<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
----------
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
COMMISSION FILE NUMBER 1-3571
----------
LONG ISLAND LIGHTING COMPANY
INCORPORATED PURSUANT TO THE LAWS OF NEW YORK STATE
----------
INTERNAL REVENUE SERVICE - EMPLOYER IDENTIFICATION NUMBER 11-1019782
175 EAST OLD COUNTRY ROAD, HICKSVILLE, NEW YORK 11801
516-755-6650
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) of the act:
Title of each class so registered:
<TABLE>
<S> <C> <C>
Common Stock ($5 par)
Preferred Stock ($100 par, cumulative):
Series B, 5.00% Series E, 4.35% Series I, 5 3/4%, Convertible
Series CC, 7.66%
Preferred Stock ($25 par, cumulative):
Series AA, 7.95% Series GG, $1.67 Series QQ, 7.05%
Series NN, $1.95
General and Refunding Bonds:
8 3/4% Series Due 1996 7.85% Series Due 1999 7.90% Series Due 2008
8 3/4% Series Due 1997 8 5/8% Series Due 2004 9 3/4% Series Due 2021
7 5/8% Series Due 1998 8.50% Series Due 2006 9 5/8% Series Due 2024
Debentures:
7.30% Series Due 1999 7.05% Series Due 2003 8.90% Series Due 2019
7.30% Series Due 2000 7.00% Series Due 2004 9.00% Series Due 2022
6.25% Series Due 2001 7.125% Series Due 2005 8.20% Series Due 2023
7.50% Series Due 2007
</TABLE>
NAME OF EACH EXCHANGE ON WHICH EACH CLASS IS REGISTERED: The New York
Stock Exchange and the Pacific Stock Exchange are the only exchanges on which
the Common Stock is registered. The New York Stock Exchange is the only
exchange on which each of the other securities listed above is registered.
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in the definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the Common Stock held by non-affiliates
of the Company at March 1, 1995 was $1,899,279,744. The aggregate market value
of Preferred Stock held by non-affiliates of the Company at March 1, 1995,
established by Lehman Brothers based on the average bid and asked price, was
$606,693,813.
COMMON STOCK ($5 PAR) - SHARES OUTSTANDING AT MARCH 1, 1995: 118,704,301
The Company's proxy statement for its Annual Meeting of Shareowners
to be held on May 24, 1995 has been incorporated by reference into Part III of
this Form 10-K to provide information required in Item 10 (Directors and
Executive Officers of the Company) as to Directors, Item 11 (Executive
Compensation), Item 12 (Security ownership of Certain Beneficial Owners and
Management) and Item 13 (Certain Relationships and Related Transactions).
<PAGE> 2
TABLE OF CONTENTS
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ABBREVIATIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . iv
PART I
ITEM 1. BUSINESS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
The Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Territory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
Segments of Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Regulation and Accounting Controls . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
The New York State Takeover Proposal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Electric Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
System Requirements and Reliability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Energy Sources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Oil . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Gas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Nuclear . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Independent Power Producers and Cogenerators . . . . . . . . . . . . . . . . . . . . . . . 6
Interconnections . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
Conservation Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1989 Settlement and Electric Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
The Rate Moderation Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Electric Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Competitive Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Shoreham Decommissioning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Gas Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Gas System Requirements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Gas Transportation and Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Gas Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Year-Round Pipeline Firm Transportation . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Winter Seasonal Pipeline Firm Transportation . . . . . . . . . . . . . . . . . . . . . . . 10
Storage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Other Deliveries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Gas Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Year-Round Firm Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Winter Seasonal Firm Supply . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Peak Shaving . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Gas Rates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Other Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Recovery of Transition Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>
i
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<TABLE>
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Environment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Air . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Water . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Nuclear Waste . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The Company's Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
The G&R Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The First Mortgage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Unsecured Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Preferred Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Preference Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Common Stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Executive Officers of the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Capital Requirements, Liquidity and Capital Provided . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ITEM 2. PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ITEM 3. LEGAL PROCEEDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Shoreham . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
Environmental . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Human Resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Other Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS . . . . . . . . . . . . . . . . . . 24
ITEM 6. SELECTED FINANCIAL DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . 30
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
Statement of Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Balance Sheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Statement of Retained Earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Statement of Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 62
Report of Independent Auditors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE . . . . . . . . . . . . 92
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ITEM 11. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . 92
</TABLE>
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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . . . . . . 92
List of Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
List of Financial Statement Schedules. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
List of Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
Reports on Form 8-K. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 100
Schedule II. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 102
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ABBREVIATIONS
The following abbreviations are sometimes used in this Annual Report.
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AFC . . . . . . . . . . . . . . . . . . . Allowance For Funds Used During Construction
BFC . . . . . . . . . . . . . . . . . . . Base Financial Component
BVPA . . . . . . . . . . . . . . . . . . Bondable Value of Property Additions
DEC . . . . . . . . . . . . . . . . . . . New York State Department of Environmental Conservation
DOE . . . . . . . . . . . . . . . . . . . United States Department of Energy
DSM . . . . . . . . . . . . . . . . . . . Demand Side Management
Dth . . . . . . . . . . . . . . . . . . . Dekatherms
EFRBs . . . . . . . . . . . . . . . . . . Electric Facilities Revenue Bonds
EPA . . . . . . . . . . . . . . . . . . . United States Environmental Protection Agency
FCA . . . . . . . . . . . . . . . . . . . Fuel Cost Adjustment
FERC . . . . . . . . . . . . . . . . . . Federal Energy Regulatory Commission
First Mortgage . . . . . . . . . . . . . Indenture of Mortgage and Deed of Trust dated as of September 1, 1951
FRA . . . . . . . . . . . . . . . . . . . Financial Resource Asset
G&R Bonds . . . . . . . . . . . . . . . . General and Refunding Bonds
G&R Mortgage . . . . . . . . . . . . . . General and Refunding Indenture dated as of June 1, 1975
GAAP . . . . . . . . . . . . . . . . . . Generally Accepted Accounting Principles
GWh . . . . . . . . . . . . . . . . . . . Gigawatt Hour
kW . . . . . . . . . . . . . . . . . . . Kilowatts
kWh . . . . . . . . . . . . . . . . . . . Kilowatt hour
LIPA . . . . . . . . . . . . . . . . . . Long Island Power Authority
MW . . . . . . . . . . . . . . . . . . . Megawatts
Niagara Mohawk . . . . . . . . . . . . . Niagara Mohawk Power Corporation
Nine Mile Point 2 . . . . . . . . . . . . Nine Mile Point Nuclear Power Station, Unit 2
NRC . . . . . . . . . . . . . . . . . . . Nuclear Regulatory Commission
NYPA . . . . . . . . . . . . . . . . . . New York Power Authority
NYPP . . . . . . . . . . . . . . . . . . New York Power Pool
NYSEG . . . . . . . . . . . . . . . . . . New York State Electric & Gas Corporation
NYSERDA . . . . . . . . . . . . . . . . . New York State Energy Research and Development Authority
PCRBs . . . . . . . . . . . . . . . . . . Pollution Control Revenue Bonds
PILOTS . . . . . . . . . . . . . . . . . Payments in-lieu-of-taxes
PRP . . . . . . . . . . . . . . . . . . . Potentially Responsible Party
PSC . . . . . . . . . . . . . . . . . . . Public Service Commission of the State of New York
RMA . . . . . . . . . . . . . . . . . . . Rate Moderation Agreement
RMC . . . . . . . . . . . . . . . . . . . Rate Moderation Component
Shoreham . . . . . . . . . . . . . . . . Shoreham Nuclear Power Station
</TABLE>
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A LISTING OF ABBREVIATIONS FREQUENTLY
USED IN THIS REPORT MAY BE FOUND
IMMEDIATELY AFTER THE TABLE OF CONTENTS
PART I
ITEM 1. BUSINESS
THE COMPANY:
Long Island Lighting Company (the "Company") was incorporated
in 1910 under the Transportation Corporations Law of the State of New York and
supplies electric and gas service in Nassau and Suffolk Counties and to the
Rockaway Peninsula in Queens County, all on Long Island, New York. The mailing
address of the Company is 175 East Old Country Road, Hicksville, New York 11801
and its general telephone number is (516) 755-6650.
TERRITORY:
The Company's service territory covers an area of
approximately 1,230 square miles. The population of the service area,
according to the Company's 1994 estimate, is about 2.7 million persons,
including approximately 98,000 persons who reside in Queens County within the
City of New York. The 1994 population estimate reflects a 0.2% increase since
the 1990 census.
Approximately 80% of all workers residing in Nassau and
Suffolk Counties are employed within the two counties. In 1994, total
non-agricultural employment in Nassau and Suffolk Counties increased by
approximately 4,500 employees, an employment increase of 0.4%. The area served
is predominantly residential, but the Company receives approximately one-half
of its electric revenues from commercial and industrial customers. About 89%
of total employment is non-manufacturing.
<PAGE> 7
SEGMENTS OF BUSINESS:
The percentages of total revenues and operating income before
income taxes derived from electric and gas operations for each of the last
three years are shown in the following table:
<TABLE>
<CAPTION>
Percentage of Percentage of
Total Operating
Revenues Income
----------------- -------------------
Electric Gas Electric Gas
-------- --- -------- ---
<S> <C> <C> <C> <C>
1992 84 16 92 8
1993 82 18 89 11
1994 81 19 91 9
</TABLE>
For additional information respecting the Company's electric
and gas financial results and operations, see "Management's Discussion and
Analysis of Financial Condition and Results of Operations for the Year Ended
December 31, 1994, " "Selected Financial Data" and Notes 2, 3, and 11 of Notes
to Financial Statements for the Year Ended December 31, 1994.
EMPLOYEES:
At December 31, 1994, the Company had approximately 5,950
full-time employees, of which approximately 2,450 belong to Local 1049 and
approximately 1,400 belong to Local 1381 of the International Brotherhood of
Electrical Workers. The Company's contracts with these unions will expire on
February 13, 1996.
REGULATION AND ACCOUNTING CONTROLS:
The Company is subject to regulation by the Public Service
Commission of the State of New York (the "PSC") with respect to rates, issuance
and sale of securities, adequacy and continuance of service, safety and siting
of certain facilities, accounting, conservation of energy, management
effectiveness and other matters. To ensure that its accounting controls and
procedures are consistently maintained, the Company actively monitors these
controls and procedures. The Audit Committee of the Company's Board of
Directors, as part of its responsibilities, periodically reviews this
monitoring program.
New York law requires that all utilities be periodically
audited to identify those aspects of their operations, if any, which are in
need of improvement. During 1994, the PSC conducted two separate audits of the
Company, one involving Executive Compensation and the other involving
Management and Accounting Controls. The results of these audits are expected to
be issued to the Company in early 1995. The Company plans to implement those
recommendations that will improve its operations.
The Company is also subject, in certain of its activities, to
the jurisdiction of the United States Department of Energy ("DOE") and the
Federal Energy Regulatory Commission ("FERC"). In addition to its accounting
jurisdiction, FERC has jurisdiction over the rates the Company may charge for
the sale of electric energy for resale in interstate commerce, including the
rates the Company charges for electricity sold to municipal electric systems
within the Company's territory, and for the transmission, through the Company's
system, of electric energy to other utilities or to industrial customers. It
is in part in the exercise of this jurisdiction over transmission that FERC is
currently considering certain issues relating to competition in the electric
industry. For additional information relating to these FERC proceedings see
the discussion under the heading "Management's Discussion and Analysis of
Financial Condition and Results of Operations for the Year Ended December 31,
1994." FERC also has
<PAGE> 8
some jurisdiction over a portion of the Company's gas supplies and substantial
jurisdiction over transportation to the Company of its gas supplies.
Operation of Nine Mile Point Nuclear Power Station, Unit 2
("Nine Mile Point 2"), a nuclear facility in which the Company has an 18%
interest, is subject to regulation by the Nuclear Regulatory Commission
("NRC").
THE NEW YORK STATE TAKEOVER PROPOSAL:
At the request of the then Governor of the State of New York,
on October 13, 1994, the chief executives of the New York Power Authority
("NYPA") and the Long Island Power Authority ("LIPA") invited the Company to
enter into negotiations with them regarding a proposal to convert the Company
into a public power utility. Under the proposal, the two state authorities
contemplated a business combination in which holders of the Company's common
stock would receive $21.50 in cash for each outstanding share of the Company's
common stock. NYPA/LIPA indicated that the completion of this transaction
would be subject to, among other things, the availability of tax-exempt
financing sufficient to complete the transaction and the verification by NYPA
and LIPA that the transaction would result in rate reductions in excess of 10%.
The Company's Board of Directors has authorized the Company to enter into
discussions with NYPA and LIPA to explore the proposal in greater detail, but
no such discussions have been held.
The new governor of the State of New York had empaneled a task
force to study the takeover proposal. While the task force did not make its
recommendation public, published reports in local newspapers indicate that the
task force recommended to reject the proposal.
ELECTRIC OPERATIONS:
General
The Company's system energy requirements are supplied from
sources located both on and off Long Island. The Company's generating sources,
with an aggregate summer generating capability of approximately 4,388,000
kilowatts ("kW"), include five steam electric generating stations and a number
of internal combustion and diesel supplemental generating units, all located on
Long Island, the Company's 18% share of Nine Mile Point 2, a nuclear generating
station located in upstate New York, and a 136 megawatt ("MW") facility located
in Holtsville, Long Island, which is owned and operated by NYPA. This facility
was constructed for the benefit and at the request of the Company and commenced
operation in 1994. Additional generating facilities owned by others, such as
independent power producers and cogenerators located on Long Island and
investor-owned and public electric systems located off Long Island, provide the
balance of the Company's energy supplies.
<PAGE> 9
The following table indicates the 1994 summer capacity of the
Company's major generating facilities, internal combustion units and facilities
under its control as reported to the New York Power Pool ("NYPP") in December
1994:
<TABLE>
<CAPTION>
Description Number of Units MW
----------- --------------- ----
<S> <C> <C>
Northport . . . . . . . . . . . . . . . . . . . . . 4 1,512
Port Jefferson . . . . . . . . . . . . . . . . . . 4 471
Glenwood . . . . . . . . . . . . . . . . . . . . . 2 228
E.F. Barrett/Island Park . . . . . . . . . . . . . 2 387
Far Rockaway . . . . . . . . . . . . . . . . . . . 1 113
Internal Combustion Units . . . . . . . . . . . . . 42 1,352
Nine Mile Point 2 (18% Share) . . . . . . . . . . . 1 189
NYPA Holtsville. . . . . . . . . . . . . . . . . . 1 136
-- -----
Total . . . . . . . . . . . . . . . . . . . . 57 4,388
== =====
</TABLE>
The maximum demand on the Company's system to date was
3,967,000 kW on July 9, 1993, representing 83% of its total available
capacity of 4,799,000 kW on that day, which included 548,000 kW of firm
capacity purchased from other sources. By agreement with the NYPP, the Company
is required to maintain, on a monthly basis, an installed and contracted firm
power reserve generating capacity equal to at least 18% of its actual peak
load. The Company is currently meeting this NYPP requirement.
System Requirements and Reliability
In 1994, system kilowatt hour ("kWh") energy requirements were
0.4% higher than in 1993. As a result of the implementation of conservation
programs and the availability to customers of energy supplies from cogeneration
sources discussed below under the heading "Independent Power Producers and
Cogenerators," the Company forecasts a 0.9% decrease and 0.4% increase,
relative to 1994, in system energy requirements for the years 1995 and 1996,
respectively. However, for the period 1995-2004, the Company forecasts an
average annual growth rate in system energy requirements of 0.5%. With the
availability of electricity provided by the Company's existing generating
facilities, by its portion of nuclear energy generated at Nine Mile Point 2 and
by power purchased from other electric systems and certain non-Company-owned
facilities located within the Company's service territory, the Company believes
it has adequate generating sources to meet its energy demands beyond the year
2000.
The Company's system electric requirements for the last three
years were provided as follows:
<TABLE>
<CAPTION>
Percentage of System Requirements
--------------------------------- Purchased
Oil* Gas* Nuclear** Power***
--- --- --------- ----------
<S> <C> <C> <C> <C>
1992 37 19 6 38
1993 33 19 7 41
1994 25 23 9 43
</TABLE>
_______________
* Generated on the Company's own system. Oil consumption for the Company's
system electric energy
<PAGE> 10
requirements in 1994 was 7.5 million barrels compared to 9.7 million
barrels in 1993. Certain units may be fired with oil or with natural gas
when it is available on an economic or as-required basis. Gas
consumption for the Company's system electric energy requirements in 1994
was 44.3 million dekatherms ("Dth") compared to 36.3 million Dth in 1993.
** Generated at Nine Mile Point 2.
*** Generated at (i) more economical nuclear, coal, oil and hydroelectric
units owned by other electric systems and transmitted to the Company over
its interconnections; (ii) the NYPA Holtsville facility; and (iii)
cogenerators and independent power producers located within the Company's
service territory.
_______________
In 1992 and 1993, cogenerators and independent power producers
provided 9.4% of the Company's system requirements for each of those years. In
1994, cogenerators and independent power producers provided 9.2% of the
Company's system requirements. After the completion of a 40 MW cogeneration
facility at the Stony Brook campus of the State University of New York ("Stony
Brook") currently expected by mid 1995, independent power producers and
cogenerators will provide an estimated 10.4% of the Company's system energy
requirements.
The Company does not expect any new major independent power
producers or cogenerators to be built on Long Island in the foreseeable future.
Among the reasons supporting this conclusion is the Company's belief that the
market for additional large electric projects to provide power to the Company's
remaining commercial and industrial customers is small. Furthermore, under
federal law, the Company is required to buy energy from qualified producers at
the Company's avoided costs. Current long-range avoided cost estimates for the
Company have significantly reduced the economic advantage to entrepreneurs
seeking to compete with the Company and with existing independent power
producers. For additional information respecting competitive issues facing the
Company, see Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Year Ended December 31, 1994."
Energy Sources
Oil: In recent years, the Company has been able to reduce its
oil requirements generally by burning natural gas and by increasing its power
purchases. The availability and cost of oil used by the Company are affected
by factors beyond its control such as the international oil market,
environmental regulations, conservation measures and the availability of
alternative fuels. The Company's fuel oil is supplied principally by five
suppliers.
For information concerning federal and other regulatory
environmental limitations on fuel oil burned by the Company, see "Environment
-- Air." For additional information concerning the recovery of electric fuel
costs, see Note 1 to Notes to Financial Statements for the Year Ended December
31, 1994.
Gas: In addition to burning oil, several of the Company's
generating stations have the capability of burning natural gas. These
dual-fired units enable the Company to burn the most cost efficient fuel and to
reduce its dependency on oil.
Nuclear: The Company holds an 18% interest in Nine Mile Point
2, a 1,047 MW nuclear generating unit near Oswego, New York. The cotenants of
Nine Mile Point 2, in addition to the Company, are Niagara Mohawk Power
Corporation ("Niagara Mohawk"), New York State Electric & Gas Corporation
("NYSEG"), Rochester Gas and Electric Corporation ("RG&E") and Central Hudson
Gas & Electric Corporation.
For additional information on Nine Mile Point 2 and nuclear
plant insurance, see Notes 5 and 10, respectively, of Notes to Financial
Statements for the Year Ended December 31, 1994.
<PAGE> 11
Independent Power Producers and Cogenerators: Independent
power producers and cogenerators located within the Company's service territory
provided approximately 203 MW of capacity to the Company in 1994. Capacity
from these sources is expected to remain at approximately 203 MW in 1995. The
Company has also contracted to purchase all excess power, currently estimated
to total 9.2 MW, from the Stony Brook project on an energy-only basis. The
Company had signed contracts for energy-only purchases totaling over 400 MW
from several other projects, but these projects were not built prior to
December 31, 1994, the expiration date of these contracts. In addition, the
Company was ordered by the PSC to enter into a contract with Mayflower Energy
Partners, L.P. ("Mayflower") incorporating the PSC's 1989 Long Run Avoided Cost
("LRAC") estimates. The contract, which the Company executed under protest,
would have required the Company to purchase, on an energy-only basis, power for
15 years from a 300 MW facility scheduled to begin commercial operation in
1995. The Company commenced a lawsuit against the PSC and the New York courts
ultimately annulled the PSC order requiring the Company to execute the
contract. The Company then notified Mayflower that it was exercising its right
to terminate the agreement as a result of Mayflower's failure to meet the
construction commencement milestone date. Subsequently, in October 1994,
Mayflower petitioned the PSC for a new contract based on a different LRAC
estimate. The Company opposed Mayflower's petition on the grounds that the
rates contained in the LRAC estimate requested by Mayflower were not just and
reasonable. In February 1995, the PSC denied Mayflower's petition.
Interconnections: Five interconnections allow for the
transfer of electricity between the Company and members of the NYPP and the New
England Power Pool. Energy from these sources is transmitted pursuant to
transmission agreements with Niagara Mohawk, NYPA, Northeast Utilities and
Consolidated Edison Company of New York, Inc. ("Con Edison") and displaces
energy which would otherwise be generated on the Company's system at a higher
cost. The capacity of these interconnections is utilized for (i) the
requirements of Con Edison, a co-owner with the Company of three of these
interconnections, (ii) the requirements on Long Island of NYPA, the owner of
one of these interconnections, (iii) the Company's purchases from NYPA and
other utilities and (iv) the transmission of the Company's share of power from
Nine Mile Point 2.
Conservation Services: In 1993, the Company filed a Modified
Demand Side Management ("DSM") Plan with the PSC to support the objectives of
the Company's electric rate case filed in December 1993. Under this modified
plan, the Company proposed a substantially lower level of spending than that
initially approved for 1994. The PSC did not approve the Company's proposed
DSM program, but instead issued a ruling in July 1994 which dictated energy
savings targets that were greater than those originally proposed by the
Company. Specifically, the targets for the Company's DSM programs amounted to
a 161.3 MW reduction in coincident peak demand and an annualized energy savings
of 702.6 gigawatthours ("GWh") by December 31, 1994. The Company was
successful in its DSM efforts.
In 1995, the Company intends to continue to carefully manage
DSM expenditures and more fully transform DSM into a strategic marketing tool
which can be used to position the Company for the future. In these efforts,
the Company will act to further increase the emphasis on education and
information programs and further decrease its emphasis on utility rebate
payments. In addition, financing programs and other cost sharing arrangements
will be stressed as a means to reduce DSM program costs. Finally, DSM programs
will be redesigned to enhance the Company's competitive position through the
offering of programs and services to the Company's customers and programs which
promote the efficient use of electricity, including energy-efficient load
growth.
1989 Settlement and Electric Rates
General: On February 28, 1989, the Company and the State of
New York (by its Governor) entered into an agreement (the "1989 Settlement")
settling certain issues relating to the Company and providing for, among other
matters, the return of the Company to financial health, the transfer of the
Shoreham Nuclear Power Station ("Shoreham") to LIPA and Shoreham's subsequent
decommissioning.
<PAGE> 12
The Rate Moderation Agreement: The Rate Moderation Agreement
("RMA"), a constituent document of the 1989 Settlement approved by the PSC,
created an asset known as the Financial Resource Asset (the "FRA") and provides
for its full recovery. The FRA has two components, the Base Financial
Component (the "BFC") and the Rate Moderation Component (the "RMC").
The BFC, as initially established, represented the present
value of the future net-after-tax cash flows which the RMA provided the Company
for its financial recovery. Similar to plant investments, the BFC was granted
rate base treatment under the terms of the RMA and is included in the Company's
electric rates through amortization over 40 years on a straight-line basis. At
December 31, 1994, the BFC amounted to $3.5 billion, net of accumulated
amortization.
The RMC reflects the difference between the Company's revenue
requirements under conventional ratemaking and the revenues resulting from the
implementation of the rate moderation plan provided for in the RMA. Prior to
December 31, 1992, the RMC had increased as the difference between revenues
resulting from the implementation of the rate moderation plan provided for in
the RMA and revenue requirements under conventional ratemaking, together with a
carrying charge equal to the allowed rate of return on rate base, was deferred.
The RMC had provided the Company with a substantial amount of non-cash earnings
since the effective date of the 1989 Settlement through December 31, 1992,
because the revenues provided under the RMA were less than the revenues
required under conventional ratemaking. At December 31, 1992, the RMC balance
was $652 million. Subsequent to December 31, 1992, the RMC balance decreased
as revenues resulting from the operation of the rate moderation plan exceeded
revenue requirements under conventional ratemaking. At December 31, 1994 and
1993, the RMC balance was $463 million and $610 million, respectively.
Electric Rates: The RMA contemplated, among other objectives,
a series of rate increases designed to restore the Company to financial health.
Pursuant to the RMA, the Company received electric rate increases of 5.4%
effective February 18, 1989 and 5.0% for each of the rate years that began on
December 1, 1989 and December 1, 1990. In 1991, the PSC approved annual
electric rate increases of 4.15%, 4.1% and 4.0% effective on December 1 of
1991, 1992 and 1993, respectively.
In December 1993, the Company filed a three-year electric rate
plan with the PSC for the period beginning December 1, 1994 (the "Electric Rate
Plan"). The Electric Rate Plan, which may be approved, modified or rejected by
the PSC, requests an allowed rate of return on common equity of 11.0% and
provides for zero percent base rate increases in years one and two of the plan
and an overall rate increase of 4.3% in the third year. Although base electric
rates would be frozen during the first two years of the Electric Rate Plan,
annual rate increases of approximately 1% are expected to result in years one
and two from the operation of the Company's fuel cost adjustment ("FCA")
mechanism. The FCA captures, among other things, amounts to be recovered from
or refunded to ratepayers in excess of $15 million which result from the
reconciliation of revenue, certain expenses, and earned performance incentive
components as prescribed by the Long Island Lighting Company Ratemaking and
Performance Plan.
The PSC had been expected to issue a final order on the
Company's Electric Rate Plan before November 29, 1994, the date that the
statutory suspension period was initially scheduled to terminate. However, in
order to accommodate further settlement negotiations in the proceedings, the
Company had requested extensions through April 1995, which were granted by the
PSC.
In the past, the PSC has taken actions consistent with the
recovery from ratepayers of the 1989 Settlement-deferred charges provided by
the RMA. The PSC has granted the Company six of the eleven electric rate
increases contemplated by the RMA and has also publicly confirmed its
commitment to the effectuation of the 1989 Settlement. Although the ultimate
outcome of the Electric Rate Plan cannot be predicted, the Company expects that
any PSC order will be consistent with the provisions of the RMA respecting the
recovery of the FRA and other 1989
<PAGE> 13
Settlement-deferred charges.
For additional information respecting the 1989 Settlement and
electric rates, see the discussion under the heading "Management's Discussion
and Analysis of Financial Condition and Results of Operation for the Year Ended
December 31, 1994" and Notes 1, 2 and 3 of Notes to Financial Statements for
the Year Ended December 31, 1994.
Competitive Environment
For a discussion of the competitive issues facing the Company,
see "Management's Discussion and Analysis of Financial Condition and Results of
Operations For the Year Ended December 31, 1994."
SHOREHAM DECOMMISSIONING:
Pursuant to the 1989 Settlement, the Company transferred
Shoreham and the Company's possession-only license for Shoreham to LIPA in
February 1992, following a decision by the NRC that approved the transfer. In
June 1992, the NRC issued an order authorizing LIPA to decommission Shoreham.
During the fourth quarter of 1994, LIPA completed the decommissioning subject
to the NRC's completion of a review of radiological measurements and its
termination of the possession-only license, which is currently expected by
mid-1995.
Under an agreement entered into as part of the 1989 Settlement
(the "Amended and Restated Asset Transfer Agreement"), the Company is required
to reimburse LIPA for any of its costs associated with the decommissioning of
Shoreham. The Site Cooperation and Reimbursement Agreement (the "Site
Agreement") entered into by the Company and LIPA describes the payment by the
Company of LIPA's and NYPA's expenses attributable to the transfer, ownership,
possession, maintenance and decommissioning of Shoreham, including certain
taxes and payments-in-lieu-of-taxes ("PILOTS") with respect to the Shoreham
site. The Site Agreement also governs, among other things, the conduct of the
parties and of NYPA, and their access to facilities and properties at the
Shoreham site.
At December 31, 1994, Shoreham post settlement costs totaled
approximately $923 million (net of accumulated amortization of approximately
$56 million). The $923 million consists of $429 million of property taxes and
PILOTS and $494 million of decommissioning costs, fuel disposal costs and all
other costs incurred at Shoreham after June 30, 1989, net of Shoreham salvage
proceeds of approximately $44 million. The Company currently estimates that,
during 1995, an additional $13 million of post settlement costs (other than
PILOTS and finance charges) will be incurred. The precise amount of taxes and
PILOTS that must be paid is the subject of the litigation described in Item 3,
"Legal Proceedings -- Shoreham."
The PSC has determined that all costs associated with Shoreham
which are prudently incurred by the Company subsequent to the effectiveness of
the 1989 Settlement are decommissioning costs. The RMA provides for recovery
of such costs through electric rates over the balance of a 40-year period
ending 2029. In addition, pursuant to the RMA, the Company reflects the costs
of the nuclear fuel related to Shoreham as a deferred charge to be recovered
from ratepayers. The Company is required under the Amended and Restated Asset
Transfer Agreement to reimburse LIPA for any of its costs associated with the
storage and disposal of Shoreham's fuel, which was completed in 1994, and is
allowed to recover these reimbursed amounts from its ratepayers as well.
For additional information respecting the 1989 Settlement, see
Notes 1 and 2 of Notes to Financial Statements for the Year Ended December 31,
1994.
<PAGE> 14
GAS OPERATIONS:
General
In 1994, the Company was an active participant in proceedings
before FERC in various matters in an effort to reduce interstate pipeline
charges, improve operational tariffs and to mitigate any adverse impact from
interstate pipeline filings on the Company's customers. In addition, in 1995,
the Company will actively participate in the proceedings before the PSC in an
attempt to influence the establishment of the new competitive natural gas
marketplace within the State of New York.
Gas System Requirements
At year-end 1994, the Company had a total of 449,316 firm gas
customers, compared to 445,830 at year-end 1993 and 441,580 at year-end 1992.
Of the 1994 year-end total, 277,077 were space heating customers. Total firm
sales in 1994 were 58,889,386 Dth, compared to 59,182,674 Dth in 1993. The
maximum daily sendout experienced on the Company's gas system in 1994 was
585,227 Dth on January 19, 1994. The forecasted maximum daily sendout for the
1994-95 winter season (November 1 - March 31) is 608,000 Dth, representing 86%
of the Company's maximum daily firm operating supply capability of 705,597 Dth
for this period. Based on this forecasted amount, the Company should have a
peak day surplus of 97,597 Dth of firm supply including peak shaving capability
for the 1994-95 winter season. The Company recovers the costs of its gas
supply from both its firm and interruptible customers through provisions in the
Company's rate schedules.
Continuing its recent efforts to expand its base of customers,
the Company is emphasizing residential and commercial gas marketing. In
particular, new market segments and new uses for natural gas are being sought,
especially as a replacement for diesel fuel. The technology for natural gas as
a vehicular fuel is becoming commercially viable. Natural gas can be cost
effective if used in high volume for public transportation and public works
vehicles. In addition to the Long Island Bus Company (formerly the
Metropolitan Suburban Bus Authority), the Company has worked with local
municipalities in testing the viability of converting various vehicle types to
compressed natural gas as well as in designing and installing refueling
stations. Projects currently under consideration could ultimately displace
several thousand gallons of diesel fuel per day.
Gas Transportation and Supply
The proceedings before FERC, developing out of its Order No.
636, have resulted in a regulatory "unbundling" of the gas supply,
transportation and storage services that for decades had been provided by the
nation's natural gas pipelines. As a result of Order No. 636, pipelines, for
the most part, no longer act as sales agents to bundle the mix of services from
the producers and other interstate pipelines. Local distribution companies
("LDCs") must now make arrangements for gas supplies and gas storage directly
with producers, marketers, pipelines and the owners of storage facilities. In
addition, each LDC must now also make separate transportation arrangements with
each pipeline in the path between the supplier and the LDC's citygate and not
merely with the nearest pipeline connecting to the LDC's system. Prior to the
effective date of Order No. 636, LDCs had purchased their gas supplies at the
citygate from those pipelines serving their territories. The citygate is
generally the location where the interstate pipeline meets the local
distribution company's system. The Company shares common citygate facilities,
known as the New York Facilities, with Con Edison and the Brooklyn Union Gas
Company. The Company's principal pipeline suppliers are Transcontinental Gas
Pipe Line Corporation ("Transcontinental"), Texas Eastern Transmission
Corporation ("Texas Eastern"), CNG Transmission Corporation ("CNG"), Tennessee
Gas Pipeline Company ("Tennessee") and the Iroquois Gas Transmission System
("Iroquois"). Through its wholly-owned subsidiary, the Company is a general
partner in Iroquois, with an equity share of 1%. The Company, through a
wholly-owned subsidiary, had been a 3-1/3% equity partner in the Liberty
Pipeline Company ("Liberty"). However, as a result of a re-evaluation of its
gas supply needs, in May 1994, the Company notified the other Liberty partners
of its withdrawal from the Liberty pipeline partnership.
<PAGE> 15
Gas Transportation: The Company's gas transportation capacity
for meeting its 1994-95 winter season requirements is provided from a portfolio
of year-round, winter seasonal, storage and cogenerator services summarized
below:
<TABLE>
<CAPTION>
1994-95 Winter Peak-Day Transportation Capacity:
-----------------------------------------------
Type of Supply Dth Per Day
-------------- -----------
<S> <C>
Year-Round 258,492
Winter Seasonal 2,726
Storage 287,839
Other Deliveries 30,840
-------
Total 579,897
=======
</TABLE>
Year-Round Pipeline Firm Transportation: The Company has
318,692 Dth per day of year-round pipeline firm transportation capacity
provided by four interstate pipeline companies: Transcontinental, Texas
Eastern, Tennessee and Iroquois. For the 1994-1995 winter season, options to
purchase 60,200 Dth per day of capacity have been granted to off-system markets
leaving a total of 258,492 Dth available to meet system peak-day requirements.
Winter Seasonal Pipeline Firm Transportation: The Company has
winter seasonal pipeline firm transportation capacity on Transcontinental
amounting to 2,726 Dth per day available through March 31, 1995.
Storage: The Company also has long-term firm storage services
to meet higher winter demand which provide a total operating supply of
approximately 287,839 Dth per day with a total capacity of 23,505,043 Dth for
the winter period. Of these totals, 277,589 Dth per day, or a total capacity
of 22,268,043 Dth, is provided by gas storage fields at Leidy, Pennsylvania,
and 10,250 Dth per day, or a total capacity of 1,237,000 Dth, is provided by a
gas storage field in upstate New York operated by Honeoye Storage Corporation
("Honeoye"). The Company currently owns 23- 1/3% of the common stock of
Honeoye. In addition, the Company has the right to request 812,500 Dth in the
winter period from a cogeneration facility with the obligation to return
quantities in kind during the following summer period.
The Company also contracts for storage capacity in a facility
in Louisiana near sources of supply and pipeline transportation. Up to 50,687
Dth per day can be withdrawn with a total storage capacity of 4,459,220 Dth
available at this facility. While this facility provides the Company with
greater security of supply and enhanced operational flexibility in meeting
peak-day requirements, the Company has no related firm pipeline transportation
agreement for these supplies. Therefore, to access gas from this storage, the
Company must curtail the transportation of some of its firm contract supply.
Other Deliveries: The Company has contract rights with NYPA
to receive a total of 900,000 Dth during a continuous 100 day period between
November 1 and March 31 of each winter season at a daily rate not to exceed
30,840 Dth per day.
Gas Supply: The Company's gas supplies for the 1994-95 winter
season are provided from a portfolio of year-round, winter seasonal, storage
and peak shaving supplies summarized below.
Year-Round Firm Supply: Of the 213,469 Dth of firm supplies,
83,575 Dth are Canadian and 129,894 Dth are domestic. The Company owns 2.7% of
the common stock of Boundary Gas, Inc., ("Boundary"), a corporation formed with
15 other gas utility companies to act as a purchasing agent for the importation
of natural gas from Canada. The Company obtains 2,470 Dth per day of its
long-term firm Canadian supply from this source. Gas supplies to use 105,223
Dth per day of the remaining year-round pipeline firm transportation capacity
are purchased by the Company in both the seasonal and monthly spot markets.
<PAGE> 16
Winter Seasonal Firm Supply: The Company also contracts for
firm seasonal supply of 90,223 Dth delivered during the period November 1 -
March 31 of each year from a number of winter seasonal suppliers.
Peak Shaving: The Company has its own peak shaving supplies
to meet its requirements on excessively cold winter days. They include a
liquefied natural gas plant with a storage capacity of approximately 620,000
Dth of gas and vaporization facilities which provide 103,300 Dth per day to the
peak-day capability of the Company's system. In addition, the Company has
propane facilities that produce 22,400 Dth per day of peak shaving with a
storage capacity of approximately 100,000 Dth.
Gas Rates
In December 1993, the PSC approved a three-year gas rate
settlement between the Company and the Staff of the PSC. The gas rate
settlement provides that the Company receive, for each of the rate years
beginning December 1, 1993, 1994 and 1995, annual gas rate increases of 4.7%,
3.8% and 2.8%, respectively. In the determination of the revenue requirements
for the gas rate settlement, an allowed rate of return on equity of 10.1% was
used. The gas rate decision also provides for earnings in excess of a 10.6%
return on equity in any of the three rate years covered by the settlement to be
shared equally between the Company's firm gas customers and its shareowners.
For additional information respecting gas rates, see Note 3 of Notes to
Financial Statements for the Year Ended December 31, 1994.
Other Activities
The unbundling of gas transportation activities and the need
for local distribution companies to negotiate directly with producers and other
suppliers and with pipelines has provided the Company with new business
opportunities. These new opportunities include providing gas to
non-traditional markets including LDCs and end-users from Mississippi to
Connecticut. In 1994, total activities in this area generated $26 million in
revenue. The profit realized from this activity is shared 85%-15% between the
Company's firm gas customers and shareowners, respectively.
Recovery of Transition Costs
Transition costs are the costs associated with unbundling the
pipelines' merchant services in compliance with Order No. 636. They include
pipelines' unrecovered gas costs and the costs that pipelines incur as a result
of reforming or terminating their gas supply contracts. In order to recover
transition costs, pipelines must demonstrate to FERC that such costs were
attributable to FERC Order No. 636 and that they were prudently incurred.
While the Company has challenged, on both eligibility and prudence grounds, its
suppliers' pipelines' efforts to recover their claimed transition costs, the
Company presently estimates that its total transition costs will be
approximately $9 million. As of December 31, 1994, the Company has paid
approximately $7 million of these transition costs and is currently collecting
these costs from its gas customers in rates.
ENVIRONMENT:
General
The Company is subject to federal, state and local laws and
regulations dealing with air, water and land quality and other environmental
matters. It is not possible to ascertain with certainty if or when the various
required governmental approvals for which applications have been made will be
issued, whether, except as noted below, additional facilities or modifications
of existing or planned facilities will be required or, generally, what effect
existing or future controls may have upon Company operations. Except as set
forth below and in Item 3 - "Legal Proceedings", no material proceedings have
been commenced or, to the knowledge of the Company, are contemplated
<PAGE> 17
by any federal, state or local agency against the Company, nor is the Company a
defendant in any material litigation with respect to any matter relating to the
protection of the environment.
In 1995 and 1996, in order to comply with environmental
regulations, the Company anticipates capital expenditures of approximately $6.0
million and $3.5 million, respectively.
Air
Federal, state and local regulations affecting new and
existing electric generating plants govern, among other emissions, sulfur
dioxide and nitrogen oxide ("NOx") and, in the future, hazardous air
pollutants.
The laws governing the sulfur content, by weight, of the fuel
oil being burned by the Company in compliance with the United States
Environmental Protection Agency ("EPA") approved Air Quality State
Implementation Plan ("SIP") are administered by the New York State Department
of Environmental Conservation ("DEC"). The Company does not expect to incur
any costs to satisfy the 1990 amendments to the federal Clean Air Act (the
"Act") with respect to the reduction of sulfur dioxide emissions, since the
Company already uses fuel with acceptable low levels of sulfur.
During 1994, the Company spent approximately $6.4 million in
order to comply with the Act. These expenditures were necessary to meet
continuous emissions monitoring requirements and Phase I NOx reduction
requirements under the Act.
The Company expects that it will have to expend approximately
$1 million in 1995 to meet continuous emission monitoring requirements and to
meet Phase I NOx reduction requirements. In order to generate 210 tons of NOx
reduction credits already under contract for sale to a third party, the Company
anticipates spending $2.5 million in 1995 and $1.9 million in 1996 for earlier
than required NOx reduction systems. Subject to requirements that are expected
to be promulgated in forthcoming regulations, the Company estimates that it may
be required to spend an additional $80 million (net of NOx credit sales) by
2003 to meet Phase II and Phase III NOx reduction requirements. In an effort
to minimize anticipated NOx reduction requirements, the Company is engaged in a
$7 million research and development project along with several co-funding
organizations to demonstrate an innovative NOx reduction technology at its E.
F. Barrett Power Station. The Company is committed to fund $3.6 million of the
project costs. Through 1994, approximately $5 million has been expended by all
of the co-funders. It is anticipated that the remaining $2 million will be
spent in 1995. In addition, the Company anticipates that it may be required to
spend approximately $24 million by 1999 to meet potential requirements for the
control of hazardous air pollutants from power plants. The Company believes
that all of the above costs will be recoverable in rates.
Electromagnetic fields ("EMF") occur naturally and also are
produced wherever there is electricity. These fields exist around power lines
and other utility equipment. The Company is in compliance with all applicable
regulatory standards and requirements concerning EMF. The Company also
monitors scientific developments in the study of EMF, contributes to funding
for research efforts and is actively involved in customer and employee outreach
programs to inform the community of EMF developments as they occur. Although
an extensive body of scientific literature has not shown an unsafe exposure
level or a causal relationship between EMF exposure and adverse health effects,
concern over the potential for adverse health effects will likely continue
without final resolution for some time.
To date, the Company has not been involved in any matter that
alleged such a causal relationship. However, four residential property owners
have initiated lawsuits against the Company alleging that the existence of EMF
has diminished the value of their homes. These actions are in the preliminary
stages of discovery and their outcome is uncertain. The Company is currently
unable to predict the impact, if any, that EMF-related matters will have on its
financial position.
<PAGE> 18
Water
Under the federal Clean Water Act and the New York State
Environmental Conservation Law, the Company is required to obtain a State
Pollutant Discharge Elimination System permit to make any discharge into the
waters of the United States or New York State. The DEC has the jurisdiction to
issue those permits and their renewals and has issued permits for the Company's
generating units. The permits allow the continued use of the circulating water
systems which have been determined to be in compliance with State Water Quality
Standards. The permits also allow for the continued use of the chemical
treatment systems. The Company expects to upgrade certain underground tanks
and piping systems in 1995 in order to comply with federal and local
regulations.
Land
The DEC has indicated to New York State utilities that it may
require all such utilities to investigate and, where necessary, remediate their
former manufactured gas plant sites. The Company is the owner of six pieces of
property on which the Company or certain of its predecessor companies produced
manufactured gas. Although the exact amount of the Company's clean-up costs
cannot yet be determined, based on the findings of investigations at two of
these six sites, preliminary estimates indicate that it may cost approximately
$35 million to clean up all of these sites over the next five to ten years.
Accordingly, the Company has recorded a $35 million liability and has also
recorded a $35 million regulatory asset to reflect its belief that the PSC will
provide for the future recovery of these costs as it has for other New York
State utilities. The Company has notified its former and current insurance
carriers that it seeks to recover from them certain of these cleanup costs.
However, the Company is unable to predict the amount of insurance recovery, if
any, that it may obtain.
The Company has been notified by the EPA that it is one of
many potentially responsible parties ("PRPs") that may be liable for the
remediation of a licensed disposal site located in Philadelphia, Pennsylvania,
and operated by Metal Bank of America. The Company and nine other PRPs, all of
which are public utilities, have completed a Remedial Investigation and
Feasibility Study which is currently being reviewed by the EPA. The level of
remediation required will be determined when the EPA issues its decision,
currently expected in May 1995. The Company currently anticipates that the
total cost to remediate this site will be between $14 million and $30 million.
The Company has recorded a liability of $1.1 million representing its estimated
share of the cost to remediate this site. The Company believes that any cost
incurred to remediate this site will be recoverable through rates.
The Company has also been named a PRP for disposal sites in
both Kansas City, Kansas, and Kansas City, Missouri. The Company is
investigating allegations that it had previously stored or made agreements for
the disposal of polychlorinated biphenyls ("PCBs") or items containing PCBs at
these sites. The Company is currently unable to determine its share of the
cost to remediate these sites or the impact, if any, on the Company's financial
position. The Company believes that any costs incurred to remediate these
sites will be recoverable through rates.
In March 1989, the Company was notified that it was a PRP for
a landfill in Port Washington, Long Island. The Company does not believe that
it has contributed to the contamination of the site and has declined the EPA's
requests to participate in the investigation and remediation activities at the
site. The Company has not received further communications regarding this site.
The Company is in the process of entering into an
Administrative Order on Consent with the DEC to remediate lead contaminated
soils at a former distribution gas holder site in Inwood, New York that
contained a gas holder coated with lead paint. Based on the current cleanup
objectives, remediation costs are estimated at $2 million and are expected to
be incurred from 1995 to 1996.
As a result of a leak in a fluid filled electrical cable in
August 1994, the Company is required to remediate certain soil locations in
North Hills, Long Island that were impacted by a release of insulating fluid
from
<PAGE> 19
the cable. The preliminary estimated cleanup costs, expected to be incurred
from 1995 to 1996, range from $0.5 to $3.2 million. The Company has initiated
cost recovery actions against third parties it believes are responsible for
causing the cable leak, the outcome of which is uncertain.
For information concerning environmental litigation, see Item
3 -- "Legal Proceedings--Environmental."
Nuclear Waste
Under the federal Low Level Radioactive Waste Policy Amendment
Act of 1985, New York was required, by January 1, 1993, to have arranged for
the disposal of all low level, radioactive waste generated within the state or,
in the alternative, contracted for the disposal of waste at an operating
facility outside the state. Failure to do so would require New York to forfeit
to the generators of waste in the state the rebate of a portion of the
surcharges paid by such generators for the disposal of waste at operating
facilities outside the state. New York's contract with the State of South
Carolina for the disposal of all low level radioactive waste (except mixed
wastes) expired in June 1994.
Under the Amended and Restated Asset Transfer Agreement,
discussed under the heading "Shoreham Decommissioning," LIPA is responsible for
the disposal of waste associated with the decommissioning of Shoreham, although
such costs will be paid by the Company and recovered through electric rates.
All low level radioactive waste associated with the decommissioning of Shoreham
was sent to South Carolina for disposal prior to the expiration of the disposal
contract.
All low level radioactive waste generated at the Nine Mile
Point 2 site since June 1994 is being temporarily stored at the Nine Mile site.
A waste management program has been put in place that will properly handle
interim on-site storage of low level radioactive waste for at least ten years,
if required. All costs associated with temporary storage and ultimate disposal
are expected to be recovered in rates.
In addition, Niagara Mohawk, on behalf of the Nine Mile Point
2 cotenants, has entered into a contract with DOE for the permanent storage of
Nine Mile Point 2 spent nuclear fuel. The Company reimburses Niagara Mohawk
for its 18% share of the cost under the contract at a rate of $1.00 per
megawatt hour of net generation less a factor to account for transmission line
losses. The Company is collecting its portion of this fee from the Company's
ratepayers. However, progress in developing a permanent DOE repository for
such high level radioactive material has been slow and it is unlikely that the
DOE's latest projections for opening a facility in 2010 can be met. In the
interim, DOE is proposing to begin accepting some spent fuel from the electric
utility industry as early as 1998 at a proposed Monitored Retrievable Storage
("MRS") facility. In view of the very limited progress made to date, it is
unlikely that this facility will begin operation in 1998. A more probable date
for operation of the MRS facility cannot be accurately determined at this time.
Currently, all spent nuclear fuel from Nine Mile Point 2 is being stored on
site. The present licensed storage capacity for Nine Mile Point 2 is expected
to be sufficient to meet its needs so that storage alternatives are not
believed to be needed at this time. The Company does not anticipate that the
possible unavailability of a DOE facility in 1998 will inhibit the operation of
Nine Mile Point 2.
THE COMPANY'S SECURITIES:
General
The Company's securities are rated by Moody's Investors
Service, Inc., Standard and Poor's Ratings Group, Fitch Investors Service, Inc.
and Duff and Phelps, Inc. For information relating to the ratings of the
Company's securities, see the discussion under the heading "Management's
Discussion and Analysis of Financial Condition and Results of Operations for
the Year Ended December 31, 1994."
<PAGE> 20
The G&R Mortgage
The Company's General and Refunding Indenture dated June 1,
1975 (the "G&R Indenture" or "G&R Mortgage") is a lien upon substantially all
of the Company's properties. The lien of the G&R Mortgage is currently
subordinate to the lien of the Company's Indenture of Mortgage and Deed of
Trust dated September 1, 1951 (the "Indenture of Mortgage" or "First
Mortgage"). The G&R Mortgage will become the Company's senior mortgage in
1997, the year in which the last of the currently outstanding non-pledged First
Mortgage Bonds mature. Outstanding at December 31, 1994 were approximately $2
billion of General and Refunding Bonds (the "G&R Bonds") and $100 million of
First Mortgage Bonds, excluding $1.3 billion of First Mortgage Bonds which are
pledged with the G&R Trustee as additional security for the G&R Bonds (the
"Pledged Bonds"). Additional information concerning the Company's G&R Mortgage
and the First Mortgage is discussed below and in Note 7 of Notes to Financial
Statements for the Year Ended December 31, 1994.
Under the G&R Mortgage, the Company may issue G&R Bonds on the
basis of either matured or redeemed G&R Bonds and First Mortgage Bonds (other
than Pledged Bonds) or on the basis of the Bondable Value of Property Additions
("BVPA"). Generally, when issuing G&R Bonds, the Company must satisfy a
mortgage interest coverage requirement (the "G&R Mortgage Interest Coverage").
The G&R Mortgage Interest Coverage requires that the Net Earnings available for
interest for any 12 consecutive calendar months within the 15 consecutive
calendar months preceding the issuance of the G&R Bonds must be equal to at
least two times the stated annual interest payable on outstanding G&R Bonds and
Prior Lien Bonds (other than Pledged Bonds), including any new G&R Bonds.
Under the G&R Mortgage Interest Coverage, the Company would currently be able
to issue approximately $4.1 billion of additional G&R Bonds based upon: (i)
earnings for the 12 months ended December 31, 1994 and (ii) an assumed interest
rate of 10% for such additional G&R Bonds. A change of 1/8 of 1% in the
assumed interest rate of such G&R Bonds would result in a change of
approximately $51 million in the amount of such G&R Bonds that the Company
could issue. The maximum amount of additional G&R Bonds which the Company is
currently able to issue on the basis of either matured or retired G&R Bonds and
First Mortgage Bonds (other than Pledged Bonds) and on the basis of the BVPA is
approximately $520 million.
The Company believes that, based upon currently scheduled
redemptions and maturities, it will have sufficient retired G&R Bonds and First
Mortgage Bonds for the foreseeable future to satisfy the requirements of the
G&R Sinking Fund or to withdraw with retired G&R Bonds and First Mortgage Bonds
any cash that may be deposited to satisfy the Sinking Fund requirements. The
Sinking Fund requires the Company to pay $26 million or to certify a like
amount of retired G&R Bonds and First Mortgage Bonds on or before June 30,
1995. The Company is planning to satisfy this requirement in 1995 with retired
G&R Bonds. In addition, the Company may use Property Additions to satisfy this
requirement.
The Maintenance Fund covenant under the G&R Mortgage requires
that the aggregate amount of Property Additions added subsequent to December
31, 1974 must be, as of the end of each calendar year subsequent to 1974, at
least equal to the cumulative Provision for Depreciation (as defined in the G&R
Mortgage) from December 31, 1974. The G&R Mortgage requires cash (or retired
G&R Bonds or retired First Mortgage Bonds) to be deposited to satisfy the
Maintenance Fund requirement only when such cumulative Provision for
Depreciation exceeds such aggregate amount of Property Additions. As of
December 31, 1994, the amount of such cumulative Property Additions calculated
pursuant to the G&R Mortgage was approximately $9.7 billion, including
approximately $5.5 billion of Property Additions attributable to Shoreham.
Also, as of December 31, 1994, the amount of the cumulative Provision for
Depreciation, similarly calculated, was approximately $1.6 billion. The
Company anticipates that the aggregate amount of Property Additions will
continue to exceed the cumulative Provision for Depreciation.
<PAGE> 21
The First Mortgage
Under the provisions of the G&R Mortgage, the Company may not
issue any additional bonds under the Company's First Mortgage other than
Pledged Bonds which are required, concurrently with the issuance of each new
series of G&R Bonds, to be deposited with the G&R Trustee. The issuance of any
such Pledged Bonds does not create additional indebtedness. The coverage
requirements of the First Mortgage and the Company's ability to issue
additional Pledged Bonds do not restrict the Company's ability to issue
additional G&R Bonds. Of the approximately $1.4 billion of First Mortgage
Bonds outstanding at December 31, 1994, $1.3 billion, or 93%, were Pledged
Bonds. After satisfying the 1994 Depreciation Fund and Sinking Fund
requirements discussed below, the Company expects that it will issue additional
Pledged Bonds if it issues additional G&R Bonds prior to the maturity, in 1997,
of the last of the outstanding non- pledged First Mortgage Bonds.
The First Mortgage requires the Company to pay the First
Mortgage Trustee by June 30 of each year cash equal to 1% of all previously
issued First Mortgage Bonds (excluding bonds issued on the basis of retired
bonds). Currently, the annual First Mortgage Sinking Fund requirement is
approximately $21 million. The Company expects to satisfy this requirement
prior to June 30, 1995, with retired First Mortgage Bonds. The annual Sinking
Fund requirement is not expected to change, because of restrictions in the G&R
Mortgage, until and unless the Company issues additional G&R Bonds. The
Company expects to be able to satisfy the Sinking Fund requirement in 1996, the
last year in which this requirement must be met, with cash, available Property
Additions or retired First Mortgage Bonds which become available through
scheduled maturities.
The Depreciation Fund covenant of the First Mortgage requires
that the Company pay to the First Mortgage Trustee by June 30 of each year cash
(which may be withdrawn up to the amount of Gross Bondable Additions and
retired First Mortgage Bonds made the basis for such withdrawal) equal to the
greater of (a) the amount actually charged on the Company's books as a utility
operating revenue deduction for the preceding calendar year for depreciation,
depletion, obsolescence, retirements and amortization of the Company's Utility
Plant ("Book Depreciation") or (b) an amount equal to (i) 15% of gross
operating revenues (less the cost of electricity and gas purchased for resale)
from Utility Plant for such year less (ii) the amount actually expended for
maintenance of Utility Plant during such year ("Revenue Depreciation"). Since
the oil crisis of the 1970s, Revenue Depreciation in each year has been greater
than Book Depreciation for such year. The Revenue Depreciation requirement for
1994 was approximately $239 million. Instead of paying cash to satisfy this
Depreciation Fund requirement, the First Mortgage permits the Company to
deliver First Mortgage Bonds or certify Property Additions. The Company
expects to satisfy the 1994 requirement by June 30, 1995, using a combination
of First Mortgage Bonds and Property Additions. The Company presently plans,
assuming that its expenditures for capital improvements are approximately $250
million annually and notwithstanding that G&R Bonds may be issued which would
require, in turn, the issuance of First Mortgage Bonds to be pledged, that it
will have adequate Property Additions and sufficient retired First Mortgage
Bonds, including Pledged Bonds, to satisfy the Depreciation Fund requirements
in 1996, the last year in which this requirement must be met.
Unsecured Debt
The Company's First Mortgage, its G&R Mortgage and its
Restated Certificate of Incorporation do not contain any limitations upon the
issuance of unsecured debt. The Company's unsecured debt consists of
Debentures and certain tax-exempt securities.
The Company's Debenture Indenture, dated as of November 1,
1986, as supplemented, and its Debenture Indenture, dated as of November 1,
1992, as supplemented, (together, the "Debenture Indentures") each provide for
the issuance of an unlimited amount of Debentures to be issued in amounts that
may be authorized from time to time in one or more series. The Debentures are
unsecured and rank pari passu with all other unsecured indebtedness of the
Company subordinate to the obligations secured by the Company's two mortgages.
Currently, there are approximately $2.3 billion of Debentures outstanding.
<PAGE> 22
As of December 31, 1994, the Company had outstanding
approximately $867 million principal amount of promissory notes, securing $2
million of tax-exempt Industrial Development Revenue Bonds ("IDRBs"),
approximately $215 million of tax-exempt Pollution Control Revenue Bonds
("PCRBs") and $650 million of tax-exempt Electric Facility Revenue Bonds
("EFRBs"). Of these amounts, $17 million issued in 1982, $150 million issued
in 1985 (the "1985 PCRBs"), $100 million issued in 1993 (the "1993 EFRBs") and
$50 million issued in 1994 (the "1994 EFRBs") are subject to periodic tenders
by the holders of the tax-exempt bonds. The 1985 PCRBs, 1993 EFRBs and 1994
EFRBs are supported by letters of credit pursuant to which the letter of credit
banks have agreed to pay the principal, interest and premium, if applicable, on
any tendered 1985 PCRBs, 1993 EFRBs or 1994 EFRBs, in the aggregate, up to
approximately $163 million, $109 million, and $54 million respectively, in the
event of default. These letters of credit expire on March 16, 1996, November
17, 1996 and October 26, 1997, respectively. The obligations of the Company to
reimburse the letter of credit banks supporting the 1985 PCRBs, the 1993 EFRBs
and the 1994 EFRBs are unsecured. Each of the IDRBs, the PCRBs and the EFRBs
have been issued by the New York State Energy Research and Development Authority
("NYSERDA").
See Note 7 of Notes to Financial Statements for the Year Ended
December 31, 1994 for additional information respecting the Company's
outstanding debt securities.
Equity Securities
Preferred Stock: The Company's Restated Certificate of
Incorporation provides that the Company may not issue additional Preferred
Stock unless the net earnings of the Company available for payment of interest
on its debt after depreciation and all taxes for any 12 consecutive calendar
months within the 15 calendar months preceding the month of issuance are at
least 1.50 times the aggregate of the annual interest charges and dividend
requirements on the debt and Preferred Stock to be outstanding immediately
after the issuance of such Preferred Stock (the "Earnings Ratio"). The Company
currently satisfies the Earnings Ratio and could issue up to approximately $250
million of Preferred Stock. When the proceeds from the sale of the Preferred
Stock to be issued are used to redeem outstanding Preferred Stock, the
requirement to satisfy the Earnings Ratio is not applicable if the dividend
requirement and the requirements for redemption in a voluntary liquidation of
the Preferred Stock to be issued do not exceed the respective amounts for the
Preferred Stock which is to be retired. Additional Preferred Stock may also be
issued beyond amounts permitted under the Earnings Ratio with the approval of
at least two-thirds of the votes entitled to be cast by the holders of the
total number of shares of outstanding Preferred Stock.
Default in the payment of dividends on any shares of Preferred
Stock in an amount equivalent to or exceeding four full quarterly dividends for
any series of Preferred Stock entitles all holders of shares of Preferred
Stock, voting separately as a class and regardless of series, to elect a
majority of the Board of Directors of the Company. The remaining Directors are
elected by the holders of Common Stock. The right of holders of shares of
Preferred Stock to elect a majority of the Board of Directors ceases when and
if the Company ceases to be in default in the payment of its Preferred Stock
dividends. At that time, the terms of office of the Directors of the Company
elected by the holders of Preferred Stock terminate and the resulting vacancies
are to be filled by the vote of the remaining Common Stock Directors.
Preference Stock: Issuance of Preference Stock, which is
subordinate to the Company's Preferred Stock, but senior to its Common Stock,
with respect to declaration and payment of dividends and the right to receive
amounts payable on any dissolution, does not require satisfaction of a net
earnings test or any other coverage requirement, unless established by the
Board of Directors for one or more series of Preference Stock, prior to the
issuance of such series. No Preference Stock has been issued by the Company
nor does the Company currently plan to issue any Preference Stock.
Common Stock: The Company's Common Stock is listed on the New
York and Pacific Stock Exchanges, and is traded under the symbol "LIL". The
Board of Directors' current policy is to pay cash dividends on the Common Stock
on a quarterly basis. However, before declaring any dividends, the Company's
Board of
<PAGE> 23
Directors considers, among other factors, the Company's financial condition,
its ability to comply with provisions of the Company's Restated Certificate of
Incorporation and the availability of retained earnings, future earnings and
cash.
EXECUTIVE OFFICERS OF THE COMPANY:
Current information regarding the Company's Executive
Officers, all of whom serve at the will of the Board of Directors, follows:
William J. Catacosinos: Dr. Catacosinos has served as
Chairman of the Board of Directors and Chief Executive Officer of the Company
since January 1984, and as a Director since December 1978. Dr. Catacosinos
also served as President of the Company from March 1984 to January 1987 and
from March 1994 to present. Dr. Catacosinos, 65, a resident of Mill Neck,
Long Island, earned a bachelor of science degree, a masters degree in business
administration and a doctoral degree in economics from New York University.
Dr. Catacosinos currently chairs the Executive Committee of the Company's Board
of Directors, and is a member of the boards of U.S. Life Corporation, Austin
International Communications, Edison Electric Institute, the Long Island
Association, the German American Chamber of Commerce, the Business Alliance for
a New, New York, and a member of the Advisory Committee of the Huntington
Township Chamber Foundation. He is the former chairman and chief executive
officer of Applied Digital Data Systems, Inc., Hauppauge, New York, a
manufacturer of computer and related products. Previously, Dr. Catacosinos
also served as chairman of the board and treasurer of Corometric Systems, Inc.
of Wallingford, Connecticut and as Assistant Director at Brookhaven National
Laboratory. He was also a member of the boards of Utilities Mutual Insurance
Co. from November 1985 through December 1994 and Ketema, Inc. from June 1988
through December 1994. Ketema is a diversified manufacturer of, among other
things, electrical and aerospace equipment. In compliance with Section 305(b)
of the Federal Power Act, Dr. Catacosinos had authorization from FERC to hold
the position of an officer or director of a public utility and at the same time
the position of an officer or director of a firm that supplies electrical
equipment to such public utility.
Theodore A. Babcock: Mr. Babcock was named Treasurer of the
Company on February 4, 1994. As Treasurer, he is responsible for Treasury
Operations, Debt Management, Trust Asset Management, Risk Management and
Remittance Processing. Mr. Babcock, 40, joined the Company in July 1992 as
Assistant Treasurer. He previously spent five years in the AMBASE Corporation
as an Assistant Vice President and was promoted in 1988 to Vice President and
Treasurer. Prior to AMBASE, Mr. Babcock spent 11 years with the Associated Dry
Goods Corporation where he was promoted to Assistant Treasurer and Director of
Corporate Treasury Operations in 1984. Mr. Babcock received a bachelor of
science degree in accounting from Manhattan College and a masters degree in
finance from Iona College.
James T. Flynn: Mr. Flynn was named Chief Operating Officer
of the Company on March 1, 1994 and continues in his position of Executive
Vice President which he assumed in April 1992. Mr. Flynn joined the Company in
October 1986 as Vice President of Fossil Production and later assumed the
position of Group Vice President, Engineering and Operations. Before joining
the Company, Mr. Flynn, 61, was general manager-Eastern Service Department for
General Electric. His career began as a member of General Electric's Technical
Marketing Program in 1957. He holds a bachelor of science degree in
mechanical engineering from Bucknell University and is a Licensed Professional
Engineer in the State of Pennsylvania.
Joseph E. Fontana: Mr. Fontana was named Controller of the
Company on October 1, 1994. Mr. Fontana, 37, joined the Company in December
1992 as Director of Accounting Services. He held the position of Assistant
Controller from February 1994 through September 1994. Before joining the
Company, Mr. Fontana was a Senior Manager at the international accounting firm,
Ernst & Young LLP. He holds a bachelor of science degree in accounting from
Westchester State College and is a Certified Public Accountant.
<PAGE> 24
Robert X. Kelleher: Vice President of Human Resources since
July 1986, Mr. Kelleher, 58, joined the Company in 1959 and has held various
managerial positions in the Finance, Accounting, Purchasing, Stores and
Employee Relations organizations. He was Industrial Relations Manager from
1975 to 1979, Manager of the Employee Relations Department from 1979 to 1985
and Assistant Vice President of the Employee Relations Department from 1985 to
1986. Mr. Kelleher is a graduate of St. Francis College and the Human
Resources Management and Executive Management Programs of Pennsylvania State
University. Mr. Kelleher is a member of the American Compensation Association,
Personnel Directors Council, Industrial Relations Research Institute, Edison
Electric Institute's Labor Relations Committee and is on the advisory council
of New York Institute of Technology's Center for Labor Relations.
John D. Leonard, Jr.: Mr. Leonard joined the Company in
1984, initially serving as Vice President of Nuclear Operations. He assumed
additional duties as Vice President of Corporate Services from July 1989
through March 1994. Mr. Leonard was named Vice President of Engineering and
Construction on April 1, 1994 and continues to be responsible for nuclear
issues. Mr. Leonard, 62, was the vice president and assistant chief engineer
for design and analysis at the New York Power Authority, from 1980 to 1984.
Prior to this position, he served as a resident manager of the Fitzpatrick
Nuclear Power Plant for approximately five years. Before accepting a position
at the New York Power Authority, Mr. Leonard served as corporate supervisor of
operational quality assurance of the Virginia Electric Power Company from 1974
to 1976. In 1974, Mr. Leonard retired with the rank of Commander from the
United States Navy, having commanded two nuclear powered submarines in a career
that spanned 20 years. He holds a bachelor of science degree from Duke
University and a master of science degree from the Naval Post Graduate School.
He is a Licensed Professional Engineer in the State of New York.
Adam M. Madsen: Vice President of Corporate Planning since
1984, Mr. Madsen, 58, holds a bachelors degree in electrical engineering from
Manhattan College and a master of science degree in nuclear engineering from
Long Island University. He has been with the Company since 1961, serving in
various engineering positions including Manager of Engineering from 1978 to
1984. Prior to that time, he held the position of Manager of the Planning
Department. Since 1978, Mr. Madsen has been the Company's representative to
the Planning Committee of the New York Power Pool. He is a member of the
Northeast Power Coordinating Council's Joint Coordinating Committee and an
alternate to the Council's Executive Committee. He also serves on the Board of
Directors of the Empire State Electric Energy Research Company. Mr. Madsen is
a Licensed Professional Engineer in the State of New York.
Kathleen A. Marion: Ms. Marion was named Vice President of
Corporate Services on April 1, 1994 and continues in her position of
Corporate Secretary which she assumed in April 1992. Ms. Marion has served as
Assistant to the Chairman since April 1987 and was Assistant Corporate
Secretary from April 1990 to 1992. Ms. Marion, 40, has a bachelor of science
degree in business and finance from the State University of New York at Old
Westbury.
Arthur C. Marquardt: Senior Vice President of Gas Business
Unit since March 1992, Mr. Marquardt, 48, joined the Company in January 1991.
He held the position of Vice President of Strategic Business Planning from
January 1991 through March 1992. He is chairman of the New York Facilities
executive committee, director of the Huntington Chamber of Commerce, the
Huntington Chamber Foundation, the Long Island Builders Institute and a member
of the Family Service League Business Advisory Council. Mr. Marquardt has had
extensive and varied business experience at Combustion Engineering Inc.,
General Electric Company, Quadrex Corporation, and at Pacific Nuclear Systems,
Inc. where he was president and chief operating officer. He received a
bachelor of science degree in mechanical engineering from Tufts University.
<PAGE> 25
Brian R. McCaffrey: Vice President of Administration since
March 1987, Mr. McCaffrey, 49, joined the Company in 1973. Mr. McCaffrey holds
a bachelor of science degree in aerospace engineering from the University of
Notre Dame. He also received a master of science degree in aerospace
engineering from Pennsylvania State University and a master of science degree
in nuclear engineering from Polytechnic University. He is a Licensed
Professional Engineer in New York. Prior to this assignment as Vice President,
Mr. McCaffrey served in many positions in the nuclear organizations of the
Company and positions in engineering capacities associated with gas turbine and
fossil power station projects. Mr. McCaffrey is a member of the executive
board of the Suffolk County Council Boy Scouts of America.
Joseph W. McDonnell: Vice President of External Affairs since
July 1992, Dr. McDonnell, 43, joined the Company in 1984. Dr. McDonnell was
Assistant to the Chairman from 1984 through 1988 when he was named Vice
President of Communications. Prior to joining the Company, Dr. McDonnell was
the director of strategic planning and business administration for Applied
Digital Data Systems, Inc. and associate director of the University Hospital at
the State University of New York at Stony Brook. He holds bachelor of arts and
master of arts degrees in philosophy and a master of arts degree in theology
from the State University of New York at Stony Brook and a Ph.D in
communications from the University of Southern California.
Anthony Nozzolillo: Mr. Nozzolillo was named Senior Vice
President of Finance and Chief Financial Officer of the Company on February 4,
1994. His reporting responsibilities include the offices of Controller,
Treasurer, Tax & Benefits Planning, Investor Relations and Financial Planning.
Prior to this appointment he had been the Company's Treasurer since July 1992.
He has been with the Company since 1972 serving in various positions including
Manager of Financial Planning and Manager of Systems Planning. Mr. Nozzolillo
is a director of Nuclear Mutual Ltd. and was a director of Utilities Mutual
Insurance Company through December 1994. Mr. Nozzolillo, 46, holds a bachelor
of science degree in electrical engineering from the Polytechnic Institute of
Brooklyn and a master of business administration degree from Long Island
University C.W. Post Campus.
Richard Reichler: Mr. Reichler was named Deputy General
Counsel and Vice President of Tax and Benefit Compliance on December 14, 1994.
He held the position of Assistant Vice President for Tax and Benefits Planning
from October 1991 through December 1994. Prior to joining the Company, Mr.
Reichler, 60, was a partner in the international accounting firm, Ernst & Young
LLP for twenty-three years. He holds a bachelor of arts degree from Columbia
College and a bachelor of law degree from Columbia University School of Law.
Since 1989, he has taught various courses at Baruch College, including state
and local taxation, corporate taxation and real estate taxation. He has
authored several publications on tax and employee benefits topics and has
served as a member of the Executive Committee of the Tax Section of the New
York State Bar Association and as an advisor to the United Development
Corporation High Technology Advisory Council.
William G. Schiffmacher: Mr. Schiffmacher was named Vice
President of Customer Relations on April 1, 1994. He held the position of Vice
President of Electric Operations from July 1990 through March 1994. Mr.
Schiffmacher, 51, joined the Company in 1965 after receiving a bachelor of
electrical engineering degree from Manhattan College. Mr. Schiffmacher also
holds a master of science degree in management engineering from Long Island
University. He has held a variety of positions in the Company, including
Manager of Electric System Operation, Manager of Electrical Engineering and
Vice President of Engineering and Construction.
Robert B. Steger: Mr. Steger was named Vice President of
Electric Operations on April 1, 1994. He held the position of Vice President
of Fossil Production from February 1990 through March 1994. Mr. Steger, 58,
joined the Company in 1963 and has since held progressive operating and
engineering positions including Manager of Electric Production-Fossil from 1985
through 1989. He holds a bachelor of mechanical engineering degree from Pratt
Institute and is a Licensed Professional Engineer in the State of New York.
<PAGE> 26
William E. Steiger, Jr.: Mr. Steiger was named Vice President
of Fossil Production on April 1, 1994. He held the position of Vice President
of Engineering and Construction from July 1990 through March 1994. Mr.
Steiger, 51, has been with the Company since 1968. During his career with the
Company, Mr. Steiger has served, among other positions, as Lead Nuclear
Engineer for Shoreham, Chief Operations Engineer for Shoreham, Plant Manager
for Shoreham as well as Assistant Vice President of Nuclear Operations. He
received a bachelor of science degree in marine engineering from the United
States Merchant Marine Academy and a master of science degree in nuclear
engineering from Long Island University.
Edward J. Youngling: Mr. Youngling was named Senior Vice
President of the Electric Business Unit on April 1, 1994. He held the position
of Vice President of Customer Relations and Conservation from March 1993
through March 1994. He joined the Company in 1968 as an Assistant Engineer in
the Electric Production Department and has held various positions in the
offices of fossil production, engineering and nuclear operations including
service as Department Manager of Nuclear Engineering. In 1988, Mr. Youngling
was named Vice President of Conservation and Load Management. In 1990, Mr.
Youngling became Vice President of Customer Relations. The Office of Customer
Relations and the Office of Conservation were merged in March 1994. Mr.
Youngling, 50, holds a bachelor of science degree in mechanical engineering
from Lehigh University.
CAPITAL REQUIREMENTS, LIQUIDITY AND CAPITAL PROVIDED:
Information as to Capital Requirements, Liquidity and Capital
Provided appears in Item 7, "Management's Discussion and Analysis of Financial
Condition and Results of Operations for the Year Ended December 31, 1994."
ITEM 2. PROPERTIES
The location and general character of the principal properties
of the Company are described in Item 1, "Business" under the headings "Electric
Operations" and "Gas Operations."
ITEM 3. LEGAL PROCEEDINGS
Shoreham
Pursuant to the Long Island Power Authority Act ("LIPA Act"),
LIPA is required to make PILOTS to the municipalities that impose real property
taxes on Shoreham. Pursuant to the 1989 Settlement, the Company agreed to fund
LIPA's PILOTS obligation. The timing and duration of PILOTS under the LIPA Act
are the subject of litigation entitled LIPA, et al. v. Shoreham-Wading River
Central School District, et al, brought in Nassau County Supreme Court by LIPA
against, among others, Suffolk County, the Town of Brookhaven and the
Shoreham-Wading River Central School District. The Company was permitted to
intervene in the lawsuit. On January 10, 1994, the Appellate Division, Second
Department, affirmed a lower court's March 29, 1993 decision holding, in major
part, that the Company is not obligated for any real property taxes that
accrued after February 28, 1992, attributable to property that it conveyed to
LIPA, that PILOTS commenced on March 1, 1992, that PILOTS are subject to
refunds and that the LIPA Act does not provide for the termination of PILOTS.
Generally, these holdings are favorable to the Company. On July 7, 1994, the
Court of Appeals denied a motion by all parties in which they sought leave to
appeal the Appellate Division decision on the basis that such decision is not a
final determination of this matter and therefore is not reviewable by the Court
of Appeals. The proper amount of PILOTS is to be determined in pending
litigation described in the next paragraph.
The costs of Shoreham included real property taxes imposed by
the Town of Brookhaven on Shoreham and capitalized by the Company during
construction. The Company has sought judicial review in Suffolk County Supreme
Court (Long Island Lighting Company v. The Assessor of the Town of Brookhaven,
et al.) of the assessments upon which those taxes were based for the years 1976
through 1992 (excluding 1979). The court has
<PAGE> 27
consolidated the review of the tax years at issue into two phases: 1976
through 1983, excluding 1979 (Phase 1); and 1984 through 1992 (Phase 2). On
October 26, 1992, the court ruled that Shoreham had been overvalued for
property tax purposes for Phase 1. Although the court did not award a refund
because of a need to make further factual findings, the Company estimates that
it is entitled to a refund of approximately $34 million plus interest.
Regarding Phase 1, the Appellate Division, Second Department, affirmed the
Supreme Court's ruling and denied leave to appeal to the Court of Appeals. The
respondents have sought leave before the Court of Appeals to appeal to that
court. The Company has opposed this motion but has sought the Court of
Appeal's permission to appeal in the event that respondents' motion is granted.
In the Phase 2 proceeding, which is currently in progress, the Company is
seeking to recover over $500 million, excluding interest, in property taxes
paid on Shoreham during this period. The amount of the Company's recovery, if
any, in the Phase 2 proceeding and the timing of all refunds cannot yet be
determined. The Company has indicated to the PSC that all refunds, less
litigation costs, will be used to reduce future electric costs. LIPA has been
permitted to intervene for limited purposes in this pending litigation.
Environmental
On February 18, 1994, a lawsuit was filed in the United States
District Court for the Eastern District of New York by the Town of Oyster Bay
(the "Town"), against the Company and 19 other PRPs. The Town is seeking
indemnification for remediation and investigation costs that have been or will
be incurred for a federal Superfund site in Syosset, New York, which served as
a Town-owned and operated landfill between 1954 and 1975. In a Record of
Decision issued in September 1990, the EPA set forth a remedial design plan,
the cost of which was estimated at $27 million and is reflected in the Town's
lawsuit. In an Administrative Consent Decree entered into between the EPA and
the Town in December 1990, the Town agreed to undertake remediation at the
site. The Company has agreed to participate in a joint PRP defense effort with
several other defendants. Liability, if imposed, would be joint and several.
While the outcome of this matter is not certain, based upon the Company's past
experience in similar matters and the number and financial condition of the
corporate defendants named in the litigation, the Company does not believe that
this proceeding will have a material adverse effect on its financial condition.
Human Resources
Pending before federal and state courts, the Federal Equal
Employment Opportunity Commission and the New York State Division of Human
Rights are charges by individuals alleging that the Company discriminated
against them on various grounds.
The Civil Rights Bureau of the New York Attorney General's
office has subpoenaed the Company for the production of documents to aid in its
investigation as to whether the Company has engaged in discriminatory
employment practices based upon age. No charges have been filed by the
Attorney General.
The Company has estimated that any costs to the Company
resulting from these matters will not have a material adverse effect on its
financial condition.
Other Matters
On January 13, 1993, the New York State Department of Law
("DOL") informed the Company that the DOL's Antitrust Bureau opened an
investigation into its Full Service Pilot Program and Contractor Advisory
Council, two programs designed to increase the Company's residential natural
gas sales. The DOL stated that the implementation of the Full Service Pilot
Program and the practices of the Contractor Advisory Council may have
anticompetitive effects in the gas-fired heating equipment installation and
conversion business and that a preliminary investigation has raised questions
of possible violations of the New York General Business Law and the Sherman
Act. The DOL has not taken any further action in this matter. If required,
the Company expects that it can demonstrate that the programs identified by the
DOL for investigation are very limited in scope and do not involve
<PAGE> 28
any violations. The outcome of the investigation by the DOL, if adverse, is
not expected to have a material effect on the financial condition of the
Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE> 29
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
At March 1, 1995, the Company had 118,704,301 registered
holders of record of Common Stock.
The Common Stock of the Company is traded on the New York
Stock Exchange and the Pacific Stock Exchange. Certain of the Company's
Preferred Stock series are traded on the New York Stock Exchange.
Information respecting the high and low sales prices and the
dividends declared on the Company's Common Stock during the past two years is
set forth in the table below.
<TABLE>
<CAPTION>
1994 1993
-------------------------------- -------------------------------
Prices Dividends Prices Dividends
--------------- Declared Per ------------------ Declared Per
High Low Share High Low Share
----- ----- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C>
1st Quarter $24 1/4 $21 1/2 $0.445 $28 3/4 $24 7/8 $0.435
2nd Quarter 22 7/8 17 1/2 0.445 28 1/4 24 3/4 0.435
3rd Quarter 19 3/8 15 0.445 29 5/8 27 0.445
4th Quarter 18 1/8 15 1/4 0.445 27 3/4 23 1/4 0.445
</TABLE>
<PAGE> 30
Item 6: Selected Financial Data
<TABLE>
<CAPTION>
(In thousands of dollars except per share amounts)
--------------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Summary of Operations Table 1
--------------------------------------------------------------------------------------------------------------------------------
Revenues $ 3,067,307 $ 2,880,995 $ 2,621,839 $ 2,547,729 $ 2,456,902
Operating expenses 2,322,362 2,125,444 1,880,734 1,762,449 1,654,272
--------------------------------------------------------------------------------------------------------------------------------
Operating income 744,945 755,551 741,105 785,280 802,630
Other income and (deductions) 52,719 70,874 66,330 40,482 20,638
--------------------------------------------------------------------------------------------------------------------------------
Income before interest charges and cumulative
effect of accounting change 797,664 826,425 807,435 825,762 823,268
Interest charges and (credits) 495,812 529,862 505,461 520,224 503,631
--------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of
accounting change 301,852 296,563 301,974 305,538 319,637
--------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of accounting change for
unbilled gas revenues (net of tax) - - - - 11,680
--------------------------------------------------------------------------------------------------------------------------------
Net income 301,852 296,563 301,974 305,538 331,317
Preferred stock dividend requirements 53,020 56,108 63,954 66,394 68,161
--------------------------------------------------------------------------------------------------------------------------------
Earnings for Common Stock $ 248,832 $ 240,455 $ 238,020 $ 239,144 $ 263,156
================================================================================================================================
Average common shares outstanding (000) 115,880 112,057 111,439 111,348 111,290
Earnings per common share
Before cumulative effect of accounting change $ 2.15 $ 2.15 $ 2.14 $ 2.15 $ 2.26
Cumulative effect of accounting change - - - - 0.10
--------------------------------------------------------------------------------------------------------------------------------
Earnings per Common Share $ 2.15 $ 2.15 $ 2.14 $ 2.15 $ 2.36
================================================================================================================================
Common stock dividends declared per share $ 1.78 $ 1.76 $ 1.72 $ 1.60 $ 1.25
Common stock dividends paid per share $ 1.78 $ 1.75 $ 1.71 $ 1.55 $ 1.125
Book value per common share at December 31 $ 20.21 $ 19.88 $ 19.58 $ 19.13 $ 18.57
Common shares outstanding
at December 31 (000) 118,417 112,332 111,600 111,365 111,324
Common shareowners of record at December 31 96,491 94,877 86,111 90,435 82,903
================================================================================================================================
--------------------------------------------------------------------------------------------------------------------------------
Capitalization Ratios* Table 2
--------------------------------------------------------------------------------------------------------------------------------
Long-term debt 62.5% 65.0% 64.7% 63.9% 62.2%
Preferred stock 8.6 8.5 8.8 8.8 9.4
Common equity 28.9 26.5 26.5 27.3 28.4
--------------------------------------------------------------------------------------------------------------------------------
Total 100.0% 100.0% 100.0% 100.0% 100.0%
================================================================================================================================
</TABLE>
*Includes current maturities of long-term debt and current redemption
requirements of preferred stock.
<TABLE>
<CAPTION>
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------------
Operations and Maintenance Expense Details Table 3
------------------------------------------------------------------------------------------------------------------------------
Payroll and employee benefits $ 436,611 $ 438,079 $ 413,817 $ 398,000 $ 357,689
Less - Charged to construction and other 103,974 116,988 124,076 123,838 97,650
------------------------------------------------------------------------------------------------------------------------------
Payroll and employee benefits charged to
operations 332,637 321,091 289,741 274,162 260,039
------------------------------------------------------------------------------------------------------------------------------
Fuel and Purchased Power
Fuel - electric operations 261,154 287,349 282,138 354,859 447,481
Fuel - gas operations 267,629 253,511 206,344 172,992 185,474
Purchased power costs 307,584 292,136 280,914 197,154 168,749
Fuel cost adjustments deferred 11,619 (5,405) (27,612) 43,697 (14,705)
------------------------------------------------------------------------------------------------------------------------------
Total fuel and purchased power 847,986 827,591 741,784 768,702 786,999
------------------------------------------------------------------------------------------------------------------------------
All other 208,017 200,569 208,204 248,597 215,770
------------------------------------------------------------------------------------------------------------------------------
Total Operations and Maintenance Expense $ 1,388,640 $ 1,349,251 $ 1,239,729 $ 1,291,461 $ 1,262,808
==============================================================================================================================
Full-time employees at December 31 5,947 6,215 6,438 6,538 6,545
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 31
<TABLE>
<CAPTION>
(In thousands of dollars)
------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Operating Income Table 4
------------------------------------------------------------------------------------------------------------------------
Revenues
------------------------------------------------------------------------------------------------------------------------
Residential $ 1,202,124 $ 1,145,891 $ 1,045,799 $ 1,047,490 $ 997,868
Commercial and industrial 1,196,422 1,132,487 1,076,302 1,070,098 1,017,387
Other system revenues 52,477 49,790 49,395 47,838 46,673
------------------------------------------------------------------------------------------------------------------------
Total system revenues 2,451,023 2,328,168 2,171,496 2,165,426 2,061,928
Sales to other utilities 14,895 12,872 9,997 23,040 24,140
Other revenues 15,719 11,069 13,139 8,102 9,592
------------------------------------------------------------------------------------------------------------------------
Total Revenues 2,481,637 2,352,109 2,194,632 2,196,568 2,095,660
------------------------------------------------------------------------------------------------------------------------
Operating Expenses
Operations - fuel and purchased power 568,738 579,032 559,583 593,656 611,122
Operations - other 310,438 306,116 294,909 296,798 271,608
Maintenance 107,573 111,765 105,341 127,446 118,545
Depreciation and amortization 111,996 106,149 104,034 104,172 98,022
Base financial component amortization 100,971 100,971 100,971 100,971 100,971
Rate moderation component amortization 197,656 88,667 (30,444) (228,572) (297,214)
Regulatory liability component amortization (79,359) (79,359) (79,359) (79,359) (79,359)
1989 Settlement credits amortization (9,214) (9,214) (9,214) (9,214) (9,214)
Regulatory amortization (4,883) (17,082) (21,984) 10,375 14,427
Operating taxes 336,263 326,407 331,122 338,429 322,197
Federal income tax - current 10,784 6,324 530 515 3,138
Federal income tax - deferred and other 156,646 158,941 158,908 173,259 169,274
------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 1,807,609 1,678,717 1,514,397 1,428,476 1,323,517
------------------------------------------------------------------------------------------------------------------------
Electric Operating Income $ 674,028 $ 673,392 $ 680,235 $ 768,092 $ 772,143
========================================================================================================================
</TABLE>
<TABLE>
<CAPTION>
(In thousands of dollars)
<S> <C> <C> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
Gas Operating Income Table 5
------------------------------------------------------------------------------------------------------------------------
Revenues
Residential - space heating $ 326,474 $ 310,109 $ 243,950 $ 190,976 $ 198,734
- other 42,263 39,515 33,035 29,383 30,854
Commercial and industrial - space heating 126,092 106,140 90,363 70,938 68,441
- other 35,275 33,181 29,094 25,515 26,501
------------------------------------------------------------------------------------------------------------------------
Total firm revenues 530,104 488,945 396,442 316,812 324,530
Interruptible revenues 26,804 24,028 19,658 21,686 30,515
------------------------------------------------------------------------------------------------------------------------
Total system revenues 556,908 512,973 416,100 338,498 355,045
Other revenues 28,762 15,913 11,107 12,663 6,197
------------------------------------------------------------------------------------------------------------------------
Total Revenues 585,670 528,886 427,207 351,161 361,242
------------------------------------------------------------------------------------------------------------------------
Operating Expenses
Operations - fuel 279,248 248,559 182,201 175,046 175,877
Operations - other 95,576 81,692 77,300 78,469 68,910
Maintenance 27,067 22,087 20,395 20,046 16,746
Depreciation and amortization 18,668 16,322 15,103 14,783 12,862
Regulatory amortization 9,211 (962) (88) - -
Operating taxes 70,632 59,440 57,866 49,951 48,120
Federal income tax - current - - - - 500
Federal income tax - deferred and other 14,351 19,589 13,560 (4,322) 7,740
------------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 514,753 446,727 366,337 333,973 330,755
------------------------------------------------------------------------------------------------------------------------
Gas Operating Income $ 70,917 $ 82,159 $ 60,870 $ 17,188 $ 30,487
========================================================================================================================
</TABLE>
<PAGE> 32
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
-----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Electric Sales and Customers Table 6
-----------------------------------------------------------------------------------------------------------------
Sales - millions of kWh
Residential 7,159 7,118 6,788 7,022 7,022
Commercial and industrial 8,394 8,257 8,181 8,322 8,359
Other 457 449 471 469 472
-----------------------------------------------------------------------------------------------------------------
System sales 16,010 15,824 15,440 15,813 15,853
Sales to other utilities 372 304 227 598 532
-----------------------------------------------------------------------------------------------------------------
Total Sales 16,382 16,128 15,667 16,411 16,385
=================================================================================================================
CUSTOMERS - MONTHLY AVERAGE
Residential 908,490 905,997 902,885 898,974 895,294
Commercial and industrial 102,490 102,254 101,838 101,740 101,562
Other 4,583 4,553 4,593 4,540 4,504
-----------------------------------------------------------------------------------------------------------------
TOTAL CUSTOMERS - MONTHLY AVERAGE 1,015,563 1,012,804 1,009,316 1,005,254 1,001,360
=================================================================================================================
CUSTOMERS - AT DECEMBER 31 1,016,739 1,011,965 1,009,028 1,005,363 1,001,441
-----------------------------------------------------------------------------------------------------------------
RESIDENTIAL
kWh per customer 7,880 7,856 7,518 7,812 7,844
Revenue per kWh 16.79c. 16.10c. 15.41c. 14.92c. 14.21c.
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL AND INDUSTRIAL
kWh per customer 81,902 80,749 80,346 81,797 82,304
Revenue per kWh 14.25c. 13.72c. 13.16c. 12.86c. 12.17c.
-----------------------------------------------------------------------------------------------------------------
SYSTEM
kWh per customer 15,765 15,624 15,297 15,731 15,832
Revenue per kWh 15.31c. 14.71c. 14.06c. 13.69c. 13.01c.
=================================================================================================================
-----------------------------------------------------------------------------------------------------------------
GAS SALES AND CUSTOMERS Table 7
-----------------------------------------------------------------------------------------------------------------
SALES - THOUSANDS OF DTH
Residential - space heating 35,693 37,191 35,089 29,687 29,810
- other 3,151 3,297 3,203 3,195 3,448
Commercial and industrial - space heating 15,679 14,366 13,662 11,636 11,271
- other 4,366 4,329 4,338 4,171 4,352
-----------------------------------------------------------------------------------------------------------------
Total firm sales 58,889 59,183 56,292 48,689 48,881
Interruptible sales 6,914 5,920 5,090 4,538 6,347
Off-system sales 7,232 2,894 - - -
-----------------------------------------------------------------------------------------------------------------
Total Sales 73,035 67,997 61,382 53,227 55,228
=================================================================================================================
CUSTOMERS - MONTHLY AVERAGE
Residential - space heating 239,857 233,882 227,834 220,562 211,400
- other 163,608 166,974 169,189 171,581 176,000
Commercial and industrial - space heating 33,776 32,783 31,666 30,453 29,072
- other 10,448 10,631 10,777 11,003 11,310
-----------------------------------------------------------------------------------------------------------------
Total firm customers 447,689 444,270 439,466 433,599 427,782
Interruptible customers 576 542 531 472 410
-----------------------------------------------------------------------------------------------------------------
TOTAL CUSTOMERS - MONTHLY AVERAGE 448,265 444,812 439,997 434,071 428,192
=================================================================================================================
CUSTOMERS - AT DECEMBER 31 449,906 446,384 442,117 436,853 430,571
-----------------------------------------------------------------------------------------------------------------
RESIDENTIAL
dth per customer 96.3 101.0 96.4 83.9 85.8
Revenue per dth $ 9.49 $ 8.64 $ 7.23 $ 6.70 $ 6.90
-----------------------------------------------------------------------------------------------------------------
COMMERCIAL AND INDUSTRIAL
dth per customer 453.3 430.6 424.1 381.3 386.9
Revenue per dth $ 8.05 $ 7.45 $ 6.64 $ 6.10 $ 6.08
-----------------------------------------------------------------------------------------------------------------
SYSTEM
dth per customer 146.8 146.4 139.5 122.6 128.9
Revenue per dth $ 8.46 $ 7.88 $ 6.78 $ 6.36 $ 6.43
-----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 33
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------------------------------------------------------------------------------------------------------------------
Electric Operations Table 8
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Energy - millions of kWh
Net generation 10,034 10,514 10,592 13,570 13,981
Power purchased 7,640 7,023 6,438 4,236 3,521
------------------------------------------------------------------------------------------------------------------
Total Energy Available 17,674 17,537 17,030 17,806 17,502
==================================================================================================================
System sales 16,010 15,824 15,440 15,813 15,853
Company use and unaccounted for 1,292 1,409 1,363 1,395 1,117
------------------------------------------------------------------------------------------------------------------
Total system energy requirements 17,302 17,233 16,803 17,208 16,970
Sales to other utilities 372 304 227 598 532
------------------------------------------------------------------------------------------------------------------
Total Energy Available 17,674 17,537 17,030 17,806 17,502
==================================================================================================================
Peak Demand - MW
Station coincident demand 3,253 2,931 2,975 3,085 3,260
Power purchased - net 629 1,036 636 819 426
------------------------------------------------------------------------------------------------------------------
System Peak Demand 3,882 3,967 3,611 3,904 3,686
==================================================================================================================
System Capablility - MW
Company stations 4,063 4,063 4,091 4,078 4,077
Nine Mile Point 2 (18% share) 189 188 188 194 194
Firm purchases - net 616 548 432 423 408
------------------------------------------------------------------------------------------------------------------
Total Capability 4,868 4,799 4,711 4,695 4,679
==================================================================================================================
Fuel Consumed for Electric Operations
Oil - thousands of barrels 7,518 9,740 10,656 15,314 16,401
Gas - thousands of dth 44,308 36,269 34,475 32,924 36,477
Nuclear - thousands of MW days 183 181 124 154 108
Total - billions of Btu 91,669 98,025 102,126 129,937 139,874
Dollars per million Btu $2.69 $2.79 $2.62 $2.61 $3.07
Cents per kWh of net generation 2.88 c. 2.97 c. 2.76 c. 2.73 c. 3.24 c.
Heat rate - Btu per net kWh 10,740 10,628 10,558 10,484 10,564
------------------------------------------------------------------------------------------------------------------
Fuel Mix (Percentage of system requirements)
Oil 25 % 33 % 37 % 50 % 56 %
Gas 23 19 19 18 20
Purchased power 43 41 38 25 20
Nuclear fuel 9 7 6 7 4
------------------------------------------------------------------------------------------------------------------
Total 100 % 100 % 100 % 100 % 100 %
==================================================================================================================
------------------------------------------------------------------------------------------------------------------
Gas Operations Table 9
------------------------------------------------------------------------------------------------------------------
Energy - thousands of dth
Natural gas 75,360 69,970 64,911 55,579 55,407
Manufactured gas and change in storage 191 (68) 48 60 (15)
------------------------------------------------------------------------------------------------------------------
Total Company Requirements 75,551 69,902 64,959 55,639 55,392
==================================================================================================================
System Sales 65,803 65,103 61,382 53,227 55,228
Off-system sales 7,232 2,894 0 0 0
Company use and unaccounted for 2,516 1,905 3,577 2,412 164
------------------------------------------------------------------------------------------------------------------
Total Company Requirements 75,551 69,902 64,959 55,639 55,392
==================================================================================================================
Maximum Day Sendout - dth 585,227 485,896 448,726 435,050 406,177
------------------------------------------------------------------------------------------------------------------
System Capability - dth per day
Natural gas 579,897 561,584 561,584 507,344 507,344
LNG manufactured or LP gas 125,700 120,700 120,700 128,200 128,200
------------------------------------------------------------------------------------------------------------------
Total Capability 705,597 682,284 682,284 635,544 635,544
==================================================================================================================
Heating Degree Days
(30 year average 4,797) 4,839 4,899 5,066 4,378 4,139
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
(In thousands of dollars)
--------------------------------------------------------------------------------------------------------------------------
1994 1993 1992 1991 1990
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Balance Sheet Table 10
--------------------------------------------------------------------------------------------------------------------------
Assets
Net utility plant $ 3,498,346 $ 3,347,557 $ 3,161,148 $ 3,002,733 $ 2,888,079
Regulatory Assets
Base financial component 3,483,490 3,584,461 3,685,432 3,786,403 3,887,373
Rate moderation component 463,229 609,827 651,657 602,053 411,443
Shoreham post settlement costs 922,580 777,103 586,045 378,386 225,818
Shoreham nuclear fuel 73,371 75,497 77,629 79,760 92,069
Postretirement benefits other than pensions 412,727 402,921 - - -
Regulatory tax asset 1,831,689 1,848,998 - - -
Other 354,524 311,832 220,380 104,484 106,654
--------------------------------------------------------------------------------------------------------------------------
Total regulatory assets 7,541,610 7,610,639 5,221,143 4,951,086 4,723,357
--------------------------------------------------------------------------------------------------------------------------
Nonutility property and other investments 24,043 23,029 20,730 9,788 6,381
Current assets 851,424 924,859 916,914 884,017 726,060
Deferred charges 1,301,257 1,487,032 1,444,524 1,290,871 1,173,361
--------------------------------------------------------------------------------------------------------------------------
Total Assets $ 13,216,680 $ 13,393,116 $ 10,764,459 $ 10,138,495 $ 9,517,238
==========================================================================================================================
Capitalization and Liabilities
Long-term debt $ 5,162,675 $ 4,887,733 $ 4,755,733 $ 5,001,016 $ 4,556,016
Unamortized discount on debt (17,278) (17,393) (14,731) (14,850) (23,125)
--------------------------------------------------------------------------------------------------------------------------
5,145,397 4,870,340 4,741,002 4,986,166 4,532,891
--------------------------------------------------------------------------------------------------------------------------
Preferred stock - redemption required 644,350 649,150 557,900 524,912 527,550
Preferred stock - no redemption required 63,957 64,038 154,276 154,371 154,674
--------------------------------------------------------------------------------------------------------------------------
Total preferred stock 708,307 713,188 712,176 679,283 682,224
--------------------------------------------------------------------------------------------------------------------------
Common stock 592,083 561,662 558,002 556,825 556,620
Premium on capital stock 1,101,240 1,010,283 998,089 993,509 992,885
Capital stock expense (52,175) (50,427) (39,304) (40,216) (42,676)
Retained earnings 752,480 711,432 667,988 620,373 560,405
--------------------------------------------------------------------------------------------------------------------------
Total common shareowners' equity 2,393,628 2,232,950 2,184,775 2,130,491 2,067,234
--------------------------------------------------------------------------------------------------------------------------
Total capitalization 8,247,332 7,816,478 7,637,953 7,795,940 7,282,349
--------------------------------------------------------------------------------------------------------------------------
Regulatory Liabilities
Regulatory liability component 357,117 436,476 515,835 595,194 674,554
1989 Settlement credits 145,868 155,081 164,294 173,507 182,720
Regulatory tax liability 111,218 114,748 - - -
Other 143,611 138,612 100,470 72,277 102,655
--------------------------------------------------------------------------------------------------------------------------
Total regulatory liabilities 757,814 844,917 780,599 840,978 959,929
--------------------------------------------------------------------------------------------------------------------------
Current liabilities 605,478 1,188,972 1,181,297 492,895 449,830
Deferred credits 3,102,434 3,109,593 1,147,310 1,001,375 816,790
Operating reserves 503,622 433,156 17,300 7,307 8,340
--------------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 13,216,680 $ 13,393,116 $ 10,764,459 $ 10,138,495 $ 9,517,238
==========================================================================================================================
(In thousands of dollars)
--------------------------------------------------------------------------------------------------------------------------
Construction Expenditures* Table 11
--------------------------------------------------------------------------------------------------------------------------
Electric $ 136,041 $ 137,583 $ 141,752 $ 129,643 $ 141,028
Gas 120,019 124,859 104,028 89,950 78,766
Common 23,610 42,251 27,124 17,958 12,671
--------------------------------------------------------------------------------------------------------------------------
Total Construction Expenditures $ 279,670 $ 304,693 $ 272,904 $ 237,551 $ 232,465
==========================================================================================================================
</TABLE>
*Includes non-cash allowance for other funds used during construction and
excludes Shoreham post settlement costs.
<PAGE> 35
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This discussion and analysis addresses matters of significance with regard to
the Company and its financial condition, liquidity, capital requirements and
results of operations for the last three years.
OVERVIEW
In 1994, the Company reached a milestone by generating sufficient cash from
operations to meet all of its operating and construction requirements in
addition to satisfying a portion of its maturing debt obligations with cash on
hand. The positive cash flow resulted, in part, from the collection of
deferred revenues associated with the Rate Moderation Component (RMC) and the
Long Island Lighting Company Ratemaking and Performance Plan, and the Company's
continued efforts to maximize operating efficiencies while reducing operating
costs.
Since 1989, the Company has received six electric rate increases and has
experienced lower than anticipated fuel costs, financing costs and production
expenses, all of which have helped to improve cash flow, which in turn, has
improved the Company's financial health. This improved financial health has
enabled the Company to file with the Public Service Commission of the State of
New York (PSC) on December 31, 1993, a three year electric rate plan (Electric
Rate Plan) requesting that base electric rates be frozen through November 30,
1996, and that overall electric rates increase 4.3% beginning December 1, 1996.
The Electric Rate Plan, as designed, will help to better position the Company
to meet existing and anticipated competitive challenges in addition to
assisting the economic recovery of Long Island.
Three Administrative Law Judges (ALJs) issued a recommended decision to the PSC
with respect to the Company's Electric Rate Plan. The ALJs agreed with the
Company's proposal to freeze base electric rates for the first year, and
implied that base rates could remain frozen for the second year as well. The
ALJs encouraged the Company and other intervening parties in the proceeding to
negotiate a settlement regarding the third year of the Company's Electric Rate
Plan. The Company, the PSC and other parties to this proceeding continue to
negotiate toward a three year rate settlement. The Company believes that a
three year rate settlement is in the best interest of shareowners and
ratepayers.
Other significant achievements during 1994 included:
- The Company maintained the same level of earnings per common share in
1994 as in 1993, despite a lower allowed return on common equity for
the gas business and the issuance of 6.1
<PAGE> 36
million shares of common stock during 1994;
- The public offering of 5.1 million shares of the Company's common
stock, for the first time in nearly ten years, raised approximately
$100 million. This offering, combined with the satisfaction of a
portion of maturing debt with cash on hand, has resulted in a
reduction of the Company's debt ratio to 62.5% at December 31, 1994
from 65.0% at December 31, 1993;
- The continuation of the Company's quarterly common stock dividend rate
at 44 1/2 cents per share;
- The reduction of the Company's average coupon rate on its outstanding
long-term debt to 7.9% as a result of the Company's refinancing
activities. The refinancing of a significant amount of the Company's
long-term debt and preferred stock, over the past several years, has
resulted in annual cash savings of approximately $100 million;
- The reduction of the RMC balance from $610 million at December 31,
1993 to $463 million at December 31, 1994. This reduction resulted,
in part, from current year revenues under the Rate Moderation
Agreement exceeding revenues that were required in 1994 under
conventional ratemaking;
- The completion, pending final regulatory approval, of the
decommissioning of the Shoreham Nuclear Power Station, including the
removal and transportation of Shoreham's fuel to another utility;
- The receipt of a gas rate increase effective December 1, 1994, which
is the second of three gas rate increases under a three-year
settlement between the Company and the PSC which provides for annual
rate increases of 4.7%, 3.8% and 2.8% for the rate years beginning
December 1, 1993, 1994 and 1995, respectively;
- The addition of over 8,500 new gas space heating customers, resulting
from the continuation of the Company's gas expansion program;
- The establishment of a record maximum day gas sendout of 585,227
dekatherms on January 19, 1994.
In addition, in 1994, the Company received an invitation at the request of the
former Governor of New York State (State), from the chief executives of the New
York Power Authority and the Long Island Power Authority, for the Company to
enter into negotiations with them in a proposal to convert the Company into a
public power utility. The new Governor of the State empaneled
<PAGE> 37
a task force to study the "takeover" proposal. While the task force did not
make its recommendation public, published reports in local newspapers indicate
that the task force recommended to reject the proposal.
<PAGE> 38
LIQUIDITY
At December 31, 1994, the Company's cash and cash equivalents amounted to
approximately $185 million, compared to $249 million at December 31, 1993. The
decrease in cash and cash equivalents reflects the Company's strategy of
applying available cash balances toward the satisfaction of maturing debt.
The Company has available for its use a $300 million revolving line of credit
through October 1, 1995, provided by its 1989 Revolving Credit Agreement (1989
RCA). At December 31, 1994, no amounts were outstanding under the 1989 RCA.
This line of credit is secured by a first lien upon the Company's accounts
receivable and fuel oil inventories. The 1989 RCA may be extended for one year
periods upon the acceptance by the lending banks of a request by the Company.
The Company's request must be delivered to the lending banks prior to April 1
of each year. In 1995, the Company intends to request such an extension. For
a further discussion of the 1989 RCA, see Note 7 of Notes to Financial
Statements.
CAPITALIZATION
The Company's capitalization, including current maturities of long-term debt
and current redemption requirements of preferred stock, at December 31, 1994,
was approximately $8.3 billion, compared to $8.4 billion at December 31, 1993.
At December 31, 1994 and 1993, the Company's capitalization ratios were as
follows:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Long-term debt 62.5% 65.0%
Preferred stock 8.6 8.5
Common shareowners' equity 28.9 26.5
------ ------
100.0% 100.0%
====== ======
</TABLE>
The Company is committed to reducing its debt ratio. To achieve this goal, the
Company intends to continue reducing debt with cash generated from operations
and intends to issue common or preferred stock if market conditions prove
favorable. With this commitment in mind, the Company issued 5.1 million shares
of common stock in 1994, marking the first time in approximately ten years that
the Company issued common equity, other than through its Automatic Dividend
Reinvestment Plan, its Employee Stock Purchase Plan or through the conversion
of Series I Preferred Stock.
In 1994, the Company applied the net proceeds from the sale of the 5.1 million
shares of common stock and the issuance of $285 million of General and
Refunding Bonds (G&R Bonds) toward the repayment, at maturity, of $400 million
of debentures and the redemption of $30 million and $5 million of debentures
that had
<PAGE> 39
been scheduled to mature in 1999 and 2019, respectively. Cash from operations
provided the balance of funds needed to retire/redeem this debt and to retire
$25 million of First Mortgage Bonds, which matured in June 1994. In addition,
in November 1994 the Company used cash on hand to satisfy the payment of $175
million of maturing debentures.
The Company's need to access the financial markets to provide additional
capital or to refinance its maturing debt has diminished compared to prior
years. The Company intends to use cash generated from operations to satisfy
the payment of $25 million of First Mortgage Bonds maturing on June 1, 1995.
With respect to the repayment of $455 million and $286 million of debt maturing
in 1996 and 1997, respectively, the Company intends to use cash generated from
operations to the maximum extent practicable. The balance of funds necessary
to satisfy maturing debt obligations in 1996 and 1997 will be obtained through
the issuance of either debt or equity securities, or some combination thereof.
Despite improving financial indicia, the Company's securities, which are rated
by Standard and Poor's Corporation (S&P), Moody's Investors Service (Moody's),
Fitch Investors Service, L.P. (Fitch) and Duff and Phelps, Inc. (D&P), have
been downgraded by certain rating agencies over the past eighteen months. In
June 1994, Moody's lowered the credit ratings of the Company reflecting Moody's
expectations that the Company's high tariff rates will intensify business risk
in an increasingly competitive environment. Recently, S&P placed its ratings on
the Company's securities on "Credit Watch with negative implications," Fitch
changed its credit trends to "declining" and Moody's placed the Company's
credit ratings under review for a possible downgrade reflecting their
respective concerns about the regulatory environment in New York State.
<PAGE> 40
At December 31, 1994, the ratings for each of the Company's principal
securities were as follows:
<TABLE>
<CAPTION>
S&P Moody's Fitch D&P
--- ------- ----- ---
<S> <C> <C> <C> <C>
. First Mortgage
Bonds BBB- Baa3 BBB BBB
. G&R Bonds BBB- Baa3 BBB BBB
. Debentures BB+ Ba1 BBB- BB+
. Preferred Stock BB+ ba1 BBB- BB
. Minimum Investment
Grade BBB- Baa3 BBB- BBB-
</TABLE>
Bold face indicates securities that meet or exceed minimum investment
grade.
The Company's Authority Financing Notes (Notes), some of which are secured by
letters of credit, are rated by certain of the rating agencies. The ratings on
the Notes secured by letters of credit reflect the ratings of the institutions
issuing the letters of credit, and not that of the Company.
<PAGE> 41
CAPITAL REQUIREMENTS AND CAPITAL PROVIDED
Capital requirements and capital provided for 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
Capital Requirements 1994 1993
-------------------- ------- -------
(In millions of dollars)
<S> <C> <C>
Construction
Electric $ 135 $ 136
Gas 119 125
Common 23 41
-------- -------
Total Construction 277 302
Refundings and Dividends
Long-term debt 635 960
Preferred stock 5 206
Common stock dividends 205 196
Preferred stock dividends 53 57
Redemption costs 2 15
-------- -------
Total Refundings and Dividends 900 1,434
Shoreham post settlement costs 167 207
-------- -------
Total Capital Requirements $ 1,344 $ 1,943
======== =======
Capital Provided
----------------
Cash generated from operations $ 836 $ 582
Long-term debt issued 331 1,090
Common stock issued 118 14
Preferred stock issued - 202
Financing costs (4) (6)
Decrease in cash 63 61
------- ------
Total Capital Provided $ 1,344 $ 1,943
======== =======
</TABLE>
For further information, see the Statement of Cash Flows.
Given the Company's current electric load forecast and the availability of
electricity provided by the Company's generating facilities and by purchases of
power from others, the Company forecasts that it will not need any new
generating facilities until beyond the year 2000. As a result, the Company
does not forecast any need for external financing for the construction of
generating facilities during this period. With respect to financing other
capital additions to plant, the Company estimates that cash generated from
operations will be sufficient to meet any such requirements in 1995.
<PAGE> 42
For 1995, total capital requirements (excluding common stock dividends) are
estimated at $431 million, of which maturing debt is $25 million, additions to
plant are $277 million, preferred stock dividends are $53 million, preferred
stock sinking funds are $5 million and Shoreham post settlement costs are $71
million, including $58 million for payments in lieu of taxes.
RATE MATTERS
Electric
In conjunction with the 1989 Settlement, the PSC agreed to the recognition of a
regulatory asset known as the Financial Resource Asset (FRA). The FRA consists
of two components, the Base Financial Component (BFC) and the RMC, discussed in
Note 1 of Notes to Financial Statements. The Rate Moderation Agreement (RMA),
one of the constituent documents of the 1989 Settlement, provides for the full
recovery of the FRA.
The BFC was granted rate base treatment under the terms of the RMA and is
included in the Company's revenue requirements through an amortization included
in rates over forty years on a straight-line basis that began July 1, 1989.
The RMC had provided the Company with a substantial amount of non-cash earnings
since the effective date of the 1989 Settlement through December 31, 1992, as
the revenues provided under the RMA were less than the revenues required under
conventional ratemaking. During 1993, however, as revenues provided under the
RMA began to exceed the revenues that would have been provided under
conventional ratemaking, the RMC balance began to decline.
Pursuant to the 1989 Settlement, the Company has received six electric rate
increases as contemplated by the RMA. In November 1991, the PSC approved the
Long Island Lighting Company Ratemaking and Performance Plan (LRPP) which
provided annual electric rate increases of 4.15%, 4.1% and 4.0% effective
December 1, 1991, 1992 and 1993, respectively. The LRPP provided for an
allowed return on common equity from electric operations of 11.6% for each of
the three rate years.
The LRPP was designed to be consistent with the RMA's long-term goals. One
principal objective of the LRPP is to reassign risk so that the Company assumes
the responsibility for risks within the control of management, whereas risks
largely beyond the control of management would be assumed by the ratepayers.
One of the major components of the LRPP provides for a revenue reconciliation
mechanism that eliminates the impact on earnings of experiencing electric sales
that are above or below the LRPP forecast by providing a fixed annual net
margin level (defined as sales revenues, net of fuel and gross receipts taxes)
that the Company receives under the LRPP.
<PAGE> 43
The LRPP allows the Company to earn for each rate year up to 60 additional
basis points, or forfeit up to 38 basis points, of the allowed return on common
equity as a result of the Company's performance within certain incentive and/or
penalty programs. These programs consist of a customer service performance
plan, a demand side management (DSM) program, a time-of-use program, a partial
pass through fuel cost incentive plan, and effective December 1, 1993, an
electric transmission and distribution reliability plan. Based upon the
Company's performance within these programs, the Company earned a total of 50
and 49 basis points, or approximately $9.2 million, net of tax effects, for
each of the rate years ended November 30, 1994, and 1993. For the rate year
ended November 30, 1992, the Company earned approximately $4.3 million, net of
tax effects, for its performance in these programs.
The LRPP contains a mechanism whereby earnings in excess of the allowed return
on common equity of 11.6%, excluding the impacts of the various incentive
and/or penalty programs, are shared equally between ratepayers and shareowners.
The Company earned $8.9 million and $21.4 million, net of tax effects, for the
rate years ended November 30, 1993 and 1992, respectively, in excess of its
allowed return on common equity which was shared equally between ratepayers (by
a reduction to the RMC) and shareowners. For the rate year ended November 30,
1994, the Company did not earn in excess of its allowed return on common
equity.
