1
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant / /
Filed by a Party other than the Registrant /X/
Check the appropriate box:
/X/ Preliminary Proxy Statement
/ / Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MAGMA POWER COMPANY
(Name of Registrant as Specified in its Charter)
CALIFORNIA ENERGY COMPANY, INC.
CE ACQUISITION COMPANY, INC.
(Name of Person Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
/ / $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-
6(i)(2).
/X/ $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transaction applies:
(3) Per unit price or other underlying value of
transaction computed pursuant to Exchange
Act Rule 0-11:
(4) Proposed maximum aggregate value of transaction:
/ / Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by
registration number, or the form or schedule and the date of its
filing.
(1) Amount previously paid:
(2) Form, schedule or registration statement no.:
(3) Filing party:
(4) Date filed:
2
PRELIMINARY COPY--11/1/94
NOVEMBER __, 1994
CALIFORNIA ENERGY COMPANY, INC.
CE ACQUISITION COMPANY, INC.
REQUEST SOLICITATION STATEMENT TO STOCKHOLDERS
OF
MAGMA POWER COMPANY
This Request Solicitation Statement is being furnished to holders of the
common stock, par value $0.10 per share ("Shares"), of Magma Power Company, a
Nevada corporation (the "Company"), who were holders of record as of the close
of business on November 7, 1994 (the "Record Date").
This Request Solicitation Statement and the enclosed GREEN request card
are first being furnished by California Energy Company, Inc., a Delaware
corporation ("CECI"), and CE Acquisition Company, Inc., a Delaware corporation
and a wholly owned subsidiary of CECI (the "Purchaser"), to holders of Shares
as of the Record Date (the "Record Holders") on or about November __, 1994 in
connection with CECI's solicitation (the "Request Solicitation") of written
requests ("Requests") from the Record Holders to require the President
("President") or the Secretary ("Secretary") of the Company to call a special
meeting (the "Special Meeting") of the stockholders of the Company pursuant to
Article I, Section 2, of the Company's Restated Bylaws, as amended (the
"Bylaws"), for the purpose of considering and voting on the proposals
described below under the heading "THE SPECIAL MEETING PROPOSALS" (the
"Special Meeting Proposals").
3
IMPORTANT
THE PURPOSE OF THE REQUEST SOLICITATION IS TO FACILITATE CONSUMMATION OF
CECI'S PENDING TENDER OFFER FOR 12,400,000 SHARES, OR 51% OF THE OUTSTANDING
SHARES ON A FULLY-DILUTED BASIS, AT $38.50 NET PER SHARE IN CASH. THE TENDER
OFFER IS THE FIRST STEP IN THE PROPOSED ACQUISITION OF THE COMPANY BY CECI.
FOR A DESCRIPTION OF THE TERMS AND CONDITIONS OF THE OFFER AND THE PROPOSED
MERGER (AS SUCH TERMS ARE DEFINED BELOW), INCLUDING THE CONSIDERATION TO BE
RECEIVED PURSUANT THERETO, SEE "THE OFFER AND THE PROPOSED MERGER".
DURING THE PAST SEVERAL WEEKS, THE COMPANY'S BOARD OF DIRECTORS HAS
UNILATERALLY TAKEN ACTION TO FRUSTRATE THE STOCKHOLDERS' ABILITY TO ACT IN
THEIR OWN INTERESTS IN CONNECTION WITH THE OFFER AND THE PROPOSED MERGER. SEE
"BACKGROUND OF THE OFFER, THE PROPOSED MERGER AND THE REQUEST SOLICITATION".
BY RETURNING THE GREEN REQUEST CARDS, A MAJORITY OF THE RECORD HOLDERS WILL BE
ABLE TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE SPECIAL MEETING AT
WHICH THE COMPANY'S STOCKHOLDERS MAY TAKE ACTIONS THAT WILL EXPRESS TO THE
COMPANY'S BOARD OF DIRECTORS THE STOCKHOLDERS' DESIRE TO ACCEPT THE OFFER AND
APPROVE THE PROPOSED MERGER. FOR A DESCRIPTION OF THE ACTIONS PROPOSED TO BE
TAKEN AT THE SPECIAL MEETING AND CERTAIN EFFECTS THEREOF. SEE "THE SPECIAL
MEETING PROPOSALS".
In order for the Record Holders to require the President or Secretary to
call the Special Meeting, valid, unrevoked GREEN Request cards must be
executed by Record Holders holding at least a majority of the Shares issued
and outstanding and entitled to vote as of the Record Date. Requests in
connection with this Request Solicitation must be delivered to CECI, for
delivery to the Company, on or before December , 1994, or such later date as
CECI may from time to time establish in accordance with the procedures set
forth below under "REQUEST PROCEDURE--Request Due Date" (December __, 1994 or
such later date is referred to herein as the "Request Due Date").
The primary purpose of this Request Solicitation is to obtain Requests
from the requisite number of Record Holders to require the President or
Secretary to call the Special Meeting to provide the stockholders of the
Company the opportunity to consider and vote on the Special Meeting Proposals,
which, if approved, would result in, among other things, placement on the
Company's Board of Directors (the "Company's Board") of four nominees of CECI
and the Purchaser. Although neither the call of the Special Meeting nor the
approval of the Special Meeting Proposals is a condition to the Offer, CECI
believes that requiring the President or Secretary to call the Special Meeting
and approving the Special Meeting Proposals will facilitate consummation of
the Offer and will increase the likelihood that the Company and the Purchaser
will enter into the Proposed Merger. See "THE OFFER AND THE PROPOSED MERGER".
4
BY REQUIRING THE PRESIDENT OR SECRETARY TO CALL THE SPECIAL MEETING AND
BY APPROVING THE SPECIAL MEETING PROPOSALS AT THE SPECIAL MEETING, THE
COMPANY'S STOCKHOLDERS WILL EXPRESS TO THE COMPANY'S BOARD THEIR VIEWS ON THE
OFFER AND THE PROPOSED MERGER. CECI BELIEVES THAT THIS IS PARTICULARLY
IMPORTANT IN LIGHT OF RECENT ACTIONS TAKEN BY THE COMPANY'S BOARD WHICH CECI
BELIEVES ARE NOT IN THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND MAY
OPERATE TO ENTRENCH THE CURRENT MANAGEMENT OF THE COMPANY AND TO DEPRIVE THE
COMPANY'S STOCKHOLDERS OF THE OPPORTUNITY TO EVALUATE AND ACT ON THE OFFER AND
THE PROPOSED MERGER. SEE "BACKGROUND OF THE OFFER, THE PROPOSED MERGER AND
THE REQUEST SOLICITATION".
CECI STRONGLY URGES YOU TO SIGN, DATE AND RETURN TO CECI, IN CARE OF
MACKENZIE PARTNERS, INC., AT THE ADDRESS INDICATED BELOW, THE ENCLOSED GREEN
REQUEST CARD IN ORDER TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE
SPECIAL MEETING. RECORD HOLDERS SHOULD NOT DELIVER REQUEST CARDS DIRECTLY TO
THE COMPANY.
THE FAILURE TO EXECUTE A GREEN REQUEST CARD HAS THE SAME EFFECT AS
OPPOSING THE CALL OF THE SPECIAL MEETING AND MAY IMPEDE CONSUMMATION OF THE
OFFER.
Questions and requests for assistance in completing or delivering Request
cards may be directed to MacKenzie Partners, Inc. at the following address and
telephone numbers:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 959-5500 (call collect)
or
Call Toll Free (800) 322-2885
THE OFFER AND THE PROPOSED MERGER
On September 19, 1994, CECI delivered a letter to the Company proposing
to acquire all of the outstanding Shares of the Company for $35 per share,
comprised of $25 in cash and $10 in market value of CECI's common stock, par
value $0.0675 per share (the "CECI Common Stock"). In the letter, CECI
reiterated its preference that any combination of the Company and CECI be
effected on a friendly, consensual basis, but it also notified the Company's
Board that, if the Company's Board failed to respond promptly or acted to
prevent the Company's stockholders from being given an opportunity to take
advantage of CECI's acquisition proposal, CECI reserved the right to approach
the Company's stockholders directly with a tender offer and/or a consent
solicitation to call a special meeting of stockholders for purposes of acting
on CECI's acquisition proposal and electing directors.
5
On October 3, 1994, CECI's financial advisors were informed that the
Company's Board had authorized the Company to adopt what is commonly referred
to as a "Poison Pill", and CECI also learned, through press reports, that the
Company had, among other things, amended its Bylaws to require that
stockholder action could occur only at a regular or special meeting of
stockholders (rather than by way of a written consent solicitation). In
addition, CECI learned on October 11, 1994 that the Company had entered into
"Golden Parachute" severance agreements with 15 of the most highly compensated
members of the Company's management and indemnification agreements with the
members of the Company's Board. CECI BELIEVES SUCH ACTIONS MAY HAVE THE
EFFECT OF ENTRENCHING THE CURRENT OFFICERS AND DIRECTORS OF THE COMPANY AND
MAY OPERATE TO DENY THE COMPANY'S STOCKHOLDERS THE RIGHT TO PARTICIPATE IN THE
OFFER AND THE PROPOSED MERGER. As CECI believes such actions are not in the
stockholders' best interests, CECI will take all appropriate actions to seek
to have such Poison Pill, Golden Parachutes and other impediments to the Offer
set aside. See "BACKGROUND OF THE OFFER, THE PROPOSED MERGER AND THE REQUEST
SOLICITATION" and "CERTAIN LITIGATION".
On October 6, 1994, as a result of what CECI viewed as an unproductive
and disappointing meeting between the Company's financial advisors and CECI's
financial advisors regarding CECI's initial acquisition proposal, the
Purchaser commenced a tender offer for 12,400,000 Shares and (unless and until
the Purchaser declares that the Merger Agreement Condition (as defined below)
has been satisfied) the associated Preferred Share Purchase Rights (the
"Poison Pill Rights") at $35 per Share (and associated Poison Pill Right), 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, each dated October 6, 1994. Subsequently, on October 10, 1994,
CECI learned through press reports that the Company's Board had recommended
that its stockholders reject the Offer and had further stated that the
Purchaser's $35 net per Share cash offer was less attractive than remaining
independent.
On October 21, 1994, CECI announced that the Purchaser had increased the
price per Share (and associated Poison Pill Right) to be paid pursuant to the
Offer to $38.50 per Share (and associated Poison Pill Right), net to the
seller in cash and without interest thereon, upon the terms and subject to the
conditions set forth in the Offer to Purchase, the Supplement thereto dated
October 26, 1994 (the "Supplement") and the related Letters of Transmittal
(which, collectively, constitute the "Offer"). The Offer is scheduled to
expire at 12:00 Midnight, New York City time, on Friday, November 4, 1994,
unless and until the Purchaser, in its sole discretion, extends the period of
time for which the Offer is open. The Purchaser currently intends to extend
the Offer beyond its scheduled November 4, 1994 expiration date. Copies of
the Offer to Purchase, the Supplement and the related Letters of Transmittal
have already been mailed to stockholders of the Company and may also be
obtained from
6
MacKenzie Partners, Inc. at its address and toll-free telephone number set
forth above. Unless the context otherwise requires, all references to Shares
in this Request Solicitation Statement include the associated Poison Pill
Rights. All references to Poison Pill Rights include all terms and conditions
of the Poison Pill applicable to Poison Pill Rights.
CECI's $38.50 per Share cash offer represents an $11.00 premium over the
$27.50 closing price for Shares on September 19, 1994, the day of CECI's
issuance of the press release announcing the initial acquisition proposal.
Despite this premium, on October 31, 1994, CECI learned through press reports
that the Company's Board had again recommended that its stockholders reject
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. CECI is seeking to negotiate with the Company a definitive
acquisition agreement (the "Proposed Merger Agreement" pursuant to which the
Company would, as soon as practicable following consummation of the Offer,
consummate a merger or other business combination (the "Proposed Merger") with
the Purchaser or another direct or indirect wholly owned subsidiary of CECI.
CECI expects that the Proposed Merger Agreement will, among other things,
contain customary conditions precedent to the Purchaser's and the Company's
obligations to consummate the Proposed Merger. Such conditions will be
determined pursuant to negotiations between CECI and the Company.
Under the Proposed Merger Agreement, at the effective time of the
Proposed Merger, each 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")) would be converted into the right to receive cash and shares of
CECI Common Stock having a combined cash and market value of $38.50 per Share.
