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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-1
AMENDMENT NO. 7
(TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934)
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NEW YORK STATE ELECTRIC & GAS CORPORATION
(Subject Company)
CALENERGY COMPANY, INC.
CE ELECTRIC (NY), INC.
(Bidder)
COMMON STOCK, PAR VALUE $6.66 2/3 PER SHARE
(Title of Class of Securities)
649840105
(CUSIP Number of Class of Securities)
---------------
STEVEN A. MCARTHUR, ESQ.
SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY
CALENERGY COMPANY, INC.
302 SOUTH 36TH STREET, SUITE 400
OMAHA, NEBRASKA 68131
(402) 341-4500
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications on Behalf of Bidder)
Copies to:
PETER J. HANLON, ESQ.
MICHAEL A. SCHWARTZ, ESQ.
WILLKIE FARR & GALLAGHER
ONE CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 821-8000
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CalEnergy Company, Inc., a Delaware corporation ("CalEnergy"), and CE
Electric (NY), Inc., a New York corporation and a wholly owned subsidiary of
CalEnergy (the "Purchaser"), hereby amend and supplement their Statement on
Schedule 14D-1 ("Schedule 14D-1") filed with the Securities and Exchange
Commission (the "Commission") on July 18, 1997, as amended by Amendment Nos. 1,
2, 3, 4, 5 and 6, with respect to the Purchaser's offer to purchase 6,540,670
shares of Common Stock, par value $6.66-2/3 per share (the "Shares"), of New
York State Electric & Gas Corporation, a New York corporation ("NYSEG"), upon
the terms and subject to the conditions set forth in the Offer to Purchase,
dated July 18, 1997 (the "Offer to Purchase") and the related Letter of
Transmittal.
Unless otherwise indicated herein, each capitalized term used but not
defined herein shall have the meaning assigned to such term in the Schedule
14D-1.
Item 3. Past Contacts, Transactions or Negotiations with the Subject Company.
The information set forth in Item 3(b) is hereby amended and
supplemented by the following:
The Purchaser has amended and supplemented the Offer to
Purchase pursuant to a Supplement, dated August 7,1997 (the
"Supplement"), to the Offer to Purchase, a copy of which is
attached hereto as Exhibit (a)(17). The information set forth
in Section 1 "Company's Board of Directors Rejects Offer and
Grants Severance Benefits to Management in Response to Offer"
of the Supplement is incorporated herein by reference.
Item 5. Purpose of the Offer and Plans or Proposals of the Bidder.
The information set forth in Items 5(a), (c) and (e) is hereby amended
and supplemented by the following:
The information set forth in the Introduction, Section 2 "The
Offer; The Proposed Merger", Section 3 "Financing of the
Proposed Merger or the Subsequent Offer", Section 4
"Subsequent Regulatory Approvals in Connection With a
Merger", Section 6 "Request for Shareholder Lists" and
Section 8 "Proposed Reincorporation of CalEnergy to New York"
of the Supplement is incorporated herein by reference.
Item 7. Contracts, Arrangements, Understandings or Relationships with Respect
to the Subject Company's Securities.
The information set forth in Item 7 is hereby amended and supplemented
by the following:
The information set forth in Section 3 "Financing of the
Proposed Merger or the Subsequent Offer" and Section 6
"Request for Shareholder Lists" of the Supplement is
incorporated herein by reference.
Item 10. Additional Information.
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The information set forth in Item 10(a) is hereby amended and
supplemented by the following:
The information set forth in Section 1 "Company's Board of
Directors Rejects Offer and Grants Severance Benefits to
Management in Response to Offer" of the Supplement is
incorporated herein by reference.
The information set forth in Item 10(b)-(c) is hereby amended and
supplemented by the following:
The information set forth in the Introduction and Item 4
"Subsequent Regulatory Approvals in Connection With a Merger"
of the Supplement is incorporated herein by reference.
The information set forth in Item 10(e) is hereby amended and
supplemented by the following:
The information set forth in Section 5 "Certain Legal
Matters", Section 6 "Request for Shareholder Lists" and
Section 7 "Saranac Partners" of the Supplement is
incorporated herein by reference.
The information set forth in Item 10(f) is hereby amended and
supplemented by the following:
The information set forth in the Supplement is incorporated
herein by reference in its entirety.
Item 11. Material To Be Filed as Exhibits.
(a)(17) Supplement to Offer to Purchase, dated August 7, 1997.
(c)(1) Letter from Cede & Co. to New York State Electric & Gas
Corporation, dated August 7, 1997.
(c)(2) Indemnification Agreement, dated August 6, 1997, between
CalEnergy Company, Inc. and National Financial Services
Corporation.
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Signatures
After due inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: August 7, 1997
CE ELECTRIC (NY), INC.
By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur, Esq.
Senior Vice President
General Counsel and Secretary
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
-------------------------------
Steven A. McArthur, Esq.
Senior Vice President
General Counsel and Secretary
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EXHIBIT INDEX
Page No.
Exhibit in Sequentially
No. Description Numbered Schedule
- ------- ----------- -----------------
(a)(17) Supplement to Offer to Purchase, dated August 7, 1997.
(c)(1) Letter from Cede & Co. to New York State Electric & Gas
Corporation, dated August 7, 1997.
(c)(2) Indemnification Agreement, dated August 6, 1997, between
CalEnergy Company, Inc. and National Financial Services
Corporation.
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SUPPLEMENT TO OFFER TO PURCHASE FOR CASH
6,540,670 SHARES OF COMMON STOCK
OF
NEW YORK STATE ELECTRIC & GAS CORPORATION
AT
$24.50 NET PER SHARE
BY
CE ELECTRIC (NY), INC.
A WHOLLY OWNED SUBSIDIARY OF
CALENERGY COMPANY, INC.
- -------------------------------------------------------------------------------
THE OFFER, THE PRORATION PERIOD AND WITHDRAWAL RIGHTS WILL EXPIRE
AT 12:00 MIDNIGHT, NEW YORK CITY TIME, ON THURSDAY, AUGUST 14, 1997, UNLESS THE
OFFER IS EXTENDED.
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THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY OWNED BY THE PURCHASER AND ITS
AFFILIATES, REPRESENTS AT LEAST 9.9% OF THE SHARES OUTSTANDING. THE OFFER IS
ALSO SUBJECT TO CERTAIN OTHER TERMS AND CONDITIONS CONTAINED IN THIS OFFER TO
PURCHASE.
THE OFFER IS NOT CONDITIONED UPON THE PURCHASER OBTAINING FINANCING.
--------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of his Shares
should either (1) complete and sign the enclosed Letter of Transmittal or a
facsimile thereof in accordance with the instructions in the Letter of
Transmittal, have his signature thereon guaranteed if required by Instruction 1
of the Letter of Transmittal and mail or deliver the Letter of Transmittal or
such facsimile with his certificates evidencing his Shares and any other
required documents to the Depositary, or follow the procedure for book-entry
transfer of Shares set forth in Section 4 of the Offer to Purchase dated July
18, 1997 or (2) request his broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for him. Shareholders having Shares
registered in the name of a broker, dealer, commercial bank, trust company or
other nominee must contact such broker, dealer, commercial bank, trust company
or other nominee if they desire to tender their Shares so registered.
A shareholder who desires to accept the Offer and tender Shares and
whose certificates for such Shares are not immediately available, or who cannot
comply with the procedure for book-entry transfer on a timely basis, should
tender such Shares by following the procedures for guaranteed delivery set
forth in Section 4 of the Offer to Purchase dated July 18, 1997.
