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| | issue date = 09/08/1997 | | | issue date = 09/08/1997 |
| | title = Forwards Original Notarized Copy of Lilco Request for NRC Approval of Indirect Transfer of Control Over Minority Interest in Nine Mile Point,Unit 2 | | | title = Forwards Original Notarized Copy of Lilco Request for NRC Approval of Indirect Transfer of Control Over Minority Interest in Nine Mile Point,Unit 2 |
| | author name = REVELEY W T | | | author name = Reveley W |
| | author affiliation = HUNTON & WILLIAMS | | | author affiliation = HUNTON & WILLIAMS |
| | addressee name = | | | addressee name = |
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| {{#Wiki_filter:CATEGORY1~~'REQULQT(INFORMATION DISTRIBUTION | | {{#Wiki_filter:}} |
| 'QTEM(RIDE)IACCESSIONNBR.97091003162 DOC.DATE.
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| 97/09/08NOTARIZED.
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| NODOCKETIFACIL:50-410 NineMilePointNuclearStation,Unit2,NiagaraMoha05000410AUTH.NAMEAUTHORAFFILIATION REVELEY,W.T.
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| 'unton6WilliamsRECIP.NAME RECIPIENT AFFILIATION DocumentControlBranch(Document ControlDesk)
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| | |
| ==SUBJECT:==
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| Forwardsoriginalnotarized copyofLILCOrequestforNRCapprovalofindirecttransferofcontroloverminorityinteresti..nNineMilePoint,Unit2.DISTRIBUTION CODE:MOOSDCOPIESRECEIVED:LTR tENCLJSIZE:TITLE:ChangesofPersonnel/Address NOTES:ARECIPIENT IDCODE/NAME PD1-1LAHOOD,DCOPIESLTTRENCL1111RECIPIENT IDCODE/NAME PD1-1PDCOPIESLTTRENCL10INTERNAL:
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| ACRSCENTER11111111ADM/DIST/T-6E7 CAA-16B-13 OC/LFDCBSECY/DSB11111011EXTERNAL:
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| NRCPDR11DUENOTETOALL"RIDS"RECIPIENTS:
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| PLEASEHELPUSTOREDUCEWASTE.TOHAVEYOURNAMEORORGANIZATION REMOVEDFROMDISTRIBUTION LISTSORREDUCETHENUMBEROFCOPIESRECEIVEDBYYOUORYOURORGANIZATION, CONTACTTHEDOCUMENTCONTROLDESK(DCD)ONEXTENSION 415-2083TOTALNUMBEROFCOPIESREQUIRED:
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| LTTR12ENCL10 d~t4 ATLANTA,GEORGIADRUSSELS, BELGIUMCHARLOTTE, NORTHCAROLINAHONGKONGKNOXVILLE, TENNESSEE MCLEAILVIRGINIAW.TAYLORREVELEY,IIIHU'NTONBcVfILLIA.MS RIVEBPBONT PLAZA,EASTTOWEB951EASTBYRDSTBEETRICIXMOND.
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| VIBOINIA23819-4074 TELEPHONE I804I788-8200FACSIMILE I804I788-82ISNEWYORK.NEWYORKNORFOLK.VIRGINIARALEIGH.NORTHCAROLINAWARSAW.POLANDWASHINGTON.
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| D.C.DIREcrDIAL'804) 7884359E-MAII'REVELEYHUNIOiV.COM September 8,1997U.S.NuclearRegulatory Commission Washington, D.C.20555Attention:
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| DocumentControlDeskREQUESTFORNRCCONSENTTOLILCO'SINDIRECTTRANSFEROFCONTROLOVERITSINTERESTINNINEMILEPOINTNUCLEARPOPOVERSTATION,UNIT2DOCKETNUMBER50-410OPERATING LICENSING NO.NPF-69
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| ==DearDocumentControlDesk:==
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| Enclosedistheoriginalnotarized copyoftheLongIslandLightingCompany's requestforNRCapprovalofanindirecttransferofcontroloverLILCO'sminorityinterestinNineMilePoint2.Verytrulyyours,W.TaylorReveley,IIEnclosure cc:HubertJ.MillerBarryJ.Norris9709i00ie2 OeioPDRADOCK0500Hillllllllillltlll!lllllllllllf((lllllll t"t'R/fiP1uI~>II ATTACHMENT BggscoLONCISLANDLICHTINCCOMPANYEXECUTIVE OFFICES:175EASTOLDCOUNTRYROAD%HICKSVILLE, NEWYORK11801WILLIAMJ.CATAOOSINOS CHAIRMANANDCHIEFEXECUTIVE CFFICER
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| ==DearShareholder:==
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| June27,1997WewillbeholdingourannualmeetingonAugust7thisyear,andIcordially inviteyoutoattend.Thismeetingisparticularly important becauseyouwillbeaskedtoapproveboththeproposedcombination ofLILCOandBrooklynUnionandthesaleofcertainassetstotheLongIslandPowerAuthority (LIPA)throughastocktransaction.
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| Ihopeyourschedulewillallowyoutoattendand,ifitdoesnot,atleasttoberepresented byproxy.Thisjointproxystatement withBrooklynUnionprovidesyouwithadetaileddescription ofbothofthesetransactions whichwebelievearebeneficial toinvestors, customers andemployees.
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| YourBoardofDirectors recommends approvalofthesetwoproposals andurgesyoutovoteFOReachofthem.Everyvotecountsbecauseweneedatwo-thirds majorityforapproval.
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| ANYSHARESNOTVOTEDWILLBECOUNTEDASVOTESAGAINSTTHEPROPOSEDTRANSACTIONS.
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| Byjoiningtwoutilities withadjacentterritories andcomplementary
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| : services, wewillhavecreatedapowerfulenergycompanyinoneofthestrongest energymarketsinthecountry.Thesynergies ofthecombination areexpectedtoresultinoperating efficiencies ofmorethan$1billionover10yearsaswellasbringtogetheratalentedgroupofenergyexperts.Thecombination ofthetwocompanies willresultintheformation ofanewholdingcompanywhichhasnotyetbeennamed.WehaveusedthenameBLHoldingCorp.inthisproxyasatemporary name.Afterthecombination ofthetwocompanies, theBrooklynUnionandLILCOregulated utilities willbecomeseparatesubsidiaries oftheholdingcompanyalongwithsomeunregulated subsidiaries alreadyownedbyBrooklynUnion.Theholdingcompanystructure willallowustooperateourcoreutilitybusinesses, growourunregulated subsidiaries, anddeveloporacquireotherenergyproducts, servicesandcompanies totakeadvantage oftheemergingcompetitive energymarket.Undertheagreement withBrooklynUnion,LILCOandBrooklynUnionshareholders willeachexchangetheircurrentsharesforsharesinthenewholdingcompany.LILCOshareholders willreceive0.803sharesinthenewcompanyforeachLILCOshareand,intotal,LILCOshareholders willown66percentofthesharesinthenewholdingcompanyandBrooklynUnionshareholders willown34percent.IftheLIPAtransaction takesplace,LILCOshareholders willincreasetheirownership inthenewcompanyto68percentandreceive0.880sharesforeachLILCOcommonshareandBrooklynUnionshareholders willown32percentofthenewholdingcompany.Undertheagreement withtheLongIslandPowerAuthority, LIPAwillacquireLILCO'selectrictransmission anddistribution system,substantially allofitselectricregulatory assetsandits18percentinterestintheNineMilePoint2nuclearpowerplantforapproximately
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| $2.5billionincashandtheassumption orrefinancing byLIPAofapproximately
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| $339millioninpreferred stockandapproximately
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| $3.6billionindebt.Theholdingcompanywillendupwithapproximately
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| $1.7billionincashandwillhaveaconsiderably strongerbalancesheet.t9709100162 Byapproving bothproposals, youwillbeinapositiontobecometheownerofanexcitingnewenergyholdingcompanywithregulated naturalgasdistribution utilities, electricgeneration facilities andseveralunregulated subsidiaries.
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| Inaddition, thenewcompanywillhaveserviceagreements withLIPAtomanagetheelectricsystemonLongIsland.Thesetransactions resolvelong-standing controversies stemmingfromtheconstruction oftheShorehamnuclearplant.Thesolutiontreatsinvestors fairlywhileproviding customers withsubstantial ratereductions andprotection fromcourt-ordered taxliabilities.
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| IntheNoticeofMeetingthatfollows,wehavealsodescribed othermattersbeingsubmitted foryourvote,allofwhichtheBoardofDirectors recommends youvoteFOR.Aquestionandanswerdiscussion beginsonpageIandInoredetaileddescriptions follow.Weappreciate yoursupportofthesetransactions whichwestronglybelievetobeinthebestinterests ofallparties.Pleasesign,dateandreturnyourproxycardtoday.IlookforwardtoseeingyouatthemeetingonAugust7,1997.Thankyou.OnbehalfoftheBoardofDirectors, Sincerely, WILLIAMJ.CATAcosINos NeithertheSECnoranystatesecurities regulator hasapprovedthecommonstockofBLHoldingCorp.tobeissuedunderthisJointProxyStatement/Prospectus, ordetermined ifthisJointProxyStatement/Prospectus isaccurateoradcquatc.
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| Anyrepresentation tothecontraryisacriminaloffense.JointProxyStatement/Prospectus datedJune27,1997,andfirstmailedtoshareholders onoraboutJune30,1997.
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| LONGISLANDLIGHTINGCOMPANYEXECUTIVE OFFICES:176EASTOLDCOUNTRYROAD~HICKSVILLE, NEWYORK11601KATHLEENA.MARIONCORPORATE SECRETARY 4RCIVICEPRESIDENT OFCORPORATE SSRVICSSNOTICEOFANNUALMEETINGOFSHAREHOLDERS ToBeHeldAugust7,1997/TheAnnualMeetingofShareholders ofLongIslandLightingCompanywillbeheldatTillesCenterforthePerforming ArtsatLongIslandUniversity, C.W.PostCampus,NorthernBoulevard, Greenvale, NewYork11548,at3:00p.m.,localtime,onThursday, August7,1997,forthefollowing purposes:
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| 1.toadopttheAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJune26,1997,betweenTheBrooklynUnionGasCompanyandLongIslandLightingCompany(described beginning onp.70);2.toadopttheAgreement andPlanofMerger,datedasofJune26,1997,betweentheLongIslandPowerAuthority (LIPA),LIPAAcquisition Corp.andLILCO(described beginning onp.84);3.toelecttwelveDirectors (described beginning onp.J-1);4.toratifytheappointment ofEmst&YoungLLPasindependent auditorsfortheperiodJanuary1,1997toMarch31,1998(described onp.J-16);5.toapprovetheLILCOAnnualStockIncentive Compensation Plan(described beginning onp.J-16);6.toapprovetheLILCOEmployeeStockPurchasePlan(described beginning onp.J-17);7.toapproveanamendment totheLILCOCertificate ofIncorporation toincreasethetotalnumberofauthorized sharesofLILCO,Common Stock(described beginning onp.J-18);and8.totakeactiononsuchotherbusinessasmayproperlycomebeforethemeeting.Theproposals presented forvotearenotconditioned ononeanother.Pleasemark,signanddatetheenclosedproxycardandreturnitpromptlyinthepostpaidreturnenvelopeprovided, whetheror'otyouexpecttoattendthemeeting.Returning theproxycardwillnotaffectyourrighttovoteinpersonshouldyoudecidetoattendthemeeting.AnysharesnotvotedwillbecountedasvotesagainstItems1and2.OnlyholdersofrecordofLILCOcommonstockandthoseseriesofpreferred stockentitledtov'oteontheLIPATransaction atthecloseofbusinessonJune26,1997areentitledtonoticeofandareeligibletovoteatthemeetingandatallpostponements oradjournments thereof.Ifyouplantoattendthemeeting,pleasebringtheenclosedadmission cardorproofofownership.
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| Ifyoursharesareheldthroughabankorbrokerage firmandyouplan.toattendthemeeting,pleaserequestaletterorsomeotherevidenceofownership fromyourbankorfirmaswellasproperauthorization ifyouwishtovoteyoursharesinperson.Ifeitheroftheagreement withBrooklynUnionortheagreement withLIPAareadoptedbyourcommonshareholders andpreferred shareholders, asrequired, andeitheroftheproposedtransactions occurs,aholderofrecordofourcommonstock(orinconnection withtheagreement withLIPA,aholderofrecordofpreferred stockentitledtovotethereon)ontherecorddatewhodissentsanddoesnotvoteforthe,proposalisentitledtoreceivepaymentincashifthatholderfollowstheprocedures providediriSections623and910of,theNewYorkBusinessCorporation Law,attachedasAnnexItotheaccompanying JointProxyStatement/Prospectus.
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| ByOrderoftheBoardofDirectors, KATHLEBNA.MARIONVicePresident andCorporate Secretary
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| [THISPAGEINTENTIONALLY LEM>>'LANK]
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| ,TABLEOFCONTENTSQUESTIONS
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| /kANSWERSONTHEBROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION; SUMMARYOFJOINTPROXYSTATEMENT/PROSPECTUS
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| ................,....
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| JOINTPROXYSTATEMENT/PROSPECTUS
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| .........
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| THEBROOKLYNUNION/LILCO COMBINATION....
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| IBackground oftheCombinatibn
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| ....................
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| CommonReasonsfortheCombination
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| ..............
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| Recommendation oftheLILCOBoardofDirectors....
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| OpinionofLILCO'sFinancial Advisor..............
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| Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction............
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| CertainArrangements Regarding theDirectors andManagement oftheHoldingCompanyFollowing theCombination andtheLIPATransaction............
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| FederalIncomeTaxConsiderations
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| .................,
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| Accounting Treatment StockExchangeListingoftheHoldingCompany.Stock.~~~~~I~~FederalSecurities LawConsequences
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| ...............
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| Appraisal Rights.,MEETINGS, VOTINGANDPROXIES...............
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| TheLILCOMeeting............
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| REGULATORY MATTERSStateApprovals andRelatedMatters........,.......
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| PublicUtilityHoldingCompanyActof1935.........
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| FederalPowerAct.Antitrust Considerations AtomicEnergyActPublicAuthorities ControlBoardApproval...........
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| General.UNAUDITED PROFORMACONSOLIDATED CONDENSED FINANCIAL INFORMATION (PURCHASE)
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| UNAUDITED PROFORMACOMBINEDi,CONDENSED FINANCIAL INFORMA'f ION(POOLING)
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| THECOMPANYFOLLOWING THECOMBINATION ANDTHELIPATRANSAClION..................
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| IManagement ofthcHoldingCompany...............
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| CommonStockDividends DESCRIPI'ION OFHOLDINGCOMPANYCAPITALSTOCKGeneralHoldingCompanyPreferred Stock..................
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| HoldingCompanyCommonStock..................
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| CertainAnti-Takeover Provisions...'................
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| THEAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGER.......
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| IThcCombination EffectsoftheCombination
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| .Representations andWamnties.....................
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| CertainCovenants Indemnification Employment andWorkforce Matters..~........,....
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| StockandBenefitPlans...........................
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| NoSolicitation ofTransactions
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| ..~..................
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| Additional Agreements
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| .Conditions toEachParty'sObligation toEffectthcCombination
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| .........
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| ~...........
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| >i...........
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| Termination
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| .Termination Fees.PageI17202025252736363743444747505050515152525254666667676770707072737474757576777880THESTOCKOPI'IONAGREEMENTS
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| ..GeneralCertainRepuiehases Restrictions onTransferTHELIPATRANSACTION Agreement andPlanofMerger........
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| OtherBasicAgreements Page81818283848487SELECTEDINFORMATION CONCERNING LILCO...BusinessofLILCOComparison ofShareholders'ights.................
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| Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoLILCO'sCcrtiflcate ofIncorporation andBy-Laws.......................
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| Anti-Takeover StatutesPotential Conflicts ofInterestofCertainPersonsjntheCombination andtheLIPATransaction............
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| SecurityOwnership ofCertainBenelicial OwnersandManagement CertainBusmessRelationships BetweenBrooklynUnionandLILCOSELECTEDINFORMATION CONCERNING BROOKLYNUNION......Recommendation oftheBrooklynUnionBoard....
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| OpinionofBrooklynUnion'sFinancial Advisor....
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| Potential Conflicts ofInterestofCertainPersonsintheCombination andtheLIPATransaction............
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| Comparison oftheHoldingCompany's Certilicate ofIncorporation andBy-LawstoBrooklynUnion'sCertilicate ofIncorporation andBy.Laws..........
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| TheBrooklynUnionMeeting...........,..........
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| BusinessofBrooklynUnionSecurityOwnership ofCertainBeneficial OwnersandManagement CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS.......
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| 88888989'0919294949495101102103105106107LEGALMATfERS.107EXPERTSFUTURESHAREHOLDER PROPOSALS
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| ..'07108AnnexA-AnnexB-AnnexC-AnnexDAnnexEAnnexFAnnexGAnnexHAnnexIAnnexJAmendedandRestatedAgreement andPlanofExchangeandMergerAmendedandRestatedLILCOStockOptionAgreement AmendedandRestatedBrooklynUnionStockOptionAgreement Agreement andPlanofMergerOpinionofMerrillLynch,Pierce,Fenner&SniithIncorporated OpinionsofDillon,Read8cCo.Inc.FormofCertificate ofIncorporation oftheHoldingCompanyFormofB'-lawsoftheHoldingCompanySection623andSection910ofthcNewYorkBusinessCorporation LawThcLILCOMeetingProposals WHEREYOUCANFINDMOREINFORMATION
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| ....109LISTOFDEFINEDTERMS.
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| QUESTIONS
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| &ANSWERSONTHEBROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION; SUMMARYOFJOINTPROXYSTATEMENT/PROSPECTUS Thissummaryliighlights selectedinformation fromthisdocumentandmaynotcontainalloftlieinformation thatisimportant toyou.Tounderstand theBrookletUnion/LILCO Combination andtheLIPATransaction fttllyandforamorecompletedescription oftftelegaltermsoftireBroollynUition/ULCO Combination andtheLIPATransaction, youshould'read carefully thisentiredocumentandthedocuments we/taver'eferred youto.See"W/tereYouCanFindMoreInfomtation" (Page109).InadditiontotheBrooklynUnion/LILCOCombination, BrooklynUnionshareholders willalsobeaskedtoapproveaproposaltoformanewlioldingcompanypendingtlteconsummation oftheBrooklynUiu'on/LILCO Agreement.
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| LILCOSliareholders willalsobeaskedtoapprovecertainat/terproposals inconnection withLILCO'sAnnualMeeting.Sliareliolders therefore shouldalsoread,carefttlly AnttexJofthisdoctunent.
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| 1,WHOARETHETWOCOMPANIES THATWILLCOMBINE?TheBrooklynUnionGasCompany-alsoreferredtointhisdocumentas"Brooklyn Union"-hasapproximately 3,000employees, distributes naturalgasintheNewYorkCityBoroughsofBrooklynandStatenIslandandintwo-thirds oftheBoroughofQueens,andservestheenergyneedsofapproximately
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| '.lmillioncustomers.
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| BrooklynUnion'sserviceterritory coversappro'ximately 187squaremiles,withapopulation ofapproximately 4millionpeople.BrooklynUnionanditssubsidiaries haveenergy-related investments ingasandoilexploration andproduction intheUnitedStatesandCanada,aswellasinenergyservicesintheUnitedStatesincluding cogeneration,,gas pipelinetransportation andstorage,marketing andotherrelatedservices.
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| BrooklynUnion'sprincipal executive officeisloca'tedatOneMetroTech Center,Brooklyn, NY11201-3851, anditsgeneraltelephone numberis(718)403-2000.
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| LongIslandLightingCompany-'alsoreferredtointhisdocumentas"LILCO"-hasapproximately 5,400employees andprovideselectricandgasservicetomorethan1millioncustomers inNassauandSuffolkCountiesandontheRockawayPeninsula inQueensCounty.LILCO'sserviceterritory covers1,230squaremileswithapopulation ofapproximately 2.7millionpeople.LILCO'sprincipal executive officeislocatedat175EastOldCountryRoad,Hicksville; NY11801,andits,generaltelephone numberis(516)755-6650.
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| 2.WHYHAVETHESETWO'OMPANIES DECIDEDTOCOMBINE?Thecombination ofBrooklynUnionandLILCOwillprovideimportant benefits'orthetwocompanies, fortheir"customers, employees andshareholders.
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| Shareholders willbenefitfromtheupsidepotential associated withthefollowing factors:~Combining BrooklynUnionandLILCOisexpectedtoresultinoperating efficiencies ofapproximately
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| $1billionover10years,whichwillbeusedtoprovideratereductions tocustomers.
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| ~Together, thetwocompanies willhelpspurincreased regionalbusinessgrowthbyproviding, energyandrelatedservicesatlowerprices.oOurcombinedcompanywillhaveanenhancedabilitytoprovideitsbroadercustomerbase,withcompetitive energyproductsandserviceswellintothefuture.~BrooklynUnionandLILCOtogetherintendtomarket,tradeanddeliverenergyproductsandservicesonalargescaletomajormarketareas.~Currentandprospective customers willbenefitfromtheopportunity todealwithanenergyservicescompanythatcanofferone-stopshoppingforproviding
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| -andmanaging-theirenergyneeds.Fortheseandotherreasons,theBoardsofDirectors ofbothBrooklynUnionandLILCOhaveunanimously approvedthecombination ofthetwocompanies, believing ittobeinthebestinterests of theirrespective companies andshareholders.
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| Accordingly, eachBoardrecommends thatitsrespective shareholders vote"FOR"theadoptionoftheBrooklynUnion/LILCO Agreement.
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| II3.HOWWILLTHE<SETWOCOMPANIES COMBINE?,
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| BrooklynUnionandLILCOwillcombinepursuanttoabindingshareexchangeandmergeragreement andbecomewholly-owned subsidiaries ofoneholdingcompany,tobenamedatalaterdate.Forpurposesofthisdocument, thenewcombinedcompanywillbereferredtoasBLHoldingCorp.ormoresimplyasthe"HoldingColnpany."
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| Thetransaction betweenourcompanies willbereferredtoasthe"Combination."
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| Underthisagreement, sharesofeachoftheindividual companies willbe,exchanged fororconverted intosharesofthene'wHoldingCompany,andeachofthecompanies'ommon shareholders willbecomeshareholders ofthenewHoldingCompany.4.HOWMANYSHARESWILLBROOKLYNUNIONSHAREHOLDERS RECEIVE<?
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| BrooklynUnionshareholders willreceiveoneshareofthecommonstockoftheHoldingCompanyforeachshareofBrooklynUnioncommonstocktheyown.Forpurposesof:thisdocument, theratioatwhichsharesofBrooklynUnioncommonstockwillbeexchanged forsharesofcommonstockofthe,HoldingCompanywillbereferredtoasthe"Brooklyn UnionRatio."5.HOWMANYSHARESWILLLILCOSHAREHOLDERS RE<CEIVE<?
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| ThenumberofsharesLILCOshareholders receiveswillbeasfollows(pleaseseeQuestions 9-12):a.LILCOshareholders willreceive0.803ofashareofcommonstockoftheHoldingCompanyforeachshareofLILCOcommonstocktheyown.Inthisscenario, BrooklynUnionandLILCOshareholders wouldown34percentand66percent,respectively,'f theshareso(thecommonstockoftheHoldingCompany.b.IftheLIPATransaction isalsocompleted (asdescribed inQuestions 10-13),=LILCOshareholders willtheninsteadreceive0.880ofashareofcommonstockoftheHoldingCompanyforeachshareofLILCOcommonstocktheyown.Shareholders forBrooklynUnionandLILCOwouldthenown32percentand68percent,respectively, ofthesharesofthecommonstockoftheHoldingCompany.IftheLIPATransaction is'completed buttheCombination isnot,LILCOalonewouldrestructure intoaholdingcompany.Inthiscase,LILCOshareholders wouldownallofthestoclofthenewHoldingCompany.6,WHOWILLMANAGETHENEWHOLDINGCOMPANY?Uponcompletion oftheCombination, Dr.WilliamJ.Catacosinos, currently ChairmanandChief.Executive OfficerofLILCO,willbecomeChairmanandChiefExe'cutive OfficeroftheHoldingCompany.Mr.RobertB.Catell,currently ChairmanandChiefExecutive OfficerofBrooklynUnion,willbecomePresident andChiefOperating OfficeroftheHoldingCompany.OneyearaftertheclosingoftheCombination, Mr.CatellwillsucceedDr.Catacosinos asChiefExecutive Officer,withDr.Catacosinos remaining asChairman.
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| 7.WHOWILLSERVEONTHEBOARDOFDIRECTORS OFTHEHOLDINGCOMPANY?TheBoardofDirectors oftheHoldingCompany'illconsistof15members:sixtobedesignated bytheBrooklynUnionBoard;sixtobedesignated bytheLILCOBoard;andthreeadditional personsjointlyselectedbyacommittee consisting oftwocurrent'Brooklyn Uniondirectors andtwocurrentLILCOdirectors.
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| 8.WHATWILLTHEDIVIDE<ND RATE<BEONTHEHOLDINGCOMPANY'S COMMONSTOCK?Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders aftercompletion oftheCombination andthetransaction withLIPAwillbe$1.78per commonsharc,subjecttoapprovaland'declaration bytheHoldingCompanyBoardofDirectors.
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| IftheCombination iscompleted, buttheLIPATransaction isnot,itisanticipated thattheinitialannualdividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare,subjecttoapprovalanddeclaration bytheHoldingCompanyBoardofDirectors.
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| Thepaymentofdividends bytheHoldingCompanyinthefuturewilldependonbusinessconditions, resultsofoperations, financial conditions, andotherfactors.9.WHATISTHELONGISLANDPOWERAUTHORITY?
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| TheLongIslandPowerAuthority (orLIPA)isacorporate municipal instrumentality andpolitical subdivision oftheStateofNewYork.Itisalsotheonlystateagencyinthecountrypermitted toissuetax-exemptbondsoutsideofthefederal.limitsplaceduponeachstate.LIPAisauthorized undertheLongIslandPowerAuthority ActtoacquirealloranypartofLILCO'ssecurities orassetsinorderto,amongotherthings,reduceelectricratespaidbyLILCOcustomers.
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| LIPAwillcreateLIPAAcquisition Corp.,aNewYorkcorporation andwholly-owned subsidiary ofLIPA,inordertocarryouttheLIPATransaction discussed below.10.WHATISTHE"LIPATRANSACTION"
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| ?LILCOhasenteredintoanagreement withLIPAinwhichLIPAwillacquireLILCO'selectrictransmission anddistribution system,itselectricregulatory assetsandits18percentinterestintheNineMilePoint2nuclearpowerplant,anucleargenerating facilitylocatedinOswego,NewYork.11.HOWWILLTHELIPATRANSACTION TAKEPLACE?Afterbecomingasubsidiary oftheHoldingCompany,LILCOwilldistribute to'heHoldingCompany,oroneormoreofitssubsidiaries, allofitsnaturalgasassetsandoperations, non-nuclear electricgenerating assetsandoperations, andcommonplant.TheLIPATransaction istheacquisition oftheremaining LILCOassetslistedinQuestion10forapproximately
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| $2.5billionincashandtheassumption, redemption orrefinancing byLIPAofapproximately
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| $339millioninpreferred stockandapproximately
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| $3.'6billionindebtattributable toLILCO.TheHoldingCompanywillendupwithapproximately
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| $1.7billionincashandwillhaveaconsiderably strongerbalancesheet.Thechartbelowshowsthebasicproposedstructure oftheHoldingCompanyafterthcBrooklynUnion/LILCO Agreement andLIPATransaction takeeffec.Shareholders (Previously ofBrooklynUnionandLILCO)BLHoldingCorp.BrooklynUnionSubsidiaries Consisting of:I)NewYorkCityNaturalGasAssetsandOperations; and2)Unregulated Operations NewSubsidiaries Consisting of:I)Non.Nuclear ElectricGenerating AssetsandOperations formerlyownedbyLILCO;2)LongIslandNaturalGasAssetsandOperations formerlyownedbyLILCO;and3)LIPAServiceAgreements 12.WHATWILLTHENE<WHOLDINGCOMPANYLOOKLIKEAFTERTHECOMBINATION ANDTHELIPATRANSACTION?
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| ThenewHoldingCompanywillbecomprised ofBrooklynUnion,consisting asitdoesatpresentofitsregulated naturalgasassetsandoperations andotherunregulated subsidiaries, andanewsubsidiary (orsubsidiaries) formedto,receive LILCO'snon-nuclearelectricgenerating assetsandoperations, naturalgasassetsandoperations andcbmmonplant.Inaddition, thenewHoldingCompanywillenterintoserviceagreements withLIPAto,amongotherthings,manageandoperatetheelectricsystemonLongIsland.IftheLIPATransaction doesnotoccur,BrooklynUnionandLILCOwouldbecomesubsidiaries pftheHoldingCompanypursuanttotheCombination (seeQuestions 1through8).Insuchevent,LILCO,orothersubsidiaries oftheHoldingCompany,wouldowntheassetscontemplated tobeacquiredbyLIPApursuanttothe-LIPATransaction andwouldserveLongIsland'selectriccustomers.
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| 13.WHATARETHEBENEFITSOFTHE-LIPATRANSACTION?
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| TheLIPATransaction shouldbenefitbothcustomers andcommonshareholders ofbothLILCOandBrooklynUnion.TheLIPATransaction seekstotakeadvantage ofLIPA'stax-exempt statusandexemption frompaymentoffederalincometax,tolowerratesforelectricratepaycrs onLongIsland.AsaresultofLIPA'sabilitytoissuelow-cost, tax-exemptmunicipal bondsand'heelimination offederalincometaxes,alongwiththeBrooklynUnion/LILCO combination andthesettlement "ofvarioustaxcertiorari proceedings, itisanticipated thatLongIslandelectriccustomers willrealizeanaverageelectricratereduction of17percent.Fromtheshareholders'erspective, theLIPATransaction willprovidetheHoldingCompanywiththeresources neededtosuccessfully competeintheemergingenergymarketplace andstrengthen theHoldingCompany's financial position.
| |
| Fortheseandotherreasons,theBoardofDirectors ofLILCOhasunanimously approvedtheLIPATransaction andbelievesitsadoptionisinthebestinterests ofLILCOanditsshareholders.
| |
| Accordingly, theLILCOBoardrecommends thatitsshareholders vote"FOR"theapprovaloftheLIPATransaction.
| |
| BrooklynUnionhasconsented totheLIPATransactiqn anditsBoardofDirectors believesthatitsconsummation, togetherwiththeCombination, isinthebestinterests ofBrooklynUnionanditsshareholders.
| |
| 14.WHOMUSTAPPROVETHELIPATRANSACTION?
| |
| Inadditiontotheapprovals bytheLILCOBoardofDirectors andtheconsentoftheBrooklynUnionBoard,allofwhichhavealreadybeenobtained, theLIPATransaction mustbeapprovedby:-LILCOshareholders (commonandcertainpreferred)
| |
| -PublicAuthorities ControlBoard-InternalRevenueService-NuclearRegulatory Commission FederalEnergyRegulatory Commission Inaddition, theLIPAAgreement issubjecttoratification bytheLIPABoardofTrustees.
| |
| 15.WHAT,PROPOSALS AREBROOKLYNUNIONSHAREHOLDERS VOTINGON?BrooklynUnionshareholders arebeingaskedtoapprovetwosignificant proposals:
| |
| a.TheBrooklynUnion/LILCO Agreement (described inQuestion3)inwhichBrooklynUnionwouldbecomeawholly-owned subsidiary oftheHoldingCompany.b.Arestructuring ofBrooklynUnionwhichwouldtakeplacebeforetheCombination.
| |
| BrooklynUnionwouldberestructured intoaholdingcompanystructure throughashareexchatige withKeySpanEnergyCorporation, asdescribed inAnnexJoftheproxymaterials delivered toBrooklynUnionshareholders.
| |
| Ifthistransaction isapprovedandconsummated, KeySpanwouldbecometheparentcompanyofBrooklynUnionandKeySpanwouldbesubstituted forBrooklynUnionintheBrooklynUnion/LILCO Agreement.
| |
| 16.WHATPROPOSALS ARELILCOSHARE<HOLDERS VOTINGON?LILCOshareholders arebeingaskedtoapprovetwosignificant proposals:
| |
| a.TheBrooklynUnion/LILCO Agreement (described inQuestion3)inwhichLILCOwouldbecomeawholly-owned subsidiary oftheHoldingCompany.lb.Theacquisition ofcertainLILCOassetsbyLIPAthroughastocksaleofLILCO(described inQuestions 10-13).Inaddition, aspartofLILCO'sAnnualMeeting,LILCOshareholders arebeingaskedtoapprovecertainother,proposals identified intheNoticeofAnnualMeetingasdescribed inAnnexJoftheproxymaterials delivered toLILCOshareholders.
| |
| 17,WHATSHAREHOLDE<R VOTEISREQUIREDTOAPPROVETHEBROOKLYNUNION/LILCO COMBINATION?
| |
| Theholdersofatleasttwo-thirds oftheoutstanding sharesofeachofBrooklynUnionandLILCOcommonstockmustvote.infavoroftheBrooklynUnion/LILCO Agreement.
| |
| 18.WHATSHARE<HOLDER VOTEISREQUIREDTOAPPROVETHELIPATRANSACTION?
| |
| 'heLIPATransaction
| |
| 'mustbeapprovedbythevoteof:1)theholdersofatleasttwo-thirds oftheoutstanding sharesofLILCOcommonstockandpreferred stockentitledtovotethereon,votingtogetherasasingleclass;2)a'ajority oftheoutstanding sharesofLILCOpreferred stockentitledtovotethereon,votingtogetherasaseparateclass;3)amajorityoftheoutstanding sharersofLILCOcommonstockvotingseparately asaclass;and4)theholdersofamajorityoftheoutstanding sharesofeachseriesofLILCOpreferred stockentitledtovotethereon,ineachcasevotingseparately asaclass.19.WHATWILLHAPPENTOMYREDEEMABLE LILCOPREFERRE<D STOCK?PriortotheclosingoftheLIPATransaction, LILCOwillredeemallredeemable preferred stock.Thesesharesofredeemedpreferred stockwillnotbeoutstanding atthetimeoftheclosingand,therefore, willnotbeentitledtovoteontheLIPATransaction.
| |
| 20.WHOISENTITLEDTOVOTE?HoldersofrecordofBrooklynUnionandLILCOcommonstockandeligibleLILCOpreferred stockonJune26,1997,theRecordDate,areentitledtovoteattheapplicable shareholders meeting.AsofJune23,1997,50,364,212 sharesof,BrooklynUnioncommonstockwereoutstanding, 121,184,527 sharesofLILCOcommonstockwereoutstanding and21,674,000 sharesofeligibleLILCOpreferred stockwereoutstanding.
| |
| 21.WHENAREALLOFTHESETRANSACTIONS EXPE<CTED TOBECOMPLETED?
| |
| Weareworkingto,complete allaspectsofthetransactions asquicklyaspossible.
| |
| Wecurrently expectthesetransactions tobecompleted inthesecondhalfof1998.TheCombination byitstermscannotbeconsummated earlierthanApril1,1998.22.WHATDOINEEDTODONOW?Justsignandmailyourproxycardintheenclosedreturnenvelopeassoonaspossible.
| |
| Thatwayyoursharescanberepresented attheBrooklynUnionorLILCOshareholders meeting.FailuretoreturnaproxycardwillhavethesaineegeclasavoteagainsttheBrooklynUnion/LILCO Agreement, tlteLIPATransaction (inthecaseofLILCOshareholders) andtheKeySpanshareexcltange (inthecaseofBrooklynUnionshareholders).
| |
| 23.CANICHANGEMYVOTEAFTERIHAVEMAILEDINMYSIGNE<DPROXYCARD?Yes,youmaychangeyourvoteatanytimebeforethevotetakesplaceattheapplicable shareholders meeting.Youcanattendtheapplicable shareholders meetingandvoteinpersontodoso.Or,ifyouareaBrooklynUnionshareholder, youcancompleteanewproxycardorsendawrittennoticestatingyouwouldliketorevokeyourproxy.Theseshouldbesentto.'Georgeson
| |
| &CompanyInc.,WallStreetStation.P.O.Box1102,NewYork,NewYork10269-0667.
| |
| Or,ifyouareaLILCOshareholder, youcansendanewproxycardorwrittennoticetorevokeyourproxytoTheCorporation TrustCotnpatiy, P.O.Box631,1Vilnu'ngton, Delaware19899.
| |
| 24.SHOULDISENDINMYSTOCKCE<RTIFICATES NOW?No.Youshouldcontinuetoholdyourcertificates forBrooklynUnionorLILCOstockuntiltheCombination andLIPATransaction becomeeffective.
| |
| Atthattime,youwillreceivewritteninstructions forexchanging youroldBrooklynUnionorLILCOstockcertificates fornewcertificates representing theappropriate numberofsharesofcommonstockofthenewHoldingCompany.LILCOshareholders willalsoreceivecashpaymentinplaceofanyfractionofashareofthecommonstockoftheHoldingCompany.25.WHEREWILLMYSHARESOFCOMMONSTOCKOFTHEHOLDINGCOMPANYBETRADED?WeexpectthatthecommonstockoftheHoldingCompanywillbelistedandtradedontheNewYorkStockExchange.
| |
| AftertheCombination andtheLIPATransaction arecompleted, BrooklynUnionandLILCOcommonstockownedbytheHoldingCompanywillno-longer.
| |
| betradedandwillbedelisted.
| |
| 26.WHEREAREBROOKLYNUNIONANDLILCOSTOCKCURRENTLY TRADED?BrooklynUnioncommonstockiscurrently listedandprincipally tradedontheNewYorkStockExchange, whileLILCOcommonstockiscurrently listedandprincipally tradedontheNewYorkandPacificStockExchanges.
| |
| OnDecember27,1996,thelastfulltradingdayontheNewYorkStockExchangepriorto'thepublicannouncement oftheBrooklynUnion/LILCO Agreement, BrooklynUnioncommonstockclosedat$31.125pershareandLILCOcommonstockclosedat$19.375pershare.Thereportedclosing,pricesofBrooklynUnionandLILCOcommonstockonJune23,1997were$28'nd$23',respectively.
| |
| 27.WHATARETHEFE<DERALINCOMETAXCONSEQUENCES OFTHEPROPOSEDTRANSACTIONS FORSHAREHOLDE<RS?
| |
| The.taxconsequences totheshareholders generally dependonwhichtransactions occurandtheorderinwhichtheyoccur.Thevariousalternatives andtheirtaxconsequences arediscussed undertheheading"TheBrooklynUnion/LILCO Combination FederalIncomeTaxConsiderations."
| |
| Ingeneral,LILCOcommonandpreferred stockshareholders shouldrecognize gain(subjecttop'ossible deferral-seepages37-40)orlossonthereceiptofcashand/orHoldingCompanycommonorpreferred stock,asappropriate, bysuchshareholders ortheExchangeAgentascontemplated herein.However,iftheLIPATransaction isterminated prio'rtotheCombination, LILCOshareholders generally shouldnotrecognize gainorlossforfederalincometaxpurposesintheCombination.
| |
| Wehavestructured theCombination andLIPATransaction sothat,with"certainexceptions, BrooklynUnionshareholders willnotrecognize anygainorlossforfederalincometaxpurposes.
| |
| Inaddition, gainorlossshouldberecognized (subjecttopossibledeferral-seepages37-40)byashareholder whohassoughtappraisal rightsorbyaLILCOshareholder whoreceivescashinlieuofafractional share(regardless ofwhethertheLIPATransaction isterminated beforetheCombination).
| |
| : Moreover, taxmaybepayableoncertainamountsdeemedreceivedbyBrooklynUnionshareholders whenBrooklynUnionpayscertaintransfertaxes.TheCombination isconditioned uponthereceiptbyBrooklynUnionofanopinionfromitstaxcounselthatsuchtransaction willqualifyasareorganization whichistax-freetoitsshareholders.
| |
| AlthoughtheBrooklynUnion/LILCO Agreement allowsBrooklynUniontowaivethecondition ofreceiving suchtaxopinion,itdoesnotintendtodoso.Ifthiscondition iswaived,wewillnotifyBrooklynUnionsharehold-ersofthewaiveranditsimplication andresolicit theirapproval.
| |
| TheLIPATransaction isconditioned uponthereceiptbythepartiesofcertainrulingsfromtheInternalRevenueService.Forafurtherdiscussion oftheFederalincometaxconsequences of-theproposedtransactions, seethediscussion under'the heading"TheBrooklynUnion/LILCO Combination
| |
| -'FederalIncomeTaxConsiderations."
| |
| 28.WILLTHEPREFERRED STOCKORBONDSOFBROOKLYNUNIONBEEXCHANGED?
| |
| BrooklynUnion'spreferred stockwillberedeemedpriortotheconsummation oftheKeySpanShareExchangeandtheCombination.
| |
| Therightsofbondholders ofBrooklynUnionwillnotchangeandwillcontinuetobeobligations ofBrooklynUnion.29.WILLTHEPREFERRED STOCKORBONDSOFLILCOBE<EXCHANGED?
| |
| Inconnection withtheLIPATransaction, LILCO'sPreferred Stock7.95%,SeriesAAwillbeexchanged foraSeriesAAPreferred Stock"of*theHoldingCompanyhavingsubstantially identical terms,assetforthinAnnexD.Eachissuedandoutstanding shareofLILCO'spreferred stockthatissubjecttooptionalredemption atorbeforetheclosingoftheLIPATransaction willbecalledforredemption nolaterthanthedateofthisclosing.LILCOpreferred stockthatisnotsubjecttothisoptionalredemption (otherthanSeriesAA)willbeacquiredbyLIPAforcashasaresult'of theLIPATransaction.
| |
| Inaddition, afterLILCOhasreceivedalltherequiredconsents, theHoldingCompanywillassumeLILCO'sDebentures, 7.30%dueJuly15,1999,and8.20%dueMarch15,2023.ThebalanceofLILCO'sdebtsecurities willbecomeobligations ofLIPAafteritacquiresthecommonstockofLILCOthroughtheLIPATransaction.
| |
| 30.HOWWILLMYPARTICIPATION INBROOKLYNUNION'SORLILCO'SDIVIDE<ND REINVESTME<NT ORSTOCKPURCHASEPLANSBEAFFECTED?
| |
| 'llsharesofBrooklynUnion.commonstockandLILCOcommonstockheldunderthecompanies'espective dividendreinvestment andstockpurchaseplanswillautomatically be'exchanged forsharesofthecomtnonstockoftheHoldingCompanywhentheCombination and/ortheLIPATransaction arecompleted.
| |
| TheHoldingCompanywillestablish similarplansaftercompletion oftheCombination.
| |
| 31.WHATIFIWANTTORECEIVETHEFAIRMARKETVALUEOFMYCURRENTSTOCKINCASH?Ifyoufollowtherequiredprocedure, youwillhavetherighttoseekanappraisal andpaymentofthefairmarketvalueofyourBrooklynUnionorLILCOshares.Yourstockwouldbeappraised inaNewYorkStateCourtproceeding.
| |
| AsaBrooklynUnionshareholder youmust:a.Fileawrittenobjection totheBrooklynUnion/LILCO Agreement beforetheproxyvote(eitherpriortoorattheshareholders meeting);
| |
| ANDb.NotvoteinfavoroftheBrooklynUnion/LILCO Agreement.
| |
| AsaLILCOshareholder youmust:a.Fileawrittenobjection to'theBrooklynUnion/LILCO Agreement and/ortheLIPATransaction beforetheproxyvote(eitherpriortoorattheshareholders meeting);
| |
| ANDb.NotvoteinfavoroftheBrooklynUnion/LILCO Agreement and/ortheLIPATransaction.
| |
| 32.ARETHEREOTHE<RLE<GALREQUIREMENTS IMUSTMEETTOOBTAINANAPPRAISAL ANDPAYMENTINCASHFORMYSHARES?Yes.Thesearedescribed inthisJointProxyStatement/Prospectus onpages44-46.Theprovisions ofNewYorklawthatgovernappraisal rightsarealsoattachedasAnnexI.Ifyouareentitledtoandwishtoseekanappraisal ofyourshares,youshouldreadandfollowthoseprovisions carefully.
| |
| Youshouldbeaware,too,thatanappraisal mayresultinacashpaymentforyoursharesthatishigherorlowerthanthevalueoftheHoldingCompanysltaresthatwouldbeissued'to youinconnection withtheBrooklynUnion/LILCO Agreement or,ifapplicable, theLIPATransaction.
| |
| 33.WHOCANICA'LLIFIHAVEANY'ADDITIONAL QUESTIONS?
| |
| Twospecialtoll-free telephone numbershavebeenestablished foryou.7 BrooklynUnionshareholders arewelcometocallGeorgeson
| |
| &CompanyInc.,whichjs,assisting BrooklynUnioninsolicitation ofproxies,at1-800-223-2064.
| |
| LILCOshareholders arewelcometocallD.F.King8cCo.,Inc.,'hich isassisting LILCOinsolicitation ofproxies,at1-800-207-3155.
| |
| Stock,and,LILCO receivedopinionsfromitsfinan-cialadvisor,Dillon,Read&Co.'Inc.,
| |
| thattheshareexchangeratiosandtheLIPATransaction werefair,fromafinancial pointofview,toLILCOsharehold-ers.Theopinionsof'thefinancial advisorsareat-tachedasannexestothisJointProxyStatement/Prospectus.
| |
| Weencourage youtoreadtheopinioris thoroughly.
| |
| SUMMARYOFOTHERSELECTEDINFORMATION Regulatory Approvals (Seepage50)Theapprovals ofthePublicServiceCommis-sionoftheStateofNewYorkundertheNewYorkPublicServiceLaw,theSecurities andExchangeCommission underthePublicUtilityHoldingCom-panyActof1935,theFederalEnergyRegulatory Commission undertheFederalPowerAct,theNu-clearRegulatory Commission undertheAtomicEn-ergyActof1954,aswellastheexpiration orearliertermination oftheapplicable waitingperiodundertheHart-Scott-Rodino Antitrust Improvements Actof1976arerequiredinordertocompletetheCombina-tionand,withtheexception oftheapprovalofthePublicServiceCommission, theLIPATransa'ction.
| |
| Inaddition, theLIPATransaction alsorequiresap-provaloftheNewYorkStatePublicAuthorities ControlBoard.AsofthedateofthisJointProxyStatement/Prospectus, noneoftherequiredregulatory approvals hasbeenobtained.
| |
| OpinionsofFinancial Advisors(Seepages27and95)IndecidingtoapprovetheBrooklyn"Union/LILCO Agreement, theBoardsofDirectors ofBrooklynUnionandLILCOconsidered theopinionsoftheirrespective financial advisorsastothefairnessoftheshareexchangeratiofromafinancial, pointofview.Inaddition, indecidingtoapprovetheLIPATransaction, theBoardofDirectors ofLILCOalsoconsidered aseparateopinionfromitsfinancial advi-sorastothefairnessof,theLIPATransaction fromafinancial pointofview.TheBoardofDirectors ofBrooklynUnionhasreceivedanopinionfromitsfi-nancialadvisor,MerrillLynch,Pierce,,Fenner&SmithIncorporated, datedasofthedateofthisJointProxyStatement/Prospectus, totheeffecttliattheBrooklynUnionRatiov/asfair,fromafinancial pointofview,totheholdersofBrooklynUnionCommonInterests ofOJJrcersandDirectors intireCombirration (Seepages36,91'and101)The'officers anddirectors ofBrooklynUnionandLILCOmayhaveinterests inthetransaction thataredifferent from,orinadditionto,yours.Forexam-ple,pursuanttoemployment.
| |
| agreements andsever-anceplans,theCombination (and,withrespecttoLILCO,theLIPATransaction) willresultinachangeincontrolofbothBrooklynUnionandLILCO,enti-tlingofficersofthecompanies toreceiveseverance benefitsundercertaincircumstances.
| |
| Asoftherecorddate,directors andofficersofBrooklynUnion,LILCO,andtheiraffiliates asagroupownedlessthan1%oftheissuedandoutstand-ingsharesofcommonstockof'theirrespective com-panies.Conditions totheCombination (Seepage77)andLIPATransaction (Seepage87)Completion oftheCombination dependsonthesatisfaction ofcertainconditions, including butnotlimitedto:(a)approvalofBrooklynUnion'sandLILCO'scommonshareholders; and(b)allrequiredapprovals ofregulatory andgovernmental agencies.
| |
| Inaddition, thecompletion oftheLIPATransaction isconditioned uponLIPA'sabilitytoobtainthenec-essaryfinancing andapprovaloftheLILCOpreferred stockholders entitledtovotethereon.Consuinmation oftheCombination isnotconditioned upontheconsummation oftheLIPATransaction, andconsumma-tionoftheLIPATransaction isnotconditioned uponconsummation oftheCombination.
| |
| Amendment orTernrination oftireBrooklynUnion/LILCO Agreement (Seepage78)andLIPAAgreement (Seepage87)TheBoardsofDirectors ofBrooklynUnionandLILCOmayamendanyofthetermsoftheBrooklyn Union/LILCO Agreement atanytimebeforeorafteritsadoptionbytheshareholders ofthecommonstockofBrooklynUnionandLILCO.Noamendment adoptedaftershareholder
| |
| : approval, however,maymaterially andadversely affecttherightsofsuchshareholders.
| |
| Atanytimepritirtoclosing,whetherbeforeorafterapprovalbytheshareholders ofBrooklynUnionorLILCO,theBrooklynUnion/LILCO Agreement maybeterminated bymutualconsentoftheBoardsofDirectors ofBrooklynUnionandLILCOandun-dercertainothercircumstances.
| |
| Depending uponthereasonforsuchtermination, substantial feesmaybedueandpayablebyBrooklynUnionorLILCO.NSimilarly, atanytimepriortoclosing,whetherbeforeorafterapprovalbytheshareholders ofLILCO,theLIPAAgreement maybeterminated bymutualconsentoftheBoardofDirectors ofLILCOandtheBoardofTrusteesofLIPAandundercertainothercircumstances.
| |
| PursuanttotheBrooklynUnion/LILCO Agreement, LILCOmaynotterminate theLIPAAgreement withouttheconsentofBrooklynUnion.Contparative Shareholder Rights(Seepage89)WhentheCombination iscompleted, holdersofBrooklynUnioncominonstockandLILCOcommonstockwillbecomeholdersofthecommonstockoftheHoldingCompany,andtheirrightswillbegov-ernedbytheHoldingCompany's certificate ofincor-porationandby-laws(theformsofwhichareat-tachedasAnnexesGandH).Certaindifferences be-tweentherightsofholdersofthecommonstockof~theHoldingCompanyandthoseofholdersofBrook.-lynUnionandLILCOcommonstockaresumma-rizedonpages102-103and89-90,respectively.
| |
| Regulation oftheHoldingCompany,BrooklynUnionandLILCO(Seepage$0)Following theCombination andtheLIPATrans-action,theHoldingCompany,astheparentcompanyofBrooklynUnionandthesubsidiaries whoreceivedfromLILCOtheassetsdescribed above,willnotbedirectlysubjecttoregulation bythePublicServiceCommission oftheStateofNewYorkortheFederalEnergyRegulatory Commission.
| |
| However,itsutilitysubsidiaries willberegulated bythevariousregula-toryagenciesthatcurrently regulateBrooklynUnionandLILCO'sgasandelectricgenerating operations.
| |
| WhentheCombination occurs,theHoldingCompanywillbecomea"publicutilityholdingcompany"asdefinedinthePublicUtilityHoldingCompanyActof1935,andwillfileanexemption statement withtheSecurities andExchangeCommission toexemptitandeachofitssubsidiaries frommostoftheprovi-sionsofthatAct.Currently, neitherBrooklynUnionnorLILCOissubjecttothatAct.Accounting Treatment (Seepage43)Theaccounting fortheCombination willbedependent onwhethertheLIPATransaction willbecompleted.
| |
| IftheLIPATransaction iscompleted, the,Combination willbeaccounted forusingthepurchasemethodofaccounting.
| |
| IftheLIPATransaction isnotcompleted, theCombination isexpectedtobeaccounted forasapoolingofinterests.
| |
| Asapoolingofinterests, wewilltreat'our companies asiftheyhadalways-beencombinedforaccounting andfinancial reporting purposes.
| |
| Forafurtherdiscussion ofaccounting considerations abouttheLIPATransaction, see"Accounting Treatment."
| |
| Statutory Appraisal Rights(Seepage44)EligibleholdersofsharesofBrooklynUnionandLILCOcommonstockwhodonotvotefor'heCom-bination, or(inthecaseofholdersofLILCOCom-monStock)theLIPATransaction, asappropriate, andwhotimelydissentandfollowtheprocedures inSec-tion623oftheNewYorkBusinessCorporation Lawwillthenhavecertainrightsasaresultofthesetrans-actionstodemandpaymentincashforthe"fairval-ue"oftheirrespective BrooklynUnionandLILCOcommonshares.Failuretotakeanyrequiredactiononatimelybasismayresultinthelossofthoserights.Theamountobtainable uponavalidexerciseofthoserightsissubjecttodetermination byjudicialproceed-'ngand,asaresult,cannotbeestimated atthistime.LILCOpreferred shareholders entitledtovoteontheLIPATransactions arealsoentitledtostatutory ap-praisalrights.BrooklynUnionpreferred stockwillberedeemedpriortoconsummation oftheCombination; and,therefore, holdersofsuchshareswillnotbeenti-tledtoappraisal rights.
| |
| SUMMARYOFSELECTEDHISTORICAL ANDUNAUDITED PROFORMACOMBINED/CONSOLIDATED CONDENSED FINANCIAL INFORMATION BROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION (Purchase andPoolingMethodsofAccounting)
| |
| SelectedHistorical Financial Information Weareproviding thefollowing financial information toaidyouinyouranalysisofthefinancial aspectsoftheCombination andtheLIPATransaction.
| |
| Wederivedthisinformation fromunaudited financial statements ofBrooklynUnionandL'ILCOforthe12monthperiodendedMarch31,1997,andtheauditedfinancial statements ofBrooklynUnionandLILCO'from 1992through1996.Theinformation isonlyasummaryandyoushouldreaditinconjunction withthehistorical financial statements (andrelatednotes)contained inourannualreportsandtheotherinformation thatwehavefiledwiththeSEC.See"WhereYouCanFindMoreInformation" onpage109.BROOKLYNUNION-HISTORICAL FINANCIAL INFORMATION Atorforthc12monthsAtorforthcYearEndedSeptember 30,ended199719961995199419931992(unaudited)
| |
| (DollarsinMillions, ExceptforPerShareAmounts)Totalrevenues.................
| |
| $1,472.8$1,432.0$1,216.3$1,338.6$1,205.5$1,074.9Earningsforcommonstock.......
| |
| 128.5(1)122.6(1)91.587.076.257.8Earningspercommonshare.......
| |
| 2.58(1)2.48(1)1.901.851.731.35Cashdividends declaredpercommonshare................
| |
| 1.441.421.391.351.321.29Bookvaluepercommonshare....20.0018.1716.9416.2715.5514.56Totalassets.2,493.82,289.62,116.9"2,029.11,897.81,748.0Long-term debt.................
| |
| 724.6712.0720.6701.4689.3'82.0(1)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5million,or$0.68pershare,,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8million,or$0.16pershare,aftertaxes.LILCO-HISTORICAL FINANCIAL INFORMATION Atorforthc12monthsendedMarch31>19971996AtorfortheYearEndedDecember'31, 1995199319941992TotalrevenuesEarningsforcommonstock....
| |
| Earningspercommonshare....
| |
| Cashdividends declaredpercommonshare.............
| |
| Bookvaluepercommonshare.TotalassetsLong-term debt..............
| |
| 1.7821.0711,849.74,457.01.781.781.781.761.7220.8920.5020.2119.8819.5812,209.712,527.612,479.312,453.89,853.14,456.84,706.65,145.44,870.34,741.0(unaudited)
| |
| (DollarsInMillions, ExceptforPerShareAmounts)$3,137.7'3,150.7$3,075.1$3,067.3$2,881.0$2,621.8270.3264.2250.7248.8240.5238.02.242.202.102.152.152.1410 SelectedUnaudited ProFormaConsolidated Condensed Financial Information
| |
| -BrooklynUnion/LILCO Combination withLIPATransaction.
| |
| Thefollowing unaudited proformaconsolidated financial information reflectsadjustments tothehistorical financial statements ofLILCOtogiveeffecttotheproposedIlistribution oftheTransferred Assets(asdefinedbelow)toawholly-owned subsidiary oftheHoldingCompanyandsubsequent saleoftheremaining LILCOcommonstocktoasubsidiary ofLIPA.Theproformastatements havebeenfurtheradjustedtogiveeffecttotheproposedCombination withBrooklynUnion.Theunaudited proformaconsolidated condensed balancesheetatMarch31,1997giveseffecttotheproposedtransaction withLIPAandtheCombination asiftheyhadoccurredatMarch31,1997.Theunaudited proformaconsolidated condensed statement ofincomeforthetwelvemonthperiodendedMarch31,1997giveseffecttotheproposedtransaction withLIPAandtheCombination asiftheyhadoccurredatApril1,1996.Thesestatements arepreparedonthebasisofaccounting fortheCombination underthepurchasemethodofaccounting andarebasedontheassumptions setforthinthenotesthereto.Wehavepresented belowtheselectedunaudited proformaconsolidated condensed financial information, reflecting theproposedtransaction withLIPA("LILCOasadjusted")
| |
| andalso-reflecting thistransaction withtheCombination
| |
| ("HoldingCompany").Youshouldnotrelyontheunaudited proformainformation asbeingindicative ofthehistorical resultsthatwewouldhavehadorthefutureresultsthatwewillexperience aftertheproposedtransaction withLIPAortheCombination.
| |
| See"Unaudited ProFormaConsolidated Condensed Financial Information" onpage54.SELECTEDUNAUDITED PROFORMAFINANCIAL DATATotalrevenues.
| |
| NetincomeEarningsforcommonstockEarningspercommonshare(1)Cashdividends declaredpercommonshare(1)(2)(3)
| |
| .TotalassetsLong-term debt.Preferred stockAtorfortheTwelveMonthPeriodEndedMarch31,1997LILCOHoldingasadJustedCompany(DollarslnMillions'xcept forPerShareAmounts)$1,629.0$3,101.884.9206.049.0170.1.411.09.331.785,114.47,916.2922.21,646.8438.0438.0(1)EachshareofBrooklynUnioncommonstockwillbeexchanged foroneshareofcommonstockoftheHoldingCompanyandeachshareofLILCOcommonstockwillbeexchanged for0.880ofashareofcommonstockoftheHoldingCompanyinthe.Combination.
| |
| Thesepershareamountsarecalculated foreachshareofcommonstockoftheHoldingCompanythatwouldhavebeenoutstanding hadthebindingshareexchanges beenconsummated asofthedateandfortheperiodreferredtoabove.(2)ToarriveatLILCOasadjustedproformacashdividends declaredpercommonshare,LILCO'shistorical payoutratioforthe12monthperiodendedMarch31,1997,wasappliedtotheLILCOasadjustedearningspercommonshare.(3)BrooklynUnionandLILCOexpecttocontinuetheirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.11 Comparative PerCommonShareInformation
| |
| -BrooklynUnion/LILCO Combination'with LIPATransaction.
| |
| Thefollowing tablesummarizes thepercommonshareinformation for'Brooklyn UnionandLILCOonaproformaconsolidated, equivalent andhistorical basis.Comparative PerShareInformation Unaudited HoldingCompanyProFormaConsolidated(2)(3)
| |
| Earningspercommonshare.Cashdividends declaredpercommonshareBookvaluepercommonshare'torforthe12MonthsEndedMarch31,1997(unaudtted)
| |
| $1.091.7824.14Unaudited LILCOasAdjusted(1)(3)
| |
| Earningspercommonshare.Cashdividends declaredpercommonshareBookvaluepercommonshare.$.41.3320.86LILCOPerShareEquivalents(5)
| |
| Earningspercommonshare.Cashdividends declaredpercommonshareBookvaluepercommonshare$.961.5721.24LILCO-Historical Financial Information Earningspercommonshare.Cashdividends declaredpercommonshare...~Bookvaluepercommonshare.$,2.241.7821.07BrooklynUnion-Historical Financial Information(4)(5)
| |
| Earningspercommonshare.$2.58Cashdividends declaredpercommonshare144Bookvaluepercommonshare20.00(1)LILCO'sbalancesheetandresultsofoperations asofandforthetwelvemonthperiodendedMarch31,1997havebeenadjustedtoreflecttheproposedtransaction withLIPA.(2)LILCO'sbalancesheetandresultsofoperations asofandforthetwelvemonthperiodendedMarch31,1997,havebeenadjustedtoreflecttheLIPATransaction andtheCombination.
| |
| (3)Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.ToarriveatLILCOasadjustedproformacashdividends declaredpercommonshare,LILCO'shistorical payoutratioforthe12monthperiodendedMarch31,1997,wasappliedtotheLILCOasadjustedearningspercommonshare.(4)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5milhonor$0.68pershare,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8millionor$0.16pershare,aftertaxes.(5)LILCOPerShareEquivalents are0.880ofUnaudited ProFormaConsolidated pershareequivalents, whileBrooklynUnionpersharcequivalents arethesameashistorical.
| |
| 12 SelectedUnaudited ProFormaCombinedCondensed Financial Information
| |
| -BrooklynUnion/LILCO Combination withnoLIPATransaction.
| |
| Thefollowing unaudited proformacondensed financial information reflectsadjustments to,thehistorical financial statements ofLILCOtogiveeffecttotheproposedmergerwithBrooklynUnioninaccordance withtheCombination.
| |
| Theunaudited proformacombinedcondensed balancesheetatMarch31,1997giveseffecttotheCombination asifithadoccurredatMarch31,1997.Theunaudited proformacombinedcondensed statements ofincomeforeachofthethree12monthperiodsinthethreeyearperiodendedMarch31,1997giveeffecttotheCombination asifithadoccurredatApril1,1994.Thesestatements arepreparedonthebasisofaccounting fortheCombination usingthepoolingofinterests methodofaccounting andarebasedontheassumptions setforthinthenotesthereto.Wehavepresented belowtheselectedunaudited proformacombinedcondensed financial information, reflecting theproposedCombination.
| |
| Youshouldnotrelyontheunaudited proformainformation asbeingindicative ofthehistorical resultsthatwewouldhavehadorthefutureresultsthatwewillexperience aftertheCombination.
| |
| See"Unaudited ProFormaCombinedCondensed Financial Information" onpage60.SELECTE1D UNAUDITED PROFORMAFINANCIAL DATATotalrevenues..Netincome.Earningsforcommonstock.Earningspercommonshare(1).Cashdividends declaredpercommonshare(1)(2)
| |
| Totalassets.Long-term debtPreferred stockAtorfortheTwelveMonthPeriodsEndedMarch31919911996~1996(DollsrslnMillions, ExceptforPerShareAmounts)$4,610.5$4,518.2$4,244.6451.2'09.3390.6399.1356.8337.72.722.462.381.781,78.~1.7814,343.55,181.6702.1(1)EachshareofBrooklynUnioncommonstockwillbeexchanged foroneshareofcommonstockoftheHoldingCompanyandeachshareofLILCOcommonstockwillbeexchanged for0.803ofashareofcommonstockoftheHoldingCompanyinaccordance withtheCombination.
| |
| Thesepershareamountsarecalculated foreachshareofcommonstockoftheHoldingCompanythatwouldhavebeenoutstanding hadtheCombination beenconsummated atthebeinninofeacheriodresented.
| |
| ggPP(2)BrooklynUnionandLILCOexpecttocontinuetheirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.13 Comparative PerCommonShareInformation
| |
| -BrooklynUnion/LILCO Combination withnoLIPATransaction Thefollowing tablesummarizes thepercommonshareinformation forBrooklynUnionandLILCOonaproformac'ombined, equivalent andhistorical basis.TheLILCOpershareequivalents arecalculated bymultiplying theunaudited proformacombinedpershareamountsby0.803asLILCOshareholders willreceive0.803sharesofthecommonstockoftheHoldingCompanyinexchangeforeachshareofLILCOCommonStock.Comparative PerShareInformation Unaudited HoldingCompanyProFormaCombinedEarningspercommonshare(1)Cashdividends declaredpercommonshare(4)BookvaluepercommonshareLILCOPerSharcEquivalents(2)
| |
| Earningspercommonshare...............
| |
| Cashdividends declaredpercommonshare.BookvaluepercommonshareBrooklynUnion-Unaudited Historical Financial Information(2)
| |
| 'Earnings percommonshare(3)Cashdividends declaredpercommonshare.BookvaluepercommonshareLILCO-Unaudited Historical Financial Information EarningspercommonshareCashdividends declaredpercommonshare.BookvaluepercommonshareAtorforthe12monthperiodendedMarch31,199719961995$2.72$2.46$2.381.781.781.7823.74$2.18$1.98$1.911.431.431.4319.06$2.58$1.93$1.841.441.401.3720.00$2.24$2.19$2.131.781.781.7821.07(1)BrooklynUnion'sunaudited balancesheetasofMarch31,1997andresultsofoperations foreachofthethree12monthperiodsduringthethreeyearperiodendedMarch31,1997havebeencombinedwithLILCO'sunaudited balancesheetasofMarch31,1997andresultsofoperations foreachofthethree12monthperiodsduringthethreeyearperiodendedMarch31,1997toarriveattheunaudited proformacombinedbalancesheetasofMarch31,1997andtheunaudited statements ofincomeforeachofthethree12monthperiodsduringthethreeyearperiodendedMarch31,1997,fromwhichthecomparative persharcinformation hasbeenderived.(2)LILCOPerShareEquivalents are0.803ofUnaudited HoldingCompanyProFormaCombinedpershareequivalents, whileBrooklynUnionpershareequivalents arethesameasitshistorical.
| |
| (3)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5millionor$0.68pershare,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8millionor$0.16pershare,aftertaxesforthe12monthperiodendedMarch31,1997.(4)BrooklynUnionandLILCOexpecttocontinuetheirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.14 Comparative Dividends andMarketPrices-LILCOLILCOcommonstockislistedandprincipally tradedontheNewYorkStockExchangeandonthe.PacificStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlowsalespricesofLILCOcommonstockforthefiscalperiodsindicated asreportedinTheWallStreetJournalasNewYorkStockExchangeComposite Transactions.
| |
| PriceRange~<YearEndedDecember31,1995"FirstQuarter.SecondQuarter.ThirdQuarterFourthQuarterYearEndedDecember31,1996FirstQuarter.~SecondQuarter.ThirdQuarterFourthQuarterYearEndingDecember31,1997FirstQuarterSecondQuarter*(through June23,1997)Dividends Paid$0.4450.4450.4450.445High$16s/4,17$173/417%LO'lv$13'/414%15%15N$0.445'.445$24'A$21s/423'/4'2s/4$0A45'185$157/k0.44517N16MI0.44517K16NOA4522%17MTheLILCOSeriesAAPreferred StockislistedandtradedontheNewYorkStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlowsalespricesoftheSeriesAAPreferred Stockforthefiscalperiodsindicated asreportedinTheWallStreetJournalasNewYorkStockExchangeComposite Transactions.
| |
| IiPriceRangeDividends PaidHighLowYearEndedDecember31,1995FirstQuarterSecondQuarterThirdQuarter.FourthQuarterYearEndedDecember31,1996'irst QuarterSecondQuarterThirdQuarter.FourthQuarterYearEndingDecember31,1997FirstQuarterSecondQuarter(throughJune23,1997)$0.4968750.4968750.4968750.496875$24N$23s/424s/s2324th2325K24'/4$0.4968750.496875$26sih$25'/426N25M$0.496875$23s/4$22i/i0.49687524s/42350.49687525240.49687526i/423N15 Comparative Dividends andMarketPrices-BrooklynUnionBrooklynUnioncommonstockislistedandprincipally tradedontheNewYorkStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlowsalespricesofBrooklynUnioncommonstockforthefiscalperiodsindicated asreportedin''TheWallStreetJournalasNewYorkStockExchangeComposite Transactions.
| |
| YearEndedSeptember 30,1995,.FirstQuarter..SecondQuarter..................~.
| |
| ThirdQuarterFourthQuarterYearEndedSeptember 30,1996FirstQuarter.SecondQuarter.,ThirdQuarterFourthQuarterYearEndingSeptember 30,1997FirstQuarter.SecondQuarterThirdQuarter(throughJune23,1997)$0.33750.34750.34750.3475$25N$21N243/42226M23s/426sik23'/4$0.3475'$29N$24N0.3550'9%25s/40.355027N'4%0.355028N'4%$0.3550$32N$277ik0.365030N27'h0.36502926NPriceRangeDividends PaidHighLowFhOnDecember27,1996,thelastfulltradingdaybeforethepublicannouncement oftheBrooklynUnion/LILCO Agreement, thehighandlowpricespershareof(i)LILCOcommonstockwere$19'nd$19N,respectively, and(ii)BrooklynUnioncommonstockwere$31Nand$30',respectively.
| |
| OnMarch18,1997,thelastfulltradingdaybeforethepublicannouncement ofanagreement inprinciple relatingtotheLIPATransaction, thehighandlowsalespricespershareof(i)LILCOcommonstockwere$23's/iaand$23N,respectively, and(ii)BrooklynUnioncommonstockwere$29Nand$29,respectively.
| |
| OnJune25,1997,thelastfulltradingdaybeforeLILCOandLIPAexecutedanddelivered theLIPAAgreement, thehighandlowsalespricespershareoftheSeriesAAPreferred Stockwere$26and$25.88,respectively.
| |
| BrooklynUnionandLILCOshareholders areencouraged toobtaincurrentmarketquotations forBrooklynUnioncommonstock,LILCOcommonstockandSeriesAAPreferred Stock.16 JOINTPROXYSTATEMENT OFTHEBROOKLYNUNIONGASCOMPANYANDLONGISLANDLIGHTINGCOMPANYPROSPECTUS OFBLHOLDINGCORP.ANDKEYSPANENERGYCORPORATION ThisJointProxyStatement andProspectus
| |
| ("JointProxyStatement/Prospectus"
| |
| )isbeingfurnished totheholdersofcommonstock,parvalue$5pershare,ofLILCO("LILCOCommonStock")andtotheholdersofSeriesAApreferred stock,parvalue$25pershare("SeriesAAPreferred Stock"),SeriesCCpreferred stock,parvalue$100pershare("SeriesCCPreferred Stock"),SeriesGGpreferred stock,parvalue$25persliare("SeriesGG'Preferred Stock"),SeriesQQpreferred stock,parvalue$25persliare("SeriesQQPreferred Stock"),andSeriesUUpreferred stock,parvalue$25pershare("SeriesUUPreferred Stock"),ofLILCO(suchseriesbeingcollectively referredtohereinas"LILCOPreferred Stock"),inconnection withthesolicitation ofproxiesbytheBoardofDirectors ofLILCOforuseattheAnnualMeetingofLILCOshareholders tobeheldonAugust7,1997,at3:00p.m.localtime,atTillesCenterforthePerforming ArtsatLongIslandUniversity, C.W.PostCampus,NorthernBoulevard, Greenvale, NewYork11548andatanyandalladjournments orpostponements thereof(the"LILCOMeeting"),andtheholdersofcommonstock,parvalue$0.33N,per share("BrooklynUnionCommonStock"),andtheholdersofPreferred Stock,parvalue$100pershare,ofTheBrooklynUnionGasCompanyinconnection withthesolicitation ofproxiesofBrooklynUnionCommonStockbytheBoardofDirectors ofBrooklynUnionforuseattheSpecialMeetingofBrooklynUnionshareholders tobeheldonAugust7,1997,at3:00p.m.localtime,atOperaHouse,BrooklynAcademyofMusic,30Lafayette Avenue,Brooklyn, NewYork11217andatanyandalladjoumments orpostponements thereof(the"Brooklyn UnionMeeting,"
| |
| andtogetherwiththeLILCOMeeting,the"Shareholder Meetings"
| |
| )..ThisJointProxyStatement/Prospectus relates,amongotherthings,totheproposedcombination ofLILCOandBrooklynUnion(the"Combination"
| |
| ),inwhichsharesofLILCOCommonStockwillbecometherighttoreceivesharesofcommonstock,parvalue$0.01pershare("HoldingCompanyCommonStock"),ofBLHoldingCorp.,acorporation tobeformedunderthelawsoftheStateofNewYork(the"HoldingCompany"),BrooklynUnionwillmergewithawhollyownedsubsidiary oftheHoldingCompany(the"Merger")andsliaresofBrooklynUnionCommonStockwillbeconverted'into sharesofHoldingCompanyCommonStock,allpursuanttoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJune26,1997(the"Brooklyn Union/LILCO Agreement"
| |
| ),betweenLILCOandBrooklynUnion.Consummation oftheCombination issubjecttovariousconditions, including theadoptionoftheBrooklynUnion/LILCO Agreement bytheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofLILCOCommonStockandtheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofBrooklynUnionCommonStockattheShareholder hfeetings.
| |
| Inconnection withtheproposaltoadopttheCombination, eachoutstanding shareofLILCOCommonStockandeachoutstanding shareofBrooklynUnionCommonStockisentitledtoonevoteattheirrespective meetings.
| |
| OnlyholdersofLILCOCommonStockandBrooklynUnionCommonStockofrecordatthecloseofbusinessonJune26,1997(the"RecordDate")willbeentitledtonoticeofandtovoteattheShareholder Meetingsoranyadjournments orpostponements thereof.HoldersofBrooklynUnionpreferred stockasoftheRecordDateareentitledtonoticeoftheBrooklynUnionMeetingbutaren'otentitledtovotethereat.AsofJune23,1997,121,184,527 sharesofLILCOCommonStockand50,364,212 sharesofBrooklynUnionCommonStockwereissuedandoutstanding.
| |
| 17 ThisJointProxyStatement/Prospectus alsorelatesto"theproposedmerger(the"LIPATransaction"
| |
| )ofLILCOwithLIPAAcquisition Corp.,aNewYorkcorporation
| |
| ("LIPASub")andawholly-owned subsidiary oftheLongIslandPowerAuthority',
| |
| acorporate municipal instrumentality and'political subdivision oftheStateofNewYork("LIPA"),
| |
| pursuanttotheAgreement andPlanofMerger,datedasofJune16,1997(the"LIPAagreement"),
| |
| byandamongLILCO,LIPASubandLIPA.Uponconsummation oftheLIPATransaction, LIPASubwillbemergedwithandintoLILCO,whichwill,bethesurviving corporation, foraggregate cashmergerconsideration of$2,497,500,000 (the"Consideration"
| |
| ),theSeriesAAPreferred Stockwillbeexchanged forSeriesAApreferred stockoftheHoldingCompanyhavingsubstantially theteimsassetforthinAnnexDheretoandeachoutstanding shareoftheSeriesCCPreferred Stock,SeriesGGPreferred Stock,SeriesQQPreferred StockandSeriesUUPreferred Stock(exceptforshareswhose'holders perfecttheirrightstoobtainjudicialappraisal thereof("Dissenting Shares"))willbecancelled andconverted intotherighttoreceivecashintheapplicable amountssetforthintheLIPAAgreement.
| |
| Inconnection withtheconsummation oftheLIPATransaction, LILCOwilltransfertotheHoldingCompanyoroneormoreofitswholly-owned subsidiaries (whichmaybelimitedliability companies) allofLILCO'sgasassetsandoperations, non-nuclear generating assetsandoperations andcommonplant(asdescribed morefullybelow,the"Transferred Assets").Consummation oftheLIPATransaction issubjecttovarious'conditions, including approvaloftheLIPAAgreement bytheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofLILCOCommonStockandLILCOPreferred Stock,votingtogetherasasingleclass;byamajorityofthevotingpowerofallholdersofLILCOPreferred Stock,votingtogetherasaseparateclass;byamajorityofthevotingpoweroftheoutstanding LILCOCommonStock;votingseparately asaclass;andbytheholdersofamajorityofthevotingpowerofeachseriesofLILCOPreferred Stock,ineachcasevotingseparately asaclass,attheLILCOMeeting.HoldersofsharesofBrooklynUnionCommonStockwillnotvoteontheLIPAAgreement."
| |
| Inconnection withtheproposaltoadopttheLIPAAgreement, eachoutst'anding shareofLILCOCommonStockisentitledtoonevote,eachoutstanding shareofLILCOPreferred Stockhavingapar,value of$100pershareisentitledtoonevoteandeachoutstanding shareofLILCOPreferred Stockhavingaparvalueof$25pershareisentitledtoone-quarter (i/~)ofavote.Only.holdersofLILCOCommonStockandeligibleLILCOPreferred StockofrecordasofthecloseofbusinessontheRecordDatewillbeentitledtonoticeofandtovoteinrespectoftheLIPAAgreement attheLILCOMeetingoranyadjournments orpostponements thereof.AsofJune23,1997,therewereissuedandoutstanding 121,184,527 sharesofLILCOCommonStockand21,674,000 sharesofLILCOPreferred Stock,ofwhich14,520,000 weresharesofSeriesAAPreferred Stock,570,000weresharesof,SeriesCCPreferred Stock,880,000weresharesofSeriesGGPreferred Stock,3,464,000 weresharesofSeriesQQPreferred Stockand2,240,000 weresharesofSeriesUUPreferred Stock.ThisJointProxyStatement/Prospectus alsoconstitutes theProspectus oftheHoldingCompanywithrespecttothe'ssuance'of (x)upto'approximately 173,048,739 share'sofHoldingCompanyCommonStocktobeissuedtocommonshareholders oFLILCOattheapplicable ratio(the"Ratio")ofHoldingCompanyCommonStockforeachshareofLILCOCommonStockandtocommonshareholders ofBrooklynUniononaone-to-one basisinconnection withtheCombination (the"Brooklyn UnionRatio")and(y)upto14,520,000,shares ofHoldingCompanySeriesAApreferred stock,parvalue$25pershare("HoldingCompanySeriesAAPreferred Stock")tobeissuedtoholdersofSeriesAAPreferred StockofLILCOonaone-'to-one basisinconnection withtheLIPAAgreement.
| |
| TheRatiowillbe(x)'0.803 sharesofHoldingCompanyCommonStockforeachshareofLILCOCommonStockiftheCombination isconsummated buttheLIPATransaction isnotconsummated (the"Original Ratio"),(y)0.880sharesofHoldingCompanyCommonStockforeachshareofLILCOCommonStockiftheCombination isconsummated andtheLIPATransaction isconsummated (the"LIPARatio")or(z)oneshareofHoldingCompanyCommonStockforeachshareofLILCOCommonStockiftheCombination isnotconsummated buttheLIPATransaction isconsummated.
| |
| HoldersofLILCOCommonStockwillown66%,68%or100%,respectively, oftheoutstanding HoldingCompanyCommonStockandholdersofBrooklynUnionCommonStockwillown34%,32%and0%,'res'pectively, oftheoutstanding HoldingCompanyCommonStockinsuchevents.1ThisJointProxyStatement/Prospectus alsorelatestoanindependent proposaltorestructure BrooklynUnionintoaholdingcompanystructure (the"KeySpanShareExchange"
| |
| ),inwhichsharesofBrooklynUnion18 eCommonStockwillbeexchanged forsharesofcommonstock,parvalue$0.33Vspershare("KeySpan CommonStock"),ofKeySpanEnergyCorporation, aNewYorkcorporation andawhollyownedsubsidiary ofBrooklynUnion("KeySpan"),
| |
| pursuanttoanAmendedandRestatedAgreement andPlanofExchange, datedasofJune9,1997,byandbetweenBrooklynUnionandKeySpan(the"KeySpanAgreement"
| |
| ).TheKeySpanShareExchangeisdescribed indetailintheAnnexJtothisJointProxyStatement/Prospectus tobedelivered toBrooklynUnionshareholders.
| |
| Consummation oftheKeySpanShareExchangeissubjecttovariousconditions, including theadoptionoftheKeySpanAgreement bytheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofBrooklynUnionCommonStockattheBrooklynUnionMeeting.ThisJointProxyStatement/Prospectus alsoconstitutes theProspectus ofKeySpanwithrespecttoissuanceofuptoapproximately 50,364,212 sharesofKeySpanCommonStocktobeissuedtoholdersofBrooklynUnionCommonStockonaone-to-one basisinconnection withtheKeySpanShareExchange.
| |
| Unlessotherwise specified, references totherightsairdobligations ofBrooklynUnionundertheBrooklynUnion/LILCO Agreement andtheeffectsoftheCombination onthesharesofBrooklynUnionCommonStock,respectively, shouldbeinterpreted torefertotherightsandobligations ofKeySpanuirdertheBroollynUnion'LILCO Agreement, andthesectsoftheCombination onthesliaresofKeySpanCommon$tockintheeventthattlieKeySpanholdingcoinpanyproposalisapprovedbyBrooklynUnionsliareholders andtheKeySpanShareExchangeiscompleted.
| |
| IftheKeySpanSliareExchangeisconsuinmated andBrooklynUnioncoinmonshareholders receiveKeySpanCoinmonStock,KeySpancoinmonshareliolders will,receivecoinnionsharesofthenewHoldingCompanyuponconsummation oftlieCombination.
| |
| TheKeySpanShareExchangeisexpectedtobeconsumniated beforetheCombination, andneithertheKeySpanSliareExchangenortlieCombination isconditioned onIheoilieroccurring.
| |
| Allinformation contained inthisJointProxyStatement/Prospectus withrespecttoLILCOhasbeenprovidedbyLILCO.Allinformation contained inthisJointProxyStatement/Prospectus withrespecttoBrooklynUnionorKeySpanhasbeenprovidedby,BrooklynUnion.NeitherLILCOnorBrooklynUniotiassumesanyresponsibility fortheaccuracyorcompleteness oftheinformation providedbytheotherparty.'his JointProxyStatement/Prospectus andtheaccompanying formsofproxyarefirstbeingmailedtoshareholders ofBrooklynUnionandLILCOonoraboutJune30,1997.Ashareholder whohasgivenaproxymayrevokeitanytimepriortotheapplicable meeting.See"Meetings, VotingandProxies."
| |
| 19 THEBROOKLYNUNION/LILCO COMBINATION
| |
| .~Background oftheCombination iOverseveralyears,eachofBrooklynUnionandLILCOhasevaluated thesignificant changesalreadymadeandexpectedtobemadeintheregulatory structure andcompetitive environment ofthegasandelectricutilitybusinesses.
| |
| Atboththefederalandstatelevels,therehavebeenimportant changesintheregulation oftheutilityindustrybusinesses and,especially withrespecttotheelectricutilitybusiness, thereistheprospectoffurtherdramaticchanges.Asdescribed morefullybelowunder"CommonReasonsfortheCombination,"
| |
| LILCOandBrooklynUnionbelievethatthecombination ofthecompanies willprovidebothcompanies'hareholders withtheopportunity tobenefitfromthecompetitive opportunities providedbytherapidlychangingcircumstances intheenergybusinesswhilealsoprovidin'g thelowerratesandincreased competition soughtbythecompanies'egulators andcustomers.
| |
| AstheeffortsofthePublicServiceCommission oftheStateofNewYork(the"PSC")torestructure theutilitybusinessinNewYorkfirstbegantotakeshapeinthePSC'sCompetitive Opportunities Proceeding in1994,Dr.WilliamJ."Catacosinos, theChiefExecutive OfficerofLILCO,andMr.RobertB.Catell,theChiefExecutive OfficerofBrooklynUnion,beganexploratory discussions aimedatdetermining whetherabusinesscombination ofLILCOandBrooklynUnioncouldprovideamutually'beneficial platformforresponding tothechangesinregulation andtheenergymarketplace.
| |
| Thosediscussions continued throughout 1994and1995.OnOctober'13, 1994,LIPAandtheNewYorkPowerAuthority madeajointproposaltoacquiretheoutstanding LILCOCommonStockforacashpurchasepriceof$21.50pershare.ThelastclosingsalespriceforLILCOCommonStockonOctober13,1994,whichwaspriortothereceiptofsuchproposal, was$16'ershare.LILCOadvisedLIPAonOctober24,1994,thatitwaspreparedtoevaluateseriously the$21.50pershareproposalmadebyLIPA.Theproposalwassuperseded onJune20,1995,byaproposalfromLIPAtoacquirealloftheoutstanding LILCOCommonStockforacashpurchasepriceof$17.50pershare.On'June30,1995,LILCOresponded bystatingthatsuchofferhadtoomanyuncertainties andcontingencies towarrantfurtherreviewordiscussions atthattime.Neitheroftheseoffersresultedinnegotiations betweenLIPAandLILCO.VTheseoffersweremadebyLIPApursuanttoitsgoverning statute,TheLongIslandPowerAuthority Act(the"LIPAAct"),whichgrantedLIPAthestatutory powertoacquireLILCO'sequityordebtsecurities orassetsthroughanegotiated transaction, bytenderofferorthroughtheexerciseofLIPA'scondemnation powers.TheLIPAActhadbeenenactedin1986inresponsetogrowingpolitical opposition toLILCO'sconstruction oftheShorehamNuclearPowerPlant("Shoreham")
| |
| onLongIsland.In1989,LILCO,LIPAandtheStateofNewYorkenteredintovariousagreements underwhichLILCOagreedtotransferitsinterestinShorehamtoLIPA.Shorehamwassubsequently decommissioned andLILCOrecordedsubstantial regulatory assetsreflecting thepresentvalueofexpectedelectricserviceratessettoprovideforLILCO'sfinancial recoverythroughtheamortization ofsuchregulatory assets,andareturnonsuchregulatory assets,overaforty-year period.BrooklynUnionretainedtheinvestment bankingfirmofMerrillLynch,Pierce,Fenner&,SmithIncorporated
| |
| ("MerrillLynch")inJanuary1995andthelawfirmofWachtell, Lipton,Rosen&KatzinApril1995inordertoassistBrooklynUnioninevaluating thefinancial andlegalimplications ofabusinesscombination withLILCO,withthepotential forinvolvement ofLIPA.LILCOconsulted withitslegalandfinancial
| |
| : advisors, Kramer,Levin,Naftalis&Frankel("KramerLevin")andDillon,Read&Co.Inc.("DillonRead"),eachofwhichhadalreadybeenretainedinconnection withtheOctober1994LIPAandtheNewYorkPowerAuthority proposal.
| |
| OnOctober24,1995,LILCOandBrooklynUnionexecutedaconfidentiality agreement tofacilitate theexchangeofnon-public information betweenthecompanies.
| |
| Throughout 1995,Dr.Catacosinos, Mr.Catell,representatives ofDillonReadandrepresentatives ofMerrillLynchhadseveralmeetingstodiscussthebasisforabusinesscombination.
| |
| Representatives ofeachcompanymettodiscussthepossiblesynergies ofanysuchcombination.
| |
| Atvarioustimesduring,1995 and1996,20 representatives ofLILCOandBrooklynUnionmettodiscussissuesassociated withcombining thetwocompanies, including revisions tomanagements'ynergies estimates andtheexchangeofnon-public information inconnection witheachcompany's "duediligence" investigation oftheother.Meanwhile, Governor-elect GeorgePatakiorganized ataskforceonDecember23,1994,toevaluatethefeasibility ofaLIPAtakeoverofLILCOasproposedinOctober1994underthenGovernorMarioGuomo.During1995,theLIPAActwasamendedtoprovideforagoverning boardoftrusteesforLIPAoffifteenmembers,nineappointed bytheGovernorandthreeeachbythemajorityleaderoftheNewYorkStateSenateandbytheSpeakeroftheNewYorkStateAssembly.
| |
| Inaddition, thatamendment madeLIPAsubjecttotheNewYorkStatePublicAuthorities ControlBoard(the"PACB"),asaresultofwhicheachagreement madebyLIPA,fortheexpenditure ofmorethan$1millionrequiresunanimous approvalbythe.representatives appointed bytheGovernor, theSenatemajorityleader,,and theSpeakerofthe,Assembly.
| |
| Promptlyaftersuchamendment wassignedintolawonAugust2,1995,the,,LIPA boardoftrusteeswasreconstituted asprovidedforintheamendment.
| |
| Asaresultofsuchamendment andthereportofsuchtaskforce,LIPA'sJune1995proposaltoacquireLILCOfor$17.50persharewasnotpursued.1InSeptember 1995,GovernorPatakiannounced hisadministration's commitment toformulate aStatetakeoverofLILCOthatachievedfourobjectives:
| |
| adouble-digit reduction inelectricratesonLongIsland;protection forLongIslandpropertyownersagainstincreased propertytaxes;aplanforlong-ter'm competition intheLongIslandelectricma'rket;andtheendofLILCOasLongIsland'selectricutility.GovernorPatakistatedthathewouldnotruleoutanyactionrequiredtoaccomplish theseobjectives, including ahostileStatetakeoverortheexerciseofLIPA'scondemnation powers.OnSeptember 29,1995,LILCOadvisedLIPAbyletterthatLILCOwouldfullycooperate withLIPAonany,constructive proposalmadebyLIPA.,InSeptember 1995,LIPAretainedBear,Stearns&Co.Inc.("BearStearns")
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| asitsfinancial advisorsandinOctober1995retainedthelawfirmsofWinthropStimsonPutnam4Robertsasitscorporate counselandHawkinsDelafield 8cWoodasitsbondcounselandtheaccounting firmofPriceWaterhouse LLP.Afteranorganizational meetinginearlyOctoberbetweenLIPAandLILCOrepresentatives andtheirrespective outsideadvisors, LILCOandBearStearnsexecutedonOctober11,1995,aconfidentiality agreement pursuanttowhich,assubsequently amended,non-public information wasprovidedb'yLILCOtospecificLIPAofficials andLIPA'soutsideadvisors.
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| Duringthefallof1995andthereafter through1996and1997,substantial non-public information wassoprovidedbyLILCO.InSepte'mber'1995, representatives'of BrooklynUnionmettwicewithrepresentatives ofLIPAtooutlineBrooklynUnion'sproposalfortheacquisition'of LILCO'sgenerating andregulatory assetsbyLIPAandthecombination ofBrooklynUnionwiththe'electric transmission anddistribution systemandgasoperations ofLILCO.,OnSepteinber 27,'1995, LIPAissuedawritten"RequestforInformation" whichsolicited indications ofinterestfromqualified partiesinconnection witha"state-authority facilitated financial restructuring/acquisition ofLILCO."According tosuchRequest,LIPAwas"intentonacquiring allorpartofLILCO's'ecurities and/orassetsatthelowestpossiblepriceandreservestherighttoacquireLILCOequitysecurities belowcurrenttradingprices."According topublished reports,thirty-one partiesformallyresponded tothisRequest.OnOctober19,1995,BrooklynUnionsubmitted toLIPAcertainadditional information supplemental toitspresentation atLIPA'sSeptember meetingsinresponsetotheLIPARequest.NOnDecember5,1995,theProposalEvaluation Committee oftheLIPABoardofTrusteesissuedaTechnical Reportwhichrecommended atransaction structure underwhichLIPAwouldacquiresubstantially allofLILCO'sassets,sellthegenerating assetstomultiplebuyers,sellthegasassetstoanotherbuyerandretainaprivateparty.tomanageforLIPA'sbenefitthetransmission anddistribution systemsoacquired.
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| AlthoughthisproposalwasneveradoptedbytheLIPABoardofTrustees, andnopricewasdiscussed withrespecttotheproposedpurchaseofassets,LIPArepresentatives overthenextfewmonthsdiscussed theproposalwithLILCO,representatives.
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| OnFebruary28,1996,theLIPABoardofTrusteesauthorized thecommencement ofdiscussions withLILCOandLIPArepresentatives thereafter beganfurtherduediligence withrespecttoLILCO.Duringsuchdiscussions LILCOrepresentatives identified severalfeaturesoftheproposalthatwereunacceptable toLILCO:21 theacquisition ofallofLILCO'soperating assets;thebreakupofthegenerating assets;andtheconstraints thatwouldbeplacedonLILCOwithrespecttothereinvestment ofproceedsinordertoavoidadversetaxconsequences.
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| 1OnMarch7,1996,Mr.CatellmetwiththeGovernorandexpressed hissupportfortheGovernor's effortstodealwiththeLILCOsituation butindicated whatheperceived tobecertainshortcomings intheLIPAproposal.=
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| InthewakeofthereleaseoftheTechnical Report,LILCOandBrooklynUnionrenewedtheirdiscussions withrespecttoapossiblebusinesscombination.
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| Thetwochiefexecutive officersmetonFebruary7,March1andMarch18,1996,todiscussthestructure, pricingandothermaterialtermsofabusinesscombination andthepotential involvement ofLIPAwithrespectthereto.OnApril8,1996,thetwochiefexecutive officersmetagain,accompanied bythecompanies'espective investment bankers,todiscussvaluation.
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| OnMay22,1996,thechiefexecutive
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| : officers, accompanied bytheirinvestment bankersandcounsel,mettodiscussstructure, legalissuesandsynergysavings.BrooklynUnionsoughttopersuadeLILCOtoapproachLIPAjointlywithaproposalalongthelinespreviously submitted byBrooklynUniontoLIPA.LILCOsoughttopersuadeBrooklynUniontoproceedwithaBrooklynUnion-LILCO combination agreement.
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| BrooklynUnionandLILCOwereunabletoreachanagreement onpriceorstructure.
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| IVDiscussions continued duringthesunimerof1996andadraftcombination agreement waspreparedbyLILCO'soutsidecounselanddelivered toBrooklynUniononAugust15,1996.Meetingswereheldbetweenthechiefexecutive
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| : officers, accompanied bytheirinvestment bankers,onAugust6,7and16,1996,andagain,butwithoutinvestment bankers,onSeptember 3,1996,butnoagreement wasreachedoneitherpriceor'corporate governance issues.Negotiations atthatpointweresuspended.
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| Meanwhile, discussions betweenLIPAandLILCOduring1996wereinfluenced bya,varietyofdevelopments.,
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| Beginning inMay1996,taxcounselforLIPAandtaxcounselforLILCObeganevaluating analternative structure whichtheybelievedshouldbemore.taxefficient.
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| Thatstructure contemplated apossibleacquisition byLIPA,ofLILCOCommonStockimmediately following atransferbyLILCOofitsgasandgenerating assetstoanewcompanytobeownedbyLILCOshareholders.
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| LIPAandLILCOrepresentatives haddiscussions withtheIRSconcerning thepossibility ofobtaining privateletterrulingswithrespecttothisalternative transaction andthetax-exempt statusoftherelatedLIPAfinancing.
| |
| becauseofthecomplexity ofthetransaction, substantive discussions betweenthepartieswereslowedduring1996.OnFebruary12,1996,thePSCissuedanordertoshowcausewhyLILCOshouldnotberequiredtoimplement animmediate reduction initselectricratesforthethreeyearperiodfrom1997to2000.OnApril17,1996,thatproceeding wasexpandedtoprovideforacomprehensive evaluation ofLILCO's,electric rates.OnAugust2,1996,thePSCstaffformallyrecommended atemporary 5.2%decreaseinLILCO'selectricrates.ThePSCultimately hasnottakenactioninconnection withthe1996proceeding, whichisstillpending.OnJune24,1996,Moody'sInvestors ServiceInc.announced thatithaddowngraded itsratingof$1.95billionoutstanding principal amountofLILCO'sgeneralandrefunding bondsfromBaa3toBal,citing"intenseregulatory scrutiny" ofLILCO'selectricratesbythePSCandtheuncertain courseofthenegotiations betweenLIPAandLILCO.Anothersignificant development affecting thosenegotiations wasadecisiononNovember4,1996,inPhaseIIofataxcertiorari proceeding broughtbyLILCOagainstcertaintaxingjurisdictions inSuffolkCounty,LongIsland,seeking'recovery ofpropertytaxespaidbyLILCOinrespectofShoreham.
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| DuringPhaseI,LILCOhadbeenawarded$81millioninrefundsandinterest.
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| ThePhaseIIdecision, whilesubjecttoappealbythe,defendants, ruledinLILCO'sfavorandcouldresultinanaggregate recoveryinexcessof$1billionforLILCO(whichamountwouldbeusedtoreduceelectricrates).LILCOperceived thisdecisionasputtinggreaterpressureonLIPAtoagreeonatransaction withLILCOwhichwouldincludeasettlement oftheShorehampropertytaxcase.'2 Finally,variousNewYorkStateofficials andrepresentatives, indiscussions withDr.Catacosinos andMr.Catell,encouraged LILCOandBrooklynUniontorecommence theirnegotiations afterreportswerepublished, inSeptember 1996disclosing thetermination ofthosenegotiations inSeptember 1996,Dr.Catacosinos andMr.Catellunderstood fromthesediscussions thattheStatewouldviewanagreement betweenLILCOandBrooklynUnionfavorably sinceitwouldresultinratereductions fromthesynergies toberealizedinabusinesscombination ofLILCOandBrooklynUnion.Accordingly, discussions betweenthechiefexecutive officersofLILCOandBrooklynUnionbeganagainonDecember4,1996,and,aftermeetings(whichincludedtheinvestment bankers)onDecember11,13and20,thechiefexecutive officersagreedtopursuethenegotiations ofadefinitive agreement baseduponanexchangeratiothatwouldresultinLILCOshareholders owning66%,andBrooklynUnionshareholders owning34%,ofthecommonequityofthecombinedentityintheabsenceofamutuallyacceptable transaction withLIPAand68%and32%,respectively, ifasatisfactory transaction withLIPAwereconsummated.
| |
| Theadvisorsforbothpartiesmetandspokeseveraltimesoverthenextweek,discussed thetransaction andrelateddocumentation, agreedupontheproposedstructure forthetransaction andnegotiated thetermsofanAgreement andPlanofExchange(the"Original Agreement"
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| ),theLILCOStockOptionAgreement betweenLILCOandBrooklynUnion,datedasofDecember29,1996(the"LILCOStockOptionAgreement"
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| )andtheBrooklynUnionStockOptionAgreement betweenBrooklynUnionandLILCO,datedasofDecember29,1996(the"Brooklyn UnionStockOptionAgreement",
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| and,togetherwiththeLILCOStockOptionAgreement, the"StockOptionAgreements"
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| ),including theconditions toclosing,thetermination provisions, thebreak-upfees,thecovenants thatwouldgoverntheoperations ofLILCOandBrooklynUnionpendingtheclosingandvariousothermattersthatwouldgoverntheoperations oftheHoldingCompanyaftertheclosing.Thepartiesalsonegotiated aprovision thatcontemplated arevisionintheexchangeratioifatransaction withLIPAacceptable toeachpartycouldbenegotiated.
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| OnDecember24andDecember27,1996,thechiefexecutive officersmetagaintonegotiate'he provisions relatingtomanagement succession andthecomposition oftheHoldingConipany's BoardofDirectors.
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| Finalagreement withrespecttosuchissueswasreachedonDecember28,1996.IOnDecember29,'1996,theLILCOBoardofDirectors metandre'ceived advicefromDillonRead,legalcounselandmanagemerit.
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| DillonReadreviewedfinancial andotherinformation concerning thetwocompanies andtheproposedOriginalRatio.DillonReadthendelivered itsoralopiniontotheLILCOBoardofDirectors that,asofsuchdateandsubjecttothemattersdiscussed, theproposedOriginalRatioof0.803sharesofHoldingCompanyCommonStockforeachshareofLILCOCommonStockwasfair',fromafinancial pointofview,totheholdersofLILCOCommonStock.Counseloutlinedin"detailthetermsandconditions'of theOriginalAgreement andtheStockOptionAgreements anddescribed thechangesintheproposeddefinitive documentation fromthedraftspreviously furnished totheLILCOBoard.ofDirectors.
| |
| TheLILCOBoardofDirectors discussed theadvicetheyhadreceivedandtliepotential benefitstotheshareholders, customers andemployees ofLILCOthatwouldresultfromacombination ofLILCOandBrooklynUnion.Aftersuchdiscussion, theLILCOBoardofDirectors unanimously approvedtheOriginalAgreement andtheStockOptionAgreements.
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| AlsoonDecember29,1996,theBrooklynUnionBoardofDirectors metandreceivedadvicefromMerrillLynch,legalcounselandmanagement.
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| MerrillLynchreviewedfinancial andotherinformation concerning thetwocompanies andtheproposedBrooklynUnionRatio.MerrillLynchthendelivered itsoralopiniontotheBrooklynUnionBoardofDirectors totheeffectthat,asofsuchdateandsubjecttothemattersdiscussed, theproposedBrooklynUnionRatiowasfair,fromafinancial pointofview,totheholdersofBrooklynUnionCommonStock.Counseloutlinedindetailthetermsandconditions oftheOriginalAgreement andtheStockOptionAgreements anddescribed thechangesintheproposeddefinitive documentation fromthedraftspreviously furnished'to theBrooklynUnionBoardofDirectors.
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| The,BrooklynUnionBoardofDirectors discussed theadvicetheyhadreceivedandthepotential benefitstotheshareholders andcustomers ofBrooklynUnionthatwouldresultfromacombination ofLILCOandBrooklynUnion.Aftersuchdiscussion, theBrooklynUnionBoardofDirectors unanimously approvedtheOriginalAgreement andtheStockOptionAgreements.,
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| 23 Aftertheseboardmeetings, theOriginalAgreement andtheStockOptionAgreements weresigned.Renewednegotiations withLIPAcommenced inJanuary1997.FromthatdateuntilMarch19,1997,LIPA,LILCOandBrooklynUnion,throughtheirofficersandoutsideadvisors, conducted extensive negotiations.
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| DuringthisperiodandthroughMay1997,LIPAanditsadvisorsconducted extensive duediligence investigations ofLILCO'sfinancial, legalandbusinessrecords,including interviews withLILCOpersonnel.
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| Thenegotiations focusedonatransaction structure inwhichcertainassetsofLILCO,including itsgas,generating andcommonplantassets,wouldbetransferred toanewcompanytobeownedbyLILCOandBrooklynUnionshareholders immediately priortoacashmergerofLILCOwithanacquisition subsidiary tobeformedbyLIPA,asaresultofwhichLILCOwouldbecomeawholly-owned'subsidiary ofLIPA.Theprincipal issuesduringthenegotiations weretheidentification oftheassetstobedistributed byLILCO,thepricetobepaidbyLIPA,thetreatment ofLILCO'spreferred stockanddebt,thetermsandconditions ofamanagement servicesagreement, apowersupplyagreement andotherserviceagreements tobeenteredintobyLILCOwiththenewcompanyandtherightsLIPAwouldhavetoacquirethegenerating facilities andtodevelopcertainrealestateparcelsforfuturegenerating, transmission anddistribution facilities.
| |
| Inaddition, thenegotiations incorporated LIPA'sacquisition ofLILCO'scurrentrightsintheShorehampropertytaxandrelatedcasesandcertainprovisions relatingtootherpendingandfuturepropertytaxcasesandtheanticipated LIPAsettlement ofthesecasesafterclosing.'hese negotiations culminated inameetingonMarch18,1997,attendedbyDr.Catacosinos, otherLILCOofficersandrepresentatives ofDillonRead,thethencurrentChairmanofLIPA,otherLIPAofficials andrepresentatives ofBearStearns,andMr.Catellandrepresentatives ofMerrillLynch,Atthatmeeting,the'final pricingtermsfortheacquisition byLIPAofLILCOwereagreedtoandsubstantially finaltermsforthemanagement servicesandrelatedagreements wereagreedtoimmediately thereafter.
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| Theseagreements weredocumented inanon-binding Agreement inPrinciple, datedasofMarch19,1997,amongLIPA,LILCOandBrooklynUnion.Thepartiesandtheirrespective.
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| outsideadvisorsthenpreparedandnegotiated thedefinitive legaldocumentation contemplated bytheAgreement inPrinciple, Theresulting draftsweresubmitted,
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| : unsigned, onApril30,1997,tothestaffofthePACBtopermitthemtobegintheirevaluation oftheproposedtransaction.
| |
| Thepartiesheldfurthernegotiations withrespecttothedefinitive legaldocumentation duringMayandJune.DuringthisperiodLIPAconducted aseriesofpublichearingsatwhichthecontentsoftheApril30thdraftswerediscussed.
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| OnJune16,1997,theLIPABoardofTrusteesauthorized theexecution byLIPAofthethencurrentdraftsofthedefinitive legaldocumentation.
| |
| Asaresultofsubsequent negotiations amongtheparties,certaintcchnical changesweremadetosuchdrafts.Inaccordance withtheresolution adoptedbytheLIPABoardofTrusteesattheirJune16thmeeting,thechangesnegotiated afterJune16remainsubjecttoratification bytheLIPABoardofTrustees.
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| OnJune26,1997,MerrillLynchdelivered itswrittenopiniontotheBrooklynUnionBoardofDirectors totheeffectthat,asofsuchdateandsubjecttothemattersdescribed therein,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockI'romafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock.Havingdiscussed atanumberofmeetingsthebenefitsthatwouldresultfromtheconsummation oftheLIPATransaction andhavingreceivedadvicefromMerrillLynch,legalcounselandmanagement, andhavingreceiveddraftsanddetaileddescriptions oftheBrooklynUnion/LILCO Agreement, theAmendedStockOptionAgreements (asdefinedbelow)andtheLIPAAgreement, theBrooklynUnionBoardofDirectors executedaunanimous writtenconsentdatedJune26,1997approving theBrooklynUnion/LILCO Agreement andtheAmendedStockOptionAgreements.
| |
| OnJune26,1997,LILCOandBrooklynUnionexecutedanddelivered'he BrooklynUnion/LILCO Agreement, pursuanttowhichBrooklynUnionconsented tothe'execution byLILCOoftheLIPAAgreement.
| |
| LILCOandBrooklynUniononJune26,1997,alsoexecutedanAmendedandRestatedBrooklynUnionStockOptionAgreemcnt andanAmendedandRestatedLILCOStockOptionAgreement (collectively, the"AmendedStockOptionAgreements"
| |
| ).AsofJune26,1997,LIPAa'ndLILCOexecutedtheLIPAAgreement.
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| 24 CommonReasonsfortheCombination BrooklynUnionandLILCObelievethatthecombinedcompany,itsshareholders anditscustomers canbenefitsignificantly fromthestrategic benefitswhichtheyexpecttoresultfromtheCombination, whichincludethefollowing:
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| ~Customers ofBrooklynUnionandLILCOshouldrealizelowerratesasaresultofthesubstantial synergysavingsanticipated toberealizedthroughthecombination ofthecompanies'perations and,iftheLIPATransaction isconsummated, electriccustomers shouldrealizesubstantially lowerratesasaresultofLIPA'sexemption frompaymentoffederalincometaxanditsrefinancing ofLILCO'sdebtwithtax-exemptfinancing.
| |
| ~Thegreaterfinancial andoperational resources available tothecombinedcompanyshouldcreateastrongercompetitor inthecontinuing development ofacompetitive energymarketplace.
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| ~Shareholders ofbothcompanies willhavetheopportunity toparticipate intheupsidepotential oftheconvergence ofgasandelectriccompanies withintheenergyindustry.
| |
| Thecombinedcompanyisexpectedtocreateaplatformtomarket,tradeandarrangephysicaldeliveryofenergyproductsandrelatedpervicesonalargescaletomajormarketareas.4Bycombining thebusinesses ofBrooklynUnionandLILCOasseparatesubsidiaries ownedbyaholdingcompany,thecombinedcompanyshouldbenefitfromgreaterIlexibility inconducting andfinancing non-regulated operations thaniscurrently available toeitherBrooklynUnionorLILCO.Thecombinedcompanyshouldalsohavegreaterfiexibility toinvestinnewlinesofbusinessthaniscurrently available toeitherBrooklynUnionorLILCO.WithgreaterIlexibility toraiseandcommitcapitaltounregulated operations intheenergybusiness, thecombinedcompanywillbebetterpositioned totakeadvantage ofthemarketopportunities presented intheincreasingly competitive energyindustry.
| |
| BrooklynUnionandLILCObelievethatthesestrategic benefitswillbefurtherenhancedthroughconsummation oftheLIPATransaction.
| |
| Theestimated netproceedsofapproximately
| |
| $1.7billionwillprovidetheHoldingCompanywithsubstantial financial resources whichBrooklynUnionandLILCOanticipate willbeusedinparttomakeacquisitions tliatwillcomplement theoperations oftheHoldingCompany.Particularly inlightofthesignificant proposedrestructurings andacquisitions announced byexistingutilities, theHoldingCompanyshouldbewellpositioned financially totakeadvantage oftheincreased opportunities whicharelikelytobepresented overthenextseveralyearstoexpanditsbusiness.
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| Nodetermination withrespecttosuchacquisition opportunities hasyetbeenmadebyeitherBrooklynUnionorLILCO.Recommendation oftheLILCOBoardofDirectors TheLILCOBoardbelievesthatthetermsofeachoftheCombination andtheLIPATransaction arefairto,andinthebestinterests of,LILCOanditsshareholders.
| |
| Accordingly, theLILCOBoard,byaunanimous vote,hasadoptedtheBrooklynUnion/LILCO Agreement andtheLIPAAgreement, andunanimously recommends theadoptionofeachbytheLILCOshareholders.
| |
| TheLILCOBoardbelievesthateachoftheCombination andtheLIPATransaction represents asignificant strategic, opportunity forLILCO.ThetermsoftheBrooklynUnion/LILCO Agreement, including theRatios,weretheresultofarm'-length negotiations betweenBrooklynUnionandLILCO.InfixingtheRatiosinthenegotiation process,LILCOmanagement reliedtoalargeextentonthefinancial analysesofDillonReadsetforthbelowunder"OpinionofLILCO'sFinancial Adviser."
| |
| TheLILCOBoardconsulted withitsfinancial advisorandlegaladvisorsandmanagement ofLILCO.Aftercarefulreviewandconsideration, theLILCOBoarddetermined thattheCombination isadesirable transaction fromthestandpoint oftheLILCOcommonshareholders.
| |
| CInreachingitsdecisiontoapprovetheBrooklynUnion/LILCO Agreement, theLILCOBoardconsidered thefollowing factors:(i)thecurrentandhistorical marketpricesoftheBrooklynUnionCommonStockandthe LILCOCommonStock(including thefactthattheclosingpricesofBrooklynUnionCommonStockandLILCOCommonStockonDecember26,1996were$30.625and$19.125,respectively; (ii)information concerning thefinancial performance, condition, businessoperations andprospects ofeachofBrooklynUnionandLILCO;(iii)theeffectsoftheCombination onLILCO'sshareholders, including thesignificant premiumtoLILCO'sthencurrentmarketpricerellected intheratioandtheopportunity toshareintheanticipated benefits'ofownership ofthecombinedenterprise; (iv)theexpectedfederalincometaxtreatment oftheCombination asataxableexchangetoshareholders unlesstheLIPAAgreement isterminated priortotheconsummation oftheCombination (asdescribed under"Fe'deral IncomeTaxConsiderations
| |
| -MaterialFederalIncomeTaxConsequences"
| |
| );(v)theimmediate reduction ingasandelectricratestoreflectanticipated synergy'savings, ascontemplated byBrooklynUnionandLILCO,andthebeliefthatcustomers willbenefitfromabroaderrangeofinnovative energyproductsandservices; (vi)tlietermsoftheBrooklynUnion/LILCO Agreement, whichprovideforbalancedrepresentations andwarranties, conditions toclosingandrightstotermination; and(vii)theopinionofLILCO'sfinancial advisor,DillonReadthat,asofthedatethereofandbaseduponthefactorsandassumptions described insuchopinion,theOriginalRatiowasfairfromafinancial pointofviewtotheholdersofsharesofLILCOCommonStock.Indetermining thattheCombination isfairtoLILCO'sshareholders, theLILCOBoardconsidered theabovefactorsasawholeanddidnotassignspecificorrelativeweightstothem.IntheviewoftheLILCOBoard,eachofthefactorslistedabovereinforced itsbeliefthatthecombinedentitywouldhaveexcellent businessprospects goingforward.BecauseLILCO'sshareholders collectively wouldownapproximately 66%(or68%iftheLIPA,Transaction isconsummated) ofthecombinedentitybased'pon thecapitalization ofthecompanies asofDecember29,1996,thedateoftheOriginalAgreement, theprospects ofsuchentitywereanimportant factortotheLILCOBoardindetermining whetherfoapprovethetrarisaction.
| |
| InreachingitsdecisiontoapprovetheLIPAAgreement, theLILCOBoardconsidered thefollowing factors:(i)thepurchasepricepayablepursuanttotheLIPAAgreement closelyapproximates thebookvalueoftheassetstobeownedbyLILCOatthetimeoftheLIPAClosing;(ii)LILCOshareholders willcontinuetoownanequityinterestinthegenerating facilities andcommonplantcurrently ownedbyLILCO,aswellasitsgasoperations (ivhichhaveenjoyedsignificant revenueandearningsgrowthinrecentyears);(iii)consummation oftheLIPATransaction isexpectedtoresultinsubstantial electricratedecreases whicharenotobtainable throughanyothermeans;(iv)thesaleofLILCO'sShoreham-related regulatory assets,whichLILCObelieveswouldhaveafavorable impactontheHoldingCompany's creditra'tingandthetradingvalueofitsequitysecurities; (v)thestructure oftheLIPATransaction includeslong-term serviceagreements pursuaiit towhichsub'sidiaries oftheHoldingCompanywillmanageonbehalfofLIPAtheday-to-day operation ofthetransmission anddistribution systemonLongIslandandtherebypromotethecontinued reliability ofthatsystem(including theabilitytousetheHoldingCompany's entireworkforce inanintegrated fashiontoassistinrestoring serviceaftermajorstorms);(vi)thepreservation of,LILCO's currentworkforce withoutlayoffs;(vii)theexpectedfederalincometaxtreatment oftheLIPATransaction (asdescribed under"FederalIncomeTaxConsiderations
| |
| -.Material FederalIncomeTaxConsequences"
| |
| );(viii)BrooklynUnion'sconsentto,andsupportfor,theLIPATransaction; (ix)theincreaseintheRatioofHoldingCompanyCommonStockissuableintheCombination foreachshareofLILCOCommonStockfrom0.803to0.880(andtheresulting increaseofHoldingCompanyCommon'Stock tobeownedbyLILCOshareholders fromapproximately 66%to'approximately 68%);(x)theferinsoftheLIPAAgreement, whichprovideforreasonable representations andwarranties andrightstotermination; (xi)thesupportfortheLIPATransaction expressed publiclybyseniorNewYorkStateofficials andrepresentatives; and(xii)theopinionofDillonReadthat,asofthedatethereofandbaseduponthefactorsandassumptions described insuchopinion,theConsideration tobereceivedpursuanttotheLIPAAgreement wasfairfromafinancial pointofviewtoLILCO.TheLILCOBoardconsidered thefactthatconsummating theLIPATransaction wouldhavetheeffectofmakingtheCombination taxabletoLILCOshareholders, butdetermined thattheoverallbenefitsanticipated tobereceivedfromtheLIPATransaction o'utweighed thedetriment associated withthecreationofataxliability onLILCOshareholders.
| |
| Indetermining thattheLIPATransaction isfairtoLILCO'sshareholders, theLILCOBoardconsidered theabovefactorsasawholeanddidnotassignspecificorrelativeweightstothem.IntheviewoftheLILCOBoard,eachofthefactorslistedabovereinforced itsbeliefthatsuchtransaction wasfair.BecauseLILCO'sshareholders collectively wouldownapproximately 68%oftheHoldingCompany(baseduponthecapitalization ofLILCOandBrooklynUnionasofDecember29,1996)assumingtheCombination is26' alsoconsummated (or,100%oftheHoldingCompanyifonlytheLIPATransaction isconsummated),
| |
| the'prospects oftheHoldingCompanyineacheventuality wereanimportant factortotheLILCOBoardindetertnining whethertoapprove.'the transaction.
| |
| THE,LILCO BOARD,BYUNANIMOUS VOTE,HASADOPTEDEACHOFTHEBROOKLYNUNION/LILCO AGREEMENT ANDTHELIPAAGREEMENT, BELIEVESTHATTHETERMSOFBACHOFTHECOMBINATION ANDTHELIPATRANSACTION AREFAIRTOLILCO'SSHAREHOLDERS ANDUNANIMOUSLY RECOMMENDS THATTHESHAREHOLDERS OFLILCOVOTETOADOPTEACHOFTHEBROOKLYNUNION/LILCO AGREEMENT ANDTHELIPAAGREEMENT.
| |
| Inconsidering theserecommendations oftheLILCOBoard,shareholders shouldbeawarethatcertainmembersofLILCO'smanagement andtheLILCOBoardhavecertaininterests intheCombination thataredifferent from,orinadditionto,theinterests ofsliareholders ofLILCOgenerally andthatcouldpotentially represent conflicts ofinterest.
| |
| TheLILCOBoardwasawareoftheseinterests andconsidered them,amongothermatters,inadoptingtheBrooklynUnion/LILCO Agreement.
| |
| See"-Potential Conflicts, ofInterests ofCertainPersonsintheBindingShareExchanges."
| |
| Fortherecommendation oftheBrooklynUnionBoard,See"Selected Information Concerning BrooklynUnion-Recommendation oftheBrooklynUnionBoard"."OpinionofLILCO'sF<lnanclal AdvisorOnDecember29,1996,theLILCOBoardreceivedthewrittenopinionofDillonReadthat,asofthedateoftheopinion,theOriginalRatiowasfairfromafinancial pointofviewtotheholdersofLILCOCommonStock.ThcfulltextofDillonRead'sopiniondatedDecember29,1996,whichdescribes theassumptions made,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtothisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead'sopiniondoesnotconstitute arecommendation toanyholderofLILCOCommonStockastohowsuchholdershouldvoteattheLILCOMeeting.HoldersofLILCOCommonStockareurgedtoreadtheopinioninitsentirety.
| |
| IInarrivingatitsopinion,DillonReadhas,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtoLILCOandBrooklynUnion;(ii)reviewedcertainfinancial forecasts andotherdataprovidedtoDillonReadbyLILCOandBrooklynUnionrelatingtothebusinessandprospects ofLILCOandBrooklynUnion;(iii)conducted discussions withmembersoftheseniormanagement ofLILCOwithrespecttothebusinessaudprospects ofLILCO;(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbuSinessDillonReadbelievedtobegenerally comparable tothoseofLILCOandBrooklynUnion;(v)reviewedthehistorical marketpricesandtradingvoltnnesofLILCOCommonStockandBrooklynUnionCommonStock;(vi)comparedtheproposedfinancial termsoftheCombination withthefinancial termsofcertainother'transactions whichDillonReadbelievedtobcgenerally comparable totheCombination; (vii)analyzedtherespective contributions intermsofrevenue,earnings, cashflowandcommonequityofLILCOandBrooklynUniontothecombinedcompany,andtherelativ'e ownership oftheHoldingCompanyaftertheCombination bythecurrentholdersofLILCOCommonStockandBrooklynUnionCommonStock;(viii)considered theproformaeffectoftheCombination onLILCO'scapitalization ratios,earnings, cashflowandbookvaluepershare;(ix)reviewedtheOriginalAgreement; and(x)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinforination, aswasdeemednecessary orappropriate.
| |
| r0Inconnection withitsreview,DillonReaddidnotassumeanyresponsibility forindependent verification ofanyoftheforegoing information andrelied,withtheconsentofLILCO,onsuchinformation beingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, DillonReaddidnotmakeanyindcpcndent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) ofLILCOorBrooklynUnionoranyoftheirrespective subsidiaries, norwasDillonReadfurnished withanysuchevaluation orappraisal.
| |
| XVithrcspccttothefinancial forecasts referredtoabove,DillonRead,withLILCO'sdirection, assumedthattheyhadbeenreasonably preparedonbasesreflecting thebestcurrently available estimates andjudgments ofLILCO'sandBrooklynUnion'smanagement astothefuturefinancial perfonnance ofeachcompany.ForitsDecember29,27 1996opinion,DillonRead'sreviewofBrooklyri Union'scurrentandanticipated futureoperations, financial condition andprospects wasbasedentirelyonpublicinformation (exceptforcertainlimitedinternalprojections'eferred toabove),andwastherefore limitedinscope.DillonReaddidnotholddiscussions withanymembersofBrooklynUnion'ssenior,management inconnection withitsDecember29,1996opinion.DillonReadassumed,initsDecember29,1996opinion,thetransaction wouldbetreatedastax-freetobothLILCOandholdersofLILCOCommonStockandwouldbeaccounted forasapoolingofinterests.
| |
| Further,DillonRead'sopinionwasbasedoneconomic,
| |
| : monetary, andmarketconditions existingonthedatethereof.TheOriginalRatioandtheLIPARatioweredetermined througharm'-length negotiations betweenLILCOandBrooklynUnion.LILCOdidnotplaceanylimitations uponDillonReadregarding theprocedures tobefollowedorfactorstobeconsidered inrendering itsopinion.DillonReadhasnotbeenrequested tosolicit,norhasitsolicited, offersforLILCOfromthirdparties.Inconnection withrendering itsopinion,DillonReadconsidered avarietyofvaluation methodswhicharesummarized below.Thefollowing summarydescribes theanalysesperformed byDillonReadinthisregardandiscompleteinallmaterialrespects.
| |
| StockTradingHistory.DillonReadreviewedtheperformance ofthepersharemarketpriceofLILCOCommonStockandBrooklynUnionCommonStockovertheperiodfromDecember31,1993toDecember24,1996.DillonReadalsocalculated theratioofthepersharemarketpriceofLILCOCommonStocktothepersharemarketpriceofBrooklynUnionCommonStockovertheperiod.Thisanalysisshowedthatovertheperiod,"LILCOCommonStocktradedataratioashighas0.927andaslowas0.560comparedtothepriceofBrooklynUnionCommonStock.Thisanalysiswasutilizedtoprovidehistorical perspective forthemannerinwhichthepublictradingmarkethadvaluedLILCOandBrooklynUnionrelativetoeachother.Contribution Analysis.
| |
| DillonReadcalculated thecontribution ofeachofLILCOandBrooklynUniontotheHoldingCompanywithrespecttooperating
| |
| : revenues, operating cashflow(earnings beforeinterest, taxes,depreciation andamortization, "EBITDA"),
| |
| netincome,cashflowfromoperations (definedascashprovidedbyoperating activities beforechangesinworkingcapital),
| |
| projected year2000netincome,netproperty, plant,andequipment,"total assets,totaldebt,bookvalueofcommonequity,totalcapitalization, netdebt(definedastotaldebtlesscashequivalents),
| |
| andnetbookcapitalization (definedasbookcapitalization lesscashequivalents) forthelatesttwelvemonthperiodorasofthelatestbalancesheetdate.Inaddition,'illon Readcalculated therelativevaluation contribution ofeachofLILCOandBrooklynUniontotheHoldingCompanywithrespecttothemarketvalueofcommonequityasofDecember24,1996,themarketvalueofcommonequityasofOctober3,1996(oneweekpriortothepublication ofreportswhichsuggested thatatakeoverofLILCObyLIPAwouldneedtobeinitiated byyear-end1996tobesuccessful),
| |
| thecomparable companytradinganalysisvaluation, andthediscounted cashflowanalysisvaluation.
| |
| Thesecalculations yieldedamountsreflecting LILCO'scontribution rangingfrom59.9percentto88.4percentofthetotalproformacombinedamount.BasedontheOriginalRatioof0.803,theholdersofLILCOCommonStockwillownapproximately 66percentofHoldingCompanyCommonStock.BasedontheLIPARatioof0.880,theholdersofLILCOCommonStockwillownapproximately 68per'centofHoldingCompanyCommonStock.Comparable CompanyTradingAnalysis.
| |
| Usingpubliclyavailable information, DillonReadcompared, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchasnetincome,projected netincome,(medianearningspershareestimates for1996,1997and1998reportedbyInstitutional BrokersEstimateSystemorbasedonInstitutional BrokersEstimateSystemestimates andexpected5-yearearningspersharegrowthratesfromZacksInvestment
| |
| : Research, Inc.),revenues, earningsbeforeinterestandtaxes("EBIT"),
| |
| EBITDA,cashflowfromoperations andthebookvalueofcommonequityofLILCOandBrooklynUniontocertainothercompanies which,inDillonRead'sjudgment, weregenerally comparable toLILCOandBrooklynUnionforthepurposeofthisanalysis.
| |
| ThefactorsDillonReadconsidered inselecting companies forcomparison includedsize,geographic
| |
| : location, financial condition andscopeofbusinessoperations.
| |
| ForLILCO,thecompanies usedinthecomparison consisted ofConsolidated EdisonCompanyofNewYork,Inc.,NewYorkStateElectric0GasCorporation, NewEnglandElectricSystem,Northeast Utilities, PublicServiceEnterprise 28 GroupIncorporated, andRochester GasandElectricCorporation.
| |
| ForBrooklynUnion,thecompanies usedinthecomparison consisted ofAGLResources, Inc.,MCNEnergyGroup,lnc.,
| |
| NICORInc.,PeoplesEnergyCorporation, andWashington GasLightCompany.Equitymarketvalues(definedasthemarketpricepercommonsharemultiplied bytheoutstanding numberofcommonshares)asamultipleofeachoftheindicated statistics forLILCOandBrooklynUnion,respectively, wereasfollows:(i)latest12-monthnet.income-8.8xand17.1x;(ii)projected oractual1996netincome-9.0xand17.1x;(iii)projected 1997netincome-8.8xand14.6x;(iv)projected 1998netincome-8.7xand13.4x;(v)latest12-monthcashflowfromoperations
| |
| -2.6xand7.6x;and(vi)bookvalueofcommonequityonSeptember 30,1996-0.91xand1.70x.Netmarketcapitalizations (definedasequitymarketvalueplusthebookvalueofdebtandpreferred stocklesscashandcashequivalents) asamultipleofeachoftheindicated statistics forLILCOandBrooklynUnion,respectively, wereasfollows:(i)latest12-monthrevenues-2.4xand1.6x;(ii)latest12-monthEBITDA-6.1xand9.2x;and(iii)latest12-monthEBIT-8.0xand13.5x.Thiscomparison wasusedtoprovideaperspective onthepresentmarketvaluation ofeachofLILCOandBrooklynUnion.Therangeandmeanfortheequitymarketvalue'asamultipleofeachoftheindicated statistics forthegroupsofcomparable companies forLILCOandBrooklynUnion,respectively, wercasfollows,(i)latest12-monthnetincome:forLILCOcomparables
| |
| -7.9xto11.4xwithameanof10.0x;forBrooklynUnioncomparables
| |
| -Il.lxto17.4xwithameanof15.4x;(ii)projected oractual1996netincome:forLILCOcomparables
| |
| -8.3xto18.3xwithameanof11.1x;forBrooklynUnioncomparablcs
| |
| -Il.lxto17.8xwithameanof15.6x;(iii)projected 1997netincome:forLILCOcomparables
| |
| -8.2xto10.7xwithameanof9.7x;forBrooklynUnioncomparables
| |
| -13.3xto16.0xwithameanof14.5x;(iv)projcctcd 1998nctincome:forLILCOcomparables
| |
| -7.9xto10.5x'with ameanof9.5x;forBrooklynUnioncomparablcs
| |
| -12.5xto14.7xwithameanof13.6x;(v)latest12-monthcashflowfromoperations:
| |
| forLILCOcomparables
| |
| -2.0xto5.9x,withameanof4.2x;forBrooklynUnioncomparables
| |
| -6.0xto7.8x,withameanof7.0x;and(vi)bookvalueofcommonequityonSeptember 30,1996:forLILCOcomparables
| |
| -0.70xto1.33xwithameanof1.04x;forBrooklynUnioncomparables
| |
| -1.70xto2.65xwithameanof2.06x.Therangeandmeanfornetmarketcapitalization asamultipleofeachofthcindicated statistics forthegroupsofcomparable companies forLILCOandBrooklynUnion,respectively, wercasfollows:(i)latest12-monthrevenues:
| |
| forLILCOcomparables
| |
| -1.4xto2.1xwithameanof1.7x;forBrooklynUnioncomparables-1.4xto1.8xwithaincanof1.6x;(ii)latest12-monthEBITDA:forLILCOcomparables
| |
| -4.7xto6.5xwithameanof5.6x;forBrooklynUnioncomparables
| |
| -6.7xto9.6xwithameanof8.0x;and(iii)latest12-month'EBIT:forLILCOcomparables
| |
| -6.9xto10.2xwithameanof8.4x;forBrooklynUnioncomparables
| |
| -8.5xto15.8xwithameanof11.8x.Thecomparable companytradinganalysisisavaluation methodusedbyDillonReadtodetermine whetherLILCOorBrooklynUnionwerereasonably valuedatexistingmarketpricesinrelationtosimilarcompanies andinrelhtiontoeach'other.DillonReadconcluded thatbothLILCOandBrooklynUnionwercreasonably valuedatexistingmarketpricesinrelationtosimilarcompanies andinrelationtoeachother.DillonReadbelievesthatthisanalysissupportsDillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfrom=afinancial point.ofview.Comparable UtilityTransactions Analysis.
| |
| Usingpubliclyavailable information, DillonReadcomparedcertaintermsofmergerssimilartothetransaction betweenLILCOandBrooklynUnion.DillonReadcomparedtherelativeownership andmarketpremiuminrecentutilitymergers-of-equals transactions andelectric/gas utilitycombinations whichinDillonRead'sjudgmentwerecomparable totheCombination forthepurposeofthisanalysis.
| |
| Themerger-of-equals transactions whichwereanalyzedincludedonecomplctcd transaction (MidwestResources Inc.andIowa-Illinois Gas&ElectricCompany)andfourpendingtransactions (Delmarva Power&LightCompanyandAtlanticEnergyInc.;Baltimore Gas&ElectricCompanyandPotomacElectricPowerCompany;Public.ServiceCompanyofColoradoandSoulhwestern PublicServiceCompany;andNorthernStatesPowerCompanyandWisconsin EnergyCorporation).
| |
| Thcelectric/gas utilitycombinations whichwereanalyzedincludedfivependingtransactions (PugetSoundPower&,LightCompanyandWashington EnergyCompanyInc.;DukePowerCompanyandPanEnergy Corp.;EnovaCorporation andPacificEntcrpriscs Inc.;HoustonIndustries Incorporated andNorAmEnergyCorp.;andEnronCorp.andPortlandGeneralCorporation).
| |
| ,29 Withrcspccttorelativeownership, incomparable mergers-of-equals transactions, thelargercompanyineachmergerreceivedbetween50percentand62percentofthecombinedcompany.Incomparable electric/gas combinations, theelectricpartnerreceivedbetween48percentand83percentofthecombinedcompany.Incomparison, LILCOshareholders willownapproximately 66or68percentoftheHoldingCompanyaftertheCombination.
| |
| Withrespecttothemarketpremium,inrecentmergers-of-equals transactions, thelargercompanypaidapremiumtothcclosingmarketpriceonthedaybeforethemergerannouncement ofbetween0.3percentand23.3percent.Inelectric/gas combinations, thelargercompanypaidapremiumtotheclosingmarketpriceonthedaybeforethemergerannouncement ofbetween11.4percentand48.8percent.LILCO,asthelargercompany,willreceivea29percentpremiumtotheclosingmarketpriceonthedaybeforetheannounccmcnt oftheOriginalAgreement.
| |
| DillonReadbelievesthatthisanalysissupportsDillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfromafinancial pointofview.Discounted CashFlowAnalysis.
| |
| DillonReadperformed adiscounted cashAowvaluation baseduponprojections furnished bythemanagements ofLILCOandBrooklynUnion.Withrespecttoprojections forLILCOandBrooklynUnion,DillonReadassumedthatsuchprojections werereasonably prepareduponbasesreAecting thebestavailable estimates andjudgments ofthemanagements ofLILCOandBrooklynUnion,respectively.
| |
| Utilizing theseprojections, DillonReaddiscounted toapresentvalue,undervaryingassumeddiscountrates,(i)thefreeunleveraged cashflowsthroughtheyear2001forLILCOandthroughtheyear2002forBrooklynUnionand(ii)theprojected terminalvalueattheendoftheyear2001forLILCOandattheendoftheyear2002forBrooklynUnion,utilizing variousassumedmultiples ofoperating cashflow(EBITDA)and,operating income(EBIT).Thisanalysisindicated that,assumingdiscountratesrangingfrom8.0percentto9.0percentforLILCOandterminalvaluemultiplcs rangingfrom5.5xto6.5xforEBITDAand7.5xto9.5xforEBIT(asindicated bycomparable companytradinganalysis),
| |
| thenetafter-tax presentvalueofthefuturecashflowsrangedfrom$15.24to$28.53pershareforLILCOonastand-alone basis.Thisanalysisalsoindicated that,assumingdiscountratesrangingfrom8.0percentto9.0percentforBrooklynUnionandterminal.
| |
| valuemultiples rangingfrom7.0xto9.0xforEBITDAand11.0xto13.0xforEBIT(asindicated bycomparable companytradinganalysis),
| |
| thenetafter-tax presentvalueoffuturecashflowsrangedfrom$23.85to$41.54pershareforBrooklynUniononastand-alone basis.Thediscounted cashAowanalysisisavaluation methodusedbyDillonReadtodetermine whetherLILCOandBrooklynUnionwerereasonably valuedinrelationtoeachother.DillonReadbelievesthatthisanalysissupportsDillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfromafinancial pointofview.ProFonnaAnalysis.
| |
| DillonReadreviewedcertainproformafinancial information forthecombinedentityresulting fromtheCombination, basedonLILCO'sandBrooklynUnion'smanagements'rojections coveringtheperiodfrom1997to2000.Withrespecttoprojections forLILCOandBrooklynUnion,DillonReadassumedthatsuchprojections werereasonably prepareduponbasesreAecting thebestavailable estimates andjudgments ofthemanagements ofLILCOandBrooklynUnion,respectively.
| |
| Thisanalysisindicated thatearningspershareresulting'from ashareexchangeattheOriginalRatioof0.803wouldbedilutivetoLILCOshareholders overtheperiodanalyzed.
| |
| DillonReadalsoperformed anearningspersharesensitivity analysis.'or thepurposeofthisanalysis, DillonReadassumedthatLILCOelectricratesonastand-alone basiswerereduced10percent.The10percentreduction isbased,uponpublicpronouncemcnts byrelevantpartiesofthemagnitude ofratereduction necessary forLILCO'selectriccustomers.
| |
| Itshouldbenotedthatthisanalysiswasforillustrative purposesonlyandthatthistransaction isnotconditioned onsucharatereduction.
| |
| Usingthisassumption, theearningspersharesensitivity analysisindicated thatearningspersharewouldbeaccretive toLILCOshareholders overtheperiodanalyzed.
| |
| Preliminary estimates ofsavingsrelatedtothecombination ofLILCOandBrooklynUnionasidentified bythemanagements ofthetwocompanies wercdeveloped toquantifyefficiencies resulting fromoperating synergies, plantconstruction deferrals andgreatereconomies ofscaleinthepurchasing offuelandotherresources usedbyLILCOandBrooklynUnion.Thesepotential pre-taxsavings(aftercertaincosts)ofapproximately
| |
| $1billionovertenyearswereassumedtoflowtoratepayers andwillbenefittheHoldingCompany's shareholders onlythroughimprovedcompetitive position(duetolowerrates).DillonReaddidnot30 independently attempttoverifytheestimated savingslevels,nordidDillonReadattemptitsownestimation ofpotential costsavingsresulting fromtheCombination.
| |
| Initsanalysis, DillonReadassumedthatallofthetotalcostsavingswouldbeflowedthroughtoratepayers.
| |
| IftheHoldingCompanywereallowed'y oneormoreregulatory authorities toretainanyofthecostsavings,theresulting projected earningswouldbecorrespondingly higher.ltLIPATransaction AnalysisOnJune26,1997,theLILCOBoardreceivedDillonRead'swrittenopinionthat,asofthedateoftheopinion,theConsideration wasfairfromafinancial pointofviewtoLILCO.Thefulltext'ofDillonRead'sopiniondatedJune26,1997,whichdescribes theassumptions m'ade,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtothisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead'sOpiniondoesnotconstitute arecommendation toanyholderofL'ILCOCommonStockastohowsuchholdershouldvoteattheLILCOMeeting.HoldersofLILCOCommonStockareurgedtoreadtheopinioninitsentirety.
| |
| Inarrivingatitsopinion,DillonReadhas,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtoLILCO,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtoitbyLILCO,including historical andprojected financial information fortheT&DBusiness, theNuclearAsse(sand'theRegulatory Assets(eachasdefinedherein),(iii)conducted discussions withmembersoftheseniormanagement ofLILCOwithrespecttothebusinessandprospects ofLILCO,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusiness.
| |
| DillonReadbelievedtobegenerally comparable totheT&DBusiness, (v)comparedpubliclyavailable financial andstockmarketdataforcertainutilities
| |
| 'withhighconcentrations ofnucleargeneration tocertainutilities withlittleornonucleargeneration, (vi)reviewedthefinancial termsofcertaintransactions involving transmission anddistribution assets,(vii)considered theproformaeffectoftheLIPATransa'ction
| |
| 'ontheHoldingCompany's financial condition, (viii)reviewedtheLIPAAgreement, (ix)considered thefinancial termsoftheBasicAgreements'as definedherein),(x)considered theeffectoftheLIPATransaction onthependingBrooklynUnion/LILCO Agreement, and(xi)conducted suchotherfinancial studies,analysesandinvestigations, andcorisidered suchotherinformation, asDillonReaddeemednecessary orappropriate.
| |
| Inconnection withitsreview,DillonReaddidnotindependently verifyanyoftheforegoing information and,withtheconsentoftheLILCOBoardofDirectors, reliedonitbeingcompleteandaccuratemallmaterial~respects.
| |
| Inaddition, DillonReaddidnotmakeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) ofL1LCOoranyofitssubsidiaries,.nor wasDillonReadfurnished withanysuchevaluation orappraisal:
| |
| Withrespecttothefinancial forecasts referredtoabove,DillonRead,withLILCO'sdirection, assuinedthattheyhadbeenreasonably preparedonbasesreflecting thebestcurrently available estimates andjudgments ofmanagement astothefuturefinancial performance ofLILCO,LILCO'stran)mission anddistribution business("T&DBusiness"
| |
| ),certainregula'tory assets("Regulator'y Assets")andLILCO's18%interestintheNineMilePoint2nuclearpowerplant(the"NuclearAssets").DillonReadalso,atLIL'CO'sdirection, reliedonLILCO'sadviceregarding thetaxconsequences oftheLIPATransaction.
| |
| DillonReaddidnotattempttoquantifytheregulatory riskinherentintheRegulatory Assets,whichwillcompriseamajority'f theassetsLILCOwillownimmediately priortotheLIPATransaction.
| |
| Further,DillonRead'sopinionwasbasedoneconomic, monetaryandmarketconditio'ns existingonthedatethereof.TheConsideration wasdetermined througharm'-length negotiations betweenLILCOandLIPA.LILCOdidnotplaceanylimitations uponDillonReadregarding theprocedures tobefollowedorfactorstobeconsidered in'rendering itsopinion.DillonReadhasnotbeenrequested tonor-hasitsolicited offersforLILCOoranyofitsbusinesses orassetsfromthirdparties.IItInconnection withrendering itsopinion,DillonReadconsidered avarietyofvaluation methodswhichatesummarized below.Thefollowing summarydescribes theanalysesperformed byDillonRead.inthisregardandiscompleteinallmaterialrespects.
| |
| *31 T&DBusinessCComparable CompanyTradingAnalysis.
| |
| DillonReadobservedthatcurrently nopubliclytradedcompanies consisting solelyofelectrictransmission anddistribution businesses exist.DillonReaddetermined thatgasdistribution companies andwaterutilities havesimilarbusinessandregulatory characteristics andshouldtherefore provideareasonably comparable basisforanalysis.
| |
| Usingpubliclyavailable information, DillonReadcompared, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchasbookvalueofcommonequityofLILCO'sT&DBusinesstocertainothercompanies which,inDillonRead'sjudgment, weregenerally comparable forthepurposeofthisanalysis.
| |
| ThefactorsDillonReadconsidered inselecting companies forcomparison.
| |
| includedsize,geographic
| |
| : location, financial condition andscopeofbusinessoperations.
| |
| Thewaterutilitycompanies usedinthecomparison consisted ofAmericanWaterWorksCompany,Inc.,AquariunCompany,Consumers WaterCompany,Philadelphia SuburbanCorporation, SouthernCalifornia WaterCompanyandUnitedWaterResources, Inc.Thegasdistribution companies usedinthecomparison consisted ofAGLResources Inc.,BrooklynUnion,MCNEnergyGroupInc.,NICORInc.,PeoplesEnergyCorporation, andWashington GasLightCompany.Therangefortheequitymarketvalueasamultipleofbookvalueforthegasdistribution companies was1.5to2.4timesandforthewaterutilitycompanies was1;4to2.0times,Themedianwas1.8timesforthegasdistribution companies and1.6timesforthewaterutilitycompanies.
| |
| DillonReadappliedratiosof1.7to2.0timesand1.4to1.6times,respectively, totheimputedbookvalueoftheT&DBusiness, resulting inanimpliedvaluefortheT&DBusinessof$920millionto$1,082millionin,thecaseofthegasdistribution companies and$758millionto$866millioninthecaseofthewaterutilitycompanies.
| |
| Comparable Transactions
| |
| : Analysis, Usingpubliclyavailable information, DillonReadcomparedcertaintermsoftransactions involving thesaleofelectrictransmission anddistribution properties totheLIPATransaction.
| |
| DillonReadalsoconsidered thattherehavebeenasyetveryfewsaletransactions oftransmission anddistribution assetsforwhichpublicinformation isavailable.
| |
| Thetransactions DillonReadincludedinitsanalysiswerc:,Southwestern PublicServiceCompany's acquisition ofpropertyfromTNPEnterprises, Inc.;UnionElectricCompany's saleofproperties toIESIndustries Inc.andCIPSCOIncorporated; andUtilicorp United'sacquisition ofpropertyfromCentelCorporation.
| |
| Thetransactions hadarangeofprice-to-book multipleof1.6to2.0times.DillonReadappliedthesemultiples totheT&DAssets,resulting inanimpliedvalueof-$866millionto$1,082million.Regulatory Assets,Discounted CashFlowAnalysis.
| |
| Dillon,Readperformed adiscounted cashflowvaluation oftheRegulatory Assetsbaseduponprojections furnished bythemanagement ofLILCO.Withrespecttoprojections, DillonRead,assumedthatsuchprojections werereasonably prepareduponbasesreflecting thebestavailable estimates andjudgments ofthemanagement ofLILCO.Utilizing theseprojections, DillonReaddiscounted toapresentvalue,underassumeddiscountratesrangingfrom7.65percentto11percent,thefreeunleveraged cashflows,fortheremaining livesoftheRegulatory Assets.Thisanalysisindicated thatthenetafter-tax presentvalueoffuturecashflowsrangedfrom$742millionto$1,600million,afterdeducting theimputeddebtandpreferred stock.NuclearAssetsDillonReadobservedthatcurrently nopubliclytradedutilities withexclusively nucleargeneration assetsexist,andtodatetherehavenotbeenanysaletransactions involving onlynuclearassets.Therefore, DillonReadreliedonlimitedpublicinformation toestablish avaluation rangefortheNuclearAssets.DillonReadcompared'he medianmarket-to-book ratioofelectricutilities withhighconcentrations ofnuclearassetstothosewithlittle~ornonuclearassets>>Electricutilities weredividedintothreecategories:
| |
| thosewheregenerating capacitywas~comprised of40%ormorenucleargeneration
| |
| ("Concentrated NuclearGroup"),thefiveutilities withthelargest32 absoluteamountofnucleargeneration
| |
| ("LargeNuclearGroup"),andthosewithnoorinsignificant amountsofnucleargeneration
| |
| ("Non-nuclear Group").TheConcentrated NuclearGroupwascomprised ofRochester Gas0ElectricCorporation, UnicornCorporation, PecoEnergyCompanyandDukePowerCompany.TheLargeNuclearGroupwascomprised ofUnicornCorporation; DukePowerCompany,EntergyCorporation, PecoEnergyCompanyandTheSouthernCompany.TheNon-nuclear'Group consisted of40utilities throughout theUnitedStatesofvaryingsizeandcharacteristics, selectedonlyonthebasisofnoorinsignificant nuclearexposure.
| |
| Themedianmarket-to-book ratioforeachgroupwas:.99timesfortheConcentrated NuclearGroup,.96fortheLargeNuclearGroup,and1.65fortheNon-nuclear Group.Onaverage,bothgroupsofnuclearutilities tradedatadiscounttonon-nuclear utilities ofbetween24%and42%.DillonReadcalculated animpliedvalueoftheNuclearAssetsbymultiplying amarket-to-book ratioof.9to1.0timestheimputedbookvalueoftheNuclearAssets.Theimputedbookvaluewascalculated bymultiplying thebookvalueoftheassetsby39%,whichrepresented thecommonequitycomponent ofLILCO'scapitalization.
| |
| Thiscalculation resultedinanimpliedmarketvalueoftheNuclearAssetsof$241millionto$267million.ProFonnaAnalysisDillonReadcomparedLILCO'sDecember31,1997projected stand-alone balancesheettoaproformaLILCObalancesheetforthesamedateadjustedfortheLIPATransaction.
| |
| DillonReadobservedthattotalassetsofLILCOwoulddeclineasaresultoftheLIPATransaction fromapproximately
| |
| $11.6billiontoapproximately
| |
| $4.3billion,largelyasaresultofregulatory assetsdeclining fromapproximately
| |
| $6.6billiontoapproximately
| |
| $141million.DillonReadalsoobservedthatLILCOwouldhavenonetdebt(totaldebtminuscash)asaresultoftheLIPATransaction.
| |
| DillonReadbelieved, therefore, thatthe,LIPATransaction wouldresultinanimprovement inLILCO'sprojected financial condition.
| |
| Usingpubliclyavailable information, DillonReadcalculated, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchaslatesttwelvemonthsrevenues, operating cashflow,operating income,cashflowfromoperations, and19P8estimated netincomeforcertaincompanies inlinesofbusinesscomparable tothoseLILCOisexpected'tobeinvolvedinaftertheLIPATransaction.
| |
| WhileLILCOwillbeengagedinthegeneration ofelectricity andthemanagement ofan'electric transmission anddistribution system,themajorityofitsearningsareexpectedtobederivedfromthegasdistribution business.
| |
| DillonReadtherefore usedasitsgroupofcomparable companies gasdistribution companies, specifically AGLResources Inc.,BrooklynUnion,MCNCorporation, NICORInc.,PeoplesEnergyCorporation andWashington Gas,LightCompany.Inselecting companies forcomparisons, DillonReadalsoconsidered size,geographic locationandfinancial condition.
| |
| Themultiples forthisgroupofcompanies rangedasfollows:netmarketcapitalization torevenue-1.2to1.9;netmarketcapitalization tooperating cashflow-6.8to10.7;net.marketcapitalization tooperating income-9.9to19.0;equitymarketvaluetoestimated 1998netincome-12.6to14.7',andequitymarketvaluetolatesttwelvemonthscashflowfromoperations
| |
| -6.5to8.4.ImpliedValues(millions)
| |
| Muliiplcs AppliedDillonRead,initsjudgment, baseduponthebusinessmixofLILCO.compared tothecomparable companies, appliedmultiples generally atthelowendoftherangeforcomparable companies totheresultsforLILCOproformafortheLIPATransaction (andbeforeanyincomefromthereinvestment ofthecashproceeds'romtheLIPATransaction) toarriveatimpliedvaluesforLILCO.Themultiples appliedandtheresulting impliedvalueswereasfollows:Revenues.Operating CashFlowOperating Income...
| |
| NetIncomeCashFlowfromOperations.
| |
| 1.3-1.46.8-7.510.0-1LO12.5-13.26.5-7.0$761-$931$681-$899$859-$1,089$975-$1,030$1,014-$1,09233
| |
| -DillonReadconsidered thefactthatpursuanttotheBrooklynUnion/LILCO Agreement, thenumberofsharesLILCOshareholders wouldreceiveinrespectofeachoftheirsharesofLILCOCommonStockwouldbeincreased from.803to.880asaresultoftheLIPATransaction.
| |
| TheLILCOshareholders'wnership oftheHoldingCompanywouldtherefore beincreased from66%to68%.4UpdatedOpinionTheLILCOBoardhasreceivedanupdatedopinionfromDillonReadthat,asofthedateofthisJointProxyStatement/Prospectus, theOriginalRatioandtheLIPARatiowerefairfromafinancial pointofviewtotheholdersofLILCOCommonStock.ThefulltextofDillonRead'sopiniondatedJune26,1997,whichdescribes theassumptions made,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtothisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead'sopiniondoesnotconstitute arecommendation toanyholderofLILCOCommonStockastohowsuchholdershouldvoteattheLILCOMeeting.HoldersofL'ILCOCommbnStockareurgedtoreadtheopinioninitsentirety.
| |
| Inadditiontoupdatingtheanalysesdescribed aboveoftheOriginalRatio,DillonRead,initsupdatedopinion,considered thefinancial consequences theLIPATransaction wouldhave,ifconsummated, ontheCombination.
| |
| Specifically, DillonReadconsidered thattheLIPATransaction wouldresultin:(i)purchaseaccounting beingapplied,ratherthanpoolingaccounting, whichDillonReadassumedwouldbeapplicable intheabsenceoftheLIPATransaction; (ii)theconsideration receivedbythcholdersofLILCOCommonStockbecomingtaxable,whereasDillonReadassumedthatintheabsenceoftheLIPATransaction theCombination wouldbetax-free; and(iii)anincreaseintheexchangeratiotobereceivedbytheholdersofLILCOCommonStockto.880,from.803intheabsenceofthe'LIPATransaction.
| |
| Inconnection withrendering itsupdatedopinion,DillonReadconsidered avarietyofvaluation methods,including thosedescribed above.Inaddition, DillonReadperformed theanalysessummarized below.ProFonnaAnalysisDillonReadcomparedLILCO'sDecember31,1997projected stand-alone balancesheettoaproformabalancesheetforthecombinedentityresulting fromtheCombination forthesamedateadjustedfortheLIPATransaction.
| |
| DillonReadobservedthattotalassetsoftheHoldingCompanywouldbeapproximately
| |
| $7.0billioncomparedtoapproximately
| |
| $11.6billionforLILCO.Themajorreas'onforthedeclineinassetswasthereduction inregulatory assetsfromapproximately
| |
| $6.6billiontoapproximately
| |
| $141million,DillonReadalsoobservedthattheHoldingCompanywouldhavenetdebt:(totaldebtminuscash)ofapproximately
| |
| $349millioncomparedtoapproximately
| |
| $5.3billionforLILCO.DillonReadbelieved, therefore,"
| |
| thattheHoldingCompanywouldhaveanimprovedprojected financial condition ascomparedtoLIL'COstand-alone.
| |
| jContparable CoinpanyTradittgAnalysisUsingpubliclyavailable information, DillonReadcalculated, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchaslatesttwelvemonthsrevenues, operating cashflow,operating
| |
| ,income,cashflowfromoperations, and1998estimated netincomeforcertaincompanies inlinesofbusinesscomparable tothosetheHoldingCompanyisexpectedtobeinvolvedinaftertheCombination andtheLIPATransaction.
| |
| Whilesubsidiaries oftheHoldingCompanyw'illbeengagedinthegeneration ofelectricity andthemanagement of.anelectrictransmission anddistribution system,themajorityofitsearningsareexpectedtobederivedfromthegasdistribution business.
| |
| DillonReadtherefore usedasitsgroupofcomparable companies gasdistribution companies, specifically AGLResources Inc.,BrooklynUnion,MCNCorporation, NICORInc.,PeoplesEnergyCorporation andWashington GasLightCompany.Inselecting companies forcomparison, DillonReadalsoconsidered size,geographic locationandfinancial condition.
| |
| Themultiples forthisgroupofcompanies rangedasfollows:netmarket,capitalization torevenue-1.2to1.9;netmarketcapitalization tooperating cashflow-6.8to10.7;equitymarketvaluetoestimated 1998netincome-12.6to14.7;andequitymarketvaluetolatesttwelvemonthscashflowfromoperations
| |
| -6.5to8.4.34
| |
| :DillonReadappliedmultiples withintherangeforcomparable companies tothe1998projected resultsfortheHoldingCompanyproformafortheLIPATransaction (andbeforeanyincomefromthereinvestment ofthecashproceedsfromthe,LIPATransaction) toarriveatimpliedtradingvaluesfortheHoldingCompany(beforeassigning anyvaluetocash).Themultiples appliedandresulting impliedvalueswercasfollows:ImpHedImpliedValuesI'orValuespcrMultiples thcIIoldingsharcofAppliedCompanyLILCO*IIRevenues.1.4-1,5$12.72-$14.61$11.19-$12.86Operating CashFlow,;..........
| |
| 7.0-8.0$12.71-$16.50$11.18-$14.52Operating Income........,
| |
| ...10.0-12.0
| |
| $14.59-$20.26$12.84-$17.83NetIncome......
| |
| 13.5-15.0
| |
| $16.55-$18.39$14.57-$16.18,CashFlowfromOperations
| |
| ...............
| |
| 6.5-7.0$14.83-$15.97$13.05-$14.05*Basedonthe.880excltange ratioandbeforeassigning anyvaluetothecashproceedsfromtheLIPATransaction.
| |
| DillonReadthencalculated theafter-tax cashproceedsthattheHoldingCompanywouldreceivepursuanttotheLIPATransaction, dividedsuchamountbytheexpectedsharesoutstanding oftheHoldingCompany,andmultiplied theresultbythe.880exchangeratiotoarriveatacashamountperLILCOshare.DillonReadaddedsuchpersliareamounttotheimpliedvaluespt:rLILCOshareresulting fromtheComparable CompanyTradingAnalysistoarriveat'totalvalueperLILCO'share of$23.32to$26.40.Finally,DillonReadcomparedsuchimpliedvaluetoLILCO'sstockpriceonDecember27,1996(thelasttradingdatepriortotheannouncement oftheCombination) of$19.375andnotedthattheimpliedvaluewashigherbybetween20and36percent.Thepreparation ofafairnessopinioninvolvesvariousdeterminations astothemostappropriate andrelevantmethodsoffinancial analysisandtheapplication ofthesemethodstoparticular circumstances, and,therefore, theopinionandanalysisarenotreadilysusceptible tosummarydescription.
| |
| Accordi'ngly, notwithstanding theseparatefactorsandanalysessummarized above,DillonReadbelievesthatitsanalysesmustbeconsidered asawholeandthatselecting portionsofitsanalysesandotherfactorsitconsidered, withoutconsidering allfactorsandanalyses, couldcreateamisleading viewoftheevaluation processunderlying itsopinions.
| |
| DillonReaddidnotassignanyparticular weighttoanyanalysisorfactoritconsidered but,rather,madequalitative judgments basedonitsexperience inrendering suchopinionsandoneconomic, monetaryandmarketconditions thenpresentastothesignificance andrelevance ofeachanalysisandfactor.Initsanalyses, DillonReadassumedrelatively stableindustryperformance, regulatory environments andgeneralbusinessandeconomicconditions, allofwhicharebey'ondLILCO'scontrol.Anyestimates contained inDillonRead'sanalysesdonotnecessarily indicateactualvalue,whichmaybesignifican'tly moreorlessfavorable thanstatedtherein.Estimates ofthefinancial valueofcompanies donotpurporttobeappraisals ornecessarily reflectthepricesatwhichcompanies actually'ay besold.Inrendering itsopinions, DillonReadexpressed noviewsastotherangeofvaluesatwhich'heLILCOCommoriStockmaytradefollowing theconsummation ofthetransactions discussed herein,nordoesDillonReadmakeanyrecommendations toaholderofLILCOCommonStockwithrespecttohowsuchholdershouldvoteonthetransactions discussed hereinortotheadvisability ofdisposing oforretaining theHoldingCompanyCommonStockfollowing thetransactions discussed herein.DillonReadisaninternationally recognized investment bankingfirm.which,aspartofitsinvestment bankingbusiness; regularly isengagedinevaluating businesses andtheirsecurities inconnection withmergersandacquisitions, negotiated underwritings, competitive bids,secondary distributions oflistedandunlistedsecurities, privateplacements andvaluations forestate,corporate andotherpurposes.
| |
| TheLILCOBoardselectedDillonReadonthebasisofthefirm'sexpertise andreputation.
| |
| Pursuanttotheengagement letterbetweenLILCOandDillonRead,LILCOhaspaidDillonReadthefollowing amounts:$2.5millionupontheexecution oftheengagement letter,whichincludescompensation for-financial servicesrenderedtoLILCOfromtimetotimesinceApril1992relatedtoproposals foratransaction 35 suchastheLIPATransaction,
| |
| $2.5millionupontherendering ofDillonRead'sfairnessopiniontotheLILCOBoardaddressing theCombination and$2.5millionupontherendering ofDillonRead'sfairnessopiniontotheLILCOBoardaddressing theLIPATransaction.
| |
| LILCOhasalsoagreedtopayDillonReadafeeuponconsummation ofeitherorbothtransactions equalto.4percentoftheaggregate amountofconsideration receivedbyLILCOoritscommonshareholders, less$6.25millionofthepaymentsmentioned abovewhichwillhavepreviously beenpaid.DillonReadhas,inthepast,performed'various investment bankingservicesforLILCOforwhichDillonReadhasbeencompensated.
| |
| Intheordinarycourseofbusiness, DillonReadtradesthedebtandequitysecurities ofLILCOandBrooklynUnionforitsownaccountandtheaccountsofitscustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| FortheopinionofBrooklynUnion'sfinancial advisor,see"Selected Information Concerning BrooklynUnion-OpinionofBrooklynUnion'sFinancial Advisor".
| |
| Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction Inconsidering therecommendations oftheBrooklynUnionBoardofDirectors andtheLILCOBoardofDirectors withrespecttotheBrooklynUnion/LILCO Agreement andtherecommendation oftheLILCOBoardofDirectors withrespecttotheLIPAAgreement, BrooklynUnionandLILCOshareholders shouldbeawarethatcertainofficersanddirectors ofB'rooklyn UnionandLILCO(ortheiraffiliates) haveinterests intheMe'rgerthataredifferent fromandinadditiontotheinterests ofBrooklynUnionandLILCOshareholders generally.
| |
| See"Selected Information Concerning LILCO-Potential Conflicts ofInterests ofCertainPersonsiritheCombination andtheLIPATransaction,"
| |
| and"-SelectedInformation Concerning BrooklynUnion-Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction."
| |
| TheHoldingCompanyisrequiredbytheBrooklynUnion/LILCO Agreement toprovideindemnification andliability insurance arrangements=for directors andofficersofBrooklynUnionandLILCO.See"TheAgreement andPlanofExchangeandMerger-Indemnification."
| |
| CertainArrangements Regarding theDirectors andManagement oftheHoldingCompanyFollowing theCombination andtheLIPATransaction BoardofDirectors.
| |
| TheBrooklynUnion/LILCO Agreement providesthatuponconsummation oftheCombination, thenumberofdirectors comprising thefullBoar'dofDirectors oftheHoldingCompanywillbe15persons,sixofwhomwillhavebeendesignated byBrooklynUnion,sixofwhomwillhavebeendesignated byLILCOandthreeofwhomwillhavebeendesignated byacommittee consisting oftwocurrentdirectors ofBrooklynUnionandtwocurrentdirectors ofLILCO.IntheeventthattheMergerisnotconsummated, theBoardofDirectors oftheHoldingCompanywillcorisistoftheDirectors ofLILCOservingimmediately beforetheclosingoftheLIPATransaction.
| |
| Officers.
| |
| UndertheBrooklynUnion/LILCO Agreement, Dr.Catacosinos, whocurrently servesasCliairman oftheBoardofDirectors, Cliairman oftheExecutive Committee andChiefExecutive OfficerofLILCO,willserveasChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompanycommencing uponconsummation oftheCombination.
| |
| Inaddition, Mr.Catell,whocurrently servesasChairmanandChiefExecutive OfficerofBrooklynUnionwillserveasPresident andChiefOperating OfficeroftheHoldingCompanycommencing uponconsum'mation oftheCombination.
| |
| TheBrooklynUnion/LILCO Agreement alsoprovidesthatatthefirstanniversary oftheconsummation oftheCombination, Dr.Catacosinos willceasetobetheChiefExecutive OfficerbutwillcontinuetobeChairmanoftheBoardandChairmanoftheExecutive Committee oftheHoldingCompanyandwillbecomeaconsultant totheHoldingCompany,andMr.CatellwillsucceedDr.Catacosinos asChiefExecutive OfficeroftheHoldingCompany.Thearrangements tocausesuchelections totakeplaceatthefirstanniversary oftheconsummation oftheCombination maybealteredonlybyavoteoftwo-thirds oftheentireBoardofDirectors oftheHoldingCompany.IntheeventthattheMergerisnotconsummated, theprovision described inthepreceding paragraph willnottakeeffectandDr.Catacosinos willcontinuetoserveasChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompany.FederalIncomeTaxConsiderations TaxRulingsRequested forLIPATransaction ThepartiesintendtoseekrulingsfromtheIRSsubstantially tothefollowing effect(1)thatexceptforanygainonLILCO'stransferoftheTransferred Assets,LILCOwillnotrecognize gainpursuanttoSection337(d)oftheInternalRevenueCodeof1986,asamended(the"Code"),'ranyotherCodeprovision (a)uponLIPA'spurchaseofLILCOCommonStockandtheamendment ofLILCO'sarticlesofincorporation (toqualifyasaSection115entity),or(b)byreasonofLILCO'ssubsequent exclusion ofincomeunderSection115oftheCode;(2)thattheLIPAAgreement constitutes a"bindingagreement" forpurposesofcertainproposedregulations underSection337(d)oftheCode,sothattheissuanceoftheproposedregulations asfinalregulations beforeorafterconsummation oftheLIPATransaction wouldnotaffectLILCO'snonrecognition ofgainasconfirmed bythepreceding Section337(d)ruling;(3)thattheincomeofLILCOfollowing theLIPATransaction, including anyincomereceivedfromrate-payersthatisattributable totheRegulatory Assets,willbederivedfromitsactivityasapublicutilityandwillaccruetoapolitical subdivision ofNewYorkStatewithinthemeaningofSection115(1)andtherefore willbeexcludedfromgrossincomeunderSection115(l)whilethestockofLILCOiswhollyownedbyLIPA;and(4)thattheinterestpaidonindebtedness issuedbyLIPAtofinancetheLIPATransaction andtorefinance certainLILCOindebtedness willqualifyforexclusion fromgrossincomeunderSection103oftheCode.Thereceiptoffavorable IRSrulingsisacondition totheobligations ofthepartiestoconsummate theLIPATransaction undertheLIPAAgreement.
| |
| Noassurance canbegiventhattheIRSwillissueanyoralloftherequiredrulings.MaterialFederalIncomeTaxConsequences Thefollowing setsforththeopinionofWachtell, Lipton,Rosen&Katzastothematerialfederalincometaxconsequences oftheMergertoBrooklynUnionanditsshareholders.
| |
| Thefollowing alsosetsforththeopinionofHunton&Williamsastothematerialfederalincometaxconsequences oftheShareExchangeandtheLIPATransaction toLILCOanditsshareholders.
| |
| ,Thefollowing discussion isbasedontheCode,theregulations thereunder, administrative interpretations andcourtdecisions.
| |
| Futurelegislation, regulations, administrative interpretations orcourtdecisions couldchangethetaxconse'quences described below.Thisdiscussion doesnotaddressallaspectsoffederaliitcome'taxation thatmaybeimportant toanyspecificshareholder inlightofsuchshareholder's p'articular circumstances.
| |
| Nordoesitaddressaspectsthatmaybeimportant toshareholders subject'to specialrules,suchasshareholders whotarenotcitizensor'residents oftheUnitedStates,financial institutions, tax-exempt organizations, insurance companies, dealersinsecurities orshareholders whoacquiredtheirBrooklynUnionCommonStock,LILCOCommonStockorLILCOPreferred Stockpursuanttotheexerciseofoptionsorotherwise ascompensation.
| |
| '37 Thisdiscussion assumesthatLILCOandBrooklynUnionshareholders holdtheirrespective sharesofstockascapitalassetswithinthemeaningofSection1221oftheCode.Accordingly, gainorlossrecognized byshareholders asdescribed belowgenerally willbecapitalgainorloss.Itwillbelong-term gainorlossforstockheldmorethanoneyearattheeffective timeofthetransaction resulting inthegainorloss.IftheKeySpanShareExchangeisconsummated priorto,theMerger,thenallreferences contained inthisdiscussion ofMaterialFederalIncomeTaxConsequences (i)toBrooklynUnionCommonStockandtheholdersthereofshallrefertoKeySpanCommonStockandtheholdersthereofand(ii)toBrooklynUnionshallrefertoKeySpan.TaxConsequences
| |
| -OverviewI>>NThematerialfederalincometaxconsequences oftheLIPATransaction andtheCombination dependinpartonwhethereachtransaction occursandtheorderinwhichthetransactions occur.'Specifically, thematerialfederalincometaxconsequences dependonwhether(i)theLIPATransaction andtheCombination occurconcurrently (ortheLIPATransaction precedestheCombination),
| |
| (ii)onlytheLIPATransaction occurs,(iii)theCombination occurswhentheLIPAAgreement hasnotbeenterminated orconsummated, or(iv)theCombination occursaftertheLIPAAgreement isterminated.
| |
| Thematerialfederalincometaxconsequences ofeachofthesepossiblealternatives isdiscussed below.Thefollowing tableisprovidedasaguidetotftediscussion ofthematerialfederalincometaxconsequences oftheproposedtransactions andisqualifedinitsentiretybythatdiscussion.
| |
| Situation ITransaction Description LIPATransaction occurswithorpriortoCombination EffectonLILCOCommontt:Preferred Shareholders vrhoDoNotDissentTaxable-Possible51033DeferralEffectonIIUShareholders ivhoDoNotDissentNottaxable(otherthantaxonpossibledividendincomeequaltoNewYorkCityrealpropertytransfertaxthatmayotherwise bepayablebyashareholder)
| |
| EffectonLILCOTaxablegainontransferofTransferred AssetsIILIPATransaction onlySameasI.III-ACombination afterCommon:SameaswhichLIPAI.Preferred:
| |
| NotI'ransaction terminated taxableNotapplicable SameasI.SameasI.Nottaxable:Noassettransfe'r III-BIII-CCombination followedbyLIPATransaction:,
| |
| Treatedasiridependent Combination followedbyLIPATransaction:
| |
| Nottreatedasindependent SameasI.SameasI.SameasI.SameasI.SameasI.SameasI.IVCombination occursNottaxableafterLIPATransaction terminated SameasI.Nottaxable:Noassettransfer, I.IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination TaxImplications toLILCO.LILCO'stransferoftheTransferred AssetstotheHoldingCompanyand/ortheHoldingCompanysubsidiaries thatreceivetheTransferred Assets(the"Transferee Subsidiaries"
| |
| )in38 exchangeforHoldingCompanyCommonStockandHoldingCompanyPreferred StockintheLIPATransaction shouldbe'ataxabletransaction forLILCO.VTaxIniplications totheHoldittgContpany.
| |
| TheHoldingCompanywillnotrecognize gainorlossuponitsissuanceofHoldingCompanyCommonStockandHoldingCompanyPreferred StocktoLILCOinexchangefortheTransferred Assets.TheHoldingCompany's aggregate basisintheTransferred AssetsshouldequalthefairmarketvalueoftheTransferred.Assetk atthetimeoftheexchange.
| |
| Inaddition, theHoldingCompanywillnotrecognize gainorlossuponitsissuanceofHoldingCompanyCommonStocktoholdersofLILCOCommon.Stock(throughtheiragent)inexchangeforthecashtheyreceived(throughtheiragent)fromLIPAintheLIPAMerger.See"TheLIPATransaction
| |
| -Agreement andPlanofMerger"foradescription oftheLIPATransaction.
| |
| ,TaxImplications toHoldersofLILCOCommonStock.Althoughnotfreefromdoubt,andsubjecttothepossibleapplication ofSection1033oftheCodeasdiscussed below,theLIPATransaction shouldbetreatedasataxabledisposition ofLILCOCommonStockbytheholdeNinexchangeforcashreceived(throughtheiragent)fromLIPAandHoldingCompanyCommonStockreceivedfromLILCO.TheholdersofLILCOCommonStockshouldrealizegainorlossequaltothedifference between(i)thesumofthecashandthefairmarketvalueofsuchHoldingCompanyCommonStockreceivedand(ii)theholders'espective taxbasisintheirLILCOCommonStock.Subjecttothepossibleapplication ofSection1033bftheCode,ashareholder's basisin(i)HoldingCompanyCommonStockreceivedfromHoldingCompanywillequalthecashpaidthereforand(ii)HoldingCompanyCommonStockreceivedfromLILCOwillequalsuchstock'sfairmarketvalueattheeffective timeoftheLIPATransaction.
| |
| HoldersofLILCOCommonStockmaybeabletodcfei'heir recognition ofsuchgain(butnotloss)pursuanttoSection1033oftheCode.Section1033generally providesthatifataxpayertransfers propertyunderathreatofcondemnation andreceivesinexchangepropertythatis"similarorrelatedinserviceoruse"tothetransferred property("replacement property"),
| |
| thenthetaxpayerwillnotrecognize gainonthetransfer.
| |
| Section1033furtherprovidesthatifthetaxpayerreceivesmoneyorotherproperty, thenthetaxpayermayelecttodeferrecognizing gainbypurchasing replacement propertywithintwoyearsafterthecloseofthetaxyearinwhichthetaxpayer,first realizesgainfromthetransfer.
| |
| LILCO'smanagement believesthattheLIPATransaction isoccurring underthreatofcondemnation.
| |
| Thenonrecognition provisions ofSection1033oftheCodemayapplytothcshareholders'isposition ofLILCOCommonStock.IfSection1033isapplicable, HoldingCompanyCommonStockmightqualifyas,replacement propertyforLILCOCommonStock.Inthatevent,holdersofLILCOCommonStockmaynotberequiredtorecognize gainwithrespecttotheirreceipt(ortheiragent'sreceipt)ofHoldingCompanyCommonStockfromLILCO.Inaddition, holdersofLILCOCommonStockthatelecttodosomaynotberequiredt9recognize gainwithrespecttotheiragent'sreceiptofcashfromLIPA,becauseofthereinvestment ofsuchcashinHoldingCompanyCommonStock.IfSection1033applies,thenashareholder willberequiredtomakeanelectiontoavoidrecognition ofgainwithrespecttothereceiptofcash,andmayberequiredtomakeanelectionwithrespecttothereceiptofHoldingCompanyCommonStock.Ifashareholder avoidsrecognizing gainintheLIPATransaction pursuanttoSection1033,theshareholder's taxbasisinthereplacement property(HoldingCompanyCommonStock)generally willequaltheshareholder's costbasisforsuchreplacement propertydecreased bytheamountofgainnotrecognized pursuanttoSection1033.Consequently, theshareholder's aggregate taxbasisinitsHoldingCompanyCommonStockgenerally shouldbethesameastheshareholder's aggregate taxbasisinLILCOCommonStock,lesstheamountofcashreceivedinlieuofafractional share.Thereisnoprcccdent involving theapplicability ofSection1033toatransaction similartotheLIPATransaction, Accordingly, counselexpresses noopinionregarding thepotential application ofSection1033toholdersofLILCOCommonStock.39 tTHEPOSSIBLEAPPLICATION OF.SECTION:1033TOTHELIPATRANSACTION ISUNCERTAIN.
| |
| EACHHOLDEROFLILCOCOMMONSTOCKISENCOURAGED TOCONSULTWITHTHESHAREHOLDE<R'S OWNTAXADVISORTODETERMINE, AMONGOTHERISSUES,(i)WHETHERSECTION1033 APPLIES-TO'SUCHSHAREHOLDER, (ii)WHATPROPERTYQUALIFIE~S ASREPLACEMENT
| |
| : PROPERTY, (iii)WHETHER,ANDINWHATMANNER,THESHAREHOLDER MUSTMAKEANELECTIONTOAVOIDRECOGNIZING GAIN,AND(iv)THEAMOUNTOF<ANYREQUIREDADJUSTMENTTOTHE,SHAREHOLDER~S BASISINREPLACEMENT PROPERTY.
| |
| MHoldersof,LILCOCommonStock,who exercisedissenters'ights withrespecttotheLIPATransaction andreceivecashfortheirLILCOCommonStockwillrecognize gainorlossforfederalincometaxpurposes.
| |
| Adissenting shareholder mightbeabletodeferrecognizing suchgainpursuanttothenonrecognition provisions ofSection]033oftheCodeasdiscussed aboveif,amongotherthingsthe shareholder acquiresreplacement property.
| |
| TaxImplications toHoldersofLILCOPreferred Stock.HoldersofLILCOSeriesAAPreferred StockwhoexchangesuchsharesforHoldingCompanypreferred stockinconnection withtheLIPATransaction willrecognize gainorlossforfederalincometaxpurposes.
| |
| Theamountofgainorlosswillequalthedifference betweenthefairmarketvalueofHoldingt,ompanystockreceivedandtheshareholders'espective taxbasisintheirLILCOSeriesAAPreferred Stock.HoldersofLILCOPreferred Stockthatiscalledforredemption orthatisacquiredorotherwise canceledinexchangeforcashbyLILCOorLIPApursuanttothetermsoftheLIPAAgreement andholdersofLILCOPreferred Stockwhodissentandreceivecashalsowillrecognize gainorloss.AholderofLILCOSeriesAAPreferred StockorotherLILCOPreferred Stockmightbeeligibletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed aboveunder"-TaxImplications toHoldersofLILCOCommonStock"if,amongotherthings,theshareholder acquiresreplacement property.
| |
| TaxImplicahons toHoldersofBrooklynUnionConnnonStock.Exceptfordissenting shareholders andthepossibleapplication ofTransferTaxes(ashereafter discussed),
| |
| theexchangeofBrooklynUnionCommonStockforHoldingCompanyCommonStockintheMergerwillbetax-free.
| |
| Accordingly, subjecttothepriorsentence, nogamorlosswillberecognized forfederalincometaxpurposesbyholdersofBrooklynUnionCommonStockwhoexcha'nge suchStockforHoldingCompanyCommonStockintheMerger.ThebasisandholdingperiodfortheHoldingCompanyCommonStockreceivedbyaBrooklynUnionshareholder intheMergerwillbethesameasthebasisandholdingperiodintheBrooklynUnionCommonStockexchanged
| |
| 'herefor.
| |
| SomeholdersofBrooklynUnionCommonStockmayhavediffering basesorholdingperiodsfortheirsharesofBrooklynUnionCommonStock.Suchholdersshouldconsulttheirtaxadvisorspriortotheexchangewithregardtoidentifying thebasesandholdingperiodsoftheparticular sharesofHoldingCompanyCommonStockreceivedintheexchange.
| |
| HoldersofBrooklynUnionCommonStockwhoexercisedissenters'ights intheMergerandreceivecashfortheirBrooklynUnionCommonStockwillrecognize eithergainorlossforfederalincometaxpurposes.
| |
| Theamountofsuchgainorlosswillbeequaltothedifference betweenthe"amountofcashreceivedandtheirtaxbasisintheirsharesofBrooklynUnionCommonStock.NewYorkCityimposescertaintaxesonthetransferofaninterestinrealproperty(including leases)locatedinNewYorkCity("TransferTaxes").TransferTaxesarealsoimposedinconnection withcertainchangesofownership" ofanentityowningarealpropertyinterestinNewYorkCity.TheexchangeofBrooklynUnionCommonStockforHoldingCompanyCommonStockbyBrooklynUnionshareholders pursuanttotheBrooklynUnion/LILCO Agreement willresultintheimposition ofTransferTaxes.BrooklynUnion(andnotKeySpan)willpayanyTransferTaxesincurredasaresultofachangeinownership ofBrooklynUnion.Forfederalincometaxpurposes, thepaymentofTransferTaxesbyBrooklynUnionmaybedeemedtobeataxabledividendpaidbyBrooklynUnionfocertainBrooklynUnionshareholders.
| |
| ThiswouldbethecaseifBrooklynUnionisconsidered tohavesatisfied whatisotherwise theobligation ofashareholder topayTransferTaxesasopposed40 toitsownobligation topaysuchtaxes.Anyincometaxesresulting fromsuchdeemeddividendwillbetheresponsibility ofthoseBrooklynUnionshareholders.
| |
| Althoughnotfreefromdoubt,aBrooklynUnionshareholder shouldbeentitledtoincreaseitstaxbasisinHoldingCompanyCommonStockreceivedintheMergerbytheamountofanysuchdeemeddistribution.
| |
| II.IfOnlytheLIPATransaction OccursIftheLIPATransaction occursbuttheCombination doesnotoccur,thematerialfederalincometaxconsequences toLILCO,HoldingCompanyandtheholdersofLILCOCommonStockandLILCOPreferred Stockshouldbethesameastheconsequences wheretheLIPATransaction occursconcurrently with,orprecedes, theCombination.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination."
| |
| III.IftheCombination OccurswhentheLIPAAgreement hasnotbeenTerminated orConsummated IftheCombination occurswhentheLIPAAgreement hasnotbeenterminated orconsummated, therearethreepossiblealternatives:
| |
| (A)theCombination occursandtheLIPAAgreement thereafter isterminated (orexpires);
| |
| (B)theLIPATransaction occursaftertheCombination, andtheLIPATransaction istreatedasanindependent transaction; and(C)theLIPATransaction occursaftertheCombination, andtheLIPATransaction isnottreatedasanindependent transaction.
| |
| Thematerialfederalincometaxconsequences ofeachofthesealternatives isdiscussed below.Ingeneral,iftheCombination occurswhentheLIPAAgreement hasnotbeenterminated orconsummated, theShareExchangeshouldbeataxabledisposition (subjecttothepossibleapplication ofSection1033ofthelCode)bytheholdersofLILCOCommonStock.IftheLIPATransaction occursaftertheCombination andtheLIPATransaction istreatedasanindependent transaction, theLIPATransaction shouldbetreatedgenerally asasaleoftheLILCOCommonStockbytheHoldingCompanytoLIPA.Ifthe'LIPATransaction occursaftertheCombination andtheLIPATransaction isnottreatedasanindependent transaction, theShareExchangeandtheLIPATransaction togethermaybetreatedgenerally asasaleoftheLILCOCommonStockbytheholdersofthatstock(subjecttothepossibleapplication ofSection1033oftheCode).Inanyevent,theMergergenerally shouldbeanontaxable exchangeoftheBrooklynUnionCommonStockforHoldingCompanyCommonStock.Thematerialfederalincometaxconsequences ofthesethreealternatives arediscussed morefullybelow.WhethertheLIPATransaction willbe,treatedasanindependent transaction iftheCombination precedestheLIPATransaction isuncertain.
| |
| ThecloserintimethattheCombination andtheLIPATransaction occur,themorelikelythattheLIPATransaction willnot'etreatedasanindependent transaction.
| |
| Becausethetimebetweenthetwotransactions andthenatureofanyintervening"events areunknown,counselexpresses noopinionwhethertheLIPATransaction willbetreatedasanindependent transaction.
| |
| A.IftheCombination OccursandtheLIPA'Agreement Thereafter isTerminated.
| |
| TheexchangeofLILCOCommonStockforHoldingCompanyCommonStockhas,beenstructured tobeataxabledisposition ofLILCOCommonStockbytheholdersthereoftoHoldingCompanyinexchangeforHoldingCompanyCommonStock;TheholdersofLILCOCommonStockshouldrecognize gainorlossequaltothedifference betwccn(i)thesumofthefairmarketvalueofHoldingCompanyCommonStockandthecashreccivcdbytheshareholders inlieuoffractional shareinterests inHoldingCompanyCommonStockand(ii)theholders'espective taxbasisintheirLILCOCommonStock.Ashareholder, mightbeabletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed above.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersoftLILCOCommonStock."HoldersofLILCOCommonStockwhodissentfromparticipating intheShareExchangeandreceivecashfortheirLILCOCommonStockwillrecognize gainorlossforfederalincometaxpurposes, Adissenting 41 tshareholder mightbeabletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed aboveif,amongotherthings,theshareholder acquiresreplacement property.
| |
| IftheCombination occursandtheLIPAAgreement thereafter isterminated (orexpires),
| |
| thefederalincometaxconsequences totheholdersofBrooklynUnionCommonStockshouldbethesameasthosedescribed foraMergerthatoccursconcurrently with,orafter,theLIPATransaction.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofBrooklynUnionCommonStock.".B.IflIreLIPATransaction OccursAftertheCombination andtheLIPATransaction isTreatedasanIndependent Transaction.
| |
| IftheCombination istreatedasindependent fromtheLIPATransaction inaccordance withitsform,thefederalincometaxconsequencesof theCombination, totheLILCOcommonshareholders andtheBrooklynUnionshareholders generally shouldbethesameasthosedescribed inthepreceding section.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheCombination OccursBeforetheLIPAAgreement isTerminated
| |
| -IftheCombination OccursandtheLIPAAgreement Thereafter isTerminated."
| |
| Underthisalternative, however,theholdersofLILCOCommonStockwillreceiveadditional sharesofHoldingCompanyCommonStockuponconsummation oftheLIPATransaction.
| |
| InthateventandiftheCombination'and theLIPATransac'tion occurindifferent taxyearsforashareholder, thecontingent payment,installment saleprovisions oftheCodemayapplytothereceiptofsuchadditional sharesofHoldingCompanyCommonStock.Further,iftheLIPATransaction closesmorethansixmonthsaftertheCombination, thenaportionoftheadditional sharesofHoldingCompanyCommonStockre'ceived maybetreatedasinterestincome.EachholderofLILCOCommonStockshouldconsultsuchshareholder's owntaxadvisorastotheseissues.IftheLIPATransaction, istreatedasindependent fromtheCombination.
| |
| LILCO'stransferoftheTransferred AssetstotheTransferee Subsidiaries inthe"LIPATransaction.
| |
| willcauseLILCOto-recognize gain.HoldersofLILCOSeriesAAPreferred StockwhoexchangesuchsharesforHoldingCompanyPreferred Stockinconnection withtheLIPATransaction shouldrecognize gainorloss.Theamountofgainorlosswillequalthedifference betweenthefairmarketvalueofHoldingCompanystockreceivedandtheshareholders'espective taxbasisintheirLILCOSeriesAAPreferred Stock.HoldersofLILCOPreferred Stockthatiscalledforredemption orthatisacquiredorotherwise canceledinexchangeforcashbyLILCOorLIPApursuanttothetermsoftheLIPAAgreement andholdersofLILCOPreferred Stockwhodissentandreceivecashalsowillrecognize gainorloss.AholderofLILCOSeriesAAPreferred Stockor.otherLILCOPreferred Stockmightbeeligibletodeferrecognition ofgainpursuanttotheprovisions ofSection1033oftheCodediscussed above.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofLILCOCommonStock."C.IftheLIPA-Transaction OccursAftertheCombination "andtheLIPATransaction isNotTreatedasanIndependent Transaction.
| |
| IftheLIPATransaction occursaftertheCombination andtheLIPATransaction isnottreatedasindependent, theholdersofLILCOCommonStockmaybetreatedassellingsuchstockdirectlytoLIPA.Inthisevent,thematerialfederalincometaxconsequences toholdersofLILCOCo'mmonStockandPreferred Stockshouldbe,andtotheholdersofBrooklynUnionCommonStockwillbe,thesameasthosedescribed forsuchholdersiftheLIPATransaction occursconcurrently with,orprecedes, theCombination.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination."
| |
| IV.IftheCombination OccursAftertheLIPAAgreemcnt isTerminated IftheCombination occursaftertheLIPAAgreement isterminated orexpires,Section351(a)oftheCodeshouldapplytotheShareExchange.
| |
| UnderSection351(a),nogainorlosswillberecognized forfederalincometaxpurposesbyholdersofLILCOCommonStockwhoexchangetheirLILCOCommonStockforHoldingCompanyCommon;Stock, exceptwithrespecttocashreceivedinlieuoffractional shares.Theaggregate taxbasisofHoldingCompanyCommonStock'received by.aLILCOshareholder asaresultoftheCombination will42 tbethesameastheshareholder's aggregate basisintheLILCOCommonStocksurrendered intheexchange(reducedbyanysuchtaxbasisallocable tothefractional shareforwhichcashisreceived).
| |
| 'TheholdingperiodofHoldingCompanyCommonStockreceivedbyaLILCOshareholder willincludetheholdingperiodfortheLILCOCommonStockexchanged forsuchHoldingCompanyCommonStock.CashreceivedbyaholderofLILCOCommonStockinlieuofafractional shareinterestinHoldingCompanyCommonStockwillresultintherecognition ofgainorlossequaltothedifference betweentheamountofcashreceivedandthetaxbasisallocable tosuchfractional shareinterest.
| |
| IfaholderofLILCOCommonStockhasdiffering basesorholdingperiodsinitssharesofLILCOCommonStock,itshouldconsultitstaxadvisorpriortotheShareExchangewithregardtoidentifying thebasesorholdingperiodsoftheparticular sharesofHoldingCompanyCommonStockreceivedintheShareExchange.
| |
| Thefederalincometaxconsequences toholdersofLILCOCommonStock,whoexercisedissenters'ights withrespecttotheCombination andreceivecashfortheirLILCOCommonStockwillbethesameasdescribed aboveforLILCOshareholders whoexercisedissenters'ights, exceptthatdissenting shareholders shouldnotbeeligibletodeferrecognition ofgainpursuanttotheprovisions ofSection1033oftheCode.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,'orPrecedes, theCombination
| |
| -TaxImplications toHoldersofLILCOCommonStock."Thefederalincometaxconsequences totheholdersofBrooklynUnionCommonStockwillbethesameasdescribed aboveforaMergerthatisprecededbytheLIPATransaction.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofBrooklyn'Union CommonStock."Thepreceding doesnotpurporttoaddressallpotential federalincometaxconsequences oftheLIPATransaction andtheCombination.
| |
| Inaddition, theforegoing discussion docsnotaddressfederalincomeetaxconsequences whichmayvarywith,orarecontingent on,ashareholder's individual, circumstances,
| |
| : Moreover, exceptforthediscussion oftheTransferTaxesabove,thisdiscussion docsnotaddressanynon-incometaxoranyforeign,stateorlocaltaxconsequences oftheCombination ortheLIPATransaction, Thisdiscussion doesnotaddressthetaxconsequences ofanytransaction otherthantheLIPATransaction andtheCombination.
| |
| Accordingly, eachshareholder isurgedtoconsultwithsuchshareholder's taxadvisortodetermine theparticular federal,state,localorforeignincomeorothertaxconsequences tosuchshareholder oftheLIPATransaction andtheCombination.
| |
| Accounting Treatment
| |
| ,General.UnlesstheLIPATransaction hasbeenconsummated, orwillbe,consummated contemporaneously with,theCombination, itisacondition totheconsummation oftheCombination thatBrooklynUnionreceivesaletterfromArthurAndersenLLPandLILCOreceivesaletterfromErnst&YoungLLP,eachdatedtheEffective Timeandeachofwhichindicates thattheyconcurwithmanagement's conclusion thatnoconditions existthatwouldprecludethetransactions contemplated by'heBrooklynUnion/LILCO Agreement, ifconsummated, fromqualifying astransactions tobeaccounted forinaccordance withthepoolingofinterests methodofaccounting undergenerally acceptedaccounting principles.
| |
| Underthisaccounting method,theassetsandliabilities ofBrooklynUnionandLILCOwillbecarriedforwardtotheconsolidated financial statements oftheHoldingCompanyattheirrecordedamounts.Resultsofoperations oftheHoldingCompanywillincludetheresultsofbothBrooklynUnionandLILCOfortheentirefiscalyearinwhichtheCombination occurs.Thereportedbalancesheetamountsandresultsofoperations oftheseparatecorporations forpriorperiodswillbecombined, reclassified andconformed asappropriate, toreflectthecombinedfinancial positionandresultsofoperations fortheHoldingCompany.See"Unaudited ProFormaCombinedCondensed Financial Information."
| |
| tIftheCombination andtheLIPATransaction areconsuminated contemporaneously, br'ftheLIPATransaction isconsummated priortotheCombination, theCombination willbeaccounted forasapurchaseofassetsandan'assumption ofliabilities inaccordance withgenerally acceptedaccounting principles.
| |
| 43 Accounting Consideration AbsentLIPATransaction.
| |
| IftheLIPA,Transaction wereterminated, LILCOwouldseekresolution ofitselectricratefilingfortherateyears1997through1999.LILCObelievesthatundersuchcircumstances, thePSCwillissueanelectricrateorderproviding foramongotherthings,thecontinuing recoverythrough.ratesoftheratemoderation component, oneoftheShoreham-related regulatory.
| |
| assets.However,ifsuchelectricrateorderisnotobtained, ordoesnotprovideforthecontinuing recoveryofsomeorallofthisregulatory assetthroughrates,LILCOmayberequiredtowrite-off theamountnotexpectedtobeprovidedforinrates.AtMarch31,1997,thebalanceoftheratemoderation component wasapproximately
| |
| $409.5million.StockExchangeListingoftheHoldingCompanyStockApplication willbemadeforthelistingonthe,NewYorkStockExchangeofthesharesofHoldingCompanyCommonStocktobeissuedpursuanttothetermsoftheBrooklynUnion/LILCO Agreement.
| |
| ThelistingontheNewYorkStockExchangeofsuchshares,subjecttonoticeofissuance, isacondition precedent totheconsummation oftheCombination.
| |
| SolongasBrooklynUnionandLILCOcontinuetomeettherequirements oftheNewYorkStockExchange, BrooklynUnionCommonStockandLILCOCommonStock,asthecasemaybe,willcontinuetobelistedontheNewYorkStockExcliange untiltheEffective Time.SolongasLILCOcontinues tomeettherequirements ofthePacificStockExchange, LILCOCommonStockwillcontinuetobelistedonthePacificStockExchangeuntiltheEffective Time.WithrespecttotheseriesofLILCOPreferred Stockcurrently listedontheNewYorkStockExchange, forsolongasLILCOandsuchpreferred stockcontinuetomeettherequirements oftheNewYorkStockExchange, suchseriesofpreferred stockwillcontinuetobelistedontheNewYorkStockExchangeaftertheEffective TimeintheeventthattheCombination isconsummated buttheLIPATransaction isnotconsummated.
| |
| FederalSecurities LawConsequences AllsharesofHoldingCompanyCommonStockreceivedbyshareholders ofBrooklynUnionandLILCOintheCombination willbefreelytransferable, exceptthatsharesofHoldingCompanyCommonStockreceivedbypersonswhoaredeemedtobe"affiliates" (assuchtermisdefinedundertheSecurities Actof1933,asamended(the"Securities Act",))of.BrooklynUnionorLILCOpriortotheCombination mayberesoldbythemonlyintransactions permitted bytheresaleprovisions ofRule145undertheSecurities Act(orRule144undertheSecurities Act,inthecaseofsuchpersonswhobecomeaffiliates oftheHoldingCompany)orasotherwise permitted undertheSecurities Act.Personswhomaybedeemedtobeaffiliates ofBrooklynUnion,LILCOortheHoldingCompanygenerally includeindividuals orentitiesthatcontrol,arecontrolled by,orareundercommoncontrolwith,suchpartyandmayincludecertainofficersand,directors ofsuchpartyaswellasprincipal shareholders ofsuch'party.
| |
| TheBrooklynUnion/LILCO Agreement alsorequireseachofBrooklynUnionandLILCOtouseallreasonable effortstocauseeachofitsaffiliates toexecuteanddelivertotheHoldingCompanyawrittenagreement totheeffectthatsuchaffiliate willnotofferorsellorotherwise disposeof(i)anysharesofBrooklynUnion,LILCOortheHoldingCompanyduringtheperiodbeginning 30dayspriortotheEffective Tinieandcontinuing untilsuchtimeasresultscoveringatleast30daysofpost-Effective Timeoperations oftheHoldingCompanyhavebeenpublished or(ii)anyofthesharesofHoldingCompanyCommonStockissuedtosuchaffiliate inorpursuanttotheCombination inviolation oftheSecurities Actortherulesandregulations promulgated bytheSecurities andExchangeCommission (the"SEC")thereunder.
| |
| ThisJointProxyStatement/Prospectus doesnotcoverresalesofHoldingCompanyCommonStockreceivedbyanypersonwhomaybedeemedtobeanaffiliate ofBrooklynUnion,LILCOortheHoldingCompany.Appraisal RightsSection910oftheNewYorkBusinessCorporation Law("NYBCL")
| |
| setsforththerightsofshareholders~
| |
| ofBrooklynUnionorLILCOwhoobjecttotheadoptionoftheBrooklynUnion/LILCO Agreement or,inthe~caseofshareholders ofLILCO,theLIPAAgreement.
| |
| AnyrecordholderofBrooklynUnionCommonStockor44 eLILCOCommonStockasoftherecorddatewhodoesnotvoteinfavoroftheadoptionoftheBrooklynUnion/LILCO Agreement, orwhodulyrevokeshisorhervoteinfavoroftheadoptionoftheBrooklynUnion/LILCO Agreement, may,iftheCombination isconsummated, obtainpayment,incash,forthefairmarketvalueofsuchholder'ssharesbystrictlycomplying withtherequirements ofSection623oftheNYBCL.Similarly, anyholderofLILCOCommonStock(unlesstheCombination occursbeforetheconsummation oftheLIPATransaction) orLILGOPreferred StockwhodoesnotvoteinfavoroftheadoptionoftheLIPAAgreement, ifentitledtovotethereon,orwhodulyrevokeshisorhervoteinfavoroftheadoptionoftheLIPAAgreement, may,iftheLIPATransaction isconsummated, obtainpayment,incash,forthefairmarketvalueofsuchholder'ssharesbystrictlycomplying withtherequirements ofSection623oftheNYBCL.Thefollowing summaryoftheapplicable provisions of:Sections 623'and910isnotintendedtobeacompletestatement ofsuchprovisions andisqualified initsentiretybyreference tothefulltextofSections623and910,copiesofwhichareattachedtothisJointProxyStatement/Prospectus as.AnnexI.Apersonhavingabeneficial interestinsharesofBrooklynUnionCommonStockorLILCOCommonStockorLILCOPreferred Stockthatareheldofrecordinthenameofanotherperson,suchasabrokerornominee,mustactpromptlytocausetherecordholdertofollowthestepssummarized, belowproperlyandinatimelymannertoperfectwhateverappraisal rightsthebeneficial ownermayhave.THISSUMMARYANDANNEXISHOULDBEREVIEWEDCAREFULLY BYHOLDERSOFBROOKLYNUNIONCOMMONSTOCK,LILCOCOMMONSTOCKANDLILCOPREFERRED STOCKWHOWISHTOEXERCISESTATUTORY APPRAISAL RIGHTSORWHOWISHTOPRESERVETHERIGHTTODOSOBECAUSEFAILURETOSTRICTLYCOMPLYWITHANYOFTHEPROCEDURAL REQUIREMENTS OFSECTION623ORSECTION910MAYRESULTINATERMINATION ORWAIVEROFAPPRAISAL RIGHTSUNDERSECTION623ANDSECTION910.Thedissenting BrooklynUnionshareholder mustfilewithBrooklynUnionbeforethetakingofthevoteontheadoptionoftheBrooklynUnion/LILCO Agreement awrittenobjection including anoticeofelectiontodissent,suchholder'snameandresidence address,thenumberandclassofsliares(Brooklyn UnionCommonStock)astowhichsuchholderdissents(whichnumbermaynotbelessthanallofthesharesastowhichsuchholderhasnrighttodissent)andademandforpaymentofthefairvalueofsuchsharesiftheBindingShareExchanges areconsummated.
| |
| Anysuchwrittenobjection shouldbeaddressed to:TheBrooklynUnionGasCompany,OneMetroTech Center,Brooklyn, NewYork11201-3851, Attention:
| |
| Secretary.
| |
| Thedissenting LILCOshareholder mustfilewithLILCO,beforethetakingofthevoteontheadoptionoftheBrooklynUnion/LILCO Agreement ortheLIPAAgreement, awrittenobjection toeitherorbothagreemcnts including anoticeof'election todissent,suchholder'snameandresidence address,thenumberandclassofshares(CommonorPreferred Stock)astowhichsuchholderdissents(whichnumbermaynotbelessthanallofthesharesastowhichsttchholderhasarighttodissent)ahdademandforpaymentofthefairvalueofsuchsharesiftheCombination orLIPATransaction asthecasemaybeisconsummated.
| |
| Anysuchwrittenobjection shouldbeaddressed to:LongIslandLightingCompany,175EastOldCountryRoad,Hicksville, NewYork11801,Attention:
| |
| Corporate Secretary.
| |
| Forpurposesofperfecting appraisal rightspursuanttoSection623,thewritten'objection ofaholderofsharesofBrooklynUnionorLILCOwhichisaddressed asprovidedaboveshallbedeemedfiledwithBrooklynUnionorLILCO,asthecasemaybe,uponreceiptofsuchobjection byBrooklynUnionorLILCO,asthecasemaybe.NeithervotingagainstnorfailuretovotefortheBrooklynUnion/LILCO Agreement, and,inthecaseofLILCOshareholders, theLIPAAgreement, willconstitute thewrittenobjection requiredtobefiledbyanobjecting shareholder.
| |
| FailuretovoteagainsttheBrooklyn'Union/LILCO Agreement, and,inthecaseofLILCOtshareholders, theLIPAAgreement, however,willnotconstitute a.waiverofrightsunderSections623and910,providedthatawrittenobjection hasbeenproperlyfiled.Ashareholder votingtoadopttheBrooklynUnion/LILCO Agreement, and,inthecaseofLILCOshareholders, theLIPAAgreement, willbedeemedtohavewaivedsuchshareholder's appraisal rights.45 ABrooklynUnionorLILCOshareholder maynotdissentastolessthanallthesharesofBrooklynUnion'rLILCO=stock, asthecasemaybe,entitledtovoteandheldofrecordthatsuchholderbeneficially owns.Anomineeorfiduciary maynotdissentonbehalfofanybeneficial ownerastolessthanallthesharesofBrooklynUnionorLILCOstockofsuchbeneficial owner,astowhichsuchnomineeorfiduciary hasarighttodissent,heldofrecordbysuchnomineeorfiduciary.
| |
| Furthermore, ifthesharesofBrooklynUnionorLILCOstockareownedofrecordinafiduciary
| |
| : capacity, suchasbyatrustee,guardianorcustodian, thedemandmustbemadeinthatcapacity, andifthesharesofBrooklynUnionorLILCOstockareownedofrecordbymorethanoneperson,asinajointtenancyortenancyincommon,thedemandmustbemadebyorforallownersofrecord.Anauthorized agent,including oneoftwoormorejointowners,mayexecutethedemandforappraisal foraholderofrecord;however,suchagentmustidentifytherecordownerorownersandexpressly stateinsuchdemandthattheagentisactingasagentfortherecordownerorownersofsuchsharesofBrooklynUnionorLILCOstock.Arecordholder,suchasabrokeroranagent,whoholdssharesofBrooklynUtiionorLILCOstockasanomineeforbeneficial owners,someofwhomdesiretodemandappraisal, mustexerciseappraisal rightsonbehalfofsuchbeneficial ownerswhodesiretodemandappraisal withrespecttothesharesofBrooklynUnionorLILCOstockentitledtovoteandheldforsuchbeneficial owners.Withintendaysafterthevoteof'Brooklyn UnionandLILCOshareholders authorizing theadoption.
| |
| oftheBrooklynUnion/LILCO Agreement (andwithrespecttoLILCOonly,theLIPAAgreement),
| |
| BrooklynUnionandLILCO,mustgivewrittennoticeofsuchauthorization toeachdissenting shareholder ofBrooklynUnionandLILCO,respectively.
| |
| Atthetimeoffilingthenoticeofelectiontodissentorwithinonemonththereafter, thedissenting shareholder mustsubmitcertificates representing suchholder'ssharestoBrooklynUnionorLILCO,asthecasemaybe,ortheirrespective transferagentsfornotationthereonoftheelection'todissent,afterwhichsuchcertificates willbereturnedtotheshareholder.
| |
| Anysuchshareholder whofailstosubmithisorhersharesfornotationwill,attheoptionofBrooklynUnionorLILCO,asthecasemaybe,exercised bywrittennoticetotheshareholder within45daysfromthedateoffilingofthenoticeofelectiontodissent,losesuchholder'sappraisal rightsunlessacourt,forgoodcauseshown,otherwise directs.Within15daysaftertheexpiration oftheperiodwithinwhichshareholders mayfiletheirnoticesofelectiontodissentorwithin15daysaftertheEffective Time,whichever islater(butnotlaterthan90daysaftertheshareholders'ote authorizing theadoptionoftheBrooklynUnion/LILCO Agreement or,inthecaseofLILCO,theLIPAAgreement},
| |
| BrooklynUnionorLILCO,asthecasemaybe,mustmakeawrittenoffer(which,iftheCombination ortheLIPATransaction havenotbeenconsummated, maybeconditioned uponsuchconsummation) toeachshareholder whohasfiledsuchnoticeofelectiontodissenttopayforsuchholder'ssharesataspecified pricewhichBrooklynUnionor.LILCO, asthecasemaybe,considers tobetheirfairvalue.IfBrooklynUnionorLILCO,asthecasemaybe,andthedissenting shareholder areunabletoagreeastosuchvalue,Section623(h)oftheNYBCLprovidesforjudicialdetermination offairvalue.Intheeventofsuchadisagreement, acourt,proceeding shallbecommenced byBrooklynUnionorLILCO,asthecasemaybe,intheSupremeCourtoftheStateofNewYork,CountyofKingsinthecaseofBrooklynUnionorCountyofNassauinthecaseofLILCO,orbythedissenting shareholder ifBrooklynUnionorLILCO,asthecasemayPe,failstocommencetheproceeding withinthetimerequiredbySection623oftheNYBCL.EachofBrooklynUnionandLILCOintendstocommencesuchaproceeding intheeventofsuchadisagreemeqt.
| |
| UndertheBrooklynUnion/LILCO Agreement, BrooklynUnionandLILCOmayterminate theBrooklynUnion/LILCO Agreement, evenaftershareholder
| |
| : approval, ifforanyreasontheBrooklynUnionBoardandtheLILCOBoarddetermine thatitisinadvisable toproceedwiththeCombination, including considering thenumberofsharesforwhichappraisal rightshavebeen,exercised andthecosttotheHoldingCompanythereof.UnlesstheLIPATransaction hasbeenconsummated, orwillbeconsummated contemporaneously withtheCombination, itisacondition ofeachparty'sobligation toeffecttheCombination thatithasreceivedaletterfromitsrespective accountants thatthetransaction willqualifyasapoolingofinterests transaction.
| |
| Thepoolingofinterests methodofaccounting requirestliatatleast90percentoftheissuedandoutstanding sharesofBrooklyn, UnionCommonStockandatleast90percentoftheissuedandoutstanding sharesofLILCOCommon Stockbeexchanged intheCombination forsharesofHoldingCompanyCommonStock.46
| |
| .MEETINGS, VOTINGANDPROXIEST/usJointProxyStatement/Prospectus isfi(nushed to(i)theholdersofBrooklynUnionConunonStockinconnection withthesolicitation ofproxiesbytheBrooklynUnionBoardfromtheholdersofBrooklynUnionConunonStockforuseattheBrooklynUtrionMeeting,and(ii)theholdersofLILCOCotnntonStockandLILCOPreferred Stockinconnection withthesolicitation ofproxiesbytheLILCOBoardfromthelioldersofLILCOCommonStockforuseattheLILCOMeeting.LILCOandBrooklynUnionanticipate thatmailingofproxymaterials totheirrespective shareholders entitledtonoticeofandtovoteattheirrespective tneetings willconunence onoraboutJune30,1997.TheLILCOMeetingGeneral.ThepurposeoftheLILCOMeetingistoconsiderandvoteupon:(i)aproposaltoadopttheBrooklynUnion/LILCO Agreement; (ii)aproposaltoadopttheLIPAAgreement (iii)aproposalt'oclccttwelvedirectors; (iv)aproposaltoratifytheappointment ofErnst&YoungLLPasindependent auditorsforLILCOfortheperiod'from January1,1997toMarch31,1998;(v)aproposaltoapprovetheLILCOAnnualStockIncentive Compensation Plan;(vi)aproposaltoapprovetheLILCOEmployeeStockPurchasePlan;(vii)aproposaltoapproveanamendment totheLILCOCertificate ofIncorporation toincreasethetotalnumberofauthorized sharesofLILCOCommonStock;and(viii)suchothermatters,ifany,asmayproperlybepresented forconsideration.
| |
| TheLILCOBoarddoesnotknow,asofthedateofmailingofthisJointProxyStatement/Pr'ospectus, ofanyotherbusinesstobebioughtbeforetheLILCOMeeting.Theenclosedproxycardauthorizes thevotingofsharesrepresented bytheproxyonallothermattersthatmayproperlycomebeforetheLILCOMeeting,andany'adjournment orpostponement thereof,anditistheintention oftheproxyholderstotakesuchactioninconnection therewith asshallbeinaccordance withtheirbestjudgment.
| |
| TheLILCOBoard,byaunanimous vote,hasadoptedtheBrooklynUnion/LILCO Agreeinent andthe.LIPAAgreeme'nt, andrecommends thatLILCOshareholders voteFORapprovaloftheBrooklynUnionAgreement andtherelatedreorganization ofLILCO,FORadoptionoftheLIPAAgreement, FORtheelectionofthenominated directors, FORratification oftheappointment ofErnst&,YoungLLPasLILCO'sindependent auditorsfortheperiodfromJanuary1,1997toMarch31,1998,FORapprovaloftheAnnualStockIncentive Compensation Plan,FORapprovaloftheEmployeeStockPurchasePlan;andFORapprovaloftheamendment toLILCO'sCertificate ofIncorporation assetforthabove.Date,PlaceandTitne;RecordDate.TheLILCOMeetingisscheduled tobeheldonThursday, August7,1997at3:00p.m.atTillesCenterforthePerforming ArtsatLongIslandUniversity C.W.PostCampus,NorthernBoulevard, Greenvale, NewYork11548.HoldersofrecordofsharesofLILCOCommonStockatthecloseofbusinessonJune26,1997,theRecordDate,willbeentitledtonoticeofandtovoteattheLILCOMeeting.'otingRights.AtthecloseofbusinessonJune23,'997,121,184,527 sharesofLILCOCommonStockwereissuedandoutsta'nding.
| |
| Eachoutstanding shareofLILCOCommonStockasoftheRecordDateisentitledtoonevoteuponeachmatterpresented attheLILCOMeetingexceptwithrespect'to theelectionofLILCODirectors asdiscussed below.Theaffirmative voteofthc,holdersofatleasttwo-thirds oftheoutstanding sharesofLILCOCommon,StockisrequiredtoadopttheLIPAAgreement andtoadopttheBrooklynUnion/LILCO Agreement attheLILCOMeeting.Inaddition, theLIPAAgreement mustbeapprovedbythevoteof:1)theholdersofatleasttwo-thirds oftheoutstanding sharesofLILCOcommonstockandpreferred stockentitledtovotethereon,votingtogetherasasingleclass;2)amajorityoftheoutstanding sharesofLILCOpreferred stockentitledtovotethereon,votingtogetherasaseparateclass;3)amajorityoftheoutstanding sharesofLILCOcommonstockvotingseparately asaclass;and4)theholdersofamajorityoftheoutstanding sharesofeachseriesofLILCOpreferred stockentitledtovotethereon,ineachcasevotingseparately asaclass.Inconnection withtheproposaltoadopttheLIPAAgreement, eachoutstanding shareofLILCOCommonStockisentitledtoonevote,eachoutstanding shareofLILCOPreferred Stockeligibletovotehavingapar47 valueof$100pershareisentitledtoonevoteandeachoutstanding shareofLILCOPreferred Stockeligibletovotehavingaparvalueof$25pershareisentitledtoone-quarter (i/~)ofavote.Amajorityof,thevotingpowerofthesharesissuedandoutstanding andentitledtovote,presentinpersonorbyproxy,isnecessary toconstitute aquorumforthetransaction ofbusinessattheLILCOMeetingexceptwithrespecttotheelectionofLILCODirectors.
| |
| Abstentions andbrokernon-votes (i.e.,proxiesfrombrokersornomineesindicating thatsuchpersonshavenotreceivedinstructions fromthebeneficial ownersorotherpersonsentitledtovotesharesastoamatterwithrespecttowhichbrokersornomineesdonothavediscretionary powertovote)willbeconsidered presentforthepurposeofestablishing aquorum.Inaccordance withNewYorkStockExchangerules,brokersandnomineesareprecluded fromexercising theirvotingdiscretion withrespecttotheadoptionoftheBrooklynUnion/LILCO Agreement andLIPAAgreement andthus,absentspecificinstructions fromthebeneficial ownerofsuchshares,arenotempowered tovotesuchshareswithrespecttotheadoptionoftheBrooklynUnion/LILCO Agreement orLIPAAgreement.
| |
| Therefore, sincethe'affirmative voteinpersonorbyproxy,oftheholdersoftwo-thirds oftheoutstanding sharesofLILCOCommonStockontheRecordDateisrequiredtoadopttheLIPAAgreement andtoadopttheBrooklynUnion/LILCO Agreement, abstentions andbrokernon-votes willhavetheeffectofavoteagainsttheLIPATransaction andtherelated'reorganization ofLILCOortheBrooklynUnion/LILCO Agreement, asthecasemaybe.Shareholders areentitledtovotecumulatively fortheelectionofLILCODirectors.
| |
| Eachshareholder isentitledtoanumberofvotesforsuchelectionequaltothenumberofvotesentitledtobecastwithrespecttothesharesheldbysuchshareholder multiplied bythenumberofdirectors tobeelected,andmaycastallvotesforonenomineeordistribute thevotesamongthenominees.
| |
| TheelectionofeachDirectorshallbedecidedbyplurality vote.Asaresult,anysharesnotvotedforaDirector(whetherbywithholding authority, brokernon-voteorotherwise) willhavenoimpactontheelectionofDirectors excepttotheextentthatthefailuretovote.foranindividual resultsinanotherindividual receiving alargernumberofvotes.LTheaffirmative voteofamajorityofthevotescastbytheholdersofthesharesofLIL'COCommonStockrepresented attheLILCOMeetingandentitledtovotethereon,votingasasingleclass(provided thatthetotalvotecastrepresents over50%ofthevotingpowerofallthesharesofLILCOCommonStockentitledtovotethereon)isrequiredtoapprove(i)theratification oftheappointment ofErnst'0YoungLLPas'LILCO's independent auditorsfortheperiodfromJanuary1,1997toMarch31,1998,(ii)'theAnnual'Stock Incentive Compensation Plan,and(iii)theEmployeeStockPurchasePlan.Theaffirmative voteofamajorityoftheoutstanding sharesofLILCOCommonStockisrequiredtoapprovetheamendmerit oftheLILCOCertificate ofIncorporation assetforthinAnnexJhereto.Abstentions andbrokernon-votes arenot.counted indetermining thevotescastinconnection withtheselection ofauditors.
| |
| Withrespecttotheremaining matterstobeactedupon,abstentions fromvotingonsuchmattersaretreatedasvotesagainst,whilebrokernon-votes aretreatedassharesnotentitledtovote.IfaLILCOshareholder isaparticipant intheLILCOInvestorCommonStockPlan,theLILCOproxy=card willrepresent thesharesheldonbehalfoftheparticipant undertheInvestorCommonStockPlanandsuchshareswillbevotedinaccordance withtheinstructions ontheLILCOproxycard.Ifaparticipant intheInvestorCommonStock'Plan doesnotreturnaLILCOproxycard,theparticipant's shareswillnotbevoted.AsofJune23,1997,directors andexecutive officersofLILCOandtheiraffiliates-owned beneficially anaggregate of56,683sharesofLILCOCommonStock,orlessthanonepercentofthesharesofLILCOCommonStockoutstanding onsuchdate.Directors andexecutive officersofLILCOhaveindicated theirintention tovotetheirsharesofLILCOCommonStockinfavorofadoptionoftheBrooklynUnion/LILCO Agreement andoftheLIPAAgreement.
| |
| /See"TheCombination
| |
| -Potential Conflicts ofInterests ofCertainPersonsintheBindingShareExchanges andtheLIPATransaction."
| |
| VotingandRevocation ofProxies.HoldersoftheLILCOCommonStockmayvoteeitherinpersonorbyproperlyexecutedproxy.EachholderofLILCOCommon'Stock willbefurnished aproxycarduponwhich48 thenamesofthreeofLILCO'sDirectors, GeorgeBugliarello, JohnH.TalmageandBasilA.Paterson, constituting theproxycommittee (the"ProxyCommittee"
| |
| ),appear.Bycompleting andreturning theformofproxy,theLILCOshareholder authorizes thepersonsnamedthereintovotealltheLILCOshareholder's sharesonhisorherbehalf.Issuedandoutstanding sharesofLILCOCommonStock,theholdersofwhichareentitledtovoteattheLILCOMeeting,whicharerepresented byproperlyexecutedproxies,will,unlesssuchproxieshavebeenrevoked,bevotedinaccordance withtheinstructions indicated insuchproxies.Ifaproxyissignedandreturnedwithoutindicating anyvotinginstructions, sharesofLILCOCommonStockrepresented bytheproxywillbevotedFORadoptionoftheLIPAAgreement, FORadoptionoftheBrooklynUnion/LILCO Agreement, FORtheelectionofthenominated directors, FORratification of,theappointment ofErnst&YoungLLPasLILCO'sindependent auditorsfortheperiodfromJanuary1,1997toMarch31,1998,FORtheapprovaloftheAnnualStockIncentive Compensation Plan,FORtheapprovaloftheEmployeeStockPurchasePlan,andFORtheapprovalofanamendment totheLILCOCertificate ofIncorporation, Withrespecttotheelectionofthenominated directors, theProxyCommittee reservestherighttocumulatevotesrepresented byproxieswhichtheyreceiveandtodistribute suchvotesamongoneormoreofthenomineesattheirdiscretion.
| |
| IfaLILCOshareholder wishestogiveaproxytosomeoneotherthantheProxyCommittee, suchshareholder maycrossoutthenamesofthemembersoftheProxyCommittee ontheproxycardandinsertthenamesofuptothreeother,personsandmake,ifnecessary, otherappropriate changesproviding unambiguous instructions tothepersonorpersonsnamed.ALILCOshareholder mayrevokeaproxyatanytimepriortoitsexerciseattheLILCOMeetingbydelivering totheCorporation TrustCompany,P.O.Box631Wilmington, Delaware19899anoticeofrevocation oradulyexecutedproxybearingalaterdateorbyattending theLILCOMeetingandvotinginperson.Attendance attheLILCOMeetingwillnotinitselfconstitute revocation ofaproxy.TheLILCOMeetingmaybeadjourned toanotherdateand/orplaceforanyproperpurpose(including, withoutlimitation, forthepurposeofsoliciting additional proxies).
| |
| Intheirdiscretion, theProxyCommittee isauthorized tovoteuponsuchbusinessasmayproperlycomebeforetheLILCOMeeting,including withoutlimitation, anymotiontoadjourntheLILCOMeetingtoanothertimeorplace(including forthepurposeofsoliciting additional proxies).
| |
| Solici/ation ofProxies.LILCOwillbearitsownexpensesinconnection withthesolicitation ofproxiesfortheLILCOMeeting,exceptthateachofLILCOandBrooklynUnionwillpayone-halfofthecostsandexpensesincurredinconnection withprintingthisJointProxyStatement/Prospectus andone-halfofallfilingfees.Inadditiontosoliciting proxiesbymail,officersandemployees ofLILCO,withoutreceiving additional compensation
| |
| : therefor, maysolicitproxiesbytelephone, bytelecopy, bytelegramorinperson.LILCOhasretainedD.F.King&Co.,Inc.toaidinthesolicitatiori ofproxiesfromtheLILCOshareholders.
| |
| Thetotalfeefortheservicesofsuchfirmisnotexpectedtoexceed$30,000,plusreimbursement forreasonable out-of-pocket expenses.
| |
| Forinformation abouttheBrooklynUnionMeeting,see"Selected Information Concerning BrooklynUnion-TheBrooklynUnionMeeting."
| |
| 49 REGULATORY MATTERSSetforthbelowisasummaryoftfiematerialregulatory requirements affecting theCombination.
| |
| Althoughthecompanies havenotyetPledfortheapprovalofalloftheagenciesdiscussed, itisanticipated thatallregulatory approvals willhavebeenreceivednolaterthantheendof199S.Forinformation concenu'ng certainIRSrulings,see"FederalIncomeTaxConsiderations
| |
| -TaxRulingsRequested forLIPATransaction."
| |
| StateA'pprovals andRelatedMatterstTlieutilityoperations ofbothLILCOandBrooklynUnionaresubjecttothecomprehensive regulatory jurisdiction ofthePSC,whichmustapprovetheCombination contemplated intheBrooklynUnion/LILCO Agreement.,On March14,1997,LILCOandBrooklynUnionfiledajointpetitionrequesting approvalofthePSCunderSection70oftheNewYorkPublicServiceLawtoalloweachofthemtobecomesubsidiaries oftheHoldingCompanythroughtheCombination.
| |
| Section70ofthePublicServiceLawprovidesthatthePSC'sconsenttotheCombination maynotbegivenunlessthereisashowingthattheexchanges areinthepublicinterest.
| |
| Aspartofitsreview,thePSCmayconsidersuchmattersastheeffectoftheCombination on,theabilityofLILCOandBrooklynUniontocontinuetoprovidesafeandadequateserviceatjustandreasonable rates,including theimpactoncustomerservice,ratesandthefinancial integrity ofBrooklynUnionandLILCO,aswellastheimpactonthecompetitive environment foreachofthecompanies.
| |
| Inthejointpetition, LILCOandBrooklynUnioneachproposedtorefiectanticipated costsavingsresulting fromtheirbusinesscombination intheretailgasandelectricratesofbothutilities, andtohavethePSCconfirmor'adoptlongtermrateplansforthegasandelectricoperations'f LILCOandthegasoperations ofBrooklynUnion.Byamendment tothejointpetitionfiledonMay16,1997,inlightofthependencyoftheLIPATransaction which,ifconsummated, willresultinLIPA,whichwillnotberegulated bythePSC,beingthesupplierofretailelectricservicetoconsumers inLILCO'sserviceterritory, LILCO'has offeredtoextendthesuspension periodwithinwhichthePSCmustruleonLILCO'slong-term electricrateplan,untilDecember31,1997.Assumingtherequisite regulatory approvals areobtained, theutilityoperations ofbothLILCOandBrooklynUnionwillremainsubjecttoregulation bythePSC.TheHoldingCompanywillbea"publicutilityholdingcompany"underthePublicUtilityHoldingCompanyActof1935(the"HoldingCompanyAct"),discussed ingreaterdetailbelow,butwillnotbesubjecttothedirectregulation ofthePSC.TheBrooklynUnionandLILCOjointpetitiontothePSConMarch14,1997alsosoughttoamendthePSCOrderdatedSeptember 25,1996issuedinconnection withtheKeySpanholdingcompanyrestructuring soastoremoveorrelaxcertainrestrictions thatmaybeapplicable aftertheCombination.
| |
| ThePSChasnotacteduponsuchpetitionasofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetitionwillbegranted.ThePSChasnojurisdiction overthemergerofLILCOwithasubsidiary ofLIPAaspartoftheLIPATransaction.
| |
| However,itisanticipated thatLILCOandtheHoldingCompanywillseekPSCapprovalforthetransferoftheTransferred Assets,aswellasthedebtthatLIPAwillnotbeassuming, tooneormoresubsidiaries oftheHoldingCompany.AftertheLIPAtransaction, thePSCwillhavecontinuing jurisdiction overtheTransferee Subsidiary thatwillbeconducting thegasdistribution businesspreviously conducted byLILCO,andmayhavejurisdiction overtheTransferee Subsidiary thatownsthenon-nuclear generating assetspreviously ownedbyLILCO,totheextenttliatsuchsubsidiary engagesinretailtransactions.
| |
| PublicUtilityHoldingCompanyActof1935AsaresultoftheCombination, theHoldingCompanywillownallofthecommonstockofbothLILCO(iftheLIPATransaction isnot'consummated) andBrooklynUnionandwilltherefore beapublicutilityholdingcompanyundertheHoldingCompanyAct,subjecttothejurisdiction oftheSEC.Additionally, iftheLIPATransaction isconsummated, theHoldingCompanywillownallofBrooklynUnionCommonStockandaTransferee Subsidiary thatwillconductthegasdistribution businessnowbeingconducted byLILCO.Accordingly, theHoldingCompanymustapplyforandobtaintheapprovaloftheSECundertheHoldingCompanyAct.However,theHoldingCompanywillfileanexemption statement withtheSECtoexemptitself50 andeachofitssubsidiaries frommostoftheprovisions oftheHoldingCompanyAct.Thebasisfortheexemption isthattheHoldingCompany,LILCO(ortheTransferee Subsidiary thatwillsucceedtothegas'istribution businesscurrently conducted byLILCO)andBrooklynUnionare"predominantly intrastate incharacter,"
| |
| inthateachofthemisorganized, andLILCO(orthesuccessor subsidiary) andBrooklynUnioneachcarryontheirrespective business~
| |
| substantially, inNewYorkState.TheSEChasauthority undertheHoldingCompanyActtochallenge theavailability ofsuchexemption totheHoldingCompany.FederalPowerActLILCOissubjecttotheregulatory jurisdiction oftheFederalEnergyRegulatory Commission
| |
| ("FERC",)
| |
| undertheFederalPowerAct(the"FPA")withrespecttocertainwholesale electricsalesandtransmission services.
| |
| Section203oftheFPAprovidesthatnopublicutilityshallsellorotherwise disposeofitsjurisdictional facilities or,directlyorindirectly, mergeorconsolidate suchfacilities withthoseofanyotherpersonoracquireanysecurityofanyotherpublicutilitywithouthavingfirstobtainedauthorization fromtheFERC.Accordingly, theapprovaloftheFERCisrequiredtoconsummate theCombination, andis,similarly, requiredtoapprovethetransferofLILCO'sFERC-jurisdictional assetstoLIPAinconnection withtheLIPATransaction.
| |
| PursuanttoSection203oftheFPA,theFERChastheauthority toapprovetheCombination andtheBrooklynUnion/LILCO Agreement asbeingconsistent withthepublicinterest.
| |
| Inaddition, therates,terms,andconditions ofservicethatwillbeprovidedtoLIPAunderthePowerSupplyAgreement (asdefinedherein)willrequireFERCapprovalunderSection205or206oftheFPAaswillanyotherHoldingCompanyservicethatisdeemedtobeFERCjurisdictional.
| |
| Antitrust Considerations UndertheHart-Scott-Rodino Antitrust Itnprovements Actof1976,asamended(the"HSRAct"),andtherules,andregulations promulgated thereunder, theCombination maynotbeconsummated untiltherequisite notifications andreportformshavebeenfiledwiththeAntitrust DivisionoftheDepartment ofJustice(the"Antitrust Division"
| |
| )andtheFederalTradeCommission (the"FTC")andthespecified HSRActwaitingperiodrequirements havebeensatisfied.
| |
| TheHSRActwaitingperiodis30daysfromthedatebothpartieshavefiledtheirnotification andreportformunlessterminated earlierorextendedbytheFTCortheAntitrust Divisionissuingarequestforadditional information ordocumentary materials.
| |
| Ifsuchrequestismade,thewaitingperiodwillexpire,unlessterminated earlier,at11:59p.m.,NewYorkCity'ime, onthetwentieth calendardayafterbothpartieshavesubstantially complied" withsuchrequest.Thereafter, thewaitingperiodmaybeextendedonlybycourtorderorwiththeparties'onsent.
| |
| Theexpiration orearliertermination oftheHSRActwaitingperioddoesnotprecludetheAntitrust DivisionortheFTCfromchallenging theCombination onantitrust groundseitherbeforeorafterconsummation oftheCombination.
| |
| Privatepartiesandstateattorneys generalmayalsobringlegalactionunderfederalorstateantitrust lawsundercertaincircumstances.
| |
| IIftheCombination isnotconsummated within12monthsaftertheexpiration orearliertermination oftheHSRActwaitingperiod,LILCOandBrooklynUnionwouldberequiredtosubmitnewfilingstotheAntitrust DivisionandtheFTC,andanewHSRActwaitingperiodwouldhavetoexpireorbeearlierterminated beforetheCombination couldbeconsummated.
| |
| LILCOandBrooklyn'nion intendtofiletheirpremerger notification andreportformspursuanttotheHSRActatsuchtimeastheybelievethereisahighdegreeofcertainty thattheCombination willbeconsummated within12monthsaftertheexpiration orearliertermination ofthewaitingperiodundertheHSRAct.TheFTGandtheAntitrust'Division frequently scrutinize thelegalityundertheantitrust lawsoftransactions suchastheproposedtransaction.
| |
| NeitherLILCOnorBrooklynUnionb'elieves thattheCombination willviolatefederalantitrust laws.Nevertheless, ther'anbenoassurance thata'challenge totheproposedtransaction willnotbemadeonantitrust groundsor,ifsuchcliallenge ismade,whattheresultwouldbe.tahepartiesintendtoseekconfirmation fromthestaffoftheFTCand'heAntitrust Divisionthatconsummation oftheLIPATransaction isexemptundertheHSRAct.Ifsuchconfirmation cannotbeobtained, appropriate filingswillbemadewithsuchagencies.
| |
| 51 AtomicEnergyActOperation ofNineMilePoint2,'nuclearpowerplantinwhichLILCOhasan18%ownership
| |
| : interest, iss'ubjecttoregulation bytheNuclearRegulatory Commission
| |
| ("NRC").The'AtomicEnergyActof1954(the"AtomicEnergyAct")providesthatsuchanownership interestmaynotbetransferred
| |
| 'orinanymannerdisposedof,directlyorindirectly, toanypersonthroughtransferof'control unlesstheNRCfindsthatsuchtransferisinaccordance withtheAtomicEnergyActandconsentstothetransfer.
| |
| PursuanttotheAtomicEnergyActandtheLIPAAgreement, LILCOwillseekapprovalfromtheNRCasnecessary.
| |
| PublicAuthorities ControlBoardApprovalTheLIPATransaction issubjecttotheapprovalofthePACB.ThePACB,createdpursuanttoNewYorkStatePublicAuthorities Law("PAL"),consistsoffivepersonsappointed bythegovernor, ofwhichoneisupontherecommendation ofthemajorityleaderoftheNewYorkStateSenate,oneupontherecommendation oftheSpeakeroftheNewYorkStateAssembly, oneupontherecommendation oftheminorityleaderoftheNewYorkStateSenateandoneupontherecommendation oftheminorityleaderoftheNewYorkStateAssembly.
| |
| Themembersappointed bythegovernorupontherecommendation oftheminorityleaderoftheSenateandtheminorityleaderoftheAssemblyarenon-voting members.Theunanimous voteofthevotingmembers"oftheboardisrequiredtoauthorize actionbythePACB.Pursuantt6PAL,LIPAmaynotundertake anyprojectwithouttheapprovalofthePACB."Project" isdefinedtomeananactionundertaken byLIPAthat:(i)causesLIPAtoissuebonds,notesorother'obligations, orsharesinanysubsidiary corporation, or(ii)significantly inodifies theuseofanassetvaluedatmorethanonemilliondollarsownedbyLIPAorinvolvesthesale,leaseorotherdisposition ofsuchanasset,or(iii)commitsLIPAtoacontractoragreement withatotalconsideration ofgreaterthanonemilliondollarsanddoesnotinvolvethedaytodayoperations ofLIPA.Th'ePACBshallonlyapproveaprojectproposedbyLIPAuponitsdetermination that:(1)theprojectis,financially feasibleasthestandardisdefinedinPAL;articleone-5;(2)theprojectdoesnotmaterially adversely affectoverallrealpropertytaxesintheservicearea;(3)theprojectisanticipated toresultgenerally inlowerutilityratesintheservicearea;~and(4)theprojectwillnotmaterially adversely affectoverallrealpropertytaxesorutilityratesinotherareasof~thestateofNewYork.GeneralLILCOandBrooklynUnionpossessmunicipal franchises andenvironmental permitsandlicensesthatmayneedtoberenewedorreplacedasaresultoftheCombination.
| |
| Thecompanies donotanticipate anydifficulties atthepresenttimeinobtaining suchrenewalsorreplacements.
| |
| UndertheBrooklynUnion/LILCO Agreement, LILCOandBrooklynUnionhaveagreedtouse"reasonable effortstoobtainallnecessary materialpermits,licenses, franchises andothergovernmental authorizations neededtoconsummate oreffectthetransactions contemplated bytheBrooklynUnion/LILCO Agreement.
| |
| Inaddition,,
| |
| undertheLIPAAgreement, eachofthepartiestheretohasagreedtosimilarly usereasonable effortstoobtainallsuchrequiredauthorizations andapprovals neededtoconsummate oreffectthetransactions contemplated bytheLIPAAgreement.
| |
| Variouspartiesmayseekintervention intheproceedings associated withtheregulatory approvalprocessinanattempttoopposetheCombination andtheJ.IPATransaction ortohaveconditions imposeduponthereceiptofthenecessary approvals.
| |
| AlthoughLILCOandBrooklynUnionbelievethattheywillreceivetherequisite regulatory approvals fortheCombination andtheLIPATransaction, thetimingoftheirreceiptcannotbedetermined.
| |
| Itisacondition totheconsummation oftheCombination thatfinalordersapproving theCombination beobtainedfromthevarious'federal andstatecommissions described above,including (iftheLIPA.Transaction willnotbeconsummated substantially contemporaneously withtheCombination) thePSC'sfinalorderapproving along-term rateplan,ontermsandconditions (x)whichwouldnothave,orwouldnotbereasonably likelytohave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects oftheHoldingCompanyanditsprospective subsidiaries takenasawhole,or(y)whichwouldnotbematerially inconsistent withtheagreements ofthepartiescontained intheBrooklynUnion/LILCO Agreement.
| |
| Forpurposesoftheabove-referenced condition withrespecttothePSC's52 finalorder,theprospects oftheHoldingCompanyanditssubsidiaries willmeanthecombination oftheresultsanticipated bycertainregulated earningsforecasts ofBrooklynUnion"andLILCOwhich'thepartiespreviously providedtoeachother.Itisacondition totheconsummation oftheLIPATransaction thatfinalordersapproving theLIPATransaction beobtainedfromthevariousfederalandstatecommissions described aboveontermsandconditions (i)whichwouldnothave,orwouldnotbereasonably likelytohave,amaterialadverseeffectonthebusiness, assets,financial condition orresultsofoperations oftheHoldingCompany,'(ii) whichwouldnotbematerially inconsistent withtheagreements ofthepartiescontained intheLIPAAgreement orintheotherBasicAgreements (asdefinedherein)or(iii)whichwouldnothave,orwouldnotbereasonably likelytohave,amaterialadverseeffectontheRetainedAssets(asdefinedherein)ortheproperties,
| |
| : business, operations, financial conditions o'rprospects ofthebusinessrelatingtotheRetainedAssetstakenasawholeoramaterialadversedeclineintheelectricratesavingsprojected toberealizedaftertheconsummation"of theLIPATransaction.
| |
| AtanytimepriortotheEffective Time,totheextentpermitted byapplicable law,.theconditions toBrooklynUnion'sorLILCO'sobligations toconsummate theCombination maybewaivedbythe,parties.Anydetermination towaiveacondition woulddependuponthefactsandcircumstances existingatthetimeofsuchwaiverandwouldbemadebythewaivingparty'sBoardofDirectors, exercising itsfiduciary dutiestosuchpartyanditsshareholders.
| |
| LILCOandBrooklynUnionhavealsoagreedundertheBrooklynUnion/LILCO Agreement tonotifyeachotherofanychangesintheirapprovedratesorcharges(otherthanpass-through fuelandgasratesorcharges),
| |
| standards ofserviceoraccounting, andnottomakeanyfilingtochangeitsratesonfilewiththePSCthatwouldhaveamaterialadverseeffectonthebenefitsassociated withtheCombination.
| |
| TheHoldingCompanyandLILCOhaveagreedundertheLIPAAgreement tonotifyLIPAorLIPASubofanychangesintheirratesorcharges(otherthanpass-through fuelratesorcharges,butincluding, withoutlimitation, gasratesorcharges),
| |
| standards ofserviceoraccounting.
| |
| LILCOhasalsoagreedundertheLIPAAgreement thatitwillnot,withouttheconsentofLIPA,fileorprosecute anyratecaseorothernonroutine proceeding beforethePSCorFERCoranyappealtherefrom, exceptforcasesorproceedings (i)relatingsolelytopass-through fuelorgasratesorcharges,(ii)requiredtobemadebyorderofthePSCorFERC,(iii)relatings'olelytotheTransferred Assets,(iv)involving commercial orcontractual disputeswhicharerequiredtoberesolvedthroughsuchproceedings or(v)amatterthatLILCOreasonably believesthreatens thefinancial viability ofLILCO.LILCOisrequiredtoprovidereasonable priornotice(including, uponrequestofLIPA,copiesofdmftdocumentation) ofanyproposedfilingwiththePSCorFERC.53 UNAUDITED PROFORMACONSOLIDATED CONDENSED FINANCIAL INFORMATION BROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION (PURCHASE)
| |
| Thefollowing unaudited proformafinancial information refiectsadjustments tothehistorical financial statements ofLILCOtogiveeffecttotheproposedtransferofLILCO'sgasandgeneration businesstosubsidiaries oftheHoldingCompany,theproposedstockacquisition ofLILCObyawhollyownedsubsidiary ofLIPAandtheproposedCombination withBrooklynUnionin,accordance withtheCombination.
| |
| Theunaudited pro,formaconsolidated condensed balancesheetatMarch31,1997giveseffecttotheproposedLIPATransaction andtheCombination asiftheyhadoccurredatMarch31,1997.Theunaudited proformaconsolidated condensed statement ofincomeforthetwelvemonthperiodendedMarch31,1997giveseffecttotheproposedLIPATransaction andtheCombination asiftheyhadoccurredatAprilI,1996.Thesestatements areprepared.
| |
| onthebasisofaccounting fortheCombination underthepurchasemethodofaccounting andarebasedontheassumptions setforthinthenotesthereto.InApril1997LILCOchangeditsyear-endfromDecember31toMarch31Thefollowing proformafinancial information hasbeenpreparedfrom,andshouldbereadinconjunction with,theLIPAAgreement (AnnexD),andthehistorical consolidated financial statements andrelatednotestheretoofBrooklynUnionandLILCO,incorporated byreference herein.Thefollowing information isnotnecessarily indicative ofthefinancial positionoroperating resultsthatwouldhaveoccurredhadtheproposedLIPATransaction andtheCombination beenconsummated onthedate,oratthebeginning oftheperiod,forwhichtheproposedLIPATransaction andtheCombination arebeinggiveneffectnorisitnecessarily indicative offutureoperating resultsorfinancial position.
| |
| 54 HOLDINGCOMPANY"UNAUDITED PROFORMACONSOLIDATED CONDENSED BALANCESHEET~March31,1997(InMillions) 49LILCO(Historical)
| |
| BrooklynUnion/LILCO LIPATransaction AsAdjustedCombination BrooklynSaletoProFormaLILCOUnionProFormaLIPA(I)Adjustments AsAdjusted(Historical)
| |
| Adjustments HoldingCompanyProFormaASSETSPropertyUtilityPlantElectric4GasCommonConstruction workinprogress................
| |
| Nuclearfuelinprocessandinreactor..........
| |
| Less-Accumulated depreciation andamortization.
| |
| Gasexploration andproduction, atcost.;.....,...
| |
| Less-Accumulated depletion
| |
| ................
| |
| TotalPropertyCostinExcessofNetAssetsAcquired, nct......Regulatory AssetsBasefinancial component (lessaccumulated amortization of$782.5)Ratemodetation component
| |
| ....................
| |
| Shoiehampost-settlemcnt costs...............,
| |
| ..Regulatory taxassetPostretirement benefitsotherthanpensions........
| |
| OtherTotalRegulatory Assets....................
| |
| utilityPropertyandOtherInvestments
| |
| ...'..rrcntAssetsCashandcashequivalents
| |
| ........,............
| |
| Deferredtax'sset.....Accountsreceivable andaccruedrevenues........Othercurrentassets.TotalCurrentAssets.DeferredCliargcs.Contractual receivable fromLIPA.............
| |
| TotalAssets$3,900.21,171.2263.3108.915.5(1,759.1) 3,700.03,256.3409.5996.31,767.2357.7456.07,243.018.964.593.3489.9162.5810.277.6$11,849.7$2,821.252.415.5(854.7)2,034.43,256.3409.5996.31,767.2334.26,763.514.193.3.327.51.3422.152.5$9,286.6(300.7)(2)
| |
| (300.7)2,432.3(3)119.0(4)19.4(2)2,570.7281.3(2)$2,551.3$1,079.01,171.'2263.356.5(904.4)1,665.657.0121.8178.84.82,496.8119.0181.8161.22,958.825.1281.3$5,114.4$-1,805.9(440.1)563.9(188.3)1,741.4156.952.5422.1474.6120.9$2,493.8308.0(6)74.1(5)74.1(74.1)(5)
| |
| $308.0$1,079.02,977.1263.356.5(1,344.5) 563.9(188.3)3,407.0308.074.157.0121.8252.916L72,549.3119.0181.8583.33,433.471.9281.3$7,916.2CAPITALIZATION ANDLIABILITIES Capitalization CommonShareholders'quity
| |
| ..................
| |
| Long-term debtPreferred stock.TotalCapitalization
| |
| .Regulatory Liabilities.
| |
| CurrentLiabilities Accountspayableandaccruedexpenses..........
| |
| Accruedtaxes(including federalincometax)......
| |
| Othercurrentliabilities.
| |
| TotalCurrentLiabilities..........
| |
| ~.4.......DcferrcdCreditsDeferredfederalOther.TotalDefeOperating ReseCommitments inorityInteTotalCapi$2,549.14,457.0702.17,708.2562.8$2,457.33,459.8339.16,256.2529.7230.251.1332.6613.9122.765.5188,2incometax....................
| |
| 2,420.52,299.0110.420.5riedCredits.....................
| |
| 2,530.92,319.5rvcs.433.9(7.0)nndConlln8eneles
| |
| ..............
| |
| restlnSnbslrpsry Compnny.......
| |
| talizatlon andLiabilities
| |
| ........$11,849.7$9,286.6Seeaccompanying NotestoUnaudited ProForma$2,432,3(3)(75.0)(15) 75.0(15)2,432.3399.0(4)399.0(280.0)(4)
| |
| (280.0)$2,551.3Consolidated
| |
| $2,524.1922.2438.03,884.333.1107.5450.1267.1824.7(158.5)89.9(68.6)440.9$5,114.4Condensed
| |
| $1,004,1724.66.31,735.0165.868.674.9309.3309.757.7367.482.1$2,493.8Financial 60.8(6)(7)334.1518.7(.3)(7>341.760.51,194.5$308.0Statements.
| |
| 151.2147.6298.8440.982.1$7,916.2$253.8(6)(7)$3,782.01,646.8(6.3)(7)438.0247.55,866.833.155 HOLDINGCOMPANYUNAUDITED PROFORMACONSOLIDATED CONDENSED STATEMENT OFINCOMEFortheTwelveMonthsEndedMarch31,1997(InMillionsExceptPerShareAmounts)0SaleProLILCOBrooklynHoldingLILCOtoFormaAsUnionProFormaCompany(Historical)
| |
| LIPA(1)Adjustments Adjusted(Historical)
| |
| Adjustments ProFormaRevenuesElectricGas-Utility salesGasproduction andother......,.....,......
| |
| TotalRevenues.
| |
| $2,465.0672.73,137.7$1,520.2(10)
| |
| $11.5(8)$956.3672.71,520.211.51,629.0$1,338.7134.11,472.8$956.32,011.4134.13,101.8Operating ExpensesOperations-fuel andpurchased power.......Operations-other.
| |
| Maintenance
| |
| .Depreciation, depletion andamortization
| |
| ....Basefinancial component amortization......
| |
| Ratemoderation component amortization....
| |
| Regulatory liability component amortization
| |
| .Otherregulatory amortization......,.......
| |
| Operating taxes.FederalincometaxesTotalOperating Expenses..Operating Income.OtherIncomeand(Deductions)
| |
| .......IncomeBeforeInterestCharges.......InterestCharges..NctIncome.,Preferred stockdividendrequirements...
| |
| EarningsforCommonStock...,.....
| |
| AverageCommonSharesOutstanding 954.8372.8117.1155.0101.0(3.0)(88.6)112.3469.6210.62,401.6736.121.5757.6435.2322,452.1$270.3120.615.0220.569.3100.7101.0(30)(88.6)96.1280.7160.8952.5567.731.7599.4349.9249.539.9$209.6120.6939.8152.347.854.3627.2367.260.292.97.1(9)7.14.416.2188.956.91,456.2172.8148.745.61,341.8131.0(7.6)(9)77.712.084.923.735.9$(1147)(11)
| |
| $49.0120.6120.647.9128.8(16) 0.3$128.549.8(10.2)45.74.4162.6176.77.7(6)77(7.7)(7.7)(7.7)(0.3)(7)$(7.4)(14.5)1,567.0519.5108.0154.916.2337.6102.542,805.7296.1-.,",:125.6206.035.9$170.1155.9EnrningsperCommonandEquivalent Shares$2.24$1.74$(.09)$0.41$2.58$1.09444Seeaccompanying NotestoUnaudited ProFormaConsolidated Condensed Financial Statements.
| |
| 56 e~'otestoUnaudited ProFormaConsolidated Condensed Financial Statements Thehistorical financial statements ofLILCOhavebeenadjustedtogiveeffecttotheproposedtransaction withLIPA,pursuanttowhichLILCOwilldistribute certainofitsnetassetsrelatingtoitsgasandgeneration business("Transferred Assets")tosubsidiaries oftheHoldingCompany.LIPAwillthenacquireLILCOinastocksale,Theadjustments arebaseduponadisaggregation ofLILCO'sbalancesheetandoperations asestimated bythemanagement ofLILCO,andaresubjecttoadjustment pursuanttothetermsoftheLIPAagreement.
| |
| Inconnection withthistransaction, theprincipal assetstobeacquiredbyLIPAthroughitsstockacquisition ofLILCOincludetheelectrictransmission anddistribution system(,"TheLIPATransmission andDistribution System");LILCO's18%interestinNineMilePoint2nuclearpowerstation,certainofLILCO'sregulatory assetsassociated withitselectricbusinessandanallocation ofaccountsreceivable andotherassets.Theprincipal liabilities tobeassumedbyLIPAincludeLILCO'sregulatory liabilities associated withitselectricbusiness, aportionofLILCO'slong-term debtandanallocation ofaccountspayable,accruedexpenses, customerdeposits, otherdeferredcreditsandclaims.Inconnection withtheLIPATransaction, LIPAiscontractually responsible forreimbursing theHoldingCompanyforpostretirement
| |
| : benefits, otherthanpensioncosts,relatedtoemployees ofLILCO'selectricbusiness.
| |
| Aproformaadjustment hasbeenreflected toreclassify theassociated regulatory assetforpostretirement benefitsotherthanpensionstocurrentandnon-current accountsreceivable pursuanttoLIPA'sobligation toasubsidiary oftheHoldingCompany.TheCashPurchasePricetobepaidbyLIPAinconnection withitsstockacquisition ofLILCOwillbe$2,497.5million.TheCashPurchasePricewasdetermined basedupontheestimated netbookvalueoftheLILCORetainedAssetsof$2,500.8millionasestimated byLILCOinaprojected balancesheetasofDecember31,1997.BaseduponthebalancesheetasofMarch31,1997,thenetbookvalueoftheLILCORetainedAssetsamountedto$2,457.3million.Inaddition, theLIPATransaction obligates theHoldingCompanyupontheclosingofthetransaction toremittoLIPA$15millionassociated withtherecoverythroughlitigation ofcertainrealestate taxespreviously paid.Transaction costsarecurrently estimated tobe$10million.AssumingtheLIPATransaction wascompleted onMarch31,1997,thenetcashtobereceivedbytheHoldingCompanywouldamountto:CashPurchasePrice.CashpaidtoLIPA..Transaction CostsNetCash.$2,457.3(15.0)(10.0)$2,432.3,4,5.Thedistribution oftheTransferred AssetsfromLILCOtosubsidiaries oftheHoldingCompanywillresultintheimposition offederalincometaxesonLILCO;PursuanttotheLIPAAgreement, the'subsidiaries createdbytheHoldingCompanytoreceivetheTransferred Assetswillreceivethebenefitoftheincreased taxbasisoftheTransferred AssetsandwillpaytheLILCOtax.IftheLIPATransaction weretohaveoccurredatMarch31,19/7,thetaxwouldhaveamountedtoapproximately
| |
| $400million.Thetaxisderivedfromthedifference betweentheestimated fairvalueofthedistributed assetsandtheirexistingtaxbasis.Forfinancial reporting
| |
| : purposes, thesubsidiaries reversedtheexistingdeferredtaxliability of$280millionrelatingtotheTransferred Assetsandrecordeda,$119milliondeferredtaxassetrefiecting theincometaxeffectbywhichthetaxbasisoftheTransferred Assetsexceededtheirbookbasis.Theunaudited proformacondensed consolidated balancesheetasofMarch31,1997refiectsthereclassification of$74.1millionofBrooklynUnion,regulatory taxassetsfromdeferredchargestoregulatory assetsinordertoconsistently presenttheregulatory assets.ofBrooklynUnionandLILCO.57 ThepurchasepriceforBrooklynUnionatMarch31,1997,whichamountedtoapproximately
| |
| $1.245billionincluding approximately
| |
| $54.1millionoftransaction costs,hasbeendetermined baseduponanaverageofLILCO'sopeningandclosingstockpricesforthetwotradingdaysbeforeandthreetradingdaysafterDecember29,1996.Thepurchasepricehasbeenallocated toassetsacquiredandliabilities assumedbasedupontheirestimated fairvalues.Itisanticipated thatthefair'value oftheutilityassetsacquiredisrepresented bytheirbookvalue,whichapproximates thevalueoftheseassetsrecognized byTheNewYorkStatePublicServiceCommission inestablishing rateswhicharedesignedto,amongotherthings,provideforareturnonthebookvalueoftheseassetsandtherecoveryofcosts'included asdepreciation andamortization charges.Theestimated fairvaluesofBrooklynUnion'snon-utility assetsapproximate theircarryingvalues.BothBrooklynUnionandLILCOwillseekPSCapprovalforrecoveryoftransaction costs.\Baseduponcurrentinformation, thepurchaseprice,including merger-related transaction costs,exceedsthefairvalueofthenetassetsacquiredby$308.0million,whichwillbeamortized toincomeover40years.Inconnection withtheformation ofKeySpan,BrooklynUnionwillredeemitsoutstanding preferred stockitapremiumof2%pertermsoftheoriginalissuanceagreement.
| |
| Asaresult,accountspayablehasbeenadjustedtoreflectapayableof$6.7millionincluding premiumsof$0.1millionwhichhavebeenchargedtoCommonShareholders'quity.
| |
| I8.Theagreement withLIPAincludesaprovision fortheHoldingCompanytoearnintheaggregate approximately
| |
| $11.5millioninannualmanagement servicefeesfromLIPAforthemanagement oftheLIPATransmission andDistribution Systemandthemanagement ofallaspectsoffuelandpowersupply.Theseagreements alsocontaincertainincentive andpenaltyprovisions whichcouldmaterially impactearningsfromsuchagreements.
| |
| 9.Theprofoimachargeof$7.1millionrepresents theincometaxeffectassociated withtherecording oftheproformaadjustmerits forthe$11.5millionmanagement fee(seeNote8),andareduction ininterestexpenseofapproximately
| |
| $7.6millionassociated withtherecapitalizafion ofthesubsidiary whichcontainsthegasandgeneration businesses.
| |
| 10.RevenuesforbothtlteassetsacquiredbyLIPAandtheTransferred Assetsweredetermined baseduponarevenue'requirements modelwhichconsidered thecostofservicefortheseassetsandareturnon,capitalization baseduponanimputedallowedrateofreturn.11.Noadjustments havebeenmadetoearningsoncommonstocktorellectearningsonnetavailable proceedsofapproximately
| |
| $1.7billiontobereceived, afterremittances totheHoldingCompany's gasandgeneration subsidiaries forworkingcapitalpurpo'ses (seeNotes3and12).Ifthesefundswereinve'sted at7%(the30yearUSTreasuryBondyieldbasedonrecentprices),theHoldingCompanywouldhaverealizedadditional interestincome,netoftaxes,ofapproximately
| |
| $77.3million,orapproximately
| |
| $.49pershare,onaconsolidated basis.Eachonepercentchangeintheassumedinterestrate,wouldincrease/decrease interestincome,netoftaxes,by$11.0million.LILCO'sallowedrateofreturnonitscommonequityforitselectricbusinessiscurrently 11%.C12Subsequent tothesaletoLIPA,aportionoftheproceedstobereceivedbytheHoldingCompanywillberemittedtoLILCO'sgasandgeneration subsidiaries inordertomeetthesubsidiaries workingcapitalneeds.Suchproposedtransaction hasbeeneliminated'in theconsolidation process.,
| |
| 13.'heallocation betweenBrooklynUnionandLILCOandtheircustomers oftheestimated costsavingsresulting fromtheCombination, netofthecostsincurredtoachievesuchsavings,willbesubjecttoregulatory reviewandapproval.
| |
| Noneoftheestimated costsavings,havebeenreflected intheunaudited proformaconsolidated condensed financial statements.
| |
| 14.Theunaudited proforrnacombinedcondensed financial statements reflecttheexchangeofeachshareofLILCOCommonStockoutstanding into0.880sharesofHoldingCompanyCommonStockandtheconversion ofeachshareofBrooklynUnionCommonStockoutstanding intooneshareofHoldingCompanyCommonStock,asprovidedintheBrooklynUnion/LILCO Agreement.
| |
| 58 15.Asmorefullydescribed inthesectionentitled"TheLIPATRANSACTION
| |
| -Agreement andPlanofMerger,"LILCOwilltransfertheTransferred Assetstosubsidiaries oftheHoldingCompanyinexchangeforsharesoftheHoldingCompanycommonstockandupto$75millionfaceamountofHoldingCompanyPreferred Stock.Theprivately placedPreferred Stockwillbenon-voting, non-convertible andhaveafive-yearterm.Forpurposesoftheseproformafinancial statements, itisassumedthattheHoldingCompanywillissue$75millionofPreferred Stock,LIL'COwillsellthepreferred stockfor$75millioninproceedsandwillretaintheproceeds(i.e.,aRetainedAsset).4Witha$75millionincreaseintheRetainedAssets,theLIPAAgreement providesthattheRetainedDebtwillincreasebyacorresponding amount.TheLIPAAgreement alsoprovidesthatiftheHoldingCompanyweretoissueanamountotherthan$75millionofPreferred Stock,theincremental difference betweentheamountactuallyissuedand$75million,willresultinacorresponding increaseordecreaseintheamountofaccountspayableretainedbyLILCO.Theseproformafinancial statements reflectareduction ininterestexpenseforthereducedlevelofsubsidiary debt,andtoreflectanincreaseinpreferred stockdividendrequirements.
| |
| Finally,forpurposesoftheseproformafinancial statements, itisassumedthatthedividendrateonthisprivately placedPreferred Stockwillbe7.95%,whichisequaltotheCompany's highestcostpreferred stock.416.TheBrooklynUnionearningsforthe12monthperiodendedMarch31,1997include-non-recurring incomeaggregating approximately
| |
| $33.5million,netoftaxes,or$0.68pershare,relatingtogainsontheinitialpublicofferingofasubsidiary's stockandthesaleofaninvestment inaCanadianplant.Thisincomewaspartially offsetbya$7.8millioncharge,netoftaxes,or$0.16pershare,relatingtoreorganization expensesincurredbythesubsidiary.
| |
| 59 UNAUDITED PROFORMACOMBINEDCONDENSED FINANCIAL INFORMATION BROOKLYNUNION/LILCO.
| |
| COMBINATION (POOLING)
| |
| -Thefollowing unaudited proformafinancial information combinesthehistorical consolidated balancesheetsandstatements of,incomeofBrooklynUnionandLILCOincluding theirrespective subsidiaries, aftergivingeffecttotheCombination.
| |
| BrooklynUnion'sbalancesheetasofMarch31,1997andresultsofoperations foreachofthe12monthperiodsinthethree,yearperiodendedMarch31,1997havebeencombinedwithLILCO,'sbalancesheetasofMarch31,,1997 andresultsofoperations foreachofthe12monthperiodsinthethreeyearperiodendedMarch31,1997toarriveattheunaudited proformacombinedcondensed balancesheetasofMarch31,1997andthestatements ofincomeforeachofthe12monthperiodsendedMarch31,1997.Theunaudited proformacombinedcondensed balancesheetatMarch31,1997giveseffecttotheCombination asifithadoccurredatMarch31,1997.Theunaudited proformacombinedcondensed statements ofincomeforeachofthe12monthperiodsinthethreeyearperiodendedMarch31,1997giveeffecttotheCombination asifithadoccurredatApril1,1994.Thesestatements arepreparedonthebasis.ofaccounting fortheCombination asapoolingofinterests andarebasedontheassumptions setforthinthenotesthereto.ItshouldbenotedthatinApril1997LILCOchangeditsyear-endfromDecember31toMarch31.-Thefollowing unaudited proformafinancial information hasbeenpreparedfrom,andshouldbereadinconjunction with,thehistorical consolidated=financial statements andrelatednotestheretoofBrooklynUnionandLILCO,incorporated byreference herein.Thefollowing information isnotnecessarily indicative ofthefinancial positionoroperating resultsthatwouldhaveoccurredhadtheCombination beenconsummated onthedate,oratthebeginning ofthe"period,forwhichtheCombination isbeinggiveneffectnorisitnecessarily indicative offutureoperating resultsorfinancial position.
| |
| 60 HOLDINGCOMPANYUNAUDITED PROFORMACOMBINEDCONDENSED BALANCESHEETMarch31,1997Pooling(InMillions)
| |
| HoldingBrooklynCompanyLILCOUnionProFormaProForma(Historical)
| |
| (Eiisiorlcal)
| |
| AdjsimsnlsCombinednof$782.5)..ASSETSPropertyUtilityplantElectric.Gas.Common.Construction workinprogressNuclearfuelinprocessandinreactorLess-Accumulated depreciation andamortization
| |
| ..Gasexploration andproduction, atcostLess-Accumulated depletion TotalPropertyRegulatory AssetsBasefinancial component (lessaccumulated amortizatio Ratemoderation component.
| |
| Shorehampost-settlement costsRegulatory taxassetPostretirement benefitsotherthanpensionsOther~oTotalRegulatory AssetsNonutility PropertyandOtherInvestmcnts CurrentAssetsCashandcashequivalents DeferredtaxassetAccountsreceivable andaccruedrevenues.
| |
| Othercurrentassets.TotalCurrentAssets..DeferredChargesTotalAssets$3,900.21,171.2263.3108.915.5(1,759.1) 3,700.03,256.3409.5996.31,767.2357.7456.07,343.018.964.593.3489.9162.5810.277.6$11,849.7$1,805.9(440.1)563.9(188.3)1,741.4156.952.5422.1474.6120.9$2,493.874.1(1)74.1(74.1)(1)
| |
| $-$3,900.22,977.1263.3108.915.5(2,199.2) 563.9(188.3)d,(did3,256.3409.5996.31,841.3357.7456.07,317.1175.8117.093.3489.9584.61,284.8124.4$14,343.5CAPITALIZATION ANDLIABILITIES Capitalization Common'Shareowners'quity Long-term debtPreferred stockTotalCapitalization Regulatory Liabilities CurrentLiabilities AccountspayableandaccruedexpensesAccruedtaxes(including federalincometax)Othercurrentliabilities
| |
| .TotalCurrentLiabilities.
| |
| DeferredCreditsDeferredfederalincometaxOther.TotalDeferredCreditsOperating Reserves.Commitments andContingencies.
| |
| MinorityInterestinSubsidiary Company.TotalCapitalization andLiabilities
| |
| $2,549.14,457.0702.17,708.2562.8230.251.1332.6613.92,420.5110.42,530.9433.9$11,849.7$1,004.1724.66.31,735.0165.868.674.9309.3309.757.7367.482.1$2,493.8(54.2)(2)(7) 3,499.05,181.6(6.3)(7)702.1(605)93827562.860.8(2)(7) 456.8119.7(0.3)(7)407.260.5983.72,730.2168.12,898.3433.982.1$14,343.5Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 61 HOLDINGCOMPANYUNAUDITED PROFORMACOMBINEDCONDENSED STATEMENT OFINCOMEFortheTwelveMonthsEndedMarch31,1997Pooling(InMillionsExceptPerShareAmounts)LILCOtHistoricat)
| |
| BrooklynUnionProForma(Historical)
| |
| Adjustments HoldingCompanyProFormaCombinedRevenuesElectricGas-UtilitysalesGasproduction andother.TotalRevenues.$2,465.0672.7$1,338.7134.13,137.71,472.8$-$2,465.02,011.4134.14,610.5Operating ExpensesOperations
| |
| -fuelandpurchased power.Operations
| |
| -otherMaintenance Depreciation, depletion andamortization.
| |
| Basefinancial component amortization Ratemoderation component amortization
| |
| .Regulatory liability component amortization...
| |
| Otherregulatory amortization Operating taxesFederalincometaxes.TotalOperating Expenses.Operating Income.............
| |
| 954.8372.9117.0155.0101.0(3.0)(88.6)112.3469.6210.62,401.6736.1627.2367.260.292.9b148.745.61,341.8131.01,582.0740.1177.2247.9101.0(3.0)(88.6)867.1OtherIncomeIncomeBeforeInterestChargesInterestCharges.NetIncomePreferred stockdividendrequirements
| |
| .EarningsforCommonStock21.545.7757.6176.7435.247.9322.4128.8(4)52.10.3(0.3)(7)$270.3$128.5$0.367.2934.3483.1451.252.1$399.1AverageCommonSharesOutstanding 120.6"49.8(23.8)(3) 146.6EarningsperCommonandEquivalent Shares$2.24$2.58$.2.72Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 62 0HOLDINGCOMPANYUNAUDITED PROFORMACOMBINEDCONDENSED STATEMENT OFINCOMEIl'ortheTwelveMonthsEndedMarch31,1996Pooling(InMillions'I:xcept PerShareAmounts)c1BrooklynLILCOUnion(Histoclml)
| |
| (Bistoical)ProFormaProFormaddjmtntents CombinedRevenuesElectric.
| |
| Gas-Utilitysales.Gasproduction andother.TotalRevenues$2,497.4650.83,148.2$1,272.297.8.1,370.0$-$2,497.41,923.097.84,518.2Operating ExpensesOperations
| |
| -fuelandpurchased powerOperations
| |
| -other.Maintenance
| |
| .Depreciation, depletion andamortization.
| |
| Basefinancial component amortization Ratemoderation component amortization
| |
| ....Regulatory liability component amortization
| |
| ..Otherregulatory amortization Operating taxestFederalincometaxesTotalOperating ExpensesOperating IncomeOtherIncome.IncomeBeforeInterestChargesInterestChargesNetIncomePreferred stockdividendrequirements
| |
| .EarningsforCommonStock.AverageCommonSharesOutstanding
| |
| ........EarningsperCommonandEquivalent Shares.888.6391.1,124.4147.3101.0(49)(88.6)175.2455.9217.02,407.0741.2569.5349.854.7'72.7139.442.61,228.7141.345.55.7786.7147.0471.952.5314.8'94.552.5,0.3$262.3$94.2119.548.8$2.19$1.931,458.1740.9179.1220.0101.0(4.9)(88.6)175c2595.3259.63,635.7882.551.2933.7524.4409.3(0.3)(7)52.5$0.3$356.8(23.5)(3)
| |
| ,144.8$-'2.46Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 63 HOLDINGCOMPANYUNAUDITED PROFORMACOMBINEDCONDENSED STATEMENT OFINCOMEFortheTwelveMonthsEnded,March31,1995Pooling(InMillionsExceptPerShareAmounts)BrooklynLILCOUnionProFormaProForma(Historical)
| |
| (Historical)
| |
| Adjustments CombinedRevenuesElectricGas-UtilitysalesGasproduction andother.TotalRevenues.$2,440.3546.1$1,203.454.82,986.41,258.2$2,440.31,749.554.84,244.6Operating ExpensesOperations
| |
| -fuelandpurchased power....
| |
| Operations
| |
| -otherMaintenance Depreciation, depletion andamortization.
| |
| Basefinancial component amortization Ratemoderation component amortization
| |
| .Regulatory liability component amortization...
| |
| Otherregulatory amortization Operating taxesFederalincometaxes.TotalOperating Expenses.Operating Income........
| |
| OtherIncomeIncomeBeforeInterestChargesInterestCharges805.8388.0141.0134.6101.0160.5(88.6)8.0'08.9185.32,244.5741.946.17(%8.0485.5493.0324.352.170.9140.740.11,121.1137.13.7140.81,298.8712.3193.1205.51010160.5(88.6)8.0549.6225.43,365.6879.049.8928.852.7-538.2NctIncomePreferred stockdividendrequirements....
| |
| 302.552.988.10.3390.6(0.3)(7)52.9EarningsforCommonStock.....AverageCommonSharesOutstanding
| |
| ,117.447.6(23.1)(3) 141.9$249.6$87.8$0.3$337,7EarningsperCommonandEquivalent Shares$2.13$1.84$-$2.38Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 64 NOTESTOUNAUDITED PROFORMACOMBINEDCONDENSED FINANCIAL STATEMENTS 1.Theunaudited proformacombinedcondensed balancesheetasofMarch31,1997reflectsthereclassification of$74.1millionofBrooklynUnionregulatory taxassetsfromdeferredchargestoregulatory assets.Allotherfinancial statement presentation andaccounting policydifferences areimmaterial andhavenotbeenadjus'ted intheunaudited proformacombinedcondensed financial statements.
| |
| 2.Transaction costs(including feesforfinancial
| |
| : advisors, attorneys, accountants, consultants, taxes,filingsandprinting) arecurrently estimated tobeapproximately
| |
| $54.1million.BothBrooklynUnionandLILCOwillseekPSCapprovalforrecoveryofsuchtransaction costs.3.Theunaudited proformacombinedcondensed financial statements reflecttheconversion ofeachshareofLILCOCommonStockoutstanding into0.803sharesofHoldingCompanyCommonStockandtheexchangeofeachshareofBrooklynUnionCommonStockoutstanding foroneshareofHoldingCompanyCommonStock,asprovidedintheBrooklynUnion/LILCO Agreement.
| |
| Theunaudited proformacombinedcondensed financial statements arepresented asifthecompanies werecombinedduringallperiodsincludedtherein.4.TheBrooklynUnionearningsforthe12monthperiodendedMarch31,1997includenon-recurring incomeaggregating approximately
| |
| $33.5million,netoftaxes,or$0.68pershare,relatingtogainsontheinitialpublicofferingofasubsidiary's stockandthesaleofaninvestment inaCanadianplant.Thisincomewaspartially offsetbya$7.8millioncharge,netoftaxes,or$0.16,pershare,relatingtoreorganization expensesincurredbythesubsidiary.
| |
| 5.Intercompany transactions betweenBrooklynUnionandLILCOduringtheperiodspresented werenottmaterialand,accordingly, noproformaadjustments weremadetoeliminate suchtransactions.
| |
| 6.Theallocation betweenBrooklynUnionandLILCOandtheircustomers oftheestimated costsavingsresulting fromtheCombination, netofthecostsincurredtoachievesuchsavings,willbesubjecttoregulatory reviewandapproval.
| |
| Noneoftheestimated costsavingsorthecoststoachievesuchsavings,havebeenreflected intheunaudited proformacombinedcondensed financial statements.
| |
| 7.Inconnection withtheformation ofKeySpan,BrooklynUnionwillredeemitsoutstanding preferred stockatapremiumof2%pertermsoftheoriginalissuanceagreement.
| |
| Asaresult,accountspayablehasbeenadjustedtoreflectapayableof$6.7millionincluding premiumsof$0.1millionwhichhavebeenchargedtoCommonShareholders'quity.
| |
| 65 THECOMPANYFOLLOWING THECOMBINATION ANDTHELIPATRANSACTION Management oftheHoldingCompany.Hoiriing CompanyBoardofDirectors.
| |
| Thenumberofdirectors comprising thefullBoardofDirectors oftheHoldingCompanyattheEffective Timewillbe15persons,sixofwhomwillbedesignated byBrooklynUnionpriortotheEffective Time,sixofwhomwillbedesignated byLILCOpriortotheEffective Timeandthreeofwhomwillbedesignated byacommittee consisting oftwocurrentBrooklynUniondirectors andtwocurrentLILCOdirectors.
| |
| IntheeventthattheCombination isnotconsummated andtheLIPATransaction isconsummated, theBoardofDirectors oftheHoldingCompanywillconsistoftheDirectors ofLILCOservingimmediately beforetheLIPAClosing.SeniorExecutives.
| |
| Dr.WilliamJ.Catacosinos willbetheChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive Officero'ftheHoldingCompanycommencing attheEffective Time.Atthefirstanniversary oftheEffective Time,Dr.Catacosinos willceasetobetheChiefExecutive Officer,butwillcontinuetobeChairmanoftheBoardandChairmanoftheExecutive Committee andwillbecomeaconsultant totheHoldingCompany.IntheeventthattheCombination isnotconsummated andtheLIPATransaction isconsummated, theaboveprovisions willnottakeeffectandDr.Catacosinos willserveinthecapacityreferredtoabove.Mr.RobertB.CatellwillbethePresident'nd ChiefOperating OfficeroftheHoldingCompanycommencing upontheconsummation oftheCombination andwillsucceedDr.Catacosinos asChiefExecutive OfficeroftheHoldingCompanycommencing onthefirstanniversary ofsuchdate.Thearrangements tocausesuchelections totakeplaceatsuchfirstanniversary maybealteredonlybyavote,following theEffective Time,oftwo-thirds oftheentireBoardofDirectors oftheHoldingCompany.CommonStockDividends Itisanticipated thattheinitialannualized dividendratepaidtoHolding.Companyshareholders aftercompletion oftheCombination, whetherornottheLIPATransaction isconsummated, willbe$1.78pershare,subjecttoapprovalanddeclaration, bytheHoldingCompanyBoardofDirectors.