In December 1993, the Company filed a three year Electric Rate Plan with the
PSC for the period beginning December 1, 1994 that minimizes future electric
rate increases while retaining consistency with the RMA's objective of the
restoration of the Company's financial health. The Electric Rate Plan requests
an allowed return on common equity of 11.0%, and provides for base rates to be
frozen in years one and two and an overall rate increase of 4.3% in the third
year. Although base electric rates would be frozen during the first two years
of the Electric Rate Plan, annual rate increases of approximately 1% are
expected to result from the operation of the Company's fuel cost adjustment
(FCA) clause. The FCA captures, among other things, amounts to be recovered
from or refunded to ratepayers in excess of $15 million, which result from the
reconciliation of revenues, certain expenses and earned performance incentive
components, under the LRPP, discussed in Note 3 of Notes to Financial
Statements.
The Company's Electric Rate Plan reflects four underlying objectives: (i) to
limit the balance of the RMC during the three year period to no more than its
1992 peak balance of $652 million; (ii) to recover the RMC within the time
frame established in the 1989 Settlement; (iii) to minimize, beginning in the
third year of the Electric Rate Plan, the final three rate increases
contemplated in the 1989 Settlement that follow the two
<PAGE> 44
year rate freeze period; and (iv) to continue the Company's gradual return to
financial health.
The Electric Rate Plan provides for, with some modifications, the continuation
of the LRPP revenue and expense reconciliations and performance incentives.
The Electric Rate Plan includes the annual reconciliation of certain expenses
for property taxes, interest costs, DSM costs and the deferral and amortization
of certain costs for enhanced reliability. The Company would be allowed to
earn for each of the three rate years under the Electric Rate Plan up to 50
additional basis points, excluding incentives under the DSM program, or forfeit
up to 47 basis points of the allowed return on common equity of 11.0% as a
result of the Company's performance within certain performance programs. These
programs consist of a customer service program, a partial pass through fuel
cost incentive plan, a DSM program and an electric transmission and
distribution reliability plan.
The Company's Electric Rate Plan provides for lower annual electric rate
increases than originally anticipated under the 1989 Settlement. However, as a
result of changes in certain assumptions upon which the RMA was based, their
impact on the RMC and the Company's plans to reduce DSM, operations and
maintenance and capital expenditures, the Company has determined that the
overall objectives of the RMA can be met under the Electric Rate Plan. As a
result of lower than originally anticipated inflation, interest costs, property
taxes, fuel costs and return on common equity allowed by the PSC, the RMC,
which originally had been anticipated to peak at $1.2 billion in 1994, peaked
at $652 million in 1992. With the exception of a projected increase in 1995
and 1996, which is not now anticipated to cause the RMC to increase above its
$652 million peak, the RMC is expected to decline until it is fully amortized.
Under the Electric Rate Plan, the recovery of the RMC would be extended, if
necessary, for an additional period of not more than three years beyond the
approximate ten year period envisioned in the RMA. The actual length of the
RMC extension will depend upon the extent to which the assumptions underlying
the Electric Rate Plan materialize. The Company's current projections indicate
that the RMC will be recovered in eleven years.
The Staff of the PSC (Staff) and other intervening parties filed testimony in
response to the Company's Electric Rate Plan. Staff concurs with the Company's
proposal for an 11.0% return on common equity in each of the three years, and
has reaffirmed its commitment to the principals of the RMA, including the full
recovery of the RMC within the time frame established by the RMA. However,
Staff has recommended an overall zero percent rate increase for the first two
years, contrasted with the Company's proposal for a base rate freeze with FCA
adjustments of approximately 1% in years one and two, as described above.
Staff
<PAGE> 45
did not make a recommendation for the level of rate relief in the third year.
In September 1994, three ALJs of the PSC issued a recommended decision to the
PSC with respect to the Company's Electric Rate Plan. The ALJs agreed with the
Company's proposed 11.0% return on common equity and its proposal to freeze
base electric rates for the first rate year. While no explicit recommendation
was made concerning the second year, the recommended decision implied that base
rates could remain frozen for the second rate year as well.
With respect to the third rate year beginning December 1, 1996, the ALJs
determined that it was not appropriate for them to issue a recommendation
since, in their opinion, the Company's revenue requirements for the third rate
year could not be precisely determined at this time. Alternatively, the ALJs
encouraged the Company and other parties in the proceeding to negotiate a
settlement concerning any rate increase for the third rate year.
The PSC had been expected to issue a final order on the Company's Electric Rate
Plan before November 29, 1994, the date that the statutory suspension period
was scheduled to terminate. However, in order to accommodate further
settlement negotiations in the proceeding, the Company has requested extensions
through April 1995, which were granted by the PSC. The Company's offers to
extend the suspension period were conditioned upon the continuation of the
current LRPP rate mechanisms. Although the ultimate outcome of the Electric
Rate Plan cannot be predicted, the Company expects that any PSC order will be
consistent with the provisions of the RMA respecting the recovery of the FRA
and other 1989 Settlement deferred charges.
Gas
In December 1993, the PSC approved a three year gas rate settlement, between
the Company and the Staff of the PSC. The gas rate settlement provides that
the Company receive, for each of the rate years beginning December 1, 1993,
1994 and 1995, annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively.
In the determination of the revenue requirements for the gas rate settlement,
an allowed return on common equity of 10.1% was used. The gas rate decision
provides that earnings in excess of a 10.6% return on common equity in any of
the three rate years covered by the settlement be shared equally between the
Company's firm gas customers and its shareowners. For the rate year ended
November 30, 1994, the Company earned $9.2 million, net of tax effects, in
excess of the 10.6% return on common equity. The firm gas customers' portion
of these excess earnings amounting to $4.6 million, net of tax effects, has
been deferred until its final disposition is determined by the PSC.
<PAGE> 46
ENVIRONMENT
During 1994, the Company spent approximately $6.4 million in order to comply
with the 1990 amendments to the Federal Clean Air Act (Act). These
expenditures were necessary to meet continuous emissions monitoring
requirements and Phase I nitrogen oxide (Nox) reduction requirements under the
Act.
The Company expects that it will have to expend approximately $1 million in
1995 to meet continuous emission monitoring requirements and to meet Phase I
Nox reduction requirements. In order to generate 210 tons of NOx reduction
credits already under contract for sale to a third party, the Company
anticipates spending $2.5 million in 1995 and $1.9 million in 1996 for earlier
than required Nox reduction systems. Subject to requirements that are expected
to be promulgated in forthcoming regulations, the Company estimates that it may
be required to spend an additional $80 million (net of Nox credit sales) by
2003 to meet Phase II and Phase III NOx reduction requirements. In an effort
to minimize costs associated with anticipated NOx reduction requirements, the
Company is engaged in a $7 million research and development project along with
several co-funding organizations to demonstrate an innovative NOx reduction
technology at its E.F. Barrett Power Station. The Company is committed to
fund $3.6 million of the project costs. Through 1994, approximately $5 million
has been expended by all of the co-funders. It is anticipated that the
remaining $2 million will be spent in 1995. In addition, the Company estimates
that it may be required to spend approximately $24 million by 1999 to meet
potential requirements for the control of hazardous air pollutants from power
plants. The Company believes that all of the above mentioned costs will be
recoverable through rates.
The New York State Department of Environmental Conservation has indicated to
New York State utilities that it may require all such utilities to investigate
and, where necessary, remediate their former manufactured gas plant (MGP)
sites. The Company is the owner of six pieces of property on which the Company
or certain of its predecessor companies produced manufactured gas. Although
the exact amount of the Company's clean-up costs cannot yet be determined,
based on the findings of investigations at two of these six sites, preliminary
estimates indicate that it will cost approximately $35 million to clean-up all
of these sites over the next five to ten years. Accordingly, the Company has
recorded a $35 million liability and a corresponding regulatory asset to
reflect its belief that the PSC will provide for the future recovery of these
costs through rates as it has for other New York State utilities. The Company
has notified its former and current insurance carriers that it seeks to recover
from them certain of these clean-up costs. However, the Company is unable to
predict the amount of insurance recovery, if any, that it may obtain.
<PAGE> 47
The Company has been notified by the Environmental Protection Agency (EPA) that
it is one of many potentially responsible parties (PRPs) that may be liable for
the remediation of three contaminated licensed treatment, storage and disposal
sites. At one site, located in Philadelphia, Pennsylvania, and operated by
Metal Bank of America, the Company and nine other PRPs, all of which are public
utilities, have completed a Remedial Investigation and Feasibility Study which
is currently being reviewed by the EPA. The level of remediation required will
be determined when the EPA issues its decision, currently expected in May 1995.
The Company currently anticipates that the total cost to remediate this site
will be between $14 million and $30 million. The Company has recorded a
liability of $1.1 million representing its estimated share of the cost to
remediate this site. The Company believes that any cost incurred to remediate
this site will be recoverable through rates.
With respect to the other two sites, which are located in Kansas City, Kansas
and Kansas City, Missouri, the Company is investigating allegations that it had
previously stored or made agreements for the disposal of polychlorinated
biphenyls (PCBs) or items containing PCBs at these sites. The Company is
currently unable to determine its share of the cost to remediate these sites or
the impact, if any, on the Company's financial position. The Company believes
that any cost incurred to remediate these sites will be recoverable through
rates.
NYPA AND LIPA PROPOSAL
At the request of the then Governor of the State of New York, on October 13,
1994 the chief executives of the New York Power Authority (NYPA) and the Long
Island Power Authority (LIPA) invited the Company to enter into negotiations
with them regarding a proposal to convert the Company into a public power
utility. Under the proposal, the two state authorities contemplated a
business combination in which holders of the Company's common stock would
receive $21.50 in cash for each outstanding share of the Company's common
stock. NYPA and LIPA indicated that the completion of this transaction would
be subject to, among other things, the availability of tax-exempt financing
sufficient to complete the transaction and the verification by NYPA and LIPA
that the transaction would result in rate reductions in excess of 10%. The
Company's Board of Directors has authorized the Company to enter into
discussions with NYPA and LIPA to explore the proposal in greater detail, but
no such discussions have been held.
The new Governor of the State of New York had empaneled a task force
to study the takeover proposal. While the task force did not make its
recommendation public, published reports in local newspapers indicate that the
task force recommended to reject the proposal.
<PAGE> 48
COMPETITIVE ENVIRONMENT
Significant changes are taking place in the business and regulatory environment
in which electric utilities operate. In response, the Company, like utilities
across the nation, is actively involved with federal and State agencies in
evaluating what type of competition would best serve both customers and
investors. The Company has also undertaken a review of its current operations,
seeking to shape those operations to best meet the challenges of a competitive
environment. As federal legislators and regulators continue pursuing a policy
of evaluating competition in the electric utility industry, state regulators
are addressing the many complex and politically sensitive issues which will
affect the cost and reliability of service to customers in their jurisdictions.
The focus on electric competition has also prompted municipalities, school
districts and certain other customers to seek permission to buy energy
elsewhere.
The Electric Industry - Federal Regulatory Issues
As a result of Congress' passage of the Public Utility Regulatory Policies Act
of 1978 (PURPA) and the National Energy Policy Act of 1992 (NEPA), the once
monopolistic electric utility industry now faces competition.
PURPA's goal was to reduce the United States' dependence on foreign oil,
encourage energy conservation and promote diversification of fuel supply.
Accordingly, PURPA provided for the development of a new class of electric
generators which rely on either cogeneration technology or alternate fuels.
The utilities are obligated under PURPA to purchase the electric output of
certain of these new generators, which are known as qualified facilities (QFs).
NEPA sought to increase economic efficiency in the creation and distribution of
power by relaxing restrictions on the entry of new competitors to the wholesale
electric power market (i.e., sales to an entity for resale to the ultimate
consumer). NEPA does so by creating exempt wholesale generators that can sell
power in wholesale markets without the regulatory constraints placed on
generators such as the Company. NEPA also expanded the Federal Energy
Regulatory Commission (FERC)'s authority to grant access to utility
transmission systems to all parties who seek wholesale wheeling for wholesale
competition. Significant issues associated with the removal of wholesale
transmission system access restrictions have yet to be resolved and the
potential impact on the Company's financial position cannot yet be determined.
FERC is in the process of setting policy which will largely
<PAGE> 49
determine how wholesale competition will be implemented. FERC has recently
declared that utilities must provide wholesale wheeling to others that is
comparable to the service utilities provide themselves. The policy will be
tested and further defined in individual proceedings. In addition, FERC has
issued policy statements concerning regional transmission groups, transmission
information requirements and "good faith" requests for service and transmission
pricing. FERC is also initiating proceedings to address issues relating to
stranded assets and power pooling. Utilities, including the Company, and other
interested parties are actively involved in these proceedings.
Major issues are arising as the industry and government contemplate the move
toward a more market-driven environment. These issues include: the impact of
competition on customers who are unable to or who have chosen not to avail
themselves of competition options; the ability of utility investors to continue
to receive a return of and a reasonable return on their investments; the effect
on service quality and reliability; comparability of service; the parameters of
regulatory jurisdiction; the relative efficiency of competitors; the effects of
mergers and the recoverability of transition costs and of assets that may
become impaired.
The Electric Industry - New York State Regulatory Issues
The PSC has instituted a number of cases which will determine the boundaries
within which power providers can compete in New York.
In 1994, the PSC completed the first phase of a competitive opportunities
proceeding, issuing guidelines that allow New York utilities, at their option,
to negotiate discounted rates with customers who otherwise would purchase
electricity elsewhere. Any net revenue lost through these negotiations will be
shared between ratepayers and shareowners, with percentages to be determined in
rate cases. With respect to the Company, the Commission has ruled that the
Company's shareowners must bear 30% of any "discount" negotiated by the Company
in order to retain customers. While this percentage is comparable to that
required of other utilities, the Company believes the percentage should be
significantly lower due to the Company's unique financial structure and,
therefore, has appealed the PSC's decision.
The PSC has recently begun a second phase of this proceeding in which it will
develop principles to guide the transition to a more competitive environment,
explore how to improve the wholesale electric market and determine the role
regulation will play. The issues to be reviewed include: wholesale
competition with or without a spin-off of generation assets; retail
competition; planning and reliability; customer impacts; financial and legal
considerations; and affordability of electric
<PAGE> 50
service to all customers. The PSC will also address the critical issue of
whether utilities will be required to write- off assets in order to offer more
competitive prices.
In addition, the State Energy Planning Board has released the 1994 State Energy
Plan (SEP) which calls for the development of a fully competitive wholesale
generation market within five years. While continuing to caution that full
retail competition may not be in the best interests of the State, the SEP
threatens that retail competition should be considered sooner "in the absence
of utility cooperation" in the development of a fully competitive wholesale
market.
The Company's Service Territory
The changing utility regulatory environment has affected the Company in a
number of ways. For example, PURPA's encouragement of the non-utility
generator (NUG) industry has negatively impacted the Company. The Company
estimates that in 1994, sales lost to NUGs totaled 237 gigawatt-hours (Gwh)
representing a loss in revenues net of fuel (net revenues) of approximately $24
million, or approximately 1.1% of the Company's 1994 net revenues.
Additionally, as mentioned above, the Company is required to purchase all the
power offered by QFs. As of December 31, 1994, QFs were selling approximately
203 megawatts (MW) of power to the Company. The Company estimates that, in
1994, purchases from QFs required by federal and State law cost the Company $53
million more than it would have cost had the Company generated this power. The
Company has also contracted, beginning in early 1995, to purchase all excess
power from the 40 MW Stony Brook project located at the State University of New
York at Stony Brook, New York.
QFs have the choice of pricing sales to the Company at either (i) the PSC's
published estimates of the Company's long run avoided costs (LRAC) or (ii) the
Company's tariff rates, which are modified from time to time, reflecting the
Company's actual avoided costs. Additionally, until repealed in 1992, New York
State law set a minimum price of six cents per kilowatt-hour (kWh) for utility
purchases of power from certain categories of QFs, considerably above the
Company's avoided cost. The six cent minimum now only applies to contracts
entered into before June 1992. The Company believes that the repeal of the six
cent law, coupled with recent PSC updates which resulted in lower LRAC
estimates, has significantly reduced the economic benefits to QFs seeking to
sell power to the Company.
After the anticipated loss of the Stony Brook load, estimated to be
approximately 190 Gwhs annually, or a net revenue loss of
<PAGE> 51
approximately $13 million, the Company expects that electric load losses due to
NUGs will stabilize. The Company believes that a number of factors, including
customer load characteristics such as a lack of a significant industrial base
and related large thermal load, will mitigate load loss and thereby make
cogeneration economically unattractive.
The Company has also experienced a revenue loss as a result of its policy of
voluntarily providing wheeling of NYPA power for economic development. The
Company estimates that NYPA power has displaced approximately 400 Gwh of annual
energy sales. The net revenue loss associated with this amount of sales is
approximately $28 million or 1.4% of the Company's 1994 net revenues.
Currently, the potential loss of additional load is limited by conditions in
the Company's transmission agreements with NYPA.
Aside from NUGs, a number of customer groups are seeking to hasten
consideration and implementation of full retail competition. For example, an
energy consultant has petitioned the PSC, seeking alternate sources of power
for Long Island school districts. The County of Nassau has also petitioned the
PSC to authorize retail wheeling for all classes of electric customers in the
county. In addition, several towns on Long Island are investigating
municipalization. Municipalization, in which customers form a
government-sponsored electric supply company, is one form of competition likely
to increase as a result of NEPA. The Town of Southampton and several other
towns in the Company's service territory are considering the formation of a
municipally owned and operated electric authority to replace the services
currently provided by the Company. Suffolk County has also approached FERC to
determine whether it can qualify as a municipal power authority in order to
purchase cheaper electricity from non-Company sources. The Company's
geographic location and the limited electrical interconnections to Long Island
serve to limit the accessibility of its transmission grid to potential
competitors from off the system.
The matters discussed above involve substantial social, economic, legal,
environmental and financial issues. The Company is opposed to any proposal
that merely shifts costs from one group of ratepayers to another, that fails to
enhance the provision of least-cost, efficiently-generated electricity or that
fails to provide the Company's shareowners with an adequate return on and
recovery of their investment. The Company is unable to predict what action, if
any, the PSC or FERC may take regarding any of these matters, or the impact on
the Company's financial condition if some or all of these matters are approved
or implemented by the appropriate regulatory authority.
<PAGE> 52
CONSERVATION SERVICES
In 1993, the Company filed a modified DSM plan with the PSC to support the
objectives of the Company's Electric Rate Plan filed in December 1993. Under
this modified plan, the Company proposed a substantially lower level of
spending than that initially approved for 1994. The PSC did not approve the
Company's proposed plan, but instead issued a ruling in July 1994, which
dictated energy savings targets that were greater than those originally
proposed by the Company. Specifically, the targets for the Company's DSM
programs amounted to a 161.3 MW reduction in coincident peak demand and an
annualized energy savings of 702.6 Gwh by December 31, 1994. The Company was
successful in its DSM efforts.
In 1995, the Company intends to continue to carefully manage DSM expenditures
and more fully transform DSM to a strategic marketing tool which can be used to
position the Company for the future. In these efforts, the Company will act to
further increase the emphasis on education and information programs and further
decrease its emphasis on utility rebate payments. In addition, financing
programs and other cost sharing arrangements will be stressed as a means to
reduce DSM program costs. Finally, DSM programs will be redesigned to enhance
the Company's competitive position through the offering of programs and
services to the Company's customers which promote the efficient use of
electricity, including energy-efficient load growth.
<PAGE> 53
RESULTS OF OPERATIONS
EARNINGS
Summary results of earnings for the years 1994, 1993 and 1992 were as follows:
<TABLE>
<CAPTION>
(In millions of dollars and shares except earnings per share)
-------------------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Net income $ 301.8 $ 296.6 $ 302.0
Preferred stock dividend
requirements 53.0 56.1 64.0
-------------------------------------------------------------------------------------------------------------------
Earnings for common stock $ 248.8 $ 240.5 $ 238.0
===================================================================================================================
Average common shares
outstanding 115.9 112.1 111.4
Earnings per common share $ 2.15 $ 2.15 $ 2.14
-------------------------------------------------------------------------------------------------------------------
</TABLE>
The Company achieved the same level of earnings per common share in 1994 as in
1993 despite an increase in the average number of common shares outstanding.
This was primarily the result of the Company's cost containment program and the
impact on earnings of positive cash flow from operations, which allowed the
Company to use cash balances to satisfy maturing debt.
The electric business achieved a higher level of earnings in 1994 as compared
to 1993, offset by a decrease in the gas business earnings. The decrease in
gas business earnings in 1994 was the result of several factors including: (i)
a lower allowed return on common equity; (ii) a write-off in 1994, of
previously deferred storm costs and (iii) a provision in the Company's gas rate
structure which became effective December 1, 1993, which requires earnings in
excess of a 10.6% return on common equity be shared equally between the
Company's firm gas customers and its shareowners.
The earnings in the electric business were lower in 1993 when compared to 1992
due primarily to the expensing of previously deferred storm costs, lower
interest rates associated with short-term investments and certain regulatory
adjustments recorded in accordance with the Company's electric rate structure.
The lower level of earnings in the electric business was offset by a
significant increase in earnings in the gas business, resulting from the
continuation of the Company's gas expansion program.
<PAGE> 54
REVENUES
Total revenues, including revenues from recovery of fuel costs, were $3.1
billion, $2.9 billion and $2.6 billion for the years 1994, 1993 and 1992,
respectively.
Electric Revenues
Revenues from the Company's electric operations for the years 1994, 1993 and
1992 were $2.5 billion, $2.4 billion and $2.2 billion, respectively.
In November 1991, the PSC approved the LRPP, which provided the Company with
annual electric rate increases of 4.15%, 4.1% and 4.0% for the rate years
beginning December 1, 1991, 1992 and 1993, respectively. These rate increases
provided $69 million of additional revenues in 1994 as compared to 1993, and
$75 million of additional revenues in 1993 as compared to 1992.
The LRPP contains several regulatory mechanisms that impact the level of
revenues, but have no impact on earnings. The Company's current electric rate
structure provides for a revenue reconciliation, which eliminates the impact on
earnings of experiencing sales that are above or below the levels reflected in
rates. As a result of lower than adjudicated electric sales, the Company
recorded non-cash income, which is included in "Other Regulatory Amortization,"
of $50.9 million, $43.5 million and $78.5 million in 1994, 1993 and 1992,
respectively.
Under the LRPP, base fuel costs collected in rates in excess of actual fuel
costs are applied as a reduction to the RMC. The Company applied $83.9
million, $37.5 million and $22.9 million of amounts collected in excess of
actual fuel costs as a reduction to the RMC for the rate years ended November
30, 1994, 1993 and 1992, respectively.
Under the LRPP, deferred balances associated with the reconciliation of
revenue, expenses and performance incentives in excess of $15 million per annum
are returned to or recovered from the ratepayers through the FCA. During the
period August 1993 through July 1994, the Company collected, through the FCA,
approximately $2.7 million per month for an aggregate of $30.2 million related
to the deferred balances for the rate year ended November 30, 1992. Since
August 1994, the PSC has allowed the Company to continue the collection of a
like amount through the FCA which will continue through the end of the
suspension period. These additional revenues, amounting to approximately $13.4
million through December 1994, were recorded as a reduction to the RMC. The
Company is awaiting PSC approval for the recovery of $48.1 million and $63.6
million for the 1993 and 1994 rate year deferrals. For a further discussion of
the LRPP regulatory mechanisms, see Note 3 of Notes to Financial Statements.
<PAGE> 55
Total electric sales volumes in millions of kWh were 16,382 in 1994, 16,128 in
1993 and 15,667 in 1992. The increase in sales in 1994 and 1993 was primarily
the result of warmer than normal weather experienced in the summer months. The
increases in sales were partially offset by sales lost to non-utility
generators and power displaced by NYPA, discussed above under the heading
"Competitive Environment." In 1994 and 1993, the composition of system sales
was 45% residential and 52% commercial/industrial. In 1992, the composition
was 44% residential and 53% commercial/industrial.
Gas Revenues
Revenues from the Company's gas operations for the years 1994, 1993 and 1992
were $586 million, $529 million and $427 million, respectively.
In December 1993, the PSC approved a three year gas rate settlement between the
Company and the Staff of the PSC. The gas rate settlement provides the Company
with annual gas rate increases of 4.7%, 3.8% and 2.8% for the rate years
beginning December 1, 1993, 1994 and 1995, respectively. The Company had also
received an annual gas rate increase of 7.1% effective December 1, 1992. These
rate increases provided $25 million in additional revenues for 1994 as compared
to 1993, and $35 million in additional revenues for 1993 as compared to 1992.
Total gas firm sales volumes in thousands of dekatherms (Mdth) were 58,889 in
1994, 59,183 in 1993 and 56,292 in 1992. In 1994, firm sales volumes decreased
when compared to 1993 primarily due to warmer weather experienced during the
1994 heating season as compared to 1993, partially offset by the addition of
approximately 8,500 new gas space heating customers resulting from the
continuation of the Company's gas expansion program. The number of monthly
average space heating customers was 273,633, 266,665 and 259,500 for the years
1994, 1993 and 1992, respectively. The Company has a weather normalization
clause which mitigates the impact on revenues of experiencing weather that is
warmer or colder than the "normal" value used for projecting sales. In 1993,
firm sales volumes increased as a result of colder weather experienced during
the 1993 heating season as compared to 1992 combined with additional gas space
heating customers resulting from the Company's gas expansion program.
The Company began selling gas off-system in 1993. Off-system gas sales
revenues were $26 million and $8 million on volumes of 7,232 Mdth and 2,894
Mdth, for the years ended December 31, 1994 and 1993, respectively. Any
profits realized from off-system sales are allocated 85% to ratepayers and 15%
to shareowners.
Recoveries of gas fuel expenses increased revenues by $33 million and $26
million in 1994 and 1993, respectively. In 1994, the increase in the
recoveries of gas fuel expenses was primarily due to increased billed sales
volumes and higher average gas prices,
<PAGE> 56
when compared to 1993. In 1993, the increase was primarily due to higher
average gas prices, when compared to 1992.
OPERATING EXPENSES
Fuel and Purchased Power
Summary of fuel and purchased power expenses for the years 1994, 1993 and 1992
were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
----------------------------------------------------------------------------------------------------
1994 1993 1992
----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Fuel for Electric Operations
Oil $ 145 $ 180 $ 190
Gas 101 93 79
Nuclear 15 13 11
Purchased power 308 293 280
---------------------------------------------------------------------------------------------------
Total 569 579 560
---------------------------------------------------------------------------------------------------
Gas fuel 279 249 182
---------------------------------------------------------------------------------------------------
Total $ 848 $ 828 $ 742
===================================================================================================
</TABLE>
Despite an increase in electric sales volumes during 1994 and rising fuel oil
prices, fuel for electric operations decreased primarily as a result of the
Company's efforts to reduce its dependency on oil as the primary fuel for
electric generation. The Company, over the past several years, has refitted
several generating facilities to enable them to burn either oil or natural gas,
depending upon the relative cost of each commodity at any given time.
In addition to the increased use of natural gas, the Company has reduced oil
consumption by using energy generated at Nine Mile Point Nuclear Power Station,
Unit 2 (NMP2) and by purchasing power from other systems, cogenerators and
independent power producers. The total barrels of oil consumed for electric
operations was 7.5 million, 9.7 million and 10.7 million, for the years 1994,
1993 and 1992, respectively.
Cogenerators and independent power producers provided approximately 9% of the
Company's system requirements in 1994, 1993 and 1992. The increase in
purchased power expenses in 1994 is primarily attributable to purchases from
the 136 MW facility in Holtsville, New York, owned by NYPA, constructed for the
benefit of the Company.
<PAGE> 57
Summary of electric fuel and purchased power mix for the years 1994, 1993 and
1992 were as follows:
<TABLE>
<CAPTION>
(Percent of system energy requirements)
--------------------------------------------------------------------------------------------------
1994 1993 1992
--------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Oil 25% 33% 37%
Gas 23 19 19
Nuclear 9 7 6
Purchased power 43 41 38
--------------------------------------------------------------------------------------------------
Total 100% 100% 100%
==================================================================================================
</TABLE>
Gas fuel expenses for gas operations increased by $30 million and $67 million
in 1994 and 1993, respectively. The increase in 1994 is primarily attributable
to the additional fuel costs associated with the Company's off-system gas
sales, while the increase for 1993 was primarily due to significantly higher
gas prices and increased volumes, as a result of colder than normal weather
during the heating season.
Operations and Maintenance Expenses
Operations and maintenance (O&M) expenses, excluding fuel and purchased power,
were $541 million, $522 million and $498 million, for the years 1994, 1993 and
1992, respectively. The increase in O&M for 1994 was primarily due to the
recognition of previously deferred storm costs associated with gas operations,
an increase in costs associated with the Company's gas expansion program, the
recognition of certain costs which exceeded the Company's insurance recoveries,
an increase in employee benefit costs and the effects of inflation. These
higher O&M expenses were partially offset by the continuation of the Company's
cost containment program. The increase in 1993 was principally due to the
recognition of previously deferred storm costs associated with electric
operations, the recording of higher accruals for uncollectible accounts and
higher transmission and distribution costs for both the electric and gas
businesses.
Rate Moderation Component and Related Carrying Charges
In 1994 and 1993, the Company recorded non-cash charges to income of
approximately $198 million and $89 million, respectively, representing the
amortization of the RMC. In 1992, the Company recorded non-cash income of
approximately $30 million, representing the accretion of the RMC. The Company
accrues a carrying charge on the unamortized balance of the RMC which amounted
to $32 million, $40 million and $43 million for the years 1994, 1993 and 1992,
respectively. For further discussion on the RMC, see Notes 1, 2 and 3 of Notes
to Financial Statements.
<PAGE> 58
Other Regulatory Amortization
In 1994, other regulatory amortization was a non-cash charge to income of $4.3
million, compared to a non-cash credit to income of $18.0 million in 1993. The
change reflects an increase in the amortization of LRPP deferrals, higher
amortization of Shoreham post settlement costs, and a non-cash charge to income
reflecting the operation of the interest deferral mechanism, as defined in the
Company's electric rate structure. These items were partially offset by higher
deferred net margin revenues, discussed above under "Revenues."
In 1993, other regulatory amortization was lower than 1992 as a result of lower
net margin revenues and the amortization of the 1992 rate year LRPP deferrals
which began in August 1993. Partially offsetting these items was the
recognition of additional non-cash credits to income resulting from the
operation of the interest deferral mechanism. For a discussion on the
Company's rate mechanisms, see Note 3 of Notes to Financial Statements.
Operating Taxes
Operating taxes were $407 million, $386 million and $389 million, for the years
1994, 1993 and 1992, respectively. The increase in operating taxes of
approximately $21 million in 1994 when compared to 1993 is primarily
attributable to higher gross receipts taxes, resulting from increased revenues,
higher property taxes, additional payroll taxes and higher dividend taxes.
INTEREST EXPENSE
The reduction in interest expense in 1994 when compared to 1993 is primarily
attributable to lower outstanding debt levels. The Company's strategy is to
apply available cash balances toward the satisfaction of debt whenever
practicable. During 1994, the Company used approximately $200 million of cash
on hand and the proceeds from the issuance of 5.1 million shares of common
stock to help lower debt by approximately $300 million. The lower interest
expense also reflects the satisfaction of $175 million of maturing debt in
November 1993, with cash on hand.
The increase in 1993 when compared to 1992 was attributable to higher debt
levels and the conversion in June 1992 of $400 million of tax-exempt securities
from a weekly variable interest rate to a higher thirty year fixed rate. Also
contributing to the increase, was the issuance in November 1992 of thirty year
fixed rate debentures, the proceeds of which were used to eliminate variable
rate bank debt. The conversion of the tax-exempt securities and refinancing of
bank debt was done in order to take advantage of historically low long-term
interest rates. Partially offsetting this increase in interest expense were
savings realized from the effects of the Company's aggressive refinancing of
higher-cost debt in 1993.
<PAGE> 59
ACCOUNTING PRONOUNCEMENTS
Effective January 1, 1993, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. Under a PSC order issued in
response to SFAS No. 106, the Company defers as a regulatory asset the
difference between postretirement benefits expense recorded for accounting
purposes in accordance with SFAS No. 106 and postretirement expenses reflected
in rates. The PSC order also requires that the ongoing annual postretirement
benefit expense be phased into and fully recovered in rates within a five year
period, with the accumulated postretirement benefit obligation being recovered
in rates over a twenty year period. The adoption of SFAS No. 106 had no impact
on net income for the years ended December 31, 1994 and 1993. For a further
discussion of SFAS No. 106, see Notes 1 and 8 of Notes to Financial Statements.
Effective January 1, 1993, the Company adopted SFAS No. 109, Accounting for
Income Taxes. SFAS No. 109 requires utilities to establish deferred tax assets
and liabilities for, among other things, transactions that were not recognized
under Accounting Principles Board Opinion No. 11, Accounting for Income Taxes.
SFAS No. 109 provides that regulatory assets and liabilities may be established
for these specific SFAS No. 109 created deferred tax assets and liabilities
providing that the regulator provides for the future recovery or return of
these amounts through rates. As a result of a PSC order issued in January
1993, providing for the recovery or return of such amounts, the Company has
recorded regulatory tax assets and liabilities to offset the effect of
accumulated deferred tax liabilities and assets created as a result of adopting
SFAS No. 109. The adoption of SFAS No. 109 had no impact on net income for the
years ended December 31, 1994 and 1993. For a further discussion of SFAS No.
109, see Notes 1 and 9 of Notes to Financial Statements.
SELECTED FINANCIAL DATA
Additional information respecting revenues, expenses, electric and gas
operating income and operations data and balance sheet information for the last
five years is provided in Tables 1 through 11 of Item 6, Selected Financial
Data. Information with regard to the Company's business segments for the last
three years is provided in Note 11 of Notes to Financial Statements.
<PAGE> 60
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
<CAPTION>
Page
----
<S> <C>
Statement of Income for each of the three years
in the period ended December 31, 1994. 56
Balance Sheet at December 31, 1994 and 1993 57
Statement of Retained Earnings for each of the three
years in the period ended December 31, 1994 59
Statement of Capitalization at December 31, 1994 and 1993 59
Statement of Cash Flows for each of the three years
in the period ended December 31, 1994 61
Notes to Financial Statements 62
Report of Ernst & Young LLP, Independent Auditors. 91
Financial Statements Schedules 92
The following Financial Statement Schedules are
submitted as part of Item 14, "Exhibits, Financial
Statement Schedules and Reports on Form 8-K," of
this annual Report. (All other Financial Statement
Schedules are omitted because they are not applicable,
or the required information appears in the Financial
Statements or the Notes thereto.)
Valuation of Qualifying Accounts (Schedule II) 101
</TABLE>
<PAGE> 61
Financial Statements
<TABLE>
<CAPTION>
Statement of Income (In thousands of dollars except per share amount)
--------------------------------------------------------------------------------------------
For year ended December 31 1994 1993 1992
--------------------------------------------------------------------------------------------
<S> <C> <C>
Revenues
Electric $ 2,481,637 $ 2,352,109 $ 2,194,632
Gas 585,670 528,886 427,207
--------------------------------------------------------------------------------------------
Total Revenues 3,067,307 2,880,995 2,621,839
--------------------------------------------------------------------------------------------
Operating Expenses
Operations - fuel and purchased power 847,986 827,591 741,784
Operations - other 406,014 387,808 372,209
Maintenance 134,640 133,852 125,736
Depreciation and amortization 130,664 122,471 119,137
Base financial component amortization 100,971 100,971 100,971
Rate moderation component amortization 197,656 88,667 (30,444)
Regulatory liability component amortization (79,359) (79,359) (79,359)
1989 Settlement credits amortization (9,214) (9,214) (9,214)
Other regulatory amortization 4,328 (18,044) (22,072)
Operating taxes 406,895 385,847 388,988
Federal income tax - current 10,784 6,324 530
Federal income tax - deferred and other 170,997 178,530 172,468
--------------------------------------------------------------------------------------------
Total Operating Expenses 2,322,362 2,125,444 1,880,734
--------------------------------------------------------------------------------------------
Operating Income 744,945 755,551 741,105
--------------------------------------------------------------------------------------------
Other Income and (Deductions)
Allowance for other funds used during construction 2,716 2,473 4,725
Rate moderation component carrying charges 32,321 40,004 42,837
Other income and deductions, net 35,343 38,997 29,273
Class Settlement (22,730) (23,178) (22,541)
Federal income tax - deferred and other 5,069 12,578 12,036
--------------------------------------------------------------------------------------------
Total Other Income and (Deductions) 52,719 70,874 66,330
--------------------------------------------------------------------------------------------
Income Before Interest Charges 797,664 826,425 807,435
--------------------------------------------------------------------------------------------
Interest Charges and (Credits)
Interest on long-term debt 437,751 466,538 450,621
Other interest 62,345 67,534 62,226
Allowance for borrowed funds used
during construction (4,284) (4,210) (7,386)
--------------------------------------------------------------------------------------------
Total Interest Charges and (Credits) 495,812 529,862 505,461
--------------------------------------------------------------------------------------------
Net Income 301,852 296,563 301,974
Preferred stock dividend requirements 53,020 56,108 63,954
--------------------------------------------------------------------------------------------
Earnings for Common Stock $ 248,832 $ 240,455 $ 238,020
--------------------------------------------------------------------------------------------
Average Common Shares Outstanding (000) 115,880 112,057 111,439
--------------------------------------------------------------------------------------------
Earnings per Common Share $ 2.15 $ 2.15 $ 2.14
--------------------------------------------------------------------------------------------
Dividends Declared per Common Share $ 1.78 $ 1.76 $ 1.72
--------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE> 62
<TABLE>
<CAPTION>
Balance Sheet (In thousands of dollars)
---------------------------------------------------------------------------------------------------------------
Assets At December 31 1994 1993
<S> <C> <C>
Utility Plant
Electric $ 3,657,178 $ 3,544,569
Gas 994,742 860,899
Common 232,346 201,418
Construction work in progress 129,824 176,504
Nuclear fuel in process and in reactor 23,251 16,533
---------------------------------------------------------------------------------------------------------------
5,037,341 4,799,923
Less - Accumulated depreciation
and amortization 1,538,995 1,452,366
---------------------------------------------------------------------------------------------------------------
Total Net Utility Plant 3,498,346 3,347,557
---------------------------------------------------------------------------------------------------------------
Regulatory Assets
Base financial component
(less accumulated amortization
of $555,340 and $454,369) 3,483,490 3,584,461
Rate moderation component 463,229 609,827
Shoreham post settlement costs 922,580 777,103
Shoreham nuclear fuel 73,371 75,497
Postretirement benefits other than pensions 412,727 402,921
Regulatory tax asset 1,831,689 1,848,998
Other 354,524 311,832
---------------------------------------------------------------------------------------------------------------
Total Regulatory Assets 7,541,610 7,610,639
---------------------------------------------------------------------------------------------------------------
Nonutility Property and Other Investments 24,043 23,029
---------------------------------------------------------------------------------------------------------------
Current Assets
Cash and cash equivalents 185,451 248,532
Special deposits 27,614 23,439
Customer accounts receivable
(less allowance for doubtful
accounts of $23,365 and $23,889) 245,125 249,074
Other accounts receivable 14,030 12,199
Accrued unbilled revenues 164,379 170,042
Materials and supplies at average cost 74,777 68,882
Fuel oil at average cost 37,723 35,857
Gas in storage at average cost 68,447 75,182
Prepayments and other current assets 33,878 41,652
---------------------------------------------------------------------------------------------------------------
Total Current Assets 851,424 924,859
---------------------------------------------------------------------------------------------------------------
Deferred Charges
Deferred federal income tax 951,766 1,094,088
Unamortized cost of issuing securities 313,207 350,239
Other 36,284 42,705
---------------------------------------------------------------------------------------------------------------
Total Deferred Charges 1,301,257 1,487,032
---------------------------------------------------------------------------------------------------------------
Total Assets $ 13,216,680 $ 13,393,116
===============================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE> 63
Page
<TABLE>
<CAPTION>
(In thousands of dollars)
-------------------------------------------------------------------------------------------------------------------
Capitalization and Liabilities At December 31 1994 1993
<S> <C> <C>
Capitalization
Long-term debt $ 5,162,675 $ 4,887,733
Unamortized discount on debt (17,278) (17,393)
-------------------------------------------------------------------------------------------------------------------
5,145,397 4,870,340
-------------------------------------------------------------------------------------------------------------------
Preferred stock - redemption required 644,350 649,150
Preferred stock - no redemption required 63,957 64,038
-------------------------------------------------------------------------------------------------------------------
Total Preferred Stock 708,307 713,188
-------------------------------------------------------------------------------------------------------------------
Common stock 592,083 561,662
Premium on capital stock 1,101,240 1,010,283
Capital stock expense (52,175) (50,427)
Retained earnings 752,480 711,432
-------------------------------------------------------------------------------------------------------------------
Total Common Shareowners' Equity 2,393,628 2,232,950
-------------------------------------------------------------------------------------------------------------------
Total Capitalization 8,247,332 7,816,478
-------------------------------------------------------------------------------------------------------------------
Regulatory Liabilities
Regulatory liability component 357,117 436,476
1989 Settlement credits 145,868 155,081
Regulatory tax liability 111,218 114,748
Other 143,611 138,612
-------------------------------------------------------------------------------------------------------------------
Total Regulatory Liabilities 757,814 844,917
-------------------------------------------------------------------------------------------------------------------
Current Liabilities
Current maturities of long-term debt 25,000 600,000
Current redemption requirements of preferred stock 4,800 4,800
Accounts payable and accrued expenses 241,775 277,519
Accrued taxes (including federal income
tax of $28,340 and $28,424) 58,133 52,656
Accrued interest 149,929 142,409
Dividends payable 57,367 54,542
Class Settlement 40,000 30,000
Customer deposits 28,474 27,046
-------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 605,478 1,188,972
-------------------------------------------------------------------------------------------------------------------
Deferred Credits
Deferred federal income tax 2,941,793 2,932,029
Class Settlement 147,437 164,942
Other 13,204 12,622
-------------------------------------------------------------------------------------------------------------------
Total Deferred Credits 3,102,434 3,109,593
-------------------------------------------------------------------------------------------------------------------
Operating Reserves
Pensions and other postretirement benefits 453,016 424,442
Claims and damages 50,606 8,714
-------------------------------------------------------------------------------------------------------------------
Total Operating Reserves 503,622 433,156
-------------------------------------------------------------------------------------------------------------------
Commitments and Contingencies - -
-------------------------------------------------------------------------------------------------------------------
Total Capitalization and Liabilities $ 13,216,680 $ 13,393,116
===================================================================================================================
</TABLE>
See Notes to Financial Statements.
<PAGE> 64
<TABLE>
<CAPTION>
Statement of Retained Earnings (In thousands of dollars)
---------------------------------------------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance at January 1 $ 711,432 $ 667,988 $ 620,373
Net income for the year 301,852 296,563 301,974
---------------------------------------------------------------------------------------------------------------------
1,013,284 964,551 922,347
Deductions
Cash dividends declared on common stock 207,794 197,236 191,693
Cash dividends declared on preferred stock 53,046 55,861 62,387
Other adjustments (36) 22 279
---------------------------------------------------------------------------------------------------------------------
Balance at December 31 $ 752,480 $ 711,432 $ 667,988
=====================================================================================================================
</TABLE>
See Notes to Financial Statements.
<TABLE>
<CAPTION>
Statement of Capitalization Shares Outstanding (In thousands of dollas)
---------------------------------------------------------------------------------------------------------------------
At December 31 1994 1993 1994 1993
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Common Shareowners' Equity
Common stock, $5.00 par value 118,416,606 112,332,490 $ 592,083 $ 561,662
Premium on capital stock 1,101,240 1,010,283
Capital stock expense (52,175) (50,427)
Retained earnings 752,480 711,432
---------------------------------------------------------------------------------------------------------------------
Total Common Shareowners' Equity 2,393,628 2,232,950
---------------------------------------------------------------------------------------------------------------------
Preferred Stock - Redemption Required
Par value $100 per share
7.40% Series L 182,000 192,500 18,200 19,250
8.50% Series R 75,000 112,500 7,500 11,250
7.66% Series CC 570,000 570,000 57,000 57,000
Less - Sinking fund requirement 4,800 4,800
---------------------------------------------------------------------------------------------------------------------
77,900 82,700
---------------------------------------------------------------------------------------------------------------------
Par value $25 per share
7.95% Series AA 14,520,000 14,520,000 363,000 363,000
$1.67 Series GG 880,000 880,000 22,000 22,000
$1.95 Series NN 1,554,000 1,554,000 38,850 38,850
7.05% Series QQ 3,464,000 3,464,000 86,600 86,600
6.875% Series UU 2,240,000 2,240,000 56,000 56,000
---------------------------------------------------------------------------------------------------------------------
566,450 566,450
---------------------------------------------------------------------------------------------------------------------
Total Preferred Stock - Redemption Required 644,350 649,150
---------------------------------------------------------------------------------------------------------------------
Preferred Stock - No Redemption Required
Par value $100 per share
5.00% Series B 100,000 100,000 10,000 10,000
4.25% Series D 70,000 70,000 7,000 7,000
4.35% Series E 200,000 200,000 20,000 20,000
4.35% Series F 50,000 50,000 5,000 5,000
5 1/8% Series H 200,000 200,000 20,000 20,000
5 3/4% Series I - Convertible 19,569 20,375 1,957 2,038
---------------------------------------------------------------------------------------------------------------------
Total Preferred Stock - No Redemption Required 63,957 64,038
---------------------------------------------------------------------------------------------------------------------
Total Preferred Stock $ 708,307 $ 713,188
---------------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE> 65
<TABLE>
<CAPTION>
(In thousands of dollars)
------------------------------------------------------------------------------------------------------------
At December 31 Maturity Interest Rate Series 1994 1993
------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
First Mortgage Bonds (excludes Pledged Bonds)
June 1, 1994 4 5/8% N $ - $ 25,000
June 1, 1995 4.55% O 25,000 25,000
March 1, 1996 5 1/4% P 40,000 40,000
April 1, 1997 5 1/2% Q 35,000 35,000
------------------------------------------------------------------------------------------------------------
Total First Mortgage Bonds 100,000 125,000
------------------------------------------------------------------------------------------------------------
General and Refunding Bonds
May 1, 1996 8 3/4% 415,000 415,000
February 15, 1997 8 3/4% 250,000 250,000
April 15, 1998 7 5/8% 100,000 -
May 15, 1999 7.85% 56,000 56,000
April 15, 2004 8 5/8% 185,000 -
May 15, 2006 8.50% 75,000 75,000
July 15, 2008 7.90% 80,000 80,000
May 1, 2021 9 3/4% 415,000 415,000
July 1, 2024 9 5/8% 375,000 375,000
------------------------------------------------------------------------------------------------------------
Total General and Refunding Bonds 1,951,000 1,666,000
------------------------------------------------------------------------------------------------------------
Debentures
June 15, 1994 10.25% - 400,000
November 15, 1994 11.75% - 175,000
June 15, 1999 10.875% - 30,545
July 15, 1999 7.30% 397,000 397,000
January 15, 2000 7.30% 36,000 36,000
July 15, 2001 6.25% 145,000 145,000
March 15, 2003 7.05% 150,000 150,000
March 1, 2004 7.00% 59,000 59,000
June 1, 2005 7.125% 200,000 200,000
March 1, 2007 7.50% 142,000 142,000
June 15, 2019 11.375% - 4,513
July 15, 2019 8.90% 420,000 420,000
November 1, 2022 9.00% 451,000 451,000
March 15, 2023 8.20% 270,000 270,000
------------------------------------------------------------------------------------------------------------
Total Debentures 2,270,000 2,880,058
------------------------------------------------------------------------------------------------------------
Authority Financing Notes
Industrial Development Revenue Bonds
December 1, 2006 7.5% 1976 A,B 2,000 2,000
Pollution Control Revenue Bonds
December 1, 2006 7.5% 1976 A 28,375 28,375
December 1, 2009 7.8% 1979 B 19,100 19,100
October 1, 2012 8 1/4% 1982 17,200 17,200
March 1, 2016 3.0% 1985 A,B 150,000 150,000
Electric Facilities Revenue Bonds
September 1, 2019 7.15% 1989 A,B 100,000 100,000
June 1, 2020 7.15% 1990 A 100,000 100,000
December 1, 2020 7.15% 1991 A 100,000 100,000
February 1, 2022 7.15% 1992 A,B 100,000 100,000
August 1, 2022 6.9% 1992 C,D 100,000 100,000
November 1, 2023 5.45% 1993 A 50,000 50,000
November 1, 2023 4.90% 1993 B 50,000 50,000
October 1, 2024 5.40% 1994 A 50,000 -
------------------------------------------------------------------------------------------------------------
Total Authority Financing Notes 866,675 816,675
------------------------------------------------------------------------------------------------------------
Unamortized Discount on Debt (17,278) (17,393)
------------------------------------------------------------------------------------------------------------
Total 5,170,397 5,470,340
------------------------------------------------------------------------------------------------------------
Less Current Maturities 25,000 600,000
------------------------------------------------------------------------------------------------------------
Total Long-Term Debt 5,145,397 4,870,340
------------------------------------------------------------------------------------------------------------
Total Capitalization $ 8,247,332 $7,816,478
------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE> 66
<TABLE>
<CAPTION>
Statement of Cash Flows (In thousands of dollars)
--------------------------------------------------------------------------------------------------------------
For year ended December 31 1994 1993 1992
--------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Operating Activities
Net Income $ 301,852 $ 296,563 $ 301,974
Adjustments to reconcile net income to net
cash provided by operating activities
Provision for doubtful accounts 19,542 18,555 16,329
Depreciation and amortization 130,664 122,471 119,137
Base financial component amortization 100,971 100,971 100,971
Rate moderation component amortization 197,656 88,667 (30,444)
Regulatory liability component amortization (79,359) (79,359) (79,359)
1989 Settlement credits amortization (9,214) (9,214) (9,214)
Other regulatory amortizations 4,328 (18,044) (22,072)
Rate moderation component carrying charges (32,321) (40,004) (42,837)
Class Settlement 22,730 23,178 22,541
Amortization of cost of issuing and redeeming securities 46,237 52,063 41,204
Federal income tax - deferred and other 165,928 165,952 160,432
Allowance for other funds used during construction (2,716) (2,473) (4,725)
Gas cost adjustment 11,709 (3,499) (24,142)
Other 37,538 15,200 1,035
Changes in operating assets and liabilities
Accounts receivable (17,353) (65,898) (14,275)
Class Settlement (30,235) (25,302) (19,039)
Accrued unbilled revenues 5,663 (26,870) (6,607)
Materials and supplies, fuel oil and gas in storage (1,026) 5,265 (10,933)
Prepayments and other current assets 7,774 (1,250) (5,548)
Accounts payable and accrued expenses (44,598) (8,800) 62,513
Accrued taxes 5,477 (14,869) 7,351
Other (5,498) (11,290) 25,772
--------------------------------------------------------------------------------------------------------------
Net Cash Provided by Operating Activities 835,749 582,013 590,064
--------------------------------------------------------------------------------------------------------------
Investing Activities
Construction and nuclear fuel expenditures (276,954) (302,220) (268,179)
Shoreham post settlement costs (167,367) (207,114) (227,658)
Other (1,349) (934) (1,484)
--------------------------------------------------------------------------------------------------------------
Net Cash Used in Investing Activities (445,670) (510,268) (497,321)
--------------------------------------------------------------------------------------------------------------
Financing Activities
Proceeds from issuance of long-term debt 331,326 1,089,770 1,659,928
Proceeds from sale of common stock 118,108 14,323 5,670
Proceeds from sale of preferred stock 201,709 411,373
Redemption of long-term debt (635,058) (960,000) (1,344,283)
Redemption of preferred stock (4,800) (205,600) (389,428)
Common stock dividends paid (205,086) (195,794) (190,477)
Preferred stock dividends paid (52,927) (56,727) (69,923)
Cost of issuing and redeeming securities (5,871) (17,036) (166,066)
Other 1,148 (3,343) 1,850
--------------------------------------------------------------------------------------------------------------
Net Cash Used in Financing Activities (453,160) (132,698) (81,356)
--------------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and Cash Equivalents $ (63,081) $ (60,953) $ 11,387
==============================================================================================================
Cash and cash equivalents at January 1 $ 248,532 $ 309,485 $ 298,098
Net (decrease) increase in cash and cash equivalents (63,081) (60,953) 11,387
--------------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at December 31 $ 185,451 $ 248,532 $ 309,485
--------------------------------------------------------------------------------------------------------------
Interest paid, before reduction for the allowance
for borrowed funds used during constuction $ 446,340 $ 469,978 $ 424,842
Federal income tax - paid $ 10,780 $ 6,000 $ 2,100
Federal income tax - refunded $ -- $ 1,000 $ 1,566
--------------------------------------------------------------------------------------------------------------
</TABLE>
See Notes to Financial Statements.
<PAGE> 67
NOTES TO FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
REGULATION
The Company's accounting policies conform to generally accepted accounting
principles as they apply to a regulated enterprise. Its accounting records are
maintained in accordance with the Uniform Systems of Accounts prescribed by the
Public Service Commission of the State of New York (PSC) and the Federal Energy
Regulatory Commission (FERC).
REGULATORY ASSETS AND LIABILITIES
General
The Company's Balance Sheet reflects the rate actions of its regulators through
the creation of regulatory assets and liabilities. Regulatory assets are
generally created whenever it is probable that the regulators will permit the
recovery through rates of a previously incurred cost that would otherwise be
charged to expense. Regulatory liabilities are generally created whenever it
is probable that the regulators will require a return through rates of revenues
or gains that would otherwise be recorded to income.
Base Financial Component and Rate Moderation Component
Pursuant to the 1989 Settlement, the Company recorded a regulatory asset known
as the Financial Resource Asset (FRA). The FRA is designed to provide the
Company with sufficient cash flows to assure its financial recovery. The FRA
has two components, the Base Financial Component (BFC) and the Rate Moderation
Component (RMC).
The BFC represents the present value of the future net-after-tax cash flows
which the Rate Moderation Agreement (RMA), one of the constituent documents of
the 1989 Settlement, provided the Company for its financial recovery. The BFC
was granted rate base treatment under the terms of the RMA and is included in
the Company's revenue requirements through an amortization included in rates
over forty years on a straight-line basis which began July 1, 1989.
The RMC reflects the difference between the Company's revenue requirements
under conventional ratemaking and the revenues resulting from the
implementation of the rate moderation plan provided for in the RMA. For a
further discussion of the 1989 Settlement and FRA, see Note 2.
Shoreham Post Settlement Costs
The balance consists of Shoreham Nuclear Power Station (Shoreham)
decommissioning costs, fuel disposal costs, payments in lieu of taxes, carrying
charges and other costs. These costs are being capitalized and amortized and
recovered through rates over a forty year period on a straight-line remaining
life basis which began July 1, 1989.
<PAGE> 68
Shoreham Nuclear Fuel
The balance principally reflects the unamortized portion of Shoreham nuclear
fuel which was reclassified from Nuclear Fuel in Process and in Reactor at the
time of the 1989 Settlement. This amount is being amortized, and recovered
through rates over a forty year period on a straight-line remaining life basis
which began July 1, 1989.
Postretirement Benefits Other Than Pensions
Under a PSC order issued in response to the Financial Accounting Standards
Board (FASB) Statement of Financial Accounting Standards (SFAS) No. 106,
Employers' Accounting for Postretirement Benefits Other Than Pensions, the
Company defers as a regulatory asset the difference between postretirement
benefit expense recorded for accounting purposes in accordance with SFAS No.
106 and postretirement benefit expense reflected in rates. Pursuant to the PSC
order, the ongoing annual postretirement benefit expense must be phased into
and fully recovered in rates within a five year period, with the accumulated
postretirement obligation being recovered in rates over a twenty year period.
For a further discussion of SFAS No. 106, see Note 8.
Regulatory Tax Asset/Liability
SFAS No. 109, Accounting for Income Taxes, requires utilities to establish
deferred tax assets and liabilities for, among other things, transactions that
did not give rise to deferred tax assets and liabilities under Accounting
Principles Board (APB) Opinion No. 11, Accounting for Income Taxes. SFAS No.
109 provides that regulatory assets and liabilities may be established for
these specific SFAS No. 109 created deferred tax assets and liabilities
providing that the regulator provides for the future recovery or return of
these amounts through rates. As a result of a PSC order issued in January
1993, providing for the recovery or return of such amounts, the Company has
recorded regulatory tax assets and liabilities to offset the effect of
accumulated deferred tax liabilities and assets created as a result of adopting
SFAS No. 109.
The tax effects of other differences between income for financial statement
purposes and for federal income tax purposes are accounted for as current
adjustments in federal income tax provisions.
Regulatory Liability Component
Pursuant to the 1989 Settlement, certain tax benefits attributable to the
Shoreham abandonment are to be shared between ratepayers and shareowners. A
regulatory liability of approximately $794 million was recorded in June 1989 to
preserve an amount equivalent to the ratepayer tax benefits attributable to the
Shoreham abandonment. This amount is being amortized over a ten year period on
a straight-line basis which began July 1, 1989.
1989 Settlement Credits
The balance represents the unamortized portion of an adjustment of the book
write-off to the negotiated 1989 Settlement amount. A portion of this amount
is being amortized over a ten year period which began on
<PAGE> 69
July 1, 1989. The remaining portion is not currently being recognized for
ratemaking purposes.
UTILITY PLANT
Additions to and replacements of utility plant are capitalized at original
cost, which includes material, labor, indirect costs associated with an
addition or replacement and an allowance for the cost of funds used during
construction. The cost of renewals and betterments relating to units of
property is added to utility plant. The cost of property replaced, retired or
otherwise disposed of is deducted from utility plant and, generally, together
with dismantling costs less any salvage, is charged to accumulated
depreciation. The cost of repairs and minor renewals is charged to maintenance
expense. Mass properties (such as poles, wire and meters) are accounted for on
an average unit cost basis by year of installation.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
The Uniform Systems of Accounts defines the allowance for funds used during
construction (AFC) as the net cost of borrowed funds for construction purposes
and a reasonable rate of return upon the utility's equity when so used. AFC is
not an item of current cash income. AFC is computed monthly using a rate
permitted by FERC on a portion of construction work in progress. The average
annual AFC rate, without giving effect to compounding, was 9.18%, 9.73% and
9.98% for the years 1994, 1993 and 1992, respectively.
DEPRECIATION
The provisions for depreciation result from the application of straight-line
rates to the original cost, by groups, of depreciable properties in service.
The rates are determined by age-life studies performed annually on depreciable
properties. Depreciation for electric properties was equivalent to
approximately 3.0%, 3.0% and 3.2% of respective average depreciable plant costs
for the years 1994, 1993 and 1992. Depreciation for gas properties was
equivalent to approximately 2.0%, 2.0% and 2.6% of respective average
depreciable plant costs for the years 1994, 1993 and 1992.
CASH AND CASH EQUIVALENTS
Cash equivalents are highly liquid investments with maturities of three months
or less when purchased. The carrying amount approximates fair value because of
the short maturity of these investments.
FAIR VALUES OF FINANCIAL INSTRUMENTS
The fair values for the Company's long-term debt and redeemable preferred stock
are based on quoted market prices, where available. The fair values for all
other long-term debt and redeemable preferred stock are estimated using
discounted cash flow analyses which are based upon the Company's current
incremental borrowing rate for similar types of securities.
<PAGE> 70
CAPITALIZATION - PREMIUMS, DISCOUNTS AND EXPENSES
Premiums or discounts and expenses related to the issuance of long-term debt
are amortized over the life of each issue. Unamortized premiums or discounts
and expenses related to issues of long-term debt that are refinanced are
amortized and recovered through rates over the shorter life of either the
redeemed issue or the new issue. Capital stock expense and redemption costs
related to certain issues of preferred stock that have been refinanced as well
as the cost of issuance of the preferred stock issued are recorded as deferred
charges. These amounts are being amortized and recovered through rates over
the shorter life of the redeemed issue or the new issue.
REVENUES
The Company accrues electric and gas revenues for services rendered to
customers but not billed at month-end. The Company's electric rate structure,
discussed in Note 3, provides for a revenue reconciliation mechanism which
eliminates the impact on earnings of experiencing electric sales that are above
or below the levels reflected in rates. The Company's gas structure provides
for a weather normalization clause, which reduces the impact on revenues of
experiencing weather which is warmer or colder than the "normal" value used for
projecting sales.
FUEL COST ADJUSTMENTS
The Company's electric and gas tariffs include fuel cost adjustment (FCA)
clauses which provide for the disposition of the difference between actual fuel
costs and the fuel costs allowed in the Company's base tariff rates (base fuel
costs). The Company defers these differences to future periods in which they
will be billed or credited to customers, except for base electric fuel costs in
excess of actual electric fuel costs, which are currently credited to the RMC
as incurred.
FEDERAL INCOME TAX
Effective January 1, 1993, the Company adopted SFAS No. 109. As permitted
under SFAS No. 109, the Company elected not to restate the financial statements
of prior years.
The Company provided deferred federal income taxes with respect to certain
items of income and expense that are reported in different years for financial
statement purposes and for federal income tax purposes.
The Company defers the benefit of 60% of pre-1982 gas and pre-1983 electric and
100% of all other investment tax credits, with respect to regulated properties,
when realized on its tax returns. Accumulated deferred investment tax credits
are amortized ratably over the lives of the related properties.
For ratemaking purposes, the Company provides deferred federal income taxes
with respect to certain differences between income before income taxes and
taxable income in certain instances when approved by the PSC, as disclosed in
Note 9. Also certain accumulated deferred federal income taxes are deducted
from rate base and amortized or otherwise applied as a reduction (increase) in
federal income tax expense in future years.
<PAGE> 71
RESERVES FOR CLAIMS AND DAMAGES
Losses arising from claims against the Company, including workers' compensation
claims, property damage, extraordinary storm costs and general liability
claims, are partially self-insured. Reserves for these claims and damages are
based on, among other things, experience, risk of loss and the ratemaking
practices of the PSC. Extraordinary storm losses incurred by the Company are
partially insured by certain commercial insurance carriers. These insurance
carriers provide partial insurance coverage for individual storm losses to the
Company's transmission and distribution system between $5 million and $50
million. Storm losses which are outside of the above-mentioned range are
self-insured by the Company. The Company is currently assessing its storm
insurance requirements, as current policies expire March 1, 1995.
RECLASSIFICATIONS
Certain prior year amounts have been reclassified in the financial statements
to be consistent with the current year's presentation.
<PAGE> 72
NOTE 2. THE 1989 SETTLEMENT
On February 28, 1989, the Company and the State of New York entered into the
1989 Settlement resolving certain issues relating to the Company and providing,
among other matters, for the financial recovery of the Company and for the
transfer of Shoreham and its subsequent decommissioning. Upon the
effectiveness of the 1989 Settlement, in June 1989, the Company simultaneously
recorded on its Balance Sheet the retirement of its investment of approximately
$4.2 billion principally in Shoreham and the establishment of the FRA.
The BFC, a component of the FRA, as initially established, represents the
present value of the future net-after-tax cash flows which the RMA provided the
Company for its financial recovery. The BFC was granted rate base treatment
under the terms of the RMA and is included in the Company's revenue
requirements through an amortization included in rates over forty years on a
straight-line basis that began July 1, 1989. At December 31, 1994 and 1993,
the unamortized balance of the BFC was approximately $3.5 billion and $3.6
billion, respectively.
The RMC, a component of the FRA, reflects the difference between the Company's
revenue requirements under conventional ratemaking and the revenues resulting
from the implementation of the rate moderation plan provided for in the RMA.
Prior to December 31, 1992, the RMC had increased as the difference between
revenues resulting from the implementation of the rate moderation plan provided
for in the RMA and revenue requirements under conventional ratemaking, together
with a carrying charge equal to the allowed rate of return on rate base, was
deferred. The RMC had provided the Company with a substantial amount of
non-cash earnings from the effective date of the 1989 Settlement through
December 31, 1992. Subsequent to December 31, 1992, the RMC balance had been
decreasing as revenues resulting from the operation of the rate moderation plan
exceeded revenue requirements under conventional ratemaking. The RMC is
currently adjusted, on a monthly basis, for the Company's share of certain Nine
Mile Point Nuclear Power Station, Unit 2 (NMP2) operations and maintenance
expenses, fuel credits resulting from the Company's electric fuel cost
adjustment clause discussed in Note 1 and gross receipts tax adjustments
related to the FRA. At December 31, 1994 and 1993, the RMC balance was $463
million and $610 million, respectively. For a further discussion of the impact
on the amortization of the RMC under the Long Island Lighting Company
Ratemaking and Performance Plan (LRPP) and the Company's Electric Rate Plan for
the three year period beginning December 1, 1994, see Note 3.
On February 29, 1992, the Company transferred ownership of Shoreham to the Long
Island Power Authority (LIPA), an agency of the State of New York. Pursuant to
the 1989 Settlement, the Company has funded the decommissioning of Shoreham.
Based on the latest available information, LIPA has reported that the cost of
decommissioning Shoreham, which is essentially complete, totaled approximately
$181 million, excluding the costs associated with the disposal of Shoreham's
fuel which was also completed in 1994 and cost approximately $112 million.
LIPA anticipates that the Nuclear Regulatory Commission (NRC) will terminate
its license for Shoreham during 1995.
<PAGE> 73
NOTE 3. RATE MATTERS
ELECTRIC
Long Island Lighting Company Ratemaking and Performance Plan
Pursuant to the 1989 Settlement, discussed in Note 2, the Company received
electric rate increases as contemplated by the RMA for each of the three rate
years in the period ended November 30, 1991. The RMA contemplates that the
Company will apply to the PSC for targeted annual rate increases of 4.5% to
5.0% in each year for an eight year period beginning December 1, 1991. In
November 1991, the PSC approved the LRPP which provided annual electric rate
increases of 4.15%, 4.1% and 4.0%, respectively, for each of the three rate
years in the period beginning December 1, 1991, with an allowed return on
common equity from electric operations of 11.6% for each of the three rate
years. After giving effect to the reductions required by the Class Settlement
discussed in Note 4, the Company's annual electric rate increases were
approximately 4.15%, 3.9% and 3.9%, with an allowed return on common equity
from electric operations of 10.92%, 10.72% and 10.58%, for the rate years
beginning December 1, 1991, 1992 and 1993, respectively.
The LRPP was designed to be consistent with the RMA's long term goals. One
principal objective of the LRPP was to reassign risk so that the Company
assumes the responsibility for risks within the control of management, whereas
risks largely beyond the control of management would be assumed by the
ratepayers. The LRPP reflects an update of the long range forecast of the
Company's revenue requirements which was the basis of the RMA's initial three
rate increases. The LRPP contains three major components--revenue
reconciliation, expense attrition and reconciliation and performance
incentives.
Revenue reconciliation is provided through a mechanism that eliminates the
impact of experiencing electric sales that are above or below the LRPP forecast
by providing a fixed annual net margin level (defined as sales revenues, net of
fuel and gross receipts taxes) that the Company will receive under the LRPP.
The differences between the actual electric net revenues and the annual net
margin level are deferred on a monthly basis during the rate year.
The expense attrition and reconciliation component permits the Company to make
adjustments for certain expenses recognizing that certain cost increases are
unavoidable due to inflation and changes in the business. The LRPP includes
the annual reconciliation of certain expenses for wage rates, property taxes,
interest costs and demand side management (DSM) costs. The LRPP also provides
for the deferral and amortization of certain costs for enhanced reliability and
production operations and maintenance expenses and the application of an
inflation index to other expenses for the rate years beginning December 1, 1992
and 1993.
Under the performance incentive component of the LRPP, the Company is allowed
to earn for each rate year up to 60 additional basis points, or forfeit up to
38 basis points, of the allowed return on common equity as a result of its
performance within certain incentive and/or penalty programs. These programs
consist of a customer service program, a time of-use program, a partial pass
through fuel cost incentive plan, a DSM program and, effective December 1,
1993, an electric transmission and distribution reliability plan. These
incentives and/or penalties, except
<PAGE> 74
for incentives earned under the DSM program, are determined on a monthly basis
during the rate year and deferred until final approval from the PSC. The
incentives earned from the DSM program are collected in rates on a monthly
basis through the FCA. Based upon the Company's performance within these
programs, the Company earned a total of 50 and 49 basis points or approximately
$9.2 million, net of tax effects, for each of the rate years ended November 30,
1994 and 1993. For the rate year ended November 30, 1992 the Company earned a
total of 23 basis points or approximately $4.3 million, net of tax effects.
The deferred balances resulting from the net margin, property taxes, interest
costs, wage rates, performance incentives and associated carrying charges,
excluding DSM incentives, are netted at the end of each rate year. The LRPP
established a band whereby the first $15 million of the total net deferrals are
used to increase or decrease the RMC balance. The LRPP provides for the
disposition of the total net deferrals in excess of the $15 million band. Upon
approval by the PSC, the total net deferrals in excess of $15 million are
refunded to or recovered from the ratepayers through the FCA over a twelve
month period.
The Company recorded deferred balances of approximately $45.2 million, $63.1
million and $78.6 million of the total net deferrals for the rate years ended
November 30, 1992, 1993 and 1994, respectively. The first $15 million of the
total net deferrals has been recorded for the rate years ended November 30,
1992 and 1993 and upon approval by the PSC of the Company's reconciliation
filing will be recorded for the rate year ended November 30, 1994 as an
increase to the RMC with the remaining net deferrals of $30.2 million, $48.1
million and $63.6 million, respectively, recovered from the ratepayers through
the FCA. As of July 31, 1994, the Company has fully collected the November 30,
1992 net deferrals through the FCA and is awaiting PSC approval for the
collection of the 1993 and 1994 rate year net deferrals through the FCA.
Effective August 1994, the PSC has allowed the Company to continue the
collection of a like amount of the total net deferrals related to the rate year
ended November 30, 1992 through the FCA. These additional revenues amounting
to approximately $13.4 million through December 1994 were recorded as a
reduction to the RMC. The Company expects to collect the 1993 rate year net
deferrals of $48.1 million by November 30, 1995 and the 1994 rate year net
deferrals of $63.6 million over the twelve month period ending November 30,
1996.
The LRPP contains a mechanism whereby earnings in excess of the allowed return
on common equity of 11.6%, excluding the impacts of the various incentive
and/or penalty programs, are shared equally between ratepayers and shareowners.
The Company earned $8.9 million and $21.4 million, net of tax effects, for the
rate years ended November 30, 1993 and 1992, respectively, in excess of its
allowed return on common equity. The amount in excess of the allowed return on
common equity was shared equally between ratepayers (by a reduction to the RMC)
and shareowners for the rate years ended November 30, 1993, and 1992. For the
rate year ended November 30, 1994, the Company did not earn in excess of its
allowed return on common equity.
To assist in the recovery of the RMC balance under the rates provided by the
LRPP, the Company, in accordance with the LRPP, has credited the RMC with
several deferred ratepayer benefits. In December 1994, the Company applied a
total of approximately $5.1 million of net deferred ratepayer benefits to the
RMC including DSM revenues overcollected in the 1994 rate year. In December
1993 and 1992, the Company reduced the RMC by
<PAGE> 75
approximately $10.1 million and $22.5 million representing various deferred
ratepayer benefits including the ratepayers portion of the excess earnings for
the rate years ended November 30, 1993 and 1992, respectively.
Electric Rate Plan
In December 1993, the Company filed a three year Electric Rate Plan with the
PSC for the period beginning December 1, 1994 that minimizes future electric
rate increases while retaining consistency with the RMA's objective of the
restoration of the Company's financial health. The Electric Rate Plan requests
an allowed return on common equity of 11.0% and provides for base rates to be
frozen in years one and two and an overall rate increase of 4.3% in the third
year. Although base electric rates would be frozen during the first two years
of the Electric Rate Plan, annual rate increases of approximately 1% are
expected to result from the operation of the Company's FCA. The FCA captures,
among other things, amounts to be recovered from or refunded to ratepayers in
excess of $15 million which result from the reconciliation of revenues, certain
expenses and earned performance incentive components, discussed above.
The Company's Electric Rate Plan reflects four underlying objectives:
(i) to limit the balance of RMC during the three year period to no more than
its 1992 peak balance of $652 million; (ii) to recover the RMC within the time
frame established in the 1989 Settlement; (iii) to minimize, beginning in the
third year of the Electric Rate Plan, the final three rate increases
contemplated in the 1989 Settlement that follow the two year rate freeze
period; and (iv) to continue the Company's gradual return to financial health.
The Electric Rate Plan provides for, with some modifications, the continuation
of the LRPP revenue and expense reconciliations and performance incentives.
The Electric Rate Plan includes the annual reconciliation of certain expenses
for property taxes, interest costs, DSM costs and the deferral and amortization
of certain costs for enhanced reliability. The Company would be allowed to
earn for the three rate years under the Electric Rate Plan up to 50 additional
basis points, excluding incentives under the DSM program, or forfeit up to 47
basis points of the allowed return on common equity of 11.0% as a result of the
Company's performance within certain performance programs. These programs
consist of a customer service program, a partial pass through fuel cost
incentive plan, a DSM program and an electric transmission and distribution
reliability plan.
The Company's Electric Rate Plan provides for lower annual electric rate
increases than originally anticipated under the 1989 Settlement. However, as a
result of changes in certain assumptions upon which the RMA was based, their
impact on the RMC and the Company's plans to reduce DSM, operations and
maintenance and capital expenditures, the Company has determined that the
overall objectives of the RMA can be met under the Electric Rate Plan. As a
result of lower than originally anticipated inflation rates, interest costs,
property taxes, fuel costs and return on common equity allowed by the PSC, the
RMC, which originally had been anticipated to peak at $1.2 billion in 1994,
peaked at $652 million in 1992. With the exception of a projected increase in
1995 and 1996, which is not now anticipated to cause the RMC to increase above
its $652 million peak, the RMC is expected to decline until it is fully
amortized.
<PAGE> 76
Under the Electric Rate Plan, the recovery of the RMC would be extended, if
necessary, for an additional period of not more than three years beyond the
approximate ten year period envisioned in the RMA. The actual length of the
RMC extension will depend on the extent to which the assumptions underlying the
Electric Rate Plan materialize. The Company's current projections indicate
that the RMC will be recovered in eleven years.
The staff of the PSC (Staff) and other intervening parties filed testimony in
response to the Company's Electric Rate Plan. Staff concurs with the Company's
proposal for an 11.0% return on common equity in each of the three years and
has reaffirmed its commitment to the principles of the RMA, including the full
recovery of the RMC within the time frame established by the RMA. However,
Staff has recommended an overall zero percent rate increase for the first two
years, contrasted with the Company's proposal for a base rate freeze with FCA
adjustments of approximately 1% in years one and two, as described above.
Staff did not make a recommendation for the level of rate relief in the third
year.
In September 1994, three Administrative Law Judges (ALJs) of the PSC issued a
recommended decision to the PSC with respect to the Company's Electric Rate
Plan. The ALJs agreed with the Company's proposed 11.0% return on common
equity and its proposal to freeze base electric rates for the first rate year.
While no explicit recommendation was made concerning the second year, the
recommended decision implies that base rates could remain frozen for the second
rate year as well.
With respect to the third rate year beginning December 1, 1996, the ALJs
determined that it was not appropriate for them to issue a recommendation
since, in their opinion, the Company's revenue requirements for the third rate
year cannot be precisely determined at this time. Alternatively, the ALJs
encouraged the Company and other parties in this proceeding to negotiate a
settlement concerning any rate increase for the third rate year.
The PSC had been expected to issue a final order on the Company's rate proposal
before November 29, 1994, the date that the statutory suspension period was
scheduled to terminate. However, in order to accommodate further settlement
negotiations in the proceeding, the Company has requested extensions through
April 1995, which were granted by the PSC. The Company's offers to extend the
suspension period were conditioned upon the continuation of the current LRPP
rate mechanisms. Although the ultimate outcome of the Electric Rate Plan
cannot be predicted, the Company expects that any PSC order will be consistent
with the provisions of the RMA respecting the recovery of the FRA and other
1989 Settlement deferred charges.
GAS
In December 1993, the PSC approved a three year gas rate settlement between the
Company and the Staff of the PSC. The gas rate settlement provides that the
Company receive, for each of the rate years beginning December 1, 1993, 1994
and 1995, annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In
the determination of the revenue requirements for the gas rate settlement an
allowed return on common equity of 10.1% was used. The gas rate decision also
provides that earnings in excess of a 10.6% return on common equity in any of
the three rate years covered by the settlement be shared equally between the
Company's firm gas customers and its shareowners. For the rate year ended
November 30, 1994, the
<PAGE> 77
Company earned $9.2 million, net of tax effects, in excess of the 10.6% return
on common equity. The firm gas customers' portion of these excess earnings
amounting to $4.6 million, net of tax effects, has been deferred until its
final disposition is determined by the PSC.
<PAGE> 78
NOTE 4. THE CLASS SETTLEMENT
The Class Settlement, which became effective on June 28, 1989, resolved a civil
lawsuit against the Company brought under the federal Racketeer Influenced and
Corrupt Organizations Act. The lawsuit which the Class Settlement resolved had
alleged that the Company made inadequate disclosures before the PSC concerning
the construction and completion of nuclear generating facilities. The Class
Settlement provides the Company's electric ratepayers with reductions,
aggregating $390 million, that are being reflected as adjustments to their
monthly electric bills over a ten year period which began on June 1, 1990.
The reductions which begin in each of the remaining twelve month periods are as
follows:
<TABLE>
<S> <C>
June 1995 $40 million
June 1996 50 million
June 1997 60 million
June 1998 60 million
June 1999 60 million
</TABLE>
Upon its effectiveness, the Company recorded its liability for the Class
Settlement on a present value basis at $170 million and simultaneously recorded
a charge to income (net of tax effects of $57 million) of approximately $113
million. Each month the Company records the changes in the present value of
its liability that results from the passage of time and from monthly
reductions. The Company expects the Class Settlement liability will be fully
satisfied by May 31, 2000.
In accordance with the Class Settlement, the Company, in 1990, established a
$10 million fund to reimburse former electric ratepayers entitled to refunds
under the Class Settlement. At December 31, 1994, approximately $4.5 million
remains undistributed in the fund. Pursuant to the terms of the Class
Settlement, the undistributed portion of the net fund balance will be used to
reduce ratepayers' bills upon the Company's receipt of the funds from the
trustee.
<PAGE> 79
NOTE 5. NINE MILE POINT NUCLEAR POWER STATION, UNIT 2
The Company has an 18% undivided interest in NMP2 which is operated by Niagara
Mohawk Power Corporation (NMPC) near Oswego, New York. Ownership of NMP2 is
shared by five cotenants: the Company (18%), NMPC (41%), New York State
Electric & Gas Corporation (18%), Rochester Gas and Electric Corporation (14%)
and Central Hudson Gas & Electric Corporation (9%). At December 31, 1994, the
Company's utility plant investment in NMP2 was $749 million, net of accumulated
depreciation of $140 million, which is included in the Company's rate base.
Output of NMP2 is shared in the same proportions as the cotenants' respective
ownership interests. The operating expenses of NMP2 are also allocated to the
cotenants in the same proportions as their respective ownership interests. The
Company's share of these expenses is included in the appropriate operating
expenses on its Statement of Income. The Company is required to provide its
respective share of financing for any capital additions to NMP2. Nuclear fuel
costs associated with NMP2 are being amortized on the basis of the quantity of
heat produced for the generation of electricity.
NMPC has contracted with the United States Department of Energy for the
disposal of nuclear fuel. The Company reimburses NMPC for its 18% share of the
cost under the contract at a rate of $1.00 per megawatt hour of net generation
less a factor to account for transmission line losses.
The Company's share of the decommissioning costs for NMP2 is estimated to be
$82 million and $234 million, in 1994 dollars and 2027 dollars, respectively,
based upon a 1989 study performed by NMPC which was updated in 1993 to reflect
a change in the NRC minimum decommissioning funding requirement. NMPC has
informed the Company that decommissioning costs for NMP2 will increase
primarily as a result of the inclusion of nuclear fuel storage charges and
costs for continuing care. NMPC will be performing an updated decommissioning
study for NMP2 in 1995. The Company will update its estimate for
decommissioning costs upon the NRC's approval of the 1995 study. NMPC expects
to commence decommissioning in 2027, shortly after cessation of operations,
using a method which removes or decontaminates NMP2 components promptly. The
Company's share of estimated decommissioning costs are being provided for in
electric rates and are being charged to operations as depreciation expense over
the expected service life of NMP2. The amount of decommissioning costs
recorded as depreciation expense in 1994 was $1.6 million. The accumulated
decommissioning costs collected in rates through December 31, 1994 amounted to
$8.7 million. The Company has established an independent decommissioning trust
fund for the decommissioning of the contaminated portion of the NMP2 plant,
which is approximately 92% of total decommissioning costs. As of December 31,
1994, the Company has accumulated $8.3 million in this external trust fund.
Net earnings on this fund are recorded as an increase to accumulated
depreciation. This fund complies with regulations issued by the NRC governing
the funding of nuclear plant decommissioning costs.
<PAGE> 80
NOTE 6. CAPITAL STOCK
COMMON STOCK
During 1994, the Company issued 6.1 million shares of common stock, including
the public offering in June of 5.1 million shares at $20 per share. The
Company has 150,000,000 shares of authorized common stock, of which 118,416,606
were issued and outstanding at December 31, 1994. The Company has reserved
1,747,570 shares for sale through its Employee Stock Purchase Plan, 5,009,762
shares were committed to the Automatic Dividend Reinvestment Plan and 114,126
shares were reserved for conversion of the Series I Convertible Preferred Stock
at a rate of $17.15 per share. Common and preferred stock dividend limitations
in the mortgage securing the Company's First Mortgage Bonds are not material.
There are no dividend limitations contained in the Company's other debt
instruments.
PREFERRED STOCK
The Company has 7,000,000 authorized shares, cumulative preferred stock, par
value $100 per share and 30,000,000 authorized shares, cumulative preferred
stock, par value $25 per share. Dividends on preferred stock are paid in
preference to dividends on common stock or any other stock ranking junior to
preferred stock.
PREFERRED STOCK SUBJECT TO MANDATORY REDEMPTION
The aggregate fair value of redeemable preferred stock with mandatory
redemptions at December 31, 1994 and 1993 amounted to approximately $564
million and $659 million, respectively, compared to their carrying amounts of
$649 million and $654 million, respectively.
The Company is required to redeem each year certain series of preferred stock
through the operation of sinking fund provisions as follows:
<TABLE>
<CAPTION>
Number Redemption
Series Redemption Provision Beginning of Shares Price
------ ----------------------------------- --------- ----------
<S> <C> <C> <C>
L July 31, 1979 10,500 $100
R December 15, 1982 37,500 100
NN March 1, 1999 77,700 25
UU October 15, 1999 112,000 25
</TABLE>
In addition, the Company will have the non-cumulative option to double the
number of shares to be redeemed pursuant to the sinking fund provisions in any
year for the preferred stock series R, NN and UU. The aggregate par value of
preferred stock required to be redeemed through sinking funds in 1995 and 1996
is $4.8 million, in 1997 and 1998 is $1.1 million and in 1999 is $5.8 million.
The Company is also required to redeem all shares of certain series of
preferred stock which are not subject to sinking fund requirements. The
scheduled mandatory redemption for these series are as follows: (i) Series GG
on March 1, 1999; (ii) Series AA on June 1, 2000; (iii) Series QQ on May 1,
2001; and (iv) Series CC on August 1, 2002.
<PAGE> 81
PREFERRED STOCK NOT SUBJECT TO MANDATORY REDEMPTION
The Company has the option to redeem certain series of its preferred stock.
For the series subject to optional redemption at December 31, 1994, the call
prices were as follows:
<TABLE>
<CAPTION>
Preferred Stock Call Price
--------------- ----------
<S> <C>
5.00% Series B $101
4.25% Series D 102
4.35% Series E 102
4.35% Series F 102
5 1/8% Series H 102
5 3/4% Series I - Convertible 100
</TABLE>
PREFERENCE STOCK
At December 31, 1994, none of the authorized 7,500,000 shares of
nonparticipating preference stock, par value $1 per share, which ranks junior
to preferred stock, were outstanding.
<PAGE> 82
NOTE 7. LONG-TERM DEBT
Each of the Company's outstanding mortgages is a lien on substantially all of
the Company's properties.
FIRST MORTGAGE
All of the bonds issued under the First Mortgage, including those issued after
June 1, 1975 and pledged with the Trustee of the General and Refunding Mortgage
(G&R Trustee) as additional security for General & Refunding Bonds (G&R Bonds),
are secured by the lien of the First Mortgage. First Mortgage Bonds pledged
with the G&R Trustee do not represent outstanding indebtedness of the Company.
Amounts of such pledged bonds outstanding were $1.3 billion and $1.0 billion at
December 31, 1994 and 1993, respectively. The annual First Mortgage
depreciation fund and sinking fund requirements for 1994, due not later than
June 30, 1995, are estimated at $239 million and $21 million, respectively.
The Company expects to meet these requirements with property additions and
retired First Mortgage Bonds.
G&R MORTGAGE
The lien of the G&R Mortgage is subordinate to the lien of the First Mortgage.
The annual G&R Mortgage sinking fund requirement for 1994, due not later than
June 30, 1995, is estimated at $26 million. The Company expects to satisfy
this requirement with retired G&R Bonds.
1989 REVOLVING CREDIT AGREEMENT
The Company has available through October 1, 1995, $300 million under its 1989
Revolving Credit Agreement (1989 RCA). This line of credit is secured by a
first lien upon the Company's accounts receivable and fuel oil inventories.
At December 31, 1994, no amounts were outstanding under the 1989 RCA. The
Company has the option, when amounts are outstanding, to commit to one of three
interest rates including: (i) the Adjusted Certificate of Deposit Rate which is
a rate based on the certificate of deposit rates of certain of the lending
banks, (ii) the Base Rate which is generally a rate based on Citibank, N.A.'s
prime rate and (iii) the Eurodollar Rate which is a rate based on the London
Interbank Offering Rate (LIBOR). The Company has agreed to pay a fee of one
quarter of one percent per annum on the unused portion. The 1989 RCA may be
extended for one year periods upon the acceptance by the lending banks of a
request by the Company which must be delivered to the lending banks prior to
April 1 of each year. It is the Company's intent to request an extension prior
to April 1, 1995.
<PAGE> 83
AUTHORITY FINANCING NOTES
Authority Financing Notes are issued by the Company to the New York State
Energy Research and Development Authority (NYSERDA) to secure certain
tax-exempt Industrial Development Revenue Bonds, Pollution Control Revenue
Bonds (PCRBs) and Electric Facilities Revenue Bonds (EFRBs) issued by NYSERDA.
Certain of these bonds are subject to periodic tender at which time their
interest rates may be subject to redetermination. Tender requirements of
Authority Financing Notes at December 31, 1994 were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
---------------------------------------------------------------------------------
Interest
Rate Series Principal
---------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PCRBs
8 1/4% 1982 $ 17,200 Tendered every three
years, next tender
October 1997
3.0% 1985 A,B 150,000 Tendered annually on
March 1
EFRBs
5.45% 1993 A 50,000 Tendered weekly
4.90% 1993 B 50,000 Tendered weekly
5.40% 1994 A 50,000 Tendered weekly
---------------------------------------------------------------------------------
</TABLE>
The 1994 and 1993 EFRBs and the 1985 PCRBs are supported by letters of credit
pursuant to which the letter of credit banks have agreed to pay the principal,
interest and premium, if applicable, in the aggregate, up to approximately $326
million in the event of default. The obligation of the Company to reimburse
the letter of credit banks is unsecured. These letters of credit expire on
October 26, 1997 for the 1994 EFRBs, November 17, 1996 for the 1993 EFRBs, and
March 16, 1996 for the 1985 PCRBs, at each of which times the Company is
required to obtain either an extension of the letters of credit or substitute
credit backup. If neither can be obtained, the 1993 EFRBs, the 1994 EFRBs and
the 1985 PCRBs must be redeemed unless the Company purchases them in lieu of
redemption and subsequently remarkets them.
<PAGE> 84
FAIR VALUES OF LONG-TERM DEBT
The carrying amounts and fair values of the Company's long-term debt at
December 31 were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
-------------------------------------------------------------------------
1994
-------------------------------------------------------------------------
Fair Carrying
Value Amount
-------------------------------------------------------------------------
<S> <C> <C>
First Mortgage Bonds $ 95,688 $ 100,000
General and Refunding Bonds 1,844,289 1,951,000
Debentures 1,867,510 2,270,000
Authority Financing Notes 829,651 866,675
-------------------------------------------------------------------------
Total $4,637,138 $5,187,675
=========================================================================
</TABLE>
<TABLE>
<CAPTION>
1993
-------------------------------------------------------------------------
Fair Carrying
Value Amount
-------------------------------------------------------------------------
<S> <C> <C>
First Mortgage Bonds $ 124,719 $ 125,000
General and Refunding Bonds 1,806,728 1,666,000
Debentures 2,944,499 2,880,058
Authority Financing Notes 851,800 816,675
-------------------------------------------------------------------------
Total $5,727,746 $5,487,733
=========================================================================
</TABLE>
For a further discussion on the fair value of the securities listed above, see
Note 1.
MATURITY SCHEDULE
Total long-term debt maturing in each of the next five years is $25 million
(1995), $455 million (1996), $286 million (1997), $101 million (1998) and $454
million (1999).
<PAGE> 85
NOTE 8. RETIREMENT BENEFIT PLANS
PENSION PLANS
The Company maintains a defined benefit pension plan which covers substantially
all employees (Primary Plan), a supplemental plan which covers officers and
certain key executives (Supplemental Plan) and a retirement plan which covers
the Board of Directors (Directors' Plan). The Company also maintains 401(k)
plans for its union and non-union employees. The Company does not contribute
to these plans.
Primary Plan
The Company's funding policy is to contribute annually to the Primary Plan a
minimum amount consistent with the requirements of the Employee Retirement
Income Security Act of 1974 (ERISA) plus such additional amounts, if any, as
the Company may determine to be appropriate from time to time.
For service before January 1, 1992, pension benefits are determined based on
the greater of the accrued benefit as of December 31, 1991, or by applying a
moving five year average of Plan compensation, not to exceed the January 1,
1992 salary, to certain percentages as defined in the Primary Plan, determined
by years of service at December 31, 1991. For service after January 1, 1992,
pension benefits are equal to 2% per year of Plan compensation through age 49
and 2 1/2% thereafter. Employees are vested in the Primary Plan after five
years of service with the Company.
The Primary Plan's funded status and amounts recognized on the Balance Sheet at
December 31, 1994 and 1993 were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
-------------------------------------------------------------------------------------------------------
1994 1993
-------------------------------------------------------------------------------------------------------
<S> <C> <C>
Actuarial present value of benefit obligation
Vested benefits $ 467,962 $ 468,797
Nonvested benefits 50,385 49,815
-------------------------------------------------------------------------------------------------------
Accumulated Benefit Obligation $ 518,347 $ 518,612
=======================================================================================================
Plan assets at fair value $ 597,200 $ 598,600
Actuarial present value of projected
benefit obligation 592,339 597,128
-------------------------------------------------------------------------------------------------------
Projected benefit obligation less
than plan assets 4,861 1,472
Unrecognized net obligation 84,577 91,397
Unrecognized net gain (90,335) (97,029)
-------------------------------------------------------------------------------------------------------
Net Accrued Pension Cost $ (897) $ (4,160)
=======================================================================================================
</TABLE>
Periodic pension cost for 1994, 1993 and 1992 for the Primary Plan included the
following components:
<TABLE>
<CAPTION>
(In thousands of dollars)
-------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned during the period $ 16,465 $ 14,481 $ 13,661
Interest cost on projected benefit
obligation and service cost 43,782 41,865 39,574
Actual return on plan assets (12,431) (54,010) (47,156)
Net amortization and deferral (31,633) 10,025 12,849
-------------------------------------------------------------------------------------------------------
Net Periodic Pension Cost $ 16,183 $ 12,361 $ 18,928
=======================================================================================================
</TABLE>
<PAGE> 86
<TABLE>
<CAPTION>
Assumptions used in accounting for the Primary Plan were as follows:
-------------------------------------------------------------------------------------------------------
1994 1993 1992
-------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate 7.75% 7.25% 7.75%
Rate of future compensation increases 5.0 % 5.0 % 5.5 %
Long-term rate of return on assets 7.5 % 7.5 % 7.5 %
-------------------------------------------------------------------------------------------------------
</TABLE>
The Primary Plan assets at fair value include cash, cash equivalents, group
annuity contracts, bonds and listed equity securities.
In 1993 the PSC issued an order which addressed the accounting and ratemaking
treatment of pension costs in accordance with SFAS No. 87, Employers'
Accounting for Pensions. Under the PSC order, the Company is required to
recognize any deferred net gains or losses over a ten year period rather than
using the corridor approach method. This change in the annual pension cost
calculation reduced pension expense by $4.6 million in the year of adoption,
1993. The Company believes that this method of accounting for financial
reporting purposes, results in a better matching of revenues and the Company's
pension cost. The Company defers differences between pension rate allowance
and pension expense under the PSC's order. In addition, the PSC requires the
Company to measure the difference between the pension rate allowance and the
annual pension contributions contributed into the pension fund.
Supplemental Plan
The Supplemental Plan, the cost of which is borne by the Company's shareowners,
provides supplemental death and retirement benefits for officers and other key
executives without contribution from such employees. The Supplemental Plan is
a non-qualified plan under the Internal Revenue Code. Death benefits are
currently provided by insurance. The provision for plan benefits, which is
unfunded, totaled approximately $2.3 million, $2.8 million and $.7 million
which was recognized as expense in 1994, 1993 and 1992, respectively.
Directors' Plan
The Directors' Plan provides benefits to directors who are not officers of the
Company. Directors who have served in that capacity for more than five years
qualify as participants under the plan. The Directors' Plan is a non-qualified
plan under the Internal Revenue Code. The provision for retirement benefits,
which is unfunded, totaled approximately $148,000, $150,000, and $133,000 which
was recognized as expense in 1994, 1993 and 1992, respectively.
<PAGE> 87
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS
In addition to providing pension benefits, the Company provides certain medical
and life insurance benefits for retired employees. Substantially all of the
Company's employees may become eligible for these benefits if they reach
retirement age after working for the Company for a minimum of five years.
These and similar benefits for active employees are provided by the Company or
by insurance companies whose premiums are based on the benefits paid during the
year. Effective January 1, 1993, the Company adopted the provisions of SFAS
No. 106, Employers' Accounting for Postretirement Benefits Other Than Pensions,
which requires the Company to recognize the expected cost of providing
postretirement benefits when employee services are rendered rather than when
paid. As a result, the Company, in 1993, recorded an accumulated
postretirement benefit obligation and a corresponding regulatory asset of
approximately $376 million. Additionally, as a result of adopting SFAS No.
106, the Company's postretirement benefit cost for 1993 increased by
approximately $28 million above the amount that would have been recorded under
the pay-as-you-go method.
In 1993, the PSC issued an order which required that the effects of
implementing SFAS No. 106 be phased into rates. The order requires the Company
to defer as a regulatory asset the difference between postretirement benefit
expense recorded for accounting purposes in accordance with SFAS No. 106 and
the postretirement benefit expense reflected in rates. The ongoing annual
postretirement benefit expense will be phased into and fully reflected in rates
within a five year period with the accumulated postretirement obligation being
recovered in rates over a twenty year period. In addition, the Company is
required to recognize any deferred net gains or losses over a ten year period.
In 1994, the Company established Voluntary Employee's Beneficiary Association
(VEBA) trusts for union and non-union employees for the funding of incremental
costs collected in rates for postretirement benefits. In December 1994, the
Company contributed $2.2 million for the incremental postretirement benefit
cost collected in gas rates. In 1995, the Company will begin funding the
incremental postretirement benefit cost for the electric business as these
amounts are reflected in rates.
<PAGE> 88
Accumulated postretirement benefit obligation other than pensions at December
31 were as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
---------------------------------------------------------------------------------
1994 1993
--------------------------------------------------------------------------------
<S> <C> <C>
Retirees $ 159,590 $ 152,800
Fully eligible plan participants 57,788 63,800
Other active plan participants 133,030 137,200
--------------------------------------------------------------------------------
Accumulated postretirement
benefit obligation $ 350,408 $ 353,800
Plan assets, cash (2,200) -
--------------------------------------------------------------------------------
Accumulated postretirement benefit
obligation in excess of plan
assets 348,208 353,800
Unrecognized net gain 73,936 49,237
--------------------------------------------------------------------------------
Accrued Postretirement Benefit Cost $ 422,144 $ 403,037
================================================================================
</TABLE>
Periodic postretirement benefit cost other than pensions for the years 1994,
1993 and 1992 were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
--------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $ 11,275 $ 12,980 $ -
Interest cost on projected
benefit obligation and
service cost 25,713 29,531 -
Amortization of net gain (5,213) - -
--------- --------- ---------
Periodic Postretirement
Benefit Cost $ 31,775 $ 42,511 $ 13,400
========= ========= =========
</TABLE>
Assumptions used to determine the postretirement benefit obligation were as
follows:
<TABLE>
<CAPTION>
1994 1993
------------------
<S> <C> <C>
Discount rate 7.75% 7.25%
Rate of future compensation
increases 5.0% 5.0%
</TABLE>
The assumed health care cost trend rates used in measuring the accumulated
postretirement benefit obligation at December 31, 1994 and 1993 were 9.0% and
9.5%, respectively, gradually declining to 6.0% in 2001 and thereafter. A one
percentage point increase in the health care cost trend rate would increase the
accumulated postretirement benefit obligation as of December 31, 1994 and 1993
by approximately $44 million and $46 million, respectively, and the sum of the
service and interest costs in 1994 and 1993 by $6 and $8 million, respectively.
<PAGE> 89
NOTE 9. FEDERAL INCOME TAX
At December 31, the significant components of the Company's deferred tax assets
and liabilities calculated under the provisions of SFAS No. 109 were as
follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
---------------------------------------------------------------------------------
1994 1993
---------------------------------------------------------------------------------
<S> <C> <C>
DEFERRED TAX ASSETS
Net operating loss carryforwards $ 552,917 $ 707,400
Reserves not currently deductible 86,267 87,050
Tax depreciable basis in excess of book 48,557 59,147
Nondiscretionary excess credits 31,933 35,362
ITC carryforwards 142,329 142,329
Other 89,763 62,800
---------------------------------------------------------------------------------
Total Deferred Tax Assets $ 951,766 $1,094,088
---------------------------------------------------------------------------------
DEFERRED TAX LIABILITIES
1989 Settlement $ 2,174,729 $2,180,413
Accelerated depreciation 608,302 597,827
Call premiums 56,324 63,735
Rate case deferrals 55,598 43,957
Other 46,840 46,097
---------------------------------------------------------------------------------
Total Deferred Tax Liabilities 2,941,793 2,932,029
---------------------------------------------------------------------------------
Net Deferred Tax Liability $1,990,027 $1,837,941
=================================================================================
</TABLE>
Federal income tax expense in accordance with APB No. 11, for the year 1992 was
as follows:
<TABLE>
<CAPTION>
(In thousands of dollars)
---------------------------------------------------------------------------------
1992
---------------------------------------------------------------------------------
<S> <C>
FEDERAL INCOME TAX, PER STATEMENT
OF INCOME
Current $ 530
---------------------------------------------------------------------------------
Deferred and other
1989 Settlement
Shoreham property 3,806
Rate moderation component 10,351
Other 1989 Settlement items 8,622
Net operating loss carryforwards (14,121)
Shoreham post settlement costs 60,125
Accelerated tax depreciation 35,951
Call premiums 35,441
Ratemaking and performance plan 17,680
Other items 2,577
---------------------------------------------------------------------------------
Total Deferred and Other 160,432
---------------------------------------------------------------------------------
TOTAL FEDERAL INCOME TAX EXPENSE $ 160,962
=================================================================================
</TABLE>
<PAGE> 90
The federal income tax amounts included in the Statement of Income differ from
the amounts which result from applying the statutory federal income tax rate to
income before income tax. The table below sets forth the reasons for such
differences.
<TABLE>
<CAPTION>
(In thousands of dollars)
---------------------------------------------------------------------------------
1994 1993 1992
---------------------------------------------------------------------------------
<S> <C> <C> <C>
Income before federal income tax $ 478,564 $ 468,839 $ 462,936
Statutory federal income tax rate 35% 35% 34%
---------------------------------------------------------------------------------
Statutory federal income tax $ 167,497 $ 164,094 $ 157,398
Additions (reductions) in federal
income tax
1989 Settlement 4,213 4,256 4,003
Allowance for funds used during
construction (2,450) (2,304) (4,118)
Tax credits (6,837) (6,871) (6,586)
Excess of book depreciation over
tax depreciation 14,745 12,437 12,193
Interest capitalized 2,449 3,443 2,947
Other items (2,905) (2,779) (4,875)
---------------------------------------------------------------------------------
Total Federal Income Tax Expense $ 176,712 $ 172,276 $ 160,962
=================================================================================
Effective federal income tax rate 36.9% 36.7% 34.8%
</TABLE>
The Company's net operating loss (NOL) carryforwards for federal income tax
purposes is estimated to be approximately $1.6 billion at December 31, 1994.
The NOL will expire in the years 2004 through 2007. The amount of investment
tax credit (ITC) carryforwards, net of the 35% reduction required by the Tax
Reform Act of 1986, are approximately $142 million. The ITC carryforwards
expire by the year 2005. For financial reporting purposes, a valuation
allowance was not required to offset the deferred tax assets related to these
carryforwards.
On January 8, 1990 and October 10, 1992, the Company received Revenue Agents'
Reports disallowing certain deductions claimed by the Company on its tax
returns for the audit cycle years 1984-1987 and 1988-1989, respectively. The
Revenue Agents' Reports reflect proposed adjustments to the Company's federal
income tax returns for 1984 through 1989 which, if sustained, would give rise
to tax deficiencies totaling approximately $220 million. The Revenue Agents
have proposed ITC adjustments which, if sustained, would reduce the Company's
ITC carryforwards by approximately $96 million. The Company is protesting some
of the adjustments and is seeking an administrative and, if necessary, a
judicial review of the conclusions reached in the Revenue Agents' Reports. The
Company cannot predict either the timing or the manner in which these matters
will be resolved. If however, the ultimate disposition of any or all matters
raised in the Revenue Agents' Reports are adverse to the Company, the Company
expects that any deficiencies that may arise will be substantially offset by
the net operating loss carrybacks associated with the 1989 Shoreham abandonment
loss deduction of $1.8 billion and thus any impact would not have a material
effect on the Company's financial condition or cash flows.
<PAGE> 91
NOTE 10. COMMITMENTS AND CONTINGENCIES
COMMITMENTS
The Company has entered into substantial commitments for gas supply, purchased
power and transmission facilities. The costs associated with these commitments
are recovered from ratepayers through provisions in the Company's rate
schedules.
The Company expects that it will have to expend approximately $1 million in
1995 to meet continuous emission monitoring requirements and to meet Phase I
nitrogen oxide (NOx) reduction requirements. Subject to requirements that are
expected to be promulgated in forthcoming regulations, the Company estimates
that it may be required to expend approximately $80 million (net of NOx credit
sales) by 2003 to meet Phase II and Phase III NOx reduction requirements and
approximately $24 million by 1999 to meet potential requirements for the
control of hazardous air pollutants from power plants. The Company believes
that all of the above costs will be recoverable through rates.
CONTINGENCIES
Environmental Matters
The Company is subject to federal, State and local laws and regulations dealing
with air and water quality and other environmental matters. The Company
continually monitors its activities in order to determine the impact of such
activities on the environment and to ensure compliance with various
environmental laws. Except as set forth below, no material proceedings have
been commenced or, to the knowledge of the Company, are contemplated against
the Company with respect to any matter relating to the protection of the
environment.
The New York State Department of Environmental Conservation has indicated to
New York State utilities that it may require all such utilities to investigate
and, where necessary, remediate their former manufactured gas plant (MGP)
sites. The Company is the owner of six pieces of property on which the Company
or certain of its predecessor companies produced manufactured gas. Although
the exact amount of the Company's clean-up costs cannot yet be determined,
based on the findings of investigations at two of these six sites, preliminary
estimates indicate that it will cost approximately $35 million to clean up all
of these sites over the next five to ten years. Accordingly, the Company has
recorded a $35 million liability and has also recorded a $35 million regulatory
asset to reflect its belief that the PSC will provide for the future recovery
of these costs through rates as it has for other New York State utilities. The
Company has notified its former and current insurance carriers that it seeks to
recover from them certain of these clean-up costs. However, the Company is
unable to predict the amount of insurance recovery, if any, that it may obtain.
<PAGE> 92
The Company has been notified by the Environmental Protection Agency (EPA) that
it is one of many potentially responsible parties (PRPs) that may be liable for
the remediation of three contaminated licensed treatment, storage and disposal
sites. At one site, located in Philadelphia, Pennsylvania, and operated by
Metal Bank of America, the Company and nine other PRPs, all of which are public
utilities, have completed a Remedial Investigation and Feasibility Study which
is currently being reviewed by the EPA. The level of remediation required will
be determined when the EPA issues its decision, currently expected in May 1995.
The Company currently anticipates that the total cost to remediate this site
will be between $14 million and $30 million. The Company has recorded a
liability of $1.1 million representing its estimated share of the cost to
remediate this site. The Company believes that any cost incurred to remediate
this site will be recoverable through rates.
With respect to the other two sites, located in Kansas City, Kansas and Kansas
City, Missouri, the Company is investigating allegations that it had previously
stored or made agreements for disposal of polychlorinated biphenyls (PCBs) or
items containing PCBs at these sites. The Company is currently unable to
determine its share of the cost to remediate these two sites or the impact, if
any, on the Company's financial position. The Company believes that any cost
incurred to remediate these sites will be recoverable through rates.
As a result of its daily business activity, the Company is involved in various
legal and administrative proceedings, including other environmental
proceedings. The Company believes the resolution of these proceedings will not
have a material adverse effect on the Company's financial position or results
of operations.
NUCLEAR PLANT INSURANCE
The NRC requires the owners of nuclear facilities to maintain certain types of
insurance. For property damage at each nuclear generating site, the NRC
requires a minimum of $1.06 billion of coverage. The NRC has provided the
Company with a partial exemption from these requirements for Shoreham. With
respect to third party liability and property damage, the NRC requires nuclear
plant owners to carry $200 million in primary coverage. Pursuant to these
requirements, the Company carries property insurance and third party bodily
injury and property liability insurance for its 18% share in NMP2 and for
Shoreham. The annual premiums for this coverage are not material.
The policies also include retroactive premiums under certain circumstances.
For the property damage policies, the retroactive premium assessments, on a per
occurrence basis, could be as much as $4.6 million. Once Shoreham is declared
a non-nuclear site by the NRC this retroactive premium assessment may decrease
significantly.
<PAGE> 93
For the third party liability and property damage insurance, the retroactive
premium is related to the NRC's requirement that nuclear facility owners, in
addition to carrying $200 million in primary coverage, also participate in a
Secondary Financial Protection Fund (Fund). Under the Price Anderson Act, that
assessment related to the Fund could be up to $79.3 million per nuclear
incident in any one year at any nuclear unit, but not in excess of $10 million
in payments per year for each incident. The Price Anderson Act also limits
liability for third-party bodily injury and third-party property damage arising
out of a nuclear occurrence at each unit to $8.9 billion.
In 1994, the NRC granted the Company permission to withdraw from the Fund
because Shoreham had been defueled. The withdrawal was effective November 18,
1994. The withdrawal relieves the Company from any retroactive premium
assessment relating to any nuclear incident as of November 18, 1994 or later.
The Company remains liable for retroactive assessments for any nuclear incident
occurring prior to November 18, 1994 during the time the Company participated
in the Fund because of its Shoreham ownership. The likelihood that the
Company's retroactive premium responsibility would be triggered, however, is
remote since it is highly unlikely that a nuclear unit had a nuclear incident
prior to November 18, 1994, did not report the incident, and that incident is
significant enough to exceed the primary coverage of $200 million, thus
triggering the retroactive premium provisions. As a co-owner of NMP2, the
Company remains liable for 18% of any retroactive premium assessment levied
against the NMP2 owners.
<PAGE> 94
NOTE 11. SEGMENTS OF BUSINESS
The Company is engaged in the electric and natural gas utility businesses. The
Company serves residential, commercial and industrial customers in Nassau and
Suffolk Counties and the Rockaway Peninsula in Queens County, all on Long
Island, New York. Identifiable assets by segment include net utility plant,
regulatory assets, materials and supplies, accrued unbilled revenues, gas in
storage, fuel and deferred charges. Assets utilized for overall Company
operations consist primarily of cash and cash equivalents, accounts receivable
and unamortized cost of issuing securities.
<TABLE>
<CAPTION>
(In millions of dollars)
------------------------------------------------------------------------------------------------------------------
For year ended December 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Electric $ 2,481 $ 2,352 $ 2,195
Gas 586 529 427
------------------------------------------------------------------------------------------------------------------
Total $ 3,067 $ 2,881 $ 2,622
==================================================================================================================
OPERATING EXPENSES (EXCLUDES FEDERAL INCOME TAX)
Electric $ 1,640 $ 1,514 $ 1,355
Gas 501 427 353
------------------------------------------------------------------------------------------------------------------
Total $ 2,140 $ 1,941 1,708
==================================================================================================================
OPERATING INCOME (BEFORE FEDERAL INCOME TAX)
Electric $ 842 $ 838 $ 840
Gas 85 102 74
------------------------------------------------------------------------------------------------------------------
Total operating income 927 940 914
AFC (7) (7) (12)
Other income and deductions (45) (56) (50)
Interest charges 500 534 513
Federal income tax 177 172 161
------------------------------------------------------------------------------------------------------------------
Net Income $ 302 $ 297 $ 302
==================================================================================================================
DEPRECIATION AND AMORTIZATION
Electric $ 112 $ 106 $ 104
Gas 19 16 15
------------------------------------------------------------------------------------------------------------------
Total $ 131 $ 122 $ 119
==================================================================================================================
CONSTRUCTION AND NUCLEAR FUEL EXPENDITURES*
Electric $ 155 $ 171 $ 164
Gas 125 134 109
------------------------------------------------------------------------------------------------------------------
Total $ 280 $ 305 $ 273
==================================================================================================================
</TABLE>
*Includes non-cash allowance for other funds used during construction and
excludes Shoreham
post settlement costs.
<TABLE>
<CAPTION>
(In millions of dollars)
------------------------------------------------------------------------------------------------------------------
At December 31 1994 1993 1992
------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
IDENTIFIABLE ASSETS
Electric $ 10,999 $ 11,194 $ 8,867
Gas 1,184 1,078 768
Total identifiable assets 12,183 12,272 9,635
Assets utilized for overall Company operations 1,034 1,121 1,129
------------------------------------------------------------------------------------------------------------------
Total Assets $ 13,217 $ 13,393 $ 10,764
------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE> 95
NOTE 12. QUARTERLY FINANCIAL INFORMATION
(Unaudited)
<TABLE>
<CAPTION>
(In thousands of dollars except earnings per common share)
-----------------------------------------------------------------------------------------------------------------------
1994 1993
-----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
OPERATING REVENUES
For the quarter ended March 31 $ 872,143 $ 760,451
June 30 626,310 604,871
September 30 913,440 849,700
December 31 655,414 665,973
-----------------------------------------------------------------------------------------------------------------------
OPERATING INCOME
For the quarter ended March 31 $ 183,865 $ 192,391
June 30 139,478 167,599
September 30 276,965 263,984
December 31 144,637 131,577
-----------------------------------------------------------------------------------------------------------------------
NET INCOME
For the quarter ended March 31 $ 69,620 $ 67,861
June 30 24,787 56,806
September 30 168,872 144,549
December 31 38,573 27,347
-----------------------------------------------------------------------------------------------------------------------
EARNINGS FOR COMMON STOCK
For the quarter ended March 31 $ 56,348 $ 53,286
June 30 11,516 42,451
September 30 155,620 131,022
December 31 25,348 13,696
-----------------------------------------------------------------------------------------------------------------------
EARNINGS PER COMMON SHARE
For the quarter ended March 31 $ .50 $ .48
June 30 .10 .38
September 30 1.32 1.17
December 31 .21 .12
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
In the fourth quarter of 1993, the Company recorded income of approximately
$6.5 million, net of tax effects, or $.06 per common share related to the
settlement of certain litigation. In addition, in the fourth quarter of 1993,
the Company recorded a charge to earnings of approximately $7.3 million, net of
tax effects or $.07 per common share principally related to previously deferred
storm costs and the reconciliation of certain ratemaking mechanisms recorded in
connection with the conclusion of the Company's rate year.
<PAGE> 96
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Shareowners and Board of Directors of Long Island Lighting Company
We have audited the accompanying balance sheet of Long Island Lighting Company
and the related statement of capitalization as of December 31, 1994 and 1993
and the related statements of income, retained earnings and cash flows for each
of the three years in the period ended December 31, 1994. Our audits also
included the financial statement schedule listed in the Index at Item 14(a).
These financial statements and schedule are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Long Island Lighting Company
at December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles. Also, in our
opinion, the related financial statement schedule, when considered in relation
to the basic financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ Ernst & Young LLP
Melville, New York
February 3, 1995
<PAGE> 97
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
Information required by Item 10 as to the Company's Executive
Officers is set forth in Item 1, "Business" under the heading "Executive
Officers of the Company" above. Information required by Item 10 as to the
Company's Directors may be found in the Company's proxy statement for its
annual meeting to be held on May 24, 1995 (the "Annual Meeting"). Such proxy
statement is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION
Information required by Item 11 may be found in the Company's
proxy statement for the Annual Meeting. Such proxy statement is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information required by Item 12 may be found in the Company's
proxy statement for the Annual Meeting. Such proxy statement is incorporated
herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information required by Item 13 may be found in the Company's
proxy statement for the Annual Meeting. Such proxy statement is incorporated
herein by reference.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a)(1) List of Financial Statements
Statement of Income for each of the three years in the period
ended December 31, 1994.
