in tenders or shall incur any liability for failure to give any such notification. Tenders shall not be deemed to have been made until all defects and irregularities have been cured or waived. 10. 31% BACKUP WITHHOLDING; SUBSTITUTE FORM W-9. Under federal income tax laws, a stockholder whose tendered Shares are accepted for payment is required to provide the Depositary with such stockholder's correct taxpayer identification number ("TIN") on Substitute Form W-9 below and certify under penalties of perjury that such number is correct and that such stockholder is not subject to backup withholding. If the Depositary is not provided with the correct TIN and certifications are not provided, the Internal Revenue Service may subject the stockholder or other payee to a $50 penalty. In addition, payments that are made to such stockholder or other payee with respect to Shares purchased pursuant to the Offer may be subject to 31% backup withholding. Certain stockholders (including, among others, all corporations and certain foreign individuals) are not subject to these backup withholding and reporting requirements. In order for a foreign individual to qualify as an exempt recipient, the stockholder must submit a Form W-8, signed under penalties of perjury, attesting to that individual's exempt status. A Form W-8 can be obtained from the Depositary. See the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for more instructions. If backup withholding applies, the Depositary is required to withhold 31% of any such payments made to the stockholder or other payee. Backup withholding is not an additional tax. Rather, the tax liability of persons subject to backup withholding will be reduced by the amount of tax withheld. If withholding results in an overpayment of taxes, a refund may be obtained from the Internal Revenue Service. The box in Part 3 of the Substitute Form W-9 may be checked if the tendering stockholder has not been issued a TIN and has applied for a TIN or intends to apply for a TIN in the near future. If the box in Part 3 is checked, the stockholder or other payee must also complete the Certificate of Awaiting Taxpayer Identification Number below in order to avoid backup withholding. Notwithstanding that the box in Part 3 is checked and the Certificate of Awaiting Taxpayer Identification Number is completed, the Depositary will withhold 31% of all payments made prior to the time a properly certified TIN is provided to the Depositary. The stockholder is required to give the Depositary the TIN (e.g., social security number or employer identification number) of the record owner of the Shares or of the last transferee appearing on the transfers attached to, or endorsed on, the Shares. If the Shares are in more than one name or are not in the name of the actual owner, consult the enclosed "Guidelines for Certification of Taxpayer Identification Number on Substitute Form W-9" for additional guidance on which number to report. 11. LOST, DESTROYED OR STOLEN CERTIFICATES. If any certificate(s) representing Shares has been lost, destroyed or stolen, the stockholder should promptly notify the Information Agent. The stockholder will then be instructed as to the steps that must be taken in order to replace the certificate(s). This Letter of Transmittal and related documents cannot be processed until the procedures for replacing lost or destroyed certificates have been followed. IMPORTANT: THIS LETTER OF TRANSMITTAL (OR A FACSIMILE THEREOF) OR AN AGENT'S MESSAGE, TOGETHER WITH CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE DEPOSITARY, OR THE NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE DEPOSITARY, ON OR PRIOR TO THE EXPIRATION DATE. TO BE COMPLETED BY ALL TENDERING STOCKHOLDERS (SEE INSTRUCTION 10)
PAYER'S NAME: IBJ SCHRODER BANK & TRUST COMPANY SUBSTITUTE Form W-9 PART 1 --PLEASE PROVIDE YOUR TIN IN THE Social security number BOX AT RIGHT AND CERTIFY BY SIGNING AND OR ______________________________ DATING BELOW Employer identification number ------------------------------------------------------------------------------------------- Department of PART 2 --CERTIFICATION --UNDER PENALTIES OF PERJURY, I CERTIFY THAT: the Treasury (1) The number shown on this form is my correct Taxpayer Identification Number (or I Internal Revenue Service am waiting for a number to be issued to me); and PAYER'S REQUEST FOR TAXPAYER (2) I am not subject to backup withholding because (i) I am exempt from backup withholding, (ii) I IDENTIFICATION NUMBER (TIN) have not been notified by the Internal Revenue Service (the "IRS") that I am subject to backup withholding as a result of a failure to report all interest or dividends, or (iii) the IRS has notified me that I am no longer subject to backup withholding. CERTIFICATION INSTRUCTIONS -- You must cross out item (2) in part 2 above if you have been notified by the IRS that you are subject to backup withholding because of under-reporting interest or dividends on your tax return. However, if after being notified by the IRS that you were subject to backup withholding you received another notification from the IRS stating that you are no longer subject to backup withholding, do not cross out item (2). ---------------------------------------------------------------------------------------- SIGNATURE ................ DATE ................ PART 3 NAME (Please Print)............................... Awaiting TIN -- [ ]
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS. YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 3 OF SUBSTITUTE FORM W-9. CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER I certify under penalties of perjury that a taxpayer identification number has not been issued to me, and either (i) I have mailed or delivered an application to receive a taxpayer identification number to the appropriate Internal Revenue Service Center or Social Security Administration Office or (ii) I intend to mail or deliver an application in the near future. I understand that if I do not provide a taxpayer identification number within 60 days, 31% of all reportable payments made to me thereafter will be withheld until I provide a number. Signature .................................... Date ............ Name (Please Print) ............................................. FACSIMILE COPIES OF THIS LETTER OF TRANSMITTAL, PROPERLY COMPLETED AND DULY EXECUTED, WILL BE ACCEPTED. THE LETTER OF TRANSMITTAL, CERTIFICATES FOR SHARES AND ANY OTHER REQUIRED DOCUMENTS SHOULD BE SENT OR DELIVERED BY EACH STOCKHOLDER OF THE COMPANY OR HIS BROKER, DEALER, COMMERCIAL BANK, TRUST COMPANY OR OTHER NOMINEE TO THE DEPOSITARY AT ONE OF ITS ADDRESSES SET FORTH ABOVE. Questions and requests for assistance may be directed to the Information Agent or to the Dealer Manager as set forth below. Requests for additional copies of the Offer to Purchase, Letter of Transmittal and other tender offer materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. The Information Agent for the Offer is: MACKENZIE PARTNERS, INC. 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (call collect) OR CALL TOLL FREE (800) 322-2885 The Dealer Manager for the Offer is: GLEACHER & CO. INC. 660 Madison Avenue New York, New York 10021 (212) 418-4206 EX-99.(A)(3) 4 NOTICE OF GUARANTEED DELIVERY NOTICE OF GUARANTEED DELIVERY FOR TENDER OF SHARES OF COMMON STOCK OF MAGMA POWER COMPANY As set forth in Section 4 of the Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), this Notice of Guaranteed Delivery or one substantially equivalent hereto must be used to accept the Offer (as defined below) if certificates representing shares of common stock, par value $0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation (the "Company"), are not immediately available or time will not permit all required documents to reach IBJ Schroder Bank & Trust Company (the "Depositary") on or prior to the Expiration Date (as defined in the Offer to Purchase), or the procedures for delivery by book-entry transfer cannot be completed on a timely basis. This Notice of Guaranteed Delivery may be delivered by hand or sent by telegram, facsimile transmission or mail to the Depositary. The Depositary for the Offer is: IBJ SCHRODER BANK & TRUST COMPANY Telephone Number: (212) 858-2103
By Mail: Facsimile Number: By Hand or Overnight Delivery: P.O. Box 84 (212) 858-2611 One State Street Bowling Green Station Attn: Reorganization Operations New York, New York 10004 New York, New York 10274-0084 Department Attn: Reorganization Operations Attn: Reorganization Operations Department Department Confirm Facsimile by Telephone: (212) 858-2103
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET FORTH ABOVE DOES NOT CONSTITUTE A VALID DELIVERY. This Notice of Guaranteed Delivery is not to be used to guarantee signatures. If a signature on a Letter of Transmittal is required to be guaranteed by an "Eligible Institution" under the instructions thereto (see Instructions 1 and 5 of the Letter of Transmittal), such signature guarantee must appear on the applicable space provided in the signature box on the Letter of Transmittal. Ladies and Gentlemen: The undersigned hereby tenders to CE Acquisition Company, Inc., a Delaware corporation, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal (which together constitute the "Offer"), receipt of which is hereby acknowledged, the number of Shares indicated below pursuant to the guaranteed delivery procedure set forth in Section 4 of the Offer to Purchase.
Number of Shares: Dated: - -------------------------------------------- --------------------------------------- Certificate No(s). (if available): Name(s) of Record Holder(s): - --------------------------------------------- --------------------------------------- - --------------------------------------------- --------------------------------------- - --------------------------------------------- Address(es): --------------------------------------- If Shares will be tendered by book- --------------------------------------- entry transfer, check one box: Area Code and Telephone Number(s): [ ] The Depository Trust Company --------------------------------------- [ ] Midwest Securities Trust Company Signature(s): --------------------------------------- [ ] Philadelphia Depository Trust Company Account Number: --------------------------------------- --------------------------------------------
GUARANTEE (NOT TO BE USED FOR SIGNATURE GUARANTEE) The undersigned, a firm that is a bank, broker, dealer, credit union, savings association or other entity which is a member in good standing of the Securities Transfer Agent's Medallion Program, hereby (a) represents that the tender of Shares effected hereby complies with Rule 14e-4 under the Securities Exchange Act of 1934 and (b) guarantees to deliver to the Depositary, at one of its addresses set forth above, the certificates representing all tendered Shares, in proper form for transfer, or confirmation of a book-entry transfer of such Shares, together with a properly completed and duly executed Letter of Transmittal (or facsimile thereof), with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in the case of book-entry delivery, and any other documents required by the Letter of Transmittal within six Nasdaq National Market ("NNM") trading days after the date of execution of this Notice of Guaranteed Delivery.
Name of Firm: - ---------------------- ------------------------- Authorized Signature Name: Address: ------------------------- - ---------------------- Please type or print - ----------------------- Date: Zip Code ------------------------- Area Code and Telephone Number: - ----------------------
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS NOTICE OF GUARANTEED DELIVERY. CERTIFICATES FOR SHARES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL. EX-99.(A)(4) 5 BROKER-DEALER LETTER GLEACHER & CO. INC. 660 Madison Avenue New York, New York 10021 (212) 418-4206 OFFER TO PURCHASE FOR CASH 12,400,000 SHARES OF COMMON STOCK OF MAGMA POWER COMPANY AT $39.00 NET PER SHARE BY CE ACQUISITION COMPANY, INC. A WHOLLY OWNED SUBSIDIARY OF CALIFORNIA ENERGY COMPANY, INC. - ------------------------------------------------------------------------------- THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. - ------------------------------------------------------------------------------- December 9, 1994 To Brokers, Dealers, Commercial Banks, Trust Companies and Other Nominees: We have been appointed by CE ACQUISITION COMPANY, INC., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc. ("CECI"), to act as the Dealer Manager in connection with its offer to purchase 12,400,000 shares of common stock, par value $0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation (the "Company") at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), and in the related Letter of Transmittal (which together constitute the "Offer") enclosed herewith. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn before the expiration of the Offer that number of Shares which, together with Shares beneficially owned by the Purchaser, represents at least a majority of the Shares outstanding on a fully diluted basis, and (2) the Purchaser being satisfied that it has obtained financing sufficient to enable it to consummate the Offer. Please furnish copies of the enclosed materials to those of your clients for whose accounts you hold Shares registered in your name or in the name of your nominee. Enclosed herewith for your information and for forwarding to your clients for whose accounts you hold Shares registered in your name or in the name of your nominee are copies of the following documents: 1. The Offer to Purchase, dated December 9, 1994; 2. The Letter of Transmittal for your use and for the information of your clients. Facsimile copies of the Letter of Transmittal may be used to tender Shares; 3. A Notice of Guaranteed Delivery to be used to accept the Offer if certificates for Shares are not immediately available or if such certificates and all other required documents cannot be delivered to the Depositary before the expiration of the Offer or if the procedures for book-entry transfer cannot be completed on a timely basis; 4. A printed form of letter which may be sent to your clients for whose account you hold Shares registered in your name or in the name of your nominee, with space provided for obtaining such clients' instructions with regard to the Offer; 5. Guidelines of the Internal Revenue Service for Certification of Taxpayer Identification Number on Substitute Form W-9; and 6. A return envelope addressed to the Depositary. YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS PROMPTLY AS POSSIBLE. THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. In order to accept the Offer, (i) a duly executed and properly completed Letter of Transmittal with any required signature guarantees or any Agent's Message (as defined in the Offer to Purchase), or other documentation should be sent to the Depositary, and (ii) either certificates representing the tendered Shares should be delivered to the Depositary or such Shares should be tendered by book-entry transfer into the Depositary's account maintained at one of the Book-Entry Transfer Facilities (as defined in the Offer to Purchase), all in accordance with the instructions set forth in the Letter of Transmittal and the Offer to Purchase. If holders of Shares wish to tender, but it is impractical for them to forward their certificates for such Shares or other required documentation on or prior to the expiration of the Offer or to comply with the book-entry transfer procedures on a timely basis, a tender may be effected by following the guaranteed delivery procedures specified in Section 4 of the accompanying Offer to Purchase. The Purchaser will not pay any commissions or fees to any broker, dealer or other person (other than the Dealer Manager and the Information Agent, as described in the Offer to Purchase) for soliciting tenders of Shares pursuant to the Offer. The Purchaser will, however, upon request, reimburse you for customary clerical and mailing expenses incurred by you in forwarding any of the enclosed materials to your clients. The Purchaser will pay or cause to be paid any stock transfer taxes payable on the transfer of Shares to it, except as otherwise provided in Instruction 6 of the enclosed Letter of Transmittal. Any questions or requests for assistance may be directed to the Information Agent or to the Dealer Manager at its address and telephone number set forth on the back cover of the Offer to Purchase. Requests for additional copies of the Offer to Purchase, the Letter of Transmittal and other tender offer materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. Very truly yours, GLEACHER & CO. INC. NOTHING CONTAINED HEREIN OR IN THE ENCLOSED DOCUMENTS SHALL CONSTITUTE YOU OR ANY OTHER PERSON THE AGENT OF THE PURCHASER, CECI, THE DEALER MANAGER, THE DEPOSITARY, THE INFORMATION AGENT OR ANY AFFILIATE OF ANY OF THEM OR AUTHORIZE YOU OR ANY OTHER PERSON TO MAKE ANY STATEMENT OR USE ANY DOCUMENT ON BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER OTHER THAN THE ENCLOSED DOCUMENTS AND THE STATEMENTS CONTAINED THEREIN. EX-99.(A)(5) 6 CLIENT LETTER OFFER TO PURCHASE FOR CASH 12,400,000 SHARES OF COMMON STOCK OF MAGMA POWER COMPANY AT $39.00 NET PER SHARE BY CE ACQUISITION COMPANY, INC. A WHOLLY OWNED SUBSIDIARY OF CALIFORNIA ENERGY COMPANY, INC. - ------------------------------------------------------------------------------- THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. - ------------------------------------------------------------------------------- December 9, 1994 To Our Clients: Enclosed for your consideration is an Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") relating to an offer by CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary of California Energy Company, Inc. ("CECI"), to purchase 12,400,000 shares of common stock, par value $0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation (the "Company"), at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. Holders of Shares whose certificates for such Shares ("Share Certificates") are not immediately available or who cannot deliver their Share Certificates and all other required documents to the Depositary on or prior to the Expiration Date, or who cannot complete the procedures for book-entry transfer on a timely basis, must tender their Shares according to the guaranteed delivery procedures set forth in Section 4 of the Offer to Purchase. THIS MATERIAL IS BEING FORWARDED TO YOU AS THE BENEFICIAL OWNER OF SHARES CARRIED BY US IN YOUR ACCOUNT BUT NOT REGISTERED IN YOUR NAME. A TENDER OF SUCH SHARES CAN BE MADE ONLY BY US AS THE HOLDER OF RECORD AND PURSUANT TO YOUR INSTRUCTIONS. THE LETTER OF TRANSMITTAL IS FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER SHARES HELD BY US FOR YOUR ACCOUNT. ACCORDINGLY, WE REQUIRE INSTRUCTIONS AS TO WHETHER YOU WISH TO TENDER ANY OR ALL OF SUCH SHARES HELD BY US FOR YOUR ACCOUNT, UPON THE TERMS AND SUBJECT TO THE CONDITIONS SET FORTH IN THE OFFER. Please note the following: 1. The Purchaser is offering to purchase 12,400,000 Shares at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer. 2. The Offer, the proration period and withdrawal rights will expire at 12:00 Midnight, New York City time, on Monday, January 9, 1995, unless the Offer is extended. 3. The Offer is conditioned upon, among other things, (1) there being validly tendered and not withdrawn before the expiration of the Offer that number of Shares which, together with Shares beneficially owned by the Purchaser, represents at least a majority of the Shares outstanding on a fully diluted basis, and (2) the Purchaser being satisfied that it has obtained financing sufficient to enable it to consummate the Offer. The Offer is also subject to certain other terms and conditions. 4. Tendering stockholders will not be obligated to pay brokerage fees or commissions or, except as set forth in Instruction 6 of the Letter of Transmittal, stock transfer taxes on the purchase of Shares pursuant to the Offer. 5. Payment for Shares accepted for payment pursuant to the Offer will be made only after timely receipt by the Depositary of (i) certificates for such Shares or timely confirmation of the book-entry transfer of such Shares into the Depositary's account at The Depository Trust Company, Midwest Securities Trust Company or Philadelphia Depository Trust Company (collectively, the "Book-Entry Transfer Facilities"), pursuant to the procedures set forth in Section 4 of the Offer to Purchase, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed and duly executed, with any required signature guarantees or an Agent's Message (as defined in the Offer to Purchase) (as described in Section 4 of the Offer to Purchase) in connection with a book-entry transfer, and (iii) any other documents required by the Letter of Transmittal. Accordingly, payment may not be made to all tendering stockholders at the same time depending upon when certificates for, or confirmations of book-entry transfer of, such Shares into the Depositary's account at a Book-Entry Transfer Facility are actually received by the Depositary. If you wish to have us tender any or all of the Shares held by us for your account, please so instruct us by completing, executing and returning to us the instruction form contained in this letter. If you authorize a tender of your Shares, all such Shares will be tendered unless otherwise indicated in such instruction form. Please forward your instructions to us in ample time to permit us to submit a tender on your behalf prior to the expiration of the Offer. The Letter of Transmittal is furnished to you for your information only and cannot be used by you to tender Shares held by us for your account. The Purchaser is not aware of any state where the making of the Offer is prohibited by administrative or judicial action pursuant to state statute. If the Purchaser becomes aware of any state where the making of the Offer is so prohibited, the Purchaser will make a good faith effort to comply with any such statute or seek to have such statute declared inapplicable to the Offer. If, after such good faith effort, the Purchaser cannot comply with any applicable statute, the Offer will not be made to (nor will tenders be accepted from or on behalf of) the holders of Shares in such states. In those jurisdictions where the laws require the Offer to be made by a licensed broker or dealer, the Offer is being made on behalf of the Purchaser by Gleacher & Co. Inc. or one or more registered brokers or dealers that are licensed under the laws of such jurisdiction. INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE FOR CASH 12,400,000 SHARES OF COMMON STOCK OF MAGMA POWER COMPANY The undersigned acknowledge(s) receipt of your letter and the enclosed Offer to Purchase, dated December 9, 1994 (the "Offer to Purchase"), and the related Letter of Transmittal (which together constitute the "Offer") relating to the offer by CE Acquisition Company, Inc., a Delaware corporation (the "Purchaser") and wholly owned subsidiary of California Energy Company, Inc. ("CECI"), to purchase 12,400,000 shares of common stock, par value $0.10 per share (the "Shares"), of Magma Power Company, a Nevada corporation, at $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase and in the related Letter of Transmittal. This will instruct you to tender to the Purchaser the number of Shares indicated below (or if no number is indicated below, all Shares) which are held by you for the account of the undersigned, upon the terms and subject to the conditions set forth in the Offer. Dated: _______________ Number of Shares to be Tendered _______________Shares - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Signature(s) - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Print Name(s) - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- - ----------------------------------------------------------------------------- Print Address - ----------------------------------------------------------------------------- Area Code and Telephone Number - ----------------------------------------------------------------------------- Tax Identification or Social Security Number EX-99.(A)(6) 7 GUIDELINES FOR CERTIFICATION ON FORM W-9 GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE PAYER--Social Security numbers have nine digits separated by two hyphens: i.e. 000-00-0000. Employer identification numbers have nine digits separated by only one hyphen: i.e., 00-0000000. The table below will help determine the number to give the payer.