Questions and requests for assistance may be directed to the
Information Agent or to the Dealer Managers at their respective addresses and
telephone numbers set forth on the back cover of this Supplement. Requests for
additional copies of this Supplement, the Offer to Purchase dated July 18,
1997, the Letter of Transmittal and other tender offer materials may be
directed to the Information Agent or to brokers, dealers, commercial banks or
trust companies.
The Dealer Managers for the Offer are:
LEHMAN BROTHERS CREDIT SUISSE FIRST BOSTON
August 7, 1997
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TABLE OF CONTENTS
PAGE
----
INTRODUCTION ............................................................
1. Company's Board of Directors Rejects Offer and Grants
Severance Benefits to Management in Response to Offer ...............
2. The Offer; The Proposed Merger ......................................
3. Financing of the Proposed Merger or the Subsequent Offer ............
4. Subsequent Regulatory Approvals in Connection with a
Merger ..............................................................
5. Certain Legal Matters ...............................................
6. Request for Shareholder Lists .......................................
7. Saranac Partners ....................................................
8. Proposed Reincorporation of CalEnergy to New York ...................
9. Miscellaneous .......................................................
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TO ALL HOLDERS OF SHARES OF COMMON STOCK OF NEW YORK STATE
ELECTRIC & GAS CORPORATION:
INTRODUCTION
The following information amends and supplements the Offer to Purchase
dated July 18, 1997 (the OOffer to PurchaseO) of CE Electric (NY), Inc., a New
York corporation (the OPurchaserO) and wholly owned subsidiary of CalEnergy
Company, Inc., a Delaware corporation (OCalEnergyO), pursuant to which the
Purchaser is offering to purchase 6,540,670 shares (OSharesO) of common stock,
par value $6.66 2/3 per share (OCommon StockO), of New York State Electric &
Gas Corporation, a New York corporation (the OCompanyO), at $24.50 per Share,
net to the seller in cash, without interest thereon, upon the terms and subject
to the conditions set forth in the Offer to Purchase and in the related Letter
of Transmittal (which together constitute the OOfferO).
Except as otherwise set forth in this Supplement, the terms and
conditions previously set forth in the Offer to Purchase remain applicable in
all respects to the Offer, and this Supplement should be read in conjunction
with the Offer to Purchase. Unless the context requires otherwise, capitalized
terms used herein but not otherwise defined herein shall have the meanings
ascribed to them in the Offer to Purchase.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH, TOGETHER WITH SHARES BENEFICIALLY OWNED BY THE PURCHASER AND ITS
AFFILIATES, REPRESENTS AT LEAST 9.9% OF THE SHARES OUTSTANDING. The waiting
period with respect to the Offer under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, expired as of 12:00 midnight, New York
City time on August 1, 1997.
1. COMPANY'S BOARD OF DIRECTORS REJECTS OFFER AND GRANTS SEVERANCE
BENEFITS TO MANAGEMENT IN RESPONSE TO OFFER. On July 30, 1997, the Company
announced that its Board of Directors had recommended that the holders of
Shares reject the Offer. At the same time, the Company's Board of Directors
awarded members of management a variety of benefits, including severance and
tax gross-up provisions. The actions taken by the Company's Board included the
following: (i) approval of amendments to existing severance agreements which
increase severance for executive officers and vice presidents, as well as
covenants to make additional payments to these officers for federal excise
taxes imposed on any payments; (ii) approval of amendments to these agreements
(including the employment agreement of Mr. Wesley W. von Schack, the Chairman,
President and Chief Executive Officer of the Company) which allow the officers
to resign solely as a result of alterations in duties which are attributable to
the Company no longer being a public company; (iii) adoption of a new Retention
Program setting aside severance to other employees not covered by these
agreements; (iv) approval of a reduction in the scope of Mr. von Schack's
post-employment noncompetition covenant so that it will apply only to
competitors in Maryland, New Jersey, New York, and Pennsylvania; (v) approval
of amendments to the Company's existing severance trust to require immediate
funding of all of the increased severance benefits and the Retention Program;
(vi) approval of the immediate funding of this trust and a directors' trust
with more than $52 million for payment of severance, retention and other
benefits; and (vii) approval of amendments to the definition of "change in
control" in all the above-referenced arrangements to include any change in a
majority of the Board that results from a proxy contest.
2. THE OFFER; THE PROPOSED MERGER. The purpose of the Offer is to
enable the Purchaser to acquire that number of Shares which, together with
Shares currently beneficially owned by the Purchaser and its affiliates, will
represent 9.9% of the total number of Shares outstanding. In order for the
Purchaser to acquire more than 9.9% of the outstanding Shares, the Purchaser
will be required to obtain certain regulatory approvals, including approvals
from the Public Service Commission of the State of New York, the Pennsylvania
Public Utility Commission, the Federal Energy Regulatory Commission and the
Nuclear Regulatory Commission. See Sections 11 and 15 of the Offer to Purchase
and Section 4 of this Supplement.
Following completion of the Offer, the Purchaser believes it would be
the single largest shareholder of the Company. If the Company were to propose a
transaction requiring a vote of shareholders following completion of the Offer
and if CalEnergy and the Purchaser were to oppose such a transaction, the
likelihood of
<PAGE>
obtaining shareholder approval of such a transaction would be diminished. If
the Purchaser were to own 9.9% of the Common Stock and to oppose a measure
requiring the approval of 66 2/3% of the outstanding Common Stock, that
approval would require the assent of approximately 74% of the Common Stock not
owned by the Purchaser.
3. FINANCING OF THE PROPOSED MERGER OR THE SUBSEQUENT OFFER. On August
6, 1997, CalEnergy announced that it had executed fully underwritten financing
commitments for a consensual merger in which each outstanding Share would be
exchanged for $27.50 in cash (the "Proposed Merger") or for a Subsequent Offer
and any related consensual merger (at a price up to $27.50 per Share in cash)
(the "Subsequent Merger") that may be consummated subsequent to the pending
Offer.
The Purchaser estimates that the total amount of funds required to
purchase the Shares in the Offer will be approximately $165 million. The
Purchaser will obtain such funds through a capital contribution by CalEnergy
from CalEnergy's available cash.
The Purchaser estimates that, following consummation of the Offer,
funds in an aggregate amount of approximately $1.7 billion would be required to
purchase the Shares in the Proposed Merger or in the Subsequent Offer and the
Subsequent Merger at a cash price of $27.50 per Share. This estimate is based
on the number of Shares outstanding as reported in the Company's Quarterly
Report on Form 10-Q for the fiscal quarter ended March 31, 1997. The Purchaser
expects to obtain such funds through various borrowings by the Purchaser from
financial institutions (as described below) and through capital contributions
to the Purchaser by CalEnergy. CalEnergy presently expects that the source of
funds for its capital contributions to the Purchaser will include the proceeds
of the Offerings (as defined below), various borrowings by CalEnergy (including
borrowings under the credit facilities described below) and CalEnergy's
corporate funds. CalEnergy presently plans, subject to market conditions, to
issue certain equity, equity-related and debt securities in public and/or
private offerings (the "Offerings") on a prompt basis, the equity and
equity-related component of which is not currently expected to exceed
approximately $550 million.
The Purchaser Credit Facilities. CalEnergy and the Purchaser have
entered into a senior bank financing commitment letter agreement with Credit
Suisse First Boston (the "CSFB Commitment Agreement") providing for a binding
commitment by CSFB to provide up to $1 billion under a term loan and revolving
credit facility to the Purchaser in connection with consummating the Proposed
Merger or such a Subsequent Offer and the Subsequent Merger, to provide for the
payment of transaction expenses and to provide working capital for the
Purchaser and the Company.
The CSFB Commitment Agreement contemplates (i) a 5-year term loan
facility of up to $650 million (the "Term Loan Facility"); and (ii) a 5-year
revolving credit facility of up to $350 million (the "Revolving Credit
Facility" and, together with the Term Loan Facility, the "Purchaser Credit
Facilities").