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| BrooklynUnion'sannualdividendrateiscurrently
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| $1.46pershareandLILCO'sannualdividendrateiscurrently
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| $1.78pershare.Declaration andtimingofalldividends declaredonHoldingCompanyCommonStockwillbeabusinessdecisiontobemadebytheHoldingCompanyBoardfromtimetotimebasedupontheresultsofoperations andfinancial condition oftheHoldingCompanyanditssubsidiaries, opportunities
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| 'available forthereinvestment ofcashreceivedinconnection withtheLIPATransaction orotherwise, andsuchotherbusinessconsiderations astheHoldingCompanyBoardconsiders relevantinaccordance withapplicable laws.Foradescription ofcertainrestrictions ontheHoldingCompany's abilitytopaydividends ontheHoldingCompanyCommonStock,see"Description ofHoldingCompanyCapitalStock."DESCRIPTION OFHOLDINGCOMPANYCAPITALSTOCKGeneralTheauthorized capitalstockoftheHoldingCompany,asoftheEffective Time,willconsistof450,000,000 sharesofHoldingCompanyCommonStock,parvalue$.01pershare,and100,000,000 sharesofpreferred stock,parvalue$.01pershare("HoldingCompanyPreferred Stock").Thedescription ofHoldingCompanycapitalstocksetforthhereindoesnotpurporttobecompleteandisqualified initsentiretybyreference totheCertificate ofIncorporation oftheHoldingCompany(the"HoldingCompanyCertificate"
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| )andtheBy-LawsoftheHoldingCompany(the"HoldingCompanyBy-Laws"),theformsofwhichareattachedheretoasAnnexesGandH,respectively, aswellasapplicable statutory orotherlaw.66 HoldingCompanyPreferred StockUndertheHoldingCompanyCertificate, subjecttoanyapprovaloftheSECwhichmayberequiredundertheHoldingCompanyAct,theBoardofDirectors oftheHoldingCompanywillbeauthorized todividetheHoldingCompanyPreferred Stockintoseries,toissuesharesofanysuchseriesand,'withinthelimitations setforthintheHoldingCompanyCertificate orprescribed bylaw,tofixanddetermine thevotingrights,ifany,oftheholdersofsharesofsuchseriesandthedesignations, preferences andrelative, participating, optionalandotherspecialrightsofeachseriesandthequalifications, limitations andrestrictions thereof(the"Preferred StockDesignation"
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| ).TherearenopresentplanstoissueanyHoldingCompanyPreferred Stockotherthanasdescribed herein.HoldingCompanyCommonStockTheholdersofHoldingCompanyCommonStockwillbeentitledtoreceivesuchdivideiids astheBoardofDirectors oftheHolding'ompany mayfromtimetotimedeclare,subjectto'anyrightsofholdersofHoldingCompanyPreferred Stock,ifanyisissued.TheholdersofsharesofHoldingCompanyCommonStockwillbeentitledtoonevoteforeachsuchshareuponallproposals presented totheshareholders onwhichtheholdersofHoldingCompanyCommonStockareentitledtovote.ExceptasprovidedbylawandsubjecttoanyclassorseriesvotingrightsofholdersofanyHoldingCompanySeriesAAPreferred Stock,theholdersofHoldingCompanyCommonStockwillhavetheexclusive righttovotefortheelectionofDirectors andforallotherpurposes, andholdersofHoldingCompanyPreferred Stockwillnotbeentitledtoreceivenoticeofanymeetingofshareholders atwhichsuchholdersofHoldingCompanyPreferred Stockarenotentitledtovote.Theholdersofsharesofaclassorseriesshallbeentitledtovoteandtovoteasaclassupontheauthorization ofanamendment and,inadditiontotheauthorization oftheamendment byvoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereon,theamendment shallbeauthorized byvoteoftheholdersofamajorityofalloutstanding sharesoftheclassorserieswhenaproposedamendment wouldchangetheirshare'stunderBCLSection801(b)(11),thatis,changeanyauthorized shares,whetherissuedorunissued, intoadifferent numberofsharesofthesameclass.TheholdersofHoldingCompanyCommonStockwillnotbeentitledtocumulatevotesfortheelectionofDirectors.
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| Intheeventofanyliquidation, dissolution orwindingupoftheHoldingCompany,theholdersofHoldingCompanyCommonStock,subjecttoanyrightsoftheholdersofanyHoldingCompanyPreferred Stock,willbeentitledtoreceivetheremainder, ifany,oftheassetsoftheHoldingCompanyafterthedischarge ofitsliabilities.
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| HoldersofHoldingCompanyCommonStockwillnotbeentitledtopreemptive rightstosubscribe fororpurchaseanypartofanyneworadditional issueofstockorsecurities convertible intostock.TheHoldingCompanyCommonStockwillnotcontainanyredemption provisions orconversion rights.I0CertainAnti-Takeover Provisions TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawswillcontainvariousotherprovisions intendedto(i)promotestability oftheHoldingCompany's shareholder baseand(ii)rendermoredifficult certainunsolicited orhostileattemptstotakeovertheHoldingCompanywhichcoulddisrupttheHoldingCompany,diverttheattention of,theHoldingCompany's directors, officersandemployees andadversely affecttheindependence andintegrity oftheHoldingCompany's business.
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| Asummaryoftheseprovisions oftheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsissetforthbelow.RemovalofDirectors.
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| TheHoldingCompanyCertificate providesthatexceptasotherwise providedfororfixedbyorpursuanttoaCertificate ofAmendment settingforththerightsoftheholdersofanyclassorseriesofHoldingCompanyPreferred Stock,newlycreateddirectorships resulting fromanyincreaseinthenumberofdirectors andanyvacancies ontheBoardofDirectors oftheHoldingCompanyresulting fromdeath,resignation, disqualification, removalorothercausewillbefilledbytheaffirmative voteofamajorityoftheremaining directors theninoffice,eventhoughlessthanaquorumofthe,BoardofDirectors oftheHoldingCompany,andnotbytheshareholders.
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| SubjecttotherightsofholdersofHoldingCompanyPreferred Stock,anydirecto'r mayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityofthevoting67 powerofalltheoutstanding capitalstockoftheHoldingCompanyentitledtovotegenerally intheelectionofdirectors (the"VotingPower"),votingtogetherasasingleclass.TheNYBCLprovidesthatunlessthecertificate ofincorporation orby-lawsofacorporation soprovide,adirectormayberemovedonlyforcausebyvoteoftheshareholders.
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| NoneoftheRestatedCertificate ofIncorporation ofBrooklynUnion,asamended(the"Brooklyn UnionCertificate,")
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| theBy-LawsofBrooklynUnion(the"Brooklyn UnionBy-Laws,")
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| theLILCOAmendedandRestatedCertificate ofIncorporation (the"LILCOCertificate"
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| )ortheBy-LawsofLILCO,asamended(the"LILCOBy-Laws")containsprovisions forremovalofadirector.
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| SpecialShareholders'eetings audRigirtIoActByIVrittenConsent.TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethataspecialmeetingofshareholders maybecalledonlybyaresolution adoptedbyamajorityofthe.entireBoardofDirectors oftheHoldingCompany.Shareholders arenotpermitted tocall,ortorequirethattheBoardofDirectors call,aspecialmeetingofshareholders.
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| : Moreover, thebusinesspermitted tobeconducted atanyspecialmeetingofshareholders islimitedtothebusinessbroughtbeforethemeetingpursuanttothenoticeofthemeetinggivenbytheHoldingCompany.TheHoldingCompanyBy-Lawspermitaspecialmeetingofshareholders tobecalledatanytimeforanypurposebyorderoftheBoardofDirectors oftheHoldingCompany.Inaddition, theHoldingCompanyCertificate providesthatanyactiontakenbytheshareholders oftheHoldingCompanymustbeeffectedatanannualorspecialmeetingofshareholders andmaynotbetakenbywrittenconsentinlieuofameeting.The'rovisions oftheHolding'ompany Certificate andtheHoldingCompanyBy-Lawsprohibiting shareholder actionbywrittenconsentmayhavetheeffectofdelayingconsideration ofashareholder proposaluntilthenextannualmeeting.Theseprovisions wouldalsopreventtheholdersofamajorityoftheVotingPowerfromunilaterally usingthewrittenconsentproc'edure totakeshareholder action.Moreover, ashareholder couldnotforceshareholder consideration ofaproposalovertheopposition oftheBoardofDirectors oftheHoldingCompanybycallingaspecialmeetingofshareholders priortothetimetheBoardbelievessuchconsideration tobeappropriate.
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| Procedures forShareholder Nomiirnlions rindProposals.'he HoldingCompanyBy-Lawsestablish anadvancenoticeprocedure forshareholders tonominatecandidates forelectionasdirectors ortobringotherbusinessbeforemeetingsofshareholders oftheHoldingCompany(the"Shareholder NoticeProcedure"
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| ).Onlythoseshareholder nomineeswhoarenominated inaccordance withtheShareholder NoticeProcedure willbeeligibleforelectionasdirectors oftheHoldingCompany.UndertheShareholder NoticeProcedure, noticeofshareholder nominations tobemadeatanannualmeeting(orofanyotherbusinessthatmayproperlybebroughtbeforesuchmeeting)mustbereceivedbytheHoldingCompanynotlessthan60daysnormorethan90dayspriortothefirstanniversary ofthepreviousyear'sannualmeeting(or,ifthedateoftheannualmeetingismorethan30daysbeforeormorethan60daysaftersuchanniversary date,notearlierthanthe90thdaypriortosuchmeetingandnotlaterthanthelaterof(i)the60thdaypriortosuchmeetingor(ii)the10thdayafterpublicannouncement ofthedateofsuchmeetingisfirstmade).Notwithstanding the'foregoing, intheeventthatthenumberofdirectors tobeelectedisincreased andthereisnopublicannouncement namingallofthenomineesfordirectororspecifying thesizeoftheincreased BoardofDiiectors madebytheHoldingCompanyatleast70dayspriortothefirstanniversary ofthepreceding year'sannualmeeting,ashareholder's noticewillbetimely,butonlywithrespecttonomineesforanynewpositions createdbysuchincrease, ifitisreceivedbytheHoldingCompanynotlaterthanthe10thdayaftersuchpublicannouncement isfirstmadebytheHoldingCompany.TheHoldingCompanyBy-Lawsprovidethatonlysuchbusinessmaybeconducted ataspecialmeetingasisspecified inthenoticeofmeeting.Nominhtions forelectiontotheHoldingCompanyBoardmaybemadeataspecialmeetingatwhichdirectors aretobeelectedonlybyorattheHoldingCompanyBoardofDirectors'irection orbyashareholder whohasgiventimelynoticeofnomination.
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| UndertheShareholder NoticeProcedure, suchnoticemustbereceivedbytheHoldingCompanynotearlierthanthe90thdaybeforesuch68 meetingandnotlaterthanthelaterof(i)the60thdaypriortosuchmeetingor(ii)the10thdayafterpublicannouncement bytheHoldingCompanyofthedateofsuchmeeting.Shareholders willnotbeabletobringotherbusinessbeforespecialmeetingsofshareholders.
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| TheShareholder NoticeProcedure providesthatatanannualmeetingonlysuchbusinessmaybeconducted ashasbeenbroughtbeforethemeetingatthedirection oftheHoldingCompanyBoardofDirectors orbyashareholder whohasgiventimelywrittennotice(assetforthabove)totheSecretary oftheHoldingCompanyofsuchshareholder's intention tobringsuchbusinessbeforesuchmeeting.'UndertheShareholder NoticeProcedure, ashareholder's noticetotheHoldingCompanyproposing tonominateanindividual forelectionasadirectormustcontaincertaininformation, including, withoutlimitation, theidentityandaddressofthenominating shareholder, theclassandnumberofsharesofstockoftheHoldingCompanyownedbysuchshareholder, andallinformation regarding theproposednomineethatwouldberequiredtobeincludedinaproxystatement soliciting proxiesfortheproposednominee.UndertheSliareholder NoticeProcedure, ashareholder's noticerelatingtotheconductofbusinessotherthanthenomination ofdirectors mustcontaincertaininformation aboutsuchbusinessandabouttheproposing shareholder, including withoutlimitation, abriefdescription ofthebusinesstheshareholder proposestobringbeforethemeeting,thereasonsforconducting suchbusinessatsuchmeeting,thenameandaddressofsuchshareholder, theclassandnumberofsharesofstockoftheHoldingCompanybeneficially ownedbysuchshareholder, andanymaterialinterestofsuchshareholder inthebusinesssoproposed.
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| IftheChairmanorotherofficerpresiding atameetingdetermines thatanindividual wasnotnominated, orotherbusinesswasnotbroughtbeforethemeeting,inaccordance withtheShareholder NoticeProcedure, such-individual willnotbeeligibleforelectionasadirector, orsuchbusinesswillnotbeconducted atsuchmeeting,asthecasemaybe.Byrequiring advancenoticeofnominations byshareholders, theShareholder NoticeProcedure willaffordtheHoldingCompanyBoardofDirecto'rs anopportunity toconsiderthequalifications oftheproposednomineesand~totheextentdeemednecessary ordesirable bytheHoldingCompany"Board,toinformshareholders aboutsuchqualifications.
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| Byrequiring advancenoticeofotherproposedbusiness, theShareholder NoticeProcedure willprovideamoreorderlyprocedur'e forconducting annualmeetingsofshareholders and,totheextentdeemednecessary ordesirable bytheHoldingCompanyBoard,willprovidetheHoldingCompanyBoardwithanopportunity toinformshareholders, priortosuchmeetings, ofanybusinessproposedtobeconducted atsuchmeetings, togetherwiththeHoldingCompanyBoard'spositionregarding actiontobetakenwithrespecttosuchbusiness, sothatshareholders canbetterdecidewhethertoattendsuchameetingortograntaproxyregarding thedisposition ofanysuchbusiness.
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| hAlthoughtheHoldingCompanyBy-LawsdonotgivetheHoldingCompanyBoardanypowertoapproveordisapprove shareholder nominationg fortheelectionofdirectors andonlylimitedpowertoapproveordisapprove shareholder proposals foraction,theymayhavetheeffectofprecluding acontestfortheelectionofdirectors ortheconsideration ofshareholder proposals iftheproperprocedures arenot.followed, andofdiscouraging ordeterring athirdpartyfromconducting asolicitation ofproxiestoelectitsown-slate ofdirectors ortoapproveitsownproposal, withoutregardtowhetherconsideration ofsuchnomineesorproposals mightbeharmfulorbeneficial totheHoldingCompanyanditsshareholders.
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| Amendment oftireHoldingCompanyCertificate andtheHoldingCompanyBy-Laws.TheHoldingCompanyCertificate providesthattheaffirmative voteofatleast80percentoftheVotingPower,votingtogetherasasingleclass,wouldberequiredto(i)amendorrepealtheprovisions oftheHoldingCompanyCertificate withrespectto(A)theelectionofdirectors and(B)therighttocallaspecialshareholders'eeting and(C)'therighttoactbywrittenconsent;(ii)adoptanyprovision inconsistent withsuchprovisions; and(iii)amendorrepealtheprovisions oftheHoldingCompanyCertificate withrespecttoamendments totheHoldingCompanyCertificate ortheHoldingCompanyBy-Laws.69 THEAME<NDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGERTltefollowing isasummaryofthematerialtermsoftheBrooklynUnion/LILCO Agreement, whichisattachedasAnnexAandisincorporated hereinbyreference.
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| Suchsununaryisqualified initsentiretybyreference totheBrooklynUnion/LILCO Agreentent.
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| IntheeventthattheKeySpanShareExchangeliasbeetrconsmnmated, thenKeySpanwillbesubstituted forBroollynUnionintlieCombination andtheBrooklynUnion/LILCO Agreement.
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| TheCombination TheBrooklynUnion/LILCO Agreement providesthat,following itsadoptionbytheshareholders ofboth,LILCOandBrooklynUnionandthesatisfaction orwaiveroftheotherconditions totheCombination, including obtaining therequisite regulatory approvals, theoutstanding sharesofLILCOCommonStockwillbeex'changed fornewlyissuedsharesofHoldingCompanyCommonStockintheShareExchangeandtheoutstanding sharesofBrooklynUnionCommonStockwillbeconver'ted intotherighttoreceivenewlyissuedsharesofHoldingCompanyCommonStockintheMerger.EffectsoftheCombination Exceptasprovidedbelow,upontheconsummation oftheShareExchange, andwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheHoldingCompany:i.Eachissuedandoutstanding shareofLILCOCommonStock,otherthansharesheldbydissenting shareholders
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| ("LILCODissenting Shares"),willbeexchanged for0.803sharesofHoldingCompanyCommonStock;providedthatiftheLIPAAgreement hasnotbeenterminated butthetransactions contemplated, therebywillnotbeconsummated contemporaneously withtheCombination, theneachissuedandoutstanding shareofLILCOCommonStock,otherthantheLILCO,Dissenting Shares,willbeexchanged for0.803sharesofHoldingCompanyCommonStockand,ifthetransactions contemplated bytheLIPA.Agreement areconsummated withintwoyearsoftheEffective Jime,thentheHoldingCompanywillissuetopersonswhowereholdersofrecordofLILCOCommonStockattheEffective Timeanadditional 0.077sharesofHoldingCompanyCommonStock(the"Contingent Issuance"
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| )inrespectofeachshareofLILCOCommonStock,otherthanLILCODissenting Shares,thathadbeenheldbythemofrecordattheEffective Time.UpontheShareExchange, theHoldingCompanywillbecometheownerofeachshareofLILCOCommonStocksoexchanged andeachsuchshareofLILCOCommonStockwillbedeemedtohavebeenexchanged forthatfractionofashareofHoldingCompanyCommonStockspecified above.ii.Eachissuedandoutstanding shareofthepreferred stockofLILCOwillbeunchanged asaresultoftheShareExchangeandwillremainoutstanding thereafter.
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| Upontheconsummation oftheMerger,andwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheHoldingCompany,eachissuedandoutstanding sharebfBrooklynUnionCommonStock,otherthansharesheldby'issenting shareholders
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| ("BrooklynUnionDissenting Shares"),willbeconverted intotherighttoreceiveoneshareofHoldingCompanyCommonStockpursuanttotheMerger.UponsuchMerger,BrooklynUnionwillbecomeawhollyownedsubsidiary oftheHoldingCompanyandeachsuchshareofBrooklynUnionCommonStockwillbedeemedtohavebeenexchanged foroneshareofHoldingCompanyCommonStock.~'ftlieCombination andtheJ.IPATransaction areconsummated contemporaneously oriftheLIPATransaction isconsummated beforetheCombination, theninsteadofconsummating theShareExchange, thetransactions contemplated bytheBrooklynUnion/LILCO Agreement andtheLIPAAgreement willbeconsummated asfollows:(i)LILCOwilltransfertheTransferred Assets(asdefinedintheLIPAAgreement) tosuchsubsidiaries oftheHoldingCompanyasBrooklynUnionandLILCOwilldirectinexchangefortheDesignated 70 Number(asdefined)of,sharesofHoldingCompanyCommonStockandupto$75millionfaceamountofHoldingCompanyPreferred Stock.,The"Designated Number"willbethenumberofsharesofHoldingCompanyCommonStockrepresenting thenetfairmarketvalueoftheTransferred Assets,aswillbedetermined ingoodfaithbyBrooklynUnionandLILCO,lessthefaceamountofsuchHoldingCompanyPreferred Stock;(ii)themergerofLIPASubwithandintoLILCOandthetr'ansactions conteniplated bytheLIPAAgreement willbeconsummated, andtheCashPurchasePrice(asdefined)willbepaidtotheExchangeAgentasagentfortheholdersofLILCOCommonStocktosubscribe forandpurchaseanumberofsharesofHoldingCompanyCommonStock,whichnumberofshareswhenaddedtotheDesignated Numbershallrepresent thenumberofsharesofLILCOCommonStockissued'and outstanding immediately priortotheLILCOEffective Time,otherthanLILCODissenting Shares,multiplied bytheLIPARatio(i.e.,0.880);and(iii);promptly thereafter, theMergershallbeconsummated.,
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| Il',BrooklynUnion'Dissenting SharesandLILCODissenting Shareswillnotbeconverted intotherighttoreceiveHolding'Company CommonStockpursuanttotheBrooklynUnion/LILCO Agreement, butwillbeconverted intosuch'consideration asmaybeduewithrespecttosuchsharespursuanttotheapplicable provisions oftheNYBCL.Assoonaspracticable aftertheconsummation oftheCombination, anexchangeagentmutuallyagreeable toLILCOandBrooklynUnion(the"Exchange Agent")willmailtoeachholderofrecordofacertificate (a"Certificate"
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| )whichimmediately priortheretorepresented outstanding sharesofLILCOCommonStockorwhichimmediately priortheretorepresented'outstanding sharesofBrooklynUnionCommonStock(the"Exchanged Shares")thatwerecancelled orexchanged forsharesofHoldingCompanyCommonStock,aletteroftransmittal andinstructions foruseineffecting thesurrender ofsuchCertificate inexchangeforcertificates representing sharesofHoldingCompanyCommonStock."Uponsurrender ofaCertificate totheExchangeAgent,togetherwithadulyexecutedletteroftransmittal andsuchotherdocuments, ifany,astheExchangeAgentshallrequire,theholderofsuchCertificate willbeentitledtoreceiveacertificate representing that,numberofwholesharesofHoldingCompanyCommonStockandanycashinlieuof'afractional shareofHoldingCompanyCommonStockwhichsuchholderhastherighttoreceivepursuanttotheBrooklynUnion/LILCO Agreement.
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| Nofractional sharesofHoldingCompanyCommonStockwillbeissuedinconnection withtheCombination ortheLIPATransaction.
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| Foreachfractional sharethatwouldotherwise beissued,theExchangeAgentwillpayanamountequaltoaprorataportionoftheproceedsofthesalebytheExchangeAgentofsharesofHoldingCompanyCommonStockrepresenting theaggregate ofallsuchfractional shares,suchsaletobeexecutedbytheExchangeAgentaspromptlyaspossibleaftertheEffective Time.Ifatransferofownership ofExchanged Sharesisnotregistered inthetransferrecordsofLILCOorBrooklynUnion,asthecasemaybe,andifthetransferee presentstotheExchangeAgent:(i)theCertificate representing suchExchanged Shares,(ii)alldocuments requiredtoevidenceandeffectsuchtransfer, and(iii)e'vidence satisfactory totheExchangeAgentthatanyapplicable stocktransfertaxeshavebeenpaid,thenacertificate representing thepropernumberofsharesofHoldingCompanyCommonStockmaybeissuedtosuchtransferee.
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| I'ntilsurrendered, eachCertificate willbedeemedatanytimeaftertheEffective Timetorepresent onlytherighttoreceiveuponsuchsurrender thecertificate representing theapplicable numberofsharesofHoldingCompanyCommonStockandcashinlieuofanyfractional shareofHoldingCompanyCommonStock.aNodividends orotherdistributions declaredormadeaftertheEffective Timewithrespecttosharesof.HoldingCompanyCommonStockwitharecord,dateafterthe,Effective Time,willbepaidtotheholderofanyunsurrendered Certificate, andnocashpaymentinlieuoffractional shareswillbepaidtoanysuchholderuntil71 suchCertificate issurrendered.
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| Aftersuchsurrender, subjecttoapplicable law,therewillbepaidtosuchholder,withoutinterest, theunpaiddividends anddistributions, andanycashpaymentinlieuofafractional share,towhichsuchholderisentitled.
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| Ifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheEffective Time,thentheExchangeAgentwillmailtoeachholderofrecordofCertificates whichimmediately prior.totheEffective Timerepresented outstanding sharesofLILCOCommonStockthatwereexchanged forHoldingCompanyCommonStockincompliance withtheissuanceprocedures described abovecertificates forthenumberofwholesharesofHoldingCompanyCommonStockwhichsuchholderhastherighttoreceivepursuanttotheContingent Issuance.
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| Nodividends orotherdistributions declaredormadeaftertheEffective TimewithrespecttosharesofHoldingCompanyCommonStockwitharecorddateaftertheEffective Timeandpriortotheconsummation ofthetransactions contemplated bytheLIPAAgreement willbepaidinrespectofsharestobeissuedpursuanttotheContingent Issuance.
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| Theprocedures described abovewithrespecttofractional shareswillbeemployedwithrespecttosharestobeissuedpursuanttotheContingent Issuance.
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| Fromandaftertheconsummation of'theCombination, thecommonstock,transferbooksofLILCOandBrooklynUnionwillbeclosedandnotransferofanyLILCOCommonStockor,BrooklynUnionCommonStockwillthereafter bemade.If,aftertheconsummation oftheCombination, Certificates arepresented totheHoldingCompany,theywillbecancelled andexchanged forcertificates representing theappropriate numberofsharesofHoldingCompanyCommonStock.HOLDERSOFLILCOCOMMONSTOCKANDBROOKLYNUNIONCOMMONSTOCKSHOULDNOTSENDINTHEIRSTOCKCERTIFICATES UNTILTHEY RECEIVEALETTEROFTRANSMITTAL.
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| Representations andWarranties TheBrooklynUnion/LILCO Agreement containscustomary representations andwarranties byeachofBrooklynUnionandLILCOrelatingto,amongotherthings(a)theirrespective organizations, theorganization oftheirrespective subsidiaries andsimilarcorporate matters;(b)theirrespective capitalstructures; (c)authorization, execution,
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| : delivery, performance andenforceability oftheBrooklynUnion/LILCO Agreement andrelatedmatters;(d)requiredgovernmental andregulatory approvals;,(e) theircompliance withapplicable laws-andagreements; (I)reportsandfinancial statements filedwiththeSEC,FERCandNRCandtheaccuracyofinformation contained therein;(g)theabsenceofanymaterialadverseeffectontheirbusiness, assets,financial condition, resultsofoperations orprospects; (h)theabsenceofadversematerialsuits,claimsorproceedings, andotherlitigation issues;(i)theaccuracyofinformation suppliedbyeachofLILCOandBrooklynUnionforuseinthisJointProxyStatement/Prospectus; (j)taxmatters;(k)retirement andotheremployeebenefitplansandmattersrelatingtotheEmployeeRetiiement IncomeSecurityActof1974,asamended("ERISA");
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| (1)labormatters;(m)compliance withallapplicable environmental laws,possession ofallmaterialenvironmental, health,andsafetypermitsandotherenvironmental issues;(n)theregulation ofBrooklynUnionandLILCOandtheirsubsidiaries aspublicutilities; (o)theshareholder voterequiredfortheadoptionoftheBrooklynUnion/LILCO Agreement (assetforthinthisJointProxyStatement/Prospectus) beingtheonlyvoterequiredtoadopttheBrooklynUnion/LILCO Agreement andthetransactions contemplated thereby;(p)that,exceptascoritemplated intheBrooklynUnion/LILCO Agreement ortheLIPAAgreement, neitherBrooklynUnionnorLILCOoranyoftheirrespective affiliates havetakenoragreedtotakeanyactionthatwouldpreventtheHoldingCompanyfromaccounting forthetransactions tobeeffectedpursuanttotheBrooklynUnion/LILCO Agreement asapoolingofinterests; (q}theinapplicability ofcertainprovisions ofNewYorklawrelatingtobusinesscombinations; (r)thedeliveryoffairnessopinionsbyMerrillLynch,inthecaseofBrooklynUnion,andDillonRead,inthecaseofLILCO;(s)themaintenance ofvalidandenforceable insurance policieswithfinancially responsible insurers; (t)theabsenceofownership ofeachother'sstock;and(u)theabsenceofanymaterialimpairment totheHoldingCompany's abilitytorealizethebusinesssynergies described inthejointpressreleaseissuedinconnection withtheannouncement oftheBrooklynUnion/LILCO Agreement.
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| 72 CertainCovenants PursuanttotheBiooklynUnion/LILCO Agreement, eachofLILCOandBrooklynUnionhasagreedthat,duringtheperiodfromthedateoftheOriginalAgreement untiltheconsummation oftheCombination, exceptaspermitted bytheBrooklynUnion/LILCO Agreement, theStockOptionAgreements, theKeySpanExchangeAgreement, theLIPAAgreement andtheHedgeArrangements (asdefinedbelow),orasotherwise consented toinwritingbytheotherpartiesandsubjecttocertainexceptions specified intheBrooklynUnion/LILCO Agreement, eachwill(andeachofitssubsidiaries will),amongotherthings:(a)carryonitsbusinessintheordinarycourseconsistent withpriorpractice; (b)notdeclareorpayanydividends onormakeotherdistributions inrespectofanyofitscapitalstockotherthan(i)tosuchpartyoritswholly-owned subsidiaries, (ii)dividends requiredtobepaidonanypreferred stock,and(iii)regularquarterly dividends tobepaidonLILCOCommonStockandBrooklynUnionCommonStocknottoexceed103%ofthedividends forthepriorfiscalyear;(c)noteffectcertainotherchangesinitscapitalization otherthanredeeming outstanding LILCOpreferred stockasrequiredbytheirtermsandBrooklynUnionpreferred stock,inaccordance withtheirterms;(d)notissueorencumberanycapitalstock,rights,warrants, optionsorconvertible orsimilarsecurities; (e)inthecaseofLILCOorBrooklynUnion,notamenditscertificate ofincorporation, by-lawsorotherorganizational, documents; (f)notacquireasubstantial interestinanyotherentity;(g)notmakeanycapitalexpenditures inexcessof110%oftheamountbudgetedorscheduled bysuchpartyforcapitalexpenditures; (h)notsell,lease,encumberorotherwise disposeofmaterialassets,otherthanintheordinarycourseofbusiness; (i)notincurindebtedness (orguarantees thereof),
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| otherthaninconnection withtherefunding ofexistingindebtedness; (j)notenterinto,adoptoramendorincreasetheamountoraccelerate thepaymentorvestingofanybenefitoramountpayableunder,anyemployeebenefitplanorotheragreement, commitment, arrangement, planorpolicy,exceptfor"normalincreases intheordinarycourseofbusinessconsistent withpastpracticethat,intheaggregate, donotresultinamaterialincreaseinbenefits; (k)notenterintooramendanyspecialarrangement withrespecttothetermination ofemployment orothersimilarcontract, agreement orarrangement withanydirector, officeroremployeeotherthanintheordinarycourseofbusinessconsistent withpastpractice; (1)notcommenceconstruction oforobligateitselftopurchaseanyadditional electricgenerating, transmission ordeliverycapacity, exceptasbudgeted; (m)nottakeanyactionwhichwouldpreventtheHoldingCompanyfromaccounting forthetransactions tobeeffectedpursuanttotheBrooklynUnion/LILCO Agreement asapoolingofinterests; (n)nottakeanyactionwllichwouldadversely affectthestatusoftheMergerasatax-freetransaction toBrooklynUnioncommonshareholders and,unlesstheLIPAAgreement hasbeenterminated, theShareExchangeasataxabletransaction totheLILCOcommonshareholders, ortocausetheformation oftheHoldingCompanytobeatransaction towhichSection351oftheCodedoesnotapply;(o)notifytheotherpartiesofanychangesinitsratesorcharges(otherthanpass-thtough fuelandgasratesorcharges)orstandards ofserviceoraccounting; andnotmakeanyfilingtochangeitsratesonfilewiththePSCthatwouldhaveamaterialadverseeffectonthebenefitsassociated withthetransactions contemplated bytheBrooklynUnion/LILCO Agreement; and(p)nottakeanyactionthatislikelytojeopardize thequalification ofLILCO'sorBrooklynUnion'soutstanding revenuebondsastax-exempt industrial development bonds.73 Indemnification TheBrooklynUnion/LILCO Agreement
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| 'provides that,totheextent,ifany,notprovidedbyanexistingrightofindemnification orotheragreement orpolicy,from.andaftertheconsummation oftheCombination, theHoldingCompanyshall,tothefullestextentpermitted byapplicable law,indemnify, defendandholdharmlesseachpersonwhowasat,orwhohadbeenatanytimepriortoDecember29,1996,orwhobecomespriortotheEffective Time,anofficer,directororemployeeofanyofthepartiestheretooranyoftheirrespective subsidiaries againstalllosses,expenses(including reasonable attorney's feesandexpenses),
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| claims,damagesorliabilities or,subjecttotheHoldingCompanyproviding itswrittenconsentforanysettlement whichshallnotbeunreasonably
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| : withheld, amountspaidinsettlement, arisingoutofactionsoromissions occurring atorpriortotheconsummation oftheCombination (andwhetherassertedorclaimedpriortoatoraftertheconsummation oftheCombination) thatare,inwhole.orinpart,basedonorarisingoutofthefactthatsuchpeisonisorwasadirector, officeroremployeeofsuchparty,andallsuchindemnified liabilities totheextenttheyarebasedonorariseoutoforpertaintothetransactions contemplated bytheBrooklynUnion/LILCO Agreement.
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| Inaddition, theBrooklynUnion/LILCO Agreement requiresthatforaperiodofsixyearsaftertheconsummation oftheCombination, theHoldingCompany(anditssuccessors andassigns)shallmaintainineffectpoliciesofdirectors'nd officers'iability insurance asmaintained byBrooklynUnionandLILCOforthebenefitofthosepersons(andtheirheirsorrepresentatives) whoarecoveredbysuchpoliciesatDecember29,1996,oratanytimesubsequent theretoandpriortotheEffective Time,ontermsnolessfavorable thanthetermsofthethenexistinginsurance coverage.
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| Also,theBrooklynUnion/LILCO Agreement providesthattothefullestextentpermitted bylaw,fromandaftertheconsummation oftheCombination, allrightstoindemnification existinginfavoroftheemployees, agents,directors andofficersofBrooklynUnion,LILCOandtheirrespective subsidiaries withrespecttotheiractivities assuchpriortotheconsummation oftheCombination, asprovidedintheirrespective certificates ofincorporation andby-lawsineffectonDecember29,1996,orotherwise ineffectonDecember29,1996,willsurvivetheCombination andwillcontinueinfullforceandeffectforaperiodofnotlessthansixyearsfro'mtheconsummation oftheCombination.
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| Employment andWorkforce MattersEmployeeAgreements.
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| TheBrooklynUnion/LILCO Agreement providesthattheHoldingCompanyanditssubsidiaries musthonorallcontracts, agreements, collective bargaining agreements andcommitments ofthepartiesmadebeforeDecember29,1996whichapplytoanycurrentorformerdirectororemployeeofthepartiesthereto.HoldingCompanyBoardofDirectors.
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| Thenumberofdirectors comprising thefullBoardofDirectors oftheHoldingCompanyupontheconsummation oftheCombination willbe15persons,sixofwhomwillbedesignated byBrooklynUnionpriortotheconsummation oftheCombination, sixofwhomwillbedesignated byLILCOpriortotheconsummation oftheCombination andthreeofwhomwillbedesignated byacommittee consisting oftwocurrentBrooklynUniondirectors andtwocurrentLILCOdirectors.'enior Execntives.
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| Dr.Catacosinos willbetheChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompanycommencing attheXffective Time.Atthefirstanniversary oftheconsummation oftheCombination, Dr.Catacosinos willceasetobe,theChiefExecutive Officer,butwillcontinuetobeChairmanoftheBoardandChairmanoftheExecutive Committee andwillbecomeaconsultant totheHoldingCompany.Mr.CatellwillbethePresident andChiefOperating OfficeroftheHoldingCompanycommenc'ing upontheconsummation oftheCombination andwillsucceedDr.Catacosinos asChiefExecutive OfficeroftheHoldingCompanycommencing onsuchfirstanniversary.
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| Thearrangements tocausesuchelections totakeplace~atsuchfirstanniversary maybealteredonlybyavote,following theconsummation oftheCombination, oftwo-~thirdsoftheentire.BoardofDirectors oftheHoldingCompany.74 IntheeventthattheMergerisnotconsummated, theprovision described inthepreceding paragraph willnottakeeffectandDr.Catacosinos willcontinuetoserveasChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompany.TheHoldingCompanywillenterinto'employment agreements witheachofDr,Catacosinos andMr.Catelleffective upontheconsummation oftheCombination providing foreachofthemtoassumethespecified positions.
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| Dr.Catacosinos willserveasaconsultant totheHoldingCompanyforafive-year periodcommencing afterheceasesbeingChiefExecutive Officer,andMr.CatellwillserveasChiefExecutive Officerforafour-year periodcommencing onthefirstanniversary oftheconsummation oftheCombination.
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| Eachofthemistoreceivecompensation (including certainincentive compensation relatedtoachieving thesynergies contemplated.to berealizedfromtheCombination) ontermsmutuallyagreedtoandinanyeventinanamountnotlessthanwhateachreceivedasofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| StockandBenefitPlansEachofthebenefitplans'fBrooklynUnionandLILCOineffectasofDecember29,1996willbecontinued fortheemployees orformeremployees ofBrooklynUnionandLILCOandanyoftheirsubsidiaries whoarecoveredbysuchplansim'mediately priortothedateoftheclosingoftheCombination (ihe"ClosingDate"),untiltheHoldingCompanyotherwise determines after'the consummation oftheCombination (subjecttoanyreservedrightcontained inany'suchbenefitplan)toamend,modify,suspend,revokeorterminate suchplan.Totheextentthatnoduplication ofbenefitorfundingresults,eachparticipant inanysuchbenefitplanwillreceivecreditforpurposesofeligibility toparticipate, vesting,benefitaccrualandeligibility toreceivebenefitsunderanybenefitplanoftheHoldingCompanyoranyofitssubsidiaries oraffiliates forservicecreditedforthetcorresponding" purposeundersuchbenefitplans.Upontheconsummation oftheMerger,LILCOandBrooklynUnionwilltakeallactionrequiredtoterminate theirrespective employeestockoption,stockpurchaseandothersimilarstockplansand:(i)eachshareofBrooklynUnionCommonStockorLILCOCommonStockheldunderBrooklynUnion'sorLILCO',sDividendReinvestment andStockPurchasePlansorBrooklynUnion'sEmployeeSavingsPlan,DiscountStockPurchasePlanforEmployees andLong-Term Performance Incentive Compensation Plan(collectively, the"Brooklyn UnionPlans")orLILCO'sEmployeeStockPurchasePlan,RetainerPlan,Incentive PlanandStockPlan(collectively, the",LILCOPlans")immediately priortotheconsummation ofthe-Merger ortheShareExchange, asthecasemaybe,willbeautomatically exchanged fortheapplicable numberofsharesofHoldingCompanyCommonStock,whichshareswillbeheldunderandpursuanttoBrooklynUnion'sorLILCO'sDividendReinvestment andStockPurchasePlansorbeissued,undersuchBrooklynUnionPlanorLILCOPlan,asthecasemaybe;and(ii)upontheconsummation oftheMerger,eachunexpired andunexercised optionto,purchase sharesofBrooklynUnionCommonStockunde'rtheLong-Term Performance Incentive Compensation Plan,whethervestedorunvested, willbeautomatically converted intoanoptiontopurchase.
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| anumberofsharesofHoldingCompanyCommonStockequaltothenumberofsharesofBrooklynUnionCommonStockwhichcouldhavebeenpurchased immediately priortotheconsummation oftheMerger(assuming fullvesting)undersuchoption,atapricepershareofHoldingCompanyCommonStockequaltothepershareoptionexercisepricespecified insuchoption.HNoSolicitation ofTransactions TheBrooklynUnion/LILCO Agreement.
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| providesthatnopartytheretowill,andeachsuchpartywillcausetitssubsidiaries notto,andeachsuchpartywillnotpermitanyofitsofficers, directors, employees, accountants, counsel,investment bankers,financial advisorsandotherrepresentatives (collectively, "Representatives"
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| )to,andeachsuchpartywilluseitsbesteffortstocausesuchpersonsnotto,directlyorindirectly
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| : initiate, solicitor75 encourage, ortakeanyactiontofacilitate themakingofanyofferorproposalwhichconstitutes orisreaso'nably likelytoleadto,anyBusinessCombination Proposal(asdefinedbelow),or,intheeventofanunsolicited BusinessCombination
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| : Proposal, excepttotheextentrequiredbytheirfiduciary dutiesunderapplicable lawifsoadvisedinawrittenopinionofoutsidecounsel,engageinnegotiations orprovideanyinformation ordatatoany-personrelatingtoanyBusinessCombination Proposal.
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| Asusedabove,"Business Combination Proposal" me~nsanytenderorexchangeoffer,proposalforamerger,consolidation orotherbusinesscombination involving anypartytotheBrooklynUnion/LILCO Agreement oranyofitsmaterialsubsidiaries, oranyproposal'or offer(ineachcase,whetherornotinwritingandwhetherornotdelivered totheshareholders ofapartygenerally) toacquireinanymanner,directlyorindirectly, asubstantial equityinterestinorasubstantial portionoftheassetsofanypartytotheBrooklynUnion/LILCO Agreement oranyofitsmaterialsubsidiaries, otherthanpursuanttothetransactions contemplated bytheBrooklynUnion/LILCO Agreement andbytheLIPAAgreement.
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| TheBrooklynUnion/LILCO Agreement providesthatuntilthetermination orconsummation ofthetransactions contemplated bytheBrooklynUnion/LILCO Agreement, nopartymayengageinanynegotiations ormaterialdiscussions withLIPAor'tsrepresentatives oragentswithoutpriornotification toorthepresenceoftheotherparties,and,willnotprovideanyinformation ordatatoLIPAwithoutproviding acopythereoftotheotherparties.Nothingcontained intheBrooklynUnion/LILCO Agreement willprohibitapartyfromtakinganddisclosing toitsshareholders apositioncontemplated byRule14e-2(a)undertheSecurities ExchangeActof1934,asamended,withrespecttoaBusinessCombination Proposalbymeansofatenderoffer.IAdditional Agreements OtherTransaclions.
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| Asdiscussed above,theBrooklynUnion/LILCO Agreement contemplates theexecution anddeliveryof,andperformance ofthetransactions contemplated by,theKeySpanExchangeAgreement.
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| TheBrooklynUnion/LILCO Agreement recognizes that,inconnection withtheLIPAAgreement, LILCOandBrooklynUnioncontemplate theformation ofapartnership forthepurposeofpurchasing interestratehedgecontracts, tobefundedthroughcapitalcontributions ofupto$30millionbyeachofthem(theformation ofsuchpartnership andthepurchaseofsuchcontracts beingreferredtohereinasthe"HedgeArrangements"
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| ).TheBrooklynUnion/LILCO Agreement providesthatLILCOwillnotmodify,amendorterininate theLIPAAgreement, andwillnotprovideanyconsent,waiverorreleasethereunder withoutthepriorwrittenconsentofBrooklynUnion.Rale145Affiliates.
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| BrooklynUnionandLILCOhaveidentified inletterstooneanotherallpersonswhoare,andtosuchperson'sbestknowledge whowillbeattheClosingDate,affiliates ofBrooklynUnionandLILCO,respectively, assuchtermisusedinRule145undertheSecurities Act(orotherwise underapplicable SECaccounting releaseswithrespecttopoolingofinterests accounting treatment).
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| EachofBrooklynUnionandLILCOhasagreedtouseallreasonable effortstocausetheirrespective affiliates (including anypersonwhomaybedeemedtohavebecomeanaffiliate afterthedateoftheletterreferredtointhepreceding paragraph) todelivertotheHolding.CompanyonorpriortotheClosingDateawrittenagreement customary fortransactions ofthisnatureandinformandsubstance reasonably satisfactory toBrooklynUnionandLILCO.Ifanypersonrefusestoprovidesuch'awrittenagreement, then,inlieuofreceiptofsuchwrittenagreement, theHoldingCompanyisentitledtoplaceappropriate legendsontheHoldingCompanyCommonStockcertificates tobereceivedbysuchpersonpursuanttothetermsoftheBrooklynUnion/LILCO Agreement, andtoissueappropriate stocktransferiristructions tothetransferagentfortheHoldingCompanyCommonStock,to76 ttheeffectthatthesharesofHoldingCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttothetermsoftheBrooklynUnion/LILCO Agreement mayonlybesold,transferred orotherwise
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| : conveyed, andtheholderthereofmayonlyreducehisinterestinorrisksrelatingtosuchsharesofHoldingCompanyCommonStock,pursuanttoaneffective registration statement undertheSecurities Act,incompliance ivithRule145thereof,asamendedfromtimetotime,orinatransaction which,intheopinionoflegalcounselsatisfactory totheHoldingCompany,isexemptfromtheregistration requirements oftheSecurities Act.Theforegoing restrictions onthetransferability ofHoldingCompanyCommonStockapplytoallpurported sales,transfers andotherconveyances ofthesharesofHoldingCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttotheBrooklynUnion/LILCO Agreement andtoallpurported reductions intheinterestinorrisksrelatingtosuchsharesofHoldingCompanyCommonStock,whetherornotsuchpersonhasexchanged thecertificates previously evidencing suchpersons'.,-
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| sharesofBrooklynUnionCommonStockorLILCOCommonStock,asthecasemaybe,forcertificates evidencing sharesofHoldingCompanyCommonStockintowhichsuchshareswereconverted.
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| Conditions toEachParty'sObligation toEffecttheCombination Therespective obligations ofLILCOandBrooklynUniontoeffecttheCombination aresubjecttothefollowing conditions:
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| (a)theadoptionbytheshareholders ofBrooklynUnionandLILCOoftheBrooklynUnion/LILCO Agreement andthetransactions contemplated thereby;(b)notemporary restraining orderorpreliminary orpermanent injunction orotherorderwillbeineffectthatpreventsconsummation oftheCombination, and'theCombination andothertransactions contemplated bytheBrooklynUnion/LILCO Agreement willnotbeprohibited underanyapplicable law;(c)theJointProxyStatement/Prospectus willhavebecomeeffective andwillnotbethesubjectofastoporder;(d)thesharesofHoldingCompanyCommonStocktobeissuedinconnection withtheCombination willhavebeenapprovedforlistingontheNewYorkStockExchangeuponofficialnotice'of issuance; (e)thereceiptofallmaterialgovernmental andregulatory authorizations,
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| : conscnts, ordersorapprovals shallhavebeenobtained, shallhavebecomeFinalOrders(asdefined.intheBrooklynUnion/LILCO Agreement) andshallnotimposetermsorconditions whichcouldreasonably beexpectedtohaveamaterialadverseeffect;(f)unlesstheLIPA'ransaction hasbeenconsummated, orwillbeconsummated contemporaneously withtheCombination, thereceiptbyeachofLILCOandBrooklynUnionoflettersfromtheirindependent publicaccountants statingtliattheyconcurwithmanagement's conclusion thatnoconditions existthatwouldprecludethetransactions contemplated bytheBrooklynUnion/LILCO Agreemcnt fromqualifying aspoolingofinterests transactions undergenerally acceptedaccounting principles;
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| 'g)iftheLIPA'Agreement hasnotbeenterminated, theissuancebytheHoldingCompanyofanappropriate amount,notine'xcessof$100million,ofpreferred stocktosuchpersons(whichpersonsmayinclude,amongothers,definedbenefitplans,employees, officersanddirectors ofBrooklynUnionorLILCO,andinvestment bankers)anduponsuchtermssoastocausethefortnation oftheHoldingCompany"tobeatransaction towhichSection351oftheCodedoesnotapply;.(h)thereceiptofanopinion,datedasoftheClosingDate,totheeffectthattheShareExchangewillsatisfytherequirements ofSection351oftheCode,iftheLIPATransaction hasbeenterminated; (i)withrespecttoeachofBrooklynUnionandLILCO,theperformance inallmaterialrespectsofallobligations oftheotherpartyrequiredtobeperformed undertheBrooklynUnion/LILCO Agrccment andtheStockOptionAgreements; (j)withrespecttoeachofBrooklynUnionandLILCO,theaccuracyof-therepresentations andwarranties oftheotherpartysetforthintheBrooklynUnion/LILCO Agrcemcnt andtheStockOption77 Agreements onandasofDecember29,1996andasoftheClosingDate(exceptaswouldnotreasonably belikelytoresultinamaterialadverseeffect);(k)LILCOandBrooklynUnionreceiveofficers'ertificates fromeachotherstatingthatcertainconditions setforthintheBrooklynUnion/LILCO Agreement havebeensatisfied; (1)withrespecttoeachofBrooklynUnionandLILCO,theabsenceofanymaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects oftheotherpartyanditssubsidiaries takenasawhole;-(m)withrespecttoBrooklynUnion,thereceiptofanopinion,datedasoftheClosingDate,totheeffectthattheMergerwillqualifyasareorganization pursuanttoSection368oftheCode;and(n)withrespecttoeachofBrooklynUnionandLILCO,thereceiptby,theother,partyofcertainmaterialthird-party consents.
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| Inaddition, theBrooklynUnion/LILCO Agreement providesthatitisacondition totheobligation ofBrooklynUniontoholdtheBrooklynUnionMeetingthattheopinionofMerrillLynchattachedheretoasAnnexEhasnotbeenwithdrawn, anditisacondition totheobligation ofLILCOtoholdtheLILCOMe'etingthattheopinionofDillonReadattachedheretoasAnnexFhasnotbeenwithdrawn.
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| AtanytimepriortotheEffective Time,totheextentpermitted byapplicable law,theconditions toBrooklynUnion'sorLILCO'sobligations toconsummate theCombination.may bewaivedbytheparties.Anydetermination towaiveacondition woulddependuponthefactsandcircumstances existingatthetimeofsuchwaiverandwouldbemadebythewaivingparty'sBoardofDirectors, exercising itsfiduciary dutiestosuchpartyanditsshareholders.
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| tTermination TheBrooklynUnion/LILCO Agreement maybeterminated atanytimepriortotheClosingDate,whetherbeforeorafterapprovalbytheshareholders ofLILCOandBrooklynUnion:(a)bymutualwrittenconsentoftheBoardsofDirectors ofBrooklynUnionandLILCO;(b)byeitherpartytotheBrooklynUnion/LILCO Agreement, bywrittennoticetotheotherparty,iftheEffective TimehasnotoccurredonorbeforeAugust31,1998(orApril28,1999ifallbutcertainspecified conditions havebeenorarecapableofbeingfulfilled onAugust31,1998),butonlyifthefailureoftheEffective Timetooccurwasnotcausedbythatparty'sfailuretofulfillanyof.itsobligations undertheBrooklynUnion/LILCO Agreement, andprovidedthatLILCOwillnothavetherighttoterminate theBrooklynUnion/LILCO Agreement pursuanttothisprovision iftheLIPAAgreement hasnotbeenterminated; (c)byeitherpartytotheBrooklynUnion/LILCO Agreement, bywrittennoticetotheotherparty,ifanyrequiredshareholder approvalhasnotbeenobtainedatadulyheldmeetingofshareholders oratanyadjournment thereof;(d)byeitherpartytotheBrooklynUnion/LILCO Agreement, ifanystateorfederallaw,order,ruleorregulation isadoptedorissuedwhichhastheeffectofprohibiting theCombination, orifanycourtofcompetent jurisdiction intheU.S.oranystatehasissuedanorder,judgmentordecreepermanently restraining, enjoining orotherwise prohibiting theCombination, andsuchorder,judgmentordecreehasbecomefinalandnonappealable; (e)byeitherLILCOorBrooklynUnion,upontwo-days'rior noticetotheotherparty,if:(i)suchpartyreceivesatenderofferoranywritten'offer orproposalwithrespecttoamergerofsuchparty,saleofamaterialportionofsuchparty'sassetsorotherbusinesscombination involving suchparty(each,a"Business Combination"
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| )byapersonotherthanLILCO,inthecaseofBrooklynUnion,orBrooklynUnionorLIPA,inthecaseofLILCO,oranyoftheirrespective affiliates, 78 (ii)suchparty'sBoardofDirectors determines ingoodfaiththatitsfiduciary obligations underapplicable lawrequirethatsuchtenderofferorotherwrittenofferorproposalbeaccepted, (iii)theBoardofDirectors ofsuchpartyhasbeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureoftheBrooklynUnion/LILCO Agreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbytheotherparty,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal, and4(iv)priortoanysuchtermination, suchpartyshall,andshallcauseitsrespective financial andle'galadvisorsto,negotiate withtheotherpartytomakesuchadjustments intheterms.and conditions oftheBrooklynUnion/LILCO Agreement aswouldenablesuch'party toproceedwiththetransactions contemplated therebyonsuchadjustedterms;(f)byeitherLILCOorBrooklynUnion,bywrittennoticetotheotherparty,if:(i)theotherpartyisinbreachoftherepresentations andwarranties itmadeintheBrooklynUnion/LILCO Agreement andsuchbreaches, individually orintheaggregate, wouldorwouldbereasonably likelytoresultinamaterialadverseeffectonthebusiness, assets,financial condition,
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| 'resultsofoperations orprospects ofthenon-breaching partyanditssubsidiaries takenasawhole,andsuchbreacheshavenotbeenremediedwithin20daysafterreceiptbythebreaching partyofnoticeinwritingfromthenon-breaching party,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)theotherparty(and/oritsappropriate subsidiaries) hasnotperformed andcompliedinallrespectswithcertainagreements andcovenants relatingtotheabsenceofchangesincapitalization orissuanceofsecurities orhasfailedtoperformandcomply,inallmaterialrespects, withitsotheragreements andcovenants undertheBrooklynUnion/LILCO Agreement orundertheLILCOStockOptionAgreeinent ortheBrooklynUnionStockOptionAgreement, asthecasemaybe,andsuchfailuretoperformorcomplyhasnotbeenremediedwithin20daysafterreceiptbythebreaching partyofnoticeinwritingfromthenon-breaching party,specifying thenatureofsuch'failure andrequesting thatitberemedied, orf(iii)theBoardofDirectors oftheotherpartyoranycommittee thereof(A)withdraws ormodifiesinanymanneradversetothepartygivingnoticeitsapprovalorrecommendation oftheBrooklynUnion/LILCO Agreement ortheCombination, (B)failstoreaffirmsuchapprovalorrecommendation upontherequestofthepartygivingnotice,(C)approvesorrecommends anyacquisition ofitselforamaterialportionofitsassetsoranytenderoffer.forshares,ofitscapitalstock,ineachcasebyapartyotherthanthepartygivingnoticeoranyofitsaffiliates (otherthan,inthecaseoftheLILCOBoard,-withrespect.to theLIPAAgreement, assuchagreement maybeamendedfromtimetotimewiththeconsentofBrooklynUnion,andwithrespecttothe,transactions contemplated thereby)or(D)resolvestotakeanyoftheactionsspecified inclause(A),(B)or(C);or,(g)byeitherLILCOorBrooklynUnion,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'sobligation toeffecttheCombination cannotbesatisfied.
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| IftheBrooklynUnion/LILCO Agreement isterminated byeitherLILCOorBrooklynUnionasprovidedabove,thenneitherLILCO,BrooklynUnionnortheirrespective officersordirectors willbeliableorhaveanyobligations thereunder otherthan:'(i)toholdinstrictconfidence alldocuments furnished'to theotherinaccordance withtheConfidentiality Agreement betweenLILCOandBrooklynUnion,datedOctober24,1995,asitmaybeamendedfromtimetotime;(ii)topaycertainfeesandexpensespursuanttocertainspecified provisions oftheBrooklynUnion/LILCO Agreement described belowunder"-Termination Fees"and(iii)tocomplywithcertainotherspecified provisions oftheBrooklynUnion/LILCO Agreement.
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| t'IIftheBrooklynUnion/LILCO Agreement isterminated pursuanttoitsterms,LILCOandtheHoldingCompanymayconsummate theShareExchangeforthepurpose,ofconsummating theLIPATransaction onthebasisofoneshareofHoldingCompanyCommonStockforeachshareofLILCOCommonStock.79 Termination FeesTheBrooklynUnion/LILCO Agreement providesthatifsuchagreement isterminable byeither(butnotboth)ofBrooklynUnionandLILCOforbreachesofanyrepresentations orwarranties contained therein,orofagreements andcovenants contained thereinorintheLILCOStockOptionAgreement ortheBrooklynUnionStockOptionAgreement described below,asthecasemaybe,andthenon-breaching partyterminates pursuanttotheprovisions oftheBrooklynUnion/LILCO Agreement described inclauses(f)(i)and(f)(ii)under"-Termination" above,then,ifsuchbreachisnotwillful,thenon-breaching partyisentitledtoreimbursement ofitsdocumented out-of-pocket
| |
| : expenses, nottoexceed$10million.Intheeventofatermination pursuanttosuchprovisions asaresultofawillfulbreach,thenon-breaching partywillbeentitledtoitsout-of-pocket expenses(whichshallnotbelimitedto$10million)andanyremediesitmayhaveatJaworinequity,providedthat,if:(i)atthetimeofthebreaching party'swillfulbreach,therehasbeenathird-party tenderofferorproposalwithrespecttoaBusinessCombination involving thebreaching partyoroneofitsaffiliates whichatthetimeoftermination hasnotbeenrejectedbythebreaching party'and withdrawn bythethirdparty,and(ii)withintwoandone-halfyearsofanytermination bythenon-breaching party,thebreaching partyoranaffiliate thereofbecomesasubsidiary ofsuchthirdpartyoroneofitsaffiliates oracceptsanoffertoconsummate orconsummates aBusinessCombination withsuchthirdparty,thensuchbreaching party,uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issignedthenattheclosingofsuchBusinessCombination, willpaytothenon-breaching partyanadditional feeequalto$65million(ifthe,breaching partyisLILCO)or$35million(ifthebreaching partyisBrooklynUnion).TheBrooklynUnion/LILCO Agreement requirespaymentofanadditional termination feeincertaincircumstances, if:(i)theBrooklynUnion/LILCO Agreement isterminated:
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| (A)asaresultofthedetermination ingoodfaithbyeithertheLILCOBoardortheBrooklynUnionBoardthatitsfiduciary obligations requiretheacceptance byeitherLILCOorBrooklynUnion,asthecasemaybe,ofathird-party tenderofferorproposalwithrespecttoaBusinessCombination pursuanttotheprovisions oftheBrooklynUnion/LILCO Agreement described inclause(e)under"-Termination" above,(B)following awithdrawal ormodification inamanneradversetotheotherpartybytheBoardofDirectors ofsuchpartyofitsrecommendation oftheCombination, afailureoftheBoardofDirectors ofsuchpartytoreaffirmitsapprovalorrecommendation oftheBindingShareExchanges uponrequestoronapprovalorrecommendation bytheBoardofDirectors ofsuchpartyofanyacquisition byathirdpartyofsuchpartyoramaterialportionofsuchparty'sassets,or(C)asaresultofsuchparty'smaterialfailuretoconveneashareholder meeting,distribute proxymaterials and,subjecttoitsBoardofDirectors'iduciary duties,recommend theBrooklynUnion/LILCO Agreement andtheCombination toitsshareholders; (ii)atthetimeofsuchtermination orpriortothemeetingofsuchparty'sshareholders, thereshallhavebeenathird-party tender,offerorproposalwithrespecttoaBusinessCombination involving suchpartyoranyofitsaffiliates whichhasnotbeenrejectedbysuchpartyandwithdrawn bythethirdparty;and(iii)withintwoandone-halfyearsofanysuchtermination described inclause(i)above,thepartywhichwasthesubjectofsuchofferorproposal(the"SubjectParty")becomesasubsidiary oraffiliate ofsuchofferororacceptsanoffertoconsummate orconsummates aBusinessCombination withsuchofferor(orasubsidiary oraffiliate ofsuchofferor).
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| Uponthesigningofadefinitive agreement betweentheSubjectPartyandthethirdpartyor,ifnosuchagreement issigned,thenattheclosingoftheSubjectPartybecomingsuchasubsidiary orsuchthird-party Business80 tCombination, theSubjectPartymustpaytotheotherparty$75million(iftheSubjectPartyisLILCO)or$45~million(iftheSubjectPartyisBrooklynUnion),plus,ineithercase,theout-of-pocket feesandexpensesincurredbytheotherpartyarisingoutof,inconnection withorrelatedtothetransactions contemplated bytheBrooklynUnion/LILCO Agreement.
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| TheBrooklyn, Union/LILCO Agreement providesalimitation onthetotalaggregate amountpayableastermination feesbyeitherpartypursuanttotheBrooklyn.,Union/LILCO Agreement andtheStockOptionAgreements.
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| Thetotalamountofall,termination feespayablewillnot.exceed
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| $90millionforLILCO(anditsaffiliates)
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| "and$50millionforBrooklynUnion(anditsaffiliates).
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| Intheeventthatthe,BrooklynUnion/LILCO Agreement becomesterminable uttdercircumstances inwhicha$75millionor$45milliontermination feecouldbepayablebyonepartypursuanttotheimmediately preceding paragraph, sucheventwillalsoconstitute a"TriggerEvent"undertheStockOptionAgreement pursuanttowhichsuchpayingpartyisobligated toissueanoptiontotheotherpartysoastoentitletheotherpartytorequiresuchpayingpartytorepurchase suchoptionortheOptionShares(asdefinedbelow)issueduponexercisethereof;See"TheStockOptionAgreements."
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| DForpurposesoftheprovisions oftheBrooklynUnion/LILCO Agreement relatingtothetermination fee,theLIPAAgreement isdeemedtobeaproposalforaBusinessCombination involving LILCO,andLIPAisdeemedtobetheofferorwithrespectthereto,andanyfeeforthebenefitofBrooklynUnionwouldbepayableundersuchprovisions atthetimetheBrooklynUnion/LILCO Agreement isterminated; providedthatiftheBrooklynUnion/LILCO Agreement isterminated following afailurebytheshareholders ofLILCOtoadopt'heBrooklynUnion/LILCO Agreement, thentheLIPAAgreement willnotbedeemedaproposalforaBusinessCombination involving LILCOandnotermination feewillbepayabletoBrooklynUnionbyvirtueoftheLIPAAgreement.
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| 81 THESTOCKOPTIONAGREEMENTS Thefollowing isabriefsummaryofthematerialtermsoftheAmendedandRestatedLILCOStockOptionAgreement andtheAmendedandRestatedBrooklynUnionStockOptionAgreement, copiesofwhichareattachedasAnnexBandAnnexC,respectively, andwhichareincorporated hereinbyreference.
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| Suchsummaryisqualtjied initsentir'ety byreference tosuchAmendedStockOptionAgreements.
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| TlieAmendedStockOptionAgreements areintendedtoincreasethelikelihood thattheCotnbination willbeconstunmated inaccordance tviththetermsoftheBrool'lyn Vnion/LILCO Agreement.
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| Conseqttently, certainaspectsoftheAmendedStockOptionAgreements mayhavetheeffectofdiscouraging personswhomightnoivorpriortotheEffective Tiniebeinterested inacquiring alloforasignificant interestin,orothenvise egectingaBusinessCombination with,BrooklynUnionor'LILCOfromconsidering orproposing suchatransaction, evenifsuchpersonswerepreparedtooffertopayconsideration toshareholders ofBrooklynUnionorLILCO,asthecaseinaybe,whichIiadahigliervalue'than thesharesofHoldingCompanyConimonStocktobereceived, pershareofBrooklynUtu'onCommonStock"orLILCOComtnonStock,asthecasemaybe,pursuantto'theBrooklynUnioiuLILCO Agreement.
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| GeneralPursuanttomutualAinendedStockOptionAgreements enteredintoconcurrently withtheBrooklynUnion/LILCO Agreement, LILCOhasgrantedtoBrooklynUnionanoptiontopurchase, undercertaincircumstances, upto23,981,964 sharesofLILCOCommonStockatapriceof$19.725pershareandBrooklynUnionhasgrantedtoLILCOanoptiontopurchase, undercertaincircumstances, upto9,948,682 sharesofBrooklyn'UnionCommonStockatapriceof$30.0375pershare(collectively, the"Options,"
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| andtheholderofeachsuchOption,the"Optio'nHolder").SharesofLILCOCommonStockpurchasable byBrooklynUnionandsharesofBrooklynUnionCommonStockpurchasable byLILCOpursuanttotheOptionsarecollectively referredtoas"OptionShares."Theexercisepriceispayable,attheOptionHolder'soption,incashor,subjecttoanyrequiredgovernmental approvals, insharesofcommonstockoftheOptionHolder.TheOptionsmaybeexercised b'ytheOptionHolder,inwholeorinpart,atanytimeorfromtimetotimeaftertheBrooklynUnion/LILCO Agreement becomesterminable bysuchOptionHolderundercircumstances whichcouldentitlesuchOptionHolderto.termination feesasaresultofaTriggerEvent(asdefinedintheAmendedStockOptionAgreements andreferredtoaboveunder"ThcAgreement andPlanofExchangeandMerger-Termination Fees"),regardless'of whethertheBrooklynUnion/LILCO Agreement isactuallyterminated orwhetherthereoccursaclosingofanyBusinessCombination.
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| TheOptionswillterminate upontheearlierof(i)theEffective Time,(ii)thetermination oftheBrooklynUnion/LILCO Agreement pursuanttoitsterms(otherthanatermination uponorduringthecontinuance ofaTriggerEvent),or(iii)180daysfollowing anytermination oftheBrooklynUnion/LILCO Agreement uponorduringthccontinuance ofaTriggerEvent(or,ifattheexpiration ofsuch180-dayperiod,theOptioncannotbeexercised byreasonofanyapplicable
| |
| : judgment, decree,order,laworregulation, tenbusinessdaysaftersuchimpediment toexercisehasbeenremovedorhasbecomefinalandisnotsubjecttoappeal,butinnoeventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing,.no Optionmaybeexercised (a)iftheOptionHolderisinmaterialbreachofanyofitsmaterialrepresentations orwarranties, orinmaterialbreachofanyofitscovenants oragreements contained intheapplicable AmendedStockOptionAgreement orintheBrooklynUnion/LILCO Agreement, or(b)untilallnecessary regulatory approvals havebeenobtainedfortheacquisition ofsharespursuanttosuch<<Option.CertainRepurchascs UnderthetermsoftheAmendedStockOptionAgreements, atanytimeduringwhichtheOptionisexercisable (the"Repurchase Period"),
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| theOptionHolderhastherightto'require theissueroftheOption(the82 "Issuer")torepurchase fromtheOptionHolderalloranyportionoftheOptionor,atanytimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate theBrooklynUnion/LILCO Agreement hasbeenextendedtoApril28,1999),alloranyportionoftheOptionSharespurchased pursuanttotheexerciseoftheOption.TheamountthattheIssuerwillpaytotheOptionHoldertorepurchase theOptionisthedifference betweentheMarket/Offer Price(asdefinedbelow)forsharesofIssuer'sCommonStockasofthedatetheOptionHoldergivesnoticeofitsintenttoexerciseitsrepurchase rights(the"NoticeDate")andtheexercisepricefortheOption,multiplied bythenumberofOptionSharespurchasable pursuanttotheOption,ortheportionthereoftobesorepurchased, butonlyiftheMarket/Offer Priceisgreaterthansuchexerciseprice.TheamountthattheIssuerwillpaytotheOptioriHoldertorepurchase theOptionSharesistheexercisepricepaidbytheOptionHolderfortheOptionSharesplusthedifference betweentheMarket/Offer PriceandtheexercisepricepaidbytheOptionHolderfortheOptionShares(butonlyiftheMarket/Offer Priceisgreaterthansuchexerciseprice),multiplied bythenumberofOptionSharestobesorepurchased.
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| Ifsuchrepurchase pricewasatalevelwhereacontemplated repurchase wouldotherwi'se besubjecttoavoteoftheshareholders oftheIssuerpursuanttoSection513(e)oftheNYBCL,thensuchrepurchase pricemaybereducedattheIssuer'soptiontoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsuchashareholder vote.TheAmendedStockOptionAgreements define"Market/Offer Price"as'thehigherof(A)thepricepershareofferedasoftheNoticeDatepursuanttoanytenderorexchangeofferorotherBusinessCombination offerwhichwasmadepriortothe,NoticeDateandnotterminated orwithdrawn asofsuchdateor(B)theFairMarketValueoftheIssuer'sCommonStockasoftheNoticeDate(whichisdefinedintheStockOptionAgreements astheaverageofthedailyclosingsalepriceforsuchsharesontheNewYorkStockExchangeduringthetenNewYorkStockExchangetradingdayspriortothefifthNewYorkStockExchangetradingdaypreceding suchdate).Thepricepcrsharefortherepurchase bytheIssuerofOptionSharespurchased bytheOptionHolderpursuant,totheOptionisthehighestpricepershareofferedpursuanttoatenderorexchangeofferorotherBusinessCombination offerwhichwasmadeduringtheRepurchase PeriodpriortotheNoticeDate.hAtanytimepriortoAugust31,1998(whichdatemaybeextendedtoApril28,1999underthecircumstances described above),theOptionHoldermayalsorequiretheIssuertoselltotheOptionHolderanysharesoftheOptionHolder'sCommonStockdelivered bytheOptionHoldertotheIssuerinpaymentfortheexercisepriceoftheOption,atthepriceattributed tosuchsharesforsuchpurposeplusinterestattherateof6.5%perannum(fromthedateofthedeliveryofsuchsharesthroughthedateofsuchrepurchase) lessanydividends paidordeclaredandpayablethereon.Restrictions onTransferTheAmendedStockOptionAgreements providethatneitherpartymaysell,assign,pledgeorotherwise disposeofortransferthesharesitacquirespursuanttotheAmendedStockOptionAgreements (collectively, the"Restricted Shares")exceptasspecifically providedforintheAmendedStockOptionAgreements.
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| Inadditiontotherepurchase rightsdescribed aboveunder"-CertainRepurchases,"
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| subsequent tothetermination oftheBrooklynUnion/LILCO Agreement, thepartieshavetherighttohavesuchsharesoftheotherpartyregistered undertheSecurities Actforsaleinapublicoffering.
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| TheAmendedStockOptionAgreements alsoprovidethat,following thetermination oftheBrooklynUnion/LILCO Agreement, eitherpartymaysellanyRestricted Sharespursuanttoatenderorexchangeofferapprovedorrecommended, orotherwise determined tobefairandinthebestinterests ofsuchotherparty'sshareholders, byamajorityoftheBoardofDirectors ofsuchotherparty.KeySpanwillsucceedtothe,rightsandobligations ofBrooklynUnionundertheAmendedStockOptionAgreements iftheKeySpanAgreement isadoptedbyBrooklynUnioncommonshareholders attheBrooklynUnionMeetingandtheKeySpanShareExchangeisconsummated.
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| Insuchevent,amongotherthings,KeySpanCommonStock,andnotBrooklynUnionCommonStock,willbesubjecttoissuanceuponanyexerciseoftheAmendedBrooklynUnionStockOptionAgreement.
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| 83 THELIPATRANSACTION Thefollowing isasummaryofthematerialtetvnsoftfieLIPAAgreement, whichisattachedasAnnexDandwhichisincorporated lrereinbyreference.
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| Thissummaryisqualified initsentiretybyreference totheLIPAAgreement.
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| Agreement andPlanofMergerLILCOandLIPAenteredintotheLIPAAgreement asofJune26,1997.TheLIPAAgreement requires:
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| (i)LIPAtoformasubsidiary (referred toas"LIPASub")andtocauseLIPASubtoexecuteacounterpart oftheLIPAAgreement; and(ii)LILCOtoformtheHoldingCompanyandtocausetheHoldingCompanytoexecuteacounterpart oftheLIPAAgreement priortotheclosingthereunder.
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| TheLIPAAgreement providesthatLIPASub(asubsidiary ofLIPA)istomergewithandintoLILCO,withLILCOtobethesurvivingicorporation (the"Surviving Corporation"
| |
| ).BeforetheclosingoftheLIPATransaction (the"LIPAClosing"),theHoldingCompanywillformsubsidiaries, whicharereferredto'astheTransferee Subsidiaries.
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| At"thedirection oftheHoldingCompany,theTransferee Subsidiaries willenterintocertainagreements inconnection withtheLIPATransaction, whicharereferredtoastheBasicAgreements (asdefinedbelow).TheTransferee Subsidiaries willalsoreceivecertainassetsandproperties ofLILCOtobetransferred aspartoftheLIPATransaction (the"Transferred Assets").TheLIPAAgreement setsouttheprinciples andprocedures tobeusedtodecidewhichLILCOassetsandproperties willbepartoftheTransferred AssetsandwhichwillremainwiththeSurviving Corporation (the"Retained Assets").Immediately priortotheeffective timeoftheLIPAmergerdescribed below(the"LIPAEffective Time"),LILCOwilltransfertheTransferred AssetstotheTransferee Subsidiaries inexchangefor(x)anumberofsharesofHoldingCompanyCommonStocktobedesignated bytheHoldingCompanypriortosuchtimeandrepresenting theHoldingCompany's estimateofthefairmarketvalueoftheTransferred Assetsand(y)upto$75millionfaceamountofaseriesofHoldingCompanyPreferred Stockhavingtermstobedesignated bytheHoldingCompanypriortosuchtime(the"PrivatePlacement Preferred Stock").'Itisanticipated thatLILCOwillbeobligated tosellthePrivatePlacement Preferred Stock,immediately priortotheLIPAEffective Time,tooneormorepurchasers inaprivateplacement:
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| Itisanticipated thatthePrivatePlacement Preferred Stockwill:(i)haveafinalmaturitydatemorethanfiveyearsaftertheLIPAEffective Time,(ii)benon-voting (exceptfor'ailure topaydividends foraspecified periodoftime),(iii)benon-convertible, and(iv)haveothertermsandconditions tobedetermined atthetimeofsale.AttheLIPAEffective Time,andwithoutanyactiononthepartofanyholderofanycapitalstockoftheHoldingCompany,LILCOorLIPASub,thesharesofcapitalstockofLILCOwillbt:treatedasfollows:(i)Thefollowing shares(the"Cancelled Shares")willbecancelled andretired,withoutthepaymentofanyconsideration:
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| (a)EachshareofLILCOCommonStockandeachshareofLILCOpreferred stockthatisownedbyLILCOastreasurystock;and(b)EachshareofLILCOpreferred stockownedbyanydirectorindirectwhollyownedsubsidiary oftheHoldingCompanyimmediately priortotheLIPAEffective Time.84 (ii)Eachissuedandoutstanding shareofLILCOCommonS'tock,otherthanCancelled SharesandsharesofLILCOCommonStockheldbyanydissenting shareholder, willbecancelled andconverted intotherighttoreceive:(a)anamountincashequaltotheCashPurchasePrice(asdefinedbelow)dividedbythenumberofsharesofLILCOCommonStockoutstanding, and(b)aproratadistribution oftheCompanyCommonStockreceivedbyLILCOinexchangefor,theTransferred Assets.t(iii)Eachholderofsuchshareswillbedeemedtohaveappointed anExchangeAgent(asdefinedintheLIPAAgreement) asits'agenttoreceivethecashandtousethecashtosubscribe forsharesofHoldingCompanyCommonStock.Thenumberofshares'ofHoldingCompanyCommonStockdistributable toholdersofLILCOCommonStockinrespectofeachshareofLILCOCommonStock,aggregating thenumberdistributable fromtheHoldingCompanyCommonStockreceivedbyLILCOinexchangefortheTransferred Assetswiththenumberdistributable fromthepurchasebytheExchangeAgentofadditional sharesofHoldingCompanyCommonStockoutofthecashmergerconsideration, willequal:(a)0.880sharesofHoldingCompany,CommonStockiftheCombination isconsummated concurrently withtheLIPAEffective Time,or(b)oneshareofHoldingCompanyCommonStockiftheCombination isnotconsummated concurrent withtheLIPAEffective Time.(iv)IftheCombination hasbeenconsummated priortotheLIPAEffective Time,then;(a)nosharesofHoldingCompanyCommonStockorPrivatePlacement Preferred Stockwillbedelivered inexchangefortheTransferred Assets,(b)theHoldingCompanyand/oroneormoreofitssubsidiaries, astheholdersofallthenoutstanding LILCOCommonStock,willreceiveallofthecashmergerconsideration, and(c)anadditional 0.077sharesofHoldingCompanyCommonStockwillbedistributed totherecordholdersasoftheEffective TimeofLILCOCommonStockinrespectofeachshareofLILCOCommonStock.V(v)Eachissuedandoutstanding shareofSeriesAApreferred stockofLILCO,otherthanCancelled SharesandsharesofLILCOSeriesAApreferred stockheldbyanydissenting shareholder
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| ("Dissenting
| |
| 'Preferred Shares"),willbe'ancelled andconverted intotherighttoreceiveonefullypaidandnon-assessable shareofpreferred stockoftheHoldingCompanywithidentical rights(including dividendrates)anddesignations totheSeriesAApreferred stock.(vi)Eachissuedandoutstanding shareofLILCOPreferred Stockthatissubjecttooptionalredemption by,LILCOatorbeforetheLIPAClosingDate,otherthanCancelled Shares,willbecalledforredemption byLILCOnotlaterthantheLIPAClosingDate.EachsuchshareofLILCOPreferred StockwillberedeemedforcashbyLILCOinaccordance withthetermsapplicable tosuchshares.Theaggregate amountofaccruedbutunpaid-dividends andredemption premiumspayablebyLILCOinrespectofsuchredemptions willbe.paidbytheHoldingCompanytoLILCOnotlaterthantwobusinessdayspriortothedatetheapplicable redemption priceispayable.(vii)Eachissuedandoutstanding shareofLILCOPreferred Stock,otherthanCancelled Shares,Dissenting Preferred Shares,sharesofSeriesAApreferred stockandredeemable preferred stock(collectively, the"Non-redeemable Preferred Stock"),willbecancelled andconverted intotherighttoreceivecashintheamountofthesumof(x)theMake-Whole Amountand(y)accruedbutunpaiddividends inrespectofsuchsharethroughtheLIPAClosingDate.AsusedinthisJointProxyStatement/Prospectus, "Make-Whole Amount"means,withrespecttosuchshare,anamountequaltothepresent,valueof:(i)thefaceorliquidation preference amountofsuchshare,and85 (ii)theremaining dividendpaymentsdueonsuchsharebetweentheLIPAClosingDateandtheapplicable redemption datecomputedusingadiscountrateequaltotheapplicable FairMarketRatedividedby0.95."FairMarketRate"isdefinedastheGenericGeneralObligation FairMarketYieldforBaaratedLow/Medium CouponGeneralMunicipal Obligations atthetimeofthecomputation asreportedonBloomberg, withamaturitymostnearlyequaltotheperiodbetweencancellation andfinalredemption ofsuchseriesofNon-redeemable Preferred StockLow/Medium CouponGeneral.Theperiodbetweencancellation andredemption referstotheperiodbetweentheClosingDateand:(A)August1,2002,withrespecttotheSeriesCCPreferred Stock,(B)March1,1999,withrespecttotheSeriesGGPreferred Stock,(C)May1,2001,withrespecttotheSeriesQQPreferred Stock,and(D)October16,2018,withrespectto"the,SeriesUUPreferred Stock.Theamountbywhichtheaggregate amountpayableexceeds100%oftheaggregate faceorliquidation preference amountsforallsharesofNon-redeemable Preferred StockshallbepaidbytheHoldingCompanytotheSurviving Corporation promptlyaftertheLIPAEffective Time.eThe"CashPurchasePrice"tobepaidbyLIPAwillbe$2,497,500,000.
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| TheCashPurchasePricewasdetermined baseduponthenetbookvalueoftheRetainedAssets,whichwas$2,500,800,000 andissetforthintheproformconsolidated balancesheetofLILCOasofDecember31,1997preparedbyLILCO.TheCashPurchasePriceisbasedupontheassumption thatthetotallongtermindebtedness ofLILCOontheLIPAClosingDatewillnotexceed$3,576,000,000 (the"Retained DebtAmount").The,RetainedDebtAmountwillbeadjustedbaseduponitsnctbookvalue,asrefiected onLILCO'sauditedconsolidated balancesheetasoftheLIPAClosingDate,asfollows.TheRetainedDebtAmountwillbeeither:(i)increased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsexceeds$2,500,800,000; or(ii)decreased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsislessthan$2,500,800,000.
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| AttheLIPAClosing,theHoldingCompanywill,andwillcauseeachoftheTransferee Subsidiaries to,executeanddeliverpromissory notes(the"Promissory Notes")onthefollowing terms:(i)Theaggregate principal amountwillbeequaltotheexcess,ifany,oftheindebtedness ofLILCOoutstanding ontheLIPAClosingDateovertheRetainedDebtAmount.(ii)Theratesandmaturities willcorrespond toeachportionofdebtunderlying theindebtedness ofLILCOontheLIPAClosingDate;provided, however,thattheinterestandprincipal paymentdateswillbeadjusted torequirepaymentbytheHoldingCompany30dayspriortothecorresponding paymentdatesontheunderlying debt.LILCOcurrently hasaseriesof7.3%Debentures dueJuly15,1999,withanapproximate aggregate
| |
| ,principal amountcurrently outstanding of$397million,andaseriesof8.20%Debentures dueMarch15,2023,withanapproximate aggregate principal amountcurrently outstanding of$270million.Subjecttoobtaining allrequiredconsents, theHoldingCompanywillassumetheseobligations attheLIPAClosing.Certainothertaxexemptauthority financing noteswillbeidentified bythepartiestotheLIPAAgreement andassumedbytheHoldingCompany(subjectto'obtaining allrequiredconscntsandtotaxcounsel's concurrence).
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| '"TheLIPAAgreenient containscustomary representations, warranties andcovenants byeachoftheHoldingCompany,LILCO,LIPAandLIPASub.Therespective obligations ofthepartiestotheLIPAAgreement toeffecttheLIPATransaction aresubjecttothesatisfaction ofcertainconditions onorpriortotheLIPAClosingDate,including, amongothers:(i)receiptofcertainstatutory approvals; (ii)entryintoeachoftheotherBasicAgreements bytherelevantparties; (iii)receiptoffavorable privateletterrulingswithrespecttoSection337(d)oftheCode;and(iv)LIPAhavingobtainedfinancing sufficient tofundtheCashPurchasePriceandcertainothertransactions.
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| Therespective obligations ofthepartiesfoeffecttheLIPATransaction arealsosubjecttothecondition that,onorpriortotheLIPAClosingDate,either:(i)thetransactions contemplated bytheBrooklynUnion/LILCO Agreement willhavebeenconsummated, (ii)theBrooklynUnion/LILCO Agreement willhavebeenterminated or(iii)allconditions toconsummation ofthetransactions contemplated bytheBrooklynUnion/LILCO Agreement willhavebeensatisfied orwaivedandsuchtransactions willbeconsummated promptlyaftertheLIPAClosing.TheLIPAAgreement issubjecttotermination'by the.partiesincertaincircumstances, including, amongothers,bytheHoldingCompanyandLILCO,ontheonehand,orLIPAandLIPASub,ontheotherhand,iftheLIPAClosinghasnotoccurredonorbeforeAugust31,1998(orApril28,1999ifallbutcertainspecified conditions, havebeenorarecapableofbeingfulfilled onAugust31,1998),butonlyifthefailureoftheLIPAClosingtooccur,wasnotcausedbytheterminating party'sfailuretofulfillanyofitsobligations undertheLIPAAgreement.
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| OtherBasicAgreements Inconnection withtheLIPATransaction, thepartiesagreedtoenterintotheLIPAAgreement, thePromissory Notesandcertainotheragreements (the"BasicAgreements"
| |
| ),whichareherebyincorporated byreference.
| |
| See"WhereYouCanFindMoreInformation".
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| TheBasicAgreements include:1.Management ServicesAgreement, wherebyasubsidiary oftheHoldingCompanyagrees,amongotherthings,toprovidealloperation, maintenance andconstruction servicestoLIPAfor8years;2.PowerSupplyAgreement, wherebyasubsidiary oftheHoldingCompanyagrees,amongotherthings,tosupplyLIPAwithcapacityandenergyfromLILCO'sexistingGenerating Facilities (asdefinedintheLIPAAgreement) inordertoallowLIPAtoprovideelectricity toitscustomers onLongIslandfor15years;3.~EnergyManagement Agreement, wherebyasubsidiary ofthe'olding Companyagrees,amongotherthings,tomanagetheSystemPowerSupply(asthereindefine'd) onbehalfofLIPAand,asagentforLIPA,topurchasefuelsuppliesfortheGenerating Facilities for15years;4.Generation PurchaseRightAgreement, pursuanttowhichLIPAhastherightduringthefourthyearaftertheLIPAClosingtopurchasetheGenerating Facilities forfairmarketvalue;5.GuarantyAgreement, wherebytheHoldingCompanyguarantees certainobligations ofitssubsidiaries
| |
| 'ndertheotherBasicAgreements; and6.Liabilities Undertakings, wherebytheHoldingCompanyandthcTransferee Subsidiaries, ontheonehand,andLIPAandtheSurviving Corporation, ontheotherhand,agreetoassumecertainliabilities andtoindemnify oneanotherincertainsituations inconnection withtheLIPATransaction.
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| 87 SELECTEDINFORMATION CONCERNING LILCOBusinessofLILCOLILCOwasincorporated in1910undertheTransportation Corporations LawoftheStateofNewYorkandsupplieselectricandgasserviceinNassauandSuffolkCountiesandtotheRockawayPeninsula inQueensCounty,allonLongIsland,New York.ThemailingaddressofLILCOis175EastOldCountryRoad,Hicksvillc, NewYork11801anditsgeneraltelephone numberis(516)755-6650.
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| Territory.
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| LILCO'sserviceterritory coversanareaofapproximately 1,230squaremiles.Thepopulation oftheservicearea,according toLILCO's1996estimate, is2.7millionpersons,including approximately 98,000personswhoresideinQueensCountywithintheCityof'NewYork."The 1996population estimatereflectsa0.7%increasesincethe1990census.Approximatt:ly 80%ofallworkersresidinginNassauandSuffolkCountiesareemployedwithinthetwocounties.
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| In1996,totalnon-agricultural employment inNassauandSuffolkCountiesincreased byapproximately 12,500positions, anemployment increaseof1.1%.LILCOservesapproximately onemillionelectriccustoiners ofwhich921,000areresidential.
| |
| LILCOreceivesapproximately 49%ofitselectricrevenuesfromresidential customers, 48%fromcommercial/industrial customers and3%fromsalestootherutilities andpublicauthorities.
| |
| LILCOalsoservesapproximately 460,000gascustomers, 412,000ofwhichareresidential, accounting for61%ofthegasrcvcnueswith the,balanceofthegasrevenuesmadeupbythecommerciaVindustrial customers andoff-system sales.Employees.
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| AsofMarch31,1997,LILCOh5d5,443full-time employees, ofwhich2,241belongtoLocal1049and1,292belongtoLocal1381ofthcInternational Brotherhood ofElectrical Worke'rs.
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| Effective February14,1996,LILCOandtheseunionsagreeduponcontracts vvhichwillexpireonFebruary13,2001.Thecontracts provide,amongotherthings,forwageincreases totaling15.5%overthetermoftheagreements.
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| Regulation andAccounting Conlrols.
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| LILCOissubjecttoregulation bythePSCwithrespecttorates,issuances andsalesofsecurities, adequacyandcontinuance ofservice,safetyandsitingofcertainfacilities,'ccounting, conservation ofenergy,management effectiveness andothermatters.Toensurethatitsaccounting controlsandprocedures areconsistently maintained, LILCOactivelymonitorsthesecontrolsandprocedures.
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| TheAuditCommittee ofLILCO'sBoard'ofDirectors, aspartofitsresponsibilities, periodically re'viewsthismonitoring program.LILCOisalsosubject,incertainofitsactivities, fothejurisdiction oftheUnitedStatesDepartment ofEnergyandtheFERC.Inadditiontoitsaccounting jurisdiction, FERChasjurisdiction overtheratesLILCOmaychargeforthesaleofelectricenergyforresaleininterstate
| |
| : commerce, including theratesLILCOcliargesforelectricity soldfo'municipal electricsystem'swithinL'ILCO'sterritory, andforthetransmission, throughLILCO'ssystem,ofelectricenergytootherutilities, andforthepricing,termsandconditions oftnnsmission anddistribution serviceswhenLILCOprovidestheseservicesseparately fromitstraditional full-requirements retailelectricservice.FERCalsohassomejurisdiction overaportionofLILCO'sgassuppliesandsubstantial jurisdiction overtransportation toLILCO,ofitsgassupplies.
| |
| HOperation ofNineMilePointNuclearPbwerStationUnit2,anuclearfacilityinwhichLILCOhasan18%interest, issubjecttoregulation bytheNRC.Additional information concerning LILCOanditssubsidiaries isincludedintheLILCOdocuments filedwithCommission whichareincorporated by,reference,herein.
| |
| See"WhereYouCanFindMoreInformation."
| |
| 88 Comparison ofShareholders'ights TherightsofBrooklynUnionshareholders arecurrently governedbytheNYBCL,theBrooklynUnionCertificate andtheBrooklynUnionBy-Laws.TherightsofLILCO'shareholders arecurrently governedbytheNYBCL,theLILCOCertificate andtheLILCOBy-Laws.Uponconsummation oftheCombination, therightsofBrooklynUnionshareholders andLILCOshareholders whobecomeshareholders oftheHoldingCompanywillbegovernedbytheNYBCL,theHoldingCompanyCertificate andtheHoldingCompanyBy-Laws.Thefollowing aresummaries ofcertaindifferences betweenthecurrentrightsofBrooklynUnionandLILCOshareholders andthoseofHoldingCompanyshareholders aftertheCombination.
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| Thefollowing discussions arenotintendedtobecompleteandarequalified byreference totheNYBCL,theBrooklynUnionCertificate, theBrooklynUnionBy-Laws,theLILCOCertificate, theLILCOBy-Laws,theHoldingCompanyCertificate andtheHoldingCompanyBy-Laws.CopiesoftheHoldingCompanyCertificate andtheHoldingCompanyBy-Laws,insubstantially theformstobeadoptedattheEffective Time,areattachedtothisJointProxyStatement-Prospectus asAnnexesGandH.CopiesoftheBrooklynUnionCertificate, theBrooklynUnionBy-Laws,theLILCOCertificate andtheLILCO'By-Laws areincorporated byreference hereinandwillbesenttoholdersofsharesofBrooklynUnionCommonStockandLILCOCommonStock,respectively, uponrequest.See"WhereYouCanFindMoreInformation."
| |
| Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoLILCO'sCertificate ofIncorporation andBy-LawsAntliorized Capita/.Thetotalauthorized capitalstockoftheHoldingCompany.willbe450,000,000 sharesofHoldingCompanyCommonStock,parvalue$.01pershare,and100,000,000 sharesofHoldingCompanyPreferred Stock,parvalue$.01pershare.Thetotalauthorized capitalstockofLILCOcurrently consistsof150,000,000 sharesofcommonstock,parvalue$5pershare,7,000,000 sharesofpreferred stock,parvalue$100pershare,30,000,000 sharesofpreferred stock,parvalue$25pershareand7,500,000 sharesofpreference stock,parvalue$1pershare.AttheLILCOMeeting,theLILCOshareholders willbeaskedtoamendtheLILCOCertificate ofIncorporation toincreas'e thetotalamountofauthorized LILCOCommonStockto160,000,000 sharestoaccommodate thenumberofsharesof'LILCOCommonStockto6ereservedforissuancetoBrooklynUnioninconnection withtheLILCOStockOptionAgreement.
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| RenmvalofDirectors; FillingVacancies ontlieZIoardofDirectors.
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| TheHoldingCompany'ertificate andtheHoldingCompanyBy-Lawsprovidethat,subjecttotherightsofholdersofHoldingCompanyPreferred, Stock,ifany,anydirectorservingontheHoldingCompanyBoardmayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityoftheVotingPower,votingtogetherasasingleclass.TheLILCOCertificate andtheLILCOBy-Lawshavenocomparable provision, buttheLILCOBy-LawsdorequireDirectors toretireattheAnnualMeetingofShareholders intheyearfollowing theyearin,whichheorshereacheshisorherseventy-second birthdayunlessauthorized bytheBoardtocontinuetoserve.However,noDirectormayservebeyondtheyearfollowing theyearinwhichheorshereachestheirseventy-fifth birthday.
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| UndertheNYBCL,unlessthecertificate ofincorporation orby-lawsofacorporation providesotherwise, adirectormayberemovedonlyforcausebythevoteofamajorityofthevotescastatashareholder meetingbytheholdersofsharesentitledtovotethereon.BoththeLILCOBy-LawsandtheHoldingCompanyCertificate providethatvacancies onthe,BoardofDirectors maybefilledbytheremaining directors.
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| TheLILCOCertificate providesthatincertaincircumstances, theholdersofpreferred stockorpreference stockmayhavelimitedrightstoelecttwoadditional Directors and,ifthereisavacancyamongthesetwoDirectors, theremaining Directorhastheauthority toselectareplacement.
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| MeetingsofSIrareimlders.
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| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethataspecialmeetingofshareholders maybecalledonlybytheHoldingCompanyBoardpursuanttoaresolution approvedbyamajorityoftheentireHoldingCompanyBoard.TheLILCOBy-Lawsalsoprovidethat89 aspecialmeetingofshareholders maybecalledbyamajorityoftheDirectors ofLILCO.Inaddition, theLILCOBy-LawsprovidethatsuchameetingmaybecalledbythePresident ofLILCO,andthatitisthePresident's dutytocallsuchameetingwheneverrequested todosoinwritingbyshareholders owningone-fourth oftheoutstanding sharesofstockofLILCOentitledtovoteatsuchmeetings.
| |
| 4Ainendment ofCorporate CharterandBy-Laws.TheNYBCLprovidesthatanamendment toacorporation's certificate ofincorporation maybeauthorized byvoteoftheboardofdirectors, followedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereonatameetingofshareholders andtheby-lawsofacorporation maybeamendedbya'oteoftheholdersofamajorityofalloutstanding sharesentitledtovoteintheelectionofanydirectors ofthecorporation or,ifsoprovidedinthecertificate ofincorporation orby-laws,bytheboardofdirectors bysuchvoteasmaybethereinspecified.
| |
| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethattheaffirmative voteoftheholdersofatleast80percentoftheVotingStockthenoutstanding, votingtogetherasasingleclass,willberequiredtochangeoradoptanyprovision inconsistent withtheprovisions thereinrelatingtocallingofspecialmeetingsofshareholders, theelectionofdirectors, fillingofvacancies ontheHoldingCompanyBoard,removalofdirectors andtheamendment oftheHoldingCompanyBy-LawsandtheHoldingCompanyCertificate.
| |
| TheLILCOCertificate providesthattheLILCOBoardofDirectors hasthepower,exceptasotherwise providedbylaw,tomake,alter,amendorrepealtheLILCOBy-Laws.TheLILCO.By-Laws providethattheBy-Lawsmaybealtered,amendedorrescinded:
| |
| (i)bytheshareholders atanyregularorspecialmeetingbyvoteofamajorityofthesharesofstockissuedandoutstanding, providednoticeofsuchintention beincludedinthenoticeofmeeting,unlessotherwise providedbylaw;or(ii)exceptwithregardtothesectionsconcerning quorumatshareholders'eetings, votingbyshareholders, dutiesandqualifications ofDirectors andthenumberandmethodofelectionofDirectors, byvoteofamajorityoftheDirectors ofLILCOatanyregularorspecialmeeting,providedatleastthreedays'otice ofsuchintention begiventoeachmemberoftheBoard.Forinformation concerning BrooklynUnion,see"Selected Information Concerning BrooklynUnion-'omparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoBrooklynUnion'sCertificate ofIncorporation andBy-Laws."
| |
| 0JJicers.
| |
| TheHoldingCompanyBy-Lawsprovidethat,effective asofthefirstanniversary oftheconsummation oftheCombination, Dr.Catacosinos shallbeelectedChairmanoftheHoldingCompanyBoard,andChairmanoftheExecutive Committee oftheHoldingCompanyBoardandMr.CatellshallbeelectedChiefExecutive Officer.of theHoldingCompany.ThisBy-Lawmaybemodifiedonlybytheaffirmative voteoftwo-thirdsoftheentireHoldingCompanyBoard.Anti-Takeover
| |
| : Statutes, Section912oftheNYBCLprohibits a"business combination" (asdefinedinSection912oftheNYBCL,generally including mergers,salesandleasesofassets,issuances ofsecurities andsimilartransactions) byacorporation incorporatedunder thcNYBCLorasubsidiary ofsuchcorporation withaninterested shareholder (asdefinedinSection912oftheNYBCL,genemllythebeneficial ownerof20percentormoreoftheNewYorkcorporation's votingstock)withinfiveyearsafterthepersonorentitybecomesaninterested shareholder, unless(i)priortothepersonorentitybecominganinterested shareholder, thebusinesscombination orthetransaction pursuanttowhichsuchpersonorentitybecameaninterested shareholder hasbeenapprovedbysuchNewYorkcorporation's boardofdirectors, or(ii)thebusinesscombination isapprovedbytheholdersofamajorityofthevotingpowerofthecapitalstockofsuchNcwYorkcorporation, excluding sharesheldbytheinterested shareholder, atameetingcalledforsuchpurposenoearlierthanfiveyearsaftersuchinterested sliareholder's "stockacquisition date."Inaddition, Section912oftheNYBCLspecifies certainminimumconsideration
| |
| 'thatmustbepaidinabusines's combination withaninterested shareholder.
| |
| 90 Linploynient Agreement withWilliamJ.Catacosinos.
| |
| PursuanttotheBrookfynUnion/LILCO Agreement, theHoldingCompanywillenterintoanemploymcnt agreement withDr.WilliamJ.Catacosinos effective asoftheeffective timeoftheCombination (the"Effective Time"),providing forhimtoassumethepositions ofChairmanoftheBoard,ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompanycommencing upontheEffective Timeandforhimtoserveasaconsultant totheHoldingCompanyforafiveyearperiodcommencing onthefirstanniversary oftheEffective Time,whichiswhenheceasestobeChiefExecutive OfficerpursuanttothctermsoftheBrooklynUnion/LILCO Agreement.
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| Underthisemployment agreement, Dr.Catacosinos istoreceivecompensation ontermstobemutuallyagreedupon,butnotlessthanwhathereceivedfromLILCOasofthedateoftheOriginalAgreement.
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| Dr.Catacosinos wouldalsobeeligibletoreceiveincentive compensation relatedtoachieving thesynergies contemplated toberealizedfromtheCombination.
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| Inaddition, theBrooklynUnion/LILCO Agreement providesthattheemployment agreemcnt withDr.Catacosinos isotherwise tocontaintermsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefcxccutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| VestingofCertainBeneJitsforLILCO'sDirectors and0+icers.UnderLILCO'sAnnualStockIncentive Compensation Plan(the"StockPlan"),intheeventaStockPlanparticipant,'s employment withLILCOisterminated for,amongotherreasons,a"changeincontrol,"
| |
| asdefinedintheStockPlan,suchparticipant shallbeentitledtoreceivepayment,assoonaspracticable afterthecloseoftheplanyearduringwhichsuchtermination ofemployment occurs,ofaprorataportionofsuchparticipant's LILCOCommonStockaward,ifany,forthecurrentplanyear.TheCombination andtheLIPATransaction willeachconstitute achangeincontrolforpurposesoftheStockPlan.UnderLILCO'sOfficers'ong-Term Incentive Plan(the"Incentive Plan"),awardsarepaidintwo,installments eachofwhichiscontemplated tobcmadeinsharesofLILCOCommonStock.Theawardsforeachperformance period(initially 1996-1997 andthereafter eachconsecutive three-year period)aredividedintotwoequalportions:
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| (i)afiftypercentvestedportion;and(ii)afiftypercentcontingent portion.Thccontingent portionissubjecttoamandatory deferralofoneyearfromthedateofthepaymentofthcaward.IntheeventanIncentive Planparticipant's employment withLILCOisterminated for,amongotherreasons,a"changeincontrol,"
| |
| asdefinedintheIncentive Plan,'such participant sliallbeentitledtoreceivepayment,assoonaspracticable afterthecloseoftheperformance periodduringwhichsuchtermination ofemployment occurs,of(i)theentirebalanceofsuchparticipant's contingent accountatthecloseoftheplanyearduringwhichtermination ofemployment occursand(ii)apro-rataportionofsuchparticipant's award,ifany,forthecurrentperformance period,asdetermined byCompensation andManagement Appraisal Committee oftheLILCOBoardofDirectors.
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| TheCombination andtheLIPATransaction willeachconstitute achangeincontrolforpurposesoftheIncentive Plan.UnderthetermsofLILCO'sDirectors'tock UnitRetainerPlan(the"Retainer Plan"),eachnon-employee directorofLILCOisrequiredtoapplyatleast50%ofhisorherannualretainertothepurch'ase ofLILCOCommonStockunits.Allocation ofLILCOCommonStockunitsundertheRetainerPlanaremadeautomatically onthe,dateduringeachfiscalquarteronwhichthequarterly installment oftheannualretainerispaid.UndertheRetainerPlan,thevalueoftheunitswhichwillbecreditedtoeachnon-employee Director's accountonaquarterly basiswillbedetermined bydividingtheaggregate amountofcashcreditedtosuchaccountbytheclosingpricepershareofLILCOCommonStock,asreportedonaNewYorkStockExchangelistingofcomposite transactions, onthefirsttradingdayofthecalendarmonthinwhichtheparticipant's retainerispaid.Theamountsaccumulated pursuanttotheRetainerPlanwillbehelduntilsuchtimeas(i)aparticipant ceasestoserveasaDirectororConsulting Director; (ii)aparticipant's death;or(iii)achangeincontrol,asdefinedintheRetainerPlan.TheCombination andtheLIPATransaction willeachconstitute achangeincontrolforpurposesofthcRetainerPlan.91 LILCOalsohasa'Retirement'lan forDirectors (the"Retirement Plan"),providing benefitstoDirectors whoarenotorwhohavenotbeenOfficersofLILCO.Directors whohaveservedinthatcapacityformorethanfiveyearsqualifyasparticipants undertheRetirement Plan.TheRetirement Planprovidesforamonthlybenefitequaltoone-twelfth ofthehighestannualretainerpaidtoeachparticipant.
| |
| Afullbenefitisavailable forparticipants whoservefortcnyearswithareduction ofone-sixtieth foreachmonthofservicelessthantenyears.UndertheRetirement Plan,paymentofbenefitsistobegin"when theDirectorceasestoserveasaDirectororConsulting Directororreachesage65,whichever islater.TheRetirement Planalsoprovidesthatintheeventofa"changeincontrol"(asdefinedintheRetirement Plan),thevalueofvestedbenefits'ould bepayableimmediately.
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| TheCombination andtheLIPATransaction willeachconstitute achangeincontrolforpurposesoftheRetirement Plan.TheBrooklynUnion/LILCO Agreement provide's thatattheEffective Time,eachshareofLILCOCommonStockheldunderthcRetainerPlan,theIncentive PlanandtheStockPlanwillbeautomatically.
| |
| exchanged forthesamenumberofsharesofHoldingCompanyCommonStockforwhichoneshareof,LILCOCommonStockwasexchanged.
| |
| LILCOChangeinConlrolSeverance Plan.LILCOhasenteredintoindividual employment agreements witheachofitsofficerstoprovidethemwithemployment securityandtominimizedistractions resulting frompersonaluncertainties andrisksofachangeincontrolofLILCO.Currently, theprincipal benefitsundertheseagreements, payableiftheofficer's employment isterminated foranyreason(including voluntary resignation) withinthreeyearsofachangeincontrol(asdefinedintheseagreements),
| |
| including byvirtueofanacquisition ofLILCO'sassetsorstock,priortoDecember31,1999,are:(i)severance payequaltothreeyears'alary; (ii)accelerated'vesting andpaymentofthevalueofsupplemental retirement benefitsatthetimeofachangeincontrol,whichareenhancedbythreeyearsofservice;and(iii)continuation oflife,medic'alanddentalinsurance foraperiodofthreeyears.LILCOhascreatedatrusttosupportpaymentofitsobligations, butremainsprimarily,
| |
| ,liableforthecompensation andretirement benefitspayabletotheofficers.
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| Thetrustwillmakesuch,paymentsonlytotheextentthatLILCOdoesnot.TheCombination ascontemplated intheBrooklynUnion/LILCO Agreement andtheLIPATransaction willeachresultinachangeincontrol(asdefinedintheseagreements) andentitleeachofficer.tothebenefitspayableunderthctermsoftheemployment agreements ifsuchofficer'employment isterminated foranyreason.LILCOhasalsoenteredintoindividual employment agreements withcertainofitsofficers(notincluding Dr.Catacosinos andMr.Flynn),effective July1,1997,pursuanttowhichsuchofficersarecmploycdforaoneyeartennandareentitledtoreceivearetention bonusequalto20%ofthcgreaterofjobvalueorsalary,iftheyarestillemployedbyLILCOoritsaffiliates atthcendofsuchtermorareterminated withoutcause(asdetermined bytheChiefExecutive Officer),
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| priortotheexpiration ofsuchterm.Theseagreements havebeenenteredintotoinducesuchofficerstocontinuetheiremploymcnt despitethesignificant proposedchangestoLILCOdescribed clsewherc inthisJointProxyStatement/Prospectus.
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| Underthetermsofanemployment contractdatedasofJanuary30,1984,asamended,Dr.Catacosinos hasagreedtoserveasCEOofLILCOuntilJanuary31,2002.Dr.Catacosinos'ontract providesfor,amongotherthings:(i)afive-year consulting periodfollowing thetermination ofhisemployment (otherthan,exceptafterachangeincontrol,forcause);(ii)supplemental disability benefits; and(iii)vestedretirement
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| : benefits, whichwillbebaseduponaformulathatconsiders hisageatretirement; hishighestannualsalary,thehighestbonushehasreceivedandthelengthofhisservicetoLILCOincluding serviceasaDirector, employeeorconsultant.
| |
| TheCombination andtheLIPATransaction willeachresultinachangeincontrolunderthetermsofDr.Catacosinos'mployment contract.
| |
| SecurityOwnership'of CertainBeneficial OwnersandManagement CnnentOwnership ofLILCOCommonStock.Thefollowing tableshowsthenumberofshares*ofLILCOCommonStockbeneficially owned,asofJunc23,1997,byeachDirector, certainOfficersandbyallDirectors andOfficersasagroup.Thepercentage ofsharesheldbyanyoneperson,orallDirectors andOfficers asagroup,doesnotexceed1%ofalloutstanding sharesofLILCOCommonStock.TheaddressofeachoftheDirectors andOfficersis:c/oLongIslandLightingHoldingCompany,175EastOldCountryRoad,Hicksville, NewYork11801.Number'fNa'me4Sbar'es~A.JamesBarnes.1,473GeorgeBugliarello
| |
| -1,473RensoL.Caporali2,144WilliamJ.Catacosinos 14,707PeterO.Crisp.973'amesT.Flynn.'.......................
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| ~.....................
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| 5,509VickiL.Fuller''........................................
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| 1,273LeonardP.Novello~.........................,.........................,
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| ..1,189AnthonyNozzolillo
| |
| ...................................
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| 1,301Katherine D.Ortega..'..........,....................
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| ',801BasilA.Paterson..s......~.2,025'ichardL.Schmalensee,.
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| 1,073'.GeorgeJ.Sideris.................................
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| 4,851JohnH.Talmage.......................*'......................,
| |
| .........
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| 1,505EdwardJ.Youngling.............................
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| 2,446AllDirectors andOfficersasagroup,including thosenamedabove,atotalof33persons56,683~"ThettuniberofsliaresincludeswholesharesheldunderLILCO'sIrivestor CommonStockPlanandforMr.Talmageincludes287sharesheldorbeneficially ownedbyaspouse,parentorchildforwhichbeneficial ownership isdisclaimed.
| |
| Inaddition, thenumberofsharesshownforeachDirector, otherthanDr.Catacosinos andMr.Flynn,includes973LILCOCommonStockunits,whichdonotconferanyvotingrights,creditedpursuanttotheDirectorStockUnitRetainerPlan.Thefollowing tablesetsforthcertaininformation withrespecttothesharesofLILCOPreferred StockandLILCOCommonStockownedbyeachpersonknownbyLILCOtobethebeneficial ownerofmorethan5%ofsuchLILCOPreferred StockandLILCOCommonStock,asofMarch31,1997.TitleofClassNamesandAddresses Percentat;e OwnedofClassCommonStock'ommon Stock16.6%12,141,500 10.1%TheBrooklynUnionGasCompany23,981,964" OneMetroTechCenterBrooklyn, NY11201-3850 CapitalGroupCompanies Inc.333SouthHopeStreetLosAngeles,CA90071*Represents thenumberofsharesthatmaybepurchased pursuanttotheLILCOStockOptionAgreement attachedasAnnexBanddescribed inthisJointProxyStatement/Prospectus.
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| See"TheStockOptionAgreemcn'ts."
| |
| LILCOhasnotbeenadvised,norisitaware,ofanyadditional sharestowhichanyonehastherighttoacquirebeneficial ownership..
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| LILCOisrequiredtoidentifyanyDirector, Officer,orpersonwhoownsmorethantenpercentofaclassofequitysecurities whofailedtotimelyfilewiththcSECarequiredreportrelatingtoownership andchangesinownership ofLILCO'sequitysecurities.
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| Basedoninformation providedtoLILCObysu'chpersons,allLILCO93 OfficersandDirectors madeallrequiredfilingsduringthefiscalyearendedDecember31,1996.Exceptasdescribed above,LILCOdoesnotknowofanypersonbeneficially owningmorethan10%ofaclassofequitysecurities.
| |
| CertainBusinessRelationships BetweenBrooklynUnionandLILCOInthenormalcourseofbusiness, LILCOpurchases naturalgas,paysgastransportation chargesandpurchases co-generation powerfromentitiesinwhichBrooklynUnionholdsanownership interest.
| |
| BrooklynUnionpurchases naturalgasandpaysgastransportation chargestoentitiesinwhichLILCOhasanequityinterest, andentitiesinwhichBrooklynUnionhasanequityinterestsellelectricity toandpurchasegastransportation servicesfromLILCO.Allsuchtransactions areatarms'-length oratratesasrequiredbylaw.SELECTEDINFORMATION CONCERNING BROOKLYNUNIONRecommendation oftheBrooklynUnionBoardTheBrooklynUnionBoardbelievesthatthetermsoftheCombination arefairto,andinthebestinterests of,BrooklynUnionanditsshareholders.
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| Accordingly, theBrooklynUnionBoard,hasunanimously adoptedtheBrooklynUnion/LILCO Agreement, andunanimously recommends itsadoptionbytheBrooklynUnionshareholders.
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| TheBrooklynUnionBoardbelievesthattheCombination represent asignificant strategic opportunity forBrooklynUnion.TheBrooklynUnionBoardalsobelievesthattheLongIslandmarketpresentsexcellent opportunities forgrowthofthegasbusinessandtheprovision ofotherenergyrelatedservices.
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| Thismarketisparticularly attractive becausethereisanextremely,low penetration ofgasasapercentage ofthetotalenergyusageinthatregion.ThetermsoftheBrooklynUnion/LILCO Agreement, including theRatios,weretheresultofarm'-length negotiations betweenBrooklynUnionandLILCO.InfixingtheRatiosinthenegotiation process,BrooklynUnionmanagement reliedtoalargeextentoncertainofthefinancial analysesofMerrillLynchsummarized belowunder"OpinionofBrooklynUnion'sFinancial Advisor."
| |
| AlthoughMerrillLynchneithermadeanyrecommendations norexpressed anyopinion,toBrooklynUnionmanagement ortheBrooklynUnionBoardduringsuchnegotiations regarding theRatios,MerrillLynchsubsequently delivered itswrittenopiniontotheBrooklynUnionBoardreferredtoinclause(vii)ofthefollowing paragraph.
| |
| TheBrooklynUnionBoardconsulted withitsfinancial advisorandlegaladvisorsandmanagement ofBrooklynUnion.Aftercarefulreviewandconsideration, theBrooklynUnionBoarddetermined thattheCombination isadesirable transaction fromthestandpoint oftheBrooklynUnioncommonshareholders.
| |
| InreachingitsdecisiontoapprovetheBrooklynUnion/LILCO Agreement, andinadditiontothefactorsdescribed above,theBrooklynUnionBoardconsidered thefollowing factors:(i)thecurrentandhistorical marketpricesoftheBrooklynUnionCommonStockandtheLILCOCommonStock(including thefactthatfromDecember1993toDecember1996,theratiooftheclosingpriceofLILCOCommonStocktotheclosingpriceofBrooklynUnionCommonStockhasrangedbetween0.542to0.942,andtheclosingpricesofBrooklynUnionCommonStockandLILCOCommonStockonDecember26,1996were$30.625and$19.125,respectively);
| |
| (ii)information concerning thefinancial performance, condition, businessoperations andprospects ofeachofBrooklynUnionandLILCO;(iii)theeffectsoftheCombination onBrooklynUnion'sshareholders, including theopportunity toshareintheanticipated benefitsofownership ofthecombinedenterprise; (iv)theexpectedfederalincometaxtreatment oftheCombination asatax-freereorganization toBrooklynUnionshareholders (asdescribed under"FederalIncomeTaxConsiderations
| |
| -MaterialFederalIncomeTaxConsequences"
| |
| );(v)theimmediate reduction ingasandelectricratestoreflectanticipated synergysavings,ascontemplated byBrooklynUnionandLILCO,andthebeliefthat,customers willbenefitfromabroaderrangeofinnovative energyproductsandservices; (vi)thetermsoftheBrooklynUnion/LILCO Agreement, whichprovideforbalancedrepresentations andwarranties, conditions toclosingandrightstotermination; and(vii)theopinionofBrooklyn94 Union'sfinancial advisor,MerrillLynch,totheeffectthat,asofthedatehereofandbasedupontheassumptions made,mattersconsidered andlimitsofreviewinconnection withsuchopinion,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionC,'ommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880"sharesofHoldingCompanyCommonStock,andiftheLIPA'ransaction werenotconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.Indetermining thattheCombination isfairtoBrooklynUnion'sshareholders, theBrooklynUnionBoardconsidered theabovefactorsasawholeanddidnotassignspecificorrelativeweightstothem.Intheview'oftheBrooklynUnionBoard,eachofthefactorslistedabovereinforced itsbeliefthatthecombinedentitywouldhaveexcellent'usiness prospects goingforwar'd.
| |
| BecauseBrooklynUnion'sshareholders collectively wouldownapproximately 34%(or32%iftheLIPATransaction isconsummated) ofthecombinedentity.baseduponthecapitalization ofthecompanies asofDecember29,1996,thedateoftheOriginalAgreement, theprospects ofsuchentitywereanimportant factortotheBrooklynUnionBoardindetermining whethertoapprovethetransaction.
| |
| THEBROOKL'YN UNIONBOARD,BYAUNANIMOUS VOTE,HASADOPTEDTHEBROOKLYNUNION/LILCO AGREEMENT, BELIEVESTHATTHETERMSOFTHECOMBINATION AREFAIRTOBROOKLYNUNION'S'HAREHOLDERS ANDUNANIMOUSLY, RECOMMENDS THATTHESHAREHOLDERS OFBROOKLYNUNIONVOTETOADOPTTHEBROOKLYNUNION/LILCO AGREEMENT.
| |
| Inconsidering therecommendation oftheBrooklynUnionBoardwithrespecttotheBrooklynUnion/LILCO Agreement, shareholders shouldbeawarethatcertainmembersofBrooklynUnion'smanagement andtheBrooklynUnionBoardhavecertaininterests intheCombination thataredifferent from,orinadditionto,theinterests ofshareholders ofBrooklynUniongenerally andthatcouldpotentially represent conflicts ofinterest.
| |
| TheBrooklynUnionBoardwasawareoftheseinterests andconsidered them,amongothermatters,inadoptingtheBrooklynUnion/LILCO Agreement.
| |
| See"TheBrooklynUnion/LILCO Combination
| |
| -Potential Conflicts ofInterests ofCertainPersonsintheCombination."-
| |
| 0OpinionofBrooklynUnion'sFinancial AdvisorEOnDecember29,1996,MerrillLynchdelivered itsoralopinion,whichwassubsequently confirmed inawrittenopiniondatedasofsuchdate,totheBrooklynUnionBoardtotheeffectthat,asofsuchdate,andbasedupontheassumptions made,mattersconsidered andlimitsofreviewsctforthinsuchopinion,theBrooklynUnionRatioofoneshareof,HoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewifthdLIPATransaction werenotconsummated, underwhichcircumstances'each shareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.Inconnection withtheapprovalbytheBrooklynUnionBoardoftheBrooklyn, Union/LILCO Agreement, MerrillLynchdelivered itsopiniontotheBrooklynUnionBoardonJune26,1997totheeffectthat,asofsuchdate,andbasedupontheassumptions made,mattersconsidered andlimitsofreviewsetforthinsuchopinion,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStock,fromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock.Inaddition, MerrillLynchdelivered itswrittenopiniontotheBrooklynUnionBoarddatedasofthedateofthisJointProxyStatement/Prospectus, totheeffectthat,asofsuchdate,andbasedupontheassumptions made,mattersconsidered andlimitsofreviewsetforthinsuchopinion,theBrooklynUnionRatioofoneshareofHolding'Company CommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances each'hare ofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock,andiftheLIPATransaction werenotconsummated, underwhich95 circumstances eachshareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.References hereintothe"MerrillLynchOpinion"refertothewrittenopinion,ofMerrillLynchdatedasofthedateofthisJointProxyStatement/Prospectus.
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| AcopyoftheMerrillLynchOpinion,whichsetsforththeassumptions made,mattersconsidered andcertainlimitations onthescopeofreviewundertaken by,MerrillLynch,isattachedasAnnexEtothisJointProxyStatement/Prospectus, BrooklynUnionshareholders areurgedtoreadsuchopinioninitsentirety.
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| TheMerrillLynchOpinionisdirectedonlytothefairnessoftheBrooklynUnionRatiofromafinancial pointofv'iew,and doesnotconstitute arecommendation toanyBrooklynUnionshareholder astohowsuchshareholder shouldvoteattheBrooklynUnionMeeting.ThesummaryoftheMerrillLynchOpinionsetforthinthisJointProxyStatement/Prospectus isqualified initsentiretybyreference tothefulltextofsuchopinion.InarrivingattheMenillLynchOpinion,MerrillLynch,among'other things:(i)reviewedBrooklynUnion'sAnnualReports,Forms10-Kandrelatedfinancial information forthethreefiscalyearsendedSeptember 30,1996andBrooklynUnion'sForms10-Qandtherelatedunaudited financial information forthequarterly periodsendingDecember31,1996andMarch31',1997;(ii)reviewedLILCO'sAnnualReports,Forms10-Kandrelatedfinancial information forthethreefiscalyearsendedDecember31,1996andLILCO's'Form 10-Qandtherelatedunaudited financial information forthequarterly periodendingMarch31,1997;(iii)reviewed.certaininformation, including financial forecasts, relatingtothebusiness,
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| : earnings, cashflow,assetsandprospects ofBrooklynUnionandLILCO,furnished toMerrillLynchbyBrooklynUnionandLILCO;(iv)conducted discussions withmembersofseniormanagement ofBrooklynUnionandLILCOconcerning theirrespective businesses, regulatory environments, prospects andstrategic objectives; (v)reviewedthehistorical marketpricesandtradingactivityforBrooklynUnionCommonStockandLILCOCommonStockandcomparedthemwiththatofcertainpubliclytradedcompanies whichMerrillLynchdeemedtobcreasonably similartoBrooklynUnionandLILCO,respectively; (vi)comparedtheresultsofoperations ofBrooklynUnionandLILCOwiththatofcertaincompanies whichMerrillLynchdeemedtobereasonably similartoBrooklynUnionandLILCO,respectively; (vii)comparedtheproposedfinancial termsofthetransactions contemplated bytheBrooklynUnion/LILCO Agreement withthefinancial termsofcertainothermergersandacquisitions whichMerrillLynchdeemedtoberelevant; (viii)considered thepotential proformaeffectoftheCombination, including onBrooklynUnion'scapitalization ratiosandearnings, dividends andbookvaluepershare;(ix)reviewedtheBrooklynUnion/LILCO Agreement; (x)reviewedtheLIPAAgreement; and(xi)reviewedsuchotherfinancial studiesandanalysesandperformed suchotherinvestigations andtookintoaccountsuchothermattersasMerrillLynchdeemednecessary, including MerrillLynch'sassessment ofgeneraleconomic, marketandmonetaryconditions.
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| pfInpreparing theMerrillLynchOpinion,Jvierrill LynchassumedwiththeconsentoftheBrooklynUnionBoardtliattheLIPATransaction, ifconsummated, wouldbeconsummated onthetermscontained intheLIPAAgreemcnt.
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| Inpreparing theMerrillLynchOpinion,MerrillLynchalsoassumedandreliedontheaccuracyandcompleteness ofallinformation suppliedorotherwise madeavailable toitorpubliclyavailable ordiscussed, withorreviewedbyorforit,andMerrillLynchdidnotassumeanyresponsibility forindependently verifying suchinformation orundertaking anindependent evaluation orappraisal ofanyoftheassetsorliabilities ofBrooklynUnionorLILCO.Inaddition, MerrillLynchdidnotconductanyphysicalinspection oftheproperties orfacilities ofBrooklynUnionorLILCO.Withrespecttothefinancial forecasts furnished toordiscussed withMerrillLynchbyBrooklynUnionandLILCO,MerrillLynchassumedthattheyhadbeenreasonably preparedandreflected thebestcurrently available estimates andjudgments ofBrooklynUnion'sorLILCO'smanagement asto'theexpectedfuturefinancial performance ofBrooklynUnionorLILCO,asthecasemaybe,andastotheexpectedfutureprojcctcd outcomesofvariouslegal,regulatory andothercontingencies.
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| Inthatregard,LILCO'sfinancial forecasts forthecaseinwhichLILCO,retains ownership ofitselectrictr'ansmission anddistribution system,substantially allofitselectricregulatory assetsandcertainotherinterests andtheLIPATransaction isnotconsummated, assumed,amongotherthings(i)thatLILCOwillbesubjecttonoreduction inelectricratesforthefive-year periodendingDecember31,2002,(ii)thatLILCOwillfullyrecoverinitscurrentandfutureelectricratesallofitscostsreferredtointheNotestoFinanciaL Statements ofLILCOforthe,yearended96 December31,1996,associated withthetransferoftheShorehamNuclearPowerStationtoLIPAanddecommissioning thereof,ontermsnolessfavorable toLILCOthanthetermscurrently ineffect,and(iii)thattherewillbenoadversechangestoLILCOingeneralcompetitive conditions forthetransmission andsaleofelectricity'n theareasservicedbyLILCOthroughtheconstruction ofnewtransmission linestoLongIslandorotherwise.
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| MerrillLynchassumedthattheCombination willbeaccounted forasapoolingofinterests inthecasewheretheLIPATransaction isnotconsummated andtha'ttheMergerwillqualifyasatax-freereorganization forU.S.federalincometaxpurposes.
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| TheMerrillLynchOpinionwasnecessarily baseduponmarket,economicandotherconditions astheyexistedandcouldbeevaluated asofthedateofsuchopinion.MerrillLyhchassumedthatinthecourseofobtaining thenecessary regulatory orotherconsentsorapprovals fortheCombination andtheLIPATransaction, norestrictions, including anydivestiture requirements oramendments ormodifications, willbeimposedthat'illhaveamaterialadverseeffectonthecontemplated benefitsoftheCombination ortheLIPATransaction.
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| TheMerrillLynchOpinionwasaddressed totheBrooklynUnionBoardanddoesnotconstitute arecommendation toanyshareholders astohowsuchshareholders shouldvoteontlieproposedCombination.
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| Inconnection withthepreparation oftheMerrillLynchOpinion,MerrillLynchwasnotauthorized byBrooklynUnionortheBrooklynUnionBoardtosolicit,norhasMerrillLynchsolicited, third-party indications ofinterestfortheacquisition ofalloranypartofBrooklynUnion.Inaddition, MerrillLynchexpressed noopinionasto'whatthevalueoftheHoldingCompanyCommonStockactuallywillbewhenissuedtotheholdersofsharesoftheBrooklynUnionCommonStockuponconsummation oftheCombination orwhatthevalueoftheBrooklynUnionCommonStockorLILCOCommonStockwillbebetweenthedateofsuchopinionandtheconsummation oftheCombination.
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| Nootherlimitations wereimposedbyBrooklynUniononMerrillLynchwithrespecttotheinvestigations madeorprocedures followedbyMerrillLynchinrendering itsopinion.Thefollowing isasummaryofthematerialfinancial andcomparative analysesperformed byMerrillLynchinarrivingattheMerrillLynchopiniondelivered totheBrooklynUnionBoardonDecember29,1996.TradingRatioAnalysis.
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| MerrillLynchreviewedtheperformance ofthedailyclosingpricespershareofLILCOCommonStockandBrooklynUnionCommonStockinrelationtoeachotherfortfiethree-year periodended'onDecember19,1996.MerrillLynchalsoreviewedthehistorical i'atiosofsuchdailyclosingpricespershareofLILCOCommonStocktothoseofBrooklynUnionCommonS(ock(the"Historical TradingRatios")fortheperiodfromDecember19,1993throughDecember19,1996,a'ndthemeanofsuchHistorical TradingRatiosfortheone-year, two-yearandthree-year periodsendedonDecember19,1996,andcomparedsuchHistorical TradingRatiostotheOriginalRatioof0.803andtheLIPARatioof0.880.Thisanalysisshowedthatduring'the three-year periodendedonDecember19,1996,themaximumHistorical TradingRatiowas0.942,theminimumHistorical TradingRatiowas0.542,andthemeanHistorical TradingRatiosfortheone-year, two-yearandthree-year periodsendedonDecember19,1996were0.635,0.657and0.705,respectively.
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| Co>reparable PubliclyTradedCompanyAualysis.,
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| Usingpubliclyavailable information, MerrillLynchcomparedcertainfinancial andoperating information andratios(described below)forBrooklynUnionandLILCO,respectively, withthecorresponding financial andoperating information andratiosforseparategroupsofpubliclytradedcompanies thatMerrillLynchdeemedtobereasonably comparable'to BrooklynUnionandLILCO,respectively.
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| Thecompanies includedintheBrooklynUnioncomparable companyanalyseswere:AGLResources, Inc.,LacledeGasCompany,NationalFuelGasCompany,NewJerseyResources Corporation, PeoplesEnergyCorporation andWashington GasLightCompany,(collectively, the"Brooklyn UnionComparables"),
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| Thecompanies includedintheLILCOanalyseswere:BostonEdisonCompany,Consolidated EdisonCompanyofNewYork,Inc.,NewYorkStateElectric&GasCorporation andPublicServiceEnterprise GroupIncorporated (collectively, the"LILCOComparables").
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| MerrillLynchderivedanestimated valuation rangeforBrooklynUnionbycomparing:
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| (i)currenttradingvaluetoestimated 1997earningspersharefortheBrooklynUnionComparables, whichestimates wereobtainedfromInstitutional BrokersEstimateSystemandrangedfrom13.0xto15.0x,comparedtoamultipleof14.4xforBrooklynUnionCommonStockbaseduponestimates fromInstitutional BrokersEstimateSystem;(ii)current97 tradingvaluetobookvaluefortheBrooklynUnionComparables, whichrangedfrom1.50xto2.00x,comparedtoamultipleof1.69xforBrooklynUnionCommonStock;and(iii)thedividendyieldratiofortheBrooklynUnionComparablcs, whichrangedfrom4.0%to6.0%,comparedtothedividendyieldratioof4.6%forBrooklynUnionCommonStock.MerrillLynchderivedanestimated valuation rangeforLILCObycomparing:
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| (i)currenttradingvaluetoestimated 1997earningspersharefortheLILCOComparables, whichestimates wereobtainedfromInstitutional BrokersEstimateSystem,whichrangedfrom8.0xto10.5x,comparedtoamultipleof8.8xforLILCOCommonStockbaseduponestimates obtainedfromInstitutional BrokersEstimateSystem;(ii)currenttradingvaluetobookvalue,fortheLILCOComparables, whichrangedfrom0.80xto1.20x,comparedtoamultipleof0.91xforLILCOCommonStock;and(iii)thedividendyieldratiofortheLILCO,Comparables, whichrangedfrom7%to9%,comparedtothedividendyieldratioof9.3%forLILCO'Common Stock.Basedupontheestimated valuation rangesofBrooklynUnionandLILCOinsuchanalyses, MemllLynchcalculated animpliedexchangeratioofashareofLILCOCommonStocktoashareoFBrooklynUnionCommonStockrangingfrom0361to1.052,comparedtotheOriginalRatioof0.803;Nopubliccompanyutilizedasacomparison intheanalysesdescribed aboveisidentical toBrooklynUnionor'LILCO.
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| Accordingly, ananalysisofpubliclytradedcomparable companies isnotmathematical; ratheritinvolvescomplexconsiderations andjudgments concerning differences infinancial andoperating characteristics ofthecomparable companies andotherfactorsthatcouldaffectthepublictradingvalueofthecomparable companies orcompanytowhichtheyarebeingcompared.
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| MergerTransaction Analysis.
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| Usingpubliclyavailable information, MerrillLynchreviewedtwelvetransactions announced betweenJune28,1994andOctober14,1996,involving themergerofselectedelectricutilitycompanies (the"Electric MergerTransactions"
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| ),andfourtransactions announced betweenOctober18,1995andOctober,14, 1996,involving themergerofgasdistribution companies (the"GasMergerTransactions"
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| ).TheElectricMergerTransactions andthedateeachtransaction wasannounced wercasfollows:EnovaCorporation/Pacific Enterprises Inc.(October1996),Centerior EnergyCorporation/Ohio EdisonCompany(September 1996),AtlanticEnergy,Inc./Delmarva Power&LightCompany(August1996),PortlandGeneralCorporation/Enron Corp.(July1996),UtiliCorp UnitedInc./Kansas CityPower&LightConipany(January1996),IESIndustries Inc./Interstate PowerCompany/WPL
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| : Holdings, Inc.(November 1/95),PotomacElectricPowerCompany/Baltimore GasandElectricCompany(September 1995),Southwestern PublicServiceCompany/Public ServiceCompanyofColorado(August1995),CIPSCOIncorporated/Union ElectricCompany(August1995),NorthernStatesPowerCompany/Wisconsin EnergyCorporation (May1995),Iowa-Illinois GasandElectricCompany/Midwest Resources Inc.(July1994)andSierraPacificResources/Washington WaterPowerCompany(June1994).TheGasMergerTransactions andthe,dateeachtransaction wasannounced wereasfollows:PacificEnterprises/Enova Corporation (October1996),UnitedCities.Gas Company/Atmos EnergyCorporation (July1996),NorAmEnergyCorp./HoustonIndustries Incorporated (August1996)andWashington EnergyCompanyInc./Puget SoundPower&LightCompany(October1995).MerrillLynchderivedanestimated valuation rangeforBrooklynUnionbycomparing theoffervalue(definedastheequityvaluedetermined usingmarketpricespriortotheannouncement date)ineachoftheGasMergerTransactions asamultipleof(i)netincomeoftheacquiredcompanyforthelatesttwelvemonths,whichrangedfrom18.0xto22.0x,and(ii)bookvalueoftheacquiredcompany,whichranged from1.75xto2.25x.MerrillLynchalsoderivedanestimated valuation rangeforLILCObycomparing theoffervalueineachoftheElectricMergerTransactions asamultipleof(i)latesttwelvemonthearningspershareoftheacquiredcompany,whichrangedfrom9.0xto13.0x,and(ii)bookvalueoftheacquiredcompany,whichrangedfrom1.00xto1.50x.nchmon~Basedupontheestimated valuations ofBrooklynUnionandLILCOinsuchanalyses, MerrillLycalculated animpliedexchangeratioofashareofLILCOCommonStocktoashareofBrooklynUnion.Com Stockrangingfrom0.451to0.988,comparedtotheOriginalRatioof0.803.98 tNoneofthebusinesscombinations utilizedasacomparison intheanalysesdescribed aboveisidentical totheproposedCombination.
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| Accordingly, ananalysisofcomparable businesscombinations isnotmathematical; ratheritinvolvescomplexconsiderations andjudgments concerning differences:
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| infinancial andoperating characteristics ofthecomparable companies andotherfactorsthatcouldaffectthepublictradingvalueofthecomparable companies orcompanytowhichtheyarebeingcompared, Discounted CashFloivAnalysis.
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| MerrillLynchderivedestimated valuation rangesforBrooklynUnionandLILCObyperforming discounted cashflow("DCF')analyses.
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| InthecaseofBrooklynUnion,theDCFwascalculated assumingdiscountratesrangingfrom8.0%to9.0%,andwascomprised ofthesumofthepresentvalueof(i)theprojected unlevered freecashfiowsforyears1998to2002estimated byBrooklynUnion,and(ii)theyear2002terminalvaluebasedupon(a)arangeofmultiples from12.0xto15.0x.ofprojected year2002netincome,and(b)arangeofmultiples from1.60xto2.00xofprojected year2002bookvalue.InthecaseofLILCO,theDCFwascalculated assumingdiscountratesrangingfrom7.75%to8.75%,andwascomprised ofthesumofthepresentvalueof(i)theprojected unlevered freecashflowsforyears1998to2002estimated byLILCO,and(ii)theyear2002terminalvaluebasedupon(a)arangeofmultiples from8.5xto10.5xofprojected year2002netincome,and(b)arangeofmultiples from0.80xto1.20xofprojected year2002bookvalue.Basedupontheestimated valuation rangesofBrooklynUnionandLILCOsetforthabove,MerrillLynchcalculated animpliedexchangeratioofashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom0.553to0.924,comparedtotheOriginalRatioof0.803.Confribltion Analysis.
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| MemllLynchcalculated thecontribution ofeachofBrooklynUnionandLILCOtotheproformacombinedcompanywithrespectto(i)earningspercommonshare,(ii)dividends percommonIshareand(iii)bookvaluepercommonshare,ineachcaseforthefiscalyears1993through1995("Historical Period"),andforthefiscalyears1996throu'gh2000(the"Projected Period"),forBrooklynUnionusingreportedresultsforfiscalyear1996andcertainprojections providedbythemanagement ofBrooklynUnion,andforLILCOusingcertainprojections forfiscalyears1996and1997obtainedfromFirstCallCorporation andforfiscalyears1998through2000providedbyLILCOmanagement.
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| TheanalysisofearningspercommonshareyieldedanimpliedexchangeratioforashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom1.283xto1.105xduringtheHistorical Period,and1.108xto.932xfortheProjected Period.TheanalysisofdividendpercommonshareyieldedanimpliedexchangeratioforashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom1.333xto1.281xfortheHistorical Period,and1.254xto1.156xfortheProjected Period.TheanalysisofbookvaluepercommonshareyieldedanimpliedexchangeratioforashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom1.278xto1.210xfortheHistorical Period,and1.177xto1.110xfortheProjected Period.Basedupontheestimated impliedratiosinsuchanalyses, MerrillLynchcalculated impliedexchangeratiosofashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom1.105to1.333duringtheHistorical Period,and0.932to1.054fortheProjected Period,comparedtotheOriginalRatioof0.803.Thefollowirig isasummaryofthematerialfinancial andcomparative analysesperformed byMerrillLynchinconnection withthepreparation oftheopinionofMerrillLynchdatedasofJune26,1997.Contribution Analysis.
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| MerrillLynchcalculated thecontribution ofeachofBrooklynUnionandLILCOtotheproformacombinedcompanyassumingthattheLIPATransaction isconsummated baseduponvaluations (i)forBrooklynUnionusingestimated 1997earningsandmultiples rangingfrom13.0xto14.0x,(ii)forLILCO'sgasdistribution businessusingestimated 1997earningsandmultiples rangingfrom13.0xto14.0x,l(iii)forLILCO'selectricgeneration businessusingLILCO'sgenerating capacityandmultiples rangingfrom$200to'$250perkilowattcapacity, (iv)forLILCO'smanagement contractwithLIPAbaseduponthepresentvalueofthefeesandotherpaymentsprojected byLILCO'smanagement tobereceivedbyLILCOduringthe99 termofthecontract; and(v)thehypothetical cashproceedstothecombinedcompany(netofestimated transaction-related expensesandliabilities butincluding thepresentvalueofcertaintax-related benefits) ofapproximately
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| $1.96billion.ThisanalysisshowedthatBrooklynUnionshareholders wouldcontribute approximately 30%ofthetotalaggregate valueofthecombinedcompanyandwouldownapproximately 32%ofthecombinedcompanyonaproformabasis.ImpliedAcquisition Vair<ation Analysis.
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| MerrillLynchderivedanestimated rangeofimpliedmultiples forLILCO'selectricgeneration businessbysubtracting fromtheaggregate equityvaluation oftheBrooklynUnionCommonStocktobeexchanged intheCombination (usingtheLIPARatioof0.880andanassumedpricepershareofBrooklynUnionCommonStockof$29.00)(i)thehypothetical cashproceeds'o thecombinedcompany(netofestimated transaction-related expensesandliabilities butincluding thepresentvalueofcertaintax-related benefits) ofapproximately
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| $1.96billion,(ii)thepresentvalueofthefeesandotherpaymentsprojected byLILCO'smanagement tobereceivedbyLILCOunderLILCO'smanagement contractwithLIPAduringthetermofsuchcontract, and(iii)multiples forLILCO'sgasdistribution businessrangingfrom14.0xto16.0xestimated 1997netincomeprovidedbyLILCO.Thisanalysisyieldedimpliedmultiples ofnetincomeforLILCO'selectricgeneration businessrangingfrom2.2xto5.5x.Thesummarysetforthabovedoesnotpurporttobeacompletedescription oftheanalysesperformed byMerrillLynch,althoughitisasummaryofthematerialfinancial andcomparative analysesperformed byMerrillLynchinarrivingattheMerrillLynchOpinion.Arrivingatafairnessopinionisacomplexprocessnotnecessarily susceptible topartialanalysisorsummarydescription.
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| MerrillLynchbelievesthatitsanalysesmustbeconsidered asawholeandthatselecting portionsofitsanalysesandofthefactorsconsidered byit,withoutconsidering allsuchfactors'nd
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| : analyses, couldcreateamisleading viewoftheprocesses underlying itsopinion.MerrillLynchdidnotassignrelativeweightstoanyofitsanalysesinpreparing itsopinion.Themattersconsidered byMerrillLynchinitsanalysesarebasedonnumerousmacroeconomic, operating andfinancial assumptions withrespecttoindustryperformance, generalbusinessandeconomicconditions andothermatters,manyofwhicharebeyondBrooklynUnion'sorLILCO'scontrolandinvolvetheapplication
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| 'ofcomplexmethodologies andeducatedjudgment.
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| Anyestimates incorporated intheanalysesperformed byMerrillLyncharenotnecessarily indicative ofactualpastorfutureresultsorvalues,whichmaybesignificantly moreorlessfavorable thansuchestimates.
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| Estimated valuesdonotpurporttobeappraisals anddonotnecessarily reflectthepricesatwhichbusinesses orcompanies maybesoldinthefuture,andsuchestimates areinherently subjecttouncertainty; TheBrooklynUnionBoardselectedMerrillLynchtoactasitsfinancial advisorbecauseofMerrillLynch'sreputation asaninternationally recognized investment bankingfirmwithsubstantial experience intransactions similartotheCombination andbecauseitisfamiliarwithBrooklynUnionanditsbusiness.
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| Aspartofitsinvestment bankingbusiness, MerrillLynchisco'ntinually engag'edinthevaluation ofbusinesses andtheirsecurities inconnection withmergersandacquisitions.
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| 4EPursuanttoaletteragreement datedJanuaryI,1995,asamendedasofOctober12,1995andasofMarch14,1997,BrooklynUnionhasagreedtopayMerrillLynch(i)afeeof$1,000,000 onMarch14,1997againstwhichceitainretainerfeeswerecredited, (ii)anadditional feeof$1,500,000 uponapprovaloftheCombination byholdersoftheBrooklynUnionCommonStock,(iii)anadditional feeof$9,000,000 uponclosingoftheCombination, and(iv)uponreceiptbyBrooklynUnionofanybreak-uportoppingfeeor,reimbursement ofexpensesintheeventtheCombination isnotconsummated, anadditional feeintheamountoftenpercent(10%)ofanamountequaltoanybreak-uportoppingfeereceivedbyBrooklynUnionplusanyexpensereimbursement receivedbyBrooklynUnion,lessout-of-pocket expensespaidbyBrooklynUniontothirdpartiesinconnection withtheCombination, providedthatanyadditional feepaidpursuanttoclauses(i)or(ii)aboveshallbecreditedagainstthefeespayablepursuanttoclauses(iii)or(iv)above.Inaddition, BrooklynUnionhasagreedtoreimburse MerrillLynchforitsreasonable.
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| expenses(including thereasoriable feesanddisbursements ofitslegalcounsel)andtoindemnify MerrillLynchandcertainrelatedpartiesfromandagainstcertainliabilities, including liabilities underthefederalsecurities laws;ajsingoutofitsengagement.
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| BrooklynUnionhasalsoagreedthat100 MerrillLynchand/oranyofitsaffiliates mayunderwrite orplaceanysecurities ofanyentity,including, withoutlimitation, LIPA,issuedinconnection withorasaresultoftheLIPATransaction.
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| MerrillLynchhas,inthepast,providedfinancial advisoryandfinancing servicestoBrooklynUnionandfinancing servicestoLILCOandhasreceivedfeesfortherendering ofsuchservices.
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| Inaddition, intheordinarycourseofMerrillLynch'sbusiness, MerrillLynchmayactivelytradethesecurities ofBrooklynUnionorLILCOforitsown'account andfortheaccountsofitscustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
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| 1Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction Ilmploynient Agreenient witIsRobertB.Catell.PursuanttotheBrooklynUnion/LILCO Agreement, iftheBrooklynUnionShareExchangeisconsummated, theHoldingCompanywillenterintoanemployment agreeinent withMr.RobertB.Catelleffe'ctive upontheEffective Timeproviding forhimtoassumethepositions ofPresident andChiefOperating Officercommencing upontheEffective.
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| TimeandforhimtoserveasChiefExecutive OfficeroftheHoldingCompanyforafouryearperiodcommencing onthefirstanniversary oftheEffective Time.Underthisemployment agreement, Mr.Catellistoreceivecompensation ontermstobemutuallyagreedupon,butnotlessthanwhathereceivedfromBrooklynUnionasofthedateoftheOriginalAgreement.
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| Mr.Catellwouldalsobeeligibletoreceiveincentive compensation relatedtoachievin'g thesynergies contemplated toberealized'from theCombination.
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| Inaddition, theBrooklynUnion/LILCO Agreement providesthattheemployment agreement withMr.Catellisothevvise tocontaintermsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| VestingofCertainBenefitsforBrooklynUnion'sDirectors andOfficers.
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| UnderBrooklynUnion'sLong-Term Performance Incentive Compensation Planforofficersandcertainkeyemployees ofBrooklynUnion(the"Performance Plan"),upona"changeofcontrol,"
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| asdefinedinthePerformance Plan,alloptionstopurchasesharesofBrooklynUnionCommonStockgrantedunderthePerfonnance Planwillbecomeimmediately exercisable andremainexercisable fortheremainder oftheiroriginalterm.ThePerformance Planalsoprovidesforawardsofperformarice shares,whichentitletheemployeetoreceiveeitheranumberofsharesofBrooklynUnionCommonStockbaseduponachievement ofperformance goalsoveraperfonnance periodorapaymentincashinlieuofsuchshares.Underthetermsof,tliePerformance Plan,upona"changeofcontrol,"
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| theperformance goalsforallsuchperformance shareswillbe.deemedtohavebeenmetandtheemployeewillreceiveeithertheawardedperformance sharesortheequivalent incash,proratedbasedontimeelapsedduringtheperformance period.TheCombination willconstitute achangeofcontrolforthepurposesofthePerformance Plan.TheBrooklyn'nion/LILCO Agreement providesthatupontheEffective Time,eachunexpired andunexercised optiontopurchasesharesofBrooklynUnionCommonStockunderthePerformance Plan,whethervestedorunvested, willbeautomatically converted into,anoptiontopurchasethesamenumberofsharesofHoldingCompanyCommonStockatthesamepershareprice.AsofJune23,1997,optionstopurchase540,500sharesofBrooklynUnionCommonStockand13,000perfonnance shareshavebeengrantedtoBrooklynUnionexecutive officersasagroupunderthe.Performance Plan(including 155,000optionsand4,000performance sharestoMr.Catell,theChairmanandChiefExecutive Officer;92,000optionsand2,300performance sharestoCraigG.Matthews, President andChiefOperating Officer;56,000optionsand2,300performance sharestoHelmutW.Peter,ViceChairman; 42,000optionsand1,100performance sharestoVincentD.Enright,SeniorVice,President andChiefFinancial Officer;and25,000optionsand550performance sharestoAnthonyJ.,DiBrita, Senior,VicePresident).
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| SuchoptionsweregrantedonNovember15,1995andNovember20,1996andvestinequal.installments overthreeyearperiodsfromtheapplicable grantdate.Allsuchperformance sharesv'estoverathreeyearperiodendingSeptember 30,1998,andtheactualnumberofperformance sharesearnediscontingent uponachieving certainperformance targets.Uponconsummation oftheCombination, allsuchoptionswillbevestedandexercisable forthesamenumberofshares101 ofHoldingCompanyCommonStockatanexercisepricerangingfrom$27.00to$30.50per,shareandtheperformance targetsforallsuchperformance sliareswillbedeemedtohavebeenmetandpaymentforaproratedportionofsuchperformance shareswillbemadeassoonaspracticable afterconsummation oftheCombination.
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| BrooklynUnionChangeofControlSeverance Plan.UndertheBrooklynUnionSeniorExecutive ChangeofControlSeverance Plan(the"Severance Plan"),participants areentitledtoreceivecertainseverance benefitsiftheiremployment isterminated undercertaincircumstances withinthreeyearsafteratransaction thatmeetsthedefinition of"changeofcontrol"underthetermsoftheSeverance Plan.Atermination bytheemployerwithout"cause"(asdefinedintheSeverance Plan)orbytheparticipant for"goodreason"(asdefinedintheSeverance Plan,andincluding asignificant diminution ofresponsibilities, anassignment toinappropriate duties,amaterialreduction incompensation orbenefits, oratransferofmorethan50miles),withinthelaterof(i)theendof15monthsafterthe"changeofcontrol"or(ii)90daysafterthe"goodreason"eventoccurs,willresultinthepaymentofbenefitsundertheSeverance Plan.Aparticipant whobecomesentitledtoseverance benefitswillreceivethefollowing:
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| alumpsumcashpaymentofsalary,previously deferredcompensation andaccruedvacationpaythroughthedateoftermination totheextentnotalreadypaid,aproratabonusfortheyearoftermination, andtheparticipant's basesalaryandbonusfortheSeverance Period(asdefinedbelow);continued employeewelfarebenefitsfortheSeverance Period;alumpsumpaymentequaltotheactuarial valueoftheadditional benefitsunderBrooklynUnion'squalified andsupplemental retirement planstheparticipant wouldhavereceivedhadheremainedemployedfortheSeverance Period;andoutplacement servicesatacostofnotmorethan$30,000.Inaddition, theparticipant willreceiveanadditional payment,ifnecessary, tomakesuchparticipant wholeforanyexcisetaxonexcessparachute paymentsimposedontheparticipant.
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| The"Severance Period"isaperiodof,eithertwoorthreeyears(asdesignated bytheOrganization andNominating Committee oftheBrooklynUnionBoard)or,ifless,theperiodremaining untilthe,participant reachesmandatory retirement age.Forthepurposesofeligibility forretirement, medical,dentalandlifeinsurance, theparticipant'will bedeemedtoremainemployedfortheentireSeverance Period.TheBrooklynUnionBoardhasdesignated asparticipants intheSeverance PlanMr.Catell,CraigG.Matthews, HelmutW.Peter,VincentD.Enright,AnthonyJ.DiBritaand6otherSeniorVicePresidents ofBrooklynUnion(eachwiththree-year Severance Periods)and12VicePresidents ofBrooklynUnion(eachwithtwo-yearSeverance Periods).
| |
| IftheCombination occurredonJanuary1,1998,andallparticipants intheplanwereterminated immediately thereafter, itisestimated thattheaggregate after-tax costoftheseverance benefitsundertheSeverance Planwouldbeapproximately
| |
| $19,833,000.
| |
| Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoBrooklynUnion'sCertificate ofIncorporation andBy-LawsAuthorized Capital.Thetotalauthorized capitalstockoftheHoldingCompanywillbe450,000,000 sharesofHoldingCompanyCommonStock,parvalue$.01pershare,and100,000,000'shares ofHoldingCompanyPreferred Stock,parvalue$.01pershare.Thetotalauthorized capitalstockofBrooklynUnionconsistsof900,000sharesofcumulative preferred stock,parvalue$100pershare,2,000,000 sharesofcumulative preferred stock,parvalue$25pershare,and70,000,000 sharesofBrooklynUnionCommonStock,parvalue$.33Npershare.Classification oftheBoardofDirectors.
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| TheBrooklynUnionCertificate andtheBrooklynUnionBy-LawsprovidethattheBrooklynUnionBoardwillbedividedintothreeclasses;each classtoconsistasnearlyaspossibleofone-third ofthedirectors andtobeelectedeverythirdyeartoserveathree-year term.TheHoldingCompanyCertificate andtheHoldingCompanyBy-LawsdonotprovidethattheHoldingCompanyBoardwillbedividedintoclasses.RentovalofDirectors'illing Vacancies ontliejloardofDirectors.
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| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethat,subjecttotherightsof.holdersofHoldingCompanyPreferred 102 Stock,ifany,anydirectorservingontheHoldingCompanyBoardmayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityoftheVotingPower,votingtogetherasasingleclass.TheBrooklynUnionCertificate andtheBrooklynUnionBy-Lawshavenocomparable provision.
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| UndertheNYBCL,unlessthecertificate ofincorporation orby-lawsofacorporation providesotherwise, adirectormayberemovedonlyforcausebythevoteofamajorityofthevotescastatashareholder meetingbytheholdersofsharesentitledtovotethereon.BoththeHoldingCompanyBy-LawsandtheBrooklynUnionBy-Lawsprovidethatvacancies ontheBoardofDirectors maybefilledbytheremaining Directors, eveniflessthana,quorum.MeetingsofShareholders.
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| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethataspecialmeetingofshareholders maybecalledonlybytheHoldingCompanyBoardpursuanttoaresolution approvedbyamajorityoftheentireHoldingCompanyBoard.TheBrooklynUnionBy-Lawsprovidethataspecialmeetingofshareholders maybecalledbytheChairmanoftheBoardofBrooklynUnionorbytheBrooklynUnionBoardpursuanttoaresolution approvedbyamajorityoftheentireBrooklynUnionBoard.AntenCknent ofCorporate OtarterandBy-Laws.TheNYBCLprovidesthatanamendment toacorporation's certificate ofincorporation maybeauthorized byvoteoftheboardofdirectors, followedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereonatameetingofshareholders andtheby-lawsofacorporation maybeamendedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovoteintheelectionofanydirectors ofthecorporation or,ifsoprovidedinthecertificate ofincorporation orby-laws,bytheboardofdirectors bysuchvoteasmaybespecified therein.TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethattheaffirmative voteoftheholdersofatleast80percentoftheVotingStockthenoutstanding, votingtogetherasasingleclass,willberequiredtochangeoradoptanyprovision inconsistent withtheprovisions thereinrelatingtocallingofspecialmeetingsofshareholders, theelectionofdirectors, fillingofvacancies ontheHoldingCompanyBoard,removalofdirectors andtheamendment ofcertainprovisions theHoldingCompanyBy-LawsandtheHoldingCompanyCertificate.
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| TheBrooklynUnionCertificate issilentonsuchmattersandtheBrooklynUnionBy-Lawsprovidethatby-lawsmaybeamendedbytheBrooklynUnionBoardorbytheholdersofthesharesatthetimeentitledtovoteintheelectionofanydirectors andthatby-lawsadoptedbytheBrooklynUnionBoardmaybeamendedorrepealedbytheshareholders insuchmanner,0+icers.TheHoldingCompanyBy-Lawsprovidethat,effective asofthefirstanniversary oftheconsummation oftheBindingSliareExchanges, Dr.Catacosinos shallbeelectedChairmanoftheHoldingCompanyBoardandChairmanoftheExecutive Committee oftheHoldingCompanyBoardandMr.CatellshallbeelectedChiefExecutive OfficeroftheHoldingCompany.ThisBy-Lawmaybemodifiedonlybytheaffirmative voteoftwo-thirds oftheentireHoldingCompanyBoard.TheBrooklynUnion-Meeting Genera/.ThisJointProxyStatement/Prospectus isfurnished toholdersofBrooklynUnionCommonStockinconnection withthesolicitation ofproxiesbytheBrooklynUnionBoardforuseattheBrooklynUnionMeetingtoconsiderandvoteupontheadoptionoftheBrooklynUnion/LILCO Agreeinent, theKeySpanShareExchange(asdescribed inAnnexJhereto)andtotransactsuchotherbusinessasmayproperlycomebeforetheBrooklynUnionMeeting.EachcopyofthisJointProxyStatement/Prospectus mailedtoshareholders ofBrooklynUnionisaccompanied byaformofproxyforuseattheBrooklynUnionMeeting.IThisJointProxyStatement/Prospectus isalsofurnished toBrooklynUnionshareholders asaprospectus inconnection withtheissuancebytheHoldingCompanyofthesharesofHoldingCompanyCommonStockinconnection withtheCombination andaprospectus inconnection withtheissuancebyKeySpanofthesharesofKeySpanCommonStockinconnection withKeySpanShareExchange.
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| Date,PlaceandTiIne;RecordDate.TheBrooklynUnionMeetingwillbeheldatOperaHouse,BrooklynAcademyofMusic,30Lafayette Avenue,Brooklyn, NewYork11217,onThursday, August7,1997,at3:00103 tp.m.localtime.TheBrooklynUnionBoardhasfixed.the closeofbusinessonJune26,1997astheRecordDateforthedetermination oftheholdersofBrooklynUnionCommonStockentitledtoreceivenoticeofandtovoteattheBrooklynUnionMeeting.VotingRights'.AtthecloseofbusinessonJune23,199751,864,212 sharesofBrooklynUnionCommonStockwereoutstanding.
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| EachshareofBrooklyn, UnionCommonStockoutstanding ontheRecordDateis"entitledtoonevoteuponeachmatterproperlysubmitted attheBrooklynUnionMeeting.Theaffirmative voteofatleasttwo-thirds oftheoutstanding sharesofBrooklynUnionCommonStockisrequiredtoadopttheBrooklynUnion/LILCO Agreement andtoadopttheKeySpanExchangeAgreement attheBrooklynUnionMeeting.ThepresenceinpersonorbyproxyattheBrooklynUnionMeetingoftheholdersofatleastamajorityoftheoutstanding sharesofBrooklynUnionCommonStockisnecessary toconstitute aquorumforthetransaction ofbusiness.
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| 'Abstentions willbecountedaspresentforpurposesofdetermining whetheraquorumispresent.BecausetheadoptionoftheBrooklynUnion/LILCO Agreement andtheKeySpanExchangeAgreement'requires theapprovalofatleasttwo-thirds oftheoutstanding sharesofBrooklynUnionCommonStock,abstentions orthefailuretovotewillhavethesameeffectasanegativevote.UndertherulesoftheNewYorkStockExchange, brokerswhoholdsharesinstreetnameforcustomers willnothavetheauthority tovoteontheadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement unlesstheyreceivespecificinstructions frombeneficial owners.Suchabrokernon-votewillbecountedaspresentforpurposesofaquorumbutwillotherwise havethes'arneeffectasavoteagainstadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement.
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| AsofMay1,1997,directors andcxccutive officersofBrooklynUnionandtheiraffiliates ownedbeneficially anaggregate of120,405sharesofBrooklynUnionCommonStock(including shareswhichmaybeacquireduponexerciseofemployeestockoptions),
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| orlessthanonepercentofthesharesofBrooklynUnionCommonStockoutstanding onsuchdate.Directors andexecutive officersofBrooklynUnionhaveindicated theirintention tovotetheirsharesofBrooklynUnionCommonStockinfavorofadoptionoftheBrooklynUnion/LILCO Agreement andtheKeySpanExchangeAgreement.
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| See"Selected Information Concerning BrooklynUnion-Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction."
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| VotingandRevocation ofProxies.SharesofBrooklynUnionCommonStockrepresented byaproxyproperlysignedandreceivedatorpriortotheBrooklynUnionMeeting,unlesssubsequently revoked,willbevotedinaccordance withtheinstructions thereon.Ifaproxyissignedandreturnedwithoutindicating anyvotinginstructions, thesharesofBrooklynUnionCommonStockrepresented bythcproxywillbevotedFORadoptionoftheBrooklynUnion/LILCO Agreement andFORadoptionoftheKeySpanExchangeAgreement.
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| BrooklynUnionproxyholdersmayintheirdiscretion votesharesvotedinfavorofadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement toadjourntheBrooklynUnionMeetingtosolicitadditional proxiesinfavorofsuchproposal.
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| Anyproxygivenpursuanttothissolicitation mayberevokedbythepersongivingitatanytimebeforetheproxyisvotedbythefilingofaninstrument revokingitorofadulyexecutedproxybearingalaterdatewiththeSecretary ofBrooklynUnion,priortoorattheBrooklynUnionMeeting,orbyvotinginpersonattheBrooklynUnionMeeting.Allwrittennoticesofrevocation andothercommunications withrespecttorevocation ofproxiesshouldbeaddressed asfollows:TheBrooklynUnionGasCompany,OneMetroTech Center,Brooklyn, NewYork11201-3851, Attention:
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| Secretary.
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| Attendance attheBrooklynUnionMeetingwillnotinandofitselfconstitute revocation ofaproxy.SharesofBrooklynUnionCommonStockheldinthenamesofthetrusteesunderBrooklynUnion'sEmployeeSavingsPlanmaybevotedbysuchtrusteesupontheinstructions ofparticipants insuchPlan,orintheabsencethereof,assuchtrusteesdeemappropriate.
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| TheBrooklynUnionBoardisnotcurrently awareofanybusinesstobeacteduponattheBrooklynUnionMeetingotherthanasdescribed herein.,If, how'ever, othermattersareproperlybroughtbeforethe,BrooklynUnionMeeting,thepersonsappointed asproxieswillhavediscretion tovoteoractthereonaccording totheirbestjudgment.
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| Shareholders ofBrooklynUnionwillnotbeentitledtopresentanymattersforconsideration attheBrooklynUnionMeeting.Confidential Voting.BrooklynUnfonhasadoptedapolicytotheeffectthatallproxy(votinginstruction) cards,ballotsandvotetabulations whichidentifytheparticular voteofaBrooklynUnionshareholder aretobekeptsecretfromBrooklynUnion,itsdirectors, officersandemployees.
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| Accordingly, proxycardsarereturnedinenvelopes addressed tothetabulator, Georgeson
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| &CompanyInc,.Wall StreetStation,P.O.Box1102,NewYork,pewYork10269-0667, whichreceivesandtabulates theproxiesandisindependent ofBrooklynUnion.Thefinaltabulation isinspected byaninspector(s) ofelectionwhoalsoisindependent ofBrooklynUnion,itsdirectors, officersandemployees.
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| Theidentityandvoteofanyshareholder willbedisclosed neithertoBrooklynUnion,itsdirectors, officersoremployees,"
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| nortoanythirdpartyexcept(i)toallowtheindependent inspector(s) ofelectiontocertifytheresultsofthevotetoBrooklynUnion,itsdirectors, officersandemployees; (ii)asnecessary tomeetapplicable legalrequirements andtoassertordefendclaimsfororagainstBrooklynUnion;or(iii)intheeventashareholder hasmadeawrittencommentonsuchformofproxy.Solicitation ofProxies.'nadditiontosolicitation byinail,directors, officersandemployees ofBrooklynUnion,whowillnotbespecifically compensated forsuchservices, maysolicitproxiesfromtheshareholders ofBrooklynUnion,personally orbytelephone, telecopyortelegramorotherformsofcommunication.
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| Brokerage houses,nominees, fiduciaries andothercustodians willberequested toforwardsoliciting materials tobeneficial ownersandwillbereimbursed fortheirreasonable expensesincurredinsendingproxymaterials tobeneficial owners.Inaddition, BrooklynUnionhasretainedGeorgeson
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| &CompanyInc.toassistinthesolicitation ofproxiesfromitsshareholders.
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| Thefeestobe'paidtosuchfirmforsuchservicesbyBrooklynUnionarenotexpectedtoexceed$25,000,plusreasonable out-of-pocket costsandexpenses.
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| BrooklynUnionwillbearitsownexpensesinconnection withthesolicitation ofproxiesfortheBrooklynUnionMeeting,exceptthateachofBrooklynUnionandLILCOwillpayone-halfofthecostsandexpensesincurredinconnection withprintingthisJointProxyStatement/Prospectus andone-halfofallfilingfees.BusinessofBrooklynUnionBrooklynUnionwasincorporated intheStateof'NewYorkin1895asat:ornbination ofexistingcompanies, tilefirstofwhichwasgrantedafranchise
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| 'in1849.BrooklynUniondistributes naturalgasatretailintheBoroughsofBrooklynandStatenIslandandtwo-thirds oftheBoroughofQueensinNewYorkCity.BrooklynUnion'sprincipal non-utility subsidiaries participate andowninvestments ingasandoilexploration, production andprocessing, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergy-related services.
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| BrooklynUnion'smailingaddressisOneMetroTech Center,Brooklyn, New'ork11201-'3850 anditsgeneraltelephone numberis(718)403-2000.
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| Territory.
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| BrooklynUnion'sserviceterritory isapproximately 187squaremiles.Thepopulation oftheterritory servedisapproximately 4millionpersons.AsofSeptember 30,1996,BrooklynUnionhadapproximately 1,126,000 activemeters,ofwhichapproximately 1,089,000'were residential.
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| Employees.
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| AsofSeptember 30,1996,BrooklynUnionhadapproximately 3,000fulltimeemployees ofwhichapproximately 1,745.belongtoLocal101oftheTransport WorkersUnionand185arerepresented byLocal3oftheInternational Brotherhood ofElectrical Workers.Effective November1995andAugust1995,respectively, BrooklynUnionandtheseunionsagreeduponnewthreeyearlaboragreements whichprovideforwageincreases ofapproximately 9%overthetermoftheagreements.
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| Regulation.
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| Utilityretailsales,whichincludesalesofgas,transportation andbalancing
| |
| : services, aremadeprimarily underrateschedules andtariffsfiledwithandsubjecttothejurisdiction ofthePSC,Amendments have105 beenmadetorateschedules andtariffstoreflect(heconditions andratesunderwhichdeliveryandotherservicesareprovidedtocust'omers whoopttohavetheirgassuppliedbythirdparties.Rateschedules alsohavebeenestablished governing theprovision ofcertainserVicestosuchmarketers.
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| BrooklynUnionisalsosubjecttoregulation bythePSCwithrespecttoissuances andsalesofsecurities, adequacyandcontinuance ofservice,safetyandsitingofcertainfacilities, accounting, andothermatters.rAdditional information concerning BrooklynUnionanditssubsidiaries isincludedintheBrooklynUniondocuments filedwiththeCommission whichareincorporated by,reference herein.See"WhereYouCanFindMoreInformation."
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| SecurityOwnership ofCertainBeneficial OwnersandManagement CurrentOwnership ofBrooklynUnionCommonStock.Thefollowing tablesetsforthinformation asofJune23,1997,withrespecttothenumberofsharesofBrooklynUnionCommonStockbeneficially ownedand/orBrooklynUnionCommonStockequivalents grantedunderthePerformance Plan,theDirectors'eferred Compensation PlanortheCorporate Incentive Compensation Plan,whichdo,notconferanyvotingrights,ownedby(i)directors andcertainexecutive officersofBrooklynUnionand(ii)alldirectors andexecutive officersofBrooklynUnionasagroup.NameR.B.Catell.K.I:Chenault'.S.Christensen
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| .D.H.ElliottA.H.FishmanJ.L.LaroccaC.G.MatthewsE.D.Miller.J.Q.Riordan.C.Uribe.........
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| H.W.PeterA.J.DiBrita.V.D.EnrightAllDirectors andExecutive Officersasagroup,includ-ingthosenamedabove,atotalof24persons.........
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| TotalofCommon'tockBenettctalty
| |
| 'ommonStockOwned&Equivalents Beneficially OwnedCommonStockEquivalents 26,0024,4099,7459,3236,7385,00715,8177,4598,2982,04614,8176,0006,40618,4811,5514,9771,7502,7383,35411,4975,9461,500010,483',6814,3977,521',8584,7687,5734,0001,6534,3201,5136,7982,0464,3341,3192,009184,235'23,96360,272LThefollowing tablesetsforthcertaininformation, withrespecttothesharesofBrooklynUnionCommonStockownedbyeachpersonknownbyBrooklynUniontobethebeneficial ownerofmorethan5%oftheissuedandoutstanding BrooklynUnionCommonStock,asofMarch31,1997.CommonStockTitleofClassNamesandAddresses OwnedPercentage ofClassLongIslandLightingCompany9,948,682*
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| '6.6%175EastOldCountryRoadHicksville, NY11801*Represents thenumberofsharesthatmaybepurchased pursuanttotheAmendedBrooklynUnionStockOptionAgreement attachedas.AnnexCanddescribed inthisJointProxyStatement/Prospectus.
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| See"TheStockOptionAgreements."
| |
| 106 CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS BrooklynUnionandLILCOhavemadeforward-looking statements inthisdocumentandinthedocuments incorporated byreference inthisdocumentthat,aresubjecttorisksanduncertainties.
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| Forward-looking statements includetheinformation concerning possibleorassumedfutureresultsofoperations ofthecompanies andtheHoldingCompanysetforthunder"TheBrooklynUnion/LILCO Combination
| |
| -CommonReasonsfortheCombination,"
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| "-OpinionsofLILCO'sFinancial Advisor"and"Selected Information Concerning BrooklynUnion-OpinionofBrooklynUnion'sFinancial Advisor"andthoseprecededby,followedbyorthatincludethewords"believes,"
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| "expects,"
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| "anticipates" orsimilarexpressions.
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| Forthosestatements, BrooklynUnionandLILCOclaimtheprotection ofthesafeharborforforward-looking statements contained inthePrivateSecurities Litigation ReformActofl,995.Shareholders ofBrooklynUnionandshareholders ofLILCOshouldunderstand thatthefollowing important factors,inadditiontothosediscussed elsewhere inthisdocumentandinthedocuments whichareincorporated byreference herein,couldaffectthefutureresults'of theHoldingCompany,BrooklynUnionandLILCO,andcouldcausethoseresultstodiffermaterially fromthoseexpressed insuchforward-looking statements:
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| materially adversechangesineconomicconditions inthemarketsservedbyBrooklynUnionorLILCOandinthemarketsthatwillbeservedbythem;asignificant delayintheexpectedclosingoftheCombination and/orLIPATransaction, orthefailureofeithertransaction toclose;futureregulatory actionsandconditions inBrooklynUnion'sandLILCO'soperating areas;andthetimingandextentofchangesincommodity pricesfor'crude oil,naturalgas,electricity andinterestrates.I'EGALMATTERSCertainlegalmattersrelatingtoLILCOinconnection withtheCombination andtheLIPATransaction, including, amongotherthings,certainlegalmatterswithrespecttothevalidityofthesecurities tobeissued,willtbepasseduponforLILCObyKramer,Levin,Naftalis&Frankel,NewYork,NewYorkandbyHunton&Williams, Washington, D.C.CertainlegalmattersrelatingtoBrooklynUnioninconnection with,theCombination willbepasseduponforBrooklynUnionbyWachtell, Lipton,Rosen&Katz,NewYork,NewYork.EXPERTSThefinancial statements ofLILCOappearing initsAnnualReport(Form10-K/A)fortheyearendedDecember31,1996andtheconsolidated financial statements ofBrooklynUnionappearing initsAnnualReport(Form10-K)fortheyearendedSeptember 30,1996,bothincorporated byreference inthisJointProxyStatement/Prospectus ofLILCOandBrooklynUnion,whicharereferredtoandmadepartofthisRegistration Statement, havebeenauditedbyErnst&YoungLLPandArthurAndersenLLP,respectively, assetforthintheirreportsthereonincludedthereinandincorporated hereinbyreference.
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| Suchfinancial statements areincorporated hereinbyreference inrelianceuponsuchreportsgivenupontheauthority ofsuchfirmsasexpertsinaccounting andauditing.
| |
| 107
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| ,FUTURESHAREHOLDER PROPOSALS 0Assumingthetimingoftheconsummation ofthetransactions contemplated intheBrooklynUnion/LILCO Agreement requireLILCOtoholdanannualmeetingin1998,proposals ofshareholders intendedtobepresented atsuchmeetingmustbereceivedbyLILCOatitsofficesat175EastOldCountryRoad,Hicksville, NewYork11801,Attention:
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| Corporate Secretary, notlaterthanNovember24,1997.Proposals mustcomplywiththeSEC'sproxyregulations relatingtoshareholder proposals inordertobeconsidered forinclusion inLILCO'sproxymaterials.
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| 'Assumingthetimingoftheconsummation ofthetransactions contemplated intheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement requireBrooklynUnionorKeySpantoholdanannualmeetingin1998,proposals ofshareholders intendedtobepresented atsuchmeetingmustbereceivedbyBrooklynUnionatitsofficesatOneMetroTech Center,Brooklyn, NewYork11201-3850, Attention:
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| Secretary, notlaterthanSeptember 1,1997.Proposals mustcomplywiththeSEC'sproxyregulations relatingtoshareholder proposals inordertobeconsidered forinclusion inBrooklynUnion'sorKeySpan's proxymaterials.
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| Mattersintendedtobepresented byholdersofBrooklynUnionorKeySpanCommonStockatthe1998annualmeetingmustbestatedinwritinganddelivered totheappropriate Secretary bysuchshareholders duringtheperiodbetween90and60dayspriortothedateofthemeeting,whichiscxpcctedtobeheldonFebruary5,1998.108 WHEREYOUCANI<INDMOREINFORMATION LILCOandBrooklynUnionfileannual,quarterly andspecialreports,proxystatements andotherinformation withtheSEC.Following theCombination, theHoldingCompanywillalsomakethesefilingswiththeSEC.Youmayreadandcopyanyreports,statements orotherinformation thatthecompanies fileattheSEC'spublicreference roomsatRoom1024,Judiciary Plaza,450FifthStreet,N.W.,Washington, D.C.20549,andattheSEC'sRegionalOfficeslocatedat7WorldgradeCenter,Suite1300,NewYork,NewYork10048andatCiticorpCenter,500WestMadisonStreet,Suite1400,Chicago,Illinois60661-2511.
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| PleasecalltheSECat1-800-SEC-0330 forfurtherinformation onthepublicreference rooms.OurSECfilingsshouldalsobeavailable tothepublicfromcommercial documentretrieval servicesandattheInternetwebsitemaintained bytheSECathttp://www.sec.gov.
| |
| Inaddition, materialandinformation concerning BrooklynUnionandLILCOcanbeinspected attheNewYorkStockExchange, Inc.,20BroadStreet,7thFloor,NewYork,'N'wYork10005,onwhichexchangetheBrooklynUnionCommonStock,theLILCOCommonStock,theLILCOPreferred Stock,certainoftheLILCOGenera1andRefunding.
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| BondsandtheLILCODebentures arelisted,andmaterialandinformation concerning LILCOcanalsobeinspected atthePacificStockExchange, Inc.,301PineStreet,SanFrancisco, California 94104,onwhichexchangetheLILCOCommonStockislisted.TheHoldingCompanyluisfiledaregistration statement onFormS-4toregisterwiththeSECthesharesofHoldingCompanyCommonStockandHoldingCompanyPreferred Stocktobeissuedinconnection withtheBrooklynUnion/LILCO Agreement andtheLIPAAgreement.
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| KeySpanhasalsofiledregistration statements onFormS-4toregisterwiththeSECthesharesofKeySpanCommonStocktobeissuedinconnection withtheKeySpanholdingcompanyrestructuring andshareexchanges.
| |
| ThisJointProxyStatement/Prospectus ispartofeachsuchregistration statement, aswellasbeingaproxystatement fortheannualmeetingofL'ILCOandthespecialmeetingofBrooklynUnion.Inaccordance withSECrules,eachsuchregistration statement maycontaintadditional information thatyouwillnotfindintlieJointProxy,Statement/Prospectus.
| |
| Theregistration statements areavailable forinspection andcopyingassetforthabove.TheSECallowsusto"incorporate byreference" information intothisJointProxyStatement/Prospectus, whichmeansthatwecandiscloseimportant information toyoub'yreferring youtoanotherdocumentfiledseparately withtheSEC.Th'einformation in'corporated byreference isdeemedtobepartofthisJointProxyStatement/Prospectus, exceptforanyinformation superseded byinformation contained directlyinthisJointProxyStatement/Prospectus.
| |
| ThisJointProxyStatement/Prospectus incorporates byreference thedocuments setforthbelowthatwercpreviously filedwiththeSECbyLILCO(FileNo.1-3571)orBr'ooklyn Union(FileNo.1-722).Thesedocuments containimportant information aboutourcompanies andtheirfinancial condition.
| |
| 1.LILCO'sAnnualReportonForm10-K/AfortheyearendedDecember31,1996.2.LILCO'sTransition ReportonForm10-Qforthe3monthperiodendedMarch31,1997.3.LILCO'sCurrentReportsonForm8-KdatedFebruary25,1997,March19,1997,asamended,andApril11,1997.4.BrooklynUnion'sAnnualReportonForm10-K/AfortheyearendedSeptember 30,1996.5.BrooklynUnion'sQuarterly ReportsonForm10-QforthequartersendedDecember31,1996andMarch31,1997.6.BrooklynUnion'sCurrentReportsonForm8-KdatedDecember30,1996,February24,1997andMarch19,1997.7.Theinformation contained inBrooklynUnion'sProxyStatement datedDecember30,1996foritsAnnualMeetingofShareholders heldonFebruary6,1997.WemayberequiredbytheSECtofileotherdocuments pursuanttoSection13(a),13(c),14or15(d)oftheSecurities ExchangeActof1934,asamended,betweenthetimethisJointProxyStatement/Prospectus issent109 tandthedatetheLILCOMeetingandtheBrooklynUnionMeetingareheld.Thesedocuments willbedeemedtobeincorporated byreference inthisJointProxyStatement/Prospectus andtobeapartofitfromthedatetheyarefiledwiththeSEC.Ifyouareashareholder, wemayhavesentyousomeofthedocuments incorporated byreference, butyoucanobtainanyofthemthroughus,theSECortheSEC'sInternetwebsiteasdescribed above.Documents incorporated byreference areavailable fromuswithoutcharge,excluding allexhibitsunlesswehavespecifically incorporated byreference anexhibitinthisJointProxyStatement/Pro'spectus.
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| Shareholders mayobtaindocuments incorporated byreference inthisJointProxyStatement/Prospectus byrequesting theminwritingor.bytelephone fromtheappropriate companyatthefollowing addresses:
| |
| KathleenA.MarionVicePresident andCorporate Secretary LongIslandLightingCompany175EastOldCountryRoid"Hicksville, NewYork11801(516)545-4914RobertR.Wieczorek VicePresident, Secretary andTreasurer TheBrooklynUnionGasCompanyOneMetroTechCenterBrooklyn, NewYork11201-3850 (718)403-3388Ifyouwouldliketorequestdocuments fromus,pleasedosopromptlyinordertoreceivethembeforetheShareholder Meetings.
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| YOUSHOULDRELYONLYONTHEINFORMATION CONTAINED ORINCORPORATED BYREFERENCE INTHISJOINTPROXYSTATEMENT/PROSPECTUS TOVOTEONTHEBROOKLYNUNIONAGREEMENT, THELIPAAGREEMENT ORTHEKEYSPANHOLDINGCOMPANYPROPOSAL.
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| WEHAVENOTAUTHORIZED ANYONETOPROVIDEYOUWITHINFORMATION THATISDIFFERENT FROMWHATISCONTAINED INTHISJOINTPROXYSTATEMENT/PROSPECTUS.
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| THISJOINTPROXYSTATEMENT/PROSPECTUS ISDATEDJUNE27,1997.YOU,SHOULD NOTASSUMETHATTHEINFORMATION CONTAINED INTHISJOINTPROXYSTATEMENT/PROSPECTUS ISACCURATEASOFANYDATEOTHERTHANTHATDATE,ANDNEITHERTHEMAILINGOFTHISJOINTPROXYSTATEMENT/PROSPECTUS TOSHAREHOLDERS NORTHEISSUANCEOFBLHOLDINGCORP.COMMONSTOCKINTHECOMBINATION ORKEYSPANCOMMONSTOCKINTHEKEYSPANSHAREEXCHANGESHALLCREATEANYIMPLICATION TOTHECONTRARY.
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| 110 ILISTOFDEFINEDTERMSDefinedTermAmendedStockOptionAgreements...
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| Antitrust DivisionAtomicEnergyAct.BasicAgreements
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| .BearStearns.BrooklynUnibn.BrooklynUnionBy-Laws...........
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| BrooklynUnionCertificate
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| ..........
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| BrooklynUnionCommonStock.....".
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| BrooklynUnionComparables........
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| BrooklynUnionDissenting Shares....
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| BrooklynUnion/LILCO Agreement...
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| BrooklynUnionMeeting............
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| BrooklynUnionPlans..............
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| BrooklynUnionRatio..............
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| BrooklynUnionStockOptionAgreement BusinessCombination
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| ..............
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| BusinessCombination Proposal......Cancelled Shares.CashPurchasePriceCertificate CodeCombination Concentrated NuclearGroup.........
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| Consideration Contingent Issuance...............
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| DCFDillonRead.Designated NumberDissenting Preferred Shares..........
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| Dissenting Shares.EBITEBITDAEffective Time.................
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| ElectricMergerTransactions.........
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| ERISA.ExchangeAgent.Exchanged SharesFairMarketRateFERC.FPAFTCGasMergerTransactions............
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| HedgeArrangements
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| ...............
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| Historical Period.Historical TradingRatios............
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| HoldingCompany.Page'umber51528721168681797'701717752,18237876848671372,1732187099207185182828919872717186515151987699972,11,17DefinedTermHoldingCompanyAct..'..'...;
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| -......HoldingCompanyBy-Laws..........
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| HoldingCompanyCertificate.........'olding CompanyCommonStock....HoldingCompanyPreferred Stock....HoldingCompanySeriesAAPreferred StockHSRActIncentive PlanIssuerJointProxyStatement/Prospectus
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| ......KeySpan.KeySpanAgreement.................
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| KeySpanCommonStock....'.........
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| KeySpanShareExchange.............
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| KramerLevin.LargeNuclearGroup.LILCO'LILCOasadjusted.
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| ~LILCOBy-L'aws.LILCOCertificate LILCOCommonStock...............
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| LILCOComparables
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| .LILCODissenting Shares.............
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| LILCOMeeting.LILCOPlans.........
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| LILCOPreferred Stock...............
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| LILCOStockOptionAgreement.......
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| LIPALIPAActLIPAAgreement LIPAClosingLIPAEffective Time......
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| LIPARatio.LIPASubLIPATransaction LIPATransmission andDistribution SystemMake-Whole AmountMarket/Offer PriceMergerMerrillLynchMerrillLynchOpinion...............
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| Non-nuclear GroupNon-redeemable Preferred Stock.......
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| NoticeDateNRC.NuclearAssetsE185191831719191918'033111,6868,1797701775172318201884841818,84185785831720963385835231PageNumber5066661766111 DefinedTeHllNYBCL.OptionHolderOptionShares.................
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| OptionsOriginalAgreement OriginalRatio.PACBPAL.........................
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| Performance Plan.Preferred StockDesignation.....
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| PrivatePlacement Preferred StockProjectProjected PeriodPromissory Notes.ProxyCommittee PSC...............
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| RatioRecordDateRegulatory Assets.Representatives Repurchase Period..Restricted SharesRetainedAssetsRetainedDebtAmount....PageNumber4482828223182152101678452998649201817317682838486DefinedTefnlRetainerPlanRetirement Plan.Securities ActSECSeriesAAPreferred Stock..........
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| SeriesCCPreferred Stock...,......
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| SeriesGGPreferred Stock..........
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| SeriesQQPreferred Stock..........
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| SeriesUUPreferred Stock....:
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| ..'...Severance Period.Severance PlanShareholder Meetings..............
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| Shareholder NoticeProcedure.......
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| ShorehamStockOptionAgreements
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| ..........
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| StockPlanSubjectParty.Surviving Corporation
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| .............
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| T&DBusinessTransferred AssetsTransferee Subsidiaries
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| ............
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| TransferTaxesTriggerEventVotingPowerNumber9192441717171717102102176820239180843118,57,8438408168~112 ANNEXAAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGERbetweenTHEBROOKLYNUNIONGASCOMPANYANDLONGISLANDLIGHTINGCOMPANYDATEDASOFJUNE26,1997
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| eTABLEOFCONTENTSARTICLEITHETRANSACTIONS SEcrION1.1THEBINDINGSHAREEXCHANGEANDMERGERSEcrIoN1.2EFFECTIVE TIMEARTICLEIIPageA-2A-2SEcrIoN2.1SECTION2.2SECTION2.3TREATMENT OFSHARESEFFECTONCAPITALSTOCK.DISSENTING SHARESISSUANCEOFNEWCERTIFICATES ARTICLEIIITHECLOSINGA-2A-3A-4SEcrIoN3.1CLOSINGARTICLEIVREPRESENTATIONS ANDWARRANTIES OFBROOKLYNUNIONA-6SECTION4.1SEcrIQN4.2SEcrIoN4.3SEcnoN4.4SECTION4.5SECTION4.6SEcnoN4.7SEcI'IQN4.8SEcrIoN4.9SECTION4.10SEcI'IQN4.11SECTION4.12SEcrION4.13SECTION4.14SEcnoN4.15SECTION4.16SECTION4.17SECTION4.18SECTION4.19ROVALS;ARTICLEVREPRESENTATIONS ANDWARRANTIES OFLILCOORGANIZATION ANDQUALIFICATION SUBSIDIARIES CAPITALIZATION AUTHORITY; NON-CONTRAVENTION; STATUTORY APPCOMPLIANCE REPORTSANDFINANCIAL STATEMENTS ABSENCEOFCERTAINCHANGESOREVENTSLITIGATION.
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| REGISTRATION STATEMENT ANDPROXYSTATEMENT TAXMATTERSEMPLOYEEMATTERS;ERISAENVIRONMENTAL PROTECTION
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| .REGULATION ASAUTILITY.VOTEREQUIREDACCOUNTING MAXI'ERSAPPLICABILITY OFCERTAINPROVISIONS OFLAWOPINIONOFFINANCIAL ADVISORINSURANCE OWNERSHIP OFLILCOCOMMONSTOCK.BUSINESSSYNERGIES A-6A-6A-7A-7A-8A-9A-9A-9A-9A-11A-12A-14A-14A-14"A-14A-14A-14A-15A-15SEcrIoN5.1ORGANIZATION ANDQUALIFICATION SEcI'IQN5.2SUBSIDIARIES ISECTION5.3CAPITALIZATION SEcrIoN5.4'UTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE LA-15A-15A-15A-16 SECTION5.5SEcI'IQN5.6SrcrIoN5.7SECTION5.8SEcrIQN5.9SECTION5.10SECTION5.11SECTION5.12SECTION5.13SECTION5.14SECTION5.15SECTION5.16SEcrIoN5.17SEcl'IQN5.18SECTION5.19SECTION6.1SEcrroN7.1SECTION7.2SEcrIoN7.3SEcrIoN7.4SEcrIoN7.5SECTION7.6SEcrIoN7.7SECTION7.8SrcrIoN7.9SEcrIoN7.10SECTION7.11SECTION7.12SECTION7.13SEcrIoN7.14,SEcrIQN7.15SECI'ION7.16SEcrIoN7.17SECTION7.18SEcrIoN7.19SEcrroN7.20SECTION'.1 SEcrIoN8.2SEcrIoN8.3REPORTSA'NDFINANCIAL STATEMENTS
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| ............
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| ABSENCEOFCERTAINCHANGESOREVENTS..........
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| LITIGATION.
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| REGISTRATION STATEMENT ANDPROXYSTATEMENT TAXMATTERS.............................
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| EMPLOYEEMATTERS;ERISA.ENVIRONMENTAL PROTECTION
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| .REGULATION ASAUTILITY.~...,VOTEREQUIRED.ACCOUNTING MATI'ERS.............
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| APPLICABILITY OFCERTAINPROVISIONS OFLAWOPINIONOFFINANCIAL ADVISORINSURANCE.
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| OWNERSHIP OFBROOKLYNUNIONCOMMONSTOCK..BUSINESSSYNERGIES......,...............
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| ARTICLEVICONDUCTOFBUSINESSPENDINGTHEEFFEcfIVE TIMECOVENANTS OFTHEPARTIES...................
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| ARTICLEVIIADDITIONAL AGREEMENTS ACCESSTOINFORMATION JOINTPROXYSTATEMENT ANDREGISTRATION STATEMENT
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| ..REGULATORY MATTERS.......................
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| SHAREHOLDER APPROVAL.
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| DIRECTORS'ND OFFICERS'NDEMNIFICATION.
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| ,DISCLOSURE SCHEDULES...................
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| PUBLICANNOUNCEMENTS......
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| RULE145AFFILIATES
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| ...........
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| EMPLOYEEAGREEMENTS.........
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| EMPLOYEEBENEFITPLANS.....
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| STOCKPLANS...............
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| 'NOSOLICITATIONS COMPANYBOARDOFDIRECTORS
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| ..SENIOREXECUTIVES
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| ..............
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| EXPENSESFURTHERASSURANCES............
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| POST-EXCHANGE OPERATIONS.....
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| OTHERTRANSACTIONS EMPLOYMENT AGREEMENT
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| .HOLDINGCOMPANY........................
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| c.....ARTICLEVIIICONDITIONS CONDITIONS TOEACHPARTY'SOBLIGATION TOEFFECTTHETRANSACTIONS.....
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| CONDITIONS TOOBLIGATION OFLILCOTOEFFECTTHETRANSACTIONS........
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| CONDITIONS TOOBLIGATION OFBROOKLYNUNIONTOEFFECTTHETRANSACTIONS...........
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| PageA-17A-17A-17A-17A-18A-'19A-20A-21A-21A-21A-21A-21A-21A-22A-22A-22A-26A-27A-27A-28A-28A-29A-29A-30A-30A-30A-31A-32A-32A-32A-33A-33A-33A-33A-34A-34A-34A-35A-36 ARTICLEIXTERMINATION>
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| AMENDMENT ANDWAIVERSECTION9.1TERMINATION
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| .SEcrtoN9.2EFFECTOFTERMINATION.
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| SEcTIDN9.3TERMINATION FEE;EXPENSES.SECTION9.4AMENDMENT SECTION9.5WAIVER'RTICLE XGENERALPROVISIONS SECTIDN10.1NON-SURVIVAL; EFFECTOFREPRESENTATIONS ANDWARRANTIES
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| ..SECTION10.2BROKERSSEcrroN10.3NOTICESSECTION10.4MISCELLANEOUS SECTION10.5INTERPRETATION
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| .SEcrtoN10.6COUNTERPARTS; EFFECT.SEGTION10.7PARTIESININTEREST; ASSIGNMENT SEcrIDN10.8WAIVEROFJURYTRIALANDCERTAINDAMAGESSECTION10.9ENFORCEMENT............
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| PageA-37A-38A-39A-40A-40'-40A-40A-41A-41A-41A-41A-42A-42A-42EXHIIIITAFormofAmendedandRestatedLILCOStockOptionAgreement tEXHIBITBFormofAtnendedandRestatedBrooklynUnionStockOptionAgreement ExHIBITCFormofAgreement andPlanofExchangeandMergerbyandamongBLHoldingCorp.,LILCO,LIPAandLIPAAcquisition Corp.
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| [THISPAGEINTENTIONALLY LEWD'LANK]
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| tAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGER,datedasofJune26,1997(this"AGREEMENT"
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| ),betweenTHEBROOKLYNUNIONGASCOMPANY,aNewYorkcorporation
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| ("BrooklynUnion")andLONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation
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| ("LILCO").
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| WHEREAS,BrooklynUnionandLILCOhavedetermined toengageinabusinesscombination aspeerfirmsinamergerandabindingshareexchangeandtoformaholdingcompanytomanagetheircombinedbusinesses (the"COMPANY"
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| );WHEREAS,BrooklynUnion,LILCOandNYECOCORP.,aNewYorkcompany("NYECO"),
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| enteredintoanAgreement andPlanofExchange, datedasofDecember29,1996(the"ORIGINAL AGREEMENT");
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| WHEREAS,BrooklynUnion,LILCOandBUGLILCOHOLDINGCORP.,aNewYorkcorporation
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| ("BUGLILCO"),
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| amendedandrestatedtheOriginalAgreement pursuanttoanAmendedandRestatedAgreement andPlanofExchange, datedasofFebruary6,1997(the"FIRSTAMENDEDANDRESTATEDAGREEMENT"
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| );WHEREAS,withtheconsentofeachofBrooklynUnionandLILCO,NYECOassignedallofitsrightsandobligations undertheOriginalAgreement toBUGLILCO(the"ASSIGNMENT"
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| );C"WHEREAS, infurtherance ofabusinesscombination byandbetween'Brooklyn UnionandLILCO,therespective BoardsofDirectors ofBrooklynUnionandLILCOhaveadoptedthisAgreemcnt andthetransactions contemplated herebyonthetermsandconditions setforthinthisAgreement; WHEREAS,theBoardofDirectors ofLILCOhasapprovedandLILCOhasexecutedanamendedandrestatedagreement withBrooklynUnionintheformofEXHIBITA(the"LILCOSTOCKOPTION1AGREEMENT"
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| )contemplating astockoption(the",LILCOSTOCKOPTION")andtheBoardofDirectors ofBrooklynUnionhasapprovedandBrooklynUnionhasexecutedanamendedandrestatedagreement withLILCOintheformofEXHIBITB(the"BROOKLYN UNIONSTOCKOPTIONAGREEMENT")
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| contemplating astockoption(the"BROOKLYN UNIONSTOCKOPTION");WHEREAS,BrooklynUnion,LILCOandLONGISLANDPOWERAUTHORITY
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| ("LIPA")enteredintoanAgreement inPrinciple, datedasofMarch19,1997,pursuanttowhichLILCOandLIPAcontemplate enteringintoanAgreement andPlanofExchangeandMergersubstantially intheformattachedasExhibitChereto(the"L'IPAAGREEMENT"
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| );WHEREAS,forfederalincometaxpurposes,'it isintendedthat(i)thepartiesheretowillrecognize nogaino'rloss,(ii) unlesstheLIPAAgreement hasbeenterminated, thestockholders ofLILCOwhoparticipate intheTransactions willrecognize (excepttotheextentSection1033oftheCode(ashereinafter defined)isavailable andavailedofbyastockiiolder) gainorlossbothinrespectofstockreceivedandinrespectofanycashtheyreceiveinlieuoffractional shares,and(iii)theshareholders ofBrooklynUnionwhoparticipate intheTransactions willnotrecognize gainorloss',ineachcase,'forfederalincometaxpurposesasaresultoftheconsummation oftheTransactions (ashereinafter defined);
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| WHEREAS,theBoardofDirectors ofBrooklynUnionhasapprovedandBrooklynUnionhasexecutedanamendedandrestatedagreement andplanofexchange, datedasofJune26,1997(the"KEYSPANEXCHANGEAGREEMENT"
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| ),withKeySpanEnergyCorporation, aNewYorkcorporation andawhollyownedsubsidiary ofBrooklynUnion("KEYSPAN"),
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| pursuanttowhich,subjecttotheadoptionbytheshareholders ofBrooklynUnionoftheKeySpanExchangeAgreement andcertainotherconditions, including theredemption byBrooklynUnionofallofitsissuedandoutstanding preferred stock,KeySpanwillacquirealltheoutstanding sharesofCommonStockofBrooklynUnioninabindingshareexchangeunderSection913oftheNewYorkBusinesstCorporation Law(the"NYBCL"),
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| inwhicheachshareofCommonStockofBrooklynUnionwillbeexchanged foroneshareofConunonStockofKeySpan,with,theresultthatBrooklynUnionwillbecomeawhollyownedsubsidiary ofKeySpan{suchtransaction, the"KEYSPAN.RESTRUCTURING"
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| );andA-1 WHEREAS,thepartiesdesiretoamendandrestatetheFirstAmendedandRestatedAgreeme'nt'as ofthedatehereoftorefiecttheAssignment, theLIPAAgreement andtheKeySpanRestructuring andcertainother,technical changes;NOWTHEREFORE, inconsideration ofthepremisesandtherepresentations, warranties, covenants andagreements contained herein,thepartieshereto,intending tobelegallyboundhereby,agreeasfollows:ARTICLEITHETRANSACTIONS SECTIQN1.1THEBINDINGSHAREEXCHANGEANDMERGER.ThisAgreement shallbesubmitted totheholdersoftheCommonStock,parvalue$5pershare,ofLILCO(the"LILCOCOMMONSTOCK")andtheholdersoftheCommonStock,parvalue$0.33Npershare,ofBrooklynUnion(the"BROOKLYN UNIONCOMMONSTOCK")foradoptioninaccordance withSection913oftheNYBCL.Theaffirmative voteoftheholdersofatleasttwo-thirds oftheissuedandoutstanding LILCOCommonStockandoftheholdersofatleasttwo-thirds oftheissuedandoutstanding BrooklynUnionCommonStockshallbenecessary toadoptthisAgreement.
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| Uponthetermsandsubjecttotheconditions ofthisAgreement, attheLILCOEffective Time(asdefinedinSECTION1.2),theoutstanding sharesofLILCOCommonStockshallbeexchanged fornewlyissuedsharesoftheCommonStock,parvalue$0.01pershare,oftheCompany(the"COMPANYCOMMONSTOCK"and,withrespecttoanyperiodaftertheEffective Time,the"COMPANYCOMMONSTOCK")asprovidedinSECTION2.1(the"SHAREEXCHANGE"
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| ),inaccordance withSection913oftheNYBCLandattheBrooklynUnionEffective Time(asdefinedinSECTION1.2),awhollyownedsubsidiary oftheCompany("MERGERSUB) willbemergedwithandintoBrooklynUnion(the"MERGER")inaccordance withSection902oftheNYBCL,pursuanttowhicheachoutstanding shareofBrooklynUnionCommonStockshallautomatically beconverted intooneshareofCompanyCommonStockasprovidedinSECTION2.1(the"MERGER"and,togetherwiththeShareExchange, the"TRANSACTIONS"
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| ).AsaresultoftheMerger,MergerSub willceasetoexistandBrooklynUnionwillsurvivetheMergerasthesurviving corporation (the"SURVIVING CORPORATION"
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| )."SEcTioN1.2EFFECTIVE TIME.OntheClosingDate(asdefinedinSECTION3.1),acertificate ofexchangecomplying withtherequirements oftheNYBCLshallbeexecutedbyLILCOandtheCompanyandacertificate ofmergercomplying withtherequirements oftheNYBCLshallbeexecutedbyBrooklynUnionandMergerSub, andeachshallbefiledbythepartieswiththeSecretary ofStateoftheStateof,NewYork.TheLILCOBindingShareExchangeshallbecomeeffective atthetimespecified inthecertificate ofexchange, withrespecttotheLILCOBindingShareExchange(the"LILCOEFFECTIVE TIME")andtheMergershallbecomeeffective atthetimespecified inthecertificate ofmergerfiledwithrespecttotheMerger(the"BROOKLYN UNIONEFFECTIVE TIME")whichspecified timesshallbecontemporaneous (the"EFFECTIVE TIME");PROVIDED, thattheBrooklynUnionEffective TimeshallbelaterthantheLILCOEffective Timeandallreferences tdtheEffective TimehereinshallincantheBrooklynUnionEffective Time.ARTICLEIITREATMENT OESHARESSEcTIoN2.1 EFFECTONCAPITALSTOCK(a)AttheBrooklynUnionEffective Time,byvirtueoftheMergerandwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnion,theCompanyorMergerSub:
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| (i)TREATMENT OFBROOKLYNUNIONCOMMONSTOCK.EachshareofBrooklynUnionCommonStockissuedandoutstanding immediately priortotheBrooklynUnionEffective Time,otherthanA-2 Dissenting Shares(asdefinedinSECTION2.2),shallbeconverted intotherighttoreceiveonefullypaidand,subjecttoSection630oftheNYBCL,nonassessable shareofCompanyCommonStock.AttheBrooklynUnionEffective Time,allsuchsharesofBrooklynUnionCommonStockshallnolongerbeoutstanding, andshallautomatically becancelled andretiredandceasetoexist,andeachholderofacertificate representing anysuchsharesshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceivethesharesofCompanyCommonStocktobeissuedinconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSECTION2.3,withinterest.
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| (ii)TREATMENT OF'ERGERSUB COMMONSTOCK.EachshareofcommonstockofMergerSub, parvalue$.01pershare,issuedandoutstanding immediately priortotheBrooklynUnionEffective Timeshallbeconverted intooneshareofcommonstock,$0.33Npershare",oftheSurviving Corporation.
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| (b)SubjecttoSECTION7.18(b),attheLILCOEffective Time,byvirtueoftheShareExchangeandwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheCompany:(i)TREATMENT OFLILCOCOMMONSTOCK.gachissuedandoutstanding shareofLILCOCommonStock,otherthanDissenting Shares,shallbeexchanged for0.803(the"ORIGINAL RATIO")fullypaidand,subjecttoSection630oftheNYBCL,nonassessable sharesofCompanyCommonStock;PROVIDEDthatiftheLIPAAgreement hasnotbeenterminated butthetransactions contemplated therebywillnotbeconsummated contemporaneously withtheconsummation ofthetransactions contemplated hereby,theneachissuedandoutstanding shareofLILCOCommonStock,otherthanDissenting Shares,shallbeexchanged for0.803fullypaidand,subjecttoSection630oftheNYBCL,nonassessable sharesofCompanyCommonStock,andtheCompanyshallcausetheretobereservedoutofitsauthorized butunissuedsharesofCompanyCommonStocksuchnumberofsharesasisequalto0.077multiplied bythenumberofsharesofLILCOCommonStockoutstanding, otherthanDissenting Shares,attheLILCOEffective Time;andifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheLILCOEffective Time,thenthereshallbeissuedtopersonswhowereholdersofrecordofLILCOCommonStockattheLILCOEffective Time,0.077sharesofCompanyCommonStockinrespectofeachshareofLILCOCommonStock,otherthanDissenting Shares,thathadbeenheldbythemofrecordattheLILCOEffective
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| 'Time.Thepotential issuanceofsliaresofCompanyCommonStockpursuanttothelastprovisoofthepreceding sentenceisreferredtohereinasthe"Contingent Issuance".
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| Thetermsofexchangedescribed intheprovisointhesentencepreceding thepreceding sentencearereferredtohereinasthe"LIPARATIO"(0.880),'and theOriginalRatioandtheLIPARatioai;ereferredtohereintogetherasthe"RATIOS".
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| Uponsuchexchange, theCompanyshallbecometheownerofeachshareofLILCOCommonStocktobesoexchanged andallsuchsharesofLILCOCommonStockshallbedeemedtohavebeenexchanged fortheapplicable numberofsharesoftheCompanyCommonStock,andeachholderofacertificate formerlyrepresenting anysuchsharesshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceivesharesoftheCompanyCommonStocktobeissuedinconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSECTION2.3.(ii)NOCHANGEINLILCOPREFERRED STOCK.Eachissuedandoutstanding sharcofthepreferred stockofLILCOshallbeunchanged asaresultoftheShareExchangeandshallremainoutstanding thereafter.
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| SEcTIQN2.2 DISSENTING SHARES.SharesofLILCOCommonStockorBrooklynUnionCommonStockheldbyanyholderentitledtoreliefasadissenting shareholder underSection910oftheNYBCL(the"DISSENTING SHARES")'shall notbecometherighttoreceiveCompanyCommonStock,butshallbecancelled andconverted intosuchconsideration asmaybeduewithrespecttosuchsharespursuanttothetapplicable provisions oftheNYBCL,unlessanduntiltherightofsuchholdertoreceivefaircashvalueforsuchDissenting Sharesterminates inaccordance withSection623oftheNYBCL.Ifsuchrightisterminated otherwise thanbythepurchaseofsuchsharesbyLILCOorBrooklynUnion,thensuchsharesshallceasetobeDissenting Sharesandshallrepresent therighttoreceiveCompanyCommonStock,asprovidedinSECTION2.1.A-3 Seerrox2.3ISSUANCEOFNEWCERTIFICATES (a)DEPOSITWITHEXCHANGEAGENT.Assoonaspracticable aftertheEffective Time,theCompanyshalldepositwithsuchbankortrustcompanymutuallyagreeable toLILCOandBrooklynUnion(the"EXCHANGE AGENT"),certificates representing sharesofCompanyCommonStockrequiredtoeffecttheissuances referredtoinSECTION2.1(or,SECTIONS2.1(a)and7.1((b)iftheTransactions aretobeconsummated pursuanttoSECTION7.18(b)).
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| f(b)ISSUANCEPROCEDURES.
