FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 16 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1997
Commission file number 1-3571
LONG ISLAND LIGHTING COMPANY
Incorporated pursuant to the Laws of New York State
Internal Revenue Service - Employer Identification No. 11-1019782
175 East Old Country Road, Hicksville, New York 11801
(516) 755-6650
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
The total number of shares of the registrant's Common Stock $5 par value,
outstanding on December 31, 1997, was 121,521,195.
<PAGE>
LONG ISLAND LIGHTING COMPANY
Part I - FINANCIAL INFORMATION
PAGE NO.
Item 1 - Financial Statements
Statement of Income 3
Balance Sheet 6
Statement of Cash Flows 8
Notes to Financial Statements 9
Item 2 - Management's Discussion and Analysis
of Financial Condition and Results of
Operations 14
Part II - OTHER INFORMATION
Item 1 - Legal Proceedings 26
Item 2 - Changes in Securities 26
Item 3 - Defaults Upon Senior Securities 26
Item 4 - Submission of Matters to a Vote
of Security Holders 26
Item 5 - Other Information 26
Item 6 - Exhibits and Reports on Form 8 - K 26
Signature
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS - EXCEPT PER SHARE AMOUNTS)
THREE MONTHS ENDED
DECEMBER 31
----------------------
1997 1996
----------------------
<S> <C> <C>
REVENUES
Electric $572,336 $550,046
Gas 207,286 192,057
---------- ----------
Total Revenues 779,622 742,103
---------- ----------
EXPENSES
Operations - fuel and purchased power 264,940 245,786
Operations - other 112,934 88,681
Maintenance 29,594 30,523
Depreciation and amortization 39,793 40,103
Base financial component amortization 25,243 25,243
Rate moderation component amortization (10,709) 9,690
Regulatory liability component amortization (22,144) (22,144)
Other regulatory amortization 2,310 (7,215)
Operating taxes 117,553 119,203
Federal income tax - current 20,382 10,905
Federal income tax - deferred and other 27,757 31,639
---------- ----------
Total Expenses 607,653 572,414
---------- ----------
OPERATING INCOME 171,969 169,689
---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 5,928 6,571
Class Settlement (4,049) (5,461)
Other income and deductions, net (24,967) 2,719
Allowance for other funds used during construction 885 754
Federal income tax - current 2,525 0
Federal income tax - deferred and other 5,283 (268)
---------- ----------
Total Other Income and (Deductions) (14,395) 4,315
---------- ----------
INCOME BEFORE INTEREST CHARGES 157,574 174,004
---------- ----------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 87,868 93,024
Other interest 14,154 17,760
Allowance for borrowed funds used during construction (1,204) (940)
---------- ----------
Total Interest Charges and (Credits) 100,818 109,844
---------- ----------
NET INCOME 56,756 64,160
Preferred stock dividend requirements 12,949 13,022
---------- ----------
EARNINGS FOR COMMON STOCK $43,807 $51,138
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (000) 121,507 120,780
BASIC AND DILUTED EARNINGS PER COMMON SHARE $0.36 $0.43
DIVIDENDS DECLARED PER COMMON SHARE $0.445 $0.445
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 3 -
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(UNAUDITED)
(THOUSANDS OF DOLLARS - EXCEPT PER SHARE AMOUNTS)
NINE MONTHS ENDED
DECEMBER 31
----------------------
1997 1996
----------------------
<S> <C> <C>
REVENUES
Electric $1,922,752 $1,907,167
Gas 373,766 379,314
---------- ----------
Total Revenues 2,296,518 2,286,481
---------- ----------
EXPENSES
Operations - fuel and purchased power 663,382 652,982
Operations - other 294,742 277,207
Maintenance 84,262 87,647
Depreciation and amortization 117,954 116,360
Base financial component amortization 75,728 75,728
Rate moderation component amortization 7,615 (8,906)
Regulatory liability component amortization (66,430) (66,430)
Other regulatory amortization 43,922 100,076
Operating taxes 349,214 352,048
Federal income tax - current 64,100 29,359
Federal income tax - deferred and other 103,370 124,250
---------- ----------
Total Expenses 1,737,859 1,740,321
---------- ----------
OPERATING INCOME 558,659 546,160
---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 17,843 19,359
Class Settlement (12,415) (15,400)
Other income and deductions, net (21,870) 13,277
Allowance for other funds used during construction 2,808 2,169
Federal income tax - current 878 0
Federal income tax - deferred and other 4,844 (1,511)
---------- ----------
Total Other Income and (Deductions) (7,912) 17,894
---------- ----------
INCOME BEFORE INTEREST CHARGES 550,747 564,054
---------- ----------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 263,530 281,942
Other interest 44,423 50,159
Allowance for borrowed funds used during construction (3,507) (2,758)
---------- ----------
Total Interest Charges and (Credits) 304,446 329,343
---------- ----------
NET INCOME 246,301 234,711
Preferred stock dividend requirements 38,865 39,145
---------- ----------
EARNINGS FOR COMMON STOCK $207,436 $195,566
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (000) 121,331 120,498
BASIC AND DILUTED EARNINGS PER COMMON SHARE $1.71 $1.63
DIVIDENDS DECLARED PER COMMON SHARE $1.335 $1.335
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
-4-
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
STATEMENT OF INCOME
(THOUSANDS OF DOLLARS - EXCEPT PER SHARE AMOUNTS)
TWELVE MONTHS ENDED
DECEMBER 31
----------------------
1997 1996
----------------------
(UNAUDITED) (AUDITED)
----------------------
<S> <C> <C>
REVENUES
Electric $2,480,543 $2,466,435
Gas 667,157 684,260
---------- ----------
Total Revenues 3,147,700 3,150,695
---------- ----------
EXPENSES
Operations - fuel and purchased power 965,249 963,251
Operations - other 390,415 381,076
Maintenance 113,602 118,135
Depreciation and amortization 156,515 153,925
Base financial component amortization 100,971 100,971
Rate moderation component amortization 13,522 (24,232)
Regulatory liability component amortization (88,573) (88,573)
Other regulatory amortization 56,140 127,288
Operating taxes 466,727 472,076
Federal income tax - current 87,478 42,197
Federal income tax - deferred and other 136,994 168,000
---------- ----------
Total Expenses 2,399,040 2,414,114
---------- ----------
OPERATING INCOME 748,660 736,581
---------- ----------
OTHER INCOME AND (DEDUCTIONS)
Rate moderation component carrying charges 23,762 25,259
Class Settlement (16,911) (20,772)
Other income and deductions, net (21,225) 19,197
Allowance for other funds used during construction 3,525 2,888
Federal income tax - current 878 0
Federal income tax - deferred and other 5,633 940
---------- ----------
Total Other Income and (Deductions) (4,338) 27,512
---------- ----------
INCOME BEFORE INTEREST CHARGES 744,322 764,093
---------- ----------
INTEREST CHARGES AND (CREDITS)
Interest on long-term debt 353,698 384,198
Other interest 61,082 67,130
Allowance for borrowed funds used during construction (4,456) (3,699)
---------- ----------
Total Interest Charges and (Credits) 410,324 447,629
---------- ----------
NET INCOME 333,998 316,464
Preferred stock dividend requirements 51,834 52,216
---------- ----------
EARNINGS FOR COMMON STOCK $282,164 $264,248
========== ==========
AVERAGE COMMON SHARES OUTSTANDING (000) 121,245 120,360
BASIC AND DILUTED EARNINGS PER COMMON SHARE $2.33 $2.20
DIVIDENDS DECLARED PER COMMON SHARE $1.78 $1.78
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 5 -
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(THOUSANDS OF DOLLARS)
DECEMBER 31 MARCH 31 DECEMBER 31
1997 1997 1996
ASSETS (UNAUDITED) (UNAUDITED) (AUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
UTILITY PLANT
Electric $4,005,928 $3,900,264 $3,882,297
Gas 1,218,703 1,171,183 1,154,543
Common 286,442 263,267 260,268
Construction work in progress 116,147 108,850 112,184
Nuclear fuel in process and in reactor 16,163 15,503 15,454
----------- ----------- -----------
5,643,383 5,459,067 5,424,746
----------- ----------- -----------
Less - Accumulated depreciation and
amortization 1,847,842 1,759,110 1,729,576
----------- ----------- -----------
Total Net Utility Plant 3,795,541 3,699,957 3,695,170
----------- ----------- -----------
REGULATORY ASSETS
Base financial component (less accumulated
amortization of $858,253, $782,525 3,180,577 3,256,305 3,281,548
and $757,282)
Rate moderation component 385,537 409,512 402,213
Shoreham post-settlement costs 1,003,589 996,270 991,795
Shoreham nuclear fuel 66,986 68,581 69,113
Unamortized cost of issuing securities 166,783 187,309 194,151
Postretirement benefits other than pensions 346,090 357,668 360,842
Regulatory tax asset 1,746,883 1,767,164 1,772,778
Other 189,263 200,137 199,879
----------- ----------- -----------
Total Regulatory Assets 7,085,708 7,242,946 7,272,319
----------- ----------- -----------
----------- ----------- -----------
NONUTILITY PROPERTY AND OTHER INVESTMENTS 49,882 18,870 18,597
----------- ----------- -----------
----------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents 179,995 64,539 279,993
Special deposits 67,431 37,631 38,266
Customer accounts receivable (less allowance
for doubtful accounts of $26,135, 247,479 305,436 255,801
$23,675 and $25,000)
Other accounts receivable 53,742 42,946 65,764
Accrued unbilled revenues 162,157 141,389 169,712
Materials and supplies at average cost 52,530 55,454 55,789
Fuel oil at average cost 53,154 49,703 53,941
Gas in storage at average cost 66,599 10,893 73,562
Deferred tax asset 11,349 93,349 145,205
Prepayments and other current assets 12,878 8,805 8,569
----------- ----------- -----------
Total Current Assets 907,314 810,145 1,146,602
----------- ----------- -----------
----------- ----------- -----------
DEFERRED CHARGES 69,281 77,656 76,991
----------- ----------- -----------
TOTAL ASSETS $11,907,726 $11,849,574 $12,209,679
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 6 -
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
BALANCE SHEET
(THOUSANDS OF DOLLARS)
DECEMBER 31 MARCH 31 DECEMBER 31
1997 1997 1996
CAPITALIZATION AND LIABILITIES (UNAUDITED) (UNAUDITED) (AUDITED)
----------- ----------- -----------
<S> <C> <C> <C>
CAPITALIZATION
Long-term debt $4,395,555 $4,471,675 $4,471,675
Unamortized discount on debt (13,861) (14,628) (14,903)
----------- ----------- -----------
4,381,694 4,457,047 4,456,772
----------- ----------- -----------
Preferred stock - redemption required 637,450 638,500 638,500
Preferred stock - no redemption required 63,562 63,598 63,664
----------- ----------- -----------
Total Preferred Stock 701,012 702,098 702,164
----------- ----------- -----------
Common stock 607,837 605,022 603,921
Premium on capital stock 1,142,581 1,131,576 1,127,971
Capital stock expense (47,879) (48,915) (49,330)
Retained earnings 907,209 861,751 840,867
Treasury stock, at cost (1,204) (385) (60)
----------- ----------- -----------
Total Common Shareowners' Equity 2,608,544 2,549,049 2,523,369
----------- ----------- -----------
----------- ----------- -----------
Total Capitalization 7,691,250 7,708,194 7,682,305
----------- ----------- -----------
REGULATORY LIABILITIES
Regulatory liability component 119,039 178,558 198,398
1989 Settlement credits 118,229 125,138 127,442
Regulatory tax liability 26,649 100,377 102,887
Other 143,155 158,660 139,510
----------- ----------- -----------
Total Regulatory Liabilities 407,072 562,733 568,237
----------- ----------- -----------
CURRENT LIABILITIES
Current maturities of long-term debt 101,000 1,000 251,000
Current redemption requirements 1,050 1,050 1,050
of preferred stock
Accounts payable and accrued expenses 288,658 230,189 289,141
LRPP payable 30,118 40,499 40,499
Accrued taxes (including federal income tax
of $15,034, $49,262 and $25,884) 54,466 51,157 63,640
Accrued interest 157,787 143,983 160,615
Dividends payable 58,671 58,474 58,378
Class Settlement 60,000 58,333 55,833
Customer deposits 28,885 29,173 29,471
----------- ----------- -----------
Total Current Liabilities 780,635 613,858 949,627
----------- ----------- -----------
DEFERRED CREDITS
Deferred federal income tax 2,506,904 2,420,443 2,442,606
Class Settlement 55,970 89,487 98,497
Other 21,394 20,889 39,447
----------- ----------- -----------
Total Deferred Credits 2,584,268 2,530,819 2,580,550
----------- ----------- -----------
OPERATING RESERVES
Pensions and other postretirement benefits 399,072 387,048 381,996
Claims and damages 45,429 46,922 46,964
----------- ----------- -----------
Total Operating Reserves 444,501 433,970 428,960
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES - - -
----------- ----------- -----------
TOTAL CAPITALIZATION AND LIABILITIES $11,907,726 $11,849,574 $12,209,679
=========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 7 -
<PAGE>
<TABLE>
<CAPTION>
LONG ISLAND LIGHTING COMPANY
STATEMENT OF CASH FLOWS
(THOUSANDS OF DOLLARS)
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31,
1997 1996 1997 1996 1997 1996
----------- ----------- ---------- ---------- ----------- -----------
unaudited unaudited unaudited unaudited unaudited audited
<S> <C> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net Income $56,756 $64,160 $246,301 $234,711 $333,998 $316,464
ADJUSTMENTS TO RECONCILE NET INCOME TO NET
CASH PROVIDED BY OPERATING ACTIVITIES
Provision for doubtful accounts 9,446 4,470 18,300 18,291 23,121 23,119
Depreciation and amortization 39,793 40,103 117,954 116,360 156,515 153,925
Base financial component amortization 25,243 25,243 75,728 75,728 100,971 100,971
Rate moderation component amortization (10,709) 9,690 7,615 (8,906) 13,522 (24,232)
Regulatory liability component amortization (22,144) (22,144) (66,430) (66,430) (88,573) (88,573)
Other regulatory amortization 2,310 (7,215) 43,922 100,076 56,140 127,288
Rate moderation component carrying charges (5,928) (6,571) (17,843) (19,359) (23,762) (25,259)
Class Settlement 4,049 5,461 12,415 15,400 16,911 20,772
Amortization of cost of issuing 7,936 8,163 22,884 25,125 30,971 34,611
