<PAGE>
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) August 6, 1997
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CalEnergy Company, Inc.
-----------------------
(Exact name of registrant as specified in its charter)
Delaware 1-9874 94-2213782
-------- ------ ----------
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
302 South 36th Street, Suite 400, Omaha, NE 68131
-------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's Telephone Number, including area code: (402) 341-4500
--------------
N/A
----------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 5. OTHER EVENTS.
TENDER OFFER; PROPOSED MERGER; SUBSEQUENT OFFER. On August 6, 1997,
CalEnergy Company, Inc. ("CalEnergy") announced that it had executed fully
underwritten financing commitments for a consensual merger (the "Proposed
Merger") with New York State Electric & Gas Corporation ("NYSEG") or for a
tender offer (the "Subsequent Offer") and related merger that may be commenced
subsequent to the pending Tender Offer (as defined below).
On July 15, 1997, CalEnergy advised NYSEG of its intention to
commence a tender offer (the "Tender Offer") to acquire that number of shares
("NYSEG Shares") of common stock, par value $6.66 2/3 per share, of NYSEG
which, together with the NYSEG Shares beneficially owned by CalEnergy, would
represent 9.9% of the total number of NYSEG Shares outstanding. On July 18,
1997 CE Electric (NY), Inc., a wholly owned subsidiary of CalEnergy (the
"Purchaser"), commenced the Tender Offer. The $24.50 per NYSEG Share
consideration offered pursuant to the Tender Offer represents a premium of
approximately 17.4% over the closing price of the NYSEG Shares on the New York
Stock Exchange on June 30, 1997, the day an affiliate of CalEnergy commenced
purchases of NYSEG Shares in the open market. The Tender Offer is scheduled to
expire at 12:00 midnight, New York City time, on Thursday, August 14, 1997,
unless extended. The Tender Offer is not subject to any financing condition.
CalEnergy also advised NYSEG on July 15, 1997 that it was prepared to
negotiate a consensual merger (the "Proposed Merger") in which each
outstanding NYSEG Share would be exchanged for $27.50 in cash. The $27.50 cash
price represented a premium of approximately 31.74% over the closing price of
the NYSEG Shares on June 30, 1997. CalEnergy and the Purchaser intend to
continue to attempt to seek to negotiate the Proposed Merger with NYSEG.
If NYSEG's Board of Directors continues to refuse to negotiate with
CalEnergy and the Purchaser, CalEnergy and the Purchaser currently intend,
following consummation of the Tender Offer, to commence the Subsequent Offer
to acquire all of the outstanding NYSEG Shares it does not then own. The
alternatives being considered by CalEnergy and the Purchaser include the
Subsequent Offer for all of such NYSEG Shares. The Purchaser currently
intends, as soon as practicable following consummation of the Subsequent
Offer, to seek to have NYSEG consummate a merger or similar business
combination with the Purchaser (the "Subsequent Merger"), pursuant to which
each outstanding NYSEG Share would be converted into the right to receive cash
in the same amount as received per NYSEG Share in the Subsequent Offer, and
NYSEG would become a wholly owned subsidiary of CalEnergy. The Subsequent
Offer would be expected to be subject to a number of conditions to which the
Tender Offer is not subject, including the receipt of all required regulatory
approvals and certain other conditions.
SOURCE AND AMOUNT OF FUNDS. The Purchaser estimates that the total
amount of funds required to purchase the NYSEG Shares in the Tender Offer will
be approximately $165 million. The Purchaser will obtain such funds through a
capital contribution by CalEnergy from available cash.
-2-
<PAGE>
The Purchaser estimates that, following consummation of the Tender
Offer, funds in an aggregate amount of approximately $1.7 billion would be
required to purchase the NYSEG Shares in the Proposed Merger at the proposed
merger price of $27.50 per NYSEG Share. This estimate is based on the number
of NYSEG Shares outstanding as reported in NYSEG'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 commercial
banks and through capital contributions to the Purchaser by CalEnergy.
CalEnergy presently expects that the source of funds for its capital
contributions to Purchaser will include the proceeds of the Offerings (as
defined below), various borrowings by CalEnergy 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. On August 5, 1997, CalEnergy and certain subsidiary trusts filed a
shelf registration statement relating to common stock, preferred stock and
debt securities, which may be issued from time to time for various purposes in
amounts up to $1.5 billion in the aggregate.
THE PURCHASER CREDIT FACILITIES. CalEnergy and the Purchaser have
entered into a senior bank financing commitment letter agreement with CSFB
(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 the
Subsequent Offer and the Subsequent Merger, to provide for the payment of
transaction expenses and to provide working capital for the Purchaser and
NYSEG.
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 NYSEG Shares pursuant to the Proposed Merger or the
Subsequent Offer and the Subsequent Merger at a price of up to $27.50 per
NYSEG Share; (ii) refinance existing indebtedness of NYSEG 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, NYSEG and their subsidiaries.
The Purchaser Credit Facilities will be secured by (i) the capital
stock of the Purchaser; (ii) the NYSEG 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 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.
-3-
<PAGE>
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
NYSEG 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.
-4-
<PAGE>
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").
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 issue securities in 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 First Boston ("CSFB") and LB I Group
Inc. ("LBI") providing for a binding commitment by
-5-
<PAGE>
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 the
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 NYSEG 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 NYSEG and
its subsidiaries, taken as a whole, since December 31, 1996; and (iv) mutually
satisfactory definitive documentation being executed. The definitive
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 hereto.
-6-
<PAGE>
Item 7. Financial Statements and Exhibits.
Exhibits.
99.1 Press Release, dated August 6, 1997, issued by CalEnergy
Company, Inc.
99.2 CSFB Commitment Agreement for the Purchaser Credit Facilities
99.3 $250 Million Credit Facility Commitment Letter Agreement
99.4 $150 Million Credit Facility Commitment Letter Agreement
99.5 Bridge Facility Commitment Letter Agreement
-7-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
CalEnergy Company, Inc.
By: /s/ Steven A. McArthur
----------------------------------
Steven A. McArthur
Senior Vice President,
General Counsel and Secretary
Dated: August 6, 1997
-8-
<PAGE>
EXHIBIT INDEX
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Exhibit No. Description
- ----------- -----------
99.1 Press Release, dated August 6, 1997, issued by CalEnergy
Company, Inc.
99.2 CSFB Commitment Agreement for the Purchaser Credit Facilities
99.3 $250 Million Credit Facility Commitment Letter Agreement
99.4 $150 Million Credit Facility Commitment Letter Agreement
99.5 Bridge Facility Commitment Letter Agreement
<PAGE>
[LOGO]
FOR IMMEDIATE RELEASE
<TABLE>
<S> <C> <C>
CONTACTS:
Craig Hammett Patti McAtee Joele Frank
Vice President, Chief Financial Officer Director, Corporate Communications Abernathy MacGregor
(402) 341-4500 (402) 341-4500 (212) 371-5999
</TABLE>
CALENERGY EXECUTES FULLY UNDERWRITTEN FINANCING
COMMITMENTS FOR PROPOSED NYSEG MERGER
New York, New York, August 6, 1997, CalEnergy Company, Inc.
("CalEnergy") (NYSE, PSE and LSE symbol: CE) and its wholly owned subsidiary,
CE Electric (NY), Inc. ("CENY") announced today the signing of fully
underwritten binding financing commitment agreements with Credit Suisse First
Boston and Lehman Brothers to fund CalEnergy's purchase of 100% of the shares
of common stock ("Shares") of New York State Electric & Gas Corporation
("NYSEG") (as well as to fund transaction costs and working capital
requirements) pursuant to CalEnergy's proposed $27.50 per Share merger
proposal.
Fully underwritten binding commitment agreements in an amount
totaling up to $1.9 billion have been entered into by CalEnergy and CENY as
follows:
o New and amended CalEnergy revolving credit facilities in the
aggregate amount of $400 million.
o Up to a $500 million CalEnergy bridge financing facility, if
required.
o Up to $1.0 billion of CENY credit facilities comprised of a
$650 million five-year term loan and a $350 million five-year
revolving credit facility.
On August 5, 1997, CalEnergy and certain affiliated capital funding
trusts also filed with the Securities and Exchange Commission a shelf
registration statement covering up to $1.5 billion of common stock, preferred
stock and debt securities which may be sold from time to time for various
purposes. CalEnergy presently intends to effect certain equity and debt
securities offerings on a prompt basis (subject to market conditions), in
which case drawings under the bridge facility may not be required. The equity
component of such future offerings is not currently expected to exceed
approximately $550 million.
CalEnergy's Chairman and CEO, David L. Sokol, commented, "We are
pleased to have executed binding commitments to provide the necessary
financing for our proposed merger with NYSEG at a $27.50 per common share
purchase price and to fund related transaction costs and provide working
capital for CENY and NYSEG. These binding commitments should provide us with
all the financing flexibility necessary to complete the acquisition of 100% of
the NYSEG shares on the terms we have previously proposed. We intend to
proceed in a determined fashion to pursue the NYSEG acquisition. We look
forward to the successful consummation of our pending cash tender offer for
9.9% of the NYSEG common shares as scheduled on August 14, 1997, and we very
much hope to commence merger negotiations with NYSEG's management on a
similarly prompt timetable."
-more-
<PAGE>
-2-
On July 18, 1997, CENY formally commenced a cash tender offer for
6,540,670 common shares of NYSEG at a price of $24.50 per share. The tender
offer is scheduled to expire at 12:00 midnight, New York City time on
Thursday, August 14, 1997, unless extended.
CalEnergy, which manages and owns interests in over 5,000 net MW of
power generation facilities in operation, construction and development
worldwide, currently operates 20 generating facilities and also supplies and
distributes electricity to 1.5 million customers.
# # #
<PAGE>
Credit Suisse
First Boston
August 6, 1997
CalEnergy Company, Inc.
CE Electric (NY), Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Re: Commitment Letter
Dear Gentlemen:
You have advised Credit Suisse First Boston ("CSFB") that a
newly formed wholly-owned subsidiary of CalEnergy Company, Inc., a Delaware
corporation ("CE"), CE Electric (NY), Inc., a New York corporation ("Bidco"),
intends to acquire the issued and outstanding shares of common stock (the
"Shares") (calculated on a fully-diluted basis) of New York State Electric &
Gas Corporation, a New York corporation ("NYSEG") by means of a takeover bid
(the "Tender Offer") and subsequent merger pursuant to which a subsidiary of
Bidco will be merged with and into NYSEG (the "Merger") pursuant to a merger
agreement with NYSEG (the "Merger Agreement"), and as a result of the Merger,
NYSEG shall become a direct or indirect wholly-owned subsidiary of CE. The
Tender Offer and the Merger are referred to herein as the "Transactions."
CSFB further understands that senior bank financing (the
"Senior Financing") is required by Bidco (with respect to the Term Loan
Facility defined below) and by Bidco and NYSEG (with respect to the Revolving
Credit Facility defined below) in connection with the Transactions, and that
such Senior Financing will be in the form of (i) a 5-year term loan facility in
the amount of up to U.S. $650 million (the "Term Loan Facility") and (ii) a
5-year revolving credit facility in the amount of up to U.S. $350 million (the
"Revolving Credit Facility" and, together with the Term Loan Facility, the
"Credit Facility"). A summary of certain preliminary terms and conditions of
the Credit Facility are set forth in the attached Summary of Certain Terms and
Conditions (the "Term Sheet").
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 2
CSFB also understands that the proceeds from the Credit
Facility shall be used to finance the acquisition of Shares pursuant to the
Tender Offer and Merger Agreement, to refinance existing indebtedness of NYSEG
after giving effect to the Merger, to pay consideration in connection with the
Merger, to pay related fees and expenses in connection with the Transactions
and to provide for the working capital and general corporate needs of Bidco,
NYSEG and their subsidiaries.
You have further advised us that in addition to the Credit
Facility Bidco will require equity proceeds in connection with the Transactions
in an amount which, when aggregated with the proceeds of the Credit Facility,
will be sufficient to enable Bidco to fund the purchase all of the Shares and
costs associated with the Transactions and for refinancing of certain
obligations, which equity proceeds will be contributed by CE through CE's cash
on hand and from the proceeds of debt and equity of CE, all as more
specifically set forth in certain letters, dated as of the date hereof, among
CSFB, other parties and CE ) (the "Debt/Equity Financing").
We are pleased to confirm that CSFB hereby commits to provide
the entire Credit Facility on the terms and conditions set forth herein and in
the Term Sheet and on such other terms and conditions as CSFB deems reasonably
necessary or appropriate in the context of the Senior Financing and the
proposed Transactions. All aspects of the Senior Financing and the proposed
Transactions including, without limitation, the Tender Offer, the Merger, the
Merger Agreement, and all documentation relating thereto, shall be in form and
substance reasonably satisfactory to CSFB. Please note that the terms and
conditions of CSFB's commitment and undertakings hereunder are not limited to
those set forth herein or in the Term Sheet. Those matters that are not covered
or made clear herein or in the Term Sheet are subject to mutual agreement of
the parties. In addition, the commitment of CSFB is subject to: (a) the
preparation, execution and delivery of mutually acceptable loan documentation,
including a credit agreement and security documentation incorporating
substantially the terms and conditions outlined herein and in the Term Sheet;
(b) the absence of any material adverse change in the business, assets,
operations, properties, prospects or condition (financial or otherwise) of
Bidco or NYSEG and its subsidiaries, taken as a whole, since December 31, 1996;
(c) our not becoming aware after the date hereof of any information or other
matter which is inconsistent in a material manner with any information or other
matter disclosed to us prior to the date hereof; (d) the absence, prior to and
during the syndication of the Senior
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 3
Facilities, of any competing bank credit for, or debt securities of, CE, Bidco
or NYSEG being arranged, offered or placed, other than the Debt/Equity
Financing, (e) the review of all aspects of the Tender Offer and Merger,
including all documents relating thereto, and the reasonable satisfaction by
CSFB therewith; and (f) the other conditions set forth in the Term Sheet.
In connection with the Senior Financing, CSFB shall act as
sole arranger and administrative agent. You agree that no other entity shall
have any title with respect to the Senior Financing or shall be appointed in
the capacity of agent, co-agent or arranger without the mutual consent of CE
and CSFB. We reserve the right, prior to or after execution of the definitive
documentation for the Senior Financing, to syndicate all or part of our
commitment to one or more financial institutions or other "accredited
investors" (as defined in Regulation D of the Securities Act of 1933, as
amended) reasonably acceptable to CE, Bidco and CSFB (collectively, the
"Lenders" and each a "Lender") that will become parties to such definitive
documentation pursuant to a syndication to be managed and controlled in all
respects by CSFB (including, without limitation, as to the timing of all offers
to potential Lenders and acceptance of commitments, the amounts offered and the
compensation provided to potential Lenders) and that CSFB would act as the sole
and exclusive agent for such Lenders (in such capacity, the "Agent"). By your
acceptance hereof, you agree both before and after the closing of the Senior
Financing to actively assist us in achieving a syndication that is satisfactory
to us, which assistance shall include but not be limited to: (a) making senior
management and representatives of CE, Bidco and its controlled affiliates
available to participate in one or more meetings with potential Lenders at such
times and places as CSFB may reasonably request; (b) using all reasonable
efforts to ensure that the syndication efforts benefit from CE's and its
controlled affiliates' existing banking relationships; and (c) providing CSFB
with information reasonably requested to complete the syndication successfully,
including, without limitation, the preparation of such offering materials as
CSFB may reasonably request.
Each of CE and Bidco hereby represents, warrants and
covenants that (x) all information (other than projections) and data concerning
CE, Bidco and their subsidiaries which has been or is hereafter furnished or
otherwise made available to CSFB by CE or Bidco or any of their representatives
in connection with the transactions contemplated hereby is and will be complete
and correct in all material
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 4
respects and does not and will not contain any untrue statement of a material
fact or omit to state a material fact necessary in order to make the statements
contained therein not misleading in light of the circumstances under which such
statements are made (it being understood by CSFB that any representation by CE
and Bidco as to any information relating to NYSEG and its subsidiaries is made
to your best knowledge) and (y) all financial projections concerning CE, Bidco
and their subsidiaries or the Transactions which have been or are hereafter
made available to CSFB or any Lender have been or will be prepared based upon
reasonable assumptions and will constitute CE's and Bidco's good faith estimate
of the items projected. In issuing this commitment and undertaking, CSFB is
relying on the accuracy of the information furnished by CE and Bidco and on
CE's and Bidco's behalf.
To induce us to issue this letter, CE and Bidco, jointly and
severally, hereby agree to pay on demand, whether or not any element of the
Transactions is consummated or the Senior Financing is closed or signed, all
reasonable costs and expenses (including the reasonable fees and expenses of
Skadden, Arps, Slate, Meagher & Flom LLP as counsel to the Agent, any local
counsel retained to represent the Agent and all of the reasonable out-of-pocket
expenses of CSFB and its affiliates) incurred by CSFB in connection with the
preparation, execution and delivery of this letter and the definitive financing
agreements for the Senior Financing (and our due diligence and syndication
efforts in connection therewith). In addition, you hereby agree to pay when and
as due the fees described in the Fee Letter referred to below. You further
agree to indemnify and hold harmless CSFB, each Lender and each director,
officer, employee and affiliate thereof (each an "indemnified person") in
connection with any losses, claims, damages, liabilities or other expenses to
which any such indemnified person may become subject, insofar as such losses,
claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from the Transactions (or any element thereof) or this
letter or the extension of the Senior Financing contemplated by this letter, or
in any way arise from any use or intended use of this letter or the proceeds of
any of the Senior Financing contemplated by this letter, and you agree to
reimburse each indemnified person for any reasonable legal or other expenses
incurred in connection with investigating, defending or participating in any
such loss, claim, damage, liability or action or other proceeding (whether or
not such indemnified person is a party to any action or proceeding out of which
any such expenses arise), provided that you
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 5
shall have no obligation hereunder to indemnify any indemnified person for any
loss, claim, damage, liability or expense to the extent it is determined by
final judgment of a court of competent jurisdiction to have resulted from the
gross negligence or willful misconduct of such indemnified person. This letter
is furnished for your benefit, and may not be relied upon by any other person
or entity. Neither CSFB, any Lender nor any of their respective affiliates
shall be responsible or liable to you or any other person for consequential
damages which may be alleged as a result of this letter.