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| Assoonaspracticable aftertheEffective Time,theExchangeAgentshallmailtoeachholderofrecordofacertificate orcertificates (the,"CERTIFICATES"
| |
| )whichimmediately priortotheLILCOEffective Timerepresented outstanding sharesofLILCOCommonStockorwhichimmediately priortotheBrooklynUnionEffective Timerepresented outstanding sharesofBrooklynUnionCommonStock(the"EXCHANGED COMMONSHARES")thatinthecaseofLILCOCommonStockwereexchanged forsharesofCompanyCommonStock(the"COMPANYSHARES")pursuanttoSECTION2.1(b)andinthecaseofBrooklynUnionCommonStockwereconverted intotherighttoreceiveCompanySharespursuanttoSECTION2.1(a),(i)aletteroftransmittal (whichshallspecifythatdeliveryshallbeeffected, andriskoflossandtitletotheCertificates shallpass,onlyuponactualdeliveryoftheCertificates totheExchangeAgent)(the"LETTEROFTRANSMIT'AL")
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| and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates rep'resenting CompanyShares.Notwithstanding theforegoing, iftheTransactions aretobeconsummated pursuanttoSECTION7.18(b),thenassoonaspracticable aftertheEffective Time,theExchangeAgentshallmailtoeachholderofrecordof(x)aCertificate whichimmediately priortotheLILCOEffective Timerepresented Exchanged CommonShares'thatwereexchanged forCompanySharespursuanttoSECTION7.18(b),or(y)aCertificate whichimmediately priortotheBrooklynUnionEffective Timerepresented Exchanged CommonSharesthatwereconverted intheMergerintotherighttoreceiveCompanySharespursuanttoSECTION2.1(a),(i)aLetterofTransmittal and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates representing CompanyShares.Uponsurrender ofaCcitificate totheExchangeAgentforexchange(ortosuchotheragentoragentsasmaybeappointed byagreement ofBrooklynUnionandLILCO),togetherwithadulyexecutedletteroftransmittal andsuchotherdocuments astheExchangeAgentsh'allrequire,theholderofsuchCertificate shallbeentitledtoreceiveacertilicate representing thatnumberofwholeCompanyShareswhichsuchholder"has therigh'ttoreceivepursuanttotheprovisions ofthisARTICLEII(orSECTIONS2.1(a)and7.18(b)iftheTransactions aretobeconsummated pursuanttoSECTION7.18(b)).
| |
| Intheeventofatransferofownership ofExchanged CommonShareswhichisnotregistered inthctransferrecordsofL'ILCOorBrooklynUnion,as'"thecasemaybe,acertificate representing thepropernumberofCompanySharesmaybeissuedtoatransferee iftheCertificate representing suchExchanged CommonSharesispresented totheExchangeAgent,accompanied byalldocuments requiredtoevidenceandeffectsuchtransferandbyevidencesatisfactory totheExchangeAgentthatanyapplicable stocktransfertaxeshavebeenpaid.Untilsurrendered as'contemplated bythisSECTION2.3,eachCertificate shallbedeemedatanytimeaftertheLILCOEffective TimeortheBrooklynUnionEffective Time,asthecasemaybe,torepresent onlytherighttoreceiveuponsuchsurrender thecertificate representing CompanySharesandcashinlieuofanyfractional sharesofCompanyCommonStockascontemplated bythisSECTION2.3.(c)DISTRIBUTIONS WITHRESPECTTOUNSURRENDERED'SHARES.
| |
| No'dividends orotherdistributions declaredormadeaftertheEffective TimewithrespecttoCompanyShareswitharecorddateafter,theEffective Timeshallbepaidtotheholderofanyunsurrendcred Certificate withrespecttotheCompanySharesrepresented therebyandnocashpaymentinlieuoffractional sharesshallbepaidtoanysuchholderpursuanttoSECTION2.3(d)untiltheholderofrecordofsuchCertificate shallsurrender suchCertificate.
| |
| Subjecttotheeffectofunclaimed
| |
| : property, escheatandotherapplicablc laws,following surrender ofanysuchCertificate, thereshallbepaidtotherecordholderofthecertificates representing wholeCompanySharesissuedinconsideration
| |
| : therefor, withoutinterest, (i)atthetimeofsuchsurrender, theamountofanycashpayableinlieuofafractional shareofCompanyCommonStocktowhichsuchholderisentitledpursuanttoSECTION2.3(d)andtheamountofdividends orotherdistributions witharecorddateaftertheEffective Timetheretofore paidwithrespecttosuchwholeCompanySharesand(ii)attheappropriate paymentdate,theamountofA-4 IHdividends orotherdistributions witharecorddateaftertheEffective Timebutpriortosurrender andapaymentdatesubsequent.
| |
| tosurrender payablewithrespecttosuchwholeCompanyShares.(d)NOFRACTIONAL SECURITIES.
| |
| Notwithstanding'any
| |
| 'otherprovision ofthisA'greement, nocertificates orscriprepresenting fractional sharesofCompanyCommonStockshallbeissueduponthesurrender forexchangeofCertificates andsuchfractional sharesshallnotentitletheownerthereoftovoteortoanyotherrightsofaholderofCompanyCommonStock.Aspromptlyaspossiblefollowing theEffective Time,theExchangeAgentshalldetermine theexcessof(i)thenumberoffullsharesofCompanyCommonStockdelivered totheExchangeAgentbytheCompanypursuanttoSECTION2.3(a)lessthenumberoffullsharesofCompanyCommonStocktobedistributed totheholdersofBrooklynUnionCommonStockpursuanttoSECTION2.1(a)'ver (ii)thenumberoffullsharesofCompanyCommonStocktobedistributed totheholdersofLILCOCommonStockpursuanttoSECTION2.1(c)orSECTION7.18(b)(suchexcessbeinghereinreferredtoasthe"EXCESSSHARES").
| |
| AssoonaftertheEffective Dateaspracticable, theExchangeAgent,asagentfortheholdersofLILCOCommonStock,shallselltheExcessSharesatthe'thenprevailing pricesontheNewYorkStockExchange(the"NYSE")throughoneorm'rememberfirms'oftheNYSEinround'lotstotheextentpracticable.
| |
| LILCOshallpay,orcausetobepaid,allcommissions, transfertaxesand'other out-of-pocket transactions costs,including theexpensesandcompensation oftheExchangeAgentincurredinconnection withsuchsaleoftheExcessShares.Untiltheproceedsofsuchsaleorsaleshavebeendistributed totheholdersofLILCOCommonStock,theExchangeAgentshallholdsuchproceedsintrustfortheholdersofLILCOCommonStock.TheExchangeAgentshalldetermine theportionoftheproceedsfromthesaleoftheExcessShares(the"EXCESSSHARESPROCEEDS"
| |
| )towhicheachholderofLILCOCommonStockisentitled, ifany,bymultiplying theamountoftheExcessSharesProceedsbyafraction, thenumerator ofwhichistheamountofthefractional shareinterests towhichsuchholderofLILCOCommonStockisentitled, andthedenominator ofwhichistheaggregate amountoffractional shareinteresttowhichalloftheholdersofLILCOCommonStockareentitled.
| |
| Assoonaspracticable afterthesaleoftheExcessSharesandthedetermination oftheamountofcash,ifany,tobepaidtoeachholderofLILCOCommonStockinlieuofany,fractional shareinterests, theExchangeAgentshalldistribute suchamountstotheholdersofLILCO"CommonStockentitledtheretoandwhohavetheretofore delivered Certificates forLILCOCommonStockpursuanttothisARTICLEII.Cashisbeingpaidinlieuoffractional sharespursuanttothisSECTION2.1(d)fortheconvenience ofthepartiesandisnotaseparately bargained forconsideration.
| |
| (e)CLOSINGOFTRANSFERBOOKS.FromandaftertheLILCOEffective TimeandtheBrooklynUnionEffective Time,thecommonstocktransferbooksofLILCOandBrooklynUnion,respectively, shallbeclosedandnotransferofanyLILCOCommonStockorBrooklynUnionCommonStockshallthereafter bemade.If,aftertheLILCOEffective TimeortheBrooklynUnionEffective Time,asthecasemaybe,Certificates arepresented totheCompany,theyshallbecancelled andexchanged forcertificates representing theappropriate numberofCompanyShares,asthecasemaybe,asprovidedinthisSECTION2.3.(f)TERMINATION OFEXCHANGEAGENT.Anycertificates representing CompanySharesdeposited withtheExchangeAgentpursuanttoSECTION2.3(a)andnotexchanged withinoneyearaftertheEffective TimepursuanttothisSECTION2.3shallbereturnedbytheExchangeAgenttotheCompany,whichshallthereafter actasExchangeAgent.AllfundshefdbytheExchangeAgentforpaymenttotheholdersofunsurrendered Certificates andunclaimed attheendofoneyearfromtheEffective Timeshall,bereturnedtotheCompany,afterwhichtimeanyh'olderofunsurrendered Certificates shalllookasageneralcreditoronlytotheCompanyforpaymentofsuchfundstowhichsuchholdermay'bedue,subjecttoapplicable law.TheCompanyshallnotbeliabletoanypersonforsuchsharesorfundsdelivered toapublicofficialpursuanttoanyapplicable abandoned
| |
| : property, escheatorsimilarlaw.(g)PROCEDURES APPLICABLE TOSHARESISSUEDPURSUANTTOTHECONTINGENT ISSUANCE.
| |
| Ifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheLILCOEffective Time,thentheExchange.
| |
| AgentshallmailtoeachholderofrecordofCertificates whichimmediately priortotheLILCOEffective Timerepresented outstanding sharesofLILCOCommonStockthatwereexchanged forCompanySharesincompliance withtheissuanceprocedures described inSECTION2.3(b)certificates forthenumberofwholeCompanyShareswhichsuchholderhastherighttoreceivepursuanttotheA-5 Contingent Issuance.
| |
| Nodividends orotherdistributions declaredormadeaftertheLILCOEffective TimewithrespecttoCompanyShareswitharecorddateaftertheLILCOEffective Timeandpriortotheconsummation ofthetransactions contemplated bytheLIPAAgreement shallbepaidinrespectofsharestobeissuedpursuanttotheContingent Issuance.
| |
| Theprocedures described inSECTION2.3(d)withrespecttofractional sharesshallbeemployedwithrespecttosharestobeissuedpursuanttotheContingent Issuance.
| |
| ARTICLEIIITHECLOSINGSECTION3.1CLOSING.TheclosingoftheTransactions (the"CLOSING"
| |
| )shalltakeplaceattheofficesofKramer,Levin,Naftalis&Frankel,919ThirdAvenue,NewYork,NewYork,at10:00A.M.,localtime,onthesecondbusinessdayimmediately following thedateonwhichthelastoftheconditions setforthinARTICLEVIIIhereofissatisfied orwaived;or atsuchothertimeanddateandplaceasBrooklynUnionandLILCOshallmutuallyagree,butinnoeventearlierthanApril1,1998(the"CLOSINGDATE").ARTICLEIVREPRESENTATIONS ANDWARRANTIES OFBROOKLYNUNIONBrooklynUnionrepresents andwarrantstoLILCOasfollows:1SECTIQN4.1 ORGANIZATION ANDQUALIFICATION.
| |
| ExceptassetforthinSection4.1oftheBrooklynUnionDisclosure Schedule(asdefinedinSECTION7.6(ii)),
| |
| eachofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries (aqdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, (a)theterm"SUBSIDIARY" ofapersonshallmeananycorporation orother'entity (including partnerships, limitedliability companies andotherbusinessassociations) ofwhichatleastamajorityoftheoutstanding capitalstockorothervotingsecurities havingvotingpowerunderordinarycircumstances toelectdirectors orsimilarmembersofthegoverning bodyofsuchcorporation orentityshallatthetimebeheld,directlyorindirectly, bysuchpersonand(b)theterm"BROOKLYN UNIONSUBSIDIARY" shallmeanaSubsidiary ofBrooklynUnion.SEcTIGN4.2 SUBSIDIARIES.
| |
| Section4.2oftheBrooklynUnionDisclosure Schedulesetsforthadescription; asofDecember29,1996,ofallSubsidiaries andJointVentures(asdefinedherein)ofBrooklynUnion,including (a)thenameofeachsuchentityandBrooklynUnion'sinterestthereinand(b)abriefdescription oftheprincipal lineorlinesofbusinessconducted byeachsuchentity.Ex'ceptassetforthinSection4.2oftheBrooklynUnionDisclosure
| |
| : Schedule, noneoftheBrooklynUnionSubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutihtycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or2(a)(11)ofthePublicUtilityHoldingCompanyActof1935,asamended(thc"1935ACT"),respectively.
| |
| ExceptassetforthinSection4.2oftheBrooklynUnionDisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofeachBrooklynUnionSubsidiary arevalidlyissued,fullypaid,nonassessable andfreeofpreemptive rights,andareowned,directlyorindirectly, byBrooklynUnionfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, chargesandoptionsofanynaturewhatsoever andtherearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rights.orwarrants; including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating anysuchBrooklynUnionSubsidiary toissue,deliverorsell,orcausetobeissued,delivered orsold,additional A-6 sharesofitscapitalstockorobligating ittogrant,extendorenterintoanysuchagreement orcommitment.
| |
| AsusedinthisAgreement, (a)theterm"JOINTVENTURE"ofapersonshallmeananycorporation orotherentity(including partnerships andotherbusinessassociations) thatisnotaSubsidiary ofsuchperson,inwhichsuchpersonoroneormoreofitsSubsidiaries ownsanequityinterestand(b)theterm"BROOKLYN UNIONJOINTVENTURE".
| |
| shallmeanthoseofthejointventuresofBrooklynUnionoranyBrooklynUnionSubsidiary identified asaBrooklynUnionJointVentureinSection4.2oftheBrooklynUnionDisclosure Schedule.
| |
| SEGTtoN4.3 CAPITALIZATION.
| |
| Theauthorized capitalstockofBrooklynUnionisassetforthinBrooklynUnion'sAnnualReportonForm10KfortheyearendedSeptember 30,1996.AsofthecloseofbusinessonDecember18,1996,there,wereissuedandoutstanding 49,993,378 sharesofBrooklynUnionCommonStock.Alloftheissuedandoutstanding sharesofthecapitalstockofBrooklynUnionare,andanysharesofBrooklynUnionCommonStockissuedpursuanttotheBrooklynUnionStockOptionAgreement willbe,validlyissued,fullypaid,nonassessable andfreeofpreemptive rights.ExceptassetforthinSection4.3oftheBrooklynUnionDisclosure
| |
| : Schedule, asofDecember29,1996,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating BrooklynUnionoranyoftheBrooklynUnionSubsidiaries'to issue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofthecapitalstockofBrooklynUnion,orobligating BrooklynUniontogrant,extendorenterintoanysuchagreement orcommitment, otherthanundertheBrooklynUnionStockOptionAgreement.
| |
| Therearenooutstanding stockappreciation rightsofBrooklynUnionwhichwerenotgrantedintandemwitharelatedstockoptionandnooutstanding limitedstockappreciation rightsorotherrightstoredeemforcashoptionsorwarrantsofBrooklynUnion.SEGTIQN4.4AUTHORITY; NON;CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
| |
| (a)AUTHORITY.
| |
| BrooklynUnionhasallrequisite powerandauthority toenterintothisAgreemcnt andtheBrooklynUnionStockOptionAgreement, and,subjecttotheBrooklynUnionShareholders'pproval (asdefinedinSECTION4.13)andtheBrooklynUnionRequiredStatutory Approvals (asdefinedinSECTION4.4(c)),toconsummate thetransactions contemplated herebyorthereby.Theexecution an'ddeliveryofthisAgreement andtheBrooklynUnionStockOptionAgreement andtheconsummation by'Brooklyn Unionofthetransactions contemplated herebyandtherebyhavebeendulyauthorized byallnecessary corporate actiononthepartofBrooklynUnion,subjecttoobtaining theapplicable BrooklynUnionShareholders'pproval.
| |
| Each'ofthisAgreement andtheBrooklynUnionStockOptionAgreement hasbeen'ulyandvalidlyexecutedanddelivered byBrooklynUnionand,assumingthedueauthorization, execution anddeliveryhereofandthereofbytheothersignatories heretoandthereto,constitutes thevalidandbindingobligation ofBrooklynUnionenforceable againstitinaccordance withitsterms.(b)NON-CONTRAVENTION.
| |
| ExceptassetforthinSection4.4(b)oftheBrooklynUnionDisclosure
| |
| : Schedule, theexecution anddeliveryofthisAgreemcnt andtheBrooklynUnionStockOptionAgreement byBrooklynUniondonot,andtheconsummation ofthetransactions contemplated herebyortherebywillnot,inanymaterialrespect,violate,confiictwith,orresultinamaterialbreachofanyprovision of,orconstitute amaterialdefault'with orwithoutnoticeorlapseoftimeorboth)under,orresultinthetermination ormodification of,oraccelerate theperformance requiredby,orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orresultinthecreationofanymateriallien,securityinterest, chargeorencumbrance uponanyoftheproperties orassetsofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures(anysuchviolation,
| |
| : confiict, breach,default,rightoftermination, modification, cancellation oracceleration, lossorcreation, a"VIOLATION" withrespecttoBrooklynUnion,suchtermwhenusedinARTICLEVhavingacorrelative meaningwithrespecttoLILCO)pursuanttoanyprovisions of(i)thecertificate ofincorporation, by-lawsorsimilargoverning documents ofBrooklyn, UnionoranyoftheBrooklynUnionSubsidiaries orthcBrooklynUnionJointVentures, (ii)subjecttoobtaining theBrooklynUnionRequiredStatutory Approvals andthereceiptoftheBrooklynUnionShareholders'pproval, anystatute,law,ordinance, rule,regulation,
| |
| : judgment, decree,order,injunction, writ,permitorlicenseofanyGovernmental Authority (asdefinedinSECTION4.4(c))applicable toBrooklynUnionoranyoftheA-7 BrooklynUnionSubsidiaries ortheBrooklynUnionJointVenturesoranyoftheirrespectiveproperties orassetsor(iii)subjecttoobtaining thethird-party consentssetforthinSection4.4(b)oftheBrooklynUnionDisclosure Schedule(the"BROOKLYN UNIONREQUIREDCONSENTS"),
| |
| anymaterialnote,bond,mortgage, indenture, deedoftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation oragreement ofanykindtowhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries ortheBrooklynUnionJointVenturesisapartyorbywhichitoranyofitsproperties orassetsmaybeboundoraffected.
| |
| (c)STATUTORY APPROVALS.
| |
| Nodeclaration, filingorregistration with,ornoticetoorauthorization, consentorapprovalof,anycourt,federal,state,localorforeigngovernmental orregulatory body(including astockexchangeorotherself-regulatory body)orauthority (each,a"GOVERNMENTAL AUTHORITY"
| |
| )isnecessary fortheexecution anddeliveryofthisAgreement ortheBrooklynUnionStockOptionAgreement byBrooklynUnionortheconsummation byBrooklynUnionofthetransactions contemplated herebyorthereby,exceptasdescribed inSection4.4(c)oftheBrooklynUnionDisclosure Schedule(the"BROOKLYN UNIONREQUIREDSTATUTORY APPROVALS",
| |
| itbeingunderstood thatreferences inthisAgreement to"obtaining" suchBrooklynUnionRequiredStatutory Approvals shallmeanmakingsuchdeclarations, filingsorregistrations; givingsuchnotices;obtainin'g suchauthorizations, consentsorapprovals; andhavingsuchwaitingperiodsexpireasarenecessary toavoidaviolation oflaw).,ftf(d)COMPLIANCE.
| |
| ExceptassetforthinSection44(d),Section4.10orSection4.11oftheBrooklynUnionDisclosure
| |
| : Schedule, orasdisclosed intheBrooklynUnionSECReports(asdefined'in SECTION4.5)filedprior'toDecember29,1996,neitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries nor,totheknowledge ofBrooklynUnion,anyBrooklynUnionJointVentureisinmaterialviolation of,is"underinvestigation withrespecttoanymaterialviolation of,orhasbeengivennoticeorbeenchargedwithanymaterialviolation of,anylaw,statute,order;rule,regulation, ordinance orjudgment(including, withoutlimitation, anyapplicable environmental law,ordinance orregulation) ofanyGovernmental Authority.
| |
| ExceptassetforthinSection4.4(d)oftheBrooklynUnionDisclosure ScheduleorinSection4.11oftheBrooklynUnionDisclosure
| |
| : Schedule, BrooklynUnionandtheBrooklynUnionSubsidiaries andBrooklynUnionJointVentureshaveallpermits,licenses, franchises andothergovernmental authorizations, consentsandapprovals necessary toconducttheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection4.4(d)oftheBrooklynUnionDisclosure
| |
| : Schedule, BrooklynUnionandeachoftheBrooklynUnionSubsidiaries isnotinmaterialbreachorviolation oforinmaterialdefaultintheperformance orobservance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseoftimeoractionbyathirdparty,couldresultinamaterialdefaultunder,(i)itscertificate ofincorporation orby-lawsor(ii)anymaterialcontract, commitmentagreement, indenture,
| |
| : mortgage, loanagreement, note,lease,bond,license,approvalorotherinstrument towhichitisapartyorbywhichitisboundortowhichanyofitspropertyissubject.St:crtoN4.5 REPORTSANDFINANCIAL, STATEMENTS.
| |
| ThefilingsrequiredtobemadebyBrooklynUnionandtheBrooklynUnionSubsidiaries sinceJanuary1,1994undertheSecurities Actof1933,asamended(the"SECURITIES ACT"),theSecurities ExchangeActof1934,asamended(the"EXCHANGE ACT"),the1935Act,theFederalPowerAct(the"POWERACT"),theAtomicEnergyActandapplicable statelawsandregulations havebeenfiledwiththeSecurities andExchangeCommission (the"SEC"),theFederalEnergyRegulatory Commission (the"FERC"),theNuclearRegulatory Commission
| |
| ("NRC")ortheappropriate statepublicutilities commission, asthecasemaybe,including allforms,statements, reports,agreements (oralorwritten)andalldocuments,
| |
| : exhibits, amendments andsupplements appertaining thereto,andcomplied, asoftheirrespective dates,inallmaterialrespectswithallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| BrooklynUnionhasmadeavailable toLILCOatrueandcompletecopyofeachreport,schedule, registration statement anddefinitive proxystatement filedbyBrooklynUnionwiththeSECsinceJanuary1,1994(assuchdocuments havesincethetimeoftheirfilingbeenamended,the"BROOKLYN UNIONSECREPORTS").Asoftheirrespective dates,theBrooklynUnionSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,in'lightofthecircumstances underwhichtheyweremade,notmisleading.
| |
| Theauditedconsolidated financial statements'nd unaudited interimfinancial statements ofBrooklynA-8 UnionincludedintheBrooklynUnionSECReports(collectively, the"BROOKLYN UNIONFINANCIAL STATEMENTS"
| |
| )havebeenpreparedinaccordance withgenerally acceptedaccounting principles appliedonaconsistent basis("GAAP")(exceptasmaybeindicated thereinorinthenotestheretoandexceptwithrespectto,unaudited statements aspermitted byForm10-QoftheSEC)andfairlypresentthefinancial positionofBrooklynUnionasofthedatesthereofandtheresultsofitsoperations andcashflowsfortheperiodsthenended,subject,inthecaseoftheunaudited interimfinancial statements, tonormal,recurring auditadjustments.
| |
| True,accurateandcompletecopiesoftheRestatedCertificate ofIncorporation andBy-lawsofBrooklynUnion,asineffectonDecember29,1996,areincluded(orincorporated byreference) intheBrooklynUnionSECRt:ports.
| |
| SEcTIQN4.6ABSENCEOFCERTAINCHANGESOREVENTS.Exceptasdisclosed intheBrooklyn, UnionSECReportsfiledpriortoDecember29,1996orassetforthinSection4.6oftheBrooklynUnionDisclosure
| |
| : Schedule, sinceSeptember 30,1996,BrooklynUnionandeachoftheBrooklynUnionSubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent, withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhaveor,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects ofBrooklynUnionanditssubsidiaries takenasawhole(a"BROOKLYN UNIONMATERIALADVERSEEFFECT").
| |
| ISEcTIQN4.7LITIGATION.
| |
| Exceptasdisclosed in'theBrooklynUnionSECReportsfiledpriortoDecember29,1996orassetforthinSection4.7,Section4.9orSection4.11oftheBrooklynUnionDisclosure
| |
| : Schedule, (i)therearenomaterialclaims,suits,actionsorproceedings, pendingor,totheknowledge ofBrooklynUnion,threatened, norarethere,totheknowledge of,BrooklynUnion,anymaterialinvestigations orreviewspendingorthreatened-against, relatingtooraffecting BrooklynUnionoranyoftheBrooklynUnionSubsidiaries, (ii)therehavenotbeenanysignificant developments sinceSeptember 30,1996withrespecttosuchdisclosed claim's,suits,actions,proceedings, investigations orreviewsand(iii)therearenomaterialjudgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality orauthority oranyarbitrator applicable toBrooklynUnionoranyoftheBrooklynUnionSubsidiaries.
| |
| Sacwtox4.8 REGISTRATION STATEMENT ANDPROXYSTATEMENT.
| |
| Noneoftheinformation suppliedortobesuppliedbyoronbehalfofBrooklynUnionforinclusion orincorporation byreference in(i)theregistration statement onFormS-4tobefiledwiththeSECbytheCompanyinconnection withtheissuanceofsharesofCompanyCommonStockintheTransactions (the"REGISTRATION STATEMENT"
| |
| )will,atthetimetheRegistration Statement isfiledwiththeSECandatthetimeitbecomeseffective undertheSecurities Act,containanyuntruestatement ofamaterialfactoromittdstateanymaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading and(ii)thejointproxystatement, indefinitive form,relatingtothemeetingsofBrooklynUnionandLILCO'shareholders tobeheldinconnection withtheTransactions (the"PROXYSTATEMENT"
| |
| )willnot,atthedatesmailedtoshareholders andatthetimesofthemeetingsofshareholders tobeheldinconnection withtheTransactions, containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary inorder',tomakethestatements therein,inlightofthecircumstances underwhichtheyaremade,notmisleading.
| |
| TheRegistration Statement andtheProxyStatement willcomplyastoforminallmaterialrespectswiththeprovisions oftheSecurities ActandtheExchangeActandtherulesandregulations thereunder.
| |
| SEcTIQN.4.9 TAXMATTERS.'TAXES",asusedinthisAgreement, meansanyfederal,state,county,localorforeigntaxes,charges,fees,levies,orother'ssessments, including allnetincome,grossincome,salesanduse,advalorem,transfer, gains,profits,excise,franchise, realandpersonal,
| |
| : property, grossreceipt,capitalstock,production, businessandoccupation, disability, employment, payroll,license,estimated, stamp,customduties,severance orwithholding taxesor,chargesimposedbyanygovernmental entity,andincludesanyinterestandpenalties (civilorcriminal) onoradditions toanysuchtaxes."TAXRETURN",asusedinthisAgreement, meansareport,retlirnorotherinformation requiredtobesuppliedtoagovernmental entitywithrespecttoTaxesincluding, wherepermitted orrequired, combinedorconsolidated returnsforanygroupofentitiesthatincludesBrooklynUnionoranyofitssubsidiaries, orLILCOoranyofitssubsidiaries, asthecasemaybe.A-9 ExceptassetforthinSection4.9oftheBrooklynUnionDisclosure schedule:
| |
| (a)'FILING OFTIMELYTAXRETURNS.BrooklynUnionandeachoftheBrooklynUnionSubsidiaries havefiled(ortherehasbeenfiledonitsbehalf)allmaterialTaxReturnsrequiredtobefiledbyeachofthemunderapplicable law.AllsuchTaxReturnswereandareinallmaterialrespectstrue,completeandcorrectandfiledonatimelybasis.(b)PAYMENTOFTAXES.BrooklynUnion,and eachoftheBrooklynUnionSubsidiaries have,withinthetimeandinthemannerprescribed bylaw,paidallTaxesthatarecurrently dueandpayableexceptforthosecontested ingoodfaithandforwhichadequatereserveshavebeentaken.(c)TAXRESERVES.
| |
| BrooklynUnionandtheBrooklynUnionSubsidiaries haveestablished ontheirbooksandrecordsreservesadequatetopayallTaxesandreservesfordeferredincometaxesinaccoidance withGAAP.(d)TAXLIENS.TherearenoTaxliensuponthe.assetsofBrooklynUniono'ranyoftheBrooklyn'UnionSubsidiaries exceptliensforTaxesnotyetdue.(e)WITHHOLDING TAXES.BrooklynUnionandeachoftheBrooklynUnionSubsidiaries havecompliedinallmaterialrespectswiththeprovisions oftheInternalRevenueCodeof1986,asamended(the"CODE")relatingtothewithholding ofTaxes,aswellassimilarprovisions underanyotherlaws,andhave,withinthetimeandinthemannerprescribed bylaw,withheldfromemployeewagesandpaidovertothepropergovernmental authorities allamountsrequired.
| |
| (1)EXTENSIONS OFTIMEFORFILINGTAXRETURNS.NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasrequested anyextension oftimewithinwhichtofileanyTaxReturn,whichTaxReturnhasnotsincebeenfiled.(g)WAIVERSOFSTATUTEOFLIMITATIONS.
| |
| NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasexecutedanyoutstanding waiversorcomparable consentsregarding theapplication ofthestatuteoflimitations withrespecttoanyTaxesorTaxReturns.(h)EXPIRATION OFSTATUTEOFLIMITATIONS.
| |
| Thestatuteoflimitations fortheassessment ofallTaxeshasexpiredforallapplicable TaxReturnsofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries orthoseTaxReturnshavebeenexaminedbytheappropriate taxingauthorities forallperiodsthroughDecember29,1996,andnodeficiency foranyTaxeshasbeenproposed, assertedorassessedagainstBrooklynUnionoranyoftheBrooklynUnionSubsidiaries thathasnotbeenresolvedandpaidinfull.(i)AUDIT,ADMINISTRATIVE ANDCOURTPROCEEDINGS.
| |
| Noauditsorotheradministrative proceedings orcourtproceedings arepresently pendingwithregardtoanyTaxesorTaxReturnsofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries.
| |
| (j)POWERSOFATI'ORNEY.
| |
| Nopowerofattorneycurrently inforcehasbeengrantedbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries concerning anyTaxmatter.(k)TAXRULINGS.NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasreceivedaTaxRuling(asdefinedbelow)orenteredintoaClosingAgreement (asdefinedbelow)withanytaxingauthority thatwouldhaveacontinuing adverseeffectaftertheClosingDate."TAXRULING",asusedinthisAgreement, shallmeanawrittenrulingofataxingauthority relatingtoTaxes."CLOSINGAGREEMENT",
| |
| asusedinthisAgreement, shallmeanawrittenandlegallybindingagreement withataxingauthority relatingtoTaxes.(1)AVAILABILITY OFTAXRETURNS.BrooklynUnionhasmadeavailable toLILCOcompleteandaccuratecopiesof(i)allTaxReturns,andanyamendments thereto,filedbyBrooklynUnionoranyoftheBrooklynUnion'Subsidiaries, (ii)allauditreportsreceivedfromanytaxingauthority'elating toanyTaxReturnfiledbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries and(iii)anyClosingAgreements enteredintobyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries withanytaxingauthority.
| |
| 0(m)TAXSHARINGAGREEMENTS.
| |
| NeitherBrooklynUnionnoranyBrooklynUnionSubsidiary isapartytoanyagreement relatingtoallocating orsharingofincomeTaxes.(n)CODESECTION280G.NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries isapartytoanyagreement,
| |
| : contract, orarrangement thatcouldresult,onaccountofthetransactions contemplated hereunder, separately orintheaggregate, inthepaymentofany"excessparachute payments" withinthemeaningofSection280GoftheCode.(o)LIABILITY FOROTHERS.NoneofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasanyliability forTaxesofanypersonotherthanBrooklynUnionandtheBrooklynUnionSubsidiaries (i)underTreasuryRegulations Section1.1502-6(oranysimilarprovision ofstate,localorforeignlaw)asatransferee orsuccessor, (ii)bycontract, or(iii)otherwise.
| |
| SEGTIQN4.10 EMPLOYEEMATTERS;ERISA.ExceptassctforthinSection4.10oftheBrooklynUnion'isclosure Schedule:
| |
| (a)BENEFITPLANS.Section4.10(a)oftheBrooklynUnionDisclosure Schedulecontainsatrueandcompletelistofeachemployeebenefitplancoveringemployees, formeremployees ordirectors ofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries ortheirbeneficiaries, orproviding benefitstosuchpersonsinrespectofservicesprovidedtoanysuchentity,including, butnotlimitedto,anyemployeebenefitplanswithinthemeaningofSection3(3)oftheEmployeeRetirement IncomeSecurityActof1974,asamended("ERISA")
| |
| andanyseverance orchangeincontrolagreement (collectively, the"BROOKLYN UNIONBENEFITPLANS").ForthepurposesofthisSECTION4,10only,theternl"Brooklyn Union"shallbedeemedtoincludethepredecessors ofsuchcompany.(b)CONTRIBUTIONS.
| |
| Allmaterialcontributions andotherpaymentsrequiredtobemadebyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries toanyBrooklynUnionBenefitPlan(ortoanypersonpursuanttothetermsthereof)havebeenmadeortheamountofsuchpaymentorcontribution obligation hasbeenrefiected intheBrooklynUnionFinancial Statements.
| |
| (c)QUALIFICATION; COMPLIANCE.
| |
| EachoftheBrooklynUnionBenefitPlansintendedtobe"qualified" withinthemeaningofSection401(a)oftheCodehasbeendetermined bytheIRStobesoqualified, and,tothebestknowledge ofBrooklynUnion,nocircumsta'nces existthatarereasonably expectedbyBrooklynUniontoresultin'therevocation ofanysuchdetertnination.
| |
| BrooklynUnionisincompliance inallmaterialrespectswith,andeachoftheBrooklynUnionBenefitPlansisandhasbeenoperatedinallmaterialrespectsincompliance with,allapplicable laws,rulesandregulations governing suchplan,including, withoutlimitation, ERISAandtheCode,EachBrooklynUnionBenefitPlanintendedtoprovideforthe,deferralofincome,thereduction ofsalaryorothercompensation, ortoaffordotherincometaxbenefits, complieswiththerequirements ofthcapplicable provisions oftheCodeorotherlaws,rulesandregulations requiredtoprovidesuchincometaxbenefits.
| |
| (d)LIABILITIES, WithrespecttotheBrooklynUnionBenefitPlans,individually andintheaggregate, noeventhasoccurred, and,tothebestknowledge ofBrooklynUnion,theredoesnotnowexistanycondition orsetofcircumstances, thatcouldsubjectBrooklynUnionoranyofthcBrooklynUnionSubsidiaries toanymaterialliability arisingundertheCode,ERISAoranyotherapplicable law(including, withoutlimitation, anyliability toanysuch'plan orthePensionBenefitGuarantyCorporation (the"PBGC,")),
| |
| orunderanyindemnity agreement towhichBrooklynUnionisaparty,excluding liability forbenefitclaimsandfundingobligations,payablc intheordinarycourse.(e)WELFAREPLANS.NoneoftheBrooklynUnionBenefitPlansthatAre"welfareplans",withinthemeaningofSection3(1)ofERISA,providesforanyretireebenefits, otherthancontinuation coveragerequiredtobeprovidedunderSection4980BoftheCodeorPart6ofTitleIofERISA.(I)DOCUMENTS MADEAVAILABLE.
| |
| BrooklynUnionhasmadeavailable toLILCOatrueandcorrectcopyofeachcollective bargaining agreement towhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries isapartyorunderwhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasobligations and,withrespecttoeachBrooklynUnionBenefitPlan,whereapplicable, (i)suchplanandsummaryplandescription, (ii)themostrecentannualreportfiledwiththeIRS,(iii)eachrelatedtrustagreement, insurance
| |
| : contract, serviceproviderorinvestment management agreement (including allamendments toeachsuchdocument),
| |
| (iv)themostrecentdetermination oftheIRSwithrespecttothequalified statusofsuchBrooklynUnionBenefitPlan,and(v)themostrecentactuarial reportorvaluation.
| |
| (g)PAYMENTSRESULTING FROMTHETRANSACTIONS.
| |
| (i)Theconsummation orannouncement ofanytransaction contemplated bythisAgreement willnot(eitheraloneorupontheoccurrence ofanyadditional orfurtheractsorevents)resultinany(A)payment(whetherofseverance payorotheovise) becomingduefromBrooklynUnionoranyoftheBrooklynUnionSubsidiaries toanyofficer,employee, formeremployeeordirectorthereofortothetrusteeunderany"rabbitrust"orsimilararrangement, or(B)benefitunderanyBrooklynUnionBenefitFlanbeingestablished orbecomingaccelerated, vestedorpayableand(ii)neitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries isapartyto(A)anymanagement, employment, deferredcompensation, severance (including anypayment,rightorbenefitresulting fromachangeincontrol),
| |
| bonusorothercontractforpersonalserviceswithanyofficer,'director oremployee, (B)anyconsulting contractwithanypersonwhopriortoenteringintosuch"contract was'directororofficerofBrooklynUnion,or(C)anyplan,agreement,'rrangement orundersta'nding similartoanyoftheforegoing.
| |
| 4(h)LABORAGREEMENTS.
| |
| AsofDecember29,1996,exceptassetforthinSection4.10(h)oftheBrooklynUnionDisclosure Scheduleorin.theBrooklynUnionSECReportsfiledpriortoDecember29,1996,neitherBrooklyn'Union noranyoftheBrooklynUnionSubsidiaries isapartytoanycollective bargaining agreement orotherlaboragreement withanyunionorlabororganization.
| |
| Tothebestknowledge ofBrooklynUnion,asofDecember29,1996,exceptassetforthinSection4.10(h)oftheBrooklynUnionDisclosure
| |
| : Schedule, thereisnocurrentunionrepresentation questioninvolving employees ofBrooklyn"UnionoranyoftheBrooklynUnionSubsidiaries, nordoesBrooklynUnionknowofanyactivityor'proceeding ofanylabororganization (orrepresentative thereof)oremployeegrouptoorganizeanysuchemployees.
| |
| Exceptasdisclosed intheBrooklynUnionSECReportsfiledpriortoDecember29,1996orinSection4.10(h)oftheBrooklynUnionDisclosure Schedule; (i)thereisnounfairlaborpractice, employment discrimination orothermaterialcomplaint againstBrooklynOnionoranyoftheBrooklynUnionSubsidiaries pending,ortothebestknowledge ofBrooklynUnion,threatened, (ii)thereisnostrikeorlockoutormaterialdispute,slowdownorworkstoppagepending,ortothebestknowledge ofBrooklynUnion,threatened, againstorinvolving BrooklynUnion,and(iii)thereisnoproceeding, claim,suit,actionorgovernmental investigation pendingor,tothebestknowledge ofBrooklynUnion,threatened, inrespectofwhichanydirector, officer,employeeoragentofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries isormaybeentitledtoclaimindemnification fromBrooklynUnionorsuch,BrooklynUnionSubsidiary pursuanttotheirrespective certificates ofincorporation orby-lawsorasprovidedintheindemnification agreements listedinSection4.10(h)oftheBrooklynUnionDisclosure
| |
| : Schedule, SEGTIQN4.11ENVIRONMENTAL PROTECTION.
| |
| ExceptassetforthinSection4.11oftheBrooklynUnionDisclosure ScheduleorintheBrooklynUnionSECReportsfifedpriortoDecember29,1996:(a)COMPLIANCE.
| |
| BrooklynUnionandeachoftheBrooklynUnionSubsidiaries isinmaterialcompliance withallapplicable Environmental Laws(asde'finedinSECTION4.11(g)(ii));
| |
| andneitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasreceivedanycommunication (writtenororal),fromanypersonorGovernmental Authority thatallegesthatBrooklynUnionoranyoftheBrooklynUnionSubsidiaries isnotinsuchcompliance withapplicable Environmental Laws.(b)ENVIRONMENTAL PERMITS.BrooklynUnionandeachoftheBrooklynUnior'ubsidiaries hasobtainedorhasappliedforallmaterialenvironmentaf, healthandsafetypermitsandgovernmental authorizations (collectively, the"ENVIRONMENTAL PERMITS")necessary fortheconstruction oftheirfacilities ortheconductoftheiroperations, andallsuchEnvironmental Permitsareingoodstandingor,whereapplicable, arenewalapplication hasbeentimelyfiledandispending-agency
| |
| : approval, andBrooklyn UnionandtheBrooklynUnionSubsidiaries areinmaterialcompliance withalltermsandconditions oftheEnvironmental Permits.(c)ENVIRONMENTAL CLAIMS.Tothebestknowledge ofBrooklynUnion,thereisnomaterialEnvironmental Claim(asdefinedinSECTION4.11(g)(i))
| |
| pending(i)against'Brooklyn UnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures, (ii)againstanypersonorentitywhoseliability foranyEnvironmental ClaimBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasormayhaveretainedorassumedeithercontractualfy orbyoperation oflaw,or(iii)againstanyrealorpersonalpropertyoroperations whichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries owns,leasesormanages,inwholeorinpart.(d)RELEASES.
| |
| BrooklynUnionhasnoknowledge ofanymaterialReleases(asdefinedinSECTION4.11(g)(iv))
| |
| ofanyHazardous Material(asdefinedinSECTION4.11(g)(iii))
| |
| thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstBrooklynUnionoranyoftheBrooklynUnionSubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw.(e)PREDECESSORS.
| |
| BrooklynUnionhasnoknowledge, withrespecttoanypredecessor ofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyReleaseofHazardous Materials thatwouldbereasonably likelytoforinthebasisofanymaterialEnvironmental Claim.(I)DISCLOSURE.
| |
| ToBrooklynUnion'sbestknowledge, BrooklynUnionhasdisclosed toLILCOallmaterialfactswhichBrooklynUnionreasonably believesformthebasisofamaterialEnvironmental Claimarisingfrom(i)thecostofBrooklynUnionpollution controlequipment currently requiredorknowntoberequiredinthefuture;(ii)currentBrooklynUnionremediation costsorBrooklynUnionremediation costsknowntoberequiredinthefuture;or(iii)anyotherenvironmental matteraffecting BrooklynUnion.(g)AsusedinthisAgreement:
| |
| (i)"ENVIRONMENTAL CLAIM"meansanyandalladministrative, regulatory orjudicialactions,suits,demands,demandletters,directives, claims,liens,investigations, proceedings ornoticesofnoncompliance orviolation (writtenororal)byanypersonorentity(including anyGovernmental Authority) allegingpotential liability (including, withoutlimitation, potential responsibility fororliability forenforcement, investigatory costs,cleanupcosts,governmental responsecosts,removalcosts,remedialcosts,naturalresources damages,propertydamages,personalinjuriesorpenalties) arisingoutof,basedonorresulting from(A)thepresence, orReleaseorthreatened Releaseintotheenvironment, ofanyHazardous Materials atanylocation, whetherornotowned,operated, leasedormanagedbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures(forpurposesofthisSECTION4.11),orbyLILCOoranyoftheLILCOSubsidiaries orLILCOJointVentures(forpurposesofSECTION5.11);or(B)circumstances formingthebasisofanyviolation, orallegedviolation, ofanyEnvironmental Law;or(C)anyandallclaimsbyanythirdpartyseekingdamages,contribution, indemnification, costrecovery, compensation orinjunctive reliefresulting fromthepresenceorReleaseofanyHazardous Materials.
| |
| (ii)"ENVIRONMENTAL LAWS"meansallfederal,state,locallaws,rulesandregulations relatingtopollution, theenvironment (including, withoutlimitation, ambientair,surfacewater',groundwater, landsurfaceorsubsurface strata)orprotection ofhumanhealthasitrelatestotheenvironment including, withoutlimitation, lawsandregulations relatingtoRelcascsorthreatened ReleasesofHazardous Materials, orotherwise relatingtothemanufacture, processing, distribution, use,treatment, storage,disposal, transport orhandlingofHazardous Materials.
| |
| (iii)"HAZARDOUS MATERIALS" means(a)anypetroleum orpetroleum
| |
| : products, radioactive materials, asbestosinanyformthatisorcouldbecomefriable,ureafortnaldehyde foaminsulation, andtransformers orotherequipment thatcontaindielectric Quidcontaining polychlorinated 1A-13 biphenyls
| |
| ("PCBs");
| |
| and(b)anychemicals, materials orsubstances whicharenowdefinedasorincludedinthedefinition of"hazardous substances",
| |
| "hazardous wastes","hazardous materials",
| |
| "extremely hazardous wastes","restricted hazardous wastes","toxicsubstances",
| |
| "toxicpollutants"-,
| |
| orwordsofsimilarimport,underanyEnvi'ronmental Law;and(c)anyotherchemical,
| |
| 'material, substance orwaste,exposuretowhichisnowprohibited, limitedorregulated underanyEnvironmental Lawin'ajurisdiction inwhichBrooklynUnionoranyoftheBrooklynUnion,Subsidiaries orBrooklynUnionJointVenturesoperates(forpurposesofthisSECTION4.11)orinwhichLILCOoranyof,theLILCOSubsidiaries orLILCOJointVenturesoperates(forpurposesofSECTION5.11).(iv)"RELEASE" meansanyrelease,spill,emission, leaking,injection, deposit,disposal, discharge, dispersal, leachingormigration intotheatmosphere, soil,surfacewater,groundwater or,property.
| |
| Secnow4.12REGULATION ASAUTILITY.ExceptassetforthinSection4.12oftheBrooklynUnionDisclosure
| |
| : Schedule, neitherBrooklynUnionnorany"subsidiary company"or"affiliate" (assuchtermsaredefinedinthe1935Act)ofBrooklynUnionissubjecttoregulation asapublicutilityorpublicservicecompany(orsimilardesignation) byanystateintheUnitedStatesotherthanNewYorkoranyforeigncountry.kSEGTlON4.13VOTEREQUIRED.
| |
| TheadoptionofthisAgreement bytwo-thirds ofthevotesentitledtobecastbyallholdersofBrooklynUnionCommonStock(the"BROOKLYN UNIONSHAREHOLDERS'PPROVAL"
| |
| )istheonlyvoteoftheholdersofanyclassorseriesofthecapitalstockofBrooklynUnionoranyofitssubsidiaries requiredtoadoptthisAgreement andtheothertransactions contemplated hereby.SEcI'ION4.14ACCOUNTING MAXI'ERS.
| |
| NeitherBrooklynUnionnor,toBrooklynUnion'sbestknowledge, anyofitsaffiliates has'taken oragreedtotakeanyactionthatwouldpreventtheCompanyfromaccounting forthetransactions tobeeffectedpursuanttothisAgreement asapoolingofinterests inaccordance withGAAP.AsusedinthisAgreemcnt (exceptasspecifically otherwise defined),
| |
| theterm"AFFILIATE",
| |
| exceptwhereotherwise definedherein,shallmean,astoanyperson,anyotherpersonwhichdirectlyorindirectly
| |
| : controls, orisundercommoncontrolwith,oriscontrolled by,suchperson.Asusedinthisdefinition, "CONTROL" (including, withitscorrelative
| |
| : meanings, "controlled by"and"undercommoncontrolwith")shallmeanpossession, directlyorindirectly, ofpowertodirectorcausethedirection ofmanagement orpolicies(whetherthroughownership ofsecurities orpartnership orotherownership interests, bycontractorotherwise).
| |
| SEcl'lON4.15APPLICABILITY OFCERTAINPROVISIONS OFLAW.Assumingtherepresentation andwarrantyofLILCOmadeinSECTION5.18'iscorrect,noneofthebusinesscombination provisions ofSection912oftheNYBCLoranysimilarprovisions oftheNYBCL(or,tothebestknowledge ofBrooklynUnion,anyothersimilarstatestatute)ortheRestatedCertificate ofIncorporation orby-lawsofBrooklynUnion,areapplicable tothetransactions contemplated bythisAgreement, including thegrantingorexerciseoftheBrooklynUnionStockOption(exceptassetforthinSection4.15oftheBrooklynUnionDisclosure Schedule).
| |
| 'rcrtoN4.16 OPINIONOFFINANCIAL ADVISOR.BrooklynUnionhasreceivedtheopinionofMerrillLynch,Pierce,Penner&SmithIncorporated
| |
| ("MERRILLLYNCH"),datedDecember29,1996,totheeffectthat,asofthedatethereof,theOriginalRatioisfairfromafinancial pointofviewtotheholdersofBrooklynUnionCommonStock,andBrooklynUnionhasreceivedtheopinionofMerrillLynchdatedJune27,1997,totheeffectthat,asofthedatethereof,theLIPARatio(asdefinedbelow)isfairfromafinancial pointofviewtotheholdersofBrooklyn, UnionCommonStock.Srcvtow4.17 INSURANCE.
| |
| ExceptassetforthinSection4.17oftheBrooklynUnionDisclosure
| |
| : Schedule, BrooklynUnionandeachoftheBrooklynUnionSubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisksandlossesasarecustomary inallmaterialrespectsforcompanies conducting thebusinessasconducted byBrooklynUnionandtheBrooklynUnionSubsidiaries duringsuchtimeperiod.ExceptassetforthinSection4.17oftheBrooklynA-14 1UnionDisclosure
| |
| : Schedule, neitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoanymaterialinsurance policyofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries.
| |
| Theinsurance policiesofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries arevalidandenforceable policiesinallmaterialrespects.
| |
| SEcl'IQN4.18OWNERSHIP OFLILCOCOMMONSTOCK.ExceptpursuanttothetermsoftheLILCOStockOptionAgreement, BrooklynUniondoesnot"beneficially own"(assuchtermisdefinedforpurposesofSection13(d)oftheExchangeAct)anysharesofLILCOCommonStock.SEcftoN4.19 BUSINESSSYNERGIES.
| |
| BrooklynUnionisnotawareofanyfactorcircumstance, including theter'insofanyagreement towhichitoranyofitsSubsidiaries issubject,thatwouldimpairinanymaterialrespecttheabilityoftheCompanytorealizethesynergies described inthejointpressreleasetobeissuedinconnection withtheannouncement ofthistransaction..
| |
| KARTICLEVREPRESENTATIONS ANDWARRANTIES orLILCOLILCOrepresents andwarrantstoBrooklynUnionasfollows:SEcfloN5.1ORGANIZATION ANDQUALIFICATION.
| |
| ExceptassetforthinSection5.1oftheLILCODisclosure Schedule(asdefinedinSECTION7.6(i)),eachofLILCOandeachoftheLILCOSubsidiaries (asdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority; andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextenttowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, theterm"LILCOSUBSIDIARY" shallmeanaSubsidiary ofLILCO.SEGTIQN5.2SUBSIDIARIES.
| |
| Section5.2oftheLILCODisclosure Schedulesetsforthadescription asofDecember29,1996ofallSubsidiaries andJointVenturesofLILCO("LILCOJOINTVENTURES"
| |
| ),including (a)thenameofeachsuchentityandLILCO'sinteresttherein,and(b)abriefdescription oftheprincipal lineorlinesofbusinessconducted byeachsuchentity.ExceptassetforthinSection5.2oftheLILCODisclosure
| |
| : Schedule, noneoftheLILCOSubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutilitycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or'(a)(11) ofthe1935Act,respectively.
| |
| ExceptassetforthinSection5.2oftheLILCODisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofeachLILCOSubsidiary arevalidlyissued,fullypaid,nonassessable andfreeofpreemptive rights,andareowneddirectlyorindirectly byLILCOfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, chargesandoptionsofanynaturewhatsoever andtherearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating anysuchLILCOSubsidiary toissue,deliverorsell,orcausetobeissued,'delivered orsold,additional sharesofitscapitalstockorobligating ittogrant,extendorenterintoanysuchagrccment orcommitment.
| |
| SEGTIQN5.3CAPITALIZATION.
| |
| Theauthorized capitalstockofLILCOisassetforthinLILCO'sAnnualReportonForm10KfortheyearendedDecember31,1995.AsofthecloseofbusinessonDecember27,1996,therewereissuedandoutstanding 120,780,792 sharesofLILCOCommonStock.Alloftheissuedandoutstanding sharesofthecapitalstockofLILCOare,andanyLILCOCommonStockissuedpursuanttothetLILCOStockOptionAgreement willbe,validlyissued,fullypaid,nonassessable (subjecttoSection630oftheNYBCL),andfreeofpreemptive rights.ExceptassetforthinSection5.3oftheLILCODisclosure
| |
| : Schedule, asofDecember29,1996,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesor othercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunder'any outstanding
| |
| : security, instrument orotheragreement, obligating LILCOoranyoftheLILCOSubsidiaries toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofthecapitalstockofLILCO,orobligating LILCOtogrant,extendorenterintoanysuchagreement orcommitment, otherthanundertheLILCOStockOptionAgreement.
| |
| Therearenooutstanding stockappreciation rightsofLILCOwhichwerenotgrantedintandemwitharelatedstockoptionandnooutstanding limitedstockappreciation rightsorotherrightstoredeemforcashoptionsorwarrantsofLILCO.'ECTION 5.4AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
| |
| (a)AUTHORITY.
| |
| LILCOhasallrequisite powerandauthority toenterintothisAgreement andtheLILCOStockOptionAgreemcnt, and,subje'cttotheLILCOShareholders'pproval (asdefinedinSECTION5.13)and,theLILCORequiredStatutory Approvals (asdefinedinSECTION5.4(c)),toconsummate thetransactions contemplated herebyorthereby.Theexecution anddeliveryofthisAgreement andtheLILCOStockOptionAgreement andtheconsummation byLILCOofthetransactions contemplate'd herebyandtherebyhavebeendulyauthorized byallnecessary corporate actiononthepartofLILCO,subjecttoobtaining theapplicable LILCOShareholders'pproval.
| |
| ThisAgreement hasbeendulyandvalidlyexecutedanddelivered byLILCO,theLILCOStockOptionAgreement hasbeendulyandvalidlyexecutedanddelivered byLILCOand,assumingthedueauthorization, execution anddeliveryhereofandthereofbytheothersignatories heretoandthereto,eachofthirAgreement andtheLILCOStockOptionAgreement constitutes thevalidandbindingobligation ofLILCO,,enforceablc againstitinaccordance withitsterms."(b)NON-CONTRAVENTION.
| |
| ExceptassetforthinSection5.4(b)oftheLILCODisclosure
| |
| : Schedule, theexecutiori'and deliveryofthisAgreement andtheLILCOStockOptionAgreement by'LILCOdonot,andtheconsummation ofthetransactions contemplaied herebyortherebywillnot,resultinamaterialViolation pursuanttoanyprovisions of(i)thecertificat ofincorporation, by-lawsorsimilargoverning documents ofLILCOoranyoftheLILCOSubsidiaries ortheLILCOJointVentures, (ii)subjecttoobtaining theLILCORequiredStatutory Approvals andthereceiptoftheLILCOShareholders'pproval, anystatute,law,ordinance, rule,regulation,
| |
| : judgment, decree,order,injunction, writ,permitorlicenseofanyGovernmental Authority applicable toL'ILCOoranyoftheLILCOSubsidiaries ortheLILCOJointVenturesoranyoftheirrespective properties orassetsor(iii)subjecttoobtaining thethird-party consentssetforthinSection5.4(b)oftheLILCODisclosure Schedule(the"LILCOREQUIREDCONSENTS")
| |
| anymaterialnote,bond,mortgage, indenture, deedoftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation oragreement ofany"kindtowhichLILCOoranyoftheLILCOSubsidiaries ortheLILCOJointVenturesisapartyorbywhichitoranyofitsproperties orassetsmaybeboundoraffected.
| |
| (c)STATUTORY APPROVALS.
| |
| Nodeclaration, filingorregistration with,ornoticetoorauthOrization, consentorapprovalof,anyGovernmental Authority isnecessary fortheexecution anddeliveryofthisAgreement ortheLILCOStockOptionAgreement byLILCOorthecbnsummation byLILCOofthctransactions contemplated hereby,orthereby,exceptasdescribed inSection5.4(c)oftheLILCODisclosure Schedule(the"LILCOREQUIREDSTATUTORY APPROVALS",
| |
| itbeingunderstood that.referen'ces inthisAgfeqment to"obtaining" suchLILCORequiredStatutory Approvals shallmeanmakingsuchdeclarations, filingsorregistrations; givingsuchnotices;obtaining suchauthorizations, consentsorapprovals; andhavingsuchwaitingperiodsexpireasarenecessary toavoidaviolation oflaw).(d)COMPLIANCE.
| |
| ExceptassetforthinSection5.4(d),Section5.10orSection5.11oftheLILCODisclosure
| |
| : Schedule, orasdisclosed intheLILCOSECReports(asdefinedinSECTION5.5)filedpriortoDecember29,1996,neitherLILCOnoranyoftheLILCOSubsidiaries nor,totheknowledge ofLILCO,anyLILCOJointVenture,isinmaterialviolation of,isunderinvestigation withrespecttoanymaterialviolation of,orhasbeengivennoticeorbeenchargedwithanymaterialviolation of,anylaw,statute,order,rule,regulation, ordinance orjudgment(including, withoutlimitation, anyapplicable environmental law,ordinance orregulation) ofanyGovernmental Authority.
| |
| ExceptassetforthinSection5.4(d)oftheLILCODisclosure ScheduleorinSection5.11oftheLILCODisclosure
| |
| : Schedule, LILCOandtheLILCOSubsidiaries andLILCOJointVentures ehaveallpermits,licenses, franchises andothergovernmental authorizations, consentsandapprovals necessary toconducttheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection5.4(d)oftheLILCODisclosure
| |
| : Schedule, LILCOandeachoftheLILCOSubsidiaries isnotinmaterialbreachorviolation oforinmaterialdefaultintheperformance orobservance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseoftimeoractionbyathirdparty,couldresultinamaterialdefaultunder,(i)itscertificate ofincorporation orby-lawsor(ii)anymaterialcontract, commitment, agreement, indenture,'mortgage, loanagreement, note,lease,bond,license,approvalorotherinstrument towhichitisapartyorbywhichitisboundortowhichanyofitspropertyissubject.lSECTIQN5.5REPORTSANDFINANCIAL STATEMENTS.
| |
| 'ThefilingsrequiredtobemadebyLILCOandtheLILCOSubsidiaries sinceJanuary1,1994undertheSecurities Act,theExchangeAct,the1935Act,thePowerAct,theAtomicEnergyActandapplicable statelawsandregulations havebeenfiledwiththeSEC,the~FERC,theNRCortheappropriate statepublicutilities commission, asthecasemaybe,including allforms,statements, reports,agreements (oralorwritten)andalldocuments,
| |
| : exhibits, amendments andsupplements appertaining thereto,andcomplied, asoftheirrespective dates,inallmaterialrespectswithallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| LILCOhasmadeavailable toBrooklynUnionatrueandcompletecopyofeachreport,schedule, registration statement anddefinitive proxystatement filedbyLILCOwiththeSECsinceJanuaryI,1994(assuchdocuments havesincethetimeoftheirfilingbeenamended,the"LILCOSECREPORTS").Asoftheirrespective dates,theLILCOSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheywercmade,not'isleading.
| |
| Theauditedconsolidated financial statements andunaudited interimfinancial statements ofLILCOincludedintheLILCOSECReports(collectively, the"LILCOFINANCIAL STATEMENTS"
| |
| )havebeenpreparedinaccordance withGAAP(exceptasmaybeindicated thereinorinthenotestheretoandexceptwithrespecttounaudited statements'as permitted byForm10-QoftheSEC)an'dfairlypresentthefinancial positionofLILCOasofthedatesthereofandtheresultsofitsoperations andcashflowsfortheperiodsthenended,subject,inthecaseof'theunaudited interimfinancial statements,'o normal,recurring auditadjustments.
| |
| True,accurateandcompletecopiesoftheRestatedCertificate ofIncorporation andBy-lawsofLILCO,asineffectonDecember29,1996,areincluded(orincorporated byreference) intheLILCOSECReports.SEcTIQN5.6 ABSENCEOFCERTAINCHANGESOREVENTS.Exceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29,1996or'ssetforthinSection5.6oftheLILCODisclosure
| |
| : Schedule, sinceDecember31,1995,LILCOandeachoftheLILCOSubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhaveor,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects ofLILCOanditssubsidiaries takenasawhole(a"LILCOMATERIALADVERSEEFFECT").hSEcTIQN5.7LITIGATION.
| |
| Exceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29,1996orassetforthinSection5.7,Section5.9orSection'5.11 oftheLILCODisclosure
| |
| : Schedule, (i)therearenomaterialclaims,suits,actionsorproceedings, pendingor,totheknowledge ofLILCO,threatened, norarethere,totheknowledge ofLILCO,anymaterialinvestigations orreviewspendingorthreatened against,relatingtooraffecting LILCOoranyoftheLILCOSubsidiaries, (ii)therehavenotbeenanysignificant developments sinceDecember31,1995withrespecttosuchdisclosed claims,suits,actions,proceedings, investigations orreviewsand(iii)therearenomaterialjudgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality orauthority oranyarbitrator applicable toLILCOoranyoftheLILCOSubsidiaries.
| |
| SEcTIQN5.8REGISTRATION STATEMENT ANDPROXYSTATEMENT.
| |
| Noneoftheinformation suppliedortobesuppliedbyoronbehalfofLILCOforinclusion orincorporation byreference in(i)theRegistration Statement will,atthetimetheRegistration Statement isfiledwiththeSECandatthetimeitbecomeseffective undertheSecurities Act,containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading and(ii)the ProxyStatement willnot,atthedatesmailedtoshareholders andatthetimesofthemeetingsofshareholders tobeheldinconnection withtheTransactions, containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary in'rdertomakethestatements therein,inlightofthecircumstances underwhichtheyaremade,notmisleading; The'Registration Statement andtheProxyStatement willcomplyastoforminallmaterialrespectswiththeprovisions oftheSecurities ActandtheExchangeActandtherulesandregulations thereunder.
| |
| St!crtox5.9TAXMATTERS.ExceptassetforthinSection5.9oftheLILCODisclosure Schedule(a)FILINGOFTIMELYTAXRETURNS.LILCOandeachoftheLILCOSubsidiaries havefiled(orthereliasbeenfiledonitsbehalf)allmaterialTaxReturnsrequiredtobefiledbyeachofthemunder.applicable law.AllsuchTaxReturnswereandareinallmaterialrespectstrue,completeandcorrectandfiledonatimelybasis.(b)PAYMENTOFTAXES.LILCOandeachoftheLILCOSubsidiaries have,withinthetimeandinthemannerprescribed bylaw,paidallTaxesthatarecurrently dueandpayableexceptforthosecontested ingoodfaithandforwhichadequatereserveshavebeentaken.(c)TAXRESERVES.
| |
| LILCOandtheLILCOSubsidiaries haveestablished ontheirbooksandrecordsreservesatlequate topayallTaxesandreservesfordeferredincometaxesinaccordance withGAAP~(d)TAXL'IENS.TherearenoTaxliensupontheassetsofLILCOoranyoftheLILCOSubsidiaries exceptliensforTaxesnotyctdue.r(e)WITHHOLDING TAXES.LILCOandeachoftheLILCOSubsidiaries havecompliedinallmaterialrespectswiththeprovisions oftheCoderelatingtothewithholding ofTaxes,aswellassimilarprovisions underanyotherlaws,andhave,withinthetimeandinthemannerprescribed bylaw,withheldfromemployeewagesandpaidovertothepropergovernmental authorities allamountsrequired.
| |
| (f)EXTENSIONS OFTIMEFORFILINGTAXRETURNS.NeitherLILCOnoranyoftheLILCOSubsidiaries hasrequested anyextension oftimewithinwhichtofileanyTaxReturn,whichTaxReturnhasnotsincebeenfiled.(g)WAIVERSOFSTATUTEOFLIMITATIONS.
| |
| NeitherLILCOnoranyoftheLILCOSubsidiaries hasexecutedany,outstanding waivers'orcomparable consentsregarding theapplication ofthestatuteoflimitations withrespecttoanyTaxesorTaxReturns.(h)EXPIRATION OFSTATUTEOFLIMITATIONS.
| |
| 'hestatuteoflimitations fortheassessment ofallTaxeshasexpiredforallapphcable TaxReturnsofLILCOandeachof'thcLILCOSubsidiaries orthoseTaxReturnshavebeenexaminedbytheappropriate taxingauthorities forallperiodsthroughDecember29,1996,andnodeficiency foranyTaxeshasbeenproposed, assertedorassessedagainstLILCO'oranyoftheLILCOSubsidiaries tliathasnotbeenresolvedandpaidinfull.C(i)AUDIT,ADMINISTRATIVE ANDCOURTPROCEEDINGS.
| |
| Noauditsorotheradministrative proceedings orcourtproceedings arepresently pendingwithregardtoanyTaxesorTaxReturnsofLILCOoranyofthe,LILCOSiibsidiaries.
| |
| (j)POWERSOFATTORNEY.
| |
| Nopowerofattorneycurrently inforce'asbeengrantedbyLILCOo'ranyoftlieLILCOSubsidiaries concerning anyTaxmatter.(k)TAXRULINGS.NeitherLILCOnoranyoftheLILCOSubsidiaries hasreceivedaTaxRulingorenteredintoaClosingAgreement withanytaxingauthority thatwouldhaveacontinuing adverseeffectaftertheClosingDate.(1)AVAILABILITY OFTAXRETURNS.LILCOhasmadeavailablc toBrooklynUnioncompleteandaccuratecopiesof(i)allTaxReturns,andanyamendments thereto,filedbyLILCOoranyoftheLILCOSubsidiaries, (ii)allauditreportsreceivedfromanytaxingauthority relatingtoanyTaxReturnfiled byLILCOoranyoftheLILCOSubsidiaries and(iii)anyClo'singAgreements enteredintobyLILCOoranyoftheLILCOSubsidiaries withanytaxingauthority.
| |
| (m)TAXSHARINGAGREEMENTS.
| |
| NeitherLILCOnoranyLILCOSubsidiary isapartytoanyagreement relatingtoallocating orsharingofincomeTaxes.(n)CODESECTION280G.NeitherLILCOnoranyoftheLILCOSubsidiaries isapartytoanyagreement,
| |
| : contract, orarrangement thatcouldresult,onaccountofthetransactions contemplated hereunder, separately orintheaggregate, inthepaymentofany"excessparachute payments" withinthemeaningofSection280GoftheCode.(o)LIABILITY FOROTHERS.NoneofLILCOoranyoftheLILCOSubsidiaries hasanyliability forTaxesofanypersonotherthanLILCOandtheLILCOSubsidiaries (i)underTreasuryRegulations Section1.1502-6(oranysimilarprovision ofstate,localorforeignlaw)asatransferee orsuccessor, (ii)bycontract, or(iii)otherwise.
| |
| SEGTIQN5.10EMPLOYEEMATTERS;ERISA.ExceptassetforthinSection5.10oftheLILCODisclosure Schedule:
| |
| (a)BENEFITPLANS.Section5.10(a)ofthe,LILCO Disclosure Schedulecontainsatrueandcompletelistofeachemployeebenefitplancoveringemployees, formeremployees ordirectors ofLILCOandeachoftheLILCOSubsidiaries ortheirbeneficiaries, orproviding benefitstosuchpersonsinrespectofservicesprovidedtoanysuchentity,including, butnotlimitedto,anyemployeebenefitplanswithinthemeaningofSection3(3)ofERISAandanyseverance orchangeincontrolagreement (collectively, the"LILCOBENEFITPLANS").ForthepurposesofthisSECTION5.10only,theterm"LILCO"shallbedeemedtoincludethepredecessors ofsuchcompany.(b)CONTRIBUTIONS.
| |
| Allmaterialcontributions andotherpaymentsrequiredtobemadebyLILCOoranyoftheLILCOSubsidiaries toanyLILCOBenefitPlan(ortoanypersonpursuanttothetermsthereof)havebeenmadeortheamountofsuchpaymentorcontribution obligation hasbeenreflected intheLILCOFinancial Statements.
| |
| (c)QUALIFICATION; COMPLIANCE.
| |
| EachoftheLILCOBenefitPlansintendedtobe"qualified" withinthemeaningofSection401(a)oftheCodehasbeendetermined bytheIRStobesoqualified, and,tothebestknowledge ofLILCO,nocircumstances existthatarereasonably expectedbyLILCOtoresultintherevocation ofanysuchdetermination.
| |
| LILCOisincompliance inallmaterialrespectswith,andeachoftheLILCOBenefitPlansisandhasbeenoperatedinallmaterialrespectsincompliance with,allapplicable laws,rulesandregulations governing suchplan,including, withoutlimitation, ERISAandtheCode.EachLILCOBenefitPlanintendedtoprovideforthedeferralofincome,thereduction ofsalaryorothercompensation, ortoaffordotherincometaxbenefits, complieswiththerequirements oftheapplicable provisions oftheCodeorotherlaws,rulesandregulations requiredtoprovidesuchincometaxbenefits.
| |
| (d)LIABILITIES.
| |
| WithrespecttotheLILCOBenefitPlans,individually andintheaggregate, noeventhasoccurred, and,tothebestknowledge ofLILCO,theredocsnotnowexistanycondition orsetofcircumstances, thatcouldsubjectLILCOoranyoftheLILCOSubsidiaries toanymaterialliability arisingundertheCode,ERISAoranyotherapplicable law(including, withoutlimitation, anyliability toanysuchplanorthePBGC),orunderanyindemnity agreement towhich'LILCO isaparty,excluding liability forbenefitclaimsandfundingobligations payableintheordinarycourse.(e)WELFAREPLANS.NoneoftheLILCOBenefitPlansthatare"welfareplans",withinthemeaningofSection3(1)ofERISA,providesforanyretireebenefits, otherthancontinuation coveragerequiredtobeprovidedunderSection4980BoftheCodeorPart6ofTitleIofERISA.(f)DOCUMENTS MADEAVAILABLE.
| |
| LILCOhasmadeavailable toBrooklynUnionatrueandcorrectcopyofeachcollective bargaining agreement towhichLILCOoranyoftheLILCOSubsidiaries isapartyor'underwhichLILCOoranyoftheLILCOSubsidiaries hasobligations and,withrespecttoeach LILCOBenefitPlan,whereapplicable, (i)suchplanandsummaryplandescription, (ii)themostrecentannualreportfiledwiththeIRS,(iii)eachrelatedtrustagreement, insurance'contract, serviceproviderorinvestment management agreement (including allamendments toeachsuchdocument),
| |
| (iv)themostrecentdetermination oftheIRSwithrespecttothequalified statusofsuchLILCOBenefitPlan,and(v)themostrecentactuarial reportorvaluation.
| |
| (g)PAYMENTSRESULTING FROMTHETRANSACTIONS.
| |
| (i)Theconsummation orannouncement ofanytransaction contemplated bythisAgreement willnot(eitheraloneorupontheoccurrence ofanyadditional orfurtheractsorevents)resultinany(A)payment(whetherofseverance payorotherwise) becomingduefromLILCOoranyoftheLILCOSubsidiaries toanyofficer,employee, formeremployeeordirectorthereofortothetrusteeunderany"rabbitrust"orsimilararrangement, or(B)benefitunderanyLILCOBenefitPlanbeingestablished orbecomingaccelerated; vestedorpayable'and(ii)neitherLILCOnoranyoftheLILCOSubsidiaries isapartyto(A)anymanagement, employment, deferredcompensation, severance (including anypayment,rightorbenefitresulting fromachangeincontrol),
| |
| bonusorothercontractforpersonalscrviccswithanyofficer,directororemployee, (B)anyconsulting contractwithanypersonwhopriortoenteringintosuchcontractwasadirectororofficerofLILCO,or(C)anyplan,agreement, arrangement orunderstanding similartoanyoftheforegoing.
| |
| (h)LABORAGREEMENTS.
| |
| AsofDecember29,1996,exceptassetforthinSection5.10(h)oftheLILCODisclosure ScheduleorintheLILCOSECReportsfiledpriortoDecember29,1996,neitherLILCOnoranyoftheLILCOSubsidiaries isapartytoanycollective bargaining agreement orotherlaboragreemcnt withanyuriionorlabororganization.
| |
| Tothebestknowledge ofLILCO,asofDecember29,1996,exceptassetforthinSection5.10(h)oftheLILCODisclosure
| |
| : Schedule, thereisnocurrentunionrepresentation questioninvolving employees ofLILCOoranyoftheLILCOSubsidiaries, nordoesLILCOknowofanyactivityorproceeding ofanylabororganization (orrepresentative thereof)oremployeegrouptoorganizeanysuchemployees.
| |
| Exceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29,1996orinSection5.10(h)oftheLILCODisclosure
| |
| : Schedule, (i)thereisnounfairlaborpractice,
| |
| ~employment discrimination orothermaterialcomplaint against'ILCO oranyoftheLILCOSubsidiaries
| |
| ~pending,ortothebestknowledge ofLILCO,threatened, (ii)thereisnostrike,orlockoutormaterialdispute,slowdownorworkstoppagepending,ortothebestknowledge ofLILCO,threatened, againstorinvolving LILCO,and(iii)thereisnoproceeding, claim,suit,actionorgovernmental investigation pendingor,tothebestknowledge ofLILCO,threatened, inrespectofwhichanydirector, officer,employeeoragentofLILCOoranyoftheLILCOSubsidiaries isormaybeentitledtoclaimindemnification fromLILCOorsuchLILCOSubsidiary pursuanttotheirrespective certificates ofincorporation orby-lawsorasprovidedintheindemnification agreemcnts listedinSection5.10(h)oftheLILCODisclosure Schedule.
| |
| Secrtow5.11ENVIRONMENTAL PROTECTION.
| |
| ExceptassetforthinSection5.11oftheLILCODisclosure ScheduleorintheLILCOSECReportsfiledpriortoDecember29,1996:(a)COMPLIANCE.
| |
| LILCOandeachoftheLILCOSubsidiaries isinmaterialcolnpiiance withallapplicable Environmental Laws;andneitherLILCOnoranyoftheLILCOSubsidiaries hasreceivedanycommunication (writtenororal),fromanypersonorGovernmental Authority thatallegestliatLILCOoranyoftheLILCOSubsidiaries isnotinsuchcdmpliance withapplicable Environmental Laws.(b)ENVIRONMENTAL PERMITS.LILCOandeachoftheLILCOSubsidiaries hasobtainedorhas'appliedforalltheEnvironmental Permitsnecessary fortheconstruction oftheirfacilities ortheconductoftheiroperations, andallsuchEnvironmental Permitsareingoodstandingor,whereapplicable, arenewalapplication hasbeentimelyfiledandispendingagencyapproval, andLILCOandtheLILCOSubsidiaries areinmaterialcompliance withalltermsandconditions oftheEnvironmental Permits.(c),ENVIRONMENTAL CLAIMS.Tothebestknowledge ofLILCO,there'isnomaterialEnvironmental Claimpending(i).againstLILCOoranyoftheLILCOSubsidiaries orLILCOJointVentures, (ii)againstanypersonorentitywhoseliability foranyEnvironmental ClaimLILCOoranyof,theLILCOSubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw,orA-20 (iii)againstanyrealorpersonalpropertyoroperations whichLILCOoranyoftheLILCOSubsidiaries owns,leasesormanages,inwholeorinpart.(d)RELEASES.
| |
| LILCOhasnoknowledge ofanymaterialReleasesofanyHazardous Materialthatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstLILCOoranyofthe,LILCOSubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimLILCOoranyoftheLILCOSubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw.(e)PREDECESSORS.
| |
| LILCOhasnoknowledge,
| |
| 'withrespecttoanypredecessor ofLILCOoranyoftheLILCOSubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyReleaseofHazardous Materials thatwouldbereasonably likelytoformthebasisofanyinaterial Environmental Claim.(f)DISCLOSURE.
| |
| ToLILCO'sbestknowledge, LILCOhasdisclosed toBrooklynUnionallmaterialfactswhichLILCOreasonably believesformthebasisofamaterialEnvironmental Claimarisingfrom,(i)thecostofLILCOpollution controlequipment currently requiredorknowntoberequiredinthefuture;(ii)currentLILCOremediation costsorLILCOremediation
| |
| 'costsknowntoberequiredinthefuture;or(iii)anyotherenvironmental matteraffecting LILCO.ISEGTION5.12 REGULATION ASAUTILITY.ExceptassetforthinSection5.12oftheLILCODisclosure
| |
| : Schedule, neitherLILCOnorany"subsidiary company"or"affiliate" (assuchtermsaredefinedinthe1935Act)ofLILCOissubjecttoregulation asapublicutilityorpublicservicecomp'any(or'similar designation) byanystateintheUnitedStatesotherthanNewYorkoranyforeigncountry.St:.crt'.13 VOTEREQUIRED.
| |
| TheadoptionofthisAgreement bytwo-thirds ofthevotesentitledtobecastbyallholdersofLILCOCommonStock(collectively, the"LILCOSHAREHOLDERS'PPROVAL"
| |
| )istheonlyvoteoftheholdersofanyclassorseriesofthecapitalstockofLILCOoranyofitssubsidiaries requiredtoadoptthisAgreement andtheothertransactions contemplated hereby.'eertow5.14 ACCOUNTING MATTERS.NeitherLILCOnor,toLILCO'sbestknowledge, anyofitsaffiliates hastakenoragreedtotakeanyactionthatwouldpreventtheCompanyfromaccounting forthetransactions tobeeffectedpursuanttothisAgreement asapoolingofinterests inaccordance withGAAPifthetransactions contemplated bytheLIPAAgreement arenotconsummated.
| |
| SrcrtoN5.15APPLICABILITY OFCERTAINPROVISIONS OFLAW.Assumingthattherepresentation andwarrantyofBrooklynUnionmadeinSECTION4.18iscorrect,-none ofthebusinesscombination provisions ofSections912oftheNYBCLoranysimilarprovisions oftheNYBCL(or,tothebestknowledge ofLILCO,anyothersimilarstatestatute)ortheRestatedCertificate ofIncorporation orby-lawsofLILCO,areapplicable tothetransactions contemplated bythisAgreement, including thegrantingorexerciseoftheLILCOStockOption(exceptassetforthinSection5.15oftheL'ILCODisclosure Schcdu'le).
| |
| SEGTIQN5.16OPINIONOFFINANCIAL ADVISOR.LILCOhasreceivedtheopinionofDillon,Read&Co.Inc.("DILLONREAD"),datedDecember29,1996totheeffectthat,asofthedatethereof,theOriginalRatioisfairfromafinancial pointofviewtotheholdersofLILCOCommonStock,andLILCOhasreceivedtheopinionofDillonReaddatedbrune27,1997,totheeffectthat,asofthedatethereof,theLIPARatioisfairfroinafinancial pointofviewtothcholdersofLILCOCommonStock.St:.cnow5.17 INSURANCE.
| |
| ExceptassetforthinSection5.17oftheLILCODisclosure
| |
| : Schedule, LILCOandeachoftheLILCOSubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisks'ndlosses'as arecustomary inallmaterialirespectsforcompanies conducting thebusinessasconducted byLILCOandtheLILCOSubsidiaries duringsuchtimeperiod.ExceptassetforthinSection5.17oftheLILCODisclosure
| |
| : Schedule, neitherLILCOnoranyoftheLILCOSubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoanymaterial Hinsurance policyofLILCOoranyoftheLILCOSubsidiaries.
| |
| Theinsurance policiesofLILCOandeachoftheLILCOSubsidiaries arevalidandenforceable policiesinallmaterialrespects.
| |
| SECTIQN5.18OWNERSHIP OFBROOKLYNUNIONCOMMONSTOCK.ExceptpursuanttothetermsoftheBrooklynUnionStockOptionAgreement, LILCOdoesnotbeneficially own(assuchtermisdefinedforpurposesofSection13(d)oftheExchangeAct)anysharesofBrooklynUnionCommonStockorBrooklynUnionPreferred Stock.SEcTION5.19.BUSINESSSYNERGIES.
| |
| LILCOisnotawareofanyfactorcircumstance, including thetermsofanyagreement towhichitoranyofitsSubsidiaries issubject,thatwouldimpairinanymaterialrespecttheabilityoftheCompanytorealizethesynergies described inthejointpressreleasetobeissuedinconnection withtheannouncement ofthistransaction.
| |
| ARTICLEVICONDUCTOFBUSINESSPENDINGTHEEFFECTIVF TIMESEGTIQN6.1COVENANTS OFTHEPARTIES.AfterthedatehereofandpriortotheEffective Timeorearliertermination ofthisAgreement, BrooklynUnionandLILCOeachagreeasfollows,eachastoitselfandtoeachoftheBrooklynUnionSubsidiaries andtheLILCOSubsidiaries, asthecasemaybe,exceptas"expressly contemplated orpermitted inthisAgreement, theBrooklynUnionStockOptionAgreement, theLILCOStockOptionAgreement, theKeySpanExchangeAgreement, theLIPAAgreement andtheHedgeArrangements (asdefinedinSECTION7.18(c)),
| |
| ortothe'extent theotherpartiesheretoshallotherwise consentinwriting:(a)ORDINARYCOURSEOFBUSINESS.
| |
| Eachpartyheretoshall,andshallcauseitsSubsidiaries to,carryontheirrespective businesses intheusual,regularandordinarycourseinsubstantially thesamemannerasheretofore conducted anduseallcommercially reasonable effortstopreserveintacttheirpresentbusinessorganizations andgoodwill,
| |
| : preserve, thegoodwillandrelationships withcustomers, suppliers andothershavingbusinessdealingswiththemand,subjecttoprudentmanagement ofworkforce needsandongoingprogramscurrently inforce,keepavailable theservicesoftheirpresentofficersandemployees.
| |
| ExceptassctforthinSection6.1(a)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypcrtnitanyofitsSubsidiaries to,enterintoanewlineofbusiness, ormakeanychangeinthelineofbusinessitengagesinasofthedatehereofinvolving anymaterialinvestment ofassetsorresources oranymaterialexposuretoliability orloss,inthecaseofBrooklynUnion,toBrooklynUnionanditsSubsidiaries takenasawhole,andinthecaseofLILCO,toLILCOanditsSubsidiaries takenasawhole.II(b)DIVIDENDS.
| |
| ExceptassetforthinSection6.1(b)oftheBrooklynUnionDisclosure ScheduleorthcLILCODisclosure
| |
| : Schedule, respcctivcly, andexceptasprovidedinthelastsentenceofthisSECTION6.1(b)nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,(i)declareorpayanydividends onormakeotherdistributions inrespectofanyoftheircapitalstockotherthantosuchpartyoritswholly-owned subsidiaries andotherthandividends requiredtobepaidonanyPreferred Stockinaccordance withtherespective termsthereof,regularquarterly dividends onLILCOCommonStockwithusualrecordandpaymentdatesnot,duringanyfiscalyear,inexcessof103%ofthedividends forthepriorfiscalyearandregularquarterly dividends onBrooklynUnionCommonStockwithusualrecordandpaymentdatesnot,duringanyfiscalyear,,inexcessof103%ofthedividends forthepriorfiscalyear;(ii)split,combineorreclassify ariyoftheircapitalstockorissueorauthorize orproposetheissuanceofanyothersecurities inrespectof,inlieuof,orinsubstitution for,sharesoftheircapitalstock;or(iii)redeem,repurchase orotherwise acquireanysharesoftheircapitalstock,othertlianredemptions, purchases oracquisitions requiredbytherespective termsofanyoutstanding seriesofpreferred stockofBrooklynUnionorLILCO,asthecasemaybc.ThelastrecorddateofeachofLILCOandBrooklynUniononorpriortotheEffective Timewhichrelatestoaregularquarterly dividendonLILCOCommonStockorBrooklyn/
| |
| UnionCommonStock,asthecasemaybe,shallbethesamedateandshallbepriortotheEffective Time.A-22 00Notwithstanding theforegoing, priortotheLILCOEffective Time,BrooklynUnionmaycausetheredemption ofallissuedandoutstanding sharesofpreferred stockofBrooklynUnioninaccordance withthetermsthereof.(c).ISSUANCE OFSECURITIES.
| |
| ExceptassetforthinSection6.1(c)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, andexceptasprovidedinSECTION7.20nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,issue,agreetoissue,deliver,sell,award,pledge,disposeoforotherwise encumberorauthorize orproposetheissuance,
| |
| : delivery, sale,award,pledge,disposalorotherencumbrance of,anysharesoftheircapitalstockofanyclassoranysecurities convertible intoorexchangeable for,oranyrights,warrantsoroptionstoacquire,anysuchsharesorconvertible orexchangeable securities.
| |
| Thepartiesshallpromptlyfurnishtoeachothersuchinformation asinaybereasonably requested including fiitancial information andtakesuchactionasmaybeJeasonably necessary andotherwise fullycooperate witheachotherinthepreparation ofanyregistration statement undertheSecurities Actandotherdocuments necessary inconnection withissuanceofsecurities ascontemplated bythisSECTION6.1(c),subjecttoobtaining customary indemnities.
| |
| (d)CHARTERDOCUMENTS.
| |
| Nopartyshallamendorproposetoamenditsrespective certificate ofincorporation, by-lawsorregulations, orsimilarorganizational documents, exceptasconteinplated herein.(e)NOACQUISITIONS.
| |
| ExceptassetforthinSection6.1(e)oftheBrooklynUnionDisc'losure ScheduleortheLILCO.Disclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,acquire,orpubliclyproposetoacquire,oragreetoacquire,bymergerorconsolidation with,orbypurchaseorotherwise, asubstantial equityinterestinorasubstantial portionoftheassetsof,anybusinessoranycorporation, partnership, association orotherbusinessorganization ordivisionthereof,norshallanypartyacquireoragreetoacquireamaterialamountofassetsotherthanintheordinarycourseofbusinessconsistent withpastpractice.
| |
| (f)CAPITALEXPENDITURES.
| |
| ExceptassetforthinSection6.1(f)oftheBrooklynUnionDisclbsure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, orasrequiredbylaw,nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,makecapifalexpenditures inexcessof110%oftheamountbudgetedbysuclipartyforcapitalexpenditures assetforthinsuchSection6.1(f)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure Schedule.
| |
| (g)NODISPOSITIONS.
| |
| ExceptassetforthinSection6.1(g)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, otherthandispositions byapartyanditsSubsidiaries oflessthan$10million,singularly orintheaggregate, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,sell,lease,license,encumberorothenvise disposeof,anyofitsassets,otherthanencumbrances ordispositions intheordinarycourseofitsbusinessconsistent withpastpractice.
| |
| (h)INDEBTEDNESS.
| |
| Exceptascontemplated bythisAgreement, nopartyshall',norshallanypartypermitanyofitsSubsidiaries to,incurorguarantee anyindebtedness (including anydebtborrowedorguaranteed orotherwise assumedincluding, withoutlimitation, theissuanc'e ofdebtsecurities orwarrarits orrightstoacquiredebt)orenterintoany"keepwell"orotheragreement tomaintainanyfinancial statement condition ofanotherpersonorenterintoanyarrangement havingtheeconomiceffectofanyoftheforegoing otherthanincurrences torefinance existingindebtedness andotherthanassetforthinSection6.1(h)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively.
| |
| (i)COMPENSATION, BENEFITS.
| |
| ExceptassetforthinSection6.1(i)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, asmayberequiredbyapplicable laworascontemplated bythisAgreement, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,(i)enterinto,adoptoramendorincreasetheamountoraccelerate thepaymentorvestingofanybenefitoramountpayableunder,anyemployeebenefitplanorothercontract, agreement, commitment, arrangemcnt, planorpolicymaintained by,contributed toorenteredintobysuchpartyoranyofitsSubsidiaries, or'ncrease, orenterintoanycontract, agreement, commitment orarrangement toincreaseinanymanner,theA-23 I4compensation orfringebenefits, orotherwise toextend,expandorenhancetheengagement, employment oranyrelatedrights,ofanydirector, officerorotheremployeeofsuchpartyoranyofitsSubsidiaries, exceptfornormalincreases intheordinarycourseofbusinessconsistent withpastpracticethat',intheaggregate, donotresultinamaterialincreaseinbenefitsorcompensation expensetosuchpartyoranyofits"Subsidiaries or(ii)enterintooramendanyemployment, severance orspecialpayarrangement withrespecttothetermination ofemployment orothersimilarcontract, agreement orarrangement withany'director orofficerorotheremployeeotherthaniritheordinarycourseofbusinessconsistent withpastpractice.
| |
| (j)1935ACT.ExceptassetforthinSection6.1(j)oftheBrooklynUnionDisclosure ScheduleorLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries
| |
| ,to,exceptasrequiredorcontemplated bythisAgreement, engageinanyactivities whichwouldcauseachangeinitsstatus,orthatofitssubsidiaries, underthe1935Act,orthatwouldimpairtheabilityofLILCOorBrooklynUnion,asthecasemaybe,toclaimanexemption asofrightunderRule2ofthe1935Act.(k)TRANSMISSION, GENERATION.
| |
| ExceptasrequiredpursuanttotariffsonfilewiththeFERCasofthedatehereof,intheordinarycourseofbusinessconsistent withpast,practice, orassetforthinSection6.1(k)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,(i)commenceconstruction ofanyadditional electricgenerating, transmission ordeliverycapacity, or(ii)obligateitselftopurchaseorotherwise acquire,ortosellorotherwise disposeof,ortoshare,anyadditional electricgenerating, transmission ordeliverycapacityexceptassetforthinthebudgetsofBrooklynUnionandLILCOonthedatehereofassetforthinSection6.1(f)oftheBrooklynUnionDisclosure ScheduleandtheLILCODisclosure Schedule.'1)
| |
| ACCOUNTING.
| |
| ExceptassetforthinSection6.1(l)oftheBrooklynUnionDisclosure ScheduleorLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,makeanychangesintheiraccounting methods,exceptasrequiredbylaw,rule,regulation orGAAP.'(m)POOLING.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,takeanyactionwhichwould,orwouldbereasonably likelyto,preventtheCompanyfromaccounting forthetransactions tobeeffectedpursuanttothisAgreement asapoolingofinterests inaccordance withGAAPandapplicable SECregulations, andeachpartyhereto,shalluseallreasonable effortstoachievesuchresult(including takingsuchactionsasmaybenecessary tocureanyfactsorcircumstances thatcouldpreventsuchtransactions fromqualifying forpooling-of-interests accounting treatment).
| |
| (n)"TAXSTATUS.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,takeany,actionswhichwould,orwouldbereasonably likelyto,adversely affectthestatusoftheMergerasatax-freetransaction totheholdersofBrooklynUnionCommonStockand,unlesstheLIPAAgreement hasbeenterminated, theShareExchangeasataxabletransaction totheholdersofLILCOCommonStockandtheformation oftheCompanytobeatransaction fowhichSection351oftheCode'doesnotapply,andeachpartyheretoshalluseallreasonable effortstoachievesuchresultandshalltakesuchpositioninanyrelevantpublicdisclosure document(including, withoutlimitation, theJoint.Proxy/Registration Statement (ashereinafter defined).
| |
| LILCO'smostrecenttaxyear,forfe'deralincometaxpurposes, commenced onApril1,1997.AtnotimeduringtheperiodApril1,1997throughMarch31,1998,inclusive,,will LILCObeeitherthecommonparentoramemberofan"affiliated group"withinthemeaningofSection1504oftheCode.LILCOwillnotwithrespecttoanytaxyearbeginning onorafterApril1,1998fileorjoininthefilingofaconsolidated federalincometaxreturnwithrespecttoanyaffiliated group,withinthemeaningofSection1504oftheCode.LILCOwilladvisethetrusteeofthedefinedbenefitplanofLILCOoftheconsequences ofowning,orpriortotheLIPAEffective Timeifthetransactions contemplated herebyaretobeconsummated pursuanttoSECTION7.'18(b)acquiring, anysharesofLIL'COCommonStock.(o)AFFILIATE TRANSACTIONS.
| |
| ExceptassetforthinSection6.1(o)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,enterintoanymaterialagreement orarrangement withanyoftheirA-24 respective affiliates (otherthanwholly-owned subsidiaries) ontermsmaterially less,favorable tosuchpartytliancouldbereasonably expectedtohavebeenobtainedwithanunaffiliated thirdpartyonanarm'-length basis.(p)COOPERATION, NOTIFICATION.
| |
| Eachpartyshall,andshallcauseitsSubsidiaries to,(i)conferonaregularandfrequentbasiswithoneormorerepresentatives oftheotherpartytodiscuss,subjecttoapplicable law,materialoperational mattersandthegeneralstatusofitsongoingoperations; (ii)promptly, notifytheotherpartyofanysignificant changesinitsbusiness, properties, assets,condition (financial orother),resultsofoperations orprospects; (iii)'advisetheotherpartyofanychangeoreventwhichhashadbr,insofarasreasonably canbeforeseen, isreasonably likelytoresultin,inthecaseofBrooklynUnion,aBrooklyn, UnionMaterialAdverseEffector,inthecaseofLILCO,aLILCOMaterialAdverseEffect;and(iv)promptlyprovidetheotherpartywithcopiesof.allfilingsmadebysuchpartyoranyofitsSubsidiaries withanystateorfederalcourt,administrative agency,commission orotherGovernmental Authority inconnection withthisAgreement andthetransactions contemplate'd hereby.,(q)RATEMATTERS.EachofBrooklyhUnionandLILCOshall,andshallcauseitsSubsidiaries to,notifytheotherofanychangesinitsoritsSubsidiaries'ates orcharges(otlierthanpass-through fuelandgasratesorcharges),
| |
| standards ofserviceoraccounting fromthoseineffectonthedatehereof,andnopartywillmakeanyfilingtochangeitsratesonfilewiththeNewYorkStatePublicServiceCommission (the"PSC")thatwouldhaveamaterialadverseeffectonthebenefitsassociated withthebusinesscombination providedforherein.(r)THIRD-PARTY CONSENTS.
| |
| BrooklynUnionshall,andshallcauseitsSubsidiaries to,useallcommercially reasonable effortstoobtainallBrooklynUnionRequiredConsents.
| |
| BrooklynUnionshallpromptlynotifyLILCOofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequested byLILCO,shallprovidecopiesofallBrooklynUnionRequiredConscntsobtainedbyBrooklynUniontoLILCO.LILCOshall,andshallcauseitsSubsidiaries to,useallcommercially reasonable effortstoobtainallLILCORequiredConsents.
| |
| LILCOshallpromptlynotifyBrooklynUnionofanyfailureorprospective
| |
| ,failuretoobtainanysuchconsentsand,ifrequested byBrooklynUnion,shallprovidecopiesofallLILCORequiredConsentsobtainedbyLILCOtoBrooklynUnion.(s)NOBREACH,ETC.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,willfully takeanyactionthatwouldorisreasonably likelytoresultinamaterialbreachofanyprovision ofthisAgreement, theBrooklynUnionStockOptionAgreement ortheLILCOStockOptionAgreement, asthecasemaybe,or,inanyofitsrepresentations andwarranties setforthinthisAgreement, theBrooklynUnionStockOptionAgreement, ortheLILCOStockOptionAgreement, asthecasemaybe,beinguntrueonand~asoftheClosingDate.(t)TAX-EXEMPT STATUS.Nopartyshall,norshallany"partypermitanySubsidiary to,takeanyactionthatwouldlikelyjeopardize thequalification ofBrooklynUnion'sorLILCO'soutstanding revenue'ondswhichqualifyonthedatehereofunderSection142(a)oftheCodeas"exemptfacilitybonds"orastax-exempt industrial development bondsunderSection103(b)(4) oftheInternalRevenueCodeof1954,as~amended,priortotheTaxReformActof1986.(u)COMPANYACTIONS.LILCOandBrooklynUnionshallcausetheCompanytotakeonlythoseactions,fromthedatehereofuntiltheEffective Time,thatarerequiredorcontemplated bythisAgreement to'besotakenbytheCompany,including, withoutlimitation, thedeclaration, filingorregistration with,ornoticetoorauthoriiation, consentorapprovalof,'anyGovernmental Authority, assetforthinSection4.4(b)oftheBrooklynUnion"Disclosure'Sch'edule, Section4.4(c)oftheBrooklynUnionDfsclosure
| |
| : Schedule, Section5.4(b)oftheLILCODisclosure ScheduleandSection5.4(c)oftheLILCODisclosure Schedule.
| |
| (v)TAXMATTERS.ExceptassetforthinSection6.1(w)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshallmakeorrescindanymaterialexpressordeemedelectionrelatingtotaxes,settleorcompromise anymaterialclaim,action,suit,litigation, A-25 0proceeding, arbitration, investigation, auditorcontroversy relatingtotaxes,orchangeanyofitsmethodsofreporting incomeordeductions forfederalincometaxpurposesfromthoseemployedinthepreparation ofitsfederalincometaxreturnforthetaxableyearendingSeptember 30,1995inthecaseofBrooklynUnionandDecember31,1995inthecaseofLILCO,exceptasmayberequiredbyapplicable law.(w)DISCHARGE OFLIABILITIES.
| |
| Nopartyshallpay,discharge orsatisfyanymaterialclaims,liabilities orobligations (whetherabsolute, accrued,assertedorunasserted, contingent orotherwise),
| |
| otherthanthepayment,discharge orsatisfaction, inthcordinarycourSeOfbusinessconsistent withpastpractice(whichincludesthepaymentoffinalandunappealable judgments) orinaccordance.
| |
| withtheirterms,ofliabilities reflected orreservedagainstin,orcontentplatcd by,themost,recentconsolidated financial statements (orthenotesthereto)ofsuchpartyincludedinsuchparty'sreportsfiledwiththeSEC,orincurredintheordinarycourseofbusinessconsistent withJiastpractice, andotherthanthepaymentbyBrooklynUnionorLILCOofcertaintransfettaxeswhichmayresultfromtheTransactions underNewYorklaw.(x)CONTRACTS.
| |
| Nopartyshall,exceptintheordinarycourseofbusinessconsistent withpastpractice, modify,amend,terminate, reneworfailtousereasonable businesseffortstorenewanymaterialcontractoragreement towhichsuchpartyoranySubsidiary ofsuchpartyisapartyorwaive,releaseor.assignanymaterialrightsorclaims.(y)INSURANCE.
| |
| Eachpartyshall,an'dshallcauseitsSubsidiaries to,maintainwithfinancially responsible insurance companies insurance insuchamountsandagainstsuchrisksandlossesasarecustomary forcompanies engagedintheelectricandgasutilityindustryandemploying methodsofgenerating electricpowerandfuelsourcessimilartothosemethodsemployedandfuelsusedbysuchpartyoritsSubsidiaries.
| |
| (z)PERMITS.Eachpartyshall,andshallcauseitsSubsidiaries to,usereasonable effortstomaintainineffectallexistinggovernmental permitspursuanttowhichsuchpartyoritsSubsidiaries operate.PARTICLEVIIADDITIONAL AGREEMENTS SEcTIGN7.1ACCESSTOINFORMATION.
| |
| Upo'nreasonable notice,eaclipartyshall,andshallcauseitsSubsidiaries to,affordtotheofficers, directors, empl'oyees, accountants, counsel,'investment bankers,financial advisorsandotherrepresentatives oftheother(collectively, "REPRESENTATIVES"
| |
| )reasonable access,duringnormalbusinesshoursthroughout theperiodpriortotheEffective Time,toallofitsproperties, books,contracts, commitments andrecords(including, butnotlimitedto,TaxReturns)and,duringsuchperiod,eachpartyshall,andshallcauseitsSubsidiaries to,furnishpromptlytotheother(i)accesstoeachreport,scheduleandotherdocumentfiledorreceivedbyitoranyofitsSubsidianes pursuanttotherequirements offederalorstatesecurities lawsorfiledwit/orsenttotheSEC,theFERC,theNRC,theDepartment'of Justice,theFederalTrade,Commission, thePSCoranyotherfederalorstateregulatory agencyorcommission, and(ii)accesstoallinformation concerning themselves, theirsubsidiaries, directors, officersandshareholders andsuchothermatters"asmaybereasonably requested bytheotherpartyinconnection withanyfilings,applications orapprovals requiredorcontemplated bythisAgreement orforanyotherreasonrelatedtothetransactions contemplated bythisAgreement.
| |
| Eachpartyshall,andshallcauseitssubsidiaries andRepresentatives to,holdinstrictconfidence alldocuments andinformation concerning theotherfurnished toitinconnection withthetransactions contemplated bythisAgreement (including, withoutlimitation, eachDisclosure Schedule) inaccordance withtheConfidentiality Agreement, datedOctober24,1995,betweenBrooklynUnionandLILCO,asitmaybeamendedfromtimetotime(the"CONFIDENTIALITY AGREEMENT").
| |
| A-26 SECfION7.2JOINTPROXYSTATEMENT ANDREGISTRATION STATEMENT.
| |
| (a)PREPARATION ANDFILING.ThepartieswillprepareandfilewiththeSECassoonasreasonably practicable afterthedatehereoftheRegistration Statement andtheProxyStatement (together, the"JOINTPROXY/REGISTRATION STATEMENT"
| |
| ).Thepartiesheretoshalleachusereasonable effortstocausetheRegistration Statement tobedeclaredeffective undertheSecurities Actaspromptlyaspracticable aftersuchfiling.Eachpartyheretoshallalsotakesuchactionasmaybereasonably requiredtocausethesharesofCompanyCommonStockissuableinconnection withtheTransactions toberegistered ortoobtain'nexemption fromregistration underapplicable state"bluesky"'orsecurities laws;PROVIDED, HOWEVER,thatnopartyshallberequiredforegisterorqualifyasaforeigncorporation ortotakeotheractionwhichwouldsubjectittoserviceofprocessinanyjurisdiction whereitwillnotbe,following theTransactions, sosubject.Eachofthepartiesheretoshallfurnishallinfor'mation concerning itselfwhichisrequiredorcustomary forinclusion intheJointProxy/Registration Statement.
| |
| Thepartiesshallusereasonable effortstocausethesharesofCothpanyCommonStockissuableintheTransactions tobeapprovedforlistingontheNYSEuponofficialnoticeofissuance.
| |
| Theinformation providedbyanypartyheretoforuseintheJointProxy/Registration Statement shallbetrueandcorrectinallmaterialrespectswithoutomissionofanymaterialfactwhichisrequiredtomakesuchinformation notfalseormisleading.
| |
| Norepresentation, covenantoragreement ismadebyanypartyheretowjthrespect,toinformation suppliedbyanyotherpartyforinclusion intheJointProxy/Registration Statement.
| |
| (b)LETI'EROFBROOKLYNUNION'SACCOUNTANTS.
| |
| BrooklynUnionshallusebesteffortstocausetobedelivered toLILCOaletterofArthurAndersenLLP,dated'a'ate withintwobusinessdaysbeforethedateoftheJointProxy/Registration Statement, andaddressed toLILCO,informandsubstance'reasonably satisfactory toLILCOandcustomary inscopeandsubstance for"coldcomfort"lettersdelivered byindependent publicaccountants inconnection withregistration statements onFormS-4.(c)LETI'EROFLILCO'SACCOUNTANTS.
| |
| LILCOshallusebesteffortstocausetobedelivered toBrooklynUnionaletterofErnst&YoungLLP,datedadatewithintwobusinessdaysbeforethedateoftheJointProxy/Registration Statement, andaddressed toBrooklynUnion,informandsubstance reasonably satisfactory toBrooklynUnionandcustomary inscopeandsubstance for"coldcomfort",letters delivered byindependent publicaccountants inconnection withregistration statements onFormS-4.(d)FAIRNESSOPINIONS.
| |
| Itshallbeacondition tothemailingoftheJointProxy/Registration Statement totheshareholders ofBrooklynUnionandLILCOthat(i)BrooklynUnionshallhavereceivedanopinionfromMerrillLynch,datedthedateoftheJointProxy/Registration Statement, totheeffectthat,asofthedatethereof,theOriginalRatioandtheLIPARatioarefairfromafinancial pointofviewtotheholdersofBrooklynUnionCommonStockand(ii)LILCOshallhavereceivedanopinionfromDillonRead,datedthedateoftheJointProxy/Registration Statement, totheeffectthat,'asof'thedatethereof,theOriginalRatioandtheLIPARatioarefairfromafinancial pointofviewtotheholders,ofLILCOCommonStock.SEGTIQN7.3REGULATORY MATTERS.(a)HSRFILINGS:EachpartyheretoshallfileorcausetobefiledwiththeFederalTradeCommission andtheDepartment ofJusticeanynotifications requiredtobefiledbytheirrespective "ultimate parent"companies undertheHart-Scott-Rodino Antitrust Improvements Actof1976,asamended(the"HSRACT"),andtherulesandregulations promulgated thereunder withrespecttothetransactions contemplated hereby.Suchpartieswilluseallcommercially reasonable effortstomakesuchfilingspromptlyandtorespondpromptlytoanyrequestsforadditional information madebyeitherofsuchagencies.
| |
| H(b)OTHERREGULATORY APPROVALS.
| |
| Eachpartyheretoshallcooperate anduseitsbesteffortstopromptlyprepareandfileallnecessary documentation andtoeffectallnecessary applications, notices,petitions, filingsandotherdocuments',
| |
| andshalluseallcommercially reasonable effortstoobtainallnecessary permits,consents, approvals andauthorizations ofallGovernmental Authorities necessary oradvisable toconsummate thetransactions contemplated bythisAgreement, including, withoutlimitation, theBrooklynUnionRequiredStatutory Approvals andtheLILCORequiredStatutory Approvals.
| |
| LILCOandBrooklynUnionshallcooperate A-27 ingoodfaithandconsultwitheachotheronallcomponents of,significant stepstowardsthecompletion of,andsignificant amendments to,theapplications toobtaintheBrooklynUnionRequiredStatutory Approvals andtheLILCORequiredStatutory Approvals, andwithrespecttomaterialfilings,communications, agreements, arrangements orconsents, writtenororal,formalorinformal, relatingtoapplications forsuchApprovals.
| |
| 4Si:.ceo'.4 SHAREHOLDER APPROVAL.
| |
| (a)APPROVALOFLILCOSHAREHOLDERS.
| |
| Subjecttothe'provisions ofSECTION7.4(c)andSECTION7.4(d),LILCOshall,assoonasreasonably practicable afterthedatehereof(i)takeallstepsnecessary todulycall,givenoticeof,conveneandholdaspecialmeetingofitsshareholders (the"LILCOSPECIALMEETING")
| |
| forthepurposeofsecuringtheLILCOShareholders'pproval, (ii)distribute toitsshareholders the'JointProxy/Registration Statement inaccordance withapplicable federalandstatelawandwithitsRestatedCertificate ofIncorporation andby-laws,(iii)subjecttothefiduciary dutiesofitsBoardofDirectors, recommend toitsshareholders theadoptionofthisAgreement andthetransactions contemplated herebyand(iv)cooperate andconsultwithBrooklynUnionwithrespecttoeachoftheforegoing matters.(b)APPROVALOFBROOKLYNUNIONSHAREHOLDERS.
| |
| Subjecttotheprovisions ofSECTION7.4(c)andSECTION7.4(d),BrooklynUnionshall,ass'oonasreasonably practicable afterthedatehereof(i)takeallstepsnecessary todulycall,givenoticeof,con'veneandholdaspecialmeetingofitsshareholders (the"BROOKLYN UNIONSPECIALMEETING")forthepurposeofsecuringtheBrooklynUnionShareholders'pproval, (ii)distribute toitsshareholders theJointProxy/Registration Statement inaccordance withapplicable federalandstatelawandwithitsRestatedCertificate ofIncorporation andby-laws,(iii)subjecttothefiduciary dutiesofitsBoardofDirectors, recommend toitsshareholders theadoptionofthisAgreement andthetransactions contemplated herebyand(iv)cooperate andconsultwithLILCOwithrespecttoeachoftheforegoing matters.(c)MEETINGDATE.TheLILCOSpecialMeetingforthepurposeofsecuring, theLILCOShareholders'pproval andtheBrooklynUnionSpecialMeritingforthepurposeofsecuringtheBrooklynUnionShareholders'pproval shallbeheldonsuchdatesasBrooklynUnionandLILCOshallmutuallydetermine, actingingoodfaith.(d)FAIRNESSOPINIONSNOTWITHDRAWN.
| |
| Ifshallbeacondition totheobligation'of BrooklynUniontoholdtheBrooklynUnionSpecialMeefingthattheopinionofMerrillLynch,referredtoinSECTION7.2(d},shallnothavebeenwithdrawn, anditshallbeacondition totheobligation ofLILCOtoholdtheLILCOSpecialMeetingthattheopinionofDillonRead,referredtoinSECTION7.2(d),shallnothavebeenwithdrawn.
| |
| SECTION7.5DIRECTORS'ND OFFICERS'NDEMNIFICATION.
| |
| (a)INDEMNIFICATION.
| |
| Totheextent,ifany,notprovidedby'anexistingrightofindemnification orotheragreement orpolicy,fromandaftertheLILCOEffective Time,theCompanyshall,tothefullestextentpermitted byapplicable law,indemnify, defendandholdharmlesseachpersonwhoisnow,orhasbeenatanytimepriortoDecember29,1996,orwhobecomespriortotheEffective Time,anofficer,directororemployeeofanyofthepartiesheretooranySubsidiary thereof(edchan"INDEMNIFIED PARTY"andcollectively, the"INDEMNIFtED PARTIES")against'(i),alllosses,expenses(including reasonabfe attorneys'ees andexpenses),
| |
| claims,damagesorliabilities or,subjecttotheprovisoofthenextsucceeding
| |
| : sentence, amountspaidinsettlement, arisingoutofactionsoromissions occurring atorpriortotheEffective Tiine(andwhether'asserted orclaimedpriorto,atoraftertheEffective Time)thatare,inwholeorinpart,basedonorarisingoutofthefactthatsuchpersonisorwasadirector, officeroremployeeofsuchparty(the"INDEMNIFIED LIABILITIES"
| |
| ),and(ii)allIndemnified Liabilities totheextenttheyarebasedonorariseout'oforpertaintothetransactions contemplated bythisAgreement.
| |
| Intheeventofanysuchloss,expense,claim,damageorliability (whetherornotarisingbeforetheEffective Time),(i)theCompanyshallpaythereasonable feesandexpensesof'counselselectedbytheIndemnitied Parties,whichcounselshallbereasonably satisfactory totheCompany,promptlyafterstatements thereforarereceivedandotherwise advancetosuchIndemnified Partyuponrequestreimbursement ofdocumented expensesreasonably
| |
| : incurred, ineither,casetotheextentnotprohibited bytheA-28 NYBCLanduponreceiptofanyundertaking requiredbyoftheNYBCL,(ii)theCompanywillcooperate inthedefenseofanysuchmatterand(iii)anydetermination requiredtobemadewithrespecttowhetheranIndemnified Party'sconductcomplieswiththestandards setforthunderNewYorklawandtheRestated'Certificate ofIncorporation orBy-lawsoftheCompanyshallbemadebyindependent, counselmutuallyacceptable totheCompanyandtheIndemnified Party;PROVIDED, HOWEVER,thattheCompanyshallnotbeliableforanysettlement effectedwithoutitswrittenconsent(whichconsentshallnotbeunreasonably withheld).
| |
| TheIndemnified Partiesasagroupmayretain.onlyonelawfirmwithrespecttoeachrelatedmatterexcepttotheextentthereis,intheopinion'of counseltoanIndemnified Party,underapplicable standards ofprofessional conduct,aconfiictonanysignificant issuebetweenpositions ofsuchIndemnified PartyandanyotherIndemnified PartyorIndemnified Parties.I(b)INSURANCE.
| |
| ForaperiodofsixyearsaftertheEffective Time,theCompanyshalleither(i)causetobemaintained ineffect,forthebenefitofthosepersonswhowerecoveredbythepoliciesofdirectors'nd officers'iability insurance maintained.
| |
| byLILCO.orBrooklynUnionatDecember29,1996andat.,anytimesubsequent theretoandpriortotheEffective Time,themorefavorable ofsuchpolicieswithrespecttotheobligations oftheCompanysetforthinthisSection7.5or(ii)obtainnewpoliciesofferingsuchcoverageatleastasfavorable asthetermsofthemorefavorable ofsuchcurrentinsurance coverage.
| |
| (c)SUCCESSORS.
| |
| IntheeventtheCompanyorany'ofitssuccessors orassigns(i)consolidates withormergesintoanyotherpersonandshallnotbethecontinuing orsurviving corporation orentityofsuchconsolidation ormer'geror(ii)transfers allorsubstantially allofitsproperties andassetstoanyperson,thenandineithersuchcase,properprovisions shallbemadesothatthesuccessors andassignsoftheCompanyshallassumetheobligations'set forthinthisSECTION7.5.(d)SURVIVALOFINDEMNIFICATION.
| |
| Tothefullestextentperinitted bylaw,fro'mandaftertheEffective Time,allrightstoindemnification asofDecember29,1996infavoroftheemployees, agents,directors andofficersofBrooklynUnion,LILCOandtheirJespective Subsidiaries withrespecttotheiractivities as'suchpriortotheEffective Time,asprovidedintheirrespective certificates ofincorporation andby-lawsineffectonthedatethereof,orotherwise ineffectonDecember29,1996,shallsurvivetheTransactions andshallcontinueinfullforceandeffectforaperiodofnotlessthansixyearsfromtheEffective Time.(e)BENEFIT.Theprovisions ofthisSECTION7.5areintendedtobeforthebenefitof,andshallbeenforceable by,eachIndemnified Party,hisorherheirsandhisorherrepresentatives.
| |
| 'ecrroN7.6DISCLOSURE SCHEDULES.
| |
| OnDecember29,1996,(i)LILCOhasdelivered toBrooklynUnionaschedule(the"LILCODISCLOSURE SCHEDULE"),
| |
| accompanied byacertificate signedbythechieffinancial officerofLILCOstatingtheLILCODisclosuie Scheduleisbeingdeliver'ed pursuanttothisSECTION7.6(i)and(ii)BrooklynUnionhasdelivered to,LILCOaschedule(the"BROOKLYN UNIONDISCLOSURE SCHEDULE"
| |
| ),accompanied byacertificate signedbythechieffinancial officerofBrooklynUnionstatingtheBrooklynUnionDisclosure Scheduleisbeingdelivered pursuanttothisSECTION7.6(ii).TheBrooklynUnionDisclosure ScheduleandtheLILCODisclosure Schedulearecollectively referredtohereinasthe"DISCLOSURE SCHEDULES".
| |
| TheDisclosure Schedules constitute anintegralpartofthisAgreement andmodifytherespective representations, warranties, covenants oragreements ofthepartiesheretocontained hereintotheextentthatsuchrepresentations, warranties, covenants oragreements expressly refertotheDisclosuie Schedules.
| |
| Anythingtothecontrary'ontained hereinorintheDisclosure Schedules notwithstanding, anyandallstatements, representations, warranties ordisclosures setforthintheDisclosure Schedules shallbedeemedtohavebeenmadeonandasofDecember29,1996.SEcmoN7.7PUBLICANNOUNCEMENTS.
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| BrooklynUnionandLILCOwill'cooperate witheachotherinthedevelopment anddistribution ofallnewsreleasesandotherpublicinformation disclosures withrespecttothisAgreement oranyofthetransactions contemplated herebyandshallnotissueanypublicannouncement orstatement withrespectheretoortheretothatisinconsistent withanypublic,announcement orstatement previously madewiththeconsentofthepartiesheretowithouttheconsentoftheotherparty(whichconsentshallnotbeunreasonably withheld),
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| exceptasmayberequiredby,law,inwhichcasethepartyrequiredtoissueA-29 theannouncement orstatement shallallowtheotherpartytimetocommentonsuchannouncement orstatement priortoitsissuance.
| |
| SEGTIQN7.8RULE145AFFILIATES.
| |
| Within30daysafterthedateofthisAgreement, BrooklynUnionshallidentifyinalettertoLILCO,andLILCOshallidentifyinalettertoBrooklynUnion,allpersonswhoare,andtosuchperson'sbestknowledge whowillbeattheClosingDate,affiliates ofBrooklynUnionandLILCO,respectively, assuchtermisusedinRule145undertheSecurities Act(orotherwise underappltcable SECaccounting releaseswithrespect.topooling-of-interests accounting treatment).
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| EachofBrooklynUnionandLILCOshalluseallreasonable effortstocausetheirrespective affiliates (including anypersonwhomaybedeemedtohavebecomeanaffiliate afterthedateoftheletterreferredtointhepriorsentence) todelivertothe,CompanyonorpriortotheClosingDateawrittenagreement customary fortransactions ofthisnaturethataretobeaccounted forasapoolingofinterests andinformanilsubstance reasonably satisfactory toBrooklynUnionandLILCO.Ifanypersonrefusestoprovidesuchawrittenagreement, theCompanyshall,inlieuofr'eceiptofsuchwrittenagreement, beentitledtoplaceappropriate legendsonthecertificates evidencing theCompanyCommonStocktobereceivedbysuchpersonpursuanttothetermsofthisAgreement, andtoissueappropriate stocktransferinstructions tothetransferagentfortheCompanyCommonStock,totheeffectthatthesharesofCompanyCommon'Stock receivedortobereceivedbysuchpersonpursuanttothetermsofthisAgreement mayonlybesold,transferred orotherwise
| |
| : conveyed, andtheholderthereofmayonlyreducehisinterestinorrisksrelatingtosuchsharesofCompanyCommonStock,pursuanttoaneffective registration statement undertheSecurities Act,incompliance withRule145,asamendedfromtimetotime,orinatransaction which,intheopinionoflegalcounselsatisfactory totheCompany,isexemptfromtheregistration requirements oftheSecurities Act.Theforegoing restrictions onthetransferability ofCompanyCommonStockshallapplytoallpurported sales,transfers andotherconveyances ofthesharesofCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttothisAgreement andtoallpurported reductions intheinterestinorrisksrelatingtosuchsharesofCompanyCommonStock,whetherornotsuchpersonhasexchanged thecertificates previously evidencing suchpersons'hares ofBrooklynUnionCommonStockorLILCOCommonStock,asthecasemaybe,forcertificates evidencing sharesofCompanyCommonStockintowhichsuchshareswereconverted.
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| TheProxyStatement andtheRegistration Statement shalldisclosethepreceding inareasonably prominent manner.St:.crroN 7.9EMPLOYEEAGREEMENTS.
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| SubjecttoSECTION7.10,SECTION7.14andSECTION'7,15, theCompanyanditsSubsidiaries sftallhonor,withoutmodification, allcontracts, agreements, collective bargaining agreements an'dcommitments ofthepartiespriortoDecember29,1996whichapplytoanycurrentorformeremployeeorcurrentorformerdirectorofthepartieshereto;PROVIDED, HOWEVER,thatthisundertaking isnotintendedtopreventtheCompanyfromettforcing suchcontracts, agreements, collective bargaining agreements andcommitments inaccordance withtheirterms,including, withoutlimitation, anyreservedrighttoamend,modify,suspend,revokeorterminate anysuchcontract, agreement, collective bargaining agreement orcommitment.
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| SEcrtoN7.10EMPLOYEEBENEFITPLANS.SubjecttoSECTION6.1(i),eachoftheBrooklynUnionBenefitPlansandLILCOBenefitPlansineffectatDecember29,1996shallbemaintained ineffectwithrespecttotheemployees orformeremployees ofBrooklynUnionandanyofitsSubsidiaries, ontheonehand,andofLILCOandanyofitsSubsidiaries, ontheotherhand,respectively, whoarecoveredbyanysuchbenefitplanimmediately priortotheClosingDate(the"AFFILIATED EMPLOYEES"
| |
| )untiltheCompanyotherwise determines aftertheEffective Time;PROVIDED, HOWEVER,th'atnothinghereincontained shalllimitanyreservedrightcontained inanysuchBrooklynUnionBenefitPlanorLILCOBenefitPlantoamend,modify,suspend,revokeorterminate anysuchplan.Withoutlimitation oftheforegoing, eachparticipant ofanysuchBrooklynUnionBenefitPlanorLILCOBenefitPlanshallreceivecreditforpurposesofeligibility toparticipate, vesting,benefitaccrualandeligibility toreceivebenefitsunderanybenefitplanoftheCompanyoranyofitssubsidiaries oraffiliates forservicecreditedforthecorresponding purpose,undersuchbenefitplan;PROVIDED, HOWEVER,thatsuchcrediting ofserviceshallnotoperatetoduplicate anybenefittoanysuchparticipant orthefundingforanysuchbenefit.AnypersonhiredbytheCompanyoranyofitssubsidiaries after,theClosingDatewhowasnotemployedbyanypartyheretooritssubsidiaries immediately priortotheClosingDateshallA-30 beeligibletoparticipate insuchbenefitplansmaintained, orcontributed to,bythesubsidiary, divisionoroperation bywhichsuchpersonisemployed, PROVIDEDthatsuchpersonmeetstheeligibility requirements oftheapplicable plan.SECTION7.11STOCKPLANS.(a)LILCOandBrooklynUnionshalltakeallactionrequiredtoterminate theirrespective employeestockoption,stockpurchaseandothersimilarstockplansconcurrent withtheEffective Time.(b)Atthe,BrooklynUnionEffective Time,(i)eachshareofBrooklynUnionCommonStock(including fractional anduncertificated shares)heldunderBrooklynUnion'sDividendReinvestment andStockPurchasePlan(the"DIVIDEND REINVESTMENT PLAN")orBrooklynUnion's,Employee SavingsPlan,DiscountStockPurchasePlanfor'mployees andLong-Term Performance Incentive Compensation Plan(eacha"BROOKLYN UNIONPLAN"andcollectively the"BROOKLYN UNIONPLANS")immediately priortotheBrooklynUnionEffective Timeshallbeautomatically exchanged foralikenumberofshares(including fractional anduncertificated shares)ofCompanyCommonStock,whichsharesshallbeheldunderandpursuanttotheDividendReinvestment PlanorbeissuedundersuchBrooklynUnionPlan,asthecasemaybe,and(ii)eachunexpired andunexercised optiontopurchasesharesofBrooklynUnionCommonStock("BROOKLYNUNIONOPTION")undertheLong-Term Performance Incentive Compensation Plan(the"INCENTIVE PLAN"),whethervestedorunvested, willbeautomatically converted intoanoption(a"SUBSTITUTE OPTION"ftopurchaseanumberofsharesofCompanyCommonStockequaltothenumberofsharesofBrooklynUnionCommonStockthatcouldhavebeenpurchased immediately priortotheBrooklynUnionEffective Time(assuming fullvesting)undersuchBrooklynUnionOption,atapricepersliareofCompanyCommonStockequaltothepershareoptionexercisepricespecified insuchBrooklynUnionOption.Inaccordance withSection424(a)oftheCode,eachSubstitute Optionshallprovidetheoptionholderswithrightsandbenefitsthatarenolessandnomorefavorable tohimthanwerepro'vided undertheBrooklynUnionOption.(c)AsoftheBrooklynUnionEffective Time,theCompanyshallsucceedtotheDividendReinvestment Planasineffectimmediately priortotheBrooklynUnionEffective Time,andtheDividendReinvestment Planshallbeappropriately modifiedtoprovidefortheissuanceordeliveryofCompanyCommonStockonandaftertheBrooklynUnionEffective Timepursuantthereto.(d)AsoftheBrooklynUnionEffective Time,theBrooklynUnionPlansshallbeappropriately amendedtoprovidefortheissuanceordeliveryofCompanyCommonStock,andtheCompanyshallagreetoissueordeliverCompanyCommonStockinconnection therewith.
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| (e)AttheLILCOEffective Time,eachshareofLILCOCommonStock(including fractional anduncertificated shares)held'nderLILCO'sDividendReinvestment Plan(the"LILCODIVIDENDREINVESTMENT PLAN")orLILCO'sEmployeeStockPurchasePlan,Directors'tock UnitRetainerPlan,Officer's LongTermIncentive PlanandAnnualStockIncentive Compensation Plan(eacha"LILCOPLAN"andcolleclively the"LILCOPLANS")immediately priortotheLILCOEffective Timeshallbeautomatically exchanged forsuchnumberofshares(including fractional anduncertificated shares)ofCompanyCommonStockaseachshareofLILCOCommonStockisexchanged forpursuanttoSECTION2.1(c),whichsharesshallbeheldunderandpursuanttotheLILCODividendReinvestment PlanorbeissuedundersuchLILCOPlan,asthecasemaybe.(f)AsoftheLILCOEffective Time,theCompanyshallsucceedtotheLILCODividendReinvestment Planasineffectimmediately priortotheLILCOEffective Time,andtheLILCODividendReinvestment Planshallbeappropriately modifiedtoprovidefortheissuanceordeliveryofCompanyCommonStockonandaftertlieLILCOEffective Timepursuantther'eto.
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| (g)AsoftheLILCOEffective'Time, theLILCOPlansshallbeappropriately amendedtoprovidefortheissuanceordeliveryofCompanyCommonStock,andtheCompanyshallagreetoissueordeliverCoippanyCommonStockinconnection therewith.
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| (h)IftheLIPAAgreement hasnotbeenterminated, theninconnection withtheconsummation ofthetransactions contemplated bySECTION2.1(orSECTIONS2.1(a)and7.18(b)iftheTransactions aretobeconsummated pursuanttoSECTION7.18(b)),
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| BrooklynUnionandLILCOshallcausetheCompanytoissueanappropriate amountofpreferred stockoftheCompanytosuchpersons(whichpersonsmayinclude,amongothers,employeebenefitplans,'mployees, officersanddirectors ofBrooklynUnionorLILCO)anduponsuchtermssoastocausetheformation oftheCompanytobeatransaction towhichSection351oftheCodedoesnotapply.SEGTIQN7.12NOSOLICITATIONS.
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| Eachpartyheretoshallnot,andeachsuchpartyshallcauseitsSubsidiaries notto,permitanyofitsRepresentatives to,andshalluseitsbesteffortstocausesuchpersonsnotto,directlyorindirectly
| |
| : initiate, solicitorencourage, ortakeanyactiontofacilitate themakingof,anyofferor,proposalwhichconstitutes orisreasonably likelytoleadt0,anyBusinessCombination Proposal(asdefinedbelow),or,intheeventofanunsolicited BusinessCombination
| |
| : Proposal, excepttotheextentrequiredbytheirfiduciary dutiesunderapplicable lawifsoadvisedinawrittenopinionofoutsidecounsel,engageinnegotiations orprovideanyinformation ordatatoanypersonrelatingtoany'Business Combination Proposal.
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| Eachpartyheretoshallnotifytheotherpartyorallyandinwritingofanysuchinquiries, offersorproposals (including, withoutlimitation, thetermsandconditions ofanysuchproposalandtheidentityofthepersonmakingit),within24hoursofthereceiptthereof,shallkeeptheotherpartyinformedofthestatusanddetailsofanysuchinquiry,offerorproposal, andshallgivetheotherpartyfivedays'dvance noticeofanyagreement tobeenteredintowithoranyinformation tobesuppliedtoanypersonmakingsuchinquiry,offerorproposal.
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| Eachpartyheretoshallimmediately ceaseandcausetobeterminated allexistingdiscussions andnegotiations, ifany,withanypartiesconducted heretofore withrespecttoanyBusinessCombination Proposal.
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| AsusedinthisSECTION7.12,"BUSINESS COMBINATION PROPOSAL" shallmeananytenderorexchangeoffer,proposalforamerger,consolidation orotherbusinesscombination involving any'artytothisAgreement oranyofitsmaterialsubsidiaries, oranypropo'sal
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| 'oroffer(in,eachcase,whetherornotinwritingandwhetherornotdelivered tothestockholders ofapartygenerally) toacquireinanymanner,directlyorindirectly, asubstantial equityinterestinorasubstantial portionoftheassetsofanypartytothisAgreement oranyofitsmaterialsubsidiaries, otherthanpursuanttothetransactions contemplated bythisAgreement andbytheLIPAAgreement.
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| Fromthedatehereofuntilthetermination orconsummation ofthetransactions contemplated bythisAgreement, neitherpartyshallengageinanynegotiations ormaterialdiscussions withtheLongIslandPowerAuthority
| |
| ("LIPA")oritsrepresentatives oragentswithoutpriornotification toorthepresenceoftheotherpartyhereto,andwillnotprovideanyinformation ordatatoLIPAwithoutproviding acopythereoftotheotherpartyhereto.Nothingcontained hereinshallprohibitaparty'from takinganddisclosing toitsstockholders apositioncontemplated byRule14e-2(a)undertheExchangeActwithrespecttoaBusinessCombination Proposalbymeansofatenderoffer.IfSecnow7.13COMPANYBOARDOFDIRECTORS.
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| Thenumberofdirectors comprising thefullBoardofDirectors oftheCompanyattheEffective Timeshallbe,15persons,sixofwhomshallbedesignated byBrooklynUnionpriortotheEffective Time,sixofwhomshallbedesignated byLILCOpriortotheEffective Timeandthreeofwhomshallbedesignated byacommittee consisting oftwocurrentBrookly'n Uniondirectors andtwocurrentLILCOdirectors.
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| 0SEGTIQN7.14SENIOREXECUTIVES.
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| Dr.WilliamJ.Catacosinos shallbetheChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheCompanycommencing atth'eEffective Time.Atthefirstanniversary oftheEffective Time,Dr.Catacosinos shallceasetobetheChiefExecutive Officer,shallcontinuetobeChairmanoftheBoardandChairmanoftheExecutive Committee andshallbecomeaconsultant oftheCompany.Mr.RobertB.CatellshallbethePresident andChiefOperating OfficeroftheCompanycommencing attheEffective TimeandshallsucceedDr.Catacosinos asChiefExecutive OfficeroftheCompany,commencing onsuchfirstanniversary.
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| Thearrangements tocausesuchelections totakeplaceatthefirstanniversary oftheEffective Timecontemplated bythepreceding sentencemaybealteredonlybyavote,following theEffective Time,oftwo-thirds oftheentireBoardofDirectors oftheCompany.Eachofthepartiesheretoshalltakesuchactionasshallreasonably bedeemedbyanyofthemtobeadvisable inordertogiveeffecttotheprovisions ofthisSection7.14.0A-32 tSt:cnoN7.15EXPENSES.
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| SubjecttoSECTION9.3,allcostsandexpenses'incurred inconnection withthisAgreement andthetransactions conteinplated herebyshallbepaidbythepartyincurring suchexpenses, exceptthatthoseexpensesincurredinconnection withprintingtheJointProxy/Registration Statement, aswellasthefilingfeerelatingtheretoandanyexpensesincurredundertheHSRAct,shallbesharedequallybyBrooklynUnionandLILCO.SEGTIQN7.16 FURTHERASSURANCES.
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| Eachpartywill,andwillcauseitsSubsidiaries to,executesuchfurtherdocuments andinstruments andtakesuchfurtheractionsasmayreasonably berequested byanyotherpartyinordertoconsummate theTransactions inaccordance withthetermshereof.SEGTIQN7.17POST-EXCHANGE OPERATIONS.
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| 'ubjectfothetransactions contemplated bytheLIPAAgreement, following theEffective Time,BrooklynUnion,ontheonehand,andLILCO,ontheotherhand,shallcontinuetheirseparatecorporate existences, operating underthenamesof"THEBROOKLYNUNIONGASCOMPANY"and"LONGISLANDLIGHTINGCOMPANY",
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| respectively, untilsuchtimeasisotherwise determined bytheBoardofDirectors oftheCompany.ThenameoftheCompanyshallbe"BL",orsuchothernameasmaybeagreedbyBrooklynUnionandLILCOpriortotheClosing(whichshallnotbethenameof,oranamesubstantially similarto,BrooklynUnionorLILCO).Thecertificate ofincorporation andby-lawsoftheCompanyshallbeamendedpriortotheEffective Timeinamannerreasonably acceptable toBrooklynUnionandLILCO.SEcTIQN7.18OTHERTRANSACTIONS (a)Thepartiesheretoherebyconseitttotheexecution anddeliveryof,andperformance ofthe'ransactions contemplated by,theLIPAAgreement andtheKeySpanExchangeAgreement, andwaiveallbreachesofrepresentations, warranties, covenants andconditions contained hereinarisingtherefrom.
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| t'(b)Intheeventthatalloftheconditions toeachofthisAgreement andtheLIPAAgreement havebeensatisfied orwaivedandeachofBrooklynUnion,LILCOandLIPAhasindicated totheotherpartiesthatitisready,willingandabletoconsummate thetransactions contemplated bythisAgreement andtheLIPAAgreement, thentheShareExchangeshallnotbeconsummated andtheother,transactions contemplated herebyandtherebyshallbeconsummated inthefollowing mannerandor'der:(i)thetransferbyLILCOoftheTransferred Assets(as.definedintheLIPAAgreement) tosuchsubsidiaries oftheCompanyasBrooklynUnionandLILCOshalldirectinexchangefortheDesignated Number(ashereinafter defined)ofsliaresofCompanyCommonStockandupto$75millionfaceamountofpreferred stockoftheCompany("CompanyPreferred Stock")ascontemplated bytheLIPAAgreement.'he "Designated Number"shallbethenumberofsharesofCompanyCommonStockrepresenting thenetfairmarketvalueoftheTransferred Assets,asshallbedetermined ingoodfaithbyBrooklynUnionandLILCO,lesssuchfaceamountofCompanyPreferred Stock;(ii)themergerofLIPAAcquisition Corp.withandintoLILCOandtherelatedtransactions contemplated bytheLIPAAgreement (including allschedules andexhibitsthereto)tooccuronorpriortotheeffective timeofsuchmerger(the"LIPAEFFECTIVE TIME")shallbeorshallhavebeenconsummated, and,attheLIPAEffective
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| 'Time,theCashPurchasePrice(asdefinedintheLIPAAgreement) shallbepaidtotheExchangeAgent(asdefinedundertheLIPAAgreement) asagentfor'heholdersofLILCOCommonStocktosubscribe forandpurchaseanumberofsharesofCompanyCommonStock,whichnumberofshareswhenaddedtotheDesignated Numbershallrepresent thenumberofsharesofLILCOCommonStockissuedandoutstanding immediately priortotheLILCOEffective Time,otherthanDissenting Shares,multiplied bytheLIPARatio;and(iii)promptlythereafter, theMergershallbeconsummated.
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| (c)Inconnection withtheL'IPAAgreement, LILCOandBrooklynUnioncontemplate theformation ofalimitedpartnership forthepurposeofpurchasing
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| : interest, ratehedge-contracts, tobefundedthroughcapitalcontributions ofupto$30millionbyeachofthem(theformation ofsuchlimitedpartnership andthepurchaseA-33 ofsuchcontracts beingreferredtohereinasthe"HEDGEARRANGEMENTS"
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| ).ThepartiesherebyconsenttotheHedgeArrangements andwaiveallbreachesofrepresentations, warranties, covenants andconditions arisingtherefrom.
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| I(d)Notwithstanding anyprovision hereintothecontrary, LILCOshallnotmodify,amendorterminate theLIPAAgreement (onceandasithasbeenenteredintobythepartiesthereto),
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| andshallnotprovideanyconsent,waiverorreleasethereunder withoutthepriorwrittenconsentofBrooklynUnion.1SEcrioN7.19EMPLOYMENT AGREEMENT.
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| (a)TheCompany'hall enterintoanemployment agreement withMr.Catelleffective asoftheEffective Timeproviding forhimtoassume'thepositions described inSection7.14atthetimesspecified therein,forhimtocontinuetoserveasChiefExecutive Officerforafouryearperiodcommencing onthefirstanniversary oftheEffective Time,forhimtoreceivecompensation (including incentive compensation relatingtorealizing thesynergies contemplated toberealizedfromtheTransactions) ontermsmutuallyagreedtoandinanyeventinanamountnotlessthanwhathereceivesasofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| k(b)TheCompanyshallenterintoanemployment agreement withDr.Catacosinos effective asoftheEffective Timeproviding forhimtoassumethepositions described inSection7.14atthetimesspecified therein,forhimtoserveasaconsultant totheCompanyforafiveyearperiodcommencing afterheceasesbeingChiefExecutive Officer,forhimtoreceivecompensation (including incentive compensation ofthekinddescribed inSection7.19(a))ontermsmutuallyagreedtoandinanyeventin'anamountnotlessthanwhathereceivesasofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.,
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| SEGTIQN7.20HOLDINGCOMPANY.PriortotheLILCOEffective Time,orifthetransactions contemplated herebyaretobeconsummated pursuanttoSection,7.18(b),
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| theLIPAEffective Time,LILCOandBrooklynUnionshallcausetheCompanytobeformedasaNewYorkcorporation forthepurposeofconsummatin'g thetransactions contemplated hereby,whichcorporation shallbe66%ownedbyLILCOand34%ownedbyBrooklynUnionimmediately priortotheLILCOEffective Time.ARTICLEVIIICONDITIONS SEcTioN8.1CONDITIONS TOEACHPARTY'SOBLIGATION TOEFFECTTHETRANSACTIONS.
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| Therespective obligations ofthepartiestoeffecttheTransactions shallbesubjecttothesatisfaction onorpriortotheClosingDateofthefollowing conditions,"except, totheextentpermitted byapplicable law,thatsuchconditions maybewaivedinwritingpursuantto'SECTION 9.5bythejointactionofthepartieshereto:(a)SHAREHOLDER APPROVALS.
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| TheLILCOShareholders'pproval andtheBrooklynUnionShareholders'pproval shallhavebeenobtained.
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| (b)NOINJUNCTION.
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| Notemporary restraining orderorpreliminary orpermanent injunction orotherorderbyanyfederalorstatecourtpreventing consummation of,theTransactions Shallhavebeenissuedandbecontinuing ineffect,andtheTransactions andtheothertransactions contemplated herebyshallnothavebeenprohibited underanyapplicable federalorstatelaworregulation.
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| (c)REGISTRATION STATEMENT.
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| TheRegistration Statement shallhavebecomeeffective inaccordance withtheprovisions oftheSecurities Act,andnostopordersuspending sucheffectiveness shallhavebeenissuedandremainineffect.A-34 (d)LISTINGOFSHARES.ThesharesofCompanyCommonStockissuableintheTransactions pursuanttoARTICLEII(including sharesissuableunderoptions)shallhavebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance.
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| (e)STATUTORY APPROVALS.
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| TheBrooklynUnionRequiredStatutory Approvals andtheLILCORequiredStatutory Approvals shallhavebeenobtainedatorpriortotheBrooklynUnionEffective TimeandtheLILCOEffective Time,suchapprovals shallhavebecomeFinalOrders(asdefinedbelow)andsuchFinalOrdersshallnotimposetermsorconditions which,intheaggregate, wouldhave,orinsofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition orresultsofoperations oftheCompanyanditsprospective subsidiaries takenasawholeorwhichwouldbematerially inconsistent withtheagreements ofthepartiescontained herein.Ifthetransactions contemplated bytheLIPAAgreement willnotbeconsummated contemporaneously withtheconsummation ofthetransactions contemplated hereby,theFinalOrderrelatingtotheapprovalofthetransactions contemplated herebytobereceivedfromthePSCshallincludethePSC'sapproval, withinthestatutory authority ofthePSC,ofratespermitted tobechargedbytheCompanyanditssubsidiaries totheircustomers whichwillbeincorporated inalongtermrateagreement theeffectofwhichcouldnotreasonably beexpectedtohaveamaterialadverseeffectonthebusiness; assets,financial condition, resultsofopemtions orprospects oftheCompanyanditssubsidiaries takenasawhole.Forpurposesofthisprovision, theprospects oftheCompanyandifssubsidiaries shallmeanthecombination oftheresultsanticipated bytheregulated earningsforecasts ofBrooklynUnionprovidedtoLILCOundercoverofamemorandum datedDecember29,1996,andtheresultsanticipated bytheregulated earningsforecasts ofLILCOprovidedtoBrooklynUnionundercoverofamemorandum datedDecember29,1996.A"FINALORDER"meansactionbytherelevantregulatory authority whichhasnotbeenreversed, stayed,enjoined, setaside,annulledorsuspended, withrespecttowhichanywaitingperiodprescribed bylawbeforethetransactions contemplated herebymaybeconsummated hasexpired,andastowhichallconditions totheconsummation ofsuchtransactions prescribed bylaw,regulation ororderhavebeensatisfied.
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| (f)POOLING.UnlesstheLIPATransaction hasbeenconsummated, "or'willbeconsummated contemporaneously withtheTransactions, eachofBrooklynUnionandLILCOshallhavereceivedaletterofitsindependent publicaccountants, datedtheClosingDate,informandsubstance reasonably satisfactory, ineachcase,toBrooklynUnionandLILCO,statingthatthetransactions effectedpursuanttothisAgreement willqualifyasapoolingofinterests transaction underGAAP.(g)PREFERRED STOCK.UnlesstheLIPAAgreement hasbeenterininated, theCompanyshallhaveissuedsharesofpreferred stockoftheCompanyassetforthinSECTIONS7.11(h).(h)TAXOPINION.LILCOsliallhavereceivedanopinionofHunton&Williamssatisfactory informandsubstance toLILCO,datedasoftheClosingDate,totheeffectthattheShareExchangewillnotbetaxabletonon-dissenting holdersofLILCOCommonStockand(exceptwithrespecttothereceiptofcashinlieuoffractional shares)willsatisfytherequirements ofSection351oftheCode;PROVIDED, HOWEVER,thatthiscondition willnotberequiredtobesatisfied unlesstheLIPAAgreement hasbeenterminated.
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| St:.crtoz 8.2CONDITIONS TOOBLIGATION OFLILCOTOEFFECTTHETRANSACTIONS.
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| Theobligation ofLILCOtoeffecttheTransactions shallbefurthersubjecttothesatisfaction, onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyLILCOinwritingpursuanttoSECTION9.5:(a)PERFORMANCE OFOBLIGATIONS OFBROOKLYNUNION."BrooklynUnion(and/oritsappropriate Subsidiaries) shallhaveperformed itsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)andshallhaveperformed inallmaterialrespectsitsotheragreements andcovenants contained inorcontemplated bythisAgreement andtheBrooklynUnionStockOptionAgreement requiredtobeperformed byitatorpriortotheBrooklynUnionEffective Time.,'(b)REPRESENTATIONS ANDWARRANTIES.
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| Therepresentations andwarranties ofBrooklynUnionsetforthinthisAgreement andtheBrooklynUnionStockOptionAgreement shallbetrueandcorrectA-35 (i)onandasofDecember29,1996and(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanDecember29,1996ortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaBrooklynUnionMaterialAdverseEffect.(c)CLOSINGCERTIFICATES."
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| LILCOshallhavereceivedacertificate signedonbehalfofBrooklynUnionbythechieffinancial officerofBrooklynUnion,datedtheClosingDate,totheeffectthat,tothebestofsuchofficer's knowledge, theconditions setforthinSECTION8.2(a)andSECTION8.2(b)havebeensatisfied.
| |
| (d)BROOKLYNUNIONMATERIALADVERSEEFFECT.NoBrooklynUnionMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaBrooklynUnionMaterialAdverseEffect.(e)BROOKLYNUNIONREQUIREDCONSENTS.
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| TheBrooklynUnionRequiredConsentsshallhavebeenobtained, exceptforthoseconsentsthefailureofwhichtoobtainwouldhaveaBrooklynUnionMaterialAdverseEffect.ISECI'lON8.3CONDITIONS TOOBLIGATION OFBROOKLYNUNIONTOEFFECTTHETRANSACTIONS.
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| Theobligation ofBrooklynUniontoeffecttheTransactions shallbefurthersubjecttothesatisfaction, onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyBrooklynUnioninwritingpursuanttoSECTION9.5:(a)PERFORMANCE OFOBLIGATIONS OFLILCO.LILCO(and/oritsappropriate Subsidiaries) shallhaveperformed'its agreements andcovenants contained inSECTIONS6.1(b)and6.1(c)andshallhaveperformed inallmaterialrespectsitsotheragreements andcovenants contained inorcontemplated bythisAgreement andtheLILCOStockOptionAgreement requiredtobeperformed atorpriortotheLILCOEffective Time.(b)REPRESENTATIONS ANDWARRANTIES.
| |
| Therepresentations andwarranties ofLILCOsetforthinthisAgreement andtheLILCOStockOptionAgreement shallbetrueandcorrect(i)onandasofDecember29,1996and(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonly,asofaspecificdateortimeotherthanDecember29,1996ortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaLILCOMaterial'dverse Effect.(c)CLOSINGCERTIFICATES.
| |
| BrooklynUnionshallhavereceivedacertificate signedonbehalfofLILCObythechieffinancial officerofLILCO,datedtheClosingDate,totheeffectthat,tothebestofsuchofficer's knowledge, theconditions setforthinSECTION8.3(a)andSECTION8.3(b)havebeensatisfied.
| |
| (d)LILCOMATERIALADVERSEEFFECT.,No LILCOMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaLILCOMaterialAdverseEffect.(e)TAXOPINION.BrooklynUnionshallhavereceivedanopinionofWachtell, Lipton,Rosen&Katzsatisfactory informandsubstance toBrooklynUnion,datedasoftheClosingDate,whichopinionmaybebasedonappropriate representations ofBrooklynUnion,KeySpanandtheCompany,totheeffectthattheMergerwillqualifyasareorganization pursuanttoSection368oftheCode.A-36 (f)LILCOREQUIREDCONSENTS.
| |
| 'fheLILCORequiredConsentsshallhavebeenobtained, exceptforthosethefailureofwhichtoobtainwouldhaveaLILCOMaterialAdverseEffect.ARTICLEIXTERMINATION>
| |
| AMENDMENT ANDWAIVER SEcfioN9.1TERMINATION.
| |
| ThisAgreement may'eterminated atanytimepriortotheClosingDate,whetherbeforeorafterapprovalbytheshareholders oftherespective partiesheretocontemplated bythisAgreement:
| |
| (a)bymutual'written consentoftheBoardsofDirectors ofBrooklynUnionandLILCO;(b)byanypartyhereto,bywrittennoticetotheotherparties,iftheEffective TimeshallnothaveoccurredonorbeforeAugust31,1998(the"INITIALTERMINATION DATE");PROVIDED, HOWEVER,thattherighttoterminate theAgreement underthisSECTION9.1(b)shallnotbeavailable toanypartywhosefailuretofulfillanyobligation underthisAgreement hasbeenthecauseof,orresultedin,thefailureoftheEffective Timetooccuronorbeforethisdate;andPROVIDED, FURTHER,thatifontheInitialTermination Datetheconditions totheClosingsetforthinSECTIONS8.1(e),8.2(e)and/or8.3(f),shallnothavebeenfulfilled butallotherconditions totheClo'singshallbefulfilled orshallbecapableofbeingfulfilled, thentheInitialTermination DateshallbeextendedtoApril28,1999;andPROVIDED, FURTHER,thatLILCOshallnothavetherighttoterminate thisAgreement pursuanttothisSection9.1(b)iftheLIPAAgreement hasnotbeenterminated; (c)byanypartyhereto,bywrittennoticetotheotherparties,iftheLILCOShareholders'pproval shallnothavebeenobtainedatadulyheldLILCOSpecialMeeting,including anyadjournments thereof,or'heBrooklynUnionShareholders'pproval shallnot,havebeenobtainedatadulyheldBrooklynUnionSpecialMeeting,including anyadjournments thereof;(d)byanypartyhereto,ifanystateorfederallaw,order,ruleorregulation isadoptedorissued,whichhastheeffect,assupported bythewrittenopinionofoutsidecounselacceptable tothepartieshereto,ofprohibiting theTransactions, orbyanypartyheretoifanycourtofcompetent jurisdiction intheUnitedStatesoranyStateshallhaveissuedanorder,judgmentordecreepermanently restraining, enjoining orotherwise prohibiting theTransactions, andsuchorder,judgmentordecreeshallhavebecomefinalandnonappealable; (e)byLILCO,upontwodays'rior noticetoBrooklynUnion,if,asaresultofatenderofferoranywrittenofferorproposalwithrespecttoamerger,saleof'amaterialportionofitsassetsorotherbusinesscombination (each,a"BUSINESS COMBINATION"
| |
| )byapartyotherthanBrooklynUnionoranyofitsaffiliates orLIPAoranyofitsaffiliates, theBoardofDirectors ofLILCOdetermines ingoodfaiththattheirfiduciary obligations underapplicable lawrequirethatsuchtenderofferorotherwrittenofferorproposalbeaccepted;
| |
| : PROVIDED, HOWEVER,that(i)theBoardofDirectors ofLILCOshallhavebeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureofthisAgreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyBrooklynUnioninnegotiations entered-into pursuanttoCLAUSE(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, LILCOshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withBrooklynUniontomakesuchadjustments inthetermsandconditions ofthisAgreement aswouldenableLILCOtoproceedwiththetransactions contemplated hereinonsuchadjustedterms;(f)byBrooklynUnion,upontwodays'rior noticetoLILCO,if,asaresultofatenderofferbyapartyotherthanLILCOoranyofitsaffiliates oranywrittenofferorproposalwithrespecttoaBusinessCombination byapartyotherthanLILCOoranyofitsaffiliates, theBoardofDirectors ofBrooklyn Uniondetermines ingoodfaiththattheirfiduciary obligations underapplicable lawrequirethatsuchtenderofferA-37 orotherwrittenofferorproposalbeaccepted;
| |
| : PROVIDED, HOWEVER,that(i)theBoardofDirectors ofBrooklynUnionshallhavebeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureofthisAgreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyLILCOinnegotiations enteredintopursuant'o clause(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, BrooklynUnionshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withLILCOtomakesuchadjustments inthetermsandconditions ofthisAgreement aswouldenableBrooklynUniontoproceedwiththetransactions contemplated hereinonsuchadjustedterms;(g)byBrooklynUnion,bywrittennoticetoLILCO,if(i)thereexistbreachesoftherepresentations andwarranties ofLILCOandBLmadehereinasofDecember29,1996whichbreaches, individually orintheaggregate, wouldorwouldbereasonably likelytoresultinaLILCOMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyLILCOofnoticeinwritingfromBrooklynUnion,specifying thenatureofs'uchbreachesandrequesting thattheyberemedied, (ii)LILCO(and/oritsappropriate subsidiaries) shallnothaveperformed andcompliedwithitsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)orshallhavefailedtoperformandcomplywith,inallmaterialrespects, its,other agreements andcovenants hereunder orundertheLILCOStockOptionAgreement andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyLILCOofnoticeinwritingfromBrooklynUnion,specifying thenatureofsuchfailureandrequesting thatitberemedied; or(iii)theBoardofDirectors ofLILCOoranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoBrooklynUnionitsapprovalorrecommendation ofthisAgreement ortheTransactions, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponBrooklynUnion'srequest,(C)shallapproveorrecommend anyacquisition ofLILCOoramaterialportionofitsassetsoranytenderofferforsharesofcapitalstockofLILCO,ineachcase,byapartyotherthanBrooklynUnionoranyofitsaffiliates andotherthantheLIPAAgreement, asthesamemaybeamendedfromtimetotimewiththeconsentofBrooklynUnion,andthetransactions contemplated therebyor(D)shallresolvetotakeanyoftheactionsspecified inCLAUSE(A),(B)or(C);(h)by,LILCO,bywrittennoticetoBrooklynUnion,if(i)thereexistmaterialbreachesoftherepresentations andwarranties ofBrooklynUnionmadehereinasofDecember29,1996whichbreaches, individually orintheaggregate, wouldorwouldbereasonably likelytoresultinaBrooklynUnionMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyBrooklynUnionofnoticeinwritingfromLILCO,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)BrooklynUnion(and/oritsappropriate subsidiaries) shallnothaveperformed andcompliedwithitsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)orshallhavefailedtoperformandcomplywith,inallmaterialrespects, itsotheragreements andcovenants hereunder orundertheBrooklynUnionStockOptionAgreement, andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyBrooklynUnionofnoticeinwritingfromLILCO,specifying thenatureofsuchfailureandrequesting thatitberemedied; or(iii)theBoardofDirectors ofBrooklynUnionoranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoLILCOitsapprovalorrecommendation ofthisAgreement ortheTransactions, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponLILCO'srequest,(C)shallapproveorrecommend anyacquisition ofBrooklynUnionoramaterialportionofitsassetsoranytenderofferforthesharesofcapitalstockofBrooklynUnion,ineachcasebyapartyotherthanLILCOoranyofitsaffiliates or(D)shallresolvetotakeanyoftheactionsspecified inCLAUSE(A),(B)or(C);or(i)byeitherparty,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'obligation toeffecttheTransactions cannotbesatisfied.
| |
| SccrtoN9.2 EFFECTOFTERMINATION.
| |
| Intheeventoftermination ofthisAgreement byeitherBrooklynUnionorLILCOpursuanttoSECTION9.1thereshallbenoliability onthepartofeitherBrooklynA-38 UnionorLILCOortheirrespective officersordirectors hereunder, exceptthatSECTION9.3,theagreement contained inthelastsentenceofSECTION7.1;SECTION10.2andSECTION10.8shallsurvivethetermination.
| |
| SECTION9.3TERMINATION FEE;EXPENSES.
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| (a)TERMINATION FEEUPONBREACHORWITHDRAWAL OFAPPROVAL.
| |
| IfthisAgreement isterminated atsuchtimethatthisAgreement isterminable pursuanttoone(butnotboth)of(x)SECTION9.1(g)(i) or(ii)or(y)SECTION9.1(h)(i) or(ii),then:(i)thebreaching partyshallpromptly(butnotlaterthanfivebusinessdaysafterreceiptofnoticefromthenon-breaching party)paytothenon-breaching partyincashanamountequaltoalldocumented out-of-pocket expensesandfeesincurredbythenonbreaching party(including, withoutlimitation, feesandexpensespayabletoalllegal,accounting"
| |
| ,financial, publicrelations andotherprofessional advisors) arisingoutof,inconnection withorrelatedtothetransactions contemplated bythisAgreement notinexcessof$10million;PROVIDED, HOWEVER,that,ifthisAgreement isterminated byapartyasaresultofawillfulbreachbytheotherparty,thenon-breaching partymaypursueanyremediesavailable toitatlaworinequityandshall,inadditiontoitsout-of-pocket expenses(whichshallbepaidasspecified aboveandshallnotbelimitedto$10million),
| |
| beentitledto,retain suchadditional amountsassuchnon-breaching partymaybeentitledtoreceiveatlaworinequity;and(ii)if(x)atthetimeofthebreaching party'swillfulbreachofthisAgreement, thereshallhavebeenathirdpartytenderofferforsharesof,orathirdpartyofferorproposalwithrespecttoaBusinessCombination involving, suchpartyoranyofitsaffiliates whichatthetimeofsuchtermination shallnothavebeenrejectedbysuchpartyanditsboardofdirectors andwithdrawn bythethirdparty,and(y)withintwoandone-halfyearsofanytermination bythenon-breaching party,thebreaching partyoranaffiliate thereofbecomesasubsidiary ofsuchofferororasubsidiary ofanaffiliate ofsuchofferororacceptsawrittenoffertoconsummate orconsummates abusinessCombination withsuchofferoror"anaffiliate, thereof,thensuchbreaching party(jointlyandseverally withitsaffiliates),
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| uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issignedthenattheclosing(andasacondition totheclosing)ofsuchbreaching partybecomingsuchasubsidiary orofsuchBusinessCombination, willpaytothenon-breaching partyincashanadditional feeequalto$65million(ifthebreaching partyisLIE,CO)or$35million(ifthebreaching partyisBrooklynUnion).(b)ADDITIONAL TERMINATION FEE.If(i)thisAgreement (x)isterminated byanypartypursuanttoSECTION9.1(e)orSECTION9.1(f)orSECTION9.1(g)(iii) orSECTION9.1(h)(iii),
| |
| (y)isterminated following afailureoftheshareholders ofanyoneofthepartiestograntthenecessary approvals described inSECTION4.13andSECTION5,13or(z)isterminated asaresultofsuchparty'smaterialbreachofSECTION7.4,and(ii)atthetimeofsuchtermination orpriortothemeetingofsuchparty'sshareholders thereshallhavebeenathird-party tenderofferforsliaresof,orathird-party offerorproposalwithrespecttoaBusinessCombination involving, suchpartyoranyofitsaffiliates whichatthetimeofsuchtermination orofthemeetingofsuchparty'sshareholders shallnothavebeen(A)rejectedbysuchpartyanditsboardofdirectors and(B)withdrawn bythethirdparty,and,withintwoandone-halfyearsofanysuchterinination, thepartywhichwasthesubjectofsuchofferorproposal(the"TARGETPARTY")becomesasubsidiary ofsuchofferororasubsidiary ofanaffiliate ofsuchofferororacceptsawrittenoffertoconsummate orconsummates aBusinessCombination withsuchofferororanaffiliate thereof,thensuchTargetParty(jointlyandseverally withitsaffiliates),
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| uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issigned,thenattheclosing(andasacondition totheclosing)ofsuchTargetPartybecomingsuchasubsidiary orofsuchBusinessCombination, willpaytotheotherparty,ifLILCOistheTarget.Party,$75million,andifBrooklynUnionistheTargetParty,$45million,ineachcaseincashplus,ineithercase,theout-of-pocket feesandexpensesincurredbytheotherparty(including, withoutlimitation, feesandexpensespayabletoalllegal,accounting, financial, publicrelations andotherprofessional advisors) arisingoutof,inconnection withorrelatedtothetransactions contemplated bythisAgreement.
| |
| (c)LIPAAGREEMENT.
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| ForpurposesofSECTIONS9.3(a)and(b),theLIPAAgreement shallbedeemedaproposalforaBusinessCombination involving LILCOandLIPAshallbedeemedtheofferorwithrespectthereto,andanyfeeforthebenefitofBrooklynUnionwouldbepayableundersuchsectionsatthetimethis,Agreement isterminated;
| |
| : PROVIDED, thatifthisAgreement isterminated following afailureoftheA-39 shareholders ofLILCOto"granttheLILCOShareholders'pproval described inSection5.13,theLIPAAgreement shallnotbedeemedaproposalforaBusinessCombination involving LILCOandnofeeshallbepayabletoBrooklynUnionbyvirtueoftheLIPAAgreement underSections9.3(b)(i)(y) and9.3(b)(ii).
| |
| (d)EXPENSES.
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| Thepartiesagreethattheagreements contained inthisSECTION9.3areanintegralpartofthetransactions contemplated bytheAgreement andconstitute liquidated damagesandnotapenalty.Monepartyfails.topromptlypaytotheotheranyfeeduehereunder, thedefaulting partyshallpaythecostsandexpenses(including legalfeesandexpenses) inconnection withanyaction,including thefilingofanylawsuitorotherlegalaction,takentoco)lectpayment,togetherwithinterestontheamountofanyunpaidfeeatthepubliclyannounced primerateofCitibank, N.A.fromthedatesuchfeewasrequiredtobepaid.(e)LIMITATION OFTERMINATION FEES.Notwithstanding anythinghereintotheco'ntrary, theaggregate amountpayabletoBrooklynUnionanditsaffiliates pursuanttoSECTION9.3(a),SECTION9.3(b)andthetermsoftheLILCOStockOptionAgreement shallnotexceed$90millionandtheaggregate amountpayabletoLILCOanditsaffiliates pursuanttoSECTION9.3(a),SECTION9.3(b)andthetermsoftheBrooklynUnionStockOptionAgreement shallnotexceed$50million(including reimbursement forfeesandexpensespayablepursuanttothisSECTION9.3).ForpurposesofthisSECTION9.3(c),theamountpayablepursuanttothetermsoftheLILCOStockOptionAgreement or'heBrooklynUnionStockOptionAgreement, hsthecasemaybe,shallbetheamountpaidpursuanttoSection7(a)(i)and7(a)(ii)thereof.SEcTIoN9.4'AMENDMENT.
| |
| ThisAgreement maybeamendedbytheBoardsofDirectors ofthepartieshereto,atanytimebeforeorafterapprovalhereofbytheshareholders ofBrooklynUnionandLILCOandpriortotheEffective Time,butaftersuchapprovals, nosuchamendment shall(i)alterorchangetheamount'or kindofsharestobeissuedunderARTICLEIIor(ii)alterorchangeanyofthetermsandconditions ofthis'Agreement ifanyofthealterations orchanges,aloneorintheaggregate, wouldmaterially adversely affecttherightsofholdersofBrooklynUnionCommonStockorLILCOCommonStock.ThisAgreement maynotbeamendedexceptbyaninstrument inwritingsignedonbehalfofeachofthepartieshereto.SEGTIQN9.5WAIVER.AtanytimepriortotheEffective Time,thepartiesheretomay(a)extendthetimefortheperformance ofanyoftheobligations orotheractsoftheotherpartieshereto,(b}waiveanyinaccuracies intherepresentations andwarranties contained hereinorinanydocumentdelivered pursuantheretoand(c)waivecompliance withanyoftheagreements orconditions contained herein,totheextentpermitted byapplicable law.Anyagreement onthepartofapartyheretotoanysuchextension orwaivershallbevalidifsetforthinaninstrum'ent inwritingsignedonbehalfofsuchparty.ARTICLEXGENERALPROVISIONS SEcTIoN10.1 NON-SURVIVAL; EFFECTOFREPRESENTATIONS ANDWARRANTIES.
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| (a)Allrepresentations, warranties andagreements inthis'Agreement shallnotsurvivetheEffective Time,exceptasotherwise providedinthisAgreement andexceptfortheagreements contained inthisSECTION10.1andinARTICLE'II, SECTION7.5,SECTION7.9,SECTION7.10,SECTION7.11,SECTION7.14,SECTION7.15andSECTION10.7.(b)Nopartymayassert'aclaimforbreachofanyrepresentation, warrantyorcovenantcontained inthisAgreement (whetherbydirectclaimor'counterclaim) exceptforthepurposeofasserting arighttoterminate thisAgreement pursuanttoSECTION9.1(g)(i) orSECTION9.1(h)(i)
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| (orpursuanttoanyothersubsection ofSECTION9.1,iftheterminating partywouldhavebeenentitledtoterminate thisAgreement pursuanttoSECTION9.1(g)(i) orSECTION9.1(h)(i))
| |
| orpursuanttoSECTION9.3.SEGTIQN10.2BROKERS.BrooklynUnionrepresents andwarrantsthat,exceptforMerrillLynchwhosefeeshavebeendisclosed toLILCOpriortothedatehereof,nobroker,finderorinvestment bankerisentitledtoA-40 anybrokerage, finder'sorotherfeeorcommission inconnection withthetransactions contemplated bythisAgreement baseduponarrangements madebyoronbehalfofBrooklynUnion.LILCOrepresents andwarrantsthat,exceptforDillonReadwhosefeeshavebeendisclosed toBrooklynUnioppriortothedatehereof,nobroker,finderorinvestment bankerisentitledtoanybrokerage, finder'sorotherfeeorcommission inconnection withthe'transactions contemplated bythisAgreement baseduponarrangements madebyoronbehalfofLILCO.SEcTIQN10.3NOTICES.Allnoticesandothercommunications hereunder shallbeinwritingandshallbedeemedgivenif(i)delivered personally, (ii)sentbyreputable overnight courierservice,(iii)telecopied (whichisconfirmed),
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| or(iv)fivedaysafterbeingmailedbyregistered orcertified mail(returnreceiptrequested) tothepartiesatthefollowing addresses (oratsuchotheraddressforapartyasshallbespecified bylikenotice):(a)IftoBrooklynUnion,to:TheBrooklynUnionGasCompanyOneMetroTechCenterBrooklyn, NewYork11201-3850 Attention:
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| ChiefExecutive Officerwithacopyto:Wachtell, Lipton,Rosen&Katz51West52ndStreetNewYork,NewYork10019Attention:
| |
| RichardD.KatcherandSethA.Kaplan(b)IftoLILCO,to:~LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Attention:
| |
| ThomasE.Constance SEGTIQN10.4MISCELLANEOUS.
| |
| ThisAgreement including thedocuments andinstruments referredtoherein(i)constitutes theentireagreement andsupersedes allotherprioragreements'and understandings, bothwrittenandoral,amongtheparties,oranyofthem,withrespecttothesubjectmatterhereofotherthantheConfidentiality Agreement; (ii)shallnotbeassignedbyoperation oflaworothenvise; and(iii)shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable tocontracts executedinandtobefullyperformed insuchState,withoutgivingeffecttoitsconflicts oflawrulesorprinciples.
| |
| SEGTIQN10.5INTERPRETATION.
| |
| Whenareference ismadeinthisAgreement toSectionsorExhibits, suchreference shallbetoaSectionorExhibitofthisAgreement, respectively, unlessotherwise indicated.
| |
| Thetableofcontentsandheadingscontained inthisAgreement areforreference purposesonlyandshallnotaffectinanywaythemeaningorinterpretation ofthisAgreement.
| |
| Wheneverthewords"include",
| |
| "includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
| |
| tSEGTIQN10.6COUNTERPARTS; EFFECT.ThisAgreement maybeexecutedinoneormorecounterparts, eachofwhichshallbedeemedtobeanoriginal, butallofwhichshallconstitute oneandthesameagreement.
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| SecrtoN10.7 PARTIESININTEREST; ASSIGNMENT.
| |
| ThisAgreement shallbebindinguponandinuresolelytothebenefitofeachpartyheretoandshallnotbeassignedbyoperation oflaworotherwise;
| |
| : provided, however,thatupon,theconsummation oftheKeySpanRestructuring, BrooklynUnionshallassigntoKeySpan,andKeySpanshallbesubstituted forandshallassume,allofBrooklynUnion'srightsandobligations hereunder effective upontheeffective timeoftheKeySpanRestructuring, andthepartiesheretoshallexecuteanyamendment tothisAgreement necessary toprovidethebenefitsofthisAgreement toKeySpan.ExceptforrightsofIndemnified PartiesassetforthinSECTION7.5,nothinginthisAgreement, expressorimplied,isintendedtoconferuponanyotherpersonanyrightsorremediesof.anynaturewhatsoever underorbyreasonofthisAgreement.
| |
| Notwithstanding theforegoing andanyotherprovision ofthisAgreement, andinadditiontoanyotherrequiredactionoftheBoardofDirectors oftheCompany(a)amajorityofthedirectors ofLILCO(ortheirsuccessors) servingontheBoardofDirectors oftheCompanywhoaredesignated byLILCOpursuanttoSECTION7.13shallbeentitledduringthethreeyearperiodcommencing attheEffective Time(the"THREEYEARPERIOD")toenforcetheprovisions ofSECTION7.9,SECTION7.10,SECTION7.11andSECTION7.14onbehalfoftheLILCOofficers, directors andemployees, asthecaselnaybe,and(b)amajorityofdirectors ofBrooklynUnion(ortheirsuccessors) servingontheBoardofDirectors oftheCompanywhoaredesignated byBrooklynUnionpursuanttoSECTION7.13shallbeentitledduringtheThreeYearPeriodtoenforcetheprovisions ofSECTIONS7.9,SECTION7.10,SECTION7.11,andSECTION7.14on'behalf oftheBrooklynUnionofficers, directors andemployees, asthecasemaybe.Suchdirectors'ights andremediesunderthepreceding sentencearecumulative andareinadditiontoanyotherrightsandremediestheymayhaveatlaworinequity,butinnoeventshallthisSECTION10.7bedeemedtoimposeanyadditional dutiesonanysuchdirectors.
| |
| TheCompanyshallpay,atthetimetheyareincurred, allcosts,feesandexpensesofsuchdirectors incurredinconnection withtheassertion ofanyrightsonbehalfofthepersonssetforthabove pursuanttothisSECTION10.7.SrcrioN10.8WAIVEROFJURYTRIALANDCERTAINDAMAGES.EachpartytothisAgreement waives,tothefullestextentpermitted byapplicable law,(i)anyrightitmayhavetoatrialbyjuryinrespectofanyaction,suitorproceeding arisingoutoforrelatingtothisAgreement and(ii)withoutlimitation toSECTION9.3,anyrightitmayhavetoreceivedamagesfromanyotherpartybasedonanytheoryofliability foranyspecial,indirect, consequential (including lostprofits)orpunitivedamages.SEcTIQN10.9ENFORCEMENT.
| |
| Thepartiesagreethatirreparable damagewouldoccurintheeventthatanyoftheprovisions ofthisAgreement werenotperformed inaccordance with,theirspecifictermsorwereotherwise breached.
| |
| Itisaccordingly agreedtliatthepartiesshallbeentitledtoaninjunction orinjunctions topreventbreachesofthisAgreement andtoenforcespecifically thetermsandprovisio'ns ofthisAgreement inanycourtoftheUnitedStateslocatedintheStateofNewYorkorinNewYorkstatecourt,thisbeinginadditiontoanyotherremedytowhichtheyareentitledatlaworinequity.A-42 eIINWITNESSWHEREOF,BrooklynUnionandLILCOhavecausedthisAgreement tobesignedbytheirrespective officersthereunto dulyauthorized asofthedatefirstwrittenabove.THEBROOKLYNUNIONGASCOMPANYBy/s/RQBERTB.CATELLRobertB.CatellChiefExecutive OfficerLONGISLANDLIGHTINGCOMPANYBy's/WILLIAMJ.CATAcosINos Dr.WilliamJ.Catacosinos ChiefExecutive OfficerA-43
| |
| [THISPAGEINTENTIONALLY LEFI'LANK]
| |
| ANNEXBAMENDEDANDRESTATEDLILCOSTOCKOPTIONAGREEMENT AMENDEDANDRESTATED'STOCK OPTIONAGREEMENT, datedasofJune26,1997,byandbetweenTHEBROOKLYNUNIONGASCOMPANY,aNewYorkcorporation
| |
| ("BrooklynUnion'"),
| |
| andLONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation (the"COMPANY"
| |
| ).WHEREAS,concurrently withtheexecution anddeliveryofthisAgreement,'(i)
| |
| BrooklynUnionandtheCompanyareenteringintoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofthedatehereof(asthesamemaybeamendedfromtimetotime,the"EXCHANGE AGREEMENT"),
| |
| whichprovides, amongotherthings,uponthetermsandsubjecttotheconditions thereof,fortheexchangeofoutstanding sharesofcapitalstockofeachofBrooklynUnionandtheCompanyfornewlyissuedsharesofcapitalstockofaNewYorkcorporation tobeformed(the"BINDINGSHAREEXCHANGES"
| |
| ),and(ii)theCompanyandBrooklynUnionareenteringintoacertainamendedandrestatedstockoptionagreement datedasofthedatehereofwherebyBrooklynUniongrantstotheCompanyanoptionwithrespecttocertainsharesofBrooklynUnion'scommonstockonthetermsandsubjecttotheconditions setforththerein(the"BROOKLYN UNIONSTOCKOPTIONAGREEMENT");
| |
| WHEREAS,asacondition toBrooklynUnion'swillingness toenterintotheoriginalAgreement andPlanofExchangebyandamongBrooklynUnion,LILCOandNYECOCorp.,datedasofDecember29,1996,BrooklynUnionhasrequested thattheCompanyagree,andtheCompanyhassoagreed,togranttoBrooklynUnionanoptionwithrespecttocertainsharesoftheCompany's commonstock,onthetermsandsubjecttotheconditions setforthherein;tWHEREAS,thepartiesdesiretoamendandrestatetheoriginalLILCOStockOptionAgreement asofthe'atehereoftoreflecttheExchangeAgreement.
| |
| NOW,THEREFORE, toinduceBrooklynUniontoenterintotheExchangeAgreement, andinconsideration ofthemutualcovenants andagreements setforthhereinandintheExchangeAgreement, thepartiesheretoagreeasfollows:41.GRANTOFOPTION.'heCompanyherebygrantsBrooklynUnionanirrevocable option(the"COMPANYOPTION")topurchaseupto23,981,964 shares,subjecttoadjustment asprovidedinSection10(suchsharesbeingreferredtohereinasthe"COMPANYSHARES")ofcommon'stock,parvalue$5.00pershare,oftheCompany(the"COMPANYCOMMONSTOCK")(being19.9%ofthenumberofsharesofCompanyCommonStockoutstanding onthedatehereof)inthemannersetforthbelowataprice(the"EXERCISE PRICE")perCompanyShareof$19.725(whichisequaltotheFairMarketValue(asdefinedbelow)ofaCompanyShareonthedatehereof)payable,atBrooklynUnion'soption,(a)incashor(b)subjecttotheCompany's havingobtainedtheapprovals ofanyGovernmental Authority requiredfortheCompanytoacquiretheBrooklynUnionShares(asdefinedbelow)fromBrooklynUnion,whichapprovals theCompanyshallusebesteffortstoobtain,insharesofcommonstock,parvalue$.33Npershare,ofBrooklynUnion("BROOKLYNUNIONSHARES")ineithercaseinaccordance withSection4hereof.Notwithstanding theforegoing, innoeventshallthenumberofCompanySharesforwhichtheCompanyOptionisexercisable exceed19.9%ofthenumberofissuedandoutstanding sharesofCompanyCommonStock.Asusedherein,the"FAIRMARKETVALUE"ofanyshareshallbetheaverageofthedailyclosingsalespriceforsuchshareontheNewYorkStockExchange(the"NYSE")duringthe10NYSEtradingdayspriortothefifthNYSEtradingdaypreceding thedatesuchFairMarketValueistobedetermined.
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| Capitalized termsusedhereinbut.notdefinedhereinshallhavethemeaningssetforthintheExchangeAgreement.
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| l2.EXERCISEOFOPTION.TheCompanyOptionmaybeexercised byBrooklyn'Union, inwholeorinpart,atanytimeorfromtimetotimeaftertheExchangeAgreement becomesterminable byBrooklynUnionundercircumstances whichcouldentitleBrooklynUniontotermination feesundereitherSectionB;1 9.3(a)'oftheExchangeAgreement (provided thattheeventsspecified inSection9.3(a)(ii)(x) oftheExchangeAgreement shallhaveoccurred, althoughtheeventsspecified inSection9.3(a)(ii)(y) thereofneednothaveoccurred) orSection9.3(b)oftheExchangeAgreement (regardless ofwhethertheExchangeAgreement isactuallyterminated orwhetherthereoccursaclosingofanyBusinessCombination involving aTargetPartyoraclosingby,whichaTargetPartybecomesasubsidiary),
| |
| anysucheven(bywhichtheExchangeAgreement becomessoterminable byBrooklynUnionbeingreferredtohereinasa"TRIGGEREVENT."TheCompanyshallnotifyBrooklynUnionpromptlyinwritingoftheoccurrence ofanyTriggerEvent,itbeingunderstood thatthegivingofsuchnoticebytheCompanyshallnotbeacondition totherightofBrooklynUniontoexercisetheCompanyOption.IntheeventBrooklynUnionwishestoexercisetheCompanyOption,BrooklynUnionshalldelivertotheCompanyawrittennotice(an"EXERCISE NOTICEi')
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| specifying thetotalnumberofCompanySharesitwishestopurchase.
| |
| EachclosingofapurchaseofCompanyShares(a"CLOSING"
| |
| )shalloccurataplace,onadateandat.atimedesignated byBrooklynUnioninanExerciseNoticedelivered atleasttwobusinessdayspriortothedateoftheClosing.TheCompanyOptionshallterminate upontheearlierof:(i)theEffective Time;(ii)thetermination oftheExchangeAgreement pursuanttoSection9.1thereof(otherthanuponorduringthecontinuance ofaTriggerEvent);or(iii)180daysfollowing anytermination oftheExchangeAgreement uponorduringthecontinuance ofaTriggerEvent(orif,atthe,expiration ofsuch180dayperiodtheCompanyOptioncannotbeexercised byreasonofanyapplicable
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| : judgment, decree,order,laworregulation, 10businessdaysaftersuchimpediment toexerciseshallhavebeenremovedorshallhavebecomefinalandnotsubjecttoappeal,butinnoeventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing, theCompanyOptionmaynotbeexercised ifBrooklynUnionisin,materialbreachofanyofits'material representations orwarranties, orinmaterialbreachofanyofitscovenants oragreements, contained inthisAgreement orintheExchangeAgreement.
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| UponthegivingbyBrooklynUniontotheCompanyoftheExerciseNoticeandthetenderoftheapplicable aggregate ExercisePrice,BrooklynUnionshallbedeemedtobetheholderofrecordoftheCompanySharesissuableuponsuchexercise, notwithstanding thatthestocktransferbooksoftheCompanyshallthenbeclosedorthatcertificates representing suchCompanySharesshallnotthenbeactuallydelivered toBrooklynUnion.3.CONDITIONS TOCLOSING.Theobligation oftheCompanytoissuetheCompanySharestoBrooklynUnionhereunder issubjecttotheconditions, which(otherthantheconditions described inclauses(i),(iii)and(iv)below)maybewaivedbytheCompanyinitssolediscretion, that(i)allwaitingperiods,ifany,undertheHSRAct,applicable totheissuanceoftheCompanyShareshereunder shallhaveexpiredorhavebeenterminated; (ii)theCompanyShares,andanyBrooklynUnionShareswhichareissuedinpaymentoftheExercisePrice,shallhlivebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance; (iii)allconsents, approvals, ordersorauthorizations of,orregistrations, declarations'or filingswith,anyfederal,stateorlocaladministrative agencyorcommission orotherfederal,stateorlocalGovernmental Authority, ifany,requiredinconnection withtheissuanceoftheCompanyShareshereunder shallhavebeenobtainedormade,asthecasemaybe,including, withoutlimitation, ifapplicable, theapprovaloftheSECunderSection10ofthe1935Actoftheacquisition oftheCompanySharesbyBrooklynUnionand,ifapplicable, theacquisition bytheCompanyoftheBrooklynUnionSharesconstituting theExercisePricehereunder; and(iv)nopreliminary orpermanent injunction orotherorderbyanycourtofcompetent jurisdiction prohibiting orotherwise restraining suchissuanceshallbeineffect.K4.CLOSING.AtanyClosing,(a)theCompanywilldelivertoBrooklynUnionoritsdesigneeasinglecertificate indefinitive formrepresenting thenumberoftheCompanySharesdesignated byBrooklynUnioninitsExerciseNotice,suchcertificate toberegistered inthenameofBrooklynUnionandtobearthelegendsetforthinSection11,and(b)BrooklynUnionwilldelivertotheCompanytheaggregate pricefortheCompanySharessodesignated andbeingpurcha'sed by(i)wiretransferofimmediately available fundsorcertified checkorbankcheckor(ii)subjecttothecondition inSection1(b),acertificate orcertificates representing thenumberofBrooklynUnionSharesbeingissuedbyBrooklynUnioninconsideration thereof,asthecasemaybe.Forthepurposesofthis'Agreement, thenumberofBrooklynUnion'Shares tobedelivered'to theCompanyshallbeequaltothequotientobtainedbydividing(i)theproduct'of (x)thenumberofCompanyShareswithrespect,towhichtheCompanyOptionisbeingexercised B-2 and(y)theExercisePriceby(ii),theFairMarketValueoftheBrooklynUnionSharesonthedateimmediately preceding thedatetheExerciseNoticeisdelivered totheCompany.TheCompany,shallpayallexpenses, andanyandallUnitedStatesfederal,stateandlocaltaxesandotherchargesthatmaybepayableinconnection withthepreparation, issueanddeliveryofstock,certificates'under'this Section4inthenameofBrooklynUnionoritsdesignee.
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| 5.REPRESENTATIONS ANDWARRANTIES OFTHECOMPANY.TheCompanyrepresents andwarrantstoBrooklynUnionthat(a)exceptassetforthinSection5.1oftheLILCODisclosure
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| : Schedule, theCompanyisacorporation dulyorganized, validlyexistingandinactivestatusunderthelawsoftheStateofNewYorkandhas"thecorporate power.and authority toenterintothisAgreement, and,subjecttoobtaining theapplicable approvalofshareholders oftheCompanyfortherepurchase ofCompanySharespursuanttoSection7(a)belowundercircumstances whereSection513(e)oftheNYBCLwouldbeapplicable (the"BUYBACKAPPROVALS"
| |
| )andsubjecttoanyregulatory approvals referredtohereinandtotheprovisions ofSection513(a)oftheNYBCL,ifapplicable, tocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement bytheCompanyandtheconsummation bytheCompanyofthetransactions contemplated herebyhave beendulyauthorized byallnecessary corporate actiononthepartoftheCompanyandnoothercorporate proceedings onthepartoftheCompanyarenecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby(otherthananyrequiredBuybackApprovals),
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| (c)suchcorporate action(including theapprovaloftheBoardofDirectors oftheCompany)isintendedtorenderinapplicable tothisAgreement andtheExchangeAgreement andthetransactions contemplated herebyandthereby,theprovisions oftheNYBCLreferredtoinSection5,15oftheExchangeAgreement, (d)thisAgreement hasbeendulyexecutedanddelivered bytheCompany,constitutes avalidandbindingobligation of,theCompanyand,assumingthisAgreement constitutes avalidandbindingobligation ofBrooklynUnion,isenforceable againsttheCompanyinaccordance withitsterms,(e)theCompanyhastakenallnecessary corporate actiontoauthorize andreserveforissuanceandtopermitittoissue,uponexerciseoftheCompanyOption,andatalltimesfromthedatehereofthroughtheexpiration oftheCompanyOptionwillhavereserved, 23,981,964 authorized andunissuedCompanyShares,suchamountbeingsubjecttoadjustment asprovidedinSection10,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, (f)upondeliveryoftheCompanySharestoBrooklynUnionupontheexerciseoftheCompanyOption,BrooklynUnionwillacquiretheCompanySharesfreeandclea'rofallclaims,liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (g)exceptasdescribed inSection5.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheconsummation bytheCompanyofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinabreachofanyprovision of,orconstitute adefault(withorwithoutnoticeorlapseoftime,orboth)under,orresultinthetermination of,oraccelerate theperformance requiredby,orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orthecreationofalien,pledge,securityinterestorotherencumbrance onassets(anysuchconflict, violation, default,rightoftermination, cancellation oracceleration, lossorcreation, a"VIOLATION"
| |
| )oftheCompanyoranyofitssubsidiaries, pursuantto,(A)anyprovision ofthecertificate ofincorporation orby-lawsoftheCompany,(B)anyprovisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,Companybenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable totheCompanyoritsproperties orassets,whichViolation, inthecaseofeachofclauses(B)and(C),couldreasonably beexpectedtohaveamaterialadve'rseeffect'on
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| 'theCompanyanditssubsidiaries takenasawhole,(h)exceptasdescribed inSection5.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheperformance ofthisAgreement bytheCompanywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority, (i)noneoftheCompany,anyofitsaffiliates oranyoneactingonitsortheirbehalfhasissued,soldorofferedanysecurityoftheCompanytoanypersonundercircumstances thatwouldcausetheissuanceandsaleoftheCompanyShares,ascontemplated bythisAgreement, tobesubjecttotheregistration requirements oftheSecurities Actasineffectonthedatehereofand,assumingtherepresentations ofBrooklynUnioncontained inSection6(h)aretrueandcorrect,theissuance, saleand8-3 "deliveryoftheCompanyShareshereunder wouldbeexemptfromtheregistration andprospectus deliveryrequirements oftheSecurities Act,asineffectonthedatehereof(andtheCompanyshallnottakeanyactionwhichwouldcausetheissuance, saleanddeliveryoftheCompanyShareshereunder nottobeexemp'tfromsuchrequirements),
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| and(j)anyBrooklynUnionSharesacquiredpursuanttothisAgreement willbeacquiredfortheCompany's ownaccount,forinvestment purposesonlyandwillnotbeacquiredbytheCompanywithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.6.REPRESENTATIONS ANDWARRANTIES OFBrooklynUnion.BrooklynUnionrepresents andwarrantstotheCompanythat(a)BrooklynUnionisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement andtocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement byBrooklynUnionandtheconsummation byBrooklynUnionofthetransactions contemplated herebyhavebeendulyauthorized byallnecessary corporate actiononthepartofBrooklynUnionandnoothercorporate proceedings onthepartofBrooklynUnionarenecessary toauthorize thisAgreement or'nyofthetransactions contemplated hereby,(c)thisAgreement hasbeendulyexecutedanddelivered byBrooklynUnionandconstitutes avalidandbindingobligation ofBrooklynUnion,and,assumingthisAgreement constitutes avalidandbindingobligation oftheCompany,isenforceable againstBrooklynUnioninaccordance withitsterms,(d)priortoanydeliveryofBrooklynUnionSharesinconsideration of'hepurchaseofCompanySharespursuanthereto,BrooklynUnionwillhavetakenallnecessary corporate actiontoauthor'ize forissuanceandtopermitittoissuesuchBrooklynUnionShares,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, andtorenderinapplicable tothereceiptbytheCompanyoftheBrooklynUnionSharestheprovisions oftheNYBCLreferredtoinSection4.15oftheExchangeAgreement, (e)uponanydeliveryofsuchBrooklynUnionSharestotheCompanyinconsideration ofthepurchaseofCompanySharespursuanthereto,theCompanywillacquiretheBrooklynUnionSharesfreeandclearofallclaims,liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (f)exceptasdescribed inSection4.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement byBrooklynUniondoesnot,andtheconsummation byBrooklynUnionofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinthebreachofanyprovision of,orconstitute adefault(withorwithoutnoticeorlapseoftime,orboth)under,orresultinanyViolation byBrooklynUnionoranyofitssubsidiaries, pursuantto(A)anyprovision ofthecertificate ofincorporation orby-lawsofBrooklynUnion,(B)anyprovisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,BrooklynUnionbenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable toBrooklynUnionoritsproperties orassets,whichViolation, inthecaseofeachofitsclauses(B)and/or(C),wouldhaveamaterialadverseeffectonBrooklynUnionanditssubsidiaries takenasawhole,(g)exceptasdescribed inSection4.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,the,execution anddeliveryofthisAgreement byBrooklynUniondoesnot,andtheconsummation byBrooklynUnionofthetransactions contemplated herebywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,'nyGovernmental Authority and(h)anyCompanySharesacquireduponexerciseoftheCompanyOptionwillbeacquiredforBrooklynUnion'sownaccount,for,investment purposesonlyandwillnotbe,andtheCompanyOptionisnotbeing,acquiredbyBrooklynUnionwithaviewtothepublicdistribution thereofinviolatiotl ofanyapplicable provision oftheSecurities Act.7.CERTAINREPURCHASES.
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| (a)BROOKLYNUNIONPUT.AttherequestofBrooklynUnionbywrittennoticeatanytimeduringwliichtheCompanyOptionisexercisable pursuanttoSection2(the"REPURCHASE PERIOD"),theCompany(oranysuccessor entitythereof)shallrepurchase fromB'rooklyn Unionallor'nyportionoftheCompanyOption,atthepricesetforthinsubparagraph (i)below,or,attherequestofBrooklynUnionbywrittennoticeatanytimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),theCompany(oranysuccessor entitythereof)shallrepurchase fromBrooklynUnionalloranyportionoftheCompanySharespurchased byBrooklynUnionpursuanttotheCompanyOption,atthepriceset,forthinsubparagraph (ii)below;(i)thedifference betweenthe"MARKET/OFFER PRICE"forsharesofCompanyCommonStockasofthedateBrooklynUniongivesnoticeofitsintenttoexerciseitsrightsunderthisSection7(definedasthehighero'f(A)thepricepershareofferedasofsu'chdatepursuanttoanytenderorexchangeofferorotherofferwithrespecttoaBusinessCombination whichwasmadepriortosuchdateandnotterminated orwithdrawn asofsuchdate(the"OFFERPRICE")and(B)theFairMarketValueofCompanyCommonStockasofsuchdate(the"MARKETPRICE"))andtheExercisePrice,multiplied bythenumberofCompanySharespurchasable pursuanttotheCompanyOption(orportionthereofwithrespecttowhichBrooklynUnionisexercising itsrightsunderthisSection7),butonlyiftheMarket/Offer PriceisgreaterthantheExercisePrice;(ii)theproductof(x)thesumof(A)theExercisePricepaidbyBrooklynUnionperCompanyShareacquiredpursuanttotheCompanyOptionand(B)thedifference betweentheMarket/Offer PriceandtheExercisePrice,butonlyiftheMarket/Offer PriceisgreaterthantheExercisePrice,and(y)thenumberofCompanySharestoberepurchased pursuanttothisSection7.Forpurposesofthisclause(ii),theOfferPriceshallbethehighestpricepershareofferedpursuanttoatenderorexchangeofferorotherBusinessCombination offerduringtheRepurchase PeriodpriortothedeliverybyBrooklynUnionofanoticeofrepurchase.
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| (b)REDELIVERY OFBROOKLYNUNIONSHARES.IfBrooklynUnionelectedtopurchaseCompanySharespursuanttotheexerciseoftheCompanyOptionbytheissuanceanddeliveryofBrooklynUnionShares,thentheCompanyshall,ifsorequested byBrooklynUnion,infulfillment ofitsobligation pursuanttoclause(a)ofSection7(a)(ii)(x)
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| (thatis,withrespecttotheExercisePriceonlyandwithoutlimitation toitsobligation topayadditional consideration underclause(b)ofSection7(a)(ii)(x)),
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| redeliver thecertificate forsuchBrooklynUnionSharestoBrooklynUnion,freeandclearofallliens,claims,damages,chargesandencumbrances ofanykindornaturewhatsoever;
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| : provided, however,thatiflessthanalloftheCompanySharespurchased byBrooklynUnionpursuanttotheCompanyOptionaretoberepurchased pursuanttothisSection7,thenBrooklynUnionshallissuetotheCompanya,newcertificate representing thoseBrooklynUnionShareswhicharenotduetobercdelivered toBrooklynUnionpursuanttothisSection7astheyconstituted paymentoftheExercisePricefortheCompanySharesnotbeingrepurchased.
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| (c)PAYMENTANDREDELIVERY OFCOMPANYOPTIONORSHARES.IntheeventBrooklynUnionexercises itsrightsunderthisSection7,theCompanyshall,within10businessdaysthereafter, paytherequiredamounttoBrooklynUnioninimmediately available fundsandBrooklynUnionshallsurrender totheCompanytheCompanyOptionorthecertificates evidencing theCompanySharespurchased byBrooklynUnionpursuantthereto,andBrooklynUnionshallwarrantthatitownstheCompanyOptionorsuchsharesandthattheCompanyOptionorsuchsharesarethenfreeandclearofallliens,claims,damages,chargesandencumbrances ofanykindornaturewhatsoever.
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| (d)'BROOKLYN UNIONCALL.IfBrooklynUnidnhaselectedtopurchaseCompanySharespursuanttotheexerci'se oftheCompanyOptionbytheissuanceanddeliveryofBrooklynUnionShares,notwithstanding thatBrooklynUnionmaynolongerholdanysuchCompanySharesorthat'rooklynUnionelectsnottoexerciseitsotherrightsunderthisSection7,BrooklynUnionmayrequire,atanytimeorfromtimefotimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),theCompanytoselltoBrooklynUnionanysuchBrooklynUnionSharesattheFairMarketValuethathadbeenattributed tosuchBrooklynUnionSharespursuanttoSection4plusinterestattherateof6.5%perannumonsuchamountfromtheClosingDaterelatingtotheB-5 exchangeof-suchBrooklynUnionSharespursuanttoSection4totheclosingdateunderthisSection7(d)lessanydividends onsuchBrooklynUnionSharespaidduringsuchperiodordeclaredandpayabletostockholders ofrecordonadateduringsuchperiod.'e)REPURCHASE PRICEREDUCEDATBROOKLYNUNION'SOPTION.Intheeventtherepurchase pricespecified inSection7(a)wouldsubjectthepurchaseoftheCompanyOptionortheCompanySharespurchased byBrooklynUnionpursuanttotheCompanyOptiontoavoteofthe,shareholders oftheCompanypursuanttoSection513(e)oftheNYBCL,thenBrooklynUnionmay,atitselection, reducetherepurchase pricetoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsuchashareholder vote.,8.RESTRICTIONS ONTRANSFER.
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| (a)RESTRICTIONS ONTRANSFER.
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| PriortotheExpiration Date,neitherpartyshall,directlyorindirectly, byoperation oflaworotherwise, sell,assign,pledge,orotherwise disposeofortransferanysharesofcapitalstockoftheotherpartyacquiredbysuchpartypursuanttothisAgreement
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| ("Restricted Shares")andbeneficially ownedbysuchparty,otherthan(i)pursuanttoSection7,or(ii)inaccordance withSection8(b)orSection9.(b)PERMITI'ED SALES.Following thetermination oftheExchangeAgreement, apartyshallbepermitted tosellanyRestricted Sharesbeneficially ownedbyitifsuchsaleismadepursuanttoatenderorexchangeofferthathasbeenapprovedorrecommended, orotherwise determined tobefairtoandinthebestinterests oftheshareholders oftheotherparty,byamajorityofthemembersoftheBoardofDirectors ofsuchotherpartywhichmajorityshallincludeamajorityofdirectors whoweredirectors priortothe'announcement ofsuchtenderorexchangeoffer.9.REGISTRATION RIGHTS.Following thetermination oftheExchangeAgreement, eachpartyhereto(a"DESIGNATED HOLDER")maybywrittennotice(the"REGISTRATION NOTICE")totheotherparty(the"REGISTRANT"
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| )requesttheRegistrant toregisterunderthe"Securities Actalloranypartof'theRestricted Sharesbeneficially ownedbysuchDesignated Holder(the"REGISTRABLE SECURITIES"
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| )pursuanttoabonafidefirmcommitment underwritten publicofferinginwhichtheDesignated Holderandtheunderwriters shalleffectaswideadistribution ofsuchRegistrable Securities asisreasonably practicable andshallusetheirbesteffortstopreventanyperson(including anyGroup(asusedinRule13d-5undertheExchangeAct))anditsaffiliates formpurchasing throughsuchofferingRestricted Sharesrepresenting morethan1%oftheoutstanding sharesofcommonstockoftheRegistrant onafullydilutedbasis(a"PERMIT'ED OFFERING"
| |
| ).TheRegistration Noticeshallincludeacertificate executedbytheDesignated Holder'anditsproposed, managingunderwriter, whichunderwriter shallbeaninvestment bankingfirmofnationally recognized standing(the"MANAGER"),
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| statingthat(i)theyhaveagoodfaithintention tocommencepromptlya,Permitted Offeringand(ii)IheManageringoodfaithbelievesthat,basedonthethenprevailing marketconditions, itwillbeabletoselltheRegistrable Securities atapersharepriceequaltoatleast80%ofthethenFairMarketValueofsuchshares.TheRegistrant (and/oranypersondesignated bytheRegistrant) shallthereupon havetheoptionexercisable bywrittennoticedelivered totheDesignated Holderwithin10businessdaysafterthereceiptoftheRegistration Notice,irrevocably toagreetopurchasealloranypartoftheRegistrable Securities proposedtobesosoldforcashataprice(the"OPTIONPRICE")equaltotheproductof(i)thenumberofRegistrable Securities tobesopurchased bytheRegistrant and(ii)thethenFairMarketValueofsuchshares.AnysuchpurchaseofRegistrable Securities bytheRegistrant (oritsdesignee) hereunder shalltakeplaceataclosingtobeheldattheprincipal executive officesoftheRegistrant orattheofficesofitscounselatanyreasonable dateandtimedesignated bytheRegistrant and/orsuchdesigneeinsuchnoticewithin20businessdaysafterdeliveryofsuchnotice.Anypaymentforthesharestobepurchased shallbemadebydeliveryatthetimeofsuchclosingoftheOptionPriceinimmediately available funds.IftheRegistrant doesnotelecttoexerciseitsoptionpursuanttothisSection9withrespecttoallRegistrable Securities, itshalluseitsbesteffortstoeffect,aspromptlyaspracticable, theregistration undertheSecurities Actoftheunpurchased Registrable Securities proposedtobesosold;provided, however,that(i)neitherpartyshallbeentitledtomorethananaggregate oftwoeffective registration statements hereunder and(ii)theRegistrant willnotberequiredtofileanysuchregistration statement duringanyperiodoftimeB-6 (nottoexceed40daysaftersuchrequestinthecaseofclause(A)belowor90daysinthecaseofclauses(B)and(C)below)when(A)theRegistrant isinpossession ofmaterialnon-public information whichitreasonably believeswouldbedetrimental tobedisclosed atsuchtimeand,intheopinionofcounseltotheRegistrant, suchinformation wouldhavetobedisclosed ifaregistration statement werefiledatthattime;(B)theRegistrant isrequiredundertheSecurities Acttoincludeauditedfinancial statements foranyperiodinsuchregistration statement andsuchfinancial statements arenotyetavailable forjnclusion insuchregistration statement; or(C)theRegistrant determines, initsreasonable
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| : judgment, thatsuchregistration wouldinterfere withanyfinancing, acquisition orothermaterialtransaction involving theRegistrant oranyofitsaffiliates.
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| TheRegistrant shalluseitsreasonable besteffortstocauseanyRegistrable Securities registered pursuanttothisSection9tobequalified forsaleunderthesecurities orBlue-Skylawsofsuchjurisdictions astheDesignated Holdermayreasonably requesta'ndshallcontinuesuchregistration orqualification ineffectinsuchjurisdiction;
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| : provided, however,thattheRegistrant shallnotberequiredtoqualifytodobusinessin,orconsenttogeneralserviceofprocessin,anyjurisdiction byreasonofthisprovision.
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| Theregistration rightssetforthinthisSection9aresubjecttothecondition thattheDesignated HoldershallprovidetheRegistrant withsuchinformation withrespecttosuch,holder's Registrable.
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| Securities, theplansforthedistribution thereof,andsuchotherinformation withrespecttosuchholderas,inthereasonable judgmentofcounselfortheRegistrant, isnecessary toenabletheRegistrant toincludeinsuchregistration statement allmaterialfactsrequiredtobedisclosed withrespecttoaregistration thereunder.
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| Aregistration effectedunderthisSection9shallbeeffectedattheRegistrant's expense,exceptforunderwriting discounts andcommissions andthefeesandtheexpensesofcounseltotheDesignated Holder,andtheRegistrant shallprovidetotheunderwriters such'documentation (including certificates, opinionsofcounseland"comfort" lettersfromauditorsasarecustomary inconnection withunderwritten publicofferings assuchunderwriters mayreasonably require.Inconnection withanysuchregistration, thepartiesagree(i)toindemnify eachotherandtheunderwriters inthecustomary manner,(ii)toenterintoanunderwriting agreement informandsubstance customary fortransactions ofsuchtypewiththeManagerandtheotherunderwriters participating insuchofferingand(iii)totakeallfurtheractionswhichshallbereasonably necessary toeffectsuchregistration andsale(including, iftheManagerdeemsitnecessary, participating inroad-show presentations).
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| TheRegistrant shallbeentitledtoinclude(atitsexpense)additional sharesofitscommonstockinaregistration effectedpursuanttothisSection9onlyifandtotheextenttheManagerdetermines thatsuchinclusion willnotadversely affecttheprospects ofsuccessofsuchoffering.
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| 10.ADJUSTMENT UPONCHANGESINCAPITALIZATION.
| |
| Withoutlimitation toanyrestriction ontheCompanycontained inthisAgreement orintheExchangeAgreement, intheeventofanychangeinCompanyCommonStockbyreaso'nofstockdividends,
| |
| : splitups, mergers(otherthantheBindingShareExchanges),
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| recapitaiizations, combinations, exchangeofsharesorthelike,thetypeandnumberofsharesorsecurities subjecttotheCompanyOption,andthepurchasepricepershareprovidedinSectionI,sliallbeadjustedappropriately torestoretoBrooklynUnionitsrightshereunder, including therighttopurchasefromtheCompany(oritssuccessors) sliaresofCompanyCommonStockrepresenting 19.9%oftheOutstanding CompanyCommonStockfortheaggregate ExercisePrice'calculated asofthedateofthisAgreement asprovidedinSection1.11.RESTRICTIVE LEGENDS.Eachcertificate representing sharesofCompanyCommonStockissuedtoBrooklynUnionhereunder, andBrooklynUnionShares,ifany,delivered totheCompanyataClosing,shallincludealegendinsubstantially thefollowing form:THESECURITIES REPRESENTED BYTHISCERTIFICATE HAVENOTBEENREGISTERED UNDER.THESECURITIES ACTOF1933,ASAMENDED,ANDMAYBEREOFFERED ORSOLDONLYIFSOREGISTERED ORIFANEXEMPTION FROMSUCHREGISTRATION ISAVAILABLE.
| |
| SUCHSECURITIES, AREALSOSUBJECTTOADDITIONAL RESTRICTIONS ONTRANSFERASSETFORTHINTHEAMENDEDANDRESTATEDSTOCK8-7 tOPTIONAGREEMENT, DATEDASOFJUNE26,1997,ACOPYOFWHICHMAYBEOBTAINEDFROMTHEISSUERUPONREQUEST.Itisundeistood andagreedthat:(i)thereference totheresalerestrictions ofthe'Securities Actintheabovelegendshallberemovedbydeliveryofsubstitute certificate(s) withoutsuchreference ifBrooklynUnionortheCompany,a'sthecasemaybe,shallhavedelivered totheotherpartyacopyofaletterfromthestaffoftheSecurities andExchangeCommission, oranopinionofcounsel,inform"andsubstance satisfactory totheotherparty,"to theeffectthatsuchlegendisnotrequiredfoipurposesoftheSecurities Act;(ii)therefererice totheprovisions tothisAgreement intheabovelegendshallberemovedbydelivery'fsubstitute ce'rtificate(s) withoutsuchreference iftheshareshavebeensoldortransferred incompliance withtheprovisions ofthisAgreeinent andundercircumstances thatdonotiequiretheretention ofsuchreference; and(iii)thelegendshallbcremoved'in itsentiretyiftheconditions inthepreceding clauses(i)and(ii)arebothsatisfied.
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| Inaddition, suchcertificates shallbearanyotherlegendasmayberequiredbylaw.Certificates representing sharessoldinaregistcrcd publicofferingpursuanttoSection9shallnotbcrequiredtobearthelegendsetforthinSection11.f2.BINDINGEFFECT;NOASSIGNMENT; NOTHIRDPAI?TYBENEFICIARIES.
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| ThisAgreement shallbebindinguponandinuretothebenefitofthepartiesheretoandtheirrespective successors andpermitted assigns.Exceptasexpressly providedforinthisAgreement, neitherthisAgreement northerightsortheobligations ofeitherpartyheretoareassignable, exceptbyoperation oflaw,orwiththewrittenconsentoftheotherparty.Nothingcontained inthisAgreement, expressorimp/ied,isintendedtoconferuponanypersonotherthanthepartiesheretoandtheirrespective permitted assignsanyrightsorremediesofanynaturewhatsoever byreasonofthisAgreement.
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| AnyRestricted Sharessoldbyapartyincompliance withtheprovisions ofSection9shall,uponconsummation ofsuchsale,befreeoftherestrictions imposedwithrespecttosuchsharesbythisAgreement, unless'anduntilsuchpartyshallrepurchase orotherwise becomethebeneficial ownerofsuchshares,andanytransferee
| |
| 'ofpuchsharesshallnotbeentitledtotheregistration rightsofsuchparty.13,SPECIFICPERFORMANCE.
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| Thepartiesrecognize andagreethatjfforanyreasonanyoftheprovisions ofthisAgreement arenotperformed inaccordance withtheirspecifictermsorarcotherwise
| |
| : breached, immediate andirreparable harmorinjurywouldbecausedforwhichmoneydamageswouldnotbeanadequateremedy,Accordingly, eachpartyagreesthat,inadditiontootherremedies, theotherpartyshallbeentitled,to aninjunction restraining anyviolation orthreatened violatioit oftheprovisions ofthisAgreement.
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| Intheeventthatanyactionshouldbebroughtinequitytoenforcetheprovisions oftheAgreement, neitherpartywillallege,andeachpartyherebywaivesthedefense,thatthereisadequateremedyatlaw.N14.ENTIREAGREEMENT.
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| ThisAgreement, theBrooklynUnionStockOptionAgreement, theConfidentiality Agreement andtheExchangeAgreement (including theexhibitsandschedules thereto)constitute theentirea'greement amongthe'parties withrespecttothesubjectmatterhereofandthereofandsupersede af1otherprioragreements andunderstandings, bothwrittenandoral,amongthepartiesoranyofthemwithrespecttothesubjectmatterhereofandthereof.15.,FURTHER ASSURANCES.
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| Eachpartywillexecuteanddeliverallsuchfurtherdocuments andinstruments andtakeallsuchfurtheractionasmaybenecessary inordertoconsummate thetransactions contemplated hereby.16.VALIDITY.
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| Theinvalidity orunenforceability ofanyprovisions ofthisAgreement shallnotaffectthevalidityorenforceability oftheotherprovisions ofthisAgreement, whichshallremaininfullforceandeffect.Intheeventanycourtorothercompetent authority holdsanyprovisions ofthisAgrcemcnt tobenull,voidorunenforceablc, thepartiesheretoshallnegotiate ingoodfaiththeexecution anddeliveryofanamendment tothisAgreement inorder,asnearlyaspossible, toeffectuate, totheextentpermitted bylaw,theintentofthepartiesheretowithrespecttosuchprovision and.theeconomiceffectsthereof.Ifforanyreasonanysuchcourtorregulatory agencydetermines thatBrooklynUnionisnotpermitted toacquire,ortheCompanyisnotpermitted torepurchase pursuanttoSection7,thefullnumberofsharesofCompanyCommonStockprovidedinSectionIhereof(asthesamemaybeadjusted),
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| itistheexpressintention ofB-8 0theCompanytoallow,BrooklynUniontoacquireortorequiretheCompanytorepurchase suchlessernumberofsharesasmaybepermissible, withoutanyamendment ormodification hereof.Eachpartyagreesthat,shouldanycourtorother,competent authority holdanyprovision ofthisAgreement or,parthereoftobenull,voidorunenforceable, ororderanypartytotakeanyactioninconsistent
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| : herewith, ornottakeanyactionrequiredherein,theotherpartyshallnotbeentitledtospecificperformance ofsuchprovision orparthereofortoanyotherremedy,including butnotlimitedtomoneydamages,forbreach'hereof orofanyotherprovision ofthisAgreement orparthereofastheresultofsuchholdingororder.17.NOTICES.,All noticesandothercommunication hereunder shallbeinwritingandshallbedeemedgivenif(i)delivered personally, or(ii)sentbyreputable overnight courierservice,or(iii)telecopied (whichisconfirmed),
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| or(iv)fivedaysafterbeingmailedbyregistered orcertified mail(return'receipt requested) tothepartiesatthefollowing addresses (oratsuchotheraddressforapartyasshallbespecified bylikenotice):A.IftoBrooklynUnion,to:TheBrooklynUnionGasCompanyOneMetroTech CenterBrooklyn, NewYork11201-3850 Attention:
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| ChiefExecutive Officerwithacopyto:Wachtell, Lipton,Rosen&Katz51West52ndStreetNewYork,NewYork10019Attention:
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| SethA.KaplanB.IftotheCompany,to:LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Attention:
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| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Attention:
| |
| ThomasE.Constance 18.GOVERNING LAW;CHOICEOFFORUM.ThisAgreement shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable toagreements madeandtobeperformed entirelywithinsuchStateandwithoutregardtoitschoiceoflawprinciples.
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| Eac'hofthepartieshereto(a)consentstosubmititselftothepersonaljurisdiction ofanyfederalcourtlocatedintheStateofNewYorkoranyNewYorkstatecourtintheeventanydisputearisesoutofthisAgreement oranyofthetransactions contemplated bythisagreement, (b)agreesthatitwillnotattempttodenyordefeatsuchpersonaljurisdiction bymotionorotherrequestforleavefromanysuchcourtand(c)agreesthatitwillnotbringanyactionrelatingtothisAgrccment oranyofthetransactions contemplated bythisAgreement inanycourtotherthanafederalcourtsittingintheStateofNewYorkoraNewYorkstatecourt.19.INTERPRETATION.
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| Whenareference ismadeinthisAgreement toaSectionsuchreference shallbetoaSectionofthisAgreement unlessotherwise indicated.
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| Wheneverthewords"include",
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| "includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
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| Thedescriptive headingshereinareinsertedforconvenience ofreference onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
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| B-9, 20.COUNTERPARTS.
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| ThisAgreement maybeexecutedintwocounterparts, eachofwhichshallbedeemedtobeanoriginal, butbothofwhich,takentogether, shallconstitute oneandthesameinstrument.
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| 21.EXPENSES.
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| Exceptasotherwise expressly providedhereinorintheExchangeAgreement, allcostsandexpensesincurredinconnection withthetransactions contemplated bythisAgreement shallbepaidbythepartyincurring suchexpenses.
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| 22.AMENDMENTS; WAIVER.ThisAgreement maybeamendedby'hepartiesheretoandthetermsandconditions hereofmaybewaivedonlybyaninstrument inwritingsignedonbehalfofeachofthepartieshereto,or,inthecaseofawaiver,byaninstrument signedonbehalfofthepartywaivingcompliance.
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| 23.EXTENSION OFTIMEPERIODS.Thetimeperiodsforexerciseof,certainrightsunderSections2,6and7shallbeextended:
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| (i)totheextentnecessary toobtainallregulatory approvals fortheexerciseofsuchrights,andfortheexpiration ofallstatutory waitingperiods;and(ii)totheextentnecessary toavoidanyliability underSection16(b)oftheExchangeActbyreasonofsuchexercise.
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| MREPLACEMENT OFCOMPANYOPTION.UponreceiptbytheCompanyofevidencereasonably satisfactory-to itoftheloss,theft,destruction ormutilation ofthisAgreement, and(inthecaseofloss,theftordestruction) ofreasonably satisfactory indemnification, anduponsurrender andcancellation ofthisAgreement, ifmutilated, theCompanywillexecuteanddeliveranewAgreement ofliketenoranddate.B-'10 INWITNESSWHEREOF,thepartiesheretohavecausedthisAgreement tobeexecutedbytheirrespective dulyauthorized officersasofthedatefirstabovesvritten.
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| THEBROOKLYNUNIONGASCOMPANYBy:/S/ROBERTB.CATELLName:RobertB.CatellTitle:ChiefExecutive OfficerILONGISLANDLIGHTINGCOMPANYBy/S/WILLIAMJ.CATACOSINOS Name:Dr.WilliamJ.Catacosinos Title:ChiefExecutive Officer
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| ANNEXCAMENDEDANDRE<STATED BROOKLYNUNIONSTOCKOPTIONAGREEMENT AMENDED,ANDRESTATEDSTOCKOPTIONAGREEMENT, datedasofJune26,1997,byandbetweenLONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation
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| ("LILCO"),
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| andTHEBROOKLYNUNIONGASCOMPANY,aNewYorkcorporation (the"COMPANY"
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| ).WHEREAS,concurrently withtheexecution anddeliveryofthisAgreement, (i)LILCOandtheCompanyareenteringintoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofthedatehereof(asthesamemaybeamendedfromtimetotime,the"EXCHANGE AGREEMENT"),
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| whichprovides, amongotherthings,uponthetermsandsubjecttotheconditions thereof,fortheexchangeofoutstanding sharesofcapitalstockofeachofLILCOandtheCompanyfornewlyissuedsharesofcapitalstockofaNewYorkcorporation tobeformed(the"BINDING, SHAREEXCHANGES"
| |
| ),and(ii)theCompanyandLILCOareenteringintoacertainamendedandrestatedstockoptionagreement datedasofthedatehereofwherebyLILCOgrantstotheCompanyanoptionwithrespecttocertainsharesofLILCO'scommonstockonthetermsandsubjecttotheconditions setforththerein(the"LILCOSTOCKOPTIONAGREEMENT"
| |
| );WHEREAS,asacondition toLILCO'swillingness toenterintotheoriginalAgreement andPlanofExchangebyandamongBrooklynUnion,LILCOandNYECOCorp.,datedasofDecember29,1996,LILCOhasrequested thattheCompanyagree,andtheCompanyhassoagreed,togranttoLIE.COanoptionwithrespecttocertainsharesoftheCompany's commonstock,onthetermsandsubjecttotheconditions setforthherein;andWHEREAS,thepartiesdesiretoamendandrestatetheoriginalBrooklynUnionStockOptionAgreement asofthedatehereoftorefiecttheExchangeAgreement.
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| NOW,THEREFORE, toinduceLILCOtoenterintotheExchangeAgreement, andinconsideration oftheemutualcovenants andagreemcnts setforthhereinandintheExchangeAgreement, thepartiesheretoagreeasfollows:1.GRANTOFOPTION.TheCompanyherebygrantsLILCOanirrevocable option(the"COMPANYOPTION")topurchaseupto9,948,682 shares,subjecttoadjustment asprovidedinSection10(suchsharesbeingreferredtohereinasthe"COMPANYSHARES")ofcommonstock,parvalue$.335pershare,oftheCompany(the"COMPANYCOMMONSTOCK")(being19.9%ofthenumberofsharesofCompanyCommonStockoutstanding onthedatehereof)inthemannersetforthbelowataprice(the"EXERCISE PRICE")perCompanyShareof$30.0375(whichisequaltotheFairMarketValue(asdefinedbelow)ofaCompanyShareonthedatehereof)payable,atLILCO'soption,(a)incashor(b)subjecttotheCompany's havingobtainedtheapprovals ofanyGovernmental Authority requiredfortheCompanytoacquiretheLILCOShares(asdefinedbelow)fromLILCO,whichapprovals theCompanyshallusebesteffortstoobtain,insharesofcommonstock,parvalue$5.00pershare,ofLILCO("LILCOSHARES")ineithercaseinaccordance withSection4hereof.Notwithstanding theforegoing, innoeventshallthenumberofCompanySharesforwhichtheCompanyOptionisexercisable exceed19.9%ofthenumberofissuedandoutstanding sharesofCompanyCommonStock.Asusedherein,the"FAIRMARKETVALUE"ofanyshareshallbe'heaverage'of thedailyclosingsalespriceforsuchshareontheNewYorkStockExchange(the"NYSE")duringthe10NYSEtradingdayspriortothefifthNYSEtradingdaypreceding thedatesuchFairMarketValueistobedetermined.
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| Capitalized termsusedhereinbutnot-definedhereinshallhavethemeaningssetforthintheExchangeAgreement.
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| 2.EXERCISEOFOPTION.TheCompanyOptionmaybeexercised byLILCO,inwholeorinpart,atanytimeorfromtimetotimeaftertheExchangeAgreement becomesterminable byLILCOundercircumstances whichcouldentitleLILCOtotermination feesundereitherSection9.3(a)oftheExchangeAgreement (provided thattheeventsspecified inSection9.3(a)(ii)(x) oftheExchangeAgreement shallhaveoccurred, althoughtheeventsspecified inSection9.3(a)(ii)(y) thereofneednothaveoccurred) orSection9.3(b)oftheExchangeAgreement (regardless ofwhethertheExchangeAgreement isactuallyterminated orwhetherthereoccursaclosingofanyBusinessCombination involving aTaiget'Party oraclosingbywhichaTargetPartybecomesasubsidiary),
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| anysucheventbywhichtheExchangeAgreement becomessoC-1 terminable byLILCObeingreferredtohereinasa"TRIGGEREVENT."TheCompanyshallnotifyLILCOpromptlyinwritingoftheoccurrence ofanyTriggerEvent,itbeing,understood thatthegivingofsuchnoticebytheCompanyshallnotbeacondition totherightofLILCOtoexercisetheCompanyOption.IntheeventLILCOwishestoexercisetheCompanyOption,LILCOshalldelivertotheCompanyawrittennotice(an"EXERCISE NOTICE")specifying thetotalnumberofCompanySharesitwishestopurchase.
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| EachclosingofapurchaseofCompanyShares(a"CLOSING"
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| )shalloccurataplace,onadateandatatimedesignated byLILCOinanExerciseNoticedelivered atleasttwobusinessdayspriortothedateoftheClosing.TheCompanyOptionshallterminate upontheearlierof:(i)theEffective Time;(ii)thetermination oftheExchangeAgreement pursuanttoSection9.1thereof(otherthanuponorduringthecontinuance ofaTrigger,Event);or(iii)180daysfollowing anytermination oftheExchangeAgreement uponorduringthecontinuance ofaTriggerEvent(orif,attheexpiration ofsuch180dayperiodtheCompanyOptioncannotbeexercised byre'asonofanyapplicable
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| : judgment, decree,order,'law orregulation, 10businessdaysaftersuchimpediment toexeiciseshallhavebeenremovedorshallhavebecomefinalandnotsubjecttoappeal,butinno'eventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing, theCompany0'ptionmaynotbeexercised ifLILCOisinmaterialbreachofanyofitsmaterialrepresentations orwarranties, orinmaterialbrcachofany'ofitscovenants oragreements, contained inthisAgreement orintheExchangeAgreement.
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| UponthegivingbyLILCOtotheCompanyoftheExerciseNoticeandthetenderoftheapplicable aggregate ExercisePrice,LILCOshallbedeemedtobetheholderofrecordoftheCompanySharesissuableuponsuchexercise, notwithstanding thatthestocktransferbooksoftheCompanyshallthenbeclosedorthatcertificates representing suchCompanySharesshallnotthenbeactuallydelivered toLILCO.3.CONDITIONS TOCLOSING.Theobligation oftheCompanytoissuetheCompanySharestoLILCOhereunder issubjecttotheconditions, which(otherthantheconditions described inclauses(i),(iii)and(iv)below)maybewaivedbytheCompanyinitssolediscretion, that(i)allwaitingperiods,ifany,undertheHSRAct,applicable totheissuanceoftheCompanyShareshereunder shallhaveexpiredorhavebeenterminated; (ii)theCompanyShares,andanyLILCOShareswhichareissuedinpaymentoftheExercisePrice,shallhavebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance; (iii)allconsents, approvals, ordersorauthorizations of,orregistrations, declarations orfilingswith,anyfederal,stateorlocaladministrative agencyorcommission orotherfederal,stateorlocalGovernmental Authority, ifany,requiredinconnection withtheissuanceoftheCompanyShareshereunder shallhavebeenobtainedormade,asthecasemaybe,including, without.limitation, ifapplicable, theapprovaloftheSECunderSection10ofthe1935Actoftheacquisition oftheCompanySharesbyLILCOand,ifapplicable, theacquisition bytheCompanyoftheLILCOSharesconstituting theExercisePricehereunder; and(iv)nopreliminary orpermanent injunction orotherorderbyanycourtofcompetent jurisdiction prohibiting orotherwise restraining suchissuanceshallbeineffect.4.CLOSING.AtanyClosing,(a)theCoinpanywilldelivertoLILCOoritsdesigneeasingle,certificate indefinitive formrepresenting thenumberoftheCompanySharesdesignated byLILCOinitsExerciseNotice,suchcertificate toberegistered inthenameofLILCOandtobearthelegendsetforthinSection11,and(b)LILCOwilldelivertotheCompanytheaggregate pricefortheCompanySharessodesignated andbeingpurchased by(i)wiretransferofimmediately available fundsorcertified checkorbankcheckor(ii)subjecttothecondition inSection1(b),acertificate orcertificates representing thenumberofLILCOSharesbeingissuedbyLILCOinconsideration thereof,asthecasemaybe.ForthepurposesofthisAgreement, thenumberofLILCOSliarestobedelivered totheCompanyshallbeequaltothequotientobtainedbydividing(i)theproductof(x)thenumberofCompanyShareswithrespecttowhichtheCompanyOptionisbeingexercised and(y)theExercisePriceby(ii)theFairMarketValueoftheLILCOSharesonthedateimmediately preceding thedatetheExerciseNoticeisdelivered totheCompany.TheCompanyshallpayallexpenses, andanyandallUnitedStatesfederal,stateandlocaltaxesandotherchargesthatmaybepayableinconnection withthepreparation, issueanddeliveryofstockcertificates underthisSection4inthenameofLILCOoritsdesignee.
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| 5.REPRESENTATIONS ANDWARRANTIES OFTHECOMPANY.TheCompany'represents andwarrantstoLILCOthat(a)exceptassetforthinSection4.1oftheBrooklynUnionDisclosure C-2 0Schedule, theCompanyisacorporation dulyorganized, v'alidlyexisting'andin activestatusunderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement and,subjecttoobtaining theapplicable approvalofshareholders oftheCompanyfortherepurchase ofCompanySharespursuanttoSection7(a)belowundercircumstances whereSection513(e)oftheNYBCLwouldbeapplicable (the"BUYBACKAPPROVALS"
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| )andsubjecttoanyregulatory approvals referredtohereinandtotheprovisions ofSection513(a)oftheNYBCL,ifapplicable, tocarryou'titsobligations hereunder, (b)theexecution anddeliveryofthisAgreement bytheCompanyandtheconsummation bythcCompanyofthetransactions contemplated herebyhavebeendulyauthorized by'allnecessary corporate actiononthepartoftheCompanyand.noothercorporate proceedings onthepartoftheCompanyarenecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby(otherthananyrequiredBuybackApprovals),
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| (c)suchcorporate action(including theapprovaloftheBoardofDirectors oftheCompany)isintendedtorenderinapplicable tothisAgreement andtheExchangeAgreement andthetransactions
| |
| 'contemplated herebyandthereby,theprovisions oftheNYBCLreferredtoinSection4.15oftheExchangeAgreement, (d)thisAgreement.has beendulyexecutedanddelivered bytheCompany,constitutes avalid,andbindingobligation oftheCompanyand,assumingthisAgreement constitutes avalidandbindingobligation ofLILCO,isenforceable againsttheCompanyinaccordance withitsterms,(e)thcCompanyhastakenallnecessary corporate actiontoauthorize andreserveforissuanceandtopermitittoissue,uponexerciseoftheCompanyOption,andatalltimesfromthedatehereofthroughtheexpiration oftheCompanyOptionwillhavereserved, 9,948,682 authorized andunissuedCompanyShares,suchamountbeingsubjecttoadjustment asprovidedinSection10,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, (f)upondeliveryoftheCompany,SharestoLILCOupontheexerciseoftheCompanyOption,LILCOwillacquiretheCompanySharesfreeandclearofallclaims,liens,chargeS,encumbrances andsecurityinterests ofanynaturewhatsoever, (g)exceptasdescribed inSection4.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheconsummation bytheCompanyofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinabreachofanyprovision of,orconstitute adefault(withorwithoutnoticeorlapseoftime,orboth)under,orresultinthetermination of,orAccelerate theperformance requiredby,orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthclossofamaterialbenefitunder,orthecreationofalien,pledge,securityinterestorotherencumbrance onassets(anysuchconllict, violation, default,rightoftermination, cancellation oracceleration, lossorcreation, a"VIOLATION"
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| )oftheCompanyoranyofitssubsidiaries, pursuantto,(A)anyprovision ofthecertificate ofincorporation orby-lawsoftheCompany,(B)anyprovisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,Companybenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable totheCompanyoritsproperties orassets,whichViolation, inthecaseofeachofclauses(B)and(C),couldreasonably beexpectedtohaveamaterialadverseeffecton'heCompanyanditssubsidiaries taken'asawhole,(h)exceptasdescribed inSection4.4(c)oftheExchangeAgreement orSection1(b)orSection3'hereof, theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheperformance ofthisAgreemcnt bytheCompanywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority, (i)noneoftheCompany,any'ofitsaffiliates oranyoneactingonitsortheirbehalfhasissued,soldorofferedanysecurityoftheCompany'o anypersonundercircumstances thatwouldcausetheissuanceandsaleoftheCom'panyShares,ascontemplated bythisAgreement, tobesubjecttotheregistration requirements oftheSecurities Actasineffectonthedatehereofand,assumingtherepresentations ofLILCOcontained inSection6(h)aretrueandcorrect,theissuance, saleanddeliveryofthcCompanyShareshereunder wouldbeexemptfromtheregistration andprospectus deliveryrequirements oftheSecurities Act,asineffectonthedatehereof(andtheCompanyshallnottakeanyactionwhichwould'causetheissuance, saleanddeliveryoftheCompanyShareshereunder nottobeexemptfromsuchrequirements),
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| and(j)anyLILCOSharesacquiredpursuanttothisAgrccment willbeacquiredfortheCompany's ownaccount,forinvestment purposesonlyandwillnotbeacquiredbytheCompanywithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.C-3 6.REPRESENTATIONS ANDWARRANTIES OFLILCO.LILCOrepresents andwarrantstotheCompanythat(a)LILCOisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement andtocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement byLILCOandtheconsummation byLILCOofthetransactions contemplated herebyhavebeendulyauthorized byallnecessary corporate actiononthepartofLILCOandnoothercorporate proceedings onthepartofLILCO'renecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby,(c)thisAgreement hasbeendulyexecutedanddelivered byLILCOandconstitutes avalidandbindingobligation ofLILCO,and,assumingthisAgreement constitutes avalidandbindingobligation oftheCompany,isenforceable againstLILCOinaccordance withitsterms,(d)priortoanydeliveryofLILCOSharesinconsideration ofthepurchaseofCompanyShares,pursuanthereto,LILCOwillhavetakenallnecessary corporate actiontoauthorize forissuanceand.topermitittoissuesuchLILCOShares,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, andtorenderinapplicable tothereceiptbytheCompanyoftheLILCOSharestheprovisions oftheNYBCLreferredtoinSection5.15oftheExchangeAgreement, (e)uponanydeliveryofsuchLILCOSharestotheCompanyinconsideration ofthepurchaseofCompanySharespursuanthereto,theCompanywillacquiretheLILCOSharesfreeandclearofall-claims, liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (f)exceptasdescribed inSection5.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement byLILCOdoesnot,andtheconsummation byLILCOofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinthebreachofanyprovision of,orconstitute adefault,(with orwithoutnoticeorlapseoftime,orboth)under,orresultinanyViolation byLILCOoranyofitssubsidiaries, pursuantto(A)anyprovision ofthecertificate ofincorporation orby-lawsofLILCO,(B)anyprovisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,LILCObenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable toLILCOoritsproperties orassets,whichViolation, inthecaseofeachofitsclauses(B)and/or(C),wouldhaveamaterialadverseeffectonLILCOanditssubsidiaries takenasawhole,(g)exceptasdescribed inSection5.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,theexecution and'delivery ofthisAgreement byLILCOdoesnot,andtheconsummation byLILCOofthetransactions contemplated herebywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority and(h)anyCompanySharesacquireduponexerciseoftheCompanyOptionwillbeacquiredforLILCO'sownaccount,forinvestment purposesonlyandwillnotbe,andtheCompanyOptionisnotbeing,acquiredbyLILCOwithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.7.CERTAINREPURCHASES.
| |
| (a)LILCOPUT,AttherequestofLILCObywrittennoticeatanytimeduringwhichtheCompanyOptionisexercisable pursuanttoSection2(the"REPURCHASE PERIOD"),theCompany(oranysuccessor entitythereof)shallrepurchase fromLILCOalloranyportionoftheCompanyOption,atthepricesetforthinsubparagraph (i)below,or,attherequestofLILCObywrittennoticeatanytimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate, theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),the,Company(oranysuccessor entitythereof)shallrepurchase fromLILCOalloranyportionoftheCompanySharespurchased byLILCOpursuanttotheCompanyOption,atthepricesetforthinsubparagraph (ii)below:(i)thedifference betweenthe"MARKET/OFFER PRICE"forsharesofCompanyCommonStockasofthedateLILCOgivesnoticeofitsintenttoexerciseitsrightsunderthis"Section7(definedasthehigherof(A)thepricepershareofferedasofsuchdatepursuanttoanytenderorexchangeofferorotherofferwithrespecttoaBusinessCombination whichwasmadepriortosuchdateandnotterminated or,withdrawn asofsuchdate(the"OFFERPRICE")and(B)theFairMarketValueofCompanyCommonStockasofsuchdate(the"MARKETC-4 TPRICE"))andtheExercisePrice,multiplied bythenumberofCompanySharespurchasable pursuantto'heCompanyOption(orportionthereofwithrespecttowhichLILCOisexercising itsrightsunderthisSection7),butonlyiftheMarket/Offer PriceisgreaterthantheExercisePrice;(ii)theproductof(x)thesumof(A)theExercisePricepaidbyLILCOperCompanyShareacquiredpursuanttotheCompanyOptionand(B)thedifference betweentheMarket/Offer PriceandtheExercisePrice,butonlyiftheMarket/Offer PriceisgreaterthantheExercisePrice,'and (y)thenumberofCompanySharestoberepurchased pursuanttothisSection7.Forpurposesofthisclause(ii),theOfferPriceshallbethehighestpricepershareofferedpursuanttoatenderore/changeofferorotherBusinessCombination offerduringtheRepurchase PeriodpriortothedeliverybyLILCOofanoticeofrepurchase.
| |
| h4(b)REDELIVERY OFLILCOSHARES.IfLILCO,elected topurchaseCompanySharespursuanttotheexerciseoftheCompanyOptionbytheissuanceanddeliveryofLILCOShares,thentheCompanyshall,ifsorequested byLILCO,infulfillment ofitsobligation pursuanttoclause(a)ofSection7(a)(ii)(x)
| |
| (thatis,withrespecttotheExercise.
| |
| Priceonlyandwithoutlimitation toitsobligation topayadditional consideration underclause(b)ofSection7(a)(ii)(x)),
| |
| redeliver thecertificate forsuchLILCOSharestoLILCO,freeandclearofallliens,claims,damages,chargesandencumbrances ofanykind,ornaturewhatsoever;
| |
| : provided, however,thatiflessthanalloftheCompany'Shares purcliased byLILCOpursuanttotheCompanyOptionaretoberepurchased pursuanttothisSection7,thenLILCOshallissuetotheCompanyanewcertificate representing thoseLILCOShareswhicharenotduetoberedelivered toLILCOpursuanttothisSection7astheyconstituted paymentoftheExercisePricefortheCompanySharesnotbeingrepurchased.
| |
| (c)PAYMENTANDREDELIVERY OFCOMPANYOPTIONORSHARES.IntheeventLILCOexercises itsrightsunderthisSection7,theCompanyshall,within10businessdaysthereafter, paytherequiredamounttoLILCOinimmediately available fundsandLILCOshallsurrender totheCompanytheCompanyOptionorthecertificates evidencing theCompanySharespurchased byLILCOpursuantthereto,andLILCOshallwarrantthatitownstheCompanyOptionorsuchsharesandthattheCompanyOptionorsuchsharesarethenfreeandclear'fallliens,claims,damages,chargesand'ncumbrances ofanykindornaturewhatsoever.
| |
| (d)LILCOCALL.IfLILCOhaselectedtopurchaseCompanySharespursuanttotheexerciseoftheCompanyOptionbytheissuanceanddeliveryofLILCOShares,notwithstanding thatLILCOmaynolongerholdanysuchCompanySharesorthatLILCOelectsnottoexerciseitsotherrightsunderthisSection7,LILCOmayrequire,atanytimeorfromtimetotimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999under,thecircumstances where'hedateafterwhicheitherpartymayterminate theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),theCompanytoselltoLILCOanysuchLILCOSharesattheFairMarketValuethathadbeenattributed tosuchLILCOSharespursuantto'Section4plusinterestattherateof6.5%perannumonsuchamountfromtheClosingDaterelatingtotheexchangeofsuchLILCOSharespursuanttoSection4tothe"closing dateunderthisSection7(d)lessanydividends onsuchLILCOSharespaidduringsuchperiodordeclaredandpayabletostockholders ofrecordonadateduringsuchperiod.(e)REPURCHASE PRICEREDUCEDATLILCO'SOPTION.Intheeventtherepurchase pricespecified inSection7(a)wouldsubjectthepurchaseoftheCompanyOptionortheCompanySharespurchased byLILCOpursuanttotheCompanyOptiontoa'voteoftheshareholders oftheCompanypursuanttoSection513(e)oftheNYBCL,thenLILCOmay,atifselection, reducetlierepurchase pricetoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsuchashareholder vote.8.RESTRICTIONS ONTRANSFER.
| |
| (a)RESTRICTIONS ONTRANSFER.
| |
| PriortotheExpiration Date,neitherpartyshall,directlyorindirectly, byoperation oflaworotherwise, sell,assign,pledge,orotherwise disposeofortransferC-5 any'shares'f capitalstockoftheotherpartyacquiredbysuchpartypursuanttothisAgreement
| |
| ("Restricted Shares")andbeneficially ownedbysuchparty,otherthan(i)pursuanttoSection7,or(ii)inaccordance withSection8(b)orSection9.(b)PERMEATED SALES.Following thetermination oftheExchangeAgreement, apartyshallbepermitted tosellanyRestricted Sharesbeneficially ownedbyitifsuchsaleismadepursuanttoatenderorexchangeofferthathasbeenapprovedorrecommended, orotherwise determined tobefairtoandinthebestiiiterests oftheshareholders oftheotherparty,byamajorityofthemembersoftheBoardofDirectors ofsuchotherpartywhichmajorityshallincludeamajorityofdirectors whoweredirectors priortotheannouncement ofsuchtenderorexchangeoffer.9.REGISTRATION RIGHTS.Following thetermination oftheExchangeAgreement, eachpartyhereto(a"DESIGNATED HOLDER")maybywrittennotice(the"REGISTRATION NOTICE")totheotherparty(the"REGISTRANT"
| |
| )requesttheRegistrant toregisterundertheSecurities ActalloranypartoftheRestricted Sharesbeneficially ownedbysuchDesignated Holder(the"REGISTRABLE SECURITIES"
| |
| )pursuanttoabonafidefirmcommitment underwritten publicofferinginwhichtheDesignated Holderandtheunderwriters shalleffectaswideadistribution ofsuchRegistrable Securities asisreasonably practicable andshallusetheirbesteffortstopreventanyp'erson(including anyGroup(asusedinRule13d-5undertheExchangeAct))anditsaffiliates formpurchasing throughsuchofferingRestricted Sharesrepresenting morethan1%oftheoutstanding sharesofcommonstockoftheRegistrant onafullydilutedbasis(a"PERMIT'ED OFFERING'").
| |
| TheRegistration Noticeshallincludea"certificate executedbytheDesignated Holderanditsproposedmanagingunderwriter, whichunderwriter shallbeaninvestment bankingfirmofnationally recognized standing(the"MANAGER"),
| |
| st'atingthat(i)'theyhaveagoodfaithintention tocommencepromptlyaPermitted Offeringand(ii)theManageringoodfaithbelievesthat,basedonthethenprevailing marketconditions, itwillbeabletoselltheRegistrable Securities atapersharcpriceequaltoatleast80%ofthethenFairMarketValueofsuchshares.TheRegistrant (and/oranypersondesignated bytheRegistrant) shallthereupon havetheoptionexercisable bywrittennoticedelivered~
| |
| fotheDesignated Holderwithin10businessdaysafterthereceiptoftheRegistration Notice,irrevocably to~a'greetopurcliase alloranypartofthe'Registrable Securities proposedtobesosoldforcashataprice(the"OPTIONPRICE")equaltotheproductof(i)thenumberofRegistrable Securities tobesopurchased bytheRegistrant and(ii)thethenFairMarketValueofsuchshares.AnysuchpurchaseofRegistrable Securities bytheRegistrant (oritsdesignee) hereunder shalltakeplaceataclosingtobeheldattheprincipal executive officesoftheRegistrant orattheofficesofitscounselatanyreasonable dateandtimedesignated bytheRegistrant and/orsuchdesigneeinsuchnoticewithin20businessdaysafterdeliveryofsuchnotice.Anypaymentforthesharestobepurchased shallbemadebydeliveryatthetimeofsuchclosingoftheOptionPrice'nimmediately available funds.IftheRegistrant doesnotelecttoexerciseitsoptionpursuanttothisSection9withrespecttoallRegistrable Securities, itshalluseitsbesteffortstoeffect,aspromptlyaspracticable, theregistration undertheSecurities Actoftheunpurchased Registrable Securities proposedtobesosold;provided, however,that(i)neitherpartyshallbeentitledtomorethananaggregate oftwoeffective registration statements hereunder and(ii)theRegistmnt willnotberequiredtofileanysuchregistration statement duringanyperiodoftime(nottoexceed40daysaftersuchrequestinthecaseofclause(A)belowor90daysinthecaseofclauses(B)and(C)below)when(A)theRegistrant isinpossession ofmaterialnon-public information whichitreasonably believeswouldbedetrimental tobedisclosed atsuchtimeand,intheopinionofcounseltotheRegistrant, suchinformation wouldhavetobedisclosed ifaregistration statement wercfiledatthattime;(B)theRegistrant isrequiredundertheSecurities Acttoincludeauditedfinancial statements foranyperiodinsuchregistration statement andsuchfinancial statements arenotyetavailable forinclusion insuchregistration statement; or(C)theRegistrant determines, initsreasonable
| |
| : judgment, thatsuchregistration wouldinterfere withanyfinancing, acquisition orothermaterialtransaction involving theRegistrant oranyofitsaffiliates.
| |
| TheRegistrant shalluseitsreasonable besteffortstocauseanyRegistrable Securities registered pursuanttothisSection9tobequalified forsaleunderthesecurities orBlue-Skylawsofsuchjurisdictions astheDesignated Holdermayreasonably requestandshallcontinuesuchregistration orC-6 equalification ineffect,insuchjurisdiction;
| |
| : provided, however,that,theRegistrant shallnotberequiredtoqualifytodobusiness.
| |
| in,orconsenttogeneralserviceofprocessin,anyjurisdiction byreasonof'thisprovision.
| |
| Theregistration rightssetforthinthisSection9aresubjecttotliecondition thattheDesignated HoldershallprovidetheRegistrant withsuchinformation withrespecttosuchholder'sRegistrable Securities, theplansforthedistribution thereof,andsuchotherinformation withrespecttosuchholderas,inthereasonable judgmentofcounselfortheRegistrant, isnecessary toenablethcRegistrant toincludeinsuchregistration statement allmaterialfactsrequiredtobedisclosed withrespecttoaregistration thereunder.
| |
| Aregistration effectedunderthisSection9shallbeeffectedattheRegistrant's expense,exceptforunderwriting discounts andcommissions andthefeesandtheexpensesofcounseltotheDcsignatcd Holder,andthcRegistrant shallprovidetotheunderwriters suchdocumentation (including certificates, opinionsof'oun'seland"comfort" lettersfromauditorsasarecustomary inconnection withunderwritten publicofferings assuchunderwriters'may reasonably require.Inconnection withanysuchregistration, thepartiesagree(i).toindemnify eachotlierandtheunderwriters inthecustomary manner,(ii)toenterintoanunderwriting agreement informandsubstance customary fortransactions ofsuchtypewiththcManagerand.theotherunderwriters participating insuchofferingand(iii)totakeallfurther'a'ctions whichshallbereasonably necessary'to effectsuchregistration andsale(including, iftheManagerdeemsitnecessary, participating inroad-show presentations).
| |
| TheRegistrant shallbeentitledtoinclude(atitsexpense)additioiial sharesofitscommonstockinaregistration effectedpursuanttothisSection9onlyifandtotheextenttheManagerdetermines thatsuchinclusion willnotadversely affecttheprospects ofsuccessofsuchoffering.
| |
| 10.ADJUSTMENT UPONCHANGESINCAPITALIZATION.
| |
| Withoutlimitation toanyrestriction ontheCompanycontained inthisAgreement orintheExchangeAgreement, intheeventofanytchangeinCompanyCommonStockbyreasonofstockdividends,
| |
| : splitups, mergers(otherthanthcBindingSliareExchanges),
| |
| recapitalizations, combinations, exchangeofsharesorthelike,thetypeandnumberofsharesorsecurities subjecttotheCompany'ption, andthepurchasepricepersharcprovidedinSectionI,shallbeadjustedappropriately torestoretoLILCOitsrightshercundcr, including therighttopurchasefromthcCompany(oritssuccessors) sharesofCompanyCommonStockrepresenting 19.9%oftheOutstanding CompanyCommonStockfortheaggregate ExercisePricecalculated asofthedateofthisAgrccment asprov'idcd inSection1.11.RESTRICTIVE LEGENDS.Eachcertificate representing sharesofCompanyCommonStockissuedtoLILCOhereunder, andLILCOShares,ifany,delivered totheCompanyataClosing,shallincludealegendinsubstantially thefollowing form:THE'ECURITIES REPRESENTED BYTHISCERTIFICATE HAVENOTBEENREGISTERED UNDERfHESECURITIES ACTOF1933,ASAMENDED,ANDMAYBEREOFFERED ORSOLDONLYIFSOREGISTERED OR,IFANEXEMPTION FROMSUCHREGISTRATION ISAVAILABLE.
| |
| SUCHSECURITIES AREALSOSUBJECTTOADDITIONAL RESTRICTIONS ONTRANSFERASSETFORTHINTHEAMENDEDANDRESTATEDSTOCKOPTIONAGREEMENT, DATEDASOFJUNE16,1997,A'OPYOFWHICHMAYBEOBTAINEDFROMTHEISSUERUPONREQUEST.Itisunderstood andagreedthat:(i)thereference totheresalerestrictions oftheSecurities Actintheabovelegendshallberemovedbydeliveryofsubstitute certificates(s) withoutsuchreference ifLILCOortheCompany,asthccasemaybe,shallhavedelivered totheotherpartyacopyofaletterfromthestaffoftheSecurities andExchangeCommission, oranopinionofcounsel,inforinandsubstance satisfactory totheotherparty,totheeffectthatsuchlegendisnotrequiredforpurposesoftheSecurities Act;(ii)thereference totheprovisions tothisAgreement intheabovelegendshallberemovedbydeliveryofsubstitute certificat(s) withoutsuchreference iftheshareshavebeensoldortransferred incompliance withtheprovisions ofthisAgreement andundercircumstances thatdonot'equire theretention ofsuchreference; C-7 and(iii)thelegendshallberemovedinitsentiretyiftheconditions inthepreceding clauses(i)and(ii)are'othsatisfied.
| |
| Inaddition, suchcertificates shallbearanyotherlegendasmayberequiredbylaw.Certificates representing sharessoldinaregistered publicofferingpursuanttoSection9shallnotberequiredtobearthelegendsetforthinSection11.12.BINDINGEFFECT;NOASSIGNMENT; NOTHIRDPARTYBENEFICIARIES.
| |
| ThisAgreement shallbebindinguponandinuretothebenefitofthepartiesheretoandtheirrespective successors andpermitted assigns,Exceptasexpressly providedforinthisAgreement, neitherthisAgreement northerightsortheobligations ofeitherpartyheretoareassignable, exceptbyoperation oflaw,orwiththewritten,consentofthe.otherparty.Nothingcontained inthisAgreement, expressorimplied,isintendedtoconferuponanypersonotherthanthepartiesheretoandtheirrespective permitted assignsanyrightsorremediesofanynaturewhatsoever byreasonofthisAgreement.
| |
| AnyRestricted Sharessoldbyapartyincompliance withtheprovisions ofSection9shall,uponconsummation ofsuchsale,befreeoftherestrictions imposedwithrespecttosuchsharesbythisAgreement, unlessanduntilsuchpartyshallrepurchase orotherwise becomethebeneficial ownerof'suchshares,andanytransferee ofsuchsharesshallnotbeentitledtotheregistration rightsofsuchparty.h13.SPECIFICPERFORMANCE.
| |
| The,partiesrecognize andagreethatifforanyreasonany,oftheprovisions ofthisAgreement arenotperformed inaccordance withtheirspecifictermsorareotherwise
| |
| : breached, iinmediate andirreparable harmorinjurywouldbecausedforwhichmoneydamageswouldnotbeanadequateremedy.Accordingly, eachpartyagreesthat,inadditiontootherremedies, theotherpartyshallbe'entitled toaninjunction restraining anyviolation orthreatened violation oftheprovisions ofthisAgreement.'In theeventthatanyactionshouldbebroughtinequitytoenforcetheprovisions oftheAgreement, neitherpartywillallege,andeachpartyherebywaivesthedefense,thatthereisadequateremedyatlaw.14.ENTIREAGREEMENT.
| |
| ThisAgreement, theLILCOStockOptionAgreement, theConfidentiality Agreement andtheExchangeAgreement (including theexhibitsandschedules thereto)constitute theentireagreement amongthepartieswithrespecttothesubjectmatterhereofandthereofandsupersede allotherprioragreements andunderstandings, bothwrittenandoral,amongthepartiesoranyofthemwithrespecttothesubjectmatterhereofandthereof.'5.FURTHERASSURANCES.
| |
| Eachpartywillexecuteanddeliverallsuchfurtherdocuments andinstruments andtakeallsuchfurtheractionasmaybenecessary inordertoconsummate thetransactions contemplated hereby.16.VALIDITY.
| |
| Theinvalidity orunenforceability ofanyprovisions ofthisAgreement shallnotaffectthevalidityorenforceability oftheotherprovisions ofthisAgreement,,which shallremaminfullforceandeffect.Intheeventanycourtorothercompetent authority holdsanyprovisions ofthisAgreement tobenull,voidorunenforceable, thepartiesheretoshallnegotiate ingoodfaiththeexecution anddeliveryofanamendment tothisAgreement inorder,asnearlyaspossible, toeffectuate, totheextentpermitted bylaw,theintentofthepartiesheretowithrespecttosuchprovision'and theeconomiceffectsthereof.Ifforanyreasonanysuchcourtorregulatory agencydetermines thatLILCOisnotpermitted toacquire,ortheCompanyisnotpermitted torepurchase pursuanttoSection7,thefullnumber'fsharesofCompanyCommoriStockprovidedinSection1hereof(asthesamemaybeadjusted),
| |
| itistheexpressintention oftheCompanytoallowLILCOtoacquireortorequiretheCompanytorepurchase suchlessernumberofsharesasmaybepermissible, withoutanyamendment ormodification hereof.Eachpartyagreesthat,shouldanycourtorothercompetent authority holdanyprovision ofthisAgreement or'arthereoftobenull,voidorunenforceable, ororderanypartytotakeanyactioninconsistent
| |
| : herewith, ornottakeanyactionrequiredherein,theotherpartyshallnotbeentitledtospecificperformance ofsuchprovision orparthereofortoanyotherremedy,including butnotlimitedtomoneydamages,forbreachhereoforofanyotherprovision ofthisAgreement orparthereofastheresultofsuchholdingororder.17.NOTICES.All'notices andothercommunication hereunder shallbeinwritingandshallbedeemedgivenif(i)delivered personally, or(ii)sentbyreputable overnight courierservice,orC-8 (iii)telecopied,(which isconfirmed),
| |
| or(iv)fivedaysafterbeingmailedbyregistered or,certified mail(returnreceiptrequested) tothepartiesatthefollowing addresses (oratsuchotheraddressforapartyasshallbe.specified bylikenotice):A.IftoLILCO,to:LongIslandLightingCompany175EastOldCountyRoadHicksville~
| |
| NewYork11801Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Attention:,
| |
| ThomasE.Constance B.IftotheCompany,to:ThcBrooklynUnionGasCompanyOneMetroTech CenterBrooklyn, NewYork11201-3850 Atrenrion:
| |
| ChiefExecutive Officerwithacopyto:Wachtell, Lipton,Rosen&Kate51West52ndStreetNewYork,NewYork10019Attention:
| |
| SethA.Kaplan18.GOVERNING LAW;CHOICEOFFORUM.ThisAgreement shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable toagreements madeandtobeperformed entirelywithinsuchStateandwithoutregardtoitschoiceoflawprinciples.
| |
| Eachofthepartieshereto(a)conscntstosubmititselftothepersonaljurisdiction ofanyfederalcourtlocatedintheStateofNewYorkoranyNewYorkstatecourtintheeventanydisputearisesoutofthisAgreemcnt oranyofthetransactions contemplated bythisagreement, (b)agreesthatitwillnotattempttodenyordefeatsuchpersonaljurisdiction bymotionorotherrequestforleavefromanysuchcourtand(c)agreesthatitwillnotbringanyactionrelatingtothisAgreement oranyofthetransactions contemplated bythisAgreement inanycourtotherthanafederalcourtsittingintheStateofNewYorkoraNewYorkstatecourt.19.INTERPRETATION.
| |
| Whenareference ismadeinthisAgreement toaSectionsuchreference shallbetoaSectionofthisAgreement unlessotherwise indicated.
| |
| Wheneverthewords"include",
| |
| "includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
| |
| Thedescriptive headingshereinareinsertedforconvenience ofreference onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
| |
| 20.COUNTERPARTS.'his Agreement maybeexecutedintwocounterparts, eachofwhichshallbedeemedtobeanoriginal, butbothofwhich,takentogether, shallconstitute oneandthesameinstrument.
| |
| 21.EXPENSES.
| |
| Exceptasotherwise expressly providedhereinorintheExchangeAgreement, allcostsandexpensesincurredinconnection withthetransactions contemplated bythisAgreement shallbepaidbythepartyincurring suchexpenses.
| |
| 22.AMENDMENTS; WAIVER.ThisAgreement maybeamendedbythepartiesheretoandthetermsandconditions hereofmaybewaivedonlybyaninstrument inwritingsignedonbehalfofeachofthepartieshereto,or,inthecaseofawaiver,byaninstrument signedonbehalfofthepartywaivingcompliance.
| |
| C-9 23.EXTENSION OFTIMEPERIODS.ThetimeperiodsforexerciseofcertainrightsunderSections2,6and7shallbeextended:
| |
| (i)totheextentnecessary toobtainallregulatory approvals fortheexerciseofsuchrights,andfortheexpiration ofallstatutory waitingperiods;and(ii)totheextentnecessary toavoidanyliability underSection16(b)oftheExchangeActbyreasonofsuchexercise.
| |
| 24.REPLACEMENT OFCOMPANYOPTION.UponreceiptbytheCompanyofevidencereasonably satisfactory toitoftheloss,theft,destruction ormutilation ofthisAgreement, and(inthecaseofloss,theftordestruction) ofreasonably satisfactory indemnification, anduponsurrender and.cancellation
| |
| ~ofthisAgreement, ifmutilated, theCompanywillexecuteanddeliveranewAgreement ofliketenoranddate.C-10 eINWITNESSWHEREOF,thepartiesheretohavecausedthisAgreement tobeexecutedbytheirrespective dulyauthorized officersasofthedatefirstabovewritten.LONGISLANDLIGHTINGCOMPANY/S/WILLIAMJ.CATACOSINOS Name:Dr.WilliamJ.Catacosinos Title:ChiefExecutive OfficerTHEBROOKLYNUNIONGASCOMPANYBy:/s/RQBERTB.CATELLName:RobertB.CatellTitle:ChiefExecutive Officer
| |
| [THISPAGEINTE<NTIONALLY LEFTBLANK]
| |
| eANNEXDAGREEMENT ANDPLANOFMERGERbyandamongBLHOLDINGCORP.,LONGISLANDLIGHTINGCOMPANY,LONGISLANDPOWERAUTHORITY ANDLIPAACQUISITION CORP.DatedasofJune26,1997
| |
| [THISPAGEINTENTIONALLY LEM~'LANK]
| |
| eSection1.1Section1.2Section1.3Section1.4Section1.5Section1.6Section1.7Section1.8Section1.9Section1.10Section1.11Section2.1Section2.2Section2.3Section3.1Section4.1Sect)on4.2Section4.3Section4.4Section4.5Section4.6Section4.7Section4.8Section4.9Section4.10Section4.11Section4.12Section4.13Section5.1Section5.2Section5.3Section5.4Scctton5.5Section6.1Section6.2TABLEOFCONTENTSARTICLEITHEMERGER;RELATEDTRANSACTIONS TheMergerEffectoftheMergerEffective TimeoftheMerger.RelatedTransactions Description ofAssetsLiabilities
| |
| .Transition WorkResignations Formation ofLIPASub.CharterAmendment
| |
| .CertainOtherPreferred Stock.ARTICLEIITREATMENT OFSHARESEffectofthcMergeronCapitalStockDissenting SharesIssuanceofParentSharesARTICLEIIICLOSINGClosingARTICLEIVREPRESENTATIONS ANDWARRANTIES OFPARENTOrganization andQualification Subsidiaries Capitalization
| |
| .Authority; Non-Contravention; Statutory Approvals; Compliance ReportsandFinancial Statements AbsenceofCertainChangesorEvents.Litigation Registration Statement andProxyStatement.
| |
| Environmental Protection Regulation asaUtilityVoteRequireInsura'nce Disclosure
| |
| .ARTICLEVREPRESENTATIONS ANDWARRANTIES OFAUTHORITY ANDLIPASUBOrganization Authority; Non-Contravention; Statutory Approvals; Compliance Disclosu're
| |
| .Ownership ofLIPASub;NoPriorActivities
| |
| .Ownership ofCompanyCommonStock.ARTICLEVICOVENANTS Covenants ofParentandCompany.Covenants ofAuthority andLIPASub ARTICLEVIIADDITIONAL AGREEMENTS Section7.1Section7.2Section7.3~Section7.4Section7.5Section7.6Section7.7Section7.8Section7.9,Section7.10Section7.11Section7.12Section7.13Section7.14AccesstoInformation ProxyStatement andRegistration Statement.
| |
| Shareholder Approval.Disclosure Schedule.....
| |
| Regulatory MattersPublicAnnouncements.
| |
| Confidentiality CertainLitigation ExpensesFurtherAssurances PurchasePriceAllocation
| |
| .ReceiptofConsentsandApprovals
| |
| ........CertainOtherMatters.OpinionsofCounsel.Section8.1Section8.2Section8.3ARTICLEVIIICONDITIONS Conditions toEachParty'sObligations Conditions toObligations ofAuthority andLIPASubConditions toObligations ofParentandCompany.Section9.1Section9.2Section9.3Section9.4Section9.5ARTICLEIXTERMINATION ANDAMENDMENT Termination
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| .EffectofTermination.