and redeeming securities
Federal income tax - deferred and other 22,474 31,907 98,526 125,761 131,361 167,060
Allowance for other funds used during (885) (754) (2,808) (2,169) (3,525) (2,888)
construction
Pensions and Other Post Retirement Benefits 25,054 4,217 38,319 14,821 51,815 14,952
Gas Cost Adjustment 2,745 (14,015) 1,250 (16,236) (6,641) 2,954
Other 15,886 6,838 63,284 36,195 72,372 49,238
CHANGES IN OPERATING ASSETS AND LIABILITIES
Accounts receivable 49,494 48,328 31,111 73,207 (527) 69,215
Accrued unbilled revenues (43,231) (23,932) (20,768) (21,044) 7,555 14,728
Materials and supplies, fuel oil (643) 2,371 (56,233) (78,233) 11,009 (34,531)
and gas in storage
Accounts payable and accrued expenses 49,048 60,670 61,743 60,255 2,791 28,258
Accrued taxes (2,674) 30,272 3,309 13,391 (9,174) 3,142
Accrued interest 10,482 18,304 13,804 8,259 (2,828) 2,290
Class Settlement (13,809) (10,589) (44,265) (36,718) (55,271) (42,084)
Special deposits (482) (2,364) (29,165) 25,146 (29,165) 25,146
Other (27,980) (22,568) (73,575) (40,349) (86,542) (46,620)
----------- ----------- ---------- ---------- ----------- -----------
Net Cash Provided by Operating Activities 192,231 250,045 545,378 653,282 703,044 889,946
----------- ----------- ---------- ---------- ----------- -----------
INVESTING ACTIVITIES
Construction and nuclear fuel expenditures (84,198) (63,344) (201,666) (195,707) (252,041) (239,896)
Shoreham post-settlement costs (9,271) (11,178) (30,207) (35,924) (40,410) (49,355)
Investment in subsidiary 0 0 (30,000) 0 (30,000) 0
Other (1,026) (2,694) (2,319) (3,600) (2,159) (4,806)
----------- ----------- ---------- ---------- ----------- -----------
Net Cash Used in Investing Activities (94,495) (77,216) (264,192) (235,231) (324,610) (294,057)
----------- ----------- ---------- ---------- ----------- -----------
FINANCING ACTIVITIES
Proceeds from sale of common stock 4,750 4,754 13,784 14,165 18,424 18,837
Issuance of long-term debt 24,880 0 24,880 0 24,880 0
Redemption of long-term debt (1,000) 0 (1,000) (415,000) (251,000) (415,000)
Redemption of preferred stock 0 (3,750) (1,050) (4,800) (1,050) (4,800)
Preferred stock dividends paid (12,948) (13,049) (38,885) (39,192) (51,854) (52,264)
Common stock dividends paid (54,004) (53,626) (161,758) (160,506) (215,507) (213,753)
Other (904) (56) (1,701) (10) (2,325) (369)
----------- ----------- ---------- ---------- ----------- -----------
Net Cash Used in Financing Activities (39,226) (65,727) (165,730) (605,343) (478,432) (667,349)
----------- ----------- ---------- ---------- ----------- -----------
----------- ----------- ---------- ---------- ----------- -----------
Net Increase (Decrease) in Cash
----------- ----------- ---------- ---------- ----------- -----------
and Cash Equivalents $58,510 $107,102 $115,456 ($187,292) ($99,998) ($71,460)
=========== =========== ========== ========== =========== ===========
Cash and cash equivalents at beginning of period $121,485 $172,891 $64,539 $467,285 $279,993 $351,453
Net Increase (Decrease) in cash
and Cash Equivalents 58,510 107,102 115,456 (187,292) (99,998) (71,460)
=========== =========== ========== ========== =========== ===========
Cash and Cash Equivalents at end of period $179,995 $279,993 $179,995 $279,993 $179,995 $279,993
=========== =========== ========== ========== =========== ===========
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
- 8-
<PAGE>
NOTES TO FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED DECEMBER 31, 1997
(UNAUDITED)
NOTE 1. BASIS OF PRESENTATION
These Notes to Financial Statements reflect events subsequent to January 31,
1997, the date of the most recent Report of Independent Auditors, through the
date of this Report on Form 10-Q for the three months ended December 31, 1997.
These Notes to Financial Statements should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the three, nine and twelve months ended December 31, 1997, the
Company's Transition Report for the three months ended March 31, 1997 and
Quarterly Report on Form 10-Q for the three months ended June 30, 1997 and
September 30, 1997 and the Company's Annual Report on Form 10-K/A filed June 30,
1997, for the year ended December 31, 1996, and the Company's Joint Proxy
Statement/Prospectus filed June 30, 1997.
The financial statements furnished are unaudited. However, in the opinion of
management, the financial statements include all adjustments, consisting of
normal recurring accruals, necessary for a fair presentation of the financial
statements for the three month period presented. Operating results for the three
month period are not necessarily indicative of results to be expected for an
entire year due to the seasonal nature of the gas and electric business.
On April 11, 1997, the Company changed its year-end from December 31 to March
31. Accordingly, the Company's financial statements have been presented on the
new basis, as well as its previous basis for comparative purposes.
Certain prior year amounts have been reclassified to be consistent with current
year presentation.
NOTE 2. LONG ISLAND POWER AUTHORITY TRANSACTION
On June 26, 1997, the Company and the Long Island Power Authority (LIPA) entered
into definitive agreements pursuant to which, after the transfer of the
Company's gas assets, non-nuclear electric generating facility assets and
certain other assets and liabilities to one or more newly-formed subsidiaries of
a new holding company, the Company's common stock will be sold to LIPA for
$2.4975 billion in cash. Subject to all required regulatory approvals, it is
anticipated that LIPA will own the Company's electric transmission and
distribution system, its 18% interest in the Nine Mile Point 2 Nuclear Power
Station (NMP2), and substantially all of its electric regulatory assets and
liabilities, and will assume or refinance part of or the total amount of
approximately $339 million in preferred stock and $3.6 billion in long term
debt.
In December 1997, the United States Nuclear Regulatory Commission (NRC) issued
an order approving the indirect transfer of control of the Company's 18%
ownership interest in NMP2 to LIPA, as contemplated in the LIPA transaction
agreements. In addition, in December 1997, the Company filed with the Federal
Energy Regulatory Commission (FERC) a settlement agreement reached with LIPA in
connection with the Company's October 1997 filing of its proposed rates for the
sale of capacity and energy to LIPA, as contemplated in the LIPA transaction
agreements. The Company had previously filed an application with FERC seeking
approval of the transfer of the Company's electric transmission and distribution
system to LIPA in connection with LIPA's purchase of the stock of the Company.
On February 11, 1998, FERC issued orders on both Company filings. Specifically,
FERC approved the Company's application to transfer assets to LIPA in connection
with LIPA's acquisition of the Company's stock. In addition, FERC accepted for
filing the Company's proposed rates for sale of capacity and energy to LIPA.
Those rates may go into effect on the date the service to LIPA begins, subject
to refund, and final rates will be set after FERC has completed its
investigation of such rates, the timing of which cannot be determined.
In January 1998, the Company filed an application with the Public Service
Commission of the State of New York (PSC) in connection with the proposed
transfer of its gas, non-nuclear generation and common assets and related
liabilities to one or more subsidiaries of the holding company to be formed as
contemplated in the LIPA transaction agreements. On February 4, 1998, the PSC
issued an order finding that the transfer of the above mentioned assets would
not adversely affect the environment.
NOTE 3. RATE MATTERS
ELECTRIC AND GAS
In December 1997, the PSC approved the continuation of the following ratemaking
mechanisms for the rate year ended November 30, 1997: (a) the gas excess
earnings mechanism whereby earnings in excess of a return on common equity of
11.0% was allocated equally between ratepayers and shareowners, with the
ratepayers' share of excess earnings credited to the regulatory asset created as
a result of costs associated with manufactured gas plant site investigation and
remediation costs; and (b) the electric Rate Moderation Component (RMC) and the
LILCO Ratemaking and Performance Plan (LRPP) mechanisms and performance
incentive programs.
KEYSPAN ENERGY CORPORATION (FORMERLY THE BROOKLYN UNION GAS COMPANY)
TRANSACTION
PSC SETTLEMENT AGREEMENT
In 1997, the Company and the Brooklyn Union Gas Company (Brooklyn Union)
filed a joint petition with the Public Service Commission of the State of New
York (PSC or Commission) seeking PSC approval, under section 70 of the New York
Public Service Law, of the KeySpan Agreement by which the Company and KeySpan
each would become subsidiaries of a newly-formed holding company through an
exchange of shares of common stock with the holding company. In addition, the
petition called for approximately $1.0 billion of efficiency savings
attributable to operating synergies that are expected to be realized over the 10
year period following the combination to be allocated to ratepayers net of
transaction costs for the combination. On December 10, 1997, Brooklyn Union, the
Company, the Staff of the Department of Public Service and three other parties
entered into a Settlement Agreement (Stipulation) resolving all issues among
them in the proceeding. Hearings on the Stipulation were held in early January
1998 and, on February 4, 1998, the PSC approved, effective February 5, the
Stipulation, modified only to reduce Brooklyn Union's earnings caps for the
remaining years of its rate plan.
Under the Stipulation, a three-year gas rate plan will be implemented for
the Company which provides for, among other things, an estimated reduction in
customers' bills of approximately 3.9%, including fuel savings, through at least
November 30, 2000. This gas rate reduction will occur in three phases as
follows: (i) a reduction in base rates of approximately $12.2 million to reflect
decreases in the Company's gas cost of service effective on February 5, 1998;
(ii) a base rate reduction of approximately $6.2 million associated with
non-fuel savings related to the KeySpan Transaction to become effective on the
closing date of the transaction; and (iii) an expected reduction in the Gas
Adjustment Clause (GAC) to reflect annual fuel savings associated with the
transaction estimated at approximately $4.0 million, the actual level of which
will be reflected in rates if and when they actually materialize. The Company
will be subject to an earning sharing provision pursuant to which it will be
required to credit to core/firm customers 60% of any utility earnings up to 100
basis points above 11.10% and 50% of any utility earnings in excess of 12.10%.
Both a customer service and a safety and reliability incentive performance
program will be implemented effective December 1, 1997 with maximum pre-tax
return on equity penalties of 40 and 12 basis points, respectively, if the
Company fails to achieve certain performance standards in these areas.
For Brooklyn Union, effective on the date of the consummation of the
KeySpan Transaction, Brooklyn Union's base rates to core/firm customers will be
reduced by $23.9 million annually. In addition, effective in the fiscal year in
which the KeySpan Transaction is consummated, Brooklyn Union will be subject to
an earnings sharing provision pursuant to which it will be required to credit to
core/firm customers 60% of any utility earnings up to 100 basis points above
certain threshold equity return levels over the term of the rate plan (other
than any earnings associated with discrete incentives) and 50% of any utility
earnings in excess of 100 basis points above such threshold levels. The
threshold levels, as modified by the February 5 Order, 13.75% for fiscal year
1998, 13.50% for fiscal years 1999, 2000, and 2001; and 13.25% for fiscal year
2002. A safety and reliability incentive mechanism will be implemented effective
on the consummation date of the KeySpan Transaction, with a maximum 12 basis
point pre-tax return on equity penalty if Brooklyn Union fails to achieve
certain safety and reliability performance standards. With the exception of the
simplification of the customer service performance standards, the current
Brooklyn Union rate plan approved by the PSC in 1996 remains unchanged. Any gas
cost savings allocable to Brooklyn Union resulting from the KeySpan Transaction
will be reflected in rates to utility customers through the GAC as those savings
are realized.
The Stipulation, which obligates the Company to reduce electric customers'
bills by approximately 2.5% resulting from the savings in operating and fuel
costs, related to synergy savings, also defers the time within which the
Commission must act on the Company's pending electric rate plan until July 1,
1998. However, any reduction in customers' bills would not become effective
until the Commission sets the Company's electric rates.
The Stipulation adopts certain affiliate transaction restrictions, cost
allocation and financial integrity conditions, and a competitive code of
conduct. These restrictions and conditions eliminate or relax many restrictions
currently applicable to Brooklyn Union in such areas as affiliate transactions;
use of the name and reputation of Brooklyn Union by unregulated affiliates;
common officers of the holding company, the utility subsidiaries and unregulated
subsidiaries; dividend payment restrictions; and the composition of the Board of
Directors of Brooklyn Union.
The Stipulation also enables the utilities to form one or more shared
services subsidiaries to perform functions common to both utilities and their
affiliates such as accounting, finance, human resources, and information systems
and technology to realize synergy savings.
