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FINANCING AGREEMENT
By and Between
LONG ISLAND POWER AUTHORITY
and
LIPA ACQUISITION CORP.
Dated as of May 1, 1998
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TABLE OF CONTENTS
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ARTICLE I
DEFINITIONS
Section 1.1. Definitions................................................ 1
Section 1.2. Agreement with Bondholders................................. 3
ARTICLE II
AGREEMENTS AS TO SYSTEM AND REVENUES
Section 2.1. Agreement to Finance Acquisition of System and Cost of
System Improvements...................................... 3
Section 2.2. Obligation to Make Payments to Authority; Grant of
Revenues and Certain Other Security
to Authority............................................... 3
Section 2.3. Powers as to Grant, Conveyance and Transfer and as to
Revenues of the System................................... 5
Section 2.4. Powers as to System and Collection of Revenues............. 5
Section 2.5. State not Liable with Respect to Note...................... 5
ARTICLE III
TRANSFER OF FUNDS
Section 3.1. Application of Bond Proceeds to Pay Costs.................. 6
Section 3.2. Payment From Construction Fund............................. 6
ARTICLE IV
DEPOSIT AND APPLICATION OF REVENUES
Section 4.1. Revenue Fund............................................... 6
Section 4.2. Subsidiary General Fund.................................... 6
Section 4.3. Application of Revenues After Event of Default............. 7
Section 4.4. Amounts Remaining.......................................... 7
(i)
TABLE OF CONTENTS
(continued)
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ARTICLE V
REPRESENTATIONS AND WARRANTIES; CONSENT TO ASSIGNMENT
Section 5.1. Representations and Warranties............................. 7
Section 5.2. Consent to Assignment...................................... 7
Section 5.3. Incorporation By Reference................................. 8
ARTICLE VI
COVENANTS
Section 6.1. Rate Covenant.............................................. 8
Section 6.2. Compliance with Report as to System Condition.............. 8
Section 6.3. Operation and Maintenance.................................. 9
Section 6.4. Annual Subsidiary Budget................................... 9
Section 6.5. Compliance with Agreements; Tax Exemption.................. 10
Section 6.6. Compliance with Resolution................................. 10
Section 6.7. Enforcement of Rules and Regulations....................... 10
Section 6.8. Books, Records and Accounts................................ 10
Section 6.9. Liens...................................................... 11
Section 6.10. Compliance with Law........................................ 11
Section 6.11. Insurance.................................................. 11
Section 6.12. Covenant Regarding Additional System Agreements............ 11
Section 6.13. Limitations on Operating Expenses and Costs of Major
Renewals and Replacements................................ 12
Section 6.14. Maintenance of Existence................................... 12
Section 6.15. Disposition of Property.................................... 12
Section 6.16. Competitive Facilities..................................... 13
Section 6.17. Payment of Lawful Charges.................................. 13
Section 6.18. Further Assurances......................................... 13
Section 6.19. No Additional G&R Bonds.................................... 13
Section 6.20. Tax Rulings................................................ 14
(ii)
TABLE OF CONTENTS
(continued)
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ARTICLE VII
AGREEMENT OF THE STATE
Section 7.1. Agreement of the State..................................... 14
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default.......................................... 14
Section 8.2. Remedies .................................................. 15
Section 8.3. Remedies Not Exclusive..................................... 15
ARTICLE IX
TERMINATION
Section 9.1. Termination................................................ 16
ARTICLE X
AMENDMENTS TO THE AGREEMENT
Section 10.1. Amendments to Agreement; Consents.......................... 16
Section 10.2. Consent of Trustee......................................... 16
ARTICLE XI
INDEMNITY OF AUTHORITY
Section 11.1. Indemnity by Subsidiary.................................... 17
ARTICLE XII
MISCELLANEOUS
Section 12.1. Conflicts.................................................. 17
(iii)
TABLE OF CONTENTS
(continued)
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Section 12.2. Assignment................................................. 17
Section 12.3. No Waiver.................................................. 18
Section 12.4. Notices ................................................... 18
Section 12.5. Separability............................................... 18
Section 12.6. Headings .................................................. 18
Section 12.7. Governing Law.............................................. 18
Section 12.8. Payments on Saturdays, Sundays and Holidays................ 18
Section 12.9. Obligation for Payment Absolute............................ 18
Section 12.10. Counterparts............................................... 18
Section 12.11. Date of Agreement.......................................... 19
Exhibit A -Schedule of Outstanding Subsidiary Unsecured Debt.................A-1
Exhibit B -Form of Disbursement Request......................................B-1
Exhibit C -Form of Subsidiary Note...........................................C-1
(iv)
FINANCING AGREEMENT
FINANCING AGREEMENT, dated as of May 1, 1998, by and between the LONG
ISLAND POWER AUTHORITY (the "Authority"), a corporate municipal instrumentality
of the State of New York (the "State"), and the LIPA ACQUISITION CORP. (the
"Subsidiary"), a New York business corporation and a wholly-owned subsidiary of
the Authority.
The parties hereto mutually agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1. Definitions. Capitalized terms used and not otherwise defined
herein shall have the respective meanings accorded such terms in the General
Bond Resolution. The terms set forth in this Section shall have the meanings
ascribed to them for all purposes of this Financing Agreement unless the context
clearly requires otherwise. Words in the singular shall include the plural, and
words in the plural shall include the singular, where the context so requires.
"Annual Subsidiary Budget" shall mean the annual budget of the Subsidiary,
as amended or supplemented, adopted or in effect for a particular Fiscal Year,
as provided in Section 6.4.
"Authority Obligations" shall mean, collectively, all Bonds and other
bonds, notes or other evidences of indebtedness for money borrowed of the
Authority, Parity Reimbursement Obligations, Parity Contract Obligations and
Subordinated Indebtedness, but shall not include debt of the Authority not
secured by the Trust Estate.
"Debenture Indentures" shall mean the Indenture dated as of November 1,
1986, between LILCO and The Connecticut Bank and Trust Company, National
Association, as amended and supplemented, and the Indenture dated as of November
1, 1992, between LILCO and Chemical Bank, as amended and supplemented.
"Disbursement Request" shall mean the written request signed by an
Authorized Representative of the Subsidiary and required to be delivered to the
Authority pursuant to Section 3.2 hereof to effect disbursements from the
Construction Fund, in substantially the form set forth in Exhibit B hereto.
"Financing Agreement" shall mean this Financing Agreement, dated as of May
1, 1998, by and between the Authority and the Subsidiary, as from time to time
hereafter amended or supplemented in accordance with the provisions hereof and
of the Resolution.
"Fiscal Year" shall mean the twelve-month period commencing on January 1
of each year; provided, however, that the Authority and the Subsidiary may, from
time to time, mutually agree on a different twelve-month period as the Fiscal
Year, in which case January 1,
when used herein with reference to Fiscal Year, shall be construed to mean the
first day of the first calendar month of such different Fiscal Year.
"G&R Bonds" shall mean any bonds authenticated and delivered, and
outstanding from time to time, under the G&R Indenture.
"G&R Indenture" shall mean the General and Refunding Indenture dated as of
June 1, 1975 between LILCO and Manufacturers Hanover Trust Company, as
supplemented and amended.
"LILCO" shall mean the Long Island Lighting Company, a New York
corporation.
"Note" shall mean the promissory note or notes of the Subsidiary delivered
in accordance with Section 2.1 hereof.
"Outstanding Subsidiary Unsecured Debt" shall mean any indebtedness of the
Subsidiary outstanding as of the date on which the merger and related
transactions between the Authority and LILCO provided for by the Acquisition
Agreement are completed, as more particularly described in Exhibit A hereto.