GIVE THE SOCIAL SECURITY FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - --------------------------------------- ---------------------------- 1. An individual's account The individual 2. Two or more individuals The actual owner of (joint account) the account or, if combined funds, any one of the individuals (1) 3. Husband and wife (joint account) The actual owner of the account or, if joint funds, either person (2) 4. Custodian account of a minor The minor (2) (Uniform Gift to Minors Act) 5. Adult and minor (joint account) The adult or, if the minor is the only contributor, the minor (1) 6. Account in the name of guardian or The ward, minor, or committee for a designated ward, incompetent person (3) minor, or incompetent person 7. a. The usual revocable savings The grantor-trustee (1) trust account (grantor is also trustee) b. So-called trust account that is The actual owner (1) not a legal or valid trust under State law 8. Sole proprietorship account The owner (4) GIVE THE EMPLOYER IDENTIFICATION FOR THIS TYPE OF ACCOUNT: NUMBER OF-- - --------------------------------------- ---------------------------- 9. A valid trust, estate, or pension Legal entity (Do not furnish trust the identifying number of the personal representative or trustee unless the legal entity itself is not designated in the account title.) (5) 10. Corporate account The corporation 11. Religious, charitable, or The organization educational organization account 12. Partnership account held in the The partnership name of the business 13. Association, club, or other The organization tax-exempt organization 14. A broker or registered nominee The broker or nominee 15. Account with the Department The public entity of Agriculture in the name of a public entity (such as a State or local government, school district, or prison) that receives agricultural program payments - --------------------------------------- ----------------------------
(1) List first and circle the name of the person whose number you furnish. (2) Circle the minor's name and furnish the minor's social security number. (3) Circle the ward's, minor's, or incompetent person's name and furnish such person's social security number. (4) Show the name of the owner. (5) List first and circle the name of the legal trust, estate, or pension trust. NOTE: If no name is circled when there is more than one name, the number will be considered to be that of the first name listed. GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 PAGE 2 OBTAINING A NUMBER If you don't have a taxpayer identification number or you don't know your number, obtain Form SS-5, Application for a Social Security Number Card, or Form SS-4, Application for Employer Identification Number, at the local office of the Social Security Administration or the Internal Revenue Service and apply for a number. PAYEES EXEMPT FROM BACKUP WITHHOLDING Payees specifically exempted from backup withholding on ALL payments including the following: o A corporation. o A financial institution. o An organization exempt from tax under section 501(a), or an individual retirement plan. o The United States or any agency or instrumentality thereof. o A State, the District of Columbia, a possession of the United States, or any subdivision or instrumentality thereof. o A foreign government, a political subdivision of a foreign government, or agency or instrumentality thereof. o An international organization or any agency or instrumentality thereof. o A registered dealer in securities or commodities registered in the U.S. or a possession of the U.S. o A real estate investment trust. o A common trust fund operated by a bank under section 584(a). o An exempt charitable remainder trust, or a non-exempt trust described in section 4947(a)(1). o An entity registered at all times under the Investment Company Act of 1940. o A foreign central bank of issue. Payments of dividends and patronage dividends not generally subject to backup withholding include the following: o Payments to nonresident aliens subject to withholding under section 1441. o Payments to partnerships not engaged in a trade or business in the U.S. and which have at least one nonresident partner. o Payments of patronage dividends where the amount received is not paid in money. o Payments made by certain foreign organizations. o Payments made to a nominee. Payments of interest not generally subject to backup withholding include the following: o Payments of interest on obligations issued by individuals. NOTE: You may be subject to backup withholding if this interest is $600 or more and is paid in the course of the payer's trade or business and you have not provided your correct taxpayer identification number to the payer. o Payments of tax-exempt interest (including exempt interest dividends under section 852). o Payments described in section 6049(b)(5) to nonresident aliens. o Payments on tax-free covenant bonds under section 1451. o Payments made by certain foreign organizations. o Payments made to a nominee. Exempt payees described above should file Form W-9 to avoid possible erroneous backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER IDENTIFICATION NUMBER, WRITE "EXEMPT" ON THE FACE OF THE FORM, AND RETURN IT TO THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS. ALSO SIGN AND DATE THE FORM. Certain payments other than interest, dividends, and patronage dividends that are not subject to information reporting are also not subject to backup withholding. For details, see the regulations under sections 6041, 6041A(a), 6045, and 6050A. PRIVACY ACT NOTICE--Section 6109 requires most recipients of dividends, interest, or other payments to give taxpayer identification numbers to payers who must report the payments to the IRS. The IRS uses the numbers for identification purposes. Payers must be given the numbers whether or not recipients are required to file tax returns. Beginning January 1, 1993, payers must generally withhold 31% of taxable interest, dividends, and certain other payments to a payee who does not furnish a taxpayer identification number to a payer. Certain penalties may also apply. PENALTIES (1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER--If you fail to furnish your taxpayer identification number to a payer, you are subject to a penalty of $50 for each such failure unless your failure is due to reasonable cause and not to willful neglect. (2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING--If you make a false statement with no reasonable basis which results in no imposition of backup withholding, you are subject to a penalty of $500. (3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION--Falsifying certifications or affirmations may subject you to criminal penalties including fines and/or imprisonment. FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL REVENUE SERVICE EX-99.(A)(7) 8 FORM OF SUMMARY ADVERTISEMENT This announcement is neither an offer to purchase nor a solicitation of an offer to sell Shares. The Offer is made solely by the Offer to Purchase dated December 9, 1994 and the related Letter of Transmittal and is being made to all holders of Shares. The Offer is not being made to (nor will tenders be accepted from or on behalf of) holders of Shares in any jurisdiction in which the making of the Offer or the acceptance thereof would not be in compliance with the laws of such jurisdiction. In any jurisdiction where the securities, blue sky or other laws require the Offer to be made by a licensed broker or dealer, the Offer shall be deemed to be made on behalf of CE Acquisition Company, Inc. by Gleacher & Co. Inc. or one or more registered brokers or dealers licensed under the laws of such jurisdiction. NOTICE OF OFFER TO PURCHASE FOR CASH 12,400,000 SHARES OF COMMON STOCK OF MAGMA POWER COMPANY AT $39.00 NET PER SHARE BY CE ACQUISITION COMPANY, INC. A WHOLLY OWNED SUBSIDIARY OF CALIFORNIA ENERGY COMPANY, INC. CE Acquisition Company, Inc., a Delaware corporation (the ``Purchaser'') and a wholly owned subsidiary of California Energy Company, Inc., a Delaware corporation (``CECI''), hereby offers to purchase 12,400,000 shares of Common Stock, par value $0.10 per share (the ``Shares''), of Magma Power Company (the ``Company''), a Nevada corporation, at a price of $39.00 per Share, net to the seller in cash, without interest thereon, upon the terms and subject to the conditions set forth in the Offer to Purchase dated December 9, 1994 (the ``Offer to Purchase'') and in the related Letter of Transmittal (which together constitute the ``Offer''). THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON MONDAY, JANUARY 9, 1995, UNLESS THE OFFER IS EXTENDED. THE BOARD OF DIRECTORS OF THE COMPANY, BY UNANIMOUS VOTE OF THOSE PRESENT, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE COMPANY AND ITS STOCKHOLDERS, HAS APPROVED THE OFFER AND THE MERGER AND RECOMMENDS THAT STOCKHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER. THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (1) THERE BEING VALIDLY TENDERED AND NOT WITHDRAWN BEFORE THE EXPIRATION OF THE OFFER THAT NUMBER OF SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY OWNED BY THE PURCHASER, REPRESENTS AT LEAST A MAJORITY OF THE SHARES OUTSTANDING ON A FULLY DILUTED BASIS (SUCH CONDITION BEING REFERRED TO AS THE ``MINIMUM TENDER CONDITION''), AND (2) THE PURCHASER BEING SATISFIED THAT IT HAS OBTAINED FINANCING SUFFICIENT TO ENABLE IT TO CONSUMMATE THE OFFER. The purpose of the Offer is to acquire majority control of the Company as the first step in the acquisition of the entire equity interest in the Company. On December 5, 1994, CECI and the Company entered into an Agreement and Plan of Merger (the ``Merger Agreement'') pursuant to which the Company will, as soon as practicable following consummation of the Offer, consummate a merger (the ``Merger'') with the Purchaser. In the Merger, each remaining outstanding Share (other than Shares held by CECI, the Purchaser or any other direct or indirect wholly owned subsidiary of CECI, Shares held in the treasury of the Company and Shares held by stockholders who properly exercise dissenters' rights under the Nevada General Corporation Law (the ``NGCL'')) will be converted into the right to receive, at the option of CECI, (i) the All Cash Component Amount (as defined below), net in cash, without interest thereon, or (ii) both (A) the Mixed Cash Component Amount (as defined below), net in cash, without interest thereon, and (B) the number of fully paid and nonassessable shares of CECI Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash Component Amount divided by the Average Closing Price (as defined below) (the All Cash Component Amount or (ii) (A) and (ii) (B), collectively, as applicable, being the ``Merger Consideration''). The ``Mixed Cash Component Amount'' shall mean an amount equal to the quotient of (A) (x) $28.50 multiplied by the number of Shares outstanding at the Effective Time (as defined in the Merger Agreement) less (y) $39.00 multiplied by the number of Shares owned by CECI and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by CECI and any of its affiliates). The ``All Cash Component Amount'' shall mean an amount equal to the quotient of (A) (x) $38.75 multiplied by the number of Shares outstanding at the Effective Time less (y) $39.00 multiplied by the number of Shares owned by CECI and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by CECI and any of its affiliates). The ``Average Closing Price'' shall mean the average closing price of shares of common stock, par value $0.0675 per share, of CECI (the ``CECI Common Stock'') on the New York Stock Exchange during the 15 consecutive trading days ending on the fifth business day prior to the Effective Time; provided, however, that if such average closing price exceeds $18.73, the Average Closing Price shall be $18.73, and if such average closing price is less than $14.27, the Average Closing Price shall be $14.27. The Purchaser expressly reserves the right, in its sole judgment, at any time or from time to time and regardless of whether any of the events set forth in Section 12 of the Offer to Purchase shall have occurred or shall have been determined by the Purchaser to have occurred, (i) to extend the period of time during which the Offer is open and thereby delay acceptance for payment of, and the payment for, any Shares, by giving oral or written notice of such extension to the Depositary (as defined in the Offer to Purchase) and (ii) subject to the terms of the Merger Agreement, to amend the Offer in any respect by giving oral or written notice of such amendment to the Depositary. Any such extension, amendment or termination will be followed as promptly as practicable by public announcement thereof, such announcement in the case of an extension to be issued not later than 9:00 A.M., New York City time, on the next business day after the previously scheduled Expiration Date (as defined in the Offer to Purchase). During any such extension, all Shares previously tendered and not withdrawn will remain subject to the Offer, subject to the right of a tendering stockholder to withdraw such stockholder's Shares. If more than 12,400,000 Shares shall be properly tendered on or prior to the Expiration Date and not withdrawn in accordance with Section 3 of the Offer to Purchase, and the acquisition of such number of Shares satisfies the Minimum Tender Condition, the Purchaser will, upon the terms and subject to the conditions of the Offer, purchase 12,400,000 Shares on a pro rata basis (with adjustments to avoid purchases of fractional Shares) based upon the number of Shares properly tendered on or prior to the Expiration Date and not withdrawn. If exactly 12,400,000 Shares are properly tendered on or prior to the Expiration Date and not withdrawn, and the acquisition of such number of Shares satisfies the Minimum Tender Condition, the Purchaser will, upon the terms and subject to the conditions of the Offer, accept for payment and purchase all such Shares so tendered. If fewer than 12,400,000 Shares shall have been properly tendered on or prior to the Expiration Date and not withdrawn, and the number of Shares so tendered and not withdrawn shall not have satisfied the Minimum Tender Condition, the Purchaser may, subject to the terms of the Merger Agreement, (i) terminate the Offer and return all tendered Shares to tendering stockholders, (ii) extend the Offer and retain all such Shares until the expiration of the Offer, as extended, subject to the terms of the Offer (including any rights of stockholders to withdraw their Shares), or (iii) waive the Minimum Tender Condition and purchase all properly tendered Shares. Due to the difficulty of determining the precise number of Shares properly tendered and not withdrawn, if proration is required, the Purchaser does not expect to announce the final results of proration or pay for any Shares until at least seven Nasdaq National Market trading days after the Expiration Date. Preliminary results of proration will be announced by press release as promptly as practicable after the Expiration Date. Holders of Shares may obtain such preliminary information when it becomes available from the Information Agent and may be able to obtain such information from their brokers. For purposes of the Offer, the Purchaser will be deemed to have accepted for payment, and thereby purchased, Shares validly tendered and not withdrawn as, if and when the Purchaser gives oral or written notice to the Depositary of the Purchaser's acceptance of such Shares for payment pursuant to the Offer. In all cases, upon the terms and subject to the conditions of the Offer, payment for Shares purchased pursuant to the Offer will be made by deposit of the purchase price therefor with the Depositary, which will act as agent for tendering stockholders for the purpose of receiving payment from the Purchaser and transmitting payment to validly tendering stockholders. Under no circumstances will interest on the purchase price for Shares be paid by the Purchaser by reason of any delay in making such payment or for any other reason. In all cases, payment for Shares purchased pursuant to the Offer will be made only after timely receipt by the Depositary of (a) certificates for such Shares (``Certificates'') or a book-entry confirmation of the book-entry transfer of such Shares and into the Depositary's account at the Depository Trust Company, the Midwest Securities Trust Company or the Philadelphia Depository Trust Company (collectively, the ``Book-Entry Transfer Facilities''), pursuant to the procedures set forth in the Offer to Purchase, (b) a Letter of Transmittal (or facsimile thereof) properly completed and duly executed, with any required signature guarantees, or an Agent's Message (as defined in the Offer to Purchase) in connection with a book-entry transfer, and (c) any other documents required by such Letter of Transmittal. If, for any reason whatsoever, acceptance for payment of any Shares tendered to the Offer is delayed, or if the Purchaser is unable to accept for payment or pay for Shares tendered pursuant to the Offer, then, without prejudice to the Purchaser's rights set forth in the Offer to Purchase, the Depositary may, nevertheless, on behalf of the Purchaser, retain tendered Shares and such Shares may not be withdrawn except to the extent that the tendering stockholder is entitled to and duly exercises withdrawal rights as described in Section 3 of the Offer to Purchase. Any such delay will be by an extension of the Offer to the extent required by law. If certain events occur, the Purchaser will not be obligated to accept for payment or pay for any Shares tendered pursuant to the Offer. If any tendered Shares are not purchased pursuant to the Offer for any reason (including because of proration) or are not paid for because of invalid tender, or if Certificates are submitted representing more Shares than are tendered, Certificates representing unpurchased or untendered Shares will be returned, without expense to the tendering stockholder (or, in the case of Shares delivered by book-entry transfer into the Depositary's account at a Book-Entry Transfer Facility pursuant to the procedures set forth in Section 4 of the Offer to Purchase, such Shares will be credited to an account maintained within such Book-Entry Transfer Facility), as soon as practicable following the expiration, termination or withdrawal of the Offer and determination of the final results of proration. Except as otherwise provided in Section 3 of the Offer to Purchase, tenders of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant to the Offer may be withdrawn at any time prior to 12:00 Midnight, New York City time, on Monday, January 9, 1995 (or if the Purchaser shall have extended the period of time for which the Offer is open, at the latest time and date at which the Offer, as so extended by the Purchaser, shall expire) and, unless theretofore accepted for payment and paid for by the Purchaser pursuant to the Offer, may also be withdrawn at any time after February 6, 1995. In order for a withdrawal to be effective, a written, telegraphic or facsimile transmission notice of withdrawal must be timely received by the Depositary at one of its addresses set forth on the back cover of the Offer to Purchase. Any notice of withdrawal must specify the name of the person who tendered the Shares to be withdrawn, the number of Shares to be withdrawn, and if Certificates for Shares have been tendered, the name of the registered holder of the Shares as set forth in the tendered Certificate, if different from that of the person who tendered such Shares. If Certificates for Shares have been delivered or otherwise identified to the Depositary, then prior to the physical release of such Certificates, the serial numbers shown on such Certificates evidencing the Shares to be withdrawn must be submitted to the Depositary and the signature on the notice of withdrawal must be guaranteed by a firm which is a bank, broker, dealer, credit union, savings association or other entity that is a member in good standing of the Securities Transfer Agent's Medallion Program (an ``Eligible Institution''), unless such Shares have been tendered for the account of an Eligible Institution. If Shares have been tendered pursuant to the procedures for book-entry transfer set forth in Section 4 of the Offer to Purchase, any notice of withdrawal must also specify the name and number of the account at the appropriate Book-Entry Transfer Facility to be credited with the withdrawn Shares and otherwise comply with such Book-Entry Transfer Facility's procedures. Withdrawal of tenders of Shares may not be rescinded, and any Shares properly withdrawn will be deemed not to be validly tendered for purposes of the Offer. Withdrawn Shares may, however, be retendered by repeating one of the procedures in Section 4 of the Offer to Purchase at any time before the Expiration Date. The Purchaser, in its sole judgment, will determine all questions as to the form and validity (including time of receipt) of notices of withdrawal, and such determination will be final and binding. Any Shares properly withdrawn will be deemed not validly tendered for the purposes of the Offer, but may be retendered at any subsequent time prior to the Expiration Date by following the procedures described in Section 3 of the Offer to Purchase. The information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General Rules and Regulations under the Securities Exchange Act of 1934 is contained in the Offer to Purchase and is incorporated herein by reference. Pursuant to the Merger Agreement, the Company will furnish CECI and the Purchaser with mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories. Upon compliance by the Company, the Offer to Purchase, the related Letter of Transmittal and other relevant materials will be mailed to record holders of Shares and will be furnished to brokers, dealers, commercial banks, trust companies and similar persons whose names, or the names of whose nominees, appear on the stockholder list, or, if applicable, who are listed as participants in a clearing agency's security position listing for subsequent transmittal to beneficial owners of Shares. THE OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN IMPORTANT INFORMATION WHICH SHOULD BE READ CAREFULLY BEFORE ANY DECISION IS MADE WITH RESPECT TO THE OFFER. Questions and requests for assistance may be directed to the Information Agent or the Dealer Manager at their respective addresses and telephone numbers set forth below. Requests for copies of the Offer to Purchase, the Letter of Transmittal and other related materials may be directed to the Information Agent or to brokers, dealers, commercial banks or trust companies. The Information Agent for the Offer is: [LOGO] 156 Fifth Avenue New York, New York 10010 (212) 929-5500 (Collect) or CALL TOLL-FREE (800) 322-2885 The Dealer Manager for the Offer is: GLEACHER & CO. INC. 660 Madison Avenue New York, New York 10021 (212) 418-4206 December 9, 1994 EX-99.(A)(8) 9 PRESS RELEASE [Letterhead of MacKenzie Partners, Inc.] CONTACT FOR CALIFORNIA ENERGY: David L. Sokol, Chairman & CEO Dale R. Schuster, Vice President California Energy Company, Inc. (402) 330-8900 or Mark H. Harnett MacKenzie Partners, Inc. (212) 929-5877 or CONTACT FOR MAGMA POWER: Thomas J. Davies Andrea Bergofin Kekst & Co. (212) 593-2655 FOR IMMEDIATE RELEASE: CALIFORNIA ENERGY AND MAGMA POWER REACH MERGER AGREEMENT AT $39 PER SHARE OMAHA, NE, and SAN DIEGO, CA, December 5, 1994 -- California Energy Company, Inc. (NYSE, PSE, LSE: CE) and Magma Power Company (NASDAQ:MGMA) today announced that they had entered into a definitive merger agreement which provides for Magma shareholders to receive a price of $39 net per share in a combination of $28.50 in cash and $10.50 in market value of California Energy common stock, or approximately $950 million in aggregate value on a fully-diluted basis. Pursuant to the terms of the agreement, California Energy will commence no later than Friday, December 9 a cash tender offer for a majority of Magma's common stock at $39 per share in cash. The tender offer will remain open for 20 days and, if over- subscribed, will be pro-rated. As soon as practicable thereafter, California Energy will complete the acquisition of all remaining shares in a second step merger transaction by issuing for each Magma share a combination of cash and California Energy common shares totalling $39, or, at its option, approximately $38.50 per share in cash. If California Energy stock is to be received in the merger, the number of shares to be issued will be increased or decreased by up to 13.5% based on the difference between $16.50 and the average daily closing price of California Energy during the fifteen trading days ending on the fifth business day prior to the consummation of the merger. California Energy's tender offer is subject to the valid tender of shares representing a majority of the voting power of Magma, funding of financing, and other customary closing conditions. In - more - CALIFORNIA ENERGY/MAGMA POWER December 5, 1994 page 2 addition, the merger (though not the tender) is conditioned, if California Energy shares are to be issued, on approval of California Energy shareholders. Under the agreement, Magma has agreed to render Magma's shareholders rights plan inapplicable to the tender offer and merger and to waive applicable Nevada anti- takeover statutes. The Hart-Scott-Rodino antitrust waiting period has expired with respect to the transaction. The parties have also agreed to terminate all litigation between them. The agreement has been approved by the Boards of Directors of both companies. Magma Power's Board has determined, after thoroughly exploring alternatives in consultation with its independent financial advisors, that the terms of the offer and merger are fair to, and in the best interests of, its stockholders and recommends that stockholders tender their Magma shares into California Energy's tender offer. Following the merger, the combined companies will have projected annual revenues in excess of $400 million, its facilities will produce in excess of 545MW of power and will have an additional 530MW of power under construction. The combined companies will constitute the largest independent geothermal power company in the world with operations in the U.S., Philippines and Indonesia. David L. Sokol, Chairman and Chief Executive Officer of California Energy said, "The combination of our two organizations creates a geothermal company with unparalleled technical, geological, developmental and operational skills. We fully believe that this merger will accelerate the achievement of our strategic objectives and will enhance our international expansion efforts. We welcome the family of talented Magma employees onto our team and we anticipate a smooth transition." Paul Pankratz, Chairman of Magma, said: "We believe this transaction reflects Magma's inherent strengths and outstanding prospects. The combined company will be the largest and most technically advanced global competitor in the geothermal energy industry -- well positioned to capitalize on growth opportunities worldwide." Ralph Boeker, President and Chief Executive Officer of Magma, said: "Magma brings excellent people, technology and projects into this combination. We look forward to working with California Energy to ensure the success of this great combined company." California Energy Company is an international developer owner and operator of geothermal and other environmentally responsible - more - CALIFORNIA ENERGY/MAGMA POWER December 5, 1994 page 3 power generation facilities. Its six existing facilities currently produce in excess of 325MW of power with an additional 300MW under construction. Magma Power Company is a leader in the geothermal industry. The company currently operates seven geothermal power plants in Southern California and geothermal leaseholds and fee interests in other parts of California and Nevada. Magma is also currently constructing a power plant in the Philippines with a total capacity of 231MW. # # # EX-99.(A)(9) 10 PRESS RELEASE [Letterhead of MacKenzie Partners, Inc.] News Release CONTACTS: David L. Sokol, Chairman & CEO Dale R. Schuster, Vice President California Energy Company, Inc. (402) 330-8900 or Mark H. Harnett MacKenzie Partners, Inc. (212) 929-5877 FOR IMMEDIATE RELEASE: CALIFORNIA ENERGY COMMENCES $39 PER SHARE CASH TENDER OFFER FOR A MAJORITY OF MAGMA POWER'S COMMON STOCK; Magma's Board Recommends Stockholders Tender OMAHA, NE, December 9, 1994 -- California Energy Company, Inc. (NYSE, PSE, LSE: CE) announced today that it has commenced a cash tender offer for 12,400,000 shares, or approximately 51% of the common stock, of Magma Power Company (NASDAQ:MGMA) at a price of $39 net per share. The offer is due to expire at midnight, New York City time, on January 9, 1995 and, if oversubscribed, will be pro-rated. As soon as practicable thereafter, California Energy will complete the acquisition of all remaining Magma shares in a second step merger transaction by issuing for each Magma share a combination of cash and California Energy common shares totalling $39, or, at California Energy's option, approximately $38.50 per share in cash. It is California Energy's present intention to pay the merger consideration solely in cash, although such intention is based on expected market conditions and other factors which may change. As previously announced, the Magma Board of Directors, by the unanimous vote of those present, has determined that the terms of the offer and merger are fair to, and in the best interest of Magma's stockholders and recommends that stockholders tender their Magma shares into California Energy's tender offer. The tender offer is subject to, among other things, there being validly tendered, together with shares beneficially owned by California Energy, a majority of the outstanding shares of Magma, the funding of financing and other customary conditions. Following the merger, the combined companies will have projected annual revenues in excess of $400 million, its facilities will produce in excess of 545 MW of power and will have an additional 530 MW of power under construction. The combined companies will constitute the largest independent geothermal power company in the world with operations in the U.S., Philippines and Indonesia. - more - CALIFORNIA ENERGY/MAGMA POWER December 9, 1994 page 2 California Energy Company is a leading international developer, owner and operator of geothermal and other environmentally responsible power generation facilities. Its six existing facilities currently produce in excess of 325 MW of power with an additional 300 MW under construction and 970 MW under contract. Magma Power Company, which has approximately 24,046,000 shares outstanding, is a leader in the geothermal industry. The Company currently operates seven geothermal plants in Southern California on geothermal leaseholds and fee interests in other parts of California and Nevada. Magma is also currently constructing a power plant in the Philippines with a total capacity if 231 MW. # # # EX-99.(B)(1) 11 BANK COMMITMENT LETTER EXHIBIT (b)(1) [Letterhead of Credit Suisse] Credit Suisse Tower 49 12 East 49th Street New York, New York October 25, 1994 Mr. John G. Sylvia Senior Vice President and Chief Financial Officer California Energy Company, Inc. 10831 Old Mill Road Omaha, Nebraska 68155 Dear Mr. Sylvia: You have advised Credit Suisse (the "Bank") that CE Acquisition Company, Inc., a newly formed Delaware corporation ("Newco") and a subsidiary of California Energy Company, Inc. ("CECI"), has offered to acquire through a tender offer (the "Tender Offer") 51% of the outstanding shares of common stock of Magma Power Company, a Nevada corporation ("Magma") and will enter into a merger with Magma (the "Merger"). Pursuant to your request, we are pleased to inform you that we hereby commit (i) to underwrite the financing of the Tender Offer in the principal amount of up to $250,000,000 (the "Tender Facility") and (ii) to underwrite the financing of the Merger in the principal amount of up to $500,000,000 (the "Merger Facility"), in each case on the terms and conditions described in the attached term sheets (the "Term Sheets"). This commitment is subject to (i) the preparation, execution and delivery of mutually acceptable loan and security documentation incorporating substantially the terms and conditions outlined in the Term Sheets, (ii) the absence of a material adverse change in the financial condition or operations of CECI or Magma and (iii) the Bank's satisfaction with its due diligence with respect to CECI and Magma. It is understood that, as provided in the Term Sheets, the Bank will act as Agent for the Tender Facility and the Merger Facility, with the right to syndicate the Tender Facility and Merger Facility to additional lending institutions. CECI and Newco acknowledge their joint and several obligation to pay fees and expenses as described in the Term Sheets and as otherwise agreed to by the Bank, Newco and CECI. CECI and Newco each jointly and severally hereby agrees to indemnify and hold harmless the Bank and each other lending institution that may participate in the Tender Facility or the Merger Facility, their respective affiliates and each of their respective directors, officers, employees, agents and advisors (each, an "Indemnified Party"), from and against any and all claims, damages, liabilities (including for securities liabilities), losses and expenses, including without limitation, fees, expenses and disbursements of counsel, which may be incurred by or asserted against an Indemnified Party in connection with the Bank's commitment or participation in the transactions contemplated hereby, this letter, the Tender Facility, the Merger Facility, the Tender Offer, the Merger or any related matter or any investigation, litigation or proceeding in connection therewith and whether or not the Tender Offer, the Merger or the financing herein contemplated is consummated, except to the extent such claim, damage, loss, liability or expenses is found in a final non- appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party's own gross negligence or willful misconduct. In further consideration of the commitment of the Bank hereunder, and recognizing that in connection herewith the Bank is incurring out-of-pocket costs and expenses, CECI and Newco each jointly and severally agrees to reimburse the Bank for all out-of-pocket costs and expenses (including fees and disbursements of outside counsel for the Bank), incurred or sustained by the Bank in connection with the transactions contemplated hereby whether or not such transactions occur and whether incurred before or after the execution by CECI and Newco of this letter. Please evidence your acceptance of the Term Sheets and the other matters referred to herein by signing in the space provided below and returning a copy of this letter to us on or before October 25, 1994, the date on which the Bank's commitment set forth above (if not accepted prior thereto) will expire. Very truly yours, CREDIT SUISSE By: /s/ Scott E. Zoellner Name: Scott E. Zoellner Title: Associate By: /s/ Peter R. Nardin Name: Peter R. Nardin Title: Member of Senior Management Accepted this 25th day of October, 1994 CALIFORNIA ENERGY COMPANY, INC. By: /s/ John G. Sylvia Name: John G. Sylvia Title: Senior Vice President and Chief Financial Officer CE ACQUISITION COMPANY, INC. By: /s/ John G. Sylvia Name: John G. Sylvia Title: Senior Vice President and Chief Financial Officer CONFIDENTIAL California Energy Company SUMMARY OF TERMS AND CONDITIONS UP TO $250,000,000 TENDER OFFER FACILITY Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent. Agent/Arranger/ Underwriter: Credit Suisse Lenders: The Agent and any other financial institutions to which the facility may be syndicated by the Agent. Facility: Up to a $250,000,000 12-month tender offer facility (the "Facility") subject to Regulation U and renewable/extendable for a term of up to three-years from initial funding at the mutual consent of both the Borrower and Lenders. Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned subsidiary ("Newco"), for the purpose of tendering for 51% of the stock of Magma Power Company (the "Target"). A condition of the tender will be the execution and delivery of a definitive merger agreement between Newco and the Target (the "Merger Agreement Condition"), although that condition may be waived by the Borrower as contemplated in the Offer to Purchase of the Borrower and Newco dated October 6, 1994, as it may be amended, (the "Offer to Purchase") under the caption "The Merger Agreement Condition." No material amendment to the Offer to Purchase shall be effective for purposes of this term sheet without the prior written consent of the Bank. If the Merger Agreement Condition is not waived, the form of the merger agreement shall be satisfactory to the Agent. Funds provided by the Facility will be advanced by the Borrower to Newco to purchase a secured note of Newco (the "Newco Secured Tender Note"). The proceeds from the sale of the Newco Secured Tender Note will be used, together with the Borrower's capital investment in Newco and other available moneys which will be in an amount and form satisfactory to the Agent, to purchase the tendered stock of the Target, and to pay related fees and costs of the transaction. The economic terms of the Newco Secured Tender Note will mirror the terms of the Facility. Borrowing Options: Adjusted LIBOR and Base Rate. CONFIDENTIAL California Energy Company "Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%) of the rates offered to the reference Lenders in the London interbank market for deposits in an amount and maturity corresponding to the interest period for the advance. LIBOR will be adjusted for reserves and other regulatory requirements, as appropriate. "Base Rate" means the higher of the Agent's prime rate or the federal funds rate + 0.50% per annum. Applicable Interest Margins: LIBOR + 2.50% Base Rate + 1.25% Computation of Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated on the basis of the actual number of days elapsed over a 365/366 day year. Interest on LIBOR loan segments will be payable in arrears (i) at the end of each applicable interest period and (ii) in the case of any interest period longer than three months, every three months during such period. Interest on LIBOR loan segments will be calculated on the basis of the actual number of days elapsed over a 360 day year. Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall be maintained as Base Rate loan segments effective in the case of LIBOR loan segments at the end of each then existing period. Scheduled Amortization: The Facility will not be subject to a scheduled amortization prior to its maturity. Mandatory Prepayments: Subject to mandatory prepayment as a whole in connection with (i) any sale of any of the ownership interest of the Target by Newco; (ii) a permanent injunction of the merger between Newco and the Target; and (iii) the closing of the merger between Newco and the Target. Subject to mandatory prepayment in part in an amount equal to the proceeds of any dividends, loans, advances or other distributions from Target to Newco or from Newco to Borrower. Optional Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount without premium or penalty other than payment of applicable "breakage" costs on LIBOR loan segments. Required notice to the Agent will be (i) one Business Day prior to the date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to the date of prepayment of any LIBOR loan segment. CONFIDENTIAL California Energy Company Application of Prepayments: All principal reductions shall be permanent. Prepayments will be applied first to Base Rate loan segments and then to LIBOR loan segments. The prepayment of LIBOR loan segments will be subject to the payment of "breakage" costs if the date of prepayment is not the last day of an interest period unless, at the option of the Borrower, the prepayment amount is escrowed with the Agent and invested in United States Treasury Securities to the last day of the applicable interest period. Security: The Facility will be secured by an assignment and a pledge of the Newco Secured Tender Note, including the Target stock pledged as security thereunder in form satisfactory to Agent. Payments on the collateral will be paid directly to the Agent, as collateral agent for the Lenders. The Borrower will provide for the payment of interest on the Facility in a manner satisfactory to the Agent. The Facility will be non-recourse to the Borrower, and the Lenders will agree to make an appropriate election under Section 1111(b) of the Bankruptcy Code to continue such non-recourse status in any proceeding involving Borrower as Debtor under the Bankruptcy Code. Representations and Warranties at Closing: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, the following: 1. Corporate organization, existence and power. 2. Corporate and government authorization, no contravention, legality, validity, binding effect and enforceability of all documentation related to this transaction. 3. The financial information of the Borrower, Newco and their material subsidiaries (to the best knowledge of Borrower based upon information available to it in the case of Target and its subsidiaries). 4. No material adverse change in the Borrower, Newco and their material subsidiaries (to the best knowledge of Borrower based upon information available to it in the case of Target and its subsidiaries). 5. No material litigation (other than litigation to which Target is a party and which is described in the Target's Form 10-K for the year ended December 31, 1993 and as described in Section 15 of the Offer to Purchase (the "Magma Litigation")). 6. Absence of default(s) or Event of Default(s). CONFIDENTIAL California Energy Company 7. Compliance with ERISA (to the best knowledge of Borrower based upon information available to it in the case of Target and its subsidiaries). 8. Regulatory approvals, consents, filings and compliance with laws. 9. Existence, incorporation etc. of subsidiaries. 10. Environmental compliance. 11. Not an investment company. 12. Full disclosure. 13. Payment of taxes. 14. Adequate insurance. Conditions Precedent to Closing: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, a capital investment in Newco in an amount and form satisfactory to the Agent, provision for an adequate level of working capital, provisions effective at the Merger, to insure Alto Peak and Malitbog equity commitments and ownership interest in Alto Peak and Malitbog satisfactory to Agent, no waiver of Tender Offer Conditions that are deemed material by Agent (other than the Merger Agreement Condition as contemplated by the Offer to Purchase) without the prior written consent of the Bank, receipt of appropriate certificates and legal opinions, accuracy of representations and warranties, absence of defaults and material litigation (excluding the Magma Litigation), evidence of authority, receipt of required governmental approvals, consents and filings of all persons, compliance with laws (including without limitation, environmental, labor and ERISA), absence of material adverse change in the Borrower, Newco, the Target and their respective subsidiaries, satisfactory due diligence by the Agent customary with tender offer facilities and payment of fees. Covenants: Those customarily found in a credit facility of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, covenants regarding compliance with laws (including ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence, visitation rights, keeping of books, maintenance of properties, use of proceeds, margin stock, transactions with affiliates, notice of defaults, delivery of unaudited (quarterly) and audited (annual) financial statements of the Borrower, Newco and its significant subsidiaries, monthly delivery of an officer's certificate, in form and substance reasonably satisfactory to the Agent, certifying the absence of (i) a material adverse CONFIDENTIAL California Energy Company change in the financial condition or operations of the Borrower and its subsidiaries, taken as a whole, or (ii) a material adverse change in the financial condition or operations of Newco and its subsidiaries, taken as a whole (and, in either case, which could reasonably be expected to materially impact the ability of the Borrower to service the Facility or the ability of the Agent on behalf of the Lenders to realize upon the collateral securing the Facility), and other customary financial reporting requirements as any Lender may reasonably requests; and without limitation, the following restrictions and limitations (subject to such baskets and exceptions as the parties may agree): 1. Negative pledge of all stock and unencumbered assets of Newco and its subsidiaries. 2. Limitation on guaranties by Newco and Borrower. 3. Limitation on mergers and sales of assets. 4. Limitation on investment in other persons. 5. Prohibition on restricted payments. 6. Maintenance of ownership of Newco and all subsidiaries. 7. Prohibition on incurrence of additional debt at Newco and its subsidiaries. 8. Limitation on dividends from Newco to Borrower unless the proceeds are used to pay down the Facility in amounts to be agreed upon. 9. Limitation on the up-streaming of any assets or funds from Newco and its subsidiaries to the Borrower unless the proceeds are used to pay down the Facility in amounts to be agreed upon. 10. Restrictions on change in nature of business, except as contemplated by the Merger. Appropriate language modifications will be made to cover situations where Borrower is unable to control the Target; provided that in all events the Lenders shall receive the protections intended to be received from these covenants. Financial Covenants: Those customarily found in a Regulation U credit facility of similar nature or as may be appropriate for this transaction. Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, permanent injunction of the merger contemplated by the CONFIDENTIAL California Energy Company Merger Agreement Condition; breach of representation or warranty in any material respect; default in any covenant or financial covenant; material cross default; bankruptcy; insolvency; change of control (except under circumstances mutually satisfactory to the parties); certain ERISA defaults; the failure to pay one or more final judgments aggregating more than a specified threshold to be mutually agreed; failure to make a payment in connection with the Facility when due; and pledge agreement shall cease to be in full force and effect or the Borrower shall so assert. Cost and Yield Protection: Standard provisions for illegality, inability to determine rate, indemnification for breakage of LIBOR funding and increased costs or reduced return, including those arising from reserve requirements, taxes and capital requirements; provided that increased costs may be applied retroactively for a maximum of 90 days preceding written notice to the Borrower and will not be more, in the case of any participant, than the applicable fronting Lender would have been entitled to claim. Assignments and Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the consent of the Borrower and the Agent, which consent shall not be unreasonably withheld, provided that the consent of the Borrower will not be required for assignments among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and (ii) to sell participations in all or a part of their loans or commitments with the transferability of voting rights limited to principal, rate, fees and term. The Borrower shall not be responsible for the costs and expenses of syndication of the Facility except as provided under "Expenses" below. Waivers and Amendments: With the exception of decreases in interest rates or fees, increases in commitment amounts, extension of maturities and times for payment, changes in funding and yield protections and indemnities, changes in sharing provisions among Lenders, changes in several nature of the obligations of the Lenders, changes in the percentage of the Lenders necessary to act, assignment by the Borrower of rights or obligations under any of the documentation for the Facility and release of the pledged collateral (which shall require consent of all the Lenders), amendments to and waivers of provisions of the loan documents shall be made or given by Lenders holding a majority of commitments under the Facility. Increased Costs/ Changed Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of unavailability of funding, illegality, capital adequacy requirements, increased costs, and funding losses and shall provide for all payments to be made free and clear of taxes. CONFIDENTIAL California Energy Company Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements relating to the transactions and the enforcement of the Agent's and/or Lenders' rights and remedies with respect to the loan documents, or the Borrower's use of loan proceeds or the commitments, in each case including but not limited to attorneys' fees and settlement costs whether or not the transaction contemplated herein is consummated. Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to this transaction pursuant to a schedule to be agreed to by the parties and any subsequent amendments or waivers; provided, however, that the Borrower shall not be liable for any such expenses incurred in connection with the syndication of the Facility except for any such expenses in connection with the syndication by the Agent of the Facility to any entity that becomes a lender on the closing of the Facility or within 90 days thereafter. Governing Law: The State of New York. CONFIDENTIAL California Energy Company SUMMARY OF TERMS AND CONDITIONS UP TO $500,000,000 IN MERGER FACILITIES Borrower: California Energy Company on a non-recourse basis in form satisfactory to the Agent Agent/Arranger/ Underwriter: Credit Suisse Lenders: The Agent and any other financial institutions to be arranged by the Agent. Facilities: Up to $500,000,000 in credit facilities (the "Facilities") composed of: (i) Up to a 6-year amortizing term loan ("Term Loan A") in an expected amount of up to $500,000,000 less the amount of the Term Loan B and (ii) Up to an 8-year amortizing term loan ("Term Loan B") in an expected amount not to be less than $150,000,000. Use of Proceeds: The Borrower proposes to capitalize CE Acquisition Company, Inc., a wholly-owned subsidiary ("Newco", which term shall also include the surviving corporation in the Merger (as defined below)), for the purpose of tendering for 51% of the stock of Magma Power Company (the "Target") and entering into a merger with the Target (the "Merger"). Funds provided by the Facilities will be advanced by the Borrower to Newco to purchase a secured term note of Newco (the "Newco Secured Term Note"). The proceeds from the sale of the Newco Secured Term Note will be used, together with the Borrower's capital investment in Newco, which will be in an amount and form satisfactory to the Agent, adequate provision of working capital and other available moneys, to fund the merger consideration payable in connection with the Merger, to refinance the Borrower's Tender Offer Facility by repaying its earlier advance to Newco to purchase the tendered stock of the Target evidenced by the Newco Secured Tender Note, to repay or acquire certain existing debt of the Target and to pay related fees and costs of the transaction. The economic terms of the Newco Secured Term Note will mirror the terms of the Facilities. Upon consummation of the Merger, the Target shall expressly assume the obligations of Newco under the Newco Secured Term Note. CONFIDENTIAL California Energy Company Borrowing Options: Adjusted LIBOR and Base Rate. "Adjusted LIBOR" means the average (rounded upward to the next higher 1/16 of 1%) of the rates offered to the reference Lenders in the London interbank market for deposits in an amount and maturity corresponding to the interest period for the advance. LIBOR will be adjusted for reserves and other regulatory requirements, as appropriate. "Base Rate" means the higher of the Agent's prime rate or the federal funds rate + 0.50% per annum. Applicable Interest Margins: Term Loan A: LIBOR + 2.50% Base Rate + 1.50% Term Loan B: LIBOR + 3.00% Base Rate + 2.00% Computation of Interest: Interest on Base Rate loan segments will be payable quarterly in arrears and calculated on the basis of the actual number of days elapsed over a 365/366 day year. Interest on LIBOR loan segments will be payable in arrears (i) at the end of each applicable interest period and (ii) in the case of any interest period longer than three months, every three months during such period. Interest on LIBOR loan segments will be calculated on the basis of the actual number of days elapsed over a 360 day year. Default Rate: All applicable margins will be increased by 2.00% per annum and all loan segments shall be maintained as Base Rate loan segments effective in the case of LIBOR loan segments at the end of each then existing period. Total annual amortization in accordance with the following table, with payments to be made semi-annually (the amount and timing of actual semi-annual payments to be determined after review of cash flows): CONFIDENTIAL California Energy Company Term Loan A Term Loan B Scheduled Annual Annual Amortization: Year Amortization Year Amortization 1 $20,000,000 1 $0 2 $30,000,000 2 $0 3 $50,000,000 3 $0 4 $75,000,000 4 $0 5 $80,000,000 5 $0 6 $95,000,000 6 $0 ------------ 7 $75,000,000 Total $350,000,000 8 $75,000,000 ------------ Total $150,000,000 Mandatory Prepayments: From the excess cash flow and capital transactions of Newco, including without limitation cash proceeds of asset sales and refinancing, on terms to be mutually agreed. Also from any other monies received from Newco other than through the Newco Secured Term Note except as mutually agreed to by the parties. Optional Prepayments: Optional prepayments will be permitted at any time in excess of a threshold amount without premium or penalty other than payment of applicable "breakage" costs on LIBOR loan segments. Required notice to the Agent will be (i) one Business Day prior to the date of prepayment of any Base Rate loan segment and (ii) three Business Days prior to the date of prepayment of any LIBOR loan segment. Application of Prepayments: Mandatory prepayments will be applied pro rata to each remaining mandatory amortization payment under the Facilities. All principal reductions shall be permanent. Prepayments will be applied first to Base Rate loan segments and then to LIBOR loan segments. The prepayment of LIBOR loan segments will be subject to the payment of "breakage" costs if the date of prepayment is not the last day of an interest period unless, at the option of the Borrower, the prepayment amount is escrowed with the Agent and invested in United States Treasury Securities to the last day of the applicable interest period. Optional prepayments will be applied in a manner to be agreed. Security: The Facilities will be secured by an assignment and pledge of the stock of Target and all other unencumbered assets of Target and its subsidiaries securing the Newco Secured Term Note. The Facilities will be non-recourse to the Borrower and the Lenders will CONFIDENTIAL California Energy Company agree to make an appropriate election under Section 1111(b) of the Bankruptcy Code to continue such non-recourse status in any proceeding involving the Borrower as Debtor under the Bankruptcy Code. Representations and Warranties: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, the following: 1. Corporate organization, existence and power including the merger of Newco and the Target and all related transactions. 2. Corporate and government authorization, no contravention, legality, validity, binding effect and enforceability of all documentation related to this transaction. 3. The financial information of the Borrower, Newco and their material subsidiaries. 4. No material adverse change in the Borrower, Newco and their material subsidiaries. 5. No material litigation (other than litigation to which the Target is a party and which is described in the Target's Form 10-K for the year ended December 31, 1993 and as described in the Offer to Purchase (the "Offer to Purchase") of the Borrower and Newco dated October 6, 1994, as it may be amended (the "Magma Litigation")). No material amendments to the Offer to Purchase shall be effective for purposes of this term sheet without the prior written consent of the Bank. 6. Absence of default(s) or Event of Default(s). 7. Compliance with ERISA. 8. Regulatory approvals, consents, filings and compliance with laws. 9. Existence, incorporation etc. of subsidiaries. 10. Environmental compliance. 11. Not an investment company. 12. Full disclosure. 13. Payment of taxes. CONFIDENTIAL California Energy Company 14. Adequate insurance. Conditions Precedent to Closing: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, a capital investment in Newco in an amount and form satisfactory to the Agent, provision for an adequate level of working capital, provisions to insure Alto Peak and Malitbog equity commitments and ownership interest in Alto Peak and Malitbog satisfactory to the Agent, receipt of appropriate certificates and legal opinions, accuracy of representations and warranties, absence of defaults and material litigation (excluding the Magma Litigation), evidence of authority, receipt of required governmental approvals, consents and filings of all persons, consummation of the merger pursuant to a definitive merger agreement between Newco and the Target satisfactory to Agent, compliance with laws (including without limitation, environmental, labor and ERISA), absence of material adverse change in the Borrower, Newco, the Target and their respective subsidiaries (in each case, taken as a whole), satisfactory due diligence by the Agent and payment of fees. Covenants: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and its subsidiaries, as applicable, including, without limitation, covenants regarding compliance with laws (including ERISA), payment of taxes, maintenance of insurance, preservation of corporate existence, visitation rights, keeping of books, maintenance of properties, use of proceeds, margin stock, transactions with affiliates, notice of defaults, delivery of the unaudited (quarterly) and audited (annual) financial statements of the Borrower, Newco and its significant subsidiaries, quarterly delivery with financial statements of an officer's certificate, in form and substance reasonably satisfactory to the Agent, certifying the absence of (i) a material adverse change in the financial condition or operations of the Borrower and its subsidiaries, taken as a whole, or (ii) a material adverse change in the financial condition or operations of Newco and its subsidiaries, taken as a whole (and, in either case, which could reasonably be expected to materially impact the ability of Borrower to service the Facilities or the ability of the Agent on behalf of the Lenders to realize upon the collateral securing the Facilities), and other customary financial reporting requirements as any Lender may reasonably request; and without limitation, the following restrictions and limitations (subject to such baskets and exceptions as the parties may agree): 1. Negative pledge of all stock and unencumbered assets of Newco and its subsidiaries. 2. Limitation on guaranties by Newco and its subsidiaries. CONFIDENTIAL California Energy Company 3. Limitation on mergers and sales of assets by Newco and its subsidiaries. 4. Limitation on investment in other persons by Newco and its subsidiaries. 5. Prohibition on restricted payments by Newco and its subsidiaries. 6. Maintenance of ownership of Newco and all subsidiaries. 7. Prohibition on incurrence of additional debt at Newco and its subsidiaries. 8. Limitation on dividends on Newco stock to Borrower unless proceeds used to pay down the Facilities in amounts to be agreed upon. 9. Limitation on the up-streaming of any assets or funds from Newco and its subsidiaries to the Borrower unless the proceeds are used to pay down the Facilities in amounts to be agreed upon. 10. Restrictions on change in nature of business. 11. Limitation on amendments to the merger agreement. Financial Covenants: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to Newco and, as applicable, its subsidiaries including, without limitation, the following: 1. Minimum interest coverage ratio. 2. Maximum leverage ratio. 3. Minimum operating cash flow. Events of Default: Those customarily found in credit facilities of this nature and any additional appropriate to this transaction with respect to the Borrower and, as applicable, its subsidiaries including, without limitation, breach of representation or warranty in any material respect; default in any covenant or financial covenant; permanent injunction of the Merger; material cross default with respect to Newco and its subsidiaries; payment default under any other agreement to which the Borrower is a party involving indebtedness in excess of $50,000,000, or other default under any such agreement resulting in acceleration which is not rescinded within 30 days; bankruptcy; insolvency; change of control (except under circumstances mutually satisfactory to the parties); certain ERISA defaults (which in the case of the Borrower shall only include such CONFIDENTIAL California Energy Company defaults as the Agent determines to materially adversely affect the collateral for the Facilities); the failure to pay one or more final judgments aggregating more than a specified threshold to be mutually agreed; failure to make a payment in connection with the Facilities when due; pledge agreement shall cease to be in full force and effect or the Borrower shall so assert. Cost and Yield Protection: Standard provisions for illegality, inability to determine rate, indemnification for breakage of LIBOR funding and increased costs or reduced return, including those arising from reserve requirements, taxes and capital requirements; provided that increased costs may be applied retroactively for a maximum of 90 days preceding written notice to the Borrower and will not be more, in the case of any participant, than the applicable fronting Lender would have been entitled to claim. Assignments and Participations: Lenders will have a right (i) to sell assignments in amounts of at least $5 million with the consent of the Borrower and the Agent, which consent shall not be unreasonably withheld, provided that the consent of the Borrower will not be required for assignments among Lenders or by a Lender to any of its affiliates or to the Federal Reserve Bank, and (ii) to sell participations in all or a part of their loans or commitments with the transferability of voting rights limited to principal, rate, fees and term. The Borrower shall not be responsible for the costs and expenses of syndication of the Facilities except as provided under "Expenses" below. Waivers and Amendments: With the exception of decreases in interest rates or fees, increases in commitment amounts, extension of maturities and times for payment, changes in funding and yield protections and indemnities, changes in sharing provisions among Lenders, changes in several nature of the obligations of the Lenders, changes in the percentage of the Lenders necessary to act, assignment by the Borrower of rights or obligations under any of the documentation for the Facilities and release of the pledged collateral (which shall require consent of all the Lenders), amendments to and waivers of provisions of the loan documents shall be made or given by Lenders holding a majority of commitments under the Facilities. Increased Costs/ Changed Circumstances: The Agreement will contain customary provisions protecting the Lenders in the event of unavailability of funding, illegality, capital adequacy requirements, increased costs, and funding losses and shall provide for all payments to be made free and clear of taxes. CONFIDENTIAL California Energy Company Indemnification: The Borrower will indemnify the Agent and the Lenders against all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements relating to the enforcement of the Agent's and/or Lenders' rights and remedies with respect to the loan documents, or the Borrower's use of loan proceeds or the commitments, in each case including but not limited to attorneys' fees and settlement costs whether or not the transaction contemplated herein is consummated. Expenses: The Borrower will pay all legal and other out-of-pocket expenses of the Agent related to this transaction pursuant to a schedule to be agreed to by the parties and any subsequent amendments or waivers; provided, however, that the Borrower shall not be liable for any such expenses incurred in connection with the syndication of the Facilities except for any such expenses in connection with the syndication by the Agent of the Facilities to any entity that becomes a lender on the closing of the Facilities or within 90 days thereafter. Governing Law: The State of New York.
EX-99.(C)(1) 12 ENGAGEMENT LETTER WITH GLEACHER Exhibit 99.(c)(1) Gleacher & Co., Inc. 660 Madison Avenue New York, NY 10021 September 18, 1994 PERSONAL AND CONFIDENTIAL Mr. David L. Sokol Chairman, President, Chief Executive Officer California Energy Company, Inc. 10831 Old Mill Road Omaha, NE 68154 Dear David: This letter will confirm that California Energy Company, Inc. (the "Company") has engaged Gleacher & Co. Inc. ("Gleacher & Co.") to act as financial advisor in connection with the possible acquisition of Magma Power Company ("Magma"). The Assignment During the term of its engagement hereunder, Gleacher & Co. will act as lead Dealer Manager in connection with any offer and will provide the Company with financial advice and assistance in connection with the proposed transaction, including advice and assistance with respect to defining objectives, structuring and planning the transaction, performing valuation analysis, negotiating the transaction and conducting due diligence, as requested by the Company. Gleacher & Co.'s compensation is as follows: (a) A fee of $250,000 payable upon the public announcement of an offer to acquire at least 50.1% of the common stock of Magma; (b) An additional fee of $500,000 payable 45 calendar days after the commencement of a tender or exchange offer, assuming the offer is outstanding at such time; (c) A fee of $4,000,000 payable upon the completion of the direct or indirect acquisition by the Company, either alone or in partnership with another company, by merger, California Energy Company, Inc. September 18, 1994 Page 2 acquisition of securities, or otherwise, of 50.1% or more of the equity securities of Magma. Any fees payable in (a) and (b) above will be credited against such fee. The Company also engages Gleacher & Co. (together with Lehman Brothers) to advise on arranging debt financing for the transaction. The Company will pay to Gleacher & Co. a fee equal to 0.25% of the principal amount of debt directly arranged by the Lehman Brothers and Gleacher & Co. team in the transaction. Other Matters In addition to any fees that may be payable to Gleacher & Co., the Company agrees to reimburse Gleacher & Co. for all reasonable travel and other reasonable out-of-pocket expenses incurred in connection with Gleacher & Co.'s engagement hereunder, including all reasonable fees and disbursements of Gleacher & Co.'s legal counsel and any other professional advisors. Gleacher & Co. shall provide reasonable documentation with respect to out-of-pocket expenses and obtain the Company's approval before incurring significant costs in connection with attorneys and other professional advisors. Gleacher & Co. will consult with the Company before selecting attorneys and other professional advisors. In connection with the foregoing and for no additional compensation, Gleacher & Co. will, upon request, render a fairness opinion, or opinions, which may be in such form as Gleacher & Co. shall determine and may be qualified in such a manner as Gleacher & Co. deems appropriate. The Company recognizes and confirms that in advising the Company in completing its engagement hereunder, Gleacher & Co. will be using and relying on non-public data, material and other information furnished to Gleacher & Co. by the Company. It is understood that in performing this engagement Gleacher & Co. may reasonably rely upon any information so supplied without independent verification. Gleacher & Co. will hold in confidence all non-public information received from the Company and will not use such information in a manner adverse to the Company, or for any purpose not contemplated by this letter or otherwise required by law. Upon the Company's request, Gleacher & Co. will promptly return or destroy all such information and all copies thereof and will confirm to the Company in writing that Gleacher & Co. has complied with the requirements of this sentence. The Company acknowledges that all advice given by Gleacher & Co. California Energy Company, Inc. September 18, 1994 Page 3 in connection with its engagement hereunder is intended solely for the benefit and use of the management and Board of Directors of the Company in considering any transaction to which such advice relates and, except as may be required by applicable law, the Company agrees that no such advice shall be used for any other purpose or be reproduced, disseminated, quoted or referred to at any time, in any manner or for any purpose, nor shall any public references to Gleacher & Co. be made by or on behalf of the Company, in each case without Gleacher & Co.'s prior written consent which shall not be unreasonably withheld. The foregoing shall not prohibit the Company from disclosing any such advice or opinions to the extent such disclosure may be required by law, provided that the Company shall notify Gleacher & Co. prior to any such disclosure and, if time permits and Gleacher & Co. so desires, offer Gleacher & Co. an opportunity to comment on such disclosure and/or take appropriate steps to preserve the confidentiality of such matters. The Company recognizes that Gleacher & Co. has been retained only by the Company and that its engagement is not deemed to be on behalf of and is not intended to confer rights upon any other shareholder of the Company, or any other person not a party hereto as against Gleacher & Co. or any of its affiliates, the respective limited and general partners, directors, officers, agents and employees of Gleacher & Co. or its affiliates or each other person, if any, controlling either of Gleacher & Co. or any of its affiliates. Unless otherwise expressly stated in writing by Gleacher & Co., no one other than the Company, is authorized to rely upon this engagement of Gleacher & Co. or any statements or conduct by Gleacher & Co. In connection with matters described in this letter, the Company and Gleacher & Co. have entered into a separate letter agreement, dated the date hereof, providing for indemnification, contribution and reimbursement of Gleacher & Co. and certain other individuals and entities. Any right to trial by jury with respect to any claim or action arising out of this agreement or conduct in connection with the engagement is hereby waived by the parties hereto and their affiliates. This agreement shall be deemed made in New York. This agreement and all controversies arising from or related to performance under this agreement shall be governed by the laws of the state of New York, without regard to such state's rules concerning conflicts of laws. All controversies arising from or related to performance under this agreement shall be adjudicated in State or Federal court within the State of New York. California Energy Company, Inc. September 18, 1994 Page 4 Gleacher & Co. may assign its rights and obligations under this letter agreement to any partnership of which Gleacher & Co. is the general partner or to any other entity which succeeds to the business of Gleacher & Co. so long as Mr. Eric J. Gleacher is a partner or principal of the