Balance Sheet at December 31, 1994 and 1993.
Statement of Retained Earnings for each of the three years
in the period ended December 31, 1994.
Statement of Capitalization at December 31, 1994 and 1993.
Statement of Cash Flows for each of the three years in the
period ended December 31, 1994.
Notes to Financial Statements.
<PAGE> 98
(2) List of Financial Statement Schedules
Valuation and Qualifying Accounts (Schedule II)
(3) List of Exhibits
Exhibits listed below which have been filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933 or the Securities Exchange
Act of 1934, and which were filed as noted below, are hereby incorporated by
reference and made a part of this report with the same effect as if filed
herewith.
3(a) Restated Certificate of Incorporation of the Company dated November
11, 1993 (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1993.)
(b) By-laws of the Company as amended on May 28, 1991 (filed as an Exhibit
to the Company's Form 10-K for the Year Ended December 31, 1991.)
4(a) General and Refunding Indenture dated as of June 1, 1975 (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991.)
Twenty-seven Supplemental Indentures to the General and Refunding
Indenture dated as of June 1, 1975, as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 06/1/75 10-K 12/31/87
Second 09/1/75 10-K 12/31/87
Third 06/1/76 10-K 12/31/87
Fourth 12/1/76 10-K 12/31/87
Fifth 05/1/77 10-K 12/31/87
Sixth 04/1/78 10-K 12/31/87
Seventh 03/1/79 10-K 12/31/87
Eighth 02/1/80 10-K 12/31/87
Ninth 03/1/81 10-K 12/31/87
Tenth 07/1/81 10-K 12/31/87
Eleventh 07/1/81 10-K 12/31/87
Twelfth 12/1/81 10-K 12/31/87
Thirteenth 12/1/81 10-K 12/31/87
Fourteenth 06/1/82 10-K 12/31/87
Fifteenth 10/1/82 10-K 12/31/87
Sixteenth 04/1/83 10-K 12/31/87
Seventeenth 05/1/83 10-K 12/31/87
Eighteenth 09/1/84 10-K 12/31/87
Nineteenth 10/1/84 10-K 12/31/87
Twentieth 06/1/85 10-K 12/31/87
Twenty-first 04/1/86 10-K 12/31/87
Twenty-second 02/1/91 10-K 12/31/90
Twenty-third 05/1/91 10-K 12/31/91
Twenty-fourth 07/1/91 10-K 12/31/91
</TABLE>
<PAGE> 99
<TABLE>
<S> <C> <C> <C>
Twenty-fifth 05/1/92 10-K 12/31/92
Twenty-sixth 07/1/92 10-K 12/31/92
*Twenty-seventh 06/1/94 10-K 12/31/94
</TABLE>
4(b) Indenture of Mortgage and Deed of Trust dated as of September 1, 1951
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1987.)
Fifty Supplemental Indentures to the Indenture of Mortgage and Deed of
Trust dated as of September 1, 1951, as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 12/1/51 10-K 12/31/87
Second 10/1/52 10-K 12/31/87
Third 09/1/53 10-K 12/31/87
Fourth 12/1/54 10-K 12/31/87
Fifth 11/1/55 10-K 12/31/87
Sixth 12/1/56 10-K 12/31/87
Seventh 05/1/58 10-K 12/31/87
Eighth 07/1/59 10-K 12/31/87
Ninth 08/1/61 10-K 12/31/87
Tenth 04/1/63 10-K 12/31/87
Eleventh 06/1/64 10-K 12/31/87
Twelfth 06/1/65 10-K 12/31/87
Thirteenth 03/1/66 10-K 12/31/87
Fourteenth 04/1/67 10-K 12/31/87
Fifteenth 09/1/69 10-K 12/31/87
Sixteenth 09/1/70 10-K 12/31/87
Seventeenth 04/1/71 10-K 12/31/87
Eighteenth 12/1/71 10-K 12/31/87
Nineteenth 09/1/72 10-K 12/31/87
Twentieth 12/1/73 10-K 12/31/87
Twenty-first 06/1/74 10-K 12/31/87
Twenty-second 11/1/74 10-K 12/31/87
Twenty-third 06/1/75 10-K 12/31/87
Twenty-fourth 09/1/75 10-K 12/31/87
Twenty-fifth 06/1/76 10-K 12/31/87
Twenty-sixth 12/1/76 10-K 12/31/87
Twenty-seventh 05/1/77 10-K 12/31/87
Twenty-eighth 04/1/78 10-K 12/31/87
Twenty-ninth 03/1/79 10-K 12/31/87
Thirtieth 02/1/80 10-K 12/31/87
Thirty-first 03/1/81 10-K 12/31/87
Thirty-second 07/1/81 10-K 12/31/87
Thirty-third 07/1/81 10-K 12/31/87
Thirty-fourth 12/1/81 10-K 12/31/87
</TABLE>
__________________________________
*Filed herewith.
<PAGE> 100
<TABLE>
<S> <C> <C> <C>
Thirty-fifth 12/1/81 10-K 12/31/87
Thirty-sixth 06/1/82 10-K 12/31/87
Thirty-seventh 10/1/82 10-K 12/31/87
Thirty-eighth 04/1/83 10-K 12/31/87
Thirty-ninth 05/1/83 10-K 12/31/87
Fortieth 02/29/84 10-K 12/31/87
Forty-first 09/1/84 10-K 12/31/87
Forty-second 10/1/84 10-K 12/31/87
Forty-third 06/1/85 10-K 12/31/87
Forty-fourth 04/1/86 10-K 12/31/87
Forty-fifth 02/1/91 10-K 12/31/90
Forty-sixth 05/1/91 10-K 12/31/91
Forty-seventh 07/1/91 10-K 12/31/91
Forty-eighth 05/1/92 10-K 12/31/92
Forty-ninth 07/1/92 10-K 12/31/92
*Fiftieth 06/1/94 10-K 12/31/94
</TABLE>
4(c) Debenture Indenture dated as of November 1, 1986 from the Company to
The Connecticut Bank and Trust Company, National Association, as
Trustee (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1986).
Seven Supplemental Indentures to the Debenture Indenture dated as of
November 1, 1986, filed as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 11/1/86 10-K 12/31/86
Second 04/1/86 10-K 12/31/89
Third 07/1/86 10-K 12/31/89
Fourth 07/1/92 10-K 12/31/92
Fifth 11/1/92 10-K 12/31/92
Sixth 06/1/93 10-K 12/31/92
Seventh 07/1/93 10-K 12/31/92
</TABLE>
__________________________________
*Filed herewith.
<PAGE> 101
4(d) Debenture Indenture dated as of November 1, 1992 from the Company to
Chemical Bank, as Trustee (filed as an Exhibit to the Company's Form
10-K for the Year Ended December 31, 1992).
Four Supplemental Indentures to the Debenture Indenture dated as of
November 1, 1992, filed as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 01/1/93 10-K 12/31/92
Second 03/1/93 10-K 12/31/92
Third 03/1/93 10-K 12/31/92
Fourth 03/1/93 10-K 12/31/92
</TABLE>
10(a) Sound Cable Project Facilities and Marketing Agreement dated as of
August 26, 1987 between the Company and the Power Authority of the
State of New York (filed as an Exhibit to the Company's Form 10-K for
the Year Ended December 31, 1987).
10(b) Transmission Agreement by and between the Company and Consolidated
Edison Company of New York, Inc. dated as of March 31, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(c) Contract for the sale of Firm Power and Energy by and between the
Company and the State of New York dated as of April 26, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(d) Capacity Supply Agreement dated as of December 13, 1991 between the
Company and the Power Authority of the State of New York (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(e) Nine Mile Point Nuclear Station Unit 2 Operating Agreement dated as of
January 1, 1993 by and between the Company, New York State Electric &
Gas Corporation, Rochester Gas and Electric Corporation and Central
Hudson Gas and Electric Corporation (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1993).
10(f) Settlement Agreement on Issues Related to Nine Mile Two Nuclear Plant
dated as of June 6, 1990 by and between the Company, the Staff of the
Department of Public Service and others (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1990).
10(g) Settlement Agreement -- LILCO Issues dated as of February 28, 1989 by
and between the Company and the State of New York (filed as an Exhibit
to the Company's Form 10-K for the Year Ended December 31, 1988).
10(h) Amended and Restated Asset Transfer Agreement by and between the
Company and the Long Island Power Authority dated as of June 16, 1988
as amended and restated on April 14, 1989 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1989).
<PAGE> 102
10(i) Memorandum of Understanding concerning proposed agreements on power
supply for Long Island dated as of June 16, 1988 by and between the
Company and New York Power Authority as amended May 24, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(j) Rate Moderation Agreement submitted by the staff of the New York
State Public Service Commission on March 16, 1989 and supported by the
Company (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1989).
10(k) Site Cooperation and Reimbursement Agreement dated as of January 24,
1990 by and between the Company and Long Island Power Authority (filed
as an Exhibit to the Company's Form 10-K for the Year Ended December
31, 1989).
10(l) Stipulation of settlement of federal Racketeer Influenced and Corrupt
Organizations Act Class Action and False Claims Action dated as of
February 27, 1989 among the attorneys for the Company, the ratepayer
class, the United States of America and the individual defendants
named therein (filed as an Exhibit to the Company's Form 10-K for the
Year Ended December 31, 1988).
10(m) Revolving Credit Agreement dated as of June 27, 1989, between the
Company and the banks and co-agents listed therein, with the Exhibits
thereto (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1989) and as amended by the First Amendment dated
as of October 13, 1989 (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1990) and as amended by the Second
Amendment dated as of March 5, 1992 and as modified by a Waiver dated
November 5, 1992 (filed as an Exhibit to the Company's Form 10-K for
the Year Ended December 31, 1992).
10(n) Indenture of Trust dated as of December 1, 1989 by and between New
York State Energy Research and Development Authority ("NYSERDA") and
The Connecticut National Bank, as Trustee, relating to the 1989 EFRBs
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1989).
Participation Agreement dated as of December 1, 1989 by and between
NYSERDA and the Company relating to the 1989 EFRBs (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(o) Indenture of Trust dated as of May 1, 1990 by and between NYSERDA and
The Connecticut National Bank, as Trustee, relating to the 1990 EFRBs
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1990).
Participation Agreement dated as of May 1, 1990 by and between NYSERDA
and the Company relating to the 1990 EFRBs (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1990).
10(p) Indenture of Trust dated as of January 1, 1991 by and between NYSERDA
and The Connecticut National Bank, as Trustee, relating to the 1991
EFRBs (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1990).
Participation Agreement dated as of January 1, 1991 by and between
NYSERDA and the Company relating to the 1991 EFRBs (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1990).
<PAGE> 103
10(q) Indenture of Trust dated as of February 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series A (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1991).
Participation Agreement dated as of February 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series A (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(r) Indenture of Trust dated as of February 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series B (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1991).
Participation Agreement dated as of February 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series B (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(s) Indenture of Trust dated as of August 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series C (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1992).
Participation Agreement dated as of August 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series C (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1992).
10(t) Indenture of Trust dated as of August 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series D (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1992).
Participation Agreement dated as of August 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series D (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1992).
10(u) Indenture of Trust dated as of November 1, 1993 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1993 EFRBs, Series A
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993).
Participation Agreement dated as of November 1, 1993 by and between
NYSERDA and the Company relating to the 1993 EFRBs, Series A (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1993).
10(v) Indenture of Trust dated as of November 1, 1993 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1993 EFRBs, Series B
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993).
Participation Agreement dated as of November 1, 1993 by and between
NYSERDA and the Company relating to the 1993 EFRBs, Series B (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1993).
<PAGE> 104
*10(w) Indenture of Trust dated as of October 1, 1994 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1994 EFRBs, Series A.
Participation Agreement dated as of October 1, 1994 by and between
NYSERDA and the Company relating to the 1994 EFRBs, Series A.
10(x) Supplemental Death and Retirement Benefits Plan as amended and
restated effective January 1, 1993 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1993) and related
Trust Agreement, which Trust Agreement was filed as Exhibit 10(q) to
the Company's Form 10-K for the Year Ended December 31, 1990.
*10(y) Executive Agreements and Management Contracts
*(1) Executive Employment Agreement dated as of January 30, 1984 by
and between William J. Catacosinos and the Company, as amended
by amendments dated March 20, 1987 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1986),
December 22, 1989 (filed as an Exhibit to the Company's Form
10-K for the Year Ended December 31, 1989), and December 2,
1991 (filed as an Exhibit to the Company's Form 10-K for the
Year Ended December 31, 1991), which amendment was restated by
an amendment dated as of December 2, 1991; an Executive
Employment Agreement dated as of November 30, 1994.
*(2) Executive Employment Agreement dated as of November
21, 1994 by and between the Company and Theodore A.
Babcock, which agreement is substantially the same as
Executive Employment Agreement by and between the Company and
(1) James T. Flynn, (2) Joseph E. Fontana, (3) Robert
X. Kelleher, (4) John D. Leonard, Jr., (5) Adam M. Madsen,
(6) Kathleen A. Marion, (7) Arthur C. Marquardt, (8) Brian R.
McCaffrey, (9) Joseph W. McDonnell, (10) Anthony Nozzolillo,
(11) Richard Reichler, (12) William G. Schiffmacher, (13)
Robert B. Steger, (14) William E. Steiger, and (15) Edward J.
Youngling.
*(3) Indemnification Agreement by and between the Company
and Theodore A. Babcock dated as of February 23, 1994, which
agreement is substantially the same as Indemnification
Agreement by and between the Company and (1) James T. Flynn
dated as of November 25, 1987, (2) Joseph E. Fontana dated
as of October 20, 1994, (3) Robert X. Kelleher
dated as of November 25, 1987, (4) John D. Leonard, Jr. dated
as of November 25, 1987, (5) Adam M. Madsen dated as of
November 25, 1987, (6) Kathleen A. Marion dated as of May 30,
1990, (7) Arthur C. Marquardt dated as of January 21, 1991,
(8) Brian R. McCaffrey dated as of November 25, 1987, (9)
Joseph W. McDonnell dated as of March 18, 1988, (10) Anthony
Nozzolillo dated as of July 29, 1992, (11) Richard Reichler
dated as of September 30, 1993, (12) William Schiffmacher
dated as of November 25, 1987, (13) Robert B. Steger dated as
of February 20, 1990, (14) William E. Steiger, Jr. dated as of
March 1, 1989, and (15) Edward J. Youngling dated as of
November 4, 1988.
*(4) Indemnification Agreement by and between the Company
and Vicki L. Fuller dated as of January 3, 1994, which
agreement is substantially the same as Indemnification
Agreement by and between the Company and (1) A. James Barnes
dated as of January 31, 1992, (2) George Bugliarello dated
as of May 30, 1990, (3) Renso L. Caporali dated as of April
17, 1992, (4) William J. Catacosinos dated as of
November 19, 1987, (5) Peter O. Crisp dated as of
April 23, 1992, (6) Katherine D. Ortega dated as of April 20,
1993, (7) Basil A. Paterson dated as of November 19, 1987, (8)
Richard L. Schmalensee dated as of
__________________________________
*Filed herewith.
<PAGE> 105
February 8, 1992, (9) George J. Sideris dated as of November
30, 1987, (10) John H. Talmage dated as of November 19, 1987,
and (11) Phyllis A. Vineyard dated as of November 19, 1987.
(5) Indemnification Agreement by and between the Company
and Lionel M. Goldberg dated as of April 20, 1993, (filed as
an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993) which agreement is substantially the same
as Indemnification Agreements by and between the Company and
Eben W. Pyne dated as of April 20, 1993, and Winfield E. Fromm
dated as of April 12, 1994.
(6) Long Island Lighting Company Officers' and Directors'
Protective Trust dated as of April 18, 1988 as Amended and
Restated as of September 1, 1994 by and between the Company
and Clarence Goldberg, as Trustee (filed as an Exhibit to the
Company's Form 10-Q for the Quarterly period Ended September
30, 1994).
(7) Long Island Lighting Company's Retirement Plan for Directors
dated as of February 2, 1990 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1989).
(8) Trust Agreement for Officers dated March 20, 1987 by and
between the Company and Clarence Goldberg as Trustee (filed as
an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1988).
*(9) Consulting Agreement dated as of April 12, 1994 by and
between the Company and Winfield E. Fromm, which agreement is
substantially the same as Consulting Agreements dated as of
April 12, 1994 by and between the Company and Lionel M.
Goldberg and Eben W. Pyne.
*23 Consent of Ernst & Young LLP, Independent Auditors.
*24(a) Powers of Attorney executed by the Directors and Officers of
the Company.
*24(b) Certificate as to Corporate Power of Attorney.
*24(c) Certified copy of Resolution of Board of Directors authorizing
signature pursuant to Power of Attorney.
*27 Financial Data Schedule.
Financial Statements of subsidiary companies accounted for by
the equity method have been omitted because such subsidiaries do not constitute
significant subsidiaries.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of
1994.
In its Report on Form 8-K dated February 1, 1995, the Company
reported earnings of $2.15 per common share on revenues of
$3,067,307,000 for the year ended December 31, 1994.
__________________________________
*Filed herewith.
<PAGE> 106
LONG ISLAND LIGHTING COMPANY
SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS
(THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------------------
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
-------------------------------------------------------------------------------------------------------------
ADDITIONS
---------------------------
CHARGED
BALANCE AT CHARGED TO TO OTHER BALANCE AT
DESCRIPTION BEGINNING COSTS AND ACCOUNTS- DEDUCTIONS- END OF
OF PERIOD EXPENSES DESCRIBE DESCRIBE PERIOD
-------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Year ended December 31,1994
Deducted from asset accounts:
Allowance for doubtful accounts $23,889 $19,542 $20,066 (1) $23,365
Year ended December 31,1993
Deducted from asset accounts:
Allowance for doubtful accounts $24,375 $18,555 $19,041 (1) $23,889
Year ended December 31,1992
Deducted from asset accounts:
Allowance for doubtful accounts $26,935 $16,329 $18,889 (1) $24,375
</TABLE>
(1) Uncollectible accounts written off, net of recoveries.
<PAGE> 107
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Date Signature and Title
---- ---------------------------------
WILLIAM J. CATACOSINOS*
---------------------------------
William J. Catacosinos, Principal
Executive Officer, President and
Chairman of the Board of Directors
JOSEPH E. FONTANA
---------------------------------
Joseph E. Fontana, Controller,
Principal Accounting Officer
A. JAMES BARNES*
---------------------------------
A. James Barnes, Director
GEORGE BUGLIARELLO*
---------------------------------
George Bugliarello, Director
March 14, 1995
RENSO L. CAPORALI*
---------------------------------
Renso L. Caporali, Director
PETER O. CRISP*
---------------------------------
Peter O. Crisp, Director
VICKI L. FULLER*
---------------------------------
Vicki L. Fuller, Director
KATHERINE D. ORTEGA*
---------------------------------
Katherine D. Ortega, Director
BASIL A. PATERSON*
---------------------------------
Basil A. Paterson, Director
RICHARD L. SCHMALENSEE*
---------------------------------
Richard L. Schmalensee, Director
GEORGE J. SIDERIS*
---------------------------------
George J. Sideris, Director
JOHN H. TALMAGE*
---------------------------------
John H. Talmage, Director
PHYLLIS S. VINEYARD*
---------------------------------
Phyllis S. Vineyard, Director
*ANTHONY NOZZOLILLO
---------------------------------
Anthony Nozzolillo (Individually,
as Senior Vice President and Principal
Financial Officer and as
attorney-in-fact for each of
the persons indicated)
March 14, 1995
<PAGE> 108
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned, thereunto duly authorized.
LONG ISLAND LIGHTING COMPANY
Date: March 14, 1995 By: ANTHONY NOZZOLILLO
----------------------------
Anthony Nozzolillo
Principal Financial Officer
Original powers of attorney, authorizing Kathleen A. Marion
and Anthony Nozzolillo, and each of them, to sign this report and any
amendments thereto, as attorney-in-fact for each of the Directors and Officers
of the Company, and a certified copy of the resolution of the Board of
Directors of the Company authorizing said persons and each of them to sign this
report and amendments thereto as attorney-in-fact for any Officers signing on
behalf of the Company, have been, are being filed or will be filed with the
Securities and Exchange Commission.
<PAGE> 109
EXHIBIT INDEX
-------------
Exhibit
No. Description
------- ------------
3(a) Restated Certificate of Incorporation of the Company dated November
11, 1993 (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1993.)
(b) By-laws of the Company as amended on May 28, 1991 (filed as an Exhibit
to the Company's Form 10-K for the Year Ended December 31, 1991.)
4(a) General and Refunding Indenture dated as of June 1, 1975 (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991.)
Twenty-seven Supplemental Indentures to the General and Refunding
Indenture dated as of June 1, 1975, as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 06/1/75 10-K 12/31/87
Second 09/1/75 10-K 12/31/87
Third 06/1/76 10-K 12/31/87
Fourth 12/1/76 10-K 12/31/87
Fifth 05/1/77 10-K 12/31/87
Sixth 04/1/78 10-K 12/31/87
Seventh 03/1/79 10-K 12/31/87
Eighth 02/1/80 10-K 12/31/87
Ninth 03/1/81 10-K 12/31/87
Tenth 07/1/81 10-K 12/31/87
Eleventh 07/1/81 10-K 12/31/87
Twelfth 12/1/81 10-K 12/31/87
Thirteenth 12/1/81 10-K 12/31/87
Fourteenth 06/1/82 10-K 12/31/87
Fifteenth 10/1/82 10-K 12/31/87
Sixteenth 04/1/83 10-K 12/31/87
Seventeenth 05/1/83 10-K 12/31/87
Eighteenth 09/1/84 10-K 12/31/87
Nineteenth 10/1/84 10-K 12/31/87
Twentieth 06/1/85 10-K 12/31/87
Twenty-first 04/1/86 10-K 12/31/87
Twenty-second 02/1/91 10-K 12/31/90
Twenty-third 05/1/91 10-K 12/31/91
Twenty-fourth 07/1/91 10-K 12/31/91
</TABLE>
<PAGE> 110
<TABLE>
<S> <C> <C> <C>
Twenty-fifth 05/1/92 10-K 12/31/92
Twenty-sixth 07/1/92 10-K 12/31/92
*Twenty-seventh 06/1/94 10-K 12/31/94
</TABLE>
4(b) Indenture of Mortgage and Deed of Trust dated as of September 1, 1951
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1987.)
Fifty Supplemental Indentures to the Indenture of Mortgage and Deed of
Trust dated as of September 1, 1951, as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 12/1/51 10-K 12/31/87
Second 10/1/52 10-K 12/31/87
Third 09/1/53 10-K 12/31/87
Fourth 12/1/54 10-K 12/31/87
Fifth 11/1/55 10-K 12/31/87
Sixth 12/1/56 10-K 12/31/87
Seventh 05/1/58 10-K 12/31/87
Eighth 07/1/59 10-K 12/31/87
Ninth 08/1/61 10-K 12/31/87
Tenth 04/1/63 10-K 12/31/87
Eleventh 06/1/64 10-K 12/31/87
Twelfth 06/1/65 10-K 12/31/87
Thirteenth 03/1/66 10-K 12/31/87
Fourteenth 04/1/67 10-K 12/31/87
Fifteenth 09/1/69 10-K 12/31/87
Sixteenth 09/1/70 10-K 12/31/87
Seventeenth 04/1/71 10-K 12/31/87
Eighteenth 12/1/71 10-K 12/31/87
Nineteenth 09/1/72 10-K 12/31/87
Twentieth 12/1/73 10-K 12/31/87
Twenty-first 06/1/74 10-K 12/31/87
Twenty-second 11/1/74 10-K 12/31/87
Twenty-third 06/1/75 10-K 12/31/87
Twenty-fourth 09/1/75 10-K 12/31/87
Twenty-fifth 06/1/76 10-K 12/31/87
Twenty-sixth 12/1/76 10-K 12/31/87
Twenty-seventh 05/1/77 10-K 12/31/87
Twenty-eighth 04/1/78 10-K 12/31/87
Twenty-ninth 03/1/79 10-K 12/31/87
Thirtieth 02/1/80 10-K 12/31/87
Thirty-first 03/1/81 10-K 12/31/87
Thirty-second 07/1/81 10-K 12/31/87
Thirty-third 07/1/81 10-K 12/31/87
Thirty-fourth 12/1/81 10-K 12/31/87
</TABLE>
__________________________________
*Filed herewith.
<PAGE> 111
<TABLE>
<S> <C> <C> <C>
Thirty-fifth 12/1/81 10-K 12/31/87
Thirty-sixth 06/1/82 10-K 12/31/87
Thirty-seventh 10/1/82 10-K 12/31/87
Thirty-eighth 04/1/83 10-K 12/31/87
Thirty-ninth 05/1/83 10-K 12/31/87
Fortieth 02/29/84 10-K 12/31/87
Forty-first 09/1/84 10-K 12/31/87
Forty-second 10/1/84 10-K 12/31/87
Forty-third 06/1/85 10-K 12/31/87
Forty-fourth 04/1/86 10-K 12/31/87
Forty-fifth 02/1/91 10-K 12/31/90
Forty-sixth 05/1/91 10-K 12/31/91
Forty-seventh 07/1/91 10-K 12/31/91
Forty-eighth 05/1/92 10-K 12/31/92
Forty-ninth 07/1/92 10-K 12/31/92
*Fiftieth 06/1/94 10-K 12/31/94
</TABLE>
4(c) Debenture Indenture dated as of November 1, 1986 from the Company to
The Connecticut Bank and Trust Company, National Association, as
Trustee (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1986).
Seven Supplemental Indentures to the Debenture Indenture dated as of
November 1, 1986, filed as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 11/1/86 10-K 12/31/86
Second 04/1/86 10-K 12/31/89
Third 07/1/86 10-K 12/31/89
Fourth 07/1/92 10-K 12/31/92
Fifth 11/1/92 10-K 12/31/92
Sixth 06/1/93 10-K 12/31/92
Seventh 07/1/93 10-K 12/31/92
</TABLE>
__________________________________
*Filed herewith.
<PAGE> 112
4(d) Debenture Indenture dated as of November 1, 1992 from the Company to
Chemical Bank, as Trustee (filed as an Exhibit to the Company's Form
10-K for the Year Ended December 31, 1992).
Four Supplemental Indentures to the Debenture Indenture dated as of
November 1, 1992, filed as follows:
<TABLE>
<CAPTION>
Previously Filed As An
Supplemental Indenture Exhibit To The Company's
Number Date Form Date
------ ---- ---- ----
<S> <C> <C> <C>
First 01/1/93 10-K 12/31/92
Second 03/1/93 10-K 12/31/92
Third 03/1/93 10-K 12/31/92
Fourth 03/1/93 10-K 12/31/92
</TABLE>
10(a) Sound Cable Project Facilities and Marketing Agreement dated as of
August 26, 1987 between the Company and the Power Authority of the
State of New York (filed as an Exhibit to the Company's Form 10-K for
the Year Ended December 31, 1987).
10(b) Transmission Agreement by and between the Company and Consolidated
Edison Company of New York, Inc. dated as of March 31, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(c) Contract for the sale of Firm Power and Energy by and between the
Company and the State of New York dated as of April 26, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(d) Capacity Supply Agreement dated as of December 13, 1991 between the
Company and the Power Authority of the State of New York (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(e) Nine Mile Point Nuclear Station Unit 2 Operating Agreement dated as of
January 1, 1993 by and between the Company, New York State Electric &
Gas Corporation, Rochester Gas and Electric Corporation and Central
Hudson Gas and Electric Corporation (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1993).
10(f) Settlement Agreement on Issues Related to Nine Mile Two Nuclear Plant
dated as of June 6, 1990 by and between the Company, the Staff of the
Department of Public Service and others (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1990).
10(g) Settlement Agreement -- LILCO Issues dated as of February 28, 1989 by
and between the Company and the State of New York (filed as an Exhibit
to the Company's Form 10-K for the Year Ended December 31, 1988).
10(h) Amended and Restated Asset Transfer Agreement by and between the
Company and the Long Island Power Authority dated as of June 16, 1988
as amended and restated on April 14, 1989 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1989).
<PAGE> 113
10(i) Memorandum of Understanding concerning proposed agreements on power
supply for Long Island dated as of June 16, 1988 by and between the
Company and New York Power Authority as amended May 24, 1989 (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(j) Rate Moderation Agreement submitted by the staff of the New York
State Public Service Commission on March 16, 1989 and supported by the
Company (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1989).
10(k) Site Cooperation and Reimbursement Agreement dated as of January 24,
1990 by and between the Company and Long Island Power Authority (filed
as an Exhibit to the Company's Form 10-K for the Year Ended December
31, 1989).
10(l) Stipulation of settlement of federal Racketeer Influenced and Corrupt
Organizations Act Class Action and False Claims Action dated as of
February 27, 1989 among the attorneys for the Company, the ratepayer
class, the United States of America and the individual defendants
named therein (filed as an Exhibit to the Company's Form 10-K for the
Year Ended December 31, 1988).
10(m) Revolving Credit Agreement dated as of June 27, 1989, between the
Company and the banks and co-agents listed therein, with the Exhibits
thereto (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1989) and as amended by the First Amendment dated
as of October 13, 1989 (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1990) and as amended by the Second
Amendment dated as of March 5, 1992 and as modified by a Waiver dated
November 5, 1992 (filed as an Exhibit to the Company's Form 10-K for
the Year Ended December 31, 1992).
10(n) Indenture of Trust dated as of December 1, 1989 by and between New
York State Energy Research and Development Authority ("NYSERDA") and
The Connecticut National Bank, as Trustee, relating to the 1989 EFRBs
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1989).
Participation Agreement dated as of December 1, 1989 by and between
NYSERDA and the Company relating to the 1989 EFRBs (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1989).
10(o) Indenture of Trust dated as of May 1, 1990 by and between NYSERDA and
The Connecticut National Bank, as Trustee, relating to the 1990 EFRBs
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1990).
Participation Agreement dated as of May 1, 1990 by and between NYSERDA
and the Company relating to the 1990 EFRBs (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1990).
10(p) Indenture of Trust dated as of January 1, 1991 by and between NYSERDA
and The Connecticut National Bank, as Trustee, relating to the 1991
EFRBs (filed as an Exhibit to the Company's Form 10-K for the Year
Ended December 31, 1990).
Participation Agreement dated as of January 1, 1991 by and between
NYSERDA and the Company relating to the 1991 EFRBs (filed as an
Exhibit to the Company's Form 10-K for the Year Ended December 31,
1990).
<PAGE> 114
10(q) Indenture of Trust dated as of February 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series A (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1991).
Participation Agreement dated as of February 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series A (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(r) Indenture of Trust dated as of February 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series B (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1991).
Participation Agreement dated as of February 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series B (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1991).
10(s) Indenture of Trust dated as of August 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series C (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1992).
Participation Agreement dated as of August 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series C (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1992).
10(t) Indenture of Trust dated as of August 1, 1992 by and between NYSERDA
and IBJ Schroder Bank and Trust Company, as Trustee, relating to the
1992 EFRBs, Series D (filed as an Exhibit to the Company's Form 10-K
for the Year Ended December 31, 1992).
Participation Agreement dated as of August 1, 1992 by and between
NYSERDA and the Company relating to the 1992 EFRBs, Series D (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1992).
10(u) Indenture of Trust dated as of November 1, 1993 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1993 EFRBs, Series A
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993).
Participation Agreement dated as of November 1, 1993 by and between
NYSERDA and the Company relating to the 1993 EFRBs, Series A (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1993).
10(v) Indenture of Trust dated as of November 1, 1993 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1993 EFRBs, Series B
(filed as an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993).
Participation Agreement dated as of November 1, 1993 by and between
NYSERDA and the Company relating to the 1993 EFRBs, Series B (filed as
an Exhibit to the Company's Form 10-K for the Year Ended December 31,
1993).
<PAGE> 115
*10(w) Indenture of Trust dated as of October 1, 1994 by and between NYSERDA
and Chemical Bank, as Trustee, relating to the 1994 EFRBs, Series A.
Participation Agreement dated as of October 1, 1994 by and between
NYSERDA and the Company relating to the 1994 EFRBs, Series A.
10(x) Supplemental Death and Retirement Benefits Plan as amended and
restated effective January 1, 1993 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1993) and related
Trust Agreement, which Trust Agreement was filed as Exhibit 10(q) to
the Company's Form 10-K for the Year Ended December 31, 1990.
*10(y) Executive Agreements and Management Contracts
*(1) Executive Employment Agreement dated as of January 30, 1984 by
and between William J. Catacosinos and the Company, as amended
by amendments dated March 20, 1987 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1986),
December 22, 1989 (filed as an Exhibit to the Company's Form
10-K for the Year Ended December 31, 1989), and December 2,
1991 (filed as an Exhibit to the Company's Form 10-K for the
Year Ended December 31, 1991), which amendment was restated by
an amendment dated as of December 2, 1991; an Executive
Employment Agreement dated as of November 30, 1994.
*(2) Executive Employment Agreement dated as of November
21, 1994 by and between the Company and Theodore A.
Babcock, which agreement is substantially the same as
Executive Employment Agreement by and between the Company and
(1) James T. Flynn, (2) Joseph E. Fontana, (3) Robert
X. Kelleher, (4) John D. Leonard, Jr., (5) Adam M. Madsen,
(6) Kathleen A. Marion, (7) Arthur C. Marquardt, (8) Brian R.
McCaffrey, (9) Joseph W. McDonnell, (10) Anthony Nozzolillo,
(11) Richard Reichler, (12) William G. Schiffmacher, (13)
Robert B. Steger, (14) William E. Steiger, and (15) Edward J.
Youngling.
*(3) Indemnification Agreement by and between the Company
and Theodore A. Babcock dated as of February 23, 1994, which
agreement is substantially the same as Indemnification
Agreement by and between the Company and (1) James T. Flynn
dated as of November 25, 1987, (2) Joseph E. Fontana dated
as of October 20, 1994, (3) Robert X. Kelleher
dated as of November 25, 1987, (4) John D. Leonard, Jr. dated
as of November 25, 1987, (5) Adam M. Madsen dated as of
November 25, 1987, (6) Kathleen A. Marion dated as of May 30,
1990, (7) Arthur C. Marquardt dated as of January 21, 1991,
(8) Brian R. McCaffrey dated as of November 25, 1987, (9)
Joseph W. McDonnell dated as of March 18, 1988, (10) Anthony
Nozzolillo dated as of July 29, 1992, (11) Richard Reichler
dated as of September 30, 1993, (12) William Schiffmacher
dated as of November 25, 1987, (13) Robert B. Steger dated as
of February 20, 1990, (14) William E. Steiger, Jr. dated as of
March 1, 1989, and (15) Edward J. Youngling dated as of
November 4, 1988.
*(4) Indemnification Agreement by and between the Company
and Vicki L. Fuller dated as of January 3, 1994, which
agreement is substantially the same as Indemnification
Agreement by and between the Company and (1) A. James Barnes
dated as of January 31, 1992, (2) George Bugliarello dated
as of May 30, 1990, (3) Renso L. Caporali dated as of April
17, 1992, (4) William J. Catacosinos dated as of
November 19, 1987, (5) Peter O. Crisp dated as of
April 23, 1992, (6) Katherine D. Ortega dated as of April 20,
1993, (7) Basil A. Paterson dated as of November 19, 1987, (8)
Richard L. Schmalensee dated as of
__________________________________
*Filed herewith.
<PAGE> 116
February 8, 1992, (9) George J. Sideris dated as of November
30, 1987, (10) John H. Talmage dated as of November 19, 1987,
and (11) Phyllis A. Vineyard dated as of November 19, 1987.
(5) Indemnification Agreement by and between the Company
and Lionel M. Goldberg dated as of April 20, 1993, (filed as
an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1993) which agreement is substantially the same
as Indemnification Agreements by and between the Company and
Eben W. Pyne dated as of April 20, 1993, and Winfield E. Fromm
dated as of April 12, 1994.
(6) Long Island Lighting Company Officers' and Directors'
Protective Trust dated as of April 18, 1988 as Amended and
Restated as of September 1, 1994 by and between the Company
and Clarence Goldberg, as Trustee (filed as an Exhibit to the
Company's Form 10-Q for the Quarterly period Ended September
30, 1994).
(7) Long Island Lighting Company's Retirement Plan for Directors
dated as of February 2, 1990 (filed as an Exhibit to the
Company's Form 10-K for the Year Ended December 31, 1989).
(8) Trust Agreement for Officers dated March 20, 1987 by and
between the Company and Clarence Goldberg as Trustee (filed as
an Exhibit to the Company's Form 10-K for the Year Ended
December 31, 1988).
*(9) Consulting Agreement dated as of April 12, 1994 by and
between the Company and Winfield E. Fromm, which agreement is
substantially the same as Consulting Agreements dated as of
April 12, 1994 by and between the Company and Lionel M.
Goldberg and Eben W. Pyne.
*23 Consent of Ernst & Young LLP, Independent Auditors.
*24(a) Powers of Attorney executed by the Directors and Officers of
the Company.
*24(b) Certificate as to Corporate Power of Attorney.
*24(c) Certified copy of Resolution of Board of Directors authorizing
signature pursuant to Power of Attorney.
*27 Financial Data Schedule.
Financial Statements of subsidiary companies accounted for by
the equity method have been omitted because such subsidiaries do not constitute
significant subsidiaries.
(b) Reports on Form 8-K
No reports on Form 8-K were filed in the fourth quarter of
1994.
In its Report on Form 8-K dated February 1, 1995, the Company
reported earnings of $2.15 per common share on revenues of
$3,067,307,000 for the year ended December 31, 1994.
__________________________________
*Filed herewith.
<PAGE> 1
Exhibit 4(a)
[CONFORMED COPY]
================================================================================
LONG ISLAND LIGHTING COMPANY
TO
UNITED STATES TRUST COMPANY
OF NEW YORK,
SUCCESSOR TRUSTEE
_________
TWENTY-SEVENTH SUPPLEMENTAL INDENTURE
DATED AS OF JUNE 1, 1994
_________
SUPPLEMENTAL
TO THE
GENERAL AND REFUNDING INDENTURE
DATED AS OF JUNE 1, 1975
_________
GENERAL AND REFUNDING BONDS
7-5/8% SERIES DUE 1998
8-5/8% SERIES DUE 2004
================================================================================
<PAGE> 2
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
SUPPLEMENTAL INDENTURE, dated as of June 1, 1994, between LONG ISLAND
LIGHTING COMPANY, a New York corporation (hereinafter called the "Company"),
having its principal office at 175 East Old Country Road in Hicksville, County
of Nassau, State of New York, and UNITED STATES TRUST COMPANY OF NEW YORK, a
national banking association (hereinafter called the "Trustee" or the "Successor
Trustee"), having its principal corporate trust office at 114 West 47th Street
in the City, County and State of New York.
WHEREAS, the Company has executed and delivered to Manufacturers
Hanover Trust Company, as Trustee (hereinafter called the "Original Trustee"),
a General and Refunding Indenture dated as of June 1, 1975 (hereinafter called
the "Original General and Refunding Indenture"), securing the principal of and
the interest and premium (if any) on the Company's General and Refunding Bonds
(the "Bonds") at any time issued and Outstanding thereunder, to declare the
terms and conditions upon which Bonds are to be issued thereunder and to
subject to the Lien thereof certain property therein described;
WHEREAS, the Company has also executed and delivered to the Original
Trustee supplemental indentures dated as of the dates set forth below, creating
series of General and Refunding Bonds and, in each instance, subjecting to the
Lien of the Original General and Refunding Indenture certain property of the
Company, as follows:
<TABLE>
<CAPTION>
DATED AS OF SERIES CREATED
------------- ----------------
<S> <C> <C>
Original Indenture . . . . . . . . . . . . June 1, 1975
Supplemental Indentures:
First . . . . . . . . . . . . . . . . . . June 1, 1975 9-1/4% Due 1983
Second . . . . . . . . . . . . . . . . . Sept. 1, 1975 9-7/8% Due 1984
Third . . . . . . . . . . . . . . . . . . June 1, 1976 9-5/8% Due 2006
Fourth . . . . . . . . . . . . . . . . . Dec. 1, 1976 8-5/8% Due 2006
Fifth . . . . . . . . . . . . . . . . . . May 1, 1977 8-5/8% Due 2007
Sixth . . . . . . . . . . . . . . . . . . April 1, 1978 9.20% Due 2008
Seventh . . . . . . . . . . . . . . . . . March 1, 1979 9.75% Due 1999
Eighth . . . . . . . . . . . . . . . . . Feb. 1, 1980 14-1/4% Due 2010
Ninth . . . . . . . . . . . . . . . . . . March 1, 1981 15-3/4% Due 1991
Tenth . . . . . . . . . . . . . . . . . . July 1, 1981 17-3/8% Due 2011
Eleventh . . . . . . . . . . . . . . . . July 1, 1981 16-3/4% Due 1991
Twelfth . . . . . . . . . . . . . . . . . Dec. 1, 1981 18% Due 2011
</TABLE>
<PAGE> 3
2
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
<TABLE>
<CAPTION>
DATED AS OF SERIES CREATED
------------- ----------------
<S> <C> <C>
Supplemental Indentures:
Thirteenth . . . . . . . . . . . . . . . Dec. 1, 1981 17% Due 1991
Fourteenth . . . . . . . . . . . . . . . June 1, 1982 17-1/8% Due 2012
Fifteenth . . . . . . . . . . . . . . . . Oct. 1, 1982 15-1/4% Due 2012
Sixteenth . . . . . . . . . . . . . . . . April 1, 1983 12-5/8% Due 1992
Seventeenth . . . . . . . . . . . . . . . May 1, 1983 13-1/2% Due 2013;
</TABLE>
WHEREAS, the Original General and Refunding Indenture and the aforesaid
Supplemental Indentures have been recorded as follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE THE CITY OF
NASSAU COUNTY NEW YORK
CLERK'S OFFICE (QUEENS COUNTY)
-------------------- ----------------
LIBER OF
MORTGAGES PAGE REEL PAGE
--------- ---- ---- ----
<S> <C> <C> <C> <C>
Original Indenture . . . . . . . . . . . 9517 1 840 761
Supplemental Indentures:
First . . . . . . . . . . . . . . . . . 9517 462 840 1224
Second . . . . . . . . . . . . . . . . 9570 407 862 546
Third . . . . . . . . . . . . . . . . . 9675 1 911 495
Fourth . . . . . . . . . . . . . . . . 9778 1 953 460
Fifth . . . . . . . . . . . . . . . . . 9814 493 985 707
Sixth . . . . . . . . . . . . . . . . . 9919 1 1063 1052
Seventh . . . . . . . . . . . . . . . . 10032 1 1143 1060
Eighth . . . . . . . . . . . . . . . . 10169 1 1239 1751
Ninth . . . . . . . . . . . . . . . . . 10285 1 1323 762
Tenth . . . . . . . . . . . . . . . . . 10322 1 1351 186
Eleventh . . . . . . . . . . . . . . . 10322 67 1351 254
Twelfth . . . . . . . . . . . . . . . . 10379 1 1392 1675
Thirteenth . . . . . . . . . . . . . . 10379 113 1392 1629
Fourteenth . . . . . . . . . . . . . . 10423 106 1432 1137
Fifteenth . . . . . . . . . . . . . . . 10471 407 1466 1713
Sixteenth . . . . . . . . . . . . . . . 10542 705 1518 884
Seventeenth . . . . . . . . . . . . . . 10571 1 1537 720
</TABLE>
<PAGE> 4
3
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
<TABLE>
<CAPTION>
IN THE SUFFOLK IN THE OFFICE OF
COUNTY CLERK'S THE REGISTRAR OF
OFFICE SUFFOLK COUNTY
-------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Original Indenture . . . . . . . . . 7358 1 231529
Supplemental Indentures:
First . . . . . . . . . . . . . . . 7358 461 231530
Second . . . . . . . . . . . . . . 7445 82 234029
Third . . . . . . . . . . . . . . . 7622 87 239417
Fourth . . . . . . . . . . . . . . 7773 55 244097
Fifth . . . . . . . . . . . . . . . 7882 500 247932
Sixth . . . . . . . . . . . . . . . 8149 58 256464
Seventh . . . . . . . . . . . . . . 8402 1 263861
Eighth . . . . . . . . . . . . . . 8688 530 271652
Ninth . . . . . . . . . . . . . . . 8950 66 278933
Tenth . . . . . . . . . . . . . . . 9034 465 281159
Eleventh . . . . . . . . . . . . . 9034 408 281158
Twelfth . . . . . . . . . . . . . . 9169 50 284685
Thirteenth . . . . . . . . . . . . 9169 122 284687
Fourteenth . . . . . . . . . . . . 9271 285 287512
Fifteenth . . . . . . . . . . . . . 9374 235 290221
Sixteenth . . . . . . . . . . . . . 9519 516 293587
Seventeenth . . . . . . . . . . . . 9578 231 294811;
</TABLE>
WHEREAS, the Company and Manufacturers Hanover Trust Company, as
Original Trustee, pursuant to Article Nine of the Uniform Commercial Code, have
executed a Financing Statement which was filed in the State of New York on June
19, 1975, in the Department of State of the State of New York as File No. 51,391
and a Continuation Statement executed by Manufacturers Hanover Trust Company has
been filed in the State of New York on May 23, 1980, in the Department of State
of the State of New York as File No. 73,661;
WHEREAS, the Original General and Refunding Indenture, as the same has
been or may be amended or supplemented from time to time by indentures
supplemental thereto, is hereinafter referred to as the "General and Refunding
Indenture;"
WHEREAS, an Instrument of Resignation, Appointment and Acceptance
dated as of April 19, 1984, pursuant to which Manufacturers Hanover Trust
Company resigned as Trustee, the Company appointed Sterling National Bank &
Trust Company of New York as Successor Trustee under the General and Refunding
<PAGE> 5
4
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
Indenture and Sterling National Bank & Trust Company of New York accepted such
appointment, has been executed by the Company, Manufacturers Hanover Trust
Company and Sterling National Bank & Trust Company of New York and recorded as
follows: In the Nassau County Clerk's office in Liber 9549 of Deeds, Page 523
on April 23, 1984; in the Office of the Register of The City of New York
(Queens County) on Reel 1671, Page 702 on April 24, 1984; in the Suffolk County
Clerk's Office in Liber 9550 of Deeds, Page 87 on April 24, 1984; and in the
Office of the Registrar of Suffolk County as Document No. 302443 on April 24,
1984;
WHEREAS, Sterling National Bank & Trust Company of New York, as
Successor Trustee, pursuant to Article Nine of the Uniform Commercial Code, has
executed an Assignment Statement which was filed in the State of New York on
April 27, 1984, in the Department of State of the State of New York as File No.
92,389;
WHEREAS, the Company has executed and delivered to Sterling National
Bank & Trust Company of New York supplemental indentures dated as of the dates
set forth below, creating series of General and Refunding Bonds and, in each
instance, subjecting to the lien of the Original General and Refunding
Indenture certain property of the Company, as follows:
<TABLE>
<CAPTION>
DATED AS OF SERIES CREATED
----------------- ----------------
<S> <C> <C>
Supplemental Indentures:
Eighteenth . . . . . . . . . . . . September 1, 1984 17-1/2% Due 1989
Nineteenth . . . . . . . . . . . . October 1, 1984 1/2% Due 1993
Twentieth . . . . . . . . . . . . . June 1, 1985 13-1/4% Due 1995
Twenty-first . . . . . . . . . . . April 1, 1986 11-1/4% Due 1996
11-7/8% Due 2015;
</TABLE>
<PAGE> 6
5
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
WHEREAS, the aforesaid Supplemental Indentures have been recorded as
follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE THE CITY OF
NASSAU COUNTY NEW YORK
CLERK'S OFFICE (QUEENS COUNTY)
------------------ ----------------
LIBER OF
MORTGAGES PAGE REEL PAGE
--------- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Eighteenth . . . . . . . . . . . . . . 10945 550 1742 623
Nineteenth . . . . . . . . . . . . . . 10988 696 1772 1416
Twentieth . . . . . . . . . . . . . . . 11159 1 1877 684
Twenty-first . . . . . . . . . . . . . 11487 1 2072 1946
</TABLE>
<TABLE>
<CAPTION>
IN THE IN THE OFFICE OF
SUFFOLK COUNTY THE REGISTRAR OF
CLERK'S OFFICE SUFFOLK COUNTY
-------------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Eighteenth . . . . . . . . . . . . . . 10356 301 306373
Nineteenth . . . . . . . . . . . . . . 10465 1 307995
Twentieth . . . . . . . . . . . . . . . 10849 81 313989
Twenty-first . . . . . . . . . . . . . 11550 95 323438
</TABLE>
<TABLE>
<CAPTION>
IN THE
OSWEGO COUNTY
CLERK'S OFFICE
---------------------
BOOK OF
MORTGAGES PAGE
--------- ----
<S> <C> <C>
Twenty-first . . . . . . . . . . . . . 869 27;
</TABLE>
WHEREAS, Sterling National Bank & Trust Company of New York, as
Successor Trustee, pursuant to Article Nine of the Uniform Commercial Code, has
executed a Continuation Statement which was filed in the State of New York on
May 28, 1985, in the Department of State of the State of New York as File No.
123,587, and an Amendment thereto as File No. 123,588;
<PAGE> 7
6
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
WHEREAS, an Instrument of Resignation, Appointment and Acceptance
dated as of January 16, 1987, pursuant to which Sterling National Bank & Trust
Company of New York resigned as Successor Trustee, the Company appointed United
States Trust Company of New York as Successor Trustee under the General and
Refunding Indenture and United States Trust Company of New York accepted such
appointment, has been executed by the Company, Sterling National Bank & Trust
Company of New York and United States Trust Company of New York and recorded as
follows: In the Oswego County Clerk's Office in Book 935 of Mortgages, Pages
295 to 308 on March 5, 1987; in the Office of the Register of The City of New
York for the County of Queens in Reel 2320P of Records, Pages 663 to 682 on
March 18, 1987; in the Suffolk County Clerk's Office in Liber 10285 of Deeds,
Pages 296 to 307A on April 2, 1987; in the Office of the Registrar of Suffolk
County as Document No. 347901 on December 18, 1987; and in the Nassau County
Clerk's Office in Liber 9809 of Deeds, Pages 582 to 594 on May 1, 1987;
WHEREAS, Sterling National Bank & Trust Company of New York, as
Successor Trustee, pursuant to Article Nine of the Uniform Commercial Code, has
executed an Assignment Statement which was filed in the State of New York on
January 26, 1987, in the Department of State of the State of New York as File
No. 24,939;
WHEREAS, United States Trust Company of New York, as Successor
Trustee, pursuant to Article Nine of the Uniform Commercial Code, has executed
a Continuation Statement which was filed in the State of New York on April 23,
1990, in the Department of State of the State of New York as File No. 83,191;
WHEREAS, the Company has executed and delivered to United States Trust
Company of New York supplemental indentures dated as of the dates set forth
below, creating series of General and Refunding Bonds and, in each instance,
subjecting to the lien of the Original General and Refunding Indenture certain
property of the Company, as follows:
<TABLE>
<CAPTION>
DATED AS OF SERIES CREATED
---------------- ---------------
<S> <C> <C>
Supplemental Indentures:
Twenty-second . . . . . . . . . . . . . . February 1, 1991 8-3/4% Due 1997
Twenty-third . . . . . . . . . . . . . . May 1, 1991 8-3/4% Due 1996
9-3/4% Due 2021
Twenty-fourth . . . . . . . . . . . . . . July 1, 1991 9-5/8% Due 2024
Twenty-fifth . . . . . . . . . . . . . . May 1, 1992 7.85% Due 1999
8.50% Due 2006
Twenty-sixth . . . . . . . . . . . . . . July 1, 1992 7.90% Due 2008;
</TABLE>
<PAGE> 8
7
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
WHEREAS, the aforesaid Supplemental Indentures have been recorded as
follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE THE CITY OF
NASSAU COUNTY NEW YORK
CLERK'S OFFICE (QUEENS COUNTY)
------------------- ----------------
LIBER OF
MORTGAGES PAGE REEL PAGE
--------- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Twenty-second . . . . . . . . . . . . . 13715 1 3121 1938
Twenty-third . . . . . . . . . . . . . 13782 1 3149 500
Twenty-fourth . . . . . . . . . . . . . 13859 1 3185 1109
Twenty-fifth . . . . . . . . . . . . . 14060 1 3319 2396
Twenty-sixth . . . . . . . . . . . . . 14113 1 3365 649
</TABLE>
<TABLE>
<CAPTION>
IN THE IN THE OFFICE OF
SUFFOLK COUNTY THE REGISTRAR OF
CLERK'S OFFICE SUFFOLK COUNTY
-------------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Twenty-second . . . . . . . . . . . . . 16594 498 388388
Twenty-third . . . . . . . . . . . . . 16737 25 390446
Twenty-fourth . . . . . . . . . . . . . 16923 154 392729
Twenty-fifth . . . . . . . . . . . . . 17664 77 401507
Twenty-sixth . . . . . . . . . . . . . 17933 80 404358
</TABLE>
<TABLE>
<CAPTION>
IN THE
OSWEGO COUNTY
CLERK'S OFFICE
-----------------
BOOK OF
MORTGAGES PAGE
--------- ----
<S> <C> <C>
Twenty-second . . . . . . . . . . . . . . 1227 19
Twenty-third . . . . . . . . . . . . . . 1242 49
Twenty-fourth . . . . . . . . . . . . . . 1264 24
Twenty-fifth . . . . . . . . . . . . . . 1334 130
Twenty-sixth . . . . . . . . . . . . . . 1357 116;
</TABLE>
WHEREAS, the Company, in accordance with the provisions of the
Original General and Refunding Indenture, desires by this Supplemental
Indenture to create two series of Bonds to be issued under the Original General
and Refunding Indenture
<PAGE> 9
8
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
(such series to be designated as "General and Refunding Bonds, 7-5/8% Series
Due 1998" and "General and Refunding Bonds, 8-5/8% Series Due 2004" and being
hereinafter sometimes referred to as "1998 Series" and "2004 Series",
respectively) and to describe, insofar as the same is permitted by the Original
General and Refunding Indenture, the form of and certain other matters with
respect to the series of Bonds (hereinafter sometimes called "1998 Series
Bonds" and "2004 Series Bonds"), and to provide for the issue thereof as fully
registered bonds without coupons;
WHEREAS, by the provisions of Article XVII of the Original General and
Refunding Indenture, indentures supplemental to the Original General and
Refunding Indenture may be executed and delivered for the purpose of setting
forth the terms, provisions and form of additional series of Bonds and
supplementing the Original General and Refunding Indenture in a manner which is
not inconsistent with the provisions thereof and does not adversely affect the
interests nor modify the rights of Outstanding Bonds and for the other purposes
therein more fully set forth;
WHEREAS, the Company desires to subject specifically to the Lien of
the General and Refunding Indenture certain property of the Company;
WHEREAS, as required by Section 5.14 of the Original General and
Refunding Indenture, the Company is creating two series of its First Mortgage
Bonds to be issued pursuant to a Fiftieth Supplemental Indenture to the
Indenture of Mortgage and Deed of Trust dated as of September 1, 1951, between
the Company and the Trustee thereunder (said Indenture of Mortgage and Deed of
Trust, as the same may be amended or supplemented from time to time by
indentures supplemental thereto, is hereinafter referred to as the "First
Mortgage Bond Indenture"), which Supplemental Indenture is to be substantially
in the form set forth as Exhibit 1 hereto;
WHEREAS, in the Original General and Refunding Indenture, the Company
has heretofore granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged and confirmed unto the Trustee, the property,
rights, privileges and franchises set forth in said Original General and
Refunding Indenture as follows:
CLAUSE FIRST
All the property particularly described in Schedule A hereto
annexed and hereby made a part hereof as fully as if set forth herein
at length.
<PAGE> 10
9
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
CLAUSE SECOND
All other property, real, personal or mixed (other than
"Excepted Property" as hereinafter defined), of every kind and
description and wheresoever situate, now owned or which may be
hereafter acquired by the Company, to the extent of all of the
Company's ownership interest therein, regardless of whether such
ownership interest constitutes the entire ownership interest in the
property concerned or whether it be a jointly held interest in common
with others divided or undivided, it being the intention hereof that
all property, rights, privileges and franchises now owned by the
Company after the date hereof (other than Excepted Property) shall be
as fully embraced within and subjected to the Lien hereof as if such
property were specifically described herein.
CLAUSE THIRD
Also any property, including Excepted Property, that may, from
time to time hereafter, by delivery or by writing of any kind, be
subjected to the Lien hereof by the Company or by anyone in its
behalf; and the Trustee is hereby authorized to receive the same at
any time as additional security hereunder. Such subjection to the
Lien hereof of any such property as additional security may be made
subject to any reservations, limitations or conditions which shall be
set forth in a writing executed by the Company or the Person so acting
in its behalf and/or the Trustee respecting the use and disposition of
such property or the proceeds thereof.
CLAUSE FOURTH
Together with all the rents, issues, profits and other income
of the property subjected or required to be subjected to the Lien of
the General and Refunding Indenture; and all the estate, right, title
and interest of every nature whatsoever of the Company in and to the
same and every part and parcel thereof.
EXCEPTED PROPERTY
There is, however, expressed excepted and excluded from the
Lien and operation of the General and Refunding Indenture the
following described property of the Company, now owned or hereafter
acquired (herein sometimes called "Excepted Property"):
<PAGE> 11
10
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
A. All cash on hand or in banks; all bills, notes and
accounts receivable; all choses in action and judgments; all
shares of stock, bonds, notes, evidences of indebtedness and
other securities; and all contracts and operating agreements;
B. All goods, wares, materials, merchandise, appliances
and supplies acquired for the purpose of sale in the ordinary
course of business; and all fuel (including nuclear fuel),
materials and supplies and other personal property which are
consumable (otherwise than by ordinary wear and tear) in their
use in the operation of the business of the Company;
C. The last day of the term of each leasehold estate (oral
or written) and/or any agreement therefor, now or hereafter
enjoyed by the Company, and whether falling within a general
or specific description of property herein;
D. All electric energy, gas, heat and other products
generated, manufactured, produced or purchased by the Company
for sale or distribution in the ordinary course of its
business;
E. Property acquired by the Company as a result of any
consolidation or merger to which the Company may be a party
which, to the extent specified in Section 13.05 hereof, does
not become subject to the Lien of this General and Refunding
Indenture;
F. Airplanes and flight equipment; and
G. Property located outside the State of New York.
The Company may, or if expressed required by the terms of this
General and Refunding Indenture shall, however, pursuant to Clause
Third, subject to the Lien hereof any Excepted Property, whereupon the
same shall cease to be Excepted Property and if, upon the occurrence
of a completed default as specified in Section 10.01 hereof, the
Trustee or a receiver appointed hereunder shall enter upon and take
possession of the Mortgaged Property, the Trustee or such receiver may
also, to the extent permitted by law, take possession of any Excepted
Property, whereupon the same shall cease to be Excepted Property; and
<PAGE> 12
11
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
WHEREAS, in the supplemental indentures to the Original General and
Refunding Indenture, the Company has heretofore granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged and confirmed
upon the Trustee all the property particularly described in each Schedule A
thereto annexed and made a part thereof, and all the property, real, personal
or mixed, rights, privileges and franchises (other than Excepted Property), of
every kind and description and wheresoever situate, as specified in Granting
Clauses First, Second, Third and Fourth of the Original General and Refunding
Indenture; and
WHEREAS, by the provisions of Article XVII of the Original General and
Refunding Indenture, indentures supplemental to the Original General and
Refunding Indenture may be executed and delivered for any purpose which is not
inconsistent with the provisions of the Original General and Refunding
Indenture and which shall not adversely affect the interests of the Holders of
the Bonds;
WHEREAS, the Company, in the exercise of the powers and authority
conferred upon and reserved to it under the provisions of the Original General
and Refunding Indenture and pursuant to appropriate action of its Board of
Directors, has fully resolved and determined to make, execute and deliver to
the Trustee this Twenty-seventh Supplemental Indenture in the form hereof for
the purposes herein provided; and
WHEREAS, the Company represents that all conditions and requirements
necessary to make this Twenty-seventh Supplemental Indenture, in the form and
upon the terms hereof, a valid, binding and legal instrument, in accordance
with its terms, and for the purposes herein expressed, have been done,
performed and fulfilled, and the execution and delivery hereof, in the form and
upon the terms hereof, have been in all respects duly authorized;
NOW, THEREFORE, in consideration of the premises and of the sum of $1
paid to the Company by the Trustee at or before the execution and delivery
hereof, the receipt whereof is hereby acknowledged and of other good and
valuable considerations, the Company does hereby acknowledge and confirm that
it has granted, bargained, sold, released, conveyed, assigned, transferred,
mortgaged, pledged and confirmed, and by these presents the Company does hereby
grant, bargain, sell, release, convey, assign, transfer, mortgage, pledge and
confirm unto the Trustee all property, real, personal or mixed, rights,
privileges and franchises (other than Excepted Property), of every kind and
description and wheresoever situate, as specified in Granting Clauses First,
Second, Third and Fourth of the Original General and Refunding Indenture.
<PAGE> 13
12
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
TO HAVE AND TO HOLD all such property, rights, privileges and
franchises as part of the Mortgaged Property with like effect as though
originally included therein.
SUBJECT, HOWEVER, to the restrictions, exceptions, reservations,
conditions, limitations, interests and other matters, if any, referred to in
the Original General and Refunding Indenture, including, without limitation,
the Prior Lien of the First Mortgage Bond Indenture given to secure the
Company's First Mortgage Bonds issued thereunder, to the extent that such First
Mortgage Bond Indenture covers property hereby mortgaged, and other Excepted
Encumbrances.
IN TRUST NEVERTHELESS for the same purposes and upon the same terms,
trusts and conditions, and subject to and with the same provisos and covenants,
as are set forth in the Original General and Refunding Indenture, with the same
force and effect as though such property had been particularly described in the
Granting Clauses of the Original General and Refunding Indenture.
The Company does hereby covenant and agree with the Trustee as follows:
ARTICLE I
CREATION, DESCRIPTION AND FORM OF THE 1998 SERIES BONDS.
SECTION 1.01. The Company hereby creates a series of Bonds to be
issued under and secured by the General and Refunding Indenture, which shall be
designated as "General and Refunding Bonds, 7-5/8% Series Due 1998" and which
shall be executed, authenticated and delivered in accordance with the
provisions of and shall in all respects be subject to all the terms, conditions
and covenants of the General and Refunding Indenture.
SECTION 1.02. An aggregate principal amount of One Hundred Million
Dollars ($100,000,000) of 1998 Series Bonds may forthwith be executed by the
Company and delivered to the Trustee and shall be authenticated by the Trustee
and delivered (either before or after the filing or recording hereof) to or
upon the order of the designated officer or officers of the Company upon
receipt by the Trustee of the cash, resolutions, certificates, opinions and
documents required to be delivered upon the issue of Bonds as provided in the
General and Refunding Indenture.
SECTION 1.03. Each 1998 Series Bond shall be dated the date of its
authentication and shall bear interest at the rate of seven and five-eighths
per centum (7-5/8%) per annum, from the date specified in such Bond as below
provided as the
<PAGE> 14
13
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
commencement date of the first interest period, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
payable semi-annually on April 15 and October 15 in each year, commencing on
October 15, 1994, until its Maturity according to its terms or on prior
redemption or by declaration or otherwise, and at the same rate, from such date
of Maturity until paid or the payment thereof shall have been duly provided
for, and any overdue installment of interest shall (to the extent that payment
of such interest is enforceable under applicable law) bear interest at the same
rate.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will be paid to the Person in whose name a particular
Series Bond (or any 1998 Series Bond evidencing the same debt) is registered at
the close of business on the Regular Record Date for such interest which shall
be the first day (whether or not a business day) of April or October in each
year. Any such interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the registered Holder on such Regular Record
Date, and may be paid to the Person in whose name a particular 1998 Series Bond
(or any 1998 Series Bond evidencing the same debt) is registered at the close
of business on a Special Record Date for the payment of such defaulted interest
to be fixed by the Trustee, notice whereof shall be given to Holders of 1998
Series Bonds not less than 10 days prior to such Special Record Date, or may be
paid, at any time in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the 1998 Series Bonds may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in Section 2.02 of the Original General and Refunding Indenture.
Payments of principal thereon shall be made at the office or agency of the
Company in the Borough of Manhattan, The City of New York, and such payments
shall be made in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts.
Checks for the payment of interest thereon shall be mailed to the registered
Holder at the address shown in the Bond register or registers of the Company.
SECTION 1.04. The 1998 Series Bonds may not be redeemed prior to
maturity except as provided in Section 1.05 below.
SECTION 1.05. The 1998 Series Bonds may be redeemed on any date prior
to Maturity, as a whole but not in part, after notice given as provided in
Section 8.07 of the Original General and Refunding Indenture not less than
thirty days and not more than ninety days before such redemption date, at a
redemption price of one hundred per centum (100%) of the then principal amount,
together with accrued interest to the date of redemption, in the event (a) that
all the outstanding common stock of the Company shall be acquired by some
governmental body or instrumentality and the Company shall elect to redeem all
the Bonds of all series, the
<PAGE> 15
14
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
redemption date in any such event to be not more than one hundred twenty days
after the date on which all said stock is so acquired, or (b) that all or
substantially all of the Mortgaged Property constituting Bondable Property
which at the time shall be subject to the Lien of the General and Refunding
Indenture shall be released from the Lien of the General and Refunding
Indenture pursuant to Section 9.04 or Section 9.05 thereof, or both, and
available moneys in the hands of the Trustee, including any moneys deposited by
the Company for the purpose, are sufficient to redeem all the Bonds of all
series at the redemption prices (together with accrued interest to the date of
redemption) specified therein applicable to the redemption thereof upon the
happening of such event.
SECTION 1.06. The 1998 Series Bonds shall be issuable only as fully
registered Bonds in denominations of $1,000 and any integral multiple of
$1,000. The 1998 Series Bonds shall be exchangeable (upon payment of any tax or
taxes or other governmental charges payable under Section 2.04 of the Original
General and Refunding Indenture) at the option of the Holders thereof, for a
like aggregate principal amount of 1998 Series Bonds of other authorized
denominations.
SECTION 1.07. The 1998 Series Bonds shall be substantially in the
following form:
[FORM OF FACE OF 1998 SERIES BONDS]
LONG ISLAND LIGHTING COMPANY
(Incorporated under the laws of the State of New York)
GENERAL AND REFUNDING BOND
7-5/8% SERIES DUE 1998
Number . . . . . . . . $ . . . . . . . .
LONG ISLAND LIGHTING COMPANY, a corporation organized and existing
under the laws of the State of New York (hereinafter called the "Company"), for
value received, hereby promises to pay to or
registered assigns, Dollars on April 15, 1998 and to pay
interest hereon at the rate of seven and five-eighths per centum (7-5/8%) per
annum, from the date of the initial issuance of the General and Refunding Bonds
of this Series, or from the most recent interest payment date to which interest
has been paid or duly provided for, semi-annually on the fifteenth day of April
and October in each year, commencing on October 15, 1994, until this bond shall
mature, according to its terms or on prior redemption or by declaration or
otherwise, and at the same rate,
<PAGE> 16
15
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
from such date of maturity of this bond until this bond shall be paid or the
payment hereof shall have been duly provided for, and (to the extent that
payment of such interest is enforceable under applicable law) to pay interest
on any overdue installment of interest at the same rate. The interest so
payable, and punctually paid or duly provided for, on any interest payment date
will, as provided in the General and Refunding Indenture hereinafter mentioned,
be paid to the person in whose name this bond (or any bond or bonds evidencing
the same debt) is registered at the close of business on the regular record
date for such interest which shall be the first day (whether or not a business
day) of April or October in each year. Any such interest not so punctually paid
or duly provided for shall forthwith cease to be payable to the registered
holder on such regular record date, and may be paid to the person in whose name
this bond (or any bond or bonds evidencing the same debt) is registered at the
close of business on a special record date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to holders
of bonds not less than 10 days prior to such special record date, or may be
paid, at any time, in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the bonds may be listed, and
upon such notice as may be required by such exchange, all as more fully
provided in the General and Refunding Indenture hereinafter mentioned. Payments
of principal hereon shall be made at the office or agency of the Company in the
Borough of Manhattan, The City of New York, and such payments shall be made in
such coin or currency of the United States of America as at the time of payment
is legal tender for payment of public and private debts. Checks for the payment
of interest hereon shall be mailed to the registered holder at the address
shown in the bond register or registers of the Company.
Reference is hereby made to the further provisions of this bond set
forth on the reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
The lien on the properties of the Company provided by the General and
Refunding Indenture hereinafter mentioned is subject to certain liens prior to
the lien of the General and Refunding Indenture hereinafter mentioned,
including the lien of the Company's Indenture of Mortgage and Deed of Trust
dated as of September 1, 1951, as supplemented, securing the First Mortgage
Bonds of the Company issued thereunder.
This bond shall not become valid or obligatory for any purpose until
United States Trust Company of New York, or its successor, as Trustee under the
General and Refunding Indenture hereinafter mentioned, or an authenticating
agent appointed by the Trustee, shall have signed the certificate of
authentication endorsed hereon.
<PAGE> 17
16
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this bond
to be duly executed under its corporate seal.
Dated:
LONG ISLAND LIGHTING COMPANY
By
----------------------------
President
Attest:
-----------------------------
Secretary
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the General and Refunding Bonds described in the within
mentioned General and Refunding Indenture.
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Successor Trustee
By
----------------------------
Authorized Officer
[or
By
----------------------------
As Authenticating Agent
for the Trustee
By
----------------------------
Authorized Officer]*
* To be used if Trustee
appoints an authenticating
agent or agents pursuant to
Section 14.23 of the General
and Refunding Indenture.
<PAGE> 18
17
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
[FORM OF REVERSE SIDE OF 1998 SERIES BONDS]
LONG ISLAND LIGHTING COMPANY
(Incorporated under the laws of the State of New York)
GENERAL AND REFUNDING BOND
7-5/8% SERIES DUE 1998
This bond is one of an issue of bonds of the Company (herein referred
to as the "General and Refunding Bonds"), not limited in principal amount
except as provided in the General and Refunding Indenture hereinafter
mentioned, issuable in series, which different series may mature at different
times, may bear interest at different rates, and may otherwise vary as provided
in the General and Refunding Indenture hereinafter mentioned, and is one of a
series known as its General and Refunding Bonds, 7-5/8% Series Due 1998,
created by a Supplemental Indenture dated as of June 1, 1994, all General and
Refunding Bonds of all series issued and to be issued under and being equally
and ratably secured (except in so far as any sinking or analogous fund,
established in accordance with the provisions of the General and Refunding
Indenture hereinafter mentioned, may afford additional security for the General
and Refunding Bonds of any particular series) by a General and Refunding
Indenture dated as of June 1, 1975, executed and delivered by the Company and
Manufacturers Hanover Trust Company, Trustee (hereinafter referred to as the
"Trustee" which term includes any successor trustee) (hereinafter, together
with all indentures supplemental thereto, including the Supplemental Indenture
hereinabove referred to, called the "General and Refunding Indenture") to which
General and Refunding Indenture reference is made for a description of the
property mortgaged, the nature and the extent of the security, the rights of
the holders of the General and Refunding Bonds and of the Company in respect
thereof, the rights, duties and immunities of the Trustee, and the terms and
conditions upon which the General and Refunding Bonds are, and are to be,
issued and secured.
The General and Refunding Indenture contains provisions permitting the
holders of not less than a majority in principal amount of all the General and
Refunding Bonds at the time outstanding, determined and evidenced as provided
in the General and Refunding Indenture, on behalf of the holders of all the
General and Refunding Bonds, to waive any past default under the General and
Refunding Indenture and its consequences except a completed default, as defined
in the General and Refunding Indenture, in respect of the payment of the
principal of, premium, if any, or interest on any General and Refunding Bond or
except a default arising from the creation of any lien, other than those
permitted by the General and Refunding
<PAGE> 19
18
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
Indenture, ranking prior to or equal with the lien of the General and Refunding
Indenture on any of the mortgaged property.
The General and Refunding Indenture also contains provisions
permitting the Company and the Trustee, with the consent of the holders of not
less than the specified percentages described below in principal amount of the
General and Refunding Bonds at the time outstanding, in each case determined
and evidenced as provided in the General and Refunding Indenture, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the General and Refunding Indenture or
modifying in any manner the rights of the holders of the General and Refunding
Bonds, subject, however, to certain limitations described below. With respect
to any of the foregoing, there shall be required the consent of the holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all the General and Refunding Bonds at the time outstanding; however, in
case the rights under the General and Refunding Indenture of the holders of
General and Refunding Bonds of one or more, but less than all, of the series of
General and Refunding Bonds outstanding shall be similarly affected, then the
consent of the holders of not less than sixty-six and two-thirds per centum
(66-2/3%) in principal amount of the outstanding General and Refunding Bonds of
such one or more series affected is required, except that if any such action
would similarly affect the General and Refunding Bonds of two or more series,
the holders of not less than sixty-six and two-thirds per centum (66-2/3%) in
principal amount of outstanding General and Refunding Bonds of such two or more
series, which need not include sixty-six and two-thirds per centum (66-2/3%) in
principal amount of each of such series, is required. No such supplemental
indenture shall, however, (i) extend the fixed maturity of any General and
Refunding Bonds, or reduce the rate or extend the time of payment of interest
thereon, or any premium payable on redemption thereof, or reduce the principal
amount thereof, or, subject to the provisions of the General and Refunding
Indenture, limit the right of a bondholder to institute suit for the
enforcement of payment of principal, premium, if any, or interest in accordance
with the terms of the General and Refunding Bonds, without the consent of the
holder of each General and Refunding Bond so affected, or (ii) reduce the
aforesaid percentage of General and Refunding Bonds, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of all General and Refunding Bonds then outstanding, or (iii)
permit the creation of any lien, other than those permitted by the terms of the
General and Refunding Indenture, ranking prior to or equal with the lien of the
General and Refunding Indenture on any of the mortgaged property without the
consent of the holders of all General and Refunding Bonds then outstanding, or
(iv) in any respect materially reduce his security and deprive the holder of
any outstanding General and Refunding Bond of the lien of the General and
Refunding Indenture on any of the mortgaged property without his consent. Any
such waiver or
<PAGE> 20
19
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
consent by the holder of this General and Refunding Bond (unless effectively
revoked as provided in the General and Refunding Indenture) shall be conclusive
and binding upon such holder and upon all future holders of this General and
Refunding Bond, or General and Refunding Bonds issued in exchange for or upon
the transfer of this General and Refunding Bond, irrespective of whether or not
any notation of such waiver or consent is made upon this General and Refunding
Bond.
No reference herein to the General and Refunding Indenture and no
provision of this General and Refunding Bond or of the General and Refunding
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this General and Refunding Bond at the time and place and at the
rate and in the coin or currency herein prescribed.
The General and Refunding Bonds of this Series are issuable only as
fully registered bonds in denominations of $1,000 and any integral multiple of
$1,000. General and Refunding Bonds of this Series may be exchanged for a like
aggregate principal amount of General and Refunding Bonds of this Series of
other authorized denominations without charge except for any tax or taxes or
other governmental charges incident to such exchange, such exchange to be made
at any office or agency to be maintained by the Company for such purposes and
in the manner and subject to the limitations provided in the General and
Refunding Indenture.
The General and Refunding Bonds of this Series may not be redeemed
prior to maturity except as herein provided in this paragraph. The General and
Refunding Bonds of this Series may be redeemed prior to maturity, as a whole,
but not in part, after notice given as provided in the General and Refunding
Indenture not less than thirty days and not more than ninety days before such
redemption date, at a redemption price of one hundred per centum (100%) of the
then principal amount, together with accrued interest to the date of
redemption, as more fully provided in Section 8.07 of the General and Refunding
Indenture, in the event (a) that all the outstanding common stock of the
Company shall be acquired by some governmental body or instrumentality and the
Company elects to redeem all the General and Refunding Bonds of all series, the
redemption date in any such event to be not more than one hundred twenty days
after the date on which all said stock is so acquired, or (b) that all or
substantially all of the mortgaged property which at the time shall be subject
to the lien of the General and Refunding Indenture shall be released from the
lien of the General and Refunding Indenture pursuant to the provisions thereof,
and available moneys in the hands of the Trustee, including any moneys
deposited by the Company for the purpose, are sufficient to redeem all the
General and Refunding Bonds of all series at the redemption prices (together
with accrued interest
<PAGE> 21
20
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
to the date of redemption) specified therein applicable to the redemption
thereof upon the happening of such event.
The General and Refunding Indenture provides that any notice of
redemption of General and Refunding Bonds may state that it is subject to the
receipt of the redemption moneys by the Trustee before the date fixed for
redemption and such notice shall be of no effect unless such moneys are
received before such date.
The General and Refunding Indenture provides that if the Company shall
deposit with the Trustee, in trust for the purpose, funds sufficient to pay the
principal of all the General and Refunding Bonds of any series, or such of the
General and Refunding Bonds of any series as have been or are to be called for
redemption (including any portions, constituting $1,000 or an integral multiple
thereof, of fully registered General and Refunding Bonds of this Series) and
premium, if any, thereon, and all interest payable on such General and
Refunding Bonds (or portions) to the date on which they become due and payable
at maturity or upon redemption or otherwise, and complies with the other
provisions of the General and Refunding Indenture in respect thereof, then from
the date of such deposit such General and Refunding Bonds (or portions) shall
no longer be secured by the lien of the General and Refunding Indenture.
The General and Refunding Indenture provides that, upon any partial
redemption of a fully registered General and Refunding Bond, and upon surrender
thereof, new General and Refunding Bonds of the same series and of authorized
denominations in principal amount equal to the unredeemed portion of such fully
registered General and Refunding Bond will be delivered without charge in
exchange therefor.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the General and Refunding Indenture, upon the occurrence of a
completed default as provided in the General and Refunding Indenture.
This General and Refunding Bond is transferable in the manner and
subject to the limitations prescribed in the General and Refunding Indenture by
the registered holder hereof in person, or by his duly authorized attorney, at
the principal corporate trust office of the Trustee or at such other office or
agency established for that purpose, upon surrender of this General and
Refunding Bond, and upon payment, if the Company shall require it, of any tax
or taxes or other governmental charges incident to such exchange or transfer,
payable in connection therewith, and thereupon, a new General and Refunding
Bond or Bonds of authorized denominations of the same series and for the same
aggregate principal
<PAGE> 22
21
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
amount will be issued to the transferee in exchange herefor as provided in the
General and Refunding Indenture. Except as otherwise provided herein with
respect to the payment of interest, the Company and the Trustee, any paying
agent, any bond registrar and any other of the Company's agents may deem and
treat the person in whose name this General and Refunding Bond is registered as
the absolute owner hereof, whether or not this General and Refunding Bond shall
be overdue, for the purpose of receiving payment and for all other purposes and
neither the Company nor the Trustee nor any paying agent nor any bond registrar
nor any other of the Company's agents shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the General and Refunding Indenture, or in any General and
Refunding Bond thereby secured, or because of any indebtedness thereby secured,
shall be had against any incorporator, or against any past, present or future
shareholder, officer or director, as such, of the Company or of any successor
corporation under any rule of law, statute or constitution, or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise; it being expressly agreed and understood that the General and
Refunding Indenture, and the obligations thereby secured, are solely corporate
obligations, and that no personal liability whatever shall attach to, or be
incurred by, such incorporators, shareholders, officers or directors, as such,
of the Company or of any successor corporation, or any of them because of the
incurring of the indebtedness thereby authorized or under or by reason of any
of the obligations, covenants or agreements contained in the General and
Refunding Indenture or in any of the General and Refunding Bonds thereby
secured, or implied therefrom.
[END OF REVERSE SIDE OF FORM OF 1998 SERIES BONDS]
<PAGE> 23
22
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
ARTICLE II
CREATION, DESCRIPTION AND FORM OF THE 2004 SERIES BONDS.
SECTION 2.01. The Company hereby creates a series of Bonds to be
issued under and secured by the General and Refunding Indenture, which shall be
designated as "General and Refunding Bonds, 8-5/8% Series Due 2004" and which
shall be executed, authenticated and delivered in accordance with the
provisions of and shall in all respects be subject to all the terms, conditions
and covenants of the General and Refunding Indenture.
SECTION 2.02. An aggregate principal amount of One Hundred and
Eighty-five Million Dollars ($185,000,000) of 2004 Series Bonds may forthwith
be executed by the Company and delivered to the Trustee and shall be
authenticated by the Trustee and delivered (either before or after the filing
or recording hereof) to or upon the order of the designated officer or officers
of the Company upon receipt by the Trustee of the cash, resolutions,
certificates, opinions and documents required to be delivered upon the issue of
Bonds as provided in the General and Refunding Indenture.
SECTION 2.03. Each 2004 Series Bond shall be dated the date of its
authentication and shall bear interest at the rate of eight and five-eighths
per centum (8-5/8%) per annum, from the date specified in such Bond as below
provided as the commencement date of the first interest period, or from the
most recent Interest Payment Date to which interest has been paid or duly
provided for, payable semi-annually on April 15 and October 15 in each year,
commencing on October 15, 1994, until its Maturity according to its terms or on
prior redemption or by declaration or otherwise, and at the same rate, from
such date of Maturity until paid or the payment thereof shall have been duly
provided for, and any overdue installment of interest shall (to the extent that
payment of such interest is enforceable under applicable law) bear interest at
the same rate.
The interest so payable, and punctually paid or duly provided for, on
any Interest Payment Date will be paid to the Person in whose name a particular
2004 Series Bond (or any 2004 Series Bond evidencing the same debt) is
registered at the close of business on the Regular Record Date for such
interest which shall be the first day (whether or not a business day) of April
or October in each year. Any such interest not so punctually paid or duly
provided for shall forthwith cease to be payable to the registered Holder on
such Regular Record Date, and may be paid to the Person in whose name a
particular 2004 Series Bond (or any 2004 Series Bond evidencing the same debt)
is registered at the close of business on a Special Record
<PAGE> 24
23
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
Date for the payment of such defaulted interest to be fixed by the Trustee,
notice whereof shall be given to Holders of 2004 Series Bonds not less than 10
days prior to such Special Record Date, or may be paid, at any time in any
other lawful manner not inconsistent with the requirements of any securities
exchange on which the 2004 Series Bonds may be listed, and upon such notice as
may be required by such exchange, all as more fully provided in Section 2.02 of
the Original General and Refunding Indenture. Payments of principal thereon
shall be made at the office or agency of the Company in the Borough of
Manhattan, The City of New York, and such payments shall be made in such coin
or currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts. Checks for the payment of
interest thereon shall be mailed to the registered Holder at the address shown
in the Bond register or registers of the Company.
SECTION 2.04. The 2004 Series Bonds may not be redeemed prior to
maturity except as provided in Section 2.05 below.
SECTION 2.05. The 2004 Series Bonds may be redeemed on any date prior
to Maturity, as a whole but not in part, after notice given as provided in
Section 8.07 of the Original General and Refunding Indenture not less than
thirty days and not more than ninety days before such redemption date, at a
redemption price of one hundred per centum (100%) of the then principal amount,
together with accrued interest to the date of redemption, in the event (a) that
all the outstanding common stock of the Company shall be acquired by some
governmental body or instrumentality and the Company shall elect to redeem all
the Bonds of all series, the redemption date in any such event to be not more
than one hundred twenty days after the date on which all said stock is so
acquired, or (b) that all or substantially all of the Mortgaged Property
constituting Bondable Property which at the time shall be subject to the Lien
of the General and Refunding Indenture shall be released from the Lien of the
General and Refunding Indenture pursuant to Section 9.04 or Section 9.05
thereof, or both, and available moneys in the hands of the Trustee, including
any moneys deposited by the Company for the purpose, are sufficient to redeem
all the Bonds of all series at the redemption prices (together with accrued
interest to the date of redemption) specified therein applicable to the
redemption thereof upon the happening of such event.
SECTION 2.06. The 2004 Series Bonds shall be issuable only as fully
registered Bonds in denominations of $1,000 and any integral multiple of
$1,000. The 2004 Series Bonds shall be exchangeable (upon payment of any tax or
taxes or other governmental charges payable under Section 2.04 of the Original
General and Refunding Indenture) at the option of the Holders thereof, for a
like aggregate principal amount of 2004 Series Bonds of other authorized
denominations.
<PAGE> 25
24
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
SECTION 2.07. The 2004 Series Bonds shall be substantially in the
following form:
[FORM OF FACE OF 2004 SERIES BONDS]
LONG ISLAND LIGHTING COMPANY
(Incorporated under the laws of the State of New York)
GENERAL AND REFUNDING BOND
8-5/8% SERIES DUE 2004
Number . . . . . . . . $ . . . . . . . .
LONG ISLAND LIGHTING COMPANY, a corporation organized and existing
under the laws of the State of New York (hereinafter called the "Company"), for
value received, hereby promises to pay to or
registered assigns, Dollars on April 15, 2004, and to pay
interest hereon at the rate of eight and five-eighths per centum (8-5/8%) per
annum, from the date of the initial issuance of the General and Refunding Bonds
of this Series, or from the most recent interest payment date to which interest
has been paid or duly provided for, semi-annually on the fifteenth day of April
and October in each year, commencing on October 15, 1994, until this bond shall
mature, according to its terms or on prior redemption or by declaration or
otherwise, and at the same rate, from such date of maturity of this bond until
this bond shall be paid or the payment hereof shall have been duly provided
for, and (to the extent that payment of such interest is enforceable under
applicable law) to pay interest on any overdue installment of interest at the
same rate. The interest so payable, and punctually paid or duly provided for,
on any interest payment date will, as provided in the General and Refunding
Indenture hereinafter mentioned, be paid to the person in whose name this bond
(or any bond or bonds evidencing the same debt) is registered at the close of
business on the regular record date for such interest which shall be the first
day (whether or not a business day) of April or October in each year. Any such
interest not so punctually paid or duly provided for shall forthwith cease to
be payable to the registered holder on such regular record date, and may be
paid to the person in whose name this bond (or any bond or bonds evidencing the
same debt) is registered at the close of business on a special record date for
the payment of such defaulted interest to be fixed by the Trustee, notice
whereof shall be given to holders of bonds not less than 10 days prior to such
special record date, or may be paid, at any time, in any other lawful manner
not inconsistent with the requirements of any securities exchange on which the
bonds may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in the General and Refunding Indenture hereinafter
mentioned. Payments of principal hereon shall be made at the
<PAGE> 26
25
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
office or agency of the Company in the Borough of Manhattan, The City of New
York, and such payments shall be made in such coin or currency of the United
States of America as at the time of payment is legal tender for payment of
public and private debts. Checks for the payment of interest hereon shall be
mailed to the registered holder at the address shown in the bond register or
registers of the Company.
Reference is hereby made to the further provisions of this bond set
forth on the reverse hereof. Such further provisions shall for all purposes
have the same effect as though fully set forth at this place.
The lien on the properties of the Company provided by the General and
Refunding Indenture hereinafter mentioned is subject to certain liens prior to
the lien of the General and Refunding Indenture hereinafter mentioned,
including the lien of the Company's Indenture of Mortgage and Deed of Trust
dated as of September 1, 1951, as supplemented, securing the First Mortgage
Bonds of the Company issued thereunder.
This bond shall not become valid or obligatory for any purpose until
United States Trust Company of New York, or its successor, as Trustee under the
General and Refunding Indenture hereinafter mentioned, or an authenticating
agent appointed by the Trustee, shall have signed the certificate of
authentication endorsed hereon.
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this bond
to be duly executed under its corporate seal.
Dated:
LONG ISLAND LIGHTING COMPANY
By
----------------------------
President
Attest:
-----------------------------
Secretary
<PAGE> 27
26
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
This is one of the General and Refunding Bonds described in the within
mentioned General and Refunding Indenture.
UNITED STATES TRUST
COMPANY OF NEW YORK,
as Successor Trustee
By
-----------------------------------
Authorized Officer
[or
By
-----------------------------------
As Authenticating Agent
for the Trustee
By
-----------------------------------
Authorized Officer]*
* To be used if Trustee appoints an
authenticating agent or agents
pursuant to Section 14.23 of the
General and Refunding Indenture.
<PAGE> 28
27
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
[FORM OF REVERSE SIDE OF 2004 SERIES BONDS]
LONG ISLAND LIGHTING COMPANY
(Incorporated under the laws of the State of New York)
GENERAL AND REFUNDING BOND
8-5/8% SERIES DUE 2004
This bond is one of an issue of bonds of the Company (herein referred
to as the "General and Refunding Bonds"), not limited in principal amount
except as provided in the General and Refunding Indenture hereinafter
mentioned, issuable in series, which different series may mature at different
times, may bear interest at different rates, and may otherwise vary as provided
in the General and Refunding Indenture hereinafter mentioned, and is one of a
series known as its General and Refunding Bonds, 8-5/8% Series Due 2004,
created by a Supplemental Indenture dated as of June 1, 1994, all General and
Refunding Bonds of all series issued and to be issued under and being equally
and ratably secured (except in so far as any sinking or analogous fund,
established in accordance with the provisions of the General and Refunding
Indenture hereinafter mentioned, may afford additional security for the General
and Refunding Bonds of any particular series) by a General and Refunding
Indenture dated as of June 1, 1975, executed and delivered by the Company and
Manufacturers Hanover Trust Company, Trustee (hereinafter referred to as the
"Trustee" which term includes any successor trustee) (hereinafter, together
with all indentures supplemental thereto, including the Supplemental Indenture
hereinabove referred to, called the "General and Refunding Indenture") to which
General and Refunding Indenture reference is made for a description of the
property mortgaged, the nature and the extent of the security, the rights of
the holders of the General and Refunding Bonds and of the Company in respect
thereof, the rights, duties and immunities of the Trustee, and the terms and
conditions upon which the General and Refunding Bonds are, and are to be,
issued and secured.
The General and Refunding Indenture contains provisions permitting the
holders of not less than a majority in principal amount of all the General and
Refunding Bonds at the time outstanding, determined and evidenced as provided
in the General and Refunding Indenture, on behalf of the holders of all the
General and Refunding Bonds, to waive any past default under the General and
Refunding Indenture and its consequences except a completed default, as defined
in the General and Refunding Indenture, in respect of the payment of the
principal of, premium, if any, or interest on any General and Refunding Bond or
except a default arising from the creation of any lien, other than those
permitted by the General and Refunding Indenture, ranking prior to or equal
with the lien of the General and Refunding Indenture on any of the mortgaged
property.
<PAGE> 29
28
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
The General and Refunding Indenture also contains provisions
permitting the Company and the Trustee, with the consent of the holders of not
less than the specified percentages described below in principal amount of the
General and Refunding Bonds at the time outstanding, in each case determined
and evidenced as provided in the General and Refunding Indenture, to execute
supplemental indentures adding any provisions to or changing in any manner or
eliminating any of the provisions of the General and Refunding Indenture or
modifying in any manner the rights of the holders of the General and Refunding
Bonds, subject, however, to certain limitations described below. With respect
to any of the foregoing, there shall be required the consent of the holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all the General and Refunding Bonds at the time outstanding; however, in
case the rights under the General and Refunding Indenture of the holders of
General and Refunding Bonds of one or more, but less than all, of the series of
General and Refunding Bonds outstanding shall be similarly affected, then the
consent of the holders of not less than sixty-six and two-thirds per centum
(66-2/3%) in principal amount of the outstanding General and Refunding Bonds of
such one or more series affected is required, except that if any such action
would similarly affect the General and Refunding Bonds of two or more series,
the holders of not less than sixty-six and two-thirds per centum (66-2/3%) in
principal amount of outstanding General and Refunding Bonds of such two or more
series, which need not include sixty-six and two-thirds per centum (66-2/3%) in
principal amount of each of such series, is required. No such supplemental
indenture shall, however, (i) extend the fixed maturity of any General and
Refunding Bonds, or reduce the rate or extend the time of payment of interest
thereon, or any premium payable on redemption thereof, or reduce the principal
amount thereof, or, subject to the provisions of the General and Refunding
Indenture, limit the right of a bondholder to institute suit for the
enforcement of payment of principal, premium, if any, or interest in accordance
with the terms of the General and Refunding Bonds, without the consent of the
holder of each General and Refunding Bond so affected, or (ii) reduce the
aforesaid percentage of General and Refunding Bonds, the holders of which are
required to consent to any such supplemental indenture, without the consent of
the holders of all General and Refunding Bonds then outstanding, or (iii)
permit the creation of any lien, other than those permitted by the terms of the
General and Refunding Indenture, ranking prior to or equal with the lien of the
General and Refunding Indenture on any of the mortgaged property without the
consent of the holders of all General and Refunding Bonds then outstanding, or
(iv) in any respect materially reduce his security and deprive the holder of
any outstanding General and Refunding Bond of the lien of the General and
Refunding Indenture on any of the mortgaged property without his consent. Any
such waiver or consent by the holder of this General and Refunding Bond (unless
effectively revoked as provided in the General and Refunding Indenture) shall
be conclusive and binding upon such holder and upon all future holders of this
General and Refunding
<PAGE> 30
29
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
Bond, or General and Refunding Bonds issued in exchange for or upon the
transfer of this General and Refunding Bond, irrespective of whether or not any
notation of such waiver or consent is made upon this General and Refunding
Bond.
No reference herein to the General and Refunding Indenture and no
provision of this General and Refunding Bond or of the General and Refunding
Indenture shall alter or impair the obligation of the Company, which is
absolute and unconditional, to pay the principal of and premium, if any, and
interest on this General and Refunding Bond at the time and place and at the
rate and in the coin or currency herein prescribed.
The General and Refunding Bonds of this Series are issuable only as
fully registered bonds in denominations of $1,000 and any integral multiple of
$1,000. General and Refunding Bonds of this Series may be exchanged for a like
aggregate principal amount of General and Refunding Bonds of this Series of
other authorized denominations without charge except for any tax or taxes or
other governmental charges incident to such exchange, such exchange to be made
at any office or agency to be maintained by the Company for such purposes and
in the manner and subject to the limitations provided in the General and
Refunding Indenture.
The General and Refunding Bonds of this Series may not be redeemed
prior to maturity except as herein provided in this paragraph. The General and
Refunding Bonds of this Series may be redeemed prior to maturity, as a whole,
but not in part, after notice given as provided in the General and Refunding
Indenture not less than thirty days and not more than ninety days before such
redemption date, at a redemption price of one hundred per centum (100%) of the
then principal amount, together with accrued interest to the date of
redemption, as more fully provided in Section 8.07 of the General and Refunding
Indenture, in the event (a) that all the outstanding common stock of the
Company shall be acquired by some governmental body or instrumentality and the
Company elects to redeem all the General and Refunding Bonds of all series, the
redemption date in any such event to be not more than one hundred twenty days
after the date on which all said stock is so acquired, or (b) that all or
substantially all of the mortgaged property which at the time shall be subject
to the lien of the General and Refunding Indenture shall be released from the
lien of the General and Refunding Indenture pursuant to the provisions thereof,
and available moneys in the hands of the Trustee, including any moneys
deposited by the Company for the purpose, are sufficient to redeem all the
General and Refunding Bonds of all series at the redemption prices (together
with accrued interest to the date of redemption) specified therein applicable
to the redemption thereof upon the happening of such event.
<PAGE> 31
30
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
The General and Refunding Indenture provides that any notice of
redemption of General and Refunding Bonds may state that it is subject to the
receipt of the redemption moneys by the Trustee before the date fixed for
redemption and such notice shall be of no effect unless such moneys are
received before such date.
The General and Refunding Indenture provides that if the Company shall
deposit with the Trustee, in trust for the purpose, funds sufficient to pay the
principal of all the General and Refunding Bonds of any series, or such of the
General and Refunding Bonds of any series as have been or are to be called for
redemption (including any portions, constituting $1,000 or an integral multiple
thereof, of fully registered General and Refunding Bonds of this Series) and
premium, if any, thereon, and all interest payable on such General and
Refunding Bonds (or portions) to the date on which they become due and payable
at maturity or upon redemption or otherwise, and complies with the other
provisions of the General and Refunding Indenture in respect thereof, then from
the date of such deposit such General and Refunding Bonds (or portions) shall
no longer be secured by the lien of the General and Refunding Indenture.
The General and Refunding Indenture provides that, upon any partial
redemption of a fully registered General and Refunding Bond, and upon surrender
thereof, new General and Refunding Bonds of the same series and of authorized
denominations in principal amount equal to the unredeemed portion of such fully
registered General and Refunding Bond will be delivered without charge in
exchange therefor.
The principal hereof may be declared or may become due prior to the
express date of the maturity hereof on the conditions, in the manner and at the
time set forth in the General and Refunding Indenture, upon the occurrence of a
completed default as provided in the General and Refunding Indenture.
This General and Refunding Bond is transferable in the manner and
subject to the limitations prescribed in the General and Refunding Indenture by
the registered holder hereof in person, or by his duly authorized attorney, at
the principal corporate trust office of the Trustee or at such other office or
agency established for that purpose, upon surrender of this General and
Refunding Bond, and upon payment, if the Company shall require it, of any tax
or taxes or other governmental charges incident to such exchange or transfer,
payable in connection therewith, and thereupon, a new General and Refunding
Bond or Bonds of authorized denominations of the same series and for the same
aggregate principal amount will be issued to the transferee in exchange herefor
as provided in the General and Refunding Indenture. Except as otherwise
provided herein with respect to the payment of interest, the Company and the
Trustee, any paying agent, any
<PAGE> 32
31
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
bond registrar and any other of the Company's agents may deem and treat the
person in whose name this General and Refunding Bond is registered as the
absolute owner hereof, whether or not this General and Refunding Bond shall be
overdue, for the purpose of receiving payment and for all other purposes and
neither the Company nor the Trustee nor any paying agent nor any bond registrar
nor any other of the Company's agents shall be affected by any notice to the
contrary.
No recourse under or upon any obligation, covenant or agreement
contained in the General and Refunding Indenture, or in any General and
Refunding Bond thereby secured, or because of any indebtedness thereby secured,
shall be had against any incorporator, or against any past, present or future
shareholder, officer or director, as such, of the Company or of any successor
corporation under any rule of law, statute or constitution, or by the
enforcement of any assessment or by any legal or equitable proceeding or
otherwise; it being expressly agreed and understood that the General and
Refunding Indenture, and the obligations thereby secured, are solely corporate
obligations, and that no personal liability whatever shall attach to, or be
incurred by, such incorporators, shareholders, officers or directors, as such,
of the Company or of any successor corporation, or any of them because of the
incurring of the indebtedness thereby authorized or under or by reason of any
of the obligations, covenants or agreements contained in the General and
Refunding Indenture or in any of the General and Refunding Bonds thereby
secured, or implied therefrom.
[END OF REVERSE SIDE OF FORM OF 2004 SERIES BONDS]
<PAGE> 33
32
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
ARTICLE III
CONCERNING THE TRUSTEE.
SECTION 3.01. The Trustee shall not be responsible in any manner for
or with respect to the validity or sufficiency of this Twenty-seventh
Supplemental Indenture, or the due execution hereof by the Company, or for or
with respect to the recitals and statements made solely by the Company.
SECTION 3.02. The Trustee hereby accepts the properties hereby
mortgaged and conveyed to it upon the trusts hereinbefore referred to and
agrees to perform the same upon the terms and conditions set forth in the
General and Refunding Indenture.
ARTICLE IV
MISCELLANEOUS.
SECTION 4.01. For all purposes hereof, except as the content may
otherwise require, (a) all terms contained herein shall have the meanings given
such terms in, and (b) all references herein to sections of the Original
General and Refunding Indenture shall be deemed to be to such sections of, the
Original General and Refunding Indenture as the same heretofore has been or
hereafter may be amended by an indenture or indentures supplemental thereto.
SECTION 4.02. This Twenty-seventh Supplemental Indenture may be
executed in several counterparts, and all such counterparts executed and
delivered, each as an original, shall constitute but one and the same
instrument.
SECTION 4.03. Attached hereto as Exhibit 1 is the form of the
Fiftieth Supplemental Indenture to the First Mortgage Bond Indenture
providing for the issuance of First Mortgage Bonds in accordance with the
provisions of Section 5.14 of the Original General and Refunding Indenture.
Pursuant to Section 259 of the Tax Law of the State of New York, the
Company hereby states that the amount which, at the time of the execution and
delivery of this Twenty-seventh Supplemental Indenture, including Exhibit 1
hereto, has been advanced or has accrued hereon or has become and is secured
hereby is the sum of $285,000,000.
<PAGE> 34
33
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this
instrument to be signed in its corporate name by its President or a Vice
President and its corporate seal to be hereunto affixed and attested by its
Secretary or an Assistant Secretary and, in token of its acceptance of the
Trusts created hereunder, UNITED STATES TRUST COMPANY OF NEW YORK has caused
this instrument to be signed in its corporate name by one of its Vice
Presidents and Trust Officers and its corporate seal to be affixed and attested
by one of its authorized officers, all as of the day and year first above
written.
LONG ISLAND LIGHTING COMPANY
[CORPORATE SEAL] By ANTHONY NOZZOLILLO
----------------------------
ANTHONY NOZZOLILLO
Senior Vice President and
Chief Financial Officer
Attest:
KATHLEEN A. MARION
-----------------------------
KATHLEEN A. MARION
Corporate Secretary
UNITED STATES TRUST COMPANY
OF NEW YORK
[CORPORATE SEAL] By LOUIS P. YOUNG
----------------------------
LOUIS P. YOUNG
Vice President
Attest:
MARGARET CIESMELEWSKI
-----------------------------
MARGARET CIESMELEWSKI
Assistant Vice President
<PAGE> 35
34
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
STATE OF NEW YORK )
: SS.
COUNTY OF NASSAU )
On the 8th day of June, in the year 1994, before me personally came
ANTHONY NOZZOLILLO, to me known, who, being by me duly sworn, did depose and
say that he resides at 430 Forest Avenue, Woodmere, New York; that he is a
Senior Vice President and Chief Financial Officer of LONG ISLAND LIGHTING
COMPANY, one of the corporations described in and which executed the above
instrument; that he knows the seal of said corporation; that the seal affixed
to said instrument is such corporate seal; that it was so affixed by order of
the Board of Directors of said corporation; and that he signed his name thereto
by like order.
HELEN R. DUFFY
--------------------------------
Notary Public
HELEN R. DUFFY
NOTARY PUBLIC, State of New York
No. 4827371, Suffolk County
Term Expires September 30, 1995
STATE OF NEW YORK )
: SS.
COUNTY OF NEW YORK )
On the 9th day of June, in the year 1994, before me personally came
LOUIS P. YOUNG, to me known, who, being by me duly sworn, did depose and say
that he resides at 6 Island Street, Plainview, New York 11803; that he is a
Vice President of UNITED STATES TRUST COMPANY OF NEW YORK, one of the
corporations described in and which executed the above instrument; that he
knows the seal of said corporation; that the seal affixed to said instrument is
such corporate seal; that it was so affixed by authority of the Board of
Directors of said corporation; and that he signed his name thereto by like
authority.
ALLISON BLUNNIE
-----------------------------------
Notary Public
ALLISON BLUNNIE
Notary Public, State of New York
No. 41-5007490
Qualified In Queens County
Commission Expires February 1, 1995
<PAGE> 36
35
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
Schedule A
TO
TWENTY-SEVENTH SUPPLEMENTAL INDENTURE
dated as of
June 1, 1994
SUPPLEMENTAL
TO
INDENTURE OF MORTGAGE AND DEED OF TRUST
dated as of
September 1, 1951
All of the properties referred to as being included in Schedule A in
the Granting Clause of this Twenty-seventh Supplemental Indenture, supplemental
to the Original Indenture, intended to be covered by the lien of the Indenture
are hereinafter described. All the right, title and interest of the Company in
and to its said properties, as acquired under the conveyances listed below,
together with all the right, title and interest of the Company in and to any
road, street or way, public or private, open or proposed, in front of,
adjoining and through any thereof, are incorporated herein as if more fully set
forth at length, and nothing in this Schedule, except as specifically stated
hereinafter, shall operate as, or be construed to be, a limitation or
diminution of said right, title or interest. Said properties, where
applicable, are subject to:
(1) Restrictions and covenants of record and easements to
other public utilities, but said restrictions, covenants and easements
in no way, manner or fashion, except as specifically stated
hereinafter, interfere adversely with the operation of the business of
the Company.
(2) Zoning ordinances and resolutions of any village, town or
any governmental authority having jurisdiction thereof.
All of the properties acquired by tax deeds from the County of Suffolk
are subject to the limitation of the Suffolk County Tax Act and to the
provisions of the Real Property Tax Law of the State of New York pertaining to
the sales of real properties for delinquent taxes in the County of Suffolk, and
also to such minor defects of title as are of the nature ordinarily found in
properties of this character.
<PAGE> 37
36
Long Island Lighting Company -- Twenty-seventh Supplemental Indenture
to the General and Refunding Indenture
COUNTY OF SUFFOLK
Town of Southampton
Item 1653
All that certain plot, piece or parcel of land, situated, lying and
being in Hayground, Town of Southampton, County of Suffolk and State of New
York, conveyed to Long Island Lighting Company by Estate of Sayre Baldwin by
deed dated July 13, 1993, and recorded in the Office of the Suffolk County
Clerk on July 29, 1993 in Liber 11638, cp 193. Indexed as District 0900,
Section 083, Block 1, part of lots 032 and 033, on the Tax Map of the County of
Suffolk.
COUNTY OF OSWEGO
Town of Scriba
Item 1654
An undivided eighteen percent (18%) interest in all that certain plot,
piece or parcel of land, situated, lying and being in the Town of Scriba,
County of Oswego and State of New York, conveyed to Long Island Lighting
Company by Niagara Mohawk Power Corporation by deed dated April 22, 1986 and
recorded in the Office of the Oswego County Clerk on May 25, 1988 in Book 1049,
cp 305.
<PAGE> 38
1
Long Island Lighting Company - Fiftieth Supplemental Indenture
EXHIBIT 1
FIFTIETH SUPPLEMENTAL INDENTURE, dated as of June 1, 1994, between
LONG ISLAND LIGHTING COMPANY, a New York corporation ("the Company"), having
its principal office at 175 East Old Country Road, in Hicksville, County of
Nassau, State of New York, and IBJ SCHRODER BANK & TRUST COMPANY, a bank and
trust company organized under the laws of the State of New York (hereinafter
called "the Trustee" or "the Successor Trustee"), having its corporate trust
office at One State Street, in the Borough of Manhattan, City, County and State
of New York.
WHEREAS, the Company has executed and delivered to City Bank Farmers
Trust Company (subsequently converted into First National City Trust Company,
which was merged into First National City Bank, now named Citibank, N.A.), as
Trustee (hereinafter called "the Original Trustee"), an Indenture of Mortgage
and Deed of Trust dated as of September 1, 1951 ("the Original Indenture")
securing the Company's First Mortgage Bonds ("the Bonds"), unlimited in
aggregate principal amount except as therein otherwise provided, and creating
the Company's First Mortgage Bonds, Series A, B and C; and
WHEREAS, thereafter the Company executed and delivered to the Trustee,
or its predecessor as Trustee, a First Supplemental Indenture, dated as of
December 1, 1951, a Second Supplemental Indenture, dated as of October 1, 1952,
a Third Supplemental Indenture, dated as of September 1, 1953, a Fourth
Supplemental Indenture, dated as of December 1, 1954, a Fifth Supplemental
Indenture, dated as of November 1, 1955, a Sixth Supplemental Indenture, dated
as of December 1, 1956, a Seventh Supplemental Indenture, dated as of May 1,
1958, an Eighth Supplemental Indenture, dated as of July 1, 1959, a Ninth
Supplemental Indenture, dated as of August 1, 1961, a Tenth Supplemental
Indenture, dated as of April 1, 1963, an Eleventh Supplemental Indenture, dated
as of June 1, 1964, a Twelfth Supplemental Indenture, dated as of June 1, 1965,
a Thirteenth Supplemental Indenture, dated as of March 1, 1966, a Fourteenth
Supplemental Indenture, dated as of April 1, 1967, a Fifteenth Supplemental
Indenture, dated as of September 1, 1969, creating the Company's First Mortgage
Bonds, Series D, E, F, G, H, I, J, K, L, M, N, O, P, Q and R, a Sixteenth
Supplemental Indenture, dated as of September 1, 1970, creating the Company's
First Mortgage Bonds, Series S and T, a Seventeenth Supplemental Indenture,
dated as of April 1, 1971, an Eighteenth Supplemental Indenture, dated as of
December 1, 1971, a Nineteenth
<PAGE> 39
2
Long Island Lighting Company - Fiftieth Supplemental Indenture
Supplemental Indenture, dated as of September 1, 1972, a Twentieth
Supplemental Indenture, dated as of December 1, 1973, a Twenty-first
Supplemental Indenture, dated as of June 1, 1974, a Twenty-second
Supplemental Indenture, dated as of November 1, 1974, a Twenty-third
Supplemental Indenture, dated as of June 1, 1975, a Twenty-fourth
Supplemental Indenture, dated as of September 1, 1975, a Twenty-fifth
Supplemental Indenture, dated as of June 1, 1976, a Twenty-sixth
Supplemental Indenture, dated as of December 1, 1976, a Twenty-seventh
Supplemental Indenture, dated as of May 1, 1977, a Twenty-eighth
Supplemental Indenture, dated as of April 1, 1978, a Twenty-ninth
Supplemental Indenture, dated as of March 1, 1979, a Thirtieth
Supplemental Indenture, dated as of February 1, 1980, a Thirty-first
Supplemental Indenture, dated as of March 1, 1981, a Thirty-second
Supplemental Indenture, dated as of July 1, 1981, a Thirty-third
Supplemental Indenture, dated as of July 1, 1981, a Thirty-fourth
Supplemental Indenture, dated as of December 1, 1981, a Thirty-fifth
Supplemental Indenture, dated as of December 1, 1981, a Thirty-sixth
Supplemental Indenture, dated as of June 1, 1982, a Thirty-seventh
Supplemental Indenture, dated as of October 1, 1982, a Thirty-eighth
Supplemental Indenture, dated as of April 1, 1983, and a Thirty-ninth
Supplemental Indenture, dated as of May 1, 1983, creating the Company's
First Mortgage Bonds, Series U, V, W, X, Y, Z, AA, BB, CC, DD, EE, FF,
GG, HH, II, JJ, KK, LL, MM, NN, OO, PP and QQ, and confirming the lien of the
Indenture on certain property, rights, privileges and franchises acquired
since the execution and delivery of the Original Indenture; and
WHEREAS, the Original Indenture and the aforesaid Supplemental
Indentures have been recorded as follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE NASSAU THE CITY OF
COUNTY CLERK'S NEW YORK
OFFICE (QUEENS COUNTY)
------------------- ------------------
LIBER OF LIBER OF
MORTGAGES PAGE MORTGAGES PAGE
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Original Indenture . . . . 4450 1 6475 1
Supplemental Indentures:
First . . . . . . . . . . 4464 69 6484 377
Second . . . . . . . . . 4724 389 6638 171
Third . . . . . . . . . . 5041 428 6799 141
Fourth . . . . . . . . . 5405 370 6966 422
Fifth . . . . . . . . . . 5703 64 7110 648
Sixth . . . . . . . . . . 6007 521 7273 281
Seventh . . . . . . . . . 6273 326 7451 458
</TABLE>
<PAGE> 40
3
Long Island Lighting Company - Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE NASSAU THE CITY OF
COUNTY CLERK'S NEW YORK
OFFICE (QUEENS COUNTY)
------------------- ------------------
LIBER OF LIBER OF
MORTGAGES PAGE MORTGAGES PAGE
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Eighth . . . . . . . . . 6532 251 7612 211
Ninth . . . . . . . . . . 6950 79 7884 530
Tenth . . . . . . . . . . 7322 1 8158 387
Eleventh . . . . . . . . 7538 61 8416 388
Twelfth . . . . . . . . . 7717 342 8639 323
Thirteenth . . . . . . . 7872 464 55* 90
Fourteenth . . . . . . . 8079 364 383* 438
Fifteenth . . . . . . . . 8529 283 349** 429
Sixteenth . . . . . . . . 8671 129 427** 242
Seventeenth . . . . . . . 8744 104 468** 1768
Eighteenth . . . . . . . 8889 237 535** 1618
Nineteenth . . . . . . . 9027 144 601** 1250
Twentieth . . . . . . . . 9291 274 725** 1786
Twenty-first . . . . . . 9365 240 766** 1373
Twenty-second . . . . . . 9439 30 799** 1072
Twenty-third . . . . . . 9517 524 840** 1275
Twenty-fourth . . . . . . 9570 458 862** 584
Twenty-fifth . . . . . . 9675 63 911** 544
Twenty-sixth . . . . . . 9778 58 953** 505
Twenty-seventh . . . . . 9814 558 985** 759
Twenty-eighth . . . . . . 9919 64 1063** 1103
Twenty-ninth . . . . . . 10032 78 1143** 1125
Thirtieth . . . . . . . . 10169 75 1239* 1812
Thirty-first . . . . . . 10285 74 1323** 816
Thirty-second . . . . . . 10322 44 1351** 230
Thirty-third . . . . . . 10322 105 1351** 293
Thirty-fourth . . . . . . 10379 68 1392** 1729
Thirty-fifth . . . . . . 10379 172 1392** 1604
Thirty-sixth . . . . . . 10423 170 1432** 1106
Thirty-seventh . . . . . 10471 471 1466** 1683
Thirty-eighty . . . . . . 10542 769 1518** 938
Thirty-ninth . . . . . . 10571 57 1537** 767
</TABLE>
_______________
*Liber of Records.