<PAGE>
NOTE 4. CAPITALIZATION
In December 1997, the Company received proceeds from the sale of $24.9 million
of Electric Facilities Revenue Bonds issued by the New York State Energy
Research and Development Authority. The net proceeds from this offering were
used to reimburse the treasury for electric generation projects previously
completed.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
EARNINGS
THREE MONTHS ENDED DECEMBER 31, 1997
Earnings per common share for the three months ended December 31, 1997 reflect
lower earnings in both the electric and gas businesses when compared to the
three months ended December 31, 1996. This reduction is primarily due to an
accrual for certain contractual obligations for key employees required as a
result of the KeySpan Energy Corporation (formerly Brooklyn Union) merger and
the Long Island Power Authority (LIPA) transaction, as discussed below in the
section titled "Other Income and Deductions." The effects of these increased
costs were partially offset by lower interest expense and a change in an
electric ratemaking mechanism which eliminates the effects of seasonality on
monthly operating income, as more fully discussed in the section titled "Rate
Moderation Component."
NINE MONTHS ENDED DECEMBER 31, 1997
For the nine months ended December 31, 1997 the Company had overall higher
earnings resulting from higher earnings in the electric business and slightly
lower earnings in the gas business compared to the nine months ended December
31, 1996.
In the electric business, the increase in earnings for the nine months ended
December 31, 1997, was primarily due to lower interest expense combined with the
change in the ratemaking noted above. These positive impacts more than offset
the effects of lower short-term interest income and the accruals discussed
above.
The decrease in earnings in the gas business for the nine months ended December
31, 1997 resulted from lower short-term interest income and the accruals, noted
above, partially offset by lower operations and maintenance expenses.
TWELVE MONTHS ENDED DECEMBER 31, 1997
For the twelve months ended December 31, 1997 the Company had higher earnings in
both the electric and gas businesses when compared to the twelve months ended
December 1996.
Electric business earnings increased for the twelve months ended December 31,
1997, primarily due to reductions in interest expense combined with the change
to the ratemaking noted above, partially offset by lower short-term interest
income and the accruals discussed above.
The increase in earnings in the gas business for the twelve months ended
December 31, 1997, was primarily due to a one-time revenue enhancement relating
to an Independent Power Producer contract and lower operation and maintenance
expenses, partially offset by lower short-term interest income and the
recognition of the accruals, noted above.
REVENUES
Electric
The increase in electric revenues of approximately $22.3 million and $15.6
million for the three and nine months ended December 31, 1997, respectively,
when compared to the same periods in 1996, was due to higher sales volumes and
higher fuel expense recoveries. The increase of approximately $14.1 million for
the twelve months ended December 31, 1997, when compared to the same period in
1996, was due to higher fuel expense recoveries and higher system sales volumes,
partially offset by lower sales to other utilities. Fluctuations in sales
volumes are generally attributable to weather. The Company's electric rate
structure eliminates the impact on earnings of sales volumes that are above or
below adjudicated levels.
Gas
The increase in gas revenues of approximately $15.2 million for the three months
ended December 31, 1997, when compared to the same period in 1996, was primarily
due to higher gas fuel expense recoveries resulting from higher gas costs.
System sales volumes were approximately the same during both periods.
The decreases in gas revenues of approximately $5.5 million and $17.1 million
for the nine and twelve months ended December 31, 1997, respectively, when
compared to the same periods in 1996, were primarily the result of lower fuel
expense recoveries driven by lower sales volumes due to warmer weather
experienced in 1997 compared to 1996. The portion of the decrease attributable
to lower fuel expense has no effect on earnings as corresponding reductions in
fuel expense offset the reduction in fuel expense recoveries. The lower sales
volumes were partially offset by higher revenues from the transportation of gas
for others. In the twelve months ended December 31, 1997, the decrease in
revenues was partially offset by an enhancement to revenues relating to an
Independent Purchased Power contract.
Variations in sales volumes resulting from weather have a limited impact on net
revenues (revenues net of fuel expenses), as the Company's gas rate structure
includes a weather normalization mechanism which mitigates the impact on net
revenues of experiencing weather that is warmer or colder than normal.
FUEL AND PURCHASED POWER
Fuel and purchased power expenses for the three, nine and twelve months ended
December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
(In Millions) (In Millions) (In Millions)
<S> <C> <C> <C> <C> <C> <C>
Electric System
Oil $ 30 $ 30 $ 80 $ 91 $117 $158
Gas 48 45 166 131 205 138
Nuclear 4 3 11 11 15 15
Purchases 81 81 235 248 320 329
-- -- --- --- --- ---
Total
Electric 163 159 492 481 657 640
Gas System 102 87 171 172 308 323
---- ---- ---- ---- ---- ----
Total $265 $246 $663 $653 $965 $963
==== ==== ==== ==== ==== ====
</TABLE>
Electric System
THREE MONTHS ENDED DECEMBER 31, 1997
For the three months ended December 31, 1997, electric fuel costs increased,
when compared to the same period in 1996. Higher system sales volumes and higher
prices for gas used for electric generation contributed to this increase.
NINE MONTHS ENDED DECEMBER 31, 1997
For the nine months ended December 31, 1997, electric fuel costs increased, when
compared to the same period in 1996 as a result of higher system sales volumes
coupled with higher purchased power prices. This increase in electric fuel costs
was mitigated, for the nine months ended December 31, 1997, as the Company was
able to reduce purchases and oil fired generation by increasing production with
more economical gas as a result of the completion in May 1997 of the conversion
of an oil fired steam generating unit at Port Jefferson to dual-fuel capability.
TWELVE MONTHS ENDED DECEMBER 31, 1997
For the twelve months ended December 31, 1997, electric fuel costs increased,
when compared to the same period in 1996, primarily as a result of higher
purchased power prices. This increase in electric fuel costs was mitigated, for
the twelve months ended December 31, 1997, as the Company was able to reduce
purchases and oil fired generation by increasing production with gas as a result
of the completion in May 1997 of the conversion of an oil fired steam generating
unit at Port Jefferson to dual-fuel capability. Also contributing to this
increase was the absence of profits generated by the sale of electric business
unit gas supplies to non-traditional customers (off-system sales) primarily as a
result of low demand for gas, brought about by the mild winter weather in the
first three months of 1997. Profits from such gas sales offset the cost of fuel
for electric generation, supporting the Company's goal of providing electric
energy to customers at the lowest cost possible.
Of the Company's 11 steam generation units, nine burn natural gas; seven of
which are also capable of burning oil. This dual-fuel capability provides the
Company with the ability to burn the most cost efficient fuel available,
consistent with seasonal and environmental requirements. In an effort to
maximize the Company's operating flexibility, the Company is in the process of
adding natural gas firing capability to one of its two remaining oil only steam
generating units. Completion is scheduled for the spring of 1998.
Electric Energy Available
The percentages of total electric energy available by type of fuel for electric
operations, for the three, nine and twelve months ended December 31, 1997 and
1996, were as follows:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
12/31/97 12/31/96 12/31/97 12/31/96 12/31/97 12/31/96
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Oil 23% 19% 17% 18% 18% 24%
Gas 27 32 40 31 38 25
Nuclear 9 6 8 8 9 9
Purchases 41 43 35 43 35 42
---- ---- ---- ---- ---- ---
Total 100% 100% 100% 100% 100% 100%
=== === === === === ===
</TABLE>
The use of gas for electric generation decreased for the three months ended
December 31, 1997 when compared to the same period in 1996 as fuel oil was more
economical than gas and purchased power. For the nine and twelve months ended
December 31, 1997, the use of gas for electric generation increased as gas
became more economical than fuel oil and purchased power when compared to the
same periods in 1996.
<PAGE>
Gas System
THREE MONTHS ENDED DECEMBER 31, 1997
For the three months ended December 31, 1997, gas fuel costs increased for
operating the gas business, when compared to the same period in 1996, as a
result of an increase in average gas prices partially offset by the operation of
the Gas Cost Adjustment (GCA) mechanism which permits the Company to increase or
decrease the current year fuel expenses for differences between amounts
collected in rates and amounts actually spent for fuel during the previous year.
For the three months ended December 31, 1997, the amounts being refunded, via
the GCA, were greater than that for the same period in 1996.
NINE AND TWELVE MONTHS ENDED DECEMBER 31, 1997
For the nine and twelve months ended December 31, 1997, gas fuel costs were
lower than the prior year as a result of a decrease in sales volumes, lower
average gas prices and the operation of the GCA mechanism. In addition, the
amounts being refunded, via the GCA, were greater than that for the same periods
in 1996.
OPERATIONS AND MAINTENANCE EXPENSES
For the three, nine and twelve months ended December 31, 1997, operations and
maintenance (O&M) expenses, excluding fuel and purchased power, increased by
$23.3 million, $14.1 million and $4.8 million, respectively, when compared to
the same periods in 1996, principally as a result of the recognition of higher
performance based employee incentives and higher provisions for doubtful
accounts.
RATE MODERATION COMPONENT
The Rate Moderation Component (RMC) reflects the difference between the
Company's electric revenue requirements under conventional ratemaking and the
revenues provided by its electric rate structure. In addition, the RMC is
adjusted monthly for the operation of the Company's Fuel Moderation Component
(FMC) mechanism and the difference between the Company's share of actual
operating costs at Nine Mile Point 2 Nuclear Power Station (NMP2) and amounts
provided for in electric rates.
For the three months ended December 31, 1997, the Company recorded a non-cash
credit to income of approximately $10.7 million compared to a non-cash charge of
$9.7 million in the same period in 1996. For the nine and twelve months ended
December 31, 1997, the Company recorded non-cash charges to income of
approximately $7.6 million and $13.5 million, respectively. For the nine and
twelve months ended December 31, 1996, the Company recorded non-cash credits to
income of approximately $8.9 million and $24.2 million, respectively.
In December 1997, the Company petitioned the Public Service Commission (PSC) to
change the monthly amortization of the RMC to a method designed to compensate
for seasonality in the electric business. Accordingly, effective December 1,
1997, the Company began recording the RMC amortization on a non-levelized basis.
Previously, the Company had amortized the RMC on a straight line (levelized)
basis over each 12 month period beginning December 1. As a result of the above
change, for the three, nine and twelve months ended December 31, 1997, the
Company recorded non-cash credits of $13.6 million more than it would have under
the previous methodology. This change in methodology will continue to affect the
comparability of quarterly earnings during the 12-month period ending December
31, 1998. It should be noted, however, that under this new methodology, the
total RMC amortization for the rate year ended November 30, 1998, will be equal
to the total RMC amortization under the previous method.
The Company continues to believe that the full amortization and recovery of the
RMC balance, which at December 31, 1997, was approximately $386 million, will
take place within the time frame established by the RMA, in accordance with the
rate plans submitted to the PSC for the single rate year 1997 and the three year
rate period 1997 through 1999. In December 1997, the Company received PSC
approval to continue the RMC and the LILCO Ratemaking and Performance Plan
(LRPP) ratemaking mechanisms and incentives for the electric rate year ending
November 30, 1997. In the event that the LIPA transaction is not consummated,
the Company expects that the PSC will issue an order providing for, among other
things, the continuing recovery, through rates, of the RMC balance, one of the
Shoreham-related regulatory assets. If such an electric rate order is not
obtained or does not provide for the continuing recovery of the RMC balance, the
Company may be required to write-off the amount not expected to be provided for
in rates. For a further discussion of the LIPA transaction, see the Joint Proxy
Statement/Prospectus filed June 30, 1997.
For a further discussion of the RMC, RMA and FMC, see the Company's Annual
Report on Form 10-K/A filed June 30, 1997, for the year ended December 31, 1996.
<PAGE>
OTHER REGULATORY AMORTIZATION
The components of other regulatory amortization, for the three, nine and twelve
months ended December 31, 1997 and 1996, were as follows:
<TABLE>
<CAPTION>
(In millions of dollars)
- ---------------------------------------------------------------------------------
Three Months Nine Months Twelve Months
1997 1996 1997 1996 1997 1996
- ---------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net Margin $ - $(43) $13 $ 5 $ 2 $ 3
Amortization of LRPP Deferral - 11 - 42 - 59
Excess Earnings - Electric (7) 10 (5) 10 6 10
Excess Earnings - Gas (3) 2 7 8 9 10
OTHER 12 13 29 35 39 45
- ---------------------------------------------------------------------------------
$ 2 $ (7) $44 $100 $56 $127
- ---------------------------------------------------------------------------------
</TABLE>
These variances are due to regulatory mechanisms and have no impact on earnings
since they reflect the net deferral of income and expense resulting from the
Company's ratemaking mechanisms discussed in further detail below.
NET MARGIN- An electric business unit revenue reconciliation mechanism,
established under the LRPP, which eliminates the impact on earnings of
experiencing sales that are above or below adjudicated levels by providing a
fixed annual net margin level (defined as sales revenue, net of fuel and gross
receipts taxes). Variations in electric revenue resulting from differences
between actual and adjudicated net margin sales levels are deferred on a monthly
basis during the rate year through a charge or credit to other regulatory
amortization. These deferrals are then refunded to or recovered from ratepayers
as explained below under "LRPP Amortization."
LRPP AMORTIZATION- As established under the LRPP, deferred balances resulting
from the net margin, electric property tax reconciliation, earned performance
incentives, and associated carrying charges are accumulated during each rate
year. The first $15 million of the total deferral is recovered from or credited
to electric ratepayers by increasing or decreasing the RMC balance. Amounts
deferred in excess of $15 million, upon approval by the PSC, are refunded to or
recovered from ratepayers through the FCA mechanism over the subsequent 12-month
period, with the offset being recorded in other regulatory amortization.