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| SurvivalAmendment Extension; WaiverARTICLEEXSTANDSTILL Section10.1Standstill Section11.1Section11.2Section11.3Section11.4Section11.5Section11.6Section11.7Section11.8Section11.9Section11.10ARTICLEXIMISCELLANEOUS CertainDefinitions Notices.Descriptive Headings.Counterparts
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| .................
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| EntireAgreement; Assignment
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| .Governing Law.SpecificPerformance
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| ..........
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| PartiesinInterestSeverability
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| .Alternative DisputeResolution
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| .
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| ScheduleBScheduleCScheduleDScheduleEScheduleFScheduleGTransferred AssetsPrinciples andProcedures forFinalizing theTransferred AssetScheduleTransition WorkTaxMattersEmployment MattersFutureRightsRetainedAssetsExhibitAExhibitBExhibitCExhibitDExhibitEExhibitFExhibitGExhibitHFormofManagement ServicesAgreement FormofPowerSupplyAgreement FormofEnergyManagement Agreement FormofGeneration PurchaseRightAgreement GuarantyAgreement FormofParentLiabilities Undertaking FormofAuthority Liabilities Undertaking FormofCertificate ofDesignation
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| AGREEMENT ANDPLANOFMERGER(the"Agreement"),
| |
| datedasofJune26,1997,byandamongBLHOLDINGCORP.,acorporation tobeforinedasaNewYorkcorporation as'ontemplated herein("Parent"),LONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation
| |
| ("Company"),LONGISLANDPOWER'AUTHORITY, acorporate municipal instrumentality andpolitical subdivision oftheStateofNewYork("Authority"
| |
| ),andLIPAACQUISITION CORP.,aNewYorkcorporation
| |
| ("LIPASub").WITNESSETH tWHEREAS,Authority isauthorized undertheLongIslandPowerAuthority Act,PublicAuthorities LawSection1020etseq.(the"Act")toacquireall,oranypartofCompany's securities orassets;andWHEREAS,theActconfersuponAuthority thepowertocondemnthesecurities and/orassetsofCompany,including thecommonstockofCompanytobeacquiredintheproposedtransaction, andAuthority haspreviously.
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| publiclyannounced itsintention toconsiderexercising itscondemnation powertoacquirethecommonstockorassetsofCompanyifanegotiated transaction cannotbeachieved; andWHEREAS,TheBrooklynUnionGasCompany,aNewYorkcorporation
| |
| ("BU"),CompanyandParenthaveenteredintoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJune26,1997(the"Exchange Agreement"
| |
| ),whichprovidesforthe,businesscombination ofBUandCompanyaspeerfirmsandtheformation ofParentasaholdingcompanytomanagetheircombinedbusinesses; andWHEREAS,Authority, CompanyandBUhaveundertaken negotiations astovariousmethodsofaccomplishing theobjectives setforthintheActandinconnection withsuchnegotiations, thepartieshavereacheddefinitive agreeinent astothetransactions described herein;andWHEREAS,theBoardsofDirectors ofCompanyandLIPASubandtheBoardofTrusteesofAuthority haveeachdeterinined thatitisadvisable forAuthority tocauseLIPASub'omergewithandintoCompanyupontheterms'and subjecttotheconditions, setforthherein;andWHEREAS,infurtherance ofsuch'combination, theBoardsofDirectors ofCompanyandLIPASubandtheBoardofTrusteesofAuthority haveeachapprovedthemerger(the"Merger")ofLIPASubwithandintoCompany,inaccordance withtheapplicable provisions oftheNewYorkBusinessCorporation Law(the"NYBCL"),
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| anduponthetermsandsubjecttotheconditions setforthherein;NOW,THEREFORE, inconsideration oftheforegoing andtherespective representations, warranties, covenants, agreements, andconditions contained herein,andintending tobelegallyboundhereby,thepartiesagreeasfollows:ARTICLEITHEMERGER)RELATEDTRANSACTIONS Section1.1TheMerger.Upontheferinsandsubjecttotheconditions ofthisAgreement, attheEffective Time(asdefinedinSection1.3),LIPASubshallbemergedwithandintoCompany(the"Merger")inaccordance withthelawsoftheStateofNewYork.Companyshallbethesurviving corporation intheMergerandshallcontinueitscorporate existence underthelawsoftheStateofNewYork.Companyasthesurviving corporation aftertheMergerishereinafter sometimes referredtoasthe"Surviving Corporation."
| |
| Section1.2E~jj'ectoftheMerger.AttheEffective Time,(i)thecertificate ofincorporation oftheCompany,asineffectimmediately priortotheEffective Time,shallbethecertilicate ofincorporation oftheSurviving Corporation untilthereafter amendedasprovidedbylawandinsuchcertificate ofincorporation and(ii)thebylawsofCompany,asirieffectimmediately priortotheEffective Time,shallbetheby-lawsoftheSurviving Corporation untilthereafter amendedasprovidedbylaw,inthecertificate ofincorporation oftheSurviving Corporation andinsuchby-laws.Subjecttotheforegoing, theadditional effectsoftheMergershallbeasprovidedintheapplicable provisions oftheNYBCL.D-1 Section1.3Effective TimeoftlieMerger.Aspromptlyaspracticable afterthesatisfaction orwaiveroftheconditions setforthinArticleVIIIandtheconsummation ofthetransactions contemplated by,Section1.4(d),thepartiesheretoshallcausetheMergertobeconsummated byfilingacertificate ofmergerascontemplated bythe.NYBCL(the"Certificate ofMerger"),togetherwithanyrequiredrelatedcertificates, withtheSecretary ofStateoftheStateofNewYork,insuchformasrequiredby,andexecutedinaccordance withtherelevantprovisions of,theNYBCL(thetimeofsuchfilingbeingthe"Effective Time").Section1.4RelatedTransactions.
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| InadditiontotheMerger,thefollowing transactions willbeconsummated atorpriortotheClosing(asdefinedbelow):(a)Formation ofSubsidiaries.
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| ParentandCompanyshalltakeallnecessary actiontoformpriortotheClosingsuchsubsidiaries (whichmaybelimitedliability companies) ofParent(the"Transferee Subsidiaries"
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| )which,atthedirection ofParent,will;asapplicable, (i)enterintoattheClosingamanagement servicesagreement intheformofExhibitAattached.
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| hereto(the"Management ServicesAgreement"
| |
| ),apowersupplyagreement intheformofExhibitBattachedhereto(the"PowerSupplyAgreement"
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| ),anenergymanagement agreement intheformofExhibitCattachedhereto(the"EnergyManagement Agreement"
| |
| ),ageneration purchaserightagreement intheformofExhibitDattachedhereto(the"Generation Purcliase RightAgreement"
| |
| )andaguarantyagreement intheformofExhibitEattachedhereto(the"Guaranty Agreement"
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| )and/or(ii)receivetheassetsandproperties ofCompanysetforthonScheduleAattachedhereto(the"Transferred Assets").Parent,uponwrittennoticetothepartieshereto,maydirectanyportionoftheTransferred Assetstobedistributed toaparticular Transferee Subsidiary;
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| : provided, however,thattheTransferee Subsidiary whichisdesignated byParenttoreceivetheassetscontemplated bytheGeneration PurchaseRightAgreement tobesubjecttoCompany's rightsthereunder shallbetheTransferee Subsidiary thatentersinto,theGeneration PurchaseRightAgreement.
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| (b)Companyshall,reasonably priortotheanticipated ClosingPate,formanewNewYorkcorporation toactasParenthereunder andtoown,directlyorindirectly, allofthestockorotherequityinterests oftheTransferee Subsidiaries, shallprovideAuthority andLIPASubwithwrittennoticeofsuchformation andshallcausesuchnewcorporation toexecuteanddeliveracounterpart hereof,whereupon suchnewcorporation shallbecomeParentforallpurposeshereofandeachotherBasicAgreement (ashereinafter defined).
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| (c)Companywillusereasonable effortstotransfertoawholly-owned subsidiary ofCompanyitsownership interestintheNineMilePointTwoNuclearPowerPlantanditsinterestinallrelatednuclearfuelandnucleardecommissioning trustfunds("NineMile"),butCompany's failuretoobtainanyrequiredconsenttheretoofanygovernmental agencyorotherownerofanyinterestthereinshallnotconstitute abreachofthisAgreement.
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| (d)(i)Immediately priortotheEffective Time,CompanyshalltransfertheTransferred AssetstotheTransferee Subsidiaries inexchangefor,andParentshalldelivertoCompany,(i)theDesignated Number(ashereinafter defined)ofsharesofthecommonstock,parvalue$0.01pershare,ofParent("ParentCommonStock")and(ii)upto$75,000,090 faceamountofParentpreferred stockinanaggregate faceamountandhavingtherightsandtermstobespecified inanoticedelivered byParenttoeachpartyheretonotlaterthanthedateonwhichthenoticesofredemption areissuedpursuanttoSection1.11(the"NewParentPreferred Stock").The"Designated Number"shallbethenumberofsharesofParentCommonStockspecified inanoticedelivered byParenttoeachpartyheretonotlaterthanthedateonwhichsuchnoticesofredemption areissuedpursuanttoSection1.11andrepresenting Parent'sgoodfaithestimateofthenetfairmarketvalueoftheTransferred AssetslessthefaceamountofNewParentPreferred Stockdelivered byParetitpursuanttothisSection1.4(d).Concurrently withsuchdeliveryandimmediately priortotheEffective Time,Companyshallsellforcashinaprivateplacement allsharesofNewParentPreferred Stocktooneormorepersonsorentitieswhicharenototherwise shareholders ofCompanyorBUattlieEffective Time.(ii)Notwithstanding clause(i)ofthisSection1.4(d),iftheBUGLILCOTransactions (as.defined,inSection2.1(b))havebeenconsummated priortotheEffective Time,thetransferoftheTransferred Assetsascontemplated bysuchclause(i)shallbemadewithoutthedeliverybyParentofanyParentCommonStockorNewParentPreferred Stock.D-2 Section1.5Description ofAssets.TotheextentthatScheduleAhereto(the"Transferred AssetSchedule"
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| )doesnotprovideforafulllegaldescription oftheTransferred Assetsreferredtotherein,thepartiesheretoshallrevisetheTransferred AssetSchedulepriortothe,Closinginaccordance withthe'principles andprocedures setforthonScheduleBattachedhereto.Section1.6Liabilities (a)AttheClosing,ParentandeachTransferee Subsidiary willexecuteanddelivertoAuthority andSurviving Corporation aliabilities undertaking andindemnification agreement insubstantially theformofExhibitFattachedhereto(the"ParentLiabilities Undertaking"
| |
| ).(b)AttheClosing,theAuthority andtheSurviving Corporation willexecuteanddelivertoParentandeachtransferee Subsidiary aliabilities undertaking andindemnification agreement insubstantially theformofExhibitGattachedhereto(the"Authority Liabilities Undertaking"
| |
| ).Section1.7Transition 1Vork.Thepartiesagreeto'taketherespective actionssetforthonScheduleCattachedheretotoprepareforanorderlytransition undertheBasicAgreements attheEffective Time.Section1.8Resignations.
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| ParentshallcauseeachofficeranddirectorofCompanytoresignfromeachpositionanysuchpersonthenholdswithCompany,effective attheEffective Time.Section1.9Formation ofLIPASub.Reasonably priortotheanticipated ClosingDate,authority shallcauseLIPASubtobedulyincorporated asaNewYorkcorporation andshallcauseLIPASubtoexecuteacounterpart ofthisAgreement.
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| Eachrepresentation andwarrantysetforthinArticleVwithrespecttoLIPASubshallbedeemedtohavebeenmadeonthedateofsuchexecution.
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| Section1.10CharterAtnendntent:
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| Authority shallcausetheAmendedandRestatedCertificate ofIncorporation of,Companytobeamendedascontemplated intherequestforarulingfromtheInternalRevenueServicewithrespecttoSection115oftheInternalRevenueCodeof1986,asamended(the"Code"),notlaterthanthetenthbusinessdayaftertheEffective Time.Section1.11CertainOtherPreferred Stock.Promptlyafterallconditions totheClosingsetforthinArticleVIIIhavebeensatisfied orwaivedinaccordance therewith (otherthanSection8.1(b),providedCompanyhas'received-assurances satisfactory toCompanythatsuchcondition canbesatisfied),
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| Companyshallissuenoticesofredemption foralloutstanding sharesofCompanyPreferred Stock(asdefinedinSection4.3)(otherthantheSeriesAAPreferred Stockandtheotherseriesthereofspecifically referredtoinSection2.1(c)(iii))
| |
| andshallpayallamountsdueinrespectofsuchredemption aspromptlyaspracticable inaccordance withtheapplicable termsofCompany's AmendedandRestatedCertificate ofIncorporation.
| |
| ARTICLEIITREATMENT OFSHARE<SESection2.1EffectoftheMergeronCapitalStockAttheEffective Time,byvirtueoftheMergerand~withoutanyactiononthepartofanyholderofanycapitalstockofParent,CompanyorLIPASub:(a)Cancellation ofCertainStock.(i)EachshareofCompanyCommonStockandeachshareofCompanyPreferred StockthatisownedbyCompanyastreasurystock,andeachshareofCompanyPreferred StockownedbyanydirectorindirectwhollyownedSubsidiary (asdefinedinSection4.1)ofParentimmediately priortotheEffective Timeshall,byvirtueoftheMergerandwithoutanyactiononthepartoftheholderthereof,ceasetobeoutstanding, becancelled andretiredwithoutpaymentofanyconsideration thereforandceasetoexist.(ii)EachshareofthecommonstockofLIPASub,byvirtueoftheMergerandwithoutanyactiononthepartoftheholderthereof,shallbecancelled andconverted intotherighttoreceiveonefullypaidand,subjecttoSection630oftheNYBCL,non-assessable shareofcommonstockoftheSurviving Corporation.
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| D-3 (b)Treat>>ie>>t ofCompanyConvnonStock.(i)Eachissuedandoutstanding shareofCompanyCommonStock,otherthansharescancelled pursuanttoSection2.1(a)andCompanyDissenting Shares(asdefinedinSection,2.2),
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| shallbecancelled andconverted intotherighttoreceive(x)anamountofcashequaltotheCashPurchasePrice(asdefinedinSection2.1(d)(i))
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| dividedbythenumberofsharesofCompanyCommonStockoutstanding ontheClosingDate(the"CommonStockConversion Amount")and(y)anumberofsharesofParentCommonStock(the"Transferred AssetsStock'Portion")
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| equalto"thenumberofsharesofParentCommonStockreceivedbyCompanypursuanttoclause(i)ofSection1.4(d)dividedbythenumberofsharesofCompanyCommonStockoutstanding ontheClosingDate.EachholderofanysuchshareofCompanyCommonStockshallbedeemedherebytohaveappointed theExchangeAgent(asdefinedinSection2.3(a))asitsagenttosubscribe forsharesofParentCommonStockbyapplyingtheaggregate CommonStockConversion Amountforsuchpurchase.
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| Thenumberofsharesof'Parent CommonStocktobepurchased fortheCommon.StockConversion Amountshallbe(x)0.880sharesofParentCommonStocklesstheTransferred AssetsStockPortionifthetransactions contemplated bytheExchangeAgreement (the"BUGLILCO Transactions"
| |
| )willbeconsummated contemporaneously withthetransactions contemplated herebyor(y)oneshareofParentCommonStocklesstheTransferred AssetsStockPortioniftheBUGLILCOTransactions willnotbeconsummated contemporaneously withthetransactions contemplated hereby.Uponsuchcancellation, allsuchsharesofCompanyCommonStockshallceasetoexist,andeachholderofacertificate formerlyrepresenting anysuchsharesshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceiveParentCommonStockpurchased pursuanttothesecondsentenceofthisSection2.1(b)anddistributed pursuanttoclause(y)ofthefirstsentenceofthisSection2.1(b).(ii)Notwithstanding clause(i)ofthisSection2.1(b),iftheBUGLILCOTransactions, havebeenconsummated priortotheEffective Time,eachissuedandoutstanding sliareofCompanyCommonStock,shallbecancelled andconverted intotherighttoreceiveonlyanamountofcashequaltotheCommonStockConversion Amountandthetransactions contemplated bythesecon'dandthirdsentences ofsuchclause(i)shallnotoccur.(c)Treat>>rent ofCoaipanyPreferred Stock.(i)Eachiss'uedandoutstanding shareofSeriesAAPreferred Stockotherthansharescancelled pursuanttoSection2.1(a)andCompanyDissenting Sharesshallbecancelled andconverted intotherighttoreceiveonefullypaidand,subjecttoSection630oftheNYBCL,non-assessable shareofpreferred stock,parvalue$25pershare,ofParent("ParentPreferred Stock")withidentical rights(including dividendrates)anddesignations.to theSeriesAAPreferred Stock,assetforthintheCertificate ofDesignation attachedheretoasExhibitH.Uponsuchconversion, eachho[derofacertificate formerlyrepresenting anysharesofSeriesAAPreferred Stockshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceivethesharesofParentPreferred Stockinconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSection2.3.(ii)Eachissuedandoutstanding shareofCompanyPreferred Stockthatissubjecttooptionalredemption byCompanyatorbeforetheClosingDate(otherthansharescancelled pursuanttoSection2.1(a)(collectively, "Redeemable Preferred Stock.")shallbecalledforredemption byCompanyasprovidedinSection1.11andallsuchsharesshallberedeemedforcashbyCompanyinaccordance withthetermsapplicable tosuchshares.Theaggregate amountofaccruedbutunpaiddividends andredemption premiumspayablebyCompanyinrespectofsuchredemptions (the"Aggregate Redemption Premium")shallbepaidbyParenttoCompanynotlaterthantwobusinessdayspriortothedatetlieapplicable redemption priceispayable.(iii)Eachissuedandoutstanding shaieofCompanyPreferred Stock(otherthansharescancelled pursuanttoSection2.1(a),CompanyDissenting Shares,sharesofSeriesAAPreferred St'ockandRedeemable Preferred Stock)(collectively,,"Nonredeemable Preferred Stock")shallbecancelled andconverted intotherighttoreceivecashintheamountofthesumof(x)theMake-Whole Aniount(ashereinafter defined)and(y)accruedbutunpaiddividends inrespectofsuchsharethroughtheClosingDate.Asusedherein,"Make-Whole Amount"withrespecttoeachshareofNonredeemable Preferred Stockmeansanamount,equaltothepresentvalueof(A)thefaceorliquidation preference amount,whichever isapplicable, ofsuchshareand(B)theremaining dividendpaymentsdueonsuchsharebetweentheClosingD-4 DateandtheearliestdateonwhichCompanymayredeemsuchshare,computedusingadiscountrateequaltotheapplicable FairMarketRatedividedby0.95."FairMarketRate"isdefinedastheGenericGeneralObligation FairMarketYieldforBaaratedLow/Medium CouponGeneralMunicipal Obligations atthetimeofthecomputation asreportedonBloomberg, with'amaturitymostnearlyequaltotheperiodbetweencancellation andfinalredemption ofsuchseriesofNon-redeemable Preferred Stock.Theperiodbetween-cancellation andredemption referstotheperiodbetweentheClosingDatean'd:(A)August1,2002,withrespecttotheSe'riesCCPreferred Stock,(B)March1,1999,withrespecttotheSeriesGGPreferred Stock,I'C)May1,2001,withrespecttotheSeriesQQPreferred Stock,and(D)October16,2018,withrespecttotheSeriesUUPreferred Stock.Theamountbywhich'heaggregate amountpayablepursuanttothisSection2.1(c)(iii) exceeds'00fo oftheaggregate faceorliquidation preference amounts,whichever isapplicable, forallsharesofNonredeemable Preferred StockshallbepaidbyParent:totheSurviving Corporation attheEffective Time.(d)CashPiirchase Price;Adjusrinenr.
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| (i)The,,"Cash PurchasePrice"tobepaidbyAuthority shallbe$2,497,500,000.
| |
| (ii)TheCashPurchasePricehasbeendetermined baseduponthenetbookvalueoftheRetainedAssets(asdefinedinSection4.4(b))of$2,500,800,000 assetforthinthe,proformaconsolidated balancesheetofCompanyasofDecember31,1997preparedbyCompany(the"ProFormaBalanceSheet").TheCashPurchasePriceisbasedupontheassumption thatthetotallong-term indebtedness ofCompanyontheClosingDateshallnotexceed$3,576,000,000 (the"Retained DebtAmount").TheRetain'ed DebtAmountshallbeadjustedinaccordance withtheadjustment referredtoinSection2.1(d)(vi).(the"Adjustment").
| |
| (iii)Nolaterthan60daysaftertheClosingDate,ParentshallprepareanddelivertoAuthority, withacopytoAuthority's independent accountants, PriceWaterhouse LLP("PriceWaterhouse"),
| |
| theauditedconsolidated balancesheetofCompanyasoftheClosingDate(the"ClosingDateBalanceSheet")andastatement, asoftheClosingDate(the"Statement"
| |
| ),settingforththeainountoftheAdjustment andthecalculations thereofinreasonable detailandshowingthedifferences betweeneachaccountcontained intheProFormaBalanceSheetandthecorresponding accountintheClosingDateBalanceSheet.TheClosingDateBalanceSheetandtheStatement shallbepreparedinaccordance withgenerally acceptedaccounting principles usedbyCompanyinthepreparation ofitsfinancial statements fortheyearendedDecember31,1996("GAAP"),
| |
| usingallocation procedures consistent withtheprocedures usedbyCompanytopreparetheProFormaBalanceSheetanditsauditedhistorical financial statements.
| |
| DuringtheperiodrequiredtopreparetheClosingDateBalanceSheet,Surviving Corporation.
| |
| willmakeavailable thebooksandrecordsofSurviving Corporation toParent,itsauthorized representatives andParent.'s independent
| |
| : auditors, Ernst&Young("E&Y.").
| |
| (iv)Duringthe60-dayperiodfollowing receiptbyAuthority oftheClosingDateBalanceSheetandtheStatement, Parentshallmakeavailable andshalldirectE&Ytomakeavailable toAuthority andPriceWaterhouse copiesoftheworkingpapers,booksandrecordsusedinthepreparation oftheClosingDateBalanceSheetandtheStatement, asreasonably requested byAutliority.
| |
| TheClosingDateBalanceSheetandtheStatement shallbecomefinalandbindinguponthepartiesatthecloseofbusinessonthesixtiethdayfollowing receiptthereofbyAuthority, excepttothe.extentthatAuthority giveswrittennoticeofitsdisagreement withtheClosingDateBalanceSheetortheStatement
| |
| ("NoticeofDisagreement"
| |
| )toParentpriortosuchdate,orifsuchdayisnotabusinessday,thenextfollowing businessday.AnyNoticeofDisagreement shallspecifyinreasonable detailthenatureofanydisagreement soasserted.
| |
| (v)Duringthe30-dayperiodfollowing thedeliveryofaNoticeofDisagreement, ParentandAuthority shallseekingoodfaithtoresolveinwritinganydifferences whichtheymayhavewithrespecttothemattersspecified
| |
| 'mtheNoticeofDisagreement.
| |
| Duringsuchperiod,'Parent andE&YshallhaveaccesstotheworkingpapersofPriceWaterhouse preparedinconnection withtheiranalysisofanymatterspecified intheNoticeofDisagreement, asreasonably requested byParent,andAuthority andPriceWaterhouse shallhaveaccesstotheworkingpapersofE&Ypreparedinconnection withtheClosingDateBalanceSheetandtheStatement, asre'asonably requested byAuthority.
| |
| Attheendofsuch30-dayperiod,ParentandAuthority D-5 shallsubmittoanindependent accounting firm(the"Accounting Firm")forreviewandresolution ofanyandallmatterswhichremainindisputeandwhichwereincludedintheNoticeofDisagreement.
| |
| TheAccounting FirmshallbeKPMGPeatMarwickor,ifsuchfirmisunableorunwilling toact,suchothernationally recognized independent publicaccounting firmasshallbeagreeduponbyParentandAuthority inwriting.IfParentandAuthority donotagreeontheselection ofanationally recognized independent accounting firm,PriceWaterhouse andE&Yshallselectathirdaccounting firmtoactastheAccounting Firmhereunder.
| |
| TheAdjustment asdetermined byParent,asmodified(ifatall)byresolution ofParentandAuthority orbytheAccounting Firm,isreferredtohereinasthe"FinalAdjustment."
| |
| Thedetermination oftheAccounting Firmastosuchmattersshallbefinalandbindingonthepartieshereto,andParentandAuthority agreethatjudgmentmaybeentereduponthedetermination oftheAccounting Firminanycourthavingjurisdiction overthepartyagainstwhichsuchdetermination istobeenforced.
| |
| ThefeesandexpensesoftheAccounting FirmincurredpursuanttothisSection2.1(d)(v) shallbebornebyParentandAuthority ininverseproportion astheymayprevailonmattersre'solved bytheAccounting Firm,whichproportionate allocations shallalsobedetermined bytheAccounting Firmatthetimethedetermination oftheAccounting
| |
| ~Firmisrenderedonthemeritsofthematterssubmitted.
| |
| Thefeesanddisbursements ofE&Yincurredinconnection withtheircertification oftheClosingDateBalanceSheetandtheStatement andreviewofanyNoticeofDisagreement shallbebornebyParentandthefeesanddisbursements ofPriceWaterhouse incurredinconnection withtheirreviewoftheClosingDateBalanceSheet,andtheStatement shallbebornebySurviving Corporation orAuthority.
| |
| "(vi)TheRetainedDebtAmountshallbe(A)increased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsexceeds$2,500,800,000 or(B)decreased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsislessthan$2,500,800,000.
| |
| (vii)TheTransferred AssetsshallincludeallcashheldbyCompanyatthe'Closing exceptforthenetproceedsofthesaleofNewParentPreferred Stock.Theaccountspayable'retained byCompanyimmediately following theClosingshallbe$101.7millionplusorminustheNewParentPreferred StockAdjustment ashereinafter defined.TotheextentthattheamountofsuchnetproceedsfromthesaleoftheNewParentPreferred Stockismore(the"Excess")orlessthan$75million(the"Shortfall"
| |
| )theaccountspayableretainedbytheCompanyimmediately following.
| |
| theClosingshallbeincreased ordecreased bytheamountoftheExcessorShortfall, respectively, (the"NewParentPreferred StockAgreement"
| |
| ).(e)RetainedDebt.,AttheClosing,ParentshallexecuteanddeliverandshallcauseeachTransferee Subsidiary toexecuteanddeliver,toCompanysuchpromissory notesasshallhaveanaggregate principal amountequaltotheexcess,ifany,of(i)theindebtedness ofCompanyoutstanding ontheClosingDate(the"ClosingDateDebtAmount")over(ii)theRetainedDebtAmountandasshallhavesuchratesandmaturities (including, withoutlimitation, accelerated maturities resulting fromdefaultandvoluntary andmandatory prepayments) asshallcorrespond, toeachportionofdebtunderlying theindebtedness ofCompanyontheClosingDate(the"Promissory Notes");provided, however,thatsuchinterestandprincipal paymentdatesshallbeadjustedtorequirepaymentbyParent,30dayspriortothecorresponding paymentdatesontheunderlying debt,ofanamountwhich,including amountsassuredtobeearnedbyAuthority whilesuchfundsareheldbyit,willbesufficient tomakethecorresponding payments.
| |
| Theaggregate excessprincipal amountshallbeallocated toeachPromissory Noteonaproratabasissuchthattheratioof(x)theprincipal amountofeachPromissory Noteto(y)theaggregate excessprincipal amountshallcorrespond totheratioof(A)theprincipal amountofthecorresponding underlying portionofdebtto(B)theClosingDateDebtAmount.TheClosingDateDebtAmountshall,forthepurposeofcalculating theaggregate principal amountofsuchPromissory Notes,betheamountsetforthinacertificate signedbytheChiefFinancial OfficerofCompanyanddelivered toParentandAuthority ontheClosingDate.SuchamountshallbereviewedbyE&Yinaccordance withSection2.1(d)(iii) andtheactualamountthereofshallbesetforthintheStatement.
| |
| TheactualamountshallbesubjecttoreviewbyPriceWaterhouse, inaccordance with'theprocedures setforthinSection2.1(d)(iv),
| |
| withanydisagreements beingresolvedinaccordance withtheprocedures setforthinSection2.1(d)(v).
| |
| Uponthe.finaldetermination ofsuchamount,thePromissory Notes-shallbeadjustedonaproratabasistoreflecttheprincipal amountsodetermined.
| |
| D-6 (f)CreditRating.(i)If,atanytimewhenanyPromissory Notesareoutstanding, aMaterialDeclineinParent'sCreditStanding(asdefinedbelow)occurs,then,within10daysaftersuchoccurrence, Parentshallprovidecreditenhancement ofthePromissory Noteshereunder atitssolecostandexpenseintheformofaletterofcreditsecuringthePromissory Noteshereunder inafaceamountequaltotheaggregate outstanding balancesofthePromissory Notes,issuedbyafinancial institution whoselong-term seniordebtisorwouldberated"A",orbetterbyatleasttwonationally recognized ratingservices.
| |
| (ii)ForpurposesofthisSection,a"Material DeclineinParent'sCreditStanding" shallbedeemedto"haveoccurredif(1)Parenthaslong-term seniordebtoutstanding whichisratedbyanationally-recognized ratingserviceandParent'slong-term seniordebtoutstanding isnotratedat'least"A"bytwoormo'esuchratingservices, or(2).inthesolereasonable opinionoftheAuthority, intheeventthatParentdoesnothavelong-term seniordebtoutstanding orsuchdebtisnotratedbyatleasttwonationally recognized ratingservices, orthecreditstandingofParentdeclinestoalevelwhichisinsufficient tosupportatleastan"A'"creditratingbytwoormorenationally recognized ratingservices, whetherornotanysuchdebtisoutstanding.
| |
| Parentshallimmediately notifytheAuthority ofanyMaterialDeclinein,Parent's CreditStanding.
| |
| (iii)Upontheoccurrence ofaMaterialDeclineinParent'sCreditStanding, Parentshallhavetherighttoeconomically defeasethePromissory Notes,bydelivering toAuthority U.S.treasurysecurities ofsuchmaturities,and insuchprincipal amountsasshallbesufficient, asreasonably determined byAuthority, to,producecashatthetimesandintheamountsrequiredtopayallamountsdueinrespectoftheindebtedness underlying thePromissory Notes.(g)Treatment ofDebtatClosing.(i)Thepartiesshallcooperate witheachothertoeffectrefinancings, repayments, amendments ofCompany's outstanding indebtedness andotherrelatedtransactions withtheintention ofminimizing theaggregate principal amountofthePromissory Notesandmaximizing theamountofCompany's tax-exempt indebtedness attheEffective Time.t(ii)NopartyshallberequiredbythisSection2.1(g)toeffectanytransaction thatitreasonably detertnines tobefinancially adversetoitby'comparison tothetransactions contemplated bySection2.'1(e).(h)Assumption ofCertainDebt.Subjecttoobtaining allrequiredconsents, ParentwillassumeatClosing(i)the7.3%Debentures dueJuly15,1999,withanapproxiniate aggregate principal amountcurrently outstanding of$397millionand(ii)the8.20%Debentures dueMarch15,2023,withanapproximate aggregate principal amountcurrently outstanding of$270million.Certainothertaxexemptauthority financing noteswillbeidentified bythepartiesandassumedbyParent(subjecttoobtaining allrequiredconsentsandtotheparties'ax counsel's concurrence).
| |
| (i)AccountsReceivable andAccruedUnbilledRevenues.
| |
| Parentwillbeentitledto/responsible foranyover/undercollection inexcessof$500,000oftheretainedcustomeraccountsreceivable andaccruedunbilledrevenuesontheClosingDateBalanceSheet.PriortotheClosingDate,thepartieswilldevelopamutuallyagreeduponmethodology thatwillmeasuresuchcollections.
| |
| Section2.2Dissenting Shares.SharesofCommonStock,SeriesAAPreferred StockorNonredeemable Preferred Stockheldbyanyholderentitledtoreliefasadissenting shareholder underSection910oftheNYBCL(the"CompanyDissenting Shares")shallnotbecometherighttoreceivetheCommonStockConversion Amountincash(inthecaseofanysuchshareofCompanyCommonStock),ParentPreferred Stock(inthecaseofanysuchshareofSeriesAAPreferred Stock)oranycashamountpayablepursuanttoSection2.1(c)(iii)
| |
| (inthecaseofanysuchshareofNonredeemable Preferred Stock),butshallbecancelled andconverted intosuchconsideration asmaybeduewithrespecttosuchsharespursuanttotheapplicable pro'visions oftheNYBCL,unlessanduntiltherightofsuchholdertorec'eivefaircashvalueforsuchCompanyDissenting Sharesterminates inaccordance withSection623oftheNYBCL.Ifsuchrightisterminated otherwise thanbythepurchaseofsuchsharesbyCompanyorLIPASub,thensuchsharesshallceasetobeCompanyDissenting Sharesandshallrepresent therighttoreceivetheCommonStockConversion Amountincash(inthecaseoftanysuchshareofCompanyCommonStock),ParentPreferred Stock(inthecaseofanysuchshareofSeriesAAPreferred Stock)oranycashamountpayablepursuanttoSection2.1(c)(iii)
| |
| (inthecaseofanysuch'hare ofNonredeemable Preferred Stock).D-7 Section2.3IssuanceofParentShares.~,(a)DepositwithExchangeAgent.Assoonaspracticable aftertheEffective Time,Parentshalldepositwithsuchbank'ortrustcorn'pany asshallhavebe'enmutuallyagreeable toCompanyandAuthority priortotheEffective Time(the"Exchange Agent"),certificates representing ParentSharesrequiredtoeffecttheissuances referredtoinSection2.1(b)andSection2.1(c)(i).
| |
| IfCompanyandAuthority shallnothaveagreedontheExchangeAgentpriortotheEffective Time,thebankortrustcompanythenservingasregistrar andtransfer"agentfortheSeriesAAPreferred StockshallbeselectedtoactasExchangeAgentfortheSeriesAAPreferred Stock.ThesharesofParentCommonStocksubscribed forbytheExchangeAgentasagentfortheholdersofCompanyCommonStockpursuanttoSection2.1(b)andthesharesofParentCommonStockconstituting theTransferred AssetsStockPortion,togetherwiththesharesofParentPreferred StockforwhichthesharesofSeriesAAPreferred Stockaretobeexchanged pursuanttoSection2.1(c)(i),
| |
| arereferredtohereincollectively asthe"ParentShares."(b)Procedures forIssuanceofParentShares.Assoonaspracticable aftertheEffective Time,theExchange"'Agent shallmailtoeachholderofrecordofacertificate orcertificates
| |
| '(the."Certificates"
| |
| )whichimmediately priortotheEffective Timerepresented outstanding sharesofSeriesAAPreferred StockorCompanyCommonStock,asapplicable (the"Cancelled Shares")thatwerecancelled andbecameinstead,directlyorindirectly, therighttoreceivetheapplicable ParentShares,(i)aletteroftransmittal (whichshallspecifythatdeliveryshallbeeffected, andriskoflossandtitletotheCertificates shallpass,'only uponactualdeliveryoftheCertificates totheExchangeAgent)and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates representing ParentShares.Uponsurrender ofaCertificate totheExchangeAgentforcancellation (ortosuchotheragentoragentsasmaybeappointed byagreement ofCompanyandAuthority),
| |
| togetherwithadulyexecutedletteroftransmittal andsuchotherdocuments astheExchangeAgentshallrequire,theholderofsuchCertificate shallbeentitledtoreceiveacertificate representing thatnumberofParentShareswhichsuchholderhastherighttoreceivepursuanttotheprovisions ofthisArticleII.Intheeventofatransferofownership ofCancelled Shareswhichisnotregistered inthetransferrecordsofCompanyacertificate representing thepropernumberofParentSharesmaybeissuedtoatransferee iftheCertificate representing suchCancelled Sharesispresented totheExchangeAgent,accompanied byalldocuments requiredtoevidenceandeffectsuchtransferandbyevidencesatisfactory totheExchangeAgentthatanyapplicable stocktransfertaxeshavebeenpaid.Untilsurrendered ascontemplated bythisSection2.3,eachCertificate shallbedeemedatanytimeaftertheEffective Timetorepresent onlytherighttoreceiveuponsuchsurrender thecertificate representing ParentSharesascontemplated bythisSection2.3.(c)Distributiotts withrespecttoUnsurrendered Shares.Nodividends orotherdistributions declaredormadeaftertheEffective TimeivithrespecttotheParentShareswitharecorddateaftertheEffective Timeshallbepaidtotheholderofanyunsurrendered Certificate withrespecttotheParentSharesrepresented therebyuntiltheholderofrecordofsuchCertificate shallsurrender suchCertificate.
| |
| Subjecttotheeffectofunclaimed
| |
| : property, escheatandotlierapplicable laws,following surrender ofanysuchCertificate, thereshallbepaidtotherecordholderofthecertificates representing ParentSharesissuedinconsideration
| |
| : therefor, withoutinterest, (i)atthetimeofsuchsurrender, theamountofdividends orotherdistributions witharecorddateaftertheEffective Timetheretofore paidwithrespecttosuchParentSharesand(ii)attheappropriate paymentdate,theamountofdividehds orotherdistributions witharecorddateaftertheEffective Timebutpriortosurrender andapaymentdatesubsequent tosurrender payablewithres'pecttosuchParentShares.(d)ClosingofTransferBoo~.FromandaftertheEffective Time,thestocktransferbookoftheCompanyshallbeclosedandnotransferofanycapitalstockoftheCompanyshallthereafter bemade.If,aftertheEffective Time,Certificates arepresented totheCompany,they.sliall becancelled andexchanged forcertificates representing theappropriate numberofParentShares,asprovidedinthisSection2.3,(e)Termination ofExchangeAgent.Anycertificates representing ParentSharesdeposited withtheExchangeAgentpursuanttoSection2.3(a)andnotexchanged withinoneyearafter'hcEffective TimepursuanttothisSection2.3shallbereturnedbytheExchangeAgenttoParent,whichshallthereafter actasExchangeAgent:Parentshallnotbeliabletoanypersonforsuchsharesdelivered toapublicofficialpursuanttoanyapplicable abandoned
| |
| : property, escheatorsimilarlaw.D-8 ARTICLE<IIICLOSINGSection3.1Closing.Uponthetcrtnsandsubjecttotheconditions ofthisAgreement, theconsummation ofthetransactions contemplated bythisAgreement (the"Closing"
| |
| )willtakeplaceonthesecondbusinessdayfollowing theredemption ofallseriesofCompanyPreferred Stockcontemplated toberedeemedpursuanttoSection1.11at10:00a.m.,atsuchplaceonLongIslandorothertimeasshallbeagreeduponbytheparties.ThedateonwhichtheClosingoccursisreferredtohereinasthe"ClosingDate."ARTICLEIVREPRESE<NTATIONS ANDWARRANTIES OFPARENTANDCOMPANYEachofParentandCompanyherebyrepresents andwarrantstoAuthority andLIPASubasfollows:Section4.1Organization andQualification.
| |
| Exceptascontemplated bySection1.4,assetforthinSection4.1oftheParentDisclosure Schedule(asdefinedinSection7.4),eachofParentCompany andeachoftheCompanySubsidiaries (asdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,.leased andoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, (a)theterm"Subsidiary" ofapersonshallmeananycorporation orotherentity(including partnerships, limitedliability companies andotherbusinessassociations) ofwhichatleastamajorityoftheoutstanding capitalstockorothervotingsecurities havingvotingpowerunderordinarycircumstances toelectdirectors orsimilarmembersofthegoverning bodyofsuchcorporation, orentityshallatthetimebeheld,directlyorindirectly, bysuchpersonand(b)theterm"CompanySubsidiary" shallmeanaSubsidiary ofCompany.Section4.2Subsidiaries.
| |
| Section4.2oftheParentDisclosure Schedulesetsforthadescription asofthedatehereofofallCompanySubsidiaries andJointVenturesofCompany("CompanyJointVentures"
| |
| ),including (a)thenameofeachsuchentityandCompany's interesttherein,and(b)abriefdescription oftheprincipal lineorlinesofbusinessconducted byeachsuchentity.ExceptassetforthinSection4.2oftheParentDisclosure
| |
| : Schedule, noneofCompanySubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutilitycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or2(a)(11)ofthePublicUtilityHoldingCompanyActof1935(the"1935Act"),respectively.
| |
| ExceptassetforthinSection4.2oftheParentDisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofCompanyandofeachCompanySubsidiary arevalidlyissued,fullypaid,nonassessable andfreeofpreemptive rights,and,asoftheClosingDate,willbeowneddirectlyorindirectly byParentfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, cliargesandoptionsofanynaturewhatsoever andtherearenooutstanding subscriptions; options,calls,contracts, voting,trusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating anysuchCompanySubsidiary toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofitscapitalstockorobligating ittogrant,extendorenterintoanysuchagreement orcommitment.
| |
| AsusedinthisAgreement, (a)theterm"JointVenture"ofapersonshallmeananycorporation orotherentity(including partnerships andotherbusinessassociations) thatisnotaSubsidiary ofsuchperson,inwhichsuchpersonoroneormoreofitsSubsidiaries ownsanequityinterestand(b)theterm"CompanyJointVenture"-shall meanthoseofthejointventuresofCompanyoranyCompanySubsidiary identified asaCompanyJointVentureinSection4.2oftheParentDisclosure Schedule.
| |
| Section4.3Capitalization.
| |
| Theauthorized capitalstockofCompanyisassetforthintheTransition ReportonFortn10-Qforthetransition period'from January1,1997toMarch31,1997.Thenumberofissuedandoutstanding sharesofcommonstock,parvalue$5pershare,ofCompany("CompanyCommonStock")D-9 andpreferred stockofCompany(the"CompanyPreferred Stock"),andeachseriesthereof,asofDecember31,1996,areassetforthinCompany's AnnualReportonForm10kfortheyearendedDecember31,1996,andCompanyhasneitherissued,sold,redeemedorrepurchased anysharesofCompanyPreferred StocksinceDecember31,1996.Alloftheissuedandoutstanding sharesofthecapitalstockofCompanyarevalidlyissued,fullypaid,nonassessable (subjecttoSection630oftheNYBCL)andfreeofpreemptive rights.ExceptassetforthinSection4.3oftheParentDisclosure
| |
| : Schedule, asofthedatehereof,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesor'thercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexcha'nge underanyoutstanding
| |
| : security, instrument orotheragreement, obligating Parent,CompanyoranyoftheCompanySubsidiaries toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofthecapitalstockofCompany,orobligating Parenttogrant,extendorenterintoanysuchagreement
| |
| 'orcommitment.
| |
| Therearenooutstanding stockappreciation rightsofCompanywhichwerenotgrantedintandemwitharelatedstockoptionandnooutstanding limitedstockappreciation rightsorotherrightstoredeemforcashoptionsorwarrantsofCompany.hSection4.4Authority; Non-Contravention; Stattttory Approvals; Compliance.
| |
| (a)Authonty.
| |
| EachofParent'andCompanyhasallrequisite powerandauthority toenterintoeachofthisAgreement, theManagement ServicesAgreement, thePowerSupplyAgreement, theEnergyManagement Agreement, theGeneration PurchaseRightAgreement, theGuarantyAgreement, theParentLiabilities Undertaking, theAuthority'iabilities Undertaking andthePromissory Notes(collectively, the"BasicAgreements"
| |
| )towhichitisaparty,and,subjecttotheParentRequiredStatutory Approvals (asdefinedinSection4.4(c)),toconsummate thetransactions contemplated herebyandthereby.Eachoftheapplicable Transferee Subsidiaries will,attheEffective Time,haveallrequisite powerandauthority toenterintoeachoftheBasicAgreements towhichitisaparty,and,subjecttotheParentRequiredStatutory Approvals, toconsummate thetransactions contemplated thereby.Theexecution anddeliveryofeachoftheBasicAgreements towhichParentorCompanyisapartyandtheconsummation byParentandCompanyofthetransactions contemplated herebyandtherebyhavebeendulyauthorized byallnecessary corporate actiononthepartofParentandCompany,otherthantheCompanyShareholder Approval(asdefinedinSection4.11).Theexecution and'delivery ofeachoftlieBasicAgreements towhichtheapplicable Transferee Subsidiaries areapartyandtheconsummation ofthetransactions contemplated therebywill,attheEffective Time,bedulyauthorized byallnecessary corporate actiononthepartofsuchTransferee Subsidiaries.
| |
| ThisAgreement hasbeendulyandvalidlyexecutedanddelivered byParentandCompanyand,assumingthedueauthorization, execution anddeliveryhereofbytheothersignatories hereto(otherthanLIPASub),constitutes thevalidandbindingobligation ofParentandCompany,enforceable againsteachoftheminaccordance withitsterms.(b)Non-Contravention.
| |
| ExceptassetforthinSection4.4(b)oftheParentDisclosure
| |
| : Schedule, theexecution anddeliveryofthisAgreement byParentandCompanyandeachoftheotherBasicAgreements towhichParentorCompanyisapartydoesnot,andtheconsummation ofthetransactions contemplated herebyandtherebywillnot,inanymaterialrespect,violate,conflictwith,orresultinamaterialbreachofanyprovision of,orconstitute amaterialdefault(withorwithoutnoticeorlapseoftimeorboth)under,orresultinthetermination ormodification of,oraccelerate theperformance requiredby,orresultina'rightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orresultinthecreationofanymateriallien,securityinterest, chargeorencumbrance uponanyoftheproperties orassetscontemplated herebytobeownedattheEffective Time(x)byCompanyor(y)byanyCompanySubsidiary orCompanyJointVenturesnotconstituting aportionoftheTransferred, Assets(collectively, andasdescribed inScheduleG,the"Retained Assets")(anysuchviolation,
| |
| : conflict, breach,default,rightoftermination, modification, cancellation oracceleration, lossorcreation, a"Violation" withrespecttoParent,CompanyoranyCompanySubsidiaries, suchtermwhenusedinArticleVhavingacorrelative meaningwithrespecttoAuthority andLIPASub)pursuanttoanyprovisions of(i)thecertificate ofincorporation, by-lawsorsimilargoverning documents ofParent,CompanyoranyoftheCompanySubsidiaries ortheCompanyJointVentures, (ii)subjecttoobtaining theParentRequiredStatutory Approvals andthereceiptoftheCompanyShareholder
| |
| : Approval, anystatute,law,ordinance, rule,regulation,
| |
| : judgment, decree,order,injunction,"
| |
| writ,permitorlicenseofanyGovernmental Authority (asdefinedinSection4.4(c))applicable toParentorCompanyoranyoftheCompanySubsidiaries or
| |
| 'the'Company JointVenturesoranyRetainedAssetor(iii)subjecttoobtaining thethird-party consentssetforthinSection4.4(b)oftheParentDisclosure Schedule(the"ParentRequiredConsents"),
| |
| anymaterialnote,bond,mortgage, indenture, deedoftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation'or agreement ofanykindtowhichParentorCompanyoranyoftheCompanySubsidiaries ortheCompanyJointVenturesisapartyorbywhichanyRetainedAssetmaybeboundoraffected.
| |
| (c)Statutory Approvals.
| |
| Nodeclaration, filingorregistration with,ornoticetoorauthorization, consentorapprov'al of,anycourt,federal,state,localorforeigngovernmental orregulatory body(including astockexchangeorotherself-regulatory body)orauthority (eacha"Governmental Authority"
| |
| )isnecessary fortheexecution anddeliveryofthisAgreement byParentandCompanyandeachoftheotherBasicAgreements towhichParent,CompanyoraTransferee Subsidiary isapartyortheconsummation byParent,CompanyandtheTransferee Subsidiaries ofthetransactions contemplated herebyandthereby,exceptasdescribed inSection4.4(c)oftheParentDisclosure Schedule(the"ParentRequiredStatutory Approvals,"
| |
| itbeingunderstood thatreferences inthisAgreement toi'obtaining" suchParentRequiredStatutory Approvals shallmeanmakingsuchdeclarations, filingsorregistrations; givingsuchnotices;obtaining suchauthorizations, consentsorapprovals; andhavingsuchwaitingperiods'expire asarenecessary toavoidaviolation oflaw).(d)Compliance.
| |
| ExceptassetforthinSection4.4(d)orSection4.9oftheParentDisclosure
| |
| : Schedule, ScheduleD(TaxMatters)orScheduleE(Employment Matters)hereto,orasdisclosed intheParentSECReports(asdefinedinSection4.5)filedpriortothedatehereof(i)neitherParent,CompanynoranyoftheCompanySubsidiaries nor,totheknowledge ofParentorCompany,anyCompanyJointVentureis,withrespecttoanyRetainedAsset,inmaterialviolation of,is,withrespecttoanyRetainedAsset,underinvestigation withrespecttoanymaterialviolation of,or,withrespecttoanyRetainedAsset,hasbeengivennoticeorbeenchargedwithanymaterialviolation of,anylaw,statute,order,rule,regulation, ordinance orjudgment(including,-without limitation, anyapplicable Environmental Law,ordinance orregulation) ofanyGovernmental Authority, and(ii)(otherthanascoveredunderclause(i)ofthisSection4.4(d))neitherCompanynoranyoftheCompanySubsidiaries nor,totheknowledge ofParentorCompany,anyCompanyJointVenture,isinmaterialviolation of,is.underinvestigation withrespecttoanymaterialviolation of,orhasbeengivennoticeorbeenchargedwithanyniaterial violation of,anylaw,statute,order,rule,regulation, ordinance orjudgment(including, withoutlimitation, anyapplicable Environmental Law,ordinance orregulation) ofanyGovernmental Authority.
| |
| ExceptassetforthinSection4.4(d)oftheParentDisclosure ScheduleorinSection4.9oftheParentDisclosure
| |
| : Schedule, CompanyandtheCompanySubsidiaries andCompanyJointVentureshaveallpermits,licenses, franchises andothergovernmental authorizations, consentsandapprovals necessary toconducttheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection4.4(d)oftheParentDisclosure
| |
| : Schedule, CompanyandeachoftheCompanySubsidiaries isnotinmaterialbreachorviolation oforinniaterial defaultintheperformance orobser'vance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseoftimeoractionbyathirdparty,couldresultinamaterialdefaultunder,(i)itscertificate ofincorporation orby-lawsor(ii)anymaterialcontract, commitment,,agreement, indenture,
| |
| : mortgage, loanagreement,'note, lease,bond,license,approvalorotherinstrument towhichitisapartyorbywhichitisboundortowhichanyRetainedAssetissubject.Section4.5ReportsandFinancial Statentents.
| |
| ThefilingsrequiredtobemadebyParent,CompanyandtheCompanySubsidiaries sinceJanuary1,1994undertheSecurities Actof1933(the"Securities Act"),theSecurities ExchangeActof1934(the"Exchange Act"),the1935Act,theFederalPowerAct,theAtomicEnergyActandapplicable statelawsandregulations havebeenfiledwiththeSecurities andExchangeCommission (the"SEC"),theFederalEnergyRegulatory Commission
| |
| ("FERC"),
| |
| theNuclearRegulatory Commission ortheappropriate statepublicutilities commission, asthecasemaybe,including allforms,statements, reports,agreements (oralorwritten)andalldocuments,
| |
| : exhibits, amendments andsupplements appertaining thereto,andcomplied, asoftheirrespective dates,inallmaterialrespects, withallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| ParentorCompanyhasmadeavailable toAuthority orLIPASubatrueandcompletecopyofeachrcport,schedule, registration statement anddefinitive" proxystatement filedbyParentorCompanywiththeSECsinceJanuary1,1994(assuchdocuments havesincethetimeoftheirfilingbeenamended,the"ParentSECReports").Asoftheirrespective dates,the ParentSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheyweremade,notmisleading.
| |
| Theauditedconsolidated financial statements andunaudited interimfinancial statements ofCompanyincludedintheParentSECReportshavebeenpreparedinaccordance withGAAP(exceptasmaybeindicated thereinorinthenotestheretoandexceptwithrespecttounaudited statements aspermitted byForm10-QoftheSEC)andfairlypresentthefinancial positionofCompanyasofthedatesthereofandtheresultsofitsoperations andcashflowsfortheperiodsthenended,subject,inthecaseoftheunaudited interimfinancial statements, tonormal,recurring auditadjustments.
| |
| True,accurateandcompletecopiesoftherespective certificates ofincorporation andby-lawsofParentandCompany,asineffectonthedatehereof,areincluded(orincorporated byreference) intheParentSECReports.Section4.6AbsenceofCertainChangesorEvents.Exceptasdisclosed intheParentSECReportsfiledpriortothedatehereoforassetforthinSection4.6oftheParentDisclosure
| |
| : Schedule, sinceDecember31,1995,Parent,CompanyandeachoftheCompanySubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhaveor,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectontheRetainedAssetsortheproperties,
| |
| : business, operations, financial condition orprospects ofthebusinessrelatingtotheRetainedAssetstakenasawholeoramaterialadversedeclineinthe'electric ratesavingsprojections presented totheAuthority atitsJune16,1997meetingtoberealizedaftertheClosing(a"Material AdverseEffect").Section4.7Litigation.
| |
| Exceptasdisclosed intheParentSECReportsfiledpriortothedatehereoforassetforthinSection4.7orSection4.9oftheParentDisclosure
| |
| : Schedule, (i)therearenomaterialclaims,suits,actionsorproceedings, pendingor,totheknowledge ofParentandCompany,threatened, norarethere,totheknowledge ofParentandCompany,anymaterialinvestigations orreviewspendingorthreatened against,relatingto'oraffecting CompanyoranyoftheCompanySubsidiaries, (ii)therehavenotbeenanysignificant developments sinceDecember31,1996withrespecttosuchdisclosed claims,suits,actions,proceedings, investigations orreviewsand(iii)therearenomaterialjudgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality orauthority oranyarbitrator applicable toCompanyoranyoftheCompanySubsidiaries.
| |
| Section4.8Registration Statement andProxyStatement.
| |
| Noneoftheinformation suppliedortobesuppliedbyoronbehalfofCompanyforinclusion orincorporation byreference inthe-proxy statement, indefinitive form,relatingtothemeetingoftheCompanyshareholders tobeheldinconnection withtheMerger(the"ProxyStatement"
| |
| )will,atthedatemailedtoshareholders andatthe.timeofthemeetingofshareholders tobeheldinconnection withtheMerger,containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary inordertomakethestatements therein,inlightofthecircumstances underwhichtheyaremade,notmisleading.
| |
| TheProxyStatement willcomplyastoforminallmaterialrespectswiththeprovisions oftheSecurities ActandtheExchangeActandtherulesandregulations thereunder.
| |
| Section4.9Enviromnental Protection.
| |
| ExceptassetforthinSection4.9oftheParentDisclosure ScheduleorintheParentSECReportsfile'dpriortothedatehereof:(a)Compliance.
| |
| Theoperation andactivities oftheCompanyandeachoftheCompanySubsidiaries are,andhavebeen,inmaterialcompliance withallEnvironmental Laws(asdefinedinSection4.9(g)(ii))
| |
| applicable totheRetainedAssets;andneitherParent,CoinpanynoranyoftheCompanySubsidiaries hasreceivedanycommunication (writtenororal),froinanypersonorGovernmental Authority thatallegesthatCompanyoranyoftheCompanySubsidiaries isnotinsuchcompliance withapplicable Environmental Laws.(b)Environ>nental Pern>its.
| |
| CompanyandeachoftheCompanySubsidiaries hasobtainedorhasappliedforallmaterialenvironmental healthandsafetypermits.and allothergovernmental
| |
| : licenses, permits,andauthorizations (collectively, the="Environmental Permits")necessary fortheconstruction offacilities constituting partoftheRetainedAssetsortheownership oroperation ofsuchfacilities orRetainedAsset,andallsuchEnvironmental Permitsareingoodstanding.
| |
| or,whereapplicable, arenewalapplication hasbeentimely filedandispendingagencyapproval, andCompanyandtheCompanySubsidiaries areinmaterialcompliance withalltertnsandconditions oftheEnvironmental Permits.(c)Environmenral Ciaine.ThereisnomaterialEnvironmental Claim(asdefinedinSection4.9(g)(i))
| |
| pending(i)againstCompanyoranyoftheCompanySubsidiaries orCompanyJointVentures, (ii)tothebestknowledge ofParentandCompany,against,anypersonorentitywhoseliability foranyEnvironmental ClaimCompanyoranyoftheCompanySubsidiaries has'ormayhaveretainedorassumedeithercontractually orbyoperation oflaw,or(iii)againstanyrealorpersonalpropertyoroperations whichCompanyoranyoftheCompanySubsidiaries ownsorformerlyownedor,tothebestknowledge ofParentandCompany,anyrealorpersonalpropertyoroperations whichCompanyoranyoftheCompanySubsidiaries leasesormanagesorformerlyleasedormanaged,ineachcase,inwholeorinpart.(d)Releases.
| |
| ParentandCompanyhavenoknowledge ofanymaterialReleases(asdefinedinSection4.9(g)(iv))
| |
| ofanyHazardous Material(asdefinedinSection4.9(g)(iii)),
| |
| thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstCompanyoranyoftheCompanySubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimParentoranyoftheCompanySubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw.(e)Predecessors.
| |
| ParentandCompanyhavenoknowledge, withrespecttoanypredecessor ofCompanyoranyoftheCompanySubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyReleaseofHazardous Materials tha't"wouldbereasonably likelytoformthebasisofanymaterialEnvironmental Claim.(f)Disclosure.
| |
| ParentandCompanyhavedisclosed toAuthority orLIPASuballmaterialfactswhichParentreasonably believesformthebasisofamaterialEnvironmental Claimarisingfrom(i)thecostofCompanypollution controlequipment currently requiredorknowntoberequiredinthefuturewithrespecttottheRetainedAssets;(ii)currentCompanyremediation costsorCompanyremediation andsitemonitoring costsknowntoberequiredinthefuturewithrespecttotheRetainedAssets;or(iii)anyotherenvironmental matteraffecting CompanywithrespecttotheRetainedAssets.(g)AsusedinthisAgreement:
| |
| (i)"Environmental Claim"meansanyandalladministrative, regulatory orjudicialactions,suits,demands,demandletters,directives, claims,liens,investigations, proceedings ornoticesofnoncompliance orviolation (writtenororal)byanypersonorentity(including anyGovernmental Authority) alleging,potential liability (including, withoutlimitation, potential responsibility fororliability forenforcement,"
| |
| investigatory costs,cleanupcosts,governmental responsecosts;removalcosts,remedialcosts,naturalresources
| |
| : datnages, propertydamages,personalinjuriesorpenalties) arisingoutof,basedonorresulting from(A)thepresence, orReleaseorthreatened Releaseintotheenvironment, ofanyHazardous Materials atanylocation, whetherornotowned,operated, leasedormanagedbyCompanyoranyoftheCompanySubsidiaries orCompanyJointVenturesandconstituting aportionoftheRetainedAssets(forpurposesofthisSection4.9)';or(B)circumstances formingthebasisofanyviolation, orallegedviolation, ofanyEnviromnental LawwithrespecttotheRetainedAssets;or(C)anyandallclaimsbyanythirdpartyseekingdamages,contribution, indemnification, costrecovery, compensation orinjunctive reliefresulting fromthepresenceorReleaseofanyHazardous Materials withrespecttotheRetainedAssets.(ii)"Environmental Laws"meansallfederal,state,locallaws,ordinances, rulesandregulations relatingtohealthandsafety,pollution, theenviromnent (including, withoutlimitation, ambientair,surfacewater,groundwater, landsurfaceorsubsurface strata)orprotection ofhumanhealthasitrelatestotheenvironment including, withoutlimitation, lawsandregulations relatingtoReleasesorthreatened ReleasesofHazardous Materials, orotherwise relatingtothemanufacture, processing, distribution, use,treatment, storage,disposal, transport orhandlingofHazardous Materials.
| |
| (iii)"Hazardous Materials" means(A)anypetroleum orpetroleum
| |
| : products, radioactive materials, asbestosinanyformthatisorcouldbecomefriable,ureaformaldehyde foaminsulation, andtransformers orotherequipment thatcontaindielectric fluidcontaining polychlorinated biphenyls
| |
| ("PCBs");
| |
| and(B)anychemicals, materials orsubstances whicharenowdefinedasorincludedinthedefinition of"hazardous substances",
| |
| "hazardous wastes","hazardous materials",
| |
| "extremely hazardous wastes","restricted hazardous wastes","toxicsubstances",
| |
| "toxicpollutants",
| |
| orwordsofsimilarimport,underanyEnvironmental Law;and(C)anyotherchemical,
| |
| : material, substance orwaste,exposuretowhichisnowprohibited, limitedorregulated underanyEnvironmental Lawinajurisdiction inwhichCompanyoranyof'heCompanySubsidiaries orCompanyJointVenturesoperatesusinganyRetainedAssets(forpurposesofthisSection4.9).(iv)"Release" meansanyrelease,spill,emission, leaking,injection, deposit,disposal, discharge, dispersal, leachingormigration intotheatmosphere, surfaceorsubsurface soil,surfacewater,saltwater shoreline orfloorbottom,groundwater orpropertyfromoraffecting anyRetainedAssets.Section4.10Regulation asaUtility.Exceptas"setforthin,Section4.10oftheParentDisclosure
| |
| : Schedule, neither'Company norany"subsidiary company"or"affiliate" (assuchtertnsaredefinedinthe1935Act)ofCompanyissubjecttoregulation asapublicutilityorpublicservicecompany(orsimilardesignation) byanystateintheUnitedStatesotherthanNewYorkoranyforeigncountry.Section4.11VoteRequired.
| |
| Thefollowing aretheonlyvotes("CompanyShareholder Approval"
| |
| )oftheholdersofanyclassorseriesofthecapitalstockofCompanyoranyofitssubsidiaries requiredtoadoptthisAgreement, theotherBasicAgreements andtheothertransactions contemplated herebyandthereby:(a)theadoptionofthisAgreement bytwo-thirds of,thevotesentitledtobecastbyallholdersofCompanyCommonStockandCompanyPreferred Stock(otherthantheRedeemable Preferred Stockredeemedinaccordance withSection2.1(c)(ii)),
| |
| votingtogetherasasingleclass(witheachshareentitledtoonevote,exceptthatCompanyPreferred Stockwith$25parvalueisentitledtoonlyI/4votepersharc);(b)theadoptionofthisAgreement byamajorityofthevotesentitledtobecastbyallholdersofCompanyPreferred Stock(otherthansuchRedeemable Preferred Stock),votingtogetherasasingleclass(witheachshareentitledtoonevote,exceptthatCompanyPreferred Stockwith$25parvalueisentitledtoonly1/4votepershare);(c)theadoptionofthisAgreement byamajorityofthevotesentitledtobecastbyallholdersofCompanyCommonStock,votingseparately asa"class;and(d),theadoptionofthisAgreemcnt byamajorityofthevotesentitledtobecastbyholdersofSeriesAAPreferred StockandeachseriesofNonredeemable Preferred Stock,ineachcasevotingasaseparateclass.Section4.12Insurance.
| |
| ExceptassetforthinSection4.12oftheParentDisclosure
| |
| : Schedule, CompanyandeachoftheCompanySubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisksandlossesasarecustomary inallmaterialrespectsforcompanies conducting thebusinessasconducted byCompanyandtheCompanySubsidiaries duringsuchtimeperiod.ExceptassetforthinSection4.12oftheParentDisclosure
| |
| : Schedule, neitherParent,CompanynoranyoftheCompanySubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoanymaterialinsurance policyofCompanyoranyoftheCompanySubsidiaries.
| |
| Theinsurance policiesofCompanyandeachofthe.CompanySubsidiaries arevalidandenforceable policiesinallmaterialrespects.
| |
| Section4.13Disclosure.
| |
| Norepresentations orwarranties byParentorCompanyinthisAgreement andnostatement contained inanydocumentfurnished byParentorCompanytoAuthority orLIPASubpursuanttotheprovisions of,orinconnection withthetransactions contemplated bythisAgreement, willcontainanyuntrue~statement ofmaterialfactoromitanymaterialfactnecessary, inlightofthecircumstances underwhichitwas~made,inordertomakesuchstatement notmisleading.
| |
| ARTICLEVRE<PRE<SENTATIONS ANDWARRANTIES OFAUTHORITY ANDLIPASUBMAuthority represents andwarrantstoParentandCompanyasfollows:Section5.1Organization.
| |
| Authority isacorporate municipal instrumentality andpolitical subdivision oftheStateofNewYorkandwascreatedbylegislation oftheStateofNewYork(C)iapter 517ofthe1986LawsofNewYork).LIPASubisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization.
| |
| EachofAuthority andLIPASubhasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| Section5.2Authority; Non-Contravention; Statutory Approvals; Compliance.
| |
| (a)Authority.
| |
| EachofAuthority andLIPASubhasallrequisite powerandauthority toenterintothisAgreement andeachoftheotherBasicAgreements towhichitisapartyand,subjecttotheAuthority RequiredStatutory Approvals (asdefinedinSection5.2(c))toconsummate thetransactions contemplated herebyandthereby.Theexecution anddeliveryofthisAgreement byeachofAuthority andLIPASubandeachoftheotherBasicAgreements towhichitisa,partyandtheconsummation byeachofAuthority andLIPASubofthetransactions contemplated herebyandtherebyhavebeendulyauthorized bytheBoard.ofTrusteesofAuthority andtheBoardofDirectors ofLIPASub;noothercorporate proceedings onthe"partofeachofAuthority andLIPASubarenecessary toauthorize thisAgreement, eachoftheotherBasicAgreements towhichitisapartyortoconsummate thetransactions contemplated herebyandthereby.ThisAgreement hasbeendulyandvalidlyexecutedanddelivered byAuthority andLIPASub'and,assumingthedueauthorization, execution anddeliverythereofbytheothersignatories hereto,thisAgreement constitutes thevalidandbindingobligation ofAuthority andLIPASub,enforceable againsteachofAuthority andLIPASubinaccordance withitsterms.~k(b)Non-Contravention.
| |
| Theexecution anddeliveryofthisAgreement andeachoftheotherBasicAgreements byAuthority orLIPASubdoesnot,andtheconsummation ofthetransactions contemplated herebyandtherebywillnot,resultinamaterialViolation pursuanttoany.provisions of(i)thecertificate ofincorporation, by-lawsorsimilargoverning documents ofLIPASub,(ii)subjecttoobtaining theAuthority RequiredStatutory Approvals, anystatute,law,ordinance, rule,regulation,
| |
| : judgment, decree,order,injunction, writ,permitorlicenseofanyGovernmental Authority applicable toAuthority orLIPASubor(iii)anyprovisions ofanymaterialnote,bond,mortgage, indenture, deedoftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation oragreement ofanykindtowhichAuthority orLIPASubisapartyorbywhichitoranyofitsproperties orassetsmaybebound.(c)Statutory Approvals.
| |
| Nodeclaration, filingorregistration with,ornoticetoor.authorization, consentorapprovalof,anyGovernmental Authority isnecessary forthe,execution anddeliveryofthis'Agreement andeachoftheotherBasicAgreements byeachofAuthority andLIPASubortheconsummation byeachofAuthority andLIPASubofthetransactions contemplated herebyandthereby,exceptassetforthinwritingbyAuthority (the"Authority RequiredStatutory Approvals"
| |
| ).Section5.3Disclosure.
| |
| Norepresentations orwarranties byAuthority orLIPASubinthisAgreement andnostatement contained inanydocumentfurnished byAuthority orLIPASubtoParentorCompanypursuanttotheprovisions of,or,inconnection withthetransactions contemplated by,thisAgreement, willcontainanyuntruestatement ofmaterialfactoromitanymaterialfactnecessary, inlightofthecircumstances underwhichitwasmade,inordertomakesuchstatement notmisleading.
| |
| <<tSection5.4Ownership ofLIPASub;NoPriorActivities.
| |
| LIPASubisadirect;whollyownedsubsidiary ofAuthority andwasformedsolelyforthepurposeofengaginginthetransactions contemplated bythisAgreement.
| |
| AsofthedatehereofandtheEffective Time,exceptforobligations orliabilities incurredin connection withitsincorporation ororganization andthetransactions contemplated bythisAgreement andexceptforthisAgreement andanyotheragreements orarrangements contemplated bythisAgreement, LIPASubhasnotandwillnothaveincurred, directlyorindirectly, throughanysubsidiary'or affiliate, anyobligations orliabilities orengagedinanybusinessactivities ofanytypeorkindwhatsoever orenteredintoanyagreements.
| |
| orarrangemerits withanyperson.Section5.5Ownership ofCompanyConnnonStock.NeitherAuthority norLIPASub"beneficially owns"(assuchtermisdefinedforpurposesofSection13(d)oftheExchangeAct)anysharesofCompanyCommonStockorCompanyPreferred Stock.ARTICLEVICOVENANTS Section6.1Covenants ofParentandCompany.AfterthedatehereofandpriortotheClosingDateorearliertermination ofthisAgreement, ParentandCompanyagreeasfollows,astothemselves andtoeachoftheCompanySubsidiaries, asthecasemaybe,exceptasexpressly contemplated orpermitted inthisAgreement, theotherBasic'Agreements ortotheextenttheotherpartiesheretoshallotherwise consentinwriting:(a)OrdinaryCourseofBusiness.
| |
| WithrespecttotheRetainedAssetsonly,CompanyandtheCompanySubsidiaries shallcarryontheir'respective businesses intheusual,regularandordinarycourseinsubstantially thesamemannerasheretofore conducted anduseallcommercially reasonable effortstopreserveintacttheirpresentbusinessorganizations andgoodwillandpreservethegoodwillandrelationships withcustomers, suppliers andothershavingbusinessdealingswiththem.CompanyandtheCompanySubsidiaries may,withthepriorapprovalofAuthority orLIPASub,engagein.,transactions outoftheordinarycourseofbusinessrelatingtotheRetainedA'ssets,suchapprovalnottobeunreasonably withheldordelayed;provided, however,thatthefollowing willnotbesubjecttoAuthority's orLIPASub'spriorapproval:
| |
| anytransaction involving theTransferred Assets;provided, however,thatsuchapprovalwillberequiredfor(A)anytransaction thatwouldimpairtheapplicable Transferee Subsidiary's abilitytoperformitsobligations underanyBasicAgreement orthatwouldviolate'ny termoftheGeneration PurchaseRightAgreement or(B)anytransaction wherebyCompany'nters intoacapacityortransmission purchaseagreement relatingtothepurchaseofmorethan75megawatts ofcapacityorhavingatermwhichextendsbeyondMarch19,1999.ExceptassetforthinSection6.1(a)oftheParentDisclosure Scheduleorascontemplated inthisSection6.1(a),neitherCompanynoranyoftheCompany,Subsidiaries shallmakeanychangeinthelineofbusinessinvolving theRetainedAssets.inwhichitengagesasofthedatehereofwhichinvolvesanyinaterial investment ofassetsorresources oranymaterialexposuretoliability orlosstotheRetainedAssetstakenasawhole.(b)CharterDocuments.
| |
| -Companyshallnotamendnorproposetoamenditscertilicate ofincorporation, by-lawsorregulations, orsimilarorganizational documents, exceptascontemplated hereinorassetforthinSection6.1(b)oftheParentDisclosure Schedule.
| |
| '(c)NoAcquisitions.
| |
| ExceptassetforthinSection6.1(c)oftheParentDisclosure Scheduleorascontemplated inSection6.1(a),neitherCompanynoranyoftheCompanySubsidiaries shallacquire, orpubliclyproposetoacquire,oragreetoacquire,bymergerorconsolidation with,orbypurchaseorotherwise, inatransaction relatingtotheRetainedAssets,asubstantial equityiriterest inorasubstantial portionoftheassetsof,anybusinessoranycorporation, partnership, association orotherbusinessorganization ordivisionthereof,norshallanypartyacquireoragieetoacquire,inatransaction relatingtotheRetainedAssets,amaterialamountofassetsotherthanintheordinarycourseofbusinessconsistent withpastpractice.
| |
| 'd)Capital,Expenditttres.
| |
| Except'ssetforthinSection6.1(d)oftheParentDisclosure
| |
| : Schedule, orasrequiredbylaw,neitherCompanynoranyoftheCompanySubsidiaries shallmakecapitalexpenditures orcommitments relatingtotheRetainedAssetsinanaggregate amount'significantly lessorsignificantly, morethantheamountsprojected thereforinCompany's 1996electricratefiling.
| |
| (e)NoDispositions.
| |
| ExceptassetforthinSection.6.1(e) of,theParentDisclosure.
| |
| Scheduleorascontemplated bySection6.1(a),singularly orintheaggregate, neitherCompanynoranyoftheCompanySubsidiaries shallsell,lease,license,encumberorotherwise disposeof,anyoftheRetainedAssets,otherthanencumbrances ordispositions intheordinarycourseofitsbusinessconsistent withpastpracticeandotherthandispositions ofRetainedAssetsbyCompanyandtheCompanySubsidiaries oflessthan$10millionintheaggregate;
| |
| : provided, however,thatnotwithstanding theforegoing, neitherCompanynoranyoftheCompanySubsidiaries shallsell,lease,license,encumberorotherwise disposeof,anyattachment orsimilarrights.(f)Indebtedness.
| |
| Exceptascontemplatedby anyBasicAgreement, neitherCompanynoranyoftheCompanySubsidiaries shallincurorguarantee anyindebtedness (including anydebtborrowedorguaranteed orotherwise assumedincluding, withoutlimitation, theissuanceofdebtsecurities orwarrantsorrightstoacquiredebt)orenterintoany"keepwell"orotheragreement tomaintainanyfinancial statement condition ofanotherpersonorenterintoanyarrangement havingtheeconomiceffectofanyoftheforegoing otherthanincurrences torefinance existingindebtedness, incurrences ofdebtthatwillbeassumedbyParentand/oroneormoreTransferee Subsidiaries attheClosingandotherthanassetforthinSection6.1(f)oftheParentDisclosure Schedule.
| |
| (g)Transmission, Generation.
| |
| ExceptasrequiredpursuanttotariffsonfilewiththeFERCasofthedatehereof,intheordinarycourseofbusinessconsistent withpastpractice, orassetforthinSection6.1(g)oftheParentDisclosure
| |
| : Schedule, neitherCompanynoranyoftheCompanySubsidiaries shall(i)commenceconstruction ofanyadditional electricgenerating, transmission ordeliverycapacity, or(ii)obligateitselftopurchaseorotherwise acquire,ortosellorotherwise disposeof,ortoshare,anyadditional electricgenerating, transmission ordeliverycapacityexceptasprovidedinclause(B)ofthesecondprovisotoSection6.1(a)orassetforthinthebudgetofCompanyonthedatehereofassetforthinSection6.1(d)oftheParentDisclosure Schedule.
| |
| (h)Accounting.
| |
| ExceptassetforthinSection6.1(h)oftheParentDisclosure
| |
| : Schedule, ParentandCoinpanyshallnot,norshallParentandCompanypermitanyoftheCompanySubsidiaries to,makeanychangesintheiraccounting methodsorprinciples, exceptasrequiredbylaw,rule,regulation orGAAP..(i)Affiliate Transactions.
| |
| ExceptassetforthinSection6.1(i)oftheParentDisclosure
| |
| : Schedule, neitherCompanynoranyoftheCompanySubsidiaries shallenterintoanymaterialagreement orarrangement withanyoftheirrespective affiliates (otherthan'hose wholly-owned subsidiaries whichwillconstitute RetainedAssets)ontermsmaterially lessfavorable tosuchpartythancouldbereasonably expectedtohavebeenobtainedwithanunaffiliated thirdpartyonanarm'-length basis.(j)Cooperation, Norificntion.
| |
| ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,(i)conferonaregularandfrequentbasiswithoneormorerepresentatives ofAuthority orLIPASubtodiscuss,subjecttoapplicable law,materialoperational mattersandthegeneralstatusofitsongoingoperations; (ii)promptlynotifyAuthority orLIPASubofanysignificant changesinitsbusiness, properties, assets,condition (financial orother),resultsofoperations orprospects; (iii)adviseAuthority orLIPASubofanychangeoreventwhichhashador,insofarasreasonably canbeforeseen, isreasonably likelytoresultinaMaterialAdverseEffect;and(iv)promptlyprovideAuthority orLIPASubwithcopiesofallfilingsmadebyParentorCompanyoranyoftheCompanySubsidiaries withanystateorfederalcourt,administrative agency,commission orotherGovernmental Authority in.connection withanyBasicAgreement andthetransactions contemplated herebyandtherebyor.theRetainedAssets.e(k),RateMa!ters.ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,notifyAuthority orLIPASubofanychangesinitsorCompany's ratesorcharges(otherthanpass-through fuelratesorcharges,butincluding, withoutlimitation, gasratesorcharges),
| |
| standards ofserviceoraccounting fromthoseineffectonthedatehereof.WithouttheconsentofAuthority (whichconsentwillnotbeunreasonably withheld),
| |
| Companyshallnotfileorprosecute anyratecaseorothernonroutine proceeding beforethePublicServiceCommission oftheStateofNewYork(the"PSC")orFERCoranyappealtherefrom, exceptforcasesor proceedings (i)relatingsolelytopass-through fuelorgasratesorcharges,(ii)requiredtobemadebyorderofthePSCorFERC,(iii)relatingsolelytotheTransferred Assetsor(iv)involving commercial orcontractual disputeswhicharerequiredtoberesolvedthroughsuchproceedings;
| |
| : provided, however,thatifCompanyreasonably believesthatamatterthreatens thefinancial viability ofCompany,itmaydefendorprosecute suchmatterbeforethePSCorFERC.EitherinseekingconsentfromAuthority orifCompanyhastherighttodefendorprosecute amatterascontemplated herein,Companyshallprovide30dayspriornoticetoAuthority (including,.upon requestofAuthority, copiesofdraftdocumentation) ofanyproposedfilingwiththePSCorFERCunlessCompanyreasonably determines thatcircumstances requireactionwithinsuch30dayperiod,inwhicheventCompanyshallprovideAuthority withaspromptnoticeasispracticable.
| |
| Thepartieswillconsultwitheachotherwithrespecttoallmattersdescribed inthepreceding twosentences.
| |
| '1)Third-Party Consents.
| |
| ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,useallcommercially reasonable effortstoobtainallParentRequiredConsents.
| |
| ParentshallpromptlynotifyAuthority orLIPSSubofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequested byAuthority orLIPASub,shallprovidecopiesofallParent,RequiredConsentsobtainedbyParentorCompanytoAuthority orLIPASub.(m)NoBreach,Etc.ParentandCompanyshallnot,norpermitany,oftheCompanySubsidiaries to,willfully takeanyactionthatwouldorisreasonably likelytoresultinamaterialbreachofanyprovision ofanyBasicAgreement, asthecasemaybe,orinanyofitsrepresentations andwarranties setforthinanyBasicAgreement, asthecasemaybe,beinguntrueonandasoftheClosingDateoranycondition fotheirobligation toclosenotbeingsatisfied.
| |
| (n)Tax-Exetnpt Status.ParentandCompanyshallnot,norshallParentandCompanypermit,anyCompanySubsidiary to,takeanyactionthatwouldlikelyjeopardize thequalification ofCompany's outstanding revenuebondswhichqualifyonthedatehere'ofunderSection142(a)oftheCodeas"exemptfacilitybonds"orastax-exempt industrial development bondsunderSection103(b)(4) oftheInternalRevenueCodeof1954,asainended, priortotheTaxReformActof1986.(o)TaxMatters.ExceptwithrespecttothematterssetforthintheLILCOTaxMattersDisclosure ScheduleattachedtoScheduleD,ParentandCompanyshallnotmakeorrescindanymaterialexpressordeemedelectionrelatingtotaxes,settle(otherthanwithinestablished reserves) orcompromise anymaterialclaim,action,suit,litigation, proceeding, arbitration, investigation, auditorcontroversy relatingtotaxes,orchangeanyofitsmethodsofreporting incomeordeductions forfederalincometaxpurposesfromthoseemployedinthepreparation oftheirrespective federalincometaxreturnsforthetaxableyearendingDecember31,1995,exceptasmayberequiredbyapplicable law.(p)Contracts.
| |
| SubjecttoSection6.1(a)andexceptassetforthinSection6.1(p)ofParentDisclosure
| |
| : Schedule, ParentandCompanyshallnot,otherthanintheordinarycourseofbusinessconsistent withpastpractice, modify,amend,terminate, reneworfailtousereasonable businesseffortstorenewanymaterialfranchise, contractoragre'ement towhichCompanyoranyCompanySubsidiary isapartyorwaive,releaseorassignanymaterialrightsorclaims,provided, however,thatParentandCompanyshallnotenterintonewpowersupplyagreements, oramendexistingpowersupplyortransmission agre'ements, withoutpriorapprovalofAutho'rity (whichapprovalwillnotbeunreasonably withheld).
| |
| (q)Insurance.
| |
| ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,maintainwithfinancially responsible insurance companies insurance insuchamountsandagainstsuchrisksandlossesasarecustomary forcompanies engagedintheelectricandgasutilityindustryandemploying methodsofgenerating electricpowerandfuelsourcessimilartothosemethodsemployedandfuelsusedbyParent,CompanyortheCompanySubsidiaries'.
| |
| 'll(r)Pernu'ts.
| |
| ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,usereasonable effortstomaintainineffectallexistinggovernmental permitspursuanttowhichCompanyortheCompanySubsidiaries ownand'operate anyRetainedAsset.
| |
| (s)-Compliance withLaiv.Permits.Theoperations andactivities, ofCompany,andtheownership, r~~~~~t~~~~~~)~~~~~~~~1~~~1~~~tpossession, maintenance andoperation oftheRetainedAssets,havecompliedandareincompliance, inallrespects, withallapplicable federal,stateandlocal,laws,statutes, acts,regulations, codes,ordinances, rules,judgments, orders,decrees,judgments, injunctions, ornoticesordemandlettersissuedorpromulgated orapprovedthereunder
| |
| ("Applicable Law").ExceptassetforthinSection6.1(s)ofParentDisclosure
| |
| : Schedule, Companyhasallmaterial'federal, state,andlocalgovernmental
| |
| : licenses, permits,approvals",
| |
| franchises andotherauthorizations
| |
| ("Permits")asarenecessary inorderforittoconductthebusinessconducted withtheRetainedAssets.Nomaterialviolations havebeenrecordedinrespectofanyPermitsandnoproceeding ispendingor,totheknowledge ofParentorCompany,threatened withrespecttothelimitation orrevocation ofanyPermit.Section6.2Covenants ofAuthority andLIPASub.(a)Filings.Authority andLIPASubshallpromptlyprovideParentandCompanywithcopiesofallfilingsmadebyAuthority orLIPASubwithanystateorfederalcourt,administrative agency,commission oIotherGovernmental Authority inconnection withthisAgreement oranyBasicAgreement andthetransactions
| |
| 'ontemplated herebyandthereby.(b)Third-Party Cotrsettts.
| |
| Authority andLIPASubshalluseallcommercially reasonable effortstoobtainallAuthority RequiredConsents.
| |
| Authority shallpromptlynotifyParentandCompanyofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequested byParentorCompany,shallprovidecopiesofallAuthority RequiredConsentsobtainedbyAuthority andLIPASubtoParentandCompany.1(c)NoBreach,Etc.Authority andLIPASubshallnotwillfully takeanyactionthatwouldoriyreasonably likelytoresultin(x)amaterialbreachofanyprovision'of thisAgreement oranyotherBasicAgreement, asthecasemaybe,(y)anyoftheirrepresentations andwarranties setforthinthisAgreement orinanyotherBasicAgreement beinguntrueon,andasoftheClosingDateor(z)anycondition totheirobligations toclosenotbeingsatisfied ARTICLEVIIADDITIONAL AGREEMENTS Section7.1AccesstoInformation.
| |
| Uponreasonable notice,eachpartyshallaffordtotheofficers, employees, accountants, counsel,investment bankers,financial
| |
| : advisors, engineers andotherrepresentatives oftheother(collectively, "Representatives"
| |
| )reasonable access,duringnormalbusinesshoursthroughout theperiodpriortotheEffective Time,toallofitsproperties, books,contracts, commitments andrecordsand,duringsuchperiod,eachpartyshallfurnishpromptlytotheother(i)accesstoeachreport,scheduleandotherdocument,filedorreceivedbyitpursuanttotherequirements offederalorstatesecurities lawsorfiledwithorsenttotheSEC,theFERC,theNRC,theDepartment ofJustice,theFederalTradeCommission, thePSCoranyotherfederalorstateregulatory agencyorcommission, and(ii)accesstoallinformation concerning themselves, theirsubsidiaries, directors andofficersandsuchothermattersasmaybereasonably requested bytheotherpartyinconnection withanyfilings;applications orapprovals requiredorcontemplated bythisAgreement orforanyotherreasonrelatedtothetransactions contemplated bythisAgreement.
| |
| Inaddition, CompanyandParentshallpromptlyfurnishtoAuthority uponrequestallsuchinformation asmaybenecessary ordesirable inorderthatAuthority mayobtainthefinancing referredtoinSection8.1(fl.Section7.2ProxyStatement andRegistration Statement.
| |
| CompanywillprepareandfilewiththeSECassoonasreasonably practicable afterthedatehereoftheregistration statement relatingtotheParentShares(the"Registration Statement"
| |
| )andtheProxyStatement.
| |
| Thepartiesheretoshalleachusereasonable effortstocausetheRegistration Statement tobedeclaredeffective undertheSecurities Actaspromptlyaspracticable aftersuchfiling.Eachofthepartiesheretoshallfurnishallinformation concerning itselfwhichjsrequiredorcustomary forinclusion intheProxy/Registration Statement.
| |
| Section7.3Sbareholder Approval.
| |
| Companyshall,assoonasreasonably practicable afterthedatehereof,(i)takeallstepsnecessary todulycall,givenoticeof,conveneandholdaspecialmeetingofitsshareholders forthepurposeofsecuringtheapprovalofitsshareholders, (ii)distribute toitsshareholders theProxyStatement inaccordance'ith
| |
| 'applicable federalandstatelawandwithitsRestatedCertificate ofIncorporation andby-laws,(iii)subjecttothefiduciary duties"of itsBoardofDirectors, recommend toitsshareowners theadoptionofthisAgreement andthetransactions contemplated herebyand(iv)cooperate andconsultwithAuthority withrespecttoeachoftheforegoing matters.Intheeventthat'during thespecialmeetingofshareholders referredtoabovetheCompanyShareholder Approvalisinitially notobtained, Companyshalladjourntliemeetingforareasonable periodandCompanyandParen'tslialltakesuchactionsasmaybenecessary ordesirable inordertoobtaintheCompanyShareholder Approvalwhensuchmeetingisreconvened.
| |
| Section7.4Disclosure Schedule.
| |
| (a)Onthedatehereof,Parenthasdelivered toAuthority aschedule(the""ParentDisclosure Schedule"
| |
| ),accompanied byacertificate signedbytheChiefFinancial Officerof,CompanystatingthattheParentDisclosure Scheduleis'beingdelivered pursuanttothisSectiOn7.4(a).TheParentDisclosure Scheduleconstitutes anintegralpartofthisAgreement andmodifiestherepresentations, warranties, covenants oragreements ofParentheretocontained hereintothe'extentthatsuchrepresentations, warranties, covenants oragreements expressly refertotheParentDisclosure Schedule.
| |
| (b)Notlaterthan30daysbeforethedatescheduled fortheClosing,ParentshalldelivertoAuthority arevisedParentDisclosure Schedule(the"UpdatedParentDisclosure Schedule"
| |
| ),accompanied byacertificate signedbytheChiefFinancial OfficerofCompanystatingthattheUpdatedParentDisclosure Scheduleisbeingdelivered pursuanttothisSection7.4(b).TheUpdatedParentDisclosure Scheduleshallcontaintheinformation Parentbelieveswouldberequiredtocomplywiththecondition setforthinSection8.2(b)(butforpurposessolelyofthisSection7.4(b),asif'suchSection8.2(b)didnotcontainanyreference toMaterialAdverseEffect).Noliability shallariseunderanyBasicAgreement byreasonofthedeliveryoftheUpdatedParentDisclosure Scheduleor,aftertheEffective Time,byreasonofanymatterdisclosed therein.Section7.5Regulatory Marrers.Eachpartyheretoshallcooperate anduseitsbesteffortstopromptlyprepareandfileallnecessary documentation andtoeffectallnecessary applications, notices,petitions, filingsandotherdocuments, andshalluseallcommercially reasonable effortstoobtainallnecessary permits,consents, approvals andauthorizations ofallGovernmental Authorities necessary oradvisable toconsummate thetransactions contemplated bythisAgreement, including, withoutlimitation, theParentRequiredStatutory Approvals andtheAuthority RequiredStatutory Approvals.
| |
| Parent,Company,Authority andLIPASubshallcooperate ingoodfaithandconsultwitheachotheronallcompone'nts of,significant stepstowardsthecompletion of,andsignificant amendments to,theapplications toobtaintheParentRequiredStatutory Approvals andtheAuthority RequiredStatutory Approvals, andwithrespectto'material filings,communications, agreements, arrangements orconsents, written'or oral,formalorinforinal, relatingtoapplications forsuchApprovals.
| |
| Section7.6PublicAnnouncements.
| |
| Parent,Company,Authority andLIPASubwillcooperate witheachotherinthedevelopment anddistribution ofallnewsreleasesandotherjointpublicinformation disclosures withrespecttothisAgreement andanyotherBasicAgreement oranyofthetransactions contemplated hereby.Section7.7Confidentiality.
| |
| (a)'CompanyRequest.Thepartiesacknowledge thatcertaininformation thatmaybefurnished pursuanttotheprovisions ofthisAgreement maybeconfidential andproprietary toCompany.TheCompanyinidParenteachacknowledges thatAuthority mayberequiredtodiscloseinformation uponrequestunderapplicable law.TheCompanyshallhavetherighttorequestAuthority inwritingnottopubliclydiscloseanyinformation whichCompanybelievestobeconfidential orproprietary andnotsubjecttopublicdisclosure underapplicable law,andsuchrequestwillbeaccompanied byanexplanation ofitsreasonsforsuchbelief.Anyinformation whichisthesubjectofsucharequestshallbeclearlymarkedonallpages,sliallbebound,andshallbephysically separatefromallnon-confidential andnon-proprietary information.
| |
| AtCompany's request,Authority anditsRepresentatives givenaccesstosuchinformation shallexecuteandcomplywiththetermsofaconfidentiality agreement inamutuallyacceptable form,subjecttoapplicable law.D-20 (b)Authority Non-Disclosure.
| |
| IfAuthority receivesarequestfromthepublicforthedisclosure ofanyinformation designated asconfidentia orproprietary byCompanypursuanttosubsection (a)ofthisSection7.7,Authority (1)shallusereasonable efforts,consistent withapplicable law,to,providenoticetoCompanyoftherequestpriortoanydisclosure, and(2)shallusereasonable efforts,consistent withapplicable law,.-tokeepinconfidence andnotdisclosesuchinformation unlessitisentitledtodosopursuanttotheprovisions ofsubsection (c)ofthisSection7.7.Companyshallindemnify, holdharmlessanddefendAuthority againstalllossesincurredfromthewithholding frompublicdisclosure ofinformation designated asconfidential orproprietary byCompanyorotherwise requested byCompanytobewithheld.
| |
| (c)Previously Furnished Inforntation.
| |
| CompanyherebypertnifsAuthority anditsRepresentatives toobtainallinformation previously furnished byCompanytoBear,Stearns&Co.Inc.andcertainotherpersonspursuanttotheletterdatedOctober11,1995,(asamendedtodate)subjecttothetermsandconditions ofthisSection7.7.Authority agreesthatallsuchinfotmafion (otherthaninformation described inclauses(1),(2)or(3)ofSection7.7(e))shallbedeemedtobedelivered toAuthority pursuanttotheprocedures setforthinSection7.7(a)forthepurposeofidentifying confidential orproprietary information.
| |
| fl(d)Restriction onUse.Authority andLIPASubmaynotuseanyconfidential orproprietary information disclosed toeitherofthembyCompany(otherthaninformation described inclauses(I),(2)or(3)ofSection7.7(e))intakinganyactiondescribed inclauses(a),(b),(c)or(d)ofArticleXatanytimeafterthedatehereof.r(e)Perntitted Disclosures.
| |
| Notwithstanding anyconfidential orproprietary designation thereofbyCompany,Authority maydisclosethefollowing:
| |
| (1)information whichisknowntoAuthority withoutanyrestriction astodisclosure oruseatthetimeitisfurnished, (2)infotmation whichisorbecomesgenerally available tothepublicwithoutbreachofanyagreement, (3)information whichisreceivedfromathirdpartywithoutlimitation orrestriction onsuchthirdpartyorAuthority atthetimeofdisclosure, or(4)following noticettoCompanypursuanttosubsection (b)ofthisSection,information which,intheopinionofcounselforAuthority, isrequiredtobedisclosed underanyapplicable law,anorderofacourtofcompetent jurisdiction, oralawfulsubpoena.
| |
| Section7.8CertainLitigation.
| |
| (a)ClassSettlenrent.
| |
| Afterthedatehereof,CompanyandAuthority shalljointlyfileanappropriate motionbeforethecourthavingjurisdiction overtheClassSettlement (ashereinafter defined)toobtainamodification ofthefinalorderapproving suchClassSettlement whichwouldpermitthepaymentinfullattheClosingofallamountsremaining unpaidwithrespecttosuchClassSettlement, discounted tosuchpresentvalueasAuthority andCompanymayagreeandsuchcourtmayapprove.Asusedherein,"ClassSettlement" shallincantheclasssettlement whichbecameeffective onJune28,1989andresolvedacivillawsuitagainstCompanybroughtunderthefederalRacketeer Influenced andCorruptOrganizations Act.(b)TaxCases.Withrespecttoalltaxcasesrelatingtopropertytaxesorpaymentsinlieuofpropertytaxesassessable againstanyoftheassetsandproperties ofCompanyasofthedatehereof,andothersimilartaxclaimsarisingpriortotheClosingDate(whichshallconstitute RetainedAssets),Companywillenterintoappropriate standstill agreements andmaintainthecurrentstatusofsuchcases;provided, however,ifanytaxingauthority increases, directlyorindirectly, orpurportstoincrease, directlyorindirectly, theassessedvalueofanyTransferred Asset(otherthaninrespectofpropertyadditions orgeneralincreases inassessments),
| |
| thenCompanymaypursueanyjudicialremedyitdeemsadvisable inconnection therewith, Notwithstanding theforegoing, ifanytaxingauthority, atanytimepriortotheClosing,assertsaclaimforpropertytaxesorpaymentsinlieuofpropertytaxeswhichCompanyreasonably believesisnotauthorized bystatuteorassertsarighttovalueataxablepropertyinamethodotherthaninaccordance withapplicable NewYorkStaterulesandregulations, thenCompanymaytakesuchactionsasitreasonably detetmines tobenecessary oradvisable toprotectits1interests, butshallnototherwise pursueitsclaimspendingtheClosingorthetertnination ofthisAgreement.
| |
| (c)PltaseIRebatcs.UpontheClosing,Parentwillimmediately payAuthority
| |
| $15millioninrespectofthePhaseIjudgmentrelatingtotheShorehampropertytaxcasefordistribution toratepayers.
| |
| Section7.9Expenses.
| |
| Allcostsandexpensesincurredinconnection withthisAgreement andanyotherBasicAgreement andthetransactions contemplated hereby(including, withoutlimitation, anytermination feesandexpense,reimbursements payableby.;Company pursuanttotheExchangeAgreement ortoitsofficersordirectors inrespectofseverance, changeofconfrolorsimilaragreements) shallbepaidbythepartyincurring suchexpenses.
| |
| AnysuchcostorexpenseofCompanynotpaidorotherwise discharged atorpriortotheClosingshallbepaidorreimbursed byParentandtheTransferee Subsidiaries pursuanttotheParentLiabilities Undertaking andshallnotbeincludedintheClosingDateBalanceSheet.Section7.10FurtlterAssurances.
| |
| Eachpartywill,andwillcauseitsSubsidiaries to,executesuchfurtherdocuments andinstruments andtakesuchfurtheractionsasmayreasonably berequested byanyotherpartyinordertoconsummate thetransactions contemplated herebyinaccordance withthe,terins hereof.Section7,11PurchasePriceAllocation.,At orpriortotheClosing,thepartiesshalljointlyprepareandagreetoanallocation forfederalincometaxpurposespursuanttoSection1060oftheCodeofthepurchasepricepayablebyParentinrespectofthetransferoftheTransferred Assets.Section7.12ReceiptofConsentsandApprovals.
| |
| Eachpartyagreestorespondpromptlytoanyrequestforanyconsentorapprovalfromanyotherpartycontemplated bythisAgreement andanythirdpartyconsentorstatutory approvalrequiredhereunder.
| |
| Eachpartyshalldesignate representatives whoshallbeauthorized toaddressanyrequestforanysuchconsentsorapprovals.
| |
| Anyactofanysuchrepresentative withrespecttosuchapprovals andconsentsshallbebindinguponthepartythat'designates suchrepresentative.
| |
| IIISection7.13CertainOtherMatters.Theprovisions setforthinSchedules D(TaxMatters),
| |
| E(Employment Matters)andF(FutureRights)attachedheretoareherebyincorporated byreference asifsetforthhereinintheirentirety.
| |
| Section7.14OpinionsofCounsel.Inaddition, ParentandCompanyshalldelivertoAuthority suchopinionsofcounselforParentandCompanyastotheagreements tobeenteredintoinconnection withthetransactions contemplated bytheBasicAgreements, incustomary formforfinancing transactions, astothemattersoflawcoveredbytherepresentations ofParentandCompanyandtheTransferee Subsidiaries intheBasicAgreements, similarmattersoflawwithrespecttosuchotheragreements andastosuchothermattersoflawasAuthority mayreasonably request,togetherwithappropriate certified authorizing resolutions andincumbency certificates.
| |
| ARTICLEVIIICONDITIONS Section8.1Conditions toEachParty'sObligations.
| |
| Therespective obligations ofeachpartytoeffectthetransactions contemplated bythisAgreement shallbesubjecttothesatisfaction onorpriortotheClosingDateofthefollowing conditions:
| |
| (a)NoInjunction.
| |
| Notemporary restraining orderorpreliminary orpermanent injunction orotherorderbyanyfederalorstatecourtpreventing consummation ofthetransactions contemplated bythisAgreement andtheotherBasicAgreements shallhavebeenissuedandbecontinuing ineffect,andthisAgreement andtheotherBasicAgreements andthetransactions contemplated herebyandtherebyshallnothavebeenprohibited underanyapplicable federalorstatelaworregulation.
| |
| (b)Statutory Approvals.
| |
| TheParentRequiredStatutory Approvals andtheAuthority RequiredStatutory Approvals shallhavebeenobtainedatorpriortotheClosingDate,suchapprovals shallhavebecomeFinalD-22 Orders(asdefinedbelow)andsuchFinalOrdersshallnotimposetermsorconditions which,intheaggregate, wouldhave,orinsofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition orresultsofoperations Parent,whichwouldbematerially inconsistent withtheagreements ofthepartiescontained hereinorintheBasicAgreements orwouldhave(or,insofarasreasonably canbeforeseencouldhave)aMaterialAdverseEffect.A"FinalOrder"meansactionbytherelevantregulatory authority whichhasnotbeenreversed, stayed,enjoined, setaside,annulledorsuspended, withrespecttowhichanywaitingperiodprescribed bylawbeforethetransactions contemplated herebymaybeconsummated hasexpired,andastowhichallconditions totheconsummation ofsuchtransactions prescribed bylaw,regulation or,orderhavebeensatisfied.
| |
| I(c)BasicAgreements.
| |
| TherelevantpartiesshallhaveenteredintoeachotherBasicAgreement.
| |
| (d)TaxRulings.Favo'rable privateletterrulingsreasonably satisfactory toeachofthepartiesheretoshallhavebeenreceivedfromtheIRSwithrespecttotheapplication ofSection337(d)oftheCode.II(e)Consutmnation ofExcltange Transaction.
| |
| Either(i)thetransactions contemplated bytheExchangeAgreement shallhavebeenconsummated, (ii)theExchangeAgreement shallhavebeenterminated or(iii)allconditions tosuchconsummation shallhavebeensatisfied orwaivedinaccordance withthetermsoftheExchangeAgreement andsuchtransactions willbeconsummated promptlyaftertheClosing.(f)Financing.
| |
| Authority shallhaveobtainedfinancing inanamountsufficient toacquiretheCommonStockandthe/on-Redeemable Preferred StockandredeemtheRedeeinable Preferred Stockandthebondsissuedinconnection therewith shallhavereceivedratingspursuanttoratingapplications whichcontemplate theissuanceofupto$7.3billionforsuchpurposeandforthepurposeofrefinancing Companydebt.eSection8.2Conditions toObligations'f Authority andLIPASub.Theobligations ofAuthority andLIPASubtoeffect'the transactions contemplated bythisAgreement andtheotherBasicAgreements sliallbefurthersubjecttothesatisfaction onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyAuthority orLIPASubinwritingpursuant.
| |
| toSection9.5:(a)Performance ofObligatioti's ofParentandContpany.
| |
| EachofParentandCompanyshallhaveperformed inallmaterialrespectsitsagreements andcovenants contained inorcontemplated bythisAgreement andtheotherBasicAgreements requiredtobeperformed byitatorpriortotheClosingDate.(b)Representations and1Varranties.
| |
| Therepresentations andwarranties ofParentandCompanysetforthinthisAgreement andtheotherBasicAgreements shallbetrueandcorrect'(i) onandasofthedatehereofand(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanthedatehereofortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties to'etrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orinthe'aggregate, wouldnotbereasonably likelytoresultinaMaterialAdverseEffect.(c)Closing'Certificates.
| |
| Authority shallhavereceivedacertificate signedonbehalfofParentandCompanybytlieChiefFifiancial OfficerofParent,dated'the ClosingDate,totheeffectthat,tothebestofsuchOfficer's knowledge, theconditions setforthinSection8.2(a)andSection8.2(b)havebeensatisfied.
| |
| (d)MaterialAdverseEffect.NoMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaMaterialAdverseEffect.t(e)ParentRequiredConsents.,
| |
| TheParentRequiredConsentsshallhavebeenobtained, exceptforthoseconsentsthefailureofwhichtoobtainwouldnothaveaMaterialAdverseEffect.D-23 (f)Formation ofParentSubsidiaries.
| |
| TheTransferee Subsidiaries willhavebeendulyformedandorganized.
| |
| (g)TaxRulings.Favorable privateletterrulingsreasonably satisfactory toAuthority shallhavebeenreceivedfromtheIRSwithrespecttotheapplication ofSections103and115oftheCode.(h)RateSavingsDeternnnation.
| |
| Authority shallhavemadethefinalratesavingsdetermination requiredunderitsgoverning'statute.
| |
| Section8.3Conditions toObligations ofParentandCompany.'Theobligations ofParentandCompanytoeffectthetransactions contemplated bythisAgreement andtheotherBasic.Agreements shallbefurthersubject'tothesatisfaction onorpriortotheClosingDateofthefollowing conditions, exceptasmaybewaivedbyParentandCompanyinwritingpursuanttoSection9.5:(a)Performance ofObligations ofAuthority andLIPASub.Authority andLIPASubshallhaveperformed inallmaterialrespectsitsag'reements
| |
| 'andcovenants contained inorcontemplated bythisAgreement andtheotherBasicAgreements requiredtobeperformed atorpriortotheClosingDate.h(b)Representations and1Varranties.
| |
| Therepresentations andwarranties ofeachofAuthority andLIPASubsetforthinthisAgreement andtheotherBasicAgreements shallbetrueandcorrect(i)onandasofthedatehereofand(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanthedatehereofortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaMaterialAdverseEffect.(c)ClosingCertificates.
| |
| Parentshallhavereceivedacertificate signedonbehalfofAuthority bytheExecutive DirectorofAuthority, datedtheClosingDate,totheeffectthat,tothebestofsuchExecutive Director's knowledge, theconditions setforthinSection8.3(a)andSection8.3(b)havebeensatisfied.
| |
| (d)MaterialAdverseEffect.NoMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaMaterialAdverseEffect.ARTICLEIXTERMINATION ANDAMENDMENT Section9.1Tertnination.
| |
| ThisAgreement maybeterminated priortotheClosingDate:(a)bymutualwrittenconsentoftheBoardofDirectors ofCompanyandtheBoardofTrusteesofAuthority; (b)byeitherParentandCompany,ontheoneliand,orAuthority andLIPASub,ontheotherhand,iftheClosingshallnothaveoccurredonorbeforeAugust.31,1998(the"Initial.
| |
| Termination Date");provided, however,thattherighttoterminate theAgreement underthisSection9.1(b)shallnotbeavailable toanypartywhosefailuretofulfillanyobligation underthisAgreement hasbeenthecauseof,orresultedin,thefailureoftheEffective Tinietooccuronorbeforethisdate;andprovided,
| |
| : fiirther, thatifontheInitialTertnination Datetheconditions totheClosingsetforthinSections8.1(b),8.1(d)or8.2(e)shallnothavebeenfulfilled butallotherconditions totheClosingshallbefulfilled orshallbecapableofbeingfulfilled, thentheInitialTermination Dateshallbe,extendedtoApril28,1999.(c)byParentorCompany,upontwodays'rior noticetoAuthority, if,asa'resultofatenderofferoranywrittenofferorproposalwithrespecttoamerger,saleofamaterialportionofitsassetsorotherbusinesscombination madebyapartyotherthanAuthority oranyofitsaffiliates priortoCompanyhavingobtainedCompanyShareholder
| |
| : Approval, theBoardofDirectors ofCompanydetermines ingoodfaiththattheirfiduciary D-24 obligations underapplicable lawrequirethatsuchtenderofferorotherwrittenofferorproposalbeaccepted;
| |
| : provided, hoivever, that(i)theBoardofDirectors ofCompanyshallhavebeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureofthisAgreement enteredintointheproperexerciseoftheirapplicable-fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyAuthority innegotiations enteredintopursuanttoclause(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment'as aresultofsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, Companyshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withAuthority tomakesuchadjustments inthetermsandconditions ofthisAgreemcnt aswouldenable,Companytoproceedwiththetransactions contemplated hereinonsuchadjustedterms;(d)byAuthority, bywrittennoticetoParentandCompany,if(i)thereexistbreachesoftherepresentations andwarranties ofParentandCompanymadehereinasofthedatehereofwhichbreaches, individually orintheaggregate, wouldorwouldbereasonably likelytoresult,inaMaterialAdverseEffect,andsuchbreachessliallIiothavebeenremediedwithin20daysafterreceiptbyParentandCompanyofnoticeinwritingfromAuthority, specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)ParentorCompanyshallhavefailedtoperformandcomplywith,inallmaterialrespects, itsagreements andcovenants liereunder orunderanyotherBasicAgreement andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyParentandCompanyofnoticeinwritingfromAuthority, specifying thenatureofsuchfailureandrequesting thatitberemedied; or(iii)theBoardofDirectors ofParentoranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoAuthority orLIPASubitsapprovalorrecommendation ofthisAgrccment ortheotherBasicAgreemcnts, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponAuthority's orLIPASub'srequest,or(C)shallresolvetotakeanyoftheactionsspecified inclause(A)or(B);(e)byParentorCompany,bywrittennoticetoAuthority andLIPASub,if(i)thereexistmaterialbreachesoftherepresentations andwarranties ofAuthority andLIPASubmadehereinasofthedatehereofwhichbreaches, individually orintheaggregate, wouldorwouldbereasonably likelytoresultinaMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithili20daysafterreceiptbyAuthority'f noticeinwritingfromParent,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)Authority shallhavefailedtoperformandcomplywith,inallmaterialrespects, itsagreements andcovenants hereunder orunderanyotherBasicAgreements, andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyAuthority orLIPASubofnoticeinwritingfromParent,specifying thcnatureofsuchfailureandrequesting thatitberemedied, or(iii)theBoardofTrusteesofAuthority oranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoParentorCompanyitsapprovalorrecommendation ofthisAgreement oranyoftheotherBasicAgreemcnts, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponParent'sorCompany's request,or(C)shallresolvetotakeanyoftheactionsspecified inclause(A)or(B);or(f)byeitherParentandCompany,ontheonehand,orAuthority andLIPASub,ontheotherhand,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'sobligation toeffectthetransactions cannotbesatisfied.
| |
| Section9.2E~jjecrofTenninarioii.
| |
| Intheeventofthetermination ofthisAgreemcnt, theprovisions inthisSection9.2,inSections7.7,7.9andArticleX(andSection11.7totheextentitisapplicable tosuchSectionsandArticle)shallsurvivethetermination andnopartyshallberelievedofanyliability foranybreachofthisAgreement.
| |
| Section9.3Survival.
| |
| Allofthecovenants intheSchedules attachedheretoshallsurvivetheEffective Time.Allrcprescntations andwarranties inthisAgreement shallnotsurvivetheEffective Time,exceptasotherwise providedinthisAgreemcnt.
| |
| Section9.4Amendment.
| |
| ThisAgreeincnt maybeamendedatanytimebythepartieshereto,butonlybytaninstrument inwritingsignedbyeachofthcpartieshereto;provided, however,thatAuthority andLIPASubshallnotunreasonably, withholdtheirconsenttoanyarnendmcnt proposedbyCompanywithrespecttoSections2.1(b)and(c).D-25 Section9.5Extensioir; lVaiver.AtanytimepriortotheClosing,thepartiesheretomay(a)extendthetimeforthe'performance of'anyoftheobligations orotheractsofthepartieshereto,(b)waiveanyinaccuracies intherepresentations andwarranties contained hereinorinanydocumentdelivered pursuantheretoand(c)waivecompliance withanyoftheagreements or,totheextentpermitted byapplicable law,conditions contained herein.Anyagreement onthepartofapartyheretotoanysuchextension orwaivershallbevalidonlyifsetforthinawritteninstrument signedbysuchparty.ARTICLEXSTANDSTILL Section10.1'tandstill.
| |
| IntheeventAuthority terminates thisAgreement, Authority anditsaffiliates willnot(andwillnotassist.orencourage othersto),directlyorindirectly, withoutthepriorconsentofParent.andCompany,priortothedatethat'issixmonthsafterthedateoftermination, ifany,ofthisAgreement byAuthority pursuanttoSection9.1:(a)acquireoragree,offer,seekorproposetoacquirc,orcausetobeacquired, ownership (including, butnotlimitedto,beneficial ownership asdefinedinRule13d-3undertheExchangeActofanyofCompany's (oranysuccessor's) assetsorbusinesses oranysecurities issuedbyCompany(oranysuccessor) oranyrightsoroptionstoacquiresuchownership, including fromathirdparty;(b)condemn'r agree,offer,seekorproposetocondemn,orcausetobecondemned, anyofCompany's (oranysuccessor's) assetsorbusinesses oranysecurities issuedbyCompany(oranysuccessor);
| |
| (c)make,orinanywayparticipate, inanysolicitation ofproxiesorconsentswithrespecttoanysecurities ofParentorCompanywhichare,ormaybe,entitledtovoteintheelectionofParent'sorCompany's directors, asthecasemaybe("VotingSecurities"),
| |
| becomea"participant" inany"election contest"(assuchtermsaredefinedorusedinRule14a-11undertheExchangeAct)withrespecttoParentorCompany;orseektoadvise,encourage orinfiuence anypersonorentitywithrespecttothevotingofanyofParent'sorCompany's VotingSecurities; ordemandacopyofParent'sorCompany's stockledger,listofParent'sorCompany's shareholders orotherbooksandrecords;orcallorattempttocallanymeetingoftheshareholders ofParentorCompany;or'd)enterintoanydiscussions, negotiations, arrangements orunderstandings withanythirdpartyoragencywithrespecttoanyofthemattersdescribed inclause(a),(b)'or(c)ofthisSection10.1.nARTICLEXIMISCELLANEOUS
| |
| 'ection11.1CertainDefinitions.
| |
| ForallpurposesofthisAgreemcnt, except'as otherwise expressly providedorunlessthecontextotherwise requires:
| |
| (a)"affiliate" or"associate" of-'anyspecified personmeansanyotherpersondirectlyorindirectly controlling orcontrolled byorunderdirectorindirectcommoncontrolwithsuchspecified person.Forthepurposesofthisdefinition, "control" whenusedwithrespecttoanyspecified personmea'nsthepowertodirectthemanagement andpoliciesofsuchperson;directlyorindirect1y, whetherthroughtheownership ofvotingsecurities, bycontractorotherwise; andtheterms"controlling" and"controlled" havemeaningscorrelative totheforegoing; (b)"business day"meansanyday(otherthanaSaturdayoraSunday)onwhichbankinginstitutions inNewYorkCity,NewYorkarenotauthorized orobligated bylaworexecutive ordertoclose;and(c)"person"meansanyindividual, corporation, firms,companies, trusts,businesstrusts,legalentitiesgeneralpartnership, limitedpartnership, jointventure,association,'joint-stock company,trust,limitedliability company,unincorporated organization orgovernment oranyagencyorpolitical subdivision thereof.
| |
| Section11.2Notices.Allnoticesandothercommunications hereunder shallbeinwritingandshallbedeemedgivenuponreceiptif.delivered personally ormailedbyregistered orcertified mail(returnreceiptrequested) orovernight deliveryservicetothepartiesatthefollowing addresses (oratsuchbtheraddressforapartyasshallbespecified bylikenotice)(a)iftoAuthority orLIPASub,toLongIslandPowerAuthority 333EarleOvingtonBoulevard Suite403Uniondale, NewYork11553Telephone:
| |
| (516)222-7700Attention:
| |
| Executive Directorewithacopyto:RichardKesselChairmanoftheBoardLongIslandPowerAuthority 333EarleOvingtonBlvd.,Suite403Uniondale, NewYork11553PatrickFoyeDeputyChairmanoftheBoardLongIslandPowerAuthority 333EarleOvingtonBlvd.,Suite403Uniondale, NewYork11553Winthrop, Stimson,Putnam&RobertsOne.BatteryParkPlazaNewYork,NewYork10004Telephone:
| |
| (212)858-1000Attention:
| |
| StephenR.Rusmisel(b)iftoParentorCompany,to:LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Telephone:
| |
| (516)545-4800Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Telephone.
| |
| '(212)715-9100Attention:
| |
| ThomasE.Constance Section11.3Descriptive Headings.
| |
| Thedescriptive headingshereinareinsertedforconvenience onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
| |
| Section11.4Counterparts.
| |
| ThisAgreement maybeexecutedintwoormorecounterparts, allofwhichshallbeconsidered oneandthesameagreement.
| |
| D-27 Section11.5EntireAgreement; Assigttntent.
| |
| ThisAgreement, including theannexesandexhibitsheretoandthedocuments, schedules (including, withoutlimitation, theDisclosure Schedule),
| |
| certificates, andinstruments referredtohereinconstitute the'entireagreement, andsupersede allprioragreements andunderstandings, bothwrittenandoral,amongthepartieswithrespecttothesubjectmatterhereof.ThisAgreement shallnotbeassignedbyoperation oflaworotherwise.
| |
| Section11.6GovenungLaiv.ThisAgreement shallbegovernedandconstrued inaccordance withthelawsofthcStateofNewYork,withoutregardtoanyapplicable principles ofconllicts oflaw.Exceptasotherwise providedinSection11.10,anyactionarisingoutoforrelatingtothisAgreement shallbebroughtinNewYorkStateCourtorFederalDistrictCourt.Section11.7'pecific Perfonnance.
| |
| Thepartiesheretoagreethatifanyoftheprovisions ofthisAgreement wercnotperformed inaccordance withtheirspecifictermsorwereotherwise
| |
| : breached, irreparable damagewouldoccur,noadequateremedyatlawwouldexistanddamageswouldbedifficult todetermine, andthatthepartiesshallbeentitledtospecificperformance ofthetermshereof,inadditiontoanyotherremedyatlaworequity.Section11.8PartiesinInterest.
| |
| JhisAgreement shallbebindinguponandinuresolelytothebenefitofeachpartyheieto,andnothinginthisAgreemcnt, expressorimplied,isintendedtoorshallconferuponanyotherpersonorpersonsanyrights,benefitsorremediesofanynaturewhatsoever underorbyreasonofthisAgreement.
| |
| Section11.9Severability.
| |
| ThisAgreement shallbedeemedseverable; theinvalidity orunenforceability ofanytermorprovision ofthisAgreement shallnotaffectthevalidityorenforceability ofthisAgreement orofanyothertermhereof,whichshallremaininfullforceandeffect.Section11.10Alternative DisputeResolution.
| |
| (a)Anydisputearisingoutoforrelatingtoanycovenantcontained inanyScheduletothisAgreement shall~beresolvedinaccordance withtheprocedures specified inthisSection11.10,whichshallconstitute thesoleand~exclusive procedures fortheresolution ofsuchdisputes, excepttotheextentanysuchScheduleexpressly providesanotherdisputeresolution process.(b)Thepartiesagreetousetheirbesteffortstosettlepromptlyanydisputesor.claimsarisingoutoforrelatingtothisAgreement throughnegotiation conducted ingoodfaithbetweenexecutives havingauthority toreachsuchasettlement.
| |
| Ifeitherpartyheretoshallsorequest,thepartiesshallmutuallyagreeonthcselection ofamediatorwhoshallmediatethenegotiations, whichshallbenon-binding.
| |
| Allnegotiations andmediation discussions pursuanttothisparagraph areconfidential andshallbctreatedascompromise andsettlement negotiations forpurposesofFederalRuleofEvidence408andapplicable staterulesofevidence.
| |
| (c)AnydisputearisingoutofrelatingtoanyScheduletothisAgreement orthebreach,termination, orvaliditythereof,whichdisputehasnotbeenresolvedbyanegotiation ormediation asprovidedinpanagraph (b)hereofwithin60daysfromthedatethateithernegotiations ormediation shallhavebeenfirstrequested, shallbesettledbybindingarbitration beforethreeindependent andimpartial arbitrators inaccordance withthethencurrentrulesoftheAmericanArbitration Association, excepttotheextentsuchrulesareinconsistent withanyprovision ofthisAgreement, inwhichcasetheprovisions ofthisAgreement shallbefollowed, andcxccptthatthearbitrations underthisAgreement shallnotbeadministered bytheAmericanArbitration Association.
| |
| TheArbitrators shallbe(i)independent ofthepartiesanddisinterested intheoutcomeofthedispute,(ii)attorneys, accountants, investment bankers,commercial bankersorengineers familiarwithcontracts governing theoperation ofelectricutilityassets,and(iii)qualified inthesubjectareaoftheissueindispute.Forpurposesofthepreceding
| |
| : sentence, residents ofLongIslandshallnotbe,.considered interested merelybyvirtueoftheirresidence.
| |
| TheArbitrators shallbcchosenbytheparties,witheachpartychoosingonearbitrator andthosearbitrators choosingthethirdarbitrator.
| |
| JudgmentontheawardrenderedbytheArbitrators maybeenteredianycourtintlieStateofNewYorkhavingjurisdictioti thereof.Ifeitherpartyrefusestoparticipate ingoodfaithD-28 inthenegotiations ormediation proceedings described inparagraph (b)hereof,theothermayinitiatearbitration atanytimeaftersuchrefusalwithoutwaitingfor,theexpiration ofthe60day,period.
| |
| ExceptasprovidedinParagraph (d)hereofrelatingtoprovisional
| |
| : remedies, theArbitrators shalldecideallaspectsofanydisputebroughttothemincluding attorneydisqualification andthetimeliness ofthemakingofanyclaim.(d)Eitherparty'may, withoutprejudice toanynegotiation, mediation, orarbitration procedures, proceedinanycourtofcompetent jurisdiction toseekprovisional judicialreliefif,insuchparty'ssolediscretion, suchactionisnecessary toavoidimminentirreparable'arm ortopreservethestatusquopendingtheconclusion ofthedisputeprocedures specified inthisSection11.10.(e)TheArbitrators shallhavenoauthority toawardpunitivedamagesoranyotherdamagesasidefromtheprevailing party'sactualandconsequential damages>plusinterestthereonattheBaseInterestRate(asdefinedintheManagement ServicesAgreement) accruedfromthedatesuchdamageswereincurred.
| |
| TheArbitrators shallnothavetheauthority tomakeanyruling,finding,orawardthatdoesnotconformtothetermsandconditions ofthisAgreement.
| |
| (f)TheArbitrators mayawardreasonable attorneys'ees andcostsofthearbitration.
| |
| (g)AnyclaimunderanySchedule.
| |
| tothisAgreement shallbetime-barred, regardless ofanystatuteoflimitations periodsprovidedbystateorfederallaw,unlessnegotiation ormediation withrespecttheretoiscommenced withrespecttosuchclaimwithintwelvemonthsafterthebasisforsuchclaimhasbeendiscovered.
| |
| (h)TheArbitrators shallhavethediscretion toorderapre-hearing exchangeofinformation bytheparties,including, withoutlimitation, theproduction ofrequested documents, theexchangeofsummaries oftestimony ofproposedwitnesses, andtheexamination bydeposition ofparties.Eachofthepartiesagrccs'to produceallesuchrequested documents andtodelivertotheotheracertificate, executedbyaseniorexecutive ofsuchparty,statingthatallsuchdocuments havebeensoproduced.
| |
| (i)Thesiteofanyarbitration proceeding broughtpursuanttothisAgreement shallbeMineolaorHauppauge, NewYork.(I)TheArbitrators'ward shallbeinwritingandshallsctforththefactualand.legalbasesfortheaward.D-29 INWITNESSWHEREOF,thepartiesheretohavecausedthisAgreement tobesignedbytheirrespective officersthereunto dulyauthorized asofthedatefirstwrittenabove.LONGISLANDLIGHTINGCOMPANYBy:Name:Dr.WilliamJ.Catacosinos Title:ChiefExecutive OfficerLONGISLANDPOWERAUTHORITY By:Name:RichardM.KesselTitle:ChairmanBy:Name:PatrickFoyeTitle:DeputyChairmanLIPAACQUISITION CORP.By:Name:Title:Ascontemplated bySection1.4hereof,theundersigned hasexecutedanddt;livered thisAgreement asParent:BLHOLDINGCORPBy:Name:Title:D-30 Investment BankingANNEXEMerrillLynchCorporate andInstitutional ClientGroupWorldFinancial CenterNorthTowerNewYork,NewYork10281-1327 2124491000June27,1997BoardofDirectors TheBrooklynUnionGasCompanyOneMetroTech CenterBrooklyn, NewYork11201-3850 LadiesandGentlemen:
| |
| TheBrooklynUnionGasCompany(the"Company" or"Brooklyn Union")andLongIslandLightingCompany("Lilco")
| |
| haveenteredintoanAmendedandRestatedAgreement andPlanofExchangeandMergeredatedasofJune26,1997(the"Agreement"
| |
| )pursuanttowhich,amongotherthings,(i)awholly-owned subsidiary ofaholdingcompanytobeformedpursuanttotheAgreement
| |
| ("Newco")
| |
| willbemergedwithandintotheCompany(the"Brooklyn UnionMerger"),asaresultofwhicheachissuedandoutstanding shareoftheCompany',s commonstock,parvalue$0.338pershare(the"CompanyShares"),otherthanDissenting Shares(asdefinedintheAgreement),
| |
| willbeconverted intotherighttoreceiveonenewlyissuedshare(the"Exchange Ratio")ofthecommonstockofNewco,parvalue$.01'pershare(the"NewcoShares"),and(ii)eachissuedandoutstanding shareofLilco'scommonstock,parvalue$5.00pershare("LilcoShares"),otherthanDissenting Shares,willbeexchanged (the"LilcoBindingShareExchange",
| |
| andtogetherwiththeBrooklynUnionMerger,the"Combination Transactions"
| |
| )for0.803newlyissuedNewcoShares,subjecttoadjustment to0.880newlyissuedNewcosharesifth'eLIPATransaction refcrrcdtobelowisconsummated.
| |
| Thetermsandconditions oftheCombination Transactions aremorefullysetforthintheAgreement.
| |
| iYouhaveaskeduswhether,inouropinion,theExchangeRatioisfairtotheholdersoftheCompanySharesfromafinancial pointofview.Inarrivingattheopinionsetforthbelow,wehave,amongotherthings:(I)ReviewedtheCompany's AnnualReports,Forms10-Kandrelatedfinancial information forthethreefiscalyearsendedSeptember 30,1996andtheCompany's Forms10-Qandtherelatedunaudited financial information forthequarterly periodsendingDecember31,1996andMarch31,1997;(2)ReviewedLilco'sAnnualReports,Forms10-Kandrelatedfinancial information forthethreefiscalyearsendedDecember31,1996andLilco'sForm10-Qandtherelatedunaudited financial information forthequarterly periodendingMarch31,1997;hfl(3)Reviewedcertaininformation, including financial forecasts, relatingtothebusiness,
| |
| : earnings, cashflow,assetsandprospects oftheCompanyandLilco,furnished tousbytheCompanyandLilco; Mevrilllhyaelh(4)Conducted discussions withmembersofseniormanagement oftheCompanyandLilcoconcerning theirrespective businesses, regulatory environments, prospects andstrategic objectives; (5)Reviewedthehistorical marketpricesandtradingactivityfortheCompanySharesandLilcoSharesandcomparedthemwiththatofcertainpubliclytradedcompanies whichwedeemedtobereasonably similartotheCompanyandLilco,respectively; (6)Comparedtheresultsofoperations oftheCompanyandLilcowiththatofcertaincompanies whichwedeemedtobereasonably similartotheCompanyandLilco,respectively; (7)Comparedtheproposedfinancial termsofthetransactions contemplated bytheAgreement withthefinancial termsofcertainothermergersandacquisitions whichwedeemedtoberelevant; (8)Considered thepotential proformaimpactoftheCombination Transactions, including ontheCoinpany's capitalization ratiosandearmngs,dividends andbookvaluepershare;(9)ReviewedtheAgreement; (10)ReviewedtheAgreemcnt andPlanofMerger,datedasofJune26,1997,byandamongBLHoldingCorp.,Lilco,LongIslandPowerAuthority
| |
| ("LIPA")andLIPAAcquisition Corp.(the"LIPAAgreemcnt")
| |
| providing for,theacquisition byLIPAofcertainspecified assetsandproperties ofLilco(the"LIPATransaction"
| |
| );and(11)Reviewedsuchotherfinancial studiesandanalysesandperformed suchotherinvestigations andtookintoaccountsuchothermattersas,wedeemednecessary, including ourassessment ofgeneraleconomic, marketandmonetaryconditions.
| |
| Inpreparing ouropinion,wehaveassumed,withyourconsent,thattheLIPATransaction, ifconsummated, willbeconsummated onthetermscontained intheLIPAAgreemcnt.
| |
| Inpreparing ouropinion,wehavealsoassumedandreliedontheaccuracyandcompleteness ofallinformation suppliedorotherwise madeavailable tousorpubliclyavailable ordiscussed withorreviewedbyorforusandwehavenotassumedanyresponsibility forindependently, verifying suchinformation orundertaken anindependent evaluation orappraisal ofanyoftheassetsorliabilities oftheCompanyorLilco.In'addition, wehavenotconducted anyphysicalinspection oftheproperties orfacilities oftheCompanyorLilco.Withrespecttothefinancial forecasts furnished toordiscussed withu'sbytheCompanyandLilco,wehaveassumedthattheyhavebeenreasonably preparedandrefiectthebestcurrently available estimates andjudgmentoftheCompany',s orLilco'smanagement astotheexpectedfuturefinancial performance oftheCompanyorLilco,asthecasemaybe,andastotheexpectedfutureprojected outcomesofvariouslegal,regulatory andothercontingencies.
| |
| Inthatregard,Lilco'sfinancial forecasts forthecaseinwhichLilcoretainsownership ofitselectrictransmission anddistribution system,substantially allofitselectricregulatory assetsandcertainotherinterests andtheLIPATransaction isnotconsummated, assume;amongotherthings,(i)thatLilcowillbesubjecttonoreduction inelectricratesforthefive-year periodendingDecember31,2002,(ii)thatI.ilcowillfullyrecoverinitscurrentandfutureelectricratesallofitscostsreferredtointheNotestoFinancial Statements ofLilcofortheyearendedDecember31,1996,associated withthetransferoftheShorehamNuclearPowerStationtoLIPAanddecoimnissioning thereof,ontermsnolessfavorable toLilcothanthetermscurrently ineffect,and(iii)thattherewillbenoadversechangestoLilcoingeneralcompetitive conditions forthetransmission andsaleofelectricity inthe,areasservicedbyLilcothroughtheconstruction ofnewtransmission linestoLongIslandorotherwise.
| |
| WehaveassumedthattheCombination Transactions willbeaccounted forasapoolingofinterests inthecasewheretl,eLIPATransaction is,notconsummated andthattheBrooklynUnionMergerwillqualifyasatax-freereorganization forU.S.federalincometaxpurposes.
| |
| MerrillLyae1hOuropinionisnecessarily baseduponmarket,economicandotherconditions astheyexistandcanbeevaluated asofthedatehereof.Wehaveassumedthatinthecourseofobtaining thenecessary regulatory orotherconsentsorapprovals fortheCombination Transactions andtheLIPATransaction, norestrictions, including anydivestiture requirements oramendments ormodifications, willbeimposedthatwillhaveamaterialadverseeffectonthecontemplated benefitsoftheCombination Transactions ortheLIPATransaction.
| |
| Inconnection withthepreparation ofthisopinion,wehavenotbeenauthorized bytheCompanyortheBoardofDirectors tosolicit,norhavewesolicited, third-party indicationS ofinterestfortheacquisition ofalloranypartoftheCompany.WeexpressnoopinionastowliatthevalueoftheNewcoSharesactuallywillbewhenissuedtotheholdersoftheCompanySharesuponconsummation oftheCombination Transactions orwhatthevalueoftheCompanySharesorLilcoShareswillbebetweenthedatehereofandtheconsummation oftheCombination Transactions.
| |
| Thisopinionisaddressed totheBoardofDirectors oftheCompanyanddoesnotconstitute arecommendation toanyshareholders astohowsuchshareholders shouldvoteontheproposedCombination Transactions.
| |
| Wehaveactedasfinancial advisortotheCompanyinconnection withtheCombination Transactions andwillreceiveafeeforourservices, asignificant portionofwhichiscontingent uponconsummation oftheCombination Transactions.
| |
| Wehave,inthepast,providedfinancial advisoryandfinancing servicestotheCompanyandfinancing servicestoLilcoandhavereceivedfeesfortherendering ofsuchservices.
| |
| Intheordinarycourseofourbusiness, wemayactivelytradethesecurities, ofthcCompanyorLilcoforourownaccountandforthcaccountsofcustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Onthebasisof,andsubjecttotheforegoing andothermatterswhichwedeemrelevant, weareoftheopinionthat,asofthedatehereof,the'Exchange RatioofoneNcwcoShareforeachCoinpanyShareisfairtotheholdersoftheCompanySharesfromafinancial pointofviewiftheLIPATransaction isconsummated, underwhichcircumstances eachLilcoSharewillbeexchanged for0.880NewcoShares,andiftheLIPATransaction isnotconsumntated, underwhichcircumstances eachLilcoSharewillbcexchanged for0.803NewcoShares.Verytrulyyours,MERRILLLYNCH,PIERCE,FENNERASMITHINCORPORATED
| |
| [THISPAGEINTENTIONALLY LEWD'LANK]
| |
| ANNEXFFDecember291996TheBoardofDirectors LongIslandLightingCompany175EastOldCountryRoadHicksvillq, NY11801Gentlemen andLadies:EYouhaverequested ouropinionastothefairness, fromafinancial pointofview,totheholders(the"Stockholders"
| |
| )ofcommonstock,parvalue$5.00pershare("CompanyCommonStock"),ofLongIslandLightingCompany(the"Company"
| |
| )oftheConversion RatiosetforthintheBindingShareExchangeAgreement, datedasofDecember29,1996(the"Agreement"
| |
| ),byandamongBrooklynUnionGasCompany("BrooklynUnion"),LongIslandLightingCompany,andNYECO,anewlycreatedcorporation
| |
| ("NYECO"),
| |
| pursuanttowhichBrooklynUnionandLongIslandLightingCompanyshallcombineandbecomewhollyownedsubsidiaries ofNYECO(the"Transaction"
| |
| ).IntheeventtheTransaction isconsummated, eachissuedandoutstanding shareofCompanyCommonStock,otherthansharesofCompanyCommonStocktobecanceledpursuanttheAgreement, shallbeconverted intothe'ighttoreceive.803(the"Conversion Ratio")sharesofNYECOcommonstock,$.01parvalue,andeachshareofBrooklynUnioncommonstock,otherthansharesofBrooklynUnioncommonstocktobecanceledpursuanttotheAgreement, shallbeconverted intotherighttoreceiveonesharcofNYECOcommonstock.Inarrivingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompanyandBrooklyn, Union,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompanyandBrooklynUnionrelatingtothebusinessandprospects oftheCompanyandBrooklynUnion,(iii)conducted discussions withmembersofthesenior'management oftheCompanywithrespecttothebusinessandprospects oftheCompany,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable tothoseoftheCompanyandBrooklynUnion,(v)reviewedthehistorical marketpricesandtradingvolumesoftheCompanyCommonStockandthecommonstockofBrooklynUnion,(vi)comparedtheproposedfinancial termsoftheTransaction withthefinancial termsofcertainothermergerswhichwebelievetobegenerally comparable totheTransaction, (vii)analyzedtherespective contributions intermsofrevenue,earnings, cashflowandcommonequityoftheCompanyandBrooklynUniontothecombinedcompany,andtherelativeownership ofNYECOaftertheTransaction bythecurrentholdersoftheCompanyCommonStockandBrooklynUnioncommonstock,(viii)considered theproformaeffectoftheTransaction ontheCompany's capitalization ratios,earnings, cashflowandbookvaluepershare,(ix)reviewedtheAgreement, and(x)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information'and have,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeany'independent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) ofheCompanyorBrooklynUnionoranyoftheirrespective subsidiaries, norhavewebeenfurnished withanysuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenreasonably preparedonbasesreflecting thebestcurrently available estimates and judgments oftheCompany's andBrooklynUnion'smanagement astothefuturefinancial performance ofeachcompany.OurreviewofBrooklynUnion'scurrentandanticipated futureoperations, financial condition andprospects was,withyourconsent,basedentirelyonpublicinformation (exceptforcertainlimitedinternalprojections referredtoabove),andwastherefore limitedinscope.Wehavenothelddiscussions withanymembersofBrooklynUnion'sseniormanagement.
| |
| Withyourconsent,wehaveassumedthattheTransaction willbetreatedastax-freetoboththeCompanyandtheStockholders andwillbeaccounted forasapoolingofinterests.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.Dillon,Read&Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withtheTransaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyandBrooklynUnionforourownaccountandfortheaccountsofourcustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Inrendering thisopinion,weexpressnoviewastotherangeofvaluesatwhichNYECOcommonstockmaytradefollowing consummation oftheTransaction, andwearenotmakinganyrecommendation totheStockholders withrespecttotheadvisability ofdisposing oforretaining suchNYECOcommonstockfollowing theTransaction.
| |
| Baseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thattheConversion Ratioisfair,fromafinancial pointofview,totheStockholders.
| |
| Verytrulyyours,DILLON,READ&CO.INC.
| |
| June26,1997TheBoardofDirectors LongIslandLightingCompany175EastOldCountiyRoadHicksville, NY11801Gentlemen andLadies:Youhaverequested ouropinionastothefairness, fromafinancial poin'tofview,totheLongIslandLightingCompany(the"Company"
| |
| )oftheConsideration tobereceivedpursuanttotheAgreement andPlanofMerger,datedasofJune26,1997(the"LIPAAgreement"
| |
| ),byandainongBLHoldingCorp.("Parerit"),
| |
| theCompany,theLongIslandPowerAuthority
| |
| ("LIPA"),
| |
| andLIPAAcquisition Corp.("LIPASub.")pursuanttowhichLIPASub.willmergewithandintotheCompany(the"LIPATransaction"
| |
| ).PriortotheLIPATransaction, theCompanywillcompleteareorganization pursuanttowhichitsnaturalgasandelectricgeneration businesses, andcertainotherassets,willbedistributed toanewlycreatedsubsidiary orsubsidiaries ofParent.PursuanttotheL1PATransaction, LIPAwillpaytoParent$2,497,500,000 incash(the"Consideration"
| |
| )forthestockoftheCompany,whichwillowntheCompany's electrictransmission anddistribution business("T&DBusiness"
| |
| )andcertainotherassetsoftheCompany,including regulatory assetsofapproximately
| |
| $6.6billion(the"Regulatory Assets")andtheCompany's 18%interestintheNineMilePointTwonuclearplant("NuclearAssets").TheCompanywillalsohaveapproximately
| |
| $3.9billionofdebtandpreferred stockoutstanding andbookvalueofapproximately
| |
| $2.5billionatthetimeofitsmergerwithLIPASub.PursuanttotheLIPATransaction, LIPAandParent(orsubsidiaries thereof)willenterintoancillary agreements pursuanttowhichParent(orsubsidiaries thereof)willprovideelectricity toLIPAandcontinuetomanageessentially allaspectsoftheT&DBusiness("BasicAgreements"
| |
| ).Inarrivingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompany,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompany,including historical andprojected financial information fortheT&DBusiness, theNuclearAssetsandtheRegulatory Assets,(iii)conducted discussions withmembersoftheseniormanagement oftheCompanywithrespecttothebusinessandprospects oftheCompany,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable totheT&DBusiness, (v)comparedpubliclyavailable financial andstockmarketdataforcertainutilities withrelatively highconcentrations ofnucleargeneration tocertainutilities withlittleornonucleargeneration, (vi)reviewedthefinancial termsofcertaintransactions involving transmission anddistribution assets,(vii)considered theproformaeffectoftheLIPATransaction ontheParent'sfinancial condition, (viii)reviewedtheLIPAAgreement, (ix)considered thefinancial termsoftheBasicAgreements, (x)considered theeffectoftheLIPATransaction ontheCompany's pendingshareexchangeagreement withTheBrooklynUnionGasCompany,and(xi)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information andhave,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) oftheCompanyoranyofitssubsidiaries, norhavewebeenfurnished withanysuchevaluation orappraisal.
| |
| Withtrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenreasonably preparedonbasesreflecting thebestcurrently available estimates andjudgments ofmanagement astothefuturefinancial performance oftheCompany,theT&DBusiness, theNuclearAssets,andtheRegulatory Assets.Wehavealso,atyourdirection, reliedonyouradviceregarding thetaxconsequences oftheLIPA Transaction.
| |
| Wehavenotattempted toquantifytheregulatory riskinherentintheRegulatory Assets,whichwillcompriseamajorityoftheassetstheCompanywillownatthetimeoftheLIPATransaction.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.Dillon,Read&Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withtheLIPATransaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyforourownaccountandfortheaccountsofourcustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Inrendering thisopinion,weexpressnoviewastotherangeofvaluesatwhichtheParentcommonstockmaytradefollowing consummation oftheLIPATransaction, andwearenotmakinganyrecommendation tothestockholders oftheCompanywithrespecttotheadvisability ofdisposing oforretaining suchParentcommonstockfollowing theLIPATransaction.
| |
| Baseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thattheConsideration isfair,fromafinancial pointofview,totheCompany.'Verytrulyyours,DILLON,READ&CO.INC.
| |
| June26,1997TheBoardofDirectors LongIslandLightingCompany175EastOldCountryRoadHicksville, NY11801Gentlemen andLadies:Youhaverequested ouropinionastothefairness, fromafinancial pointofview,totheholders(the"Stockholders"
| |
| )ofcommonstock,parvalue$5.00pershare("CompanyCommonStock"),ofLongIslandLightingCompany(the"Company"
| |
| )oftheConversion RatiossetforthintheAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJune26,1997(the"Agreement"
| |
| ),byandamongBrooklynUnionGasCompany("BrooklynUnion")andLongIslandLightingCompany,pursuanttowhichBrooklynUnionandLongIslandLightingCompanyshallcombineandbecomewhollyownedsubsidiaries ofBLHoldingCorp.,anewlycreatedholdingcompany(the"Transaction"
| |
| ).IntheeventtheTransaction isconsummated, eachissuedandoutstanding shareofCompanyCommonStock,otherthansharesofCompanyCommonStocktobecanceledpursuanttheAgreement, shallbeconverted intotherighttoreceive.803(the"Original Ratio")shares,oriftheLIPATransaction isconsummated,
| |
| .88(the"LIPARatio")shares,ofBLHoldingCorp.commonstock,$.01parvalue,andeachshareofBrooklynUnioncommonstock,otherthansharesofBrooklynUnioncommonstocktobecanceledpursuanttotheAgreement, shallbeconverted intotherighttoreceiveoneshareofBLHoldingCorp.commonstock.Inarrivingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompanyandBrooklynUnion,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompanyandBrooklynUnionrelatingtothebusinessandprospects oftheCompanyandBrooklynUnion,(iii)conducted discussions withmembersoftheseniormanagements oftheCompanyandBrooklynUnionwithrespecttothebusinessandprospects oftheCompanyandBrooklynUnion,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable tothoseoftheCompanyandBrooklynUnion,(v)reviewedthehistorical marketpricesandtradingvolumesoftheCompanyCommonStockandthecommonstockofBrooklynUnion,(vi)comparedtheproposedfinancial termsoftheTransaction withthefinancial termsofcertainothermergerswhichwebelievetobegenerally comparable totheTransaction, (vii)analyzedtherespective contributions intermsofrevenue,earnings, cashfiowandcommonequityoftheCompanyandBrooklynUniontothecombinedcompany,andtherelativeownership ofBLHoldingCorp.aftertheTransaction bythecurrentholdersoftheCompanyCommonStockandBrooklynUnioncommonstock,(viii)considered theproformaeffectoftheTransaction ontheCompany's capitalization ratios,earnings, cashflowandbookvaluepershare,(ix)reviewedtheAgreement, and(x)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information andhave,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) oftheCompanyorBrooklynUnionoranyoftheirrespective subsidiaries, norhavewebeenfurnished withanysuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenreasonably preparedonbasesreflecting thebestcurrently available estimates andtjudgments oftheCompany's andBrooklynUnion'smanagement astothefuturefinancial performance ofeachcompany.Withyourconsent,wehavereliedonyouradviceregarding thetaxconsequences oftheTransaction.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.
| |
| Dillon,Read4Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withtheTransaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyandBrooklynUnionforourownaccountandfortheaccountsofour'customers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Inrendering thisopinion,weexpressnoviewastotheratigeofvaluesatwhichBLHoldingCorp.commonstockmaytradefollowing consummation oftheTransaction, andwearenotmakinganyrecommendation totheStockholders withrespecttotheadvisability ofdisposing oforretaining suchBLHoldingCorp.commonstockfollowing theTransaction.
| |
| Baseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thattheOriginalRatioandtheLIPARatioarefair,fromafinancial pointofview,totheStockholders.
| |
| Verytrulyyours,DILLON,READ&CO.INC.ll ANNEXGFORMOFCERTIFICATE OFINCORPORATION OFTHEHOLDINGCOMPANYIiiUNDERSECTION402OFTHEBUSINESSCORPORATION LAWOFTHESTATEOFNEWYORKARTICLEINAMEThenameofthecorporation (the"Corporation"
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| )is"ARTICLEIIPURPOSEIThepurposesforwhichtheCorporation isformedaretoengageinanylawfulactoractivityforwhichcoqiorations maybeorganized undertheNYBCL,buttheCorporation isnotformedtoengageinanyactoractivityrequiring theconsentorapproval" ofanystateofficial, department, board,agencyorotherbodywithoutsuchconsentorapprovalfirstbeingobtained.
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| ARTICLEIIIOFFICETheofficeoftheCorporation istobelocatedintheCountyof,StateofNewYork.ARTICLEIVCAPITALSTOCKSection1.Theaggregate numberofshareswhichtheCorporation shallhav'eauthority toissueshallbe450,000,000 sharesofCommonStock,parvalue$.01pershare,and100,000,000 sharesofPreferred Stock,parvalue$.01pershare.Section2.TheamountofcapitalstockOftheCorporation shallbe$7,000,000.
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| Section3.SharesofPreferred Stockmaybeissuedfromtimetotimeinoneormoreseriesasmaybedetermined fromtimetotimebytheBoardofDirectors.
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| Exceptinrespectoftheparticulars tobefixedbytheBoardofDirectors asprovidedbelow,allsharesofPreferred Stockshallbeofequalrank.AllsharesinanyoneseriesofPreferred Stockshallbealikeineveryparticular exceptthatsharesofanyoneseriesissuedatdifferent timesmaydifferastothedatesfromwhichdividends thereonshallbecumulative.
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| Thevotingrights,ifany,ofeachsuchseriesandthepreferences andrelative, participating, optionalandotherspecialrightsofeachseriesandthequalifications, limitations andrestrictions thereof,ifany,maydifferfromthoseofanyandallotherseries.TheBoardofDirectors shallhavetheauthority tofixbyresolution dulyadoptedpriortotheissuanceofanysharesofaparticular seriesofPreferred Stockdesignated bytheBoardofDirectors, thevoting.rights,if,any,oftheholdersofsharesofsuchseriesandthedesignations, preferences andrelative, participating, optionalndotherspecialrightsofeachseriesand,thequalifications, limitations andrestrictions thereof(the"Preferred StockDesignation"
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| ).G-I rWithoutlimitingthegenerality oftheforegoing authority oftheBoardofDirectors, theBoardofDirectors fromtimetotimemay:(a)establish anddesignate aseriesofPreferred Stock,whichmaybedistinguished bynumber,letterortitlefromotherPreferred StockoftheCorporation oranyseriesthereof;(b)fixandthereafter increaseor,decrease (butnotllelowthenumberofsharesthereofthenoutstanding) thenumberofsharesthatshallconstitute suchseries;(c)providefordividends onsharesof.suchseriesand"ifprovision ismadefordividends, determine thedividendrateandthedatesonwhichdividends, ifdeclared, shallbepayable,whetherthedividends shallbecumulative and,ifcumulative, forwhatdateordatesdividends shallaccrue,andtheotherconditions, ifany,including rightsofpriority, ifany,uponwhichthedividends shallbepaid;.(d)provideastowhetherthesharesofsuchseriesshallberedeemable, andifredeemable, theterms,limitations andrestrictions withrespecttosuchredemption, including withoutlimitation, themannerofselecting sharesforredemption iflessthanallsharesaretoberedeemed, thetimeortimesandthepriceorpricesatwhichthesharesofsuchseriesshallbesubjecttoredemption, inwholeorinpart,andtheamount,ifany,inadditiontoanyaccrueddividends thereonwhichtheholdersofsharesofanyseriesshallbeentitledtoreceiveupontheredemption thereof,whichamountmayvaryatdifferent redemption datesandmaybedifferent withrespecttosharesredeemedthroughtheoperation ofanypurchase; retirement orsinkingfundandwithrespecttosharesotherwise redeemed; (e)fixtheamount,inadditiontoanyaccrueddividends thereon,whichtheholdersofsharesofsuchseriesshallbeentitledtoreceiveuponthevoluntary orinvoluntary liquidation, dissolution orwindingupoftheCorporation, whichamountmayvaryatdifferent datesandmayvarydepending onwhethersuchliquidation, dissolution orwindingupisvoluntary orinvoluntary, andtodetermine anyotherrights,ifany,towhichholdersofthesharesofsuchseriesshallbeentitledintheeventofanyliquidation, dissolution orwindingupoftheCorporation; (f)establish whetherthesharesofsuchseriesshallbesubjecttotheoperation ofapurchase, retirement orsinkingfundandifso,theterms,limitations andrestrictions withrespectthereto,including withoutlimitation, whethersuchpurchase, retirement orsinkingfundshallbecumulative ornoncumulative, theextenttoandthemannerinwhichsuchfundsshallbeappliedtothepurchase, retirement orredemption ofthesharesofsuchseriesforretirement ortoothercorporate purposesandthetermsandprovisions relativetotheoperation thereof;(g)determine theextentofthevotingrights,ifany,ofthesharesofsuchseriesanddetermine whetherthesharesofsuchserieshavingvotingrightsshallhavemultiplevotespershare;II(h)providewhetherornot,thesharesofsuchseriesshallbeconvertible intoorexchangeable forsharesofanyotherclassorclassesofcapitalstockoftheCorporation, including CommonStock,Preferred Stockorofanyseriesthereof,andifconvertible orexchangeable, establish theconversion orexchangepriceorrate,theadjustments thereof,andtheothertermsandconditions, ifany,onwhichsuchshares'shall beconvertible orexchangeable; and)(i)provideforanyotherpreferences, anyrelativeparticipating, optionalorotherspecialrights,anyqualifications, limitations orrestrictions thereof,oranyothertermorprovision ofsharesofsuchseriesastheBoardofDirectors maydeemappropriate ordesirable.
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| 4IISharesofPreferred Stockmaybeissuedby'heCorporation for'suchconsideration asisdetermined bytheBoardofDirectors.
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| IIltSection4.TheCommonStockshallbesubjecttotheexpresstermsofthePreferred Stockandanyseriesthereof.TheholdersofsharesofCommonStockshallbeentitledtoonevoteforeachsuchshareuponallproposals presented totheshareholders onwhichtheholdersofCommonStockareentitledto.vote.Exceptasotherwise providedbylaworbytheresolution orresolutions adoptedbytheBoardofDirectors designating therights,powersandpreferences ofanyseriesofPreferred Stock,theCommonStockshallhavetheexclusive rightG-2 ttovotefortheelectionofDirectors andforallotherpurposes, andholdersofPreferred.
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| Stockshallnotbeentitledtoreceivenoticeofanymeetingofshareholders atwhichtheyarenotentitledtovote.Thenumber-of authorized sharesofPreferred Stockmaybeincreased, ordecreased (butnot,below the.numberofsharesthereofthenoutstanding) bytheaffirmative voteoftheholders,ofamajorityoftheoutstanding sharesofCommonStock,withoutavoteoftheholdersofthePreferred Stock,orofanyseriesthereof,unlessavoteofanysuchholdersisrequiredpursuanttoanyPreferred StockDesignation.
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| TheCorporafion shallbeentitledtotreat'hepersoninwhosenameanyshareofitsstockisregistered astheownerthereofforallpurposesandshallnotbeboundtorecognize anyequitable orotherclaimto,orinterestin,suchshareonthepartofanyotherperson,whetherornottheCorporation shallhavenoticethereof,exceptasexpressly providedbyapplicable law.ARTICLEVSHAREHOLDER ACTIONAnyactionrequiredorpermitted tobetakenbytheshareholders oftheCorporation mustbeeffectedatadulycalledannualorspecialmeetingofsuchholdersandmaynotbeeffectedbyanyconsentinwritingbysuchholders.Exceptasotherwise requiredbylawandsubjecttotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation, specialmeetingsofshareholders oftheCorporation foranypurposeorpurposesmaybecalledonlybytheBoardofDirectors pursuanttoaresolution statingthepurposeorpurposesthereofapprovedbyamajorityofthetotalnumberofDirectors whichtheCorporation wouldhaveiftherewerenovacancies (the"WholeBoard")andanypowerofshareholders tocallaspecialmeetingisspecifically denied.Nobusinessotherthanthatstatedinthenoticeshallbetransacted atanyspecialmeeting.IIARTICLEVIELECTIONOFDIRECTORS UnlessandexcepttotheextentthattheBy-Laws.oftheCorporation shallsorequire,theelectionofDirectors oftheCorporation neednotbebywrittenballot.ARTICLEVIIBOARDOFDIRECTORS Section1.Number,ElectionandTerms.Exceptasotherwise fixedbyorpursuanttotheprovisions ofArticleIVhereofrelatingtotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectadditional Directors
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| 'underspecified circumstances, thenumberoftheDirectors "oftheCorporation shall'befixedfromtime'totimeexclusively pursuanttoaresolution adoptedbyamajorityoftheWholeBoard.NodecreaseinthenumberofDirectors, however,shallshortenthetermofanyincumbent Director.
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| Directors shallbeelectedbytheshareholders oftheCorporation attheirannualmeeting,exceptas'ereinotherwise provided'for newlycreateddirectorships andvacancies, toserveforoneyearoruntiltheirsuccessors are'elected orchosenandqualified.
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| Section2.Shareholder Nomination, of,DirectorCandidates;,
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| Shareholder Propo'sal ofBusiness.
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| Advancenoticeofshareholder nominations fortheelectionofDirectors andoftheproposalofbusinessbyshareholders shallbegiveninthemannerprovidedintheBy-LawsoftheCorporation, asamendedandineffectfromtimetotime.Section3.NewlyCreatedDirectorships andVacancies.
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| Exceptasotherwise providedfororfixedbytorpursuanttotheprovisions ofArticleIVhereofrelating.
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| totherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends or'ponliqui'dation toelectDirectors underspecified circumstances, newlycreateddirecforships resulting fromanyincreaseinthenumberofDirectors andG-3 anyvacancies ontheBoardofDirectors resulting fromdeath,resignation, disqualification, removalorother.causeshallbefilledbytheaffirmative voteofamajorityoftheremaining Directors theninoffice,eventhoughlessthanaquorumoftheBoardofDirectors, andnotbytheshareholders.
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| AnyDirectorelectedinaccordance withthepre'ceding sentenceshallholdofficefortheremainder ofsuchunexpired termoruntilsuchDirector's successor shallhavebeendulyelectedorchosenandqualified.
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| NodecreaseinthenumberofDirectors constituting theBoardofDirectors shallshortenthetermofanyincumbent Director.
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| Section4.Removal.SubjecttotherightSofanyclassorseriesofstockhayingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underspecified circumstances, anyDirectormayberemovedfromoffice.onlyforcausebytheaffirmativ voteoftheholdersofatleastamajorityofthevotingpowerofallsharesoftheCorporation entitledtovotegenerally intheelectionofDirectors (the"VotingStock")thenoutstanding, votingtogetherasasingleclass.Section5.Amendmcnt, Repeal,Etc.Notwithstanding anythingcontained inthisCertificate ofIncorporation tothecontrary, theaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass,shallberequiredtoalter,amend,adoptanyprovision inconsistent withorrepealthisArticleVII.iARTICLEVIIIBY-LAWS"TheBy-LawsmaybealteredorrepealedandnewBy-Lawsmaybeadopted(1)atanyannualorspecialmeetingofshareholders, bytheaffirmative voteoftheholdersofamajorityofthevotingpowerofthestockissuedandoutstanding andentitledtovotethereat,provided, however,thatanyproposedalteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section2.2,2.7or2.10ofArticleIIoftheBy-LawsorwithSection3.9or3.11ofArticleIIIoftheBy-Laws,bytheshareholders shallrequiretheaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass;andprovided, further,however,thatinthecaseofanysuchshareholder actionataspecialmeetingof~shareholders, noticeoftheproposedalteration, repealoradoptionofthenewBy-LaworBy-Lawsmustbe~contained inthenoticeofsuchspecialmeeting,or(2)bytheaffirmative voteofamajorityoftheWhole'oard; providedthatanyproposedalteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section4.9or4.11oftheArticleIVoftheBy-LawsbytheBoardof'Directors shallrequirethevoteoftwo-thirds oftheWholeBoard.ARTICLEIXAMENDMENT OFCERTIFICATE OFINCORPORATION TheCorporation reservestherightatanytimefromtimetotimetoamend,alter,changeorrepealanyprovision contained inthisCertificate ofIncorporation, andanyotherprovisions authorized bythelawsoftheStateofNewYorkatthetimeinforcemaybeaddedorinserted, inthemannernoworhereafter prescribed bylaw;and,exceptassetforthinArticlesXIVandXV,allrights,preferences andprivileges ofwhatsoever natureconferred uponshareholders, Directors oranyotherpersonswhomsoever byandpursuanttothisCertificate ofIncorporation initspresentformorashereafter amendedareglantedsubjecttotherightreservedinthisArticle.Notwithstanding anythingcontained inthisCertificate ofIncorporation tothecontrary, theaffirmative voteoftheholdersofat"least80%oftheVotingStockthenoutstanding, votingtogetherasasingleclass,shallberequiredtoalter,amend,adoptanyprovision inconsistent withorrepealArticleV,VII,VIIIorthissentence.
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| hARTICLEXAGENTFORSERVICEOFPROCESSTheSecretary ofStateoftheStateofNewYorkisdesignated asagentoftheCorporation uponwhomprocessagainsttheCorporation maybeserved.ThepostofficeaddresstowhichtheSecretary ofStateshallmailacopyofanyprocessagainsttheCorporation serveduponhimis>>c/oCTCorporation System,1633Broadway, NewYork,NewYork10019.
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| ARTICLEXIREGISTERED AGENTThenameandaddressoftheregistered agent,whichistobetheagentoftheCorporation uponwhomprocessagainstitmaybeserved,areCTCorporation System,1633Broadway, NewYork,NewYork10019.ARTICLEXIIDURATIONThedurationoftheCorporation shallbeperpetual.
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| ARTICLEXIIINOPREEMPTIVE RIGHTSTheholdersofequitysharesandtheholdersofvotingshares(aseachtermisdefinedinSection622oftheNYBCL)oftheCorporation shallnothaveanypreemptive rights.ARTICLEXIVLIMITEDLIABILITY; INDEMNIFICATION Section1.Eachpersonwhowasorismadeapartyoristh'reatened tobemadeapartytoorisinvolvedinanyaction,suitorproceeding, orappealthereof,whethercivil,criminal, administrative orinvestigative (hereinafter a"proceeding"),
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| byreasonofthefactthatheorshe,orapersonOfwhomheorsheisthelegalrepresentative, isorwasaDirectororofficeroftheCorporation orisorwasservingattherequestoftheCorporation asaDirector, officer,employeeoragentofanothercorporation orofapartnership, jointventure,trustorotherenterprise, including servicewithrespecttoemployeebenefitplans,whetherthebasisofsuchproceeding isallegedactioninanofficiacapacityasaDirector, officer,employeeoragentorinanyothercapacitywhileservingasaDirector, officer,employeeoragent,shallbeindemnified andheldharmlessbytheCorporation tothefullestextentauthorized bytheNYBCL,asthesameexistsormayhereafter beamended(but,inthecaseofanysuchamendment, onlytotheextentthatsuchamendment'permits theCorporation toprovidebroaderindemnification rightsthansaidlawpermitted theCorporation toprovidepriortosuchamendment),
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| againstallexpense,liability andloss(including, butnotlimitedto,allattorneys'ees, judgments, fines,ERISAexcisetaxesorpenalties andamountspaidortobep'aidinsettlement) reasonably incurredorsufferedbysuchpersoninconnection therewith andsuchindemnification shallcontinueastoapersonwhohasceasedtobeaDirector, officer,employeeoragentandshallinuretothebenefitofhisorherheirs,executors andadministrators;
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| : provided, however,that,exceptasprovidedinSection2ofthisArticleXIV,theCorporation shallindemnify anysuchpersonseekingindemnification inconnection withaproceeding (orpartthereof)initiated bysuchpersononlyifsuchproceeding (orpartthereof)wasauthorized bytheBoardofDirectors oftheCorporation.
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| Therighttoindemnification conferred inthisSection1shallbeacontractrightandshallincludetherighttobepaidbytheCorporation theexpenses(including, withoutlimitation, attorneys'ees) incurredindefending anysuchproceeding inadvanceofitsfinaldisposition;
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| : provided, however,that,iftheNYBCLrequires, thepaymentofsuchexpensesincurredbyaDirectororofficerinhisorhercapacityasaDirectororofficer(andnotinanyothercapacityinwhichservicewasorisrenderedbysuchpersonwhileaDirectororofficer,including, withoutlimitation, servicetoanemployeebenefitplan)inadvanceofthefinaldisposition ofaproceeding shallbemadeonlyupondeliverytotheCorporation ofanundertaking, byoronbehalfofsuchDirectororofficer,torepayallamountssoadvancedifitshallultimately bedetermined thatsuchDirectororofficerisnotentitledtobeindemnified underthisArticle,XIVorotherwise.
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| TheCorporation may,byactionofitsBoardofDirectors, provideindemnification toemployees andagentsoftheCorporation withthesamescopeandeffectastheforegoing indemnification ofDirectors andofficers, oron'suchothertermsandconditions astheBoardofDirectors maydeemnecessary ordesirable.
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| G-5 Section2.IfaclaimunderSection1ofthisArticle'XIV isnotpaidinfullbytheCorporation withinthirtydaysafterawrittenclaimhasbeenreceivedbytheCorporation, theclaimantmayatanytimethereafter bringsuitagainsttheCorporation torecovertheunpaidamountoftheclaimand,ifsuccessful inwholeorinpart,theclaimantshallbeentitledtobepaidalsotheexpense(including, withoutlimitation, attorneys'ees) ofprosecuting suchclaim.,It shallbeadefensetoanysuchaction(otherthananactionbroughttoenforceaclaimforexpensesincurredindefending anyproceeding inadvanceofitsfinaldisposition wheretherequiredundertaking, ifanyisrequired, hasbeentenderedtotheCorporation) thattheclaimanthasnotmetthestandards ofconductwhichmakeitpermissible undertheNYBCLfortheCorporation toindemnify theclaimantfortheamountclaimed,buttheburdenofprovingsuchdefenseshallbeontheCorporation.
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| NeitherthefailureoftheCorporation (including itsBoardofDirectors, oranypartthereof,independent legalcounsel,oritsshareholders) tohavemadeadetermination priortothecommencement ofsuchactionthatindemnification oftheclaimantisproperinthecircumstances becauseheorshehasmettheapplicable standardofconductsetforthintheNYBCL,noranactualdetermination bytheCorporation (including itsBoardofDirectors, oranypartthereof,independent legalcounsel,oritsshareholders) thattheclaimanthasnotmetsuchapplicable standardofconduct,shallbeadefensetotheactionorcreateapresumption thattheclaimanthasnotmettheapplicable standardofconduct.Section3.Therighttoindemnification andthepaymentofexpensesincurredindefending aproceeding inadvanceofitsfinaldisposition conferred inthisArticleXIVshallnotbeexclusive ofanyotfierrightwhichanypersonmayhaveorhereafter acquireunderanystatute,provision oftheCertificate ofIncorporation, By-Law,agreement; voteofshareholders ordisinterested Directors orotherwise.
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| Section4.TheCorporation maymaintaininsurance, atitsex'pense,"
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| toprotectitselfandanyDirector, officer,employeeoragentoftheCorporation oranothercorporation, partnership, jointventure,trustorotherenterprise againstanyexpense,liability orloss,tothefullestextentallowedbylaw,whetherornottheCorporation wouldhavethepowertoindemnify suchpersonagainstsuchexpense,liability orlossundertheNYBCL.ARTICLEXVDIRECTORLIABILITY ADirectoroftheCorporation shallnotbepersonally liabletotheCorporation oritsshareholders fordamagesforanybreachofdutyinsuchcapacityexceptthattlteliability ofaDirectorshallnotbesolimitedif(1)ajudgmentorotherfinaladjudication adversetohimestablishes thathis'actsoromissions wereinbadfaithorinvolvedintentional misconduct oraknowing.violation oflaworthathep'ersonally gainedinfactafinancial profitorotheradvantage towhichhewasnotlegallyentitledorthathisactsviolatedSection'719 oftheNYBCL,or(2)hisactsoromissions occurredpriortotheadoptionofthisprovision.
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| Noamendment toorrepealofthisArticleXVshallapplytoorhaveanyeffectontheliability orallegedliability ofanyDirectoroftheCorporation fororwithrespecttoanyactsoromissions ofsuchDirectoroccurring priortosuchamendment orrepeal.IftheNYBCLisamendedhereafter toexpandorlimittheliability ofa,director, thentheliability ofaDirectoroftheCorporation shallbeexpandedtotheextentrequiredorlimitedtotheextentpermitted bythe'NYBCL, assoamended.G-6 FORMOFBY-LAWSOFTHEHOLDINGCOMPANYINCORPORATED UNDERTHELAWSOFTHESTATEOFNEWYORKANNEXHARTICLEIOFFICESANDRECORDSSection1.1.NewYorkOAice.TheofficeoftheCorporation intheStateofNewYorkshallbelocatedintheCountyofISection1.2.OtherOffices.TheCorporation mayhavesuchotheroffices,,either withinorwithouttheStateofNewYork,astheBoardofDirectors maydesignate, orasthebusinessoftheCorporation mayfromtimetotimerequire.Section1.3.BooksandRecords.ThebooksandrecordsoftheCorporation maybekeptoutsidetheStateofNewYorkatsuchplaceorplacesasmayfromtimetotimebedesignated bytheBoardofDirectors.
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| ARTICLEIISHAREHOLDERS Section2.1.AnnualMeeting.Theannualmeetingoftheshareholders oftheCorporation shallbeheld~~~onsuchdateandatsuchtimeasmaybefixedbyresolution oftheBoardofDirectors.
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| Section2.2.SpecialMeeting.Exceptasotherwise requiredbylawandsubjecttotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation, specialmeetingsofsliareholders oftileCorporation foranypurposeorpurposesmaybecalledonlybytheBoardofDirectors pursuanttoaresolution statingthepurposeorpurposesthereofapprovedbyamajo'rity ofthetotalnumberofDirectors whichtheCorporation would'have iftherewerenovacancies (the"WholeBoard").tSection2,3.PlaceofMeeting.TheBoardofDirectors maydesignate theplaceofmeetingfor-anyannualmeetingorforanyspecialmeetingoftheshareholders.
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| Ifnodesignation issomade,theplaceofmeetingshallbetheprincipal officeoftheCorporation.
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| IIISection2.4,NoticeofMeeting.Writtenorprintednotice,statingtheplace,dayandhourofthemeetingandthepurposeorpurposesforwhichthemeetingiscalled,shallbedelivered bytheCorporation notlessthan10calendardaysnormorethan50calendardaysbeforethedateoftheineeting, eitherpersonally orbymail,toeachshareholder:of recordentitledtovoteatsuchmeeting.Ifmailed,suchnoticesliallbedeemedtobedelivered whendeposited intheUnitedStatesmailwithpostagethereonprepaid,addressed totheshareholder atsuchperson'saddressasitappearsonthestocktransferbooksoftheCorporation.
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| Suchfurthernoticeshallbegivenasmayberequiredbylaw.Onlysuchbusinessshallbeconducted ataspecialmeetingofshareholders asshallhavebeenbroughtbeforethemeetingpursuanttotheCorporation's noticeofmeeting.Meetingsmaybeheldwithoutnoticeifallshareholders entitledtovotearepresent,orifnoticeiswaivedbythosenotpresentinaccordance withSection6.4oftheseBy-Laws.Any'reviously scheduled meetingoftheshareholders maybepostponed, andanyspecialmeetingoftheshareholders maybecanceled, byresolution oftheBoardofDirectors uponpublicnoticegivenpriortothedatepreviously scheduled forsuchmeetingofshareholders.
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| H-1
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| ,Section2.5.QuorumandAdjournment; Voting.Exceptasotherwise providedbylaworbytheCertificate ofIncorporation, theholdersofamajorityofthevotingpowerofalloutstanding sharesoftheCorporation entitledtovotegenerally intheelectionofDirectors (the"VotingStock"),represented inpersonorbyproxy,shallconstitute aquorumatameetingofshareholders, exceptthatwhenspecified businessistobevotedonbyaclassorseriesofstockvotingasaclass,theholders,ofamajorityofthesharesofsuchclassorseriesshallconstitute aquorumofsuchclassorseriesforthetransaction ofsuchbusiness.
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| TheChairmanofthemeetingmayadjournthemeetingfromtimetotime,whether'or nottherei8suchaquorum.Nonoticeofthetimeandplaceofadjourned meetingsneedbegivenexcepta'srequiredbylaw.Theshareholders presentatadulycalledmeetingatwhichaquorumispresentmaycontinuetotransactbusinessuntiladjournment, notwithstanding thewithdrawal ofenoughshareholders toleavelessthanaquorum.ISection2.6.Proxies.Atallmeetingsofshareholders, ashareholder mayvotebyproxyexecutedinwriting(or,insuchmannerprescribed bythe,NewYorkBusinessCorporation Law(the,"NYBCL"))
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| bytheshareholder, orbysuchperson'sdulyauthorized attorneyinfact.Section2.7.NoticeofShareholder BusinessandNominations.
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| '4T(A)AnnualMeetingsofShareholders.
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| (1)Nominationsof personsforelectiontotheBoardofDirectors oftheCorporation andtheproposalofbusinesst'obeconsidered bytheshareholders maybemadeatanannualmeetingofshareholders,(a) pursuanttotheCorporation's noticeofmeetingpursuanttoSection2.4oftheseBy-Laws,(b)byoratthedirection oftheBoardofDirectors or(c)byanyshareholder oftheCorporation whowasashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisBy-Law,whoisentitledtovoteatthemeetingandwhocomplieswiththenoticepiocedures setforthinthisBy-Law.(2)Fornominations orotherbusinesstobeproperlybroughtbeforeanannualmeetingbyashareholder "pursuanttoclause(c)ofparagraph (A)(1)ofthisBy-Law,theshareholder musthavegiventimelynoticethereofinwritingtotheSecretary oftheCorporation andsuchotherbusinessmustotherwise beapropermatterforshareholder action.Tobe,timely,ashareholder's noticeshallbedelivered totheSecretary attheprincipal executive officesoftheCorporation notlaterthanthecloseofbusinessonthe60thcalendardaynorearlierthanthecloseofbusinessonthe90thcalendardaypriortothefirstanniversary ofthepreceding year'sannualmeeting;plovided, however,thatintheeventthatthedateoftheannualmeetingismorethan30calendardaysbeforeormorethorn60calendardaysaftersuchanniversary date,notice,bytheshareholder tobetimelymustbesodelivered notearlierthanthe,closeofbusinessonthe90thcalendarday,prior tosuchannualmeetingandnotlaterthanthecloseofbusinessonthelaterofthe60thcalendardaypriortosuchannualmeetingorthe10thcalendardayfollowing thecalendardayonwhichpublicannouncement ofthedateofsuchmeetingisfirstmadebytheCorporation.
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| Forpurposesofdetermining whetherashareholder's noticeshallhavebeendelivered inatimelymannerfortheannualrqeetingofshareholders in199,thefirstanniversary ofthepreviousyear'meetingshallbedeemedtobe,,199.Innoeventshallthepublicannouncement ofanadjournment ofanannualmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.Suchshareholder's noticeshallsetforth(a)astoeachpersonwhomtheshareholder proposestonominateforelectionorreelection asaDirectorallinformation relatingtosuchpersonthatisrequiredtobedisclosed insolicitations ofproxiesfor,electionofDirectors inanelectioncontest,orisotherwise
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| : required, ineachcasepursuanttoRegulation 14Aunder'heSecurities ExchangeActof1934,asamended(the"Exchange Act")andRule14a-11thereunder (including suchperson'swrittenconsenttobeingnamedintheproxystatement asanomineeandtoservingasaDirectorifelected);
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| (b)astoanyotherbusinessthattheshareholder proposestobringbeforethemeeting,abriefdescription ofthebusinessdesiredtobebroughtbeforethemeeting,thereasonsforconducting such,businessatthemeetingandanymaterialinterestinsuchbusinessofsuchshareholder andthebeneficial owner,ifany,onwhosebehalftheproposalismade;and(c)astotheshareholder givingthenoticeandthe,beneficial owner,ifany,onwhosebehalfthenomination orproposaliSmade(i)thenameandaddressofsuchshareholder, as'theyappearontheCorporation's books,andofsuchbeneficial ownerand(ii)theclassandnumberofsharesoftheCorporation whichareownedbeneficially andofrecordbysuchshareholder andsuchbeneficial owner.H-2 (3)Notwithstanding anythinginthesecondsentenceofparagraph (A)(2)ofthisBy-La'wtothecontrary, intheeventthatthenumberofDirectors tobeelectedtotheBoardofDirectors oftheCorporation isincreased andthereisnopublicannouncement by'heCorporation namingallofthenomineesforDirectororspecifying thesize'oftheincreased Boardof.Directors atleast70calendardayspriortothefirstanniversary ofthepreceding year'sannualmeeting,ashareholder's" notice.requiredbythisBy-Lawshallalsobeconsidered timely,butonlywithrespecttonomineesforanynewpositions createdbysuchincrease, ifitshillbedelivered totheSecretary attheprincipal executive officesoftheCorporation notlaterthanthecloseofbUsinessonthe10thcalendardayfollowing thedayonwhichsuchpublicannouncement isfirstmadebytheCorporation.
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| (B)SpecialMeetingsofShareholders.
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| Nominations ofpersonsforelectiontotheBoardofDirectors maybemadeataspecialmeetingofshareholders atwhichDirectors aretobeelectedpursuanttotheCorporation's noticeofmeeting(a)byoratthedirection oftheBoardofDirectors or(b)providedthattheBoardofDirectors hasdetermined thatDirectors shallbeelectedatsuchmeeting,byanyshareholder oftheCorporation whoisashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisBy-Law,whoshallbe,entitledtovoteatthemeetingandwhocomplieswiththenoticeprocedures setforthinthisBy-Law,IntheeventtheCorporation callsaspecialmeetingofshareholders forthepurposeofelectingoneormoreDirectors totheBoardofDirectors, anyshareholder maynominateapersonorpersons(asthecasemaybe),forelectiontosuchposition(s) asspecified intheCorporation's noticeofmeetingpursuanttoclause(b)ofthepreceding
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| : sentence, iftheshareholder's noticecomplying withthereq'uirements'of clauses(a)and(c)ofparagraph (A)(2)ofthisBy-Lawshallbedelivered totheSecretary attheprincipal executive officesoftheCorporation notearlierthanthecloseofbusinessonthe90thcalendardaypriortosuchspecialmeetingandnotlaterthanthecloseofbusinessonthelaterofthe60thcalendardaypriortosuchspecialmeetingorthe10thcalendardayfollowing, thedayonwhichpublicannouncement isfirstmadeofthedateofthespecialmeetingandofthenomineesproposedbytheBoardofDirectors tobeelectedatsuchmeeting.Innoeventshallthepublicannouncement ofanadjournment ofaspecialmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.,Pt(C)General.(I)Onlysuchpersonswhoarenominated inaccordance withtheprocedures setforthinthisBy-Lawshallbeeligible, toserveasDirectors andonlysuchbusinessshallbeconducted atameetingofshareholders asshallhavebeenbroughtbefore.themeetinginaccordance withtheprocedures setforthinthisBy-Law.Exceptasotherwise providedbylaw,theCertificate ofIncorporation ortheseBy-Laws,theChairman'ofthemeetingshallhavethepoweranddutytodetermine whetheranomination oranybusinessproposedtobebroughtbeforethemeetingwasmadeorproposed, asthecasemaybe,inaccordance withtheprocedures setforthinthisBy-Lawand,ifanyproposednonjnation orbusinessisnotincompliance withthisBy-Law,todeclaretliatsuchdefective proposalornomination shallbedisregarded.
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| (2)ForpurposesofthisBy-Law,"publicannouncement" shallmeandisclosure inapressreleasereportedbytheDowJonesNewsService,Associated Pressorcomparable nationalnewsserviceorinadocumentpubliclyfiledbytheCorporation withtheSecurities andExchangeCommission pursuanttoSection13,14or15(d)oftheExchangeAct.(3)Notwithstandin'g theforegoing provisions ofthisBy-Law,ashareholder shall'also complywithallapplicable requirements oftheExchangeActandtherulesandregulations thereunder withrespecttothematterssetforthinthisBy-Law.NothinginthisBy-Lawshallbedeemedtoaffectanyrights(i)ofshareholders torequestinclusion ofproposals intheCorporation's proxystatement pursuant'to Rule14a-8undertheExchangeActor(ii)oftheholdersofanyseriesofPreferred StocktoelectDirectors underanapplicablb Preferred StockDesignation (asdefinedintheCertificate ofIncorporation).
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| Section2.8.Procedure forElectionofDirectors; RequiredVote.ElectionofDire'ctors atallmeetingsoftheshareholders atwhichDirectors aretobeelectedshallbebyballot,and,subjecttotherightsoftheholdersofanyseriesofPreferred StocktoelectDirectors underanapplicable Preferred StockDesignation',
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| aplurality ofthevotescastthereatshallelectDirectors.
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| Exceptasotherwise providedbylaw,theCertificate ofIncorporation, Preferred StockDesignation, ortheseBy-Laws,inallmattersotherthantheelectionofDirectors, theaffirmative tvoteofamajority'of thevotingpowerofthesharespresentinpersonorrepresented byproxyatthemeetingandentitledtovoteonthemattershallbetheact'oftheshareholders.
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| H-3 Section2.9.Inspectors ofElections; OpeningandClosingthePolls.TheBoardofDirectors byresolution shallappoint,orshallauthorize anofficeroftheCorporation toappoint,oneormoreinspectors, whichinspector orinspectors mayincludeindividuals whoservetheCorporation inothercapacities, including, withoutlimitation, asofficers, employeesagents orrepresentatives, toactatthemeetingsofshareholders andmakeawrittenreportthereof.Oneormorepersonsmaybedesignated, asalternate inspector(s) toreplaceanyinspector whofailstoact.Ifnoinspector oralternate hasbeenappointed toactorisabletoactatameetingofshareholders, theChairmanofthemeetingshallappointoneormoreinspectors.to actatthemeeting.Eachinspector, beforedischarging "suchperson'sduties,shalltakeandsignanoathfaithfully toexecutethedutiesofinspector withstrictimpartiality andaccording tothebestofsuchperson'sability.Theinspector(s) shallhavethedutiesprescribed bylaw.TheChairmanofthemeetingshallfixandannounceatthemeetingthedateandtimeoftheopeningandtlieclosingofthepollsforeachmatteruponwhichtheshareholders will'voteat.ameeting.Section2.10.NoShareholder ActionbyWrittenConsent.Anyactionrequiredorpermitted tobetakenbytheshareholders oftheCorporation mustbeeffectedatadulycalledannualorspecialmeetingofsuchholdersandmaynotbeeffectedbyanyconsentinwritingbysuchholders.ARTICLEIIVBOARDOFDIRECTORS Section3,1.GeneralPowers.ThebusinessandaffairsoftheCorporation shallbemanagedunderthedirection oftheBoardofDirectors.
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| Inadditiontothepowersandauthorities bytheseBy-Lawsexpressly conferred uponthem,theBoardofDirectors mayexerciseallsuchpowersoftheCorporation anddoallsuchlawfulactsandthingsasarenotbystatuteorbytheCertificate ofIncorporation orbytheseBy-Lawsrequiredtobeexercised ordonebytheshareholders.
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| ADirectorofthisCorporation neednotbeashareholder therein.Section3.2.NumberandTenure.Exceptasotherwise fixedbyorpursuanttotheprovisions ofArticleIVofthe'Certificate ofI'ncorporation relatingtotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends orupon'iquidation toelectadditional Directors underspecified circumstances, thenumberoftheDirectors oftheCorporation shallbefixedfromtimetotimeexclusively pursuant'toaresolution adoptedbyamajorityoftheWholeBoard.NodecreaseinthenumberofDirectors, however,shallshortenthe'termofanyincumbent Director.
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| Directors shallbeelectedbytheshareholders oftheCorporation attheirannualmeeting,exceptashereinotherwise providedforvacancies andnewlycreateddirectorships, inthemannerprovidedinArticleIIhereof,toserveforoneyearoruntiltheirsuccessors areelectedorchosenandqualified.
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| LSection3.3.RegularMeetings.
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| AregularmeetingoftheBoardofDirectors shallbeheldwithoutothernoticethanthisBy-Lawiminediately after,andatthesameplaceas,theannualmeetingofshareholders.
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| TheBoardofDirectors may,byresolution, providethetimeandplacefortheholdingofadditional regularmeetingswithoutothernoticethansuchresolution.
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| Section3.4,SpecialMeetings.
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| SpecialmeetingsoftheBoardofDirectors shallbecalledattherequestof,theChairmanoftheBoard,thePresident oramajorityoftheBoardofDirectors theninoffice.Thepersonorpersonsauthorized tocallspecialmeetingsoftheBoardofDirectors mayfixtheplace,and timeofthemeetings.
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| Section3.5,Notice.NoticeofanyspecialmeetingofDirectors shallbegiventoeachDirectoratsuchperson'sbusinessorresidence inwritingbyhanddelivery, first-class orovernight mailorcourierservice,telegramorfacsimile transmission, ororallybytelephone.
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| Ifmailedbyfirst-class mail,suchnoticeshallbedeemedadequately delivered whendeposited intheUnitedStatesmailssoaddressed, withpostagethereonprepaid,atleast5calendardaysbeforesuchmeeting.Ifbytelegram, overnight mailorcourierservice,suchnoticeshallbedeemedadequately delivered whenthetelegramisdelivered tothetelegraph companyorthenoticeisdelivered totheovernight mailorcourierservicecompanyatleast24hoursbeforesuchmeeting.IfbyH-4 tfacsimile transmission, suchnoticeshallbe.deemedadequately delivered whenthenoticeistransmitted atleast12hoursbeforesuchmeeting.ifbytelephone orbyhanddelivery, thenoticeshallbegivenatleast12hourspriortothetimesetforthemeeting.Neitherthebusinesstobetransacted at,northepurposeof,anyregularorspecialmeetingoftheBoardofDirectors.
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| needbespecified inthenoticeofsuchmeeting,exceptforamendments totheseBy-Laws.Ameetingmaybeheldatany'imewithoutnoticeifalltheDirectors arepresentorifthosenotpresentwaivenotice,ofthemeetingeitherbeforeoraftersuchmeeting.'tIISection3.6.ActionbyConsentofBoarclofDirectors.
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| Anyactionrequiredorpermitted tobetakenatanymeetingoftheBo'ardofDirectors orofanycommittee thereofmaybetakenwithoutameetingifallmembersoftheBoardorcommittee, asthecase,maybe,consenttheretoinwriting,andthewritingorwritingsarefiledwiththeminutesofproceedings oftheBoardorcommittee.
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| IISection3.7.Conference Telephone Meetings.
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| MembersoftheBoardofDirectors oranycommittee thereofmayparticipate inameetingoftheBoardofDirectors orsuchcommittee bymeansofconference telephone orsimilarcommunications equipment bymeansofwhichallpersonsparticipating inthemeetingcanheareachother,andsuchparticipation inameetingshallconstitute presenceinpersonatsuchmeeting.Section3.8.Quorum.SubjecttoSection3.9,awholenumberofDirectors equaltoatleastamajorityoftheWholeBoardshallconstitute aquorumforthetrans'ac'tion oFbusiness, butifatanymeetingoftheBoardofDirectors thereshallbelessthanaquorumpresent,amajorityoftheDirectors presentmayadjournthemeetingfromtimetotimewithoutfurthernotice.TheactofthemajorityoftheDirectors presentatameetingatwhichaquorumispresentshallbetheactoftheBoardofDirectors.
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| TheDirectors presentatadulyo'rganized meetingmaycontinuetotransactbusinessuntiladjournment, notwithstanding thewithdrawal ofenoughDirectors toleavelessthanaquorum.lfSection3.9.Vacancies.
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| Exceptasotherwise providedfororfixedbyorpursuanttotheprovisions ofArticleIVoftheCertifiicate ofIncorporation xelatingtothe'rights oftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underspecified circumstances, newly'reated directorships resulting fromanyincreaseinthenumberofDirectors andanyvacancies ontheBoardofDirectors resulting fromdeath,resignation, disqualification, removalorothercauseshallbefilledbytheaffirmative voteofamajorityoftheremaining Directors theninoffice,eventhoughlessthanaquorumoftheBoardofDirectors.
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| Anydirectorelectedinaccordance withthep'receding sentenceshallholdofficefortheremainder ofsuchunexpired termoruntilsuchDirector's successor shallhavebeendulyelectedorchosenandqualifie'd.
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| NodecreaseinthenumberofDjrectors constituting theBoardofDirectors shallshortenthet'ermofanyincumbent Director.
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| SgSection3.10.Committees, (a)TheBoardofDirectors may,byresolution adoptedbyamajorityoftheWholeBoard,designate committees toexercise,
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| 'subjecttoapplicable provisions oflaw,anyorallthepowersoftheBoardinthemanagement ofthe'business andaffairsoftheCorporation whentheBoardisnotinsession,including withoutlimitation thepowertodeclaredividends andtoauthorize theissuanceoftheCorporation's capitalstock.Eachsuchcommittee shallconsistoftwoormoreDirectors oftheCorporation.
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| TheBoardmaydesignate oneormoreDirectors asalternate membersofanycommittee, whomayreplaceanyabsentordisqualified memberatanymeetingofthecommittee, Anysuchcommittee maytotheextentpermitted bylawexercisesuchpowersandshallhavesuchresponsibilities asshallbespecified inthedesignating resolution.
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| Intheabsenceordisqualification ofanymemberofsuchcommittee orcommittees, themeinberormembersthereofpresentatanymeetingandnotdisqualified fromvoting,whetherornotconstituting aquorum,mayunanimously appointanothermemberoftheBoardtoactatthemeetingintheplaceofanysuchabsentordisqualified member.Eachcommittee shallkeepwrittenminutesofitsproceedings andshallreportsuchproceedings totheBoardwhenrequired.
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| 'b)Amajorityofanycommittee maydetermine itsactionandfixthetimeandplaceofitsmeetings, unlesstheBoardshallotherwise.
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| provide.Notice,ofsuchmeetingsshallbe'giventoeachmemberofthecommittee inH-'5 themannerprovidedforinSection3.5oftheseBy-Laws.TheBoardshall=havepoweratanytimetofillvacancies in,tochangethemembership of,ortodissolveanysuchcommittee.
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| NothinghereinshallbedeemedtopreventtheBoardfromappointing oneormorecommittees consisting inwholeorinpartofpersonswhoarenotDirectors oftheCorporation;
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| : provided, however,thatnosuchcommittee shallhaveormayexerciseanyauthority oftheBoard.Section3.11.,Removal.
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| Subjecttotherightsofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underspecified circumstances, anyDirectormayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass.Section3.12,Records.TheBoardofDirectors shallcausetobekeptarecordcontaining theminutesoftheproceedings ofthemeetingsoftheBoardandoftheshareholders, appropriate stockbooksandregisters andsuchbooksofrecordsandaccountsasmaybenecessary fortheproperconductofthebusinessoftheCorporation.
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| ARTICLEIV"OFFICERS'I, Section4.1.ElectedOfficers.
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| TheelectedofficersoftheCorporation shallbeaChairmanoftheBoardofDirectors, aChiefExecutive Officer,aPresident, aSecretary, aTreasurer, andsuchotherofficers(including, withoutlimitation, SeniorVicePresidents andExecutive VicePresidents andVicePresidents) astheBoardof.Directors fromtimetotimemaydeemproper.TheChairmanoftheBoardshallbechosenfromamongtheDirectors.
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| AllofficerselectedbytheBoardofDirectors shalleachhavesuchpowersanddutiesasgenerally pertaintotheirrespective offices,subjecttothespecificprovisions ofthisArticleIV.Suchofficersshallalsohavesuchpowersanddutiesasfromtimetotimemaybeconferred bytheBoardofDirectors orbyany~committee thereof.TheBoardoranycommittee thereofmayfromtimetotimeelectsuchotherofficers~(including oneormoreVicePresidents, Controllers, Assistant Secretaries andAssistant Treasurers),
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| asmaybenecessary ordesirable fortheconductofthebusinessof,theCorporation.
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| SuchotherofficersandagentsshallhavesuchdutiesandshallholdtheirofficesforsuchtermsasshallbeprovidedintheseBy-Lawsorasmaybeprescribed bytheBoardorsuchcommittee, asthecasemaybe.Section4.2.ElectionandTermofOffice.ExceptasprovidedinSection4.1l,theelectedofficersoftheCorporation shallbeelectedannuallybytheBoardofDirectors attheregularmeetingoftheBoardofDirectors heldaftertheannualmeetingoftheshareholders.
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| Iftheelectionofofficersshallnotbeheldatsuchmeeting,suchelectionshallbeheldassoonthereafter asconvenient.
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| Eachofficershallholdofficeuntilsuchperson'ssuccessor shallhavebeendulyelectedandshallhavequalified oruntilpuchperson'sdeathoruntilheshallresignorberemovedpursuanttoSection4.9.Section4.3.Cliairman oftheBoard.TheChairmanoftheBoardshallpresideatallmeetingsoftheshareholders andoftheBoardofDirectors.
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| TheChairmanofthe'Board shallperformallsuchotherdutiesasareproperlyrequiredofhimbytheBoardofDirectors.
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| TheChairmanoftheBoardmayalsoserveasPresident, ifsoelectedbytheBoard.TheDirectors alsomayelectaVice-Chairman toactintheplaceoftheChairmanuponhisorherabsenceorinability toact.'Section4.4.ChiefExecutive Officer.TheChiefExecutive'fficer oftheCorporation shallberesponsible forthegeneralmanagement oftheaffairsoftheCorporation andshallmakereportstotheBoardofDirectors andthe'shareholders, andshallseethatallordersandresolutions oftheBoardofDirectors andofanycoinmittee thereofarecarriedintoeffect.tSection4.5.President.
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| ThePresident shallactinageneralexecutive capacityandshallassisttheChiefExecutive Officerintheadministration andoperation oftheCorporation's businessandgeneralsupervision ofH-6 itspoliciesandaffairs.ThePresident, ifheorsheisalsoaDirector, shall,intheabsenceoforbecauseoftheinability toactoftheChairmanoftheBoard,performalldutiesoftheChairmanoftheBoardandpresideatallmeetingsofshareholders andoftheBoardofDirectors.
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| \hSection4.6.VicePresidents.
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| EachSeniorVicePresident andExecutive VicePresident andanyVicePresident shallhavesuchpowersandshallperformsuchdutiesasshallbeassignedtohimbytheBoardofDirectors.
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| iSection4.7.Treasurer.
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| TheTreasurer shallexercisegeneralsupervision overthereceipt,custodyanddisbursement ofcorporate funds.TheTreasurer shallcausethefundsoftheCorporation tobedeposited insuchbanksasmaybeauthorized by'heBoardofDirectors, orinsuchbanksasmaybedesignated asdepositories inthemannerprovidedbyresolution oftheBoardofDirectors.
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| TheTreastlrer shallhavesuchfurtherpowersanddutiesandshallbesubjecttosuchdirections asmaybegrantedorimposedfromtimetotimebytheBoardofDirectors.
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| Section4.8.Secretary.
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| (a)TheSecretary shallkeeporcausetobekeptinoneormorebooksprovidedforthatpurpose,theminutesofallmeetingsoftheBoard,thecommittees oftheBoardandtheshareholders; theSecretary shallseethatallnoticesaredulygiveninaccordance withtheprovisions.
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| oftheseBy-Lawsandasrequiredbylaw;shallbecustodian oftherecordsand,thesealoftheCorporation andaffixandattestthesealtoallstockcertificates oftheCorporation (unlessthesealoftheCorporation onsuchcertificates shallbeafacsimile, ashereinafter provided) andaffixandattestthesealtoallotherdocuments tobeexecutedonbehalfof'heCorporation underitsseal;andshallseethatthebooks,reports,statements, certificates andotherdocuments andrecordsrequiredbylawtobekeptandfiledareproperlykeptandfiled;andingeneral,shallperformallthedutiesincidenttotheofficeofSecretary andsuchotherdutiesasfromtimetotimemaybeassignedtotheSecretary bytheBoard.t(b)Assistant Secretaries shallhavesuchoftheauthority andperformsuchofthedutiesoftheSecretary asmaybeprovidedintheseBy-LawsorassignedtothembytheBoardofDirectors orbytheSecretary.
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| DuringtheSecretary's absenceorinability, theSecretary's authority anddutiesshallbepossessed bysuchAssistant Secretary orAssistant Secretaries astheBoardofDirectors maydesignate.
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| Section4.9.Removal.Anyofficerelected,oragentappointed, bytheBoardofDirectors mayberemovedbytheaffirmative voteofamajorityoftheWholeBoardwhenever, intheirjudgment, thebestinterests oftheCorporation wouldbeservedthereby,exceptthattheofficerselectedascontemplated bySection4.11mayberemovedfromtheofficesspecified thereinduringthetermsspecified thereinonlybythevoteoftwo-thirdsoftheWholeBoard.Noelectedofficershallhaveanycontractual rightsagainsttheCorporation forcompensation byvirtueofsuchelectionbeyondthedateoftheelectionofsuchperson'ssuccessor, suchperson'death,suchperson'sresignation orsuchperson'sremoval,whichever eventshallfirstoccur,exceptasotherwise providedinanemployment contractorunderanemployeedeferredcompensation plan.Section4.10.Vacancies.
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| Anewlycreatedelectedofficeandavacancyinanyelectedofficebecauseofdeath,resignation, orremovalmaybefilledbytheBoardofDirectors fortheunexpired portionofthetermatanymeetingoftheBoardofDirectors.
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| Section4.11.CertainOfficers.
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| Notwithstanding anyprovision hereintothecontrary, effective asof[thefirstanniversary oftheEffective Time],Dr.WilliamJ.Catacosinos shallbeelectedChairmanoftheBoardofDirectors andChairmanoftheExecutive Committee oftheBoardofDirectors andMr.RobertB.Catellshallbe.electedChiefExecutive OfficeroftheCorporation, ineachcase,foratermendingattheregularmeetingoftheBoardofDirectors heldafterthe[next]annualmeetingofshareholders.
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| ThisSection4.11maybemodifiedonlybytheaffirtnative voteoftwo-thirds oftheWholeBoard.H-7 ARTICLEVSTOCKCERTIFICATES ANDTRANSFERS
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| 'ection5.1.StockCertificates andTransfers.
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| Theinterestofeachshareholder oftheCorporation shallbeevidenced bycertificates forsharesofstockinsuchformastheappropriate officersoftheCorporation mayfromtimetotimeprescribe.
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| ThesharesofthestockoftheCorporation shallbetransferred onthebooksoftheCorporation bytheholderthereofinpersonorbysuchperson'sattorney, uponsurrender forcancellation ofcertificates foratleastthesamenumberofshares,withanassignment andpoweroftransferendorsedthereonorattachedthereto,dulyexecuted, withsuchproofoftheauthenticity, ofthesignature astheCorporation oritsagentsmayreasonably require.Thecertificates ofstockshallbesigned,countersigned andregistered insuchmannerastheBoardofDirectors maybyresolution prescribe, whichresolution maypermitalloranyofthesignatures onsuchcertificates tobeinfacsimile.
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| Incaseanyofficer,transferagentorregistrar whohassignedorwhosefacsimile sigtiature hasbeenplaceduponacertificate hasceased.tobesuchofficer,transferagentorregistrar beforesuchcertificate isissued,itmaybeissuedbytheCorporation withthesameeffectasifheweresuchofficer,transfer, agentorregistrar at.thedateofissue,Section5.2.Lost,Stolenor.'Destroyed Certificates.
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| Nocertificate forsharesofstockintheCorporation shallbeissuedinplaceofanycertificate allegedtohavebeenlost,destroyed orstolen,exceptonproduction ofsuchevidenceofsuchloss,destruction ortheftandondeliveryto'theCorporation ofabondofindemnity insuchamount,uponsuchtermsandsecuredbysuch"surety, astheBoardofDirectors oranyfinancial officermayinitsorsuchperson'sdiscretion require..
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| ,ARTICLEVIMISCELLANEOUS PROVISIONS Section6.1.FiscalYear.[ThefiscalyearoftheCorporation shallbeginonthefirstdayofJanuaryandendonthethirty-first dayofDecemberofeachyear.]Section6.2.Dividends.
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| TheBoardofDirectors mayfromtimetotimedeclare,andtheCorporation maypay,dividends onitsoutstanding sharesinthemannerandgiponthetermsandconditions providedbylawandtheCertificate ofIncorporation.
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| iSection6.3.Seal,Thecorporate sealshallhaveinscribed thereonthewords"Corporate Seal,"theyearofincorporation andaroundthemarginthereofthewords"NewYork."Section6.4.WaiverofNotice.Wheneveranynoticeisrequiredtobe'giventoanyshareholder orDirectoroftheCorporation undertheprovisions oftheNYBCLortheseBy-Laws,awaiverthereofinwriting,signedbythepersonorpersonsentitledtosuch.notice,whetherbeforeorafterthetimestated,thereinshall bedeemedequivalent tothegivingofsuchnotice.Neitherthebusinesstobetransacted at,northepurposeof,anyannualorspecialmeetingoftheshareholders ortheBoardofDirectors orcommittee thereofneedbespecified inanywaiverofnoticeofsuchmeeting.Section6.5.Audits.Theaccounts, booksandrecordsoftheCorporation shallbeauditedupontheconclusion ofeachfiscalyearbyanindependent certified publicaccountant selectedbytheBoardofDirectors, anditshallbethedutyoftheBoardofDirectors tocausesuchaudittobedoneannually.
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| Section6.6.Resignations.
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| AnyDirectororanyofficer,whetherelectedorappointed, mayresignatanytimebygivingwrittennoticeof.suchresignation totheChairmanoftheBoard,theChiefExecutive Officer,thePresident ortheSecretary, andsuchresignation shallbedeemedtobeeffective asofthecloseofbusinessonthedatesaidnoticeisreceivedbytheChairmanoftheBoard,theChiefExecutive Officer,thePresident ortheSecretary, oratsuchlatertimeasisspecified therein.,
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| NoformalactionshallberequiredoftheBoardofDirectors ortheshareholders tomakeanysuchresignation effective.
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| H-8 eARTICLEVIICONTRACTS, PROXIES,ETC.Section7.1.Contracts.
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| Exceptasotherwise requiredbylaw,theCertificate ofIncorporation, aPreferred StockDesignation, ortheseBy-Laws;anycontracts orotherinstruments maybeexecutedanddelivered inthenameandonthebehalfoftheCorporation bysuchofficerorofficersoftheCorporation astheBoardofDirectors mayfromtimetotimedirect.Suchauthority maybegeneralorconfinedtospecificinstances astheBoardmaydetermine.
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| TheChairmanoftheBoard,theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident mayexecutebonds,contracts, deeds,leasesandotherinstruments tobemadeorexecutedfororonbehalfoftheCorporation.
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| Subjecttoanyrestrictions imposedbytheBoardofDirectors, theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident oftheCorporation maydelegatecontractual powerstoothersundersuchperson'jurisdiction, itbeingunderstood, however,thatanysuchdelegation ofpowershallnotrelievesuchofficerofresponsibility withrespect'totheexerciseofsuchdelegated power.Section7.2.Proxies,Unlessotherwise providedbyresolution adoptedbytheBoardofDirectors, theChairmanof,theBoard,theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident mayfromtimetotimeappointanattorneyorattorneys oragentoragentsoftheCorporation, inthenameandonbehalfoftheCorporation, tocastthevoteswhichtheCorporation maybeentitledtocastastheholderofstockorothersecurities inanyothercorporation, anyofwhosestockorothersecurities maybeheld'ytheCorporation, atmeetingsoftheholdersofthestockorothersecurities ofsuchothercorporation, ortoconsentinwriting,inthenameof.theCorporation assuchholder,toanyactionbysuchothercorporation, andmayinstructthepersonorpersonssoappointed astothemannerofcastingsuchvotesorgivingsuchconsent,andmayexecuteorcausetobeexecutedinthenameandonbehalfoftheCorporation andunderitscorporate sealorotherwjse, allsuchwrittenproxiesorotherinstruments ashemaydeemnecessary orproperinthepremisesARTICLEVIIIAMENDMENTS Section8.1.Amendments.
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| Exceptasotherwise specified herein,theBy-LawsmaybealteredorrepealedandnewBy-Lawsmaybeadopted(1)atanyannualorspecialmeetingofshareholders bytheaffirmative voteoftheholdersofamajorityofthevotingpowerofthestockissuedandoutstanding andentitledtovotethereat,provided, however,thatanyproposedalteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section2.2,2.7or2.10ofArticleIIorSection3.9or3.11ofArticleIIIoftheBy-Lawsbytheshareholders shallrequiretheaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass,andprovided, further,however,that,inthecaseofanysuchshareholder actionataspecialmeetingofshareholders, noticeoftheproposedalteration, repealoradoptionofthenewBy-LaworBy-Lawsmustbecontained inthenoticeofsuchspecialmeeting,or(2)bytheaffirmative voteofamajorityoftheWholeBoard.H-9
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| AnnexISECTION623ANDSECTION910OFTHENEWYORKBUSINESSCORPORATION LAW5623.Procedure toenforceshareholder's righttoreceivepaymentforshares(a)A'hareholder intending toenforcehisrightunderasectionofthischaptertoreceivepaymentforhissharesiftheproposedcorporate actionreferredtothereinistakenshallfilewiththecorporation, beforethemeetingofshareholders atwhichtheactionissubmitted toavoteoratsuchmeetingbutbeforethevote,writtenobjection totheaction.Theobjection shallincludeanoticeofhiselectiontodissent,hisnameandresidence address,thenumberandclassesofsharesastowhichhe'dissents andademandforpaymentofthefairvalueofhissharesiftheactionistaken.Suchobjection isnotrequiredfromanyshareholder towhomthecorporation didnotgivenoticeof:suchmeetinginaccordance withthischapterorwheretheproposedactionisauthorized
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| .bywrittenconsentofshareholders withoutameeting.II(b)Withintendaysaftertheshareholders'uthorization date,which,termasusedinthissectionmeansthedateonwhichtheshareholders'ote authorizing suchactionwastaken,orthedate.onwhichsuchconsent,withoutameetingwasobtainedfromtherequisite shareholders, thecorporation shallgivewrittennoticeofsuchauthorization orconsentbyregistered mailtoeachshareholder whofiledwrittenobjection orfromwhomwrittenobjection wasnot,required, excepting anyshareholder whovotedfororconsented inwritingtotheproposedactionandwhotherebyisdeemedtohaveelectednottoenforcehisrighttoreceivepaymentforhisshares,(c)Withintwentydaysafterthegivingofnoticetohim,anyshareholder fromwhomwrittenobjection wasnotrequiredandwhoelectstodissentshallfilewiththecorporation awrittennoticeofsuchelection, statinghisnameandresidence address,th'enumberandclassesofsharesastowhichhedissentsandademandforpaymentofthefairvalueofhisshares.Anyshareholder whoelectstodissentfromamergerundersection905(Mergerofsubsidiary corporation) orparagraph (c)'ofsection907(Mergerorconsolidation ofdomesticandforeigncorporations) orfromashareexchangeunderparagraph (g)ofsection913(Shareexchanges) shallfileawrittennoticeofsuchelectiontodissentwithintwentydaysafterthegivingtohiinofacopyof.theplanofmergerorexchangeoranoutlineofthematerialfeaturesthereofundersection905or913.(d)Ashareholder maynotdissentastolessthanalloftheshares,astowhichhehasarighttodissent,heldbyhimofrecord,thatheownsbeneficially.
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| Anomineeorfiduciary maynotdissentonbehalfofanybeneficial ownerastolessthanallofthesharesofsuchowner,astowhichsuchnomineeorfiduciary, hasarighttodissent,heldofrecordbysuchnomineeorfiduciary.
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| (e)Uponconsummation ofthecorporate action,theshareholder shallceasetohaveanyoftherightsofashareholder excepttherighttobepaidthefairvalueofhissharesandanyotherrightsunderthissection.Anoticeofelectionmaybewithdrawn bytheshareholder atanytimepriortohisacceptance inwritingofanoffermadebythecorporation, asprovidedinparagraph (g),but'innocaselaterthansixtydaysfromthedateofconsummation ofthecorporate action"exceptthatifthecorporation failstomakeatimelyoffer,asprovidedinparagraph (g),thetimeforwithdrawing anoticeofelectionshallbeextendeduntilsixtydaysfromthedateanofferismade.Uponexpiration ofsuchtime,"withdrawal ofa.noticeofelectionshallrequirethewrittenconsentofthecorporation.
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| Inordertobeeffective, withdrawal ofanoticeofelectionmustbeaccompanied bythereturntothecorporation ofanyadvancepaymentmadetotheshareholder asprovidedinparagraph (g).,ifanoticeofelectioniswithdrawn, orthecorporate actionisrescinded, oracourtshalldetermine thattheshareholder isnotentitledtoreceivepaymentforhisshares,ortheshareholder shallotherwise losehisdissenter's rights,heshallnothavetherighttoreceivepaymentforhissharesandheshallbereinstated toallhisrightsasashareholder asoftheconsummation ofthecorporate action,including anyintervening preemptive rightsandtheright'topaymentofanyintervening dividendorotherdistribution or,ifanysuchrightshaveexpiredoranysuchdividendordistribution otherthanincashhasbeencompleted, inlieuthereof,attheelectionofthecorporation, thefairvaluethereofincashasdetermined bytheboardasofthetimeofsuchexpiration orcompletion, butwithoutprejudice otherwise toanycorporate proceedings thatmayhavebeentakenintheinterim.(f)Atthetimeoffilingthenoticeofelectiontodissentorwithinonemonththereafter theshareholder ofsharesrepresented bycertificates shallsubmitthecertificates representing hissharestothecorporation, ortoitsI-1 transferagent,whichshallforthwith noteconspicuously thereonthatanoticeofelectionhasbeenfiledandshall~returnthecertificates totheshareholder orotherpersonwhosubmitted themonhisbehalf.Anyshareholder ofsharesrepresented bycertificates whofailstosubmit hiscertificates forsuchnotationashereinspecified shall,attheoptionofthecorporation exercised bywritten'otice tohimwithinforty-five daysfromthedateoffilingofsuchnoticeofelectiontodissent,losehisdissenter's rightsunlessacourt,forgoodcauseshown,shallotherwise
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| 'irect.Upontransferofacertificate bearingsuchnotation, each"newcertificate issuedthereforshallbearasimilarnotationtogetherwiththenameoftheoriginaldissenting holderofthesharesandatransferee shallacquirenorightsinthecorporation, exceptthose,whichtheoriginaldissenting shareholder had,atthetimeoftransfer.
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| (g)Withinfifteendaysaftertheexpiration oftheperiodwithinwhichshareholders mayfiletheirnoticesofelectiontodissent,orwithinfifteendaysaftertheproposedcoiporate actionisconsummated, whichever islater(butinnocaselaterthanninetydaysfromtheshareholders'uthorization date),thecorporation or,inthecaseofamergerorconsolidation, theSurviving ornewcorporation, shallmakeawrittenofferbyregistered mailtoeachshareholder whohasfiledsuchnoticeofelectiontopayforhissharesataspecified pricewhichthecorporation considers tobetheirfairvalue.Suchoffershallbeaccompanied byastatement settingforththeaggregate numberofshareswithrespecttowhichnoticesofelectiontodissenthavebeenreceivedandtheaggregate numberofholdersofsuchshares.Ifthecorporate actionhasbeenconsummated, suchoffershallalsobeaccompanied by(1)advancepaymenttoeachsuchshareholder whohassubmitted thecertificates representing hissharestothecorporation, asprovidedinparagraph (f),ofak'amount equaltoeightypercentoftheamountofsuchoffer,or(2)astoeachshareholder whohasnotyetsubmitted hiscertificates astatement thatadvancepaymenttohimofanamountequaltoeightypercentoftheamountofsuchofferwillbemadebythecorporation promptlyuponsubmission ofhis;certificates.
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| Ifthe.corporate actionhasnotbeenconsummated atthetimeofthemakingof theoffer,suchadyancepaymentorstatement astoadvancepaymentshallbesenttoeachshareholder entitledtheretoforthwith uponconsummation,,of thecorporate action.Everyadvancepaymentorstatement astoadvancepaymentshallincludeadvicetotheshareholder totheeffectthatacceptance ofsuchpaymentdoesnotconstitute awaiverofanydissenters'ights.
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| Ifthecorporate actionhasnotbeenconsummated upontheexpiration of,theninetydayperiodaftertheshareholders'uthorization date,theoffermaybeconditioned upontheconsummation ofsuchaction.Suchoffershallbemadeatthesainepricepersharetoalldissenting shareholders ofthesameclass,orifdividedintoseries,ofthesameseriesandshallbeaccompanied byabalancesheetofthecorporation whosesharesthedissenting shareholder holdsasofthelatestavailable date,whichshallnotbeearlierthantwelvemonthsbeforethemaking'ofsuchoffer,andaprofitandloss'tatement orstatements fornotlessthanatwelvemonthperiod'ended onthedateofsuchbalancesheetor',ifthecorporation wasnotinexistence throughout suchtwelvemonthperiod,fortheportionthereofduringwhichitwasinexistence.
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| Notwithstanding'he'foregoing, thecorporation shallnotberequiredtofurnishabalancesheetorprofitandlossstatement orstatements toanyshareholder towhomsuchbalancesheetorprofitandlossstatement orstatements werepreviously furnished,,nor if.inconnection withobtaining theshareholders'uthorization fororconsenttotheproposedcorporate actiontheshareholders werefurnished withaproxyorinformation statement, whichincludedfinancial statements, pursuanttoRegulation 14AorRegulation 14Cof,theUnitedStatesSecurities andExchangeCommission.
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| IfwIthinthirtydaysafterthemakingofsuchoffer,thecorporation makingthe,offerandanyshareholder agreeuponthepricetobepaidforhisshares,paymentthereforshallbemadewithinsixtydaysafterthemakingofsuchofferortheconsummation oftheproposedcorporate action,whichever islater,uponthesurrender ofthecertificates'for anysuchsharesrepresented bycertificates.
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| (h)Thefollowing procedure shallapplyifthecorporation failstomakesuchofferwithinsuchperiodoffifteendays,orifitm'akestheofferandanydissenting shareholder orshareholders failtoagreewithitwithintheperiodofthirtydays'thereafter uponthepricetobe,paidfortheirshares:(1)Thecorporation shall,within'wenty daysaftertheexpiration ofwhichever isapplicable ofthetwoperiodslastmentioned, institute aspecialproceeding inthesupremecourtinthejudicialdistrictinwhichtheofficeofthecorporation islocatedtodetermine therightsofdissenting shareholders and'tofixthefairvalueoftheirshares.If,inthecaseofmergerorconsolidation, thesurviving ornewcorporation isaforeigncorporation withoutanofficeinthisstate,suchproceeding shallbebroughtinthecountywheretheofficeofthedomesticcorporation, whosesharesaretobevalued,waslocated.I-2 (2)Ifthecorporation failstoinstitute suchproceeding withinsuchperiodoftwentydays,anydissenting shareholder mayinstitute suchproceeding forthesamepurposenotlaterthanthirtydaysaftertheexpiration ofsuchtwentydayperiod.Ifsuchproceeding isnotinstituted withinsuchthirtydayperiod,alldissenter's rightsshallbelostunlessthesupremecourt,forgoodcauseshown,shallotherwise direct.I(3)Alldissenting shareholders, excepting thosewho,asprovidedin"paragraph (g),haveagreedwiththecorporation uponthepricetobepaidfortheirshares,shallbemadepartiesto.suchproceeding, whichshallhavetheeffectofanactionquasiinreagainsttheirshares.'fhe corporation shallserveacopyofthepetitioninsuchproceeding uponeachdissenting shareholder whoisaresidentofthisstateinthemannerprovidedbylawfortheserviceofasummons,anduponeachnonresident dissenting shareholder eitherbyregistered mailandpublication, orinsuchoIhermannerasispermitted bylaw.Thejurisdiction ofthecourtshallbeplenaryandexclusive.
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| t(4)Thecourtshalldetermine whethereachdissenting shareholder, astowhomthecorporation requeststhecourttomakesuchdetermination,'s entitledtoreceivepaymentforhisshares.Ifthecorporation doesnotrequestanysuchdetermination orifthecourtfindsthatanydissenting shareholder issoentitled, itshallproceedtofixthevalueoftheshares,which,forthepurposesofthissection,shallbethefairvalueasofthecloseofbusinessonthedaypriortotheshareholders'authorization date.Infixingthefairvalueoftheshares,thecourtshallconsiderthenatureofthetransaction givingrisetotheshareholder's righttoreceivepaymentforsharesanditseffectsonthecorporation anditsshareholders, theconceptsandmethodsthencustomary intherelevant,securities andfinancial marketsfordetermining fairvalueofsharesofacorporation engaginginasimilartransaction undercomparable circumstances'and allotherrelevantfactors.Thecourtshalldetermine thefair,valueoftheshareswithoutajuryandwithoutreferraltoanappraiser orreferee.Uponapplication bythecorporation orbyanyshareholder whoisapartytotheproceeding, thecourtmay,initsdiscretion, permitpretrialdisclosure, including, butnotlimitedto,disclosure ofanyexpert,'s reportsrelatingtothefairvalueoftheshareswhetherornotintendedforuseatthetrialintheproceeding andnotwithstanding'subdivision (d)ofsection3101ofthecivilpracticelawandrules.(5)Thefinalorderinthe.proceeding shallbeenteredagainstthecorporation infavorofeachdissenting shareliolder whoisapartytotheproceeding andisentitledtheretoforthevalueofhissharessodetermined.
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| (6)Thefinalordershallincludeanallowance forinterestatsuchrateasthecourtfindstobeequitable, from,thedatethecorporate actionwasconsummated tothedateof"payment.
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| Indetermining therateofinterestthe courtshallconsiderallrelevantfactors,including therateofinterestwhichthecorporation wouldhavehadtopaytoborrowmoneyduringthependencyoftheproceeding.
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| Ifthecourtfindsthattherefusalofanyshareholder toacceptthecorporate offerofpaymentforhisshareswasarbitrary, vexatious or'otherwise notingoodfaith,nointerestshallbeallowedtohim."(7)Eachpartytosuchproceeding shallbearitsowncostsandexpenses, including thefeesandexpensesofitscounselandofanyexpertsemployedbyit.Notwithstanding theforegoing, thecourtmay,initsdiscretion, apportion andassessalloranypartofthecosts,expensesandfeesincurredbythecorporation againstanyorallofthedissenting sharehoMers whoarepartiestotheproceeding, including anywhohavewithdrawn theirnoticesofelectionasprovidedinp'aragraph (e),ifthecourtfindsthattheirrefusaltoacceptthecorporate offerwasarbitrary, vexatious orotherwise notingoodfaith.'The courtmay,initsdiscretion, apportion andassessallorany,partofthecosts,expensesandfeesincurredbyanyorallofthedissenting shareholders whoarepartiestotheproceeding againstthecorporation ifthecourtfindsanyofthefollowing:
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| (A)thatthefairvalueofthesharesasdetermined materially exceedstheamountwhichthecorporation
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| ,offeredtopay;(8)thatnoofferorrequired.
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| advancepaymentwas,madebythecorporation; (C)thatthe.corporation failedtoinstitute thespecialproceeding withintheperiodspecified therefor; or(D)thattheactionofthecorporation incomplying withitsobligations asprovidedinthissectionwasarbitrary, vexatious orotherwise notingoodfaith.Inmakinganydetermination asprovidedinclause(A),thecourtmayconsiderthedollaramountorthepercentage, orboth,bywhichthefairvalueofthesharesasdetermined exceedsthecorporate offer.I-3
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| ,(8)Withinsixtydaysafterfinaldetermination oftheproceeding, thecorporation shallpaytoeach,,dissenting shareholder theiamountfoundtobeduehim,uponsurrender ofthecertificates foranysuch.sharesrepresented bycertificates.
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| ~'i)Sharesacquiredbythecorporation uponthepaymentoftheagreedvaluetherefororoftheamountdueunderthefinalorder,asprovidedinthissection,shallbecome,treasurysharesorbecancelled asprovidedinsection,515 (Reacquired shares),exceptthat,inthecaseofamergerorconsolidation, theymaybeheldanddisposedofastheplanofmergerorconsolidation mayotherwise provide.1(j)Nopaymentshallbemadetoadissenting shareholder underthissectionatatimewhenthecorporation isinsolvent orwhensuchpaymentwouldmakeitinsolvent.
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| Insuchevent,thedissenting shar'eholder shall,athisoption:(1)Withdrawhisnoticeofelection, whichshallinsucheventbedeemedwithdrawn withthewrittenconsent'of thecorporation; or*.~(2)Retainhisstatusasaclaimantagainstthecorporation and,ifitisliquidated, besubordinated totherightsofcreditors ofthecorporation, buthaverightssuperior.
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| tothenon-dissenting shareholders, andifitisnot,liquidated, retainhisrighttobepaidforhisshares,whiphrightthecorporation shallbeobligedtosatisfywhentherestrictions ofthisparagraph donotapply.(3)Thedissenting shareholder shallexercisesuchoptionundersubparagraph (1)or(2)bywrittennoticefiledwiththecorporation withinthirtydaysafterthe'corporation hasgivenhimwrittennoticethatpaymentforhissharescannotbemadebecauseoftherestric'tions ofthisparagraph.
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| Ifthe'dissenting shareholder failstoexercisesuchoptionasprovided, thecorporation shallexercisetheoptionbywrittennoticegiventohimwithintwentydaysaftertheexpiration ofsuchperiodofthirtydays.i(k)Theenforcement byashareholder ofhisrighttoreceivepaymentforhissharesinthemannerprovidedhereinshallexcludetheenforcement bysuchshareholder ofanyotherrighttowhichhemightotherwise beentitledbyvirtueofshareownership, exceptasprovidedinparagraph (e),andexceptthatthissectionshallnotexcludetherightofsuchshareholder tobringormaintainanappropriate actiontoobtainrelief'on thegroundthatsuchcorporate actionwillbeorisunlawfulorfraudulerit astohim.(1)Exceptasotherwise expressly providedinthissection,anynoticetobegivenbyacorporation toashareholder underthisse'ctionshallbegiveninthemannerprovidedinsection605(Noticeofmeetingsofshareholders).
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| (m)Thissectionshallnotapplytoforeigncorporations exceptasprovidedinsubparagraph (e)(2)ofsection907(Mergerorconsolidation ofdomesticandforeigncorporations).
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| ei5910.Rightofshareholder toreceivepaymentforsharesupon"mergerorconsolidation,'r sale,lease,exchangeorother'isposition ofassets,orshareexchange'I4(a)Ashareholder ofadomesticcorporation shall,subjecttoandbycomplying withsection623(Procedure toenforceshareholder's righttoreceivepaymentforshares),havetherighttoreceivepaymentofthefairvalueofhissharesandtheotherrights,andbenefitsprovidedbysuchsection,inthefollowing cases:(1)Anyshareholder entitledtovotewhodoesnotassenttothetakingofanactionspecified insubparagraphs (A);(B)and(C).i,(A)Anyplanofmergeror'consolidation towhichthecorporation isaparty;exceptthattherightto'eceivepaymentofthefairvalueofhissharesshallnotbeavailable:
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| if1(i)Toashareholder oftheparentcorporation inamergerauthorized bysection905(Mergerofparentandsubsidiary corporations),
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| orparagraph(c) ofsection907(Mergerorconsolidation ofdomesticandforeigncorporations);
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| and1-4 (ii)Toashareholder ofthesurviving corporation inamergerauthorized bythisarticle,otherthanamergerspecified insubparagraph (i),unlesssuchmergereffectsoneormoreofthechangesspecified insubparagraph (b)(6)ofsection806(Provisions astocertainproceedings) intherightsofthesharesheldbysuchshareholder.
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| (B)Anysale,lease,exchangeorotherdisposition ofallorsubstantially alloftheassetsofacorporation whichrequiresshareholder approvalundersection909(Sale,lease,exchangeorotherdisposition ofassets)otherthanatransaction whollyforcashwheretheshareholders'pproval thereofisconditioned uponthedissolution ofthecorporation andthedistribution ofsubstantially allofitsnetassetstotheshareholders inaccordance withtheirrespective interests withinoneyearafterthedateofsuchtransaction.
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| (C)Anyshareexchangeauthorized bysection913inwhichthecorporation isparticipating asasubjectcorporation; exceptthattherighttoreceivepaymentofthefairvalueofhissharesshallnotbeavailable toashareholder whoseshareshavenotbeenacquiredintheexchange.
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| (2)Anyshareholder ofthesubsidiary corporation inamergerauthorized bysection905orparagraph (c)ofsection907,orinashareexchangeauthorized byparagraph (g)ofsection913,whofileswiththecorporation awrittennoticeofelectiontodissentasprovidedinparagraph (c)ofsection623.1-5
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| [THISPAGEINTENTIONALLY LEFTBLANK]tI ANNEXJTHELILCOMEE<TINGPROPOSALS ITEM3-E<LECTION OF'IILCODIRECTORS Currently, allnomineesareDirectors.
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| JamesT.Flynnwasappointed aDirectorofLILCObyitsBoardofDirectors effective December1996.Ifelected,thetwelvepersonsnamedbelowwillholdofficeforoneyearoruntiltheirsuccessors are,dulyelectedorchosenandqualified.
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| Shouldanyofthepersonshereinafter namedadvisetheCorporate Secretary ofLILCOpriortotheLILCOMeetingthat,theywillbeunabletoserveafterbeingelected,thesharesrepresented byproxywillbevotedfortheelectionofanysubstitute nomineeornomineesasthepresentBoardofDirectors mayrecommend totheProxyCommittee.
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| Ifnosubstitute isrecommended, the,sizeoftheBoardmaybereduced.LILCOdoesnotanticipate thatanyofthenomineesnamedhereinforelectionbytheholdersofLILCOCommonStockwillbeunabletoservethefulltermofofficetowhichtheymaybeelected.LILCOrecommends avoteFORthetwelvepersonsnamedbelowtoserveasmembersoftheBoardofDirectors.
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| LILCO'snomineesforelectionasDirectors are:WILLIAMJ.CATACOSINOS
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| -Age67CItainnan oftheBoardandChiefExecutive OJJtcerChairman-Executive Committee Directorsince1978LILCOsharesownedBoard/Board committee attendance 14,707100%tIIChairmanoftheBoardofDirectors andChief.Executive Officer("CEO")ofLILCOsinceJanuary1984;,President ofLILCOfromMarch1984toJanuary1987andfromMarch1994toDecember1996.ResidentofMillNeck,LongIsland.Receivedbachelorofsciencedegree,mastersdegreeinbusinessadministration andadoctoraldegreeineconomics fromNewYorkUniversity.