CSFB reserves the right to employ the services of its
affiliates in providing the services contemplated by this letter and to
allocate, in whole or in part, to such affiliates certain fees payable to CSFB
in such manner as CSFB and its affiliates may agree in their sole discretion.
You acknowledge that CSFB may share with any of its affiliates, and such
affiliates may share with CSFB, any information relating to CE, Bidco and their
respective subsidiaries and affiliates or NYSEG and its subsidiaries and
affiliates (including, without limitation, any non-public information regarding
CE, Bidco and their respective subsidiaries and affiliates or NYSEG and its
subsidiaries and affiliates), subject to CSFB's maintaining the confidential
treatment of such confidential information.
The provisions of the two immediately preceding paragraphs
shall survive any termination of this letter.
The provisions of this letter are supplemented as set forth
in a separate fee letter dated the date hereof from us to you (the "Fee
Letter") and are subject to the terms of such Fee Letter. By executing this
letter, you acknowledge that this letter, the Term Sheet and the Fee Letter are
the only agreements between you and CSFB with respect to the Credit Facilities
and set forth the entire understanding of the parties with respect thereto.
None of this letter, the Term Sheet nor the Fee Letter may be changed except
pursuant to a writing signed by each of the parties hereto.
You agree that this letter is for your confidential use only
and you are not authorized to show or disclose this letter or the contents
thereof in any public filing or announcement or to any other person or entity
(other than your legal and financial advisors in connection with your
evaluation hereof and on a confidential
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 6
basis) provided that after such time as you have accepted this letter and the
Fee Letter as provided below you may make such disclosure of this letter (but
not the Fee Letter) as is required by law or regulation in the opinion of your
counsel. If this letter is not accepted by you as provided below, you are
directed to immediately return this letter (and any copies hereof) to CSFB.
Our commitment pursuant to this letter shall terminate at
5:00 p.m. (New York time) on August 6, 1997 unless you shall have accepted this
letter and the enclosed fee letter on or prior to such date and shall in any
event terminate at 5:00 p.m. (New York time) on October 15, 1997 unless
definitive credit documentation acceptable to us has been executed and
delivered.
If you are in agreement with the foregoing, please sign and
return to CSFB the two enclosed copies of this letter, together with two
executed copies of the accompanying fee letter fully executed by the parties
thereto. This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This letter, the Term Sheet and the Fee Letter
shall be governed by and construed in accordance with the laws of the State of
New York. Each of CE and Bidco hereby irrevocably waive all rights to trial by
jury of any actions, proceeding or counterclaim (whether based on contract,
tort or otherwise) arising out of or relating to this
<PAGE>
CalEnergy Company, Inc.
CE Electric (NY), Inc.
August 6, 1997
Page 7
letter, the transactions contemplated hereby or the actions of CSFB in
negotiation, performance or enforcement hereof.
We are pleased to have been given the opportunity to assist
you in connection with the Transactions.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ Richard Carey
---------------------------
Title: Director
By: /s/ James Moran
---------------------------
Title: Director
Agreed to and Accepted this
6th day of August, 1997.
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
-------------------------------
Title: Senior Vice President,
General Counsel and
Secretary
CE ELECTRIC (NY), INC.
By: /s/ Steven A. McArthur
-------------------------------
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY TERMS AND CONDITIONS
$1,000,000,000 CREDIT FACILITIES*
- --------------------------------------------------------------------------------
BORROWER: 1. Term Loan Facility: CE Electric (NY),
Inc., a New York corporation ("Bidco"), a
newly formed, wholly owned subsidiary of
CalEnergy Company, Inc.
2. Revolving Credit Facility: Bidco and/or
New York State Electric & Gas Corporation, a
New York corporation, the shares of which
are subject to the tender offer by Bidco
("NYSEG").
FACILITY AND AMOUNTS: $650 Million Term Loan Facility (the "Term
Loan Facility"), with a bullet maturity.
$350 Million Revolving Credit Facility (the
"Revolving Credit Facility).
The Term Loan Facility and Revolving Credit
Facility are referred to herein collectively
as the "Credit Facilities."
ARRANGER AND ADMINISTRATIVE Credit Suisse First Boston ("CSFB").
AGENT:
LENDERS: A syndicate of lenders (the "Lenders")
arranged by CSFB and reasonably acceptable
to the Borrower.
FINAL MATURITY: Fifth Anniversary of the date on which the
Credit Agreement evidencing the Credit
Facilities is executed and delivered (such
date, the "Effective Date").
AVAILABILITY: The Term Loan Facility shall be available to
be drawn in multiple drawings for a period
of one year from the Closing Date. Loans
under the Revolving Credit Facility may be
borrowed, repaid and reborrowed until the
Final Maturity Date.
USE OF PROCEEDS: Term Loan Facility: Together with proceeds
of equity contributions (the "Initial
Equity Contribution") which are sufficient,
when combined with the proceeds of the Term
Loan Facility, to fund the purchase price of
all of the Shares and costs associated
with the Transactions, for refinancing of
certain obligations and for working
capital purposes.
Revolver: Refinancing of certain obligations
and for working capital purposes.
SECURITY: The Facilities will be secured by (A) a
perfected first priority lien on, and pledge
of, (i) all of the capital stock of Bidco,
and
- -------------
* Capitalized terms used but not otherwise defined herein shall have the
respective meanings ascribed thereto in the Commitment Letter to which
this Summary of Terms and Conditions is attached.
<PAGE>
(ii) the Shares of NYSEG owned by Bidco or
any of its affiliates or designees, and (B)
a perfected first priority lien on, and
security interest in, all of the tangible
and intangible properties and assets
(including all real property interests) of
Bidco (it being understood that none of the
foregoing shall be subject to any other
liens or security interests, except for
certain customary exceptions to be agreed
upon).
TERMINATION OF The commitments in respect of the Credit
COMMITMENTS: Facilities will terminate in their entirety
on December 31, 1998 if the initial funding
under the Credit Facilities does not occur
on or prior to such date.
INTEREST RATES: Base Rate or Eurodollar Rate Loans, with
both the Base Rate Facility Applicable
Margins and Eurodollar Rate Applicable
Margins determined according to a ratings
grid based on the Bidco's senior unsecured
debt rating, as set forth on Schedule I.
DEFAULT RATE: The applicable interest rate (including
applicable margin) plus 2.00% per annum.
COMMITMENT FEES: Payable on undrawn amount of the Credit
Facilities, commencing on the dates the
Credit Agreement evidencing the Credit
Facilities is executed, at the rates
determined according to a ratings grid based
on Bidco's senior unsecured debt rating set
forth on Schedule 1.
OTHER FEES: Payable pursuant to the separate fee
letters.
VOLUNTARY PREPAYMENTS/
REDUCTIONS IN COMMITMENTS: Term Loan Facility: All or any portion of
the Term Loans may be prepaid at any time
and the unutilized portion of the Term Loan
Facility may be terminated in whole or in
part (in minimum amounts to be agreed upon)
at Bidco's option, without premium or
penalty (except, in the case of Eurodollar
Rate borrowings, prepayments not made on the
last day of the relevant interest period).
Such prepayments of Term Loans may not be
reborrowed.
Revolving Credit Facility: The unutilized
portion of the commitments under the
Revolving Facility may be reduced and loans
under such Revolving Credit Facility may be
repaid at any time, in each case, at the
option of the Borrower, in a minimum
principal amount and in multiples to be
agreed upon, without premium or penalty
(except, in the case of Eurodollar Rate
borrowings, prepayments made on the last day
of the relevant interest period).
MANDATORY PREPAYMENTS: The Term Loan Facility is subject to
mandatory repayment in the amount of
proceeds of asset sales not in the ordinary
course of business, in amounts to be
determined.
Mandatory prepayments of Term Loans may not
be reborrowed.
2
<PAGE>
CONDITIONS PRECEDENT: Those conditions precedent to the making of
the Term Loan and the initial Revolving
Credit Loans (the date of such initial Loan,
the "Closing Date") shall be those which are
usual and customary for this type of credit
facility, and such additional conditions
precedent as are appropriate under the
circumstances including, but not limited
to:
(A) Receipt of net proceeds from the
Initial Equity Contribution and the
Term Loan Facility in sufficient
amounts to fund the purchase price for
all of the Shares, costs of the
Transactions and to refinance
obligations required to be refinanced.
(B) The delivery of (i) customary legal
opinions in form and substance
satisfactory to the Lenders, (ii)
customary officers' certificates,
together with the accompanying charter
documents and corporate resolutions, in
form and substance satisfactory to the
Lenders, and (iii) other closing
documents, agreements and certificates
customary for such agreements or
reasonably requested by the Arranger.
(C) The Board of Directors of the Borrower
and NYSEG shall have authorized and
approved the Merger Agreement and the
Lenders shall have received
satisfactory evidence of the same. The
Borrower and NYSEG shall have entered
into the Merger Agreement and the
Merger Agreement shall be in full force
and effect. The terms, conditions and
structure of the Tender Offer and the
Merger, including any amendments
thereto (and the documentation
therefor) shall be in form and
substance reasonably satisfactory to
the Arranger and the Lenders. All
Tendered Shares shall have been
accepted for payment in accordance
with the terms of the Tender Offer. The
Borrower shall, upon consummation of
the Tender Offer, own and control such
number of Shares (on a fully diluted
basis) as shall be necessary to approve
the Merger without the affirmative vote
or approval of any other securityholder
or entity. The Tender Offer and the
financing therefor shall be in
compliance with all laws and
regulations, including any state
anti-takeover law regulating the Tender
Offer or the Merger, or the Arranger
shall have determined such to be
inapplicable to the Tender Offer and
the Merger. The Arranger shall have
received copies, certified by Bidco, of
all filings made with any governmental
authority in connection with the Tender
Offer, the Merger or the other
Transactions.
(D) Not less than 662/3% of the Shares be
owned by Bidco and/or shall have been
tendered and not withdrawn pursuant to
the Tender Offer and Merger Agreement.
(E) Either (i) Bidco shall have received
not less than an investment grade
rating with respect to its senior
unsecured debt by both of Standard and
Poors, Inc. ("S&P")
3
<PAGE>
and Moody's Investor Services, Inc.
("Moody's") or (ii) financial tests to
be agreed upon.
(F) NYSEG shall not have any "poison pill"
rights or shall have redeemed such
rights at a nominal price, or the
Arranger shall otherwise be satisfied
that such rights are null and void as
applied to the Tender Offer and the
Merger.
(G) All material terms and conditions in
the Tender Offer shall have been
satisfied, and not waived, amended,
supplemented or otherwise modified
except with the consent of the Arranger
and the Lenders, to the satisfaction of
the Arranger and the Lenders.
(H) All of the net proceeds of the Initial
Equity Contribution shall have been
applied by Bidco to the purchase of the
Shares tendered.
(I) Each of the Transactions shall have
been consummated in all material
respects in accordance with the terms
hereof and the terms of documentation
therefor (without the waiver of any
material condition unless consented to
by the Arranger and the Lenders) that
are in form and substance reasonably
satisfactory to the Arranger and the
Lenders.
(J) All requisite third parties and
governmental authorities shall have
approved or consented to the
Transactions and the other transactions
contemplated hereby (without the
imposition of any materially burdensome
or adverse conditions) and all such
approvals and consents shall be in full
force and effect (or there shall be a
plan reasonably satisfactory to the
Arranger for the obtaining thereof),
including, without limitation, the
approved of the New York Public Service
Commission (the "New York PSC"), the
Nuclear Regulatory Commission (the
"NRC") and the Federal Energy
Regulatory Commission ("FERC"). All ap-
plicable waiting periods shall have
expired without any action being taken
by any competent authority which re-
strains, prevents, or imposes
materially adverse conditions upon
the Transactions.
(K) There shall not have occurred or become
known (i) any material adverse change
or any condition or event that could
reasonably be expected to result in a
material adverse change in the
business, assets, liabilities (contin-
gent or otherwise), operations,
condition (financial or otherwise),
solvency, properties or material
agreements (each, a "Material Adverse
Change") of Bidco or NYSEG, together
with their respective subsidiaries
taken as a whole, as the case may be
(and before and after giving effect to
the Transactions), (ii) any facts or
circumstances discovered by the
Lenders in the course of their ongo-
ing due diligence investigation of the
Transactions, Bidco
4
<PAGE>
and NYSEG and their respective
subsidiaries after giving effect to the
Transactions, and the other
transactions contemplated hereby, which
(x) the Arranger and the Lenders
reasonably believe could, individually
or in the aggregate, have a material
adverse effect on the Transactions or
result in a Material Adverse Change
with respect to Bidco or NYSEG,
together with their respective
subsidiaries taken as a whole, as the
case may be (and before and after
giving effect to the Transactions), or
the tax or accounting consequences of
the Transactions, or (y) would be
materially inconsistent with the
assumptions underlying the projections
delivered to the Lenders in
syndication, (iii) any transaction
(other than the Transactions) entered
into by Bidco or NYSEG or any of their
respective subsidiaries, whether or not
in the ordinary course of business,
that, in the reasonable judgment of the
Arranger and the Required Lenders, is
material to Bidco or NYSEG, together
with their respective subsidiaries
taken as a whole, or (iv) any dividend
or distribution of any kind declared or
paid by Bidco or NYSEG on its capital
stock (other than regular dividends by
NYSEG).
(L) There shall not exist any threatened or
pending action, proceeding or
counterclaim by or before any court or
governmental, administrative or
regulatory agency or authority,
domestic or foreign, (i) challenging
the consummation of any of the
Transactions or which would restrain,
prevent or impose burdensome conditions
on the Transactions, individually or in
the aggregate, or any other transaction
contemplated hereunder, (ii) seeking to
prohibit the ownership or operation by
Bidco or any of its subsidiaries of all
or a material portion of any of their
businesses or assets or businesses or
the Shares of NYSEG, or (iii) seeking
to obtain, or having resulted in the
entry of, any judgment, order or
injunction that (a) would restrain,
prohibit or impose adverse conditions
on the ability of the Lenders to make
the Loans under the Credit Facilities,
(b) could be reasonably expected to
result in a Material Adverse Change
with respect to Bidco or NYSEG,
together with their respective
subsidiaries taken as a whole, as the
case may be (and before and after
giving effect to tie Transactions), (c)
could reasonably be expected to affect
the legality, validity or
enforceability of any Credit Document
or any documents relating thereto or
could have a material adverse effect on
the ability of any Credit Party to
fully aid timely perform their obliga-
tions under the Credit Documents or the
rights and remedies of the Lenders,
(d) would be materially inconsistent
with the stated assumptions underlying
the projections provided to the
Arranger and the Lenders, or (e) is
seeking any material damages as a
result thereof.
(M) The Arranger and the Required Lenders
shall be satisfied (in their reasonable
judgment) with the corporate and
organizational structure of Bidco,
NYSEG and their re-
5
<PAGE>
spective subsidiaries (after giving
effect to the Transactions), including
as to direct and indirect ownership and
as to the terms of the indebtedness and
capital stock of Bidco, NYSEG and their
respective subsidiaries. Immediately
after giving effect to the Tender Offer
and the borrowings under the Credit
Facilities, Bidco, NYSEG and its
subsidiaries shall have no outstanding
indebtedness or preferred stock other
than the Loans, the existing
indebtedness of NYSEG and the existing
preferred stock of NYSEG.
(N) Any defaults in any material agreements
of Bidco or NYSEG that may result from
the Transactions shall have been
resolved or otherwise addressed in a
manner reasonably satisfactory to the
Arranger and the Lenders; and no law or
regulation shall be applicable in the
reasonable judgment of the Arranger and
the Lenders that restrains, prevents or
imposes materially adverse conditions
upon any component of the Transactions
or the financing thereof, including the
extensions of credit under the Credit
Facilities.
(O) All other material documentation and
agreements related to the Transactions
or which, in the reasonable judgment of
the Arranger and the Lenders, affects
the extension of credit under the
Credit Facilities in any respect shall
be in form and substance reasonably
satisfactory to the Arranger and the
Lenders; and all conditions precedent
under all documentation relating to the
Transactions (other than the
conditions precedent set forth in the
Credit Agreement) or the financing or
refinancing thereof as the case may be
shall have been satisfied (except to
the extent such conditions have been
waived with the prior consent of the
Arranger and the Lenders).
(P) All loans and other financing to the
Borrowers shall be in full compliance
with all applicable requirements of
Regulations G, T, U and X of the Board
of Governors of the Federal Reserve
System.
(Q) All accrued fees and expenses
(including the reasonable fees and
expenses of counsel to the Lenders, the
Arranger and the Administrative Agent)
of the Lenders, the Arranger and the
Administrative Agent in connection with
the Credit Documents shall have been
paid.
(R) The Arranger shall be satisfied as to
the amount and nature of all tax,
ERISA, employee retirement benefit, and
other contingent liabilities to which
the Bidco, NYSEG or any of their
respective subsidiaries may be subject,
and the plans of Bidco, NYSEG and its
subsidiaries with respect thereto.
(S) The Lenders shall have received a pro
forma balance sheet satisfactory to the
Arranger and the Lenders of the
6
<PAGE>
Borrowers and their subsidiaries as at
the Closing Date and after giving
effect to the Transactions and the
financings contemplated hereby, which
pro forma balance sheet shall be
substantially in conformity with that
delivered to the Lenders during
syndication. The Lenders shall have
received projected cash flows and
income statements for the period of
nine years following the Closing Date,
which projections shall be (i) based
upon reasonable assumptions made in
good faith and (ii) substantially in
conformity with those projections
delivered to the Lenders during
syndication.
CONDITIONS TO ALL Each extension of credit under the Credit
EXTENSION OF CREDIT: Facilities will be subject to the (i)
absence of any Default or Event of Default,
and (ii) continued accuracy of
representations and warranties (except
representations and warranties which are
made only as of a prior date).