The proceeds of the Purchaser Credit Facilities shall be used to (i)
finance the acquisition of Shares pursuant to the Proposed Merger or the
Subsequent Offer and the Subsequent Merger at a price of up to $27.50 per
Share; (ii) refinance existing indebtedness of the Company after giving effect
to the Proposed Merger or the Subsequent Merger; (iii) pay related fees and
expenses in connection with the Proposed Merger or the Subsequent Offer and the
Subsequent Merger; and (iv) provide for the working capital and general
corporate needs of the Purchaser, the Company and their subsidiaries.
The Purchaser Credit Facilities will be secured by (i) the capital
stock of the Purchaser; (ii) the Shares owned by the Purchaser or any of its
affiliates; and (iii) certain other properties and assets of the Purchaser.
Interest on loans borrowed under the Purchaser Credit Facilities will
be payable, at the election of the borrowers, at either a Base Rate (the higher
of CSFB's announced prime commercial lending rate or the daily federal funds
rate plus 0.50%) or Eurodollar Rate (the rate for U.S. Dollar deposits as
reported by the British
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<PAGE>
Bankers' Association as adjusted for applicable reserves), plus interest
margins determined according to a ratings grid based on the Purchaser's senior
unsecured debt rating.
CSFB's commitment under the Purchaser Credit Facilities will terminate
on (x) October 15, 1997 unless definitive credit documentation mutually
acceptable to the parties has been executed and delivered, and (y) December 31,
1998, unless the initial borrowing thereunder has occurred on or prior to such
date.
The obligations of CSFB under the CSFB Commitment Agreement are
subject, among other things, to the following conditions: (i) the preparation,
execution and delivery of mutually acceptable loan documentation; (ii) the
absence of certain material adverse changes; (iii) CSFB's reasonable
satisfaction with its due diligence with respect to the Proposed Merger or the
Subsequent Offer and the Subsequent Merger; (iv) not less than 66-2/3% of the
Shares being owned by the Purchaser or having been tendered and not withdrawn
pursuant to the Subsequent Offer; and (v) execution of satisfactory
documentation providing for the Proposed Merger or the Subsequent Offer and the
Subsequent Merger.
The definitive documentation relating to the Purchaser Credit
Facilities will contain representations, warranties, covenants, events of
default and conditions customary for transactions of this size and type.
CalEnergy has agreed to pay certain fees to CSFB with respect to the Purchaser
Credit Facilities which, in the aggregate, are not material to the transactions
described herein.
The Amended and Restated $250 Million Credit Facility. CalEnergy has
entered into a senior bank financing commitment letter agreement with CSFB and
Lehman Commercial Paper, Inc. ("Lehman") providing binding commitments to amend
and restate its existing $100 million revolving credit facility to provide for
an unsecured revolving loan and standby letter of credit facility in the
aggregate amount of $250 million (the "$250 Million Credit Facility").
The term of the $250 Million Credit Facility will be three years,
extendible on the second and third anniversaries of the closing for a period of
one year, at CalEnergy's request with the consent of the lending banks.
Loans under the $250 Million Credit Facility will bear interest, at
CalEnergy's election, at either (i) a Base Rate equal to the higher of the rate
announced from time to time by CSFB as its prime commercial lending rate or the
daily federal funds rate plus .50%, or (ii) a Eurodollar Rate (the rate for
U.S. Dollar deposits as reported by the British Bankers' Association as
adjusted for applicable reserves), plus, in each case, an interest margin based
on the credit rating of CalEnergy's senior unsecured long-term debt.
The commitment to provide the $250 Million Credit Facility is subject
to customary conditions for a facility of this size and type, including without
limitation, (a) the preparation, execution and delivery of mutually acceptable
loan and credit documentation; and (b) the absence of any material adverse
change in the business, assets, operations, properties, prospects or condition
(financial or otherwise) of CalEnergy and its subsidiaries, taken as a whole,
since December 31, 1996. The commitment will terminate on October 15, 1997
unless definitive credit documentation mutually acceptable to the parties has
been executed and delivered.
The definitive documentation relating to the $250 Million Credit
Facility will contain representations, warranties, covenants (including,
without limitation, restrictions on the use of net cash proceeds from asset
dispositions, limitations on the incurrence of debt and restrictions on
acquisitions), events of default and conditions customary for transactions of
this size and type. CalEnergy has agreed to pay certain fees to CSFB and Lehman
with respect to the $250 Million Credit Facility which, in the aggregate, are
not material to the transactions described herein.
The New $150 Million Credit Facility. CalEnergy has entered into a
senior bank financing commitment letter agreement with CSFB and Lehman
providing a binding commitment for an unsecured revolving credit facility in
the aggregate amount of $150 million (the "$150 Million Credit Facility").
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The term of the $150 Million Credit Facility will be three years,
extendible on the second and third anniversaries of the closing for a period of
one year, at CalEnergy's request with the consent of the lending banks.
Interest on loans under the $150 Million Credit Facility will be
payable at spreads which vary depending on CalEnergy's senior unsecured
long-term debt ratings. The spreads vary from 0.75% to 2.25% above Eurodollar
Rate (the rate for U.S. Dollar deposits as reported by the British Bankers'
Association as adjusted for applicable reserves) or from 0.00% to 1.00% above
Base Rate (the higher of CSFB's announced prime commercial lending rate or the
daily federal funds rate plus 0.50%). CalEnergy may elect to incur loans at
either Eurodollar Rate or Base Rate.
The commitment to provide the $150 Million Credit Facility is subject
to customary conditions for a facility of this size and type, and conditions to
be agreed upon, if applicable, including without limitation, (a) the
preparation, execution and delivery of mutually acceptable loan and credit
documentation; and (b) the absence of any material adverse change in the
business, assets, operations, properties, prospects or condition (financial or
otherwise) of CalEnergy and its subsidiaries, taken as a whole, since December
31, 1996. The commitment will terminate on August 5, 1998, unless definitive
credit documentation mutually acceptable to the parties has been executed and
delivered.
The definitive documentation relating to the $150 Million Credit
Facility will contain representations, warranties, covenants (including,
without limitation, restrictions on the use of net cash proceeds from asset
dispositions, limitations on the incurrence of debt and restrictions on
acquisitions), events of default and conditions customary for transactions of
this size and type. CalEnergy has agreed to pay certain fees to CSFB and Lehman
with respect to the $150 Million Credit Facility which, in the aggregate, are
not material to the transactions described herein.
The Bridge Facility. CalEnergy presently plans, subject to market
conditions, to effect the Offerings on a prompt basis. To the extent that the
net proceeds of the Offerings result in less than $500 million of net proceeds
to CalEnergy, CalEnergy would then require bridge loan financing. In order to
provide for such bridge financing, if required, CalEnergy has entered into a
fully underwritten bridge loan financing commitment letter agreement with CSFB
and LB I Group Inc. ("LBI") providing for a binding commitment by CSFB and LBI
to provide an unsecured bridge loan facility for an amount of up to
$500,000,000, less the amount of net proceeds, if any, raised in Offerings (the
"Bridge Facility").
The commitment shall terminate 364 days after the execution of the
Bridge Facility commitment letter agreement unless the lenders shall have
extended the term in writing. Interest on the bridge loans, if any, borrowed
under the Bridge Facility would be payable at a rate per annum equal to the 3
Month Adjusted LIBOR (LIBOR plus statutory reserves) plus the "Applicable
Spread". If the Bridge Facility were to be funded, then the Applicable Spread
would initially be 600 basis points and would increase by 100 basis points at
the end of the six month period following the funding of the Bridge Facility,
if applicable, and by an additional 50 basis points at the end of each three
month period thereafter, if applicable, until maturity, subject to certain
limitations. In the event that the LIBOR rate cannot be determined or a LIBOR
rate loan may not be lawfully maintained by a lender, then interest shall
accrue at the Base Rate (the higher of CSFB's announced prime commercial
lending rate less 200 basis points and the federal funds effective rate plus 50
basis points) plus the Applicable Spread.