"Property Tax Settlement" shall mean the agreement by the Authority to
finance a program of rebates and credits to System customers in respect of the
amounts otherwise payable by Suffolk County, the Town of Brookhaven and certain
other municipalities within Suffolk County as refunds of taxes and payments in
lieu of taxes relating to the Shoreham Nuclear Power Plant.
"Reimbursement Agreement" shall mean that certain Reimbursement Agreement
entered into by the Authority, dated as of May 1, 1998, in connection with the
Authority's issuance of its Electric System Subordinated Revenue Bonds, 1998
Series 1, 2, 3, 4, 5 and 6.
"Resolution" shall mean, collectively, the bond resolution adopted by the
Authority on May 13, 1998, authorizing, among other things, the issuance of the
Bonds from time to time (together with all supplemental resolutions thereto, and
other resolutions contemplated thereby, the "General Bond Resolution") and, with
respect to other bonds, notes or other evidences of indebtedness of the
Authority, any other resolution, trust indenture or similar document, in each
case as the same is amended or supplemented pursuant to the terms thereof.
"Subsidiary" initially shall mean LIPA Acquisition Corp. and, following
the merger of LIPA Acquisition Corp. into LILCO, shall mean LILCO as the
surviving corporation following such merger, and any successor thereto and
assignee thereof permitted hereunder.
"Subsidiary Debentures" shall mean any "Bonds" as defined in the Debenture
Indentures.
"Subsidiary General Fund" shall mean the special fund by that name
established by the Subsidiary and held by a bank, trust company or banking
association designated by the Subsidiary to act as a depository for the general
funds of the Subsidiary.
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"System Manager" initially means, collectively, MarketSpan TD Management,
LLC as Manager under the Management Services Agreement and MarketSpan Energy
Management, LLC as Energy Manager under the Energy Manager Agreement, and
thereafter means any person, company or entity who signs an agreement to operate
some or all of System or System-related activities on behalf of the Subsidiary.
"Transferee Promissory Notes" shall mean the Promissory Notes (as defined
in the Acquisition Agreement) of the Transferee Subsidiaries (as defined in the
Acquisition Agreement).
Section 1.2. Agreement with Bondholders. Subject in all respects to the
provisions of Article X hereof, the Authority and the Subsidiary agree that this
Agreement is executed in part to induce the purchase or entering into by others
of Authority Obligations issued or entered into from time to time, and all
representations, warranties, covenants and agreements contained in this
Financing Agreement are declared to be for the benefit of the holders of
Authority Obligations or other parties thereto.
ARTICLE II
AGREEMENTS AS TO SYSTEM AND REVENUES
Section 2.1. Agreement to Finance Acquisition of System and Cost of System
Improvement. The Authority agrees to finance (i) the acquisition of all
outstanding LILCO common stock in accordance with the Acquisition Agreement,
(ii) the payment of a portion of the redemption price of certain preferred stock
of LILCO in accordance with the Acquisition Agreement, (iii) the Property Tax
Settlement, (iv) the retirement of certain outstanding debt of LILCO, (v) the
purchase of certain interest rate xxxxxx entered into in anticipation of the
issuance of the Acquisition Debt, and (vi) capital expenditures and other
purposes of the initial Series of Bonds, and, thereafter, to use its best
efforts to finance all or a part of the Cost of System Improvements, by the
issuance of Authority Obligations from time to time in accordance with the
Resolution, in each case unless and to the extent funded from other sources. The
Authority and the Subsidiary agree that the issuance of Authority Obligations,
including the issuance of Authority Obligations for the purpose of refunding
Authority Obligations or Outstanding Subsidiary Unsecured Debt in accordance
with this Section 2. 1 and the Resolution, shall be deemed to constitute a loan
to the Subsidiary. The obligation of the Subsidiary to repay such loan and to
make payments in accordance with Section 2.2(a) shall be evidenced by the
delivery of the Note, which shall be substantially in the form of Exhibit C
hereto.
Section 2.2. Obligation to Make Payments to Authority; Grant of Revenues
and Certain Other Security to Authority. (a) On or before one business day prior
to each due date for the payment of the principal of and redemption price, if
any, or interest on, or other payments required under, or with respect to,
Authority Obligations, until the same shall have been paid in full or provision
for the payment thereof in full shall have been made in accordance with the
Resolution or any other document entered into by the Authority in connection
therewith, or the provisions thereof, the Subsidiary shall make or cause to be
made payments to the Authority in an amount which, when added to any moneys then
on deposit under the Resolution
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and available therefor, including any dividends theretofore paid to the
Authority and held thereunder, shall be equal to the amount payable on such due
date with respect to the Authority Obligations, as provided in the Resolution,
including amounts due for the payment of the principal of and sinking fund
installments and premium, if any, and interest on the Bonds, which payment
obligations are evidenced by the Note. In addition, the Subsidiary shall pay or
cause to be paid to the Authority, as and when the same shall become due, all
other amounts due and payable by it under the Resolution and all other documents
entered into by the Authority in connection with the Authority Obligations,
together with interest thereon at the then applicable rate. The principal amount
from time to time due and owing under the Note and the scheduled amortization
thereof and related interest rates (or the method of determining the same) shall
be evidenced by the periodic delivery to the Subsidiary of a certificate of an
Authorized Representative of the Authority setting forth the same.
Outstanding Subsidiary Unsecured Debt shall be paid pursuant to and in
accordance with the Resolution and the respective resolutions, indentures or
similar instruments authorizing and providing for the issuance thereof.
(b) In consideration of the promises and agreements of the Authority
contained herein and in consideration of the issuance or entering into of the
Authority Obligations and application of the proceeds thereof for the purposes
specified in Section 2.1 hereof, and in order to assure a source of payment of
and security for the Note and all amounts payable by the Authority under the
Resolution or any other document entered into by the Authority in connection
with Authority Obligations, including without limitation the Bonds, the
Subordinated Indebtedness, Required Deposits, deposits in respect of the Rate
Stabilization Fund and such other payments as are to be made from Revenues in
accordance with the Resolution, the Subsidiary hereby gives, grants, conveys and
transfers to the Authority all of its right, title and interest in and to the
Revenues and the Transferee Promissory Notes, including all of its rights to
collect and receive the same, subject only to the provisions of this Financing
Agreement and the Resolution permitting the application thereof for or to the
purposes and on the terms and conditions herein and therein set forth, and
pledges and grants a security interest in the same to the Authority and to each
Trustee under the Resolution for the benefit of the holders of Authority
Obligations.
(c) In consideration of the promises and agreements of the Authority
contained herein and in consideration of the issuance or entering into of the
Authority Obligations and application of the proceeds thereof for the purposes
specified in Section 2. 1 hereof, and in order to assure a source of payment of
and security for the payment obligations of the Authority hereunder and under
the Note, the Subsidiary hereby further pledges and assigns to the Authority,
and grants to the Authority a security interest in, the System Agreements,
subject however to the right and obligation of the Subsidiary to exercise its
rights and to carry out its obligations and duties thereunder, and further
subject to the terms of this Financing Agreement and the Resolution, the right
and obligation to enforce or realize upon its rights and interests in the System
Agreements.
(d) The pledges of subsections (b) and (c) shall be valid and binding from
the time when it is made, and the liens of such pledges shall be valid and
binding as against all parties having claims of any kind in tort, contract or
otherwise against the Subsidiary,
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irrespective of whether such parties have notice thereof. The Revenues, moneys
and proceeds received by the Subsidiary shall immediately be subject to the lien
of such pledges without any physical delivery or further act.