REPRESENTATIONS AND Those representations and warranties to be
WARRANTIES: made by the Borrowers which are usual and
customary for this type of facility, and
such additional representations and
warranties as are appropriate under the
circumstances including, but not limited to
(subject to materiality thresholds, where
appropriate, to be mutually agreed):
i) Corporate existence.
ii) Corporate power and
authority/enforceability.
iii) No violation of law or organizational
documents or material contracts.
iv) No material litigation or contingent
liabilities.
v) Correctness of financial statements
and other financial information and
no material adverse change.
vi) As of the date of funding of any
loans under the Facilities, no
required governmental or third party
approvals and consents (except as
have been obtained and which are in
full force and effect, including,
without limitation, those of the New
York PSC, the NRC and FERC).
vii) Use of proceeds/compliance with
margin regulations.
viii) Environmental matters.
ix) Payment of taxes.
x) Not an investment company or public
utility holding company.
xi) Compliance with laws (including
ERISA).
xii) Title to properties, leases.
7
<PAGE>
xiii) No default or event of default.
COVENANTS: Those covenants usual and customary for this
type of credit facility, and such additional
covenants as are appropriate under the
circumstances (with customary exceptions to
be agreed upon), all such covenants to be
applicable to Bidco, NYSEG and their
respective subsidiaries. Although the
covenants have not yet been specifically
determined, it is anticipated that the
covenants shall in any event include:
i) Limitations on incurrence of Bidco
indebtedness and NYSEG indebtedness
with customary exceptions.
ii) Limitations on mergers, acquisitions,
joint ventures, partnerships and
acquisitions and dispositions of
assets.
iii) Limitations on sale-leaseback
transactions and lease payments.
iv) Limitations on restricted payments
(including prohibition on the payment
of dividends), although dividends may
be payable in an amount not to exceed
100% of net income, subject (in each
case both immediately before and
after giving effect thereto) to
absence of default or event of
default, compliance with financial
covenant tests and maintenance of
senior unsecured debt ratings of not
less than investment grade by both
Moody's and S&P.
v) Limitations on prepayments of other
indebtedness and amendments thereto,
and amendments to organizational
documents.
vi) Limitations on transactions with
affiliates.
vii) Limitations on investments.
viii) Maintenance of existence and
properties.
ix) Limitations on liens.
x) Financial Covenants set forth below
at levels to be determined and
agreed upon:
o Fixed Charge Coverage Ratio
o EBITDA to Interest
o Debt to Total Capitalization
xi) Obligation to repay or refinance all
existing bank debt.
xii) Adequate insurance coverage.
xiii) ERISA covenants.
xiv) Financial reporting, notice of
material events and visitations and
inspection rights.
8
<PAGE>
xv) Compliance with laws, including
environmental.
xvi) Payment of taxes.
xvii) Lines of business.
xviii) Limitation on dividend and other
payment restrictions affecting
subsidiaries.
xix) Restriction on changes to Merger
Agreement.
EVENTS OF DEFAULT: Those events of default usual and customary
for this type of facility, and such
additional events of default as are
appropriate under the circumstances,
including but not limited to:
i) Failure to pay principal, interest,
fees and other amounts under the
Credit Documents when due (subject,
other than in the case of payment of
principal, to customary grace
periods).
ii) Violation of covenants under the
Credit Documents (with grace periods
for certain covenants, where
appropriate).
iii) Representations and warranties not
true and correct in any material
respect.
iv) Cross default and cross acceleration
to indebtedness in each case in
excess of a certain dollar threshold
(to be determined).
v) Judgment defaults in excess of a
certain dollar threshold (to be
determined).
vi) Bankruptcy and insolvency of
Borrower, NYSEG or any of their
respective material subsidiaries.
vii) Change of ownership or control.
viii) ERISA.
ix) Failure of the Merger to be
consummated within 6 months of
initial funding of the Facilities,
provided that two additional 3 month
periods shall be permitted if the
reason for the failure of the Merger
to have been consummated within
such initial 6 month period (or, in
the case of the second 3 month
period, within the initial extended 3
month period) is the failure to
obtain final regulatory approvals
necessary for such Merger, which
regulatory approvals are reasonably
expected (in the judgment of the
Administrative Agent) to be obtained
within each extended 3 month period
and provided that the Borrower has
taken all necessary action to obtain
such regulatory approvals and
diligently pursues the same.
9
<PAGE>
ASSIGNMENT AND The Borrower may not assign its rights or
PARTICIPANTS: obligations under the Facilities without the
prior written consent of the Lenders. Any
Lender may assign, and may sell
participations in, its rights and
obligations under the Facilities, subject
(x) in the case of participations, to
customary restrictions on the voting rights
of the participants, (y) in the case of
assignments, the payment of a fee equal to
$3,500 to the Administrative Agent by the
assignor or assignee Lender (other than in
connection with an assignment to another
existing Lender, an existing Lender's
affiliate or to a Federal Reserve Bank) and
a minimum assignment amount of $5MM (other
than in connection with an assignment to
another existing Lender, and existing
Lender's affiliate or to a Federal Reserve
Bank) and to the consent of the Borrower,
the Administrative Agent and the issuing
Lender, such consent, in each case, not to
be unreasonably withheld. Assignments will
be by novation.
COST AND YIELD Usual for facilities and transactions of
PROTECTIONS: this type including, without limitation,
reserve adjustments for LIBOR.
GOVERNING LAW: The rights and obligations of the parties
under the Credit Documents shall be
construed in accordance with and governed by
the law of the State of New York.
INDEMNIFICATION: The Credit Documents will contain customary
indemnities for the Administrative Agent and
the Lenders and their respective affiliates,
officers, directors and controlling persons
(other than as a result of such indemnified
person's gross negligence or willful
misconduct).
REQUIRED LENDERS: 51%.
COUNSEL FOR ARRANGER: Skadden, Arps, Slate, Meagher & Flom LLP.
10
<PAGE>
SCHEDULE I
Pricing Grid
The Eurodollar Loan Margin, the Base Rate Loan Margin and the rate for
Commitment Fees shall be determined in accordance with this Pricing Grid based
upon Bidco's Senior Unsecured Long-Term Debt Ratings established by S&P and
Moody's as follows:
<TABLE>
<CAPTION>
SENIOR UNSECURED LONG- EURODOLLAR BASE RATE
TERM DEBT RATINGS LOAN LOAN COMMITMENT
----------------------- MARGIN MARGIN FEE
CATEGORY S&P MOODY'S
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 BBB Baa2 50 bps 0 pbs 18.75 bps
2 BBB- Baa3 70 bps 0 bps 25 bps
3 BB+ Ba1 100 bps 0 bps 37.5 bps
4 BB Ba2 150 bps 50 bps 50 bps
</TABLE>
If Bidco is split-rated and the ratings differential is one level, the lower
rating will apply. If Bidco is split-rated and the ratings differential is two
levels or more, the rating at the midpoint will apply. If there is no midpoint
rating, the lower of the two intermediate ratings will apply. If there is no
unsecured debt rating of Bidco, Category 2 will apply.
11
<PAGE>
CREDIT SUISSE FIRST BOSTON LEHMAN COMMERCIAL PAPER INC.
August 6, 1997
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Re: Commitment Letter
Dear Gentlemen:
CalEnergy Company, Inc., a Delaware corporation (the
"Company"), intends to amend and restate the Amended and Restated Credit
Agreement, dated as of July 8, 1996 (as currently in effect, the "Existing
Credit Agreement") among the Company, the banks and other financial
institutions parties thereto, Credit Suisse First Boston ("CSFB") and National
Westminster Bank PLC ("NatWest") as L/C Issuers, NatWest, as Documentation
Agent, CSFB, as Administrative Agent and CSFB and NatWest as Co-Arrangers, as
described herein. You have requested CSFB and Lehman Commercial Paper Inc
("LB") to commit to provide the entirety of such amended and restated facility
which will be in the form of a 3-year revolving loan and standby letter of
credit facility in the amount of U.S. $250 million (such amended and restated
facility, the "Credit Facility"). A summary of the terms and conditions of the
Credit Facility will be the same as those set forth in the Existing Credit
Agreement with only such changes as are set forth in the attached Summary of
Terms and Conditions (the "Term Sheet").
We are pleased to confirm that CSFB and LB each hereby
commits (the "Commitments") to provide one-half of the entire Credit Facility
on the terms and conditions set forth herein and in the Term Sheet. Those
matters that are not covered or made clear herein or in the Term Sheet are
subject to mutual agreement of the parties. In addition, the commitment of
CSFB and LB is subject to: (a) the preparation, execution and delivery of
mutually acceptable loan documentation, including a credit agreement
incorporating substantially the terms and conditions outlined herein and in
the Term Sheet; (b) the absence of any material adverse change in the
business, assets, operations, properties, prospects or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole, since
December 31, 1996; (c) our not becoming aware after
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 2
the date hereof of any information or other matter which is inconsistent in a
material manner with any information or other matter disclosed to us prior to
the date hereof; (d) prior to December 31, 1997, the absence of any competing
bank credit for, or debt securities of, the Company, being arranged, offered
or placed, other than the facilities described in separate letters among us,
unless the syndication has been completed as agreed among the parties prior to
such date; (e) the Co-Arrangers shall be satisfied with the financial
projections concerning the Company and its subsidiaries which have been or
will be prepared and delivered to the Co-Arrangers in connection with the
Credit Facility and (f) the other conditions set forth in the Term Sheet.
In connection with the Credit Facility, CSFB shall act as
sole administrative agent, CSFB and LB shall act as co-arrangers and LB shall
act as documentation agent. You agree that no other entity shall have any
title with respect to the Credit Facility or shall be appointed in the
capacity of agent, co-agent or arranger without the consent of the Company,
CSFB and LB. We reserve the right, prior to or after execution of the
definitive documentation for the Credit Facility, to syndicate all or part of
our commitment to one or more financial institutions or other "accredited
investors" (as defined in Regulation D of the Securities Act of 1933, as
amended) reasonably acceptable to the Company, CSFB and LB (collectively, the
"Lenders" and each a "Lender") that will become parties to such definitive
documentation pursuant to a syndication to be managed and controlled in all
respects by CSFB and LB (including, without limitation, as to the timing of
all offers to potential Lenders and acceptance of commitments, the amounts
offered and the compensation provided to potential Lenders) and that CSFB
would act as the sole and exclusive administrative agent for such Lenders (in
such capacity, the "Agent"). By your acceptance hereof, you agree both before
and after the closing of the Credit Facility to actively assist us in
achieving a syndication that is satisfactory to us, which assistance shall
include but not be limited to: (a) making senior management and
representatives of the Company and its affiliates available to participate in
one or more meetings with potential Lenders at such times and places as CSFB
and LB may reasonably request; (b) using all reasonable efforts to ensure that
the syndication efforts benefit from the Company's and its affiliates'
existing banking relationships; and (c) providing CSFB and LB with information
reasonably deemed necessary to complete the syndication successfully,
including, without limitation, the preparation of such offering materials as
CSFB and LB may reasonably request.
The Company hereby represents, warrants and covenants that
(x) all information (other than projections) and data concerning the Company
and its subsidiaries which has been or is hereafter furnished or otherwise
made available to CSFB and LB by the Company or any of its representatives in
connection with the transactions contemplated hereby is and will be complete
and correct in all material respects and does not and will
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 3
not contain any untrue statement of a material fact or omit to state a
material fact necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements are made
and (y) all financial projections concerning the Company and its subsidiaries
which have been or are hereafter made available to CSFB and LB or any Lender
have been or will be prepared based upon reasonable assumptions and will
constitute the Company's good faith estimate of the items projected. In
issuing this commitment and undertaking, CSFB and LB relying on the accuracy
of the information furnished by the Company and on the Company's behalf.
To induce us to issue this letter, the Company hereby agrees
to pay on demand, whether or not the Credit Facility is closed or signed, all
reasonable costs and expenses (including the reasonable fees and expenses of
Skadden, Arps, Slate, Meagher & Flom LLP as counsel to the Agent, any local
counsel retained to represent the Agent and all of the out-of-pocket expenses
of CSFB, LB and their respective affiliates) incurred by CSFB and LB in
connection with the preparation, execution and delivery of this letter and the
definitive financing agreements for the Credit Facility (and our due diligence
and syndication efforts in connection therewith). In addition, you hereby
agree to pay when and as due the fees described in the Fee Letter referred to
below. You further agree to indemnify and hold harmless CSFB, LB, each Lender
and each director, officer, employee and affiliate thereof (each an
"indemnified person") in connection with any losses, claims, damages,
liabilities or other expenses to which any such indemnified person may become
subject, insofar as such losses, claims, damages, liabilities (or actions or
other proceedings commenced or threatened in respect thereof) or other
expenses arise out of or in any way relate to or result from this letter (or
any element thereof) or the extension of the Credit Facility contemplated by
this letter, or in any way arise from any use or intended use of this letter
or the proceeds of any of the Credit Facility contemplated by this letter, and
you agree to reimburse each indemnified person for any reasonable legal or
other expenses incurred in connection with investigating, defending or
participating in any such loss, claim, damage, liability or action or other
proceeding (whether or not such indemnified person is a party to any action or
proceeding out of which any such expenses arise), provided that you shall have
no obligation hereunder to indemnify any indemnified person for any loss,
claim, damage, liability or expense to the extent it is determined by final
judgment of a court of competent jurisdiction to have resulted from the gross
negligence or willful misconduct of such indemnified person. This letter is
furnished for your benefit, and may not be relied upon by any other person or
entity. Neither CSFB, LB, any Lender nor any of their respective affiliates
shall be responsible or liable to you or any other person for consequential
damages which may be alleged as a result of this letter.
CSFB and LB each reserves the right to employ the services
of their respective affiliates in providing the services contemplated by this
letter and to allocate,
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 4
in whole or in part, to such affiliates certain fees payable to CSFB and LB in
such manner as CSFB and LB and their respective affiliates may agree in their
sole discretion. You acknowledge that CSFB and LB may share with any of their
respective affiliates, and such affiliates may share with CSFB and LB, any
information relating to the Company and its respective subsidiaries and
affiliates (including, without limitation, any non-public information
regarding the Company and its subsidiaries and affiliates), subject to CSFB's
and LB's maintaining the confidential treatment of such confidential
information.
The provisions of the two immediately preceding paragraphs
shall survive any termination of this letter.
The provisions of this letter are supplemented as set forth
in a separate fee letter dated the date hereof from us to you (the "Fee
Letter") and are subject to the terms of such Fee Letter. By executing this
letter, you acknowledge that this letter, the Term Sheet and the Fee Letter
are the only agreements between you, CSFB and LB with respect to the Credit
Facility and set forth the entire understanding of the parties with respect
thereto. None of this letter, the Term Sheet nor the Fee Letter may be changed
except pursuant to a writing signed by each of the parties hereto.
You agree that this letter is for your confidential use only
and you are not authorized to show or disclose this letter or the contents
thereof in any public filing or announcement or to any other person or entity
(other than your legal and financial advisors in connection with your
evaluation hereof and on a confidential basis) provided that after such time
as you have accepted this letter and the Fee Letter as provided below you may
make such disclosure of this letter (but not the Fee Letter) as is required by
law or regulation in the opinion of your counsel. If this letter is not
accepted by you as provided below, you are directed to immediately return this
letter (and any copies hereof) to CSFB.
Our commitment pursuant to this letter shall terminate at
5:00 p.m. (New York time) on August 6, 1997 unless you shall have accepted
this letter and the enclosed fee letter on or prior to such date and shall in
any event terminate at 5:00 p.m. (New York time) on October 15, 1997 unless
definitive credit documentation acceptable to each of us has been executed and
delivered.
If you are in agreement with the foregoing, please sign and
return to CSFB the two enclosed copies of this letter, together with two
executed copies of the accompanying fee letter fully executed by the parties
thereto. This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 5
of which when executed and delivered shall be an original, but all of which
shall together constitute one and the same instrument. This letter, the Term
Sheet and the Fee Letter shall be governed by and construed in accordance with
the laws of the State of New York. the Company hereby irrevocably waives all
rights to trial by jury of any actions, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to this
letter, the transactions contemplated hereby or the actions of CSFB or LB in
negotiation, performance or enforcement hereof.
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 6
We are pleased to have been given the opportunity to assist
you in connection with the Credit Facility.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ Richard Carey
---------------------------
Title: Director
By: /s/ James Moran
---------------------------
Title: Director
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Dennis J. Dee
------------------------------
Title: Authorized Signatory
Agreed to and Accepted this 6th day of August, 1997.
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
--------------------------
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
Borrower: CalEnergy Company, Inc. ("CalEnergy"). CalEnergy is
referred to herein as "Borrower."
Purpose: Borrowings shall be used for general corporate
purposes, including permitted new business
developments and acquisitions.
Amount: $250,000,000 (the "Credit Facility").
Co-Arrangers: Credit Suisse First Boston and Lehman Commercial
Paper Inc.
Administrative
Agent: Credit Suisse First Boston (in such capacity, the
"Agent").
Documentation
Agent: Lehman Commercial Paper Inc.
Letter of Credit
Issuer: Credit Suisse First Boston.
Banks: A syndicate of financial institutions acceptable to
Borrower and the Co-Arrangers.
Facility
Description: A fully revolving credit facility with a final
maturity on the third anniversary of the Closing
Date. On the second and third anniversary of
closing, the Credit Facility may be extended for
a one-year period at the request of Borrower,
subject to the consent of all of the Banks.
Borrower may utilize up to $100,000,000 of the
Credit Facility to request Letters of Credit.
The Credit Agreement will provide that: (1) for at
least one period of 30 consecutive days or at least
three periods of 15 consecutive days each in each
12-month period, there shall
<PAGE>
be no outstanding Loans or unreimbursed drawings
under Letters of Credit, and (2) Letters of Credit
may not be used to fund, directly or indirectly,
any debt service reserve.
Rank: The Credit Facility will be pari passu with all
existing and future senior indebtedness of the
Borrower, subject to permitted liens set forth in
the covenant relating to negative pledge of the
Borrower described below.
Borrowing Options: Eurodollar Rate and Base Rate.
Eurodollar Rate will be adjusted for reserves and
other regulatory requirements.
Base Rate means the higher of Credit Suisse First
Boston's prime rate or the federal funds rate
+0.50%.
Commitment Fee: See attached pricing schedule - A per annum
fee calculated on a 360-day basis payable on the
unused portion of the facility quarterly in arrears
and on termination of the Credit Facility.
Margins on Loans: See attached pricing schedule -
Calculated on a 360-day basis (in the case of
Eurodollar Rate Loans) or a 365 or 366 day basis
(as applicable, in the case of Base Rate Loans).
