UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 13D
UNDER THE SECURITIES EXCHANGE ACT OF 1934
THE BROOKLYN UNION GAS COMPANY
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(Name of Issuer)
COMMON STOCK, PAR VALUE $0.33 1/3 PER SHARE
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(Title of Class of Securities)
114259104
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(CUSIP Number)
LEONARD P. NOVELLO,
GENERAL COUNSEL
LONG ISLAND LIGHTING COMPANY
175 EAST OLD COUNTRY ROAD
HICKSVILLE, NEW YORK 11801
(516) 545-5162
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(Name, Address and Telephone Number of Person Authorized to
Receive Notices and Communications)
Copy to
THOMAS E. CONSTANCE, ESQ.
KRAMER, LEVIN, NAFTALIS & FRANKEL
919 THIRD AVENUE
NEW YORK, NEW YORK 10022
(212) 715-9100
DECEMBER 29, 1996
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(Date of Event which Requires Filing of this Statement)
Page 1 of 12 Pages
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CUSIP NO. 114259104 Page 2 of 12 Pages
SCHEDULE 13D
1. NAME OF REPORTING PERSON
SS OR I.R.S IDENTIFICATION NO. OF ABOVE PERSON
Long Island Lighting Company
11-1019782
2. CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [ ]
(b) [ ]
3. SEC USE ONLY
4. SOURCE OF FUNDS
WC
5. CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED
PURSUANT TO ITEMS 2(d) OR 2(e)
6. CITIZENSHIP OR PLACE OF ORGANIZATION
New York
7. SOLE VOTING POWER
NUMBER OF 0
SHARES
BENEFICIALLY 8. SHARES VOTING POWER
OWNED BY 0
EACH
REPORTING 9. SOLE DISPOSITIVE POWER
PERSON 0
WITH
10. SHARES DISPOSITIVE POWER
0
11. AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
9,948,682 shares of Common Stock.
12. CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES
13. PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 16.6%. Based upon
49,993,378 shares of Common Stock outstanding as of December 18, 1996,
as represented by Issuer, calculated pursuant to Rule 13d-3(d)(1) and
assuming, solely for purposes of such calculation, that the option to
purchase such shares has been exercised.
14. TYPE OF REPORTING PERSON
CO
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ITEM 1. SECURITY AND ISSUER.
This Schedule 13D relates to the common stock, par value $0.33 1/3 per
share ("BUG Common Stock"), of The Brooklyn Union Gas Company, a New York
corporation ("BUG"). The principal executive offices of BUG are located at One
Metrotech Center, Brooklyn, New York 11201-3850.
ITEM 2. IDENTITY AND BACKGROUND.
This Schedule 13D is filed by Long Island Lighting Company, a New York
corporation ("LILCO"). LILCO supplies electric and gas service in Nassau and
Suffolk Counties and to the Rockaway Peninsula in Queens County, all on Long
Island, New York. LILCO's principal executive offices are located at 175 East
Old Country Road, Hicksville, New York 11801.
Each executive officer and each director of LILCO is a citizen of the
United States. The name, business address and present principal occupation of
each executive officer and director are set forth in Annex I to this Schedule
13D which is incorporated herein by this reference.
During the last five years, to the best of LILCO's knowledge, neither
LILCO nor any of its executive officers or directors has been convicted in a
criminal proceeding (excluding traffic violations or similar misdemeanors) or
has been a party to a civil proceeding of a judicial or administrative body of
competent jurisdiction as a result of which LILCO or such person was or is
subject to a judgment, decree or final order enjoining future violations of, or
prohibiting or mandating activities subject to, federal or state securities
laws, or finding any violation with respect to such laws, and which judgment,
decree or final order was not subsequently vacated.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
Pursuant to a stock option agreement, dated as of December 29, 1996,
between Brooklyn Union and LILCO (the "BUG Stock Option Agreement"), BUG granted
LILCO an irrevocable option (the "BUG Option") to purchase from BUG, under
certain circumstances and subject to certain adjustments, up to 9,948,682
authorized and unissued shares of BUG Common Stock, at a price per share of
$30.0375 (the "Purchase Price"), payable, at LILCO's option, (a) in cash or (b)
subject to BUG's having obtained the approvals of any governmental authority
required for BUG to acquire such shares of LILCO Common Stock (as defined below)
from BUG, in shares of Common Stock, par value 85 per share, of LILCO ("LILCO
Common Stock").
As of the date hereof, the BUG Option is not exercisable. The shares of
BUG Common Stock subject to the BUG Option would equal 19.9% of the outstanding
BUG Common Stock before giving effect to the exercise of the BUG Option and
16.6%
Page 3 of 12 Pages
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of the outstanding BUG Common Stock after giving effect to the exercise of the
BUG Option. Under certain circumstances, LILCO may require BUG to, or BUG may be
permitted to, repurchase for cash the BUG Option and any shares of BUG Common
Stock acquired pursuant to the exercise of the BUG Option.
The BUG Option was granted by BUG as a condition of and in
consideration for LILCO entering into the Agreement and Plan of Exchange, by and
among NYECO CORP., a New York corporation ("NYECO" or, from and after the
consummation of the Binding Share Exchanges (as defined below), the "Company"),
BUG and LILCO, dated as of December 29, 1996 (the "Exchange Agreement"), and the
LILCO Stock Option Agreement, by and between BUG and LILCO, dated as of December
29, 1996 (the "LILCO Stock Option Agreement"), each as described below.
The exercise of the BUG Option for the full number of shares currently
covered thereby would require aggregate funds of $298,833,535. It is anticipated
that, should the BUG Option become exercisable and should LILCO determine to
exercise the BUG Option for cash, LILCO would obtain the funds from working
capital or by borrowing from parties whose identity is not yet known.
A copy of the BUG Stock Option Agreement is included as Exhibit 2.3 to
this Schedule 13D and is incorporated herein by this reference. The foregoing
description of the BUG Stock Option Agreement is qualified in its entirety by
reference to such exhibit.
ITEM 4. PURPOSE OF TRANSACTION.
In connection with the execution of the BUG Stock Option Agreement,
BUG, LILCO and NYECO entered into the Exchange Agreement, pursuant to which,
among other matters and subject to the terms and conditions set forth in the
Exchange Agreement, each outstanding share of LILCO Common Stock will be
exchanged for .803 (the "Ratio") of a newly issued share of Common Stock, par
value $0.01 per share, of NYECO (the "NYECO Common Stock") and each outstanding
share of BUG Common Stock will be exchanged for one newly issued share of NYECO
Common Stock (collectively, the "Binding Share Exchanges"). Also in connection
with the execution of the BUG Stock Option Agreement, BUG and LILCO entered into
the LILCO Stock Option Agreement, pursuant to which LILCO granted BUG an
irrevocable option (the "LILCO Option") to purchase from LILCO, under certain
circumstances and subject to certain adjustments, up to 23,981,964 authorized
and unissued shares of LILCO Common Stock, at a price per share of $19.725,
payable, at BUG's option, (a) in cash or (b) subject to BUG's having obtained
the approvals of any governmental authority required for BUG to acquire such
shares of LILCO Common Stock from LILCO, in shares of LILCO Common Stock. The
LILCO Option was granted by LILCO as a condition of and in consideration for
Page 4 of 12 Pages
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BUG entering into the Exchange Agreement and the BUG Stock Option Agreement.
Consummation of the Binding Share Exchanges is subject to certain
conditions, including among other things: (i) receipt of the approval of the
Exchange Agreement by the holders of two-thirds of the outstanding shares of
LILCO Common Stock and by two-thirds of the outstanding shares of BUG Common
Stock; (ii) registration of the shares of NYECO Common Stock to be issued in the
Binding Share Exchanges under the Securities Act of 1933, as amended; (iii)
approval for listing of the shares of NYECO Common Stock to be issued in the
Binding Share Exchanges on the New York Stock Exchange (the "NYSE") upon
official notice of issuance; (iv) receipt of required approvals by governmental
authorities, which approvals shall have become final and shall not impose terms
or conditions which, in the aggregate, would have, or insofar as reasonably can
be foreseen, could have, a material adverse effect on the business, assets,
financial condition or results of operations of the Company and its prospective
subsidiaries taken as a whole or which would be materially inconsistent with the
agreements of the parties contained in the Exchange Agreement; (v) receipt by
each of BUG and LILCO of a letter from their respective independent public
accountants confirming that the transactions effected pursuant to the Exchange
Agreement will qualify as a pooling of interests transaction under generally
accepted accounting principles and applicable regulations promulgated by the
Securities and Exchange Commission; and (vi) satisfaction of certain other
conditions. Pursuant to the Exchange Agreement, upon consummation of the Binding
Share Exchanges, (a) the number of directors comprising the full Board of
Directors of the Company will be 15 persons, six of whom will be designated by
BUG, six of whom will be designated by LILCO and three of whom will be
designated by a committee consisting of two current BUG directors and two
current LILCO directors and (b) Dr. William J. Catacosinos will be the Chairman
of the Board of Directors, Chairman of the Executive Committee and Chief
Executive Officer of the Company, and Mr. Robert B. Catell will be President and
Chief Operating Officer of the Company. Upon consummation of the Binding Share
Exchanges, each of the LILCO Common Stock and the BUG Common Stock will be
delisted from the NYSE. Pursuant to the Exchange Agreement, at the first
anniversary of the effective time of the Binding Share Exchanges, Dr.
Catacosinos will cease to be the Chief Executive Officer, will continue to be
Chairman of the Board and Chairman of the Executive Committee and will become a
consultant of the Company, and Mr. Catell will succeed Dr. Catacosinos as Chief
Executive Officer of the Company.
A copy of the Exchange Agreement is included as Exhibit 2.1 to this
Schedule 13D and is incorporated herein by this reference. The foregoing
description of the Exchange Agreement is qualified in its entirety by reference
to such exhibit.
Page 5 of 12 Pages
<PAGE>
A copy of the LILCO Stock Option Agreement is included as Exhibit 2.2
to this Schedule 13D and is incorporated herein by this reference. The foregoing
description of the LILCO Stock Option Agreement is qualified in its entirety by
reference to such exhibit.