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| Member,boardsofU.S.LifeCorporation; LongIslandAssociation; BusinessAllianceforaNew,NewYork;FirstNationalBankofL.I.;andamemberoftheAdvisoryCommittee oftheHuntington Tovtnship ChamberFoundation.
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| Formerchairmanandchiefexecutive officer-of Applied.DigitalDataSystems,Inc.,Hauppauge, NewYork;chairmanoftheboardandtreasurer ofCorometric Systems,Inc.ofWallingford, Connecticut; andassistant directoratBrookhaven NationalLaboratory, Upton,NewYork.JOHNH.TALMAGE-Age67Partner,H.R.Tahnage&SonFarmRiverhead, NewYorkChairman-Nominating Committee Member-Executive Co>nmittee andtheCotnpensation andManagement Appraisal Cotnmittee Directorsince1982LILCOsharesowned,Board/Board committee attendance 1,505*100%GraduateoftheCollegeof'Agriculture andLifeSciences, CornellUniversity.
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| President since1992anddirectorsince1960,Friar'sHeadFarm,Inc.;Chairman, boardofdirectors, H.P.Hood,Inc.ofBoston,Massachusetts, 1980to1995;director, Agway,Inc.,1967to1995;CurticeBurnsFoods,Inc.,1969to1984;and*SuffolkCountyFederalSavingsandLoanAssociation, 1975to1982.
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| BASILA.PATERSON-Age71Partner,LawFinnofDirectorsince1983Meyer,Suozzi,EnglishandKlein,P.C.LILCOsharesowned,,Board/Board colnmitteeattendance Chairman-Audit Committee Member-Executive Conunittee2,025*89%Receivedjurisdoctorate fromSt.John'sUniversity SchoolofLaw.ServedasSecretary ofStateofNewYorkfrom1979to1982,asDeputyMayorofNew''ork" City,asa'NewYorkStateSenatorandasacommissioner ofthePortAuthority ofNewYorkandNewJersey.'Partner inthelawfirmofMeyer,Suozzi,EnglishandKlein,'.C.,
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| MineolaNew York.Servedasa'rofessor atanumberofuniversities, asamemberoftheboardofeditorsoftheNewYorkLawJournalandasamemberoftheNewYorkStateCommission onJudicialNomination.
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| GEORGEBUGLIARELLO
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| -Age70Chancellor, Polytechnic UnivetsityChairman-Cotnpensation andManagement Appraisal Cotnmittee Member-Executi veConunitteeDirectorsince1990LILCOsharesownedBoard/Board committee attendance 1,473*95%Receiveddoctorofsciencedegreeinengineering fromMassachusetts Institute ofTechnology andseveralhonorarydegreesfromotherinstitutions.
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| President ofPolytechnic University from1973toJuly1994,presently holdsthepositionofChancellor.
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| Member,boardofdirectors oftheLordCorporation, SymbolTechnologies, ComtechTelecommunications Corp.,theTeagleFoundation, theJuraCorp.,theGreenwall Foundation andSpectrumInformation Technologies, Inc.MemberoftheCouncilonFo'reignRelations andNationalAcademyofEngineering.
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| Fellow,theAmericanSocietyofCivilEngineers, theAmer'ican Association fortheAdvancement ofScienceandtheNewYork'Academy ofMedicine.
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| : Chairman, BoardofInfrastructure andConstructed Environment, NationalResearchCouncil.Previously heldaNATOSeniorFacultyFellowship attheTechnical University ofBerlinandthechairmanship ontheCommittee onScience,Engineering andPublicPolicyoftheAmericanAssociation fortheAdvancement ofScience.FormermemberoftheScientific Committee oftheSummerSchoolonEnvironmental DynamicsinVenice.GEORGEJ.SIDERIS-Age70RetiredSeniorVicePresident LongIslandLightingCompany,Member-Nominating Committee andPlanningandEnvironment Cotnmittee Directorsince1991LILCOsharesowned.Board/Board Committee attendance 4,851*100%Receivedbachelors degreeineconomics fromNewYorkUniversity.
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| JoinedLILCOin1984asVicePresident ofFinanceandChiefFinancial Officer.BecameSeniorVicePresident ofFinancein1987andretiredinJanuary1992.Member,boardofdirectors ofUtilities MutualInsurance CompanythroughDecember1994..Self-employed asamanagement andfinancial consultant, 1981-1984.
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| Previously servedasavicepresident ofQualpecoServices, Inc.,andasavicepresident andchairmanoftheNortheast Operations GroupofU.S.Industries, Inc.*SeeNotestoLILCOSecurityOwnership Tableonpage93.J-2 A.JAMESBARNE<S-Age54Dean,IndianaUniversity SchoolofPublicandEnvironmental AgnirsDirectorsince1992LILCOsharesowtiedBoard/Board conunitteeattendance1,473*100ÃoChairman-Planning andEnvironment Comtnittee Member-Executive Contmittee, Compensation andManagement Appraisal Committee Receivedundergraduate degreefromMichiganStateUniversity andjurisdoctorate fromHarvardLawSchool.ServedasGeneralCounseloftheU.S.Department ofAgriculture from1981to1983,asGeneralCounseloftheU.S.Environmental Protection Agencyfrom1983to"1984andasDeputyAdministrator oftheAgencyfrom1985to1988.Previously wasapartnerinthelawfirmofBeveridge, Fairbanks andDiamond,Washington, D.C.andalsoservedwiththeU.S.Department ofJustice.JoinedtheIndianaUniversity SchoolofPublicandEnvironmental AffairsasitsDeanin1988.RICHARDL.SCHMALENSEE<
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| -Age53Director, Massachusetts Institute ofTeclniology CenterforEnergyandEnvironmental PolicyResearchDirectorsince1992LILCOsharesownedBoard/Board conunittee attendance 1,073487%Member-Compensation andManagement Appraisal Committee andPlanningandEnvironment Committee Receiveddoctoraldegreeineconomics andbachelorofsciencedegreeineconomics, politicsandsciencefromtheMassachusetts Institute ofTechnology
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| ("MIT").GordonY.BillardProfessor ofEconomics andManagement atMIT'sSloanSchoolsince1988.ServedasmemberofthePresident's'Council ofEconomicAdvisorsfrom1989to1991.Currently, DeputyDeanoftheMITSloanSchoolofManagement andDir'ector oftheMITCenterforEnergyandEnvironmental PolicyResearch.
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| Consultant toavarietyofgovernment agenciesandprivatefirtnsthroughtheNationalEconomicResearchAssociates Inc.'onarangeofissuesincluding aspectsofutilityregulation.
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| RENSOL.CAPORALI-Age64SeniorVicePresident ofEngineering andBusinessDevelopment RaytheonCompanyDirectorsince1992LILCOsharesowned,Board/Board committee attendance 2,144*100%Member-Audit Committee
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| ~*IIReceiveddoctorate andtwomastersdegreesinAeronautical Engineering fromPrinceton University andamastersofmechanical engineering degreeandbacheforofcivilengineering degreefromClarksonCollegeofTechnology.
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| ServedasPresident ofGrummanCorporation's AircraftSystemsDivisionsince1985,ViceChairmanofCorporate Technology 1988to1990andChairmanandCEOfrom1990toJune1994.Consultant toandmemberoftheboardofdirectors ofNoithrop-Grumman fromJune1994toMarch1995.ServesontwoPrinceton University AdvisoryCouncils.
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| FormerChairmanoftheAerospace Industries Association's BoardofGovernors andExecutive Committee.
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| Presently corporate SeniorVicePresident ofEngineering andBusinessDevelopment fortheRaytheonCompany.MemberoftheNationalAcademyofEngineering.
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| *SeeI<IotestoLILCOSecurityOwtiership Tableonpage93.J-3 PETERO.CRISP-Age64ChairmanVetirock, Inc.Directorsince1992LILCOsharesownedBoard/Board corn)nittee attendance 973*100%Member-Nominating Committee andAuditCommittee IReceivedbachelors'degree fromYaleUniversity andmastersdegreeinbusinessadministration fromHarvardBusinessSchool.GeneralPartner,VenrockAssociates, aventurecapitallimitedpartnership, since1969.Chairman, Venrock,Inc.,thecorporation whichmanagesVenrockAssociates, since1980.Directo'r ofAmericanSuperconductor Corporation, Evaris&Sutherland ComputerCorporation, ThermoPowerCorporation, Thermedics Inc.,ThermoElectronCorporation, ThermoTrex Corporation andU.S.TrustCorporation aswell.asanumberofotherprivatecompanies.
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| MemberoftheboardsoftheMemorialSloanKettering CancerCenterandNorthShoreUniversity
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| : Hospital, KATHERINE D.ORTEGA-Age62ForinerTreasurer oftheUnitedStatesDirectorsl'Itce1993LILCOsharesownedBoard/Board Conunittee attendance
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| .',801*100%Member-Nominating Committee andAuditCommittee Receivedbachelorofartsdegreeinbusinessandeconomics fromEasternNewMexicoUniversity andthreehonorarydoctoroflawdegreesandanhonorarydoctorofsocialsciencedegree.Treasurer oftheUnitedStatesfrom1983to1989.Servedasacommissioner oftheCopyright RoyaltyTribunal, amemberofthePresident's AdvisoryCommittee onSmallandMinorityBusinessandanalternate representative totheUnitedNationsGeneralAssembly.
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| Memberoftheboardofdirectors ofUltramarDiamondShamrockCorp.,TheKrogerCompany,Ralston,PurinaCompany,RayonierInc.andCatalyst.
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| MemberoftheComptroller General'Consultant PaneLAdvisoryBoardMember ofWashington MutualInvestors Fund.1,273*92goC.'ICKIL.FULLER-Age39SeniorVicePresident Directorsince1994AllianceCapitalManagement LILCO:sharesownedCorporation Board/Board Committee attendance Mentber-Nominating Committee andPlanningandEnviromnent Cotnmittee Receivedbachelors degreeatRoosevelt University andmastersdegree inbusinessadministration attheUniversity ofChicagoandisaCertified PublicAccountant.
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| Servedasanassociate inMorganStanleyandCo.'scorporate financedepartment from1981to1983.ServedasaratingofficeratStandard&Poor'sCorporation from1984to1985.JoinedEquitable CapitalManagement Corporation
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| ("ECM")in1985asaseniorinvestment manager,holdingvariouspositions including ManagingDirectorfrom1989to1993.VicePresident ofAllianceCapitalManagement Corporation
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| ("Alliance"
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| ),whichacquiredECivl,from1993to1994;currently holdsthepositionofSeniorVicePresident ofAlliance.
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| MemberoftheBoardofTrusteesofNorthCarolinaAgricultural
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| &Technology University.
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| Incompliance withSection305(b)ofthe.,FederalPowerAct,Ms.Fullerhasauthorization toholdthepositionofanofficerordirectorofapublicutilityandatthesametimethepositionofanofficerordirectorofa'firmthatisauthorized tounderwrite orparticipate inthemarketing ofthesecurities ofapublicutility.*SeeNotestoLILCOSecuriiyOwnership Tableonpage93.
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| eJAMEST.FLYNN-Age63President antiChiefOperating OfhcerDirectorsince1996LILCOsharesownedBoard/Board Committee attendance 5,5091007o-Appointed bytheBoardofDirectors, Mr.FlynnbecameaDirectorofLIL'COinDecember1996.Holdsabachelorofsciencedegreeinmechanical engineering fromBucknellUniversity andisaLicensedProfessional Engineer.
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| JoinedLILCOinOctober1986asVicePresident ofFossilProduction andwaspromotedtoGroupVicePresident, Engineering andOperations iriApril1992.Appointed Executive'Vice President andChiefOperating OfficerinMarch1994.HasservedasPresident andChiefOperating OfficersinceDecember1996.LILCOBOARDOFDIRECTORS ThebusinessandaffairsofLILCOaremanagedunderthedirection qfitsBoardofDirectors.
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| TheBoardhasresponsibility forestablishing broadcorpora'te policiesandfortheoverallperfonnance ofLILCOratherthantheday-to-day management ofitsoperations.
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| LILCO'sBy-lawsprovidethattheBoard,consistofnotlessthansevennormorethanfifteendirectors.
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| Thenumberofdirectors, asmaybefixedfromtimetotimebytheBoard,iscurrently setattwelve.TheBoardofDirectors, whichgenerally meetseveryothermonthandconductsspecialmeetingsasrequired, metatotalofninetimesduring1996.Inaddition, thevariousstandingcommittees oftheBoard,whicharedescribed ingreaterdetailbelow,metatotaloffifteentimesin1996.iAttheBoardmeetings, thedirectors generally discusssignificant, developments affecting LILCOandtakeactiononvariousmattersincluding thedeclaration ofdividends, thereviewandapprovalofLILCO'scorporate goals,businessplans,earningsplan,expenseandcapitalbudgetsandotherfinancial andsecurities relatedmatters.TheBoardalsoapprovestheannualreporttoshareholders, theannualreportonForm10-Kandtheproxystatement.
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| Inadditiontoattendance atBoardandcommittee
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| : meetings, member'softheBoardarekeptinformedofLILCO'sbusinessbyvariousreportsanddocuments senttothemeachmonth,aswellasbyreportspresented atmeetingsoftheBoardanditscommittees byofficersandemployees ofLILCOandotherindividuals, ifrequired.
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| Directors alsoperformtheirresponsibilities throughout theyearbynumerouspersonalmeetingsandothercommunications, including frequenttelephone conversations withtheChairmanandotherDirectors regarding allmattersofimportance toLILCO.Compensation PaidtoLILCODirectors The1996annualretainerfeepaidtoeachDirec'tor was$12,500incashand$12,500appliedtoadeferr'ed stockunitaccount,exceptforDr.Catacosinos andMr.Flynnwho,asOfficersofLILCO,donotreceivecompensation forservingasDirectors.
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| ThefeepaidtoeachDirectorwhoisnotalsoanOfficerofLILCOforattending eachmeetingoftheBoardofDirectors orofoneofitscommittees was$500.UnderthetermsoftheDirectors'tock UnitRetainerPlan(the"Retainer Plan"),eachnon-employee directorofLILCOisrequiredtoapplyatleast50/oofhisorherannualretainertothepurchaseofLILCOCommonStockunits("StockUnits").Allocation ofStockUnitsundertheRetainerPlanaremadeautomatically onthedateduringeachfiscalquarteronwhichthequarterly installment oftheannualretainerispaid.UndertheRetainerPlan,thevalueoftheunitswhichwillbecreditedtoeachnon-employee Director's accountonaquarterly basiswillbedetermined bydividingtheaggregate amountofcashcreditedtosuchaccountbytheclosingpricepershareofLILCOCommonStock,asreportedonaNewYoqkStockExchangelistingofcomposite transactions, onthefirsttradingdayofthecalendarmonthinwhichtheParticipant's retainerJ-5 ispaid.Theamountsaccumulated pursuanttotheRetainerPlanwillbehelduntilsuchtimeas(i)aparticipant ceasestoserveasaDirectororconsulting Director(ii)aparticipant's death;or(iii)a"ChangeinControl"(asdefinedintheRetainerPlan).IftheDirectorsoelects,theaggregate valueoftheStockUnitsaccumulated pursuanttotheRetainerPlanmaybereceivedincertificated sharesofLILCOCommonStockatthetimeofdistribution.
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| TheDirectormayelecttoreceiveadistribution ofRetainerPlanbenefitsinalumpsumorintenannualinstallments.
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| Anysuchsharesshallbepurchased byLILCOontheopenmarketorshallbetakenfromsharesofLILCOCommon,Stockpreviously acquiredbyLILCOandheldinitstreasury.
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| Priortodistribution, aDirectorshallhavenovotingorotherrightsofashareholder withrespecttosuchStockUnits.However,eachDirector's accountwillbecreditedwithanamountequaltotheamountofanydividends paidonsharesofLILCOCommonStockproportionate tothenumberofStockUnitsaccumulated pursuanttotheRetainerPlanpriortosuchdividendpaymentdate.Amountssocreditedshallbeappliedtowardthepurchaseofanadditional numberofStockUnits.Thetransactions contemplated withBrooklynUnionand/orLIPAwillresultinaChangeinControlforpurposesoftheRetainerPlan.LILCOhasenteredintoaconsulting agreement withEbenW.Pyne,aformerDirectorofLILCO,naminghimConsulting Director.
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| Thisagreement providesthattheConsulting DirectorwilladviseandcounseltheBoardandanyofitscommittees onvariousmattersand'willreceiveanannualretainerof$25,000(halfofwhichWascreditedtoadeferredstockunitaccountpursuanttotheRetainerPlanasdiscussed above)plusanadditional
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| $500foreachBoard'orcommittee meetingattended.
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| AConsulting DirectordoesnothavetherighttovoteatmeetingsoftheBoardoratmeetingsofcommittees oftheBoard.Directors mayelecttodeferthereceiptofanyportionoftheircompensation underthe'eferred Compensation PlanforDirectors.
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| Amountsdeferredmaybeallocated toadeferredcompensation account.Eachparticipating Director's accountaccruesinterest, compounded quarterly, attheprimerateplusiA%.TheDeferredCompensation PlanforDirectors isunfundedandanyaccountsundertheplanwillbegeneralobligations ofLILCO.Distributions fromadeferredcompensation accountcommenceupontermination ofmembership ontheBoardofDirectors, deathordisability, oratadatepreviously designated bytheparticipating Director.
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| Distributions fromthedeferredcompensation accountmaybemadebylump-sumpaymentorannuallyovereitherafiveorten-yearperiod.Currently, noneoftheDirectors areparticipating intheDeferredCompensation Planfor"Directors.
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| IL'ILCOhasaRetirement PlanforDirectors (the"Retirement Plan"),providing benefitstoDirectors whoarenotor'hohavenotbeenOfficersofLILCO.Directors whohaveservedinthatcapacityformorethanfiveyearsqualifyasparticipants undertheplan.Theplanprovidesforamonthlybenefitequaltoone-twelfth ofthehighestannualretainerpaidtoeachparticipant.
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| Afullbenefitisavailable forparticipant's whoservefortenyearswithareduction ofone-sixtieth foreachmonthofservicelessthantenyears.Undertheplan,paymentofbenefitsistobeginwhentheDirectorceasestoserveasaDirectororConsulting Directororreachesage65,whichever islater.Theplanalso,providesthatintheeventofa"changeincontrol".(asdefinedintheRetirement Plan),including byvirtueofanacquisition ofLILCO'sassetsorstock,thevalueofvestedbenefitscouldbepayableimmediately.
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| InadditiontoDr.Bugliarello, whowouldbeentitledtobepaidareducedbenefit,Messrs.Paterson, TalmageandPynewouldbeentitledtobepaidfullbenefitsweretheytoceasetoserveasaConsulting DirectororDirectoratthistime.Benefitsareprovidedonastraight-life annuitybasisexceptthatiftheDirectorismarriedatthetimebenefitsbegin,ajointand50%survivorbenefitmaybepaidonanactuarially equivalent basis.Thebenefitsareunfundedandaregeneralobligations ofLILCO.Thetransactions contemplated withBrooklynUnion.and/orLIPAwillresultina,ChangeofControlforpurposesoftheRetirement Plan.LILCOenteredintoanagreement in1987withMr.Sideris,whilehewasanOfficerofLILCO,whichprovidesretirement benefitssupplementing thebenefitstowhichheisentitledunderLILCO'sRetirement IncomePlanandSupplemental
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| 'DeathandRetirement BenefitsPlan,bothdiscussed below.LILCOhasestablished atrust,which iscurrently makingpaymentoftheretireinent benefits.
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| Notwithstanding thecreationofthetrust,LILCOcontinues tobeprimarily liable.J-6 PursuanttotheNYBCLandtheLILCOBy-laws,LILCOhasenteredintoagreements withitsDirectors andOfficersproviding for'ndemnific'ation andadvancement ofexpensesin'efending certainactionsorproceedings inadvanceoftheirfinaldisposition subjecttorefundiftheyarefoundnottobeentitledtoindemnification.
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| LILCOhasestablished atrust,theLongIsland,LightingCompanyOfficers'nd Directors'rotective Trust,tofundLILCO'sobligations, undertheseagreements.
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| fCommittees oftheBoardofDirectors TheLILCOBoardhasestablished standingcommittees toassistitinperforming itsduties.Theprincipal responsibilities ofeachcommittee aredescribed below.Eachcommittee reportstotheBoardallactiontakeneitherbywrittenreportoratasubsequent Boardmeeting.TheDirectorbiography portionofthisJointProxyStatement/Prospectus identifies themembersofthevariouscommittees.
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| TheExecutive Comniittee, whichiscomposedoffivemembers,hastheauthority duringtheintervals betweenregularBoardmeetingstoexerciseallthepowersoftheBoard,exceptforcertainpowersreservedexclusively totheBoard,whichincludesthepowertosubmitmatterstoshareholders forapproval.
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| TheExecutive Committee metsix(6)timesduring1996.TheAuditCommiItee, whichmetthree(3)'timesduring1996,iscomposedoffouroutsideDirectors andis'esponsible forthesubstantive reviewofthescopeandresultsoftheindependent auditors'udit ofLILCO'sfinancial statements, theinternalauditactivityo(LILCOandotherpertinent auditingandinternalcontrolmatters.TheAuditCommittee alsorecommends totheBoardofDirectors theappointment ofoutsideauditors.
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| TheConipensaiion andManagement Appraisal Committee, whichmetthree(3)timesduring1996,iscomposedoffouroutsideDirectors andisauthorized toreviewandrecommend totheBoard"'of Directors compensation levelsofLILCO'sDirectors andOfficers.
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| Inaddition, thisCommittee reviewstheprocedures tinvolvedinestablishing management compensation andadministers LILCO'sAnnualStockIncentive Compensation PlanandLong-Term StockIncentive Planforofficers.
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| TheNominating Committee consistsoffivemembersanddetermines criteriaforqualification andselection ofDirectors andprovidestheBoardofDirectors withrecommendations relatingtotheDirectorselection process.Itevaluates possiblecandidates fortheBoardof'Directors andassistsinattracting qualified candidates.
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| TheNominating Committee metone(1)timeduring1996.Shareholders wishingtorecommend candidates fornomination totheBoardofDirectors shouldsubmittotheCorporate Secretary ofLILCOthename,astatement ofqualifications andthewrittenconsentofthecandidate.
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| Recommendations maybesubmitted atanytimeandwillbebroughttotheattention oftheNominating Committee.
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| ThePlanningandEnviroiunent Conunitree, whichmettwo(2)timesduring1996,consisted offourmembers,andreviewsLILCO'sgeneralandenvironmental objectives, strategies andplans,considers andrecommends variousoptionsandopportunities available toLILCOforitslong-term growthanddevelopment andmonitorsitsprogresstowardtheaccomplishment ofitsgoals.
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| REPORTOFTHECOMPENSATION ANDMANAGEMENT APPRAISAL COMMITTEE ONEXECUTIVE COMPENSATION Thedisclosure contaitied inthissectionoftheproxystatement shallnotbedeemedincorporated byreference intoanypriorfilingbyLILCOpursuanttotheSecurities Actof1933ortheSecurities ExchangeActof1934thatincorporate futurefilingsorportionsthereof(including thisprox'ystatement oranypartthereof).
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| TheCompensation andManagement Appraisal Committee (the,"Committee"
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| ),whichestablishes theprocedures bywhichmanagement compensation isdetermined, reviewsandrecommends to'the,BoardofDirectors thecompensation levelsofLILCO'sOfficersa'ndadministers theAnnualStockIncentive Compensation Plan(the"AnnualStockIncentive Plan")andtheOfficers'ong-Term Incentive'Plan discussed below.TheCommittee ismadeupentirelyofoutsideDirectors.
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| ItsmembersareGeorgeBugiiaiello, A.JamesBarnes,RichardL.Schmalensee andJohnH.Talmage.During1996,theCommittee usedtwooutsideconsultants, theHayGroup("Hay"),toreviewthecompensation levelsofLILCO'sofficers, including thenamedexecutive
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| : officers, andWilliamM.Mercer,Inc.("Mercer"),toprovideadvicewithrespecttoincentive compensation arrangements.
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| LILCO'sHumanResources officealsosuppliedindustrycompensation comparisons.
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| Executive Compensation Philosophy ItistheBoard'sphilosophy touseincentives andothervariableperformance-based payprogramstolinkexecutive paywithenhancements toLILCOperformance andcustomerserviceandtoensuretheattraction andretention ofkeyexecutives.
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| To'accomplish theseobjectives, overthepasttwoyears,theBoardhaschangedtheexecutive compensation programfromaprogramthatacknowledged performance solelythroughtheadministration ofbasepaytoaprogramthatincludesboththeAnnualStockIricentive PlanandtheLong-Term Incentive Plan.Thisperformance-based compensation philosophy placesasignificant emphasison'heachievement ofstrategic goalsrelatedtofinancial andcustomerserviceperformance.
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| AsaresultoftheadoptionoftheAnnualStockIncentive Plan,officerbasesalarieshavebeenheldattheirApril1995level.However,evenaftertheadoptionoftheAnnualStockIncentive Plan,LILCO'sofficertotalcompensation opportunities remainsbelowmediancompetitive'levels amongothercomparable electricutilities.
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| Itistheintention oftheCommittee toreviewwiththe.Boardthiscompetitive compensation shortfall onaregularbasistoensurethatLILCOmaintains itsabilitytoretaintalentedandcapableexecutives.
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| Determination ofBaseSalaryLevelsIIITheCommittee annuallyconsiders adjustments tobasesalaryrangesusingtheexternalcomparisons tootherutilityandnon-utility companies.
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| Specifically, LILCOstudiestheaveragecompensation levelsofcomparable executives offourdatabases providedbyHayforgeneralindustry, metropolitan NewYorkcompanies, nationalutilities and9regionalutilitycompanies (the"HayGroupUtilities"
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| ).TwooftheHayGroupUtilities arealsoincludedintheStandard&Poor'sElectricUtilityIndexshownintheperformance graphonpageJ-11.Inadditiontocompensation levelsamongtheHaydatabases, theCommittee alsoreviewstheresultsoftheEdisonElectricInstitute's AnnualCompensation Surveyof118utilities (the"EEIUtilities"
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| )aswellasthecompensation paidtotheofficersofotherNewYorkutilities.
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| Individual basesalaryincreases withinthoserangesarethensubjectively determined basedonseveralfactors.Thesefactorsincludethecompetitiveness oftheexecutive's currentbasesalaryandpotential incentive compensation, theexecutive's individual accomplishments duringtheyearandtheexecutive's lengthoftimeinhisorherposition.
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| However,becausebasesalarieshavenotbeenincreased sinceApril1995,the1996basesalariesearnedbythenamedexecutive officersintheSummaryCompensation Tablefellto8percentbelowcomparable basesalariesamongtheHayGroupUtilities.
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| J-8 TheAnnualStockIncentive Compensation Plan~*'nnualincentive compensation isearnedunderLILCO'sAnnualStockIncentive Plan.AwardsearnedunderthePlan,lessapplicable taxwithholding>
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| arepaidin.CommonStockfollowing thecloseofagivenplanyear;BymakingtheawardspayableinLILCOCommon Stock,officers'erformance ismorecloselyalignedwithshareholder interest.
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| Officersreceivedpaymentforthefirsttimein1996for,theperformance achievedduringcalendaryear1995.I'heAnnualStockIncentive Planisbasedontheachievement oftwoquantifiable objectives:
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| reducingexpenditures andmaintaining orimproving criticalservicegoals.Ifthreshold levelsarenotachievedforeither"'bjective, noincentive isreceived.
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| Asthreshold leyels.were
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| : exceeded, theofficerswereeligibletoreceiveawardsfromtheAnnualStockIncentive Plan.t'II'IThetargetincentive awards-,theamountsthatwillbepaidifgoalperformance levelsareattainedforallprogramobjectives
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| -were15%forseniorofficers, 25%fortheCEOandCOOandl0%forotherofficers, ofthemidpointforthebasesalaryrangeofeachpositionforawardspaidin1996forPlanYear1995.Themidpointforthebasesalaryrangeisdependentupon theexecutive's levelintheorganization.
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| Seventy-five percentofeachindividual's earnedincentive awardisbasedon.thelevelof,achievement ofthetwocorporate objectives, Thebalanceofeachaward,whichcanrangefromzeroto50percentoftheearnedincentive award,isthensubjectively determined bythe,Committee based,oneachindividual's contribution towardhelpingLILCOachieveitsobjectives.
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| Basedonthelevelofachievement forthebudgetsavingsandservicegoals,andindividual contributions toLILCO,awardsundertheAnnualStockIncentive Planpaidin1996forplanyear1995rangedfrom75to110percentofeachindividual's earnedincentive award.The1996totalannualcompensation (basesalaryplusannualstockincentive) earnedbythenamedexecutive officersintheSummaryCompensation tablewas9percentbelowthetotalannualcompensation levelsofthecomparable executives intheHayGroupUtilities.
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| ITheOfficers'ong-Term Incentive PlanInDecember1995,LILCO'sBoardofDirectors adopted,andatthe1996AnnualMeetingtheshareholders
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| : approved, theLong-Term Incentive Plan.Priortotheestablishment ofthisplan,LILCOwasoneofthefewutilities initspeergroupwithoutalong-term incentive compensation plan.Consequently, itstotaldirect"1rcompensation (basesalaryplusannualandlong-term incentives) levelsfell28percentbelowthetotaldirectcompensation levelsofthecomparison groupin1995.ThepurposeoftheLong-Term Incentive PlanistomotivatetheOfficerstomeetorexceedLILCO'sbusinessgoals,withaparticular focusonthelong-term effectsoftheiractions,andtoprovideincentives for,continued servicetoLILCO.AwardsmadeundertheLong-Term Incentive Planwillbepaidonlyupontheattainment offinancial performance goalsorgoalssetbytheCommittee.
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| Thesegoalsincludefreezingrates,improving earningsandreducingO&Mexpenditures.
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| Ingeneralthegoalsaretobeattainedovertheperiodofthreecalendaryears,withanewcyclebeginning everytwoyears(the"Performance Period").ThefirstPerformance Period(1996-1997) willbetwoyears.Awardswillbepaidfortheattainment ofspecified threshold, targetandmaximumresultsoverthePerformance Periodandareaspecified percentage peryearofthemidpointoftheindividual participant's salaryrange.Awardswillbepaidintwoinstallments, each'ofwhichiscontemplated tobemadeinsharesofCompanyStock.Fiftypercentoftheawardwillbedistributed inthenextcalendaryearaftertheendofthePerformance Periodandtheremaining 50%willbesubjecttoamandatory one-yeardeferralperiod.Generally, anindividual mustbeemployedbyLILCOonthedateeachinstallment oftheawardispaidtobeeligibletoreceivetheaward.Usingthetargetawardsforcomparison, the1996totaldirectcompensation achievable bythenamedexecutive officersintheSummaryCompensation tablefell14percentbelowthetotaldirectcompensation levelsofthecomparable executives intheHayGroupUtilities.
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| J-9 CEOCompensation Thecompensation ofDr.Catacosinos consistsofbasesalaryandannualandlong-term incentives.
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| For1996,theCommittee didnotrecommend anincreaseinDr.Catacosintis'ase salary.Thistreatment isconsistent withtheBoard'sapproachtofreezingthebasesalarylevelsforallofficersandreflectstheBoard'sphilosophy thatanincreased percentage ofthetotalcompensation oftheCEOshouldbederivedfromperformance-based compensation ratherthanbasepay.Inmakingitsdetermination withrespecttoDr.Catacosinos'nnual StockIncentive Planawardforplanyear1995,theCommittee considered, amongotherthings,thelevelofachievement ofthebudgetsavingsandservicegoalsinaccordance withtheAnnualStockIncentive Plan,LILCO'soperating results,theefficiency andhighlevelofreliability ofLILCO'selectricsystem,andtheeffectiveness ofthestrategies andinitiatives beingusedtoaddresscompetitive factorsimpacting theelectricandgasindustries.
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| Specifically, thecontinuation ofLILCO'saggressive programtocontainoperating andmaintenance expensesaswellascapitalexpensesresultedinareduction intheseexpensesof$159million.Thisreduction significantly enhancedLILCO'scashflow,enablingittoredeemallbondsoutstanding underitsfirstmortgage'with cashonhand.Basedontheseachievements, theCommittee approvedanincentive awardnetoftheappropriate incomeandemployment taxesforDr.Catacosinos of5,407sharesofLILCOCommonStock.Marketcomparisons showedthatDr.Catacosinos'otal annualcompensation (basesalaryandannualincentive) for1996was4percentbelowthetotalannualcompensation and11percentbelowthetotaldirectcompensation (basesalaryandannualandlong-term incentives) ofCEO'sinMercer'sdatabases.
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| However,byestablishing directlinksbetweenpayandperformance, theCommittee isconfident thatLILCO'scompensation programsproperlyalignmanagement's interests withthelong-term interests ofratepayers andshareholders.
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| CertainTaxMattersGenerally, Section162(m)oftheInternalRevenueCodeof1986,asamendedlimitstaxdeductions forexecutive compensation to$1million.Section162(m)wasnotapplicable in1996tothecompensation oftheexecutives namedintheSummaryCompensation Table.1GeorgeBugliarello
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| -ChairmanJohnH;TalmageA.JamesBarnesRichardL.Schmalensee
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| : MEETINGS, VOTINGANDPROXIES/ThisJointProxyStatement/Prospectus isfurnished to(i)theholdersofBrooklynUnionCommonStockinconnection withthe.solicitation ofproxiesbytheBrooklynUnionBoardfrom,theholders'of
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| : Brooklyn, UnionCommonStockforuseatlireBrooklynUnionMeeting,and(ii)theholdersofLILCOCommonStockandLILCOPreferred Stock.inconnection withthesolicitation ofproxiesbytheLILCOBoardfromtheholdersof,LILCOCommonStockforuseattheLILCOMeeting.LILCOandBrooklynUnionanticipate thatmailingofproxymaterials totheirrespective shareholders entitledtonoticeofandtovoteattheirrespective meetingswillcommenceonoraboutJune30,1997.*tTheBrooklynUnionMeeting'eneral.ThisJointProxyStatement/Prospectus isfurnished toholdersofBrooklynUnionCommonStockinconnection withthesolicitation ofproxiesbytheBrooklynUnionBoardfor'useattheBrooklynUnionMeetingtoconsiderandvoteupontheadoptionoftheBrooklynUnion/LILCO Agreement, theKeySpanShareExchange(asdescribed'in AnnexJhereto)andtotransactsuchotherbusinessasmayproperlycomebeforetheBrooklynUnionMeeting.EachcopyofthisJointProxyStatement/Prospectus mailedtoshareholders ofBrooklynUnionisaccompariied byaformofproxyforuseattheBrooklynUnionMeeting.ThisJointProxyStatement/Prospectus isalsofurnished toBrooklynUnionshareholders asaprospectus inconnection withtheissuancebytheHoldingCompanyofthesharesofHoldingCompanyCommonStockinconnection withtheCombination andaprospectus inconnection withtheissuancebyKeySpanofthesharesofKeySpanCommonStockinconnection withKeySpanShareExchange.
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| Date,PlaceandTime;RecordDate.TheBrooklynUnionMeetingwillbeheldatOperaHouse,BrooklynAcademyofMusic,30Lafayette Avenue,Brooklyn, NewYork11217,onThursday, A'ugust7,1997,at3:00p.m.localtime.TheBrooklynUnionBoardhasfiXedthe'closeofbusinessonJune26,1997astheRecordDateforthedetermination oftheholdersofBrooklynUnionCommonStockentitledtoreceivenoticeofandtovoteattheBrooklynUnionMeeting.VotingRights.AtthecloseofbusinessonJune23,199750,364,212 sharesofBrooklynUnionCommonStockwereoutstanding.
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| EachshareofBrooklynUnionCommonStockoutstanding ontheRecordDateisentitledtoonevoteuponeachmatterproperlysubmitted attheBrooklynUnionMeeting.Theaffirmative voteofatleasttwo-thirds oftheoutstanding sharesofBrooklynUnionCommonStockisrequiredtoadopttheBrooklynUnion/LILCO Agreement andtoadopttheKeySpanExchangeAgreement attheBrooklynUnionMeeting.ThepresenceinpersonorbyproxyattheBrooklynUnionMeetingoftheholdersofatleastamajorityoftheoutstanding sharesofBrooklynUnionCommonStockisnecessary toconstitute aquorumforthetransaction ofbusiness.
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| Abstentions willbecountedaspresentforpurposesofdetermining whetheraquorumispresent.BecausetheadoptionoftheBrooklynUnion/LILCO Agreement andtheKeySpanExchangeAgreement requirestheapprovalofatleasttwo-thirds oftheoutstanding sharesofBrooklynUnionCommonStock,abstentions orthefailuretovotewillhavethesameeffectasanegativevote.UndertherulesoftheNewYorkStockExchange, brokerswhoholdsharesinstreetnameforcustomers willnothavetheauthority tovoteontheadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement unlesstheyreceivespecificinstructions frombeneficial owners.Suchabrokernon-votewillbecountedaspresentforpurposesofaquorumbutwillotherwise havethesameeffectasavoteagainstadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement.
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| AsofMay1,1997,directors andexecutive officersofBrooklynUnionandtheiraffiliates ownedbeneficially anaggregate of120,405sharesofBrooklynUnionCommonStock(including shareswhichmaybeacquireduponexerciseofemployeestockoptions),
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| orlessthanonepercentofthesharesofBrooklynUnion LILCO,respectively.
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| Atthetimeoffilingthe'~notice ofelectionto"dissent orwithinonemonththereafter, thedissenting shareholder mustsubmitcertificates representing suchholder'ssharestoBrooklynUnionorLILCO,asthecasemaybe,ortheirrespective transferagentsfornotationthereon,oftheelectiontodissent,afterwhichsuchcertificates willbereturnedtothesha'reholder.
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| Anysuchshareholder whofailstosubmithisorhe'rsharesfor"notationwill,atthe'option ofBrooklynUnionorLILCO,asthecasemaybe,exercised bywrittennoticetotheshareholder within45daysfromthedateoffilingofthenotice"ofelectiontodissent,losesuchholder'sappraisal rights,unlessacourt,forgoodcauseshown,otherwise directs.i1ltWithin15daysaftertheexpiration oftheperiodwithinwhichshareholders mayfiletheirnoticesofelectiontodissentorwithin15daysaftertheEffective Time,whichever islater(butnotlaterthan90daysaftertheshareholders'ote authorizing theadoptionoftheBrooklynUnio~ILCO Agreement or,inthecaseofLILCO,theLIPAAgreement),
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| BrooklynUnionorLILCO,asthecasemaybe,mustmakeawritte'n'offei(which,iftheCombination orthe.,LIPA Transaction havenotbeen,consummated, maybeconditioned upon.suchconsummation) toeachshareholder!who hasfiledsuchnoticeofelectiontodissenttopayforsuchiiolder's sharesatasiiecified pricewhich'Brooklyn UnionorLILCO,asthecasemay,be,considers tobetheirfairvalue.IfBrooklynUnionorLILCO,asthecasemaybe,andthedissentingshareholder areunabletoagreeastosuchvalue,Section623(h),,ofthe NYBCLprovidesforjudicial.
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| determination offairvalue.Inthe,eventofsuchadisagreement, acourtproceeding shallbecommenced byBrooklynUnionorLILCO;asthecasemaybe,intheSupremeCourtoftheStateofNewYork,CountyofKingsinthecaseofBrooklynUnionorCountyofNassauinthecase,ofLILCO,orbythedissenting shareholder ifBrooklynUnionorLILCO,asthecasemaybe,failstocommencethe,proceeding withinthetimerequiredbySection623oftheNYBCL.EachofBroqklynUnionandLILCOintendstocommencesuchaproceeding intheeventofsuchadisagreement.,),
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| !IUndertheBrooklynUnion/LILCO Agreement, BrooklynUnionandLILCOmayterminate theBrooklynUnion/LILCO Agreement, evenaftershareholder
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| : approval, ifforanyreasontheBrooklynUnionBoardandtheLILCOBoarddetermine thatitisinadvisable,to proceedwiththeCombination, including considering thenumberofsharesforwhich;appraisal rights,havebeenexercised and,thecosttotheHoldingCompanythereof.UnlesstheLIPATransaction gasbeenconsummated, orwillbe,consummated contemporaneously, withtheCombination, itisacondition ofeachparty'sobligation toeffecttheCombination thatithasreceivedaletterfromitsrespective accountants thatthetransaction willqualifyasapoolingofinterests transaction.
| |
| Thepoolingofinterests methodof,accounting requiresthatat,least,90percent,oftheissuedandoutstanding sharesofBrooklynUnionCommonStockandatleast90percentoftheissuedandoutstanding shares,ofLILCOCommonStockbeexchanged intheCombination forsharesofHoldingCompanyCommonStock.h1!-,d''.4"lf'4~,'I43 WHOWISHTOEXERCISESTATUTORY APPRAISAL RIGHTSORWHOWISHTOPRESERVETHERIGHTTODOSOBECAUSEFAILURETOSTRICTLYCOMPLYWITHANYOFTHEPROCEDURAL REQUIREMENTS OFSECTION623ORSECTION910MAYRESULTINATERMINATION ORWAIVEROFAPPRAISAL RIGHTSUNDERSECTION623ANDSECTION910.Thedissenting BrooklynUnionshareholder mustfilewithBrooklynUnionbeforethetakingofthevoteontheadoptionoftheBrooklynUnion/LILCO Agreement awrittenobjection including anoticeofelectiontodissent,suchholder'snameandresidence address,thenumberandclassofshares(Brooklyn Union'Common Stock)astowhichsuchholderdissents(whichnumbermaynotbelessthanallofthesharesastowhichsuchholderhasarighttodissent)andademandforpaymentofthefairvalueofsuchsharesiftheBindingShareExchanges areconsummated.
| |
| Anysuchwrittenobjection shouldbeaddressed to:TheBrooklynUnionGasCompany,OneMetroTech Center,Brooklyn, NewYork11201-3851, Attention'.
| |
| Secretary."
| |
| Thedissenting LILCOshareholder mustfilewithLILCO,beforethetakingofthevoteontheadoptionoftheBrooklynUnion/LILCO Agreement ortheLIPAAgreement, awrittenobjection toeitherorbothagreements including anoticeofelectiontodissent,suchholder'snameandresidence address,thenumberandclassofshares(CommonorPreferred Stock)astowhichsuchholderdissents(whichnumbermaynotbelessthanallofthesharesastowhich'suchholderhasarighttodissent)andademandforpaymentofthefairvalueofsuchsharesiftheCombination orLIPATransaction asthecasemaybeisconsummated.
| |
| Anysuchwrittenobjection shouldbeaddressed to:LongIslandLightingCompany,175EastOldCountryRoad,Hicksville, NewYork11801,Attention:
| |
| Corpoi'ate Secretary.
| |
| Forpurposesofperfecting appraisal rightspursuanttoSection623,thewritten"objection ofaholderofsharesofBrooklynUnionorLILCOwhichisaddressed asprovidedaboveshallbedeemedfiledwithBrooklynUnionorLILCO,asthecasemaybe,uponreceiptofsuchobjection byBrooklynUnionorLILCO,asthecasemaybe.Neithervotingagainstnorfailuretovoteforthekrooklyn Union/LILCO Agreement, and,inthecaseofLILCOshareholders, theLIPAAgreement, willconstitute thewrittenobjection requiredtobefiledbyanobjecting shareholder.
| |
| FailuretovoteagainsttheBrooklynUnion/LILCO Agreement, and,inthecaseofLILCOshareholders, theLIPAAgreement, however,willnotconstitute awaiverofrightsunderSectioris 623and910,provided, thatawrittenobjection hasbeenproperlyfiled.Ashareholder votingtoadopttheBrooklynUnion/LILCO Agreement, and,inthecaseofLILCOshareholders, theLIPAAgreement, willbedeemedtohavewaivedsuchshareholder's appraisal rights.ABrooklynUnionorLILCOshareholder maynotdissentastolessthanallthesharesofBrooklynUnionorLILCOstock,asthecasemaybe,entitledtovoteandheldofrecordthatsuchholderbeneficially, owns.Anomineeorfiduciary maynotdissentonbehalfofanybeneficial ownerastolessthanallthesharesof.BrooklynUnionorLILCOstockofsuchbeneficial owner,astowhichsuchnomineeorfiduciary hasarighttodissent,heldofrecordby,suchnomineeorfiduciary.
| |
| Furthermore, ifthesharesofBrooklynUnionorLILCOstockareownedofrecordinafiduciary
| |
| : capacity, suchasbyatrustee,guardianorcustodian, thedemandmustbemadeinthatcapacity, andjfthesharesofBrooklynUnionorLILCOstockareownedofrecordbymorethanoneperson,asinajointtenancyortenancyincommon,thedemandmustbemadebyorforallownersofrecord.Anauthorized agent,including oneoftwoormorejointowners,mayexecutethedemandforappraisal foraholderofrecord;however,suchagentmustidentifytherecordownerorownersandexpressly stateinsuchdemandthattheagentisactingasagentfortherecordownerorownersofsuchsharesofBrooklynUnionorLILCOstock.Arecordholder,suchasabrokeroranagent,whoholdssharesofBrooklynUnionorLILCOstockasanomineeforbeneficial owners,someofwhomdesiretodemandappraisal, mustexercise-appraisal rightsonbehalfofsuchbeneficial ownerswhodesiretodemandappraisal withrespecttothesharesofBrooklynUnionorLILCOstockentitledtovoteandheldforsuchbeneficial owners.WithintendaysafterthevoteofBrooklynUnionandLILCOshareholders authorizing theadoptionoftheBrooklynUnion/LILCO Agreement (andwith'respecttoLILCOonly,theLIPAAgreement),
| |
| BrooklynUnionandLILCOmustgivewrittennoticeofsuchauthorization toeachdissenting shareholder ofBrooklynUnionand42 WithrespecttotheseriesofLILCOPreferred Stockcurrently listedontheNewYork'Stock
| |
| : Exchange, forsolongasLILCOandsuchpreferred stockcontinuetomeettherequirements oftheNewYorkStockExchange, suchseriesofpreferred stockwillcontinuetobelistedonthe'NewYorkStockExchangeaftertheEffective TimeintheeventthattheCombination isconsummated buttheLIPATransaction isnotconsummated.,
| |
| I~'ederal Securities LawConsequences AllsharesofHoldingCompanyCommonStockreceivedbyshareholders ofBiooklynUnionandLILCOintheCombination willbefreelytransferable, exceptthatsharesofHoldingCompanyCommonStockreceivedbypersonswhoaredeemedtobe"affiliates" (assuchtermisdefinedunder,theSecurities Actof1933,asamended(the"Securities Act"))ofBrooklynUnionorLILCOpriortotheCombination mayberesoldbythemonlyintransactions permitted bytheresaleprovisions ofRule145undertheSecurities Act(orRule144undertheSecurities Act,inthecaseofsuchpersonswhobecomeaffiliates oftheHoldingCompany)orasotherwise permitted undertheSecurities Act.Personswhomaybedeemedtobeaffiliates ofBrooklynUnion,-LILCO ortheHoldingCompanygenerally includeindividuals orentitiesthatcontrol,arecontrolled by,orareundercommoncontrolwith,suchpartyandmayincludecertainofficersanddirectors ofsuchpartyaswellasprincipal shareholders ofsuchparty.TheBrooklynUnion/LILCO Agreement alsorequireseachofBrooklynUnionandLILCOtouseallreasonable effortstocauseeachofitsaffiliates toexecuteanddelivertothe,HoldingCompanyawrittenagreement totheeffectthatsuchaffiliate willnotofferorsellorotherwise disposeof(i)anysharesofBrooklynUnion,LILCOortheHoldingCompanyduringtheperiodbeginning 30dayspriortotheEffective Timeandcontinuing untilsuchtimeasresultscoveringatleast30daysofpost-Effective Timeoperations oftheHoldingCompanyhavebeenpublished or(ii)anyofthesharesofHoldingCompanyCommonStockissuedtosuchaffiliate inorpursuanttotheCombination inviolation oftheSecurities Actortherulesandregulations promulgated bytheSecurities andExchangeCommission (the"SEC")thereunder.
| |
| ThisJointProxyStatement/Prospectus doesnotcoverresalesofHoldingCompanyCommonStockreceivedbyanypersonwhomaybedeemedtobeanaffiliate ofBrooklynUnion,LILCOortheHoldingCompany.Appraisal RightsSection'910 oftheNewYorkBusinessCorporation Law("NYBCL")
| |
| setsforththerightsofshareholders ofBrooklynUnionorLILCOwhoobjecttotheadoptionoftheBrooklynUnion/LILCO Agreement or,inthecaseofshareholders ofLILCO,theLIPAAgreement.
| |
| AnyrecordholderofBrooklynUnionCommonStockoiLILCOCommonStockasoftherecorddatewhodoesnotvoteinfavoroftheadoptionoftheBrooklynUnion/LILCO Agreement, orwhodulyrevokeshisorhervoteinfavoroftheadoptionoftheBrooklynUnion/LILCO Agreement, may,iftheCombination isconsummated, obtainpayment,incash,forthefairmarketvalueofsuchholder'ssharesbystrictlycomplying withtherequirements ofSection623oftheNYBCL.Similarly, anyholderofLILCOCommonStock(unlesstheCombination occursbeforetheconsttmmation oftheLIPATransaction) orLILCOPreferred StockwhodoesnotvoteinfavoroftheadoptionoftheLIPAAgreement, ifentitledtovotethereon,orwhodulyrevokeshisorhervoteinfavoroftheadoptionoftheLIPA"Agreement, may,iftheLIPATransaction isconsummated, obtainpayment,in'cash,forthefairmarketvalue'ofsuchholder'ssharesbystrictlyc'omplying withtherequirements ofSection623oftheNYBCL.'he following summaryoftheapplicable provisions ofSections623and910isnotintendedtobeacompletestatement ofsuchprovisions andisqualified initsentiretybyreference tothefulltextofSections623and910,copiesofwhichareattachedtothisJointProxyStatement/Prospectus asAnnexI.Apersonhavingabeneficial interestinsharesofBrooklynUnionCommonStockorLILCOCommonStockorLILCOPreferred Stockthatareheldofrecordinthenameofanotherperson,suchasabrokerornominee,mustactpromptlytocausetherecordholdertofollowthestepssummarized belowproperlyandinatimelymannertoperfectwhateverappraisal rightsthebeneficial ownermayhave.fTHISSUMMARY.AND ANNEX,.ISHOULD.BEREVIEWEDCAREFULLY BYHOLDERSOFBROOKLYNUNIONCOMMONSTOCK,LILCOCOMMONSTOCKANDLILCOPREFERRED STOCK41 Thefederalincometaxconsequences totheholdersofBrooklynUnionCommonStockwillbethesameasdescribed aboveforaMergerthatisprecededbytheLIPATransaction.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofBrooklynUnionCommonStock."Thepreceding doesnotpurporttoaddressallpotential federalincometaxconsequences oftheLIPATransaction andtheCombination.
| |
| Inaddition, theforegoing discussion doesnotaddressfederalincometaxconsequences whichmayvarywith,orarecontingent on,ashareholder's individual circumstances,
| |
| : Moreover, exceptforthediscussion oftheTransferTaxesabove,thisdiscussion doesnotaddressanynon-incometaxoranyforeign,stateorlocaltaxconsequences oftheCombination ortheLIPATransaction.
| |
| This'discussion doesnotaddressthetaxconsequences ofanytransaction otherthantheLIPATransaction andtheCombination.
| |
| Accordingly, eachshareholder isurgedtoconsultwith=such shareholder's taxadvisortodetermine theparticular federal,state,localorforeignincomeorothertaxconsequences tosuchshareholder oftheLIPATransaction andfheCombination.
| |
| Accounting Treatment, General.UnlesstheLIPATransaction hasbeenconsummated, orwillbeconsummated contemporaneously with,theCombination, itisacondition totheconsummation oftheCombination thatBrooklynUnionreceivesaletterfromArthurAndersonLLPandLILCOreceivesaletterfromErnst8r,YoungLLP,eachdatedtheEffective Timeandeachofwhichindicates thattheyconcurwithmanagement's conclusion thatnoconditions existthatwouldprecludethetransactions contemplated bytheBrooklynUnion/LILCO Agreement, ifconsummated, fromqualifying astransactions tobeaccounted forinaccordance withthepoolingofinterests methodofaccounting undergenerally accepte'd-accounting principles.
| |
| Underthisaccounting method,theassetsandliabilities ofBrooklynUnionandLILCOwillbecarriedforwardtotheconsolidated financial statements oftheHoldingCompanyattheirrecordedamounts.Resultsofoperations oftheHoldingCompanywillincludetheresultsofbothBrooklynUnionandLILCOfortheentirefiscalyearinwhichtheCombination occurs.Thereportedbalancesheetamountsandresultsofoperations oftheseparatecorporations forpriorperiodswillbecombined, reclassified andconformed asappropriate, toreflectthecombinedfinancial positionandresultsofoperations fortheHoldingCompany.See"Unaudited ProFormaCombinedCondensed Financial Information."
| |
| IftheCombination andtheLIPATransaction areconsummated contemporaneously, oriftheLIPATransaction isconsummated priortotheCombination, theCombination willbeaccounted forasapurchaseofassetsandanassumption ofliabilities inaccordance withgenerally acceptedaccounting principles.
| |
| V.UAccounh'ng Cousideraliou AbsentLIPATransacriou.
| |
| IftheLIPATransaction wereterminated, LILCOwouldseekresolution ofitselectricratefilingfortherateyears1997through1999.LILCObelievesthatundersuchcircumstances, thePSCwillissueanelectricrateorderproviding foramongotherthings,thecontinuing recoverythroughratesoftheratemoderation component, oneoftheShoreham-related regulatory assets.However,ifsuchelectricrateorderisnotobtained, ordoesnotprovideforthecontinuing-recovery ofsomeorallofthisregulatory assetthroughrates,LILCOmayberequiredtowrite-off theamountnotexpectedtobeprovidedforinrates.AtMarch31,1997,thebalanceoftheratemoderation component wasapproximately
| |
| $409.5million.I)StockExchangeListingoftheHoldingCompanyStockApplication willbemadeforthelistingontheNewYorkStockExchangeofthesharesofHoldingCompanyCommonStocktobeissuedpursuanttothetermsoftheBrooklynUnion/LILCO Agreement.
| |
| ThelistingontheNewYorkStockExchangeofsuchshares,subjecttonoticeofissuance, isacondition precedent totheconsummation oftheCombination.
| |
| SolongasBrooklynUnionandLILCOcontinuetomeettherequirements oftheNewYorkStockExchange, BrooklynUnionCommonStockandLILCOCommonStock,asthecasemaybe,willcontinueto'belistedontheNewYorkStockExchangeuntiltheEffective Time.SolongasLILCOcontinues tomeettherequirements ofthePacificStockExchange, LILCOCommonStock'will continuetobelistedonthePacificStockExchangeuntiltheEffective Time.40 CommonStock.Further,iftheLIPATransaction closesmorethansixmonthsaftertheCombination, thenaportionoftheadditional sharesofHoldingCompanyCommonStockreceivedmaybetreatedasinterestincome.EachholderofLILCOCommonStockshouldconsultsuchshareholder's owntaxadvisorastotheseissues.IftheLIPATransaction istreatedasindependent fromtheCombination.
| |
| LILCO'stransferoftheTransferred AssetstotheTransferee Subsidiaries intheLIPATransaction willcauseJ.ILCOtorecognize gain.h.,Holders ofLILCOSeriesAAPreferred StockwhoexchangesuchsharesforHoldingCompanyPreferred Stockinconnection withtheLIPA,Transaction shouldrecognize gainorloss.Theanlountofgainorlosswillequalthedifference betweenthefairmarketvalueofHoldingCompanystockreceivedandtheshareholders'espective taxbasisintheirLILCOSeriesAAPreferred Stock.HoldersofLILCOPreferred Stockthatiscalledforredemption.
| |
| orthatis,acquiredorotherwise canceledinexchangeforcashbyLILCOorLIPApursuanttothetermsoftheLIPAAgreement andholdersofLILCOPreferred Stockwhodissentandreceivecashalso,willrecognize gainorloss.AholderofLILCOSeriesAAPreferred StockorotherLILCOPreferred Stockmightbe*eligible todeferrecognition ofgainpursuanttotheprovisions ofSection1033oftheCodediscussed above.SeeMaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -'faxImplications toHoldersofLILCOCommonStock.">>1.C.IftireLIPATransaction OccnrsAftertheCombination andtheLIPATransaction isNotTreatedasanIndependent Transaction.
| |
| IftheLIPATransaction occursaftertheCombination andtheLIPATransaction isnottreatedasindependent, theholdersofLILCOCommonStockmay.betreatedassellingsuchstockdirectlytoLIPA.Inthisevent,thematerialfederalincometaxconsequences,.to holdersofLILCOCommonStockandPreferred Stockshouldbe,andtotheholdersofBrooklynUnionCommonStockwillbe,thesameasthosedescribed forsuchholdersiftheLIPATransaction occursconcurrently with,orprecedes, theCombination.,
| |
| See"-MaterialFederal,IncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination."
| |
| IV.IftheCombination OccursAftertheLIPAAgreement isTerminated
| |
| ,IftheCombination occursaftertheLIPAAgreement isterminated orexpires,Section351(a)oftheCodeshouldapplyto,theShareExchange.
| |
| UnderSection351(a),nogainorJosswillberecognized forfederalincometaxpurposesbyholdersofLILCOCommonStockwho,exchange theirLILCOCommonStockforHoldingCompanyCommonStock,exceptwithrespecttocashreceivedinlieuoffractional shares.Theaggregate taxbasisofHoldingCompanyCommonStockreceivedbyaLILCOshareholder asaresult.oftheCombination willbethesameastheshareholder's aggregate basisintheLILCOCommonStocksurrendered intheexchange(reducedbyanysuchtaxbasisallocable tothefractional shareforwhichcashisreceived).
| |
| TheholdingperiodofHoldingCompanyCommonStockreceivedbyaLILCOshareholder willincludetheholdingperiodfortheLILCOCommonStockexchanged forsuchHolding.CompanyCommonStock.Cashreceived,by aholderofLILCOCommonStock.inlieuofafractional shareinterestinHoldingCompanyCommonStock,willresultintherecognition ofgainorlossequaltothedifference betweentheamountofcashreceivedandthetaxbasisallocable tosuchfractional shareinterest.
| |
| IfaholderofLILCOCommonStockhasdiffering basesorholdingperiodsinitssharesofLILCOCommonStock,itshouldconsultitstaxadvisorpriortotheShareExchangewithregardtoidentifying thebasesorholdingperiodsoftheparticular sharesofHoldingCompanyCommonStockreceivedintheShareExchange.
| |
| Thefederalincometaxconsequences toholdersofLILCOCommonStockwhoexercisedissenters'ights withrespecttotheCombination andreceive.cashfortheirLILCOCommonStockwillbethesameasdescribed aboveforLILCOshareholders whoexercisedissenters'ights, exceptthatdissenting shareholders shouldnotbeeligibletodeferrecognition ofgainpursuanttotheprovisions ofSection1033oftheCode.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofLILCOCommonStock."39 independent transaction; and(C),theLIPATransaction occursaftertheCombination, andtheLIPATransaction isnottreatedasanindependent transaction.
| |
| Thematerialfederalincometaxconsequences ofeachofthesealternatives isdiscussed below.'lIngeneral,iftheCombination occurswhentheLIPAAgreement hasnotbeenterminated orconsummated, theSharcExchangeshouldbeataxabledisposition (subjecttothepossibleapplication ofSection1033oftheCode)bytheholdersofLILCOCommonStock.IftheLIPATransaction occursaftertheCombination andtheLIPATransaction istreatedasanindependent transaction, theLIPATransaction shouldbetreatedgenerally asasaleoftheLILCOCommonStockbytheHoldingCompanytoLIPA.IftheLIPATransaction occursaftertheCombination andtheLIPATransaction isnottreatedasanindependent transaction, theShareExchangeandtheLIPATransaction togethermaybetreatedgenerally asasaleoftheLILCOCommonStockbytheholdersofthatstock(subjecttothepossibleapplication ofSection1033oftheCode).Inanyevent,theMerger.generally shouldbeanontaxable exchangeoftheBrooklynUnionCommonStockforHoldingCompanyCommonStock.Thematerialfederalincometaxconsequences ofthesethreealternatives arediscussed inorefullybelow.(WhethertheLIPATransaction willbetreatedas,anindependent transaction iftheCombination precedestheLIPATransaction isuncertain.
| |
| ThecloserintimethattheCombination andtheLIPATransaction occur,themorelikelythattheLIPATransaction willnotbetreatedasanindependent transaction, Becausethetimebetweenthetwotransactions andthenatureofanyintervening eventsareunknown,counselexpresses noopinionwhethertheLIPATransaction willbetreatedasanindependent transaction.
| |
| .A.IftheCombination OccursandtheLIPAagreement T/tereafter isTetvninated.,
| |
| TheexchangeofLILCOCommonStockforHoldingCompanyCommonStockhasbeenstructured tobeataxabledisposition ofLILCOCommonStockbytheholdersthereoftoHoldingCompanyinexchangeforHoldingCompanyCommonStock.TheholdersofLILCOCommonStockshouldrecognize gainorlossequaltothedifference between(i)thesumofthefairmarketvalueofHoldingCompanyCommonStockandthecashreceivedbytheshareholders inlieuoffractional shareinterests inHoldingCompanyCommonStockand(ii)theholders'espective taxbasisintheirLILCOCommonStock.Ashareholder mightbeabletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed above.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofLILCOCommonStock."HoldersofLILCOCommonStockwhodissentfromparticipating intheShareExchangeandreceivecashfortheirLILCOCommonStockwillrecognize gainorlossforfederalincometaxpurposes.
| |
| Adissenting shareholder mightbeabletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed aboveif,amongotherthings,theshareholder acquiresreplacement property.
| |
| IftheCombination occursandtheLIPAAgreement thereafter isterminated (orexpires),
| |
| thefederalincometaxconsequences totheholdersofBrooklynUnionCommonStockshouldbethesameasthosedescribed foraMergerthatoccursconcurrently with,orafter,theLIPATransaction.
| |
| See"-Material, FederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination
| |
| -TaxImplications toHoldersofBrooklynUnionCommonStock.'-'.
| |
| fR=IftheLIPAtransaction OccursAftertheCombination andtheLIPATransaction isTreatedasanIndependent Transaction.
| |
| If,theCombination istreatedasindependent fromtheLIPATransaction inaccordance withitsform,thefederalincometaxconsequences oftheCombination totheLILCOcommonshareholders andtheBrooklynUnionshareholders generally shouldbethesameasthosedescribed inthepreceding section.See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheCombination OccursBeforetheLIPAAgreement isTerminated
| |
| -IftheCombination OccursandtheLIPAAgreement Thereafter isTerminated."
| |
| Underthisalternative, however,theholdersofLILCOCommonStockwillreceiveadditional sharesofHoldingCompanyCommonStockupon-consummation oftheLIPATransaction.
| |
| lnthateventandiftheCombination andtheLIPATransaction occurindifferent taxyearsfora-shareholder, thecontingent payment*,
| |
| installment saleprovisions oftheCodemayapplytothereceiptofsuchadditional sharesofHoldingCompany38 theirLILCOSeriesAAPreferred Stock.HoldersofLILCOPreferred Stockthatiscalledforredemption orthatisacquiredorotherwise canceledinexchangeforcashbyLILCOorLIPApursuanttothetermsoftheLIPAAgreement andholdersofLILCOPreferred Stockwhodissentandreceivecashalsowillrecognize gainorlos's.AholderofLILCOSeriesAAPreferred StockorotherLILCOPreferred Stockmightbeeligibletodeferrecognition ofsuchgainpursuanttotheprovisions ofSection1033oftheCodediscussed aboveunder"-TaxImplications toHoldersofLILCOCommonStock"if,amongotherthings,theshareholder acquiresreplacement property.
| |
| ~'axImplications toHoldersofBrooklynUnionCommonStock.Exceptfordissenting shareholders andthepossibleapplication ofTransferTaxes(as.hereafter discussed),
| |
| theexchangeofBrooklynUnionCommonStockfoi;HoldingCompanyCommonStockintheMergerwillbetax-free.
| |
| Accordingly, subjecttothepriorsentence,.no gainorlosswillberecognized forfederalincometaxpurposesbyholdersofBrooklynUnionCommonStockwhoexchangesuchStockforHoldingCompanyCommonStockintheMerger.ThebasisandholdingperiodfortheHoldingCompanyCommonStockreceivedbyaBrooklynUnionshareholder intheMergerwillbethesameasthebasisandholdingperiodintheBrooklynUnionCommonStockexchanged therefor.
| |
| SomeholdersofBrooklynUnionCommonStockmayhavediffering basesorholdingperiodsfortheirsharesofBrooklynUnionCommonStock.Suchholdersshouldconsulttheirtaxadvisorspriortotheexchangewithregardtoidentifying thebasesandholdingperiodsoftheparticular sharesofHoldingCompanyCommonStockreceivedintheexchange.
| |
| HoldersofBrooklynUnionCommonStockwhoexercisedissenters'ights intheMergerandreceivecashfortheirBrooklynUnionCommonStockwillrecognize eithergainorlossforfederalincometaxpurposes.
| |
| Theamountofsuchgainorlosswillbeequaltothedifference betweentheamountofcashreceivedandtheirtaxbasisintheirsharersofBrooklynUnionCommonStock.NewYorkCityimposescertaintaxesonthetransferofaninterestinrealproperty(including leases)locatedinNewYorkCity("TransferTaxes").TransferTaxesarealsoimposedinconnection with,certainchangesofownership ofan"entityowningarealpropertyinterestinNewYorkCity.TheexchangeofBrooklynUnionCommonStockforHoldingCompanyCommonStock.byBrooklynUnionshareholders pursuanttotheBrooklynUnion/LILCO Agreement willresultintheimposition ofTransfer.
| |
| Taxes.BrooklynUnion(andnotKeySpan)willpayanyTransferTaxesincurredasaresultofachangeinownership ofBrooklynUnion.Forfederalincometaxpurposes, thepaymentofTransferTaxesbyBrooklynUnionmaybedeemedtobeataxabledividendpaidbyBrooklynUniontocertainBrooklynUnionshareholders.
| |
| Thiswouldbethe'caseifBrooklynUnionisconsidered tohavesatisfied whatisotherwise theobligation ofashareholder topayTransferTaxesasopposedtoitsownobligation topaysuchtaxes.Anyincometaxesresulting fromsuchdeemeddividendwillbetheresponsibility ofthoseBrooklynUnionshareholders.
| |
| Althoughnotfree.from'doubt,aBrooklynUnionshareholder shouldbeentitledtoincreaseitstax-basisinHoldingCompanyCommonStockreceivedintheMergerbytheamount'of anysu'chdeemeddistribution.
| |
| II.IfOnlytheLIPATransaction OccursIIftheLIPATransaction occursbuttheCombination doesnotoccur,thematerialfederalincometaxconsequences toLILCO,HoldingCompanyandtheholdersofLILCOCommonStockandLILCOPreferred Stockshouldbethesameastheconsequences wheretheLIPATransaction occursdoncurrently with,orprecedes, theCombination.
| |
| See"-MaterialFederalIncomeTaxConsequences
| |
| -IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination."
| |
| IlIIII.IftheCombination OccurswhentheLIPAAgreement hasnotbeenTerminated orConsummated IftheCombination occurswhentheLIPAAgreement hasnotbeenterminated orconsummated, therearethreepossiblealternatives:
| |
| (A)theCombination occursandtheLIPAAgreement thereafter isterminated (orexpires);
| |
| (B)theLIPATransaction occursaftertheCombination, andtheLIPATransaction istreatedasan37 HoldingCompanyCommonStockreceivedfromHoldingCompanywillequalthecashpaidthereforand(ii)HoldingCompanyCommonStockreceivedfromL'ILCOwillequalsuchstock'sfairmarketvalueattheeffective timeoftheLIPATransaction.
| |
| KHoldersofLILCOCommonStockmaybeabletodefertheirrecognition ofsuchgain(butnotloss)pursuanttoSection1033oftheCo'de.Section1033generally providesthatifataxpayertransfers propertyunderathreatofcondemnation andreceivesinexchangeproperty'hat is"similarorrelatedinserviceoruse"tothetransferred property("replacemen't property"),
| |
| thenthetaxpayerwillnotrecognize gainonthetransfer.
| |
| Section1033furtherprovidesthatifthetaxpayerreceivesmoneyorotherproperty, thenthetaxpayermayelecttodeferrecognizing gainbypurchasing replacement propertywithintwoyearsafterthecloseofthetaxyearinwhichthetaxpayerfirstrealizesgainfromthetransfer'.
| |
| LILCO'smanagement believesthattheLIPATransaction isoccurring underthreatofcondemnation.
| |
| Thenonrecognition provisions ofSection1033oftheCodemayapplytotheshareholders'isposition ofLILCOCommonStock.IfSection1033isapplicable, HoldingCompanyCommonStock'mightqualifyasreplacement propertyforLILCOCommonStock.Inthateventholders ofLILCOCommonStockmaynotberequiredtorecognize gainwithrespecttotheirreceipt(ortheiragent'sreceipt)ofHoldingCompanyCommonStockfromLILCO.Inaddition, holdersofLILCOCommonStockthatelecttodosomaynotberequiredtorecognize gainwithrespecttotheiragent'sreceiptofcashfromLIPA,becauseofthereinvestment ofsuchcashinHoldingCompanyCommonStock.IfSection1033applies,thenashareholder willberequiredtomakeanelectiontoavoidrecognition ofgainwithrespecttothereceiptofcash,andmayberequiredtomakeanelectionwithrespecttothe'receiptofHoldingCompanyCommonStock.Ifashareholder avoidsrecognizing gainintheLIPATransaction pursuanttoSection1033,theshareholder's taxbasisinthereplacement property(HoldingCompanyCommonStock)generally willequaltheshareholder's costbasisforsuchreplacement propertydecreased bytheamountofgainnotrecognized pursuanttoSection1033.Consequently, theshareholder's aggregate taxbasisinitsHoldingCompanyCommonStockgenerally shouldbethesameastheshareholder's aggregate taxbasisinLILCOCommonStock,lesstheamountofcashreceivedinlieuofafractional share.Thereisnoprecedent irivolving theapplicability ofSection1033toatransaction similartotheLIPATransaction.
| |
| Accordingly, counselexpresses noopinionregarding thepotential application ofSection1033toholdersofLILCOCommonStock.-THEPOSSIBLEAPPLICATION OFSECTION1033TOTHELIPATRANSACTION ISUNCERTAIN.
| |
| EACHHOLDEROFLILCOCOMMONSTOCKISENCOURAGED TOCONSULTWITHTHESHAREHOLDE<R'S OWNTAXADVISORTODETERMINE<,
| |
| AMONGOTHERISSUES,(1)WHETHERSECTION1033APPLIESTOSUCHSHAREHOLDER)
| |
| (ii)WHATPROPERTYQUALIFIES ASREPLACEMENT
| |
| : PROPERTY, (lii)WHETHER,ANDINWHATMANNER,THESHAREHOLDER MUSTMAKE<ANEI.ECTION TOAVOIDRECOGNIZING GAIN,AND(iv)THEAMOUNTOFANYREQUIREDADJUSTMENTTOTHESHAREHOLDER'S BASISINREPLACE<ME<NT PROPERTY.
| |
| HoldersofLILCOCommonStockwhoexercisedissenters'ights withrespecttotheLIPATransaction andreceivecashfortheirLILCOCommonStockwillrecognize gainorlossforfederalincometaxpurposes.
| |
| Adissenting shareholder mightbeabletodeferrecognizing suchgainpursuanttothenonrecognition provisions ofSection1033oftheCodeasdiscussed aboveif,amongotherthings,theshareholder acquiresreplacement property.
| |
| TaxImplications toHoldersofLILCOPreferred Stock.HoldersofLILCOSeriesAAPreferred StockwhoexchangesuchsharesforHoldingCompanypreferred stockinconnection withtheLIPATransaction willrecognize gainorlossforfederalincomefaxpurposes.
| |
| Theamountofgainorlosswillequalthedifference betweenthefairmarketvalueofHoldingCompanystockreceivedandtheshareholders'espective taxbasisin36 Situation ITaxablegainontransferofTransferred AssetsNottaxable(otherthantaxonpossibledividendincomeequaltoNewYorkCityrealpropertytransfertaxthatmayotherwise bepayablebyashareholder)
| |
| LIPATransaction occurswithorpriortoCombination Thefollowing tableisprovidedasaguidetothediscuss'ion ofthematerialfederalincometaxconsequences oftheproposedtransactions andisqualifted initsentiretybythatdiscussion.
| |
| EffectonLILCOCommon&Preferred
| |
| ~.Transaction Shareholders whoEffectonIIUShareholders
| |
| ~'ffectonDescription DoNotDissentIvhoDoNotDissentLILCOTaxable-Possible$1033DeferralIII-ACombination afterwhich'LIPATransaction terminated Common:Sameas'.Preferred:
| |
| NottaxableIILIPATransaction onlySameasINotapplicable SameasI.SameasI.Nottaxable:NoassettransferIII-CCombination followedbyLIPATransaction:
| |
| Treatedasindependent Combination followedbyLIPATransaction:
| |
| Nottreatedasindependent SameasI.SameasI.SameasI.SameasI.SameasI.SameasI.IVCombination occursNottaxableafterLIPATransaction terminated SameasI.Nottaxable:NoassettransferI.IftheLIPATransaction OccursConcurrently With,orPrecedes, theCombination TaxImplications toLILCO.LILCO'stransferoftheTransferred AssetstotheHoldingCompanyand!ortheHoldingCompanysubsidiaries thatreceivetheTransferred Assets(the"Transferee Subsidiaries"
| |
| )inexchangeforHoldingCompanyCommonStockandHoldingCompanyPreferred StockintheLIPATransaction shouldbeataxabletransaction forLILCO.TaxImplications t'otheHoldingCompany.TheHoldingCompanywillnotrecognize gainorlossuponitsissuanceofHoldingCompanyCommonStockandHoldingCompanyPreferred StocktoLILCOinexchangefor'theTransferred Assets.The,HoldingCompany's aggregate basisintheTransferred AssetsshouldequalthefairmarketvalueoftheTransferred Assetsatthetimeoftheexchange.
| |
| Inaddition, theHoldingCompanywillnotrecognize gainorlossuponitsissuanceofHoldingCompanyCommonStock,toholdersofLILCOCommonStock(throughtheiragent)inexchangeforthecashtheyreceived(throughtheiragent)fromLIPAintheLIPAMerger.See"TheLIPATransaction
| |
| -Agreement andPlanofMerger"foradescription oftheLIPATransaction.
| |
| STaxImplications toHoldersofLILCOCommonStock.Althoughnotfreefromdoubt,andsubjecttothepossibleapplication ofSection1033oftheCodeasdiscussed below,theLIPATransaction shouldbetreatedasataxabledisposition ofLILCOCommonStockbytheholdersinexchangeforcashreceived(throughtheiragent)fromLIPAandHoldingCompanyCommonStockreceivedfromLILCO.TheholdersofLILCOCommonStockshouldrealizegainorlossequaltothedifference between.(i) thesumofthecashandthefairmarketvalueofsuchHoldingCompanyCommonStockreceivedand(ii)theholders'espective taxbasisintheirLILCOCommonStock.Subjecttothepossibleapplication ofSection1033oftheCode;-ashareholder's basisin(i)35 MaterialFederalIncomeTaxConsequences,
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| *~Thefollowing setsforththeopinionofWachtell, Lipton,Rosen&,gatzastothematerialfederalincometaxconsequences oftheMergertoBrooldynUnionanditsshareholders.
| |
| Thefollowing alsosetsforththeopinionofHunton4Williamsastothematerialfederalincometaxconsequences oftheShareExchangeandtheLIPATransaction toLILCOanditsshareholders.
| |
| Thefollowing discussion isbasedontheCode,theregulations thereunder, administrative interpretations andcourtdecisions.
| |
| Futurelegislation, regulations, admintstrative interpretations orcourtdecisions couldchangethetaxconsequences described below.Thisdiscussion doesnotaddressallaspectsoffederalincometaxationthatmaybeimportant toanyspecificshareholder inlightofsuchshareholder's particular circumstances.
| |
| Nordoesitaddressaspectsthatmaybeimportant toshareholders subjecttospecialrules,suchasshareholders whoarenotcitizensorresidents oftheUnitedStates,financial institutions, tax-exempt organizations, insurance companies, dealersinsecurities orshareholders who,acquired theirBrooklynUnionCommonStock,LILCOCommonStockorLILCOPreferred Stockpursuanttotheexerciseofoptionsorotherwise ascompensation.
| |
| Thisdiscussion, assumesthatLILCOandBrooklynUqionshareholders holdtheirrespective sharesofstockascapitalassetswithinthemeaningofSection1221oftheCode.Accordingly, gainorlossrecognized byshareholders asdescribed belowgenerally willbecapitalgainorlo'ss.Itwillbelong-term gainorlossfoistockheldmorethanoneyearattheeffective timeofthetransaction resulting inthegainorloss.IftheKeySpanShareExchangeisconsummated priortotheMerger,thenallreferences contained inthisdiscussion ofMaterialFederalIncomeTaxConsequences (i)toBiooklynUnionCommonStockandtheholdersthereofshallrefertoKeySpanCommonStockandtheholdersthereofand(ii)toBrooklynUnionshallrefertoKeySpan.TaxConsequences
| |
| -OverviewThematerialfederalincometaxconsequences oftheLIPATiansaction andtheCombiriation dependinpartonwhethereachtransaction occurs.and theorderinwhichthetransactions occur.Specifically, thematerialfederalincometaxconsequences dependonwhether(i)theLIPATransaction andtheCombination occurconcurrently (ortheLIPATransaction precedes'he Coinbination),
| |
| (ii)onlytheLIPATransaction occurs,(iii)theCombination o'ccurswhenthe'LIPAAgreement hasnotbeenterminated orconsummated, or(iv)theCombination occursaftertheLIPAAgreement isterminated.
| |
| Thematerialfederalincometaxconsequences ofeachofthesepossiblealternatives isdiscussed below.34 LILCOandthreeofwhomwillhavebeendesignated byacommittee consisting oftwocurrent~directors ofBrooklynUnionandtwocurrentdirectors ofLILCO.IntheeventthattheMergerisnotconsummated, theBoardofDirectors oftheHoldingComp'any,wilf consist'oftheDirectors ofLILCOservingiminediately'before theclosingofthe'IPATransaction.,
| |
| IIOvers.UndertheBrooklynUnion/LILCO Agreement, Dr.Catacostnos, whocurrently serves'sChairmanoftheBoardof,Directors, ChairmanoftheExecutive Committee andChiefExecutive OfficerofLILCO,'ill serveas'Chairman oftheBoardofDirectors',"Chaiiman oftheExecutive Committee andChiefExecutive'Officer of'theHoldingCompanycomniencirig upon'consumma'tion oftheCombination.
| |
| Inaddition,'r, Catell,whocurrently servesasChairmanandChief'Executive Officer'of BrooklynUnionwillserveasPresident andChief.Operating OfficeroftheHoldingCompany'ommencing uponconsummation oftheCombination.
| |
| '*~'IIII'TheBrooklynLrnion/L'ILCO Agreement alsoprovidesthatat"thefirstanniversary'f thec'onsummation oftheCombination,'Dr.
| |
| Catacosinos willceasetobetheChiefExecutive Officerbutwillcontinuetob'eChairmari ofthe.BoardandChairmanoftheExecutive Committee oftheHoldingCompanyandwillbecomeaconsultant totheHoldingCompany,andMr.CatellwillsucceedDr.'Catacosinos asChiefExecutive OfficeroftheHoldingCompany.Thearrangements tocausesuchelections totake'place atthefirstanniversary oftheconsummation oftheCombination may,bealteredonlybyavoteoftwo-thIids oftheentireBoardofDirectors ofth'eHoldingCompany.I*IIIntheeventthattheMergerisnotconsummated,'the provision described inthepieceding paragraph willnottakeeffectandDr.Catacosinos willcontinuetoserveasChairmanofthe'Board ofDirectors, Cliairman oftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompany.FederalIncomeTaxConsiderations TaxRulingsRequested forLIPATransaction, ThepartiesintendtoseekrulingsfromtheIRSsubstantially tothe'following effect:"I(1)thatexceptforanygainonLILCO'stransferoftheTransferred Assets,LILCOwillnotrecognize gainpursuant,to Section337(d)oftheInternalRevenue,Code,of1986,asamended(the",Code,"),or any,otherCodeprovision (a)uponLIPA'spurchaseofLILCOCommonStockand,theamendment ofLILCO'sarticlesofincorporation (toqualifyasaSection115entity),or(b)byreasonofLILCO'ssubsequent exclusion ofincomeunderSection115oftheCode;(2)thattheLIPAAgreement constitutes a"bindingagreement" forpurposesofcertainproposedregulations underSection337(d)oftheCode,sothattheissuanceoftheproposedregulations asfinalregulations beforeorafterconsummation oftheLIPATransaction wouldnotaffectLILCO'snonrecognition ofgainasconfirmed bythepreceding Section337(d)ruling;(3)thattheincomeofLILCOfollowing theLIPATransaction, including anyincomereceivedfromrate-payersthatisattributable totheRegulatory Assets,willbederivedfromitsactivityasapublicutilityandwillaccruetoapolitical subdivision ofNewYorkStatewithinthemeaningofSection115(1)andtherefore willbeexcludedfromgrossincomeunderSection115(l)whilethestockofLILCOiswhollyownedbyLIPA;and(4)thattheinterestpaidonindebtedness issuedbyLIPAtofinancetheLIPATransaction andtorefinance certainLILCOindebtedness willqualifyforexclusion fromgrossincomeunderSection103oftheCode.Thereceiptoffavorable IRSrulingsisa'condition totheobligations ofthepartiestoconsummate theLIPATransaction undertheLIPAAgreement.
| |
| Noassurance canbegiventhattheIRSwillissueanyoralloftherequiredrulings.33 prices"atwhichbusinesses or'companies maybesoldinthefffuture',
| |
| and:suchestimates areinherently subjecttoIuncertainty.
| |
| -'f~Ilw',fffflThe.BrooklynUnionBoardselectedMerrillLynch-toactasitsfinancial advisorbecauseofMerrillLynch'sreputation asaninternationally recognized inv'estment bankingfirmwith,substantial experience intransactions similartotheCombination and'because itisfamiliar.
| |
| withBrooklyn, Unionanditsbusiness..
| |
| Aspartofitsinvestment bankingbusiness, MerrillLynchiscontinually engagedinthevaluation ofbusinesses andtheirsecurities inconnection withmergersandhcquisitions.
| |
| IffPursuanttoaletteragreement datedJanuary,1; 1995,asamendedasofOctober12,1995andasofMarch14,1997,BrooklynUnionhasagreedtopayMerrillLynch(i)afeeof$1,000,000 onMarch14,1997againstwhichcertainretainerfeeswerecredited, (ii)anadditional feeof$1,500,000 uponapprovaloftheCombination byholdersoftheBrooklynUnionCommonStock;(iii),an,additional feeof$9,000,000.upon closingoftheCombination, and(iv)uponreceipt,byBrooklyn, Unionofanybreak-uporfftopping,fee orreimbursement.
| |
| ofexpensesintheeventtheCombination isnotconsummated, anadditional feeintheamountoftenpercent(10%)ofanamountequaltoanybreak-upor,toppingfeereceived, PyBrooklynUnion"plusanyexpense.reimbursement receivedbyBrooklyn;Union; lessout-of-pocket expensespaidbyBrooklynUniontothirdpartiesinconnection withtheCombination, providedthatanyadditional feepaidpursuanttoclauses(i)or(ii)aboveshallbecreditedagainst.thefeespayable pursuanttoclauses(iii)or(iv)above.Inaddition, BrooklynUnionhasagreedtoreimburse MemllLynchforitsreasonable expenses(including, thereasonable feesanddisbursements ofitslegalcounsel)andtoindemnify MerrillLynch,and certainrelatedpartiesfromandagainstcertain,liabilities, including liabilities under.thefederalsecurities laws,arisingoutof,itsengagement.
| |
| BrooklynUnionhasalsoagreedthatMerrillLynchand/or,anyof.itsaffiliates mayunderwrite orplaceanysecurities ofanyentity,including, withoutlimitation, LIPA,issuedinconnection with,orasaresultoftheLIPATransaction.
| |
| ffMerrillLynchhas,inthepast,providedfinancial
| |
| : advisory, andfinancing servicestoBrooklynUnionandfinancing servicestoLILCOandhasreceivedfeesfortherendering ofsuchservices.
| |
| Inaddition, inthe,ordinarycourseofMerrillLynch'sbusiriess, MerrillLynchmayactivelytradethesecurities ofBrooklynUnionorLILCOforitsownaccountandfortheaccountsofitscustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| FortheopinionofLILCO'sfinancial advisor,see".Selected Information Concerning LILCO-OpinionofLILCO'sFinancial Advisor."
| |
| WIPotential Conflicts ofInterests of'Certain PersonsintheCombination andtheL'IPATransaction
| |
| ~ff'"~HInconsidering thereco'mmendations'of theBrooklynUnionBoaidofDirectors andtheLILCOBoardofDirectors withrespecttotheBrooklynUniori/L'ILCO A'greement andtherecommendation oftheLILCOBoardofDirectors withrespecttotheLIPAAgreement, BrooklynUnionandLILCOshar'eholders shouldbeawarethatcertainofficersanddirectors ofBrooklynUnion'andLILCO(ortheiraffiliates) haveinterests intheMergerthataredifferent fromandinadditiontotheinterests ofBrooklyn'Union andLILCOshareholders'generally.
| |
| See"Selected Information Concerning BrooklynUnion-Potential Conflicts ofInterests ofCertainPersonsintheCombination andtheLIPATransaction,"
| |
| and"-SelectedInformation Concerning LILCO-Potential Conflicts ofInterestofCertaihPersonsintheCombination ahd'theLIPATransaction."
| |
| TheHoldingCompanyisrequiredbytheBrooklynUnion/LILCO Agreement toprovideindemnification andliability insurance arrangements fordirectors andofficersofBrooklynUnionandLILCO.See"TheAgreement'and Plan'ofExchangeandMerger-Indemnification."
| |
| 'ff'IIICertainArrangements Regarding theDirectors andManagement oftheHolding.CompanyFollowing theCombination andthe,LIPATransaction
| |
| 'BoardofDirecrors.
| |
| TheBrooklynUnion/LILCO Agreement
| |
| : provides, thatuponconsummation'of theCombination, thenumberofdirectors comprising thefullBoardofDirectors oftheHoldingCompany,willbe15persons,"sip ofwhomwillhavebeendesignated byBrooklynUnion",sixofwhomwillhavebeendesignated by32 Stockrangingfrom1.283xto1.105xduringtheHistorical Period,and1;108xto.932xfortheProjected Period.TheanalysisofdividendpercommonshareyieldedanimpliedexchangeratioforashareofLILCO,Common StocktoashareofBrooklynUnionCommonStockrangingfrom1.333xto1.281xfortheHistorical Period,and1.254xto1.156xfortheProjected Period.Theanalysisofbook-,value percommonshareyieldedan:implied exchangeratioforashareofLILCOCommonStock.toashare'ofBrooldynUnionCommonStockrangingfrom1.278xto'1.210x fortheHistorical Period,and1.177xto1.110xforthe,Projected Period.-lihBasedupontheestimated impliedratiosinsuchanalyses, MerrillLynch:calculated impliedexchangeratiosofashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom1.105to1.333duringtheHistorical Period,"and 0.932to1:254fortheProjected Period,compared'to theOriginalRatioof0.803."Ii,~'Thefollowing isa'summary ofthematerialfinancial andcomp'arative analysesperformed byMerrillLynchinconnection withthepreparation oftheopinionofMerrillLynchdatedasofJune26,'1997..
| |
| h'IifI,~'l-''Con&bution Analysis'.
| |
| MerrillLynchcalculated thecontribution ofeachofBrooklynUnionandLILCOtotheprofoimacombinedcompanyassumingthattheLIPATransaction isconsummated baseduponvaluations (i)*forBrooklynUnionusingestimated 1997earning's aridmultiples ranging"from13.0xto14.0x,(ii)forLILCO's'gas distribution businessusingestimated 1997earningsandmultiples rangingfrom13.0xto14.0x,(iii)forLILCO'selectricgeneration businessusingL'ILCO's'generatin'g capacityandmultiples rangingfrom$200to4250perkilow'att
| |
| : capacity, (iv)fo'rLILCO'smanagement
| |
| 'contract withLIPAbaseduponthepresentvalueofthefeesand'other paymentsprojected byLILCO'smanagement to'bereceivedbyLILCOduringthetermofthecontract, and(v)thehypbthetical cashproceedsto'thecombinedcompany(net'ofestimated transaction-related expensesandliabilities" but'ncluding thepresentvalueof'certairi tax-related benefits) ofapproximately
| |
| $1.96billion.ThisanalysisshowedthatBrooklynUnionshareholders wouldcontribute approximately" 30%ofthetotalaggregate valueof'thecombinedcompanyŽandwouldownapproximately 32%ofthecomb'ined companyonaproformabasis.ItIImpliedAcquisition Valuatiori Analysis.
| |
| MerrillLyn'chderivedanestimated rangeofimpliedmultiples forLILCO'selectricgeneration businessby'subtracting fromthe'aggregate equityvaluation oftheBrooklynUnionCommonStocktobeexchanged intheCombination (usingthe'LIPA" Ratioof0.880andariassumedpricepershareofBrooklynUnionCommonStockof$29.00)(i)thehypothetical cashproceedstothecombinedcompany(net,ofestimated transaction-related expensesandliabilities butincluding thepresentvalueofcertaintax-related benefits) ofapproximately
| |
| $1.96billion,(ii)thepresentvalueofthefeesandotherpaymentsprojected byLILCO'smanageinent tobereceivedbyLILCOunderLILCO'smanagemen't contractwithLIPAduringthetermofsuchcontract, and(iii)multiples forLILCO'sgasdistribution businessrangingfrom14.0xto16.0xestimated 1997netincomeprovidedbyLILCO.Thisanalysisyieldedimpliedmultiples ofnetincomeforLILCO'selectricgeneration businessrangingfrom2.2xto5.5x.Itt-.Thesummarysetfoithabovedoesnotpurporttobea'complete description oftheanalysesperfoimed byMerrillLynch,althoughitisasummaryofthemateiialfinancial aridcomparative arialyses performed byMerrillLynchinarrivingattheMerrillLynchOpinion.Arrivingatafairnessopinionis'acomplexprocess'notnecessarily susceptible topartialanalysisorsummarydescription.
| |
| MerrillLynchbelievesthatitsanalysesmustbeconsidered asa.who'ndthatselecting portionsofitsanalysesandofthefactorsconsidered byit,withoutconsidering allsuchfactorsandanalyses, couldcreateamisleading view,oftheprocesses-underlying itsopinion.MerrillLynchdidnotassignrelativeweightstoanyofitsanalysesinpreparing itsopinion.Themattersconsidered byMerrillLynchinitsanalysesarebasedonnumerousmacroeconomic, operating andfinancial assumptions withrespect'to industryperformance, generalbusinessandeconomicconditions ando'the'rmatters,manyofwhicharebeyondBrooldynUnion'sorLILCO'scontrol'attd involvetheapplication
| |
| 'ofcomplexmethodologies andeducatedjudgment.
| |
| Anyestimates incorporated inthe'analyses performed byMerrillLynch.arenotnecessarily indicative ofactualpastorfutureresults,orvalues,whichmaybesignificantly moretorlessfavorable thansuchestimates.
| |
| Estimated valuesdonot'purport tobeappraisals anddonotnecessarily, refiectthe31 ElectricPowerCompany/Baltimore GasandElectricCompany(September 1995),Southwestern PublicServiceCompany/Public ServiceCompanyofColorado(August1995),CIPSCOIncorporated/Union ElectricCompany(August1995),NorthernStatesPowerCompany/Wisconsin EnergyCorporation (May1995),Iowa-Illinois GasandElectricCompany/Midwest Resources Inc.(July1994)andSierraPacificResources/Washington WaterPowerCompany.(June1994).TheGasMergerTransactions andthedateeachtransaction wasannounced wereasfollows:PacificEnterprises/Enova Corporation (October1996),UnitedCitiesGasCompany/Atmos EnergyCorporation'(July 1996),NorAmEnergyCorpiHouston Industries Incorporated (August1996)andWashington EnergyCompanyInc./Puget SoundPower4Light'Company (October1995).n~MerrillLynchderivedanestimated valuation rangeforBrooklynUnionbycomparing theoffervalue(definedastheequityvaluedetermined usingmarketpricespriortotheannouncement date)ineachoftheGasMergerTransactions asamultipleof(i)netincomeoftheacquiredcompanyforthelatesttwelvemonths,whichrangedfrom18.0xto22.0x,and(ii)bookvalueoftheacquiredcompany,whichrangedfrom1.75xto2.25x.'errill Lynchalsoderivedanestimated valuation rangeforLILCObycomparing theoffervalueineachoftheElectricMergerTransactions asamultipleof(i)latesttwelvemonthearningspershareoftheacquiredcompany,whichrangedfrom9.0xto13.0x,and(ii)bookvalueoftheacquiredcompany,whichrangedfrom1.00xt'o1.50x.Basedupontheestimated valuations ofBrooklynUnionandLILCOinsuchanalyses, MerrillLynchcalculated animpliedexchangeratioofashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfromOA51to0.988,comparedtotheOriginalRatioof0.803.JNoneofthebusinesscombinations utilizedasacomparison intheanalysesdescribed aboveisidentical totheproposedCombination.
| |
| Accordingly, ananalysisofcomparable businesscombinations isnotmathematical; ratheritinvolvescomplexconsiderations andjudgments concerning differences infinancial andoperating characteristics ofthecomparable companies andotherfactorsthatcouldaffectthepublictradingvalueofthecomparable companies orcompanytowhichtheyarebeingcompared.
| |
| kDiscounted'Cash Flow,Analysis.
| |
| MerrillLynchderivedestimated valuation rangesforBrooklynUnionandLILCObyperforming discounted cashflow("DCF")analyses.
| |
| InthecaseofBrooklynUnion,theDCF,wascalculated assumingdiscountratesrangingfrom8.0%to9.0%,andwascomprised ofthesumofthepresentvalueof(i)theprojected unlevered freecashflowsforyears1998to2002estimated byBrooklynUnion,and(ii)theyear2002terminalvaluebasedupon(a)arangeofmultiples from12.0xto15.0xofprojected year2002netincome,and(b)arangeofmultiples from1.60xto2.00xofprojected year2002bookvalue.InthecaseofLILCO,theDCFwascalculated assumingdiscountratesrangingfrom7.75%to8.75%,andwascomprised ofthesumofthepresentvalueof(i)theprojected'unlevered freecashflowsforyears1998to2002estimated byLILCO,and(ii)theyear2002terminalvaluebasedupon(a)arangeofmultiples from8.5xto10.5xofprojected year2002netincome,and(b)arangeofmultiples from0.80xto1.20xofprojected year2002bookvalue.Basedupontheestimated valuation rangesofBrooklynUnionandLILCOsetforthabove,MerrillLynchcalculated animpliedexchangeratioofashareofLILCOCommonStocktoashare'ofBrooklynUnionCommonStockrangingfrom0.553to0.924,comparedtotheOriginalRatioof0.803.Contribution Analysis.
| |
| MerrillLynchcalculated thecontribution ofeachofBrooklynUnionandLILCOtotheproformacombinedcompanywithrespectto(i)earningspercommonshare,(ii)dividends percommonshareand(iii)bookvaluepercommonshare,ineachcaseforthefiscalyears1993through1995("Historical Period"),andforthefiscalyears1996through2000(the"Projected Period"),forBrooklynUnionusingreportedresultsforfiscalyear1996andcertainprojections providedbythemanagement ofBrooklynUnion,andforLILCOusingcertainprojections forfiscalyears1996and1997obtainedfromFirst.CallCorporation andforfiscalyears1998through2000providedbyLILCOmanagement.
| |
| TheanalysisofearningspercommonshareyieldedanimpliedexchangeratioforashareofLILCOCommonStocktoashareofBrooklynUnionCommon30 Ratiosfortheone-year,,two-year andthree-year periodsendedonDect:mber 19,1996,andcomparedsuchHistorical TradingRatiostotheOriginalRatioof0.803,and theLIPARatioof0.880.Thisanalysisshowedthatduringthethree-year periodendedonDecember19,1996,the-maximum Historical TradingRatiowas0.942,theminimumHistorical TradingRatiowas0.542,andthemeanHistorical, TradingRatiosfortheone-year, two-yearandthree-year periodsendedonDecember19,1996were0.635,0.657and0.705,respectively.
| |
| Comparable PubliclyTradedCompanyAnalysis.
| |
| Usingpubliclyavailable information, MerrillLynchcomparedcertainfinancial andoperating information andratios(described below)forBrooklynUnionandLILCO,respectively, withthecorresponding financial andoperating information andratiosforseparategroupsofpubliclytra'dedcompanies thatMerrillLynchdeemedtobereasonably comparable toBrooklynUnionandLILCO,respectively.
| |
| Thecoinpanies includedintheBrooklynUnioncomparable companyanalyseswere:AGLResources, Inc.,LacledeGasCompany,NationalFuelGasCompany,NewJerseyResources Corporation, PeoplesEnergyCorporation andWashington GasLightCompany,(collectively, the"Brooklyn UnionComparables").
| |
| Thecompanies includedintheLILCOanalyseswere:BostonEdisonCompany,Consolidated EdisonCompanyofNewYork,Inc.,NewYorkStateElectric&GasCorporation andPublicServiceEnterprise GroupIncorporated (collectively, the"LILCOComparables").
| |
| MerrillLynchderivedanestimated valuation rangeforBrooklynUnionbycomparing:
| |
| (i)currenttradingvalueto'estimated 1997earningspersharefortheBrooklynUnionComparables, whichestimates wereobtainedfrominstitutional BrokersEstimateSystemandrangedfrom13.0xto15.0x,comparedtoamultipleof14.4xforBrooklynUnionCommonStockbaseduponestimates fromInstitutional BrokersEstimateSystem;(ii)currenttradingvaluetobookvaluefortheBrooklynUnionComparables, whichrangedfrom1.50xto2.00x,comparedtoamultipleof1.69xforBrooklynUnionCommonStock;and(iii)the'dividend yieldratiofortheBrooklynUnionComparables, whichrangedfrom4.0%to6.0%;coitipared tothedividendyieldratioof4.6%forBrooklynUnionCommonStock.IMerrillLynchderivedanestimated valuation rangeforLILCObycomparing:
| |
| (i)currenttradingvaluetoestimated 1997earningspersharefortheLILCOComparables, whichestimates wereobtainedfromInstitutional BrokersEstimateSystem,whichrangedfrom8.0xto10.5x,comparedtoamultiple.
| |
| of8.8xforLILCOCommonStockbaseduponestimates obtainedfromInstitutional BrokersEstimateSystem(ii)currenttradingvaluetobookvaluefortheLILCOComparables, whichrangedfrom0.80xto1.20x,comparedtoamultipleof0.91xforLILCOCommonStock;and(iii)thedividendyieldratiofortheLILCOComparables, whichrangedfrom'%to9%%uo,comparedtothedividendyieldratioof9.3%forLILCOCommonStock.Basedupon'theestimated valuation rangesofBrooklynUnionandLILCOinsuchanalyses, MerrillLynchcalculated animpliedexchangeratioofashareofLILCOCommonStocktoashareofBrooklynUnionCommonStockrangingfrom0.461to1.052,comparedtotheOriginalRatioof0.803.Nopubliccompanyutilizedasacomparison intheanalysesdescribed aboveisidentical toBrooklynUnionorLILCO.Accordingly, ananalysisofpubliclytradedcomparable companies isnotmathematical; ratheritinvolvescomplexconsiderations andjudgments concerning differences infinancial andoperating characteristics ofthecomparable companies andotherfactorsthatcouldaffectthepublictradingvalueofthecomparable companies orcompanytowhichtheyarebeingcompared.
| |
| MergerTransaction Analysis.
| |
| Usingpubliclyavailable information, MerrillLynchreviewedtwelvetransactions announced betweenJune28,1994andOctober.14,1996,involving themergerofselectedelectricutilitycompanies (the"Electric MergerTransactions"
| |
| ),and'fourtransactions announced betweenOctober18,1995andOctober14,1996,involving themergerofgasdistribution companies (the"GasMergerTransactions"
| |
| ).TheElectricMergerTransactions andthedateeachtransaction wasannounced wereasfollows:EnovaCorporation/Pacific Enterprises Inc.(October1996),Centerior EnergyCorporation/Ohio EdisonCompany(September 1996),AtlanticEnergy,Inc./Delmarva Power&LightCompany(August1996),'ortland GeneralCorporation/Enron Corp.(July1996),UtiliCorp UnitedInc./Kansas CityPower&LightCompany(January1996),IES;,Industries Inc./Interstate PowerCompany/WPL
| |
| : Holdings, Inc.(November 1995),Potomac29 Union/LILCO Agreement; (x)reviewedtheLIPAAgreement; and(xi)'reviewed suchotherfinancial studiesandanalysesandperformed suchotherinvestigations andtookintoaccountsuchothermattersasMerrillLynchdeemednecessary, including MerrillLynch'sassessment ofgeneraleconomic, marketandmonetaryconditions.
| |
| Inpreparing theMerrillLynchOpinion,MerrillL'ynchassumedwiththeconsentoftheBrooklynUnionBoardthattheLIPATransaction, ifconsumma'ted, wouldbeconsummated onthetermscontained intheLIPAAgreement.
| |
| Inpreparing theMerrillLynchOpinion,MerrillLynchalsoassumedandreliedontheaccuracyandcompleteness ofallinformation suppliedorotherwise madeavailable toitorpubliclyavailable ordiscussed withorreviewedbyorforit,andMerrillLynchdidnotassumeanyresponsibility forindependently verifying suchinformation orundertaking anindependent evaluation orappraisal ofanyoftheassetsorliabilities ofBrooklynUnionorLILCO.Inaddition, MerrillLynchdidnotconductanyphysicalinspection oftheproperties orfacilities ofBrooklynUnionorLILCO.Withrespecttothefinancial forecasts furnished toordiscussed withMerrillLynchbyBrooklynUnionandLILCO,MerrillLynchassumedthattheyhadbeenreasonably preparedandreflected thebestcurrently available estimates andjudgments ofBrooklynUnion'sorLILCO'sman'agement astotheexpectedfuturefinancial performance ofBrooklynUnionorLILCO,asthecasemaybe,andastotheexpectedfutureprojected outcomesofvariouslegal,regulatory andothercontingencies.
| |
| Inthatregard,L'ILCO'sfinancial forecasts forthecaseinwhichLILCOretainsownership ofitselectrictransmission anddistribution system,substantially allofitselectricregulatory assetsandcertainotherinterests andtheLIPATransaction isnotconsummated, assumed,amongotherthings(i)thatLILCOwillbesubjecttonoreduction inelectricratesforthefive-year periodendingDecember31,2002,(ii)thatK.ILCOwillfullyrecoverinitscurrentandfutureelectricratesallofitscostsreferredtointheNotestoFinancial Statements ofLILCOfortheyear'endedDecember31,1996,associated withthetransferoftheShorehani NuclearPowerStationtoLIPAanddecommissioning thereof,ontermsnolessfavorable toLILCOthanthetermscurrently ineffect,and(iii)that'here willbenoadversechangestoLILCOingeneralcompetitive conditions forthetransmission andsaleofelectricity intheareasservicedbyLILCOthroughtheconstruction ofnewtransmission linestoLongIslandorotherwise.
| |
| MerrillLynchassumedthattheCombination willbeaccounted forasapoolingofinterests inthecasewheretheLIPATransaction isnotconsummated andthattheivfergerwillqualifyasatax,-free reorganization forU.S.federalincometaxpurposes.
| |
| TheMerrillLynchOpinionwas,necessarily baseduponmarket,economicandotherconditions astheyexistedandcouldbeevaluated asofthedateofsuchopinion.MerrillLynchassumedthatinthecourse'ofobtaining thenecessary regulatory orotherconsentsorapprovals fortheCombination andtheLIPATransaction, norestrictions, including anydivestiture requirements oramendments ormodifications, willbeimposedthatwillhaveamaterialadverse.effectonthecontemplated benefitsoftheCombination ortheLIPATr'ansaction.
| |
| TheMerrillLynchOpinionwasaddressed totheBrooklynUnionBoardanddoesnotconstitute arecommendation toanyshareholders astohowsuchshareholders shouldvoteontheproposedCombination.
| |
| Inconnection withtheprepamtion oftheMerrillLynchOpinion,MerrillLynchwasnotauthorized byBrooldynUnionortheBrooklynUnionBoardtosolicit,norhasMerrillLynchsolicited, third-party indications ofinterestfortheacquisition ofall,oranypartofBrooklynUnion.Inaddition, MerrillLynchexpressed noopinionastowhatthevalueoftheHoldingCompanyCommonStockactuallywillbewhenissuedtothehqldersofsharesoftheBrooklynUnionCommonStockuponconsummation oftheCombination orwhatthevalueoftheBrooklynUnionCommonStock,orLILCOCommonStockwillbebetweenthedateofsuchopinionandtheconsummation oftheCombination.
| |
| Nootherlimitations wereimposedbyBrooklynUniononMerrillLynchwithrespecttotheinvestigations madeorprocedures followedbyMerrillLynchinrendering itsopinion.Thefollowing isasummaryofthematerialfinancial andcomparative analysesperformed byMerrillLynchinarrivingattheMerrillLynchopiniondelivered totheBrooklynUnionBoardonDecember29,1996.TradingRatioAnalysis.
| |
| MerrillLynchreviewedtheperformance ofthedailyclosingpricespershareofLILCOCommonStockandBrooklynUnionCommonStockinrelationtoeachotherforthethree-year periodendedonDecember19,1996.MerrillLynchalsoreviewedthehistorical ratiosofsuchdailyclosingpricespershareofLILCOCommonStocktothoseofBrooklynUnionCommonStock(the"Historical TradingRatios")fortheperiodfromDecember19,1993throughDecember19,1996,andthemeanofsuchHistorical Trading28 Opinion.ofBrooklynUnion'sFinancial Advisor'OriDecember29,1996,Merr'illLynchdelivered itsoralopinion,which'was subsequently confirmed inawritten'opinion datedasofsuchdate,totheBrooklynUnionBoardtotheeffectthat,a'sofsuchdate,andbasedupontheassumptions made,mattersconsidered andlimitsofreviewsetforthinsuchopinion,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewiftheLIPATransaction werenotconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.Inconnection withtheapprovalbytheBrooklynUnionBoard"oftheBrooklynUnion/LILCO Agreement, MerrillLynchdelivered itsopiniontotheBrooklynUnionBoardonJune26,1997totheeffectthat,asofsuchdate,andbasedupontheassumptions made,mattersconsidered andlimitsofreviewsetforthinsuchopinion,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock.Inaddition, MerrillLynchdelivered itswrittenopiniontotheBrooklynUnionBoarddatedasofthedateofthisJointProxyStatement/Prospectus, to,theeffectthat,asofsuchdate,and.basedupontheassumptions made,mattersconsidered andlimitsofreviewsetforthinsuchopinion,theBrooklynUnionRatioof,oneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStockfromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock,andiftheLIPATransaction v/erenotconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.References hereintothe"MerrillLynchOpinion"refertothewrittenopinionofMerrillLynchdatedasofthedateofthisJointProxyStatement/Prospectus.
| |
| 'copyoftheMerrillLynch,Opinion,whichsetsforththeassumptions made,mattersconsidered andcertainlimitations onthescopeofreviewundertaken byMerrillLynch,isattachedasAnnexEtothisJointProxyStatement/Prospectus.
| |
| BrooklynUnionshareholders arcurgedtoreadsuchopinioninitsentirety.
| |
| TheMerrillLynchOpinionisdirectedonlytothefairnessoftheBrooklynUnionRatiofromafinancial pointofviewanddoesnotconstitute arecommendation toany,BrooklynUriionshareholder astohowsuchshareholder shouldvoteattheBrooklynUnionMeeting.Thesummary'of theMerrillLynchOpinionsetforthinthisJointProxyStatement/Prospectus is'qualified initsentiretybyreference tothefulltextofsuchopinion.InarrivingattheMerrillLynchOpinion,MerrillLynch,amongotherthings:(i)reviewedBrooklynUnion'sAnnualReports,Forms10-Kandrelatedfmancialinformation forthethreefiscalyearsendedSeptember 30,1996andBrooklynUnion'sForms10-Qandtherelatedunaudited financial information forthequarterly periodsendingDecember31,1996andMarch31,1997;(ii)reviewedLILCO'sAnnualReports,Forms10-Kandrelatedfinancial information forthethreefiscalyearsendedDecember31,1996andLILCO'sForm10-Qandtherelatedunaudited financial information forthequarterly periodendingMarch31,1997;(iii)reviewedcertainin'fo'rmation, including financial forecasts, relatingtothebusiness,
| |
| : earnings, cashflow,assetsandprospects ofBrooklynUnionandLILCO,furnished toMerrillLynchbyBrooklynUnionandLILCO;(iv)conducted discussions withmembersofseniormanagement ofBrooklynUnionandLILCOconcerning theirrespective businesses, regulatory environments, prospects andstrategic objectives; (v)reviewedthehistorical marketpricesandtradingactivityforBrooklynUnionCommonStockandLILCOCommonStockandcomparedthemwiththatofcertainpubliclytradedcompanies whichMerrillLynchdeemedtobereasonably similartoBrooklynUnionandLILCO,respectively; (vi)comparedtheresultsofoperations ofBrooklynUnionandLILCOwiththatofcertaincompanies whichMerrillLynchdeemedtobereasonably similartoBrooklynUnionandLILCO,respectively; (vii)comparedtheproposedfinancial termsof.thetransactions contemplated bytheBrooklynUnion/K,ILCO Agreement withthefinancial termsofcertainothermergersandacquisitions whichMerrillLynchdeemedtoberelevant; (viii)considered thepotential proformaeffectoftheCombination, including onBrooklynUnion'scapitalization ratiosandearnings, dividends.
| |
| andbookvaluepershare;(ix)reviewedtheBrooklyn27 BrooklynUnionBoardreferredtoinclause(vii)ofthefollowing paragraph.
| |
| TheBrooklynUnion.Boardconsulted withitsfinancial advisorandlegaladvisorsandmanagement ofBrooklynUnion.Aftercarefulreviewandconsideration, theBrooklynUnionBoarddetermined thattheCombination isadesirable transaction fromthestandpoint oftheBrooklynUnioncommonshareholders.
| |
| InreachingitsdecisiontoapprovetheBrooklynUnion/LILCOAgreement, andjnadditiontothefactorsdescribed above,theBrooklynUnionBoardconsidered thefollowing factors:(i)thecurrentandhistorical marketpricesoftheBrooklynUnionCommonStockandtheLILCOCommonStock(including thefactthatfromDecember1993toDecember.1996, theratiooftheclosingpriceofLILCOCommonStock.totheclosingpriceofBrooklynUnionCommonStockhasrangedbetween0.542to0.942,andtheclosingpricesofBrooklynUnionCommonStockandLILCOCommonStockonDecember26,1996were$30.625and$19.125,respectively);
| |
| (ii)information concerning thefinancial performance, condition, businessoperations andprospects ofeachofBrooklynUnionand'LILCO',
| |
| (iii)theeffectsoftheCombination onBrooklynUnibn'sshareholders, including theopportunity toshareintheanticipated benefitsofownership ofthecombinedenterprise; (iv)theexpectedfederalincometaxtreatment oftheCombination asatax-freereorganization toBrooklynUnionshareholders (asdescribed under"FederalIncomeTaxConsiderations
| |
| -MaterialFederalIncomeTaxConsequences"
| |
| );(v)theimmediate reduction ingasandelectricratestorefiectanticipated synergysavings,ascontemplated byBrooklynUnionandLILCO,andthebeliefthatcustomers willbenefitfromabroaderrangeofinnovative energyproductsandservices; (vi)thetermsoftheBrooklynUnion/LILCO Agreement, whichprovideforbalancedrepresentations'and warranties, conditions toclosing.andrightstotermination; and(vii)theopinionofBrooklynUnion'sfinancial advisor,MerrillLynch,totheeffectthat,asofthedatehereofandbasedupontheassumptions made,matters.considered andlimitsofreviewin,connection withsuchopinion,theBrooklynUnionRatioofoneshareofHoldingCompanyCommonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommon'Stock fromafinancial pointofviewiftheLIPATransaction wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock,andiftheLIPATransaction werenotconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.803sharesofHoldingCompanyCommonStock.In'etermining thattheCombination isfairtoBrooklynUnion'sshareholders, theBrooklynUnionBoardconsidered theabovefactorsasawholeanddidnotassignspecificorrelativeweightstothem.IntheviewoftheBrooklynUnionBoard,eachofthefactorslistedabovereinforced itsbeliefthatthecombinedentitywouldhaveexcellent businessprospects goingforward..Because BrooklynUnion'sshareholders collectively wouldownapproximately 34%(or32%if'theLIPATransaction isconsummated) of.thecombinedentitybasedupon.thecapitalization ofthecompanies asofDecember29,1996,thedateof"theOriginalAgreement, theprospects ofsuchentitywereanimportant factor'to theBrooklynUnionBoardindetermining whethertoapprovethetransaction.
| |
| THEBROOKLYNUNIONBOARD,BYAUNANIMOUS VOTE,HASADOPTEDTHEBROOKLYNUNION/LILCO AGREEMENT, BELIEVESTHATTHETERMSOFTHECOMBINATION AREFAIRTOBROOKLYNUNION'SSHAREHOLDERS, ANDUNANIMOUSLY RECOMMENDS THATTHESHAREHOLDERS OFBROOKLYNUNIONVOTETOADOPTTHEBROOKLYNUNION/LILCO AGREEMENT.
| |
| Inconsidering there'commendation oftheBrooklynUnionBoardwithrespecttotheBrooklynUnion/LILCO Agreement, shareholders shouldbeawarethatcertainmembersofBrooklynUnion'smanagement andtheBrooklynUnionBoardhavecertaininterests intheCombination thataredifferent from,orinadditionto,theinterests ofshareholders ofBrooklynUniongenerally andthatcouldpotentially represent conllicts ofinterest.
| |
| TheBrooklynUnionBoardwasawareoftheseinterests andconsidered them,amongothermatters,inadoptingtheBrooklynUnion/LILCO Agreement.
| |
| See"TheBrooklynUnion/LILCO Combination
| |
| -Potential Confiicts ofInterests ofCertainPersonsintheCombination."
| |
| Fortherecommendation oftheLILCOBoard,see"Selected Information Concerning LILCO-Recommendation oftheLILCOBoard,"26 CommonReasonsfortheCombination BrooklynUnionandLILCObelievethat,thecombinedcompany,itsshareholders anditscustomers canbenefitsignificantly fromthestrategic benefitswhichtheyexpecttoresultfromtheCombination, whichincludethefollowing:
| |
| ~Customers ofBrooklynUnionandLILCOshouldrealizelowerratesasaresultofthesubstantial synergysavingsanticipated toberealizedthroughthecombination ofthecompanies'perations and,iftheLIPATransaction isconsummated, electriccustomers shouldrealizesubstantially lowerratesa'saresultofLIPA'sexemption'from paymentoffederalincometaxanditsrefinancing ofLILCO'sdebtwithtax-exemptfinancing.
| |
| ~Thegreaterfinancial andoperational resources available tothecombinedcompanyshouldcreateastrongercompetitor inthecontinuing development ofacompetitive energymarketplace.
| |
| ~Shareholders ofbothcompanies willhavetheopportunity toparticipate intheupsidepotential oftheconvergence ofgasandelectriccompanies withintheenergyindustry'.
| |
| Thecombinedcompanyisexpectedtocreateaplatformtomarket,tradeandarrangephysicaldeliveryofenergyproductsandrelatedservicesonalargescaletomajormarketareas.~Bycombining thebusinesses ofBrooklynUnionandLILCOasseparatesubsidiaries ownedbyaholdingcompany,thecombinedcompanyshouldbenefitfromgreaterflexibility inconducting andfinancing non-regulated operations thaniscurrently available toeitherBrooklynUnionorLILCO.Thecombinedcompanyshouldalsohavegreaterflexibility toinvestinnewlinesofbusinessthaniscurrently available toeitherBrooklynUnionorLILCO.Withgreaterflexibility toraiseandcommitcapitaltounregulated operations intheenergybusiness, thecombinedcompanywillbebetterpositioned totakeadvantage ofthemarketopportunities presented intheincreasingly competitive energyindustry.
| |
| BrooklynUnionandLILCObelievethatthesestrategic benefitswillbefurtherenhancedthroughconsummation oftheLIPATransaction.
| |
| Theestimated netproceedsofapproximately
| |
| $1.7billionwillprovidetheHoldingCompanywithsubstantial financial resources whichBrooklynUnionandLILCOanticipate willbeusedinparttomakeacquisitions thatwillcomplement theoperations oftheHoldingCompany.Particularly inlightofthesignificant proposedrestructurings andacquisitions announced byexistingutilities, theHoldingCompanyshouldbewellpositioned financially totakeadvantage oftheincreased opportunities whicharelikelytobe,presented overthenextseveralyearstoexpanditsbusiness.
| |
| Nodetermination withrespecttosuchacquisition opportunities hasyetbeenmadebyeitherBrooklynUnionorLILCO.Recommendation oftheBrooklynUnionBoardofDirectors TheBrooklynUnionBoardbelievesthatthetermsoftheCombination arefairto,andinthebestinterests of,BrooklynUnionanditsshareholders.
| |
| Accordingly, theBrooklynUnionBoard,has'unanimously adoptedth'BrooklynUnion/LILCO Agreement, andunanimously'recommends itsadoptionbytheBrooklynUnionshareholders.
| |
| TheBrooklynUnionBoardbelievesthattheCombination represent asignificant'trategic opportunity forBrooklynUnion.TheBrooklynUnionBoardalsobelievesthattheLongIslandmarketpresentsexcellent opportunities forgrowthofthegasbusinessandtheprovision ofotherenergyrelatedservices.
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| Thismarketisparticularly attractive becausethereisanextremely lowpenetration ofgasasapercentage ofthetotalenergyusageinthatregion.ThetermsoftheBrooklynUnion/LILCO Agreement, including theRatios,weretheresultofarm'-length negotiations betweenBrooklynUnionandLILCO.InfixingtheRatiosinthenegotiation process,"Brooklyn Unionmanagement reliedtoalargeextentoncertainofthefinancial analysesofMemllLynchsummarized belowunder"OpinionofBrooklynUnion'sFinancial Advisor."
| |
| AlthoughMerrillLynchneithermadeanyrecommendations norexpressed anyopiniontoBrooklynUnionmanagement ortheBrooklynUnionBoardduringsuchnegotiations regarding theRatios,MerrillLynchsubsequently delivered itswrittenopiniontothe25 Aftertheseboardmeetings, theOriginalAgreement andtheStockOptionAgreements weresigned.Renewednegotiations withLIPAcommenced inJanuary1997.FromthatdateuntilMarch19,1997,LIPA,LILCOandBrooklynUnion,throughtheirofficersandoutsideadvisors, conducted extensive negotiations.
| |
| DuringthisperiodandthroughMay1997,LIPAanditsadvisorsconducted extensive duediligence investigations ofLILCO'sfinancial, legalandbusinessrecords,including interviews withLILCOpersonnel.
| |
| Thenegotiations focusedonatransaction structure inwhichcertainassets'of LILCO,including itsgas,generating andcommonplantassets,wouldbetransferred toanewcompanytobeownedbyLILCOandBrooklynUnionshareholders immediately priortoacashmergerofLILCOwithanacquisition subsidiary tobeformedbyLIPA,asaresultofwhichLILCOwouldbecomeawholly-owned subsidiary ofLIPA.Theprincipal issuesduringthenegotiations weretheidentification oftheassetstobedistributed'by LILCO,thepricetobepaidbyLIPA,thetreatment ofLILCO'spreferred stockanddebt,thetermsandconditions ofamanagement servicesagreement, apowersupplyagreement andotherserviceagreements tobeenteredintobyLILCOwiththenewcompanyandtherightsLIPAwouldhavetoacquirethegenerating facilities andtodevelopcertainrealestateparcelsforfuturegenerating, transmission anddistribution facilities.
| |
| Inaddition, thenegotiations incorporated LIPA'sacquisition of'LILCO's currentrightsintheShoreham" propertytaxandrelatedcasesandcertainprovisions relatingtootherpendingandfuturepropertytaxcasesandtheanticipated LIPAsettlemenf ofthesecasesafterclosing.Thesenegotiations culminated inameetingonIvIarch18,1997,attendedbyDr.Catacosinos, otherLILCOofficersandrepresentatives ofDillonRead,thethencurrentChairmanof,LIPA,otherLIPAofficials andrepresentatives ofIJearStearns,andMr.Catellandrepresentatives ofMerrillLynch,Atthatmeeting,thefinalpricingtermsfortheacquisition byLIPAofLILCOwereagreedtoandsubstantially finaltermsforthemanagement servicesandrelatedagreements,-were agreedtoimmediately thereafter.
| |
| Theseagreements weredocumented inanon-binding Agreement inPrinciple, datedasofMarch19,1997,amongLIPA,LILCOandBrooklynUnion.IThepartiesandtheirrespective outsideadvisorsthenpreparedandnegotiated thedefinitive legaldocumentation contemplated bytheAgieement inPrinciple.
| |
| Theresulting draftsweresubmitted,,urisigned, onApril30,1997,tothestaffofthePACBtopermitthemtobegintheirevaluation oftheproposedtransaction.
| |
| Thepartiesheldfurthernegotiations withrespecttothedefinitive legaldocumentation duringMayandJune.DuringthisperiodLIPAconducted aseriesofpublichearingsatwhichthecontentsoftheApril,30th draftswerediscussed.
| |
| OnJune16,1997,theLIPABoardofTrusteesauthorized theexecution byLIPAofthethencurrentdraftsofthedefinitive legaldocumentation.
| |
| Asaresultofsubsequent negotiations amon'gtheparties,certaintechnical changesweremadetosuchdrafts,Inaccordance withtheresolution adoptedbytheLIPABoardofTrusteesattheirJune16thmeeting,thechangesnegotiated afterJune16remainsubjecttoratification bytheLIPABoardofTrustees.
| |
| OnJune26,'1997,MerrillLynchdelivered itswrittenopiniontotheBrooklynUnionBoardofDirectors totheeffectthat,asofsuch"date andsubjecttothemattersdescribed therein,theBrooklynUnionRatioofoneshareofHoldingCompa'nyCoinmonStockforeachshareofBrooklynUnionCommonStockwasfairtotheholdersofBrooklynUnionCommonStock'fromafinancial pointofviewifthe'LIPATransac'tion wereconsummated, underwhichcircumstances eachshareofLILCOCommonStockwouldbeexchanged for0.880sharesofHoldingCompanyCommonStock.Havingdiscussed atanumberofmeetingsthebenefitsthatwouldresultfromtheconsummation oftheLIPATransaction andliavingreceivedadvicefromMerrillLynch,legalcounselandmanagement, andhavingreceiveddraftsanddetaileddescriptions oftheBrooklyri Union/LILCO Agreement, theAmendedStockOptionAgreelnents (asdefinedbelow)andtheLIPAAgreement, theBrooklynUnionBoardofDirectors executeda,unanimous writtenconsentdatedJune26,1997approving theBrooklynUnion/LILCO Agreement andthe'Amended StockOptionAgreements.
| |
| OnJune26,1997,LILCOandBrooklynUnionexecutedanddelivered theBrooklynUnion/LILCO Agreement, pursuanttowhichBrooklynUnionconsented totheexecution byLILCOoftheLIPAAgreement.
| |
| LILCOandBrooklynUniononJune26,1997,alsoexecutedanAmendedandRestatedBrooklynUnionStockOptionAgreement andanAmendedandRestatedLILCOStockOptionAgreement (collectively, the"AmendedStockOptionAgreements"
| |
| ).AsofJune26,1997,LIPAandLILCOexecutedtheLIPAAgreement.
| |
| Finally,variousNewYorkStateofficials andrepresentatives, indiscussions withDr.Catacosinos andMr.Catell,encouraged LILCOandBrooklynUniontorecommence theirnegotiations afterreportswerepublished inSeptember 1996disclosing the.termination ofthosenegotiations inSeptember 1996.Dr.Catacosinos andMr.Catellunderstood fromthesediscussions thattheStatewouldviewanagreement betweenLILCOandBrooklynUnionfavorably sinceitwouldresultinratereductions fromthesynergies toberealizedinabusinesscombination ofLILCOandBrooklynUnion.Accordingly, discussions betweenthechiefexecutive officersofLILCOandBrooklynUnionbeganagainonDecember4,1996,and,aftermeetings(whichincludedtheinvestment bankers)onDecember11,13and20,thechiefexecutive officersagreedtopursuethenegotiations ofadefinitive agreement baseduponanexchangeratiothatwouldresultinLILCOshareholders owning66%,andBrooklynUnionshareholders owning34%,ofthecommonequityofthecombinedentityintheabsenceofamutuallyacceptable transaction withLIPAand68%and32%,respectively, ifasatisfactory transaction withLIPAwereconsummated.
| |
| Theadvisorsforbothpartiesmetandspokeseveraltimesoverthenextweek,discussed thetransaction andrelateddocumentation, agreedupontheproposedstructure forthetransaction andnegotiated thetermsofanAgreement andPlanofExchange(the"Original Agreement"
| |
| ),theLILCOStockOptionAgreement betweenLILCOandBrooklynUnion,datedasofDecember29,1996(the"LILCO'tock OptionAgreement"
| |
| )andtheBrooklynUnionStockOptionAgreement betweenBrooklynUnionandLILCO,datedasofDecember29,1996(the"Brooklyn"Union StockOptionAgreement",
| |
| and,togetherwiththeLILCOStockOptionAgreement, the"StockOptionAgreements"
| |
| ),including theconditions toclosing,thetermination provisions, thebreak-upfees,thecovenants thatwouldgoverntheoperatioiis ofLILCOandBrooklynUnionpendingtheclosingandvariousothermattersthatwouldgoverntheoperations oftheHoldingCompanyaftertheclosing.Thepartiesalsonegotiated aprovision thatcontemplated arevisionintheexchangeratioifatransaction withLIPAacceptable toeachpartycouldbenegotiated.
| |
| OnDecember24andDecember27,1996,thechiefexecutive officersmetagaintonegotiate theprovisions relatingtomanagement succession andthecomposition oftheHoldingCompany's BoardofDirectors.
| |
| Finalagreement withrespecttosuchissueswasreachedonDecember28,1996.OnDecember29,1996,theL'ILCOBoardofDirectors metandreceivedadvicefromDillonRead,legalcounselandmanagement.
| |
| DillonReadreviewedfinancial andotherinformation concerning thetwocompanies andtheproposedOriginalRatio.DillonReadthendelivered itsoralopiniontotheLILCOBoardofDirectors that,asofsuchdateandsubjecttothemattersdiscussed, theproposedOriginalRatioof0.803sharesofHoldingCompanyCoininonStockforeachshareofLILCOCommonStockwasfair,fromafinancial pointofview,totheholdersofLILCOCommonStock.Counseloutlinedindetailthetermsandconditions oftheOriginalAgreement andtheStockOptionAgreements anddescribed thechangesintheproposeddefinitive documentation fromthedraftspreviously furnished totheLILCOBoardofDirectors.
| |
| The,.LILCO BoardofDirectors discussed theadvicetheyhadreceivedandthepotential benefitstotheshareholders, customers andemployees ofLILCOthatwouldresultfroma,combination ofLILCOandBrooldynUnion.Aftersuchdiscussion, theLILCOBoardofDirectors unanimously approvedtheOriginalAgreement andtheStockOptionAgreements.
| |
| AlsoonDecember29,1996,theBrooklynUnionBoardofDirectors metandreceivedadvicefromMerrillLynch,legalcounselandmanager@cut.
| |
| MerrillLynchreviewedfinancial andother,information concerning thetwocompanies andtheproposedBrooklynUnionRatio.MerrillLynchthendelivered itsoralopiniontotheBrooklynUnionBoardofDirectors totheeffectthat,asofsuchdateandsubjecttothe,mattersdiscussed, theproposedBrooklynUnionRatiowasfair,fromafinancial pointofview,totheholdersofBrooklynUnionCommonStock.Counseloutlinedindetailthetermsandconditions oftheOriginalAgreement andtheStockOptionAgreements anddescribed thechangesintheproposeddefinitive documentation fromthedraftspreviously furnished totheBrooklynUnionBoardof,Directors.
| |
| TheBrooklynUnionBoardofDirectors discussed theadvicetheyhadreceivedandthepotential benefitstotheshareholders andcustomers ofBrooklynUnionthatwouldresult.fromacombination ofLILCOandBrooklynUnion.Aftersuchdiscussion, theBrooklynUnionBoardofDirectors unanimously approvedtheOriginalAgreement andtheStockOptionAgreements.
| |
| 23 theacquisition ofallofLILCOlsoperating assets;thebreakupof;thegenerating assets;andtheconstraints thatwouldbeplacedonLILCOwithrespecttothereinvestment ofproceedsin ordertoavoidadversetaxconsequences.
| |
| iiiliOnMarch7,1996,Mr.CatellmetwiththeGovernorandexpressed hissupportforthe'Governor's effortstodealwiththeLILCO.situation butindicated whatheperceived tobecertainshortcomings in.theLIPAproposai.
| |
| i'IInthewakeofthereleaseoftheTechnical Report,LILCO,and BrooklynUnionrenewedtheirdiscussions withrespecttoapossiblebusinesscombination.
| |
| The,twochiefexecutive officersmet,onfebruary7,March1andMarch18,1996,todiscussthe,structure, pricingandothermaterialtermsofabusinesscombination andthepotential involvement ofLIPAwithrespecttheretoOnApril8,:1996,thetwochiefexecutive officersmetagain,accompanied bythecompanies'espective investment bankers,"-
| |
| todiscussvaluation.
| |
| OnMay22,1996,thechiefexecutive
| |
| : officers, accompanied bytheirinvestment bankersandcounsel,mettodiscussstructure, legalissuesandsynergysavings.BrooldynUnionsoughttopersuadeLILCOtoapproachLIPAjointlywithaproposalalongthelinespreviously submitted byBrooklynUniontoLIPA.LILCO,soughttopersuadeBrooklynUniontoproceedwithaBrooklynUnion-LILCO combination agreement.
| |
| BrooklynUnionandLILCO,were unabletoreachanagreement, onpriceorstructure.
| |
| a'~IDiscussions continued duringthesummerof1996andadraft...combination agreement wasprepared.
| |
| by,LILCO'soutsidecounsel,anddelivered toBrooklynUniononAugust15;1996,Meetingswereheldbetweenthechiefexecutive
| |
| : officers, accompanied bytheir:investment bankers,.on August6,7and16,1996,andagain,butwithoutinvestment bankers,onSeptember 3,1996,butnoagreement wasreachedoneitherpriceorcorporate governance issues.Negotiations, atthatpointweresuspended.
| |
| iMeanwhile, discussions betweenLIPAandLILCOduring1996;-were infiuenced byavarietyofdevelopments.
| |
| Beginning inMay1996,taxcounselforLIPAandtaxcounselforLILCObeganevaluating analternative structure-which-they believedshould'be moretaxefficient.
| |
| Thatstructure contemplated apossibleacquisition byLIPAofLILCOCommonStockimmediately following atransferbyLILCOofitsgasandgenerating assetstoanewcompanyto'beowned'byLILCOshareholders.
| |
| LIPAandLILCOrepresentatives haddiscussions withthe,IRSconcerning the,possibility<of obtaining privateletterrulingswithrespecttothis,alternative transaction andthetax-exempt statusoftherelatedLIPAfinancing.
| |
| Becauseofthecomplexity ofthetransaction, substantive discussions betweenthepartieswereslowed-during 1996.NiilOnFebruary12,1996,thePSCissuedanordertoshowcausewhyLILCOshouldnotberequiredtoiinplement animmediate reduction initselectricratesforthethreeyearperiodfrom1997to2000.On.April17,1996,thatproceeding wasexpandedtoprovideforacomprehensive, evaluation ofLILCO'selectric, rates.OnAugust2,1996,thePSCstaffformally, recommended atemporary, 5.2%decreaseinLILCO'-s, electricrates.ThePSCultimately hasnottakenactioninconnection withthe-1996proceeding, whichisstillpending.OnJune24,1996,Moody'sInvestors ServiceInc.announced thatithaddowngraded itsratingof'$1.95billionoutstanding principal amountofLILCO'sgeneralandrefunding bondsfromBaa3to'Bal,citing"intenseregulatory scrutiny" ofLILCO'selectricratesbythePSCandthe,uncertain.,course, of-thenegotiations betweenLIPAandLILCO.ilAnothersignificant development affecting thosenegotiations wasadecisiononNovember4;,1996,inPhaseIIofataxcertiorari proceeding broughtbyLILCOagainst.certaintaxingjurisdictions in,SuffolkCounty,'Long Island,seekingrecoveryofpropertytaxespaidbyLILCOinrespectof:Shoreham.
| |
| DuringPhaseI,LILCOhadbeenawarded$81millioninrefunds,and interest.-The Phase,IIdecision, whilesubjecttoappealbythedefendants, ruledinLILCO'sfavorandcouldresultinanaggregate recoveryin.excessof$1billionforLILCO(whichamountwould,beusedto'reduceelectricrates).LILCOperceived thisdecisionasputtinggreaterpressureonLIPAtoagreeonatransaction withLILCOwhichwouldincludeasettlement oftheShorehampropertytaxcase.,I22 companies, including revisions tomanagements'ynergies estimates andtheexchangeof'non-public information inconnection witheachcompany's "duediligence" investigation oftheother.Meanwhile, Governor-elect GeorgePatakiorganized ataskforceonDecember23,1994,toevaluatethefeasibility ofaLIPAtakeoverofLILCOasproposedinOctober1994underthenGovernorMarioCuomo.During1995,the'LIPAActwasamendedtoprovideforagoverning boardoftrustees'or LIPAoffifteenmembers,nineappointed bytheGovernorandthreeeachbythemajorityleaderoftheNewYorkStateSenateandbytheSpeakeroftheNewYorkStateAssembly.
| |
| Inaddition, thatamendment madeLIPAsubjecttotheNewYorkStatePublicAuthorities ControlBoard(the"PACB"),asaresultofwhicheachagreement madeby'IPAforthe'expenditure ofmorethan$1millionrequiresunanimous approvalbytherepresentatives appointed by'theGovernor, theSenatemajorityleaderandtheSpeakeroftheAssembly.
| |
| Promptlyaftersuchamendment wassignedinto'awonAugust2,1995,theLIPAboardoftrusteeswasreconstituted asprovidedforintheamendment.
| |
| As'aresultofsuchamendment andthereportofsuchtaskforce,LIPA'sJune1995proposaltoacquireLILCOfor$17;50persharewasnotpursued.InSeptember 1995,GovernorPatakiannounced hisadministration's commitment toformulate aStatetakeoverofLILCOthatachievedfourobjectives:
| |
| adouble-digit reduction inelectricratesonLongIsland;protection forLongIslandpiopertyownersagainstincreased propertytaxes;aplanforlong-term competition intheLongIslandelectricmarket;andtheendofLILCOasLongIsland'selectricutility.GovernorPatakistatedthathewouldnotruleoutanyactionrequiredtoaccomplish theseobjectives, including ahostileStatetakeoverortheexerciseofLIPA'scondemnation powers.OnSeptember 29,1995,LILCOadvisedLIPAbyletterthatLILCOwouldfullycooperate withLIPAonanyconstructive proposalmadebyLIPA.E'nSeptember 1995,LIPAretainedBear,Stearns4Co.Inc.("BearStearns")
| |
| asitsfiriancial advisorsandinOctober1995retainedthelawfirmsofWinthropStimsonPutnam&Robertsasitscorporate counselandHawkinsDelafield O'oodasitsbondcounselandtheaccounting firmofPriceWaterhouse LLP.Afteranorganizational meetinginearlyOctoberbetweenLIPAandLILCOrepresentatives andtheirrespective outsideadvisors, LILCOandBearStearnsexecutedonOctober11,1995,aconfidentiality agreement pursuanttowhich,assubsequently amended,non-public information wasprovidedbyLILCOtospecificLIPAofficials andLIPA'soutsideadvisors.
| |
| Duringthefallof1995andthereafter through1996and1997,substantial non-public information wassoprovidedbyLILCO.InSeptember 1995,representatives ofBrooklynUnionmettwicewithrepresentatives ofLIPAtooutlineBrooklynUnion'sproposalfortheacquisition'f LILCO'sgenerating andregulatory assetsbyLIPAandthe'combination ofBrooklynUnionwiththeelectrictransmission anddistribution systemandgasoperations ofLILCO.OnSeptember 27,1995,LIPAissuedawritten"RequestforInformation" whichsolicited indications ofinterestfromqualified partiesinconnection witha"state-authority facilitated financial restructuring/acquisition ofLILCO."According tosuchRequest,LIPAwas"intentonacquiring allorpartofLILCO'ssecurities and/orassetsatthelowestpossiblepriceandreservestherighttoacquireLILCOequitysecurities belowcurrenttradingprices."According topublished reports,thirty-one partiesformallyresponded tothisRequest.OnOctober19,1995,BrooklynUnion'submitted toLIPAcertainadditional information supplemental toitspresentation atLIPA'sSeptember meetingsinresponsetotheLIPARequest.OnDecember5,1995,theProposalEvaluation Committee oftheLIPABoardofTrusteesissuedaTechnical Reportwhichrecommended atransaction structure underwhichLIPAwouldacquiresubstantially allofLILCO'sassets,sellthegenerating assetstomultiplebuyers,sellthegasassetstoanotherbuyerandretainaprivatepartytoma'nageforLIPA'sbenefitthetransmission anddistribution systemsoacquired.
| |
| AlthoughthisproposalwasneveradoptedbytheLIPABoardofTrustees, andnopricewasdiscussed withrespecttotheproposedpurchaseofassets,LIPArepresentatives overthenextfewmonthsdiscussed theproposalwithLILCOrepresentatives.
| |
| OnFebruary28,1996,theLIPABoardofTrusteesauthorized thecommencement ofdiscussions withLILCOandLIPArepresentatives thereafter beganfurtherduediligence with.respecttoLILCO.Duringsuchdiscussions LILCOrepresentatives identified severalfeaturesoftlieproposalthatwereunacceptable toLILCO:21 THEBROOKLYNUNION/LILCO COMBINATION
| |
| | |
| ===Background===
| |
| oftheCombination kOverseveralyears,eachofBrooklynUnionandLILCOhasevaluated thesignificant changesalreadymadeandexpectedtobemadeintheregulatory structure andcompetitive environment ofthegasandelectricutilitybusinesses.
| |
| Atboththefederalandstatelevels,therehave,beenimportant changesintheregulation oftheutilityindustrybusinesses and,especially withrespecttotheelectric, utilitybusiness, thereistheprospectoffurtherdramaticchanges.Asdescribed morefullybelowunder"CommonReasonsfortheCombination,"
| |
| LILCOandBrooklynUnionbelievethatthecombination ofthecompanies willprovidebothcompanies'hareholders withtheopportunity to,benefit fromthecompetitive opportunities providedbytherapidlychangingcircumstances intheenergybusinesswhilealsoproviding thelowerratesandincreased competition soughtbythecompanies'egulators andcustomers.
| |
| AstheeffortsofthePublicServiceCommission oftheStateofNewYork(the"PSC")torestructure theutilitybusinessinNewYorkfirstbegantotakeshapeinthePSC'sCompetitive Opportunities Proceeding in1994,Dr.WilliamJ.Catacosinos, theChiefExecutive OfficerofLILCO,andMr.RobertB.Catell,theChiefExecutive OfficerofBrooklynUnion,beganexploratory, discussions aimedatdetermining whetherabusinesscombination ofLILCOandBrooklynUnioncouldprovideamutuallybeneficial platformforresponding tothechangesinregulation andtheenergymarketplace.
| |
| Thosediscussions continued throughout 1994and,1995.
| |
| OnOctober13,1994,LIPAandtheNewYorkPowerAuthority madeajointproposaltoacquiretheoutstanding LILCOCommonStockforacashpurchasepriceof$21.50pershare.ThelastclosingsalespriceforLILCOCommonStockonOctober13,1994,whichwaspriortothereceiptofsuchproposal, was$16'ershare.LILCOadvisedLIPAonOctober24,1994,thatitwaspreparedtoevaluateseriously the$21.50pershareproposalmadebyLIPA.Theproposalwassuperseded onJune20,1995,.byaproposalfromLIPAtoacquirealloftheoutstanding LILCOCommonStockforacashpurchasepriceof$17.50pershare.OnJune30,1995,LILCOresponded bystatingthatsuchofferhadtoomanyuncertainties andcontingencies towarrantfurtherreviewordiscussions atthattime.Neitheroftheseoffersresultedinnegotiations betweenLIPAandLILCO.TheseoffersweremadebyLIPApursuanttoitsgoverning statute,TheLongIslandPowerAuthority Act(the"LIPAAct"),whichgrantedLIPAthestatutory powertoacquireLILCO'sequityordebt,securities orassetsthroughanegotiated transaction, bytenderofferorthroughtheexerciseofLIPA'scondemnation powers.TheLIPAActhadbeenenactedin1986inresponsetogrowingpolitical opposition toLILCO'sconstruction oftheShorehamNuclearPowerPlant("Shoreham")
| |
| onLongIsland.In1989,LILCO,LIPAandtheStateofNewYorkenteredintovariousagreements underwhichLILCOagreedtotransferitsinterestinShorehamtoLIPA.Shorehamwassubsequently decommissioned andLILCOrecordedsubstantial regulatory assetsreflecting thepresentvalueofexpectedelectricserviceratessettoprovideforLILCO'sfinancial recoverythroughtheamortization ofsuchregulatory assets,andareturnonsuchregulatory assets,overaforty-year period.BrooklynUnionretainedtheinvestment bankingfirmofMerrillLynch,Pierce,Fenner&SmithIncorporated
| |
| ("MerrillLynch")inJanuary1995andthelawfirmofWachtell, Lipton,Rosen&KatzinApril1995inordertoassistBrooklynUnioninevaluating thefinancial andlegalimplications ofabusinesscombination withLILCO,withthepotential forinvolvement ofLIPA.LILCOconsulted withitslegalandfinancial
| |
| : advisors, Kramer,Levin,Naftalis&Frankel("KramerLevin")andDillon,Read&Co.Inc.("DillonRead"),eachofwhichhadalreadybeenretainedinconnection withtheOctober1994LIPAandtheNewYorkPowerAuthority proposal.
| |
| OnOctober24,1995,LILCOandBrooklynUnionexecutedaconfidentiality agreement tofacilitate theexchangeofnon-public information betweenthecompanies.
| |
| Throughout 1995,Dr.Catacosinos, Mr.Catell,representatives ofDillonReadandrepresentatives ofMerrillLynchhadseveralmeetingstodiscussthebasisforabusinesscombination.
| |
| Representatives ofeachcompanymettodiscussthepossiblesynergies ofanysuchcombination.
| |
| Atvarioustimesduring1995and1996,representatives ofLILCOandBrooklynUnionmettodiscussissuesassociated withcombining thetwo20 CommonStockwillbeexchanged forsharesofcommonstock,parvalue$0.335,per share("KeySpan CommonStock"),ofKeySpanEnergyCorporation, aNewYorkcorporation andawhollyownedsubsidiary ofBrooklynUnion("KeySpan"),
| |
| pursuanttoanAmendedandRestatedAgreement andPlan,.of.
| |
| : Exchange, datedasofJune9,1997,byandbetweenBrooklynUnionandKeySpan(the"KeySpanAgreement"
| |
| ).TheKeySpanShareExchangeisdescribed indetailin"theAnnexJ"tothis'JointProxyStatement/Prospectus tobedelivered toBrooklynUnionshareholders.
| |
| Consummation oftheKeySpariShaieExchangeissubje'cttovariousconditions, including theadoptionoftheKeySpan"Agreement by'theholdersoftwo-thirds ofthe'voting poweroftheoutstanding shares'of Brooklyn'Union CommonStockattheBrooklynUni'onMeeting".
| |
| 4ThisJointProxy'Statement/Prospectus alsoconstitute5 theProspectu's ofKeySpanwithrespectto"issuance ofuptoapproximately'50,364,212 sharesof'KeySpan CommonStocktobeissuedtoholdersofBrooMyn'Union CommonStockonaone-to-one basisinconnection withtheKe'ySp'an Sha'reExchange.
| |
| Unlessotherwise specified, references totherightsandobligations ofBrooklynUnionundertheBrooklynUnion/LILCO'Agreenient andthesectsoftheCombination orii%esharesofBrooklynUnionCommonStock,respectively, shouldbeihterpre'led torefertotherightsandoblig'ations ofKeySpanundertheBrooklynUnion/LILCO'Agreement andthe"'effects oftheCombination onthe'shares ofKeySpanCommoiiStock'nth'eventthattheKeySpanholdingcompanyproposalisapprovedbyBrooklynUnionshare/raiders andtheKeySpanShareExcltdnge iscompleted.
| |
| Ifth'eKeySpanSliareExchangeisconsuntinated'and BrooklynUnioncommonshareholders receiveKeySpanComi>ionStock'eySpan commonshareholders willreceivec'ommonsharesofthenewHoldingCompanyuponconsummation oftheCombination.
| |
| TheKeySpanShareExchangeisexpectedtobeconsumntated beforet'eConibt'natio'n,
| |
| 'andneithertheKeySpanShareExcltange nor'tlie'Combination iscoriditioned ontheotheroccurring.
| |
| rAll'i'nformation contained inthisJointProxyStatement/Prospectus withrespect<<to.LILCO"-has beenprovidedbyLILCO.Allinformation contained inthisJointProxyStatement/Prospectus withrespecttoBrooklynUnionorKeySpanhasbeenprovidedbyBrooklynUnion,NeitherLILCOnorBrooklynUnionassumes.anynesponsibility fortheaccuracyorcompleteness oftheinformation providedbytheotherparty."I1ThisJointProxyStatement/Prospectus andtheaccompanying formsofproxyarefirstbeingmailedtoshareholders ofBrooklynUnionandLILCOonoraboutJune30,1997.A"shareholder whohasgivenaproxymayrevokeitan'ytimepriortotheapplicable meeting.See"Meetings, VotingandProxies."
| |
| 19 0ThisJointProxyStatement/Prospectus alsorelatestotheproposedmerger(the"LIPATransaction"
| |
| )ofLILCOwithLIPAAcquisition Corp.,aNew:Yorkcorporation,("LIPA Sub")andawholly-owned subsidiary oftheLongIslandPowerAuthority, acorporate municip'al instrumentality andpolitical subdivision oftheStateofNewYork("LIPA"),
| |
| pursuant'to
| |
| 'theAgreement andPlanofMeiger,datedasofJune16,1997(the"LIPAAgreement"
| |
| ),byandamongLILCO,LIPASubandLIPA.Uponconsummation oftheLIPATransaction, LIPASubwillbemergedwithandintoLILCO,which'ill be'thesurviving'corporation, foraggregate cashmergerconsideration of$2,497,500,000 (the"Consideration"
| |
| ),theSeriesAAPreferred Stockwillbeexchanged forSeriesAApreferred stockoftheHoldingCompanyhavingsubstantially thetermsassetforthinAnnexDheretoandeachoutstanding shareoftheSeriesCCPreferred Stock,SeriesGGPreferred Stock,SeriesQQPreferred StockandSeriesUUPreferred Stock(exceptfor,shareswhoseholdersperfecttheirrightstoobtainjudicialappraisal thereof("Dissenting Shares"))willbecancelled andconverted intotherighttoreceivecashintheapplicable amountssetforthintheiLIPA'Agreement~
| |
| Inconnec'tion.with the,consummation oftheLIPATransaction, LILCOwilltransfertotheHoldingCompanyoroneormoreofitswholly-owned subsidiaries (which.,may belimitedliability companies),all ofLIL'CO'sgas~assets andoperations, non-nuclear generating assetsandoperations andcommonplant'(asdescribed morefullybelow,the"Transferred Assets'i):
| |
| Consummation of;theL'IPATransaction issubjectto',variousconditions,",including approvaloftheLIPAAgreement bytheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofLILCOCommonStockandLILCOPreferred'Stock, votingtogetherasasingleclass;byamajorityofthevotingpower.ofallholdersof.LILCOPreferred, Stock,,voting togetherasaseparateclass;byamajorityofthevotingpoweroftheoutstanding LILCOCommonStock,votingseparately asaclass;andbytheholdersofa'majority ofthevoting-power ofeach'series ofLILCOPreferred Stock,ineach'case votingseparately asaclass,attheLILCOMeeting.HoldersofsharesofBrooklynUnionCommonStockwillnot.voteontheLIPAAgreement.
| |
| "-~.I'I.,Inconnection withtheproposaltoadopttheLIPA,Agreement, eachoutstanding'share ofLILCOCommonStockisentitledtoonevote,eachoutstanding shareofLILCOPreferred Stockhavingaparvalueof$100pershareisentitledtoonepoteandeachoutstanding shareofLILCOPreferred Stockhavingaparvalueof$25pershare,isentitledto.one-quarten
| |
| ('/4)ofavote.Onlyholders.ofLILCO,CommonStockandeligibleLILCOPreferred Stockofrecord,asoftheclose.ofbusiness, ontheRecordDatewillbeentitledtonotice,ofandtovoteinrespectoftheLIPAAgreement attheLILCO,Meeting oranyadjournments orpostponements thereof.AsofJune23,1997,therewereissuedandoutstanding 121,184,527 sharesofLILCOCommonStockand21,674,000 sharesofLILCOPreferred Stock,ofwhich14,520,000 weresharesofSeriesAAPreferred Stock,'570,000 were,sharesofSeriesCCPreferred Stock,880,000weresharesofSeriesGGPreferred Stock,3,464,000 weresharesofSeriesQQPreferred Stockand,2,240,000 weresharesofSeriesUUPreferred Stock.,ThisJointProxySfatement/Prospectus alsoconstifutes theProspectus oftheHoldingCompanywithrespecttotheissuanceof'(x)uptoapproximately
| |
| '173',048,'739 shares"of HoldingCompanyCommonStockfobeissue'dtocommonshareholders" ofLILCOat'theapplicable ratio(the""Ratib")
| |
| 'ofHoldingCompanyCommonStockforeachshare"ofLILCOCominon'Stock andtocommon'shareholde'rs ofBrooklynUnionon'a'one-to-one basis'nconnection witlitheCombination (the"Brooklyn UnionRatio")'and (y)upto14,520,000 sharesofHoldingCompanySeriesAApreferred stock,"pa'rvalue$25pershare("Holding Com'panySeries'A'A.
| |
| Preferred Stock")fobeissuedtoholdersofSeriesAAPreferred StockofLILCO'onaone'-to-one basisinconnection withtheLIPA"Agreement.
| |
| TheR'atiowill'be(x)0.803"shares ofHoldingCompanyCoinmonStockforeachshar'eofL'ILCOCommonStockiftheCombin'ation isconsummated but'heLIPATransaction's not'consummated'(the "Original Ratio"),(y)0.880sharesofHoldingCompanyCommonStockforeachshare'fLIE.COCommonStockiftheCombination isconsummated andtheLIPATransaction isconsummated (the"LIPARatio")or(z)oneshareofHoldingCompanyCommonStockforeachshareofLILCO'ommon Stock'iftheCombination isnotconsummated buttheLIPATrarisaction isconsummated.'Holders ofLIL'CO'Common Sto'ckwill'own66%',68%or100%,respectively, oftheoutsfanding HoldingCompanyCommonStockandholdersofBrooklynUnionCommonStockwillown34%,32%a'nd0%,'respectively, oftheoutstanding HoldingCompanyCommonStockinsuchevents.IfIIIIIIIThisJointProxyStatement/Prospectus alsorelatestoanindependentproposal torestructure BrooklynUnionintoaholdingcompanystructure (the"KeySpanShareExchange"
| |
| ),inwhichsharesofBrooklynUnion18 JOINTPROXYSTATEMENT OFTHEBROOKLYNUNIONGASCOMPANYANDLONGISLANDLIGHTINGCOMPANYPROSPECTUS
| |
| 'FBLHOLDINGCORP.ANDKEYSPANENERGYCORPORATION
| |
| 'hisJointProxyStatement andProspectus
| |
| ("JointProxyStatement/Prospectus"
| |
| )isbeingfurnished totheholdersofcommonstock,parvalue$5pershare,ofLILCO("LILCOCommonStock")andtotheholdersofSeriesAApreferred stock,parvalue$25pershare("SeriesAAPreferred Stock"),SeriesCCpreferred stock,parValue$100pershare("SeriesCCPreferred Stock"),SeriesGGpreferred stock,parvalue$25pershare("SeriesGGPreferred Stock"),SeriesQQpreferred stock,parvalue'$25 per'hare'("Series QQPreferred Stock"),andSeriesUUpreferred stock,parvalue$25pershare("SeriesUUPreferred Stock"),ofLILCO(suchseriesbeingcollectively referredtohereinas"LILCOPreferred Stock"),inconnection withthesolicitation ofproxie'sbytheBoardofDirectors ofLILCOforuseattheAnnualMeetingofLILCOshareholders tobeheldonAugust7,1997,at3:00p.m.localtime,atTillesCenterforthePerforming ArtsatLongIslandUniversity, C.W.PostCampus,NorthernBoulevard, Greenvale, NewYork11548andatanyandalladjournments orpostponements thereof(the"LILCOMeeting"),andtheholdersofcommonstock,parvalue$0.33tr5pershare("BrooklynUnionCommonStock"),andtheholdersofPreferred Stock,parvalue$100pershare,ofTheBrooklynUnionGasCompanyinconnection'with thesolicitation ofproxiesofBrooklynUnionCommonStockbytheBoardofDirectors ofBrooklynUnionforuseattheSpecialMeetingofBrooklynUnionshareholders tobeheldonAugust7,1997,at3:00p.m.localtime,atOperaHouse,BrooklynAcademyofMusic,30Lafayette Avenue,Brooklyn, NewYork11217andatanyandalladjournments orpostponements thereof(the"Brooklyn UnionMeeting,"
| |
| andtogetherwiththeLILCOMeeting,the"Shareholder Meetings"
| |
| ).ThisJointProxyStatement/Prospecttts relates,amongotherthings,totheproposedcombination ofLILCOandBrooklynUnion(the"Combination"
| |
| )",inwhichsharesofLILCOCommonStockwillbecometherighttoreceivesharesofcommonstock,parvalue$0.01pershare,("HoldingCompanyCommonStock"),ofBLHoldingCorp.,acorporation tobeformedunderthelawsoftheStateofNewYork(the,"HoldingCompany"),BrooklynUnionwillmergewithawhollyownedsubsidiary oftheHoldingCompany(the"Merger")andsharesofBrooklynUnionCommonStock,willbeconverted intosharesofHoldingCompanyCommonStock,allpursuanttoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedas'ofJune26,1997(the"Brooklyn Union/LILCO Agreement"
| |
| ),betweenLILCOandBrooklynUnion.Consummation oftheCombination issubjecttovariousconditions, including theadoptionoftheBrooklynUnion/LILCO Agreement bytheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofLILCOCommonStockandtheholdersoftwo-thirds ofthevotingpoweroftheoutstanding sharesofBrooklynUnionCommonStockattheShareholder Meetings.
| |
| hInconnection withtheproposaltoadopttheCombination, eachoutstanding shareofLILCOCommonStockandeachoutstanding shareofBrooklynUnionCommonStockisentitledtoonevoteattheirrespective meetings.
| |
| OnlyholdersofLILCOCommonStockandBrooklynUnionCommonStockofrecordatthecloseofbusinessonJune26,1997(the"RecordDate")willbeentitledtonoticeofandtovoteattheShareholder Meetingsor anyadjournments orpostponements thereof.HoldersofBrooklynUnionpreferred stockasoftheRecordDateareentitledtonoticeoftheBrooklynUnionMeetingbutarenotentitledtovotethereat.AsofJune23,1997,121,184,527 sharesofLILCOCommonStockand50,364,212 sharesofBrooklynUnionCommonStockwereissuedandoutstanding.
| |
| 17 Comparative Dividends andMarketPrices-BrooklynUnion,.BrooklynUnioncommonstockislistedandprincipally tradedontheNewYorkStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlow"salespricesofBrooklynUnioncommonstockforthefiscalperiodsindicated asreportedinTheWallStreet.JournalasNewYorkStockExchangeComposite Transactions.
| |
| YearEndedSeptember 30,1995FirstQuarterSecondQuarter".ThirdQuarterFourthQuarter.YearEndedSeptember 30,1996FirstQuarterSecondQuarter.ThirdQuarterFourthQuarter.YearEndingSeptember 30,1997FirstQuarterSecondQuarter.ThirdQuatter(throughJune23,1997).PriceRangeDividends PaidHighLow$0.3375$25N$21'A0.34752474220.347526%23740.3475'6%23V4$0.3475'29%$24N0.3550'9M25N"'0.3550278,247ih0.3550'28Vs24M$0.3550$32N$277/s0.365030Vi27'h0.3650";2926VsOnDecember27,1996,thelastfu/Itradingdaybeforethepublicannouncement oftheBrooklynUnion/LILCO Agreement, thehighandlowpricespershareof(i)LILCOcommonstockwere$19thand$19N,respectively, and(ii)BrooklynUnioncommonstockwere$318and$30iA,respectively.
| |
| OnMarch18,1997,thelastfulltradingdaybeforethepublicannouncement ofanagreement inprinciple relatingtotheLIPATransaction, thehighandlowsalespricespershareof(i)LILCOcommonstockwere$23',s/isand$23Y4,respectively, and(ii)BrooklynUnioncommonstockwere$29Nand$29,respectively.
| |
| OnJune25,1997,thelastfulltradingdaybeforeLILCOandLIPAexecutedanddelivered theLIPAAgreement, the,highandlowsalespricespershareoftheSeriesAAPreferred Stockwere$26and$25.88,respectively.
| |
| BrooklynUnionandLILCOshareholders areencouraged toobtaincurrentmarketquotations forBrooklynUnioncommonstock,LILCOcommonstockandSeriesAAPreferred Stock.16 Comparative Dividends andMarketPrices-LILCO"~LILCOcommonstockislistedandprincipally tradedontheNewYorkStockExchangeandonthePacificStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlowsalespricesofLILCOcommonstockforthefiscalperiodsindicated asreportedinTheWallStreetJournalas,NewYorkStockExchangeComposite Transactions.
| |
| PriceRangeDividends PaidHighLowYearEndedDecember31,1995FirstQuarter.SecondQuarter.ThirdQuarterFourthQuarterYearEndedDecember31,1996FirstQuarter.SecondQuarter.ThirdQuarter,FourthQuarterYearEndingDecember31,1997FirstQuarter.'SecondQuarter(throughJune23,1997)$0.4450.445OA45OA45$16Y4$13i/4,17'A~14N173/4ISN'17%,15N$0.4450.445$24/i$21>/423i/422s/4$0A45$18N$157ik044517M16i/s0A45173/416'.44522N17MTheL'ILCOSeriesAAPreferred StockislistedandtradedontheNewYorkStockExchange.
| |
| Thetablebelowsetsforththedividends paidandthehighandlowsalespricesoftheSeriesAAPreferred Stockforthefiscalperiodsindicated asreportedinTheWallStreetJournalasNewYorkStockExchangeComposite Transactions.
| |
| PriceRangeDividends PaidHighLowYearEndedDecember31,1995"FirstQuarter.SecondQuarter.'hirdQuarterFourthQuarterYearEndedDecember31,1996FirstQuarter.SecondQuarter.ThirdQuarterFourthQuarterYearEndingDecember31,1997FirstQuarter.SecondQuarter(throughJune23,1997).$0.4968750.4968750.4968750.496875$0.4968750.4968750.4968750.496875$0.4968750.496875$23>/4$22Vi24N23Vs'252426'/423N$24s/s$23N&N23&iA2325s/424/4$26Nz$25i/426N25N15 Comparative PerCommon.ShareInformation
| |
| -BrooklynUnion/LILCO Combination with'noLIPATransaction pThefollowing tablesummarizes thepercommonshareinformation forBrooklynUnionandLILCOonaproformacombined, equivalent andhistorical basis.TheLILCOpershareequivalents are'calculated bymultiplying theunaudited proformacombinedpershareamountsby0.803asLILCOshareholders willreceive0.803sharesofthecommonstockoftheHoldingCompanyinexchangeforeachshareofLILCOCommonStock.Comparative PerShareInformation RUnaudited HoldingCompanyProFormaCombinedEarningspercommonshare(1)Cashdividends declaredpercommonshare(4)BookvaluepercommonshareLILCOPerShareEquivalents(2)
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| EarningspercommonshareCashdividends declaredpercommonshareBookvalue'per commonshareBrooklynUnion-Unaudited Historical Financial Information(2)
| |
| Earningspercommonshare(3)Cashdividends declaredpercommonshareBookvaluepercommonshare.LILCO-Unaudited Historical Financial Information Earningspercommonshare..Cashdividends declaredpercommonshareBookvaluepercommonshare............
| |
| Atorforthe12monthperiodendedMarch31,199719961995$2.72$2.46$2.381.781.781.7823.74$2.18$1.98$1.911.431.431.4319.06$2.58$1.93$1.841.441.401.3720.00'2.24$2.19$2.131.781.781.7821.07.(1)BrooklynUnion'sunaudited balancesheetasofMarch31,1997andresultsofoperations foreachofthethree12monthperiodsduringthethreeyearperiodendedMarch31,1997havebeencombinedwithLILCO'sunaudited balance,sheetasofMarch31,1997andresultsofoperations foreachofthe)hree12monthperiodsduringthethreeyearperiodendedMarch31,1997toarriveattheunaudited proformacombinedbalancesheetasofMarch31,19)7andtheunaudited statements ofincomeforeachofthethree12monthperiodsduringthethreeyearperiodendedMarch31,1997,fromwhichthecomparative pershareinformation hasbeenderived.(2)LILCOPerShareEquivalents are0.803ofUnaudited HoldingCompanyProFormaCombinedpershareequivalents, whileBrooklynUnionpershareequivalents arethesameasitshistorical.
| |
| (3)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5millionor$0.68pershare,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8millionor$0.16pershare,aftertaxesforthe12monthperiodendedMarch31,1997.(4)BrooklynUnionandLILCOexpecttocontinuetheirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.14 SelectedUnaudited ProFormaCombinedCondensed Financial Information
| |
| -BrooklynUnion/LILCO Combination withnoLIPATransaction.
| |
| Thefollqwing unaudited proformacondensed financial information reflectsadjustments tothehistorical financialostytements ofLILCOtogiveeffectto,theproposedmergerwithBrooklynUnioninaccordance withtheCombination.
| |
| Theunaudited proformacombinedcondensed balancesheetatMarch31,1997giveseffecttotheCombination asifithadoccurred..at March31,1997.Theunaudited proformacombinedcondensed statements ofincomeforeachofthethree12monthperiodsinthethreeyearperiodendedMarch31,1997giveeffecttotheCombination asifithadoccurredatApril1,1994.Thesestatements arepreparedonthebasisofaccounting fortheCombination usingthepoolingofinterests methodofaccounting andarebasedontheassumptions setforthinthenotesthereto.nr"Wehavepresented belowtheselectedunaudited proformacombinedcondensed financial information, reflecting theproposedCombination.
| |
| Youshouldnotrelyontheunaudited proformainformation asbeingindicative ofthehistorical resultsthatwewouldhavehadorthefutureresultsthatwewillexperience aftertheCombination.
| |
| See"Unaudited ProFormaCombinedCondensed Financial Information" onpage57.-SELECTEDUNAUDITED PROF9ORMAFINANCIAL DATATotalrevenues.
| |
| Netincome..........,....
| |
| EarningsforcommonstockEarningspercommonshare(1).Cashdividends declaredpercommonshare(1)(2)
| |
| Totalassets.Long-term debtPreferred stock.Atorforthc'DvelvcMonthPeriodsEndedMarch31,199919961996(DollnrxinNilpono,ExceptforPerSharcAmounts)$4,610.5$4,518.2$4,244.6451.2409.3390.6399.1356.8.337.72.722.462.381.78.1.78'.7814,343.55,181.6.702.1(1)EachshareofBrooklynUnioncommonstockwillbeexchanged foroneshareofcommonstockoftheHoldingCompanyandeachshareofLILCOcommonstockwillbeexchanged for0.803ofashareofcommonstockoftheHoldingCompanyinaccordance withtheCombination.
| |
| Thesepershareamountsarecalculated foreachshareofcommonstockoftheHoldingCompanythatwouldhavebeenoutstanding hadtheCombination beenconsummated atthebeginning ofeachperiodpresented.
| |
| (2)BrooklynUnionandLILCOexpectto'continue theirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitial"annualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.o13 Comparative PerCommonShareInformation
| |
| -BrooklynUnion/LILCO Combination withLIPATransaction.
| |
| Thefollowing tablesummarizes thepercommonshareinformation forBrooklynUnionandLILCOonaproformaconsolidated, equivalent andhistorical basis.Comparative PerShareInformation Unaudited HoldingCompanyProFormaConsolidated(2)(3)
| |
| EarningspercommonsharepCashdividends declaredpercommonshare,,BookvaluepercommonshareAtorforthe12MonthsEndedMarch31,1997(unaudited)'
| |
| $1.09.1.7824.14Unaudited LILCOasAdjusted(1)(3)
| |
| EarningspercommonshareCashdividends declaredpercommonshare..Bookvaluepercommonshare$.41.3320.86LILCOPerShareEquivalents(5)
| |
| EarningspercommonshareCashdividends declaredpercommonshareBookvaluepercommonshare$.961.5721.24LILCO-Historical Financial Information Earningspercommonshare............
| |
| $2.24Cashdividends declaredpercommonshare1.78Bookvaluepercommonshare21.07BrooklynUnion-Historical Financial Information(4)(5)
| |
| Earningspercommonshare'$2.58Cashdividends declaredpercommonshare...1.44Bookvaluepercommonshare......,......
| |
| 20.00(1)LILCO'sbalancesheetandresultsofoperations asofandforthetwelvemonthperiodendedMarch31,1997havebeenadjustedtoreflecttheproposedtransaction withLIPA.(2)LILCO'sbalancesheetandresultsofoperations asofandforthetwelvemonthperiodendedMarch31,1997,havebeenadjustedtoreflecttheLIPATransaction andtheCombination.
| |
| (3)Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.ToarriveatLILCOasadjustedproformacashdividends declaredpercommonshare,LILCO'shistorical payoutratioforthe12monthperiodendedMarch31,1997,wasappliedtotheLILCOasadjustedearningspercommonshare.(4)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5millionor$0.68pershare,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8millionor$0.16pershare,aftertaxes.(5)LILCOPerShareEquivalents are0.880ofUnaudited ProFormaConsolidated pershareequivalents, whileBrooklynUnionpershareequivalents arethesameashistorical.
| |
| 12 SelectedUnaudited ProFormaConsolidated Condensed Financial Information
| |
| -BrooklynUnion/LILCO Combination withLIPATransaction.
| |
| Thefollowing unaudited proforma.consolidated financial information reflectsadjustments tothehistorical financial statements ofLILCOtogiveeffecttotheproposeddistribution oftheTransferred Assets(asdefinedbelow)toawholly-owned subsidiary oftheHoldingCompanyandsubsequent saleoftheremaining LILCOcommonstocktoasubsidiary ofLIPA.Theproformastatements havebeenfurtheradjustedtogiveeffecttothe'roposedCombination withBrooklynUnion.Theunaudited proformaconsolidated condensed balancesheetatMarch31,1997giveseffecttotheproposedtransaction withLIPAandthe.Combination asiftheyhadoccurredatMarch31,1997.Theunaudited proformaconsolidated condensed statement ofincomeforthetwelvemonthperiodended.March31,1997giveseffecttotheproposedtransaction withLIPAandtheCombination asiftheyhadoccurredatApril1,1996.Thesestatements arepreparedonthebasisofaccounting fortheCombination underthepurchasemethodofaccounting andarebasedontheassumptions setforthinthenotesthereto.Wehavepresented belowtheselectedunaudited proformaconsolidated'condensed financial information, reflecting theproposedtransaction withLIPA("LILCOasadjusted")
| |
| andalsoreflecting thistransaction withtheCombination
| |
| ("HoldingCompany").Youshouldnotrelyontheunaudited proformainformation asbeingindicative ofthehistorical resultsthatwewouldhavehadorthefutureresultsthatwewillexperience aftertheproposedtransaction withLIPAortheCombination.
| |
| See"Unaudited ProFormaConsolidated Condensed Financial Information" onpage51.1'iSELECTEDUNAUDITED PROFORMAFINANCIAL DATAAtorforthe'&reiveMonthPeriodEndedMarch31,1997TotalrevenuesNetincome.Earningsforcommonstock.......................
| |
| Earningspercommonshare(1)Cashdividends declaredpercommonshare(l)(2)(3)
| |
| .Totalassets.Long-term debt.Preferred stocknLILCOHoldingasadjusted"Company(DollarsinMillionsExceptforPerShareAmounts)$1,629.0=$3,101.884.9,206.049.0,170.1.41,1.09.331.785,1.14.4, 7,916.2,922.2,1,646.8438.0,438.0(1)EachshareofBrooklynUnioncommonstockwill,beexchanged foroneshareofcommonstockoftheHoldingCompanyandeachshareofLILCOcommonstockwillbeexchanged for0.880ofashareofcommonstockoftheHoldingCompanyintheCombination.
| |
| Thesepershareamountsarecalculated foreachshareofcommonstockoftheHoldingCompanythatwouldhavebeenoutstanding hadthebindingshareexchanges beenconsummated asofthedateandfortheperiodreferredtoabove.(2)ToarriveatLILCOasadjustedproformacashdividends declaredpercommonshare,LILCO'shistorical payoutratioforthe12monthperiodendedMarch31,1997,wasappliedtotheLILCO'sadjustedearningspercommonshare.(3)BrooklynUnionandLILCOexpecttocontinuetheirrespective currentdividendpoliciesuntilthecompletion oftheCombination.
| |
| Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare.11 SUMMARYOFSELECTEDHISTORICAL ANDUNAUDITED PROFORMACOMBINED/CONSOLIDATED CONDENSED FINANCIAL INFORMATION BROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION (Purchase andPoolingMethodsofAccounting)
| |
| IISelectedHistorical Financial Information Weareproviding thefollowing financial information toaidyouinyouranalysisofthefinancial aspectsoftheCombination a'ndtheLIPATransaction.
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| Wederivedthisinformation fromunaudited financial statements ofBrooklynUnionandLILCOforthe12monthperiodendedMarch31,1997,andtheauditedfinancial statements ofBrooklynUnionandLILCOfrom1992through1996.Theinformation isonlyasummaryandyoushouldreaditinconjunction withthehistorical financial statements (andrelatednotes)contained inourannualreportsandtheotherinformation thatwehavefiledwiththeSEC.See"WhereYouCan,FindMoreInformation" onpage'10.BROOKLYNUNION-HISTORICAL FINANCIAL INFORMATION 4Atorforthe12monthsAtorfortheYearEndedSeptember 30,19971996'199519941993'992(unaudited)
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| (DollarsInMillions, ExceptforPerShareAmounts)Totalrevenues$1,472.8$1,432.0$1,216.3$1,338.6$1,205.5$',074.9Earningsforcommonstock.......
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| 128.5(1)122.6(1)91.587.076.257.8Earningspercommonshare.......
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| 2.58(1)2.48(1)1.901.851.731.35Cashdividends declaredpercommonshare................
| |
| -1,441.421.391.351.32"1.29Bookvaluepercommonshare....20.0018.1716.9416.2715.5514.56Totalassets.2,493,82,289.6~2,116.92,029.11,897.81,748.0Long-term debt.................
| |
| 724.6712.0,720.6701.4689.3.682.0(1)Includesgainsonthesaleofsubsidiary stockandaCanadianplantof$33.5million,or$0.68pershare,aftertaxes,offsetbyasubsidiary reorganization chargeof$7.8million,or$0.16pershare,aftertaxes.LILCO-HISTORICAL FINANCIAL INFORMATION Totalrevenues...
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| Earningsforcommonstock.....
| |
| Earningspercommonshare.....
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| Caskdividends declaredpercommonshare.....,........
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| Bookvaluepercommonshare..TotalassetsLong-term debtAtorforthe12monthsendedMarch31,1997(unaudited)
| |
| $3,137.7270.32.241.7821.07,11,849.74,457.0AtorfortheYearEndedDecember31,1996199519941993(DollarsInMillions, ExceptforPcrShareAmounts)$3,150.7$3,075.1$-3,067.3.$2,881.0$2,621.8264.2250.7248.8.240.5238.02.202.102.152.152.141.781.781.781.761.7220.8920.5020.2119.8819.5812,209.712,527.6 12,479.3,12,453.8 9,853.14,456.84,706.65,145.4',870.34,741.010 Union/LILCO Agreement atanytimebeforeor'afteritsadoptionbytheshareholders ofthecommonstockofBrooklynUnionandLILCO.Noamendment adoptedaftershareholder
| |
| : approval, however,maymaterially andadversely affecttherightsofsuchshareholders.
| |
| Atanytimepriortoclosing,whetherbeforeorafterapprovalbytheshareholders ofBrooklynUnionorLILCO,theBrooklynUnion/LILCO Agreement maybeterminated bymutualconsentoftheBoardsofDirectors ofBrooklynUnionandLILCOandun-dercertainothercircumstances.
| |
| Depending uponthereasonforsuchtermination, substantial feesmaybedueandpayablebyBrooklynUnionorLILCO.Similarly, atanytimepriortoclosing,whetherbeforeorafterapprovalbytheshareholders ofLILCO,theLIPAAgreement maybeterminated bymutualconsentoftheBoardofDirectors ofLILCOandtheBoardofTrusteesofLIPAandundercertainothercircumstances.
| |
| PursuanttotheBrooklynUnion/LILCO Agreement, LILCOmaynotterminate theLIPAAgreement withouttheconsentofBrooklynUnion.Comparative Shareholder Rights(Seepage85)WhentheCombination iscompleted, holdersofBrooklynUnioncommonstockandLILCOcommonstockwillbecomeholdersofthecommonstockoftheHoldingCompany,andtheirrightswillbegov-ernedbytheHoldingCompany's certificate ofincor-porationandby-laws(theformsofwhichareat-tachedasAnnexesGandH).Certaindifferences be-tweentherightsofholdersofthecommonstockoftheHoldingCompanyandthoseofholdersofBrooklynUnionandLILCOcommonstockaresum-marizedonpages85-87andpages102-103,respec-tively.Regulation oftheHoldingCompany,BrooklynUnionandLILCO(Seepage47)Following theCombination andtheLIPATrans-action,theHoldingCompany,astheparentcompanyofBrooklynUnionandthesubsidiaries whoreceivedfromLILCOtheassetsdescribed above,willnotbedirectlysubjecttoregulation bythePublicServiceCommission oftheStateofNewYorkortheFederalEnergyRegulatory Commission.
| |
| However,itsutilitysubsidiaries willberegulated bythevariousregula-toryagenciesthatcurrently regulateBrooklynUnionandLILCO'sgasandelectricgenerating operations.
| |
| .,WhentheCombination occurs,theHoldingCompany~willbecomea,"publicutilityholdingcompany"asdefinedinthePublicUtilityHoldingCompanyActof1935,andwillfileanexemption statement withtheSecurities andExchangeCommission toexemptitandeachofitssubsidiaries frommostoftheprovi-sionsofthatAct.Currently, neitherBrooklynUnion"norLILCOissubjecttothatAct.Accounting Treatment (Seepage40)Theaccounting fortheCombination willbedependent onwhethertheLIPATransaction willbecompleted.
| |
| IftheLIPATransaction iscompleted, theCombination willbeaccounted forusingthepurchasemethodofaccounting.
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| IftheLIPATransaction isnotcompleted, theCombination isexpectedtobeaccounted forasapoolingofinterests.
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| Asapoolingofinterests, wewilltreatourcompanies asiftheyhadalwaysbeencombinedforaccounting andfinancial reporting puiposes.
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| Forafurtherdiscussion ofaccounting consideration abouttheLIPATransactions, see"Accounting Treatment."
| |
| Statutory Appraisal Rights(Seepage41)EligibleholdersofsharesofBrooklynUnionandLILCOcommonstock'who donotvotefortheCom-bination, or(inthecaseofholdersofLILCOCom-monStock)theLIPATransaction, asappropriate, andwhotimelydissentandfollowtheprocedures inSec-tion623oftheNewYorkBusinessCorporation Lawwillthenhavecertainrightsasaresultofthesetrans-actionstodemandpaymentincashforthe"fairval-ue"oftheirrespective BrooklynUnionandLILCOcommonshares.Failuretotakeanyrequiredactiononatimelybasismayresult.inthelossofthoserights.Theamountobtainable uponavalidexerciseofthoserightsissubjecttodetermination byjudicialproceed-ingand,asaresult,cannotbeestimated atthistime.LILCOpreferred shareholders entitledtovoteontheLIPATransactions arealsoentitledtostatutory ap-praisalrights.BrooklynUnionpreferred stockwillberedeemedpriortoconsummation oftheCombination; and,therefore, holdersofsuchshareswillnotbeenti-tledtoappraisal rights.
| |
| BrooklynUnionshareholders arewelcometocallGeorgeson
| |
| &"CompanyInc.,whichisassisting BrooklynUnioninsolicitation ofproxies,at1-800-'23-2064.
| |
| LILCOshareholders arewelcometocallD.F.King,&Co.,Inc.,whichis.assisting LILCOinsolicitation ofproxies,at1-800-207-3155.
| |
| SUMMARYOFOTHERSELECTEDINFORMATION Regulatory Approvals (Seepage47)Theapprovals ofthePublicServiceCommis-sion'ftheStateofNewYorkundertheNewYorkPublicServiceLaw,theSecurities andExchangeCommission underthePublicUtilityHoldingCom-panyActof1935,theFederalEnergyRegulatory Commission undertheFederalPowerAct,theNu-clearRegulatory Commission undertheAtomicEn-ergyActof1954,aswellas,theexpiration orearlier"tepnination oftheapplicable waitingperiodundertheHart-Scott-Rodino Antitrust,,
| |
| Improvements Actof1976arerequiredinordertocompletetheCombina-tionand,withtheexception oftheapprovalofthePublicServiceCommission, theLIPATransaction.
| |
| Inaddition, theLIPATransaction alsorequiresap-provaloftheNewYorkStatePublicAuthorities ControlBoard.AsofthedateofthisJointProxyStatement/Prospectus, noneoftherequiredregulatory approvals hasbeenobtained.
| |
| kOpinionsofFinancial Advisors(Seepages27and91)IndecidingtoapprovetheBrooklynUnion/LILCO Agreement, theBoardsofDirectors ofBrooklynUnionandLILCOconsidered theopinionsoftheirrespective financial advisorsastothefairnessoftheshareexchangeratiofromafinancial pointofview.Inaddition, indecidingtoapprovetheLIPATransaction, theBoardofDirectors ofLILCOalsoconsidered aseparateopinionfromitsfinancial advi-sorastothefairnessofthe.LIPATransaction fromafinancial pointofview.TheBoardofDirectors ofBrooklynUnionhasreceivedanopinionfromitsfi-nancialadvisor,MerrillLynch,Pierce,Fenner&SmithIncorporated, datedasofthedateofthisJointProxyStatement/Prospectus, totheeffectthattheBrooklynUnionRatiowasfair,fromafinancial pointofview,totheholdersofBrooklynUnionCommonStock,andLILCOreceivedopinionsfromitsfinan-cialadvisor,,Dillon, Read&Co.;,Inc.,
| |
| thattheshareexchangeratiosandtheLIPATransaction werefair,fromafinancial pointofview,toLILCOsharehold-ers.Theopinionsofthefinancial advisorsareat-tachedasannexestothis"JointProxyStatement/Prospectus.
| |
| VPeencourage youtoread"theopinionsthoroughly.
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| Interests ofOjficersandDirectors intheCombination (Seepages32,87and100)Theofficersanddirectors ofBrooklynUnionandLILCOmayhaveinterests inthetransaction thataredi('ferent from,orinadditionto,yours.Forexam-ple,pursuanttoemployment agreements andsever-anceplans,theCombination (and,withrespecttoLILCO,theLIPATransaction) willresultinachangeincontrolofbothBrooklynUnionandLILCO,enti-tlingofficersofthecompanies toreceiveseverance benefitsundercertaincircumstances.
| |
| Asoftherecorddate,dinpctors andofficersofBrooklynUnion,LILCOandtheiraffiliates asagroupownedlessthan1%oftheissuedandoutstand-ingsharesofcommonstockoftheirrespective com-panies.Conditions totheCombination (Seepage74)andLIPATransaction (Seepage81)Completion oftheCombinatiqn dependsonthesatisfaction ofcertainconditions, including butnotlimitedto:(a)approvalofBrooklynUnion'sandLILCO'scommonshareholders; and(b)allrequiredapprovals ofregulatory andgovernmental agencies.
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| Inaddition, thecompletion oftheLIPATransaction isconditioned uponLIPA'sabilitytoobtainthenec-essaryfinancing andapprovaloftheLILCOpreferred stockholders entitledtovotethereon.Consummation oftheCombination isnotconditioned upontheconsummation oftheLIPATransaction, andconsumma-tionoftheLIPATransaction isnotconditioned uponconsummation oftheCombination.
| |
| Amehhdkthehht orTermination oftheBrooklynUnion/LILCO Agreement (Seepage75)andLIPAAgreement (Seepage84)TheBoardsofDirectors ofBrooklynUnionandLILCOmayamendanyofthetermsoftheBrooklyn 28.WILLTHEPREFERRED STOCKORBONDSOF'BROOKLYN UNIONBEEXCHA'NGED?
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| BrooklynUnion'spreferred stockwillberedeemedpriorto,,theconsummation oftheKeySpanShareExchangeandtheCombination.
| |
| Therightsofbondholders ofBrooklynUnionwillnot.changeandwillcontinuetobeobligations ofBrooklynUnion.ttlt29.WILL"fHEPREFERRED STOCKORBONDSOFLILCOBEEXCHANGED?
| |
| Inconnection withtheLIPATransaction, LILCO'sPreferred Stock7.95%,SeriesAAwillbeexchanged foraSeriesAAPreferred StockoftheHoldingCompanyhavingsubstantially identical terms,assetforthinAnnexD.Eachissuedandoutstanding shareofLILCO'spreferred stockthatissubjecttooptionalredemption atorbeforetheclosingoftheLIPATransaction willbecalledforredemption nolaterthanthedateofthisclosing.LILCOpreferred stockthatis'otsubjecttothisoptionalredemption (otherthanSeriesAA)willbeacquiredbyLIPAforcashasaresultoftheLIPATransaction.
| |
| Inaddition, afterLILCOhasreceivedalltherequiredconsents, theHoldingCompanywillassumeLILCO'sDebentures, 7.30%dueJuly15,1999,and8.20%dueMarch15,2023.ThebalanceofLILCO'sdebtsecurities willbecomeobligations ofLIPAafteritacquiresthecommonstock'fLILCOthroughtheLIPATransaction.
| |
| l30.HOWWILLMYPARTICIPATION INBROOKLYNUNION'SORLILCO'SDIVIDENDREINVESTMENT ORSTOCKPURCHASEPLANSBEAFFECTED?
| |
| AllsharesofBrooklynUnioncommonstockandLIECOcommonstockheldunderthecompanies'espective dividendreinvestment andstockpurchaseplanswillautomatically beexchanged forsharesofthecommonstockoftheHoldingCompanywhentheCombination and/ortheLIPATransaction arecompleted.
| |
| TheHoldingCompanywillestablish similarplansaftercompletion oftheCombination.
| |
| 31.WHATIFIWANTTORECEIVETHEFAIRMARKETVALUEOFMYCURRENTSTOCKINCASH?Ifyoufollowtherequiredprocedure, youwillhavetherighttoseekanappraisal andpaymentofthefairmarketvalueofyourBrooklynUnionorLILCOshares.Yourstockwouldbeappraised ina'ewYorkStateCourtproceeding.
| |
| AsaBrooklynUriionshareholder youmust:a.Fileawrittenobjection totheBrooklynUnion/LILCO Agreement beforetheproxyvote(eitherpriortoorattheshareholders meeting);
| |
| ANDb.NotvoteinfavoroftheBrooklynUnion/LILCO Agreement.
| |
| AsaLILCOshareholder youmust:a.Fileawrittenobjection totheBrooklynUnion/LILCO Agreement and/or"theLIPATransaction beforetheproxyvote(eitherpriorf'oorattheshareholders meeting);
| |
| ANDb.Not'voteinfavoroftheBrooklyn;Union/LILCO Agreement and/ortheLIPATransaction.
| |
| 32.ARETHEREOTHERLEGALREQUIREMENTS IMUSTME<ETTOOBTAINANAPPRAISAL ANDPAYMENTINCASHFORMYSHARES?Yes.Thesearedescribed inthisJointProxyStatement/Prospectus onpages41-43.Theprovisions ofNewYorklawthatgovernappraisal rightsarealsoattachedasAnnexI.Ifyouareentitledtoandwishtoseekanappraisal ofyourshares,youshouldreadandfollowthoseprovisions carefully.
| |
| Youshouldbeaware,too,thatanappraisal mayresultinacashpaymentforyoursharesthatishigherorlowerthanthevalueoftheHoldingCompanysharesthatwouldbeissuedtoyouinconnection withthe'Brooklyn Union/LILCO Agreement or,ifapplicable, theLIPATransaction.
| |
| 33,WHOCANICALLIFIHAVEANYADDITIONAL QUESTIONS?
| |
| Twospecialtoll-free telephone numbershavebeenestablished foryou.
| |
| 24.SHOULDISENDINMYSTOCK'CERTIFICATES NOW?No.Youshouldcontinuetoholdyourcertificates forBrooklynUnionorLILCOstockuntiltheCombination andL'IPATransaction becomeeffective.
| |
| Atthattime,youwillreceivewritteninstructions forexchanging yourold'Brooklyn UnionorLILCOstockcertificates fornewcertificates representing theappropriate numberofsharesofcommonstockofthenewHoldingCompany.LILCOshareholders willalsoreceivecashpaymentinplaceofanyfractionofashareofthecommonstockoftheHoldingCompany.25.WHEREWILLMYSHARESOFCOMMONSTOCKOFTHEHOLDINGCOMPANYBETRADED?Weexpectthat'thecommonstockoftheHoldingCompanywillbelistedandtradedontheNewYorkStockExchange.
| |
| AftertheCombination andtheLIPATransaction arecompleted, BrooklynUnionandLILC6commonstockownedbytheHoldingCompanywillnolongerbetradedandwillbedelisted.
| |
| 26.WHEREAREBROOKLYNUNIONANDLILCOSTOCKCURRENTLY TRADED?BrooklynUnioncommonstockiscurrently listedandprincipally tradedontheNewYorkStockExchange, whileLILCOcommonstockiscurrently listedandprincipally tradedontheNewYorkandPacificStockExchanges.
| |
| OnDecember27,1996,thelastfulltradingdayontheNewYorkStockExchangepriortothepublic'nnouncement oftheBrooklynUnion/LILCO Agreement, BrooklynUnioncommonstockclosedat$31.125pershareandLILCOcommonstockclosedat$19.375pershare.ThereportedclosingpricesofBrooklynUnionandLILCOcommonstockonJune23,1997were$28Nand$23',respectively.
| |
| 27.WHATARETHEFEDERALINCOMETAXCONSEQUENCES OFTHEPROPOSEDTRANSACTIONS FORSHAREHOLDERS?
| |
| Thetaxconsequences totheshareholders generally dependonwhichtransactions occur'and theorderinwhichtheyoccur.,TheVariousalternatives andtheirtaxconsequences arediscussed undertheheading",The BrooklynUnion/LILCO Combination FederalIncomeTaxConsiderations."
| |
| Ingeneral,LILCO"commonandpreferred stockshareholders shouldrecognize gain(subjecttopossibledeferral-seepages33-36)orlossonthereceiptofcashand/orHoldingCompanycommonorpreferred'stock, asappropriate, bysuchshareholders ortheExchangeAgentas.contemplated herein.However,iftheLIPATransaction isterminated priortotheCombination, LILCOshareholders generally shouldnotrecognize gainorlossforfederalincometaxpurposesintheCombination.
| |
| Wehavestructured theCombination andLIPATransaction sothat,withcertainexceptions, BrooklynUnionshareholders will'notrecognize anygainorlossforfederalincometaxpurposes.
| |
| lcInaddition, gainorlossshouldberecognized (subjecttopossibledeferral-seepages33-36)byashareholder whohassoughtappraisal rightsorbyaLILCOshareholder whoreceivescashinlieuofafractional share(regardless ofwhethertheLIPATransaction isterminated beforetheCombination).
| |
| : Moreover, taxmaybepayableoncertainamountsdeemedreceivedbyBrooklynUnionshareholders whenBrooklynUnionpayscertaintransfertaxes.TheCombination isconditioned uponthereceiptbyBrooklynUnionofanopinionfromitstaxcounselthatsuchtransaction willqualifyasareorganization whichistax-freetoitsshareholders.
| |
| AlthoughtheBrooklynUnion/LILCO Agreement allowsBrooklynUniontowaivethecondition ofreceiving suchtaxopinion,itdoesnotintendtodoso.Ifthiscondition iswaived,wewillnotifyBrooklynUnionsharehold-ersofthewaiveranditsimplication andresolicit theirapproval.
| |
| TheLIPATransaction isconditioned uponthereceiptbythepartiesofcerfainrulingsfrointheInternalRevenueService.Forafurtherdiscussion ofthe.Federalincometaxconsequences oftheproposedtransactions, seethediscussion.
| |
| undertheheading"TheBrooklynUnion/LILCO Combination
| |
| -FederalIncomeTaxConsiderations."
| |
| 16.WHATPROPOSALS ARELILCOSHAREHOLDERS VOTINGON?LILCO'shareholders arebeingaskedtoapp'rovetwosignificant proposals:
| |
| a.TheBrooklynUnion/LILCO Agreement (described inQuestion3)inwhichLILCOwouldbecomeawholly-owned subsidiary oftheHoldingCompany.b.Theacquisition ofcertainLILCOassetsbyLIPAthroughastocksaleofLILCO(described inQuestions 10-13).Inaddition, aspartofLILCO'sAnnualMeeting;LILCOshareholders arebeingaskedtoapprovecertainotherproposals identified intheNoticeofAnnualMeetingasdescribed inAnnexJoftheproxymaterials deliv'ered toLILCOshareholders.
| |
| 17.WHATSHAREHOLDER VOTEISREQUIREDTOAPPROVETHEBROOKLYNUNION/LILCO COMBINATION?
| |
| Theholdersofatleasttwo-thirds oftheoutstanding sharesofeachofBrooklynUnionandLILCOcommonstockmustvoteinfavoroftheBrooklynUnion/LILCO Agreement.
| |
| 18.WHATSHAREHOLDER VOTEISREQUIREDTOAPPROVETHELIPATRANSACTION?
| |
| TheLIPATransaction mustbeapprovedbythevoteof:1)theholdersofatleasttwo-thirds oftheoutstanding sharesofLILCOcommonstockandpreferred stockentitledtovotethereon,votingtogetherasasingleclass;2)amajorityoftheoutstanding sharesofLILCOpreferred stockentitledtovotethereon,votingtogetherasaseparateclass;3)amajorityoftheoutstanding sharesofLILCOcommonstockvotingseparately asaclass;and4)theholdersofamajorityoftheoutstanding sharesofeachseriesofLILCOpreferred stockentitledtovotethereon,ineachcasevotingseparately asaclass.19.WHATWILLHAPPENTOMYREDEE<MABLE<
| |
| LILCOPREFERRED STOCK?PriortotheclosingoftheLIPATransaction, LILCOwillredeemallredeemable preferred stock.Thesesharesofredeemedpreferred stockwillnotbeoutstanding atthetimeoftheclosingand,therefore, willnotbeentitledtovoteontheLIPATransaction.
| |
| 20.WHOISENTITLEDTOVOTE?HoldersofrecordofBrooklyn" UnionandLILCOcommonstockandeligibleLILCOpreferred stockonJune26,1997,theRecordDate,areentitledtovoteattheapplicable shareholders meeting.AsofJune23,1997,50,364,212 sharesofBrooklynUnioncommonstockwereoutstanding, 121,184,527 sharesofLILCOcommonstockwereoutstanding and21,674,000 sharesofeligibleLILCOpreferred stockwereoutstanding.
| |
| 21.WHENAREALLOFTHESETRANSACTIONS EXPECTEDTOBECOMPLETED?
| |
| Weareworkingtocompleteallaspectsofthetransactions asquicklyaspossible.
| |
| Wecurrently expectthesetransactions tobecompleted inthesecondhalfof1998.TheCombination byitstermscannotbeconsummated earlierthanApril1,1998.22.WHATDOINEEDTODONOW?Justsignandmailyourproxycardintheenclosedreturnenvelopeassoonaspossible.
| |
| That'ayyoursharescanberepresented attheBrooklynUnionorLILCOshareholders meeting.FailuretoreturnaproxycardivillhavethesameegectasavoteagainsttheBrooklynUnion/LILCO Agreement, theLIPATransaction (intliecaseofLILCOshareholders) andtheKeySpanshareexchange(inthecaseofBrooklynUnionshareholders).
| |
| 23.CANICHANGEMYVOTEAFTERIHAVEMAILEDINMYSIGNEDPROXYCARD?Yes,youmaychangeyourvoteatany,timebeforethevotetakesplaceattheapplicable shareholders meetirig.
| |
| Youcanattendtheapplicable shareholders meeting,and voteinpersontodoso.Or,ifyou,areaBrooklynUnionshareholder, youcancompleteanewproxycardorsendawrittennoticestatingyouwouldliketorevokeyourproxy.Theseshouldbesentto:Georgeson
| |
| &CompanyInc.,IVallStreetStation.P.O.Box1102,NewYork,NewYork10269-0667.
| |
| Or,ifyouareaLILCOshareholder, youcansendanewproxycardorwrittennoticetorevokeyourproxytoTheCorporation TrustCompany,P.O.Box631,Wilmington, Delaware19899.
| |
| 12.WHATWILLTHENEWHOLDINGCOMPANYLOOKLIKEAFTERTHECOMBINATION ANDTHELIPATRANSACTION?
| |
| ThenewHoldingCompanywillbecomprised ofBrooklynUnion,consisting asitdoesatpresentofitsregulated naturalgasassetsandoperations andotherunregulated subsidiaries, andanewsubsidiary (orsubsidiaries) formedtoreceiveLILCO'snon-nuclearelectricgenerating assetsandoperations, naturalgasassetsandoperations andcommonplant.Inaddition, thenewHoldingCompanywillenterintoserviceagreements withLIPAto,amongotherthings,manageandoperatetheelectricsystemonLongIsland.IftheLIPATransaction doesnotoccur,BrooklynUnion,andLILCOwouldbecomesubsidiaries oftheHoldingCompanypursuanttotheCombination (seeQuestions Ithrough8).Insuchevent,LILCO,orothersubsidiaries oftheHoldingCompany,wouldowntheassetscontemplated tobeacquiredbyLIPApursuanttotheLIPATransaction andwouldserveLongIsland'selectriccustomers.
| |
| LIPATransaction andbelievesitsadoptionisinthebestinterests ofLILCOanditsshareholders.
| |
| Accordingly, theLILCOBoardrecommends thatitsshareholders vote"FOR"theapprovaloftheLIPATransaction.
| |
| BrooklynUnionhasconsented totheLIPATransaction anditsBoardofDirectors believesthatitsconsummation, togetherwiththeCombination, isinthebestinterests.
| |
| ofBrooklynUnionanditsshareholders.
| |
| 14.WHOMUSTAPPROVETHELIPATRANSACTION?
| |
| Inadditiontotheapprovals bytheLILCOBoardofDirectors andtheconsentoftheBrooklynUnionBoard,allofwhichhavealreadybeenobtained, theLIPATransaction mustbeapprovedby:LILCOshareholders (commonandcertainpreferred)
| |
| PublicAuthorities ControlBoardInternalRevenue,ServiceNuclearRegulatory Commission FederalEnergyRegulatory Commission 13.WHATARETHEBENEFITSOFTHELIPATRANSACTION?
| |
| TheLIPATransaction shouldbenefitbothcustomers andcommonshareholders ofbothLILCOandBrooklynUnion.TheLIPATransaction seekstotakeadvantage ofLIPA'stax-exempt status'nd exemption frompaymentof'federalincometax,tolowerratesforelectricratepayers onLongIsland.AsaresultofLIPA'sabilitytoissuelow-cost, tax-exemptmunicipal bondsandtheelimination offederalincometaxes,alongwiththeBrooklyn-Union/LILCO combination andthesettlement ofvarioustaxcertiorari proceedings, itisanticipated thatLongIslandelectriccustomers willrealizeanaverageelectricratereduction of17percent.Fromtheshareholders'erspective, theLIPATransaction willprovidetheHoldingCompanywiththeresources neededtosuccessfully competeintheemergingenergymarketplace andstrengthen theHoldingCompany's financial position.
| |
| Fortheseandotherreasons,theBoardofDirectors ofLILCOhasunanimously approvedtheInaddition, theLIPAAgreement issubjecttoratification bytheLIPABoardofTrustees.
| |
| 15.WHATPROPOSALS AREBROOKLYNUNIONSHAREHOLDERS VOTINGON?BrooklynUnionshareholders arebeingaskedtoapprovetwosignificant proposals:
| |
| a.TheBrooklynUnion/LILCO Agreement (described inQuestion3)inwhichBrooklynUnionwouldbecomeawholly-owned subsidiary oftheHoldingCompany.b.Arestructuring ofBrooklynUnionwhichwouldtakeplacebeforetheCombination.
| |
| BrooklynUnionwouldberestructured intoaholdingcompanystructure throughashareexchangewithKeySpanEnergyCorporation, asdescribed inAnnexIoftheproxymaterials delivered toBrooklynUnionshareholders.
| |
| Ifthistransaction isapprovedandconsummated, KeySpanwouldbecometheparentcompanyofBrooklynUnionandKeySpanwouldbesubstituted forBrooklynUnionintheBrooklynUnion/LILCO Agreement.
| |
| commonshare,subjecttoapprovalanddeclaration bytheHoldingCompanyBoardofDirectors.
| |
| IftheCombination iscompleted, but.theLIPATransaction isnot,itisanticipated thattheiriitialannualdividendratepaidtoHoldingCompanycommonshareholders willbe$1.78percommonshare,subjecttoapprovalanddeclaration bytheHoldingCompanyBoardofDirectors.
| |
| The'payment ofdividends bytheHoldingCompanyinthefuturewilldepend'nbusinessconditions, resultsofoperations",
| |
| financial conditions, andotherfactors.9.WHATISTHELONG.ISLANDPOWERAUTHORITY?
| |
| TheLongIslandPowerAuthority (orLIPA)isacorporate municipal instrumentality andpolitical subdivision oftheStateofNe)vYork.Itisalsotheonlystateagencyinthecountrypermitted toissuetax-exemptbondsoutsideofthefederallimitsplaceduponeachstate.LIPAisauthorized undertheLongIslandPowerAuthority ActtoacquirealloranypartofLILCO'ssecurities orassetsinorderto,amongotherthings,reduceelectricratespaidbyLILCOcustomers.
| |
| LIPAwillcreateLIPAAcquisition Corp.,aNewYorkcorporation andwholly-owned subsidiary ofLIPA,inordertocarryouttheLIPATransaction discussed below.l0.WHATISTHE"LIPATRANSACTION"
| |
| ?LILCOhasenteredintoanagreemcnt withLIPAinwhichLIPA'illacquireLILCO'selectrictransmission anddistribution system,itselectricregulatory assetsandits18percentinterestintheNineMilePoint2Iiuclearpowerplant,anucleargenerating facilitylocatedinOswego,NewYork.II.'HOWWILLTHELIPATRANSACTION TAKEPLACE?Afterbecomingasubsidiary oftheHoldingCompany,LILCOwilldistribute totheHoldingCompany,oroneormoreofitssubsidiaries, allofitsnaturalgasassetsandoperations, non-nuclear electricgenerating assetsandoperations, andcommonplant.TheLIPATransaction istheacquisition oftheremaining LILCOassetslistedinQuestion10forapproximately
| |
| $2.5billionincashandtheassumption, redemPtion orrefinancing byLIPAofapproximately
| |
| $339millioninpreferred stock'ndapproximately
| |
| $3.6billionindebtattributable toLILCO.TheHoldingCompanywillendupwithapproximately
| |
| $1.7billionjticashandwillhavehconsiderably strongerbalancesheet.Thechartbefowshowsthebasicproposedstructure oftheHoldingCompanyaftertheBrooklynUnion/LILCO Agreement andLIPATransaction takeeffect.Shareholders (Previously ofBrooklynUnionandLILCO)BLHoldingCorp.BrooklynUnionSubsidiaries Consisting of:5I)NewYorkCityNaturalGasAssetsandOperations; and2)Umegulated Operations NewSubsidiaries Consisting of:I)Non-Nuclear ElectricGenerating AssetsandOperations formerlyownedbyLILCO;2)LongIshndNaturalGasAssetsandOperations formerlyownedbyLILCO;and3)LIPAServiceAgreements Itheirrespective companies, and'shareholders.
| |
| Accordingly;
| |
| 'ehchBoard,.recoinmends'hat itsrespective shareholders vote"FOR"theadoptionoftheBrooklynUnion/LILCO Agreement.
| |
| 3.HOWWILLTHESETWOCOMPANIES COMBINE?BrooklynUnion'ndLILCOwillcombinepursuanttoabindingshare.exchangeandmergeragreement andbecomewholly-owned subsidiaries'of oneholdingcompany,tobenamedatalaterdate.For"purposesofthisdocument, thenewcombinedcompanywillbereferredtoasBLHoldingCorp.ormore,simply,as,the"HoldingCompany."
| |
| Thetransaction between'our companies willbereferredtoasthe"Combination."
| |
| 'i(Under,thisagreement, sharesofeachoftheindividual companies willbeexchanged fororconverted intosharesofthenewHoldingCompany,andeachofthecompanies'ommon shareholders willbecomeshareholders ofthenewHoldingCompany.4."HOWMANY'HARES WILLBROOKLYN..UNIONSHAREHOLDERS RECEIVE?BrooklynUnion"shareholders willreceiveoneshareofthecommonstockoftheHolding'Company foreachshare.ofBrooklynUnioncommonstocktheyown;Forpurposesofthisdocument, theratioatwhichsharesofBrooklynUnioncommonstockwillbeexchanged forsharesofcommonstockoftheHoldingCompanywillbereferred, toasthe"Brooklyn UnionRatio."5.HOWMANYSHARESWILLLILCOSHAREHOLDERS RECEIVE?ThenumberofsharesLILCOsh'areholders receiveswillbeasfollows(pleaseseeQuestions 9-12):a.LILCOshareholders willreceive0.803ofashareof'commonstockoftheHolding'CompanyforeachshareofLILCOcommonstocktheyown.Inthisscenano,BrooklynUnionandLILCOshareholders wouldOwn34percentand66percent,respectively,'of thesharesof,thecommonstockoftheHoldingCompany.b."IftheLIPATransaction is-alsocompleted (asdescribed inQuestions 10-13);LILCOshareholders willtheninsteadreceive0.880"ofa.shareofcommon;stock oftheHoldingCompanyforeachshareofLILCO"commonstockthey>>own.Sha'reholders forBrooklynUnionaridLILCOwouldthenown32percentand68percent,respectively, ofthe'ha'resofthecommonstockoftheHoldingCo'mpany.
| |
| nIftlieLIPATransaction iscompleted buttheCombination is,not,LILCO,,alone wouldrestructure intoaholdingcompany.Inthiscase,LILCOshareholders wouldownallofthestockofthenewHoldingCompany.6.WHOWILLMANA.'GETHENEWHOLDINGCOMPANY?Uponcompletion ofthe...Combination, Dr.WilliamJ.Catacosinos, currently, ChairmanandChiefExecutive OfficerofLILCO,willbecomeChairmanandChiefExecutive OfficeroftheHoldingCompany..
| |
| Mr.RobertB.Catell,currently ChairmanandChiefExecutive OfficerofBrooklynUnion,willbecomePresident andChiefOperating OfficeroftheHoldingCompany.,
| |
| OneyearaftertheclosingoftheCombination, Mr.CatellwillsucceedDr.Catacosinos asChiefExecutive Officer,withDr.Cafacosinos remaining asChairman.
| |
| J7.''WHO'WILLSERVEONTHEBOARDOFDIRECTORS OFTHE<HOL'DINGCOMPANY?''.
| |
| TheBoardofDirectors oftheHoldingCompanywillconsist,of15members:sixtobedesignated bytheBrooklynUnionBoard;sixtobedesignated bytheLILCOBoard;andthreeadditional personsjointlyselectedbyacommittee, consisting oftwocurrentBrooklynUnion'directors andtwocurrentL'IL'COdirectors.
| |
| 8.WHATWILLTHEDIVIDENDRATEBE,ONTHEHOLDINGCOMPANY'S COMMONSTOCK?Itisanticipated thattheinitialannualized dividendrate'aidtoHoldingCompany.commonshareholders aftercompletion oftheCombination andthetransaction with'LIPAwillbe$L78per QUESTIONS
| |
| &ANSWERSONTHEBROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION; SUMMARYOFJOINTPROXYSTATEMENT/PROSPECTUS Thissummaryhighlights selectedinfonnationjom thisdocumentandmaynotcontainalloftlteinfor7nation thatisimportant toyou.Tounderstand theBrooklynUnion/LILCO Combination andtheLIPATransaction ftdlyandforamorecompletedescription ofthelegaltermsoftikeBrooklynUnion/LILCO Combination andtheLIPATransaction, youshouldreadcarefully thisentiredocumentandthedocuments we/ravereferredyouto.See"WhereYouCanFindMoreInformation" (Page110).InadditiontotheBrooklynUnion/LILCO Combination, BrooklynUnionshareliolders willalsobeaskedtoapproveaproposaltoformanewlloldingcompanypendingtheconsummation oftheBrooklynUnion/LILCO Agreement.
| |
| LILCOSlurrelrolders willalsobeaskedtoapprovecertainotlrerproposals incori'rtection withLlLCO'sAruiualMeeting.Shareholders therefore slrouldahoreadcarefully Antre'ofthisdocunrent.
| |
| 1.WHOARETHETWOCOMPANIES THATWILLCOMBINE?TheBrooklynUnionGasCompany-alsoreferredtointhisdocumentas"Brooklyn Union"-hasapproximately 3,000employees, distributes naturalgasintheNewYorkCityBoroughsofBrooklynandStatenIslandandintwo-thirds oftheBoroughofQueens,andservestheenergyneedsofapproximately 1.1millioncustomers.
| |
| BrooklynUnion'sserviceterritory coversapproximately 187squaremiles,withapopulation ofapproximately 4millionpeople.,LBrooklynUnionanditssubsidiaries, haveenergy-related investments ingasandoilexploration andproduction intheUnitedStatesandCanada,aswellasinenergyservjcesjnthe,UnitedStatesincluding cogeneration, gaspipelinetransportation andstorage,marketing andotherrelatedservices.
| |
| BrooklynUnion'sprincipal executive officeislocatedatOneMetroTech Center,'Brooklyn, NY11201-3851, anditsgeneraltelephone numberis(718)403-2000.
| |
| LongIslandLightingCompany-alsoreferredtointhisdocumentas"LILCO"-hasapproximately 5,400employees andprovideselectricandgasservicetomorethan1millioncustomers inNassauandSuffolkCountiesandontheRockawayPeninsula inQueensCounty.LILCO'sserviceterritory covers1,230squaremileswithapopulation ofapproximately 2.7millionpeople..LILCO's principal executive officeislocatedat175EastOldCountryRoad,Hicksville, NY11801,anditsgeneraltelephone numberis(516)755-6650.
| |
| 2,WHYHAVETHESETWOCOMPANIES DECIDEDTOCOMBINE?Thecombination ofBrooklynUnionandLILCOwillprovideimportant benefitsforthetwocompanies,'or theircustomers, employees andshareholders.
| |
| Shareholders willbenefitfromtheupsidepotential associated withthefollowing factors:~Combining BrooklynUnionandLILCOisexpectedtoresultinoperating efficiencies ofapproximately
| |
| $1billionover10years,whichwillbeusedtoprovideratereductions tocustomers.
| |
| ~Together, thetwocompanies willhelpspurincreased regionalbusinessgrowthbyproviding energyandrelatedservicesatlowerprices.~Ourcombinedcompanywillhaveanenhancedabilitytoprovideitsbroadercustomerbasewithcompetitive energyproductsandserviceswellintothefuture.~BrooklynUnionandLILCOtogetherintend-tomarket,tradeanddeliverenergyproductsandservicesonalargescaletomajormarketareas.~Currentandprospective customers willbenefitfromtheopportunity todealwithanenergyservicescompanythatcanofferone-stopshoppingforproviding
| |
| -andmanaging-theirenergyneeds.Fortheseandotherreasons,theBoardsofDirectors ofbothBrooklynUnionandLILCOhaveunanimously approvedthecombination ofthetwocompanies, believing ittobeinthebestinterests of TABLEOFCONTENTS't1~~~~~~t~'QUESTIONS 8cANSWERSONTHEBROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION; SUMMARYOFJOINTPROXYSTATEMENT/PROSPECTUS
| |
| ..........
| |
| JOINTPROXYSTATEMENT/PROSPECIUS
| |
| .........
| |
| THEBROOKLYNUNION/LILCO COMBINATION....
| |
| | |
| ===Background===
| |
| oftheCombination
| |
| ....................
| |
| CommonReasonsfortheCombination
| |
| ...'..........
| |
| Recommendation oftheBrooklynUnionBoardofDirectors.
| |
| OpinionofBrooklynUnion'sFinancial Advisor.......
| |
| Potential Conflicts ofInterests ofCertainPersonsintheCombination andthcLIPATransaction............
| |
| CertainArrangements Regarding theDirectors andManagement oftheHoldingCompanyFollowing theCombination andtheLIPATransaction
| |
| ..'..........
| |
| FederalIncomeTaxConsiderations
| |
| .................
| |
| Accounting Treatment StockExchangeListingoftheHoldingCompanyStock.........................................
| |
| FederalSecurities LawConsequences
| |
| ...............
| |
| Appraisal RightsMEETINGS, VOTINGANDPROXIES...............
| |
| TheBrooklynUnionMeetingREGULATORY MATIERS............'...
| |
| StateApprovals andRelatedMatters................
| |
| PublicUtilityHoldingCompanyActof1935.........
| |
| FederalPowerAct.AntitmstConsiderations AtomicEnergyAct~PublicAuthorities ControlBoardApproval...........
| |
| GeneralUNAUDITED PROFORMACONSOLIDATED CONDENSED FINANCIAL INFORMATION (PURCHASE)
| |
| UNAUDITED PROFORMACOMBINEDCONDENSED FINANCIAL INFORMATION (POOLING)
| |
| THECOMPANYFOLLOWING THECOMBINATION ANDTHELIPATRANSACIMN..................
| |
| Management oftheHoldingCompany...............
| |
| CommonStockDividends
| |
| .DESCRIPTION OFHOLDINGCOMPANYCAPITALSTOCKGeneralHoldingCompanyPreferred Stock.......,..........
| |
| HoldingCompanyCommonStock..................
| |
| CertainAnti-Takeover Provisions...................
| |
| THEAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGER.......
| |
| TheCombination.
| |
| EffectsoftheCombination
| |
| .Representations andWarrantics.....................
| |
| CertainCovenants
| |
| .Indemnification
| |
| .Employment andWorkforce Matters................
| |
| StockandBenefitPlans.NoSolicitation ofTransactions.....................
| |
| Additional Agreements
| |
| .Conditions toEachParty'sObligation toEffecttheCombination
| |
| .Termination
| |
| .Termination Fees.PageI172020252527323233404041414444474747484849494951576363636363646467676769707171727373747577Page797979808181848585858687878989909091100107108109109109110112AnnexA-AnncxB-AnnexC-AnnexDAnnexEAnnexFAnnexGAnnexHAnnexIAnnexJAnnexK-AnnexL-AmendedandRestatedAgreement andPlanofExchangeandMergerAmendedandRestatedLILCOStockOptionAgreement AmendedandRestatedBrooklynUnionStockOptionAgrecmcnt Agreement andPlanofMergerOpinionofMemllLynch,Pierce,Fenner4SmithIncorporated OpinionsofDillon,Read4,Co.Inc.FormofCcitificatc ofIncorporation oftheHoldingCompanyFormofBy-lawsoftheHoldingCompanySection623andSection910oftheNewYorkBusinessCorporation LawBrooklynUnionProposal2:HoldingCompanyandAdoptionofthcKeySpanExchangeAgreement AmendedandRestatedAgreement andPlanofExchangebctwcenBrooklynUnionandKeySpanRestatedCertificate ofIncorporation andBy-lawsofKeySpanTHESTOCKOPTIONAGREEMENTS
| |
| ...............
| |
| GeneralCertainRepurchases Restrictions onTransferTHELIPATRANSACTION Agrecmcnt andPlanofMerger..........,..........
| |
| OtherBasicAgrecmcnts SELECfEDINFORMATION CONCERNING BROOKLYNUNIONBusinessofBrooklynUnionComparison ofShareholders'ights.................
| |
| Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoBrooklynUnion'sCertificate ofIncorporation andBy-Laws..........
| |
| Anti-Takeover StatutesPotential Conflicts ofInterestofCertainPersonsintheCombination andtheLIPATransaction............
| |
| SecurityOwnership ofCertainBeneficial OwnersandManagement CertainBusinessRelationships BetweenBrooklynUnionandLILCO.SELECfEDINFORMATION CONCERNING LILCO...Recommendation oftheLILCOBoard...............
| |
| OpinionofLILCO'sFinancial Advisor..............
| |
| Potential Conflicts ofInterestofCertainPersonsintheCombination andtheLIPATransaction............
| |
| Comparison oftheHoldingCompany's CertiTicate ofIncorporation andBy-LawstoLILCO'sCertificate ofIncorporation andBy-Laws.......................
| |
| TheLILCOMccting.BusinessofLILCO.SecurityOwnership ofCertainBeneficial OwnersandManagement
| |
| .CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS...,.........
| |
| LEGALMATfERS,.~EXPERTS...FUTURESHAREHOLDER PROPOSALS
| |
| .............
| |
| WHEREYOUCANFINDMOREINFORMATION
| |
| ....LISTOFDEFINEDTERMS........................
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| Directions tothe,OperaHouse,BROOKLYNACADEMYOFMVSIC30Lafayette AvenueBrooklyn, NewYork11217~t<<o<<"Cyasvw0KAlSCOHUE+C/gg4OyCH~vre"irriSly4p)~+utByCar:FromManhattan viatheManhattan B'shlandPhce,proceedonebl~~kFromManhattan viatheBrokroo'lynBndgetContinueotebridgeandmakethefirstlepossiblewhichisTillarySt.CStreetandturnrightontoFlatbushAvenue.rect.ontinueonTillFromQueensLoQ,LongIslandandConnecticut:
| |
| TakteLongIslandExpresswa totheFromStatenIsland:CrosstheVeB'dtothBooklerooynQueensExpressway.
| |
| ExitatTillaryStreet,exit29.Followe'owexitontoTillaryStreet,ocandturnleftontoFlatbushAvenue.FromNewJersey:UsetheieHollandTunnelandeet,whichleadsdirectlyeeastonanalStreetse,,anattanBridge,ContinuestrathebridgeontoFlatbushAvenue'.BySubwaytTheBrooklynAcademofMu'oMusiciswithinthree~2,3,4,5,D,Q:AtlanticAvenueB,N,M,R:PacificStreet~G:FultonStreetLIRR:FlatbushAvenueParking:AllBrooklynAcademyofMusicarkin1patrolled continuously durinthewo OneMetroTech CenterBrooMyn,NewYork11201.3850 NOTICEOFSPECIALMEETINGOFSHAREHOLDERS ToBeHeldAugust7,1997
| |
| | |
| ==DearShareholder:==
| |
| | |
| Iampleasedtogiveyounoticeofandtocordially inviteyoutoattendtheSpecialMeetingofShareholders ofTheBrooklynUnionGasCompany,whichwillbeheld:Thursday, August7,19973:00p.m.OperaHouseBrooklynAcademyofMusic30Lafayette AvenueBrooklyn, NewYork11217AtourSpecialMeeting,commonshareholders willconsiderandtakeactionon:1.OurproposaltocombinewithLongIslandLightingCompany("LILCO")
| |
| byadoptingtheAmendedandRestated, Agreement andPlanofExchangeandMergerwithLILCO,acopyofwhichisattachedasAnnexAtotheaccompanying JointProxyStatement/Prospectus, pursuanttowhichBrooklynUnionandLILCOwillbecomesubsidiaries ofanewholding'ompany(the"HoldingCompany"),holdersofBrooklynUnionCommonStockwillreceiveoneshare"ofHoldingCompanyCommonStockforeachshareofBrooklynUnionorKeySpanCommonStocktheyownandholdersofLILCOCommonStockwillreceive0.803(or0.880ifthetransactions contemplated bytheAgreement andPlanofMergerbyandamongtheHoldingCompany,LILCOandtheLongIslandPowerAuthority areconsummated) ofashareofHoldingCompanyCommonStockforeachshareofLILCOCommon'Stock theyown;and2.OurholdingcompanyproposalbyadoptingtheAmendedandRestatedAgreement andPlanofExchangewithKeySpanEnergyCorporation
| |
| ("KeySpan"),
| |
| acopyofwhichisattachedasAnnexKtotheaccompanying JointProxyStatement/Prospectus, pursuanttowhichKeySpanwillbecometheparentholdingcompanyofBrooklynUnionandtheholdersofsharesofBrooklynUnionCommonStockwillbecomeholdersofsharesofCommonStockofKeySpan.TheLILCOcombination proposalandtheKeySpanholdingcompanyproposalarenotconditioned ononeanother.Ifapprovedbyourcommonshareholders, weexpectourKeySpanholdingcompanyproposalwillbeconsummated priortoourproposedcombination withLILCO.Themeetingroomwillbeopenforadmission at2:00p.m.Isuggestyouarriveearly,sinceseatingislimitedandisonafirst-come basis.Holdersofrecordofouroutstanding commonstockandpreferred stockonJune26,1997,therecorddate,areentitledtoreceivenoticeofourSpecialMeeting.Onlyholdersofrecord"ofsharesofourcommonstockontherecorddateareentitledtovoteatthemeeting.Ifyoursharesareheldthroughabankorbrokerage firmandyouplantoattendthemeeting,pleaserequestaletterorsomeotherevidenceofownership fromyourbankorfirmaswellasproperauthorization ifyouwishtovoteyoursharesinperson.IftheAmendedandRestatedAgreement andPlanofExchangeandMergerwithLILCOisadoptedbyourcommonshareholders andtheLILCOcombination occurs,aholderofrecordofourcommonstockontherecord,datewhodissentsanddoesnotvotefortheproposalisentitledtoreceivepaymentincashifthatholderfollowstheprocedures providedinSections623and910oftheNewYorkBusinessCorporation Law,attachedasAnnexItotheaccompanying JointProxyStatement/Prospectus.
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| Similarly, iftheAmendedandRestatedAgreement andPlanofExchangewithKeySpanisadoptedbyourcommonshareholders andtheKeySpanrestructuring occurs,aholderofrecordofourcommonstockonthe'record datewhodissentsanddoesnotvotefortheproposalisentitledtoreceivecashifthatholderfollowstheprocedures referenced above.'une27,1997ByOrderoftheBoardofDirectors, ROBERTR.WIECZOREK VicePresident, Secretary andTreasurer
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| | |
| ofBrooklynUnionandLILCOwouldhold32%and68%,respectively, ofthesharesofthecommonstockofthenewholdingcompanyiftheLIPAtransaction wasconsummated; and34%and66%,respectively, iftheLIPAtransaction wasnotconsummated.
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| YourBoardofDirectors believesthatthetransaction withLILCOisinthebestinterests ofBrooklynUnionanditsshareholders andhasunanimously adoptedit.YourBoardunanimously recommends thatshareholders votaFORtheLILCObusinesscombination proposal.
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| TlieKeySpanProposalAsecondpurposeoftheSpecialMcctingistovoteontheKeySpanproposal, whichisindependent oftheLILCObusinesscombination proposalandisnotconditioned onitortheLIPAtransaction beingconsummated.
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| BecauseitisnotpossibletopredictwhentheLILCOtransaction willbecompleted, proceeding nowwithKeySpanwillgiveBrooklynUniontheadditional flexibility tomakeinvestments inunregulated businesses whetherornottheLILCOtransaction isconsummated.
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| HavingKeySpanasourparentcompanywillallowustomakefulluseofourexperience inservingthetotalenergyneedsofcustomers withinandbeyondtheboundaries ofourtraditional utilityservicearea.Wewillbeabletotakeadvantage ofbusinessopportunities inamoretimelyfashion,competemoreaggressively andinvestinamorebroadlydefinedenergybusiness, withoutalengthyregulatory approvalprocessforeachinitiative takentoexpandourbusiness.
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| BrooklynUnionwillbethemostsignificant subsidiary ofKeySpan.Certainofourexistingnon-utilitybusinesses andanynewlycreatednon-utility businesses willbeoperatedasseparatesubsidiaries ofKeySpan.Iwillbethechairman, president andchiefexecutive officeraswellasadirectorofKeySpan,andIwillcontinueaschairman, chiefexecutive officerandadirectorofBrooklynUnion.AsaresultoftheKeySpantransaction, BrooklynUnioncommonstockcertificates willautomatically becomecertificates representing KeySpancommonstock,andyouwillautomatically becomeashareholder ofKeySpanandceasetobeashareholder ofBrooklynUnion.Yourproportionate ownership interestwillnotcliangeintheKeySpanrestructuring.
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| Intermsofourproposedbusinesscombination withLILCO,KeySpanwillbesubstituted forBrooklynUnionandthetransaction willproceedwithKeySpan,ifbothproposals areapprovedattheSpecialMeeting.YourBoardofDirectors unanimously recommends thatsharcltoldcrs voteFORtheKeySpanproposal.
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| Wcappreciate yoursupportintheseimportant transactions.
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| Weareveryenthusiastic abouttheKeySpanrestructuring andthecombination withLILCO,andareconfident thatyourcompanywillgrowandprosperinacompetitive marketplace.
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| Sincerely,
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| +'l~RODEttTB.CATELt.ChairmanandChiefExecalive OfficerNeithertheSECnoranystatesccuritics regulator hasapprovedthecommonstockofKcySpanEnergyCorporation orBLHoldingCorp.tobcissuedunderthisJointProxyStatement/Prospectus, ordetermined ifthisJointProxyStatcmcnt/Prospectus isaccurateoradctluatc.
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| Anyrepresentation tothecontraryisncriminaloffense.JointProxyStatement/Prospectus datedJune27,1997,andfirstmailedtoshareholders onoraboutJune30,1997.
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| hq===BrooklynOneMetroTech CenterBrooktyn, NewYork11201-3850
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| | |
| ==DearShareholder:==
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| | |
| IampleasedtoinviteyoutotheSpecialMeetingofShareholders tobeheldonAugust7,1997,atwhichyouwillbeaskedtoapprovetheproposedcombination ofBrooklynUnionandLongIslandLightingCompany("LILCO").
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| Youwillalsobeaskedtoapprovetheformation ofKeySpanEnergyCorporation
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| ("KeySpan")
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| asanewholdingcompanyforBrooklynUnion,whichwillprovideyourcompanywithgreaterfinancial andorganizational flexibility andenableustocompetemoreeffectively pendingtheconsummation oftheproposedcombination withLILCO.YourBoardofDirectors unanimously recommends approvalofbothproposals andurgesyoutosign,dateandreturntheenclosedproxytoday.TheLILCOBusinessConibination ProposalTheproposedtransaction withLILCOoffersBrooklynUnionshareholders theopportunity toparticipate intheupsidepotential oftheconvergence ofthegasandelectriccompanies withintheenergyindustry.'Our combination withLILCOwillopenuptheLongIslandmarketforBrooklynUnion.Thismarketisparticularly attractive becausethereisanextremely lowpenetration ofgasasapercentofthetotalenergyusageofthatregion.Webelievethatthecombination willresultinsynergysavingsofapproxiinately
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| $1billionovertenyears.Thiswillleadtomorecompetitive ratesandhelpspurincreased regionalbusinessgrowthandenhancedenergy-related productsandservices.
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| Yourcompanywillbenefitfromtheattractive growthprospects resulting fromaccesstomorcthanonemillioncustomers inanareawithapopulation of2.7millionpeople.OnJunc26,1997,definitive agreements wereenteredintoforthe,purchasebytheLongIslandPowerAuthority
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| ("LIPA")ofLILCO'selectricJune27,1997transmission anddistribution system,substantially allofitselectricregulatory assetsanditsshareoftheNineMilePoint2nuclearpowerplantforapproximately
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| $2.5billionincashandtheassumption orrefinancing byLIPAofapproximately
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| $3.6billioninLILCOdebtandapproximately
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| $339millioninpreferred stock.Consuinmation oftheLIPAtransaction isnotacondition totheclosingofourtransaction withLILCO;however,asdescribed below,theclosingoftheLIPAtransaction willresultinachangeintheexchangeratioinourtransaction withLILCO.Asmorefullydescribed intheaccompanying JointProxyStatement/Prospectus, BrooklynUnionand-LILCOwouldbecombinedinatransaction whichwouldbetax-freetotheBrooklynUnionshareholders andwouldbecomesubsidiaries ofanewholdingcompany.Uponconsummation oftheproposedtransaction, youwillreceiveoneshareofthecommonstockofthenewholdingcompanyforeachshareofBrooklynUnionorKeySpancommonstockyouown.Ifthetransaction withLIPAdescribed aboveisconsummated, LILCOshareholders wouldreceive0.880ofashareofcommonstockofthenewholdingcompanyforeachshareofLILCOcommonstocktheyown;iftheLIPAtransaction isnotconsummated, LILCOshareholders wouldreceive0.803ofashareofcommonstockofthenewholdingcompanyforeachoftheirsharesofLILCOcommonstock.MerrillLynch,Pierce,Fenner&SmithIncorporated, yourcompany's financial advisor,hasdelivered itsopiniontotheBrooklynUnionBoardofDirectors totheeffectthat,undereitherscenario, theratioatwhichsharesofBrooklynUnioncommonstockwillbeexchanged forsharesofcommonstockofthenewholdingcompanyisfairtotheBrooklynUnioncommonshareholders fromafinancial pointofview.Basedonthecurrentcapitalization ofBrooklynUnionandLILCO,theholdersofthecommonshares PRINTEDONRECYCLEDPAPER Item7requirestheapprovalofamajorityoftheoutstanding sharesofLILCOCommonStockentitledtovote.Thefollowing resolution willbeproposedforapprovalbyholdersoftheLILCOCommonStockasItem7:RESOLVED, thattheCertificate ofIncorporation ofLILCOshallbeamendedtoincreasethetotalamountofauthorized LILCOCommonStockto'160,000,000 commonshares.TheBoardofDirectors ofLILCOrecommends avoteFORapprovaltoadoptthisamendment.
| |
| ADDITIONAL INFORMATION Outstanding VotingStockOnJune23,1997,therewere121,184,527 sliaresofLILCOCommonStock,1,366,840 sharesofLILCOPreferred Stock,$100parvalue,and22,658,000 sharesofLILCOPreferred Stock,$25parvalue,issuedandoutstanding.
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| HoldersofsliaresofLILCOPreferred StockSeriesL,B,D,E,F,H,IandNNarenotentitledtovoteonanyofthematterstobeconsidered atthisLILCOMeeting.HoldersofsharesofLILCOPreferred Stock,SeriesAA,CC,GG,QQandUUmayvoteontheproposaltoadopttheLIPAAgreement.
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| HoldersofsharesofLILCOCommonStockmayvoteonallmatters.Thestockbookswillnotbeclosed.
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| Employees willbe'abletopurchaseshareseitherbyapayrolldeduction methodorbymakinglumpsumpaymentsorboth.Iftheemployeeelectstousethepayrolldeduction method,suchemployeewillbecreditedwithanallowance of'8of1%permonthoftheamountsdeductedfromhispay,whichwillbeappliedtoreducethepurchasepriceofthesharesundertheESPP.Theamountssodeductedfrompayrollmaybeusedimmediately byLILCOforgeneralcorporate purposes.
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| Inanysix-month purchaseperiod,thetotalpaymentsbyanemployeetopurchaseshares,including bothpayrolldeductions andlumpsumpayments, cannotexceed20%oftheirsalaryat,thebeginning of,suchperiod.Moreover, thefairmarketvalueofsharespurchased byanemployeeundertheESPP,duringanycalendaryear,cannotexceed$25,000.Theimaximumnumberofsharesanemployeemaypurchaseinapurchaseperiodis600shares,subjecttothe$25,000limitdiscussed above.TheBoardofDirectors willcontinuetohavetheright,withoutshareholder
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| : approval, tosuspend,terminate ormodifytheESPP.Shareholder approvalisrequiredtoextendthetermoftheESPP,decreasethepurchasepriceoftheshares,toincreasethemaximumnumberofshareswhichmaybeboughtbyanemployee, toincreasethetotalnumber,ofsharesavailable undertheESPP,ortonarrowthedefinition ofemployees eligibletoparticipate.
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| TheproceedsreceivedfromsalesundertheESPPwill:beusedforconstruction andothercorporate purposes.
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| OnJune23,1997,theclosingpriceofLILCOCommonStockasreportedontheNYSElistingofcomposite transaction was$23Npershare.Item6requirestheapprovalofamajorityoftheouts'tanding sharesofLILCOCommonStockentitledtovote.Thefollowing resolution willbeproposedforapprovalbyholdersofLILCOCommonStockasItem6:RESOLVED, thattheLILCOEmployeeStockPurchasePlan("ESPP")shallbeamendedtoextendthedateas'ofwhichtheESPPwillterminate fromAugust31,1997,toAugust31,2007.The,BoardofDirectors ofLILCOrecommends avoteFORapprovaltoauthorize theextension oftheESPP.ITEM7-APPROVALOFPROPOSEDAMENDMENT TOTHECERTIFICATE OFINCORPORATION TheLILCOCertificate ofIncorporation providesforauthorized commonstockof150,000,000 shares.AtDecember31,1996,therewere120,784,277 commonsharesoutstanding andatotalof28,388,658 commonsharesreservedforissuance, including atotalof23,981,964 commonsharesreservedforissuanceinconnection withtheLILCOStockOptionAgreement enteredintowithBrooklynUnion.Accordingly, atDecember31,1996,therewereonly827,065commonsharesavailable forissuanceplus3,485commonsharesheldintreasury.
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| TheBoardofDirectors believesthatthislimitation onthenumberofcommonsharesthatLILCOmayissueisundulyrestrictive andthaitheCertificate ofIncorporation shouldbeamendedtoincreasetheauthorized LILCOcommonstockto160,000,000 shares.Adoptionofthisamendment wouldincreasethetotalofauthorized butunissuedcommonsharesfrom827,065to10,827,065 asof,December31,1996,comparedtothetotalofauthorized butunissuedcommonsharesofmorethan24,000,000 thatwereavailable forissuanceimmediately beforetheLILCOStockOptionAgreement wasenteredintoonDecember29,1996.LILCOdoesnothaveanycurrentplansorcommitments toissueLILCOCommonStockinconnection withanyfinancing oracquisition (otherthanpursuanttotheLILCOStockOptionAgreement) andLIL'CO'sabilitytoissueadditional sharesofLILCOCommonStockisrestricted pursuanttotheBrooklynUnion/LILCO Agreement.
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| thetwocorporate objectives.
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| Thebalance,ofeachaward,whichcanbe-zero,25or50percentofthetargetincentive payment,isthensubjectively determined basedoneachindividual's contribution towardhelpingLILCOachieveitsobjectives.
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| Following thecloseofeachcalendaryear,theCommittee willreviewthetargetsorthresholds achievedandconsidereachindividual officer's contribution, inordertodetermine anyincentive awardstobepaidundertheAnnualStockIncentive Plan.UnderSection162(m)oftheInternalRevenuecodeof1986,asamendedandtheapplicable regulations, paymentsmadepursuanttoa"qualified performance-based compensation plan"willbeexemptfrom.therestrictions contained inSection162(m)'regarding LILCO'sabilitytoobtainadedu'ction forcompensation paidtocertainhigh-ranking officersofLILCO.Inordertoqualifyasaplanof"qualified performance-based
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| "'ompensation" theAnnualStockIncentive Plananditsmaterialtermsmust,amongotherrequirements, beapprovedbyamajorityoftheoutstanding sharesofLILCOCommonStockentitledtovote.TheBoardofDirectors'f LILCOrecommends avoteFORapprovaloftheAnnualStockIncentive Plan.ITEM6-APPROVALOFLILCOEMPLOYEESTOCKPURCHASEPLAN,In1957,LILCOshareholders firstauthorized theissuanceofsharesofLILCOCommonStockpursuanttoanEmployeeStockPurchasePlan("ESPP").
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| Overtheyears,theESPPhasbeenamendedseveraltimesto,amongotherthings,providefortheissuanceofadditional sharesofLILCOCommonStockandtoextendtheperiodforthepurchaseofsuchshares.Currently, theshareholders hiveauthorized LILCOtoissueLILCOCommonStockpursuanttotheESPPuntilAugust31,1997,and1,678,208 sharesremainavailable forpurchasebyemployees pursuanttosuchauthorization.
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| Todate,approximately 2.5millionshareshavebeenpurchased byemployees whohaveinvestedapproximately
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| $39millioninLILCOthroughtheESPP.TheBoardofDirectors believesthattheESPPhasbeensuccessful inachieving itspurposeandthatitisinthebestinterests ofLILCOtocontinuetoencourage ownership oftheLILCOCommonStockbyitsemployees andtodosobyproviding asystematic methodofemployeeacquisition.
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| Accordingly, theBoardofDirectors requeststhatLILCOshareholders authorize anextension oftheESPPandtheissuanceofupto1,678,208 sharesofcommonstockthroughAugust31,2007.However,theShareExchangeAgreement contemplates thattheESPPwillbeterminated uponclosingofthetransactions contemplated therein.Itiscurrently anticipated thatfollowing consummation oftheBindingShareExchanges, theCompanywillimplement anemployeestockplantoreplaceboththeLILCOESPPandBrooklyn(InionsDiscountStockPurchasePlanforEmployees.
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| Thetermsandconditions ofsuchplanhavenotyetbeendetermined.