successor entity, in each case, without the consent of the Company. The Company shall not be obligated to pay Gleacher & Co. any additional fees pursuant to this agreement as a result of such assignment. The provisions of this agreement (including the attached letter agreement) shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company and Gleacher & Co. Gleacher & Co.'s services hereunder may be terminated with or without cause by the Company or by Gleacher & Co. at any time. Upon termination, this agreement shall have no further force or effect except that (i) any fees earned or payable pursuant to this letter agreement as of the date of termination and any out- of-pocket expenses incurred by Gleacher & Co. prior to the date of termination shall be paid or reimbursed in accordance with the terms of this agreement; (ii) in the case of termination by the Company, Gleacher & Co. shall be entitled to any fees that would otherwise be payable pursuant to this letter agreement for any acquisition of control transaction involving the Company and Magma Power effected within one year of such termination, and (iii) the indemnity, contribution and other provisions as contained in the attached letter agreement shall continue to apply notwithstanding termination. Gleacher & Co. is pleased to accept this engagement and looks forward to working with the Company on this important transaction. Please confirm that the foregoing is in accordance California Energy Company, Inc. September 18, 1994 Page 5 with the Company's understanding by signing and returning to Gleacher & Co. the enclosed duplicate of this letter. Very truly yours, GLEACHER & CO. /s/ James Goodwin ------------------ James Goodwin Managing Director Accepted and Agreed to: CALIFORNIA ENERGY COMPANY, INC. By: /s/ David L. Sokol ------------------ David L. Sokol Chairman, President, Chief Executive Officer Gleacher & Co. Inc. 667 Madison Avenue New York, New York 10021 Gentlemen: In connection with the activities of Gleacher & Co. Inc. ("Gleacher & Co.") pursuant to a letter agreement, dated as of the date hereof, between California Energy Company, Inc. (The "Company") and Gleacher & Co., as the same may be amended from time to time, including without limitation any activities of Gleacher & Co. in connection with any transaction contemplated by such letter agreement, whether occurring before, at or after the date hereof, the Company agrees for a period of six years from the date of termination of Gleacher & Co.'s engagement hereunder, to indemnify and hold harmless Gleacher & Co. and its affiliates, the respective limited and general partners, directors, officers, agents and employees of Gleacher & Co. and its affiliates and each other person, if any, controlling Gleacher & Co. or any of its affiliates (hereinafter collectively referred to as the "indemnified parties"), to the full extent lawful, from and against any losses, damages, liabilities, expenses or claims (or actions in respect thereof, including, without limitation, shareholder and derivative actions) related to or otherwise arising out of such engagement or Gleacher & Co.'s role in connection therewith, relating to an action commenced within six years following the termination of Gleacher & Co.'s engagement and will undertake the legal defense of any indemnified party (with counsel, which may be outside counsel to the Company, reasonably acceptable to such indemnified party) and reimburse any indemnified party for all other reasonable expenses as they are incurred by any indemnified party in connection with investigating, preparing or defending any claim, action, proceeding or investigation, in connection with pending or threatened litigation to which any indemnified party is or may be made a party, arising in connection with or related to Gleacher & Co.'s engagement or Gleacher & Co.'s role in connection therewith. If, in the written opinion of counsel to any indemnified party, there is a significant potential for a conflict of interest between any of the indemnified parties and the Company, then the Company will pay the reasonable fees and expenses of one national and local separate counsel acting for all such indemnified parties. For any action commenced after three years from the date of termination of Gleacher & Co.'s engagement, Gleacher & Co. will contribute up to $500,000 to the costs of defending such action. The Company will not, however, be responsible for any losses, damages, liabilities, expenses or claims to the extent they are finally judicially determined to have resulted from any indemnified party's bad faith or gross negligence. The Company also agrees that no indemnified party Gleacher & Co. Inc. September 23, 1994 Page 2 will have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company for or in connection with such engagement except to the extent that any such liability for losses, damages, liabilities, expenses or claims incurred by the Company result from such indemnified party's bad faith or gross negligence. In the event that the foregoing indemnity is unavailable to any indemnified party for any reason or insufficient to hold any indemnified party harmless, then the Company agrees to contribute to any such losses, damages, liabilities, expenses, claims or actions and will do so in such proportion as is appropriate to reflect the relative benefits received (or anticipated to be received) by, and the relative fault of, the indemnified parties, on the one hand, and the Company and the Company's securityholders, on the other, as well as any other relevant equitable considerations, from any actual or proposed transaction. The Company and Gleacher & Co. agree that it would not be just and equitable if contribution were determined by pro rata allocation or by any other method of allocation which does not take account of the equitable considerations referred to above. The Company agrees that it will not, without the prior written consent of Gleacher & Co., which consent shall not be unreasonably withheld, settle or compromise or consent to the entry of any judgment with respect to any pending or threatened claim, action, suit or proceeding in respect of which indemnification or contribution may be sought hereunder (whether or not Gleacher & Co. is an actual or potential party to such claim or action) unless such settlement, compromise or consent includes an unconditional release of Gleacher & Co. from all liability arising out of such claim, action, suit or proceeding unless the claims not released relate to the bad faith or gross negligence of any indemnified party. The foregoing agreement shall be in addition to any rights that any indemnified party may have at common law or otherwise, and shall be in addition to any liability which the Company may otherwise have. The Company hereby consents to personal jurisdiction, service and venue in any court in which any claim which is subject to this agreement is brought against Gleacher & Co. or the Company. ANY RIGHT TO TRIAL BY JURY WITH RESPECT TO ANY CLAIM OR ACTION ARISING OUT OF THIS AGREEMENT IS WAIVED. Gleacher & Co. may assign its rights and obligations under this letter agreement to any partnership of which Gleacher & Co. is the general partner or to any other entity, of which Eric J. Gleacher is a partner or principal, which succeeds to the Gleacher & Co. Inc. September 23, 1994 Page 3 business of Gleacher & Co., in each case, without the consent of the Company. This agreement shall remain in full force and effect following the completion or termination of Gleacher & Co.'s engagement and shall be binding upon and inure to the benefit of any successors, assigns, heirs and personal representatives of the Company and any indemnified party. Very truly yours, Accepted: CALIFORNIA ENERGY COMPANY, INC. GLEACHER & CO. INC. By: /s/David L. Sokol By: /s/James Goodwin ----------------- ---------------- Date: September 19, 1994 Date: September 18, 1994 ------------------ ------------------ EX-99.(C)(2) 13 ENGAGEMENT LETTER WITH LEHMAN Exhibit 99.(c)(2) LEHMAN BROTHERS September 27, 1994 California Energy Company, Inc. 10831 Old Mill Road Omaha, Nebraska 68154 Attention: Mr. David L. Sokol Chairman, President and Chief Executive Officer Dear David: This letter agreement (this "Agreement") will confirm the understanding and agreement between Lehman Brothers Inc. ("Lehman Brothers") and California Energy Company, Inc. (the "Company" or "CEC"): 1. The Company hereby engages Lehman Brothers to render financial advisory services to the Company concerning its acquisition of Magma Power Company ("Magma"). 2. Lehman Brothers hereby accepts the engagement and, in that connection, agrees to: (a) provide advisory services, in conjunction with Gleacher and Company ("Gleacher"), including general business and financial analysis, transaction feasibility analysis and pricing of the prospective acquisition of Magma; and (b) assist, in conjunction with Gleacher, in corporate capital planning for such acquisition, including the identification of commercial bank acquisition financing, and assist in the arrangement of such financing. 3. For purposes of this Agreement, an "acquisition" of Magma shall mean any transaction or series or combination of transactions, other than in the ordinary course of business, whereby, directly or indirectly, control of a majority equity interest in Magma or any of its businesses or assets is transferred to the Company or any of its 1 affiliates for consideration, including, without limitation, a sale or exchange of capital stock or assets, a merger or consolidation, a tender or exchange offer, a leveraged buy-out, or any similar transaction. 4. The term of Lehman Brothers' engagement hereunder shall extend from the date hereof until terminated as set forth below. Subject to the provisions of paragraphs 5 through 14, which shall survive any termination of this Agreement, either party may terminate Lehman Brothers' engagement hereunder at any time by giving the other party at least 10 days' prior written notice. 5. As compensation for the services rendered by Lehman Brothers hereunder, the Company shall pay Lehman Brothers as follows: (a) If an acquisition of Magma occurs either (i) during the term of Lehman Brothers engagement hereunder, or (ii) at any time during a period of six months following the effective date of termination of Lehman Brothers' engagement hereunder then the Company shall pay to Lehman Brothers a financial advisory fee equal to $1,000,000, payable at the closing of such acquisition. (b) In conjunction with such acquisition, Lehman Brothers will also act as the lead arranger for the placement of any commercial bank financing necessary for the Company to complete the acquisition. In consideration thereof, the Company will pay Lehman Brothers a fee equal to one quarter of 1% (0.25%) of the total principal amount of any such commercial bank financing arranged by Lehman Brothers and Gleacher. Compensation which is payable pursuant to this subparagraph (b) shall be paid by the Company upon the closing of the acquisition; provided, however, that the aggregate compensation payable to Lehman Brothers under this Agreement shall not exceed $2,250,000. 6. The Company shall: 2 (a) indemnify Lehman Brothers and hold it harmless against any and all losses, claims, damages or liabilities to which Lehman Brothers may become subject arising in any manner out of or in connection with the rendering of services by Lehman Brothers hereunder, except to the extent it is finally judicially determined that such losses, claims, damages or liabilities resulted from the negligence or willful misconduct of Lehman Brothers; and (b) subject to the Company's right to assume Lehman's legal defense pursuant to the following paragraph, reimburse Lehman Brothers promptly for any legal or other expenses reasonably incurred by it in connection with investigating, preparing to defend or defending, or providing evidence in or preparing to serve or serving as a witness with respect to, any lawsuits, investigations, claims or other proceedings arising in any manner out of or in connection with the rendering of services by Lehman Brothers hereunder (including, without limitation, in connection with the enforcement of this Agreement and the indemnification obligations set forth herein); provided, however, that in the event a final judicial determination is made to the effect specified in subparagraph 6(a) above, Lehman Brothers will promptly remit to the Company any amounts reimbursed under this subparagraph 6(b); and provided further that, with respect to claims made after three years from the date hereof, Lehman brothers shall contribute $50,000 to the defense thereof. The Company agrees that the indemnification and reimbursement commitments set forth in this paragraph 6 shall apply whether or not Lehman Brothers is a formal party to any such lawsuits, claims or other proceedings and that such commitments shall extend upon the terms set forth in this paragraph to any controlling person, affiliate, director, officer, employee or agent of Lehman Brothers (each, with Lehman Brothers, an "Indemnified Person"). The Company further agrees that, without Lehman Brothers' prior written consent, which consent will not be unreasonably withheld, it will not enter into any settlement of a lawsuit, claim or other proceeding arising out 3 of the transactions contemplated by this Agreement unless such settlement includes an explicit and unconditional release from the party bringing such lawsuit, claim or other proceeding of all Indemnified Persons, except to the extent the claims not released relate to Lehman Brothers' negligence or willful misconduct. If indemnification is to be sought hereunder by an Indemnified Person, then such Indemnified Person shall notify the Company of the commencement of any action or proceeding in respect thereof; provided, however, that the failure so to notify the Company shall not relieve the Company of any liability that it may have to such Indemnified Person pursuant to this paragraph 6 except to the extent the Company has been prejudiced in any material respect by such failure or from any liability that it may have to such Indemnified Person other than pursuant to this paragraph 6. Notwithstanding the above, following such notification, the Company may elect in writing to assume the defense of such action or proceeding, and, upon such election, it shall not be liable for any legal costs subsequently incurred by such Indemnified Person (other than reasonable costs of investigation or providing evidence) in connection therewith, unless (i) the Company has failed to provide counsel reasonably satisfactory to such Indemnified Person in a timely manner, (ii) counsel which has been provided by the Company reasonably determines that its representation of such Indemnified Person would present it with a conflict of interest or (iii) outside counsel to the Indemnified Person provides a written opinion that there is a significant potential for a conflict of interest. In connection with any one action or proceeding, the Company shall not be responsible for the fees and expenses of more than one separate law firm in any one jurisdiction for all Indemnified Persons. 7. The Company and Lehman Brothers agree that if any indemnification or reimbursement sought pursuant to the preceding paragraph 6 is judicially determined to be unavailable for a reason other than the negligence or willful misconduct of Lehman Brothers, then, whether or not Lehman Brothers is the Indemnified Person, the Company and Lehman Brothers shall contribute to the losses, claims, damages, liabilities and expenses for which such indemnification or reimbursement is 4 held unavailable (i) in such proportion as is appropriate to reflect the relative benefits to the Company on the one hand, and Lehman Brothers on the other hand, in connection with the transactions to which such indemnification or reimbursement relates, or (ii) if the allocation provided by clause (i) above is judicially determined not to be permitted, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative faults of the Company on the one hand, and Lehman brothers on the other hand, as well as any other equitable considerations; provided, however, that in no event shall the amount to be contributed by Lehman Brothers pursuant to this paragraph exceed the amount of the fees actually received by Lehman Brothers hereunder. 8. Except as contemplated by the terms hereof or as required by applicable law or pursuant to an order entered or subpoena issued by a court of competent jurisdiction, Lehman Brothers shall keep confidential all material non-public information provided to it by the Company, and shall not disclose such information to any third party, other than to such of its employees and advisors as Lehman Brothers determines to have a need to know. 9. Except as required by applicable law, any advice to be provided by Lehman Brothers under this Agreement shall not be disclosed publicly or made available to third parties without the prior approval of Lehman Brothers, which approval shall not be unreasonably withheld, and accordingly such advice shall not be relied upon by any person or entity other than the Company. 10. The Company agrees that Lehman Brothers has the right following the closing of an acquisition to place advertisements in financial and other newspapers and journals at its own expense describing its services to the Company hereunder, provided that Lehman Brothers will submit a copy of any such advertisements to the Company for its prior approval, which approval shall not be unreasonably withheld. 11. The Company and Lehman Brothers each represent to the other that, except for Gleacher, there is no other person or entity that is entitled to a finder's fee or any type of brokerage commission 5 in connection with the transactions contemplated by this Agreement as a result of any agreement or understanding with it. 12. Nothing in this Agreement, express or implied, is intended to confer or does confer on any person or entity other than the parties hereto or their respective successors and assigns, and to the extent expressly set forth herein, the Indemnified Persons, any rights or remedies under or by reason of this Agreement or as a result of the services to be rendered by Lehman Brothers hereunder. The Company further agrees that neither Lehman Brothers nor any of its controlling persons, affiliates, directors, officers, employees or agents shall have any liability to the Company or any person asserting claims on behalf of or in right of the Company for any losses, claims, damages, liabilities or expenses arising out of or relating to this Agreement or the services to be rendered by Lehman Brothers hereunder, except to the extent it is finally judicially determined that such losses, claims, damages, liabilities or expenses resulted from the negligence or willful misconduct of Lehman Brothers. 13. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provisions of this Agreement, which shall remain in full force and effect. 14. This Agreement may not be amended or modified except in writing signed by each of the parties and shall be governed by and construed and enforced in accordance with the laws of the State of New York. Any right to trial by jury with respect to any lawsuit, claim or other proceeding arising out of or relating to this Agreement or the services to be rendered by Lehman Brothers hereunder is expressly and irrevocably waived. If the foregoing correctly sets forth the understanding and agreement between Lehman Brothers and the Company, please so indicate in the space provided for that purpose below, whereupon 6 this letter shall constitute a binding agreement as of the date hereof. LEHMAN BROTHERS INC. By: /s/ Joseph G. Sauvage ---------------------- Managing Director AGREED: CALIFORNIA ENERGY COMPANY, INC. By: /s/ David L. Sokol ------------------- Name: David L. Sokol Title: Chairman, President and Chief Executive Officer 7 EX-99.(C)(3) 14 AGREEMENT AND PLAN OF MERGER FINAL CONFORMED COPY CALIFORNIA ENERGY COMPANY, INC., CE ACQUISITION COMPANY, INC. and MAGMA POWER COMPANY AGREEMENT AND PLAN OF MERGER Dated as of December 5, 1994 TABLE OF CONTENTS SECTION PAGE - ------- ---- ARTICLE I THE TENDER OFFER SECTION 1.01. The Offer. . . . . . . . . . . . . . . . . 2 SECTION 1.02. Company Action . . . . . . . . . . . . . . 3 SECTION 1.03. Directors. . . . . . . . . . . . . . . . . 4 ARTICLE II THE MERGER SECTION 2.01. The Merger . . . . . . . . . . . . . . . . 5 SECTION 2.02. Effective Time . . . . . . . . . . . . . . 5 SECTION 2.03. Effect of the Merger . . . . . . . . . . . 6 SECTION 2.04. Subsequent Actions . . . . . . . . . . . . 6 SECTION 2.05. Certificate of Incorporation; By-Laws; Directors and Officers . . . . . . . . . . 6 SECTION 2.06. Merger Consideration . . . . . . . . . . . 7 SECTION 2.07. Dissenting Company Common Stock. . . . . . 8 SECTION 2.08. Surrender of Company Common Stock; Stock Transfer Books . . . . . . . . . . . 8 SECTION 2.09. No Fractional Shares . . . . . . . . . . . 10 SECTION 2.10. Stock Options; Deferred Stock. . . . . . . 10 SECTION 2.11. Dividends; Transfer Taxes. . . . . . . . . 11 SECTION 2.12. Stockholders' Meetings . . . . . . . . . . 11 SECTION 2.13. Board Nominees; Assistance in Consummation of the Merger . . . . . . . . 12 ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB SECTION 3.01. Corporate Organization; Subsidiaries . . . 12 SECTION 3.02. Certificate of Incorporation and By-Laws . 13 SECTION 3.03. Capitalization . . . . . . . . . . . . . . 13 SECTION 3.04. Authority Relative to this Agreement . . . 14 SECTION 3.05. No Conflict; Required Filings and Consents 14 SECTION 3.06. SEC Filings; Financial Statements. . . . . 15 SECTION 3.08. Title to Property. . . . . . . . . . . . . 17 SECTION 3.09. Litigation . . . . . . . . . . . . . . . . 17 SECTION 3.10. Financing Arrangements . . . . . . . . . . 17 i SECTION PAGE - ------- ---- SECTION 3.11. No Prior Activities. . . . . . . . . . . . 17 SECTION 3.12. Brokers. . . . . . . . . . . . . . . . . . 17 SECTION 3.13. Information in Disclosure Documents; Registration Statement; Etc . . . . . . . 17 SECTION 3.14. Conduct of Business. . . . . . . . . . . . 18 SECTION 3.15. Environment. . . . . . . . . . . . . . . . 18 SECTION 3.16. Energy Regulatory Status . . . . . . . . . 19 SECTION 3.17. Employee Benefit Plans; Labor Matters. . . 19 SECTION 3.18. Insurance. . . . . . . . . . . . . . . . . 21 SECTION 3.19. Taxes. . . . . . . . . . . . . . . . . . . 21 SECTION 3.20. Trademarks, Licenses, Patents and Copyrights . . . . . . . . . . . . . . . . 22 SECTION 3.21. Related Party Transactions . . . . . . . . 22 SECTION 3.22. Status of Development and Construction Projects . . . . . . . . . . . . . . . . . 23 SECTION 3.23. Status of Operating Projects . . . . . . . 23 ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY SECTION 4.01. Corporate Organization; Subsidiaries . . . 24 SECTION 4.02. Articles of Incorporation and Bylaws . . . 25 SECTION 4.03. Capitalization . . . . . . . . . . . . . . 25 SECTION 4.04. Authority Relative to this Agreement . . . 26 SECTION 4.05. No Conflict; Required Filings and Consents 26 SECTION 4.06. SEC Filings; Financial Statements. . . . . 27 SECTION 4.07. Absence of Certain Changes or Events . . . 28 SECTION 4.08. Title to Property. . . . . . . . . . . . . 29 SECTION 4.09. Litigation . . . . . . . . . . . . . . . . 29 SECTION 4.10. Information in Disclosure Documents. . . . 30 SECTION 4.11. Fairness Opinion . . . . . . . . . . . . . 30 SECTION 4.12. Brokers. . . . . . . . . . . . . . . . . . 30 SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement Amendment . . . . . . . . . . . 30 SECTION 4.14. Conduct of Business. . . . . . . . . . . . 31 SECTION 4.15. Environment. . . . . . . . . . . . . . . . 31 SECTION 4.16. Energy Regulatory Status . . . . . . . . . 31 SECTION 4.17. Employee Benefit Plans; Labor Matters. . . 32 SECTION 4.18. Insurance. . . . . . . . . . . . . . . . . 34 SECTION 4.19. Taxes. . . . . . . . . . . . . . . . . . . 34 SECTION 4.20. Trademarks, Licenses, Patents and Copyrights . . . . . . . . . . . . . . . . 35 SECTION 4.21. Related Party Transactions . . . . . . . . 35 ii SECTION PAGE - ------- ---- SECTION 4.22. Status of Development and Construction Projects . . . . . . . . . . . . . . . . . 35 SECTION 4.23. Status of Operating Projects . . . . . . . 36 ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Acquisition Proposals. . . . . . . . . . . 36 SECTION 5.02. Conduct of Business by the Parties Pending the Merger . . . . . . . . . . . . 37 SECTION 5.03. No Shopping. . . . . . . . . . . . . . . . 40 ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Registration Statement/Proxy Statement . . 41 SECTION 6.02. Stock Exchange Listing . . . . . . . . . . 42 SECTION 6.03. Additional Agreements. . . . . . . . . . . 42 SECTION 6.04. Notification of Certain Matters. . . . . . 42 SECTION 6.05. Access to Information. . . . . . . . . . . 42 SECTION 6.06. Public Announcements . . . . . . . . . . . 43 SECTION 6.07. Best Efforts; Cooperation. . . . . . . . . 43 SECTION 6.08. Agreement to Defend and Indemnify. . . . . 43 SECTION 6.09. Disposition of Litigation. . . . . . . . . 44 SECTION 6.10. Employee Benefits. . . . . . . . . . . . . 45 SECTION 6.11. Certain Action of Parent and Merger Sub. . 46 ARTICLE VII CONDITIONS OF MERGER SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger . . . . . . . . . . . . 46 SECTION 7.02. Additional Conditions to Obligations of the Company . . . . . . . . . . . . . . . . . 47 SECTION 7.03. Additional Conditions to Obligations of Parent and Merger Sub. . . . . . . . . . . 47 ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination. . . . . . . . . . . . . . . . 48 SECTION 8.02. Effect of Termination. . . . . . . . . . . 49 SECTION 8.03. Agreement Termination Fee. . . . . . . . . 49 iii SECTION PAGE - ------- ---- SECTION 8.04. Offer Fee. . . . . . . . . . . . . . . . . 50 ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and Agreements . . . . . . . . 51 SECTION 9.02. Notices. . . . . . . . . . . . . . . . . . 51 SECTION 9.03. Expenses . . . . . . . . . . . . . . . . . 52 SECTION 9.04. Certain Definitions. . . . . . . . . . . . 52 SECTION 9.05. Headings . . . . . . . . . . . . . . . . . 52 SECTION 9.06. Severability . . . . . . . . . . . . . . . 52 SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries . . . . . . . . . . . . . . 52 SECTION 9.08. Waiver . . . . . . . . . . . . . . . . . . 53 SECTION 9.09. Amendment. . . . . . . . . . . . . . . . . 53 SECTION 9.10. Assignment . . . . . . . . . . . . . . . . 53 SECTION 9.12. Counterparts . . . . . . . . . . . . . . . 53 Annex I iv AGREEMENT AND PLAN OF MERGER AGREEMENT AND PLAN OF MERGER, dated as of December 5, 1994 (this "Agreement"), among CALIFORNIA ENERGY COMPANY, INC., a Delaware corporation ("Parent"), CE ACQUISITION COMPANY, INC., a Delaware corporation and a wholly owned subsidiary of Parent ("Merger Sub"), and MAGMA POWER COMPANY, a Nevada corporation (the "Company"). W I T N E S S E T H: WHEREAS, the Boards of Directors of Parent, Merger Sub and the Company have each approved the acquisition of the Company by Parent upon the terms and subject to the conditions set forth in this Agreement; WHEREAS, in furtherance thereof, it is proposed that Merger Sub will make a cash tender offer (the "Offer") to acquire 12,400,000 shares of the issued and outstanding common stock, $0.10 par value, of the Company, including the associated Preferred Stock purchase rights (the "Rights") issued pursuant to the Rights Agreement dated October 6, 1994 between the Company and Chemical Trust Company of California, as Rights Agent (the "Rights Agreement") (the "Company Common Stock"; all issued and outstanding shares of Company Common Stock and the associated Rights being hereinafter collectively referred to as the "Shares") for $39.00 per Share, or such higher price as may be paid in the Offer (the "Per Share Cash Amount"), net to the seller in cash, subject to (i) there being validly tendered and not withdrawn before the expiration of the Offer that number of Shares which, together with Shares beneficially owned by Merger Sub, represents at least a majority of the Shares outstanding on a fully diluted basis (the "Minimum Tender Condition") and (ii) Merger Sub having obtained sufficient financing to enable it to consummate the Offer (the "Financing Condition"); WHEREAS, also in furtherance of such acquisition, the Boards of Directors of the Company and Merger Sub have each approved the merger (the "Merger") of Merger Sub with and into the Company following completion of the Offer in accordance with the General Corporation Law of the State of Delaware ("Delaware Law") and the General Corporation Law of the State of Nevada ("Nevada Law") and upon the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Board of Directors of the Company has resolved to recommend acceptance of the Offer and the Merger to the holders of Shares and has determined that the consideration to be paid for each Share in the Offer and the Merger is fair to the holders of such Shares; NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, Parent, Merger Sub and the Company hereby agree as follows: 2 ARTICLE I THE TENDER OFFER SECTION 1.01. The Offer. (a) Provided that this Agreement shall not have been terminated in accordance with Section 8.01 hereof and none of the events set forth in Annex I hereto shall have occurred or be existing, Parent shall cause Merger Sub to, and Merger Sub shall, commence the Offer as promptly as practicable, but in no event later than five business days after the date hereof. The obligation of Parent to accept for payment any Shares tendered shall be subject to the satisfaction of the conditions set forth in Annex I, including the Minimum Tender Condition. Parent expressly reserves the right to waive any such condition, to increase the price per Share payable in the Offer, or to make any other changes in the terms and conditions of the Offer (provided that no change may be made that decreases the price per Share payable in the Offer or that imposes additional conditions to the Offer from those set forth in Annex I hereto). Merger Sub covenants and agrees that, subject to the terms and conditions of this Agreement, unless the Company otherwise consents in writing, Merger Sub will accept for payment and pay for Shares as soon as it is permitted to do so under applicable law. The Per Share Cash Amount shall be net to the seller in cash, subject to reduction only for any applicable Federal back-up withholding or stock transfer taxes payable by the seller. The Company agrees that no Shares held by the Company or any of its subsidiaries (as hereinafter defined) will be tendered pursuant to the Offer. (b) The Offer shall be made by means of an offer to purchase (the "Offer to Purchase") having the conditions and provisions set forth in Annex I hereto. As soon as practicable on the date the Offer is commenced, Parent and Merger Sub shall file with the Securities and Exchange Commission (the "SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments and supplements thereto, the "Schedule 14D-1") with respect to the Offer. The Schedule 14D-1 will comply in all material respects with the provisions of, and satisfy in all material respects the requirements of, such Schedule 14D-1 and all applicable Federal securities laws and will contain (including as an exhibit) or incorporate by reference the Offer to Purchase (or portions thereof) and forms of the related letter of transmittal (which documents, together with any supplements or amendments thereto, and any other SEC schedule or form that is filed in connection with the Offer and related transactions, are referred to collectively herein as the "Offer Documents"). Each of Parent, Merger Sub and the Company represents and warrants that the information provided and to be provided by it and/or by its auditors, attorneys, financial advisors or other consultants or advisors specifically for use in the Schedule 14D-1 and the Offer Documents on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders shall not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. Each of Parent, Merger Sub and the Company agrees promptly to correct any 3 information provided by it for use in the Schedule 14D-1 or the Offer Documents if and to the extent that it shall have become false or misleading in any material respect and to supplement the information provided by it specifically for use in the Schedule 14D-1 or the Offer Documents to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and Parent and Merger Sub further agree to take all steps necessary to cause the Schedule 14D-1, as so corrected or supplemented, to be filed with the SEC and the Offer Documents, as so corrected or supplemented, to be disseminated to holders of Shares, in each case as and to the extent required by applicable Federal securities laws. The Company and its counsel shall be given the right to review and comment on the Schedule 14D-1 before filing with the SEC. SECTION 1.02. Company Action. (a) The Company hereby approves of and consents to the Offer and represents and warrants that the Board of Directors of the Company, at a meeting duly called and held on December 5, 1994, at which a majority of the Directors were present, duly approved and adopted this Agreement and the transactions contemplated hereby, including the Offer and the Merger, recommended that the stockholders of the Company accept the Offer and tender their Shares pursuant to the Offer, and determined that this Agreement and the transactions contemplated hereby, including the Offer and the Merger, are fair to and in the best interests of the stockholders of the Company. The Company further represents that Goldman, Sachs & Co. ("Goldman Sachs") has rendered to the Board of Directors of the Company its opinion as of December 5, 1994, to the effect that the consideration to be received by the stockholders of the Company pursuant to the Offer and the Merger is fair to such stockholders (other than Parent and its affiliates). (b) The Company hereby agrees to file with the SEC, as promptly as practicable after the filing by Parent and Merger Sub of the Schedule 14D-1 with respect to the Offer, a Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 (together with any amendments or supplements thereto, the "Schedule 14D-9") that will comply in all material respects with the provisions of all applicable Federal securities laws. The Company agrees to mail such Schedule 14D-9 to the stockholders of the Company promptly after the commencement of the Offer. The Schedule 14D-9 and the Offer Documents shall contain the recommendations of the Board of Directors of the Company described in Section 1.02(a) hereof. The Schedule 14D-9, on the date filed with the SEC and on the date first published, sent or given to the Company's stockholders, shall not contain 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 were made, not misleading, except that no representation is made by the Company with respect to written information supplied by Parent or Merger Sub specifically for inclusion in the Schedule 14D-9. The Company agrees promptly to correct the Schedule 14D-9 if and to the extent that it shall become false or misleading in any material respect, and each of Parent and Merger Sub, with respect to written information supplied by it specifically for use in the 4 Schedule 14D-9, shall promptly notify the Company of any required corrections of such information and cooperate with the Company with respect to correcting such information and to supplement the information contained in the Schedule 14D-9 to include any information that shall become necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading, and the Company shall take all steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the SEC and disseminated to the Company's stockholders to the extent required by applicable Federal securities laws. Parent and Merger Sub, and their counsel, shall be given an opportunity to review and comment on the Schedule 14D-9 before filing with the