Section 2.3. Powers as to Grant, Conveyance and Transfer and as to
Revenues of the System. (a) The Subsidiary is and will be authorized under the
Act and all applicable laws to grant, convey and transfer the Revenues, and to
pledge and assign the System Agreements and other moneys, securities and funds
and the rights under contracts purported to be granted, conveyed and transferred
by this Financing Agreement, in the manner and to the extent provided in this
Financing Agreement and the Resolution. The Revenues, the System Agreements and
other moneys, securities and funds and the rights under contracts so granted,
conveyed, pledged and transferred are and will be free and clear of any pledge,
lien, charge or encumbrance thereon or with respect thereto prior to, or of
equal rank with, the pledge created or authorized by the Resolution, and all
corporate action on the part of the Subsidiary to that end has been duly and
validly taken. The Subsidiary shall at all times, to the extent permitted by
law, defend, preserve and protect the pledge of the Revenues, the System
Agreements and other moneys, securities and funds and the rights under the
contracts pledged under this Financing Agreement and the Resolution and all the
rights of the Authority and the Bondholders under this Financing Agreement and
the Resolution against all claims and demands of all persons whomsoever.
(b) Subject to the provisions of Section 6.15 hereof, upon consummation of
the merger of LIPA Acquisition Corp. with and into LILCO, the Subsidiary will
be, and so long as any Authority Obligations remain outstanding will at all
times continue to be, the owner of the System. Accordingly, all acts and things
required to be done or performed by the Subsidiary with respect to the System
hereunder shall be deemed to be acts and things which the Subsidiary will cause
to be done or performed by the Subsidiary or any person acting on behalf of the
Subsidiary.
(c) The Subsidiary shall, so long as any Authority Obligations remain
outstanding, perform all acts and duties required to be performed by it with
respect to the System Agreements, and shall not permit any rescission or
termination or amendment thereof, or otherwise take any action under or in
connection with either, not expressly provided for by the terms thereof, which
will in any manner impair or adversely affect the rights of the Subsidiary
thereunder, or the rights or security of the holders of or parties to Authority
Obligations under the provisions thereof or of the Resolution, and any action by
the Subsidiary in violation of this covenant shall be null and void as to the
Subsidiary.
Section 2.4. Powers as to System and Collection of Revenues. So long as
any Authority Obligations remain outstanding, the Subsidiary shall have or shall
use its best efforts to obtain good right and lawful authority to maintain,
operate and improve the System; to impose and collect such fees, rates, rents
and charges for the use or services of the System as are established from time
to time by the Authority in accordance with the Resolution and the Act; and to
demand and collect all Revenues becoming due to it for the use or services of
the System.
Section 2.5. State not Liable with Respect to Note. The Note and other
obligations of the Subsidiary under this Agreement shall not be a debt of the
State or of any
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municipality, and neither the State nor any municipality shall be liable
thereon. Neither the credit, the revenues nor the taxing power of the State or
of any municipality shall be, or shall be deemed to be, pledged to the payment
of the Note or other obligations of the Subsidiary.
ARTICLE III
TRANSFER OF FUNDS
Section 3.1. Application of Bond Proceeds to Pay Costs. The proceeds of
the issuance of Bonds shall be deposited by the Authority in accordance with the
provisions of the Resolution and the applicable provisions of the Supplemental
Resolution authorizing such Bonds, and the proceeds of other bonds, notes or
other evidences of indebtedness of the Authority shall be deposited and applied
in accordance with the provisions of the resolution, trust indenture or similar
document authorizing and providing therefor; provided, however, that the portion
of proceeds which is to be used to pay the Costs of System Improvements shall be
held only in the Construction Fund unless the Authority and the Subsidiary shall
otherwise agree.
Section 3.2. Payment From Construction Fund. The Costs incurred by the
Subsidiary with respect to System Improvements shall be evidenced to the
Authority by a certificate signed by an Authorized Representative of the
Subsidiary. Each such certificate shall contain the information required to be
set forth in a Disbursement Request. Upon receipt of such certificate the
Authority shall pay or cause to be paid to the person entitled thereto amounts
sufficient to pay all such certified Costs. Neither the Authority nor the
Trustee shall be required to provide funds to pay the Costs of System
Improvements from any source other than the Construction Fund and no such funds
shall be required to be paid to the Subsidiary by the Authority or the Trustee
in excess of the amounts set aside therefor in the Construction Fund.
ARTICLE IV
DEPOSIT AND APPLICATION OF REVENUES
Section 4.1. Revenue Fund. All Revenues, as promptly as practicable after
receipt thereof by or on behalf of the Subsidiary, shall be deposited by the
Subsidiary or by any System Manager into the Revenue Fund. Without limiting the
generality of the foregoing, the Subsidiary shall take such actions as it shall
determine necessary and appropriate to assure that the Manager complies with
Section 4.9(D) of the Management Services Agreement and that the Energy Manager
complies with Section 6.2.2 of the Energy Management Agreement. All Revenues
held by or for the Subsidiary shall be deemed to be held in trust for the
Authority pending their deposit into the Revenue Fund.
Section 4.2. Subsidiary General Fund. There shall be deposited in the
Subsidiary General Fund all amounts received by the Subsidiary from the
Authority or the Trustee pursuant to the Resolution for the purpose of paying
Subsidiary Expenses and any necessary and proper renewals, replacements and
extensions to the System or, as provided in Section 6.17, PILOTs. All amounts in
the Subsidiary General Fund shall be held in trust by the Subsidiary and applied
only as provided herein, in the Act or in the Resolution. Amounts on
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deposit in the Subsidiary General Fund shall be applied by the Subsidiary solely
for the payment of Subsidiary Expenses, or any such renewals, replacements or
extensions, or PILOTs.
Section 4.3. Application of Revenues After Event of Default. The
Subsidiary covenants that if an "Event of Default", as defined in the
Resolution, shall occur, the Subsidiary, upon demand of the Trustee, shall pay
over or cause to be paid over to the Trustee all moneys and securities then held
by the Subsidiary or by any System Manager in the Subsidiary General Fund, and
thereafter, as promptly as practical, the Revenues, for application in
accordance with Section 1003 of the General Bond Resolution.
Section 4.4. Amounts Remaining. Any amounts received or held by the
Authority or the Trustee pursuant to the provisions of the Resolution or this
Financing Agreement after all Authority Obligations have been paid in full or
are no longer outstanding pursuant to the provisions thereof and of the
Resolution, and after payment of all other obligations and expenses of the
Authority or provision for payment thereof in full has been made in accordance
with the provisions thereof and of the Resolution, shall be paid to the
Subsidiary.
ARTICLE V
REPRESENTATIONS AND WARRANTIES;
CONSENT TO ASSIGNMENT
Section 5.1. Representations and Warranties. The Subsidiary makes the
following representations and warranties as the basis for the undertakings on
its part herein contained:
(a) It is a New York business corporation duly organized and validly
existing under the laws of the State, and has full power and authority:
(i) to own the System and to carry out its purposes in the
manner proposed to be conducted pursuant to this Agreement; and
(ii) to execute, deliver and perform, and observe all of the
terms and provisions of, this Financing Agreement and all System
Agreements in effect as of the date hereof.
(b) The execution, delivery and performance of this Agreement have
been duly authorized by all necessary action on the part of the
Subsidiary.
(c) The Subsidiary has duly and lawfully adopted, and there are now
in force and effect, by-laws relating to the Subsidiary.