The per Share amount of cash and CECI Common Stock to be distributed in the
Proposed Merger would be determined such that the blended purchase price for
all Shares acquired by the Purchaser and its affiliates in the Offer and the
Proposed Merger would be $28.50 in cash, without interest thereon, and $10 in
market value of CECI Common Stock, subject to a collar provision in the
Proposed Merger Agreement. Assuming 12,400,000 Shares are purchased pursuant
to the Offer, 24,027,080 Shares are outstanding at the effective time of the
Proposed Merger and all Shares, other than the 200,000 shares owned by CECI,
are converted in the Merger, on a per Share basis the consideration to be paid
in the Proposed Merger would be, subject to the collar provision,
approximately $17.65 in cash and approximately $20.85 in market value of CECI
common stock.
The collar provision in the Proposed Merger Agreement would provide a
range of maximum and minimum prices for CECI Common
7
Stock. If the market value of CECI Common Stock were to exceed the top of such
range, the number of shares of CECI Common Stock to be issued in the Proposed
Merger would be based on the maximum price for CECI Common Stock (i.e., the
top of the range), and if the market value of the CECI Common Stock were to be
less than the bottom of such range, the number of shares of CECI Common Stock
to be issued in the Proposed Merger would be based on the minimum price for
the CECI Common Stock (i.e., the bottom of the range). The effect of the
collar provision would be to increase the number of Shares to be issued in the
Proposed Merger (and therefore the value of the stock consideration to be
received in the Proposed Merger) if the market price of the CECI Common Stock
were to be greater than the top of the established range and to decrease the
number of Shares to be issued in the Proposed Merger (and therefore the value
of the stock consideration to be received in the Proposed Merger) if the
market price of the CECI Common Stock were to be less than the bottom of the
established range. CECI intends to establish such range shortly prior to the
Purchaser's entering into the Proposed Merger Agreement.
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, (2) the Company having entered into a definitive merger
agreement with the Purchaser to provide for the acquisition of the Company
pursuant to the Offer and the Proposed Merger (such condition being referred
to as the "Merger Agreement Condition"), (3) the Purchaser being satisfied, in
its sole judgment, that the Purchaser has obtained financing sufficient to
enable it to consummate the Offer and the Proposed Merger (such condition
being referred to as the "Financing Condition") and (4) authorization by
CECI's stockholders of the issuance of CECI Common Stock sufficient to
complete the Proposed Merger (such condition being referred to as the "CECI
Stockholder Approval Condition"). The Offer is also subject to certain other
conditions which are set forth in the Offer to Purchase, the Supplement and
the related Letters of Transmittal, copies of which may be obtained from
MacKenzie Partners, Inc.
On October 25, 1994, CECI received from Credit Suisse a fully
underwritten commitment to provide the financing for the Offer and the
Proposed Merger. Such commitment is subject to customary conditions,
including the execution of definitive documentation. See "BACKGROUND OF THE
OFFER, THE PROPOSED MERGER AND THE REQUEST SOLICITATION."
In addition, consummation of the Proposed Merger will require approval by
the Company's Board and the affirmative vote of the holders of a majority of
the outstanding Shares. The Purchaser intends to vote all Shares acquired by
it in favor of the Proposed Merger, and, if the Purchaser were to purchase a
majority of the Shares pursuant to the Offer and to obtain full
8
voting power for such Shares pursuant to the Control Share Statute, if
applicable (as defined below under "THE SPECIAL MEETING PROPOSALS"), if
applicable, the Purchaser would have a sufficient number of Shares to approve
the Proposed Merger and to elect directors as described below without the
affirmative vote of any other holder of Shares. Although the Purchaser will
seek consummation of the Proposed Merger as soon as practicable following the
purchase of Shares pursuant to the Offer, the exact timing and details of the
Proposed Merger will depend on a variety of factors and legal requirements,
including, among other things, whether the conditions to the Offer have been
satisfied or waived.
CECI anticipates that the Proposed Merger will be conditioned upon
satisfaction of the Financing Condition, the CECI Stockholder Approval
Condition and customary conditions to be negotiated.
CECI BELIEVES THAT CALLING THE SPECIAL MEETING AND APPROVING THE SPECIAL
MEETING PROPOSALS WILL FACILITATE CONSUMMATION OF THE OFFER AND WILL INCREASE
THE LIKELIHOOD THAT THE COMPANY AND THE PURCHASER WILL ENTER INTO THE PROPOSED
MERGER.
THE SPECIAL MEETING
CECI is seeking Requests from Record Holders owning at least a majority
of the Shares issued and outstanding and entitled to vote in order to require
the President or Secretary to call the Special Meeting pursuant to the Bylaws
for the purpose of considering and voting on the Special Meeting Proposals
described below under "THE SPECIAL MEETING PROPOSALS". The Requests solicited
hereby expressly include a further request that the record date for the
Special Meeting (the "Special Meeting Record Date") and the date of the
Special Meeting (the "Special Meeting Date") be designated by CECI on behalf
of the Record Holders executing such Requests. CECI currently intends (i) to
set as the Special Meeting Record Date the 11th calendar day following the
date on which the requisite number of valid, unrevoked Requests are delivered
by CECI to the Company and (ii) to set as the Special Meeting Date the 30th
calendar day following the Special Meeting Record Date. In the event that
either such date does not fall on a business day, then such date shall be the
first business day thereafter.
THE PURPOSE OF THE SPECIAL MEETING IS TO PROVIDE STOCKHOLDERS OF THE
COMPANY THE OPPORTUNITY TO CONSIDER AND VOTE ON THE SPECIAL MEETING PROPOSALS.
CECI BELIEVES THAT THE RECENT ACTIONS TAKEN BY THE COMPANY'S BOARD ARE NOT IN
THE BEST INTERESTS OF THE COMPANY'S STOCKHOLDERS AND MAY OPERATE TO ENTRENCH
THE CURRENT MANAGEMENT OF THE COMPANY AND TO DEPRIVE THE COMPANY'S
STOCKHOLDERS OF THE OPPORTUNITY TO EVALUATE AND ACT ON THE OFFER AND THE
PROPOSED MERGER. IN ADDITION, CECI BELIEVES THAT SUCH ACTIONS IMPOSE
ARTIFICIAL IMPEDIMENTS WHICH ONLY ADD
9
COST, TIME, NEEDLESS AND UNPRODUCTIVE LITIGATION AND DISTRACTION OF MANAGEMENT
TO AN ISSUE WHICH THE MAJORITY OF THE COMPANY'S STOCKHOLDERS WILL EVENTUALLY
DECIDE ON ITS MERITS. THEREFORE, BY REQUIRING THE COMPANY TO CALL THE SPECIAL
MEETING AND BY VOTING ON THE SPECIAL MEETING PROPOSALS AT THE SPECIAL MEETING,
THE COMPANY'S STOCKHOLDERS WILL BE ABLE TO EXPRESS THEIR VIEWS ON THE OFFER
AND THE PROPOSED MERGER DIRECTLY TO THE COMPANY'S BOARD AND TO PROTECT THEIR
INTERESTS IN THE COMPANY.
In light of recent actions taken by the Company's Board in response to
the Offer, CECI believes that the Company's Board may take actions designed to
impede the calling of the Special Meeting, including attempting to establish
different record or meeting dates than those contemplated herein. In the
event the Company's Board takes such actions, CECI will take such steps as it
deems necessary to reaffirm the right of the stockholders to set such dates
and otherwise act in accordance with the procedures described herein.
THE SPECIAL MEETING PROPOSALS
At the Special Meeting, CECI intends to ask the stockholders of the
Company to consider and vote on the following proposals (the "Special Meeting
Proposals"):
a. that the number of directors on the Company's Board be increased
from 11 to 15;
b. that the nominees of CECI identified in CECI's proxy materials to be
distributed in connection with the Special Meeting (the "CECI
Nominees") be elected as directors to fill the four newly created
directorships on the Company's Board;
c. that the Bylaws be amended (the "First Bylaw Amendment") to require
the affirmative vote of at least 80% of the entire Board of
Directors of the Company (irrespective of vacancies) with respect to
certain actions outside the ordinary course of business taken or
committed to be taken prior to the Company's 1995 Annual Meeting of
Stockholders, including issuances of securities, dispositions of
assets, taking certain compensation, benefit and employment action,
entering into material commitments or contracts, and certain
incurrences of debt or liens; and
d. that the Bylaws be amended (the "Second Bylaw Amendment") to render
the provisions of the "Control Share Statute", Sections 78.378
through 78.3793, inclusive, of the NGCL, inapplicable to the Offer.
The details regarding the Special Meeting Proposals, including the
specific text thereof, will be set forth in CECI's
10
proxy materials to be distributed in connection with the Special Meeting.
Although CECI does not presently expect any other proposed matters to be
included in the notice of the Special Meeting (the "Special Meeting Notice"),
CECI specifically reserves the right to require inclusion in the Special
Meeting Notice of such other matters as CECI may deem necessary, advisable or
appropriate in connection with facilitating consummation of the Offer and the
Proposed Merger.
The Special Meeting Proposals are intended to facilitate consummation of
the Offer and to increase the likelihood that the Company and the Purchaser
will enter into the Proposed Merger. The purpose of expanding the size of the
Company's Board from 11 to 15 directors and filling the four new directorships
created thereby with nominees of CECI is to place on the Company's Board
directors who are committed, subject to their fiduciary duties as directors of
the Company (which may require them to consider and/or accept offers from
other persons to purchase or otherwise combine with the Company), to removing
any impediments to stockholders being able to choose freely whether to accept
the Offer and to approve the Proposed Merger, thereby ensuring that the Offer
and the Proposed Merger get a full and fair hearing. Assuming all four of the
CECI Nominees are elected at the Special Meeting to serve on the Company's
Board, CECI believes it would be able to obtain majority representation on the
Company's Board (eight seats out of 15) if the Purchaser subsequently elected
all directors standing for election at the 1995 Annual Meeting of Stockholders
(the "1995 Annual Meeting"). The Purchaser would be able to elect all such
directors and obtain majority representation on the Company's Board at the
1995 Annual Meeting if it were to purchase a majority of the Shares pursuant
to the Offer and if the Second Bylaw Amendment rendering the Control Share
Statute inapplicable to the Offer has been approved at the Special Meeting or,
if the Control Share Statute has otherwise been complied with or found to be
inapplicable to the Offer, such that all Shares purchased pursuant to the
Offer will have full voting power.
CECI has not yet designated the CECI Nominees. CECI intends to identify
the CECI Nominees and provide all pertinent information regarding their
background in CECI's proxy solicitation material to be distributed in
connection with the Special Meeting. Pursuant to the Articles of
Incorporation, (i) the Company's Board is divided into three classes, with one
class of directors elected each year for a three-year term, (ii) any increase
in the number of directors shall be apportioned among the classes so as to
maintain the number of directors in each class as nearly equal as possible and
(iii) the term of a director elected to fill a newly created directorship
shall expire at the same time as the terms of the other directors of the class
for which the new directorship is created. CECI also intends to designate the
class of director for each CECI Nominee. CECI expects that of the four new
directorships to be created, one will serve until the 1995 Annual Meeting of
Stockholders, one
11
will serve until the 1996 Annual Meeting of Stockholders and two will serve
until the 1997 Annual Meeting of Stockholders.
According to the proxy statement relating to the Company's 1994 Annual
Meeting of Stockholders, each director of the Company who was not employed by
the Company was entitled to receive an annual fee of $15,000, plus a fee of
$1,500 for each meeting of the Company's Board attended and $750 for each
committee meeting attended (if such committee meeting is not held on the same
day as a meeting of the Company's Board). Directors who are employees of the
Company are not entitled to receive directors' fees. Other than as set forth
above, CECI is not aware of any other arrangements pursuant to which any
director of the Company was compensated for services as a director during the
Company's most recent fiscal year.
In the event that a CECI Nominee is not an employee or director of CECI,
such CECI Nominee may receive a retainer fee, intended to reflect their time
and expenses of serving, which will be negotiated and paid by CECI (and
described in the proxy statement that CECI will file with the Securities and
Exchange Commission related to the Special Meeting), from CECI to serve as a
nominee and to serve as a director, if elected. CECI believes that the CECI
Nominees, if elected, will be indemnified for their service as a director of
the Company to the same extent indemnification is available to directors of
the Company under the Bylaws. In addition, CECI believes that, upon election,
the CECI Nominees will be covered by the Company's officer and director
liability insurance, assuming the Company has in effect a standard officer and
director insurance policy. CECI also intends to indemnify each of the CECI
Nominees against any expenses (including legal fees) arising out of
participation in any proxy solicitation and to provide each such CECI Nominee
with supplemental director and officer liability insurance coverage, if
needed.