SEC. (c) In connection with the Offer, the Company shall promptly upon execution of this Agreement furnish Parent and Merger Sub with mailing labels containing the names and addresses of all record holders of Shares and security position listings of Shares held in stock depositories, each as of a recent date, and shall promptly furnish Parent and Merger Sub with such additional information, including updated lists of stockholders, mailing labels and security position listings, and such other information and assistance as Parent and Merger Sub or their agents may reasonably request for the purpose of communicating the Offer to the record and beneficial holders of Shares. SECTION 1.03. Directors. (a) Promptly upon the purchase by Merger Sub of a majority of the outstanding Shares pursuant to the Offer, and from time to time thereafter as Shares are acquired by Merger Sub, Merger Sub shall be entitled, subject to compliance with Section 14(f) of the Securities Exchange Act of 1934 (the "Exchange Act"), to designate such number of directors, rounded to the nearest whole number (any number ending with .5 being rounded to the next highest whole number), on the Board of Directors of the Company as will give Merger Sub representation on the Board of Directors equal to that number of directors which equals the product of the total number of directors on the Board of Directors (giving effect to the directors appointed or elected pursuant to this sentence and including current directors serving as officers of the Company) multiplied by the percentage that the aggregate number of Shares beneficially owned by Merger Sub or any affiliate of Merger Sub (including for purposes of this Section 1.03 such Shares as are accepted for payment pursuant to the Offer, but excluding Shares held by the Company or any of its affiliates) bears to the number of Shares outstanding, but in no event less than a majority of the entire Board of Directors of the Company (regardless of vacancies). At such times, the Company will also cause (i) each committee of the Board of Directors, (ii) if requested by Merger Sub, the board of directors of each of the Company's Subsidiaries (as defined below) and (iii) if requested by Merger Sub, each committee of such board to include persons designated by Merger Sub constituting the same percentage of each such committee or board as Merger Sub's designees are of the Board of Directors. The Company shall, upon request by Merger Sub, promptly increase the size of the Board of Directors or exercise its best efforts to secure the resignations of such number of directors as is necessary to enable Merger Sub designees to be elected to the Board of Directors and shall cause 5 Merger Sub's designees to be so elected; provided, however, that such resignations shall not cause the number of Disinterested Directors (as defined below) to be less than two. Subject to applicable law, the Company shall promptly take all action necessary pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order to fulfill its obligations under this Section 1.03 and shall include in the Schedule 14D-9 mailed to stockholders promptly after the commencement of the Offer (or an amendment thereof or an information statement pursuant to Rule 14f-1 if Merger Sub has not theretofore designated directors) such information with respect to the Company and its officers and directors as is required under Section 14(f) and Rule 14f-1 in order to fulfill its obligations under this Section 1.03. Parent and Merger Sub will supply the Company and be solely responsible for any information with respect to itself and its nominees, officers, directors and affiliates required by Section 14(f) and Rule 14f-1. (b) Following the election or appointment of Parent's designees pursuant to this Section 1.03 and prior to the Effective Time, any amendment of this Agreement or the Restated Articles of Incorporation or Restated Bylaws of the Company, any termination of this Agreement by the Company, any extension by the Company of the time for the performance of any of the obligations or other acts of Parent or Merger Sub or waiver of any of the Company's rights hereunder, and any other consent or action by the Board of Directors hereunder, will require the concurrence of a majority (which shall be at least two) of the directors of the Company then in office who are not designees of Parent or Merger Sub (the "Disinterested Directors"). ARTICLE II THE MERGER SECTION 2.01. The Merger. At the Effective Time and subject to and upon the terms and conditions of this Agreement, Delaware Law and Nevada Law, 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. The Company as the surviving corporation after the Merger hereinafter sometimes is referred to as the "Surviving Corporation". SECTION 2.02. Effective Time. As promptly as practicable after the satisfaction or waiver of the conditions set forth in Article VII, the parties hereto shall cause the Merger to be consummated by filing this Agreement or a Certificate of Merger with the Secretary of State of the State of Delaware and the Secretary of State of the State of Nevada, in such form as required by, and executed in accordance with the relevant provisions of, Delaware Law and Nevada Law, respectively (the time of such later filing being the "Effective Time"). Prior to such filings, a closing shall be held at the offices of Willkie Farr & Gallagher, One Citicorp Center, 153 East 53rd Street, New York, New York 10022, or 6 such other place as the parties shall agree, for the purpose of confirming the satisfaction or waiver of the conditions set forth in Article VII. SECTION 2.03. Effect of the Merger. At the Effective Time, the effect of the Merger shall be as provided in the applicable provisions of Delaware Law and Nevada Law. 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 debts, liabilities and duties of the Company and Merger Sub shall become the debts, liabilities and duties of the Surviving Corporation. SECTION 2.04. 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 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 of the Surviving Corporation or otherwise to carry out this Agreement. SECTION 2.05. Certificate of Incorporation; By-Laws; Directors and Officers. (a) Unless otherwise determined by Parent before the Effective Time, at the Effective Time the Certificate of Incorporation of Merger Sub, as in effect immediately before the Effective Time, shall be the Articles of Incorporation of the Surviving Corporation until thereafter amended as permitted by law and such Articles of Incorporation; provided, however, that Article One of the Articles of Incorporation of the Surviving Corporation shall be amended to read as follows: "FIRST: The name of the corporation is Magma Power Company". (b) The By-Laws of Merger Sub, as in effect immediately before the Effective Time, shall be the By-Laws of the Surviving Corporation until thereafter amended as permitted by law, the Articles of Incorporation of the Surviving Corporation and such By-Laws. (c) The directors of Merger Sub immediately before the Effective Time will be the initial directors of the Surviving Corporation, and the officers of the Company immediately before the Effective Time will be the initial officers of the Surviving 7 Corporation, in each case until their successors are elected or appointed and qualified. If, at the Effective Time, a vacancy shall exist on the Board of Directors or in any office of the Surviving Corporation, such vacancy may thereafter be filled in the manner provided by law or the By-laws of Merger Sub. SECTION 2.06. Merger Consideration. At the Effective Time, by virtue of the Merger and without any action on the part of Merger Sub, the Company or the holder of any of the following securities: (a) All Shares which are held by the Company or any subsidiary of the Company, and any Shares owned by Parent, Merger Sub or any other subsidiary of Parent, shall cease to be outstanding, shall be canceled and retired without payment of any consideration therefor and shall cease to exist. (b) Subject to Section 2.09, each remaining outstanding Share shall be converted in the Merger into the right to receive that amount of cash and that number of shares of common stock, par value $0.0675 per share, of Parent (the "Parent Common Stock") equal to, at the option of Parent, (i) the All Cash Component Amount (as defined below), net in cash, without interest thereon, or (ii) both (A) the Mixed Cash Component Amount (as defined below), net in cash, without interest thereon, and (B) the number of fully paid and nonassessable shares of Parent Common Stock equal to the quotient of (I) $39.00 less (II) the Mixed Cash Component Amount divided by the Average Closing Price (as defined below) (the All Cash Component Amount or (ii)(A) and (ii)(B), collectively, as applicable, being the "Merger Consideration"). The "Mixed Cash Component Amount" shall mean an amount equal to the quotient of (A) (x) $28.50 multiplied by the number of Shares outstanding at the Effective Time less (y) $39.00 multiplied by the number of Shares owned by Parent and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by Parent and any of its affiliates). The "All Cash Component Amount" shall mean an amount equal to the quotient of (A) (x) $38.75 multiplied by the number of Shares outstanding at the Effective Time less (y) $39.00 multiplied by the number of Shares owned by Parent and any of its affiliates immediately prior to the Effective Time, divided by (B) the number of Shares outstanding at the Effective Time (other than Shares owned by Parent and any of its affiliates). The "Average Closing Price" shall mean the average closing price of Parent Common Stock on the New York Stock Exchange (the "NYSE") during the 15 consecutive trading days ending on the fifth business day prior to the Effective Time; provided, however, that if such average closing price exceeds $18.73, the Average Closing Price shall be $18.73, and if such average closing price is less than $14.27, the Average Closing Price shall be $14.27. (c) All Shares to be converted into the right to receive the Merger Consideration pursuant to this Section 2.06 shall cease to be outstanding, shall be canceled 8 and retired and shall cease to exist, and each holder of a certificate representing any such Shares shall thereafter cease to have any rights with respect to such shares, except the right to receive for each of the Shares, upon the surrender of such certificate in accordance with Section 2.08, the Merger Consideration and cash in lieu of fractional shares of Parent Common Stock as contemplated by Section 2.09. (d) Each issued and outstanding share of capital stock of Merger Sub shall be converted into and become one fully paid and nonassessable share of common stock, $.01 par value, of the Surviving Corporation. SECTION 2.07. Dissenting Company Common Stock. (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 of Company Common Stock in accordance with Nevada Law 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 the Merger Consideration pursuant to Section 2.06(b), but the holder thereof shall be entitled to only such rights as are granted by Nevada Law. (b) Notwithstanding the provisions of subsection (a) of this Section 2.07, if any holder of shares of Company Common Stock who demands appraisal of his shares under Nevada Law 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 of Company Common Stock shall automatically be converted into and represent only the right to receive the Merger Consideration as provided in Section 2.06(b), without interest thereon, upon surrender of the certificate or certificates representing such shares of Company Common Stock. (c) The Company shall give Parent (i) prompt notice of any written demands for appraisal or payment of the fair value of any Company Common Stock, withdrawals of such demands, and any other instruments served pursuant to Nevada Law received by the Company and (ii) the opportunity to direct all negotiations and proceedings with respect to demands for appraisal under Nevada Law. The Company shall not voluntarily make any payment with respect to any demands for appraisal and shall not, except with the prior written consent of Parent, settle or offer to settle any such demands. SECTION 2.08. Surrender of Company Common Stock; Stock Transfer Books. (a) Before the Effective Time, the Company and Parent shall designate a bank or trust company to act as agent for the holders of Company Common Stock (the "Exchange Agent") to receive the funds and securities necessary to make the payments contemplated by Section 2.06. Such funds shall be invested by the Exchange Agent as directed by the Surviving Corporation, provided that such investments shall be in obligations of or guaranteed by the United States of America or of any agency thereof and backed by the full 9 faith and credit of the United States of America, in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit accounts, certificates of deposit or banker's acceptances of, repurchase or reverse repurchase agreements with, or Eurodollar time deposits purchased from, commercial banks with capital, surplus and undivided profits aggregating in excess of $200 million (based on the most recent financial statements of such bank which are then publicly available at the SEC or otherwise). (b) Each holder of a certificate or certificates representing any outstanding shares of Company Common Stock ("Certificates") canceled upon the Merger pursuant to Section 2.06(b) 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. Any portion of the Merger Consideration which remains unclaimed by the former stockholders of the Company for one year after the Effective Time shall be delivered to Parent, upon demand of Parent. Parent agrees that promptly after the Effective Time it shall cause the distribution to holders of record of Company Common Stock as of the Effective Time appropriate materials to facilitate such surrender, including (i) a form of letter of transmittal (which shall specify that delivery shall be effected, and risk of loss and title to the Certificates shall pass, only upon proper delivery of the Certificates to the Exchange Agent) and (ii) instructions for use in effecting the surrender of the Certificates for payment therefor. Upon surrender of Certificates for cancellation to the Exchange Agent, together with such letter of transmittal duly executed and any other required documents, the holder of such Certificates shall be entitled to receive for each of the shares of Company Common Stock represented by such Certificates the Merger Consideration and the Certificates so surrendered shall forthwith be canceled. Until so surrendered, Certificates shall represent solely the right to receive the Merger Consideration and any cash in lieu of fractional shares of Parent Common Stock as contemplated by Section 2.09 with respect to each of the shares contemplated thereby. (c) If payment of the Merger Consideration 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 that such tax either has been paid or is not payable. (d) At the close of business on the day of the Effective Time, the stock transfer books of the Company shall be closed and there shall not be any further registration 10 of transfers of Shares thereafter on the records of the Company. If, after the Effective Time, Certificates are presented to the Surviving Corporation, they shall be canceled and exchanged for the Merger Consideration as provided in Section 2.06(b). No interest shall accrue or be paid on any cash payable upon the surrender of a Certificate or Certificates which immediately before the Effective Time represented outstanding shares of Company Common Stock. SECTION 2.09. No Fractional Shares. No Certificates or scrip representing less than one share of Parent Common Stock shall be issued upon the surrender for exchange of Certificates representing shares of Company Common Stock pursuant to Section 2.06(b). In lieu of any such fractional share, each holder of Shares who would otherwise have been entitled to a fraction of a share of Parent Common Stock upon surrender of Certificates for exchange pursuant to Section 2.06(b) shall be paid upon such surrender cash (without interest) in an amount equal to such holder's proportionate interest in the net proceeds from the sale or sales in the open market by the Exchange Agent, on behalf of all such holders, of the aggregate fractional Parent Common Stock issued pursuant to this Section 2.09. As soon as practicable following the Effective Time the Exchange Agent shall determine the excess of (i) the number of full shares of Parent Common Stock delivered to the Exchange Agent by Parent over (ii) the aggregate number of full shares of Parent Common Stock to be distributed to holders of Company Common Stock (such excess being herein called the "Excess Shares"), and the Exchange Agent, as agent for the former holders of Company Common Stock, shall sell the Excess Shares at the prevailing prices on the NYSE. The sale of the Excess Shares by the Exchange Agent shall be executed on the NYSE and shall be executed in round lots to the extent practicable. The Exchange Agent shall deduct from the proceeds of the sale of the Excess Shares all commissions, transfer taxes and other reasonable out-of- pocket transaction costs, including any expenses of the Exchange Agent, incurred in connection with such sale of Excess Shares. Until the net proceeds of such sale have been distributed to the former stockholders of the Company, the Exchange Agent will hold such proceeds in trust for such former stockholders. As soon as practicable after the determination of the amount of cash to be paid to former stockholders of the Company in lieu of any fractional interests, the Exchange Agent shall make available in accordance with this Agreement such amounts to such former stockholders. SECTION 2.10. Stock Options; Deferred Stock. Immediately prior to the Effective Time, (a) each unexpired and unexercised option to purchase Shares (each, a "Company Option"), under the Company's 1987 Stock Option Plan and 1994 Equity Participation Plan (collectively, the "Company Stock Option Plans"), whether or not then exercisable, shall be cancelled by the Company, and each holder of a cancelled Company Option shall be entitled to receive at the Effective Time or as soon as practicable thereafter from the Company in consideration for the cancellation of such Company Option an amount in cash equal to the product of (i) the number of Shares previously subject to such Company Option and (ii) the excess, if any, of the Per Share Cash Amount or, if the election 11 contemplated by Section 2.06(b)(i) has been made by Parent, $38.75, over the exercise price per Share previously subject to such Company Option, and (b) each outstanding unvested share of deferred stock under the Company's 1994 Equity Participation Plan or otherwise identified on Schedule 4.03 (each, a "Deferred Share") shall be cancelled by the Company, and each holder of a cancelled Deferred Share shall be entitled to receive at the Effective Time or as soon as practicable thereafter from the Company in consideration for the cancellation of such Deferred Share an amount in cash equal to the Per Share Cash Amount or, if the election contemplated by Section 2.06(b)(i) has been made by Parent, $38.75. SECTION 2.11. Dividends; Transfer Taxes. No dividends or other distributions that are declared or made on Parent Common Stock will be paid to persons entitled to receive certificates representing Parent Common Stock pursuant to this Agreement until such persons surrender their Certificates representing Company Common Stock. Upon such surrender, there shall be paid to the person in whose name the certificates representing such Parent Common Stock shall be issued any dividends or other distributions that shall have become payable with respect to such Parent Common Stock in respect of a record date after the Effective Time. In no event shall the person entitled to receive such dividends be entitled to receive interest on such dividends. Neither the Exchange Agent nor any party hereto shall be liable to a holder of Shares for any shares of Parent Common Stock or dividends thereon delivered to a public official pursuant to any applicable escheat laws. SECTION 2.12. Stockholders' Meetings. (a) The Company shall take all action necessary, in accordance with applicable law and its Articles of Incorporation and Bylaws, to convene a special meeting of the holders of Shares (the "Company Meeting") as promptly as practicable after consummation of the Offer for the purpose of considering and taking action upon this Agreement and the Merger. The stockholder vote required for approval of the Merger will be no greater than that set forth in Nevada Law. The Board of Directors of the Company will recommend that holders of Shares vote in favor of and approve the Merger. The Company will use its best efforts to solicit from stockholders of the Company proxies in favor of the Merger and will take all other action necessary or, in the reasonable opinion of Parent, advisable to secure any vote of stockholders required by Nevada Law to effect the Merger. At the Company Meeting, all of the Shares then owned by Parent, Merger Sub, or any other subsidiary of Parent, or with respect to which Parent, Merger Sub, or any other subsidiary of Parent holds the power to direct the voting, will be voted in favor of approval of the Merger and adoption of this Agreement. (b) Parent shall take all action necessary, unless Parent has elected the All Cash Component under Section 2.06(b)(i), in accordance with applicable law and its Certificate of Incorporation and Bylaws, to convene a special meeting of the holders of Parent Common Stock (the "Parent Meeting") as promptly as practicable after consummation of the Offer for the purpose of considering and taking action to (i) authorize the issuance of Parent Common Stock pursuant to the Merger under the applicable guidelines of the NYSE 12 (the "Parent Share Proposal") and (ii) authorize the increase of the authorized Parent Common Stock from 60,000,000 shares to no more than 80,000,000 shares or such greater number of shares as shall be required to issue the Parent Common Stock in the Merger. The Board of Directors of Parent will (i) recommend that holders of Parent Common Stock vote in favor of and approve the Parent Share Proposal at the Parent Meeting and (ii) recommend that holders of Parent Common Stock vote in favor of and approve an amendment to its Certificate of Incorporation increasing the authorized Parent Common Stock from 60,000,000 shares to no more than 80,000,000 shares or such greater number of shares as shall be required to issue the Parent Common Stock in the Merger (the "Charter Amendment"). Parent will use its reasonable best efforts to solicit from stockholders of Parent proxies in favor of the Parent Share Proposal and the Charter Amendment and will take all other action necessary or, in the reasonable opinion of the Company, advisable to secure any vote of stockholders required by Delaware Law to effect the Merger. SECTION 2.13. Board Nominees; Assistance in Consummation of the Merger. (a) Parent will nominate and use its best efforts to cause up to two nominees of the Company designated in writing to Parent prior to the closing of the Merger to be elected or appointed as members of the Board of Directors of Parent. (b) Each of Parent, Merger Sub and the Company shall provide all reasonable assistance to, and shall cooperate with, each other to bring about the consummation of the Offer and the Merger as soon as possible in accordance with the terms and conditions of this Agreement. Parent shall cause Merger Sub to perform all of its obligations in connection with this Agreement. ARTICLE III REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB Except as set forth on the Parent Disclosure Schedule previously delivered by Parent to the Company (the "Parent Disclosure Schedule"), Parent and Merger Sub hereby jointly and severally represent and warrant to the Company as follows: SECTION 3.01. Corporate Organization; Subsidiaries. Each of Parent and the Parent Subsidiaries (as defined below) is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and any necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted, and is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, 13 except for such failure which, when taken together with all other such failures, would not have a Material Adverse Effect (as defined below) on Parent and Merger Sub. The term "Parent Subsidiary" means any corporation, partnership, joint venture or other legal entity of which Parent (either alone or through or together with any other Parent Subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity interests, or owns, directly or indirectly, interests such that the holders are generally entitled to vote for the election of 50% of the board of directors or other governing body, of such corporation, partnership, joint venture or other legal entity. When used in connection with Parent and Merger Sub, the term "Material Adverse Effect" means any change or effect, when taken together with all other adverse changes and effects relating to Parent or Merger Sub, which are not individually or in the aggregate deemed to have a Material Adverse Effect, that is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of Parent and the Parent Subsidiaries taken as a whole; provided, however, that the occurrence of any or all of the following shall not constitute a Material Adverse Effect: (i) any change in any law applicable to Parent or any Parent Subsidiary or by which any property or asset of Parent or any Parent Subsidiary is bound, (ii) a failure to receive any contract for which Parent or any Parent Subsidiary has submitted or will submit a competitive bid, (iii) the loss of any contract or arrangement (whether by revocation, lapse or invalidity) with respect to a project that Parent or a Parent Subsidiary has under development other than any such loss resulting from a breach by Parent of the representations and warranties set forth in Section 3.22 or 3.23 hereof, (iv) a failure to close any public or private financing of any project in which Parent or any Parent Subsidiary owns a direct or indirect interest or (v) the termination of the employment of any employee, officer, director or consultant of Parent or any Parent Subsidiary. SECTION 3.02. Certificate of Incorporation and By-Laws. Parent has heretofore furnished to the Company a complete and correct copy of Parent's and Merger Sub's Certificates of Incorporation and By-Laws, each as amended to the date hereof. Such Certificates of Incorporation and By-Laws are in full force and effect. Neither Parent nor Merger Sub is in violation of any of the provisions of its Certificate of Incorporation or By-laws or equivalent organizational documents. SECTION 3.03. Capitalization. As of the date hereof, the authorized capital stock of Parent consists of 60,000,000 shares of Parent Common Stock and 1,000,000 shares of preferred stock ("Parent Preferred Stock"). As of September 30, 1994, (i) 35,649,278 shares of Parent Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable and 3,816,686 shares of Parent Common Stock held in treasury, (ii) 1,247 shares of Series C Redeemable Preferred Stock of Parent were outstanding and 3,529,252 shares of Parent Common Stock reserved for issuance upon conversion of such shares of Series C Redeemable Preferred Stock, (iii) there were 3,541,166 shares of Parent Common Stock reserved for issuance pursuant to options granted 14 under Parent's 1986 Stock Option Plan (the "Parent Stock Option Plan"), (iv) there were 6,064,154 shares of Parent Common Stock reserved for issuance under options other than those granted under the Parent Stock Option Plan, and (v) 4,444,444 shares of Parent Common Stock reserved for issuance pursuant to the 5% Convertible Subordinated Debentures due July 31, 2000 of Parent . There has been no material change in the capitalization of Parent since September 30, 1994. All of the outstanding shares of Parent Common Stock have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights or other similar obligations. Except as set forth in this Section 3.03 or on Schedule 3.03, there are not, as of the date hereof, any outstanding or authorized subscriptions, options, warrants, convertible securities, calls, rights, commitments to issue or any other agreements of any character relating to the issued or unissued capital stock or other securities of Parent to which Parent is party or by which Parent is bound obligating Parent to issue, deliver, or sell, or cause to be issued, delivered or sold, additional shares of capital stock of Parent or obligating Parent to grant, extend or enter into any subscription, option, warrant, call, right, commitment or other such agreement. All the outstanding capital stock or partnership or other equity interest of each of the Parent Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and, except as disclosed on Schedule 3.01, is owned by Parent or a Parent Subsidiary free and clear of any liens, security interests, pledges, agreements, claims, charges or encumbrances of any nature whatsoever. There are no existing options, calls or commitments of any character relating to the issued or unissued capital stock or other securities of any Parent Subsidiary. Except for the Parent Subsidiaries and except as previously disclosed in the Parent SEC Reports (as defined below), Parent does not directly or indirectly own a 50% or greater equity interest in any other corporation, partnership, joint venture or other business association or entity. SECTION 3.04. Authority Relative to this Agreement. The execution and delivery of this Agreement by Parent and Merger Sub and the consummation by Parent and Merger Sub of the transactions contemplated hereby (the "Transactions") have been duly authorized by all necessary corporate action on the part of Parent and Merger Sub and by Parent as the sole stockholder of Merger Sub, and no other corporate proceeding is necessary for the execution and delivery of this Agreement by Parent or Merger Sub, the performance by Parent or Merger Sub of their obligations hereunder and the consummation by Parent or Merger Sub of the transactions contemplated hereby. This Agreement has been duly executed and delivered by Parent and Merger Sub and constitutes a legal, valid and binding obligation of each, enforceable against each of them in accordance with its terms. SECTION 3.05. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by Parent and Merger Sub do not, and the performance of this Agreement by Parent and Merger Sub will not, (i) conflict with or violate any law, regulation, court order, judgment or decree applicable to Parent or any Parent Subsidiary or by which any of their property is bound or affected, (ii) violate or conflict with either the Certificate of Incorporation or By-Laws of either Parent or any Parent 15 Subsidiary, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of, or result in the creation of a lien or encumbrance on any of the property or assets of Parent or any Parent Subsidiary pursuant to, any contract, instrument, permit, license or franchise to which Parent or any Parent Subsidiary is a party or by which Parent or any Parent Subsidiary or any of their property is bound or affected, except in the case of (i) or (iii) for conflicts, violations, breaches or defaults that, in the aggregate, would not have a Material Adverse Effect. (b) Except for applicable requirements, if any, of the Securities Act of 1933, as amended (the "Securities Act"), the Exchange Act, "blue sky" laws of various states, the New York Stock Exchange, Inc. and filing and recordation of appropriate merger documents as required by Delaware Law and Nevada Law, neither Parent nor Merger Sub is required to submit any notice, report or other filing with any governmental authority, domestic or foreign, in connection with the execution, delivery or performance of this Agreement or the consummation of the transactions contemplated hereby. Except as aforesaid, no waiver, consent, approval or authorization of any governmental or regulatory authority, domestic or foreign, is required to be obtained or made by either Parent or Merger Sub in connection with its execution, delivery or performance of this Agreement. SECTION 3.06. SEC Filings; Financial Statements. (a) Parent has filed all forms, reports and documents required to be filed with the SEC since January 1, 1992, and has heretofore delivered (or made available) to the Company, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended December 31, 1993 and December 31, 1992, respectively, (ii) all proxy statements relating to the Company's meetings of stockholders (whether annual or special) held since January 1, 1992, and (iii) all other reports or registration statements (including Quarterly Reports on Form 10-Q) filed by Parent with the SEC since January 1, 1992 (collectively, the "Parent SEC Reports"). The Parent SEC Reports (i) were prepared in all material respects in accordance with the requirements of the Securities Act or the Exchange Act, as the case may be, and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under that they were made, not misleading. No Parent Subsidiary is required to file any statements or reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act. (b) The consolidated financial statements contained in the Parent SEC Reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of Parent and the Parent Subsidiaries as at the respective dates thereof and the consolidated results of operations and changes in financial position of Parent and the Parent Subsidiaries for the 16 periods indicated, except that the unaudited interim financial statements were or are subject to normal and recurring year-end adjustments which were not or are not expected to be material in amount. (c) Except as reflected or reserved against in the consolidated financial statements contained in the Parent SEC Reports, and except as set forth on Schedule 3.06, Parent and the Parent Subsidiaries have no liabilities of any nature (whether accrued, absolute, contingent or otherwise) that in the aggregate could have a Material Adverse Effect or any bonds, debentures, notes, letters of credit or other indebtedness (including guarantees) for any amount greater than $1,000,000. Since September 30, 1994, neither Parent nor any of the Parent Subsidiaries has incurred any liabilities material to Parent and the Parent Subsidiaries taken as a whole, except (i) liabilities incurred in the ordinary course of business and consistent with past practice, (ii) liabilities incurred in connection with or as a result of the Offer or the Merger or (iii) liabilities disclosed on Schedule 3.06. SECTION 3.07. Absence of Certain Changes or Events. Since September 30, 1994, except as contemplated in this Agreement or as specifically disclosed in the Parent SEC Reports or the Tender Offer Statement on Schedule 14D-1 that was originally filed by Parent and Merger Sub with the SEC on October 6, 1994 (as amended to the date hereof) (the "Previous 14D-1") or as appears on Schedule 3.07, there has not been: (a) any Material Adverse Effect; (b) any redemption or other acquisition of Parent Common Stock by Parent or any of the Parent Subsidiaries (other than pursuant to a plan of repurchase under Rule 10b-18 of the Exchange Act) or any declaration or payment of any dividend or other distribution in cash, stock or property with respect to Parent Common Stock; (c) any entry into any material commitment or transaction (including, without limitation, any borrowing or capital expenditure) other than in the ordinary course of business or as contemplated by this Agreement; or (d) any change by Parent in accounting principles or methods except insofar as such change may have been required by a change in generally accepted accounting principles and disclosed in the Parent SEC Reports. Since September 30, 1994, except as disclosed on Schedule 3.07, the Previous 14D-1 or in the Parent SEC Reports, Parent and the Parent Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and have not made any material change in the conduct of the business or operations of Parent and the Parent Subsidiaries taken as a whole. 