BUG and LILCO contemplate that discussions will continue with the Long
Island Power Authority ("LIPA") to arrive at an agreement, mutually acceptable
to each of BUG and LILCO, pursuant to which LIPA would acquire certain assets or
securities of LILCO, the consideration for which would inure to the benefit of
the Company. In such event, the Ratio will automatically be revised to, and
become, .880.
BUG and LILCO will continue their respective current dividend policies
until the closing of the Binding Share Exchanges. It is expected that the
Company's dividend policy will be determined prior to closing.
Except as set forth herein, LILCO does not have any current plans or
proposals that relate to or would result in (i) the acquisition by any person of
additional shares of BUG Common Stock or the disposition of shares of BUG Common
Stock; (ii) an extraordinary corporate transaction, such as a merger,
reorganization or liquidation, involving BUG or any of its subsidiaries; (iii) a
sale or transfer of any material amount of assets of BUG or any of its
subsidiaries; (iv) any change in the present board of directors or management of
BUG, including any plans or proposals to change the number or term of directors
or to fill any vacancies on the board; (v) any material change in the present
capitalization or dividend policy of BUG; (vi) any other material change in
BUG's business or corporate structure; (vii) any change in BUG's Certificate of
Incorporation or Bylaws, or instruments corresponding thereto, or other actions
that may impede the acquisition of control of BUG by any person; (viii) causing
a class of securities of BUG to be delisted from a national securities exchange
or to cease to be authorized to be quoted in an inter-dealer quotation system of
a registered national securities association; (ix) a class of equity securities
of BUG becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934, as amended; or (x) any action
similar to any of those enumerated above.
ITEM 5. INTEREST IN SECURITIES OF ISSUER.
Although the BUG Option does not allow LILCO to purchase any shares of
BUG Common Stock pursuant thereto unless and until the conditions to exercise
specified in the BUG Stock Option Agreement occur, assuming for purposes of this
Item 5 that such conditions are satisfied and LILCO is entitled to purchase
shares of BUG Common Stock pursuant to the BUG Option, LILCO would currently be
entitled to purchase 9,948,682 shares of BUG Common Stock, or approximately
19.9% of the currently outstanding
Page 6 of 12 Pages
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BUG Common Stock before giving effect to the exercise of the BUG Option and
16.6% of the currently outstanding BUG Common Stock after giving effect to the
exercise of the BUG Option (based upon 49,993,378 shares of BUG Common Stock
outstanding as of December 18, 1996, as represented by BUG in the Exchange
Agreement).
LILCO does not have the right to acquire any shares of BUG Common Stock
under the BUG Option unless certain events specified in the BUG Stock Option
Agreement occur. Accordingly, LILCO does not have sole or shared voting or
dispositive power with respect to any shares of BUG Common Stock purchasable
under the BUG Option, and LILCO disclaims beneficial ownership of BUG Common
Stock subject to the BUG Option until such events occur. Assuming for purposes
of this Item 5 that events occurred that would enable LILCO to exercise the BUG
Option and LILCO exercised the BUG Option, LILCO would have sole voting power
and sole dispositive power with respect to the shares of BUG Common Stock
acquired pursuant to the BUG Option.
The foregoing description of certain terms of the BUG Stock Option
Agreement is qualified in its entirety by reference to the BUG Stock Option
Agreement which is filed as Exhibit 2.3 hereto and which is incorporated herein
by this reference.
To the best of LILCO's knowledge, no executive officer or director of
LILCO beneficially owns any shares of BUG Common Stock, nor (except for the
issuance of the BUG Option) have any transactions in BUG Common Stock been
effected during the past 60 days by BUG or, to the best knowledge of BUG, by any
executive officer or director of LILCO. In addition, no other person is known by
LILCO to have the right to receive or the power to direct the receipt of
dividends from, or the proceeds from the sale of, the securities covered by this
Schedule 13D.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed as part of this Schedule 13D:
Exhibit 2.1 -- Exchange Agreement filed as Exhibit 2 to the
Current Report on Form 8-K of LILCO dated
December 29, 1996, is hereby
incorporated by reference
Exhibit 2.2 -- LILCO Stock Option Agreement
Exhibit 2.3 -- BUG Stock Option Agreement
Page 7 of 12 Pages
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ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the name and present principal occupation of each
director and executive officer of Long Island Lighting Company as of December
29, 1996. The business address of each such director and executive officer is
c/o Long Island Lighting Company, 175 East Old Country Road, Hicksville, New
York 11801.
NAME PRINCIPAL OCCUPATION
DIRECTORS
OF LILCO:
A. James Barnes Dean, Indiana
University School of Public
and Environmental Affairs
George Bugliarello Chancellor, Polytechnic
University
Renso L. Caporali Senior Vice President of
Government and Commercial
Marketing, Raytheon Company
Dr. William J. Catacosinos Chairman and Chief Executive
Officer, Long Island Lighting
Company
Peter O. Crisp President, Venrock, Inc.
James T. Flynn President and Chief Operating
Officer, Long Island Lighting
Company
Vicki L. Fuller Senior Vice President, Alliance
Capital Management Corporation
Katherine O. Ortega Former Treasurer of the United
States
Basil A. Paterson Partner, law firm of Meyer,
Suozzi, English and Klein, P.C.
Richard L. Schmalensee Director, Massachusetts
Institute of Technology Center
for Energy and Environmental
Policy Research
Page 8 of 12 Pages
<PAGE>
George J. Sideris Retired Senior Vice President,
Long Island Lighting Company
John H. Talmage Partner, H.R. Talmage & Son Farm
EXECUTIVE OFFICERS
OF LILCO
(WHO ARE NOT DIRECTORS):
Theodore A. Babcock Vice President and Treasurer,
Assistant Corporate Secretary
Charles A. Daverio Vice President, Energy Exchange
Corp.
Joseph E. Fontana Vice President and Controller
Robert X. Kelleher Vice President, Human Resources
John D. Leonard, Jr. Vice President, Engineering &
Construction
Adam M. Madsen Vice President, Corporate
Planning
Kathleen A. Marion Vice President, Corporate
Securities and Corporate
Secretary
Brian R. McCaffrey Vice President, Administration
Joseph W. McDonnell Senior Vice President, Electric
& Gas Marketing and External
Affairs
Leonard P. Novello Senior Vice President and
General Counsel
Anthony Nozzolillo Senior Vice President, Finance
and Chief Financial Officer
Richard Reichler Vice President, Tax and Benefit
Compliance and Deputy General
Counsel
William G. Schiffmacher Senior Vice President, Customer
Relations and Information
Systems
Werner J. Schweiger Vice President, Electric
Operations
Page 9 of 12 Pages
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Richard M. Siegel Vice President, Information
Systems and Technology
Robert B. Steger Senior Vice President, Gas
Operations
William E. Steiger, Jr. Vice President, Fossil
Production
Edward J. Youngling Senior Vice President, Electric
Business Unit
Page 10 of 12 Pages
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SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
LONG ISLAND LIGHTING COMPANY
By: /s/ Anthony Nozzolillo
-----------------------
Name: Anthony Nozzolillo
Title: Senior Vice President, Finance
and Chief Financial Officer
Dated: January 9, 1997
Page 11 of 12 Pages
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EXHIBIT INDEX
EXHIBIT DESCRIPTION
2.1 Agreement and Plan of Exchange, dated as of December
29, 1996, among NYECO Corp., The Brooklyn Union Gas
Company and Long Island Lighting Company, filed as
Exhibit 2.1 to the Current Report on Form 8-K of Long
Island Lighting Company dated December 29, 1996, is
incorporated herein by reference.
2.2 LILCO Stock Option Agreement, dated as of December 29,
1996, between The Brooklyn Union Gas Company and Long
Island Lighting Company.
2.3 BUG Stock Option Agreement, dated as of December 29,
1996, between The Brooklyn Union Gas Company and Long
Island Lighting Company.
Page 12 of 12 Pages
LILCO STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 29, 1996 by and among THE
BROOKLYN UNION GAS COMPANY, a New York corporation ("BUG"), and LONG ISLAND
LIGHTING COMPANY, a New York corporation (the "COMPANY").
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) BUG, the Company and NYECO Corp., a New York corporation
("NYECO"), are entering into an Agreement and Plan of Exchange, dated as of the
date hereof (the "EXCHANGE AGREEMENT"), which provides, among other things, upon
the terms and subject to the conditions thereof, for the exchange of outstanding
shares of capital stock of each of BUG and the Company for newly issued shares
of capital stock of NYECO (the "BINDING SHARE EXCHANGE"), and (ii) the Company
and BUG are entering into a certain stock option agreement dated as of the date
hereof whereby BUG grants to the Company an option with respect to certain
shares of BUG's common stock on the terms and subject to the conditions set
forth therein (the "BUG STOCK OPTION AGREEMENT"); and
WHEREAS, as a condition to BUG's willingness to enter into the Exchange
Agreement, BUG has requested that the Company agree, and the Company has so
agreed, to grant to BUG an option with respect to certain shares of the
Company's common stock, on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, to induce BUG to enter into the Exchange Agreement, and
in consideration of the mutual covenants and agreements set forth herein and in
the Exchange Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants BUG an
irrevocable option (the "COMPANY OPTION") to purchase up to 23,981,964
shares, subject to adjustment as provided in Section 11 (such shares
being referred to herein as the "COMPANY SHARES") of common stock, par
value $5.00 per share, of the Company (the "COMPANY COMMON STOCK")
(being 19.9% of the number of shares of Company Common Stock
outstanding on the date hereof) in the manner set forth below at a
price (the "EXERCISE PRICE") per Company Share of $19.725 (which is
equal to the Fair Market Value (as defined below) of a Company Share on
the date hereof) payable, at BUG's option, (a) in cash or (b) subject
to the Company's having obtained the approvals of any Governmental
Authority required for the Company to acquire the BUG Shares (as
defined below) from BUG, which approvals the Company shall use best
efforts to obtain, in shares of common stock, par value $.33 1/3 per
share, of BUG ("BUG SHARES") in either case in accordance with Section
4 hereof. Notwithstanding the foregoing, in no event shall the number
of Company Shares for which the Company Option is exercisable exceed
19.9% of the number of issued and outstanding shares of Company Common
Stock. As used herein, the "FAIR MARKET VALUE" of any share shall be
the average of the daily closing sales price for such share on the New
York Stock Exchange (the "NYSE") during the 10 NYSE trading days prior
to the fifth NYSE trading day preceding the date such Fair Market Value
is to be determined. Capitalized
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terms used herein but not defined herein shall have the meanings set
forth in the Exchange Agreement.