The purpose of the First Bylaw Amendment is to require the approval of at
least one of the CECI Nominees (if all four of the CECI Nominees were to be
seated on the Company's Board) of certain actions that could adversely affect
CECI's ability to consummate the Offer and the Proposed Merger.
The purpose of the Second Bylaw Amendment is to amend the Bylaws to state
expressly that the provisions of the Control Share Statute do not apply to the
Offer. The Control Share Statute purports to deny voting rights to shares of
an Issuing Corporation (as defined below) that are acquired by a person and
persons acting in association with such person (together, an "Acquiring
Person") the total number of which is sufficient to enable the Acquiring
Person directly or indirectly to exercise voting power in the election of
directors at or above any of three thresholds (20%, 33-1/3% or a majority of
the outstanding voting power of the Issuing Corporation), and any shares
acquired by the Acquiring Person within 90 days before such acquisition
12
("Control Shares"), unless, among other exceptions, (i) the articles of
incorporation or bylaws of the corporation in effect on the tenth day
following such acquisition provide that the provisions of the Control Share
Statute do not apply or (ii) voting rights for such Control Shares have been
approved at a meeting of certain disinterested stockholders called in
accordance with the provisions of the Control Share Statute (the "Control
Share Special Meeting"). Although, as noted below, CECI believes the Control
Share Statute is inapplicable to Shares purchased pursuant to the Offer,
approval of the Second Bylaw Amendment would expressly render the provisions
of the Control Share Statute inapplicable to the Offer.
The Control Share Statute provides that it applies to certain
acquisitions of shares of a corporation (an "Issuing Corporation")
incorporated in Nevada that has 200 or more stockholders, at least 100 of whom
are stockholders of record and residents of Nevada and that does business in
Nevada directly or through an affiliated corporation. CECI has reviewed a
list of the record holders of the Shares as of October __, 1994, which list
was made available by order of the Nevada State District Court. Such list
indicates that the Company had, at such date, fewer stockholders of record
who are residents of Nevada than the required minimum number for the Control
Share Statute to be applicable. Accordingly, CECI believes the Control Share
Statute is inapplicable to Shares purchased pursuant to the Offer and the
Proposed Merger. CECI has made a demand to the Company requesting concurrence
with this view and has taken preliminary steps to initiate court action
seeking a declaratory judgment if the Company disputes the inapplicability of
the Control Share Statute. See "CERTAIN LITIGATION."
If the Control Share Statute were found to be applicable to the Offer and
the Proposed Merger, approval of the Second Bylaw Amendment would have the
effect of rendering unavailable certain rights which, under certain
circumstances, might otherwise have been available to stockholders. Pursuant
to the Control Share Statute, unless the articles of incorporation or bylaws
of a corporation in effect on the tenth day following a control share
acquisition provide otherwise, in the event shares acquired in a control share
acquisition are accorded full voting rights and the acquiring person has
beneficial ownership of shares entitled to cast a majority of the votes which
could be cast in an election of directors, all stockholders of the corporation
(other than the acquiring person) have the right to dissent from the granting
of voting rights and to demand payment of the fair value of their shares under
the Control Share Statute. Fair value under the Control Share Statute may in
no event be less than the highest price per Share paid in the control share
acquisition. Based upon publicly available information, on the date hereof,
the Company's Articles of Incorporation and Bylaws do not restrict the
dissenter's rights granted under the Control Share Statute.
13
THE FOREGOING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF THE
PROVISIONS OF THE CONTROL SHARE STATUTE AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO THE CONTROL SHARE STATUTE AND TO ANY AMENDMENTS TO SUCH STATUTE
AS MAY BE ADOPTED AFTER THE DATE OF THIS PROXY STATEMENT.
Stockholders should be aware that if CECI and the Purchaser are able to
negotiate an acquisition agreement or merger agreement with the Company prior
to consummation of the Offer, the dissenters' rights under the Control Share
Statute will not be applicable. However, in such event, certain other
dissenters' rights under the NGCL relating to mergers and certain other
corporate transactions may be applicable.
Any stockholder who desires to exercise his dissenters' rights should
carefully review the relevant provisions of the Nevada General Corporation Law
and is urged to consult his legal advisor before exercising or attempting to
exercise such rights.
This Request Solicitation Statement is not being delivered pursuant to
the provisions of the Control Share Statute, and shall not, and is not
intended to, be construed as an offeror's statement or a request for a Control
Share Special Meeting. Notwithstanding the foregoing, if CECI and the
Purchaser determine that the Control Share Statute is applicable to Shares
purchased pursuant to the Offer and the Proposed Merger, CECI and the
Purchaser reserve the right to deliver at a future time an offeror's statement
to the Company in connection with the Offer and, contemporaneously therewith,
to request that the Company call the Control Share Special Meeting. CECI, in
its sole discretion, may, if necessary, also seek other means, including legal
proceedings, to establish the voting rights of Shares tendered pursuant to the
Offer.
CECI STRONGLY URGES YOU TO SIGN, DATE AND RETURN TO CECI, IN CARE OF
MACKENZIE PARTNERS, INC., AT THE ADDRESS INDICATED BELOW, THE ENCLOSED GREEN
REQUEST CARD IN ORDER TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE
SPECIAL MEETING.
A REQUEST TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE SPECIAL
MEETING IS ONLY EFFECTIVE IF EXPRESSED BY RECORD HOLDERS OWNING AT LEAST A
MAJORITY OF THE SHARES ISSUED AND OUTSTANDING AND ENTITLED TO VOTE. THE
FAILURE TO EXECUTE A GREEN REQUEST CARD HAS THE SAME EFFECT AS OPPOSING THE
CALL OF THE SPECIAL MEETING AND MAY IMPEDE CONSUMMATION OF THE OFFER.
BACKGROUND OF THE OFFER, THE PROPOSED MERGER
AND THE REQUEST SOLICITATION
Between May 1991 and June 1994, representatives of the Company and CECI
discussed, on various occasions, the possibility of the Companies cooperating
on certain matters, engaging in a joint venture or entering into a business
combination or other
14
acquisition transaction. These discussions did not lead to any agreements or
understandings.
On or about June 20, 1994, David L. Sokol, Chairman, President and Chief
Executive Officer of CECI contacted Ralph W. Boeker, President and Chief
Executive Officer of the Company, and proposed a meeting in person between
members of management of the two companies to discuss the possible combination
of CECI and the Company. As a result of that conversation, an August 11, 1994
meeting was scheduled to be held between Mr. Sokol and Mr. Boeker and other
representatives of their companies.
On August 9, 1994, Mr. Sokol was advised that Mr. Boeker had cancelled
the scheduled August 11 meeting. On August 10, 1994, Mr. Sokol spoke to Mr.
Boeker by telephone, and was advised 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.
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, Paul M. Pankratz, the Chairman of the Company, and
Mr. 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.
15
On September 19, 1994, Mr. Sokol sent the following letter to Messrs.
Pankratz and Boeker:
Dear Paul and Ralph:
We have discussed on several occasions during the past 12 months the
possible combination of California Energy Company, Inc. ("California
Energy") and Magma Power Company ("Magma"). As you know, California
Energy believes strongly that the strategic benefits which result
from merging our companies would enhance value for the shareholders
of both companies, while improving our shared competitive position
in an increasingly challenging business environment. While we have
been respectful of your desire to move slowly in this matter in the
past, the demands of a rapidly changing domestic and global
marketplace have led us to conclude that it is appropriate to make a
proposal to purchase Magma at this time.
Consequently, pursuant to the authority of its Board of Directors,
California Energy hereby proposes to acquire all outstanding shares
of Magma's common stock for $35 per share, comprised of $25.00 in
cash and $10.00 in market value of California Energy's common stock.
We understand from you that Magma will complete the financing of its
Malitbog geothermal project in the Philippines in mid-November and
we therefore established our proposal price to reflect fully the
value of this project although our proposal is not contingent on the
completion of such financing.
We hope that our proposed transaction can be consummated amicably
and expect to hear from you promptly. I am available to meet with
you and Magma's Board to discuss this proposal, and to answer any
questions you may have. As you know, California Energy has
substantial cash on hand and our financial advisor has confirmed to
us that we can conclude any additional financing required to effect
the combination of our two companies on a timely basis.
As I have stressed in our past discussions, we would prefer that the
combination of Magma and California Energy be effected on a
friendly, consensual basis in which the interest of our respective
shareholders, employees, customers and business partners are fairly
served. We are, of course, prepared to negotiate in good faith all
aspects of our proposal and to work out the terms of a mutually
satisfactory merger agreement, containing terms and conditions
typical for a transaction of this type.
16
Under the circumstances, we believe that Magma's Board of Directors
has a fiduciary responsibility to provide its shareholders with the
opportunity to take advantage of this proposal. While we hope that
it will not become necessary for us to approach your shareholders
directly, in the event that you do not respond to this proposal
promptly, we reserve the right to approach your shareholders
directly with a tender offer and/or a consent solicitation to call a
special meeting of shareholders for purposes of acting on this
proposal and electing directors.
Our companies, and the three of us personally, have enjoyed cordial
relations for some time. While I have consistently expressed to you
our belief that a business combination of California Energy and
Magma has strong commercial advantages, my colleagues and I have
also expressed our regard for the quality of Magma's projects and
the professionalism of its management. As we are all keenly aware,
the independent power industry is undergoing fundamental change as a
result of the accelerating deregulation in the U.S. electric utility
industry. Simultaneously, our greatest growth opportunities have
shifted from the domestic market to the international arena. While
our growth prospects internationally are extremely favorable, they
also require dramatically expanded developmental, financial,
construction and operational resources and talents. We are confident
that the combination of our companies will advance us to the
forefront of the global competition and will greatly enhance our
probability of successful growth with diligent risk management. We
also believe that the combined company would obtain a powerful
strategic advantage on international projects by being able to draw
upon the engineering talents of The Dow Chemical Company and the
construction expertise and capabilities of Peter Kiewit Sons' Inc.,
California Energy's largest shareholder.
California Energy continues to experience strong growth and remains
committed to rapid international expansion. We have this year
successfully financed and placed over 300 MW of geothermal power in
construction in the Philippines and believe that Magma's experienced
management team and dedicated employees will be an important
addition to California Energy as it pursues its aggressive
development strategy.
Paul, as you, Ralph and I discussed on our phone call last Thursday,
the combination of our two companies is fundamentally an economic
decision and should additionally provide for the proper and fair
treatment of both companies' employees. I can assure you that in any
such transaction, we would work together to ensure
17
a high level of opportunity and satisfaction for our combined
employee group. It is my personal hope that you and your advisors
will share our enthusiasm for the combination we have proposed and
that we can promptly provide for our respective shareholders the
enhanced value which it will create.
I encourage you to contact me at your earliest convenience;
additionally, your advisors may contact directly Mr. James Goodwin
of Gleacher & Co. (212) 418-4218, California Energy Company's
financial advisor.
Sincerely yours,
/s/ David L. Sokol
David L. Sokol
Chairman, President and
Chief Executive Officer
cc: Board of Directors of Magma Power Company
c/o Magma Power Company
It should be noted that CECI's view as to the obligations of the Company have
been contested by the Company and are the subject of litigation. See
"CERTAIN LITIGATION".
On September 20, 1994, Mr. Pankratz sent the following letter to Mr.
Sokol:
Dear David:
We have received your letter of September 19, 1994 regarding your
unsolicited proposal to purchase Magma Power Company for a
combination of cash and securities. The purpose of this letter is to
advise you that the Magma Board of Directors will consider your
proposal in due course and inform you of its decision after
completion of its evaluation.
Very truly yours,
/s/ Paul M. Pankratz
Paul M. Pankratz
Chairman of the Board
During the week of September 19, 1994, representatives of CECI had
several telephone conversations with the 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
18
a recent sale by Dow of 857,143 Shares, representing approximately 4% of the
total amount of Shares outstanding and approximately 17% of the Shares
beneficially owned by Dow, for $28.25 per Share and an associated option
agreement (the "Dow Option") to acquire such Shares at the same price, which
Dow had reported in filings with the Securities and Exchange Commission (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 26, 1994, Mr. Sokol sent the following letter to Messrs.