**Reel.
<PAGE> 41
4
Long Island Lighting Company - Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE SUFFOLK IN THE OFFICE OF
COUNTY CLERK'S THE REGISTRAR OF
OFFICE SUFFOLK COUNTY
------------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Original Indenture . . . . . . . 1884 1 29050
Supplemental Indentures:
First Indenture . . . . . . . . 1889 569 29279
Second Indenture . . . . . . . 2006 74 35843
Third . . . . . . . . . . . . . 2143 211 43709
Fourth . . . . . . . . . . . . 2326 488 52211
Fifth . . . . . . . . . . . . . 2539 317 59824
Sixth . . . . . . . . . . . . . 2773 327 68422
Seventh . . . . . . . . . . . . 3015 86 78200
Eighth . . . . . . . . . . . . 3251 5 88155
Ninth . . . . . . . . . . . . . 3678 380 106597
Tenth . . . . . . . . . . . . . 4081 14 122751
Eleventh . . . . . . . . . . . 4390 72 134155
Twelfth . . . . . . . . . . . . 4664 366 143894
Thirteenth . . . . . . . . . . 4890 405 151648
Fourteenth . . . . . . . . . . 5130 543 160481
Fifteenth . . . . . . . . . . . 5682 431 179778
Sixteenth . . . . . . . . . . . 5891 14 187577
Seventeenth . . . . . . . . . . 6006 544 191628
Eighteenth . . . . . . . . . . 6236 195 198008
Nineteenth . . . . . . . . . . 6473 299 204868
Twentieth . . . . . . . . . . . 6956 378 219354
Twenty-first . . . . . . . . . 7104 80 223591
Twenty-second . . . . . . . . . 7221 17 226961
Twenty-third . . . . . . . . . 7358* 510 231531
Twenty-fourth . . . . . . . . . 7445* 120 234028
Twenty-fifth . . . . . . . . . 7622* 61 239418
Twenty-sixth . . . . . . . . . 7773* 100 244098
Twenty-seventh . . . . . . . . 7882* 552 247933
Twenty-eighth . . . . . . . . . 8149* 30 256465
Twenty-ninth . . . . . . . . . 8401* 574 263862
Thirtieth . . . . . . . . . . . 8689 1 271653
</TABLE>
---------------
*Volume of Mortgages.
<PAGE> 42
5
Long Island Lighting Company - Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE SUFFOLK IN THE OFFICE OF
COUNTY CLERK'S THE REGISTRAR OF
OFFICE SUFFOLK COUNT
-------------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Supplemental Indentures:
Thirty-first . . . . . . . . 8950 38 278932
Thirty-second . . . . . . . . 9034 385 281160
Thirty-third . . . . . . . . 9034 446 281157
Thirty-fourth . . . . . . . . 9169 97 284686
Thirty-fifth . . . . . . . . 9169 161 284688
Thirty-sixth . . . . . . . . 9271 423 287513
Thirty-seventh . . . . . . . 9374 279 290222
Thirty-eighth . . . . . . . . 9519 563 293588
Thirty-ninth . . . . . . . . 9578 272 294810;
</TABLE>
WHEREAS, the Company and First National City Bank (now Citibank,
N.A.), as Trustee, pursuant to Article Nine of the Uniform Commercial Code,
have executed a Financing Statement which was filed in the State of New York on
June 2, 1965, in the Department of State of the State of New York as File No.
65-124,203, and Continuation Statements numbered 48,738, 40,081, 73,660 and
123,589, which were filed, respectively, in the State of New York on April 21,
1970, May 15, 1975, May 23, 1980 and May 28, 1985, in the Department of State
of the State of New York; and
WHEREAS, a Fortieth Supplemental Indenture, dated as of February 29,
1984, wherein the Company accepts the resignation of Citibank, N.A., as
Original Trustee under the Indenture, appoints J. Henry Schroder Bank & Trust
Company as Successor Trustee under the Indenture and J. Henry Schroder Bank &
Trust Company accepts such appointment, has been executed by the Company,
Citibank, N.A. and J. Henry Schroder Bank & Trust Company and recorded as
follows: In the Nassau County Clerk's Office in Liber 9538 of Deeds, Page 581
on March 1, 1984; in the Office of the Register of The City of New York (Queens
County) on Reel 1647, Page 40 on March 5, 1984; in the Suffolk County Clerk's
Office in Liber 9992 of Mortgages, Page 418 on March 5, 1984; and in the Office
of the Registrar of Suffolk County as Document No. 301270 on March 5, 1984; and
WHEREAS, the Company and First National City Bank (now Citibank,
N.A.), as Trustee, pursuant to Article Nine of the Uniform Commercial Code,
have executed an Amendment to the Financing Statement which was filed in the
State of New York on May 28, 1985, in the Department of State of the State of
New York as File No. 123,590, and an
<PAGE> 43
6
Long Island Lighting Company - Fiftieth Supplemental Indenture
Assignment Statement on May 28, 1985 numbered 123,591 to J. Henry Schroder Bank
& Trust Company, and on April 23, 1990 the Company and J. Henry Schroder Bank &
Trust Company filed a Continuation Statement numbered 83,189 and an Amendment
Statement numbered 83,190; and
WHEREAS, thereafter the Company executed and delivered to the
Successor Trustee a Forty-first Supplemental Indenture, dated as of September
1, 1984, a Forty-second Supplemental Indenture, dated as of October 1, 1984, a
Forty-third Supplemental Indenture, dated as of June 1, 1985, a Forty-fourth
Supplemental Indenture, dated as of April 1, 1986, a Forty-fifth Supplemental
Indenture, dated as of February 1, 1991, a Forty-sixth Supplemental Indenture,
dated as of May 1, 1991, a Forty-seventh Supplemental Indenture, dated as of
July 1, 1991, a Forty-eighth Supplemental Indenture, dated as of May 1, 1992,
and a Forty-ninth Supplemental Indenture dated as of July 1, 1992, creating the
Company's First Mortgage Bonds, Series RR, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA,
BBB and CCC, respectively, and confirming the lien of the Indenture on certain
property, rights, privileges and franchises acquired since the execution and
delivery of the Original Indenture; and
WHEREAS, the aforesaid Supplemental Indentures have been recorded as
follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE THE CITY OF
NASSAU COUNTY NEW YORK
CLERK'S OFFICE (QUEENS COUNTY)
------------------- -----------------
LIBER OF
MORTGAGES PAGE REEL PAGE
--------- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Forty-first . . . . . . . . . . 10945 622 1742 680
Forty-second . . . . . . . . . 10988 758 1772 1463
Forty-third . . . . . . . . . . 11159 60 1877 735
Forty-fourth . . . . . . . . . 11487 95 2073 1
Forty-fifth . . . . . . . . . . 13715 178 3121 1996
Forty-sixth . . . . . . . . . . 13782 196 3149 569
Forty-seventh . . . . . . . . . 13859 167 3185 1156
Forty-eighth . . . . . . . . . 14060 193 3319 2469
Forty-ninth . . . . . . . . . . 14113 170 3365 698
</TABLE>
<PAGE> 44
7
Long Island Lighting Company - Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE IN THE OFFICE OF
SUFFOLK COUNTY THE REGISTRAR OF
CLERK'S OFFICE SUFFOLK COUNTY
--------------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Supplemental Indentures:
Forty-first . . . . . . . . . . . 10357 1 306374
Forty-second . . . . . . . . . . 10465 165 307994
Forty-third . . . . . . . . . . . 10849 202 313990
Forty-fourth . . . . . . . . . . 11550 227 323439
Forty-fifth . . . . . . . . . . . 16595 1 388389
Forty-sixth . . . . . . . . . . . 16737 201 390447
Forty-seventh . . . . . . . . . . 16923 299 392730
Forty-eighth . . . . . . . . . . 17664 247 401508
Forty-ninth . . . . . . . . . . . 17933 227 404359
</TABLE>
<TABLE>
<CAPTION>
IN THE
OSWEGO COUNTY
CLERK'S OFFICE
----------------
BOOK OF
MORTGAGES PAGE
--------- ----
<S> <C> <C>
Forty-fourth . . . . . . . . . . 869 106
Forty-fifth . . . . . . . . . . . 1227 77
Forty-sixth . . . . . . . . . . . 1242 85
Forty-seventh . . . . . . . . . . 1264 71
Forty-eighth . . . . . . . . . . 1334 168
Forty-ninth . . . . . . . . . . . 1357 175; and
</TABLE>
WHEREAS, the Organization Certificate of J. Henry Schroder Bank &
Trust Company, filed in the Office of the Superintendent of Banks of the State
of New York, was amended, effective January 1, 1987, to provide that J. Henry
Schroder Bank & Trust Company be named IBJ Schroder Bank & Trust Company; and
WHEREAS, the Original Indenture, together with the aforesaid
forty-nine supplemental indentures and this Fiftieth Supplemental Indenture, is
hereinafter called "the Indenture;" and
<PAGE> 45
8
Long Island Lighting Company - Fiftieth Supplemental Indenture
WHEREAS, as required by Section 5.14 of the General and Refunding
Indenture dated as of June 1, 1975 between the Company and Manufacturers
Hanover Trust Company, as Trustee ("the General and Refunding Indenture"), the
Company desires by this Fiftieth Supplemental Indenture to create two series of
Bonds to be issued under the Indenture, to designate or otherwise distinguish
such series, to specify the particulars necessary to describe and define the
same, and to specify such other terms, provisions and agreements in respect
thereto as are in the Indenture provided or permitted; and
WHEREAS, in the Original General and Refunding Indenture, the Company
has heretofore granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged and confirmed unto the Trustee, the property,
rights, privileges and franchises set forth in said Original General and
Refunding Indenture as follows:
CLAUSE FIRST
All the property particularly described in Schedule A hereto
annexed and hereby made a part hereof as fully as if set forth herein
at length.
CLAUSE SECOND
All other property, real, personal or mixed (other than
"Excepted Property" as hereinafter defined), of every kind and
description and wheresoever situate, now owned or which may be
hereafter acquired by the Company, to the extent of all of the
Company's ownership interest therein, regardless of whether such
ownership interest constitutes the entire ownership interest in the
property concerned or whether it be a jointly held interest in common
with others divided or undivided, it being the intention hereof that
all property, rights, privileges and franchises now owned by the
Company after the date hereof (other than Excepted Property) shall be
as fully embraced within and subjected to the Lien hereof as if such
property were specifically described herein.
CLAUSE THIRD
Also any property, including Excepted Property, that may, from
time to time hereafter, by delivery or by writing of any kind, be
subjected to the Lien hereof by the Company or by anyone in its
behalf; and the Trustee is hereby authorized to receive the same at
any time as additional security hereunder. Such subjection to the
Lien hereof of any such property as additional security may be made
<PAGE> 46
9
Long Island Lighting Company - Fiftieth Supplemental Indenture
subject to any reservations, limitations or conditions which shall be
set forth in a writing executed by the Company or the Person so acting
in its behalf and/or the Trustee respecting the use and disposition of
such property or the proceeds thereof.
CLAUSE FOURTH
Together with all the rents, issues, profits and other income
of the property subjected or required to be subjected to the Lien of
the General and Refunding Indenture; and all the estate, right, title
and interest of every nature whatsoever of the Company in and to the
same and every part and parcel thereof.
EXCEPTED PROPERTY
There is, however, expressed excepted and excluded from the
Lien and operation of the General and Refunding Indenture the
following described property of the Company, now owned or hereafter
acquired (herein sometimes called "Excepted Property"):
A. All cash on hand or in banks; all bills, notes and
accounts receivable; all choses in action and judgments; all
shares of stock, bonds, notes, evidences of indebtedness and
other securities; and all contracts and operating agreements;
B. All goods, wares, materials, merchandise, appliances
and supplies acquired for the purpose of sale in the ordinary
course of business; and all fuel (including nuclear fuel),
materials and supplies and other personal property which are
consumable (otherwise than by ordinary wear and tear) in their
use in the operation of the business of the Company;
C. The last day of the term of each leasehold estate (oral
or written) and/or any agreement therefor, now or hereafter
enjoyed by the Company, and whether falling within a general
or specific description of property herein;
D. All electric energy, gas, heat and other products
generated, manufactured, produced or purchased by the Company
for sale or distribution in the ordinary course of its
business;
E. Property acquired by the Company as a result of any
consolidation or merger to which the Company may be a party
which, to the extent specified in Section 13.05 hereof,
<PAGE> 47
10
Long Island Lighting Company - Fiftieth Supplemental Indenture
does not become subject to the Lien of this General and
Refunding Indenture;
F. Airplanes and flight equipment; and
G. Property located outside the State of New York.
The Company may, or if expressed required by the terms of this
General and Refunding Indenture shall, however, pursuant to Clause
Third, subject to the Lien hereof any Excepted Property, whereupon the
same shall cease to be Excepted Property and if, upon the occurrence
of a completed default as specified in Section 10.01 hereof, the
Trustee or a receiver appointed hereunder shall enter upon and take
possession of the Mortgaged Property, the Trustee or such receiver may
also, to the extent permitted by law, take possession of any Excepted
Property, whereupon the same shall cease to be Excepted Property; and
WHEREAS, in the supplemental indentures to the Original General and
Refunding Indenture, the Company has heretofore granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged and confirmed upon
the Trustee all the property particularly described in each Schedule A thereto
annexed and made a part thereof, and all the property, real, personal or mixed,
rights, privileges and franchises (other than Excepted Property), of every kind
and description and wheresoever situate, as specified in Granting Clauses First,
Second, Third and Fourth of the Original General and Refunding Indenture; and
WHEREAS, since the execution and delivery of the Original Indenture,
the Company has acquired certain property, rights, privileges and franchises
which by the terms of the Original Indenture are subject to the lien of the
Indenture, and the Company desires to confirm the lien of the Indenture on said
property, rights, privileges and franchises so acquired in accordance with the
provisions of the Indenture; and
WHEREAS, all the conditions and requirements necessary to make this
Fiftieth Supplemental Indenture when duly executed a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed
have been done, performed and fulfilled, and the execution and delivery of this
Fiftieth Supplemental Indenture have in all respects been duly authorized by
resolution of the Board of Directors of the Company;
NOW, THEREFORE, in consideration of the premises and of the sum of $1
paid to the Company by the Trustee at or before the execution and delivery
hereof, the receipt whereof is hereby acknowledged, and of other good and
valuable considerations, the Company does hereby acknowledge
<PAGE> 48
11
Long Island Lighting Company - Fiftieth Supplemental Indenture
and confirm that it has granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged and confirmed, and by these presents the
Company does hereby grant, bargain, sell, release, convey, assign, transfer,
mortgage, pledge and confirm unto the Trustee all property, real, personal or
mixed, rights, privileges and franchises (other than Excepted Property as
defined in the Indenture), of every kind and description and wheresoever
situate, acquired by the Company since the execution and delivery of the
Original Indenture.
TO HAVE AND TO HOLD all such property, rights, privileges and
franchises as part of the Trust Estate (as defined in the Indenture) with like
effect as though originally included therein.
IN TRUST NEVERTHELESS for the same purposes and upon the same terms,
trusts and conditions, and subject to and with the same provisos and covenants,
as are set forth in the Indenture, with the same force and effect as though
such property had been particularly described in the Granting Clauses of the
Original Indenture.
The Company does hereby covenant and agree with the Trustee as follows:
ARTICLE I
FIRST MORTGAGE BONDS, SERIES DDD 7-5/8% DUE 1998
SECTION 1. There is hereby created a series of Bonds to be issued
under and secured by the Indenture to be designated as "First Mortgage Bonds,
Series DDD 7-5/8% Due 1998" of the Company ("the Bonds of Series DDD"), and the
form thereof shall be substantially as hereinafter recited. The principal
amount of Bonds of Series DDD which may be authenticated and delivered under
this Supplemental Indenture shall be limited to One Hundred Million Dollars
($100,000,000), except for Bonds of Series DDD authenticated and delivered upon
transfer of, or in exchange for, or in lieu of other Bonds of Series DDD
pursuant to the provisions of the Original Indenture, as from time to time
amended and supplemented, or of this Supplemental Indenture. An aggregate
principal amount of One Hundred Million Dollars ($100,000,000) of the Bonds of
Series DDD may forthwith be executed by the Company and delivered to the
Trustee for authentication and delivery. From time to time, so long as the
aggregate principal amount of the Bonds of Series DDD authenticated and
delivered does not exceed the limitation hereinabove set forth, and subject to
the terms and conditions of the Indenture relative to the authentication and
delivery of Bonds, Bonds of Series DDD additional to the initial issue thereof
may be executed by the Company and delivered to the Trustee for authentication
and delivery. The Bonds of Series DDD shall be registered Bonds without coupons
in
<PAGE> 49
12
Long Island Lighting Company - Fiftieth Supplemental Indenture
denominations of $1,000 or any multiple thereof, and of such amount of each
denomination as may be executed by the Company and delivered to the Trustee for
authentication and delivery. The Bonds of Series DDD shall mature April 15,
1998, and shall bear interest at the rate of seven and five-eighths per centum
(7-5/8%) per annum, payable semi-annually on April 15 and October 15 in each
year, commencing on the date specified in such Bond as below provided as the
commencement date of the first interest period, until the principal thereof
shall have become due and payable. Interest shall be payable on overdue
principal of the Bonds of Series DDD and (to the extent that payment of such
interest is enforceable under applicable law) on overdue instalments of
interest of Bonds of Series DDD at the rate of six per centum (6%) per annum.
Both the principal of and interest on the Bonds of Series DDD shall be paid at
the office or agency of the Company in the Borough of Manhattan in The City of
New York, in any coin or currency of the United States of America which at the
time of payment shall be legal tender for public and private debts.
SECTION 2. The provisions of the second paragraph of Section 2.05 of
the Indenture shall not be applicable to the Bonds of Series DDD. All Bonds of
Series DDD shall be dated the date of their authentication, and shall bear
interest from the date specified in such Bond as below provided as the
commencement of the first interest period, or from the most recent interest
date to which interest has been paid or duly provided for. Interest on any Bond
of Series DDD which is payable, and is punctually paid or duly provided for, on
any interest date shall be paid to the person in whose name that Bond (or one
or more Bonds of Series DDD evidencing all or a portion of the same debt) is
registered at the close of business on the Regular Record Date for such
interest which shall be the first day of April or October, as the case may be,
next preceding such interest date whether or not such first day of April or
October is a day which is not a day on which banking institutions in The City
of New York are authorized or required by law or executive order to be closed
(hereinafter a "Business Day").
SECTION 3. Any interest on any Bond of Series DDD which is payable,
but is not punctually paid or duly provided for, on any interest date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Regular Record Date by virtue of having been
such holder; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the Bonds of Series
DDD (or the respective Bonds of Series DDD evidencing all or a portion
of the same debt) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall
<PAGE> 50
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Long Island Lighting Company - Fiftieth Supplemental Indenture
notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Bond of Series DDD and the date of the
proposed payment, and at the same time the Company shall make
arrangements satisfactory to the Trustee for the deposit with the
Trustee of an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest prior to the date of
the proposed payment, such money when deposited to be held in trust
for the benefit of the persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more than 15 nor less than 5 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first class postage prepaid, to each
holder of a Bond of Series DDD at his address as it appears in the
Bond register, not less than 10 days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the
expense of the Company, cause a similar notice to be published at
least once in a daily newspaper in the Borough of Manhattan in The
City of New York, but such publication shall not be a condition
precedent to the establishment of such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the persons in whose names the Bonds of Series DDD
(or the respective Bonds of Series DDD evidencing all or a portion of
the same debt) are registered on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Bonds of Series
DDD may be listed, and upon such notice as may be required by such
exchange, if after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
SECTION 4. The Bonds of Series DDD shall be redeemable at a
redemption price of one hundred per centum (100%) of their principal amount,
together with accrued interest thereon from the interest date to which interest
has previously been paid or made available for payment to the date fixed for
redemption, upon the application of Trust Moneys pursuant to
<PAGE> 51
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Long Island Lighting Company - Fiftieth Supplemental Indenture
the last paragraph of Section 9.04, and Sections 9.10 and 9.11 of the
Indenture.
Bonds of Series DDD shall be redeemed in accordance with their terms
and Article Eleven of the Indenture.
SECTION 5. In order to prevent the application of the provisions of
Section 9.10 of the Indenture requiring the redemption of Bonds pursuant to
said Section, the Company shall use its best efforts to take such action as may
be necessary so that at no time shall there have been on deposit at all times
during the preceding three years Trust Moneys in an amount in excess of
$25,000.
The Company shall, in the manner provided in Sections 9.04A and 12.01
of the Indenture, use its best efforts to make alternative directions and
designations so that it shall not be required by the provisions of said
Sections to purchase or redeem any Bonds of Series DDD.
SECTION 6. No payment by way of principal or interest on any Bond of
Series DDD shall be made if the Trustee shall have received written notice
signed on behalf of the registered holder of such Bond of Series DDD stating
that the same has been waived by such registered holder and such waiver shall
not have been revoked, all in the manner and at the times hereinafter
specified. With respect to principal of any Bond of Series DDD becoming due
and payable on any date, said notice shall be on file with the Trustee at the
close of business on said due date if said due date is a Business Day, or, if
said due date is not a Business Day, then on the Business Day next following
said due date. With respect to any instalment of interest on any Bond of Series
DDD, said notice shall be on file with the Trustee at the close of business on
the date which is the 30th day after the date fixed for payment of such
instalment or, if said 30th day is not a Business Day, on the Business Day
next preceding said 30th day. The above-mentioned notices of waiver may be
revoked by written notice signed and filed with the Trustee in the same manner
specified herein for a notice of waiver.
Unless a waiver is so revoked, (a) at the close of business on the
date when any principal of any Bond of Series DDD with respect to which a
waiver was on file with the Trustee as aforesaid shall become due and payable
or, if said due date is not a Business Day, on the Business Day next following
said due date, such principal shall cease to be payable, and interest shall
thereupon cease to accrue thereon, and (b) at the close of business on the date
which is the 30th day after the date fixed for payment of any instalment of
interest with respect to which a waiver was on file with the Trustee as
aforesaid or, if said 30th day is not a Business Day, on the
<PAGE> 52
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Long Island Lighting Company - Fiftieth Supplemental Indenture
Business Day next preceding said 30th day, such instalment shall cease to be
payable.
Said notice shall specify the certificate numbers and denominations of
Bonds of Series DDD to which it applies and the principal or instalments of
interest being thereby waived and shall state that the person signing or on
whose behalf it is signed is the registered holder of said Bonds of Series DDD,
that said Bonds of Series DDD are in said registered holder's possession and,
if required by the Trustee, will be promptly produced for inspection by the
Trustee, that payment of the principal of or instalments of interest specified
therein are thereby waived, that said notice is being delivered to the Trustee
for the purpose of being relied on by the Trustee in the administration of the
trust under the Indenture, that the Trustee may so rely and that the person(s)
signing are thereunto duly authorized.
Where the person on whose behalf a notice is given is a corporation,
said notice shall be signed by the President or any Vice President, Cashier,
Controller, Treasurer, Trust Officer or Assistant Vice President, and by an
Assistant Cashier, Assistant Controller, Assistant Treasurer or Assistant Trust
Officer.
The Trustee shall be entitled to rely upon and shall be fully
protected in relying upon written notices delivered to it in accordance with
this Section 6.
SECTION 7. The Company covenants that the annual interest charges on
the Bonds of Series DDD which would be payable except for the waiver of such
payment described in Section 6 hereof shall be included as annual interest
charges upon the Company's Secured Debt (as defined in the Indenture) for the
purpose of any Gross Income Certificate under the Indenture.
SECTION 8. All Bonds of Series DDD shall, upon surrender to the
Trustee at its corporate trust office, be exchangeable for other Bonds of
Series DDD of a different authorized denomination or denominations, as
requested by the holder surrendering the same, but of a like aggregate
principal amount. The Company will execute and the Trustee shall authenticate
and deliver registered Bonds of Series DDD whenever the same shall be required
for any such exchange.
For any exchange of Bonds of Series DDD (other than exchanges
expressly provided in the Indenture to be made at the Company's own expense or
without expense or without charge to Bondholders) or for any transfer of any
Bond of Series DDD, the Company, at its option, may require the payment by the
Bondholder of a sum sufficient to reimburse it for any stamp tax and/or any
other governmental charge incident thereto,
<PAGE> 53
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Long Island Lighting Company - Fiftieth Supplemental Indenture
but, notwithstanding the provisions of the last paragraph of Section 2.08 of
the Indenture, no other charge shall be made by the Company for any such
exchange or transfer.
The right reserved by the Company in the first paragraph of Section
2.06 of the Indenture not to make any transfers or exchanges of Bonds for a
period of 10 days next preceding any interest payment date shall not be
applicable to transfers or exchanges of Bonds of Series DDD.
Except as hereinabove provided in this Section, exchanges of Bonds of
Series DDD shall be subject to Sections 2.06 and 2.08 of the Indenture.
The Trustee is hereby appointed Registrar of the Bonds of Series DDD
for the purpose of registering and transferring Bonds of Series DDD as provided
in the Indenture.
SECTION 9. The form of the Bonds of Series DDD and the certificate of
authentication of the Trustee to be executed thereon are to be substantially in
the following forms, respectively, with such variations as are permitted in the
Indenture for registered Bonds without coupons:
[FORM OF BONDS OF SERIES DDD FACE SIDE]
LONG ISLAND LIGHTING COMPANY
Registered Registered
FIRST MORTGAGE BOND
SERIES DDD 7-5/8% DUE 1998
$ $
NUMBER
LONG ISLAND LIGHTING COMPANY, a corporation of the State of New York
(hereinafter called "the Company"), for value received, hereby promises to pay
to or registered assigns, at the
close of business on April 15, 1998, if said due date is a day (herein called a
"Business Day") which is not a day on which banking institutions in The City of
New York are authorized or required by law or executive order to be closed, or,
if said due date is not a Business Day, then on the Business Day next following
said due date, Dollars, and to pay interest
thereon from the date of the initial issuance of the Bonds of this Series, or
from the most recent interest date to which interest has been paid or duly
provided for, at the rate of seven and five-eighths per centum (7-5/8%) per
annum, semi-annually at the close of business on April 15 and October 15 in
each year, commencing on October 15, 1994 or, if said April 15 or October 15 is
not a Business Day, on the Business Day next following
<PAGE> 54
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Long Island Lighting Company - Fiftieth Supplemental Indenture
said date, until the principal hereof shall have become due and payable, and to
pay interest on any overdue principal and (to the extent enforceable under
applicable law) on any overdue instalment of interest at the rate of six per
centum (6%) per annum. The principal hereof and interest hereon shall be
payable at the office or agency of the Company in the Borough of Manhattan in
The City of New York, in any coin or currency of the United States of America
which at the time of payment shall be legal tender for public and private
debts.
The provisions of this Bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Bond shall not be valid until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture hereinafter
mentioned.
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this Bond
to be executed in its corporate name with the facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the facsimile
signature of its Secretary or of an Assistant Secretary.
Dated:
LONG ISLAND LIGHTING
COMPANY
By
----------------------------
President
Attest:
-----------------------------
Secretary
[Form of the Trustee's Certificate
of
Authentication]
This is one of the Bonds, of the Series designated therein, described
in the within mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE
By
----------------------------
Authorized Officer
<PAGE> 55
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Long Island Lighting Company - Fiftieth Supplemental Indenture
[FORM OF BOND OF SERIES DDD -- REVERSE SIDE]
LONG ISLAND LIGHTING COMPANY
FIRST MORTGAGE BOND
SERIES DDD 7-5/8% DUE 1998
(Continued)
The interest so payable, and punctually paid or duly provided for, on
any interest date will, as provided in the Indenture hereinafter mentioned, be
paid to the person in whose name this Bond (or any Bond or Bonds evidencing all
or a portion of the same debt) is registered at the close of business on the
Regular Record Date for such interest which shall be the first day of April
or October, as the case may be (whether or not a Business Day), next preceding
such interest date. Any such interest not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on such Regular
Record Date, and may be paid to the person in whose name this Bond (or any Bond
or Bonds evidencing all or a portion of the same debt) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to the
registered holder hereof not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Bond may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided for in the Indenture hereinafter mentioned.
If an Event of Default, as defined in the Indenture hereinafter
mentioned, shall occur, the principal of this Bond may become or be declared
due and payable, in the manner and with the effect provided in the Indenture
hereinafter mentioned.
This Bond is one of an authorized issue of Bonds of the Company known
as its "First Mortgage Bonds", not limited in principal amount except as in the
Indenture hereinafter mentioned provided, issued and to be issued in one or
more series under, and all equally and ratably secured (except as any sinking
or other fund may afford additional special security for the Bonds of any
particular series) by, an Indenture of Mortgage and Deed of Trust dated as of
September 1, 1951, executed by the Company to City Bank Farmers Trust Company
(subsequently converted into First National City Trust Company, which was
merged into First National City Bank, now named Citibank, N.A.), as Trustee
(hereinafter referred to as "the Trustee" which term includes any successor
trustee) (herein, together with all
<PAGE> 56
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Long Island Lighting Company - Fiftieth Supplemental Indenture
indentures supplemental thereto, called "the Indenture") to which Indenture
reference is hereby made for a description of the properties thereby mortgaged
and conveyed, the nature and extent of the security, the rights of the holders
of said Bonds and of the Trustee and of the Company in respect of such
security, and the terms upon which said Bonds are and are to be authenticated
and delivered.
As provided in the Indenture, said Bonds are issuable in series which
may vary as to maturity, interest and otherwise as in the Indenture provided or
permitted. This Bond is one of a series entitled "First Mortgage Bonds, Series
DDD 7-5/8% Due 1998" created by a Fiftieth Supplemental Indenture dated as of
June 1, 1994, as provided for in the Indenture.
As provided in, and to the extent permitted by, the Indenture, the
rights and obligations of the Company and of the holders of said Bonds may be
modified by the Company with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the Bonds of all
series then outstanding which are affected by such modification (excluding
Bonds disqualified from voting by reason of the Company's interest therein as
provided in the Indenture). The Indenture provides, among other things, that,
without the consent of the holder hereof, no such modification shall effect the
reduction, or the extension of the stated time of payment, of the principal
hereof, or of the interest hereon, or permit the creation of any lien on the
properties so mortgaged and conveyed prior to or on a parity with the lien of
the Indenture (except as therein expressly permitted) or deprive the holder
hereof of the lien created by the Indenture on said properties. The holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all Bonds of all series then outstanding (excluding Bonds disqualified as
aforesaid) may on behalf of the holders of all such Bonds waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, or premium or interest on, any of the Bonds as and
when the same shall become due by the terms of such Bonds or a call for
redemption.
No recourse shall be had for the payment of the principal of or the
interest or premium on this Bond, or for any claim based hereon or otherwise in
respect hereof or of the Indenture, against any incorporator, stockholder,
director or officer, as such, past, present or future, of the Company or of any
predecessor or successor corporation, either directly or through the Company or
any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise howsoever; all
such liability being, by the acceptance hereof and as a part of the
consideration for the issuance hereof, expressly waived and released by every
holder hereof; provided, however, that nothing herein or in the Indenture
contained shall be taken to prevent recourse to and the
<PAGE> 57
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Long Island Lighting Company - Fiftieth Supplemental Indenture
enforcement of the liability, if any, of any stockholder or subscriber to
capital stock upon or in respect of shares of capital stock not fully paid.
This Bond is transferable by the registered owner hereof, in person or
by attorney authorized in writing, at the corporate trust office of the
Trustee, and at such other offices or agencies as may be required to be
maintained for such purpose to comply with the rules of any securities exchange
on which the Bonds of this Series may at the time be listed, upon surrender of
this Bond, and upon any such transfer of a new Bond or Bonds, of the same
series for the same aggregate principal amount, will be issued to the
transferee in exchange herefor, without payment of any charge other than stamp
taxes and other governmental charges incident thereto. The Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof, whether or not this Bond shall be overdue, for the
purpose of receiving payment as herein provided and for all other purposes.
The Bonds of this Series are issuable as registered Bonds without
coupons in denominations of $1,000 and/or any multiple thereof authorized by
the Company. As provided in the Indenture, Bonds of this Series are
exchangeable for other Bonds of this Series of a different authorized
denomination or denominations, as requested by the holder surrendering the
same, without payment of any charge other than stamp taxes and other
governmental charges incident thereto.
The Company shall not be required to make any transfer or exchange of
this Bond for a period of 10 days next preceding the mailing of notice of
redemption of any Bonds of this Series.
The Bonds of this Series are subject to redemption upon prior notice
given as provided in the Indenture, upon payment of one hundred per centum
(100%) of the principal amount so redeemed together with interest accrued
thereon to the date fixed for redemption in the event that all or substantially
all of the Electric Property or all or substantially all of the Gas Property of
the Company shall be released or substantially all of the Trust Estate (with
certain exceptions) shall be taken by eminent domain or sold in anticipation of
such taking.
Bonds for whose redemption and payment provision is made in accordance
with the Indenture shall thereupon cease to be entitled to the lien of the
Indenture and shall cease to bear interest from and after the date fixed for
redemption.
[END OF REVERSE SIDE OF FORM OF BOND OF SERIES DDD]
<PAGE> 58
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Long Island Lighting Company - Fiftieth Supplemental Indenture
ARTICLE II
FIRST MORTGAGE BONDS, SERIES EEE 8-5/8% DUE 2004
SECTION 1. There is hereby created a series of Bonds to be issued
under and secured by the Indenture to be designated as "First Mortgage Bonds,
Series EEE 8-5/8% Due 2004" of the Company ("the Bonds of Series EEE"), and the
form thereof shall be substantially as hereinafter recited. The principal
amount of Bonds of Series EEE which may be authenticated and delivered under
this Supplemental Indenture shall be limited to One Hundred and Sixty-four
Million Dollars ($164,000,000), except for Bonds of Series EEE authenticated
and delivered upon transfer of, or in exchange for, or in lieu of other Bonds
of Series EEE pursuant to the provisions of the Original Indenture, as from
time to time amended and supplemented, or of this Supplemental Indenture. An
aggregate principal amount of One Hundred and Sixty-four Million Dollars
($164,000,000) of the Bonds of Series EEE may forthwith be executed by the
Company and delivered to the Trustee for authentication and delivery. From time
to time, so long as the aggregate principal amount of the Bonds of Series EEE
authenticated and delivered does not exceed the limitation hereinabove set
forth, and subject to the terms and conditions of the Indenture relative to the
authentication and delivery of Bonds, Bonds of Series EEE additional to the
initial issue thereof may be executed by the Company and delivered to the
Trustee for authentication and delivery. The Bonds of Series EEE shall be
registered Bonds without coupons in denominations of $1,000 or any multiple
thereof, and of such amount of each denomination as may be executed by the
Company and delivered to the Trustee for authentication and delivery. The Bonds
of Series EEE shall mature April 15, 2004 and shall bear interest at the rate
of eight and five-eighths per centum (8-5/8%) per annum, payable semi-annually
on April 15 and October 15 in each year, commencing on the date specified in
such Bond as below provided as the commencement date of the first interest
period, until the principal thereof shall have become due and payable. Interest
shall be payable on overdue principal of the Bonds of Series EEE and (to the
extent that payment of such interest is enforceable under applicable law) on
overdue instalments of interest of Bonds of Series EEE at the rate of six per
centum (6%) per annum. Both the principal of and interest on the Bonds of
Series EEE shall be paid at the office or agency of the Company in the Borough
of Manhattan in The City of New York, in any coin or currency of the United
States of America which at the time of payment shall be legal tender for public
and private debts.
SECTION 2. The provisions of the second paragraph of Section 2.05 of
the Indenture shall not be applicable to the Bonds of Series EEE. All Bonds of
Series EEE shall be dated the date of their authentication, and shall bear
interest from the date specified in such Bond as below provided as the
<PAGE> 59
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Long Island Lighting Company - Fiftieth Supplemental Indenture
commencement of the first interest period, or from the most recent interest
date to which interest has been paid or duly provided for. Interest on any Bond
of Series EEE which is payable, and is punctually paid or duly provided for, on
any interest date shall be paid to the person in whose name that Bond (or one
or more Bonds of Series EEE evidencing all or a portion of the same debt) is
registered at the close of business on the Regular Record Date for such
interest which shall be the first day of April or October, as the case may be,
next preceding such interest date whether or not such first day of April or
October is a day which is not a day on which banking institutions in The City
of New York are authorized or required by law or executive order to be closed
(hereinafter a "Business Day").
SECTION 3. Any interest on any Bond of Series EEE which is payable,
but is not punctually paid or duly provided for, on any interest date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Regular Record Date by virtue of having been
such holder; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the Bonds of Series
EEE (or the respective Bonds of Series EEE evidencing all or a portion
of the same debt) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on
each Bond of Series EEE and the date of the proposed payment, and at
the same time the Company shall make arrangements satisfactory to the
Trustee for the deposit with the Trustee of an amount of money equal
to the aggregate amount proposed to be paid in respect of such
Defaulted Interest prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15
nor less than 5 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each holder of a Bond of Series EEE at his
address as it appears in the Bond register, not less than 10 days
prior to such Special Record Date. The Trustee may, in its discretion,
in the name and at the expense of the Company, cause a similar notice
to be
<PAGE> 60
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Long Island Lighting Company - Fiftieth Supplemental Indenture
published at least once in a daily newspaper in the Borough of
Manhattan in The City of New York, but such publication shall not be a
condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the persons in whose names the
Bonds of Series EEE (or the respective Bonds of Series EEE evidencing
all or a portion of the same debt) are registered on such Special
Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Bonds of Series
EEE may be listed, and upon such notice as may be required by such
exchange, if after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
SECTION 4. The Bonds of Series EEE shall be redeemable at a
redemption price of one hundred per centum (100%) of their principal amount,
together with accrued interest thereon from the interest date to which interest
has previously been paid or made available for payment to the date fixed for
redemption, upon the application of Trust Moneys pursuant to the last paragraph
of Section 9.04, and Sections 9.10 and 9.11 of the Indenture.
Bonds of Series EEE shall be redeemed in accordance with their terms
and Article Eleven of the Indenture.
SECTION 5. In order to prevent the application of the provisions of
Section 9.10 of the Indenture requiring the redemption of Bonds pursuant to
said Section, the Company shall use its best efforts to take such action as may
be necessary so that at no time shall there have been on deposit at all times
during the preceding three years Trust Moneys in an amount in excess of
$25,000.
The Company shall, in the manner provided in Sections 9.04A and 12.01
of the Indenture, use its best efforts to make alternative directions and
designations so that it shall not be required by the provisions of said
Sections to purchase or redeem any Bonds of Series EEE.
SECTION 6. No payment by way of principal or interest on any Bond of
Series EEE shall be made if the Trustee shall have received written notice
signed on behalf of the registered holder of such Bond of Series EEE stating
that the same has been waived by such registered holder and such
<PAGE> 61
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Long Island Lighting Company - Fiftieth Supplemental Indenture
waiver shall not have been revoked, all in the manner and at the times
hereinafter specified. With respect to principal of any Bond of Series EEE
becoming due and payable on any date, said notice shall be on file with the
Trustee at the close of business on said due date if said due date is a
Business Day, or, if said due date is not a Business Day, then on the Business
Day next following said due date. With respect to any instalment of interest on
any Bond of Series EEE, said notice shall be on file with the Trustee at the
close of business on the date which is the 30th day after the date fixed for
payment of such instalment or, if said 30th day is not a Business Day, on the
Business Day next preceding said 30th day. The above-mentioned notices of
waiver may be revoked by written notice signed and filed with the Trustee in
the same manner specified herein for a notice of waiver.
Unless a waiver is so revoked, (a) at the close of business on the
date when any principal of any Bond of Series EEE with respect to which a
waiver was on file with the Trustee as aforesaid shall become due and payable
or, if said due date is not a Business Day, on the Business Day next following
said due date, such principal shall cease to be payable, and interest shall
thereupon cease to accrue thereon, and (b) at the close of business on the date
which is the 30th day after the date fixed for payment of any instalment of
interest with respect to which a waiver was on file with the Trustee as
aforesaid or, if said 30th day is not a Business Day, on the Business Day next
preceding said 30th day, such instalment shall cease to be payable.
Said notice shall specify the certificate numbers and denominations of
Bonds of Series EEE to which it applies and the principal or instalments of
interest being thereby waived and shall state that the person signing or on
whose behalf it is signed is the registered holder of said Bonds of Series EEE,
that said Bonds of Series EEE are in said registered holder's possession and,
if required by the Trustee, will be promptly produced for inspection by the
Trustee, that payment of the principal of or instalments of interest specified
therein are thereby waived, that said notice is being delivered to the Trustee
for the purpose of being relied on by the Trustee in the administration of the
trust under the Indenture, that the Trustee may so rely and that the person(s)
signing are thereunto duly authorized.
Where the person on whose behalf a notice is given is a corporation,
said notice shall be signed by the President or any Vice President, Cashier,
Controller, Treasurer, Trust Officer or Assistant Vice President, and by an
Assistant Cashier, Assistant Controller, Assistant Treasurer or Assistant Trust
Officer.
<PAGE> 62
25
Long Island Lighting Company - Fiftieth Supplemental Indenture
The Trustee shall be entitled to rely upon and shall be fully
protected in relying upon written notices delivered to it in accordance with
this Section 6.
SECTION 7. The Company covenants that the annual interest charges on
the Bonds of Series EEE which would be payable except for the waiver of such
payment described in Section 6 hereof shall be included as annual interest
charges upon the Company's Secured Debt (as defined in the Indenture) for the
purpose of any Gross Income Certificate under the Indenture.
SECTION 8. All Bonds of Series EEE shall, upon surrender to the
Trustee at its corporate trust office, be exchangeable for other Bonds of
Series EEE of a different authorized denomination or denominations, as
requested by the holder surrendering the same, but of a like aggregate
principal amount. The Company will execute and the Trustee shall authenticate
and deliver registered Bonds of Series EEE whenever the same shall be required
for any such exchange.
For any exchange of Bonds of Series EEE (other than exchanges
expressly provided in the Indenture to be made at the Company's own expense or
without expense or without charge to Bondholders) or for any transfer of any
Bond of Series EEE, the Company, at its option, may require the payment by the
Bondholder of a sum sufficient to reimburse it for any stamp tax and/or any
other governmental charge incident thereto, but, notwithstanding the provisions
of the last paragraph of Section 2.08 of the Indenture, no other charge shall
be made by the Company for any such exchange or transfer.
The right reserved by the Company in the first paragraph of Section
2.06 of the Indenture not to make any transfers or exchanges of Bonds for a
period of 10 days next preceding any interest payment date shall not be
applicable to transfers or exchanges of Bonds of Series EEE.
Except as hereinabove provided in this Section, exchanges of Bonds of
Series EEE shall be subject to Sections 2.06 and 2.08 of the Indenture.
The Trustee is hereby appointed Registrar of the Bonds of Series EEE
for the purpose of registering and transferring Bonds of Series EEE as provided
in the Indenture.
SECTION 9. The form of the Bonds of Series EEE and the certificate of
authentication of the Trustee to be executed thereon are to be substantially in
the following forms, respectively, with such variations as are permitted in the
Indenture for registered Bonds without coupons:
<PAGE> 63
26
Long Island Lighting Company - Fiftieth Supplemental Indenture
[FORM OF BONDS OF SERIES EEE FACE SIDE]
LONG ISLAND LIGHTING COMPANY
Registered Registered
FIRST MORTGAGE BOND
SERIES EEE 8-5/8% DUE 2004
$ $
NUMBER
LONG ISLAND LIGHTING COMPANY, a corporation of the State of New York
(hereinafter called "the Company"), for value received, hereby promises to pay
to or registered assigns, at the
close of business on April 15, 2004, if said due date is a day (herein called a
"Business Day") which is not a day on which banking institutions in The City of
New York are authorized or required by law or executive order to be closed, or,
if said due date is not a Business Day, then on the Business Day next following
said due date, Dollars, and to pay interest
thereon from the date of the initial issuance of the Bonds of this Series, or
from the most recent interest date to which interest has been paid or duly
provided for, at the rate of eight and five-eighths per centum (8-5/8%) per
annum, semi-annually at the close of business on April 15 and October 15 in
each year, commencing on October 15, 1994 or, if said April 15 or October 15 is
not a Business Day, on the Business Day next following said date, until the
principal hereof shall have become due and payable, and to pay interest on any
overdue principal and (to the extent enforceable under applicable law) on any
overdue instalment of interest at the rate of six per centum (6%) per annum.
The principal hereof and interest hereon shall be payable at the office or
agency of the Company in the Borough of Manhattan in The City of New York, in
any coin or currency of the United States of America which at the time of
payment shall be legal tender for public and private debts.
The provisions of this Bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Bond shall not be valid until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture hereinafter
mentioned.
<PAGE> 64
27
Long Island Lighting Company - Fiftieth Supplemental Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this Bond
to be executed in its corporate name with the facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the facsimile
signature of its Secretary or of an Assistant Secretary.
Dated:
LONG ISLAND LIGHTING
COMPANY
By
----------------------------
President
Attest:
-----------------------------
Secretary
[Form of the Trustee's Certificate
of
Authentication]
This is one of the Bonds, of the Series designated therein, described
in the within mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE
By
----------------------------
Authorized Officer
<PAGE> 65
28
Long Island Lighting Company - Fiftieth Supplemental Indenture
[FORM OF BOND OF SERIES EEE -- REVERSE SIDE]
LONG ISLAND LIGHTING COMPANY
FIRST MORTGAGE BOND
SERIES EEE 8-5/8% DUE 2004
(Continued)
The interest so payable, and punctually paid or duly provided for, on
any interest date will, as provided in the Indenture hereinafter mentioned, be
paid to the person in whose name this Bond (or any Bond or Bonds evidencing all
or a portion of the same debt) is registered at the close of business on the
Regular Record Date for such interest which shall be the first day of April
or October, as the case may be (whether or not a Business Day), next preceding
such interest date. Any such interest not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on such Regular
Record Date, and may be paid to the person in whose name this Bond (or any Bond
or Bonds evidencing all or a portion of the same debt) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to the
registered holder hereof not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Bond may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided for in the Indenture hereinafter mentioned.
If an Event of Default, as defined in the Indenture hereinafter
mentioned, shall occur, the principal of this Bond may become or be declared
due and payable, in the manner and with the effect provided in the Indenture
hereinafter mentioned.
This Bond is one of an authorized issue of Bonds of the Company known
as its "First Mortgage Bonds", not limited in principal amount except as in the
Indenture hereinafter mentioned provided, issued and to be issued in one or
more series under, and all equally and ratably secured (except as any sinking
or other fund may afford additional special security for the Bonds of any
particular series) by, an Indenture of Mortgage and Deed of Trust dated as of
September 1, 1951, executed by the Company to City Bank Farmers Trust Company
(subsequently converted into First National City Trust Company, which was
merged into First National City Bank, now named Citibank, N.A.), as Trustee
(hereinafter referred to as "the Trustee" which term includes any successor
trustee) (herein, together with all
<PAGE> 66
29
Long Island Lighting Company - Fiftieth Supplemental Indenture
indentures supplemental thereto, called "the Indenture") to which Indenture
reference is hereby made for a description of the properties thereby mortgaged
and conveyed, the nature and extent of the security, the rights of the holders
of said Bonds and of the Trustee and of the Company in respect of such
security, and the terms upon which said Bonds are and are to be authenticated
and delivered.
As provided in the Indenture, said Bonds are issuable in series which
may vary as to maturity, interest and otherwise as in the Indenture provided or
permitted. This Bond is one of a series entitled "First Mortgage Bonds, Series
EEE 8-5/8% Due 2004" created by a Fiftieth Supplemental Indenture dated as of
June 1, 1994, as provided for in the Indenture.
As provided in, and to the extent permitted by, the Indenture, the
rights and obligations of the Company and of the holders of said Bonds may be
modified by the Company with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the Bonds of all
series then outstanding which are affected by such modification (excluding
Bonds disqualified from voting by reason of the Company's interest therein as
provided in the Indenture). The Indenture provides, among other things, that,
without the consent of the holder hereof, no such modification shall effect the
reduction, or the extension of the stated time of payment, of the principal
hereof, or of the interest hereon, or permit the creation of any lien on the
properties so mortgaged and conveyed prior to or on a parity with the lien of
the Indenture (except as therein expressly permitted) or deprive the holder
hereof of the lien created by the Indenture on said properties. The holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all Bonds of all series then outstanding (excluding Bonds disqualified as
aforesaid) may on behalf of the holders of all such Bonds waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, or premium or interest on, any of the Bonds as and
when the same shall become due by the terms of such Bonds or a call for
redemption.
No recourse shall be had for the payment of the principal of or the
interest or premium on this Bond, or for any claim based hereon or otherwise in
respect hereof or of the Indenture, against any incorporator, stockholder,
director or officer, as such, past, present or future, of the Company or of any
predecessor or successor corporation, either directly or through the Company or
any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise howsoever; all
such liability being, by the acceptance hereof and as a part of the
consideration for the issuance hereof, expressly waived and released by every
holder hereof; provided, however, that nothing herein or in the Indenture
contained shall be taken to prevent recourse to and the
<PAGE> 67
30
Long Island Lighting Company - Fiftieth Supplemental Indenture
enforcement of the liability, if any, of any stockholder or subscriber to
capital stock upon or in respect of shares of capital stock not fully paid.
This Bond is transferable by the registered owner hereof, in person or
by attorney authorized in writing, at the corporate trust office of the
Trustee, and at such other offices or agencies as may be required to be
maintained for such purpose to comply with the rules of any securities exchange
on which the Bonds of this Series may at the time be listed, upon surrender of
this Bond, and upon any such transfer of a new Bond or Bonds, of the same
series for the same aggregate principal amount, will be issued to the
transferee in exchange herefor, without payment of any charge other than stamp
taxes and other governmental charges incident thereto. The Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof, whether or not this Bond shall be overdue, for the
purpose of receiving payment as herein provided and for all other purposes.
The Bonds of this Series are issuable as registered Bonds without
coupons in denominations of $1,000 and/or any multiple thereof authorized by
the Company. As provided in the Indenture, Bonds of this Series are
exchangeable for other Bonds of this Series of a different authorized
denomination or denominations, as requested by the holder surrendering the
same, without payment of any charge other than stamp taxes and other
governmental charges incident thereto.
The Company shall not be required to make any transfer or exchange of
this Bond for a period of 10 days next preceding the mailing of notice of
redemption of any Bonds of this Series.
The Bonds of this Series are subject to redemption upon prior notice
given as provided in the Indenture, upon payment of one hundred per centum
(100%) of the principal amount so redeemed together with interest accrued
thereon to the date fixed for redemption in the event that all or substantially
all of the Electric Property or all or substantially all of the Gas Property of
the Company shall be released or substantially all of the Trust Estate (with
certain exceptions) shall be taken by eminent domain or sold in anticipation of
such taking.
Bonds for whose redemption and payment provision is made in accordance
with the Indenture shall thereupon cease to be entitled to the lien of the
Indenture and shall cease to bear interest from and after the date fixed for
redemption.
[END OF REVERSE SIDE OF FORM OF BOND OF SERIES EEE]
<PAGE> 68
31
Long Island Lighting Company - Fiftieth Supplemental Indenture
ARTICLE III
THE TRUSTEE
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fiftieth Supplemental Indenture
or the due execution hereof by the Company; or for or in respect of the
recitals and statements contained herein, all of which recitals and statements
are made solely by the Company.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 1. Except insofar as herein otherwise expressly provided, all
the provisions, terms and conditions of the Original Indenture as heretofore
supplemented shall be deemed to be incorporated in, and made a part of, this
Fiftieth Supplemental Indenture; and the Original Indenture as heretofore
supplemented by this Fiftieth Supplemental Indenture is in all respects
ratified and confirmed; and the Original Indenture as heretofore supplemented
and this Fiftieth Supplemental Indenture shall be read, taken and construed as
one and the same instrument.
SECTION 2. This Fiftieth Supplemental Indenture may be executed in
any number of counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts, or as many of
them as the Company and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.
<PAGE> 69
32
Long Island Lighting Company - Fiftieth Supplemental Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this
Fiftieth Supplemental Indenture to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary and, in token of its
acceptance of the trusts created hereunder, IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee as aforesaid, has caused this Supplemental Indenture to be signed in
its corporate name by a Vice President or an Assistant Vice President and its
corporate seal to be affixed and attested by a Secretary or an Assistant
Secretary, all as of the day and year first above written.
LONG ISLAND LIGHTING
COMPANY
[CORPORATE SEAL]
BY
----------------------------
ANTHONY NOZZOLILLO
Senior Vice President and
Chief Financial Officer
Attest:
-----------------------------
KATHLEEN A. MARION
Corporate Secretary
IBJ SCHRODER BANK
& TRUST COMPANY,
as Trustee as aforesaid
[CORPORATE SEAL] By
----------------------------
NANCY R. BESSE
Vice President
Attest:
-----------------------------
THOMAS J. BOGERT
Assistant Secretary
<PAGE> 70
33
Long Island Lighting Company - Fiftieth Supplemental Indenture
STATE OF NEW YORK )
: SS.
COUNTY OF NASSAU )
On the day of , in the year 199 , before me personally came
ANTHONY NOZZOLILLO, to me known, who being by me duly sworn, did depose and say
that he resides at 430 Forest Avenue, Woodmere, New York; that he is a Senior
Vice President and Chief Financial Officer of LONG ISLAND LIGHTING COMPANY, one
of the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
order.
-----------------------------------
NOTARY PUBLIC
STATE OF NEW YORK )
: SS.
COUNTY OF NEW YORK )
On the day of , in the year 199 , before me personally came
NANCY R. BESSE, to me known, who being by me duly sworn, did depose and say
that she resides at 375 South End Avenue, New York, New York 10280; that she is
a Vice President of IBJ SCHRODER BANK & TRUST COMPANY, one of the corporations
described in and which executed the above instrument; that she knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that she signed her name thereto by like authority.
-----------------------------------
NOTARY PUBLIC
<PAGE> 71
34
Long Island Lighting Company - Fiftieth Supplemental Indenture
Schedule A
TO
FIFTIETH SUPPLEMENTAL INDENTURE
dated as of
June 1, 1994
SUPPLEMENTAL
TO
INDENTURE OF MORTGAGE AND DEED OF TRUST
dated as of
September 1, 1951
All of the properties referred to as being included in Schedule A in
the Granting Clause of this Fiftieth Supplemental Indenture, supplemental to
the Original Indenture, intended to be covered by the lien of the Indenture are
hereinafter described. All the right, title and interest of the Company in and
to its said properties, as acquired under the conveyances listed below,
together with all the right, title and interest of the Company in and to any
road, street or way, public or private, open or proposed, in front of,
adjoining and through any thereof, are incorporated herein as if more fully set
forth at length, and nothing in this Schedule, except as specifically stated
hereinafter, shall operate as, or be construed to be, a limitation or
diminution of said right, title or interest. Said properties, where
applicable, are subject to:
(1) Restrictions and covenants of record and easements to
other public utilities, but said restrictions, covenants and easements
in no way, manner or fashion, except as specifically stated
hereinafter, interfere adversely with the operation of the business of
the Company.
(2) Zoning ordinances and resolutions of any village, town or
any governmental authority having jurisdiction thereof.
All of the properties acquired by tax deeds from the County of Suffolk
are subject to the limitation of the Suffolk County Tax Act and to the
provisions of the Real Property Tax Law of the State of New York pertaining to
the sales of real properties for delinquent taxes in the County of Suffolk, and
also to such minor defects of title as are of the nature ordinarily found in
properties of this character.
<PAGE> 72
35
Long Island Lighting Company - Fiftieth Supplemental Indenture
COUNTY OF SUFFOLK
Town of Southampton
Item 1653
All that certain plot, piece or parcel of land, situated, lying and
being in Hayground, Town of Southampton, County of Suffolk and State of New
York, conveyed to Long Island Lighting Company by Estate of Sayre Baldwin by
deed dated July 13, 1993, and recorded in the Office of the Suffolk County
Clerk on July 29, 1993 in Liber 11638, cp 193. Indexed as District 0900,
Section 083, Block 1, part of lots 032 and 033, on the Tax Map of the County of
Suffolk.
COUNTY OF OSWEGO
Town of Scriba
Item 1654
An undivided eighteen percent (18%) interest in all that certain plot,
piece or parcel of land, situated, lying and being in the Town of Scriba,
County of Oswego and State of New York, conveyed to Long Island Lighting
Company by Niagara Mohawk Power Corporation by deed dated April 22, 1986 and
recorded in the Office of the Oswego County Clerk on May 25, 1988 in Book 1049,
cp 305.
<PAGE> 73
RECORDING DATA
The Twenty-seventh Supplemental Indenture to the General and Refunding
Indenture was filed for record and recorded in the State of New York on June
14, 1994 as follows: In the Office of the County Clerk of Nassau County in
Liber 16364 of Mortgages, Page 1; in the Office of the County Clerk of Suffolk
County in Liber 18832 of Mortgages, Page 150; in the Office of the Registrar of
Suffolk County as Document No. 42973; in the Office of the Register of the City
of New York for the County of Queens with Document No. 39170 in Reel 3893 of
Records, Page 1284; and in the Office of the County Clerk of Oswego County on
June 15, 1994 in Book 1580 of Mortgages, Page 54.
<PAGE> 1
[CONFORMED COPY]
================================================================================
LONG ISLAND LIGHTING COMPANY
TO
IBJ SCHRODER BANK & TRUST COMPANY
SUCCESSOR TRUSTEE
_________
FIFTIETH SUPPLEMENTAL INDENTURE
DATED AS OF JUNE 1, 1994
_________
SUPPLEMENTAL
TO THE
INDENTURE OF MORTGAGE AND DEED OF TRUST
DATED AS OF SEPTEMBER 1, 1951
_________
FIRST MORTGAGE BONDS
SERIES DDD 7-5/8% DUE 1998
AND
FIRST MORTGAGE BONDS
SERIES EEE 8-5/8% DUE 2004
================================================================================
<PAGE> 2
Long Island Lighting Company-Fiftieth Supplemental Indenture
FIFTIETH SUPPLEMENTAL INDENTURE, dated as of June 1, 1994, between
LONG ISLAND LIGHTING COMPANY, a New York corporation ("the Company"), having
its principal office at 175 East Old Country Road, in Hicksville, County of
Nassau, State of New York, and IBJ SCHRODER BANK & TRUST COMPANY, a bank and
trust company organized under the laws of the State of New York (hereinafter
called "the Trustee" or "the Successor Trustee"), having its corporate trust
office at One State Street, in the Borough of Manhattan, City, County and State
of New York.
WHEREAS, the Company has executed and delivered to City Bank Farmers
Trust Company (subsequently converted into First National City Trust Company,
which was merged into First National City Bank, now named Citibank, N.A.), as
Trustee (hereinafter called "the Original Trustee"), an Indenture of Mortgage
and Deed of Trust dated as of September 1, 1951 ("the Original Indenture")
securing the Company's First Mortgage Bonds ("the Bonds"), unlimited in
aggregate principal amount except as therein otherwise provided, and creating
the Company's First Mortgage Bonds, Series A, B and C; and
WHEREAS, thereafter the Company executed and delivered to the Trustee,
or its predecessor as Trustee, a First Supplemental Indenture, dated as of
December 1, 1951, a Second Supplemental Indenture, dated as of October 1, 1952,
a Third Supplemental Indenture, dated as of September 1, 1953, a Fourth
Supplemental Indenture, dated as of December 1, 1954, a Fifth Supplemental
Indenture, dated as of November 1, 1955, a Sixth Supplemental Indenture, dated
as of December 1, 1956, a Seventh Supplemental Indenture, dated as of May 1,
1958, an Eighth Supplemental Indenture, dated as of July 1, 1959, a Ninth
Supplemental Indenture, dated as of August 1, 1961, a Tenth Supplemental
Indenture, dated as of April 1, 1963, an Eleventh Supplemental Indenture, dated
as of June 1, 1964, a Twelfth Supplemental Indenture, dated as of June 1, 1965,
a Thirteenth Supplemental Indenture, dated as of March 1, 1966, a Fourteenth
Supplemental Indenture, dated as of April 1, 1967, a Fifteenth Supplemental
Indenture, dated as of September 1, 1969, creating the Company's First Mortgage
Bonds, Series D, E, F, G, H, I, J, K, L, M, N, O, P, Q and R, a Sixteenth
Supplemental Indenture, dated as of September 1, 1970, creating the Company's
First Mortgage Bonds, Series S and T, a Seventeenth Supplemental Indenture,
dated as of April 1, 1971, an Eighteenth Supplemental Indenture, dated as of
December 1, 1971, a Nineteenth Supplemental Indenture, dated as of September 1,
1972, a Twentieth Supplemental Indenture, dated as of December 1, 1973, a
Twenty-first
<PAGE> 3
2
Long Island Lighting Company-Fiftieth Supplemental Indenture
Supplemental Indenture, dated as of June 1, 1974, a Twenty-second Supplemental
Indenture, dated as of November 1, 1974, a Twenty-third Supplemental Indenture,
dated as of June 1, 1975, a Twenty-fourth Supplemental Indenture, dated as of
September 1, 1975, a Twenty-fifth Supplemental Indenture, dated as of June 1,
1976, a Twenty-sixth Supplemental Indenture, dated as of December 1, 1976, a
Twenty-seventh Supplemental Indenture, dated as of May 1, 1977, a Twenty-eighth
Supplemental Indenture, dated as of April 1, 1978, a Twenty-ninth Supplemental
Indenture, dated as of March 1, 1979, a Thirtieth Supplemental Indenture, dated
as of February 1, 1980, a Thirty-first Supplemental Indenture, dated as of
March 1, 1981, a Thirty-second Supplemental Indenture, dated as of July 1,
1981, a Thirty-third Supplemental Indenture, dated as of July 1, 1981, a
Thirty-fourth Supplemental Indenture, dated as of December 1, 1981, a
Thirty-fifth Supplemental Indenture, dated as of December 1, 1981, a
Thirty-sixth Supplemental Indenture, dated as of June 1, 1982, a Thirty-seventh
Supplemental Indenture, dated as of October 1, 1982, a Thirty-eighth
Supplemental Indenture, dated as of April 1, 1983, and a Thirty-ninth
Supplemental Indenture, dated as of May 1, 1983, creating the Company's First
Mortgage Bonds, Series U, V, W, X, Y, Z, AA, BB, CC, DD, EE, FF, GG, HH, II,
JJ, KK, LL, MM, NN, OO, PP and QQ, and confirming the lien of the Indenture on
certain property, rights, privileges and franchises acquired since the
execution and delivery of the Original Indenture; and
WHEREAS, the Original Indenture and the aforesaid Supplemental
Indentures have been recorded as follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE NASSAU THE CITY OF
COUNTY CLERK'S NEW YORK
OFFICE (QUEENS COUNTY)
-------------- ----------------
Liber of Liber of
Mortgages Page Mortgages Page
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Original Indenture . . . . 4450 1 6475 1
Supplemental Indentures:
First . . . . . . . . . . 4464 69 6484 377
Second . . . . . . . . . 4724 389 6638 171
Third . . . . . . . . . . 5041 428 6799 141
Fourth . . . . . . . . . 5405 370 6966 422
Fifth . . . . . . . . . . 5703 64 7110 648
Sixth . . . . . . . . . . 6007 521 7273 281
Seventh . . . . . . . . . 6273 326 7451 458
</TABLE>
<PAGE> 4
3
Long Island Lighting Company-Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE NASSAU THE CITY OF
COUNTY CLERK'S NEW YORK
OFFICE (QUEENS COUNTY)
-------------- ----------------
LIBER OF LIBER OF
MORTGAGES PAGE MORTGAGES PAGE
--------- ---- --------- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Eighth . . . . . . . . . 6532 251 7612 211
Ninth . . . . . . . . . . 6950 79 7884 530
Tenth . . . . . . . . . . 7322 1 8158 387
Eleventh . . . . . . . . 7538 61 8416 388
Twelfth . . . . . . . . . 7717 342 8639 323
Thirteenth . . . . . . . 7872 464 55* 90
Fourteenth . . . . . . . 8079 364 383* 438
Fifteenth . . . . . . . . 8529 283 349** 429
Sixteenth . . . . . . . . 8671 129 427** 242
Seventeenth . . . . . . . 8744 104 468** 1768
Eighteenth . . . . . . . 8889 237 535** 1618
Nineteenth . . . . . . . 9027 144 601** 1250
Twentieth . . . . . . . . 9291 274 725** 1786
Twenty-first . . . . . . 9365 240 766** 1373
Twenty-second . . . . . . 9439 30 799** 1072
Twenty-third . . . . . . 9517 524 840** 1275
Twenty-fourth . . . . . . 9570 458 862** 584
Twenty-fifth . . . . . . 9675 63 911** 544
Twenty-sixth . . . . . . 9778 58 953** 505
Twenty-seventh . . . . . 9814 558 985** 759
Twenty-eighth . . . . . . 9919 64 1063** 1103
Twenty-ninth . . . . . . 10032 78 1143** 1125
Thirtieth . . . . . . . . 10169 75 1239* 1812
Thirty-first . . . . . . 10285 74 1323** 816
Thirty-second . . . . . . 10322 44 1351** 230
Thirty-third . . . . . . 10322 105 1351** 293
Thirty-fourth . . . . . . 10379 68 1392** 1729
Thirty-fifth . . . . . . 10379 172 1392** 1604
Thirty-sixth . . . . . . 10423 170 1432** 1106
Thirty-seventh . . . . . 10471 471 1466** 1683
Thirty-eighty . . . . . . 10542 769 1518** 938
Thirty-ninth . . . . . . 10571 57 1537** 767
</TABLE>
---------------
*Liber of Records.
**Reel.
<PAGE> 5
4
Long Island Lighting Company-Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE SUFFOLK IN THE OFFICE OF
COUNTY CLERK'S THE REGISTRAR OF
OFFICE SUFFOLK COUNTY
-------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Original Indenture . . . . . . . 1884 1 29050
Supplemental Indentures:
First Indenture . . . . . . . . 1889 569 29279
Second Indenture . . . . . . . 2006 74 35843
Third . . . . . . . . . . . . . 2143 211 43709
Fourth . . . . . . . . . . . . 2326 488 52211
Fifth . . . . . . . . . . . . . 2539 317 59824
Sixth . . . . . . . . . . . . . 2773 327 68422
Seventh . . . . . . . . . . . . 3015 86 78200
Eighth . . . . . . . . . . . . 3251 5 88155
Ninth . . . . . . . . . . . . . 3678 380 106597
Tenth . . . . . . . . . . . . . 4081 14 122751
Eleventh . . . . . . . . . . . 4390 72 134155
Twelfth . . . . . . . . . . . . 4664 366 143894
Thirteenth . . . . . . . . . . 4890 405 151648
Fourteenth . . . . . . . . . . 5130 543 160481
Fifteenth . . . . . . . . . . . 5682 431 179778
Sixteenth . . . . . . . . . . . 5891 14 187577
Seventeenth . . . . . . . . . . 6006 544 191628
Eighteenth . . . . . . . . . . 6236 195 198008
Nineteenth . . . . . . . . . . 6473 299 204868
Twentieth . . . . . . . . . . . 6956 378 219354
Twenty-first . . . . . . . . . 7104 80 223591
Twenty-second . . . . . . . . . 7221 17 226961
Twenty-third . . . . . . . . . 7358* 510 231531
Twenty-fourth . . . . . . . . . 7445* 120 234028
Twenty-fifth . . . . . . . . . 7622* 61 239418
Twenty-sixth . . . . . . . . . 7773* 100 244098
Twenty-seventh . . . . . . . . 7882* 552 247933
Twenty-eighth . . . . . . . . . 8149* 30 256465
Twenty-ninth . . . . . . . . . 8401* 574 263862
Thirtieth . . . . . . . . . . . 8689 1 271653
</TABLE>
---------------
*Volume of Mortgages.
<PAGE> 6
5
Long Island Lighting Company-Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE SUFFOLK IN THE OFFICE OF
COUNTY CLERK'S THE REGISTRAR OF
OFFICE SUFFOLK COUNTY
-------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Supplemental Indentures:
Thirty-first . . . . . . . . 8950 38 278932
Thirty-second . . . . . . . . 9034 385 281160
Thirty-third . . . . . . . . 9034 446 281157
Thirty-fourth . . . . . . . . 9169 97 284686
Thirty-fifth . . . . . . . . 9169 161 284688
Thirty-sixth . . . . . . . . 9271 423 287513
Thirty-seventh . . . . . . . 9374 279 290222
Thirty-eighth . . . . . . . . 9519 563 293588
Thirty-ninth . . . . . . . . 9578 272 294810;
</TABLE>
WHEREAS, the Company and First National City Bank (now Citibank,
N.A.), as Trustee, pursuant to Article Nine of the Uniform Commercial Code,
have executed a Financing Statement which was filed in the State of New York on
June 2, 1965, in the Department of State of the State of New York as File No.
65-124,203, and Continuation Statements numbered 48,738, 40,081, 73,660 and
123,589, which were filed, respectively, in the State of New York on April 21,
1970, May 15, 1975, May 23, 1980 and May 28, 1985, in the Department of State
of the State of New York; and
WHEREAS, a Fortieth Supplemental Indenture, dated as of February 29,
1984, wherein the Company accepts the resignation of Citibank, N.A., as
Original Trustee under the Indenture, appoints J. Henry Schroder Bank & Trust
Company as Successor Trustee under the Indenture and J. Henry Schroder Bank &
Trust Company accepts such appointment, has been executed by the Company,
Citibank, N.A. and J. Henry Schroder Bank & Trust Company and recorded as
follows: In the Nassau County Clerk's Office in Liber 9538 of Deeds, Page 581
on March 1, 1984; in the Office of the Register of The City of New York (Queens
County) on Reel 1647, Page 40 on March 5, 1984; in the Suffolk County Clerk's
Office in Liber 9992 of Mortgages, Page 418 on March 5, 1984; and in the Office
of the Registrar of Suffolk County as Document No. 301270 on March 5, 1984; and
WHEREAS, the Company and First National City Bank (now Citibank,
N.A.), as Trustee, pursuant to Article Nine of the Uniform Commercial Code,
have executed an Amendment to the Financing Statement which was filed in the
State of New York on May 28, 1985, in the Department of State of the State of
New York as File No. 123,590, and an
<PAGE> 7
6
Long Island Lighting Company-Fiftieth Supplemental Indenture
Assignment Statement on May 28, 1985 numbered 123,591 to J. Henry Schroder Bank
& Trust Company, and on April 23, 1990 the Company and J. Henry Schroder Bank &
Trust Company filed a Continuation Statement numbered 83,189 and an Amendment
Statement numbered 83,190; and
WHEREAS, thereafter the Company executed and delivered to the
Successor Trustee a Forty-first Supplemental Indenture, dated as of September
1, 1984, a Forty-second Supplemental Indenture, dated as of October 1, 1984, a
Forty-third Supplemental Indenture, dated as of June 1, 1985, a Forty-fourth
Supplemental Indenture, dated as of April 1, 1986, a Forty-fifth Supplemental
Indenture, dated as of February 1, 1991, a Forty-sixth Supplemental Indenture,
dated as of May 1, 1991, a Forty-seventh Supplemental Indenture, dated as of
July 1, 1991, a Forty-eighth Supplemental Indenture, dated as of May 1, 1992,
and a Forty-ninth Supplemental Indenture dated as of July 1, 1992, creating the
Company's First Mortgage Bonds, Series RR, SS, TT, UU, VV, WW, XX, YY, ZZ, AAA,
BBB and CCC, respectively, and confirming the lien of the Indenture on certain
property, rights, privileges and franchises acquired since the execution and
delivery of the Original Indenture; and
WHEREAS, the aforesaid Supplemental Indentures have been recorded as
follows:
<TABLE>
<CAPTION>
IN THE OFFICE OF
THE REGISTER OF
IN THE THE CITY OF
NASSAU COUNTY NEW YORK
CLERK'S OFFICE (QUEENS COUNTY)
-------------- ----------------
LIBER OF
MORTGAGES PAGE REEL PAGE
--------- ---- ---- ----
<S> <C> <C> <C> <C>
Supplemental Indentures:
Forty-first . . . . . . . . . . 10945 622 1742 680
Forty-second . . . . . . . . . 10988 758 1772 1463
Forty-third . . . . . . . . . . 11159 60 1877 735
Forty-fourth . . . . . . . . . 11487 95 2073 1
Forty-fifth . . . . . . . . . . 13715 178 3121 1996
Forty-sixth . . . . . . . . . . 13782 196 3149 569
Forty-seventh . . . . . . . . . 13859 167 3185 1156
Forty-eighth . . . . . . . . . 14060 193 3319 2469
Forty-ninth . . . . . . . . . . 14113 170 3365 698
</TABLE>
<PAGE> 8
7
Long Island Lighting Company-Fiftieth Supplemental Indenture
<TABLE>
<CAPTION>
IN THE IN THE OFFICE OF
SUFFOLK COUNTY THE REGISTRAR OF
CLERK'S OFFICE SUFFOLK COUNTY
-------------- ----------------
LIBER OF
MORTGAGES PAGE DOCUMENT NO.
--------- ---- ------------
<S> <C> <C> <C>
Supplemental Indentures:
Forty-first . . . . . . . . . . . 10357 1 306374
Forty-second . . . . . . . . . . 10465 165 307994
Forty-third . . . . . . . . . . . 10849 202 313990
Forty-fourth . . . . . . . . . . 11550 227 323439
Forty-fifth . . . . . . . . . . . 16595 1 388389
Forty-sixth . . . . . . . . . . . 16737 201 390447
Forty-seventh . . . . . . . . . . 16923 299 392730
Forty-eighth . . . . . . . . . . 17664 247 401508
Forty-ninth . . . . . . . . . . . 17933 227 404359
</TABLE>
<TABLE>
<CAPTION>
IN THE
OSWEGO COUNTY
CLERK'S OFFICE
----------------
BOOK OF
MORTGAGES PAGE
--------- ----
<S> <C> <C>
Forty-fourth . . . . . . . . . . 869 106
Forty-fifth . . . . . . . . . . . 1227 77
Forty-sixth . . . . . . . . . . . 1242 85
Forty-seventh . . . . . . . . . . 1264 71
Forty-eighth . . . . . . . . . . 1334 168
Forty-ninth . . . . . . . . . . . 1357 175; and
</TABLE>
WHEREAS, the Organization Certificate of J. Henry Schroder Bank &
Trust Company, filed in the Office of the Superintendent of Banks of the State
of New York, was amended, effective January 1, 1987, to provide that J. Henry
Schroder Bank & Trust Company be named IBJ Schroder Bank & Trust Company; and
WHEREAS, the Original Indenture, together with the aforesaid
forty-nine supplemental indentures and this Fiftieth Supplemental Indenture, is
hereinafter called "the Indenture;" and
<PAGE> 9
8
Long Island Lighting Company-Fiftieth Supplemental Indenture
WHEREAS, as required by Section 5.14 of the General and Refunding
Indenture dated as of June 1, 1975 between the Company and Manufacturers
Hanover Trust Company, as Trustee ("the General and Refunding Indenture"), the
Company desires by this Fiftieth Supplemental Indenture to create two series of
Bonds to be issued under the Indenture, to designate or otherwise distinguish
such series, to specify the particulars necessary to describe and define the
same, and to specify such other terms, provisions and agreements in respect
thereto as are in the Indenture provided or permitted; and
WHEREAS, in the Original General and Refunding Indenture, the Company
has heretofore granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged and confirmed unto the Trustee, the property,
rights, privileges and franchises set forth in said Original General and
Refunding Indenture as follows:
CLAUSE FIRST
All the property particularly described in Schedule A hereto
annexed and hereby made a part hereof as fully as if set forth herein
at length.
CLAUSE SECOND
All other property, real, personal or mixed (other than
"Excepted Property" as hereinafter defined), of every kind and
description and wheresoever situate, now owned or which may be
hereafter acquired by the Company, to the extent of all of the
Company's ownership interest therein, regardless of whether such
ownership interest constitutes the entire ownership interest in the
property concerned or whether it be a jointly held interest in common
with others divided or undivided, it being the intention hereof that
all property, rights, privileges and franchises now owned by the
Company after the date hereof (other than Excepted Property) shall be
as fully embraced within and subjected to the Lien hereof as if such
property were specifically described herein.
CLAUSE THIRD
Also any property, including Excepted Property, that may, from
time to time hereafter, by delivery or by writing of any kind, be
subjected to the Lien hereof by the Company or by anyone in its
behalf; and the Trustee is hereby authorized to receive the same at
any time as additional security hereunder. Such subjection to the
Lien hereof of any such property as additional security may be made
<PAGE> 10
9
Long Island Lighting Company-Fiftieth Supplemental Indenture
subject to any reservations, limitations or conditions which shall be
set forth in a writing executed by the Company or the Person so acting
in its behalf and/or the Trustee respecting the use and disposition of
such property or the proceeds thereof.
CLAUSE FOURTH
Together with all the rents, issues, profits and other income
of the property subjected or required to be subjected to the Lien of
the General and Refunding Indenture; and all the estate, right, title
and interest of every nature whatsoever of the Company in and to the
same and every part and parcel thereof.
EXCEPTED PROPERTY
There is, however, expressed excepted and excluded from the
Lien and operation of the General and Refunding Indenture the
following described property of the Company, now owned or hereafter
acquired (herein sometimes called "Excepted Property"):
A. All cash on hand or in banks; all bills, notes and
accounts receivable; all choses in action and judgments; all
shares of stock, bonds, notes, evidences of indebtedness and
other securities; and all contracts and operating agreements;
B. All goods, wares, materials, merchandise, appliances
and supplies acquired for the purpose of sale in the ordinary
course of business; and all fuel (including nuclear fuel),
materials and supplies and other personal property which are
consumable (otherwise than by ordinary wear and tear) in their
use in the operation of the business of the Company;
C. The last day of the term of each leasehold estate (oral
or written) and/or any agreement therefor, now or hereafter
enjoyed by the Company, and whether falling within a general
or specific description of property herein;
D. All electric energy, gas, heat and other products
generated, manufactured, produced or purchased by the Company
for sale or distribution in the ordinary course of its
business;
E. Property acquired by the Company as a result of any
consolidation or merger to which the Company may be a party
which, to the extent specified in Section 13.05 hereof,
<PAGE> 11
10
Long Island Lighting Company-Fiftieth Supplemental Indenture
does not become subject to the Lien of this General and
Refunding Indenture;
F. Airplanes and flight equipment; and
G. Property located outside the State of New York.
The Company may, or if expressed required by the terms of this
General and Refunding Indenture shall, however, pursuant to Clause
Third, subject to the Lien hereof any Excepted Property, whereupon the
same shall cease to be Excepted Property and if, upon the occurrence
of a completed default as specified in Section 10.01 hereof, the
Trustee or a receiver appointed hereunder shall enter upon and take
possession of the Mortgaged Property, the Trustee or such receiver may
also, to the extent permitted by law, take possession of any Excepted
Property, whereupon the same shall cease to be Excepted Property; and
WHEREAS, in the supplemental indentures to the Original General and
Refunding Indenture, the Company has heretofore granted, bargained, sold,
released, conveyed, assigned, transferred, mortgaged, pledged and confirmed upon
the Trustee all the property particularly described in each Schedule A thereto
annexed and made a part thereof, and all the property, real, personal or mixed,
rights, privileges and franchises (other than Excepted Property), of every kind
and description and wheresoever situate, as specified in Granting Clauses First,
Second, Third and Fourth of the Original General and Refunding Indenture; and
WHEREAS, since the execution and delivery of the Original Indenture,
the Company has acquired certain property, rights, privileges and franchises
which by the terms of the Original Indenture are subject to the lien of the
Indenture, and the Company desires to confirm the lien of the Indenture on said
property, rights, privileges and franchises so acquired in accordance with the
provisions of the Indenture; and
WHEREAS, all the conditions and requirements necessary to make this
Fiftieth Supplemental Indenture when duly executed a valid, binding and legal
instrument in accordance with its terms and for the purposes herein expressed
have been done, performed and fulfilled, and the execution and delivery of this
Fiftieth Supplemental Indenture have in all respects been duly authorized by
resolution of the Board of Directors of the Company;
NOW, THEREFORE, in consideration of the premises and of the sum of $1
paid to the Company by the Trustee at or before the execution and delivery
hereof, the receipt whereof is hereby acknowledged, and of other good and
valuable considerations, the Company does hereby acknowledge
<PAGE> 12
11
Long Island Lighting Company-Fiftieth Supplemental Indenture
and confirm that it has granted, bargained, sold, released, conveyed, assigned,
transferred, mortgaged, pledged and confirmed, and by these presents the
Company does hereby grant, bargain, sell, release, convey, assign, transfer,
mortgage, pledge and confirm unto the Trustee all property, real, personal or
mixed, rights, privileges and franchises (other than Excepted Property as
defined in the Indenture), of every kind and description and wheresoever
situate, acquired by the Company since the execution and delivery of the
Original Indenture.
TO HAVE AND TO HOLD all such property, rights, privileges and
franchises as part of the Trust Estate (as defined in the Indenture) with like
effect as though originally included therein.
IN TRUST NEVERTHELESS for the same purposes and upon the same terms,
trusts and conditions, and subject to and with the same provisos and covenants,
as are set forth in the Indenture, with the same force and effect as though
such property had been particularly described in the Granting Clauses of the
Original Indenture.
The Company does hereby covenant and agree with the Trustee as follows:
ARTICLE I
FIRST MORTGAGE BONDS, SERIES DDD 7-5/8% DUE 1998
SECTION 1. There is hereby created a series of Bonds to be issued
under and secured by the Indenture to be designated as "First Mortgage Bonds,
Series DDD 7-5/8% Due 1998" of the Company ("the Bonds of Series DDD"), and the
form thereof shall be substantially as hereinafter recited. The principal
amount of Bonds of Series DDD which may be authenticated and delivered under
this Supplemental Indenture shall be limited to One Hundred Million Dollars
($100,000,000), except for Bonds of Series DDD authenticated and delivered upon
transfer of, or in exchange for, or in lieu of other Bonds of Series DDD
pursuant to the provisions of the Original Indenture, as from time to time
amended and supplemented, or of this Supplemental Indenture. An aggregate
principal amount of One Hundred Million Dollars ($100,000,000) of the Bonds of
Series DDD may forthwith be executed by the Company and delivered to the
Trustee for authentication and delivery. From time to time, so long as the
aggregate principal amount of the Bonds of Series DDD authenticated and
delivered does not exceed the limitation hereinabove set forth, and subject to
the terms and conditions of the Indenture relative to the authentication and
delivery of Bonds, Bonds of Series DDD additional to the initial issue thereof
may be executed by the Company and delivered to the Trustee for authentication
and delivery. The Bonds of Series DDD shall be registered Bonds without coupons
in
<PAGE> 13
12
Long Island Lighting Company-Fiftieth Supplemental Indenture
denominations of $1,000 or any multiple thereof, and of such amount of each
denomination as may be executed by the Company and delivered to the Trustee for
authentication and delivery. The Bonds of Series DDD shall mature April 15,
1998, and shall bear interest at the rate of seven and five-eighths per centum
(7-5/8%) per annum, payable semi-annually on April 15 and October 15 in each
year, commencing on the date specified in such Bond as below provided as the
commencement date of the first interest period, until the principal thereof
shall have become due and payable. Interest shall be payable on overdue
principal of the Bonds of Series DDD and (to the extent that payment of such
interest is enforceable under applicable law) on overdue instalments of
interest of Bonds of Series DDD at the rate of six per centum (6%) per annum.
Both the principal of and interest on the Bonds of Series DDD shall be paid at
the office or agency of the Company in the Borough of Manhattan in The City of
New York, in any coin or currency of the United States of America which at the
time of payment shall be legal tender for public and private debts.
SECTION 2. The provisions of the second paragraph of Section 2.05 of
the Indenture shall not be applicable to the Bonds of Series DDD. All Bonds of
Series DDD shall be dated the date of their authentication, and shall bear
interest from the date specified in such Bond as below provided as the
commencement of the first interest period, or from the most recent interest
date to which interest has been paid or duly provided for. Interest on any Bond
of Series DDD which is payable, and is punctually paid or duly provided for, on
any interest date shall be paid to the person in whose name that Bond (or one
or more Bonds of Series DDD evidencing all or a portion of the same debt) is
registered at the close of business on the Regular Record Date for such
interest which shall be the first day of April or October, as the case may be,
next preceding such interest date whether or not such first day of April or
October is a day which is not a day on which banking institutions in The City
of New York are authorized or required by law or executive order to be closed
(hereinafter a "Business Day").
SECTION 3. Any interest on any Bond of Series DDD which is payable,
but is not punctually paid or duly provided for, on any interest date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Regular Record Date by virtue of having been
such holder; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the Bonds of Series
DDD (or the respective Bonds of Series DDD evidencing all or a portion
of the same debt) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall
<PAGE> 14
13
Long Island Lighting Company-Fiftieth Supplemental Indenture
notify the Trustee in writing of the amount of Defaulted Interest
proposed to be paid on each Bond of Series DDD and the date of the
proposed payment, and at the same time the Company shall make
arrangements satisfactory to the Trustee for the deposit with the
Trustee of an amount of money equal to the aggregate amount proposed
to be paid in respect of such Defaulted Interest prior to the date of
the proposed payment, such money when deposited to be held in trust
for the benefit of the persons entitled to such Defaulted Interest as
in this Clause provided. Thereupon the Trustee shall fix a Special
Record Date for the payment of such Defaulted Interest which shall be
not more than 15 nor less than 5 days prior to the date of the
proposed payment and not less than 10 days after the receipt by the
Trustee of the notice of the proposed payment. The Trustee shall
promptly notify the Company of such Special Record Date and, in the
name and at the expense of the Company, shall cause notice of the
proposed payment of such Defaulted Interest and the Special Record
Date therefor to be mailed, first class postage prepaid, to each
holder of a Bond of Series DDD at his address as it appears in the
Bond register, not less than 10 days prior to such Special Record
Date. The Trustee may, in its discretion, in the name and at the
expense of the Company, cause a similar notice to be published at
least once in a daily newspaper in the Borough of Manhattan in The
City of New York, but such publication shall not be a condition
precedent to the establishment of such Special Record Date. Notice of
the proposed payment of such Defaulted Interest and the Special Record
Date therefor having been mailed as aforesaid, such Defaulted Interest
shall be paid to the persons in whose names the Bonds of Series DDD
(or the respective Bonds of Series DDD evidencing all or a portion of
the same debt) are registered on such Special Record Date and shall no
longer be payable pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Bonds of Series
DDD may be listed, and upon such notice as may be required by such
exchange, if after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
SECTION 4. The Bonds of Series DDD shall be redeemable at a
redemption price of one hundred per centum (100%) of their principal amount,
together with accrued interest thereon from the interest date to which interest
has previously been paid or made available for payment to the date fixed for
redemption, upon the application of Trust Moneys pursuant to
<PAGE> 15
14
Long Island Lighting Company-Fiftieth Supplemental Indenture
the last paragraph of Section 9.04, and Sections 9.10 and 9.11 of the
Indenture.
Bonds of Series DDD shall be redeemed in accordance with their terms
and Article Eleven of the Indenture.
SECTION 5. In order to prevent the application of the provisions of
Section 9.10 of the Indenture requiring the redemption of Bonds pursuant to
said Section, the Company shall use its best efforts to take such action as may
be necessary so that at no time shall there have been on deposit at all times
during the preceding three years Trust Moneys in an amount in excess of
$25,000.
The Company shall, in the manner provided in Sections 9.04A and 12.01
of the Indenture, use its best efforts to make alternative directions and
designations so that it shall not be required by the provisions of said
Sections to purchase or redeem any Bonds of Series DDD.
SECTION 6. No payment by way of principal or interest on any Bond of
Series DDD shall be made if the Trustee shall have received written notice
signed on behalf of the registered holder of such Bond of Series DDD stating
that the same has been waived by such registered holder and such waiver shall
not have been revoked, all in the manner and at the times hereinafter
specified. With respect to principal of any Bond of Series DDD becoming due
and payable on any date, said notice shall be on file with the Trustee at the
close of business on said due date if said due date is a Business Day, or, if
said due date is not a Business Day, then on the Business Day next following
said due date. With respect to any instalment of interest on any Bond of Series
DDD, said notice shall be on file with the Trustee at the close of business on
the date which is the 30th day after the date fixed for payment of such
instalment or, if said 30th day is not a Business Day, on the Business Day next
preceding said 30th day. The above-mentioned notices of waiver may be revoked
by written notice signed and filed with the Trustee in the same manner
specified herein for a notice of waiver.
Unless a waiver is so revoked, (a) at the close of business on the
date when any principal of any Bond of Series DDD with respect to which a
waiver was on file with the Trustee as aforesaid shall become due and payable
or, if said due date is not a Business Day, on the Business Day next following
said due date, such principal shall cease to be payable, and interest shall
thereupon cease to accrue thereon, and (b) at the close of business on the date
which is the 30th day after the date fixed for payment of any instalment of
interest with respect to which a waiver was on file with the Trustee as
aforesaid or, if said 30th day is not a Business Day, on the
<PAGE> 16
15
Long Island Lighting Company-Fiftieth Supplemental Indenture
Business Day next preceding said 30th day, such instalment shall cease to be
payable.
Said notice shall specify the certificate numbers and denominations of
Bonds of Series DDD to which it applies and the principal or instalments of
interest being thereby waived and shall state that the person signing or on
whose behalf it is signed is the registered holder of said Bonds of Series DDD,
that said Bonds of Series DDD are in said registered holder's possession and,
if required by the Trustee, will be promptly produced for inspection by the
Trustee, that payment of the principal of or instalments of interest specified
therein are thereby waived, that said notice is being delivered to the Trustee
for the purpose of being relied on by the Trustee in the administration of the
trust under the Indenture, that the Trustee may so rely and that the person(s)
signing are thereunto duly authorized.
Where the person on whose behalf a notice is given is a corporation,
said notice shall be signed by the President or any Vice President, Cashier,
Controller, Treasurer, Trust Officer or Assistant Vice President, and by an
Assistant Cashier, Assistant Controller, Assistant Treasurer or Assistant Trust
Officer.
The Trustee shall be entitled to rely upon and shall be fully
protected in relying upon written notices delivered to it in accordance with
this Section 6.
SECTION 7. The Company covenants that the annual interest charges on
the Bonds of Series DDD which would be payable except for the waiver of such
payment described in Section 6 hereof shall be included as annual interest
charges upon the Company's Secured Debt (as defined in the Indenture) for the
purpose of any Gross Income Certificate under the Indenture.
SECTION 8. All Bonds of Series DDD shall, upon surrender to the
Trustee at its corporate trust office, be exchangeable for other Bonds of
Series DDD of a different authorized denomination or denominations, as
requested by the holder surrendering the same, but of a like aggregate
principal amount. The Company will execute and the Trustee shall authenticate
and deliver registered Bonds of Series DDD whenever the same shall be required
for any such exchange.
For any exchange of Bonds of Series DDD (other than exchanges
expressly provided in the Indenture to be made at the Company's own expense or
without expense or without charge to Bondholders) or for any transfer of any
Bond of Series DDD, the Company, at its option, may require the payment by the
Bondholder of a sum sufficient to reimburse it for any stamp tax and/or any
other governmental charge incident thereto,
<PAGE> 17
16
Long Island Lighting Company-Fiftieth Supplemental Indenture
but, notwithstanding the provisions of the last paragraph of Section 2.08 of
the Indenture, no other charge shall be made by the Company for any such
exchange or transfer.
The right reserved by the Company in the first paragraph of Section
2.06 of the Indenture not to make any transfers or exchanges of Bonds for a
period of 10 days next preceding any interest payment date shall not be
applicable to transfers or exchanges of Bonds of Series DDD.
Except as hereinabove provided in this Section, exchanges of Bonds of
Series DDD shall be subject to Sections 2.06 and 2.08 of the Indenture.
The Trustee is hereby appointed Registrar of the Bonds of Series DDD
for the purpose of registering and transferring Bonds of Series DDD as provided
in the Indenture.
SECTION 9. The form of the Bonds of Series DDD and the certificate of
authentication of the Trustee to be executed thereon are to be substantially in
the following forms, respectively, with such variations as are permitted in the
Indenture for registered Bonds without coupons:
[FORM OF BONDS OF SERIES DDD FACE SIDE]
LONG ISLAND LIGHTING COMPANY
Registered Registered
FIRST MORTGAGE BOND
SERIES DDD 7-5/8% DUE 1998
$ $
NUMBER
LONG ISLAND LIGHTING COMPANY, a corporation of the State of New York
(hereinafter called "the Company"), for value received, hereby promises to pay
to or registered assigns, at the
close of business on April 15, 1998, if said due date is a day (herein called a
"Business Day") which is not a day on which banking institutions in The City of
New York are authorized or required by law or executive order to be closed, or,
if said due date is not a Business Day, then on the Business Day next following
said due date, Dollars, and to pay interest
thereon from the date of the initial issuance of the Bonds of this Series, or
from the most recent interest date to which interest has been paid or duly
provided for, at the rate of seven and five-eighths per centum (7-5/8%) per
annum, semi-annually at the close of business on April 15 and October 15 in
each year, commencing on October 15, 1994 or, if said April 15 or October 15 is
not a Business Day, on the Business Day next following
<PAGE> 18
17
Long Island Lighting Company-Fiftieth Supplemental Indenture
said date, until the principal hereof shall have become due and payable, and to
pay interest on any overdue principal and (to the extent enforceable under
applicable law) on any overdue instalment of interest at the rate of six per
centum (6%) per annum. The principal hereof and interest hereon shall be
payable at the office or agency of the Company in the Borough of Manhattan in
The City of New York, in any coin or currency of the United States of America
which at the time of payment shall be legal tender for public and private
debts.
The provisions of this Bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Bond shall not be valid until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture hereinafter
mentioned.
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this Bond
to be executed in its corporate name with the facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the facsimile
signature of its Secretary or of an Assistant Secretary.
Dated:
LONG ISLAND LIGHTING
COMPANY
By
--------------------------------
President
Attest:
------------------------------
Secretary
[Form of the Trustee's Certificate
of
Authentication]
This is one of the Bonds, of the Series designated therein, described
in the within mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE
By
--------------------------------
Authorized Officer
<PAGE> 19
18
Long Island Lighting Company-Fiftieth Supplemental Indenture
[FORM OF BOND OF SERIES DDD -- REVERSE SIDE]
LONG ISLAND LIGHTING COMPANY
FIRST MORTGAGE BOND
SERIES DDD 7-5/8% DUE 1998
(Continued)
The interest so payable, and punctually paid or duly provided for, on
any interest date will, as provided in the Indenture hereinafter mentioned, be
paid to the person in whose name this Bond (or any Bond or Bonds evidencing all
or a portion of the same debt) is registered at the close of business on the
Regular Record Date for such interest which shall be the first day of April or
October, as the case may be (whether or not a Business Day), next preceding
such interest date. Any such interest not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on such Regular
Record Date, and may be paid to the person in whose name this Bond (or any Bond
or Bonds evidencing all or a portion of the same debt) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to the
registered holder hereof not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Bond may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided for in the Indenture hereinafter mentioned.
If an Event of Default, as defined in the Indenture hereinafter
mentioned, shall occur, the principal of this Bond may become or be declared
due and payable, in the manner and with the effect provided in the Indenture
hereinafter mentioned.
This Bond is one of an authorized issue of Bonds of the Company known
as its "First Mortgage Bonds", not limited in principal amount except as in the
Indenture hereinafter mentioned provided, issued and to be issued in one or
more series under, and all equally and ratably secured (except as any sinking
or other fund may afford additional special security for the Bonds of any
particular series) by, an Indenture of Mortgage and Deed of Trust dated as of
September 1, 1951, executed by the Company to City Bank Farmers Trust Company
(subsequently converted into First National City Trust Company, which was
merged into First National City Bank, now named Citibank, N.A.), as Trustee
(hereinafter referred to as "the Trustee"
<PAGE> 20
19
Long Island Lighting Company-Fiftieth Supplemental Indenture
which term includes any successor trustee) (herein, together with all
indentures supplemental thereto, called "the Indenture") to which Indenture
reference is hereby made for a description of the properties thereby mortgaged
and conveyed, the nature and extent of the security, the rights of the holders
of said Bonds and of the Trustee and of the Company in respect of such
security, and the terms upon which said Bonds are and are to be authenticated
and delivered.
As provided in the Indenture, said Bonds are issuable in series which
may vary as to maturity, interest and otherwise as in the Indenture provided or
permitted. This Bond is one of a series entitled "First Mortgage Bonds, Series
DDD 7-5/8% Due 1998" created by a Fiftieth Supplemental Indenture dated as of
June 1, 1994, as provided for in the Indenture.
As provided in, and to the extent permitted by, the Indenture, the
rights and obligations of the Company and of the holders of said Bonds may be
modified by the Company with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the Bonds of all
series then outstanding which are affected by such modification (excluding
Bonds disqualified from voting by reason of the Company's interest therein as
provided in the Indenture). The Indenture provides, among other things, that,
without the consent of the holder hereof, no such modification shall effect the
reduction, or the extension of the stated time of payment, of the principal
hereof, or of the interest hereon, or permit the creation of any lien on the
properties so mortgaged and conveyed prior to or on a parity with the lien of
the Indenture (except as therein expressly permitted) or deprive the holder
hereof of the lien created by the Indenture on said properties. The holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all Bonds of all series then outstanding (excluding Bonds disqualified as
aforesaid) may on behalf of the holders of all such Bonds waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, or premium or interest on, any of the Bonds as and
when the same shall become due by the terms of such Bonds or a call for
redemption.
No recourse shall be had for the payment of the principal of or the
interest or premium on this Bond, or for any claim based hereon or otherwise in
respect hereof or of the Indenture, against any incorporator, stockholder,
director or officer, as such, past, present or future, of the Company or of any
predecessor or successor corporation, either directly or through the Company or
any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise howsoever; all
such liability being, by the acceptance hereof and as a part of the
consideration for the issuance hereof, expressly waived and released by every
holder hereof; provided, however, that nothing herein or in
<PAGE> 21
20
Long Island Lighting Company-Fiftieth Supplemental Indenture
the Indenture contained shall be taken to prevent recourse to and the
enforcement of the liability, if any, of any stockholder or subscriber to
capital stock upon or in respect of shares of capital stock not fully paid.
This Bond is transferable by the registered owner hereof, in person or
by attorney authorized in writing, at the corporate trust office of the
Trustee, and at such other offices or agencies as may be required to be
maintained for such purpose to comply with the rules of any securities exchange
on which the Bonds of this Series may at the time be listed, upon surrender of
this Bond, and upon any such transfer of a new Bond or Bonds, of the same
series for the same aggregate principal amount, will be issued to the
transferee in exchange herefor, without payment of any charge other than stamp
taxes and other governmental charges incident thereto. The Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof, whether or not this Bond shall be overdue, for the
purpose of receiving payment as herein provided and for all other purposes.
The Bonds of this Series are issuable as registered Bonds without
coupons in denominations of $1,000 and/or any multiple thereof authorized by
the Company. As provided in the Indenture, Bonds of this Series are
exchangeable for other Bonds of this Series of a different authorized
denomination or denominations, as requested by the holder surrendering the
same, without payment of any charge other than stamp taxes and other
governmental charges incident thereto.
The Company shall not be required to make any transfer or exchange of
this Bond for a period of 10 days next preceding the mailing of notice of
redemption of any Bonds of this Series.
The Bonds of this Series are subject to redemption upon prior notice
given as provided in the Indenture, upon payment of one hundred per centum
(100%) of the principal amount so redeemed together with interest accrued
thereon to the date fixed for redemption in the event that all or substantially
all of the Electric Property or all or substantially all of the Gas Property of
the Company shall be released or substantially all of the Trust Estate (with
certain exceptions) shall be taken by eminent domain or sold in anticipation of
such taking.
Bonds for whose redemption and payment provision is made in accordance
with the Indenture shall thereupon cease to be entitled to the lien of the
Indenture and shall cease to bear interest from and after the date fixed for
redemption.
[END OF REVERSE SIDE OF FORM OF BOND OF SERIES DDD]
<PAGE> 22
21
Long Island Lighting Company-Fiftieth Supplemental Indenture
ARTICLE II
FIRST MORTGAGE BONDS, SERIES EEE 8-5/8% DUE 2004
SECTION 1. There is hereby created a series of Bonds to be issued
under and secured by the Indenture to be designated as "First Mortgage Bonds,
Series EEE 8-5/8% Due 2004" of the Company ("the Bonds of Series EEE"), and the
form thereof shall be substantially as hereinafter recited. The principal
amount of Bonds of Series EEE which may be authenticated and delivered under
this Supplemental Indenture shall be limited to One Hundred and Sixty-four
Million Dollars ($164,000,000), except for Bonds of Series EEE authenticated
and delivered upon transfer of, or in exchange for, or in lieu of other Bonds
of Series EEE pursuant to the provisions of the Original Indenture, as from
time to time amended and supplemented, or of this Supplemental Indenture. An
aggregate principal amount of One Hundred and Sixty-four Million Dollars
($164,000,000) of the Bonds of Series EEE may forthwith be executed by the
Company and delivered to the Trustee for authentication and delivery. From time
to time, so long as the aggregate principal amount of the Bonds of Series EEE
authenticated and delivered does not exceed the limitation hereinabove set
forth, and subject to the terms and conditions of the Indenture relative to the
authentication and delivery of Bonds, Bonds of Series EEE additional to the
initial issue thereof may be executed by the Company and delivered to the
Trustee for authentication and delivery. The Bonds of Series EEE shall be
registered Bonds without coupons in denominations of $1,000 or any multiple
thereof, and of such amount of each denomination as may be executed by the
Company and delivered to the Trustee for authentication and delivery. The Bonds
of Series EEE shall mature April 15, 2004 and shall bear interest at the rate
of eight and five-eighths per centum (8-5/8%) per annum, payable semi-annually
on April 15 and October 15 in each year, commencing on the date specified in
such Bond as below provided as the commencement date of the first interest
period, until the principal thereof shall have become due and payable. Interest
shall be payable on overdue principal of the Bonds of Series EEE and (to the
extent that payment of such interest is enforceable under applicable law) on
overdue instalments of interest of Bonds of Series EEE at the rate of six per
centum (6%) per annum. Both the principal of and interest on the Bonds of
Series EEE shall be paid at the office or agency of the Company in the Borough
of Manhattan in The City of New York, in any coin or currency of the United
States of America which at the time of payment shall be legal tender for public
and private debts.
SECTION 2. The provisions of the second paragraph of Section 2.05 of
the Indenture shall not be applicable to the Bonds of Series EEE. All Bonds of
Series EEE shall be dated the date of their authentication, and shall
<PAGE> 23
22
Long Island Lighting Company-Fiftieth Supplemental Indenture
bear interest from the date specified in such Bond as below provided as the
commencement of the first interest period, or from the most recent interest
date to which interest has been paid or duly provided for. Interest on any Bond
of Series EEE which is payable, and is punctually paid or duly provided for, on
any interest date shall be paid to the person in whose name that Bond (or one
or more Bonds of Series EEE evidencing all or a portion of the same debt) is
registered at the close of business on the Regular Record Date for such
interest which shall be the first day of April or October, as the case may be,
next preceding such interest date whether or not such first day of April or
October is a day which is not a day on which banking institutions in The City
of New York are authorized or required by law or executive order to be closed
(hereinafter a "Business Day").
SECTION 3. Any interest on any Bond of Series EEE which is payable,
but is not punctually paid or duly provided for, on any interest date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the
registered holder on the relevant Regular Record Date by virtue of having been
such holder; and such Defaulted Interest may be paid by the Company, at its
election in each case, as provided in Clause (1) or Clause (2) below:
(1) The Company may elect to make payment of any
Defaulted Interest to the persons in whose names the Bonds of Series
EEE (or the respective Bonds of Series EEE evidencing all or a portion
of the same debt) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on
each Bond of Series EEE and the date of the proposed payment, and at
the same time the Company shall make arrangements satisfactory to the
Trustee for the deposit with the Trustee of an amount of money equal
to the aggregate amount proposed to be paid in respect of such
Defaulted Interest prior to the date of the proposed payment, such
money when deposited to be held in trust for the benefit of the
persons entitled to such Defaulted Interest as in this Clause
provided. Thereupon the Trustee shall fix a Special Record Date for
the payment of such Defaulted Interest which shall be not more than 15
nor less than 5 days prior to the date of the proposed payment and not
less than 10 days after the receipt by the Trustee of the notice of
the proposed payment. The Trustee shall promptly notify the Company of
such Special Record Date and, in the name and at the expense of the
Company, shall cause notice of the proposed payment of such Defaulted
Interest and the Special Record Date therefor to be mailed, first
class postage prepaid, to each holder of a Bond of Series EEE at his
address as it appears in the Bond register, not less than 10 days
prior to such Special Record Date. The Trustee may, in its discretion,
in the name
<PAGE> 24
23
Long Island Lighting Company-Fiftieth Supplemental Indenture
and at the expense of the Company, cause a similar notice to be
published at least once in a daily newspaper in the Borough of
Manhattan in The City of New York, but such publication shall not be a
condition precedent to the establishment of such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been mailed as aforesaid, such
Defaulted Interest shall be paid to the persons in whose names the
Bonds of Series EEE (or the respective Bonds of Series EEE evidencing
all or a portion of the same debt) are registered on such Special
Record Date and shall no longer be payable pursuant to the following
Clause (2).
(2) The Company may make payment of any Defaulted
Interest in any other lawful manner not inconsistent with the
requirements of any securities exchange on which the Bonds of Series
EEE may be listed, and upon such notice as may be required by such
exchange, if after notice given by the Company to the Trustee of the
proposed payment pursuant to this Clause, such payment shall be deemed
practicable by the Trustee.
SECTION 4. The Bonds of Series EEE shall be redeemable at a
redemption price of one hundred per centum (100%) of their principal amount,
together with accrued interest thereon from the interest date to which interest
has previously been paid or made available for payment to the date fixed for
redemption, upon the application of Trust Moneys pursuant to the last paragraph
of Section 9.04, and Sections 9.10 and 9.11 of the Indenture.
Bonds of Series EEE shall be redeemed in accordance with their terms
and Article Eleven of the Indenture.
SECTION 5. In order to prevent the application of the provisions of
Section 9.10 of the Indenture requiring the redemption of Bonds pursuant to
said Section, the Company shall use its best efforts to take such action as may
be necessary so that at no time shall there have been on deposit at all times
during the preceding three years Trust Moneys in an amount in excess of
$25,000.
The Company shall, in the manner provided in Sections 9.04A and 12.01
of the Indenture, use its best efforts to make alternative directions and
designations so that it shall not be required by the provisions of said
Sections to purchase or redeem any Bonds of Series EEE.
SECTION 6. No payment by way of principal or interest on any Bond of
Series EEE shall be made if the Trustee shall have received written notice
signed on behalf of the registered holder of such Bond of Series EEE
<PAGE> 25
24
Long Island Lighting Company-Fiftieth Supplemental Indenture
stating that the same has been waived by such registered holder and such waiver
shall not have been revoked, all in the manner and at the times hereinafter
specified. With respect to principal of any Bond of Series EEE becoming due and
payable on any date, said notice shall be on file with the Trustee at the close
of business on said due date if said due date is a Business Day, or, if said
due date is not a Business Day, then on the Business Day next following said
due date. With respect to any instalment of interest on any Bond of Series EEE,
said notice shall be on file with the Trustee at the close of business on the
date which is the 30th day after the date fixed for payment of such instalment
or, if said 30th day is not a Business Day, on the Business Day next preceding
said 30th day. The above-mentioned notices of waiver may be revoked by written
notice signed and filed with the Trustee in the same manner specified herein
for a notice of waiver.
Unless a waiver is so revoked, (a) at the close of business on the
date when any principal of any Bond of Series EEE with respect to which a
waiver was on file with the Trustee as aforesaid shall become due and payable
or, if said due date is not a Business Day, on the Business Day next following
said due date, such principal shall cease to be payable, and interest shall
thereupon cease to accrue thereon, and (b) at the close of business on the date
which is the 30th day after the date fixed for payment of any instalment of
interest with respect to which a waiver was on file with the Trustee as
aforesaid or, if said 30th day is not a Business Day, on the Business Day next
preceding said 30th day, such instalment shall cease to be payable.
Said notice shall specify the certificate numbers and denominations of
Bonds of Series EEE to which it applies and the principal or instalments of
interest being thereby waived and shall state that the person signing or on
whose behalf it is signed is the registered holder of said Bonds of Series EEE,
that said Bonds of Series EEE are in said registered holder's possession and,
if required by the Trustee, will be promptly produced for inspection by the
Trustee, that payment of the principal of or instalments of interest specified
therein are thereby waived, that said notice is being delivered to the Trustee
for the purpose of being relied on by the Trustee in the administration of the
trust under the Indenture, that the Trustee may so rely and that the person(s)
signing are thereunto duly authorized.
Where the person on whose behalf a notice is given is a corporation,
said notice shall be signed by the President or any Vice President, Cashier,
Controller, Treasurer, Trust Officer or Assistant Vice President, and by an
Assistant Cashier, Assistant Controller, Assistant Treasurer or Assistant Trust
Officer.
<PAGE> 26
25
Long Island Lighting Company-Fiftieth Supplemental Indenture
The Trustee shall be entitled to rely upon and shall be fully
protected in relying upon written notices delivered to it in accordance with
this Section 6.
SECTION 7. The Company covenants that the annual interest charges on
the Bonds of Series EEE which would be payable except for the waiver of such
payment described in Section 6 hereof shall be included as annual interest
charges upon the Company's Secured Debt (as defined in the Indenture) for the
purpose of any Gross Income Certificate under the Indenture.
SECTION 8. All Bonds of Series EEE shall, upon surrender to the
Trustee at its corporate trust office, be exchangeable for other Bonds of
Series EEE of a different authorized denomination or denominations, as
requested by the holder surrendering the same, but of a like aggregate
principal amount. The Company will execute and the Trustee shall authenticate
and deliver registered Bonds of Series EEE whenever the same shall be required
for any such exchange.
For any exchange of Bonds of Series EEE (other than exchanges
expressly provided in the Indenture to be made at the Company's own expense or
without expense or without charge to Bondholders) or for any transfer of any
Bond of Series EEE, the Company, at its option, may require the payment by the
Bondholder of a sum sufficient to reimburse it for any stamp tax and/or any
other governmental charge incident thereto, but, notwithstanding the provisions
of the last paragraph of Section 2.08 of the Indenture, no other charge shall
be made by the Company for any such exchange or transfer.
The right reserved by the Company in the first paragraph of Section
2.06 of the Indenture not to make any transfers or exchanges of Bonds for a
period of 10 days next preceding any interest payment date shall not be
applicable to transfers or exchanges of Bonds of Series EEE.
Except as hereinabove provided in this Section, exchanges of Bonds of
Series EEE shall be subject to Sections 2.06 and 2.08 of the Indenture.
The Trustee is hereby appointed Registrar of the Bonds of Series EEE
for the purpose of registering and transferring Bonds of Series EEE as provided
in the Indenture.
SECTION 9. The form of the Bonds of Series EEE and the certificate of
authentication of the Trustee to be executed thereon are to be substantially in
the following forms, respectively, with such variations as are permitted in the
Indenture for registered Bonds without coupons:
<PAGE> 27
26
Long Island Lighting Company-Fiftieth Supplemental Indenture
[FORM OF BONDS OF SERIES EEE FACE SIDE]
LONG ISLAND LIGHTING COMPANY
Registered Registered
FIRST MORTGAGE BOND
SERIES EEE 8-5/8% DUE 2004
$ $
NUMBER
LONG ISLAND LIGHTING COMPANY, a corporation of the State of New York
(hereinafter called "the Company"), for value received, hereby promises to pay
to or registered assigns, at the
close of business on April 15, 2004, if said due date is a day (herein called a
"Business Day") which is not a day on which banking institutions in The City of
New York are authorized or required by law or executive order to be closed, or,
if said due date is not a Business Day, then on the Business Day next following
said due date, Dollars, and to pay interest
thereon from the date of the initial issuance of the Bonds of this Series, or
from the most recent interest date to which interest has been paid or duly
provided for, at the rate of eight and five-eighths per centum (8-5/8%) per
annum, semi-annually at the close of business on April 15 and October 15 in
each year, commencing on October 15, 1994 or, if said April 15 or October 15 is
not a Business Day, on the Business Day next following said date, until the
principal hereof shall have become due and payable, and to pay interest on any
overdue principal and (to the extent enforceable under applicable law) on any
overdue instalment of interest at the rate of six per centum (6%) per annum.
The principal hereof and interest hereon shall be payable at the office or
agency of the Company in the Borough of Manhattan in The City of New York, in
any coin or currency of the United States of America which at the time of
payment shall be legal tender for public and private debts.