If the Bridge Facility were to be funded, then the bridge loans would
mature 364 days thereafter.
CSFB's and LBI's commitment to provide the Bridge Facility is subject
to certain customary conditions including (i) the execution of satisfactory
documentation providing for the Proposed Merger or the Subsequent Offer and the
Subsequent Merger; (ii) not less than 66-2/3% of the Shares being owned by the
Purchaser or having been tendered and not withdrawn pursuant to the Subsequent
Offer; (iii) the absence of any material adverse change in the business,
assets, operations, properties, prospects or condition (financial or otherwise)
of CalEnergy and its subsidiaries, taken as a whole, or the Company and its
subsidiaries, taken as a whole, since December 31, 1996; and (iv) mutually
satisfactory definitive documentation being executed. The definitive
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<PAGE>
documentation relating to the Bridge Facility is expected to contain
representations, warranties, covenants, events of default and conditions
customary for transactions of this size and type. CalEnergy has agreed to pay
certain fees to CSFB and LBI with respect to the Bridge Facility which, in the
aggregate, are not material to the transactions described herein.
Miscellaneous. The foregoing description of each of the Bridge
Facility commitment letter agreement, the $150 Million Credit Facility
commitment letter agreement, the $250 Million Credit Facility commitment letter
agreement and the CSFB Commitment Agreement is qualified in its entirety by
reference to the text thereof filed as an exhibit to CalEnergy's Current Report
on Form 8-K dated August 6, 1997 filed with the Commission, copies of which may
be obtained from the offices of the Commission in the manner set forth in
Section 8 of the Offer to Purchaser.
4. SUBSEQUENT REGULATORY APPROVALS IN CONNECTION WITH A MERGER.
Following consummation of the Offer, the Purchaser intends to seek regulatory
approvals permitting the acquisition and ownership of the Common Stock and the
merger of the Company into the Purchaser in accordance with the Proposed Merger
or the Subsequent Offer and the Subsequent Merger (collectively referred to as
the "Merger") and, after receiving such approvals, to acquire all of the
outstanding Shares it does not then own. See Section 11 of the Offer to
Purchase. The regulatory approvals that would be needed for the Merger are
described below.
New York Public Service Commission. Approval of the New York Public
Service Commission ("PSC") will be required under Sections 69 and 70 of the New
York Public Service Law ("PSL") for the Merger. The applicable standard applied
by the PSC under each section is whether the Merger will be in the public
interest. In making this determination, CalEnergy and the Purchaser believe the
PSC will consider the impact of the Merger on rates, competition and quality of
service. The Purchaser presently expects that it will file an application
addressing each of these factors in August.
Pennsylvania Public Utility Commission. The Company holds a
certificate of public convenience and necessity from the Pennsylvania Public
Utility Commission ("Pennsylvania PUC") for the Homer City generation facility
that the Company owns jointly with Pennsylvania Electric Company. As a
consequence, the Purchaser will file an application requesting that the Merger
be approved by the Pennsylvania PUC as being in the public interest under
Section 1102 of the Pennsylvania Consolidated Statutes (66 Pa. Cons. Stat. ss.
1102 (1996)). The Purchaser presently expects that it will file an application
addressing this standard.
Federal Power Act. The Federal Energy Regulatory Commission ("FERC")
has determined that its approval is required under Section 203 of the Federal
Power Act ("FPA") before any person can acquire a controlling interest in a
public utility. Therefore FERC's approval will be required before the Purchaser
can, after consummation of the Offer, acquire the remaining shares of the
Common Stock of the Company or merge the Company into the Purchaser. Under
Section 203 of the FPA, FERC must approve a proposed merger if it finds that it
will be consistent with the public interest. In making this determination, FERC
is expected to consider the effect of the Merger on: (1) competition; (2)
rates; and (3) regulation. The Purchaser will file an application addressing
each of these factors.
Atomic Energy Act. NYSEG holds a possession-only interest in the
operating license from the Nuclear Regulatory Commission ("NRC") for the Nine
Mile Point 2 nuclear plant. Niagara Mohawk Power Corporation holds the NRC
license to operate the plant. CalEnergy will be required under the pertinent
provision of the Atomic Energy Act of 1954, 42 U.S.C. ss. 2234, to obtain the
approval of the NRC for the transfer of control over NYSEG's possession-only
license. As the statute has been implemented by the NRC in its regulations, 10
CFR ss. 50.80, CalEnergy must demonstrate that it is not owned, controlled or
dominated by foreign interests, that it possesses the requisite technical and
financial qualifications to hold the license and that the transfer does not
raise any considerations inconsistent with the antitrust laws. A conforming
license amendment reflecting the transfer of control may also be issued by the
NRC. CalEnergy will file with the NRC an application for approval of the
proposed transaction, addressing each of the factors identified above.
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<PAGE>
General. CalEnergy and the Purchaser expect that the foregoing
approval processes should take from 6 to 12 months, although there can be no
assurance these regulatory approvals will be obtained successfully or within
that time frame.
Others. Based upon an examination of publicly available information
with respect to the Company, the Purchaser is not aware of any other regulatory
approval that would be required prior to the acquisition of the remaining
outstanding shares of the Common Stock. However, there may be a requirement to
obtain approvals of the transfer of various licenses, franchises or other
permits. The Purchaser anticipates that such approvals should be granted in the
ordinary course of business. The Purchaser presently intends to take such
actions with respect to any additional approvals that may be needed as will
enable it to acquire the remaining outstanding shares of the Common Stock
subsequent to the completion of the Offer. In addition, subsequent to
completion of the Offer and prior to acquiring additional Shares of the
Company, CalEnergy expects to dispose of a portion of its current interests in
certain independent generating plants that are qualifying facilities ("QFs")
under the Public Utility Regulatory Policies Act of 1978 in order to preserve
the QF status of such facilities. Any such dispositions are not expected to
have a material adverse effect on CalEnergy's consolidated financial condition.
5. CERTAIN LEGAL MATTERS.
Litigation Initiated by the Company. On July 30, 1997, the Company
commenced an action against CalEnergy and the Purchaser in the United States
District Court for the Southern District of New York. On August 1, 1997, the
Company filed an amended complaint in this action. The action seeks preliminary
and permanent injunctive relief against the Offer on the grounds, among other
things, that CalEnergy has allegedly breached a confidentiality agreement dated
May 6, 1997 between the Company and CalEnergy relating to a potential gas
pipeline extension opportunity which the Company's amended complaint
characterizes as a gas joint venture (the "Confidentiality Agreement") and that
the Offer materials contain allegedly misleading and inadequate disclosures,
thereby allegedly violating the federal securities laws. In addition, the
action seeks an order divesting any and all securities of the Company acquired
by CalEnergy and its affiliates while in possession of such alleged
confidential information.
More particularly, with respect to the alleged breach of the
Confidentiality Agreement by CalEnergy, the amended complaint asserts that, in
determining to embark on its plan to acquire the Company, CalEnergy improperly
used allegedly confidential information provided to it by the Company in the
spring of 1997 in connection with the negotiation of a potential gas joint
venture between the Company and CalEnergy and that this alleged improper use of
the Company's confidential information violates the terms of the
Confidentiality Agreement. As a result, the amended complaint asserts that
CalEnergy has breached the Confidentiality Agreement, and the Offer and
CalEnergy's takeover plan are the unlawful products of the breach. The amended
complaint also asserts that by pursuing the acquisition of the Company and
improperly using the allegedly confidential information, CalEnergy has
allegedly breached a purported fiduciary duty owed to the Company arising from
their consideration of the gas joint venture.