17 SECTION 3.08. Title to Property. Parent and the Parent Subsidiaries have good and marketable title, or valid leasehold rights in the case of leased property, to all real property and all personal property purported to be owned or leased by them, except where the failure to have such title or rights would not have a Material Adverse Effect. SECTION 3.09. Litigation. Except as disclosed in the Parent SEC Reports, the Previous 14D-1, or as disclosed on Schedule 3.09, there are no claims, actions, suits, proceedings or investigations pending or, to the best knowledge of Parent, threatened against Parent or any of the Parent Subsidiaries, or any properties or rights of Parent or any of the Parent Subsidiaries, before any court, administrative, governmental or regulatory authority or body, domestic or foreign, which are reasonably likely, in the aggregate, to have a Material Adverse Effect or would, and are reasonably likely to, prevent or delay the performance of this Agreement. As of the date hereof, neither Parent nor any of the Parent Subsidiaries nor any of their property is subject to any order, judgment, injunction or decree having a Material Adverse Effect. SECTION 3.10. Financing Arrangements. Parent and Merger Sub have obtained a commitment letter from Credit Suisse with respect to the financing for the Offer and the Merger (the "Commitment Letter"). The Commitment Letter is in full force and effect on the date of this Agreement, and Parent and Merger Sub know of no reason why the financing contemplated by the Commitment Letter will not be consummated in accordance with its terms. SECTION 3.11. No Prior Activities. Except for obligations or liabilities incurred in connection with its incorporation or organization or the negotiation and consummation of this Agreement and the transactions contemplated hereby (including any financing), Merger Sub has not incurred any obligations or liabilities, and has not engaged in any business or activities of any type or kind whatsoever or entered into any agreements or arrangements with any person or entity. SECTION 3.12. Brokers. No broker, finder or investment banker (other than Gleacher & Co. Inc. ("Gleacher") and Lehman Brothers Inc. ("Lehman Brothers")) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of Parent or Merger Sub. SECTION 3.13. Information in Disclosure Documents; Registration Statement; Etc. None of the information supplied by Parent or Merger Sub for inclusion in (i) the Registration Statement to be filed with the SEC by Parent on Form S-4 under the Securities Act for the purpose of registering the shares of Parent Common Stock to be issued in the Merger (the "Registration Statement") and (ii) the joint prospectus/proxy statement of the Company and Parent (the "Proxy Statement") required to be mailed to the stockholders of 18 the Company and Parent in connection with the Merger will, in the case of the Proxy Statement or any amendments or supplements thereto, at the time of the mailing of the Proxy Statement and any amendments or supplements thereto, and at the time of the Parent Meeting to be held in connection with the Merger, or, in the case of the Registration Statement, at the time it becomes effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Registration Statement will comply as to form in all material respects with the provisions of the Securities Act, and the rules and regulations promulgated thereunder. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. SECTION 3.14. Conduct of Business. Except as disclosed in Schedule 3.14 hereto, the business of Parent and each of the Parent Subsidiaries is not being conducted in default or violation of any term, condition or provision of (i) its respective Articles of Incorporation or Bylaws or similar organizational documents, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease or other instrument or agreement of any kind to which Parent or any of the Parent Subsidiaries is now a party or by which Parent or any of the Parent Subsidiaries or any of their respective properties or assets may be bound, or (iii) any Federal, state, local or foreign statute, law, ordinance, rule, regulation, judgment, decree, order, concession, grant, franchise, permit or license or other governmental authorization or approval applicable to Parent or any of the Parent Subsidiaries, except, with respect to the foregoing clauses (ii) and (iii), defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 3.15. Environment. (a) As used herein, the term "Environmental Laws" means all Federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or industrial, toxic or hazardous substances or wastes into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of chemicals, pollutants, contaminants, or industrial, toxic or hazardous substances or wastes, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, licenses, notices or notice letters, orders, permits, plans or regulations issued, entered, promulgated or approved thereunder. (b) Except as disclosed on Schedule 3.15 hereto, to the knowledge of Parent there are, with respect to Parent or any of the Parent Subsidiaries, or any real property currently or formerly owned, leased, or otherwise used by Parent or any of the Parent Subsidiaries, no past or present violations of Environmental Laws, releases of any material into the environment, actions, activities, circumstances, conditions, events, 19 incidents, or contractual obligations which may give rise to any common law or other legal liability, including, without limitation, liability under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 ("CERCLA") or similar state or local laws, which liabilities, either individually or in the aggregate, would have a Material Adverse Effect. SECTION 3.16. Energy Regulatory Status. (a) Each of the operational electric generation facilities ("Plants") owned in whole or part, directly or indirectly by: (i) Parent, or (ii) any legal entity in which Parent directly or indirectly owns more than 50% of the voting stock or other equity interest, including any partnership in which Parent has an interest, is a "qualifying small power production facility" ("Small Power QF"), as such term is defined in the Federal Power Act, as amended ("FPA"), and the regulations thereunder, and has continuously been in compliance with the requirements for being a Small Power QF since it commenced sales of electricity. (b) The owner of each of the Plants under development by Parent or any Parent Subsidiary and located in the United States will, no later than the date operations commence, either qualify as a "qualifying small power producer" or an "exempt wholesale generator" ("EWOG"), as such terms are defined in FPA, the regulations under the FPA, and the Public Utility Holding Company Act of 1935, as amended ("PUHCA"). (c) The owner of each of the Plants under development by Parent or any Parent Subsidiary and located outside the United States will, no later than the date operations commence, either qualify as an EWOG or a "foreign utility company", as such term is defined under PUHCA and the regulations thereunder. (d) Neither Parent nor any "affiliate" of Parent is a "public utility company" or a "public utility holding company", as such terms are defined in PUHCA and the regulations thereunder, a "public utility" as defined in the FPA and the regulations thereunder, or subject to regulations by any state public utilities commission or similar state regulatory body. (e) Each of the Plants obtained any necessary certificates or permits from state regulatory authorities for construction of each of the operational Plants and associated transmission equipment owned by the owners of such Plant, and each other entity constructing, owning or operating any of the foregoing has obtained each required certificate or permit. SECTION 3.17. Employee Benefit Plans; Labor Matters. (a) With respect to each U.S. or foreign employee benefit plan, program, arrangement and contract (including, without limitation, any "employee benefit plan", as defined in Section 3(3) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")) and any executive 20 compensation arrangement, whether or not funded, maintained or contributed to by Parent or any Parent Subsidiary, or with respect to which Parent or any Parent Subsidiary could incur liability under Section 4069, 4212(c) or 4204 of ERISA, as well as any employee benefit plan that is subject to Section 412 of the Code or Title IV of ERISA and which is maintained or contributed to by any other trade or business (whether or not incorporated) which is treated as a single employer with Parent under Section 414(b), (c), (m) or (o) of the Code (each such trade or business being referred to herein as a "Code Affiliate") (the "Parent Benefit Plans"), Parent has made available to the Company a true and correct copy of (i) the most recent annual report (Form 5500) filed with the Internal Revenue Service (the "IRS"), (ii) such Parent Benefit Plan, (iii) each trust agreement relating to such Parent Benefit Plan, (iv) the most recent summary plan description for each Parent Benefit Plan for which a summary plan description is required, (v) the most recent actuarial report or valuation relating to a Parent Benefit Plan subject to Title IV of ERISA, if any, (vi) the most recent determination letter, if any, issued by the IRS with respect to any Parent Benefit Plan qualified under Section 401(a) of the Code and (vii) the most recent annual and periodic accounting of related plan assets, if any. (b) With respect to the Parent Benefit Plans, no event has occurred and, to the knowledge of Parent, there exists no condition or set of circumstances, in connection with which Parent or any Parent Subsidiary could be subject to any liability under the terms of such Parent Benefit Plans, ERISA, the Code or any other applicable Law which would have a Material Adverse Effect. No claim has been asserted or, to the knowledge of Parent, threatened, by the IRS, the Department of Labor or any participant of a Parent Benefit Plan that Parent or any Parent Subsidiary has, with respect to any Parent Benefit Plan, engaged in or been a party to any "prohibited transaction," as such term is defined in Section 4975 of the Code and Section 406 of ERISA, which would result in the imposition of either a penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by section 4975 of the Code, in each case applicable to Parent, any Parent Subsidiary or any Parent Benefit Plan. Each Parent Benefit Plan intended to qualify under Section 401(a) of the Code does so qualify, and the trusts created thereunder are exempt from tax under Section 501(a) of the Code, and each such Parent Benefit Plan will be amended in the manner required by the Code by December 31, 1994, and has been or will be submitted to the IRS on or prior to March 31, 1995 for a determination letter confirming that such Parent Benefit Plan meets the currently applicable requirements for qualification and exemption from taxation under Section 401(a) and 501(a) of the Code. No Parent Benefit Plan has plan assets invested in any insurance company which is or has been in insolvency proceedings within the last 3 years. No Parent Benefit Plan subject to Section 412 of the Code has incurred any "accumulated funding deficiency" (as defined in ERISA), whether or not waived. Neither Parent nor any of the Parent Subsidiaries or Code Affiliates has at any time since 1987 maintained or contributed to any Parent Benefit Plan, including without limitation any "multiemployer plan" (as defined in Section 3(37) of ERISA), which (i) is a "defined benefit plan" (as defined in Section 414(j) of the Code) or (ii) is subject to Title IV of ERISA. 21 (c) Except as set forth in Schedule 3.17, neither Parent nor any Parent Subsidiary is a party to any collective bargaining or other labor union contract applicable to persons employed by Parent or any Parent Subsidiary, no collective bargaining agreement is being negotiated by Parent or any Parent Subsidiary and neither Parent nor any Parent Subsidiary knows of any activities or proceedings of any labor union to organize any of their respective employees. As of the date hereof, (i) Parent and all of the Parent Subsidiaries are in compliance in all material respects with all applicable laws relating to employment and employment practices, wages, hours, and terms and conditions of employment, (ii) there are no material charges with respect to or relating to Parent or any of the Parent Subsidiaries pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, and (iii) there is no labor dispute, strike or work stoppage against Parent or any Parent Subsidiary pending or, to Parent's knowledge, threatened which may interfere with the respective business activities of Parent or the Parent Subsidiaries, except where such non-compliance, charge, dispute, strike or work stoppage would not have a Material Adverse Effect. As of the date hereof, to the knowledge of Parent, none of Parent or any Parent Subsidiary, or their respective representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of Parent or the Parent Subsidiaries, and there is no charge or complaint against Parent or the Parent Subsidiaries by the National Labor Relations Board or any comparable state agency pending or threatened in writing, except where such unfair labor practice, charge or complaint would not have a Material Adverse Effect. SECTION 3.18. Insurance. The insurance policies in force at the date hereof, with respect to the assets, properties or operations of each of Parent and the Parent Subsidiaries are set forth on Schedule 3.18 and are in full force and effect with reputable insurers in such amounts and insure against such losses and risks (including product liability) as are customary to protect the properties and business of each of Parent and Parent Subsidiaries. SECTION 3.19. Taxes. (a) Except as set forth in Schedule 3.19, and except as would not, either individually or in the aggregate, have a Material Adverse Effect, (i) Parent and each of the Parent Subsidiaries have timely filed with the appropriate governmental authorities all Tax Returns (as defined below) required to be filed by or with respect to the Company and each of the Subsidiaries or their respective operations or assets, and such Tax Returns are true, correct and complete in all material respects and (ii) all Taxes (as defined below) shown to be due on such Tax Returns, all Taxes required to be paid on an estimated or installment basis, and all Taxes required to be withheld with respect to the Parent or any of the Parent Subsidiaries or their respective operations or assets have been timely paid or, if applicable, withheld and paid to the appropriate taxing authority in the manner provided by law, except in each case for such Taxes which are not material in the aggregate. 22 (b) Neither Parent nor any of the Parent Subsidiaries has filed a consent to the application of Section 341(f) of the Code. (c) No indebtedness of the Parent or any of the Parent Subsidiaries is "corporate acquisition indebtedness" within the meaning of Section 279(b) of the Code. (d) For purposes of this Agreement, "Taxes" means all taxes, charges, fees, levies or other assessments imposed by any United States Federal, state, or local taxing authority or by any foreign taxing authority, including, but not limited to, income, gross receipts, excise, property, sales, use transfer, payroll, license, ad valorem, value added, withholding, social security, license, ad valorem, value added, withholding, social security, national insurance (or other similar contributions or payments), franchises, estimated, severance, stamp, and other taxes (including any interest, fines, penalties or additions attributable to or imposed on or with respect to any such taxes, charges, fees, levies or other assessments). (e) For purposes of this Agreement, "Tax Return" means any return, report, information return or other document (including any related or supporting information and, where applicable, profit and loss accounts and balance sheets) with respect to Taxes. SECTION 3.20. Trademarks, Licenses, Patents and Copyrights. Except as set forth on Schedule 3.20, Parent or the Parent Subsidiaries own or possess adequate licenses or other valid rights to use all patents, patent rights, trademarks, trademark rights, trade names, trade name rights and proprietary information used or held for use in connection with, and material to, its business as currently being conducted and are unaware of any assertions or claims challenging the validity of any of the foregoing which are reasonably likely to have a Material Adverse Effect; and, to the best knowledge of Parent, the conduct of Parent's business as now conducted or proposed to be conducted does not and will not conflict with any patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights or copyrights of others known to the Parent or the Parent Subsidiaries in any way reasonably likely to have a Material Adverse Effect. No material infringement of any proprietary right owned by or licensed by or to Parent or any of the Parent Subsidiaries is known to Parent or any Parent Subsidiary which is reasonably likely to have a Material Adverse Effect. SECTION 3.21. Related Party Transactions. Except as is set forth in the Parent SEC Reports and the Previous 14D-1, to the knowledge of Parent, Schedule 3.21 sets forth the material transactions since September 1, 1994 between Parent and the Parent Subsidiaries on the one hand, and (i) an officer or director of Parent or any of the Parent Subsidiaries, (ii) a record or beneficial owner of five percent (5%) or more of the Parent Common Stock, or (iii) an affiliate of any such officer, director or beneficial owner, on the 23 other hand, other than payment of compensation for services rendered to the Parent and the Parent Subsidiaries in the ordinary course of business. SECTION 3.22. Status of Development and Construction Projects. To Parent's knowledge, except as specifically disclosed on Schedule 3.22, the following statements, as applicable, are true and correct as of the date hereof, with respect to each of the following development and construction projects: Upper Mahiao 120 MW and Mahanagdong 180 MW: (i) There is no pending or threatened revocation or loss of such project award, whether as a result of government action or otherwise; (ii) The executed power sales contract and construction contract for such project is in full force and effect and there is no oral or written threat to its validity, whether as a result of government action or otherwise; (iii)For any project with an executed construction contract, the estimated total capital cost for construction of such project (without well-field development expenses), including any existing or expected change orders, is set forth on Schedule 3.22; (iv) The joint venture or partnership or similar agreements with local partners or contractors are in full force and effect and the Parent's percentage equity ownership pursuant to such contracts are as set forth on Schedule 3.22, and there is no threat of loss or invalidity to such contracts, whether as a result of consummating this transaction or otherwise; (v) The status of the financing and political risk insurance arrangements for each such project is set forth on Schedule 3.22; and (vi) Parent has not taken any actions which violate the Foreign Corrupt Practices Act ("FCPA") and is not aware of any actions taken by foreign Parent Subsidiaries or local partners which if taken by a U.S. company would constitute a violation of the FCPA. SECTION 3.23. Status of Operating Projects. To Parent's knowledge, as of the date hereof, with respect to each operating project, except as set forth on Schedule 3.23: (i) Parent is not aware of any event or occurrence which would create a material impairment to the operating performance or a material increase in operating expenses or material non-compliance with regulatory or contractual requirements; 24 (ii) Parent and any of the Parent Subsidiaries or joint ventures has not changed in any material adverse respect such project's operating, maintenance reserves or procedures; and (iii)Parent is not aware of any events which, with lapse of time or otherwise could reasonably be expected to result in a material impairment to the project's operating performance or a material increase in operating expenses or material non-compliance with regulatory or contractual requirements. ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY Except as set forth on the Company Disclosure Schedule previously delivered by the Company to Parent (the "Company Disclosure Schedule"), the Company hereby represents and warrants to Parent and Merger Sub as follows: SECTION 4.01. Corporate Organization; Subsidiaries. Each of the Company and its Subsidiaries is a corporation duly organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation and has the requisite corporate power and authority and any material necessary governmental authority to own, operate or lease the properties that it purports to own, operate or lease and to carry on its business as it is now being conducted, and is duly qualified as a foreign corporation to do business, and is in good standing, in each jurisdiction where the character of its properties owned, operated or leased or the nature of its activities makes such qualification necessary, except for such failure which, when taken together with all other such failures, would not have a Material Adverse Effect (as defined below) on the Company. The term "Subsidiary" means any corporation, partnership, joint venture or other legal entity of which the Company or, if the context requires, the Surviving Corporation (either alone or through or together with any other Subsidiary) owns, directly or indirectly, 50% or more of the stock or other equity interests, or owns, directly or indirectly, interests such that the holders are generally entitled to vote for the election of 50% of the board of directors or other governing body, of such corporation, partnership, joint venture or other legal entity. When used in connection with the Company or any of its Subsidiaries, the term "Material Adverse Effect" means any change or effect, when taken together with all other adverse changes and effects relating to the Company and its Subsidiaries, that is or is reasonably likely to be materially adverse to the business, operations, properties, condition (financial or otherwise), assets or liabilities (including, without limitation, contingent liabilities) of the Company and the Subsidiaries taken as a whole; provided, however, that the occurrence of any or all of the following shall not constitute a Material Adverse Effect: (i) any change in any law applicable to the Company or any Subsidiary or by which any property or asset of the Company or any 25 Subsidiary is bound, (ii) a failure to receive any contract or award for which the Company or any Subsidiary has submitted or will submit a competitive bid, (iii) the loss of any contract or arrangement (whether by revocation, lapse or invalidity) with respect to a project that the Company or any Subsidiary has under development, other than any such loss related to the Malitbog project or Fish Lake project and other than any such loss resulting from a breach by the Company of the representations and warranties set forth in Sections 4.22 and 4.23 hereof, (iv) an unfavorable ruling by the California Public Utilities Commission with respect to the Company's California plants under the pending Biennial Resource Plan Update, (v) a loss of, or unfavorable ruling in, the Company's pending litigation against Southern California Edison Company, but only insofar as such litigation seeks to increase the energy price payable for deliveries over nameplate capacity and not insofar as any unfavorable ruling affects the validity or enforceability of any contract subject thereto or the enforceability of any material term thereof, (vi) a failure to close any public or private financing of any project in which the Company or any Subsidiary owns a direct or indirect interest (other than as a result of a loss with respect to the Malitbog project or the Fish Lake project or as a result of a breach by the Company of the representation and warranties set forth in Section 4.22 or 4.23 hereof), or (vii) the termination of the employment of any employee, officer, director or consultant of the Company or any Subsidiary. A true and complete list of all the Subsidiaries, together with the jurisdiction of incorporation or formation of each Subsidiary is set forth in Schedule 4.01 hereto. SECTION 4.02. Articles of Incorporation and Bylaws. The Company has heretofore furnished to Parent a complete and correct copy of the Articles of Incorporation and Bylaws or equivalent organizational documents, each as amended to the date hereof, of the Company, and the Company has made available to Parent such documents with respect to all Subsidiaries. Such Articles of Incorporation, Bylaws and equivalent organizational documents are in full force and effect. Neither the Company nor any Subsidiary is in violation of any of the provisions of its Articles of Incorporation or Bylaws or equivalent organizational documents. SECTION 4.03. Capitalization. As of the date hereof, the authorized capital stock of the Company consists of 30,000,000 shares of Company Common Stock and 1,000,000 shares of preferred stock ("Company Preferred Stock"). As of September 30, 1994, 24,042,915 shares of Company Common Stock were issued and outstanding, all of which were validly issued, fully paid and nonassessable, and no shares of Company Preferred Stock were outstanding. As of December 1, 1994, there were 582,478 shares of Company Common Stock reserved for issuance pursuant to options and deferred stock awards granted under the Stock Option Plans or otherwise identified on Schedule 4.03, and there were 996,943 shares of Company Common Stock reserved for future issuance under the Stock Option Plans. There have been no material changes in the capitalization of the Company since September 30, 1994. Schedule 4.03 separately identifies as of December 1, 1994 the option holders, the number of shares subject to each option held, the exercise 26 prices, vesting schedules and expiration dates of the outstanding options granted under the Stock Option Plans. All of the outstanding shares of Company Common Stock have been duly authorized and validly issued and are fully paid and nonassessable and free of preemptive rights or other similar obligations. Except as set forth in this Section 4.03 or on Schedule 4.03, there are not, as of the date hereof, any outstanding or authorized subscriptions, options, warrants, convertible securities, calls, rights, commitments to issue or any other agreements of any character relating to the issued or unissued capital stock or other securities of the Company to which the Company is party or by which the Company is bound obligating the Company to issue, deliver, or sell, or cause to be issued, delivered or sold, additional shares of capital stock of the Company or obligating the Company to grant, extend or enter into any subscription, option, warrant, call, right, commitment or other such agreement. All the outstanding capital stock or partnership or other equity interest of each of the Subsidiaries is duly authorized, validly issued, fully paid and nonassessable and, except as disclosed on Schedule 4.01, is owned by the Company or a Subsidiary free and clear of any liens, security interests, pledges, agreements, claims, charges or encumbrances of any nature whatsoever. There are no existing options, calls or commitments of any character relating to the issued or unissued capital stock or other securities of any Subsidiary. Except for the Subsidiaries and except as previously disclosed to Parent on the Disclosure Schedule and in the Company SEC Reports (as defined below), the Company does not directly or indirectly own a 50% or greater equity interest in any other corporation, partnership, joint venture or other business association or entity. SECTION 4.04. Authority Relative to this Agreement. The Company has the necessary corporate power and authority to enter into this Agreement and, subject to obtaining any necessary stockholder approval of the Merger, to carry out its obligations hereunder. The execution and delivery of this Agreement by the Company 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 the approval of the Merger by the Company's stockholders in accordance with Nevada Law. This Agreement has been duly executed and delivered by the Company and constitutes a legal, valid and binding obligation of the Company, enforceable against it in accordance with its terms. SECTION 4.05. No Conflict; Required Filings and Consents. (a) The execution and delivery of this Agreement by the Company do not, and the performance of this Agreement by the Company will not, (i) conflict with or violate any law, regulation, court order, judgment or decree applicable to the Company or any of the Subsidiaries or by which its or any of their property is bound or affected, (ii) violate or conflict with the Certificate of Incorporation or Bylaws or equivalent organizational documents of the Company or any Subsidiary, or (iii) result in any breach of or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination or cancellation of, or result in the creation of a lien or 27 encumbrance on any of the properties or assets of the Company or any of the Subsidiaries pursuant to, any contract, instrument, permit, license or franchise to which the Company or any of the Subsidiaries is a party or by which the Company or any of the Subsidiaries or its or any of their property is bound or affected, except as set forth on Schedule 4.05 and except in the case of (i) or (iii) for conflicts, violations, breaches or defaults which, in the aggregate, would not have a Material Adverse Effect. (b) Except for applicable requirements, if any, of the Exchange Act and filing and recordation of appropriate merger or other documents as required by Nevada Law, and except for any notice, filings, authorizations, consents or approvals which are required because of the regulatory status of the Company or any of its Subsidiaries or facts specifically applicable to them, and except as set forth on Schedule 4.05, the Company is not required to submit any notice, report or other filing with any governmental authority, domestic or foreign, in connection with the execution, delivery or performance of this Agreement. Except as aforesaid, no waiver, consent, approval or authorization of any governmental or regulatory authority, domestic or foreign, is required to be obtained or made by the Company in connection with its execution, delivery or performance of this Agreement. SECTION 4.06. SEC Filings; Financial Statements. (a) The Company has filed all forms, reports and documents required to be filed with the SEC since January 1, 1992, and has heretofore delivered (or made available) to Parent, in the form filed with the SEC, its (i) Annual Reports on Form 10-K for the fiscal years ended December 31, 1993 and December 31, 1992, respectively, (ii) all proxy statements relating to the Company's meetings of stockholders (whether annual or special) held since January 1, 1992, and (iii) all other reports or registration statements (including Quarterly Reports on Form 10-Q) filed by the Company with the SEC since January 1, 1992 (collectively, the "Company SEC Reports"). The Company SEC Reports (i) were prepared in all material respects in accordance with the requirements of the Securities Act, or the Exchange Act, as the case may be and (ii) did not at the time they were filed contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. No Subsidiary is required to file any statements or reports with the SEC pursuant to Sections 13(a) or 15(d) of the Exchange Act. (b) The consolidated financial statements contained in the Company SEC Reports have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods involved (except as may be indicated in the notes thereto) and fairly present the consolidated financial position of the Company and its Subsidiaries as at the respective dates thereof and the consolidated results of operations and changes in financial position of the Company and its Subsidiaries for the periods indicated, except that the unaudited interim financial statements were or are subject to normal 28 and recurring year-end adjustments which were not or are not expected to be material in amount. (c) Except as reflected or reserved against in the consolidated financial statements contained in the Company SEC Reports, and except as set forth on Schedule 4.06, the Company and its Subsidiaries have no liabilities of any nature (whether accrued, absolute, contingent or otherwise) which in the aggregate could have a Material Adverse Effect or any bonds, debentures, notes, letters of credit or other indebtedness (including guarantees) for any amount greater than $1,000,000. Since September 30, 1994, neither the Company nor any of the Subsidiaries has incurred any liabilities material to the Company and the Subsidiaries taken as a whole, except (i) liabilities incurred in the ordinary course of business and consistent with past practice, (ii) liabilities incurred in connection with or as a result of the Offer or the Merger or (iii) liabilities disclosed on Schedule 4.06. SECTION 4.07. Absence of Certain Changes or Events. Since September 30, 1994, except as contemplated in this Agreement or as specifically disclosed in the Company SEC Reports or the Tender Offer Solicitation/Recommendation Statement on Schedule 14D-9 that was originally filed by the Company with the SEC on October 11, 1994 with respect to Parent's previous tender offer (as amended to the date hereof) (the "Previous 14D-9"), or as appears on Schedule 4.07, there has not been: (a) any Material Adverse Effect; (b) any redemption or other acquisition of Company Common Stock by the Company or any of the Subsidiaries or any declaration or payment of any dividend or other distribution in cash, stock or property with respect to Company Common Stock; (c) any entry into any material commitment or transaction (including, without limitation, any borrowing or capital expenditure) other than in the ordinary course of business or as contemplated by this Agreement; (d) any transfer of, or rights granted under, any material leases, licenses, agreements, patents, trademarks, trade names or copyrights other than those transferred or granted in the ordinary course of business and consistent with past practice; (e) any mortgage, pledge, security interest or imposition of lien or other encumbrance on any asset of the Company or any of the Subsidiaries that when viewed in the aggregate with all such other encumbrances is material to the business, financial condition or operations of the Company and the Subsidiaries taken as a whole; or 29 (f) any change by the Company in accounting principles or methods except insofar as such change may have been required by a change in generally accepted accounting principles and disclosed in the Company SEC Reports. Since September 30, 1994, except as disclosed on Schedule 4.07, in the Company SEC Reports or the Previous 14D-9, the Company and its Subsidiaries have conducted their business only in the ordinary course and in a manner consistent with past practice and have not made any material change in the conduct of the business or operations of the Company and its Subsidiaries taken as a whole. Without limiting the generality of the foregoing, the Company has not, since such date, except for the contracts referred to in the Company SEC Reports or as disclosed on Schedule 4.07 or in the Previous 14D-9, made any changes in executive compensation levels (other than increases in the ordinary course of business and consistent with past practice) or in the manner in which other employees of the Company or the Subsidiaries are compensated, paid or agreed to pay any pension, retirement allowance or other employee benefit not required or permitted by the terms of any plan, agreement or arrangement existing on such date to any director, officer or employee, whether past or present, or committed itself to any collective bargaining agreement (except for renewals of existing collective bargaining agreements) or to any additional pension, profit-sharing, bonus, incentive, deferred compensation, stock purchase, stock option, stock appreciation right, group insurance, severance pay, retirement or other employee benefit plan, agreement or arrangement, or to any employment or consulting agreement with or for the benefit of any person, or to amend any of such plans or any of such agreements in existence on such date. SECTION 4.08. Title to Property. The Company and its Subsidiaries have good and marketable title, or valid leasehold rights in the case of leased property, to all real property and all personal property purported to be owned or leased by them, except where the failure to have such title or right would not have a Material Adverse Effect. There are no material mechanics', materialmen's, laborers', employees', suppliers' or other liens arising by operation of law on any of the Company's properties. SECTION 4.09. Litigation. Except as disclosed in the Company SEC Reports, the Previous 14D-9 or as disclosed on Schedule 4.09, there are no claims, actions, suits, proceedings or investigations pending or, to the best knowledge of the Company, threatened against the Company or any of its Subsidiaries, or any properties or rights of the Company or any of its Subsidiaries, before any court, administrative, governmental or regulatory authority or body, domestic or foreign, which are reasonably likely, in the aggregate, to have a Material Adverse Effect or would, and are reasonably likely to, prevent or delay the performance of this Agreement. As of the date hereof, neither the Company nor any of its Subsidiaries nor any of their property is subject to any order, judgment, injunction or decree, having a Material Adverse Effect. 