The provisions of this Bond are continued on the reverse hereof and
such continued provisions shall for all purposes have the same effect as though
fully set forth at this place.
This Bond shall not be valid until the certificate of authentication
hereon shall have been signed by the Trustee under the Indenture hereinafter
mentioned.
<PAGE> 28
27
Long Island Lighting Company-Fiftieth Supplemental Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this Bond
to be executed in its corporate name with the facsimile signature of its
President or one of its Vice Presidents and its corporate seal, or a facsimile
thereof, to be impressed or imprinted hereon, attested by the facsimile
signature of its Secretary or of an Assistant Secretary.
Dated:
LONG ISLAND LIGHTING
COMPANY
By
--------------------------------
President
Attest:
------------------------------
Secretary
[Form of the Trustee's Certificate
of
Authentication]
This is one of the Bonds, of the Series designated therein, described
in the within mentioned Indenture.
IBJ SCHRODER BANK & TRUST
COMPANY, AS TRUSTEE
By
--------------------------------
Authorized Officer
<PAGE> 29
28
Long Island Lighting Company-Fiftieth Supplemental Indenture
[FORM OF BOND OF SERIES EEE -- REVERSE SIDE]
LONG ISLAND LIGHTING COMPANY
FIRST MORTGAGE BOND
SERIES EEE 8-5/8% DUE 2004
(Continued)
The interest so payable, and punctually paid or duly provided for, on
any interest date will, as provided in the Indenture hereinafter mentioned, be
paid to the person in whose name this Bond (or any Bond or Bonds evidencing all
or a portion of the same debt) is registered at the close of business on the
Regular Record Date for such interest which shall be the first day of April or
October, as the case may be (whether or not a Business Day), next preceding
such interest date. Any such interest not punctually paid or duly provided for
shall forthwith cease to be payable to the registered holder on such Regular
Record Date, and may be paid to the person in whose name this Bond (or any Bond
or Bonds evidencing all or a portion of the same debt) is registered at the
close of business on a Special Record Date for the payment of such defaulted
interest to be fixed by the Trustee, notice whereof shall be given to the
registered holder hereof not less than 10 days prior to such Special Record
Date, or may be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which this Bond may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided for in the Indenture hereinafter mentioned.
If an Event of Default, as defined in the Indenture hereinafter
mentioned, shall occur, the principal of this Bond may become or be declared
due and payable, in the manner and with the effect provided in the Indenture
hereinafter mentioned.
This Bond is one of an authorized issue of Bonds of the Company known
as its "First Mortgage Bonds", not limited in principal amount except as in the
Indenture hereinafter mentioned provided, issued and to be issued in one or
more series under, and all equally and ratably secured (except as any sinking
or other fund may afford additional special security for the Bonds of any
particular series) by, an Indenture of Mortgage and Deed of Trust dated as of
September 1, 1951, executed by the Company to City Bank Farmers Trust Company
(subsequently converted into First National City Trust Company, which was
merged into First National City Bank, now named Citibank, N.A.), as Trustee
(hereinafter referred to as "the Trustee" which term includes any successor
trustee) (herein, together with all
<PAGE> 30
29
Long Island Lighting Company-Fiftieth Supplemental Indenture
indentures supplemental thereto, called "the Indenture") to which Indenture
reference is hereby made for a description of the properties thereby mortgaged
and conveyed, the nature and extent of the security, the rights of the holders
of said Bonds and of the Trustee and of the Company in respect of such
security, and the terms upon which said Bonds are and are to be authenticated
and delivered.
As provided in the Indenture, said Bonds are issuable in series which
may vary as to maturity, interest and otherwise as in the Indenture provided or
permitted. This Bond is one of a series entitled "First Mortgage Bonds, Series
EEE 8-5/8% Due 2004" created by a Fiftieth Supplemental Indenture dated as of
June 1, 1994, as provided for in the Indenture.
As provided in, and to the extent permitted by, the Indenture, the
rights and obligations of the Company and of the holders of said Bonds may be
modified by the Company with the consent of the holders of not less than
seventy-five per centum (75%) in principal amount of all the Bonds of all
series then outstanding which are affected by such modification (excluding
Bonds disqualified from voting by reason of the Company's interest therein as
provided in the Indenture). The Indenture provides, among other things, that,
without the consent of the holder hereof, no such modification shall effect the
reduction, or the extension of the stated time of payment, of the principal
hereof, or of the interest hereon, or permit the creation of any lien on the
properties so mortgaged and conveyed prior to or on a parity with the lien of
the Indenture (except as therein expressly permitted) or deprive the holder
hereof of the lien created by the Indenture on said properties. The holders of
not less than sixty-six and two-thirds per centum (66-2/3%) in principal amount
of all Bonds of all series then outstanding (excluding Bonds disqualified as
aforesaid) may on behalf of the holders of all such Bonds waive any past
default under the Indenture and its consequences, except a default in the
payment of the principal of, or premium or interest on, any of the Bonds as and
when the same shall become due by the terms of such Bonds or a call for
redemption.
No recourse shall be had for the payment of the principal of or the
interest or premium on this Bond, or for any claim based hereon or otherwise in
respect hereof or of the Indenture, against any incorporator, stockholder,
director or officer, as such, past, present or future, of the Company or of any
predecessor or successor corporation, either directly or through the Company or
any predecessor or successor corporation, whether by virtue of any
constitution, statute or rule of law, or by the enforcement of any assessment
or penalty or by any legal or equitable proceeding or otherwise howsoever; all
such liability being, by the acceptance hereof and as a part of the
consideration for the issuance hereof, expressly waived and released by every
holder hereof; provided, however, that nothing herein or in the Indenture
contained shall be taken to prevent recourse to and the
<PAGE> 31
30
Long Island Lighting Company-Fiftieth Supplemental Indenture
enforcement of the liability, if any, of any stockholder or subscriber to
capital stock upon or in respect of shares of capital stock not fully paid.
This Bond is transferable by the registered owner hereof, in person or
by attorney authorized in writing, at the corporate trust office of the
Trustee, and at such other offices or agencies as may be required to be
maintained for such purpose to comply with the rules of any securities exchange
on which the Bonds of this Series may at the time be listed, upon surrender of
this Bond, and upon any such transfer of a new Bond or Bonds, of the same
series for the same aggregate principal amount, will be issued to the
transferee in exchange herefor, without payment of any charge other than stamp
taxes and other governmental charges incident thereto. The Company and the
Trustee may deem and treat the person in whose name this Bond is registered as
the absolute owner hereof, whether or not this Bond shall be overdue, for the
purpose of receiving payment as herein provided and for all other purposes.
The Bonds of this Series are issuable as registered Bonds without
coupons in denominations of $1,000 and/or any multiple thereof authorized by
the Company. As provided in the Indenture, Bonds of this Series are
exchangeable for other Bonds of this Series of a different authorized
denomination or denominations, as requested by the holder surrendering the
same, without payment of any charge other than stamp taxes and other
governmental charges incident thereto.
The Company shall not be required to make any transfer or exchange of
this Bond for a period of 10 days next preceding the mailing of notice of
redemption of any Bonds of this Series.
The Bonds of this Series are subject to redemption upon prior notice
given as provided in the Indenture, upon payment of one hundred per centum
(100%) of the principal amount so redeemed together with interest accrued
thereon to the date fixed for redemption in the event that all or substantially
all of the Electric Property or all or substantially all of the Gas Property of
the Company shall be released or substantially all of the Trust Estate (with
certain exceptions) shall be taken by eminent domain or sold in anticipation of
such taking.
Bonds for whose redemption and payment provision is made in accordance
with the Indenture shall thereupon cease to be entitled to the lien of the
Indenture and shall cease to bear interest from and after the date fixed for
redemption.
[END OF REVERSE SIDE OF FORM OF BOND OF SERIES EEE]
<PAGE> 32
31
Long Island Lighting Company-Fiftieth Supplemental Indenture
ARTICLE III
THE TRUSTEE
The Trustee shall not be responsible in any manner whatsoever for or in
respect of the validity or sufficiency of this Fiftieth Supplemental Indenture
or the due execution hereof by the Company; or for or in respect of the
recitals and statements contained herein, all of which recitals and statements
are made solely by the Company.
ARTICLE IV
MISCELLANEOUS PROVISIONS
SECTION 1. Except insofar as herein otherwise expressly provided, all
the provisions, terms and conditions of the Original Indenture as heretofore
supplemented shall be deemed to be incorporated in, and made a part of, this
Fiftieth Supplemental Indenture; and the Original Indenture as heretofore
supplemented by this Fiftieth Supplemental Indenture is in all respects
ratified and confirmed; and the Original Indenture as heretofore supplemented
and this Fiftieth Supplemental Indenture shall be read, taken and construed as
one and the same instrument.
SECTION 2. This Fiftieth Supplemental Indenture may be executed in
any number of counterparts, and each of such counterparts shall for all
purposes be deemed to be an original, and all such counterparts, or as many of
them as the Company and the Trustee shall preserve undestroyed, shall together
constitute but one and the same instrument.
<PAGE> 33
32
Long Island Lighting Company-Fiftieth Supplemental Indenture
IN WITNESS WHEREOF, LONG ISLAND LIGHTING COMPANY has caused this
Fiftieth Supplemental Indenture to be signed in its corporate name by its
President or a Vice President and its corporate seal to be hereunto affixed and
attested by its Secretary or an Assistant Secretary and, in token of its
acceptance of the trusts created hereunder, IBJ SCHRODER BANK & TRUST COMPANY,
as Trustee as aforesaid, has caused this Supplemental Indenture to be signed in
its corporate name by a Vice President or an Assistant Vice President and its
corporate seal to be affixed and attested by a Secretary or an Assistant
Secretary, all as of the day and year first above written.
Long Island Lighting Company
[Corporate Seal]
By ANTHONY NOZZOLILLO
--------------------------------
ANTHONY NOZZOLILLO
Senior Vice President and
Chief Financial Officer
Attest:
KATHLEEN A. MARION
--------------------------------------
KATHLEEN A. MARION
Corporate Secretary
IBJ SCHRODER BANK
& TRUST COMPANY,
as Trustee as aforesaid
[CORPORATE SEAL] By NANCY R. BESSE
--------------------------------
NANCY R. BESSE
Vice President
Attest:
THOMAS J. BOGERT
--------------------------------------
THOMAS J. BOGERT
Assistant Secretary
<PAGE> 34
33
Long Island Lighting Company-Fiftieth Supplemental Indenture
STATE OF NEW YORK )
) SS.
COUNTY OF NASSAU )
On the 8th day of June, in the year 1994, before me personally came
ANTHONY NOZZOLILLO, to me known, who being by me duly sworn, did depose and say
that he resides at 430 Forest Avenue, Woodmere, New York; that he is a Senior
Vice President and Chief Financial Officer of LONG ISLAND LIGHTING COMPANY, one
of the corporations described in and which executed the above instrument; that
he knows the seal of said corporation; that the seal affixed to said instrument
is such corporate seal; that it was so affixed by order of the Board of
Directors of said corporation; and that he signed his name thereto by like
order.
HELEN R. DUFFY
--------------------------------
NOTARY PUBLIC
HELEN R. DUFFY
NOTARY PUBLIC, STATE OF NEW YORK
NO. 4827371, SUFFOLK COUNTY
TERM EXPIRES SEPTEMBER 30, 1995
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
On the 9th day of June, in the year 1994, before me personally came
NANCY R. BESSE, to me known, who being by me duly sworn, did depose and say
that she resides at 375 South End Avenue, New York, New York 10280; that she is
a Vice President of IBJ SCHRODER BANK & TRUST COMPANY, one of the corporations
described in and which executed the above instrument; that she knows the seal
of said corporation; that the seal affixed to said instrument is such corporate
seal; that it was so affixed by authority of the Board of Directors of said
corporation; and that she signed her name thereto by like authority.
CAROL E. SCHWAB
--------------------------------
Notary Public
CAROL E. SCHWAB
NOTARY PUBLIC, STATE OF NEW YORK
NO. 4982621
QUALIFIED IN NEW YORK COUNTY
COMMISSION EXPIRES JUNE 3, 1995
<PAGE> 35
34
Long Island Lighting Company-Fiftieth Supplemental Indenture
Schedule A
TO
FIFTIETH SUPPLEMENTAL INDENTURE
dated as of
June 1, 1994
SUPPLEMENTAL
TO
INDENTURE OF MORTGAGE AND DEED OF TRUST
dated as of
September 1, 1951
All of the properties referred to as being included in Schedule A in
the Granting Clause of this Fiftieth Supplemental Indenture, supplemental to
the Original Indenture, intended to be covered by the lien of the Indenture are
hereinafter described. All the right, title and interest of the Company in and
to its said properties, as acquired under the conveyances listed below,
together with all the right, title and interest of the Company in and to any
road, street or way, public or private, open or proposed, in front of,
adjoining and through any thereof, are incorporated herein as if more fully set
forth at length, and nothing in this Schedule, except as specifically stated
hereinafter, shall operate as, or be construed to be, a limitation or
diminution of said right, title or interest. Said properties, where
applicable, are subject to:
(1) Restrictions and covenants of record and easements to
other public utilities, but said restrictions, covenants and easements
in no way, manner or fashion, except as specifically stated
hereinafter, interfere adversely with the operation of the business of
the Company.
(2) Zoning ordinances and resolutions of any village, town or
any governmental authority having jurisdiction thereof.
All of the properties acquired by tax deeds from the County of Suffolk
are subject to the limitation of the Suffolk County Tax Act and to the
provisions of the Real Property Tax Law of the State of New York pertaining to
the sales of real properties for delinquent taxes in the County of Suffolk, and
also to such minor defects of title as are of the nature ordinarily found in
properties of this character.
<PAGE> 36
35
Long Island Lighting Company-Fiftieth Supplemental Indenture
COUNTY OF SUFFOLK
Town of Southampton
Item 1653
All that certain plot, piece or parcel of land, situated, lying and
being in Hayground, Town of Southampton, County of Suffolk and State of New
York, conveyed to Long Island Lighting Company by Estate of Sayre Baldwin by
deed dated July 13, 1993, and recorded in the Office of the Suffolk County
Clerk on July 29, 1993 in Liber 11638, cp 193. Indexed as District 0900,
Section 083, Block 1, part of lots 032 and 033, on the Tax Map of the County of
Suffolk.
COUNTY OF OSWEGO
Town of Scriba
Item 1654
An undivided eighteen percent (18%) interest in all that certain plot,
piece or parcel of land, situated, lying and being in the Town of Scriba,
County of Oswego and State of New York, conveyed to Long Island Lighting
Company by Niagara Mohawk Power Corporation by deed dated April 22, 1986 and
recorded in the Office of the Oswego County Clerk on May 25, 1988 in Book 1049,
cp 305.
<PAGE> 37
RECORDING DATA
The Fiftieth Supplemental Indenture to the Indenture of Mortgage and
Deed of Trust was filed for record and recorded in the State of New York on
June 14, 1994 as follows: In the Office of the County Clerk of Nassau County in
Liber 16364 of Mortgages, Page 199; in the Office of the County Clerk of
Suffolk County in Liber 18832 of Mortgages, Page 151; in the Office of the
Registrar of Suffolk County as Document No. 429732; in the Office of the
Register of the City of New York for the County of Queens with Document No.
39171 in Reel 3893 of Records, Page 1363; and in the Office of the County Clerk
of Oswego County on June 15, 1994 in Book 1580 of Mortgages, Page 132.
<PAGE> 1
================================================================================
INDENTURE OF TRUST
BETWEEN
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
AND
CHEMICAL BANK,
AS TRUSTEE
Dated as of October 1, 1994
================================================================================
-relating to-
Electric Facilities Revenue Bonds
(Long Island Lighting Company Project), 1994 Series A
<PAGE> 2
TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS; LIABILITY UNDER BONDS;
INDENTURE TO CONSTITUTE CONTRACT
Section 1.01. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 1.02. Rules of construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 1.03. Liability under Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38
ARTICLE II
DESCRIPTION; AUTHORIZATION; MANNER OF EXECUTION;
AUTHENTICATION; REGISTRATION AND TRANSFER OF BONDS
Section 2.01. Issuance of Bonds; Designation of Bonds; Certain Particulars and Form of Bonds . . . . . . . . . 39
Section 2.02. Additional Particulars of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39
Section 2.03. Interest Rates on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Section 2.04. Conversion of Interest Rate on Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Section 2.05. Optional and Mandatory Tender of Bonds for Purchase . . . . . . . . . . . . . . . . . . . . . . . 51
Section 2.06. Remarketing of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Section 2.07. Delivery of Purchased Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 59
Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 2.09. Temporary Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 2.10. Execution of Bonds; Effect of Change of Officers . . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 2.11. Registration of Bonds; Transfers; Securities Depository . . . . . . . . . . . . . . . . . . . . . 61
Section 2.12. Persons Treated as Owners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 2.13. Exchange of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Section 2.14. Payment For and Limitations on Exchanges and Transfers . . . . . . . . . . . . . . . . . . . . . . 64
Section 2.15. Endorsement of Certificate of Authentication on Bonds . . . . . . . . . . . . . . . . . . . . . . 65
Section 2.16. Cancellation of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Section 2.17. Redemption of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
ARTICLE III
SECURITY FOR BONDS; ISSUANCE OF BONDS
Section 3.01. Pledge and Assignment Effected by Indenture; Bonds Equally and Ratably Secured . . . . . . . . . . 66
Section 3.02. Issuance of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66
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ARTICLE IV
PARTICIPATION AGREEMENT AND COMPANY NOTE
Section 4.01. Amendments to Participation Agreement not Requiring Consent of Bondowners . . . . . . . . . . . . 68
Section 4.02. Amendments to Participation Agreement Requiring Consent of Bondowners . . . . . . . . . . . . . . 68
Section 4.03. Amendments to Company Note . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Section 4.04. Amendments to Tax Regulatory Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
ARTICLE V
PROJECT FUND; REBATE FUND
Section 5.01. Creation and Custody of Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 5.02. Application of Moneys in the Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 5.03. Construction Account Requisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 70
Section 5.04. Retention of Requisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 5.05. Certification of Completion of the Project . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Section 5.06. Disposition of Balance Remaining in Project Fund . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 5.07. Creation and Custody of Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Section 5.08. Application of Moneys in the Rebate Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
ARTICLE VI
BOND FUND; LETTER OF CREDIT
Section 6.01. Creation and Custody of the Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.02. Payments into the Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.03. Application of Moneys in the Bond Fund . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Section 6.04. Non-presentment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 6.05. (Intentionally Deleted) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 6.06. Trustee to Notify Authority and Company of Funds in Bond Fund . . . . . . . . . . . . . . . . . . 76
Section 6.07. Letter of Credit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76
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ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
Section 7.01. Moneys Held in Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 7.02. Uninvested Moneys Held by the Trustee. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 7.03. Investment of, and Payment of Interest on, Moneys . . . . . . . . . . . . . . . . . . . . . . . . 79
Section 7.04. Disposition of Amounts After Payment of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Section 7.05. Compliance with Tax Regulatory Agreement in the Event of Partial Redemption of Bonds . . . . . . . 81
ARTICLE VIII
REDEMPTION OF BONDS
Section 8.01. Bonds to be Redeemed Only in Manner Provided in Article VIII . . . . . . . . . . . . . . . . . . . 82
Section 8.02. Redemption of Less Than all Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.03. Notice of Redemption . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.04. Rights of Owners of Bonds Called for Redemption Limited to
Redemption Price and Accrued Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Section 8.05. Redemption at Demand of the State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
ARTICLE IX
PARTICULAR COVENANTS
Section 9.01. Payment of Principal of and Interest and Redemption Premium of Bonds . . . . . . . . . . . . . . . 85
Section 9.02. Performance of Covenants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.03. Further Instruments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.04. Inspection of Project Books . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.05. No Extension of Time of Payment of Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Section 9.06. Trustee's, Paying Agent's, Indexing Agent's, Tender Agent's and Remarketing Agents's Fees,
Charges and Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Section 9.07. Agreement of the State of New York . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
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ARTICLE X
DEFAULTS AND REMEDIES
Section 10.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
Section 10.02. Judicial Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10.03. Effect of Discontinuance or Abandonment of Proceedings . . . . . . . . . . . . . . . . . . . . . . 89
Section 10.04. Power of Bondowners to Direct Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Section 10.05. Limitation on Actions by Bondowners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10.06. Trustee's Right to Enforce Rights in Respect of Bonds in Own
Name and Without Possession of Bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90
Section 10.07. No Remedy herein Conferred upon or Reserved Exclusive . . . . . . . . . . . . . . . . . . . . . . 90
Section 10.08. No Delay or Omission to be Deemed Waiver of Default . . . . . . . . . . . . . . . . . . . . . . . 91
Section 10.09. Application of Moneys Received by Trustee Pursuant to Article X . . . . . . . . . . . . . . . . . 91
Section 10.10. Entirety of Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Section 10.11. Notice of Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93
ARTICLE XI
CONCERNING THE TRUSTEE AND PAYING AGENT
Section 11.01. Appointment of Trustee; Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 11.02. No Responsibility for Correctness of Statements in Indenture . . . . . . . . . . . . . . . . . . . 94
Section 11.03. No Responsibility for Default of Agents Selected with Due Care, nor for Own Acts Save Willful
Misconduct or Negligence . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94
Section 11.04. No Duty to Take Enforcement Action Unless so Requested by Owners of 25% of the Bonds . . . . . . . 95
Section 11.05. Right to Rely . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Section 11.06. Right to Own and Deal in Bonds and Engage in Other Transactions with Authority and Company . . . . 96
Section 11.07. Construction of Provisions of Indenture by Trustee . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.08. Right to Resign Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.09. Removal of Trustee 95 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Section 11.10. Appointment of Successor Trustee by Bondowners or Authority . . . . . . . . . . . . . . . . . . . 96
Section 11.11. Qualifications of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.12. Court Appointment of Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97
Section 11.13. Acceptance of Appointment by, and Transfer of Trust Estate to, Successor Trustee . . . . . . . . . 97
Section 11.14. Successor Trustee by Merger or Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
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Section 11.15. Exercise of Rights and Powers During Event of Default . . . . . . . . . . . . . . . . . . . . . . 98
Section 11.16. Trustee may Intervene in Judicial Proceedings Involving Authority or the Company . . . . . . . . . 98
Section 11.17. Paying Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Section 11.18. Appointment of Co-Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 99
ARTICLE XII
EXECUTION OF INSTRUMENTS BY BONDOWNERS
AND PROOF OF OWNERSHIP OF BONDS
Section 12.01. Execution of Instruments; Proof of Ownership of Bonds . . . . . . . . . . . . . . . . . . . . . . 101
ARTICLE XIII
INDENTURES SUPPLEMENTAL HERETO
Section 13.01. Supplemental Indentures not Requiring Consent of Bondowners . . . . . . . . . . . . . . . . . . . 102
Section 13.02. Supplemental Indentures Requiring Consent of Bondowners . . . . . . . . . . . . . . . . . . . . . 102
Section 13.03. Company and Bank Consent to Amendment of Indenture . . . . . . . . . . . . . . . . . . . . . . . . 103
ARTICLE XIV
DEFEASANCE
Section 14.01. Defeasance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 104
ARTICLE XV
REMARKETING AGENTS; REMARKETING OF BONDS; INDEXING AGENT;
TENDER AGENT
Section 15.01. Appointment and Duties of Remarketing Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 15.02. Qualifications of a Remarketing Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107
Section 15.03. Appointment and Duties of Indexing Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 108
Section 15.04. Qualifications of Indexing Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 15.05. Dealings With the Authority and the Company . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
</TABLE>
(v)
<PAGE> 7
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 15.06. Tender Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 109
Section 15.07. Qualifications of Tender Agent; Resignation; Removal . . . . . . . . . . . . . . . . . . . . . . 110
ARTICLE XVI
MISCELLANEOUS
Section 16.01. Parties in Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 16.02. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 16.03. No Individual Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 16.04. Payment Due on Saturdays, Sundays and Holidays . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 16.05. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112
Section 16.06. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 16.07. Effective Date; Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 16.08. References to the Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
Section 16.09. Date for Identification Purposes Only . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113
EXHIBIT A [Intentionally Omitted] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B NOTICE OF ELECTION TO RETAIN BOND FOLLOWING A MANDATORY PURCHASE DATE . . . . . . . . . . . . . B-1
EXHIBIT C REQUISITION CERTIFICATE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
(vi)
<PAGE> 8
THIS INDENTURE OF TRUST, made and dated as of the 1st day of
October, 1994, by and between New York State Energy Research and Development
Authority (the "Authority"), a body corporate and politic, constituting a
public benefit corporation, and Chemical Bank (the "Trustee"), a banking
corporation organized under the laws of the State of New York, with its
principal corporate trust office located in New York, New York, as trustee,
W I T N E S S E T H T H A T:
WHEREAS, pursuant to special act of the Legislature of the
State of New York (Title 9 of Article 8 of the Public Authorities Law of New
York, as from time to time amended and supplemented, herein called the "Act"),
the Authority has been established as a body corporate and politic,
constituting a public benefit corporation; and
WHEREAS, pursuant to the Act, the Authority is empowered to
contract with any power company to participate in the construction of
facilities to be used for the furnishing of electric energy to the extent
required by the public interest in development, health, recreation, safety,
conservation of natural resources and aesthetics; and
WHEREAS, pursuant to the Act, the Authority has also been
empowered to extend credit and make loans from bond and note proceeds to any
Person for the construction, acquisition and installation of, or for the
reimbursement to any Person for costs in connection with, any special energy
project, including, but not limited to, any land, works, system, building or
other improvement, and all real and personal properties of any nature or any
interest in any of them which are suitable for or related to the furnishing,
generation or production of energy; and
WHEREAS, the Authority is also authorized under the Act to
borrow money and issue its negotiable bonds and notes to provide sufficient
moneys for achieving its corporate purposes; and
WHEREAS, the Authority is also authorized under the Act to
enter into any contracts and to execute all instruments necessary or convenient
for the exercise of its corporate powers and the fulfillment of its corporate
purposes; and
WHEREAS, contemporaneously with the execution hereof, Long
Island Lighting Company (the "Company") and the Authority have entered into a
Participation Agreement of even date herewith (herein referred to as the
"Participation Agreement"), providing for the acquisition, construction and
installation of certain facilities (the "Project") for the furnishing of
electric energy within the Company's service area; and
WHEREAS, the Participation Agreement provides that the
Authority will issue its bonds and make the proceeds of such bonds available to
the Company to finance the cost of the Project; and
WHEREAS, pursuant to Resolution No. 822 adopted January 26,
1994, the Authority has determined to issue $50,000,000 aggregate principal
amount of electric facilities
<PAGE> 9
2.
revenue bonds initially bearing the designation set forth on the title page of
the Indenture of Trust (the "Bonds") for the purpose of financing the cost of
the Project; and
WHEREAS, in order to provide an inducement to the Authority to
issue the Bonds, the Company has entered into a Letter of Credit and
Reimbursement Agreement relating to the Bonds dated as of October 1, 1994, with
Union Bank of Switzerland, New York Branch, (the "Bank") and certain other
parties, pursuant to which the Bank has agreed to issue an irrevocable letter
of credit in favor of the Trustee, which letter of credit expires by its terms
on October 26, 1997, unless extended or unless earlier terminated in accordance
with its terms, to provide for the payment of such amounts as are specified
therein with respect to the principal of, premium, if any, and interest on, the
Bonds and certain other payments with respect to the Bonds; and
WHEREAS, all acts, conditions and things necessary or required
by the Constitution and statutes of the State of New York or otherwise, to
exist, happen, and be performed as prerequisites to the execution and delivery
of the Indenture, do exist, have happened, and have been performed; and
WHEREAS, the Authority has determined that the Bonds issuable
hereunder and the certificate of authentication by the Trustee to be endorsed
on such Bonds shall be, respectively, substantially in the following forms with
such variations, omissions and insertions as are required or permitted by the
Indenture:
<PAGE> 10
3.
[Form of Bonds]
[MONEY MARKET MUNICIPAL RATE LEGEND
Last Day of Money Market
Interest Rate _____ Municipal Rate Period _____
Interest due at end of Money
Market Municipal Rate Period _____ Number of Days _____](1)
NEW YORK STATE ENERGY RESEARCH AND
DEVELOPMENT AUTHORITY
ELECTRIC FACILITIES REVENUE BOND
(LONG ISLAND LIGHTING COMPANY PROJECT)
1994 SERIES A
NO. NYAR-1 $50,000,000*
MATURITY DATE ORIGINAL ISSUE DATE CUSIP
_______________ _______________ 649841 ___
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: FIFTY MILLION DOLLARS
NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY (the
"Authority"), a body corporate and politic, constituting a public benefit
corporation, organized and existing under and by virtue of the laws of the
State of New York, for value received, hereby promises to pay solely from the
sources hereinafter provided, to the Registered Owner specified above, or
registered assigns, on the Maturity Date specified above, unless redeemed prior
thereto as hereinafter provided, upon the presentation and surrender hereof,
the Principal Amount specified above and to pay solely from such sources
interest on said Principal Amount from the date hereof at the rates and at the
times provided herein, until said Principal Amount is paid. This bond shall be
subject to mandatory purchase by the Tender Agent as hereinafter described.
The principal of and premium, if any, on this bond are payable at the corporate
trust office of Chemical Bank, New York, New York, the Trustee hereinafter
____________________
(1) Such legend to appear only on face of Bonds bearing
interest at a Money Market Municipal Rate.
<PAGE> 11
4.
mentioned and as paying agent. The interest on this bond, when due and
payable, shall be paid to the Registered Owner hereof (or of any bond or bonds
previously outstanding in exchange, transfer or substitution for which this
bond was issued) as of the close of business on the Record Date (hereinafter
referred to) for each interest payment date by check, mailed to such Person at
such Person's address appearing as of the close of business on such Record Date
on the Bond Register (hereinafter referred to). On and prior to the date a
Fixed Rate (as hereinafter defined) becomes effective as hereinafter provided,
in the event that less than all of the Bonds are held under a book-entry-only
system, any owner of not less than $1,000,000 (or $100,000 during any Money
Market Municipal Rate Period) aggregate principal amount of Bonds not held
under a book-entry-only system may request that interest on the Bonds be paid
by wire transfer within the continental United States; provided, however, that
during a Money Market Municipal Rate Period, interest on a Bond is payable only
upon presentation and surrender thereof to the Tender Agent upon purchase
thereof pursuant to the Indenture, and if such presentation and surrender is
made by 12:00 noon (New York City time) such payment shall be by wire transfer.
Interest not so paid shall be paid in accordance with the provisions of Article
X of the Indenture (as hereinafter defined). All such payments shall be made
in such coin or currency of the United States of America, which at the
respective times of payment, are legal tender for payment of public and private
debts.
This bond is one of a duly authorized issue of bonds of the
Authority designated as "Electric Facilities Revenue Bonds (Long Island
Lighting Company Project), 1994 Series A" (the "Bonds"), issued in the
aggregate principal amount of $50,000,000 pursuant to the Constitution and laws
of the State of New York, particularly the New York State Energy Research and
Development Authority Act, Title 9 of Article 8 of the Public Authorities Law
of the State of New York, as amended (the "Act"), and a resolution adopted by
the Authority on January 26, 1994. The Bonds are issued and secured under and
pursuant to an Indenture of Trust dated as of October 1, 1994, between the
Authority and Chemical Bank, as Trustee (the "Indenture"). The Bonds are
issued for the purpose of financing a portion of the cost of acquisition,
construction and installation of certain facilities of Long Island Lighting
Company (the "Company") to be used for the local furnishing of electric energy
(the "Project") pursuant to a Participation Agreement dated as of October 1,
1994, between the Authority and the Company (hereinafter, as it may be amended
or supplemented from time to time, called the "Participation Agreement"). All
terms used but not defined herein are used as defined in the Indenture.
*1. Copies of the Indenture are on file at the corporate
trust office of Chemical Bank, New York, New York, as Trustee under the
Indenture or its successor as Trustee (the "Trustee"), and reference is made to
the Indenture for the provisions relating, among other things, to the terms and
security of the Bonds, the rights and remedies of the owners of the Bonds, and
the terms and conditions upon which Bonds are issued thereunder.
*2. The Bonds are not general obligations of the
Authority, and shall not constitute an indebtedness of or a charge against the
general credit of the Authority or give rise
<PAGE> 12
5.
to any pecuniary liability of the Authority. The liability of the Authority
under the Bonds shall be enforceable only to the extent provided in the
Indenture, and the Bonds shall be payable solely from payments to be made by
the Company to the Trustee and any other funds held by the Trustee under the
Indenture (including, but not limited to, funds drawn under the Letter of
Credit) and available for such payment. In order to provide security for the
payment of the principal of and premium, if any, and interest on all the Bonds
in accordance with their terms and the terms of the Indenture, the Authority
has in the Participation Agreement directed the Company to execute and deliver
its Company Note to the Trustee as evidence of the obligation of the Company to
the Authority to repay the advance of the proceeds of the Bonds by the
Authority and the Authority has under the Indenture pledged and assigned all
its right, title and interest in and to the payments under such Company Note to
the Trustee for the benefit of the owners from time to time of the Bonds. The
Bonds are further secured by a pledge and assignment of (i) the rights and
interest of the Authority under the Participation Agreement (except the rights
and interest of the Authority under Article III and Sections 4.04, 4.08, 4.09,
4.10 and 5.16 and insofar as the obligations of the Corporation under Section
4.07 relate to taxes and assessments imposed upon the Authority and not the
Trustee, Section 4.07 thereof and subject to the provisions of the
Participation Agreement relating to the amendment thereof), (ii) the rights
and interest of the Authority under the Tax Regulatory Agreement, dated the
date of the original issuance of the Bonds, between the Authority and the
Company (subject to a reservation by the Authority of the right to
independently enforce the obligations of the Company thereunder and to the
provisions of the Tax Regulatory Agreement relating to the amendment thereof)
(iii) the proceeds of sale of the Bonds and (iv) all funds held by the
Trustee under the Indenture and available for the payment of the Bonds under
the terms of the Indenture (expressly not including in such funds, the Rebate
Fund) and the income earned by the investment of such funds held under the
Indenture. In addition, the Authority has granted the Trustee the same power
as the Authority to enforce from time to time the rights of the Authority set
forth in Article III and Section 5.16 of the Participation Agreement, subject
to the provisions of the Participation Agreement relating to the amendment
thereof.
*3. Interest Rate. Interest on the Bonds will initially be
payable at a Weekly Rate of __________________ per centum (______%) per annum
from the initial delivery date to and including _________________ (the "First
Interest Period"). Subsequent to such period and prior to the Fixed Rate
Conversion Date, interest on this Bond will be paid at the lowest of (a) a
Weekly Rate, a Money Market Municipal Rate, a Semi-Annual Rate or a Medium-Term
Rate as from time to time selected and determined in accordance with the
Indenture, (b) 15% and (c) the maximum interest rate specified in the Letter of
Credit with respect to coverage for the payment of interest or the interest
component of Purchase Price; thereafter, interest will be paid at the Fixed
Rate, determined in accordance with the Indenture, which shall not exceed 18%.
Each such rate will be set by the Remarketing Agents in accordance with the
applicable standards provided in the Indenture; provided that each such rate
will not be greater than 110% of the rate index for such rate (the "Rate
Index"). The Rate Index will be selected by an Indexing Agent for such rate,
appointed pursuant to the Indenture. If such rate is not established by the
Remarketing Agents, no Remarketing Agent shall be serving or the rate so
established
<PAGE> 13
6.
is held to be invalid or unenforceable by a final judgment of a court of law,
then such rate will be 100% of the related Rate Index. Subsequent to the First
Interest Period, unless and until a different Interest Rate Determination
Method is selected in accordance with the Indenture, interest on the Bonds will
continue to be payable at a Weekly Rate. The Company may change the Interest
Rate Determination Method from time to time in accordance with the Indenture;
provided, however, that if the Company changes the Interest Rate Determination
Method to a Fixed Rate, it may not thereafter change the Interest Rate
Determination Method and the Fixed Rate shall be the rate of interest on the
Bonds from the Fixed Rate Conversion Date to the Maturity Date. The Company
may direct the Trustee to change the Interest Rate Determination Method
applicable to all or a portion of the Bonds. Except as specifically provided
otherwise in the Indenture, the conditions and procedures for such change in
the Interest Rate Determination Method for a portion of the Bonds shall be the
same as the conditions and procedures for a change in the Interest Rate
Determination Method for the entire series of Bonds. If the Company directs
the Trustee to change the Interest Rate Determination Method from one Rate to
another for less than all of the Bonds then outstanding, the Trustee shall
select Bonds to be converted by lot or by such other method as the Trustee
shall deem appropriate. In the event the Company wishes to convert less than
all the Bonds then outstanding, the Company shall notify the Trustee of such
decision not less than 40 days or more than 60 days before the effective date
of the proposed conversion. On the Conversion Date the portion of the Bonds
which are being converted shall be redesignated in such a way as to identify a
separate Subseries and thereby avoid confusion of such Subseries with any other
Subseries. The Company may also determine to similarly redesignate the portion
of the Bonds which are not being converted on the Conversion Date. The holders
of Bonds which are being redesignated may be required to deliver such Bonds to
the Trustee in order to receive a new Bond of the applicable designation, in
the same principal amount. In the event holders are not required to surrender
such Bonds, the Trustee shall appropriately designate any Bonds subsequently
issued in exchange therefor. If less than all of the Bonds are to be
converted, all references herein to the Bonds shall be deemed to refer to the
Bonds of each Subseries separately.
*Interest on this Bond will accrue and will be payable as
provided in the Indenture. Except as otherwise provided in the Indenture, the
Interest Payment Dates are: (i) during any Weekly Rate Period, the first
Business Day of each calendar month; (ii) each Conversion Date; (iii) during
any Semi-Annual Rate Period or Medium-Term Rate Period, the first day of each
of two months which are six months apart, as specified in a certificate of an
Authorized Officer delivered to the Trustee prior to the Conversions to a
Semi-Annual Rate Period or Medium-Term Rate Period, provided, however, if the
last such day occurring in any Semi-Annual Rate Period is not a Business Day
then the first Business Day thereafter shall be the Interest Payment Date,
provided, further, however, if any Interest Payment Date in a Semi-Annual Rate
Period, determined as set forth above, would cause such Semi-Annual Rate
Period to extend for a period in excess of 182 days, the Interest Payment Date
for such Semi-Annual Rate Period shall be the last Business Day occurring
within such Semi-Annual Rate Period that does not cause such Semi-Annual Rate
Period to exceed 182 days in duration; (iv) during the Fixed Rate Period, each
April 1 and October 1; (v) during each Money Market Municipal Rate
<PAGE> 14
7.
Period, the first Business Day after any Calculation Period; and (vi) the
Maturity Date. With respect to the First Interest Period, interest will be
payable on November 1, 1994. If prior to the conversion to a Semi-Annual Rate
Period, Medium-Term Rate Period or Fixed Rate Period, an Officer's Certificate
shall be delivered to the Trustee specifying different Interest Payment Dates
for such Rate Period together with an Opinion of Bond Counsel to the effect
that such adjustment will not adversely affect the exclusion of interest on the
Bonds from gross income for federal income tax purposes, then the Interest
Payment Dates for such Rate Period shall be so adjusted; provided, however,
that no such adjustment shall result in the establishment of Interest Payment
Dates between which more than six months would pass.
*The Record Dates with respect to the various Interest Payment
Dates are: (i) during any Weekly Rate Period or Money Market Municipal Rate
Period, the day next preceding such Interest Payment Date, regardless of
whether such day is a Business Day; and (ii) during any Semi-Annual Rate
Period, Medium-Term Rate Period or Fixed Rate Period, the Trustee's close of
business on the fifteenth day of the calendar month next preceding such
Interest Payment Date, regardless of whether such day is a Business Day.
*During any Weekly Rate Period or Money Market Municipal Rate
Period, interest on the Bonds will be computed on the basis of a 365 or 366-day
year, as the case may be, for the actual number of days elapsed. During any
Semi-Annual Rate Period, Medium-Term Rate Period or Fixed Rate Period, interest
on the Bonds will be computed on the basis of a 360-day year consisting of
twelve 30-day months.
*4. Letter of Credit. The Bonds are initially supported by a
letter of credit issued by Union Bank of Switzerland, New York Branch (such
bank or any issuer of any alternate credit facility as described herein being
hereinafter referred to as the "Bank"), in favor of the Trustee. The letter of
credit expires on October 26, 1997, unless extended in accordance with its
terms, or on the earlier occurrence of events specified in it. The initial
letter of credit or any Alternate Credit Facility meeting the requirements of
Section 6.07 of the Indenture and Section 4.12 of the Participation Agreement
during the time it is in effect is hereinafter called the "Letter of Credit."
The Letter of Credit shall be in effect at all times prior to the Fixed Rate
Conversion Date, except any period during which all of the outstanding Bonds
are owned by the Company. The Letter of Credit shall entitle the Trustee to
draw up to (a) an amount equal to the principal amount of the Bonds then
outstanding to pay the principal amount of the Bonds (or the portion of the
Purchase Price of the Bonds corresponding to principal); plus (b) an amount
equal to 210 days' accrued interest on the Bonds at a maximum rate specified
therein, which shall in no event exceed 15%, to pay interest on the Bonds.
Such maximum rate for the initial letter of credit is 15%. If the Bonds shall
be redeemable at a premium during a period during which a Letter of Credit is
in effect, no redemption may be made unless the Letter of Credit or other
Available Moneys are available to pay such premium.
*Except as otherwise provided herein, the Bonds shall become
subject to mandatory tender for purchase (see "Mandatory Tender for Purchase"
below) on the twentieth
<PAGE> 15
8.
calendar day next preceding the scheduled expiration date of the Letter of
Credit. Within five calendar days after the Bonds become subject to such
mandatory tender for purchase, the Trustee shall notify the owners of the Bonds
by first class mail of the expiration of the Letter of Credit and the name of
the issuer of the successor Letter of Credit, if applicable.
*5. Tender of Bonds for Purchase.
*Optional Tender. During any Weekly Rate Period or any
Semi-Annual Rate Period, the owners of the Bonds shall have the right to tender
any Bond (or portion thereof in an authorized denomination) to the Tender Agent
for purchase on any Optional Tender Date prior to the Conversion Date, but only
upon:
(1) giving or delivery to the Tender Agent at its
principal office, during the times specified below, of a telephonic or
facsimile notice confirmed in writing which states (i) the aggregate
principal amount of the Bond to be purchased and (ii) that such Bond
(or portion thereof in an authorized denomination) shall be purchased
on such Optional Tender Date pursuant to the Indenture; and
(2) delivery of such Bond (with an appropriate instrument
of transfer duly executed in blank) to the Tender Agent at its
principal office at or prior to 12:00 noon, New York City time, on
such Optional Tender Date; provided, however, that no Bond (or portion
thereof in an authorized denomination) shall be purchased unless the
Bond so delivered to the Tender Agent shall conform in all respects to
the description thereof in the aforesaid notice.
During any Weekly Rate Period, irrevocable notice must be given on a Business
Day not later than the close of business on the seventh calendar day prior to
the Optional Tender Date; and during any Semi-Annual Rate Period irrevocable
notice must be given not earlier than the thirtieth calendar day and not later
than the close of business on the fifteenth calendar day next preceding the
Optional Tender Date.
*Any election of a Bondowner to tender a Bond (or portion
thereof as aforesaid) for purchase on the Optional Tender Date in accordance
with the Indenture shall be irrevocable and shall be binding on the Bondowner
making such election and on any transferee of such Bondowner.
*Mandatory Tender for Purchase. All Bonds are subject to
mandatory tender and purchase, with no right of owners to retain Bonds, as more
fully provided in the Indenture, on each Conversion Date and each Medium-Term
Adjustment Date.
*Any Bond bearing a Money Market Municipal Rate shall be
subject to mandatory tender for purchase in accordance with the Indenture on
the Business Day immediately following each Calculation Period for such Bond at
a price equal to the principal amount thereof and
<PAGE> 16
9.
owners of any Bond bearing interest at a Money Market Municipal Rate shall have
no right to elect to retain such Bond subsequent to such Business Day.
*Each Bond shall be subject to mandatory tender and purchase
on each Mandatory Purchase Date established pursuant to Section 2.05(e) of the
Indenture.
*Upon the Bonds becoming subject to mandatory tender for
purchase on a Mandatory Purchase Date, the Trustee shall give telephonic notice
to the Remarketing Agents, the Authority and the Tender Agent and give notice
by mail to the Bondowners in accordance with Section 2.05(e)(2) of the
Indenture.
*Failure to mail the notice described in Section 2.05(e)(2) of
the Indenture or any defect therein, shall not extend the period for tendering
any of the Bonds for purchase, and the Trustee shall not be liable to any
Bondowner by reason of its failure to mail such notice or any defect therein.
*The Bonds shall be tendered for purchase as provided in
Section 2.05(e) of the Indenture.
*All Bonds (or portion thereof in an authorized denomination)
which are not delivered to the Tender Agent shall be deemed to have been
properly tendered to the Tender Agent (such Bond being hereinafter referred to
as an "Untendered Bond"), and, to the extent that there shall be on deposit
with the Tender Agent on the applicable Purchase Date, an amount sufficient to
pay the Purchase Price thereof, such Untendered Bond shall cease to constitute
or represent a right to payment of principal or interest thereon and shall
constitute and represent only the right to the payment of Purchase Price
payable on such date. The foregoing shall not limit the entitlement of any
Bondowner on any Record Date to receipt of interest due on such date unless
such interest is paid as part of the Purchase Price.
*Purchase of Tendered Bonds. On each Optional Tender Date and
Purchase Date there shall be purchased (but solely from funds received by the
Tender Agent in accordance with the terms of the Indenture) the Bond or Bonds
(or portions thereof in authorized denominations) tendered (or deemed to have
been tendered) to the Tender Agent for purchase in accordance with Section 2.05
of the Indenture at the applicable Purchase Price. Funds for the payment of
the Purchase Price of such Bond or Bonds (or portions thereof in authorized
denominations) shall be paid by the Tender Agent solely from the sources and in
the order of priority specified in Section 2.05(h) of the Indenture. Bonds (or
portions thereof in authorized denominations) purchased as provided above shall
be delivered as provided in Section 2.07 of the Indenture.
*The owners of the Bonds shall not have the right or be
required, as the case may be, to tender any Bond or Bonds (or portions thereof
in authorized denominations) for purchase on any Optional Tender Date or the
Purchase Date, if on any such date an Event of Default under Section 10.01(f)
or (g) of the Indenture shall have occurred and be continuing thereunder
<PAGE> 17
10.
with respect to the Bonds.
*All Bonds shall be subject to mandatory tender and purchase,
with no right of owners to retain Bonds, upon a date established by the Trustee
after receipt by the Trustee of a written notice from the Bank of the
occurrence and continuance of an event that would constitute an Event of
Default pursuant to Section 10.01(f) or (g) of the Indenture except that the
Bank shall have directed mandatory tender and purchase pursuant to Section
2.05(j) of the Indenture rather than acceleration of the Bonds.
*6. Redemptions.
*Optional Redemption. At any time during a Weekly Rate Period
or Money Market Municipal Rate Period, the Bonds will be subject to redemption,
by the Authority at the direction of the Company, in whole on any Business Day
or in part on any Interest Payment Date at a redemption price equal to the
principal amount thereof plus accrued interest, if any, to the redemption date.
During a Semi-Annual Rate Period or during a Medium-Term Rate Period equal to
one calendar year, each Bond is subject to redemption by the Authority at the
direction of the Company, in whole or in part on the last Business Day of such
Rate Period in effect on the applicable redemption date, at a redemption price
equal to the principal amount of the Bond or Bonds to be redeemed plus accrued
and unpaid interest thereon to the redemption date. During a Medium-Term Rate
Period of greater than one calendar year but less than or equal to three
calendar years, each Bond will be subject to optional redemption by the
Authority at the direction of the Company on the dates and at the redemption
prices set forth in the following table plus accrued and unpaid interest to the
redemption date:
<TABLE>
<CAPTION>
Redemption Date Redemption Prices
--------------- -----------------
<S> <C>
Earliest Optional Redemption Date through 100.5%
the last day prior to the First Anniversary
of the Earliest Optional Redemption Date
First Anniversary of the Earliest Optional 100
Redemption Date, if applicable,
and thereafter
</TABLE>
As used in the immediately preceding table "Earliest Optional Redemption Date"
means the anniversary of the Conversion Date occurring in the year which is one
year after the commencement of any such Medium-Term Rate Period.
During a Medium-Term Rate Period of greater than three
calendar years but less than or equal to five calendar years, each Bond will be
subject to optional redemption by the Authority at the direction of the Company
on the dates and at the redemption prices set forth in the following table plus
accrued and unpaid interest to the redemption date:
<PAGE> 18
11.
<TABLE>
<CAPTION>
Redemption Date Redemption Prices
--------------- -----------------
<S> <C>
Earliest Optional Redemption Date through 101%
the last day prior to the First Anniversary
of the Earliest Optional Redemption Date
First Anniversary of the Earliest Optional 100.5
Redemption Date through the last day prior
to the Second Anniversary of the Earliest
Optional Redemption Date
Second Anniversary of the Earliest Optional 100
Redemption Date and thereafter
</TABLE>
As used in the preceding table "Earliest Optional Redemption Date" means the
anniversary of the Conversion Date occurring in the year which is two years
after the commencement of any such Medium-Term Rate Period. During a
Medium-Term Rate Period of greater than five but less than or equal to ten
calendar years, the Bonds will be subject to optional redemption by the
Authority at the direction of the Company on the dates and at the redemption
prices set forth in the following table plus accrued and unpaid interest to the
redemption date:
<TABLE>
<CAPTION>
Redemption Date Redemption Prices
--------------- -----------------
<S> <C>
Earliest Optional Redemption Date through 101.5%
the last day prior to the First Anniversary
of the Earliest Optional Redemption Date
First Anniversary of the Earliest Optional 101
Redemption Date through the last day prior
to the Second Anniversary of the Earliest
Optional Redemption Date
Second Anniversary of the Earliest Optional 100.5
Redemption Date through the last day prior
to the Third Anniversary of the Earliest
Optional Redemption Date
Third Anniversary of the Earliest Optional 100
Redemption Date and thereafter
</TABLE>
As used in the immediately preceding table "Earliest Optional Redemption Date"
means the anniversary of the Conversion Date occurring in the year which is
four years after the commencement of any such Medium-Term Rate Period.
<PAGE> 19
12.
*During a Medium-Term Rate Period of greater than ten calendar
years, the Bonds will be subject to optional redemption by the Authority at the
direction of the Company on the dates and at the redemption prices set forth in
the next succeeding table; provided that, with respect to such a Medium-Term
Rate Period, "Earliest Optional Redemption Date" means the anniversary of the
Conversion Date occurring in the year which is eight years after the Conversion
Date or Medium-Term Adjustment Date.
*After the Fixed Rate Conversion Date, the Bonds will be
subject to optional redemption by the Authority at the direction of the Company
on or after the Earliest Optional Redemption Date (as defined below), in whole
on any Business Day or in part on any Interest Payment Date, during the periods
and at the respective redemption prices (expressed as a percentage of principal
amount) set forth in the following table plus accrued and unpaid interest to
the redemption date:
<TABLE>
<CAPTION>
Redemption Date Redemption Prices
--------------- -----------------
<S> <C>
Earliest Optional Redemption Date through 102%
the last day prior to the First Anniversary
of the Earliest Optional Redemption Date
First Anniversary of the Earliest Optional 101
Redemption Date through the last day prior
to the Second Anniversary of the Earliest
Optional Redemption Date
Second Anniversary of the Earliest Optional 100
Redemption Date and thereafter
</TABLE>
*As used in the preceding table, "Earliest Optional Redemption
Date" means the anniversary of the Conversion Date occurring in the year which
is ten years after the Fixed Rate Conversion Date.
*Subject to the provisions of the Indenture, if prior to a
Medium-Term Rate Conversion Date or the Fixed Rate Conversion Date the
Remarketing Agents certify to the Trustee, the Authority and the Company in
writing that any of the foregoing redemption schedules are not consistent with
then prevailing market conditions, with the approval of the Authority and the
Company, the foregoing Earliest Optional Redemption Dates or premiums may be
revised in accordance with the best professional judgment of the Remarketing
Agents to reflect then prevailing market conditions; provided, that the Company
causes to be delivered to the Trustee an Opinion of Bond Counsel stating to the
effect that such revision is permitted by the Indenture and will not cause the
interest on the Bonds to be includible in gross income for federal income tax
purposes.
<PAGE> 20
13.
*Extraordinary Optional Redemption. The Bonds may be redeemed
at the option of the Authority exercised at the direction of the Company, as a
whole or in part at any time, at a redemption price equal to 100% of the
principal amount thereof plus accrued and unpaid interest thereon to the date
fixed for redemption, upon the occurrence of any of the following events:
(i) All or substantially all of the Project shall
have been damaged or destroyed or title to, or the temporary use of,
all or a substantial portion of the Project shall have been taken
under the exercise of the power of eminent domain by any governmental
authority, or Person, firm or corporation acting under governmental
authority, as in each case renders the Project unsatisfactory to the
Company for its intended use;
(ii) Unreasonable burdens or excessive liabilities
shall have been imposed upon the Authority or the Company with respect
to all or substantially all of the Project, including without
limitation the imposition of federal, state or other ad valorem
property, income or other taxes other than taxes in effect on the date
of original issuance of the Bonds levied upon privately owned property
used for the same general purpose as the Project; or
(iii) Any court or regulatory or administrative body
shall enter or adopt, or fail to enter or adopt, a judgment, order,
approval, decree, rule or regulation, as a result of which the Company
elects to cease operation of all or substantially all of the Project.
*Special Optional Redemptions. The Bonds will also be subject
to redemption at the option of the Authority exercised at the direction of the
Company, in whole at a redemption price equal to the principal amount thereof
plus accrued and unpaid interest thereon to the redemption date if the Company
reasonably concludes and certifies to the Trustee that the business,
properties, condition (financial or otherwise), operations or business
prospects of the Company will be materially and adversely affected unless the
Company takes or omits to take a specified action and that the Company has been
advised in writing by Bond Counsel that either (x) the specified action or
omission would adversely affect the exclusion from gross income for federal
income tax purposes of interest on the Bonds afforded by Section 103 of the
Code, or (y) that the matter is subject to such doubt that such Bond Counsel is
unable to advise the Company that the specified action or omission would not
adversely affect such exclusion. Such conclusion and certification shall be
evidenced by delivery to the Trustee of a written certificate of an Authorized
Company Representative to the effect that the Company has reached such
conclusion, together with a copy of such advice of Bond Counsel.
*During any Medium-Term Rate or the Fixed Rate Period, the
Bonds will also be subject to redemption at the option of the Authority
exercised at the direction of the Company at a redemption price equal to the
principal amount thereof plus accrued and unpaid interest
<PAGE> 21
14.
thereon to the redemption date if the Company reasonably concludes and
certifies to the Trustee that the business, properties, condition (financial or
otherwise), operations or business prospects of the Company will be materially
and adversely affected unless the Company takes or omits to take a specified
action and that the specified action or omission would cause the use of the
Project to be such that, pursuant to Section 150 of the Code, the Company would
not be entitled to deduct the interest on the Bonds for purposes of determining
the Company's federal taxable income, for a period of not less than ninety
consecutive or nonconsecutive days during a twelve-month period. Such
conclusion and certification shall be evidenced by delivery to the Trustee of a
written certificate of an Authorized Company Representative to the effect that
the Company has reached such conclusion, together with a copy of written advice
of Bond Counsel. In the event that the Bonds become subject to redemption as
provided in this paragraph, the Bonds will be redeemed in whole unless
redemption of a portion of the Bonds outstanding would, in the opinion of Bond
Counsel, have the result that interest payable on the Bonds remaining
outstanding after such redemption would be deductible for purposes of
determining the federal taxable income of the Company, and, in such event, the
Bonds shall be redeemed (in the principal amount equal to the current minimum
authorized denomination or an integral multiple thereof) from time to time by
lot or in such other manner as the Trustee shall in its discretion deem proper
in order to assure each owner of Bonds a fair opportunity to have such owner's
Bond or Bonds or portions thereof selected, in such amount as is necessary to
accomplish that result.
*Mandatory Redemption on Determination of Taxability. The
Bonds will be redeemed in whole (or in part as provided below), at a redemption
price equal to the principal amount thereof plus accrued and unpaid interest
accrued thereon to the redemption date, on the first day of a month selected by
the Authority at the direction of the Company (such direction also being
delivered to the Trustee) within 180 days after the Company receives written
notice from a Bondowner or former Bondowner or the Trustee of a final
determination by the Internal Revenue Service or a court of competent
jurisdiction that, as a result of a failure by the Company to perform any of
its agreements in the Participation Agreement or the inaccuracy, the failure to
perform or breach of any of the representations, warranties, covenants or
agreements of the Company in the Tax Regulatory Agreement or any requisition
submitted pursuant to the Indenture, the interest paid or to be paid on any
Bond (except to a "substantial user" of the Project or a "related person" of
such a "substantial user" within the meaning of Section 147(a) of the Internal
Revenue Code of 1986, as amended) is or was included in the gross income of the
Bond's owner for federal income tax purposes. No such determination will be
considered final unless the Bondowner or former Bondowner involved in the
determination gives the Company, the Authority and the Trustee prompt written
notice of the commencement of the proceedings resulting in the determination
and offers the Company, subject to the Company's agreeing to pay all expenses
of the proceeding and to indemnify the owner against all liabilities that might
result from it, including additional income tax liabilities as a result of
interest accruing on the Bonds following commencement of such proceedings, the
opportunity to control the defense of the proceeding and either the Company
does not agree within 30 days to pay the expenses, indemnify the owner and
control the defense or the Company exhausts or chooses not
<PAGE> 22
15.
to exhaust available procedures to contest or obtain review of the result of
the proceedings. Fewer than all the Bonds may be redeemed if, in the opinion
of Bond Counsel, redemption of fewer than all would result in the interest
payable on the Bonds remaining outstanding being not included in the gross
income for federal income tax purposes of any owner other than a "substantial
user" of the Project or a "related person" of such a "substantial user". If
fewer than all of the Bonds are redeemed, the Trustee will select the Bonds to
be redeemed as provided in the Indenture. IF THE LIEN OF THE INDENTURE IS
DISCHARGED AS DESCRIBED IN SECTION 10 BELOW PRIOR TO THE OCCURRENCE OF A FINAL
DETERMINATION OF TAXABILITY AS DESCRIBED ABOVE, THE BONDS WILL NOT BE REDEEMED
AS DESCRIBED IN THIS PARAGRAPH.
*Mandatory Redemption Upon State Furnishing Funds. The Bonds
are subject to redemption as a whole, at a redemption price equal to the
applicable optional redemption price described herein or, if no such optional
redemption price shall be applicable, 105% of the principal amount thereof
during the Fixed Rate Period or 100% of the principal amount thereof prior to
the Fixed Rate Conversion Date, together with unpaid interest accrued thereon
to the date fixed for redemption, on any Interest Payment Date not less than
twenty years after the date of the original issuance of the Bonds if the State
of New York furnishes funds therefor, all as more fully described in the
Indenture.
*Notice of Redemption. At least 30 days before each
redemption, the Trustee will mail a notice of redemption by first-class mail to
each Bondowner at the owner's registered address. Failure to give any required
notice of redemption as to any particular Bonds will not affect the validity of
the call for redemption of any Bonds in respect of which no such failure
occurs. Any notice mailed as provided in this paragraph will be conclusively
presumed to have been given whether or not actually received by the addressee.
*Effect of Notice of Redemption. When notice of redemption is
required and given, Bonds called for redemption become due and payable on the
redemption date at the applicable redemption price, except as otherwise
provided herein; in such case when funds are deposited with the Trustee
sufficient for redemption or for the purchase of Bonds otherwise subject to
redemption, interest on the Bonds to be redeemed or purchased ceases to accrue
as of the date of redemption or purchase whether or not such Bond is delivered
to the Trustee on such date.
*7. Denominations, Transfer, Exchange. The Bonds are issued
in registered form without coupons in denominations of $5,000 or any integral
multiple of $5,000, except that when the Bonds bear interest at a Weekly Rate
or Money Market Municipal Rate, they will be issuable in denominations of
$100,000 or any integral multiples thereof. Notwithstanding the foregoing,
prior to the commencement of any Semi-Annual Rate Period or Medium-Term Rate
Period or the Fixed Rate Period, the Authority at the request of the Company
may direct the Trustee to authenticate Bonds only in denominations of $100,000
or any integral multiple of $100,000 during such Rate Period in accordance with
the Indenture. An owner may register the
<PAGE> 23
16.
transfer of or exchange Bonds in accordance with the Indenture. The Trustee
may require an owner, among other things, to furnish appropriate endorsements
and transfer documents and to pay any taxes and fees required by law or
permitted by the Indenture. After the Fixed Rate Conversion Date, the Trustee
need not register the transfer of or exchange any Bond for the period beginning
15 days before mailing a notice of redemption of such Bond and ending on the
redemption date.
*The Depository Trust Company, New York, New York ("DTC")
initially will act as Securities Depository for the Bonds. The ownership of
one fully registered Bond in the aggregate principal amount of the Bonds will
be registered in the name of Cede & Co., as nominee of DTC. Such Bond will be
held in trust until its redemption or until such time as DTC or its nominee is
no longer the registered owner of the Bonds. So long as Cede & Co. is the
registered owner of the Bonds, as nominee of DTC, references herein to the
Bondowners or registered owners of the Bonds, shall mean Cede & Co. and shall
not mean the beneficial owners of the Bonds. In the event that the
book-entry-only system through DTC (or a successor securities depository) is
discontinued as provided in the Indenture and the beneficial owners become
registered owners of the Bonds, the provisions applicable to such registered
owners, as set forth herein and in the Indenture, will apply. In the event
that a book-entry-only system is reinstituted after discontinuance, Registered
Owners will not be able to register the transfer of or tender their Bonds
without first registering such Bonds in the book-entry-only system.
*8. Persons Deemed Owners. The Registered Owner of this Bond
may be treated by the Authority, the Company, the Trustee, the Tender Agent and
the Paying Agents as the owner of this Bond for all purposes.
*9. Unclaimed Money. On or after the Fixed Rate Conversion
Date and solely with respect to moneys not resulting from a draw on the Letter
of Credit and not constituting remarketing proceeds, if money for the payment
of principal, premium, interest or Purchase Price remains unclaimed for two
years, the Trustee will, upon request of the Company, pay the money to or for
the account of the Company. After that, owners entitled to the money must look
only to the Company and not to the Trustee or the Bank for payment unless an
applicable abandoned property law designates another person.
*10. Discharge Before Redemption or Maturity. If at any time
there shall have been delivered to the Trustee for cancellation all the Bonds
(other than any Bonds which have been mutilated, lost, stolen or destroyed and
which shall have been replaced or paid as provided in the Indenture, except for
any such Bonds as are shown by proof satisfactory to the Trustee to be held by
bona fide owners), or with respect to all the Bonds not theretofore delivered
to the Trustee for cancellation, the whole amount of the principal and the
interest and the premium, if any, due and payable on such Bonds then
outstanding shall be paid or deemed to be paid as set forth in the Indenture,
and provision shall also be made for paying all other sums payable thereunder,
including the Authority's, the Indexing Agent's, Remarketing Agents', Paying
Agent's, Trustee's and Tender Agent's fees and expenses, then the Bonds shall
be deemed paid
<PAGE> 24
17.
and the Trustee, in such case, on demand of the Authority or the Company, shall
acknowledge the discharge of the Authority's obligations under the Indenture
with respect to such Bonds and under the Bonds and deliver to the Company the
Company Note and deliver to the Bank the Letter of Credit, and shall execute
such documents as may be reasonably required by the Authority and the Company
to evidence such discharge, all as more fully set forth in Article XIV of the
Indenture. If the Company at any time deposits with the Trustee money or
Investment Obligations sufficient to pay at redemption or maturity principal of
and interest on or the Purchase Price of the outstanding Bonds, and if the
Company also pays all other sums then payable by the Company under the
Indenture, the Indenture (except for the Rebate Fund established pursuant to
the Indenture) will be discharged. After discharge, Bondowners may look only
to the deposited money and securities for payment. Investment Obligations are
securities backed by the full faith and credit of the United States or
securities evidencing ownership interest in such full-faith-and-credit
securities.
*11. Amendment, Supplement, Waiver. Subject to certain
exceptions, the Indenture, the Participation Agreement or the Bonds may be
amended or supplemented with the consent of the owners of not less than
two-thirds in aggregate principal amount of the Bonds, and any past default or
noncompliance with any provision may be waived with the consent of the owners
of a majority in aggregate principal amount of the Bonds. Without the consent
of any Bondowner, the Authority may amend or supplement the Indenture, the
Participation Agreement or the Bonds as described in the Indenture in order to,
among other things, cure any ambiguity, omission, defect or inconsistency,
provide for uncertificated Bonds in addition to or in place of certificated
Bonds, to the extent permitted by law, or make any change that does not
materially adversely affect the rights of any Bondowner.
*12. Defaults and Remedies. The Indenture provides that the
occurrences of certain events constitute Events of Default. An Event of
Default and its consequences may be waived as provided in the Indenture.
Bondowners may not enforce the Indenture or the Bonds except as provided in the
Indenture. The Trustee may refuse to enforce the Indenture or the Bonds unless
it receives indemnity satisfactory to it. Subject to certain limitations,
owners of a majority in principal amount of the Bonds may direct the Trustee in
its exercise of any trust or power.
*13. Abbreviations. Customary abbreviations may be used in
the name of a Bondowner or an assignee, such as TEN COM (= tenants in common),
TEN ENT (= Tenants by the entireties), JT WROS (= joint tenants with right of
survivorship and not as tenants in common), CUST (= Custodian), and U/G/M/A (=
Uniform Gifts to Minors Act).
*14. Remarketing Agents; Indexing Agent; Tender Agent. The
Authority has appointed Lehman Brothers Inc. and Dillon, Read & Co. Inc., as
the initial Remarketing Agents under the Indenture. The Authority may from
time to time, at the request of the Company, remove or replace one or more of
the Remarketing Agents. The Authority has appointed Kenny Information Systems
Inc. as Indexing Agent under the Indenture. The Authority may from time
<PAGE> 25
18.
to time, at the request of the Company, remove the Indexing Agent and appoint a
different nationally recognized municipal securities evaluation service to
serve as Indexing Agent. The Authority has appointed Chemical Bank as Tender
Agent under the Indenture. The Authority may from time to time, at the request
of the Company, remove or replace the Tender Agent.
This Bond shall not be entitled to any benefit under the
Indenture or be valid or become obligatory for any purpose until this Bond
shall have been authenticated by the execution by the Trustee or the Tender
Agent of the Certificate of Authentication hereon.
No covenant or agreement contained in this Bond or the
Indenture shall be deemed to be a covenant or agreement of any member or
employee of the Authority in his or her individual capacity, and neither the
members of the Authority nor any officer thereof executing this Bond shall be
liable personally on this Bond or be subject to any personal liability or
accountability by reason of the issuance of this Bond.
The Bonds are not a debt of the State of New York and the
State of New York shall not be liable thereon.
It is hereby certified and recited that all conditions, acts
and things required by law and the Indenture to exist, to have happened and to
have been performed precedent to and for the issuance of this Bond, exist, have
happened and have been performed, and that the issuance of this Bond and the
issue of which it forms a part are within every debt and other limit prescribed
by the laws of the State of New York.
<PAGE> 26
19.
IN WITNESS WHEREOF, the Authority has caused this Bond to be
signed in its name and on its behalf by the manual or facsimile signature of
its Chair, Vice-Chair, President or Treasurer and its seal or a facsimile
thereof to be impressed, imprinted or otherwise reproduced hereon and attested
by the manual or facsimile signature of its Secretary or an Assistant
Secretary, as of the date set forth below.
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By
----------------------------
Chair
Attest:
-------------------------------
Secretary
Dated:
[Form of Trustee's or Tender Agent's Authentication on Bonds]
CERTIFICATE OF AUTHENTICATION
This Bond is one of the Electric Facilities Revenue Bonds
(Long Island Lighting Company Project), 1994 Series A, described in the
within-mentioned Indenture.
Chemical Bank Chemical Bank
as Trustee or as Tender Agent
By By
----------------------------- -----------------------------
<PAGE> 27
20.
The Authority may, in its discretion, cause any or all of the
paragraphs preceded by the symbol "*" to be printed on the reverse of the
Bonds, in which event the face of the Bonds shall state the following:
THE TERMS AND PROVISIONS OF THIS BOND ARE CONTINUED ON THE
REVERSE SIDE HEREOF AND SUCH CONTINUED TERMS AND CONDITIONS
SHALL FOR ALL PURPOSES HAVE THE SAME EFFECT AS IF SET FORTH AT
THIS PLACE.
In the event that some but not all of such paragraphs are printed on the
reverse of the Bonds, the numbering of such paragraphs may be revised
accordingly.
The language contained in the preceding paragraph and the
paragraphs preceded by the symbol "*" may be deleted for Bonds issued in
temporary form or delivered to a Securities Depository for book-entry-only
registration and the language to be contained on the reverse side of definitive
Bonds and Bonds not in book-entry-only form may be incorporated by reference,
in which event the Bonds shall state the following after the second paragraph
of the Bonds:
REFERENCE IS MADE TO THE FURTHER PROVISIONS OF THIS BOND SET
FORTH IN THE FORM OF BONDS IN THE INDENTURE, WHICH PROVISIONS
COMPRISE THE PARAGRAPHS IDENTIFIED BY THE INDENTURE AS
APPEARING ON THE REVERSE OF THE BONDS AND SHALL FOR ALL
PURPOSES HAVE THE SAME EFFECT AS THOUGH FULLY SET FORTH AT
THIS PLACE.
[END OF BOND FORM]
<PAGE> 28
21.
WHEREAS, the Trustee has accepted the trusts created by the
Indenture and in evidence thereof has joined in the execution hereof;
GRANTING CLAUSE
NOW, THEREFORE, THIS INDENTURE WITNESSETH, that in
consideration of the premises, of the acceptance by the Trustee of the trusts
hereby created, and of the purchase and acceptance of the Bonds by the owners
thereof, and also for and in consideration of the sum of One Dollar ($1.00) to
the Authority in hand paid by the Trustee at or before the execution and
delivery of the Indenture, the receipt of which is hereby acknowledged, and for
the purpose of fixing and declaring the terms and conditions upon which the
Bonds are to be issued, authenticated, delivered, secured and accepted by all
Persons who shall from time to time be or become owners thereof, and in order
to secure the payment of all the Bonds at any time issued and outstanding
hereunder and the interest and the redemption premiums, if any, thereon
according to their tenor, purport and effect, and in order to secure the
performance and observance of all the covenants, agreements and conditions
therein or herein contained, the Authority has executed and delivered the
Indenture, has caused the Company to deliver to the Trustee the Company Note
executed by the Company pursuant to the Participation Agreement and the Company
has caused the Bank (hereinafter referred to) to deliver the Letter of Credit
(hereinafter referred to) to the Trustee, and the Authority does hereby assign
and pledge to the Trustee, for the benefit of such Bondowners, as security for
the payment of the principal of and premium, if any, and interest on the Bonds
in accordance with their terms and the provisions of the Indenture, subject
only to the provisions of the Indenture, permitting the application thereof for
the purposes and on the terms and conditions set forth in the Indenture, (i)
the rights and interest of the Authority under the Participation Agreement
(except the rights and interest of the Authority under Article III and Sections
4.04, 4.08, 4.09, 4.10 and 5.16 and insofar as the obligations of the Company
under Section 4.07 relate to taxes and assessments imposed upon the Authority
and not the Trustee, Section 4.07 of the Participation Agreement and subject to
the provisions of the Participation Agreement relating to the amendment
thereof), (ii) the rights and interest of the Authority under the Tax
Regulatory Agreement (as defined herein), subject to a reservation by the
Authority of a right to independently enforce the obligations of the Company
thereunder and to the provisions of the Tax Regulatory Agreement relating to
the amendment thereof, (iii) the proceeds of sale of the Bonds and (iv) all
funds held by the Trustee under the Indenture and available for the payment of
Bonds under the terms of the Indenture (expressly not including in such funds
the Rebate Fund) and the income earned by the investment of such funds held
under the Indenture; in addition, the Authority hereby grants the Trustee the
same power as the Authority to enforce from time to time the rights of the
Authority set forth in Article III and Section 5.16 of the Participation
Agreement, subject to the provisions of the Participation Agreement relating to
the amendment thereof.
<PAGE> 29
22.
THIS INDENTURE FURTHER WITNESSETH, and it is expressly
declared, that all Bonds from time to time issued and secured hereunder are to
be issued, authenticated and delivered, and all said property, rights and
interest, including, without limitation, the amounts hereby assigned and
pledged, are to be dealt with and disposed of subject to the terms of the
Indenture, and the Authority agrees with the Trustee and with the respective
owners, from time to time, of said Bonds or any part thereof as follows:
<PAGE> 30
23.
ARTICLE I
DEFINITIONS; LIABILITY UNDER BONDS;
INDENTURE TO CONSTITUTE CONTRACT
Section 1.01. Definitions. The terms defined in this
Section 1.01 shall for all purposes of the Indenture have the meanings herein
specified, unless the context clearly otherwise requires:
Act shall mean the New York State Energy Research and
Development Authority Act, Title 9 of Article 8 of the Public Authorities Law
of the State of New York, as from time to time amended and supplemented.
Act of Bankruptcy shall mean the filing of a petition
commencing a case by or against the Company or any of its Affiliates or the
Authority under the United States Bankruptcy Code, Title 11, United States
Code, as the same may be amended from time to time, or any successor law, or
the filing of a petition or the seeking of relief by or against the Company or
the Authority under any state bankruptcy or insolvency law.
Administration Fees shall mean the amounts payable by the
Company to the Authority pursuant to Section 4.04 of the Participation
Agreement to defray a portion of the expenses incurred by the Authority in
conducting and administering its special energy project programs and the amount
payable to the State of New York as a bond issuance charge in connection with
the Bonds.
Affiliate of any specified Person shall mean any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" when used with respect to any specified Person means the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities, by contract or otherwise,
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
Alternate Credit Facility shall mean any instrument
satisfactory to the Authority, such as a letter of credit, committed line of
credit, insurance policy, surety bond or standby bond purchase agreement, or
any combination of the foregoing, and issued by a bank or banks, insurance
company or companies, other financial institution or institutions, or any
combination of the foregoing, which Alternate Credit Facility provides for the
payment of (i) the purchase price equal to the principal of and accrued
interest on Bonds delivered to the Remarketing Agents or any depository or
other party pursuant to the provisions hereof or of a Remarketing Agreement and
discount, if any, incurred in remarketing such Bonds, and/or (ii) principal of
and interest on all Bonds coming due and payable during the term thereof, and
is issued in substitution for and having, in all material respects, the same
terms as the Letter of Credit in accordance with, and pursuant to, Section 4.12
of the Participation Agreement.
<PAGE> 31
24.
Authority shall mean New York State Energy Research and
Development Authority, the public benefit corporation created by the Act, and
its successors and assigns.
Authorized Company Representative shall mean any officer or
other employee of the Company at the time designated to act on behalf of the
Company by written certificate furnished to the Authority and the Trustee
containing the specimen signature of such person and signed on behalf of the
Company by its President or a Vice President and its Treasurer, Assistant
Treasurer, Secretary or an Assistant Secretary.
authorized denomination means (a) during any Weekly Rate
Period or any Money Market Municipal Rate Period, $100,000 or any larger
integral multiple of $100,000, and (b) during any Semi-Annual Rate Period, any
Medium-Term Rate Period or the Fixed Rate Period, $5,000 or any integral
multiple thereof. Notwithstanding the foregoing, at the time of any conversion
to a Semi-Annual Rate Period, Medium-Term Rate Period or the Fixed Rate Period,
the Authority at the written request of the Company may direct the Trustee to
authenticate and deliver Bonds only in denominations of $100,000 or any larger
integral multiple of $100,000 during such Rate Period.
Authorized Officer means the Chair, Vice-Chair, President,
Treasurer, Assistant Treasurer or Secretary of the Authority.
Available Moneys shall mean (a) with respect to any date for
the payment of principal, premium, if any, interest or Purchase Price on the
Bonds occurring during the term of the Letter of Credit, moneys which have been
on deposit with the Trustee, the Tender Agent or the Paying Agent in the Bond
Fund or in a separate and segregated account for the purpose of purchasing or
redeeming Bonds for at least 123 days during and prior to which no Act of
Bankruptcy, as evidenced by a certificate of the Company and the Authority
respectively, shall have occurred unless the proceeding arising from such Act
of Bankruptcy shall have been dismissed and such dismissal shall be final and
not subject to appeal, and the proceeds from the investment thereof, and (b)
with respect to any date for the payment of principal, interest or premium, if
any, on the Bonds not occurring during the term of the Letter of Credit, any
moneys furnished to the Trustee and the proceeds from the investment thereof.
Bank means Union Bank of Switzerland, New York Branch, the
issuer of the initial Letter of Credit, in its capacity as issuer of the Letter
of Credit, the issuer of any Alternate Credit Facility and each of their
successors in such capacity.
Bond or Bonds shall mean any bond or bonds or all the bonds,
as the case may be, of the Authority executed, authenticated and delivered
under the Indenture.
Bond Counsel shall mean an attorney or firm or firms of
attorneys, satisfactory to the Authority and the Trustee, experienced in laws
relating to tax exemption of interest on bonds of states and their political
subdivisions.
<PAGE> 32
25.
Bond Fund shall mean the Bond Fund created in Section 6.01.
Bond Register shall have the meaning specified in Section 2.11.
Bond Year shall mean each one-year period (or shorter period
from the issue date) that ends at the close of business each October 1.
Business Day means any day other than (1) Saturday or Sunday,
(2) a day of the year on which banks located in (i) The City of New York, New
York, (ii) the city in which the Corporate Trust Office of the Trustee is
located are authorized or obligated by law or executive order to remain closed,
or (3) any other day not defined as a "business day" under the Letter of
Credit.
Calculation Period shall mean during any Money Market
Municipal Rate Period, any period or periods from and including a Business Day
to and including any day not more than 364 (during any year other than a "leap
year") or 365 (during any "leap year") days, as the case may be, thereafter,
which is a day immediately preceding a Business Day established by the
Remarketing Agents pursuant to Section 2.03(d).
Code shall mean the Internal Revenue Code of 1986, as amended,
and the rules and regulations promulgated thereunder or officially proposed to
be promulgated thereunder.
Company shall mean Long Island Lighting Company, or any
corporation which is the surviving, resulting or transferee corporation in any
merger, consolidation or transfer of assets permitted under the Participation
Agreement.
Company Indenture shall mean collectively, (i) the Indenture
of Mortgage and Deed of Trust, dated as of September 1, 1951, from the Company
to IBJ Schroder Bank and Trust Company (formerly J. Henry Schroder Bank & Trust
Company) as trustee, as amended and supplemented and (ii) the General and
Refunding Indenture dated as of June 1, 1975, from the Company to United States
Bank & Trust Company of New York (as successor trustee), as amended and
supplemented.
Company Note shall mean the promissory note of the Company
executed and delivered to the Trustee as provided in Section 4.01 of the
Participation Agreement.
Company Note Payments shall mean the amounts payable by the
Company under the Company Note.
completed or completion, when used with reference to the
Project as of a stated date, shall mean that the Project has been constructed
substantially in accordance with the description thereof (notwithstanding that
substantial additions or modifications thereto are planned, and notwithstanding
that additional licensing or testing may be required with respect
<PAGE> 33
26.
to the Project), and that the Company does not intend to submit any further
requisitions pursuant to Section 3.03 of the Participation Agreement with
respect to the Project.
Completion Date shall mean the date specified by an Authorized
Company Representative pursuant to Section 3.05 of the Participation Agreement.
Component Issuers means issuers of securities, the interest on
which is excluded from gross income for federal income tax purposes, selected
by the Indexing Agent in accordance with the Indenture.
Computation Period shall have the meaning ascribed to such
term in the Tax Regulatory Agreement.
construction, when used with respect to the Project, shall
include, without limitation, the construction, acquisition and/or installation
of the Project.
Conversion Date means each day on which the Interest Rate
Determination Method applicable to the Bonds shall be converted from one
Interest Rate Determination Method to a different Interest Rate Determination
Method or each day on which the interest rate on the Bonds shall be converted
from a Medium-Term Rate applicable for a Medium-Term Rate Period of one
duration to a Medium-Term Rate applicable for a Medium-Term Rate Period of a
different duration, as the case may be, in accordance with Section 2.04. With
respect to notices, time periods and requirements in connection with the
proceedings for such conversion, "Conversion Date" means the day on which it is
proposed that such conversion occur.
Conversion Notice shall have the meaning set forth in Section
2.04(a)(1).
Corporate Trust Office, when used in connection with the
Trustee, shall mean the office of the Trustee at which at any particular time
its corporate trust business shall be principally administered, which office at
the date hereof is located at 450 West 33rd Street, 15th Floor, New York, New
York 10001, Attention: Corporate Trustee Administration Department and when
used in connection with the Tender Agent shall mean its principal office
located at 55 Water Street, Room 234, North Building, New York, New York 10041,
Attention: Corporate Tellers.
Cost of Construction shall mean all costs incurred by the
Company at any time prior to or after delivery of the Bonds for or in
connection with the construction of the Project and shall include, but not be
limited to, (a) obligations of the Company incurred for labor, services,
materials and other expenses and to contractors, builders and materialmen in
connection with the construction of the Project; (b) the cost of acquiring
necessary land or rights in land and any costs incidental thereto; (c) the cost
of contract bonds and of insurance of all kinds that may be required or
necessary prior to the Completion Date which is not paid by the contractor or
contractors or otherwise provided for; (d) expenses of the Company (including
overhead charges)
<PAGE> 34
27.
in connection with the preparation of plans and specifications for the Project
(including any architectural, engineering or other professional fees or the
cost of any preliminary investigations for the Project), and for supervising
construction, as well as for the performance of all other duties required by or
appropriate to the construction of the Project; (e) the fees, compensation and
expenses (including reasonable counsel fees) of the Trustee, the Tender Agent,
the Paying Agent, the Bank, the Indexing Agent and the Remarketing Agents
incurred prior to the Completion Date of the Project and the legal, accounting,
financial (including compensation to underwriters), printing, bond rating and
other fees and expenses incurred in connection with the issuance, purchase and
sale of the Bonds or any other obligations issued or incurred by the Authority
pursuant to an agreement with the Company in connection with the Project,
including, but not limited to, the Administration Fees or any other fees of the
Authority; (f) taxes, assessments and other charges, if any, payable in
connection with the construction and owning of the Project prior to the
Completion Date; (g) interest due and payable on the Bonds or any other
obligations issued or incurred by the Authority pursuant to an agreement with
the Company or by the Company in connection with the Project from the date of
issuance thereof to the Completion Date of the Project; (h) the costs of
testing the Project and obtaining any required permit, consent, license or
approval for the Project, to the extent such costs shall have been incurred
prior to the Completion Date; (i) any amount payable to the United States of
America in connection with the Bonds pursuant to Section 148(f) of the Code;
and (j) any sums required to reimburse the Company for advances and payments
made by it at any time prior to or after delivery of the Bonds for any of the
above items, or for any other cost incurred or work done by the Company with
respect to the Project.
Debt Service Account shall mean the account in the Bond Fund
so designated and created pursuant to Section 6.01.
description, when used with reference to the Project, shall
mean the description of the Project set forth in Exhibits A and B to the
Participation Agreement, as such description may be amended in accordance with
the Participation Agreement.
Determination Date shall mean the first day of each
Calculation Period.
Electric Facilities shall mean facilities of the Company for
the furnishing of electric energy which are required by the public interest in
development, health, recreation, safety, conservation of natural resources or
aesthetics or which constitute "special energy projects" within the meaning of
the Act and which constitute facilities for the local furnishing of electric
energy or other "exempt facilities" within the meaning of Section 142(a)(8) of
the Code.
Event of Default shall mean any event of default specified in
Section 10.01.
First Interest Period means the period described as such in
Section 2.03(a).
<PAGE> 35
28.
Fixed Rate means the Fixed Rate established in accordance with
Section 2.03(f).
Fixed Rate Period means the period from and including the
Fixed Rate Conversion Date to and including the date of maturity of the Bonds.
Fixed Rate Conversion Date means the Conversion Date on which
the interest rate on the Bonds shall be converted to the Fixed Rate.
Fixed Rate Index means the average of the yield evaluations
(on the basis of full coupon securities trading at par with a term
approximately equal to the Fixed Rate Period) of securities (whether or not
actually issued), the interest on which is not included in gross income for
federal income tax purposes, of not fewer than twenty component issues, which
shall be issues of bonds selected by the Indexing Agent and which have a rating
by a Rating Agency in the same rating category as the bonds of the Authority
secured by unsecured promissory notes of the Company are rated at the time by
such rating agency (or if the Bonds are to be supported by some form of credit
enhancement, which have a rating by a Rating Agency in the same rating category
as the Bonds of the Authority supported by such credit enhancement are rated at
the time by such Rating Agency) or, if no such bonds are so rated, shall be
debt which, in the judgment of the Indexing Agent, is of credit quality
comparable to that of such bonds, computed by the Indexing Agent on the day
described in Section 2.03(f). In the event that the Indexing Agent fails to
compute the Fixed Rate Index and no other qualified municipal securities
evaluation service can be appointed Indexing Agent by the Authority, the Fixed
Rate Index shall be determined by the Remarketing Agents and shall be 90% of
the average yield shown for the most recent calendar month for United States
Treasury Notes or Bonds having the same number of years to maturity as the
number of 12-month periods (or months if the Fixed Rate Period is less than one
year) in the Fixed Rate Period, as published in the Federal Reserve Bulletin in
the last issue before the Computation Date. If that issue does not contain
such a yield, the Fixed Rate Index will be determined by linear interpolation
between the yields shown in that issue for United States Treasury Notes and
Bonds having the next shorter and next longer number of years (or months) to
maturity. In addition, at the request of the Company and upon delivery to the
Trustee of an Opinion of Bond Counsel that such action will not adversely
affect the exclusion of interest on the Bonds from gross income of the owners
thereof for federal income tax purposes, the Authority may designate a new
method of setting the Fixed Rate Index in the event any of the above-described
methods are unavailable, impracticable or unrealistic in the market place.
Indenture shall mean the Indenture of Trust, as from time to
time amended or supplemented in accordance with the terms hereof.
Indexing Agent shall mean the indexing agent appointed in
accordance with Section 15.03, and its successor or successors appointed
pursuant to the provisions of the Indenture.
<PAGE> 36
29.
Interest Payment Date means (i) during any Weekly Rate
Period, the first Business Day of each calendar month; (ii) each Conversion
Date; (iii) during any Semi-Annual Rate Period or Medium-Term Rate Period the
first day of each of two months which are six months apart, as specified in a
certificate of an Authorized Officer delivered to the Trustee prior to the
Conversions to a Semi-Annual Rate Period or Medium-Term Rate Period, provided,
however, if the last such day occurring in any Semi-Annual Rate Period is not a
Business Day then the first Business Day thereafter shall be the Interest
Payment Date, provided, further, however, if any Interest Payment Date in a
Semi-Annual Rate Period, determined as set forth above, would cause such
Semi-Annual Rate Period to extend for a period in excess of 182 days, the
Interest Payment Date for such Semi-Annual Rate Period shall be the last
Business Day occurring within such Semi-Annual Rate Period that does not cause
such Semi-Annual Rate Period to exceed 182 days in duration; (iv) during the
Fixed Rate Period, each April 1 and October 1; (v) during each Money Market
Municipal Rate Period, the first Business Day after any Calculation Period; and
(vi) the Maturity Date. With respect to the First Interest Period, interest
will be payable on November 1, 1994. If prior to the conversion to a
Semi-Annual Rate Period, Medium-Term Rate Period or Fixed Rate Period, an
Officer's Certificate shall be delivered to the Trustee specifying different
Interest Payment Dates for such Rate Period together with an Opinion of Bond
Counsel to the effect that such adjustment will not adversely affect the
exclusion of interest on the Bonds from gross income for federal income tax
purposes, then the Interest Payment Dates for such Rate Period shall be so
adjusted; provided, however, that no such adjustment shall result in the
establishment of Interest Payment Dates between which more than six months
would pass.
Interest Period means the period from and including any
Interest Payment Date to and including the day next preceding the following
Interest Payment Date.
Interest Rate Determination Method means any of the methods of
determining the interest rate on the Bonds described in Section 2.03.
Issue Date means the date on which the Bonds are delivered to
the purchaser or purchasers thereof upon original issuance.
Investment Obligations shall have the meaning assigned to that
term in Section 14.01.2.
Letter of Credit shall mean that irrevocable letter of credit
issued and delivered to the Trustee pursuant to, and in the form of Exhibit A
to, the Reimbursement Agreement (including any extensions of such letter of
credit) and, upon the issuance and delivery of an Alternate Credit Facility,
"Letter of Credit" shall mean such Alternate Credit Facility.
Letter of Credit Account shall mean the account in the Bond
Fund so designated and created pursuant to Section 6.01.
<PAGE> 37
30.
Mandatory Purchase Date means a date on which the Bonds are
required to be purchased in accordance with Section 2.05(e).
Maturity Date shall mean October 1, 2024.
Medium-Term Adjustment Date means the first day of each
Medium-Term Rate Period that does not occur on a Conversion Date and as of
which a new interest rate is established pursuant to Section 2.03(e).
Medium-Term Rate means the interest rate on the Bonds
established from time to time under Section 2.03(e).
Medium-Term Rate Index means the average of the yield
evaluations at par, determined by the Indexing Agent, of securities (whether or
not actually issued), having a term approximately equal to the Medium-Term Rate
Period or which are subject to optional or mandatory tender by the owner
thereof at the end of a term approximately equal to the Medium-Term Rate
Period, the interest on which is not included in gross income for federal
income tax purposes, of at least twenty Component Issuers selected by the
Indexing Agent, computed by the Indexing Agent as of the Business Day preceding
each date on which the Medium-Term Rate is determined by the Remarketing
Agents. When the Bonds are rated by a Rating Agency or shall be subject to the
benefits of a Letter of Credit and the Bank has issued letters of credit to
support other debt obligations rated by a Rating Agency in one of its two
highest long-term debt rating categories, each Component Issuer must have
outstanding securities rated by a Rating Agency in one of its two highest
long-term debt rating categories. If the Bonds or other debt obligations
supported by letters of credit issued by the Bank are rated by a Rating Agency
in a rating category that is lower than its two highest long-term debt rating
categories (and the Bonds or other debt obligations supported by letters of
credit issued by the Bank are not rated in one of the two highest such
categories by the other Rating Agency), each Component Issuer must have
outstanding securities rated by a Rating Agency in the same long-term debt
rating category as the Bonds or other debt obligations supported by letters of
credit issued by the Bank as are rated by that Rating Agency. The Indexing
Agent may change the Component Issuers from time to time in its discretion,
subject to the foregoing requirements. In addition, at the request of the
Company and upon delivery to the Trustee of an Opinion of Bond Counsel that
such action will not adversely affect the exclusion of interest on the Bonds
from gross income of the owners thereof for federal income tax purposes, the
Authority may designate a new method of setting the Medium-Term Rate Index in
the event any of the above-described methods are unavailable, impracticable or
unrealistic in the market place.
Medium-Term Rate Period means Medium-Term Rate Period as
defined in Section 2.03(e).
Money Market Municipal Rate shall mean an interest rate
established pursuant to Section 2.03(d).
<PAGE> 38
31.
Money Market Municipal Rate Index shall mean with respect to
the first day of each Calculation Period during a Money Market Municipal Rate
Period, the average of yield evaluations at par, determined by the Indexing
Agent, of securities (whether or not actually issued) all of which shall have a
term as near as practicable to such Calculation Period or which are subject to
optional or mandatory tender by the owner thereof at the end of a term as near
as practicable to such Calculation Period, the interest on which is not
included in gross income for federal income tax purposes, of no fewer than
twenty Component Issuers selected by the Indexing Agent, including issuers of
commercial paper, project notes, bond anticipation notes and tax anticipation
notes, computed by the Indexing Agent on and as of such day. If the Bonds are
rated by a Rating Agency or are subject to the benefits of a Letter of Credit
and the issuer of such Letter of Credit has issued letters of credit to support
other debt obligations rated by a Rating Agency in its highest note or
commercial paper rating category or one of its two highest long-term debt
rating categories, each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its highest note or commercial paper rating
category or (b) not have outstanding notes or commercial paper rated by a
Rating Agency but have outstanding securities rated by a Rating Agency in one
of its two highest long-term debt rating categories. If the Bonds or other
debt obligations supported by letters of credit issued by the Bank are rated by
a Rating Agency in a rating category that is lower than its highest note or
commercial paper rating category or its two highest long-term debt rating
categories (and the Bonds or other debt obligations supported by letters of
credit issued by the Bank are not rated in one of such categories by the other
Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or the other debt obligations supported by letters of credit issued by
the Bank or (b) have outstanding securities rated by a Rating Agency in the
same long-term debt rating category as the Bonds or the other debt obligations
supported by letters of credit issued by the Bank are rated by that Rating
Agency and not have any outstanding notes or commercial paper rated by such
Rating Agency. The Indexing Agent may change the Component Issuers from time
to time in its discretion, subject to the foregoing requirements. In addition,
at the written request of the Company and upon delivery to the Trustee of an
Opinion of Bond Counsel that, under then-existing statutes and court decisions,
such action will not adversely affect the exclusion of interest on the Bonds
from gross income of the owners thereof for federal income tax purposes, the
Authority, with the consent of the Company, may designate a new method of
setting the Money Market Municipal Rate Index in the event any of the
above-described methods are determined by the Authority to be unavailable,
impracticable or unrealistic in the market place.
Money Market Municipal Rate Period means Money Market
Municipal Rate Period as defined in Section 2.03(d).
Money Market Municipal Rate Period Record Date shall mean,
with respect to each Interest Payment Date during a Money Market Municipal Rate
Period, the Business Day next preceding such Interest Payment Date.
<PAGE> 39
32.
Moody's shall mean Moody's Investors Service, Inc., a
corporation organized and existing under the laws of the State of Delaware, its
successors and their assigns, and, if such corporation shall be dissolved or
liquidated or shall no longer perform the functions of a securities rating
agency, "Moody's" shall be deemed to refer to any other nationally recognized
securities rating agency designated by the Authority, with the approval of the
Company, by written notice to the Trustee, the Company, the Remarketing Agents
and the Indexing Agent.
Officer's Certificate shall mean a certificate signed by an
Authorized Officer.
Opinion of Bond Counsel shall mean a written opinion of Bond
Counsel.
Optional Retention Date means each day which is one Business
Day prior to each Mandatory Purchase Date established pursuant to Section
2.05(e). Nothing in the Indenture shall be deemed to provide any Bondowner the
right contrary to Section 2.05(e)(4) to retain Bonds subject to mandatory
purchase under Section 2.05(e).
Optional Retention Notice Date means the fifth Business Day
prior to a Mandatory Purchase Date.
Optional Tender Date means (i) during any Weekly Rate Period,
any Business Day; provided that such Business Day is at least seven days after
notice of such tender is delivered in accordance with Section 2.05(a), and (ii)
during any Semi-Annual Rate Period, each Interest Payment Date; provided that
notice of such tender has been given in accordance with Section 2.05(b).
Other Facilities shall mean the facilities described in Exhibit
B to the Participation Agreement.
outstanding, when used with reference to Bonds, shall mean, as
of any particular date, the aggregate of all Bonds authenticated and delivered
under the Indenture, except
(a) Bonds cancelled by the Trustee or delivered
to the Trustee for cancellation at or prior to such date;
(b) Bonds for the payment or redemption of which
Available Moneys in the necessary amount have been theretofore
deposited with the Trustee or the Paying Agent for the owners
of such Bonds, provided that if such Bonds are to be redeemed,
notice of such redemption has been duly given pursuant to the
Indenture or provision therefor satisfactory to the Trustee
has been made;
(c) Bonds paid or deemed to be paid as provided in
Section 14.01; and
(d) Bonds in lieu of or in substitution for which
other Bonds shall have
<PAGE> 40
33.
been authenticated and delivered pursuant to the Indenture, unless
proof satisfactory to the Trustee shall be presented that any such
Bond shall be held by a bona fide purchaser (as such term is defined
in the Uniform Commercial Code of the State of New York);
provided, however, that in determining whether the owners of the requisite
principal amount of Bonds outstanding have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Bonds held by
the Tender Agent or held by or for the account of the Company shall be
disregarded and deemed not to be outstanding, except, that in determining
whether the Trustee shall be protected in relying upon any such request,
demand, authorization, direction, notice, consent or waiver, only Bonds which a
Responsible Officer of the Trustee knows to be so held shall be so disregarded.
Bonds so held which have been pledged in good faith may be regarded as
outstanding if the pledgee establishes to the satisfaction of the Trustee the
pledgee's right so to act with respect to such Bonds and that the pledgee is
not the Company and that the pledgee is not holding for the account of the
Company.
Owner or Bondowner or, when used with respect to an owner of Bonds,
owner shall mean the Registered Owner of any Bond.
Participation Agreement shall mean the Participation Agreement dated as
of October 1, 1994, between the Authority and the Company, as amended and
supplemented by Supplemental Participation Agreements from time to time.
Paying Agent shall mean any paying agent or co-paying agent for the
Bonds (and may include the Trustee) and its successor or successors appointed
pursuant to the provisions of the Indenture.
Person shall mean an individual, a corporation, a partnership, an
association, a joint stock company, a trust, any unincorporated organization or
a government or political subdivision thereof.
Project shall mean the Electric Facilities described in Exhibit A to
the Participation Agreement and the Other Facilities.
Project Fund shall mean the Project Fund created in Section 5.01.
Purchase Date means any Mandatory Purchase Date, Conversion Date,
Medium-Term Adjustment Date or any date on which Bonds are subject to mandatory
tender for purchase pursuant to Section 2.05(d), Section 2.05(e), Section
2.05(g) or Section 2.05(j).
Purchase Price means an amount equal to 100% of the principal amount of
any Bond tendered or deemed tendered to the Tender Agent for purchase pursuant
to Section 2.05 (or an amount equal to any applicable optional redemption price
on such date if such Bonds are
<PAGE> 41
34.
to be purchased on a Conversion Date occurring during a Medium-Term Rate Period
in accordance with Section 2.04), plus accrued and unpaid interest thereon to
the date of purchase; provided, however, if the date of such purchase occurs
after the Record Date applicable to the interest accrued on such Bond from the
last occurring Interest Payment Date, then the Purchase Price shall not include
accrued and unpaid interest, which shall be paid to the owner of record on the
applicable Record Date.
Rate means the Weekly Rate, Money Market Municipal Rate,
Semi-Annual Rate, Medium-Term Rate or Fixed Rate.
Rate Index means the Weekly Rate Index, the Semi-Annual Rate
Index, the Medium-Term Rate Index, the Money Market Municipal Rate Index or the
Fixed Rate Index.
Rate Period means any Weekly Rate Period, Semi-Annual Rate
Period, Medium-Term Rate Period, Money Market Municipal Rate Period or Fixed
Rate Period.
Rating Agency means, to the extent that such entity maintains
a current rating on the Bonds, Moody's or S&P.
Rating Category shall mean one of the generic rating
categories of a Rating Agency, without regard to any refinement or gradation of
such rating category by a numerical modifier, plus or minus sign, or otherwise.
Rebate Amount shall have the meaning ascribed to such term in
the Tax Regulatory Agreement.
Rebate Fund shall mean the Rebate Fund created in Section 5.07.
Record Date means with respect to each Interest Payment Date
(i) during any Weekly Rate Period or Money Market Municipal Rate Period, the
Business Day next preceding such Interest Payment Date, and (ii) during any
Semi-Annual Rate Period or Medium-Term Rate Period or Fixed Rate Period, the
Trustee's close of business on the fifteenth day of the calendar month next
preceding such Interest Payment Date, regardless of whether such day is
Business Day.
Registered Owner shall mean the Person or Persons in whose
name or names the particular Bond shall be registered on the Bond Register.
Reimbursement Agreement means the Letter of Credit and
Reimbursement Agreement dated as of October 1, 1994, between the Company, Union
Bank of Switzerland, New York Branch, as Issuing Bank and Agent, and the
Participating Banks named therein, and any and all modifications, alterations,
amendments and supplements thereto and, upon the issuance and delivery of an
Alternate Credit Facility, "Reimbursement Agreement" shall mean
<PAGE> 42
35.
the letter of credit and reimbursement agreement (or other document performing
a similar function) relating to such Alternate Credit Facility.
Remarketing Agents means the remarketing agent or agents
appointed in accordance with Section 15.01, and any successor or successors
appointed pursuant to the provisions of the Indenture.
Remarketing Agreement shall mean the Remarketing Agreement
with respect to a particular Interest Rate Determination Method then in effect
between the Company and the Remarketing Agents.
Responsible Officer, when used with respect to the Trustee,
means an officer of the Trustee assigned to the Corporate Trustee
Administration Department of the Trustee to whom any matter is referred because
of his or her knowledge of and familiarity with the particular subject.
S&P shall mean Standard & Poor's Ratings Group (a division of
McGraw-Hill, Inc.), its successors and their assigns, and, if such corporation
shall be dissolved or liquidated or shall no longer perform the functions of a
securities rating agency, "S&P" shall be deemed to refer to any other
nationally recognized securities rating agency designated by the Authority,
with the approval of the Company, by notice to the Trustee, the Company, the
Remarketing Agents and the Indexing Agent.
Securities Depository means a Bondowner acting as a central
securities depository as provided in Section 2.11(b).
Semi-Annual Adjustment Date means Semi-Annual Adjustment Date
as defined in Section 2.03(c).
Semi-Annual Rate means the interest rate on the Bonds
established from time to time pursuant to Section 2.03(c).
Semi-Annual Rate Index means the average of six-month yield
evaluations at par, determined by the Indexing Agent, of securities (whether or
not actually issued), the interest on which is not included in gross income for
federal income tax purposes, of at least twenty Component Issuers selected by
the Indexing Agent, including issuers of commercial paper, project notes, bond
anticipation notes and tax anticipation notes, computed by the Indexing Agent
as of the Business Day next preceding each date on which the Semi-Annual Rate
is determined by the Remarketing Agents. When the Bonds are rated by a Rating
Agency or shall be subject to the benefits of a Letter of Credit and the Bank
has issued letters of credit to support other debt obligations rated by a
Rating Agency in its highest note or commercial paper rating category or one of
its two highest long-term debt rating categories, each Component Issuer must
(a) have outstanding securities rated by a Rating Agency in its highest note or
commercial paper
<PAGE> 43
36.
rating category or (b) not have outstanding notes or commercial paper rated by
a Rating Agency but have outstanding securities rated by a Rating Agency in one
of its two highest long-term debt rating categories. If the Bonds or other
debt obligations supported by letters of credit issued by the Bank are rated by
a Rating Agency in a rating category that is lower than its highest note or
commercial paper rating category or its two highest long-term debt rating
categories (and the Bonds or other debt obligations supported by letters of
credit issued by the Bank are not rated in one of such categories by the other
Rating Agency), each Component Issuer must (a) have outstanding securities
rated by a Rating Agency in its note or commercial paper rating category which
is the same or correlative, in the Indexing Agent's judgment, to the note or
commercial paper rating category or the long-term debt rating category of the
Bonds or other debt obligations supported by letters of credit issued by the
Bank or (b) have outstanding securities rated by a Rating Agency in the same
long-term debt rating category as the Bonds or the other debt obligations
supported by letters of credit issued by the Bank are rated by that Rating
Agency and not have any outstanding notes or commercial paper rated by such
Rating Agency. The Indexing Agent may change the Component Issuers from time
to time in its discretion, subject to the foregoing requirements. In addition,
at the request of the Company and upon delivery to the Trustee of an Opinion of
Bond Counsel that such action will not adversely affect the exclusion of
interest on the Bonds from gross income of the owners thereof for federal
income tax purposes, the Authority may designate a new method of setting the
Semi-Annual Rate Index in the event any of the above-described methods are
unavailable, impracticable or unrealistic in the market place.
Semi-Annual Rate Period means Semi-Annual Rate Period as
defined in Section 2.03(c).
Subseries means any Subseries of Bonds established pursuant to
Section 2.01 and references to the Bonds of any Subseries shall include all
Bonds at any particular point in time designated as the Bonds of such Subseries
in accordance with the provisions of the Indenture.
Supplemental Indenture shall mean any indenture supplementary
or amendatory to the Indenture now or hereafter duly executed and delivered in
accordance with the provisions hereof.
Supplemental Participation Agreement shall mean an agreement
supplementing or amending the Participation Agreement.
Tax Regulatory Agreement shall mean the Tax Regulatory
Agreement dated the date of the original issuance of the Bonds between the
Authority and the Company and any and all modifications, alterations,
amendments and supplements thereto.
Tender Agent shall mean Chemical Bank, a banking corporation
organized under the laws of the State of New York, having its principal office
in The City of New York, New York, and its successor or successors as Tender
Agent under the Indenture.
<PAGE> 44
37.
Trustee shall mean Chemical Bank, a banking corporation
organized under the laws of the State of New York, having its principal
corporate trust office in New York, New York, in its capacity as trustee under
the Indenture, and its successor or successors as trustee under the Indenture.
Untendered Bond means any Untendered Bond as defined in
Section 2.05(f).
Weekly Rate means the interest rate on the Bonds established
pursuant to Section 2.03(b).
Weekly Rate Index means the average of 30-day yield
evaluations at par, determined by the Indexing Agent, of securities (whether or
not actually issued), the interest on which is not included in gross income for
federal income tax purposes, of at least twenty Component Issuers selected by
the Indexing Agent, including issuers of commercial paper, project notes, bond
anticipation notes and tax anticipation notes, computed by the Indexing Agent
as of the Business Day next preceding each day a Weekly Rate is determined by
the Remarketing Agents. When the Bonds are rated by a Rating Agency or shall
be subject to the benefits of a letter of credit and the Bank has issued
letters of credit to support other debt obligations rated by a Rating Agency in
its highest note or commercial paper rating category or one of its two highest
long-term debt rating categories, each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its highest note or
commercial paper rating category or (b) not have outstanding notes or
commercial paper rated by a Rating Agency but have outstanding securities rated
by a Rating Agency in one of its two highest long-term debt rating categories.
If the Bonds or other debt obligations supported by letters of credit issued by
the Bank are rated by a Rating Agency in a rating category that is lower than
its highest note or commercial paper rating category or its two highest
long-term debt rating categories (and the Bonds or other debt obligations
supported by letters of credit issued by the Bank are not rated in one of such
categories by the other Rating Agency), each Component Issuer must (a) have
outstanding securities rated by a Rating Agency in its note or commercial paper
rating category which is the same or correlative, in the Indexing Agent's
judgment, to the note or commercial paper rating category or the long-term debt
rating category of the Bonds or other debt obligations supported by letters of
credit issued by the Bank or (b) have outstanding securities rated by a Rating
Agency in the same long-term debt rating category as the Bonds or other debt
obligations supported by letters of credit issued by the Bank are rated by that
Rating Agency and not have any outstanding notes or commercial paper rated by
such Rating Agency. The Indexing Agent may change the Component Issuers from
time to time in its discretion, subject to the foregoing requirements. In
addition, at the request of the Company and upon delivery to the Trustee of an
Opinion of Bond Counsel that, under then existing statutes and court decisions,
such action will not adversely affect the exclusion of interest on the Bonds
from gross income of the owners thereof for federal income tax purposes, the
Authority may designate a new method of setting the Weekly Rate Index in the
event any of the above-described methods are unavailable, impracticable or
unrealistic in the market place.
<PAGE> 45
38.
Weekly Rate Period means Weekly Rate Period as defined in
Section 2.03(b).
Section 1.02. Rules of construction. Unless the context
clearly indicates to the contrary, the following rules shall apply to the
construction of the Indenture:
(a) Words importing the singular number shall
include the plural number and vice versa.
(b) Words importing the redemption or calling for
redemption of Bonds shall not be deemed to refer to or connote
the payment of Bonds at their stated maturity or upon the
acceleration of the principal thereof by the Trustee under
Article X.
(c) All references herein to particular articles
or sections are references to articles or sections of the
Indenture.
(d) The captions and headings herein are solely
for convenience of reference and shall not constitute a part
of the Indenture nor shall they affect its meaning,
construction or effect.
(e) The terms "hereby," "hereof," "hereto,"
"herein," "hereunder" and any similar terms, as used in the
Indenture refer to the Indenture in its entirety and not the
particular article or section of the Indenture in which they
appear, and the term "hereafter" means after, and the term
"heretofore" means before, the date of the Indenture.
(f) All references to Medium-Term Rate Period of
"similar duration" refer to Medium-Term Rate Periods of equal
duration as measured in months taking into account any portion
of a month as the entire month.
Section 1.03. Liability under Bonds. The Bonds shall not
be general obligations of the Authority, and shall not constitute an
indebtedness of or a charge against the general credit of the Authority or give
rise to any pecuniary liability of the Authority. The liability of the
Authority under the Bonds shall be enforceable only to the extent provided in
the Indenture, and the Bonds shall be payable solely from the Company Note
Payments and any other funds held by the Trustee under the Indenture and
available for such payment (including, but not limited to any funds drawn under
the Letter of Credit). The Bonds shall not be a debt of the State of New York
and the State of New York shall not be liable thereon.
<PAGE> 46
39.
ARTICLE II
DESCRIPTION; AUTHORIZATION; MANNER OF EXECUTION;
AUTHENTICATION; REGISTRATION AND TRANSFER OF BONDS
Section 2.01. Issuance of Bonds; Designation of Bonds;
Certain Particulars and Form of Bonds. The Bonds shall be issued in one series
in the aggregate principal amount of $50,000,000 and shall be designated as
"Electric Facilities Revenue Bonds (Long Island Lighting Company Project), 1994
Series A." In order to distinguish between Bonds which are subject to different
Interest Rate Determination Methods, Bonds may be designated and redesignated
(as herein provided) in such a way as to identify several Subseries. Such
Subseries may be designated as Subseries A-1, Subseries A-2, and so forth.
Each Bond shall bear upon the face thereof such designation or redesignation,
if any.
The Bonds shall be issuable in the form of registered bonds
without coupons in authorized denominations except as provided in Section 2.08
with respect to lost, stolen, destroyed or undelivered Bonds. The Bonds shall
be numbered consecutively from NYAR-1 upwards bearing numbers not then
contemporaneously outstanding (in order of issuance) according to the records
of the Trustee. If the Bonds are redesignated to identify several Subseries,
the Bonds shall be numbered in accordance with their Subseries designation,
i.e. NYA1R-1, NYA1R-2, and so forth.
Bonds shall be substantially in the form set forth in the
recitals to the Indenture, with such appropriate variations, omissions and
insertions as are permitted or required by the Indenture and may have endorsed
thereon such legends or text as may be necessary or appropriate to conform with
the Indenture or to any applicable rules and regulations of any governmental
authority or any usage or requirement of law with respect thereto.
Section 2.02. Additional Particulars of Bonds. The Bonds
initially shall be dated the Issue Date but, thereafter, each Bond shall be
dated the date of its authentication. Each Bond shall bear interest from the
last Interest Payment Date on which interest on such Bond has been paid or, if
no interest has been paid, from the Issue Date. The Bonds will mature (subject
to the right of prior redemption at the prices and dates and upon the terms and
conditions hereinafter set forth) on the Maturity Date.
Only such Bonds as shall have been endorsed thereon a
certificate of authentication substantially in the form set forth in the Form
of Bond duly executed by the Trustee or the Tender Agent shall be entitled to
any right or benefit under the Indenture. No Bond shall be valid or obligatory
for any purpose unless and until such certificate of authentication shall have
been duly executed by the Trustee or the Tender Agent, and such executed
certificate of the Trustee or the Tender Agent upon any such Bonds shall be
conclusive evidence that such Bond has been authenticated and delivered under
the Indenture. The certificate of authentication of the Trustee or the Tender
Agent on any Bond shall be deemed
<PAGE> 47
40.
to have been executed by it, respectively, if signed with an authorized
signature of the Trustee or the Tender Agent, but it shall not be necessary
that the same party or the same person sign the certificate of authentication
on all of the Bonds issued hereunder.
The principal and the Purchase Price of and the redemption
premium, if any, and the interest on the Bonds shall be payable in lawful money
of the United States of America. The principal and the Purchase Price of and
the redemption premium, if any, on all Bonds shall be payable at the principal
office of the Paying Agent upon the presentation and surrender of the Bonds as
the same become due and payable. The interest on the Bonds shall be paid by
check or draft drawn upon the Paying Agent and mailed to the persons in whose
names the Bonds are registered on the registration books maintained by the
Trustee at the close of business on the Record Date next preceding each
Interest Payment Date; provided, that in the event that less than all of the
Bonds are held under a book-entry-only system any Registered Owner of a Bond or
Bonds not held under a book-entry-only system in an aggregate principal amount
of not less than $1,000,000 (or $100,000 during any Money Market Municipal Rate
Period) may, by prior written instructions filed with the Paying Agent (which
instructions shall remain in effect until revoked by subsequent written
instructions), request that interest payments for any period prior to the Fixed
Rate Conversion Date be made by wire transfer or other means acceptable to the
Paying Agent to an address in the continental United States; and provided,
further, that during a Money Market Municipal Rate Period, interest on a Bond
is payable only upon presentation and surrender thereof to the Tender Agent
upon purchase thereof pursuant to the Indenture, and if such presentation and
surrender is made by 12:00 noon (New York City time) such payment shall be by
wire transfer.