Letters of
Credit Fee: See attached pricing schedule - A per annum
fee calculated on a 360-day basis payable on
Letters of Credit issued and outstanding quarterly
in arrears and on termination of the facility.
Interest Payments: Eurodollar Rate Loans, at the end of each applicable
Interest Period or quarterly, if earlier. Base Rate
Loans, on the last business day of each calendar
quarter.
Interest Periods: Eurodollar Rate Loans - 1, 2, 3 or 6 months, and,
if available, 9 or 12 months. Letters of Credit -
maximum term - 12 months.
2
<PAGE>
Drawdowns: Minimum amounts of $1 million with additional
increments of $1 million. Drawdowns are at the
Borrower's option with one business day's notice
for Base Rate Loans and three business days' notice
for Eurodollar Rate Loans.
Letters of Credit: Issuance on ten business days' notice.
Prepayments: Loans may be prepaid at the option of Borrower at
any time on at least three business days' notice in
whole or in part in minimum amounts of $1 million
and integral multiples thereof; provided that
Borrower shall be required to indemnify the Banks
for funding losses resulting from any prepayment
other than at the end of an Interest Period.
Mandatory
Repayments: Borrower is required to repay outstanding Loans or
cash collateralize outstanding Letters of Credit to
the extent that outstanding Loans and Letters of
Credit exceed the aggregate Commitments (including
by reason of any reduction of Commitments as
provided below).
Termination or
Reduction of
Commitments: CalEnergy may terminate or reduce the Commitments
in amounts of at least $5 million at any time on at
least three business days' notice.
In the event that Borrower or any of its
Subsidiaries shall at any time, or from time to
time, receive any net proceeds in excess of
$100,000,000 from Asset Dispositions made during
any fiscal year, Borrower shall give prompt written
notice thereof to the Agent, and the Commitments of
the Banks shall, at the election of Majority Banks,
be ratably reduced (pro rata with the revolving
credit facility in the maximum principal amount of
$150 million (the "Other Facility") as contemplated
by that separate commitment letter among the
Borrower and the Co-Arrangers, provided that the
Commitments, together with the commitments under
the Other Facility, shall not be reduced to an
aggregate amount less than $250 million) by such
amounts up to
3
<PAGE>
such excess and at such times as the Agent or
Majority Banks may direct.
Representations
and Warranties: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), and updated as
appropriate, as follows:
1. Organization.
2. Authorization of Credit Documents.
3. Consents.
4. No Conflicts.
5. Enforceability of Credit Documents.
6. Title to Property; Sufficiency of Assets.
7. Compliance with Law.
8. No Litigation.
9. Events of Default.
10. Financial Condition.
11. No Material Adverse Effect.
12. No Default.
13. No Burdensome Restrictions.
14. Taxes.
15. ERISA and IRC Compliance Liability.
16. Funding.
4
<PAGE>
17. Prohibited Transactions and Payments.
18. No Termination Event.
19. ERISA Litigation.
20. No Other Obligations.
21. Margin Regulations.
22. Investment Company Act and Public Utility
Holding Company Act of 1935.
23. Environmental Matters.
24. Disclosure.
25. Insurance.
26. SEC Filings of Borrower.
27. Projections (to conform to requirements
set forth therefor in the Commitment
Letter)*.
28. Patents, Licenses, Franchises and Formulas.
Conditions
Precedent
to Closing: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), and updated as
appropriate, as follows:
1. Certificate of Incorporation or
Organizational Documents.
2. Certificate of Good Standing.
3. Certificate of Qualification.
4. By-laws and Resolutions.
5
<PAGE>
5. Incumbency Certificate.
6. Opinions of Counsel.
7. Fees.
8. Notes.
9. Notice of Borrowing or Request for Letter
of Credit Issuance.
10. Officer's Certificate.
11. Confirmation of Agent for Service.
12. Financial Statements.
13. Performance of Agreements.
14. Government Approvals and Litigation.
15. Material Adverse Effect.
16. Projections.
17. Compliance with Margin Regulations.*
Conditions to
all Borrowings
and Issuance: 1. Accuracy of representations and warranties,
including absence of material adverse
change to the Borrower.
2. Absence of default.
3. The sum of all Loans and Letters of Credit
obligations shall not exceed the total
amount of all Commitments.
Covenants: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), as follows:
6
<PAGE>
1. Payment of Taxes.
2. Maintenance of Insurance.
3. Preservation of Corporate Existence.
4. Compliance with Laws.
5. Inspection Rights.
6. Keeping of books by Borrower and its
Subsidiaries in accordance with GAAP.
7. Maintenance of Properties.
8. Reporting Requirements.
9. Use of Proceeds.
10. Use of Net Cash Proceeds from Asset
Dispositions. In the event that the Borrower's
senior unsecured debt rating established by
Standard and Poors Inc. or Moody's Investor
Services Inc. is at least BB- or Ba3, respectively,
Borrower shall use the Net Cash Proceeds from any
Asset Disposition within 365 days of such Asset
Disposition or receipt of the Net Cash Proceeds
thereof to either (i) invest in the business of
Borrower, any of its Restricted Subsidiaries or any
Eligible Joint Venture or (ii) apply such Net Cash
Proceeds to the payment of any Debt of Borrower or
any of its Restricted Subsidiaries or any Eligible
Joint Venture (or as otherwise required under the
terms of such Debt), provided that, no such payment
of Debt (A) under the Credit Agreement evidencing
the Credit Facility or any other revolving credit
agreement shall count for this purpose unless the
related loan commitment, standby facility or the
like shall be permanently reduced by an amount
equal to the principal amount so repaid and (B)
owed to Borrower, a Restricted Subsidiary thereof
or an Eligible Joint Venture shall count for this
purpose. If in the case of any sale of assets
located outside the United States, repatriation of
proceeds is prohib-
7
<PAGE>
ited or delayed under applicable law, or such
registration would result in material adverse tax
consequences to Borrower, Borrower's obligations in
respect of the applicable net proceeds may be
returned outside the United States until such
prohibition, delay or adverse consequence no longer
continues.*
Remainder of this covenant shall be the same as set
forth in the Existing Credit Agreement.
11. Negative pledge with respect to Borrower
with customary exceptions.
12. Negative pledge with respect to Restricted
Subsidiaries and Eligible Joint Ventures with
customary exceptions.
13. Limitations on Fundamental Changes.
14. Nature of business.
15. Fiscal Year.
16. Limitations on transactions with
affiliates.
17. Restricted Payments.
18. Limitations on Debt. Borrower shall not
create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any
Debt, except:
(i) subject to clean-up periods, the
Obligations under the Credit
Agreement; and
(ii) other Debt the incurrence of which
was permitted under the
following proviso;
provided that no Debt may be incurred by Borrower,
unless after giving effect thereto, (i) no Default
or Event of Default would exist or be created
thereby, (ii) the Borrower's senior unsecured debt
is rated at least both BB- by Standard &
8
<PAGE>
Poors Inc. and Ba3 by Moody's Investor Services
Inc., and (iii) either (after giving effect to such
incurrence, the use of the proceeds thereof and
giving pro forma effect to acquisitions and
dispositions as of the beginning of the measurement
period) (A) the Cash Flow Coverage Ratio is not
less than 2.00 to 1.00 as of the date of incurrence
of such Debt or (B) the Borrower's senior unsecured
debt rating shall not be downgraded below BB or
Ba2, as the case may be.*
Other provisions of this covenant shall be as set
forth in the Existing Credit Agreement.
19. Subordinated Debt.
20. Compliance with ERISA.
21. No Restrictions on Distributions.
22. Limitation on Certain Sale-Leasebacks.
23. Limitation on Sale of Subsidiary Preferred
Stock.
24. Restrictions on Acquisitions, Etc.*
Borrower shall not, and shall not permit any of its
Restricted Subsidiaries or any Eligible Joint
Venture to, in any fiscal year, make any
acquisition of any capital stock or equity interest
of any person or entity (other than investments in
Restricted Subsidiaries or Eligible Joint Ventures
made in connection with the development,
construction, design, operation, servicing or
management of one or more newly developed or
constructed or existing Permitted Facilities), or
the purchase or acquisition of all or a substantial
part of the assets or business of, any person or
entity unless, after giving effect to any such
purchase or acquisition, the equity contribution
component of any such purchase or acquisition price
to be paid in such cash therefor, together with the
equity contribution component of any such cash
purchase or acquisition price of all other
purchases and acquisitions during such year
(excluding the acquisition of New York State
Electric & Gas Corporation or any equity interests
therein), does not
9
<PAGE>
exceed 5.00 times the Parent Net Operating Cash
Flow (defined as the sum of dividends from any
Subsidiary, management fees, royalty fees, net
proceeds from exercise of options granted to
purchase capital stock of Borrower, tax sharing
payments, consulting service revenues, interest
income on cash held by Borrower, and all other cash
flows from Subsidiaries to Borrower other than the
proceeds of any material disposition of any
interest therein other than in connection with a
recapitalization, minus corporate overhead,
development costs, royalty payments of Borrower,
taxes of Borrower and its Subsidiaries and all
distributions to Subsidiaries (whether in the form
of loans, advances, capital contributions,
management fees, or otherwise)) for such year.
25. Cash Flow Coverage Ratio.
26. Total Debt to Cash Flow Ratio.
27.* Consolidated EBITDA to Consolidated
Interest Expense. On a trailing four quarters
basis, the ratio of Consolidated EBITDA (defined as
earnings before interest, taxes, depreciation and
amortization on a consolidated basis) to
Consolidated Interest Expense (defined as total
interest expense of the Borrower on a consolidated
basis) shall not be greater than the levels to be
mutually agreed upon.
28.* Consolidated Debt to Capital. On a trailing
four quarters basis, the ratio of Consolidated
Total Debt to Capital (defined as the sum of
Consolidated Total Debt of the Borrower plus
stockholders' equity of the Borrower and its
Subsidiaries shall not be greater than the levels
to be mutually agreed upon.
Events of Default: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *) as follows:
1. Failure to pay any interest, principal, or
fees payable under the Credit Agreement when due.
10
<PAGE>
2. Violation of any covenant or agreement in
the Credit Agreement (subject to grace periods and
cure rights, where appropriate).
3. Representations or warranties false in any
material respect when made.
4. Borrower shall fail to make any payment of
principal of $1 million or more with respect to
debt, within any applicable grace period, whose
aggregate principal amount is $50 million or more
or any interest or premium thereon, when due.
5. Change of ownership or control. Triggers
if a person or group, other than the Kiewit
Entities, acquires more than 35% of the voting
stock of Borrower.*
6. An event of default shall have occurred
under the Indenture, dated as of March 24, 1994,
between the Borrower and IBJ Schroder Bank & Trust
Company, relating to Borrower's 10 1/4% Senior
Discount Notes due 2004, in the aggregate amount of
$529,640,000, in the Indenture, dated as of
September 20, 1996, between the Borrower and IBJ
Schroder Bank & Trust Company, relating to
Borrower's 9 1/2% Senior Notes due 2006, in the
aggregate amount of $225,000,000 or in respect of
any other agreement evidenc ing debt with an
aggregate original principal amount of $100,000,000
or more.*
7. Other usual defaults with respect to
Borrower and its Subsidiaries, relating to taxes,
insolvency, bankruptcy, ERISA, judgment defaults
and invalidity of any provision of any credit
document (if such invalidity is reasonably expected
to have a Material Adverse Effect (as defined in
the Existing Credit Agreement).
11
<PAGE>
Increased Costs/
Change of
Circumstances: The Credit Agreement will contain provisions the
same as set forth in the Existing Credit Agreement
with respect to protecting the Banks in the event
of unavailability of funding, illegality, increased
costs and funding losses.
Indemnification: Borrower will indemnify the Banks the same as set
forth in the Existing Credit Agreement with respect
to all losses, liabilities, claims, damages, or
expenses relating to their Loans, the Letters of
Credit, the Credit Agreement, Borrower's use of
Loan proceeds or the Commitments, including but not
limited to reasonable attorneys' fees and
settlement costs.
Assignments and
Participation: Banks will have the right to transfer or sell
participations in their Loans, Letter of Credit
participations or Commitments, the same as set
forth in the Existing Credit Agreement with
respect to with the transferability of voting
rights limited to changes in principal, rate, fees
and term. Assignments, which must be in amounts
of at least $5 million, will be allowed with the
consent of Borrower and the Agent, provided that no
such consent shall be required for assignment
within the Bank group, to Banks' affiliates or to
the Federal Reserve Bank.
Co-Arrangers'
Counsel: Skadden, Arps, Slate, Meagher & Flom LLP.
Governing Law: State of New York.
12
<PAGE>
PRICING SCHEDULE
The "Applicable Margin," "Applicable Commitment Fee Rate"
and "Applicable L/C Fee Rate" for any day are the respective percentages set
forth below in the applicable row under the column corresponding to the Status
that exists on such day:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Status Level I Level II Level III Level IV Level V
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Applicable Margin -
Eurodollar Rate Loans 0.75% 1.25% 1.50% 1.75% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
Applicable Margin -
Base Rate Loans 0.00% 0.00% 0.25% 0.50% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Applicable Commit-
ment Fee Rate 0.25% 0.30% 0.30% 0.375% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
Applicable L/C Fee
Rate 0.75% 1.25% 1.50% 1.75% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date,
Borrower's senior unsecured long-term debt is rated both BBB- or higher by S&P
and Baa3 or higher by Moody's.
"Level II Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB+ or higher by S&P
and Ba1 or higher by Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB or higher by S&P
and Ba2 or higher by Moody's and (ii) neither Level I Status nor Level II
Status exists.
"Level IV Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB- or higher by S&P
and Ba3 or higher by Moody's and (ii) none of Level I Status, Level II Status
and Level III Status exists.
13
<PAGE>
"Level V Status" exists at any date if, at such date, no
other Status exists.
"Status" refers to the determination which of Level I
Status, Level II Status, Level III Status, Level IV Status or Level V Status
exists at any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of Borrower
(including, if no senior unsecured long-term debt securities of Borrower are
outstanding, any such ratings that Moody's or S&P has explicitly stated may be
implied from the ratings it has assigned to Borrower's outstanding
subordinated unsecured long-term debt securities) without third-party credit
enhancement, and any rating assigned to any other debt security of Borrower
shall be disregarded. The rating in effect at any date is that in effect at
the close of business on such date.
14
<PAGE>
CREDIT SUISSE FIRST BOSTON LEHMAN COMMERCIAL PAPER, INC.
August 6, 1997
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Re: Commitment Letter
Dear Gentlemen:
You have advised Credit Suisse First Boston ("CSFB") and
Lehman Commercial Paper Inc. ("LB" and, together with CSFB, sometimes referred
to as "us" or "we"), that senior bank financing is required by the CalEnergy
Company, Inc., a Delaware corporation (the "Company"), and that such financing
will be in the form of a 3-year revolving credit facility in the amount of
U.S. $150 million (the "Credit Facility"). The Credit Facility will be
evidenced by a credit agreement substantially in the form of the Amended and
Restated Credit Agreement, dated as of July 8, 1996 (as currently in effect,
the "Existing Credit Agreement") among the Company, the banks and other
financial institutions parties thereto, CSFB and National Westminster Bank PLC
("NatWest"), as L/C Issuers, NatWest, as Documentation Agent, CSFB, as
Administrative Agent and CSFB and NatWest, as Co-Arrangers. The terms and
conditions of the Credit Facility will be the same as the Existing Credit
Facility with only such changes as are set forth in the attached Summary of
Certain Terms and Conditions (the "Term Sheet").
We are pleased to confirm that CSFB and LB each hereby
commits (the "Commitments") to provide one-half of the entire Credit Facility
on the terms and conditions set forth herein and in the Term Sheet. Those
matters that are not covered or made clear herein or in the Term Sheet are
subject to mutual agreement of the parties. In addition, the commitment of
CSFB and LB is subject to: (a) the preparation, execution and delivery of
mutually acceptable loan documentation, including a credit agreement
incorporating substantially the terms and conditions outlined herein and in
the Term Sheet; (b) the absence of any material adverse change in the
business,
<PAGE>
assets, operations, properties, prospects or condition (financial or
otherwise) of the Company and its subsidiaries, taken as a whole, since
December 31, 1996; (c) our not becoming aware after the date hereof of any
information or other matter which is inconsistent in a material manner with
any information or other matter disclosed to us prior to the date hereof; (d)
prior to December 31, 1997, the absence of any competing bank credit for, or
debt securities of, the Company being arranged, offered or placed, other than
the facilities described in separate letters among us, unless the syndication
has been completed as agreed among CSFB, LB and the Company prior to such
date, (e) the Co-Arrangers shall be satisfied with the financial projections
concerning the Company and its subsidiaries in connection with the Credit
Facility, and (f) the other conditions set forth in the Term Sheet (including,
without limitation, additional conditions precedent which, although not set
forth expressly in the Term Sheet, shall be agreed to among the Company, CSFB,
LB and the Lenders (as hereinafter defined), which additional conditions may,
depending on the facts and circumstances existing at the time such Credit
Facility is to be drawn, be similar to those listed as conditions precedent to
the $250 million revolving credit facility as set forth in that separate
commitment letter, dated as of the date hereof, among the Company, CSFB and LB
(including those set forth in the Term Sheet referred to therein) and/or those
conditions precedent to the $500 million bridge loan facility as set forth in
the commitment letter, dated the date hereof, among the Company, CSFB and LB
relating to such bridge loan facility and/or other mutually agreed
conditions).