Boeker and Pankratz:
Dear Ralph and Paul:
As I stated in my letter of September 19, 1994, we believe that the
combination of California Energy and Magma Power is in the best
interest of the shareholders of both companies and the favorable
market reaction to our proposal would appear to validate this
belief.
Not having heard from you since Paul's letter of the 20th, I am
writing to reiterate our desire that the proposed transaction be
consummated on an amicable and consensual basis. In this spirit, I
am available to meet with you, Magma's directors or any appropriate
committee of the Board and its independent financial and legal
advisors to discuss our proposal and to answer any questions you may
have.
However, in order to be in a position to satisfy certain legal time
periods which I understand are applicable to our proposal, and as an
expression of our strong commitment to this transaction, we intend
to take this matter directly to Magma's shareholders. Please
understand that our decision to move forward in this fashion is not
intended to preclude the direct, friendly negotiation we seek.
Accordingly, if you do wish to arrange a meeting, please contact me
today directly at (402) 334-3710 or our advisors, Gleacher & Co. at
(212) 418-4200.
Sincerely yours,
/s/ David L. Sokol
David L. Sokol
Chairman, President and
Chief Executive Officer
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
19
parties, Mr. Sokol and Steven A. McArthur, Senior Vice President, General
Counsel and Secretary of CECI, 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. At the end of the meeting,
Mr. Sokol delivered the following letter to Messrs. Boeker and Pankratz:
Dear Ralph and Paul:
I had hoped that we would meet directly this week to discuss the
combination of California Energy and Magma. While I am personally
disappointed that neither of you nor a representative of your Board
will be present, we have nevertheless agreed to meet with Goldman
Sachs, on Wednesday, September 28, 1994, to discuss any questions
your advisors may have regarding our proposal and deliver a draft
merger agreement for review by your Board.
As a condition to the meeting with Goldman Sachs, you have requested
that we refrain from commencing a tender offer or making any press
release about this matter until Tuesday, October 4, 1994, the day
subsequent to the completion of Magma's Board of Directors meeting
scheduled for October 2nd and 3rd. We have accepted this condition
and understand that Magma's Board will fully consider our proposal
at this extended meeting.
The decision we have made to await the outcome of the deliberations
of Magma's Board before taking further action should not be
interpreted as any willingness on our part to delay a process which,
from our perspective, has moved too slowly in the past. Although we
have acceded to your request for more time, I want to be clear about
our intentions after Monday so that there are no surprises between
us. Accordingly, if your Board does not authorize meaningful merger
negotiations between us by the close of business on Monday, October
3, 1994, we will commence a tender offer for Magma's common shares
promptly on October 4, 1994.
Sincerely yours,
/s/ David L. Sokol
David L. Sokol
Chairman, President and
Chief Executive Officer
cc: Mr. Mac Heller
Goldman, Sachs & Co.
20
On October 3, 1994, the Company's financial advisors informed CECI's
financial advisors that the Company's Board had authorized the Company to
adopt the Poison Pill 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 Poison Pill 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 set forth in Sections 78.411 through 78.444,
inclusive, of the NGCL (the "Merger Moratorium Statute"), is valid and not in
violation of the Commerce Clause and Supremacy Clause of the United States
Constitution.
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.
Subsequently, CECI announced that the Offer would commence on October 6,
1994 and issued the following press release:
CALIFORNIA ENERGY TO MAKE CASH TENDER OFFER FOR
51% OF MAGMA POWER AT $35 PER SHARE
OMAHA, NE, October 4, 1994--California Energy Company, Inc.
(NYSE, PSE, LSE:CE) announced today that a wholly owned subsidiary
of California Energy will commence on Thursday 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 $35 net per share as
a first step in implementing its September 19 proposal to acquire
all Magma's shares for a combination of $25 in cash and $10 in
market value of California Energy common stock. The tender offer is
conditioned upon, among other things, entering into a merger
agreement with Magma Power providing for a
21
second-step merger, although, under certain circumstances California
Energy could waive the merger agreement condition, in which case it
would seek to obtain majority representation on Magma's Board.
Today's announcement follows unsuccessful discussions between
representatives of the companies that occurred today following
yesterday's decision by Magma's Board of Directors to adopt a poison
pill and take certain other defensive actions in response to
California Energy's September 19 proposal. California Energy intends
to take any action necessary to have attempted impediments to its
offer set aside. David L. Sokol, California Energy's Chairman and
Chief Executive Officer, stated:
"We have attempted in every reasonable way possible to commence
merger negotiations with Magma in order to allow their
shareholders to achieve value from our proposal. At Magma's
request last week, we delayed commencement of a tender offer to
permit Magma's Board to fully consider our proposal. Following
this morning's disappointing meeting with Magma's advisors, we
have concluded that allowing the shareholders to vote through a
tender offer and consent solicitation is the only way to move
forward in an efficient manner." Sokol further stated that "We
believe that the price which we have offered is fair and
represents full value for Magma. We believe that this
transaction represents a unique fit for us and as such allows
us to value Magma at a higher value than other potential
bidders." Sokol further noted that "Our price represents a
27.3% premium to the value of Magma's stock the day we
initially made the proposal.''
California Energy also intends to take appropriate action to
ensure its right to call a special meeting of Magma's shareholders
to elect directors to Magma's Board and to take other actions that
it believes will facilitate consummation of its tender offer and the
proposed second-step merger with Magma. The tender offer and consent
solicitations will be made only pursuant to definitive offering and
solicitation documents, which will be filed with the Securities and
Exchange Commission and mailed to Magma stockholders. Gleacher & Co.
Inc. is acting as Financial Advisor to California Energy and Dealer
Manager in connection with the tender offer and MacKenzie Partners,
Inc. is acting as the Information Agent for the tender offer.
California Energy Company is an international developer, owner and
operator of geothermal and other
22
environmentally responsible power generation facilities. Its six existing
facilities currently produce in excess of 325MW of power with an
additional 300MW under construction.
On October 5, 1994, Mr. Sokol sent the following letter to Messrs.
Pankratz and Boeker:
Dear Paul and Ralph:
At your request, we delayed taking any formal action to implement
our acquisition proposal dated September 19th. We did so in the hope
that you or your advisors would be willing to have good faith
discussions about our proposal.
Unfortunately, the October 3rd meeting between Gleacher & Co. and
Goldman Sachs was entirely unproductive. Goldman Sachs was unwilling
to discuss our $35 per share proposal or to share information which
would demonstrate that Magma might be worth more than $35 per share.
It now appears that your request that we delay commencing a tender
offer last week was simply a device to buy the time necessary to
adopt a poison pill in response to our offer, as well as other
by-law amendments designed to impede majority shareholder action and
to file lawsuits against us which your advisors did not even have
the courtesy to inform us of before we read about them in the
newspaper, notwithstanding the courtesies we had formerly extended
to you and to them.
We now find it necessary to make our proposal directly to
shareholders. As a first step, California Energy will be commencing
a cash tender offer on Thursday to acquire 51% of Magma's common
shares for $35 net per share, to be followed by a merger in which
all shareholders will receive $35 per Magma share, consisting of a
combination of cash and California Energy common stock. The steps
which you have taken, to litigate rather than to negotiate, leave us
no choice but to respond accordingly. Such litigation and other
steps which you have chosen to take are wasteful of corporate assets
and are in no way in your shareholders' interest. We would clearly
prefer not to engage in proxy contests and litigation in various
forums; however, you have left us no alternative.
We note your unfortunate attempt to discredit our offer by calling
it "coercive". Apparently this is a continuation of your ongoing
strategy of delay, litigation and otherwise working to keep our
offer from receiving fair consideration by Magma's shareholders.
23
Further, in response to a press release today from The Dow Chemical
Company, we want to once again emphasize that our merger agreement
would provide all Magma shareholders the same total consideration of
$35 per share. We also note that our proposed price of $35 per share
is substantially in excess of the price that Dow recently received
from the sale of the majority of its Magma holdings.
Moreover, as we have no assurance that your Board has had the
benefit of a fair presentation of our views, I will restate some of
the more salient points we made to your advisors:
For those of your Directors who have had only a brief introduction
to California Energy, our company operates independent power
facilities aggregating over 300MW and has over 325MW under
construction. For the year ended December 31, 1993 and the six
months ended June 30, 1994, California Energy had revenues of $149.3
million and $80.7 million, respectively, and a net income of $47.2
million and $15.0 million, respectively. As of June 30, 1994,
California Energy had cash and short-term investments of $379.5
million.
Kiewit Energy Company, a wholly owned subsidiary of Peter Kiewit
Sons' Inc. ("PKS"), is an approximate 43% stockholder (on a
fully-diluted basis) in California Energy. 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 California Energy's international private
power projects.
In addition, I provide the following summary of recent developments
reported by California Energy in the first nine months of 1994:
- In January 1994, California Energy signed an International
Joint Venture agreement with PKS.
- In February 1994, California Energy established a Singapore
office to oversee its Asian project development activities.
- In March 1994, California Energy closed its $400 million Senior
Note offering to fund, among other things, international
projects and corporate or project acquisitions.
24
- In April 1994, California Energy closed a $162 million
construction and term project financing for, and commenced
construction of, its 128MW Upper Mahiao geothermal project in
the Philippines.
- In May 1994, California Energy's wholly-owned engineering
subsidiary, The Ben Holt Co., became a 20% partner in a
construction joint venture with a subsidiary of PKS which will
construct the Mahanagdong project under a $201 million turnkey
contract.
- In June 1994, California Energy completed construction of a
50MW gas turbine cogeneration project in Yuma, Arizona and
commenced commercial operation under a 30-year power sales
contract with San Diego Gas & Electric Company.
- In August 1994, California Energy closed a $240 million
construction and term project financing for, and commenced
construction of, the 180MW Mahanagdong geothermal project in
the Philippines.
- In September 1994, California Energy submitted a definitive
proposal for the Casecnan 100MW hydroelectric and irrigation
(water sales) project in the Philippines.
- In September 1994, California Energy signed power sales
contracts for the 30MW of output from its Newberry geothermal
project in Oregon, after the final environmental impact
statement record of decision was published by the U.S. Forest
Service.
- In September 1994, California Energy opened its Manila office
to oversee its over 300MW of current Philippine power project
construction activities and new project development activities.
We believe it would also be useful for your Board to understand the
clear benefits we see from our proposal.
California Energy believes that combining the businesses of the two
companies would provide an excellent strategic fit and that the
synergies and other benefits which would result from combining the
operations of Magma and California Energy pursuant to the proposed
merger would enhance value for the stockholders of both companies,
and would strengthen the combined companies' competitive position in
the increasingly challenging business environment and global markets
in which they presently operate.
25
Each of Magma and California Energy have separately indicated their
respective beliefs that, in the next several years, the greatest
opportunities for financially attractive development projects will
be found in the international markets and each company is engaged
in, or otherwise pursuing, geothermal power and other power
development projects in the Philippines and Indonesia, and elsewhere
overseas where competition is strong and involves much larger
entities than either company.
California Energy believes that the combined companies'
international growth prospects would be substantially enhanced by
the expanded development, financial, construction and operational
resources and capabilities resulting from the proposed merger and
that certain domestic and international synergies would also result
from such a transaction.
The expected operational and other synergies include the following:
- Competitive Cost Advantage--Competition among independent power
producers internationally, which California Energy believes holds
the majority of attractive investment opportunities over the next
several years, is primarily based on the cost to produce power and
accordingly, geothermal energy competes directly with oil, gas and
coal-fired plants (e.g., the Pagbilao and Paiton projects in the
Philippines and Indonesia, respectively). Thus, neither California
Energy nor Magma are competing internationally only against other
"renewables," such as solar or wind, and as you know, over the last
several years domestic competition has also increasingly focused on
the low cost provider as a result of increasing domestic
deregulation. California Energy believes that a combination with
Magma would create an enterprise with the ability to reduce its
average cost per Kwh by expanding its asset base, without materially
expanding its cost structure, and therefore allowing it to be more
price competitive with traditional fossil fuel power plants, which
California Energy believes will be its primary competition in the
future. This benefit of scale associated with a combination of
California Energy and Magma should provide the resulting entity with
a competitive advantage as it pursues both international and
domestic power sales opportunities with potential customers who
consider both the price of power and the provider's capabilities as
the primary factors in their evaluation of potential power
suppliers.