If any payment of interest or principal or redemption premium
on the Bonds is due on a date which is not a Business Day, payment shall be
made on the next succeeding Business Day with the same force and effect as if
made on the date which is fixed for such payment, and no interest shall accrue
on such amount for the period after such due date.
Section 2.03. Interest Rates on Bonds.
[2.03] (a) Generally; Initial Rates. Interest accrued on the
Bonds shall be paid on each Interest Payment Date. The interest rate on the
Bonds will be determined as provided in this Section, provided, that in any
event (i) no Weekly Rate, Money Market Municipal Rate, Semi-Annual Rate or
Medium-Term Rate shall exceed the lesser of: (a) fifteen per centum (15%) per
annum and (b) the maximum interest rate specified in the Letter of Credit with
respect to coverage for the payment of interest or the interest component of
Purchase Price and (ii) the Fixed Rate shall not exceed eighteen per centum
(18%) per annum and, provided, further, no rate as so determined shall exceed
the maximum rate permitted by applicable law. Interest on the Bonds will
initially be payable at a Weekly Rate of two and ninety one-hundredths per
centum (2.90%) per annum for the period from October 26, 1994, to and including
November 1, 1994 (the "First Interest Period"). Thereafter, unless and until
the Interest Rate Determination Method is changed as described in Section 2.04,
the Bonds will bear interest at a Weekly Rate.
<PAGE> 48
41.
The Company may direct the Remarketing Agents to change the
Interest Rate Determination Method applicable to all or a portion of the Bonds,
except that no Bonds may be converted to bear interest at a Fixed Rate unless
all Bonds are converted to bear interest at a Fixed Rate. Except as
specifically provided otherwise herein, the conditions and procedures for such
change in the Interest Rate Determination Method for a portion of the Bonds
shall be the same as the conditions and procedures for a change in the Interest
Rate Determination Method for the entire series of Bonds. If less than all of
the Bonds are to be converted, the Bonds which are being converted shall,
pursuant to Section 2.01, be redesignated in such a way as to identify a
separate Subseries, and, in such event, all references herein to the Bonds
shall be deemed to refer to the Bonds of each Subseries separately.
During any Weekly Rate Period or Money Market Municipal Rate
Period, interest on the Bonds will be computed on the basis of a 365 or 366-day
year, as the case may be, for the actual number of days elapsed. During any
Semi-Annual Rate Period, Medium-Term Rate Period or Fixed Rate Period, interest
on the Bonds will be computed on the basis of a 360-day year of twelve 30-day
months.
[2.03] (b) Weekly Rate. During any period commencing on the
date that the Interest Rate Determination Method is converted to a mode where
the Bonds bear interest at a Weekly Rate pursuant to Section 2.04 to, but not
including, the next Conversion Date (a "Weekly Rate Period"), the Bonds will
bear interest at the Weekly Rate. With respect to any Weekly Rate Period, the
Remarketing Agents will set a rate (a "Weekly Rate") by 12:00 noon New York
City time: (i) on the first Business Day before any Conversion Date immediately
after which the Bonds will bear interest at a Weekly Rate for the period
commencing on the Conversion Date through and including the next Tuesday that
is at least six days from such Conversion Date and (ii) on each Wednesday
thereafter (or the first Business Day before such Wednesday, if such Wednesday
is not a Business Day) for the seven day period from such Wednesday through and
including the next Tuesday. Each Weekly Rate shall be the rate of interest
which, if borne by the Bonds, would, in the judgment of the Remarketing Agents,
having due regard to the prevailing financial market conditions for tax-exempt
revenue bonds or other tax-exempt securities of the same general nature as the
Bonds or tax-exempt securities which are competitive as to credit and maturity
(or period for tender) with the credit and maturity (or period for tender) of
the Bonds, be the interest rate necessary, but would not exceed the interest
rate necessary, to enable the Remarketing Agents to remarket the Bonds at a
price of par (plus accrued interest, if any) on such Wednesday; provided that
the Weekly Rate shall not be greater than 110% of the Weekly Rate Index. If
for any reason the Weekly Rate for any Weekly Rate Period is not established as
aforesaid by the Remarketing Agents, no Remarketing Agent shall be serving as
such hereunder or the rate so established is held to be invalid or
unenforceable by a final judgment of a court of law with respect to any day,
then the Weekly Rate for such Weekly Rate Period shall be 100% of the Weekly
Rate Index on the date such interest rate was (or would have been) determined
as provided above.
The Indexing Agent shall establish the Weekly Rate Index on the Business Day
<PAGE> 49
42.
next preceding each day on which a Weekly Rate is determined by the Remarketing
Agents. Notwithstanding the foregoing, in the event that the Remarketing
Agents, in their judgment, shall determine that the Weekly Rate Index so
established is sufficiently non- representative of current market conditions
that the Bonds may not be remarketed at par if the Weekly Rate is set at a rate
not greater than 110% of the applicable Weekly Rate Index, the Remarketing
Agents may establish a new Weekly Rate Index in accordance with the procedures
and standards set forth in this paragraph and in the preceding paragraph and
for purposes of the Weekly Rate Index so established, all references to
Indexing Agent in the Indenture shall be deemed to refer to the Remarketing
Agents; provided that the Remarketing Agents shall select securities (whether
or not actually issued) having a term equal to the Weekly Rate Period or which
are subject to optional or mandatory tender by the owner thereof at the end of
a term equal to the Weekly Rate Period.
[2.03] (c) Semi-Annual Rate. During any period
commencing on the date that the Interest Rate Determination Method is converted
to a mode where the Bonds bear interest at a Semi-Annual Rate pursuant to
Section 2.04 to, but not including, the next Conversion Date (a "Semi-Annual
Rate Period"), the Bonds will bear interest at the Semi-Annual Rate. With
respect to any Semi-Annual Rate Period, the Remarketing Agents will set a rate
(a "Semi-Annual Rate") not later than 5:00 p.m. New York City time: (i) on or
before the first Business Day before any Conversion Date immediately after
which the Bonds will bear interest at a Semi-Annual Rate for the period
commencing on the Conversion Date through but not including the next Interest
Payment Date (each such date occurring during a Semi-Annual Rate Period being
referred to herein as a "Semi-Annual Adjustment Date") and (ii) on or before
the first Business Day before each Semi-Annual Adjustment Date for the period
commencing on such Semi-Annual Adjustment Date through but not including the
next Semi-Annual Adjustment Date. Each Semi-Annual Rate shall be the rate of
interest which, if borne by the Bonds, would, in the judgment of the
Remarketing Agents, having due regard for the prevailing financial market
conditions for tax-exempt revenue bonds or other tax-exempt securities of the
same general nature as the Bonds or tax-exempt securities which are competitive
as to credit and maturity (or period for tender) with the credit and maturity
(or period for tender) of the Bonds, be the interest rate necessary, but would
not exceed the interest rate necessary to enable the Remarketing Agents to
remarket the Bonds at a price of par (plus accrued interest, if any) on the
next succeeding Interest Payment Date (or, if any such day is not a Business
Day, on the next succeeding Business Day); provided that the Semi-Annual Rate
shall not be greater than 110% of the Semi-Annual Rate Index. If for any
reason the Semi-Annual Rate for any Semi-Annual Rate Period is not established
as aforesaid by the Remarketing Agents, no Remarketing Agent shall be serving
as such hereunder or the rate so established is held to be invalid or
unenforceable by a final judgment of a court of law with respect to any
Semi-Annual Period, then the Semi-Annual Rate for such Semi-Annual Rate Period
shall be 100% of the Semi-Annual Rate Index on the date such interest rate was
(or would have been) determined as provided above.
The Indexing Agent shall establish the Semi-Annual Rate Index
during the Semi-Annual Rate Period on the Business Day next preceding each day
on which a Semi-Annual Rate
<PAGE> 50
43.
is determined by the Remarketing Agents.
[2.03] (d) Money Market Municipal Rates. During any
period commencing on the date that the Interest Rate Determination Method is
converted to a mode where the Bonds bear interest at Money Market Municipal
Rates pursuant to Section 2.04 to, but not including, the next Conversion Date
(a "Money Market Municipal Rate Period"), the Bonds will bear interest at the
various Money Market Municipal Rates for the various Calculation Periods
established herein. During any Money Market Municipal Rate Period, any Bond
may have a different Calculation Period and a different Money Market Municipal
Rate from any other Bond, all as established by the Remarketing Agents as
provided below.
[2.03 (d)] (i) Establishment of Calculation Periods. During
any Money Market Municipal Rate Period, at or prior to 12:00 noon New
York City time on any Conversion Date immediately after which the
Bonds will bear interest at the Money Market Municipal Rate and each
day immediately after the end of a Calculation Period, the Remarketing
Agents shall establish Calculation Periods with respect to Bonds for
which no Calculation Period is currently in effect. In determining
Calculation Periods, the Remarketing Agents shall take the following
factors into account: (1) existing short-term taxable and tax-exempt
market rates and indices of such short-term rates, (2) the existing
market supply and demand for short-term tax-exempt securities, (3)
existing yield curves for short-term and long-term tax-exempt
securities or obligations having a credit rating that is comparable to
the Bonds, (4) general economic conditions, (5) economic and financial
factors present in the securities industry that may affect or that may
be relevant to the Bonds and (6) any information available to the
Remarketing Agents pertaining to the Bank or the Company regarding any
events or anticipated events which could have a direct impact on the
marketability of or interest rates on the Bonds. The Remarketing
Agents shall select the Calculation Periods and the applicable Money
Market Municipal Rates that, together with all other Calculation
Periods and related Money Market Municipal Rates, in the sole judgment
of the Remarketing Agents, will result in the lowest overall borrowing
cost on the Bonds or are otherwise in the best financial interests of
the Company, as determined in consultation with the Company. Any
Calculation Period established hereunder may not extend beyond any
Conversion Date, the first Business Day next preceding the scheduled
expiration date of the Letter of Credit or the day prior to the
maturity date of the Bonds, and the maximum length of the Calculation
Period shall not exceed the number of days of interest coverage under
the Letter of Credit minus 30 days of interest coverage.
[2.03 (d)] (ii) Setting of Rates. On the first day of each
Calculation Period, the Remarketing Agents shall set rates ("Money
Market Municipal Rates") by 12:00 noon New York City time for each
Calculation Period. With respect to Bonds for each Calculation
Period, the Money Market Municipal Rate shall be the rate of interest
which, if borne by such Bonds, would, in the judgment of the
Remarketing Agents, having due regard to the prevailing financial
market conditions for tax-exempt revenue bonds or
<PAGE> 51
44.
other tax-exempt securities which are competitive as to credit and
maturity (or period of tender) with the credit and maturity (or period
of tender) of such Bond, be the interest rate necessary, but would not
exceed the interest rate necessary, to enable the Remarketing Agents
to remarket such Bond at a price of par on the date such rate is set;
provided that the Money Market Municipal Rates shall not be greater
than 110% of the Money Market Municipal Rate Index.
The Authority, at the request of the Company, may place such
limitations upon the establishment of Calculation Periods pursuant to the
preceding paragraph (i) as may be set forth in a written direction from the
Authority, which direction must be received by the Trustee and the Remarketing
Agents prior to 10:00 a.m. (New York City time) on the day prior to any
Determination Date to be effective on such date, but only if the Trustee
receives an Opinion of Bond Counsel to the effect that such action is
authorized by the Indenture, is permitted under the Act, and will not have an
adverse effect on the exclusion of interest on the Bonds from gross income for
federal income tax purposes.
The Indexing Agent shall establish the Money Market Municipal
Rate Index.
[2.03] (e) Medium-Term Rate. During any period (a
"Medium-Term Rate Period") commencing on the date that the Interest Rate
Determination Method is converted to a method where the Bonds bear interest at
a Medium-Term Rate pursuant to Section 2.04 to, but not including the earliest
to occur of, the next Conversion Date or the next Medium-Term Adjustment Date
and any period commencing on a Medium-Term Adjustment Date, to but not
including, the earliest to occur of the next Conversion Date or the next
Medium-Term Adjustment Date, the Bonds shall bear interest at the Medium-Term
Rate.
[2.03(e)] (i) Selection of Period. The length of each
Medium-Term Rate Period shall be selected by the Company with the
intention of yielding the lowest overall interest expense on the Bonds
over the term of such Medium-Term Rate Period, taking into account (1)
general economic conditions and economic and market conditions relevant
to the Bonds and (2) such other facts, circumstances and conditions as
the Company determines to be relevant. The Company shall select a
Medium-Term Rate Period so that: (1) such period ends on the day
preceding an Interest Payment Date, (2) the Medium-Term Period is at
least one year in duration, and (3) such period will end not later than
one Business Day prior to the expiration of the Letter of Credit then
in effect. In addition, if the Company is converting from a Weekly
Rate Period, a Money Market Municipal Rate Period or a Semi-Annual Rate
Period, the Company shall not select a Medium-Term Period that ends
after the Interest Payment Date immediately preceding final maturity of
the Bonds unless it has provided an Opinion of Bond Counsel that, under
then existing statutes and court decisions, such conversion of interest
on the Bonds will not cause interest on the Bonds to be included in
gross income for federal income tax purposes.
<PAGE> 52
45.
The Company shall give written notice of the term of any
Medium-Term Rate Period to the Trustee, the Tender Agent, the
Authority, the Indexing Agent and the Remarketing Agents not later
than 35 days prior to the commencement of any Medium-Term Rate Period.
In the event that no specific term of a Medium-Term Rate Period shall
have been so specified by the Company, the term of a subsequent
Medium-Term Rate Period shall be the same as the term of the
Medium-Term Rate Period immediately preceding it.
[2.03(e)] (ii) Setting of Rate. With respect to any
Medium-Term Rate Period, the Remarketing Agents will set a rate no
later than 10:00 a.m. New York City time on or before the first
Business Day before any Conversion Date immediately after which the
Bonds will bear interest at a Medium-Term Rate and the first Business
Day before any Medium-Term Adjustment Date for the applicable
Medium-Term Rate Period. Each Medium-Term Rate shall be the rate of
interest which, if borne by the Bonds, would, in the judgment of the
Remarketing Agents, having due regard for prevailing market conditions
for tax-exempt revenue bonds or other tax-exempt securities which are
competitive as to credit and maturity (or period of tender), with the
credit and maturity of the Bonds, be the interest rate necessary, but
would not exceed the interest rate necessary, to enable the
Remarketing Agents to remarket the Bond(s) or portion(s) thereof as
aforesaid tendered (or deemed to have been tendered) for purchase at a
price of par (plus accrued interest, if any) on the first day of such
Medium-Term Period; provided that the Medium-Term Rate shall not be
greater than 110% of the Medium-Term Rate Index.
If for any reason the applicable Medium-Term Rate is not
established as aforesaid by the Remarketing Agents, no Remarketing
Agent shall be serving as such hereunder or the rate so established is
held to be invalid or unenforceable by a final judgment of a court of
law with respect to any Medium-Term Rate Period, the interest rate to
be borne by all Bonds outstanding under the Indenture from the first
day of the applicable Medium-Term Rate Period to the last day of the
applicable Medium-Term Rate Period shall be equal to 100% of the
Medium-Term Rate Index calculated for such Medium-Term Rate Period.
The Indexing Agent shall establish the Medium-Term Rate Index
on the Business Day next preceding each day on which a Medium-Term Rate is
determined by the Remarketing Agents.
[2.03] (f) Fixed Rate. During the period commencing on the
date that the Interest Rate Determination Method is converted to a method where
the Bonds bear interest at the Fixed Rate pursuant to Section 2.04 to (subject
to the right of prior redemption at the prices and dates and upon the terms and
conditions hereinafter set forth) the Maturity Date of the Bonds (the "Fixed
Rate Period"), the Bonds shall bear interest at the Fixed Rate.
<PAGE> 53
46.
With respect to the Fixed Rate Period, the Remarketing Agents
will set a rate (the "Fixed Rate") not later than 10:00 a.m. New York City time
one Business Day prior to any Fixed Rate Conversion Date. The Fixed Rate shall
be the interest rate which, if borne by the Bonds, would, in the judgment of
the Remarketing Agents having due regard for prevailing financial market
conditions for tax-exempt revenue bonds or other tax-exempt securities which
are competitive as to credit and maturity (or period of tender) with the credit
and maturity of the Bonds, be the interest rate necessary, but would not exceed
the interest rate necessary, to enable the Remarketing Agents to remarket the
Bonds(s) or portion(s) thereof as aforesaid tendered (or deemed to have been
tendered) for purchase at a price of par (plus accrued interest, if any) on the
Fixed Rate Conversion Date, provided that the Fixed Rate shall not be greater
than 110% of the Fixed Rate Index. If for any reason the applicable Fixed Rate
is not established as aforesaid by the Remarketing Agents, no Remarketing Agent
shall be serving as such hereunder or the rate so established is held to be
invalid or unenforceable by a final judgment of a court of law, the interest
rate to be borne by all Bonds outstanding under the Indenture from the Fixed
Rate Conversion Date to the date of payment in full of the Bonds shall be equal
to 100% of the Fixed Rate Index as of such Computation Date.
The Indexing Agent shall establish the Fixed Rate Index on or
before the Business Day next preceding the Fixed Rate Conversion Date.
[2.03] (g) Notice of Rates. Promptly following the
determination of any Weekly Rate, Semi-Annual Rate, Medium-Term Rate, Money
Market Municipal Rate or Fixed Rate, the Remarketing Agents shall give notice
to the Trustee, the Authority, the Company and the Tender Agent in writing and,
promptly thereafter, except in the case of the Semi-Annual Rate and Weekly
Rate, the Trustee shall give each Bondowner notice of the new rate.
[2.03] (h) [Intentionally Omitted.]
[2.03] (i) Absence of Remarketing Agents. If no Remarketing
Agent shall be serving hereunder at the time of the determination of the Weekly
Rate, Semi-Annual Rate, Medium-Term Rate, the Fixed Rate or the Money Market
Municipal Rate, the Rate shall be the Weekly Rate Index, Semi-Annual Rate
Index, Medium-Term Rate Index, the Fixed Rate Index or Money Market Municipal
Rate Index, as the case may be, then in effect until a new Remarketing Agent is
appointed by the Authority to make such Rate determination. Any determination
of the Weekly Rate, Semi-Annual Rate, the Medium-Term Rate, the Fixed Rate or
the Money Market Municipal Rate by the Remarketing Agents, or pursuant to the
preceding sentence, shall be conclusive and binding upon the Authority, the
Company, the Tender Agent, the Trustee, the Paying Agent, the Remarketing
Agents and the Bondowners.
[2.03] (j) No Liability. In determining the interest rate
that the Bonds shall bear as provided in this Section, the Remarketing Agents
and, as aforesaid, the Trustee shall have no liability to the Authority, the
Company, the Tender Agent, the Paying Agent or any Bondowner except for their
willful misconduct.
<PAGE> 54
47.
[2.03] (k) Legend Authorized. Any Bond issued upon
registration of transfer or exchange on or after any Fixed Rate Conversion Date
shall contain a prominent legend on the face thereof, to be specified by the
Authority and placed thereon by the Trustee, to the effect that the Letter of
Credit has expired, that the Bonds are no longer entitled to the benefit of any
Letter of Credit, that the Bonds are not subject to mandatory purchase by the
Tender Agent and that the interest rate on the Bonds has been converted to
another Interest Rate Determination Method, in which case such method shall be
specified.
Section 2.04. Conversion of Interest Rate on Bonds. (a)(1)
During any Rate Period other than the Fixed Rate Period, at any time, subject
to the conditions set forth below, the Company may direct a change in the
Interest Rate Determination Method from one Rate to another by so directing the
Trustee in writing (such being hereinafter referred to as a "Conversion
Notice") with copies to the Remarketing Agents, the Tender Agent, the
Authority, the Indexing Agent and, during the term of the Letter of Credit, the
Bank, delivered at least thirty (30) days (where the Bonds bear interest at a
Weekly Rate, Money Market Rate or Semi-Annual Rate) or thirty-five (35) days
(where the Bonds bear interest at a Medium-Term Rate) but, in either case, not
more than sixty (60) days prior to the Conversion Date, accompanied by an
Opinion of Bond Counsel stating that, under then existing statutes and court
decisions, such conversion of interest on the Bonds to the other Rate will not
cause the interest on the Bonds to be included in gross income for federal
income tax purposes. The Company's notice must specify (i) the Conversion
Date, (ii) the new Interest Rate Determination Method to take effect, (iii) if
the new Interest Rate Determination Method is a Medium-Term Rate Period, the
length of the Medium-Term Rate Period, (iv) if the new Interest Rate
Determination Method is a Money Market Municipal Rate Period, the maximum
length of Calculation Periods, and (v) if the new Interest Rate Determination
Method is to apply to less than all of the Bonds then outstanding, the
aggregate principal amount of Bonds to which the new Interest Rate
Determination Method is to apply.
If the Company directs the Trustee to change the Interest Rate
Determination Method from one Rate to another for less than all of the Bonds
then outstanding, the Trustee shall select Bonds to be converted by lot or by
such other method as the Trustee may select. In the event the Company wishes
to convert less than all the Bonds then outstanding, the Company shall notify
the Trustee of such decision not less than 40 days or more than 60 days before
the effective date of the proposed conversion. On the Conversion Date the
portion of the Bonds which are being converted shall be redesignated in such a
way as to identify a separate Subseries and thereby to avoid confusion of such
Subseries with any other Subseries. The Company may also determine to
similarly redesignate the portion of the Bonds which are not being converted on
the Conversion Date. The holders of Bonds which are being redesignated may be
required to deliver such Bonds to the Trustee in order to receive a new Bond of
the applicable designation, in the same principal amount. In the event holders
are not required to surrender such Bonds, the Trustee shall appropriately
designate any Bonds subsequently issued in exchange therefor. The Trustee
shall not be liable to any Bondholder for the method selected and employed by
the Trustee or by the Company's selection of a partial redemption.
<PAGE> 55
48.
[2.04(a)] (2) Any change in the Interest Rate Determination
Method must comply with the following to the extent applicable:
(i) Except in the case of a change in the Interest Rate
Determination Method from a Medium-Term Rate Period to another Rate
Period, all Conversion Dates shall occur on Business Days.
(ii) If the Semi-Annual Rate or a Medium-Term Rate is then in
effect, the Conversion Date shall be an Interest Payment Date (or if
the Semi-Annual Rate is then in effect the immediately succeeding
Business Day, if such Interest Payment Date is not a Business Day) or
any Business Day on which the Bonds are subject to optional
redemption.
(iii) If a Medium-Term Rate is then in effect, the Conversion
Date shall occur only during the period during which the Bonds are
subject to optional redemption at a redemption price of 100% of the
principal amount thereof unless the Letter of Credit then in effect
provides for payment of Purchase Price equal to such redemption price
above par or Available Moneys have been provided in an amount
sufficient, together with any amounts available under the Letter of
Credit, to pay such Purchase Price in full; provided, that if the
Bonds are subject to optional redemption at a redemption price above
par, the Purchase Price on the Conversion Date shall include the
optional redemption premium.
(iv) No conversion of the interest rate on the Bonds shall
occur under this Section if at the time of such conversion an Event of
Default shall have occurred hereunder and be continuing with respect
to the Bonds.
(v) No Rate Period other than the Fixed Rate Period shall
extend to a date later than the first Business Day next preceding the
scheduled expiration of the Letter of Credit in effect at the
beginning of such Rate Period.
(vi) If the Rate Period in effect after the conversion is a
Money Market Municipal Rate Period, the maximum length of the
Calculation Period shall not exceed the number of days of interest
coverage under the Letter of Credit minus 30 days of interest
coverage.
[2.04(a)] (3) Any change in the Interest Rate Determination
Method shall not be effective unless by 10:00 a.m., New York City time, on the
Conversion Date the Company delivers a supplemental Opinion of Bond Counsel to
the Trustee stating that under the laws existing on the Conversion Date the
conversion to the other Rate will not cause the interest on the Bonds to be
included in gross income for federal income tax purposes and the Rate to be in
effect after the conversion does not exceed the maximum rate permitted by the
Indenture and by applicable law.
<PAGE> 56
49.
[2.04(a)] (4) Notwithstanding any other provision of the
Indenture, after the Interest Rate Determination Method is changed to the Fixed
Rate, such method may not thereafter be changed and such Fixed Rate shall be
the rate of interest on the Bonds from the Fixed Rate Conversion Date until the
Maturity Date.
(b) Upon receipt of a Conversion Notice from the Company, the
Trustee shall no later than twenty-five (25) days (if the Bonds then bear
interest at a Weekly Rate, Money Market Rate or Semi-Annual Rate) or thirty
(30) days (if the Bonds then bear interest at a Medium-Term Rate) prior to the
Conversion Date give notice by mail to the Bondowners provided, however, if the
Conversion will occur on a Medium-Term Adjustment Date, no such notice to
Bondholders need be given. Such notice shall state in substance:
[2.04(b)] (1) that the interest rate on the Bonds shall be
converted to a Weekly Rate, a Semi-Annual Rate, a Medium-Term Rate, a
Money Market Municipal Rate or the Fixed Rate, as the case may be;
[2.04(b)] (2) the Conversion Date;
[2.04(b)] (3) if applicable, that the Company has delivered
to the Trustee an Opinion of Bond Counsel stating that under the
statutes and court decisions existing on the date of the Conversion
Notice, the conversion of the interest rate on the Bonds to the
applicable rate will not cause the interest on the Bonds to be
included in gross income for federal income tax purposes;
[2.04(b)] (4) if applicable, that the interest rate on the
Bonds shall not be converted unless the Company delivers to the
Trustee on the applicable Conversion Date a supplemental Opinion of
Bond Counsel stating that under the statutes and court decisions
existing on the Conversion Date, (A) the conversion of the interest
rate on the Bonds will not cause the interest on the Bonds to be
included in gross income for federal income tax purposes; and (B) the
rate to be in effect after the conversion does not exceed the maximum
rate permitted by the Indenture and by applicable law; provided,
however, that if the Company fails to deliver such supplemental
Opinion of Bond Counsel on such date, the interest rate on the Bonds
shall not be converted on the applicable Conversion Date, and all
Bonds tendered (or deemed to have been tendered) for purchase shall
not be purchased on the applicable Conversion Date as provided
herein and the Bonds shall continue to bear interest in accordance
with the Interest Rate Determination Method in effect prior to the
proposed Conversion Date;
[2.04(b)] (5) that all Bonds (or portions thereof in
authorized denominations) tendered (or deemed to have been tendered)
for purchase by the owners thereof shall be purchased on the
applicable Conversion Date at the Purchase Price;
[2.04(b)] (6) that, to the extent that there shall be on
deposit with the Tender
<PAGE> 57
50.
Agent, the Paying Agent or the Trustee on or before the applicable
Conversion Date an amount of money sufficient to pay the Purchase
Price thereof, all Bonds, whether or not actually delivered for
purchase on such date, shall be deemed to have been properly tendered
for purchase and shall cease to constitute or represent a right on
behalf of the owner thereof to the payment of principal and/or
interest thereon and shall represent and constitute only the right to
payment of the Purchase Price thereof, without interest accruing
thereon, on deposit with the Tender Agent, the Paying Agent or the
Trustee;
[2.04(b)] (7) the name of the Tender Agent and the address of
the principal office of the Tender Agent;
[2.04(b)] (8) that, if the conversion is to a Fixed Rate, the
Letter of Credit will expire no later than the close of business on
the first Business Day following the applicable Fixed Rate Conversion
Date;
[2.04(b)] (9) that, in the case of conversion to the Fixed
Rate, the rating assigned by the Rating Agency then rating the Bonds,
if any, to the Bonds, either may be or is expected to be lowered or
eliminated as a result of such conversion;
[2.04(b)] (10) that, if the conversion is to the Fixed Rate,
from and after the Fixed Rate Conversion Date, the Bonds will no
longer be subject to purchase as provided in Section 2.05 or, if the
conversion is to a Medium-Term Rate, the Bonds will not be subject to
tender until the expiration of the applicable Rate Period; and
[2.04(b)] (11) that, if the conversion is to a Medium-Term
Rate Period of greater than three years duration, the short term
rating, if any, assigned by any Rating Agency to the Bonds will be
withdrawn as a result of such conversion.
[2.04] (c) If the Company fails to deliver to the Trustee by
10:00 a.m. New York City time on the Conversion Date, the supplemental Opinion
of Bond Counsel as and if required by subsection (a) of this Section, the
interest rate on the Bonds shall not be converted to the Weekly Rate,
Semi-Annual Rate, Medium-Term Rate, Money Market Municipal Rate or Fixed Rate
on the Conversion Date, as the case may be, and Bonds tendered (or deemed to
have been tendered) for purchase on the Conversion Date shall not be purchased
on the Conversion Date and the Bonds shall continue to bear interest at the
rate determined in accordance with the Interest Rate Determination Method in
effect prior to the proposed Conversion Date. In such event, all rights of the
Authority, the Trustee and the Company hereunder shall continue as if no such
proceedings for the conversion of the interest rate on the Bonds had been taken
and the Bonds shall be available for remarketing under Section 2.06. The
Trustee shall promptly notify the Authority and the Bondowners by mail (and
shall promptly notify the Tender Agent, the Paying Agent, the Bank and the
Remarketing Agents by telephone) in the event that the interest rate on the
Bonds is not converted on the Conversion Date as provided herein.
<PAGE> 58
51.
[2.04] (d) Failure to mail the notice described in subsection
(a) or (b), or any defect therein, shall not affect the validity of any
interest rate or change in the Interest Rate Determination Method on any of the
Bonds or extend the period for tendering any of the Bonds for purchase, and the
Trustee shall not be liable to any Bondowner by reason of its failure to mail
such notice or any defect therein.
[2.04] (e) The Letter of Credit shall not be available
to pay the principal or Purchase Price of or interest on any Bonds after the
earlier of the first Business Day following the Fixed Rate Conversion Date or
the date a drawing is made under the Letter of Credit in connection therewith.
The Letter of Credit shall be returned to the Bank for cancellation promptly
upon the expiration thereof on or after such Fixed Rate Conversion Date.
Section 2.05. Optional and Mandatory Tender of Bonds for
Purchase. (a) During any Weekly Rate Period, the owners of the Bonds shall
have the right to tender any Bond (or portion thereof in an authorized
denomination) to the Tender Agent for purchase on any Optional Tender Date, but
only upon:
(1) giving or delivery to the Tender Agent at its principal
office, on a Business Day, not later than the seventh calendar day
prior to the Optional Tender Date, of a written or telephonic notice,
confirmed in writing, which states (i) the number and aggregate
principal amount of each Bond to be purchased and (ii) that such Bond
(or portion thereof in an authorized denomination) shall be purchased
on such Optional Tender Date pursuant to the Indenture; and
(2) delivery of such Bond (with an appropriate instrument of
transfer duly executed in blank) to the Tender Agent at its principal
office at or prior to 12:00 noon, New York City time, on such Optional
Tender Date; provided, however, that no Bond (or portion thereof in an
authorized denomination) shall be purchased unless the Bond so
delivered to the Tender Agent shall conform in all respects to the
description thereof in the aforesaid notice.
Any election of a Bondowner to tender a Bond (or portion thereof as aforesaid)
for purchase on the Optional Tender Date in accordance with this subsection (a)
shall be irrevocable and shall be binding on the Bondowner making such election
and on any transferee of such Bondowner and any Bond with respect to which such
an election has been made which is not properly delivered by the owner thereof
to the Tender Agent shall be deemed to have been properly tendered to the
Tender Agent, and, to the extent that there shall be on deposit with the Tender
Agent on or before the Optional Tender Date, an amount sufficient to pay the
Purchase Price thereof, such Bond shall cease to constitute or represent a
right to payment of principal or interest thereon and shall constitute and
represent only the right to payment of the Purchase Price payable on such date.
[2.05] (b) During any Semi-Annual Rate Period, the owners of
the Bonds shall
<PAGE> 59
52.
have the right to tender any Bond (or portion thereof in an authorized
denomination) to the Tender Agent for purchase on any Optional Tender Date
prior to a Conversion Date, but only upon:
(1) giving or delivery to the Tender Agent at its principal
office, not earlier than the thirtieth calendar day and not later than
the fifteenth calendar day next preceding such Optional Tender Date of
a written or telephonic notice confirmed in writing which states (i)
the number and aggregate principal amount of each Bond to be purchased
and (ii) that such Bond (or portion thereof in an authorized
denomination) shall be purchased on such Optional Tender Date pursuant
to the Indenture; and
(2) the delivery of such Bond (with an appropriate instrument
of transfer duly executed in blank) to the Tender Agent at its
principal office at or prior to 12:00 noon, New York City time, on
such Optional Tender Date; provided, however, that no Bond (or portion
thereof in an authorized denomination) shall be purchased unless the
Bond so delivered to the Tender Agent shall conform in all respects
to the description thereof in the aforesaid notice.
Any election of a Bondowner to tender a Bond (or portion
thereof as aforesaid) for purchase on the Optional Tender Date in accordance
with this subsection (b) shall be irrevocable and shall be binding on the
Bondowner making such election and on any transferee of such Bondowner and any
Bond with respect to which such an election has been made which is not properly
delivered by the owner thereof to the Tender Agent shall be deemed to have been
properly tendered to the Tender Agent, and, to the extent, that there shall be
on deposit with the Tender Agent on or before the Optional Tender Date, an
amount sufficient to pay the Purchase Price thereof, such Bond shall cease to
constitute or represent a right to payment of principal or interest thereon and
shall constitute and represent only the right to payment of the Purchase Price
payable on such date.
[2.05] (c) The Tender Agent shall give the Trustee, the
Company, the Remarketing Agents, the Paying Agent and the Bank prompt notice by
telephone confirmed promptly in writing of the receipt of any notice in
accordance with clause (1) of subsection (a) or (b) above. During any
Semi-Annual Rate Period, the Trustee shall give notice by mail to Bondowners
not more than forty-five or less than thirty calendar days before each Optional
Tender Date, which notice shall state in substance: (i) the next Optional
Tender Date, and (ii) that the Bonds are subject to tender at the option of
the owner thereof in the manner set forth in subsection (b) of this section.
[2.05] (d) All Bonds are subject to mandatory tender and
purchase on each Conversion Date and each Medium-Term Adjustment Date.
[2.05] (e) All Bonds shall be subject to mandatory tender and
purchase on each Mandatory Purchase Date unless the owner exercises his or her
right to retain the Bonds (in
<PAGE> 60
53.
certain circumstances) pursuant to this subsection (e) as hereinafter provided:
[2.05(e)] (1) The owners of the Bonds shall tender all
Bonds (with appropriate instruments of transfer duly executed in blank) to the
Tender Agent at its principal office for purchase on the applicable Mandatory
Purchase Date, which date shall be established pursuant to clause (iii) of
paragraph (2) of this subsection (e), at the Purchase Price due on such
Mandatory Purchase Date. A Mandatory Purchase Date shall be established for
the Bonds if:
(A) The Company fails to deliver to the Trustee on or
prior to the thirty-seventh calendar day next preceding the
effective date of an Alternate Credit Facility (including,
without limitation, any Alternate Credit Facility issued as
contemplated by (B) below) (i) such Alternate Credit Facility,
(ii) an Opinion of Bond Counsel as described in Section
6.07.2(b) and (iii) if applicable, written evidence as
described in Section 6.07.2(c); or
(B) The Company fails to deliver to the Trustee on or
prior to the thirty-seventh calendar day next preceding the
scheduled expiration date of the Letter of Credit then in
effect either (i) written evidence that the Letter of Credit
then in effect will be extended or renewed for a period of at
least one year beyond such expiration date and will end not
sooner than the first Business Day following the Interest
Payment Date for such Interest Period or (ii) the items set
forth in Section 6.07.2(a), (b) and, if applicable, (c).
[2.05(e)] (2) Upon the Bonds becoming subject to mandatory
tender for purchase as provided in clause (1) above, the Trustee shall within
five (5) calendar days give telephonic notice to the Remarketing Agents, the
Authority and the Tender Agent and give notice by mail to the Bondowners, which
notice shall state in substance:
(i) the name of the bank issuing the Alternate Credit
Facility, if any, and the effective date thereof;
(ii) the Optional Retention Date, if applicable;
(iii) the Mandatory Purchase Date, which in the case of
(1)(A) above shall be the effective date of the Alternate Credit Facility, or,
if no Alternate Credit Facility is delivered to the Trustee, the twentieth
calendar day next preceding the scheduled expiration date of the Letter of
Credit and in the case of (1)(B) above shall be a date that is one Business Day
prior to such expiration date;
(iv) in the case of (1)(A) above, that in connection with the
issuance of the Alternate Credit Facility, the Trustee has not received a
letter from the Rating Agency then rating the Bonds stating that such Rating
Agency has reviewed the terms of the Alternate Credit Facility and the bank
issuing the same and that issuance of the Alternate Credit Facility for the
<PAGE> 61
54.
benefit of the Bondowners will not result in a lowering of the rating then
assigned by such Rating Agency to the Bonds;
(v) in the case of (1)(B) above, that the Letter of Credit
will expire no later than the close of business on the first Business Day
following the Mandatory Purchase Date;
(vi) if the Bonds are then rated, that the rating assigned by
the Rating Agency to the Bonds may be lowered or eliminated as a result of the
issuance of the Alternate Credit Facility, in the case of (1)(A) above, or as a
result of the expiration of the Letter of Credit, in the case of (1)(B) above;
(vii) that all Bonds (or portions thereof in authorized
denominations) tendered shall be purchased on the Mandatory Purchase Date at
the applicable Purchase Price;
(viii) that, to the extent that there shall be on deposit
with the Tender Agent, the Paying Agent or the Trustee on or before the
Mandatory Purchase Date an amount of money sufficient to pay the Purchase Price
thereof, all Bonds, whether or not actually delivered for purchase on such
date, (or portions thereof in authorized denominations) not delivered to the
Tender Agent on the Optional Retention Date shall be deemed to have been
properly tendered for purchase and shall cease to constitute or represent a
right on behalf of the owner thereof to the payment of principal and/or
interest thereon and shall represent and constitute only the right to payment
of the Purchase Price thereof, without interest accruing thereon, on deposit
with the Tender Agent, the Paying Agent or the Trustee; provided that Bonds (or
portions thereof in authorized denominations) the owner of which shall have
elected to retain and not to tender in accordance with clause (4) below shall
not be deemed to have been tendered for purchase and shall constitute and
continue to represent the right of the owner thereof to payment of principal
and interest, if any, thereon in accordance with the terms of such Bond; and
(ix) the name of the Tender Agent and the address of the
principal office of the Tender Agent.
[2.05(e)] (3) Failure to mail the notice described in clause
(2) or any defect therein, shall not extend the period for tendering any of the
Bonds for purchase, and the Trustee shall not be liable to any Bondowner by
reason of its failure to mail such notice or any defect therein.
[2.05(e)] (4) The Bonds shall be tendered for purchase as
provided in this subsection (e), except for any Bond or Bonds (or portions
thereof in authorized denominations) the owner of which shall deliver to the
Tender Agent at its principal office no later than the applicable Optional
Retention Notice Date, a written notice, substantially in the form of EXHIBIT B
to the Indenture, appropriately completed; provided that such owners shall have
the right to retain only those Bonds to be secured by a Letter of Credit
meeting the requirements of Section 4.12 of the Participation Agreement
following the Mandatory Purchase Date and any
<PAGE> 62
55.
Bonds not meeting those requirements shall be deemed tendered and shall be
subject to subsection (f) of this Section notwithstanding any election to
retain such Bonds.
[2.05] (f) Any election by a Bondowner to retain any Bond (or
portion thereof in an authorized denomination) and not to tender such Bond (or
portion thereof in an authorized denomination) for purchase on an Optional
Retention Date in accordance with subsection (e), shall be irrevocable and
shall be binding on the Bondowner making such election and on any transferee of
such Bondowner. If a Bondowner fails to give notice of such an election with
respect to any Bond (or portion thereof in an authorized denomination) on the
applicable Optional Retention Notice Date and thereafter fails to deliver such
Bond to the Tender Agent on or before the applicable Optional Retention Date,
such Bond (or portion thereof in an authorized denomination) which is not
delivered to the Tender Agent shall be deemed to have been properly tendered to
the Tender Agent (such Bond being hereinafter referred to as an "Untendered
Bond"), and, to the extent that there shall be on deposit with the Tender Agent
on or before the Purchase Date, an amount sufficient to pay the Purchase Price
thereof, such Untendered Bond shall cease to constitute or represent a right to
payment of principal or interest thereon and shall constitute and represent
only the right to the payment of Purchase Price payable on such date. The
foregoing shall not limit the entitlement of any Bondowner on any Record Date
to receipt of interest due on such date unless such interest is paid as part of
Purchase Price. The Tender Agent will inform the Remarketing Agents and the
Trustee by telephone promptly after the applicable Optional Retention Notice
Date of the principal amount of Bonds which will be tendered or deemed to have
been tendered on the applicable Optional Retention Date.
[2.05] (g) During any Money Market Municipal Rate Period, each
Bond shall be subject to mandatory tender for purchase on the Business Day
immediately following each Calculation Period, at a price equal to the
principal amount thereof. Owners of such Bonds shall have no right to elect to
retain such Bonds.
[2.05] (h) On each Optional Tender Date and Purchase Date,
there shall be purchased (but solely from funds received by the Tender Agent in
accordance with the terms hereof) the Bond or Bonds (or portions thereof in
authorized denominations) tendered (or deemed to have been tendered) to the
Tender Agent for purchase in accordance with this Section at the applicable
Purchase Price. Funds for the payment of the Purchase Price of such Bond or
Bonds (or portions thereof in authorized denominations) shall be paid by the
Tender Agent solely from the following sources and in the following order of
priority:
(i) moneys drawn under the Letter of Credit by the Trustee
pursuant to Section 6.07.1;
(ii) proceeds of the remarketing of such Bond or Bonds (or
portions thereof in authorized denominations) pursuant to Section 2.06
which have been transferred to the Tender Agent pursuant to said
Section; and
<PAGE> 63
56.
(iii) any other moneys furnished by the Company for purchase
of Bonds.
The Trustee shall draw moneys under the Letter of Credit for the payment of
Purchase Price to the extent that moneys are obtainable thereunder, and moneys
described under clauses (ii) and (iii) above shall be used for payment of
Purchase Price only to the extent that sufficient moneys are not obtainable
under the Letter of Credit. To the extent that moneys drawn under the Letter
of Credit have been used for payment of Purchase Price, moneys described under
clause (ii) above may be paid to the Bank upon reinstatement of the related
amount under the Letter of Credit.
Bonds (or portions thereof in authorized denominations)
purchased as provided above shall be delivered as provided in Section 2.07.
The Tender Agent shall hold any such moneys, uninvested, in trust for the
purposes set forth in the Indenture.
[2.05] (i) The owners of the Bonds shall not have the right or
be required, as the case may be, to tender any Bond or Bonds (or portions
thereof in authorized denominations) for purchase on any Optional Tender Date
or the Optional Retention Date, if on any such date an Event of Default under
Section 10.01(f) or (g) shall have occurred and be continuing hereunder with
respect to the Bonds.
[2.05] (j) All Bonds shall be subject to mandatory tender and
purchase, with no right of owners to retain Bonds, upon a date established by
the Trustee after receipt by the Trustee and the Tender Agent of a written
notice from the Bank of the occurrence and continuance of an event that would
constitute an Event of Default pursuant to Section 10.01(f) or (g) except that
the Bank shall have directed mandatory tender and purchase pursuant to this
provision rather than acceleration of the Bonds; provided, however, that in the
case of any event that would constitute an Event of Default pursuant to Section
10.01(g) such notice must have been received on or before the tenth calendar
day after a drawing under the Letter of Credit in respect of interest on the
Bonds. Upon receipt of such notice, the Trustee shall immediately declare the
Bonds as being subject to mandatory tender and purchase in accordance with this
Section 2.05(j) and give notice thereof to the Authority, the Company, the
Tender Agent, the Remarketing Agents, and the Bank and shall select a date
(occurring on or before the seventh day next succeeding the Trustee's receipt
of such notice, which date shall be a Business Day) for the mandatory tender
and purchase of the Bonds, and shall promptly give notice by mail to all
Bondowners, which shall include the circumstances leading to mandatory tender
and purchase, the absence of any right to retain Bonds, the date set therefor
and directions for the tender and purchase of such Bonds. Upon such
declaration, the Trustee immediately shall draw upon the Letter of Credit in an
amount sufficient to pay the full Purchase Price due on the date established
for such mandatory tender and purchase (including an amount representing
interest accrued to such mandatory tender and purchase date) and hold such
amount for application to the payment on such mandatory tender and purchase
date of the Purchase Price of the Bonds in accordance with the Indenture.
Notwithstanding anything in this Indenture to the contrary, no Bonds which may
be subject to mandatory tender and purchase under any other provision of the
<PAGE> 64
57.
Indenture shall be remarketed by the Remarketing Agent subsequent to the
receipt of a Notice from the Bank directing a mandatory tender and purchase
under this Section 2.05(j). Any Bonds so tendered for purchase shall be
purchased with funds drawn under the Letter of Credit as described above.
[2.05] (k) In the event that any Bond is subject at any time
to tender and purchase pursuant to more than one provision of the Indenture,
provisions relating to the timing of notices of options to retain Bonds and
options to tender Bonds and the irrevocability of certain actions and notices
shall be interpreted as though only one such tender and purchase provision
applied to such Bond to the extent that such interpretation will prevent a
conflict between such provisions. For purposes of the foregoing sentence, a
mandatory tender provision without a right of owners to retain Bonds shall take
precedence over all other tender provisions, and a mandatory tender provision
shall take precedence over any optional tender provision.
[2.05] (l) If an agreement with a Securities Depository as
described in Section 2.11 hereof is then in effect, tenders of Bonds shall be
governed by the procedures of such Securities Depository as may be set forth in
or described in an agreement between the Authority and such Securities
Depository. The Depository Trust Company ("DTC") shall act as Securities
Depository for the Bonds upon the initial issuance of the Bonds. So long as the
Bonds are held in the DTC book-entry-only system, tenders of Bonds shall be
governed by the DTC procedures described in the DTC Letter of Representations,
which is hereby incorporated by reference.
Section 2.06. Remarketing of Bonds. (a) Upon receipt of
any notice given pursuant to Section 2.05 that any Bonds will be or are
required to be tendered for purchase in accordance with Section 2.05, the
Remarketing Agents shall use their best efforts to remarket such Bonds (or
portions thereof in authorized denominations) on any Optional Tender Date or
Purchase Date at the Purchase Price. By 2:00 p.m., New York City time, on the
Business Day prior to each Optional Tender Date or Purchase Date, the
Remarketing Agents shall give notice by telecopy or telephone (confirmed in
writing) of the principal amount of such Bonds (or portions thereof in
authorized denominations) and the registration information concerning the new
Bondowners, for which they have arranged a remarketing and for which the
Remarketing Agents hold remarketing proceeds on hand, to the Trustee, the
Tender Agent, the Paying Agent and the Bank and, by 12:00 noon, New York City
time, on each Optional Tender Date or Purchase Date shall transfer to the
Tender Agent the proceeds of the remarketing of such Bonds for delivery to the
Bank upon verification that sufficient amounts relating to such Bonds have been
paid under the Letter of Credit and upon reinstatement of the related amount
under the Letter of Credit.
[2.06] (b) In remarketing any Bonds tendered for purchase
pursuant to the Indenture, the Remarketing Agents shall determine, in
accordance with Section 2.03, the Semi-Annual Rate, the Weekly Rate, the
Medium-Term Rate, the Money Market Municipal Rate or the Fixed Rate, as the
case may be, on the Bonds.
<PAGE> 65
58.
[2.06] (c) The Remarketing Agents shall not remarket any
Bonds pursuant to this Section if they have received written notice from the
Trustee that an Event of Default (other than an Event of Default set forth in
Section 6.01(d) of the Participation Agreement) shall have occurred and be
continuing hereunder with respect to the Bonds.
[2.06] (d) The Remarketing Agents shall not knowingly
remarket any Bonds to the Company or any of its Affiliates or to the Authority
pursuant to this Section prior to the expiration or earlier termination of the
Letter of Credit unless, prior to such remarketing, the Trustee and the
Remarketing Agents shall have received an unqualified Opinion of Bond Counsel
experienced in bankruptcy matters and satisfactory to the Trustee and to
Moody's, if Moody's shall then be rating the Bonds, and to S&P, if S&P shall
then be rating the Bonds, to the effect that such remarketing would not result
in a preferential payment pursuant to the provisions of Section 547 of the
United States Bankruptcy Code, 11 U.S.C. Sections 101, et seq.
[2.06] (e) The Remarketing Agents may remarket any Bonds
tendered for purchase as provided in Section 2.05(e) only if (1) the Company
delivers to the Trustee a Letter of Credit and the requirements of Section 4.12
of the Participation Agreement have been met or (2) the Company changes the
Interest Rate Determination Method to the Fixed Rate in accordance with Section
2.04. The Remarketing Agents may remarket any Bonds tendered for purchase as
provided in Section 2.05(j) only if the Trustee and Remarketing Agents have
received notice from the Bank that the event referred to in the written notice
from the Bank delivered under Section 2.05(j) has been cured or waived and the
Letter of Credit has been reinstated in full.
[2.06] (f) The Remarketing Agents, with respect to any Bond
for which a redemption date has been established and which the Remarketing
Agents are attempting to remarket, shall provide to any purchaser notice of the
applicable redemption terms at the time of or before purchase by such
purchaser.
[2.06] (g) The Tender Agent, with respect to any Bond for
which the Tender Agent or Trustee has received notification from the
Remarketing Agent that it has found a purchaser or purchasers to whom the
Remarketing Agent can remarket Bonds tendered for purchase, shall so notify the
Bank in writing.
Section 2.07. Delivery of Purchased Bonds. (a) Bonds (or
portions thereof in authorized denominations) purchased pursuant to Section
2.05 (other than on a Fixed Rate Conversion Date) shall be delivered as
follows:
[2.07(a)] (i) Bonds (or portions thereof in authorized
denominations) purchased with moneys described in clause (i) (to the
extent that the Trustee has received notice of reinstatement of the
Letter of Credit in an amount equal to the Purchase Price of the Bonds
and has so notified the Tender Agent) and in clause (ii) of Section
2.05(h) shall be delivered by the Tender Agent to the purchasers
thereof upon receipt of payment
<PAGE> 66
59.
thereof. Prior to such delivery, the Tender Agent shall surrender
such Bonds, if so requested by the purchasers thereof, to the Trustee
for registration of transfer. Bonds, portions of which in authorized
denominations shall have been purchased with such moneys, shall be
surrendered by the Tender Agent to the Trustee for registration of
transfer with respect to principal amounts thereof so purchased and
for registration of transfer with respect to the principal amounts
thereof not so purchased as provided in clause (ii) below or for
cancellation as provided in clause (iii) below;
[2.07(a)] (ii) Bonds (or portions thereof in authorized
denominations), any portion of the Purchase Price of which shall have
been paid with moneys drawn under the Letter of Credit, shall, if and
to the extent that the Trustee has not received notice of
reinstatement of the Letter of Credit in an amount equal to the
Purchase Price of the Bonds (or portion thereof), be surrendered by
the Tender Agent to the Trustee for registration of transfer to the
Company and upon such registration of transfer, the Bonds issued in
respect thereof shall be delivered to and held by the Tender Agent for
the account of the Company and shall not be released, pledged or
otherwise transferred or disposed of unless prior to or simultaneously
with the release of the Bonds by the Tender Agent to the Remarketing
Agents for remarketing, the amount to be drawn under the Letter of
Credit shall have been correspondingly reinstated and written notice
of such reinstatement shall have been delivered by the Trustee or the
Bank to the Tender Agent, or in the case of a purchase pursuant to
Section 2.05(e), an Alternate Credit Facility meeting the requirements
of Section 6.07 has been provided; provided, further, that, upon
receipt by the Tender Agent of either (A) notice of the establishment
of a Mandatory Purchase Date pursuant to Section 2.05(e) or (B) notice
from the Bank directing mandatory tender and purchase of the Bonds
pursuant to Section 2.05(j), then any Bonds theretofore or thereafter
purchased with such moneys drawn under the Letter of Credit shall be
surrendered by the Tender Agent to the Trustee for registration of
transfer to the Bank and upon such registration of transfer, the Bonds
issued in respect thereof shall be delivered to and held by the Tender
Agent for the account of the Bank and shall not be released, pledged
or otherwise transferred or disposed of (except to the Bank) other
than in accordance with the Remarketing Agreement, and the Tender
Agent shall notify the Bank that it is holding such Bonds for the
Bank's account; and
[2.07(a)] (iii) Bonds (or portions thereof in authorized
denominations) purchased with any other moneys pursuant to Section
2.05(h) shall be delivered to the Trustee for cancellation as to the
principal amount thereof so purchased and for registration of transfer
and delivery pursuant to (i) or (ii) above as to the remainder
thereof.
[2.07] (b) Bonds (or portions thereof in authorized
denominations) purchased pursuant to Section 2.05(d) (only insofar as such
subsection relates to a Fixed Rate Conversion Date) shall be delivered to the
Trustee for cancellation and Bonds shall be issued in exchange therefor in
accordance with Section 2.03(k), which shall be delivered: (i) to the
purchasers thereof, with respect to the Bonds (or portions thereof in
authorized denominations) purchased
<PAGE> 67
60.
with moneys described in Section 2.07(a)(i) or (ii) to the Tender Agent, with
respect to Bonds (or portions thereof in authorized denominations) purchased
with moneys as described in Section 2.07(a)(ii) and shall be held for the
account of the Company, except as otherwise provided in such Section
2.07(a)(ii), will not be entitled to the benefits of the Letter of Credit and
shall (x) have a legend stating "This Bond is not entitled to the benefits of
the Letter of Credit referred to herein", affixed thereto by the Tender Agent
until released and delivered pursuant to the following paragraph (c), and (y)
shall be held by the Tender Agent and shall be disposed of solely pursuant to
the terms of the following clause (c). Bonds so purchased with any other
moneys shall be delivered to the Trustee for cancellation and no replacement
Bonds shall be issued in respect thereof.
[2.07] (c) The Tender Agent shall authenticate and
deliver new Bonds in replacement of any Bonds held pursuant to the preceding
clause (ii) to or upon the order of the Remarketing Agents, only upon receipt
by the Tender Agent from any Person other than the Company following any
remarketing of such new Bonds of payment in immediately available funds in
respect of the principal amount of such Bonds (including accrued interest, if
any). Such funds shall be received by the Tender Agent solely for the account
of the Bank and shall be promptly transmitted to or upon the written order of
the Bank. Upon such delivery, such Bonds shall be entitled to the benefits of
the Letter of Credit.
Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds.
In the event any outstanding Bond, whether temporary or definitive, is
mutilated, lost, stolen or destroyed, the Authority may execute and, upon its
request, the Trustee may authenticate a new Bond of like tenor as the
mutilated, lost, stolen or destroyed Bond; provided that, in the case of any
mutilated Bond, such mutilated Bond shall first be surrendered to the Trustee,
and in the case of any lost, stolen or destroyed Bond, there shall be first
furnished to the Trustee evidence of the ownership thereof and of such loss,
theft or destruction in form satisfactory to the Trustee, together with an
indemnity satisfactory to it which indemnity shall name the Authority as an
additional indemnified party. In the event any such Bond shall have matured,
instead of issuing a substitute Bond the Authority may authorize the payment of
the same. The Authority and the Trustee may charge the owner of such Bond with
their reasonable fees and expenses in this connection. Any Bond issued under
the provisions of this Section in lieu of any Bond alleged to be destroyed,
lost or stolen shall constitute an original additional contractual obligation
on the part of the Authority, whether or not the Bond so alleged to be
destroyed, lost or stolen be at any time enforceable by anyone, and shall be
equally and proportionately entitled to the benefits of the Indenture with all
other Bonds issued hereunder to the same extent as the Bonds in substitution
for which such Bonds were issued.
Section 2.09. Temporary Bonds. Until Bonds in definitive
form are ready for delivery, the Authority may execute, and upon its request in
writing, the Trustee shall authenticate and deliver in lieu of any thereof, and
subject to the same provisions, limitations, and conditions, one or more
printed, lithographed or typewritten Bonds in temporary form, substantially of
the tenor of the Bonds hereinbefore described, and with appropriate omissions,
<PAGE> 68
61.
variations and insertions. Bonds in temporary form will be for such principal
amounts as the Authority shall determine. Until exchanged for Bonds in
definitive form, such Bonds in temporary form shall be entitled to the security
and benefit of the Indenture. The Authority shall, without unreasonable delay,
prepare, execute and deliver to the Trustee, and thereupon, upon the
presentation and surrender of the Bond or Bonds in temporary form to the
Trustee at the Corporate Trust Office, the Trustee shall authenticate and
deliver, in exchange therefor, a Bond or Bonds, in definitive form in the
authorized denomination, and for the same principal amount, as the Bond or
Bonds in temporary form surrendered. Such exchange shall be made without
making any charge to the Bondowners therefor.
Section 2.10. Execution of Bonds; Effect of Change of
Officers. All the Bonds shall, from time to time, be executed on behalf of the
Authority by, or bear the facsimile signature of, its Chair, Vice Chair,
President or Treasurer, and its corporate seal (which may be facsimile) shall
be thereunto affixed (or imprinted or engraved if facsimile) and attested by
the signature of its Secretary or an Assistant Secretary (which may be
facsimile).
If any of the officers who shall have signed or sealed any of
the Bonds or whose facsimile signature shall be upon the Bonds shall cease to
be such officer of the Authority before the Bonds so signed and sealed shall
have been actually authenticated by the Trustee or delivered by the Authority,
such Bonds nevertheless may be authenticated, issued and delivered with the
same force and effect as though the person or persons who signed or sealed such
Bonds or whose facsimile signature shall be upon the Bonds had not ceased to be
such officer or officers of the Authority; and also any such Bond may be signed
and sealed on behalf of the Authority by those persons who at the actual date
of the execution of such Bond shall be the proper officers of the Authority,
although at the date of such Bond any such person shall not have been such
officer of the Authority.
Section 2.11. Registration of Bonds; Transfers; Securities
Depository. (a) All the Bonds issued under the Indenture shall be negotiable,
subject to the provisions for registration of transfer contained in the
Indenture and in the Bonds. The Trustee shall be the registrar for the Bonds.
So long as any of the Bonds shall remain outstanding, the Trustee shall
maintain and keep at its Corporate Trust Office the Bond Register for the
registration of transfer of Bonds. Upon presentation thereof for such purpose
at said office, the Trustee shall register or cause to be registered therein
under such reasonable regulations as it may prescribe, the transfer of any
Bond.
The registration of transfer of any Bond shall be made only
upon the Bond Register at such Corporate Trust Office at the written request of
the Registered Owner thereof or his or her representative duly authorized in
writing, upon surrender thereof, together with a written instrument of transfer
satisfactory to the Trustee duly executed by the Registered Owner or his or her
representative duly authorized in writing. Upon the registration of transfer
of any Bond, the Authority shall issue in the name of the transferee, in
authorized denominations, one or more Bonds of the same aggregate principal
amount as the surrendered Bonds.
<PAGE> 69
62.
The Trustee shall not register any transfer of any Bond (or
portion thereof), except pursuant to Bondowner tender, after notice calling
such Bond (or portion thereof) for redemption or partial redemption has been
given and prior to such redemption. In connection with any such transfer
pursuant to Bondowner tender, the Trustee shall deliver to the transferee a
copy of the applicable call for redemption.
The Trustee or the Tender Agent shall, in addition,
authenticate and register in the name and in the manner directed by the
recipient thereof Bonds in replacement for Bonds deemed to be tendered for
purchase pursuant to Section 2.05 for delivery in accordance therewith.
[2.11] (b) DTC shall act as Securities Depository for the
Bonds upon the initial issuance of the Bonds. The ownership of one fully
registered Bond in the aggregate principal amount of the Bonds shall be
registered in the name of Cede & Co., as nominee of DTC. Each such Bond shall
be held in trust until its redemption or until such time as DTC or its nominee
is no longer the Registered Owner of the Bonds, as provided below.
For so long as the Bonds are held in a book-entry-only system
and so long as a Securities Depository or its nominee is the Registered Owner
of the Bonds, references herein to the Bondowners or Registered Owners of the
Bonds shall mean such Securities Depository or its nominee and shall not mean
the beneficial owners ("Beneficial Owners") of the Bonds. For so long as a
Securities Depository or its nominee is the Registered Owner of the Bonds,
principal, Purchase Price, redemption price, including premium, if any, and
interest payments on the Bonds shall be made to such Securities Depository or
its nominee, as Registered Owner of the Bonds, and the Authority and the
Trustee shall recognize such Securities Depository or its nominee as the
Bondowner for all purposes, and such Securities Depository or its nominee shall
be considered the only owner of such Bonds for all purposes, including receipt
of notice, voting and requesting or directing the Trustee, the Remarketing
Agents, the Paying Agent, the Tender Agent or any other fiduciary to take or
not to take any action under the Indenture. Conveyance of notices and other
communications by a Securities Depository to Beneficial Owners will be governed
by arrangements among them, subject to any statutory and regulatory
requirements as may be in effect from time to time.
THE AUTHORITY, THE COMPANY, THE TRUSTEE, THE PAYING AGENT AND
THE REMARKETING AGENTS WILL NOT HAVE ANY RESPONSIBILITY OR OBLIGATION TO ANY
BENEFICIAL OWNER WITH RESPECT TO (I) THE ACCURACY OF ANY RECORDS MAINTAINED BY
A SECURITIES DEPOSITORY; (II) THE PAYMENT BY A SECURITIES DEPOSITORY OF ANY
AMOUNT WITH RESPECT TO THE PRINCIPAL, PURCHASE PRICE, INCLUDING PREMIUM, IF
ANY, OR INTEREST ON THE BONDS; (III) ANY NOTICE WHICH IS PERMITTED OR REQUIRED
TO BE GIVEN TO BENEFICIAL OWNERS OR (IV) ANY CONSENT GIVEN OR OTHER ACTION
TAKEN BY A SECURITIES DEPOSITORY OR ITS NOMINEE AS BONDOWNER.
<PAGE> 70
63.
The Authority may elect to discontinue such book-entry-only
system and upon the discontinuance of such book-entry-only system, Bond
certificates are required to be delivered in physical and registered form to
the Bondowners or their designees, according to the terms of the Indenture.
Upon the institution of any Rate Period after such discontinuance, the
Authority upon the direction of the Company may direct that the Bonds shall be
held as book-entry-only Bonds by notification to the Trustee, the Paying Agent,
the Tender Agent and the Remarketing Agents of its intention to reinstitute the
book-entry-only system. Upon receipt of such notice, the Trustee shall notify
owners of such Bonds that such Bonds shall be registered in a book-entry-only
system with DTC or its nominee or such alternative Securities Depository as the
Authority shall appoint. Upon or before the date specified in such notice,
such owners shall surrender their Bond certificates to the Trustee or Tender
Agent to have their beneficial ownership interest in the Bonds registered under
the book-entry-only system described herein. If any Bondowner fails to
surrender any such certificate to the Trustee or Tender Agent, such Bondowner
shall remain the Registered Owner of such Bond; provided, however, that such
Registered Owner shall have no right to transfer or tender such Bond without
first surrendering such Bond for registry in the book-entry-only system.
If, during any period that a Securities Depository, including
DTC or its nominee, is the Registered Owner of the Bonds, (a) such Securities
Depository determines to discontinue providing its service with respect to the
Bonds by giving notice to the Authority and the Trustee and discharging its
responsibilities with respect thereto under applicable laws, and the Authority
fails to appoint a successor Securities Depository for the Bonds, or (b) the
Authority at the direction of the Company determines to discontinue the
book-entry-only system through such Securities Depository, then Bond
certificates are required to be delivered in physical and registered form to
the Beneficial Owners or their designees, according to the terms of the
Indenture. Each Beneficial Owner, upon delivery of certificates held in the
Beneficial Owner's name, will become the Registered Owner of that portion of
the Bonds.
In the event that the book-entry-only system is discontinued
and the Beneficial Owners become Registered Owners of the Bonds, the provisions
applicable to such Registered Owners shall apply.
In connection with any notice or other communication to be
provided to Bondowners pursuant to the Indenture by the Authority or the
Trustee with respect to any consent or other action to be taken by Bondowners,
the Authority or the Trustee, as the case may be, shall establish a record date
for such consent or other action and give the nominee or Securities Depository
notice of such record date not less than fifteen calendar days in advance of
such record date to the extent possible.
The Authority and the Trustee are hereby authorized to enter
into any arrangements determined necessary or desirable with any Securities
Depository in order to effectuate this Section and both of them shall act in
accordance with the Indenture and any such agreement. Without limiting the
generality of the foregoing, any such arrangements may alter
<PAGE> 71
64.
the manner of effecting delivery of Bonds and the transfer of funds for the
payment of Bonds to the Securities Depository.
Section 2.12. Persons Treated as Owners. The Authority,
the Trustee, the Tender Agent and any Paying Agent may, for all purposes, deem
and treat the Registered Owner of any Bond as the absolute owner of such Bond
whether or not such Bond is overdue, and neither the Authority nor the Trustee
nor the Tender Agent nor the Paying Agent shall be affected by any notice to
the contrary.
Payment made to the Registered Owner of any Bond for the
purpose of such payment in accordance with the provisions of this Section 2.12
shall be valid and effectual, to the extent of the sum or sums so paid, to
satisfy and discharge the liability upon such Bond in respect of which such
payment was made.
Section 2.13. Exchange of Bonds. So long as any of the
Bonds remain outstanding, the Authority shall make all necessary provisions to
permit the exchange of Bonds at the Corporate Trust Office of the Trustee.
Bonds, upon surrender thereof at the Corporate Trust Office of
the Trustee with a written instrument requesting such exchange satisfactory to
the Trustee duly executed by the Registered Owner or his or her representative
duly authorized in writing, may be exchanged for an equal aggregate principal
amount of Bonds of any other authorized denominations, in an aggregate
principal amount equal to the principal amount of the Bonds so surrendered.
Section 2.14. Payment For and Limitations on Exchanges and
Transfers. In all cases in which the right of exchanging or registering the
transfer of Bonds is exercised, the Authority shall execute and the Trustee
shall authenticate and deliver Bonds in accordance with the provisions hereof.
All Bonds surrendered for registration of transfer or exchange shall forthwith
be cancelled by the Trustee. For every such registration of transfer or
exchange of Bonds, the Trustee may charge an amount sufficient to reimburse it
for any tax, fee or other governmental charge required to be paid with respect
to such registration of transfer or exchange which, if not resulting in a
change in Bondowner, shall be paid by the Company pursuant to the Participation
Agreement. The cost of preparing each new Bond upon each registration of
transfer or exchange, and any other expenses (except any applicable tax, fee or
other governmental charge) of the Authority or the Trustee incurred in
connection with such registration of transfer or exchange shall be paid by the
Company pursuant to the Participation Agreement.
Section 2.15. Endorsement of Certificate of Authentication
on Bonds. No Bond shall be secured hereby or entitled to the benefit of the
Indenture or be valid or obligatory for any purpose unless there shall be
endorsed on such Bond a certificate of authentication, substantially in the
form prescribed in the Indenture, executed by the Trustee or the Tender Agent;
and such certificate on any Bond issued by the Authority shall be conclusive
evidence
<PAGE> 72
65.
and the only competent evidence that such Bond has been duly authenticated and
delivered hereunder. The Trustee's certificate of authentication on any Bond
shall be deemed to have been executed by it if signed by an authorized officer
of the Trustee or the Tender Agent, but it shall not be necessary that the same
officer sign the certificate of authentication on all of the Bonds issued
hereunder.
Section 2.16. Cancellation of Bonds. Upon the surrender to
the Trustee of any temporary or mutilated Bonds, or Bonds transferred or
exchanged for other Bonds, or Bonds paid at maturity or upon defeasance in
accordance with Article XIV or otherwise delivered to the Trustee for
cancellation, the same shall forthwith be cancelled and may be destroyed by the
Trustee in such manner as it deems appropriate and the Trustee shall, if such
Bonds are so destroyed, deliver its certificate as to such destruction to the
Authority.
Section 2.17. Redemption of Bonds. The Bonds shall be
subject to optional and mandatory redemption at the times and at the redemption
prices set forth in the form of Bonds in the preamble hereto.
<PAGE> 73
66.
ARTICLE III
SECURITY FOR BONDS; ISSUANCE OF BONDS
Section 3.01. Pledge and Assignment Effected by Indenture;
Bonds Equally and Ratably Secured. In accordance with the provisions of
subsection 8 of Section 1860 of the Act, the pledge and assignment effected by
the Indenture shall be valid and binding from the date of execution and
delivery of the Indenture, the moneys so pledged and assigned and hereafter
received by the Authority shall be subject to the lien of such pledge and
assignment without any physical delivery thereof or further act, and such lien
shall be a continuing, irrevocable and exclusive first lien and shall be valid
and binding as against all parties having claims of any kind in tort, contract
or otherwise against the Authority irrespective of whether such parties have
notice thereof. In addition to the pledges and assignments set forth above,
the Authority hereby further grants to the Trustee the same power as the
Authority to enforce from time to time the rights of the Authority set forth in
Article III and Section 5.16 of the Participation Agreement, subject to the
provisions of the Participation Agreement relating to the amendment thereof.
All Bonds issued and to be issued hereunder are, and are to
be, to the extent provided in the Indenture, equally and ratably secured by the
Indenture without preference, priority or distinction on account of the actual
time or times of the authentication or delivery of the Bonds, or any of them,
so that, subject to the provisions of Section 9.05, all Bonds at any time
outstanding hereunder shall have the same right, lien and preference under and
by virtue of the Indenture and shall all be equally and ratably secured hereby
with like effect as if they had all been executed, authenticated and delivered
simultaneously on the date hereof; provided, however, that Bonds registered in
the name of the Company or held or required to be held by the Tender Agent
pursuant to Section 2.07 shall not be entitled to any benefit of the Letter of
Credit.
Section 3.02. Issuance of Bonds. The Bonds shall forthwith
be executed by the Authority and delivered to the Trustee for authentication
and, upon the written request and authorization to the Trustee signed by an
Authorized Officer, the Bonds shall be authenticated by the Trustee or the
Tender Agent and shall be delivered to or upon the written order of an
Authorized Officer, but only upon the receipt by the Trustee of proceeds
(including accrued interest, if any) of sale of the Bonds, of which (i) a sum
equal to the accrued interest, if any, paid by the initial purchasers of such
Bonds shall be deposited in the Bond Fund and (ii) the balance thereof shall be
deposited in the Construction Account of the Project Fund. Prior to, or
simultaneously with, the authentication and delivery of the Bonds, the Trustee
shall also receive the following:
(a) A copy, certified by the Secretary of the Authority,
of the resolution or resolutions adopted by the Authority authorizing
the execution and delivery of the Indenture and the Participation
Agreement and the issuance, sale, execution and delivery of the Bonds;
<PAGE> 74
67.
(b) An original executed counterpart of the Participation
Agreement and the Indenture;
(c) The Company Note;
(d) The Letter of Credit;
(e) A copy of resolutions authorizing the execution and
delivery of the Participation Agreement, and the issuance, execution
and delivery of the Company Note, by the Company, certified by the
Secretary or an Assistant Secretary of the Company, under its
corporate seal, to have been duly adopted by the Board of Directors of
the Company, or the Executive and Finance Committee thereof, and to be
in full force and effect on the date of such certification;
(f) A copy of the opinion of counsel to the Company
delivered to the initial purchasers of the Bonds, together with a
letter to the effect that the Trustee may rely on such opinion as if
it were addressed to it;
(g) An opinion of counsel, who shall be satisfactory to
the Trustee, experienced in laws relating to the issuance of bonds of
states and their political subdivisions, to the effect that the
issuance of the Bonds has been duly authorized and that all conditions
precedent to the issuance thereof have been fulfilled; and
(h) A copy of an opinion of counsel to the Bank to the
effect that the Letter of Credit has been duly authorized, executed
and delivered and is a valid and binding obligation of the Bank,
together with a letter to the effect that the Trustee may rely on such
opinion as if it were addressed to it.
<PAGE> 75
68.
ARTICLE IV
PARTICIPATION AGREEMENT AND COMPANY NOTE
Section 4.01. Amendments to Participation Agreement not
Requiring Consent of Bondowners. The Authority may, without the consent of the
Trustee and without notice to or consent of the Bondowners, enter into any
amendment or modification of the rights and interest of the Authority under
Article III of the Participation Agreement or Sections 4.04, 4.08, 4.09, 4.10
and 5.16 of the Participation Agreement upon the delivery to the Trustee of an
Opinion of Bond Counsel, satisfactory to the Trustee, to the effect that the
proposed amendment or modification will not impair the exclusion from gross
income for federal income tax purposes of interest on any of the Bonds
theretofore issued or otherwise adversely affect the rights and/or interests of
the Trustee or any of the owners of the Bonds. The Authority may, without the
consent of or notice to the Bondowners, amend or modify any other provision of
the Participation Agreement as may be required (i) for the purpose of curing
any ambiguity or formal defect or omission in the Participation Agreement; or
(ii) in connection with any other change therein which is not prejudicial to
the interests of the Trustee or the owners of the Bonds, including but not
limited to any change necessary to obtain or maintain a rating of the Bonds
from Moody's or S&P.
Prior to the expiration of the Letter of Credit, no amendment
or modification of the Participation Agreement shall be effective without the
prior written consent of the Bank, which consent shall not be unreasonably
withheld.
Section 4.02. Amendments to Participation Agreement
Requiring Consent of Bondowners. Except for amendments or modifications as
provided in Section 4.01, the Authority shall not enter into any amendment or
modification of the Participation Agreement without the written consent of the
Trustee and the owners of not less than two-thirds in aggregate principal
amount of the Bonds then outstanding and affected by such modification or
amendment.
Such consent of Bondowners shall be given and procured in the
same manner as provided in Section 13.02 with respect to Supplemental
Indentures.
No modification or amendment requiring the consent of
Bondowners shall be effective unless the required consent of Bondowners is
obtained and such modification is not prejudicial to the interests of the
Trustee.
Notwithstanding anything to the contrary contained in the
Indenture or the Participation Agreement, the Authority shall not agree to any
amendment, change or modification of, or any waiver, discharge or termination
of, any of the provisions of the Participation Agreement in any respect which
would impair the exclusion from gross income for federal income tax purposes of
interest on any of the Bonds.
<PAGE> 76
69.
Prior to the expiration of the Letter of Credit, no amendment
or modification of the Participation Agreement shall be effective without the
prior written consent of the Bank, which consent shall not be unreasonably
withheld.
Section 4.03. Amendments to Company Note. Except for such
amendments or modifications of the Company Note as may be required for the
purpose of curing any ambiguity or formal defect or omission in the Company
Note, or in connection with any other change therein which, in the judgment of
the Trustee, is not prejudicial to the interests of the Trustee or the
Bondowners, the Trustee shall not enter into any amendment or modification of
the Company Note without obtaining the prior written consent of the owners of
not less than two-thirds in aggregate principal amount of the Bonds then
outstanding. No such modification or amendment shall be made which will affect
the times, amounts and currency of payment of the principal of and premium, if
any, and interest on the Company Note without the consent of the owners of all
Bonds then outstanding.
The Trustee shall consent to any such proposed action
requiring the consent of the owners of the Bonds if the required consent of the
owners of the Bonds is obtained; provided that the Trustee may, but shall not
be obligated to consent to any such proposed action which affects its own
rights, powers, duties or obligations hereunder. Such consent of Bondowners
shall be given and procured in the same manner as provided in Section 13.02
with respect to Supplemental Indentures. Prior to the expiration of the Letter
of Credit, the Trustee shall not consent to any amendment or modification of
the Company Note without the prior written consent of the Bank, which consent
shall not be unreasonably withheld.
Section 4.04. Amendments to Tax Regulatory Agreement. The
Authority may, without the consent of the Trustee and without notice to or
consent of the Bondowners, enter into any amendment or modification of the Tax
Regulatory Agreement upon the delivery to the Trustee of an Opinion of Bond
Counsel to the effect that the proposed amendment or modification will not
adversely affect the exclusion from gross income for federal income tax
purposes of interest on the Bonds.
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70.
ARTICLE V
PROJECT FUND; REBATE FUND
Section 5.01. Creation and Custody of Project Fund. 1.
There is hereby created a Project Fund, which shall be held by the Trustee.
There shall be paid into the Project Fund the amount required to be so paid by
the provisions of Section 3.02.
2. There is hereby established within the Project Fund two (2)
separate trust accounts to be known as the "Construction Account" and the
"Investment Proceeds Account." All income or gain on moneys deposited in the
Construction Account or the Investment Proceeds Account shall be deposited in
the Investment Proceeds Account.
Section 5.02. Application of Moneys in the Project Fund.
1. The moneys in the Construction Account, until applied in payment of any item
of the Cost of Construction of the Project, shall be held by the Trustee and,
pending such application, shall be subject to a claim and charge in favor of
the owners of the Bonds and for the further security of such owners until paid
out as herein provided. The moneys in the Investment Proceeds Account, until
applied in accordance with the provisions of Section 5.02.2, shall be held by
the Trustee, but shall not be subject to a claim or charge in favor of the
Bondowners and shall be applied solely in accordance with the provisions of
this Article and shall not be available for the payment of Bonds within the
meaning of the Indenture. Pending such application, such moneys may be
invested in accordance with the provisions of Article VII.
2. On the first Business Day following each Computation
Period, the Trustee shall withdraw from the Investment Proceeds Account and
deposit in the Rebate Fund an amount such that the amount held in the Rebate
Fund after such deposit, as certified to the Trustee by an Authorized Company
Representative, is equal to the Rebate Amount calculated as of the last day of
the Computation Period, as certified to the Trustee by an Authorized Company
Representative. Any remaining balance in the Investment Proceeds Account shall
be deposited in the Construction Account. In the event of any deficiency, the
balance required shall be provided by the Company pursuant to Section 7.3 of
the Tax Regulatory Agreement. Computations of the amounts on deposit in each
fund hereunder, descriptions of each investment held therein, and computations
of the Rebate Amount shall be furnished to the Trustee by the Company in
accordance with Section 7.3 of the Tax Regulatory Agreement.
Section 5.03. Construction Account Requisitions. The
Trustee is authorized and directed to make payments from the Construction
Account to pay the Cost of Construction of the Project, upon the written order
of the Company, but only upon receipt from time to time of requisitions signed
by an Authorized Company Representative in the form of EXHIBIT C attached
hereto upon which the Trustee may conclusively rely, stating with respect to
each payment to be made for the Project:
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71.
(a) the requisition number;
(b) the items of the Cost of Construction of the
Project to which the disbursement relates or has been
allocated and the nature of the disbursement;
(c) the payee, with address, which may be the Company
in the case of reimbursements for advances and payments made
or costs incurred or work done by the Company;
(d) the amount of such payment;
(e) that the disbursement will be used to pay, or
reimburse the Company for, a Cost of Construction of the
Project and that it is a proper charge against the
Construction Account;
(f) that none of the items for which the disbursement
is requested has formed the basis for any disbursement
theretofore made from the Construction Account;
(g) that the disbursement will not be used in a
manner that would result in a violation of any representation,
warranty or covenant contained in Article III of the Tax
Regulatory Agreement or Section 5.04 of the Participation
Agreement;
(h) that no event of default under the Participation
Agreement shall have occurred and be continuing and that no
event which with the lapse of time alone would become such a
default has occurred and is continuing; and
(i) that no event of default under the Indenture
shall have occurred and be continuing and that no event which
with the lapse of time alone would become such a default has
occurred and is continuing.
Section 5.04. Retention of Requisitions. For seven years from
the dates thereof the Trustee shall retain in its possession all requisitions
received by it as herein required, subject to the inspection during normal
banking hours, of the Authority, its agents and representatives and the Company
and, upon reasonable request, inspection during normal banking hours of the
Bondowners and their representatives, in any case, at the Corporate Trust
Office.
Section 5.05. Certification of Completion of the Project.
On the date when all Costs of Construction expected to be paid from the Project
Fund have been paid, the Trustee and the Authority shall be furnished promptly
with a certificate of an Authorized Company Representative, which certificate
shall contain an appropriate direction to the Trustee with respect to any
amount in the Project Fund which is to be disposed of as provided in Section
5.06.
<PAGE> 79
72.
Section 5.06. Disposition of Balance Remaining in Project
Fund. All moneys remaining in the Project Fund after the certificate referred
to in Section 5.05 is furnished shall, at the written direction of an
Authorized Company Representative, be deposited in a segregated account in the
Bond Fund, or paid to the Bank to reimburse the Bank for any unreimbursed draw
under the Letter of Credit relating to the purchase of Bonds tendered or deemed
tendered pursuant to Section 2.05 (and, pending any such application, be
invested in securities in accordance with the direction of an Authorized
Company Representative delivered pursuant to Article VII, which direction shall
confirm that such investment will not be in violation of the covenants and
warranties made to the Authority by the Company in Section 7.1 of the Tax
Regulatory Agreement), or deposited in the Rebate Fund.
Section 5.07. Creation and Custody of Rebate Fund. There
is hereby created a Rebate Fund, which shall be held by the Trustee. There
shall be paid into the Rebate Fund the amount required to be so paid under
Section 5.02.2. All income or gain on moneys deposited in the Rebate Fund
shall be deposited in the Rebate Fund. The Rebate Fund and the amounts
deposited therein shall not be subject to a claim and charge in favor of the
Trustee or any owners of Bonds and shall be applied solely in accordance with
the provisions of this Article and shall not be available for the payment of
Bonds within the meaning of the Indenture.
Section 5.08. Application of Moneys in the Rebate Fund. 1.
Amounts deposited in the Rebate Fund shall be applied solely to pay Costs of
Construction described in clause (i) of the definition of Costs of Construction
in accordance with subsection 2 of this Section 5.08 except to the extent
otherwise permitted by subsection 3 of this Section 5.08.
2. The Trustee, upon receipt of written instructions from an
Authorized Company Representative in accordance with Section 7.3 of the Tax
Regulatory Agreement, shall pay to the United States out of amounts in the
Rebate Fund (a) not later than thirty (30) days after the end of each five-year
period following the date of issuance of the Bonds, an amount certified to the
Trustee by an Authorized Company Representative such that, together with
amounts previously paid, the total amount paid to the United States is equal to
90% of the Rebate Amount calculated as of the end of the most recent
Computation Period, and (b) not later than 30 days after the date on which all
of the Bonds have been paid or redeemed, 100% of the Rebate Amount as of the
end of the final Computation Period as certified to the Trustee by an
Authorized Company Representative.
3. In the event that on the first day of any Bond Year the
amount on deposit in the Rebate Fund exceeds the Rebate Amount, the Trustee,
upon the receipt of written instructions from an Authorized Company
Representative specifying the amount of such excess, shall withdraw such excess
amount and prior to the Completion Date, deposit it in the Investment Proceeds
Account of the Project Fund, or, after the Completion Date, deposit it in the
Bond Fund.
Pending such application, such moneys may be invested in
accordance with
<PAGE> 80
73.
instructions from the Company given in accordance with the provisions of
Article VII.
<PAGE> 81
74.
ARTICLE VI
BOND FUND; LETTER OF CREDIT
Section 6.01. Creation and Custody of the Bond Fund. There
is hereby created a Bond Fund, which shall be held in trust by the Trustee for
the benefit of the Bondowners and shall be subject to a lien and charge in
favor of the Bondowners. Neither the Company nor the Authority shall have any
interest in, or ability to withdraw funds from, the Bond Fund. There are
hereby created within the Bond Fund two separate trust accounts to be
designated as the Debt Service Account and the Letter of Credit Account. The
moneys in each such account shall not in any way be commingled with funds in
any other trust account maintained by the Trustee. The Trustee shall maintain
such records for deposits made into the Debt Service Account so that the
Trustee may at all times ascertain the source and dates of deposit of the
moneys in the Debt Service Account.
The Authority hereby authorizes and directs the Trustee to
withdraw in accordance with Section 6.03 sufficient funds from the Bond Fund to
pay the principal of and premium, if any, and interest on the Bonds as the same
become due and payable and to make such funds so withdrawn available to the
Paying Agents, if any, for the purpose of paying such principal, premium, if
any, and interest.
Section 6.02. Payments into the Bond Fund. The Trustee
shall deposit in the Bond Fund for credit to the Debt Service Account as and
when received (1) the amount, if any, of the proceeds of sale of the Bonds, to
the extent required by this Indenture, (2) all Company Note Payments, (3) the
amounts remaining in the Project Fund after the certificate referred to in
Section 5.05 is furnished, (4) all interest and other income received on
investments of moneys on deposit in the Bond Fund, as provided in Section 7.03,
(5) any funds made available pursuant to Section 8.05, (6) any proceeds of
refunding obligations and (7) any amount paid into the Bond Fund pursuant to
Section 5.08.3.
There shall be deposited in the Letter of Credit Account all
moneys drawn by the Trustee under the Letter of Credit and received by the
Trustee for the purposes of paying principal of, premium, if any, and interest
on, the Bonds. In the event that the Bonds are held by a Securities
Depository, moneys drawn under the Letter of Credit may be paid directly to the
Securities Depository, in which event, proper notification concerning such
payment shall be sent to the Trustee and the Paying Agent.
Section 6.03. Application of Moneys in the Bond Fund.
Except as otherwise provided in Sections 6.04 and 14.01.3, moneys on deposit in
the Bond Fund shall be used solely for the payment of the principal of and
premium, if any, and interest on the Bonds as the same shall become due and
payable either at maturity, upon redemption, by declaration or otherwise.
Moneys for such payments of the principal of, premium, if any and interest on
the Bonds shall be derived from the following sources in the following order of
priority:
<PAGE> 82
75.
(i) moneys drawn under the Letter of Credit and either
deposited in the Letter of Credit Account or, if necessary during any
Rate Period when the Bonds are held by a Securities Depository, paid
to such Securities Depository;
(ii) moneys paid into the Bond Fund pursuant to clause (1) of
Section 6.02 in respect of accrued interest which constitute Available
Moneys and proceeds from the investment thereof that constitute
Available Moneys which moneys shall be used to pay interest on the
Bonds;
(iii) proceeds of the sale of refunding obligations which
constitute Available Moneys and proceeds from the investment thereof
that constitute Available Moneys;
(iv) moneys deposited into the Bond Fund pursuant to clause
(3) or clause (7) of Section 6.02 which constitute Available Moneys
and proceeds from the investment thereof that constitute Available
Moneys;
(v) Company Note Payments which constitute Available Moneys
and proceeds from the investment thereof that constitute Available
Moneys;
(vi) to the extent permitted by Section 8.05, moneys
deposited into the Bond Fund pursuant to clause (5) of Section 6.02,
and proceeds from the investment thereof that constitute Available
Moneys; and
(vii) Company Note Payments which do not constitute Available
Moneys and proceeds from the investment thereof.
The Trustee hereby agrees to draw moneys under the Letter of
Credit to be applied to the payment of principal of, premium, if any, or
interest on, the Bonds. If and to the extent moneys under clause (i) of the
preceding paragraph are insufficient or unobtainable therefor, the Trustee
shall apply any other moneys that are available therefor, in the preceding
order of priority, including moneys described in clauses (vi) and (vii) of the
preceding paragraph, to the payment of the principal of, premium, if any, and
interest on, the Bonds. After the Letter of Credit has expired, any moneys
held by the Trustee in the Bond Fund may be used to make any payment of the
principal of, premium, if any, and interest on, the Bonds.
Prior to the expiration of the Letter of Credit, moneys under
clauses (iii), (iv) and (v) of this Section 6.03 shall not be used to pay the
redemption price of any Bond redeemed pursuant to the direction of the Company,
unless the Trustee shall have received the written direction specified in
Section 8.01 providing for such redemption at least 123 days prior to such
redemption date.
If on the due date of principal and premium, if any, or
interest with respect to Bonds, the amounts on deposit in the Bond Fund (except
amounts held by the Trustee pursuant
<PAGE> 83
76.
to Section 6.04) are not sufficient to pay in full all such principal of and
premium, if any, and interest on the Bonds, such amounts shall be applied to
the payment of such principal, premium and interest in accordance with the
provisions of Section 10.09.
Section 6.04. Non-presentment of Bonds. In the event any
Bonds (or any portion thereof) shall not be presented for payment when the
principal thereof and redemption premium, if any, thereon becomes due, either
at maturity or at the date fixed for redemption thereof (including, for such
purpose, any conversion to a Fixed Rate) or otherwise, if funds sufficient to
pay such Bonds (or portions thereof) and redemption premiums, if any, shall be
held by the Trustee for the benefit of the owner or owners thereof, all
liability of the Authority to the owner or owners thereof for the payment of
such Bonds (or portions thereof) and redemption premiums, if any, shall
forthwith cease, terminate and be completely discharged, and thereupon it shall
be the duty of the Trustee to hold such funds (without investment thereof) in
the Bond Fund for a period of at least two years, without liability for
interest thereon, for the benefit of the owner or owners of such Bonds who
shall thereafter be restricted exclusively to such funds for any claim of
whatever nature on such owner's or owners' part under the Indenture or on, or
with respect to, such Bonds. On November 1 of each year in which the Bonds are
outstanding, the Trustee will pay any funds (other than moneys resulting from a
draw on the Letter of Credit) which it has then held in respect of Bonds not
presented for payment for two years or more to the Company, and thereafter the
owners of such Bonds shall look only to the Company for the payment thereof and
then only to the extent of the amount so received without any interest thereon,
and the Authority, the Trustee and the Paying Agent shall have no
responsibility with respect to such moneys.
Section 6.05. (Intentionally Deleted).
Section 6.06. Trustee to Notify Authority and Company of
Funds in Bond Fund. The Trustee, upon the written request of the Company or
the Authority, shall notify the Company and the Authority of the amount of
funds on deposit in the Bond Fund at the time of such request.
Section 6.07. Letter of Credit. (1) The Trustee shall draw
moneys under the Letter of Credit in accordance with the terms thereof as shall
be necessary to make timely payments of principal of, and interest on, the
Bonds required to be made from the Bond Fund and to make timely payments
required to be made pursuant to, and in accordance with, Section 2.05. In
connection with each such drawing, the Trustee shall timely prepare and present
all certificates, drafts and other documents which are required by the terms of
the Letter of Credit to effect payment thereunder. The Trustee shall give
immediate telephonic or facsimile (confirmed in writing) notice to the Company
of a draw under the Letter of Credit and the amount thereof. Nothing in this
Section 6.07 shall require the Trustee to draw moneys under the Letter of
Credit for the payment of Bonds registered in the name of, or held beneficially
for, the Company or the Bank or any Bonds held or required to be held by the
Tender Agent for the account of the Company or the Bank pursuant to the
Indenture to the extent not permitted by the
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77.
Letter of Credit.
(2) If at any time on or prior to the thirty-seventh
calendar day next preceding the scheduled expiration date of a Letter of
Credit, there shall have been delivered to the Trustee (a) an Alternate Credit
Facility, (b) an Opinion of Bond Counsel stating that the delivery of such
Alternate Credit Facility to the Trustee is authorized under the Participation
Agreement and the Indenture and complies with the terms of the Participation
Agreement and the Indenture and (c) written evidence satisfactory to the
Trustee from Moody's, if the Bonds are then rated by Moody's, and from S&P, if
the Bonds are then rated by S&P, in each case to the effect that such Rating
Agency has reviewed the proposed Alternate Credit Facility and that the
substitution of the proposed Alternate Credit Facility for the Letter of Credit
will not, by itself, result in a reduction or withdrawal of its rating or
ratings of the Bonds from those which then prevail, then the Trustee shall
accept such Alternate Credit Facility and surrender the previously held Letter
of Credit to the Bank, in accordance with the terms of such Letter of Credit,
for cancellation.
(3) The Company may substitute an Alternate Credit
Facility which has the effect of lowering any then prevailing rating on the
Bonds or with respect to which the Company will not seek a rating from a Rating
Agency then rating the Bonds only if (i) notice of mandatory purchase pursuant
to Section 2.05(e)(1) shall have been given and such Alternate Credit Facility
shall take effect on or prior to the date on which the Bonds are purchased
pursuant to Section 2.05(e)(1) and (ii) such substitution will result in a
rating of not less than the third highest rating category of a Rating Agency.
Upon delivery to the Trustee of: (a) such Alternate Credit Facility, (b) an
Opinion of Bond Counsel stating that the delivery of such Alternate Credit
Facility is authorized under the Participation Agreement and the Indenture and
complies with the terms thereof, and (c) written evidence satisfactory to the
Trustee from a Rating Agency that delivery of such Alternate Credit Facility
will not result in a rating of less than the third highest rating category of
such Rating Agency, currently "A" in each case, the Trustee shall surrender the
Letter of Credit previously in effect, promptly following any drawing required
to be made on such Letter of Credit on the date the Bonds are so purchased.
(4) If at any time, the Letter of Credit shall expire
because there shall cease to be any Bonds outstanding hereunder, or because the
Fixed Rate Conversion Date shall have occurred, then the Trustee shall
surrender the Letter of Credit to the Bank for cancellation after having made
any necessary drawing in accordance with this Section 6.07 and with the terms
of the Letter of Credit. The Trustee shall comply with the procedures set
forth in the Letter of Credit relating to the termination thereof.
(5) Prior to the expiration of the Letter of Credit, the
Trustee shall give notice to the owners of the Bonds, in the name of the
Authority, of such expiration, which notice shall (a) specify the date of the
expiration of the Letter of Credit and (b) specify the last time and date prior
to such expiration on which Bonds must be delivered and the notice given to the
owners of the Bonds for the purchase of Bonds pursuant to tenders as provided
in Section 2.05, and the places where such Bonds must be delivered for such
purchase, and (c) either (i) if the
<PAGE> 85
78.
requirements of subsection 2 of this Section 6.07 have not been met, state that
the Bonds shall be subject to mandatory tender for purchase at the Purchase
Price thereof on the Mandatory Purchase Date or (ii) state the name of the
issuer of the Alternate Credit Facility. Such notice shall be given by first
class mail not later than thirty (30) days prior to the Mandatory Purchase
Date.
(6) Notwithstanding anything in the Indenture to the
contrary, in the event the Bonds are held by a Securities Depository under
Section 2.11(b), the Trustee may instruct the Bank to pay amounts drawn
thereunder directly to the Securities Depository, as Registered Owner of the
Bonds, in which event, proper notification concerning such payment shall be
sent to the Trustee and the Paying Agent.
<PAGE> 86
79.
ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
Section 7.01. Moneys Held in Trust. All moneys from time
to time received by the Trustee and held in any fund created under the
Indenture (other than the Rebate Fund), or otherwise held for the benefit of
the owners, shall, except as otherwise provided herein, be held in trust by the
Trustee for the benefit of the owners from time to time of the Bonds entitled
to be paid therefrom.
Section 7.02. Uninvested Moneys Held by the Trustee. All
moneys received by the Trustee hereunder and not invested by the Trustee
pursuant to the provisions of this Article VII, to the extent not insured by
the Federal Deposit Insurance Company or other federal agency, shall be
deposited with a member bank of the Federal Reserve System or with the Trustee,
or with a national or state bank or a trust company which has a combined
capital and surplus aggregating not less than $100,000,000; provided, however,
that any such moneys drawn under the Letter of Credit and any moneys held under
Section 6.04 shall be deposited with the Trustee or be fully insured by the
Federal Deposit Insurance Company.
Section 7.03. Investment of, and Payment of Interest on,
Moneys. Moneys on deposit to the credit of the Project Fund or the Rebate Fund
may be retained uninvested as trust funds. Such moneys shall, at the written
direction of an Authorized Company Representative, be invested by the Trustee
in (a) any obligation issued or guaranteed by, or backed by the full faith and
credit of, the United States of America (including any certificates or any
other evidence of an ownership interest in any such obligation or in specified
portions thereof, which may consist of specified portions of the principal
thereof or the interest thereon), (b) deposit accounts in, or certificates of
deposit issued by, and bankers' acceptances of, any bank, trust company or
national banking association which is a member of the Federal Reserve System
(which may include the Trustee), having capital stock and surplus aggregating
not less than $100,000,000, (c) obligations issued or guaranteed by any Person
controlled or supervised by and acting as an instrumentality of the United
States of America pursuant to the authority granted by the Congress of the
United States, (d) commercial paper rated in the highest investment grade or
next highest investment grade by Moody's or S&P, (e) obligations rated not less
than "A" or equivalent by Moody's or S&P issued or guaranteed by any state of
the United States of America or the District of Columbia, or any political
subdivision, agency or instrumentality of any such state or District, or issued
by any corporation, (f) obligations of a public housing authority fully secured
by contracts with the United States of America, rated at least "A" or better by
a Rating Agency, (g) shares of a money market fund, the sole assets of which
are comprised of obligations described in (a) above or (h) shares of a money
market fund which is rated "Prime-1" by Moody's or "AAAm" or "AAAm-g" by S&P.
Moneys on deposit to the credit of the Bond Fund, other than
moneys on deposit in the Letter of Credit Account, subject to Section 6.04,
shall without any instruction from the
<PAGE> 87
80.
Company or the Authority be invested in shares of a money market fund, the sole
assets of which are comprised of obligations issued or guaranteed by, or backed
by the full faith and credit of, the United States of America (including any
certificates or any other evidence of an ownership interest in any such
obligation or in specified portions thereof, which may consist of specified
portions of the principal thereof or the interest thereon and which
certificates or other evidence of an ownership interest must be rated by the
Rating Agency then rating the Bonds at least as high as the obligations issued
or guaranteed by, or backed by the full faith and credit of, the United States
of America); provided that to the extent that such investments may be
unavailable the Trustee may hold such funds uninvested.
Notwithstanding anything in the preceding paragraph, Available
Moneys held under the Indenture shall be invested by the Trustee, except to the
extent such Available Moneys are permitted to be held uninvested under the
Indenture, in any obligation issued or guaranteed by, or backed by the full
faith and credit of, the United States of America (including any certificates
or any other evidence of an ownership interest in any such obligation or in
specified portions thereof, which may consist of specified portions of the
principal thereof or the interest thereon and which certificates or other
evidence of an ownership interest must be rated by the Rating Agency then
rating the Bonds at least as high as the obligations issued or guaranteed by,
or backed by the full faith and credit of, the United States of America), which
matures on or prior to the redemption date.
In no event shall the Trustee invest moneys on deposit to the
credit of the Bond Fund in any obligation or security issued or guaranteed by
the Company or the Authority or any obligation or security issued or guaranteed
by any Person known to a Responsible Officer of the Trustee to be an Affiliate
of either the Company or the Authority.
Investments of moneys on deposit to the credit of the Project
Fund, the Bond Fund and the Rebate Fund pursuant to this Section 7.03 shall
have maturity dates, or shall be subject to redemption at the option of the
Trustee, on or prior to the respective dates on which the moneys invested
therein are payable for the purposes of such Funds. The securities purchased
with the moneys in each such Fund or in any account or sub-account thereof
shall be deemed a part of such Fund or account or sub-account. The interest,
including realized increment on securities purchased at a discount, received on
all such securities in any Fund or any account or sub-account thereof shall be
deposited by the Trustee to the credit of such Fund or account or sub-account,
except as otherwise provided in Section 5.01.2. The Trustee shall not be
liable or responsible for any loss resulting from any such investment or
resulting from the redemption, sale or maturity of any such investment as
herein authorized or for monitoring or ensuring the Company's compliance with
its covenants contained in the Tax Regulatory Agreement. The Company shall be
responsible for, and provide additional funds as necessary in connection with,
any and all losses on investment of moneys on deposit in the Bond Fund. If at
any time it shall become necessary that some or all of the securities purchased
with the moneys in either such Fund be redeemed or sold in order to raise the
moneys necessary to comply with the provisions of the Indenture, the Trustee
shall effect such redemption or sale,
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employing in the case of a sale any commercially reasonable method of effecting
such sale.
Any direction to invest moneys given orally under the terms of
the Indenture shall be confirmed in writing.
Moneys drawn on the Letter of Credit shall be retained
uninvested by the Trustee or the Tender Agent, as appropriate, and shall not
bear interest.
Section 7.04. Disposition of Amounts After Payment of
Bonds. Any amounts determined by the Trustee to be remaining in the Funds
created under the Indenture, other than amounts held in the Rebate Fund, after
payment in full, or provision for payment in full, of principal of and premium,
if any, and interest on all the Bonds, in accordance with the provisions of the
Indenture, and payment of all the fees, charges and expenses of the Authority,
the Trustee, the Tender Agent, the Indexing Agent, the Remarketing Agents and
the Paying Agent in accordance with the Indenture and the Participation
Agreement and any amounts required to be paid to the United States of America
pursuant to the Tax Regulatory Agreement, shall be paid to the Bank; provided,
however, that on or after the Fixed Rate Conversion Date and solely with
respect to moneys not resulting from a draw on the Letter of Credit and not
constituting remarketing proceeds, such amounts that would be payable to the
Bank pursuant to this Section 7.04 shall, at the written direction of an
Authorized Company Representative, be paid to the Company or, if the Bank has
not been paid in full under the Reimbursement Agreement, to the Bank.
Section 7.05. Compliance with Tax Regulatory Agreement in
the Event of Partial Redemption of Bonds. Notwithstanding any provision of the
Indenture to the contrary, no later than twenty (20) days after any partial
redemption of Bonds, the Trustee shall reduce the aggregate amount of all
investments held under the Indenture which are subject to the 150 percent
limitation described in Section 7.7 of the Tax Regulatory Agreement to the
extent required by such Section, all in accordance with the written direction
received from an Authorized Company Representative. The Trustee shall act only
upon, and be entitled conclusively to rely upon, such written direction.
<PAGE> 89
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ARTICLE VIII
REDEMPTION OF BONDS
Section 8.01. Bonds to be Redeemed Only in Manner Provided
in Article VIII. Any redemption of all or any part of the Bonds which are
subject to redemption shall be made in the manner provided in this Article
VIII.
Bonds which are subject to redemption at the option of the
Authority exercised upon the direction of an Authorized Company Representative,
shall be called by the Trustee for redemption in the manner provided in this
Article VIII upon receipt by the Trustee, at least forty-five (45) days prior
to the redemption date, of an executed counterpart of the written direction of
an Authorized Company Representative to the Authority and the Trustee providing
for such redemption. Such written direction shall specify the principal amount
of such Bonds or portions thereof so to be called for redemption, the
applicable redemption price, the applicable redemption date and the provision
or provisions of the Indenture pursuant to which such Bonds are to be called
for redemption. The foregoing provisions of this paragraph shall not apply in
the case of any mandatory redemption of Bonds in accordance with the Indenture.
The moneys necessary for any redemption of Bonds shall be made
available to the Trustee on or prior to the date fixed for redemption. The
Trustee is hereby authorized and directed to apply such moneys in accordance
with Section 6.03 to the payment of the Bonds or portions thereof called for
redemption, together with accrued interest thereon to the redemption date.
Upon the giving of notice and the deposit of funds for redemption, interest on
the Bonds or portions thereof thus called shall no longer accrue on and after
the date fixed for redemption. No payment shall be made by the Trustee upon
any Bond or portion thereof called for redemption until such Bond or portion
thereof shall have been delivered for payment or cancellation or the Trustee
shall have received the items required by Section 2.08 with respect to any
mutilated, lost, stolen or destroyed Bond.
Notwithstanding anything in the Indenture to the contrary, no
redemption at the option of the Authority which requires a redemption price in
excess of par to be payable shall be exercisable unless (i) a Letter of Credit
providing for payment of such premium together with other amounts owed as part
of redemption price shall be in effect and shall not be scheduled to expire by
its terms before the specified redemption date or (ii) other Available Moneys
shall be held by the Trustee under the Indenture and are available for payment
of such premium.
<PAGE> 90
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Section 8.02. Redemption of Less Than all Bonds. If less
than all of the Bonds shall be called for redemption, the particular Bonds or
portions of Bonds to be redeemed shall be selected by the Trustee by lot or in
such other manner as the Trustee in its discretion may deem proper in order to
assure each owner of Bonds a fair opportunity to have such owner's Bond or
Bonds or portions thereof selected; provided, however, that the portion to be
redeemed of any Bond of a denomination more than the then-applicable minimum
authorized denomination shall be such minimum authorized denomination or an
integral multiple thereof, and that in selecting portions of such Bonds for
redemption, the Trustee shall treat each such Bond as representing that number
of Bonds of such minimum authorized denomination obtained by dividing the
principal amount of such Bond by such minimum authorized denomination; provided
further that the Trustee shall first select any Bonds registered in the name of
the Company or the Bank and then the remaining Bonds.
Section 8.03. Notice of Redemption. In the case of any
redemption pursuant to Section 2.17, the Trustee shall give in its own name or
in the name of the Authority, notice mailed by first-class mail to the
Registered Owners of the Bonds to be redeemed, addressed to him or her at his
or her address as it appears on the Bond Register at least thirty (30) days
before the date fixed for redemption, which notice shall state that Bonds
properly identified have been called for redemption and, in the case of Bonds
to be redeemed in part only, the portion of the principal amount thereof that
has been called for redemption (or if all the outstanding Bonds are to be
redeemed, so stating, in which event such identification may be omitted), that
they will be due and payable on the date fixed for redemption (specifying such
date) upon surrender thereof at the Corporate Trust Office or, at the option of
the owner, at the corporate trust office of the Paying Agent, if any, for such
Bonds, at the applicable redemption price (specifying such price) together with
accrued interest to such date, and that all interest on the Bonds, or portions
thereof, so to be redeemed will cease to accrue on and after such date.
Failure to give any required notice of redemption as to any particular Bonds
will not affect the validity of the call for redemption of any Bonds in respect
to which no such failure occurs. Any notice mailed as provided in this Section
shall be conclusively presumed to have been duly given, whether or not the
Registered Owner actually receives the notice.
Section 8.04. Rights of Owners of Bonds Called for
Redemption Limited to Redemption Price and Accrued Interest. If notice of
redemption has been given as provided in Section 8.03, the Bonds or portions
thereof called for redemption shall be due and payable on the date fixed for
redemption at the redemption price, together with accrued interest to the date
fixed for redemption. Payment of the redemption price, together with accrued
interest, shall be made by the Trustee upon surrender of such Bonds. If there
shall be called for redemption less than the entire principal amount of a Bond,
the Authority shall execute and deliver and the Trustee shall authenticate,
upon surrender of such Bond, and without charge to the owner thereof, Bonds for
the unredeemed portion of the principal amount of the Bond so surrendered.
Subject to the deposit with the Trustee of amounts necessary
for the redemption of such Bonds as provided in Section 8.01, from and after
the date fixed for redemption
<PAGE> 91
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designated in such notice, notwithstanding that any Bonds so called for
redemption in whole or in part shall not have been surrendered for
cancellation, no further interest shall accrue upon the principal of any of the
Bonds or portions thereof so called for redemption; and such Bonds or portions
thereof so to be redeemed shall cease to be entitled to any lien, benefit or
security under the Indenture and the owners thereof shall have no rights in
respect of such Bonds or portions thereof except to receive payment of the
redemption price thereof and unpaid interest accrued to the date fixed for
redemption from such amounts deposited with the Trustee which shall be held
uninvested by the Trustee in trust for the owner of such Bonds or portions
thereof.
Section 8.05. Redemption at Demand of the State. In
accordance with the provisions of Section 1864 of the Act, the State of New
York may, upon furnishing sufficient funds therefor, require the Authority to
redeem prior to maturity, as a whole, any issue of Bonds, on any Interest
Payment Date not less than twenty years after the date of the original issuance
of the Bonds of such issue. The Authority shall deposit any such funds
received by it with the Trustee. After the expiration of the Letter of Credit,
the Trustee shall deposit such funds in the Bond Fund and, upon notice given as
provided in Section 8.03, shall apply such funds to the redemption of such
Bonds, at a redemption price equal to the applicable optional redemption price
set forth in the Indenture or 105 percent of the principal amount of the Bonds
to be redeemed, whichever is less, together with accrued and unpaid interest to
the date fixed for redemption, all in the manner provided in this Article VIII.
Prior to the expiration of the Letter of Credit, the Trustee shall deposit any
such funds received by it in a segregated sub-account in the Debt Service
Account of the Bond Fund, and upon notice published in the manner provided in
Section 1864 of the Act, shall draw moneys under the Letter of Credit and apply
such moneys drawn under the Letter of Credit to the redemption of such Bonds at
a redemption price equal to 100 percent of the principal amount of the Bonds to
be redeemed, together with accrued and unpaid interest to the date fixed for
redemption in the manner specified in the preceding sentence. Upon the
application of such moneys drawn under the Letter of Credit, the Trustee shall
pay the funds furnished by the State of New York to the Bank with instructions
to apply such funds to the reimbursement of the Bank for such moneys drawn
under the Letter of Credit. Upon such redemption, the Trustee shall assign the
Company Note to or as directed in writing by the Authority.
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85.
ARTICLE IX
PARTICULAR COVENANTS
Section 9.01. Payment of Principal of and Interest and
Redemption Premium of Bonds. The Authority will promptly pay from the Company
Note Payments and other funds held by the Trustee and available therefor the
principal of, and the interest on, every Bond issued under and secured by the
Indenture and any premium required to be paid for the retirement of said Bonds
by redemption, at the places, on the dates and in the manner specified in the
Indenture and in said Bonds according to the true intent and meaning thereof,
subject, however, to the provisions of Section 1.03.
Section 9.02. Performance of Covenants. The Authority will
faithfully perform at all times all covenants, undertakings, stipulations and
provisions contained in the Indenture, in any and every Bond and in all
proceedings of the Authority pertaining thereto.
Section 9.03. Further Instruments. The Authority will from
time to time execute and deliver such further instruments and take such further
action as may be reasonable and as may be required to carry out the purpose of
the Indenture; provided, however, that no such instruments or actions shall
pledge the credit of the Authority or the State of New York or the taxing power
of the State of New York or otherwise be inconsistent with the provisions of
Section 1.03.
Section 9.04. Inspection of Project Books. All books and
documents in the possession of the Authority relating to the Project or the
Participation Agreement shall at all times be open to inspection by such
accountants or other agents as the Trustee may from time to time designate.
Section 9.05. No Extension of Time of Payment of Interest.
In order to prevent any accumulation of claims for interest after maturity, the
Authority will not directly or indirectly extend or assent to the extension of
the time of payment of any claims for interest on any of the Bonds and will not
directly or indirectly be a party to or approve any such arrangement by
purchasing such claims for interest or in any other manner. In case any such
claim for interest shall be extended in violation hereof, such claim for
interest shall not be entitled, in case of any default hereunder, to the
benefit or security of the Indenture except subject to the prior payment in
full of the principal of, and premium, if any, on, all Bonds issued and
outstanding hereunder, and of all claims for interest which shall not have been
so extended or funded.
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86.
Section 9.06. Trustee's, Paying Agent's, Indexing Agent's,
Tender Agent's and Remarketing Agents's Fees, Charges and Expenses. Pursuant
to the provisions of Section 4.05 of the Participation Agreement, the Company
has agreed to pay the fees and the expenses of the Trustee, the Paying Agent,
the Indexing Agent, the Tender Agent and the Remarketing Agents, in the amounts
set forth more fully therein, and the Authority shall have no liability for the
payment of any fees or expenses of the Trustee, the Paying Agent, the Indexing
Agent, the Tender Agent and the Remarketing Agents.
Exclusive of the proceeds of any drawing under the Letter of
Credit and any other moneys within the meaning of subdivision (a) of the
definition of Available Moneys, the Trustee shall have a first lien with right
of payment prior to payment on account of principal of, premium, if any, and
interest on any Bond under the Indenture for the fees, charges and expenses of
the Trustee. When the Trustee incurs expenses or renders services after the
occurrence of an Act of Bankruptcy with respect to the Company, the expenses
and the compensation for services are intended to constitute expenses of
administration under any federal or state bankruptcy, insolvency, arrangement,
moratorium, reorganization or other debtor relief law. The Company shall have
no liability to pay any fees, charges or other expenses of the Trustee
hereinabove mentioned except from amounts pledged under the Indenture.
Section 9.07. Agreement of the State of New York. In
accordance with the provisions of subdivision 11 of Section 1860 of the Act,
the Authority, on behalf of the State of New York, does hereby pledge to and
agree with the owners of the Bonds that the State of New York will not limit or
alter the rights and powers vested by the Act in the Authority to fulfill the
terms of any contract made with Bondowners, or in any way impair the rights and
remedies of such owners, until the Bonds, together with the interest thereon,
with (to the extent permitted by law) interest on any unpaid installments of
interest, and all costs and expenses in connection with any action or
proceeding by or on behalf of such owners, are fully met and discharged.
<PAGE> 94
87.