2. EXERCISE OF OPTION. The Company Option may be exercised by
BUG, in whole or in part, at any time or from time to time after the
Exchange Agreement becomes terminable by BUG under circumstances which
could entitle BUG to termination fees under either Section 9.3(a) of
the Exchange Agreement (provided that the events specified in Section
9.3(a)(ii)(x) of the Exchange Agreement shall have occurred, although
the events specified in Section 9.3(a)(ii)(y) thereof need not have
occurred) or Section 9.3(b) of the Exchange Agreement (regardless of
whether the Exchange Agreement is actually terminated or whether there
occurs a closing of any Business Combination involving a Target Party
or a closing by which a Target Party becomes a subsidiary), any such
event by which the Exchange Agreement becomes so terminable by BUG
being referred to herein as a "TRIGGER EVENT." The Company shall notify
BUG promptly in writing of the occurrence of any Trigger Event, it
being understood that the giving of such notice by the Company shall
not be a condition to the right of BUG to exercise the Company Option.
In the event BUG wishes to exercise the Company Option, BUG shall
deliver to the Company a written notice (an "EXERCISE NOTICE")
specifying the total number of Company Shares it wishes to purchase.
Each closing of a purchase of Company Shares (a "CLOSING") shall occur
at a place, on a date and at a time designated by BUG in an Exercise
Notice delivered at least two business days prior to the date of the
Closing. The Company Option shall terminate upon the earlier of: (i)
the Effective Time; (ii) the termination of the Exchange Agreement
pursuant to Section 9.1 thereof (other than upon or during the
continuance of a Trigger Event); or (iii) 180 days following any
termination of the Exchange Agreement upon or during the continuance of
a Trigger Event (or if, at the expiration of such 180 day period the
Company Option cannot be exercised by reason of any applicable
judgment, decree, order, law or regulation, 10 business days after such
impediment to exercise shall have been removed or shall have become
final and not subject to appeal, but in no event under this clause
(iii) later than June 30, 1998). Notwithstanding the foregoing, the
Company Option may not be exercised if BUG is in material breach of any
of its material representations or warranties, or in material breach of
any of its covenants or agreements, contained in this Agreement or in
the Exchange Agreement. Upon the giving by BUG to the Company of the
Exercise Notice and the tender of the applicable aggregate Exercise
Price, BUG shall be deemed to be the holder of record of the Company
Shares issuable upon such exercise, notwithstanding that the stock
transfer books of the Company shall then be closed or that certificates
representing such Company Shares shall not then be actually delivered
to BUG.
3. CONDITIONS TO CLOSING. The obligation of the Company to
issue the Company Shares to BUG hereunder is subject to the conditions,
which (other than the conditions described in clauses (i), (iii) and
(iv) below) may be waived by the Company in its sole discretion, that
(i) all waiting periods, if any, under the HSR Act, applicable to the
issuance of the Company Shares hereunder shall have expired or have
been terminated; (ii) the Company Shares, and any BUG Shares which are
issued in payment of the Exercise Price, shall have been approved for
listing on the NYSE upon official
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notice of issuance; (iii) all consents, approvals, orders or
authorizations of, or registrations, declarations or filings with, any
federal, state or local administrative agency or commission or other
federal, state or local Governmental Authority, if any, required in
connection with the issuance of the Company Shares hereunder shall have
been obtained or made, as the case may be, including, without
limitation, if applicable, the approval of the SEC under Section 10 of
the 1935 Act of the acquisition of the Company Shares by BUG and, if
applicable, the acquisition by the Company of the BUG Shares
constituting the Exercise Price hereunder; and (iv) no preliminary or
permanent injunction or other order by any court of competent
jurisdiction prohibiting or otherwise restraining such issuance shall
be in effect.
4. CLOSING. At any Closing, (a) the Company will deliver to
BUG or its designee a single certificate in definitive form
representing the number of the Company Shares designated by BUG in its
Exercise Notice, such certificate to be registered in the name of BUG
and to bear the legend set forth in Section 12, and (b) BUG will
deliver to the Company the aggregate price for the Company Shares so
designated and being purchased by (i) wire transfer of immediately
available funds or certified check or bank check or (ii) subject to the
condition in Section 1(b), a certificate or certificates representing
the number of BUG Shares being issued by BUG in consideration thereof,
as the case may be. For the purposes of this Agreement, the number of
BUG Shares to be delivered to the Company shall be equal to the
quotient obtained by dividing (i) the product of (x) the number of
Company Shares with respect to which the Company Option is being
exercised and (y) the Exercise Price by (ii) the Fair Market Value of
the BUG Shares on the date immediately preceding the date the Exercise
Notice is delivered to the Company. The Company shall pay all expenses,
and any and all United States federal, state and local taxes and other
charges that may be payable in connection with the preparation, issue
and delivery of stock certificates under this Section 4 in the name of
BUG or its designee.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company represents and warrants to BUG that (a) except as set forth in
Section 5.1 of the LILCO Disclosure Schedule, the Company is a
corporation duly organized, validly existing and in active status under
the laws of the State of New York and has the corporate power and
authority to enter into this Agreement and, subject to obtaining the
applicable approval of shareholders of the Company for the repurchase
of Company Shares pursuant to Section 7(a) below under circumstances
where Section 513(e) of the NYBCL would be applicable (the "BUYBACK
APPROVALS") and subject to any regulatory approvals referred to herein
and to the provisions of Section 513(a) of the NYBCL, if applicable, to
carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any of the transactions contemplated hereby
(other than any required Buyback Approvals), (c) such corporate action
(including the approval of the Board of Directors of the Company) is
intended to render inapplicable to this Agreement and the Exchange
Agreement and the transactions
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<PAGE>
contemplated hereby and thereby, the provisions of the NYBCL referred
to in Section 5.15 of the Exchange Agreement, (d) this Agreement has
been duly executed and delivered by the Company, constitutes a valid
and binding obligation of the Company and, assuming this Agreement
constitutes a valid and binding obligation of BUG, is enforceable
against the Company in accordance with its terms, (e) the Company has
taken all necessary corporate action to authorize and reserve for
issuance and to permit it to issue, upon exercise of the Company
Option, and at all times from the date hereof through the expiration of
the Company Option will have reserved, 23,981,964 authorized and
unissued Company Shares, such amount being subject to adjustment as
provided in Section 11, all of which, upon their issuance and delivery
in accordance with the terms of this Agreement, will be validly issued,
fully paid and nonassessable, (f) upon delivery of the Company Shares
to BUG upon the exercise of the Company Option, BUG will acquire the
Company Shares free and clear of all claims, liens, charges,
encumbrances and security interests of any nature whatsoever, (g)
except as described in Section 5.4(b) of the Exchange Agreement, the
execution and delivery of this Agreement by the Company does not, and
the consummation by the Company of the transactions contemplated hereby
will not, violate, conflict with, or result in a breach of any
provision of, or constitute a default (with or without notice or lapse
of time, or both) under, or result in the termination of, or accelerate
the performance required by, or result in a right of termination,
cancellation, or acceleration of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security
interest or other encumbrance on assets (any such conflict, violation,
default, right of termination, cancellation or acceleration, loss or
creation, a "VIOLATION") of the Company or any of its subsidiaries,
pursuant to, (A) any provision of the certificate of incorporation or
by-laws of the Company, (B) any provisions of any loan or credit
agreement, note, mortgage, indenture, lease, Company benefit plan or
other agreement, obligation, instrument, permit, concession, franchise,
license or (C) any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or its properties or
assets, which Violation, in the case of each of clauses (B) and (C),
could reasonably be expected to have a material adverse effect on the
Company and its subsidiaries taken as a whole, (h) except as described
in Section 5.4(c) of the Exchange Agreement or Section 1(b) or Section
3 hereof, the execution and delivery of this Agreement by the Company
does not, and the performance of this Agreement by the Company will
not, require any consent, approval, authorization or permit of, or
filing with or notification to, any Governmental Authority, (i) none of
the Company, any of its affiliates or anyone acting on its or their
behalf has issued, sold or offered any security of the Company to any
person under circumstances that would cause the issuance and sale of
the Company Shares, as contemplated by this Agreement, to be subject to
the registration requirements of the Securities Act as in effect on the
date hereof and, assuming the representations of BUG contained in
Section 6(h) are true and correct, the issuance, sale and delivery of
the Company Shares hereunder would be exempt from the registration and
prospectus delivery requirements of the Securities Act, as in effect on
the date hereof (and the Company shall not take any action which would
cause the issuance, sale and delivery of the Company Shares hereunder
not to be exempt from such requirements), and (j) any BUG Shares
acquired pursuant to this Agreement will be acquired for the Company's
own account, for investment purposes only and will not be acquired by
the Company
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<PAGE>
with a view to the public distribution thereof in violation of any
applicable provision of the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF BUG. BUG represents and
warrants to the Company that (a) BUG is a corporation duly organized,
validly existing and in good standing under the laws of the State of
New York and has the corporate power and authority to enter into this
Agreement and to carry out its obligations hereunder, (b) the execution
and delivery of this Agreement by BUG and the consummation by BUG of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of BUG and no other corporate
proceedings on the part of BUG are necessary to authorize this
Agreement or any of the transactions contemplated hereby, (c) this
Agreement has been duly executed and delivered by BUG and constitutes a
valid and binding obligation of BUG, and, assuming this Agreement
constitutes a valid and binding obligation of the Company, is
enforceable against BUG in accordance with its terms, (d) prior to any
delivery of BUG Shares in consideration of the purchase of Company
Shares pursuant hereto, BUG will have taken all necessary corporate
action to authorize for issuance and to permit it to issue such BUG
Shares, all of which, upon their issuance and delivery in accordance
with the terms of this Agreement, will be validly issued, fully paid
and nonassessable, and to render inapplicable to the receipt by the
Company of the BUG Shares the provisions of the NYBCL referred to in
Section 4.15 of the Exchange Agreement, (e) upon any delivery of such
BUG Shares to the Company in consideration of the purchase of Company
Shares pursuant hereto, the Company will acquire the BUG Shares free
and clear of all claims, liens, charges, encumbrances and security
interests of any nature whatsoever, (f) except as described in Section
4.4(b) of the Exchange Agreement, the execution and delivery of this
Agreement by BUG does not, and the consummation by BUG of the
transactions contemplated hereby will not, violate, conflict with, or
result in the breach of any provision of, or constitute a default (with
or without notice or lapse of time, or both) under, or result in any
Violation by BUG or any of its subsidiaries, pursuant to (A) any
provision of the certificate of incorporation or by-laws of BUG, (B)
any provisions of any loan or credit agreement, note, mortgage,
indenture, lease, BUG benefit plan or other agreement, obligation,
instrument, permit, concession, franchise, license or (C) any judgment,
order, decree, statute, law, ordinance, rule or regulation applicable
to BUG or its properties or assets, which Violation, in the case of
each of its clauses (B) and/or (C), would have a material adverse
effect on BUG and its subsidiaries taken as a whole, (g) except as
described in Section 4.4(c) of the Exchange Agreement or Section 1(b)
or Section 3 hereof, the execution and delivery of this Agreement by
BUG does not, and the consummation by BUG of the transactions
contemplated hereby will not, require any consent, approval,
authorization or permit of, or filing with or notification to, any
Governmental Authority and (h) any Company Shares acquired upon
exercise of the Company Option will be acquired for BUG's own account,
for investment purposes only and will not be, and the Company Option is
not being, acquired by BUG with a view to the public distribution
thereof in violation of any applicable provision of the Securities Act.