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| Thepurchasepricetoemployees undertheESPPwillcontinuetobe95%oftheaverageofthehighestandlowestpricespaidfortheLILCOCommonStock'hsreportedintheintheNYSElistingofcomposite transactions, withthedischunted pricethenro'undeduptothenextcentonthepricingday(whichisthelasttradingdayontheNYSE)ofeachpurchaseperiod(currently MarchIthroughAugust31andSeptember 1ofagivenyearthroughthelastdayofFebruaryinthefollowing year).AllLILCOemployees areeligibletoparticipate intheESPPexcept(i)employees whowillnothavebeenonLILCOspayrollfor12monthsasofthepricingdayinapurchaseperiod;(ii)employees who,attheendofapurchaseperiod,havebeenonmilitaryleaveoroncontinuous sickleaveformorethan90daysifnotentitledtolateremployment byLILCO;(ii)part-time employees; and(iv)Directors whoarenotalsofull-time employees ofLILCO.
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| ITEM4-APPOINTMENT OFINDEPENDENT AUDITORSErnst&YoungLLP,395North'ervice Road,Melville, NewYork,auditedLILCO's1996financial statements.
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| Auditrelatedservicesperformed byErnst&,YoungLLPfor1996consisted principally oftheauditofthefinancial statements ofLILCO,thereviewoftheunaudi)ed quarterly financial statements andassistance andconsultation inconnection withfilingswiththeSECandtheFERCandinconnection withtheissuanceofallsecurities.
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| yArepresentative ofErnst&,YoungLLPwillbepresentattheLILCOMeeting,shallhavetheopportunity tomakeastatement ifheorshedesirestodosoandwillbeavailable toanswerquestions byshareholders concerning thefinancial statements ofLILCO.~Theappointment ofauditorsisapprovedannuallybytheB'oardofDirectors andissubsequently submitted totheshareholders forratification.
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| ThedecisionoftheBoard'ofDirectors isbasedupontherecommendation oftheAuditCommittee oftheBoardofDirectors.
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| TheDirectorbiography portionofthisJointProxyStatement/Prospectus identifies themembersoftheAuditCommittee.
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| Inmakingitsrecommendation, theAuditCommittee reviewstheauditscopeforthecomingyear.ITheBoardofDirectors has,subjecttoratification byholdersoftheoutstanding sharesofLILCO'sCommonStock,appointed Ernst&,YoungLLPasindependent auditoisfortheperiodfromJanuary1,1997toMarch31,1998.Ratification requiresafavorable votebyamajorityofthevotes,castatameetingoftheholdersofsharesentitledtovoteontheproposal.
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| Abstentions andvotesnotcastbybrokersandnomineesarenotincluded.
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| Accordingly, thefollowing resolution, identified ontheproxycardasIt'em4,willbeproposedforratification bysuchshareholders attheLILCOMeeting:RESOLVED, thattheappointment ofErnst&YoungLLPbytheBoardofDirectors ofLongIslandLightingCompanyasindependent auditorstoauditLILCO'sfinancial statements fortheperiodfromJanuary1,1997toMarch31,1998andtoperformotherappropriate accounting
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| : services, isherebyratified.
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| TheBoardofDirectors ofLILCOrecommends avoteFORtheratification oftheappointment bytheBoardofDirectors ofErnst&.YoungLLPasindependent auditorsofLILCOfortheperiodfromJanuary1,1997toMarch31,1998.~<ITE<M5-APPROVAL" OFTHEANNUALSTOCKINCENTIVE PLANInApril1995theBoardofDirectors, upontherecommendation oftheCompensation andManagement Appraisal Committee, established theAnnualStockIncentive Planfortheofficergroup,basedonperformance achievedforeachcalendaryear.TheAnnualStockIncentive Planwasimplemented toensurethatLILCO'scompensation programremainscompetitive toattractandretainkeyexecutive talentand.rewardoutstanding contributions.
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| Allofficers, including theChiefExecutive Officer,havebeenselectedasparticipants intheAnnualStockIncentive Plan,andawardsaretobepaidinsharesofcommonstock,lessapplicable taxwithholdings, following thecloseoftheyear.Bymakingawardspayableinstock,officerperformance is,morecloselyalignedwithshareholder, interests.
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| TheAnnualStockIncentive Planis,designedtorewardcurrentperformance byproviding stockcompensation comparable tocertaincompetitive marketbenchmark levelsforcashincentives forsimilarpositions, whichwereprovidedbyMercer.TheAnnualStockIncentive Planiscurrently based'onthbachievement oftwoquantifiable objectives, improving cashflowandmaintaining orimproving tencriticalservicegoals.Ifthreshold levelsarenotachievedforeitherobjective, noincentive willbepaid.Thetargetincentive payment-theamountsthatwillbepaidiftpredetermined performance levelsareattainedforallprogramtargets-isdependent upontheexecutive's levelintheorganization.
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| Seventy-five percentofeachindividual's paymentisbasedonthelevelofachievement of in'terests ofLILCOorforanygleasonafterachangeincontrol.Thetransactions contemplated withBrooklynUnionand/orLIPAwillresultinachangeincontrolundertheContract.
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| TheContractalsoprovidesforvestedContractRetirement Benefits'commencing attheearlierofDr.Catacosinos'etirement ordeath,payablemonthlytoDr.Catacosinos andhiswifeasajointandsurvivorannuitywithaminimumguaranteed periodoftenyears.TheContractRetirement BenefitsinanyyearwillbereducedbymonthlybenefitspayableunderLILCO'sotherretirement plans.Thebenefitwillbebaseduponaformulathatconsiders hisageatretirement, hishighestannualsalary,thehighestbonushehasreceivedandtlfelengthofhisservicetoLILCOincluding serviceasaDirector, employeeorconsultant.
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| Thebenefitisalsosubjecttocertainannualcostoflivingadjustments.
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| : Assuming, forillustrative
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| : purposes, hisretirement atDecember31,1997,theamountoftheestimated retirement benefitpayableundertheContracttoDr.Catacosinos asofJanuary1,1998(assuming continuation ofhiscurrentsalary)wouldbeapproximately
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| $895,234.LILCOhasestablished truststoprovideforpaymentsofitsobligations undertheContract, thecostsofwhicharebornebyLILCO'sshareholders.
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| Notwithstanding thecreationofthetrusts,LILCOcontinues tobeprimarily liableforallamountspayabletoDr.Catacosinos andthetrustswill,makesuchpaymentstotheextentthatLILCOdoesnot.TheOfficershavealsoenteredintoinde'mnification agreements thataredescribed belowundertheheading"Transactions withManagement andOthers."NoDirectororOfficerorassociate ofany'irector orOfficerhasanyarrangement withanypersonwithrespecttoanyfutureemployment byLILCOor"itsaffiliates otherthanthosedescribed herein.raTRANSACTIONS WITHMANAGEMENT ANDOTHERSIndenrnification ofDirectors andOfficers:
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| Formanyyearspriorto1986,statutory.
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| provisions oftheNYBCLpermitted corporations, including LILCO,undercertaincircumstances inconnection withlitigation inwhichitsDirectors andOfficersweredefendants, toindemnify themfor,amongotherthings,judgments, amountspaidinsettlemcnt andreasonable expenses.
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| Toreimburse itwhenithasindemnified itsDirectors andOfficers, LILCObeganin1970,pursuanttostatutory authorization, topurchaseDirectorandOfficer("D&O")liability insurance ineachyear.D&Oliability insurance alsoprovidesdirectpaymenttoLILCO'sDirectors andOfficersundercertaincircumstances whenLILCOhasnotpreviously providedindemnification.
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| LILCOhasD&Oliability insurance whichithaspu'rchased fromAssociated Electric&GasInsurance ServicesLtd.("AEGIS"),EnergyInsurance Mutual("EIM"),ColumbiaCasuafty, Steadfast Insurance Company,A.C.E.Insurance CompanyandXLInsurance Company,all'withtheeffective dateofAugust26,1996.LILCOalsohasliability insurance effective July1,1996purchased fromAEGISandEIM,whichprovidesfiduciary liability coverageforLILCO,itsDirectors, Officersandemployees foranyallegedbreachoffiduciary dutyunderERISA.Thetotalannualpremiumfor,allthesecoverages was$1,599,300 in1996.TheLILCOBy-lawsprovideforthemandatory indemnification ofDirectors andOfficerstotheextentnotexpressly prohibited bytheNYBCL.Inaddition, theLILCOBy-lawsauthorize theBoardofDirectors tograntindemnity rightstoemployees andotheragentsofLILCO.Suchprovisions areeffective asfoallclaimsforindemnification, whethertheactsoromissions" givingrisetoaclaimforsuchindemnification occurredortheexpensesforwhichindemnity issoughtwereincurred, beforeoraftertheprovisions oftheLILCOBy-lawswereadopted.Oneoftheprovisions oftheLILCOBy-lawsauthorized theBoardofDirectors toenterintoindemnification agreements withanyofLILCO'sDirectors orOfficersextending rightstoindemnification andadvancement ofexpensestosuchpersontothefullestextentpermitted byapplicable law.LILCOhasenteredintosuchagreements, whicharedescribed undertheheading"Compensation PaidtoDirectors,"
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| witheachofitsDirectors andOfficers.
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| Pursuanttothetermsofthoseagreements andtheprov'isions oftheLILCOBy-laws,LILCOhasalsoestablished atrusttofundLILCO'sobligations undertheagreements.
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| FTheLILCOCertificate limitsthepersonalliability ofDirectors forcertainbreachesofdutyinsuchcapacitypursuanttoprovisions oftheNYBCL.TheLILCOCertificate doesnotbarlitigation againstDirectors butprovidesthatDirectors arestillrequiredtodefendthemselves inlitigation inwhichactsoromissions toactareallegedforwhichtheymightbeheldliable.Furthermore, theLILCOCertificate providesprotection toDirectors onlyanddoesnotaffecttheliability ofOfficersofLILCOforbreachesofthefiduciary dutiesofcareandloyalty.
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| 1Thefollowing tableshowstheprojected annualretirement benefitpayableonastraight-life annuitybasispursuanttoLILCO'sRetirement IncomePlantoeachoftheindividuals listedintheSummaryCompensation Tableatnormalretirement age.(whichisthelaterofage65orfiveyearsofservice),
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| assumingcontinltation ofemployment tonormalretirement dateattherateofplancompensation during1996:AnnualCreditedNormal'IRetircmc'nt ScndceasRetirement, Benefit(1) of12/31/96DateWilliamJ,Catacosinos
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| $146,64212years11monthsAprilI,1995(2)JamesT.Flynn.$66,11010years3monthsJanuary1,1999LeonardP.Novello.$73,8161year9monthsJanuaryI,2006EdwardJ.Youngling
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| .$135,80528years9monthsAugustI,2009AnthonyNozzolillo
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| ..,$132,68324years6monthsSeptember 1,2013(I)TheseRetirement IncomePlanbenefitsmaybelimitedatretirement bythemaximumbenefitlimitation underSection415orthemaximumcompensation limitation underSection401(a)(17) oftheInternalRevenueCode.Thebenclitsshownhavebeencalculated withoutthelimitations.
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| LILCOhascstablishcd theRetirement IncomeRestoration PlanofLongIslandLightingCompanytorestorequalified planbenefitswhichhavebeenreducedpursuanttotheCodeorwhichmaynotbeincludible inthecalculation ofbcncfitspursuanttoLILCO'sRetirement IncomePlan.Intheeventthattheretirement benefitsarereducedbyoperation ofcithcrSection415or401(a)(17) oftheInternalRevenueCode,LILCO'sRetirement IncomeRestoption Planwouldprovidepaymentofplanformulapension'enefitswhichexcccdthosepayablcundertheCode'smaximumlimitations.
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| For1996themaximumbenefitlimitsctbySection415andapplicable totheamountsshownabovewas$120,000.For1996themaximumcompensation limitsetbySection401(a)(17) andapplicable totheamountsshownabovewas$250,000.'For 1997theinaximumbenefitlimitsctbySection415is$125,000andthemaximumcompensation litnitsetbySection401(a)(17) andtobeutilizedforbenefitsaccruedin1997is$160,000.(2)Dr.Catacosinos'mployment agrccment, discussed below,providesf'rhiscontinued employment beyondhisnornlalretirement date,Agreements withErecu/ives/
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| LILCOhase'nteredintoindividual employment agreements witheachofitsOfficer's toprovidethemwithemployment securityandtominimizedistractions resulting frompersonaluncertainties andrisksofachangeincontrolofLILCO.Currently, theprincipal benefitsundertheseagreements,'
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| payableiftheOfficer's employment isterminated foranyreason(including voluntary resignation) withinthreeyearsofachange.incontrol(asdefinedintheseagreements),
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| including byvirtueofanacquisition ofLILCO'sassetsorstock,priortoDecember31,1999,are:(i)severance payequaltothreeyears'alary; (ii)accelerated vestingandpaymentofthevalueofsupplemental retirement benefitsatthetimeofachangeincontrol,whichareenhancedbythreeyearsofservice;and(iii)continuation oflife,medicalanddentalinsurance foraperiodofthreeyears.Thecostsassociated withthesearrangements willbebornebyLILCO'sshareholders.
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| Notwithstanding thecreationofatrusttosupportpaymentofi'bligations, LILCOisprimarily liableforthecompensation andretirement benefitspayabletotheOfficersandthetrustwillmakesuchpaymentsonlytotheextentthatLILCOdoesnot.Thetransactions contemplated withBrooklynUnionand/orLIPAwillresultInachangeincontrol(asdefinedintheseagreements) andentitleeachOfficertothebenefitspayableunderthetermsoftheemployment agreements IfsuchOfficer's employment isterminated foranyreason.LILCOhasalsoenteredintoindividual employment agreements withcertainofitsofficers(notincluding Dr.Catacosinos andMr.Flynn),effective July1,1997,pursuant"to whichsuchofficersareemployedforaoneyeartermandareentitledtoreceivearetention bonusequalto20%ofthegreaterofjobvalueorsalary,iftheyarestillemployedbyLILCOoritsaffiliafes attheendofsuchtermorare'erminated withoutcause(asdetermined bytheChiefExecutive Officer)priortotheexpiration ofsuchterm.Theseagreements havebeenenteredintotoinducesuchofficerstocontinuetheiremployment despitethesignificant proposedchangestoLILCOdescribed elsewhere inthisJointProxyStatement/Prospectus.
| |
| Underthetermsofanemployment contractdatedasofJanuary30,1984,asamended(the"Contract"
| |
| ),Dr.'Catacosinos hasagreedtoServeasCEOofLILCOuntilJanuary31,2002.TheContractprovidesforaflve-yearconsulting periodfollowing thetermination ofhisemployment (otherthan,exceptafterachangeInconfrol,forcause).Hisconsulting compensation willbe90%ofhisbaseannualsalaryathisretirement duringthefirsftwoyears,75%ofsuchsalaryduringthethirdandfourthyearsand50%ofsuchsalaryduringthefifthyear.TheContractalsoprovidesforsupplemental disability benefits.
| |
| Dr.Catacosinos'mployment undertheContractmaybetertninated byLILCOforcauseorforsuchotherreasonastheBoardofDirectors may,ingoodfaith,determine tobeinthebestinterests ofLILCOandbyDr.Catacosinos ifhedetermines ittobeinthebest Supplemental DeathandRetirement BenefitsPlatrtOfficersandcertainotherseniormanagement employees eligibletoparticipate inLILCO'sSupplemental DeathandRetirement BenefitsPla'n,areprovidedwithdeathbenefits, generally fundedbylifeinsurance, equaltofivetimestheplancompensation.
| |
| fortheChairman, CEO,President andCOOandthree,'times theplancompensation foreachotherOfficer."Plancompensation" isdefinedinthisplanasthehigIiestsalaryincluding anyincentive earnedpursuanttotheAnnualStockIncentive Plan.Priortoretirement, participants electeithertoreceivecontinued deathbenefitcoverageortoreceivemonthlyretirement
| |
| : benefits, apartiallump-sumdistribution, oracombination ofeach.Foraparticipant whoretiresonorafterage65andelectsthedeathbenefit,thedeathbenefitcoveragewillbecontinued uptofivetimesplancompensation fortheChairman, CEO,President andCOOanduptothreetimesplancompensation foreachOfficer.Foraparticipant whoretiresonorafterage65andelectsthemonthlyretirement incomebenefit,theannualretirement benefitspayableunderthe15-yearcertainoptionwillbe,fortheChairman, CEO,President andCOO,25%of'plancompensation and,foreachotherOfficer,15%ofsuch'Officer's plancompensation, withotheroptionsavailable tomakepaymentonanactuarially equivalent basisthroughalifetimeannuity,ajointand,survivor annuityoranincreasing incomeannuity.Retirement benefitsunderthisplanarenotavailable toparticipants whoretirepriortoage60.Aparticipant willvestupontheearlierofattainment ofage60withtenyearsofserviceoruponattainment ofhisorhernormalretirement date(i.e.,age65).Ifavested,participant retirespriortoage'65,reducedbenefitsarepayable.'he projected valueoftheannualretiremeht benefitspayableundertheSupplemental DeathandRetirement BenefitsPlanutilizing the15-yearcertainretirement incomepaymentelectionforeachoftheindividuals listedintheSummaryCompensation Tableatnormalretirement age,65,baseduponcompensation ineffectfor1996,areasfollows:Dr.Catacosinos,
| |
| $196,753;Mr.Flynn,$97,639;Mr.Novello,$41,804;Mr.Youngling,
| |
| $30,943;andMr.Nozzolillo,
| |
| $30,251.ThetermsofDr.Catacosinos'mployment agreement, discussed below,provideforhiscontinued employment beyondnormalretirement age.Inaddition, Dr.Catacosinos hasmadean,assignment ofhisrightstodeathbenefitsandtherefore willnotreceivethemonthlyretirement benefitsunderthisplan.LILCOrecognizes thecostofthesebenefits, whicharebornebyLILCO'sshareholders, asanexpenseonitsincomestatement's foreachyear.LILCOhasalsoestablished atrusttoprovideforpaymentsofitsobligations totheparticipants intheSupplemental DeathandRetirement BenefitsPlan.Notwithstanding thecreationofthetrust,LILCOcontinues tobeprimarily liableforthedeathorretirement benefitspayabletotheparticipants andiscurrently makingsuchpaymentstosuchretiredparticipants.
| |
| 'IRetirement l>icomePlarr:Generally, allLILCOemployees (exceptcertainleased'nd part-time employees) areeligibleforinclusion intheRetirement, Inc'omePlanuponcompletion ofoneyearofemployment withLILCO.Aparticipant will'vest uponcompletion offiveyearsofservice".
| |
| Thisplaniscurrently noncontributory andprovidesfixed-dollar pensionbenelits.
| |
| TheRetirement IncomePlanusesacareeraveragepayformulawhichprovidesacreditforeachyearofparticipation intheretirement plan.ForservicebeforeJanuary1,1992,pensionbenefitsaredetermined basedonthegreateroftheaccruedbenefitasofDecember31,1991,orbymultiplying amovingfive-year averageofplancompensation, nottoexceedtheJanuary1,1992salary,byacertainpercentage determined byye'arsofparticipation intheretirement planatDecember31,1991.ForserviceafterJanuary1,1992,pensionbenefitsareequalto2%of"plancomperisation" throughage49and2iA%thereafter.
| |
| "Plancompensation" isdefinedinthisplanasthebaserateofpayineffectonJanuary1ofeachyearandmaydifferfromtheamountsreportedundertheheading"Salary"intheSummaryCompensation Table.Anydifference isprimarily attributable tothetimingofannualsalaryincreases forthenamedexecutive officerswhichimpactstheamountpaidtosuchofficerandreportedforagivenyear.
| |
| COMPENSATION PAIDTOEXECUTIVE OFFICERSSummaryCompensa/ion Table:,.Thefollowing tableillustrates thecompensation paid,byLILCOduringthepastthreeyearstoeachofitsmosthighlycompensated Executive Officers:
| |
| AnnualCompensation LongTermCompensation NameandPrincipal PositionYearSalary($)(1)BonusOtherAnnual~Restricted Stock($)(2)Compensation
| |
| ($)Award(s)($)Payouts-Options/LTIPAllOtherSARs(¹)Payouts($)Compensation
| |
| ($)(3)IviltiamJ.Caiacosinos-CEOJamesT.Flynn-COOandPresident LeonardP.Novello-ScniorVicePresident andGeneralCounselEdwardJ.Youngling-SeniorVicePresident Engineering andConstruction 1996199519941996199519941996199519941996,19951994580,413(4) 587,976(4) 579,654(4) 263,364255,500235,178236,186176,250(5) n/a172,358172,000,169,512153,2030090,5540033,6930034,28500n/a*n/an/an/an/an/an/an/a,n/a018,65315,18412,3045,8003,7252,1161,410883n/a766650591AnthonyNozzolillo 1996SeniorVicePresident
| |
| -1995FinanceandChief1994Financial Officeran/a-NotApplicable.
| |
| 170,331169,083157,67831,67200n/an/an/a574487423rotestoSummaryCompensation Table;*(1)LILCOhasinplacea401(k)CapitalAccumulation Plan,whichqualifies forfavorable taxtreatment undertheInternalRevenueCodeof1986,asamended.Thisplanisdesignedtoprovideforsalaryreduction contributions byparticipants underSection401(k)oftheInternalRevenueCodeof1986,asamendedthatpermitemployees todeferaportionoftheircurrentcompensation andtherefore aportionoftheircurrentfederaland,inmostinstances, stateandlocalincometaxes.AlthoughthisplanallowsLILCOtomakematchingcontributions tothesedeferredamounts,nosuchmatchingcontributions havebeenmadetodate.TheamountsshownforannualsalaryintheSummaryCompensation Tableforeachindividual officerincludeamountsdeferredbythoseindividuals intothisplan.(2)Represents thedollarvalueofLILCOCommonStockawardsundertheAnnualStockIncentive Plan,including applicable taxwithholdings.
| |
| ThenetamountoftheawardswerepaidinsharesofLILCOCommonStockin1996asfollows:Dr.Catacosinos
| |
| -5,407shares,Mr.Flynn-3,196shares,Mr.Novello-1,189shares,Mr.Youngling
| |
| -1,210shares,andMr.Nozzolillo
| |
| -1,117shares.(3)LILCOhasanoncontributory Supplemental DeathandRetirement BenefitsPlanforitsOfficersandcertainotherseniormanagement employees.
| |
| Currently, deathbenefitsfortheChairman, CEO,President andChiefOperating Officer("COO")arefivetimestheirplancompensation and,foreachotherOfficer,threetimestheirplancompensation.
| |
| Compensation underthisplanisdefinedasthehighestsalaryincluding anyincentive earnedpursuanttotheAnnualStockIncentive Plan.Thecostoflifeinsurance, paidbyLILCOforcoverageunderthisplan,isincludedinAllOtherCompensation foreachoftheindividuals listed.Foreachyearreflected intheCompensation Table,insurance coverageforthesedeathbenefitswasprovidedbysplit-dollar lifeinsurance policiesonthelifeofeachplanparticipant.
| |
| Theamountshownforeachparticipant represents theamountallocated tosuchparticipant forincometaxpurposes.
| |
| (4)AportionofDr.Catacosinos'alary ineachoftheseyearshasbeendeferredathisrequestandisreflected intheamountsshown.5)LeonardP.NovelloassumeddutiesasGeneralCounseleffective April1,1995.Priortothatdate,Mr.NovellowasGeneralCounselforthepublicaccounting firmofKPMGPeatMarwick; STOCKPERFORMANCE GRAPHSet,forthbelowisagraphcomparing thecumulative'eturn ofLILCO,theStandard&Poor's500Composite StockIndex("S&P500")andtheS&PElectricUtilities Index("S&PELEC")overthepastfive-yearperiod.Thegraphassumesa$100initialin0estment onDecember31,1991,andareinvestment ofdividends inLILCOandeachofthecompariies reportedintheindices.$250~uLCOS&P500S&PELEC$200$150$100$140$135$50$01991'9921993199419951996 Conimon'toc/c oulstanding onsuchdate.Directors andexecutive officersofBrooklynUnionhaveindicated theirintention tovotetheirsharesofBrooklynUnionCommonStockinfavorofadoptionoftheBrooklynUnion/LILCO Agreement andtheKeySpanExchangeAgreement.
| |
| 1See"The'Brooklyn Unio&ILCO Combination
| |
| -Potential
| |
| 'Conflicts ofInterestofCertainPersonsiritheCoiqbinatibn andtheLIPATransaction."
| |
| 'IVotingandRevocation ofProxies.SharesofBrooklynUnionCommonStockrepresented byaproxyproperlysignedandreceivedatorpriortotheBrooklynUnionMeeting,unlesssubsequently revoked,willbevotedinaccordance with,theinstructions thereon.Ifaproxyissignedandreturnedwithoutindicating anyvotinginstructions, thesharesofBrooklynUnionCommonStockrepresented bytheproxywillbevotedFORadoptionoftheBrooklynUnion/LILCO Agreement andFORadoptionoftheKeySpanExchangeAgreement.
| |
| BrooklynUnionproxyholdersmayintheirdiscretion votesharesvotedinfavorofadoptionoftheBrooklynUnion/LILCO Agreement ortheKeySpanExchangeAgreement toadjourntheBrooklynUnionMeetingtosolicitadditional proxiesinfavorofsuchproposal.
| |
| Anyproxygivenpursuanttothissolicitation mayberevokedbythepersongivingitatanytimebeforetheproxyisvotedbythefilingofaninstrument revokingitorofadulyexecutedproxybearingalaterdatewiththeSecretary ofBrooklynUnion,priortoorattheBrooklynUnionMeeting,orbyvotinginpersonattheBrooklynUnionMeeting.Allwrittennoticesofrevocation andothercommunications withrespecttorevocation ofproxiesshouldbeaddressed asfollows:TheBrooklynUnionGasCompany,OneMetroTech Center,Brooklyn, NewYork11201-3851, Attention:
| |
| Secretary.
| |
| Attendance attheBrooklynUnionMeetingwillnotinandofitselfconstitute revocation ofaproxy.SharesofBrooklynUnionCommonStockheldinthenamesofthetrusteesunderBrooklynUnion'sEmployeeSavingsPlanmaybevotedbysuchtrusteesupontheinstructions ofparticipants insuchPlan,orintheabsencethereof,assuchtrusteesdeemappropriate.
| |
| TheBrooklynUnionBoardisnotcurrently awareofanybusinesstobeacteduponattheBrooklynUnionMeetingotherthanasdescribed herein.If,however,othermattersareproperlybroughtbeforetheBrooklynUnionMeeting,thepersonsappointed asproxieswillhavediscretion tovoteoractthereonaccording totheirbestjudgment.
| |
| Shareholders ofBrooklynUnionwillnotbeentitledtopresentanymattersforconsideration attheBrooklynUnionMeeting.Confidential Voting.BrooklynUnionhasadoptedapolicytotheeffectthatallproxy(votinginstruction) cards,ballotsandvotetabulations whichidentifytheparticular voteofaBrooklynUnionshareholder aretobekeptsecretfromBrooklynUnion,itsdirectors, officersandemployees.
| |
| Accordingly, proxycardsarereturnedinenvelopes addressed tothetabulator, Georgeson
| |
| &CompanyInc.,WallStreetStation,P.O.Box1102,NewYork,NewYork10269-0667, whichreceivesandtabulates theproxiesandisindependent ofBrooklynUnion.Thefinaltabulation isinspected byaninspector(s) ofelectionwhoalsoisindependent ofBrooklynUnion,itsdirectors, officersandemployees.
| |
| Theidentityandvoteofanyshareholder willbedisclosed neithertoBrooklynUnion,itsdirectors, officersoremployees, nortoanythirdpartyexcept(i)toallowtheindependent inspector(s) ofelectiontocertifytheresultsofthevotetoBrooklynUnion,itsdirectors, officersandemployees; (ii)asnecessary tomeetapplicable legalrequirements andtoassertordefendclaimsfororagainstBrooklynUnion;or(iii)intheeventashareholder hasmadeawrittencommentonsuchformofproxy.Solicitation ofProxies.Inadditiontosolicitation bymail,directors, officersandemployees ofBrooklynUnion,whowillnotbespecifically compensated forsuchservices, maysolicitproxiesfromtheshareholders ofrooklynUnion,personally orbytelephone, telecopyortelegramorotherformsofcommunication.
| |
| Brokerage ouses,nominees, fiduciaries andothercustodians willberequested toforwardsoliciting materials tobeneficial 45 ownersandwillbereimbursed fortheirreasonable expensesincurredinsendingproxymatcnaistobeneficial owners.Inaddition, BrooklynUnionhasretainedGeorgeson EcCompanyInc.toassistinthesolicitation ofproxiesfromjtsshareholders.
| |
| ThefeestobepaidtosuchfirmforsuchservicesbyBrooklynUnionarenotexpectedtoexceed$25,000,plusreasonable out-of-pocket costsandexpenses.
| |
| BrooklynUnionwillbearitsownexpensesinconnection withthesolicitation ofproxiesfortheBrooklynUnionMeeting,exceptthateachofBrooklynUnionandLILCOwillpayone-halfofthecostsandexpensesincurredinconnection withprintingthisJointProxyStatement/Prospectus andone-halfofallfilingfees.Forinformation abouttheLILCOMeeting,see"Selected Information Concerning LILCO-TheLILCOMeeting."
| |
| 46 REGULATORY MATTERS.I'It4Setforthbelowisasummaryofthematerialregulatory requirements, affecting the,Combination.
| |
| Althoughthecompanies
| |
| /tavenotyetjiledfortheapprovalofalloftheagenciesdiscussed, itisanticipated that.allregulatory approvals ivill,have beenreceivednopatertitantheendof1998.Forinformation concerning certainIRSrulings,see"FederalIncomeTax-Considerations
| |
| -TaxRulingsRequested forLIPATransaction."
| |
| StateApprovals andRelatedMattersTheutilityoperations ofbothLILCOandBrooklynUnionaresubjecttothecomprehensive regulatory junsdiction ofthePSC,whichmustapprovetheCombination contemplated inthe'Brooklyn,Union/LILCO Agre'ement.
| |
| OnMarch14,1997,LILCOandBrooklynUnion'filed ajointpetitionrequesting'pproval ofthePSCunderSection70oftheNewYorkPublicServiceLawtoalloweachofthemtobecomesiibsidiaries oftheHoldingCompanythrough'the Combination.
| |
| Section70ofthePublicService'LawprovidestliatthePSC'sconse'rit totheCombination maynotbegiven"unlessthere'isa'showingthatthe'exchanges areinthepublicinterest.
| |
| A'spartofit'sreview,thePSC'mayconsidersuchmattersastheeffectoftheCombination onthe'ability of,LILCOandBrooklynUnion'tocontinuetoprovidesafeandadequateserviceatjustandreasonable rates,including tlieimpact'on custome'r service,'rates andthefinancial.
| |
| integrity ofBrooklyn'Union andLILCO,aswellastheimpactonthecompetitive'environment foreachofthecompanies.
| |
| Inthe'joint
| |
| : petition, LILCOandBrooklynUnioneach'proposed toreflectanticipated costsavin'gsresulting fromtheirbusinesscombination intheretailgasandelectricratesofbothutilities, andtohavethePSCconfirmoradoption'gterinrateplansforthegasandelectricopeiations ofLILCOandthegasoperations ofBrooklynUnion.Byamendment'to thejointpetitionfiledonMay16,1997,inlightofthependencyoftheLIPATransaction which,ifconsummated, willresultinLIPA,whichwillnotberegulated bythePSC,beingthesupplierofretailelectricservicetoconsumers in;LILCO's serviceterritory, QILCOhasofferedto,extend thesuspensioil periodwithinwhichthe,PSCmustruleonLILCO'slong-term electricrateplan, untilDecember3f,)997.Assumingtherequisite regulatory approvals,,are
| |
| : obtained, theutilityoperations, of,bothLILCOandBrooklynUnionwillremainsubjecttoregulation bythePSC.The'olding Company'-will bea,"public, utility,holdingcompany,"
| |
| under,thePublicUtilityHoldingCompany,A'ct of1935(the"Holding, Company'Act".),
| |
| discussed jngreaterdetailbelow,butwillnotbesubjecttothedirectregulation ofthePSC.f-flTheBrooklyn, UnionandLILCOjointpetitiontothePSConMarch14,1997alsos'oughtto,amendthePSCOrder datedSeptember 25,1996issuedinconnection withtheKeySpanholdingcompanyrestructuring soasto'remove orrelaxcertainrestrictions thatmaybeapplicable aftertheCombination.
| |
| ThePSChasnotacteduponsuchpetitiott"as ofthedateofthisJointProxyStatement/Prospectus, andthere'c'an benoassurance thatany'orallofthereliefrequested in)hepetitionwillbegranted.ThePSChasnojurisdiction overthe'nierger ofLILCOwithasubsidiary ofLIPAaspartof'theLIPATransaction.
| |
| However,itisanticipated thatLILCOandtheHoldipgCompanywillseekPSCapprovalforthetransferoftheTransferred Assets,"as wellasthedebtthatLIPAwillnotbeassumin'g, tooneormoresubsidiaries ofthe'Holding Company.A.ftertheLIPAtransaction, thePSCwillhavecontinuing'jurisdiction overtheTransferee Subsidiary'hat willbeconducting thegasdistribution business" previously conducted byLILCO,"andmayhavejurisdiction overtheTransferee Subsidiary thafownsthenon-nuclear generating assetspreviously ownedbyLIL'CO,totheextentthatsuchsubsidiaiy engagesin'etailtransaction's.
| |
| !PublicUtilityHoldingCompanyActof1935,AsiaresultoftheCombination, theHoldingCompanywillownallofthe,commonstock.ofbothLILCO(ifthe<<LIPATransaction isnotconsummated) andBrooklynUnionandwilltherefore beapublicutilityholdingcompanyundertheHoldingCompany,Act, subjecttothejurisdiction oftheSEC."Additionally, iftheLIPATransaction isconsummated, theHoldingCompanywillownallofBrooklynUnionCommonStockandaTransferee Subsidiary thatwillconductthegasdistribution businessnowbeingconducted byLILCO.ccordingly, theHoldingCompanymustapplyfor-andobtaintheapprovaloftheSECundertheHoldingompanyAct.However,theHoldingCompanywillfileanexemption statement withtheSECtoexemptitself147 andeachofitssubsidiaries frommostoftheprovisions oftheHoldingCompanyAct.Thebasisfortheexemption isthattheHoldingCompany,LILCO(ortheTransferee Subsidiary thatwillsucceedtothegasdistribution businesscurrently conducted by'LILCO)andBrooklynUnionare"predominantly intrastate incharacter,"
| |
| inthateachof'themisorganized, andLILCO(orthesuccessor subsidiary) andBrooklynUnioneachcarryontheirrespective businesses substantially, inNewYorkState.TheSEChasauthority undertheHoldingCompanyActtochallenge theavailability ofsuchexemption totheHoldingCompany..:trFederalPowerActtIILILCOissubjecttotheregula'tory jurisdiction oftheFederalEnergyRegulatory Commission
| |
| ("FERC")undertheFederalPowerAct(the"FPA")withrespecttocertainwholesale electricsales'and transmission services.
| |
| Section203oftheFPAprovidesthatnopublicutilityshallsellorotherwise dispose'of itsjurisdictional facilities or,directlyorindire'ctly, mergeorconsolidate suchfacilities withthoseofany'otherpersonoracquireanysecurityofanyotherpublicutilitywithouthayingfirstobtainedauthorization'from theFERC.Accor'dingly',
| |
| theapprovaloftheFERCisrequiredtoconsummate theCombination, andis,similarly, requiredto"approvethetransferofLILCO'sFERC-jurisdictional assetstoLIPAinconnection withtheLIPATransaction.
| |
| PursuanttoSection203oftheFPA,theFERChastheauthority toapprovetheCombination andtheBrooklynUnion/LILCO Agreement asbeingconsistent withthepublicinterest.
| |
| Inaddition, therates,terms,andconditions ofservicethatwillbeprovidedtoI.IPAunderthePowerSupplyAgreement (asdefinedherein)willrequireFERCapprovalunderSection205or'206oftheFPAaswillanyotherHoldingCompanyservicethatisdeemedtobeFERCjurisdictional.
| |
| kAntitrust Considerations rUndertheHart-Scott-Rodino Antitrust Improvements "A'ctof1976,asamended(the"HSRAct"),andtherules,andregulations promulgated thereunder, theCombination maynotbeconsummated untiltherequisite notifications andreportformshavebeenfiledwiththeAntitrust DivisionoftheDepartment ofJustice(the"Antitrust Division"
| |
| )andtheFederalTradeCommission'(the "Fl'C")andthespecified HSRActwaitinperiodrequirements have'been satisfied.
| |
| TheHSRActwaitingperiodis30daysfromthedatebothpartieshavefiledtheirnotification andreportformunlessterminated earlierorextendedbytheFTCortheAntitrust Divisionissuingarequestforadditional information ordocumentary materials.
| |
| Ifsuchrequestismade,thewaitingperiodwillexpire,unlessterminated earlier,at11:S9p.m.,NewYorkCitytime,onthetwentieth calendardayafterbothpartieshavesubstantially compliedwithsuchrequest.Thereafter, thewaitingperiodmaybeextendedonlybycourtorderorwiththeparties'onsent.
| |
| Theexpiration orearliertermination oftheHSRActwaitingperioddoesnotprecludetheAntitru'st DivisionortheFTCfromchallenging theCombination onantitrust groundseitherbeforeorafterconsummation oftheCombination.
| |
| Privatepartiesandstateattorneys generalmayalsobringlegalactionunderfederalorstateantitrust lawsundercertaincircumstances.
| |
| 1IftheCombination isnotconsummated within12monthsaftertheexpiration orearliertermination oftheHSRActwaitingperiod,LILCOandBrooklynUnionwouldberequi'red tosubmitnewfilingstotheAntitrust DivisionandtheFTC,andanewHSRActwaitingperiodwouldhavetoexpireorbeearlierterminated beforetheCombination couldbeconsummated, LILCOandBrooklynUnionintendtofiletheirpremerger notification andreportformspursuanttotheHSRActatsuchtimeastheybelievethereisahighdegreeofcertainty thattheCombination willbeconsummated within12monthsaftertheexpiration orearliertermination ofthewaitingperiodundertheHSRAct.TheFTCandtheAntitrust Divisionfrequently scrutinize thelegalityundertheantitrust lawsoftransactions suchastheproposedtransaction.
| |
| NeitherLILCOnorBrooklynUnionbelievesthattheCombination willviolatefederalantitrust laws.Nevertheless; therecanbenoassurance thatachallenge totheproposedtransa'ction w'illnotbemadeonantitrust groundsor,ifsuchchallenge ismade,whattheresultwouldbe.ItThepartiesintendtoseekconfirmation fromthestaffoftheFTCandtheAntitrust Divisionthatconsummation oftheLIPATransaction isexemptunderthe'SRAct.Ifsuchconfirmation cannotbeobtaineappropriate filingswillbemadewithsuchagencies.
| |
| 48 tAtomicEnergyActOperation ofNineMilePoint2,anuclear"power plantinwhichLILCOhasan18%ownership
| |
| : interest, issubjecttoregulation bytheNuclearRegulatory Commission
| |
| ("NRC").TheAtomicEnergyActof'1954(the"AtomicEnergyAct")providesthatsuchanownership interestmaynotbetransferred
| |
| 'or'nanymannerdisposedof,directlyorindirectly, toanypersonthroughtransferofcontrolunlesstheNRCfindsthatsuchtransferisinaccordance withtheAtomicEnergyActand'consents tothetransfer.
| |
| PursuanttotheAtomicEnergyActandtheLIPAAgreement, LILCOwillseekapprovalfromtheNRCasnecessary.
| |
| PublicAuthorities ControlBoardApprovalTheLIPATransaction issubjecttotheapproval"ofthePACB.ThePACB,createdpursuanttoNewYorkStatePublicAuthorities Law("PAL"),consistsoffivepersonsappointed bythegovernor, ofwhichoneisupontherecommendation ofthemajorityleaderoftheNewYorkStateSenate,oneupontherecommendation'of theSpeakeroftheNewYorkStateAssembly, oneupontherecommendation oftheminorityleaderoftheNewYorkStateSenateandoneupontherecommendation oftheminorityleaderoftheNewYorkStateAssembly.
| |
| Themembersappointed bythegovernorupontherecommendation oftheminorityleaderoftheSenateandtheminorityleaderoftheAssemblyarenon-voting members.Theunanimous voteofthevotingmembersoftheboardisrequiredtoauthorize actionbythePACB.PursuanttoPAL,LIPAmaynotundertake anyprojectwithouttheapprovalofthePACB."Project" isdefinedtomeananactionundertaken byLIPAthat:(i)causesLIPAtoissuebonds,notesorotherobligations, orsharesinanysubsidiary corporation, or(ii)significantly modifiestheuseofanassetvaluedatmorethan,one'illion dollarsownedbyLIPAorinvolvesthesale,leaseorotherdisposition ofsuchanasset,or(iii)commitsLIPAtoacontractoragreement withatotalconsideration ofgreaterthanonemilliondollarsanddoesnotinvolvethedaytodayoperations ofLIPA.ThePACBshallonlyapproveaprojectproposedbyLIPAuponitsdetermination that:(1)theprojectisfinancially feasibleasthestandardisdefinedinPAL;articleone-A;(2)theprojectdoesnotmaterially adversely affectoverallrealpropertytaxesintheservicearea;(3)theprojectisanticipated toresultgenerally in'lowerutilityratesinthe'service area;nd(4)theprojectwillnotmaterially adversely affectoverallrealpropertytaxesorutilityratesinother'areas ofhestateofNewYork.lGeneralLILCOandBrooklynUnionpossessmunicipal franchises andenvironmental permitsandlicensesthatmay'eedtoberenewedorreplacedasaresultoftheCombination.
| |
| Thecompanies donotanticipate anydifficulties atthepresenttimeinobtaining suchrenewalsorreplacements.
| |
| UndertheBrooklynUnion/LILCO Agreement, LILCOandBrooklynUnionhaveagreedtousereasonable effortstoobtainallnecessary materialpermits,licenses, franchises andothergovernmental authorizations neededtoconsummate oreffectthetransactions contemplated bytheBrooklynUnion/LILCO Agreement.
| |
| Inaddition, undertheLIPAAgreement, eachofthepartiestheretohasagreedtosimilarly usereasonable effortstoobtainallsuchrequiredauthorizations andapprovals neededtoconsummate oreffectthetransactions contemplated bytheLIPAAgreement.
| |
| Variouspartiesmayseekintervention intheproceedings associated withtheregulatory approvalprocessinanattempttoopposetheCombination andtheLIPATransaction ortohaveconditions imposeduponthereceiptofthenecessary approvals.
| |
| AlthoughLILCOandBrooklynUnionbelievethattheywillreceivetherequisite regulatory approvals fortheCombination andtheLIPATransaction, thetimingoftheirreceiptcannotbedetermined.
| |
| Itisacondition totheconsummation oftheCombination thatfinalordersapproving theCombination beobtainedfromthevariousfederalandstatecommissions described above,including (iftheLIPATransaction willnotbeconsummated substantially contemporaneously withtheCombination) thePSC'sfinalorderapproving along-term rateplan,ontermsandconditions (x)whichwouldnothave,orwouldnotbereasonably likelytohave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects oftheHoldingCompanyanditsprospective subsidiaries takenasahole,or(y)whichwouldnotbematerially inconsistent withtheagreements ofthepartiescontained intherooklynUnion/LILCO Agreement.
| |
| Forpurposesoftheabove-referenced condition withrespecttothePSC's49 finalorder,theprospects oftheHoldingCompanyanditssubsidiaries willmeanthecombination oftheresultsanticipated bycertainregulated earningsforecasts ofBrooklynUnionandLILCOwhichthepartiespreviously providedtoeachother.Itisacondition totheconsummation oftheLIPATransaction thatfinalordersapproving theLIPATransaction beobtainedfromthevariousfederalandstatecommissions described aboveontermsandconditions (i)whichwouldnothave,,orwouldnotbereasonably likelytohave,amaterialadverseeffectonthebusiness, assets,financial condition orresultsofoperations, oftheHoldingCompany,(ii)whichwouldnotbematerially inconsistent withtheagreements ofthepartiescontained intheLIPAAgreemcnt orintheotherBasicAgreements (asdefinedherein)or(iii)whichwouldnothave,orwouldnotbereasonably likelytohave,amaterialadverseeffectontheRetainedAssets(asdefinedherein)ortheproperties,
| |
| : business, operations, financial conditions orprospects ofthebusinessrelatingtotheRetainedAssetstakenasawholeoramaterialadversedeclineintheelectricratesavingsprojected toberealizedaftertheconsummation oftheLIPATransaction.
| |
| AtanytimepriortotheEffective Time,tothe'extent permitted byapplicable law,theconditions toBrooklynUnion'sorLILCO'sobligations toconsummate theCombination maybewaivedbytheparties.Anydetermination towaiveacondition woulddependuponthefactsandcircumstances existingatthetimeofsuchwaiverandwouldbemadebythewaivingparty'sBoardofDirectors, exercising itsfiduciary dutiestosuchpartyanditsshareholders.
| |
| LILCOandBrooklynUnionhavealsoagreedundertheBrooklynUnion/LILCO Agreement tonotifyeachotherofanychangesintheirapprovedratesorcharges(otherthanpass-through fuelandgasratesorcharges),
| |
| standards ofserviceoraccounting, andnottomakeanyfilingtochangeitsratesonfilewiththePSCthatwouldhaveamaterialadverseeffectonthebenefitsassociated withtheCombination.
| |
| TheHoldingCompanyandLILCO'have agreedundertheLIPAAgreement tonotifyLIPAorLIPASubofanychangesintheirratesorcharges(otherthanpass-through fuelratesorcharges,butincluding, withoutlimitation, gasratesorcharges),
| |
| standards ofserviceoraccounting.
| |
| LILCOhasalsoagreedundertheLIPAAgreement thatitwillnot,withouttheconsentofLIPA,fileorprosecute anyratecaseorothernonroutine proceeding beforethePSCor7ERCoranyappealtherefrom, exceptforcasesorproceedings (i)relatingsolelytopass-through fuelorgasratesorcharges,(ii)requiredtobemadebyorderofthePSCorFERC,(iii)relatingsolelytotheTransferred Assets(iv)involving commercial orcontractual.
| |
| disputeswhicharerequiredtoberesolvedthrough'uch proceedings or(v)amatterthatLILCOreasonably believesthreatens thefinancial viability ofLILCO.LILCOisrequiredtoprovidereasonable priornotice(including, uponrequestofLIPA,copiesofdraftdocumentation) ofanyproposedfilingwiththePSCorFERC.50 tUNAUDITED PROFORMACONSOLIDATED CONDENSED FINANCIAL INFORMATION BROOKLYNUNION/LILCO COMBINATION ANDLIPATRANSACTION (PVRCHASE)
| |
| Thefollowing unaudited proformafinancial information reflectsadjustments tothehistorical financial statements ofLILCOtogiveeffecttotheproposedtransferofLILCO'sgasandgeneration businesstosubsidiaries oftheHoldingCompany,theproposedstockacquisition ofLILCObyawhollyownedsubsidiary ofLIPAandtheproposedCombination withBrooklynUnioninaccordance withtheCombination.
| |
| Theunaudited proform'a."consolidated condensed balance'heet,'at March31,1997giveseffecttotheproposedLIPATransaction andtheCombination asiftheyhadoccurredatMarch31,1997.Theunaudited proformaconsolidated condensed statement ofincomeforthetwelvemonthperiodendedMarch31,1997giveseffecttotheproposedLIPATransaction andtheCombination asiftheyhadoccurredatApril1,1996.Thesestatements arepreparedonthebasisofaccounting fortheCombination underthepurchasemethodofaccounting andarebasedontheassumptions setforthinthenotesthereto.InApril1997LILCOchangeditsyear-endfromDecember31toMarch31.Thefollowing proformafinancial information hasbeenpreparedfrom,andshouldbereadinconjunction
| |
| ,with,theLIPAAgreement (AnnexD),andthehistorical consolidated financial statements andrelatednotestheretoofBrooklynUnionandLILCO,incorporated byreference herein.Thefollowing information is,notnecessarily indicative ofthefinancial positionoroperating resultsthatwouldhaveoccurredhadtheproposedLIPATransaction andtheCombination beenconsummated onthedate,oratthebeginning oftheperiod,forwhichtheproposedLIPATransaction andtheCombination arebeinggiveneffectnorisitnecessarily indicative offuture,operating resultsorfinancial position.
| |
| K51
| |
| 'HOLDINGCOMPANYUNAUDITED PROFORMACONSOL'IDATED CONDENSED BALANCESHEETMarch31,1997gnMillions)
| |
| BrooklynUnion/LILCO, LIPATransaction
| |
| 'AsA'djusted Combination Brooklyn"LILCO"SaletoProForma'ILCO'UnionProForma(Historical)
| |
| LIPA(I)Adjustments, AsAdjusted(Historical),
| |
| Adjustments HoldingCompanyFroFotmoASSETSPropertyUtilityPlantElectricGasCommonConstruction workinprogress................
| |
| Nuclearfuelinprocessandinreactor..........
| |
| Less-Accumulated depreciation andamortization.
| |
| Gasexploration andproduction, atcost...........
| |
| Less-Accumulated depletion
| |
| .....'..........'otal Property.'ostInExcessofNetAssets'Acquired, net.'.'....Regulatory AssetsIBasefinancial component (lessaccumulated amortization of$782.5)..........
| |
| ~."~~..~"~Ratemoderation component
| |
| ......'......"........
| |
| Shorehampost-settlement costs..................
| |
| Regulatory taxasset.Postretirement bcncfitsotherthanpensions........
| |
| Other.TotalRegulatory Assets....................
| |
| Nonutility PropertyandOtherInvestments
| |
| .....CurrentAssetsCashandcashequivalents......................
| |
| Deferredtaxasset.Accountsreceivable andaccruedrevenues........OtherCurrentAssetsTotalCurrentAssets.DeferredCharges.Contractual receivable fromLIPA.............
| |
| TotalAssets(1,759.1) 3.7M.O.(854.7)2,034.44'3,256;3'09.5.1996.31,767.2357.7456.07,243.018.93,256.3409.5996.31,767.2334.26,763.514.164.593.3489.9162.5810.277.6$11,849.793.3327.51.3422.152.5$9,286.6$3,900.2$2,821.2',171.'2263.3,108.952.415.5'5.5(300.7)(2)
| |
| (300.7)2,432.3(3)119.0(4)19.4(2)2,570.7281.3(2)$2,551.3$1,079.01,17I'.2263.3565(904A)rI665.tjo57.0121.8178.84.82,496.8119.0181.8161.22,958.825.1281.3$5,114.4'4tv4156.9If9*'74.1(5)74.152.5422.1474.6120.9$2,493.8(74.1)(5)
| |
| $308.0J$-;.$-'1,805.9III)44(440.1)563.9'188.3),.
| |
| >'1,741.4 308.0(6)$1,079.02,977.1263.356.5(1,344.5) 563.9(188.3)~r3,407.0308.0vtvJ74.157.0)2L8252.9I181.8583.33,433.471.9281.357,916.2$2,432.3(3)(75.0)(15) 75,0(15)2,432.3$2,457.33,459.8339.16,256.2529.7$2,549.14,457.0702.17.708.2562.8230.2122.751.1332.665.5613.9188.2399.0(4)399.02,420.52,299.0(280.0)(4) 110.420.52,530.92,319.5(280.0)433.9(7.0)$11,849.7$9,286.6$2,551.3nauditedProFormaConsolidated Seeaccompanying NotestoUCAPITALIZATION ANDLIABILITIES Capitalization CommonShareholders'quity..............
| |
| Long-term debtPreferred stockTotalCapitalization
| |
| .Regulatory Liabilities CurrentLiabilities Accountspayablcandaccruedexpenses......Accruedtaxes(including federaltncomctax)..Othercurrentliabilities...
| |
| TotalCurrentLiabilities................
| |
| DeferredCreditsDeferredfederalincometax................
| |
| OtherTotalDeferredCredits......~..........
| |
| Operating Reserves.
| |
| Commitments andContingencies
| |
| ..........
| |
| MinorityInterestInSubsidiary Company...
| |
| TotalCapitalization andLiabilities
| |
| ....$2,524.1922.2438.03,8&4.333.1107.5450.1267.1824.7(158.5)89.9(68.6)440.9$5,114.4Condensed
| |
| $1,004.1724.66.31,735.0165.868.674.9309.3309.757.7367.482.1$2,493.8Financial 60.8(6)(7)334.1518.7(.3)(7)341.760.51,194.5$308.0Statements.
| |
| 151.2147.6298.8440.982.1$7$253.8(6)(7)$3,782.01,646.8(6.3)(7)438.0247.55,866.833.152
| |
| ,~HOLDINGCOMPANYHoldingCompanyProForma$956.32,011.4134.13,101.81,567.0519.5108.0154916.2337.6102.52,805.7296.135.5331.6125.6206.035.9$170.1155.9eUNAUDITED PROFORMACONSOLIDATED CONDENSED, STATEMENTI OFINCOMEFor.the'fwelveMonthsEndedMarch31;1997,~",.~gnMillionsexceptPerShareAmounts)
| |
| 'IIt~iSalePro'LILCOBrooklynLILCOtoFormaAsUnionProForma(Historical)
| |
| LIPA(1)Adjustments Adjusted(Historical)
| |
| Adjustments Revenues.,Electric,......................'....
| |
| $2,465.0$1,520.2(10}
| |
| $11.5(8)$956.3$-$-Gas-Utility sales..............
| |
| 672.7--'72.71,338.7Gasproduction" andother"...."
| |
| ".-...........
| |
| ''"""'-'-"134.1TotalRevenues.........
| |
| 3,l37.71,520.2'1.51,629.01,472.8Operating ExpensesOperations-fuel andpurchased power.........
| |
| 954.8'"15.0-939.8627.2Operations-other...........".....'.'.:
| |
| ..372:8''20.5'-152.3367.2Maintenance
| |
| ............
| |
| 117.169.347.860.2Depreciation, depiction andamortization
| |
| .~.....-155.0'100.7~-.>54.3'92.97.7(6)Basefinancial component amortization........
| |
| 101.0101,0.Ratemoderation component amortization......,
| |
| (3.0)(3.0),Regulatory liability c'omponent amortization
| |
| ...(88.6)(88.6)Otherregulatory amortization................
| |
| '112.396.1-'"16.2Operating taxes..............
| |
| 469.6,280.7--188.9'148.7Federalincometaxes........
| |
| 210.6160.87.1(9)56.945.6TotalOperating Expenses....;.........
| |
| '...'..2,401.6'52.57.11,456.21,341.8''.7Operating Income,.........
| |
| 736.1'67.7 4.4l72.8131.0'7.7)tOtherIncome.and(Deductions)
| |
| ............
| |
| 21.5-31.7.-(10.2)45.7IncomeBeforeInterestCharges...,.........
| |
| 757.61599.4,,4.4 162.6,176.7(7.7)InterestCharges.s..i..........,
| |
| 435.2349.9>>,~(7,6)(9)77.747.9NetIncome..i..............".............
| |
| 322.'4'49.5'2.0'84.9128.8(16)
| |
| (7.7)Preferred stock'dividend requirements...'."'.'....
| |
| 52.139.923.735.9"~0.3(0.3)(7)EarningsforCommonStock...............
| |
| $270.3$209.6$(11.7)(11)
| |
| $49.0$128.5$(7.4)AverageCommonSharesOutstanding
| |
| ......120.6120.6120.6120.649.8(14.5)EarningsperCommonandEquivalent Shares$2.24$1.74$(.09)$0.41$2.58$-$1.09~'aIISeeaccompanying NotestoUnaudited ProFormaConsolidated Condensed Financial Statements.
| |
| 53 NotestoUnaudited ProFormaConsolidated Condensed Financial Statements 1.Thehistorical'fina'ncial statements o'fLILCOhavebeenadjusted'to gtveeffectto'heproposedtransaction withLIPA,pursuanttowhichLILCO'will distribute'certain ofits'rieta'ssetsrelatingtoitsgasandgeneration business("Transferred Assets")tosubsidiaries'of theHoldingiCompany.
| |
| LIPAwillthenacquireLILCOinastocksale.Theadjustments arebaseduponadisaggregation ofLILCO'sbalancesheetandoperations
| |
| .;>asestimated bythe,management, ofLILCO,andaresubjecttoadjustment pursuanttothetermsoftheLIPA''"'agr'cement.
| |
| 'KInconnection withthistransaction, theprincipal assetstobeacquiredbyLIPAthroughitsstockacquisitio'n ofLILCOincludetheelectrictran'smission and'distribution system("TheLIPATransmission"and
| |
| ~Distribution System"),LILCO's18%interestinNineMilePoint2nuclearpowerstation,certain.ofLILCO'sregulatory assetsassociated withitselectricbusinessandanallocation ofaccountsreceivable andotherassets.Theprincipal liabilities tobeassumedbyLIPAincludeLILCO'sregulatory liabilities associated withitselectricbusiness, aportionofLILCO'slong-term debtand,an,allocation ofac'counts
| |
| ....payable,accruedexpenses, customerdeposits, otherdeferredcreditsandclaims.2.Inconnection vyiththeLIPATransaction, LIPAiNcontractually responsible forreimbursing theHoldingCompanyforpostretirement
| |
| : benefits, otherthanpension'co'sts, relatedtoemployees ofLILCO'selectricbusiness.
| |
| Aproformaadjustment hasbeenreflected to'reclassify theassociated regulatory assetforpostretirement benefitsotherthanpensionstocurrentandnon-current accountsreceivable
| |
| 'pursuant toLIPA'sobligation toasubsidiary oftheHoldingCompany.-,.*I3.,TheCashPurchasePricetobepaidbyLIPAinconnection-with itsstockacquisition, of,LILCOwillbe.$2,497.5'million.
| |
| TheCashPurchasePricewasdetermined basedupontheestimated netbookvalueoftheLILCORetainedAssetsof$2',500.8millionasestimated byLILCOinaprojected balancesheetasof.December 31,1997..'ased uponthebalancesheet'asofMarch31,1997,thenetbook'value oftheL'ILCORetainedAssetsamountedto'2,457.3'"million.
| |
| Inaddition, theLIPATransaction obligates theHoldingCompanyupontheclosingofthetransaction toremitto'LIPA$15millionassociated withtherecovery,throughlitigation ofcertainrealestatetaxespreviously paid.Transaction costsarecurrently estimated tobe;$10million.AssumingtheLIPATransaction wascompleted onMarch31,1997,thenetcashtobe,receivedbytheHoldingCompanywouldamountto:CashPurchasePriceCashpaidtoLIPA............,.
| |
| Transaction Costs.NetCash.$2,457.3''''15.0)'(0.0)
| |
| $2,432.3Thedistribution oftheTransferred AssetsfromLILCOtosubsidiaries oftheHoldingCompanywillresultintheimposition offederalincometaxesonLILCO.PursuanttotheLIPAAgreement, thesubsidiaries createdbytheHoldingCompanytoreceivetheTransferred Assetswillreceivethebenefitoftheincreased taxbasisoftheTransferred AssetsandwillpaytheLILCOtax.IftheLIPATransaction weretohaveoccurredatMarch31,1997,thetaxwouldhaveamountedtoapproximately
| |
| $400million.Thetaxisderivedfromthedifference betweentheestimated fairvalueofthedistributed assetsandtheirexistingtaxbasis.Forfinancial reporting
| |
| : purposes, thesubsidiaries reversedtheexistingdeferredtaxliability of$280millionrelatingtotheTransferred Assetsandrecordeda$119milliondeferredtaxassetreflecting theincometaxeffectbywhichthetaxbasisoftheTransferred Assetsexceededtheirbookbasis.Theunaudited proformacondensed consolidated balancesheetasofMarch31,1997reflectsthereclassification of$74.1millionofBrooklynUnionregulatory taxassetsfromdeferredchargestoregulatory assetsinorder,toconsistently pre'senttheregulatory assetsofBrooklynUnionandLILCO,54 6.ThepurchasepriceforBrooklynUnionatMarch31,1997,whichamountedtoapproximately
| |
| $1.245billionincluding approximately
| |
| $54.1'million oftransaction costs,hasbeendetermined baseduponanaverageofLILCO'sopeningandclosingstockpricesforthetwotradingdaysbeforeandthreetradingdaysafterDecember29,1996.Thepurchasepricehasbeenallocated toassetsacquiredandliabilities assumedbased<upontheirestimatedifair values.Itisanticipated thatthefairvalueoftheutilityassetsacquiredisrepresented bytheirbookvalue,whichapproximates thevalueoftheseassetsrecognized bytheNewYorkStatePublicServiceCommission inestablishing rateswhichare'designed to,amongotherthings,provide,.forareturnonthebookvalueoftheseassetsandtherecoveryofcostsincludedasdepreciation andamortization charges.Theestimated fairvaluesofbrooklynUnion'snon-utility assetsapproximate theircarryingvalues.BothBrooklynUnionandLILCOwillseekPSCapprovalforrecoveryoftransaction costs.Baseduponcurrentinformation, thepurchaseprice,including merger-related transaction costs,exceedsthefairvalueofthenetassetsacquiredby$308.0million,whichwillbeamortized toincomeover40years.7.Inconnection withtheformation ofKeySpan,BrooklynUnionwillredeemitsoutstanding preferred stockat,apremiumof2%pertermsoftheoriginalissuanceagreement.
| |
| Asaresult,accountspayablehasbeenadjustedtoreflectapayableof$6.7millionincluding premiumsof$0.1millionwhichhav'ebeenchargedtoCommonShareholders'quity.
| |
| ,8.Theagreement withLIPAincludes.a provision fortheHoldingCompanytoearnintheaggregate approximately
| |
| $11.5millioninannualmanagement servicefeesfromLIPAforthemanagement oftheLIPATransmission, andDistribution Systemandthemanagement ofallaspectsoffuelandpowersupply.Theseagreements alsocontaincertainincentive andpenaltyprovisions whichcouldmaterially impactearningsfromsuchagreements.
| |
| Theproformachargeof$7.1millionrepresents theincometaxeffectassociated withtherecording oftheproformaadjustments forthe$11.5millionmanagement fee(seeNote8),andareduction ininterestexpenseofapproximately
| |
| $7.6millionassociated withtherecapitalization ofthesubsidiary whichcontainsthegasandgeneration businesses.
| |
| RevenuesforboththeassetsacquiredbyLIPAandthe.Transferred Assetsweredetermined baseduponarevenuerequirements modelwhichconsidered thecostofservicefortheseassetsandareturnoncapitalization baseduponanimputedallowedrateofreturn.Noadjustments havebeenmadetoearningsoncommonstocktoreflectearningsonnetavailable proceedsofapproximately
| |
| $1.7billiontobereceived, afterremittances totheHoldingCompany's gasandgeneration subsidiaries forworkingcapitalpurposes(seeNotes3and12).Ifthesefundswereinvestedat7%(the30yearUSTreasuryBondyieldbasedonrecentprices),theHoldingCompanywouldhaverealizedadditional interestincome,netoftaxes,ofapproximately
| |
| $77.3million,orapproximately
| |
| $.49pershare,onaconsolidated basis.Eachonepercentchangeintheassumedinterestrate,wouldincrease/decrease interestincome,netoftaxes,by$11.0million.LILCO'sallowedrateofreturnonitscommonequityforitselectricbusinessiscurrently 11%,aftertaxes.12.13.14Subsequent tothesaletoLIPA,aportionoftheproceedstobereceivedbytheHoldingCompanywillberemittedtoLILCO'sgasandgeneration subsidiaries inordertomeetthesubsidiaries workingcapitalneeds.Suchproposedtransaction hasbeeneliminated intheconsolidation process.Theallocation betweenBrooklynUnionandLILCOandtheircustomers oftheestimated costsavingsresulting fromtheCombination, netofthecostsincurredtoachievesuchsavings,willbesubjecttoregulatory reviewandapproval.
| |
| Noneoftheestimated costsavings,havebeenreflected intheunaudited proformaconsolidated condensed financial statements.
| |
| Theunaudited proformacombinedcondensed financial statements reflecttheexchangeofeachshareofLILCOCommonStockoutstanding into0.880sharesofHoldingCompanyCommonStockandtheconversion ofeachshareofBrooklynUnionCommonStockoutstanding intooneshareofHoldingCompanyCommonStock,asprovidedintheBrooklynUnion/LILCO Agreement.
| |
| 55 15.Asmorefullydescribed inthesection'entitled "TheLIPATRANSACTION
| |
| -Agreement andPlanof.Merger,"LILCOwilltransfertheTransferred Assetstosubsidiaries of,theHoldingCompanyinexchangeforsharesoftheHoldingCompanycommonstockandupto$75millionfaceamountofHoldingCompanyPreferred Stock.The'privately placedPreferred Stockwillbenon-voting, non-convertible andhave.afive-yearterm.Forpurposesoftheseproformafinancial statements, itisassumedthattheHoldingCompanywillissue$75millionofPreferred Stock,LILCOwillsellthepreferred stockfor$75millioninproceedsandwillretaintheproceeds'(Le.,
| |
| aRetainedAsset).Witha'$75millio'nincreaseintheRetainedAssets,theLIPAAgreement providesthattheRetainedDebtwill'increase by'acorresponding amount.'he LIPAAgreement alsoprovidesthatiftheHoldingCompanyweritoissueanamountotherthan$75millionofPreferred Stock,theincremental difference betweentheamountactuallyissuedand$75million,will.resultinacorresponding increaseordecreaseintheamountof-,accounts payableretainedbyLILCO.Theseproformafinancial statements reflectareduction, ininterestexpenseforthereducedlevelofsubsidiary debt,andtorellectanincreaseinpreferred stockdividendrequirements.
| |
| Finally,forpurposesoftheseproformafinancial statements, itis'assumedthat'thedividendrateonthisprivately placedPreferred'Stock willbe7.95%,whichisequal'totheCompany's highe'stcostpreferred stock.'6.TheBrooklynUnionearningsforthe12monthperiodendedMarch31,1997includenon-recurring incomeaggregating approximately
| |
| $33.5million,netoftaxes,or$0.68pershare,relating'o gainsontheinitialpublicofferingofasubsidiary's stockandthe"saleofaninvestment inaCanadianplant.Thi'sincomewaspartially
| |
| 'offsetbya$7.8millioncharge,netoftaxes,or$0.16pershare,relatingtoreorganization'expenses incurredbythesubsidiary.
| |
| ,'If~I56 0UNAUDITED PRO'FORMA COMBINEDCONDENSED FINANCIAL, INFORMAT/ON BROOKLYNUNION/LII'.CO COMBINATION
| |
| 'gOOLING)o'+Thefollowing unaudited proformafinancial;information combinesthehistorical consolidated balancesheetsandstatements ofincomeofBrooklynUnionandLILCOincluding theirrespective subsidiaries, aftergivingeffecttotheCombination.
| |
| BrooklynUnion'sbalancesheetasofMarch31,1997andresultsofoperations for'each'fthe12month'periods inthethreeyearperiodendedMarch31,1997havebeencombinedwithLILCO,'sbalancesheetas,of,gyfarch 31$99/andresultsofoperations foreachofthe12monthperiodsinthethreeyearperiod'ended Mar'ch'31, 1997'toarriveattheunaudited proformacombinedcondensed balance.sheetasofMarch31,1997andthestatements ofincomeforeachofthe12monthperiodsendedMarch31,1997.Theunaudited proformacombinedcondensed balancesheetatMarch31,1997giveseffecttotheCombination asifithadoccurredatMarch31,l997.Theunaudited proformacombinedcondensed statements ofincomeforeachofthe12monthperiodsinthethreeyearperiodendedMarch31,1997giveeffecttotheCombination asifithadoccurredatApril1,1994.Thesestatements are-prepared onthebasisofaccounting fortheCombination asapoolingofinterests andarebasedontheassumptions setforthinthenotesthereto,ItshouldbenotedthatinApril1997LILCOchangeditsyear-endfromDecember31toMarch31.PThefollowing unaudited proformafinancial information hasbeenpreparedfrom,andshould,bereadinconjunction with,thehistorical consolidated financial statements andrelatednotesthefetoofBrooklynUnionandLILCO,incorporated byreference herein.Thefollowing information isnotnecessarily indicative ofthefinancial positionoroperating resultsthatwouldhave'occurred hadtheCombination beenconsummated onthedate,oratthebeginning oftheperiod,forwhichtheCombination isbeinggiveneffectnorisitnecessarily indicative offutureoperating resultsorfinancial position.
| |
| hlEI'{'7 HOLDINGCOMPANYUNAUDITED PROFORMACOMBINEDCONDENSED BALANCESHEETMarch3191997PoolinggnMillions)
| |
| ->>"'oldingBrooklynCompanyLILCOUnionProFormaProForma(Hlstoslcol)
| |
| (Hlstodcol)
| |
| AdjustcolsCobloodASSETSPropertyUtilityPlantElectricGas~)4~9'Common.Construction workinprogressNuclearfuelinprocessandinreactor.....,..4...~......,.~.,4....Less-Accumulated depreciation andamortization
| |
| ...................
| |
| Gasexploration andproduction, atcostLess-Accumulateddepletion
| |
| .............."4"""""6"
| |
| ~~~~~~~ro~TotalPropertyRegulatory AssetsBasefinancial, component (lessaccumulated amortization of$782.5)........Ratemoderation component.
| |
| Shorehampost-settlement costs~rrrrdo~4~~Regulatory taxassetPostretirement benefitsotherthanpensionsOtherTotalRegulatory Assets.Nonutility PropertyandOtherInvestments CurrentAssetsCashandcashequivalents DeferredtaxassetAccountsreceivable andaccruedrevenues.
| |
| OtherCurrentAssets.TotalCurrentAssets.DeferredChargesTotalAssets$3,900.21,171.2263.3108.915.5(1,759.1) 3,700.03,256.3409.5996.31,767.2357.7456.07,243.018.964.593.34899162.5810.2"77.68l).849.7$',805.9(440.1)563.9(188,3)1,741.48156.952.5422.1474.6120.9$2,493.8.74.1(1)74.1(74.1)(1)
| |
| $-$3,900.Z2,977.1263.3108.915.5(2,199.2) 563.9(188.3)5,441.43,256.3409.5996.31,841.3357.7456.07,317.1175.8584.61,284.8124.4$14,343.5CAPITALIZATION ANDLIABILITIES Capitalization CommonShareowners'quity Long-term debtPreferred stockTotalCapitalization Regulatory Liabilities CurrentLiabilities AccountspayableandaccruedexpensesAccruedtaxes(including federalmcometax)Othercurrentliabilities
| |
| .TotalCurrentLiabilities.
| |
| DeferredCreditsDeferredfederalincometax.Other.TotalDeferredCredits.Operating Reserves...
| |
| Commitments andContingencies.
| |
| MinorityInterestlnSubsidiary Company.TotalCapitalization andLiabilities
| |
| $2,549.14,457.0702.17,708.2562.8230.251.1332.6613.92,420.5110.42,530.9433.9$11,849.7$1,004.1724.66.31,735.0165.868.674.9309.3309.757.7367.482.1$2,493.8(542)(2)(7)(63)(7)(60.5)3,499.05,181.6702.19,382.7562.860.8(2)(7) 456.8119.7(0.3)(7)407.260.6983.72,730.2168.12,898.3433.982.1$14,343.5Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements 58 HOLDINGCOMPA'NY'NAUDITED PROFORMA'OMBINED CONDENSED STATEMENT OF'INCOME
| |
| -For.theTwelve'Months Ended)Marchi31;t1997 Pooling(InMillions, ExceptPerShareAmounts)~hd.nBrooklynLILCOUnion(Htetortmt) lHlstorlesl)
| |
| HoldingCompanyProFormaProFormaAdjnstmenls Come)nodRevenuesElectric...........'...........'..
| |
| Gas-"Utilitysales...Gasproduction andother'.'otalRevenues$2,465.0$672.71,338.7134.1~3,137.7-1,472.8"~s4$-=~$2,465.0.<"2,011.4')34'.)'4610.5'perating ExpensesOperations
| |
| -fuelandpurchased power/Operations
| |
| -other.........'...........
| |
| Maintenance
| |
| .De'preciation, dhpletion andamortization.
| |
| Basefinancial component amortization
| |
| .Ratemoderation component amortization
| |
| ....Regulatory liability component amortization
| |
| ..Otherregulatory amortization.......
| |
| Operating taxeseFederalincometaxessrTotalOperating Expenses..Operating Incomeo~~~~~~~o~~~~'954.8372.9117.0155.0'101.0(3.0)'(88.6)112.3469.6210.62,401.6736.1'627.2'-"'',582.0367.2-'40.1602.-'*'177.2'2.9'
| |
| -'''247.9''Ioi.O"'3.0)(88.6)'.'112.3'48.7
| |
| -""618.345.6''""'256.21,341.8'"',743.4131.0''67;1OtherIncome.IncomeBeforeInterestCharges..'nterestChargessINet,Income rPreferred stockdividendrequirements
| |
| .EarningsforCommonStockrAverageCommonSharesOutstanding'
| |
| 'IrEarningsperCommonandEquivalent Shares21.5757.6'35.2322.452.1'$270.3!'120.6$2.2445.7-67.2176.7'-'34.347.9"'-'483.1128.8(4)-451.20.3(0.3)(7)52.1$128.5$0.3$4399.149.8(23.8)(3) 146.6$2.58$-$2.720Seeaccompanying NotestoUnaudited Pro'Forma CombinedCondensed Financial Statements.'
| |
| 59 HOLDINGCOMPANYUNAUDITED PRO-FORMA COMBINEDCONDENSED STATEMENT OFINCOMEFortheTwelveMonthsEndedMarch31,1996Pooling(InMillionsExceptPerShareAmounts)BrooklynLILCOUnionProFormaProForma(Historical)
| |
| (Historical)
| |
| Adjustments Combined0RevenuesElectricGas-,Utility sales.Gasproduction andotherTotalRevenues.$2,497.4$-,$-$2,497.4650.81,272.2,-,1,923.097.8-,97.83,148.25,370.0,-,4,518.2Operating ExpensesOperations
| |
| -fuelandpurchased power.Operations
| |
| -otherMaintenance
| |
| ..Depreciation, depletion andamortization.
| |
| Basefinancial component amortization
| |
| .Ratemoderation component amortization Regulatory liability component amortization
| |
| ..Otherregulatory amortization Operating taxes.Federalincometaxes.....TotalOperating Expenses...,.Operating IncomeOtherIncomeIncomeBeforeInterestCharges888.6391.1124.4147.3101.0(49)(88.6)175.2455.9217.02,407.0741.245.5786.7569.5349.854.772.'7139.442.61,228.7141.35.7147.01,458.1740.9179.1220.0101.0(49)(88.6)1,75.251.2933.7InterestChargesNetIncomePreferred stockdividendrequirements
| |
| .EarningsforCommonStockAverageCommonSharesOutstanding EarningsperCommonandEquivalent Shares471.9314.852.5$262.3119.552.594.50.3$94.248.8$2.19$1.93524.4409.3(0.3)(7)52.5$0.3$356.8(23.5)(3),
| |
| 144.8$-$2.46Seeaccompa'nying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 60
| |
| :.';.HOLDING.
| |
| COMPANYt.EUNAUDITED PROFORMACOMBINEDCONDENSED STATEMENT OFINCOME''Forthe'Twelve MohthsEndedMarch31;1995'Pooling"~"(InMillionsExceptPerShareAmounts)~1BrooklynLILCOUnion>>(Historical)
| |
| (Historical) 4er,,,ProFormaAdJustmenls ProFormaCombinedRevenuesElectric..........~~~~~~~~~~Gas-.,Utilitysales.Gasproduction andother......,..>...,
| |
| .'otalRevenuesgOperating Expenses.Operations
| |
| -fuelandpurchased powerMaintenance
| |
| ...Depreciation, depletion andamortization.....,.
| |
| ~;............
| |
| Basefinancial component amortization
| |
| ...,;..'.............
| |
| Ratemoderation component amortization Regulatory liability component amortization................
| |
| Otherregulatory amortization
| |
| .Operating taxeseFederalincometaxes4TotalOperating Expenses...,.......,.
| |
| Operating IncomeOtherIncomeiIncomeBeforeInterestCharges.........
| |
| Interest'ChargesNetIncomePreferred stockdividendrequirements
| |
| $2,440.3546.12,986.4$1,203.454.81,258.2I805.8,388.0,.141.0134.6101.0160.5(88.6)8.0~408.9185.32,244.5741.9493.0324.352.170.9140.7'0.11,121.1137.13.7'46.1788.0140.8485.5'52.7I302.588.152.90.3(0.3)(7)$2,440.31,749.554.8"4,244.61,298.8712.3193.1205.5101.0160.5(88.6).8.0549.6225.43,365.6879.049.8=928.8,538.2~"390.652.9EarningsforCommonStock.AverageCommonSharesOutstanding
| |
| $249.6$87.8$0.3$337.7117.447.6(23.1)(3) 141.9EarningsperCommonandEquivalent Shares....$2.13$1.84$-$2.38Seeaccompanying NotestoUnaudited ProFormaCombinedCondensed Financial Statements.
| |
| 61 NOTESTOUNAUDITED PROFORMACOMBINEDCONDENSED FINANCIAL STATEMENTS,,
| |
| 1.Theunaudited proformacombinedcondensed balancesheet.asofMarch31,1997refiectsthereclassification of$74.1millionofBrooklynUnionregulatory taxassetsfromdeferredchargestoregulatory assets.Allotherfinancial statement presentation andaccounting policydifferences areimmaterial andhavenotbeenadjustedintheunaudited proformacombinedcondensed financial statements.
| |
| 2.Transaction costs(including feesforfinancial
| |
| : advisors, attorneys, accountants, consultants, taxes,filingsandprinting) arecurrently estimated tobeapproximately
| |
| $54.1million.BothBrooklynUnionandLILCOwillseekPSCapprovalforrecoveryofsuchtransaction costs.3.Theunaudited proformacombinedcondensed financial statements refiecttheconversion ofeachshareofLILCOCommonStockoutstanding into0.803sharesofHoldingCompanyCommonStockandtheexchangeofeachshareofBrooklynUnionCommonStockoutstanding foroneshareofHoldingCompanyCommonStock,asprovidedintheBrooklynUnion/LILCO Agreement.
| |
| Theunaudited proformacombinedcondensed financial statements arepresented asifthecompanies werecombinedduringallperiodsincludedtherein.'.TheBrooklynUnionearningsforthe12monthperiodendedMarch31,1997includenon-recurring incomeaggregating approximately
| |
| $33.5million,netoftaxes,or$0.68pershare,relatingtogainsontheinitialpublicofferingofasubsidiary's stockandthesaleofaninvestment inaCanadianplant.Thisincomewaspartially offsetbya$7.8millioncharge,netoftaxes,or$0.16pershare,relatingtoreorganization expensesincurredbythesubsidiary.
| |
| 5.Intercompany transactions betweenBrooklynUnionandLILCOduringtheperiodspresented werenotmaterialand,accordingly, noproformaadjustments weremadetoeliminate suchtransactions.
| |
| 6.Theallocation betweenBrooklynUnionandLILCOandtheircustomers oftheestimated costsavingsresulting fromtheCombination, netofthecostsincurredtoachievesuchsavings,willbesubjecttoregulatory reviewandapproval.
| |
| Noneoftheestimated costsavingsorthecoststoachievesuchsavings,havebeenreflected intheunaudited proformacombinedcondensed financial statements.
| |
| 7.Inconnection withtheformation ofKeySpan,BrooklynUnionwillredeemitsoutstanding preferred stockatapremiumof2%pertermsoftheoriginalissuanceagreement.
| |
| Asaresult,"accounts payablehasbeenadjustedtoreflectapayableof$6.7millionincluding premiumsof$0.1millionwhichhavebeenchargedtoCommonShareholders'quity.
| |
| 62 THECOMPANYFOLLOWING THECOMBINATION ANDTHELIPATRANSACTION Management oftheHoldingCompanyHoldingCompanyBoardofDirectors.
| |
| The,numberofdirectors comprising thefull.BoardofDirectors oftheHoldingCompanyattheEffective Timewillbe15persons,sixofwhomwillbedesignated byBrooklynUnionpriortotheEffective Time,sixofwhomwillbedesignated.
| |
| byLILCOpriortotheEffective Timeandthreeofwhomwillbedesignated byacommittee consisting oftwocurrentBrooklynUniondirectors andtwocurrentLILCOdirectors.
| |
| IntheeventthattheCombination isnotconsummated andtheLIPATransaction isconsummated, theBoardofDirectors oftheHoldingCompanywillconsistoftheDirectors ofLILCOservingimmediately beforetheLIPAClosing.SeniorExecutives.
| |
| Dr.WilliamJ.Catacosinos willbetheChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee'and ChiefExecutive OfficeroftheHoldingCompanycommencing at'theEffective Time.Atthefirstanniversary oftheEffective Time,Dr.Catacosinos willceasetobetheChiefExecutive Officer',
| |
| butwillcontinuetobeChairmanoftheBoardandChairmanoftheExecutive'Committee andwillbecomeaconsultant totheHoldingCompany.IntheeventthattheCombination isnotconsummated andtheLIPATransactioti isconsummated, theaboveprovisions willnottakeeffectandDr.Catacosinos willserveinthecapacityreferredtoabove.Mr.RobertB.Catell"willbethePresident andChiefOperating'Officer oftheHoldingCompanycommencing upontheconsummation oftheCombination andwillsucceedDr.Catacosinos asChiefExecutive OfficeroftheHoldingCompanycommencing onthefirstanniversary'f such,date.Thearrangements to'causesuchelections totakeplaceat'suchfirstanniversary maybealteredonlybyavote,following theEffective Time,oftwo-thirds oftheentireBoardofbirectors'f theHoldingCompany.IommonStockDividends Itisanticipated thattheinitialannualized dividendratepaidtoHoldingCompanyshareholders aftercompletion oftheCombination, whetherornottheLIPATransaction isconsummated, willbe$1.78pershare,subjecttoapprovalanddeclaration by>>theHoldingCompanyBoardofDirectors.
| |
| BrooklynUnion'sannualdividendrateiscurrently
| |
| $1.46pershareandLILCO'sannualdividendrateiscurrently
| |
| $1.78pershare.Declaration andtimingofalldividends declaredonHoldingCompanyCommonStockwillbeabusinessdecisiontobemadebytheHoldingCompanyBoardfromtimetotimebasedupontheresultsofoperations andfinancial condition oftheHoldingCompanyanditssubsidiaries, opportunities available forthereinvestment ofcashreceivedinconnection withtheLIPATransaction orotherwise, andsuchotherbusinessconsiderations astheHoldingCompanyBoardconsiders relevantinaccordance withapplicable laws.Foradescription ofcertainrestrictions ontheHoldingCompany's abilitytopaydividends ontheHoldingCompanyCommonStock,see"Description ofHoldingCompanyCapitalStock."DESCRIPTION OFHOLDINGCOMPANYCAPITALSTOCKGeneralIITheauthorized capitalstockoftheHoldingCompany,asoftheEffective Time,willconsistof450,000,000 sharesofHoldingCompanyCommonStock,parvalue$.01pershare,and100,000,000 sharesofpreferred stock,parvalue$.01pershare("HoldingCompanyPreferred Stock").Thedescription ofHoldingCompanycapitalstocksetforthhereindoesnotpurporttobecompleteandisqualified initsentiretybyreference totheCertificate of.Incorporation oftheHoldingCompany(the"HoldingCompanyCertificate"
| |
| )andtheBy-LawsoftheHoldingompany(the"HoldingCompanyBy-Laws"),theformsofwhichareattachedheretoasAnnexesGandH,spectively, aswellasapplicable statutory orotherlaw.63 HoldingCompanyPreferred StocKUndertheHoldingCompanyCertificate, subjecttoanyapprovaloftheSECwhichmayberequiredundertheHoldingCompanyAct,theBoardofDirectors oftheHoldingCompanywillbeauthorized todividetheHoldingCompanyPreferred Stockintoseries,toissuesharesofanysuch'series and,withinthelimitations setforthintheHoldingCompanyCertificate orprescribed bylaw,tofixanddetermine'the votingrights,ifany,oftheholdersofsharesofsuchseriesandthedesignations, preferences andrelative, participating, optionalandotherspecialrightsofeachseriesandthequalifications, limitations andrestrictions thereof(the"Preferred StockDesignation"
| |
| ).TherearenopresentplanstoissueanyHoldingCompanyPreferred Stockotherthanasdescribed herein.HoldingCompanyCommonStockTheholdersofHoldingCompanyCommonStockwillbeentitledtoreceivesuchdividends astheBoardofDirectors oftheHoldingCompanymayfromtimetotimedeclare,subjecttoanyrightsofholdersofHoldingCompanyPreferred Stock,ifanyisissued.,The holdersofsharesofHoldingCompanyCommonStockwillbeentitledtoonevoteforeachsuchshareuponallproposals presented totheshareholders onwhichtheholdersofHoldingCompanyCommonStockareentitledtovote.ExceptasprovidedbylawandsubjecttoanyclassorseriesvotingrightsofholdersofanyHoldingCompanySeriesAAPreferred Stock,theholdersofHoldingCompanyCommonStockwillhavetheexclusive righttovotefortheelectionofDirectors andforallotherpurposes, andholdersofHoldingCompanyPreferred Stockwillnotbeentitledtoreceivenoticeofanymeetingofshareholders atwhichsuchholdersofHoldingCompanyPreferred Stockarenotentitledtovote.Theholdersofsharesofaclassorseriesshallbeentitledtovoteandtovoteasaclassupontheauthorization ofanamendment and,inadditiontotheauthorization oftheamendment byvoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereon,theamendment shallbeauthorized byvoteoftheholdersofamajorityofalloutstanding sharesoftheclassorserieswhenaproposedamendment wouldchangetheirsharesunderBCLSection801(b)(11),thatis,changeanyauthorized shares,whetherissuedorunissued, intoadifferent numberofsharesofthesameclass.TheholdersofHoldingCompanyCommonStockwillnotbeentitledtcumulatevotesfortheelectionofDirectors.
| |
| Intheeventofanyliquidation, dissolution orwindingupoftheHoldingCompany,theholdersofHoldingCompanyCommon,Stock,subjecttoanyrightsoftheholdersofanyHoldingCompanyPreferred Stock,willbeentitledtoreceivetheremainder, ifany,oftheassetsoftheHoldingCompanyafterthedischarge ofits'liabilities.
| |
| HoldersofHoldingCompanyCommonStockwillnotbeentitledtopreemptive rightstosubscribe fororpurchaseanypartofanyneworadditional issueofstockorsecurities convertible intostock.TheHoldingCompanyCommonStockwillnotcontainanyredemption provisions orconversion rights.CertainAnti-Takeover Provisions tTheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawswillcontainvariousotherprovisions intendedto(i)promotestability oftheHoldingCompany's shareholder baseand(ii)rendermoredifficult certainunsolicited orhostileattemptstotakeovertheHoldingCompanywhichcoulddisrupttheHoldingCompany,diverttheattention oftheHoldingCompany's directors, officersandemployees andadversely affecttheindependence andintegrity oftheHoldingCompany's business.
| |
| Asummaryoftheseprovisions oftheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsissetforthbelow.RemovalofDirectors.
| |
| TheHoldingCompanyCertificate providesthatexceptasotherwise providedfororfixedbyorpursuanttoaCertificate ofAmendment settingforththerightsoftheholdersofanyclassorseriesofHoldingCompanyPreferred Stock,newlycreateddirectorships resulting fromany.increaseinthenumberofdirectors andanyvacancies ontheBoardofDirectors oftheHoldingCompanyresulting fromdeath,resignation, disqualification, removalorothercausewillbefilledbytheaffirmative voteofamajorityoftheremaining directors theninoffice,eventhoughlessthanaquorumoftheBoardofDirectors oftheHoldingCompany,andnotbytheshareholders.
| |
| SubjecttotherightsofholdersofHoldingCompanyPreferred Stbck,anydirectormaberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityofthevotin ipowerofalltheoutstanding capitalstockoftheHoldingCompanyentitledtovotegenerally intheelectionofdirectors (the"VotingPower"),voting,togetherasasingleclass.:TheNYBCLprovidesthatunlessthecertificate ofincorporation orby-lawsofacorporation soprovide,adirectormayberemovedonlyforcausebyvoteofthe'shareholders.
| |
| NoneoftheRestatedCertificate of.Incorporation ofBrooklynUnion,asamended(the"Brooklyn UnionCertificate,")
| |
| theBy-LawsofBrooklynUnion(the"Brooklyn UnionBy-Laws,")
| |
| theLILCOAmendedandRestatedCertificate of.Incorporation (the"LILCOCertificate"
| |
| )ortheBy-LawsofLILCO,asamended(the"LILCOBy-Laws")containsprovisions forremovalofadirector.
| |
| fSpecialShareholders'eetings andRighttoActByWrittenConsent.TheHoldingCompanyCertificate, and'theHoldingCompanyBy-Lawsprovidethataspecialmeetingofshareholders maybecalledonlybyaresolution adoptedbyamajorityoftheentireBoardofDirectors oftheHoldingCompany.Shareholders arenot,permit'ted tocall,ortorequirethattheBoardofDirectors call,aspecialmeetingofshareholders.
| |
| : Moreover, thebusinesspermitted tobeconducted-at anyspecialmeeting-'f, shareholders islimitedtothebusiness'brought'efore themeetingpursuanttothenoticeofthemeetinggivenbytheHoldingCompany.TheHoldingCompanyBy-Lawspermitaspecialmeetingofshareholders tobecalledatanytimeforanypurposebyorderoftheBoardofDirectors oftheHoldingCompany.Inaddition, theHoldingCompanyCertificate provides-that anyactiontakenby.theshareholders of'theHoldingCompanymustbeeffectedatanannualorspecialmeetingofshareholders andmaynotbetakenbywrittenconsentinlieuofameeting..-
| |
| 4LITheprovisions oftheHolding,CompanyCertificate,and the,E3olding CompanyBy-Lawsprohibiting shareholder actionbywrittenconsentmayhavetheeffectofdelayingconsideration ofashareholder proposaluntilthenextannualmeeting.Theseprovisions wouldalsopreventtheholdersofamajorityoftheVotingPowerfromunilaterally usingthewrittenconsentprocedure totakeshareholder action.Moreover, ashareholder couldnotforceshareholder consideration ofaproposalovertheopposition oftheBoardofDirectors oftheHoldingCompanybycallingaspecialmeetingofshareholders priortothetimetheBoardbelievessuchconsideration toeappropriate; Procedures forShareholder Nominations andProposals.,
| |
| TheHoldingCompanyBy-Lawsestablish anadvancenoticeprocedure forshareholders tonominatecandidates forelectionasdirectors ortobring.otherbusinessbeforemeetingsofshareholders oftheHoldingCompany(the"Shareholder NoticeProcedure"
| |
| ).Onlythoseshareholder nomineeswhoarenominated inaccordance withtheShareholder NoticeProcedure willbeeligibleforelectionasdirectors oftheHoldingCompany.UndertheShareholder NoticeProcedure, noticeofshareholder nominations tobemadeatanannualmeeting(orofanyotherbusinessthatmayproperlybebroughtbeforesuchmeeting)mustbereceivedbytheHoldingCompanynotlessthan60daysnormorethan90dayspriortothefirstanniversary ofthepreviousyear',sannualmeeting(or,ifthedateoftheannualmeetingismorethan30.daysbeforeormorethan60daysaftersuchanniversary date,not,earlier thanthe90thdaypriortosuchmeetingandnotlaterthanthelaterof(i)the60thdaypriortosuchmeetingor(ii)the10thdayafterpublicannouncement ofthedateof,suchmeetingisfirstmade).Notwithstanding theforegoing, intheeventthatthenumberofdirectors tobeelectedisincreased andthereisnopublicannouncement namingallofthenomineesfordirectororspecifying thesizeoftheincreased BoardofDirectors madebytheHoldingCompanyat,least70dayspriortothefirstanniversary ofthepreceding year'sannualmeeting;ashareholder's noticewillbetimely,butonlywithrespecttonomineesforanynewpositions createdbysuchincrease, ifitisreceivedbytheHoldingCompanynotlaterthanthe10thdayaftersuchpublicannouncement isfirstmadebytheHoldingCompany.kHITheHoldingCompanyBy-Lawsprovidethatonlysuchbusinessmaybeconducted ataspecialmeetingasisspecified inthenoticeofmeeting.Nominations forelectiontotheHoldingCompanyBoardmaybemadeataspecialmeetingatwhichdirectors aretobeelectedonlybyorattheHoldingCompanyBoardofDirectors'rection orbyashareholder whohasgiventimelynoticeofnomination.
| |
| UndertheShareholder Noticerocedure, suchnoticemustbereceivedbytheHoldingCompanynotearlierthanthe90thdaybeforesuch65 meetingandnotlaterthanthelaterof(i)the60thdaypriortosuchmeetingor(ii)the10thdayafterpublicannouncement bytheHoldingCompanyofthedateofsuchmeeting.Shareholders willnotbeabletobringotherbusinessbeforespecialmeetingsofshareholders.
| |
| 'IkTheShareholder NoticeProcedure providesthatatanannualmeetingonlysuchbusinessmaybeconducted ashasbeenbroughtbeforethemeetingatthedirection oftheHoldingCompanyBoardofDirectors orbyashareholder whoh'asgiventimelywrittennotice(assetforthabove)totheSecretary oftheHoldingCompanyofsuchshareholder's intention tobringsuchbusinessbeforesuchmeeting.UndertheShareholder NoticeProcedure, ashareholder's noticetotheHoldingCompanyproposing tonominateanindividual forelectionasadirectormustcontaincertaininformation, including, withoutlimitation, theidentityandaddressofthenominating shareholder, theclassandnumberofsharesofstockoftheHoldingCompanyownedbysuchshareholder, andallinformation regarding theproposednomineethatwouldberequiredtobeincludedinaproxystatement soliciting proxiesfortheproposednominee.UndertheShareholder NoticeProcedure, ashareholder's noticerelatingtotheconductofbusinessotherthanthenomination ofdirectors mustcontaincertaininformatiori aboutsuchbusinessandabouttheproposing shareholder, including withoutlimitation, abriefdescription ofthebusinesstheshareholder proposestobringbeforethemeeting,thereasonsforconducting suchbusinessatsuchmeeting,thenameandaddressofsuchshareholder; theclassandnumberofsharesofstockoftheHoldingCompanybeneficially ownedbysuchshareholder;and anymaterialinterestofsuchshareholder inthebusinesssoproposed.
| |
| IftheChairmanorotherofficerpresiding atameetingdetermines thatanindividual wasnotnominated, orotherbusinesswasnotbroughtbeforethemeeting,inaccordance withtheShareholder NoticeProcedure, suchindividual willnotbeeligibleforelectionasadirector, orsuchbusinesswillnot'beconducted atsuchmeeting,as'thecasemaybe.1Byrequiring advancenoticeofnominations byshareholders, theShareholder NoticeProcedure willaffordtheHoldingCompanyBoardofDirectors anopportunity toconsiderthequalifications oftheproposedn'ominees and,totheextentdeemednecessary ordesirable bytheHoldingCompanyBoard,toinformshareholders aboutsuchqualifications.
| |
| Byrequiring advancenoticeofotherproposedbusiness, theShareholder NoticeProcedure willprovideamoreorderlyprocedure forconducting annualmeetingsofshareholders and,totheextentdeemednecessary ordesirable bytheHoldingCompanyBoard,willprovidetheHoldingCompanyBoardwithanopportunity toinformshareholders, priortosuchmeetings, ofanybusinessproposedtobeconducted atsuchmeetings, togetherwiththeHoldingCompanyBoard'spositionregarding actiontobetakenwithrespecttosuchbusiness, sothatshareholders canbetterdecidewhethertoattendsuchameetingortograntaproxyregarding thedisposition ofanysuchbusiness.
| |
| AlthoughtheHoldingCompanyBy-LawsdonotgivetheHoldingCompanyBoardanypowertoapproveordisapprove shareholder nominations fortheelectionofdirectors andonlylimitedpowertoapproveordisapprove shareholder proposals foraction,theymayhavetheeffectofprecluding acontestfortheelectionofdirectors ortheconsideration ofshareholder proposals iftheproperprocedures arenotfollowed, andofdiscouraging ordeterring athirdpartyfromconducting asolicitation ofproxiestoelectitsownslateofdirectors ortoapproveitsownproposal, withoutregardtowhetherconsideration ofsuchnomineesorproposals mightbeharmfulorbeneficial totheHoldingCompanyanditsshareholders.
| |
| *Amendment oftheHoldingCompanyCertigcate andtheHoldingCompanyBy-Laws.TheHoldingCompanyCertificate providesthattheaffirmative voteofatleast80percentoftheVotingPower,votingtogetherasasingleclass,wouldberequiredto(i)amendorrepealtheprovisions oftheHoldingCompanyCertificate withrespectto(A)theelectionofdirectors and(B)therighttocallaspecialshareholders'eeting and(C)therighttoactbywrittenconsent;(ii)adoptanyprovision inconsistent withsuchprovisions; and(iii)amendorrepealtheprovisions oftheHoldingCompanyCertificate withrespecttoamendments totheHoldingCompanyCertificate ortheHoldingCompanyBy-Laws.66 THEAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGERThefollowing isasummaryofthematerialtermsoftheBrooklynUnion/LILCO Agreeinent, whichisattachedas.AnnexAandisincorporated hereinbyreference.
| |
| Suchseminaryisqualified initsentiretybyreference totlieBrooklynUnion/LILCO Agreement.
| |
| IntheeventthattheKeySpanShareExchangehasbeenconsummated, thenKeySpanwillbesubstituted forBrooklynUnionintheCombination andtheBrooklynUnion/LILCO Agreement.
| |
| LPTheCombination TheBrooklynUnion/LILCO Agreement providesthat,following itsadoptionbytheshareholders ofbothLILCOandBrooklynUnionandthesatisfaction orwaiveroftheotherconditions totheCombination, including obtaining therequisite regulatory approvals, theoutstanding sharesofLILCOCommonStockwillbeexchanged fornewlyissuedsharesofHoldingCompanyCommonStockintheShareExchangeandtheoutstanding sharesofBrooklynUnionCommonStockwillbeconverted intotherighttoreceivenewlyissuedsharesofHoldingCompanyCommonStockintheMerger.EffectsoftheCombination Exceptasprovidedbelow,upontheconsummation oftheShareExchange, andwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheHoldingCompany:'i.Eachissuedan'doutstanding shareofLILCOCommonStock,otherthansharesheldbydissenting
| |
| 'hareholders
| |
| ("LILCODissenting Shares"),willbeexchanged for0.803sharesofHoldingCompanyCommonStock;providedthatiftheLIPAAgreement hasnotbeenterminated butthetransactions contemplated therebywillnotbeconsummated contemporaneously withtheCombination, theneachissuedandoutstanding'share ofLILCOCommonStock,othertharttheLILCODissenting Shares,willbeexchanged for0.803sharesofHoldingCompanyCommonStockand,ifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheEffective Time,thentheHoldingCompanywillissuetopersonswhowereholdersofrecordofLILCOCommonStockattheEffective Timeanadditional 0.077sharesofHoldingCompanyCommonStock(the"Contingent Issuance"
| |
| )inrespectofeachshareofLILCOCommonStock,otherthanLILCODissenting Shares,thathadbeenheldbythemofrecordattheEffective Time.UpontheShareExchange, theHoldingCompanywillbecometheownerofeachshareofLILCOCommonStocksoexchanged andeachsuchshareofLILCOCommonStockwillbedeemedtohavebeenexchanged forthatfractionofashareofHoldingCompanyCommonStockspecified above.ii.'achissuedandoutstanding shareofthepreferred stockofLILCOwillbeunchanged asaresultoftheShareExcliange andwillremainoutstanding thereafter.
| |
| AlUpontheconsummation oftheMerger,andwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheHoldingCompany,eachissuedandoutstanding shareofBrooklynUnionCommonStock,otherthansharesheldbydissenting shareholders
| |
| ("BrooklynUnionDissenting Shares"),willbe'converted intotherighttoreceiveoneshareofHolding-Company CommonStockpursuanttotheMerger.UponsuchMerger,BrooklynUnionwillbecomeawhollyownedsubsidiary oftheHoldingCompanyandeachsuchshare'ofBrooklynUnionCommonStockwillbedeemedtohavebeenexchanged foroneshareofHoldingCompanyCommonStock.IftheCombination andtheLIPATransaction areconsummated contemporaneously oriftheLIPATransaction isconsummated beforetheCombination, theninsteadofconsummating theShareExchange, thetransactions contemplated bytheBrooklynUnion/LILCO Agreement andtheLIPAAgreement willbeconsummated asfollows:t(i)LILCOwilltransfertheTransferred Assets(asdefinedintheLIPAAgreement) tosuchsubsidiaries oftheHoldingCompanyasBrooklynUnionandLILCOwilldirectinexchangefortheDesignated 67 Number(asdefine)of.sharesof.HoldingCompanyCommonStockandupto$75.millionlface amountofHoldingCompanyPreferred Stock.The"Designated Number"willbethenumberofsharesofHoldingCompanyCommonStockrepresenting thenetfairmarketvalueoftheTransferred Assets,aswillbedetermined ingoodfaithbyBrooklynUnionand'LILCO,'ess thefaceamount'of suchHolding\CompanyPreferred Stock;(ii)themergerofLIPASubwithandintoLILCOandthetransactions contemplated bytheLIPAAgreement willbeconsummated, andtheCashPurchasePrice(asdefined)willbepaidtotheExchangeAgentasagentfortheholdersofLILCOCommonStocktosubscribe forandpurchaseanumberofsharesofHoldingCompanyCommonStock,whichnumberofsharesWhen'added totheDesignated Numbershallrepresent thenumberof-shares ofLIL'CO'Common Stockissuedandoutstanding immediately'prior totheLILCOEffective Time,otherthanLILCODissenting, Share's,multiplied bytheLIPARatio(i.e.,0.880);and(iii)"promptly thereafter; theMergersh'allbeconsummated.
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| t"BrooklynUnionDissenting SharesandLILCODissenting Shareswillnotbeconverted intotherighttoreceiveHoldingCompanyCommonStockpursuanttotheBrooklynUnion/LILCO Agreement, butwillbeconverted intosuchconsideration asmaybeduewithrespecttosuchsharespursuanttotlieapplicable provisions oftheNYBCL.IAssoonaspracticable aftertheconsummation oftheCombination, anexchangeagentmutuallyagreeable toLILCOandBrooklynUnion(the"Exchange.
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| Agent")willmailtoeach,holderofrecordofa.certificate (a"Certificate"
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| )whichimmediately priortheretorepresented outstanding sharesofLILCOCommon,Stockorwhichimmediately priortheretorepresented outstanding sharesofBrooklynUnionCommonStock(the",Exchanged Shares")thatwerecancelled orexchanged for,sharesofHoldingCompanyCommonStock,aletteroftransmittal andinstructions foruseineffecting the.surrender, ofsuchCertificate inexchangeforcertificates representing sharesofHoldingCompanyCommonStock.,;...
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| 'Ii'Uponsurrender ofa'Certificate totheExchangeAgent,togetherwithaduly'xecuted letterofIransmittal andsuchotherdocuments, ifany,asthe'Exchange Agentshallrequire,the,holderofsuchCertifi'cate willbeentitledtoreceiveacertificate representing thatnumberofwholesharesofHoldingCompanyCommonStockandanycashinlieuofafractional shareofHoldingCom'panyCommonStockwhichsuchholderhastherighttoreceivepursuanttothe'Brooklyn Union/LILCO Agreement.
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| Nofractional sharesof.HoldingCompanyCoinmonStockwillbeissuedinconnection withtheCombination ortheLIPATransaction.
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| Foreachfractional sharethat'would otherwise beissued,'he'Exchange Agentwillpay.,anamountequalto,aprorataportionoftheproceedsofthesale,bytheExchangeAgentofsharesofHoldingCompanyCommonStockrepresenting theaggregate, ofall,suchfractional shares,suchpaletobeexecutedbytheExchangeAgentaspromptlyaspossibleaftertheEffective Time.llIIIfatransfer.
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| ofownership ofExchanged Shares.isnotregistered in,thetransferrecords-of~LILCO, orBrooklynUnion,asthecase,maybe,andifthetransferee, presentstotheExchangeAgent:.(i) theCertificate representing suchExchanged Shares,(ii)alldocuments requiredtoevidenceandeffectsuchtransfer, and.(iii) evidencesatisfactory to,theExchangeAgentthatany-applicable, stocktransfertaxeshavebeen,paid,thenacertificate representing thepropernumberofsharesofHoldingCompany,CommonStockmaybeissuedtosuchtransferee.
| |
| ~ttti.Untilsurrendered, eachCertificate willbedeemedatanytimeaftertheEffective Timetorepresent onlytherighttoreceiveuponsuchsurrender the.certificate representing theapplicablenumber.of sharesofHoldingCompanyCommonStockandcashinlieuofanyfractional shareofHoldingCompanyCommonStock.Nodividends orotherdistributions declaredormadeaftertheEffective TimewithrespecttosharesofHoldingCompanyCommonStockwitharecorddateaftertheEffective Timewillbepaid'tothe'holder ofanyunsurrendered Certificate, andnocashpaymentinlieuoffractional shareswillbepaidtoanysuchholderuntil68 uchCertificate issurrendered.
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| Aftersuchsurrender, subjecttoapplicable law,therewillbepaidtosuchholder,withoutinterest, theunpaiddividends anddistributions, andanycashpaymentinlieuofafractional share,towhichsuchholderisentitled.
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| Ifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheEffective Time,thenthe'Exchange AgentwillmailtoeachholderofrecordofCertificates whichimmediately priortotheEffective Timerepresented outstanding shares'of LILCOCommonStockthatwere'exchanged forHoldingCompanyCommonStockincompliahce'with theissuanceprocedures describeabovecertificates'or thenumberof'wholesharesofHoldingCompa'nyCommonStockwhichsuchholderhas'therighttoreceivepursuanttotheContingent Issuance"
| |
| .Nodividends orotherdistributions declaredormadeafter'the Effective TimewithrespecttosharesofHoldingCompanyCommonStockwitharecorddateaftertheEffective Timeandpriortotheconsummation ofthetransactions contemplated bytheLIPAAgreement willbepaidinrespectofsharestobeissuedpursuanttotheContingent Issuance.
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| Theprocedures described abovewithrespecttofractional shareswillbeemployedwithrespect,tosharestobeissuedpursuanttotheContingent Issuance.
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| IFromandafterthe.consummation oftheCombination, thecommonstocktransferbooksofJ.ILCOandBrooklynUnionwillbeclosedandnotransferofanyLILCOCommonStockorBrooklynUnionCommonStockwillthereafter bemade.If,aftertheconsummation oftheCombination, Certificates arepresented totheHoldingCompany,theywillbecancelled and'exchanged forcertificate's representing theappropriate numberofsharesofHoldingCompanyCommonStock.*rHOLDERSOFLILCOCOMMONSTOCKANDBROOKLYNUNIONCOMMONSTOCKSHOULDNOTSENDINTHEIRSTOCKCERTIFICATES UNTIL'WHEYRECEIVEALETTEROFTRANSMITTAL.
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| epresentations andWarranties
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| ~~TheBrooklynUnion/LILCO Agreement containscustomary representations
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| 'andwarranties byeachofBrooklynUnionandLILCOrelatingto,amongotherthings:(a)theirrespective organizations, theorganization oftheirrespective subsidiaries andsimilarcorporate matters;(b)theirrespective capitalstructures; (c)authorization, execution,
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| : delivery, performance andenforceability oftheBrooklynUnion/LILCO Agreement andrelatedmatters;(d)requiredgovernmental andregulatory approvals; (e)theircompliance withapplicable lawsandagreements; (f)reportsandfinancial statements filedwiththeSEC,FERCandNRCand,theaccuracyofinforniatioit contained, therein;(g)theabsenceofanymaterialadverseeffectontheirbusiness, assets,financial condition, resultsofoperations orprospects; (h)theabsenceofadversematerialsuits,claimsor,proceedings, andotherlitigation issues;(i)theaccuracyofinformation suppliedbyeachofLILCOandBrooklynUnionforu'seinthisJointProxyStatement/Prospectus; (j)taxmatters;(k)retirement andotheremployeebenefitplansandmattersrelatingtotheEmployeeRetirement IncomeSecurityActof1974,asamended("ERISA");
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| (l)labormatters;(m)compliance withallapplicable environmental laws,possession ofallmaterialenvironmehtal, health,andsafetypermitsandotherenvironmental issues;(n)theregulation ofBrooklynUnionandLILCOandtheirsubsidiaries aspublicutilities; (o)theshareholder vote,requiredfortheadoptionoftheBrooklynUnion/LILCO Agreement (assetforthinthisJointProxyStatement/Prospectus) beingtheonlyvoterequiredtoadopttheBrooklynUnion/LILCO Agreement andthetratisactions contemplated thereby;(p)that,exceptascontemplated intheBrooklynUnion/LILCO Agreement ortheLIPAAgreement, neitherBrooklynUnionnorLILCOoranyoftheirrespective affiliates havetakenoragreedtofakeanyactionthatwouldpreventtheHoldingCompanyfroinaccounting forthetransactions tobeeffectedpursuanttotheBrooklynUnion/LILCO Agreement's apoolingofinterests; (q)theinapplicability ofcertainprovisions ofNewYorklawrelatingtobusinesscombinations; (r)thedeliveryoffairnessopinionsbyMerrillLynch,inthecaseofBrooklynUnion,andDillonead,inthecaseofLILCO;(s)themaintenance ofvalidandenforceable insurance policieswithfinancially sponsible insurers; (t)theabsenceofownership ofeachother'sstock;and(u)theabsenceofanymaterial69 impairment totheHoldingCompany's abilitytorealizethebusinesssynergies described inthejointpressreleaseissuedinconnection withtheannouncement oftheBrooklynUnion/LILCO Agreement.
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| CertainCovenants tPursuanttotheBrooklynUnion/LILCO Agreement, eachofLILCOandBrooklynUnionhasagreedthat,duringtheperiodfromthedateoftheOriginalAgreement untiltheconsummation oftheCombination, exceptaspermitted bytheBrooklynUnion/LILCO Agreement, theStockOptionAgreements, theKeySpanExchangeAgreement, theLIPAAgreement andtheHedgeArrangements (asdefinedbelow),orasotherwise consented toinwritingbytheotherpartiesandsubjecttocertainexceptions specified intheBrooklynUnion/LILCO Agreement, eachmill(andeachofitssubsidiaries will),amongotherthings:(a)carryonits.business intheordinarycourseconsistent withpriorpractice; (b)notdeclareorpayanydividends onormakeotherdistributions inrespectofanyofitscapitalstockotherthan(i)tosuchparty'oritswholly-owned subsidiaries, (ii)dividends requiredtobepaidonanypreferred stock,and(iii)regularquarterly dividends tobepaidonLILCOCommonStockandBrooklynUnionCommonStocknottoexceed103%ofthedividends forthepriorfiscayear;(c)noteffectcertainotherchangesinitscapitalization otherthanredeeming outstanding LILCOpreferred stockasrequiredbytheirtermsandBrooklynUnionpreferred stock,inaccordance withtheirterms;(d)notissueorencumberanycapitalstock,rights,warrants, optionsorconvertible orsimilarsecurities; (e)inthe'ase'of LILCOorBrooklynUnion,notamenditscertificate ofincorporation, by-lawsorotherorganizational documents; (f)notacquireasubstantial interestinanyotherentity;(g)notmakeanycapitalexpenditures inexcessof110%oftheamountbudgetedorscheduled bysucpartyforcapitalexpenditures; (h)notsell,lease,encumberorotherwise disposeofmaterialassets,otherthanintheordinarycourseofbusiness; (i)notincurindebtedness (orguarantees thereof),
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| otherthaninconnection withtherefunding ofexistingindebtedness; (j)notenterinto,adoptoramendorincreasetheamountoraccelerate thepaymentorvestingofanybenefitoramountpayableunder,anyemployeebenefitplanorotheragreement, commitment, arrangement,
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| 'lanorpolicy,exceptfornormalincreases intheordinarycourseofbusinessconsistent withpastpractice'hat,intheaggregate, donotresultinamaterialincreaseinbenefits;
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| "(k)notenterintooramendanyspecialarrangement withrespecttothetermination ofemployment orothersimilarcontract, agreement orarrangement withanydirector, officeroremployeeotherthanintheordinarycourseofbusinessconsistent withpastpractice;
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| ~(1)notcommenceconstruction oforobligateitselftopurchaseanyadditional electricgenerating, "transmission ordeliverycapacity, exceptasbudgeted; (m)nottakeanyactionwhichwouldpreventtheHoldingCompanyfromaccounting forthetransactions tobeeffectedpursuanttotheBrooklynUnion/LILCO Agreement asapoolingofinterests; (n)nottakeanyactionwhichwouldadversely affectthestatusoftheMergerasatax-freetransaction toBrooklynUnioncommonshareholders and,unlesstheLIPAAgreement hasbeenterminated, theShareExchangeasataxabletransaction totheLILCOcommonshareholders, ortocausetheformation oftheHoldingCompanytobeatransaction towhichSection351oftheCodedoesnotapply;(o)notifytheotherpartiesofanychangesinitsratesorcharges(otherthanpass-through fuelandgasratesocharges)orstandards ofserviceoraccounting; andnotmakeanyfilingtochangeitsratesonfilewiththePSCth70
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| ~~~~iIi'wouldhaveamaterialadverseeffectonthebenefitsassociated, withthe.transactions co'ntemplated bythe"'iBrooklyn'Union/LILCO Agreement; and""(p)'ottakea'yaetio'n'that'is likely-to jeopardize the'qualification ofLILCO'sor'Broomyn Union's''utstariding rev'enuebonds'astax-exempt mdustrial'development bonds.'ndemnification,
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| 'The.BrooklynUnion/LILCO Agreement providesthat;,totheextent,ifany,notprovidedby,anexisting.
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| rightofindemnification orother.agreement orpolicy,fromandaftertheconsummation oftheCombination,'the HoldingCompanyshall,tothefullestextentpermitted byapplicable law,indemnify, defendandholdharmlesseachpersonwho,wasat,or,who,hadbeenatany.timeprior,toDecember,29, 1996,orwho,becomes priortotheEffective Time,anofficer,,director, oremployee,,of, any:of,the,partiestheretoor,any>of
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| 'theirrespecttve subsidiaries againstalllosses,expenses(including reasonable attorney's fees,andexpenses),
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| claims,;damages orliabilities, or;subjecttotheHoldingCompanyproviding itswritteconsentfor,any,settlement whichshall-not beunreasonably
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| : withheld, amountspaidinsettlement; arising,out,-of actions,oromissions occurring atorpriortotheconsummation oftheCombination (andwhetherassertedor,claimedprior,to, atoraftertheconsummation oftheCombination) thatare,,in,whole,.or inpart,,based
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| 'on,or,arising,outofthefactthatpuchperson,isorwasa,.director, officerhoiemployee ofsuchparty,and:allsuchindemnified liabilities" totheextentthey.arebasedonorariseoutof.orpertainto,thetransactions, contemplated bythe~Brooklyn Union/LILCO Agreement,,
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| ,Ia~IEIInaddition, theBrooklynUnion/LILCO Agreement requiresthatforaperiodofsixyearsaftertheconsummation oftheCombination, theHoldingCompany(anditssuccessors andassigns)shallmaintainineffectpoliciesofdirectors'nd officers'iability insurance asmaintained byBrooklynUnionand'LILCO forthebe'nefi'tE of.thosepersons(andtheirheirsorrepresentatives) whoarecoveredbysuchpoliciesat,December29,1996,oratanytimesubsequent theretoandpriortotheEffective Time,ontermsno,lessfavorable thantheterms,of,thethenexistinginsurance coverage.
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| IIIAlso,theBrooklynUnion/LILCO Agreement providesthattothefullestextentpermitted bylaw,fromandaftertheconsummation oftheCombination,'ll rightstoindemnification existingin'favoroftheemployees, agents,directors and'officers ofBrooklynUnion',LILCOand'their respective"subsidiaries withres'pecttotheir'ctivities assuchprioitotheconsummation',of theCombination, aspiovided'in theirrespective certificates*ohf incorporation andby-lawsineffectonDecember'29,1996,orothherwise ineffectonDecember29,.1996, willsurvivetheCombination andwillcontinueinfullforceandeffectfor5peri'oJofnot'lessthansixyear'sfromtheconsummation oftheCombination.
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| I4~'EIi44"1'Employment andEWorkforce MattersEmplayee.Agreements.
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| TheBrooklynUnion/LILCO Agreement, providesthattheHoldingCompanyanditssubsidiaries musthonorallcontracts, agreements, collective bargaining agreements andcommitments oftheparties.madebeforeDecember29,1996whichapplytoanycurrentorformer,directpr oremployeeofthepartiesthereto.~4II'I4I..Holding Company'Board ofDirectois.
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| Thenumberofdirectors comprising thefullBoardofDirectors oftheHoldingCompany,upontheconsummation oftheCombination willbe15persons,sixofwhomwillbedesignated byBrooklynUnionpriortothec'onsummatiqn oftheCombination, sixofwhomwillbedesignated byLILCOpriortotheconsummation oftheCombination aiidthreeofwhom'will be'designated bya'committee consisting oftwocurrentBrooklynUniondirecto'rs andtwocuirentLILCOdirectors.
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| 'SeniorExecutives.
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| Dr.,Catacosinos.will betheChairmanof.theBoardofDirectors, ChairmanoftheExecutive-Committee andChief.Executive OfficeroftheHoldingCompanycommencing attheEffective Time.Atthefirstanniversary oftheconsummation oftheCombination, Dr.Catacosinos.will ceasetobetheChiefxecutiveOfficer,butwillcontinuetobeChairmanoftheBoardandChairmanofthe,Executive Committee andillbecomeaconsultant totheHoldingCompany.71 Mr.CatellwillbethePresident andChiefOperating OfficeroftheHoldingCompanycommencing upontheconsummation oftheCombination andwillsucceedDr.Catacosinos asChiefExecutive OfficeroftheIHoldingCompanycommencing onsuchfirstanniversary.
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| Thearrangements tocausesuchelections totakeplaceatsuchfirstanniversary maybealteredonlybyavote,following theconsummation, oftheCombination, oftwo-thirdsoftheentireBoardofDirectors oftheHoldingCompany.IntheeventthattheMergerisnotconsummated, theprovision described inthepreceding paragraph willnottakeeffectand-Dr.Catacosinos willcontinuetoserveasChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheHoldingCompany.TheHoldingCompanywillenterintoemployment agreements witheachofDr.Catacosinos andMr.Catelleffective upontheconsummation oftheCombination providing foreachofthemtoassumethe'specified positions:
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| Dr.Catacosinos willserveasaconsultant totheHoldingCompanyforafive-year periodcommencing afterheceasesbeingChiefExecutive Officer,andMr.CatellwillserveasChiefExecutive Officerforafour-year periodcommencing onthefirstanniversaiy oftheconsummation oftheCombination.
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| Eachofthemistoreceivecompensation (including'certain incentive compensation relatedtoachieving thesyne'rgies contemplated toberealizedfromtheCombination) ontermsmutuallyagreedtoandinanyeventinanamountnotlessthanwhat'achreceivedas"ofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| iN'iStockandBenefitPlansEachofthebenefitplansofBrooklynUnionandLILCOineffectasofDecember29,1996willbecontinued fortheemployees orformeremployees ofBrooklynUnionanilLILCOandanyoftheirsubsidiaries whoarecoveredbysuchplansimmediately priortothedateoftheclosingoftheCombination (the"Closin'g Date"),untiltheHoldingCompanyotherwis'e determines aftertheconsummation oftheCombination (subjectoanyreservedrightcontained inanysuchbenefitplan)toamend,modify,suspend,revokeorterminate suchplan.Totheextentthatnoduplication ofbenefitorfundingresults,eachparticipant inanysuchbenefitplanwillreceivecreditforpurposesofeligibility toparticipate, vesting,benefitaccrual'and eligibility toreceivebenefitsunderanybenefitplanoftheHoldingCompanyoranyofits,subsidiaries oraffiliates forservicecreditedforthecorresponding purposeundersuchbenefitplans.Upontheconsummation oftheMerger,LILCOandBrooklynUnionwilltakeallactionrequiredtoterminate theirrespective employeestockoption,stockpurchaseandothersimilarstockplansand:(i)eachshareofBrooklynUnionCommonStockorLILCOCommonStockhelduriderBrooklynUnion'sorLILCO'sDividendReinvestment andStockPurchasePlansorBrooklynUnion'sEmployeeSavingsPlan,DiscountStockPurchasePlanforEmployees andLong-Term Performance Incentive Compensation Plan(collectively, the"Brooklyn UnionPlans")orJ.ILCO'sEmployeeStockPurcliase Plan,RetainerPlan,Incentive PlanandStockPlan(collectively, the"LILCOPlans")immediately priortothe'consummation oftheMergerortheShareExchange, asthecasemaybe,willbeautomatically exchanged fortheapplicable numberofsharesofHoldingCompanyCommonStock,whichshareswillbeheldunderandpursuanttoBrooklynUnion'sorLILCO'sDividendReinvestment andStockPurchasePlansorbeissuedundersuchBrooklynUnionPlanorLILCOPlan,asthecasemaybe;and(ii)upontheconsummation oftheMerger,eachunexpired andunexercised optiontopurchasesharesofBrooklynUnionCommonStockundertheLong-Term Performance Incentive Compensation Plan,whethervestedorunvested, willbeautomatically converted intoanoptiontopurchaseanumberofshares-ofHoldingCompanyCommonStockequaltothenumberofsharesofBrooklynUnionCommonStockwhichcouldhavebeenpurchased immediately priortotheconsummation oftheMerger(assuming fullvesting)undersuchoption,atapricepershare:ofHoldingCompanyCommonStockequaltothepershoptionexercisepricespecified insuchoption.72
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| ~~NoSolicitation ofTransactions The'Brooklyn Union/LIL'CO Agreement providesthatno'partytheretowill,andeachsuchpartywill'caus'e itssubsidiaries notto,andeachsuchpartywillnotperniit'any'of its"officers, directors, employees, accountants, counsel,investment bankers,firiancial "advisors andoth'errepresentativ'es (collectively,
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| '"Rep'resentatives")
| |
| to',andeachsuchpartywilluseitsbesteffortstocausesuchp'ersonsn'o*ttb,directly'or'indirectly mitiate,solicitorencourag'e, ortakeanyactiontofacilitate themakingof'anyofferorpioposalwhichc'onstitutes orisreasonably likelytoleadto,anyBusinessCombination Proposal(as'definedbelow);or,in'heeventofan"unsolicited BusinessCombination
| |
| : Proposal, excepttotheextentrequiredbytheirfiduciary'uties under'applicable lawif'so'dvisedinawrittenopinionofoutside"'counsel, en'gageinnegotiations orprovideanyinformatio'n"or datatoanypersonrelatingtoanyBusinessCombmation Proposal.
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| Asusedabove,"Business Combination Proposal" meansanytenderor"exchange'offer, proposalforamerger,consolidation orotherbusinesscombination involving'any party'to'the'Brooklyn Union/LILCO Agreement oranyofitsmaterialsubsidiaries, or'anyproposaloroffer(ineachcase,whetherornotinwritingandwhetherornotdelivered-to theshareholders ofapartygenerally) toacquireinanymanner,directly'or indirectly, asubstantial equityin'terest inorasubstaritial portionoftheassets,ofanypartytotheBrooklynUnion/LILCO Agreement'or anyofitsmaterialsubsidiaries, otherthanpursuanttothetransactions contemplated bytheBrooklynUnion/LILCO Agreement andbytheLIPAAgreement.
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| '"'<<'''~TheBrooklynUnion/LILCO Agreement providesthatuntilthetermination orconsummation ofthetransactions contemplated bytheBrooklynUnion/I.IL'CO Agreement, no'party'may engageinanynegotiations ormaterial'discussions withLIPAoritsrepresentatives oragentswithoutpriornotification toorthepresenceoftheotherparties,andwillnotprovideanyinformation ordatatoLIPAwithoutproviding acopythereoftotheotherparties.Nothingcontained intheBrooklynUnion/LILCO Agreement willprohibitapartyfromtakinganddisclosing toifsshareholders apositioncontemplated by"Rule,14e-2(a) undertheSecurities ExchangeActof1934,asamended,withrespecttoaBusinessCombination Proposalbymeansofatenderoffer'.''g 1Additional Agreements IOtherTransactions.
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| Asdiscussed above,theBrooklynUnion/LILCO,Agreement contemplates theexecution anddeliveryof,and'performance ofthetransactions coiitemplated by,the'KeySpan ExchangeAgreement.
| |
| (,s''s.~'TheBrooklynUnion/LILCO Agreement recognizes that,inconnection withthe~LIPAAgreement, LILCOandBrooklynUnioncontemplate theformation ofapartnership forthepurposeofpurchasing interestratehedgecontracts, tobefundedthroughcapitalcontributions ofupto$30millionbyeachofthem(theformation ofsuchpartnership andthepurchaseofsuchcontracts beingreferredtohereinasthe"HedgeArrangements"
| |
| ).TheBrooklynUnion/LILCO Agreement providesthatLILCOwillnotmodify,amendorterminate theLIPAAgreement, andwillnotprovideanyconsent,.waiver orreleasethereunder withoutthepriorwrittenconsentofBrooklynUnion.I"*4,MRule145Ajfiliates.
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| BrooklynUnionandLILCOhaveidentified inletterstooneanotherallpersonswhoare,andtosuchperson',s best.knowledge whowillbeatthe.ClosingDate,,affiliates.
| |
| of..Brooklyn UnionandLILCO,respectively, assuchtermisusedinRule145undertheSecurities Act(orotherwise underapplicable SECaccounting releaseswithrespecttopoolingofinterests'accounting treatment).'k EachofBrooldynUnionandL'ILCOh'asagree'dtouseallreasonable
| |
| 'effortsto"cause'their, respective affiliates (including anyperson'who maybedeemedto,havebecome'anaffiliate"after thedateoftheletterreferredtointhepreceding paragraph) todelivertoth'e'Holding Companyonor'r'iortotheClosingDateawrittenagreement customary fortransactions ofthisnatureandinformand:substance rea'sonably satisfactory torooklynUnionandLILCO.73 Ifanypersonrefusestoprovidesuchawrittenagreement, then,inlieuofreceiptofsuchwrittenagreement, theHoldingCompanyisentitledtoplaceappropriate legendsontheHoldingCompanyCommonStockcertificates
| |
| 'tobereceivedbysuchpersonpursuanttothetermsoftheBi;ooklyn Union/LILCO Agreement, andtoissueappropriate stocktransfer, instructions tothetransferagentfortheHoldingCompanyCommonStock,totheeffectthatthesharesofHoldingCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttothetermsoftheBrooklynUnion/LILCO Agreement mayonlybesold,transferred orotherwise
| |
| : conveyed, andtheholderthereofmayonlyreducehisinterestinorrisksrelatingtosuchsharesofHoldingCompanyCommonStock,pursuanttoaneffective registration statement undertheSecurities Act,incompliance withRule145thereof,asamendedfromtimetotime,orinatransaction which,intheopinionoflegalcounselsatisfactory totheHoldingCompany,isexemptfromtheregistration requirements oftheSecurities Act.Theforegoing restrictions onthetransferability ofHoldingCompanyCommon,Stockapplytoallpurported sales,transfers andotherconveyances ofthesharesofHoldingCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttotheBrooklynUnion/LILCO Agreement andtoallpurported reductions intheinterestinorrisksrelatingtosuchsharesofHoldingCompanyCommonStock,whetherornotsuchpersonhasexchanged thecertificates previously evidencing suchpersons'hares ofBrooklynUnionCommonStockorLILCOCommonStock,asthecasemaybe,for.certificates evidencing sharesofHoldingCompanyCommonStockintowhichsuchshareswereconverted.
| |
| Conditions toEachParty'sObligation toEffecttheCombination Therespective obligations ofLILCOandBrooklynUniontoeffecttheCombination aresubjecttothefollowing conditions:
| |
| F(a)theadoptionbytheshareholders ofBrooklynUnionandLILCOoftheBrooklynUnion/LILCO Agreement andthetransactions contemplated thereby;(b)notemporary restraining orderorpreliminary orpermanent injunction orotherorderwillbeieffectthatpreventsconsummation oftheCombination, andtheCombination andothertransactions contemplated bytheBrooklynUnion/LILCO Agreement willnotbeprohibited underanyapplicable law;(c)theJointProxyStatement/Prospectus willhavebecomeeffective andwillnotbethesubjectofastoporder;(d)thesharesofHoldingCompanyCommonStocktobeissuedinconnection withtheCombination willhavebeenapprovedforlistingontheNewYorkStockExchangeuponofficialnoticeofissuance; (e)thereceiptofallmaterialgovernmental andregulatory authorizations,
| |
| : consents, ordersorapprovals shallhavebeenobtained, shallhavebecomeFinalOrders(asdefinedintheBrooklynUnion/LILCO Agreement) andshallnotimposetermsorconditions whichcouldreasonably beexpectedtohaveamaterialadverseeffect;(f)unlesstheLIPATransaction hasbeen'consummated, orwillbeconsummated contemporaneously withtheCombination, thereceiptbyeachofLILCOandBrooklynUnionoflettersfromtheirindependent publicaccountants statingthattheyconcurwithmanagement's conclusion thatnoconditions existthatwouldprecludethetransactions contemplated bytheBrooklynUnion/LILCO Agreement fromqualifying aspoolingofinterests transactions undergenerally acceptedaccounting principles; (g)iftheLIPAAgreement hasnotbeenterminated, theissuancebytheHoldingCompanyofanappropriate amount,notinexcessof$100million',
| |
| ofpreferred stocktosuchpersons(whichpersonsmayinclude,amongothers,definedbenefitplans,employees, officersanddirectors ofBrooklynUnionorLILCO,andinvestment bankers)anduponsuchtermssoastocausetheformation oftheHoldingCompanytobeatransaction towhichSection351oftheCodedoesnotapply;(h)thereceiptof.anopinion,datedasoftheClosingDate,totheeffectthattheShareExchangewil~satisfytherequirements ofSection351oftheCode,iftheLIPATransaction hasbeenterminated; 74 (i)withrespecttoeachofBrooklynUnionandLILCO,theperformance inallmaterialrespectsofallobligations oftheotherpartyrequiredtobeperformed undertheBrooklynUnion/LILCO Agreement andtheStockOptionAgreements; (j)withrespecttoeachofBrooklynUnionandLILCO,theaccuracyoftherepresentations andwarranties oftheotherpartysetforthintheBrooklynUnion/LILCO Agreement andtheStockOptionAgreements onandasofDecember29,1996andasoftheClosingDate(exceptaswouldnotreasonably belikelytoresultinamaterialadverseeffect);(k)LILCOandBrooklynUnionreceiveofficers'ertificates fromeachotherstatingthatcertain,conditions setforthintheBrooklynUnion/LILCO Agreement havebeensatisfied;,
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| (I)withrespecttoeachofBrooklynUnionandLILCO,theabsenceofanymaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects oftheotherpartyanditssubsidiaries takenasawhole;(m)withrespecttoBrooklynUnion,thereceiptofanopinion,datedasoftheClosingDate,totheeffectthatthe=Merger willqualifyasareorganization pursuanttoSection368oftheCode;and(n)withrespecttoeachofBrooklynUnionandLILCO,thereceiptby=theotherpartyofcertainmaterialthird-party consents.
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| Inaddition, theBrooklynUnion/LILCO Agreement providesthatitisacondition totheobligation ofBrooklynUniontoholdtheBrooklynUnionMeetingthattheopinionofMerrillLynchattachedheretoasAnnexEhasnotbeenwithdrawn, anditisacondition totheobligation ofLILCOtoholdtheLILCOMeetingthattheopinionofDillonReadattachedheretoasAnnexFhasnotbeenwithdrawn.
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| AtanytimepriortotheEffective Time,totheextentpermitted byapplicable law,theconditions toBrooklynUnion'sorLILCO'sobligations toconsummate theCombination maybewaivedbytheparties.Anyetermination towaiveacondition woulddependuponthefactsandcircumstances existingatthetimeofsuchaiverandwouldbemadebythewaivingparty'sBoardofDirectors, exercising its,fiduciary dutiestosuchpartyanditsshareholders.
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| Termination TheBrooklynUnion/LILCO Agreement maybeterminated atanytimepriortotheClosingDate,whetherbeforeorafterapprovalbytheshareholders ofLILCOandBrooklynUnion;(a)bymutualwrittenconsentoftheBoardsofDirectors ofBrooklynUnionandLILCO;'b)byeitherpartytotheBrooklynUnion/LILCO Agreement, bywrittennoticetotheotherparty,iftheEffective TimehasnotoccurredonorbeforeAugust31,1998(orApril28,1999ifallbutcertainspecified conditions havebeenorarecapableofbeingfulfilled onAugust31,1998),butonlyifthefailureoftheEffective Timetooccurwasnotcausedbythatparty'sfailuretofulfillanyofitsobligations underthe'Brooklyn Union/LILCO Agreement, andprovidedthatLILCOwillnothavetherighttoterminate theBrooklynUnion/LILCO Agreement
| |
| : pursuant, tothisprovision iftheLIPAAgreement hasnotbeenterininated; (c)byeitherpartytotheBrooklynUnion/LILCO Agreement, bywrittennoticetotheotherparty,ifanyrequiredshareholder approvalhasnotbeenobtainedatadulyheldmeetingofshareholders oratany"adjournment thereof;(d)byeitherpartytotheBrooklynUnion/LILCO Agreement, ifanystateorfederallaw,order,ruleorregulation isadoptedorissuedwhichhastheeffectofprohibiting theCombination, orifanycourtofcompetent jurisdiction intheU.S.oranystatehasissuedanorder,judgmentor,decree,permanently restraining, enjoining orotherwise prohibiting theCombination, andsuchorder,judgmentordecreehasbecomefinalandnonappealable;,,
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| 75 (e)byeitherLILCOorBrooklynUnion,upontwo-days'rior noticetotheotherparty,if:(i)suchpartyreceivesatenderofferoranywrittenofferorproposalwithrespecttoamergerofsuchparty,saleofamaterialportionofsuchparty'sassetsorotherbusinesscombination involving suchparty(each,a"Business Combination"
| |
| )byapersonotherthanLILCO,inthecaseofBrooklynUnion,orBrooklynUnionorLIPA,inthecaseofLILCO,oranyoftheirrespective affiliates, (ii)suchparty'sBoardofDirectors determines ingoodfaiththatitsfiduciar'y obligations underapplicable lawrequirethatsuchtenderofferorotherwrittenofferorproposalbeaccepted, (iii)theBoardofDirectors ofsuchpartyhasbeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingc'ommitment toconsummate anagreement ofthenatureoftheBrooklynUnion/LILCO Agreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbytheotherparty,suchfiduciary, dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal, and(iv)priortoanysuchtermination, suchpartyshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withtheotherpartytomakesuchadjustments inthetermsandconditions oftheBrooklynUnion/LILCO Agreement aswouldenable'such partytoproceedwiththetransactions contemplated therebyonsuchadjustedterms;(I)byeitherLILCOorBrooklynUnion,bywrittennoticetotheotherparty,if:(i)theotherpartyisinbreachoftherepresentations andwarranties itmadeintheBrooklynUnion/LILCO Agreement andsuchbreaches, individually orintheaggregate,'ould orwouldbereasonably likelytoresultinamaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects ofthenon-breaching partyanditssubsidiaries takenasawhole,andsuchbreacheshavenotbeenremediedwithin20daysafterreceiptbythebreaching partyofnoticeinwritingfromthenon-breaching party,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, II(ii)theotherparty(and/oritsappropriate subsidiaries) hasnotperformed andcompliedinallrespectswithcertainagreements andcovenants relatingtotheabsenceofchangesincapitalization orissuanceofsecurities orhasfailedtoperformandcomply,inallmaterialrespects, withitsotheragreements andcovenants undertheBrooklynUnion/LILCO Agreement orundertheLILCOStockOptionAgreement ortheBrooklynUnionStockOptionAgreement, asthecasemaybe,andsuchfailuretoperformorcomplyhasnotbeenremediedwithin20daysafterreceiptbythebreaching partyofnoticeinwritingfromthenon-breaching party,specifying thenatureofsu'chfailureandrequesting thatitberemedied, or(iii)theBoardofDirectors oftheotherpartyoranycommittee thereof(A)withdraws ormodifiesinanymanneradversetothepartygivingnoticeitsapprovalorrecommendation oftheBrooklynUnion/LILCO Agreement ortheCombination, (B)failstoreaffirmsuchapprovalorrecommendation upontherequestofthepartygivingnotice,(C)approvesorrecommends anyacquisition ofitselforamaterialportionofitsassetsoranytenderofferforsharesofitscapitalstock,ineachcasebyapartyotherthanthepartygivingnoticeoranyofitsaffiliates (otherthan,inthecaseoftheLILCOBoard,withrespecttotheLIPAAgreement, assuchagreement maybeamendedfromtimetotimewiththeconsentofBrooklynUnion,andwithrespecttothetransactions contemplated thereby)or(D)resolvestotakeanyoftheactionsspecified inclause(A),(B)or(C);or(g)byeitherLILCOorBrooklynUnion,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'sobligation toeffecttheCombination cannotbesatisfied IftheBrooklynUnion/LILCO Agreement isterminated byeitherLILCOorBrooklynUnionasprovidedabove,thenneitherLILCO,BrooklynUnionnortheirrespective officersordirectors willbeliableorhaveanyobligations thereunder otherthan:(i)toholdinstrictconfidence alldocuments furnished totheother~accordance withtheConfidentiality Agreement betweenLILCOandBrooklynUnion,datedOctober24,'199~76 itmaybeamendedfromtimetotime;,(ii) topaycertainfeesandexpensespursuanttocertainspecified provisions oftheBrooklynUnion/LILCO Agreement described belowunder"-Termination Fees"and(iii)tocomplywithcertainotherspecified provisions oftheBrooklynUnion/LILCO Agreement.
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| IftheBrooklynUnion/LILCO Agreement isterminated pursuanttoitsterms,LILCOandtheHoldingCompanymayconsummate theShareExchangeforthepurposeofconsummating theLIPATransaction onthebasisofoneshareofHoldingCompanyCommonStockforeachshareofLILCOCommonStock..Termination FeesllTheBrooklynUnion/LILCO Agreement providesthatifsuchagreement isterminable byeither(butnotboth)ofBrooklynUnionandLILCOforbreaches'of anyrepresentations orwarranties contained therein,orofagreements andcovenants contained thereinorintheLILCOStockOptionAgreement, ortheBrooklynUnionStockOptionAgreement described below,asthecasemaybe,andthenon-breaching partyterminates pursuant.
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| totheprovisions oftheBrooklynUnion/LILCO Agreement described inclauses(f)(i)and(f)(ii)under"-Termination" above,then,ifsuchbreachisnotwillful,thenon-breaching partyisentitledtoreimbursement ofitsdocumented out-of-pocket
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| : expenses, nottoexceed$10million.NIntheeventofatermination pursuant.
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| tosuchprovisions asaresultofawillfulbreach,thenon-breaching partywillbeentitledtoitsout-of-pocket expenses(whichshallnotbelimitedto$10million)andanyremediesitmayhaveatlaworinequity,providedthat,if:C.'i)atthetimeofthebreachin'g party'swillfulbreach,therehasbeenathird-party tenderofferorproposalwithrespecttoaBusinessCombination involving thebreaching partyoroneofitsaffiliates which'tthetim'eoftermination hasnotbeenrejectedbythebreaching partyandwithdrawri bythethirdparty,and.t(ii)withintwoandone-halfyearsofanytermination bythenon-breaching party,thebreaching partyoranaffiliate thereofbecomesasubsidiary ofsuchthirdpartyoroneofitsaffiliates oracceptsanoffertoconsummate o<consummates aBusinessCombination withsuchthirdparty,1thensuchbreaching party,uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issignedthenattheclosingofsuchBusinessCombination, willpaytothenon-breaching partyanadditional feeequalto$65million(ifthebreaching partyisLILCO)or$35million(ifthebreaching partyisBrooklynUnion).TheBrooklynUnion/LILCO Agreement requirespaymentofanadditional termination feeincertaincircumstances, if:(i)theBrooklynUnion/LILCO Agreement isterminated:
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| (A)asaresultofthedetermination ingoodfaithbyeithertheLILCOBoardortheBrooklynUnionBoardthatitsfiduciary obligations requiretheacceptance byeitherLILCOorBrooklynUnion,asthecasemaybe,ofathird-party tenderofferorproposalwithrespecttoaBusinessCombination pursuanttotheprovisions oftheBrooklynUnion/LILCO Agreement described inclause(e)under"-Termination" above,(B)following awithdrawal ormodification inamanneradversetotheotherpartybytheBoardofDirectors ofsuchpartyofitsrecommendation oftheCombination, afailureoftheBoardofDirectors ofsuchpartytoreaffirmitsapprovalorrecommendation oftheBindingShareExchanges uponrequestoronapprovalorrecommendation bytheBoardofDirectors ofsuchpartyofanyacquisition byathirdpartyofsuchpartyoramaterialportionofsuchparty'sassets,ort(C)asaresultofsuchparty'smaterialfailuretoconveneashareholder meeting,distribute proxymaterials and,subjecttoitsBoardofDirectors'iduciary duties,recommend theBrooklynUnion/LILCO Agreement andtheCombination toitsshareholders; 77 (ii)atthetimeofsuchtermination orpriortothemeetingofsuchparty'ssh'areholders, thereshahavebeenathird-party tenderofferorproposalwithrespecttoaBusinessCombination involving suchpartyoranyofitsaffiliates whichhasnotbeenrejectedbysuchpartyandwithdrawn bythethirdparty;and(iii)withintwoandone-halfyearsofanysuchtermination described inclause(i)above,thepartywhichwasthesubjectofs'uchofferorproposal(the"SubjectParty")becomesasubsidiary oraffiliate ofsuchofferororacceptsanoffertoconsummate orconsummates aBusinessCombination withsuchofferor(orasubsidiary oraffiliate ofsuchofferor).
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| Uponthesigningofadefinitive agreement betweentheSubjectPartyandthethirdpartyor,ifnosuchagreement issigned,thenattheclosingoftheSubjectPartybecomingsuchasubsidiary orsuchthird-party BusinessCombination, theSubjectPartymustpaytotheotherparty$75million(ifthe,SubjectPartyisLILCO)or$45million(iftheSubjectPartyisBrooklynUnion);plus,ineithercase,theout-of-pocket feesandexpensesincurredbytheotherpartyarisingoutof,inconnection withorrelatedtothetransactions contemplated bytheBrooklynUnion/LILCO Agreement.
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| TheBrooklynUnion/LILCO Agreement providesalimitation onthetotalaggregate amountpayableastermination feesbyeitherpartypursuanttotheBrooklynUnion/LILCO Agreement andtheStockOptionAgreements.
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| Thetotalamountofalltermination feespayablewillnotexceed$90millionforLILCO(anditsaffiliates) and$50millionfor'Brooklyn Union(anditsaffiliates).
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| IntheeventthattheBrooklynUnion/LILCO Agreement becomesterminable undercircumstances inwhicha$75millionor$45milliontermination feecouldbepayablebyonepartypursuanttotheimmediately preceding paragraph, sucheventwillalsoconstitute a"TriggerEvent"undertheStockOptionAgreement pursuanttowhichsuchpayingpartyisobligated toissueanoptiontotheotherpartysoastoentitletheotherpartytorequiresuchpayingpartytorepurchase suchoptionortheOptionShares(asdefinedbelow)issueduponexercisethereof.See"TheStockOptionAgreements."
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| Forpurposesoftheprovisions oftheBrooklynUnion/LILCO Agreement relatingtothetermination ftheLIPAAgreement isdeemedtobeaproposalforaBusinessCombination involving LILCO,andLIPAisdeemedtobetheofferorwithrespectthereto,andanyfeeforthebenefitofBrooklynUnionwouldbepayableundersuchprovisions atthetimetheBrooklynUnion/LILCO Agreement isterminated; providedthatiftheBrooklynUnion/LILCO Agreement isterminated following afailurebytheshareholders ofLILCOtoadopttheBrooklynUnion/LILCO Agreement; thentheLIPAAgreement willnotbe'eemedaproposalforaBusinessCombination involving LILCOandnotermination feewillbepayabletoBrooklynUnionbyvirtueoftlieLIPAAgreement.
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| 78 eTHESTOCKOPTIONAGREEMENTS Thefollowing isabriefsummaryof,theniaterial termsoftheAmended,andRestatedLILCOStockOptionAgreement andtheAmendedandRestatedBrooklynUnionStockOptionAgreement, copiesofwhicliiarq attachedasAnnexBandAnnexC,respectively, andwhichareincorporated hereinbyreference.
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| Suchsummaryisqualified initsentiretybyreference tosuchAmendedStockOptionAgreements.
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| TheAmendedStockOptionAgreements areintendedtoincrease, theIikeli%ood tliattheCombination willbe,consummated inaccordance withthetenpsoftheBrpoklynUnion/LILCO Agreement.
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| Consequently,certain aspects.oftheAmendedStockOptionAgreements tnayhavetheegectofdiscouraging personswhomightnoworpriortotheEffective Timebeinterested inacquiring alloforasignificant interestin,orothenvise egectingaBusinessCombination with,BrooklynUnion,orLliCOfromconsidering orproposing suchatransaction, evenifsuchpersonswerepreparedtooffertopayconsideration toshareholders ofBrooklynUnionorLILCO,asthecase>naybe,whichhadaIiighervaluethanthesharesofHoldingCompanyCommonStocktobereceivedpershareofBrooklynUnionComnionStockorLILCOCommonStock,asthecasemay.be,pursuanttotheBrooklynUnion/LILCO Agreeinent.
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| GeneralPursuanttomutualAmendedStockOptionAgreements enteredintoconcurrently withtheBrooklynUnion/LOCO Agreement, LILCOhasgrantedtoBrooklynUnionanoptiontopurchase, undercertaincircumstances, upto23,981,964 sharesofLILCOCommonStockatapriceof$19.725pershareandBrooklynUnionhasgrantedtoLILCOanoptiontopurchase, undercertaincircumstances, upto9,948,682 sharesofBrooklynUnionCommonStockataprice.of$30.0375pershare(collectively, the"Options" andtheholderofeachsuchOption,the"OptionHolder").SharesofLILCOCommonStockpurchasable byBrooklynUnionandsharesofBrooklynUnionCommonStockpurchasable byLILCOpursuanttotheOptions,arecollectively referredtoas"OptionShares,"Theexercisepriceispayable,attheOptionHolder'soption,incashor,subject~~oanyrequiredgovernmental approvals, insharesofcommonstockoftheOptionHolder.TheOptionsmaybeexercised bytheOptionHolder,inwholeorinpart,atanytimeorfromtimetotimeaftertheBrooklynUnion/LILCO Agreement becomesterminable bysuchOptionHolderundercircumstances whichcouldentitlesuchOptionHoldertotermination feesasaresultofaTriggerEvent(asdefinedintheAmendedStockOptionAgreements andreferredtoaboveunder"TheAgreement andPlanofExchangeandMerger-Termination Fees"),regardless ofwhethertheBrooklynUnion/LILCO Agreement isactuallyterminated orwhetherthereoccursaclosingofanyBusinessCombination.
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| TheOptionswillterminate upontheearlierof(i)theEffective Time,(ii)thetermination oftheBrooklynUnion/LILCO Agreement pursuanttoitsterms(otherthanatermination uponorduringthecontinuance ofaTriggerEvent),or(iii)180daysfollowing anytermination oftheBrooklynUnion/LILCO Agreement uponorduringthecontinuance
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| 'ofaTriggerEvent(or,ifattheexpiration ofsuch180-dayperiod,theOptioncannotbeexercised byreason'ofany'applicable
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| : judgment, decree,order,laworregulation, tenbusiness'daysaftersuchimpediment toexercisehasbeenremovedorhasbecomefinalandisnotsubjecttoappeal,butinnoeventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing, noOptionmaybeexercised (a)iftheOptionHolderisinmaterialbreachofanyofitsmaterialrepresentations orwarranties, orinmaterialbreachofanyofitscovenants oragreements contained intheapplicable AmendedStockOptionAgreement orintheBrooklynUnion/LILCO Agreement, or(b)untilallnecessary regulatoiy approvals havebeenobtainedfortheacquisition ofsharespursuanttosuchOption.CertainRepurchases tUnderthetermsoftheAmendedStockOptionAgreements, atanytimeduringwhichtheOptionisercisable (the"Repurchase Period"),theOptionHolderhastherighttorequiretheisstieroftheOption(the79 "Issuer")torepurchase fromtheOptionHolderalloranyportionoftheOptionor,atanytimepriortoAugus31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate theBrooklynUnio'n/LILCO Agreement hasbeenextendedtoApril28,1999),alloranyportionoftheOptionSharespurchased pursuanttotheexerciseoftheOption.TheamountthattheIssuerwillpaytotheOptionHoldertorepurchase theOptionisthedifference betweentheMarket/Offer Price(asdefinedbelow)forsharesofIssuer'sCommonStockasofthedatetheOptionHoldergivesnoticeofitsintenttoexerciseitsrepurchase rights(the"NoticeDate")andtheexercisepricefortheOption,multiplied bythenumberofOptionSharespurchasable pursuanttotheOption,ortheportionthereoftobesorepurchased, butonlyiftheMarket/Offer Priceisgreaterthansuchexerciseprice.The,amountthattheIssuerwillpay'totheOptionHoldertorepurchase the*Option Sharesistheexercise'rice paidbytheOptionHolderfortheOptionSharesplusthedifference betweentheMarket/Offer PriceandtheexercisepricepaidbytheOptionHolderfortheOptionShares(butonlyiftheMarket/Offer Priceisgreaterthansuchexerciseprice),multiplied bythenumberofOptionSharestobesorepurchased.
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| Ifsuch'repurchase pricewasatalevelwhereacontemplated repurchase wouldotherwise besubjecttoavoteoftheshareholders oftheIssuerpursuanttoSection513(e)oftheNYBCL,thensuchrepurchase pricemaybereducedattheIssuer'soptiontoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsuchashareholder vote.TheAmendedStockOptionAgreements define"Market/Offer Price"asthehigherof(A)thepricepershareofferedasoftheNoticeDatepursuanttoanytenderorexchangeofferorotherBusinessCombination offerwhichwasmadepriortotheNoticeDateandnotterminated orwithdrawn asofsuchdateor(B)theFairMarketValueoftheIssuer'sCommonStockasoftheNoticeDate(whichisdefinedintheStockOptionAgreements astheaverageofthedailyclosingsalepriceforsuchsharesontheNewYorkStockExchangeduringthetenNewYorkStockExchangetrading'days priortothefifthNewYorkStockExchangetradingdaypreceding suchdate).Thepriceper'sharefortherepurchase bytheIssuerofOptionSharespurchased bytheOptionHolderpursuanttotheOptionisthehighestpricepershareofferedpursuanttoatenderorexchangeofferorotherBusinessCombination offerwhichwasmadeduringtheRepurchase PeriodpriortotheNoticeDate.AtanytimepriortoAugust31,1998(whichdatemaybeextendedtoApril28,1999underthecircumstances described above),theOptionHoldermayalsorequiretheIssuertoselltotheOptionHolderanysharesoftheOptionHolder'sCommonStockdelivered bytheOptionHoldertotheIssuerinpaymentfortheexercisepriceoftheOption,atthepriceattributed tosuchsharesforsuchpurposeplusinterestattherateof6.5%perannum(fromthedateofthedeliveryofsuchsharesthroughthedateofsuchrepurchase) lessanydividends paidordeclaredandpayablethereon.Restrictions onTransferTheAmendedStockOptionAgreements providethatneitherpartymaysell,assign,pledgeorotherwise disposeofortransferthesharesitacquirespursuanttotheAmendedStockOption.Agreements (collectively, the"Restricted Shares")exceptasspecifically providedforintheAmendedStockOptionAgreements.
| |
| Inadditiontotherepurchase rightsdescribed aboveunder"-CertainRepurchases,"
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| subsequent tothetermination oftheBrooklynUnion/LILCO Agreement, thepartieshavetherighttohavesuchsharesoftheotherpartyregistered undertheSecurities Actforsaleinapublicoffering.
| |
| TheAmendedStockOptionAgreements alsoprovidethat,following thetermination oftheBrooklynUnion/LILCO Agreement, eitherpartymaysellanyRestricted Sharespursuanttoatenderorexchangeofferapprovedorrecommended, orotherwise determined tobefairandin.thebestinterests ofsuchotherparty'sshareholders, byamajorityoftheBoardofDirectors ofsuchotherparty.KeySpanwillsucceedtotherightsandobligations ofBrooklynUnionundertheAmendedStockOptionAgreements iftheKeySpanAgreement isadoptedbyBrooklynUnioncommonshareholders attheBrooklynUnionMeetingandtheKeySpanShareExchangeisconsummated.
| |
| Insuchevent,amongotherthings,KeySpanCommonStock,andnotBrooklynUnionCommonStock,willbesubjecttoissuanceuponanyexerciseoftAmende4BrooklynUnionStockOptionAgreement.
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| 80
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| 'HE,LIPATRANSACTION, Thefollowing isasummaryofthematerialtermsoftheLIPAAgreement, whichisattachedasAnriexDand)viu'chisincorporated hereinbyreference.,
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| Thissummaryisqualipedinitsentiretybyreference totheLIPAAgreement.
| |
| Agreement andPlanofMergerLILCOandLIPAenteredintotheLIPAAgreement asofJune26,1997.TheLIPAA'greement requires:
| |
| (i)LIPAtoformasubsidiary (referred toas"LIPASub")andto'causeLIPASubtoexecute'a counterpart oftheLIPAAgreement; and(ii)LILCOtoformtheHoldingCompanyandtocausetheHoldingCompanytoexecuteacounterpart oftheLIPAAgreement priortotheclosingthereunder.
| |
| TheLIPAA'greement providesthatLIPASub(asubsidiary ofLIPA)istoniergewithandintoLILCO,'with LILCOtobethesurviving corporation (the"Surviving Corporation"
| |
| ).BeforetheclosingoftheLIPATransaction (the"LIP'AClosihg"),
| |
| theHoldingCompanywillformsubsidiaries, whicharereferredtoastheTransferee Subsidiaries.
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| Arthedirection oftheHoldingCompany,theTransferee Subsidiaries will,enterintocertainagreements inconnection withtheLIPATransaction, whicharereferredtoastheBasicAgreements (asdefinedbelow).TheTransferee Subsidiaries willalsoreceivecertainassetsandproperties ofLILCOtobetransferred aspartoftheLIPATransaction (the"Transferred Assets").TheLIPA'Agreement setsouttheprinciples andprocedures tobeusedtodecidewhichLILCOassetsandproperties willbepartoftheTransferred AssetsandwhichwillremainwiththeSurviving Corporation (the"Retained Assets").,Immediately priortotheeffective timeoftheLIPAmergerdescribed below(the"LIPAEffective Time"),LILCOwilltransfertheTransferred AssetstotheTransferee Subsidiaries inexchangefor(x)anumberofshares~~ofHoldingCompanyCommonStocktobedesignated by,theHoldingCompanypriortosuchtimeandpresenting theHoldingCompany's estimateofthefairmarketvalueoftheTransferred Assetsand(y)upto5millionfaceamountofaseriesofHoldingCompanyPreferred Stockhavingtermstobedesignated bytheHoldingCompanypriortosuchtime(the"PrivatePlacement Preferred Stock").Itisanticipated thatLILCOwillbeobligated tosellthePrivatePlacement Preferred Stock,immediately priortothe"LIPAEffective Time,'ooneormorepurchasers inaprivateplacement.'It isanticipated thatthePrivatePlacement Preferred Stockwill:,(i)haveafinalmaturitydatemorethanfiveyearsaftertheLIPAEffective Time,(ii)benon-voting (exceptforfailuretopaydividends foraspecified periodoftime),l(iii)benon-convertible, and.f(iv)haveothertermsandconditions tobedetermined atthetimeofsale.AttheLIPAEffective Time,andwithoutanyactiononthepartofanyholderofany,capitalstockoftheHoldingCompany,LILCOorLIPASub,thesharesofcapitalstockofLILCOwi11betreatedasfollows:(i)Thefollowing shares(the"Cancelled Shares")willbecancelled andretired,withoutthepaymentofanyconsideration:
| |
| lp(a)EachshareofLILCOCommonStockandeachshareofLILCOpreferred stockthatisownedbyLILCOastreasury-stock; and(b)EachshareofLILCOpreferred stockown'edbyanydirector'indirect whollyownedsubsidiary oftheHoldingCompanyimmediately prior,totheLIPAEffective Time.
| |
| (ii)Eachissuedandoutstanding shareofLILCOCommonStock,otherthanCancelled SharesansharesofLILCOCommonStockheldbyanydissenting shareholder, willbecancelled andconverted intotherighttoreceive:-
| |
| (a)anamountincashequaltotheCashPurchasePrice(asdefinedbelow)dividedbythenumberofsharesofLILCOCommonStockoutstanding, and(b)aproratadistribution oftheCompanyCommonStockreceivedbyLILCOinexchangefortheTransferred Assets.(iii)Eachholder,ofsuchshareswillbedeemedtohaveappointed anExchangeAgent(asdefinedintheLIPAAgreement) asitsagenttoreceivethecashandtousethecashtosubscribe forsharesofHoldingCompanyCommonStock.ThenumberofsharesofHoldingCompanyCommonStockdistributable toholdersofLILCOCommonStockinrespectofeachshareofLILCO,Common, Stock,aggregating thenumberdistributable fromtheHoldingCompanyCommonStockreceivedbyLILCOinexchangefor,theTransferred Assetswiththenumberdistributable fromthepurchasebytheExchangeAgentofadditional sharesofHoldingCompanyCommon,Stockoutofthecashmergerconsideration, willequal:(a)0.880sharesofHoldingCompanyCommonStockiftheCombination isconsummated
| |
| 'concurrently withtheLIPAEffective Time,or(b)oneshareofHoldingCompanyCommonStockiftheCombination isnotconsummated concurrent with,theLIPA.Effective Time.(iv)IftheCombination hasbeenconsummated priortotheLIPAEffective Time,then:(a)nosharesofHoldingCompanyCommonStockorPrivatePlacement Preferred Stockwillbedelivered inexchangefortheTransfer/ud Assets,(b)theHoldingCompanyand/oroneorm'oreofitssubsidiaries, astheholdersofalltheoutstanding LILCOCommonStock,willreceiveallofthecashmergerconsideration, and(c)anadditional 0.077sharesofHoldingCompanyCommonStockwillbedistributed totherecordholdersasoftheEffective TimeofLILCOCommonStockinrespectofeachshareofLILCOCommonStock.(v)Eachissuedandoutstanding shareofSeriesAApreferred stockofLILCO,otherthanCancelled SharesandsharesofLILCOSeriesAApreferred stockheldbyanydissenting shareholder
| |
| ("Dissenting Preferred Shares"),willbecancelled andconverted intotherighttoreceiveonefullypaidandnon-assessable shareofpreferred stockdftheHoldingCompanywithidentical rights(including dividendrates)anddesignations totheSeriesAApreferred stock.(vi)Eachissuedandoutstanding shareofLILCOPreferred Stockthatissubjecttooptionalredemption byLILCOatorbeforetheLIPAClosingDate,otherthanCancelled Shares,willbecalledforredemption byLILCOnotlaterthantheLIPAClosingDate.EachsuchshareofLILCOPreferred StockwillberedeemedforcashbyLILCOinaccordance withthetermsapplicable
| |
| 'tosuchshares.Theaggregate amountofaccruedbutunpaiddividends andredemption premiumspayablebyLILCOinrespectofsuchredemptions willbepaidbytheHoldingCompanytoLILCOnotlaterthantwobusinessdayspriortothedatetheapplicable redemption priceispayable.(vii)Eachissuedandoutstanding shareofLILCOPreferred Stock,otherthanCancelled Shares,Dissenting Preferred Shares,sharesofSeriesAApreferred stockandredeemable preferred stock(collectively, the"Non-redeemable Preferred Stock"),willbecancelled andconverted intotherighttoreceivecashintheamountofthesumof(x)theMake-Whole Amountand(y)accruedbutunpaiddividends inrespectofsuchsharethroughtheLIPAClosingDate.AsusedinthisJointProxyStatement/Prospectus, "Make-Whole Amount"means,withrespecttosuchshare,anamountequaltothepresentvalueof:(i)thefaceorliquidation preference amountof,suchshare,and82 t(ii)theremaining dividendpaymentsdueonsuchsharebetweentheLIPAClosingDateandtheapplicable redemption datecomputedusingadiscountrateequaltotheapplicable FairMarketRatedividedby0.95."FairMarketRate"isdefinedastheGenericGeneralObligation FairMarketYieldforBaaratedLow/Medium CouponGeneralMunicipal Obligations atthetimeofthecomputation asreportedonBloomberg, withamaturitymostnearlyequaltotheperiodbetweencancellation andfinalredemption ofsuchseriesofNon-redeemable'Preferred StockLow/Medium CouponGeneral.Theperiodbetweencancellation andredemption referstotheperiodbetweentheClosingDateand:(A)August1,2002,withrespectto'theSeries"CCPreferred Stock,(B)March1,1999,withrespecttotheSeriesGGPreferred Stock,(C)May1,2001,withrespecttotheSeriesQQPreferred Stock,and(D)October16,2018,withrespecttotheSeriesUUPreferred Stock.Theamountbywhichtheaggregate amountpayableexceeds100%oftheaggregate faceor'liquidation preference amountsforallsharesofNon-redeemable Preferred Stockshallbepaid'bytheHoldingCompanyto'theSurviving Corporation promptlyafter'the LIPAEffective Time.The"Cash-Purchase Price"tobepaidby'IPA'will be$2,497,500,000.
| |
| TheCashPurchasePricewasdetermined baseduponthenetbookvalueoftheRetainedAssets,whichwas$2,500,800,000 andissetforthintheproformconsolidated balancesheetofLILCOasofDecember31,1997preparedbyLILCO.TheCashPurchasePriceisbasedupontheassumption thatthetotallongtermindebtedness ofLILCOontheLIPAClosingDatewillnotexceed$3,576,000,000 (the"Retained DebtAmount").TheRetainedDebtAmountwillbeadjustedbaseduponitsnetbookvalue,asrefiected onLIL'CO'sauditedconsolidated balancesheetasofthe'LIPAClosingDate,asfollows.TheRetainedDebtAmountwill"beeither:(i)increased by'heamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsexceeds"$2,500,800,000; ort'(ii)decreased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsislessthan'2,500,800,000.
| |
| AttheLIPAClosing,theHoldingCompanywill,andwillcauseeachoftheTransferee Subsidiaries to,executeanddeliverpromissory notes(the"Promissory Notes")onthefollowing terms:(i)Theaggregate principal amountwillbeequaltotheexcess,ifany,oftheindebtedness ofLILCOoutstanding ontheLIPAClosingDateovertheRetainedDebtAmount.h(ii)Theratesandmaturities willcorrespond toeachportionofdebtunderlying theindebtedness of'IL'COonth'eLIPAClosingDafe;provided, however,thattheinterestandprincipal paymentdateswillbeadjustedtorequire'payment bytheHoldingCompany30dayspriortothecorresponding paymentdatesontheunderlying debt.LILCOcurrently hasaseriesof7.3%Debentures dueJuly15,1999,withanapproximate aggregate principal amountcurrently outstanding-of
| |
| $397million,andaseriesof8.20%Debentures dueMarch15,2023,withanapproximate aggregate principal amountcurrently outstanding of$270million.Subjecttoobtaining allrequiredconsents, theHoldi'ngCompanywillassumetheseobligations attheLIPAClosing.Certainothertaxexemptauthority financing noteswillbeidentified bythepartiestotheLIPAAgreement andassumedbytheHoldingCompany(subjecttoobtaining allrequiredconsentsandtotaxcounsel's concurrence).
| |
| TheLIPAAgreement containscustomary representations, warranties andcovenants byeachoftheHoldingCompany,LILCO,LIPAandLIPASub.Therespective obligations ofthepartiestotheLIPAAgreement toeffecttheLIPATransaction aresubjecttothesatisfaction ofcertainconditions onorpriortotheLIPAClosingDate,including, amongothers:(i)receiptofcertainstatutory approvals; (ii)entryintoeachoftheotherBasicAgreements bytherelevantparties;'83 (iii)receiptoffavorable privateletterrulingswithrespecttoSection337(d)oftheCode;andI(iv)LIPAhavingobtainedfinancing sufficient tofundtheCashPurchasePriceandcertainothertransactions.
| |
| Therespective obligations ofthepartiestoeffectthe.,LIPA Transaction arealsosubjecttothecondition that,onorpriortotheLIPAClosingDate;either:,(i)thetransactions contemplated bytheBrooklynUnion/LILCO Agreement willhavebeenconsummated, (ii)theBrooklynUnion/LILCO Agreement willhavebeenterminated or(iii)allconditions toconsummation ofthetransactions contemplated by,theBrooklynUnion/LILCO Agreement willhavebeensatisfied orwaivedandsuchtransactions willbeconsummated promptlyaftertheLIPAClosing.TheLIPAAgreement issubjecttotermination bythepartiesincertaincircumstances, including, amongothers,bytheHoldingCompanyandLILCO,ontheonehand,orLIPAandLIPASub,ontheotherhand,iftheLIPAClosinghasnotoccurredonorbeforeAugust31,1998(orApril28,1999ifallbutcertainspecified conditions havebeen,orarecapableofbeingfulfilled onAugust31,1998),butonlyifthefailureoftheLIPAClosingtooccurwasnotcausedbytheterminating party'sfailuretofulfillanyofitsobligations undertheLIPAAgreement.
| |
| OtherBasicAgreements Inconnection withtheLIPA,Transaction, thepartiesagreedtoenterintotheLIPAAgreement, thePromissory Notesandcertainotheragreements (the"BasicAgreements"
| |
| ),whichareherebyincorporated byreference.
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| See"WhereYouCanFindMoreInformation".
| |
| TheBasicAgreements include:1.Management ServicesAgreement, wherebyasubsidiary oftheHoldingCompanyagrees,amongotherthings,toprovidealloperation, maintenance andconstruction servicestoLIPAfor8years;12.PowerSupplyAgreement, wherebyasubsidiary oftheHoldingCompanyagrees,amongotherthintosupplyLIPAwithcapacityandenergyfromLILCO'sexistingGenerating Facilities (asdefinetheLIPAAgreement) inordertoallowLIPAtoprovideelectricity toitscustomers onLongIslandfor15years;3.EnergyManagement Agreement, wherebyasubsidiary oftheHoldingCompanyagrees,amongotherthings,tomanagetheSystemPowerSupply(asthereindefined)onbehalfofLIPAand,asagentforLIPA,topurchasefuelsuppliesfortheGenerating Facilities for15years;4.Generation PurchaseRightAgreement, pursuanttowhichLIPAhasthe,rightduringthefourthyearaftertheLIPAClosingtopurchasetheGenerating Facilities forfairmarketvalue;5.GuarantyAgreement, wherebytheHoldingCompanyguarantees certainobligations ofitssubsidiaries undertheotherBasicAgreements; and6.Liabilities Undertakingswhereby theHoldingCompanyandtheTransferee Subsidiaries, ontheonehand,andLIPAandtheSurviving Corporation, ontheotherhand,agreetoassumecertainliabilities andtoindemnify oneanotherincertainsituations inconnection withtheLIPATransaction.
| |
| 84
| |
| 'SELECTED INFORMATION CONCERNING "BROOKLYNUNIONBusinessofBrooldynUnionBrooklynUnionwasincorporated intheStateofNewYorkin1895asacombination ofexistingcompanies, thefirstofwhichwasgrantedafranchise in1849.BrooklynUniondistributes naturalgasatretailintheBoroughsofBrooklynandStatenIslandandtwo-thirds oftheBoroughofQueensinNewYorkCity.BrooklynUnion'sprincipal non-utility subsidiaries participate andowninvestments ingasandoilexploration, production andprocessing, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergy-related services.
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| BrooklynUnion'smailingaddressisOneMetroTech Center,Brooklyn, NewYork11201-3850 anditsgeneraltelephone numberis(718)403-2000.
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| Territory.
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| BrooklynUnion'sserviceterritory isapproximately 187squaremiles.Thepopulation oftheterritory servedisapproximately 4millionpersons.AsofSeptember 30,1996,BrooklynUnionhadapproximately 1,126,000 activemeters,ofwhichapproximately 1,089,000 wereresidential.
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| Employees.
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| AsofSeptember 30,1996,BrooklynUnionhadapproximately 3,000fulltimeemployees ofwhichapproximately 1,745belongtoLocal101oftheTransport WorkersUnionand185arerepresented byLocal3oftheInternational Brotherhood ofElectrical Workers.Effective November1995andAugust1995,respectively, BrooklynUnionandthese"unionsagreeduponnewthreeyearlaboragreements whichprovideforwageincreases ofapproximately 9%overthetermoftheagreements.
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| Regulation.
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| Utilityretailsales,whichincludesalesofgas,transportation andbalancing
| |
| : services, aremadeprimarily underrateschedules andtariffsfiledwithandsubjecttothejurisdiction ofthePSC.Amendments havebeenmadetorateschedules andtariffstoreflecttheconditions andratesunderwhichdeliveryandotherservicesareprovidedtocustomers whoopttohavetheirgassuppliedbythirdparties.Rateschedules alsohavebeenstablished governing theprovision ofcertainservicestosuchmarketers.
| |
| iBrooklynUnionisalsosubjecttoregulation bythePSCwithrespecttoissuances andsalesofsecurities, adequacyandcontinuance ofservice,safetyandsitingofcertainfacilities, accounting, andothermatters.IAdditioilal information concerning Brooklyn'Unionanditssubsidiaries is'included intheBrooklynUniondocuments filedwiththeCommission whichareincorporated byr'eference herein.See"WhereYouCanFindMoreInformation."
| |
| Comparison ofShareholders'ights TherightsofBrooklynUnionshareholders arecurrently'overned bytheNYBCL,theBrooklynUnionCertificate andtheBrooklynUnionBy-Laws.TherightsofLILCOshareholders arecurrently governedbytheNYBCL,theLILCOCertificate andtheLILCOBy-Laws.Uponconsummation oftheCombination, therightsofBrooklynUnionshareholders andLILCOshareholders whobecomeshareholders oftheHoldingCompanywillbegovernedbytheNYBCL,theHoldingCompanyCertificate andth'eHoldingCompanyBy-Laws.Thefollowing aresummaries ofcertaindifferences betweenthecurrentrightsofBrooklynUnionandLILCOshareholders andthoseofHoldingCompanyshareholders aftertheCombination.
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| Thefollowing discussions arenotintendedtobecompleteandarequalified byreference totheNYBCL,theBrooklynUnionCertificate, theBrooklynUnionBy-Laws,theLILCOCertificate, theLILCOBy-Laws,theHoldingCompanyCertificate andtheHoldingCompanyBy-Laws.CopiesoftheHoldingCompanyCertificate andtheHoldingCompanyBy-Laws,insubstantially theformstobeadoptedattheEffective Time,areattachedtothisJointProxyStatement-Prospectus asAnnexesGandH.CopiesoftheBrooklynUnionCertificate, theBrooklynUnionBy-Laws,theLILCOCertificate andtheLILCOBy-Lawsareincorporated byreference hereindwillbesenttoholdersofsharesofBrooklynUnionCommonStockandLILCOCommonStock,pectively, uponrequest.See"WhereYouCanFindMoreInformation."
| |
| 85 Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoBrooklynUnion'sCertificate ofIncorporation andBy-LawsAuthorized Capital.Thetotalauthorized capitalstockoftheHoldingCompanywillbe,.450,000,000 sharesofHoldingCompanyCommonStock,parvalue$.01pershare,and100,000,000 sharesofHoldingCompanyPreferred Stock,parvalue$.01persharc.Thetotalauthorized capitalstockofBrooklynUnionconsistsof900,000sharesofcumulative preferred stock,parvalue$100pershare,2,000,000 sharesofcumulative preferred stock,parvalue$25pershare,and70,000,000 sharesofBrooklynUnionCommonStock,parvalue$.335pershare./Classification oftheBoardofDirectors.
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| TheBrooklynUnionCertificate andtheBrooklynUnionBy-LawsprovidethattheBrooklynUnionBoardwillbedividedintothreeclasses,eachclasstoconsistasneailyaspossibleofone-third ofthedirectors andtobeelectedeverythirdyeartoserveathree-year term.TheHoldingCompanyCertificate andtheHolding,CompanyBy-LawsdonotprovidethattheHoldingCompanyBoardwillbedividedintoclasses.RemovalofDirectors; FillingVacancies ontiieBoardofDirectors.
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| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethat,subjecttotherightsofholdersofHoldingCompanyPreferred Stock,ifany,anydirectorservingontheHoldingCompanyBoardmayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityofthe.VotingPower,votingtogetherasasingleclass.TheBrooklynUnionCertificate andtheBrooklynUnionBy-Lawshavenocomparable provision.
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| UndertheNYBCL,unlessthecertificate ofincorporation orby-lawsofacorporation providesotherwise, adirectormayberemovedonlyforcausebythevoteofamajorityofthevotescastatashareholder meetingbytheholdersofsharesentitledtovotethereon.BoththeHoldingCompanyBy-LawsandtheBrooklynUnionBy-Lawsprovidethatvacancies ontheBoardofDirectors maybe'illedbytheremaining Directors, eveniflessthanaquorum.MeetingsofShareholders.
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| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovithataspecialmeetingofshareholders maybecalledonlybytheHoldingCompanyBoardpursuanttoaresolution approvedbyamajorityoftheentireHoldingCompanyBoard.TheBrooklynUnionBy-Lawsprovidethataspecialmeetingofshareholders maybecalledbytheChairmanoftheBoardofBrooklynUnionorbytheBrooklynUnionBoardpursuanttoaresolution approvedbyamajorityoftheentireBrooklynUnionBoard.AinenCknent ofCorporate CharterandBy-Laws.TheNYBCLprovidesthatanamendment toacorporation's certificate ofincorporation maybeauthorized byvoteoftheboardofdirectors, followedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereonatameetingofshareholders andtheby-lawsof,acorporation maybeamendedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovoteintheelectionofanydirectors ofthecorporation or,ifsoprovidedinthecertificate ofincoiporation orby-laws,bytheboardofdirectors bysuchvoteasmaybespecified therein.TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethatthe.affirmative voteoftheholdersofatleast80percentoftheVotingStockthenoutstanding, votingtogetherasasingleclass,willberequiredtochangeoradoptanyprovision inconsistent withtheprovisions.
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| thereinrelatingtocallingofspecialmeetingsofshareholders, theelectionofdirectors, fillingofvacancies ontheHoldingCompanyBoard,removalofdirectors andtheamendment ofcertainprovisions theHoldingCompanyBy-LawsandtheHoldingCompanyCertificate.
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| The,BrooklynUnionCertificate issilentonsuchmattersandtheBrooklynUnionBy-Lawsprovidethatby-lawsmaybeamendedbytheBrooklynUnionBoardorbytheholdersofthesharesatthetime'ntitled tovoteintheelectionofanydirectors andthatby-lawsadoptedbytheBrooklynUnionBoardmaybeamendedorrepealedbytheshareholders insuchmanner'.sForinformation concerning LILCO,see"Selected Information concerning LILCO-Comparison ofHoldingCompany's Certificate ofIncorporation andBy-LawstoLILCO'sCertificate ofIncorporation andLaws."86 t'+cers.TheHoldingCompany'y-Laws providethat,effective asofthe'first anniversary oftheconsummation oftheBindingShareExchanges, Dr.Catacosinos ShallbeelectedChairmanoftheHoldingCompany'Board andChairmanoftheExecutive Committee oftheHoldingCompanyBoardandMr.CatellshallbeelectedChiefExecutive Officerofthe-Holding Company.ThisBy-Lawmaybemodifiedonlybytheaffirmative voteoftwo-thirds of-theentireHoldingCompanyBoard.Forinformation concerning LILCO,see"Selected Information Concerning LILCO-Comparison oftheHoldingCompany's Certificate ofIncorporation andBy-LawstoLILCO'sCertificate ofIncorporation andBy-Laws."
| |
| r1Anti-Takeover StatutesSection912oftheNYBCLprohibits a"business combination" (asdefinedinSection912oftheNYBCL,generally including mergers,salesandleasesofassets,issuances ofsecurities andsimilartransactions) byacorporation incorporated undertheNYBCLorasubsidiary ofsuchcorporation withaninterested shareholder (asdefinedinSection912oftheNYBCL,generally thebeneficial ownerof20percentormoreoftheNewYorkcorporation's votingstock)withinfiveyearsafterthepersonorentitybecomesaninterested shareholder, unless(i)priortothepersonorentitybecominganinterested shareholder, thebusinesscombination orthetransaction pursuantto'whichsuchpersonorentitybecameaninterested shareholder hasbeenapprovedbysuchNewYorkcorporation's boardofdirectors,'or (ii)thebusinesscombination isapprovedbytheholdersofamajorityofthevoting'powerofthe-capital stock'ofsuchNewYorkcorporation, excluding sharesheldbytheinterested shareholder, atameeting'called forsuchpurposenoearlierthanfiveyearsaftersuchinterested shareholder's "stockacquisition date."Inaddition, Section912oftheNYBCLspecifies certainminimumconsideration thatmustbepaidin'abusinesscombination'ith aninterested shareholder.
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| Potential ConflictofInterestofCertainPersonsintheCombination andtheLIPATransaction Employment Agreement withRobertB.Catell.Pursuanttoth'eBrooklynUnion/LILCO Agreement, iftheBrooklynUnionShareExchangeisconsummated, theHoldingCompanywillenterintoanemployment agreement withMr.Rt>bertB.Catelleffective upontheEffective Tinie'providing forhimtoassumethepositions ofPresident a'ndChiefOperating Offic'ercommencing upontheEffective TiineandforhimtoserveasChiefxecutiveOfficer'of theHoldingCompanyforafouryearperiodcommencing onthefirstanniversary oftheEffective Time.Underthisemployment agreement, Mr.Catellistoreceivecompensation ontermstobemutuallyagreedupon,butnotlessthanwhat,hereceivedfromBrooklynUnionasofthedateoftheOriginalAgreement.
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| Mi'."Catell wouldalsobeeligibletoreceiveincentive compensation relatedto'achieving thesynergies contemplated toberealizedfromtheCombination.
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| Inaddition, theBrooklynUnion/LILCO Agreement providesthattheemployment agreement withMr.Catelliso'therwise tocontaintermsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| PVestingof,CertainBenefitsforBrooklynUnion'sDirectors andOfficers.
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| UnderBrooklynUnion'sLong-Term Performance Incentive Compensation Planforofficersandcertainkeyemployees ofBrooklynUnion(the"Performance Plan"),upona"changeofcontrol,"
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| asdefinedinthePerformance Plan,alloptionstopurchasesharesofBrooklynUnionCommonStockgrantedunderthePerformance Planwillbecomeimmediately exercisable andremainexercisable fortheremainder oftheiroriginalterm.ThePerformance Flanalsoprovidesforawardsofperformance shares,whichentitletheemployeetoreceiveeitheranumberofsharesofBrooklynUnionCommonStockbaseduponachievement ofperformance goalsoveraperformance periodorapaymentincashinlieuofsuchshares.UnderthetermsofthePerformance.
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| Plan,upona"changeofcontrol,"
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| theperformance goalsforallsuchperformance shareswillbedeemedtohavebeenmetandtheemployeewillreceiveeithertheawardedperformance sharesortheequivalent incash,proratedbasedontimeelapsedduringtheperformance period.TheCombination willconstitute achangeofcontrolforthepurposesofthePerformance Plan.TheBrooklynUnion/LILCO Agreement providesthatupontheEffective Time,eachunexpired andunexercised optiontopurchasesharesofBrooklynUnionCommonStockunderthePerformance Plan,whetherestedorunvested, willbeautomatically converted intoanoptiontopurchasethesamenumberofsharesofldingCompanyCommonStockatthesamepershareprice.87.
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| Asof.June23,1997,optionstopurchase640,500shares,of.BrooklynUnionCommonStockand13,000performance shareshavebeen,grantedto,Brooklyn Unionexecutive officers-as'a groupunderthePerformance Plan(including 155,000optionsand>4,000 performance sharestoMr.Catell,theChairmanandChief:Executive Officer;92,000optionsand2;300,performa'nce shares,to Craig'G:Matthews, President andChiefOperating Officer;56,000optionsand2,300performance sharesto'Helmut W.,'Peter, ViceChairman; 42,000'options and1;100performance sharestoVincentD.Enright;SeniorVicePresident andChief,Financial Officer;and25,000optionsand550performance sharestoAnthonyJ.,DiBrita, SeniorVicePresident).
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| Such'options weregrantedonNovember15,1995andNovember20,1996andvestinequalinstallments overthreeyearperiodsfromtheapplicable grantdate.Allsuchperformance sharesvestoverathreeyearperiodendingSeptember 30,1998,an'dthe,actualnumberofperformance sharesearnediscontingent uponachieving certainperformance targets."Upon consummation of.theCombination, allsuchoptionswillbevestedandexercisable forthesamenumberofsharesofHoldingCompanyCommonStock.,at anexercisepricerangingfrom$27i00to$30.50per.share.and theperformance targetsforall.suchperformance shareswillbedeemedtohavebeenmetandpaymentforaproratedportionofsuchperformance shares.willbemadeassoonaspracticable afterconsummation oftheCombination.
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| '4j.II*~r44IIBrook1ynUnionChangeof,Control,Severance, Plan;Underther,;Brooklyn UnionSenior.Executive ChangeofControlSeverance Plan(the"Severance Plan",),participants, areentitledtoreceivecertainseverance benefitsiftheiremployment isterminated under,certain,circumstances withinthree.yearsafter'atransaction
| |
| <hatmeetsthe,definition of"change.of.control",.undei)the terms-oftheSeverance Plan.A,termination bytheemployerwithout''cause" (asdefined,in.theSeverance Plan)or.bytheparticipant, for"goodreason"(asdefinedintheSeverance Plan,andincluding asignificant diminution ofresponsibilities, an-assignment toinappropriate duties,amaterialreduction incompensation orbenefits, oratransferofmorethan50miles),withinthelaterof(i)theendof15monthsafterthe-"change'of uontrop'or (ii)90day5afterthe"'gbod reason"ev'entoccu'rs,willresultinthepaymentofbenefitsundertheSeverance Plan.rlr)'IJ44'llIIAparticipant,who becomesentitledtoseverance, benefitswill,receivethefollowing:
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| a,lumpsumcashpaymentofsalary,previously deferredcompensation andaccruedvacationpaythroughthe,dateoftermination tothe,extentnot.already paid,aprorata,bonusforthe"yeaiof termination, andthe,participant'.s basesalaryanbonusfortheSeverance Period(asdefinedbelow);continued employeewelfarebenefitsfor.'theSeverance Period;alumpsumpaymentequal,tothe"actuarial value,oftheadditional benefitsunderBrooklynUnion'squalified,and supplemental retirement planstheparticipant wouldhaveteceivedhadhe,remainedemployedfortheSeverance Period;andoutplacement pervIcesatacostofgotmore,than$30,000.Inaddition, theparticipant willreceiveanadditional payment,ifnecessary, tomakesuchparticipant wholeforanyexcisetaxonexcessparachute paymentsimposedontheparticipant.
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| The.,"Severance Period"isaperiodofeithertwoorthreeyears(asdesignated bytheOrganization andNoinmating Committee oftheBrooklynUnionBoard)or,ifless,theperiodremaining untiltheparticipant reachesmandatory retirement age.Forthepurposesofeligibility forretirement; medical,dentalandlifeinsurance,'the participant willbedeemedtoremainemployedfortheentireSeverance Period;"r,Th'e'Brooklyn UnionBoardhasde'signated asparticipants intheSeverance PlanMr.Catell,CraigG.Matthews, Helm'utW.Peter,,Vincent D.Enright,Anthony.J.
| |
| DiBritatand 6otherSenior,VicePresidents ofBrooklynUnion(eachwiththree-year Severance Periods),and 12VicePresidents ofBrooklynUnion'(each withtwo-yearSeverance Periods).
| |
| IftheCombination occurredonJanuary',
| |
| 1998,andallparticipants intheplanwereterminated immediately thereafter, itisestimated thattheaggregate after-tax costoftheseverance benefitsundertheSeverance Planwouldbeapproximately
| |
| $19',833,000.
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| II'4IIr44)4III88 tSecurityOwnership ofCertainBeneficial Ownersand'Management 4'urrent.
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| Ownership ofBrooklynUnionCommonStack.Thefollowing tablesetsforthinformation.
| |
| asofJune23,1997,withrespecttothenumberofsharesofBrooklynUnionCommonStockbeneficially ownedand/orBrooklynUnionCommonSto'ckequivalents grantedunderthePerformance Plan,theDirectors'eferred Compensation PlanortheCorpoiate Incentive Compens'ation Plan,whichdo.notconferany'oting rights,ownedbg'(i)directors andcertain'eXecutive officersofBrooklynUnionand(ii)alldi'rectors andexecutive officersofBrooklynUnionasagroup.oeeTotalofCommonStockBeneficiall CommonStockCommonStockName,~-OwnedAEquivalents Beneflctally OwnedEquivalents R.B'.Catell26,002'8,481-'-7,521K.I.Chenault.
| |
| '""'...'.."''.',4091,551',2,858'A.S.Christensen....
| |
| '...''.'""9,745.4,977'"4,768'D.H.'Elliott'
| |
| ''''9,323',750.7,573A.H.Fishman...'.."......'.
| |
| '...'...''',738""',738'4,000'.L.
| |
| Larocca....5,0073,3541,653C.G'.Matthews;
| |
| "','15,817'll,'4974,320E.D.Miller 7,4595,9461,51'3J.Q.Riordan''*'"',298',500,',798 C.Uribe.''2,046'"02,046"'H.W.'eter.
| |
| 14,&17o,'0,483~4,334A.J.DiBrita6,000,"4,681',319Y.D.Enright'...""...''"6,406''"'',397'r2,009AllDirectors andExecutive Officersasagroup,includ-'ngthosenamedabove,atotal"of24persons......'..
| |
| '184,235'23,963'0,272e'sr'~Thefollowing'table setsfo'ithcertaininformatiori with'respect to'thesharesofBrooklynUnionCommontockownedbyeachpersonknownbyBrooklyri Uniontobethebeneficial ownerofmore'han5%oftheissuedandoutstanding BrooklynUnionCo'mmonStock,asofMarch31,1997.ITtneofClass,,,.NamesandAddresses
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| .OwnedPercentage ofCloseCommonStock..."
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| .:...:...:.Longeisiand LightingCompany9,948,688o I6.6%175EastOldCountryRoadHicksville, NY11801.t1*Represents thenumberofsharesthatmaybepurchased pursuant.
| |
| totheAmendedBrooklyn, UnionStockOptionAgreement attachedasAnnexCanddescribed inthisJointProxyStatement/Prospectus.
| |
| See"TheStock,OptionAgreements.l' tlCertainBusinessRelationships BetweenBrooklynUnionandLILCOInthenormalcrourseofbusiness, LILCOpurchases naturalgas,'pays gastransportation chargesandpurchase's co-'generation powerfromentitiesinwhichBrooklynUnionholdsanownership interest.
| |
| BrooklynUnionpurchases naturalgasand'paysgastransportation chargestoentitiesinwhichLILCOhasanequityinterest, andentitiesin'whichBrooklynUnionhas'anequityinterestsellelectricity toandpurchasegastransportation servicesfromLILCO.Allsuchtransactions areatarms'-length'or atratesasrequiredbylaw'.to89 SELECTEDINFORMATION CONCERNING'LILCO
| |
| "".:-,'i-"",~r,.Recomniendation's
| |
| 'oftheLILCO'Board'he LILCO,Board believesthatthetermsofeachoftheCombination and.the,LIPATransaction arefairto,and,.inthebestinterests of,LILCOanditsshareholders.
| |
| Accor'dingly, theLILCOBoard,'by,,a unanimousvote, hasadoptedthe Brooklyn.UnionlLILCO Agreement,and the,LIPAAgreem'ent,,
| |
| andunanimously=recommends theadoptionofeachbytheLILCOshareholders.
| |
| TheLILCOBoardbelievesthateachoftheCombinatio'n andtheLIPATransaction represents asignificant strategic opportunity forLILCO.'~~u'">>Theterms'oftheBrookly'n Union/LILCO Agreement, including theRatios,weretheresultofarm'-length negotiations betweenBrooklynUnionand,LILCO.InfixingtheRatiosinthenegotiation process,LILCOmanagement reliedtoalargeextentonthefinancial analysesofDillonReadsetforthbelowunder.,",Opinion ofLILCO'.sFinancial Adviser."
| |
| TheLILCO.Boardconsulted withitsfinancial advisorandlegal,advisors;and management ofLILCO.Aftercareful'review andconsideration, theLILCOBoarddetermined thatitheCombination isadesirable transaction from-,the standpoint oftheLILCOcommonshareholders.
| |
| ,InreachingitsdecisiontoapprovetheBrooklynUnion/LILCO Agreement, theLILCOBoard,considered thefollowing factors:.(i) thecurrentand,historical marketpricesoftheBrooklynUnionCommonStock;and,tlie LILCOCommonStock(including thefactthattheclosingpricesofBrooklynUnionCommonStockandLILCOCommonStockonDecember26,1996,were$30.625and$19.125,respectively; (ii)information concerning thefinancial performance condition,
| |
| : business, operations andprospects ofeachofBrooklynUnionandLILCO;,(iji) theeffectsoftheCombination onLILCO',,s shareholders, including thesignificant prenuumtoLILCO,sthencurrentmarketprice,reflected intheratioandtheopportunity toshareintheanticipated benefitsofownership ofthecombinedenterprise; (iv)theexpectedfederalincometaxtreatment, oftheCombination as,ataxableexchange'toshareholders unlesstheLIPAAgreement, isterminated priorto'theconsummation of,theCombination (asdescribed under"FederalIncomeTaxConsiderations
| |
| -MaterialFederalIncomeTaxConsequences"
| |
| );(v)theimmediate reduction ingasandelectricratestoreflectanticipated synergy,savings,as,contemp]ated,by Brookly~UnionandLILCO,andthebeliefthatcustomers, willbenefitfrom,abrqaderrangeofinnovative energyproduc~andservices; (vi)thetermsoftheBrooklynUnion/LILCO.
| |
| Agreement, whichprovideforbalancedrepresentations andwarranties, conditions toclosingandrightstotermination; and(vii)theopinionofLILCO's,'financial'a'dvisor, DillonReadthat,asof.tlie'date.'thereof.and baseduponthefactor's,and:ass'umptions described insuch'o'pinion, theOriginalRatiowas,fair~from afinancial pointofviewtothe.holdersofsharesofLILCOCommonStock.Indetermining that.the~Combination isfairtoLILCO'sshareholders, theLILCOBoardconsidered theabovefactorsasawholeand'didnotassignspecificorrelativeweightstothem.IntheviewoftheLILCOBoard,eachofthefactorslistedabovereinforced itsbeliefthatthecombinedentitywouldhaveexcellent
| |
| 'business prospects going'"forward.'-Because'ILCO's shareholders collectively
| |
| 'ouldownapproximately 66%(or68%'iftheLIPA'iTransaction isconsummated).of thecombinedentity'baseduponthecapitalization ofthecompanies asofDecember29,1996,thedateoftheOriginalAgreement; theprospects ofsuchentitywereanimportant factortotheLILCOBoardindetermining whethertoapprovethetransaction.
| |
| 1InreachingitsdecisiontoapprovetheLIPAAgreement, theLILCOBoardconsidered thefollowing factors:(i}thepurchasepricepayablepursuanttoth'eLIPAAgreement closelyapproximates thebookvalueoftheassetstobeoyvnedbyLILCOat,thetimeoftheLIPAClosing;(ii)LILCO,shareholders willcontinuetoow'nanequityinterestinthegenerating facilities andcommonplantcurrently ownedbyI;ILCO,aswellasitsgasoperations (whichhaye'enjoyed significant revenueandearningsgrowthinrecent years);(iii)consummation oftheLIPATransaction isexpectedtoresultinsubstantial electiicratedecreases whicharenotobtainable througiianyothermeans;(iv)thesaleofLILCO'sShoreham-related regulatory assets,whichLILCObelieveswouldhaveafavorable impactontheHoldingCompany's creditratingandthetradingvalueofitsequitysecurities; (v)thestructure oftheLIPATransaction includeslong-term serviceagreements pursuanttowhichsubsidiaries oftheHoldingCompanywillmanageonbehalfofLIPAtheday-to-day operation ofthetransmission anddistribution systemonLongIslandandtherebypromotethecontinued reliability ofthatsystem(including theabilitytotheHoldingCompany's entireworkforce inanintegrated fashiontoassistinrestoring serviceafterm90 storms);,(vi).the preservation ofLILCO'scurrentworkforce withoutlayoffs;,(vii) theexpectedfederalincometaxtreatment oftheLIPATransaction (asdescribed under"FederalIncomeTaxConsiderations
| |
| -MaterialFederalIncomeTaxConsequences"
| |
| );(viii)Brooklyn'Union's consentto,andsupportfor,theLIPATransaction; (ix)theincreaseintheRatio'ofHoldingCompany.CommonStockissuableintheCombination foreachshareofLILCOCommonStockfrom0.803to0.880(andtheresulting increaseofHoldingCompanyCommonStocktobeownedbyLILCOshareholders fromapproximately 66%toapproximately 68%);(x)thetermsoftheLIPAAgreement, whichprovideforreasonable representations andwarranties andrightstotermination; (xi)thesupportfortheLIPATransaction expressed publiclybyseniorNewYorkStateofficials andrepresentatives; and(xii)theopinionofDillonReadthat,asofthedatethereofandbaseduponthefactorsandassumptions described insuchopinion,theConsideration tobereceivedpursuanttotheLIPAAgreement wasfairfromafinancial pointofviewtoLILCO.TheLILCOBoardconsidered thefactthatconsummating theLIPATransaction wouldhavetheeffectofmakingtheCombination taxabletoLILCOshareholders, butdetermined thattheoverallbenefitsanticipated tobereceivedfromtheLIPATransaction outweighed thedetriment associated withthecreationofataxliability onLILCOshareholders.
| |
| Indetermining thattheLIPATransaction isfairtoLILCO'sshareholders, theLILCOBoardconsidered theabovefactorsasawholeanddidnotassignspecificorrelativeweightstothem.IntheviewoftheLILCOBoard,eachofthefactorslistedabovereinforced itsbeliefthatsuchtransaction wasfair.BecauseLILCO'sshareholders collectively wouldownapproximately 68%oftheHoldingCompany(baseduponthecapitalization ofLILCOandBrooklynUnionasofDecember29,1996)assumingtheCombination, isalsoconsummated (or100%oftheHoldingCompanyifonlytheLIPATransaction isconsummated),
| |
| theprospects oftheHoldingCompanyineacheventuality wereanimportant factortotheLILCOBoardindetermining whethertoapprovethetransaction.
| |
| THELILCOBOARD,BYUNANIMOUS VOTE,HASADOPTEDEACHOFTHEBROOKLYNUNION/LILCO AGREEMENT ANDTHELIPAAGREEMENT, BELIEVESTHATTHETERMSOFEACHOFT&JECOMBINATION ANDTHELIPATRANSACTION AREFAIRTOLILCO'SSHAREHOLDERS ANDUNANIMOUSLY RECOMMENDS THATTHESHAREHOLDERS OFLILCOVOTETOADOPTACHOFTHEBROOKLYNUNION/LILCO AGREEMENT ANDTHELIPAAGREEMENT.
| |
| NInconsidering theserecommendations oftheLILCOBoard,shareholders shouldbeawarethatcertainmembersofLILCO'smanagement andtheLILCOBoardhavecertaininterests intheCombination thataredifferent from,orinadditionto,theinterests ofshareholders ofLILCOgenerally andthatcouldpotentially represent conflicts ofinterest.
| |
| TheLILCOBoardwasawareoftheseinterests andconsidered them,amongothermatters,inadoptingtheBrooklynUnion/LILCO Agreement.
| |
| See"-Potential Conflicts ofInterests ofCertainPersonsintheBindingShareExchanges."
| |
| OpinionofLILCO'sFinancial AdvisorOnDecember29,1996,theLILCOBoardreceivedthewrittenopinionofDillonReadthat,asofthedateoftheopinion,theOriginalRatiowasfairfromafinancial pointofviewtotheholdersofLILCOCommonStock.ThefulltextofDillonRead'sopiniondatedDecember29i1996,whichdescribes theassumptions made,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtothisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead',sopiniondoesnotconstitute areconimendation toanyholderofLILCOCommonStockastohowsuchholdershouldvoteattheLILCOMeeting.HoldersofLILCOCommonStockareurgedtoreadtheopinioninitsentirety.
| |
| IIInarrivingatitsopinion,DillonReadhas,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtoLILCOandBrooklynUnion;(ii)'reviewed certainfinancial forecasts andotherdataprovidedtoDillonReadbyLILCOandBrooklynUnionrelatingtothebusinessandprospects ofLILCOandBrooklynUnion;(iii)conducted discussions withmembersoftheseniormanagement ofLILCOwithrespecttothebusinessandprospects ofLILCO;(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesSDillonReadbelievedtobegenerally comparable tothoseofLILCOandBrooklynUnion;(v)reviewedthehistorical marketpricesandtradingvolumesofLILCOmmonStockandBrooklynUnionCommonStock;(vi)comparedthe"proposed, financial termsofthebination.with thefinancial terms,ofcertainothertransactions" whichDillonReadbelievedtobegenerally 91 comparable totheCombination; (vii)analyzedtherespective contributions'in termsofrevenue,earnings, cashflow'andcommonequityofLILCOandBrooklynUnion'othecombinedcompany,andtherelativeownership oftheHolding'Company.,
| |
| aftertheCombination bythecurrentholdersofLILCOCommonStockandBiooklynUnionCommonStock;,(viii);considered theproformaeffectof theCombination, on.LILCO'scapitalization ratios,earnings, cashflowandbookvaluepershare;(ix)revieWedthe,OriginalAgreement and(x)conducted suchotherfinancial studies,analysesandinvestigations, and,.considered suchother.infqrmation, aswasdeemednecessaryor appropriate.,
| |
| ~p~Inconnection withitsreview,DillonReaddidnotassumeanyresponsibility forindependent verification ofanyoftheforegoing information andrelied,withtheconsentofLILCO,onsuchinformation beingcompleteand,accurateinallmaterialrespects.
| |
| Inaddition, Dillon,Readdid,notmakeanyindependent evaluation orappraisal, ofanyoftheassets.or,liabilities (contingent orotherwise) ofLILCOorBrooklynUnionoranyoftheirrespective subsidiaries, norwasDillonReadfurtiished withanysuchevaluation orappraisal; Withrespecttothefinancial forecasts referredto,aboye, DillonRead,with LILCO'sdirection, assumedthatthey,hadbeenreasonably preparedonbases.reflecting thebestcurrently available estimates andjudgments'f LILCO',sandBrookly'n Union'smanagement astothefuture"financial performance ofeach,company.ForitsDecember29,1996opinion,DillonRead'sreviewofBrooklynUnion'scurre'ntandanticipated future'operations, financial condition andprospects wasbasedentirely,.on publicinformation (exceptforcertainlimiteilinternalprojections referredto"above),and%a'stherefore limitedinscope.DillonReaddidnothold'discu'ssions withanymembersofBrooklynUnion'sseniormanagement in'connection withitsDecember29,1996'"opinion.
| |
| DillonReadassu'med, initsDecember'29, 1996opinion,'the transaction
| |
| 'wouldbetreatedastax-free'to both'I'.ILCO'ahd holdersofLILCOCommonStockandwouldbeaccounted forasapoolingofinteres'ts.
| |
| Further,DilloiiRead'sopinionwasbasedoneconomic,
| |
| : monetary, andmarketconditions existingonthedatethereof.II'tiN'HTheOriginalRatioandtheLIPARatioweredetermined througharm'-length negotia'tions betwee'nLILCOaridBrooklynUnion.LILCOdidnotplace'any limitatioris uponDillonReadregarding theprocedures" tobefollowedorfactorsto'beconsidered inrendering itsopinion.DillonReadhasnot'beenrequested tosolicit,norhasitsolicited, offers'or'LILCO fromthirdparties.1'nconnection withrendering itsopinionDillonReadconsidered avarietyofvaluation methodswhicharesummarized below.Thefollowing summary,describes the,analysesperformed byDilfonReadinthisregardandiiscompleteinallmaterialrespects.
| |
| StockTradingHistory.DillonReadreviewedtheperformance ofthe,persharemarket,priceofLILCOCommonStockandBrooklynUnionCommonStockovertheperiodfromDecember31,1993toDecember24,1996.DillonReadalsocalculated theratioofthepersharemarketpriceofLILCOCommonStocktothepersharemarketpriceofBrooklynUnionCommonStockovertheperiod.Thisanalysisshow'edthatovertheperiod,LILCOCommonStocktr'adedataratio'ashighas0.927andasloveas0.560comparedtotheprice'ofBrooklynUriionCommonStock.Thisanalysiswasu'tilized toprovidehistorical perspective fortheman'nerin'whichthepublictradingmarkethad'valued LILCOandBrooklynUnionrelativetoeachother';~II'III'Corilnbution A/i'aiysis.
| |
| DillonReadcalculated the'contrib'ufion ofeachof'LILCOandBrooklynUniontotheHoldin'gCompany.with'respecttooperating revenu'es,
| |
| 'oper'ating cashflow(earnings beforeinterest, taxes,depreciation andamortization, "EBITDA"),
| |
| netincome,cashflowfroinoperations (definedascashpiovidedbyoperating activities beforechangesinworkingcapital),
| |
| projected year,2000netincome,netproperty,,plant, andequipment, totalassets,totaldebt,bookvalue,ofcommonequity,total,capitalization, netdebt,(definedastotaldebt lesscashequivalents),
| |
| andnetbookcapitalization (definedasbookcapitalization lesscashequivalents) forthelatesttwelvemonthperiodorasoftheilatest,balance sheet,date.Inaddition, DillonReadcalculated therelativevaluation contribution ofeach;ofLILCOandBrooklyn, UniontotheHoldingCompanywithrespecttothemarketvalueofcommonequityasof,,December 24,1996,themarketvalueofcommonequityasofOctober3,1996(oneweekprior,'to thepublication, ofreportswhich.suggested, thatatakeoverofLILCObyLIPAwouldneed'obeinitiated byyear-end1996tobesuccessful),
| |
| thecomparable companytradinganalysisvaluation, thediscounted cashflowanalysisvaluation.
| |
| Thesecalculations yieldedamountsreflecting LILCO'scontribut 92 trangingfrom59.9percentto88.4percentofthetotal'pro forma.combined amount.BasedontheOriginalRatioof0.803,theholdersofLILCOCommonStockwillownapproximately 66percentofHoldingCompanyCommonStock.BasedontheLIPA'atio of0.880,theholdersofLILCOCommonStockwillownapproximately 68percentofHoldingCompanyCominonStock.Comparable CompanyTradingAnalysis.
| |
| Usingpubliclyavailable informationDillon Readcompared, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchasnetincome,projected netincome,(medianearningspershareestimates for1996,1.997and1998reportedbyInstitutional Broker'EstimateSystemorbasedonInstitutional BrokersEstimateSystemestimates andexpected5-yearearningspersharegrowthratesfromZacksInvestment
| |
| : Research, Inc.),revenues, earningsbeforeinterestandtaxes("EBIT"),
| |
| EBITDA,cashfiowfromoperations andthebookvalueofcommonequityofLILCOaridBrooklynUniontocertainothercompanies which,inDillonRead'sjudgment, weregenerally comparable toLILCOandBrooklyn'Union forthepurposeofthisa'nalysis.
| |
| ThefactorsDillonReadconsidered inselecting companies forcomparison includedsize,geographic
| |
| : location, financial condition andscopeofbusinessoperations.
| |
| ForLILCO,thecompanies usedinthecomparison consisted ofConsolidated EdisonCompanyofNewYork,Inc.,NewYorkStateElectric&GasCorporation, NewEnglandElectricSystem,Northeast Utilities,'ublic ServiceEnterprise GroupIncorporated, andRochester GasandElectricCorporation.
| |
| ForBrooklynUnion,thecompanies usedinthecomparison consisted ofAGLResources, Inc.,MCNEnergyGroupInc.,NICORInc.,PeoplesEnergyCorporation, andWashington GasLightCompany.HbEquitymarketvalues(definedasthemarketpricepercommonsharemultiplied bytheoutstanding numberofcommonshares)asamultipleofeachoftheindicated statistics forL'ILCOandBrooklynUnion,respectively, wercasfollows:(i)latest12-month"netincome-8.8xand17,1x(ii)projected oractual1996netincome-9;Oxand'17.1x",(iii)projected 1997netincome-8.8xand14.6x;(iv)projected 1998netincome-8,7xand13.4x;(v)latest12-monthcashflowfromoperations
| |
| -2.6xand7.6x;and'(vi)bookvalueofcommonequityonSeptember 30,1996-0.91xand1.70x.Netmarketcapitalizations (definedasequitymarketvalueplusthebookvalueofdebtandpreferred stocklesscashandcashequivalents) asamultipleofeachoftheindicated statistics forLILCOandBrooklynUnion,respectively, wereasfollows:(i)latest12-monthrevenues-2.4xand1.6x;(ii)latest12-monthEBITDA-6.1x'and9.2x;andi(iii) latest12-monthEBIT-8.0xand13.5x.Thiscomparison wasusedtoprovideaperspective onthepresentmarketvaluation ofeachofLILCOandBrooklynUnion.1khITherangeandmeanfortheequitymarketvalueasamultipleofeachoftheindicated statistics forthegroupsofcomparable companies forLILCOandBrooklynUnion,respectively,'were.
| |
| asfollows,(i)latest12-monthnetincome:forLILCOcomparables
| |
| -7.9xto11.4xwithameanof10.0x;forBrooklynUnioncomparables
| |
| -11.1x-to17.4xwithameanof15.4x;(ii)projected oractual1996netincome:forLILCOcomparables
| |
| -8.3xto18.3xwithamean.of11.1x;forBrooklynUnioncomparables
| |
| -11.1xto17.8xwithameanof15.6x;(iii)projected 1997netincome:forLILCOcomparables
| |
| -'8.2xto10.7xwithameanof9.7x',forBrooklynUnioncomparables
| |
| -13,3xto16,0xwithameanof14.5x;(iv)projected 1998netincome:forLILCOcomparables
| |
| -7.9xto10.5xwithameanof9.5x;forBrooklynUnioncomparables
| |
| -12.5xto14.7xwithameanof13.6x;(v)latest'12-month cashfiowfromoperations:
| |
| forLILCOcomparables
| |
| -2.0xto5.9x;withameanof4.2xforBrooklynUnioncomparables
| |
| -6.0xto7.8x,.with'amean:of7.0x;and(vi)"bookvalueofcommonequity'nSeptember 30,1996:"forLILCOcomparables
| |
| -"0.70xto1.33$withameanof1.04x;forBrooklynUnioncomparables
| |
| -1;70xto2.65xwithameanof2.06x.PPTherangeandmeanfornetmarketcapitalization asamultipleofeachoftheindicated statistics forthegroupsofcomparable companies'or LILCOandBrooklynUnion,respectively, wereasfollows:-(i) latest12-monthrevenues:
| |
| forLILCOcomparable' 1.4xto2.1xwithamean'f1.7x;forBrooklynUnioncomparables-1,4xto1.8xwithameanof1.6x;(ii)latest'12-month EBITDA."for LILCOcomparables
| |
| -4.7xto6.5xwithameanof5.6x;forBrooklynUnioncomparables
| |
| -6.7xto9.6xwithameanof8.0x;and(iii)latest12-monthEBIT:forLILCOcomparables
| |
| -6.9xto10.2xwithameanof8.4x;forBrooklynUnioncomparables
| |
| -8.5xto5.8xwithamean'f11.8x.Thecomparable companytrading.analysisisavaluation method:-used byDilloneadtodetermine whetherLILCOorBrooklyn'nion werereasonably valuedatexistingmarketpricesin93 relationtosimilarcompanies andinrelationtoeachother.DillonReadconcluded thatbothLILCOandBrooklynUnionwerereasonably valuedatexistingmarketpricesin.relationtosimilarcompanies andinrelationtoeachother.DillonReadbelievesthatthisanalysissupportsDillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfromafinancial pointofview.Comparable UtiVityTransactions, Analysis.
| |
| Usingpubliclyavailable information, DillonReadcomparedcertaintermsof.mergerssimilartothetransaction betweenLILCOandBrooklynUnion.DillonReadcomparedtherelativeownership andmarketpremiuminrecentutilitymergers-of-equals transactions andelectric/gas utilitycombinations which,inDillonRead'sjudgmentwerecomparable totheCombination forthepurposeofthisanalysis.
| |
| Themerger:of-equals transactions, whichwereanalyzedincludedonecompleted transaction (MidwestResources" Inc.andIowa-Illinois Gas&Electric, Company)andfourpendingtransactions (Delmarva
| |
| 'Power&LightCompanyandAtlanticEnergyInc.;Baltimore Gas&ElectricCompanyandPotomacElectricPowerCompany;PublicServiceCompanyofColoradoandSouthwestern PublicServiceCompany;andNorthernStatesPowerCompanyandWisconsin EnergyCorporation).
| |
| Theelectric/gas utilitycombinations whichwereanalyzedincludedfivependingtransactions (PugetSoundPower&LightCompanyandWashington EnergyCompanyInc.;DukePowerCompanyandPanEnergy Corp.;EnovaCorporation andPacificEnterprises Inc.;HoustonIndustries Incorporated andNorAmEnergyCorp;;,and EnronCorp.andPortlandGeneralCorporation).
| |
| 4Withrespecttorelativeownership, incomparable mergers-of-equals transactions, the.largercompanyineachmergerreceivedbetween50percentand62percentofthecombinedcompany.Incomparable electric/gas combinations, theelectriclpartner receivedbetween48.percent and83percentofthecombinedcompany.Incomparison, LILCOshareholders willownapproximately 66or68percentoftheHoldingCompanyaftertheCombination.
| |
| Withrespecttothemarket;premium,inrecentmergers-of-equals transactions, thelargercompanypaidapremiumtotheclosing,marketpriceonthedaybeforethemergerannouncement ofbetween0.3percentand23,3percent.Inelectric/gas combinations, thelargercompanypaidapremiumtotheclosingmarketpriceonthedaybeforethemerger'nnouncement ofbetween11.4percentand48.8percent.LILCO,asthejargercompany,willreceivea29percentpremiumtotheclosingmarketpriceon..the'day beforetheannouncement oftheOriginalAgreement.
| |
| DillonReadbelievesth'atthisanalysis-supports DillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfromafinancial pointofview.IDiscounted CashFlowAnalysis.
| |
| DillonReadperformed adiscounted cashflowvaluation baseduponprojections furnished bythemanagements ofLILCOandBrooklynUnion.Withrespecttoprojections forLILCOandBrooklynUnion,DillonReadassumed.thatsuchprojections werereasonably prepareduponbasesreflecting thebestavailable estimates andjudgments ofthemanagements ofLILCOandBrooklynUnion,respectively.
| |
| Utilizing theseprojections, DillonReaddiscounted toapresent.value,undervaryingassumeddiscountrates,(i)thefreeunleveraged cashflowsthroughtheyear2001forLILCOandthroughtheyear2002forBrooklynUnionand(ii)theprojected
| |
| : terminal, valueat,theend,oftheyear2001forLILCOandattheendoftheyear2002forBrooklynUnion,utilizing variousassumedmultiples ofoperating cashflow(EBITDA)andoperating income(EBIT).This.analysisindicated that,assumingdiscountratesrangingfrom8.0percentto9.0percentfor'LILCO andterminalvaluemultiples, rangingfrom5.5xto6.5xforEBITDAand7.5xto9.5xforEBIT(asindicated bycomparable companytradinganalysis),
| |
| the.netafter-tax presentvalueofthefuturecashflowsrangedfrom$15.24to$28.53pershareforLILCO,onastahd-alone basis.Thisanalysisalsoindicated that,assumingdiscountratesrangingfrom8.0percentto9.0percentforBrooklynUnionandterminalvaluemultiples rangingfrom7.0xto9.0xforEBITDAand11.0xtol3.0xforEBIT(asindicated bycomparable companytrading'analysis),
| |
| thenetafter;tax presentvalue,offuturecashflowsrangedfrom$23.85to$41.54pershareforBrooklynUniononastand-alone crasis.Thediscounted cash'flow analysisisavaluation methodusedbyDillonReadtodetermine whetherLILCOandBrooklynUnionwerereasonably valuedinrelationtoeachother.DillonReadbelievesthatthisanalysissupportsDillonRead'sviewthattheOriginalRatiowasfairtotheholdersofLILCOCommonStockfromafinancial pointofview.'IProFormaAnalysis.
| |
| DillonRead,reviewedcertainproformafinancial information forthecombineentityresulting fromtheCombination basedonLILCO'sandBrooklynUnion'smanagements'rojectio 94 coveringtheperiodfrom1997to2000.Withrespect.toprojections forLILCOandBrooklynUnion,DillonReadassumed'that suchprojections werereasonably prepareduponbasesrefiecting thebestavailable estimates andjudgments ofthemanagements ofLILCOandBrooklynUnion,respectively.
| |
| Thisanalysisindicated thatearningspershareresulting fromashareexchangeattheOriginalRatioof0.&03wouldbedilutivetoLILCOshareholders overtheperiodanalyzed.
| |
| DillonReadalsoperformed anearningspersharesensitivity analysis.
| |
| Forthepurposeofthisanalysis, DillonReadassumedthatLILCOelectricratesonastand-alone basiswerereduced10percent.The10percentreduction isbaseduponpublic:pronouncements byrelevantpartiesofthemagnitude ofratereduction necessary forLILCO'selectriccustomers.
| |
| It.shouldbenotedthatthisanalysis.
| |
| wasforillustrative purposesonlyandthatthistransaction isnot.conditioned onsucharatereduction.
| |
| Usingthisassumption, theearningspersharesensitivity analysisindicated thatearningspersharewouldbeaccretive toLILCOshareholders overtheperiodanalyzed.
| |
| Preliminary estimates ofsavingsrelatedtothecombination ofLILCOand'Brooklyn Unionasidentified bythemanagements ofthetwocompanies weredeveloped toquantifyefficiencies resulting fromoperating synergies, plantconstruction deferrals andgreatereconomies ofscaleinthepurchasing of-fuelandotherresources usedbyLILCOandBrooklynUnion.Thesepotential pre-taxsavings(aftercertaincosts)ofapproximately
| |
| $1billion'ver tenyearswereassumedtoflowtoratepayers andwillbenefittheHoldingCompany's shareholders onlythroughimprovedcompetitive position(duetolowerrates).DillonReaddidnotindependently attempttoverifytheestimated savingslevels,nordidDillonReadattemptitsownestimation ofpotential costsavingsresulting fromtheCombination.
| |
| Initsanalysis, DillonReadassumedthatallofthetotalcostsavingswouldbeflowedthroughtoratepayers.
| |
| IftheHoldingCompanywereallowedbyone,ormoreregulatory authorities toretainanyofthecostsavings,theresulting projected earningswouldbecorrespondingly higher.LIPATransaclion AnalysisOnJune26,1997,theLILCOBoardreceivedDillonRead'swrittenopinionthat,asofthedateoftheopinion,theConsideration wasfairfromafinancial pointofviewtoLILCO,ThefulltextofDillonRead'sopiniondatedJune26,1997,whichdescribes theassumptions made,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtothisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead'sOpiniondoesnotconstitute arecommendation toanyholderofLILCOCommonStockastohowsuchholdershouldvoteattheLILCOMeeting.HoldersofLILCOCommonStockareurgedtoreadtheopinionlnitsentirety.
| |
| Inarrivingatitsopinion,DillonReadhas,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtoLILCO,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtoitbyLILCO,including historical andprojected financial information fortheT&DBusiness, theNuclearAssetsandtheRegulatory Assets(eachasdefinedherein),(iii)conducted discussions withmembersoftheseniormanagement ofLILCOwithrespecttothebusinessandprospects ofLILCO,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinessDillonReadbelievedtobegenerally comparable totheT&DBusiness, (v),comparedpubliclyavailable financial andstockmarketdataforcertainutilities withhighconcentrations ofnucleargeneration tocertainutilities withlittleornonucleargeneration, (vi)reviewedthefinancial, termsofcertaintransactions involving transmission anddistribution assets,(vii)considered theproformaeffectoftheLIPATransaction ontheHoldingCompany's financial condition, (viii)reviewedtheLIPAAgreement, (ix)considered thefinancial termsoftheBasicAgreements (asdefinedherein),(x)considered theeffectoftheLIPATransaction onthependingBrooklynUnion/LILCO Agreement, and(xi)conducted suchotherfinancial studies,analysesandinvestigations,,and considered suchotherinformation, asDillonReaddeemednecessary.
| |
| orappropriate.
| |
| Inconnection withitsreview,DillonReaddidnotindependently verifyanyoftheforegoing information nd,withtheconsentoftheLILCOBoardofDirectors; reliedonitbeingcompleteahdaccurateinallmaterialspects.Inaddition, DillonReaddidnotmakeanyindependent evaluation orappraisal ofanyoftheassetsor95 liabilities (contingent orotherwise) ofLILCOoranyofitssubsidiaries, norwasDillonReadfurnished withanysuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,DillonRead,withLILCO'sdirection, assumedthattheyhadbeenreasonably'prepared onbasesreflecting thebest'urrently available estimates andjudgments ofmanagement astothe,fUturefinancial performance ofLILCO,LILCO'stransmission anddistribution business("T&DBusiness"
| |
| ),certainregulatory'assets,("
| |
| Regulatory Assets")andLILCO's18%interestintheNineMilePoint2nuclear.powerplant(the"NuclearAssets").DillonReadalso,.atLILCO'sdirection, reliedonLILCO'sadviceregarding thetaxconsequences oftheLIPATransaction.
| |
| DillonReaddidnotattempttoq'uantify theregulatory'risk inherentintheRegulatory Assets,whichwillcompriseamajority.
| |
| oftheassetsLILCOwillownimmediately priortotheLIPATransaction.
| |
| Further,DillonRead'sopinionwasbasedoneconomic, monetaryandmarketconditions existingonthedatethereof.~,t,fTheConsideration wasdetermined througharm'-length negotiations betweenLILCOandLIPA.LILCOdidnot'.place any,.limitations, uponDillonReadregarding-,the, procedures.,to befollowedor,factorstobeconsidered inrendering itsopinion.DillonReadhasnot.beenrequested tonorhasitsolicited offersforLILCOorany'ofitsbusinesses orassetsfromthirdparties.,,,Inconnection, withrendering itsopinion,DillonReadconsidered avarietyofvaluation methodswhicharesummarized below.Thefollowing summarydescribes theanalyses, performed byDillonReadinthisregardandiscompleteinall.material respects.:
| |
| '4iT&DBusinesstv'IComparable CompanyTradingAnalysis.
| |
| DillonReadobservedthatcur'rently nopubliclytradedcompanies consisting solelyofelectrictransmission anddistribution businesses exist.DillonReaddetermined thatgasdistribution companies andwaterutilities havesimilarbusinessandregulatory chmacteristics andshouldtherefore provideareasonably comparable basisforanalysis.
| |
| Usingpubliclyavailable information, DillonReadcompared, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchasbookvalue'ofcommonequityofLILCO'sT&DBusinesstocertairiothercompanies which,inDillonRead'sjudgment, weregenerally comparable forthepurposeof'thisanalysis.
| |
| Thefactor'sDillonReadconsidered inselecting companies forcomparison includedsize,geographic
| |
| : location, financial condition andscopeofbusinesstoperations.
| |
| Thewaterutilitycompanies usedinthecomparison consisted ofAmericanWaterWorks.Company,Inc.,AquariunCompany,Consumers WaterCompany,Philadelphia SuburbanCorporation,'Southern California WaterCompanyand"United%'aterResources, Inc.The,gasdistribution companies used'nthecomparison consisted ofAGLResources Inc.,BrooklynUnion,MCNEnergyGroupInc.,'ICOR Inc.,'eoples EnergyCorporation, andWashington GasLightCompany.\Therangeforthee'quitymarketvalueasamultiple'of bookvaluefor'hegasdistribution companies was1.5'to'2.4 times'and forthewaterutilitycompanies was1.4-to2.0time'.Themedianwas1.8timesforthegaddistribution companies and1.6tim'esforthewaterutilitycompanies.'Dillon Readappliedr'atiosof1.7'to2.0timesand1.4to1.6times,respectively; totheimputedbookvalueofthef&DBusiness,'resulting inanimpliedvaluefortheT&DBusinessof$920millionto$1,082millioninthecase'ofthegasdistribution companies'nd
| |
| $758millionto$866"millioninthecaseofthewaterutilitycompanies.
| |
| C4Comparable Transactions Analysis.
| |
| Usingpubliclyavailable information, DillonReadcomparedceitaintermsoftransactions involving thesaleofelectrictransmission anddistribution properties totheLIPATransaction.
| |
| DillonReadalso'onsidered thattherehavebeenasyetveryfewsaletransactions of-transmission anddistribution assetsforwhichpublicinformation isavailable.
| |
| Thetransactions DillonReadincludedinitsanalysiswere:Southwestern PublicServiceCompany's acquisition ofpropertyfromTNPEnterprises; Inc.;UnionElectricCompany's saleofproperties toIESIndustries Inc.andCIPSCOIncorporated; andUtilicorp United'sacquisition ofpropertyfromCentelCorporation.
| |
| g1Thetransactions-hhd a.rangeofprice-to-book multipleof'1.6to-2.0times'.,Dillon Readappliedthesmultiples totheT&DAssets,resulting inan,impliedvalueof$866million,to
| |
| $1,082million,96
| |
| ~Regulatoiy AssetsIII~iIIDiscounted CashFlowA'nalysis.
| |
| DillonR'cadpeiformed a'is'counted cashflow'valuation of'theRegulatory Assetsbaseduponprojections furnished bythemanagement ofLILCO.Withrespect'to projections, DillonRead,assumedthatsuchprojections werereasonably nrepareduponbasesreflecting the,bestavailable h~'nl"~~.IIestimates andjudgments ofthemanagement ofLILCO.Utilizing theseprojections, DillonReaddiscounted toapresentvalue,underassumed'discount ratesrangingfrom7.65percentto11percent,thefreeunleveraged cashflowjfortheremaining
| |
| 'lives,of,theRegulatory Assets.ThisanalysisiritIicated thatthenetafter-tax presentvalueoffuturecashflowsrangedfrom'$742 millionto$1,600million,afterdeducting the,tmputed debtandprefeired stock.NuclearAssets.'Dillon,Readobservedth'atcurrently no'publicly tradedutilities withexclusively nuclearget)eration assetsexist,andtodatether'avenot.beenanysaletrans'actions irivol'ving only'uclea'r assets.Therefore, DillonReadreliedonlimitedpublicinformation toestablish'a valuation rangefortheNuclearAssets.DillonReadcomparedthemedianmarket-to-book ra'tioofelectric'utilities withhighconcentrations ofnuclearassetstothosewithlittleornonuclearassets".Electricutilities weredividedintothreecategories:
| |
| thosewhere'generating capacitywascomyrIsed of>40%qrmorenuclear,,generation
| |
| ("Concentrated NuclearGroup"),.thefiveutilities wjththelargestabsoluteamount,of nuclear>generation
| |
| ("LargeNuclearGroup"),andthosewithnoor,insignificant amountsofnIjcIeargeneration
| |
| (,"Pop-nuclear Group".,).
| |
| The,Concentrated NuclearGroupwascomprised,of Rochester Gas&ElectricCorporation, UnicornCorporation,,Peco Energy,CompanyandDukePowerCompany.ThyLargeNuclearGroupwascomprised ofUnicornCorporation, DukePowerCompany,EntergyCorporation, PecoEnergyCompanyandTheSouthernCompany.TheNon-nuclear Groupconsisted of40utilities throughout theUnitedStatesofvaryingsizeandcharacteristics, selectedonlyonthebasisofnoorinsignificant nuclearexposure.
| |
| The.medianmarket-to-book ratio:for.
| |
| eachgroup'was:
| |
| .99timesfortheConcentrated NuclearGroup,.96fortheLargeNuclearGroup,and.1.65forthe'on-'nuclear Group.'n.:average, both'roups ofnucleartutilities",.traded atadiscount'.to non-nucleai utilities ofbetween24%.and42%.'illon, Readcalculated, aniinpliedyalue,oftheNuclearAssetsbymultiplying amarket-to-book ratioof,9,to,1.0,timestheimputedboo/valueoftheNuclearAssets.The,imputedbook~valuewas,calculated bymultiplying the,bookvalueof(heassetsby39%,whichIepresepted thecommonetluiIycomponent ofLILCO'scapjtalizatjon,,'Jhis calculation resultedinanimpliedmarketvalueoftheNuclearAssetsof$241millionto$267mflljon,',
| |
| Pro'For'ma An'alysis
| |
| '.Dillongepd;compared LILCO'sDecember,31, 1997projected.
| |
| stand-alone balance'sheetto,aproformaLILCO,balance sheetforthesamedateadjustedfortheLIPATransaction.
| |
| DillonReadobservedthattotalassets,of>PILCO woulddeclineasa~result, oftheLIPATransaction fromapproximately
| |
| $11.6billion,toapproximately
| |
| $4.3billion,largelyasaresultofregulatory assetsdeclining fromapproximately,$
| |
| 6.6billionto,approximately
| |
| $141million.DillonReadalsoobservedthatLILCOwouldhavenonetdebt(totaldebtminuscash)asaresultof-:the~'LIPA Transaction,'Dillbn Read'believ'ed, therefore, thattheLIPA'ransaction wouldresultinanimprovement in'LILCO's projecte'd financial condition.
| |
| *Usingpubliclyavailable information, DillonReadcalculated, baseduponmarkettradingvaluesatthetime, multiples ofcertainfinancial
| |
| : criteria, suchaslatesttwelvemonthsrevenues, operating cashflow,opeiating income,.cashflowfromoPerations, and1998estimated>net incomeforcertain.companies inlinesofbusiness.comparable tothose.LILCO isexpectedtobeinvolvedinaftertheLIPATransaction.
| |
| WhileLILCOwill'beengaged'in thegeneration ofelectricity andthemanagement ofanelectric:transmission anddistribution system,the'majority, of,itsearningsareexpectedtobederivedfromthe,gasdistribu'tion business.
| |
| DillonReadtherefore
| |
| .'used.as:itsgroupoficomparable companies gasdistribution.
| |
| companies, specifically AGLResources Inc.,IBrooklyn Union,'MCN Corporation, NICORIncPeoples EnergyCorporation andWashington GasLightompany.Iniselecting companies'.for comparisons, DillonReadalsoconsidered size,geographic.
| |
| locationandnancialcondition.
| |
| Themultiples.for thisgroupofcompanies rangedas"follows:
| |
| netmarketcapitalization to97 revenue-1.2to1.9;netmarketcapitalization tooperating cashflow-6.8to10.7;netmarketcapitalization'to operating income-9.9to19.0;equitymarketvaluetoestimated 1998netincome-12.6to14.7;and.equity marketvaluetolatesttwelvemonthscashflowfromoperations
| |
| -6.5to8,4.IIDillonRead,initsjudgment, baseduponthebusinessmixofLILCOcomparedtothecomparable companies,'applied multiples generally atthelowendoftherang'eforcomparable companies totheresultsforLILCOproformafortheLIPATransaction (andbeforeanyincomefromthereinvestment ofthecashproceedsfromtheLIPATransaction) toarriveatimpliedvaluesforLILCO.Themultiples appliedandtheresulting impliedvalueswereasfollows:ImpliedMultlples ValuesApplied(millions)
| |
| Revenues.1.3-1.4$761-$931Operating CashFlow...............
| |
| 6.8-7.5$681-$899Operating Income.....
| |
| 10.0-11.0$859-$1,089NetIncome.....12.5-13.2$975-$1,030CashFlowfromOperations
| |
| ..............
| |
| 6.5-7.0$1,014-$1,092DillonReadconsidered thefactthatpUrsuanttotheBrooklynUnion/LILCO Agreement, thenumberofsharesLILCOshareholders wouldreceiveinrespectofeachoftheirsharesofLILCOCommonStockwouldbeincreased from.803to.880asaresultoftheLIPATransaction.
| |
| TheLILCOshareholders'wnership oftheHoldingCompanywouldtherefore beincreased from66%to68%.FUpdatedOpinionTheLILCOBoardhasreceivedanupdatedopinionfromDillonReadthat,asofthedateofthisJointProxyStatement/Prospectus, theOriginalRatioandtheLIPARatiowerefairfromafinancial pointofviewto-theholdersofLILCOCommonStock.ThefulltextofDillonRead'.sopiniondatedJune26,1997,whichdescribes theassumptions made,mattersconsidered andlimitsonthereviewundertaken, isattachedheretoasAnnexFtthisJointProxyStatement/Prospectus andisincorporated hereinbyreference.
| |
| DillonRead'sopiniondoesnoconstitufe arecommendation toanyholderofLILCOCommonStockastohow'suchholdershouldvoteattheLILCOMeeting.HoldersofLILCOCommonStockareurgedtoreadtheopinioninitsentirety.
| |
| Inadditiontoupdatingtheanalysesdescribed aboveoftheOriginalRatio,DillonRead,initsupdatedopinion,considered thefinancial consequences theLIPATransaction wouldhave,ifconsummated, ontheCombination.
| |
| Specifically, DillonReadconsidered thattheLIPATransaction wouldresultin;(i)purchaseaccounting beingapplied,ratherthanpoolingaccounting, whichDillonReadassumedwouldbeapplicable intheabsenceoftheLIPATransaction; (ii)theconsideration receivedbytheholdersofLILCOCommonStockbecomingtaxable,whereasDillonReadassumedthatintheabsenceoftheLIPATransaction theCombination wouldbetax-free; and(iii)anincreaseintheexchangeratiotobereceivedbytheholdersofLILCOCommonStockto.880,from.803intheabsenceoftheLIPATransaction.
| |
| Inconnection withrendering itsupdatedopinion,DillonReadconsidered avarietyofvaluation methods,including thosedescribed above.Inaddition, DillonReadperformed theanalysessummarized'below,,-
| |
| ProFormaAnalysisDillonReadcomparedLILCO'sDecember31,1997projected stand-alone balancesheettoaproformabalancesheetforthecombinedentityresulting fromtheCombination forthesamedateadjustedfortheLIPATransaction.
| |
| DillonReadobservedthattotalassetsoftheHoldingCompanywouldbeapproximately
| |
| $7.0billioncomparedtoapproximately
| |
| $11.6billionforLILCO.Themajorreasonforthedeclineinassetswasthereduction inregulatory assetsfromapproximately
| |
| $6.6billiontoapproximately
| |
| $141million.DillonReadalsoobservedthattheHoldingCompanywouldhavenetdebt(totaldebtminuscash)ofapproximately
| |
| $349millioncomparedtoapproximately
| |
| $5.3billionforLILCO.DillonReadbelieved, therefore, thattheHoldingCompanywouldhavanimprovedprojected financial condition ascomparedtoLILCOstand-alone.."
| |
| 98 tComparable CompanyTradingAnalysisUsingpubliclyavailable information, DillonReadcalculated, baseduponmarkettradingvaluesatthetime,multiples ofcertainfinancial
| |
| : criteria, suchaslatesttwelvemonthsrevenues, operating cashflow,operating income,cashflowfromoperations, and1998estimated netincomeforcertaincompanies inlinesofbusinesscomparable tothosetheHoldingCompanyisexpectedtobeinvolvedinaftertheCombination andtheLIPATransaction.
| |
| Whilesubsidiaries oftheHoldingCompanywillbeengagedinthegeneration ofelectricity'and themanagement ofanelectrictransmission anddistribution system,themajorityofitsearningsareexpectedtobederivedfromthegasdistribution business.
| |
| DillonReadtherefore usedasitsgroupofcomparable companies gasdistribution companies, specifically AGLResources Inc.,BrooklynUnion,MCNCorporation, NICORInc.,PeoplesEnergyCorporation andWashington GasLightCompany.Inselecting companies forcomparison, DillonReadalsoconsidered size,geographic locationandfinancial condition.
| |
| Themultiples forthisgroupofcompanies rangedasfollows:netmarketcapitalization torevenue-1.2to1.9;netmarketcapitalization tooperating cashflow-6.8to10.7;equitymarketvaluetoestimated 1998netincome-12.6to14.7;andequitymarketvaluetolatesttwelvemonthscashflowfromoperations
| |
| -6.5to8.4.,DillonReadappliedmultiples withintherangeforcomparable companies tothe1998projected resultsfortheHoldingCompanyproformafortheLIPATransaction (andbeforeanyincomefromthereinvestment ofthecashproceedsfromtheLIPATransaction) toarriveatimpliedtradingvaluesfortheHoldingCompany(beforeassigning anyvaluetocash).Themultiples appliedandresulting impliedvalueswereasfollows:ImpliedValuesforhfultlples theHoldingAppliedCompany1,.4-1.5$12.72-$14.617.0-8.0$12.71-$16.5010.0-12.0
| |
| $14.59-$20.2613.5-15.0
| |
| $16.55-$18.396.5-7.0$14.83-$15.97'4Revenues.Operating CashFlowOperating Income...........
| |
| NetIncomeCashFlowfromOperations
| |
| ...*Basedonthe.880exchangeratioTransaction.
| |
| andbeforeassigning anyvaluetothecashImpliedValuespershareofLILCO~$11.19-$12.86$11.18-$14.52$12.84-$17.83$14.57-$16.18$13.05-$14.05proceedsfromtheLIPADillonReadthencalculated theafter-tax cashproceedsthattheHoldingCompanywouldreceivepursuanttotheLIPATransaction, dividedsuchamountbytheexpectedsharesoutstanding oftheHoldingCompany,andmultiplied theresultbythe.880exchangeratiotoarriveatacashamountperLILCOshare.DillonReadaddedsuchpershareamounttotheimpliedvaluesperLILCOshareresulting fromtheComparable CompanyTradingAnalysistoarriveatatotalvalueperLILCOshareof$23.32to$26.40.Finally,DillonReadcomparedsuchimpliedvaluetoLILCO'sstockpriceonDecember27,1996(thelasttradingdatepriortotheannouncement oftheCombination) of$19.375andnotedthattheimpliedvaluewashigherbybetween20and36percent.Thepreparation ofafairnessopinioninvolvesvariousdeterminations astothemostappropriate andrelevantmethodsoffinancial analysis=and theapplication of,thesemethodstoparticular circumstances, and,therefore, the,opinionandanalysisarenotreadilysusceptible tosummarydescription.
| |
| Accordingly, notwithstanding theseparatefactorsandanalysessummarized above,DillonReadbelievesthatitsanalysesmustbeconsidered asawholeandthatselecting portionsofitsanalysesandotherfactorsitconsidered, withoutconsidering allfactorsandanalyses, couldcreate'amisleading viewoftheevaluation processunderlying itsopinions.
| |
| DillonReaddidnotassignanyparticular weighttoanyanalysisorfactoritconsidered but,rather,madequalitative judgments basedonitsexperience inrendering suchopinionsandoneconomic, monetaryandmarketconditions thenpresentastothesignificance andrelevance ofeachanalysisandfactor.Initsanalyses, DillonReadassumedrelatively stableindustryperformance, regulatory environments andgeneralbusinessandeconomicconditions, llofwhicharebeyondLILCO'scontrol.Anyestimates contained inDillonRead'sanalysesdonotnecessarily dicateactualvalue,whichmaybesignificantly moreorlessfavorable thanstatedtherein.Estimates ofthe99 financial valueofcompanies donotpurporttobeappraisals ornecessarily reflectthepricesatwhichcompanies actuallymaybesold.Inrendering itsopinions, DillonReadexpressed noviewsastotherangeofvaluesatwhichtheK,ILCOCommonStockmay'radefollowing theconsummation ofthetransactions discussed herein,nordoesDillonReadmakeanyrecommendations toaholderofLILCOCommonStockwithrespecttohowsuchholdershouldvoteonthetransactions discussed hereinortotheadvisability ofdisposing oforretaining theHoldingCompanyCommonStockfollowing thetransactions discussed h'erein.DillonReadisaninternationally recognized investment bankingfirmwhich,aspartofitsinvestment bankingbusiness, regularly isengagedinevaluating businesses andtheirsecurities inconnection withmergersandacquisitions, negotiated underwritings, competitive bids,secondary distributions oflistedand,unlisted'securities, privateplacements andvaluations forestate',corporate andotherpurposes.
| |
| TheLILCOBoardselectedDillonReadonthebasisofthefirm's'expertise andreputation.
| |
| 'I(Pursuanttotheengagement letterbetweenLILCOandDillonRead,'ILCO haspaidDillonReadthefollowing amounts:$2.5millionupontheexecution oftheengagement letter,whichincludescompensation forfinancial servicesrenderedtoLILCOfromtimetotimesinceApril1992relatedtoproposals foratransaction suchastheLIPATransaction,
| |
| $2.5millionupontherendering ofDillonRead'sfairnessopiniontotheLILCOBoardaddressing theCombination and$2.5'million upontherendering ofDillonRead'sfairnessopiniontotheLILCOBoardaddressing theLIPATransaction.
| |
| LILCOhasalsoagreedtopay'Dillon Read'afeeuponconsummation ofeitherorbothtransactions equalto.4percentoftheaggregate'amount ofconsideration receivedbyLILCOoritscommonshareholders, less$6.25millionofthepaymentsmentioned abovewhichwillhavepreviously beenpaid.DillonReadhas,inthepast,performed variousinvestment bankingservicesforLILCOforwhichDillonReadhasbeencompensated.
| |
| Intheordinarycourseofbusiness, DillonReadtradesthedebtandequity'ecurities ofLILCOandBrooklynUnionforitsownaccountandtheaccountsofitscustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Potential Conflicts ofInterestofCertainPersonsintheCombination andtheLIPATransaction Employment Agreement withWilliamJ.Calacosinos.
| |
| PursuanttotheBrooklynUnion/LILCO Agreement, theHoldingCompanywillenterintoanemployment agreement withDr.WilliamJ.Catacosinos effective asoftheeffective timeoftheCombination (the"Effective Time"),providing forhimtoassumethepositions ofChairmanoftheBoard,ChairmanoftheExecutive Committee andChiefExecutive, OfficeroftheHoldingCompanycommencing upontheEffective Timeandforhimtoserveasaconsultant totlteHoldingCompanyforafiveyearperiodcommencing onthefirstanniversary oftheEffective Time,whichiswhenhe,ceasestobeChiefExecutive OfficerpursuanttothetermsoftheBrooklynUnion/LILCO Agreement.
| |
| Underthisemployment agreement, Dr.Catacosinos istoreceivecompensation ontermstobemutuallyagreedupon,butnotlessthanwhathereceivedfromLILCOasofthedateoftheOriginalAgreement, Dr.'atacosinos wouldalsobeeligibletoreceiveincentive compensation relatedtoachieving thesynergies contemplated toberealizedfromtheCombination.
| |
| Inaddition, theBrooklyn, Union/LILCO Agreement providesthattheemployment agreement withDr.Catacosinos isotherwise tocontaintermsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements forchiefexecutive.
| |
| officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
| |
| VestingofCertainBenefitsforLILCO'sDirectors andOgcers.UnderLILCO"sAnnualStocklncentive Compensation Plan(the"StockPlan"),intheevent,aStockPlanparticipant's employment withLILCOisterminated for,amongotherreasons,a"changeincontrol,"
| |
| asdefinedintheStockPlan,suchparticipant.
| |
| shallbeentitledtoreceive,payment,assoonaspracticable afterthecloseoftheplanyearduringwhichsuchtermination ofemployment occurs,ofaprorataportionofsuchparticipant's LILCOCommonStockaward,ifany,forthecurrentplanyear.TheCombination andtheLIPATransaction willeach.constitute achangecontrolforpurposesoftheStockPlan.100 Under~LILCO'sOfficers'ong-Term Incentive Plan(the"Incentive Plan"),awardsarepaidintwoiristallments'each ofwhichiscontemplated tobemadeinsharesofLILCOCommonStock.Theawardsforeachperformance period(initially 1996-1997 andthereafter eachconsecutive three-year period)aredividedinto,twoequalportions:
| |
| (i)afiftypercentvested,portion;and(ii)'afiftypercent:contingent portion.'he contingent'portion issubjecttoamandatory deferralofoneyearfromthedateofthepaymentoftheaward.IntheeventanIncentive Planparticipant's employment withLILCOisterminated for,amongotherreasons,a"changeincontrol,"
| |
| asdefinedintheIncentive Plan,suchparticipant shallbeentitledtoreceivepayment,assoonaspracticable afterthecloseofthe'"performance periodduringwhichsuchtermination ofemployment occurs,of(i)the,entirebalanceofsuchparticipant's contingent accountatthecloseoftheplanyearduringwhichtermination ofemployment o'ccursand(ii)apro-rataportionofsuchparticipant's award,ifany,forthe'current performance period,asdetermined byCompensation andManagement Appraisal Committee oftheLILCOBoardofDirectors.'-
| |
| TheCombination andtheLIPATransaction willeachconstitute achangeincontiolforpurposesoftheIncentive Plan.,UnderthetermsofLILCO'sDirectors'tock UnitRetainerPlan(the"Retainer Planl'),eachnon-employee directorofLILCOis.,required toapplyatleast50%ofhisorher.annualretainertothepurchaseofLILCOCommonStockunits.Allocation ofLILCOCommonStockunitsundertheRetainerPlanaremadeautomatically, onthedateduringeachfiscal.quarteronwhichthequarterly installment oftheannual.retainerispaid.>>UndertheRetainer, Plan,thevalueoftheunitswhichwillbecreditedtoeachnon-employee Director's accounton,aquarterly basiswillbedetermined bydividingtheaggregate amountofcashcreditedto,suchaccountbytheclosingpricepershareofLILCOCommonStock,asreportedonaNewYorkStockExchangelistingofcomposite transactions, onthefirsttradingdayofthecalendarmonthinwhichtheparticipant's retainerispaid.Theamountsaccumulated pursuanttotheRetainerPlanwillbehelduntilsuchtimeas(i)aparticipant ceasestoserve'saDirectoror'Consulting Director; (ii)a'ar'ticipant's death;or(iii)'achangeincontrol,asdefinedintheRetainerPlan.TheCombination andtheLIPATransaction willeachconstitttte achangeincontr'olfor.purposesoftheRetainer, Plan.H~gfLILCOalsohasaRetirement PlanforDirectors (the"Retirement Plan"),providing benefitstoDirectors wh'o'aie'notor'whohavenotbeenQfficersofLILCO.'Directors who'haveservedinthatcapacityformoretharifiveyearsqualifyasparticipants undertheRetirement Plan.TheRetirement'Plan providesforamonthlybenefitequaltoone-twelfth
| |
| 'ofthehighestannualretainerpaid'toeach,partic'ipant.
| |
| Afullbenefitis'available forparticipants w'hoservefortenyearswithareduction ofone-'sixtieth fo'reachmonthofservicelessthantenyears.UndertheRetirement Plan,paymentofbenefits, istobeginwhentheDirectorceasestoserveasaDirectororConsulting Directororreachesage65,whicheyer islater.'The Retir'ement Planal'soprov'ides thatintheeventof"=a"changeincontrol"(asdefinedintheRetirement Plan),the"valueofvestedbenefitscouldbep'ay'able immediately.
| |
| TheCombination andtheLIPA,Transaction willeachconstitute achangeincontrolforpurposesoftheRetirement
| |
| 'Plan.'CTheBrooklynUnion/LILCO Agreement
| |
| 'proVides thatattheEffective Time,'eachshareofLILCOCommonStockheldundertheRetainerPlan,theIncentive PlanandtheStockPlanwillbeautomatically exchanged forthesamenumberofsh'aresofHoldingCompanyCommonStockforwhichoneshareofK,ILCOCommonStockwasexchanged.
| |
| F~rLILCOChangeinControlSeverance Plan."'ILCOhasenteredintoindividual employment agreements witheachofits'officers toprovidethemwithemployment securityandtominimizedistractions resulting frompersonaluncertainties andrisksofachangeincontrolofLILCO.'Currently, theprincipal
| |
| : benefits, undertheseagreements, payableiftheofficer's employment isterminated foranyreason(including voluntary resignation) withinthreeyearsofachangeincontrol(asdefinedintheseagreements),
| |
| including byvirtueofanacquisition ofLILCO'sassetsorstock,priortoDecember31,1999,are!(i)severance payequaltothreeyears'salary; (ii)accelerated vestingandpaymentofthevalueofsupplemental retirement benefits'atthetimeofachange'in
| |
| 'trol,whichareenhancedbythreeyearsofse'rvice; and(iii)continuation oflife,medicalanddentalinsurance raperiodofthreeyears.LILCOhascreatedatrusttosupportpaymentofitsobligations, butremainsprimarily 101 liableforthecompensation andretirement benefitspayabletotheofficers.
| |
| ThetrustwillmakesuchpaymentsonlytotheextentthatLILCOdoesnot.TheCombination ascontemplated intheBrooklynUnion/LILCO Agreement andtheLIPATransaction willeachresultinachangeincontrol(asdefinedintheseagreements) andentitleeachofficertothebenefitspayableunderthetermsoftheemployment agreements ifsuchofficer'employment isterminated foranyreason.LILCOhasalsoenteredintoindividual employment agreements withcertainofitsofficers(notincluding Dr.Catacosinos andlyfr.Flynn),effective July1,1997,pursuanttowhich'suchofficersareemployedforaoneyeartermandareentitledtoreceivea,retention bonusequalto20%ofthegreaterofjobvalueorsalary,iftheyarestillemployedby,LILCOoritsaffiliates attheendofsuchtermorareterminated withoutcause(asdetermined bytheChiefExecutive Officer)priortotheexpiration ofsuchterm.Theseagreements havebeenentered,intotoinducesuchofficerstocontinuetheiremployment despitethesignificant proposed'changes toLILCOdescribed elsewhere inthisJointProxyStatement/Prospectus.
| |
| Underthetermsofanemployment contractdatedasofJanuary30,1984,asamended,Dr.Catacosinos hasagreedtoserveasCEOofLILCOuntilJanuary31,2002.Dr.Catacosinos'ontract providesfor,amongotherthings:(i)afive-year consulting periodfollowing'he termination ofhisemployment (otherthan,exceptafterachangeincontrol,forcause);(ii)supplemental disability benefits; and(iii)vestedretirement
| |
| : benefits, whichwillbebaseduponaformulathatconsiders hisageatretirement, hishighestannualsalary,thehighestbonushehasreceivedandthelengthofhisservicetoLILCOincluding serviceasaDirector, employeeorconsultant.
| |
| TheCombination'and theLIPATransaction willeachresultinachangeincontrolunderthetermsofDr.Catacosinos'mployment contract.
| |
| tComparison oftheHolding Company's Certificate ofIncorporation andBy-Lawsto,LILCO's CertiTicate ofIncorporation andBy-LawsAuthorized Capital.Thetotalauthorized capitalstockoftheHoldingCompanywillbe450,000,0 sharesofHoldingCompanyCommonStock,parvalue
| |
| $.01pershare,and100,000,000 sharesofHoldinCompanyPreferred Stock,parvalue$.0ipershare.Thetotalauthorized capitalstockofLILCOcurrently consistsof150,000,000 sharesofcommonstock,parvalue$5pershare,7,000,000 sharesofpreferred stock,parvalue$100pershare,30,000,000 sharesofpreferred stock,parvalue$25pershareand7,500,000 sharesofpreference stock,parvalue$1pershare.AttheLILCOMeeting,theLILCOshareholders willbeaskedtoamendtheLILCOCertificate ofIncorporation.to increasethetotalamountofauthorized LILCOCommonStockto160,000,000 sharestoaccommodate thenumberofsharesofLILCOCommonStocktobereservedforissuancetoBrooklynUnioninconnection withtheLILCOStockOptionAgreement.
| |
| RemovalofDirectors; FillingVacancies ont/ieBoardofDirectors.
| |
| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethat,subjecttotherightsofholdersofHoldingCompanyPreferred Stock,ifany,anydirectorservingontheHoldingCompanyBoardmayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleastamajorityoftheVotingPower,votingtogetherasasingleclass.TheLILCOCertificate andtheLILCOBy-Lawshaveno.comparable provision, buttheLILCOBy-LawsdorequireDirectors toretireattheAnnualMeetingofShareholders intheyearfollowing theyearinwhichheorshereacheshisorherseventy-second birthdayunlessauthorized bytheBoardtocontinuetoserve.However,noDirectormayservebeyondtheyearfollowing theyearinwhichheorshereachestheirseventy-fifth, birthday.
| |
| UndertheNYBCL,unlessthecertificate ofincorporation orby-lawsofacorporation providesotherwise, adirectormayberemovedonlyforcausebythevoteofamajorityofthevotescastatashareholder meetingbytheholdersofsharesentitledtovotethereon.BoththeLILCOBy-LawsandtheHoldingCompanyCertificate providethatvacancies ontheBoardofDirectors maybefilledbytheremaining directors.
| |
| TheLILCOCertificate providesthatincertaincircumstances, theholdersofpreferred, stockorpreference stockmayhavelimitedrightstoelecttwoadditional Directors anifthereisavacancyamongthesetwoDirectors, theremaining Directorhastheauthority toselectareplaceme 102 tMeetingsofShareholders.
| |
| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethataspecialmeetingofshareholders maybecalledonlybytheHoldingCompanyBoardpursuanttoaresolution approvedbyamajorityoftheentireHoldingCompanyBoard.TheLILCOBy-Lawsalsoprovidethataspecialmeetingofshareholders maybecalledbyamajority, oftheDirectors ofLILCO.Inaddition, theLILCOBy-LawsprovidethatsuchameetingmaybecalledbythePresident ofLILCO,andthatitisthePresident's dutytocallsuchameetingwheneverrequested todosoinwritingbyshareholders owningone-fourth oftheoutstanding sharesofstockofLILCOentitledtovoteatsuchmeetings~
| |
| Amendment ofCorporate Cliarterand/3y-La>vs.
| |
| TheNYBCLprovidesthat,anamendment toacorporation's certificate ofincoqioration maybeauthorized byvoteoftheboardofdirectors, followedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovotethereonatameetingofshareholders andtheby-lawsofacorporation maybeamendedbyavoteoftheholdersofamajorityofalloutstanding sharesentitledtovoteintheelectionofanydirectors ofthecorporation or,ifsoprovidedinthecertificate ofincorporation orby-laws,bytheboardofdirectors by'uchvoteasmaybethereinspecified.
| |
| TheHoldingCompanyCertificate andtheHoldingCompanyBy-Lawsprovidethattheaffirmative voteoftheholdersofatleast80percentoftheVotingStockthenoutstanding, votingtogetherasasingleclass,willberequiredtochangeoradoptanyprovision inconsistent withtheprovisions thereinrelatingtocallingofspecialmeetingsofshareholders, theelectionofdirectors, fillingofvacancies ontheHoldingCompanyBoard,removalofdirectors andtheamendment oftheHoldingCompanyBy-LawsandtheHoldingCompanyCertificate.
| |
| TheLILCOCertificate providesthattheLILCOBoardofDirectors hasthepower,exceptasotherwise providedbylaw,tomake,alter,amendorrepealtheLILCOBy-Laws.TheLILCOBy-LawsprovidethattheBy-Lawsmaybealtered,amendedorrescinded:
| |
| (i)bytheshareholders atanyregularorspecialmeetingbyvoteofamajorityofthesharesofstockissuedandoutstanding, providednoticeofsuchintention beincludedinthenoticeofmeeting,unlessotherwise providedbylaw,or(ii)exceptwithregardtothesectionsconceding quorumatshareholders'eetings, votingbyshareholders, dutiesandqualifications ofDirectors andthenumberandnethodofelectionofDirectors, byvoteofamajorityoftheDirectors ofLILCOatanyregularorspecialmeeting,providedatleastthreedays'otice ofsuchintention begiventoeachmemberoftheBoard.0+cers.TheHoldingCompanyBy-Lawsprovidethat,effective asofthefirstanniversary oftheconsummation oftheCombination, Dr.Catacosinos shallbeelectedChairmanoftheHoldingCompanyBoardandChairmanoftheExecutive Committee oftheHoldingCompanyBoardandMr.CatellshallbeelectedChiefExecutive OfficeroftheHoldingCompany.ThisBy-Lawmaybemodifiedonlybytheaffirmative voteoftwo-thirdsoftheentireHoldingCompanyBoard.TheLILCOMeetingGeneral.ThepurposeoftheLILCOMeetingistoconsiderandvoteupon:(i)aproposaltoadopttheBrooklynUnion/LILCO Agreement; (ii)aproposaltoadopttheLIPAAgreement; (iii)aproposaltoelecttwelvedire'ctors; (iv)aproposaltoratifytheappointment ofErnst'YoungLLPasindependent auditorsforLILCOfortheperiodfromJanuary1,1997toMarch31,1998;(v)aproposaltoapprovetheLILCOAnnualStockIncentive Compensation Plan;(vi)aproposaltoapprove'he LILCOEmploy'ee StockPurchasePlan',(vii)'aproposaltoapproveanamendment totheLILCOCertificate ofIncorporation toincreasethetotalnumberofauthorized sliaresofLILCOCommonStock;and(viii)suchothermatters,ifany,asmayproperlybepresented forconsideration.
| |
| TheLILCOBoarddoesnotknow,asofthedateofmailingofthisJointProxyStatement/Prospectus, ofanyotherbusinesstobebroughtbeforetheLILCOMeeting.Theenclosedproxycardauthorizes thevotingofsharesrepresented bytheproxyonalloth'ermattersthatmayproperlycomebeforetheLILCOMeeting,andanyadjournment orpostponement thereof,anditistheintention'of theproxyholderstotake'such actioninconnection therewith asshallbeinaccordance withtheirbestjudgment, TheLILCOBoard,byaunanimous vote,hasadoptedtheBrooklynUnion/LILCO Agreement andtheLIPAgreement, andrecommends thatLILCOshareholders voteFORapprovaloftheBrooklynUnionAgreement 103 andtherelatedreorganization ofLILCO,FORadoptionoftheLIPAAgreement, FORtheelectionofthenominated directors, FOR,ratification oftheappointment ofErnst8'cYoungLLPasLILCO'sindependent auditorsfortheperiodfromJanuary1,1997toMarch31,1998,FORapprovaloftheAnnualStockIncentive Compensation Plan,FORapprovaloftheEmployeeStockPurchasePlan;andFORapprovaloftheamendment toLILCO'sCertificate ofIncorporation assetforthabove.tiDate,PlaceandTime;RecordDate.,TheLILCOM'ectingisscheduled tobeheldonThursday, August7,1997at3:00p.m.atTillesCenterforthePerforming ArtsatLongIslandUniversity C.W.PostCampus,NorthernBoulevard,'Greenvale, NewYork11548.HoldersofrecordofsharesofLILCOCommonStockatthecloseofbusinessonJune26,1997,theRecordDate,willbeentitledtonoticeofandtovoteattheLILCOMeeting.'IVotingRights.AtthecloseofbusinessonJune23,1997,121,184,527 sharesofLILCOCommonStockwereissuedandoutstanding.
| |
| Eachoutstanding shareofLILCOCommonStockasoftheRecordDateisentitledtoonevoteuponeachmatterpresented attheLILCOMeetingexceptwithrespecttotheelectionofLILCODirectors asdiscussed below.Theaffirmative voteoftheholdersofatleasttwo-thirds oftheoutstanding sharesofLILCOCommonStockisrequiredtoadopttheLIPAAgreement andtoadopttheBrooklynUnion/LILCO Agreement attheLILCOMeeting.Inaddition, theLIPAAgreement mustbeapprovedbythevoteof:1)theholdersofatleasttwo-thirds oftheoutstanding sharesofLILCOcommonstockandpreferred stockentitledtovotethereon,votingtogetherasasingleclass;2)amajorityoftheoutstanding sharesofLILCOpreferred stockentitledtovotethereon,votingtogetherasaseparateclass;3)amajorityoftheoutstanding sharesofLILCOcommonstockvotingseparately asaclass;and4)theholdersofamajorityoftheoutstanding sharesofeachseriesofLILCOpreferred stockentitledtovotethereon,ineachcasevotingseparately asaclass.Inconnection withtheproposaltoadopttheLIPAAgreement, eachoutstanding shareofLILCOCommonStockisentitledtoonevote,eachoutstanding shareofLILCOPreferred Stockeligibletovotehavingaparvalueof$100pershareisentitledtoonevoteandeachoutstanding shareofLILCOPreferred Stockeligibletvotehavingaparvalueof$25pershareisentitledtoone-quarter (i/4)ofavote.Amajorityofthevotingpowerofthesharesissuedandoutstanding andentitledtovote,presentinpersonorbyproxy,isnecessary toconstitute aquorumforthetransaction ofbusinessattheLILCOMeetingexceptwithrespecttotheelectionofLILCODirectors.