ARTICLE X
DEFAULTS AND REMEDIES
Section 10.01. Events of Default. In case one or more of the
following Events of Default shall have occurred:
(a) default in the payment of any installment of
interest in respect of any Bond as the same shall become due
and payable which default continues for five days; or
(b) default in the payment of the principal of or
premium, if any, in respect of any Bond as the same shall
become due and payable either at maturity, upon redemption, by
acceleration or otherwise; or
(c) default in the payment of any amount due
pursuant to Section 2.05 as the same becomes due and payable
which default continues for five days; or
(d) an event of default specified in Article VI
of the Participation Agreement; or
(e) after the expiration of the Letter of Credit,
failure on the part of the Authority to duly observe or
perform any other of the covenants or agreements on the part
of the Authority contained in the Indenture or in any Bond for
a period of 90 days after the date on which written notice of
such failure, requiring the Authority to remedy the same,
shall have been given to the Authority and the Company by the
Trustee; or
(f) receipt by the Trustee of written notice from
the Bank of the occurrence and continuance of an event of
default under the Reimbursement Agreement, that the Bank is
terminating the Letter of Credit and that the Bank is
directing the Trustee to accelerate the Bonds; or
(g) receipt by the Trustee of written notice from
the Bank on or before the tenth day after a drawing under the
Letter of Credit in respect of interest on the Bonds, to the
effect that the Bank has not been reimbursed for any such
drawing and that the Bank is directing the Trustee to
accelerate the Bonds;
then, upon (a) the occurrence and continuance of any Event of Default described
in clause (a), (b), (c), (d) or (e) of this paragraph, the Trustee may, and at
the written request of owners of not less than 25% in aggregate principal
amount of Bonds then outstanding shall, or (b) the occurrence of an Event of
Default described in clause (f) or (g) of this paragraph the Trustee shall
immediately, by written notice given to the Authority, the Governor, the
Comptroller, the
<PAGE> 95
88.
Attorney General of the State of New York and the Company, declare the
principal of all Bonds then outstanding to be due and payable immediately, at
which time (unless a Fixed Rate Conversion Date has occurred and the Letter of
Credit is no longer in effect) interest shall cease to accrue, and upon such
declaration the said principal, together with interest accrued thereon, shall
become due and payable immediately at the place of payment provided therein,
anything in the Indenture or in the Bonds to the contrary notwithstanding and
the Trustee shall give notice thereof to the Authority, the Company, the Tender
Agent, the Remarketing Agents and the Bank, and shall give notice thereof by
mail to all owners of outstanding Bonds. Prior to the expiration of the Letter
of Credit, the Trustee shall draw immediately upon the Letter of Credit in the
event the Bonds shall have been declared immediately due and payable and
immediately apply amounts drawn under the Letter of Credit to payment of Bonds
in accordance with the Indenture.
The provisions of the preceding paragraph, however, are
subject, after the expiration of the Letter of Credit, to the condition that
if, after the principal of said Bonds has been so declared to be due and
payable, all arrears of interest upon the Bonds are paid, and the Authority has
performed all other things in respect to which it may have been in default
hereunder and the reasonable compensation and expenses of the Trustee, and the
Bondowners, including reasonable attorneys' fees, shall have been paid, or
provision satisfactory to the Trustee shall be made for such payments, then,
and in every such case, the owners of a majority in aggregate principal amount
of the Bonds then outstanding, by written notice to the Authority and to the
Trustee, may annul such declaration and its consequences, and such annulment
shall be binding upon the Trustee and upon all owners of Bonds issued
hereunder, or, if the Trustee shall have acted in the absence of a written
request of the owners of at least twenty-five percent (25%) in aggregate
principal amount of all outstanding Bonds, and if there shall not have been
theretofore delivered to the Trustee written direction to the contrary by the
owners of at least twenty-five percent (25%) in aggregate principal amount of
the Bonds then outstanding, then any such declaration shall ipso facto be
deemed to be rescinded and any such default and its consequences shall ipso
facto be deemed to be annulled and such annulment shall be binding upon the
Trustee and upon all owners of Bonds; but no such annulment shall extend to or
affect any subsequent default or impair any right or remedy consequent thereon.
The Trustee shall forward a copy of any notice from Bondowners received by it
pursuant to this paragraph to the Company.
The provisions of the second preceding paragraph are, further,
subject to the condition that any waiver by the Bank of any event of default
under the Reimbursement Agreement and a rescission and annulment of its
consequences shall constitute a waiver of the corresponding Event of Default
under the Indenture and a rescission and annulment of the consequences thereof;
provided that, the Trustee shall have received written notice from the Bank to
the effect that the Letter of Credit has been reinstated, if applicable, and is
in full force and effect (with respect to the principal of, premium, if any,
interest on, and the purchase price of, all Bonds then entitled to the benefits
of the Letter of Credit). If written notice of such event of default under the
Reimbursement Agreement shall have been given as provided herein and
<PAGE> 96
89.
if the Trustee shall thereafter have received written notice from the Bank that
such event of default shall have been waived, the Trustee shall promptly give
written notice of such waiver, rescission or annulment and of the corresponding
waiver, rescission and annulment of the Event of Default hereunder to the
Authority, the Governor, the Comptroller, the Attorney General of the State of
New York, the Company, the Bank, the Tender Agent and the Remarketing Agents,
and shall give written notice thereof by mail to all owners of outstanding
Bonds; but no such waiver, rescission and annulment shall extend to or affect
any subsequent Event of Default or impair any right or remedy consequent
thereon.
Section 10.02. Judicial Proceedings by Trustee. Upon the
happening and continuance of any Event of Default, then and in every such case
the Trustee in its discretion may, and upon the written request of the owners
of at least twenty-five percent (25%) in aggregate principal amount of the
Bonds then outstanding and receipt of indemnity to its satisfaction, shall:
(a) by suit, action or special proceeding,
enforce all rights of the Bondowners and require the
Authority, the Bank or the Company to perform its or their
duties under the Act, the Participation Agreement, the Bonds,
the Letter of Credit, the Company Note and the Indenture;
(b) bring suit upon the Bonds;
(c) by action or suit in equity require the
Authority to account as if it were the trustee of an express
trust for the Bondowners; or
(d) by action or suit in equity enjoin any acts
or things which may be unlawful or in violation of the rights
of the Bondowners.
Section 10.03. Effect of Discontinuance or Abandonment of
Proceedings. In case the Trustee shall have proceeded to enforce any right
under the Indenture and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the
Trustee, then and in every such case the Authority, the Trustee and the
Bondowners shall be restored respectively to their former positions and rights
hereunder, respectively, and all rights, remedies and powers of the Authority,
the Trustee and the Bondowners, respectively, shall continue as though no such
proceedings had been taken.
Section 10.04. Power of Bondowners to Direct Proceedings.
Anything in the Indenture to the contrary notwithstanding, the owners of a
majority in aggregate principal amount of the Bonds then outstanding hereunder
shall have the right, by an instrument in writing executed and delivered to the
Trustee, to direct the method and place of conducting all remedial proceedings
to be taken by the Trustee hereunder, subject, however, to the provisions of
Section 11.04, and provided, however, such direction shall not be in conflict
with any rule of law or with any provision of the Indenture (including, without
limitation, any provision requiring the
<PAGE> 97
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Trustee to accelerate the Bonds and draw on the Letter of Credit upon the
occurrence of an Event of Default under Section 10.01(f) or (g)) and shall not
unduly prejudice the rights of the Bondowners who are not in such majority.
The Trustee shall not be liable with respect to any action taken or omitted to
be taken by it in good faith in accordance with the direction of the owners of
a majority in aggregate principal amount of the Bonds and which is not in
conflict with the Trustee's obligation to accelerate the Bonds and draw on the
Letter of Credit upon the occurrence of an Event of Default under Section
10.01(f) or (g).
Section 10.05. Limitation on Actions by Bondowners. No owner
of any of the Bonds shall have any right to institute any suit, action or
proceeding in equity or at law for the enforcement of any trust hereunder, or
any other remedy hereunder or under the Bonds, unless such owner previously
shall have given to the Trustee written notice of an Event of Default as
hereinabove provided and unless also the owners of not less than twenty-five
percent (25%) in aggregate principal amount of the Bonds then outstanding shall
have made written request of the Trustee so to do, after the right to exercise
such powers or rights of action, as the case may be, shall have accrued, and
shall have afforded the Trustee a reasonable opportunity either to proceed to
exercise the powers hereinabove granted, or to institute such action, suit or
proceeding in its or their name; nor unless there also shall have been offered
to the Trustee security and indemnity satisfactory to it against the costs,
expenses and liabilities to be incurred therein or thereby, and the Trustee
shall not have complied with such request within a reasonable time; and such
notification, request and offer of indemnity are hereby declared in every such
case, at the option of the Trustee, to be conditions precedent to the execution
of the trusts of the Indenture or for any other remedy hereunder; it being
understood and intended that no one or more owners of the Bonds hereby secured
shall have any right in any manner whatever by such owner's or owners' action
to affect, disturb or prejudice the security of the Indenture, or to enforce
any right hereunder or under the Bonds, except in the manner herein provided,
and that all proceedings at law or in equity shall be instituted, had and
maintained in the manner herein provided and for the equal benefit of all
owners of outstanding Bonds, subject, however, to the provisions of Section
9.05. Nothing in the Indenture or in the Bonds contained shall affect or
impair the right of action, which is also absolute and unconditional, of any
owner of any Bond to enforce payment of the principal of and premium, if any,
and interest on such owner's Bond at the date of maturity and places therein
expressed.
Section 10.06. Trustee's Right to Enforce Rights in Respect
of Bonds in Own Name and Without Possession of Bonds. All rights of action
under the Indenture or under any of the Bonds which are enforceable by the
Trustee may be enforced by it without the possession of any of the Bonds, or
the production thereof at the trial or other proceedings relative thereto, and
any such suit, action or proceeding instituted by the Trustee shall be brought
in its name, as trustee, for the equal and ratable benefit of the owners of the
Bonds subject to the provisions of the Indenture.
Section 10.07. No Remedy herein Conferred upon or Reserved
Exclusive. No remedy herein conferred upon or reserved to the Trustee or to
the owners of the Bonds is
<PAGE> 98
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intended to be exclusive of any other remedy or remedies, except as provided in
Section 10.10, and each and every such remedy shall be cumulative, and shall be
in addition to every other remedy given hereunder.
Section 10.08. No Delay or Omission to be Deemed Waiver of
Default. No delay or omission of the Trustee or of any owner of the Bonds to
exercise any right or power accruing upon any default shall impair any such
right or power or shall be construed to be a waiver of any such default, or an
acquiescence therein; and every power and remedy given by this Article X to the
Trustee and to the owners of the Bonds, respectively, may be exercised from
time to time and as often as may be deemed expedient.
Section 10.09. Application of Moneys Received by Trustee
Pursuant to Article X. Any moneys or other property or assets received by the
Trustee or by any receiver pursuant to this Article X (i) shall be applied
first to the payment of the costs and expenses of the proceedings resulting in
the collection of any moneys received by the Trustee or by any receiver
pursuant to this Article X and of the expenses, liabilities and advances
incurred or made and compensation for services rendered by or on behalf of the
Trustee, including reasonable counsel fees and expenses; provided that, moneys
drawn under the Letter of Credit shall not be applied to any such payment, and
(ii) any remaining amounts shall then be applied as follows:
(a) Unless the principal of all Bonds shall have
become or shall have been declared due and payable, all such
moneys shall be applied:
First: To the payment to the Persons entitled
thereto of all installments of interest then due on
the Bonds, in the order of the maturity of the
installments of such interest including (to the
extent permitted by law) interest on overdue
installments of interest at the rate borne by the
Bonds on which such interest shall then be due, and,
if the amount available shall not be sufficient to
pay in full any particular installment or
installments, then to the payment ratably, according
to the amounts due on such installment or
installments, to the Persons entitled thereto,
without any discrimination or preference; and
Second: To the payment to the Persons entitled
thereto of the unpaid principal of and premium, if
any, on any of the Bonds which shall have become due
(other than Bonds called for redemption for the
payment of which moneys are held pursuant to the
provisions of the Indenture) in the order of their
due dates, with interest on such Bonds from the
respective dates upon which they become due and, if
the amount available shall not be sufficient to pay
in full Bonds due on any particular date, together
with such interest, then to the payment ratably,
according to the amount of principal due on such
date, to the Persons entitled thereto without any
discrimination or preference.
<PAGE> 99
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(b) If the principal of all the Bonds shall have
become or shall have been declared due and payable, all such
moneys shall be applied to the payment of the principal,
premium, if any, and interest then due and unpaid upon the
Bonds, with interest on overdue principal, premium, if any,
and interest as aforesaid, without preference or priority of
principal and premium, if any, over interest or of interest
over principal and premium, if any, or of any installment of
interest over any other installment of interest or of any Bond
over any other Bond, ratably, according to the amounts due
respectively for principal, premium, if any, and interest, to
the Persons entitled thereto without any discrimination or
preference.
(c) If the principal of all the Bonds shall have
been declared due and payable, and if such declaration shall
thereafter have been rescinded and annulled under the
provisions of this Article X, then, subject to the provisions
of paragraph (b) of this Section which shall be applicable in
the event that the principal of all the Bonds shall later
become due or be declared due and payable, the moneys shall be
applied in accordance with the provisions of paragraph (a) of
this Section.
Moneys drawn under the Letter of Credit may not be applied to
effect any payment on any Bond not entitled to the benefits thereof as provided
in Section 3.01. Whenever moneys are to be applied pursuant to the provisions
of this Section, such moneys shall be applied at such times, and from time to
time, as the Trustee shall determine, having due regard to the amount of such
moneys available for application and the likelihood of additional moneys
becoming available for such application in the future. Whenever the Trustee
shall apply such funds, it shall fix the date (which shall be an Interest
Payment Date unless it shall deem another date more suitable) upon which such
application is to be made and upon such date interest on the amount of
principal to be paid on such date shall cease to accrue. Notwithstanding the
two preceding sentences any moneys drawn under the Letter of Credit under this
Article X shall be applied by the Trustee pursuant to the provisions of this
Section 10.09 within five days after such moneys have been drawn. For the
purpose of determining the Bondowners who are entitled to such application, the
Trustee may establish a record date not more than five days before such payment
date. The Trustee shall give such notice to Bondowners by mailing in the
manner it may deem appropriate of the deposit with it of any such moneys and of
the fixing of any such payment date, and shall not be required to make payment
to the owner of any Bond until such Bond shall be presented to the Trustee for
appropriate endorsement or for cancellation if fully paid.
Section 10.10. Entirety of Agreement. The rights and
remedies of the owners of the Bonds and of the Trustee set forth in this
Article X are in lieu of the rights and remedies of owners of bonds of the
Authority set forth in Section 1865 of the Act and the provisions of such
Section 1865 are hereby abrogated with respect to the Bonds.
<PAGE> 100
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Section 10.11. Notice of Event of Default. The Trustee
shall, within 30 days after the occurrence of an Event of Default becomes known
to a Responsible Officer, give notice thereof to all Bondowners by mail in the
manner provided in Section 16.05 unless such Event of Default shall have been
cured before the giving of such notice.
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ARTICLE XI
CONCERNING THE TRUSTEE AND PAYING AGENT
Section 11.01. Appointment of Trustee; Paying Agents.
Chemical Bank is hereby appointed as Trustee and Paying Agent for the owners
from time to time of the Bonds. The Trustee hereby accepts the duties and
obligations of the Trustee and Paying Agent created by the Indenture for the
owners from time to time of the Bonds.
The provisions of this Article XI shall not affect the
Trustee's obligation to accelerate the Bonds upon the occurrence of an Event of
Default under Section 10.01(f) or (g), draw on the Letter of Credit or make any
payment of principal, premium or interest on the Bonds.
Subject to Article X and Section 11.04, and as and to the
extent provided in Sections 4.08 and 4.09 of the Participation Agreement, the
Trustee, the Paying Agent and the Tender Agent shall be entitled to
indemnification by the Company for any losses, costs, charges, expenses
(including reasonable attorneys' fees and disbursement), judgments and
liabilities incurred by the Trustee, the Paying Agent and the Tender Agent in
connection with any claims made, or any action, suit or proceeding instituted
or threatened, in connection with the transactions contemplated by the
Participation Agreement or the Indenture. The Trustee, Paying Agents and
Tender Agent, except as otherwise provided in Section 9.06, shall look solely
to the Company for such indemnification.
Section 11.02. No Responsibility for Correctness of
Statements in Indenture. The recitals, statements and representations in the
Indenture or in the Bonds contained, save only the Trustee's certificate of
authentication upon the Bonds, shall be taken and construed as made by and on
the part of the Authority, and not by the Trustee, and the Trustee does not
assume, and shall not have, any responsibility or obligation for the
correctness of any recitals, statements and representations hereof or thereof
or any other document delivered by the Authority or the Company in connection
with the issuance of the Bonds.
Section 11.03. No Responsibility for Default of Agents
Selected with Due Care, nor for Own Acts Save Willful Misconduct or Negligence.
The Trustee may execute such of the trusts or powers required of it hereunder
and perform the duties required of it hereunder as may be reasonably necessary
by or through attorneys, agents or receivers and the Trustee shall not be
answerable for the default, negligence or misconduct of any such attorney,
agent or receiver selected by it with reasonable care. The Trustee may in all
cases pay such reasonable compensation to and receive reimbursement for all
such attorneys, agents, receivers, and employees as may reasonably be employed
in connection with the trusts hereof. The Trustee may act upon the opinion or
advice of any attorney (who may be the attorney or attorneys for the Authority
or the Company), approved by the Trustee in the exercise of reasonable care.
The Trustee shall not be responsible for any loss or damage resulting from any
action or non-action
<PAGE> 102
95.
in good faith in reliance upon such opinion or advice. The Trustee shall not
be answerable for the exercise or non-exercise of any discretion or power under
the Indenture or for anything whatever in connection with the trusts herein
created, except only for its own willful misconduct or negligence. No
provision of the Indenture shall require the Trustee to expend or risk its own
funds or otherwise incur any financial liability in the performance of any of
its duties hereunder, or in the exercise of any of its rights or powers, if it
shall have reasonable grounds for believing that such funds will not be repaid
or if satisfactory indemnity against such risk or liability is not provided to
the Trustee.
Section 11.04. No Duty to Take Enforcement Action Unless so
Requested by Owners of 25% of the Bonds. Unless and until an Event of Default
shall have occurred and (i) written notice thereof shall have been given to the
Trustee or (ii) the occurrence thereof otherwise shall be known to a
Responsible Officer of the Trustee, the Trustee shall be under no obligation to
take any action in respect of any default or otherwise in respect of or toward
the execution or enforcement of any of the trusts hereby created, or to
institute, appear in or defend any suit or other proceeding in connection
therewith, unless requested in writing so to do by owners of at least
twenty-five percent (25%) in aggregate principal amount of the Bonds then
outstanding, and if in its opinion such action may tend to involve it in
expense or liability, unless furnished, from time to time as often as it may
require, with security and indemnity satisfactory to it; but the foregoing
provisions are intended only for the protection of the Trustee, and shall not
affect any discretion or power given by any provisions of the Indenture to the
Trustee to take action in respect of any default without such notice or request
from the Bondowners, or without such security or indemnity.
Notwithstanding any other provision of the Indenture or the
Participation Agreement, no right of the Trustee to indemnification shall
prevent the Trustee from (a) making payments on the Bonds when due from moneys
available to it, (b) accelerating the Bonds as required pursuant to Article X,
or (c) drawing on the Letter of Credit to make payments on the Bonds when due.
Section 11.05. Right to Rely. The Trustee shall be protected
and shall incur no liability in acting or proceeding in good faith upon any
resolution, notice, telegram, request, consent, waiver, certificate, statement,
affidavit, voucher, bond, requisition or other paper or document which it shall
in good faith believe to be genuine and to have been authorized or signed by
the proper board or person or to have been prepared and furnished pursuant to
any of the provisions of the Indenture and the Trustee may require a written
opinion from legal counsel who is reasonably acceptable to the Trustee, which
counsel may be an employee of or counsel to the Company or the Trustee,
confirming the accuracy of any such paper or document, and the Trustee shall be
under no duty to make any investigation or inquiry as to any statements
contained or matters referred to in any such instrument but may accept and rely
upon the same as conclusive evidence of the truth and accuracy of such
statements.
Section 11.06. Right to Own and Deal in Bonds and Engage
in Other
<PAGE> 103
96.
Transactions with Authority and Company. The Trustee may in good faith buy,
sell, own, hold and deal in any of the Bonds issued hereunder and secured by
the Indenture, and may join in any action which any Bondowner may be entitled
to take with like effect as if the Trustee were not a party to the Indenture.
The Trustee, either as principal or agent, may also engage in or be interested
in any financial or other transaction with the Authority or the Company, and
may act as depository, trustee, or agent for any committee or body of owners of
the Bonds secured hereby or other obligations of the Authority as freely as if
it were not Trustee hereunder.
Section 11.07. Construction of Provisions of Indenture by
Trustee. The Trustee may construe any of the provisions of the Indenture
insofar as the same may appear to be ambiguous or inconsistent with any other
provision thereof, and any construction of any such provisions hereof by the
Trustee in good faith shall be binding upon the Bondowners.
Section 11.08. Right to Resign Trust. The Trustee may at any
time and for any reason resign and be discharged of the trusts created by the
Indenture by (a) executing an instrument in writing resigning such trusts and
specifying the date when such resignation shall take effect, (b) filing the
same with the Secretary of the Authority (c) giving notice thereof in writing
to the Company not less than 60 days before the date specified in such
instrument when such resignation shall take effect, and (d) giving notice of
such resignation to Bondowners by mail in the manner provided in Section 16.05,
the mailing of said notice to occur not less than four weeks prior to the date
specified in such notice when such resignation shall take effect. Such
resignation shall take effect only upon the appointment of a successor Trustee
in accordance with the provisions of Section 11.10.
Section 11.09. Removal of Trustee. (a)The Trustee at any
time and for any reason may be removed by an instrument in writing, appointing
a successor, filed with the Trustee so removed and executed by the owners of a
majority in aggregate principal amount of the Bonds then outstanding; provided,
however, that no such removal shall become effective until the acceptance of
appointment by a successor Trustee in accordance with Section 11.13.
(b) The Trustee at any time other than during the continuance
of an Event of Default or the continuance of an event which but for the passage
of time would constitute an Event of Default and for any reason may be removed
by an instrument in writing, executed by an Authorized Officer, appointing a
successor, filed with the Trustee so removed; provided, however, that no such
removal shall become effective until the acceptance of appointment by a
successor Trustee in accordance with Section 11.13.
Section 11.10. Appointment of Successor Trustee by Bondowners
or Authority. In case at any time the Trustee shall resign, or shall be
removed, or be dissolved, or if its property or affairs shall be taken under
the control of any state or federal court or administrative body because of
insolvency or bankruptcy, or for any other reason, a vacancy shall forthwith
and ipso facto exist in the office of the Trustee, then a successor may be
appointed by the owners of a majority in aggregate principal amount of the
Bonds then outstanding, by an
<PAGE> 104
97.
instrument or instruments in writing filed with the Secretary of the Authority,
signed by such Bondowners or by their attorneys-in-fact duly authorized.
Copies of each such instrument shall be promptly delivered by the Authority to
the predecessor Trustee, to the Trustee so appointed and to the Company.
Until a successor Trustee shall be appointed by the Bondowners
as herein authorized, the Authority, by an instrument authorized by resolution,
shall appoint a Trustee to fill such vacancy. The Authority shall not appoint
a Trustee without the approval of the Company as evidenced by a certificate in
writing signed by an Authorized Company Representative, which approval shall
not be unreasonably withheld. After any appointment by the Authority, it shall
cause notice of such appointment to be mailed to the Bondowners in the manner
provided in Section 16.05. Any new Trustee so appointed by the Authority shall
immediately and without further act be superseded by a Trustee appointed by the
Bondowners in the manner above provided.
Section 11.11. Qualifications of Successor Trustee. Every
successor in the trusts hereunder appointed pursuant to the foregoing provision
shall be a bank or trust company organized and doing business under the laws of
the United States or any state or territory thereof with trust powers, shall
have a combined capital and surplus of at least $100,000,000 and shall (or the
parent corporation of such successor shall) be rated at least Baa-3 and/or P-3
or an equivalent rating by Moody's or otherwise be acceptable to Moody's and
the Authority if such a bank or trust company willing and able to accept the
trusts on customary terms can, with reasonable effort, be located.
Section 11.12. Court Appointment of Successor Trustee. In
case at any time the Trustee shall resign and no appointment of a successor
Trustee shall be made pursuant to the foregoing provisions of this Article XI
prior to the date specified in the notice of resignation as the date when such
resignation shall take effect, the Trustee, the Company or the owner of any
Bond may apply to any court of competent jurisdiction to appoint a successor
Trustee. Such court may thereupon, after such notice, if any, as it may deem
proper and prescribe, appoint a successor Trustee.
Section 11.13. Acceptance of Appointment by, and Transfer of
Trust Estate to, Successor Trustee. Any successor Trustee appointed hereunder
shall execute, acknowledge and deliver to the Authority an instrument accepting
such appointment hereunder as a fiduciary for the owners from time to time of
the Bonds and shall request the Bank to transfer the Letter of Credit to it as
successor Trustee, and thereupon such successor Trustee, without any further
act, deed or conveyance, shall become duly vested with all the estates,
property, rights, powers, trusts, duties and obligations of its predecessor in
the trust hereunder, with like effect as if originally named Trustee herein and
shall give notice thereof to the Company. Upon request of such Trustee, the
Trustee ceasing to act and the Authority shall execute and deliver an
instrument transferring to such successor Trustee all the estates, property,
rights, powers and trusts hereunder of the Trustee so ceasing to act, and the
Trustee so ceasing to act shall pay over
<PAGE> 105
98.
to the successor Trustee all moneys and other assets, including the Company
Note at the time held by it hereunder.
Section 11.14. Successor Trustee by Merger or Consolidation.
Any corporation into which any Trustee hereunder may be merged or with which it
may be consolidated, or any corporation resulting from any merger or
consolidation to which any Trustee hereunder shall be a party, or any
corporation to which any Trustee hereunder may transfer all or substantially
all of its assets, shall be the successor Trustee under the Indenture, without
the execution or filing of any paper or any further act on the part of the
parties hereto, anything herein to the contrary notwithstanding.
Section 11.15. Exercise of Rights and Powers During Event of
Default. Notwithstanding any other provisions of this Article XI, the Trustee
shall, during the existence of an Event of Default of which a Responsible
Officer of the Trustee has actual knowledge, exercise such of the rights and
powers vested in it by the Indenture and use the same degree of skill and care
in their exercise as a prudent man would use and exercise under the
circumstances in the conduct of his own affairs.
Section 11.16. Trustee may Intervene in Judicial Proceedings
Involving Authority or the Company. In any judicial proceeding to which the
Authority or the Company is a party and which in the opinion of the Trustee and
its counsel has a substantial bearing on the interests of owners of the Bonds,
the Trustee may in its own name or as trustee of an express trust intervene on
behalf of the owners of the Bonds and shall, upon receipt of indemnity
satisfactory to it, do so if requested in writing by the owners of at least
twenty-five percent (25%) in aggregate principal amount of Bonds then
outstanding if permitted by the court having jurisdiction in the premises.
Section 11.17. Paying Agents. The Authority may, with the
approval of the Company as evidenced by a certificate in writing signed by an
Authorized Company Representative, at any time or from time to time appoint one
or more additional Paying Agents for the owners from time to time of the Bonds
in the manner and subject to the conditions set forth in this Section 11.17.
Each Paying Agent shall signify its acceptance of the duties and obligations
imposed upon it by the Indenture by written instrument of acceptance deposited
with the Authority, the Trustee and the Company.
Each Paying Agent appointed in addition to the Trustee and the
Tender Agent shall be a bank or trust company duly organized under the laws of
the United States or any state or territory thereof, shall have a capital stock
and surplus aggregating at least $100,000,000 and shall (or the parent
corporation of such successor shall) be rated at least Baa-3 and/or P-3 or an
equivalent rating by Moody's or otherwise be acceptable to Moody's and the
Authority and shall be willing and able to accept the office on reasonable and
customary terms and shall be authorized by law to perform all the duties
imposed upon it by the Indenture.
<PAGE> 106
99.
Any Paying Agent may at any time resign and be discharged of
the duties and obligations created by the Indenture by giving at least 60 days'
prior written notice to the Authority, the Trustee and the Company. Any Paying
Agent may be removed at any time by an instrument filed with such Paying Agent,
the Company and the Trustee and signed by the Authority.
In the event of the resignation or removal of any Paying
Agent, such Paying Agent shall pay over, assign and deliver any moneys held by
it as Paying Agent to its successor, or if there be no successor, to the
Trustee. In the event that for any reason there shall be a vacancy in the
office of any Paying Agent, the Trustee shall act as such Paying Agent.
Each Paying Agent shall set aside, segregate and hold in a
trust account in trust solely for the benefit of the owners from time to time
of the Bonds moneys transferred to such Paying Agent for the payment of the
principal of, premium, if any, and interest on the Bonds.
Section 11.18. Appointment of Co-Trustee. It is the purpose
of the Indenture that there shall be no violation of any law of any
jurisdiction (including particularly the law of the State of New York) denying
or restricting the right of banking corporations or associations to transact
business as a trustee in such jurisdiction. It is recognized that in case of
litigation under the Indenture or the Participation Agreement and in particular
in case of the enforcement thereof upon an Event of Default, or in the case the
Trustee deems that by reason of any present or future law of any jurisdiction
it may not exercise any of the powers, rights or remedies herein granted to the
Trustee or hold title to the properties, in trust, as herein granted, or take
any action which may be desirable or necessary in connection therewith, it may
be necessary that the Trustee appoint an additional individual or institution
as a separate or co-trustee. The following provisions of this Section are
adapted to these ends.
In the event that the Trustee appoints an additional
individual or institution as a separate or co-trustee, each and every remedy,
power, right, claim, demand, cause of action, immunity, estate, title, interest
and lien expressed or intended by the Indenture to be exercised by or vested in
or conveyed to the Trustee with respect thereto shall be exercisable by and
vest in such separate or co-trustee but only to the extent necessary to enable
such separate or co-trustee to exercise such powers, rights and remedies, and
every covenant and obligation necessary to the exercise thereof by such
separate or co-trustee shall run to and be enforceable by either of them.
Should any instrument in writing from the Authority be
required by the separate or co-trustee so appointed by the Trustee for more
fully and certainly vesting in and confirming to it such properties, rights,
powers, trusts, duties and obligations, any and all such instruments in writing
shall, on request, be executed, acknowledged and delivered by the Authority.
In case any separate or co-trustee or a successor to either shall die, become
incapable of acting, resign or be removed, all the estates, properties, rights,
powers, trusts, duties and obligations of such separate or co-trustee, so far
as permitted by law, shall vest in and be exercised by the Trustee
<PAGE> 107
100.
until the appointment of a new trustee or successor to such separate or
co-trustee.
<PAGE> 108
101.
ARTICLE XII
EXECUTION OF INSTRUMENTS BY BONDOWNERS
AND PROOF OF OWNERSHIP OF BONDS
Section 12.01. Execution of Instruments; Proof of Ownership
of Bonds. Any request, direction, consent, or other instrument in writing
required or permitted by the Indenture to be signed or executed by Bondowners
may be in any number of concurrent instruments of similar tenor and shall be
signed or executed by such Bondowners in person or by agent appointed by an
instrument in writing. Proof of the execution of any such instrument and of
the ownership of Bonds shall be sufficient for any purpose of the Indenture and
shall be conclusive in favor of the Trustee with regard to any action taken by
it under such instrument if made in the following manner:
(a) The fact and date of the execution by any Person
of any such instrument may be proved by the certificate of any
officer in any jurisdiction who, by the laws thereof, has
power to take acknowledgements within such jurisdiction, to
the effect that the Person signing such instrument
acknowledged before him or her the execution thereof, or by an
affidavit of a witness to such execution.
(b) The ownership of Bonds shall be proved by the
Bond Register.
Nothing contained in this Article XII shall be construed as
limiting the Trustee to such proof, it being intended that the Trustee may
accept any other evidence of the matters herein stated which to it may seem
sufficient. Any request or consent of the owner of any Bond shall bind every
future owner of the same Bond, or any Bond issued in exchange or substitution
therefor, in respect of anything done by the Trustee in pursuance of such
request or consent.
<PAGE> 109
102.
ARTICLE XIII
INDENTURES SUPPLEMENTAL HERETO
Section 13.01. Supplemental Indentures not Requiring Consent
of Bondowners. Subject to the conditions and restrictions herein contained,
the Authority and the Trustee may, without the consent of or notice to the
Bondowners, enter into an indenture or indentures supplemental hereto, for any
one or more of the following purposes:
(a) To cure any ambiguity or formal defect or
omission in the Indenture;
(b) To grant to or confer upon the Trustee for the
benefit of the Bondowners any additional rights, remedies,
power or authority that may lawfully be granted to or
conferred upon the Bondowners or the Trustee or either of
them;
(c) To subject to the provisions of the Indenture
additional revenues, properties or collateral;
(d) To modify, amend or supplement the Indenture in
such manner as to permit the qualification of the Indenture
under any federal statute now or hereafter in effect or under
any state Blue Sky Law, and, in connection therewith, if they
so determine, to add to the Indenture, such other terms,
conditions and provisions as may be permitted or required by
said federal statute or Blue Sky Law;
(e) To modify, amend or supplement the Indenture in
such manner as to permit the qualification of the Bonds for
deposit with a Securities Depository, and, in connection
therewith, if they so determine, to add to the Indenture, such
other terms, conditions and provisions as may be required to
permit such qualification; or
(f) To provide for any change in the Indenture which
is not prejudicial to the interests of the Trustee or the
Bondowners, including but not limited to any change necessary
to obtain or maintain a rating on the Bonds from Moody's or
S&P.
Section 13.02. Supplemental Indentures Requiring Consent of
Bondowners. Except as otherwise provided in Section 13.01, any modification or
amendment of the Indenture may be made only with the consent of the owners of
not less than two-thirds in aggregate principal amount of the Bonds then
outstanding and shall be set forth in a Supplemental Indenture. No such
modification or amendment shall be made which will reduce the percentages of
aggregate principal amount of Bonds, the consent of the owners of which is
required for any such modification or amendment, or permit the creation by the
Authority of any lien prior to or
<PAGE> 110
103.
on a parity with the lien of the Indenture upon the Company Note Payments and
other funds pledged hereunder, or which will affect the times, amounts and
currency of payment of the principal of and premium, if any, and interest on
the Bonds without the consent of the owners of all Bonds then outstanding and
affected thereby.
If at any time the Authority shall request the consent of
Bondowners to the execution of any such Supplemental Indenture for any of the
purposes of this Section, the Trustee shall, upon being satisfactorily
indemnified with respect to expenses, cause notice of the proposed execution of
such Supplemental Indenture to be given as shall be reasonably requested by the
Authority and in any event mailed to Bondowners in the manner provided in
Section 16.05. Such notice shall briefly set forth the nature of the proposed
Supplemental Indenture and shall state that copies thereof are on file at the
Corporate Trust Office of the Trustee for inspection by all Bondowners. If,
within 60 days or such longer period as shall be prescribed by the Authority
following the mailing of such notice, the required consent and approval of
Bondowners is obtained, no owner of any Bond shall have any right to object to
any of the terms and provisions contained therein, or the operation thereof, or
in any manner to question the propriety of the execution thereof, or to enjoin
or restrain the Authority or the Trustee from executing the same or restrain
the Authority or the Trustee from taking any action pursuant to the provisions
thereof. Upon the execution of any such Supplemental Indenture as in this
Section permitted and provided, the Indenture shall be and be deemed to be
modified and amended in accordance therewith.
The Trustee shall consent to any such Supplemental Indenture
requiring the consent of Bondowners if the required consent of Bondowners is
obtained; provided that the Trustee may, but shall not be obligated to consent
to any Supplemental Indenture which affects its own rights, powers, duties or
obligations hereunder.
Section 13.03. Company and Bank Consent to Amendment of
Indenture. The Authority and the Trustee shall not enter into any indenture
supplemental to or amendatory of the Indenture without the prior consent of the
Company as evidenced by a certificate in writing signed by an Authorized
Company Representative and no such indenture supplemental to or amendatory of
the Indenture shall be or become effective until such consent (as so evidenced)
shall have been given by the Company. Prior to the expiration of the Letter of
Credit, the Trustee shall not enter into any indenture supplemental to or
amendatory of the Indenture without the prior written consent of the Bank,
which consent shall not be unreasonably withheld.
<PAGE> 111
104.
ARTICLE XIV
DEFEASANCE
Section 14.01. Defeasance. 1. If at any time:
(a) there shall have been delivered to the Trustee
for cancellation all the Bonds (other than any Bonds which
have been mutilated, lost, stolen or destroyed and which shall
have been replaced or paid as provided in the Indenture,
except for any such Bonds as are shown by proof satisfactory
to the Trustee to be held by bona fide owners), or
(b) with respect to all the Bonds not theretofore
delivered to the Trustee for cancellation, the whole amount of
the principal and the interest and the premium, if any, due
and payable on such Bonds then outstanding shall be paid in
accordance with the terms thereof and the terms of the
Indenture (including but not limited to Section 6.03) or
deemed to be paid as set forth below,
and provision shall also be made for paying all other sums payable hereunder,
including the Authority's, Trustee's, Tender Agent's, Remarketing Agent's,
Indexing Agent's and Paying Agent's fees and expenses, then the Trustee, in
such case, on written demand of the Authority or the Company, shall release the
Indenture with respect to such Bonds and turn over to the Company the Company
Note and turn over to the Bank the Letter of Credit, and shall execute such
documents as may be reasonably required by the Authority and the Company to
evidence such release. If the Bank certifies to the Trustee that any amount
remains unpaid under the Reimbursement Agreement, the Trustee shall pay to the
Bank any balances remaining in any fund created under the Indenture, other than
(i) moneys and Investment Obligations retained for the redemption or payment of
principal, interest or Purchase Price of Bonds which shall be held under the
Indenture for the benefit of the Owners and (ii) moneys held in the Rebate Fund
which shall be paid to the Company. Notwithstanding the foregoing, the Trustee
shall not release the Project Fund or Rebate Fund or any funds therein to the
Company until it shall have received an Opinion of Bond Counsel to the effect
that such funds may be transferred to the Company without adversely affecting
the exclusion of interest on any series of Bonds from gross income for federal
income tax purposes; and all rights and immunities of the Trustee, including
its rights to indemnification and to payment of fees and expenses under the
Indenture or the Participation Agreement, shall survive the satisfaction of the
Indenture under this Article XIV.
2. After the date that the interest rate on the Bonds is
converted to a Fixed Rate, Bonds shall be deemed to be paid whenever there
shall have been deposited with the Trustee (whether upon or prior to the
maturity or the redemption date of such Bonds) either moneys in an amount which
shall be sufficient, or noncallable obligations, not subject to prepayment,
issued or guaranteed as to full and timely payment by the United States of
America (including any certificates or any other evidence of an ownership
interest in such obligations or in specified
<PAGE> 112
105.
portions thereof, which may consist of specified portions of the principal
thereof or the interest thereon and which certificates or other evidence of an
ownership interest must be rated by the Rating Agency then rating the Bonds at
least as high as the obligations issued or guaranteed by, or backed by the full
faith and credit of, the United States of America, which obligations are held
by a custodian in safekeeping on behalf of the owners thereof) (such
noncallable obligations, certificates and other evidence are herein referred to
as "Investment Obligations") of such maturities and interest payment dates and
bearing such interest as will, without the necessity of further investment or
reinvestment of either the principal amount thereof or interest therefrom,
provide moneys which shall be sufficient, to pay when due the principal of and
premium, if any, and interest due and to become due on all such Bonds on and
prior to the redemption date or maturity date thereof, as the case may be, or a
combination of such moneys and Investment Obligations which shall be sufficient
for such purposes, and the Trustee shall have given notice to the Registered
Owners of such Bonds in the manner provided in Section 16.05 that a deposit
meeting the requirements of this paragraph has been made and stating such
maturity or redemption date upon which moneys are to be available for the
payment of the principal or redemption price, if applicable, on such Bonds;
provided, however, that neither Investment Obligations nor moneys deposited
with the Trustee pursuant to this paragraph nor principal or interest payments
on any Investment Obligations shall be withdrawn, or used for any purpose other
than, and shall be held in trust for, the payment of the principal of and
premium, if any, and interest on such Bonds.
3. Prior to the date that the interest rate on the Bonds is
converted to a Fixed Rate, Bonds shall be deemed to be paid whenever (i) there
shall have been deposited with the Trustee in the Bond Fund, Available Moneys
in an amount which shall be sufficient, without the necessity of further
investment or reinvestment of either the principal amount thereof or interest
therefrom, to pay when due the principal of, premium, if any, and interest due
and to become due on the Bonds (computed at the maximum interest rate that may
become applicable to the Bonds) on and prior to the redemption date or maturity
date thereof, as the case may be, provided, however, if the Bonds are subject
to optional or mandatory tender for purchase prior to the redemption date or
maturity date thereof, as the case may be, such deposit also must be in an
amount which shall be sufficient, without the necessity of such further
investment or reinvestment, to pay when due the Purchase Price which may become
applicable to the Bonds prior to the redemption date or maturity date, as the
case may be, and (ii) any Rating Agency then rating the Bonds shall have
received both an opinion of a nationally recognized accounting firm as to the
sufficiency of the deposit in clause (i), without the necessity of further
investment or reinvestment, and an unqualified opinion of counsel experienced
in bankruptcy matters and satisfactory to the Trustee and to Moody's, if the
Bonds are then rated by Moody's, or to S&P, if the Bonds are then rated by S&P,
to the effect that the application of such Available Moneys to the payment of
principal of, premium, if any, and interest on the Bonds would not result in a
preferential payment pursuant to the provisions of Section 547 of the United
States Bankruptcy Code, 11 U.S.C. Sections 101, et seq.; and, if the Bonds are
to be redeemed the Trustee shall have given, or shall have received, in form
satisfactory to it, irrevocable instructions to give, on a date in accordance
with the provisions of Article VIII, notice of redemption of the Bonds to
<PAGE> 113
106.
Bondowners; provided, however, that if the Trustee shall not have given notice
of redemption to the Bondowners because such notice is not yet due, then the
Trustee shall give notice to the Registered Owners of such Bonds in the manner
provided in Section 16.05 that a deposit meeting the requirements of this
paragraph has been made and stating such maturity or redemption date upon which
moneys are to be available for the payment of principal or redemption price, if
applicable, on such Bonds. Moneys so deposited with the Trustee shall not be
withdrawn or used for any purpose other than, and shall be held in trust for,
the payment of the principal of, premium, if any, and interest on, the Bonds or
for the payment of the Purchase Price of Bonds or authorized denominations
thereof, in accordance with Section 2.05; provided that such moneys, if not
then needed for such purpose, shall, to the extent practicable, upon written
direction of the Company be invested and reinvested in Investment Obligations
maturing on or prior to the earlier of (i) the date moneys may be required for
the purchase of Bonds pursuant to Section 2.05 or (ii) the date moneys may be
required to pay principal, premium, if any, or interest on the Bonds as
evidenced by an opinion of a nationally recognized accounting firm or such
other evidence as may be acceptable to the Trustee. Subject to the provisions
of the next succeeding sentence and the last sentence of Section 14.01.1,
neither the Company nor the Authority shall have any interest in, or ability to
withdraw amounts from, any moneys so deposited with the Trustee. Amounts
determined by the Trustee to be in excess of the amount necessary to pay the
principal of, premium, if any, and interest (computed at the maximum interest
rate that may become applicable to the Bonds on or prior to the redemption date
or maturity date, as applicable) on, the Bonds or the Purchase Price thereof
(computed at the maximum interest rate that may become applicable to the Bonds
on or prior to the redemption date or Maturity Date, as applicable) pursuant to
Section 2.05 shall, upon a written direction of the Company, be paid over to
the Company, as received by the Trustee, free and clear of any trust, lien or
pledge.
<PAGE> 114
107.
ARTICLE XV
REMARKETING AGENTS; REMARKETING OF BONDS; INDEXING AGENT;
TENDER AGENT
Section 15.01. Appointment and Duties of Remarketing Agents.
The Authority has appointed, with the approval of the Company, Lehman Brothers
Inc. as the initial Remarketing Agent (the "Remarketing Agent") and Dillon,
Read & Co. Inc. as the initial Co-Remarketing Agent (the "Co-Remarketing
Agent") for the Bonds (the Remarketing Agent and the Co-Remarketing Agent shall
hereafter be collectively referred to as the "Remarketing Agents"). Each
Remarketing Agent shall designate to the Trustee its principal office and
signify its acceptance of the duties and obligations imposed upon it hereunder
by a written instrument of acceptance delivered to the Authority, the Company
and the Trustee under which such Remarketing Agent will agree particularly to
(i) perform its obligations under Section 2.03 with respect to the
determination of the Weekly Rate, the Semi-Annual Rate, the Medium-Term Rate,
the Money Market Municipal Rate, and the Fixed Rate (ii) perform its
obligations under Section 2.06 with respect to any Bond delivered or deemed to
have been delivered to the Tender Agent for purchase pursuant to Section 2.05,
and (iii) keep books and records with respect to its activities hereunder as
shall be consistent with prudent industry practice and to make such books and
records available for inspection by the Authority, the Trustee, the Company and
the Bank at all reasonable times. Such acceptance shall include a designation
of one Remarketing Agent as the "Remarketing Representative" who shall act on
behalf of the other Remarketing Agent(s) and the acceptance by each Remarketing
Agent of the determinations of the Remarketing Representative.
Each Remarketing Agent acts as an agent for the purchasers of
remarketed Bonds and not as an agent of the Authority or the Company in
connection with any moneys delivered to it for the purchase of Bonds.
The Authority shall cooperate with the Trustee, the Tender
Agent and the Company to cause the necessary arrangements to be made and to be
thereafter continued whereby funds from the sources specified herein and in the
Participation Agreement will be made available for the purchase of Bonds
presented at the Corporate Trust Office of the Tender Agent and whereby Bonds
executed by the Authority and authenticated by the Trustee shall be made
available to the Tender Agent to the extent necessary for delivery pursuant to
Section 2.07.
Section 15.02. Qualifications of a Remarketing Agent. Each
Remarketing Agent shall be a commercial bank or member of the National
Association of Securities Dealers, Inc., having a capitalization of at least
$25,000,000 and authorization by law to perform all the duties imposed upon it
by the Indenture (provided that to qualify as a successor Remarketing Agent,
such successor, or the parent corporation of such successor, shall be rated at
least Baa-3 and/or P-3 or an equivalent rating by Moody's or otherwise be
acceptable to Moody's and the Authority). Subject to the provisions of the
next succeeding paragraph, a Remarketing Agent
<PAGE> 115
108.
may at any time resign and be discharged of the duties and obligations created
by the Indenture by giving at least thirty (30) days' notice to the Authority,
the Company and the Trustee. A Remarketing Agent may be removed upon 30 days'
notice, upon written request of the Company, by an instrument, signed by the
Authority, filed with the Company, each Remarketing Agent (if more than one),
the Indexing Agent, the Tender Agent, the Trustee and the Bank.
In the event that a Remarketing Agent shall resign or be
removed, and the Authority shall not have appointed a successor as Remarketing
Agent and there are no other Remarketing Agents continuing to serve hereunder,
then the last such Remarketing Agent or Remarketing Agent to resign or be
removed notwithstanding the provisions of the first paragraph of this Section
15.02, shall continue as the Remarketing Agent solely for the purpose of
determining the interest rate to be borne by the Bonds until the appointment by
the Authority of a successor Remarketing Agent.
Section 15.03. Appointment and Duties of Indexing Agents.
The Authority shall, with the approval of the Company, appoint the Indexing
Agent for the Bonds, subject to the conditions set forth in this Section.
There may be separate Indexing Agents for the purpose of calculating each of
the interest indices set forth in Section 1.01. The Indexing Agent shall
designate to the Trustee its principal office and signify its acceptance of the
duties and obligations imposed upon it hereunder by a written instrument of
acceptance delivered to the Authority, the Trustee, the Company and the
Remarketing Agents under which the Indexing Agent will agree, particularly:
(a) to compute the Weekly Rate Index, Semi-Annual Rate
Index, the Medium-Term Rate Index, the Money Market Municipal Rate
Index or the Fixed Rate Index, as the case may be, pursuant to and in
accordance with Section 2.03, and when the Bonds bear interest at the
related Rate, to give written notice to the Trustee, the Remarketing
Agents and the Company of such index on the date of the computation
thereof; and
(b) to keep such books and records as shall be consistent
with prudent industry practice and to make such books and records
available for inspection by the Authority, the Trustee, the
Remarketing Agents and the Company at all reasonable times.
The Indexing Agent will perform the duties provided for in
Section 2.03. Whenever the Indexing Agent makes a computation under that
Section, it will promptly notify in writing the Trustee, the Authority, the
Remarketing Agents and the Company of the results and date of computation. The
Indexing Agent will keep adequate records pertaining to the performance of its
duties and allow the Trustee, the Authority, the Remarketing Agents and the
Company to inspect the records at reasonable times.
<PAGE> 116
109.
Section 15.04. Qualifications of Indexing Agents. The
Indexing Agent shall be a commercial bank, a member of the National Association
of Securities Dealers, Inc. or a nationally recognized municipal securities
evaluation service authorized by law to perform all the duties imposed upon it
by the Indenture. The Indexing Agent may at any time resign and be discharged
of the duties and obligations created by the Indenture by giving at least sixty
(60) days' written notice to the Authority, the Company, the Remarketing Agents
and the Trustee. The Indexing Agent may be removed at any time, at the written
direction of the Company, by an instrument, signed by the Authority, filed with
the Company, the Indexing Agent, the Remarketing Agents, the Trustee and the
Bank.
In the event that the Authority shall fail to appoint an
Indexing Agent hereunder or the Indexing Agent shall resign or be removed, or
be dissolved, or if the property or affairs of the Indexing Agent shall be
taken under the control of any state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, and the Authority
shall not have appointed its successor as Indexing Agent, the Remarketing
Representative, notwithstanding the provisions of the first paragraph of this
Section 15.04, shall ipso facto be deemed to be the Indexing Agent solely for
the purpose of determining the interest rate to be borne by the Bonds until the
appointment by the Authority of the Indexing Agent or successor Indexing Agent,
as the case may be.
Section 15.05. Dealings With the Authority and the Company.
The Remarketing Agents and the Indexing Agent may in good faith buy, sell, own,
hold and deal in any of the Bonds issued hereunder, and may join in any action
which any Bondowner may be entitled to take with like effect as if it did not
act in any capacity hereunder. The Remarketing Agents and the Indexing Agent,
either as principal or agent, may also engage in or be interested in any
financial or other transaction with the Authority or the Company, and may act
as depository, trustee or agent for any committee or body of Bondowners secured
hereby or other obligations of the Authority as freely as if it did not act in
any capacity hereunder.
Section 15.06. Tender Agent. The Authority shall, with the
approval of the Company and the Bank, appoint the Tender Agent for the Bonds,
subject to the conditions set forth in Section 15.07. The Tender Agent shall
designate its Corporate Trust Office and signify its acceptance of the duties
and obligations imposed upon it hereunder by a written instrument of acceptance
delivered to the Authority, the Trustee, the Remarketing Agents, the Indexing
Agent, the Bank and the Company under which the Tender Agent will agree,
particularly to perform its obligations under Article II and to request the
Trustee to draw on the Letter of Credit as provided in Section 6.07.1.
Notwithstanding anything to the contrary in the Indenture, the Tender Agent
shall not invest any moneys it receives from such a draw on the Letter of
Credit.
The Tender Agent may designate from time to time a different
Corporate Trust Office within The City of New York, New York, by a written
instrument delivered to the Authority, the Trustee, the Remarketing Agents, the
Indexing Agent, the Bank and the
<PAGE> 117
110.
Company.
The Tender Agent undertakes to perform such duties, and only
such duties, as are specifically set forth in the Indenture and in any written
instrument of acceptance of duties hereunder and no implied covenants shall be
read into the Indenture against the Tender Agent.
Insofar as such provisions may be applicable, the Tender Agent
shall enjoy the same protective provisions in the performance of its duties
hereunder as are specified in Sections 11.03, 11.05, 11.06, 11.07 and 11.14
with respect to the Trustee.
Section 15.07. Qualifications of Tender Agent; Resignation;
Removal. Any successor Tender Agent shall be a bank or trust company or a
corporation duly organized under the laws of the United States of America or
any state or territory thereof, which has an office in The City of New York,
New York, and having a combined capital stock, surplus and undivided profits of
at least $100,000,000 and authorized by law to perform all the duties imposed
upon it by the Indenture. The Tender Agent may at any time resign and be
discharged of the duties and obligations created by the Indenture by giving at
least sixty (60) days' notice to the Authority, the Trustee, the Remarketing
Agents, the Indexing Agent and the Company. The Tender Agent may be removed at
any time, at the request of the Company, by an instrument, signed by the
Authority, delivered to the Tender Agent, and to the Trustee, the Remarketing
Agents, the Bank and the Indexing Agent. Any such resignation or removal of
the Tender Agent shall not take effect until the appointment of a successor
Tender Agent.
In the event of the resignation or removal of the Tender
Agent, the Tender Agent shall pay over, assign and deliver any moneys and Bonds
held by it in such capacity to its successor (provided that to qualify as a
successor Tender Agent, such successor, or the parent corporation of such
successor, shall be rated at least Baa-3 and/or P-3 or an equivalent rating by
Moody's or otherwise be acceptable to Moody's and the Authority) or, if there
be no successor, to the Trustee.
In the event that the Tender Agent shall resign or be removed,
or be dissolved, or if the property or affairs of the Tender Agent shall be
taken under the control of the state or federal court or administrative body
because of bankruptcy or insolvency, or for any other reason, a successor may
be appointed by the Authority with the prior written approval of the Bank and
the Trustee. Any such successor shall have an office in The City of New York,
New York, and shall be acceptable to the Trustee. Written notice of such
appointment shall immediately be given by the Company to the Trustee and the
Remarketing Agents and the Trustee shall cause written notice of such
appointment to be given to the owners of the Bonds. Any successor Tender Agent
shall execute and deliver an instrument accepting such appointment and
thereupon such successor, without any further act, deed or conveyance, shall
become fully vested with all rights, powers, duties and obligations of its
predecessor, with like effect as if originally named as Tender Agent, but such
predecessor shall nevertheless, on the written request of the Authority or the
Trustee, or of the successor, execute and deliver such instruments
<PAGE> 118
111.
and do such other things as may reasonably be required to more fully and
certainly vest and confirm in such successor all rights, powers, duties and
obligations of such predecessor. If no successor Tender Agent has accepted
appointment in the manner provided above within 90 days after the Tender Agent
has given notice of its resignation as provided above, the Tender Agent may
petition any court of competent jurisdiction for the appointment of a temporary
successor Tender Agent; provided that any Tender Agent so appointed shall
immediately and without further act be superseded by a Tender Agent appointed
by the Authority as provided above. The Tender Agent shall not be required to
take or be deemed to have notice of any Event of Default or of any event which
the lapse of time or giving of notice, or both, would constitute an Event of
Default unless an officer in its Corporate Trust Office shall have received
written notice thereof from the Authority, the Bank or the Trustee.
<PAGE> 119
112.
ARTICLE XVI
MISCELLANEOUS
Section 16.01. Parties in Interest. Except as herein
otherwise specifically provided, nothing in the Indenture expressed or implied
is intended or shall be construed to confer upon any Person other than the
Company, the Authority, the Trustee, the Tender Agent, the Bank and the owners
of the Bonds hereunder, any right, remedy or claim under or by reason of the
Indenture, the Indenture being intended to be for the sole and exclusive
benefit of the Company, the Authority, the Trustee, the Bank and the owners of
the Bonds.
Section 16.02. Severability. In case any one or more of the
provisions of the Indenture or of the Bonds issued hereunder shall, for any
reason, be held to be illegal or invalid, such illegality or invalidity shall
not affect any other provisions of the Indenture or of the Bonds, and the
Indenture and the Bonds shall be construed and enforced as if such illegal or
invalid provisions had not been contained therein.
Section 16.03. No Individual Liability. No covenant or
agreement contained in the Bonds or in the Indenture shall be deemed to be the
covenant or agreement of any member, agent or employee of the Authority in his
or her individual capacity, and neither the members of the Authority nor any
official executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof.
Section 16.04. Payment Due on Saturdays, Sundays and
Holidays. In any case where the date of maturity of interest on or principal
of the Bonds or the date fixed for redemption of any Bonds or any Mandatory
Purchase Date shall be on a day other than a Business Day, then payment of
interest or principal and premium, if any, or Purchase Price, need not be made
on such date but may be made (without additional interest) on the next
succeeding Business Day, with the same force and effect as if made on the date
of maturity or the date fixed for redemption or the Mandatory Purchase Date.
Section 16.05. Notices. (a) All notices, certificates,
requests or other communications hereunder shall be sufficiently given and
shall be deemed given, unless otherwise required by the Indenture, when mailed
by first class mail, postage prepaid, addressed as follows: If to the
Authority, at 2 Empire State Plaza, Suite 1901, Albany, New York 12223,
Attention: President; if to the Company, at 175 East Old Country Road,
Hicksville, New York, Attention: Treasurer; if to the Trustee, at 450 West 33rd
Street, 15th Floor, New York, New York 10001, Attention: Corporate Trustee
Administration Department; if to the Tender Agent, at 55 Water Street, Room
234, North Building, New York, New York 10041, Attention: Corporate Tellers; if
to the Bank, at its address specified in the Reimbursement Agreement; and, if
to the Indexing Agent or Remarketing Agents, at the address specified in their
respective acceptances delivered pursuant to Article XV. A duplicate copy of
each notice, certificate, request or other communication given hereunder to the
Authority, the Company, the Trustee,
<PAGE> 120
113.
the Bank, the Indexing Agent, the Tender Agent or the Remarketing Agents shall
also be given to the Authority, the Company and the Trustee. The Company, the
Authority, the Trustee, the Bank, the Remarketing Agents and the Indexing Agent
may, by notice given hereunder, designate any further or different addresses to
which subsequent notices, certificates, requests or other communications shall
be sent. Any notice or other communication to be mailed to Registered Owners
of the Bonds hereunder shall be mailed by first class mail in a sealed
envelope, postage prepaid, addressed to each such Bondowner as his or her
address last appears on the Bond Register. In case, by reason of the
suspension of or irregularities in regular mail service, it shall be
impractical to mail notice to the Registered Owners of Bonds of any event when
such notice is required to be given pursuant to any provision of the Indenture,
then any manner of giving such notice as shall be satisfactory to the Trustee
shall be deemed to be a sufficient giving of such notice.
(b) So long as the Bonds shall be rated by Moody's, the
Trustee shall furnish to Moody's at 99 Church Street, New York, New York, Attn:
Structured Transactions Group or such other office as Moody's may designate to
the Trustee, and if the Bonds shall be rated by S&P, the Trustee shall furnish
to S&P, (i) a copy of each amendment to the Indenture, Participation Agreement,
Letter of Credit, and Reimbursement Agreement of which it has knowledge, (ii)
notice of the termination, extension or expiration of any Letter of Credit,
(iii) notice of the payment of all the Bonds, (iv) notice of conversion to a
Medium-Term Rate Period of greater than three years duration or a Fixed Rate,
and (v) notice of any successor Trustee, Paying Agent, Tender Agent or
Remarketing Agents; provided, however, that failure by the Trustee to notify
Moody's or S&P shall not result in any liability on the part of the Trustee or
affect the validity of such documents or actions.
SECTION 16.06. GOVERNING LAW. THE LAW OF THE STATE OF NEW
YORK SHALL GOVERN THE CONSTRUCTION OF THE INDENTURE AND OF THE BONDS.
Section 16.07. Effective Date; Counterparts. The Indenture
shall become effective on delivery. The Indenture may be executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument.
Section 16.08. References to the Bank. After the
establishment of a Fixed Rate for the Bonds and upon receipt by the Trustee of
notice from the Bank that all amounts payable to the Bank with respect to draws
under the Letter of Credit have been received, all references in the Indenture
to the Bank shall be ineffective.
Section 16.09. Date for Identification Purposes Only. The
date of the Indenture shall be for identification purposes only and shall not
be construed to imply that the Indenture was delivered as of any date other
than the actual date of the delivery hereof by the parties hereto.
<PAGE> 121
114.
IN WITNESS WHEREOF, the Authority has caused the Indenture to
be executed by its Chair and its corporate seal to be hereunto affixed and
attested by its Secretary, and the Trustee has caused the Indenture to be
executed by one of its Vice Presidents or Assistant Vice Presidents and
attested by one of its authorized officers or persons, all as of the date first
above written.
NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT
AUTHORITY
By /s/ FRANCIS J. MURRAY, JR.
----------------------------
Chair
[SEAL]
Attest:
/s/ HOWARD JACK
--------------------------
Secretary
CHEMICAL BANK
AS TRUSTEE
By /s/ GREG McFARLANE
-------------------
[SEAL]
Attest:
/s/ RICH LORENZEN
--------------------------
<PAGE> 122
115.
STATE OF NEW YORK )
: ss.:
CITY OF NEW YORK )
On the 26th of October, 1994 before me personally came Greg
McFarlane and Rich Lorenzen, to me known, who, being by me duly sworn, did
depose and say that they are a(n) Vice President and a(n) Senior Trust Officer,
respectively, of Chemical Bank, the Trustee, described in and which executed
the above instrument; that they know the seal of said Trustee; that the seal
affixed to said instrument is such corporate seal; that it was so affixed by
authority of the Corporate Trust Committee of the Board of Directors of said
Trustee, and that they signed their names thereto by like authority.
/s/ SANDRA EMIGHOLZ
-------------------------------
Notary Public
Sandra Emigholz
Notary Public, State of New York
No. 43-4743002
Qualified in Richmond County
Commission Expires April 30, 1995
<PAGE> 123
116.
STATE OF NEW YORK )
: ss.:
COUNTY OF ALBANY )
On the 23rd day of October, 1994, before me personally came
FRANCIS J. MURRAY, JR., to me known, who being by me duly sworn, did depose and
say that he is Chair of New York State Energy Research and Development
Authority, the Authority described in and which executed the above instrument
and that he signed his name thereto by authority of the members of said
Authority.
/s/ JACQUELYN L. JERRY
--------------------------------
Notary Public
JACQUELYN L. JERRY
Notary Public, State of New York
No. 4953824
Qualified in Albany County
Commission Expires July 31, 1995
STATE OF NEW YORK )
: ss.:
COUNTY OF ALBANY )
On the 27th day of October, 1994, before me personally came
Howard A. Jack, to me known, who being by me duly sworn, did depose and say
that he is Secretary of New York State Energy Research and Development
Authority, the Authority described in and which executed the above instrument;
that he knows the seal of said Authority, the Authority described in and which
executed the above instrument; that he knows the seal of said Authority; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by authority of the members of said Authority, and that he signed his
name thereto by like authority.
/s/ JACQUELYN L. JERRY
--------------------------------
Notary Public
JACQUELYN L. JERRY
Notary Public, State of New York
No. 4953824
Qualified in Albany County
Commission Expires July 31, 1995
<PAGE> 124
EXHIBIT A
[Intentionally Omitted]
A-1
<PAGE> 125
EXHIBIT B
NOTICE OF ELECTION TO RETAIN BOND(2)
FOLLOWING A MANDATORY PURCHASE DATE
[Name and Address
of Tender Agent]
Attention: Bond Tender Unit
Ladies and Gentlemen:
This notice is being sent to you in your capacity as Tender
Agent under the Indenture of Trust (the "Indenture"), dated as of October 1,
1994, between New York State Energy Research and Development Authority (the
"Authority") and Chemical Bank as Trustee (the "Trustee"), relating to the
Authority's $50,000,000 aggregate principal amount Electric Facilities Revenue
Bonds (Long Island Lighting Company Project), 1994 Series A (the "Bonds"). You
are hereby notified that:
1. The undersigned is the owner of Bond No.(s)
__________ outstanding under the Indenture in the principal amount(s) of
$__________.
2. The undersigned's address is_______________________.
3. The undersigned has received a notice from the
Trustee that the Bonds are required to be tendered on the Mandatory Purchase
Date for purchase on the Mandatory Purchase Date as a result of the matters
discussed in such notices.
4. The undersigned elects to retain Bond No.(s)________
in the principal amount(s) of $__________ (or any portion thereof in an
authorized denomination) and will not tender such Bond(s) (or portion thereof
as aforesaid) on the Mandatory Purchase Date (or prior thereto) for purchase
pursuant to Section 2.05(e)(4) of the Indenture.
5. The undersigned agrees to surrender such Bond(s) to
be retained by the undersigned to [Name of Trustee], as Trustee, on the
Mandatory Purchase Date in exchange for a replacement Bond or Bonds bearing the
appropriate legend and in the following denomination(s): ____________________.
------------------------------
(2) Note: Owners of Bonds may not elect to retain (i) if the Bonds currently
bear interest at a Money Market Municipal Rate and (ii) unless the Bonds
continue to be secured by a Letter of Credit after the Mandatory Purchase
Date or have been converted to a Fixed Rate, as more particularly set forth
in Section 2.05(e) of the Indenture.
B-1
<PAGE> 126
6. The undersigned acknowledges that this notice of
election is irrevocable and that the events specified in the notice from the
Trustee referred to in Paragraph 3 above are to occur.
7. The undersigned acknowledges that the rating assigned
by Moody's or S&P, if any, to the Bonds may be lowered or withdrawn as a result
of the matters described in the notice from the Trustee referred to in
Paragraph 3 above.
8. All capitalized terms not otherwise defined herein
shall have the meaning given to such terms in the Indenture.
Dated:
------------------------
------------------------------- ---------------------------------------
Witness
Name of owner as it is written on
the face of the above-identified Bonds,
in every particular without alteration,
enlargement or any change whatsoever.
B-2
<PAGE> 127
EXHIBIT C
REQUISITION CERTIFICATE
Long Island Lighting Company (the "Company") hereby requests
Chemical Bank, as Trustee, under the Indenture of Trust relating to New York
State Energy Research and Development Authority's (the "Authority") Electric
Facilities Revenue Bonds (Long Island Lighting Company Project), 1994 Series A
dated as of October 1, 1994 (the "Indenture"), to withdraw $__________ from the
Construction Account in the Project Fund established under the Indenture for
purposes permitted by Section 5.03 thereof. In connection with this
withdrawal, the Company states as follows:
1. This requisition relates to the Bond Proceeds
Sub-Account of the separate account in the Project Fund relating to the Project
(as defined in the Indenture).
2. The number of this requisition is No. _____.
3. Payments aggregating $__________ are due to the
following persons in the following amounts for expenditures incurred in
connection with the Project:
Person Amount Item
4. Payment is due to the Company in the total amount of
$__________ in reimbursement for amounts paid by the Company in connection with
the Project as shown on the Schedule attached hereto. Deposit such payment by
wire transfer to the _______________.
5. Each amount referred to in paragraphs 3 and 4 hereof
will be used to pay, or reimburse the Company for, a Cost of Construction of
such Project and is a proper charge against the separate account for such
Project in the Project Fund.
6. None of the items for which the disbursement is
requested has formed the basis for any disbursement heretofore made from the
Project Fund.
7. The disbursement will not be used in a manner that
would result in a violation of any representation, warranty or covenant
contained in Section 5.04 of the Participation Agreement or in the Tax
Regulatory Agreement.
C-1
<PAGE> 128
8. No "event of default" as defined in the Participation
Agreement has occurred and is continuing and no event which with the lapse of
time alone would become such a default has occurred and is continuing.
9. No "event of default" as defined in the Indenture has
occurred and is continuing and no event which with the lapse of time alone
would become such a default has occurred and is continuing.
Capitalized terms used in this requisition are used as defined
in the Indenture.
I am an Authorized Company Representative.
LONG ISLAND LIGHTING COMPANY
By:
----------------------------
Name:
Title:
C-2
<PAGE> 129
================================================================================
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
AND
LONG ISLAND LIGHTING COMPANY
---------------------------------------------
PARTICIPATION AGREEMENT
---------------------------------------------
Dated as of October 1, 1994
================================================================================
- relating to -
Electric Facilities Revenue Bonds
(Long Island Lighting Company Project), 1994 Series A
<PAGE> 130
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION; EFFECTIVE DATE
AND DURATION OF PARTICIPATION AGREEMENT
Section 1.01. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.02. Rules of Construction. . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.03. Effective Date of Participation Agreement; Duration of
Participation Agreement. . . . . . . . . . . . . . . . . . . . . . . . 3
ARTICLE II
REPRESENTATIONS
Section 2.01. Representations and Warranties by the Authority. . . . . . . . . . . . 4
Section 2.02. Representations and Warranties by the Company. . . . . . . . . . . . . 4
ARTICLE III
CONSTRUCTION OF THE PROJECT;
ISSUANCE OF BONDS
Section 3.01. Construction of the Project . . . . . . . . . . . . . . . . . . . . . . 6
Section 3.02. Sale of Bonds and Deposit of Proceeds; Liability Under Bonds. . . . . . 6
Section 3.03. Disbursements from Project Fund and Rebate Fund . . . . . . . . . . . . 7
Section 3.04. Revision of Construction Plans . . . . . . . . . . . . . . . . . . . . 7
Section 3.05. Certification of Completion of Project . . . . . . . . . . . . . . . . 8
Section 3.06. Payment of Cost of Construction of the Project in
Event Project Fund Inadequate. . . . . . . . . . . . . . . . . . . . . 8
Section 3.07. No Interest in Project Conferred. . . . . . . . . . . . . . . . . . . . 8
Section 3.08. Operation, Maintenance and Repair. . . . . . . . . . . . . . . . . . . 8
Section 3.09. Investment of Moneys in Funds Under the Indenture. . . . . . . . . . . 9
Section 3.10. Agreement not to Exercise Option to Convert to Fixed Rate
Absent Specified Rating. . . . . . . . . . . . . . . . . . . . . . . . 9
Section 3.11. Securities Depository. . . . . . . . . . . . . . . . . . . . . . . . . 9
</TABLE>
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ARTICLE IV
COMPANY NOTE AND PAYMENTS; LETTER OF CREDIT
Section 4.01. Execution and Delivery of Company Note to Trustee. . . . . . . . . . . . 10
Section 4.02. Redemption of Bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . 10
Section 4.03. Obligation for Payment Absolute; Deficiencies. . . . . . . . . . . . . . 10
Section 4.04. Administration Fees; Expenses, Etc. . . . . . . . . . . . . . . . . . . . 11
Section 4.05. Compensation of Trustee, Paying Agent, Remarketing Agents,
Indexing Agent and Tender Agent . . . . . . . . . . . . . . . . . . . . . 11
Section 4.06. Project Not Security for Bonds. . . . . . . . . . . . . . . . . . . . . . 12
Section 4.07. Payment of Taxes and Assessments; No Liens or Charges. . . . . . . . . . 12
Section 4.08. Indemnification of Authority, Trustee, Tender Agent, Paying Agent,
Remarketing Agents and Indexing Agent. . . . . . . . . . . . . . . . . . 12
Section 4.09. Company to Pay Attorneys' Fees and Disbursements. . . . . . . . . . . . . 13
Section 4.10. No Abatement of Administration Fees and Other Charges. . . . . . . . . . 13
Section 4.11. Payment to Tender Agent. . . . . . . . . . . . . . . . . . . . . . . . . 13
Section 4.12. The Letter of Credit. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
ARTICLE V
SPECIAL COVENANTS
Section 5.01. No Warranty as to Suitability of Project . . . . . . . . . . . . . . . . 15
Section 5.02. Authority's Rights to Inspect Project and Plans and Specifications . . . 15
Section 5.03. Company Consent to Amendment of Indenture . . . . . . . . . . . . . . . . 15
Section 5.04. Tax Covenant . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Section 5.05. Company Agrees to Perform Obligations Imposed by Indenture . . . . . . . 15
Section 5.06. Maintenance of Office or Agency of Company . . . . . . . . . . . . . . . 15
Section 5.07. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.08. Payment of Taxes and Other Charges . . . . . . . . . . . . . . . . . . . 16
Section 5.09. Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.10. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Section 5.11. Proper Books of Record and Account . . . . . . . . . . . . . . . . . . . 17
Section 5.12. Certificates as to Defaults . . . . . . . . . . . . . . . . . . . . . . . 17
Section 5.13. Company Not to Permit Hindrance or Delay of Payment of Company Note . . . 17
Section 5.14. Corporate Existence, Consolidation, Merger or Sale of Assets . . . . . . 17
Section 5.15. Financial Statements of Company . . . . . . . . . . . . . . . . . . . . . 18
Section 5.16. Compliance with Laws . . . . . . . . . . . . . . . . . . . . . . . . . . 18
</TABLE>
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ARTICLE VI
DEFAULTS BY COMPANY; REMEDIES
Section 6.01. Events of Default; Acceleration . . . . . . . . . . . . . . . . . . . . 19
Section 6.02. Certain Events of Default; Authority or Trustee May Take
Certain Actions . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
Section 6.03. Judicial Proceedings by Trustee . . . . . . . . . . . . . . . . . . . . 21
ARTICLE VII
MISCELLANEOUS
Section 7.01. Disposition of Amounts After Payment of Bonds . . . . . . . . . . . . . 22
Section 7.02. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.03. Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.04. References to the Bank . . . . . . . . . . . . . . . . . . . . . . . . 22
Section 7.05. Amendment of Participation Agreement . . . . . . . . . . . . . . . . . 23
Section 7.06. Assignment by Authority . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.07. Participation Agreement Supersedes Any Prior Agreements . . . . . . . . 23
Section 7.08. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.09. Severability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
Section 7.10. New York Law to Govern . . . . . . . . . . . . . . . . . . . . . . . . 24
EXHIBIT A DESCRIPTION OF ELECTRIC FACILITIES . . . . . . . . . . . . . . . . . . A-1
EXHIBIT B DESCRIPTION OF OTHER FACILITIES . . . . . . . . . . . . . . . . . . . . B-1
EXHIBIT C PROMISSORY NOTE . . . . . . . . . . . . . . . . . . . . . . . . . . . . C-1
</TABLE>
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<PAGE> 133
This PARTICIPATION AGREEMENT, dated as of October 1, 1994,
between NEW YORK STATE ENERGY RESEARCH AND DEVELOPMENT AUTHORITY, a body
corporate and politic, constituting a public benefit corporation, established
and existing under and by virtue of the laws of the State of New York (the
"Authority"), and LONG ISLAND LIGHTING COMPANY, a corporation duly organized
and existing and qualified to do business as a public utility under the laws of
the State of New York (the "Company"),
W I T N E S S E T H :
WHEREAS, pursuant to special act of the Legislature of the
State of New York (Title 9 of Article 8 of the Public Authorities Law of New
York, as from time to time amended and supplemented, herein called the "Act"),
the Authority has been established, as a body corporate and politic,
constituting a public benefit corporation; and
WHEREAS, pursuant to the Act, the Authority is empowered to
contract with any power company to participate in the construction of
facilities for the furnishing of electricity to the extent required by the
public interest in development, health, recreation, safety, conservation of
natural resources and aesthetics; and
WHEREAS, pursuant to the Act, the Authority has also been
empowered to extend credit and make loans from bond and note proceeds to any
person for the construction, acquisition and installation of, or for the
reimbursement to any person for costs in connection with, any special energy
project, including, but not limited to, any land, works, system, building or
other improvement, and all real and personal properties of any nature or any
interest in any of them which are suitable for or related to the furnishing,
generation or production of energy; and
WHEREAS, the Authority is also authorized under the Act to
borrow money and issue its negotiable bonds and notes to provide sufficient
moneys for achieving its corporate purposes; and
WHEREAS, the Authority is also authorized under the Act to
enter into any contracts and to execute all instruments necessary or convenient
for the exercise of its corporate powers and the fulfillment of its corporate
purposes; and
WHEREAS, the Company is a public utility corporation doing
business in the State of New York and operates power plants in the State of New
York; and
WHEREAS, the Company has requested that the Authority
participate in financing the acquisition, construction and installation of
certain facilities for the furnishing of electric energy within the Company's
service area (such facilities for the furnishing of electric energy being
hereinafter referred to as the "Project") and, as part of such participation,
that the Authority issue bonds pursuant to the Act to provide funds to finance
the cost to the Company of the Project and the expenses incurred in connection
with the authorization, issuance and sale of such bonds; and
<PAGE> 134
2.
WHEREAS, the Authority, pursuant to Resolution No. 822,
adopted January 26, 1994, has determined to issue its Electric Facilities
Revenue Bonds (Long Island Lighting Company Project), bearing the series
designation set forth on the first page of this Participation Agreement in an
aggregate principal amount of $50,000,000 (the "Bonds"), for the purpose of
financing a portion of such costs and expenses, all such Bonds to be issued
under and secured by an Indenture of Trust relating to the Bonds dated as of
October 1, 1994, between the Authority and Chemical Bank, as Trustee (the
"Indenture");
NOW, THEREFORE, for and in consideration of the premises and
of the mutual covenants and agreements hereinafter set forth, it is hereby
agreed by and between the parties as follows:
<PAGE> 135
3.
ARTICLE I
DEFINITIONS; RULES OF CONSTRUCTION; EFFECTIVE DATE
AND DURATION OF PARTICIPATION AGREEMENT
Section 1.01. Definitions. The terms used in this
Participation Agreement which are defined in Section 1.01 of the Indenture
shall have the meanings, respectively, herein, which such terms are given in
said Section 1.01 of the Indenture.
Section 1.02. Rules of Construction. Unless the context
clearly indicates to the contrary, the following rules shall apply to the
construction of the Participation Agreement:
(a) Words importing the singular number shall include the
plural number and vice versa;
(b) All references herein to particular articles or sections
are references to articles or sections of the Participation Agreement;
(c) The captions and headings herein are solely for
convenience of reference and shall not constitute a part of the
Participation Agreement nor shall they affect its meaning,
construction or effect;
(d) The terms "hereby," "hereof," "hereto," "herein,"
"hereunder" and any similar terms, as used in the Participation
Agreement, refer to the Participation Agreement in its entirety and
not to the particular article or section of the Participation
Agreement in which they appear, and the term "hereafter" means after,
and the term "heretofore" means before, the date of the Participation
Agreement; and
(e) In the event that there is any conflict between the
provisions of the Participation Agreement and those of the Indenture,
the provisions of the Indenture shall govern the disposition of such
conflict.
Section 1.03. Effective Date of Participation Agreement;
Duration of Participation Agreement. This Participation Agreement shall become
effective upon its execution and delivery, and shall continue in full force and
effect until the principal of, and premium, if any, and interest on, the
Company Note and Bonds have been fully paid (or provision for their payment has
been made in accordance with the provisions of the Indenture) and all sums to
which the Authority or the Trustee are entitled hereunder have been fully paid.
<PAGE> 136
4.
ARTICLE II
REPRESENTATIONS
Section 2.01. Representations and Warranties by the
Authority. The Authority represents and warrants as follows:
(a) The Authority is a body corporate and politic,
constituting a public benefit corporation, established and existing
under the laws of the State of New York;
(b) The Authority has full power and authority to execute and
deliver this Participation Agreement, the Indenture and the Tax
Regulatory Agreement and to consummate the transactions contemplated
hereby and thereby and to perform its obligations hereunder and
thereunder;
(c) The Authority is not in default under any of the
provisions of the laws of the State of New York which would affect its
existence or its powers referred to in the preceding paragraph (b);
(d) The Authority has determined that its participation in
the financing of the Project, as contemplated by this Participation
Agreement, is in the public interest;
(e) The Authority has duly authorized the execution and
delivery of this Participation Agreement, the Indenture and the Tax
Regulatory Agreement and the execution and delivery of the other
documents incidental to this transaction, and all necessary
authorizations therefor or in connection with the performance by the
Authority of its obligations hereunder or thereunder have been
obtained and are in full force and effect; and
(f) The execution and delivery by the Authority of this
Participation Agreement, the Indenture and the Tax Regulatory
Agreement and the consummation of the transactions herein or therein
contemplated will not violate any indenture, mortgage, loan agreement
or other contract or instrument to which the Authority is a party or
by which it is bound, or to the best of the Authority's knowledge, any
judgment, decree, order, statute, rule or regulation applicable to the
Authority.
Section 2.02. Representations and Warranties by the Company.
The Company represents and warrants as follows:
(a) The Company is a corporation duly incorporated and in
good standing under the laws of the State of New York, is duly
qualified and authorized to engage in business as a public utility in
the State of New York, has power to enter into, execute and deliver
this Participation Agreement, the Tax Regulatory Agreement and the
Company Note by
<PAGE> 137
5.
proper corporate action and has duly authorized the execution and
delivery by it of this Participation Agreement, the Tax Regulatory
Agreement and the Company Note;
(b) The execution and delivery by the Company of this
Participation Agreement, the Tax Regulatory Agreement and the Company
Note and the consummation of the transactions herein contemplated do
not conflict with or constitute a breach of or a default under the
Company's Certificate of Incorporation, By-Laws or any indenture,
mortgage, loan agreement or other contract or instrument to which the
Company is a party or by which it is bound, or to the best of the
Company's knowledge, any judgment, decree, order, statute, rule or
regulation applicable to the Company;
(c) This Participation Agreement, the Tax Regulatory
Agreement and the Company Note constitute valid and legally binding
obligations of the Company, enforceable against the Company in
accordance with their respective terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, moratorium,
reorganization or other laws, judicial decisions or principles of
equity relating to or affecting the enforcement of creditors' rights
or contractual obligations generally;
(d) The execution and delivery by the Company of this
Participation Agreement and the Company Note in the manner and for the
purposes herein set forth have been duly authorized by an order of the
Public Service Commission of the State of New York;
(e) No additional authorizations for or approvals of the
execution and delivery by the Company of this Participation Agreement,
the Tax Regulatory Agreement and the Company Note need be obtained by
the Company or if any such authorization or approval is necessary it
has been obtained; and
(f) The representations of the Company set forth in the Tax
Regulatory Agreement are hereby incorporated by reference as though
fully set forth herein.
<PAGE> 138
6.
ARTICLE III
CONSTRUCTION OF THE PROJECT;
ISSUANCE OF BONDS
Section 3.01. Construction of the Project. 1. The Company
will construct and complete or cause construction and completion of the Project
with reasonable dispatch and in accordance with the Company's construction
plans therefor. The Project shall belong to and be the property of the
Company. In order to effectuate the purposes of this Participation Agreement,
the Company will do or cause to be done all things requisite or proper for the
construction of the Project and the fulfillment of the obligations of the
Company under this Participation Agreement.
2. Notwithstanding any other provision of this
Participation Agreement to the contrary, the Company shall not be required to
complete the construction of any component of the Project with respect to which
funds have not been disbursed from the Project Fund if in the Company's
business judgment it is not necessary or advisable to do so, provided that
failure to complete the construction of such component will not affect the
character or intended purpose of any other component of such Project and
provided further that the estimated Cost of Construction of the components of
the Project yet to be completed (as estimated by the Company at the time it
determines not to complete any component) is at least equal to the amount of
moneys remaining in the Project Fund.
Notwithstanding any other provision of this Participation
Agreement to the contrary, the Company shall not be required to complete the
construction of any component of the Project if in the Company's business
judgment it is not necessary or advisable to do so and the Company shall have
delivered to the Authority an opinion of Bond Counsel to the effect that
failure to complete such component of such Project will not adversely affect
the qualification of any other component of such Project for financing under
the Act or the exclusion from gross income for Federal income tax purposes of
interest on the Bonds.
Section 3.02. Sale of Bonds and Deposit of Proceeds;
Liability Under Bonds. 1. In order to provide funds for payment of a portion
of the Cost of Construction of the Project, the Authority, as soon as
practicable after the execution of this Participation Agreement will issue,
sell and deliver the Bonds to the initial purchasers thereof, all pursuant to
and as provided in the Purchase Contract for the Bonds among the Authority, the
Company, Lehman Brothers Inc. and Dillon, Read & Co. Inc., and will deposit the
proceeds of such sale of the Bonds with the Trustee, as follows: (i) in the
Bond Fund, a sum equal to the accrued interest, if any, paid by the initial
purchasers of the Bonds and (ii) in the Construction Account of the Project
Fund, the balance of the proceeds received from such sale.
2. The Bonds shall not be general obligations of the
Authority, and shall not constitute an indebtedness of, or a charge against the
general credit of, the Authority or give rise
<PAGE> 139
7.
to any pecuniary liability of the Authority. The liability of the Authority
under the Bonds shall be enforceable only to the extent provided in the
Indenture, and the Bonds shall be payable solely from the Company Note
Payments, funds drawn under the Letter of Credit and any other funds held by
the Trustee under the Indenture and available for such payment. The Bonds
shall not be a debt of the State of New York, and the State of New York shall
not be liable thereon.
Section 3.03. Disbursements from Project Fund and Rebate
Fund. 1. The Authority has, in the Indenture, authorized and directed the
Trustee to make payments from the Project Fund, in accordance with and subject
to the provisions of Section 5.03 of the Indenture, to pay the Cost of
Construction of the Project upon receipt from time to time of requisitions
signed by an Authorized Company Representative, stating with respect to each
payment to be made for the Project the information required by Section 5.03 of
the Indenture.
The Company will cause such requisitions to be submitted to
the Trustee as may be necessary to effect payments out of the Project Fund in
accordance with the provisions of the Indenture. Concurrently with the
delivery by the Company of each requisition to the Trustee, the Company will
deliver to the Authority a copy of such requisition and any attachments
thereto. The Authority and the Trustee may rely on the Company as to the
completeness and accuracy of all statements in such requisition, and the
Company will indemnify and save harmless the Authority and the Trustee from any
liability incurred in connection with any requisition so delivered and the
payment of funds in reliance thereon.
2. All moneys remaining in the Project Fund after the
certificate referred to in Section 5.05 of the Indenture is furnished shall, at
the written direction of an Authorized Company Representative, be applied in
accordance with Section 5.06 of the Indenture.
Section 3.04. Revision of Construction Plans. The Company
may revise the construction plans for the Project at any time and from time to
time; provided, however, that no such revision shall be made prior to the
Completion Date with respect to such Project which would render the description
of such Project inaccurate in any material respect, except in accordance with
the following procedure:
(a) Prior to any such revision the Company shall deliver to
the Trustee and the Authority (1) a certificate of an Authorized
Company Representative, setting forth the text of the change in the
description of such Project which would be necessary to reflect
accurately the proposed revision in plans and specifications, and
certifying that, notwithstanding such revision, such Project will
still be designed to serve the purposes which would have been served
by such Project in the absence of such revision, and (2) an opinion of
Bond Counsel that such revision of such Project description and the
expenditure of moneys from the Project Fund under the provisions of
the Indenture to pay the Cost of Construction of such Project in
accordance with the revised description of such Project will not
impair the exclusion of interest on any of the Bonds then outstanding
from gross income for Federal income tax purposes.
<PAGE> 140
8.
(b) Ten (10) days after the receipt by the Authority and the
Trustee of the certificate and opinion referred to in paragraph (a)
above, such Project description shall be deemed amended to include
such revision for all purposes of this Participation Agreement and the
Indenture. Upon the request of either party or the Trustee, the
Authority and the Company shall enter into an appropriate instrument
reflecting such amendment.
Section 3.05. Certification of Completion of Project. When
the Project has been completed (except for components that the Company has
determined not to complete in accordance with Section 3.01), the Company shall
promptly deliver to the Trustee and the Authority a certificate of an
Authorized Company Representative to the effect that, as of a specified date,
the Project has been completed (except as aforesaid). Such certificate shall
specify the components of the Project, if any, the completion of which has been
excused pursuant to Section 3.01. The certificate delivered pursuant to this
Section 3.05 shall also contain an appropriate direction to the Trustee with
respect to any amount in the Project Fund which is to be retained or thereupon
disposed of as provided in Section 5.06 of the Indenture. The Trustee may rely
as to the accuracy and completeness of all statements in such certificate.
Notwithstanding the foregoing, such certificate shall be given
and may state that it is given without prejudice to any rights against third
parties which exist at the date thereof or which may subsequently come into
being.
Section 3.06. Payment of Cost of Construction of the Project
in Event Project Fund Inadequate. If the moneys in the Project Fund available
therefor shall not be sufficient to pay the Cost of Construction of the Project
in full (whether due to investment losses or otherwise), the Company shall,
subject to the provisions of Section 3.01, complete the Project and pay
(whether through financing or otherwise) all that portion of the Cost of
Construction thereof in excess of the moneys available therefor in the Project
Fund. The Authority does not make any warranty, either express or implied,
that the moneys which will be paid into the Project Fund will be sufficient to
pay the Cost of Construction of the Project. If the Company shall pay any
portion of the Cost of Construction of the Project pursuant to the provisions
of this Section, except to the extent it may submit requisitions pursuant to
Section 5.03 of the Indenture, it shall not be entitled to any reimbursement
therefor from the Authority, the Trustee or the owners of any of the Bonds, nor
shall it be entitled to any diminution in or postponement of the payments
required to be paid by the Company pursuant to this Participation Agreement or
the Company Note.
Section 3.07. No Interest in Project Conferred. Neither the
Authority nor the Trustee shall be entitled to any interest in the Project by
reason of the advance of Bond proceeds pursuant to this Participation
Agreement.
Section 3.08. Operation, Maintenance and Repair. The
Authority and the Company recognize that the Project will constitute integrated
portions of the electric energy
<PAGE> 141
9.
production, transmission, and distribution facilities of the Company and that
it is not feasible to administer the Project separately from such facilities.
The Company shall operate the Project (with such changes, improvements or
additions as the Company may deem desirable) as part of such facilities for the
joint useful life of the Project and such facilities and shall maintain and
repair the Project in conformity with the Company's normal maintenance and
repair programs for such facilities provided that the Company shall have no
obligation to operate, maintain or repair any element or item of the Project
the operation, maintenance, or repair of which becomes uneconomic to the
Company because of damage or destruction or obsolescence (including physical,
functional and economic obsolescence), or change in government standards and
regulations, or the termination of the operation of the facilities to which the
element or item of the Project is an adjunct; and provided further that, in any
event, the Company is proceeding in good faith to maintain the availability of
the Project for use as an authorized project under the Act.
Section 3.09. Investment of Moneys in Funds Under the
Indenture. Any moneys held as a part of any fund created under the Indenture
shall be invested or reinvested by the Trustee as provided in Article VII of
the Indenture. Any such investment shall be consistent with the provisions of
the Tax Regulatory Agreement.
Section 3.10. Agreement not to Exercise Option to Convert
to Fixed Rate Absent Specified Rating. The Company agrees not to direct that a
Fixed Rate become effective pursuant to Section 2.04(b) of the Indenture unless
the Company shall have delivered to the Authority evidence satisfactory to the
Authority that upon conversion to a Fixed Rate the Bonds are expected to be
rated in at least the third highest rating category of Moody's or S&P
(currently "A" in the case of Moody's and "A" in the case of S&P).
Section 3.11. Securities Depository. The Company
acknowledges that the Authority and the Trustee, at the request of the Company,
have arranged for the initial deposit of the Bonds with The Depository Trust
Company ("DTC") which will act as Securities Depository in order to effectuate
a book-entry-only system and that this system may be discontinued or, if
discontinued, reinstituted (with DTC or another Securities Depository) in
accordance with the Indenture. The Company agrees to take all actions
necessary, and to refrain from taking actions contrary to the effectuation of a
book-entry-only system established pursuant to the Indenture and any
arrangements among the Authority, the Trustee and any Securities Depository.
The Authority shall not enter into any written agreements with a Securities
Depository without receipt and acceptance of such agreements by the Company.
The Company agrees that, absent subsequent agreement among the Authority, the
Trustee, the Company and a Securities Depository, the Bonds shall not be held
in a book-entry-only system during any Money Market Municipal Rate Period.
<PAGE> 142
10.
ARTICLE IV
COMPANY NOTE AND PAYMENTS; LETTER OF CREDIT
Section 4.01. Execution and Delivery of Company Note to
Trustee. 1. Concurrently with the authentication by the Trustee and delivery
by the Authority of the Bonds and in order to evidence the obligation of the
Company to the Authority to repay the advance of the proceeds of the Bonds, the
Authority hereby directs the Company, and the Company hereby agrees, to execute
and deliver to the Trustee its Company Note and to duly and punctually pay the
principal of, premium, if any, and interest on, the Company Note at the place,
the times and in the manner provided therein. The Company Note shall be
substantially in the form attached hereto as EXHIBIT C.
2. The obligation of the Company to make any payment of
principal of, and premium, if any, and interest on, the Company Note shall be
deemed satisfied and discharged to the extent of the corresponding payment made
by the Bank under the Letter of Credit.
Section 4.02. Redemption of Bonds. Whenever Bonds are
redeemable in whole or in part, the Authority will redeem the same at the
written direction of an Authorized Company Representative given in accordance
with Section 8.01 of the Indenture.
Section 4.03. Obligation for Payment Absolute;
Deficiencies. The Company agrees that its obligation to make the Company Note
Payments and payments under Section 4.11 at the times and in the amounts
provided in the Company Note and this Participation Agreement shall be
absolute, irrevocable and unconditional and shall not be subject to any defense
(other than payment) or any right of set-off, counterclaim or recoupment for
any reason, including, without limitation, the unenforceability (because of
judicial decision or otherwise) or the impossibility of performance of the
Company Note obligations, or any breach by the Authority of any obligation to
the Company, whether under this Participation Agreement or otherwise, or
inaccuracy of any representation by the Authority to the Company under this
Participation Agreement or in any other instrument, or any indebtedness or
liability at any time owing to the Company by the Authority, or any failure to
complete the Project, or the destruction by fire or other casualty of the
Project or any portion thereof, or the taking of title thereto or the use
thereof by the exercise of the power of eminent domain. If for any reason
Company Note Payments, together with other moneys held by the Trustee and then
available for such purpose (including moneys paid by the Bank under the Letter
of Credit), would not be sufficient to make the corresponding payments of
principal of, and premium, if any, and interest on, the Bonds when such
payments are due, the Company will pay the amounts required from time to time
to make up any such deficiency. If for any reason payments under Section 4.11,
together with other moneys held by the Trustee and the Tender Agent and then
available for such purpose (including moneys paid by the Bank under the Letter
of Credit), would not be sufficient to make the corresponding payments of the
purchase price of the Bonds when such payments are due, the Company will pay
the amounts required from time to time to make up any such deficiency.
<PAGE> 143
11.
Section 4.04. Administration Fees; Expenses, Etc. In order
to defray a portion of the expenses incurred by the Authority in conducting and
administering its programs for the acquisition and construction of facilities
for the furnishing of electricity, special energy projects and the development
of advanced technologies, the Company shall pay to the Authority an initial
Administration Fee in the amount of $125,000 on the date of the delivery of the
Bonds to the initial purchasers thereof and an annual Administration Fee in the
amount of $6,500 on October 1 of each year commencing October 1, 1995, until
the Bonds are no longer outstanding. In addition, the Company shall pay to the
State of New York with respect to the Bonds a bond issuance charge in the
amount of $175,000 on the date of authentication and delivery of the Bonds to
the initial purchasers.
In addition to such Administration Fees, the Company will pay
or reimburse the Authority upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Authority (including
printing costs and the reasonable fees, expenses and disbursements of its
counsel, bond counsel and co-bond counsel) in connection with the Participation
Agreement, the Indenture or any transaction or event contemplated by the
Participation Agreement, the Tax Regulatory Agreement or the Indenture.
Section 4.05. Compensation of Trustee, Paying Agent,
Remarketing Agents, Indexing Agent and Tender Agent. The Company agrees:
(1) to pay to the Trustee from time to time upon its
request reasonable compensation for all services rendered by it in any
capacity under the Indenture (which compensation shall not be limited
by any provision of law in regard to the compensation of a trustee of
an express trust);
(2) except as so otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred by it in any capacity under the
Indenture (including the reasonable compensation and the expenses and
disbursements of its agents and counsel), except any such expense,
disbursement or advance as may be attributable to its negligence or
bad faith;
(3) to pay to the Paying Agent from time to time upon its
request, reasonable compensation for all services rendered by it as
Paying Agent under the Indenture and reimburse it for its reasonable
expenses incurred under the Indenture (including reasonable
compensation and expenses and disbursements of its agents and
counsel), except any such expense as may be attributable to its
negligence or bad faith; and
(4) to pay to the Remarketing Agents, the Tender Agent
and the Indexing Agent their reasonable fees and expenses as and when
the same become due, except any such expense as may be attributable to
such person's negligence or bad faith.
<PAGE> 144
12.
Section 4.06. Project Not Security for Bonds. It is
expressly recognized by the parties that neither the Project nor any other
property of the Company will constitute any part of the security for the Bonds.
Section 4.07. Payment of Taxes and Assessments; No Liens or
Charges. The Company will (a) pay, when the same shall become due, all taxes
and assessments, including income, profits, property or excise taxes, if any,
or other municipal or governmental charges, imposed, levied or assessed by the
Federal, state or any municipal government upon the Authority, the Tender Agent
or the Trustee in respect of any payments (other than payments made pursuant to
Sections 4.04 and 4.05) made or to be made pursuant to this Participation
Agreement or the Company Note and (b) pay or cause to be discharged, within
sixty (60) days after the same shall accrue, any lien or charge upon any such
payment made or to be made under this Participation Agreement, provided that
the Company shall not be required to pay any such tax or assessment so long as
(i) the Company at its expense contests, by appropriate legal proceedings
conducted in good faith and with due diligence, the amount, validity or
application of any such tax, assessment or charge, (ii) such proceedings shall
have the effect of suspending the collection thereof from the Authority, the
Trustee and the Tender Agent, and (iii) the Company shall indemnify and hold
the Authority, the Trustee and the Tender Agent harmless from any losses,
costs, charges, expenses (including reasonable attorneys' fees and
disbursements), judgments and liabilities arising in respect of such tax,
assessment or charge and the nonpayment thereof.
Section 4.08. Indemnification of Authority, Trustee, Tender
Agent, Paying Agent, Remarketing Agents and Indexing Agent. Any obligation of
the Authority created by or arising out of this Participation Agreement shall
be a limited obligation of the Authority, payable solely from the Company Note
Payments, any payments by the Company under Section 4.11, funds drawn under the
Letter of Credit and any other funds held by the Trustee under the Indenture
and available for such payment, and shall not constitute an indebtedness of or
a charge against the general credit of the Authority and shall not constitute
or give rise to any pecuniary liability of the Authority; nevertheless, if the
Authority shall incur any such pecuniary liability, then in such event the
Company shall indemnify and hold the Authority harmless by reason thereof. The
Company releases the Authority, the Trustee, the Paying Agent, the Remarketing
Agents, the Tender Agent and the Indexing Agent from, agrees that the
Authority, the Trustee, the Remarketing Agents, the Tender Agent, the Paying
Agent and the Indexing Agent shall not be liable for, and agrees to indemnify
and hold the Authority, the Trustee, the Paying Agent, the Remarketing Agents,
the Tender Agent and the Indexing Agent harmless from, any liability for any
loss or damage to property or any injury to or death of any person that may be
occasioned by any cause whatsoever arising out of the construction or operation
of the Project or the financing thereof. The Company agrees to indemnify and
hold the Authority, its members, officers and employees, the Trustee, the
Tender Agent, the Remarketing Agents, the Paying Agent and the Indexing Agent
harmless from any losses, costs, charges, expenses (including reasonable
attorneys' fees and disbursements), judgments and liabilities incurred by it or
them, as the case may be, in connection with any claims made, any action, suit
or proceeding instituted
<PAGE> 145
13.
or threatened, in connection with the transactions contemplated by this
Participation Agreement or the Indenture so long as, in the case of the
Authority, its members, officers and employees, it or they, as the case may be,
have acted in good faith to carry out the transactions contemplated by this
Participation Agreement, the Remarketing Agreement or the Indenture and,
except, in the case of the Trustee, the Tender Agent, the Paying Agent and the
Indexing Agent, the Trustee's, the Tender Agent's, the Paying Agent's and the
Indexing Agent's willful misconduct or negligence.
Section 4.09. Company to Pay Attorneys' Fees and
Disbursements. If the Company shall default under any of the provisions of this
Participation Agreement and the Authority or the Trustee or both of them shall
employ attorneys or incur other expenses for the collection of payments due
under this Participation Agreement or for the enforcement of performance or
observance of any obligation or agreement on the part of the Company contained
in this Participation Agreement, the Company will on demand therefor reimburse
the reasonable fees of such attorneys and such other reasonable disbursements so
incurred.
Section 4.10. No Abatement of Administration Fees and Other
Charges. It is understood and agreed that so long as any Bonds are outstanding
under the Indenture, Administration Fees and other charges payable to the
Authority pursuant to this Participation Agreement shall continue to be payable
at the times and in the amounts herein specified, whether or not the Project, or
any portion thereof, shall have been destroyed by fire or other casualty, or
title thereto or the use thereof shall have been taken by the exercise of the
power of eminent domain, and that there shall be no abatement of any such
Administration Fees and other charges by reason thereof.
Section 4.11. Payment to Tender Agent. The Company shall pay,
or cause to be paid, to the Tender Agent amounts equal to the amounts to be
paid pursuant to Section 2.05 of the Indenture in respect of Bonds tendered for
purchase or deemed to be so tendered pursuant to the terms of Section 2.05 of
the Indenture, such amounts to be paid by the Company to the Tender Agent on
the dates such payments pursuant to Section 2.05 of the Indenture are to be
made; provided, however, that the obligation of the Company to make any such
payment shall be reduced by the amount of any moneys available for such payment
under clauses (i) through (iii) of Section 2.05(h) of the Indenture and
provided, further, that the obligation of the Company to make any such payment
shall be deemed satisfied and discharged to the extent of the corresponding
payment made by the Bank under the Letter of Credit.
Section 4.12. The Letter of Credit. At all times on or prior
to the Fixed Rate Conversion Date except during any period when all the Bonds
then outstanding are held by or for the account of the Company, a Letter of
Credit meeting the requirements of this Section 4.12 shall be in effect and, in
the event that an Alternate Credit Facility is to replace an expiring Letter of
Credit, the requirements of Section 6.07 of the Indenture will be fulfilled. A
Letter of Credit shall be an obligation of a bank or banks, insurance company
or companies, other financial institution or institutions, or any combination
of the foregoing, entitling the Trustee to
<PAGE> 146
14.
draw up to (a) an amount equal to the principal amount of the Bonds then
outstanding to pay (i) the principal of the Bonds when due, or (ii) the portion
of the Purchase Price of Bonds corresponding to principal, plus (b) an amount
equal to 210 days' accrued interest on the Bonds then outstanding computed at
the maximum rate specified in such Letter of Credit, which shall in no event
exceed fifteen percent (15%), on the basis of a 360-day year. A Letter of
Credit shall expire on the earliest occurrence of (1) at its stated expiration
date, which shall be no earlier than two (2) days after the next succeeding
Optional Tender Date or Purchase Date not less than six months from its
effective date, (2) when all available amounts have been drawn, (3) the second
business day following the effective date of the Fixed Rate Conversion Date,
(4) on the effective date of any Alternate Credit Facility that replaces the
then effective Letter of Credit, (5) the earliest date on which no Bonds are
outstanding and (6) twelve (12) days after the Trustee receives notice from the
Bank that it is terminating the Letter of Credit and directing the Trustee to
cause a mandatory tender and purchase of or to accelerate the Bonds. A Letter
of Credit shall provide that when there is a drawing to pay interest on
scheduled payment dates, if the Trustee does not receive from the Bank by the
close of business on a day specified therein, which shall not be later than the
tenth (10th) day following such a drawing in respect of interest, notice by
telephone confirmed in writing (or by other means acceptable to the Trustee and
the Authority) that the amount available to be drawn has not been reinstated by
the amount of the drawing for interest (except on principal of a Bond being
paid or purchased and cancelled), the amount available to be drawn will
automatically be reinstated by the amount of the drawing on such specified day.
<PAGE> 147
15.
ARTICLE V
SPECIAL COVENANTS
Section 5.01. No Warranty as to Suitability of Project. The
Authority makes no warranty, either express or implied, with respect to actual
or designed capacity of the Project, as to the suitability of the Project for
the purposes specified in this Participation Agreement, as to the condition of
the Project, or as to the suitability of the Project for the Company's purposes
or needs.
Section 5.02. Authority's Rights to Inspect Project and Plans
and Specifications. The Authority shall have the right at all reasonable times
to examine and inspect the Project and, to the extent reasonably available, the
plans and specifications therefor and such other information and records
relating to the Project as may be reasonably necessary to establish the
qualification of the Project for financing under the Act and compliance with
this Participation Agreement.
Section 5.03. Company Consent to Amendment of Indenture. The
Authority shall not enter into any indenture supplemental to or amendatory of
the Indenture without the prior consent of the Company as evidenced by a
certificate in writing signed by an Authorized Company Representative.
Section 5.04. Tax Covenant. Notwithstanding any other
provision hereof, the Company covenants and agrees that it will not take or
authorize or permit any action to be taken with respect to the Project, or the
proceeds of Bonds, including any amounts treated as proceeds of the Bonds for
any purpose of Section 103 of the Code, which will result in the loss of the
exclusion of interest on the Bonds from gross income for Federal income tax
purposes under Section 103 of the Code (except for any Bond during any period
while any such Bond is held by a person referred to in Section 147(a) of the
Code). This provision shall control in case of conflict or ambiguity with any
other provision of this Participation Agreement. In furtherance of such
covenant and agreement, the Authority and the Company have entered into the Tax
Regulatory Agreement and the Company hereby agrees to comply with the
provisions thereof insofar as the Tax Regulatory Agreement relates to the
Bonds.
Section 5.05. Company Agrees to Perform Obligations Imposed
by Indenture. The Company agrees to perform such obligations as may be
required of it by the provisions of the Indenture.
Section 5.06. Maintenance of Office or Agency of Company.
The Company will at all times keep in Hicksville, New York, or another location
in the State of New York an office or agency where notices and demands with
respect to the Company Note and this Participation Agreement may be served, and
will, from time to time, give written notice to the Trustee and the Authority
of the location of such office or agency; and, in case the Company
<PAGE> 148
16.
shall fail so to do, notices may be served and demands may be made at the
principal office of the Trustee.
Section 5.07. Further Assurances. The Company will make,
execute, acknowledge and deliver, or cause to be made, executed, acknowledged
and delivered, to the Trustee any and all such further acts, instruments or
assurances as may be reasonably required for effectuating the intention of this
Participation Agreement and the Company Note.
Section 5.08. Payment of Taxes and Other Charges. The
Company will promptly pay and discharge, or cause to be paid and discharged, as
the same become due and payable, any and all taxes, rates, levies, assessments,
and governmental liens, claims and other charges at any time lawfully imposed
or accruing upon or against the Company or upon or against its properties or
any part thereof, or upon the income derived therefrom or from the operations
of the Company, provided that the Company shall not be required to pay or
discharge, or cause to be paid or discharged, any such obligation, tax, rate,
levy, assessment, lien, claim or other charge so long as in good faith and by
appropriate legal proceedings the validity thereof shall be contested.
Section 5.09. Maintenance of Properties. The Company will at
all times make or cause to be made such expenditures for repairs, maintenance
and renewals, or otherwise, as shall be necessary to maintain its properties in
good repair, working order and condition as an operating system or systems to
the extent necessary to meet the Company's obligations under the Public Service
Law of the State of New York and the Participation Agreement; provided,
however, that nothing herein contained shall be construed to prevent the
Company from ceasing to operate any of its plants or any other property, if, in
the judgment of the Company, it is advisable not to operate the same and the
operation thereof shall not be essential to the maintenance and continued
operation of the rest of the operating system or systems, and the security
under the Indenture afforded by the Company Note will not be substantially
impaired by the termination of such operation. It is understood that the
Company has agreed pursuant to a settlement with the State of New York,
approved by the Company's shareholders on June 28, 1989, not to operate the
Shoreham Nuclear Power Station.
Section 5.10. Insurance. The Company will keep or cause to
be kept such parts of its properties as, in the opinion of an Authorized
Company Representative (as defined in the Indenture and who shall be a licensed
professional engineer), are of an insurable nature, insured against loss or
damage by fire or other casualties, the risk of which is customarily insured
against by companies similarly situated and operating like properties, to the
extent that property of similar character is customarily insured against by
such companies, either (a) by reputable insurers or (b) in whole or in part in
the form of reserves or of one or more insurance funds created by the Company,
whether alone or with other corporations, provided that the plan of each such
insurance fund shall have been or shall be approved by the Board of Directors
of the Company. Notwithstanding the foregoing, the Company may carry a lesser
amount of insurance with respect to the Shoreham Nuclear Generating Station to
the extent that the Company has
<PAGE> 149
17.
received an exemption from the Nuclear Regulatory Commission permitting it to
carry such lesser amount.
Section 5.11. Proper Books of Record and Account. The
Company will at all times keep or cause to be kept proper books of record and
account, in which full, true and correct entry will be made of all dealings,
business and affairs of the Company, including proper and complete entries to
capital or property accounts covering property worn out, obsolete, abandoned or
sold, all in accordance with the requirements of any system of accounting or
keeping accounts or the rules, regulations or orders prescribed by a regulatory
commission with jurisdiction over the rates of the Company giving rise to at
least fifty-one percent (51%) of the Company's gross revenues, or if there are
no such requirements or rules, regulations or orders, then in compliance with
generally accepted accounting principles.
Section 5.12. Certificates as to Defaults. The Company shall
file with the Trustee, on or before April 30 of each year, a certificate signed
by an Authorized Company Representative (as defined in the Indenture) stating
that, to the best of his knowledge, information and belief, the Company has
kept, observed, performed and fulfilled each and every one of its covenants and
obligations contained in this Participation Agreement and in the Company Note
and, to the best of his knowledge, information and belief, there does not exist
at the date of such certificate any default by the Company under this
Participation Agreement or any event of default hereunder or other event which,
with notice or the lapse of time specified in Section 6.01, or both, would
become an event of default or, if any such default or event of default or other
event shall so exist, specifying the same and the nature and status thereof.
Section 5.13. Company Not to Permit Hindrance or Delay of
Payment of Company Note. The Company will not voluntarily do, suffer or permit
any act or thing intended to hinder or delay the payment of the indebtedness
evidenced by the Company Note.
Section 5.14. Corporate Existence, Consolidation, Merger or
Sale of Assets. The Company will maintain its corporate existence, will not
consolidate with or permit itself to be merged into any other corporation or
corporations, or sell, transfer or otherwise dispose of all or substantially
all of its properties and assets, except in the manner and upon the terms and
conditions set forth in this Section 5.14.
Nothing contained in this Participation Agreement shall
prevent (and this Participation Agreement shall be construed as permitting and
authorizing) any lawful consolidation or merger of the Company with or into any
other corporation or corporations lawfully authorized to acquire and operate
the properties of the Company, or a series of consolidations or mergers, in
which the Company or its successor or successors shall be a party, or any sale
of all or substantially all the properties of the Company as an entirety to a
corporation lawfully authorized to acquire and operate the same; provided that,
upon any consolidation, merger or sale, the corporation formed by such
consolidation, or into which such merger may be made, or making such purchase
shall execute and deliver to the Trustee an
<PAGE> 150
18.
instrument, in form satisfactory to the Trustee, whereby such corporation shall
effectually assume the due and punctual payment of the principal of, and
premium, if any, and interest on, the Company Note according to its tenor and
the due and punctual performance and observance of all covenants and agreements
to be performed by the Company pursuant to this Participation Agreement, the
Tax Regulatory Agreement and the Company Note.
Every such successor corporation shall possess, and may
exercise, from time to time, each and every right and power hereunder of the
Company, in its name or otherwise; and any act, proceeding, resolution or
certificate by any of the terms of this Participation Agreement, the Tax
Regulatory Agreement and the Company Note required or provided to be done,
taken and performed or made, executed or verified by any board or officer of
the Company shall and may be done, taken and performed or made, executed or
verified with like force and effect by the corresponding board or officer of
any such successor corporation.
If consolidation, merger or sale or other transfer is made as
permitted by this Section, the provisions of this Section shall continue in
full force and effect and no further consolidation, merger or sale or other
transfer shall be made except in compliance with the provisions of this
Section.
Section 5.15. Financial Statements of Company. The Company
agrees to furnish the Trustee with a copy of its annual report to stockholders
for each year, beginning with the year 1994, on or before March 31 of the
subsequent year or as soon thereafter as it is reasonably available. The
Company further agrees to furnish to the Trustee, and to any owner of the Bonds
if requested in writing by such owner, all financial statements which it sends
to its shareholders generally.
Section 5.16. Compliance with Laws. The Company agrees to
comply in all material respects with all applicable laws, rules and regulations
and orders of any governmental authority, non-compliance with which would
adversely affect the Company's ability to perform its obligations hereunder or
under the Tax Regulatory Agreement or the Company Note, except laws, rules,
regulations or orders being contested in good faith or laws, rules, regulations
or orders which the Company has applied for variances from, or exceptions to.
<PAGE> 151
19.