Section 5.2. Consent of Assignment. The lien on the Revenues created by
and pursuant to the Resolution and the Act is made for the benefit of the
Authority and holders of and parties to Authority Obligations. The Subsidiary
hereby consents to the assignment by the Authority to the Bondholders of the
benefits and rights of the Authority provided by this Financing Agreement,
including, without limitation, the lien upon the Revenues created by and
pursuant to this Financing Agreement, the Resolution and the Act and the pledge
and agreement
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of the State included herein pursuant to Section 1020-o of the Act and set forth
in Section 7.1 hereof, to the extent set forth in or pursuant to, or as
permitted by, the Resolution.
Section 5.3. Incorporation By Reference. The Subsidiary hereby makes with
respect to itself each and every representation and warranty made with respect
to the Subsidiary by the Authority in Article IV of the Reimbursement Agreement.
ARTICLE VI
COVENANTS
Section 6.1. Rate Covenant. (a) The Subsidiary and the Authority hereby
covenant and agree that fees, rates, rents, charges and surcharges for the use
of, or services furnished, rendered or made available by, the System shall be
established by the Authority in accordance with the Resolution and the Act such
that such fees, rates, rents, charges and surcharges shall be adequate, together
with any other available funds, to provide for, among other things, (i) the
timely payment of the Principal Installments of and interest on all Bonds, the
principal of and interest on any other Authority Obligations payable from
Revenues, and the principal of and interest on the Outstanding Subsidiary
Unsecured Debt, (ii) the proper operation and maintenance of the System, (iii)
all other payments required for the System not otherwise provided for and (iv)
all other payments required pursuant to this Agreement and any System
Agreements.
(b) If the periodic review of System fees, rates, rents, charges and
surcharges conducted by the Authority in accordance with Section 701 of the
General Bond Resolution, or the report prepared pursuant to Section 702 of the
General Bond Resolution, indicates that such rates, fees, rents, charges and
surcharges are, or will be, insufficient to meet the requirements of Section 701
of the General Bond Resolution, the Subsidiary, in accordance with the
directions, if any, of the Authority, shall promptly take and diligently pursue
all necessary actions within its reasonable control to cure or avoid any such
deficiency.
(c) Except to the extent required by law, the Subsidiary will not furnish
or supply or cause to be furnished or supplied any product, use or service of
the System free of charge (or at a nominal charge) to any person, firm or
corporation, public or private unless and to the extent the Authority shall have
determined that other adequate consideration has been or is expected to be
received by the Subsidiary in connection therewith, and the Subsidiary will use
reasonable efforts to enforce or cause to be enforced the payment of any and all
amounts owing to the Subsidiary for use of the System in accordance with Section
6.7 hereof.
(d) Nothing contained in this Financing Agreement shall be deemed to limit
or restrict the right or obligation of the Authority or the Subsidiary to comply
with any covenant relating to rates to be charged for the use of, or services
provided by, the System which may be made with the holders of or parties to
Authority Obligations in accordance with the Act.
Section 6.2. Compliance with Report as to System Condition. (a) The
Subsidiary covenants that if any report prepared in accordance with Section 702
of the General Bond Resolution shall set forth that the properties of the System
have not been maintained in
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good repair and sound operating condition, it will restore the properties or
cause the properties to be restored to good repair and sound operating condition
as promptly as practicable.
(b) The Subsidiary further covenants that (i) the Authority, the
Consulting Engineer, if any, and the Rate Consultant, if any, shall at all times
have free access to all properties of the System and every part thereof for the
purposes of inspection and examination, and (ii) its books, records and accounts
may be examined by the Authority, such Consulting Engineer and such Rate
Consultant at all reasonable times.
Section 6.3. Operation and Maintenance. The Subsidiary hereby covenants
that it shall, at all times:
(a) In accordance with the advice and recommendations set forth in
the reports prepared from time to time in accordance with Section 702 of
the General Bond Resolution, operate the System properly and in a sound
and economical manner and shall maintain, preserve, and keep the same
preserved and kept with the appurtenances and every part and parcel
thereof, in good repair, working order and condition, and shall from time
to time make, or cause to be made, all necessary and proper repairs,
replacements, renewals and extensions so that at all times the operation
of the System may be properly and advantageously conducted; provided,
however, that nothing herein contained shall require the Subsidiary to
operate, maintain, preserve, repair, replace, renew or reconstruct any
part of the System if, in the case of any part of the System having a
market value of greater than $1 million, there shall be filed with the
Subsidiary, the Authority and the Trustee a certificate of an Authorized
Representative of the Subsidiary stating that in the opinion of the
Subsidiary abandonment of operation of such part of the System will not
adversely affect the operation of the System or impair the ability of the
Subsidiary and the Authority to comply with the provisions of Section 6.1
hereof and Section 701 of the General Bond Resolution;
(b) enforce the rules and regulations governing the operations, use
and services of the System established from time to time by the Subsidiary
or the Authority; and
(c) observe and perform all of the terms and conditions contained in
the Act, and comply with all valid acts, rules, regulations, orders and
directions of any legislative, executive, administrative or judicial body
having competent jurisdiction of the Subsidiary or the System; provided,
however, that the failure of the Subsidiary to comply with the covenant
contained in this subsection (c) for any period shall not constitute a
default on its part so long as the Subsidiary (i) is taking reasonable and
timely steps to achieve compliance and (ii) the Subsidiary shall have
delivered to the Trustee and to the Authority a Certificate of an
Authorized Representative of Subsidiary which (1) sets forth in reasonable
detail the facts and circumstances attendant to such non-compliance, (2)
sets forth the steps being taken by the Subsidiary to achieve compliance,
(3) sets forth the estimated date on which the Subsidiary will be in
compliance and (4) states that in the opinion of such Authorized
Representative such noncompliance during the period described will not
adversely affect the operation of the System or the amount of Revenues to
be derived therefrom.
Section 6.4. Annual Subsidiary Budget. Not less than thirty (30) days
prior to the beginning of each Fiscal Year commencing with Fiscal Year 1999, the
Subsidiary shall file
9
with the Authority and the Trustee an Annual Subsidiary Budget for the ensuing
Fiscal Year which shall set forth in reasonable detail the estimated Revenues,
Subsidiary Expenses and renewals, replacements and extensions for the System for
such year. Such Annual Subsidiary Budget also may set forth such additional
material as the Subsidiary may determine or the Authority shall request. At the
end of each quarter, the Subsidiary shall review its estimates for such Fiscal
Year, and in the event such estimates do not substantially correspond with
actual Revenues or Subsidiary Expenses, or if there are at any time during any
such Fiscal Year extraordinary receipts or payments of unusual costs, the
Subsidiary shall prepare an amended Annual Subsidiary Budget for the remainder
of the then current Fiscal Year. The Subsidiary also may at any time adopt an
amended Annual Subsidiary Budget for the remainder of the then current Fiscal
Year.
Section 6.5. Compliance with Agreements; Tax Exemption. (a) The Subsidiary
hereby covenants with the Authority that it shall take all such actions or
refrain from taking all such actions, as the case may be, so as to comply with
the terms and provisions of this Financing Agreement and the Resolution. The
Authority hereby covenants with the Subsidiary that it shall take all such
actions or refrain from taking any such actions, as the case may be, so as to
comply with the terms and provisions of the Resolution and this Financing
Agreement.
(b) The Subsidiary hereby covenants with the Authority, so long as any
Bonds or other Authority Obligations, issued with the intent that the interest
thereon not be included in gross income for Federal income tax purposes, shall
be outstanding, that it will not take any action, or fail to take any action,
which, if taken or not taken, as the case may be, would adversely affect the
tax-exempt status of the interest payable on any such Bonds or other Authority
Obligations.