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| Abstentions andbrokernon-votes (i.e.,proxiesfrombrokersornomineesindicating thatsuchpersonshavenotreceivedinstructions from'thebeneficial ownersorotherpersonsentitledtovotesharesastoamatterwithrespecttowhichbrokersornomineesdonothavediscretionary powertovote)willbeconsidered presentforthepurposeofestablishing aquorum.Inaccordance withNewYorkStockExchangerules,brokersandnomineesareprecluded fromexercising theirvotingdiscretion withrespecttotheadoptionoftheBrooklynUnion/LILCO Agreement andLIPAAgreement andthus,absentspecificinstructions fromthe.beneficial ownerofsuchshares,arenotempowered tovotesuchshareswithtespecttotheadoptionoftheBrooklynUnion/LILCO Agreement orLIPA,Agreement.
| |
| Therefore, sincetheaffirmative voteinpersonorbyproxy,oftheholdersoftwo-thirds oftheoutstanding sharesofLILCOCommonStockontheRecordDateisrequiredtoadopttheLIPAAgreement andto,adopttheBrooklynUnion/LILCO Agreement, abstentions andbrokernon-votes willhavetheeffectofavoteagainsttheLIPATransaction andtherelatedreorganization ofLILCOortheBrooklynUnion/LILCO Agreement, asthecasemaybe.Shareholders areentitledtovotecumulatively fortheelectionofLILCODirectors.
| |
| Eachshareholder isentitledtoanumberofvotesforsuchelectionequaltothenumberofvotesentitledtobecastwithrespecttothesharesheldbysuchshareholder multiplied bythenumberofdirectors tobeelected,andmaycastallvotesforonenomineeordistribute thevotesamongthenominees.
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| TheelectionofeachDirectorshallbedecidedbyplurality vote.Asaresult,anysharesnotvotedforaDirector(whetherbywithholding authority, brokernon-voteorotherwise) willhavenoimpactontheelectionofDirectors excepttotheextentthatthefailuretovoteforaindividual resultsinanotherindividual receiving alargernumberofvotes, tTheaffirmative voteofamajorityofthevotescastbytheholdersofthesharesofLILCOCommonStockrepresented attheLILCOMeetingandentitledtovotethereon,votingasasingleclass(provided that;,the totalvotecastrepresents over50%ofthevotingpowerofallthesharesofLILCOCommonStockentitledtovotethereon)isrequiredtoapprove(i)theratification oftheappointment ofErnst&YoungLLPasLILCO'sindependent auditorsfortheperiodfromJanuary1,1997toMarch31,1998,(ii)theAnnualStockJncentive Compensation Plan,and(iii)theEmployeeStock.PurchasePlan.Theaffirmative voteofamajorityof,theoutstanding sharesofLILCOCommonStockisrequiredtoapprovetheamendment oftheLILCOCertificate ofIncorporation assetforthinAnnexJhereto.Abstentions andbrokernon-votes arenotcounted,indetermining thevotescastinconnection withtheselection ofauditors.
| |
| Withrespecttotheremaining matterstobeactedupon,abstentions fromvotingonsuchmattersaretreatedasvotesagainst,whilebrokernon-votes aretreatedassharesnotentitledtovote.IfaLILCOshareholder isaparticipant intheLILCOInvestorCommonStockPlan,theLILCOproxycardwillrepresent thesharesheldonbehalfoftheparticipant undertheInvestorCommonStockPlanandsuchshareswillbevotedinaccordance withtheinstructions ontheLILCOproxycard.Ifaparticipant intheInvestorCommonStockPlandoesnotreturnaLILCOproxycard,theparticipant's shareswillnotbevoted.AsofJune23,1997,directors andexecutive officersofLILCOandtheiraffiliates ownedbeneficially anaggregate of56,683sharesofLILCOCommonStock,orlessthanonepercentofthesharesofLILCOCommonStockoutstanding onsuchdate.Directors andexecutive officersofLILCOhaveindicated theirintention tovotetheirsharesofLILCOCommonStockinfavorofadoptionoftheBrooklynUnion/LILCO Agreement andoftheLIPAAgreement.
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| See"Selected Information Concerning LILCO-Potential Conflicts ofInterestofCertainPersonsintheCombination andtheLIPATransaction."
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| VotingandRevocation ofProxies.HoldersoftheLILCOCommonStockmayvoteeitherinpersonoryproperlyexecutedproxy,BachholderofLILCOCommonStockwillbefurnished aproxycarduponwhichthenamesofthreeofLILCO'sDirectors, GeorgeBugliarello, JohnH.TalmageandBasilA.Paterson, constituting theproxycommittee (the"ProxyCommittee"
| |
| ),appear.Bycompleting andreturning theformofproxy,theLILCOshareholder authorizes thepersonsnamedthereintovotealltheLILCOshareholder's sharesonhisorherbehalf.Issuedandoutstanding sharesofLILCOCommonStock,theholdersofwhichareentitledtovoteattheLILCOMeeting,whicharerepresented byproperlyexecutedproxies,will,unlesssuchproxieshavebeenrevoked,bevotedinaccordance withtheinstructions indicated insuchproxies.Ifaproxyissigneda'ndreturnedwithoutindicating anyvotinginstructions, sharesofLILCOCommonStockrepresented bytheproxywillbevotedFORadoptionoftheLIPAAgreement, FORadoptionoftheBrooklynUnion/LILCO Agreement, FORtheelectionof"thenominated directors, FORratification oftheappointment ofErnst&YoungLLPasLILCO'sindependent auditorsfortheperiodfromJanuaryI,1997toMarch31,1998,FORtheapprovaloftheAnnualStockIncentive Compensation Plan,FORtheapprovaloftheEmployeeStockPurchasePlan,andFORtheapprovalofanamendment totheLILCOCertificate ofIncorporation.
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| eIIWithrespecttotheelectionofthe'nominated directors, theProxyCommittee reservestherighttocumulatevotesrepresented byproxieswhichtheyreceiveandtodistribute suchvotesamongoneormoreofthenomineesattheirdiscretion.
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| IfaLILCOshareholder wishestogiveaproxytosomeoneotherthantheProxyCommittee, suchshareholder maycrossoutthenamesofthemembersoftheProxyCommittee ontheproxycardandinsertthenamesofuptothreeotherpersonsandmake,ifnecessary, otherappropriate changesproviding uuambiguous instructions tothepersonorpersonsnamed.ALILCOshareholder mayrevokeaproxyatanytimepriortoitsexerciseattheLILCOMeetingbyelivering totheCorporation TrustCompany,P.O.Box631,Wilmington, Delaware19899anoticeofrevocation 105 oradulyexecutedproxybearingalaterdateorbyattending theLILCOMeetingandvotinginperson.Attendance attheLILCOMeetingwillnotinitselfconstitute revocation ofaproxy.aTheLILCOMeetingmay'eadjourned to'anotherdateand/orplaceforanyproperpurpose(including, withoutlimitation, forthepurposeofsoliciting additional proxies).
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| Intheirdiscretion, theProxyCommittee isauthorized tovoteuponsuchbusinessasmayproperlycomebeforetheLILCOMeeting,including withoutlimitation, anymotiontoadjourntheLILCOMeetingtoanothertimeorplace(including for'hepurposeofsoliciting additional proxies).
| |
| ISolicilaiioii ofProxies.LILCOwillbearitsownexpensesinconnection withthesolicitation ofproxiesfortheLILCOMeeting,exceptthateachofLILCOandBrooklynUnionwillpayone-halfofthecostsandexpensesincurredinconnection withprintingthisJointProxyStatement/Prospectus andone-halfofallfilingfees.Inadditiontosoliciting proxiesbymail,officers" andemployees ofLILCO,withoutreceiving'dditional compensation
| |
| : therefor, maysolicitproxiesbytelephone, bytelecopy, bytelegramorinperson.LILCOhasretainedD.F.King&Co.,Inc.toaidinthesolicitation ofproxiesfromtheLILCOshareholders.
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| Thetotalfeefortheservicesofsuchfirmisnotexpectedtoexceed$30,000,plusreimbursement forreasonable out-of-pocket expenses.
| |
| rBusinessofLILCOLILCOwasincorpora'ted in1910undertheTransportation Corporations LawoftheStateofNewYorkandsupplieselectricandgasserviceinNassauandSuffolkCountiesandtotheRockawayPeninsula inQueendCounty,allonLongIsland,NewYork.ThemailingaddressofLILCOis175EastOldCountryRoad,Hicksville, NewYork11801anditsgeneraltelephone numberis(516)755-6650.
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| Territory.
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| LILCO'sserviceterritory coversanareaofapproximately 1,230squaremiles.Thepopulation oftheservicearea,according toLILCO's1996estimate, is2.7millionpersons,including approximately 98,00personswhoresideinQueensCountywithintheCityofNewYork.The1996population estimatereflectsa0.7%increasesincethe1990census.Approximately 80%ofallworkersresidinginNassauandSuffolkCountiesareemployedwithinthetwocounties.
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| In1996,totalnon-agricultural employment inNassauandSuffolkCountiesincreased byapproximately 12,500positions, anemployment increaseof1.1%.\LILCOservesapproximately onemillionelectriccustomers ofwhich921,000areresidential.
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| LILCOreceivesapproximately 49%ofitselectricrevenuesfrom,residential customers, 48%fromcommerciaVindustrial customers and3%fromsalestootherutilities andpublicauthorities.
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| LILCOalsoservesapproximately 460,000gascustomers, 412,000ofwhichareresidential, accounting for61%ofthegasrevenues, withthebalanceofthegas,revenues madeupbythecommerciaVindustrial customers andoff-system sales.Lii~ployees.
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| AsofMarch31,1997,LILCOhad5,443full-time employee's, ofwhich2,241belongtoLocal1049and1,292belongtoLocal1381oftheInternational Brotherhood ofElectrical Workers.Effective February14,1996,LILCOandtheseunionsagreeduponcontracts whichwillexpireonFebruary13,2001.Thecontracts provide,amongotherthings,forwageincreases totaling15.5%overthetermoftheagreements.
| |
| Regulation andAccounting Conlroh.'ILCO issubjecttoregulation bythePSCwithrespecttorates,issuances andsalesofsecurities, adequacyandcontinuance ofservice,safetyandsitingofcertainfacilities, accounting, conservation ofenergy,management effectiveness andothermatters.Toensurethatitsaccounting controlsandprocedures areconsistently maintained, LILCOactivelymonitorsthesecontrolsandprocedures.
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| TheAuditCommittee ofLILCO'sBoardofDirectors, aspartofitsresponsibilities, periodically reviewsthimonitoring program.106 tLILCOisalsosubject,incertainofitsactivities, tothejurisdiction of'theUnitedStatesDepartment ofEnergyandtheFERC.Inadditiontoitsaccounting jurisdiction, FERChasjurisdiction overtheratesLILCOmaychargeforthesaleofelectricenergyforresaleininterstate
| |
| : commerce, including theratesLILCOchargesforelectricity soldtomunicipal electricsystemswithinLILCO'sterritory, andforthetransmission, throughLILCO'ssystem,ofelectricenergytootherutilities, andforthepricing,termsandconditions oftransmission anddistribution serviceswhenLILCOprovidestheseservicesseparately fromitstraditional full-requirements retailelectricservice.FERCalsohassomejurisdiction overaportionofLILCO'sgassuppliesandsubstantial jurisdiction overtransportation toLILCOofitsgassupplies.
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| Operation ofNineMilePointNuclearPowerStationUnit2,anuclearfacilityinwhichLILCOhasan18%interest, issubjecttoregulation bytheNRC.Additional information concerning LILCOanditssubsidiaries isincludedintheLILCOdocuments filedwithCommission whichareincorporated byreference herein.See''WhereYouCanFindMoreInformation."
| |
| NameA.JamesBarnes.GeorgeBugliarello RensoL.CaporaliWilliamJ.Catacosinos PeterO.Crisp.........
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| JamesT.Flynn.VickiL.Fuller..............,.
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| LeonardP.NovelloAnthonyNozzolillo Katherine D.Ortega...........
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| BasilA.Paterson.RichardL.Schmalensee GeorgeJ.Sideris.JohnH.Talmage.EdwardJ.Youngling.
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| AllDirectors andOfficersasagroup,including 33persolls1,4731,4732,14414,7079735,5091273.1,1891,3011,8012,0251,0734,8511,5052,446thosenamedaboveatotalof56,683ThenumberofsharesincludeswholesharesheldunderLILCO'sInvestorCommonStockPlanandforMr.Talmageincludes287sharesheldorbeneficially ownedbyaspouse,parentorchildforwhichbeneficial ownership isdisclaimed.
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| Inaddition, thenumberofsharesshownforeachDirector, otherthanDr.Catacosinos andMr.Flynn,includes973LILCOCommonStockunits,whichdonotconferanyvotingrights,creditedpursuanttotheDirectorStockUnitRetainerPlan.SecurityOwnership ofCertainBeneficial OwnersandManagement CunenfOwnership ofLILCOCommon,Stock.Thefollowing tableshowsthenumberofshares*ofLILCOCommonStockbeneficially owned,asofJune23,1997,byeachDirector, certainOfficersandbyallDirectors andOfficersasagroup.Thepercentage ofsharesheldbyanyoneperson,orallDirectors andOfficersasagroup,doesnotexceed1%ofalloutstanding sharesofLILCOCommonStock.TheaddressofeachoftheDirectors andOfficersis:c/oLongIslandLightingHoldingCompany,175EastOldCountryRoad,Hicksville, NewYork11801.&NumberofShares*107 Thefollowing tablesetsforthcertaininformation withrespecttothesharesofLILCOPreferred StockandLILCOCommonStockowned,byeachpersonknownbyLILCOtobethebeneficial ownerofmorethan5%ofsuchLILCOPreferred StockatidLILCOCommonStock,asofMarch31,l997.TitleofClassNamesandAddresses CommonStockCommonStockTheBrooklynUnionGasCompanyOneMetroTech CenterBrooklyn',
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| NY11201-3550 CapitalGroupCompanies Inc.333SouthHopeStreetLosAngeles,CA90071hw*Represents thenumberofsharesthatmaybepurchased pursuanttotheLILCOattachedasAnnexBanddescribed inthisJointProxyStatement/Prospectus.
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| Agreements."
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| Percentage OwnedofChew23,981,964o 16.6%12,141,500 10.1%hStockOptionAgreement See"TheStockOptionLILCOhasnotbeenadvised,norisitaware;ofanyadditional'shares to'whichanyonehastherighttoacquirebeneficial ownership.
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| "1,~LILCOisrequiredtoidentifyanyDirector, Officer,orpersonwhoow'nsmorethantenpercentofaclassofequitysecurities whofailedtotimelyfilewiththeSECarequiredreportrelatingtoownership andchangesinownership ofLILCO'sequitysecurities.
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| Basedoninformation providedtoLILCObysuchpersons,allLILCOOfficersandX)irectors madeallrequiredfilingsduringthefiscalyearendedDecember31,1996.Exceptasdescribed above,LILCOdoesnotknowofanypersonbeneficially owningmorethan10%ofaclassofequitysecurities.
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| CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS BrooklynUnionandLILCOhavemadeforward-looking statements inthisdocumentandinthedocuments incorporated byreference inthisdocumentthataresubjecttorisksanduncertainties.
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| Forward-looking statements includetheinformation concerning possibleorassumedfutureresultsofoperations ofthecompanies andtheHoldingeCompanysetforthunder"TheBrooklynUnion/LILCO Combination
| |
| -CommonReasonsfortheCombination,"
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| "-OpinionofBrooklynUnion'sFinancial Advisor"and"Selected Information Concerning LILCO-OpinionsofLILCO'sFinancial Advisor"andthoseprecededby,followedbyorthatincludethewords"believes,"
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| "expects,"
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| "anticipates" orsimilarexpressions.
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| Forthosestatements, BrooklynUnionandLILCOclaimtheprotection ofthesafeharborforforward-looking statements contained inthePrivateSecurities Litigation ReformActof1995.Shareholders ofBrooklynUnionandshareholders ofLILCOshould'understand thatthefollowing important factors,inadditiontothosediscussed elsewhere inthisdocumentandinthedocuments whichareincorporated byreference herein,couldaffectthefutureresultsoftheHoldingCompany,BrooklynUnionandLILCO,andcouldcausethoseresultstodiffer'aterially "fromthoseexpressed insuchforward-looking statements:
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| materially adversechangesineconomicconditions inthemarketsservedbyBrooklynUnionorLILCOandinthe,marketsthatwillbeservedbythem;asignificant delayintheexpectedclosingoftheComtiination and/orLIPATransaction, orthefailureofeithertransactioit toclose;futureregulatory actionsandconditions j'nBrooklynUnion'sandLILCO'soperating areas;andthetimingandextentofchangesincommodity pricesforcrudeoil,naturalgas,electricity andinterestrates.108 LEGALMATTERS'Ce'rtain legalmattersrelatingtoLILCOinconnection withtheCombination andtheLIPATransaction, including, amongotherthings",certainlegalmatterswithrespecttothevalidityofthesecurities tobeissued,willbe'passedupon.forLILCObyKramer,Levin,Naftalis&Frankel,NewYork,NewYorkandbyHunton&Williams, Washington, D.C.fF,CertainlegalmattersrelatingtoBrooklynUnion,inconnection withtheCombination willbepassedupottforBrooklynUnionbyWachtell, Lipton,Rosen&Katz,NewYork,NewYork.EXPERTSlThefinancial statements ofLILCO,appearing initsAnnualReport(Form10-K/A)fortheyear=ended December31,1996andtheconsolidated financial statements, ofBrooklynUnionappearing initsAnnualReport(Form10-K)fortheyearendedSeptember 30,1996,bothincorporated byreference inthisJointProxyStatement/Prospectus ofLILCOand,BrooklynUnion,whicharereferredtoandmadepartofthisRegistration, Statement, havebeenauditedbyErnst&Young.LLPandArthurAndersenLLP,respectively, assetforthintheirreportsthereonincludedthereinandincorporated hereinbyreference.
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| Suchfinancial statements areincorporated hereinbyreference jnrelianceuponsuchreportsgivenupontheauthority ofsuchfirmsasexpertsinaccounting andauditing, yFUTURESHAREHOLDER PROPOSALS Assumingthetimingoftheconsummation ofthetransactions contemplated intheBrooklyn'Union/LILCO Agreement requireLILCOtoholdanannualmeetingin1998,proposals ofshareholders intendedtobepresented tsuchmeetingmustbereceivedbyLILCOatitsofficesat175EastOldCountryRoad,Hicksville, NewYork1801,Attention:
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| Corporate Secretary, notlaterthanNovember24,1997.Proposals mustcomplywiththeSEC'sproxyregulations relatingto shareholder proposals inordertobeconsidered forinclusion inLILCO'sproxymaterials.
| |
| : Assuming, thetimingoftheconsummation ofthetransactions contemplated intheBrooklynUnion/LILCO Agreement, orthekeySpanExchangeAgreement requireBrooklynUnionorKeySpantoholdanannualmeetingiri1998,proposals ofshareholders jntendedtobepresented atsuchmeetingmustbereceivedby,BrooklynUnionatitsofficesatOneMetroTech Center,Brooklyn, NewYork11201-3850, Attention:
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| Secretary, notlater,thanSeptember 1,1997.Proposals mustcomplywiththeSEC'sproxyregulations relatingtoshareholder proposals inordertobeconsidered forinclusion inBrooklynUnion'sorKeySpan's proxymaterials.
| |
| Mattersintendedtobepresented byholdersofBrooklynUnionorKeySpanCommonStockatthe1998annualmeetingmustbestatedinwritinganddelivered totheappropriate Secretary bysuchshareholders duringtheperiodbetween90and60dayspriortothedateofthemeeting,whichisexpectedtobeheldonFebruary5,1998.109 WHEREYOUCANFINDMOREINFORMATION LILCOandBrooklynUnionfileannual,quarterly andspecialreports,proxystatements andotherinformation withthe.SEC.Following theCombination, theHoldingCompanywillalsomakethesefilingswiththeSEC.Youmayreadandcopyanyreports,statements orotherinformation thatthecompanies fileattheSEC'spublicreference roomsatRoom1024,Judiciary Plaza,450FifthStreet,N.W.,Washington, D.C.20549,andattheSEC'sRegionalOfficeslocatedat7WorldTradeCenter,Suite1300,NewYork,NewYork10048andatCiticorpCenter,500WestMadisonStreet,Suite1400,Chicago,Illinois60661-2511.
| |
| PleasecalltheSECat1-800-SEC-0330 forfurtherinformation onthepublicreference rooms.OurSECfilingsshouldalsobeavailable tothepublicfromcommercial documentretrieval servicesandattheInternetwebsitemaintained bytheSECathttp://www.sec.gov.
| |
| Inaddition, materialandinformation concerning BrooklynUnionandLILCOcanbeinspected attheNewYorkStockExchange, Inc.,'20BroadStreet,7thFloor,NewYork,NewYork10005,onwhichexchangetheBrooklynUnionCommonStock,theLILCOCommonStock,theLILCOPreferred Stock,certainoftheLILCOGeneralandRefunding BondsandtheLILCODebentures arelisted,andmaterialandinformation concerning LILCOcanalsobeinspected atthePacificStockExchange, Inc.,301PineStreet,SanFrancisco,
| |
| 'California 94104,onwhichexchangetheLILCOCommonStockislisted.TheHoldingCompanyhasfiledaregistration statement onFormS-4toregisterwiththeSECthesharesofHoldingCompanyCommonStockandHoldingCompanyPreferred Stocktobeissuedinconnection withtheBrooklynUnion/LILCO Agreement andtheLIPAAgreement.
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| KeySpanhasalsofiledregistration statements onFormS-4toregisterwiththeSECthesharesofKeySpanCommonStocktobeissuedinconnection withtheKeySpanholdingcompanyrestructuring andshareexchanges.
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| ThisJointProxyStatement/Prospectus ispartofeachsuchregistration statement, aswellasbeingaproxystatement fortheannualmeetingofLILCOandthespecialmeetingofBrooklynUnion.Inaccordance withSECrules,eachsuchregistration statement maycontainadditional information thatyouwillnotfindintheJointProxyStatement/Prospectus.
| |
| Theregistration statements areavailable forinspection andcopyingassetforthabove.TheSECallowsusto"incorporate byreference" information intothisJointProxyStatement/Prospectus, whichmeansthatwecandiscloseimportant information toyoubyreferring youtoanotherdocumentfiledseparately withtheSEC.Theinformation incorporated byreference isdeemedtobepartofthisJointProxyStatement/Prospectus, exceptfor'anyinformation superseded byinformation contained directlyinthisJointProxyStatement/Prospectus.
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| ThisJointProxyStatement/Prospectus incorporates byreference the'documents setforthbelowthatwerepreviously filedwiththeSECbyLILCO(FileNo.1-3571)orBrooklynUnion(FileNo.1-722).Thesedocuments containimportant information aboutourcompanies andtheirfinancial condition.
| |
| 1.LILCO'sAnnualReportonForm10-K/AfortheyearendedDecember31,1996.2.LILCO'sTransition ReportonForm10-Qforthe3monthperiodendedMarch31,19973.LILCO'sCurrentReportsonForm8-KdatedFebruary25,1997,March19,1997,asamended,andApril11,1997.4.BrooklynUnion'sAnnualReportonForm10-K/AfortheyearendedSeptember 30,1996.5.BrooklynUnion'sQuarterly ReportsonForm10-QforthequartersendedDecember31,1996andMarch31,1997.6.BrooklynUnion'sCurrentReportsonForm8-KdatedDecember30,1996,February24,1997andMarch19,1997.7.Theinformation contained inBrooklynUnion'sProxyStatement datedDecember30,1996foriAnnualMeetingofShareholders heldonFebruary6,1997.110 tWemayberequiredbytheSECtofileotherdocuments pursuanttoSection13(a),13(c),14or15(d)oftheSecurities ExchangeActof1934,asamended,betweenthetimethisJointProxyStatement/Prospectus issentandthedatetheLILCOMeetingandtheBrooklynUnionMeetingareheld.Thesedocuments willbedeemedtobeincorporated byreference inthisJointProxyStatement/Prospectus andtobeapartofitfromthedatetheyarefiledwiththeSEC.Ifyouareashareholder, wemayhavesentyousomeofthedocuments incorporated byreference, butyoucanobtainanyofthemthroughus,theSECortheSEC'sInternetwebsiteasdescribed above.Documents incorporated byreference areavailable fromuswithoutcharge,excluding allexhibitsunlesswehavespecifically incorporated byreference anexhibitinthisJointProxyStatement/Prospectus.
| |
| Shareholders mayobtaindocuments incorporated byreference inthisJointProxyStatement/Prospectus byrequesting theminwritingorbytelephone fromtheappropriate companyatthefollowing addresses:
| |
| KathleenA.Marion,VicePresident andCorporate Secretary LongIslandLightingCompany175EastOldCountryRoadHicksville, NewYork11801(516)5454914RobertR.Wieczorek
| |
| .VicePresident, Secretary andTreasurer TheBrooklynUnionGasCompanyOneMetroTechCenterBrooklyn, NewYork11201-3850 (718)403-3388Ifyouwouldliketorequestdocuments fromus;pleasedosopromptlyinordertoreceivethembeforetheShareholder Meetings.
| |
| YOUSHOULDRELYONLYONTHEINFORMATION CONTAINED ORINCORPORATED BYREFERENCE INTHISJOINTPROXYSTATEMENT/PROSPECTUS TOVOTEONTHEBROOKLYNUNIONAGREEMENT, THELIPAAGREEMENT ORTHEKEYSPANHOLDINGCOMPANYPROPOSAL.
| |
| WEHAVENOTAUTHORIZED ANYONETOPROVIDEYOUWITHINFORMATION THATISDIFFERENT FROMWHAT'SCONTAINED INTHISJOINTPROXYSTATEMENT/PROSPECTUS.
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| THISJOINTPROXYSTATEMENT/PROSPECTUS ISDATEDJUNE27,1997.YOUSHOULDNOTASSUMETHATTHEINFORMATION CONTAINED INTHISJOINTPROXYSTATEMENT/PROSPECTUS ISACCURATEASOFANYDATEOTHERTHANTHATDATE,ANDNEITHERTHEMAILINGOFTHISJOINTPROXYSTATEMENT/PROSPECTUS TO'SHAREHOLDERS NORTHEISSUANCEOFBLHOLDINGCORP.COMMONSTOCKIN'THECOMBINATION ORKEYSPANCOMMONSTOCKINTHEKEYSPANSHAREEXCHANGESHALLCREATEANYIMPLICATION TOTHECONTRARY.
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| 111' a~'ISTOFDEFINEDTERMS-~Definedi''i~'.PageDefined'*i".".iii~"uPage'mendedStockOptionAgreements.'...".
| |
| Antitrust DivisionAtomicEnergyActBasicAgreements
| |
| ..'.:......'..."..'....
| |
| BearStearns.'"BrooklynUnion."''iooklynUnionBy-'Laws....'...;
| |
| .i.'."BrooklynUnionCertificate
| |
| ...'...BrooklynUnionCommonStock........
| |
| 17Incentive Plan.~'"'."-:.'-'101'4,HoldingCompanyAct...,..:......;...,.,"
| |
| .4748HoldingCompanyBy-Laws.....'i'...'...;
| |
| ~~'".6349HoldingCompanyCertificate............
| |
| 63"84'oldingCompan'yCommonStock....':.:>'>>
| |
| 1721.HoldingCompanyPreferred Stock...;t..'631'HoldingCompanySeries-AA Preferred
| |
| '5"Stock........'..:".........i........>.'."'I" 18'65"'HSRAct'-~'"i"'~"'''"4896112BrooklynUnionComparables..........
| |
| 29Issuer.80BrooklynUnionDissenting Shares'......"
| |
| ''67JointProxyStatement/Prospectus
| |
| ..'.'..'...17BrooklynUniori/LILCO Agreement.'...."
| |
| '""'17KeySpan-""~"''19BrooklynUnionMeeting.......'..".....
| |
| '"*1'/KeySpanAgreement
| |
| ''"'....".19BrooklynUnionPlans.......'....
| |
| ~.'.'.."'72'eySpan CommonStock..."..".'......:
| |
| 19BrooklynUnionRatio..."....'..'.."
| |
| ...'"2,18KeySpanShare'Exchange.....'..'.".....'.."
| |
| 18BrooklynUnionStockOption'-*.KramerLevin.''.'"20Agre'enient'
| |
| ''.'"23LargeNuclearGroup.''""'97'usine'sS Combination-
| |
| ..'....".'..'.......
| |
| "'6'ILCO'......:!"=
| |
| '=';''=.."'"I"BusinessCombination Proposal........73LILCOasadjusted.
| |
| ~'-""~'llCancelled Shares..81LILCOBy-Laws.65Cash*Purchase Price.:.:..;.........,,;
| |
| ",8$LILCOCertificate",.'....;,,
| |
| i,:,'.",....,~
| |
| 65lCertificate
| |
| ..i..:,:.~........,.i...;.,.....,
| |
| 68LILCOCommonStock'.:....,.>>:,;,;...'.
| |
| <<,>>,""17ClosingDate....,.~i.i.q>>.......,;-....',
| |
| .72,"LILCOComparables:......:.
| |
| ~."-.........
| |
| "iQ9<Code..:......,;t...."...,.,'..-i.:
| |
| ....;,33'",.LILCO Dissenting Shares..i.,~i....;.":...',",,67~
| |
| Combination,
| |
| .......;....r...,...
| |
| ",';17,LILCO,Meeting
| |
| .:'...~..r..';:-:,,....,
| |
| i."17~Concentrated NuclearGroup.;.';......,:"
| |
| ~,",,"97,'LILCOPlans...r...>>,';",>>'.i.'...'".".;z, 72'onsideratiqn
| |
| .....:....",,.
| |
| >~.".....;,
| |
| -...-,,".,18,'.LILCOPreferred Stock;...-...",':.,;.'.;:,<<;17 Contingent Issliance
| |
| .,'..:,.:.i.....i.....-..
| |
| =,67,,".,LILCO,Stock Option,AgreeIilent
| |
| <,"....,,,
| |
| <<,(>>23')DCF~.i.....i.'.".!
| |
| '.~..~~~'i.i.i./.
| |
| ~':~~~~".',<<,30LIPA'~~i~...~~~i>>~~~~~"j~~a'is"ii'gl18~DillonRead,.~;-,",>>,:20~~LIPAAct.....'...:..;"..'..;,.;...',,
| |
| i('<i"20'"
| |
| Designated Number.....'....."..;.;...:
| |
| .','.68,,;LIPAAgreement
| |
| ~.':,,~,:...:.;,,;,....i.,.':,",,18, Dissenting Preferred Shares............
| |
| 82,J.IPAClosing......,:.....'.,.".",
| |
| '."..z.",....,
| |
| i;>81Dissenting Shares18LIPAEffectiveTime
| |
| "-''"'"'-"81"'BIT 93LIPARatio18EBITDA.92LIPASub.18,81Effective Time.100LIPATransaction
| |
| .18ElectricMergerTransactions...........
| |
| 29LIPATransmission andDistribution ERISA69System.54ExchangeAgent68Make-Whole Amount82Exchanged Shares.68Market/Offer Price80FairMarketRate83Merger17FERC......
| |
| 48MerrillLynch...........
| |
| 20FPA.48MerrillLynchOpinion.................
| |
| 27FTC.48Non-nuclear Group..97GasMergerTransactions..............
| |
| 29Non-redeemable Preferred Stock.........
| |
| 82HedgeArrangements
| |
| .....~...........
| |
| 73NoticeDate80Historical Period30NRC49Historical TradingRatios..............
| |
| 28NuclearAssetsHoldingCompany.2,11,17 DefinedTeraiNYBCL.OptionHolder.OptionShares.OptionsOriginalAgreement
| |
| .OriginalRatio.PACBPAL...'erformance Plan.Preferred StockDesignation........'....
| |
| PrivatePlacement Preferred Stock.....';.
| |
| ProjectProjected PeriodPromissory NotesProxyCommittee PSCRatio.RecordDateRegulatory AssetsRepresentatives
| |
| .Repurchase PeriodRestricted Shares.........
| |
| RetainedAssets.RetainedDebtAmount....PageNumber4179797923182149876481493083105201817967379'808183DefinedTernlRetainerPlan.Retirement Plan.............
| |
| Securities Act.SECSeriesAAPreferred Stock.....
| |
| SeriesCCPreferred Stock.....
| |
| SeriesGGPreferred Stock.....
| |
| SeriesQQPreferred Stock.....
| |
| SeriesUUPreferred Stock.....
| |
| Severance Plan........Severance Period.Shareholder Meetings.........
| |
| Shareholder NoticeProcedure
| |
| ..Shoreham...................
| |
| StockOptionAgreements
| |
| .....StockPlanSubjectPartySurviving Corporation
| |
| ........T&DBusiness.Transferred Assets.~.........
| |
| Transferee Subsidiaries
| |
| .......TransferTaxes'.'."..l.'........
| |
| TriggerEvent.........
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| VotingPower.PageNumber1011014141171717171788881765202310078819618,54,8135377865113
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| AMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEANDMERGERbetweenTHEBROOKLYNUNIONGA.SCOMPANYANDLONGISLANDLIGHTINGCOMPANYDATEDASOFJUNE26,1997 1[THISPAGEINTENTIONALLY LEFTBLANK]'}4~IrRg SEcnoN1.1SECTION1.2SEcnoN2.1SECTION2.2SECTION2.3TABLEOFCONTENTSARTICLEITHETRANSACTIONS THEBINDINGSHAREEXCHANGEANDMERGEREFFECTIVE TIME..............................,..
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| ARTICLEIITREATMENT OFSHARESEFFECTONCAPITALSTOCKDISSENTING SHARES.ISSUANCEOFNEWCERTIFICATES
| |
| .aARTICLEIIITHECLOSINGPageA-2A-2A-2A4SECTION3.1CLOSINGARTICLEIVREPRESENTATIONS ANDWARRANTIES OFBROOKLYNUNIONA-6SECTION4.1SEcrIoN4.2SEcnoN4.3ECnoN4.4SECTION4.5SEcrIQN4.6SECTION4.7SEcnoN4.8SEcrIoN4.9SECTION4.10SEcrIoN4.11SECTION4.12SEcrIoN4.13SECTION4.14SECTION4.15SECTION4.16SECTION4.17SECTION4.18SECTION4.19SEcrIoN5.1SECTION5.2SECTION5.3ECTION5.4IORGANIZATION ANDQUALIFICATION.
| |
| SUBSIDIARIES
| |
| ..i.........,.
| |
| CAPITALIZATION,
| |
| .AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVAL'S; COMPLIANCE REPORTSANDFINANCIAL STATEMENTS
| |
| ....'....
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| ABSENCEOFCERTAINCHANGESOREVENTSLITIGATION.
| |
| REGISTRATION STATEMENT ANDPROXYSTATEMENT TAXMATTERS......................
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| EMPLOYEEMATTERS;ERISAENVIRONMENTAL PROTECTION
| |
| .REGULATION ASAUTILITY.................
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| VOTEREQUIREDACCOUNTING MATTERS.APPLICABILITY OFCERTAINPROVISIONS OFLAW...OPINIONOFFINANCIAL ADVISORINSURANCE.
| |
| OWNERSHIP OFLILCOCOMMONSTOCK..'.'.......
| |
| ~..BUSINESSSYNERGIES ARTICLEVREPRESENTATIONS ANDWARRANTIES OFLILCOORGANIZATION ANDQUALIFICATION SUBSIDIARIES
| |
| .........
| |
| :....~....~.CAPITALIZATION
| |
| .AUTHORITY; NOI+CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE
| |
| '-6A-6A-7'-7A-8A-9A-9A-9A-9A-11A-12A-14A-14A-14A-14A-14A-14A-15A-15A-15A-15A-15A-16 SEcrIQN5.5SECTION5.6SEcrloN5.7SECTION5.8SEcrIoN5.9SEcrIoN5.10SEc1'IQN5.11SEcrIQN5.12SEcrroN5.13SECTION5.14SECTION5.15SECTION5.16SEcrIoN5.17SECTION5.18SECTION5.19SECTION6.1SEcnoN7.1SEcrIoN7.2SECTION7.3SECI'ION7.4SECTION7.5SEcrroN7.6SEcrIoN7.7SEcnoN7.8SEcrIoN7.9SEcrIQN7.10SEcnoN7.11SECTION7.12SECTION7.13SEcnoN7.14SECTION7.15SEcrIoN7.16SEcnoN7.17SEcrIoN7.18SEcrIoN7.19SEcrIoN7.20SEcrIoN8.1SECTION8.2SEcnoN8.3REPORTSANDFINANCIAL STATEMENTS ABSENCEOFCERTAINCHANGESOREVENTSLITIGATION REGISTRATION STATEMENT AND'PROXY STATEMENT
| |
| ..TAXMATTERSEMPLOYEEMATTERS;ERISAENVIRONMENTAL PROTECTION
| |
| .REGULATION ASAUTILITYVOTEREQUIREDACCOUNTING MATI'ERS=APPLICABILITY OFCERTAINPROVISIONS OFLAW.OPINIONOFFINANCIAL ADVISORINSURANCE.
| |
| OWNERSHIP OFBROOKLYNUNIONCOMMONSTOCKBUSINESSSYNERGIES..........,
| |
| .ARTICLEVICONDUCTOFBUSINESSPENDINGTHEEFFECTIVE TIMECOVENANTS OFTHEPARTIESARTICLEVIIADDITIONAI.
| |
| AGREEMENTS ACCESSTOINFORMATION JOINTPROXYSTATEMENT ANDREGISTRATION STATEMENT.........
| |
| ~..REGULATORY MATTERSSHAREHOLDER APPROVAL.
| |
| ~........
| |
| DIRECTORS'ND OFFICERS'NDEMNIFICATION.
| |
| DISCLOSURESCHEDULES PUBLICANNOUNCEMENTS RULE145AFFILIATES EMPLOYEEAGREEMENTS EMPLOYEEBENEFITPLANSSTOCKPLANSNOSOLICITATIONS COMPANYBOARDOFDIRECTORS SENIOR,EXECUTIVES EXPENSESFURTHERASSURANCES POST-EXCHANGE OPERATIONS.....
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| OTHERTRANSACTIONS EMPLOYMENT AGREEMENT
| |
| ..........,.......
| |
| lHOLDINGCOMPANY.ARTICLEVIIICONDITIONS CONDITIONS TOEACHPARTY'SOBLIGATION TOEFFECTTHETRANSACTIONS...............
| |
| CONDITIONS TOOBLIGATION OFLILCOTOEFFECTTHETRANSACTIONS CONDITIONS TOOBLIGATION OFBROOKLYNUNIONTOEFFECTTHETRANSACTIONS A-170A-17A-17A-17A-18A-19A-20A-21A-21A-21A-21A-21A-21A-22A-22A-22A-26A-27A-27A-29A-30A-30A-30A-31A-32A-32A-32A-33A-33A-33A-33A-34A-34A-34A-35 ARTICLEIXTERMINATION, AMENDMENT ANDWAIVERSECTION9.1TERMINATION
| |
| .SECTIQN9.2EFFECTOFTERMINATION.
| |
| SEGTIQN9.3TERMINATION FEE;EXPENSES..SECTION9.4AMENDMENT SECTION9.5WAIVERPageA-37A-38A-39A-40A-40ARTICLEXGENERALPROVISIONS SEGTIQN10.1NON-SURVIVAL; EFFECTOFREPRESENTATIONS ANDWARRANTIES SECTION10.2BROKERS..SECTION10.3NOTICESSECTION10.4MISCELLANEOUS SECTIQN10.5INTERPRETATION
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| .SEGTIQN10.6COUNTERPARTS; EFFECT....SECTION10.7PARTIESININTEREST; ASSIGNMENT SECTION10.8WAIVEROFJURYTRIALANDCERTAINDAMAGESSECTIQN10.9ENFORCEMENT...........
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| ~.nExHIEITAFormofAmendedandRestatedLILCOStockOptionAgreement A-40A-40A-41A-41A-41AQIA-42A-42A-42ExHIIIITBFormofAmendedandRestatedBrooklynUnionStockOption'Agreement xHrnrrC'ormofAgreement andPlanofExchangeandMergerbyandamongBLHoldingCorp.,LILCO,LIPAandLIPAAcquisition Corp.
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| t'~wiM'I[THISPAGEINTENTIONALLY LEFTBLANK]
| |
| ~~.lAMENDED,AND RESTATED.
| |
| AGREEMENT ANDPLANOFEXCHANGEANDMERGER,dafedasof.June<6,.1997 (this".AGREEMENT"
| |
| ),betweenTHEBROOKL'YN UNIONGASCOMPANY,~a NewYorkcorporation
| |
| ("BrooklynUnion")andLONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation
| |
| ("LILCO").
| |
| 4WHEREASBrooklyn Unionand.IILCO,have determined tyengageinabusinesscombination as,peerfirmsinamergerandabindingshareexchangeandtoformaholdingcompanytomanagetheircombinedbusinesses (the"COMPANY"
| |
| );WHEREAS,BrooklynUnion,LILCOandNVECOCORP.,aNewYorkcompany("NYECO"),
| |
| enteredintoanAgreement andPlanofExchange, datedas;of.Decemberi 29,1996(the"ORIGINAL AGREEMENT");
| |
| ,WHEREAS,BrooklynUnion, LILCO,and
| |
| : BUGLILCQ, HOLDINGCORP.,aNew,Yorkcorporation
| |
| (.",3+GLILCO>');.amended, andrestated, theOriginalAgreement pursuanttoanAmendedandRestatedAgreement andPlan,of Exchange<
| |
| dated,asofFebruary, 6,1997(the "FIRSTAMENDEDAND,RESTATED, AQPEEME5T",);
| |
| .IIWHEREAS,withthec'onsentofea'ch'ofBrooklynUnionandLILCO,'NYECO
| |
| 'assigne'd allofitsnghtsand'bligatioris urideitheOrigin'al
| |
| 'A'greement to4UGLIL'CO (the'ASSIGNMENT'');
| |
| "4=aWHEREAS,'n furtherance'of a'business combinati'on byandbetween'Brooklyn Vnion>and LILCO,theresp'ective Boards'fDire'ctors ofBrooklynUnion'and'LILCO haveadop'tedthisAgreement andthetransactions contemplated hereby"on'the'terms "andConditions s'etforth'inthisAg'reement; 44I,,WHEREAS,.the Board,of,Directors of,.LILCO..
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| h~liIiproyed andLILCOgasexecutedanamendedandrestatedagreement withBrooklyn.
| |
| Unioninthy;,form;ofEXHIBIT A(the,."LILCO STOCKOPTIONAGREEMENT,")
| |
| contemplating.astock-option (the"LILCOSTOCKOPTION")andtheBoard,ofDirectors ofBrooklynUnionhasapprovedandBrooklynUnionhasexecutedanlimendedandrestatedagreement, withLILCO,the,formof.EXHIBITB(the"BROOKLYN UNIONSTOCK,OPTIONAGREEMENT"
| |
| )cpntemplating aockoption(the".-BROOKLYN UNION,STOCKOPTION',');
| |
| WHEREAS,BrooklynUnion,LILCOandLONGISLANDPOWERAUTHORITY
| |
| ("LIPA")e'nter'ed infoanAgreement inPrinciple,.dated asofMarch19,1997,pursuantto.whichLILCOandLIPAconteinplate enteringintpan'Agreement aridPlan',ofExchangeandMerger'substantially in'heforniattaclied,as ExhibitChereto(the"L'IPQ'AGREEMENT".)
| |
| t'WHEREAS,forfederal'income'tax purpo'ses, itis"inlerided that'(i)the'partieshereto'w'ill recognize nog'ainorloss,'(ii) unlesdtheL'IPAAg're'ement has'eenterminated, thestockholders ofLILCOwho"participate inthe'ransactions''ill
| |
| 'recognize (excepttotheextentSection1633"oftheCode'(ashereinafter defined)is'vailable andavaileddfbya'stockholder) gainorlossbothinrespec'tofstockreceivetl
| |
| 'andinrespectofanycash'"they receive"inlieuo'f"fractional'shares, aiid'(iii).the shareholders ofBrooklynUnionwhop'articipate intheTran'sactions willn'ot'recognize''ain'or loss,'in-'ea'ch case,forfederalincometaxpurposesasaresultoftheconsummation oftheTransactions (ashereinafter defined)WHEREAS,theBoardofDirectors ofBrooklynUnionhasapprovedandBrooklynUnionhasexecutedanamendedandrestatedagreement andplanofexchange, datedasofJune26,1997(the"KEYSPANEXCHANGEAGREEMENT"),
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| withKeySpanEnergyCorporation,"a NewYorkcorporation andawhollyownedsubsidiary ofBrooklynUnion("KEYSPAN"),
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| pursuanttowhich,subjecttotheadoptionbytheshareholders ofBrooklynUnionoftheKeySpanExchangeAgreement andcertainotherconditions, including theredemption byBrooklynUnionofallofitsissuedand,outstanding preferred stock,KeySpanwillacquireallthe,outstanding sharesofCommonStockofBrooklynUnioninabinding'hare exchangeunderSection913oftheNewYorkBusinessCorporation Law(the"NYBCL"),
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| inwhicheachshareofCommonStockofBrooklynUnionwillbeexchanged
| |
| .oneshare.ofCommonStockofKeySpan,withtheresulrthatBrooklyn~Union willbecome'a'%holly owned5idiaryofKeySpan(suchtransaction, the"KEYSPANRESTRUCTURING't)and WHEREAS,thepaitiesdesiretoamendandrestatetheFirstAmendedandRestatedAgreement asofthdatehereoftorefiecttheAssignment, theLIPAAgreement andtheKeySpanRestructuring andcertainothertechnical changes;NOWTHEREFORE, inconsideration ofthepremisesandtherepresentations, warranties, covenants andagreements contained herein,thepartieshereto,intending tobelegaleboundhereby,agreeasfollows:ARTICLEITHETRANsAcrioNs SEcrION1.1THEBINDINGSHAREEXCHANGEANDMERGER.ThisAgreement shallbesubmitted totheholdersoftheCommonStock,parvalue$5pershare,ofLILCO(the"LILCOCOMMONSTOCK")andtheholdersoftheCommonStock,parvalue$0.33Mpershare,ofBrooklynUnion(the"BROOKLYN UNIONCOMMONSTOCK")foradoptioninaccordance withSection913oftheNYBCL.Theaffirmative voteofthe'olders ofatleasttwo-thirds oftheissuedandoutstanding LILCOCommonStockandoftheholdersofatleasttwo-thirds oftheissuedandoutstanding BrooklynUnionCommonStockshallbenecessary toadoptthisAgreement.
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| Uponthetermsandsubjecttotheconditions ofthisAgreement, attheLILCOEffective Time(asdefinedinSECTION,1.2),
| |
| theoutstanding sharesofLILCOCommonStockshallbeexchanged fornewlyissuedsharesoftheCommonStock,parvalue$0.01pershare,oftheCompany(the"COMPANYCOMMONSTOCK"and,withrespecttoanyperiodaftertheEffective Time,the."COMPANY COMMONSTOCK",)asprovidedinSECTION2.1(the"SHAREEXCHANGE"),
| |
| inaccordance withSection913oftheNYBCLandattheBrooklynUnionEffective Time(asdefinedinSECTION1.2),awhollyownedsubsidiary oftheCompany("MERGERSUB) willbemergedwithandintoBrooklynUnion(the"MERGER")
| |
| inaccordance withSection902oftheNYBCL,pursuanttowhicheachoutstanding shareofBrooklynUnionCommonStockshallautomatically beconverted intooneshareofCompanyCommonStockasprovidedinSECTION2.1(the"MERGER"and,togetherwiththeShareExchange, the"TRANSACTIONS"
| |
| ).AsaresultoftheMergerMergerSub willceasetoexistandBrooklynUnionwillsurvivetheMergerasthesurviving corporation (the"SURVIVING CORPORATION"
| |
| ).SEcrioN1.2EFFECTIVE TIME.OntheClosingDate(asdefinedin'SECTION 3.1),acertificate ofexchangecomplying withtherequirements oftheNYBCLshallbeexecutedbyLILCOandtheCompanyandacertificate ofmergercomplying withtherequirements oftheNYBCLshallbeexecutedbyBrooklynUnionandMergerSub, and,eachshallbefiledbythepartieswiththeSecretary ofStateoftheStateofNewYork.TheLILCOBindingShareExchangeshallbecomeeffective atthetimespecified inthecertificate ofexchangewithrespecttotheLILCOBindingShareExchange(the"LILCOEFFECTIVE TIME")andtheMergershallbecomeeffective atthetimespecified inthecertificate ofmergerfiledwithrespecttotheMerger(the"BROOKLYN UNIONEFFECTIVE TIME")whichspecified timesshallbecontemporaneous (the"EFFECTIVE TIME");PROVIDED, thattheBrooklynUnionEffective TimeshallbelaterthantheLILCOEffective Timeandallreferences totheEffective TimehereinshallmeantheBrooklynUnionEffective Time.ARTICLEIITREATMENT OFSHARESSEcTION2.1EFFECTONCAPITALSTOCK.(a)AttheBrooklynUnionEffective Time,byvirtueoftheMergerandwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnion,theCompanyorMergerSub:
| |
| (i)TREATMENT OFBROOKLYNUNIONCOMMONSTOCK.EachshareofBrooklynUnio'ommon Stockissuedandoutstanding immediately priortotheBrooklynUnionEffective Tiine,otherthA-2 Dissenting Shares(asdefinedinSECTION2.2),shallbeconverted intotheright"toreceiveonefullypaidand,subjecttoSection630oftheNYBCL,nonassessable shareofCompanyCommonStock.AttheBrooklynUnionEffective Time,allsuchsharesofBrooklynUnionCommonStockshallnolongerbeoutstanding, andshallautomatically becancelled andretiredandceasetoexist,andeachholderofacertificate representing anysuchsharesshallceasetohaveanyrightswithrespectthereto,'except therighttoreceivethe'shares ofCompanyCommonStocktobeissuedinconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSECTION2.3,withinterest.
| |
| (ii)TREATMENT OFMERGERSUB COMMONSTOCK.EachshareofcommonstockofMergerSub, parvalue$.01pershare,issuedandoutstanding immediately priortotheBrooklynUnionEffective Timeshallbeconverted intooneshareofcommonstock,$0.335pershare,oftheSurviving Corporation.
| |
| (b)SubjecttoSECTION7.18(b),attheLILCOEffective Time,byvirtueoftheShareExchangeandwithoutanyactiononthepartofanyholderofanycapitalstockofLILCO,BrooklynUnionortheCompany:(i)TREATMENT OFLILCOCOMMONSTOCK.Eachissuedandoutstanding shareofLILCOCommonStock,otherthanDissenting Shares,shallbeexchanged for0.803,(the"PRIGINAL RATIO")fullypaidand,subjecttoSection630oftheNYBCL,nonassessable sharesofCompanyCommonStock;PROVIDEDthatiftheLIPAAgreement hasnotbeenterminated butthetransactions contemplated therebywillnotbeconsummated contemporaneously withtheconsummation ofthetransactions contemplated hereby,theneachissuedandoutstanding shareofLILCOCommonStock,otherthanDissenting Shares,,shallbeexchanged for0.803fullypaidand,subjecttoSection630oftheNYBCL,nonassessable sharesofCompanyCommonStock,andtheCompanyshallcausetheretobereservedoutofitsauthorized butunissuedsharesofCompanyCommonStocksuchnumberofsharesasisequalto0.077multiplied bythenumberofsharesofLILCOCommonStockoutstanding, otherthanDissenting Shares,attheLILCOEffective Time;andifthetransactions contemplated bytheLIPAAgreement areconsummated withintwoyearsoftheLILCOEffective Time,thenthereshallbeissuedtopersonswhowereholdersofrecordofLILCOCommonStockattheLILCOEffective Time,0.077sharesofCompanyCommonStockinrespectofeachshareofLILCOCommonStock,otherthanDissenting Shares,thathadbeenheldbythemofrecordattheLILCOEffective Time.Thepotential issuanceofsharesofCompanyCommonStockpursuanttothelastprovisoofthepreceding sentenceisreferredtohereinasthe"Contingent Issuance".
| |
| Thetermsofexchangedescribed intheprovisointhesentencepreceding thepreceding sentencearereferredtohereinasthe"LIPARATIO"(0.880),andtheOriginalRatioandtheLIPARatioarereferredtohereintogetherasthe"RATIOS".
| |
| Uponsuchexchange, theCompanyshallbecometheownerofeachshareofLILCOCommonStocktobesoexchanged andallsuchsharesofLILCOCommonStockshallbedeemedtohavebeenexchanged fortheapplicable numberofsharesoftheCompanyCommonStock,andeachholderofacertificate formerlyrepresenting anysuchsharesshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceivesharesoftheCompanyCommonStocktobeissuedinconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSECTION2.3.(ii)NOCHANGEINLILCOPREFERRED STOCK.Eachissuedandoutstanding shareofthepreferred stockofLILCOshallbeunchanged asaresultoftheShareExchangeandshallremainoutstanding thereafter.
| |
| IISi:.crioN2.2 DISSENTING SHARES.SharesofLILCOCommonStockorBrooklynUnionCommonStockheldbyanyholderentitledtoreliefasadissenting shareholder underSection910oftheNYBCL(the"DISSENTING SHARES")shallnotbecometherighttoreceiveCompanyCommonStock,b'utshallbecancelled andconverted intosuchconsideration asmaybeduewithrespecttosuchsharespursuanttotheapplicable provisions oftheNYBCL,unlessanduntiltheright'ofsuchholdertoreceivefaircashvalueforsuchDissenting Sharesterminates inaccordance withSection623oftheNYBCL.Ifsuchrightisterminated otherwise anbythepurchaseofsuchsharesbyLILCOorBrooklynUnion,thensuchsharesshallceasetobeDissenting aresandshallrepresent therighttoreceiveCompanyCommonStock,asprovidedinSECTION2.1.A-3 SEGTIQN2.3ISSUANCEOFNEWCERTIFICATES.
| |
| It(a)DEPOSITWITHEXCHANGEAGENT.Assoonaspracticable aftertheEffective Time,theCompanyshalldepositwithsuchbankortrustcompanymutuallyagreeable toLILCOandBrooklynUnion(the"EXCHANGE AGENT"),certificates representing sharesofCompanyCommonStockrequiredtoeffecttheissuances referredtoinSECTION2.1(or,SECTIONS2.1(a)and7.18(b)iftheTransactions aretobeconsummated pursuanttoSECTION7.18(b)).
| |
| t(b)ISSUANCEPROCEDURES.
| |
| Assoonaspracticable aftertheEffective Time,theExchangeAgentshallmailtoeachholderofrecordofacertificate orcertificates (the"CERTIFICATES"
| |
| )whichimmediately prior,totheLILCOEffective Timerepresented outstanding sharesofLILCOCommonStockorwhichimmediately priortotheBrooklynUnionEffective Timerepresented outstanding sharesofBrooklynUnionCommonStock(the"EXCHANGED COMMONSHARES")thatinthecaseofLILCOCommonStockwereexchanged forsharesofCompanyCommonStock(the"COMPANYSHARES")pursuanttoSECTION2.1(b)andinthecaseofBrooklynUnionCommonStockwereconverted intotherightto-receive, CompanySharespursuanttoSECTION2.1(a),(i)aletteroftransmittal (whichshallspecifythatdeliveryshallbeeffected, andriskoflossandtitletotheCertificates shallpass,onlyuponactualdeliveryoftheCertificates totheExchangeAgent)(the"LETI'EROFTRANSMITTAL"
| |
| )and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates representing CompanyShares.Notwithstanding theforegoing, iftheTransactions aretobeconsummafed pursuanttoSECTION7.18(b),thenassoon*aspracticable aftertheEffective Time,theExchangeAgentshallmailtoeachhblderofrecordof(x)aCertificate whichimmediately priortotheLILCOEffective Timerepresented Exchanged CommonSharesthatwereexchanged forCompanySharespursuanttoSECTION7.18(b),or(y)aCertificate whichimmediately'prior totheBrooklynUnionEffective Timerepresented Exchanged CommonSharesthatwereconverted intheMergerintotherightto'eceive CompanySharespursuanttoSECTION2.1(a),(i)aLetterofTransmittal and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates representing Company'Shares.
| |
| Uponsurrender ofaCertificate totheExchangeAgentforexchange(ortosuchotheragentoragentsasmaybeappointed bya'greement ofBrooklynUnionandLILCO),togetherwithadulyexecutedletteroftransmittal andsuchothedocilm'ents astheExchangeAgentshallrequire,theholderofsuchCertificafe shallbeentitledtoreceiveacertificate representing thatnumberofwholeCompanyShareswhichsuchholderhastherighttoreceivepursuanttotheprovisions ofthisARTICLEII(orSECTIONS2.1(a)and7.18(b)iftheTransactions aretobecolisummated pursuanttoSECI'ION7.18(b)).
| |
| Intheeventofatransferofownership ofExchanged CommonShareswhichisnotregisfered inthetransferrecordsofLILCOorBrooklynUnion,as'thecasemaybe,acertificate representing thepropernumberofCompanySharesmaybeissuedtoatransferee iftheCertificate representing suchExchanged CommonSharesispresented totheExchangeAgent,accompanied byalldocuments requiredtoevidenceandeffectsuchtransferandbyevidencesatisfactory totheExchangeAgentthatanyapplicable stocktransfertaxeshavebeenpaid.Untilsurrendered ascontemplated bythisSECTION2.3,eachCertificate shallbedeemedatanytimeaftertheLILCOEffective TimeortheBrooklynUnionEffective Time,'sthecasemaybe,torepresent onlytherighttoreceiveuponsuchsurrender thecertificate representing CompanySharesandcashinlieuofanyfractional sharesofCompanyCommonStockascontemplafed bythisSECTION2.3.(c)DISTRIBUTIONS WITHRESPECTTOUNSURRENDERED SHARES.Nodividends orotherdistributions declaredormadeaftertheEffective TimewithrespecttoCompanyShareswitharecorddateaftertheEffective Timeshallbepaidtotheholderofanyunsurrendered Certificate withrespecttotheCompanyShamsrepresented therebyandnocashpaymentinlieuoffractional sharesshallbepaidtoanysuchholderpursuanttoSECTION2.3(d)uritiltheholderofrecordofsuchCertificate"shall surrender suchCertificate.
| |
| Subjecttotheeffectofunclaimed
| |
| : property, escheatandotherapplicable laws,following surrender ofanysuchCertificate, thereshallbepaidtotherecordholderofthecertificates representing wholeCompanySharesissuedinconsideration
| |
| : therefor, withoutinterest, (i)atthetimeofsuchsurrender, theamountofanycashpayableinlieuofafractional shareofCompanyCommonStocktowhichsuchholderisentitledpursuanttoSECTION2.3(d)andtheamountofdividends orotherdistributions witharecorddateaftertheEffective Timetheretofor paidwithrespecttosuchwholeCompanySharesand(ii)attheappropriate paymentdate,theamountA-4 edividends orotherdistributions witharecorddateaftertheEffectiye Timebutpriortosurrender andapaymentdatesubsequent.to surrender payablewith,respecttosuchwholeCompany.Shares.,(d)NOFRACTIONAL SECURITIES.,'otwithstanding any'"other'rovision of'this'greement, nocertificates orscriprepresenting fractional sharesofCompanyCo'm'monStockshallbe'issued uponthesurrender forexchangeofCertificates andsuchfractional "sharesshall'otentitlethe"owner'thereof tovoteorto'anyotherrightsofaholderofCompanyCommonStock.Aspromptlyaspossiblefollowing theEffective Time,theExchangeAgentshalldetermine theexcessof(i)thenumberoffullsharesofCompanyCommonStockdelivered totheExchangeAgentbytheCompanypursuant-to SECTION2.3(a)lessthenumberoffullsharesofCompanyCommonStocktobedistributed totheholdersofBrooklynUnionCommonStockpursuanttoSECTION2.1(a)over(ii)thenumberoffullsharesofCompanyCommonStocktobedistributed totheholdersofLILCOCommonStockpursuanttoSECTION2;l(c)orSECTION7.18(b)('suchexcessbeinghereinreferredtoasthe"EXCESSSHARES").AssoonaftertheEffective Dateaspracticable, the"ExchangeAgent,'sagentfor'theholdersofLILCOCommon'Stock, shallsellth'eExcessSharesat"thethen':prevailing pricesontheNewYorkStockExchange(the"NYSE")throughoneormo'ememberfirms'of'the'NYSE iriroundlotstotheextentpracticable.
| |
| LILCOshallpay,orcauseto'bepaid,allcommis'sions, transfer'thxesandotherout-of-pocket transactions costs,including theexpensesandcompensation oftheExchangeAgentincurredinconnection withsuchsaleoftheExcessShares.Untiltheproceedsofsuchsaleorsaleshavebeendistributed totheholdersofLILCOCommonStock,theExchangeAgentshallhol'dsuchproceedsintrustfortheholdersofLILCOCommonStock.TheExchangeAgent,shalldetermine theportionoftheproceedsfrom thesaleoftheExcessShares(the"EXCESSSHARESPROCEEDS"
| |
| )towhicheachholderofLILCOCommonStockisentitled, ifany,bymultiplying theamountoftheExcessSharesProceedsbya>fraction, thenumerator'of whichisiheamountofthefractional shareinterests towhichsuchholderofLILCOCommonStockisentitled, andthedenominator ofwhichistheaggregate amountoffractional'share-interest towhichalfofthe"holders'of LIL'COCommonStockareentitled.
| |
| Assoonaspracticable afte'rth'e'sale oftheExcessShares'and thedetermination oftheamou'ntofcash,ifany,tobepaid'to"eachholderofLILCOCommonSfo'ckinlieu'of'any'raction'al share'interests,"the ExchangeAgentshall"dist'ribute suchamountstotheholdeNofLILCO'Common'tock entitledtheretoandwhoavetheretofore delivered Certificates for-LILCO Co'mnionStockpursuantto'thisA'RTICLEII.Cashisbeingpaidinlieuoffractional sharespursuanttO'thisSECTION2.1(d)for'theconvenience oftheparties'and'is notaseparately bargained forconsideration.
| |
| (e)CLOSINGOFTRANSFERBOOKS.FromandaftertheLILCOEffective Time,andtheBrooklynUnionEffective Time,thecommon,stock,transfer booksofLILCOandBrooklynUnion,respectively, shallbeclosedandnotransferofany,LILCO CommpnStockorBrooklyn,.Union CommonStockshallthereafter, bemade.If,aftertheLILCOEffective TimeortheBrooklynUnionEffective Time,asthecasemay.beCertificates arepresented totheCompany.,
| |
| theyshallbecancelled and,exchanged forcertificates, representing the,appropriate numberofCompanyShares,asthecasemaybe,asprovidedinthisSECTION2.3.,(f)TERMINATION OFEXCHANGEAGENT.Anycertificates representing CompanySharesdeposited withtheExchangeAgentpursuantto'SECTION2.3(a)andnotexchanged withinorieyearafter'the Effective TimepursuanttothisSECTION2.3shallbereturned'by theExchangeAgenttotheCompan),which'shall thereafter actasExchangeAgent.Allfundsh'eldbythe'Exchange''Agent, for''payment totheholdersofunsurrendered Cer'tificates andunclaimed attlie'endofonePear'from th'eEffective'Time shallbereturnedto'theCompany,afterwhichtimeanyholderofunsurrendered Certificates shalllook"asageneraIcreditoronlytotheCompanyfoipaymentof'suchfundstowhichsuchholdermaybedue,subjecttoapplicable law.TheCompanyshallnotbeliabletoanyperson'for suchsharesorfundsdelivered'to apublic'official pursuanttoanyapplicable abandoned propertyescheat orsimilarlaw.(g)PROCEDURES APPLICABLE; TO<<.SHARESISSUED'PURSUANT
| |
| .TO,THE"CONTINGENT ISSUANCE.
| |
| Ifthetransactions contemplated bytheLJPA,Agreeutient areconsummated withintwoyearsoftheLILCOEffective Time,thentheExchange, Agentshall.mailtoeachholder.ofrecordofCertificates whichimmediately prior,fotheLILCOEffective Timerepresented outstanding sharesofLILCOCommonStockthatereexchanged forCompany,Sharesincompliance withtheissuanceprocedures described:in SECTION2.3(b)rtificates forthenumberof,wholeCompanyShareswhichsuchholderhas,the.righttoreceivepursuanttotheA-5 Contingent Issuance.
| |
| Nodividends orotherdistributions declaredormadeaftertheLILCOEffective TimewithrespecttoCompanyShareswitharecorddateaftertheLILCOEffective Timeandpriortotheconsummation ofthetransactions contemplated bytheLIPAAgreement shallbepaidinrespectofsharestobeissuedpursuanttotheContingent Issuance.
| |
| Theprocedures described inSECTION2.3(d)withrespecttofractional sharesshallbeemployedwithrespecttosharestobeissuedpursuanttotheContingent Issuance.
| |
| ARTICLEIIITHECLosINGSECTIoN3.1CLOSING,TheclosingoftheTransactions (the"CLOSING"
| |
| )shalltakeplaceattheofficesofKramer,Levin,Naftalis&Frankel,919~irdAvenue,NewYork,NewYorkat10:00A.M.,localtime,onthesecondbusinessdayimmediately following thedateonwhichthelastoftheconditions setforthinARTICLEVIIIhereofissatisfied or'waived, oratsuchothertime,anddateandplaceasBrooklynUnionandLILCOshallmutuallyagree,butin,noeventearlierthanApril1,1998(the"CLOSINGDATE").ARTICLEIVREPRESENTATIONS ANDWARRANTIES OFBROOKLYNUNIONBrooklynUnionrepresents andwarrantstoLILCOasfollows:SECTIGN4.1 ORGANIZATION ANDQUALIFICATION.
| |
| ExceptassetforthinSection4.1oftheBrooklynUnionDisclosure Schedule(asdefinedinSECTION7.6(ii)),
| |
| eachofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries (asdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetandproperties totheextentowned,leasedandoperated,and tocarryonitsbusinessasitisnowbeingconducteandisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, (a)theterm"SUBSIDIARY" ofapersonshallmeananycorporation orotherentity(including partnerships, limitedliability companies andotherbusinessassociations) ofwhichatleast'majorityoftheoutstanding capitalstockoroth'ervotingsecurities havingvotingpowerunderordinarycircumstances toelectdirectors orsimilarmembersofthegoverning bodyofsuchcorporation orentityshallatthetimebeheld,directlyorindirectly, bysuchpe'rsonand(b)theterm"BROOKLYN UNIONSUBSIDIARY" shallmeanaSubsidiary ofBrooklynUnion.SEcfioN4.2 SUBSIDIARIES.
| |
| Section4.2oftheBrooklynUnionDisclosure Schedulesetsforthadescription, asofDecember29,1996,ofallSubsidiaries andJointVentures(asdefinedherein)ofBrooklynUnion,including (a)thenameofeachsuchentityandBrooklynUnion'sinterestthereinand(b)abriefdescription oftheprincipal
| |
| 'lineorlinesofbusinessconducted byeachsuchentity.ExceptassetforthinSection4.2oftheBrooklynUnionDisclosure
| |
| : Schedule, noneoftheBrooklynUnionSubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutilitycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or2(a)(11)ofthePublicUtilityHoldingCompanyActof1935,asamended(the"1935ACT"),respectively.
| |
| ExceptassetforthinSection4.2oftheBrooklynUnionDisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofeachBrooklynUnionSubsidiary arevalidlyissued,fullypaid,nonassessable andfreeof'preemptive rights,andareowned,directlyorindirectly, byBrooklynUnionfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, chargesandoptionsofanynaturewhatsoever andtherearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligatianysuchBrooklynUnionSubsidiary toissue,deliverorsell,orcausetobeissued,delivered orsold,addition, A-6
| |
| 'haresofitscapitalstockorobligating ittogrant,extendorenterintoany.suchagreement orcommitment'.
| |
| AsusedinthisAgreement, (a)theterm"JOINTVENTURE"ofapersonshallmeanany,corporation orotherentity(including partnerships andotherbusinessassociations) thatisnotaSubsidiary ofsuch'person, inwhichsuchpersonoroneormoreofitsSubsidiaries ownsanequityinterestand(b)theterm"BROOKLYN UNIONJOINTVENTURE"shallmeanthoseofthejointventuresofBrooklynUnionoranyBrooklynUnionSubsidiary identified asaBrooklynUnionJointVentureinSection4.2oftheBrooklynUnionDisclosure Schedule.
| |
| 'EGTIQN4.3 CAPITALIZATION.
| |
| Theauthorized capitalstockofBrooklynUnionisassetforthinBrooklynUnion'sAnnualReportonForm10KfortheyearendedSeptember 30,1996.Asofthecloseofbusinesson,December18,1996,-therewereissuedandoutstanding 49,993,378,shares ofBrooklynUnionCommonStock.Alloftheissuedandoutstanding sharesofthecapitalstockofBrooklynUnionare,andanysharesofBrooklynUnionCommonStockissuedpursuanttotheBrooklynUnionStockOptionAgreement willbe,validlyissued,fullypaid,nonassessable andfreeofpreemptive rights.ExceptassetforthinSection4.3oftheBrooklynUnionDisclosure
| |
| : Schedule, asofDecember29,1996,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderany'outstanding
| |
| : security, instrument orotheragreement, obligating BrooklynUnionoranyoftheBrooklynUnionSubsidiaries toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofthecapitalstockofBrooklynUnion,orobligating BrooklynUniontogrant,extendorenterintoanysuchagreement orcommitment, otherthanundertheBrooklynUnionStockOptionAgreement.
| |
| Therearenooutstanding stockappreciation rightsofBrooklynUnionwhichwerenotgrantedintandem-with arelatedstockoptionandnooutstanding:limited stockappreciation rightsorotherrightstoredeemforcashoptionsorwarrantsofBrooklynUnion.Bcertom4.4AUTHORITY; NON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
| |
| (a)AUTHORITY.
| |
| BrooklynUnionhasallrequisite powerandauthority
| |
| 'toenterintothisAgieem'ent andtheBrooklynUnionStockOptionAgree'ment, and,'ubje'ct totheBrooklynUnionShareholders''pproval (asfinedinSECTION4.13)'ndtheBrooklynUnionRequiredStatutory Approvals (asdefinedinSECTION.4(c)),toconsummate thetransactions contemplated herebyor'hereby.
| |
| Theexecution anddeliveryofthisAgreement andtheBrooklynUnionStockOptionAgreement andtheconsummation byBrooklynUnionofthetransactions contemplated herebyandtherebyhavebeendulyauthorized by'allnecessary corporate actiononthepartofBrooklynUnion,subjecttoobtaining theapplicable BrooklynUnionShareholders'pproval.
| |
| EachofthisAgreement andtheBrooklynUnionStockOptionAgreement hasbeen'dulyandvalidlyexecutedanddelivered byBrooklynUnionand,assumingthedueauthorization,'xecution
| |
| 'anddeliveryhereofandthereofbytheothersignatories heretoandthereto,constitutes thevalidandbindingobligation ofBrooklynUnionenforceable againstitinaccordance withitsterms.(b)NON-CONTRAVENTION.
| |
| Exceptasset.forthinSection4.4(b)of:theBrooklynUnionDisclosure
| |
| : Schedule, theexecution anddeliveryofthisAgreement andtheBrooklynUnionStockOptionAgreemeht byBrooklynUniondonot,andthe.consummation ofthetransactions contemplated hereby,ortherebywillnot,inanymaterialrespect,violate,conAictwith,orresultinamaterial" breachofanyprovision of,orconstitute amaterial" default(withorwithoutnoticeorlapseoftimeorboth)under,orresultinthetermination ormodification of,oraccelerate theperformance requiredby,orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orresultinthecreationofanymateriallien,securityinterest, chargeorencumbrance uponanyoftheproperties orassetsofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures(anysuchviolation,,conflict, breach,default,rightoftermination, modification, cancellation oracceleration, lossorcreation, a"VIOLATION" withrespecttoBrooklynUnion,suchtermwhenusedinARTICLEVhavingacorrelative meaningwithrespecttoLILCO)pursuanttoanyprovisions of(i)thecertificate ofincorporation, by-lawsorsimilargoverning documents ofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries ortheBrooklyn'Union JointVentures, (ii)subjecttoobtaining theBrooklynUnionRequiredStatutory Approvals andthe'receipt oftheBrooklynUnionShareholders'rovalany statute,law,ordinance; rule,regulation,
| |
| : judgment, decree,order,injunction, writ,permitorlicenseanyGovernmental Authority (asdefinedinSECTION4.4(c))applicable toBrooklynUnionoranyoftheA-7 BrooklynUnion,Subsidiaries ortheBrooklynUnionJointVenturesoranyoftheirrespective properties orassetor(iii)subjecttoobtaining thethird-party,consents setforthinSection4.4(b)oftheBrooklynUnionDisclosure Schedule(the"BROOKLYN UNIONREQUIREDCONSENTS"),
| |
| anymaterialnote,bond,mortgage, indenture,
| |
| 'deedoftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation oragreement ofanykindto.whichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries ortheBrooklynUnionJointVenturesisapartyorbywhichitoranyofitsproperties orassetsmaybeboundoraffected.
| |
| (c)STATUTORY APPROVALS.
| |
| ¹declaration, filingorregistration with,ornoticetoorauthorization, consentorapprovalof,anycourt,"federal,'state, localorforeigngovernmental orregulatory body(including astockexchangeorotherself-regulatory body)or"'atithority (each,a"GOVERNMENTAL AUTHORITY"
| |
| )isnecessary fortheexecution anddeliveryofthisAgreement ortheBrooklynUnionStockOptionAgreement byBrooklynUnionortheconsummation byBrooklynUnionofthetransactions conteinplated herebyorthereby,exceptasdescribed inSection4.4(c)oftheBrooklynUnionDisclosure Schedule(the"BROOKLYN UNIONREQUIREDSTATUTORY APPROVAL.S",
| |
| itbeingunderstood thatreferences inthisAgreement to"obtaining" suchBrooklynUnionRequiredStatutory Approvals shallmeanmakingsuchdeclarations, filingsorregistrations; givingsuchnotices,"
| |
| obtaining suchaiithorizations, consentsorapprovals; andhavingsuchwaitingperiodsexpireasarenecessary toavoidaviolation oflaw).(d)COMPLIANCE.
| |
| Except'as set'orthinSection4.4(d);Section4.10orSection4.11oftheBrooklynUnionDisclosure
| |
| : Schedule, orasdisclosed intheBrooklynUnionSECReports(asdefinedinSECTION4.5)filedpriortoDecember29,1996,"neither BrboklynUnionno'ranyoftheBrooklynUnionSubsidiaries nor,totheknowledge ofBrooklynUnion,anyBrooklynUnionJointVenture'is"inmaterialviolation of,isunderinvestigation withrespecttoanymaterialviolation of,orhas,beengivennoticeorbeenchargedwithanymaterialviolation of,'anylaw,statute,order,'rule, regulation, ordinance orjudgment(including, withoutlimitation, anyapplicable environmental law,ordinance orregulation) ofanyGovernmental Authority.
| |
| ExceptassetforthinSection4.4(d)oftheBrooklynUnionDisclosure ScheduleorinSection,4.11 oftheBrooklyn.
| |
| UnionDisclosure
| |
| : Schedule, BrooklynUnionandtheBrooklynUnionSubsidiaries andBrooklynUnionJointVentureshave.apermits,licenses, franchises andothergovernmental authorizations, consentsandapprovals necessary tocondutheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection4.4(d)oftheBrooklynUnionDisclosure
| |
| : Schedule, brooklynUnionandeachoftheBrooklynUnionSubsidiaries isnotinmaterialbreachorviolation oforinmaterialdefaultintheperformance orobservance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseof,timeoractionbyathirdparty,couldresultinamaterialdefaultunder,(i)itscertificate ofincorporation orby-lawsor(ii)anymaterialcontract, commitment, agreement, indenture,
| |
| : mortgage, loanagreement, note,lease,bond,license,approvalorotherinstrument tow'hichitisapartyorbywhichitisboundortowhichanyofitspropertyissubject.SecrroN4.5 REPORTSANDFINANCIAL STATEMENTS.
| |
| ThefilingsrequiredtobemadebyBrooklynUnionandtheBrooklynUnionSubsidiaries sinceJanuary1,1994undertheSecurities Actof1933,asamended(the"SECURITIES ACT"),theSecurities ExchangeActof1934,asamended(the"EXCHANGE ACT"),the1935Act,theFederalPowerAct(the"POWERACT"),theAtomicEnergy Actandapplicable statelawsandregulations havebeenfiledwiththeSecurities andExchangeCommission (the"SEC"),theFederalEnergyRegulatory Commission (the"FERC"),theNuclearRegulatory Commission
| |
| ("NRC")ortheappropriate statepublicutilities commission, asthecasemaybe,including allforms,statements, reports,agreements (oralorwritten)andalldocuments,
| |
| : exhibits, amendments andsupplements.
| |
| appertaining thereto,andcomplied, asoftheirrespective dates,inallmaterialrespects, withallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| : Brooklyn, Unionhasmadeavailable toLILCOatrueandcompletecopyofeachreport,schedule, registration statement anddefinitive proxy,statement filedbyBrooklynUnionwiththeSECsinceJanuary1,1994(assuchdocuments havesincethetimeoftheirfilingbeenamended,the"BROOKLYN UNIONSECREPORTS").Asoftheirrespective dates,theBrooklynUnionSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheyweremade,nmisleading.
| |
| Theauditedconsolidated financial statements andunaudited interimfinancial statements ofBrooklA-8 nionincludedintheBrooklynUnionSECReports(collectively, the"BROOKLYN UNIONFINANCIAL STATEMENTS"
| |
| )havebeenpreparedinaccordance withgenerally acceptedaccounting principles appliedonaconsistent basis("GAAP")(exceptasmaybeindicated thereinorinthenotestheretoandexceptwithrespecttounaudited statements aspermitted by.Form10-QoftheSEC)andfairlypresentthefinancial positionofBrooklynUnionasofthedatesthereofandtheresultsofitsoperations andcashflowsfortheperiodsthenended,subject,inthecaseoftheunaudited interimfinancial statements, tonormal,recurring auditadjustments.
| |
| True,accurateandcompletecopiesoftheRestatedCertificate ofincorporation andBy-lawsofBrooklynUnion,asineffectonDecember29,1996,areincluded(orincorporated byreference) intheBrooklynUnionSECReports.Sorrow4.6ABSENCEOFCERTAINCHANGESOREVENTS.Exceptasdisclosed intheBrooklynUnionSECReportsfiledpriortoDecember29,1996orassetforthinSection4.6oftheBrooklynUnionDisclosure
| |
| : Schedule, sinceSeptember 30,1996,BrooklynUnionandeachoftheBrooklynUnionSubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhaveor,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects ofBrooklynUnionanditssubsidiaries takenasawhole(a"BROOKLYN'NION MATERIALADVERSEEFFECT").SEcTIQN4.7 LITIGATION.
| |
| Exceptasdisclosed inthe'Brooklyn UnionSECReportsfiledpriortoDecember29,1996orassetforthinSection4.7,Section4.9or'Section 4.11oftheBrooklynUnionDisclosure
| |
| : Schedule, (i)therearenomaterialclaims,suits,actionsor;proceedings, pendingor,totheknowledge ofBrooklynUnion,threatened, norarethere,totheknowledge ofBrooklynUnion,anymaterialinvestigations orreviewspendingorthreatened against,relatingtooraffecting BrooklynUnionoranyoftheBrooklynUnionSubsidiaries, (ii)therehavenotbeenanysignificant developments sinceSeptember 30,1996withrespecttosuchdisclosed claims,suits,actionS,proceedings, investigations orreviewsand(iii)therearenomaterialjudgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality authority oranyarbitrator applicable toBrooklynUnionoranyoftheBrooklynUnionSubsidiaries.
| |
| SEcfIQN4.8 REGISTRATION STATEMENT ANDPROXYSTATEMENT.
| |
| Noneoftheinformation suppliedortobesuppliedby,oronbehalfofBrooklynUnionforinclusion orincorporation byreference in(i)the.registration statement onFormS-4tobefiledwiththeSECbytheCompanyinconnection withtheissuanceofsharesofCompanyCommonStockintheTransactions (the,"REGISTRATION STATEMENT"
| |
| )will,atthetimetheRegistration Statement isfiledwiththeSECandatthetimeitbecomeseffective undertheSecurities Act,containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary tomakethestatements thereinnotmisleading and(ii)thejointproxystatement, in'definitive form,relatingtothemeetin'gs ofBrooklynUnionand'LILCOshareholders tobeheldinconnection withtheTransactions (the"PROXYSTATEMENT"
| |
| )willnot,atthedatesmailedtoshareholders and"atthetimesofthemeetings, ofshaieholders tobeheldinconnection withtheTransactions, containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary inordertomakethestatementq therein,inlightofthecircumstances underwhichtheypremade,notmisleading.
| |
| TheRegistration Statement andtheProxyStatement we'llcomplyastoforminallmaterialrespectswiththeprovisions oftheSecurities ActandtheExchangeActandtherulesandregulations thereunder.
| |
| VSEGTIQN4.9 TAXMATTERS."TAXES",asusedinthisAgreement, meansanyfederal,state,'county, localorforeigntaxes,charges,fees,levies,orotherassessments, including allnetincome,grossincome,salesanduse,advalorem,transfer, gains,profits,excise,franchise, realandpersonalproperty, grossreceipt,capitalstock,production, businessandoccupation, disability, employment, payroll,license',
| |
| estimated, stamp,customduties,severance.
| |
| orwithholding taxesorchargesimposedbyanygovernmental entity,andincludesanyinterestandpenalties (civilorcriminal) onoradditions toanysuchtaxes.'RETAXRETURN",asusedinthisAgreement, meansareport,returnorotherinformation requiredtobesuppliedtoagovernmental entitywithrespecttoTaxesluding,wherepermitted orrequired, combinedorconsolidated returnsforanygroupofentitiesthatincludesooklynUnionoranyofitssubsidiaries, orLILCOoranyofitssubsidiaries, asthecasemaybe.A-9 ExceptassetforthinSection4.9oftheBrooklynUnionDisclosure Schedule:
| |
| (a)FILING"OFTIMELYTAXRETURNS.BrooklynUnionandeachoftheBrooklynUnionSubsidiaries havefiled(ortherehasbeenfiledonitsbehalf)allmaterialTaxReturnsrequiredtobefiledbyeachofthemu'nderapplicable law.AllsuchTaxReturnswereandareinallmaterialrespectstrue,completeandcorrectandfiledonatimelybasis.(b)PAYMENTOFTAXES.BrooklynUnionandeachoftheBrooklynUnionSubsidiaries have,withinthetimeandinthemannerprescribed bylaw,paidall,Taxes thatarecurrently dueandpayableexceptforthosecontested ingoodfaithandforwhichadequatereserveshavebeentaken.(c)TAXRESERVES.
| |
| BrooklynUnionandtheBrooklynUnionSubsidiaries haveestablished ontheirbooksandrecordsreservesadequatetopayallTaxesandreservesfordeferredincometaxesinaccordance withGAAP.(d)TAXLIENS.TherearenoTaxliensupontheassetsofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries exceptliensforTaxesnotyetdue.(e)WITHHOLDING TAXES.BrooklynUnionandeachoftheBrooklynUnionSubsidiaries havecompliedinallmaterialrespectswiththeprovisions oftheInternalRevenueCodeof1986,asamended(the"CODE")relatingtothewithholding ofTaxes,aswellassimilarprovisions underanyotherlaws,andhave,withinthetimeandinthemannerprescribed bylaw,withheldfromemployeewagesandpaidovertothepropergovernmental authorities allamountsrequired.
| |
| (f)EXTENSIONS OFTIMEFORFILINGTAXRETURNS.NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasrequested anyextension oftimewithinwhichtofileanyTaxReturn,whichTaxReturnhasnotsincebeenfile.-(g)WAIVERSOFSTATUTEOFLIMITATIONS.
| |
| NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasexecutedanyoutstanding waiversorcomparable consentsregarding theapplication ofthestatuteoflimitations withrespecttoanyTaxesorTaxReturns.(h)EXPIRATION OFSTATUTEOFLIMITATIONS.
| |
| Thestatuteoflimitations fortheassessmei
| |
| -ofallTaxeshasexpiredforallapplicable TaxReturnsofBrooklynUnionandeachoftheBrooklyn'Union Subsidiaries orthoseTaxReturnshavebeenexaminedbytheappropriate taxingauthorities forallperiodsthroughDecember29,1996,andnodeficiency foranyTaxeshasbeenproposed, assertedorassessedagainstBrooklynUnionoranyoftheBrooklynUnionSubsidiaries thathasnotbeenresolvedandpaidinfull.(i),AUDIT, ADMINISTRATIVE ANDCOURTPROCEEDINGS.
| |
| Noauditsorotheradministrative proceedings orcourtproceedings arepresently pendingwithregardtoanyTaxesorTaxReturnsofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries.
| |
| (j)POWERSOFATTORNEY.
| |
| Nopowerofattorneycurrently inforcehasbeengrantedbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries concerning anyTaxmatter.(k)TAXRULINGS.NeitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasreceivedaTaxRuling(asdefinedbelow)orenteredintoaClosingAgreement (asdefiriedbelow)withanytaxingauthority thatwouldhaveacontinuing adverseeffectaftertheClosingDate."TAXRULING",asusedinthisAgreement, shallmeanawrittenrulingofataxingauthority relatingtoTaxes."CLOSINGAGREEMENT",
| |
| asusedinthisAgreement, shallmeanawrittenandlegallybindingagreement withataxingauthority relatingtoTaxes.(1)AVAILABILITY OFTAXRETURNS.BrooklynUnionhasmadeavailable toLILCOcompleteandaccuratecopiesof(i)allTaxReturns,andanyamendments thereto,filedbyBrooklyn.
| |
| UnionoranyoftheBrooklynUnionSubsidiaries, (ii)allauditreportsreceivedfromanytaxingauthority relatingtoanyTaxReturnfiledbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries and(iii)anyClosingAgreements enteredintobyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries withanytaxi~authority.
| |
| (m)TAXSHARINGAGREEMENTS.
| |
| NeitherBrooklynUnionnoranyBrooklynUnionSubsidiary isapartytoanyagreement relatingtoallocating orsharingofincomeTaxes.(n)CODESECTION280G.'either BrooklynUnionnoranyoftheBrooklynUnionSubsidiaries isapartytoanyagreement,
| |
| : contract, orarrangement thatcouldresult,onaccountofthetransactions contemplated hereunder, separately orintheaggregate, inthepaymentofany"excessparachute payments" withinthemeaningofSection280GoftheCode.(o)LIABILITY FOROTHERS.NoneofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasanyliability forTaxesofanypersonotherthanBrooklynUnionandtheBrooklynUnionSubsidiaries (i)underTreasuryRegulations Section1.1502-6(oranysimilarprovision ofstate,localorforeignlaw)asatransferee orsuccessor, (ii)bycontract, or(iii)otherwise.
| |
| Sscnont4.10 EMPLOYEEMA%TERS;ERISA.ExceptassetforthinSection4.10oftheBrooklynUnionDisclosure Schedule:
| |
| (a)BENEFITPLANS.Section4,10(a)oftheBrooklynUnionDisclosure Schedulecontainsatrueandcompletelistofeachemployeebenefitplancoveringemployees, formeremployees ordirectors ofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries ortheirbeneficiaries, orproviding benefitstosuchpersonsinrespectofservicesprovidedtoanysuchentity,including, butnotlimitedto,anyemployeebenefitplanswithinthemeaningofSection3(3)ofthe,EmployeeRetirement IncomeSecurityActof1974,asamended("ERISA")
| |
| andanyseverance orchangeincontrolagreement (collectively, the"BROOKLYN UNIONBENEFITPLANS").ForthepurposesofthisSECTION4.10only,theterm"Brooklyn Union"shallbedeemedtoincludethepredecessors ofsuchcompany.(b)CONTRIBUTIONS.
| |
| All'material contributions and'therpaymentsrequiredtobemadebyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries toanyBrooklynUnionBenefitPlan(ortoanypersonpursuanttothetermsthereof)havebeenmadeortheamountofsuchpaymentorcontribution obligation hasbeenrefiected intheBrooklynUnionFinancial Statements.
| |
| (c)QUALIFICATION; COMPLIANCE.
| |
| EachoftheBrooklynUnionBenefitPlansintendedtobe"qualified" withinthemeaningofSection401(a)oftheCodehasbeendetermined bytheIRStobesoqualified, and,tothebestknowledge ofBrooklynUnion,nocircumstances existthatarereasonably
| |
| : expected, byBrooklynUniontoresultintherevocation ofanysuchdetermination.
| |
| BrooklynUnionisincompliance inallmaterialrespectswith,andeachoftheBrooklynUnionBenefitPlansisandhasbeenoperatedin.allmaterialrespectsincompliance'with, allapplicable laws,rulesandregulations governing suchplan,including, withoutlimitation, ERISAandtheCode.EachBrooklynUnionBenefitPlanintendedtoprovideforthedeferralofincome,thereduction ofsalaryorothercompensation, ortoaffordotherincometaxbenefits, complieswiththerequirements oftheapplicable provisions oftheCodeorotherlaws,rulesandregulations requiredtoprovidesuchincometaxbenefits.
| |
| (d)LIABILITIES.
| |
| WithrespecttotheBrooklynUnionBenefitPlans,individually andintheaggiegate, noeventhasoccurred, and,tothebestknowledge
| |
| 'ofBrooklynUnion,theredoesnotnowexistanycondition orsetofcircumstances, thatcouldsubjectBrooklynUnionoranyoftheBrooklynUnionSubsidiaries toanymaterialliability arisingundertheCode,ERISAoranyotherapplicable law(including, withoutlimitation, anyliability toanysuchplanorthePensionBenefitGuarantyCorporation (the"PBGC")),
| |
| orunderanyindemnity agreement towhichBrooklynUnionisaparty,excluding liability forbenefitclaimsandfundingobligations payableintheordinarycourse.(e)WELFAREPLANS.NoneoftheBrooklynUnionBenefitPlansthatare"welfareplans",withinthemeaningofSection3(1)ofERISA,providesforanyretireebenefits, otherthancontinuation coveragerequiredtobeprovidedunderSection4980BoftheCodeorPart6ofTitleIofERISA.(f)DOCUMENTS MADEAVAILABLE.
| |
| BrooklynUnionhasmadeavailable toLILCOatrueandtcorrectcopyofeachcollective bargaining.
| |
| agreement towhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries isapartyorunderwhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries Phasobligations and,withrespectto'eachBrooklynUnionBenefitPlan;where applicable, (i)suchplanandsummaryplandescription,'-(ii) themostrecentannualreportfiledwiththeIRS,"(iii) eachrelatedtrustagreement, insurance contractserviceprovideror,investment management, agreement,,(including allamendments toeachsuchdocument)t (iv)the~ostrecentdetermination ofthe'IRSwithrespecttothequalified statusofsuchBrooklynUnionBenefitPlan,,and (v)themostrecentactuarial reportorvaluation.
| |
| {g)PAYMENTSRESULTING FROMTHETRANSACTIONS.
| |
| (i)Theconsummation orannouncement of,anytransaction contemplated bythisAgreement willnot(eitheraloneorupontheoccurrence of,anyadditional orfurther,actsorevents),resultinany(A)payment(whetherofseverance pay~orotherwise) becomingduefrom]brooklyn Unionor,anyofthebrooklynUnionSubsidiaries toanyofficer,employee, formeremployee'ordirectorthereoforto.thetrusteeunder,any,",,rabbi trust"orsimilararrangement, or(B)benefitunderanyBrooklynUnionBenefitPlanbeingestablished orbecomingaccelerated, vestedorpayable=and (ii)neitherBrooklyn Union'nor anyoftheBrooklynUnionSubsidiaries isapartyto(A)anymanagement, employment, deferredcompensation, severance (including anypayment,rightorbenefitresulting fromachangeincontrol),
| |
| bonusorothercontractforpersonalserviceswithanyofficer,directorbremployee, (B)'anyconsulting contract'ith anyperson'who piior'oenteringintosuch'contract was'a'director or'ffic'ei,of Brooklyn'Union",
| |
| or(C)anyplan,agreement, arrangement orunderstanding similartoany'oftheforegoin'g.
| |
| J(h)LABORAGREEMENTS''
| |
| Asof;December',
| |
| 1996,except.assetforthinSection4.10(h)oftheBrooklynUnionDisclosure,'Schedule orin:theBrooklynUnionSECReportsfiledprior-toDecember"29,1996,neitherBrooklynUriion"noranyof.the"BrooklynUnionSubsidiaries isa'partyto'anycollective bargaining agreement orotherlaboragreement withanyunionorlabororganization.
| |
| To'theb'estknowledge ofBrooklynUnion,asofDecember29,,199$,exceptassetforthinSection.4.10(h) oftheBrooklynUnionDisclosure
| |
| : Schedule, thereis'nocurrentunionrepresentation questioninvolving employees ofBrooklyn,UnionoranyoftheBrooklynUnionSubsidiaries, nordoesBrooklynUnisonknowofanyactivityorg,Pj'lproceeding ofanylabororganization (orrepresentative thereof)oremployeegrouptoorganizeanysuchemployees.
| |
| Exceptasdisclosed intheBrooklynUnionSECReportsfiledpriortoDecember29,1996oriSection'4.10(h) oftheBrooklyn'Union Disclosur'e Schedule,i.(i) thereisno'nfairlaborpractice, employmerit discrimination or.othermaterial complaint againstBrooklynUnionor-'anyof.theBrooklynUnionSubsidiaries pending,or'tothe,bestknowledge ofBrooklyn.
| |
| Union,threatened, (ii)thereisnostrikeorlockoutormaterialdispute,slowdownorworkstoppagepending,ortothebestknowledge ofBrooklynUnion,threatened, againstorinvolving BrooklynUnion,and(iii)thereisnoproceeding, claim,suit,action.orgovernmental.investigation pendingor,tothebestknowledge ofBrooklynUnion,threatened, inrespectofwhichany'director; officer;employeeoragentofBrooklyn" Union;oranyoftheBrooklynUnionSubsidiaries isormaybeentitled'to claim'indemnifica'tion fromBrooklynUnionorsuchBrooklynUnionSubsidiary pu'rsuant totheirrespective.
| |
| certificates ofincorporation orby-lawsorasprovidedintheindemnification agreements listedinSection4.10(h)oftheBrooklynUnionDisclosure Schedule.
| |
| "~',,~q,>-gC,SecrtoN4.11ENVIRONMENTAL PROTECTION.
| |
| Exceptassetforthin,Section4.11oftheBrooklynUnionDisclosure Scheduleorinthe-Brooklyn Union,SEC;Reports filed,priortoDecember,29, 1996:I(a)COMPLIANCE.'rooklyn UnionandeachoftheBrooklyn, UnionSubsidiaries isin,materialcomplian'ce withallapplicable Environmental Law's(asdefinedinSECTION4.11{g)(ii));
| |
| and'neither Brooklyn'Union'nor anyoftheBrobklynUnionSubsidiaries hasreceivedany"communication'(written ororal),fromanypersonorGovernmental Authority tha'tallegesthatBrooklynUnionoranyoftheBrooklynUnionSubsidiaries isnotinquchcompliance withapplicable Environmental Laws.(b)ENVIRONMENTAL PERMITS.BrooklynUnioq,andeachoftheBrooklyn, UnionSubsidiaries hasobtainedorhasappliedforallmaterialenvironmental, healthandsafetypermitsandgovernmental authorizations (collectively; the"ENVIRONMENTAL PERMITS")necessary'for th'econstruction oftheirfacilities ortheconductoftheiroperations,"and allsuchEnvironmental Pe'rmits'are ingoodstanding-whereapplicable, arenewalapplication hasbeentimelyfiledandispendingagencyapproval, and-Brookl UnionandtheBrooklynUnionSubsidiaries areinmaterialcompliance withalltermsandconditions ofthe"'nvironmental Permits.(c)ENVIRONMENTAL CLAIMS.Tothebestknowledge ofBrooklynUnion,thereisnomaterialEnvironmental Claim(asdefinedinSECTION4.11(g)(i))
| |
| pending(i)againstBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures, (ii)againstanypersonorentitywhoseliability foranyEnvironmental ClaimBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw,or(iii)againstanyreal'orpersonalpropertyoroperations whichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries owns,leasesormanages,inwholeorinpart.(d)RELEASES.
| |
| BrooklynUnionhasnoknowledge ofanymaterialReleases(asdefinedinSECTION4.11(g)(iv))
| |
| ofanyHazardous Material(asdefinedinSECTION4.11(g)(iii))
| |
| thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstBrooklynUnionoranyoftheBrooklynUnionSubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimBrooklynUnionoranyoftheBrooklynUnionSubsidiaries hasormayhaveretainedor'assumed eithercontractually orbyoperation oflaw.(e)PREDECESSORS.
| |
| BrooklynUnionhasnoknowledge, withrespecttoanypredecessor ofBrooklynUnionoranyoftheBrooklynUnionSubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyReleaseofHazardous Materials thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental Claim.(f)DISCLOSURE.
| |
| ToBrooklynUnion'sbestknowledge, BrooklynUnionhasdisclosed toLILCOallmaterialfactswhichBrooklynUnionreasonably believesformthebasisofamaterialEnvironmental Claimarisingfrom(i)thecostofBrooklynUnionpollution controlequipment currently requiredorknowntoberequiredinthefuture;(ii)current,BrooklynUnionremediation costsorBrooklynUnionremediation costsknowntoberequiredinthefuture;or(iii)anyotherenvironmental matteraffecting BrooklynUnion.(g)AsusedinthisAgreement:
| |
| (i)"ENVIRONMENTAL CLAIM"meansanyandalladministrative, regulatory orjudicialactions,suits,demands,demandletters,directives, claims,liens,investigations, proceedings ornoticesofnoncompliance orviolation (writtenororal)byanypersonorentity(including anyGovernmental Authority) allegingpotential liability (including, withoutlimitation, potential responsibility fororliability forenforcement, investigatory costs,cleanupcosts,governmental responsecosts,removalcosts,remedialcosts,naturalresources damages,propertydamages,personalinjuriesorpenalties) arisingoutof,basedonorresulting from(A)thepresence, orReleaseorthreatened Releaseintotheenvironment, ofanyHazardous Materials atanylocation, whetherornotowned,operated, leasedormanagedbyBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVentures(forpurposesofthisSECTION4.11),orbyLILCOoranyoftheLILCOSubsidiaries orLILCOJointVentures(forpurposesofSECTION5.11);or(B)circumstances formingthebasisofanyviolation, orallegedviolation, ofanyEnvironmental Law;or(C)anyandallclaimsbyanythirdpartyseekingdamages,contribution, indemnification, costrecovery, compensation orinjunctive reliefresulting fromthepresenceorReleaseofanyHazardous Materials.
| |
| (ii)"ENVIRONMENTAL LAWS"meansallfederal,state,locallaws,rulesandregulations relatingtopollution, theenvironment (including, withoutlimitation, ambientair,surfacewater,groundwater, landsurfaceorsubsurface strata)orprotection ofhumanhealthasitrelatestotheenvironment including, withoutlimitation, lawsandregulations relatingtoReleasesorthreatened ReleasesofHazardous Materials, orotherwise relatingtothemanufacture, processing, distribution, use,treatment, storage,disposal, transport orhandlingofHazardous Materials.
| |
| 1(iii)"HAZARDOUS MATERIALS" means(a)anypetroleum orpetroleum
| |
| : products, radioactive materials, asbestosinanyformthatisorcouldbecomefriable,ureaformaldehyde foaminsulation, andtransformers orotherequipment thatcontaindielectric fiuidcontaining polychlorinated biphenyls
| |
| ("PCBs");
| |
| and(b)anychemicals, materials orsubstances whicharenowdefmedasoincludedinthedefinition of"hazardous substances",
| |
| "hazardous wastes","hazardous materials",
| |
| "extremely hazardous wastes","restricted hazardous wastes","toxicsubstances",
| |
| "toxicpollutants",
| |
| orwordsofsimilarimport,underanyEnvironmental Law;and(c)anyotherchemical,
| |
| : material, substance orwaste,exposuretowhichisnowprohibited, limitedorregulated underanyEnvironmental Lawinajurisdiction inwhichBrooklynUnionoranyoftheBrooklynUnionSubsidiaries orBrooklynUnionJointVenturesoperates(forpurposesofthisSECTION4.11)orinwhichLILCOoranyoftheLILCOSubsidiaries orLILCOJointVenturesoperates(forpurposesofSECTION5.11).(iv)"RELEASE" meansanyrelease,spill,emission, leaking,injection, deposit,disposal, discharge, dispersal, leachingormigration intotheatmosphere, soil,surfacewater,groundwater orproperty.
| |
| SEcTIQN4.12REGULATION ASAUTILITY.ExceptassetforthinSection4.12oftheBrooklynUnionDisclosure
| |
| : Schedule, neitherBrooklynUnionnorany"subsidiary company"or"affiliate" (assuchtermsaredefinedinthe1935Act)ofBrooklynUnionissubjecttoregulation asapublicutilityorpublicservicecompany(orsimilardesignation) byanystateintheUnitedStatesotherthanNewYorkoranyforeigncountry.IStlcrtoN4.13VOTEREQUIRED.
| |
| TheadoptionofthisAgreement bytwo-thirds ofthebootesentitledtobecastbyallholdersofBrooklynUnionCommonStock(the"BROOKLYN UNIONSHAREHOLDERS'PPROVAL"
| |
| )istheonlyvoteoftheholdersofanyclassorseriesofthecapitalstockofBrooklynUnionoranyofitssubsidiaries requiredtoadoptthisAgreement andtheothertransactions contemplated hereby.SEcnow4.14 ACCOUNTING MATTERS.NeitherBrooklynUnionnor,toBrooklynUnion'sbestknowledge, anyofitsaffiliates hastakenoragreedtotakeanyactionthatwouldpreventtheCompanyfromaccounting forthetransactions'to beeffectedPursuanttothisAgreement asapoolingofinterests inaccordance withGAAP.AsusedinthisAgreement (exceptasspecifically otherwise defined),
| |
| theterm"AFFILIATE'xcept whereotherwise definedherein,shallmean,astoanyperson,anyotherpersonwhichdirectlyorindirectcontrols, orisundercommoncontrolwith,oriscontrolled by,suchperson.Asusedinthisdefinition, "CONTROL"'including, withitscorrelative
| |
| : meanings, "controlled by"and"undercommoncontrolwith")shallmeanpossession, directlyorindirectly, ofpowertodirectorcausethedirection ofmanagement orpolicies(whetherthroughownership ofsecurities orpartnership orotherownership interests, bycontractorotherwise).
| |
| SEcl'ION4.15APPLICABILITY OFCERTAINPROVISIONS OFLAW.Assumingtherepresentation andwarrantyofLILCOmadeinSECTION5.18iscorrect,noneofthebusinesscombination provisions ofSection912oftheNYBCLoranysimilarprovisions oftheNYBCL(or,tothebestknowledge ofBrooklynUnion,anyothersimilarstatestatute)ortheRestatedCertificate ofIncorporation orby-lawsofBrooklynUnion,areapplicable tothetransactions contemplated bythisAgreement, including thegrantingorexerciseoftheBrooklynUnionStockOption(exceptassetforthinSection4.15oftheBrooklynUnionDisclosure Schedule).
| |
| SEcnox4.16 OPINIONOFFINANCIAL ADVISOR.BrooklynUnionhasreceivedtheopinionofMerrillLynch,Pierce,Fenner&SmithIncorporated
| |
| ("MERRILLLYNCH"),datedDecember29,1996,totheeffectthat,asofthedatethereof,theOriginalRatioisfairfromafinancial pointofviewtotheholdersofBrooklynUnionCommonStock,andBrooklynUnionhasreceivedtheopinionofMerrillLynchdatedJune27,1997,totheeffectthat,asofthedatethereof,theLIPARatio{asdefinedbelow)isfairfromafinancial pointofviewtotheholdersofBrooklynUnionCommonStock.SEcflON4.17 INSURANCE.
| |
| ExceptassetforthinSection4.17oftheBrooklynUnionDisclosure
| |
| : Schedule, BrooklynUnionandeachoftheBrooklynUnionSubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisksandlossesasarecustomary inallmaterialrespectsforcompanies conducting thebusinessasconducted byBrooklynUniandtheBrooklynUnionSubsidiaries duringsuchtimeperiod.ExceptassetforthinSection4.17oftheBrookl nionDisclosure
| |
| : Schedule, neitherBrooklynUnionnoranyoftheBrooklynUnionSubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoanymaterialinsurance policyofBrooklynUnionorany'fthe,BrooklynUnionSubsidiaries.
| |
| Theinsurance policiesofBrooklynUnionandeachoftheBrooklynUnionSubsidiaries arevalidandenforceable policiesinallmaterialrespects.
| |
| SEcTIoN4.18OWNERSHIP OFLILCOCOMMONSTOCK.ExceptpursuanttothetermsoftheLILCOStockOptionAgreement, BrooklynUniondoesnot,"beneficially own"(assuchtermisdefinedforpurposesofSection13(d)oftheExchangeAct)anysharesofLILCOCommonStock.SEcrioN4.19BUSINESSSYNERGIES.
| |
| BrooklynUnionisnotawareofanyfactorcircumstance, including thetermsofanyagreement towhichitoranyofitsSubsidiaries issubject,thatwouldimpairinanymaterialrespecttheabilityoftheCompanytorealizethesynergies described inthejointpressreleasetobeissuedinconnection withtheannouncement ofthistransaction.
| |
| ARTICLEVREPRESENTATIONS ANDWARRANTIES OFLILCOLILCOrepresents andwarrantstoBrooklynUnionasfollows:SECTIoN5.1 ORGANIZATION ANDQUALIFICATION.
| |
| Exceptassetforth'inSection5.1.oftheLILCODisclosure Schedule(asdefinedinSECTION7.6(i)),eachofLILCOandeachoftheLILCOSubsidiaries (asdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofits'jurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andinoodstandingtodobusinessfin eachjurisdiction inwhichthenatureofitsbusiness'ortheownership orleasingitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, theterm"LILCOBSIDIARY" shallmeanaSubsidiary ofLILCO.SECTIQN5.2SUBSIDIARIES; Section5.2oftheLILCODisclosure Schedulesetsforthadescription asofDecember29,1996ofallSubsidiaries andJointVenturesofLILCO("LILCOJOINTVENTURES"),
| |
| including (a)thenameofeachsuchentityandLILCO'sinteresttherein,and(b)abriefdescription oftheprincipal lineor.linesofbusinessconducted byeachsuchentity.ExceptassetforthinSection5.2oftheLILCODisclosure
| |
| : Schedule, noneoftheLILCOSubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutilitycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or2(a)(11)ofthe1935Act,respectively.
| |
| ExceptassetforthinSection5.2oftheLILCODisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofeachLILCOSubsidiary arevalidlyissued,fullypaid,'nonassessable andfreeofpreemptive rights,andareowneddirectlyorindirectly byLILCOfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, chargesandoptionsofanynaturewhatsoever andtherearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating anysuchLILCOSubsidiary toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofitscapitalstockorobligating ittogrant,extendorenterintoanysuchagreement orcommitment.
| |
| SECTIoN5.3CAPITALIZATION.
| |
| Theauthorized capitalstockofLILCOisassetforthinLILCO'sAnnualReportonForm10KfortheyearendedDecember31,1995.AsofthecloseofbusinessonDecember27,1996,therewereissuedandoutstanding 120,780,792 sharesofLILCOCommonStock.Alloftheissuedandoutstanding sharesofthecapitalstockofLILCOare,andanyLILCOCommonStockissuedpursuanttotheLILCOStockOptionAgreement willbe,validlyissued,fullypaid,nonassessable (subjecttoSection630oftheCL),andfreeofpreemptive rights.ExceptassetforthinSection5.3oftheLILCODisclosure
| |
| : Schedule, asDecember29,1996,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesor other'ommitments,.understandings',
| |
| .restrictions,-arrangements, rights"orwarrants,":including any-right, o'conversion or,exchangeunderanyoutstanding=security, instrument "orotheragreement;~obligating.LILCO oranyioftheLILCOSubsidiaries toissue,deliver'or sell;-orcausetobeissueddelivered-or.
| |
| Cold;.additional sharesofthecapitalstockofLILCO,orobligating.LILCO.
| |
| to:grant; ex(endorenterpinto'~any suchagreement.
| |
| orcommitment, otherthanundertheLILCOStockOptionAgreement.
| |
| Therearenooutstanding stockappreciation rightsofL'ILCOwhich'were no'tgrantedintandemwitha'related stockoption'and nooutst'anding limit'edstock'appreciation rightsorotherrightsto'redeemfor'cash"options'oi warrarifh
| |
| 'ofLIL'CO:.SECTION5.4AUTHORITY'ON-CONTRAVENTION; STATUTORY APPROVALS; COMPLIANCE.
| |
| ~(a),AUTHORITY".LILCO hasall,xequisite powerandauthority toenter,intothis,Agreement,and theLILCOStoepOptionAgreement,-and, subjecttothe,LILCO Shareholders'i
| |
| : Approval, (asdefined,in,SECI'ION 5.13)andtheLILCORequiredStatutory Approvals.,(as defined.inSECTION5.4(c)),toconsurruyate thetransa'ctions contemplated herebyorthereby.Theexecution anddeliveryofthisAgreement andtheLILCOStockOptionAgreement andtheconsummation byLILCOofthetransactions contemplated herebyandtherebyhavebeendulyauthorized byallnecessary corporate actiononthe,partofLILCO,subjecttoobtaining theapplicable LILCOShareholders'pproval.
| |
| ThisAgreement hasPeendulyandvalidlyexecutedanddelivered byLILCO,theLILCOStockOptionAgrcem'ent hasbeendulyandvalidlyexecutedanddelivered byLILCOand,assumingthedueauthorization, execution anddelivery, hereofandther<ofPy,theothersignatories heretoandthereto,eachofthisAgreement andtheLILCOStockOptionAgreement, constitutes thevalidandbindingobligation ofL'ILCO,'enforceable againstitinaccordance withi8terms.',"
| |
| >,'<<.(b)NON-COIgRAVENTIONi.
| |
| Exceptassetfourth,in'ection 5.4(b)of.the+ILCODisclosure
| |
| $cheduJe,iheexecution anddeliveryofthis.Agreement andthe,LILCO StockOptionAgreelnent.by, LILCOd9:got,andtheconsumma>ion ofthetransactions contemplated herebyortherebywillno<,resultin,amaterial, Violation pursuant,to any.provisions,,of (i)thecertificat of.incorporation,by;laws-or~similar governing<<documents of.LILCO;or anyofthe,LILCO Subsidiaries ortheLILCOJoint,Ventures(ii) subject,to obtaining the,LILCO RequiredStatutory Approvals andthereceiptof,the,LILCO Shareholders'pproval,any, statute,law;ordinanrule,regulation,
| |
| : judgment, decree,order,injunction, writ,~permit or,license,of<<any.
| |
| Goyernmental
| |
| <<Authoriapplicable toLILCOoranyoftheLILCOSubsidiaries ortheLILCOJointVenturesoranyoftheirrespective properties orassetsor(iii),subject toobtaining thethird-party'consents'set forth'inSection.5:4(b) ofitheL'ILCODisclosure Schedule(the"LILCOREQUIRED.CGNSENTS")
| |
| anymaterialnote,bond,"mortgage, indenture, deedoftrust;license,franchise, permit,concession, coritract',
| |
| leaseorother'inst'rument, obligation, oragreement of~any,kindtowhichLILCOoranyof.theLILCOSubsidiaries,or'he LILCO.Joint "Ventures isap'arty,or-by
| |
| ,whichit,'ranyofitsproperties orassetsmaybeboundoraffected.",
| |
| '",I(c)STATUTORY APPROVALS.
| |
| Nodeclaration, filingorregistration, with,ornoticetoorauthorization, consentorapprovalof,,any,Governmental<<Authority is.iiecessary,foi;,
| |
| the,execution and,delivery ofthisAgreement or,the.LILCO StockOptionAgreement" byLILCO,,or the,consummation"by",LILCO,of, thetransactions contemplated herebyorthereby,exceptasdescribcdrin Section,$
| |
| .4(c)ofthe,J.ILCO Disclosure
| |
| ,Schedule (the"LILCOREQUIRED, STATUTORY APPROVALS.',
| |
| itbeing~understood thatreferences in~thipAgreement to"obtaining" suchLILCORequiredStatutory,Approyals shall'mean;making,such.
| |
| declarations, filingsorregistrations;,
| |
| givingsuchnotices;obtaining suchauthorizationsconsents or.approvals;-and havingsuchwaitingperiods.expireasarenecessary toavoidaviolation oflaw).W'I(d)COMPLIANCE.
| |
| ExceptassetforthinSection5.4(d),Section5.10orSection5.11oftheLILCO.Disclosure
| |
| : Schedule, orasdisclosed intheLILCOSEC.Reports.
| |
| (asdefinedin'.SECTIGN 5.5)filed-prior toDecember29,1996,neitherLILCO:nor any'oftheLILCOSubsidiaries nor,to',th6knowledge ofLILCO,;any LILCOJoint.Venture,isinmaterialviolation of,isunderinv'estig'ation withresp'ectfoanymaterialviolation'of, or,hasbeen.givennoticeorbeenchargedwithanymaterial-violation of,any:law;statute,'rder,,rule; regulation, ordinance orjudginent (including; withoutlimitation, anyapplicable enviionmental law,.ordinance orregulation) ofanyGovernmental.Authority.
| |
| Except'asset,forth inSection5.4(d)oftheLILCODisclosure; Schedule.
| |
| or'ection 5.11'f.the.LILCO Disclosure Schedule; LILCOandthe.LILCOSubsidiaries and,LILCO'Joirit Vent veallpermits,licenses, franchises andothergovernmental authorizations, consentsandapprovals necessary toonducttheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection5.4(d)oftheLILCODisclosure
| |
| : Schedule, LILCOandeachoftheLILCOSubsidiaries isriotinmaterialbreachorviolation oforinmaterial-default intheperformance orobservance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseoftimeoractionbyathirdparty,couldresult,inamaterial.
| |
| defaultunder,(i)itscertificate ofincorporation orby-lawsor(ii)anymaterialcontract, commitment, agreement; indenture,
| |
| : mortgage, loanagreement, note,leasebond, license,approvalorotherinstrument towhichitisapartyorbywhichitisboundortowhichanyofitspropertyissubject.iSEcTloN5.5REPORTSANDFINANCIAL STATEMENTS.
| |
| ThefilingsrequiredtobemadebyLILCOandtheLILCOSubsidiaries sinceJariuary1,1994undertheSecurities Act,theExchangeAct,the1935Act,thePowerAct,theAtomicEnergyActandapplicable statelawsandregulations h'avebeenfiledwiththeSEC,theFERC,theNRCortheappropriate statepublicutilities commission, asthecasem'aybe,including allforms,statements; repprts,agreements, (oral"orwritten).
| |
| andalldocuments,
| |
| : exhibits, amendments andsupplements appertaining thereto,andcomplied, asoftheirrespective dates,inallmaterialrespectswithallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| LILCOhasmadeavailable toBrooklynUnionatrueandcompletecopytifeachreport,schedule, registration statement anddefinitive proxystatement filed'byLILCOwiththeSECsinceJanuary1,1994(assuchdocuments have'since thetimeoftheirfilingbeenamertded, the'LILCO SEC'REPORTS").
| |
| Asoftheirrespective dates,theLILCOSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfactrequiredtobestatedthereinornecessary tomakethestatemepts, therein,inlightofthecircumstances underwhichtheyweremade,notmisleading.
| |
| Theauditedconsolidated financial statements andunaudited interimfinancial statements ofLILCOincludedintheLILCOSECReports(collectively, the"LILCOFINANCIAL STATEMENTS"
| |
| )havebeenpreparedinaccordance withGAAP(exceptasmaybe'indicated thereinorinthenotestheretoandexceptwithrespecttounaudited statements aspermitted byForm10-QoftheSEC)andfairlypresentthefinancial positionofLILCOasofthedatesthereofandtheresultsofitsoperations andcashfiowsforthep'eriodsthenended,bject,inthecaseoftheunaudited interim'financial statements, tonormal,'ecurring auditadjustments.
| |
| True,urateandcompletecopiesoftheRestatedCertificate ofIncorporation andBy-lawsofLILCO,asineffectonecember29,1996,areincluded(orincorporated byreference) intheLILCOSECReports.SEGHQN5.6 ABSENCEOFCERTAINCHANGESOREVENTS.Exceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29,1996orassetforthinSection5.6oftheLILCODisclosure
| |
| : Schedule, sinceDecember31,1995,'ILCO and.eachoftheLILCOSubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhave,or,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations orprospects ofLILCOanditssubsidiaries takenasawhole(a"LILCOMATERIALADVERSEEFFECT").
| |
| SEcHoN5.7LITIGATION.
| |
| 'xceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29,1996orassetforthinSection5.'7,Section5.9orSection5.11oftheLILCODisclosure
| |
| : Schedule, (i)therearenomaterial.
| |
| claims,suits,actionsorproceedings, pendingor,totheknowledge ofLILCO,threatened, norarethere,totheknowledge ofLILCO,anymaterialinvestigations-or reviewspendingor,threatened against,relatingtooraffecting LILCOoranyoftheLILCOSubsidiaries, (ii)therehavenotbeen,anysignificant developments sinceDecember31,1995withrespecttosuchdisclosed claims,suits,actions,proceedings, investigations orreviewsand(iii)thereareno'material judgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality or'uthority oranyarbitrator applicable toLILCOoranyoftheLILCOSubsidiaries.
| |
| Sorrow5.8REGISTRATION STATEMENT ANDPROXYSTATEMENT.
| |
| Noneoftheinformation suppliedortobesuppliedbyoronbehalfofLILCOforinclusion orincorporation byreference in(i)theRegistration Statement will,atthetimetheRegistration Statement;is filedwiththeSECandatthetimeitomeseffective undertheSecurities Act,containanyuntruestatement ofamaterialfactoromittostateanyerialfactrequiredtobe-stated thereinornecessary tomakethestatements thereinnotmisleading and(ii)the ProxyStatement willnot,atthedatesmailedtoshareholders andatthetimesof;themeetingsofshareholders tbeheldinconnection;with theTransactions, containanyuntrue"statement ofaimateriaJ factoromit.to.stateanmaterial, fact.required.
| |
| tobe-stated thereinornecessary inordertomakethestatements therein,inlightofthecircumstances.
| |
| underwhichtheyaremade,notmisleading.
| |
| TheRegistration Statement andtheProxyStatement willcomplyastoform,inallmaterialrespectswiththeprovisions
| |
| -oftheSecurities.
| |
| ActandtheExchangeActand,therulesandregulations thereunder.-
| |
| IIISsertoN5.9TAXMATTERS.ExceptassetforthinSection5.9,oftheLILCO'Disclosure Schedule:
| |
| (a)FILING,OF TIMELYTAXRETURNS.I.ILCOandeachof.theLILCO,Subsidiaries havefiled(ortherehasbeenfiledonitsbehalf)allmaterialTaxReturnsrequiredtobefiledbyeachoftotemunderapplicable law.All,suchTaxReturnswereandareinallmaterialrespectstrue,completeandcorrectandfiledonatimelybasis.(b)PAYMENTGFTAXES.'ILCO andeach'oftheLILCOSubsidiaries have,withinthetimeand"inthemannerprescribed bylaw,paidallTaxesthatarecurrently
| |
| 'due'and'payable exceptforthosecontested ingoodfaithandforShtchadequatereserves'have beentaken.'(c)TAXRESERVES.
| |
| LILCO,and theLILCOSubsidiaries'have established ontheirbooksandrecordsreservesadequatetopay.all,Taxes,andreserves'for deferredincometaxesinaccordance withGAAP.(d)TAXLIENS.TherearenoTaxliensupontheassetsofL'ILCO'or a'ny'oftheLILCOSubsidiaries
| |
| 'xceptliens forTaxesnotyetdue.
| |
| -''""""-""~'*'(e)WG'HHOLDING TAXES.LILCOandeachoftheLILCOSubsidiaries, have,compliedinall,.materialrespects, withtheprovisions, oftheCoderelatingto.the,withholding ofTaxes,aswellassimilarprovisions underanyotherlawsandhave,withinthetimeandinthemannerprescrjbed bylaw,withheldfromemployeewages.and paidoyertothepropergovernmental authorities allamountsrequired.
| |
| (f)EXTENSIONS OFTIMEFORFILINGfAXRETURNS.'either'LILCO noranyoftheLILSubsidiaries hasrequested anyextension oftimewithinwhich'to'ile'ny TaxReturn,whichTaxReturthasnotsincebeen,filed..~(g).WAIVERS OF.STATUTEOFLIMITATIONS.
| |
| NeitherLILCOnoranyoftheJ.ILCOSubsidiaries has.ex'ecuted anyoutstanding'waivers orcomparable consentsregarding theapplication ofthestatuteoflimitations withrespecttoanyTaxesorTaxReturns.,",
| |
| 'h}'EXPIRATION OFSTATUTEOFI.'IMITATIONS.
| |
| Thestatuteoflimitations fortheassessment
| |
| 'fallTaxeshasexpiredforallapplicable TaxReturnsofLILCO.and "eachoftheLILCOSubsidiaries orthoseTaxReturnshavebeenexaminedbytheappropriate taxingauthorities forallperiodsthroughDecember29,1996,andnodeficiency foranyTaxeshasbeenproposed, assertedorassessedagainstLILCOoranyoftheLILCOSubsidiaries;that hasnotbeenresolved, and,paidinfull.(i)AUDIT,ADMINISTRATIVE ANDCOURT'PROCEEDINGS."'o auditsorotheradministrative
| |
| 'proceedings orcourtproceedings arepresently" pendingwithregardtoanyTaxesorTaxReturnsofLILCOor'a'nyoftheLILCOSub'sidiaries.
| |
| ~(j)POWERSOFATtORNEY.
| |
| Nopowerofattorneycurrently inforcehasbeengrantedbyLILCO,oranyoftheLILCOSubsidiaries concerning any,Taxmatter.(k)TAXRULINGS.NeitherLILCOnoranyoftheLILCOSubsidiaries has'received aTaxRulingorenteredintoaClosingAgreement withanytaxingauthority thatwouldhaveacontinuing adverseeffectaftertheClosingDate.tl(I)AVAIL'ABILITY OFTAXRETURNS.LILCOhasmadeavailable toBrooklynUnioncompleteandaccuratecopiesof(i)allTaxReturns,andanyamendments thereto;filedbyLILCOoranyof'ILCOSubsidiaries, (ii)allauditreportsreceivedfromanytaxingauthority relatingtoanyTaxReturn byLILCOoranyoftheLILCOSubsidiaries and(iii)anyClosingAgreements enteredinto,byLILCOoranyoftheLILCOSubsidiaries withanytaxingauthority.
| |
| (m)TAXSHARINGAGREEMENTS.
| |
| 'NeitherLILCOnoranyLILCOSubsidiary isa'partytoanyagreement relatingtoallocating orsharingofincomeTaxes.4(n)CODESECTION280G.NeitherLILCOnoranyoftheLILCOSubsidiaries, isapartytoanyagreement,
| |
| : contract, orarrangement thatcouldresult,onaccountofthetransactions contemplated hereunder, separately orintheaggregate, inthepaymentofany"excessparachute payments" withinthemeaningofSection280GoftheCode.(o)LIABILITY FOROTHERS.NoneofLILCOoranyoftheLILCOSubsidiaries hasanyliability forTaxesofanypersonotherthanLILCOandtheLILCOSubsidiaries (i)underTreasuryRegulations Section1.1502-6(oranysimilarprovision ofstate,localorforeignlaw)asatransferee orsuccessor, (ii)bycontract, or(iii)otherwise.
| |
| SEcTIoN5.10 EMPT.OYEE MATTERS;ERISA.ExceptassetforthinSection5.10oftheLILCODisclosure Schedule:
| |
| (a)BENEFITPLANS.Section5.10(a)oftheLILCODisclosure Schedulecontainsatrueandcompletelistofeachemployeebenefitplancoveringemployees, formeremployees ordirectors ofLILCOandeachoftheLILCOSubsidiaries ortheirbeneficiaries, orproviding benefitstosuchperson'sinrespectofservicesprovidedtoanysuchentity,including, butnotlimitedto,'nyemployeebenefitplanswithinthemeaningofSection3(3)ofERISAandanyseverance orchangeincontrol'agreement (collectively, the"LILCOBENEFITPLANS").ForthepurposesofthisSECTION5.10only,theterm"LILCO"shallbedeemedtoincludethepredecessors ofsuchcompany.(b)CONTRIBUTIONS.
| |
| Allmaterialcontributions andotherpaymentsrequiredtobemadebytLILCOoranyoftheLILCOSubsidiaries toanyLILCOBenefitPlan(ortoanypersonpursuanttothetermsthereof)havebeenmadeortheamountofsuchpaymentorcontribution obligation hasbeerirefiected intheLILCOFinancial Statements.
| |
| (c)QUALIFICATION; COMPLIANCE.
| |
| EachoftheLILCOBenefitPlansintendedtobe"qualified" withinthemeaningofSection401(a)oftheCodehasbeendetermined bytheIRStobesoqualified, and,tothebestknowledge ofLILCO,nocircumstances existthatarereasonably expectedbyLILCOtoresultintherevocation ofanysuchdetermination.
| |
| LILCOisincompliance inallmaterialrespectswith,andeachoftheLILCOBenefitPlansisandhasbeenoperatedinallmaterialrespectsincompliance with,allapplicable laws,rulesandregulations governing suchplan,including, withoutlimitation, ERISAandtheCode.EachLILCOBenefitPlanintendedtoprovideforthedeferralofincome,thereduction ofsalaryorothercompensation, ortoafford'otherincometax
| |
| : benefits, complieswiththerequirements oftheapplicable provisions oftheCodeorotherlaws,rulesandregulations requiredtoprovidesuchincometaxbenefits.
| |
| (d)LIABILITIES.
| |
| WithrespecttotheLILCOBenefitPlans,individually andintheaggregate, noeventhasoccurred, and,tothebestknowledge ofLILCO,theredoesnotnowexistanycondition orsetofcircumstances, thatcouldsubjectLILCOoranyoftheLILCOSubsidiari&
| |
| toanymaterialliability arisingundertheCode,ERISAoranyotherapplicable law(including, withoutlimitation, anyliability toanysuchplanorthePBGC),orunderanyindemnity agreement towhichLILCOisaparty,excluding liability forbenefitclaimsandfundingobligations payableintheordinarycourse.(e)WELFAREPLANS.NoneoftheLILCOBenefitPlansthat.are"welfareplans",withinthemeaningofSection3(1).ofERISA,providesforanyretireebenefits, otherthancontinuation coveragerequiredtobeprovidedunderSection4980BoftheCodeorPart6ofTitleIofERISA.(I)DOCUMENTS MADEAVAILABLE.
| |
| LILCOhasmadeavailable toBrooklynUnionatrueandtcorrectcopyofeachcollective bargaining agreement towhichLILCOoranyoftheLILCOSubsidiaries isapartyorunderwhichLILCOoranyoftheLILCOSubsidiaries hasobligations and,withrespecttoeach iL'ILCOBenefitPlan,where,applicable; (i)suchplanandsummaryplandescrip'tion,
| |
| {ii)themo'streceannualreportfiledwiththeIRS,(iii)eachrelatedtrustagreement,"
| |
| insurance
| |
| : contract, serviceproviderorinvestment management agreement (including allamendments to,,eachsuchdocument),
| |
| (iv)themostrecentdetermination oftheIRSwithrespecttothequalified statusofsuchLILCOBenefitPlan,and(v)themostrecentactuarial reportorvaluation.
| |
| "(g)PAYMENTS'ESULTING FROM'THE'RANSACTIONS.
| |
| (i)Theconsummation orannouncement ofanytransaction contemplated bythisAgreement willnot(eitheraloneoruponthe'occurrence ofanyadditional orfurther'acts orevents)resultinany(A)p'ayment(whetherofseverance payorotherwise) becomingduefromLILCOoranyoftheLILCOSubsidiaries toanyofficer,employee, former""employeeordirector'thereof or'tothetrusteeunderany"rabbitrust>"orsimilararrangement; or(B)benefit'under'ny LIL'COBenefit.Planbeingestablished orbecomingaccelerated, vestedorpayableand{ii)neither~LILCOnoranyofthe'LILCO'Subsidiaries isapartyto(A)anymanagement, employment, deferredcompensation, severance (including anypayment,rightorbenefitresulting fromachangeincontrol),
| |
| bonusorothercontractforpersonalserviceswithanyofficer,directororemployee, (B)anyconsulting contractwith'any"'person who'prior toentering'-'into suchcontractwas'adirectororofficerofLILCO,'or(C)anyplan,agreement, arrangement orunderstanding similartoanyoftheforegoing.
| |
| (h)LABORAGREEMENTS.
| |
| AsofDecember29,1996,exceptas,setforth'inSection5.10(h)oftheLILCO'Disclosure Schedule'or'in theLILCOSECReportsfiledpriortoDecember29,1996',neither'ILCOnor'anyoftheLILCOSubsidiaries isapartyto,"anycollective bargaming agreement orotherlabor","agreement witlianyunionorlabororganization.
| |
| To'thebestknowledge ofLILCO,asofDecember, 29,'1996,exceptasset'forth
| |
| 'inSection5.10(h)oftheLILCODisclosure Sch'edule,,
| |
| thereisnocurrentunionrepresentation questioninv'olvmg employees ofLILCOoranyoftheLILCOSubsidiaries, noidoesLILCOknowofanyactivityorproceeding ofanylabororganization (orrepresentative thereof)or'employee grouptoorganizeanysuchemployees:
| |
| Exceptasdisclosed intheLILCOSECReportsfiledpriortoDecember29.1996,or inSection5.10(h)oftheLILCODisclosure
| |
| : Schedule, (i)thereisnounfairlaborpractice,
| |
| =,employment discrimination orothermaterialcomplaint againstLILCOoranyoftheLILCOSubsidia'ending,ortothebestknowledge ofLILCO,threatened, (ii)thereisnostrike,orlockoutormater=dispute, slowdownorworkstoppagepending,ortothebeytknowledge of.LILCO, threatened, againstorinvolving LILCO,and(iii)thereisnoproceeding, claim,'uit, actionorgovernmental investigation pending,or,tothebestknowledge ofLILCO,threatened, inrespectofwhich'nydirector, officer,'employee oragentofLILCOoranyoftheLILCO.Subsidiaries isormaybee'ntitled toclaimindemnification fromLILCOorsuchLILCOSubsidiary pursuanttotheirrespective certificates ofincorporation orby-lawsorasprovidedinthe,indemnification agreements listedinSection5.10(h)oftheLILCODisclosure Schedule.
| |
| *1)1SEGTIQN,5.11 ENVIRONMENTAL PROTECTION.
| |
| ExceptassetforthinSection5.11of-.theLILCODisclosure ScheduleorintheLILCOSECReportsfiledprior.toDecember29,1996:(a)COMPLIANCE.
| |
| LILCOandeachoftheLILCOSubsidiaries isinmaterialcompliance withallapplicable Environmental Laws;andneitherLILCOnoranyoftheLILCOSubsidiarieshas receivedanycommunication(written ororal)fromanypersonorGoverntriental,Authority
| |
| >hatalleges,thatLILCOoranyoftheLILCOSubsidiaries isnotinsuchcompliance with.applicable Environmental Laws.(b)''ENVIRONMENTAL PERMITS.LILCOand'eachoftheLILCOSubsidiaries'has obtainedorha'sapplied'for alltheEnvironmental Permitsnecessary.for the'onstruction oftheirfacilities ortheconductoftheiroperations, andallsuchEnvironmental Permitsareingoodstandingor,whereapplicable, arenewalapplication hasbeentimelyfiledandispendingagency,approval, andLILCOandtheLILCOSubsidiaries areinmaterialcompliance withalltermsand,conditions oftheEnvironmental Permits..'c)
| |
| ENVIRONMENTAL CLAIMS.Tothebestknowledge "ofLILCO,thereisnomaterial'Environmental Claimpending(i)againstL'ILCOorariyoftheLILCOSubsidiaries orLILCOJointVentures, (ii)againstanypersonorentitywhoseliability foranyEnvironmental ClaimL'ILCOoranytheLILCOSubsidiaries hasormayhaveretainedor'assumedeithercontractually orbyoperation oflaA-20 e(iii)againstanyrealorpersonalpropertyoroperations whichLILCOoranyoftheLILCOSubsidiaries owns,leasesormanages,inwholeorinpart.(d)RELEASES.
| |
| LILCOhasnoknowledge ofanymaterialReleasesofanyHazardous Materialthatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstJ.ILCOoranyoftheLILCOSubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimLILCOoranyoftheLILCOSubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw.(e)PREDECESSORS.
| |
| LILCOhasnoknowledge, withrespecttoanypredecessor ofLILCOoranyoftheLILCOSubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyRelease'f Hazardous Materials thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental Claim.(f)DISCLOSURE.
| |
| ToLILCO'sbestknowledge, LILCOhasdisclosed toBrooklynUnionallmaterialfactswhichLILCOreasonably believesformtliebasisofamaterialEnvironmental Claimarisingfrom(i)thecostofLILCOpollution controlequipment, currently requiredorknowntoberequiredinthefuture;(ii)currentLILCOremediation costsorLILCOremediation costsknowntoberequiredinthefuture;or(iii)anyotherenvironmental matteraffecting LILCO.SEGTION5.12 REGULATION ASAUTILITY.Exceptassetforthin,Section5.12oftheLILCODisclosure
| |
| : Schedule, neitherLILCOnorany"subsidiary company"or"affiliate" (assuchtermsaredefiinedinthe1935Act)ofLILCOissubjecttoregulation asapublicutilityorpublicservicecompany(orsimilardesignation) byanystateintheUnitedStatesotherthanNewYorkoranyforeigncountry.SEcl'toN5.13VOTEREQUIRED.
| |
| The'doption ofthisAgreement bytwo-thirds ofthevotesentitledtobecastbyallholdersofLILCOCommonStock(collectively, the"LILCOSHAREHOLDERS'PPROVAL"
| |
| )istheonlyvoteoftheholdersofanyclassorseriesofthecapitalstockofLILCOoranyofitssubsidiaries
| |
| 'quiredtoadoptthisAgreement andtheothertransactions contemplated hereby.lVSt:.crtoN 5.14ACCOUNTING MATTERS.NeitherLILCOnor,toLILCO'sbestknowledge, anyofitsaffiliates hastakenoragreedtotakeanyactionthatwouldpreventtheCompanyfromaccounting forthetransactions tobeeffectedpursuanttothisAgreement asapoolingofinterests inaccordance withGAAPifthetransactions contemplated bytheLIPAAgreement, arenotconsummated.
| |
| lSacnox5.15APPLICABILITY OFCERTAINPROVISIONS OFLAW.Assumingthattherepresentation andwarrantyofBrooklynUnionmadeinSECTION4.18iscorrect,noneofthebusinesscombination provisions ofSections912oftheNYBCLoranysimilarprovisions oftheNYBCL(or,tothebestknowledge dfLILCO,anyothersimilarstatestatute)ortheRestatedCertificate ofIncorporation orby-lawsofLILCO,areapplicable tothetransactions contemplated bythisAgreement, including thegrantingorexerciseoftheLILCOStockOption(exceptassetforthinSection5.15oftheLILCODisclosure Schedule).
| |
| SEclION5.16OPINIONOFFINANCIAL ADVISOR.LILCOhasreceivedtheopinionofDillon,Read0,Co.Inc.("DILLONREAD"),datedDecember29,1996totheeffectthat,asofthedatethereof,the'Original Ratioisfairfromafinancial pointofviewtotheholdersofLILCOCommonStock,andLILCOhas'received theopinionofDillonReaddatedJune27,1997,totheeffectthat,asofthedatethe'reof, theI,IPARatioisfairfromafinancial pointofviewtotheholdersofLILCOCommonStock.SEGTIQN5.17INSURANCE.
| |
| ExceptassetforthinSection5.17oftheLILCODisclosure
| |
| : Schedule, LILCOandeachoftheLILCOSubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisksandlossesasarecustomary inallmaterialrespectsforcompanies conducting thebusinessasconducted byLILCOandtheLILCOSubsidiaries duringsuch1'meperiod.Exceptasse'tforthinSanction5.17oftheLILCODisclosure
| |
| : Schedule, neitherLILCO'nor anyofeLILCOSubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoany'aterial insurance policyofLILCOoranyoftheLILCOSubsidiaries.
| |
| Theinsurance policiesofLILCOandeachoftheLILCOSubsidiaries arevalidandenforceable policiesinallmaterialrespects.
| |
| SEcTioN5.18 OWNERSHIP OFBROOKLYNUNIONCOMMONSTOCK.Exceptpursuanttothetermsofth'eBrooklynUnionStockOptionAgreement, LILCOdoesnotbeneficially own(assuchtermisdefinedforpitrposes ofSection13(d)oftheExchangeAct)anysharesofBrooklynUnionCommonStockorBrooklynUnioriPreferred Stock..SEcTioN5.19.BUSINESSSYNERGIES.
| |
| LILCOisnotawareofanyfactorcircumstance, including thetermsofanyagreement towhichitoranyofitsSubsidiaries issubject,thatwouldimpairinanymaterialrespecttheabilityoftheCompanytorealizethesynergies described inthejointpressreleasetobeissuedinconnection withtheannouncement ofthistransaction.
| |
| ARTICLEVIICONDUCTOFBUSINESSPENDINGTHEEFFECTIVE TIMEiSEGTIQN6.1COVENANTS OFTHEPARTIES.AfterthedatehereofandpriortotheEffective Timeorearliertermination ofthisAgreement, BrooklynUnionandLILCOeachagreeasfollows,eachastoitselfandtoeachoftheBrooklynUnionSubsidiaries andtheLILCOSubsidiaries, asthecasemaybe,exceptasexpressly contemplated orpermitted inthisAgreement, theBrooklynUnionStockOptionAgreement, theLILCOStockOptionAgreement, theKeySpanExchangeAgreement, theLIPAAgreement andtheHedgeArrangements (asdefinedinSECTION7.18(c)),
| |
| ortotheextenttheotherpartiesheretoshallotherwise consentinwriting:(a)ORDINARYCOURSEOFBUSINESS.
| |
| Eachpartyheretoshall,andshallcauseitsSubsidiaries to,carryontheirrespective businesses intheusual,regularandordinarycourseinsubstantially thesame~,,mannerasheretofore conducted anduseallcommercially reasonable effortstopreserveintacttheirpresentbusinessorganizations andgoodwill, preservethegoodwill.and relationships withcustomers, suppliers anothershavingbusinessdealingswiththemand,subjecttoprudentmanagement ofworkforce needsanongoingprogramscurrently inforce,keepavailable theservicesoftheirpresentofficersandemployees.
| |
| ExceptassetforthinSection6.1(a)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, no,partyshall,norshallanypartypermitanyofitsSubsidiaries to,enterinto'anewlineofbusiness, ormakeanychangeinthelineofbusinessitengagesinasofthedatehereofinvolving anymaterialinvestment ofassetsorresources oranymaterialexposuretoliability orloss,inthecaseofBrooklynUnion,toBrooklynUnionanditsSubsidiaries takenasawhole,andinthecaseofLILCO,toLILCOanditsSubsidiaries takenasawhole.(b)DIVIDENDS.
| |
| ExceptassetforthinSection6.1(b)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, andexceptasprovidedinthelastsentenceofthis'ECTION6.1(b)nopartyshall,norshillanypartypermitanyofitsSubsidiaries to,(i)declareorpayanydividends onormakeotherdistributions inrespectofanyoftheircapitalstockotherthantosuchpartyor.itswholly-owned subsidiaries andothe'handividends requiredtobepaidonanyPreferred Stockinaccordance withtherespective termsthereof,regularquarterly dividends onLILCOCommonStockwithusualrecordandpaymentdatesnot,duringanyfiscalyear,inexcessof103%ofthedividends forthepriorfiscalyearandregularquarterly dividends onBrooklynUnionCommonStockwithusualrecordandpaymentdatesnot,duringanyfiscalyear,inexcessof103%ofthedividends forthepriorfiscalyear;(ii)split,combineorreclassify anyoftheircapitalstockorissueorauthorize orproposetheissuanceofanyothersecurities inrespectof,inadieuof,or-insubstitution for,sharesoftheircapitalstock;or(iii)redeem,repurchase orotherwise acquireanysharesoftheircapitalstock,otherthanredemptions, purchases or,acquisitions requiredbytherespective termsofanyoutstanding seriesofpreferred stockofBrooklynUnion,orLILCO,asthecasemay,be./he1astrecorddateofeachofLILCOandBrooklynUniononorpriortotheEffective Timewhichrelatestoaregularquarterly dividendonLILCOCommonStockorBrooklyUnionCommonStock,asthecasemaybe,shallbethesamedateandshallbepriortotheEffective TimA-22 0Notwithstanding theforegoing, priortotheLILCOEffective Time,,BrooklynUnionmaycausetheredemption ofallissuedandoutstanding sharesofpreferred stockofBrooklynUnioninaccordance withthetermsthereof.(c)ISSUANCEOFSECURITIES.
| |
| ExceptassetforthinSection'6.1(c)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, andexceptasprovidedinSECTION7.20nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,issue,agreetoissue,deliver,sell,award,pledge,disposeoforotherwise encumberorauthorize orproposetheissuance,
| |
| : delivery, sale,award,pledge,disposalor.otherencumbrance of,anysharesoftheircapitalstockofanyclassoranysecurities convertible intoorexchangeable for,oranyrights,warrantsoroptionstoacquire,anysuchsharesorconvertible orexchangeable securities.
| |
| Thepartiesshallpromptlyfurnishtoeachothersuchinformation as'maybereasonably requested including financial information andtakesuchactionas,maybereasonably necessary andotherwise fullycooperate with,eachotherinthepreparation ofanyregistration statement undertheSecurities Actandotherdocuments necessary, inconnection withissuanceofsecurities ascontemplated bythisSECTION6.1(c),subjecttoobtaining customary indemnities.
| |
| (d),CHARTER DOCUMENTS.
| |
| Nopartyshallamendorproposetoamenditsrespective certificate ofincorporation, by-lawsorregulations, orsimilarorganizational documents, exceptascontemplated herein.(e)NOACQUISITIONS.,
| |
| ExceptassetforthinSection6.1(e)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,acquire,orpubliclyproposetoacquire,oragreetoacquire,bymergerorconsolidation with,orbypurchaseorotherwise, asubstantial equityinterestin,orasubstantial portionoftheassetsof,anybusinessoranycorporation, partnership, association orotherbusinessorganization ordivisionthereof,norshallanypartyacquireoragreetoacquireamaterialamountofassetsotherthanintheordinarycourseofbusinessconsistent withpastpractice.
| |
| (f)CAPITALEXPENDITURES.
| |
| ExceptassetforthinSection6.1(f)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, orasrequiredbylaw,nopartyshall,norshallanypartypermitanyof'itsSubsidiaries to,makecapitalexpenditures inexcessof110%oftheamountbudgetedbysuchpartyforcapitalexpenditures assetforthinsuchSection6.1(f)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure Schedule.-
| |
| (g)NODISPOSITIONS.
| |
| ExceptassetforthinSection6.1(g)of,theBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, otherthandispositions by'partyanditsSubsidiaries oflessthan$10million,singularly orintheaggregate, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,sell,lease,license,encumberorotherwise disposeof,anyofitsassets,otherthanencumbrances ordispositions intheordinarycourse'of itsbusinessconsistent withpastpractice.
| |
| (h)INDEBTEDNESS.
| |
| Exceptascontemplated bythisAgreement, nopartyshall,norshallanypartypermit,anyofitsSubsidiaries to,incurorguarantee anyindebtedness (including anydebtborrowedorguaranteed orotherwise assumedincluding, withoutlimitation, theissuanceofdebtsecurities orwarrantsorrightstoacquiredebt)orenterintoany"keepwell"orotheragreement tomaintainanyfinancial statement condition ofanotherpersonorenterintoanyarrangement havingtheeconomiceffectofanyoftheforegoing otherthanincurrences torefinance existingindebtedness andotherthanassetforthinSection6.1(h)oftheBrooklynUnionDisclosure, ScheduleortheLILCODisclosure
| |
| : Schedule, respectively.
| |
| (i)'COMPENSATION, BENEFITS.
| |
| ExceptassetforthinSection6.1(i)oftheBrooklynUnionDisclosure Scheduleo'rtheLILCODisclosure'Schedule, asmayberequiredbyapplicable laworascontemplated bythisAgreement, nopartyshall,norsliallany'partypermitanyofitsSubsidiaries to,(i)enterinto,adoptoramendorincreasetheamountoraccelerate thepaymentorvestingofanybenefitoramountpayableunder,anyemployeebenefitplanorothercontract, agreement, commitment, arrangement, planorpolicymaintained by,contributed toorenteredintobysuchpartyoranyofitsSubsidiaries, orincrease, orenterintoanycontract, agreement, commitment orarrangement toincreaseinanymanner,theA-23 compensation orfringebenefits, orotherwise toextend,expandorenhancetheengagement,employment oranyrelatedrights,ofanydirector, officerorotheremployeeofsuchpartyoranyof,itsSubsidiaries, exceptfornormalincreases intheordinarycourseofbusinessconsistent withpastpracticethat,intheaggregate, donotresultinamaterialincreaseinbenefitsorcompensation expensetosuchpartyoranyofitsSubsidiaries or(ii)enterintooramendanyemployment, severance orspecialpayarrangement withrespecttothetermination ofemployment orothersimilarcontract, agreement orarrangement withanydirectororofficerorotheremployeeotherthanintheordinarycourseofbusinessconsistent withpastpractice.
| |
| (j)1935ACT.ExceptassetforthinSection6.1(j)oftheBrooklynUnionDisclosure ScheduleorLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshaHanypartypermitanyofitsSubsidiaries to,exceptasrequiredorcontemplated bythisAgreement, engageinanyactivities whichwouldcauseachangeinitsstatus,orthatofitssubsidiaries, underthe1935Act,orthatwouldimpairtheabilityofLILCOorBrooklynUnion,asthecasemaybe,toclaimanexemption asofrightunderRule2ofthe1935Act.(k)TRANSMISSION, GENERATION.
| |
| ExceptasrequiredpursuanttotariffsorifilewiththeFERCasofthedatehereof,intheordinarycourseofbusinessconsistent withpastpractice, orassetforthinSection6.1(k)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, mspectively,-
| |
| nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,(i)commenceconstruction ofanyadditional electricgenerating, transmission ordeliverycapacity, or{ii)obligateitselftopurchaseorotherwise acquire,ortosellorotherwise disposeof,ortoshare,anyadditional electricgenerating, transmission ordeliverycapacityexceptassetforthinthebudgetsofBrooklynUnionandLILCOonthedatehereofassetforthinSection6.1(f)oftheBrooklynUnionDisclosure ScheduleandtheLILCODisclosure Schedule.
| |
| I(1)ACCOUNTING.
| |
| Exceptas,setforthinSection6.1(1)oftheBrooklynUnionDisclosure ScheduleorLILCODisclosure
| |
| : Schedule, respectively, nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,makeanychangesintheiraccounting methods,exceptasrequiredbylaw,rule,regulation orGAAP.(m)POOLING.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,takeanyactiorwhichwould,orwouldbereasonably likelyto,preventtheCompanyfromaccounting forthetransactions tobeeffectedpursuanttothisAgreement asapoolingofinterests inaccordance withGAAPandapplicable SECregulations, andeachpartyheretoshalluseallreasonable effortstoachievesuchresult(including takingsuchactionsasmaybenecessary tocureanyfactsorcircumstances thatcouldpreventsuchtransactions fromqualifying forpooling-of-interests accounting treatment).
| |
| (n)TAXSTATUS.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,takeanyactionswhichwould,orwouldbereasonably likelyto,adversely affectthestatusoftheMergerasatax-freetransaction totheholdersofBrooklynUnionCommonStockand,unlesstheLIPAAgreement hasbeenterminated, theShareExchangeasataxabletransaction totheholdersofLILCOCommonStockandtheformation oftheCompanytobeatransaction towhichSection351oftheCodedoesnotapply,andeachpartyheretoshalluseaHreasonable effortstoachievesuchresultandshalltakesuchposition'in anyrelevantpublicdisclosure document(including, withoutlimitation, theJointProxy/Registration Statement (ashereinafter defined).
| |
| LILCO'smost'recenttaxyear,forfederalincometaxpurposes, commenced onApril'1,1997.AtnotimeduringtheperiodApril1,1997throughMarch31,1998,,inclusive, willLILCObeeitherthecommonparentoramemberofan"affiliated group"withinthemeaningofSection1504oftheCode.LILCOwillnotwithrespecttoanytaxyearbeginning onorafterApril1,1998fileorjoininthe,filingofaconsolidated federalincometaxreturnwithrespecttoanyaffiliated group,withinthemeaningofSection1504oftheCode.LILCOwilladvisethetrusteeofthedefinedbenefitplanofLILCOoftheconsequences ofowning,orpriortotheLIPAEffective Timeifthetransactions contemplated herebyaretobeconsummated pursuanttoSECTION7.18{b)acquiring, anysharesofLILCOCommonStock.(o)AFFILIATE TRANSACTIONS.
| |
| ExceptassetforthinSection6.1(o)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshaH,norshallanyppermitanyofitsSubsidiaries to,enterintoanymaterialagreement orarrangement withanyoftheA-24 respective affiliates (otherthanwholly-owned subsidiaries) ontermsmaterially lessfavorable tosuchpartythancouldbereasonably expectedtohavebeenobtainedwithanunaffiliated thirdpartyonanarm'-length basis.j(p)COOPERATION, NOTIFICATION.
| |
| Eachpartyshall,andshallcauseitsSubsidiaries to,(i)conferonaregularandfrequentbasiswithoneormorerepresentatives oftheotherp'artytodiscuss,subjecttoapplicable law,materialoperational mattersandthegeneralstatusofitsongoingoperations; (ii)promptlynotifytheotherpartyofanysignificant changesinitsbusiness, properties, assets,condition (financial orother),resultsofoperations orprospects; (iii)advisetheotherpartyofanychangeoreventwhichhashador,insofarasreasonably canbeforeseen, isreasonably likelytoresultin,inthecaseofBrooklynUnion,aBrooklynUnionMaterialAdverseEffector,inthecaseofLILCO,aLILCO'Material AdverseEffect;and(iv)promptlyprovidetheotherpartywithcopiesofallfilingsmadebysuchpartyoranyofitsSubsidiaries, withanystateorfederalcourt,administrative agency,commission orotherGovernmental Authority inconnection withthisAgreement andthetransactions contemplated hereby.(q)RATEMATTERS.EachofBrooklynUnionandL'ILCOshall,andshallcauseitsSubsidiaries to,notify'he otherofanychangesinitsoritsSubsidiaries'ates orcharges(otherthanpass-through fuelandgasratesorcharges),
| |
| standards ofserviceoraccounting fromthoseineffectonthedatehereof,andnopartywillmakeanyfilingtocharigeitsratesonfilewiththeNewYorkStatePublicServiceCommission (the"PSC")thatwouldhaveamaterialadverseeffectonthebenefitsassociated withthebusinesscombination providedforherein.(r)THIRD-PARTY CONSENTS.
| |
| BrooklynUnionshall,andshallcauseitsSubsidiaries to,useallcommercially reasonable effortstoobtainallBrooklynUnionRequiredConsents.
| |
| BrooklynUnionshallpromptlynotifyLILCOofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequested byLILCO,shallprovidecopiesofallBrooklynUnionRequiredConsentsobtainedbyBrooklynUniontoLILCO.LILCOshall,andshallcauseitsSubsidiaries to,useallcommercially reasonable effortstoobtainallLILCORequiredConsents.
| |
| LILCOshallpromptlynotifyBrooklynUnionofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequested byBrooklynUnion,shallprovidecopiesofallLILCORequiredConsentsobtainedbyLILCOtoBrooklynUnion.(s)NOBREACH,ETC.Nopartyshall,norshallanypartypermitanyofitsSubsidiaries to,willfully takeanyactionthatwouldorisreasonably likelytoresultinamaterialbrcachofanyprovision ofthisAgreement, theBrooklynUnionStockOptionAgreement'or theLILCOStockOptionAgreemcnt, asthecasemaybe,orinanyofitsrepresentations andwanantics setforthinthisAgreement, theBrooklynUnionStockOptionAgreement, ortheLILCOStockOptionAgreement, asthecasemaybe,beinguntrueonandasoftheClosingDate..(t)TAX-EXEMPT STATUS.Nopartyshall;nor shallanypartypermitanySubsidiary to,takeanyactiontha'twouldlikelyjeopardize thequalification ofBrooklynUnion'sorLILCO'soutstanding revenuebondswhichqualifyonthedatehereofunderSection142(a)oftheCodeas"exemptfacilitybonds"orastax-exempt industrial development bondsunderSection103(b)(4) oftheInternalRevenueCodeof1954,asamended,priortotheTaxReformActtif1986.(u)COMPANYACTIONS.LILCOandBrooklynUnionshallcausetheCompanytotakeonlythose~'ctions,fromthedatehereofuntiltheEffective Time,thatarerequiredorcontemplated bythisAgrecmcnt tobesotakenbytheCompany,including, without'limitation, thedeclaration, filingorregistration with,ornoticeto'rauthorization, consentorapprovalof,anyGovernmental Authority, assetforthinSection4.4(b)oftheBrooklynUnionDisclosure
| |
| : Schedule, Section4.4(c)oftheBrooklynUnionDisclosure
| |
| : Schedule, Section,5.4(b) oftheLILCODisclosure ScheduleandSection5.4(c)oftheLILCODisclosure Schcdulc.
| |
| (v)TAXMAXI'ERS.
| |
| ExceptassetforthinSection6.1(w)oftheBrooklynUnionDisclosure ScheduleortheLILCODisclosure
| |
| : Schedule, respectively, nopartyshallmakeorrescindanymaterialexpressordeemedelectionrelatingtotaxes,settleorcompromise anymaterialclaim,action,suit,litigation, A-25 proceeding, arbitration, investigation, auditorcontroversy relatingtotaxes,-orchange.anyofitsmethodsreporting incomeordeductions forfederalincometaxpurposesfromthoseemployedinthepreparation ofitsfederalincometaxreturnforthetaxableyearendingSeptember 30,1995inthecaseofBrooklynUnionandDecember31,1995inthecaseofLILCO,exceptasmayberequiredbyapplicable law.(w)DISCHARGE OFLIABILITIES.
| |
| Nopartyshallpay,discharge orsatisfyanymaterialclaims,liabilities orobligations (whetherabsolute, accrued,assertedorunasserted, contingent orotherwise),
| |
| otherthanthe.payment,discharge orsatisfaction, intheordinarycourseofbusinessconsistent withpastpractice(whichincludesthepaymentoffinalandunappealable judgments) orinaccordance withtheirterms,ofliabilities reflected orreservedagainstin,orcontemplated by,themostrecentconsolidated financial statements (orthenotesthereto)ofsuchpartyincludedinsuchparty'sreportsfiled withtheSEC,orincurredintheordinarycourseofbusinessconsistent withpastpractice, andotherthanthepaymentbyBrooklynUnionorLILCOofcertaintransfertaxeswhichmayresultfromtheTransactions underNewYorklaw.(x)CONTRACTS.
| |
| Nopartyshall,exceptintheordinarycourseofbusinessconsistent withpastpractice, modify,amend,terminate, reneworfailtousereasonable businesseffortstorenewanymaterialcontractoragreement towhichsuchpartyoranySubsidiary ofsuchpartyisapartyorwaive,releaseorassignanymaterialrightsorclaims.(y)INSURANCE.
| |
| Eachpartyshall,andshallcauseitsSubsidiaries to,maintainwithfinancially responsible insurance companies insurance insuchamountsandagainstsuchrisksandlossesasarecustomary forcompanies engagedintheelectricandgasutilityindustryandemploying methodsofgenerating electricpowerandfuelsourcessimilartothosemethodsemployedandfuelsusedbysuchpartyoritsSubsidiaries.
| |
| (z)PERMITS.Eachpartyshall,andshallcauseitsSubsidiaries to,usereasonable effortstomaintainineffectallexistinggovernmental permitspursuantto'whichsuchpartyoritsSubsidiaries operate.ARTICLEVIIADDITIONAL AGREEMENTS SEciioN7.1 ACCESSTOINFORMATION.
| |
| Uponreasonable notice,eachpartyshall,andshallcauseitsSubsidiaries to,affordtotheofficers,'irectors, employees, accountants, counsel,investment bankers,financial advisorsandotherrepresentatives oftheother(collectively, "REPRESENTATIVES"
| |
| )reasonable access,duringnormalbusinesshoursthroughout theperiodpriortotheEffective Time,toallofitsproperties, books,contracts, commitments andrecords(including, butnotlimitedto,TaxReturns)and,duringsuchperiod,eachpartyshall,andshallcauseitsSubsidiaries to,furnishpromptlytotheother(i)accesstoeachreport,scheduleandotherdocumentfiledorreceivedbyitoranyofitsSubsidiaries pursuanttotherequirements offederalorstatesecurities lawsorfiledwithorsenttotheSEC,theFERC,theNRC,theDepartment ofJustice,theFederalTradeCommission, thePSCoranyotherfederalorstateregulatory agencyorcommission, and(ii)accesstoallinformation concerning themselves, theirsubsidiaries, directors, officersandshareholders andsuchothermattersasmaybereasonably requested bytheotherpartyinconnection withanyfilings,applications orapprovals requiredorcontemplated bythisAgreement orforanyotherreasonrelatedtothetransactions contemplated bythisAgreement.
| |
| Eachpartyshall,andshallcause,itssubsidiaries andRepresentatives to,holdinstrictconfidence alldocuments andinformation concerning theotherfurnished toitinconnection withthetransactions contemplated bythisAgreement (including, withoutlimitation, eachDisclosure Schedule) inaccordance withtheConfidentiality Agreement, datedOctober24,1995,betweenBrooklyn.-Union andLILCO,asitmaybeamendedfromtimetotime(the"CONFIDENTIALITY AGREEMENT"
| |
| ).A-26 tSt!cnox7.2JOINTPROXYSTATEMENT ANDREGISTRATION STATEMENT.
| |
| (a)PREPARATION ANDFILING.ThepartieswillprepareandfilewiththeSECas,soori'as reasonably practicable afterthedatehereoftheRegistration Statement andtheProxyStatement (together, the"JOINTPROXY/REGISTRATION STATEMENT"
| |
| ).Thepartiesheretoshalleachusereasonable effortstocausetheRegistration Statement tobedeclaredeffective undertheSecurities Actaspromptlyaspracticable aftersuchfiling.Eachpartyheretoshallalsotakesuchactionasmaybereasonably requiredtocausethesharesofCompanyCommonStockissuableinconnection withtheTransactions toberegistered ortoobtain'an exemption fromregistration underapplicable state"bluesky"orsecurities laws;PROVIDED, HOWEVER,thatnopartyshallberequiredtoregisterorqualifyasaforeigncorporation ortotakeotheractionwhichwouldsubjectittoserviceofprocessinanyjurisdiction
| |
| 'whereitwillnotbe,following theTransactions; sosubject.Eachbfthepartiesheretoshallfurnishallinformation concerning itselfwhichis'required orcustomary forinclusion intheJointProxy/Registration Statement.
| |
| Thepartiesshallusereasonable effortstocausethesharesofCompanyCommonStockissuableintheTransactions tobeapprovedforlistingon'heNYSEuponofficialnoticeofissuance.
| |
| Theinformation providedbyanypartyheretoforuseintheJointProxy/Registration Statement shallbetrueandcorrectinallmaterialrespectswithoutomissionofanymaterialfactwhichisrequiredtomakesuchinfo'rmation notfalseormisleading.
| |
| Norepresentation, covenantoragreement ismadebyanypartyheretowithrespecttoinformation suppliedbyanyotherpartyforinclusion intheJointProxy/Registration Statement.
| |
| (b)LETTEROFBROOKLYNUNION'SACCOUNTANTS.
| |
| BrooklynUnionshallusebesteffortstocausetobedelivered toLILCOaletterofArthurAndersenLLP,datedadatewithintwobusinessdaysbeforethedateoftheJointProxy/Registration Statement, andaddressed toLILCO,informandsubstance reasbnably satisfactory toLILCOandcustomary inscopeandsubstance for"coldcomfort"lettersdelivered byindependent publicaccountants inconnection withregistration statements onFormS-4.(c)LETI'EROFLILCO'SACCOUNTANTS.
| |
| LILCOshallusebesteffortstocausetobedelivered toBrooklynUnionaletterofErnst&YoungLLP,datedadatewithintwobusinessdaysbeforethedate"'oftheintProxy/Registration Statement, andaddressed toBrooklynUnion,informand'ubstance'reasonably atisfactory toBrooklynUnionandcustomary inscopeandsubstance for"coldcomfort"lettersdelivered byindependent publicaccountants inconnection withregistration statements onFormS-4.(d)FAIRNESSOPINIONS.
| |
| Itshallbeacondition tothemailingoftheJoint'roxy/Registration Statement totheshareholders ofBrooklynUnionandLILCOthat(i)BrooklynUnionshall'have receivedanopinionfromMerrillLynch,datedthedateoftheJointProxy/Registration Statement, totheeffectthat,asofthedatethereof,theOriginalRatioandtheLIPARatioarefairfromafinancial pointofviewtotheholdersofBrooklynUnionCommonStockand(ii)LILCOshallhavereceivedanopinionfromDillonRead,datedthedateoftheJointProxy/Registration Statement, totheeffectthat,asofthedatethereof,theOriginalRatioandtheLIPARatioarefairfromafinancial pointofviewtotheholdersofLILCOCommonStock.SEGTIQN7.3REGULATORY MATTERS.(a)HSRFILINGS.EachpartyheretoshallfileorcausetobefiledwiththeFederalTradeCommissiori andtheDepartment ofJusticeanynotifications requiredtobefiled'bytheirre'spective "ultimate parent"companies undertheHart-Scott-Rodino Antitrust Improvements Actof1976,asamended(the"HSRACT"),andtherulesandregulations promulgated thereunder withrespecttothetransactions contemplated hereby.Suchpartieswilluseallcommercially reasonable effortstomakesuchfilingspromptlyandtorespondpromptlytoanyrequestsforadditional information madebyeitherofsuchagencies.
| |
| (b)OTHERREGULATORY APPROVALS.
| |
| Eachpartyheretoshallcooperate anduseitsbesteffortstopromptlyprepareandfileallnecessary documentation andtoeffectallnecessary applications, notices,petitions, filingsandotherdocuments, andshalluseallcommercially reasonable effortstoobtainallnecessary permits,consents, approvals andauthorizations ofallGovernmental Authorities necessary oradvisable toconsummate etransactions contemplated bythisAgreement, including, withoutlimitation, theBrooklynUnionRequiredtatutoryApprovals andtheLILCORequiredStatutory Approvals.
| |
| LILCOandBrooklynUnionshallcooperate A-27 ingoodfaithandconsultwitheachotheronallcomponents of,significant stepstowardsthecompletion of,andsignificant amendments to,theapplications toobtaintheBrooklynUnionRequiredStatutory Approvals andtheLILCORequiredStatutory Approvals, andwithrespecttomaterialfilings,communications, agreements, arrangements orconsents, writtenororal,formalorinformal, relatingtoapplications forsuchApprovals.
| |
| 'ECrrox7.4SHAREHOLDER APPROVAL.
| |
| (a)APPROVALOFLILCOSHAREHOLDERS.
| |
| Subjecttotheprovisions ofSECTION7.4(c)andSECTION7.4(d),LILCOshall,assoonasreasonably practicable afterthedatehereof(i)takeallstepsnecessary todulycall,givenoticeof,conveneandholdaspecialmeetingofitsshareholders (the"LILCOSPECIALMEETING")forthepurposeofsecuringtheLILCOShareholders'pproval, (ii)distribute toitsshareholders theJointProxy/Registration Statement inaccordance withapplicable federalandstatelawandwithitsRestatedCertificate ofIncorporation andby-laws,(iii)subjecttothefiduciary dutiesofitsBoardofDirectors, recommend toitsshareholders theadoptionofthisAgreement.
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| andthetransactions, contemplated herebyand(iv)cooperate andconsultwithBrooklynUnionwith.respecttoeachoftheforegoing matters.(b)APPROVALOFBROOKLYNUNIONSHAREHOLDERS.
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| Subjecttotheprovisions ofSECTION7.4(c)andSECTION7.4(d),BrooklynUnionshall,assoonasreasonably practicable afterthedatehereof(i)takeallstepsnecessary todulycall,givenoticeof,conveneandholdaspecialmeetingofitsshareholders (the"BROOKLYN UNIONSPECIALMEETING")forthepurposeofsecuringtheBrooklynUnionShareholders'pproval, (ii)distribute toitsshareholders theJointProxy/Registration Statement inaccordance withapplicable federalandstate.lawandwithitsRestatedCertificate ofIncorporation andby-laws,(iii)subjecttothefiduciary dutiesofitsBoard.ofDirectors, recommend toitsshareholders theadoptionofthisAgreement andthetransactions contemplated herebyand(iv)cooperate andconsultwithLILCOwithrespecttoeachoftheforegoing matte@.(c)MEETING'DATE.
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| TheLILCOSpecialMeetingforthepurposeofsecttring theLILCOShareholders'pproval andtheBrooklynUnionSpecialMeetingforthepurposeofsecuringtheBrooklynUnionShareholders'pproval shallbeheldonsuchdatesasBrooklynUnionandLILCOshallmutuallydetermine, actingingoofaith.(d)FAIRNESSOPINIONSNOTWITHDRAWN.
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| Itshallbeacondition totheobligation ofBrooklynUniontoholdtheBrooklynUnionSpecialMeetingthattheopinionofMerrillLynch,referred,to inSECTION7.2(d),shallnothavebeenwithdrawn, anditshallbeacondition totheobligation ofLILCOtoholdtheLILCOSpecialMeetingthattheopinionofDillonRead,referredtoinSECTION7.2(d),shallnot.havebeenwithdrawn.
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| SEcFIQN7.5DIRECTORS'ND OFFICERS'NDEMNIFICATION.
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| (a)INDEMNIFICATION.
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| 'otheextent,ifany,notprovidedbyanexistingrightofindemnification orotheragreement orpolicy,fromandaftertheLILCOEffective Time,theCompanyshall,tothefullestextentpermitted byapplicable law,indemnify, defendandholdharmlesseachpersonwhoisnow,orhasbeenatanytimepriortoDecember29,1996,orwhobecomespriortotheEffective Time,anofficer,directororemployeeofanyofthepartiesheretooranySubsidiary thereof(eachan"INDEMNIFIED PARTY"andcollectively, the"INDEMNIFIED PARTIES")against,(i) alllosses,expenses(including reasonable attorneys'ees andexpenses),
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| claims,damagesorliabilities or,subjecttotheprovisoofthenext.succeeding
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| : sentence, amountspaidinsettlement;-
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| arisingoutofactionsoromissions occurring atorpriortotheEffective Time(andwhetherassertedorclaimedpriorto,atoraftertheEffective Time)thatare,inwholeorinpart,basedonorarisingoutofthefactthatsuchpersonisorwasadirector, officeroremployeeofsuchparty(the"INDEMNIFIED LIABILITIES"
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| ),and(ii)allIndemnified Liabilities totheextenttheyarebasedonorariseoutoforpertaintothetransactions contemplated bythisAgreement.
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| Intheeventofanysuchloss,expense,claim,damageor1iability (whetherornotarisingbeforetheEffective Time),(i)theCompanyshallpaythereasonable feesandexpensesofcounselselectedbytheIndemnified Parties,whichcounselshallbereasoriably satisfactory totheCompany,promptlyafterstatements thereforarereceivedandotherwise advancetosuchIndemnified Partyuponrequereimbursement ofdocumented expensesreasonably
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| : incurred, ineithercasetotheextentnotprohibited bythA-28 YBCLanduponreceiptofanyundertaking requiredbyoftheNYBCL,(ii)theCompanywillcooperate inthedefenseofanysuchmatterand(iii)anydetertnination requiredtobemadewithrespecttowhetheranIndemnified Party'sconductcomplieswiththestandards setforthunderNewYorklawandtheRestatedCertificate ofIncorporation or'By-lawsoftheCompanyshallbemadebyindependent counselmutuallyacceptable totheCompanyandtheIndemnified Party;.PROVIDED, HOWEVER,thattheCompanyshallnotbeliableforanysettlement, effectedwithoutitswrittenconsent,(whichconsentshallnotbeunreasonably withheld).
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| TheIndemnified Partiesasagroupmayretainonlyonelaw,firmwithrespectto,eachrelatedmatterexcepttotheextentthereisintheopinionofcounseltoanIndemnified Party,underapplicable standards, ofprofessional conduct,aconflictonanysignificant issuebetween.positions ofsuchIndemnifietl PartyandanyotherIndemnified PartyorIndemnified Parties,(b)INSURANCE.
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| ForaperiodofsixyearsaftertheEffective Time,"theCompanyshalleither(i)causetobemaintained ineffect,forthebenefitofthosepersonswhowerecoveredbythepoliciesofdirectors'nd officers'iability insurance maintained byLILCOorBrooklynUnionatDecember29,1996andatanytimesubsequent theretoandpriortotheEffective Time,themorefavorable ofsuchpoliciesivithrespecttotheobligations oftheCompanysetforthinthisSection7.5or(ii)obtainnewpoliciesofferingsuchcoverageatleastasfavorable asthetermsofthemorefavorable ofsuchcurrentinsurance coverage.
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| (c)SUCCESSORS.
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| IntheeventtheCompanyoranyofitssuccessors orassigns(i)consolidates withormergesiritoanyotherpersonandshallnotbethecontinuing orsurviving corpdration orentityofsuchconsolidation orinergeror(ii)transfers allorsubstantially allofitsproperties andassetstoanyperson,thenandineithersuchcase,properprovisions shallbemadesothatthesuccessors andassignsoftheCompanyshallassumetheoblig'ations setforthinthisSECTION7.5.(d)SURVIVALOFINDEMNIFICATION.
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| Tothefullestextentpermitted bylaw,fromandaftertheEffective Time,allrightstoindemnification asofDecember29,1996infavoroftheemployees, agents,directors andofficersofBrooklynUnion,LILCOandtheirrespective Subsidiaries withrespecttotheiractivities assuchriortotheEffective Time,asprovidedintheirrespective certificates ofincorporation andby-lawsineffectoniedatethereof,orotherwise ineffectonDecember29,1996,shallsurvivetheTransactions andshallcontinueinfullforceandeffectforaperiodofnotlessthansixyearsfromtheEffective Time.(e)BENE/IT.Theprovisions ofthisSECTION7.5areintendedtobeforthebenefitof,andshallbeenforceable by,eachIndemnified Party,hisorherheirsandhisorherrepresentatives.
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| Si.:crtoN 7.6DISCLOSURE SCHEDULES.
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| 'nDecember=29, 1996,(i)LILCOhasdelivered toBrooklynUnionaschedule(the"LILCODISCLOSURE SCHEDULE"
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| ),accompanied byacertificate signedbythechieffinancial officerofLILCOstatingtheLILCODisclosure Scheduleisbeingdelivered pursuanttothisSECTION7.6(i)and(ii)BrooklynUnionhasdelivered'to LILCOaschedule(the"BROOKLYN UNIONDISCLOSURE SCHEDULE"
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| ),accompanied byacertificate signedbythechieffinancial officerofBrooklynUnionstatingtheBrooklynUnionDisclosure Scheduleisbeingdelivered pursuanttothisSECTION7.6(ii).TheBrooklynUnionDisclosure ScheduleandtheLILCODisclosure Schedulearecollectively referredtohereinasthe"DISCLOSURE SCHEDULES".
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| TheDiscfosure Schedules constitute anintegralpartofthisAgreement andmodifytherespective representations, warranties,'covenants oragreements ofthepartiesheretocontained hereintotheextentthatsuchrepresentations, warra'nties, covenants oragreements expressly refertotheDisclosure'chedules.
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| AnythingtotheContrarycontained herein'or intheDisclosure Schedules notwithstanding, anyandallstatements, representations, warranties ordisclosures setforthintheDisclosure Schedules shallbedeemedtohavebeenmadeonand'asofDecember29,1996.'Secrtonr7.7PUBLICANNOUNCEMENTS, BrooklynUnionandLILCOwillcooperate witheachotherinthedevelopmentand distribution ofallnewsreleasesandotherpublicinformation disclosures withrespecttothisAgreement, oranyofthetransactions contemplated herebyandshallnotissueanypublicannouncement orstatement withrespectheretoor,theretothatisinconsistent withanypublicannouncement orstatement,
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| : eviously, madewiththeconsentofthepartiesheretowithouttheconsentoftheotherparty(whichconsentallnotbeunreasonably withheld),
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| exceptasmayberequiredbylaw,inwhichcasethepartyrequiredtoissueA-29 theannouncement orstatement shallallowtheotlierpartytimetocommentonsuchannouncement orstatement priortoitsissuance.
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| SEcTIQN7.8RULE145AFFILIATES.
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| Within30daysafterthedateofthisAgreement, BrooklynUnionshallidentifyinalettertoLILCO,an'dLILCOshall'identify inalettertoBrooklynUnion,allpersonswhoare,andtosuchperson'sbestknowledge whowillbeattheClosingDate,affiliates ofBrooklynUtlionandLILCO,respectively, assuchtermisusedinRule145undertheSecurities Act(orotherwise underapplicable SECaccounting releaseswithrespecttopooling-of-interests accounting treatment).
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| EachofBrooklynUnionandLILCOshalluseallreasonable effortstocausetheirrespective affiliates (including anypersonwhomaybedeemedtohavebecomeanaffiliate afterthedateoftheletterreferredtointhepriorsentence) todelivertotheCompanyonorpriortotheClosingDateawrittenagreement customary fortransactions ofthisnaturethataretobeaccounted forasapoolingofinterests andinformandsubstance reasonably satisfactory toBrooklynUnionandLILCO.Ifanypersonrefusestoprovidesuchawrittenagreement, theCompanyshall,inlieuofreceiptofsuchwrittenagreement, beentitledtoplaceappropriate legendsonthecertificates evidencing theCompanyCommonStocktobereceivedbysuchpersonpursuanttothetermsofthisAgreement, andtoissueappropriate stocktransferinstructions tothetransferagentfortheCompanyCommonStock,totheeffectthatthesharesofCompanyCommonStockreceivedortobereceivedbysuchpersonpursuanttothetermsofthisAgreement mayonlybesold,transferred orotherwise
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| : conveyed, andtheholderthereofmayonlyreducehisinterestinorrisksrelatingtosuchsharesofCompanyCommonStock,pursuanttoaneffective registration statement undertheSecurities Act,incompliance withRule145,asamendedfromtimetotime,orinatransaction which,intheopinionoflegalcounselsatisfactory totheCompany,isexemptfromtheregistration requirements oftheSecurities Act.Theforegoing restrictions onthetransferability ofCompanyCommonStockshallapplytoallpurported sales,transfers andotherconveyances ofthesharesofCompanyCommonStock,receivedortobereceivedbysuchpersonpursuanttothisAgreement andtoallpurported reductions intheinterestinorrisksrelatingtosuchsharesofCompanyCommonStock,whetherornotsuchpersonhasexchanged thecertificates previously evidencing suchpersons'hares ofBrooklynUnionCommonStockorLILCOCommonStock,asthecasemaybe,forcertificates evidencing sharesofCompanyCommonStockintowhichsuchsharesweconverted.
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| TheProxyStatement andtheRegistration Statement shalldisclosethepreceding inareasonabl prominent manner.St:.cnow7.9EMPLOYEEAGREEMENTS.
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| SubjecttoSECTION7.10;SECTION7.14andSECTION 7.15,theCompanyanditsSubsidiaries shallhonor,withoutmodification, allcontracts, agreements, collective bargaining agreements andcommitments ofthepartiespriortoDecember29,1996whichapplytoanycurrentorformeremployeeorcurrentorformerdirectorofthepartieshereto;PROVIDED, HOWEVER,thatthisundertaking isnotintendedtopreventtheCompanyfromenforcing suchcontracts, agreements, collective bargaining agreements andcommitments inaccordance withtheirterms,including, withoutlimitation, anyreservedrighttoamend,modify,suspend,revokeorterminate anysuchcontract, agreement, collective bargaining agreement orcommitment.
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| SEGTIQN7.10EMPLOYEEBENEFITPLANS.SubjecttoSECTION6.1(i),eachoftheBrooklynUnionBenefitPlansandLILCOBenefitPlansineffectatDecember29,1996shallbemaintained ineffectwithrespecttotheemployees orformeremployees ofBrooklynUnionandanyofitsSubsidiaries, ontheonehand,andofLILCOandanyofitsSubsidiaries, ontheotherhand,respectively, whoarecoveredbyanysuchbenefitplanimmediately priortotheClosingDate(the"AFFILIATED EMPLOYEES"
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| )untiltheCompanyotherwise determines aftertheEffective Time;PROVIDED, HOWEVER,thatnothinghereincontained shalllimitanyreservedrightcontained inanysuchBrooklynUnionBenefitPlanorLILCOBenefitPlantoamend,modify,suspend,revokeorterminate anysuchplan.Withoutlimitation oftheforegoing, eachparticipant ofanysuchBrooklynUnionBenefitPlanorLILCOBenefitPlanshallreceivecreditforpurposesofeligibility toparticipate, vesting,benefitaccrualandeligibility toreceivebenefitsunderanybenefitplanoftheCompanyoranyofitssubsidiaries oraffiliates forservicecreditedforthecorresponding purposeundersuchbenefitplan;PROVIDED, HOWEVER,thatsuchcrediting ofserviceshallnotoperatetoduplicate anybenefittoanysuchparticipant orthefundingforanysuchbenefit.AnypersonhiredbytheCompanyoranyofitssubsidiaries aftertheClosin~Datewhowasnotemployedbyanypartyheretooritssubsidiaries immediately priortotheClosingDatesha~A-30 beeligibletoparticipate insuchbenefitplansmaintained, orcontributed to,bythesubsidiary, divisionoroperation bywhichsuchpersonisemployed, PROVIDEDthatsuch'person meetstheeligibility requirements oftheapplicable plan.SEcTIQN7.11STOCKPLANS.(a)LIL'COandBrooklynUnionshalltakeallactionrequiredtoterminate theirrespective employeestockoption,stockpurchaseandothersimilarstockplansconcurrent withtheEffective Time.(b)AttheBrooklynUnionEffective Time,(i)eachshareofBrooklynUnionCommonStock(including fractional anduncertificated shares)heldunderBrooklynUnion'sDividendReinvestment andStockPurchasePlan(the"DIVIDEND REINVESTMENT PLAN")orBrooklynUnion'sEmployeeSavingsPlan,DiscountStockPurchasePlanforEmployees andLong-Term Performance Incentive Compensation Plan(eacha"BROOKLYN UNIONPLAN"andcollectively the"BROOKLYN UNIONPLANS")immediately priortotheBrooklynUnionEffective Timeshallbeautomatically exchanged foralikenumberofshares(including fractional anduncertificated shares)ofCompanyCommonStock,whichsharesshallbeheldunderandpursuanttotheDividendReinvestmerit PlanorbeissuedundersuchBrooklynUnionPlan,asthecasemaybe,and(ii)eachunexpired andunexercised optiontopurchasesharesofBrooklynUnionCommonStock("BROOKLYNUNIONOPTION")undertheLong-Term Performance Incentive Compensation Plan(the"INCENTIVE PLAN"),whethervestedorunvested, willbeautomatically converted intoanoption(a"SUBSTITUTE OPTION")topurchaseanumberofsharesofCompanyCommonStockequaltothenumberofsharesofBrooklynUnionCommonStockthatcouldhavebeenpurchased immediately priortotheBrooklynUnionEffective Time(assuming fullvesting)undersuchBrooklynUnionOption,atapricepershareofCompanyCommonStockequaltothepershareoptionexercisepricespecified insuchBrooklynUnionOption.Inaccordance withSection424(a)oftheCode,eachSubstitute Optionshallprovidetheoptionholderswithrightsandbenefitsthatarenolessandnomorefavorable tohimthanwereprovidedundertheBrooklynUnionOption.(c)AsoftheBrooklynUnionEffective Time,theCompanyshallsucceedtotheDividendReinvestment Planasineffectimmediately priortotheBrooklynUnionEffective Time,andtheDividendReinvestment Planshallbeappropriately modifiedtoprovidefortheissuanceordeliveryofCompanyCommonStockonandaftertheBrooklynUnionEffective Timepursuantthereto.(d)AsoftheBrooklynUnionEffective Time,theBrooklynUnionPlansshallbeappropriately amendedtoprovidefortheissuanceordeliveryofCompanyCommonStock,andtheCompanyshallagreetoissueordeliverCompanyCommonStockinconnection therewith.
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| (e)AttheLILCOEffective Time,eachshareofLILCOCommonStock(including fractional anduncertificated shares)heldunderL'ILCO'sDividendReinvestment Plan(the"LILCODIVIDENDREINVESTMENT PLAN")orLILCO'sEmployeeStockPurchasePlan,Directors'tock UnitRetainerPlan,Officer's LongTermIncentive PlanandAnnualStockIncentive Compensation Plan(eacha"LILCOPLAN"andcollectively the"LILCOPLANS")immediately priortotheLILCOEffective Timeshallbeautomatically exchanged forsuchnumberofshares(including fractional anduncertificated shares)ofCompanyCommonStockaseachshareofLILCOCommonStockisexchanged forpursuanttoSECTION2.1(c),whichsharesshallbeheldunderandpursuanttotheLILCODividendReinvestment PlanorbeissuedundersuchLILCOPlan,asthecasemaybe.(f)AsoftheLILCOEffective Time,theCompanyshallsucceedtotheLILCODividendReinvestment Planasineffectimmediately priortotheLILCOEffective Time,andtheLILCODividendReinvestment Planshallbeappropriately modifiedtoprovidefortheissuanceordeliveryofCompanyCommonStockonandaftertheLILCOEffective Timepursuantthereto.(g)AsoftheLILCOEffective Time,theLILCOPlansshallbeappropriately amendedtoprovideforthe'ssuanceordeliveryofCompanyCommonStock,andtheCompanyshallagreetoissueordeliverCompanyommonStockinconnection therewith.
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| (h)IftheLIPAAgreement haS'otbeenterminated, theninconnection withtheconsummation ofthetransactions contemplated bySECTION2.1(orSECTIONS2.1(a)and7.18(b)iftheTransactions are'tobeconsummated pursuanttoSECTION7.18(b)),
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| BrooklynUnionandLILCOshallcausetheCompanytoissueanappropriate amountofpreferred stockoftheCompanytosuchpersons(whichpersonsmayinclude,amongothers,employeebenefitplans,employees, officersanddirectors ofBrooklynUnion'orLILCO)anduponsuchtermssoastocausetheformation oftheCompanytobeatransaction towhichSection,351 oftheCodedoesnotapply.SEcTIQN7.12 NOSOLICITATIONS.
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| Eachpartyheretoshallnot,andeachsuchpartyshallcauseitsSubsidiaries notto,permitanyofitsRepresentatives to,andshalluseitsbesteffortstocausesuchpersonsnotto,directlyorindirectly
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| : initiate, solicitorencourage, ortakeanyactiontofacilitate themakingof,,anyofferorproposalwhichconstitutes orisreasonably likelytoleadto,anyBusinessCombination Proposal(asdefinedbelow),or,intheeventofanunsolicited BusinessCombination
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| : Proposal, excepttotheextentrequiredbytheirfiduciary dutiesunderapplicable lawifsoadvisedinawrittenopinionofoutsidecounsel,engageinnegotiations orprovideanyinformation ordatatoanypersonrelatingtoanyBusinessCombination Proposal.
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| Eachpartyheretoshallnotifytheotherpartyorallyandinwritingofanysuchinquiries, offersorproposals (including, withoutlimitation, thetermsandconditions ofanysuchproposalandtheidentityoftheperson'making it),within24hoursofthereceiptthereof,shallkeeptheotherpartyinformedofth'estatusanddetailsofanysuchinquiry,offerorproposal, andshallgivetheotherparty'ive days'dv'ance noticeofanyagreement tobeenteredintowithoranyinformation tobesuppliedtoanypersonmakingsuchinquiry,offerorproposal.
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| Eachpartyheretoshallimmediately ceaseandcausetobeterminated allexistingdiscussions andnegotiations,'if any,withanypartiesconducted heretofore withrespecttoanyBusinessCombination Pyoposat.
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| AsusedinthisSECTION7.12,"BUSINESS COMBINATION PROPOSAL" shallmeananytenderorexchangeoffer,proposalforamerger,consolidation orotherbusinesscombination involving anypartytothisAgreement oranyofitsmaterialsubsidiaries, oranyproposaloroffer(ineachcase,whetherornotinwritingandwhetherornotdelivered tothestockholders ofapartygenerally) toacquireinanymanner,directlyorindirectly, asubstantial equityinterestinorasubstantial portionoftheassetsofanypartytothisAgreement oranyofitsmaterialsubsidiaries, otherthapursuanttothetransactions contemplated bythisAgreement andbytheLIPAAgreement, Fromthedatehereountilthetermination orconsummation ofthetransactions contemplated bythisagreement, neitherpartyshallengageinanynegotiations ormaterialdiscussions withtheLongIslandPowerAuthority
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| ("LIPA")oritsrepresentatives oragentswithoutpriornotification toorthepresenceoftheotherpartyhereto,andwillnotprovideanyinformation ordatatoLIPAwithoutproviding acopythereoftothe.otherpartyhereto..Nothing contained hereinshallprohibitapartyfromtakinganddisclosing" toitsstockholders apositioncontemplated byRule14e-2(a)undertheExchangeActwithrespecttoaBusinessCombination Proposalbymeansofatenderoffer.Srcnow7.13COMPANYBOARDOFDIRECTORS.
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| Thenumberofdirectors comprising thcfullBoardofDirectors oftheCompanyattheEffective Timeshallbe15persons,sixofwhomshallbedesignated byBrooklynUnionprior,totheEffective Time,sixofwhomshallbedesignated byLILCOpriortotheEffective Timeandthreeofwhomshallbedesignated byacommittee consisting oftwocurrentBrooklynUniondirectors andtwocurrentLILCOdirectors.
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| IISEGTIQN7.14SENIOREXECUTIVES.
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| Dr.WilliamJ.Catacosinos shallbetheChairmanoftheBoardofDirectors, ChairmanoftheExecutive Committee andChiefExecutive OfficeroftheCompanycommencing attheEffective Time.Atthefirstanniversary oftheEffective Time,Dr.Catacosinos shallceasetobetheChiefExecutive Officer,shallcontinuetobeChairmanoftheBoardandChairmanoftheExecutive Committee andshallbecomeaconsultant oftheCompany.Mr.RobertB.CatellshallbethePresident andChiefOperating OfficeroftheCompanycommencing attheEffective TimeandshallsucceedDr.Catacosinos asChiefExecutive OfficeroftheCompanycommencing onsuchfirstanniversary.
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| Thearrangements tocausesuchelections totakeplaceatthefirstanniversary oftheEffective Timecontemplated bythepreceding sentencemaybealteredonlybyavote,following theEffective Time,oftwo-thirds oftheentireBoardofDirectors oftheCompany.Erichofthepartiesheretoshalltakesuchactionasshallreasonably bedeemedbyanyofthemtobeadvisable inordertgiveeffecttotheprovisions ofthisSection7.14.A-32
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| \SEGTIQN7.15EXPENSES.
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| SubjecttoSECTION9.3,'allcostsandexpensesincurredinconnection withthisAgreement andthetransactions contemplated herebyshallbepaidbythepartyincurring suchexpenses, exceptthatthoseexpensesincurredinconnection withprintingtheJointProxy/Registration Statement, aswellasthefilingfeerelatingtheretoandanyexpensesincurredundertheHSRAct,shallbesharedequallybyBrooklynUnionandLILCO.SEGTIQN7.16 FURTHERASSURANCES.
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| Eachpartywill,andwillcauseitsSubsidiaries to,executesuchfurtherdocuments andinstruments andtakesuchfurtheractionsasmayreasonably berequested byanyotherpartyinordertoconsummate theTransactions inaccordance withthetermsheieof.'EGTIQN 7.17POST-EXCHANGE OPERATIONS.
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| Subjecttothetransactions contemplated bytheLIPAAgreement, following theEffective Time,BrooklynUnion,ontheonehand,andLILCO,ontheotherhand,shallcontinuetheirseparatecorporate existences, operating underthenamesof"THEBROOKLYNUNIONGASCOMPANY"and"LONGISLANDLIGHTINGCOMPANY",
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| respectively, untilsuchtimeasisotherwise determined bytheBoardofDirectors oftheCompany.ThenameoftheCompanyshallbe"BL",orsuchothernameasmaybeagreedbyBrooklynUnionandLILCOpriortotheClosing(whichshallnotbethenameof,oranamesubstantially similarto,BrooklynUnionorLILCO).Thecertificate ofincorporation andby-lawsoftheCompanyshallbeamendedpriortotheEffective Timeinamannerreasonably acceptable toBrooklynUnionandLILCO.SEGTIQN7.18OTHERTRANSACTIONS 1%(a)Thepartiesheretoherebyconsenttotheexecution anddeliveryof,andperformance ofthetransactions contemplated by,theLIPAAgreement andtheKeySpanExchangeAgreement, andwaiveallbreachesofrepresentations, warranties, covenants andconditions contained hereinarisingtherefrom.
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| (b)Intheeventthatalloftheconditions toeachofthisAgreement andtheLIPAAgreement havebeensatisfied orwaivedandeachofBrooklynUnion,LILCOandLIPAhasindicated totheotherpartiesthat itiseady,willingandabletoconsummate thetransactions contemplated bythisAgreement andtheLIPAAgreement, thentheShareExchangeshallnotbeconsummated andtheothertransactions contemplated herebyandtherebyshallbeconsummated mthefol/owing mannerandorder.'i) thetransferbyLILCOoftheTransferred Assets(asdefinedintheLIPAAgreement) tosuchsubsidiaries oftheCompanyasBrooklynUnionandLILCOshalldirectinexchangefortheDesignated Number(ashereinafter defined)ofsharesofCompanyCommonStockandupto$75millionfaceamountofpreferred stockoftheCompany("CompanyPreferred Stock")ascontemplated bytheLIPAAgreement The"Designated Number"shallbethenumberofsharesofCompanyCommonStockrepresenting thenetfairmarketvalueoftheTransferred Assets,asshallbedetermined ingoodfaithbyBrooklynUnionandLILCO,lesssuchfaceamountofCompanyPreferred Stock;(ii)themergerofLIPAAcquisition Corp.withandintoLILCOandtherelatedtransactions contemplated bytheLIPAAgreement (including allschedules andexhibitsthereto)tooccuronorpriortotheeffective timeofsuchmerger(the"LIPAEFFECTIVE TIME")shallbeorshallhavebeenconsummated, and,attheLIPAEffective Time,theCashPurchasePrice(asdefinedintheLIPAAgreement) shallbepaidtotheExchangeAgent(asdefinedundertheLIPAAgreement) asagentfortheholdersofLILCOCommonStocktosubscribe forandpurchaseanumberofsharesofCompanyCommonStock,whichnumberofshareswhenaddedtotheDesignated Numbershallrepresent thenumberofsharesofLILCOCommonStockissuedandoutstanding immediately priortotheLILCOEffec'tive Time,otherthanDissenting Shares,multiplied bythe'LIPARatio;and'(iii)promptlythereafter, theMergershallbeconsummated.
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| (c)Inconnection withtheLIPAAgreement, LILCOandBrooklyri Unioncontemplate theformation ofaimitedpartnership forthepurposeofpurchasing interestratehedgecontracts, tobefundedthroughcapitalontributions ofupto$30millionbyeachofthem(theformation ofsuchlimitedpartnei;ship andthepurchaseA-33 ofsuch.contracts beingreferredtohereinasthe"HEDGEARRANGEMENTS"
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| ).ThepartiesherebyconsenttotheHedgeArrangements andwaiveallbreachesofrepresentations, warranties, covenants andconditions arisingtherefrom.
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| I(d)Notwithstanding anyprovision hereintothecontrary, LILCOshallnotmodify,amendorterminate theLIPAAgreement.
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| (onceandasithasbeenenteredintobythepartiesthereto),
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| andshallnotprovideanyconsent,waiverorreleasethereunder withoutthepriorwrittenconsentofBrooklynUnion.SECI'IQN7.19EMPLOYMENT AGREEMENT.
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| (a)TheCompanyshallenterintoanemployment agreement withMr.Catelleffective asoftheEffective Timeproviding'for himtoassumethepositions described inSection7.14atthetimesspecified therein,forhimtocontinuetoserveasChiefExecutive Officerforafouryearperiodcommencing onthefirstanniversary oftheEffective Time,'orhimtoreceivecompensation (including incentive compensation relatingtorealizing thesynergies contemplated toberealizedfromtheTransactions) ontermsmutuallyagreedtoandinanyeventinanamountnotlessthanwhathereceivesasofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnolessfavorable thanthosecustomarily applicable toemployment agreements for'chiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| (b)TheCompanyshallenterintoanemployment agreement withDr.Catacosinos effective asoftheEffective Timeproviding forhimtoassumethepositions described inSection7.14atthetimesspecified therein,forhimtoserveasaconsultant totheCompanyforafiveyearperiodcommencing afterheceasesbeingChiefExecutive Officer,forhimtoreceivecompensation (including incentive compensation ofthekinddescribed inSection7.19(a))ontermsmutuallyagreedtoandinanyeventinanamountnotlessthanwhathereceivesasofDecember29,1996aswellasreasonable increases, andotherwise containing termsandconditions comparable toandnoless,favorable thanthosecustomarily applicable toemployment agreements forchiefexecutive officersofsimilarly sizedcompanies intheenergyandutilitybusinesses.
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| IfSECTION7.20HOLDINGCOMPANY.PriortotheLILCOEffective Time,orifthetransactions contemplated herebyaretobeconsummated pursuanttoSection7.18(b),theLIPAEffective Time,LILCOandBrooklynUnionshallcausetheCompanytobeformedasaNewYorkcorporation forthepurposeofconsummating thetransactions contemplated hereby,whichcorporation shallbe66%ownedbyLILCOand34%ownedbgBrooklynUnionimmediately'rior totheLILCOEffective Time.ARTICLEVIIICONDITIONS SECTION8.1CONDITIONS TOEACHPARTY'SOBLIGATION TOEFFECTTHETRANSACTIONS.
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| Therespective obligations ofthepartiestoeffecttheTransactions shallbesubjecttothe'satisfaction onorpriortotheClosingDateofthefollowing conditions, except,totheextentpermitted byapplicable law,'that suchconditions maybewaivedinwritingpursuanttoSECTION9.5bythejointactionofthepartiesh'ereto:(a)SHAREHOLDER APPROVALS.
| |
| TheLILCOShareholders'pproval andtheBrooklynUnionShareholders'pproval shallhavebeenobtained.
| |
| (b)NOINJUNCTION.
| |
| Notemporary restraining orderorpreliminary orpermanent injunction orotherorderbyanyfederalorstatecourtpreventing consummation oftheTransactions shallhavebeenissuedandbecontinuing ineffect,andtheTransactions andtheothertransactions contemplated herebyshallnothavebeenprohibited underanyapplicable federalorstatelaworregulation.
| |
| (c)REGISTRATION STATEMENT.
| |
| TheRegistration Statement shallhavebecomeeffective inaccordance withtheprovisions oftheSecurities Act,andnostopordersuspending sucheffectiveness shalhavebeenissuedandremainineffect.A-34 (d)LISTINGOFSHARES.ThesharesofCompanyCommonStockissuableintheTransactions pursuanttoARTICLEII(including sharesissuableunderoptions)shallhavebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance.
| |
| (e)STATUTORY APPROVALS.
| |
| TheBrooklynUnionRequiredStatutory Approvals andtheLILCORequiredStatutory Approvals shallhavebeenobtainedatorpriortotheBrooklynUnionEffective TimeandtheLILCOEffective Time,suchapprovals shallhavebecomeFinalOrders(asdefinedbelow)andsuchFinalOrdersshallnotimposetermsorconditions which,intheaggregate,'ould have,orinsofaras,reasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial
| |
| ,condition orresultsofoperations oftheCompanyanditsprospective subsidiaries takenasawholeorwhichwouldbematerially inconsistent withtheagreements, ofthepartiescontained herein.Ifthetransactions contemplated bytheLIPAAgreement willnotbeconsummated contemporaneously withtheconsummation ofthetransactions contemplated hereby,theFinalOrderrelatingtotheapprovalofthetransactions contemplated herebytobereceivedfromthePSCshallincludethePSC'sapproval, withinthestatutory authority ofthePSC,ofratespermitted tobechargedbytheCompanyanditssubsidiaries totheircustomers whichwillbeincorporated inalongtermrateagreement theeffectofwhichcouldnotreasonably beexpectedtohaveamaterialadverseeffectonthebusiness, assets,financial condition, resultsofoperations
| |
| 'orpros'pects oftheCompanyanditssubsidiaries takenasawhole.Forpurposesofthisprovision, theprospects oftheCompanyanditssubsidiaries shallmeanthecombination oftheresultsanticipated bytheregulated earningsforecasts ofBrooklynUnionprovidedtoLILCOundercoverofamemoranduin datedDecember29,1996,andtheresultsanticipated bytheregulated earningsforecasts ofLILCOprovidedtoBrooklynUnionundercoverofameniorandum dated'ecember 29,1996.A"FINALORDER"meansactionbytherelevantregulatory authority whichhasnotbeenreversed, stayed,enjoined, setaside',annulledorsuspended, withrespecttowhichanywaitingperiodprescribed bylawbeforethetransactions contemplated herebymaybeconsummated hasexpired,andastowhichall'conditions totheconsummation ofsuchtransactions prescribed bylaw,regulation ororderhavebeensatisfied.
| |
| e(f)POOLING.UnlesstheLIPATransaction hasbeenconsummated, orwillbeconsummated contemporaneously withtheTransactions, eachofBrooklynUnionandL'ILCOshallhavereceivedaletter'fitsindependent publicaccountants, datedtheClosingDate,'informandsubstance reasonably satisfactory, ineachcase,toBrooklynUnionandLILCO,statingthatthetransactions effectedpursuanttothisAgreement willqualifyasapoolingofinterests transaction underGAAP,,(g)PREFERRED STOCK.Unless-the LIPAAgreement hasbeenterminated, theCompanyshallhaveissuedsharesofpreferred stockoftheCompanyassetforthinSECTIONS7.11(h).(h)TAXOPINION.LILCOshallhavereceivedanopinionofHuntonAWilliamssatisfactory informandsubstance toLILCO,datedasoftlieClosingDate,totheeffectthattheShareExchangewillnotbetaxabletonon-dissenting holdersofLILCOCommonStockand(exceptwithrespecttothereceiptofcashinlieuoffractional shares)willsatisfytherequirements ofSection351oftheCode;PROVIDED, HOWEVER,thatthiscondition willnotberequiredtobesatisfied unlesstheLIPAAgreement hasbeenterminated.
| |
| SECfION8.2CONDITIONS TOOBLIGATION OELILCOTOEFFECTTHETRANSACTIONS.
| |
| Theobligation ofLILCOtoeffecttheTransactions shallbefurthersubjecttothesatisfaction, onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyLILCOinwritingpursuanttoSECTION9.5:(a)PERFORMANCE OFOBLIGATIONS OFBROOkLYNUNION.BrooklynUnion(and/oritsappropriate Subsidiaries) shallhaveperformed itsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)andshallhaveperformed inallmaterialrespectsitsotheragreements andcovenants contained inorcontemplated bythisAgreement andtheBrooklynUnionStock,OptionAgreement requiredtobeperformed byitatorpriortotheBrooklynUnionEffective Time.(b)REPRESENTATIONS ANDWARRANTIES, Therepresentations and=warranties ofBrooklynUnionsetforthinthisAgreement andtheBrooklynUnionStockOptionAgreement'shall betrueandcorrectA-35 (i)onandasofDecember29,1996and(ii)onandasoftheClosingDateCiththesameeffectasthouglsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanDecember29,1996ortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained theiein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaBrooklynUnionMaterialAdverseXffect.(c)CLOSINGCERTIFICATES.
| |
| LILCOshallhavereceivedacertificate signedonbehalfofBrooklynUnionbythechieffinancia1 officerofBrooklynUnion,datedtheClosingDate,totheeffectthat,'tothebestofsuchofficer's'knowledge, theconditions setforthinSECTION8.2(a)andSECTION8.2(b)'havebeensatisfied.
| |
| 'I(d)BROOKLYNUNIONMATERIALADVERSEEFFECT.NoBrooklynUnionMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaBrooklynUnionMaterialAdverseEffect.(e)BROOKLYNUNIONREQUIREDCONSENTS.
| |
| TheBrooklynUmonRequiredConsentsshallhavebeenobtained, exceptforthoseconsentsthefailureofwhichtoobtainwouldhaveaBrooklynUnionMaterialAdverseEffect.Secrtox8.3CONDITIONS TOOBLIGATION OFBROOKLYNUNIONTOEFFECTTHETRANSACTIONS.
| |
| Theobligation ofBrooklynUniontoeffecttheTransactions shallbefurthersubjecttothesatisfaction, onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyBrooklynUnioninwritingpursuanttoSECTION9.5:,(a)PERFORMANCE OFOBLIGATIONS OFLILCO.LILCO(and/oritsappropriate Subsidiaries) shallhaveperformed itsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)andshallhavperformed inallmaterialrespectsitsotheragreements andcovenants contained inorcontemplated bythAgreement andtheLILCOStockOptionAgreement requiredtobeperformed atorpriortotheLILCEffective Tjme.I.(b)REPRESENTATIONS ANDWARRANTIES.
| |
| The'representations andwarranties ofLILCOsetforthinthisAgreement andtheLILCOStockOptionAgreement shallbetrueandcorrect(i)onandasofDecember29,1996and(ii)onandasoftheClosingDatewiththesameeffectasthough=such representations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanDecember29,1996ortheClosingDatewhichneedonlybetrueandcorrectisofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaLILCOMaterialAdverseEffect.(c)CLOSINGCERTIFICATES.
| |
| BrooklynUnionshallhavereceivedacertificate signedonbehalfofLILCObythechieffinancial officerofLILCO,datedtheClosingDate,totheeffectthat,tothebestofsuchofficer's knowledge, theconditions setforthinSECTION8.3(a)andSECTION8.3(b)havebeensatisfied.
| |
| (d)LILCOMATERIALADVERSEEFFECT.NoLILCOMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactorcircumstance whichisreasonably likelytohaveaLILCOMaterialAdverseEffect.(e)TAXOPINION.BrooklynUnionshallhavereceivedanopinionofWachtell, Lipton,Rosen&Katzsatisfactory inform.andsubstance toBrooklynUnion,datedasoftheClosingDate,whichopinionmaybebasedonappropriate representations ofBrooklynUnion,KeySpan'and theCompany,totheeffethattheMergerwillqualifyasareorganization pursuanttoSection368oftheCode.A-36 0(f)LILCOREQUIREDCONSENTS.
| |
| TheL'ILCORequiredConsentsshallhavebeenobtained, exceptforthosethefailureofwhichtoobtainwouldhaveaLILCOMaterialAdverseEffect.ARTICLEIXTERMINATION)
| |
| AMENDMENT ANDWAIVERSEcTioN9.1TERMINATION.
| |
| ThisAgreement maybeterminated atanytimepriortotheClosingDate,whetherbeforeorafterapprovalbytheshareholders oftherespective partiesheretocontemplated bythisAgreement:
| |
| (a)bymutualwrittenconsentoftheBoardsofDirectors ofBrooklynUnionandLILCO;(b)byanypartyhereto,bywrittennoticetotheotherparties,iftheEffective TimeshallnothaveoccurredonorbeforeAugust31,1998(the"INITIALTERMINATION DATE");PROVIDED, HOWEVER,thattherighttoterminate theAgreement underthisSECTION9.1(b)shallnotbeavailable toanypartywhosefailuretofulfillanyobligation underthisAgreement hasbeenthecauseof,orresultedin,thefailureoftheEffective Timetooccuronorbeforethisdate;andPROVIDED, FURTHER,thatifontheInitialTermination Datetheconditions totheClosingsetforthinSECTIONS8.1(e),8.2(e)and/or8.3(f)shallnothavebeenfulfilled butallotherconditions totheClosingshallbefulfilled orshallbecapableofbeingfulfilled, thentheInitialTermination DateshallbeextendedtoApril28,1999;andPROVIDED, FURTHER,thatLILCOshallnothavetherighttoterm'mate thisAgreement pursuanttothisSection9.1(b)iftheLIPAAgreement hasnotbeenterminated; (c)byanypartyhereto,bywrittennoticetotheotherparties,iftheLILCOShareholders'pproval shallnothavebeenobtainedatadulyheldLILCOSpecialMeeting,including anyadjoumments thereof,ortheBrooklynUnionShareholders'pproval shallnot,havebeenobtainedatadulyheldBrooklynUnionSpecialMeeting,including anyadjournments thereof;(d)byanypartyhereto,ifanystateorfederallaw,order,ruleorregulation isadoptedorissued,whichhastheeffect,assupported bythewrittenopinionofoutsidecounselacceptable tothepartieshereto,ofprohibiting theTransactions, orbyanypartyheretoifanycourtof.competent jurisdiction intheUnitedStatesoranyStateshallhaveissuedanorder,judgmentordecreepermanently restraining, enjoining orotherwise prohibiting theTransactions, andsuchorder,judgmentordecreeshallhavebecomefinalandnonappealable; (e)byLILCO,'upon twodays'rior noticetoBrooklynUnion,if,asaresultofatenderofferoranywrittenofferorproposalwithrespecttoamerger,saleofamaterialportion'of itsassetsorotherbusinesscombination (each,a"BUSINESS COMBINATION"
| |
| )byapartyotherthanBrooklynUnionoranyofitsaffiliates orLIPAoi'nyofitsaffiliates, theBoardofDirectors ofLII.COdetermines ingoodfaiththattheir'iduciary obligations underapplicable lawrequirethatsuchtenderofferorotherwrittenofferorproposalbeaccepted; PROVIDED; HOWEVER,that(i)theBoardofDire'ctors ofLILCOshallhavebeenadvisedinawrittenopinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenature'ofthisAgreement enteredintointh'eproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyBrooklynUnioninnegotiations enteredintopursuanttoCLAUSE(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, LILCOshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withBrooklynUniontomakesuchadjustments inthetermsandconditions ofthisAgreement aswouldenableLILCOtoproceedwiththetransactions contemplated hereinonsuchadjustedterms;(f)byBrooklynUnion,upontwodays'rior noticetoLILCO,if,asaresultofatenderofferbyapartyotherthanLILCOoranyofitsaffiliates oranywrittenofferorproposalwithrespecttoaBusinessCombination byapartyotherthanLILCOoranyofitsaffiliates, theBoardof'Directors ofBrooklynUniondetermines ingoodfaith,that.theirfiduciary obligations underapplicable lawrequirethatsuchtenderofferA-37 orotherwrittenofferorproposalbeaccepted;
| |
| : PROVIDED, HOWEVER,that(i)theBoardofDirectors oBrooklynUnionshallhavebeen'advised'in awrittenopinionof'outside counselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureofthisAgreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyLILCOinnegotiations enteredintopursuanttoclause(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresult'fsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, BrooklynUnion'shall, andshallcauseitsrespective financial andlegaladvisorsto,negotiate withLILCOtomakesuchadjustments inthetermsandconditions ofthisAgreement aswouldenableBrooklynUniontoproceedwiththetransactions contemplated hereinonsuchadjustedterms;(g)byBrooklynUnion,bywrittennoticetoLILCO,if(i)thereexistbreachesoftherepresentations andwarranties ofLILCOandBLmadehereinasofDecember29,1996whichbreaches, individually orintheaggregate, wouldor,wouldbereasonably likelytoresultinaLILCOMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyLILCOofnoticeinwritingfromBrooklynUnion,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)LILCO(and/oritsappropriate subsidiaries) shallnothaveperformed andcompliedwithitsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)orshallhavefailedtoperformandcomplywith,inallmaterialrespects, itsotheragreements andcovenants hereunder orundertheLILCOStockOptionAgreement andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyLILCOofnoticeinwritingfromBrooklynUnion,specifying the.natureofsuchfailureandrequesting thatitberemedied; or(iii)theBoardofDirectors ofLILCOoranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoBrooklynUnionitsapprovalorrecommendation ofthisAgreement ortheTransactions, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponBrooklynUnion'srequest,(C)shallapproveorrecommend anyacquisition ofLILCOoramaterialportionofitsassetsoranytenderofferforsharesofcapitalstockofLILCO,ineachc&e,byaparty.otherthanBrooklynUnionoranyofitsaffiliates andotherthantheLIPAAgreement, asthesamemaybeamendedfromtimetotimewiththeconsentofBrooklynUnion,andthetransactions contemplated therebyor(D)shallresolvetotakanyoftheactionsspecified inCLAUSE(A),(B)or(C);(h)byLILCO,bywrittennoticetoBrooklynUnion,if(i)thereexistmaterialbreachesoftherepresentations andwarranties ofBrooklynUnionmadehereinasofDecember29,1996whichbreaches, individually orintheagg'regate, wouldorwouldbereasonably likelytoresultinaBrooklynUnionMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyBrooklynUnionofnoticeinwritingfromLILCO,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)BrooklynUnion(and/oritsappropriate subsidiaries) shallnothaveperformed andcompliedwithitsagreements andcovenants contained inSECTIONS6.1(b)and6.1(c)orshallhavefailedtoperformandcomplywith,inallmaterialrespects, itsotheragreements andcovenants hereunder orundertheBrooklynUnionStockOptionAgreement, andsuchfailuretoperformorcoliiplyshalliiothavebeenremediedwithin20daysafterreceiptbyBrooklynUnionofnoticeinwritingfromLILCO,specifying thenatureofsuchfailureandrequesting thatitberemedied; or,(iii)theBoardofDirectors ofBrooklynUnionoranycommittee:thereof (A)shallwithdraw, ormodifyinanymanneradversetoLILCOitsapprovalorrecommendation ofthisAgreement orthe.Transactions, (B),shall failtoreaffirmsuchapprovalorrecommendation uponLILCO'srequest,(C)shallapproveorrecommend=
| |
| anyacquisition ofBrooklynUnionoramaterialportionofitsassetsoranytenderofferforthesharesofcapitalstockofBrooklynUnion,ineachcasebyapartyotherthanLILCOoranyofits.affiliates or(D)shallresolvetotakeanyoftheactionsspecified in,CLAUSE(A),(B)or(C);or(i)byeitherparty,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'obligation toeffecttheTransactions cannotbesatisfied.
| |
| Si:crioN9.2 EFFECTOFTERMINATION.
| |
| In"theeventoftermin'ation ofthisAgreement byeitheBrooklynUnionorLILCOpursuanttoSECTION9.1thereshallbenoliability onthepartofeitherBrooklyA-38
| |
| 'UnionorLILCOortheirrespective officersordirectors hereunder, exceptthatSECTION9.3,theagreement contained inthelastsentenceofSECTION7.1,SECTION10.2andSECTION10.8shallsurvivethetermination.
| |
| HSECTION9.3TERMINATION FEE;EXPENSES.
| |
| (a)TERMINATION FEEUPONBREACHORWITHDRAWAL OFAPPROVAL.
| |
| IfthisAgreement isterminated atsuchtimethatthisAgreement isterminable pursuanttoone(butnotboth)of(x)SECTION9.1(g)(i) or(ii)or(y)SECTION9,1(h)(i) or(ii),,then:(i)thebreaching partyshallpromptly(butnotlaterthanfivebusinessdaysafterreceiptofnoticefromthenon-breaching party)paytothenon-breaching partyincashanamountequaltoalldocumented out-of-pocket expensesandfeesincurredbythenonbreaching party(including, withoutlimitation, feesandexpensespayabletoalllegal,accounting, financial, publicrelations andotherprofessional advisors) arisingoutof,inconnection withorrelatedtothetransactions contemplated bythisAgreement notinexcessof$10million;PROVIDED, HOWEVER,that,ifthisAgreement is.terminated byapartyasaresultofawillfulbreachbytheotherparty,thenon-breaching partymaypursueanyremediesavailable toit.atlaworinequityandshall,.in additiontoitsout-of-pocket expenses(whichshallbepaidasspecified aboveandshallnotbelimitedto$10million),
| |
| beentitledtoretainsuchadditional amountsassuchnon-breaching partymaybeentitledtoreceiveatlaworinequity;and(ii)if(x)atthetimeofthebreaching party'swillfulbreachofthisAgreement, thereshallhavebeenathirdpartytenderofferforsharesof,orathirdpartyofferorproposalwithrespecttoaBusinessCombination involving, suchpartyoranyofitsaffiliates whichatthetimeofsuchtermination shallnothavebeenrejectedbysuchpartyanditsboardofdirectors andwithdrawn bythethirdparty,and(y)withintwoandone-halfyearsofanytermination bythenon-breaching party,thebreaching partyoranaffiliate thereofbecomesa'subsidiary ofsuchofferororasubsidiary ofanaffiliate ofsuchofferororacceptsawrittenoffertoconsummate orconsummates aBusinessCombination withsuchofferororanaffiliate thereof,thensuchbreaching party.(jointlyandseverally withitsaffiliates),
| |
| uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issignedthenattheclosing(andasacondition totheclosing)ofsuchbreaching partybecomingsuchasubsidiary orofsuchBusinessCombination, willpaytothenon-breaching partyincashanadditional feeequalto$65million(ifthebreaching partyisLILCO)or$35million(ifthebreaching partyisBrooklynUnion).(b)ADDITIONAL TERMINATION FEE.If(i)thisAgreement.
| |
| (x)isterminated byanypartypursuanttoSECTION9.1(e)orSECTION9.1(f)orSECTION9.1(g)(iii) orSECTION9.1(h)(iii),
| |
| (y)isterminated following afailureof'theshareholders ofanyoneofthePartiestograntthenecessary approvals described inSECTION4.13andSECTION5.13or(z)isterminated asaresultofsuchparty'smaterialbreachofSECTION7.4,and(ii)atthetimeofsuchtermination orpriortothemeetingofsuchparty'sshareholders thereshallhavebeenathird-party tenderofferforsharesof,orathird-party offerorproposalwithrespecttoaBusinessCombination involving, suchpartyoranyofitsaffiliates whichatthetimeofsuchtermination orofthemeetingofsuchparty'sshareholders shallnothavebeen(A)rejectedbysuchpartyanditsboardofdirectors and(B)withdrawn bythethirdparty,and,withintwoandone-halfyearsofanysuchtermination, thepartywhichwasthesubjectofsuchofferorproposal(the"TARGETPARTY")becomesasubsidiary ofsuchofferororasubsidiary ofanaffiliate ofsuchofferororacceptsawrittenoffertoconsummate orconsummates aBusinessCombination withsuchofferororanaffiliate thereof,thensuchTargetParty,(jointlyandseverally withitsaffiliates),
| |
| uponthesigningofadefinitive agreement relatingtosuchaBusinessCombination, or,ifnosuchagreement issigned,thenattheclosing(andasacondition totlieclosing)ofsuchTargetPartybecomingsuch'asubsidiary orofsuchBusinessCombination, willpaytotheotherparty,ifLILCOistheTargetParty,$75million,andifBrooklynUnionistheTargetParty,$45million,ineachcaseincashplus,ineithercase,theout-of-pocket feesandexpensesincurredbytheotherparty(including, withoutlimitation, feesandexpensespayabletoalllegal,accounting, firiancial, publicrelations andotherprofessional advisors) arisingoutof,inconnection withorrelatedtothetransactions contemplated bythisAgreement.
| |
| (c)LIPAAGREEMENT.
| |
| ForpurposesofSECTIONS9.3(a)and(b),'theLIPAAgreement shallbedeemedaproposalforaBusinessCombination involving LILCOandLIPAshallbedeemedtheofferorwithespectthereto,andanyfeeforthebenefitofBrooklynUnionwouldbepayableundersuchsectionsatthetimehisAgreement isterminated;
| |
| : PROVIDED, thatifthisAgreement isterminated following afailureofthe shareholders ofLILCOtogranttheLILCOShareholders'pproval described in,Section5.13,theLIPAAgreement shallnot.bedeemedaproposalforaBusinessCombination involving LILCOandnofeeshallbepayabletoBrooklynUnionbyvirtueoftheLIPAAgreement underSections9.3(b)(i)(y) and9.3(b)(ii).
| |
| (d)EXPENSES.
| |
| Thepartiesagreethattheagreements contained inthisSECTION9.3areanintegralpartofthetransactions contemplated bytheAgreement andconstitute liquidated damagesandnotapenalty.Ifonepartyfailstopromptlypaytotheotheranyfeeduehereunder, thedefaulting partyshallpaythecostsandexpenses(including legalfeesandexpenses) inconnection withanyaction,including thefilingofanylawsuitorotherlegalaction,takentocollectpayment,togetherwithinterestontheamountofanyunpaidfeeatthepubliclyannounced primerateofCitibank, N.A.fromthedatesuchfeewasrequiredtobepaid.(e)LIMITATION OFTERMINATION FEES.Notwithstanding anythinghereintothecontrary, theaggregate amountpayabletoBrooklynUnionanditsaffiliates pursuanttoSECTION9.3(a);SECTION9.3(b)andthetermsof'theLILCOStockOptionAgreement shallnotexceed$90millionandtheaggregate amountpayabletoLILCOanditsaffiliates pursuanttoSECTION9.3(a),SECTION9.3(b)andthetermsoftheBrooklynUnionStockOptionAgreement shallnot'exceed
| |
| $50million(including reimbursement forfeesandexpensespayablepursuanttothisSECTION9.3).ForpurposesofthisSECTION9.3(c),theamountpayablepursuanttothetermsoftheLILCOStockOptionAgreement ortheBrooklynUnionStockOptionAgreement, asthecasemaybe,shallbetheamountpaidpursuanttoSection7(a)(i)and7(a)(ii)thereof.SEcTION9.4AMENDMENT.
| |
| ThisAgreement maybeamendedbytheBoardsofDirectors ofthepartieshereto,atanytimebeforeorafterapprovalhereofbytheshareholders ofBrooklynUnionandLILCOandpriortotheEffective Time,butaftersuchapprovals, nosuchamendment shall(i)alterorchangetheamountorkindofsharestobeissuedunderARTICLEIIor(ii)alterorchangeanyofthetermsandconditions ofthisAgreement ifanyofthealterations orchanges,aloneorintheaggregate, wouldmaterially adversely affecttherightsofholdersofBrooklynUnionCommonStockorLILCOCommonStock.ThisAgreement maynotbeamendedexceptbyaninstrument inwritingsignedonbehalfofeachofthepartieshereto.SEGTIQN9.5WAIVER.Atany,timepriortotheEffective Time,thepartiesheretomay(a)extendthetimefortheperformance ofanyoftheobligations orotheractsoftheotherpartieshereto,(b)waiveanyinaccuracies intherepresentations and"warranties contained hereinorinanydocumentdelivered pursuantheretoand(c)waivecompliance withanyoftheagreements orconditions contained herein,totheextentpermitted byapplicable law.Anyagreement onthepartofapartyheretotoanysuchextension orwaivershallbevalidifsetforthinaninstrument inwritingsignedonbehalfofsuchparty.ARTICLEXGENERALPROVISIONS SEcrioN10.1 NON-SURVIVAL;
| |
| 'EFFECTOFREPRESENTATIONS ANDWARRANTIES.
| |
| (a)Allrepresentations, warranties andagreements inthisAgreement shallnotsurvivetheEffective Time,exceptasotherwise providedinthisAgreement andexc'eptfortheagreements contained inthisSECTION10.1andinARTICLEII,SECTION7.5,SECTION7.9,SECTION7.10,SECTION7.11,SECTION7.14,SECTION7.15andSECTION10.7.(b)Nopartymayassertaclaimforbreachofanyrepresentation, warrantyorcovenantcontained inthisAgreement (whetherbydirectclaimorcounterclaim) exceptforthepurposeofasserting arighttoterminate thisAgreement pursuanttoSECTION9.1(g)(i) orSECTION9.1(h)(i)
| |
| (o',pursuanttoanyothersubsection ofSECTION9.1,iftheterminating partywouldhavebeenentitledtoterminate thisAgreement pursuanttoSECTION9.1(g)(i) orSECTION9.1(h)(i))
| |
| orpursuanttoSECTION-9.3.
| |
| SEcrioN10.2BROKERS.BrooklynUnionrepresents andwarrantsthat,exceptforMerrillLynchwhos~feeshavebeendisclosed toLILCOpriortothedatehereof,nobroker,finderorinvestment bankerisentitledt~A-40 nybrokerage, finder'sorotherfeeor,commission, inconnection withthetransactions contemplated bythisAgreement baseduponarrangements madebyoronbehalfofBrooklynUnion.LILCOrepresents andwarrantsthat,exceptforDillonReadwhosefees,havebeendisclosed toBrooklynUnionpriortothedatehereof,nobroker,finderorinvestment bankerisentitledtoanybrokerage, finder'sorotherfeeorcommission inconnection withthetransactions contemplated bythisAgreement baseduponarrangements madebyoronbehalfofLILCO.Srcrtow10.3NOTICES.Allnoticesandothercommunications hereunder shall,beinwritingandshallbedeemedgivenif(i)delivered.
| |
| personally, (ii)sentbyreputable overnight courierservice,(iii)telecopied (whichisconfirmed),
| |
| or(iv)fivedaysafterbeingmailedbyregistered orcertified mail(returnreceiptrequested) tothe,partiesatthefollowing addresses (oratsuchotheraddressforapartyasshallbespecified bylikenotice):(a)IftoBrooklynUnion,to:TheBrooklynUnionGasCompany'neMetroTech CenterBrooklyn, NewYork11201-3850 Attention:
| |
| ChiefExecutive OfficerP*Jwithacopyto:Wachtell, Lipton,Rosen4Katz51West52ndStreet'NewYork,NewYork10019Attention:
| |
| Richar'dD.KatcherandSethA.Kaplan(b)IftoLILCO,to:,LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Attention:
| |
| ThomasE.Constance SEcTloN10.4MISCELLANEOUS.
| |
| ThisAgreement including thedocuments andinstruments referredtoherein(i)constitutes theentireagreement andsupersedes allotherprioragreements andunderstandings, bothwrittenandoral,amongtheparties,oranyofthem,withrespecttothesubjectmatterhereofotherthantheConfidentiality Agreement; (ii)shallnotbeassignedbyoperation oflaworotherwise; and(iii)shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable tocontracts executedinandtobefullyperformed insuchState,withoutgivingeffecttoitsconfiicts oflawrulesorprinciples.