For the three, nine and twelve months ended December 31, 1997, the amortization
of the deferred LRPP balance in excess of $15 million related to the rate year
ended November 30, 1995, has not begun, as the Company has yet to receive
approval from the PSC to begin refunding the amount owed to its electric
ratepayers. For the three, nine and twelve months ended December 31, 1996, the
Company recognized $10.6 million, $42.4 million and $58.7 million, respectively,
of non-cash charges to income representing the amortization of the deferred LRPP
balance related to the rate year ended November 30, 1994. For a further
discussion of the LRPP, see Note 3 of Notes to Financial Statements included in
the Company's Annual Report on Form 10-K/A filed June 30, 1997, for the year
ended December 31, 1996.
EXCESS EARNINGS- Also recorded in other regulatory amortization, if applicable,
are non-cash charges representing: (a) 100% of electric earnings generated by
the Company in excess of amounts provided for in electric rates, which is
returned to the electric ratepayer through a reduction to the RMC balance; and
(b) 50% of the gas earnings generated by the Company in excess of amounts
provided for in gas rates, which will be returned to the gas ratepayers through
a reduction in the amount due from gas ratepayers related to manufactured gas
plant site (MGP) clean-up costs. These rate year excess earnings are calculated
and recorded on the Company's books on a quarterly basis to reflect the
Company's best estimate of amounts earned in excess of the Company's 11% allowed
return on common equity. As a result of these quarterly measurements, which, for
example, in March represent four months of actual results and eight months of
projected results, it is not uncommon to have increases or decreases during the
year.
OPERATING TAXES
For the three, nine, and twelve months ended December 31, 1997, operating taxes
decreased compared to the same periods in the prior year, primarily as a result
of the expiration, at December 31, 1996, of the Corporate Tax Surcharge.
FEDERAL INCOME TAX
For the three month period ended December 31, 1997, federal income tax (FIT)
expense decreased as a result of lower pre-tax book income. For the nine and
twelve month periods ended December 31, 1997, FIT expense increased as a result
of higher pre-tax book income.
The current operating portion of the FIT liability, for the three months ended
December 31, 1997, totaled $20.4 million, of which $15.3 million was Alternative
Minimum Tax (AMT). The operating FIT liability, for the nine months ended
December 31, 1997, totaled $64.1 million, of which $36.2 million was AMT. The
operating FIT liability, for the twelve months ended December 31, 1997, totaled
$87.5 million, of which $67.4 million was AMT. The increase in the FIT liability
over the comparable periods last year was primarily attributable to the
Company's full utilization of the AMT net operating loss carryforwards during
1996.
OTHER INCOME AND DEDUCTIONS
Other income and deductions decreased for the three, nine and twelve months
ended December 31, 1997 when compared to the same periods in 1996, primarily as
a result of the Company's accrual of certain contractual obligations for key
employees, required as a result of the KeySpan merger and the LIPA transaction.
The nine and twelve month decreases were also affected by lower interest income
from short-term investments and lower fuel incentives.
INTEREST EXPENSE
Interest expense decreased for the three, nine and twelve months ended December
31, 1997, when compared to the same periods in 1996, as a result of lower debt
levels.
LIQUIDITY AND CAPITAL RESOURCES
At December 31, 1997, the Company's cash and cash equivalents amounted to
approximately $180 million, compared to $65 million at March 31, 1997. This
increase in cash and cash equivalents was primarily attributable to cash
generated from operations exceeding the Company's operating, construction and
dividend requirements. In addition, the Company received net proceeds of
approximately $24.5 million, from the sales of tax-exempt bonds, to reimburse
the treasury for amounts previously expended on electric generation projects.
At December 31, 1997, March 31, 1997 and December 31, 1996, the Company's
capitalization and ratios were as follows:
<TABLE>
<CAPTION>
(In millions of dollars)
- --------------------------------------------------------------------------------
12/31/97 3/31/97 12/31/96
AMOUNT PERCENT AMOUNT PERCENT AMOUNT PERCENT
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Long-term debt $4,483 57.5 $4,458 57.8 $4,708 59.3
Preferred stock 702 9.0 703 9.1 703 8.9
Common shareowners'
EQUITY 2,609 33.5 2,549 33.1 2,523 31.8
- --------------------------------------------------------------------------------
$7,794 100.0 $7,710 100.0 $7,934 100.0
- --------------------------------------------------------------------------------
</TABLE>
A $250 million line of credit, secured by a first lien upon the Company's
accounts receivable and fuel oil inventories, is available to the Company under
its Revolving Credit Agreement (RCA). The lending banks participating in the RCA
have agreed to extend their commitments through October 1, 1998. In July 1997,
the Company utilized $40 million in interim financing under the RCA, which was
repaid in August 1997. The Company will, in order to satisfy short-term cash
requirements, continue to avail itself of such interim financing through the
RCA, as necessary.
The Company has no current plans to access the capital markets for financing as
cash from operations and/or on hand, should be sufficient to meet operating
requirements and debt maturities through December 31, 1998, including $100
million of General and Refunding Bonds maturing April 15, 1998. The Company may,
however utilize short term borrowings above its line of credit to meet costs and
expenses anticipated to be incurred in conjunction with the Keyspan merger
and/or LIPA transaction.
CAPITAL REQUIREMENTS AND CAPITAL PROVIDED
Capital requirements and capital provided, for the three, nine and twelve months
ended December 31, 1997, were as follows:
<TABLE>
<CAPTION>
(In millions of dollars)
- ----------------------------------------------------------------------------------------
Three Months Ended Nine Months Ended Twelve Months Ended
December 31, 1997 December 31, 1997 December 31, 1997
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C>
Capital Requirements
Construction $84 $202 $252
- ----------------------------------------------------------------------------------------
Redemptions and Dividends
Long-term debt 1 1 251
Preferred stock - 1 1
Preferred stock dividends 13 39 52
Common stock dividends 54 162 216
- ----------------------------------------------------------------------------------------
Total Redemption and
Dividends 68 203 520
- ----------------------------------------------------------------------------------------
Shoreham post-settlement
Costs 9 30 40
- ----------------------------------------------------------------------------------------
Total Capital Requirements $161 $435 $812
========================================================================================
Capital Provided
Cash from operations $192 $545 $703
(Increase) Decrease in cash
balances (59) (115) 100
Long term debt issued 25 25 25
Common stock issued 5 14 18
Hedge funding - (30) (30)
Other investing and financing
Activities (2) (4) (4)
- ----------------------------------------------------------------------------------------
Total Capital Provided $161 $435 $812
========================================================================================
</TABLE>
For further information, see the Statement of Cash Flows.
RATE MATTERS
For a discussion of Rate Matters, see Note 3 of Notes to Financial Statements.
KEYSPAN ENERGY CORPORATION (FORMERLY BROOKLYN UNION) TRANSACTION
For a further discussion on the KeySpan Energy Corporation transaction, see Note
3 of Notes to Financial Statements.
LONG ISLAND POWER AUTHORITY TRANSACTION
For a further discussion on the Long Island Power Authority transaction, see
Note 2 of Notes to Financial Statements.
<PAGE>
IMPACT OF YEAR 2000
Some of the Company's older computer programs were written using two digits
rather than four to define the applicable year. As a result, those computer
programs have time-sensitive software that recognizes a date using "00" as the
year 1900 rather than the year 2000. This could cause a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions, bill ratepayers, or
engage in similar normal business activities.
The company embarked on a program in 1996 to complete Year 2000 compliance by
year-end 1998. The Company currently expects to spend approximately $10 million,
consisting of $7 million to modify application systems and $3 million on overall
non-information technology systems, to be expended over a three year period
(1997-1999). As of December 31, 1997, $3.75 million of the $7 million, referred
to above, has been expended in investigating and modifying software. This effort
is scheduled to be completed in 1998 and testing will continue into early 1999.
A corporate-wide program has been established to review all software, hardware
and associated compliance plans. The readiness of suppliers and vendor systems
is also under review. Contingency and business continuation plans are being
prepared and will be reviewed periodically.
The Company believes that, with modifications to existing software and
conversions to new software, the Year 2000 Issue will not pose significant
operational problems for its computer systems. However, if such modifications
and conversions are not made, or are not completed timely, the Year 2000 Issue
could have a material impact on the operations of the Company.
The costs of the project and the date on which the Company believes it will
complete the Year 2000 modifications are based on management's best estimates,
which were derived utilizing numerous assumptions of future events, including
the continued availability of certain resources and other factors. However,
there can be no guarantee that these estimates will be achieved and actual
results could differ materially from those anticipated. Specific factors that
might cause such material differences include, but are not limited to, the
availability and cost of personnel trained in this area, the ability to locate
and correct all relevant computer codes, and similar uncertainties.
ACCOUNTING PRONOUNCEMENT
In February 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" (SFAS
No. 128). This statement supersedes APB Opinion No. 15, "Earnings Per Share" and
simplifies the computation of earnings per share. SFAS No. 128 is effective for
financial statements for both interim and annual periods ending after December
15, 1997. Accordingly, the Company adopted SFAS No. 128 at December 31, 1997.
The FASB issued Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income" (SFAS No. 130). The Company will adopt SFAS No. 130 on
April 1, 1998, and does not expect any material effect on its financial
statements from adoption of the statement.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This report contains statements which, to the extent they are not recitations of
historical fact, constitute "forward-looking statements" within the meaning of
the Securities Litigation Reform Act of 1995. In this respect, the words
"estimate," "project," "anticipate," "expect," "intend," "believe" and similar
expressions are intended to identify forward-looking statements. All such
forward-looking statements are intended to be subject to the safe harbor
protection provided by the Reform Act. A number of important factors affecting
the Company's business and financial results could cause actual results to
differ materially from those stated in the forward-looking statements. Those
factors include the proposed transactions with The KeySpan Energy Corporation
and LIPA as discussed under the heading "KeySpan Energy Corporation Transaction"
and "Long Island Power Authority Transactions", state and federal regulatory
rate proceedings, competition, and certain environmental matters each as
discussed herein, in the Company's Annual Report on Form 10-K/A filed June 30,
1997, for the year ended December 31, 1996, the Joint Proxy Statement/Prospectus
filed June 30, 1997, or in other reports filed by the Company with the
Securities and Exchange Commission.
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
None
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) EXHIBITS
*10(a) Indenture of Trust dated as of December 1, 1997 by and between
New York State Energy Research and Development Authority
(NYSERDA) and The Chase Manhattan Bank, as Trustee, relating
to the 1997 Electric Facilities Revenue Bonds.
Participation Agreement dated as of December 1, 1997 by and
between NYSERDA and the Company relating to the 1997
Electric Facilities Revenue Bonds.
*10(b) Executive Retention Agreement dated as of July
1, 1997 by and between the Company and Theodore
A. Babcock, Vice President and Treasurer, which
agreement is substantially the same as
Executive Retention Agreement by and between
the Company and (1) Michael E. Bray, Senior
Vice President; (2) Charles A. Daverio, Vice
President; (3) Jane A. Fernandez, Vice
President; (4) Joseph E. Fontana, Vice
President and Controller; (5) Robert X.
Kelleher, Senior Vice President; (6) Howard A.
Kosel, Vice President; (7) John D. Leonard,
Jr., Vice President; (8) Adam M. Madsen, Senior
Vice President; (9) Kathleen A. Marion, Vice
President; (10) Brian R. McCaffrey, Vice
President; (11) Joseph W. McDonnell, Senior
Vice President; (12) Leonard P. Novello, Senior
Vice President and General Counsel; (13)
Anthony Nozzolillo, Senior Vice President and
Chief Financial Officer; (14) Richard Reichler,
Vice President; (15) William G. Schiffmacher,
Senior Vice President; (16) Werner J.
Schweiger, Vice President; (17) Richard M.
Siegel, Vice President; (18) Robert B. Steger,
Senior Vice President; (19) William E. Steiger,
Jr., Vice President, and (20) Edward J.
Youngling, Senior Vice President.
*27 Financial Data Schedule UT for the nine-month period ended December
31, 1997.
(B) REPORTS ON FORM 8-K
In its current report on Form 8-K dated December 31, 1997, the Company
provided unaudited pro forma combined condensed financial information for
LILCO and KeySpan at September 30, 1997 and for the twelve months ended
September 30, 1997.
*Filed Herewith
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
LONG ISLAND LIGHTING COMPANY
(Registrant)
BY /S/ ANTHONY NOZZOLILLO
-------------------------
Senior Vice President and
Principal Financial Officer
Dated: February 17, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No.
10(a) Indenture of Trust dated as of December 1, 1997 by and between New
York State Energy Research and Development Authority (NYSERDA) and
The Chase Manhattan Bank, as Trustee, relating to the 1997 Electric
Facilities Revenue Bonds begins on page 32.
Participation Agreement dated as of December 1, 1997 by and between
NYSERDA and the Company relating to the 1997 Electric Facilities
Revenue Bonds begins on page 158.
10(b) Executive Retention Agreement dated as of July 1, 1997 by and between
the Company and Theodore A. Babcock, Vice President, which agreement
is substantially the same as Executive Retention Agreement by and
between the Company and (1) Michael E. Bray, Senior Vice President;
(2) Charles A. Daverio, Vice President; (3) Jane A. Fernandez, Vice
President; (4) Joseph E. Fontana, Vice President and Controller; (5)
Robert X. Kelleher, Senior Vice President; (6) Howard A. Kosel, Vice
President; (7) John D. Leonard, Jr., Vice President; (8) Adam M.