26
- Operational Efficiencies--Combination of the businesses of
California Energy and Magma would provide an opportunity to
efficiently integrate all aspects of their respective domestic and
international operations resulting in significant expected cost
savings.
- Increased Size, Diversification And Stability--The combined
companies would be advantaged by their expanded asset base and
diversification in their resource production facilities and sources
of revenue, which the Company believes should result in an overall
long-term enhanced credit profile and an improved access to capital
at decreased costs. As a larger entity, we believe the combined
companies would have the critical mass with which to more
effectively compete against larger competitors in international
markets and an increasingly deregulated domestic market place.
- Development Opportunities--The combined companies should be able
to increase their development programs and activities, both
domestically and internationally, by pursuing additional development
opportunities rather than pursuing parallel paths with respect to
the same countries, thereby enhancing the ability of the combined
companies to obtain and successfully complete new power projects. In
addition, the expanded size and capabilities of the combined
companies is expected to enhance its reputation with sovereign
government and state utility customers and therefore enhance its
ability to successfully compete for new projects.
As your advisors know, the price we have offered is based on a
detailed financial analysis of publicly available information which
we believe fully values all projects which Magma has publicly
reported it is currently operating, constructing, financing or
developing. Moreover, as your Board is no doubt aware from its
review of the proposed merger agreement we provided to you last
week, we believe that in the context of a negotiated transaction we
had attempted to more than fairly provide for the interests of
employees in that agreement. Lastly, in response to your advisors'
questions regarding the response of Magma's and California Energy's
foreign customers to our proposal, we are pleased to report that the
response to our inquiry from such customers, like that of the stock
market, was highly favorable and we can obtain any further
assurances in this regard that your Board desires.
In short, we believe the proposed transaction makes eminent good
sense, and we urge your Board to either (i) authorize merger
discussions with us, (ii) auction
27
the company to the highest bidder, or (iii) let the shareholders
decide freely whether to accept our proposal without attempting to
impose artificial impediments which will simply add additional
costs, time, needless and unproductive litigation and distraction of
management to a process in which the majority of Magma's owners will
eventually decide the issue on the merits. Let me once more extend
to you my willingness, now or in the future, to meet with you at any
time in order to negotiate a successful merger of our companies
which will best serve our shareholders, customers and employees.
Sincerely,
/s/ David L. Sokol
David L. Sokol
Chairman, President and
Chief Executive Officer
cc: Board of Directors of Magma Power Company
c/o Magma Power Company
CECI's expectation regarding the operational and other synergies
described in the foregoing letter are based on the knowledge and experience of
CECI's officers, who, on average, have over 10 years of experience in the
independent power production industry. Nevertheless, as with any expectation
of future events, there can be no assurance that any or all of the expected
operational or other synergies described above will be obtained.
On October 5, 1994, Mr. Ben Holt, a director of CECI and a record holder
of Shares, made a demand to the Company for access to the Company's
stockholder list and other stockholder information necessary to communicate
with stockholders pursuant to the NGCL.
On October 6, the Purchaser commenced the Offer by filing with the
Commission a Tender Offer Statement on Schedule 14D-1 pursuant to the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
On October 10, 1994, CECI learned through press reports that the
Company's Board had recommended that its stockholders reject the Offer and had
further stated that the Offer at a price of $35 per Share (and associated
Right) was less attractive than remaining independent.
On October 11, 1994, the Company filed with the Commission a
Solicitation/Recommendation Statement on Schedule 14D-9 pursuant to the
Exchange Act, formally rejecting the Offer and disclosing, among other things,
that the Company's Board had (i) authorized the Company to enter into "golden
parachute" severance agreements
28
with 15 of the most highly compensated members of the Company's management,
(ii) authorized the Company to enter into indemnification agreements with each
member of the Company's Board, (iii) amended the Company's Bylaws purporting
to eliminate the ability of the Company's stockholders to act by written
consent and (iv) hired Goldman, Sachs & Co. ("Goldman") to assist the
Company's Board with respect to CECI's proposal.
On October 12, 1994, the Company informed CECI that it had denied Mr.
Holt's demand for the Company's stockholder information under the NGCL, and
that the Company would not currently provide such information to Mr. Holt.
On October 13, 1994, CECI issued the following press release announcing
the filing of a preliminary proxy statement with the Commission pursuant to
the Exchange Act:
CALIFORNIA ENERGY TO SOLICIT CALL OF SPECIAL MEETING
OF MAGMA STOCKHOLDERS
OMAHA, NEBRASKA, October 13, 1994 --California Energy Company, Inc.
(NYSE, PSE and LSE: CE) ("CECI") announced today that in order to
facilitate consummation of its pending cash tender offer ("Offer") for
12,400,000 shares, or approximately 51%, of the common stock of Magma
Power Company (NASDAQ:MGMA) ("Magma") at a price of $35 net per share,
CECI has filed materials with the Securities and Exchange Commission
("SEC") to solicit written requests from Magma shareholders to require
Magma to call a Special Meeting of shareholders. A Special Meeting will
provide Magma stockholders the opportunity to consider and vote on CECI's
Special Meeting proposals which, if approved, would result in certain
By-law amendments that would facilitate CECI's proposal and the election
of four (4) CECI nominees to Magma's Board, who would be committed to
removing any impediments to shareholders being able to freely choose
whether to accept the Offer and approve the proposed merger, thereby
ensuring that the Offer and proposed merger get a full and fair hearing.
As previously announced, CECI's tender offer is to be followed by a
second step merger in implementing its September 19 proposal to acquire
all Magma shares for a combination of $25 in cash and $10 in market value
of California Energy common stock.
Today's announcement by CECI to commence a Special Meeting Request
Solicitation follows the decision by Magma's Board of Directors to
recommend that Magma shareholders not tender into CECI's $35 per share
Offer because remaining independent was more attractive to shareholders.
In its SEC filing recommending against CECI's Offer, Magma also disclosed
that it had entered into "Golden Parachute" severance agreements with 15
of the most highly compensated members of Magma's management as well as
indemnity agreements with Board members in response to CECI's
29
September 19 proposal. CECI intends to take any appropriate action
necessary to have any impediments to its Offer set aside. David L. Sokol,
California Energy's Chairman and Chief Executive Officer, stated:
"Magma's rejection of our offer, without any attempted negotiation
with us, demonstrates their disregard for Magma shareholders. Rather
than maximizing shareholder value, they have implemented Golden
Parachutes for the top 15 members of management, entered into an
excessive fee arrangement with Goldman Sachs and initiated wasteful
litigation. These actions alone are estimated to cost Magma's
shareholders between 0.75 and $1.00 per share. We believe that
Magma's Board of Directors have a fiduciary obligation to maximize
shareholder value, not the lifestyles of their friends and
co-workers.
It is our understanding that the Magma Board Chairman, President and
Chief Financial Officer began a "road show" presentation for
investors yesterday directed at misrepresenting and discrediting our
offer, disparaging California Energy, and offering extraordinary and
unsustainable projections for Magma's future. Much of the
information which Magma presented is inaccurate, misleading and in
our view in violation of the proxy solicitation rules established by
the Securities and Exchange Commission.
Magma's management, again yesterday, stated their hope to investors
that we would just go away. This will not happen unless the
shareholders reject our ultimate offer. It is our belief that
Magma's shareholders recognize the value of our offer and will not
allow the Magma management to prosper to their detriment."
The Special Meeting Request Solicitation will be made only pursuant
to definitive solicitation documents, which will be filed with the
Securities and Exchange Commission and mailed to Magma stockholders.
Gleacher & Co. Inc. is acting as Financial Advisor to California
Energy and Dealer Manager in connection with the tender offer and
Request Solicitation and MacKenzie Partners, Inc. is acting as the
Information Agent for the tender offer and Request Solicitation.
California Energy Company is an 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.
On October 13, 1994, CECI issued the following press release regarding
the Company's refusal to provide Mr. Holt with the requested stockholder
information:
30
MAGMA TO BE SUED TO OBTAIN RELEASE OF MAGMA STOCKHOLDER LIST
OMAHA, Neb., Oct. 13--California Energy Company, Inc. (NYSE, PSE and
LSE: CE) ("CECI") announced today that Magma Power Company (Nasdaq: MGMA)
("Magma"), in an apparent effort to delay the ability of Magma
shareholders to call a special meeting, has denied the request of one of
CECI's directors who is a long-time Magma shareholder, for the Magma
shareholder list. As previously announced, CECI is soliciting requests to
call a Special Meeting of Magma's shareholders in order to provide Magma
stockholders the opportunity to consider and vote on CECI's Special
Meeting proposals which, if approved, would result in certain By-law
amendments that would facilitate CECI's proposal to acquire Magma and the
election of four (4) CECI nominees to Magma's Board, who would be
committed to removing any impediments to shareholders being able to
freely choose whether to accept CECI's pending cash tender offer for
12,400,000 shares at $35 net per share and approve the proposed second
step merger, thereby ensuring that the offer and proposed merger get a
full and fair hearing.
David L. Sokol, California Energy's Chairman and Chief Executive
Officer, stated:
"Magma's denial of access to the list of shareholders is, at best,
an attempt to delay the inevitable, when Magma's Board and
management will have to account for their recent actions in front of
their shareholders. Such obstructionist tactics viewed in light of
recent actions to implement "Golden Parachutes" for 15 of the most
highly compensated members of management simply serve as further
evidence of management's improper entrenchment motive in
recommending against CECI's acquisition proposal." Sokol added:
"This sort of irresponsible corporate behavior simply demonstrates
the fact that Magma's management is apparently unwilling to permit
its actions to be judged by the Company's owners and will result in
another wasteful lawsuit to the detriment of Magma's shareholders."
The Special Meeting Request Solicitation will be made only pursuant
to definitive solicitation documents, which will be filed with the
Securities and Exchange Commission and mailed to Magma stockholders.
Gleacher & Co. Inc. is acting as Financial Advisor to California Energy
and Dealer Manager in connection with the tender offer and request
solicitation and MacKenzie Partners, Inc. is acting as the Information
Agent for the tender offer and request solicitation.
California Energy Company is an international developer, owner and
operator of geothermal and other environmentally responsible power
generation facilities. Its
31
six existing facilities currently produce in excess of 325 MW of power
with an additional 300 MW under construction.
On October 14, Mr. Holt commenced an action in the Second Judicial
District Court for the State of Nevada in and for the County of Washoe (the
"Court"), seeking an order requiring the Company, pursuant to the NGCL, to
turn over to him the stockholder information requested in his demand letter to
the Company. The Court entered an order setting a briefing schedule which
would permit consideration of the matter on an expedited basis. See "CERTAIN
LITIGATION".
On October 17, 1994, CECI issued the following press release announcing
that it had sued the directors of the Company's Board for, among other things,
breach of their fiduciary duties in failing to consider CECI's proposal to
acquire Magma and for taking obstructionist actions in response to CECI's
proposal:
CALIFORNIA ENERGY SUES MAGMA'S
DIRECTORS FOR BREACH OF FIDUCIARY DUTY
OMAHA, NEBRASKA, October 17, 1994 -- California Energy Company, Inc.
(NYSE, PSE and LSE: CE) ("CECI") announced today that it has sued the
Directors of Magma Power Company (NASDAQ: MGMA) ("Magma"), for, among
other things, breach of their fiduciary duties in failing to properly
consider CECI's proposal to acquire Magma and for taking obstructionist
actions in response to CECI's proposal, such as adopting special
indemnity agreements for themselves, "Golden Parachutes" for 15 Magma
executives, a discriminatory "poison pill" and by-law amendments which
are intended to impede the right of the majority of Magma's shareholders
to freely consider CECI's offer and to entrench current Magma management.
In addition, CECI's suit notes that the Board (which includes five (5)
present or former Dow employees out of an 11 member Board) breached its
duties by not disclosing to Magma's shareholders Dow's conflict of
interest in the transaction due to the fact that Dow cannot obtain the
same benefit from the tender offer price as other shareholders because of
recent Dow transactions that would invoke the SEC's Section 16(b)
short-swing profit disgorgement rule.