In connection with the Credit Facility, CSFB shall act as
sole administrative agent, CSFB and LB shall act as co-arrangers and LB shall
act as documentation agent. You agree that no other entity shall have any
title with respect to the Credit Facility, or shall be appointed in the
capacity of agent, co-agent or arranger without the consent of the Company,
CSFB and LB. We reserve the right, prior to or after execution of the
definitive documentation for the Credit Facility, to syndicate all or part of
our commitment to one or more financial institutions or other "accredited
investors" (as defined in Regulation D of the Securities Act) reasonably
acceptable to the Company, CSFB and LB (collectively, the "Lenders" and each a
"Lender") that will become parties to such definitive documentation pursuant
to a syndication to be managed and controlled in all respects by CSFB and LB
(including, without limitation, as to the timing of all offers to potential
Lenders and acceptance of commitments, the amounts offered and the
compensation provided to potential Lenders) and that CSFB would act as the
sole and exclusive administrative agent for such Lenders (in such capacity,
the "Agent"). By your acceptance hereof, you agree both before and after the
closing of the Credit Facility to actively assist us in achieving a
syndica-
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 3
tion that is satisfactory to us, which assistance shall include but not be
limited to: (a) making senior management and representatives of the Company
and its affiliates available to participate in one or more meetings with
potential Lenders at such times and places as CSFB and LB may reasonably
request; (b) using all reasonable efforts to ensure that the syndication
efforts benefit from the Company's and its affiliates' existing banking
relationships; and (c) providing CSFB and LB with information reasonably
deemed necessary to complete the syndication successfully, including, without
limitation, the preparation of such offering materials as CSFB and LB may
reasonably request.
The Company hereby represents, warrants and covenants that
(x) all information (other than projections) and data concerning the Company
and its subsidiaries which has been or is hereafter furnished or otherwise
made available to CSFB and LB by the Company or any of its representatives in
connection with the transactions contemplated hereby is and will be complete
and correct in all material respects and does not and will not contain any
untrue statement of a material fact or omit to state a material fact necessary
in order to make the statements contained therein not misleading in light of
the circumstances under which such statements are made and (y) all financial
projections concerning the Company and its subsidiaries which have been or are
hereafter made available to CSFB and LB or any Lender have been or will be
prepared based upon reasonable assumptions and will constitute the Company's
and Bidco's good faith estimate of the items projected. In issuing this
commitment and undertaking, CSFB and LB relying on the accuracy of the
information furnished by the Company and Bidco and on the Company's and
Bidco's behalf.
To induce us to issue this letter, the Company hereby agrees
to pay on demand, whether or not the Credit Facility is closed or signed, all
reasonable costs and expenses (including the reasonable fees and expenses of
Skadden, Arps, Slate, Meagher & Flom LLP as counsel to the Agent, any local
counsel retained to represent the Agent and all of the out-of-pocket expenses
of CSFB, LB and their respective affiliates) incurred by CSFB and LB in
connection with the preparation, execution and delivery of this letter and the
definitive financing agreements for the Credit Facility (and our due diligence
and syndication efforts in connection therewith). In addition, you hereby
agree to pay when and as due the fees described in the Fee Letter referred to
below. You further agree to indemnify and hold harmless CSFB, LB, each Lender
and each director,
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 4
officer, employee and affiliate thereof (each an "indemnified person") in
connection with any losses, claims, damages, liabilities or other expenses to
which any such indemnified person may become subject, insofar as such losses,
claims, damages, liabilities (or actions or other proceedings commenced or
threatened in respect thereof) or other expenses arise out of or in any way
relate to or result from this letter (or any element thereof) or the extension
of the Credit Facility contemplated by this letter, or in any way arise from
any use or intended use of this letter or the proceeds of any of the Credit
Facility contemplated by this letter, and you agree to reimburse each
indemnified person for any reasonable legal or other expenses incurred in
connection with investigating, defending or participating in any such loss,
claim, damage, liability or action or other proceeding (whether or not such
indemnified person is a party to any action or proceeding out of which any
such expenses arise), provided that you shall have no obligation hereunder to
indemnify any indemnified person for any loss, claim, damage, liability or
expense to the extent it is determined by final judgment of a court of
competent jurisdiction to have resulted from the gross negligence or willful
misconduct of such indemnified person. This letter is furnished for your
benefit, and may not be relied upon by any other person or entity. Neither
CSFB, LB, any Lender nor any of their respective affiliates shall be
responsible or liable to you or any other person for consequential damages
which may be alleged as a result of this letter.
CSFB and LB each reserves the right to employ the services
of their respective affiliates in providing the services contemplated by this
letter and to allocate, in whole or in part, to such affiliates certain fees
payable to CSFB and LB in such manner as CSFB and LB and their respective
affiliates may agree in their sole discretion. You acknowledge that CSFB and
LB may share with any of their respective affiliates, and such affiliates may
share with CSFB and LB, any information relating to the Company and its
subsidiaries and affiliates (including, without limitation, any non-public
information regarding the Company and its subsidiaries and affiliates),
subject to CSFB's and LB's maintaining confidential treatment of such
confidential information.
The provisions of the two immediately preceding paragraphs
shall survive any termination of this letter.
The provisions of this letter are supplemented as set forth
in a separate fee letter dated the date hereof from us to
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 5
you (the "Fee Letter") and are subject to the terms of such Fee Letter. By
executing this letter, you acknowledge that this letter, the Term Sheet and
the Fee Letter are the only agreements between you, CSFB and LB with respect
to the Credit Facility and set forth the entire understanding of the parties
with respect thereto. None of this letter, the Term Sheet nor the Fee Letter
may be changed except pursuant to a writing signed by each of the parties
hereto.
You agree that this letter is for your confidential use only
and you are not authorized to show or disclose this letter or the contents
thereof in any public filing or announcement or to any other person or entity
(other than your legal and financial advisors in connection with your
evaluation hereof and on a confidential basis) provided that after such time
as you have accepted this letter and the Fee Letter as provided below you may
make such disclosure of this letter (but not the Fee Letter) as is required by
law or regulation in the opinion of your counsel. If this letter is not
accepted by you as provided below, you are directed to immediately return this
letter (and any copies hereof) to CSFB.
Our commitment pursuant to this letter shall terminate at
5:00 p.m. (New York time) on August 6, 1997 unless you shall have accepted
this letter and the enclosed fee letter on or prior to such date and shall in
any event terminate at 5:00 p.m. (New York time) on the date which is 364 days
from the date of execution of this letter unless definitive credit
documentation acceptable to each of us has been executed and delivered.
If you are in agreement with the foregoing, please sign and
return to CSFB the two enclosed copies of this letter, together with two
executed copies of the accompanying fee letter fully executed by the parties
thereto. This letter may be executed in any number of counterparts and by the
different parties hereto on separate counterparts, each of which when executed
and delivered shall be an original, but all of which shall together constitute
one and the same instrument. This letter, the Term Sheet and the Fee Letter
shall be governed by and construed in accordance with the laws of the State of
New York. The Company hereby irrevocably waives all rights to trial by jury of
any actions, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this letter, the transactions
contemplated
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 6
hereby or the actions of CSFB or LB in negotiation, performance or enforcement
hereof.
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 7
We are pleased to have been given the opportunity to assist
you in connection with the Credit Facility.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ Richard Carey
---------------------------
Title: Director
By: /s/ James Moran
---------------------------
Title: Director
LEHMAN COMMERCIAL PAPER INC.
By: /s/ Dennis J. Dee
------------------------------
Title: Authorized Signatory
Agreed to and Accepted this 6th day of August, 1997.
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
--------------------------
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
SUMMARY OF TERMS AND CONDITIONS
Borrower: CalEnergy Company, Inc. ("CalEnergy"). CalEnergy is
referred to herein as "Borrower."
Purpose: Borrowings shall be used for general corporate
purposes, including permitted new business
developments and acquisitions.
Amount: $150,000,000 (the "Credit Facility").
Co-Arrangers: Credit Suisse First Boston and Lehman Commercial
Paper Inc.
Administrative
Agent: Credit Suisse First Boston (in such capacity, the
"Agent").
Documentation
Agent: Lehman Commercial Paper Inc.
Banks: A syndicate of financial institutions acceptable to
Borrower and the Co-Arrangers.
Facility
Description: A fully revolving credit facility with a final
maturity on the third anniversary of the Closing
Date. On the second and third anniversary of
closing, the Credit Facility may be extended for a
one-year period at the request of Borrower, subject
to the consent of all of the Banks.
The Credit Agreement will provide that for at least
one period of 30 consecutive days or at least three
periods of 15 consecutive days each in each
12-month period, there shall be no outstanding
Loans.
Rank: The Credit Facility will be pari passu with all
existing and future senior indebtedness of the
Borrower, subject to permitted liens set forth in
the covenant relating to negative pledge of the
Borrower described below.
<PAGE>
Borrowing Options: Eurodollar Rate and Base Rate.
Eurodollar Rate will be adjusted for
reserves and other regulatory
requirements.
Base Rate means the higher of Credit
Suisse First Boston's prime rate or the
federal funds rate +0.50%.
Commitment Fee: See attached pricing schedule - A per
annum fee calculated on a 360-day basis
payable on the unused portion of the
Credit Facility quarterly in arrears and
on termination of the Credit Facility.
Margins on Loans: See attached pricing schedule -
Calculated on a 360-day basis (in the case
of Eurodollar Rate Loans) or a 365 or 366
day basis (as applicable, in the case of
Base Rate Loans).
Interest Payments: Eurodollar Rate Loans, at the
end of each applicable Interest Period
or quarterly, if earlier. Base Rate Loans,
on the last business day of each calendar
quarter.
Interest Periods: Eurodollar Rate Loans - 1, 2, 3
or 6 months, and, if available, 9 or 12
months.
Drawdowns: Minimum amounts of $1 million with
additional increments of $1 million.
Drawdowns are at the Borrower's option
with one business day's notice for Base
Rate Loans and three business days' notice
for Eurodollar Rate Loans.
Prepayments: Loans may be prepaid at the option of
Borrower at any time on at least three
business days' notice in whole or in part
in minimum amounts of $1 million and
integral multiples thereof; provided that
Borrower shall be required to indemnify
the Banks for funding losses resulting
from any prepayment other than at the end
of an Interest Period.
Mandatory
Repayments: Borrower is required to repay outstanding
Loans to the extent that outstanding Loans
exceed the aggregate Com-
2
<PAGE>
mitments (including by reason of any
reduction of Commitments as provided
below).
Termination or
Reduction of
Commitments: The Commitments shall terminate permanently in
their entirety in the event that the initial
funding does not occur on or prior to September 30,
1998.
CalEnergy may terminate or reduce the Commitments
in amounts of at least $5 million at any time on at
least three business days' notice.
In the event that Borrower or any of its
Subsidiaries shall at any time, or from time to
time, receive any net proceeds in excess of
$100,000,000 from Asset Dispositions made during
any fiscal year, Borrower shall give prompt written
notice thereof to the Agent, and the Commitments of
the Banks shall, at the election of Majority Banks,
be ratably reduced (pro rata with the $250 million
revolving loan and letter of credit facility
amending and restating the Existing Credit
Agreement (the "Restated Credit Agreement"),
provided that the Commitments, together with the
commitments under the Restated Credit Agreement,
shall not be reduced to an aggregate amount less
than $250 million) by such amounts up to such
excess and at such times as the Agent or Majority
Banks may direct.
Representations
and Warranties: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), and updated as
appropriate, as follows:
1. Organization.
2. Authorization of Credit Documents.
3. Consents.
4. No Conflicts.
3
<PAGE>
5. Enforceability of Credit Documents.
6. Title to Property; Sufficiency of Assets.
7. Compliance with Law.
8. No Litigation.
9. Events of Default.
10. Financial Condition.
11. No Material Adverse Effect.
12. No Default.
13. No Burdensome Restrictions.
14. Taxes.
15. ERISA and IRC Compliance Liability.
16. Funding.
17. Prohibited Transactions and Payments.
18. No Termination Event.
19. ERISA Litigation.
20. No Other Obligations.
21. Margin Regulations.
22. Investment Company Act and Public Utility
Holding Company Act of 1935.
23. Environmental Matters.
24. Disclosure.
4
<PAGE>
25. Insurance.
26. SEC Filings of Borrower.
27. Projections (to conform to requirements
set forth therefor in the Commitment
Letter)*.
28. Patents, Licenses, Franchises and Formulas.
Conditions
Precedent
to Closing: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), and updated as
appropriate, as follows:
1. Certificate of Incorporation or
Organizational Documents.
2. Certificate of Good Standing.
3. Certificate of Qualification.
4. By-laws and Resolutions.
5. Incumbency Certificate.
6. Opinions of Counsel.
7. Fees.
8. Notes.
9. Notice of Borrowing or Request for Letter
of Credit Issuance.
10. Officer's Certificate.
11. Confirmation of Agent for Service.
12. Financial Statements.
5
<PAGE>
13. Performance of Agreements.
14. Government Approvals and Litigation.
15. Material Adverse Effect.
16. Projections.
17. Compliance with Margin Regulations.*
18. Execution and delivery of the Restated
Credit Agreement with terms consistent
with the Credit Facility.*
In addition to the foregoing, additional conditions
precedent shall be agreed to among the Borrower,
the Agent, the CoArrangers and the Lenders pursuant
to separate documentation.* In the event that the
parties fail to agree on such additional
conditions, the Borrower acknowledges that the
conditions precedent to Closing shall not be
satisfied.
Conditions to all
Borrowings and
Issuance: 1. Accuracy of representations and
warranties, including absence of material adverse
change to the Borrower.
2. Absence of default.
3. The sum of all Loans shall not exceed the
total amount of all Commitments.
Covenants: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *), as follows:
1. Payment of Taxes.
2. Maintenance of Insurance.
3. Preservation of Corporate Existence.
4. Compliance with Laws.
6
<PAGE>
5. Inspection Rights.
6. Keeping of books by Borrower and its
Subsidiaries in accordance with GAAP.
7. Maintenance of Properties.
8. Reporting Requirements.
9. Use of Proceeds.
10. Use of Net Cash Proceeds from Asset
Dispositions. In the event that the Borrower's
senior unsecured debt rating established by Standard
and Poors Inc. or Moody's Investor Services Inc. is
at least BB- or Ba3, respectively, Borrower shall
use the Net Cash Proceeds from any Asset Disposition
within 365 days of such Asset Disposition or receipt
of the Net Cash Proceeds thereof to either (i)
invest in the business of Borrower, any of its
Restricted Subsidiaries or any Eligible Joint
Venture or (ii) apply such Net Cash Proceeds to the
payment of any Debt of Borrower or any of its
Restricted Subsidiaries or any Eligible Joint
Venture (or as otherwise required under the terms of
such Debt), provided that, no such payment of Debt
(A) under the Credit Agreement evidencing the Credit
Facility or any other revolving credit agreement
shall count for this purpose unless the related loan
commitment, standby facility or the like shall be
permanently reduced by an amount equal to the
principal amount so repaid and (B) owed to Borrower,
a Restricted Subsidiary thereof or an Eligible Joint
Venture shall count for this purpose. If in the case
of any sale of assets located outside the United
States, repatriation of proceeds is prohibited or
delayed under applicable law, or such registration
would result in material adverse tax consequences to
Borrower, Borrower's obligations in respect of the
applicable net proceeds may be returned outside the
United States until such prohibition, delay or
adverse consequence no longer continues.*
7
<PAGE>
Remainder of this covenant shall be the same as set
forth in the Existing Credit Agreement.
11. Negative pledge with respect to Borrower
with customary exceptions.
12. Negative pledge with respect to Restricted
Subsidiaries and Eligible Joint Ventures with
customary exceptions.
13. Limitations on Fundamental Changes.
14. Nature of business.
15. Fiscal Year.
16. Limitations on transactions with affiliates.
17. Restricted Payments.
18. Limitations on Debt. Borrower shall not
create, incur, assume or otherwise become or remain
directly or indirectly liable with respect to any
Debt, except:
(i) subject to clean-up periods, the
Obligations under the Credit
Agreement; and
(ii) other Debt the incurrence of which
was permitted under the
following proviso;
provided that no Debt may be incurred by Borrower,
unless after giving effect thereto, (i) no Default
or Event of Default would exist or be created
thereby, (ii) the Borrower's senior unsecured debt
is rated at least both BB- by Standard & Poors Inc.
and Ba3 by Moody's Investor Services Inc., and
(iii) either (after giving effect to such
incurrence, the use of the proceeds thereof and
giving pro forma effect to acquisitions and
dispositions as of the beginning of the measurement
period) (A) the Cash Flow Coverage Ratio is not
less than 2.00 to 1.00 as of the date of incurrence
of such Debt
8
<PAGE>
or (B) the Borrower's senior unsecured debt rating
shall not be downgraded below BB or Ba2, as the
case may be.*
Other provisions of this covenant shall be as set
forth in the Existing Credit Agreement.
19. Subordinated Debt.
20. Compliance with ERISA.
21. No Restrictions on Distributions.
22. Limitation on Certain Sale-Leasebacks.
23. Limitation on Sale of Subsidiary Preferred
Stock.
24. Restrictions on Acquisitions, Etc.*
Borrower shall not, and shall not permit any of its
Restricted Subsidiaries or any Eligible Joint
Venture to, in any fiscal year, make any
acquisition of any capital stock or equity interest
of any person or entity (other than investments in
Restricted Subsidiaries or Eligible Joint Ventures
made in connection with the development,
construction, design, operation, servicing or
management of one or more newly developed or
constructed or existing Permitted Facilities), or
the purchase or acquisition of all or a substantial
part of the assets or business of, any person or
entity unless, after giving effect to any such
purchase or acquisition, the equity contribution
component of any such purchase or acquisition price
to be paid in such cash therefor, together with the
equity contribution component of any such cash
purchase or acquisition price of all other
purchases and acquisitions during such year
(excluding the acquisition of New York State
Electric & Gas Corporation or any equity interests
therein), does not exceed 5.00 times the Parent Net
Operating Cash Flow (defined as the sum of
dividends from any Subsidiary, management fees,
royalty fees, net proceeds from exercise of options
granted to purchase capital stock of Borrower, tax
sharing payments, consulting service revenues,
interest income on cash held by Borrower, and all
other cash flows
9
<PAGE>
from Subsidiaries to Borrower other than the
proceeds of any material disposition of any
interest therein other than in connection with a
recapitalization, minus corporate overhead,
development costs, royalty payments of Borrower,
taxes of Borrower and its Subsidiaries and all
distributions to Subsidiaries (whether in the form
of loans, advances, capital contributions,
management fees, or otherwise)) for such year.
25. Cash Flow Coverage Ratio.
26. Total Debt to Cash Flow Ratio.
27.* Consolidated EBITDA to Consolidated Interest
Expense. On a trailing four quarters basis, the
ratio of Consolidated EBITDA (defined as earnings
before interest, taxes, depreciation and
amortization on a consolidated basis) to
Consolidated Interest Expense (defined as total
interest expense of the Borrower on a consolidated
basis) shall not be greater than the levels to be
mutually agreed upon.