30 SECTION 4.10. Information in Disclosure Documents. None of the information with respect to the Company or its Subsidiaries to be included or incorporated by reference in the Proxy Statement or the Registration Statement will, in the case of the Proxy Statement or any amendments or supplements thereto, at the time of the mailing of the Proxy Statement and any amendments or supplements thereto, and at the time of the Company Meeting to be held in connection with the Merger, or, in the case of the Registration Statement, at the time it becomes effective and at the Effective Time, contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they are made, not misleading. The Proxy Statement will comply as to form in all material respects with the provisions of the Exchange Act and the rules and regulations thereunder. SECTION 4.11. Fairness Opinion. The Company has received the opinion of Goldman Sachs, to the effect that the consideration to be received by the Company's stockholders pursuant to the Offer and the Merger is fair to the stockholders of the Company (other than Parent and its affiliates). SECTION 4.12. Brokers. No broker, finder or investment banker (other than Goldman Sachs) is entitled to any brokerage, finder's or other fee or commission in connection with the transactions contemplated by this Agreement based upon arrangements made by and on behalf of the Company. The Company has heretofore furnished to Parent true and complete information concerning the financial arrangements between the Company and Goldman Sachs, pursuant to which such firm would be entitled to any payment as a result of the transactions contemplated hereunder. SECTION 4.13. Takeover Provisions Inapplicable; Rights Agreement Amendment. (a) As of the date hereof and at all times on or prior to the Effective Time, Sections 78.378 through 78.3793, inclusive, and Sections 78.411 through 78.444, inclusive, of Nevada Law are, and shall be, inapplicable to the Offer, the Merger and the transactions contemplated by this Agreement including, without limitation, the pledge of the shares of Company Common Stock acquired in the Offer to the lending institutions providing the financing for the Offer, and the transfer of such shares upon the exercise of remedies under the applicable agreements. The Company has heretofore delivered to Parent a complete and correct copy of the resolutions of the Board of Directors of the Company to the effect that such sections of Nevada Law are, and shall be, inapplicable to the Offer, the Merger and the transactions contemplated by this Agreement. (b) The Board of Directors of the Company has taken all necessary action with respect to the Rights Agreement, such that none of the execution or delivery of this Agreement, the purchase of Shares pursuant to the Offer, the exchange of the Shares for the shares of Parent Common Stock and cash in accordance with this Agreement or any transaction contemplated by this agreement will cause (A) the rights (the "Rights") issued 31 pursuant to the Rights Agreement to become exercisable under the Rights Agreement, (B) Parent, Merger Sub and any of their associates or affiliates (as such terms are defined in the Rights Agreement) to be deemed an "Acquiring Person" (as defined in the Rights Agreement), or (C) the "Stock Acquisition Date" or "Distribution Date" (as such terms are defined in the Rights Agreement) to occur upon any such event. SECTION 4.14. Conduct of Business. Except as disclosed in Schedule 4.14 hereto, the business of the Company and each of the Subsidiaries is not being conducted in default or violation of any term, condition or provision of (i) its respective Articles of Incorporation or Bylaws or similar organizational documents, or (ii) any note, bond, mortgage, indenture, contract, agreement, lease or other instrument or agreement of any kind to which the Company or any of the Subsidiaries is now a party or by which the Company or any of the Subsidiaries or any of their respective properties or assets may be bound, or (iii) any Federal, state, local or foreign statute, law, ordinance, rule, regulation, judgment, decree, order, concession, grant, franchise, permit or license or other governmental authorization or approval applicable to the Company or any of the Subsidiaries, except, with respect to the foregoing clauses (ii) and (iii), defaults or violations that would not, individually or in the aggregate, have a Material Adverse Effect. SECTION 4.15. Environment. Except as disclosed on Schedule 4.15 hereto, to the knowledge of the Company, there are, with respect to the Company or any of its Subsidiaries, or any real property currently or formerly owned, leased, or otherwise used by the Company or any of its Subsidiaries, no past or present violations of Environmental Laws, releases of any material into the environment, actions, activities, circumstances, conditions, events, incidents, or contractual obligations which may give rise to any common law or other legal liability, including, without limitation, liability under CERCLA or similar state or local laws, which liabilities, either individually or in the aggregate, would have a Material Adverse Effect. SECTION 4.16. Energy Regulatory Status. (a) Each of the Plants owned in whole or part, directly or indirectly by: (i) the Company or (ii) any legal entity in which the Company directly or indirectly owns 50% or greater of the voting stock or other equity interest, including any partnership in which the Company has an interest, is a Small Power QF, as such term is defined in the FPA, and the regulations thereunder, and has continuously been in compliance with the requirements for being a Small Power QF since it commenced sales of electricity. (b) The owner of each of the Plants under development by the Company or any Subsidiary and located in the United States will, no later than the date operations commence, either qualify as a "qualifying small power producer" or an EWOG, as such terms are defined in the FPA, the regulations under the FPA, and the PUHCA. 32 (c) The owner of each of the Plants under development by the Company or any Subsidiary and located outside the United States will, no later than the date operations commence, either qualify as an EWOG or a "foreign utility company", as such term is defined under PUHCA and the regulations thereunder. (d) Neither the Company nor any "affiliate" of the Company is a "public utility company" or a "public utility holding company", as such terms are defined in PUHCA and the regulations thereunder, a "public utility" as defined in the FPA and the regulations thereunder, or subject to regulations by any state public utilities commission or similar state regulatory body. (e) Each of the Plants obtained any necessary certificates or permits from state regulatory authorities for construction of each of the operational Plants and associated transmission equipment owned by the owners of the Plant, and each other entity constructing, owning or operating any of the foregoing has obtained each required certificate or permit. SECTION 4.17. Employee Benefit Plans; Labor Matters. (a) With respect to each U.S. or foreign employee benefit plan, program, arrangement and contract (including, without limitation, any "employee benefit plan", as defined in Section 3(3) of ERISA) and any executive compensation arrangement, whether or not funded, maintained or contributed to by the Company or any of its Subsidiaries, or with respect to which the Company or any of its Subsidiaries could incur liability under Section 4069, 4212(c) or 4204 of ERISA, as well as any employee benefit plan that is subject to Section 412 of the Code or Title IV of ERISA and which is maintained or contributed to by any other trade or business (whether or not incorporated) which is treated as a single employer with the Company under Section 414(b), (c), (m) or (o) of the Code (each such trade or business being referred to herein as a "Code Affiliate") (the "Company Benefit Plans"), the Company has made available to Parent a true and correct copy of (i) the most recent annual report (Form 5500) filed with the IRS, (ii) such Company Benefit Plan, (iii) each trust agreement relating to such Company Benefit Plan, (iv) the most recent summary plan description for each Company Benefit Plan for which a summary plan description is required, (v) the most recent actuarial report or valuation relating to a Company Benefit Plan subject to Title IV of ERISA, if any, (vi) the most recent determination letter, if any, issued by the IRS with respect to any Company Benefit Plan qualified under Section 401(a) of the Code and (vii) the most recent annual and periodic accounting of related plan assets, if any. (b) With respect to the Company Benefit Plans, no event has occurred and, to the knowledge of the Company, there exists no condition or set of circumstances in connection with which the Company or any of its Subsidiaries could be subject to any liability under the terms of such Company Benefit Plans, ERISA, the Code or any other applicable Law which would have a Material Adverse Effect. No claim has been asserted, or, to the knowledge of the Company, threatened by the IRS, the Department of Labor or 33 any participant of a Company Benefit Plan that the Company or any of the Subsidiaries has, with respect to any Company Benefit Plan, engaged in or been a party to any "prohibited transaction", as such term is defined in Section 4975 of the Code and Section 406 of ERISA, which could result in the imposition of either a penalty assessed pursuant to Section 502 of ERISA or a tax imposed by Section 4975 of the Code, in each case applicable to the Company, any Subsidiary or any Company Benefit Plan. Each Company Benefit Plan intended to qualify under Section 401(a) of the Code does so qualify, and the trusts created thereunder are exempt from tax under Section 501(a) of the Code, and each such Company Benefit Plan will be amended in the manner required by the Code by December 31, 1994, and has been or will be submitted to the IRS on or prior to March 31, 1995 for a determination letter confirming that such Company Benefit Plan meets the currently applicable requirements for qualification and exemption from taxation under Sections 401(a) and 501(a) of the Code. No Company Benefit Plan has plan assets invested in any insurance company which is or has been in insolvency proceedings within the last 3 years. No Company Benefit Plan subject to Section 412 of the Code has incurred any "accumulated funding deficiency" (as defined in ERISA), whether or not waived. Neither the Company nor any of its Subsidiaries or Code Affiliates has at any time since 1987 maintained or contributed to any Company Benefit Plan, including without limitation any "multiemployer plan" (as defined in Section 3(37) of ERISA), which (i) is a "defined benefit plan", (as defined in Section 414(j) of the Code) or (ii) is subject to Title IV of ERISA. (c) Except as set forth in Schedule 4.17, (i) neither the Company nor any of its Subsidiaries is a party to any collective bargaining or other labor union contract applicable to persons employed by the Company or its Subsidiaries, (ii) no collective bargaining agreement is being negotiated by the Company or any of its Subsidiaries and (iii) neither the Company nor any of its Subsidiaries knows of any activities or proceedings of any labor union to organize any of their respective employees. As of the date hereof, the Company and all of its Subsidiaries are in compliance in all material respects with all applicable laws relating to employment and employment practices, wages, hours, and terms and conditions of employment, there are no material charges with respect to or relating to the Company or any of its Subsidiaries pending before the Equal Employment Opportunity Commission or any state, local or foreign agency responsible for the prevention of unlawful employment practices, and there is no labor dispute, strike or work stoppage against the Company or any of its Subsidiaries pending or, to the Company's knowledge, threatened which may interfere with the respective business activities of the Company or its Subsidiaries, except where such noncompliance, charge, dispute, strike or work stoppage would not have a Material Adverse Effect. As of the date hereof, to the knowledge of the Company, none of the Company or any of its Subsidiaries, or their respective representatives or employees, has committed any unfair labor practices in connection with the operation of the respective businesses of the Company or its Subsidiaries, and there is no charge or complaint against the Company or its Subsidiaries by the National Labor Relations Board or 34 any comparable state agency pending or threatened in writing, except where such unfair labor practice, charge or complaint would not have a Material Adverse Effect. (d) The Company has made available to Parent (i) copies of all employment agreements with officers of the Company and its Subsidiaries; (ii) copies of all severance agreements, programs and policies of the Company with or relating to its employees; and (iii) copies of all plans, programs, agreements and other arrangements of the Company with or relating to its employees which contain change in control provisions (which plans, programs, agreements and arrangements are set forth in Schedule 4.17 or have been disclosed in the Company SEC Reports or the Previous 14D-9). (e) Except as provided in Schedule 4.17 or as otherwise required by Law, no Company Benefit Plan provides retiree medical or retiree life insurance benefits to any person. SECTION 4.18. Insurance. The insurance policies in force at the date hereof, with respect to the assets, properties or operations of each of the Company and the Subsidiaries are set forth on Schedule 4.18 and are in full force and effect with reputable insurers in such amounts and insure against such losses and risks (including product liability) as are customary to protect the properties and businesses of each of the Company and the Subsidiaries. SECTION 4.19. Taxes. (a) Except as set forth in Schedule 4.19, and except as would not, either individually or in the aggregate, have a Material Adverse Effect, (i) the Company and each of the Subsidiaries have timely filed with the appropriate governmental authorities all Tax Returns (as defined below) required to be filed by or with respect to the Company and each of the Subsidiaries or their respective operations or assets, and such Tax Returns are true, correct and complete in all material respects and (ii) all Taxes shown to be due on such Tax Returns and all Taxes required to be withheld with respect to the Company or any of the Subsidiaries or their respective operations or assets have been timely paid or, if applicable, withheld and paid to the appropriate taxing authority in the manner provided by law, except in each case for such Taxes which are not material in the aggregate. (b) Neither the Company nor any of the Subsidiaries has filed a consent to the application of Section 341(f) of the Code. (c) Except as set forth on Schedule 4.19, no property of either of the Company or any of the Subsidiaries is "tax exempt use property" within the meaning of Section 168(h) of the Code or property that either of the Company or any of the Subsidiaries will be required to treat as being owned by another person pursuant to Section 168(f)(8) of the Internal Revenue Code of 1954, as amended, in effect immediately before the enactment of the Tax Reform Act of 1986. 35 SECTION 4.20. Trademarks, Licenses, Patents and Copyrights. Except as set forth on Schedule 4.20, the Company or the Subsidiaries own or possess adequate licenses or other valid rights to use all patents, patent rights, trademarks, trademark rights, trade names, trade name rights and proprietary information used or held for use in connection with, and material to, its business as currently being conducted and are unaware of any assertions or claims challenging the validity of any of the foregoing which are reasonably likely to have a Material Adverse Effect; and, to the best knowledge of the Company, the conduct of the Company's business as now conducted or proposed to be conducted does not and will not conflict with any patents, patent rights, licenses, trademarks, trademark rights, trade names, trade name rights or copyrights of others known to the Company or the Subsidiaries in any way reasonably likely to have a Material Adverse Effect. No material infringement of any proprietary right owned by or licensed by or to the Company or any of the Subsidiaries is known to the Company or any Subsidiary which is reasonably likely to have a Material Adverse Effect. SECTION 4.21. Related Party Transactions. Except as is set forth in the Company SEC Reports or in the Previous 14D-9, to the Company's knowledge, Schedule 4.21 sets forth the material transaction since September 1, 1994 between the Company and its Subsidiaries, on the one hand, and (i) an officer or director of the Company or any of its Subsidiaries, (ii) a record or beneficial owner of five percent (5%) or more of Company Common Stock, or (iii) an affiliate of any such officer, director or beneficial owner, on the other hand, other than payment of compensation for services rendered to the Company and its Subsidiaries in the ordinary course of business. SECTION 4.22. Status of Development and Construction Projects. To the Company's knowledge, except as specifically disclosed on Schedule 4.22, the following statements, as applicable, are true and correct as of the date hereof with respect to each of the following development and construction projects: (Malitbog 231 MW, Alto Peak 70 MW, Fish Lake 16 MW and 20MW Salton Sea Unit 1 expansion): (i) There is no pending or threatened revocation or loss of such project award, whether as a result of government action or otherwise; (ii) The executed power sales contract and construction contract for such project is in full force and effect and there is no oral or written threat to its validity, whether as a result of government action or otherwise; (iii) For any project with an executed construction contract, the estimated total capital cost for construction of such project (without well-field development expenses), including any existing or expected change orders is set forth on Schedule 4.22; 36 (iv) The joint venture or partnership or similar agreements with local partners or contractors are in full force and effect, and the Company's percentage equity ownership pursuant to such contracts is as set forth on Schedule 4.22, and there is no threat of loss or invalidity to such contracts, whether as a result of consummating this transaction or otherwise; (v) The status of the financing and political risk insurance arrangements for each such project is set forth on Schedule 4.22; and (vi) The Company has not taken any actions which violate the FCPA and is not aware of any actions taken by foreign Subsidiaries or local partners which if taken by a U.S. company would constitute a violation of the FCPA. SECTION 4.23. Status of Operating Projects. With respect to each operating project, except as set forth on Schedule 4.23: (i) The Company is not aware of any event or occurrence which would create a material impairment to the operating performance or a material increase in operating expenses or material non-compliance with regulatory or contractual requirements; (ii) The Company and any of its Subsidiaries or joint ventures have not changed in any material adverse respect such project's operating, maintenance reserves or procedures; and (iii) The Company is not aware of any events which, with lapse of time or otherwise, could reasonably be expected to result in a material impairment to the project's operating performance or a material increase in operating expenses or material non-compliance with regulatory or contractual requirements. ARTICLE V CONDUCT OF BUSINESS PENDING THE MERGER SECTION 5.01. Acquisition Proposals. The Company will notify Parent immediately if any inquiries or proposals are received by, any information is requested from, or any negotiations or discussions are sought to be initiated or continued with the Company, in each case in connection with any acquisition, business combination or purchase of all or any significant portion of the assets of, or any equity interest in, the Company or any Subsidiary. The Company shall provide a copy of any such written inquiries or proposals to Parent immediately after receipt thereof and thereafter keep Parent and Merger Sub promptly advised of any development with respect thereto. 37 SECTION 5.02. Conduct of Business by the Parties Pending the Merger. (I) The Company covenants and agrees that, between the date of this Agreement and the Effective Time, unless Parent shall otherwise consent in writing and except as is otherwise permitted hereby, the businesses of the Company and its Subsidiaries shall be conducted only in, and the Company and its Subsidiaries shall not take any action except in, the ordinary course of business and in a manner consistent with past practice; and the Company will use its best efforts to preserve substantially intact its business organization, to keep available the services of its present officers, employees and consultants and to preserve its present relationships with customers, suppliers and other persons with which it or any of its subsidiaries has significant business relations. By way of amplification and not limitation, except as contemplated by this Agreement, neither the Company nor any of its Subsidiaries shall, between the date of this Agreement and the Effective Time, directly or indirectly, do any of the following without the prior written consent of Parent: (a) (i) issue, sell, pledge, dispose of, encumber, authorize, or propose the issuance, sale, pledge, disposition, encumbrance or authorization of any shares of its or its subsidiaries' capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries' capital stock, or any other ownership interest (except with respect to Company Common Stock previously reserved for issuance as disclosed in Section 4.03 hereof); (ii) amend or propose to amend its articles of incorporation or bylaws or equivalent organizational documents; (iii) split, combine or reclassify any of its outstanding common stock, or declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise with respect to the common stock; (iv) redeem, purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire any shares of its capital stock, except in the performance of its obligations under existing employee plans; or (v) authorize or propose or enter into any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this Section 5.02(I)(a); (b) (i) acquire (by merger, consolidation, or acquisition of stock, partnership interests or assets) any corporation, partnership or other business organization or division thereof or any other interests in operating properties; (ii) except in the ordinary course of business and in a manner consistent with past practices, and except as set forth on Schedule 5.02(I)(b), sell, pledge, lease, transfer, dispose of, or encumber or authorize or propose the sale, pledge, lease, transfer disposition or encumbrance of any of its or its Subsidiaries' assets (including intangible assets); (iii) create, incur, assume or guarantee any indebtedness or other similar obligation, or enter into any contract or agreement, except in the ordinary course of business and consistent with past practice, and except as set forth on Schedule 5.02(I)(b); (iv) enter into any new line of business or make any bid or enter into any commitment in respect of any new or proposed projects; (v) prepay or 38 refinance any part of the principal or interest of any existing indebtedness before the due date thereof; (vi) assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person or entity, except for endorsements in the ordinary course of business in connection with the deposit of items for collection; (vii) make any loans, advances or capital contributions to or investments in any person or entity; (viii) waive, release, grant or transfer any rights of value or modify or change in any material respect any existing license, material lease or commitment; (ix) make or commit to or guarantee any single capital expenditure or obligations which are not consistent with past practice and currently budgeted; or (x) enter into or amend any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this Section 5.02(I)(b); (c) take any action other than in the ordinary course of business and in a manner consistent with past practice (none of which actions shall be unreasonable or unusual) with respect to the grant of any severance or termination pay (otherwise than pursuant to policies of the Company or any of its Subsidiaries in effect on November 30, 1994) or with respect to any increase of benefits payable under its severance or termination pay policies in effect on November 30, 1994; (d) make any payments (except in the ordinary course of business and in amounts and in a manner consistent with past practice) under any of its employee plans to any of its or its subsidiaries' employees, independent contractors or consultants, enter into any new employee plan, any new employment or consulting agreement, grant or establish any new awards under such plan or agreement, or adopt or otherwise amend any of the foregoing; (e) take any action except in the ordinary course of business and in a manner consistent with past practice (none of which actions shall be unreasonable or unusual) with respect to accounting policies or procedures (including without limitation its procedures with respect to the payment of accounts payable); (f) before the purchase of Company Common Stock pursuant to the Offer and other than pursuant to this Agreement, take any action to cause the shares of its common stock to cease to be listed on the Nasdaq National Market; (g) cause or permit any of their current insurance (or reinsurance) policies to be cancelled or terminated or any of the coverage thereunder to lapse, unless forthwith upon notice of such termination, cancellation or lapse, the Company or such Subsidiary used its best efforts to obtain commercially reasonable replacement policies from the same or comparable insurers providing coverage which is the same as or comparable to that provided under the cancelled, terminated or lapsed policies; 39 (h) enter into any agreement or transaction with any affiliate of the Company upon terms and conditions less favorable to the Company or such affiliate than could be obtained on an arm's length basis, except for agreements or transactions in the ordinary course of business and consistent with past practice; (i) settle any material pending litigation; or (j) enter into any oral or written agreement, contract, commitment, arrangement or understanding with respect to any of the foregoing. Notwithstanding any other term or provision of this Section 5.02(I): (i) the Company may close the financing of its Maltibog project without the prior consent of Parent provided that Parent has been given the opportunity to review the relevant financing documents and Company has given Parent at least two days' prior notice of the anticipated closing date; (ii) the Company may make and commit to ordinary course budgeted operational capital and other expenditures relating to projects in operation or construction without the consent of Parent; (iii)the Company may make planned capital and operational expenditures with respect to its Maltibog project, without the consent of Parent; (iv) the Company will not make any capital or other expenditures in excess of $500,000 in the aggregate with respect to its Nevada Power Pumped Storage contract, its Alto Peak contract and any other contract related to a development project without prior consultation with Parent and Parent's consent; (v) the Company may honor all existing contractual obligations relating to projects in operation or construction without the consent of Parent; and (vi) the Company will not incur any additional indebtedness secured or unsecured) or make new project or capital commitments in excess of $1,000,000 without prior consultation with Parent and Parent's consent. (II) Parent covenants and agrees that, between the date of this Agreement and the Effective Time (unless the election contemplated by Section 2.06(b)(i) has been made), unless the Company shall otherwise consent in writing and except as is otherwise permitted 40 hereby, neither Parent nor any of the Parent Subsidiaries shall, directly or indirectly, do any of the following: (a) (i) issue or sell, or propose the issuance or sale of, any shares of its or its subsidiaries' capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of its or its subsidiaries' capital stock, or any other ownership interest (except with respect to Parent Common Stock previously reserved for issuance as disclosed in Section 3.03 hereof) if (A) the proceeds of any such issuance or sale ("Proceeds") exceed $50,000,000, and (B) such Proceeds are not applied, if necessary, so as to allow Parent to exercise the election contemplated by Section 2.06(b)(i); (ii) split, combine or reclassify any of its outstanding common stock, or declare, set aside or pay any dividend or distribution payable in cash, stock, property or otherwise with respect to the common stock; (iii) redeem, purchase or otherwise acquire or offer to redeem, purchase or otherwise acquire any shares of its capital stock, except in the performance of its obligations under existing employee plans or pursuant to a repurchase program under Rule 10b-18 promulgated under the Exchange Act; or (iv) authorize or propose or enter into any contract, agreement, commitment or arrangement with respect to any of the matters set forth in this Section 5.02(II)(a); (b) in the case of Parent, merge or consolidate with or into another person or engage in a recapitalization or other similar extraordinary business transaction; (c) make any material change in accounting policies, other than as required by generally accepted accounting principles; or (d) enter into any oral or written agreement, contract, commitment, arrangement or understanding with respect to any of the foregoing. SECTION 5.03. No Shopping. The Company and its Subsidiaries will not, directly or indirectly, through any officer, director, agent, financial adviser or otherwise, solicit, initiate or encourage submission of proposals or offers from any person relating to any Competing Transaction (as defined below), or participate in any negotiations regarding, or furnish to any other person any information (except for information which has been previously publicly disseminated by the Company in the ordinary course of business) with respect to, or otherwise cooperate in any way with, or assist or participate in, facilitate or encourage, any effort or attempt by any other person to do or seek any of the foregoing. Notwithstanding the foregoing, the parties hereby agree that the Board of Directors of the Company may (i) review and act upon (which actions may include, without limitation, providing confidential information, negotiating a transaction and entering into an agreement for a transaction) an unsolicited proposal by any other person relating to any of the transactions referred to in the preceding sentence, if the Board of Directors determines in 41 good faith, after consultation with and based upon the advice of its financial and legal advisors, that failing to review and act upon such proposal would constitute a breach of fiduciary duty and (ii) comply with Rule 14e-2 promulgated under the Exchange Act with regard to a tender or exchange offer, and such review, conduct or compliance will not violate this Section 5.03. For purposes of this Agreement, "Competing Transaction" shall mean any of the following involving the Company or any Subsidiary: (i) any merger, consolidation, share exchange, business combination, or other similar transaction; (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition of 50% or more of the assets of the Company and the Subsidiaries, taken as a whole, in a single transaction or series of transactions; (iii) any tender offer or exchange offer for 50% or more of the Shares or the filing of a registration statement under the Securities Act in connection therewith; (iv) any person having acquired beneficial ownership or the right to acquire beneficial ownership of, or any "group" (as such term is defined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) having been formed which beneficially owns or has the right to acquire beneficial ownership of, 50% or more of the Shares; or (v) any public announcement of a proposal, plan or intention to do any of the foregoing or any agreement to engage in any of the foregoing. ARTICLE VI ADDITIONAL AGREEMENTS SECTION 6.01. Registration Statement/Proxy Statement. (a) As promptly as practicable after the consummation of the Offer, the Company and Parent shall prepare and file with the SEC preliminary proxy materials which shall constitute the preliminary Proxy Statement and a preliminary prospectus with respect to the Parent Common Stock to be issued in connection with the Merger. As promptly as practicable after comments are received from the SEC with respect to such preliminary materials and after the furnishing by the Company and Parent of all information required to be contained therein, the Company shall file with the SEC the definitive Proxy Statement and Parent shall file with the SEC the Registration Statement (which shall include the definitive Proxy Statement), and Parent and the Company shall use their best efforts to cause the Registration Statement to become effective and to mail the definitive Proxy Statement to their respective stockholders as soon thereafter as practicable. (b) Parent and the Company shall make all necessary filings with respect to the Merger and the Parent Share Proposal under the Securities Act and the Exchange Act and the rules and regulations thereunder, under applicable blue sky or similar securities laws and the New York Stock Exchange, Inc. and shall use all reasonable efforts to obtain required approvals and clearances with respect thereto. 