David L. Sokol, California Energy's Chairman and Chief Executive
Officer, stated:
"We find it astounding that Magma's Board has not even given serious
consideration to a proposal which would pay shareholders a $7.50 per
share premium over Magma's trading price prior to making the
proposal. Moreover, the Board, while stating our price to be
"inadequate," has declined to engage in a discussion about what
price would constitute an adequate offer. Although we have indicated
that we are prepared to negotiate all aspects
32
of our offer, Magma has refused to engage in price discussions,
merely stating that it is somehow in the best interest of
shareholders to remain "independent." At the same time Magma's Board
has also taken actions to impede majority shareholder action (such
as adopting a poison pill and by-law amendments and refusing access
to a shareholder list) which indicate the Board's apparent belief
that shareholders shouldn't be permitted to make up their own minds
as to what is in their best economic interest and which only serve
to entrench current management.
It is also noteworthy that, while attempting to deny shareholders
the right to consider our offer, Magma's Board has taken steps to
provide for management's economic self-interest, such as approving
"Golden Parachute" severance agreements for the 15 most highly
compensated members of Magma's management. These and other
obstructionist actions are estimated to cost shareholders between
$0.75 and $1.00 per share. Such actions, viewed in the context of
Dow's conflict of interest, due to its inability to fully benefit
from the tender offer as a result of Section 16(b), paint a picture
of management entrenchment plain and simple."
Sokol added:
"It is curious to note that the five (5) Dow Board members
recommended against our $35 per share offer in light of Dow's
liquidation of a significant amount of its Magma holdings (3,635,000
shares) in 1993 at a net price of $30.88 per share and Dow's recent
sale in September 1994 of 857,143 Magma shares at $28.25. Assuming
the Section 16(b) problems which prevent Dow from fully benefitting
from our offer were fully disclosed to the independent Magma Board
members, we do find it surprising that Magma's Board could be
advised that there was not a conflict that would require the five
(5) Dow members to abstain from voting on our proposal."
As previously announced, CECI is soliciting requests to call a
Special Meeting of Magma's shareholders in order to provide Magma
stockholders the opportunity to consider and vote on CECI's Special
Meeting proposals which, if approved, would result in certain by-law
amendments that would facilitate CECI's proposal to acquire Magma and the
election of four (4) CECI nominees to Magma's Board, who would be
committed to removing any impediments to shareholders being able to
freely choose whether to accept CECI's pending cash tender offer for
12,400,000 shares at $35 net per share and to approve the proposed second
step merger, thereby ensuring that the offer and proposed merger get a
full and fair hearing. The Special Meeting Request Solicitation will be
33
made only pursuant to definitive solicitation documents, which will be
filed with the Securities and Exchange Commission and mailed to Magma
stockholders. Gleacher & Co. Inc. is acting as Financial Advisor to
California Energy and Dealer Manager in connection with the tender offer
and request solicitation and MacKenzie Partners, Inc. is acting as the
Information Agent for the tender offer and request solicitation.
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 with an additional 300 MW under construction.
On October 21, 1994, CECI issued the following press release announcing
that the Purchaser had increased the price per Share (and associated Right) to
$38.50 per Share (and associated Right), net to the seller in cash and without
interest thereon:
CALIFORNIA ENERGY INCREASES ITS OFFER
FOR MAGMA POWER TO $38.50 PER SHARE
Omaha, Nebraska, October 21, 1994 --California Energy Company, Inc.
(NYSE, PSE, LSE: CE) ("CECI") announced today that it has increased its
offer to purchase Magma Power Company to $38.50 per share, consisting of
$28.50 per share in cash and $10.00 per share of CECI stock.
In connection with this enhanced proposal, CECI has extended the
expiration date of its pending cash tender offer for 51%, or 12,400,000
of Magma's shares to Friday, November 4, 1994 and has increased the cash
price to $38.50 net per share.
CECI also confirmed its intention to solicit consents to call a
special meeting of Magma's shareholders to elect four new members to
Magma's Board of Directors who would ensure that Magma gives proper
consideration to this enhanced offer. CECI also announced it would
commence a series of investor and shareholder presentations beginning
Tuesday, October 25, 1994. These presentations would highlight to Magma
shareholders the benefits of the CECI acquisition proposal.
David L. Sokol, CECI's Chairman and Chief Executive Officer, stated:
"We sincerely hope that Magma's Board of Directors will negotiate and
sign a merger agreement with us so that all Magma shareholders can
receive the benefits of our acquisition offer. In any event, we are now
putting forth our best acquisition proposal, and are beginning a consent
solicitation to provide Magma's shareholders the right to express their
views directly on the merits of our proposal. We have increased the cash
price of our Tender
34
Offer which should provide Magma shareholders with an additional
mechanism to communicate to Magma's Board their support of CECI's
acquisition offer."
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.
On October 21, 1994, the Company announced that its local Indonesian
partner on the smaller of its two proposed development stage projects in
Indonesia, the Karaha project, had terminated its joint venture with the
Company. On October 25, 1994, CECI and the Purchaser filed their second
amended counterclaims which, among other things, seek an injunction requiring
the Company to refrain from taking actions to damage its international
development projects, including the Karaha project. See "CERTAIN LITIGATION".
On October 25, 1994, CECI issued the following press release announcing
the receipt of a fully underwritten $500,000,000 financing commitment from
Credit Suisse:
CALIFORNIA ENERGY ANNOUNCES RECEIPT OF
FULLY UNDERWRITTEN $500,000,000 FINANCING COMMITMENT
FOR MAGMA ACQUISITION
OMAHA, NE, October 25, 1994 --California Energy Company, Inc. (NYSE,
PSE, LSE:CE) ("CECI") today announced that it has received a
fully-underwritten $500,000,000 financing commitment from Credit Suisse
in connection with CECI's proposed acquisition of Magma Power Company
(NASDAQ:MGMA) ("Magma"). The financing commitment contains two facilities
and provides funding both for the purchase of tendered Magma common
shares pursuant to CECI's pending cash tender offer for 51%, or
12,400,000 shares of Magma at $38.50 net per share, and for permanent
financing in order to consummate a merger of the two companies.
David L. Sokol, Chairman and Chief Executive Officer of CECI,
stated, "We believe this $500,000,000 financing commitment, together with
over $300,000,000 of existing cash on hand, demonstrates the strength of
our offer to Magma's shareholders and reinforces our capability to
expeditiously consummate the proposed transaction."
The tender offer facility has a final maturity of 12 months
(extendable to three years) and the permanent financing facility has a
final maturity of 8 years with semi-annual amortization from
internally-generated funds. Pricing is based upon Libor or an alternative
base rate.
35
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.
Also on October 25, 1994, the Court issued an order in the action filed
by Mr. Holt, granting the relief requested by Mr. Holt by directing that the
Company turn over to Mr. Holt without delay the stockholder list and other
information sought in his demand letter.
On October 28, 1994, CECI issued the following press release announcing
the record date for this Request Solicitation:
CALIFORNIA ENERGY SETS NOVEMBER 7, 1994
AS RECORD DATE FOR MAGMA SOLICITATION
OMAHA, NEBRASKA, October 28, 1994 -- California Energy Company, Inc.
(NYSE, PSE and LSE: CE) ("CECI") announced today that it has set a record
date of November 7, 1994 for the Request Solicitation to call a special
meeting of the shareholders of Magma Power Company (NASDAQ: MGMA)
("Magma"). As previously announced, the Special Meeting Request
Solicitation is intended to provide Magma stockholders the opportunity to
call a special meeting at which they can elect new directors who will
take steps to enable shareholders to freely choose whether to accept
CECI's $38.50 per share acquisition proposal.
The Special Meeting Request Solicitation will be made only pursuant
to definitive solicitation documents, which have been filed with the
Securities and Exchange Commission and will be mailed to Magma
stockholders. Gleacher & Co. Inc. is acting as Financial Advisor to
California Energy and Dealer Manager in connection with the tender offer
and request solicitation and MacKenzie Partners, Inc. is acting as the
Information Agent for the tender offer and request solicitation.
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.
On October 31, 1994, CECI learned through press reports that the
Company's Board had again recommended that its stockholders reject the Offer.
In rejecting the revised offer, the Company's Board considered a variety of
factors, including the revised offer's conditional nature, the terms of CECI's
financing, and the opinion of its independent financial advisor, Goldman,
Sachs
36
& Co., that the consideration offered in the revised offer was inadequate.
The Company said that its board has authorized the Company's management
and its financial advisor to explore all available alternatives to further the
best interests of the Company's stockholders, including remaining independent,
conducting discussions with interested parties, including CECI, concerning
possible business combinations, strategic partnerships or equity investments,
recapitalizing or restructuring the Company and similar transactions.
REQUEST PROCEDURE
In order to request the call of the Special Meeting, a Record Holder
should (1) mark the "REQUEST" box on the enclosed GREEN Request card, (2) sign
and date the GREEN Request card and (3) mail it to CECI c/o MacKenzie
Partners, Inc. in the enclosed postage-prepaid envelope. To be effective, the
GREEN Request card must bear the signature of the Record Holder. RECORD
HOLDERS SHOULD NOT DELIVER REQUEST CARDS DIRECTLY TO THE COMPANY.
RECORD HOLDERS SHOULD BE AWARE THAT FAILURE TO EXECUTE A GREEN REQUEST
CARD HAS THE SAME EFFECT AS OPPOSING THE CALL OF THE SPECIAL MEETING AND MAY
IMPEDE CONSUMMATION OF THE OFFER.
Only Record Holders are eligible to execute a GREEN Request card.
Persons owning Shares "beneficially" (i.e., deriving the economic benefits of
ownership thereof or having the power to vote or dispose of shares), but not
"of record" (i.e., having one's name recorded on the stock transfer records of
the Company), such as persons whose ownership of Shares is through a broker,
bank or other financial institution, should contact their broker, bank,
financial institution or other record holder and instruct such person or
entity to execute the GREEN Request card on their behalf.
IF A GREEN REQUEST CARD IS EXECUTED AND RETURNED BUT NO INDICATION IS
MADE AS TO WHAT ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A
REQUEST TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE SPECIAL MEETING.
Failure to provide your Request to require the President or Secretary to
call the Special Meeting will not prevent you from tendering your Shares in
the Offer, and a Request to require the President or Secretary to call the
Special Meeting will not obligate you to tender your Shares in the Offer.
However, CECI believes that requiring the President or Secretary to call the
Special Meeting and approving the Special Meeting Proposals will facilitate
consummation of the Offer and will increase the likelihood that the Company
and the Purchaser will enter into the Proposed Merger.
37
Requests Required
Pursuant to Article I, Section 2, of the Bylaws, the President or
Secretary is required to call a special meeting of stockholders upon the
request in writing of stockholders owning a majority of the capital stock of
the Company issued and outstanding and entitled to vote. According to the
Bylaws, each stockholder is entitled to cast one vote for each Share held by
such person. Therefore, in order for the Record Holders to require the
President or Secretary to call the Special Meeting, valid, unrevoked GREEN
Request cards must be executed by Record Holders owning at least a majority of
the outstanding Shares as of the Record Date.
According to the Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994 (the "June 1994 10-Q"), filed with the Commission pursuant
to the Exchange Act, as of June 30, 1994, there were 24,027,080 Shares
outstanding. According to the Company's Proxy Statement for the 1994 Annual
Meeting of Stockholders, dated May 11, 1994 (the "1994 Proxy Statement"),
filed with the Commission pursuant to the Exchange Act, as of December 31,
1993, there were 598,250 Shares subject to outstanding options and, according
to the Company's 1993 Annual Report to Shareholders, there were 19,925 Shares
subject to a deferred stock incentive award program.
On the Record Date, CECI beneficially owned 200,000 Shares, representing,
based on information in the June 1994 10-Q, approximately 1% of the
outstanding Shares.
CECI intends to execute a Request requiring the President or Secretary to
call the Special Meeting with respect to all Shares which it beneficially
owns. Therefore, assuming no additional Shares have been issued since June
30, 1994 and no options or deferred stock incentive awards outstanding as of
December 31, 1993 or issued thereafter have been exercised or vested (by
acceleration or otherwise), as the case may be, Requests representing
approximately 11,813,541 additional Shares will constitute the requisite
number of Requests to require the President or Secretary to call the Special
Meeting.
Record Date
In order to determine the stockholders entitled to request the call of
the Special Meeting, the Record Date for the purposes of this Request
Solicitation is November 7, 1994.