With respect to alleged disclosure violations, the amended complaint
asserts that the Offer is being made on the basis of inadequate and misleading
disclosures in violation of Sections 14(d) and (e) of the Securities Exchange
Act of 1934 and the rules and regulations promulgated thereunder. It is alleged
that these purported inadequate and misleading disclosures include: (a) the
alleged failure to disclose that CalEnergy has purported significant conflicts
of interest vis-a-vis the Company stemming from the Company's entry into the
Saranac Power Purchase Agreement (see Section 7 of this Supplement) with a
partnership alleged to be now controlled by CalEnergy and which agreement the
Company considers "extremely onerous"; (b) the alleged failure to disclose the
alleged impact of the purported conflict of interest arising from the Saranac
Power Purchase Agreement will have on CalEnergy's ability to obtain required
regulatory approvals; (c) the alleged failure to disclose what, if any, plans
CalEnergy has with respect to modifying the terms and conditions of the Saranac
Power Purchase Agreement if it acquires control of the Company; (d) the alleged
failure to disclose certain specific terms of the Saranac Power Purchase
Agreement and the impact on CalEnergy's financial condition if the Company's
legal challenges to the Saranac Power Purchase Agreement were successful; (e)
the
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<PAGE>
alleged failure to disclose the purported confidential information concerning
the potential gas joint venture which the amended complaint alleges Purchaser
and CalEnergy are not at liberty to disclose or otherwise make alleged further
use of in connection with the Offer; (f) the alleged failure to disclose
material facts concerning purported obstacles to obtaining regulatory
approvals, which allegedly include the purported conflict of interest arising
from the Saranac Power Purchase Agreement, pending litigation against certain
partnerships in California which CalEnergy has an approximate 50% ownership
interest which was brought by Southern California Edison Company ("Edison"),
and purported "excessive debt and leverage" that would result from the
financing of Purchaser and CalEnergy's acquisition of the Company; (g) the
purported failure to disclose the lack of (or terms of) required regulatory,
financing and operational plans for the Company alleged to be needed to obtain
regulatory approvals; (h) the purported failure to disclose full and complete
information regarding the feasibility of obtaining, and the terms and
conditions of, financing for the acquisition of the Company, how CalEnergy will
pay for the financing and what the financial impact of the acquisition on
CalEnergy and the Company will be; (i) the alleged failure to disclose whether
CalEnergy plans to lower rates by 10% and, if so, the impact of that reduction
on CalEnergy's payment of the debt service for the acquisition financing; (j)
the alleged failure to disclose financial impact on CalEnergy and its ability
to finance the acquisition of any divestitures required as a result of
CalEnergy's acquiring more than a 9.9% interest in the Company; (k) the alleged
failure to disclose the expiration dates of certain contracts to produce
electricity by independent generating facilities in which CalEnergy has various
ownership interests and the alleged financial impact on CalEnergy of the
expiration of such contracts; (l) the alleged failure to disclose, contrary to
CalEnergy's statements that it welcomes full competition in the electrical
energy market, that CalEnergy allegedly has substantial interests in
anticompetitive regulatory practices pursuant to certain "PURPA" contracts
which are purportedly material to its financial condition; (m) the alleged
failure to disclose purported adverse consequences to the Company which
allegedly would result from Purchaser and CalEnergy's acquisition of 9.9% of
the Company's stock; (n) the alleged misleading representations concerning
CalEnergy's ability to obtain control of the Company's board of directors
through removal of the board by means of a consent or proxy solicitation; (o)
the alleged failure to disclose CalEnergy's alleged improper use of
confidential information and alleged discussions between the Company and
CalEnergy with respect to the Saranac Power Purchase Agreement and the
potential gas joint venture; (p) the alleged misrepresentation of CalEnergy's
pre-Offer discussions with the Company; and (q) the alleged failure to disclose
the purported consequences of any impediments to CalEnergy's reincorporation in
New York.
The Purchaser and CalEnergy believe the lawsuit has no merit and the
Purchaser and CalEnergy intend to vigorously contest these allegations and the
requested relief.
Litigation Initiated by the Company's Shareholders Against the
Company. The Company's Schedule 14D- 9 dated July 30, 1997 identifies the
following shareholder lawsuits: On July 17, 1997, a class action was commenced
in the Supreme Court of the State of New York, Broome County, against the
Company and its directors, entitled MORTIMER SCHULMAN, ET AL. , V. WESLEY W.
VON SCHACK, ET AL., Index No. 1997001655 (the "Schulman Action"). On July 22,
1997, a class action was commenced in the Supreme Court of the State of New
York, New York County, against the Company and Mr. Von Schack, entitled MALCOLM
ROSENWALD V. NEW YORK STATE ELECTRIC & GAS CORPORATION, ET AL, Index No.
97-603715 (the "Rosenwald Action"). On July 24, 1997, a class action was
commenced in the Supreme Court of the State of New York, New York County,
against the Company and its directors, entitled CARMINE S. CASELLA V. NEW YORK
STATE ELECTRIC & GAS CORP., ET AL., Index No. 97-112854 (the "Casella Action").
On July 25, 1997, a class action was commenced in the Supreme Court of the
State of New York, Kings County, against the Company and its directors,
entitled HOWARD LASKER, ET AL. V. WESLEY W. VON SCHACK, ET AL., Index No.
24812/1997 (the "Lasker Action" and, collectively with the Schulman Action, the
Rosenwald Action and the Casella Action, the "Shareholder Actions").
In addition to the class actions brought against the Company and the
Company's Board of Directors described in the Company's Schedule 14D-9 dated
July 30, 1997, Purchaser and CalEnergy are aware of two additional shareholder
class actions against the Company as follows. On or about July 16, 1997, a
class action was filed in the Supreme Court of the State of New York, County of
New York, entitled JUDITH M. STUCHINER V. NEW YORK STATE ELECTRIC & GAS CORP.,
ET AL. On or about July 16, 1997, a class
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<PAGE>
action was filed in the Supreme Court of the State of New York, County of
Tompkins, entitled PAUL B. ENGEL V. NEW YORK STATE ELECTRIC & GAS CORP., ET AL.
These shareholder actions against the Company and its directors
allege, among other things, breaches of the director's fiduciary duties and
seek declaratory and injunctive relief directing the defendants to fulfill
their fiduciary duty to maximize shareholder value. Several of these lawsuits
also seek damages from the defendants.
Pending PSC Petition. On August 6, 1997, the Company announced that it
had petitioned the PSC to, among other things, issue a ruling on or before
August 13 that CalEnergy or the Purchaser cannot acquire any Shares (including
any Shares presently owned by the Purchaser and any Shares to be purchased in
the Offer) without first completing a PSC approval process purportedly pursuant
to Section 70 of the New York Public Service Law to determine the
qualifications and fitness of CalEnergy to run the Company. Section 70 states
that no gas or electric company may acquire any securities of another gas or
electric company without first obtaining the PSC's approval. CalEnergy and the
Purchaser believe it is not a gas or electric company within the meaning of the
statute. Accordingly, CalEnergy and the Purchaser intend to vigorously seek to
dismiss the petition insofar as it challenges the Purchaser's existing
ownership of Shares and proposed purchase of Shares pursuant to the Offer.