28.* Consolidated Debt to Capital. On a trailing
four quarters basis, the ratio of Consolidated
Total Debt to Capital (defined as the sum of
Consolidated Total Debt of the Borrower plus
stockholders' equity of the Borrower and its
Subsidiaries shall not be greater than the levels
to be mutually agreed upon.
Events of Default: Same as set forth in the Existing Credit Agreement
(except for changes indicated by *) as follows:
1. Failure to pay any interest, principal, or
fees payable under the Credit Agreement when due.
2. Violation of any covenant or agreement in
the Credit Agreement (subject to grace periods and
cure rights, where appropriate).
3. Representations or warranties false in any
material respect when made.
10
<PAGE>
4. Borrower shall fail to make any payment of
principal of $1 million or more with respect to
debt, within any applicable grace period, whose
aggregate principal amount is $50 million or more
or any interest or premium thereon, when due.
5. Change of ownership or control. Triggers
if a person or group, other than the Kiewit
Entities, acquires more than 35% of the voting stock
of Borrower.*
6. An event of default shall have occurred
under the Indenture, dated as of March 24, 1994,
between the Borrower and IBJ Schroder Bank & Trust
Company, relating to Borrower's 10 1/4% Senior
Discount Notes due 2004, in the aggregate amount of
$529,640,000, in the Indenture, dated as of
September 20, 1996, between the Borrower and IBJ
Schroder Bank & Trust Company, relating to
Borrower's 9 1/2% Senior Notes due 2006, in the
aggregate amount of $225,000,000, in the Restated
Credit Agreement or in respect of any other
agreement evidencing debt with an aggregate
original principal amount of $100,000,000 or more.*
7. Other usual defaults with respect to
Borrower and its Subsidiaries, relating to taxes,
insolvency, bankruptcy, ERISA, judgment defaults
and invalidity of any provision of any credit
document (if such invalidity is reasonably expected
to have a Material Adverse Effect (as defined in
the Existing Credit Agreement).
Increased Costs/
Change of
Circumstances: The Credit Agreement will contain provisions the
same as set forth in the Existing Credit Agreement
with respect to protecting the Banks in the event
of unavailability of funding, illegality, increased
costs and funding losses.
Indemnification: Borrower will indemnify the Banks the same as set
forth in the Existing Credit Agreement with respect
to all losses, liabilities, claims, damages, or
expenses relating to their Loans, the Credit
Agreement, Borrower's use of Loan
11
<PAGE>
proceeds or the Commitments, including but not
limited to reasonable attorneys' fees and
settlement costs.
Assignments and
Participation: Banks will have the right to transfer or sell
participations in their Loans or Commitments, the
same as set forth in the Existing Credit Agreement
with respect to with the transferability of
voting rights limited to changes in principal,
rate, fees and term. Assignments, which must be in
amounts of at least $5 million, will be allowed
with the consent of Borrower and the Agent,
provided that no such consent shall be required
for assignment within the Bank group, to Banks'
affiliates or to the Federal Reserve Bank.
Co-Arrangers'
Counsel: Skadden, Arps, Slate, Meagher & Flom LLP.
Governing Law: State of New York.
12
<PAGE>
PRICING SCHEDULE
The "Applicable Margin," "Applicable Commitment Fee Rate"
and "Applicable L/C Fee Rate" for any day are the respective percentages set
forth below in the applicable row under the column corresponding to the Status
that exists on such day:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Status Level I Level II Level III Level IV Level V
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Applicable Margin -
Eurodollar Rate Loans 0.75% 1.25% 1.50% 1.75% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
Applicable Margin -
Base Rate Loans 0.00% 0.00% 0.25% 0.50% 1.00%
- ---------------------------------------------------------------------------------------------------------------------
Applicable Commit-
ment Fee Rate 0.25% 0.30% 0.30% 0.375% 0.50%
- ---------------------------------------------------------------------------------------------------------------------
Applicable L/C Fee
Rate 0.75% 1.25% 1.50% 1.75% 2.25%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
For purposes of this Schedule, the following terms have the
following meanings:
"Level I Status" exists at any date if, at such date,
Borrower's senior unsecured long-term debt is rated both BBB- or higher by S&P
and Baa3 or higher by Moody's.
"Level II Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB+ or higher by S&P
and Ba1 or higher by Moody's and (ii) Level I Status does not exist.
"Level III Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB or higher by S&P
and Ba2 or higher by Moody's and (ii) neither Level I Status nor Level II
Status exists.
"Level IV Status" exists at any date if, at such date (i)
Borrower's senior unsecured long-term debt is rated both BB- or higher by S&P
and Ba3 or higher by Moody's and (ii) none of Level I Status, Level II Status
and Level III Status exists.
13
<PAGE>
"Level V Status" exists at any date if, at such date, no
other Status exists.
"Status" refers to the determination which of Level I
Status, Level II Status, Level III Status, Level IV Status or Level V Status
exists at any date.
The credit ratings to be utilized for purposes of this Schedule are those
assigned to the senior unsecured long-term debt securities of Borrower
(including, if no senior unsecured long-term debt securities of Borrower are
outstanding, any such ratings that Moody's or S&P has explicitly stated may be
implied from the ratings it has assigned to Borrower's outstanding
subordinated unsecured long-term debt securities) without third-party credit
enhancement, and any rating assigned to any other debt security of Borrower
shall be disregarded. The rating in effect at any date is that in effect at
the close of business on such date.
14
<PAGE>
CREDIT SUISSE FIRST BOSTON LB I GROUP INC.
Eleven Madison Avenue Three World Financial Center
New York, New York 10010 200 Vesey Street
New York, New York 10285
August 6, 1997
CalEnergy Company, Inc.
302 South 36th Street
Suite 400
Omaha, Nebraska 68131
Bridge Loan Commitment Letter
Ladies and Gentlemen:
CalEnergy Company, Inc., a Delaware corporation ("you" or
"CE") have advised Credit Suisse First Boston ("CSFB") and LB I Group Inc.
("LB" and, together with CSFB, sometimes referred to as "we", "us" or the
"Bridge Lenders") that your wholly owned subsidiary, CE Electric (NY), Inc., a
New York corporation ("Bidco"), intends to acquire (the "Acquisition") all of
the issued and outstanding shares (the "Shares") of New York State Electric &
Gas Corporation, a New York corporation ("NYSEG") by means of a takeover bid
(the "Tender Offer") and subsequent merger, as a result of which a subsidiary
of Bidco will be merged with and into NYSEG (the "Merger") pursuant to a merger
agreement with NYSEG (the "Merger Agreement"), and NYSEG will become an
indirect wholly owned subsidiary of CE. The Tender Offer, Acquisition and the
Merger are referred to herein as the "Transactions."
You have further advised us that, in connection with the
Transactions, you propose to issue a combination of debt securities (the "Debt
Offering") in a registered public offering, a Rule 144A offering or other
offering exempt from the registration requirements of the Securities Act of
1933, as amended (the "Securities Act"), and common stock, $.0675 par value of
CE ("CE Common Stock") (or securities convertible into or exercisable or ex-
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 2
changeable for common stock) in a registered public offering or in an offering
exempt from the registration requirements of the Securities Act (the "Equity
Offering" and, together with the Debt Offering, the "Offerings"). To the extent
that the Offerings result in less than $500 million of net proceeds to CE, CE
will require a bridge loan facility of up to $500 million (the "Bridge Loan
Facility").
You have requested that the Bridge Lenders commit, subject to
the fulfillment of certain conditions set forth herein, to provide the Bridge
Loan Facility to you in an aggregate amount of up to $500 million, less the
amount of net proceeds, if any, raised in the Offerings (the "Bridge Loan").
The intention and the expectation of CE and the Bridge
Lenders is to consummate both the Equity Offering and the Debt Offering
promptly and to borrow the Bridge Loan only to the extent the Offerings fail to
yield net proceeds of at least $500 million.
Accordingly, subject to the terms and conditions set forth
below, the Bridge Lenders hereby agree with you as follows:
1. Commitment. Each of CSFB and LB severally hereby commit
(the "Commitment") to provide one half of the Bridge Loan on the terms set
forth on the Summary of Principal Terms and Conditions attached as Exhibit A
hereto (the "Term Sheet"), subject to the completion of reasonable and
customary due diligence satisfactory to us and the additional closing
conditions to be set forth in the definitive documentation relating to the
Bridge Loan (the "Bridge Loan Documents"), including without limitation those
conditions set forth in Annex III to the Term Sheet (or, in the event of the
Escrowed Funding referred to below, those conditions set forth in Annex II to
the Term Sheet).
2. Bridge Facility. (a) In the event that, within 364 days
after the execution of this letter (such
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 3
364 day period, the "Bridge Loan Availability Period"), the net proceeds
received by CE from the Offerings are less than $500 million in the aggregate
(such deficiency, the "Deficiency Amount"), CE shall have the right (subject to
the conditions contained herein) until the end of the Bridge Loan Availability
Period, to draw down on the Bridge Loan in an amount up to the Deficiency
Amount by giving a notice (the "Borrowing Notice") to CSFB and LB at least 10
days prior to the date of borrowing (which Borrowing Notice shall also set
forth the amount, not to exceed the Deficiency Amount, requested to be
borrowed).
(b) If the Bridge Loans are not drawn by the end of the
Bridge Loan Availability Period, then, at the option of the Bridge Lenders in
their sole discretion, the Bridge Lenders may, provided that the Merger
Agreement has been executed and is in full force and effect and will not
terminate by its terms during the Extension Period (as defined below) either
(i) waive the conditions precedent to funding requiring that all conditions to
consummation of the Merger set forth in the Merger Agreement (the "Merger
Agreement Conditions") be satisfied or (ii) extend the Bridge Loan Availability
Period for an additional 30 day period after the end of the initial Bridge Loan
Availability Period (such extended 30 day period, the "Extension Period"). In
the event the Bridge Lenders waive the conditions precedent to funding referred
to in clause (i) above, CE may, subject to satisfaction of the conditions
precedent set forth in Annex II to the Term Sheet, borrow the Bridge Loans,
provided that the proceeds thereof are deposited with an escrow agent (the
"Escrow Agent") selected by CSFB and LB to be held by the Escrow Agent in
escrow (the "Escrowed Proceeds"; the funding of the Bridge Loan made pursuant
to this paragraph (b) referred to as the "Escrowed Funding"), to be released
only upon satisfaction of the conditions precedent set forth in Annex III to
the Term Sheet. In the event that (x) the Merger is not consummated within 365
days of an Escrowed Funding or (y) if the Merger Agreement is terminated or
ceases to be in full force and effect, whichever is sooner, the Escrowed
Proceeds shall
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 4
be released to CSFB and LB to be applied to the mandatory
repayment of the outstanding Bridge Loans.
3. Obligations of CE. You agree to fully cooperate with the
Bridge Lenders and to provide the Bridge Lenders with all information required
by the Bridge Lenders in connection with the Offerings. CE shall, without
limitation and in addition to all of its other obligations herein:
(a) in order to facilitate the Offerings,
prepare and file with the SEC as expeditiously as possible but in no event
later than 30 days after the date of this letter a "universal" or "generic"
shelf registration statement on Form S-3 (the "Registration Statement")
relating to the issuance and sale by CE of debt securities, CE Common Stock,
preferred stock or any other equity securities or securities that are
exchangeable or exer-cisable for or convertible into CE Common Stock on a
delayed or continuous basis pursuant to Rule 415 (or any successor rule to
similar effect) promulgated under the Securities Act.
(b) use its best efforts to cause the
Registration Statement to become effective as soon as
practicable;
(c) prepare and file with the SEC such
amendments and supplements to the Registration Statement and the prospectus
used in connection therewith as may be necessary to effectuate the Offerings
contemplated thereby, including filing any and all necessary periodic reports
on a timely basis (including Forms 8-K relating to the Transactions);
(d) before filing the Registration State-
ment or prospectus or any amendments or supplements thereto, other than any
documents incorporated by reference therein, CE shall (i) promptly furnish to
the Bridge Lenders copies of all such documents proposed to be filed, which
documents shall be subject to the review by the Bridge Lenders, and (ii) notify
the Bridge Lenders of
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 5
any stop order issued or threatened by the SEC and take all reasonable actions
required to prevent the entry of such stop order or to remove it if entered;
(e) in the event the Bridge Lenders advise
CE to consummate either of the Offerings in a transaction exempt from
registration under the Securities Act, CE will comply with the applicable
provisions of this Section 3 and will (i) promptly prepare an offering
memorandum, containing such disclosures as may be required by the Securities
Act and other applicable laws and other disclosures as are customary and
appropriate for such a document, in form and substance reasonably satisfactory
to the Bridge Lenders, and (ii) execute, in customary form, a purchase
agreement and registration rights agreement, in form and substance reasonably
satisfactory to the Bridge Lenders and perform its obligations thereunder;
(f) promptly issue securities in the
Offerings at such prices and with such terms, including interest rates,
dividend rates and conversion rates, as the Bridge Lenders consider appropriate
(after consultation with you) in light of market conditions at the time of
sale;
(g) make available for inspection by the
Bridge Lenders, any underwriter participating in any distribution pursuant to
the Registration Statement, and any attorney, accountant or other agent
retained by such persons (collectively, the "Inspectors"), all financial and
other records, pertinent corporate documents and properties (collectively,
"Information") of CE, NYSEG and their respective subsidiaries, as shall be
reasonably necessary to enable them to conduct a customary due diligence
investigation, and cause its and its subsidiaries' officers, directors and
employees to supply all information and respond to all inquiries reasonably
requested by any such Inspector in connection with such due diligence
investigation, provided that, with respect to the requirements set forth in
this subsection (g) as it relates to NYSEG and its subsidiaries, such
obligation
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 6
shall, to the extent such Information is not otherwise in CE's possession or
within CE's control, be to use CE's best efforts to make such Information of
NYSEG and its Subsidiaries so available;
(h) make available senior management per-
sonnel to participate in, and cause them to cooperate with the underwriters,
initial purchasers or placement agents in connection with, "road show" and
other customary marketing activities, including "one-on-one" meetings with
prospective purchasers of the securities to be sold in the Offerings to the
same extent as if CE was engaged in a primary registered offering of CE Common
Stock;
(i) in connection with a registered public
Offering, execute underwriting agreements in customary form reasonably
satisfactory in form and substance to the Bridge Lenders and perform its
obligations thereunder;
(j) deliver to the Bridge Lenders legal
opinions in form and substance reasonably satisfactory to
the Bridge Lenders;
(k) cause its certified public accountants
to deliver to the Bridge Lenders "comfort letters" in
customary form and substance; and
(l) otherwise cooperate with the Bridge
Lenders in connection with the Offerings.
Certain additional matters with respect to the Offerings are
governed by the Engagement Letter (as defined below).
4. Syndication Rights. Each of CSFB and LB reserves the right to and
may, prior to or after the execution of the Bridge Loan Documents, to syndicate
all or a portion of its Commitment to one or more financial institutions (such
financial institutions, together with CSFB and LB, the "Lenders") reasonably
satisfactory to you, CSFB and LB that will become parties to the Bridge Loan
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 7
Documents. It is agreed that CSFB will act as agent and syndication coordinator
of the Bridge Loan, and LB will act as documentation agent of the Bridge Loan.
No additional agents or co-agents will be appointed without the prior written
consent of CSFB and LB. Completion of the syndication of the Bridge Loan is not
a condition to CSFB's or LB's funding the Bridge Loan.
You agree to assist CSFB and LB in forming any such syndicate
and to provide the Lenders, promptly upon request of CSFB and LB, with all
information reasonably requested by CSFB and LB to complete successfully the
syndication, including but not limited to (a) an information package for
delivery to potential Lenders and participants and (b) all information and
projections prepared by you or your advisers relating to the transactions
described herein. You also agree to use your best efforts to ensure that CSFB's
and LB's syndication efforts benefit from your existing lending relationships.
You further agree to make your senior officers and representatives, and those
of Bidco, available to participate in informational meetings for potential
Lenders and participants at such times and places as CSFB and LB may reasonably
request. In connection with the syndication of the Bridge Loan, CSFB and LB
may, in their discretion, allocate to other Lenders portions of any fees
payable to CSFB and LB in connection with the Bridge Loan. You agree that no
Lender will receive any compensation of any kind for its participation in the
Bridge Loan except as expressly provided for in this letter or in the Fee
Letter referred to below.
5. Representations and Warranties. You represent and warrant
and covenant that:
(a) all information (other than projections) which has been
or is hereafter furnished to CSFB or LB by you or any of your
representatives in connection with the Transactions and the Offerings
is and will be complete and correct in all material respects as of the
time furnished and does not and will not as of the time furnished
contain any untrue
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 8
statement of a material fact or omit to state a material fact
necessary in order to make the statements contained therein not
misleading in light of the circumstances under which such statements
were made; and
(b) all financial projections that have been or are hereafter
prepared by you or on your behalf and made available to CSFB and LB
have been or will be prepared in good faith based upon reasonable
assumptions.
You agree to supplement the information and projections
referred to in clauses (a) and (b) above from time to time until completion of
the syndication so that the representations and warranties in the preceding
sentence remain correct without regard to when such information and projections
were furnished. All information with respect to NYSEG referred to in clause (a)
above shall, prior to the initial funding of the Bridge Loan, be given to the
best knowledge of CE and all information with respect to NYSEG which is
hereafter furnished by CE or any of its representatives shall be deemed to
supplement the information previously given by CE or its representatives to the
extent it relates to NYSEG. In arranging and syndicating the Bridge Loan, CSFB
and LB will be entitled to use and rely on such information and projections
without independent verification thereof.
6. Fees and Expenses. You agree to reimburse CSFB, LB and
their affiliates, upon request, for their reasonable fees and expenses incurred
in connection with the preparation, execution and delivery of this letter, the
Term Sheet and the Bridge Loan Documents and the activities thereunder or
contemplated thereby, including syndication expenses (other than fees allocated
in accordance with Section 4 hereof) including, without limitation, the
reimbursement of CSFB, LB and their respective affiliates, upon request, for
the reasonable fees and expenses of their counsel (including the fees and
expenses of Skadden, Arps, Slate, Meagher & Flom LLP), whether or not the
Transactions, the Offerings or the Bridge
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 9
Loans are consummated and whether incurred before or after the execution of
this letter. This letter is the commitment letter referred to in the Fee Letter
(as defined below). The terms of the Fee Letter, including your obligation to
pay certain fees and expenses as provided for therein, are hereby ratified and
affirmed.