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<PAGE>
7. CERTAIN REPURCHASES.
(a) BUG PUT. At the request of BUG by written notice at any
time during which the Company Option is exercisable pursuant to Section
2 (the "REPURCHASE PERIOD"), the Company (or any successor entity
thereof) shall repurchase from BUG all or any portion of the Company
Option, at the price set forth in subparagraph (i) below, or, at the
request of BUG by written notice at any time prior to December 31, 1997
(provided that such date shall be extended to June 30, 1998 under the
circumstances where the date after which either party may terminate the
Exchange Agreement pursuant to Section 9.1(b) of the Exchange Agreement
has been extended to June 30, 1998), the Company (or any successor
entity thereof) shall repurchase from BUG all or any portion of the
Company Shares purchased by BUG pursuant to the Company Option, at the
price set forth in subparagraph (ii) below:
(i) the difference between the "MARKET/OFFER PRICE"
for shares of Company Common Stock as of the date BUG gives
notice of its intent to exercise its rights under this Section
7 (defined as the higher of (A) the price per share offered as
of such date pursuant to any tender or exchange offer or other
offer with respect to a Business Combination which was made
prior to such date and not terminated or withdrawn as of such
date (the "OFFER PRICE") and (B) the Fair Market Value of
Company Common Stock as of such date (the "MARKET PRICE")) and
the Exercise Price, multiplied by the number of Company Shares
purchasable pursuant to the Company Option (or portion thereof
with respect to which BUG is exercising its rights under this
Section 7), but only if the Market/Offer Price is greater than
the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise
Price paid by BUG per Company Share acquired pursuant to the
Company Option and (B) the difference between the Market/Offer
Price and the Exercise Price, but only if the Market/Offer
Price is greater than the Exercise Price, and (y) the number
of Company Shares to be repurchased pursuant to this Section
7. For purposes of this clause (ii), the Offer Price shall be
the highest price per share offered pursuant to a tender or
exchange offer or other Business Combination offer during the
Repurchase Period prior to the delivery by BUG of a notice of
repurchase.
(b) REDELIVERY OF BUG SHARES. If BUG elected to purchase
Company Shares pursuant to the exercise of the Company Option by the
issuance and delivery of BUG Shares, then the Company shall, if so
requested by BUG, in fulfillment of its obligation pursuant to clause
(a) of Section 7(a)(ii)(x) (that is, with respect to the Exercise Price
only and without limitation to its obligation to pay additional
consideration under clause (b) of Section 7(a)(ii)(x)), redeliver the
certificate for such BUG Shares to BUG, free and clear of all liens,
claims, damages, charges and encumbrances of any kind or nature
whatsoever; provided, however, that if less than all of the Company
Shares purchased by BUG pursuant to the Company Option are to be
repurchased pursuant to this Section 7, then BUG shall issue to the
Company a new certificate representing those BUG Shares which are not
due to be redelivered to BUG pursuant to this Section 7 as
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<PAGE>
they constituted payment of the Exercise Price for the Company Shares
not being repurchased.
(c) PAYMENT AND REDELIVERY OF COMPANY OPTION OR SHARES. In the
event BUG exercises its rights under this Section 7, the Company shall,
within 10 business days thereafter, pay the required amount to BUG in
immediately available funds and BUG shall surrender to the Company the
Company Option or the certificates evidencing the Company Shares
purchased by BUG pursuant thereto, and BUG shall warrant that it owns
the Company Option or such shares and that the Company Option or such
shares are then free and clear of all liens, claims, damages, charges
and encumbrances of any kind or nature whatsoever.
(d) BUG CALL. If BUG has elected to purchase Company Shares
pursuant to the exercise of the Company Option by the issuance and
delivery of BUG Shares, notwithstanding that BUG may no longer hold any
such Company Shares or that BUG elects not to exercise its other rights
under this Section 7, BUG may require, at any time or from time to time
prior to December 31, 1997 (provided that such date shall be extended
to June 30, 1998 under the circumstances where the date after which
either party may terminate the Exchange Agreement pursuant to Section
9.1(b) of the Exchange Agreement has been extended to June 30, 1998),
the Company to sell to BUG any such BUG Shares at the Fair Market Value
that had been attributed to such BUG Shares pursuant to Section 4 plus
interest at the rate of 6.5% per annum on such amount from the Closing
Date relating to the exchange of such BUG Shares pursuant to Section 4
to the closing date under this Section 7(d) less any dividends on such
BUG Shares paid during such period or declared and payable to
stockholders of record on a date during such period.
(e) REPURCHASE PRICE REDUCED AT BUG'S OPTION. In the event the
repurchase price specified in Section 7(a) would subject the purchase
of the Company Option or the Company Shares purchased by BUG pursuant
to the Company Option to a vote of the shareholders of the Company
pursuant to Section 513(e) of the NYBCL, then BUG may, at its election,
reduce the repurchase price to an amount which would permit such
repurchase without the necessity for such a shareholder vote.
8. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date,
neither party shall, directly or indirectly, by operation of law or
otherwise, sell, assign, pledge, or otherwise dispose of or transfer
any Restricted Shares beneficially owned by such party, other than (i)
pursuant to Section 7, or (ii) in accordance with Section 9(b) or
Section 10.
(b) PERMITTED SALES. Following the termination of the Exchange
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended, or otherwise
determined to be fair to and in the best interests of the
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<PAGE>
shareholders of the other party, by a majority of the members of the
Board of Directors of such other party which majority shall include a
majority of directors who were directors prior to the announcement of
such tender or exchange offer.
9. REGISTRATION RIGHTS. Following the termination of the
Exchange Agreement, each party hereto (a "DESIGNATED HOLDER") may by
written notice (the "REGISTRATION NOTICE") to the other party (the
"REGISTRANT") request the Registrant to register under the Securities
Act all or any part of the Restricted Shares beneficially owned by such
Designated Holder (the "REGISTRABLE SECURITIES") pursuant to a bona
fide firm commitment underwritten public offering in which the
Designated Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably
practicable and shall use their best efforts to prevent any person
(including any Group (as used in Rule 13d-5 under the Exchange Act))
and its affiliates form purchasing through such offering Restricted
Shares representing more than 1% of the outstanding shares of common
stock of the Registrant on a fully diluted basis (a "PERMITTED
OFFERING"). The Registration Notice shall include a certificate
executed by the Designated Holder and its proposed managing
underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "MANAGER"), stating that (i) they
have a good faith intention to commence promptly a Permitted Offering
and (ii) the Manager in good faith believes that, based on the then
prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 80% of the then Fair
Market Value of such shares. The Registrant (and/or any person
designated by the Registrant) shall thereupon have the option
exercisable by written notice delivered to the Designated Holder within
10 business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price (the "OPTION
PRICE") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Registrant and (ii) the then Fair
Market Value of such shares. Any such purchase of Registrable
Securities by the Registrant (or its designee) hereunder shall take
place at a closing to be held at the principal executive offices of the
Registrant or at the offices of its counsel at any reasonable date and
time designated by the Registrant and/or such designee in such notice
within 20 business days after delivery of such notice. Any payment for
the shares to be purchased shall be made by delivery at the time of
such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option
pursuant to this Section 10 with respect to all Registrable Securities,
it shall use its best efforts to effect, as promptly as practicable,
the registration under the Securities Act of the unpurchased
Registrable Securities proposed to be so sold; provided, however,, that
(i) neither party shall be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) the Registrant
will not be required to file any such registration statement during any
period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below)
when (A) the Registrant is in possession of material non-public
information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to the
Registrant,
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<PAGE>
such information would have to be disclosed if a registration statement
were filed at that time: (B) the Registrant is required under the
Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) the
Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other
material transaction involving the Registrant or any of its affiliates.