ARTICLE VI
DEFAULTS BY COMPANY; REMEDIES
Section 6.01. Events of Default; Acceleration. In case one
or more of the following events of default shall have occurred and be
continuing:
(a) failure by the Company to pay when due any amount
required to be paid under this Participation Agreement or the Company Note,
which failure causes a default in the payment when due of the interest on any
of the Bonds and continuance of such default for five (5) days; or
(b) failure by the Company to pay when due any amount
required to be paid under this Participation Agreement or the Company Note,
which failure causes a default in the payment when due of the principal of, or
premium, if any, on any of the Bonds; or
(c) failure by the Company to pay when due any amount
required to be paid under Section 4.11, which failure causes a default in the
payment when due of any amount payable pursuant to Section 2.05 of the
Indenture and continuance of such default for five (5) days; or
(d) failure on the part of the Company to duly observe or
perform any other of the covenants or agreements on the part of the Company
contained in this Participation Agreement (other than failure to pay amounts
required to be paid under Sections 4.04, 4.05, 4.08, 4.09 or 4.10) or in the
Company Note for a period of ninety (90) days after the date on which written
notice of such failure, requiring the Company to remedy the same, shall have
been given to the Company by the Authority or the Trustee; or
(e) an Act of Bankruptcy relating to the Company; or
(f) the occurrence and continuance of an "event of default"
as defined in the Company Indenture;
then, and in any such event, the Trustee, may, and upon the written request of
the owners of at least twenty-five percent (25%) in aggregate principal amount
of the Bonds then outstanding shall, by notice in writing to the Company and
provided that the default has not theretofore been cured, declare the Company
Note to be due and payable immediately, and upon any such declaration the same
shall become and shall be immediately due and payable, anything contained in
this Participation Agreement or in the Company Note to the contrary
notwithstanding. Any amounts collected by the Trustee pursuant to action taken
under this Section 6.01 shall be applied in accordance with the Indenture. In
addition, if at any time the principal of the Bonds shall have been declared to
be due and payable by acceleration pursuant to the terms of the Indenture, the
Company Note shall thereupon become and be immediately due and payable,
<PAGE> 152
20.
subject to such declaration with respect to the Bonds being annulled pursuant
to Section 10.01 of the Indenture.
The right or obligation of the Trustee to make any such
declaration as aforesaid, however, is subject to the condition that if, at any
time after declaration, but before all the Bonds shall have matured by their
terms, the principal of, premium, if any, and interest on, the Company Note
which shall have become due and payable otherwise than by such declaration, and
all other sums payable hereunder, except the principal of, and interest on, the
Company Note which shall have become due and payable by such declaration, shall
have been paid or provision satisfactory to the Trustee shall have been made
for such payment, and the reasonable expenses of the Trustee and of the owners
of the Bonds shall have been paid, including reasonable attorneys' fees paid or
incurred, and all defaults hereunder and under the Bonds or under the
Indenture, except as to the payment of principal and interest due and payable
solely by reason of such declaration, shall be made good or be secured to the
satisfaction of the Trustee or provision deemed by the Trustee to be adequate
shall be made therefor, then and in every such case the owners of a majority in
aggregate principal amount of the Bonds then outstanding, by written notice to
the Authority and to the Trustee, may rescind such declaration and annul such
default in its entirety, or, if the Trustee shall have acted in the absence of
a written request of the owners of at least twenty-five percent (25%) in
aggregate principal amount of the outstanding Bonds, and if there shall not
have been theretofore delivered to the Trustee written direction to the
contrary by the owners of at least twenty-five percent (25%) in aggregate
principal amount of the outstanding Bonds, then any such declaration shall ipso
facto be deemed to be rescinded and any such default and its consequences shall
ipso facto be deemed to be annulled, but no such rescission and annulment shall
extend to or affect any subsequent default or impair or exhaust any right or
power consequent thereon.
In case the Trustee shall have proceeded to enforce any right
under this Participation Agreement or the Company Note and such proceedings
shall have been discontinued or abandoned for any reason or shall have been
determined adversely to the Trustee, then and in every such case the Company,
the Authority and the Trustee shall be restored respectively to their former
positions and rights hereunder, and all rights, remedies and powers of the
Company, the Authority and the Trustee shall continue as though no such
proceedings had been taken.
Section 6.02. Certain Events of Default; Authority or Trustee
May Take Certain Actions. In case the Company shall have failed to comply with
its obligations under Article III or under Sections 4.04, 4.08, 4.09, 4.10 or
5.16, which event shall have continued for a period of ninety (90) days after
the date on which written notice of such failure, requiring the Company to
remedy the same, shall have been given to the Company by the Authority or the
Trustee, the Authority or the Trustee may take whatever action at law or in
equity as may appear necessary or desirable to enforce performance or
observance of any obligations or agreements of the Company under said Article
or Sections. In case the Company shall have failed to comply with its
obligations under Section 4.05, which event shall have continued for a period
of ninety (90)
<PAGE> 153
21.
days after the date on which written notice of such failure, requiring the
Company to remedy the same, shall have been given to the Company by the
Trustee, the Trustee may take whatever action at law or in equity as may appear
necessary or desirable to the Trustee to enforce performance or observance of
any obligations or agreements of the Company under said section.
Section 6.03. Judicial Proceedings by Trustee. Upon the
occurrence and continuance of an event of default (as defined in Section 6.01)
the Trustee may, and upon the written request of the owners of at least
twenty-five percent (25%) in aggregate principal amount of the Bonds then
outstanding and receipt by the Trustee of indemnity satisfactory to it shall,
institute any actions or proceedings at law or in equity for the collection of
any amounts then due and unpaid on the Company Note, and may prosecute any such
action or proceeding to judgment or final decree, and may collect in the manner
provided by law the moneys adjudged or decreed to be payable.
<PAGE> 154
22.
ARTICLE VII
MISCELLANEOUS
Section 7.01. Disposition of Amounts After Payment of Bonds.
Any amounts determined by the Trustee to be remaining in the funds created
under the Indenture after payment in full, or provision for payment in full, of
principal of, and premium, if any, and interest on, all of the Bonds, in
accordance with the provisions of the Indenture, and payment of all the fees,
charges and expenses of the Authority, the Trustee, the Tender Agent, the
Indexing Agent, the Remarketing Agents and the Paying Agents in accordance with
the Indenture and this Participation Agreement and any amounts required to be
paid to the United States of America pursuant to the Tax Regulatory Agreement,
shall be paid to the Bank; provided, however, that on or after the Fixed Rate
Conversion Date and solely with respect to moneys not resulting from a draw on
the Letter of Credit and not constituting remarketing proceeds, such amounts
that would be payable to the Bank pursuant to this Section 7.01 shall be paid
to the Company if the Bank has been paid in full under the Reimbursement
Agreement.
Section 7.02. Notices. All notices, certificates, requests
or other communications between the Authority, the Company and the Trustee
required to be given under this Participation Agreement or under the Indenture
(except as otherwise provided therein) shall be sufficiently given and shall be
deemed given when delivered or mailed by first class mail, postage prepaid,
addressed as follows if to the Authority, at 2 Empire State Plaza, Suite 1901,
Albany, New York 12223, Attention: President; if to the Company, at 175 East
Old Country Road, Hicksville, New York 11801, Attention: Treasurer; and if to
the Trustee, at 450 West 33rd Street, 15th Floor, New York, New York 10001
Attention: Corporate Trustee Administration Department and if to the Tender
Agent, Remarketing Agents or the Indexing Agent to the addresses set forth for
such persons in Section 16.05 of the Indenture. A duplicate copy of each
notice, certificate, request or other communication given hereunder to the
Authority, the Company or the Trustee shall also be given to the others. The
Company, the Authority and the Trustee may, by notice given hereunder,
designate any further or different addresses to which subsequent notices,
certificates, requests or other communications shall be sent.
Section 7.03. Successors and Assigns. This Participation
Agreement shall inure to the benefit of and shall be binding upon the
Authority, the Company, the Trustee, the Bank and their respective successors
and assigns.
Section 7.04. References to the Bank. After establishment of
a Fixed Rate for the Bonds and upon receipt by the Trustee of notice from the
Bank that all amounts payable to the Bank with respect to draws under the
Letter of Credit have been received, all references in this Participation
Agreement to the Bank shall be ineffective.
<PAGE> 155
23.
Section 7.05. Amendment of Participation Agreement. This
Participation Agreement may not be amended except by an instrument in writing
signed by the parties and, if such amendment occurs after the issuance of the
Bonds, upon compliance with the provisions of Sections 4.01 and 4.02 of the
Indenture.
Section 7.06. Assignment by Authority. The Authority shall
assign its rights under and interest in this Participation Agreement (except
the rights and interest of the Authority under Article III and Sections 4.04,
4.08, 4.09, 4.10 and 5.16 and insofar as the obligations of the Company under
Section 4.07 relate to taxes and assessments imposed upon the Authority and not
the Trustee, Section 4.07), subject to the provisions of this Participation
Agreement relating to the amendment thereof, to the Trustee pursuant to the
Indenture, as security for payment of the principal of, and premium, if any,
and interest on, the Bonds. In addition, the Trustee shall have the same power
as the Authority to enforce from time to time the rights of the Authority set
forth in Article III and Section 5.16, subject to the provisions of this
Participation Agreement relating to the amendment hereof. Except as provided
in this Section 7.05, the Authority will not sell, assign, transfer, convey or
otherwise dispose of its interest in this Participation Agreement during the
term of this Participation Agreement.
Section 7.07. Participation Agreement Supersedes Any Prior
Agreements. This Participation Agreement supersedes any other prior agreements
or understandings, written or oral, between the parties with respect to the
transactions contemplated hereby.
Section 7.08. Counterparts. This Participation Agreement may
be executed in any number of counterparts, each of which when so executed and
delivered shall be an original, but such counterparts shall together constitute
but one and the same Participation Agreement.
Section 7.09. Severability. If any clause, provision or
section of this Participation Agreement is held illegal, invalid or
unenforceable by any court or administrative body, such Participation Agreement
shall be construed and enforced as if such illegal or invalid or unenforceable
clause, provision or section had not been contained in this Participation
Agreement. In case any agreement or obligation contained in this Participation
Agreement shall be held to be in violation of law, then such agreement or
obligation shall be deemed to be the agreement or obligation of the Authority
or the Company, as the case may be, to the full extent permitted by law.
<PAGE> 156
24.
SECTION 7.10. NEW YORK LAW TO GOVERN. THE LAW OF THE STATE
OF NEW YORK SHALL GOVERN THE CONSTRUCTION OF THIS PARTICIPATION AGREEMENT.
IN WITNESS WHEREOF, the parties hereto have caused this
Participation Agreement to be duly executed as of the day and year first
written above.
NEW YORK STATE ENERGY
RESEARCH AND DEVELOPMENT
AUTHORITY
By /s/ FRANCIS J. MURRAY, JR.
-----------------------------
[SEAL] Chair
ATTEST:
/s/ HOWARD A. JACK
-------------------------
Secretary
LONG ISLAND LIGHTING COMPANY
By /s/ THEODORE A. BABCOCK
[SEAL] -----------------------------
Treasurer
ATTEST:
/s/ HERBERT M. LEIMAN
-------------------------
Assistant Secretary
<PAGE> 157
EXHIBIT A
(To Participation Agreement dated as
of October 1, 1994, between New York
State Energy Research and Development
Authority and Long Island Lighting Company)
DESCRIPTION OF ELECTRIC FACILITIES
The Project will consist of the following facilities which are
to be acquired, constructed and installed by Long Island Lighting Company (the
"Utility") as part of the Utility's electric system:
1. Production Facilities;
2. Transmission Facilities including interconnections and subtransmission;
3. Distribution Facilities, including stations, lines, transformers and
meters;
4. Certain Common Facilities.
All such facilities are as further described in the Tax
Regulatory Agreement between the Authority and the Company dated the date of
the initial delivery of the Bonds.
The Project shall also include (i) such instrumentation,
controls, structures and all other facilities, equipment, devices and the like
necessary to support the facilities herein described, (ii) such necessary land
improvements, and (iii) subject to Section 3.04 of the Participation Agreement,
such additional or substituted facilities for the furnishing of electric energy
which, because of changes in technology, environmental standard, cost or the
like, the Utility determines shall be added or substituted for said facilities.
A-1
<PAGE> 158
EXHIBIT B
(To Participation Agreement dated as
of October 1, 1994, between New York
State Energy Research and Development
Authority and Long Island Lighting Company)
DESCRIPTION OF OTHER FACILITIES
Any portion of the Electric Facilities described in Exhibit A
as shall have been placed in service more than one year prior to the date of
the original issuance and delivery of the Bonds.
B-1
<PAGE> 159
EXHIBIT C
(To Participation Agreement dated as of
October 1, 1994, between New York
State Energy Research and Development
Authority and Long Island Lighting Company)
LONG ISLAND LIGHTING COMPANY
$50,000,000
PROMISSORY NOTE
FOR
ELECTRIC FACILITIES REVENUE BONDS
(LONG ISLAND LIGHTING COMPANY PROJECT), 1994 SERIES A
Long Island Lighting Company (the "Company"), a New York
corporation, for value received, hereby promises to pay, on or before the dates
set forth below, the amounts set forth below, to Chemical Bank, New York, New
York, as trustee or its successor or successors as trustee (the "Trustee")
under the Indenture of Trust relating to the above-referenced Bonds dated as of
October 1, 1994, between the New York State Energy Research and Development
Authority (the "Authority"), a body corporate and politic, constituting a
public benefit corporation, established and existing under and by virtue of the
laws of the State of New York, and the Trustee. Such Indenture of Trust, as it
may be amended or supplemented from time to time, is herein called the
"Indenture." Unless otherwise defined herein, the terms used in this promissory
note (the "Company Note") which are defined in Section 1.01 of the Indenture
shall have the meanings, respectively, herein which such terms are given in
said Section 1.01 of the Indenture.
This Company Note is issued pursuant to the Participation
Agreement in order to evidence the obligation of the Company to the Authority
to repay the advance of the proceeds of the Bonds. In accordance with the
Participation Agreement, the Authority has authorized and directed the Company
to issue this Company Note payable to the order of the Trustee as security for
the payment of principal of, premium, if any, and interest on, the Bonds. The
rights and interest of the Authority under the Participation Agreement (except
the rights and interest of the Authority under Article III and Sections 4.04,
4.08, 4.09 and 4.10 and 5.16 thereof and insofar as the obligations of the
Company under Section 4.07 relate to taxes and assessments imposed upon the
Authority and not the Trustee, Section 4.07 thereof), subject to the provisions
of the Participation Agreement relating to the amendment thereof, have been
assigned to the Trustee pursuant to the Indenture. In addition, the Authority
has granted the Trustee the same power as the Authority to enforce from time to
time the rights of the Authority set forth in said Article III and Section
5.16, subject to the provisions of the Participation Agreement relating to
C-1
<PAGE> 160
the amendment thereof. All of the terms, conditions and provisions of the
Participation Agreement are, by this reference thereto, incorporated herein as
part of this Company Note.
This Company Note shall be payable as to principal, premium, if any, and
interest as follows:
(a) On or before each Interest Payment Date, commencing November
1, 1994, a sum which together with other moneys then available for
such purpose in the Bond Fund will enable the Trustee to pay the
interest on the Bonds coming due on such date;
(b) On or before any redemption date for the Bonds (other than a
redemption date pursuant to Section 8.05 of the Indenture), a sum
which together with other moneys then available for such purpose in
the Bond Fund will enable the Trustee to pay the principal of,
premium, if any, and interest on the Bonds which are to be redeemed on
such date; and
(c) On or before October 1, 2024, a sum which together with other
moneys then available for such purpose in the Bond Fund will enable
the Trustee to pay the outstanding principal amount of the Bonds;
provided that, if the Bonds are redeemed pursuant to Section 8.05 of the
Indenture, the amounts that would otherwise have been payable on this Company
Note if not for such redemption, shall continue to be payable at the times and
in the amounts set forth above as if such redemption had not occurred; and
provided further that if the Bonds are redeemed pursuant to Section 8.05 of the
Indenture the Company shall have the right at any time thereafter to prepay
this Company Note by paying the amount due on this Company Note at the time of
such prepayment together with unpaid interest accrued thereon to the date of
such prepayment.
The obligation of the Company to make any payment of principal
of, and premium, if any, and interest on, this Company Note shall be deemed
satisfied and discharged to the extent of the corresponding payment made by the
Bank under the Letter of Credit.
All payments of principal of, and premium, if any, and
interest on, this Company Note shall be made in immediately available funds to
the Trustee at its corporate trust office, 450 West 33rd Street, 15th Floor,
New York, New York 10001, Attention: Corporate Trustee Administration
Department, Wire Transfer Number: 967-0-22461, or to such different address or
wire transfer number as the Trustee may from time to time designate, on or
before each date on which such principal, premium, if any, or interest is due
in such coin or currency of the United States of America as at the time of
payment shall be legal tender for the payment of public and private debts.
The Company has agreed in the Participation Agreement that if
for any reason Company Note Payments, together with other moneys held by the
Trustee and then available for such purpose (including moneys paid by the Bank
under the Letter of Credit), would not be sufficient to make the corresponding
payments of principal of, and premium, if any, and interest on, the Bonds when
such payments are due, the Company will pay the amounts required from time to
time to make up any such deficiency.
C-2
<PAGE> 161
In the event that payment has been made in respect of the
principal of and premium, if any, and interest on, all of the Bonds, or
provision therefor has been made in accordance with Article XIV of the
Indenture, then this Company Note shall be deemed paid in full and shall be
cancelled and returned to the Company; provided that this Company Note shall
not be deemed paid in full if the Bonds are redeemed pursuant to Section 8.05
of the Indenture.
No reference herein to the Participation Agreement shall
impair the obligation of the Company to pay the principal of and premium, if
any, and interest on this Company Note at the time and place and in the amounts
herein prescribed, which obligation is absolute, irrevocable and unconditional
and is not subject to any defense (other than payment) or any right of set-
off, counterclaim or recoupment for any reason, including, without limitation,
any breach by the Authority of any obligation to the Company, whether under the
Participation Agreement or otherwise, or inaccuracy of any representation by
the Authority to the Company under the Participation Agreement, or any
indebtedness or liability at any time owing to the Company by the Authority or
any failure to complete the Project or the destruction by fire or other
casualty of the Project or any portion thereof, or the taking of title thereto
or the use thereof by the exercise of the power of eminent domain.
In case of an event of default (as defined in Section 6.01 of
the Participation Agreement), the principal of and interest to the date of
payment of this Company Note may be declared immediately due and payable as
provided in the Participation Agreement. In addition, if at any time the
principal of the Bonds shall have been declared to be due and payable by
acceleration pursuant to the terms of the Indenture, this Company Note shall
thereupon become and be immediately due and payable, subject to such
declaration with respect to the Bonds being annulled pursuant to Section 10.01
of the Indenture.
This Company Note may not be amended except by an instrument
in writing signed by the Company, by the Authority and by the Trustee, on
behalf of the owners of the Bonds, in the manner and subject to the conditions
provided in Section 4.03 of the Indenture.
This Company Note may not be transferred by the Trustee except
to effect an assignment to a successor Trustee under the Indenture or pursuant
to Section 8.05 of the Indenture.
THIS COMPANY NOTE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAW OF THE STATE OF NEW YORK.
Presentment, demand, protest and notice of dishonor are hereby
expressly waived.
C-3
<PAGE> 162
IN WITNESS WHEREOF, the Company has caused this Company Note
to be duly executed and delivered as of October __, 1994.
LONG ISLAND LIGHTING COMPANY
[SEAL]
By:
----------------------------
Treasurer
ATTEST:
-----------------------------
Assistant Secretary
C-4
<PAGE> 1
Exhibit 10(y)(1)
LONG ISLAND LIGHTING COMPANY EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 30th day of
November, 1994, by and between LONG ISLAND LIGHTING COMPANY, a New York
corporation (hereinafter referred to as the "Company"), and William J.
Catacosinos (hereinafter referred to as "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company as its Chief
Executive Officer,
WHEREAS, the Executive is entitled to post-employment benefits
under his employment agreement dated as of January 30, 1984 (the "Employment
Agreement") as amended from time to time, and
WHEREAS, the Company desires to provide Executive with the same
incentives for continuation of his current services as Chief Executive Officer
with respect to a possible Change of Control (as defined herein) as is available
to other officers, and
WHEREAS, it is necessary to coordinate the provisions of
various agreements between the Company and Executive with respect to a Change of
Control;
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the parties hereto
mutually covenant and agree as follows:
1. Definitions.
(A) Cause. "Cause" for termination by the Company of the
Executive's employment shall mean "for cause" as defined in Section 1(e) of the
Employment Agreement.
(B) Change of Control. The term "Change of Control" means an
event which shall be deemed to have occurred if:
(i) any "person" as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40%
<PAGE> 2
or more of the combined voting power of the Company's then outstanding
securities;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (iii) or (iv) herein) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than 25% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change of Control;
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of, or the Company sells or disposes of, all or
substantially all of the Company's assets or all or substantially all
of the assets of the Company acquired for or used in the electric
utility business of the Company, or any such sale or disposition is
effected through condemnation proceedings; or
(v) the Board of Directors shall approve an agreement to effect
a Change of Control, and in connection therewith, the Board of
Directors approves the Executive's termination of his employment as
Chief Executive Officer and the commencement of his employment as a
consultant pursuant to section 6 of his Employment Agreement.
- 2 -
<PAGE> 3
The Chief Legal Officer shall notify the parties to this Agreement as
to whether and when a Change of Control has occurred. The preceding sentence
shall not preclude any other party to this Agreement from giving such notice.
(C) Company. Upon the occurrence of any merger or consolidation
described in Section 1(B)(iii) in which the Company is not the surviving entity
and which is not a Change of Control, "Company" shall thereafter for all
purposes hereof be deemed to mean such surviving entity and in such event
"Company" for purposes of Section 1(B)(ii) shall mean Long Island Lighting
Company prior to such event and such surviving entity thereafter.
(D) Notice of Termination. "Notice of Termination" shall mean a
notice delivered by the Company or the Executive, as the case may be, and
stating that the Executive's employment with the Company is terminated.
(E) Limited Waiver. The waiver by the Company of a violation of
any provisions of this Agreement, whether express or implied, shall not operate
or be construed as a waiver of any subsequent violation of any such provision.
(F) Code. For purposes of this Agreement, the term "Code" means
the Internal Revenue Code of 1986, including any amendments thereto or successor
tax codes thereof. References to any section of the Code shall include any
amended or successor section of comparable import.
(G) Covered Termination. For purposes of this Agreement, the
term "Covered Termination" means any termination of the Executive's employment
where the Termination Date is any date prior to the end of the Employment
Period.
(H) Employment Period. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the date of a Change of Control
of the Company, and ending at 11:59 p.m. Eastern Time on the third anniversary
of such date.
(I) Good Reason. For purposes of this Agreement, the Executive
shall have a "Good Reason" for termination of employment after a Change of
Control of the Company in the event of:
(i) a termination of the Executive's employment by the Company,
including a termination described in Section 1(B)(v), for any reason
other than Cause;
(ii) a good faith determination by the Executive that there has
been a significant adverse change, without the Executive's written
consent, in the Executive's working
- 3 -
<PAGE> 4
conditions or status with the Company from such working conditions or
status in effect immediately prior to the Change of Control of the
Company, including but not limited to (A) a significant change in the
nature or scope of the Executive's authority, powers, functions, duties
or responsibilities, or (B) a significant reduction in the level of
support services, staff, secretarial and other assistance, office space
and accoutrements (regardless of whether such reduction is part of a
general reduction applicable to such items at the Company); or
(iii) other than with respect to a Change of Control described
in Section 1(B)(v), any voluntary termination of employment by the
Executive for any reason other than Cause where the Notice of
Termination is given more than three months after the date on which
there is a Change of Control of the Company, but not after the date
which is the third anniversary of such Change of Control of the
Company.
(J) Person. For purposes of this Agreement, the term "Person"
shall mean any individual, firm, partnership, corporation or other entity,
including any successor (by merger or otherwise) of such entity, or a group of
any of the foregoing acting in concert.
(K) Termination Date.
(i) For purposes of this Agreement, the term "Termination Date"
means (a) if the Executive's employment is terminated by the
Executive's death, the date of death; (b) if the Executive's employment
is terminated by reason of voluntary early retirement, as agreed in
writing by the Company and the Executive, the date of such early
retirement which is set forth in such written agreement; (c) if the
Executive's employment is terminated for purposes of this Agreement by
reason of disability, as defined in the Retirement Income Plan of the
Company (as in effect on the date hereof), the earlier of thirty days
after the Notice of Termination is given or one day prior to the end of
the Employment Period; (d) if the Executive's employment is terminated
by the Executive voluntarily (other than for Good Reason), the date the
Notice of Termination is given; and (e) if the Executive's employment
is terminated by the Company (other than by reason of disability) or by
the Executive for Good Reason, the earlier of thirty days after the
Notice of Termination is given or one day prior to the end of the
Employment Period, except that if the Notice of Termination is given on
or prior to the third anniversary of the date of the Change of Control
of the Company, the Termination Date shall be deemed to have occurred
no later
- 4 -
<PAGE> 5
than the third anniversary of the date of the Change of Control of the
Company. Notwithstanding the foregoing:
(ii) If termination is "for Cause" pursuant to Section 1(A) and
if the Executive has "cured the conduct" constituting such Cause as
described by the Company in its Notice of Termination within such
thirty day or shorter period, then the Executive's employment hereunder
shall continue as if the Company had not delivered its Notice of
Termination.
(iii) If the party receiving the Notice of Termination notifies
the other party that a dispute exists concerning the termination and it
is finally determined that the reason asserted in such Notice of
Termination did not exist, then (a) if such Notice was delivered by the
Executive, the Executive will be deemed to have voluntarily terminated
his employment and the Termination Date shall be the earlier of the
date fifteen days after the Notice of Termination is given or one day
prior to the end of the Employment Period and (b) if delivered by the
Company, the Company will be deemed to have terminated the Executive
other than by reason of death, disability or Cause.
2. Termination or Cancellation Prior to Change of Control. In
the event (A) the Executive's employment is terminated prior to a Change of
Control of the Company, or (B) no Change of Control of the Company occurs prior
to December 31, 1999, this Agreement shall be terminated and canceled and of no
further force and effect, and any and all rights and obligations of the parties
hereunder shall cease. The termination of this Agreement shall have no effect on
the rights and obligations of the Company and Executive under his Employment
Agreement or any other Agreement between the parties.
3. Benefits. If there is a Covered Termination, the Executive
shall be entitled to the following benefits:
(A) Accrued Benefits. The Executive shall be paid the amount of
the Executive's Accrued Benefits. For purposes of this Agreement, the
Executive's "Accrued Benefits" shall include the following amounts, payable as
described herein: (i) all base salary, and accrued vacation pay, for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies or other reimbursable costs advanced in connection with the Executive's
employment for reasonable and necessary expenses incurred by the Executive on
behalf of the Company for the time period ending with the Termination Date;
(iii) any and all other cash earned through the Termination Date and deferred at
the election of the Executive or pursuant to any deferred compensation plan then
in effect, and any increments thereon as
- 5 -
<PAGE> 6
determined under such plan; and (iv) a lump sum payment of the bonus or
incentive compensation otherwise payable to the Executive with respect to the
year in which termination occurs, or for the prior year, under all bonus or
incentive compensation plans in which the Executive is a participant. Payment of
Accrued Benefits shall be made promptly in accordance with the Company's
prevailing practice and shall not in any way affect Executive's rights under the
Employment Agreement.
(B) Welfare Benefits. Until the expiration of the Consulting
Term (as described in the Employment Agreement), the Executive shall continue to
be covered, at the expense of the Company, by the same or equivalent welfare
benefits, including life insurance, hospitalization, medical and dental coverage
and disability benefits, as were provided to the Executive immediately prior to
the commencement of such Consulting Term. The amount of such benefits shall be
determined on the basis of the Executive's compensation prior to the start of
the Consulting Term.
(C) Contractual Retirement Benefits. During the period in which
Executive provides the consulting services referred to in his Employment
Agreement, the Company shall make the periodic payments of Retirement Benefits
provided under the Employment Agreement until such time as a Change in Control
(as defined in the Employment Agreement) takes place. Furthermore, at the time a
Change in Control (as defined in the Employment Agreement) takes place, the
Company or the Trustee of the Deferred Compensation Trust shall make the payment
of the Actuarial Equivalent lump-sum payment, required by the provisions of
Section 6.7 of the Deferred Compensation Trust, dated January 7, 1987, without
regard to whether the Executive's employment terminated prior to, or subsequent
to, a Change of Control.
(D) Termination of Consulting Services. In the event that the
Board of Directors determines, for any reason, that Executive's consulting
services during the Consulting Term are not required because of the
circumstances leading to a Change of Control, (i) the Company or the Trustee of
the Original Term and Consulting Term Compensation Trust shall pay the dollar
amount of the compensation payable for such services in a lump sum without any
adjustment for early payment, and (ii) the Company shall continue to provide the
welfare benefits described in (B) above. In such event, the Executive shall be
discharged of any obligation to provide consulting services during the
Consulting Term.
(E) Supplemental Death and Retirement Benefit Plans. Executive
qualifies by reason of age and service for the benefit provided under the
Supplemental Death and Retirement benefit Plan. Payment of the benefit elected
under such plan shall
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<PAGE> 7
commence at the time that the supplemental death benefit provided pursuant to
paragraph (B) above terminates.
(F) Severance Payment. The Executive will be entitled to cash
compensation equal to three (3) years pay, calculated as described below,
payable in equal monthly installments. The aggregate cash compensation will be
calculated as the greater of three (3) times (i) the Executive's current rate of
base salary at the Termination Date or (ii) the Executive's highest annual rate
of base salary within one (1) year prior to the Change of Control. Cash
compensation paid pursuant to this provision shall be subject to appropriate
payroll deductions.
(G) Tax Gross-Up.
(i) In the event that the Executive becomes entitled to
payments in connection with a Change in Control or his termination of
employment (the "Payments"), if any of the Payments will be subject to
the tax imposed by Section 4999 of the Code (or any similar tax that
may hereafter be imposed) (the "Excise Tax"), the Company shall pay to
Executive an additional amount (the "Gross-Up Payment") such that the
net amount retained by him, after deduction of any Excise Tax on the
Payments and any federal, state and local income tax and Excise Tax
upon the payment provided for by this paragraph, shall be equal to the
Payments. For purposes of determining whether any of the Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (a) any
other payments or benefits received or to be received by Executive in
connection with a Change of Control or his termination of employment
(whether pursuant to the terms of this Agreement or any plan,
arrangement or agreement with the Company or any person whose actions
result in a Change of Control or any person affiliated with the Company
or such person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors, and consented to in
writing by the Executive, which consent shall not be unreasonably
withheld, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered before the date of the change within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject
to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of
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<PAGE> 8
the Payments or (2) the amount of excess parachute payments within the
meaning of Section 280G(b)(1) (after applying clause (a), above), and
(c) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal, state and local income
taxes at the highest marginal rate of federal, state and local income
taxation in the calendar year in which the Gross-Up Payment is to be
made. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of Executive's employment, he shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by Executive if such repayment results in
a reduction in Excise Tax and/or a federal, state and local tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code, applied by treating the
period between initial payment of the Gross-Up Payment and the
repayment in respect thereof as the term of the debt instrument
referred to in section 1274(d)(1)(A) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(ii) A Gross-Up Payment shall be made not later than the fifth
day, or as soon thereafter as the Company in good faith deems
practicable, following the date Executive becomes subject to payment of
excise tax; provided, however, that if the amounts of such payment
cannot be finally determined on or before such day, the Company shall
pay to Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments and shall pay
the remainder of such payment (together with interest at the rate
provided under Section 1274(b)(2)(B) of the Code) as soon as the amount
can be determined but no later than the thirtieth day after the date
Executive
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<PAGE> 9
becomes subject to the payment of excise tax. In the event the amount
of the estimated payment exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to
Executive, payable on the fifth day after demand by the Company
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code).
4. Further Obligations of the Executive. The Executive agrees
that, in the event of any Covered Termination where the Executive is entitled to
Accrued Benefits and the Termination Payment, the Executive shall hold in
confidence and not directly or indirectly disclose or use or copy or make lists
of any confidential information or proprietary data of the Company, except to
the extent authorized in writing pursuant to authorization by the Board of
Directors of the Company or required by any court or administrative agency,
other than to an employee of the Company or a person to whom disclosure is
reasonably necessary or appropriate in connection with the performance by the
Executive of duties as an executive of the Company. Confidential information
shall not include any information known generally to the public or any
information of a type not otherwise considered confidential by persons engaged
in the same business or a business similar to that of the Company. All records,
files, documents and materials, or copies thereof, relating to the business of
the Company which the Executive shall prepare, or use, or come into contact
with, shall be and remain the sole property of the Company and shall be promptly
returned to the Company upon termination of employment with the Company.
5. Expenses and Interest. If, after a Change of Control of the
Company, (A) a dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or (B) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, the Executive shall recover from the Company any
reasonable attorneys' fees and necessary costs and disbursements, including
without limitation expert witness fees, incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Morgan Guaranty Trust Company of New York from
time to time as its prime or base lending rate from the date that payments to
him should have been made under this Agreement. Within ten days after the
Executive's written request therefor (which, without limitation, may be made
periodically or from time to time based on the date or dates at which the
Executive is billed for services and related expenses which are reimbursable as
"Expenses" hereunder), the Company shall pay to the Executive, or such other
person or entity as the Executive may designate in writing to the Company, the
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<PAGE> 10
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
6. Payment Obligations Absolute. The Company's obligation
during and after the Employment Period to pay the Executive the amounts and to
make the benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. All amounts payable by the
Company hereunder shall be paid without notice or demand. Each and every payment
made hereunder by the Company shall be final, and the Company will not seek to
recover all or any part of such payment from the Executive, or from whomsoever
may be entitled thereto, for any reason whatsoever.
7. Successors.
(A) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. In case of such assignment by the
Company and of assumption and agreement by such Person, as used in this
Agreement, "Company" shall thereafter mean such Person which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, and
this Agreement shall inure to the benefit of, and be enforceable by, such
Person. The Executive shall, in his discretion, be entitled to proceed against
any or all of such Persons, any Person which theretofore was such a successor to
the Company (as defined in the first paragraph of this Agreement) and the
Company (as so defined) in any action to enforce any rights of the Executive
hereunder. Except as provided in this Subsection, this Agreement shall not be
assignable by the Company. This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company.
(B) This Agreement and all rights of the Executive shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to
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<PAGE> 11
the Executive under this Agreement, if the Executive had lived shall be paid, in
the event of the Executive's death, to the Executive's estate, heirs and
representatives; provided, however, that the foregoing shall not be construed to
modify any terms of any benefit plan of the Company or of any agreement or
arrangement of the Company with respect to benefits, as such terms are in effect
on the date of the Change of Control of the Company, that expressly govern
benefits under such plan, agreement or arrangement in the event of the
Executive's death.
8. Severability. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereto are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby.
9. Amendment. This Agreement may not be amended or modified at
any time except by written instrument executed by the Company and the Executive.
10. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of nationally recognized tax counsel if any question as to the amount
or requirement of any such withholding shall arise.
11. Governing Law; Resolution of Disputes. This Agreement and
the rights and obligations hereunder shall be governed and construed in
accordance with the laws of the State of New York. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be New York or, at the Executive's election,
if the Executive is no longer residing or working in the New York metropolitan
area, in the judicial district encompassing the city in which the Executive
resides; provided, that, if the Executive is not then residing in the United
States, the election of the Executive with respect to such venue shall be either
in New York, New York or in the judicial district encompassing that city in the
United States among the thirty cities having the largest population (as
determined by the most recent United States Census data available at the
Termination Date) which is closest to the Executive's residence. The parties
consent to personal
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<PAGE> 12
jurisdiction in each trial court in the selected venue having subject matter
jurisdiction notwithstanding their residence or situs, and each party
irrevocably consents to service of process in the manner provided hereunder for
the giving of notices.
12. Payment from Trust Funds. The Company has established
various Trust Funds in order to assure payment by the Company of obligations
under the Employment Agreement, its various benefit programs and pursuant to
this Agreement. In the event that the Company or its successors or assigns shall
not make a payment required by this Agreement or pursuant to any employment
arrangement or agreement with respect to which a Trust has been established, the
Trustee of such Trust, consistent with the terms and conditions of the Trust,
shall make the payment required of the Company without any need to inquire into
the obligations of the Executive to the Company under this Agreement.
13. Notices. All notices hereunder shall be in writing and
deemed properly given if delivered by hand and receipted or if mailed by
registered mail, return receipt requested. Notices to the Company shall be
directed to the Corporate Secretary at the Company's headquarters offices.
Notices to the Executive shall be directed to his last known home address.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement dated this 21st day of November, 1994.
LONG ISLAND LIGHTING COMPANY
By: /s/ Robert J. Grey
---------------------------------
/s/ W. J. Catacosinos
---------------------------------
William J. Catacosinos
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<PAGE> 13
This Amendment, dated as of December 2, 1991, to the Agreement
dated January 30, 1984 between LONG ISLAND LIGHTING COMPANY, a New York
Corporation (the "Company") and WILLIAM J. CATACOSINOS (the "Executive")
WHEREAS, the Company and the Executive entered into an
agreement on the 30th day of January 1984 with regard to the employment of the
Executive (the "Agreement");
WHEREAS, the Agreement has been previously amended from time
to time;
WHEREAS, the Amendment originally entered into on December 2,
1991 with respect to the extension of the Executive's employment term
incorrectly reflected the agreements of the parties;
WHEREAS, the Company and the Executive by this agreement wish
to correct such prior Amendment and to reflect the parties' actual agreement on
December 2, 1991 to make additional amendments to certain provisions of the
Agreement regarding the Term of the Agreement (the "Amendment");
NOW, THEREFORE, the Company and the Executive agree as follows:
1. Section 1 of the Agreement is amended by deleting Section
1(b) in its entirety and adding the following to Section 1(a):
The Original Term shall be extended for (1) an additional
period beginning on February 1, 1989 and ending on January 31,
1992 and (2) an additional period beginning on February 1, 1992
and ending on January 31, 1997 (the first such period being
referred to as the "First Renewal Term," the second such period
being referred to as the "Second Renewal Term" and the First
Renewal Term and the Second Renewal Term being referred to
collectively as the "Renewal Term") if with respect to the
First Renewal Term the Executive notifies Company after
September 1, 1988 and before January 15, 1989 and with respect
to the Second Renewal Term the Executive notifies Company after
September 1, 1991 and before January 15, 1992 of the
Executive's desire so to extend the Original Term or the First
Renewal Term, as the case may be, and if Company does not
within fifteen (15) days after receipt of each such notice
notify Executive that it does not wish to extend the Original
Term. For all purposes of this Agreement, "Original Term"
<PAGE> 14
shall mean and include such First Renewal Term and such Second
Renewal Term to the extent the Original Term is extended as
provided in the immediately preceding sentence.
2. This Agreement shall become effective immediately.
3. Upon the effectiveness of this Agreement, any reference to
the Agreement in the Agreement and in any of the amendments thereto and other
agreements of the Executive with the Company shall mean and be a reference to
the Agreement as amended by each of the amendments thereto.
4. This Amendment restates the Amendment originally entered
into on December 2, 1991, which prior Amendment shall have no force and effect.
Except as amended previously and by this amendment, the Agreement shall remain
in full force and effect and is in all respects ratified and confirmed.
IN WITNESS WHEREOF, as of the date hereof, the Company has
caused this Amendment to be executed by an officer in its name and for and on
its behalf and the Executive has set his hand.
LONG ISLAND LIGHTING COMPANY
By: /s/ Robert J. Grey
-------------------------------
ROBERT J. GREY, GENERAL COUNSEL
Attest:
/s/ Herbert M. Leiman
-----------------------------
HERBERT M. LEIMAN,
ASSISTANT CORPORATE SECRETARY
/s/ William J. Catacosinos
--------------------------------
WILLIAM J. CATACOSINOS
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<PAGE> 1
Exhibit 10(y)(2)
LONG ISLAND LIGHTING COMPANY EXECUTIVE EMPLOYMENT AGREEMENT
THIS AGREEMENT, made and entered into as of the 21st day of
November, 1994, by and between LONG ISLAND LIGHTING COMPANY, a New York
corporation (hereinafter referred to as the "Company"), and Theodore A. Babcock
(hereinafter referred to as "Executive").
W I T N E S S E T H :
WHEREAS, the Executive is employed by the Company in a key
executive capacity and the Executive's services are valuable to the conduct of
the business of the Company; and
WHEREAS, the Company recognizes that circumstances may arise in
which a change in control of the Company occurs, through acquisition or
otherwise, thereby causing uncertainty about the Executive's future employment
with the Company without regard to the Executive's competence or past
contributions, which uncertainty may result in the loss of valuable services of
the Executive to the detriment of the Company and its shareholders, and the
Company and the Executive wish to provide reasonable security to the Executive
as an incentive for the continuation by Executive of his or her current
relationship with the Company.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements hereinafter set forth, the [parties hereto
mutually covenant and agree as follows:
1. Definitions.
(A) Cause. "Cause" for termination by the Company of the
Executive's employment after a Change of Control of the Company shall, for
purposes of this Agreement, be limited to (i) the Executive's intentionally
engaging in conduct not in good faith which has caused demonstrable and serious
financial injury to the Company, all of which shall be evidenced by a
determination in a binding and final judgment, order or decree of a court or
administrative agency of competent jurisdiction, in effect after exhaustion or
lapse of all rights of appeal, in an action, suit or proceeding, whether civil,
criminal, administrative or investigative; (ii) conviction of a felony (as
evidenced by binding and final judgment, order or decree of a court of competent
jurisdiction, in effect after exhaustion of all rights of appeal) which
substantially impairs the Executive's ability to perform his duties or
responsibilities; and (iii) continuing willful and unreasonable refusal by the
Executive to perform the Executive's duties or responsibilities (unless such
duties or responsibilities have been significantly changed without the
Executive's consent).
<PAGE> 2
(B) Change of Control. The term "Change of Control" means an
event which shall be deemed to have occurred if:
(i) any "person" as such term is used in Section 13(d) and
14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")
(other than the Company, any trustee or other fiduciary holding
securities under any employee benefit plan of the Company, or any
company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company) is or becomes the "beneficial owner" (as defined
in Rule 13d-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing 40% or more of the combined
voting power of the Company's then outstanding securities;
(ii) during any period of two consecutive years, individuals
who at the beginning of such period constitute the Board, and any new
director (other than a director designated by a person who has entered
into an agreement with the Company to effect a transaction described in
clause (iii) or (iv) herein) whose election by the Board or nomination
for election by the Company's stockholders was approved by a vote of at
least two-thirds (2/3) of the directors then still in office who either
were directors at the beginning of the period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger or
consolidation of the Company with any other corporation, other than a
merger or consolidation which would result in the voting securities of
the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into
voting securities of the surviving entity) more than 80% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation; provided, however, that a merger or consolidation
effected to implement a recapitalization of the Company (or similar
transaction) in which no "person" (as hereinabove defined) acquires
more than 25% of the combined voting power of the Company's then
outstanding securities shall not constitute a Change of Control; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of, or the Company sells or disposes of, all or
substantially all of the Company's assets or all or substantially all
of the assets of the Company acquired for or used in the electric
utility
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<PAGE> 3
business of the Company, or any such sale or disposition is effected
through condemnation proceedings.
The Chief Legal Officer shall notify the parties to this Agreement as
to whether and when a Change of Control has occurred. The preceding sentence
shall not preclude any other party to this Agreement from giving such notice.
(C) Company. Upon the occurrence of any merger or consolidation
described in Section 1(B)(iii) in which the Company is not the surviving entity
and which is not a Change of Control, "Company" shall thereafter for all
purposes hereof be deemed to mean such surviving entity and in such event
"Company" for purposes of Section 1(B)(ii) shall mean Long Island Lighting
Company prior to such event and such surviving entity thereafter.
(D) Notice of Termination. "Notice of Termination" shall mean a
notice delivered by the Company or the Executive, as the case may be, and
stating that the Executive's employment with the Company is terminated.
(E) Limited Waiver. The waiver by the Company of a violation of
any provisions of this Agreement, whether express or implied, shall not operate
or be construed as a waiver of any subsequent violation of any such provision.
(F) Code. For purposes of this Agreement, the term "Code" means
the Internal Revenue Code of 1986, including any amendments thereto or successor
tax codes thereof. References to any section of the Code shall include any
amended or successor section of comparable import.
(G) Covered Termination. For purposes of this Agreement, the
term "Covered Termination" means any termination of the Executive's employment
where the Termination Date is any date prior to the end of the Employment
Period.
(H) Employment Period. For purposes of this Agreement, the term
"Employment Period" means a period commencing on the date of a Change of Control
of the Company, and ending at 11:59 p.m. Eastern Time on the third anniversary
of such date.
(I) Good Reason. For purposes of this Agreement, the Executive
shall have a "Good Reason" for termination of employment after a Change of
Control of the Company in the event of:
(i) a termination of the Executive's employment by the Company
for any reason other than Cause;
(ii) a good faith determination by the Executive that there has
been a significant adverse change, without the
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<PAGE> 4
Executive's written consent, in the Executive's working conditions or
status with the Company from such working conditions or status in
effect immediately prior to the Change of Control of the Company,
including but not limited to (A) a significant change in the nature or
scope of the Executive's authority, powers, functions, duties or
responsibilities, or (B) a significant reduction in the level of
support services, staff, secretarial and other assistance, office space
and accoutrements (regardless of whether such reduction is part of a
general reduction applicable to such items at the Company); or
(iii) any voluntary termination of employment by the Executive
for any reason other than Cause where the Notice of Termination is
given more than three months after the date on which there is a Change
of Control of the Company, but not after the date which is the third
anniversary of such Change of Control of the Company.
(J) Person. For purposes of this Agreement, the term "Person"
shall mean any individual, firm, partnership, corporation or other entity,
including any successor (by merger or otherwise) of such entity, or a group of
any of the foregoing acting in concert.
(K) Termination Date.
(i) For purposes of this Agreement, the term "Termination Date"
means (a) if the Executive's employment is terminated by the
Executive's death, the date of death; (b) if the Executive's employment
is terminated by reason of voluntary early retirement, as agreed in
writing by the Company and the Executive, the date of such early
retirement which is set forth in such written agreement; (c) if the
Executive's employment is terminated for purposes of this Agreement by
reason of disability, as defined in the Retirement Income Plan of the
Company (as in effect on the date hereof), the earlier of thirty days
after the Notice of Termination is given or one day prior to the end of
the Employment Period; (d) if the Executive's employment is terminated
by the Executive voluntarily (other than for Good Reason), the date the
Notice of Termination is given; and (e) if the Executive's employment
is terminated by the Company (other than by reason of disability) or by
the Executive for Good Reason, the earlier of thirty days after the
Notice of Termination is given or one day prior to the end of the
Employment Period, except that if the Notice of Termination is given on
or prior to the third anniversary of the date of the Change of Control
of the Company, the Termination Date shall be deemed to have occurred
no later
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<PAGE> 5
than the third anniversary of the date of the Change of Control of the
Company. Notwithstanding the foregoing:
(ii) If termination is "for Cause" pursuant to Section 1(A) of
this Agreement and if the Executive has "cured the conduct"
constituting such Cause as described by the Company in its Notice of
Termination within such thirty day or shorter period, then the
Executive's employment hereunder shall continue as if the Company had
not delivered its Notice of Termination.
(iii) If the party receiving the Notice of Termination notifies
the other party that a dispute exists concerning the termination and it
is finally determined that the reason asserted in such Notice of
Termination did not exist, then (a) if such Notice was delivered by the
Executive, the Executive will be deemed to have voluntarily terminated
his employment and the Termination Date shall be the earlier of the
date fifteen days after the Notice of Termination is given or one day
prior to the end of the Employment Period and (b) if delivered by the
Company, the Company will be deemed to have terminated the Executive
other than by reason of death, disability or Cause.
2. Termination or Cancellation Prior to Change of Control. The
Company and the Executive shall each retain the right to terminate the
employment of the Executive at any time prior to a Change of Control of the
Company. In the event (A) the Executive's employment is terminated prior to a
Change of Control of the Company, or (B) no Change of Control of the Company
occurs prior to December 31, 1999, this Agreement shall be terminated and
canceled and of no further force and effect, and any and all rights and
obligations of the parties hereunder shall cease.
3. Benefits. If there is a Covered Termination, the Executive
shall be entitled to the following benefits:
(A) Accrued Benefits. The Executive shall be paid the amount of
the Executive's Accrued Benefits. For purposes of this Agreement, the
Executive's "Accrued Benefits" shall include the following amounts, payable as
described herein: (i) all base salary, and accrued vacation pay, for the time
period ending with the Termination Date; (ii) reimbursement for any and all
monies or other reimbursable costs advanced in connection with the Executive's
employment for reasonable and necessary expenses incurred by the Executive on
behalf of the Company for the time period ending with the Termination Date;
(iii) any and all other cash earned through the Termination Date and deferred at
the election of the Executive or pursuant to any deferred compensation plan then
in effect, and any increments thereon as
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<PAGE> 6
determined under such plan; and (iv) a lump sum payment of the bonus or
incentive compensation otherwise payable to the Executive with respect to the
year in which termination occurs, or for the prior year, under all bonus or
incentive compensation plans in which the Executive is a participant. Payment of
Accrued Benefits shall be made promptly in accordance with the Company's
prevailing practice.
(B) Welfare Benefits.
(i) Until the third anniversary of the date of the Covered
Termination, the Executive shall continue to be covered, at the expense of the
Company, by the same or equivalent welfare benefits, including life insurance,
hospitalization, medical and dental coverage and disability benefits, as were
provided to the Executive immediately prior to the date of the Change of
Control.
(ii) In the case of benefits of a character described in
Section 4980B of the Code, the Company shall reimburse the Executive for the
cost of coverage for such benefits until such third anniversary of the date of
the Covered Termination (which may be effected by paying the applicable premium
on behalf of the Executive and reporting it as income of the Executive for
federal and other applicable income tax purposes). The amount of such payment
shall be grossed up so that the net effect of such payment by the Company, after
giving effect to federal, state and local income taxes on payments under this
subdivision (ii), shall be the same as if the Company had provided such coverage
fully at its own expense as described in subdivision (i) of this Section (B).
(C) Leased Automobile. For a period of 90 days from the date of
a Covered Termination, the Company shall continue to make available to the
Executive the leased automobile being provided for the Executive by the Company
at the date of the Change of Control (or in the case of a successor automobile,
such automobile) on the same basis and at the same cost to the Executive, if
any, as such automobile is provided on the Termination Date.
(D) Severance Payment. The Executive will be entitled to cash
compensation equal to three (3) years pay, calculated as described below,
payable in equal monthly installments. The aggregate cash compensation will be
calculated as the greater of three (3) times (i) the Executive's current rate of
base salary at the Termination Date or (ii) the Executive's highest annual rate
of base salary within one (1) year prior to the Change of Control. Cash
compensation paid pursuant to this provision shall be subject to appropriate
payroll deductions.
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<PAGE> 7
(E) Supplemental Death and Retirement Benefit Plan.
(i) An executive whose employment is terminated for any reason
after a Change of Control and who is not vested at the time of such
termination in the post-retirement benefits provided under the
Supplemental Death and Retirement Benefits Plan (SD&RB) shall become
vested as of the date of a Change of Control in the following
percentage of such benefits.
(ii) The percentage referred to in subdivision (i) of this
Section is the percentage determined by multiplying 100 percent by a
fraction, the numerator of which is the Executive's period of service
at the Executive's Termination Date computed to the nearest whole month
and then increased by 36 months, and the denominator of which is the
years of service, or partial years of service, computed to the nearest
whole month, which the Executive would have had at the first day of the
month in which the Executive's 65th birthday falls, had the Executive
been continuously employed until such date. The percentage so
determined shall be multiplied by the number of the Participant's Units
of Participation in the SD&RB at the date of any Change of Control to
determine the Units available to the Participant at the Termination
Date and the provisions of the SD&RB shall be deemed to be amended to
the full extent necessary to give effect to the provisions of this
Section 3(E).
(iii) The percentage of the life insurance or annuity benefit
provided under the SD&RB for each Unit, or fraction thereof, shall
become payable at the end of the period described in (A) above during
which the pre-retirement death benefit provided under the SD&RB is
continued.
(iv) If the Executive elects any annuity benefit provided under
the SD&RB, such benefit shall be elected within 90 days of the
Termination Date. With respect to the calculation of the amount of any
annuity benefit payable to the Executive under the SD&RB, the actuarial
equivalent of the normal form of benefit provided under the SD&RB shall
be computed by adding 36 months to the Executive's attained age, and
with no reduction for commencement before age 60 (determined after such
addition), and a reduction of four percent (4%) for each full year that
the Executive is under age 60 (determined after such addition). In
addition to the options available under the SD&RB, the Executive may
elect to receive a lump sum payment of the actuarial equivalent of any
annuity option provided under the SD&RB. Any such lump sum payment
shall be determined by utilizing an actuarial factor of 110.16 per $1
of monthly income as of the Termination Date. The amount determined as
of the
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<PAGE> 8
Termination Date, whether in a lump sum or annuity form, shall be
actuarially increased to reflect the interval between the Termination
Date and the date of payment, based on the rate of interest announced
by Morgan Guaranty Trust Company of New York from time to time as its
prime or base lending rate between the Termination Date and the payment
date.
(F) Tax Gross-Up.
(i) In the event that the Executive becomes entitled to
payments in connection with a Change in Control or his termination of
employment (the "Payments"), if any of the Payments will be subject to
the tax imposed by Section 4999 of the Code (or any similar tax that
may hereafter be imposed) (the "Excise Tax"), the Company shall pay to
Executive an additional amount (the "Gross-Up Payment") such that the
net amount retained by him, after deduction of any Excise Tax on the
Payments and any federal, state and local income tax and Excise Tax
upon the payment provided for by this paragraph, shall be equal to the
Payments. For purposes of determining whether any of the Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (a) any
other payments or benefits received or to be received by Executive in
connection with a Change of Control or his termination of employment
(whether pursuant to the terms of this Agreement or any plan,
arrangement or agreement with the Company or any person whose actions
result in a Change of Control or any person affiliated with the Company
or such person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "excess parachute
payments" within the meaning of Section 280G(b)(1) shall be treated as
subject to the Excise Tax, unless in the opinion of tax counsel
selected by the Company's independent auditors, and consented to in
writing by the Executive, which consent shall not be unreasonably
withheld, such other payments or benefits (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services
actually rendered before the date of the change within the meaning of
Section 280G(b)(4) of the Code in excess of the base amount within the
meaning of Section 280G(b)(3) of the Code, or are otherwise not subject
to the Excise Tax, (b) the amount of the Payments which shall be
treated as subject to the Excise Tax shall be equal to the lesser of
(1) the total amount of the Payments or (2) the amount of excess
parachute payments within the meaning of Section 280G(b)(1) (after
applying clause (a), above), and (c) the value of any non-cash benefits
or any deferred payment or benefit shall be determined by the Company's
independent auditors in
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<PAGE> 9
accordance with the principles of Sections 280G(d)(3) and (4) of the
Code.
For purposes of determining the amount of the Gross-Up Payment,
the Executive shall be deemed to pay federal, state and local income
taxes at the highest marginal rate of federal, state and local income
taxation in the calendar year in which the Gross-Up Payment is to be
made. In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of
termination of Executive's employment, he shall repay to the Company at
the time that the amount of such reduction in Excise Tax is finally
determined the portion of the Gross-Up Payment attributable to such
reduction (plus the portion of the Gross-Up Payment attributable to the
Excise Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by Executive if such repayment results in
a reduction in Excise Tax and/or a federal, state and local tax
deduction) plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code, applied by treating the
period between initial payment of the Gross-Up Payment and the
repayment in respect thereof as the term of the debt instrument
referred to in section 1274(d)(1)(A) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of Executive's employment
(including by reason of any payment the existence or amount of which
cannot be determined at the time of the Gross-Up Payment), the Company
shall make an additional Gross-Up Payment in respect of such excess
(plus any interest payable with respect to such excess) at the time
that the amount of such excess is finally determined.
(ii) A Gross-Up Payment shall be made not later than the fifth
day, or as soon thereafter as the Company in good faith deems
practicable, following the date Executive becomes subject to payment of
excise tax; provided, however, that if the amounts of such payment
cannot be finally determined on or before such day, the Company shall
pay to Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments and shall pay
the remainder of such payment (together with interest at the rate
provided under Section 1274(b)(2)(B) of the Code) as soon as the amount
can be determined but no later than the thirtieth day after the date
Executive becomes subject to the payment of excise tax. In the event
the amount of the estimated payment exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the
Company to Executive, payable on the fifth day after demand by the
Company (together with
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<PAGE> 10
interest at the rate provided in Section 1274(b)(2)(B) of the Code).
4. Further Obligations of the Executive.
(A) Confidentiality. The Executive agrees that, in the event of
any Covered Termination where the Executive is entitled to Accrued Benefits and
the Termination Payment, the Executive shall hold in confidence and not directly
or indirectly disclose or use or copy or make lists of any confidential
information or proprietary data of the Company, except to the extent authorized
in writing pursuant to authorization by the Board of Directors of the Company or
required by any court or administrative agency, other than to an employee of the
Company or a person to whom disclosure is reasonably necessary or appropriate in
connection with the performance by the Executive of duties as an executive of
the Company. Confidential information shall not include any information known
generally to the public or any information of a type not otherwise considered
confidential by persons engaged in the same business or a business similar to
that of the Company. All records, files, documents and materials, or copies
thereof, relating to the business of the Company which the Executive shall
prepare, or use, or come into contact with, shall be and remain the sole
property of the Company and shall be promptly returned to the Company upon
termination of employment with the Company.
5. Expenses and Interest. If, after a Change in Control of the
Company, (A) a dispute arises with respect to the enforcement of the Executive's
rights under this Agreement or (B) any legal or arbitration proceeding shall be
brought to enforce or interpret any provision contained herein or to recover
damages for breach hereof, the Executive shall recover from the Company any
reasonable attorneys' fees and necessary costs and disbursements, including
without limitation expert witness fees, incurred as a result of such dispute,
legal or arbitration proceeding ("Expenses"), and prejudgment interest on any
money judgment or arbitration award obtained by the Executive calculated at the
rate of interest announced by Morgan Guaranty Trust Company of New York from
time to time as its prime or base lending rate from the date that payments to
him should have been made under this Agreement. Within ten days after the
Executive's written request therefor (which, without limitation, may be made
periodically or from time to time based on the date or dates at which the
Executive is billed for services and related expenses which are reimbursable as
"Expenses" hereunder), the Company shall pay to the Executive, or such other
person or entity as the Executive may designate in writing to the Company, the
Executive's reasonable Expenses in advance of the final disposition or
conclusion of any such dispute, legal or arbitration proceeding.
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<PAGE> 11
6. Payment Obligations Absolute. The Company's obligation
during and after the Employment Period to pay the Executive the amounts and to
make the benefit and other arrangements provided herein shall be absolute and
unconditional and shall not be affected by any circumstances, including, without
limitation, any setoff, counterclaim, recoupment, defense or other right which
the Company may have against him or anyone else. All amounts payable by the
Company hereunder shall be paid without notice or demand. Each and every payment
made hereunder by the Company shall be final, and the Company will not seek to
recover all or any part of such payment from the Executive, or from whomsoever
may be entitled thereto, for any reason whatsoever.
7. Successors.
(A) If the Company sells, assigns or transfers all or
substantially all of its business and assets to any Person or if the Company
merges into or consolidates or otherwise combines (where the Company does not
survive such combination) with any Person (any such event, a "Sale of
Business"), then the Company shall assign all of its right, title and interest
in this Agreement as of the date of such event to such Person, and the Company
shall cause such Person, by written agreement in form and substance reasonably
satisfactory to the Executive, to expressly assume and agree to perform from and
after the date of such assignment all of the terms, conditions and provisions
imposed by this Agreement upon the Company. In case of such assignment by the
Company and of assumption and agreement by such Person, as used in this
Agreement, "Company" shall thereafter mean such Person which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law, and
this Agreement shall inure to the benefit of, and be enforceable by, such
Person. The Executive shall, in his discretion, be entitled to proceed against
any or all of such Persons, any Person which theretofore was such a successor to
the Company (as defined in the first paragraph of this Agreement) and the
Company (as so defined) in any action to enforce any rights of the Executive
hereunder. Except as provided in this Subsection, this Agreement shall not be
assignable by the Company. This Agreement shall not be terminated by the
voluntary or involuntary dissolution of the Company.
(B) This Agreement and all rights of the Executive shall inure
to the benefit of and be enforceable by the Executive's personal or legal
representatives, executors, administrators, heirs and beneficiaries. All amounts
payable to the Executive under this Agreement, if the Executive had lived shall
be paid, in the event of the Executive's death, to the Executive's estate, heirs
and representatives; provided, however, that the foregoing shall not be
construed to modify any terms of
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<PAGE> 12
any benefit plan of the Company or of any agreement or arrangement of the
Company with respect to benefits, as such terms are in effect on the date of the
Change of Control of the Company, that expressly govern benefits under such
plan, agreement or arrangement in the event of the Executive's death.
8. Severability. The provisions of this Agreement shall be
regarded as divisible, and if any of said provisions or any part hereto are
declared invalid or unenforceable by a court of competent jurisdiction, the
validity and enforceability of the remainder of such provisions or parts hereof
and the applicability thereof shall not be affected thereby.
9. Amendment. This Agreement may not be amended or modified at
any time except by written instrument executed by the Company and the Executive.
10. Withholding. The Company shall be entitled to withhold from
amounts to be paid to the Executive hereunder any federal, state or local
withholding or other taxes or charges which it is from time to time required to
withhold; provided, that the amount so withheld shall not exceed the minimum
amount required to be withheld by law. The Company shall be entitled to rely on
an opinion of nationally recognized tax counsel if any question as to the amount
or requirement of any such withholding shall arise.
11. Governing Law; Resolution of Disputes. This Agreement and
the rights and obligations hereunder shall be governed and construed in
accordance with the laws of the State of New York. Any dispute arising out of
this Agreement shall, at the Executive's election, be determined by arbitration
under the rules of the American Arbitration Association then in effect (in which
case both parties shall be bound by the arbitration award) or by litigation.
Whether the dispute is to be settled by arbitration or litigation, the venue for
the arbitration or litigation shall be New York or, at the Executive's election,
if the Executive is no longer residing or working in the New York metropolitan
area, in the judicial district encompassing the city in which the Executive
resides; provided, that, if the Executive is not then residing in the United
States, the election of the Executive with respect to such venue shall be either
in New York, New York or in the judicial district encompassing that city in the
United States among the thirty cities having the largest population (as
determined by the most recent United States Census data available at the
Termination Date) which is closest to the Executive's residence. The parties
consent to personal jurisdiction in each trial court in the selected venue
having subject matter jurisdiction notwithstanding their residence or situs, and
each party irrevocably consents to service of process in the manner provided
hereunder for the giving of notices.
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<PAGE> 13
12. Payment from Trust Funds. The Company has established
various Trust Funds in order to assure payment by the Company of obligations
under its various benefit programs and pursuant to this Agreement. In the event
that the Company or its successors or assigns shall not make a payment required
by this Agreement or pursuant to any employment arrangement or agreement with
respect to which a Trust has been established, the Trustee of such Trust,
consistent with the terms and conditions of the Trust, shall make the payment
required of the Company without any need to inquire into the obligations of the
Executive to the Company under this Agreement.
13. Notices. All notices hereunder shall be in writing and
deemed properly given if delivered by hand and receipted or if mailed by
registered mail, return receipt requested. Notices to the Company shall be
directed to the Corporate Secretary at the Company's headquarters offices.
Notices to the Executive shall be directed to his last known home address.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement dated this 21st day of November, 1994.
LONG ISLAND LIGHTING COMPANY
By: /s/ W. J. Catacosinos
---------------------------------
/s/ Theodore A. Babcock
---------------------------------
Theodore A. Babcock
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<PAGE> 1
Exhibit 10(y)(3)
AGREEMENT
This Agreement is made this 23rd day of February 1994
by and between Long Island Lighting Company, a New York corporation (the
"Company"), and Theodore A. Babcock ("Indemnitee").
W I T N E S S E T H:
WHEREAS, the Company, as an additional inducement to
Indemnitee to continue to serve the Company, has agreed to provide Indemnitee
with the benefits contemplated by this Agreement which benefits are intended to
supplement or replace, if necessary, the Company's existing directors' and
officers' liability insurance; and
WHEREAS, as a result of the provision of such benefits
Indemnitee has agreed to serve or to continue to serve as a director and/or
officer of the Company;
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, including the Indemnitee's
continued service to the Company, the Company and Indemnitee hereby agree as
follows:
1. Definitions. The following terms, as used herein,
shall have the following respective meanings:
"Adverse Determination" means a Determination (as hereinafter
defined) that Indemnitee is not entitled to be fully indemnified by the Company
for Losses and Expenses in connection with any actual or threatened action, suit
or proceeding, whether civil, criminal or investigative, against Indemnitee
because the claim is an Excluded Claim or because Indemnitee is not otherwise
entitled to payment under this Agreement.
<PAGE> 2
"Change of Control" means any transaction or event where (a)
the Company merges with, or consolidates into, another person or entity, (b) all
or a substantial portion of the assets of the Company are transferred to another
person or entity unless the sale is approved by a majority of the Continuing
Directors, (c) any person or group of persons (as defined in Rule 13d-5
promulgated under the Securities Exchange Act of 1934), together with its
affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 under
such Act), directly or indirectly, of securities of the Company (including
securities convertible at the option of the holder into securities of the
Company ordinarily having the right to vote in elections of directors) which
together represent or would together represent, after giving effect to any
conversion, in excess of 40 percent of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote in
elections of directors, (d) a liquidator, trustee or other similar person is
appointed for all or substantially all of the assets of the Company, or (e)
Continuing Directors no longer constitute at least a majority of the Company's
Board. For purposes of this Agreement, (y) the Company's class of Preferred
Stock shall not be deemed to be securities of the Company ordinarily having the
right to vote in elections of directors, and (z) "Continuing Director" means any
individual who was a member of the Company's Board on March 15, 1987, or is
designated (before such person's initial election as a director) as a Continuing
Director by a majority of the then remaining Continuing Directors.
"Covered Amount" means Losses and Expenses which, in type or
amount, are not insured under the D&O Insurance maintained by the Company from
time to time.
"Covered Act" means any breach of duty, neglect, error,
misstatement, misleading statement, omission or other act done or wrongfully
attempted by Indemnitee or any of the foregoing alleged by any claimant or any
claim against Indemnitee solely by reason of being a director or officer of the
Company or serving at the request of the Company any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity.
"D&O Insurance" means the directors' and officers' liability
insurance policies currently maintained by the Company, identified in Exhibit A
hereto, and any replacement or substitute policies issued by one or more
reputable insurers providing in all respects coverage at least comparable to and
in the same amount as that provided under the policies identified in Exhibit A.
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<PAGE> 3
"Determination" means a determination, based on the
facts known at the time, made by:
(i) A majority vote of a quorum of Disinterested Directors; or
(ii) Independent legal counsel in a written opinion
prepared at the request of a majority of a quorum of
Disinterested Directors; or
(iii) A majority of the disinterested shareholders of the
Company; or
(iv) A final adjudication by a court of competent
jurisdiction; provided, however, that after a Change of Control occurs, a
"Determination" shall mean only a final adjudication by a court of competent
jurisdiction.
"Determined" shall have a correlative meaning.
"Disinterested Director" means a director of the Company who
is not and was not a party to the action, suit or proceeding in respect of which
indemnification is sought.
"Excluded Claim" means any payment for Losses or Expenses in
connection with any claim the payment of which by the Company under this
Agreement is not permitted by applicable law.
"Expenses" means any reasonable expenses incurred by
Indemnitee as a result of a claim or claims made against him for Covered Acts
including, without limitation, attorneys fees and disbursements and costs of
investigative, judicial or administrative proceedings or appeals, but shall not
include Fines.
"Fines" means any fine, penalty or, with respect to an
employee benefit plan, any excise tax or penalty assessed with respect thereto,
but only to the extent such may not be indemnified by the Company under
applicable law.
"Losses" means any amounts which Indemnitee is legally
obligated to pay as a result of a claim or claims made against him for Covered
Acts including, without limitation, damages and judgments and sums paid in
settlement of a claim or claims, but shall not include Fines.
2. Maintenance of D&O Insurance.
(a) The Company hereby represents and warrants that the
insurance policies identified in Exhibit A contain all policies of directors'
and officers' liability insurance currently maintained by the Company and that
such policies are in full force and effect.
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<PAGE> 4
(b) In all policies of D&O Insurance, Indemnitee
shall be named as an insured in such a manner as to provide Indemnitee the same
rights and benefits, subject to the same limitations, as are accorded to the
Company's directors or officers most favorably insured by such policy.
(c) The Company hereby covenants and agrees that,
so long as Indemnitee shall continue to serve as a director and/or officer of
the Company and thereafter so long as Indemnitee shall be subject to any
possible claim or threatened, pending or completed action, suit or proceeding,
whether civil, criminal or investigative, by reason of the fact that Indemnitee
was a director and/or officer of the Company, the Company, shall maintain in
full force and effect D&O Insurance; provided, however, that prior to a Change
of Control, the Company shall have no obligation to maintain D&O Insurance if
the Company determines in good faith that such insurance is not reasonably
available, the premium costs for such insurance are disproportionate to the
amount of coverage provided, or the coverage provided by such insurance is
limited by exclusions so as to provide an insufficient benefit. Subsequent to a
Change of Control, the Company shall maintain in full force and effect D&O
Insurance.
3. Indemnification. The Company shall indemnify Indemnitee
and hold him harmless to the extent of the Covered Amount from any and all
Losses and Expenses subject, in each case, to the further provisions of this
Agreement.
4. Excluded Coverage.
(a) The Company shall have no obligation to indemnify
Indemnitee for and hold him harmless from any Loss or Expense which has been
Determined to constitute an Excluded Claim.
(b) The Company shall have no obligation pursuant
to this Agreement to indemnify Indemnitee and hold him harmless for any Loss or
Expense to the extent that Indemnitee is indemnified by the Company pursuant to
the Company's By-Laws or otherwise indemnified and in each case he actually
receives payment of such indemnity amount.
5. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice
of the commencement of or the threat of commencement of any action, suit or
proceeding, Indemnitee may, if indemnification with respect thereto may be
sought from the Company under this
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<PAGE> 5
Agreement, notify the Company of the commencement thereof, but Indemnitee's
failure to so notify the Company shall not affect his right to indemnification
hereunder.
(b) If, at the time of the receipt of such notice,
the Company has D&O Insurance in effect, the Company shall give prompt notice to
the insurers of the commencement or the threat of commencement of such action,
suit or proceeding in accordance with the procedures set forth in the respective
policies in favor of Indemnitee. The Company shall thereafter take all necessary
or desirable action to cause such insurers to pay, on behalf of Indemnitee, all
Losses and Expenses payable as a result of such actual or threatened action,
suit or proceeding in accordance with the terms of such policies.
(c) To the extent the Company does not, at the
time of the commencement of or the threat of commencement of such action, suit
or proceeding, have applicable D&O Insurance, or if a Determination is not made
that any Expenses arising out of such action, suit or proceeding will be payable
under the D&O Insurance then in effect, the Company shall be obligated to
advance the Expenses of any such action, suit or proceeding as they are billed
and in advance of the final disposition thereof and the Company, if appropriate,
shall be entitled to assume the defense of such action, suit or proceeding, with
counsel satisfactory to Indemnitee in his sole discretion, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, the Company will not be liable to Indemnitee under this Agreement for
any legal or other Expenses subsequently incurred by the Indemnitee in
connection with such defense other than reasonable Expenses of investigation;
provided that Indemnitee shall have the right to employ his own counsel in any
such action, suit or proceeding but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at the Indemnitee's expense; provided further that if (i) the
employment of his own counsel by Indemnitee has been previously authorized by
the Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, (iii) a Change of Control shall have occurred before or during the
actual or threatened action, suit or proceeding, or (iv) the Company shall not,
in fact, have employed counsel to assume the defense of such actual or
threatened action, suit or proceeding, the fees and disbursements of counsel
chosen by Indemnitee in his sole discretion shall be at the expense of the
Company.
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<PAGE> 6
(d) All payments on account of the Company's
indemnification obligations under this Agreement shall be made within sixty (60)
days of Indemnitee's written request therefor unless a Determination is made
that the claims giving rise to Indemnitee's request are Excluded Claims or
otherwise not payable under this Agreement, provided that all payments on
account of the Company's obligations under Section 5(c) of this Agreement prior
to the final disposition of any action, suit or proceeding shall be made within
20 days of Indemnitee's written request therefor and such obligation shall not
be subject to any such Determination but shall be subject to Section 5(e) of
this Agreement.
(e) Indemnitee agrees that he will (without
interest) reimburse the Company for Losses and Expenses paid by the Company
pursuant to this Agreement in connection with any actual or threatened action,
suit or proceeding against Indemnitee in the event and only to the extent that a
Determination shall have been made by a court in a final adjudication from which
there is no further right of appeal that the Indemnitee is not entitled to be
indemnified by the Company for such Losses or Expenses because the claim is an
Excluded Claim or because Indemnitee is otherwise not entitled to payment under
this Agreement.
6. Settlement. The Company shall have no obligation to
indemnify Indemnitee under this Agreement for any amounts paid in settlement of
any pending or threatened action, suit or proceeding effected without the
Company's prior written consent prior to a Change of Control, but shall have the
obligation to so indemnify Indemnitee in any such settlement effected without
the Company's prior written consent upon or after a Change of Control. The
Company shall not settle any claim in any manner which would impose any Fine or
any obligation on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee shall unreasonably withhold their consent to any proposed
settlement.
7. Presumptions and Effect of Certain Proceedings. The
Secretary of the Company shall, promptly upon receipt of Indemnitee's request
for indemnification, advise in writing the Board of Directors or such other
person or persons empowered to make the Determination as provided in Section 5
hereof that Indemnitee shall be presumed to be entitled to indemnification
hereunder and the Company shall have the burden of proof in the making of any
Determination contrary to such presumption. If the person or persons so
empowered to make such Determination shall have failed to make the requested
Determination within 60 days after receipt by the Company of such request, the
requisite Determination of entitlement to indemnification shall be deemed
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<PAGE> 7
to have been made and Indemnitee shall be absolutely entitled to such
indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 5 hereof by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself: (a) create a presumption that Indemnitee's acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action adjudicated or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled; or (b)
otherwise adversely affect the rights of Indemnitee to indemnification except as
may be provided herein.
8. Rights Not Exclusive. Nothing herein shall limit or affect
any right of Indemnitee otherwise than hereunder to indemnification or
advancement of expenses, including attorneys fees, under any statute, rule,
regulation, certificate of incorporation, by-law, insurance policy, contract,
vote of disinterested shareholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in any other
capacity by holding such office, and shall continue after the Indemnitee ceases
to serve the Company as a director and/or officer.
9. Enforcement.
(a) Indemnitee's right to indemnification shall be
enforceable by Indemnitee in the state courts of the State of New York or the
United States District Courts for the Southern or Eastern Districts of New York
and shall be enforceable by Indemnitee notwithstanding any Adverse Determination
(except an Adverse Determination not subject to further appeal by a court of
competent jurisdiction). In any such action, if a prior Adverse Determination
has been made, the burden of proving that indemnification is required under this
Agreement shall be on Indemnitee. The Company shall have the burden of proving
that indemnification is not required under this Agreement if no prior Adverse
Determination shall have been made.
(b) In the event that any action is instituted by
Indemnitee under this Agreement, or to enforce or interpret any of the terms of
this Agreement, Indemnitee shall be entitled to be paid all court costs and
expenses, including reasonable counsel fees ("Enforcement Expenses"), incurred
by Indemnitee with respect to such action. If the payment by the Company of any
of the Enforcement Expenses results in the recognition by the Indemnitee of
taxable income for Federal, state or local tax purposes, the Company, to the
extent permitted by law, shall make an additional payment to Indemnitee which,
when added to the
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<PAGE> 8
Enforcement Expenses, results in a net after-tax benefit to Indemnitee equal to
the Enforcement Expenses, unless the court determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous.
(c) Subsequent to a Change of Control and unless
and until a court of competent jurisdiction makes an Adverse Determination which
becomes final and not subject to further appeal, Indemnitee (whether or not
still serving as a director and/or officer of the Company) and Indemnitee's
agents, for purposes of enforcing this Agreement and investigating, defending
and/or settling any claim for which indemnification may be available under this
Agreement, shall have full access to the Company's employees and records to the
same extent that Indemnitee now has, and the Company at its expense will provide
Indemnitee with copies of any such records requested by Indemnitee or
Indemnitee's agents. The Company will cooperate fully with Indemnitee in making
such records and employees available in connection with the investigation,
defense and/or settlement of any such claim.
(d) The Company hereby waives, effective upon a
Change of Control, any objections it may have, whether based upon conflict of
interest or otherwise, to any attorney or law firm which has represented the
Company within the past five years in connection with any matter or may
hereafter represent the Company in connection with any matter, and affirmatively
agrees that any such attorney may represent Indemnitee in connection with the
interpretation, construction or enforcement of this Agreement or of the Trust
(as that term is defined in Section 15) or in any other matter.
(e) The Company hereby authorizes any attorney,
effective upon a Change of Control, to appear on its behalf in any state court
of the State of New York or the United States District Court for the Southern or
Eastern District of New York to consent to summary judgment in favor of
Indemnitee in any declaratory judgment action brought by Indemnitee to determine
the validity and enforceability of this Agreement and of the Trust.
10. Severability. In the event that any provision of this
Agreement is determined by a final order not subject to further appeal of a
court of competent jurisdiction to require the Company to do or to fail to do an
act which is in violation of applicable law, such provision shall be limited or
modified in its application to the minimum extent necessary to avoid a
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<PAGE> 9
violation of law, and, as so limited or modified, such provision and the balance
of this Agreement shall be enforceable in accordance with their terms.
11. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
12. Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of New York and the United States District Courts for the Southern and Eastern
Districts of New York for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state courts
of the State of New York and the United States District Courts for the Southern
and Eastern Districts of New York.
13. Successors and Assigns. This Agreement shall be (i)
binding upon all successors and assigns of the Company (including any transferee
of all or substantially all of its assets and any successor by merger or
otherwise by operation of law) and (ii) shall be binding on and inure to the
benefit of the heirs, personal representatives and estate of Indemnitee.
14. Amendment. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto.
15. Establishment of Trust. The Company has created a trust
pursuant to the agreement annexed hereto as Exhibit B (the "Trust") for the
benefit of Indemnitee and other directors and officers of the Company (together
with the Indemnitee, the "Beneficiaries") who have executed agreements similar
to this Agreement (together with this Agreement, the "Indemnity Agreements"),
the trustee and any successor trustee of which shall be chosen by a majority of
the Beneficiaries. The Company initially funded the Trust with $5,000 and, prior
to a Change of Control, shall fund the Trust in an additional amount sufficient
in the sole judgment of a majority of the continuing Directors to satisfy any
and all Losses and Expenses reasonably anticipated at the time of such funding
for which the Company may indemnify the Beneficiaries under the Indemnity
Agreements. From time to time after a Change of Control, upon receipt of a
written request from any of the Beneficiaries, the Company shall further fund
the Trust in amounts sufficient to satisfy any and all Losses and Expenses
reasonably anticipated at the time of such request for which the Company may
indemnify the Beneficiaries under the Indemnity Agreements. The amount of
amounts to be deposited in the Trust pursuant to the foregoing funding
obligations shall be determined by mutual agreement of the indemnitee and the
Company or, if the Company and the Indemnitee are unable to reach such an
agreement, by independent legal counsel selected by a majority of
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<PAGE> 10
the Beneficiaries. The terms of the Trust shall provide that, except upon the
written consent of all of the Beneficiaries and the Company, (i) the Trust shall
not be revoked or the principal thereof invaded, (ii) the trustee shall advance
to the Indemnitee within 20 days of a request by Indemnitee, any and all Losses
and Expenses, Indemnitee hereby agreeing to reimburse the trustee of the Trust
for Losses and Expenses so advanced in the event and only to the extent that a
Determination is made by a court in a final adjudication from which there is no
further right of appeal that Indemnitee is not entitled to be indemnified under
this Agreement, (iii) the Trust shall continue to be funded by the Company in
accordance with the funding obligations set forth in this Section, (iv) the
trustee shall promptly pay to Indemnitee any amounts to which Indemnitee shall
be entitled (including amounts to be advanced) pursuant to this Agreement, and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by independent legal counsel selected by a majority of the
Beneficiaries or a court of competent jurisdiction that all of the Beneficiaries
have been fully indemnified with respect to the proceeding giving rise to the
establishment of the Trust in question under the terms of the Indemnity
Agreements.
IN WITNESS WHEREOF, the Company and Indemnitee have executed
this Agreement as of the day and year first above written.
Attest: LONG ISLAND LIGHTING COMPANY
By: /s/ H. M. Leiman By: /s/ W. J. Catacosinos
--------------------------- -------------------------
Herbert M. Leiman William J. Catacosinos
Title: Assistant Corporate Title: Chairman and
Secretary Chief Executive
Officer
Witness:
/s/ Timothy P. Kiernan /s/ Theodore A. Babcock
--------------------------- -------------------------
Theodore A. Babcock
- 10 -
<PAGE> 11
EXHIBIT A
Policies of insurance providing indemnification of Directors and Officers for
a claim alleging a wrongful act on their part and/or reimbursement to the
Company for damages due to indemnification by the Company which may be
required or permitted by law.
<TABLE>
<CAPTION>
Insurance Limits of Policy
Company Liability Deductible Number Term
--------- ------------ ------------ ------ -------
<S> <C> <C> <C> <C>
($ millions)
Associated $35 At least DOO4OA 8/26/94
Electric & $5,000 but 1A94 8/26/95
Gas Ins. no more than
Services Ltd. $55,000
(AEGIS)
Energy Ins. $50 Underlying 900153 8/26/94
Mutual Ltd. X/O Coverage 92DO 8/26/95
(EIM) $35
Zurich Ins. $10 Underlying DOC7912 8/26/94
Co. X/O Coverage 722-01 8/26/95
$100
ACE Ins. $45 Underlying LIL 8/26/94
Co. Ltd. X/O 7403-D 8/26/95
$110
Zurich Ins. $15 Underlying DOC793 8/26/94
Co. X/O Coverage 9225-01 8/26/95
$155
XL Ins. $10 Underlying XLDCR 8/26/94
Co. Ltd. X/O Coverage 00278-94 8/26/95
$170
ACE Ins. $5 Underlying LIL 8/26/94
Co. Ltd. X/O Coverage 7036D 8/26/95
$180
</TABLE>
- 11 -
<PAGE> 1
Exhibit 10(y)(4)
AGREEMENT
This Agreement is made this third day of January 1994 by and
between Long Island Lighting Company, a New York corporation (the "Company"),
and Vicki L. Fuller ("Indemnitee").
W I T N E S S E T H:
WHEREAS, the Company, as an additional inducement to
Indemnitee to continue to serve the Company, has agreed to provide Indemnitee
with the benefits contemplated by this Agreement which benefits are intended to
supplement or replace, if necessary, the Company's existing directors' and
officers' liability insurance; and
WHEREAS, as a result of the provision of such benefits
Indemnitee has agreed to serve or to continue to serve as a director and/or
officer of the Company;
NOW, THEREFORE, in consideration of the promises, conditions,
representations and warranties set forth herein, including the Indemnitee's
continued service to the Company, the Company and Indemnitee hereby agree as
follows:
1. Definitions. The following terms, as used herein,
shall have the following respective meanings:
"Adverse Determination" means a Determination (as hereinafter
defined) that Indemnitee is not entitled to be fully indemnified by the Company
for Losses and Expenses in connection with any actual or threatened action, suit
or proceeding, whether civil, criminal or investigative, against Indemnitee
because the claim is an Excluded Claim or because Indemnitee is not otherwise
entitled to payment under this Agreement.
<PAGE> 2
"Change of Control" means any transaction or event where (a)
the Company merges with, or consolidates into, another person or entity, (b) all
or a substantial portion of the assets of the Company are transferred to another
person or entity unless the sale is approved by a majority of the Continuing
Directors, (c) any person or group of persons (as defined in Rule 13d-5
promulgated under the Securities Exchange Act of 1934), together with its
affiliates, is or becomes the beneficial owner (as defined in Rule 13d-3 under
such Act), directly or indirectly, of securities of the Company (including
securities convertible at the option of the holder into securities of the
Company ordinarily having the right to vote in elections of directors) which
together represent or would together represent, after giving effect to any
conversion, in excess of 40 percent of the combined voting power of the
Company's outstanding securities ordinarily having the right to vote in
elections of directors, (d) a liquidator, trustee or other similar person is
appointed for all or substantially all of the assets of the Company, or (e)
Continuing Directors no longer constitute at least a majority of the Company's
Board. For purposes of this Agreement, (y) the Company's class of Preferred
Stock shall not be deemed to be securities of the Company ordinarily having the
right to vote in elections of directors, and (z) "Continuing Director" means any
individual who was a member of the Company's Board on March 15, 1987, or is
designated (before such person's initial election as a director) as a Continuing
Director by a majority of the then remaining Continuing Directors.
"Covered Amount" means Losses and Expenses which, in type or
amount, are not insured under the D&O Insurance maintained by the Company from
time to time.
"Covered Act" means any breach of duty, neglect, error,
misstatement, misleading statement, omission or other act done or wrongfully
attempted by Indemnitee or any of the foregoing alleged by any claimant or any
claim against Indemnitee solely by reason of being a director or officer of the
Company or serving at the request of the Company any other corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise in
any capacity.
"D&O Insurance" means the directors' and officers' liability
insurance policies currently maintained by the Company, identified in Exhibit A
hereto, and any replacement or substitute policies issued by one or more
reputable insurers providing in all respects coverage at least comparable to and
in the same amount as that provided under the policies identified in Exhibit A.
- 2 -
<PAGE> 3
"Determination" means a determination, based on the facts
known at the time, made by:
(i) A majority vote of a quorum of Disinterested Directors; or
(ii) Independent legal counsel in a written opinion prepared
at the request of a majority of a quorum of Disinterested Directors; or
(iii) A majority of the disinterested shareholders of the
Company; or
(iv) A final adjudication by a court of competent
jurisdiction; provided, however, that after a Change of Control occurs, a
"Determination" shall mean only a final adjudication by a court of competent
jurisdiction.
"Determined" shall have a correlative meaning.
"Disinterested Director" means a director of the Company who
is not and was not a party to the action, suit or proceeding in respect of which
indemnification is sought.
"Excluded Claim" means any payment for Losses or Expenses in
connection with any claim the payment of which by the Company under this
Agreement is not permitted by applicable law.
"Expenses" means any reasonable expenses incurred by
Indemnitee as a result of a claim or claims made against him for Covered Acts
including, without limitation, attorneys fees and disbursements and costs of
investigative, judicial or administrative proceedings or appeals, but shall not
include Fines.
"Fines" means any fine, penalty or, with respect to an
employee benefit plan, any excise tax or penalty assessed with respect thereto,
but only to the extent such may not be indemnified by the Company under
applicable law.
"Losses" means any amounts which Indemnitee is legally
obligated to pay as a result of a claim or claims made against him for Covered
Acts including, without limitation, damages and judgments and sums paid in
settlement of a claim or claims, but shall not include Fines.
2. Maintenance of D&O Insurance.
(a) The Company hereby represents and warrants that the
insurance policies identified in Exhibit A contain all policies of directors'
and officers' liability insurance currently maintained by the Company and that
such policies are in full force and effect.
- 3 -
<PAGE> 4
(b) In all policies of D&O Insurance, Indemnitee shall be
named as an insured in such a manner as to provide Indemnitee the same rights
and benefits, subject to the same limitations, as are accorded to the Company's
directors or officers most favorably insured by such policy.
(c) The Company hereby covenants and agrees that, so long as
Indemnitee shall continue to serve as a director and/or officer of the Company
and thereafter so long as Indemnitee shall be subject to any possible claim or
threatened, pending or completed action, suit or proceeding, whether civil,
criminal or investigative, by reason of the fact that Indemnitee was a director
and/or officer of the Company, the Company, shall maintain in full force and
effect D&O Insurance; provided, however, that prior to a Change of Control, the
Company shall have no obligation to maintain D&O Insurance if the Company
determines in good faith that such insurance is not reasonably available, the
premium costs for such insurance are disproportionate to the amount of coverage
provided, or the coverage provided by such insurance is limited by exclusions so
as to provide an insufficient benefit. Subsequent to a Change of Control, the
Company shall maintain in full force and effect D&O Insurance.
3. Indemnification. The Company shall indemnify Indemnitee
and hold him harmless to the extent of the Covered Amount from any and all
Losses and Expenses subject, in each case, to the further provisions of this
Agreement.
4. Excluded Coverage.
(a) The Company shall have no obligation to indemnify
Indemnitee for and hold him harmless from any Loss or Expense which has been
Determined to constitute an Excluded Claim.
(b) The Company shall have no obligation pursuant to this
Agreement to indemnify Indemnitee and hold him harmless for any Loss or Expense
to the extent that Indemnitee is indemnified by the Company pursuant to the
Company's By-Laws or otherwise indemnified and in each case he actually receives
payment of such indemnity amount.
5. Indemnification Procedures.
(a) Promptly after receipt by Indemnitee of notice of the
commencement of or the threat of commencement of any action, suit or proceeding,
Indemnitee may, if indemnification with respect thereto may be sought from the
Company under this
- 4 -
<PAGE> 5
Agreement, notify the Company of the commencement thereof, but Indemnitee's
failure to so notify the Company shall not affect his right to indemnification
hereunder.
(b) If, at the time of the receipt of such notice, the Company
has D&O Insurance in effect, the Company shall give prompt notice to the
insurers of the commencement or the threat of commencement of such action, suit
or proceeding in accordance with the procedures set forth in the respective
policies in favor of Indemnitee. The Company shall thereafter take all necessary
or desirable action to cause such insurers to pay, on behalf of Indemnitee, all
Losses and Expenses payable as a result of such actual or threatened action,
suit or proceeding in accordance with the terms of such policies.
(c) To the extent the Company does not, at the time of the
commencement of or the threat of commencement of such action, suit or
proceeding, have applicable D&O Insurance, or if a Determination is not made
that any Expenses arising out of such action, suit or proceeding will be payable
under the D&O Insurance then in effect, the Company shall be obligated to
advance the Expenses of any such action, suit or proceeding as they are billed
and in advance of the final disposition thereof and the Company, if appropriate,
shall be entitled to assume the defense of such action, suit or proceeding, with
counsel satisfactory to Indemnitee in his sole discretion, upon the delivery to
Indemnitee of written notice of its election so to do. After delivery of such
notice, the Company will not be liable to Indemnitee under this Agreement for
any legal or other Expenses subsequently incurred by the Indemnitee in
connection with such defense other than reasonable Expenses of investigation;
provided that Indemnitee shall have the right to employ his own counsel in any
such action, suit or proceeding but the fees and expenses of such counsel
incurred after delivery of notice from the Company of its assumption of such
defense shall be at the Indemnitee's expense; provided further that if (i) the
employment of his own counsel by Indemnitee has been previously authorized by
the Company, (ii) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense, (iii) a Change of Control shall have occurred before or during the
actual or threatened action, suit or proceeding, or (iv) the Company shall not,
in fact, have employed counsel to assume the defense of such actual or
threatened action, suit or proceeding, the fees and disbursements of counsel
chosen by Indemnitee in his sole discretion shall be at the expense of the
Company.
- 5 -
<PAGE> 6
(d) All payments on account of the Company's indemnification
obligations under this Agreement shall be made within sixty (60) days of
Indemnitee's written request therefor unless a Determination is made that the
claims giving rise to Indemnitee's request are Excluded Claims or otherwise not
payable under this Agreement, provided that all payments on account of the
Company's obligations under Section 5(c) of this Agreement prior to the final
disposition of any action, suit or proceeding shall be made within 20 days of
Indemnitee's written request therefor and such obligation shall not be subject
to any such Determination but shall be subject to Section 5(e) of this
Agreement.
(e) Indemnitee agrees that he will (without interest)
reimburse the Company for Losses and Expenses paid by the Company pursuant to
this Agreement in connection with any actual or threatened action, suit or
proceeding against Indemnitee in the event and only to the extent that a
Determination shall have been made by a court in a final adjudication from which
there is no further right of appeal that the Indemnitee is not entitled to be
indemnified by the Company for such Losses or Expenses because the claim is an
Excluded Claim or because Indemnitee is otherwise not entitled to payment under
this Agreement.
6. Settlement. The Company shall have no obligation to
indemnify Indemnitee under this Agreement for any amounts paid in settlement of
any pending or threatened action, suit or proceeding effected without the
Company's prior written consent prior to a Change of Control, but shall have the
obligation to so indemnify Indemnitee in any such settlement effected without
the Company's prior written consent upon or after a Change of Control. The
Company shall not settle any claim in any manner which would impose any Fine or
any obligation on Indemnitee without Indemnitee's written consent. Neither the
Company nor Indemnitee shall unreasonably withhold their consent to any proposed
settlement.
7. Presumptions and Effect of Certain Proceedings. The
Secretary of the Company shall, promptly upon receipt of Indemnitee's request
for indemnification, advise in writing the Board of Directors or such other
person or persons empowered to make the Determination as provided in Section 5
hereof that Indemnitee shall be presumed to be entitled to indemnification
hereunder and the Company shall have the burden of proof in the making of any
Determination contrary to such presumption. If the person or persons so
empowered to make such Determination shall have failed to make the requested
Determination within 60 days after receipt by the Company of such request, the
requisite Determination of entitlement to indemnification shall be deemed
- 6 -
<PAGE> 7
to have been made and Indemnitee shall be absolutely entitled to such
indemnification, absent actual and material fraud in the request for
indemnification. The termination of any action, suit, investigation or
proceeding described in Section 5 hereof by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself: (a) create a presumption that Indemnitee's acts were committed in bad
faith or were the result of active and deliberate dishonesty and were material
to the cause of action adjudicated or that he personally gained in fact a
financial profit or other advantage to which he was not legally entitled; or (b)
otherwise adversely affect the rights of Indemnitee to indemnification except as
may be provided herein.
8. Rights Not Exclusive. Nothing herein shall limit or affect
any right of Indemnitee otherwise than hereunder to indemnification or
advancement of expenses, including attorneys fees, under any statute, rule,
regulation, certificate of incorporation, by-law, insurance policy, contract,
vote of disinterested shareholders or disinterested directors, or otherwise,
both as to action in his official capacity and as to action in any other
capacity by holding such office, and shall continue after the Indemnitee ceases
to serve the Company as a director and/or officer.
9. Enforcement.
(a) Indemnitee's right to indemnification shall be enforceable
by Indemnitee in the state courts of the State of New York or the United States
District Courts for the Southern or Eastern Districts of New York and shall be
enforceable by Indemnitee notwithstanding any Adverse Determination (except an
Adverse Determination not subject to further appeal by a court of competent
jurisdiction). In any such action, if a prior Adverse Determination has been
made, the burden of proving that indemnification is required under this
Agreement shall be on Indemnitee. The Company shall have the burden of proving
that indemnification is not required under this Agreement if no prior Adverse
Determination shall have been made.
(b) In the event that any action is instituted by Indemnitee
under this Agreement, or to enforce or interpret any of the terms of this
Agreement, Indemnitee shall be entitled to be paid all court costs and expenses,
including reasonable counsel fees ("Enforcement Expenses"), incurred by
Indemnitee with respect to such action. If the payment by the Company of any of
the Enforcement Expenses results in the recognition by the Indemnitee of taxable
income for Federal, state or local tax purposes, the Company, to the extent
permitted by law, shall make an additional payment to Indemnitee which, when
added to the
- 7 -
<PAGE> 8
Enforcement Expenses, results in a net after-tax benefit to Indemnitee equal to
the Enforcement Expenses, unless the court determines that each of the material
assertions made by Indemnitee as a basis for such action were not made in good
faith or were frivolous.
(c) Subsequent to a Change of Control and unless and until a
court of competent jurisdiction makes an Adverse Determination which becomes
final and not subject to further appeal, Indemnitee (whether or not still
serving as a director and/or officer of the Company) and Indemnitee's agents,
for purposes of enforcing this Agreement and investigating, defending and/or
settling any claim for which indemnification may be available under this
Agreement, shall have full access to the Company's employees and records to the
same extent that Indemnitee now has, and the Company at its expense will provide
Indemnitee with copies of any such records requested by Indemnitee or
Indemnitee's agents. The Company will cooperate fully with Indemnitee in making
such records and employees available in connection with the investigation,
defense and/or settlement of any such claim.
(d) The Company hereby waives, effective upon a Change of
Control, any objections it may have, whether based upon conflict of interest or
otherwise, to any attorney or law firm which has represented the Company within
the past five years in connection with any matter or may hereafter represent the
Company in connection with any matter, and affirmatively agrees that any such
attorney may represent Indemnitee in connection with the interpretation,
construction or enforcement of this Agreement or of the Trust (as that term is
defined in Section 15) or in any other matter.
(e) The Company hereby authorizes any attorney, effective upon
a Change of Control, to appear on its behalf in any state court of the State of
New York or the United States District Court for the Southern or Eastern
District of New York to consent to summary judgment in favor of Indemnitee in
any declaratory judgment action brought by Indemnitee to determine the validity
and enforceability of this Agreement and of the Trust.
10. Severability. In the event that any provision of this
Agreement is determined by a final order not subject to further appeal of a
court of competent jurisdiction to require the Company to do or to fail to do
an act which is in violation of applicable law, such provision shall be limited
or modified in its application to the minimum extent necessary to avoid a
- 8 -
<PAGE> 9
violation of law, and, as so limited or modified, such provision and the balance
of this Agreement shall be enforceable in accordance with their terms.
11. CHOICE OF LAW. THIS AGREEMENT SHALL BE GOVERNED
BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK.
12. Consent to Jurisdiction. The Company and the Indemnitee
each hereby irrevocably consent to the jurisdiction of the courts of the State
of New York and the United States District Courts for the Southern and Eastern
Districts of New York for all purposes in connection with any action or
proceeding which arises out of or relates to this Agreement and agree that any
action instituted under this Agreement shall be brought only in the state courts
of the State of New York and the United States District Courts for the Southern
and Eastern Districts of New York.
13. Successors and Assigns. This Agreement shall be (i)
binding upon all successors and assigns of the Company (including any transferee
of all or substantially all of its assets and any successor by merger or
otherwise by operation of law) and (ii) shall be binding on and inure to the
benefit of the heirs, personal representatives and estate of Indemnitee.
14. Amendment. No amendment, modification, termination or
cancellation of this Agreement shall be effective unless made in a writing
signed by each of the parties hereto.
15. Establishment of Trust. The Company has created a trust
pursuant to the agreement annexed hereto as Exhibit B (the "Trust") for the
benefit of Indemnitee and other directors and officers of the Company (together
with the Indemnitee, the "Beneficiaries") who have executed agreements similar
to this Agreement (together with this Agreement, the "Indemnity Agreements"),
the trustee and any successor trustee of which shall be chosen by a majority of
the Beneficiaries. The Company initially funded the Trust with $5,000 and, prior
to a Change of Control, shall fund the Trust in an additional amount sufficient
in the sole judgment of a majority of the continuing Directors to satisfy any
and all Losses and Expenses reasonably anticipated at the time of such funding
for which the Company may indemnify the Beneficiaries under the Indemnity
Agreements. From time to time after a Change of Control, upon receipt of a
written request from any of the Beneficiaries, the Company shall further fund
the Trust in amounts sufficient to satisfy any and all Losses and Expenses
reasonably anticipated at the time of such request for which the Company may
indemnify the Beneficiaries under the Indemnity Agreements. The amount of
amounts to be deposited in the Trust pursuant to the foregoing funding
obligations shall be determined by mutual agreement of the indemnitee and the
Company or, if the Company and the Indemnitee are unable to reach such an
agreement, by independent legal counsel selected by a majority of
- 9 -
<PAGE> 10
the Beneficiaries. The terms of the Trust shall provide that, except upon the
written consent of all of the Beneficiaries and the Company, (i) the Trust shall
not be revoked or the principal thereof invaded, (ii) the trustee shall advance
to the Indemnitee within 20 days of a request by Indemnitee, any and all Losses
and Expenses, Indemnitee hereby agreeing to reimburse the trustee of the Trust
for Losses and Expenses so advanced in the event and only to the extent that a
Determination is made by a court in a final adjudication from which there is no
further right of appeal that Indemnitee is not entitled to be indemnified under
this Agreement, (iii) the Trust shall continue to be funded by the Company in
accordance with the funding obligations set forth in this Section, (iv) the
trustee shall promptly pay to Indemnitee any amounts to which Indemnitee shall
be entitled (including amounts to be advanced) pursuant to this Agreement, and
(v) all unexpended funds in the Trust shall revert to the Company upon a final
determination by independent legal counsel selected by a majority of the
Beneficiaries or a court of competent jurisdiction that all of the Beneficiaries
have been fully indemnified with respect to the proceeding giving rise to the
establishment of the Trust in question under the terms of the Indemnity
Agreements.
IN WITNESS WHEREOF, the Company and Indemnitee have executed
this Agreement as of the day and year first above written.
Attest: LONG ISLAND LIGHTING COMPANY
By: /s/ Herbert M. Leiman By: /s/ William J. Catacosinos
------------------------ --------------------------
Herbert M. Leiman William J. Catacosinos
Title: Assistant Corporate Title: Chairman and
Secretary Chief Executive
Officer
Witness:
/s/ Renee Banks /s/ Vicki L. Fuller
---------------------------- ---------------------------
Vicki L. Fuller
- 10 -
<PAGE> 11
EXHIBIT A
Policies of insurance providing indemnification of Directors and Officers for a
claim alleging a wrongful act on their part and/or reimbursement to the Company
for damages due to indemnification by the Company which may be required or
permitted by law.
<TABLE>
<CAPTION>
Insurance Limits of Policy
Company Liability Deductible Number Term
--------- --------- ---------- ------ ----
<S> <C> <C> <C> <C>
($ millions)
Associated $35 At least DOO4OA 8/26/93
Electric & $5,000 but 1A93 8/26/94
Gas Ins. no more than
Services Ltd. $55,000
(AEGIS)
Energy Ins. $50 Underlying 900153 8/26/93
Mutual Ltd. X/O Coverage 92DO 8/26/94
(EIM) $35
Continental $15 Underlying DSB 8/26/93
Ins. Co. X/O Coverage 082593-1 8/26/94
$85
Zurich Ins. $10 Underlying DSB 8/26/93
Co. X/O Coverage 082593-2 8/26/94
$100
ACE Ins. $45 Underlying LIL 8/26/93
Co. Ltd. X/O 7035D 8/26/94
$110
Zurich Ins. $15 Underlying DSB 8/26/93
Co. X/O Coverage 082593-3 8/26/94
$155
XL Ins. $10 Underlying XLDCR 8/26/93
Co. Ltd. X/O Coverage 00278-93 8/26/94
$170
ACE Ins. $5 Underlying LIL 8/26/93
Co. Ltd. X/O Coverage 7036D 8/26/94
$180
</TABLE>
- 11 -
<PAGE> 1
Exhibit 10(y)(9)
CONSULTING AGREEMENT
AGREEMENT made as of April 12, 1994 between LONG ISLAND LIGHTING
COMPANY, a New York corporation, having its principal offices at 175 East Old
Country Road, Hicksville, New York 11801 (hereinafter the "Company") and
WINFIELD E. FROMM, residing in Glen Cove, New York (hereinafter the
"Consultant");
WHEREAS, the company has requested that the Consultant
perform services for it; and
WHEREAS, the Consultant is willing to perform consulting
services for the Company;
NOW THEREFORE, it is agreed that:
1. Effective April 12, 1994, the Consultant will be engaged as a
Consulting Director for a period ending on the day of the 1995 Annual Meeting of
Shareowners. The Consultant will advise and counsel the Board of Directors and
any of its committees on various business and financial matters and any other
areas requested by or on behalf of the Board of Directors of the Company.
2. For such services, the Consultant will receive an annual retainer
equal to the annual retainer paid to a duly elected Director, an additional
$500.00 for each Board or Committee meeting attended and the same pension and
health benefits provided to a duly elected director.
3. The Consultant shall have the right to participate as a Consulting
Director in the Company's Deferred Compensation Plan for Directors and the
Company's Retirement Income Plan for Directors.
<PAGE> 2
4. This agreement shall be governed by the laws of the
State of New York.
IN WITNESS WHEREOF, this agreement has been executed this 12th day of
April, 1994.
CONSULTANT LONG ISLAND LIGHTING COMPANY
/s/ WINFIELD E. FROMM /s/ Kathleen A. Marion
--------------------- ----------------------------
WINFIELD E. FROMM CORPORATE SECRETARY
<PAGE> 1
Exhibit 23
Consent of Independent Auditors
We consent to the incorporation by reference in the
Post-Effective Amendment No. 3 to Registration Statement (No. 33-16238) on Form
S-8 relating to Long Island Lighting Company's Employee Stock Purchase Plan,
Post-Effective Amendment No. 1 to Registration Statement (No. 2-87427) on Form
S-3 relating to Long Island Lighting Company's Automatic Dividend Reinvestment
Plan and in the related Prospectus, Registration Statement (No. 2-88578) on
Form S-3 relating to the issuance of Common Stock and in the related Prospectus
and Registration Statement (No. 33-52963) on Form S-3 relating to the issuance
of General and Refunding Bonds, Debentures, Preferred Stock or Common Stock and
in the related Prospectus, of our report dated February 3, 1995, with respect
to the financial statements and schedule of Long Island Lighting Company
included in this Annual Report on Form 10-K for the year ended December 31,
1994.
ERNST & YOUNG LLP
Melville, New York
March 9, 1995
<PAGE> 1
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 27th day of February 1995.
/s/ William J. Catacosinos
---------------------------
WILLIAM J. CATACOSINOS
PRINCIPAL EXECUTIVE OFFICER,
PRESIDENT and CHAIRMAN OF THE
BOARD OF DIRECTORS
<PAGE> 2
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 27th day of February 1995.
/s/ A. James Barnes
----------------------------
A. JAMES BARNES, DIRECTOR
<PAGE> 3
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 23rd day of February 1995.
/s/ George Bugliarello
-----------------------------
GEORGE BUGLIARELLO, DIRECTOR
<PAGE> 4
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 4th day of March 1995.
/s/ Renso L. Caporali
-----------------------------
RENSO L. CAPORALI, DIRECTOR
<PAGE> 5
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 25th day of February 1995.
/s/ Peter O. Crisp
---------------------------
PETER O. CRISP, DIRECTOR
<PAGE> 6
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 9th day of March 1995.
/s/ Vicki L. Fuller
----------------------------
VICKI L. FULLER, DIRECTOR
<PAGE> 7
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 9th day of March 1995.
/s/ Katherine D. Ortega
--------------------------------
KATHERINE D. ORTEGA, DIRECTOR
<PAGE> 8
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 13th day of March 1995.
/s/ Basil A. Paterson
------------------------------
BASIL A. PATERSON, DIRECTOR
<PAGE> 9
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 9th day of March 1995.
/s/ Richard L. Schmalensee
--------------------------------
RICHARD L. SCHMALENSEE, DIRECTOR
<PAGE> 10
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 9th day of March 1995.
/s/ George J. Sideris
---------------------------
GEORGE J. SIDERIS, DIRECTOR
<PAGE> 11
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 27th day of February 1995.
/s/ John H. Talmage
----------------------------
JOHN H. TALMAGE, DIRECTOR
<PAGE> 12
Exhibit 24(a)
Annual Report on Form
10-K for the period
ending December 31, 1994
LONG ISLAND LIGHTING COMPANY
POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation
(the "Company"), intends to file with the Securities and Exchange Commission
under the Securities Exchange Act of 1934, as amended, an Annual Report on Form
10-K as prescribed by said Commission pursuant to said Act and the rules and
regulations promulgated thereunder.
NOW, THEREFORE, in my capacity either as a director or
officer, or both as the case may be, of the Company, I do hereby appoint
KATHLEEN A. MARION and ANTHONY NOZZOLILLO, and each of them severally, as my
attorneys-in-fact with power to execute in my name and place, and in my capacity
as a director, officer, or both, as the case may be, of LONG ISLAND LIGHTING
COMPANY, said Report, any amendment to said Report and any other documents
required in connection therewith, and to file the same with the Securities and
Exchange Commission.
IN WITNESS WHEREOF, I have executed this power of attorney
this 9th day of March 1995.
/s/ Phyllis S. Vineyard
--------------------------------
PHYLLIS S. VINEYARD, DIRECTOR
<PAGE> 1
EXHIBIT 24(b)
1994 Form 10-K
LONG ISLAND LIGHTING COMPANY
CERTIFICATE AS TO POWER OF ATTORNEY
WHEREAS, LONG ISLAND LIGHTING COMPANY, a New York corporation,
intends to file with the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, an Annual Report for the year
ended December 31, 1994, on Form 10-K as prescribed by said Commission pursuant
to said Act and the rules and regulations promulgated thereunder.
NOW, THEREFORE, in my capacity as Assistant Corporate Secretary of
Long Island Lighting Company, I do hereby certify that Anthony Nozzolillo has
been appointed by the Board of Directors of Long Island Lighting Company with
power to execute, among other documents, said Report, any amendment to said
Report and any other documents required in connection therewith, and to file
the same with the Securities and Exchange Commission.
WITNESS my hand and the seal of the Company this 9th day of March,
1995.
s/ Herbert M. Leiman
-----------------------------------
HERBERT M. LEIMAN
Assistant Corporate Secretary
(Corporate Seal)
<PAGE> 1
Exhibit 24(c)
1994 FORM 10-K
LONG ISLAND LIGHTING COMPANY
I, HERBERT M. LEIMAN, Assistant Corporate Secretary of LONG ISLAND
LIGHTING COMPANY (the "Company"), a New York corporation, DO HEREBY CERTIFY
that annexed hereto is a true, correct and complete copy of the resolution
adopted at a meeting of the Board of Directors of the Company duly called and
held on March 9, 1995, at which meeting a quorum was present and acting
throughout.
AND I DO FURTHER CERTIFY that the foregoing resolution have not been in
any way amended, annulled, rescinded or revoked and that the same are still in
full force and effect.
WITNESS my hand and the seal of the Company this 9th day of March, 1995.
s/ Herbert M. Leiman
-----------------------------
HERBERT M. LEIMAN
Assistant Corporate Secretary
(Corporate Seal)
<PAGE> 2
LONG ISLAND LIGHTING COMPANY
(Resolution adopted on March 9, 1995)
"RESOLVED, that
1. the proper officers of this Company are authorized to execute and
file with the Securities and Exchange Commission under the Securities Exchange
Act of 1934, as amended, the Annual Report on Form 10-K for the Year Ended
December 31, 1994 as prescribed by said Commission pursuant to said Act and the
rules and regulations promulgated thereunder, substantially in the form
submitted to each of the directors with such additional changes therein as
counsel for the Company shall approve (the "Form 10-K");
2. Anthony Nozzolillo, Senior Vice President and Chief Financial
Officer, and Kathleen A. Marion, Vice President and Corporate Secretary, their
successors and each of them, are designated as agents for service in connection
with said Form 10-K and each of them is authorized to receive all notices and
communications from the Securities and Exchange Commission respecting said Form
10-K and any amendment thereto; and all powers which are provided by any rules
and regulations of said Commission to be conferred upon persons so designated
are hereby conferred upon each of said officers; and
3. without limiting the authority of any officer of this Company to act
in the premises, Anthony Nozzolillo and Kathleen A. Marion, their successors
and each of them, are hereby appointed attorneys-in-fact of this Company with
the power to execute and file any instruments and documents, including but not
limited to the Form 10-K, and to make any payments and do any other acts and
things, including the execution and filing of any amendment to said Form 10-K
as they may deem necessary or desirable to effect such filing; and the
Corporate Secretary or any Assistant Corporate Secretary, or any other officer
of this Company, is hereby authorized to certify and deliver to the Securities
and Exchange Commission copies of this resolution as evidence of such powers."
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Income, Balance Sheet and Statement of Cash Flows, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,498,346
<OTHER-PROPERTY-AND-INVEST> 24,043
<TOTAL-CURRENT-ASSETS> 851,424
<TOTAL-DEFERRED-CHARGES> 1,301,257
<OTHER-ASSETS> 7,541,610
<TOTAL-ASSETS> 13,216,680
<COMMON> 592,083
<CAPITAL-SURPLUS-PAID-IN> 1,049,065
<RETAINED-EARNINGS> 752,480
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,393,628
644,350
63,957
<LONG-TERM-DEBT-NET> 5,145,397
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 25,000
4,800
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,939,548
<TOT-CAPITALIZATION-AND-LIAB> 13,216,680
<GROSS-OPERATING-REVENUE> 3,067,307
<INCOME-TAX-EXPENSE> 181,781
<OTHER-OPERATING-EXPENSES> 2,140,581
<TOTAL-OPERATING-EXPENSES> 2,322,362
<OPERATING-INCOME-LOSS> 744,945
<OTHER-INCOME-NET> 52,719
<INCOME-BEFORE-INTEREST-EXPEN> 797,664
<TOTAL-INTEREST-EXPENSE> 495,812
<NET-INCOME> 301,852
53,020
<EARNINGS-AVAILABLE-FOR-COMM> 248,832
<COMMON-STOCK-DIVIDENDS> 205,086
<TOTAL-INTEREST-ON-BONDS> 437,751
<CASH-FLOW-OPERATIONS> 835,749
<EPS-PRIMARY> $2.15
<EPS-DILUTED> $2.15
</TABLE>