7. Confidentiality. This letter is confidential and shall not
be disclosed by you to any person other than (i) accountants, attorneys and
advisors for you or any of your affiliates, (ii) rating agencies, (iii) to the
extent approved by CSFB and LB, other advisors in connection with the
Transactions, and then only on a confidential basis, and (iv) as required by
applicable law and compulsory legal process.
8. Entire Agreement. The provisions of this letter are
supplemented as set forth in a separate fee letter (the "Fee Letter") and
separate engagement letter (the "Engagement Letter"), each dated the date
hereof from us to you, and are subject to the terms of such Fee Letter and
Engagement Letter. By executing this letter, you acknowledge that this letter,
the Term Sheet and the Fee Letter are the only agreements between you and the
Bridge Lenders (or any of their affiliates) with respect to the Bridge Loan and
set forth the entire understanding of the parties with respect thereto. None of
this letter, the Term Sheet, the Fee Letter or the Engagement Letter may be
changed except pursuant to a writing signed by each of the parties hereto.
9. Indemnification. The indemnification provisions set forth
in Annex A to the Engagement Letter, which provisions are incorporated by
reference herein and constitute a part hereof, shall apply to actions hereunder
taken by the Bridge Lenders and their affiliates and their respective
directors, officers, employees, agents and controlling persons and to the
transactions contemplated hereby.
10. Termination. The Commitment shall termi-
nate 364 days from the execution date of this letter
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 10
unless (i) the Bridge Lenders and CE have extended the term hereof in writing,
or (ii) the Bridge Lenders extended the term hereof pursuant to Section 2
hereof; provided, however, that the Commitment shall also terminate if (i) you
have not accepted this letter by 5:00 p.m. (New York time) on August 6, 1997,
or (ii) the acquisition proposal by CE (or any of its affiliates) is terminated
or abandoned, or the Merger Agreement, in the event it is entered into, is
terminated or ceases to be effective. No termination shall affect the
obligations set forth in Sections 6, 7, 8 and 9, which shall survive any such
termination.
11. Governing Law. This letter shall be governed by, and
construed in accordance with, the laws of the State of New York.
12. Assignment. This letter is intended to be solely for the
benefit of the parties hereto and is not intended to confer any benefits upon,
or create any rights in favor of, any person other than the parties hereto.
This letter and CSFB's and LB's respective commitments hereunder may not be
assigned by you without the prior written consent of CSFB and LB, and any
attempted assignment without such consent shall be void. CSFB's and LB's
respective commitments hereunder may be assigned by CSFB and LB respectively to
any of their respective affiliates or any Lender. This letter may not be
amended or modified or any provisions hereof waived except in writing signed by
CSFB, LB and you.
13. Counterparts. This letter agreement may be executed in
any number of counterparts, each of which when so executed and delivered shall
be deemed an original and all of which together shall constitute one and the
same instrument. Delivery of an executed counterpart of a signature page of
this letter by facsimile transmission shall be as effective as delivery of a
manually signed counterpart hereof.
<PAGE>
CalEnergy Company, Inc.
August 6, 1997
Page 11
Please confirm that the foregoing correctly sets forth our
understanding by signing and returning to CSFB and LB the duplicate copy of
this letter enclosed herewith. Upon your acceptance hereof, this letter shall
constitute a binding agreement between you and the Bridge Lenders.
Very truly yours,
CREDIT SUISSE FIRST BOSTON
By: /s/ Ann F. Lopez
------------------------
Name: Ann F. Lopez
Title: Managing Director
By: /s/ Marisa J. Harney
------------------------
Name: Marisa J. Harney
Title: Director
LB I GROUP INC.
By: /s/ Thomas Bernard
------------------------
Name: Thomas Bernard
Title: Managing Director
Agreed to and Accepted:
CALENERGY COMPANY, INC.
By: /s/ Steven A. McArthur
----------------------
Name: Steven A. McArthur
Title: Senior Vice President,
General Counsel and
Secretary
<PAGE>
Exhibit A
Bridge Loan Facility
Summary of Principal Terms and Conditions
Agent: CREDIT SUISSE FIRST BOSTON
("CSFB").
Documentation Agent: LB I Group Inc. ("LB")
Lenders: A syndicate of lenders (the
"Lenders") arranged by CSFB and
LB and reasonably acceptable to
Borrower.
Borrower: CalEnergy Company, Inc., a Dela-
ware corporation.
Amount: Up to $500 million aggregate
principal amount. The aggregate
principal amount available to be
drawn shall be limited to the
difference between $500 million
and the amount of net proceeds
received by Borrower pursuant to
the Equity Offering and the Debt
Offering.
Rank: The loans to be made hereunder
by each of the Lenders (the
"Bridge Loans") will be senior
unsecured debt of Borrower, pari
passu in right of payment to all
existing and future senior in-
debtedness of Borrower.
Use of Proceeds: The proceeds of the Bridge
Loans, together with the pro-
ceeds received by Borrower from
the proceeds of the Offerings,
cash on hand and other credit
facilities available to Borrower
will be contributed as capital
to, or used to purchase common
stock of, Bidco (the "Equity
Contribution").
<PAGE>
Maturity/Exchange: The Bridge Loans will mature on
the date which is 364 days after
the Closing Date (the "Bridge
Maturity Date"). If any Bridge
Loan is not repaid in full on or
prior to the Bridge Maturity
Date, the Lender thereof will
have the option at any time or
from time to time to receive, in
exchange for such Bridge Loan or
portion thereof, exchange notes
of Borrower (the "Exchange
Notes") ranking pari passu with
the Bridge Loans and having the
terms set forth in the term
sheet attached hereto as Annex
I. If any Lender does not ex-
change its Bridge Loan for Ex-
change Notes on the Bridge Matu-
rity Date, such Lender shall be
required (unless there exists an
event of default, non-payment of
fees and in certain other cir-
cumstances such as the failure
to have in effect a registration
statement with respect to the
Exchange Notes) to extend the
maturity of such loan to another
date selected by such Lender.
If, at such extended maturity,
such Lender does not exchange
its Bridge Loan, such Lender
shall be required again (unless
there exists an event of de-
fault, non-payment of fees and
in certain other circumstances
such as the failure to have in
effect a registration statement
with respect to the Exchange
Notes) to extend the maturity of
such Bridge Loan to another date
selected by such Lender (provid-
ed that such Lender shall not be
required to extend the maturity
of its loans beyond the tenth
anniversary of the Closing Date
(the "Final Maturity Date")) and
2
<PAGE>
this sentence shall apply to each
extended maturity of its Bridge
Loan prior to the Final Maturity
Date.
Interest Rates: Prior to the Bridge Maturity
Date, the Bridge Loans will
accrue interest at a rate per
annum equal to 3 month Adjusted
LIBOR plus the Applicable
Spread.
The "Applicable Spread" on the
Bridge Loans will initially be 600
basis points and will increase by
100 basis points at the end of the
six month period following the
Closing Date and by an additional
50 basis points at the end of each
three-month period thereafter until
the Bridge Maturity Date; provided,
however, that the interest rate on
Bridge Loans in effect at any time
prior to the Bridge Maturity Date
shall not exceed 17% per annum; to
the extent that the interest
payable on the Bridge Loans exceeds
a rate of 15% per annum, Borrower
may, at its option, cause such
excess interest to be paid in the
form of additional bridge notes.
Adjusted LIBOR will at all times
include any applicable statutory
reserves.
In the event that Adjusted LIBOR
cannot be determined, or any Lender
is unable lawfully to maintain a
loan accruing interest at Adjusted
LIBOR, the affected Bridge Loans
will accrue interest until the
Bridge Maturity Date at the Base
Rate plus
3
<PAGE>
the Applicable Spread, in each
case.
As used herein, "Base Rate" shall
mean the higher of (i) CSFB's Prime
Rate less 200 basis points and (ii)
the Federal Funds Effective Rate
plus 50 basis points.
Following the Bridge Maturity Date,
all outstanding Bridge Loans will
accrue interest at the rate
provided for the Exchange Notes in
Annex I hereto, subject to the
absolute and cash caps therein.
Calculation of interest shall be on
the basis of actual days elapsed in
a year of 360 days (or 365 or 366
days, as the case may be, in the
case of Bridge Loans based on the
Base Rate).
Interest Payments: Interest will be payable in
arrears (a) for Bridge Loans
accruing interest at a rate
based on Adjusted LIBOR, at the
end of each Adjusted LIBOR peri-
od and on the Bridge Maturity
Date, (b) for Bridge Loans ac-
cruing interest at the Base
Rate, at the end of each fiscal
quarter of Borrower following
the Closing Date and on the
Bridge Maturity Date and (c) for
Bridge Loans outstanding after
the Bridge Maturity Date, at the
end of each fiscal quarter of
Borrower following the Bridge
Maturity Date.
4
<PAGE>
Mandatory
Prepayments: The Bridge Loans will be re-
quired to be prepaid with:
(a) subject to limited excep-
tions, 100% of the net cash
proceeds of the issuance or
incurrence of debt or of
any sale of assets or sale
and lease-back; and
(b) 100% of the net cash
proceeds from any issuance
of equity securities in
any public offering or
transaction exempt from
registration.
Optional
Prepayments: Bridge Loans may be repaid at
any time upon ten days' prior
notice to CSFB and LB, in whole
or in part at the option of
Borrower in a minimum principal
amount and in multiples to be
agreed upon, without premium or
penalty (except breakage costs
in the case of Adjusted LIBOR
Bridge Loans).
Conditions to
Escrowed Funding: The making of the Escrowed Fund-
ing shall be subject to the
conditions precedent set forth
in Annex II attached hereto (all
such conditions to be satisfied
in a manner reasonably satisfac-
tory in all respects to CSFB and
LB).
Conditions to
Unconditional
Funding/Release of
Escrowed Proceeds: The making of the Bridge Loans
(including the release of the
Escrowed Proceeds to the Borrow-
er in the event of an Escrowed
5
<PAGE>
Funding) shall be subject to
conditions precedent specified in
Annex III attached hereto (all such
conditions to be satisfied in a
manner reasonably satisfactory in
all respects to CSFB and LB).
Representations and
Warranties: Customary for loans similar to
the Bridge Loans and such addi-
tional representations and war-
ranties as may reasonably be re-
quired by CSFB and LB, including
but not limited to: no Default
or Event of Default; absence of
material adverse change; consol-
idated and consolidating finan-
cial statements and supporting
documentation satisfactory to
CSFB and LB; absence of undis-
closed liabilities or material
contingent liabilities not known
to the CSFB and LB prior to the
date hereof; receipt of all
governmental approvals, compli-
ance with laws, charter docu-
ments or agreements; good stand-
ing; payment of taxes; ownership
of properties; absence of liens
and security interests; and, in
the case of equity securities,
valid issuance, full payment,
non-assessability, absence of
pre-emptive or other similar
rights, and reservation of un-
derlying the CE Common Stock, if
applicable.
Affirmative
Covenants: Customary for loans similar to
the Bridge Loans and such others
as may reasonably be required by
the CSFB and LB, including but
not limited to: maintenance of
corporate existence and rights;
compliance with laws; perfor-
6
<PAGE>
mance of obligations; maintenance
of properties in good repair;
maintenance of appropriate and
adequate insurance; inspection of
books and properties; payment of
taxes and other liabilities; notice
of defaults, litigation and other
adverse actions; delivery of
consolidated and consolidating
financial statements, financial
projections, compliance
certificates and supporting
documentation satisfactory to CSFB
and LB; and further assurances.
In addition, Borrower will agree to
file a registration statement under
the Securities Act or prepare an
offering memorandum covering senior
unsecured notes of Borrower (the
"Securities") to be issued in a
public offering or private
placement to refinance in full the
Bridge Loans (the "Loan
Refinancing") and to consummate
such Loan Refinancing as soon as
possible after the Closing Date in
an amount sufficient to refinance
all amounts outstanding under the
Bridge Loan Documents and on such
terms and conditions (including,
without limitation interest rate,
yield, redemption prices and dates)
as CSFB and LB may in their
reasonable judgment determine to be
appropriate in light of prevailing
circumstances and market conditions
and the financial condition and
prospects of Borrower, provided
that Borrower shall not be required
to issue senior unsecured notes
bearing interest in excess of the
maximum interest rate (and maximum
cash interest rate) set
7
<PAGE>
forth in Annex I applicable to
Exchange Notes. The indenture for
the Securities will be
substantially in the form of
Borrower's Indenture relating to
its 9 1/2% Senior Notes due 2006,
modified as appropriate to reflect
the terms of this transaction and
the financial condition and
prospects of Borrower and its
subsidiaries, and in form and
substance reasonably satisfactory
to CSFB, LB and Borrower. If any
Securities are issued in a
transaction not registered under
the Securities Act, all such
Securities shall be entitled to the
benefit of registration rights
agreements to be entered into by
Borrower in customary form
acceptable to CSFB and LB.
Negative Covenants: Customary for loans similar to
the Bridge Loans and such others
as may reasonably be required by
CSFB and LB, including but not
limited to: prohibition on
incurrence of indebtedness (ex-
cept that existing debt, exist-
ing commitments under existing
debt documents, and refinancing
thereof, debt incurred under
Borrower's existing working
capital facilities, debt which
is expressly non-recourse to
Borrower, the Senior Bank Facil-
ity, the Bridge Loans and the
Exchange Notes shall be permit-
ted); limitations on loans, in-
vestments and joint ventures;
limitations on guarantees or
other contingent obligations;
limitations on restricted pay-
ments (including dividends, re-
demptions and repurchases of
capital stock); limitations on
8
<PAGE>
fundamental changes (including
limitations on mergers,
acquisitions and asset sales);
limitations on operating leases;
limitations on sale-leaseback
transactions; limitations on
transactions with affiliates;
limitations on dividend and other
payment restrictions affecting
subsidiaries; limitations on
capital expenditures; limitations
on lines of business; limitations
on amendment of indebtedness and
other material documents; and
limitations on prepayment or
repurchase of other indebtedness.
Events of Default: Customary for facilities similar
to the Bridge Loan facilities
and others as are reasonably
specified by CSFB and LB, in-
cluding but not limited to:
nonpayment of principal, inter-
est, fees or other amounts when
due; violation of covenants;
failure of any representation or
warranty to be true in all mate-
rial respects; cross-default and
cross-acceleration; Change in
Control; bankruptcy events,
material judgments; ERISA; and
actual or asserted invalidity of
any Bridge Loan Document.
Yield Protection and
Increased Costs: Customary for facilities of this
type.
Assignments and
Participations: Borrower may not assign its
rights or obligations in connec-
tion with the Bridge Loan Docu-
ments without the prior written
consent of all the Lenders.
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<PAGE>
Lenders will have the absolute and
unconditional right to assign
Bridge Loans and Commitments
without the consent of Borrower,
and assignments will be by novation
which will release the obligation
of the assigning Lender. CSFB will
act as agent for all assignees (if
any) holding the Bridge Loans from
time to time.
Lenders will be permitted to
participate their Bridge Loans to
any other entity. Participants will
have the same benefits as the
selling Lenders would have with
regard to yield protection and
increased costs, collateral
benefits, certain other basic
issues and provision of information
on Borrower and its subsidiaries.
Voting: Amendments and waivers of any
provision of any Bridge Loan
Documents will require the ap-
proval of Lenders holding loans
and commitments representing a
majority of the aggregate amount
of the loans and commitments
under the Bridge Loan Facility,
except that the consent of all
affected Lenders shall be re-
quired with respect to (a) in-
creases in commitments, (b)
reductions of principal, inter-
est or fees and (c) extensions
of the Bridge Maturity Date.
Expenses and
Indemnification: In addition to those out-of-
pocket expenses reimbursable
under the Commitment Letter, all
out-of-pocket expenses of CSFB
and LB (and the Lenders for en-
forcement costs and documentary
10
<PAGE>
taxes) associated with the
preparation, execution and delivery
of any waiver or modification
(whether or not effective) of, and
the enforcement of, any Bridge Loan
Document and any document relating
to the refinancing of the Bridge
Loans (including the reasonable
fees, disbursements and other
charges of counsel for CSFB and LB)
are to be paid by Borrower.
Borrower will indemnify CSFB and LB
and the other Lenders and hold them
harmless from and against all
costs, expenses (including fees,
disbursements and other charges of
counsel) and liabilities arising
out of or relating to any
litigation or other proceeding
(regardless of whether CSFB, LB or
any such other Lender is a party
thereto) that relate to the
Transactions, the Bridge Loans or
the refinancing thereof; provided,
that neither CSFB, LB nor any such
other Lender will be indemnified
for any costs, expense or liability
to the extent resulting from any
such person's gross negligence or
willful misconduct.
Governing Law and
Forum: New York.
Agent's and Technical's
Counsel: Skadden, Arps, Slate, Meagher &
Flom LLP.
11
<PAGE>
Annex I
to Exhibit A
Exchange Notes
Summary of Principal Terms and Conditions
Issuer: Borrower will issue Exchange
Notes under an indenture which
complies with the Trust Inden-
ture Act (the "Indenture").
Principal Amount: The Exchange Notes will be
available only in exchange for
the Bridge Loans. The face
amount of any Exchange Note will
equal 100% of the aggregate
principal amount (including any
accrued interest not required to
be paid in cash) of the Bridge
Loan for which it is exchanged.
Maturity: The Exchange Notes will mature
on the tenth anniversary of the
Closing Date.
Interest Rate: Exchange Notes will bear inter-
est at a rate equal to the Ini-
tial Rate (as defined below)
plus the Exchange Spread (as
defined below). Notwithstanding
the foregoing, the interest rate
on Exchange Notes in effect at
any time shall not exceed 17%
per annum; to the extent that
the interest payable on Exchange
Notes exceeds a rate of 15% per
annum, Borrower may, at its
option, cause such excess inter-
est to be paid by issuing addi-
tional Exchange Notes in a prin-
cipal amount equal to such ex-
cess portion of interest. In-
terest on Exchange Notes will be
payable semiannually in arrears.