Section 6.6. Compliance with Resolution. The Subsidiary shall take all
such actions and refrain from taking all such actions, as the case may be, and
otherwise shall operate the System as shall ensure their compliance, and the
compliance of the Authority, with the terms and provisions of the Resolution, or
any other agreement entered into by the Authority in connection with the
financing or operation of the System and which shall, by its terms, directly or
indirectly apply to the Subsidiary.
Section 6.7. Enforcement of Rules and Regulations. The Subsidiary shall
enforce or cause any System Manager of the System to enforce the rules and
regulations providing for discontinuance of or disconnection from the provision
of electric service, for non-payment of fees, rates, rents or other charges
imposed by the Authority and the Subsidiary, provided that such discontinuance
or disconnection shall not be carried out except in the manner and upon notice
consistent with Section 1020-cc of the Act as in effect on the date hereof.
Section 6.8. Books, Records and Accounts. (a) If the Authority so
requests, the Subsidiary shall provide to the Authority such reports concerning
the System as may be required by the Authority.
(b) Each of the Authority and the Subsidiary shall keep or cause to be
kept, proper books of record and account in which complete and correct entries
shall be made of all transactions relating to their corporate purposes under the
Act and this Agreement.
10
Section 6.9. Liens. Until all Authority Obligations have been paid in full
or provision has been made therefor in accordance with the Resolution, the
Subsidiary shall not create, and, except to the extent permitted under Section
6.17 hereof and to the extent it has the power to do so, shall not permit to be
created, any lien upon or pledge of the System, any real or personal properties
comprising any part of the System, or the Trust Estate including but not limited
to the Revenues, except the lien and pledge thereon created by this Financing
Agreement, the Resolution, and the Act.
Section 6.10. Compliance with Law. The Authority and the Subsidiary hereby
covenant and agree each for itself that it will observe and perform all of the
terms and conditions contained in the Act, and comply with all valid laws, acts,
rules, regulations, orders and directions of any legislative, executive,
administrative or judicial body having competent jurisdiction over its property
or affairs.
Section 6.11. Insurance. (a) The Subsidiary shall maintain or cause the
System Manager to maintain with responsible insurers all insurance required and
reasonably obtainable in the amounts and of the types customarily maintained by
electric utilities consistent with prudent utility practice, to indemnify for
loss of or damage to the System, and against public and other liabilities
relating to the operations of the Subsidiary and the System.
(b) The Subsidiary shall also maintain or cause to be maintained any
additional or other insurance which is required by the System Agreements.
(c) Any insurance required to be maintained by this Section shall be in
the form of policies or contracts for insurance with insurers of good standing
qualified to do business in the State and shall be payable to the Authority, the
Subsidiary, or the Trustee, as their interests may appear.
(d) Any insurance procured and maintained by the Subsidiary pursuant to
this Section, including any blanket insurance policy, may include reasonable
deductibles.
(e) No provision of this Section shall be construed to prohibit the
Subsidiary from self-insuring against any risk at the recommendation of an
insurance consultant chosen by or acceptable to an Authorized Representative of
the Subsidiary; provided, however, that the Subsidiary shall provide adequate
funding of such self-insurance if and to the extent recommended by such
insurance consultant.
(f) The Subsidiary shall file with the Trustee annually a Certificate of
an Authorized Representative of the Subsidiary setting forth (i) a description
in reasonable detail of the insurance then in effect pursuant to the
requirements of this Section and that the Subsidiary has complied in all
respects with the requirements of this Section, and (ii) whether during such
year any portion of the System having a book value greater than $2 million has
been damaged or destroyed and, if so, the amount of insurance proceeds covering
such loss or damage and specifying the Subsidiary's reasonable and necessary
costs of reconstruction or replacement thereof.
Section 6.12. Convenant Regarding Additional System Agreements. Any
additional System Agreement executed by the Subsidiary shall contain such terms
and conditions
11
as will enable the Subsidiary to retain such overall supervision and control of
the business, design, operating, management, transportation, maintenance,
planning and research and development functions of the System as may be required
by law, this Financing Agreement or the Resolution.
Section 6.13. Limitations on Operating Expenses and Costs of Major
Renewals and Replacements. The Subsidiary shall not incur or allow any System
Manager to incur Operating Expenses or costs of major renewals, replacements and
extensions for the System in any year in excess of the reasonable and necessary
amount of such Operating Expenses or costs, respectively, and, except as may be
necessary to respond to emergency conditions and to assure the continuing
operation of the System, shall not expend or cause to be expended any amount
from the Subsidiary General Fund for Operating Expenses or from the Construction
Fund for costs of major renewals, replacements and extensions for the System for
such year in excess of the respective amounts provided therefor in the Annual
Subsidiary Budget as originally adopted or as amended.
Section 6.14. Maintenance of Existence. (A) Except as set forth in
Sections 6.14(B) and (C) hereof, the Subsidiary covenants and agrees that during
the term of this Financing Agreement it will maintain its existence as a
corporation, will continue to be a corporation either organized under the laws
of or duly qualified to do business in the State, will not dissolve or otherwise
dispose of all or substantially all of its assets and will not consolidate with
or merge into one or more other entities or permit one or more other entities to
consolidate with or merge into it.
(B) The Company may, however, without violating the agreements contained
in this Section, consolidate with or merge into one or more other entities or
permit one or more other entities to consolidate with or merge into it, or sell
or otherwise transfer to one or more other entities all or substantially all of
its assets as an entirety and thereafter liquidate or dissolve, if (a) the
Subsidiary is the surviving, resulting or transferee entity, or (b) in the event
the Subsidiary is not the surviving, resulting or transferee entity, such entity
(i) is solvent, and either organized under the laws of or duly qualified to do
business subject to service or process in the State, (ii) assumes in writing all
of the obligations of the Subsidiary herein and (iii) is either the Authority or
is wholly owned by the Authority, and (c), in either event, the Trustee shall
have been furnished (1) an Opinion of Bond Counsel to the effect that under then
existing statutes and court decisions, such consolidation, merger, sale or
transfer does not adversely affect the exclusion of interest on any obligations
of the Authority then outstanding the interest on which is excluded from gross
income for federal income tax purposes, and (2) written confirmation from each
Rating Agency to the effect that such consolidation, merger, sale or transfer,
in and of itself, will not result in a withdrawal, suspension or downward
revision of the rating assigned by such Rating Agency to the Bonds.
(C) Nothing in Section 6.14(B) hereof shall restrict the merger of the
Subsidiary with and into LILCO on the date of issuance of the initial Series of
Bonds with the effect that LILCO shall become the successor Subsidiary hereunder
and under the Note.
Section 6.15. Disposition of Property. The Subsidiary may, with the
approval of the Authority, dispose of properties if such disposal, in the
judgment of the Subsidiary, (i) is
12
desirable in the conduct of its business, (ii) is not disadvantageous in any
material respect to the Holders of Authority Obligations and (iii) does not
materially impair the ability of Authority and the Subsidiary to comply with
Section 6. 1 of this Agreement and Section 701 of the General Bond Resolution.
Section 6.16. Competitive Facilities. The Subsidiary shall not hereafter
construct, acquire, or operate, any plants, structures, facilities or properties
which will provide electric service in the Service Area (as defined in the Act
as in effect on the date hereof) unless the same are a part of the System.