The Registrant shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be
qualified for sale under the securities or Blue-Sky laws of such
jurisdictions as the Designated Holder may reasonably request and shall
continue such registration or qualification in effect in such
jurisdiction; provided, however, that the Registrant shall not be
required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are
subject to the condition that the Designated Holder shall provide the
Registrant with such information with respect to such holder's
Registrable Securities, the plans for the distribution thereof, and
such other information with respect to such holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all
material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 10 shall be
effected at the Registrant's expense, except for underwriting discounts
and commissions and the fees and the expenses of counsel to the
Designated Holder, and the Registrant shall provide to the underwriters
such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors as are customary in connection with
underwritten public offerings as such underwriters may reasonably
require. In connection with any such registration, the parties agree
(i) to indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and
the other underwriters participating in such offering and (iii) to take
all further actions which shall be reasonably necessary to effect such
registration and sale (including, if the Manager deems it necessary,
participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected
pursuant to this Section 10 only if and to the extent the Manager
determines that such inclusion will not adversely affect the prospects
of success of such offering.
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without
limitation to any restriction on the Company contained in this
Agreement or in the Exchange Agreement, in the event of any change in
Company Common Stock by reason of stock dividends, splitups, mergers
(other than the Binding Share Exchanges), recapitalizations,
combinations, exchange of shares or the like, the type and number of
shares or securities subject to the Company Option, and the purchase
price per share
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<PAGE>
provided in Section 1, shall be adjusted appropriately to restore to
BUG its rights hereunder, including the right to purchase from the
Company (or its successors) shares of Company Common Stock representing
19.9% of the Outstanding Company Common Stock for the aggregate
Exercise Price calculated as of the date of this Agreement as provided
in Section 1.
11. RESTRICTIVE LEGENDS. Each certificate representing shares
of Company Common Stock issued to BUG hereunder, and BUG Shares, if
any, delivered to the Company at a Closing, shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF DECEMBER 29, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed
by delivery of substitute certificates(s) without such reference if BUG
or the Company, as the case may be, shall have delivered to the other
party a copy of a letter from the staff of the Securities and Exchange
Commission, or an opinion of counsel, in form and substance
satisfactory to the other party, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in
its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other
legend as may be required by law. Certificates representing shares sold
in a registered public offering pursuant to Section 10 shall not be
required to bear the legend set forth in Section 12.
12. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY
BENEFICIARIES. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement,
neither this Agreement nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the
written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person
other than the parties hereto and their respective permitted assigns
any rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free
of the restrictions imposed with respect to such shares by this
Agreement, unless and until such party shall
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<PAGE>
repurchase or otherwise become the beneficial owner of such shares, and
any transferee of such shares shall not be entitled to the registration
rights of such party.
13. SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
14. ENTIRE AGREEMENT. This Agreement, the BUG Stock Option
Agreement, the Confidentiality Agreement and the Exchange Agreement
(including the exhibits and schedules thereto) constitute the entire
agreement among the parties with respect to the subject matter hereof
and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof and thereof.
15. FURTHER ASSURANCES. Each party will execute and deliver
all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions
contemplated hereby.
16. VALIDITY. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall
remain in full force and effect. In the event any court or other
competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by law,
the intent of the parties hereto with respect to such provision and the
economic effects thereof. If for any reason any such court or
regulatory agency determines that BUG is not permitted to acquire, or
the Company is not permitted to repurchase pursuant to Section 7, the
full number of shares of Company Common Stock provided in Section 1
hereof (as the same may be adjusted), it is the express intention of
the Company to allow BUG to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof. Each party agrees that, should
any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order
any party to take any action inconsistent herewith,or not take any
action required herein, the other party shall not be entitled to
specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof
or of any other provision of this Agreement or part hereof as the
result of such holding or order.
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<PAGE>
17. NOTICES. All notices and other communication hereunder
shall be in writing and shall be deemed given if (i) delivered
personally, or (ii) sent by reputable overnight courier service, or
(iii) telecopied (which is confirmed), or (iv) five days after being
mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
A. If to BUG, to:
The Brooklyn Union Gas Company
One Metrotech Center
Brooklyn, New York 11201-3850
Attention: Chief Executive Officer
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan
B. If to the Company, to:
Long Island Lighting Company
175 East Old County Road
Hicksville, New York 11801
Attention: Chief Executive Officer
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Thomas E. Constance
18. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York applicable to agreements made and to be performed entirely
within such State and without regard to its choice of law principles.
Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New
York or any New York state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this
agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State
of New York or a New York state court.
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<PAGE>
19. INTERPRETATION. When a reference is made in this Agreement
to a Section such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement.
20. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both
of which, taken together, shall constitute one and the same instrument.
21. EXPENSES. Except as otherwise expressly provided herein or
in the Exchange Agreement, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall
be paid by the party incurring such expenses.
22. AMENDMENTS; WAIVER. This Agreement may be amended by the
parties hereto and the terms and conditions hereof may be waived only
by an instrument in writing signed on behalf of each of the parties
hereto, or, in the case of a waiver, by an instrument signed on behalf
of the party waiving compliance.
23. EXTENSION OF TIME PERIODS. The time periods for exercise
of certain rights under Sections 2, 6 and 7 shall be extended: (i) to
the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the expiration of all statutory
waiting periods; and (ii) to the extent necessary to avoid any
liability under Section 16(b) of the Exchange Act by reason of such
exercise.
24. REPLACEMENT OF COMPANY OPTION. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and
date.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
THE BROOKLYN UNION GAS COMPANY
By:/s/ Robert B. Catell
--------------------
Name: Robert B. Catell
Title: Chief Executive Officer
LONG ISLAND LIGHTING COMPANY
By:/s/ William J. Catacosinos
--------------------------
Name: Dr. William J. Catacosinos
Title: Chief Executive Officer
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BUG STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of December 29, 1996 by and among LONG
ISLAND LIGHTING COMPANY, a New York corporation ("LILCO"), and THE BROOKLYN
UNION GAS COMPANY, a New York corporation (the "COMPANY").
WHEREAS, concurrently with the execution and delivery of this
Agreement, (i) LILCO, the Company and NYECO Corp., a New York corporation
("NYECO"), are entering into an Agreement and Plan of Exchange, dated as of the
date hereof (the "EXCHANGE AGREEMENT"), which provides, among other things, upon
the terms and subject to the conditions thereof, for the exchange of outstanding
shares of capital stock of each of LILCO and the Company for newly issued shares
of capital stock of NYECO (the "BINDING SHARE EXCHANGE"), and (ii) the Company
and LILCO are entering into a certain stock option agreement dated as of the
date hereof whereby LILCO grants to the Company an option with respect to
certain shares of LILCO's common stock on the terms and subject to the
conditions set forth therein (the "LILCO STOCK OPTION AGREEMENT"); and
WHEREAS, as a condition to LILCO's willingness to enter into the
Exchange Agreement, LILCO has requested that the Company agree, and the Company
has so agreed, to grant to LILCO an option with respect to certain shares of the
Company's common stock, on the terms and subject to the conditions set forth
herein.
NOW, THEREFORE, to induce LILCO to enter into the Exchange Agreement,
and in consideration of the mutual covenants and agreements set forth herein and
in the Exchange Agreement, the parties hereto agree as follows:
1. GRANT OF OPTION. The Company hereby grants LILCO an
irrevocable option (the "COMPANY OPTION") to purchase up to 9,948,682
shares, subject to adjustment as provided in Section 11 (such shares
being referred to herein as the "COMPANY SHARES") of common stock, par
value $.33 1/3 per share, of the Company (the "COMPANY COMMON STOCK")
(being 19.9% of the number of shares of Company Common Stock
outstanding on the date hereof) in the manner set forth below at a
price (the "EXERCISE PRICE") per Company Share of $30.0375 (which is
equal to the Fair Market Value (as defined below) of a Company Share on
the date hereof) payable, at LILCO's option, (a) in cash or (b) subject
to the Company's having obtained the approvals of any Governmental
Authority required for the Company to acquire the LILCO Shares (as
defined below) from LILCO, which approvals the Company shall use best
efforts to obtain, in shares of common stock, par value $5.00 per
share, of LILCO ("LILCO SHARES") in either case in accordance with
Section 4 hereof. Notwithstanding the foregoing, in no event shall the
number of Company Shares for which the Company Option is exercisable
exceed 19.9% of the number of issued and outstanding shares of Company
Common Stock. As used herein, the "FAIR MARKET VALUE" of any share
shall be the average of the daily closing sales price for such share on
the New York Stock Exchange (the "NYSE") during the 10 NYSE trading
days prior
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to the fifth NYSE trading day preceding the date such Fair Market Value
is to be determined. Capitalized terms used herein but not defined
herein shall have the meanings set forth in the Exchange Agreement.
2. EXERCISE OF OPTION. The Company Option may be exercised by
LILCO, in whole or in part, at any time or from time to time after the
Exchange Agreement becomes terminable by LILCO under circumstances
which could entitle LILCO to termination fees under either Section
9.3(a) of the Exchange Agreement (provided that the events specified in
Section 9.3(a)(ii)(x) of the Exchange Agreement shall have occurred,
although the events specified in Section 9.3(a)(ii)(y) thereof need not
have occurred) or Section 9.3(b) of the Exchange Agreement (regardless
of whether the Exchange Agreement is actually terminated or whether
there occurs a closing of any Business Combination involving a Target
Party or a closing by which a Target Party becomes a subsidiary), any
such event by which the Exchange Agreement becomes so terminable by
LILCO being referred to herein as a "TRIGGER EVENT." The Company shall
notify LILCO promptly in writing of the occurrence of any Trigger
Event, it being understood that the giving of such notice by the
Company shall not be a condition to the right of LILCO to exercise the
Company Option. In the event LILCO wishes to exercise the Company
Option, LILCO shall deliver to the Company a written notice (an
"EXERCISE NOTICE") specifying the total number of Company Shares it
wishes to purchase. Each closing of a purchase of Company Shares (a
"CLOSING") shall occur at a place, on a date and at a time designated
by LILCO in an Exercise Notice delivered at least two business days
prior to the date of the Closing. The Company Option shall terminate
upon the earlier of: (i) the Effective Time; (ii) the termination of
the Exchange Agreement pursuant to Section 9.1 thereof (other than upon
or during the continuance of a Trigger Event); or (iii) 180 days
following any termination of the Exchange Agreement upon or during the
continuance of a Trigger Event (or if, at the expiration of such 180
day period the Company Option cannot be exercised by reason of any
applicable judgment, decree, order, law or regulation, 10 business days
after such impediment to exercise shall have been removed or shall have
become final and not subject to appeal, but in no event under this
clause (iii) later than June 30, 1998). Notwithstanding the foregoing,
the Company Option may not be exercised if LILCO is in material breach
of any of its material representations or warranties, or in material
breach of any of its covenants or agreements, contained in this
Agreement or in the Exchange Agreement. Upon the giving by LILCO to the
Company of the Exercise Notice and the tender of the applicable
aggregate Exercise Price, LILCO shall be deemed to be the holder of
record of the Company Shares issuable upon such exercise,
notwithstanding that the stock transfer books of the Company shall then
be closed or that certificates representing such Company Shares shall
not then be actually delivered to LILCO.