Other Pending Litigation. On June 9, 1997, Edison filed a complaint
alleging breach of certain ISO4 power purchase agreements ("SO4 Agreements")
between Edison and Coso Finance Partners, Coso Power Partners and Coso Energy
Developers as a result of alleged improper venting of certain noncondensible
gases at the Coso geothermal energy project located in California (partnerships
in which CalEnergy holds an approximate 50% ownership interest, collectively
the "Coso Partnerships"). In the complaint Edison seeks unspecified damages,
including the refund of certain amounts previously paid under the SO4
Agreements, and termination of the SO4 Agreements. The complaint was recently
filed and the proceeding is in its early procedural stages. CalEnergy believes
this litigation has entirely no merit. The Coso Partnership intends to
vigorously defend this action and prosecute all available counterclaims against
Edison.
Antitrust. The required waiting period under the HSR Act for the Offer
expired as of 12:00 midnight, New York City time, on August 1, 1997.
6. REQUEST FOR SHAREHOLDER LISTS. At the request of CalEnergy and the
Purchaser, on August 7, 1997, a shareholder of the Company demanded the right
to inspect the Company's shareholders list and certain related materials
pursuant to the New York Business Corporation Law. The purpose of this demand
is to enable CalEnergy and the Purchaser to facilitate communications with
other shareholders of the Company regarding the affairs of the Company,
including the Offer, the Proposed Merger and the conducting of a possible
consent or proxy solicitation if CalEnergy and the Purchaser determine to do
so. CalEnergy has agreed to reimburse certain expenses and provide certain
indemnities in connection with the demand. Copies of the demand letter and the
indemnification agreement are attached as exhibits hereto and are incorporated
by reference herein.
On July 22, 1997, CEABC, Inc., a wholly owned subsidiary of CalEnergy,
transferred without consideration to the Purchaser 100 Shares, which were
registered on the books of the Company in the name of the Purchaser and on July
22, 1997 Purchaser demanded a shareholders list and related materials. On July
31, 1997, the Purchaser commenced a proceeding against the Company in the
Supreme Court of the State of New York, County of Tompkins, seeking to compel
the Company to provide the Purchaser with access to its shareholders list and
certain related materials. The action asserts that, despite a proper demand,
the Company has failed to provide the Purchaser with its shareholders list and
related materials in violation of the Purchaser's common law entitlement to
them. The verified petition stated that the Purchaser requested the
shareholders list and related materials in order to facilitate communication
with other shareholders of the Company regarding the affairs of the Company
including the Offer, the Proposed Merger and the conducting of a possible
consent solicitation and/or proxy contest if CalEnergy and the Purchaser
determine to do so. In opposing the verified
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<PAGE>
petition, the Company argued, inter alia, that its action pending in the United
States District Court for the Southern District of New York was a prior pending
action which raised issues that the district court must determine before the
judge should rule upon the Purchaser's request for the shareholder list and
related materials and that the request was too broad.
On August 6, 1997, a hearing on the matter was held at which the court
indicated it would enter an order directing the Company to compile the
requested materials so that they would be ready to produce and that such
materials should be produced within 24 hours if the district court determines
that there has not been an improper use of any confidential information by the
Purchaser or CalEnergy which would otherwise warrant issuance of a preliminary
injunction barring the Offer. The order will further provide that if the
district court makes no findings of fact and conclusions of law with respect to
the alleged improper use of confidential information, the parties may reapply
to the Supreme Court for such relief as may be warranted.
7. SARANAC PARTNERS. The Company is a party to a long-term power
purchase agreement, dated as of April 27, 1990, as amended to date (the
"Saranac Power Purchase Agreement") with Saranac Power Partners, L.P. ("Saranac
Partners"). The general partner of Saranac Partners is Saranac Energy Company,
Inc., a wholly-owned indirect subsidiary of CalEnergy, and the limited partners
are indirect subsidiaries of Tomen Power Corporation and General Electric
Capital Corporation. The Saranac Power Purchase Agreement provides, among other
things, that for a term of 15 years (until June 21, 2009), the Company is
required to purchase and Saranac Partners is required to sell, subject to the
terms of the Saranac Power Purchase Agreement, all of the electricity produced
at the 240 MW natural gas-fired cogeneration facility located in Plattsburgh,
New York (the "Saranac Plant") which is owned by the Saranac Partnership.
During 1996, the Company made payments of approximately $140 million for power
under the Saranac Power Purchase Agreement at an average purchase price of
approximately 7.3 cents per kilowatt. The Company has alleged that the prices
payable under the Saranac Power Purchase Agreement substantially exceed "the
current appropriate market rate".
On February 14, 1995, the Company filed with the FERC a Petition for a
Declaratory Order, Complaint, and Request for Modification of Rates in Power
Purchase Agreements Imposed Pursuant to the Public Utility Regulatory Policies
Act of 1978 ("Petition") seeking FERC (i) to declare that the rates the Company
pays under the Saranac Power Purchase Agreement, which was approved by the PSC,
were in excess of the level permitted under the Public Utility Regulatory
Policies Act of 1978 ("PURPA") and (ii) to authorize the PSC to reform the
Saranac Power Purchase Agreement. On March 14, 1995, Saranac Partners
intervened in opposition to the Petition asserting, inter alia, that the
Saranac Power Purchase Agreement fully complied with PURPA, that the Company's
action was untimely and that the FERC lacked authority to modify the Saranac
Power Purchase Agreement. On March 15, 1995, CalEnergy intervened also in
opposition to the Petition and asserted similar arguments. On April 12, 1995,
the FERC by a unanimous (5-0) decision issued an order denying the various
forms of relief requested by the Company and finding that the rates required
under the Saranac Power Purchase Agreement were consistent with PURPA and the
FERC's regulations. On May 11, 1995, the Company requested rehearing of the
order and, by order issued July 19, 1995, the FERC unanimously (5-0) denied the
Company's request. On June 14, 1995, the Company petitioned the United States
Court of Appeals for the District of Columbia Circuit (the "Appeals Court") for
review of FERC's April 12, 1995 order. FERC moved to dismiss the Company's
petition for review on July 28, 1995. Saranac Partners intervened in the appeal
and concurred with the Company on the issue of the Court's jurisdiction while
disagreeing on the merits. On July 11, 1997, the Appeals Court dismissed the
Company's appeal holding that it was without jurisdiction to review the FERC's
order and that any enforcement action under PURPA lies in federal district
court.
On August 7, 1997, it was reported that the Company commenced an
action in U.S. District Court for the Northern District of New York requesting
the reformation of its power generation contracts with Saranac Partners and
Lockport Energy Associates, L.P. ("Lockport") and seeking a refund for money it
claims to have overpaid to Saranac Partners and Lockport in the form of alleged
above market prices. During 1996, the
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average purchase price paid to Saranac Partners was approximately 7.3(cent) per
kilowatt. It was reported that the complaint asserts that the Company and its
customers have suffered harm because of the allegedly above market rates that
the Company pays for electric power under the terms of these contracts which it
entered into under PURPA. It was reported that the action seeks (a) a
declaration that the rates in these two contracts violate PURPA and that they
are illegal; (b) modification of all unlawful rates in the agreements; (c)
declaration that the Company is excused from performing the contracts; (d) an
order by the court directing the FERC to take any action necessary to revise or
waive its rules to grant the Company's requested relief (if the court does not
reform the contracts); (e) restitution of all money paid by the Company to
Saranac Partners and Lockport which are claimed to be in excess of PURPA's
market price ceiling together with interest for costs, disbursements, attorney
fees; and (f) other relief as the court deems appropriate if applicable.