Section 6.17. Payment of Lawful Charges. (A) The Subsidiary shall pay or
cause to be paid, to the extent not paid by the Authority, all taxes and
assessments or other municipal or governmental charges, if any, and all PILOTs
to the extent not paid by the Authority, lawfully levied or assessed upon or in
respect of the System, or upon any part thereof or upon the Revenues, when the
same shall become due, and shall duly observe and comply in all material
respects with all valid requirements of any municipal or governmental authority
relative to any part of the System, and shall not create or suffer to be created
any lien or charge upon the System or any part thereof or upon the Revenues
therefrom, except the pledge and lien created hereby and by the Resolution for
the payment of the principal and redemption price of and interest on, and other
payments under, Authority Obligations. The Subsidiary shall pay or cause to be
discharged, or will make adequate provision to satisfy and discharge, within
sixty (60) days after the same shall accrue, all lawful claims and demands for
labor, materials, supplies or other objects which, if unpaid, might by law
become a lien upon the System or any part thereof or the Revenues therefrom;
provided, however, that nothing contained in this Section shall require the
Subsidiary to pay or cause to be discharged, or make provision for, any such
tax, assessment, lien or charge, or any PILOTs so long as the validity thereof
shall be contested in good faith and by appropriate legal proceedings. The
Subsidiary may elect to pay any such tax, assessment or other municipal or
governmental charges in such installments and over such period of time as may be
allowed by the appropriate governmental agencies.
(B) Nothing in subsection (A) of this Section 6.17 shall be construed to
prevent the Subsidiary or the Authority from entering into agreements to make
PILOTs.
Section 6.18. Further Assurances. The Subsidiary from time to time shall
make, do, execute, adopt, acknowledge and deliver and take all and every such
further acts, deeds, conveyances, assignments, resolutions, transfers and
assurances as may be necessary or desirable for the better assuring, conveying,
granting, assigning, confirming and effecting the rights assigned and the
Revenues pledged or perfecting the lien of this Financing Agreement and the
Resolution.
Section 6.19. No Additional G&R Bonds. The Subsidiary covenants that it
will not further amend or supplement the G&R Indenture or the Debenture
Indentures, or take any other action, to allow the issuance of any additional
G&R Bonds or any additional Subsidiary Debentures other than bonds issued in
lieu of or substitution therefor in accordance with the G&R Indenture and the
Debenture Indentures. The Subsidiary agrees to take such further actions as may
be required to close the G&R Indenture and the Debenture Indentures against the
13
authentication and delivery on initial issuance of additional G&R Bonds and
Subsidiary Debentures, respectively.
Section 6.20. Tax Rulings. The Subsidiary shall not do or omit to do any
act that would result in (i) the revocation of the rulings that were issued by
the Internal Revenue Service to the Authority, dated March 4, 1998, and (ii) a
resultant material federal income tax liability.
ARTICLE VII
AGREEMENT OF THE STATE
Section 7.1. Agreement of the State. In accordance with Section 1020-o of
the Act, the Authority, as agent for the State, does hereby pledge to and agree
with the holders of any obligations issued under the Act and the parties to any
contracts with the Authority thereunder that the State will not limit or alter
the rights thereby vested in the Authority until such obligations together with
the interest thereon are fully met and discharged and/or such contracts are
fully performed on the part of the Authority, provided that nothing herein
contained shall preclude such limitation or alteration if and when adequate
provision shall be made by law for the protection of the holders of such
obligations of the Authority, or those entering into such contracts with the
Authority.
ARTICLE VIII
EVENTS OF DEFAULT AND REMEDIES
Section 8.1. Events of Default. An "event of default" shall mean, whenever
used in this Financing Agreement, the occurrence and continuation of any one or
more of the following events:
(a) failure by the Subsidiary to make any payment when due under the
Note or required to be made to the Authority pursuant to Section 2.2 of
this Financing Agreement;
(b) failure by the Subsidiary to remit or cause to be remitted the
Revenues, or any portion thereof, promptly upon receipt by the Subsidiary,
for deposit in the Revenue Fund;
(c) failure of the Subsidiary to observe any covenant, term or
condition of this Agreement, other than as referred to in clause (a) or
(b) of this Section; provided, however, that such failure shall have
continued for a period of sixty (60) days after written notice, specifying
such failure and requesting that it be remedied, is given to the
Subsidiary by the Authority, unless the Authority shall agree in writing
to an extension of such time prior to its expiration, and provided
further, that if the failure stated in the notice cannot be remedied
within the applicable period, the Authority shall not unreasonably
withhold its consent to an extension of such time if corrective action has
been instituted by the Subsidiary, as the case may be, within such period
and is being diligently pursued;
(d) if the Subsidiary (1) files a petition seeking a composition of
its indebtedness under the Federal bankruptcy laws, or under any other
applicable law or statute of
14
the United States of America or of the State; (2) consents to the
appointment or taking possession by a receiver, liquidator, assignee,
custodian, trustee, sequestrator or other similar official of the
Subsidiary or any substantial portion of its property; (3) makes any
assignment for the benefit of creditors; (4) admits in writing its
inability to pay its debts generally as they become due; or (5) takes
action in furtherance of any of the foregoing;
(e) if (1) a decree or order for relief is entered by a court having
jurisdiction of the Subsidiary adjudging the Subsidiary a bankrupt or
insolvent or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or composition in respect of the
Subsidiary in an involuntary case under the Federal bankruptcy laws, or
under any other applicable law or statute of the United States of America
or of the State; (2) a receiver, liquidator, assignee, custodian, trustee,
sequestrator or other similar official of the Subsidiary or of any
substantial portion of its property is appointed; or (3) the winding up or
liquidation of its affairs is ordered and the continuance of any such
decree or order unstayed and in effect for a period of sixty (60)
consecutive days; or
(f) the respective provisions of the Act pursuant to which the
Resolution has been adopted or Authority Obligations have been issued or
entered into, including, without limitation, those provisions pursuant to
which the lien upon the Revenues has been created pursuant to this
Financing Agreement and the Resolution and those provisions authorizing
the establishment of the Subsidiary, shall be materially and adversely
limited, altered or impaired by any legislative action or any formal
judgment or the terms, conditions and security provided under this
Financing Agreement, the Authority Obligations and the Resolution shall be
materially and adversely limited, altered or impaired by any legislative
action or any final judgment.
Section 8.2. Remedies. Whenever any event of default shall have occurred
and be continuing, and written notice of the event of default, if required,
shall have been given to the Subsidiary by the Authority or by the Trustee and
the event of default shall not have been cured within the period provided
therefor, the Authority and the Trustee may take whatever action at law or in
equity may appear necessary or desirable to collect the payments then due and as
they thereafter become due, and the Authority and the Trustee, so long as any
Bonds are outstanding, may take whatever action at law or in equity may appear
necessary or desirable to enforce performance and observance of any obligation,
agreement or covenant of the Subsidiary under this Financing Agreement.
Section 8.3. Remedies Not Exclusive. (a) Subject to the provisions of
Sections 8.1 and 8.2 hereof, the remedies conferred upon or reserved to the
Authority in respect of any event of default are not intended to be exclusive of
any other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute.
(b) No delay or omission 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 thereof, but any such right and power may be exercised from time to time
and as often as may be deemed expedient. In order to entitle the Authority to
exercise any remedy reserved to it in this Article, it
15
shall not be necessary to give any notice, other than such notice as may be
expressly required herein.
ARTICLE IX
TERMINATION
Section 9.1. Termination. This Financing Agreement shall terminate, and
the covenants and other obligations contained herein shall be discharged and
satisfied, when (i) payment of all Authority Obligations has been made or
provided for in accordance with the Resolution (or such other resolution, trust
indenture or similar document securing such indebtedness) and (ii) either all
payments required hereunder have been made in full, or provision for such
payments satisfactory to the Authority and the Trustee has been made or the
Authority pays or assumes all liabilities, obligations, duties, rights and
powers of the Subsidiary hereunder.