42 SECTION 6.02. Stock Exchange Listing. Parent shall use its best efforts to list on the NYSE, upon official notice of issuance, the Parent Common Stock to be issued pursuant to the Merger. SECTION 6.03. Additional Agreements. The Company, Parent and Merger Sub will each comply in all material respects with all applicable laws and with all applicable rules and regulations of any governmental authority in connection with its respective execution, delivery and performance of this Agreement and the transactions contemplated hereby. Each of the parties hereto agrees to use all reasonable efforts to obtain in a timely manner all necessary waivers, consents and approvals and to effect all necessary registrations and filings, and to use all reasonable efforts to take, or cause to be taken, all other actions and to do, or cause to be done, all other things necessary, proper or advisable to consummate and make effective as promptly as practicable the transactions contemplated by this Agreement. SECTION 6.04. Notification of Certain Matters. The Company shall give prompt notice to Parent, and Parent shall give prompt notice to the Company, of (i) the occurrence or non-occurrence of any event whose occurrence or non-occurrence would be likely to cause any representation or warranty contained in this Agreement to be untrue or inaccurate in any material respect at any time from the date hereof to the Effective Time and (ii) any material failure of the Company, Parent or Merger Sub, as the case may be, or any officer, director, employee or agent thereof, to comply with or satisfy any covenant, condition or agreement to be complied with or satisfied by it hereunder; provided, however, that the delivery of any notice pursuant to this Section 6.04 shall not limit or otherwise affect the remedies available hereunder to the party receiving such notice. SECTION 6.05. Access to Information. (a) From the date hereof to the Effective Time, each of Parent and the Company shall, and shall cause their respective subsidiaries, officers, directors, employees, auditors, attorneys and agents to, afford the officers, employees, auditors, attorneys and agents of the other party (the "Respective Representatives") complete access at all reasonable times and on reasonable notice to its officers, employees, agents, accountants, properties, offices and other facilities and to all books and records, and shall furnish such Respective Representatives with all financial, operating and other data and information and all information relating to the regulatory status of its Plants (whether held by it, a subsidiary, or agents thereof) as the other party, through its officers, employees, agents or accountants, may reasonably request. (b) All information obtained by Parent or the Company pursuant to this Section 6.05 shall be kept confidential in accordance with the confidentiality agreements dated December 4, 1994 between Parent and the Company. 43 (c) In the event of the termination of this Agreement, each of Parent and the Company shall, and shall cause its affiliates to, return promptly every document furnished to them by the other party or its Respective Representatives in connection with the transactions contemplated hereby and any copies thereof which may have been made, and shall cause its Respective Representatives to whom such documents were furnished promptly to return such documents and any copies thereof any of them may have made, other than documents filed with the Commission or otherwise publicly available. SECTION 6.06. Public Announcements. Parent and the Company shall consult with each other before issuing any press release or otherwise making any public statements with respect to the Merger and shall not issue any such press release or make any such public statement before such consultation, except as may be required by law. SECTION 6.07. Best Efforts; Cooperation. Upon the terms and subject to the conditions hereof, each of the parties hereto agrees to use its best efforts to take or cause to be taken all actions and to do or cause to be done all things necessary, proper or advisable to consummate the transactions contemplated by this Agreement and shall use its best efforts to obtain all necessary waivers, consents and approvals, and to effect all necessary filings under the Exchange Act. The parties shall cooperate in responding to inquiries from, and making presentations to, regulatory authorities. SECTION 6.08. Agreement to Defend and Indemnify. (a) If any action, suit, proceeding or investigation relating hereto or to the transactions contemplated hereby is commenced, whether before or after the Effective Time, the parties hereto agree to cooperate and use their best efforts to defend against and respond thereto. It is understood and agreed that, subject to the limitations, if any, on indemnification contained in applicable law, the Company shall, to the fullest extent permitted under applicable law and regardless of whether the Merger becomes effective, indemnify and hold harmless, and after the Effective Time, the Surviving Corporation and Parent shall, to the fullest extent permitted under applicable law, indemnify and hold harmless, each director, officer, employee, fiduciary and agent of the Company or any Subsidiary and their respective subsidiaries and controlled affiliates, including, without limitation, officers and directors serving as such on the date hereof (collectively, the "Indemnified Parties"), from and against any costs or expenses (including attorneys' fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement in connection with any claim, action, suit, proceeding or investigation arising out of or pertaining to any of the transactions contemplated hereby, including without limitation liabilities arising under the Securities Act or the Exchange Act in connection with the Merger. Parent shall cause the Surviving Corporation to continue in effect the indemnification provisions currently provided (or provisions that are no less favorable to the Indemnified Parties than those currently provided) by the Articles of Incorporation, Bylaws or any written indemnification agreement of the Company for a period of not less than six years following the Effective Time. This Section shall survive the consummation of the 44 Merger. This covenant shall survive any termination of this Agreement pursuant to Section 8.01 hereof. Notwithstanding Section 9.07 hereof, this Section is intended to be for the benefit of and to grant third party rights to Indemnified Parties whether or not parties to this Agreement, and each of the Indemnified Parties shall be entitled to enforce the covenants contained herein. (b) Parent shall cause to be maintained in effect for not less than three years after the Effective Time the current policies of directors' and officers' liability insurance maintained by the Company and its Subsidiaries with respect to matters occurring prior to the Effective Time; provided, however, that Parent may substitute therefor its current policies or other policies of at least the same coverage containing terms and conditions which are no less advantageous to the Indemnified Parties; provided, however, that in no event shall Parent be required to expend pursuant to this Section 6.08(b) more than an amount equal to 125% of current annual premiums paid by the Company for such insurance. (c) If Parent, the Surviving Corporation or any of either of their successors or assigns (i) consolidates with or merges into any other person 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, then and in each such case, proper provision shall be made so that the successors and assigns of Parent or Surviving Corporation assume the obligations set forth in this Section 6.08. SECTION 6.09. Disposition of Litigation. (a) The parties agree to file jointly a stipulation of dismissal without prejudice, or take other reasonable steps necessary to terminate without prejudice, the action entitled Magma Power Company, et al. v. California Energy Company, Inc., et al., Case No. CV-N-94-00719-DWH pending in the United States District Court for the District of Nevada, including any and all claims and counterclaims asserted against the Company, its directors, its officers, Parent and Merger Sub, with each party bearing its own costs and attorneys' fees. The Company agrees that it will not settle any litigation currently pending, or commenced after the date hereof, against the Company or any of its directors by any stockholder of the Company relating to the Offer or this Agreement, without the prior written consent of Parent. (b) The Company will not voluntarily cooperate with any third party that has sought or may hereafter seek to restrain or prohibit or otherwise oppose the Offer or the Merger and will cooperate with Parent and Merger Sub to resist any such effort to restrain or prohibit or otherwise oppose the Offer or the Merger, unless failing to so cooperate with such third party or cooperating with Parent or Merger Sub, as the case may be, would constitute a breach of fiduciary duty of the Board of Directors of the Company or otherwise violate any applicable law or rules. 45 SECTION 6.10. Employee Benefits. (a) Parent shall cause the Surviving Corporation and its Subsidiaries to (x) honor all employment, change in control, deferred compensation, pension, retirement and severance agreements in effect on the date hereof between the Company or one of its Subsidiaries and any employee of the Company or one of its Subsidiaries, or maintained for the benefit of any employee of the Company or one of its Subsidiaries, all of which have been made available to Parent, and (y) honor all bonus determinations for the fiscal year ending December 31, 1994 made by the Company or any of its Subsidiaries prior to the date hereof with respect to the bonus plans and arrangements of the Company and its Subsidiaries. (b) For a period of one year commencing on the Effective Time, Parent shall cause the Surviving Corporation to provide active employees of the Company and its Subsidiaries with benefits (including, without limitation, welfare benefits) that are no less favorable, taken as a whole, than the benefits provided under the Company Benefit Plans (other than equity-based plans and bonus plans) as in effect immediately prior to the Effective Time. To the extent that service is relevant for eligibility, vesting or benefit calculations or allowances (including, without limitation, entitlements to vacation and sick days) under any plan or arrangement maintained in order to provide the benefits described in the preceding sentence, such plan or arrangement shall credit employees for service on or prior to the Effective Time with the Company or any of its Subsidiaries. (c) Parent shall as promptly as practicable after the Effective Time cause the Surviving Corporation to (or the Company may prior to the Effective Time) amend each demand note made in favor of the Company by an employee of the Company or one of its Subsidiaries (each of which has been made available to Parent) to provide that (x) such demand note will not be repayable on demand from the Company and (y) upon the involuntary termination without cause of the employment of such employee, all sums owed under such demand note shall be payable in equal quarterly installments over a period of not less than 36 months. (d) With respect to each employee of the Company (other than employees of the Company which are parties to a "change in control" or "severance" agreements referred to in the Previous 14D-9) who is, within the one year period following the closing of the Offering, either (i) terminated without cause or (ii) terminated as a result of a reduction in force, Parent shall cause the Surviving Corporation to make the following payments: (1) if, upon the effective date of such employee's termination, such employee has less than one year's service with the Company, a payment equal to three months base salary plus an amount equal to one-fourth of the prior years targeted bonus for such employee, payable in twelve equal installments over the twelve months following such termination; or 46 (2) if, upon the effective date of such employee's termination, such employee has one year or more of service with the company, a payment equal to six months base salary plus an amount equal to one-fourth of the prior years targeted bonus for each such employee, payable in twelve equal installments over the twelve months following such termination. For the purposes of subclauses (1) and (2), if an employee was not eligible for a bonus in the referenced prior year, then the targeted bonus for the current year shall be used. An employee shall not be eligible for the payments specified in subclauses (1) or (2) if such employee's termination relates to a reduction in force referred to subclause (ii) above and such employee has been offered a comparable position (in terms of compensation) by Parent at any location; provided however, that no such amounts referenced in (1) and (2) will be payable if, in the good faith determination of the Company, the employee's job performance did not merit continued employment or offer of relocation to a comparable position. An employee may not receive the severance payments contemplated by this Section 6.10(d) and also receive any severance payments under the Company's severance policy covered by Sections 6.10(a) and (b) and identified on a schedule hereto. SECTION 6.11. Certain Action of Parent and Merger Sub. Promptly following the execution of this Agreement, Parent and Merger Sub shall suspend their solicitation of requests for the call of a special meeting of the Company's stockholders and their solicitation of proxies to elect nominees to the Company's Board of Directors. ARTICLE VII CONDITIONS OF MERGER SECTION 7.01. Conditions to Obligation of Each Party to Effect the Merger. The respective obligations of each party to effect the Merger shall be subject to the following conditions: (a) Offer. Parent shall have made, or caused to be made, the Offer and shall have purchased, or caused to be purchased, Shares pursuant to the Offer; (b) Company Stockholder Approval. This Agreement and the transactions contemplated hereby shall have been approved and adopted by the requisite vote of the holders of the Company Common Stock. (c) Parent Stockholder Approval. The Parent Share Proposal shall have been approved by the requisite vote of the holders of Parent Common Stock. 47 (d) Stock Exchange Listing. The Parent Common Stock issuable in the Merger shall have been authorized for listing on the NYSE upon official notice of issuance. (e) Effectiveness of Registration Statement. The Registration Statement shall have become effective in accordance with the provisions of the Securities Act. No stop order suspending the effectiveness of the Registration Statement shall have been issued by the Commission and remain in effect. (f) No Prohibition. There shall not be in effect (i) any judgment decree or order issued by any Federal, state or local court of competent jurisdiction, or (ii) any statute, rule or regulation enacted or promulgated by any Federal, state, local or legislative, administrative or regulatory body of competent jurisdiction, that in either of cases (i) or (ii) prohibits the consummation of the Merger or makes such consummation illegal. SECTION 7.02. Additional Conditions to Obligations of the Company. The obligation of the Company to effect the Merger is also subject to the fulfillment of the following conditions: (a) Representations and Warranties. The representations and warranties of Parent and Merger Sub contained in this Agreement shall be true and correct in all material respects on the date hereof and shall also be true and correct in all material respects on and as of the Effective Time, except for changes contemplated by this Agreement, with the same force and effect as if made on and as of the Effective Time, except to the extent that the failure of such representations and warranties to be so true and correct, individually and in the aggregate, does not have a Material Adverse Effect; provided, however, that any inaccuracy of a representation or warranty, on the date hereof or at the Effective Time, shall not result in the non-satisfaction of this Section 7.02(a) unless any such inaccuracy or inaccuracies, either (i) individually or in the aggregate, constitute facts or circumstances having a Material Adverse Effect (it being understood that such facts or circumstances shall be deemed to be so constituted if the particular representation or warranty which is inaccurate contains a Material Adverse Effect standard) or (ii) are clearly intentional misrepresentations; and (b) Agreements, Conditions and Covenants. Parent and Merger Sub shall have performed or complied in all material respects with all agreements, conditions and covenants required by this Agreement to be performed or complied with by them on or before the Effective Time. SECTION 7.03. Additional Conditions to Obligations of Parent and Merger Sub. The obligations of Parent and Merger Sub to effect the Merger are also subject to the following conditions: 48 (a) Representations and Warranties. The representations and warranties of the Company contained in this Agreement shall be true and correct in all material respects on the date hereof and shall also be true and correct in all material respects on and as of the Effective Time, except for changes contemplated by this Agreement, with the same force and effect as if made on and as of the Effective Time, except to the extent that the failure of such representations and warranties to be so true and correct, individually and in the aggregate, does to have a Material Adverse Effect; provided, however that any inaccuracy of a representation or warranty, on the date hereof or at the Effective Time, shall not result in the non-satisfaction of this Section 7.03(a) unless any such inaccuracy or inaccuracies, either (i) individually or in the aggregate, constitute facts or circumstances having a Material Adverse Effect (it being understood that such facts or circumstances shall be deemed to be so constituted if the particular representation or warranty which is inaccurate contains a Material Adverse Effect standard) or (ii) are clearly intentional misrepresentations; and (b) Agreements; Conditions and Covenants. The Company shall have performed or complied in all material respects with all agreements, conditions and covenants required by this Agreement to be performed or complied with by it on or before the Effective Time. (c) Funding. Parent and/or Merger Sub shall have received the proceeds of the financing contemplated by Section 3.10 hereof. ARTICLE VIII TERMINATION, AMENDMENT AND WAIVER SECTION 8.01. Termination. This Agreement may be terminated at any time before the Effective Time: (a) By mutual consent of the Boards of Directors of Parent and the Company; or (b) By the Company or Parent if the Offer shall not have been consummated by February 28, 1995; or (c) By the Company or Parent if the Effective Time shall not have occurred on or prior to September 30, 1995; or (d) By either Parent or the Company if a court of competent jurisdiction or governmental, regulatory or administrative agency or commission shall have issued an order, decree or ruling or taken any other action (which order, decree or ruling the parties hereto 49 shall use their best efforts to lift), in each case permanently restraining, enjoining or otherwise prohibiting the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and nonappealable; or (e) By Parent if (i) the Board of Directors of the Company withdraws, modifies or changes its recommendation of this Agreement or any of the transactions contemplated by this Agreement or shall have resolved to do any of the foregoing, or (ii) the Board of Directors of the Company recommends to the holders of Shares any proposal with respect to a merger, consolidation, share exchange or similar transaction involving the Company or any of its Subsidiaries, other than the transactions contemplated by this Agreement; or (f) By Parent if, without the Company's consent, any person has acquired beneficial ownership or the right to acquire beneficial ownership of or any "group" (as defined under Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder) has been formed which beneficially owns, or has the right to acquire "beneficial ownership" (as defined in the Rights Agreement) of, more than 10% of the Shares; or (g) By the Company or Parent if (i) a corporation, partnership, person or other entity or group shall have made a bona fide offer that the Board of Directors of the Company determines in its good faith judgment and in the exercise of its fiduciary duties, after consultation with and based upon the advice of its financial and legal advisors, is more favorable to the Company's stockholders than the Offer and the Merger or (ii) any person (including, without limitation, the Company or any affiliate thereof), other than Parent or any affiliate of Parent, shall have become the beneficial owner of more than 50% of the then outstanding Shares; or (h) By either Parent or the Company if the other party shall have breached this Agreement hereunder in any material respect and such breach continues for a period of ten days after the receipt of notice of the breach from the nonbreaching party. SECTION 8.02. Effect of Termination. In the event of termination of this Agreement as provided in Section 8.01 hereof, this Agreement shall forthwith become void and there shall be no liability on the part of Parent, Merger Sub or the Company, except (i) as set forth in Sections 8.03, 8.04 and 9.01 hereof, and (ii) nothing herein shall relieve any party from liability for any willful breach hereof. SECTION 8.03. Agreement Termination Fee. (a) If this Agreement is terminated pursuant to Section 8.01(e) or (g) or terminated by Parent pursuant to Section 8.01(h), the Company shall pay Parent a fee of $8,000,000 plus Parent's actual documented out-of-pocket expenses incurred since September 13, 1994 in connection with this Agreement 50 and the transactions contemplated hereby (including the previous offer referred to in the Previous 14D-9), including, without limitation legal and professional fees and expenses. (b) Any payment required to be made pursuant to Section 8.03(a) shall be made not later than one business day after termination of this Agreement and shall be made by wire transfer of immediately available funds to an account designated by Parent. SECTION 8.04. Offer Fee. (a) If, by December 19, 1994, Parent has not delivered to the Company either a revised Commitment Letter or definitive loan documentation reflecting the financing contemplated by such Commitment Letter which, in each case (i) do not contain any due diligence conditions regarding Parent and the Company and its Subsidiaries and (ii) have a definition of "material adverse effect" and/or "material adverse change" that substantially conforms in all material respects with the definition of Material Adverse Effect (other than as provided in subclause (i) thereof) contained herein with respect to Parent and the Company, then Parent shall owe the Company a fee of $8,000,000 payable in accordance with and to the extent provided in subsection (b) below. (b) The $8,000,000 fee referred to in Section 8.04(a) shall be paid by Parent to the Company only upon (i) termination or expiration of the Offer without Merger Sub having accepted for payment the shares tendered pursuant thereto or (ii) termination of this Agreement pursuant to Section 8.01(b) (collectively, the "Offer Termination Events") unless failure to close the Offer results from one or more of the following: (i) A Material Adverse Effect with respect to the Company shall exist or shall have occurred and be continuing on or prior to the relevant Offer Termination Event; (ii) The Company shall have materially breached this Agreement and Parent shall have terminated this Agreement under Section 8.01(h), in each case on or prior to the relevant Offer Termination Event; or (iii) Generally accepted accounting principles would require a restatement of the Company's audited financial statements contained in the Company SEC Reports. (c) Any payment required to be made pursuant to Section 8.04 shall be made not later than one business day after the occurrence of an Offer Termination Event and shall be made by wire transfer of immediately available funds to an account designated by the Company. 51 ARTICLE IX GENERAL PROVISIONS SECTION 9.01. Non-Survival of Representations, Warranties and Agreements. The representations, warranties and agreements in this Agreement shall terminate at the Effective Time or the termination of this Agreement pursuant to Section 8.01, as the case may be, except that the agreements set forth in Article I and Section 6.08 shall survive the Effective Time indefinitely and those set forth in Sections 6.05(b), 6.05(c), 6.10 and 9.03 shall survive termination indefinitely. SECTION 9.02. Notices. All notices and other communications given or made pursuant hereto shall be in writing and shall be deemed to have been duly given or made as of the date delivered or mailed if delivered personally or mailed by registered or certified mail (postage prepaid, return receipt requested) to the parties at the following addresses (or at such other address for a party as shall be specified by like notice, except that notices of changes of address shall be effective upon receipt): (a) if to Parent or Merger Sub California Energy Company, Inc. 10831 Old Mill Road Omaha, Nebraska 68154 Attention: Steven A. McArthur, Esq. with a copy to: Willkie Farr & Gallagher One Citicorp Center 153 East 53rd Street New York, New York 10022 Attention: Peter J. Hanlon, Esq. (b) if to the Company: Magma Power Company 4365 Executive Drive, Suite 900 San Diego, California 92121 Attention: Jon R. Peele, Esq. with a copy to: Shearman & Sterling 52 555 California Street San Francisco, California 94104 Attention: Michael J. Kennedy, Esq. SECTION 9.03. Expenses. Except as is provided in Section 8.03 hereof, all costs and expenses incurred in connection with this Agreement and the transactions contemplated hereby shall be paid by the party incurring such costs and expenses. SECTION 9.04. Certain Definitions. For purposes of this Agreement, the term: (a) "affiliate" of a person means a person that directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, the first mentioned person; (b) "control" (including the terms "controlled by" and "under common control with") means the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of a person, whether through the ownership of stock, as trustee or executor, by contract or credit arrangement or otherwise; and (c) "person" means an individual, corporation, partnership, association, trust or any unincorporated organization. SECTION 9.05. Headings. The headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. SECTION 9.06. Severability. If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other conditions and provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner adverse to any party. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner to the end that transactions contemplated hereby are fulfilled to the maximum extent possible. SECTION 9.07. Entire Agreement; No Third-Party Beneficiaries. This Agreement constitutes the entire agreement and supersedes any and all other prior agreements and undertakings, both written and oral, among the parties, or any of them, with respect to the subject matter hereof and, except as otherwise expressly provided herein and for the provisions of Sections 2.10, 6.05 and 6.10 hereof, is not intended to confer upon any other person any rights or remedies hereunder. 53 SECTION 9.08. Waiver. At any time before the Effective Time, any party 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. Any agreement on the part of a party hereto to any such extension or waiver shall be valid only as against such party and only if set forth in an instrument in writing signed by such party. SECTION 9.09. Amendment. This Agreement may be amended by the parties hereto by action taken by Parent and Merger Sub, and by action taken by or on behalf of the Company's Board of Directors at any time before the Effective Time, provided, however, that, after approval of the Merger by the stockholders of the Company, no amendment may be made which would materially adversely impact the interests of the Company's stockholders or reduce the amount or change the type of consideration into which each Share will be converted upon consummation of the Merger. This Agreement may not be amended except by an instrument in writing signed by the parties hereto. SECTION 9.10. Assignment. This Agreement shall not be assigned by operation of law or otherwise, except that Parent and Merger Sub may assign all or any of their rights hereunder to any affiliate of Parent provided that no such assignment shall relieve the assigning party of its obligations hereunder. SECTION 9.11. Governing Law. This Agreement shall be governed by, and construed in accordance with, the internal laws of the State of Delaware. SECTION 9.12. Counterparts. This Agreement may be executed in one or more counterparts and by facsimile, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original but all of which shall constitute one and the same agreement. 54 IN WITNESS WHEREOF, Parent, Merger Sub and the Company have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized. CALIFORNIA ENERGY COMPANY, INC. By: /s/ David L. Sokol -------------------------------- Name: David L. Sokol Title: Chairman, President and Chief Executive Officer CE ACQUISITION COMPANY, INC. By: /s/ David L. Sokol -------------------------------- Name: David L. Sokol Title: Chairman, President and Chief Executive Officer MAGMA POWER COMPANY By: /s/ Ralph W. Bocker -------------------------------- Name: Ralph W. Bocker Title: President and Chief Executive Officer ANNEX I CONDITIONS TO THE OFFER Notwithstanding any other provision of the Offer, Merger Sub shall not be required to accept for payment or pay for, or may delay the acceptance for payment of or payment for, tendered Shares, or may, in the sole discretion of Merger Sub, terminate or amend the Offer as to any Shares not then paid for if (i) at the Expiration Date the Minimum Tender Condition or the Financing Condition shall not have been satisfied or waived, or (ii) on or after December 9, 1994, and at or before the acceptance for payment for any of such Shares, any of the following events shall occur: (a) there shall be instituted or pending any action or proceeding by any government or governmental authority or agency, domestic or foreign, or by any other person, domestic or foreign, before any court or governmental authority or agency, domestic or foreign, (i) challenging or seeking to make illegal, to delay or otherwise directly or indirectly to restrain or prohibit the making of the Offer, the acceptance for payment of or payment for some of or all the Shares by Merger Sub or any other affiliate of Parent, the consummation by Merger Sub of the Merger or seeking to obtain material damages, (ii) seeking to prohibit the ownership or operation by Merger Sub of all or any material portion of the business or assets of the Company and its subsidiaries or of Merger Sub, or to compel Merger Sub to dispose of or hold separately all or any material portion of the business or assets of Merger Sub or the Company or any of its subsidiaries or seeking to impose any material limitation on the ability of Merger Sub or any other affiliates of Parent to conduct their business or own such assets, (iii) seeking to impose or confirm limitations on the ability of Merger Sub or any other affiliates of Parent effectively to exercise full rights of ownership of the Shares, including, without limitation, the right to vote any Shares acquired by any such person on all matters properly presented to the Company's stockholders, (iv) seeking to require divestiture by Merger Sub or any other affiliates of Parent of any Shares, or (v) seeking any material diminution in the benefits expected to be derived by Merger Sub or any other affiliates of Parent as a result of the transactions contemplated by the Offer or the Merger; (b) there shall be any action taken, or any statute, rule, regulation, interpretation, judgment, order or injunction enacted, enforced, promulgated, amended, issued or deemed applicable (i) to Merger Sub or (ii) to the Offer or the Merger by any court, government or governmental, administrative or regulatory authority or agency, domestic or foreign, other than the routine application of the waiting period provisions of the HSR Act to the Offer or to the Merger, which might, directly or indirectly, result in any of the consequences referred to in clauses (i) through (v) of paragraph (a) above; (c) it shall have been publicly disclosed or Merger Sub shall have otherwise learned that (i) any person, entity (including the Company or any of its subsidiaries) or "group" (within the meaning of Section 13(d)(3) of the Exchange Act) shall have acquired beneficial ownership of more than 20% of any class or series of capital stock I-1 of the Company (including the Shares), through the acquisition of stock, the formation of a group or otherwise, or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of more than 20% or any class or series of capital stock of the Company (including the Shares) other than acquisitions for bona fide arbitrage purposes only and except as disclosed in a Schedule 13D or 13G on file with the SEC on December 5, 1994 or (ii) any such person, entity or group which before December 5, 1994, had filed such a Schedule with the SEC has acquired or proposes to acquire, through the acquisition of stock, the formation of a group or otherwise, beneficial ownership of an additional 5% or more of any class or series of capital stock of the Company (including the Shares), or shall have been granted any right, option or warrant, conditional or otherwise, to acquire beneficial ownership of an additional 5% or more of any class or series of capital stock of the Company (including the Shares); provided, however, that if such person or group acquired the shares without the Company's consent and the Company has not taken any action under its Rights Plan to exempt such acquisition from the terms thereof, then the foregoing condition shall be inapplicable; (d) the Company shall have failed to comply with in any material respect any of its obligations under the Agreement or any representation or warranty of the Company in such Agreement shall not be true and correct in any material respect and such failure to comply or be true and correct shall have a Material Adverse Effect; (e) a Material Adverse Effect with respect to the Company shall have occurred; (f) this Agreement shall have been terminated in accordance with its terms; or (g) the Company's Board of Directors shall have withdrawn, modified or amended in any unfavorable respect its recommendation of the Offer or shall have resolved to do so or shall have entered into an agreement with a third party with respect to a Competing Transaction; which, in the good faith judgment of Parent and Merger Sub with respect to each and every matter referred to above and regardless of the circumstances (including any action or inaction by Parent or Merger Sub) giving rise to any such condition, makes it inadvisable to proceed with the Offer or with such acceptance for payment or payment. The foregoing conditions are for the sole benefit of Parent and Merger Sub and may be asserted by Parent or Merger Sub or may be waived by Parent or Merger Sub in whole or in part at any time and from time to time in its sole discretion. I-2 -----END PRIVACY-ENHANCED MESSAGE-----