Madsen, Senior Vice President; (9) Kathleen A. Marion, Vice President;
(10) Brian R. McCaffrey, Vice President; (11) Joseph W. McDonnell,
Senior Vice President; (12) Leonard P. Novello, Senior Vice President
and General Counsel; (13) Anthony Nozzolillo, Senior Vice President
and Chief Financial Officer; (14) Richard Reichler, Vice President;
(15) William G. Schiffmacher, Senior Vice President; (16) Werner J.
Schweiger, Vice President; (17) Richard M. Siegel, Vice President;
(18) Robert B. Steger, Senior Vice President; (19) William E. Steiger,
Jr., Vice President, and (20) Edward J. Youngling, Senior Vice
President, begins on page 190.
27 Financial Data Schedule UT for the nine-month period ended December
31, 1997 begins on page 211.
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
INDENTURE OF TRUST
BETWEEN
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
AND
THE CHASE MANHATTAN BANK,
AS TRUSTEE
Dated as of December 1, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
-relating to-
Electric Facilities Revenue Bonds
(Long Island Lighting Company Project), 1997 Series A
<PAGE>
1.
THIS INDENTURE OF TRUST, made and dated as of the 1st day of
December 1997, by and between New York State Energy Research and Development
Authority (the "Authority"), a body corporate and politic, constituting a public
benefit corporation, and The Chase Manhattan 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
<PAGE>
2.
WHEREAS, pursuant to Resolution No. 903 adopted December 17, 1997,
the Authority has determined to issue $24,880,000 aggregate principal amount of
electric facilities 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 December 1, 1997, with The
Toronto-Dominion Bank, Houston Agency (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 December
30, 1998, 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>
3.
[Form of Bonds]
[COMMERCIAL PAPER RATE LEGEND
Last Day of Commercial Paper
Interest Rate _____ Rate Period _____
Interest due at end of
Commercial Paper Rate Period _____ Number of Days _____]
NEW YORK STATE ENERGY RESEARCH AND
DEVELOPMENT AUTHORITY
ELECTRIC FACILITIES REVENUE BOND
(LONG ISLAND LIGHTING COMPANY PROJECT)
1997 SERIES A
NO. _____ $__________*
MATURITY DATE ORIGINAL ISSUE DATE CUSIP
- ---------------- --------------- --------
REGISTERED OWNER: CEDE & CO.
PRINCIPAL AMOUNT: ____________________ 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 The Chase Manhattan Bank, New York, New York, the Trustee hereinafter
<PAGE>
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 Commercial Paper 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 Commercial Paper
Rate Period, interest on a Bond is payable only upon presentation and surrender
of the Bond 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), 1997 Series A" (the "Bonds"), issued in the aggregate
principal amount of $24,880,000 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 December 17, 1997. The Bonds are issued and secured under and
pursuant to an Indenture of Trust dated as of December 1, 1997, between the
Authority and The Chase Manhattan 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 December 1,
1997, 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 The Chase Manhattan 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.
<PAGE>
5.
*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 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 Company 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
the 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 January 6, 1998 (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 Commercial Paper 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% or (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
<PAGE>
6.
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 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 (for the first Weekly Rate Period, the first Business Day of
February 1998); (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-
<PAGE>
7.
Annual Rate Period to exceed 182 days in duration; (iv) during the Fixed Rate
Period, each June 1 and December 1; (v) during each Commercial Paper Rate
Period, the first Business Day after any Calculation Period; and (vi) the
Maturity Date. With respect to the First Interest Period, the first Interest
Payment Date will be February 2, 1998. 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 Commercial Paper 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 Commercial Paper 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 The Toronto-Dominion Bank, Houston Agency (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 December 30, 1998, 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.
<PAGE>
8.
*Except as otherwise provided herein, the Bonds shall become subject
to mandatory tender for purchase (see "Mandatory Tender for Purchase" below) on
the twentieth 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.
<PAGE>
9.
*Any Bond bearing a Commercial Paper 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 owners of any Bond bearing interest at a
Commercial Paper 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.
<PAGE>
*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 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
Commercial Paper 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:
REDEMPTION DATE REDEMPTION PRICES
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
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:
REDEMPTION DATE REDEMPTION PRICES
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
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.
<PAGE>
*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:
REDEMPTION DATE REDEMPTION PRICES
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
<PAGE>
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.
*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:
REDEMPTION DATE REDEMPTION PRICES
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
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.
<PAGE>
*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.
*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.
<PAGE>
*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 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 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
<PAGE>
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.
<PAGE>
*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
Commercial Paper Rate, they will be issuable in denominations of $100,000 or any
larger multiple of $5,000. Notwithstanding the foregoing, prior to the
commencement of any Semi-Annual Rate Period, 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 larger
multiple of $5,000 during such Rate Period in accordance with the Indenture. An
owner may register the 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 Agent 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, if any, 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.
<PAGE>
*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, the Remarketing Agents', the Paying Agent's,
the Trustee's and the Tender Agent's fees and expenses, then the Bonds shall be
deemed paid 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, if it is
still in existence, 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).
<PAGE>
*14. REMARKETING AGENT; INDEXING AGENT; TENDER AGENT. The Authority
has appointed J.P. Morgan Securities Inc., as the initial Remarketing Agent
under the Indenture. The Authority may from time to time, at the request of the
Company, remove or replace any Remarketing Agent or appoint one or more
Remarketing Agents. The Authority has appointed Kenny Information Systems Inc.
as Indexing Agent under the Indenture. The Authority may from time 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 The Chase Manhattan 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>
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 Vice President and Secretary or an Assistant
Secretary, as of the date set forth below.
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
By_______________________________
President
Attest:
- -------------------------------
Vice President and Secretary
Dated:
<PAGE>
[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), 1997 Series A, described in the
within-mentioned Indenture.
The Chase Manhattan Bank The Chase Manhattan Bank
as Trustee or as Tender Agent
By_____________________________ By_____________________________
<PAGE>
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>
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>
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>
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>
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, Senior Vice 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 Commercial Paper Rate Period, $100,000 or any larger multiple of $5,000, 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 multiple of $5,000 during such
Rate Period.
AUTHORIZED OFFICER means the Chair, Vice Chair, President, Vice
President and Treasurer, Assistant Treasurer or Vice President and 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 The Toronto-Dominion Bank, Houston Agency, 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>
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 December 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, or
(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 Commercial Paper 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.
COMMERCIAL PAPER RATE shall mean an interest rate established
pursuant to Section 2.03(d).
COMMERCIAL PAPER RATE INDEX shall mean with respect to the first day
of each Calculation Period during a Commercial Paper 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
<PAGE>
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 Commercial Paper Rate Index
in the event any of the above-described methods are determined by the Authority
to be unavailable, impracticable or unrealistic in the marketplace.
COMMERCIAL PAPER RATE PERIOD means Commercial Paper Rate Period as
defined in Section 2.03(d).
COMMERCIAL PAPER RATE PERIOD RECORD DATE shall mean, with respect to
each Interest Payment Date during a Commercial Paper Rate Period, the Business
Day next preceding such Interest Payment Date.
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
or any permitted assignee under Section 5.17 of the Participation Agreement.
COMPANY INDENTURE shall mean the General and Refunding Indenture
dated as of June 1, 1975, from the Company to United States Trust Company of New
York (formerly Manufacturers Hanover Trust Company), 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 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.
<PAGE>
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
<PAGE>
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) 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.
<PAGE>
FIRST INTEREST PERIOD means the period described as such in Section
2.03(a).
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>
INTEREST PAYMENT DATE means (i) during any Weekly Rate Period, the
first Business Day of each calendar month, commencing on February 2, 1998 for
the first Weekly Rate Period; (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
SemiAnnual 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
SemiAnnual Rate Period that does not cause such Semi-Annual Rate Period to
exceed 182 days in duration and provided further, however, that the initial
Interest Payment Date in a Medium-Term Rate Period shall be a date which is not
in excess of 182 days from the Conversion Date; (iv) during the Fixed Rate
Period, each June 1 and December 1; (v) during each Commercial Paper Rate
Period, the first Business Day after any Calculation Period; and (vi) the
Maturity Date. With respect to the First Interest Period, the first Interest
Payment Date will be the first Business Day of February 1998. 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.
<PAGE>
LETTER OF CREDIT ACCOUNT shall mean the account in the Bond Fund so
designated and created pursuant to Section 6.01.
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 December 1, 2027.
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.
<PAGE>
MEDIUM-TERM RATE PERIOD means Medium-Term Rate Period as defined in
Section 2.03(e).
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;
<PAGE>
(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 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 December 1, 1997, 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, a
limited liability company, 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).
<PAGE>
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 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, Commercial Paper 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 Commercial Paper Rate Index or the Fixed Rate
Index.
RATE PERIOD means any Weekly Rate Period, Semi-Annual Rate Period,
Medium- Term Rate Period, Commercial Paper 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 Commercial Paper 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 a 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 December 30, 1997, between the Company, The
Toronto-Dominion Bank, Houston Agency, individually and as issuing bank and
Toronto-Dominion (Texas), Inc., as agent 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
the letter of credit and reimbursement agreement (or other document performing a
similar function) relating to such Alternate Credit Facility.
<PAGE>
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 Services, a division of
McGraw-Hill Companies, 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
<PAGE>
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 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.
<PAGE>
TENDER AGENT shall mean The Chase Manhattan 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.
TRUSTEE shall mean The Chase Manhattan 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
<PAGE>
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.
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>
ARTICLE II
DESCRIPTION; AUTHORIZATION; MANNER OF EXECUTION;
AUTHENTICATION; REGISTRATION AND TRANSFER OF BONDS
Section 2.01ISSUANCE 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 $24,880,000 and shall be designated as "Electric
Facilities Revenue Bonds (Long Island Lighting Company Project), 1997 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 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.
<PAGE>
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 Commercial Paper 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 Commercial
Paper 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, Commercial Paper Rate, SemiAnnual 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 four and ten one hundredths per centum (4.10%) per annum for the period from
the Issue Date, to and including January 6, 1998 (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>
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 Commercial Paper 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 Weekly Rate Period, 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.
<PAGE>
The Indexing Agent shall establish the Weekly Rate Index on the
Business Day 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. To the extent the Indexing Agent
or the Remarketing Agent shall fail to set a Weekly Rate Index for the Bonds,
the rate in effect shall be the same as the immediately preceding Weekly Rate.
[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 SemiAnnual 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 SemiAnnual 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.
<PAGE>
The Indexing Agent shall establish the Semi-Annual Rate Index during
the SemiAnnual Rate Period on the Business Day next preceding each day on which
a Semi-Annual Rate is determined by the Remarketing Agents. To the extent the
Indexing Agent or the Remarketing Agent shall fail to set a Semi-Annual Rate
Index for the Bonds, the rate in effect shall be the same as the immediately
preceding Semi-Annual Rate.
[2.03] (d) COMMERCIAL PAPER 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 Commercial Paper Rates pursuant to Section 2.04
to, but not including, the next Conversion Date (a "Commercial Paper Rate
Period"), the Bonds will bear interest at the various Commercial Paper Rates for
the various Calculation Periods established herein. During any Commercial Paper
Rate Period, any Bond may have a different Calculation Period and a different
Commercial Paper 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
Commercial Paper 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 Commercial Paper 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 Commercial Paper
Rates that, together with all other Calculation Periods and related
Commercial Paper 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 second 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.
<PAGE>
[2.03 (d)] (ii) SETTING OF RATES. On the first day of each Calculation
Period, the Remarketing Agents shall set rates ("Commercial Paper Rates")
by 12:00 noon New York City time for each Calculation Period. With respect
to Bonds for each Calculation Period, the Commercial Paper 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 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 Commercial
Paper Rates shall not be greater than 110% of the Commercial Paper 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 Commercial Paper Rate Index.
To the extent that the Indexing Agent or the Remarketing Agent shall fail to set
a Commercial Paper Rate Index for the Bonds, the rate in effect shall be the
same as the immediately preceding Commercial Paper Rate.
[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 two 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 Commercial Paper 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>
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 or
portions thereof 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. To the extent the Indexing Agent or the Remarketing
Agent shall fail to set a Medium-
<PAGE>
Term Rate Index for the Bonds, the rate in effect shall be the same as the
immediately preceding Medium-Term Rate.
[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.
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) 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 Period.
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, Commercial Paper 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.
<PAGE>
[2.03] (h) 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 Commercial Paper Rate,
the Rate shall be the Weekly Rate Index, Semi-Annual Rate Index, Medium-Term
Rate Index, the Fixed Rate Index or Commercial Paper 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 Commercial Paper
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] (i) 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.
[2.03] (j) 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 a Fixed Rate.
Section 2.04CONVERSION 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, Commercial
Paper 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 Commercial
Paper 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
<PAGE>
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. 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.
[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 Commercial
Paper 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.
<PAGE>
[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.
[2.04(a)] (4Notwithstanding 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, Commercial Paper 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 Commercial
Paper 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
<PAGE>
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 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 second
Business Day following the applicable Fixed Rate Conversion Date and will
not be available with respect to payment of interest after the 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, Commercial Paper 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>
[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
second Business Day following the Fixed Rate Conversion Date or the date a
drawing is honored 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.
<PAGE>
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 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
<PAGE>
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 at
the Purchase Price 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 certain circumstances) pursuant to this subsection
(e) as hereinafter provided:
[2.05(e)] (1The 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 (i) upon the
delivery of any Alternate Credit Facility (other than an Alternate Credit
Facility which is an extension or replacement of the existing Letter of Credit
of the then existing Bank) or (ii) if 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:
(A) (i) an Alternate Credit Facility (including, without limitation,
any Alternate Credit Facility issued as contemplated by (B) below),
(ii) an Opinion of Bond Counsel as described in Section 6.07(2)(b)
and (iii) written evidence as described in Section 6.07(2)(c); or
(B) (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 second
Business Day following the Interest Payment Date for such Interest
Period.