Only Record Holders are entitled to require the President or Secretary to
call a Special Meeting. If you acquired Shares after the Record Date without
a proxy, you may not execute a Request to require the President or Secretary
to call the Special Meeting with respect to such Shares. A Record Holder will
retain the right to execute a Request card in connection with this Request
Solicitation even if such Record Holder sells such Shares
38
after the Record Date or tenders such Shares pursuant to the Offer. The
tender of Shares pursuant to the Offer does not constitute a Request to
require the President or Secretary to call the Special Meeting or a grant to
CECI or the Purchaser of any voting rights with respect to the tendered Shares
until such time as such Shares are accepted for payment pursuant to the Offer.
Request Due Date
Requests in connection with this Request Solicitation must be delivered
to CECI, for delivery to the Company, on or before December __, 1994, which
date may from time to time be extended, without notice, in the sole discretion
of CECI.
The President or Secretary shall be required to call the Special Meeting
at any time prior to the Request Due Date, upon delivery by CECI to the
Company of valid, unrevoked GREEN Request cards from the Record Holders
holding at least a majority of the Shares issued and outstanding and entitled
to vote. If upon inquiry, inspection or tabulation it is determined that CECI
does not have a number of valid, unrevoked Requests from Record Holders
representing at least a majority of the Shares issued and outstanding and
entitled to vote, CECI may continue to solicit Requests from the Record
Holders until such time as a sufficient number of Requests to require the
President or Secretary to call the Special Meeting have been delivered by CECI
to the Company. A Request shall not be valid beyond six months from the date
on which such Request was executed by the Record Holder.
Revocation of Request
A Request executed and delivered by a Record Holder may subsequently be
revoked by written notice of revocation to the Company or CECI. A revocation
may be in any written form validly signed and dated by the Record Holder as
long as it clearly states that such Record Holder's Request previously given
is no longer effective. Any valid revocation delivered to the Company or CECI
shall supersede any previously dated or undated GREEN Request card. To be
effective, a Record Holder's written notice of revocation of his or her
previously executed and delivered Request must be signed, dated and delivered
prior to the time that the requisite number of valid, unrevoked GREEN Request
cards by Record Holders holding at least a majority of the outstanding capital
stock of the Company entitled to vote have been delivered by CECI to the
Company.
Any revocation may be delivered to either CECI, c/o MacKenzie Partners,
Inc., 156 Fifth Avenue, New York, New York 10010 or any address provided by
the Company. CECI requests that, if a revocation is delivered to the Company,
a photostatic or other legible copy of the revocation also be delivered to
CECI, c/o MacKenzie Partners, Inc. at the address set forth on the back cover
of this Request Solicitation Statement. In this
39
manner, CECI will be aware of all revocations and can more accurately
determine if and when the requisite number of Requests have been received.
If a Record Holder signs, dates and delivers a GREEN Request card to CECI
and thereafter, on one or more occasions, dates, signs and delivers a later-
dated GREEN Request card, the latest-dated GREEN Request card will be
controlling as to the instructions indicated therein and supersedes such
holder's prior Request or Requests as embodied in any previously submitted
GREEN Request cards; provided, however, that any such later-dated GREEN
Request card will be inoperative and of no effect if it is delivered after the
Request Due Date or, if applicable, after the date during the solicitation
period on which Requests become effective.
If the Company's Board chooses to oppose CECI's Request Solicitation and
if, in such instance, a Record Holder signs a Request revocation card sent to
such Record Holder by the Company's Board, such Record Holder may override
that revocation by returning to CECI, c/o MacKenzie Partners, Inc., at the
address set forth on the back cover of this Request Solicitation Statement, a
subsequently dated and signed GREEN Request card.
CERTAIN LITIGATION
Magma Power Company v. California Energy Company, Inc.
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
Poison Pill and amendments to the 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 subsequently removed this action to the United States
District Court for the District of Nevada.
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's stockholders from taking action by written consent, and
implementation of its Poison Pill, 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
40
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 and directing
the Company's Board to redeem the Poison Pill Rights; (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 its 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 Proposed Merger.
CECI intends to take any action necessary to have attempted impediments
to the Offer and the Proposed Merger set aside.
Ben Holt v. Magma Power Company
On October 14, 1994, Ben Holt, a stockholder of the Company, and a
director of CECI, filed a complaint entitled Ben Holt v. Magma Power Company,
Case No. CV94-06432, against the Company in the Second Judicial District Court
for the State of Nevada in and for the County of Washoe (the "Court"),
alleging, among other things, that the Company has infringed the plaintiff's
right as a
41
stockholder by denying his statutory right under the NGCL to demand access to
the Company's stockholder list and certain related material necessary to
communicate with the Company's stockholders. The plaintiff sought an order
directing the Company to comply with the demand for the stockholder list and
related information necessary to communicate with stockholders.
On October 25, 1994, the Court issued an order directing the Company
forthwith and without delay to turn over to Mr. Holt a complete record or list
of the Company's stockholders together with certain other information
concerning stockholders of the Company requested by Mr. Holt in his demand
letter to the Company. The Court ruled expressly that Mr. Holt satisfied the
requirements of the NGCL governing requests for stockholder information in
that he had been a stockholder of the Company for more than six months as of
the time of his demand, and had complied with the Company's request for an
affidavit concerning his request; that Mr. Holt's purpose for requesting
stockholder information of the Company, which was to facilitate CECI's request
for a special meeting of stockholders of the Company and otherwise to
communicate with the other stockholders of the Company concerning CECI's
proposal to acquire the Company through the Offer and the Proposed Merger was
a proper purpose for which to request stockholder information; and that the
public interest is served by granting Mr. Holt's request for stockholder
information.
Other Stockholder Litigation
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 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 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
42
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.
SOLICITATION EXPENSES AND PROCEDURES
The entire expense of preparing, assembling, printing and mailing the
Request Solicitation and the accompanying form of Request, and the cost of
soliciting Requests, will be borne by CECI. CECI does not intend to seek
reimbursement from the Company for these expenses.
In addition to the use of the mails, Requests may be solicited by certain
officers, directors and other employees or affiliates of CECI by telephone,
facsimile, telegraph and personal interviews, for which no additional
compensation will be paid to such individuals. Banks, brokerage houses and
other custodians, nominees and fiduciaries will be requested to forward the
solicitation material to the customers for whom they hold Shares, and CECI
will reimburse them for their reasonable out-of-pocket expenses.
CECI has retained MacKenzie Partners, Inc. ("MacKenzie") for advisory,
information agent and Request solicitation services, for which MacKenzie will
be paid reasonable and customary compensation and will be reimbursed for
certain reasonable out-of-pocket expenses. CECI has also agreed to indemnify
MacKenzie against certain liabilities and expenses in connection with its
engagement, including certain liabilities under the federal securities laws.
MacKenzie will solicit Requests from individuals, brokers, bank nominees and
other institutional holders. Approximately ___ persons will be utilized by
MacKenzie in its solicitation efforts, which may be made by telephone,
telegram, facsimile and in person.
CECI estimates that total expenditures relating to the solicitation will
be approximately $225,000, including $75,000 payable to MacKenzie directly
attributable to the proxy solicitations. To date, CECI has spent $ ______ of
such total estimated expenditures.
In addition, Gleacher & Co. Inc. ("Gleacher") may also solicit Requests
in connection with this Request Solicitation. Gleacher is acting as financial
advisor to CECI and the Purchaser in connection with the transactions
described in the Offer to Purchase, as Dealer Manager for the Offer and as co-
arranger of the debt financing described in the Offer to Purchase.
Approximately ___ persons will be utilized by Gleacher in its solicitation
efforts, which may be made by telephone, telegram, facsimile and in person.
43
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.
Neither CECI nor the Purchaser will pay any fees or commissions to any
broker or dealer or other person (other than Gleacher and MacKenzie) for
soliciting tenders of Shares pursuant to the Offer or for soliciting Requests
pursuant to the Request Solicitation. Brokers, dealers, commercial banks and
trust companies will be reimbursed by CECI for customary mailing and handling
expenses incurred by them in forwarding offering materials to their customers.
CERTAIN INFORMATION CONCERNING THE PARTICIPANTS
CECI, the Purchaser, Gleacher, David L. Sokol, Chairman, President, and
Chief Executive Officer of CECI, Steven A. McArthur, Senior Vice President,
General Counsel and Secretary of CECI, John G. Sylvia, Senior Vice President,
Chief Financial Officer and Treasurer of CECI, Dale R. Schuster, Vice
President--Administration of CECI, Eric Gleacher, Chairman and Chief Executive
Officer of Gleacher, Charles G. Phillips, managing director of Gleacher, and
James Goodwin, managing director of Gleacher, may be deemed to be
"participants" (as defined in Instruction 3 to Item 4 of Rule 14a-101 of the
Exchange Act) in this Request Solicitation. Messrs. Sokol, McArthur, Sylvia
and Schuster are referred to herein as the "CECI Employees", and Messrs.
Gleacher, Phillips and Goodwin are referred to herein as the "Gleacher
Employees". The CECI Employees and the Gleacher Employees are collectively
referred to herein as the "Individuals".
The CECI Nominees may also be deemed to be participants in this request
solicitation. CECI does not intend to designate the CECI Nominees until such
time as this solicitation of Requests is complete. CECI intends to identify
the CECI Nominees and to provide all pertinent information regarding the
background of the
44
CECI Nominees in the proxy solicitation material to be distributed in
connection with the Special Meeting.
The Purchaser was recently incorporated in Delaware and has not engaged
in any business since its incorporation other than in connection with its
organization and the Offer and the Proposed Merger. The Purchaser is a direct
wholly owned subsidiary of CECI. The principal business address of CECI, the
Purchaser and the CECI Employees is 10831 Old Mill Road, Omaha, Nebraska
68154.
CECI commenced business in 1971 and, 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 six months ended June 30, 1994, CECI had revenues of $149.3 million
and $80.7 million, respectively, and net income of $47.2 million and $17.0
million, respectively. As of June 30, 1994, CECI had cash and short-term
investments of $379.5 million.
Gleacher is primarily engaged in providing investment banking and
advisory services. As described above, Gleacher is acting as financial
advisor to the Purchaser and CECI in connection with the transactions
described in the Offer, as dealer manager for the Offer and as co-arranger of
the debt financing. The principal business address of Gleacher and the
Gleacher Employees is 660 Madison Avenue, New York, New York 10022.
As of the date hereof, the Purchaser is the record owner, and CECI is the
beneficial owner, of 200,000 Shares. Except as set forth above, and other
than the record ownership by Mr. Ben Holt, a director of CECI, of 3,763
Shares, none of CECI or the Purchaser or any of their respective directors or
officers, Gleacher, the Individuals or any associate of any of the foregoing
persons or any other person who may be deemed a "participant" is the
beneficial or record owner of any Shares.
Certain information relating to the beneficial ownership of Shares by
participants in the solicitation and certain other information is contained in
Schedule I hereto and is incorporated herein by reference.
STOCKHOLDER PROPOSALS
Any notice of a qualified stockholder submitting a proposal for the 1995
Annual Meeting of Stockholders of the Company must
45
be in proper form and be received by the Secretary of the Company no later
than February 21, 1995.
ADDITIONAL INFORMATION
The principal executive offices of the Company are at 4365 Executive
Drive, Suite 900, San Diego, California 92121. Except as otherwise noted
herein, the information concerning the Company has been taken from or is based
upon documents and records on file with the Commission and other publicly
available information. Although CECI does not have any knowledge that would
indicate that any statement contained herein based upon such documents and
records is untrue, CECI does not take any 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 that may affect the
significance or accuracy of such information.
For information regarding the security ownership of certain beneficial
owners and the management of the Company, see Schedule II.
NO MATTER HOW MANY SHARES YOU OWN, YOUR REQUEST TO REQUIRE THE PRESIDENT
OR SECRETARY TO CALL THE SPECIAL MEETING IS VERY IMPORTANT. PLEASE SIGN AND
DATE THE ENCLOSED GREEN REQUEST CARD AND PROMPTLY RETURN IT IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
46
SCHEDULE I
BENEFICIAL OWNERSHIP OF
SHARES BY PARTICIPANTS IN THE SOLICITATION
As of the date of this Proxy Statement, the Purchaser is the record
owner, and CECI is the beneficial owner of the following Shares:
Shares Price
Transaction Date Acquired* Per Share**
September 15, 1994 50,000 $27.25
September 15, 1994 50,000 27.62
September 16, 1994 100,000 28.00
Total 200,000
________________________________
* All transactions set forth in the table above were effected by the
Purchaser through a registered broker on the Nasdaq National Market.