3. CONDITIONS TO CLOSING. The obligation of the Company to
issue the Company Shares to LILCO hereunder is subject to the
conditions, which (other than the conditions described in clauses (i),
(iii) and (iv) below) may be waived by the Company in its sole
discretion, that (i) all waiting periods, if any, under the HSR Act,
applicable to the issuance of the Company Shares hereunder shall have
expired or have been
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terminated; (ii) the Company Shares, and any LILCO Shares which are
issued in payment of the Exercise Price, shall have been approved for
listing on the NYSE upon official notice of issuance; (iii) all
consents, approvals, orders or authorizations of, or registrations,
declarations or filings with, any federal, state or local
administrative agency or commission or other federal, state or local
Governmental Authority, if any, required in connection with the
issuance of the Company Shares hereunder shall have been obtained or
made, as the case may be, including, without limitation, if applicable,
the approval of the SEC under Section 10 of the 1935 Act of the
acquisition of the Company Shares by LILCO and, if applicable, the
acquisition by the Company of the LILCO Shares constituting the
Exercise Price hereunder; and (iv) no preliminary or permanent
injunction or other order by any court of competent jurisdiction
prohibiting or otherwise restraining such issuance shall be in effect.
4. CLOSING. At any Closing, (a) the Company will deliver to
LILCO or its designee a single certificate in definitive form
representing the number of the Company Shares designated by LILCO in
its Exercise Notice, such certificate to be registered in the name of
LILCO and to bear the legend set forth in Section 12, and (b) LILCO
will deliver to the Company the aggregate price for the Company Shares
so designated and being purchased by (i) wire transfer of immediately
available funds or certified check or bank check or (ii) subject to the
condition in Section 1(b), a certificate or certificates representing
the number of LILCO Shares being issued by LILCO in consideration
thereof, as the case may be. For the purposes of this Agreement, the
number of LILCO Shares to be delivered to the Company shall be equal to
the quotient obtained by dividing (i) the product of (x) the number of
Company Shares with respect to which the Company Option is being
exercised and (y) the Exercise Price by (ii) the Fair Market Value of
the LILCO Shares on the date immediately preceding the date the
Exercise Notice is delivered to the Company. The Company shall pay all
expenses, and any and all United States federal, state and local taxes
and other charges that may be payable in connection with the
preparation, issue and delivery of stock certificates under this
Section 4 in the name of LILCO or its designee.
5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to LILCO that (a) except as set forth in
Section 4.1 of the Nassau Disclosure Schedule, the Company is a
corporation duly organized, validly existing and in active status under
the laws of the State of New York and has the corporate power and
authority to enter into this Agreement and, subject to obtaining the
applicable approval of shareholders of the Company for the repurchase
of Company Shares pursuant to Section 7(a) below under circumstances
where Section 513(e) of the NYBCL would be applicable (the "BUYBACK
APPROVALS") and subject to any regulatory approvals referred to herein
and to the provisions of Section 513(a) of the NYBCL, if applicable, to
carry out its obligations hereunder, (b) the execution and delivery of
this Agreement by the Company and the consummation by the Company of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of the Company and no other
corporate proceedings on the part of the Company are necessary to
authorize this Agreement or any of the transactions contemplated hereby
(other than any required Buyback Approvals), (c) such corporate
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<PAGE>
action (including the approval of the Board of Directors of the
Company) is intended to render inapplicable to this Agreement and the
Exchange Agreement and the transactions contemplated hereby and
thereby, the provisions of the NYBCL referred to in Section 4.15 of the
Exchange Agreement, (d) this Agreement has been duly executed and
delivered by the Company, constitutes a valid and binding obligation of
the Company and, assuming this Agreement constitutes a valid and
binding obligation of LILCO, is enforceable against the Company in
accordance with its terms, (e) the Company has taken all necessary
corporate action to authorize and reserve for issuance and to permit it
to issue, upon exercise of the Company Option, and at all times from
the date hereof through the expiration of the Company Option will have
reserved, 9,948,682 authorized and unissued Company Shares, such amount
being subject to adjustment as provided in Section 11, all of which,
upon their issuance and delivery in accordance with the terms of this
Agreement, will be validly issued, fully paid and nonassessable, (f)
upon delivery of the Company Shares to LILCO upon the exercise of the
Company Option, LILCO will acquire the Company Shares free and clear of
all claims, liens, charges, encumbrances and security interests of any
nature whatsoever, (g) except as described in Section 4.4(b) of the
Exchange Agreement, the execution and delivery of this Agreement by the
Company does not, and the consummation by the Company of the
transactions contemplated hereby will not, violate, conflict with, or
result in a breach of any provision of, or constitute a default (with
or without notice or lapse of time, or both) under, or result in the
termination of, or accelerate the performance required by, or result in
a right of termination, cancellation, or acceleration of any obligation
or the loss of a material benefit under, or the creation of a lien,
pledge, security interest or other encumbrance on assets (any such
conflict, violation, default, right of termination, cancellation or
acceleration, loss or creation, a "VIOLATION") of the Company or any of
its subsidiaries, pursuant to, (A) any provision of the certificate of
incorporation or by-laws of the Company, (B) any provisions of any loan
or credit agreement, note, mortgage, indenture, lease, Company benefit
plan or other agreement, obligation, instrument, permit, concession,
franchise, license or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its
properties or assets, which Violation, in the case of each of clauses
(B) and (C), could reasonably be expected to have a material adverse
effect on the Company and its subsidiaries taken as a whole, (h) except
as described in Section 4.4(c) of the Exchange Agreement or Section
1(b) or Section 3 hereof, the execution and delivery of this Agreement
by the Company does not, and the performance of this Agreement by the
Company will not, require any consent, approval, authorization or
permit of, or filing with or notification to, any Governmental
Authority, (i) none of the Company, any of its affiliates or anyone
acting on its or their behalf has issued, sold or offered any security
of the Company to any person under circumstances that would cause the
issuance and sale of the Company Shares, as contemplated by this
Agreement, to be subject to the registration requirements of the
Securities Act as in effect on the date hereof and, assuming the
representations of LILCO contained in Section 6(h) are true and
correct, the issuance, sale and delivery of the Company Shares
hereunder would be exempt from the registration and prospectus delivery
requirements of the Securities Act, as in effect on the date hereof
(and the Company shall not take any action which would cause the
issuance, sale and delivery of the Company Shares hereunder not to be
exempt from such requirements), and (j) any
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<PAGE>
LILCO Shares acquired pursuant to this Agreement will be acquired for
the Company's own account, for investment purposes only and will not be
acquired by the Company with a view to the public distribution thereof
in violation of any applicable provision of the Securities Act.
6. REPRESENTATIONS AND WARRANTIES OF LILCO. LILCO represents
and warrants to the Company that (a) LILCO is a corporation duly
organized, validly existing and in good standing under the laws of the
State of New York and has the corporate power and authority to enter
into this Agreement and to carry out its obligations hereunder, (b) the
execution and delivery of this Agreement by LILCO and the consummation
by LILCO of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of LILCO and
no other corporate proceedings on the part of LILCO are necessary to
authorize this Agreement or any of the transactions contemplated
hereby, (c) this Agreement has been duly executed and delivered by
LILCO and constitutes a valid and binding obligation of LILCO, and,
assuming this Agreement constitutes a valid and binding obligation of
the Company, is enforceable against LILCO in accordance with its terms,
(d) prior to any delivery of LILCO Shares in consideration of the
purchase of Company Shares pursuant hereto, LILCO will have taken all
necessary corporate action to authorize for issuance and to permit it
to issue such LILCO Shares, all of which, upon their issuance and
delivery in accordance with the terms of this Agreement, will be
validly issued, fully paid and nonassessable, and to render
inapplicable to the receipt by the Company of the LILCO Shares the
provisions of the NYBCL referred to in Section 5.15 of the Exchange
Agreement, (e) upon any delivery of such LILCO Shares to the Company in
consideration of the purchase of Company Shares pursuant hereto, the
Company will acquire the LILCO Shares free and clear of all claims,
liens, charges, encumbrances and security interests of any nature
whatsoever, (f) except as described in Section 5.4(b) of the Exchange
Agreement, the execution and delivery of this Agreement by LILCO does
not, and the consummation by LILCO of the transactions contemplated
hereby will not, violate, conflict with, or result in the breach of any
provision of, or constitute a default (with or without notice or lapse
of time, or both) under, or result in any Violation by LILCO or any of
its subsidiaries, pursuant to (A) any provision of the certificate of
incorporation or by-laws of LILCO, (B) any provisions of any loan or
credit agreement, note, mortgage, indenture, lease, LILCO benefit plan
or other agreement, obligation, instrument, permit, concession,
franchise, license or (C) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to LILCO or its properties or
assets, which Violation, in the case of each of its clauses (B) and/or
(C), would have a material adverse effect on LILCO and its subsidiaries
taken as a whole, (g) except as described in Section 5.4(c) of the
Exchange Agreement or Section 1(b) or Section 3 hereof, the execution
and delivery of this Agreement by LILCO does not, and the consummation
by LILCO of the transactions contemplated hereby will not, require any
consent, approval, authorization or permit of, or filing with or
notification to, any Governmental Authority and (h) any Company Shares
acquired upon exercise of the Company Option will be acquired for
LILCO's own account, for investment purposes only and will not be, and
the Company Option is not being, acquired by LILCO with a view to the
public distribution thereof in violation of any applicable provision of
the Securities Act.