ARTICLE X
AMENDMENTS TO THE AGREEMENT
Section 10.1. Amendments to Agreement; Consents. (a) No amendment, waiver,
consent or extension of the time for performance of or under this Financing
Agreement shall be effective unless it is in writing, signed by each of the
parties hereto and, to the extent required by the Resolution, consented to in
writing by the Trustee.
(b) Except as hereinafter expressly provided, the parties hereto may enter
into any amendment, change or modification of this Financing Agreement;
provided, however, the parties hereto shall not enter into or consent to, any
amendment, change or modification of the provisions of this Agreement, without
first obtaining the consent of the holders of or parties to Authority
Obligations in accordance with and to the extent provided by the provisions
thereof and of the Resolution, if such amendment, modification or change would
materially adversely affect the rights of such holders or parties by modifying
or revoking the provisions of this Financing Agreement with respect to: (i) the
obligations of the Subsidiary under Article II, III, IV and VI hereof; (ii) the
grant of Revenues to the Authority; (iii) the pledge and assignment of the
System Agreements; (iv) the deposit or application of the Revenues in the
Revenue Fund; (v) the consent to assignment by the Authority; (vi) the agreement
of the State; (vii) events of default and remedies; (viii) termination; (ix)
amendments to this Agreement; (x) the controlling effect of the Resolution and
the Authority Obligations; (xi) severability of invalid provisions; (xii)
governing law; or (xiii) the effective date of this Financing Agreement.
Section 10.2. Consent of Trustee. In consenting to any amendment referred
to in Section 10. 1 the Trustee shall be fully protected in relying on an
opinion of Bond Counsel, reasonably satisfactory to the Trustee, that such
amendment is authorized or permitted by the terms of this Financing Agreement.
16
ARTICLE XI
INDEMNITY OF AUTHORITY
Section 11.1. Indemnity by Subsidiary. To the extent permitted by law, the
Subsidiary hereby releases and agrees to hold harmless and indemnify the
Authority and its trustees, officers, officials, agents and employees from and
against all, and agrees that the Authority and its trustees, officers,
officials, agents and employees shall not be liable for any, (i) liabilities,
suits, actions, claims, demands, damages, losses, expenses and costs of every
kind and nature resulting from any action taken in accordance with, or permitted
hereby, or the Resolution, or arising from or incurred by the Authority by
reason of its incurrence of Authority Obligations pursuant hereto and the
Resolution, or (ii) loss or damage to property or any injury to or death of any
or all persons that may be occasioned by any cause whatsoever pertaining to the
System arising by reason of or in connection with the presence on, in or about
the premises of the System of any person; including in each case, without
limiting the generality of the foregoing, causes of action and attorneys' fees
and other expenses incurred in defending any suits or actions which may arise as
a result of any of the foregoing and including any loss, damage or liability
which may arise as a result of the negligence (but excluding any loss, damages
or liability which may arise as a result of the gross negligence, willful
misconduct, or intentional misrepresentation) of any party so indemnified by the
Subsidiary, and to deliver at the request of an Authorized Representative of the
Authority any further instrument or instruments in form satisfactory to such
Authorized Representative as to such provisions of this Section; provided,
however, that the indemnity provided in this sentence shall be effective only to
the extent of any loss or liability that may be sustained by the Authority or
another party so indemnified by the Subsidiary in excess of net proceeds
received from any insurance carried with respect to such loss or liability; and
provided further that the Authority and the Subsidiary shall each provide waiver
of rights of subrogation against the other in any insurance coverage obtained
relating to the System.
ARTICLE XII
MISCELLANEOUS
Section 12.1. Conflicts. The provisions of this Financing Agreement are in
no way intended to, nor shall such provisions, change or in any manner alter the
terms of the Resolution, or the security, rights or remedies of the Trustee or
the holders or owners of Authority Obligations. In the event any provision of
this Financing Agreement conflicts at any time, or in any manner, with the
provisions of the Resolution or any Authority Obligations, the provisions of the
Resolution or Authority Obligation shall be controlling and conflicting
provisions of this Financing Agreement shall be disregarded.
Section 12.2. Assignment. The Authority has, pursuant to the Resolution,
pledged and assigned to the Trustee certain of its rights and interests in and
to this Financing Agreement including, without limitation, its rights and
interests in and to all amounts payable to the Authority hereunder as security
for the payment of the principal of, premium, if any, and interest on the Bonds
and other Authority Obligations. The Subsidiary hereby consents to such pledge
and assignment and to the enforcement of such rights and interests by the
Trustee.
17
Section 12.3. No Waiver. No failure to exercise, and no delay in
exercising by the parties hereto, any right, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial exercise of any
right, power or privilege hereunder preclude any other or further exercise
thereof, or the exercise of any right, power or privilege. The rights and
remedies herein provided are cumulative and not exclusive of any rights or
remedies provided by law.
Section 12.4. Notices. All notices, requests and other communications
under this Agreement shall be deemed to have been duly given if in writing and
delivered personally or by certified mail (a) to the Subsidiary at 000 Xxxxx
Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx 00000, attention: Chairman
(with a copy to the attention of General Counsel at the same address); and (b)
to the Authority at 000 Xxxxx Xxxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxx, Xxx Xxxx
00000, attention: Chairman (with a copy to the attention of General Counsel at
the same address), or such other address as, the Subsidiary and the Authority,
as the case may be, shall hereafter designate by notice in writing.
Section 12.5. Separability. In the event that any one or more of the
provisions contained in this Agreement is or are invalid, irregular or
unenforceable in any respect, the validity, regularity and enforceability of the
remaining provisions contained in this Agreement shall be in no way affected,
prejudiced or disturbed thereby.
Section 12.6. Headings. The descriptive headings of the several articles
of this Agreement are inserted in this Financing Agreement for convenience only
and shall not be deemed to affect the meaning or construction of any of the
provisions hereof.
Section 12.7. Governing Law. This Financing Agreement shall be governed
by, and construed in accordance with, the internal laws of the State of New
York, without regard to conflicts of laws principles.
Section 12.8. Payments on Saturdays, Sundays and Holidays. In any case
where the date of any payment required to be made under this Financing Agreement
shall be a Saturday or a Sunday or shall be, at the place designated for such
payment, a legal holiday or a day on which banking institutions are authorized
by law to close, then such payment shall not be made on such date but shall be
made on the next preceding business day not a Saturday, Sunday or a legal
holiday or a day upon which banking institutions are authorized by law to close.
Section 12.9. Obligation for Payment Absolute. Anything herein to the
contrary notwithstanding, the Subsidiary agrees that its obligation to make
payments hereunder and under the Note 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, any failure by the Authority to perform any of its
obligations hereunder.
Section 12.10. Counterparts. This Financing Agreement 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.
18
Section 12.11. Date of Agreement. The date of this Financing Agreement
shall be for identification purposes only. This Financing Agreement shall become
effective upon the delivery of the initial issue of bonds, notes or other
obligations of the Authority to the original purchasers thereof.
IN WITNESS WHEREOF, the Authority has caused this Financing Agreement to
be executed in its name by its Chairman and the Subsidiary has caused this
Financing Agreement to be executed in its name by its Chairman, all as of the
date first above written.
LONG ISLAND POWER AUTHORITY
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Chairman
LIPA ACQUISITION CORP.