1
<PAGE>
In no event shall the interest rate
on the Exchange Notes exceed the
highest lawful rate permitted under
applicable law.
"Exchange Spread" shall mean 50
basis points during the three-month
period commencing on the Bridge
Maturity Date and shall increase by
50 basis points at the beginning of
each subsequent three-month period.
"Initial Rate" shall be determined
on the Bridge Maturity Date and
shall be equal to the greatest of
(a) the interest rate borne by
Bridge Loans on the day immediately
preceding the Bridge Maturity Date,
(b) the Treasury Rate (as defined
below) on the Bridge Maturity Date
plus 700 basis points and (c) the
CREDIT SUISSE FIRST BOSTON
CORPORATION High Yield Index Rate
on the Bridge Maturity Date plus
200 basis points.
"Treasury Rate" means (i) the rate
borne by direct obligations of the
United States maturing on the tenth
anniversary of the Closing Date and
(ii) if there are no such
obligations, the rate determined by
linear interpolation between the
rates borne by the two direct
obligations of the United States
maturity closest to, but
straddling, the tenth anniversary
of the Closing Date, in each case
as published by the Board of
Governors of the Federal Reserve
System.
Rank: Exchange Notes will rank pari
passu with Bridge Loans.
2
<PAGE>
Mandatory Redemption: Same as Bridge Loans.
Optional Redemption: Same as Bridge Loans.
Registration Rights: Borrower will have caused to be
filed and to have become effec-
tive prior to the issuance of
Exchange Notes, an exchange
offer registration statement or
a shelf registration statement
and Borrower will use its best
efforts to keep such registra-
tion statement effective for
customary periods, and to amend
such registration statement from
time to time as necessary to
including newly issued Exchange
Notes from time to time.
Exchange Notes
Escrowed: The Exchange Notes will be de-
livered on the Closing Date and
held, undated, in escrow by a
mutually agreeable fiduciary.
Right To Transfer
Exchange Notes: The holders of the Exchange
Notes shall have the absolute
and unconditional right to
transfer such Exchange Notes to
any third parties in compliance
with applicable law.
Warrants: Warrants to purchase 10% of the
fully diluted common stock of
the Borrower (the "Warrants")
will be delivered on the Closing
Date and held in an escrow ac-
count by a mutually agreeable
fiduciary. The Warrants will be
exercisable at the Closing Date
and at any time thereafter on or
prior to the tenth anniversary
of the Closing Date but only if,
at the time of such exercise,
the senior unsecured debt rating
of the Borrower established by
3
<PAGE>
Standard & Poor's, Inc. and
Moody's Investor Services, Inc.
is below either BB- or Ba3,
respectively (the "Minimum Rat-
ing").
Each Warrant will have mutually
agreed provisions relating to
antidilution and registration
rights.
After the Closing Date, the
Warrants will be released from the
escrow under two alternative
circumstances, but only if, at the
time of such release, the senior
unsecured debt rating of the
Borrower is below the Minimum
Rating: release for resale in
connection with a bona fide,
arms'-length sale of Bridge Loans
or Exchange Notes and release
pursuant to an "earn-in" formula.
Release of Warrants
for Resale: With respect to release for
resale, Warrants will be re-
leased from escrow at the re-
quest of a holder of Exchange
Notes or Bridge Loans (in an
amount not to exceed such
holder's share of the Warrants
initially placed in escrow, such
share to be equal to such
holder's pro rata share of the
aggregate amount of Bridge Loans
calculated at the time of any
release in connection with a
transfer by such holder of any
Exchange Notes, Bridge Loans and
such Warrants to a third party.
Warrants shall be released for
resale, subject to the forego-
ing, only upon the representa-
tion of the holder that the
Warrants are necessary for a
4
<PAGE>
resale of the Bridge Loans or
Exchange Notes and only to the
extent necessary so that the sale
price (including the Warrants) does
not exceed the principal amount of
the Bridge Loans or Exchange Notes.
"Earn-in" of
Warrants: With respect to an "earn-in"
release, the holder of any
Bridge Loans or Exchange Notes
immediately following the Bridge
Maturity Date shall be entitled
to receive (i) on the Bridge
Maturity Date, Warrants repre-
senting such holder's pro rata
share of 5% of the fully diluted
common stock of Borrower; and
(ii) six months after the Bridge
Maturity Date, additional War-
rants representing such holder's
pro rata share of 5% of the
fully diluted common stock of
Borrower, but only, in each
case, if on such dates, the Bor-
rower's senior unsecured debt
rating is below the Minimum
Rating.
Warrants will be released from
escrow pursuant to the "earn-in"
provisions to the extent earned by
a holder, in accordance with the
foregoing, and requested by such
holder. Unless previously released
pursuant to the preceding sentence,
all Warrants earned by a holder
pursuant to the "earn-in"
provisions shall be released to
such holder upon such holder
ceasing to own any Bridge Loans or
Exchange Notes. The holders of the
Warrants shall have the absolute
and unconditional right to transfer
such released Warrants to any
5
<PAGE>
third parties in compliance with
applicable law.
Cancellation of
Warrants: Any Warrants not required to be
released from escrow as set
forth above shall be returned to
Borrower for cancellation.
Covenants: Those which are substantially
similar to those in Borrower's
9 1/2% Senior Notes due 2006.
Events of Default: Those which are substantially
similar to these in Borrower's
9 1/2% Senior Notes due 2006, in-
cluding, without limitation,
non-payments with respect to the
Exchange Notes.
6
<PAGE>
Annex II
to Exhibit A
ESCROWED FUNDING CONDITIONS
Capitalized terms used but not defined herein shall, unless
otherwise specified, have the meanings assigned to such terms in the Letter (as
hereinafter defined).
The Commitment of CSFB and LB to make the Escrowed Funding
pursuant to the Letter shall be subject to the following conditions:
(i) There not becoming known to CSFB or LB after the date of
the Letter any information or other matter relating to Borrower,
Bidco, their respective subsidiaries or NYSEG and its subsidiaries
which CSFB or LB has reasonable cause to believe is accurate and which
is inconsistent in a material and adverse manner with any information
or other matter disclosed to CSFB or LB by Borrower, Bidco, their
respective subsidiaries or NYSEG and its subsidiaries prior to the
date of the Letter.
(ii) There shall be no litigation or administrative
proceedings or other legal or regulatory developments actual or
threatened, that, singly or in the aggregate, (A) would restrain,
prohibit or impose adverse conditions on the ability of the Borrower
or the Lenders to consummate the financing contemplated by the Letter
or which would adversely affect the validity or enforceability of any
of the Bridge Loan Documents executed in connection therewith or the
rights, remedies and benefits available to the parties thereunder or
(B) other than resulting from the Transactions or stockholder
litigation (1) could have a Material Adverse Effect (as defined below)
on Borrower, Bidco, their respective subsidiaries or NYSEG and its
subsidiaries, (2) adversely affect the ability of Borrower to fully
and timely perform its obligations under the Bridge Loan Documents,
(3) seeks to prohibit the ownership or operation by Borrower, Bidco or
any of its subsidiaries of all or a material portion of any of their
businesses or assets or businesses, or (4) would be
1
<PAGE>
materially inconsistent with the stated assumptions underlying the
projections provided to CSFB, LB and the Lenders.
(iii) CSFB's and LB's and, if applicable, the Lenders',
reasonable satisfaction in all material respects with (i) the terms of
the Committed Facilities (as hereinafter defined) and the Equity
Contribution and (ii) all material documentation and agreements
affecting the extension of credit under the Bridge Loan Documents.
(iv) There shall be in effect a registration statement (the
"Resale Registration Statement") in form and substance satisfactory to
the Bridge Lenders providing for the resale by the Bridge Lenders of
such number of the Borrower Common Stock into which the Warrants (as
this term is defined in the Term Sheet) are exercisable.
(v) The commitments necessary to complete the purchase of all
of the Shares (in an amount which shall be reasonably satisfactory to
CSFB, LB and the Lenders) (collectively, the "Committed Facilities")
shall be in full force and effect and there shall be no default or
event of default there-under.
(vi) Borrower shall have fulfilled its obligations under
Section 3 of the Commitment Letter.
(vii) There not having occurred or becoming known to CSFB or
LB (A) any general suspension of trading in, or limitation on prices
for, securities on any national securities exchange or in the
over-the-counter market in the United States for a period in excess of
forty-eight hours, (B) the declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States, (C)
the commencement of a war, armed hostilities or other international or
national calamity, directly or indirectly involving the United States,
(D) any limitations (whether or not mandatory) imposed by any
governmental authority on the nature or extension of credit or further
extension of credit by banks or other lending institutions, or (E) in
the
2
<PAGE>
case of the foregoing clauses (C) and (D), a material acceleration or
worsening thereof.
(viii) The delivery of (a) customary legal opinions in form
and substance satisfactory to the Lenders, (b) customary officers'
certificates, together with the accompanying charter documents and
corporate resolutions, in form and substance satisfactory to the
Lenders, and (c) other closing documents, agreements and certificates
customary for the transactions contemplated by the Letter and Term
Sheet or reasonably requested by CSFB, LB or any Lender.
(ix) The Board of Directors of Borrower and NYSEG shall have
authorized and approved the Merger Agreement and the Lenders shall
have received satisfactory evidence of the same. Borrower and NYSEG
shall have entered into the Merger Agreement and the Merger Agreement
shall be in full force and effect. The terms, conditions and structure
of the Tender Offer, Acquisition and the Merger, including all
agreements and documents relating thereto and any amendments thereto,
shall, in each case, be in form and substance reasonably satisfactory
to CSFB, LB and the Lenders. The Tender Offer and the financing
therefor shall be in compliance with all laws and regulations,
including any state anti-takeover law regulating the Tender Offer, the
Acquisition or the Merger, or CSFB and LB shall have determined such
to be inapplicable to the Tender Offer, the Acquisition and the
Merger. CSFB and LB shall have received copies, certified by Bidco, of
all filings made with any governmental authority in connection with
the Tender Offer, the Acquisition or the Merger or the other
Transactions.
(x) There shall not have occurred or become known (a) any
material adverse change or any condition or event that could
reasonably be expected to result in a material adverse change in the
business, assets, liabilities (contingent or otherwise), operations,
condition (financial or otherwise), solvency, properties or material
agreements (each, a "Material Adverse Change") of Borrower and its
subsidiaries, taken as a whole, or NYSEG and its subsidiaries, taken
as a whole, as the case may be
3
<PAGE>
(and before and after giving effect to the Transactions), (b) any
transaction (other than the Transactions) entered into by Borrower or
NYSEG or any of their respective subsidiaries, whether or not in the
ordinary course of business, that, in the reasonable judgment of the
Required Lenders, is material to Borrower or NYSEG, together with
their respective subsidiaries taken as a whole, or (c) any dividend or
distribution of any kind declared or paid by Bidco or NYSEG on its
capital stock (other than regular dividends with respect to NYSEG's
capital stock).
(xi) Any defaults in any material agreements of Borrower,
Bidco or NYSEG that may result from the Transactions shall have been
resolved or otherwise addressed in a manner reasonably satisfactory to
CSFB, LB and the Lenders; and no law or regulation shall be applicable
in the judgment of CSFB, LB and the Lenders that restrains, prevents
or imposes materially adverse conditions upon any component of the
Transactions or the financing thereof, including the extensions of
credit under the Bridge Loan Documents and the Committed Facilities.
(xii) All loans and other financing to Borrower shall be in
full compliance with all applicable requirements of Regulations G, T,
U and X of the Board of Governors of the Federal Reserve System.
(xiii) All accrued fees and expenses (including the
reasonable fees and expenses of counsel to the Lenders, CSFB and LB)
of the Lenders, CSFB and LB in connection with the Bridge Loan
Documents shall have been paid.
(xiv) CSFB and LB shall be satisfied as to the amount and
nature of all tax, ERISA, employee retirement benefit, and other
contingent liabilities to which Borrower, Bidco, NYSEG or any of their
respective subsidiaries may be subject, and the plans of Borrower,
Bidco, NYSEG and its subsidiaries with respect thereto.
(xv) The Lenders shall have received a pro forma balance
sheet satisfactory to CSFB, LB and the Lenders of Borrower and its
subsidiaries as at the
4
<PAGE>
Closing Date and after giving effect to the Transactions and the
financings contemplated hereby, which pro forma balance sheet shall be
substantially in conformity with that delivered to the Lenders during
syndication. The Lenders shall have received projected cash flows and
income statements for the period of nine years following the Closing
Date, which projections shall be (i) based upon reasonable assumptions
made in good faith, (ii) reasonably satisfactory to the Lenders and
(iii) substantially in conformity with those projections delivered to
the Lenders during syndication.
A "Material Adverse Effect" shall mean the result of one or
more events, changes or effects which, individually or in the aggregate, could
reasonably be expected to have a material adverse effect on (i) the business,
results of operations, financial condition or prospects of the Borrower and
each of its subsidiaries, taken as a whole, or and NYSEG and its subsidiaries,
taken as a whole or (ii) the ability of Borrower to perform its obligations
under the Bridge Loan Documents or CSFB's, LB's or any Lender's rights and
remedies with respect thereto.
5
<PAGE>
Annex III
to Exhibit A
FUNDING CONDITIONS
Capitalized terms used but not defined herein shall, unless
otherwise specified, have the meanings assigned to such terms in the Letters
(as defined).
The initial funding of the Commitment of CSFB and LB, and the
release of the Escrowed Proceeds to the Borrower with respect to an Escrowed
Funding, pursuant to the Bridge Facility Commitment Letter, dated as of August
4, 1997, between CSFB, LB and the Borrower (the "Letter") shall be subject to
the satisfaction of all of the conditions precedent set forth in Annex II on
the date of such initial funding or release of Escrowed Proceeds, together with
the following additional conditions:
(i) the obligations of the parties thereto contained in the
Merger Agreement to be performed at or prior to the consummation of
the Merger shall have been performed or complied with prior to the
consummation of the Merger, without any waiver or amendment thereto
without the prior written consent of the Lenders.
(ii) there shall be no litigation or administrative
proceedings or other legal or regulatory developments, actual or
threatened, that, singly or in the aggregate, (a) could have a
Material Adverse Effect (as defined below) on Borrower, Bidco, their
respective subsidiaries or NYSEG and its subsidiaries, (b) adversely
affects the ability of Borrower to fully and timely perform its
obligations under the Bridge Loan Documents and the other documents
executed in connection with the Transactions, (c) challenges the
consummation of any of the Transactions or would restrain, prohibit or
impose adverse conditions on the ability of the Borrower or Lenders to
consummate the financing or the other Transactions contemplated by the
Letter, or would adversely affect the validity or enforceability of
any of the Bridge Loan Documents or the documents executed in
connection with the Transactions or rights, remedies and benefits
available to the
1
<PAGE>
Lenders and other parties thereunder, (e) seeks to prohibit the
ownership or operation by Borrower, Bidco or any of its subsidiaries
of all or a material portion of any of their businesses or assets or
businesses, or (f) would be materially inconsistent with the stated
assumptions underlying the projections provided to CSFB, LB and the
Lenders.
(iii) all conditions precedent to the consummation of the
Transactions shall have been fulfilled (except to the extent such
conditions shall have been waived with the prior consent of the Bridge
Lenders).
(iv) the loans under the Committed Facilities shall be
available to be drawn.
(v) Borrower shall, upon consummation of the Tender Offer,
own and control such number of Shares (on a fully diluted basis) as
shall be necessary to approve the Merger without the affirmative vote
or approval of any other security holder or entity.
(vi) Not less than 662/3% of the shares of NYSEG shall be
owned by Bidco and/or have been tendered and not withdrawn pursuant to
the Tender Offer and Merger Agreement.
(vii) CSFB, LB and the Lenders shall have reviewed the Rate
Case and shall be satisfied in their sole discretion with respect
thereto.
(viii) NYSEG shall not have any "poison pill" rights or shall
have redeemed such rights at a nominal price, or CSFB and LB shall
otherwise be satisfied that such rights are null and void as applied
to the Tender Offer and the Merger.
(ix) All terms and conditions of the Tender Offer shall have
been satisfied, and not waived, amended, supplemented or otherwise
modified except with the consent of CSFB, LB and the Lenders, to the
satisfaction of CSFB, LB and the Lenders. The purchase price for the
tendered shares shall not exceed a price per share to be agreed upon
between the Borrower, CSFB and LB. The Lenders shall have received
satisfactory evidence that fees and expenses
2
<PAGE>
in connection with the Transactions will not exceed an amount to be
agreed upon between the Borrower, CSFB and LB.
(x) Each of the Transactions shall have been consummated in
all material respects in accordance with the terms hereof and the
terms of documentation therefor (without the waiver of any material
condition unless consented to by CSFB and LB and the Lenders) that are
in form and substance reasonably satisfactory to CSFB, LB and the
Lenders.
(xi) All requisite third parties and governmental authorities
shall have approved or consented to the Transactions and the other
transactions contemplated hereby (without the imposition of any
materially burdensome or adverse conditions) and all such approvals
and consents shall be in full force and effect (or there shall be a
plan reasonably satisfactory to the CSFB and LB for the obtaining
thereof), including, without limitation, the approval of the New York
Public Service Commission (the "New York PSC"), the Nuclear Regulatory
Commission (the "NRC") and the Federal Energy Regulatory Commission
("FERC"). All applicable waiting periods shall have expired without
any action being taken by any competent authority which restrains,
prevents, or imposes materially adverse conditions upon the
Transactions.
(xii) CSFB, LB and the Lenders shall be satisfied (in their
reasonable judgment) with the proposed and actual capitalization and
corporate and organizational structure of Borrower, Bidco, NYSEG and
their respective subsidiaries (after giving effect to the
Transactions), including as to direct and indirect ownership and as to
the terms of the indebtedness and capital stock of Bidco, NYSEG and
their respective subsidiaries.
(xiii) All conditions precedent under all documentation
relating to the Transactions or the financing or refinancing thereof
as the case may be shall have been satisfied (except to the extent
such conditions have been waived with the prior consent of CSFB, LB
and the Lenders).
3
<PAGE>
A "Material Adverse Effect" shall have the meaning set forth
in Annex II.
4