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<PAGE>
7. CERTAIN REPURCHASES.
(a) LILCO PUT. At the request of LILCO by written notice at
any time during which the Company Option is exercisable pursuant to
Section 2 (the "REPURCHASE PERIOD"), the Company (or any successor
entity thereof) shall repurchase from LILCO all or any portion of the
Company Option, at the price set forth in subparagraph (i) below, or,
at the request of LILCO by written notice at any time prior to December
31, 1997 (provided that such date shall be extended to June 30, 1998
under the circumstances where the date after which either party may
terminate the Exchange Agreement pursuant to Section 9.1(b) of the
Exchange Agreement has been extended to June 30, 1998), the Company (or
any successor entity thereof) shall repurchase from LILCO all or any
portion of the Company Shares purchased by LILCO pursuant to the
Company Option, at the price set forth in subparagraph (ii) below:
(i) the difference between the "MARKET/OFFER PRICE"
for shares of Company Common Stock as of the date LILCO gives
notice of its intent to exercise its rights under this Section
7 (defined as the higher of (A) the price per share offered as
of such date pursuant to any tender or exchange offer or other
offer with respect to a Business Combination which was made
prior to such date and not terminated or withdrawn as of such
date (the "OFFER PRICE") and (B) the Fair Market Value of
Company Common Stock as of such date (the "MARKET PRICE")) and
the Exercise Price, multiplied by the number of Company Shares
purchasable pursuant to the Company Option (or portion thereof
with respect to which LILCO is exercising its rights under
this Section 7), but only if the Market/Offer Price is greater
than the Exercise Price;
(ii) the product of (x) the sum of (A) the Exercise
Price paid by LILCO per Company Share acquired pursuant to the
Company Option and (B) the difference between the Market/Offer
Price and the Exercise Price, but only if the Market/Offer
Price is greater than the Exercise Price, and (y) the number
of Company Shares to be repurchased pursuant to this Section
7. For purposes of this clause (ii), the Offer Price shall be
the highest price per share offered pursuant to a tender or
exchange offer or other Business Combination offer during the
Repurchase Period prior to the delivery by LILCO of a notice
of repurchase.
(b) REDELIVERY OF LILCO SHARES. If LILCO elected to purchase
Company Shares pursuant to the exercise of the Company Option by the
issuance and delivery of LILCO Shares, then the Company shall, if so
requested by LILCO, in fulfillment of its obligation pursuant to clause
(a) of Section 7(a)(ii)(x) (that is, with respect to the Exercise Price
only and without limitation to its obligation to pay additional
consideration under clause (b) of Section 7(a)(ii)(x)), redeliver the
certificate for such LILCO Shares to LILCO, free and clear of all
liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever; provided, however, that if less than all of the Company
Shares purchased by LILCO pursuant to the Company Option are to be
repurchased pursuant to this Section 7, then LILCO shall issue to the
Company a new certificate representing those LILCO Shares which are not
due to be redelivered to
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<PAGE>
LILCO pursuant to this Section 7 as they constituted payment of the
Exercise Price for the Company Shares not being repurchased.
(c) PAYMENT AND REDELIVERY OF COMPANY OPTION OR
SHARES. In the event LILCO exercises its rights under this Section 7,
the Company shall, within 10 business days thereafter, pay the required
amount to LILCO in immediately available funds and LILCO shall
surrender to the Company the Company Option or the certificates
evidencing the Company Shares purchased by LILCO pursuant thereto, and
LILCO shall warrant that it owns the Company Option or such shares and
that the Company Option or such shares are then free and clear of all
liens, claims, damages, charges and encumbrances of any kind or nature
whatsoever.
(d) LILCO CALL. If LILCO has elected to purchase Company
Shares pursuant to the exercise of the Company Option by the issuance
and delivery of LILCO Shares, notwithstanding that LILCO may no longer
hold any such Company Shares or that LILCO elects not to exercise its
other rights under this Section 7, LILCO may require, at any time or
from time to time prior to December 31, 1997 (provided that such date
shall be extended to June 30, 1998 under the circumstances where the
date after which either party may terminate the Exchange Agreement
pursuant to Section 9.1(b) of the Exchange Agreement has been extended
to June 30, 1998), the Company to sell to LILCO any such LILCO Shares
at the Fair Market Value that had been attributed to such LILCO Shares
pursuant to Section 4 plus interest at the rate of 6.5% per annum on
such amount from the Closing Date relating to the exchange of such
LILCO Shares pursuant to Section 4 to the closing date under this
Section 7(d) less any dividends on such LILCO Shares paid during such
period or declared and payable to stockholders of record on a date
during such period.
(e) REPURCHASE PRICE REDUCED AT LILCO'S OPTION. In the event
the repurchase price specified in Section 7(a) would subject the
purchase of the Company Option or the Company Shares purchased by LILCO
pursuant to the Company Option to a vote of the shareholders of the
Company pursuant to Section 513(e) of the NYBCL, then LILCO may, at its
election, reduce the repurchase price to an amount which would permit
such repurchase without the necessity for such a shareholder vote.
8. RESTRICTIONS ON TRANSFER.
(a) RESTRICTIONS ON TRANSFER. Prior to the Expiration Date,
neither party shall, directly or indirectly, by operation of law or
otherwise, sell, assign, pledge, or otherwise dispose of or transfer
any Restricted Shares beneficially owned by such party, other than (i)
pursuant to Section 7, or (ii) in accordance with Section 9(b) or
Section 10.
(b) PERMITTED SALES. Following the termination of the Exchange
Agreement, a party shall be permitted to sell any Restricted Shares
beneficially owned by it if such sale is made pursuant to a tender or
exchange offer that has been approved or recommended, or otherwise
determined to be fair to and in the best interests of the
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shareholders of the other party, by a majority of the members of the
Board of Directors of such other party which majority shall include a
majority of directors who were directors prior to the announcement of
such tender or exchange offer.
9. REGISTRATION RIGHTS. Following the termination of the
Exchange Agreement, each party hereto (a "DESIGNATED HOLDER") may by
written notice (the "REGISTRATION NOTICE") to the other party (the
"REGISTRANT") request the Registrant to register under the Securities
Act all or any part of the Restricted Shares beneficially owned by such
Designated Holder (the "REGISTRABLE SECURITIES") pursuant to a bona
fide firm commitment underwritten public offering in which the
Designated Holder and the underwriters shall effect as wide a
distribution of such Registrable Securities as is reasonably
practicable and shall use their best efforts to prevent any person
(including any Group (as used in Rule 13d-5 under the Exchange Act))
and its affiliates form purchasing through such offering Restricted
Shares representing more than 1% of the outstanding shares of common
stock of the Registrant on a fully diluted basis (a "PERMITTED
OFFERING"). The Registration Notice shall include a certificate
executed by the Designated Holder and its proposed managing
underwriter, which underwriter shall be an investment banking firm of
nationally recognized standing (the "MANAGER"), stating that (i) they
have a good faith intention to commence promptly a Permitted Offering
and (ii) the Manager in good faith believes that, based on the then
prevailing market conditions, it will be able to sell the Registrable
Securities at a per share price equal to at least 80% of the then Fair
Market Value of such shares. The Registrant (and/or any person
designated by the Registrant) shall thereupon have the option
exercisable by written notice delivered to the Designated Holder within
10 business days after the receipt of the Registration Notice,
irrevocably to agree to purchase all or any part of the Registrable
Securities proposed to be so sold for cash at a price (the "OPTION
PRICE") equal to the product of (i) the number of Registrable
Securities to be so purchased by the Registrant and (ii) the then Fair
Market Value of such shares. Any such purchase of Registrable
Securities by the Registrant (or its designee) hereunder shall take
place at a closing to be held at the principal executive offices of the
Registrant or at the offices of its counsel at any reasonable date and
time designated by the Registrant and/or such designee in such notice
within 20 business days after delivery of such notice. Any payment for
the shares to be purchased shall be made by delivery at the time of
such closing of the Option Price in immediately available funds.
If the Registrant does not elect to exercise its option
pursuant to this Section 10 with respect to all Registrable Securities,
it shall use its best efforts to effect, as promptly as practicable,
the registration under the Securities Act of the unpurchased
Registrable Securities proposed to be so sold; provided, however, that
(i) neither party shall be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) the Registrant
will not be required to file any such registration statement during any
period of time (not to exceed 40 days after such request in the case of
clause (A) below or 90 days in the case of clauses (B) and (C) below)
when (A) the Registrant is in possession of material non-public
information which it reasonably believes would be detrimental to be
disclosed at such time and, in the opinion of counsel to the
Registrant,
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<PAGE>
such information would have to be disclosed if a registration statement
were filed at that time: (B) the Registrant is required under the
Securities Act to include audited financial statements for any period
in such registration statement and such financial statements are not
yet available for inclusion in such registration statement; or (C) the
Registrant determines, in its reasonable judgment, that such
registration would interfere with any financing, acquisition or other
material transaction involving the Registrant or any of its affiliates.
The Registrant shall use its reasonable best efforts to cause any
Registrable Securities registered pursuant to this Section 10 to be
qualified for sale under the securities or Blue-Sky laws of such
jurisdictions as the Designated Holder may reasonably request and shall
continue such registration or qualification in effect in such
jurisdiction; provided, however, that the Registrant shall not be
required to qualify to do business in, or consent to general service of
process in, any jurisdiction by reason of this provision.