[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) [intentionally omitted];
(ii) the Optional Retention Date, if applicable;
<PAGE>
(iii) the Mandatory Purchase Date, which in the case of (1)(A) above
shall be 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
two Business Days prior to such expiration date;
(iv) [intentionally omitted];
(v) in the case of (1)(B) above, that the Letter of Credit will
expire no later than the close of business on the second 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, 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.
<PAGE>
[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 A 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 minimum
requirements of Section 4.12 of the Participation Agreement following the
Mandatory Purchase Date and any Bonds not meeting those minimum 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 the 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. 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 Commercial Paper 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:
<PAGE>
(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
(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 exercise their optional right 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 and the Trustee shall have
accelerated the Bonds by reason thereof.
[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 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 ((i) occurring on or before the
fourth day next succeeding the Trustee's receipt of such notice, which date
shall be a Business Day and (ii) a Business Day which is at least two days prior
to the day on which the Letter of Credit will expire) 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,
<PAGE>
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 Indenture shall be remarketed by the
Remarketing Agents 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
<PAGE>
reinstatement of the related amount under the Letter of Credit. Bonds remarketed
pursuant to the provisions of this Indenture shall not be released until a
Letter of Credit meeting the terms of this Indenture shall be reinstated for
such Bonds.
[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 SemiAnnual Rate, the Weekly Rate, the Medium-Term Rate, the
Commercial Paper Rate or the Fixed Rate, as the case may be, on the Bonds.
[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 as evidenced
in writing, 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.
ss.ss.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 or a Mandatory Purchase Date has been established and
which the Remarketing Agents are attempting to remarket, shall provide to any
purchaser notice of the applicable redemption or mandatory purchase 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 Agents
that it has found a purchaser or purchasers to whom the Remarketing Agents can
remarket Bonds tendered for purchase, shall so notify the Bank in writing. The
Remarketing Agents shall only remarket the Bonds tendered for purchase at par.
<PAGE>
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 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) unless otherwise provided by the Remarketing
Agreement, and the Tender Agent shall notify the Bank that it is holding
such Bonds for the Bank's account; and
<PAGE>
[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
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 2.08MUTILATED, 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.
<PAGE>
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, 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 2.10EXECUTION 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, Vice
President and 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 Vice President and 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 2.11REGISTRATION 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.
<PAGE>
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.
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.
<PAGE>
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.
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 their 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.
<PAGE>
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 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.
<PAGE>
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 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>
ARTICLE III
SECURITY FOR BONDS; ISSUANCE OF BONDS
Section 3.01PLEDGE 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>
(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 or opinions 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>
ARTICLE IV
AMENDMENT OF
PARTICIPATION AGREEMENT, COMPANY NOTE
AND TAX REGULATORY AGREEMENT
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
<PAGE>
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.
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.
<PAGE>
ARTICLE V
PROJECT FUND; REBATE FUND
Section 5.01CREATION 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 7.4 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 7.4 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 B attached hereto upon which the
Trustee may conclusively rely, stating with respect to each payment to be made
for the Project:
<PAGE>
(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>
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 instructions from the Company given in accordance with the provisions of
Article VII.
<PAGE>
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>
(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 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.
<PAGE>
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
December 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 Letter of Credit. The Company shall notify the
Remarketing Agent of any extentions or substitutions with respect to the Letter
of Credit.
<PAGE>
(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/or 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 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 requirements of subsection 2 of this Section
<PAGE>
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>
ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
Section 7.01MONEYS 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 7.02UNINVESTED 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.
<PAGE>
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 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, 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.
<PAGE>
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>
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. Notwithstanding notice of redemption having been given as aforesaid, the
redemption shall be cancelled if as of the date fixed for redemption the Trustee
does not have Available Moneys on deposit hereunder sufficient and available to
pay the redemption price of the Bonds to be redeemed.
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
<PAGE>
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 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 8.05REDEMPTION 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.
<PAGE>
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.
<PAGE>
Section 9.06 TRUSTEE'S, PAYING AGENT'S, INDEXING AGENT'S, TENDER
AGENT'S AND REMARKETING AGENTS' 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>
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;
<PAGE>
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 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
<PAGE>
(only to the extent that the Letter of Credit then in effect provides for the
payment 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 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
<PAGE>
rule of law or with any provision of the Indenture (including, without
limitation, any provision requiring the 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.
<PAGE>
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 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>
(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
shall occur and on such date shall draw on the Letter of Credit. 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.
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.
<PAGE>
ARTICLE XI
CONCERNING THE TRUSTEE AND PAYING AGENT
Section 11.01. APPOINTMENT OF TRUSTEE; PAYING AGENT. The Chase
Manhattan 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, make any payment of
principal or interest on the Bonds or proceed with a mandatory tender of the
Bonds pursuant to the terms of Section 2.05.
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 Agent 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
<PAGE>
action or non-action 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,
(c) drawing on the Letter of Credit to make payments on the Bonds when due, or
(d) proceeding with a mandatory tender of the Bonds pursuant to the terms of
Section 2.05.
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.
<PAGE>
Section 11.06. RIGHT TO OWN AND DEAL IN BONDS AND ENGAGE IN OTHER
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 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.
<PAGE>
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 sucessor 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 to the successor Trustee all moneys and
other assets, including the Company Note at the time held by it hereunder.
<PAGE>
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 the 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>
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 until the
appointment of a new trustee or successor to such separate or co-trustee.
<PAGE>
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>
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 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.
<PAGE>
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 is 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>
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 Agents',
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 portions thereof, which may consist of
<PAGE>
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 rated by a Rating Agency in its highest note
or commercial paper rating category, and 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, 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. ss.ss.101, ET SEQ.; and, if the Bonds are to
<PAGE>
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
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>
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, J.P. Morgan
Securities Inc. as the initial Remarketing Agent. The 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
the 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 Commercial Paper 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. In the event that
more than one Remarketing Agent is selected, 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.
The 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. The
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, the Remarketing Agent 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
<PAGE>
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 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 Commercial Paper 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.
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
<PAGE>
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 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.
<PAGE>
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 Agent, 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,
<PAGE>
execute and deliver such instruments 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>
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 Corporate
Plaza West, 286 Washington Avenue Extension, Albany, New York 12203, Attention:
President; if to the Company, at 175 East Old Country Road, Hicksville, New
York, Attention: Vice President and 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 Agent, at the address specified in their
<PAGE>
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, 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, 10007-2796
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 at 25 Broadway, New York, New York 10004, Attn: Letter of
Credit Surveillance Group, (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, (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 and (vi) notice of a mandatory
tender of Bonds.
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>
IN WITNESS WHEREOF, the Authority has caused the Indenture to be
executed by its President and its corporate seal to be hereunto affixed and
attested by its Vice President and Secretary, and the Trustee has caused the
Indenture to be executed by one of its authorized officers 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/ F. William Valentino Jr.
-------------------------------
(SEAL) President
Attest:
/s/ Howard A. Jack
- ------------------------------
Vice President and Secretary
THE CHASE MANHATTAN BANK
AS TRUSTEE
By /s/ G. McFarlane
--------------------
Vice President
Attest:
/s/ R. Lorenzen
- ---------------
Senior Trust Officer
<PAGE>
STATE OF NEW YORK )
: ss.:
CITY OF NEW YORK )
On the 29th day of December, 1997 before me personally came G.
McFarlane and R. 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 The Chase Manhattan 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/ Emily Fayan
------------------
Notary Public
<PAGE>
STATE OF NEW YORK )
: ss.:
COUNTY OF ALBANY )
On the 22nd day of December, 1997, before me personally came F.
William Valentino, to me known, who being by me duly sworn, did depose and say
that he is President 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.
Jacquelyn L. Jerry
------------------
Notary Public
STATE OF NEW YORK )
: ss.:
COUNTY OF ALBANY )
On the 22nd day of December, 1997, before me personally came Howard
A. Jack, to me known, who being by me duly sworn, did depose and say that he is
Vice President and 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, 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.
Jacquelyn L. Jerry
------------------
Notary Public
<PAGE>
EXHIBIT A
NOTICE OF ELECTION TO RETAIN BOND
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 December 1, 1997,
between New York State Energy Research and Development Authority (the
"Authority") and The Chase Manhattan Bank as Trustee (the "Trustee"), relating
to the Authority's $24,880,000 aggregate principal amount Electric Facilities
Revenue Bonds (Long Island Lighting Company Project), 1997 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 The Chase Manhattan Bank, 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): ____________________.
<PAGE>
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.
- --------
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.
A-1
<PAGE>
EXHIBIT B
REQUISITION CERTIFICATE
Long Island Lighting Company (the "Company") hereby requests The
Chase Manhattan 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), 1997
Series A dated as of December 1, 1997 (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.
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:
B-1
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
DEFINITIONS; LIABILITY UNDER BONDS;
INDENTURE TO CONSTITUTE CONTRACT
Section 1.01. Definitions.............................................. 24
Section 1.02. Rules of construction.................................... 39
Section 1.03. Liability under Bonds.................................... 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.......................... 41
Section 2.02. Additional Particulars of Bonds.......................... 41
Section 2.03. Interest Rates on Bonds.................................. 42
Section 2.04. Conversion of Interest Rate on Bonds..................... 49
Section 2.05. Optional and Mandatory Tender of Bonds for
Purchase............................................... 53
Section 2.06. Remarketing of Bonds..................................... 59
Section 2.07. Delivery of Purchased Bonds.............................. 61
Section 2.08. Mutilated, Lost, Stolen or Destroyed Bonds............... 62
Section 2.09. Temporary Bonds.......................................... 63
Section 2.10. Execution of Bonds; Effect of Change of Officers......... 63
Section 2.11. Registration of Bonds; Transfers; Securities
Depository............................................. 63
Section 2.12. Persons Treated as Owners................................ 66
Section 2.13. Exchange of Bonds........................................ 66
Section 2.14. Payment For and Limitations on Exchanges and
Transfers.............................................. 67
Section 2.15. Endorsement of Certificate of Authentication on
Bonds.................................................. 67
Section 2.16. Cancellation of Bonds.................................... 67
Section 2.17. Redemption of Bonds...................................... 67
<PAGE>
ARTICLE III
SECURITY FOR BONDS; ISSUANCE OF BONDS
Section 3.01. Pledge and Assignment Effected by Indenture;
Bonds Equally and Ratably Secured...................... 68
Section 3.02. Issuance of Bonds........................................ 68
ARTICLE IV
AMENDMENT OF
PARTICIPATION AGREEMENT, COMPANY NOTE
AND TAX REGULATORY AGREEMENT
Section 4.01. Amendments to Participation Agreement not
Requiring Consent of Bondowners........................ 70
Section 4.02. Amendments to Participation Agreement
Requiring Consent of Bondowners........................ 70
Section 4.03. Amendments to Company Note............................... 71
Section 4.04. Amendments to Tax Regulatory Agreement................... 71
ARTICLE V
PROJECT FUND; REBATE FUND
Section 5.01. Creation and Custody of Project Fund..................... 72
Section 5.02. Application of Moneys in the Project Fund................ 72
Section 5.03. Construction Account Requisitions........................ 72
Section 5.04. Retention of Requisitions................................ 73
Section 5.05. Certification of Completion of the Project............... 73
Section 5.06. Disposition of Balance Remaining in Project Fund......... 74
Section 5.07. Creation and Custody of Rebate Fund...................... 74
Section 5.08. Application of Moneys in the Rebate Fund................. 74
ARTICLE VI
BOND FUND; LETTER OF CREDIT
Section 6.01. Creation and Custody of the Bond Fund.................... 76
Section 6.02. Payments into the Bond Fund.............................. 76
Section 6.03. Application of Moneys in the Bond Fund................... 76
Section 6.04. Non-presentment of Bonds................................. 78
Section 6.05. (Intentionally Deleted).................................. 78
Section 6.06. Trustee to Notify Authority and Company of
Funds in Bond Fund..................................... 78
Section 6.07. Letter of Credit......................................... 78
<PAGE>
ARTICLE VII
SECURITY FOR AND INVESTMENT OF MONEYS
Section 7.01. Moneys Held in Trust..................................... 81
Section 7.02. Uninvested Moneys Held by the Trustee.................... 81
Section 7.03. Investment of, and Payment of Interest on,
Moneys................................................. 81
Section 7.04. Disposition of Amounts After Payment of Bonds............ 83
ARTICLE VIII
REDEMPTION OF BONDS
Section 8.01. Bonds to be Redeemed Only in Manner Provided
in Article VIII........................................ 84
Section 8.02. Redemption of Less Than all Bonds........................ 85
Section 8.03. Notice of Redemption..................................... 85