8. PROPOSED REINCORPORATION OF CALENERGY TO NEW YORK. CalEnergy
intends to reincorporate in New York for the purpose of, among other things,
being organized and operating in the same jurisdiction that governs its future
utility customers and in order to qualify for an exemption from registration
under the Public Utility Holding Company Act of 1935 pursuant to Section
3(a)(i) thereof. The proposed reincorporation will be effected by the merger of
CalEnergy into a wholly-owned New York subsidiary of CalEnergy, which would
become the surviving corporation (the "Surviving Company"). There will be no
change in the business or properties of CalEnergy as a result of the
reincorporation, and the Surviving Company will assume all of the obligations
of CalEnergy. It is presently expected that the directors and officers of the
Surviving Company will be the same as those of CalEnergy. Approval of the
reincorporation requires the affirmative vote of a majority of the outstanding
common stock of CalEnergy entitled to vote thereon. In the event CalEnergy were
unable to obtain shareholder approval of the reincorporation, CalEnergy would
not be able to obtain such exemption and would be required to seek another
exemption or else become subject to the applicable provisions of the Public
Utility Holding Company Act of 1935. CalEnergy's Board of Directors, by a
unanimous vote of all Board members present at the meeting (including all three
of the representatives of Kiewit Energy Company, which owns approximately 32%
of CalEnergy's outstanding common stock), has approved the commencement of the
Offer and the Proposed Merger and the efforts of CalEnergy's management to
acquire the Company, including the changing of CalEnergy's state of
incorporation to New York.
9. MISCELLANEOUS. The terms and conditions set forth in the Offer to
Purchase and the related Letter of Transmittal remain applicable in all
respects to the Offer. The Purchaser has filed with the Commission, pursuant to
Rule 14d-3 of the Exchange Act, amendments to its Statement on Schedule 14D-1
containing certain additional information with respect to the Offer and may
file further amendments thereto. Such Statement and any amendments thereto,
including exhibits, may be examined and copies may be obtained from the
principal office of the Commission in Washington, D.C. in the manner set forth
in Section 8 of the Offer to Purchase.
No person has been authorized to give any information or make any
representation on behalf of the Purchaser not contained in this Supplement, the
Offer to Purchase or the Letter of Transmittal and, if given or made, such
information or representation must not be relied upon as having been
authorized.
CE Electric (NY), Inc.
August 7, 1997
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<PAGE>
Facsimile copies of the Letter of Transmittal will be accepted. The
Letter of Transmittal and certificates for Shares and any other required
documents should be sent or delivered by each shareholder or his broker,
dealer, commercial bank, trust company or other nominee to the Depositary at
one of its addresses set forth below:
The Depositary for the Offer is:
IBJ SCHRODER BANK & TRUST COMPANY
Telephone Number:
(212) 858-2103
<TABLE>
<CAPTION>
<S> <C> <C>
By Mail: By Facsimile: By Hand Or Overnight Delivery
P.O. Box 84 (212) 858-2611 One State Street
Bowling Green Station Attn: Reorganization Operations New York, New York 10004
New York, New York 10274-0084 Department Attn: Reorganization Operations
Attn: Reorganization Operations Department
Department
</TABLE>
Confirm Facsimile by Telephone: (212) 858-2103
Questions and requests for assistance may be directed to the
Information Agent or to the Dealer Managers at their respective addresses and
telephone numbers set forth below. Requests for additional copies of this
Supplement, the Offer to Purchase dated July 18, 1997, the Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent or to brokers, dealers, commercial banks or trust companies.
The Information Agent for the Offer is:
[GRAPHIC TO COME]
156 Fifth Avenue
New York, New York 10010
(212) 929-5500 (Call Collect)
or
CALL TOLL-FREE (800) 322-2885
The Dealer Managers for the Offer are:
Lehman Brothers Credit Suisse First Boston
3 World Financial Center Eleven Madison Avenue
New York, New York 10285 New York, New York 10010
Call collect at: (212) 526-1941 Call: (888) 285-7693
<PAGE>
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
August 6, 1997
National Financial Services Corporation
82 Devonshire Street
Mail Zone G12A
Boston, MA 02109
Re: Stockholder Demand for Shareholder List of New York State
Electric & Gas Corporation
-------------------------------------------
Ladies and Gentlemen:
On July 18, 1997, CE Electric (NY), Inc. (the "Purchaser"), a wholly
owned subsidiary of CalEnergy Company, Inc. ("CalEnergy"), commenced a cash
tender offer to purchase 6,540,670 shares of common stock, (the "Common
Stock"), of New York State Electric & Gas Corporation (the "Company") at
$24.50 per share in cash. However, under applicable New York statutory
procedure, (as compared to their common law rights) the Purchaser and
CalEnergy are not, at the present time, qualified to make the appropriate
written demand to obtain the shareholders list from the Company as the
statutory procedure requires a six month holding period. Accordingly, Ms. Lee
Brenin (the "Customer"), as a beneficial owner of 225 shares (the "Shares") of
Common Stock for more than six months, wishes to make such a demand (the
"Demand") for a list of the Company shareholders and other materials pursuant
to Section 624 of the New York Business Corporation Law.
In consideration for your making the Demand on behalf of the
Customer, CalEnergy agrees to reimburse you for any and all of your expenses
incurred in connection with your making the Demand, including, without
limitation, the fees of your legal counsel. In addition, CalEnergy agrees to
indemnify and hold harmless you and your affiliates and each other person, if
any, controlling you or any of your affiliates (you and each such person being
an "Indemnified Person") from and against any losses, claims, damages or
liabilities (or actions in respect thereof) related to or arising out of the
Demand or your role in connection therewith, and will reimburse each
Indemnified Person for all expenses (including counsel fees) as they are
incurred by any such Indemnified Person in connection with investigating,
preparing or defending any such claim or action, whether or not in connection
with pending or threatened litigation in which any Indemnified Person is a
party. You agree that so long as CalEnergy continues to comply with its
obligations pursuant to this letter, without the prior written consent of
CalEnergy, which consent will not be unreasonably withheld, you will not
settle, compromise, consent to the entry of judgment in, or otherwise seek to
consent or terminate, any such claim, action or litigation that may arise.
<PAGE>
If the foregoing provisions are acceptable to you, please sign in the
space provided below and return to us a copy of this letter, whereupon this
letter agreement shall constitute a binding obligation.
Very truly yours,
CalEnergy Company, Inc.
By: /s/ Steven A. McArthur
------------------------------
Name: Steven A. McArthur
Title: Senior Vice President, General
Counsel and Secretary
Accepted and agreed as of
the date first above written
National Financial Services Corporation
By:/s/ Jeffrey Sheftic
------------------------------------
Name: Jeffrey Sheftic
Title: Director
<PAGE>
August 7, 1997
Cede & Co.
c/o The Depository Trust Company
7 Hanover Square
New York, New York 10004
New York State Electric & Gas Corporation
4500 Vestal Parkway East
Binghamton, New York 13902
Attention: Corporate Secretary
Ladies and Gentlemen:
Cede & Co., the nominee of The Depository Trust Company ("DTC"), is a
holder of record of shares of common stock, par value $6.66 2/3 per share
("Common Stock"), of New York State Electric & Gas Corporation, a New York
corporation (the "Company"). DTC is informed by its Participant, National
Financial Services Corporation ("Participant"), that on the date hereof 225
shares (the "Shares") of Common Stock credited to Participant's DTC account
are and have been beneficially owned for over six months by Ms. Lee Brenin, an
indirect customer of Participant (the "Customer"). Cede & Co. has been advised
by Participant that the Shares have been credited to its DTC account for the
immediately preceding 6 months and continue to be credited to Participant's
account on the date hereof.