The registration rights set forth in this Section 10 are
subject to the condition that the Designated Holder shall provide the
Registrant with such information with respect to such holder's
Registrable Securities, the plans for the distribution thereof, and
such other information with respect to such holder as, in the
reasonable judgment of counsel for the Registrant, is necessary to
enable the Registrant to include in such registration statement all
material facts required to be disclosed with respect to a registration
thereunder.
A registration effected under this Section 10 shall be
effected at the Registrant's expense, except for underwriting discounts
and commissions and the fees and the expenses of counsel to the
Designated Holder, and the Registrant shall provide to the underwriters
such documentation (including certificates, opinions of counsel and
"comfort" letters from auditors as are customary in connection with
underwritten public offerings as such underwriters may reasonably
require. In connection with any such registration, the parties agree
(i) to indemnify each other and the underwriters in the customary
manner, (ii) to enter into an underwriting agreement in form and
substance customary for transactions of such type with the Manager and
the other underwriters participating in such offering and (iii) to take
all further actions which shall be reasonably necessary to effect such
registration and sale (including, if the Manager deems it necessary,
participating in road-show presentations).
The Registrant shall be entitled to include (at its expense)
additional shares of its common stock in a registration effected
pursuant to this Section 10 only if and to the extent the Manager
determines that such inclusion will not adversely affect the prospects
of success of such offering.
10. ADJUSTMENT UPON CHANGES IN CAPITALIZATION. Without
limitation to any restriction on the Company contained in this
Agreement or in the Exchange Agreement, in the event of any change in
Company Common Stock by reason of stock dividends, splitups, mergers
(other than the Binding Share Exchanges), recapitalizations,
combinations, exchange of shares or the like, the type and number of
shares or securities subject to the Company Option, and the purchase
price per share
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provided in Section 1, shall be adjusted appropriately to restore to
LILCO its rights hereunder, including the right to purchase from the
Company (or its successors) shares of Company Common Stock representing
19.9% of the Outstanding Company Common Stock for the aggregate
Exercise Price calculated as of the date of this Agreement as provided
in Section 1.
11. RESTRICTIVE LEGENDS. Each certificate representing shares
of Company Common Stock issued to LILCO hereunder, and LILCO Shares, if
any, delivered to the Company at a Closing, shall include a legend in
substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY BE
REOFFERED OR SOLD ONLY IF SO REGISTERED OR IF AN EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION
AGREEMENT, DATED AS OF DECEMBER 29, 1996, A COPY OF WHICH MAY BE
OBTAINED FROM THE ISSUER UPON REQUEST.
It is understood and agreed that: (i) the reference to the resale
restrictions of the Securities Act in the above legend shall be removed
by delivery of substitute certificates(s) without such reference if
LILCO or the Company, as the case may be, shall have delivered to the
other party a copy of a letter from the staff of the Securities and
Exchange Commission, or an opinion of counsel, in form and substance
satisfactory to the other party, to the effect that such legend is not
required for purposes of the Securities Act; (ii) the reference to the
provisions to this Agreement in the above legend shall be removed by
delivery of substitute certificate(s) without such reference if the
shares have been sold or transferred in compliance with the provisions
of this Agreement and under circumstances that do not require the
retention of such reference; and (iii) the legend shall be removed in
its entirety if the conditions in the preceding clauses (i) and (ii)
are both satisfied. In addition, such certificates shall bear any other
legend as may be required by law. Certificates representing shares sold
in a registered public offering pursuant to Section 10 shall not be
required to bear the legend set forth in Section 12.
12. BINDING EFFECT; NO ASSIGNMENT; NO THIRD PARTY
BENEFICIARIES. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. Except as expressly provided for in this Agreement,
neither this Agreement nor the rights or the obligations of either
party hereto are assignable, except by operation of law, or with the
written consent of the other party. Nothing contained in this
Agreement, express or implied, is intended to confer upon any person
other than the parties hereto and their respective permitted assigns
any rights or remedies of any nature whatsoever by reason of this
Agreement. Any Restricted Shares sold by a party in compliance with the
provisions of Section 10 shall, upon consummation of such sale, be free
of the restrictions imposed with respect to such shares by this
Agreement, unless and until such party shall
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repurchase or otherwise become the beneficial owner of such shares, and
any transferee of such shares shall not be entitled to the registration
rights of such party.
13. SPECIFIC PERFORMANCE. The parties recognize and agree that
if for any reason any of the provisions of this Agreement are not
performed in accordance with their specific terms or are otherwise
breached, immediate and irreparable harm or injury would be caused for
which money damages would not be an adequate remedy. Accordingly, each
party agrees that, in addition to other remedies, the other party shall
be entitled to an injunction restraining any violation or threatened
violation of the provisions of this Agreement. In the event that any
action should be brought in equity to enforce the provisions of the
Agreement, neither party will allege, and each party hereby waives the
defense, that there is adequate remedy at law.
14. ENTIRE AGREEMENT. This Agreement, the LILCO Stock Option
Agreement, the Confidentiality Agreement and the Exchange Agreement
(including the exhibits and schedules thereto) constitute the entire
agreement among the parties with respect to the subject matter hereof
and thereof and supersede all other prior agreements and
understandings, both written and oral, among the parties or any of them
with respect to the subject matter hereof and thereof.
15. FURTHER ASSURANCES. Each party will execute and deliver
all such further documents and instruments and take all such further
action as may be necessary in order to consummate the transactions
contemplated hereby.
16. VALIDITY. The invalidity or unenforceability of any
provisions of this Agreement shall not affect the validity or
enforceability of the other provisions of this Agreement, which shall
remain in full force and effect. In the event any court or other
competent authority holds any provisions of this Agreement to be null,
void or unenforceable, the parties hereto shall negotiate in good faith
the execution and delivery of an amendment to this Agreement in order,
as nearly as possible, to effectuate, to the extent permitted by law,
the intent of the parties hereto with respect to such provision and the
economic effects thereof. If for any reason any such court or
regulatory agency determines that LILCO is not permitted to acquire, or
the Company is not permitted to repurchase pursuant to Section 7, the
full number of shares of Company Common Stock provided in Section 1
hereof (as the same may be adjusted), it is the express intention of
the Company to allow LILCO to acquire or to require the Company to
repurchase such lesser number of shares as may be permissible, without
any amendment or modification hereof. Each party agrees that, should
any court or other competent authority hold any provision of this
Agreement or part hereof to be null, void or unenforceable, or order
any party to take any action inconsistent herewith,or not take any
action required herein, the other party shall not be entitled to
specific performance of such provision or part hereof or to any other
remedy, including but not limited to money damages, for breach hereof
or of any other provision of this Agreement or part hereof as the
result of such holding or order.
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17. NOTICES. All notices and other communication hereunder
shall be in writing and shall be deemed given if (i) delivered
personally, or (ii) sent by reputable overnight courier service, or
(iii) telecopied (which is confirmed), or (iv) five days after being
mailed by registered or certified mail (return receipt requested) to
the parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
A. If to LILCO, to:
Long Island Lighting Company
175 East Old County Road
Hicksville, New York 11801
Attention: Chief Executive Officer
with a copy to:
Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Thomas E. Constance
B. If to the Company, to:
The Brooklyn Union Gas Company
One Metrotech Center
Brooklyn, New York 11201-3850
Attention: Chief Executive Officer
with a copy to:
Wachtell, Lipton, Rosen & Katz
51 West 52nd Street
New York, New York 10019
Attention: Seth A. Kaplan
18. GOVERNING LAW; CHOICE OF FORUM. This Agreement shall be
governed by and construed in accordance with the laws of the State of
New York applicable to agreements made and to be performed entirely
within such State and without regard to its choice of law principles.
Each of the parties hereto (a) consents to submit itself to the
personal jurisdiction of any federal court located in the State of New
York or any New York state court in the event any dispute arises out of
this Agreement or any of the transactions contemplated by this
agreement, (b) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any
such court and (c) agrees that it will not bring any action relating to
this Agreement or any of the transactions contemplated by this
Agreement in any court other than a federal court sitting in the State
of New York or a New York state court.
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19. INTERPRETATION. When a reference is made in this Agreement
to a Section such reference shall be to a Section of this Agreement
unless otherwise indicated. Whenever the words "include", "includes" or
"including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation". The descriptive headings
herein are inserted for convenience of reference only and are not
intended to be part of or to affect the meaning or interpretation of
this Agreement.
20. COUNTERPARTS. This Agreement may be executed in two
counterparts, each of which shall be deemed to be an original, but both
of which, taken together, shall constitute one and the same instrument.
21. EXPENSES. Except as otherwise expressly provided herein or
in the Exchange Agreement, all costs and expenses incurred in
connection with the transactions contemplated by this Agreement shall
be paid by the party incurring such expenses.
22. AMENDMENTS; WAIVER. This Agreement may be amended by the
parties hereto and the terms and conditions hereof may be waived only
by an instrument in writing signed on behalf of each of the parties
hereto, or, in the case of a waiver, by an instrument signed on behalf
of the party waiving compliance.
23. EXTENSION OF TIME PERIODS. The time periods for exercise
of certain rights under Sections 2, 6 and 7 shall be extended: (i) to
the extent necessary to obtain all regulatory approvals for the
exercise of such rights, and for the expiration of all statutory
waiting periods; and (ii) to the extent necessary to avoid any
liability under Section 16(b) of the Exchange Act by reason of such
exercise.
24. REPLACEMENT OF COMPANY OPTION. Upon receipt by the Company
of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss,
theft or destruction) of reasonably satisfactory indemnification, and
upon surrender and cancellation of this Agreement, if mutilated, the
Company will execute and deliver a new Agreement of like tenor and
date.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective duly authorized officers as of the date first above
written.
LONG ISLAND LIGHTING COMPANY
By: /s/ William J. Catacosinos
--------------------------
Name: Dr. William J. Catacosinos
Title: Chief Executive Officer
THE BROOKLYN UNION GAS COMPANY
By: /s/ Robert B. Catell
------------------------
Name: Robert B. Catell
Title: Chief Executive Officer
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