Section 8.04. Rights of Owners of Bonds Called for Redemption Limited
to Redemption Price and Accrued Interest .............. 85
Section 8.05. Redemption at Demand of the State........................ 86
ARTICLE IX
PARTICULAR COVENANTS
Section 9.01. Payment of Principal of and Interest and
Redemption Premium of Bonds............................ 87
Section 9.02. Performance of Covenants................................. 87
Section 9.03. Further Instruments...................................... 87
Section 9.04. Inspection of Project Books.............................. 87
Section 9.05. No Extension of Time of Payment of Interest.............. 87
Section 9.06. Trustee's, Paying Agent's, Indexing Agent's,
Tender Agent's and Remarketing Agents' Fees, Charges and
Expenses............................................... 88
Section 9.07. Agreement of the State of New York....................... 88
<PAGE>
ARTICLE X
DEFAULTS AND REMEDIES
Section 10.01. Events of Default........................................ 89
Section 10.02. Judicial Proceedings by Trustee.......................... 91
Section 10.03. Effect of Discontinuance or Abandonment of
Proceedings............................................ 91
Section 10.04. Power of Bondowners to Direct Proceedings................ 91
Section 10.05. Limitation on Actions by Bondowners...................... 92
Section 10.06. Trustee's Right to Enforce Rights in Respect of
Bonds in Own Name and Without Possession of Bonds...... 92
Section 10.07. No Remedy herein Conferred upon or Reserved
Exclusive.............................................. 93
Section 10.08. No Delay or Omission to be Deemed Waiver of
Default................................................ 93
Section 10.09. Application of Moneys Received by Trustee
Pursuant to Article X.................................. 93
Section 10.10. Entirety of Agreement.................................... 94
Section 10.11. Notice of Event of Default............................... 95
ARTICLE XI
CONCERNING THE TRUSTEE AND PAYING AGENT
Section 11.01. Appointment of Trustee; Paying Agents.................... 96
Section 11.02. No Responsibility for Correctness of Statements
in Indenture........................................... 96
Section 11.03. No Responsibility for Default of Agents Selected
with Due Care, nor for Own Acts Save Willful Misconduct or
Negligence............................................. 96
Section 11.04. No Duty to Take Enforcement Action Unless so
Requested by Owners of 25% of the Bonds................ 97
Section 11.05. Right to Rely............................................ 97
Section 11.06. Right to Own and Deal in Bonds and Engage in
Other Transactions with Authority and Company.......... 98
Section 11.07. Construction of Provisions of Indenture by
Trustee................................................ 98
Section 11.08. Right to Resign Trust.................................... 98
Section 11.09. Removal of Trustee....................................... 98
Section 11.10. Appointment of Successor Trustee by Bondowners
or Authority........................................... 98
Section 11.11. Qualifications of Successor Trustee...................... 99
Section 11.12. Court Appointment of Successor Trustee................... 99
Section 11.13. Acceptance of Appointment by, and Transfer of
Trust Estate to, Successor Trustee..................... 99
Section 11.14. Successor Trustee by Merger or Consolidation.............100
Section 11.15. Exercise of Rights and Powers During Event of
Default................................................100
Section 11.16. Trustee may Intervene in Judicial Proceedings
Involving Authority or the Company.....................100
Section 11.17. Paying Agents............................................100
Section 11.18. Appointment of Co-Trustee................................101
<PAGE>
ARTICLE XII
EXECUTION OF INSTRUMENTS BY BONDOWNERS
AND PROOF OF OWNERSHIP OF BONDS
Section 12.01. Execution of Instruments; Proof of Ownership of
Bonds..................................................103
ARTICLE XIII
INDENTURES SUPPLEMENTAL HERETO
Section 13.01. Supplemental Indentures not Requiring Consent of
Bondowners.............................................104
Section 13.02. Supplemental Indentures Requiring Consent of
Bondowners.............................................104
Section 13.03. Company and Bank Consent to Amendment of
Indenture..............................................105
ARTICLE XIV
DEFEASANCE
Section 14.01. Defeasance...............................................106
ARTICLE XV
REMARKETING AGENTS; REMARKETING OF BONDS; INDEXING AGENT;
TENDER AGENT
Section 15.01. Appointment and Duties of Remarketing Agents.............109
Section 15.02. Qualifications of a Remarketing Agent....................109
Section 15.03. Appointment and Duties of Indexing Agents................110
Section 15.04. Qualifications of Indexing Agents........................110
Section 15.05. Dealings With the Authority and the Company..............111
Section 15.06. Tender Agent.............................................111
Section 15.07. Qualifications of Tender Agent; Resignation;
Removal................................................112
ARTICLE XVI
MISCELLANEOUS
Section 16.01. Parties in Interest......................................114
Section 16.02. Severability.............................................114
Section 16.03. No Individual Liability..................................114
Section 16.04. Payment Due on Saturdays, Sundays and Holidays...........114
Section 16.05. Notices..................................................114
SECTION 16.06. GOVERNING LAW............................................115
Section 16.07. Effective Date; Counterparts.............................115
Section 16.08. References to the Bank...................................115
Section 16.09. Date for Identification Purposes Only....................115
EXHIBIT A NOTICE OF ELECTION TO RETAIN BOND FOLLOWING A MANDATORY
PURCHASE DATE..................................................A-1
EXHIBIT B REQUISITION CERTIFICATE........................................B-1
(i)
<PAGE>
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
NEW YORK STATE ENERGY RESEARCH
AND DEVELOPMENT AUTHORITY
AND
LONG ISLAND LIGHTING COMPANY
PARTICIPATION AGREEMENT
Dated as of December 1, 1997
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
- relating to -
Electric Facilities Revenue Bonds
(Long Island Lighting Company Project), 1997 Series A
<PAGE>
1.
This PARTICIPATION AGREEMENT, dated as of December 1, 1997, 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 a 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
WHEREAS, the Authority, pursuant to Resolution No. 903, adopted
December 17, 1997, 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 $24,880,000 (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 December 1, 1997, between
the Authority and The Chase Manhattan 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>
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>
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:
<PAGE>
(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 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>
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, J.P. Morgan
Securities Inc., Lehman Brothers Inc., Merrill Lynch & Co., and M.R. Beal &
Company 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.
<PAGE>
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 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
<PAGE>
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.
(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.
<PAGE>
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 and production 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.
<PAGE>
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
<PAGE>
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.
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 $62,200 on the date of the delivery of the
Bonds to the initial purchasers thereof and an annual Administration Fee in the
amount of $3,250 on December 1 of each year commencing December 1, 1998, 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 $87,080 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 and
bond counsel) in connection with the Participation Agreement, the Indenture, the
Tax Regulatory Agreement 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
<PAGE>
(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.
Section 4.06 PROJECT NOT SECURITY FOR BONDS. It is expressly
recognized by the parties hereto 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
<PAGE>
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 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.
<PAGE>
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 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)
its stated expiration date, which shall be no earlier than one (1) day 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>
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 shall fail so to do,
notices may be served and demands may be made at the principal office of the
Trustee.
<PAGE>
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.
<PAGE>
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
<PAGE>
or substantially all the properties of the Company as an entirety to a
corporation lawfully authorized to acquire and operate the same; provided that
except as provided by Section 5.17 hereof, 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
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 1997, 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 for
which the Company has applied for variances or exceptions.
Section 5.17 TRANSFER OF PROJECT AND PARTICIPATION AGREEMENT TO
AFFILIATE. The parties acknowledge that the Company has filed an application
with the Federal Energy Regulatory Commission seeking, among other things,
<PAGE>
approval of the transfer of the Company's electric transmission and distribution
system to the Long Island Power Authority ("LIPA") in connection with LIPA's
acquisition of the stock of the Company. The Company currently plans, in
connection with such transfer, to transfer its non-nuclear electric generation
assets (with the exception of power supply contracts), its gas assets and
certain other assets and liabilities to affiliates of the Holding Company formed
in connection with the transactions contemplated between the Company, KeySpan
Energy Corporation and the Long Island Power Authority. The entity acquiring
such non-nuclear electric generation assets is hereinafter referred to as the
"Generation Affiliate".
If, as part of such transfer of non-nuclear electric generation
assets, the Project is transferred to the Generation Affiliate, then the
Generation Affiliate shall assume the obligations of the Company pursuant to
this Participation Agreement, the Company Note, the Tax Regulatory Agreement and
all other obligations of the Company relating to the Bonds. On or after such
time of transfer, the Company, upon satisfaction of the conditions set forth in
the final sentence of this paragraph, shall be released from any further
obligations pursuant to this Participation Agreement, the Company Note, the Tax
Regulatory Agreement and the Bonds. Upon transfer of non-nuclear electric
generation assets to the Generation Affiliate, the Generation Affiliate shall:
1) execute and deliver to the Trustee and the Authority an instrument,
in form satisfactory to the Trustee and the Authority, whereby the
Generation Affiliate 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,
2) provide for the delivery to the Authority and the Trustee of an
opinion of Bond Counsel to the effect that such assumption by the
Generation Affiliate and such release of the Company will not
adversely affect the exclusion of interest on the Bonds from gross
income for federal income tax purposes,
3) deliver to the Authority and the Trustee an opinion of counsel to
the Generation Affiliate to the effect that the assumption of the
performance and observance of all covenants and agreements set forth
in 1) above have been duly and validly authorized, executed and
delivered by the Generation Affiliate and that the Participation
Agreement, Company Note and Tax Regulatory Agreement constitute valid
and binding agreements of the Generation Affiliate and are enforceable
against the Generation Affiliate in accordance with their terms and
4) deliver such other documents, instruments and certificates as the
Authority the Trustee may reasonably require in connection with the
transfer of the Project and the assumption by the Generation Affiliate
of the obligations of the Company pursuant to this Participation
Agreement, the Company Note, the Tax RegulAgreement and all other
obligations of the Company relating to the Bonds
<PAGE>
Thereafter, the Generation Affiliate shall constitute the "Company"
for all purposes of this Participation Agreement the Company Note, the Tax
Regulatory Agreement and the Bonds and 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, and 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 the Generation Affiliate or any
body or individual performing a similar function.
<PAGE>
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
<PAGE>
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, 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
<PAGE>
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) 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>
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 Agent 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 Corporate Plaza West, 286 Washington Avenue
Extension, Albany, New York 12203, Attention: President; if to the Company, at
175 East Old Country Road, Hicksville, New York 11801, Attention: Vice President
and 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>
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 thereof), 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 7.06, 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>
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/ F. William Valentino, Jr.
--------------------------------
(SEAL) President
ATTEST:
/s/ Howard A. Jack
- ------------------
Vice President and Secretary
LONG ISLAND LIGHTING COMPANY
By /s/ Theodore A. Babcock
--------------------------
(SEAL) Vice President and Treasurer
ATTEST:
/s/ Stephen W. McCaffrey
- ------------------------
Of Counsel
<PAGE>
EXHIBIT A
(To Participation Agreement dated as
of December 1, 1997, 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 the Company (as such term is defined in
the Participation Agreement):
1. Production Facilities;
2. 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 Company determines shall be added or substituted for said facilities.
A-1
<PAGE>
EXHIBIT B
(To Participation Agreement dated as
of December 1, 1997, 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>
EXHIBIT C
(To Participation Agreement dated as of
December 1, 1997, between New York
State Energy Research and Development
Authority and Long Island Lighting Company)
LONG ISLAND LIGHTING COMPANY
$24,880,000
PROMISSORY NOTE
FOR
ELECTRIC FACILITIES REVENUE BONDS
(LONG ISLAND LIGHTING COMPANY PROJECT), 1997 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 The Chase Manhattan 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 December 1, 1997, 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
<PAGE>
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 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
__________________, 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 _______________, 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 Trust Administration Department, Wire Transfer
Number: 9102758100, 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
<PAGE>
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.
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.
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Company Note to be
duly executed and delivered as of December 30, 1997.
LONG ISLAND LIGHTING COMPANY
By: /s/ Theodore A. Babcock
---------------------------
Vice President and Treasurer
(SEAL)
ATTEST:
/s/ Stephen W. McCaffrey
- ------------------------
Of Counsel
C-1
<PAGE>
TABLE OF CONTENTS
PAGE
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.................................................. 9
Section 3.08. Operation, Maintenance
and Repair................................................. 9
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
<PAGE>
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
<PAGE>
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
Section 5.17. Transfer of Project and Participation
Agreement to Affiliate......................................................18
ARTICLE VI
DEFAULTS BY COMPANY; REMEDIES
Section 6.01. Events of Default;
Acceleration............................................... 21
Section 6.02. Certain Events of
Default; Authority or Trustee
May Take Certain Actions................................. 22
Section 6.03. Judicial Proceedings by
Trustee.................................................... 23
ARTICLE VII
MISCELLANEOUS
Section 7.01. Disposition of Amounts
After Payment of Bonds..................................... 24
Section 7.02. Notices.................................................... 24
Section 7.03. Successors and Assigns..................................... 24
Section 7.04. References to the Bank..................................... 24
Section 7.05. Amendment of
Participation Agreement.................................... 25
Section 7.06. Assignment by Authority.................................... 25
Section 7.07. Participation Agreement
Supersedes Any Prior
Agreements............................................... 25
Section 7.08. Counterparts............................................... 25
Section 7.09. Severability............................................... 25
SECTION 7.10. NEW YORK LAW TO GOVERN..................................... 26
EXHIBIT A..................................................................A-1
EXHIBIT B..................................................................B-1
EXHIBIT C..................................................................C-1
(i)
<PAGE>
LONG ISLAND LIGHTING COMPANY
EXECUTIVE RETENTION AGREEMENT
This Employment Agreement is entered into as of the first day of July,
1997, by and between Theodore A. Babcock ("Executive") and Long Island Lighting
Company ("Employer"), a New York corporation with its principal place of
business at 175 East Old Country Road, Hicksville, New York 11801.
WITNESSETH:
WHEREAS, Executive is currently employed by the Employer as Vice President and
Treasurer, and the Employer and Executive desire to continue the employment
relationship; and
WHEREAS, Employer's current Executive compensation program provides total
compensation which is less than that offered by other comparable businesses; and
WHEREAS, Employer is in a period of transition and Employer believes that giving
reasonable assurances of employment security and additional compensation to
secure the continued services of Executive throughout a period of uncertainty is
in the best interest of Employer and its present and future shareholders;
NOW, THEREFORE, in consideration of the premises hereof and of the mutual
promises and agreements contained herein, the parties hereto, intending to be
legally bound, agree as follows:
1. EMPLOYMENT. Employer currently employs Executive, and Executive hereby
agrees to continue his employment with Employer on and after the Effective Date
(as defined in Section 3 below) under the terms and conditions hereinafter set
forth.