By: /s/ Xxxxxxx X. Xxxxxx
-----------------------------
Chairman
19
Exhibit A
Schedule of Outstanding Subsidiary Unsecured Debt
Debentures
Amount Redemption
Maturity ($000) Rate Callable On Price(l)
-------- ------ ---- ----------- --------
1/15/00 $ 36,000 7.300% NC NA
7/15/01 145,000 6.250 NC NA
3/15/03 150,000 7.050 NC NA
3/01/04 59,000 7.000 NC NA
6/01/05 200,000 7.125 NC NA
3/01/07 142,000 7.500 3/01/98 103.54%
7/15/19 420,000 8.900 7/15/98 105.94
11/01/22 451,000 9.000 11/l/02 104.19
----------
$1,603,000
==========
7/15/99(2) $ 397,000 7.300% NC NA
3/15/23(2) 270,000 8.200 3/15/2003 104%
----------
$ 667,000
----------
$2,270,000
==========
----------
NC = Non-callable
NA = Not applicable
(1) Declining upon later redemption date.
(2) Subject to BL Holding Corp. exchange offer.
A-1
NYSERDA Financing Notes(1)
Amount
Outstanding Redemption
Maturity ($000) Rate Callable On Price
-------- ------ -------- ----------- -----
12/01/06 $ 2,000 7.500% At any time 100%
12/01/06 27,375 7.500 At any time 100
12/01/09 19,100 7.800 At any time 100
10/01/12 17,200 8.250 At any time 100
3/01/16 150,000 Variable AIPD 100
9/01/19 50,000 7.150 6/15/02 102
9/01/19 50,000 7.150 6/15/02 102
6/01/20 100,000 7.150 6/15/02 102
12/01/20 100,000 7.150 6/15/02 102
2/01/22 50,000 7.150 6/15/02 102
2/01/22 50,000 7.150 6/15/02 102
8/01/22 50,000 6.900 1/21/03 102
8/01/22 50,000 6.900 1/21/03 102
11/01/23 50,000 Variable AIPD 100
11/01/23 50,000 Variable AIPD 100
10/01/24 50,000 Variable AIPD 100
8/01/25 50,000 Variable AIPD 100
--------
$915,675
========
-------------
NYSERDA = New York State Energy Research and Development Authority
AIPD = Any Interest Payment Date
(1) NYSERDA Financing Notes, Series 1997A, due 12/01/27 in the principal
amount of $24,880,000 and bearing variable interest rates are to be
transferred to BL Holding Corp. or one of its subsidiaries.
A-2
Exhibit B
Form of Disbursement Request
STATEMENT NO._____
REQUESTING DISBURSEMENT OF FUNDS FROM THE CONSTRUCTION FUND
Pursuant to Section 3.2 of the Financing Agreement dated as of May 1, 1998
by and between Long Island Power Authority and LIPA Acquisition Corp. (the
"Financing Agreement"), the undersigned Authorized Representative (a defined in
the Resolution) of the Subsidiary hereby requests the Authority to pay or cause
to be paid to the Subsidiary or to the person(s) listed on the Schedule attached
hereto out of the moneys on deposit in the Construction Fund (as defined in the
Resolution) the aggregate sum of $_________ to pay such person(s) or to
reimburse the Subsidiary, as indicated on such Schedule, for Costs of System
Improvements.
In connection with the foregoing, the undersigned hereby certifies that:
(a) Each item for which disbursement is requested hereunder is
properly payable out of the Construction Fund in accordance with the terms
and conditions of the Financing Agreement and the Resolution and none of
such items has formed the basis for any disbursement heretofore made from
the Construction Fund; and
(b) This Disbursement Request and all attachments hereto, including
the Schedule attached hereto, shall constitute full warrant, protection
and authority to the Authority for its actions taken pursuant hereto.
Capitalized terms used herein and not otherwise defined shall have the
respective meanings accorded such terms in the Financing Agreement.
This _____ day of ________________, _____.
___________________________
Authorized Representative
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DISBURSEMENT SCHEDULE TO STATEMENT NO.____
REQUESTING DISBURSEMENT OF FUNDS FROM CONSTRUCTION FUND
Name and Address
of Payee Amount Description of Cost
-------- ------ -------------------
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Exhibit C
Form of Subsidiary Note
LIPA ACQUISITION CORP.
FINANCING AGREEMENT NOTE
FOR VALUE RECEIVED, the undersigned LIPA Acquisition Corp., a New York
business corporation (the "Subsidiary"), hereby promises to pay to the order of
the Long Island Power Authority, a corporate municipal instrumentality of the
State of New York (the "Authority"), on or before one business day prior to each
due date for the payment of the principal of and redemption price, if any, or
interest on, or other payments required under, Authority Obligations (as defined
in the Financing Agreement hereinafter referred to), until the same shall have
been paid in full or provision for the payment thereof in full shall have been
made in accordance with the Resolution (as defined in the Financing Agreement)
or the provisions thereof, payments in an amount which, when added to any moneys
then on deposit under the Resolution and available therefor, including any
dividends theretofore paid to the Authority and held thereunder, shall be equal
to the amount payable on such due date with respect to the Authority Obligations
as provided in the Resolution, including amounts due for the payment of the
principal of and sinking fund installments and premium, if any, and interest on
the Bonds. In addition, the Subsidiary shall pay or cause to be paid to the
Authority, as and when the same shall become due, all other amounts due and
payable by the Authority under the Resolution and all other documents entered
into by the Authority in connection with the Authority Obligations, together
with interest thereon at the then applicable rate, and any other amounts payable
by the Authority from Revenues in accordance with the Resolution.
In order to assure a source of payment of and security for this Note, in
accordance with, and as more particularly set forth in, the Financing Agreement,
the Subsidiary has given, granted, conveyed and transferred to the Authority all
of its right, title and interest in and to the Revenues and certain other assets
and interests. The Subsidiary hereby agrees that the Authority may apply such
Revenues and any amounts received by the Authority in respect of such other
assets and interests to the payment hereof in accordance with the Resolution.
This Note is issued pursuant to Section 2.2 of the Financing Agreement by
and between the Authority and the Subsidiary, dated as of May 1, 1998, as
amended and supplemented (the "Financing Agreement").
The principal amount from time to time due and owing hereunder, the
scheduled amortization thereof and related interest rates (or the method of
determining the same) shall be evidenced by the periodic delivery to the
Subsidiary of a certificate of an Authorized Representative of the Authority
setting forth the same. Payments shall be made at such time or times, such
office or offices and in such manner as shall be specified by the Authority.
During the occurrence and continuance of any Event of Default as defined
in the Financing Agreement, the Authority (or any permitted assignee under the
Financing Agreement) may exercise any of the remedies provided in the Financing
Agreement.
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THIS NOTE SHALL NOT BE A DEBT OF THE STATE OF NEW YORK OR ANY
MUNICIPALITY, AND NEITHER THE STATE OF NEW YORK NOR ANY MUNICIPALITY SHALL BE
LIABLE THEREON. NEITHER THE CREDIT, THE REVENUES NOR THE TAXING POWERS OF THE
STATE OF NEW YORK OR ANY MUNICIPALITY SHALL BE, OR SHALL BE DEEMED TO BE,
PLEDGED TO THE PAYMENT OF THIS NOTE.
No recourse shall be had for the payment of this Note, or for any claim
based on this Note or on the Financing Agreement, against any director or
officer of the Subsidiary.
This Note shall be governed by, and construed in accordance with, the laws
of the State of New York.
IN WITNESS WHEREOF, the Subsidiary has caused this Note to be duly
executed and its corporate seal to be affixed hereto.
DATED as of: May 28, 1998
LIPA ACQUISITION CORP.
By_________________________
Chairman
(SEAL)
Attest:
______________________________
Secretary
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