At the request of Participant, on behalf of the Customer and pursuant
to ss.624 of the New York Business Corporation Law, Cede & Co., as the holder
of record of the Shares for more than six months, hereby demands the right,
during the usual hours for business, to inspect the following records and
documents of the Company and to make copies or extracts therefrom:
(a) A complete record or list of the shareholders of the Company,
certified by the Company or its transfer agent, showing the names and
addresses of each shareholder, the account number of each such
shareholder, and the number and class of shares of stock registered
in the name of each such shareholder, as of the most recent date
available;
(b) A complete record or list of the shareholders participating in
any employee benefit plan, or other comparable plan, of the Company,
certified by the Company or its transfer agent, showing the name and
address of each participating shareholder, the number and class of
shares owned by such participating shareholder, and a description of
the voting and dispositive rights of the participating shareholders
and/or any administrator or trustee of each such employee benefit
plan or other comparable plan;
(c) A magnetic computer tape list of the shareholders referred to in
paragraph (a), showing the names and addresses of each shareholder,
the account number of each such shareholder, and number and class of
shares of stock registered in the name of each such shareholder, as
of the most recent date available, such computer processing data as
is necessary to make use of
<PAGE>
such magnetic computer tape, and a printout of such magnetic computer
tape for verification purposes;
(d) A magnetic computer tape list of the participating shareholders
referred to in paragraph (b), showing the names and addresses of each
participating shareholder, the account number of such participating
shareholder, and the number and class of shares of stock owned by
each such participating shareholder, as of the most recent date
available, such computer processing data as is necessary to make use
of such magnetic computer tape, and a printout of such magnetic
computer tape for verification purposes;
(e) All daily transfer sheets showing changes in the lists of the
shareholders of the Company referred to in paragraphs (a) and (b)
above, showing changes in the names, addresses, account numbers, and
numbers and classes of shares of stock of the holders thereof, which
are in or come into the possession or control of the Company or its
transfer agent, or which can reasonably be obtained from brokers,
dealers, banks, clearing agencies or voting trustees, or their
nominees, from the date of such list to such date as CalEnergy (as
defined below) consummates or withdraws the Proposal (as defined
below), which daily transfer sheets should be provided on a weekly
basis;
(f) All information in or which comes into the possession or control
of the Company or its transfer agent, or which can reasonably be
obtained from brokers, dealers, banks, clearing agencies or voting
trustees, or their nominees concerning the names, addresses and
numbers and classes of shares held by the participating brokers,
dealers, banks, clearing agencies or voting trustees named in the
individual nominee names of Cede & Co., Philadep, DLJ and any other
or similar nominees;
(g) All information in or which comes into the possession or control
of the Company or its transfer agent, or which can reasonably be
obtained from brokers, dealers, banks, clearing agencies or voting
trustees, or their nominees, relating to the names of the
non-objecting and acquiescing beneficial owners of common stock in
the Company ("NOBOs"), in the format of a printout and magnetic tape
in descending order balance (such information being readily available
to the Company under Rule 14b-1(c) or Rule 14b-2(c) of the Securities
Exchange Act of 1934 from Independent Election Corporation of
America);
(h) A stop list or stop lists relating to any shares of stock of the
Company as of the date of the list referred to in paragraphs (a) and
(b) above;
(i) All information in or which comes into the possession or control
of the Company or its transfer agent, or which can reasonably be
obtained from brokers, dealers, banks, clearing agencies or voting
trustees, or their nominees concerning any change in the total number
of shares of Common Stock outstanding since the Company's filing of
its Form 10-Q for the period ended March 31, 1997; and
(j) All information requested in paragraph (a), (b), (c), (d), (f),
(g) and (i) as of the Record Date (as the same may be determined) of
any consent or proxy solicitation of the Company's shareholders which
the Purchaser or its affiliates may hereafter commence and any and
all omnibus proxies and respondent omnibus proxies as of the record
date of any such consent or proxy solicitation.
<PAGE>
Cede & Co., at the request of Participant, on behalf of the Customer,
further demands that modifications or additions to or deletions from any and
all records referred to in paragraphs (a) through (j) above, from the date of
the list referred to in paragraph (a) above to such date as CalEnergy
consummates or withdraws the Proposal, be immediately furnished to the
Customer, as such modifications, additions or deletions become available to
the Company or its agents or representatives.
Cede & Co. has been advised by the Participant that the Customer or
CalEnergy Company, Inc. will bear the reasonable costs incurred by the Company
including those of its transfer agent(s) or registrar(s) in connection with
the production of the information demanded.
Cede & Co. has been advised by the Participant that the purpose of
this notice is to enable CalEnergy Company, Inc. ("CalEnergy") and CE Electric
(NY), Inc. (the "Purchaser") to facilitate communications with other
shareholders of the Company regarding the affairs of the Company, including
the tender offer by the Purchaser and CalEnergy, a corporate affiliate of the
Purchaser, commenced on July 18, 1997; the proposal by CalEnergy to acquire
the Company in a consensual merger (the "Proposal"); and a possible consent or
proxy solicitation, if CalEnergy determines to do so.
Cede & Co. hereby designates and authorizes Willkie Farr & Gallagher,
MacKenzie Partners, Inc. and their respective partners and employees, and any
other persons designated by them, acting singly or in combination, to conduct
the inspection, extracting and copying herein requested.
Please immediately advise either Mr. Mark Harnett of MacKenzie
Partners, Inc., 156 Fifth Avenue, New York, New York 10010 (212-929-5500) or
Steven A. Seidman, Esq., of Willkie Farr & Gallagher, One Citicorp Center, 153
East 53rd Street, New York, New York 10022 (212-821-8000), as to when and
where the items demanded above will be available.
A written affidavit of Cede & Co. is attached hereto as Annex 1.
While Cede & Co. is furnishing this demand as the shareholder of
record of the Shares, it does so at the request of Participant and only as a
nominal party for the true party in interest, the Customer. Cede & Co. has no
interest in this matter other than to take those steps which are necessary to
ensure that the Customer is not denied its rights as the beneficial owner of
the Shares, and Cede & Co. assumes no further responsibility in this matter.
<PAGE>
Please acknowledge receipt of this letter by signing the enclosed
copy of this letter in the place indicated below and returning it to our
messenger who has been instructed to wait.
Very truly yours,
Cede & Co.
By: /s/ John L. Scheuermann
--------------------------
John L. Scheuermann
Partner
Receipt of a signed and notarized
copy of this letter on August __, 1997
is hereby acknowledged on behalf
of New York State Electric & Gas Corporation
Name:
-------------------------
Title:
------------------------
<PAGE>
ANNEX 1
-------
STATE OF NEW YORK )
) SS.:
COUNTY OF NEW YORK )
John L. Scheuermann, having been first duly sworn according
to law, deposes and says that he is a partner of Cede & Co., that he is
authorized on behalf of Cede & Co. to execute the foregoing demand and to make
the demand designations, authorizations and representations contained therein,
that Cede & Co. has been a holder of record of the Shares for at least six
months prior to the attached demand and that the foregoing demand is not for
the purpose which is in the interest of a business or object other than the
business of New York State Electric & Gas Corporation. Subject to the
following paragraph, Cede & Co. has not within five years sold or offered for
sale any list of stockholders of any corporation of any type or kind, whether
on or not formed under the laws of New York, or aided or abetted any person in
procuring any such record of stockholders for any such purpose.
Companies whose securities are eligible for deposit in the
DTC system may subscribe to receive from DTC a daily, weekly, monthly or
quarterly dividend record date report known as a Security Position Listing,
showing the total amount of their securities deposited within the system and
giving a breakdown of the amount of securities each Participant has on deposit
at the time of the report. The cost of the reports depends on the frequency
with which a company receives them. Each company receives free of charge a
report of its voting securities in the system each year at the time of its
annual meeting.
The statements contained in the foregoing demand are true
and correct.
Cede & Co.
/s/ John L. Scheuermann
-----------------------------
By: John L. Scheuermann
Partner
Sworn to before me this
7th day of August, 1997
Notary Public
Sue Ann Vajda
- -----------------------
My commission expires: December 31, 1998