2. DUTIES. Executive's powers and duties shall continue to be those
normally associated with his current position or as may be delegated or assigned
to Executive. It is understood and agreed that changes in the reporting
relationships, title, or job duties of Executive during the term of this
Agreement will not result in a termination of this Agreement and will not effect
a termination of employment under any section of this Agreement. Executive shall
also serve without additional compensation in such other offices of the Employer
or its subsidiaries, affiliates, successors or assigns to which he may be
elected or appointed by the Chief Executive Officer of Employer or by the Board
of Directors of Employer or its subsidiaries, affiliates, successors or assigns
respectively.
1
<PAGE>
3. EFFECTIVE DATE. This Agreement shall be effective as of the date set
forth above (the "Effective Date").
4. TERM OF AGREEMENT. Subject to the terms and conditions set forth herein,
Executive shall be employed hereunder for a term of one year beginning on the
Effective Date.
5. BASE COMPENSATION. For all duties rendered by Executive, Employer shall
continue to pay Executive his current base salary ("Base Salary") annually, to
be reviewed on an annual basis in accordance with Employer's existing salary
review practices based on the performance of Executive. Base salary shall be
paid to Executive in equal monthly payments in accordance with Employer's normal
payroll policies.
6. ADDITIONAL COMPENSATION. During the period of this Agreement and as a
result of employment under this Agreement, Executive shall receive or be
eligible for the following additional compensation:
(a) RETENTION BONUS: Executive shall receive a retention bonus ("Retention
Bonus") in the amount of twenty percent (20%) of job value or salary
whichever is greater to be paid in full on July 1, 1998 or as soon as
administratively practicable thereafter ("Payment Date"), if Executive
is and has been continuously employed with Employer from the Effective
Date to the Payment Date.
(b) INCENTIVE COMPENSATION: Executive shall be eligible to participate in
the annual and long term incentive programs of Employer as such may be
in effect during the term of this Agreement for officers of the
Employer and will be eligible to receive incentive compensation in
accordance therewith, as determined by the Compensation and Benefits
Committee of the Board of Directors of Employer.
(c) OTHER BENEFITS: Executive will also be eligible to participate in any
employee benefit plans or programs (including paid vacation and auto
lease) available to managerial or executive employees of Employer as
such may be in effect from time to time as provided in Section 17
below.
7. EXPENSES. Executive shall be reimbursed for ordinary and necessary
business expenses incurred by Executive on behalf of
2
<PAGE>
Employer and its subsidiaries or affiliates upon presentation of vouchers in
accordance with the usual and customary procedure of Employer in relation to
such expense items, except that Employer may elect, at its option, to pay such
expense items directly rather than reimburse Executive therefor.
8. EXTENT OF SERVICE. Executive shall devote substantially all of his
working time, attention and energies to the business of the Employer and shall
not, during the term of this Agreement, take, directly or indirectly, an active
role in any other business activity without prior consent of the Employer; but
this Section shall not prevent Executive from serving as director of other
entities not affiliated with Employer, from making real estate or other
investments of a passive nature, or from participating in the activities of a
nonprofit charitable organization where such participation does not require a
substantial amount of time and does not adversely affect Executive's ability to
perform his duties under this Agreement.
9. TERMINATION FOR CAUSE. This Agreement shall immediately be terminated
and neither party shall have any obligation hereunder if the Executive's
employment is terminated for cause as determined by the Chief Executive Officer.
10. INVOLUNTARY TERMINATION WITHOUT CAUSE BY THE EMPLOYER. The Company
reserves the right to terminate the employment of Executive at any time for any
reason. If Executive's employment is involuntarily terminated without cause as
such term is defined in Section 9 above, any unpaid amount described in Section
6(a) of this Agreement will be accelerated and paid to him in a lump sum cash
payment within five (5) business days of the termination. In addition, the
Executive will be eligible to be receive an Award under the Officers' Annual
Stock Incentive Plan and the Officers' Long-Term Incentive Plan (or successor
plan, if any) of the Employer based on the target award for the year or
performance period in which the involuntary termination occurs, prorated for the
Executive's active employment during such year or performance period and
adjusted for Executive's performance. Except as stated in the foregoing
sentence, the provisions of the Officers' Annual Stock Incentive Plan and the
Officers' Long-Term Incentive Plan shall be applicable to Executive. Involuntary
termination includes divesture of the operating company or division employing
Executive, unless Executive is offered other employment by the Employer after
such divestiture.
11. VOLUNTARY TERMINATION BY EXECUTIVE. The Executive reserves the right to
voluntarily terminate his employment at any time for any reason (including
retirement), provided, he shall
3
<PAGE>
give the Company not less than 60 days written notice thereof, unless the
Employer consents to a shorter notice period. Sixty days after the Employer
receives such notice, this Agreement shall cease, all obligations of the Company
hereunder shall be canceled automatically, and the Executive shall not be
entitled to any form of compensation under this Agreement, except for payout of
benefits accrued under the employee benefit plans of the Employer.
12. DISABILITY. The event of physical or mental disability of a nature that
entitles Executive to sick pay or benefits under the Company's Long-Term
Disability Plan is not a termination of employment under any section of this
Agreement. This Agreement shall remain in effect notwithstanding Executive's
disability
13. DEATH. In the event of Executive's death during the term of this
Agreement, his spouse or beneficiary shall be entitled to the Retention Bonus's
referred to in paragraph 6 (a) above. If the Executive is unmarried at his
death, beneficiary shall mean his designated beneficiary under the executive
life insurance plan of Employer in which Executive participates. Any benefit
payable under this Section 13 shall be in addition to any other benefit due to
Executive his spouse or beneficiary from Employer, including but not limited to,
payments under any Officer Incentive Plan.
14. CONFIDENTIALITY AND CONDUCT. The Executive warrants that he will not
disclose to any other person (other than a person to whom disclosure is
necessary in connection with the performance of his duties as an Employee of
Employer) any material confidential information or trade secrets concerning the
Employer or any of its subsidiaries, successors or assigns at any time during or
after the term of this Agreement including, but not limited to, strategic plans,
customer lists, contract terms, financial costs, pricing terms, sales data or
business opportunities, whether for existing, new or developing businesses.
Executive will at all times refrain from taking any action or making any
statements, written or oral, which are intended to and do disparage the goodwill
or reputation of the Employer or its directors, officers, or executives or which
could adversely affect the morale of employees of the Employer.
15. NON-SOLICITATION. During the term of employment provided for
hereunder, and for a period of one year after termination of employment with
Employer, Executive will not (i) directly or indirectly solicit business which
could reasonably be expected to conflict with the interest of Employer or any
subsidiary, successor or assign of Employer from any entity,
4
<PAGE>
organization or person which has been doing business with the Employer, from
which the Employer was soliciting business at the time of the termination of
employment, or from which Executive knew or had reason to know that Employer was
going to solicit business at the time of termination of employment, or (ii)
employ or solicit for employment or advise or recommend to any other persons
that they employ or solicit for employment, any employee of the Employer, its
subsidiaries, successors or assigns.
16. ENFORCEMENT. Notwithstanding anything to the contrary contained
herein, Executive and the Employer acknowledge and agree that any of the
covenants contained in Sections 14 and 15 of this Agreement will survive
termination of the Agreement and may be specifically enforced by the Employer
through injunctive relief but such right to injunctive relief shall not preclude
the Employer from other remedies which may be available to it.
17. EMPLOYEE BENEFIT PLANS. In addition to the benefits specifically
provided for herein, Executive and his family will be entitled to participate in
all health and welfare benefit plans maintained by the Employer for executive or
managerial employees according to the terms of such plans. Executive shall also
be entitled to participate in any profit-sharing, retirement or similar plans
established by the Employer in which executive or managerial employees of
Employer participate, including any such plan intended to comply with Section
401(k) of the Internal Revenue Code of 1986, as amended, and any plan providing
supplemental executive retirement benefits.
18. WITHHOLDING. The Employer shall withhold the amount of any Federal,
state or local income taxes attributable to any amounts payable under this
Agreement.
19. EXCESS PARACHUTE PAYMENTS. If, for any reason, payments made pursuant
to this Agreement are determined to be "excess parachute payments" subject to an
excise tax under Section 4999 of the Internal Revenue Code of 1986, as amended,
the provisions of Paragraph 2.(F) of the LONG ISLAND LIGHTING COMPANY EXECUTIVE
EMPLOYMENT AGREEMENT shall apply to such payment.
20. NO ASSIGNMENT. No right, benefit or interest hereunder shall be
subject to assignment, encumbrance, charge, pledge, hypothecation or set-off by
Executive in respect of any claim, debt, or obligation or similar process. The
Executive acknowledges that the services to be rendered by him are unique and
personal, and Executive may not assign any of his rights or delegate any of his
duties under this Agreement.
5
<PAGE>
21. AMENDMENT. This Agreement may not be amended, modified, or canceled
except by written agreement of the parties.
22. SEVERABILITY. In the event that any provision or portion of this
Agreement shall be determined to be invalid or unenforceable for any reason, the
remaining provisions of this Agreement shall remain in full force and effect to
the fullest extent permitted by law.
23. ARBITRATION. Any dispute or controversy arising out of or in connection
with this Agreement which cannot be settled by the parties hereto within thirty
(30) days after the same shall arise shall be settled exclusively by arbitration
in New York , New York in accordance with the rules of the American Arbitration
Association rules for consensual arbitration.
24. BINDING EFFECT/SUCCESSORS. This Agreement shall be binding upon and
inure to the benefit of Executive, the Employer, its subsidiaries or affiliates,
and any successor organization or organizations which shall succeed to the
business, personnel, property or assets of the Employer, whether by means of
direct or indirect purchase, merger, consolidation or otherwise and/or which
shall succeed Employer as the employer of some or all of the current employees
of Employer. Any such successor shall expressly assume and agree to perform this
Agreement in the same manner and to the same extent as Employer would be
required to perform hereunder if no such succession had taken place.
25. UNSECURED PROMISE. No amounts payable pursuant to this Agreement shall
be secured by any specific assets of the Employer. All rights of the Executive,
his spouse or other beneficiary shall at all times be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
Employer for payment of any amounts due hereunder. Neither Executive, nor his
spouse or other beneficiary shall have any interest in or rights against any
specific assets of Employer, and Executive and his spouse or other beneficiary
shall have only the rights of a general unsecured creditor of Employer.
26. SET-OFF. Payments to or with respect to Executive under this Agreement
shall be reduced by the amount of any debt or obligation of Executive owed to
Employer.
27. NOTICES. Any notice required or permitted to be given under this
Agreement shall be sufficient if in writing and sent by registered or certified
mail to his residence in the case of the Executive, or to its principal office
in the case of the Employer and the date of receipt shall be deemed the date
which
6
<PAGE>
such notice has been provided.
28. WAIVER OF BREACH. The waiver by either party of any provision of this
Agreement shall not operate as a waiver of any subsequent breach by any other
party.
29. ENTIRE AGREEMENT. This instrument contains the entire agreement of the
parties and supersedes the existing agreement providing for employment at will
and may not be changed orally but only by an agreement in writing signed by the
party against whom enforcement of any waiver, change, modification, extension or
discharge is sought. Except as provided in Paragraph 19 herein, this Agreement
shall have no effect on any other provision of the LONG ISLAND LIGHTING COMPANY
EXECUTIVE EMPLOYMENT AGREEMENT.
30. APPLICABLE LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to agreements made
and entirely performed within the state.
31. HEADINGS. The sections, subjects and headings of this Agreement are
inserted for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
32. COUNTERPARTS. This Agreement may be executed in counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties have executed this Agreement on the day
and year first written above.
/S/ THEODORE A. BABCOCK
-----------------------
Executive
LONG ISLAND LIGHTING COMPANY
By: /S/ WILLIAM J. CATACOSINOS
------------------------------
William J. Catacosinos
Chairman, Board of Directors
7
<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> 1000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,795,541
<OTHER-PROPERTY-AND-INVEST> 49,882
<TOTAL-CURRENT-ASSETS> 907,314
<TOTAL-DEFERRED-CHARGES> 69,281
<OTHER-ASSETS> 7,085,708
<TOTAL-ASSETS> 11,907,726
<COMMON> 607,837
<CAPITAL-SURPLUS-PAID-IN> 1,093,498
<RETAINED-EARNINGS> 907,209
<TOTAL-COMMON-STOCKHOLDERS-EQ> 2,608,544
637,450
63,562
<LONG-TERM-DEBT-NET> 4,395,555
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 101,000
1,050
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 4,100,565
<TOT-CAPITALIZATION-AND-LIAB> 11,907,726
<GROSS-OPERATING-REVENUE> 2,296,518
<INCOME-TAX-EXPENSE> 167,470
<OTHER-OPERATING-EXPENSES> 1,570,389
<TOTAL-OPERATING-EXPENSES> 1,737,859
<OPERATING-INCOME-LOSS> 558,659
<OTHER-INCOME-NET> 7,912
<INCOME-BEFORE-INTEREST-EXPEN> 550,747
<TOTAL-INTEREST-EXPENSE> 304,446
<NET-INCOME> 246,301
38,865
<EARNINGS-AVAILABLE-FOR-COMM> 207,436
<COMMON-STOCK-DIVIDENDS> 161,758
<TOTAL-INTEREST-ON-BONDS> 263,530
<CASH-FLOW-OPERATIONS> 545,378
<EPS-PRIMARY> $1.71
<EPS-DILUTED> $1.71
</TABLE>