** All prices are exclusive of commissions.
Except as otherwise set forth in this Schedule I, none of CECI, the
Purchaser, Gleacher, the Individuals or any associate of any of the foregoing
persons or any other person who may be deemed a "participant" in this
solicitation has purchased or sold any Shares within the past two years,
borrowed any funds for the purpose of acquiring or holding any Shares, or is
or was within the past year a party to any contract, arrangement or
understanding with any person with respect to any Shares. There have not been
any transactions since the beginning of the Company's last fiscal year and,
other than the Offer and the Proposed Merger, there is not any currently
proposed transaction to which the Company or any of its subsidiaries was or is
to be a party, in which any of CECI, the Purchaser, Gleacher, the Individuals
or any associate or immediate family member of any of the foregoing persons or
any other person who may be deemed a "participant" in this solicitation had or
will have a direct or indirect material interest. Other than the Offer and
the Proposed Merger and the directorships contemplated by the Special Meeting
Proposals, none of CECI the Purchaser, Gleacher, the Individuals or any
associate of any of the foregoing persons or any other person who may be
deemed a "participant" in this solicitation has any arrangement or
understanding with any person with respect to any future employment by the
Company of its affiliates, or with respect to any future transactions to which
the Company or its affiliates will or may be a party.
47
SCHEDULE II
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT AS A GROUP
The following table sets forth, as of April 15, 1994 (except as otherwise
noted below), the name and address of, and the total number of Shares (if any)
of the Company beneficially owned (as defined in Rule 13d-3 under the Exchange
Act) and the percentage of outstanding Shares beneficially owned by, (i) each
person who is known to the Company to own beneficially 5% or more of the
outstanding Shares, (ii) each director of the Company, (iii) the Company's
Chief Executive Officer and each of its executive officers and (iv) all
directors and executive officers as a group. The information presented below
has been taken from or is based upon documents and records on file with the
Commission and other publicly available information. Although CECI does not
have any knowledge that would indicate that any statement contained herein
based upon such documents and records is untrue, CECI does not take any
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 that may affect the significance or accuracy of such information.
AMOUNT AND NATURE OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP (#)(2) PERCENTAGE OF CLASS (3)
The Dow Chemical Company
2030 Dow Center
Midland, Michigan 48674 5,032,430(4) 21.0%
B.C. McCabe Foundation
7624 S. Painter Ave.,
Suite A
Wittier, CA 90602-2313 2,752,641(5) 11.5%
Firstar Investment Research
& Management Company
777 E. Wisconsin Ave.
Milwaukee, WI 53202 2,280,800 9.5%
James D. Shepard 221,134(6) *
Paul M. Pankratz 66,100(7) *
Jon R. Peele 19,500(8) *
Wallace C. Dieckmann 17,159(9) *
Kenneth J. Kerr 16,000(10) *
Thomas C. Hinrichs 15,951(11) *
Ralph W. Boeker 15,000(12) *
Trond Aschehoug 12,450(13) *
48
AMOUNT AND NATURE OF BENEFICIAL
NAME AND ADDRESS OF BENEFICIAL OWNERS(1) OWNERSHIP (#)(2) PERCENTAGE OF CLASS (3)
Louis A. Simpson 10,000 *
John D. Roach 1,000 *
Roger L. Kesseler 200 *
Directors and executive
officers as a group
(15 persons) 394,494(14) 1.6%(15)
* Represents less than one percent.
(1) Except as otherwise indicated, the address of each of the persons named
below is c/o Magma Power Company, 4365 Executive Drive, Suite 900, San
Diego, California 92121.
(2) For purposes of this table, a person is deemed to have "beneficial
ownership" of (i) any security which such person has the right to
acquire within 60 days after April 15, 1994, (ii) any security which is
held by such person's spouse or other immediate family member sharing
such person's household, (iii) securities held in certain trusts,
partnerships and other legal entities affiliated with such person, and
(iv) individual retirement accounts of such person. Beneficial
ownership has been disclaimed by certain of the named persons with
respect to certain of such shareholdings. The amounts set forth under
this column exclude Shares held for the benefit of the named person in
the Company's 401(k) Plan. All information with respect to the
beneficial ownership of the Shares referred to in this table is based
upon filings made by the respective beneficial owners with the
Commission or information provided to the Company by such beneficial
owners.
(3) Unless otherwise noted, the number of Shares outstanding for this
purpose is 24,011,379.
(4) Includes 4,000,005 Shares which were placed in escrow, pursuant to an
escrow agreement dated April 1, 1991 between Dow and Morgan Guaranty
Trust Company of New York, as Escrow Agent, for delivery upon exchanges
of $150,000,000 aggregate principal amount of 5 3/4% Subordinated
Exchangeable Notes Due 2001 of Dow (the "Notes"). The Notes are
exchangeable at any time into Shares at an exchange rate of 26.6667
Shares per $1,000 principal amount of Notes. Dow retains the right to
vote the Shares placed in escrow.
49
(5) Does not include Shares held by Mr. James D. Shepard, a director of the
Company, who is a co-trustee of the B.C. McCabe Foundation.
(6) Does not include Shares owned by B.C. McCabe Foundation for which Mr.
Shepard is a co-trustee, and with regard to which beneficial ownership
is disclaimed. Includes 5,000 Shares initially promised to Mr. Shepard
by the Company's Board in 1987 in connection with his resignation as an
employee of the Company; such Shares vested and were issued to Mr.
Shepard on his 55th birthday in August 1993.
(7) Includes Mr. Pankratz's options to purchase 66,000 Shares.
(8) Includes 4,500 shares of Deferred Stock ("Deferred Shares") which the
Company expected to be granted following the 1994 Annual Stockholders
Meeting if and to the extent that the stockholders approved the 1994
Equity Participation Plan (the "Plan"). Such Deferred Shares will be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such Shares or receive dividends until
vested. Also includes Mr. Peele's options to purchase 15,000 Shares.
(9) Includes 6,000 Deferred Shares which the Company expected to be granted
following the 1994 Annual Stockholders Meeting if and to the extent
that the stockholders approved the Plan. Such Deferred Shares will be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such Deferred Shares or receive
dividends until vested. Also includes Mr. Dieckmann's options to
purchase 11,159 Shares.
(10) Includes 9,000 Deferred Shares which the Company expected to be granted
following the 1994 Annual Stockholders Meeting if and to the extent
that the stockholders approved the Plan. Such Deferred Shares shall be
subject to vesting requirements based on continuing employment. Also
includes 1,000 Deferred Shares which are subject to vesting
requirements based on continuing employment. The holder of such
Deferred Shares is not entitled to vote such Shares or receive
dividends until vested. Also includes Mr. Kerr's options to purchase
5,000 Shares.
(11) Includes 6,000 Deferred Shares which the Company expected to be granted
following the 1994 Annual Stockholders Meeting if and to the extent
that the stockholders approved the Plan. Such Deferred Shares shall be
subject to vesting requirements based on continuing employment, and the
holder is not entitled to vote such Deferred Shares or receive
dividends until vested. Also includes Mr. Hinrichs's options to
purchase 4,084 Shares.
50
(12) Includes 3,000 Deferred Shares which the Company expected to be granted
following the 1994 Annual Stockholders Meeting if and to the extent
that the stockholders approved the Plan. Such Deferred Shares shall be
subject to vesting requirements based on continuing employment and the
holder is not entitled to vote such Deferred Shares or receive
dividends until vested. Also includes Mr. Boeker's options to purchase
10,000 Shares.
(13) Includes 7,200 Deferred Shares which the Company expected to be granted
following the 1994 Annual Stockholders Meeting if and to the extent
that the stockholders approved the Plan. Such Deferred Shares will be
subject to vesting requirements based on continuing employment. Also
includes 2,100 Deferred Shares which are subject to vesting
requirements. The holder of such Deferred Shares is not entitled to
vote or receive dividends until vested. Also includes Mr. Aschehoug's
options to purchase 3,000 Shares.
(14) Includes 32,700 Deferred Shares held by all directors and executive
officers as a group, which are expected to be granted following the
1994 Annual Stockholders Meeting if and to the extent that the
stockholders approved the Plan. Also includes 6,100 outstanding
Deferred Shares. Also includes 114,243 Shares held by all directors
and executive officers as a group. Does not include Shares held by
Dow, which is the employer of directors Knee, Kesseler and Reinhard.
(15) Includes the 39,800 Deferred Shares and the options to purchase 114,243
Shares referred to in Note 14 above. The number of outstanding Shares
for this purpose is 24,164,422.
51
If your Shares are held in the name of a brokerage firm, bank or bank nominee,
only it can execute a Request with respect to your Shares and only upon your
specific instructions. Accordingly, please contact the persons responsible
for your account and instruct them to execute the GREEN Request card.
CECI STRONGLY URGES YOU TO SIGN, DATE AND RETURN TO CECI, IN CARE OF
MACKENZIE PARTNERS, INC., AT THE ADDRESS INDICATED BELOW, THE ENCLOSED GREEN
REQUEST CARD IN ORDER TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE
SPECIAL MEETING.
A REQUEST TO REQUIRE THE PRESIDENT OR SECRETARY TO CALL THE SPECIAL
MEETING IS ONLY EFFECTIVE IF EXPRESSED BY RECORD HOLDERS OWNING AT LEAST A
MAJORITY OF SHARES ISSUED AND OUTSTANDING AND ENTITLED TO VOTE. THE FAILURE
TO EXECUTE A GREEN REQUEST CARD HAS THE SAME EFFECT AS OPPOSING THE CALL OF
THE SPECIAL MEETING AND MAY IMPEDE CONSUMMATION OF THE OFFER.
Questions and requests for assistance in completing or delivering Request
cards may be directed to MacKenzie Partners, Inc. at the following address and
telephone numbers:
MacKenzie Partners, Inc.
156 Fifth Avenue
New York, New York 10010
(212) 959-5500 (call collect)
or
Call Toll Free (800) 322-2885
1
[FRONT OF REQUEST CARD]
REQUEST SOLICITATION
MAGMA POWER COMPANY
THIS REVOCABLE REQUEST IS SOLICITED BY
CALIFORNIA ENERGY COMPANY, INC.
CE ACQUISITION COMPANY, INC.
The undersigned, acting with regard to all shares of common stock, par
value $0.10 per share ("Shares"), of Magma Power Company, a Nevada corporation
(the "Company"), which the undersigned is entitled to vote as of November 7,
1994, hereby requests the taking of the action described below.
The undersigned hereby requests:
That the President or the Secretary of the Company be required to
call a special meeting (the "Special Meeting") of the stockholders
of the Company pursuant to Article I, Section 2, of the Company's
Restated Bylaws, as amended, to consider and vote on the "Special
Meeting Proposals" described in the Request Solicitation Statement
of California Energy Company, Inc. and CE Acquisition Company, Inc.,
dated November __, 1994 under the heading "THE SPECIAL MEETING
PROPOSALS". The foregoing includes a request that the record date
for the Special Meeting and the date of the Special Meeting be
designated by CECI on behalf of the person executing this Request
Card.
/ / Request / / Withhold Request / / Abstain
California Energy Company, Inc. strongly recommends that you REQUEST the
preceding action.
2
[BACK OF REQUEST CARD]
IF A GREEN REQUEST CARD IS EXECUTED AND RETURNED BUT NO INDICATION IS
MADE AS TO WHAT ACTION IS TO BE TAKEN, IT WILL BE DEEMED TO CONSTITUTE A
REQUEST THAT THE PRESIDENT OR SECRETARY OF THE COMPANY BE REQUIRED TO CALL THE
SPECIAL MEETING AND THAT THE RECORD DATE FOR THE SPECIAL MEETING AND THE DATE
OF THE SPECIAL MEETING BE DESIGNATED BY CECI.
Dated: _____________________ _____, 1994
___________________________________
Signature
___________________________________
Signature (if jointly held)
Title:__________________________________
Please sign exactly as your name appears hereon.
When shares are held by joint tenants, both
should sign. When signing as an attorney,
executor, administrator, trustee or guardian,
give full title as such. If a corporation, sign
in full corporate name by president or other
authorized officer. If a partnership, sign in
partnership name by authorized person.
PLEASE SIGN, DATE AND MAIL PROMPTLY IN THE POSTAGE-PAID ENVELOPE ENCLOSED.