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| Secrtow10.5INTERPRETATION.
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| Whenareference ismadeinthisAgreement toSectionsorExhibits, suchreference shallbetoaSectionorExhibitofthisAgreement, respectively, unlessotherwise indicated.
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| Thetableofcontentsandheadingscontained inthisAgreement areforreference purposesonlyandshallnotaffectinanywaythemeaningorinterpretation ofthisAgreement.
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| Wheneverthewords"include",
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| "includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
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| SilcrtoN10.6 COUNTERPARTS; EFFECT.ThisAgreement maybeexecutedinoneormoreunterparts, eachofwhichshallbedeemedtobeanoriginal, butallofwhichshallconstitute oneandthesamereement.
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| Srcrtox10.7PARTIESININTEREST; ASSIGNMENT.
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| This'Agreement shallbebindinguponainuresolelytothebenefitofeachpartyheretoandshallnot'beassignedbyoperation oflaworotherwise;
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| : provided, however,tliatupontheconsummation oftheKeySpanRestructuring, BrooklynUnionshallassigntoKeySpan,andKeySpanshallbesubstituted forandshallassume,allofBrooklynUnion'srightsandobligations hereunder effective upontheeffective timeoftheKeySpanRestructuring, andthepartiesheretoshallexecuteanyamendment tothisAgreement necessary toprovidethebenefitsofthisAgreement toKeySpan.ExceptforrightsofIndemnified Parties-as setforthinSECTION7.5,nothing'n thisAgreement, expressorimplied,isintendedtoconferuponanyotherpersonanyrightsorremediesofanynaturewhatsoever underoxbyreasonofthisAgreement.
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| Notwithstanding theforegoing andanyotherprovision ofthisAgreement, andinadditiontoanyotherrequiredactionoftheBoardofDirectors oftheCompany(a)amajorityofthedirectors ofLILCO(ortheirsuccessors) servingontheBoardofDirectors oftheCompanywhoaredesignated byLILCOpursuanttoSECTION7.13shallbeentitledduringthethreeyearperiodcommencing attheEffective Time(the"THREEYEARPERIOD")toenforcetheprovisions ofSECTION7.9,SECTION,7.10, SECTION7.11andSECTION7.14onbehalfoftheLILCOofficers, directors andemployees, asthecasemaybe,and(b)amajorityofdirectors ofBrooklynUnion(ortheirsuccessors) servingontheBoardofDirectors oftheCompanywhoaredesignated byBrooklynUnionpursuanttoSECTION7.13shallbeentitledduringtheThreeYearPeriodtoenforcetheprovisions ofSECTIONS7.9,SECTION7.10,SECTION7.11,andSECTION7.14onbehalfoftheBrooklynUnionofficers, directors andemployees, asthecasemaybe.Suchdirectors'ights and'remedies underthepreceding sentencearecumulative andareinadditiontoanyotherrightsandremediestheymayhaveatlaworinequity,butinnoeventshallthisSECTION10.7bedeemedtoimposeanyadditional dutiesonanysuchdirectors.
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| TheCompanyshallpay,atthetimetheyareincurred, allcosts,feesandexpensesofsuchdirectors incurredinconnection withtheassertion ofanyrightsonbehalfofthepersonssetforthabovepursuanttothisSECTION10.7.Sacriont10.8WAIVEROFJURYTRIALANDCERTAINDAMAGES.EachpartytothisAgreement waives,tothefullestextentpermitted byapplicable law,(i)anyrightitmayhavetoatrialbyjuryinrespectofanyaction,suitorproceeding arisingoutoforrelatingtothisAgreement and(ii)withoutlimitation toSECTIO9.3,anyrightitmayhavetoreceivedamagesfromanyotherpartybasedonanytheoryofliability foraispecial,indirect, consequential (including lostprofits)orpunitivedamages.St.cnow10.9ENFORCEMENT.
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| Thepartiesagreethatirreparable damagewouldoccurintheeventthatanyoftheprovisions ofthisAgreement werenotperformed inaccordance withtheirspecifictermsorwereotherwise breached.
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| Itisaccordingly agreedthatthepartiesshallbeentitledtoaninjunction orinjunctions topreventbreachesofthisAgreement andtoenforcespecifically thetermsandprovisions ofthisAgreement inanycourtoftheUnitedStateslocatedintheStateofNewYorkorinNewYorkstatecourt,thisbeinginadditiontoanyotherremedytowhichtheyareentitledatlaworinequity.A-42 INWITNESSWHEREOF,BrooklynUnionandLILCOhavecausedthisAgreement tobesignedbytheirrespective officersthereunto dulyauthorized asofthedatefirstwrittenabove.THEBROOKLYNUNIONGASCOMPANYBy/S/ROBERTB.CATELLRobertB.CatellChiefExecutive OfficerLONGISLANDLIGHTINGCOMPANYBy:/s/WILLIAMJ.CATAcosINos Dr.WilliamJ.Catacosinos ChiefExecutive OfficerA-43
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| AMENDEDANDRESTATEDLILCOSTOCKOPTIONAGREEMENT ANNEXBAMENDEDANDRESTATEDSTOCKOPTIONAGREEMENT, datedasofJune26,1997,byandbetweenTHEBROOKLYNUNIONGASCOMPANY,aNewYorkcorporation
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| ("BrooklynUnion"),andLONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation (the"COMPANY"
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| ).WHEREAS;concurrently withtheexecution anddeliveryofthisAgreement, (i)BrooklynUnionandtheCompanyareenteringintoanAmendedandRestatedAgre'ement andPlan'ofExchangeandMerger,datedasofthedatehereof(asthesamemaybeamendedfromtimetotime,the"EXCHANGE AGREEMENT"),
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| whichprovides, amongotherthings,uponthetermsandsubjecttotheconditions thereof,fortheexchangeofoutstanding sharesofcapitalstockofeachofBrooklynUnionandtheCompanyfornewlyissuedsharesofcapital'stockofaNewYorkcorporation tobeformed(the"BINDINGSHAREEXCHANGES"
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| ),and(ii)theCompanyandBrooklynUnionareenteringintoacertainamendedandrestatedstockoptionagreement datedasofthedatehereofwherebyBrooklynUniongrantsto'heCompanyanoptionwithrespecttocertainsharesofBrooklynUnion'scommonstockonthetermsandsubjecttotheconditions setforththerein(the"BROOKLYN UNIONSTOCKOPTIONAGREEMENT");
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| WHEREAS,asacondition toBrooklynUnion'swillingness toenterintotheoriginalAgreement andPlanofExchangebyandamongBrooklynUnion,LILCOandNYECOCorp.,datedasofDecember29,1996,BrooklynUnionhasrequested thattheCompanyagree,andtheCompanyhassoagreed,togranttoBrooklynUnionanoptionwithrespecttocertainsharesoftheCompany's commonstock,onthetermsandsubjecttotheconditions setforthherein;,WHEREAS, thepartiesdesiretoamendandrestatetheoriginalLILCOStockOptionAgreement asoftheatehereoftorefiecttheExchangeAgreement.
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| NOW,THEREFORE, toinduceBrooklynUniontoenterintotheExchangeAgreement, andinconsideration ofthemutualcovenants andagreements setforthhereinandintheExchangeAgreement, thepartiesheretoagreeasfollows:1.GRANTOFOPTION.TheCompanyhereby'rants BrooklynUnionanirrevocable option(the-"COMPANY OPTION")topurchaseupto23,981,964 shares,subjecttoadjustment asprovidedinSection10(suchsharesbeingreferredtohereinasthe"COMPANYSHARES")ofcommonstock,parvalue$5.00'ershare,oftheCompany(the"COMPANYCOMMONSTOCK")(being19.9%ofthenumberofsharesofCompanyCommonStockoutstanding onthedatehereof)inthemannersetforthbelowataprice(the"EXERCISE PRICE")perCompanyShareof$19.725(whichisequaltotheFairMarketValue(asdefinedbelow)ofaCompanyShareonthedatehereof)payable,atBrooklynUnion'soption,(a)incashor(b)subjecttotheCompany's havingobtainedtheapprovals ofanyGovernmental Authority requiredfortheCompanytoacquiretheBrooklynUnionShares(asdefinedbelow)fromBrooklynUnion,whichapprovals theCompanyshallusebesteffortstoobtain,insharesofcommonstock,parvalue$.33$pershare,ofBrooklynUnion("BROOKI.YN UNIONSHARES")ineithercaseinaccordance withSection4hereof.Notwithstanding theforegoing, inno,eveqtshallthenumberofCompanySharesforwhichtheCompanyOptionisexercisable exceed19,9%ofthenumberofissuedandoutstanding sharesofCompanyCommonStock.Asusedherein,the"FAIRMARKETVALUE"ofanyshareshallbetheaverageofthedailyclosingsalespriceforsuchshareontheNewYorkStockExchange(the"NYSE")duringthe10NYSEtradingdayspriortothefifthNYSEtradingdaypreceding thedatesuchFairMarketValueistobedetermined.
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| Capitalized termsusedhereinbutnot,defined hereinshallhavethemeaningssetforthintheExchangeAgreement.
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| t2.EXERCISEOFOPTION.TheCompanyOptionmaybeexercised byBrooklynUnion,inwholeorinpart,atanytimeorfromtimetotimeaftertheExchangeAgreement becomesterminable byBrooklynUnionundercircumstances whichcouldentitleBrooklynUnionto.termination feesundereitherSectionB-1 9.3(a)oftheExchangeAgreement (provided thattheeventsspecified iriSection9.3(a)(ii)(x) oftheExchangeAgreement shallhaveoccurred, althoughtheeventsspecified inSection9.3(a)(ii)(y) thereofneednothaveoccurred) orSection9.3(b)oftheExchangeAgreement (regardless ofwhethertheExchangeAgreement isactuallyterminated orwhetherthereoccursa'closingofanyBusinessCombination involving aTargetPartyoraclosingbywhichaTargetPartybecomesasubsidiary),
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| anysucheventbywhichtheExchangeAgreement becomessoterminable byBrooklynUnionbeingreferredtohereinasa"TRIGGEREVENT."TheCompanyshallnotifyBrookIynUnionpromptlyinwritingoftheoccurrence ofanyTriggerEvent,itbeingunderstood thatthegivingofsuchnoticebytheCompanyshallnotbeacondition totherightofBrooklynUniontoexercisetheCompanyOption.In,theeventBrooklynUnionwishestoexercisetheCompanyOption,BrooklynUnionshalldelivertotheCompanyawrittennotice(an"EXERCISE NOTICE")specifying thetotalnumberofCompanySharesitwishestopurchase.
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| EachclosingofapurchaseofCompanyShares(a"CLOSING"
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| )shalloccurataplace,onadateandatatimedesignated byBrooklynUnioninanExerciseNoticedelivered atleasttwobusinessdayspriortothedateoftheClosing.TheCompanyOptionshallterminate upontheearlierof:(i)theEffective Time;(ii)thetermination oftheExchangeAgreement pursuanttoSection9.1thereof(otherthanuponorduringthecontinuance ofaTriggerEvent);or(iii)180daysfollowing anytermination oftheExchangeAgreement uponorduringthecontinuance ofaTriggerEvent(orif,attheexpiration of,suchl80dayperiodtheCompanyOptioncannotbeexercised byreasonofanyapplicable
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| : judgment, decree,order,laworregulation, 10business, daysaftersuchimpediment toexerciseshallhavebeenremovedorshallhavebecomefinalandnotsubjecttoappeal,butinnoeventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing, theCompanyOptionmaynotbeexercised ifBrooklynUnionisinmaterialbreachofanyofitsmaterialrepresentations orwarranties, orinmaterialbreachofanyofitscovenants oragreements, contained inthisAgreement orintheExchangeAgreement.
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| Uponthegivingby.,BrooklynUniontotheCompanyoftheExerciseNoticeandthetenderoftheapplicable aggregate ExercisePrice,BrooklynUnionshallbedeemedtobetheholderofrecordoftheCompanySharesissuableuponsuchexercise, notwithstanding thatthestocktransferbooksoftheCompanyshallthenbeclosedorthatcertificates representing suchCompanySharesshallnotthenbeactuallydelivered toBrooklynUnion.3.CONDITIONS TOCLOSING.Theobligation oftheCompany,toissuetheCompanySharestoBrooklynUnionhereunder issubjecttotheconditions, which(otherthantheconditions described inclauses(i),(iii)and(iv)below)maybewaivedbytheCompanyinitssolediscretion, that(i)allwaitingperiods,ifany,undertheHSRAct,applicable totheissuanceoftheCompanyShareshereunder shallhaveexpiredorhavebeenterminated; (ii)theCompanyShares,andanyBrooklynUnionShareswhichareissuedinpaymentoftheExercisePrice,shallhavebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance; (iii)allconsents, approvals, ordersorauthorizations of,orregistrations, declarations orfilingswith,anyfederal,stateorlocaladministrative agencyorcommission orotherfederal,stateorlocalGovernmental Authority, ifany,requiredinconnection withtheissuanceoftheCompanyShareshereunder shallhavebeenobtainedormade,asthecasemaybe,including, withoutlimitation, ifapplicable, theapprovaloftheSECunderSection10ofthe1935Actoftheacquisition oftheCompanySharesbyBrooklynUnionand,ifapplicable, theacquisition bytheCompanyoftheBrooklynUnionSharesconstituting theExercisePricehereunder; and(iv)nopreliminary orpermanent injunction orotherorderbyanycourtofcompetent jurisdiction prohibiting orotherwise restraining suchissuanceshallbeineffect.4.CLOSING.AtanyClosing,(a)theCompanywilldelivertoBrooklynUnionoritsdesigneea'inglecertificate indefinitive formrep'resenting thenumberoftheCompanySharesdesignated byBrooklynUnioninitsExerciseNotice,suchcertificate toberegistered inthenameofBrooklynUnionandtobearthelegendsetforthinSection11,.and(b)BrooklynUnionwilldelivertotheCompany theaggregate pricefortheCompanySharessodesignated andbeingpurchased by(i)wiretransferofimmediately available fundsorcertified checkorbankcheckor(ii)subjecttothecondition inSection1(b),acertificate orcertificates representing thenumberofBrooklynUnionSharesbeingissuedbyBrooklynUnioninconsideration thereof,asthe,casemaybe.ForthepurposesofthisAgreement, thenumberofBrooklynUnionSharestobedelivered totheCompanyshallbeequaltothequotientobtainedbydividing(i)th~productof(x)thenumberofCompanyShareswithrespecttowhichtheCompanyOptionisbeingexercise~
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| B-2 and(y)theExercisePriceby(ii)theFairMarketValueoftheBrooklynUnionSharesonthedateimmediately preceding thedatetheExerciseNoticeisdelivered totheCompany.TheCompanyshallpayallexpenses, andanyandallUnitedStatesfederal,stateandlocaltaxesandotherchargesthatmaybepayableinconnection withthepreparation, issueanddeliveryofstockcertificates underthisSection4inthenameofBrooklynUnionoritsdesignee.
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| 5.REPRESENTATIONS ANDWARRANTIES OFTHECOMPANY.TheCompanyrepresents andwarrantstoBrooklynUnionthat(a)exceptassetforthinSection5.1oftheLILCODisclosure
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| : Schedule, theCompanyisacorporation dulyorganized, validlyexistingandin"active statusu'nderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement and,subjecttoobtaining theapplicable approvalofshareholders oftheCompanyfortherepurchase ofCompanySharespursuanttoSection7(a)belowundercircumstances whereSection513(e)oftheNYBCLwouldbeapplicable (the"BUYBACKAPPROVALS"
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| )andsubjecttoanyregulatory approvals referredtohereinandtotheprovisions ofSection513(a)oftheNYBCL,ifapplicable, tocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement bytheCompanyandtheconsummation bytheCompanyofthetransactions contemplated herebyhavebeendulyauthorized byallnecessary corporate actiononthepartoftheCompanyandnoothercorporate proceedings onthepartoftheCoinpanyarenecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby(otherthananyrequiredBuybackApprovals),
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| (c)suchcorporate action(including theapprovaloftheBoardofDirectors oftheCompany)isintendedtorenderinapplicable tothisAgreement andtheExchangeAgreement andthetransactions contemplated herebyandthereby,theprovisions oftheNYBCLreferredtoinSection5.15oftheExchangeAgreement, (d)thisAgreement hasbeendulyexecutedanddelivered bythe,Company,constitutes avalidandbindingobligation oftheCompanyand,assumingthisAgreement constitutes avalid,and bindingobligation ofBrooklynUnion,isenforceable againsttheCompanyinaccprdance withitsterms,(e)theCompanyhastakenallnecessary corporate actiontoauthorize andreserveforissuanceandtopermitittoissue,uponexerciseoftheCompanyOption,andatalltimesfromthedatehereofthroughtheexpiration oftheCompanyOptionwillhavereserved, 23,981,964 authorized andunissuedCompanyShares,suchamountbeingsubjecttoadjustment asprovidedinSection10,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, (f)upondeliveryoftheCompanySharestoBrooklynUnionupontheexerciseoftheCompanyOption,BrooklynUnionwillacquiretheCompanySharesfreeandclearofallclaims,liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (g)exceptasdescribed inSection5.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheconsummation bytheCompanyofthetransactions contemplated herebywillnot,violate,conflict)vith,orresultinabreachofanyprovision of,orconstitute adefault(withorwithoutnoticeorlapseoftime,orboth)under,orresultin'hetermination of,oraccelerate theperformance requiredby,.orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orthecreationofalien,pledge,securityinterestorotherencumbrance onassets(anysuchconfiict, violation, default,rightoftermination, cancellation oracceleration, lossorcreation, a"VIOL'ATION")"
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| oftheCompanyoranyofitssubsidiaries, purs'uant to,(A)anyprovision ofthecertificate ofincorporation orby-laws'of theCompany,(B)anyprovisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,Companybenefitplanorotheragreemenf, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable totheCompanyoritsproperties orassets,whichViolation, inthecaseofeachofclauses(B)and(C),couldreasonably beexpectedtoliaveamaterialadverseeffectontheCompanyanditssubsidiaries takenasawhole',(h)exceptasdescribed inSection5.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheperformance ofthisAgreement bytheCompanywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority, (i)noneoftheCompany,anyofitsaffiliates oranyoneactingonitsortheirbehalfhasissued,soldorofferedanysecurityoftheCompanytoanypersonundercircumstances thatwouldcausetheissuanceandsaleoftheCompanyShares,ascontemplated bythisAgreement, tobesubjecttothetregistration requirements oftheSecurities Actasineffectonthedatehereofand,assumingtherepresentations ofBrooklynUnion'contained inSection6(h)aretrueandcorrect,theissuance, saleandB-3 tdeliveryoftheCompanyShareshereunder wouldbeexemptfromtheregistration andprospectus deliverequirements oftheSecurities Act,asineffectonthedatehereof(andtheCompanyshallnottakeanyactionwhichwouldcausetheissuance, saleanddeliveryoftheCompanyShareshereunder nottobeexemptfromsuchrequirements),
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| and(j)anyBrooklynUnionSharesacquiredpursuanttothisAgreement willbeacquiredfortheCompany's ownaccount,forinvestment purposesonlyandwillnotbeacquiredbytheCompanywithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.6.REPRESENTATIONS ANDWARRANTIES OFBrooklynUnion.BrooklynUnionrepresents andwarrantstotheCompanythat(a)BrooklynUnionisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsoftheStateofNewYorkand,hasthecorporate powerandauthority to~enterintothisAgreement andtocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement byBrooklynUnionandtheconsummation byBrooklynUnionofthetransactions contemplated herebyhavebet:ndulyauthorized byallnecessary corporate actiononthepartofBrooklynUnionandnoothercorporate proceedings onthepartofBrooklynUnionarenecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby,(c)thisAgreement hasbeendulyexecutedanddelivered byBrooklynUnionandconstitutes avalidandbindingobligation ofBrooklynUnion,and,assumingthisAgreement constitutes avalidand'binding obligation oftheCompany,isenforceable againstBrooklynUnioninaccordance withitsterms,(d)priortoanydeliveryofBrooklynUnionSharesinconsideration ofthepurchaseofCompaliySharedpursuanthereto,BrooklynUnionwillhavetakenallnecessary corporate actiontoauthorize for'ssuance'and topermitittoissuesuchBrooklynUnionShares,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable,"and torenderinapplicable tothereceiptbytheCompanyoftheBrooklynUnionSharestheprovisions oftheNYBCLreferredtoinSection4.15oftheExchangeAgreement, (e)uponanydeliveryofsuchBrooklynUnionSharestotheCompanyinconsideration ofthepurchaseofCompanySharespursuanthereto,theCompanywillacquiretheBrooklynUnionSharesfreeandclearofallclaims,liens,charges,encutnbrari'ces andsecurityinterests ofanynaturewhatsoever, (f)exceptasdescribed inSection4.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement byBrooklUniondoesnot,andtheconsummation byBrooklynUnionofthetransactions contemplated herebywnot,violate,conflictwith,orresultinthebrcachofanyprovision of,orconstitute adefault(withorwithout"noticeorlapseof'ime,orboth)under,orresultinanyViolation byBrooklynUnionoranyofitssubsidiaries, pursuantto(A)anyprovision ofthecertificate ofincorporation orb'-lawsofBrooklynUnion,(B)anyprovisions ofanyloan6rcredit"agreement, note,m'ortgage, indenture,'ease, BrooklynUnionbenefitplanorotheragtee'ment, obligation, in'strument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable toBrooklynUnionoritsproperties orassets,whichViolation, inthecaseofeachofitsclhuses(B)and/or(C),wouldhaveamaterialadverseeffectonBrooklynUnionanditssubsidiaries takenasawhole,(g)exceptasdescribed inSection4.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,theexecution anddeliveryofthisAgreement byBrooklynUniondoesnot,'andtheconsummation byBrooklynUnionofthetransactions contemplated herebywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority and(h)anyCompanySharesacquireduponexerciseoftheCompanyOptionwillbeacquiredforBrooklynUnion'sownaccount,forinvestment purposesonlyandwillnotbe,andtheCompanyOptionisnotbeing,acquired, byBrooklynUnionwithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.7.CERTAINREPURCHASES.
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| (a)BROOKLYNUNIONPUT.AttherequestofBrooklynUnionby"writtennoticeatanytimeduringwhichtheCompany'Optionisexercisable pursuantto'Section2(the"REPURCHASE PERIOD"),theCompany(oranysuccessor entityihereof)shallrepu'rchase fromBrooklynUnionalloranyportionofthe'Company Option,atthepricesetforthinsubparagraph (i)below,or,attherequestofBrooklynUniori'ywrittennoticeatanytimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheithpartymayterminate theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreemBA hasbeenextendedtoApril28,1999),theCompany(or'anysuccessor entitythereof)shallrepurchase fromBrooklynUnionalloranyportionoftheCompanySharespurchased byBrooklynUnionpursuanttotheCompanyOption,atthepricesetforthinsubparagraph (ii)below'.(i)the,difference betweenthe'MARKET/OFFER PRICE"forsharesofCompanyCommonStockasofthedateBrooklynUniongivesnoticeofitsintenttoexerciseitsrightsunderthisSection7(definedasthehigherof(A)thepricepcrshareofferedasofsuchdatepursuanttoanytenderor'xchange offerorotherofferwithrespecttoaBusiness's Combination whichwasmadepriortosuchdateandnotterminated orwithdrawn ayofsuchdate(the"OFFERPRICE")and(B)theFairMarketValueofCompanyCommonStockasofsuchdate(the"MARKETPRICE"))andtheExercisePrice,multiplied bythenumberofCompanySharespurchasable pursuanttotheCompanyOption(orportionthereof"withrespecttowhichBrooklynUnionisexercising itsrightsunderthisSection7),butonlyiftheMarket/Offer Priceisgreaterthanthe'xercisePrice;(ii)theproductof(x)thesumof(A)theExercisePricepaidbyBrooklynUnionperCompanyShareacquiredpursuanttotheCompanyOptionand(B)thedifference betweentheMarket/Offer PriceandtheExercisePrice,butonlyiftheMarkef/Offer PriceisgreaterthantheExercisePrice,and(y)thenumberofCompanySharestoberepurchased pursuanttothisSection7.Forpurposesofthisclause(ii),theOfferPriceshallbethehighestpricepershareofferedpursuanttoatenderorexchangeofferorotherBusinessCombination offerduringtheRepurchase PeriodpriortothedeliverybyBrooklynUnionofanoticeofrepurchase.
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| (b)REDELIVERY OFBROOKLYNUNIONSHARES.IfBrooklynUnionelectedtopurchaseCompanySharespursuanttotheexerciseoftheCompanyOptionbytheissuanceanddeliveryofBrooklynUnionShares,then.theCompanyshall,ifsorequested byBrooklynUnion,infulfillment ofitsobligation pursuanttoclause(a)ofSection7(a)(ii)(x)
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| (thatis,withrespecttotheExercisePriceonlyandwithoutlimitation toitsobligation topayadditional consideration underclause(b)ofSection7(a)(ii)(x)),
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| redeliver thecertificate forsuchBrooklynUnionSharestoBrooklynUnion,freeandclearofallliens,claims,damages,chargesandencumbrances ofanykindornaturewhatsoever;
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| : provided, however,thatiflessthanalloftheCompanySharespurchased byBrooklynUnionpursuanttotheCompanyOptionaretoberepurchased pursuanttothisSection7,thenBrooklynUnionshallissuetotheCompanyanewcertificate representing thoseBrooklynUnionShareswhicharenotduetoberedelivered toBrooklynUnionpursuanttothisSection7astheyconstituted paymentoftheExercisePricefortheCompanySharesnotbeingrepurchased.
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| (c)PAYMENTANDREDELIVERY OFCOMPANYOPTIONORSHARES.IntheeventBrooklynUnionexercises itsrightsunderthisSection7,theCompanyshall,within10businessdaysthereafter, paytherequiredamoun'ttoBrooklynUnioninimmediately available fundsandBrooklynUnionshallsurrender totheCompanytheCompanyOptionorthecertificates evidencing theCompanySharespurchased byBrooklynUnionpursuantthereto,andBrooklynUnionshallwarrantthatitownstheCompanyOptionorsuchsharesandthaftheCompanyOption'or suchsharesarethenfreeandclearofallliens,claims,damages,chargesandencumbrances ofanykindornaturewhatsoever.
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| (d)BROOKLYNUNIONCALL.IfBrooklynUnionhaselectedtopurchaseCompanySharespursuanttotheexerciseoftheCompanyOptionbytheissuanceanddeliveryofBrooklynUnionShares,notwithstanding thatBrooklynUnionmaynolongerholdanysuchCompanySharesorthatBrooklynUnionelectsnottoexerciseitsotherrightsunderthisSection7,BrooklynUnion.mayrequire,atanytimeorfromtimetotimepriortoAugust31,1998(provided thatsuchdates)tallbeextendedto,April28,1999,underthecircumstances wherethedateafterwhicheitherpartymay,terminate theExchangeAgreement pursuanttoSection9,1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),theCompanytoselltoBrooklynUnionanysuchBrooklynUnionSharesattheFairMarketValuethathadbeenattributed tosuchBrooklynUnionSharespursuanttoSection4plusinterestattherateof6.5/aperannumonsuchamountfromtheClosingDaterelatingtotheB-5 1exchangeofsuchBrooklynUnionSharespursuanttoSection4totheclosingdateunderthisSectio7(d)lessanydividends'on suchBrooklynUnionSharespaidduringsuchperiodordeclaredandpayabletostockholders ofrecordonadateduringsuchperiod.(e)REPURCHASE PRICEREDUCEDATBROOKLYNUNION'SOPTION.Intheeventtherepurchase pricespecified inSection7(a)wouldsubjectthepurchaseoftheCompanyOptionortheCompanySharespurchased byBrooklyn.
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| UnionpursuanttotheCompanyOptiontoavoteoftheshareholders oftheCompanypursuanttoSection513(e)oftheNYBCL,thenBrooklynUnionmay,atitselection, reducetherepuichase pricetoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsuchashareholder vote.8.RESTRICTIONS ONTRANSFER.
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| (a)RESTRICTIONS ONTRANSFER.
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| PriortotheExpiration Date,neitherpartyshall,directlyorindirectly, byoperation oflaworotherwise, sell,assign,pledge,orotherwise disposeofortransferanysharesofcapitalstockoftheotherpartyacquiredbysuchpartypursuanttothisAgreement
| |
| ("Restricted Shares")andbeneficially ownedbysuchparty,otherthan(i)pursuanttoSection7,or(ii)inaccordance withSection8(b)'orSection9.(b)PERMIITEDSALES.Following thetermination oftheExchangeAgreement, apartyshallbepermitted t'osellanyRestricted Sharesbeneficially ownedby"itif'suchsaleismade,pursuanttoatenderorexchangeofferthathasbeenapprovedorrecommended, orotherwise determined tobefairtoandinthebestinterests oftheshareholders oftheotherparty,by'amajorityofthemembersoftheBoardofDirectors ofsuchotherpartywhichmajorityshallincludeamajorityofdirectors whoweredirect'ors priortotheannouncement ofsuchtenderorexchangeoffer.9.REGISTRATION RIGHTS.Following thetermination oftheExchangeAgreement, eachpartyhereto(a"DESIGNATED HOLDER")maybywrittennotice(the"REGISTRATION NOTICE")totheotherparty(the"REGISTRANT"
| |
| )requesttheRegistrant toregisterundertheSecurities Act'lloranypartoftheRestricted Sharesbeneficially ownedbysuchDesignated Holder(the"REGISTRABLE SECURITIES"
| |
| )pursuanttoabonafidefirmcommitment underwritten publicofferinginwhichtDesignated Holderandtheunderwriters shalleffectaswideadistribution ofsuchRegistrable Securities isreasonably practicablc andshallusetheirbesteffortstopreventanyperson(including anyGroup(asusedinRule13d-5tindertheExchangeAct))anditsaffiliates formpurchasing throughsuchofferingRestricted Sharesrepresenting morethan1%oftheoutstanding sharesofcommonstockoftheRegistrant onafullydilutedbasis(a"PERMIT'ED OFFERING"
| |
| ).TheRegistration Noticeshallincludeacertificate executedbytheDesignated Holderanditsproposedmanagingunderwriter, whichunderwriter shallbeaninvestment bankingfirmofnationally recognized standing(the"MANAGER"),
| |
| statingthat(i)theyhaveagoodfaithintention tocommencepromptlyaPermitted Offeringand(ii)theManageringoodfaithbelievesthat,basedonthethenprevailing marketconditions, itwillbeabletoselltheRegistrable Securities atapersharepriceequaltoatleast80%ofthethenFairMarketValueofsuchshares.TheRegistrant (and/oranypersondesignated bytheRegistrant) shallthereupon havetheoptionexercisable bywrittennoticedelivered totheDesignated Holderwithin10businessdaysafterthereceiptoftheRegistration Notice,irrevocably toagreetopu'rchase alloranypartoftheRegistrable Securities proposedtobesosoldforcashataprice(the"OPTIONPRICE")equaltotheproductof(i)thenumberofRegistrable Securities tobeso.purchased bytheRegistrant and(ii)thethenFairMarketValueofsuchshares.AnysuchpurchaseofRegistrable Securities bytheRegistrant (oritsdesignee) hereunder shalltakeplaceataclosingtobeheldattheprincipal executive officesoftheRegistrant orattheofficesofitscounselatanyreasonable dateandtimedesignated bytheRegistrant and/orsuch,designeeinsuchnoticewithin20businessdaysafterdeliveryofsuchnotice.Anypaymentforthesharestobepurchased shallbemadebydeliveryatthetimeofsuchclosingof,theOptionPriceinimmediately available funds.If.theRegistrant doesnotelecttoexerciseitsoptionpursuanttothisSection9withrespecttoallRegistrable Securities, itshalluseitsbesteffortstoeffect,aspromptlyaspracticable, theregistration undertheSecurities Actoftheunpurchased Registrable Securities proposedtobesosold;provided, however,that(i)neitherpartyshallbeentitledtomorethananaggregate oftwoeffective registration statements hereunand(ii)theRegistrant willnotberequiredtofileanysuchregistration statement duringanyperiodoftiB-6 (nottoexceed40daysaftersuchrequestinthecaseofclause(A)belowor90daysinthecaseofclauses(B)and(C)below)when(A)theRegistrant isinpossession ofmaterialnon-public information whichitreasonably believeswouldbedetrimental tobedisclosed atsuchtimeand,intheopinionofcounseltotheRegistrant, such,information wouldhavetobedisclosed ifaregistration statement werefiledatthattime;(B)theRegistrant isrequiredundertheSecurities Acttoincludeauditedfinancial statements foranyperiodinsuchregistration statement apdsuchfinancial statements arenotyetavailable forinclusion insuchregistration statement; or(C),theRegistrant determines, initsreasonable
| |
| : judgment, thatsuchregistration wouldinterfere withanyfinancing, acquisition orothermaterialtransaction involving theRegistrant orany.ofitsaffiliates.
| |
| TheRegistrant shalluseitsreasonable besteffortstocauseanyRegistrable Securities registered pursuanttothisSection9tobequalified, forsaleunderthesecurities orBlue-Skylawsofsuchjurisdictions astheDesignated Holdermayreasonably requestandshallcontinuesuchregistration orqualification ineffectinsuchjurisdiction;
| |
| : provided, however,thattheRegistrant shallnotberequiredtoqualifytodobusinessin,orconsenttogeneralserviceofprocessin,anyjurisdiction byreasonofthisprovision.
| |
| Theregistration rightssetforthinthisSection9aresubjecttothecondition thattheDesignated Holder,shallprovidetheRegistrant withsuchinformation withrespecttosuchholder'sRegistrable Securities, theplansforthedistribution thereof,andsuchotherinformation withrespecttosuchholderas,inthereasonable judgmentofcounselfortheRegistrant, isnecessary toenabletheRegistrant toincludeinsuchregistration statement allmaterialfactsrequiredtobedisclosed withrespecttoaregistration thereunder.
| |
| Aregistration effectedunderthisSection9shallbeeffectedattheRegistrant's expense,exceptforunderwriting discounts andcommissions andthefeesandtheexpensesofcounseltotheDesignated Holder,andtheRegistrant shallprovidetotheunderwriters suchdocumentation (including certificates, opinionsofcounseland"comfort" lettersfromauditorsasarecustomary inconnection withunderwritten publicofferings assuchunderwriters mayreasonably require.Inconnection withanysuchregistration, thepartiesagree(i)toindemnify eachotherandtheunderwriters inthecustomary manner,(ii)toenterintoanunderwriting agreement in'formandsubstance customary fortransactions ofsuchtypewiththeManagerandtheotherunderwriters participating insuchofferingand(iii)totakeallfurtheractionswhichshallbereasonably necessary toeffectsuchregistration andsale(including, iftheManagerdeeinsitnecessary, participating inroad-show presentations).
| |
| TheRegistrant shallbeentitledtoinclude(atitsexpense)additional sharesofitscommonstockinaregistration effectedpursuanttothisSection9onlyifandtotheextenttheManagerdetermines thatsuchinclusion willnotadversely affecttheprospects ofsuccessofsuchoffering.
| |
| ,.10.ADJUSTMENT UPONCHANGESINCAPITALIZATION.
| |
| Withoutlimitation toanyrestriction ontheCompanycontained inthisAgreement orintheExchangeAgreement, intheeventofanychangeinCompanyCommonStockbyreasonofstockdividends,
| |
| : splitups, mergers(other,thantheBindingShareExchanges),
| |
| recapitalizations, combinations, exchangeofsharesorthelike,thetypeandnumberofsharesorsecurities subjecttotheCompanyOption,andthepurchasepricepershareprovidedinSection1,shallbeadjustedappropriately torestoretoBrooklynUnionitsrightshereunder, including therighttopurchasefromtheCompany(oritssuccessors) sharesofCompanyCommonStockrepresenting 19.9/ooftheOutstanding CompanyCommonStockfortheaggregate ExercisePricecalculated asofthedateofthisAgreement asprovidedinSectionl.11.RESTRICTIVE LEGENDS.Eachcertificate representing sliaresofCompanyCommonStockissuedtoBrooklynUnionhereunder, andBrooklynUnionShares,ifany,delivered totheCompanyataClosing,shallincludealegendinsubstantially thefollowing form:4THESECURITIES REPRESENTED BYTHISCERTIFICATE HAVENOTBEENREGISTERED UNDERTHESECURITIES ACTOF1933,ASAMENDED,ANDMAYBEREOFFERED ORSOLDONLYIFSOREGISTERED ORIFANEXEMPTION FROMSUCHREGISTRATION ISAVAILABLE.
| |
| SUCHSECURITIES AREALSOSUBJECTTOADDITIONAL
| |
| *RESTRICTIONS ONTRANSFERASSETFORTHINTHEAMENDEDANDRESTATEDSTOCKB-7 OPTIONAGREEMENT, DATEDASOFJUNE.26,1997,ACOPYGFWHICHMAYBOBTAINEDFROMTHEISSUERUPONREQUEST.Itisunderstood andagreedthat:(i)thereference totheresalerestrictions ofthe'Securities Actintheabovelegendsliallberemovedbydeliveryofsubstitute certificates(s) withoutsuchreference ifBrooklynUnionortheCompany,asthecasemaybe,shallhavedelivered totheotherpartyacopyofaletterfromthestaffoftheSecurities andExchangeCommission, oranopinionofcounsel,informandsubstance satisfactory to'theotherparty,totheeffectthat'uchlegendisnotrequiredforpurposesoftheSecurities Act;(ii)thereference totheprovisions'o thisAgreement intheabovelegendshallberemovedbydeliveryofsubstitute certificate(s) withoutsuchreference iftheshareshavebeensoldortransferred incompliance withtheprovisions ofthisAgreement andundercircumstances thatdonotrequiretheretention ofsuchreference; and(iii)'thelegendshallberemovedinitsentiretyiftheconditions inthepieceding clauses(i)and(ii)arebothsatisfied.
| |
| Inaddition, suchcertificates shallbearanyotherlegendasmayberequiredbylaw.Certificates representing sharessoldina'egistered publicofferingpursuanttoSection9shallnotberequiredtobearthelegendsetforthinSection11.12.BINDINGEFFECT;NOASSIGNMENT; NOTHIRD"PART'YBENEFICIARIES.
| |
| ThisAgreement shallbebindinguponandinuretothebenefitofthepartiesheretoandth'eirrespective successors andpermitted assigns.Exceptasexpressly providedforinthisAgreement, neitherthisAgreemcnt northerightsortheobligations ofeitherpartyheretoare'assignable, exceptbyoperation oflaw,orwiththewrittenconsent'f theotherparty.Nothingcontained inthisAgreement, expressorimplied,isintendedtoconferuponanypersonotherthanthepartiesheretoandtheirrespective, permitted assignsanyrightsorremediesofanynaturewhatsoever byreasonofthisAgreement.
| |
| AnyRestricted Sharessoldbyapartyincompliance withtheprovisions ofSection9shall,uponconsummation ofsuchsale,befreeoftherestrictions imposedwithrespecttosuchsharesbythisAgreement, unlessanduntilsuchpartyshallrepurchase orotherwise becomethebeneficial ownerofsuchshares,andanytransfercc ofsuchsharesshallnotbeentitledtothcregistration rightsofsuchparty.13.SPECIFICPERFORMANCE.
| |
| Thepartiesrecognize andagreethatifforanyreasonanyofthprovisions ofthisAgrccment arenotperformed inaccordance withtheirspecific.
| |
| termsorareotherwisbreached, immediate alidirreparable harmorinjurywouldbecausedforwhichmoneydamageswouldnotbeanadcquatcremedy.Accordingly, eachpartyagreesthat,inadditiontootherremedies, thcotherpartyshallbeentitledtoaninjunction restraining anyviolation orthreatened violation oftheprovisions ofthisAgreement.
| |
| Intheeventthatanyactionshouldbebroughtinequitytoenforcethepr'oyisions ofthcAgreement, ncithcrpartywillallege,andeachpartyherebywaivesthedefense,thatthereisadequateremedyatlaw.14.ENTIREAGREEMENT.
| |
| This"Agreement, theBrooklynUnionStockOptionAgreement, theConfidentiality Agreemcnt andtheExchangeAgreement (including theexhibitsandschedules thereto)constitute theentireagreement amongthepartieswithrespecttothesubjectRatterhereofandthereofandsupersede allotherprior'agreements andunders'tandings, bothwrittenandoral,amongthe'parties oranyofthemwithrespe'cttothcsubjectmatterhereofandthereof.\15.FURTHERASSURANCES.
| |
| Eachpartywillexecuteanddeliverallsuchfurtherdocuments andinstruments andtakeallsuchfurtheractionasmaybcnecessary inordertoconsummate thetransactions contemplated hereby.16.VALIDITY.
| |
| Theinvalidity orunenforceability ofanyprovisions ofthisagreement shallnotaffectthevalidityorenforceability oftheotherprovisions ofthisAgreement, whichshallremaininfullforceandeffect.Intheeventanycourtorothercompetent authority holdsanyprovisions ofthisAgreement tobenull,voidorunenforceable, thepartiesheretoshallnegotiate ingoodfaiththeexec'ution anddeliveryofanamendment tothisAgreement inorder,asnearlyaspossible, toeffectuate, totheextentpermitted bylaw,theintentofthepartiesheretowithrespecttosuchprovision andtheeconomiceffectsthereof.Ifforanyreasonanysuchcourtorregulatory agency'etermines thatBrooklynUnionisnotpe'rmitted toacquire,orthcCompanyisnotpermitted torepurchase pursuantto.Section7,thefullnumberofsharesofCompanCommonStockprovidedinSection1hereof(as'thesamemaybeadjusted),
| |
| itistheexpressintention
| |
| ~B-8 theCompanytoallowBrooklynUnionto'.acquire'or torequiretheCompanytorepurchase suchlesser'numberofsharesasmaybepeimissible, withoutanyamendment ormodification hereof;Eachpartyagreesthat,shouldanycourtorothercompetent authority holdanyprovision ofthiyAgreement orparthereoftobenull,voidorunenforceable, ororderanypartytotakeany,actioninconsistent
| |
| : herewith, ornottakeanyactionrequiredhereiri,theotherpartyshallnotbeentitledtospecificperformance ofsuchprovision orparthereofortoanyotherremedy,including butnotlimitedtomoneydamages,forbreachhereoforofany'therprovision ofthisAgreement orparthereofasth'eresultofsuchholdingororder.~lt17.NOTICES.Allnoticesandothercommunication hereunder shallbeinwritingandshallbedeemedgivenif(i)delivered personally, or(ii)sentbyreputable overnight courierservice,or(iii)telecopied (whichisconfirmed),
| |
| or(iv)fiveday'safterbeingmailedbyregistered orcertified niail(returnreceipt'request'ed) to'thepartiesatthefollowing
| |
| 'addresses (oratsuchotheraddressforapartyasshallbespecified bylikenotice):HfgA.IftoBrooklynUnion,to:TheBrooklynUnionGasCompanyOneMetroTech Center"Brooklyn, NewYork11201-3850
| |
| 'ttention:
| |
| ChiefExecutive Officerwithacopyto:Wachtell, Lipton,Rosen&Katz51West52ndStreetNewYork,NewYork10019Attention:
| |
| SethA.KaplanB.IftotheCompany,to:LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Attention:
| |
| ThomasE.Constance 18.GOVERNING LAW;CHOICEOFFORUM.ThisAgreement shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable toagreements madeandtobeperformed entirelywithinsuchStateandwithoutregardtoitschoiceoflawprinciples.
| |
| Eachofthepartieshereto(a)consentstosubmititselftothepersonaljurisdiction ofanyfederalcourtlocatedintheStateofNewYorkoranyNewYorkstatecourtintheeventanydisputearisesoutofthisAgreement oranyofthetransactions contemplated bythisagreement, (b)agreesthatitwillnotattempttodenyordefeatsuchpersonaljurisdiction bymotionorotherrequestforleavefromanysuchcourtand(c)agreesthatitwillnotbringanyactionrelatingtothisAgreement oranyofthetransactions contemplated bythisAgreement inanycourtotherthanafederalcourtsittingintheStateofNewYorkoraNewYorkstatecourt.19.INTERPRETATION.
| |
| Whenareference ismadeinthisAgreement toaSectionsuchreference shallbetoaSectionofthisAgreement unlessotherwise indicated.
| |
| Wheneverthewords"include",
| |
| t"includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
| |
| Thedescriptive headingshereinareinsertedforconvenience ofreference onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
| |
| B-9 20.COUNTERPARTS.
| |
| ThisAgreement may.beexecutedintwocounterparts, eachofwhichshabedeemedtobeanoriginal, butbothofwhich,takentogether, shallconstitute oneandthesameinstrument.
| |
| 21.EXPENSES.
| |
| Exceptasotherwise expressly'provided hereinorintheExchangeAgreement, allcostsandexpensesincurredinconnection withthetransactions contemplated by'hisAgreement shallbepaidbythepartyincurring suchexpenses.
| |
| 22.AMENDMENTS; WAIVER.ThisAgreement maybeamendedbythepartiesheretoandthetermsandconditions hereofmaybewaivedonlybyaninstrument inwritingsignedonbehalfofeachofthepartieshereto,or,inthecaseofawaiver,byaninstrument signedonbehalfofthepartywaivingcompliance.
| |
| J23.EXTENSION OFTIMEPERIODS.ThetimeperiodsforexerciseofcertainrightsunderSections2,6and7shallbeextended:
| |
| (i)totheextentnecessary toobtainallregulatory approvals fortheexerciseofsuchrights,andfortheexpiration ofallstatutory waitingperiods;and(ii)totheextentnecessary toavoidanyliability underSection16(b)oftheExchangeActbyreasonofsuchexercise.
| |
| 24.REPLACEMENT OFCOMPANYOPTION.UponreceiptbytheCompanyofevidencereasonably satisfactory toitoftheloss,theft,destruction ormutilation ofthisAgreement, and(inthecaseofloss,theftordestruction) ofreasonably satisfactory indemnification, anduponsurrender andcancellation ofthisAgreement, ifmutilated, theCompanywillexecuteanddeliveranewAgreement ofliketenoranddate.B-10 INWITNESSWHEREOF,thepartiesheretohavecausedthisAgreement tobeexecutedbytheirrespective ulyauthorized officersasofthedatefirstabovewritten.THEBROOKLYNUNIONGASCOMPANYBy(S/ROBERTB.CATELLName:RobertB.CatellTitle:ChiefExecutive OfficerLONGISLANDLIGHTINGCOMPANYByi/S/WILLIAMJ.CATACOSINOS Name:Dr.WilliamJ.Catacosinos Title:ChiefExecutive Officer
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| ANNEXCAMENDEDAND'RESTATED
| |
| :BROOKLYNUNION.STOCKOPTION'AGREEMENT
| |
| 'MENDEDANDRESTATEDSTOCK'OPTION'GREEMENT,'date'd'as ofJune'26,1997,byandbetween'ONG ISLAND"LIGHTINGCOMPANY,a'ewYorkcorporatiori
| |
| ("LlLCO"),
| |
| andTHEBROOKLYNUNIONGASCOMPANY,"
| |
| aNew'orkcorporation (the"COMPANY"
| |
| ).'WHEREAS,concurrently withtheexecution aliddeliveryof,thisAgreemept, (i)LILCOandtheCompanyareenteringintoanAmendedandRestatedAgreement and,PlanofExchangeandMerger,datedasofthedatehereof,(asthesamemaybeamendedfromtimeto,time,the"EXCHANGE AGREEMENT"
| |
| ),whichprovides, amongotherthirigs,uponthetermsandsubjecttotheconditions thereof,fortheexchangeofoutstanding sparesofcapitalstockofeachofLILCOand theCompanyfornewly,,issued sharesof.capitalstockof,.aJewYorkcorporation tobeformed(the"BINDINGSHAREEXCHANGES"
| |
| ),and(ii)theCompanyandLILCOareenteringintoacertainamendedandrestatedstockoptionagreement datedasofthedatehereofwhere)yLILCOgrantstotheCompanyanoptionwithrespecttocertainshares ofQILCO'scommonstockonthe,termsandsubject,totheconditions setforththerein(the"LILCOSTOCKOPTIONAGREEMENT"
| |
| )'WHEREAS,asa.,condition toLILCO'swillingness toenterintotheoriginal".Agreement.and PlanofExchangebyand.among BrooklynUnion,LILCOand,NYECO Corp.,datedasofDecember29,1996,LILCOhasrequested thattheCompanyagree,andtheCompanyhassoagreed,togranttoLILCO,aiioptionwithrespectto:certain sharesoftheCompany's commonstock;ontheterinsandsubjecttotheconditions setforthherein;and'HEREAS;thepartiesdesiretoiamendandrestatetHeoriginalBrooklynUnionStockOptionAgreement asofthedatehereoftoreflectthe'Exchange Agreement.
| |
| 'tNOW,'THEREFORE, toinduce'LILCO toenterintotheExchangeAgieement, and'in'consideratiori ofthemutualcovenants and'agreements setforthhereinandintheExchangeAgreement',
| |
| thepartieshereto'agree asollows:1.'GRANTOF"OPTION.TheCompanyhereb'ygrantsL'ILCOanirrevocable option(the"COMPANYOPTION")topurchaseupto'9,948,682 shares,subject'to adjustment asprovidedinSection10(suchsharesbeing'referred tohereinasthe"COMIANYSHARES")"ofcommonstock,parvalue,$.33Spershare,oftheComp'any(the"COMPANYC6MMON'STOCK")
| |
| (beirig19.9%%uoofthenumberofshares,ofCompanyCommonStockoutstanding on'thedatehereof)inthemannersetforthbelowataprice(the'"EXERCISE PRICE")perCompanySliareof$30.0375(whichisequaltotheFairMarketValue(asdefinedbelow)ofa'Company Shareonthe'datehereof)payable,atLII.CO'soption,(a)incashor(b)"subjecttotheCompany's havingobtainedtheapprovals"of anyGovernment'al Authority
| |
| : required, fortheCompanytoacquiretheLILCOShares(asdefinedbelow)fromLILCO,whichapprovals theCompanyshall'sebesteffortstoobtain,insharesof'common Stock,parvalue$5.00,'.per'share,'of LILCO("LILCO.SHARES")ineithercaseinaccordance with5ection"4 hereof.Notwithstanding'he foregoing, in:noevent'h'all.tlienumberof'Company SharesforWhichtheCompanyOptionisexercisable exceed19;9%'ofthenlimbe'r=
| |
| ifissuedandoutstanding sharesofCompanyCommonSto'ck.As'usedherein,'the-'FAIR
| |
| 'MARKETVALUE"ofanyShareshallbetheaverageofth'edailyclosingsalespriceforsuchshareontheNew'orkStockExchange(the"NYSE'~)durihgthe10NYSEtradingdayspriorto'tliefifthNYSEtradingdaypreceding'th'e datesuchFairMarketValueistobedetermined:
| |
| Capitalized teimsu'sed'heiein'but not'defined'herein shallhavethe'mhanfngs set'forth inthe'Exchange Agreement:
| |
| 2.EXERCISEOFOPTION."TheCompariyOption'may beexercised b'yLILCO,'in wholeorinpart,a'tanytimeorfrom'imetotimeafter'theExchangeAgreement becomesterminable by'ILCO'nder
| |
| 'Circumstances'which could'entitle LILCOtotermiriation feesu'nder'ither Section'9.3(a) of'theExchangeAgreement (provided oaftheeventsspecified inSection9.3(a)(ii)(x)
| |
| 'oftheExchange'Agreeinent shallhaveoccurred, althoughtheeventsspecified inSection9.3(a)(ii)(y) thereofneednot'haveoccuried) orSection9.3(b)oftheExchangeAgreement (regardless ofwhethertheExchangeAgreement is'ctu'ally terminated
| |
| ..or,whether,thereoccurs'aclosingofanyBusinessCombination involving a'TargetPartyoraclosingbywhichaTargetPartybecomesasubsidiary),
| |
| anysucheventbywhichtheExchangeAgreement becomessoC-1 terminable byLILCObeingreferredtohereinasa"TRIGGEREVENT."TheCompanyshallnotifyLILCOpromptlyinwritingoftheoccurrence'f'an'y Trigger.Event,itbeingunderstood thatthegivingofsuchnoticebytheCompanyshallnotbeacondition totherightofLILCOtoexercisetheCompanyOption.Intheevent.LILCOwishes.toexercisetheCompanyOption,LILCOshalldelivertotheCompanyawrittennotice(an"EXERCISE NOTICE"),Specifying thetotalnumberofCompanySharesitwishestopurchase.
| |
| EachclosingofapurchaseofCompanyShares(a"CLOSING"
| |
| )shalloccurataplace,onadateandatatimedesignated byLILCOinanExerciseNoticedelivered atleasttwobusinessdayspriortothedateoftheClosing.TheCompanyOptionshallterminate upon'theearlier'f:
| |
| (i)theEffective Time;(ii)thetermination oftheExchangeA'greement pursuanttoSection91thereof(other'than uponorduringthecontinuance ofaTriggerEvent);or(iii)180daysfollowing anytermination oftheExchangeAgreement uponorduringthecontinuance ofaTriggerEvent(orif,attheexpiration ofsuch180dayperiodtheCompanyOptioncannotbeexercised byreasonofanyapplicable
| |
| : judgment, decree,order,laworregulation, 10business'days aftersuchimpediment toexerciseshallhavebeenremovedorshallhavebecomefinalandnotsubjecttoappeal,butinnoeventunderthisclause(iii)laterthanApril28,1999).Notwithstanding theforegoing, theCompanyOptionmaynotbeexercised ifLOCOisinmaterialbreachofanyofitsmaterialrepresentations ofwarranties, orinmaterialbreachofanyofitscovenants oragreements, contained in,thisAgreement orintheExchangeAgreement.
| |
| UponthegivingbyLILCOtotheCompanyoftheExerciseNoticeandthetenderoftheapplicable aggregate ExercisePrice,LILCOshallbedeemedtobetheholderofrecordoftheCompanySharesissuableuponsuchexercise, notwithstanding thatthestocktransferbooksoftheCompanyshallthenbeclosedorthatcertificates representing suchCompanySharesshallnotthenbeactuallydelivered toLILCO.3.CONDITIONS TOCLOSING.,
| |
| Theobligation ofthe-Company toissuetheCompanySharestoLILCOhereunder issubjecttotheconditions, which(otherthantheconditions described inclauses(i),(iii)and(iv)below)maybewaivedbytheCompanyinitssolediscretion, that(i)allwaitingperiods,ifany,undertheHSRAct,applicable to.theissuanceoftheCompanyShareshereunder shallhaveexpiredorhavebeenterminated; (ii)theCompanyShares,andanyLILCOShareswhichareissuedinpaymentoftheExercisePrice,shallhavebeenapprovedforlistingontheNYSEuponofficialnoticeofissuance; (iii)alconsents, approvals, ordersorauthorizations of,,orregistrations, declarations orfilingswith,anyfederal,stateorlocaladministrative agencyorcommission orotherfederal,stateorlocalGovernmental Authority, ifany,requiredinconnection withtheissuanceofthecompany Shareshereunder shallhavebeenobtainedormade,asthecasemaybe,including, withoutlimitation, ifapplicable, theapprovaloftheSECunderSection10ofthe1935Actoftheacquisition oftheCompanySharesbyLILCOand,ifapplicable, theacquisition bytheCompanyoftheL'ILCOSharesconstituting theExercisePricehereunder; and(iv)nopreliminary orpermanent injunction orotherorderbyanycourtofcompetent jurisdiction prohibiting orotherwise restraining suchissuanceshallbeineffect.4.CLOSING.AtanyClosing,(a)theCompanywilldelivertoLILCOoritsdesigneeasinglecertificate indefinitive formrepresenting thenumberoftheCompanySharesdesignated byLILCO.initsExerciseNotice,suchcertificate toberegistered inthenameofLILCOandtobearthelegendsetforthinSection11,and(b)LILCOwilldeliver,to theCompanytheaggregate priceforthe.CompanySharessodesignated andbeingpurchased by(i)wiretransferofimmediately available fundsorcertified checkorbankcheckor(ii)subjecttothecondition inSection1(b),acertificate orcertificates, representing thenumberofLILCOSharesbeingissuedbyLILCOinconsideration thereof,as,thecasemaybe.ForthepurposesofthisAgreement, thenumberofJ.ILCOSharestobedelivered totheCompanyshallbeequaltothequotientobtained, bydividing(i)theproductof(x),thenumberofCompanyShareswithrespecttowhichtheCompanyOptionisbeingexercised and(y)theExercisePriceby(ii)theFairMarketValueoftheLILCOSharesonthedateimmediately preceding thedatetheExerciseNoticeisdelivered totheCompany.TheCompanyshallpayallexpenses, andanyandallUnitedStates,federal,stateandlocaltaxesandotherchargesthat.maybepayableinconnection withthepreparation, issueanddeliveryofstockcertificates under,thisSection4inthenameofLILCOoritsdesignee.
| |
| 5.REPRESENTATIONS ANDWARRANTIES OFTHECOMPANY.TheCompanyrepresent andwarrantstoLILCOthat(a)exceptassetforthinSection4.1oftheBrooklynUnionDisclosuC-2
| |
| : Schedule, theCompanyisacorporation dulyorganized, validlyexisting-and inactivestatusunderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement and,~subjecttoobtaining theapplicable app'roval ofshareholders oftheCompanyfortherepurchase ofCompanySharespursuanttoSection7(a)belowundercircumstances phereSection513(e)oftheNYBCLwouldbeapplicable (the"BUYBACKAPPROVALS"
| |
| )andsubjectto-anyregulatory approvals referredtohereinandtotheprovisions ofSection513(a)oftheNYBCL,ifapplicable, tocarryoutitsobligations hereunder,
| |
| ,(b)theexecution anddeliveryofthisAgreement bytheCompanyandtheconsummation bytheCompanyofthetransactions contemplated herebyhavebeendulyauthorized byallnecessary corporate actiononthepartoftheCompanyandnoothercorporate proceedings onthepartoftheCompanyarenecessary toauthorize thisAgreement oranyofthetransactions contemplated hereby(otherthananyrequiredBuybackApprovals),
| |
| (c)suchcorporate action(including theapprovaLoftheBoardofDirectors oftheCompany)isintendedtorenderinapplicable tothisAgreement andtheExchangeAgreement andthetransactions
| |
| .contemplated herebyandthereby,theprovisions ofthe.NYBCL referredtoinSection4.15oftheExchangeAgreement, (d)thisAgreement hasbeendulyexecutedanddelivered bytheCompany,constitutes avalidandbindingobligation oftheCompanyand,assumingthisAgreement constitutes avalidandbindingobligation ofLILCO,isenforceable againsttheCompanyinaccordance withitsterms,(e)theCompanyhastakenallnecessary corporate actiontoauthorize andreserveforissuanceandtopermitittoissue,uponexerciseoftheCompanyOption,andatalltimesfromthedatehereofthroughtheexpiration oftheCompanyOptionwillhavereserved, 9,948,682 authorized andunissuedCompanyShares,suchamountbeingsubjecttoadjustment asprovidedinSection10,allof,which,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fullypaidandnonassessable, (f)upondeliveryoftheCompanySharestoLILCOupontheexerciseoftheCompanyOption,LILCOwillacquiretheCompanySharesfreeandclearofallclaims,liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (g)exceptasdescribed inSection4.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement bytheCompanydoesnot,andtheconsummation bytheCompanyofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinabreachof:anyprovision of,oreconstitute adefault,(withorwithoutnoticeorlapseoftime,orboth)under,orresultinthetermination of,oraccelerate theperformance requiredby,orresultinarightoftermination, cancellation, oracceleration ofanyobligation orthelossofamaterialbenefitunder,orthecreationofalien,,pledge, securityinterestorotherencumbrance onassets(anysuchconflict,
| |
| 'violation, default,rightof,termination, cancellation oracceleration, lossor,creation, a"VIOLATION"
| |
| )oftheCompanyoranyofitssubsidiaries, pursuantto,(A)anyprovision ofthecertificat ofincorporation orby-lawsoftheCompany,(B)any,provisions ofanyloanorcreditagreement, note,mortgage, indenture, lease,;Companybenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)anyjudgment, order,decree,statute,law,ordinance, ruleorregulation applicable totheCompanyoritsproperties orassets,whichViolation, inthecaseofeachofclauses(B)and(C),couldreasonably beexpectedtohaveamaterialadverseeffectontheCompanyanditssubsidiaries takenasawhole,(h)exceptasdescribed inSection4.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,the'execution anddeliveryofthisAgreement bytheCompanydoesnot,andtheperformance ofthisAgreement bytheCompanywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority, (i)noneoftheCompany,anyofitsaffiliates oranyone"actingonitsortheirbehalfhasissued,soldorofferedanysecurityoftheCompanytoanypersonundercircumstances thatwouldcausetheissuanceandsaleoftheCompanyShares,ascontemplated bythisAgreement, tobesubjecttotheregistration requirements oftheSecurities Actasineffectonthedatehereofand,assumingtherepresentations ofLILCO"contained inSection6(h)aretrueandcorrect,theissuance, saleanddeliveryoftheCompanyShareshereunder wouldbeexemptfromtheregistration andprospectus deliveryrequirements oftheSecurities Act,asineffectonthedatehereof(andtheCompanyshallnottakeanyactionwhichwouldcausetheissuance, saleanddeliveryoftheCompanyShareshereunder nottobeexemptfromsuchrequirements),
| |
| and(j)anyLILCOSharesacquiredpursuanttothisAgreement willbeacquiredfortheCompany's ownaccount,forinvestment purposesonlyandwillnotbeacquiredbytheCompanywithaviewtothepublicdistribution thereofintviolation ofanyapplicable provision oftheSecurities Act.C-3 6.REPRESENTATIONS ANDWARRANTIES OFLILCO.LILCOrepresents andwarrantstothCompanythat(a)LILCOisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsoftheStateofNewYorkandhasthecorporate powerandauthority toenterintothisAgreement andtocarryoutitsobligations hereunder, (b)theexecution anddeliveryofthisAgreement byLILCOandtheconsummation byLILCOofthetransactions, contemplated herebyhavebeendulyauthorized byallnecessary corporate actiononthepartofLILCOandnoothercorporate proceedings onthepartofLILCO"arenecessary toauthorize thisAgreement or'nyofthetransactions contemplated hereby,(c)thisAgreement hasbeendulyexecutedanddelivered byLILCOandconstitutes avalidandbindingobligation ofLILCO,and,assumingthisAgreement constitutes avalidandbindingobligation oftheCompany,is.enforceable againstLILCOinaccordance withitsterms,(d)priortoanydeliveryofLILCOSharesinconsideration ofthepurchaseofCompanySharespursuanthereto,LILCOwillhavetakenallnecessary corporate actiontoauthorize forissuanceandtopermitittoissuesuchLILCOShares,allofwhich,upontheirissuanceanddeliveryinaccordance withthetermsofthisAgreement, willbevalidlyissued,fully'paidandnonassessable, andtorenderinapplicable tothereceipt,bytheCompanyoftheLILCOSharestheprovisions oftheNYBCLreferredtoinSection5.15oftheExchangeAgreement, (e)uponanydeliveryofsuchLILCOSharestotheCompanyinconsideration ofthepurchaseofCompanySharespursuanthereto,theCompanywillacquiretheLILCOSharesfreeandclearofallclaims,liens,charges,encumbrances andsecurityinterests ofanynaturewhatsoever, (f)exceptasdescribed inSection5.4(b)oftheExchangeAgreement, theexecution anddeliveryofthisAgreement byLILCOdoesnot,andtheconsummation byLILCOofthetransactions contemplated herebywillnot,violate,conflictwith,orresultinthebreachofanyprovision of,orconstitute adefault(withorwithoutnoticeorlapseoftime,orboth)under,orresultinanyViolation byLILCOoranyofitssubsidiaries, pursuantto(A)anyprovision ofthecertificate ofincorporation orby-lawsofLILCO,(B)anyprovisions ofanyloanorcreditagreement; note,mortgage, indenture, lease,LILCObenefitplanorotheragreement, obligation, instrument, permit,concession, franchise, licenseor(C)any'judgment, order,decree,statute,law,ordinance, ruleorregulation applicable toLILCOoritsproperties orassets,whichViolation, inthecaseofeachofitsclauses(B)and/or(C),wouldhaveamaterialadverseeffectonLILCOanditssubsidiaries takenasawhole,(g)exceptasdescribed i~Section5.4(c)oftheExchangeAgreement orSection1(b)orSection3hereof,theexecution anddeliver~ofthisAgreement byLILCOdoesnot,andtheconsummation byLILCOofthetransactions contemplated herebywillnot,requireanyconsent,approval, authorization orpermitof,orfilingwithornotification to,anyGovernmental Authority and(h)anyCompanySharesacquireduponexerciseoftheCompanyOptionwillbeacquiredforLILCO'sownaccount,forinvestment purposesonlyandwillnotbe,andtheCompanyOptionisnotbeing,acquiredbyLILCOwithaviewtothepublicdistribution thereofinviolation ofanyapplicable provision oftheSecurities Act.;7.CERTAINREPURCHASES.
| |
| (a)LILCOPUT.AttherequestofLILCObywrittennoticeatanytimeduringwhichtheCompanyOptionisexercisable pursuanttoSection2(the"REPURCHASE PERIOD"),theCompany(oranysuccessor entitythereof)shallrepurchase fromLILCOalloranyportionoftheCompany,Option,atthepricesetforthinsubparagraph (i)below,or,attherequestofLILCObywrittennoticeatanytimepriortoAugust31,1998(provided thatsuchdateshallbeextendedtoApril28,1999underthecircumstances wherethedateafterwhicheitherpartymayterminate theExchangeAgreement pursuanttoSection9.1(b)oftheExchangeAgreement hasbeenextendedtoApril28,1999),theCompany(oranysuccessor entitythereof)shallrepurchase fromLILCOalloranyportionoftheCompanySharespurchased byLILCOpursuanttotheCompanyOption,atthepricesetforthinsubparagraph (ii)below:(i)thedifference betweenthe"MARKET/OFFER PRICE"forsharesofCompanyCommonStockasofthedateLILCOgivesnoticeofitsintenttoexerciseitsrightsunderthisSection7(definedasthehigherof(A)thepricepershareofferedasofsuch'date pursuanttoanytenderorexchangeofferorotherofferwithrespecttoaBusinessCombination whichwasmadepriortosuchdateandnotterminated orwithdrawn asofsuchdate(the"OFFERPRICE")a(B)theFairMarketValueofCompanyCommonStockasofsuchdate(the"MARC-4
| |
| -...">'.PRICE"
| |
| ))and'the'Exercise Price,,multiplied bythenumber,ofCompany'Shares purchasable pursuantto>>theCompanyOption(orportionthereofwithrespect'to whichLILCOisexercising itsrightsunderthisSection7),butonly,iftheMarket/Offer PriceisgreaterthantheExercise*~~,.>>>>kk.III,(ii)theproductof(x)thesumof>>(A)theExercisePricepaidbyLILCOperCompanySharekacquiiedpursuanttotheCompanyOptionand(B)thedifference betweentheMarket/Offer PriceandtheExercisePrice,butonlyifthe.,Market/Offer Priceisgreater,than>>the ExercisePrice,and;(y),thenumberofCompanySharestoberepurchased pursuantto,thisSection7.Forpurposesofthisclause(ii),theOffer.Price.shallbethehighestpricepershareofferedpursuanttoatenderorexchangeofferorother.BusinessCombination offei;duringtheRepurchase Periodpriortothedelivery, byLILCOofanoticeofrepurchase.
| |
| (b)REDELIVERY OF,LILCOSHARES.If>>LILCOelectedtopurchase;Company.Shares pursuantto,the-exercise oftheCompanyOptionbytheissuanceanddelivery,,of LILCOShares;then.~'theCompanyshall,ifsorequested byJ.ILCO,in.fulfil/ment ofitsobligation>>pursuant;to clause,(a) of,,;..Qectiqp.7(a)(ii)(x)
| |
| (that,iqwitll,respect totheExercisePriceonly,and, withoutlimitationtto its,,-~obligation topayadditional, consideration, underclause,(b) ofSection7(a)(ii)(x)),
| |
| redeliver thecertificate forsuch.LILCO,Shares,to.
| |
| LILCO,freeandclearofallliens,claims;damages,.charges and.encumbrances, ofany.kind,ornatureiyhatsqever;
| |
| : provided, however,thatiflessthan.alloftheCompanySharesyprchased.by LILCOpursuanttothe,Company,Optionaretoberepurchased pursuant.,tothiy,Section,7;,then LILCO,shall issuetotheCompany anewcertificate representing thoseLILCO;..ShareswhichareInot;due toberedeJivered,to LILCOpursuantto,.thiySection7astheyconstituted paymentoftheExercise,,Price fortheCompany,',Shares,not being,repurchased.
| |
| (c)PAYMENTANDREDELIVERY;"OI>>
| |
| COMPANYOPTION,ORSHARES..In theevent
| |
| .'.LILCOexercises itsrights'under thisSection7,theCompanyshall,within10,business daysthereafter, epay,thet>>equired amounttoLILCOinimmediately available.
| |
| fundsandLILCOshallsurrender tothe,CompanytheCompany,Optionorthecertificates evidencing theCompanySharespurchased byLILCO-pursuant theretoand LILCOsha]1warrant.that, itownstheCompanyOptioqorsuch.sharesandthat,;,theCompany,.Option or,suchsharesarethenfreeandclear,ofalfliens,claims,damages,,charges and,encumbrances, ofanykindornaturewhatsoever.
| |
| ;(d)LILCOCALL.kIfLILCOhaselectedtopurchaseCompanyShares'pursuant totheeXerciseof'the'Company,Optioh by-theissuance'and deliveryofLILCOShares,notwithstanding that,LILCO<<".maynolongerholdanysuchCompanySharesor,thatLILCOelects,not to>>exercise itsotherrights..underthisSection,.7, LILCOmay,require;,at anytimeorfromtimeto,time.priortoAugust31,1998(provided thatsuchdateshallbeextended'to April28,1999under.,the circumstances wherethedateafter,whicheitherpartymayterminate theExchangeAgreement pursuanttoSection9.l,(b)oftheExchangeAgreement hasbeenextendedto,,April 28,1999),theCompanytoselltoLILCOanysuchLILCOSharesattheFairMarket''Value'that hadbeenattributed tosuchLILCOShamspursuantto,Section4plusinterestattherateof6>>5%perannumonsuchamountfromtheClosingDateielatingtoth'eexchangeofs'uchLII.COShares'pursuant toSection4totheclosingdateundeithisSection7(d)"lessanydividends.
| |
| on'suchLILC6Shkare'spaid'duringsuch'eriod ordeciaiedan'd'Ii'ayable tostockholders ofrecordo'na'date,Juriiig suchperiod.(e),REPURCPPSE,,PRICE, REDUCEDATLILCO'SOPTION,In,the,event.the.
| |
| repurchase
| |
| ..pricespecified in)ection7(a)wouldsubjectthepurchaseoftheCompanyOptionortheCompanySharespurchased byLILCOpursuanttotheCompany.Optiontoavoteoftheshareholders ofthe,CompanypursuanttoSection513(e)oftheNYBCL,thenLILCOmay,atitselection, reducetherepurchase pricetoanamountwhichwouldpermitsuchrepurchase withoutthenecessity forsucha'hareholder vote.kJT1(,,.-8,,RESTRICTIONS ONTRANSFER.>>
| |
| (a)RESTRICTIONS ONTRANSFER.'
| |
| Priortothe'Expiration Date,neitherpartyshall,"directly-orindirectly; byopera'tion oflawor'otherwise, sell,assign;pledge,orotherwise dispose,ofortransferC-5 anysharesofcapitalstockoftheotherpartyacquiredbysuchpartypursuanttothisAgreement
| |
| ("Restricted Shares")andbeneficially ownedbysuchparty,otherthan(i)pursuanttoSection7,or(ii)inaccordance withSection8(b)orSection9.(b)PERMITTED SALES.Following thetermination oftheExchangeAgreement, apartyshallbepermitted tosellanyRestricted Sharesbeneficially ownedbyitifsuchsaleismadepursuanttoatenderorexchangeofferthathasbeenapprovedorrecommended, orotherwise determined tobefairtoandinthebestinterests oftheshareholders oftheotherparty,byamajorityofthemembersoftheBoardofDirectors ofsuchotherpartywhichmajorityshallincludeamajorityofdirectors whoweredirectors priortotheannouncement ofsuchtenderorexchangeoffer.9.REGISTRATION RIGHTS.Following thetermination oftheExchangeAgreement, eachpartyhereto(a"DESIGNATED HOLDER")maybywrittennotice(the"REGISTRATION NOTICE")totheotherparty(the"REGISTRANT"
| |
| )requesttheRegistrant to'register undertheSecurities Actalloranypartofthe'Restricted Sharesbeneficially ownedbysuchDesignated Holder(the"REGISTRABLE SECURITIES"
| |
| )pursuanttoabonafidefirmcommitment underwritten publicofferinginwhichtheDesignated Holderandtheunderwriters shalleffectaswideadistribution ofsuchRegistrable Securities asisreasonably practicable andshallusetheirbesteffortstopreventanyperson(including anyGroup(asusedinRule13d-5undertheExchangeAct))anditsaffiliates formpurchasing throughsuchofferingRestricted Sharesrepresenting morethan1%oftheoutstanding sharesofcommonstockoftheRegistrant onafullydilutedbasis(a"PERMIITEDOFFERING"
| |
| ).TheRegistration Noticeshallincludeacertificate executedbytheDesignated Holderanditsproposedmanagingunderwriter, whichunderwriter shallbeaninvestment bankingfirmofnationally recognized standing(the"MANAGER"),
| |
| statingthat(i)theyhaveagoodfaithintention tocommencepromptlyaPermitted Offeringand(ii)theManageringoodfaithbelievesthat,basedonthethenprevailing marketconditions, itwillbeabletoselltheRegistrable Securities atapersharepriceequaltoatleast80%ofthethenFairMarketValueofsuchshares.TheRegistrant (and/orany'ersondesignated bytheRegistrant) shallthereupon havetheoptionexercisable bywrittennoticedelivered totheDesignated Holderwithin10businessdaysafterthereceiptoftlieRegistration Notice,irrevocably tagreetopurchasealloranypartoftheRegistrable Securities proposedtobesosoldforcashataprice(th"OPTIONPRICE")equaltotheproductof(i)thenumberofRegistrable Securities tobesopurchased bytheRegistrant and(ii)thethenFairMarketValueofsuchshares.'Anysuchpurchase'of Registrable Securities bytheRegistrant (oritsdesignee) hereunder shalltakeplaceataclosingtobeheldattheprincipal executive officesoftheRegistrant orattheofficesofitscounselatanyreasonable dateandtimedesignated bytheRegistrant and/orsuchdesigneeinkuchnoticewithin20businessdaysafterdeliveryofsuchnotice.Anypaymentforthesharestobepurchased shallbemadebydeliveryatthetimeofsuchclosingoftheOptionPriceinimmediately available funds.IftheRegistrant doesnotelecttoexerciseitsoptionpursuanttothisSection9withrespecttoallRegistrable Securities, itshalluseitsbesteffortstoeffect,aspromptlyaspracticable, theregistration undertheSecurities Actoftheunpurchased Registrable Securities proposedtobesosold;provided, however,that(i)neitherpartyshallbeentitledtomorethananaggregate oftwoeffective registration statements hereunder and(ii)theRegistrant willnotberequiredtofileanysuchregistration statement duringanyperiodoftime(nottoexceed40daysaftersuchrequestinthecaseofclause(A)belowor90daysinthecaseofclauses(B)and(C)below)when(A)theRegistrant isinpossession ofmaterialnon-public information whichitreasonably believeswouldbedetrimental tobedisclosed atsuchtimeand,"intheopinionofcounseltotheRegistrant, suchinformation wouldhavetobedisclosed ifaregistration statement werefiledatthattime;(B)theRegistrant isrequiredundertheSecurities Acttoincludeauditedfinancial statements foranyperiodinsuchregistration statement andsuchfinancial statements arenotyetavailable forinclusion insuchregistration statement; or(C)theRegistrant determines, initsreasonable
| |
| : judgment, thatsuchregistration wouldinterfere withanyfinancing, acquisition orothermaterialtransaction involving theRegistrant oranyofitsaffiliates.
| |
| TheRegistrant shalluseitsreasonable besteffortstocauseanyRegistrable Securities registered pursuanttothisSection9tobequalified forsaleunderthesecurities orBlue-Skylawsofsucjurisdictions astheDesignated Holdermayreasonably requestandshallcontinuesuchregistration C-6 equalification ineffectinsuchjurisdiction;
| |
| : provided, however,thattheRegistrant shallnotberequiredtoqualifytodobusinessin,orconsenttogeneralserviceofprocessin,anyjurisdiction byreasonofthisprovision.
| |
| Theregistration rightssetforthinthisSection9aresubjecttothecondition thattheDesignated HoldershallprovidetheRegistrant withsuchinformation withrespecttosuchholder'sRegistrable Securities, theplansforthedistribution thereof,andsuchother.information withrespecttosuchholderas,inthereasonable judgmentofcounselfortheRegistrant, isnecessary toenabletheRegistrant toincludeinsuchregistration statement allmaterialfactsrequiredtobedisclosed withrespecttoaregistration thereunder.
| |
| Aregistration effectedunderthisSection9shallbeeffectedattheRegistrant's expense,exceptfor,underwriting discounts andcommissions andthefeesandtheexpensesofcounseltotheDesignated Holder,andthe,Registrant shallprovidetotheunderwriters suchdocumentation (including certificates, opinionsofcounseland"comfort" lettersfromauditorsasarecustomary inconnection withunderwritten publicofferings assuchunderwriters mayreasonably require.Inconnection withanysuchregistration, thepartiesagree(i)toindemnify eachotherandtheunderwriters inthecustomary manner,(ii)toenterintoanunderwriting agreement informandsubstance customary fortransactions ofsuchtypewiththeManagerandtheotherunderwriters participating insuchoffeiingand(iii)totakeallfurtheractionswhichshallbereasonably necessary toeffectsuchregistration andsale(including, iftheManagerdeemsitnecessary, participating inroad-show presentations).
| |
| III,TheRegistrant shallbeentitledtoinclude(atitsexpense)additional sharesofitscommonstockinaregistration effectedpursuanttothisSection9onlyifandtotheextenttheManagerdetermines thatsuchinclusion willnotadversely affecttheprospects ofsuccessofsuchoffering.
| |
| 10.ADJUSTMENT UPONCHANGESINCAPITALIZATION.
| |
| Withoutlimitation toanyrestriction ontheCompanycontained inthisAgreement orintheExchangeAgreement, intheeventofanychangeinCompanyCommonStockbyreasonofstockdividends,
| |
| : splitups, mergers(otherthantheBindingShareExchanges),
| |
| recapitalizations, combinations, exchangeofsharesorthelike,thetypeandnumberofsharesorsecurities subjecttotheCompanyOption,andthepurchasepricepershareprovidedinSection1,shallbeadjustedappropriately torestoretoLILCOitsrightshereunder, including therighttopurchasefromtheCompany(oritssuccessors) sharesofCompanyCommonStockrepresenting 19.9%oftheOutstanding Company'o'inmon Stockfor'theaggregate ExercisePricecalculated asofthedate'ofthisAgreement asprovidedinSectionl.11.RESTRICTIVE LEGENDS.Eachcertificate representing sharesofCompanyCommonStockissuedtoLILCOhereunder, andLILCOShares,ifany,delivered totheCompanyataClosing,shallincludealegendinsubstantially thefollowing form:.THESECURITIES REPRESENTED BYTHISCERTIFICATE HAVENOTBEENREGISTERED UNDERTHESECURITIES ACTOF1933,ASAMENDED,ANDMAYBEREOFFERED ORSOLDONLYIFSOREGISTERED ORIFANEXEMPTION FROMSUCHREGISTRATION ISAVAILABLE.
| |
| SUCHSECURITIES AREALSOSUBJECTTOADDITIONAL RESTRICTIONS ONTRANSFERASSETFORTHINTHEAMENDEDANDRESTATEDSTOCKOPTIONAGREEMENT, DATEDASOFJUNE16,1997,ACOPYOFWHICHMAYBE,OBTAINEDFROMTHEISSUERUPGNREQUEST.Itisunderstood andagreedthat:(i)thereference fotheresalerestrictions oftheSecurities Actintheabovelegendshallberemovedbydeliveryofsubstitute ceitificates(s) withoutsuchreference ifLILCOortheCompany,asthecasemaybe,shallhavedelivered totheotherpartyacopyofaletterfromthestaffoftheSecurities andExchangeCommission, oranopinionofcounsel,informandsubstance satisfactory totheotherparty,totheeffect'that suchlegen'disnotrequiredforpurposesoftheSecurities Act;(ii)theereference totheprovisions tothisAgreement intheabovelegendshallberemovedbydeliveryofsubstitute
| |
| 'certificate(s) withoutsuchreference iftheshareshavebeensoldortransferred incompliance withtheprovisions ofthisAgreement-and undercircumstances thatdonotrequiretheretention ofsuchreference; C-7
| |
| ,,and(iii)thelegendshallberemovedinitsentiretyiftheconditions inthepreceding clauses(i)and(ii)arebothsatisfied.
| |
| Inaddition, such,certificates shallbearany,otherlegendasmayberequiredby,law.Certificates representing sharessoldinaregistered publicofferingpursuanttoSection9,shallnotberequiredtobearthelegendsetforthinSection11iIt*W,ly"IV(,12.,BINDINGEFFECT;NOASSIGNMENT; NO,THIRDPARTYBENEFICIARIES.
| |
| ThisAgreement shallbebindinguponandinuretothebenefitofthepartiesheretoandtheirrespective successors
| |
| ,=.andpermitted assigns.Exceptasexpressly providedforinthisAgreement, neitherthisAgreement northerightsortheobligations ofeitherpartyheretoareassignable, exceptbyoperation oflaw,orwiththewrittenconsentoftheotherparty.Nothingcontained inthisAgreement, expressorimplied,isintendedtoconferuponanypersonotherthanthepartieshenetoandtheirrespective permitted'assigns anyrightsorremedies'ofany'nature whatsoever byreasonofthisAgreement.
| |
| AnyRestricted Sharessoldbyapartyincompliance withtheprovisions'of Section9shall,uponconsummation ofsuchsale,befreeoftherestrictions imposed'ith're'spect tosuchshares'by thisAgr'cement, unlessanduntilsuchpartyshallrepurchase oi'otherwise
| |
| 'becomethe'beneficial ownerofs'uchshares,andanytransferee ofsuch"'shares'hall
| |
| 'notbeentitledtotheregistration rightsofsuchparty.'~'3.SPECIFICPERFORMANCE.
| |
| Thepartiesrecognize andagreethatifforanyreasonanyoftheprovisions ofthisAgreement arenotperformed inaccordance withtheirspecifictermsorareotherwise
| |
| : breached, immediate andirreparable harmorinjurywouldbecausedforwhichmoneydamageswouldnotbeanadequateremedy.Accordingly, eachpartyagreesthat,inadditiontootherremedies, theotherpartyshall'beentitledtoaninjunction restraining anyviolation'or threatened violation
| |
| 'ofthe'provisions ofthis"'Agreement.'n the'event thatanyaction'hould bebroughtinequitytoenforcetheprovisions oftheAgreement, neitherpartywillalleg'e,'nd eachpartyherebywaivesthedefense,thatthere's'adequate remedyat,law.'14.ENTIREAGREEMENT ThisAgreement,
| |
| 'theLILCOStockOptionAgreement, the'Corifidentiality Agreement andtheExchangeAgreement (including theexhibitsandschedules thereto)'onstitute theeritireagreement amongthepartieswithrespecttothe'subject matterhereofandthereofansupersede allotherprioragreements andunderstandings, bothwrittenandoral,amongthe'partiesoranyofthemwithrespecttothesubjectmatter'hereof andthereof.15.FURTHERASSURANCES.
| |
| Eachpartywillexecuteanddeliverallsuchfurtherdocuments andinstruments andtakeallsuchfurtheractionasmaybenecessary inordertoconsummate thetransactions contemplated hereby.16.VALIDITY.,
| |
| Theinvalidity orunenforceability ofanyprovisions ofthisAgreement shallnotaffectthevalidityorenforceability oftheotherprovisions ofthisAgreement, whichshall,remaininfullforceandeffect.Intheeventanycourtorothercompetent authority holdsanyprovisions ofthisAgreement tobenull,voidorunenforceable, thepartiesheretoshallnegotiate ingoodfaiththeexecution anddeliveryofanamendment tothisAgreement inorder,asnearlyaspossible, toeffectuate, totheextentpermitted bylaw,theintentofthepartiesheretowithrespecttosuchprovision andtheeconomiceffectsthereof.Ifforany.reasonanysuchcourtorregulatory agencydetermines thatLILCOisnotpermitted to,acquire, orthe-'-Company isnotpe'rmitted torepurchase pursuanttoSection7,,thefullnu'mberofshaiesof.CompanyCom'inonStockprovidedinSection1hereof(asthe'samemaybeadjusted),
| |
| itistheexpressintention oftheCompanytoallowLILCOtoacquireortorequiretheCompany'o'repurchase
| |
| 'suchlesser",number ofsharesasmaybepermissible, withoutanyamendment ormodification hereof.Eachpartyagreesthat,shouldanycourtorothercompetent authority holdanyprovision ofthisAgreement orparthereoftobenull,voidoruneriforceable, ororderanypartytotakeanyactioninconsistent
| |
| : herewith, ornottakeanyactionrequiredherein,theotherpartyshallnotbeentitledtospecificperformance ofsuchprovision orparthereofortoanyotherremedy,including butnotlimitedtomoneydamage's, forbreachhereoforofanyotherprovision ofthisAgreement orparthereofa'stheresultofsuchholdingororder.tl'7.NOTICES.Allnoticesandothercommunication hereunder shallbeinwriting.andshallb,deemedgivenif(i)delivered personally, or(ii)sentbyreputable overnight courierservice,C-8
| |
| '~"'iii)telecopied (which'is'onfirmed),
| |
| or.(iv)'ivelaysafter'being inailed-byregistered orcer'tified mail(returnreceiptrequested) to'.the'parties atthefollowing
| |
| 'addresses'(or" atsuchotheraddressforapartyasshallbespecified by'likenotice):A.IftoLILCO',to!"'if.LongIsland,LightingCompany,,175East,OldCountyRoad,;,HicksvilleNew York11801,-Attention:
| |
| ChiefExecutive Officerwithacopyto:Kramer,Levin,Naftalis&Frankel919ThirdAvenueNewYork,NewYork10022Artention:
| |
| ThomasE.Constance B.IftotheCompany,to:TheBrooklynUnionGasCompanyOneMetroTechCenterBrooklyn, NewYork11201-3850 Attention:
| |
| ChiefExecutive Officerwithacopyto:Wachtell, Lipton,Rosen&Katz51West52ndStreetNewYork,NewYork10019Attention:
| |
| SethA.Kaplan18.GOVERNING LAW;CHOICEOFFORUM.ThisAgreement shallbegovernedbyandconstrued inaccordance withthelawsoftheStateofNewYorkapplicable toagreements madeandtobeperformed entirelywithinsuchStateandwithoutregardtoitschoiceoflawprinciples.
| |
| Eachofthepartieshereto(a)consentstosubmititselftothepersonaljurisdiction ofanyfederalcourtlocatedintheStateofNewYorkoranyNewYorkstatecourtintheeventanydisputearisesoutofthisAgreement oranyofthetransactions contemplated bythisagreement, (b)agreesthatitwillnotattempttodenyordefeatsuchpersonaljurisdiction bymotionorotherrequestforleavefromanysuchcourtand(c)agreesthatitwillnotbringanyactionrelatingtothisAgreement oranyofthetransactions contemplated bythisAgreement inanycourtotherthanafederalcourtsittingintheStateofNewYorkoraNewYorkstatecourt.19.INTERPRETATION.
| |
| Whenareference ismadeinthisAgreement toaSectionsuchreference shallbetoaSectionofthisAgreement unlessotherwise indicated.
| |
| Wheneverthewords"include",
| |
| "includes" or"including" areusedinthisAgreement, theyshallbedeemedtobefollowedbythewords"withoutlimitation".
| |
| Thedescriptive headingshereinareinserted, forconvenience ofreference onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
| |
| 20.COUNTERPARTS.
| |
| ThisAgreement maybeexecutedintwocounterparts, eachofwhichshallbedeemedtobeanoriginal, butbothofwhich,takentogether, shallconstitute oneandthesameinstrument.
| |
| 21.EXPENSES.
| |
| Exceptasotherwise expressly providedhereinorintheExchangeAgreement, allcostsandexpensesincurredinconnection withthetransactions contemplated bythisAgreement shallbepaidbythepartyincurring suchexpenses.
| |
| 22.AMENDMENTS; WAIVER.ThisAgreement maybeamendedbythepartiesheretoandthetermsandconditions hereofmaybewaivedonlybyaninstrument inwritingsignedonbehalfofeachofthepartieshereto,or,inthecaseofawaiver,byaninstrument signedonbehalfofthepartywaivingcompliance.
| |
| C-9' 23.EXTENSION OFTIMEPERIODS.
| |
| Thetimeperiodsforexerciseof certainrightsunderSections2,6and7shallbeextended:
| |
| (i),totheextentnecessary toobtainallregulatory approvals fortheexerciseofsuchrights,andfortheexpiration ofallstatutory waitingperiods;and(ii)totheextentnecessary toavoidanyliability underSection16(b)oftheExchangeActbyreasonofsuch.exercise.
| |
| 24.REPLACEMENT OFCOMPANYOPTION.UponreceiptbytheCompanyofevidencereasonably satisfactory toitoftheloss,theft,destruction ormutilation ofthisAgreemen't, and(inthecaseofloss,theftordestruction) ofreasonably satisfactory indemnification, anduponsurrender andcancellation ofthisAgreement, ifmutilated, theCompanywillexecuteanddeliveranewAgreement ofliketenoranddate.C-10 eINWITNESSWHEREOF,thepartiesheretohavecausedthisAgreement tobeexecutedbytheirrespective dulyauthorized officersas'ofthedatefirstabovewritten.LONGISLANDLIGHTINGCOMPANYB./S/WILLIAMJ.CATACOSINOS Name:Dr.WilliamJ.Catacosinos Title:ChiefExecutive OfficerTHEBROOKLYNUNIONGASCOMPANYBy:/s/RQBERTB.CATELLName:RobertB.CatellTitle:ChiefExecutive Officer
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| ANNEXD0AGREEMENT ANDPLANOFMERGERbyandamongBLHOLDINGCORP.,LONGISLANDLIGHTINGCOMPANY,LONGISL'ANDPOWERAUTHORITY ANDLIPAACQUISITION CORP.DatedasofJune26,1997
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| TABLEOFCONTENTSARTICLEITHEMERGER;RELATEDTRANSACTIONS Section1.1Section1.2Section1.3Section1.4Section1.5Section1.6Section1.7Section1.8Section1.9Section1.10Section1.11Section2.1Section2.2Section2.3Section3.1TheMerger.EffectoftheMerger.Effective TimeoftheMerger.RelatedTransactions
| |
| ......,.Description ofAssets.Liabilities
| |
| .'ransition Work,Resignations Formation ofLIPASub.CharterAmendment
| |
| .CertainOtherPreferred Stock...ARTICLEIITREATMENT OFSHARESEffectoftheMergeronCapitalStockDissenting SharesIssuanceofParentShares.ARTICLEIIICLOSING'losing.r~~a~~rSection4.1Section4,2Section4.3Section4.4Section4.5Section4.6Section4.7Section4.8Section4.9Section4.10Section4.11Section4.12Section4.13Section5.1Section5.2Section5.3Section5.4Section5.5Section6.1Section6.2ARTICLEIVREPRESENTATIONS ANDWARRANTIES OFPARENTOrganization andQualification
| |
| .Subsidiaries
| |
| .Capitalization Authority; Non-Contravention; Statutory Approvals; Compliance........
| |
| ReportsandFinancial Statements AbsenceofCertainChangesorEvents.Litigation Registration Statement andProxyStatement.
| |
| Environmental Protection
| |
| .Regulation asaUtilityVoteRequireInsurance
| |
| ................................................
| |
| Disclosure
| |
| .ARTICLE7,REPRESENTATIONS ANDWARRANTIES OFAUTHORITY ANDLIPASUBOrganization Authority; Non-Contravention; Statutory Approvals; Compliance Disclosure Ownership ofLIPASub;NoPriorActivities Ownership ofCompanyCommonStockARTICLEVICOVENANTS Covenants ofParentandCompany.Covenants ofAuthority andLIPASub................
| |
| i.'
| |
| Section7.1Section7.2Section7.3Section7.4Section7.5~Section7.6Section7.7Section7.8Section7.9Section7.10Section7.11Section7.12Section7.13Section7.14Section8.1Section8.2Section8.3"ARTICLEVII';,ADDITIONAL AGREEMENTS Accesstolnformation
| |
| ."'"'''ProxyStatement andRegistration Statement Shareholder Approval~.Disclosure ScheduleRegulatory MattersPublicAnnouncements...........;
| |
| .Confidentiality
| |
| ..'..;.';;.CertainLitigation
| |
| .~'V~Expenses~FurtherAssurances
| |
| .;PurchasePriceAllocation
| |
| .ReceiptofConsentsandApprovals
| |
| .CertainOtherMatters..........,..
| |
| OpinionsofCounsel..........,...,...,,.
| |
| ARTICLEVIIICONDITIONS, Conditions toEachParty'sOblig'ations.
| |
| '"Conditions toObligations ofAuthor'ity'and LIPASub.Conditions toObligations ofParentandCompany.SIVknhV~V~~~~~V'n>7~nVn<<S~.n,nVVnn7In.,',ARTICLEIXTERMINATION ANDAMENDMENT Section9.1Section9.2Section9.3Section9.4Section9.5Termination
| |
| .EffectofTermination
| |
| .Survival.;Amendment.
| |
| Extension; WaiverV'~~V~~ARTICLEXSTANDSTILL Section10.1Standstill 7SectionSectionSectionSectionSectionSectionSectionSectionSectionSectionARTICLEXIMISCELLANEOUS 11.1CertainDefinitions 11.2Notices.........,
| |
| 11.3Descriptive Headings.11.4Counterparts 11.5EntireAgreement; Assignment 11.6Governing Law11.7SpecificPerformance
| |
| .........!
| |
| ."'.."."..~'<.'"."
| |
| ~11.8PartiesinInterest<<lyre11.9Severability
| |
| .~<<~~r~<<~~~~1~~~~~~~~<<~~'11.10Alternative, DisputeResolution..........:
| |
| ..','.<~.<<(<<1~V-0 ScheduleAScheduleBScheduleCScheduleDScheduleEScheduleFScheduleGExhibitAExhibitBExhibitCExhibitDExhibitEExhibitFExhibitG.'xhibitHTransferred AssetsPrinciples andProcedures forFinalizing theTransferred AssetScheduleTransition WorkTaxMattersEmployment MattersFutureRightsRetainedAssetsFormofManagement ServicesAgreement FormofPowerSupplyAgreement FormofEnergyManagement Agreement FormofGeneration PurchaseRightAgreement GuarantyAgreement FormofParentLiabilities Undertaking FormofAuthority Liabilities Undertaking FormofCertificate ofDesignation
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| AGREEMENT ANDPLANOFMERGER(the"Agreement"
| |
| ),datedasofJune26,1997,by,andamongBLHOLDINGCORP.,acorporation tobeformedasaNewYorkcorporation, as'contemplated:herein
| |
| ("Parent."),
| |
| LONGISLANDLIGHTINGCOMPANY,aNewYorkcorporation
| |
| ("Company"),LONGISLANDPOWER'AUTHORITY, acorporate municipal instrumentality andpolitical subdivision oftheStateofNewYork("Authority"
| |
| ),andLIPAACQUISITION CORP.,aNewYorkcorporation
| |
| ("LIPASub").W,ITNESSETHWHEREAS,Authority isauthorized undertheLongIsland'Power Authority Act,PublicAuthorities LawSection1020etseq.(the"Act")toacquirealloranypartofCompany's securities orassets;andWHEREAS,theActconfersuponAuthority thepowertocondemnthesecurities and/orassetsofCompany,including thecommonstock'ofCompanytobeacquiredintheproposedtransaction, andAuthority haspreviously publiclyannounced itsintention toconsiderexercising itscondemnation powertoacquirethecommonstockorassetsofCompanyifanegotiated transaction cannotbeachieved; and1WHEREAS,TheBrooklynUnionGasCompany,aNewYorkcorporation
| |
| ("BU"),CompanyandParenthaveenteredintoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJune26,1997(the"Exchange Agreement"
| |
| ),whichprovidesforthebusinesscombination ofBUandCompanyaspeerfirmsandtheformation ofParentasaholdingcompanytomanagetheircombinedbusinesses; andWHEREAS,Authority, CompanyandBUhaveundertaken negotiations astovariousmethodsofaccomplishing theobjectives setforthintheActandinconnection withsuchnegotiations, thepartieshavereacheddefinitive agreement'as tothetransactions described herein;andWHEREAS,theBoardsofDirectors ofCompanyandLIPASubandtheBoardofTrusteesofAuthority haveeachdetermined thatitisadvisable forAuthority tocauseLIPASubtomergewithandintoCompanyuponthetermsandsubjecttotheconditions setforthherein;andWHEREAS,infurtherance ofsuchcombination, theBoardsofDirectors ofCompanyandLIPASubandtheBoardofTrusteesofAuthority haveeachapprovedthemerger(the"Merger")ofLIPASubwithandintoCompany,inaccordance withtheapplicable provisions oftheNewYorkBusinessCorporation Law(the"NYBCL"),
| |
| anduponthetermsandsubjecttotheconditions setforthherein;NOW,THEREFORE, inconsideration oftheforegoing andtherespective representations, warranties, covenants, agreements, andconditions contained herein,andintending tobelegallyboundhereby,thepartiesagreeasfollows:ARTICLEITHEMERGER;RELATEDTRANSACTIONS Section1.1TheMerger.Uponthetermsandsubjecttotheconditions ofthisAgreement, attheEffective Time(asdefinedinSection1.3),LIPASubshallbemergedwithandintoCompany(the"Merger")inaccordance withthelawsoftheStateofNewYork.Companyshallbethesurviving corporation intheMergerandshallcontinueitscorporate existence underthelawsoftheStateofNewYork.Companyasthesurviving corporation aftertheMergerishereinafter sometimes referredtoasthe"Surviving Corporation."
| |
| Section1.2EgectoftheMerger.AttheEffective Time,(i)thecertificate ofincorporation oftheCompany,asineffectimmediately priortotheEffective Time,shallbethecertificate ofincorporation oftheSurviving Corporation untilthereafter amendedasprovidedbylawandinsuchcertificate ofincorporation and(ii)theby-lawsofCompany,asineffectimmediately priortotheEffective Time,shallbetheby-lawsoftheSurviving Corporation untilthereafter amendedasprovidedbylaw,inthecertificate ofincorporation oftheSurviving Corporation andinsuchby-laws.Subjecttotheforegoing, theadditional effectsoftheMergershalleasprovidedintheapplicable provisions oftheNYBCL.D-1 Section1.3Effective TimeoftheMerger.Aspromptly, aspr'acticable afterthesatisfaction orwaiveroftheconditions setforthinArticleVHIandtheconsummation ofthetransactions contemplated bySection1.'4(d),the'paities heretoshallcausetheMerger.to beconsummated byfilingacertificate ofmergerascontemplated bytheNYBCL(the."Certificate ofMerger"),togetherwithanyrequiredrelatedcertificates, withtheSecretary ofStateoftheStateof,NewYork,insuchformasrequired, by,andexecutedinaccordance withtherelevantprovisions of,theNYBCL(thetimeofsuchfilingbeingthe"Effective Time").,ISection1.4RelatedTransactions.
| |
| InadditiontotheMerger,thefollowing transactions willbeconsummated atorpriortotheClosing(asdefinedbelow):(a)Formation ofSubsidiaries.
| |
| ParentandCompanyshalltakeallnecessary actiontoformpriortotheClosingsuchsubsidiaries (whichmaybelimitedliability companies) ofParent(the''Transferee Subsidiaries"
| |
| )which,atthedirection ofParent,will,asapplicable, (i)enterintoattheClosingamanagement servicesagreement intheformofExhibitAattachedhereto(the"Management ServicesAgreement"
| |
| ),apowersupplyagreement intheformofExhibitBattachedhereto(the"PowerSupplyAgreement",),
| |
| anenergymanagement agreement intheformofExhibitCattachedhereto(the"EnergyManagement Agreement"
| |
| ),ageneration purchaserightagreement intheformofExhibitDattachedhereto(the"Generation PurchaseRightAgreement"
| |
| )andaguarantyagreement intheformofExhibitEattached'heieto (the"Guaranty Agreement"
| |
| )and/or(ii)receiveth'eassetsandproperties ofCompanysetforthonScheduleAattachedhereto(the"Transfer'red Assets").Parent,uponwrittennoticetothepartieshereto,maydirectanyportionoftheTransferred Assetstobedistributed toaparticular Transferee Subsidiary;
| |
| : provided, however,thattheTransferee Subsidiary whichisdesignated byParenttoreceivetheassetscontemplated bytheGeneration PurchaseRightAgreement tobesubjecttoCompany's rightsthereunder shallbetheTransferee Subsidiary thatentersintotheGeneration PurchaseRightAgreement.
| |
| V(b)Companyshall,reasonably priortotheanticipated ClosingDate,formanewNewYorkcorporation toactasParenthereunder andtoown,directlyorindirectly, allofthestockorotherequity interests oftheTransferee Subsidiaries, shallprovideAuthority andLIPASubwithwrittennoticeofsuchformation andshallcausesuch"newcorporation toexecuteanddeliveracounterpart hereof,"whereupon suchnewcorporation shalbecomeParentforallpurposeshereofandeachotherBasicAgreement (ashereinafter defined).
| |
| (c)Companywillusereasonable effortstotransfertoawholly-owned subsidiary ofCompanyitsownership interestintheNineMilePointTwoNuclearPowerPlantanditsinterestinallrelatednuclearfuelandnucleardecommissioning trustfunds("NineMile"),butCompany's failuretoobtainanyrequiredconsenttheretoofanygovernmental agencyorotherownerofanyinterestthereinshallnotconstitute abreachofthisAgreement.
| |
| (d)(i)Immediately priortotheEffective Time,CompanyshalltransfertheTransferred AssetstotheTransferee Subsidiaries inexchangefor,andParentshalldelivertoCompany,(i)theDesignated Number(ashereinafter defined)ofsharesofthecommonstock,par'value
| |
| $0.01pershare,ofParent("ParentCommonStock")and(ii)upto$75,000,000 face,amountofParentpreferred stockinanaggregate faceamountandhavingtherightsandtermstobespecified inanoticedelivered byParenttoeachpartyheretonotlaterthanthedateonwhichthenoticesofredemption areissuedpursuanttoSection1.11(the."NewParentPreferred "Stock").The"Designated Number"shallbethenumberofsharesofParentCommonStockspecified inanoticedelivered byParenttoeachpartyheretonotlaterthanthedateonwhichsuchnoticesofredemption areissuedpursuanttoSection1.11andrepresenting Parent'sgoodfaithestimateofthenetfairmarketvalueoftheTransferred AssetslessthefaceamountofNewParentPreferred Stockdelivered byParentpursuanttothisSection1.4(d).Concurrently withsuchdeliveryandimmediately priortotheEffective Time,Companyshallsellforcashinaprivateplacement allsharesofNew'arent Preferred Stocktooneormorepersonsorentitieswhicha'enototherwise shareholders ofCompanyorBUattheEffective Time.('4(ii)Notwithstanding clause(i)ofthisSection1.4(d),iftheBUGLILCOTransactions (asdefinedinSection2.1(b))havebeenconsummated priortotheEffective, Time,thetransferoftheTransferred Assetsascontemplated bysuchclause(i)shallbemadewithoutthedeliverybyParentofanyParentCommonStockorNewParentPreferred Stock.D-2 eSection1.5Description ofAssets.To.theextentthatScheduleAhereto(the"Transferred AssetSchedule"
| |
| )doesnotprovideforafulllegaldescription oftheTransferred Assetsreferredtotherein,thepartiesheretoshallrevisetheTransferred AssetSchedulepriortotheClosinginaccordance withtheprinciples andprocedures setforthonScheduleBattachedhereto.Section1.6Liabilities.
| |
| (a)AttheClosing,ParentandeachTransferee Subsidiary willexecuteanddelivertoAuthority andSurviving Corporation aliabilities undertaking andindemnification agreement insubstantially theform.ofExhibitFattachedhereto(the"ParentLiabilities Undertaking"
| |
| ).(b)AttheClosing,theAuthority andtheSurviving Corporation willexecuteanddelivertoParentandeachTransferee, Subsidiary aliabilities undertaking andindemnification agreement in,substantially theformofExhibitGattachedhereto,(the "Authority Liabilities Undertaking"
| |
| ).SectionI:7Transition Work.Theparties'agreetotaketherespective actionssetforthonScheduleCattachedheretotoprepareforanorderlytransition undertheBasicAgreements attheEffective Time.Section1.8Resignations.
| |
| ParentshallcauseeachofficeranddirectorofCompanytoresignfromeachpositionanysuchpersonthenholdswithCompany,effective attheEffective Time.Section1.9Formation ofLIPASub.Reasonably priortotheanticipated ClosingDate,authority shallcauseLIPASubtobedulyincorporated asaNewYorkcorporation andshallcauseLIPASubtoexecuteacounterpart ofthisAgreement.
| |
| Eachrepresentation andwarrantysetforthinArticleVwithrespecttoLIPASubshallbedeemedtohavebeenmadeonthedateofsuchexecution.
| |
| JSection1.10'CharterAmendment.
| |
| Authority shall.,cause theAmendedandRestatedCertificate ofIncorporation ofCompanytobeamendedascontemplated intherequestforarulingfrom,theInternalRevenueServicewithrespecttoSection115oftheInternalRevenueCodeof1986,asamended(the"Code"),notlaterhanthetenthbusinessdayafter'heEffective Time.AlSection'.11 CertainOtherPreferred Stock.Promptlyafterallconditions totheClosingsetforth'inArticleVIIIhavebeensatisfied orwaivedinaccordance therewith (otherthanSection8.1(b),providedCompanyhasreceivedassurances satisfactory toCompanythatsuchcondition canbesatisfied),
| |
| Companyshallissuenoticesofredemption foralloutstanding sharesofCompanyPreferred Stock(asdefinedinSection4.3)(otherthantheSeriesAAPreferred Stockandtheotherseriesthereofspecifically referredtoinSection2.1(c)(iii))
| |
| andshallpayallamountsdueinrespectofsuchredemption aspromptlyaspracticable inaccordance withtheapplicable termsofCompany's AmendedandRestatedCertificate ofIncorporation.
| |
| ARTICLEIITREATMENT OFSHARESSection2.1EgectoftheMergeronCapitalStock.AttheEffective Time,byvirtueoftheMergerandwithoutanyactiononthepartofanyholderofanycapitalstockofParent,CompanyorLIPASub:(a)Cancellation ofCertainStock,(i)EachshareofCompanyCommonStockandeachshareofCompanyPreferred StockthatisownedbyCompanyastreasurystock,andeachshareofCompanyPreferred StockownedbyanydirectorindirectwhollyownedSubsidiary (asdefinedinSection4.1)ofParentimmediately priortotheEffective Timeshall,byvirtueoftheMergerandwithoutanyactiononthepartoftheholderthereof,ceasetobeoutstanding, becancelled a'ndretiredwithoutpaymentofanyconsideration thereforandceasetoexist.(ii)EachshareofthecommonstockofLIPASub,byvirtueoftheMergerandwithoutanyactiononethepartoftheholderthereof,shallbecancelled andconverted intotherighttoreceiveonefullypaidand,subjecttoSection630oftheNYBCL,non-assessable shareofcommonstockoftheSurviving Corporation.
| |
| D-3 (b)Treatment ofCompanyCommonStock.(i)Eachissuedandoutstanding shareofCompanyCommonStock,otherthansharescancelled pursuanttoSection2.1(a)andCompanyDissenting Shares(asdefinedihSection2.2),shallbecancelled andconverted intotherighttoreceive(x)anamountofcashequaltotheCashPurchasePrice(asdefinedinSection2.1(d)(i))
| |
| dividedbythenumberofsharesofCompanyCommonStockoutstanding ontheClosingDate(the"CommonStockConversion Amount")and(y)anumberofsharesofParentCommonStock(the"Transferred AssetsStockPortion")equaltothenumberofsharesofParentCommonStockreceivedbyCompanypursuanttoclause(i)ofSection1.4(d)dividedbythenumberofsharesofCompanyCommonStockoutstanding ontheClosingDate.EachholderofanysuchshareofCompanyCommonStockshallbedeemedherebytohaveappointed theExchangeAgent(asdefinedinSection2.3(a))asitsagenttosubscribe forsharesofParentCommonStockbyapplyingtheaggregate CommonStockConversion Amountforsuchpurchase.
| |
| ThenumberofsharesofParentCommonStocktobepurchased fortheCommonStockConversion Amountshallbe(x)0.880sharesofParentCommonStocklesstheTransferred AssetsStock'Portion ifthetransactions contemplated bytheExchangeAgreement (the"BUGLILCO Transactions"
| |
| )willbeconsummated contemporaneously withthetransactions contemplated herebyor(y)oneshareofParentCommonStocklessthe,Transferred AssetsStockPortioniftheBUGLILCOTransactions willnotbeconsummated contemporaneously withthetransactions contemplated hereby.Uponsuchcancellation, allsuchsharesofCompanyCommonStockshallceasetoexist,andeachholderofacertificate formerlyrepresenting anysuchsharesshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceiveParent"CommonStockpurchased pursuanttothesecondsentenceofthisSection2.1(b)anddistributed pursuanttoclause(y)ofthefirstsentenceofthisSection2.1(b).(ii)Notwithstanding clause(i)ofthisSection2.1(b),iftheBUGLILCOTransactions havebeenconsummated priortotheEffective Time,eachissuedandoutstanding shareofCompanyCommonStock,shallbecancelled andconverted intotherighttoreceiveonlyanamountofcashequaltotheCommonStockConversion Amountandthetransactions contemplated bythesecondandthirdsentences ofsuchclause(i)shallnotoccur.(c)Treatment ofCompanyPreferred Stock.(i)Eachissuedandoutstanding shareofSeriesAAPreferred Stockotherthansharescancelled pursuanttoSection2.1(a)andCompan'yDissenting Sharesshallbecancelleandconverted intotherighttoreceiveonefullypaidand,subjecttoSection630oftheNYBCL,non-assessable shareofpreferred stock,parvalue$25pershare,ofParent("ParentPreferred Stock")withidentical rights(including dividendrates)anddesignations totheSeriesAAPreferred StockassetforthintheCertificate ofDesignation attachedheretoasExhibitH.Uponsuchconversion, eachholderofacertificate formerlyrepresenting anysharesofSeriesAAPreferred Stockshallceasetohaveanyrightswithrespectthereto,excepttherighttoreceivethesharesofParentPreferred Stock,inconsideration thereforuponthesurrender ofsuchcertificate inaccordance withSection2.3.(ii)Eachissuedandoutstanding shareofCompanyPreferred Stockthatissubjecttooptionalredemption byCompanyatorbeforetheClosingDate(otherthansharescancelled pursuanttoSection2.1(a)(collectively, "Redeemable Preferred Stock")shallbecalledforredemption byCompanyasprovidedinSection1.11andallsuchsharesshallberedeemedforcashbyCompanyinaccordance withthetermsapplicable tosuchshares.Theaggregate amountofaccruedbutunpaiddividends and,redemption premiumspayablebyCompanyinrespectofsuchredemptions (the"Aggregate Redemption Premium")shallbepaidbyParenttoCompanynotlaterthantwobusinessdayspriortothedatetheapplicable redemption priceispayable.(iii)Hachissuedandoutstanding shareofCompanyPreferred Stock(otherthansharescancelled pursuanttoSection2.1(a),Company,.Dissenting Shares,sharesofSeriesAAPreferred StockandRedeemable Preferred Stock)(collectively, "Nonredeemable Preferred Stock")shallbecancelled andconverted intotherighttoreceivecashintheamountofthesumof(x)theMake-Whole Amount(ashereinafter defined)and(y)accruedbutunpaiddividends inrespectofsuchsharethroughtheClosingDate.Asusedherein,"Make-Whole Amount"withrespecttoeachshareofNonredeemable Preferred Stockmeansanamountequaltothepresentvalueof(A)thefaceorliquidation preference amount,whichever i.applicable, ofsuchshareand(B)theremaining dividendpaymentsdueonsuchsharebetweentheClosinD-4 DateandtheearliestdateonwhichCompanymayredeemsuchshare,computedusingadiscountrateequaltotheapplicable FairMarketRatedividedby0.95."FairMarketRate"isdefinedasthe-Generic GeneralObligation FairMarketYieldforBaaratedLow/Medium CouponGeneralMunicipal Obligations atthetimeofthecomputation asreportedonBloomberg, withamaturitymostnearlyequal.totheperiodbetweencancellation andfinalredemption ofsuchseriesofNon-redeemable Preferred Stock.Theperiodbetweencancellation andredemption referstotheperiodbetweentheClosingDateand:(A)August1,2002,withrespecttotheSeriesCCPreferred Stock,(B)March1,1999,withrespecttotheSeriesGGPreferred Stock,(C)May1,2001,withrespecttotheSeriesQQPreferred Stock,and(D)October16,2018,withrespecttotheSeriesUUPreferred Stock.Theamountbywhich'heaggregate amountpayablepursuanttothisSection2.1(c)(iii) exceeds100%oftheaggregate faceorliquidation preference, amounts,whichever isapplicable, forallsharesofNonredeemable Preferred StockshallbepaidbyParenttotheSurviving Corporation attheEffective Time.(d)CashPurchase,.
| |
| Price;Adjustqient.,
| |
| (i)The"CashPurchasePrice"tobepaidbyAuthority shallbe$2,497,500,000.
| |
| (ii)TheCashPurchasePrice'has beendetermined baseduponthenetbookvalueoftheRetainedAssets(asdefinedinSection4.4(b))of$2,500,800,000 asset'orthintheproformaconsolidated balancesheetofCompanyas'fDecember31,1997preparedbyCompany(the"Pro'Forma BalanceSheet").TheCashPurchasePriceisbasedupontheassumption thatthetotallong-term indebtedness ofCompanyontheClosingDateshallnotexceed$3,576,000,000 (the"Retained DebtAmount").TheRetainedDebtAmountshallbeadjustedinaccordance withtheadjustment referredtoinSection2.1(d)(vi)
| |
| (the"Adjustment"
| |
| ).(iii)Nolaterthan60daysaftertheClosingDate,'Parent shallprepareanddelivertoAuthority, withacopytoAuthority's independent accountants, PriceWaterhouse LLP("PriceWaterhouse"),
| |
| theauditedconsolidated balancesheetofCompanyasoftheClosingDate(the"ClosingDateBalanceSheet")andastatement, asoftheClosingDate(the"Statement"
| |
| ),settingforth.the amountoftheAdjustment andthecalculations thereofinreasonable detailandshowingthedifferences betweeneachaccountcontained intheProForma.BalanceSheetandthecorresponding accoui)tintheClosingDateBalanceSheet.TheClosingDateBalance.SheetandtheStatement.
| |
| shallbepreparedinaccordance withgenerally
| |
| : accepted, accounting principles usedbyCompanyinthepreparation ofitsfinancial statements, fortheyearendedDecember31,1996("GAAP"),
| |
| usingallocation procedures consistent withtheprocedures usedbyCompanytopreparetheProFormaBalanceSheetanditsauditedhistorical financial statements.
| |
| DuringtheperiodrequiredtopreparetheClosingDateBalanceSheet,Surviving Corporation, willmakeavailable thebooksandrecordsofSurviving Corporation, toParent,itsauthorized representatives andParent'sindependent
| |
| : auditors, Ernst&Young("E&Y").(iv)Duringthe60-dayperiodfollowing receiptbyAuthority oftheClosingDateBalanceSheetandtheStatement, Parentshallmakeavailable andshalldirectE&Ytomakeavaifable toAuthority andPriceWaterhouse copiesoftheworkingpapers,booksandrecordsusedinthepreparation oftheClosingDateBalanceSheetandtheStatement, asreasonably requested byAuthority.
| |
| TheClosingDateBalanceSheetandtheStatement shallbecomefinalandbindinguponthepartiesatthecloseofbusinessonthesixtiethdayfollowing receiptthereofbyAuthority, excepttotlieextentthatAuthority giveswrittennoticeofitsdisagreement withtheClosingDateBalanceSheetortheStatement
| |
| ("NoticeofDis'agreement")
| |
| toParentpriortosuchdate,orifsuchdayisnotabusinessday,thenextfollowing businessday.AnyNoticeofDisagreement shallspecifyinreasonable de'tailthenatureofanydisagreement soasserted.
| |
| (v)Duringthe30-dayperiodfollowing thedeliveryofaNoticeofDisagreement, ParentandAuthority
| |
| ~'shallseekingoodfaithtoresolveinwritinganydifferences whichtheymayhavewithrespecttothematters,specified intheNoticeofDisagreement.
| |
| Duringsuch'eriod, ParentandE&YshallhaveaccesstotheworkingpapersofPriceWaterhouse preparedinconnection withtheiranalysisofanymatterspecified intheNoticeofDisagreement, asreasonably requested byParent,andAuthority andPriceWaterhouse shallhaveaccesstotheworkingpapersofE&Ypreparedinconnection withtheClosingDateBalanceSheetandtheStatement, asreasonably requested byAuthority.
| |
| Attheendofsuch30-dayperiod,ParentandAuthority D-5 shallsubmit'oanindependent accounting firm(the"Accounting Firm")forreviewandresolution'of anyandallmatterswhichremainindisputeandwhichwereincludedintheNoticeofDisagreement.
| |
| TheAccounting FirmshallbeKPMGPeatMarwickor,ifsuchfirmisunableorunwilling toact,suchother~nationally recognized independent publicaccounting firmasshallbeagreeduponbyParentandAuthority inwriting,IfParentandAuthority donotagreeontheselection ofanationally recognized independent accounting firm,Price.Waterhouse.
| |
| andE&Yshallselectathirdaccounting firmtoactastheAccounting Firmhereunder.
| |
| TheAdjustment asdetermined byParent,asmodified(ifatall)byresolution ofParentandAuthority orbytheAccounting'Firm, isreferredtohereinasthe"FinalAdjustment."
| |
| Thedetermination oftheAccounting Firmastosuchmattersshallbefinalandbindingonthepartieshereto,andParentandAuthority agreethatjudgmentmaybeentereduponthedetermination oftheAccounting Firminany'ourthavingjurisdiction overthepartyagainstwhichsuchdetermination istobeenforced.
| |
| ThefeesandexpensesoftheAccounting FirmincurredpursuanttothisSection2.1(d)(v) shallbebornebyParentandAuthority ininverseproportion astheymayprevailonmattersresolvedbytheAccounting Firm,whichproportionate allocations shallalsobedetermined bytheAccounting Firmatthetimethedetermination ofthe'Accounting Firmisrenderedonthemeritsofthematterssubmitted.
| |
| Thefeesanddisbursements ofE&Yincurredinconnection withtheircertification oftheClosingDateBalanceSheetandtheStatement andreviewofanynoticeofDisagreement shallbebornebyParentandthefeesanddisbursements ofPriceWaterhouse incurredinconnection withtheirreviewoftheClosingDateBalanceSheet,andtheStatement shallbebornebySurviving Corporation orAuthority.
| |
| 'vi)TheRetainedDebtAmount'shallbe(A)increased bytheamount,ifany,bywhichthenetbookvalueoftheRetainedAssetsex'ceeds$2,500,800,000 or'B)decreased bytheamottnt,if.any,by'hichthenetbookvalueoftheRetainedAssetsislessthan$2,500,800,000.
| |
| (vii)TheTransferred Assets.shallincludeallcashheldbyCompanyattheClosingexceptforthenet'proceeds of'thesale'of.New ParentPreferred Stock.TheaccountspayableretainedbyCompanyimmediately following theClosing'hall be$101.7millionplusormiriustheNewParentPreferred'Stock Adjtistment ashereinafter define'd."
| |
| Totheextentthat,thea'mountofsuchnetproceedsfromthesaleoftheNewParentPreferred Stockismore(the"Excess")orlessthan$75million(the"Shortfall"
| |
| )theaccountspayableretainedbytheCompanyimmediately following theClosingshallbeincreased ordecreased'by theamountoftheExcessorShortfall,'espectively, (the"NewParent'referred StockAgreement'-').
| |
| (e)RetainedDe'bt.'ttheClosing,ParentshallexecuteanddeliverandshallcauseeachTransferee Subsidiary toexecuteanddeliver,toCompanysuchpromissory notesasshallhaveanaggregate principal amountequaltotheexcess;if any,of(i)theindebtedness ofCompanyoutstanding onthe'Closing Date(the"ClosingDateDebtAmount")over(ii)theRetainedDebtAmountandasshallhavesuchratesandmaturities (including, withoutlimitation,,accelerated maturities resulting fromdefaultandvoluntary andmandatory prepayments) asshallcorrespond, toeachportionofdebtunderlying theindebtedness of.CompanyontheClosingDate(the"Promissory Notes");provided, however,thatsuchinterestandprincipal paymentdatesshallbeadjustedtorequirepaymentbyParent,30dayspriortothecorresponding paymentdatesontheunderlying debt,ofanamountwhich,including amountsassuredtobeearnedbyAuthority whilesuchfundsareheldbyit,w'illbesufficient tomakethecorresponding
| |
| : payments, Theaggregate excessprincipal amountshallbeallocated toeachPromissory Noteonaproratabasissuchthattheratioof(x)theprincipal amountofeachPromissory Noteto(y)theaggregate excessprincipal amountshallcoriespond totheratioof(A)theprincipal amountofthecorresponding underlying portionofdebtto(B)theClosingDateDebtAmount.TheClosingDateDebtAmountshall,fortliepurposeofcalculating theaggregate principal amountofsuchPromissory Notes,betheainountsetforthinacertificate signedbytheChiefFinancial OfficerofCompanyanddelivered toParentandAuthority ontheClosingDate.Such'amount shallbereviewedbyE&Yinaccordance withSection2.1(d)(iii) andtheactualamount,thereofshallbesetforthinthe,Statement.
| |
| TheactualamountshallbesubjecttoreviewbyPriceWaterhouse, inaccordance withtheprocedures setforthinSection2.1(d)(iv),
| |
| withanydisagreements beingresolvedinaccordance withtheprocedures setforthinSection2.1(d)(v).
| |
| Uponthefinaldetermination ofsuchamount,thePromissory Notes'shallbeadjustedonaproratabasistoreflecttheprincipal amountsodetermined.
| |
| ~l'~'-6 (f)CreditRating.(i)If,atanytimewhenanyPromissory Notesareoutstanding, aMaterialDeclinein,arent's,Ciedit Standing(as,-defined below)occurs,thenwithin10daysaftersuchoccurrence,,Parent shallprovidecreditenhancement ofthePromissory Not~,hereunder atitssolecostandexpenseintheformofaletterof,credi<
| |
| securingthePromissory Noteshereunder, inafaceamountequaltotheaggregate outstanding balanceso(thePromissory Notes,issued,byafinancial institution whoselong-term seniordebt,isorwouldberated"A",or,betterbyqtleasttwonationally recognized, ratingservices.
| |
| I(ii)Forpurposesof:thisSection,a"Material DeclineinParent'sCreditStanding" shall,be'deemed to'ha've'occurred if:(1)Parenthaslong-term seniordebtoutstanding whichis,ratedbyariationally recognized
| |
| '~'atingserviceandParent'slong-term seniordebtoutstanding isnotratedatleast"A",-bytwoormoresucliratingservices',
| |
| or(2)inthesolereasonable opinionoftheAuthority, inthe'eventthat'Parent doesnothav'e'."Iong-term~senior debt'outstanding orsuchdebtisnotratedbyatleasttwo'nationally recoghized ratingservices, orthecreditstandingofParentdeclinestoalevelwhichisinsufficient tosupportatleast.an."A"creditratingbytwoormorenationally recognized ratingservices, whetherornotanysuchdebtis,outstanding.
| |
| Parentshallimmediately notifytheAuthority ofany,MaterialDeclineinParent'p, CreditStanding.
| |
| (iii)Upontheoccurrence ofaMaterialDeclineinParent'sCreditStanding,,Parent shallhave,theright.,to=economically defeasethePromissory Notesby,delivering toAuthority U.S.treasurysecurities ofsuch.maturities andinsuchprincipal amountsasshallbesufficient, asreasonablydetermined byAuthority, toproducecashatthetimesandinthe.amountsrequiredtopayallamountsdueinrespectoftheindebtedness
| |
| ,;tunderlying thePromissory Notes.Nl(t'g)Treatlnent ofDebtatClosing.(i)Thepartiesshallcooperate withehch'other toeffectrefinancings; repayments,'mendments of'Company's outstanding indebt'edness andotherrelatedtransactions withthe,iritention ofminimizing theaggregate princip'al "amountofthePromissory'Notes andmaximizing theamountofCompany's tax-exempt indebtedness ottheEffective Time.'ii)No'artyshall'be'equired bythis"Section2.1(g)toeffectanytran'saction thatitreasonably determines tobefinancially adversetoitbycomparison tothe'transactions contemplated bySection2.1'(e).p,(h)AssianptionofCertainDebt.Subjecttoobtaining allrequiredconsents, ParentwillassumeatClosing(i).,the7.3%Debentures dueJuly151999with anapproximate aggregate principal amount.currently outstanding of$397millionand(ii)the8.20%Debentures dueMarch15,2023,withanapproximate aggregate principal amountcurrently outstanding qf$270million,Certainothertaxexemptauthority financing noteswillbeidentified bythepartiesandassumedbyParent(subjecttoobtaining allrequiredconsentsandtotheparties'ax'coun'sel's'concurrence).
| |
| IIp,(i)AccounisReceivable andAccruedUnbilledRevenues.
| |
| Parentwillbeentitledto/responsible, foranyover/undercollection inexcessof,$500,000oftheretainedcustomeraccountsreceivable andaccruedunbilledrevenues'on theClosingDateBalanceSheet.PriortotheClosingDate,thepartieswilldevelopamutuallyagreeduponmethodology thatwillmeasuresuchcollections.
| |
| J6f.Section2.2,Dissenting
| |
| /bares.SharesofCommonStockSeries AAPreferred StockorNonredeemable Preferred Stockheldbyanyholderentitledto,relief asadissenting shareholder underSection910oftheNYBCL(the,"Company Dissenting shares"),shall notbecomethe,rightto,receive~the Common,StockConversion Amountincash(inthecaseof.any:such shareofCompanyCommonStock),ParentPreferred Stock(inthecaseofanysuchshareofSeriesAAPreferred Stock)oranycashamountpayablepursuanttoSection2.1(c)(iii)
| |
| (inthecaseofan'ys'uchsh~ofNonredeemable Pieferred Stock),butshallbecancelled an'dconverted intosuchconsideration asmaybe'duewithres'pecttosuchsharespursuanttotheapplicable'provisions oftheNYBCL,unlessanduntilthe'right of'suchholdertoreceivefair'cash valueforsuchCompanyDissenting Shaiesterminates inaccordance withSection623ofthe"NYBCL.Ifsuchriglitisterminated "otherwise thanbythepilrchase of.'suchsharesbyCompanyorLIPASub,thensuchsharesshallceasetobeCompanyDissenting Sharesandshallrepresent>the righttoreceivethe,CommonStockConversion Amountincash,(inthecase.ofanysuchshareofCompanyCommonStock),ParentPreferred Stock(inthecaseofanysuchshareofSeriesAAreferredStock)oranycashamount;payable pursuanttoSection2.1(c)(iii)
| |
| (inthecaseofanysuchshareofonredeemable Preferred Stock).D-"7 Section2.3IssuanceofParentShares.,(a)DepositwithExchangeAgent.Assoon'aspracticable aftertheEffective Time,Parentshalldepositwithsuchbankortrustcompanyasshallhavebeenmutuallyagreeable toCompanyand'Authority priortotheEffective Time(the"Exchange Agent"),certificates representing ParentSharesrequiredtoeffecttheissuances referre'd toinSection2.1(b)'andSection2.1(c)(i).
| |
| IfCompanyandAuthority shallnothaveagreedontheExchangeAgentpriortotheEffective Time,thebank'ortrustcompanythenservingasregistrar a'ndtransferagentfortheSeriesAAPreferred StockshallbeselectedtoactasExchangeAgentforthe.SeriesAAPreferred Stock.ThesharesofParentCommonStocksubscribed forbytheExchangeAgentasagentfortheholdersofCompanyCommon'Stock pursuanttoSection2.1(b)andthe,sharesofParentCommonStockconstituting theTransferred.
| |
| AssetsStockPortion,togetherwiththesharesofParent.Preferred StockforwhichthesharesofSeriesAAPreferred Stockaretobeexchanged pursuanttoSection2.1(c)(i),
| |
| arereferredtohereincollectively asthe"Parent Shares."(b)Procedures forIssuanceofParentShares.Assoonaspracticable aftertheEffective Time,theExchangeAgentshallmailtoeachholderofrecordofa'certificate orcertificates (the"Certificat")'which immediately priortotheEffective Timerepresented outstanding sharesofSeriesAAPreferred StockorCompanyCommonStock,asapplicable (the"Cancelled Shares")thatwerecancelled andbecameinstead,directlyorindirectly, therighttoreceivetheapplicable ParentShares,(i)aletteroftransmittal (whichshall.specifythatdeliveryshallbeeffected, andriskoflossandtitletotheCertificates shallpass,onlyuponactualdeliveryof-theCertificates totheExchangeAgent)and(ii)instructions foruseineffecting thesurrender oftheCertificates inexchangeforcertificates representing ParentShares.Uponsurrender ofaCertificate totheExchangeAgentforcancellation (ortosuchotheragentoragentsasmaybeappointed byagreement ofCompanyandAuthority),
| |
| togetherwithadulyexecutedletteroftransmittal andsuchotherdocuments astheExchangeAgentshallrequire,theholderofsuchCertificate shallbeentitledtoreceive,a certificate representing thatnumberofParentShareswhichsuchholderhastherighttoreceivepursuanttotheprovisions ofthisArticleII.Intheeventofatransferofownership ofCancelled Shareswhichisnotregistered inthetransferrecordsofCompanyacertificate representing thepropertiumberofParentSharesmaybeissuedtoatransferee iftheCertificate representing suchCancelled Sharesispresented totheExchangeAgent,accompanied byadocuments requiredtoevi'derice andeffectsuchtransferandbyevidencesatisfactory totheExchangeAgentthaanyapplicable stocktransfertaxeshavebeenpaid.Untilsurrendered ascontemplated bythisSection2.3,eachCertificate shallbedeemedatanytimeaftertheEffective Timetorepresent onlytherighttoreceiveuporisuchsurrender thecertificate representing ParentSharesascontemplated bythisSection2.3.(c)Distributions withrespecttoUnsurrendered Shares.Nodividends orotherdistributions declaredormadeaftertheEffective TimewithrespecttotheParentShareswitharecorddateaftertheEffective Timeshallbepaidtotheholderofanyunsurrendered Certificate withrespecttotheParentSharesrepresented therebyuntiltheholderofrecordofsuchCertificate shallsurrender suchCertificate.
| |
| Subjecttotheeffectofunclaimed
| |
| : property, escheatandotherapplicable laws,following surrender ofanysuchCertificate, thereshallbepaidtotherecordholderofthecertificates representing ParentSharesissuedinconsideration
| |
| : therefor, withoutinterest, (i)atthetimeofsuchsurrender, theamountofdividends orotherdistributions witharecorddateaftertheEffective Timetheretofore paidwithre'specttosuchParentSharesand(ii)attheappropriate paymentdate,theamountofdividends orotherdistributions witharecorddateaftertheEffective Timebutpriortosurrender andapaymentdatesubsequent tosurrender payablewithrespecttosuchParentShares.(d)ClosingofTransferBooks.FromandaftertheEffectiye Time,thestocktransferbookoftheCompanyshallbeclosedandnotransfer, ofanycapitalstockoftheCompanyshallthereafter bemade.If>aftertheEffective Time,Certificates arepresented totheCompany,theyshallbecancelled andexchanged forcertificates representing theappropriate numberofParentShares,asprovidedinthisSection2.3.'e)Termination ofZrchangeAgent.Anycertificates representing ParentSharesdeposited withtheExchangeAgentpursuanttoSection2.3(a)andnotexchanged withinoneyearaftertheEffective TimepursuanttothisSection.2.3 shallbereturnedbytheExchangeAgenttoParent,whichshallthereafter actasExchangeAgent.Parentshallnotbeliabletoanypersonforsuchsharesdelivered toapublicofficialpursuanttoanapplicable abandoned
| |
| : property, escheatorsimilarlaw.D-8 ARTICLEIIItCLOSINGSection3.1Closing.Uponthetermsandsubjecttotheconditions ofthisAgreement, theconsummation ofthetransactions
| |
| 'contemplated bythisAgreement (the"Closing"
| |
| )willtakeplaceonthesecondbusinessdayfollowing theredemption ofallseriesofCompanyPreferred Stockcontemplated toberedeemed'pursuant toSection1.11at10:00a.m.,atsuchplaceonLongIslandorothertimeasshallbeagreeduponbytheparties.ThedateonwhichtheClosingoccursisreferredtohereinasthe"ClosingDate."ARTICLEIVREPRESENTATIONS ANDWARRANTIES OFPARENTANDCOMPANYEachofParentandCompanyherebyrepresents andwarrantstoAuthority andLIPASubasfollows:Section4.1Organization andQualtjication.
| |
| Exceptascontemplated bySection1.4,assetforthinSection4.1oftheParentDisclosure Schedule(asdefinedinSection7.4),eachofParent,CompanyandeachoftheCompanySubsidiaries (asdefinedbelow)isacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization, hasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstandingtodobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| AsusedinthisAgreement, (a)theterm"Subsidiary" ofapersonshallmeananycorporation orotherentity(including partnerships, limitedliability companies andotherbusinessassociations) ofwhichat,leastamajorityoftheoutstanding capitalstockorothervotingsecurities havingvotingpowerunderordinarycircumstances toelectdirectors orsimilarmembersofthegoverning bodyofsuchcorporation orentityshallatthetimebeJield,directlyorindirectly, bysuchpersonand(b)theterm"CompanySubsidiary" shallmeanaSubsidiary ofompany.Section4.2Subsidiaries.
| |
| Section4.2oftheParentDisclosure Schedulesetsforthadescription asofthedatehereofofallCompanySubsidiaries andJointVenturesofCompany("CompanyJointVentures"
| |
| ),including (a)thenameofeachsuchentityandCompany's interesttherein,and(b)abriefdescription oftheprincipal lineorlinesofbusinessconducted byeachsuchentity.ExceptassetforthinSection4.2oftheParentDisclosure
| |
| : Schedule, noneofCompanySubsidiaries isa"publicutilitycompany",
| |
| a"holdingcompany",
| |
| a"subsidiary company"oran"affiliate" ofanypublicutilitycompanywithinthemeaningofSection2(a)(5),2(a)(7),2(a)(8)or2(a)(11)ofthePublicUtilityHoldingCompanyActof1935(the"1935Act"),respectively.
| |
| ExceptassetforthinSection4.2oftheParentDisclosure
| |
| : Schedule, alloftheissuedandoutstanding sharesofcapitalstockofCompanyandofeachCompanySubsidiary arevalidlyissued,fullypaid,nonassessable andfreeofpreemptive rights,and,asoftheClosingDate,willbeowneddirectlyorindirectly byParentfreeandclearofanyliens,claims,encumbrances, securityinterests,
| |
| : equities, chargesandoptionsofanynaturewhatsoever an'dtherearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightof,conversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating anysuchCompanySubsidiary toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofitscapitalstockorobligating ittogrant,extendorenterintoanysuchagreement orcommitment.
| |
| AsusedinthisAgreement, (a)theterm"JointVenture"ofapersonshallmeananycorporation orotherentity(including partnerships andotherbusinessassociations) thatisnotaSubsidiary ofsuchperson,inwhichsuchpersonoroneormoreofitsSubsidiaries ownsanequityinterestand(b)theterm"CompanyJointVenture"shallmeanthoseofthejointventuresofCompanyoranyCompanySubsidiary identified asaCompanyJointVentureinSection4.2oftheParentDisclosure Schedule.
| |
| Section4.3Capitalization.
| |
| Theauthorized capitalstockofCompanyisassetforthintheTransition eportonForm10-Qforthetransition periodfromJanuary1,1997toMarch31,1997.The.numberof~issued ndoutstanding sharesofcommonstock,parvalue$5pershare,ofCompany("CompanyCommonStock")D-9 andpreferred stockofCompany(the"CompanyPreferred Stock"),andeachseriesthereof,asofDecember31,1996,areassetforthinCompany's AnnualReportonForm10kfortheyearendedDecember31,1996,andCompanyhasneither,issued,sold,redeemedorrepurchased anysharesofCompanyPreferred StocksinceDecember31,1996.All.oftheissuedandoutstanding sharesofthecapitalstockofCompanyarevalidlyissued,fullypaid,nonassessable (subjecttoSection630oftheNYBCL)andfreeofpreemptive rights.ExceptassetforthinSection4.3oftheParentDisclosure
| |
| : Schedule, asofthe'atehereof,therearenooutstanding subscriptions, options,calls,contracts, votingtrusts,proxiesorothercommitments, understandings, restrictions, arrangements, rightsorwarrants, including anyrightofconversion orexchangeunderanyoutstanding
| |
| : security, instrument orotheragreement, obligating Parent,CompanyoranyoftheCompanySubsidiaries toissue,deliverorsell,orcausetobeissued,delivered orsold,additional sharesofthecapitalstockofCompany,orobligating Parenttogrant;extendorenterinto,anysuchagreement orcommitment.
| |
| Therearenooutstanding stockappreciation rightsofCompanywhichwerenotgrantedintandemwitharelatedstockoptionandnooutstanding limitedstock'appreciation'rights orotherrightstoredeemforcashoptionsorwarrantsofCompany..Section4.4Authority; Non-Contraventiont Statutory Approvals; Compliance.
| |
| (a)Authority.
| |
| Each'ofParentandCompanyhasallrequisite powerandauthority toenterintoeachofthisAgreement, theManagement ServicesAgreement, thePowerSupplyAgreement, theEnergyManagement Agreement, theGeneration PurchaseRightAgreement, theGuarantyAgreement, the'ParentLiabilities Undertaking, theAuthority Liabilities Undertaking andthePromissory Notes(collectively, the"BasicAgreements"
| |
| )towhichitis'aparty,and,subjecttotheParentRequiredStatutory Approvals (asdefinedinSection4.4(c)),toconsummate thetransa'ctions contemplated herebyandthereby.Eachoftheapplicable Transferee Subsidiaries will,'at'theEffective Time,haveallrequisite powerandauthority toenterintoeachoftheBasicAgreements t'owhichitisaparty,and,subjecttotheParentRequiredStatutory'pprovals, toconsummate" thetransactions
| |
| 'contemplated thereby.Theexecution'and deliveryofeachoftheBasicAgreements towhichParent'or Co'mpanyisapartyandtheconsummation byParentandCompanyofthetransactions contemplated herebyandtherebyhavebeendulyauthorized byallnecessary corporate actiononthepartofParentandCompany,otherthantheCompanyShareholder Approval(asdefinedinSection4.11).TheexecutioanddeliveryofeachoftheBasicAgreements towhichtheapplicable Transferee Subsidiaries areapartyandthconsummation ofthetransactions.
| |
| contemplated therebywill,attheEffective Time,bedulyauthorized byallnecessary corporate actiononthepartofsuchTransferee Subsidiaries.
| |
| ThisAgreement has.beendulyandvalidlyexecuted-and delivered by.ParentandCompanyand,assumingthedueauthorization, execution anddeliveryhereofbytheothersignatories hereto(otherthanLIPASub),constitutes thevalidandbindingobligation ofParentandCompany,enforceable againsteachoftheminaccordance withitsterms.I(b)Non-Contravention.
| |
| ExceptassetforthinSection4.4(b)oftheParentDisclosure
| |
| : Schedule, theexecution anddeliveryof.thisAgreement byParentandCompanyandeachoftheotherBasicAgreements towhichParentorCompanyisapartydoesnot,andtheconsummation ofthetransactions contemplated herebyandtherebywillnot,inanymaterialrespect,violate,confiictwith,orresultinamaterialbreachofanyprovision of,orconstitute amaterialdefault(withorwithoutnoticeorlapseoftimeorboth)under,'or resultinthetermination ormodification of,oraccelerate theperformance requiredby,or'esultinarightoftermination, cancellation, oracceleration'of anyobligation orthelossofamaterialbenefitunder,orresultinthecreationofanymaterial'lien, security'nterest, chargeorencumbrance uponanyoftheproperties orassetscontemplated herebytobeownedattheEffective Time(x)byCompanyor(y)byanyCompanySubsidiary orCompanyJointVentures'not constituting aportionoftheTransferred Assets(collectively, andasdescribed inScheduleG,the"Retained Assets")(anysuchviolation,
| |
| : confiict, breach,default,rightoftermination, modification, cancellation oracceleration, lossorcreation, a"Violation" withrespecttoParent,CompanyoranyCompanySubsidiaries, suchtermwhenusedinArticleVhavingacorrelative meaningwithrespecttoAuthority andLIPASub)pursuanttoanyprovisions of(i)thecertificate ofincorporation, by-lawsorsimilargoverning documents ofParent,CompanyoranyoftheCompanySubsidiaries ortheCompanyJointVentures, (ii)subjecttoobtaining theParen'tRequiredStatutory Approvals andthereceiptoftheCompanyShareholder
| |
| : Approval, anystatute,law,ordinance, rule,regulation, judgmentdecree, order,injunction, writ,permitorlicenseofanyGovernmenta Authority:(as definedinSection4.4(c))applicable toParentorCompanyoranyoftheCompanySubsidiaries heCompanyJointVenturesoranyRetainedAssetor(iii)subjecttoobtaining thethird-party consentssetforthinSection4.4(b)oftheParentDisclosure Schedule(the"ParentRequiredConsents"),
| |
| anymaterialnote,bond,mortgage, indenture, deed,oftrust,license,franchise, permit,concession,
| |
| : contract, leaseorotherinstrument, obligation oragreement ofanykindtowhichParentorCompanyoranyoftheCompanySubsidiaries ortheCompanyJointVenturesisapartyorbywhichanyRetainedAssetmaybeboundoraffected.
| |
| (c)Statutory Approvals.
| |
| Nodeclaration, filingorregistration with,ornoticetoorauthorization, consentorapprovalof,anycourt,federal,state,localorforeigngovernmental orregulatory body(including astockexchangeorotherself-regulatory body)orauthority (eacha"Governmental Authority"
| |
| )isnecessary fortheexecution anddeliveryofthisAgreement byParentandCompanyandeachoftheotherBasicAgreements towhichParent,CompanyoraTransferee Subsidiary isapartyortheconsummation byParent,CompanyandtheTransferee Subsidiaries ofthetransactions contemplated herebyandthereby,.except asdescribed inSection4.'4(c)oftheParentDisclosure Schedule(the"ParentRequiredStatutory Approvals,",
| |
| itbeingunderstood thatreferences inthisAgreement to,"obtaining" suchParentRequiredStatutory Approvals shallmeanmakingsuchdeclarations, filings,orregistrations; givingsuchnotices;obtaining, suchauthorizations, consentsorapprovals; andhaving;Such waitingperiodsexpireasarenecessary toavoidaviolation oflaw).,(d}Compliaiice.
| |
| ExceptassetforthinSection4.4(d)orSection4.9oftheParentDisclosure
| |
| : Schedule, ScheduleD(TaxMatters)orScheduleE(Employment Matters)hereto,orasdisclosed intheParentSECReports(asdefinedinSection4.5)filedpriortothedatehereof(i)neitherParent,CompanynoranyoftheCompanySubsidiaries nor,totheknowledge ofParentor.Company,anyCompanyJointVentureis,withrespecttoanyRetainedAsset,inmaterialviolation of,is,withrespecttoanyRetainedAsset,underinvestigation withrespecttoanymaterialviolation of,or,withrespecttpanyRetainedAsset,hasbeengivennoticeorbeenchargedvtithanymaterialviolation of>>anylaw,statute,order,ruleregulation, ordinance orjudgment(including, withoutlimitation, anyapplicable Environmental Law,ordinance orregulation) ofanyGovernmental Authority, and(ii)(otherthanas,,covered tipderclause(i)ofthisSection4.4(d))neitherCompanynoranyoftheCompanySubsidiaries nor,totheknowledge ofParentorCompany,anyCompanyJointVenture,isinmaterialviolation f,isunderinvestigation withrespecttoanymaterialviolation of,oi;hasbeengivennoticeorbeenchargedwithnymaterialviolation of,anylaw,statute,order,rule,regulation, ordinance orjudgment(including, withoutlimitation, anyapplicable Environmental Law,ordinance orregulation) ofanyGovernmental Authority.
| |
| Exceptassetforthin.,Section 4.4(d)oftheParentDisclosure ScheduleorinSection4.9oftheParentDisclosure
| |
| : Schedule, CompanyandtheCompanySubsidiaries andCompanyJointVentureshaveallpermits,"
| |
| : licenses, franchises'and othergovernmental=authorizations, consentsandapprovals necessary toconducttheirbusinesses aspresently conducted inallmaterialrespects.
| |
| ExceptassetforthinSection4.4(d)oftheParentDisclosure
| |
| : Schedule, CompanyandeachoftheCompanySubsidiaries isnotinmaterialbreachorviolation oforinmaterialdefaultintheperformance orobservance ofanytermorprovision of,andnoeventhasoccurredwhich,withlapseoftimeoractionbyathirdparty,couldresu'ltinamaterialdefaultunder',(i)itscertificate ofincorporation or'by-laws or(ii)anymaterialcontract, commitment, agreement, indenture,
| |
| : mortgage, loanagreement, note,lease,bond,license,approvalorotherinstrument towhichitisapartyorbywhichitisboundortowhichanyRetainedAssetissubject.Section4.5ReportsandFinancial Statements.
| |
| ThefilingsrequiredtobeinadebyParent,CompanyandtheCompanySubsidiaries sinceJanuaryI,1994undertheSecurities Actof1933(the"Securities Act"),theSecurities ExchangeActof1934,(the "Exchange Act"),the1935Act,theFederalPowerAct,theAtomicEnergyActandapplicable statelawsandregulations havebeenfiledwiththeSecurities andExchangeCommission (the"SEC"),theFederalEnergyRegulatory Commission
| |
| ("FERC"),
| |
| theNuclearRegulatory Commission ortheappropriate.
| |
| statepublicutilities commission, asthecasemaybe,including allforms,statements, reports,agreements (oralorwritten)andalldocuments,
| |
| : exhibits, amendments andsupplements appertaining.
| |
| thereto,andcomplied, asoftheirrespective dates,inallmaterialrespectswithallapplicable requirements oftheappropriate statuteandtherulesandregulations thereunder.
| |
| ParentorCompanyhasmadeavailable toAuthority orLIPASubatrueandcompletecopyofeachreport,schedule, registration statement andefinitive proxystatement filedbyParentorCompanywiththeSECsinceJanuary1,1994(assuchdocuments vesince-the timeoftheirfilingbeenamended,the"ParentSECReports").Asoftheirrespective dates,the ParentSECReportsdidnotcontainanyuntruestatement ofamaterialfactoromittostateamaterialfacrequiredtobestatedthereinornecessary tomakethestatements therein,inlightofthecircumstances underwhichtheyweremade,notmisleading.
| |
| Theauditedconsolidated financial statements andunaudited interimfinancial statements ofCompanyincludedintheParentSECReportshavebeenpreparedinaccordance withGAAP(exceptasmaybeindicated thereinorinthenotestheretoandexceptwithrespecttounaudited statements aspermitted byForm10-QoftheSEC)andfairlypresentthefinancial positionofCompanyasofthedatesthereofandtheresultsofitsoperations andcashflowsfortheperiodsthenended,subject,inthecaseoftheunaudited interimfinancial statements, tonormal,recurring auditadjustments.
| |
| True,accurateandcompletecopiesoftherespective certificates ofincorporation andby-lawsofParentandCompany,asineffectonthedatehereof,areincluded(orincorporated byreference) intheParentSECReports.Section4.6AbsenceofCertainChangesorEvents.Exceptasdisclosed intheParentSECReportsfiledpri'ortothedatehereoforassetforthinSection4.6oftheParentDisclosure
| |
| : Schedule, since'December 31,1995,Parent,CompanyandeachoftheCompanySubsidiaries haveconducted theirbusinessonlyintheordinarycourseofbusinessconsistent withpastpracticeandtherehasnotbeen,andnofactorcondition existswhichwouldhaveor,insofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectontheRetainedAssetsortheproperties,
| |
| : business, operations, financial condition orprospects ofthebusinessrelatingtotheRetainedAssetstakenasawholeoramaterialadversedeclineintheelectricratesavingsprojections presented totheAuthority atitsJune16,1997meetingtoberealizedaftertheClosing(a"Material AdverseEffect").Section4.7Litigation.
| |
| Exceptasdisclosed intheParentSECReportsfiledpriortothedatehereoforassetforthinSection4.7orSection4.9oftheParentDisclosure
| |
| : Schedule, (i)therearenomaterialclaims,suits,actionsorproceedings, pendingor,totheknowledge ofParentandCompany,threatened, norarethere,totheknowledge ofParentandCompany,anymaterialinvestigations orreviewspendingorthreatened against,relatingtooraffecting CompanyoranyoftheCompanySubsidiaries, (ii)therehavenotbeenanysignificant developments sinceDecember31,1996withrespecttosuchdisclosed claims,suits,actions,proceedings, investigations orreviewsand(iii)therearenomaterialjudgments, decrees,injunctions, rulesorordersofanycourt,governmental department, commission, agency,instrumentality orauthority oranyarbitrator applicable tCompanyoranyoftheCompanySubsidiaries.
| |
| Section4.8Registration Statement andProxyStatement.
| |
| Noneoftheinformation suppliedortobesuppliedbyoronbehalfofCompanyforinclusion orincorporation byreference intheproxystatement, indefinitive form,relatingtothemeetingoftheCompanyshareholders tobeheldinconnection withtheMerger(the"ProxyStatement"
| |
| )will,,atthedatemailedtoshareholders andatthetimeofthemeetingofshareholders tobeheldinconnection withtheMerger,containanyuntruestatement ofamaterialfactoromittostateanymaterialfactrequiredtobestatedthereinornecessary inordertomakethestatements therein,inlightofthecircumstances underwhichtheyaremade,notmisleading.
| |
| TheProxyStatement willcomplyastoforminallmaterialrespectswiththeprovisions oftheSecurities ActandtheExchangeActandtherulesandregulations thereunder.
| |
| Section4.9Environtnental Protection.
| |
| ExceptassetforthinSection4.9oftheParentDisclosure ScheduleorintheParentSECReportsfiledpriortothedatehereof:(a)Compliance.
| |
| Theoperation andactivities oftheCompanyandeachoftheCompanySubsidiaries are,andhavebeen,inmaterialcompliance withallEnvironmental Laws(asdefinedinSection4.9(g)(ii))
| |
| applicable totheRetainedAssets;andneitherParent,CompanynoranyoftheCompanySubsidiaries hasreceivedanycommunication (writtenororal),fromanypersonorGovernmental Authority thatallegesthatCompanyoranyoftheCompanySubsidiaries isnotinsuchcompliance withapplicable Environmental Laws.(b)Environmental Pet7nits.
| |
| CompanyandeachoftheCompanySubsidiaries hasobtainedorhasappliedforallmaterialenvironmental healthandsafetypermitsandallothergovernmental
| |
| : licenses, permits,andauthorizations (collectively, the"Environmental Permits")necessary fortheconstruction offacilities constituting partoftheRetainedAssetsortheownership oroperation ofsuchfacilities orRetainedAsset,anallsuchEnvironmental Permitsareingoodstandingor,whereapplicable, arenewalapplication hasbeentimel iledandispendingagencyapproval, an'dCompanyandtheCompanySubsidiaries areinmaterialcompliance withalltermsandconditions oftheEnvironmental Permits..
| |
| j(c)Enviromneirtal Claims.ThereisnomaterialEnvironmental Claim(asdefinedinSection4.9(g)(i))
| |
| pending(i)againstCompanyorany.oftheCompanySubsidiaries orCompanyJointVentures, (ii)tothebestknowledge ofParentand,Company,againstanypersonorentitywhoseliability foranyEnvironmental ClaimCompanyoranyoftheCompanySubsidiaries,has ormayhaveretainedorassumedeithercontractually orbyoperation oflaw,or(iii)againstanyrealorper'sonal propertyoroperations whichCompanyoranyoftheCompanySubsidiaries ownsorformerlyownedor,tothebestknowledge ofParentandCompany,anyrealorpersonalpropertyoroperations whichCompanyoranyof,theCompanySubsidiaries leasesormanagesorformerlyleasedormanaged,ineachcase,inwholeorinpart.I(d)Releases.
| |
| ParentandCompanyhavenoknowledge ofanymaterialReleases(asdefinedinSection4.9(g)(iv))
| |
| ofanyHazardous Material(asdefinedinSection4.9(g)(iii)),
| |
| thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental ClaimagainstCompanyoranyoftheCompanySubsidiaries, oragainstanypersonorentitywhoseliability foranymaterialEnvironmental ClaimParentoranyoftheCompanySubsidiaries hasormayhaveretainedorassumedeithercontractually orbyoperation oflaw.(e)Predecessors.
| |
| ParentandCompanyhavenoknowledge, withrespecttoanypredecessor ofCompanyoranyoftheCompanySubsidiaries, ofanymaterialEnvironmental Claimpendingorthreatened, orofanyReleaseofHazardous Materials thatwouldbereasonably likelytoformthebasisofanymaterialEnvironmental Claim.(f)Disclosure.
| |
| ParentandCompanyhavedisclosed t'oAuthority orL'IPASuballmaterialfactswhichParentreasonably believesformthebasisofamaterialEnvironmental Claimarisingfrom(i)thecostofCompanypollution controlequipment currently requiredorknowntoberequiredinthefuturewithrespecttotheRetainedAssets;(ii)currentCompanyremediation costsorCompanyremediation andsitemonitoring costsnowntoberequiredinthefuturewithrespecttotheRetainedAssets;or(iii)anyotherenvironmental matterfectingCompanywithrespecttotheRetainedAsse4.(g)AsusedinthisAgreement; (i)"Environmental Claim"meansanyandalladministrative, regulatory orjudicialactions,suits,.demands,demandletters,directives, claims,liens,investigations, proceedings ornoticesofnoncompliance orviolation (writtenororal)byanypersonorentity(including anyGovernmental Authority) allegingpotential liability (including, withoutlimitation, potential responsibility fororliability forenforcement, investigatory costs,cleanupcosts,governmental responsecosts,removalcosts,remedialcosts,naturalresources damages,propertydamages,personalinjuriesorpenalties) arisingoutof,basedonorresulting from(A)thepresence, orReleaseorthreatened Releaseintotheenvironment, ofanyHazardous Materials atanylocation, whetherornotowned,operated, leasedormanagedbyCompanyoranyoftheCompany,Subsidiaries orCompanyJointVenturesandconstituting aportionoftheRetainedAssets(forpurposesofthisSection4.9);or(B)circumstances formingthebasisofanyviolation, orallegedviolation, ofanyEnvironmental LawwithrespecttotheRetainedAssets;or(C)anyandallclaimsbyanythirdpartyseekingdamages,contribution, indemnification, costrecovery, compensation orinjunctive reliefresulting fromthepresenceorReleaseofanyHazardous Materials withrespecttotheRetainedAssets.(ii)"Environmental Laws"mea'nsallfederal,state,locallaws;ordinances, rulesandregulations relatingtohealthandsafety,pollution, theenvironment (including, withoutlimitation, ambientair,surfac'ewater,groundwater, landsurfaceorsubsurface strata)orprotection ofhumanhealthasitrelate'stotheenvironment including, withoutlimitation, lawsandregulations relatingtoReleasesorthreatened ReleasesofHazardous Materials, orotherwise relatingtothemanufacture, processing, distribution, use,treatment, storage,disposal, transport orhandlingofHazardous Materials.
| |
| t(iii)"Hazardous Materials" means(A)anypetroleum orpetroleum
| |
| : products, radioactive materials, asbestosinanyformthatisorcouldbecomefriable,ureaformaldehyde foaminsulation, and.transformers D-13 orotherequipment thatcontaindielectric fluidcontaining polychlorinated biphenyls
| |
| ("PCBs");
| |
| and(Banychemicals,'materials orsubstances whicharenowdefinedasorincludedinthe,definition of"hazardous substances",
| |
| "hazardous wastes","hazardous materials",
| |
| "extremely hazardous wastes","restricted hazardous wastes","toxicsubstances",
| |
| "toxicpollutants",
| |
| orwordsofsimilarimport,underanyEnvironmental Law;and(C)anyotherchemical,
| |
| : material, substance orwaste,exposureto.whichisnowprohibited, limitedorregulated underanyEnvironmental Lawinajurisdiction inwhichCompanyoranyoftheCompanySubsidiaries orCompanyJointVenturesoperatesusing'any RetainedAssets(forpurposesofthisSection4.9).h(iv)"Release" meansanyrelease,spill,emission, leaking,injection, deposit,disposal, discharge, dispersal, leachingormigration intotheatmosphere, surfaceorsubsurface soil,surfacewater,saltwater shoreline orfloorbottom,groundwater orpropertyfromoraffecting anyRetainedAssets.Section4.10Regulation asaUtility.ExceptassetforthinSection4.10oftheParentDisclosure
| |
| : Schedule, neitherCompanynorany"subsidiary company"or"affiliate" (assuchtermsaredefinedinthe1935Act)ofCompanyissubjecttoregulation asapublicutilityorpublicservicecompany(orsimilardesignation) byanystateintheUnitedStatesother-than NewYorkoranyforeigncountry.Section4.11VoteRequired.
| |
| Thefollowing aretheonlyvotes("CompanyShareholder Approval"
| |
| )oftheholdersofanyclassorseriesofthecapitalstockofCompanyoranyofitssubsidiaries requiredtoadoptthisAgreement, theotherBasicAgreements andtheothertransactions contemplated herebyandthereby:(a)theadoptionofthisAgreement bytwo-thirds ofthevotesentitledtobecastbyallholdersofCompanyCommonStockandCompanyPreferred Stock(otherthantheRedeemable Preferred Stockredeemedinaccordance withSection2.1(c)(ii)),
| |
| votingtogetherasasingleclass(witheachshareentitledtoonevote,exceptthatCompanyPreferred Stockwith$25parvalueisentitledtoonly1/4votepershare)(b)theadoptionofthisAgreement byamajorityofthevotesentitledtobecastbyallholdersCompanyPreferred Stock(otherthansuchRedeemable Preferred Stock),votingtogetherasasingleclas.(witheachshareentitledtoonevote,exceptthatCompanyPreferred Stockwith$25parvalueisentitledtoonly1/4votepershare);(c)theadoptionofthisAgreement byamajorityofthevotesentitledtobecastbyallholdersofCompanyCommonStock,votingseparately asaclass;and(d)theadoptionofthisAgreement byamajorityofthevotesentitledtobecastbyholdersofSeriesAAPreferred StockandeachseriesofNonredeemable Preferred Stock,ineachcasevotingasaseparateclass.Section4.12Insurance.
| |
| ExceptassetforthinSection4.12oftheParentDisclosure
| |
| : Schedule, CompanyandeachoftheCompanySubsidiaries is,andhasbeencontinuously sinceJanuary1,1991,insuredwithfinancially responsible insurersinsuchamountsandagainstsuchrisksandlossesasarecustomary inallmaterialrespectsforcompanies conducting thebusinessasconducted byCompanyandtheCompanySubsidiaries duringsuchtimeperiod.ExceptassetforthinSection4.12oftheParentDisclosure
| |
| : Schedule, neitherParent,CompanynoranyoftheCompanySubsidiaries hasreceivedanynoticeofcancellation ortermination withrespecttoanymaterialinsurance policyofCompanyoranyoftheCompanySubsidiaries.
| |
| Theinsurance policiesofCompanyandeachoftheCompanySubsidiaries arevalidandenforceable policiesinallmaterialrespects.,
| |
| hSection4.13Disclosure.
| |
| Norepresentations orwarranties byParentorCompanyinthisAgreement andnostatement contained inanydocumentfurnished byParentorCompanytoAuthority orLIPASubpursuanttotheprovisions of,orinconnection withthetransactions contemplated bythisAgreement, willcontainanyuntruestatement ofmaterialfactoromitanymaterialfactnecessary, inlightofthecircumstances underwhichitwmade,inordertomakesuchstatement notmisleading.
| |
| ARTICLEV'EPRESENTATIONS ANDWARRANTIES'OF AUTHORITY,AND''IPA SUBAuthority represents andwarrantstoParentandCo'mpanyasfollows:IISection5.1Organization.
| |
| Authority isacorporate municipal instrumentality hand'politictai subdivision oftheStateofNew;Yorkandwascreatedbylegislation oftheStateofNewYork(Chapter517ofthe1986LawsofNewYork).LIPASubisacorporation dulyorganized, validlyexistingandingoodstandingunderthelawsofitsjurisdiction ofincorporation ororganization.
| |
| EachofAuthority andLIPA,Subthasallrequisite corporate powerandauthority, andhasbeendulyauthorized byallnecessary approvals andorderstoown,leaseandoperateitsassetsandproperties totheextentowned,leasedandoperatedandtocarryonitsbusinessasitisnowbeingconducted andisdulyqualified andingoodstaiiding todobusinessineachjurisdiction inwhichthenatureofitsbusinessortheownership orleasingofitsassetsandproperties makessuchqualification necessary.
| |
| ,,Section5.2 Authorityt Non-Contravention; Statutory Approvals; Compliance.
| |
| tt(a)Authority.
| |
| EachofA'uthority andLIPASubhasallrequisite
| |
| 'powera'ndauthority" toenterintothisAgreement andeachoftheotherBasicAgreeme'nts towhichitisapartyand,subjecttotheAuthority RequiredStatutory Approvals (asdefinedinSection5:2(c))toconsummate thetransactions contemplated herebyandthereby.Theexecution.and deliveryofthisAgreement byeachofAuthority andLIPASubandeachofthe,otherBasicAgreements towhichitisapartyandtheconsummation, byeachof.Authority andLIPASubofthetransactions contemplated herebyandtherebyhave,beendulyauthorized bytheBoardofTrusteesofAuthority and.theBoard,ofDirectors ofLIPASub;noother.corporate proceedings onthepartofeachofAuthority andLIPASubarenecessary,to authorize thisAgreement, eachof,tPeother,BasicAgreements towhich,itisapartyor-.toconsummate thetransactions.
| |
| contemplated herebyand,thereby.ThisAgreement hasbeendulyandvalidlyexecutedanddelivered byAuthority, andLIPASuband,assumingthedueauthorization, execution and,delivery hereofbytheothersignatories hereto,this,Agreement constitutes, thevalid,and.bindingobligationtof Authority dLIPASub,enforceable againsteachofAuthority andLIPASubin,accordance withitsterms...tt(b)Non-Contraventioli.
| |
| Theexecution anddeliveryofthisAgreement andeachofthe"otherBasicAgreements byAuthority orLIPASubdoesnot,andtheconsummation ofthetransactions contemplated herebyand'therebywill'not, resultinamaterialViolation pursuanttoany'provisions, of(i)"tliecertificate ofincorporation, by-lawsorsimilargoverning documents ofLIPASub,(ii)subjecttoobtaining theAuthority
| |
| : Required, Statutory Approvals,.any statute,law,ordinance, rule,regulationr
| |
| : judgment, decree,order;injunction, writ,permitor,licenseofanyGovernmental Authority applicable tq,Authority orLIPASubog(iii)anyprovisions ofany,materialnote,bond,,mortgage, indenture, deed;,oftrustlicense,franchise, permit,concession,
| |
| : contract, leaseor'otherinstrument, obligation oragreement.
| |
| ofanykindtowhichAulhority orLIPASubisapartyorbywhichitoranyofitsproperties orassetsmaybebound.lItI'l't""~(c)Statutory Approvals.
| |
| Nodeclaration, filingor,registration vtith,ornoticeto,orauthorization, consentorapprovalof,anyGovernmental Authority isnecessary fortheexecution anddeliveryofthisAgreement andeachoftheotherBasicAgreements byeachofAuthority andLIPASubortheconsummation byeachofAuthority andLIPASubofthetransactions contemplated hereby-and'thereby, exceptassetforthinwritingbyAuthority (the"Authority RequiredStatutory Approvals"
| |
| ).>'tttSection5.3Disclosure, Norepresentations orwarranties byAuthority orLIPASubinthisAgreement andnostatement contained inanydocumentfurnished byAuthority orLIPASub,toParentorCompanypursuanttotheprovisions of,orinconnection withthetransactions, contemplated by,thisAgreement, willcontain anyuntruestatement ofmaterialfactoromitanymaterialfactnecessary, inlightof,.thecircumSlancep underwhichitwasmade,inordertomakesuchstatement notmisleading.
| |
| l'ection5.4Ownership ofLIPASub;NoPriorActivities.,
| |
| LIPASubisadirect,whollyownedsubsidiary
| |
| ,Authority andwasforme'dsolely,forthepurposeofengaginginthe,trarisactions contemplated bythisreement.AsofthedatehereofandtheEffective Time,exceptforobligations orliabilities incurredin connection withitsincorporation ororganization andthetransactions contemplated bythisAgreement anexceptforthisAgreement andanyotheragreements orarrangements contemplated bythisAgreement, LIPASubhasnotandwillnothaveincurred, directlyorindirectly, throughanysubsidiary oraffiliate, anyobligations orliabilities orengagedinanybusinessactivities ofanytypeorkindwhatsoever orenteredintoanyagreements orarrangements withanyperson.IIISection5.5Ownership ofCompanyCommonStockNeitherAuthority norLIPASub"beneficially owns"(assuchtermisdefinedforpurposesofSection13(d)oftheExchangeAct)anysharesofCompanyCommonStockorCompanyPreferred Stock.ARTICLEVICOVENANTS Section6.1Covenants ofParentandCompany.AfterthedatehereofandpriortotheClosingDateorearliertermination ofthisAgreement, ParentandCompanyagreeasfollows,astothemselves andtoeachoftheCompanySubsidiaries, asthecasemaybe,exceptas'xpressly contemplated orpermitted inthisAgreement, theotherBasicAgreements ortotheextenttheotherpartiesheretoshallotherwise consentinwriting:(a)OrdinaryCourseofBusiness.
| |
| WithrespecttotheRetainedAssetsonly,CompanyandtheCompanySubsidiaries shallcarryontheirrespective businesses intheusual,regularandordinarycourseinsubstantially thesamemannerasheretofore conducted anduseallcommercially reasonable effortstopreserveintacttheirpresentbusinessorganizations andgoodwillandpreservethegoodwillandrelationships withcustomers, suppliers andothershavingbusinessdealingswiththem.CompanyandtheCompanySubsidiaries may,withthepriorapprovalofAuthority or'IPASub,engageintransactions outoftheordinarycourseofbusinessrelatingtotheRetainedAssets,suchapprovalnottobeunreasonably withheldor'delayed;
| |
| : provided, however,thatthefollowing willriotbesubjecttoAuthority's orLIPASub'spriorapproval:
| |
| anytransaction involving theTransferred Assets;provided,'however, thatsuchapprovalwillberequiredfor(A)anytransaction thatwouimpairtheapplicable Transferee Subsidiary's abilitytoperformitsobligations underanyBasicAgreement thatwouldviolateanytermoftheGeneration PurchaseRightAgreement or(B)anytrarisaction wherebyCompanyentersintoacapacityorfransmission'urchase agreement relatingtothepurchaseofmorethan75megawatts ofcapacityorhavingatermwhichextendsbeyondMarch19,1999.I'xceptassetforthinSection6.1(a)of'theParentDisclosure Scheduleorascontemplated inthisSection6.1(a),'neither CompanynoranyoftheCompanySubsidiaries shallmakeanychangeinthelineofbusinessinvolving theRetainedAssetsinwhichitengagesasofthedatehereofwhichinvolvesanymaterialinvestment ofassetsorresources oranymaterialexposuretoliability orlosstotheRetainedAssetstakenasawhole.(b)CharterDocuments.
| |
| Companyshallnotamendnorproposetoamenditscertificate ofincorporation, by-lawsor'regulations, orsimilarorganizational documents, exceptascontemplated hereinorassetforthinSection6.1(b)oftheParentDisclosure Schedule.
| |
| (c)NoAcquisitions.
| |
| ExceptassetforthinSection6.1(c)oftheParentDisclosure Scheduleorascontemplated inSection6.1(a),neitherCompanynoranyoftheCompanySubsidiaries shallacquire,orpubliclyproposetoacquire,oragreetoacquire,bymergerorconsolidation with,orbypurchaseorotherwise, inatransaction relatingtotheRetainedAssets,asubstantial equityinterestinorasubstantial portionoftheassetsof,any'usiness oranycorporation, partnership, association" orotherbusinessorganization ordivisionthereof,norshallanypartyacquireoragreetoacquire,inatransaction relatingtotheRetainedAssets,amaterialamountofassetsotherthanintheordinarycourseofbusinessconsistent withpastpractice.
| |
| (d)CapitalExpenditures.
| |
| ExceptassetforthinSection6.1(d)oftheParentDisclosure
| |
| : Schedule, orasrequiredbylaw,neitherCompanynoranyoftheCompanySubsidiaries shallmakecapitalexpenditures orcommitments relatingtotheRetainedAssetsinanaggregate amountsignificantly lessorsignificantly moreththeamountsprojected therefor'in Company's 1996electricratefiling.
| |
| t(e)NoDispositions.
| |
| ExceptassetforthinSection6.1(e)oftheParentDisclosure Scheduleorascontemplated bySection6.1(a),singularly orintheaggregate, neitherCompanynoranyoftheCompanySubsidiaries shallsell,lease,license,encumber, orotherwise disposeof,anyof,theRetainedAssets,otherthanencumbrances ordispositions intheordinarycourseofitsbusinessconsistent withpastpracticeandotherthandispositions ofRetainedAssetsbyCompanyandtheCompanySubsidiaries oflessthan$10millionintheaggregate;
| |
| : provided, however,thatnotwithstanding theforegoing, neitherCompanynoranyoftheCompanySubsidiaries shallsell,lease,license,encumberorotherwise disposeof,anyattachment orsimilarrights.(f)Indebtedness.
| |
| Exceptascontemplated byanyBasicAgreement, neitherCompanynoranyoftheCompanySubsidiaries shallincurorguarantee anyindebtedness (including anydebtborrowedorguaranteed orotherwise assumedincluding, withoutlimitation, theissuanceofdebtsecurities orwarrantsorrightstoacquiredebt)orenterintoany"keepwell"orotheragreement tomaintainanyfinancial statement condition ofanotherpersonorenterintoanyarrangement havingtheeconomiceffectofanyoftheforegoing otherthanincurrences torefinance;existing indebtedness, incurrences ofdebtthatwillbeassumedbyParentand/oroneormoreTransferee Subsidiaries attheClosingandotherthanassetforthinSection6.1(f)oftheParentDisclosure Schedule.
| |
| (g)Transmission, Generation.
| |
| ExceptasrequiredpursuanttotariffsonfilewiththeFERCasofthedatehereof,in'theordinarycourseofbusinessconsistent withpastpractice, orassetforthinSection6.1(g)oftheParent.Disclosure
| |
| : Schedule, neitherCompanynoranyoftheCompanySubsidiaries shall(i)commenceconstructiori ofany'additional electricgenerating; transmission ordeliverycapacity, or(ii)obligateitselftopurchaseorotherwise acquire,ortosellorotherwise disposeof,ortoshare,anyadditional electricgenerating, transmission ordeliverycapacityexceptasprovidedinclause(B)ofthesecondprovisotoSection6.1(a)orassetforthinthebudgetofCompanyonthedatehereofassetforthinSection6.1(d)oftheParentDisclosure Schedule.
| |
| (h)Accounting.
| |
| ExceptassetforthinSection6.1(h)oftheParentDisclosure
| |
| : Schedule, Parentandompanyshallnot,norshallParentandCompanypermitanyoftheCompanySubsidiaries to,makeanychangestheiraccounting methodsorprinciples, exceptasrequiredbylaw,rule,regulation orGAAP.(i)AfhliateTransactions.
| |
| ExceptassetforthinSection6.1(i)oftheParentDisclosure
| |
| : Schedule, neitherCompanynoranyoftheCompanySubsidiaries shallenterintoanymaterialagreement orarrangement withanyoftheirrespective affiliates (otherthanthosewholly-owned subsidiaries whichwillconstitute RetainedAssets)ontermsmaterially lessfavorable tosuchpartythancouldbereasonably expectedtohavebeenobtainedwithanunaffiliated thirdpartyonanarm'-length basis.(t)Cooperation, Notification.
| |
| ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,(i)conferonaregularandfrequentbasiswithoneormorerepresentatives ofAuthority orLIPASubtodiscuss,subjecttoapplicable law,materialoperational mattersandthegeneralstatusofitsongoingoperations; (ii)promptlynotifyAuthority orLIPASubofanysignificant changesinitsbusiness, properties, assets,condition (financial orother),resultsofoperations orprospects; (iii)adviseAuthority orLIPASubofanychangeoreventwhichhashador,insofarasreasonably canbeforeseen, isreasonably likelytoresultinaMaterialAdverseEffect;and(iv)promptlyprovideAuthority orLIPASubwithcopiesofallfilirigsmadebyParentorCompanyoranyoftheCompanySubsidiaries withanystateorfederalcourt,administrative agency,commission orotherGovernmental Authority inconnection withanyBasicAgreement andthetransactions contemplated herebyandtherebyortheRetainedAssets.(k)RateMatters.ParentandCompanyshall,andshallcausetheCompanySubsidiaries to,notifyAuthority orLIPASubofanychangesinitsorCompany's ratesorcharges(otherthanpass-through fuelratesorcharges,butincluding, withoutlimitation, gasratesorcharges),
| |
| standards ofserviceoraccounting fromthoseineffectonthedatehereof.WithouttheconsentofAuthority (whichconsentwillnotbeunreasonably withheld),
| |
| ompanyshallnotfileorprosecute anyratecaseorothernonroutine proceeding beforethePublicServicemmissionoftheStateofNewYork(the"PSC")orFERCoranyappealtherefrom, exceptforcasesor proceedings (i)relatingsolelytopass-through fuelorgasratesorcharges,(ii)requiredto*bemadebyorderothePSCorFERC,(iii)relatingsolelytotheTransferred Assetsor(iv)involving commercial orcontractual disputeswhicharerequiredtoberesolvedthroughsuchproceedings;
| |
| : provided, however,'thatifCompanyreasonably believesthatamatterthreatens thefinancial viability ofCompany,itmaydefendorprosecute suchmatterbeforethePSCorFERC.EitherinseekingconsentfromAuthority orifCompanyhastheright'todefendorprosecute amatterascontemplated herein,Companyshallprovide30dayspriornoticetoAuthority (including, uponrequestofAuthority, copiesofdraftdocumentation) ofanyproposedfilingwiththePSCorFERCunlessCompanyreasonably determines thatcircumstances requireactionwithinsuch30dayperiod,inwhicheventCompany"shallprovideAuthority withasprompt'notice asispracticable.
| |
| Thepartieswillconsultwitheachotherwithrespecttoallmattersdescribed inthepreceding twosentences.
| |
| (1)Third-Party Consents.
| |
| ParentandCompanyshall,"andshallcausetheCompanySubsidiaries to,useallcommercially reasonable effortstoobtainallParentRequiredConsents.
| |
| Parentshall,promptlynotifyAuthority orLIPASubofanyfailureorprospective failure.toobtainanysuchconsentsand,ifrequested byAuthority orLIPASub,shallprovidecopiesofallParentRequiredConsentsobtainedbyParentorCompanytoAuthority orLIPASub.(m)NoBreach,Etc.ParentandCompanyshallnot,norpermitanyoftheCompanySubsidiaries to,willfully takeanyactionthatwouldorisreasonably likelytoresultinamaterialbreachofanyprovision ofanyBasicAgreement, asthecasemaybe,orinanyofitsrepresentations andwarranties setforthinanyBasicAgreement, asthecasemaybe,beinguntrueonandasoftheClosingDateoranycondition totheirobligation toclosenotbeingsatisfied.
| |
| (n)Tax-Exempt Status.ParentandCompany,shallnot,norshallParentand'Company, permit,anyCompanySubsidiary to,takeanyactionth'atwouldlikelyjeopardize thequalification ofCompany's outstandipg revenuebondswhichqualifyonthedatehereofunderSection142(a)oftheCodeas"exemptfacilitybonds"orastax-exempt industrial development bondsunderSection103(b)(4) of,theInternalRevenueCodeof1954,asamended,priortotheTaxReformActof1986,(o)TaxMatters.ExceptwithrespecttothematterssetforthintheLILCOTax'Matters
| |
| 'Disclosuie ScheduleattachedtoScheduleD,Parent,and Companyshallnotmakeorrescindanymaterialexpressordeemedelectionrelatingtotaxes,settle(otherthan,withinestablished reserves) orcompromise anymaterialclaim,action,suit,litigation, proceeding, arbitration, investigation, auditorcontroversy relatingtotaxes,orchangeanyofitsmethodsofreporting incomeordeductions forfederalincometaxpurposesfromthoseemployedinthepreparation oftheirrespective federalincometaxreturnsforthetaxableyearendingDecember31,1995,exceptasmayberequiredbyapplicable law.(p)Contracts.
| |
| SubjecttoSection6.1(a)andexceptassetforthinSection6.1(p}ofParentDisclosure
| |
| : Schedule, ParentandCompanyshallnot,otherthanintheordinarycourseofbusinessconsistent "withpastpractice, modify,amend,terminate, reneworfailtousereasonable businesseffortstorenewanymaterialfranchise, contractoragreement towhich,CompanyoranyCompanySubsidiary isapartyorwaive,releaseorassignanymaterialrightsorclaims,provided, however,'thatParentandCompanyshallnotenterintonewpowersupplyagreements, oramendexistingpowersupplyortransmission agreements, withoutprioraIiproval ofAuthority (whichapprovalwillnotbeunreasonably withheld).
| |
| (q)Insurance.
| |
| ParentandCompany"shall,andshallcausetheCompanySubsidiaries to,maintainwithfinancially responsible insurance companies insurance insuchamountsandagainstsuchrisksandlossesasarecustomary forcompanies engagedintheelectricandgasutilityindustryandemploying methodsofgenerating electricpowerandfuelsourcessimilarto'thosemethodsemployedandfuelsusedbyParent,CompanyortheCompanySubsidiaries.'
| |
| (r)Permits.ParentandCompanyshall,andshallcausetheCom'panySubsidiaries to,usereasonable effortstomaintainineffectallexistinggovernmental permitspursuanttowhichCompanyortheCompaSubsidiaries ownandoperateanyRetainedAsset.
| |
| t(s)Compliance withLaivtPermits.Theoperations andactivities ofCompany,andtheownership, possession, maintenance andoperation oftheRetainedAssets,havecompliedandareincompliance, inallrespects, withallapplicable federal,stateandlocallaws,statutes, acts,regulations, codes,ordinances, rules,judgments,,orders, decrees,judgments'njunctions, ornoticesordemand,lettersissuedorpromulgated orapprovedthereunder
| |
| ("Applicable,Law"),
| |
| ExceptassetforthinSection6.1(s)ofParentDisclosure
| |
| : Schedule, Companyhasallmaterialfederal,state,andlocalgovernmental
| |
| : licenses, permits,approvals, franchises andotherauthorizations
| |
| ("Permits")asarenecessary inorderforittoconductthebusinessconducted withtheRetainedAssets.Nomaterialviolations havebeenrecordedinrespectofanyPermitsandnoproceeding ispendingor,totheknowledge ofParent-or.
| |
| Company,threatened wjthrespecttothelimitation orrevocation ofanyPermit.Section6.2Covenants ofAuthority andUPASub.(a)Filings.Authority andLIPASubshallpromptlyprovideParentandCompanywithcopiesofallfilingsmadebyAuthority orLIPA,Subwithanystateorfederalcourt,administrative agency,commission orotherGovernmental Authority inconnection withthisAgrt;ement oranyBasicAgreement andthetransactions contemplated herebyandthereby.(b)Third-Party Consents.
| |
| Authority andLIPASubshalluseallcommercially reasonable effortstoobtainallAuthority RequiredConsents.
| |
| Authority shallpromptlynotifyParentandCompanyofanyfailureorprospective failuretoobtainanysuchconsentsand,ifrequCsted byParentorCompany,shallprovidecopiesofallAuthority RequiredConsentsobtainedbyAuthority andLIPASubtoParentandCompany.(c)NoBreach,Etc,,Authority andLIPA;Subshal(,not willfully takeanyactionthatwouldorisreasonably likelytoresultin(x)amaterialbreachof.anyprovision ofthisAgreement oranyotherBasicAgreement, asthecasemaybe,(y)anyoftheirrepresentations andwarrantiesset forthinthisAgreement orinanyotherBasicAgreement beinguntrueonandasoftheClosingDateor(z)anycondition totheirobligations oclosenotbeingsatisfied.
| |
| ARTICLEVIIADDITIONAL AGREEMENTS Section7.1AccesstoInfortnation.
| |
| Uponreasonable notice,eachpartyshallaffordtotheofficers, employees, accountants, counsel,investment bankers,financial
| |
| : advisors, engineers andotherrepresentatives oftheother(collectively,'Representatives"
| |
| )reasonable access,'uring norinalbusinesshoursthroughout theperiodpriortotheEffective Time,toallofitsproperties, books,contracts, commitments andrecordsand,duringsuchperiod,eachpartyshallfurnishpromptlytotheother(i)accessto'achreport,scheduleandotherdocumentfiledorreceivedbyitpursuanttotherequirements offederalorstatesecurities lawsorfiledwithorsenttotheSEC,theFERC,theNRC,theDepartment ofJustice,theFederalTradeCommission, thePSCoranyotherfederalorstateregulatory agencyorcommission, and(ii)accesstoallinformation concerning themselves, theirsubsidiaries, directors andofficersandsuchothermattersasmaybereasonably requested bytheotherpartyinconnection withanyfilings,applications orapprovals requiredorcontemplated bythisAgreement orforanyotherreasonrelatedtothetransactions contemplated by,thisAgreement.
| |
| InadditionCompany andParentshallpromptlyfurnishto'Authority uponrequestallsuchinformation asmaybenecessary ordesirable inorderthatAuthority, mayobtainthefinancing referredtoinSection8.1(f).V~lSection7.2Proxy,Statement andRegistration Statement.
| |
| CompanywillprepareandfilewiththeSECassoonasreasonably practicable afterthedatehereoftheregistration statement relatingtotheParentShares(the"Registration Statement"
| |
| )andtheProxyStatement.
| |
| Thepartiesheretoshalleachusereasonable effortstocausetheRegistration Statement tobedeclaredeffective undertheSecurities Actaspromptlyaspracticable afterchfiling.Eachofthepartiesheretoshallfurnishallinformation concerning itselfwhichisrequiredorstomaryfor'nclusion in,theProxy/Registration Statement, Section7.3Shareholder Approval.
| |
| Companyshall,assoonasreasonably practicable afterthedathereof,(i)takeallstepsnecessary todulycall,givenoticeof,conveneandholda'pecialmeetingofitsshareholders forthepurposeofsecuringtheapprovalofitsshareholders, (ii)distribute toitsshareholders theProxyStatement in.accordance withapplicable federalandstatelawandwithitsRestatedCertificate.
| |
| ofIncorporation andby-laws,(iii)subjecttothefiduciary dutiesofitsBoard'ofDirectors, recommend to-its'hareowners theadoptionofthis"Agreement andthetransactions contemplated herebyand(iv)cooperate andconsultwithAuthority withrespecttoeachoftheforegoing matters.Intheeventthatduringthespecialmeetingofshareholders referredtoabovetheCompanyShareholder Approvalisinitially notobtained, Companyshalladjournthemeetingforareasonable periodandCompanyandParent'shall takesucha'ctionsasmaybenecessary ordesirable inordertoobtaintheCompanyShareholder Approvalwhensuchmeetingisreconvened.
| |
| Section7.4Disclosure Schedule.
| |
| (a)Onthedatehereof,Parenthasdelivered toAuthority aschedule(the"ParentDisclosure Schedule"
| |
| ),accompanied byacertificate signedbytheChiefFinancial OfficerofCompanystatingthattheParentDisclosure Scheduleisbeingdelivered pursuanttothisSection7.4(a).TheParentDisclosure Scheduleconstitutes anintegralpartofthisAgreement andmodifies'therepresentations, warranties, covenants oragreements ofParentheretocontained hereintotheextentthatsuchrepresentations, warranties, covenants oragreements expressly refertotheParentDisclosure Schedule.
| |
| (b)Notlaterthan30daysbefore"thedatescheduled fortheClosing,ParentshalldelivertoAuthority arevisedParent'Disclosure Schedule(the"UpdatedParentDisclosure Schedule"
| |
| ),accompanied byacertificate signedbytheChiefFinancial Officer'of CompanystatingthattheUpdatedParentDisclosure Scheduleisbeingdelivered pursuanttothisSection7.4(b).TheUpdatedParentDisclosure Scheduleshallcontaintheinformation Parentbelieveswouldberequiredtocomplywiththecondition setforthinSection8.2(b)(butfor'urposes solelyofthisSection7.4(b),asifsuchSection8.'2(b)didnotcontainanyreference toMaterialAdverseEffect).Noliability shallariseunderanyBasicAgreement byreasonofthedeliveryoftheUpdatedParentDisclosure Scheduleor,aftertheEffective Time,byreasonofanymatterdisclosed therein.Section7.5Regulatory Matters.Eachpartyheretoshallcooperate anduseitsbesteffortstopromptprepareandfileallnecessary documentation andtoeffectallnecessary applications, notices,petitions, filingandotherdocuments, andshalluseallcommercially reasonable effortstoobtainallnecessary permits,consents, approvals andauthorizations ofallGovernmental Authorities, necessary oradvisable toconsummate thetransactions contemplated bythisAgreement, including, withoutlimitation, theParentRequiredStatutory Approvals andtheAuthority RequiredStatutory Approvals.
| |
| Parent,Company,Authority andLIPASubshallcooperate ingoodfaithandconsultwitheachotheronallcomponents of,significant stepstowardsthecompletion of,andsignificant amendments to,theapplications toobtaintheParentRequiredStatutory Approvals andtheAuthority RequiredStatutory Approvals, andwithrespecttomaterialfilings,communications, agreements, arrangements orconsents, writtenororal,formalorinformal, relating'to applications forsuchApprovals.
| |
| Section7.6PublicAnnouncements.
| |
| Parent,Company,Authority andLIPA'ubwillcooperate witheachotherinthedevelopment anddistribution ofallnewsreleasesand'other jointpublicinformation disclosuies withrespecttothisAgreement andanyotherBasicAgreement orany'fthe'ransactions contemplated hereby.Section7.7Confidentiality.
| |
| (a)CoinpanyRequest.Thepartiesacknowledge thatcertaininformation thatmaybefurnished pursuanttotheprovisions ofthisAgreement maybeconfidential andproprietary toCompany.TheCompanyandParenteachacknowledges thatAuthority mayberequiredtodiscloseinformation uponrequestunderapplicable law.TheCompanyshallhavetherighttorequestAuthority inwritingnottopubliclydiscloseanyinformation whichCompanybelievestobeconfidential orproprietary andnotsubjecttopublicdisclosure "underapplicable law,andsuchrequestwillbeaccompanied byanexplanation ofitsreasonsforsuchbelief.Anyinformation whichisthesubjectofsucharequestshallbeclearlymarkedonallpages,-shallbebound,andshallbephysically separatefromallnon-confidential andnon-proprietary information.
| |
| AtCompany's request,Authority anditsRepresentatives givenaccesstosuchinformation shallexecuteandcomp~withthetermsofaconfidentiality agreement inamutuallyacceptable form,subjecttoapplicable law.D-20 (b)Authority Non-Disclosure.
| |
| IfAuthority receivesarequestfromthepublicforthedisclosure ofanynformation designated asconfidential orproprietary byCompanypursuanttosubsection (a)ofthisSection7.7,Authority (1)shallusereasonable efforts,consistent withapplicable law,toprovidenoticetoCompanyoftherequestpriortoanydisclosure, and(2)shallusereasonable efforts,consistent withapplicable law,tokeepinconfidence andnotdisclosesuchinformation unlessitisentitledtodosopursuanttotheprovisions ofsubsection (c)ofthisSection7.7.Companyshallindemnify, holdharmlessanddefendAuthority againstalllossesincurredfromthewithholding frompublicdisclosure ofinformation designated asconfidential orproprietary byCompanyorotherwise requested byCompanytobewithheld.
| |
| (c)Previously Furnished Information.
| |
| CompanyherebypermitsAuthority anditsRepresentatives toobtainallinformation previously furnished byCompanytoBear,Stearns&Co.Inc.andcertainotherpersonspursuanttotheletterdatedOctober11,1995,(asamendedtodate)subjecttothetermsandconditions ofthisSection7.7.Authority agreesthatallsuchinformation (otherthaninformation described inclauses(1),(2)or(3)ofSection7.7(e))shallbedeemedtobedelivered toAuthority pursuanttotheprocedures setforthinSection7.7(a)forthepurposeofidentifying confidential orproprietary information.
| |
| (d)Restriction onUse.Authority andLIPASubmaynotuseanyconfidential orproprietary information disclosed toeitherofthembyCompany(otherthaninformation described inclauses(1),,(2)or(3)ofSection7.7(e))intakinganyactiondescribed inclauses(a),,(b),
| |
| (c)or(d)ofArticleXatanytimeafterthedatehereof.(e)Permitted Disclosures.
| |
| Notwithstanding anyconfidential orproprietary designation thereofbyCompany,Authority maydisclosethefollowing:
| |
| (1)information whichisknowntoAuthority withoutanyrestriction astodisclosure oruseatthetimeitisfurnished, (2)information whichisorbecomesgenerally available tothepublicwithoutbreachofanyagreement, (3)information whichisreceivedfromathirdpartywithoutlimitation orrestriction onsuchthirdpartyorAuthority atthetimeofdisclosure, or(4)following noticetoCompanypursuanttosubsection (b)ofthisSection,information which,intheopinionofcounselforAuthority, isrequiredtobedisclosed underanyapplicable law,anorderofacourtofcompetent jurisdiction, orlawfulsubpoena.
| |
| Section7.8CertainLitigation.
| |
| (a)ClassSettlement.
| |
| Afterthedatehereof,CompanyandAuthority shalljointlyfileanappropriate motionbeforethecourthavingjurisdiction overtheClassSettlement (ashereinafter defined)toobtainamodification ofthefinalorderapproving suchClassSettlement whichwouldpermitthepaymentinfullattheClosingofallamountsremairiing unpaidwithrespecttosuchClassSettlement, discounted tosuchpresentvalueasAuthority andCompanymayagreeandsuchcourtmayapprove.Asusedherein,"ClassSettlement" shallmeantheclasssettlement whichbecameeffective onJune28,1989andresolvedacivillawsuitagainstCompanybroughtunderthefederalRacketeer Infiuenced andCorruptOrganizations Act.(b)TaxCases.Withrespecttoalltaxcasesrelatingtopropertytaxesorpaymentsinlieuofpropertytaxesassessable againstanyoftheassetsandproperties ofCompanyasofthedatehereof,andothersimilartaxclaimsarisingpriortotheClosingDate(whichshallconstitute RetainedAssets),Companywillenterintoappropriate standstill agreements andmaintainthecurrentstatusofsuchcases;provided, however,ifanytaxingauthority increases, directlyorindirectly, orpurportstoincrease, directlyorindirectly, theassessedvalueofanyTransferred Asset(otherthaninrespectofpropertyadditions orgeneralincreases inassessments),
| |
| thenCompanymaypursueanyjudicialremedyitdeemsadvisable inconnection therewith.
| |
| Notwithstanding theforegoing, ifanytaxingauthority, atanytimepriortotheClosing,assertsaclaimforpropertytaxesorpaymentsinlieuofpropertytaxeswhichCompanyreasonably believesisnotauthorized bystatuteorassertsarighttovalueataxablepropertyinamethodotherthaninaccordance withapplicable MewYorkStaterulesandregulations, thenCompanymaytakesuchactionsasitreasonably determines tobe'necessary oradvisable toprotectitsinterests, butshallnototherwise pursueitsclaimspendingtheClosingorthetermination ofthisAgreement.
| |
| (c)PhaseIRebates.UpontheClosing,Parentwillimmediately payAuthority
| |
| $15millioninrespectofPhaseIjudgmentrelatingtotheShoreham.property taxcasefordistribution toratepayers.
| |
| Section7.9Expenses.
| |
| Allcosts'and expensesincurredinconnection withthisAgreement andanyothBasicAgreement andthetransa'ctions contemplated hereby(including, without'imitation, anytermination feesandexpensereimbursements payablebyCompany'pursuant to'theExchangeAgreement ortoitsofficersordirectors'n respectofseverance,'change ofcontrolorsimilaragreements) shallbepaidbythepartyincurring suchexpenses.
| |
| Anysuchcost'orexpenseofCompanynotpaidorotherwise discharged atorpriortotheClosingshallbepaidorreimbursed byParentandtheTransferee Subsidiaries pursuanttotheParentLiabilities Undertaking andshallnotbeincludedintheClosingDateBalanceSheet.Section7.10FurtherAssurances.
| |
| Eachpartywill,andwillcauseitsSubsidiaries to,executesuchfurtherdocuments,and'instruments andtakesuchfurther,actionsasmayreasonably berequested byanyotherparty,inordertoconsummate thetransactions contemplated herbyinaccordance'with thetermshereof.'~Section7.11PurchasePriceAllocation.
| |
| AtorpriortotheClosing,thepartiesshalljointlyprepareandagreetoanallocation forfederalincome,tax purposespursuanttoSection1060oftheCodeofthepurchasepricepayablebyParentinrespectofthetransferoftheTransferred Assets.';aSection7.12-ReceiptofConsentsandApprovals.'ach partyagreestorespondpromptlyto'anyrequestforanyconsentorapprovalfromanyotherpartycontemplated bythisAgreement andanythirdpartyconsentorstatutory approvalrequiredhereunder.
| |
| Eachpartyshalldesignate representatives whoshallbeauthorized toaddress'any requestfor'nysuchconsentsor'approvals.
| |
| Anyactofany'uchrepresentative withrespecttosuchappro'vals andco'nsents shallbebindinguponthepartythatdesignates suchrepresentative.
| |
| A,'It/,Section'7.13,'ertaiit OtherMatters.Thep'royisions setforthinSchedules D(Ta'xMatters),
| |
| E(Employment Matters)andF(FutureRights)attachedheretoare.Herebyiricorporated byreference'as ifsetforthhereinjntheirentirety.
| |
| USection7.14OpinionsofCounsel.Inaddition, ParentandCompanyshalldelivertoAuthority suopinionsofcounselforParentandCompanyastotheagreements tobeenteredinto.inconnection withthetransactions contemplated bytheBasicagreements, incustomary formforfinancing transactions, astothemattersoflawcovered'by therepresentatio'ris,of ParentandCompanyandtheTransferee Subsidiaries intheBasicAgreemenis, similarma'tte'rs oflaw"withrespecttosuchotheragreements" andastosuchothermattersoflawasAuthor'ity mayreasonably request,togetherwithappropriate'certified authorizing resolutions andincumbency certificates.
| |
| IInARTICLEVIII,',,CONDITIONS
| |
| ,.i,Section8.1Conditions toEachParty'sObligations.
| |
| The,respective obligations ofeachpartytoeffectthetransactions-contemplated bythisAgreement shallbesubjecttothesatisfaction onorprior,totheClosingDateofthefollowing conditions:
| |
| (a)NoInjunction.
| |
| Notemporary restraining orderorpreliminary orpermanent injunction orotherorderbyanyfederalo'rstatecourtpreventing consummation ofthetransactions contemplated bythisAgreement andtheotherBasicAgreements shalihavebeenissuedandbecontinuing ineffect,andthisAgreement, andtheotherBasicAgreements andthetransactions contem'plated herebyandtherebyshallnothavebeenprohibited underanyapplicable federalorstatelaworregulation.'b)
| |
| Statutory Approvals.
| |
| 'TheParentRequiredStatutory Approvals andtheAuthority RequiredStatutApprovals shallhavebeenobtainedat'rpriortotheClosingDate,suchapprovals shallhavebecomeFiD-22 rders(asdefinedbelow)andsuch,FinalOrdersshallnotimposetermsorconditions which,intheaggregate, wouldhave,orinsofarasreasonably canbeforeseen, couldhave,amaterialadverseeffectonthebusiness, assets,financial condition orresultsofoperations Parent,whichwouldbematerially inconsistent withtheagreenients ofthepartiescontained hereinorintheBasicAgreements orwouldhave(or,insofarasreasonably canbeforeseencouldhave)aMaterialAdverseEffect.A"FinalOrder"meansactionbytherelevantregulatory authority
| |
| )vhichhasnotbeenreversed, stayed,enjoined, setaside,annulledorsuspended, withrespecttowhichanywaitingperiodprescribed bylawbeforethetransactions contemplated herebymaybeconsummated hasexpired,andastowhichallconditions totheconsummation ofsuchtransactions prescribed bylaw,regulation ororderhavebeensatisfied.
| |
| I-.(c)BasicAgreements:
| |
| TherelevantpartiesshallhaveenteredintoeachotherBasicAgreement.
| |
| (d)TaxRulings.Favorable privateletterrulingsreasonably satisfactory toeachofthepartiesheretoshallhavebeenreceivedfromtheIRSwithrespecttotheapplication ofSection337(d)oftheCode.(e)Consummation ofExchangeTransaction.
| |
| Either(i)thetransactions contemplated bytheExchangeAgreement shallhavebeenconsummated, (ii)theExchangeAgreement shall,havebeenterminated or(iii)allconditions tosuchconsummation shallhavebeensatisfied orwaivedinaccordance withthetermsoftheExchangeAgreement:and suchtransactions willbeconsummated promptlyaftertheClosing.h(f)Einancing.
| |
| Authority shallhaveobtainedfinancing inanamountsufficient toacquiretheCommonStockandtheNon-Redeemable, Preferred StockandredeemtheRedeemable Preferred Stockandthebondsissuedinconnection therewith shallhavereceivedratingspursuanttoratingapplications whichcontemplate theissuanceofupto$7.3billionforsuchpurposeandforthepurposeofrefinancing Companydebt.Section8.2Corttiitions toObligations ofAuthority andLIPASub.Theobligations ofAuthority andPASubtoeffectthetransactions contemplated bythisAgreement andtheotherBasicAgreements shallberthersubjecttothesatisfaction onorpriortotheClosingDate,ofthefollowing conditions, exceptasmaybewaivedbyAuthority orLIPASubinwritingpursuanttoSection9.5:(a)Performance ofObligations ofParentandCompany.EachofParentandCompanyshallhaveperformed inallmaterialrespectsitsagreements andcovenants contained inorcontemplated bythisAgreement andtheotherBasicAgreements requiredtobeperformed byitatorpriortotheClosingDate.(b)Representations andWarranties.
| |
| Therepresentations andwarranties ofParentandCompanysetforthinthisAgreement andthe,otherbasicAgreements shallbetrueandcorrect(i)onandasofthedatehereofand(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyasofaspecificdateortimeotherthanthedatehereofortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)and(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaMaterialAdverseEffect.,(c)ClosingCertificates.
| |
| Authority shallhavereceivedacertificate signedonbehalfofParentandCompanybytheChiefFinancial OfficerofParent,datedtheClosingDate,totheeffectthat,tothebestofsuchOfficer's Imowledge, theconditions setforthinSection8.2(a)andSection8.2(b)havebeensatisfied.
| |
| (d)MaterialAdversediect.NoMaterialAdverseEffectshallhaveoccurredandthereshallexistnofactor,circumstance whichisreasonably likelytohaveaMaterialAdverseEffect.IIt(e)ParentRequiredConsents.
| |
| TheParentRequiredConsentsshallhavebeenobtained, exceptforthosensentsthefailureofwhichtoobtainwouldnothaveaMaterialAdverseEffect.D-23 (f)Fot7nation ofParentSubsidiaries.
| |
| TheTransferee Subsidiarie's willhavebeendulyformedanorganized.
| |
| (g)TaxRulings.Favorable privateletterrulingsreasonablysatisfactory toAuthority shallhavebeenreceivedfromtheIRSwithrespecttotheapplication of.Sections103and115,oftheCode.(h)RateSavingsDetermination.
| |
| Authority shallhavemadethefinalratesavihgsdetermination requiredunderitsgoverning statute.Section8.3Conditions toObligations ofParentandCompany.Theobligations ofParentandCompanytoeffectthetransactions contemplated bythisAgreement andtheotherBasicAgreements shallbefurthersubjecttothesatisfaction onorpriortotheClosingDateofthefollowing conditions, exceptasmaybewaivedbyParentandCompanyinwritingpursuanttoSection9.5:(a)Perfonnance ofObligatipns ofAuthority andLIPASub.Authority andLIPASubshallhaveperformed inallmaterialrespectsitsagreements andcovenants contained inorcontemplated bythisAgreement andtheotherBasicAgreements requiredtobeperformed atorpriortotheClosingDate.(b)Representations andWarranties.
| |
| Therepresentations andwarranties ofeachofAuthority andLIPASubsetforthinthisAgreement andtheotherBasicAgreements shallbetrueandcorrect(i)onandasofthedatehereofand(ii)onandasoftheClosingDatewiththesameeffectasthoughsuchrepresentations andwarranties hadbeenmadeonandasoftheClosingDate(exceptforrepresentations andwarranties thatexpressly speakonlyas'ofaspecificdateortimeotherthanthedatehereofortheClosingDatewhichneedonlybetrueandcorrectasofsuchdateortime)exceptineachofcases(i)anU'(ii)forsuchfailuresofrepresentations orwarranties tobetrueandcorrect(withoutregardtoanymateriality qualifications contained therein)which,individually orintheaggregate, wouldnotbereasonably likelytoresultinaMaterialAdverseEffect.(c)ClosingCertificates.
| |
| Parentshallhavereceivedacertificate signedonbehalfofAuthority bytheExecutive DirectorofAuthority, datedtheClosingDate,totheeffectthat,,tothebest,ofsuchExecutivDirector's knowledge, theconditions setforthinSection8.3(a)andSection8.3(b)havebeensatisfied, (d)MaterialAdverseEgect.NoMaterialAdverseEffectshallhaveoccurredandthereshallexistnofact.orcircumstance whichisreasonably likelytohaveaMaterialAdverseEffect.IIARTICLEIXTERMINA,TION ANDAMENDMENT Section9.1Termination.
| |
| ThisAgreement maybeterminated prior'otheClosingDate:(a)bymutualwrittenconsentoftheBoardofDirectors ofCompanyandtheBoardofTrusteesofAuthority; (b)byeitherParentandCompany,ontheonehand,orAuthority andLIPASub,ontheotherhand,'iftheClosingshallnothaveoccurredonorbeforeAugust.31,1998(the"Initial, Termination Date");provided, however,thattherighttotermin'ate theAgreement underthisSection9.1(b)shallnotbeavailable toanypartywhosefailuretofulfillanyobligation underthisAgreement hasbeenthecauseof,orresultedin,thefailureoftheEffective Timetooccuronorbeforethisdate;andprovided,
| |
| : ftirther, thatifontheInitialTermination Datetheconditions totheClosingsetforthinSections8.1(b),8.1(d)or8.2(e)shall'nothavebeenfulfilled butallotherconditions totheClosingshallbefulfilled orshallbecapableofbeingfulfilled, thentheInitialTermination DateshallbeextendedtoApril28,1999.(c)byParentorCompany,upontwodays'rior noticetoAuthority, if,asaresultofatenderofferoranywrittenofferorproposalwithrespecttoamerger,saleofamaterialportionofitsassetsorotherbusinesscombination madebyapartyotherthanAuthority oranyofitsaffiliates priortoCompanyhavingobtainCompanyShareholder
| |
| : Approval, theBoardofDirectors of,Companydetermines ingoodfaiththattheirfiduciD-24 bligations underapplicable lawrequirethatsuchtenderofferorotherwritten'offerorproposalbeaccepted;
| |
| : provided, Iiowever, that(i)theBoardofDirectors ofCompanyshallhavebeenadvisedina,written opinionofoutsidecounselthatnotwithstanding abindingcommitment toconsummate anagreement ofthenatureofthisAgreement enteredintointheproperexerciseoftheirapplicable fiduciary duties,andnotwithstanding allconcessions whichmaybeofferedbyAuthority innegotiations enteredintopursuanttoclause(ii)below,suchfiduciary dutieswouldalsorequirethedirectors toreconsider suchcommitment asaresultofsuchtenderofferorotherwrittenofferorproposal; and(ii)priortoanysuchtermination, Companyshall,andshallcauseitsrespective financial andlegaladvisorsto,negotiate withAuthority tomakesuchadjustments inthetermsandconditions ofthisAgreement aswouldenableCompanytoproceedwiththetransactions contemplated hereinonsuchadjustedterms;E(d)byAuthority, bywrittennoticetoParentandCompany,if(i)thereexistbreachesoftherepresentations andwarranties ofParentandCompanymadehereinasofthe,datehereofwhichbreaches, individually orintheaggregate, wouldorwould.bereasonably likelytoresultinaMaterialAdverseEffect,andsuchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyParentandCompanyofnoticeinwritingfromAuthority, specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)ParentorCompanyshallhavefailedtoperformandcomplywith,inallmaterialrespects, itsagreements andcovenants hereunder orunderanyotherBasicAgreement andsuchfailuretoperformor"comply shallnothavebeenremediedwithin20daysafterreceiptbyParentandCompanyofnoticeinwritingfrom'Authority, specifying thenatureofsuchfailureandrequesting thatitberemedied; or(iii)theBoardofDirectors ofParentoranycommittee thereof(A)shallwithdrawor.modifyinanymanneradversetoAuthority orLIPASubitsapprovalorrecommendation ofthisAgreement ortheotherBasicAgreements, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponAuthority's orLIPASub'srequest,or(C)shall,resolvetotakeanyoftheactionsspecified inclause(A)or(B);(e)byParentorCompany,bywrittennoticetoAuthority andLIPASub,if(i)thereexistmaterialbreachesoftherepresentations andwarranties ofAuthority andLIPA,Submadehereinasofthedatehereofwhichbreaches, ndividually orintheaggregate, wouldorwouldbereasonably likelytoresultinaMaterialAdverseEffect,andchbreachesshallnothavebeenremediedwithin20daysafterreceiptbyAuthority ofnoticeinwritingfromarent,specifying thenatureofsuchbreachesandrequesting thattheyberemedied, (ii)Authority shallhavefailedtoperformandcomplywith,inallmaterialrespects, itsagreements andcovenants hereunder orunderanyotherBasicAgreements, andsuchfailuretoperformorcomplyshallnothavebeenremediedwithin20daysafterreceiptbyAuthority orLIPASubofnoticeinwritingfromParent,specifying thenatureofsuchfailureandrequesting thatitberemedied, or(iii)theBoardofTrusteesofAuthority oranycommittee thereof(A)shallwithdrawormodifyinanymanneradversetoParentorCompanyitsapprovalorrecommendation ofthisAgreement oranyoftheotherBasicAgreements, (B)shallfailtoreaffirmsuchapprovalorrecommendation uponParent'sorCompany's request,or(C)shallresolvetotakeanyoftheactionsspecified inclause(A)or(B);or(f)byeitherParentandCompany,ontheonehand,orAuthority andLIPASub,ontheotherhand,bywrittennoticetotheotherparty,ifanyoftheconditions ofeitherparty'sobligation toeffectthetransactions cannotbesatisfied.
| |
| Section9.2EgectofTermination.
| |
| Intheeventofthetermination ofthisAgreement, theprovisions inthisSection9.2,inSections7.7,7,9andArticleX(andSection11.7totheextentitisapplicable tosuchSectionsandArticle)shallsurvivethetermination andnopartyshallberelievedofanyliability foranybreachofthisAgreement.
| |
| Section9.3Survival.
| |
| Allofthecovenants intheSchedules attachedheretoshallsurvivetheEffective Time.Allrepresentations andwarranties inthisAgreement shallnotsurvivetheEffective Time,exceptasotherwise providedinthisAgreement.
| |
| Section9.4Amendment.
| |
| ThisAgreement maybeamendedatanytimebythepartieshereto,butonlybyaninstrument inwritingsignedbyeachofthepartieshereto;provided, however,thatAuthority andLIPASuballnotunreasonably withholdtheirconsenttoanyamendment proposedbyCompanywithrespecttoSections(b)and(c).D-25 Section9.5Extension,',
| |
| lVaiver.AtanytimepriortotheClosing,thepartieshereto;may (a)extendthtimefortheperformance ofanyoftheobligations'or otheractsofthepartieshereto,(b)waiveanyinaccuracies intherepresentations andwarranties contained hereinor'inanydocumentdelivered pursuantheretoand(c)waivecompliance withanyoftheagreements'or, totheextentpermitted byapplicable law,conditions contained herein.Anyagreement onthepartofapartyheretotoanysuchextension orwaivershallbevalidonlyifsetforthinawritteninstrument signedbysuchparty.Il,IIARTICLEX,,STANDSTILL Section10.1Standstill.
| |
| In'theeventAuthority'terminates thisA'greement, Authority anditsaffiliates willnot(andwillnotassistorencourage othersto),directlyorindirectly,'without theprior'consent ofParentandCompany,priortothedatethatissixmonthsafterthe'dateoftermination,:if riny,ofthisAgreement byAutholity pursuanttoSec'tion9.1:I(a)acquireoragree,offer,seek'orproposetoacquire,orca'usetobea'cquired, ownffeiship (including, butnotlimited,,to, beneficial ownership asdefinedinRule13d-3undertheExchangeActofanyofCompany's (oranysuccessor's) assetsorbusinesses orany,securities
| |
| >psuedbyCompany(oranysuccessor) orany,rightsoroptionstoacquiresuchownership, including fromathirdparty;(b)condemnoragree',offer,seekorpiopose'tocondemn,'or'ause tobecondemned, anyofCompany's (oranysuccessor's) assetsorbusinesses orariysecurities issuedbyCompany'or anysuccessor);
| |
| IIffI'(c)make,orinanywayparticipate, inanysolicitation ofproxiesorconsentswithrespecttoanysecurities ofParent'orCompanywhichare,ormaybe,entitledtovoteintheelectionofParent'sorCompariy's'directors, asthecasemaybe("VotingSecurities"
| |
| ),becomea"participant" inan)"election contest"(assuch'erms aredefinedorusedinRule14a-11undertheExchangeAct)'with respecttoParentorCompany;orse'ektoadvisencourage orinfiueffnce anypersonorentitywithrespecttothev'otingofanyofParent'sorCompany's rotiSecurities; ordemandacop'yofParent'sorCompany's stockledger,list'ofParffent's orCom'pany's shareholders orotherbooksandrecordsor'callorattemptto'callanymeeting''of theshareholders ofParent"or'Company
| |
| 'or'ff(d)enter-into anydiscussions, negotiations, arrangements.
| |
| orunderstandings withanythird'party.or agencywithrespecttoanyofthemattersdescribed inclause(a),(b)or(c)ofthisSection10.1.ffffFI.ARTICLEXIPrIISCELLANEOUS Sectibn11.1CertainDelitiitions.i Forallpurposesofthis'Agreement, except'as otherwise'expressly providedorunlessthecontextotherwise requires:
| |
| (a)"affiliate".
| |
| or"associate" of.anyspecified personmeansanyother.persondirectly'or indirectly controlling orcontrolled byorunderdirector,,indirectcommon,controlwithsuchspecified person.Forthepurposesofthisdefinition,,"control" whenusedwith"respect toanyspecified personmeansthepowertodirectthemanagement andpoliciesofsuchperson,directlyorindirectly, whetherthroughtheownership of;votingsecurities, bycontractorotherwise; andtheterms"controlling" and"controlled" havemeaningscorrelative totheforegoing; FffF~(b)"business day"meansanyday(otherthanaSaturdayoraSunday)onwhichbankinginstitutions inNewYorkCity,NewYorkarenotauthorized orobligated bylaworexecutive ordertoclose;andIIffI.'c)"person"means'nyindividual,'corporation,-firms, companies, trusts,businesstrusts,legalentitiesgeneralpartnership, limitedpartnership, jointventure,association, joint-stock company,trust;limitedliabil~company,unincorporated organization orgovernment oranyagencyorpolitical subdivision thereof.'
| |
| Section11.2Notices.Allnoticesandothercommunications hereunder shallbeinwritingandshallbedeemedgiven,uponreceiptifdelivered personally ormailedbyregistered orcertified mail(returnreceiptrequested) orovernight deliveryservicetothepartiesatthefollowing addresses (oratsuchother,addressforapaityasshallbespecified bylikenotice):PIPI~(a)iftoAuthority orLIPASub,to:PVLongIslandPowerAuthority P333EarleOvingtonBoulevard Suite403Uniondale, NewYork11553Telephone:
| |
| (516)222-7700Attention:
| |
| Executive DirectorPwithacopyto:RichardKesselChairman'oftheBoard'ongIslandPowerAuthority 333EarleOvingtonBlvd.,Suite403Uniondale, NewYork11553V.PIIePatrickFoyeDeputyChairmanoftheBoardLongIslandPowerAuthority 333EarleOvingtonBlvd.,Suite403Uniondale, NewYork11553winthrop, Stimson,-Putnam
| |
| &RobertsOneBatteryPark,Plaza NewYork,NewYork10004Telephone:
| |
| (212)858-1000Attention:
| |
| StephenR.RusmiselV(b)-iftoParentorCompany,to:LongIslandLightingCompany175EastOldCountyRoadHicksville, NewYork11801Telephone:
| |
| (516)545-4800Attention:
| |
| ChiefExecutive OfficerwithacopytoVKramer,Levin,Naftalis&Frankel919ThirdAvenue'ew York,NewYork10022IITelephone:
| |
| (212)715-9100Attention:
| |
| ThomasE.Constance ISection11.3Descriptive Headings.
| |
| Thedescriptive headingshereinareinsertedforconvenience onlyandarenotintendedtobepartofortoaffectthemeaningorinterpretation ofthisAgreement.
| |
| "IIVVSection.11.4 Counterparts.
| |
| ThisAgreement maybeexecutedintwoormorecounterparts, allofwhichallbeconsidered oneandthesameagreement.
| |
| ID-27
| |
| 'Section11.5EntireAgreement; Assigntnent.
| |
| ThisAgreement, including theannexesandexhibitsheretandthedocuments, schedules (including, without,limitafion, theDisclosure Schedule),
| |
| certificates andinstruments referredtohereinconstitute theentireagreement,.
| |
| andsupersede.all prioragreements andunderstandings, bothwrittenandoral,amongthepartieswithrespecttothesubjectmatterhereof.ThisAgreement shallnotbeassignedbyoperation oflaworotherwise.
| |
| Section11.6Governing Laiv.This'greement shallbegovernedandconstrued inaccordance withthelawsoftheStateofNewYork,withoutregardtoanyapplicable principles ofconfiicts oflaw.Exceptasotherwise providedinSection11.10,anyactionarisingoutoforrelatingtothisAgreement shallbebroughtinNewYorkStateCourtorFederalDistrictCourt.Section11.7SpecificPerfonnance.
| |
| Thepartiesheretoagreethatifanyof,theprovisions ofthisAgreement werenotperformed inaccordance withtheirspecifictermsorwereotherwise
| |
| : breached, irreparable damagewouldoccur,noadequateremedyatlawwouldexistanddamageswouldbedifficult todetermine, andthatthepartiesshallbeentitledtospecificperformance ofthetermshereof,inadditiontoanyotherremedyatlaworequity.Section11.8PartiesinInterest.
| |
| ThisAgreement shallbebindinguponandinuresolelytothebenefitofeachpartyhereto,andnothinginthisAgreement, expressorimplied,isintendedtoorshallconferuponanyotherpersonorpersonsanyrights,benefitsorremediesofanynaturewhatsoever underorbyreasonofthisAgreement.
| |
| Section11.9Severability.
| |
| ThisAgreement shallbedeemedseverable; theinvalidity orunenforceability ofanytermorprovision ofthisAgreement shallnotaffectthevalidityorenforceability ofthisAgreement orofanyothertermhereof,whichshallremaininfullforceandeffect.Section11.10,Alternative DisputeResolution.
| |
| I(a)Anydisputearisingoutoforrelatingtoanycovenantcontained inanyScheduletothisAgreement shallberesolvedinaccordance withtheprocedures specified inthisSection11.10,whichshallconstitute thesoleaexclusive procedures fortheresolution ofsuchdisputes, excepttotheextentanysuchSchedule'xpress providesanotherdisputeresolution process.(b)ThepartiesagreetousetheirbesteffortstosettlepromptlyanydisputesorclaimsarisingoutoforrelatingtothisAgreement throughnegotiation conducted ingoodfaithbetweenexecutives havingauthority toreachsuchasettlement.
| |
| Ifeitherpartyheretoshallsorequest,thepartiesshallmutuallyagreeorat.theselection ofamediatorwhoshallmediatethenegotiations, whichshallbenon-binding.
| |
| Allnegotiations andmediation discussions pursuanttothisparagraph areconfidential andshallbetreatedascompromise andsettlement negotiations forpurposesofFederalRuleofEvidence408andapplicable staterulesofevidence.
| |
| (c)AnydisputearisingoutofrelatingtoanyScheduletothisAgreement orthebreach,termination, orvaliditythereof,whichdisputehasnotbeenresolvedbyanegotiation ormediation asprovidedinparagraph (b)hereofwithin60daysfromthedatethateithernegotiations ormediation shallhavebeenfirstrequested, shallbesettledbybindingarbitration beforethreeindependent andimpartial arbitrators inaccordance withthethencurrentrulesoftheAmericanArbitration Association, excepttotheextentsuchrulesare=inconsistent withanyprovision ofthisAgreement, inwhichcasetheprovisions ofthisAgreement shallbefollowed, andexceptthatthearbitrations underthisAgreement shallnotbeadministered bytheAmericanArbitration Association.
| |
| TheArbitrators shallbe(i)independent ofthepartiesanddisinterested intheoutcomeofthedispute,(ii)attorneys, accountants, investment bankers,commercial bankersorengineers familiarwithcontracts governing theoperation ofelectricutilityassets;and(iii).qualified inthesubjectarea.oftheissueindispute.Forpurposesofthepreceding
| |
| : sentence, residents'of LongIslandshallnotbeconsidered interested merelybyvirtueoftheirresidence.
| |
| TheArbitrators shallbechosenbytheparties,witheachpartychoosingonearbitrator andthosearbitrators choosingthethird'arbitrator.
| |
| JudgmentontheawardrenderedbytheArbitrators maybeenteredanycourtintheStateofNewYorkhavingjurisdiction thereof.Ifeitherpartyrefusestoparticipate ingoodfaD-28 thenegotiations ormediation proceedings described inparagraph (b)hereof,theotherinayinitiatearbitration atanytimeaftersuchrefusalwithoutwaitingfortheexpiration ofthe60dayperiod.Except,asprovidedinParagraph (d)hereofrelatingtoprovisional
| |
| : remedies, theArbitrators shalldecideallaspectsofanydisputebroughttothe'mincluding attorneydisqualification andthetimeliness ofthemakingofanyclaim.(d)Eitherpartymay,withoutprejudice toanynegotiation, mediation, orarbitration procedures, proceedinanycourtofcompetent jurisdiction
| |
| 'toseek-provisional judicialreliefif,insuchparty'ssolediscretion, suchactionisnecessary toavoidimminentirreparable harmortopreservethestatusquopendingtheconclusion ofthedisputeprocedures specified inthisSection11.10.,'k4(e)TheArbitrators shallhavenoauthority toawardpunitivedamagesoranyotherdamagesasidefromtheprevailing party'sactualandconsequential damages,'plus interestthereonattheBaseInterestRate(asdefinedintheManagement ServicesAgreement) acciiiedfromthedatesuchdamageswereincurred.
| |
| TheArbitrators shallnothavetheauthority tomakeanyruling,finding,orawardthatdoesnotconformtothetermsandconditions ofthisAgreement.
| |
| (f)TheArbitrators mayawardreasonable attorneys'ees andcostsofthearbitration.
| |
| (g)AnyclaimunderanyScheduletothisAgreement shallbetime-barred, regardless ofanystatuteoflimitations periodsprovidedby'st'ate or'federal law,unlessnegotiation ormediation withrespecttheretoiscommenced withrespecttosuchclaimwithintwelvemonthsafterthebasisforsuchclaimhasbeendiscovered.
| |
| (h)TheArbitrators shallhavethediscretion loorderapre-hearing exchangeofinformation bytheparties,including, withoutlimitation, theproduction ofrequested documents, theexchangeofsummaries oftestimony ofproposedwitnesses, andtheexamination bydeposition ofparties.Eachofthepartiesagreestoproduceallsuchrequested documents andtodeliverto'heother''acer'tificate, executedbyaseniorexecutive oFsuchparty,statingthatallsuchdocuments havebeensoproduced.
| |
| h(i)Thesiteofanyarbitration proceeding broughtpursuanttothisAgreement shallbeMineolaorauppauge, NewYork.(j)TheArbitrators'ward shallbeinwritingandshallsetforththefactualandlegalbasesfortheaward.D-29
| |
| =,IN:WITNESS WHEREOF,;
| |
| thepartiesheretohavecausedthisAgreement tobesignedbytheirrespectiv officersthereunto dulyauthorized asofthedatefirst,writtenabove.''\LONGISLAND,LIGHTINGCOMPANY..~c5NBy:,,.Name',Dr, WilliamJ.Catacosinos
| |
| .-,,.Title:,Chief Executive Officerty,yILONGISLANDPOWERAUTHORITY r,e<''Iii'By;..'>>>r~*.,Name:jRichard M.KesselTitle:ChairmantMdAscontemplated bySection1.4hereof,Parent:By:Name:PatrickFoyeTitle:DeputyChairmanLIPAACQUISITION, CORP.By:Name:JI.Title:theundersigned,has executedanddelivered thisAgreement astI.BLHOLDINGCORP.By:Name:Title:D-30 MerrillLynchWttIW~WlANNEXEWfInvestment BankingCorporate andInstitutional
| |
| >".ClientGroup'orld'Finan'cial'Center
| |
| ,-,,NorthTowerNewYork,NewYork.10281-1327
| |
| ,212449$000June27,1997BoardofDirectors TheBrooklynUnionGasCompanyOne'Metro TechCenterBrooklyn, NewYork11201-3850 W~Itiix'3'LadiesandGentlemen:
| |
| TheBrooklynUnionGasCompany(the"Company""or "Brooklyn Union")andLong'Island LightingCompany("Lilco")
| |
| haveenteredintoanAmendedandRestatedAgreement andPlan:ofExchange'and MergerdatedasofJune26,1997(the"Agreement"
| |
| )pursuanttowhich,amongotherthings,(i)awholly-owned subsidiary'of aholdingcompanyto'be'forined pursuanttotheAgreement
| |
| ("Newco")
| |
| willbemergedwithandnto'heCompany(the"Brooklyn Union'erger"
| |
| ),'isaresultofwhicheachissuedandoutstanding shareofheCompany's commonstock,parvalue$0.33Npershare(the"CompanyShares"),otherthanDissenting Shares(asdefinedintheAgreement),
| |
| willbeconverted intotherighttoreceiveonenewlyissuedshare(the"Exchange Ratio")ofthecommo'ns'tockof'Newco, parvalue$;01pershare(the"NewcoShares"),and(ii)eachissuedandoutstanding shareofLilco'scommonstock,parvalue'$5.00'per share'("Lilco Shares"),otlierthanDissenting Shares,willbeexchanged (the"LilcoBindingShareExchange",
| |
| andtogetherwiththeBrooklynUnionMerger,the'Combination Transactions"
| |
| )for0.803newlyissuedNewcoSharessubjecttoadjustment'to 0.880newlyissuedNewcosharesiftheLIPATransaction referredtobelow'sconsummate'd.
| |
| Thetermsandconditions'of theCombination 1'ransactions aremorefully'set forthinthe'greement.
| |
| wtWYouhaveaskeduswhether,,in ouropinion,theExchangeRatioisfairtotheholdersoftheCompanySharesfromafinancial pointof,view.SWI~tlIttInarrivingattheopinion>set forthbelow,wehave,amongotherthings:IVt"(1)ReviewedtheCompany's AnnualReports,Forms10-Kandrelatedfinancial information forthethree'fiscalyearsendedSeptember 30,1996andtheCompany's Forms10-Qandtherelatedunaudited wfinancial information forthequarterly.
| |
| periodsendingDecember31,1996andMarch31,1997',~(2)ReviewedLilco's"AnnualReports,Forms''10-K andrelatedfinancial information forthethreefiscalyearsendedDecember31,'1996andLilco's.Form'10-Q andtherelatedunaudited financial'information for'thequarterly periodendingMarch31,W1997;*,'.lIWI'3)Reviewedcertaininformation",
| |
| including financial forecasts, relatingtothebusiness, earnings>
| |
| cashflow;assets'and prospects ofth'eCompany.and Lilco,furnished tousby,theCompanyandLilco;'
| |
| 2Merri11Lynch,h(4)Conducted discussions withmembersofseniormanagement oftheCompanyandLilcoconcerning theirrespective businesses, regulatory environments, prospects andstrategic objectives; (5)Reviewedthehistorical marketpricesandtradingactivityfortheCompanySharesandLilcoSharesandcomparedthemwiththatofcertainpubliclytradedcompanies whichwedeemedtobereasonably similartotheCo'mpanyandLilco,respectively; (6)Comparedtheresultsofoperations oftheCompanyandLilcowiththatofcertaincompanies whichwedeemedtobereasonably similartotheCompanyandLilco,respectively; (7)Comparedtheproposedfinancial termsofthetransactions contemplated bytheAgreement withthefinancial termsofcertainothermergersandacquisitions whichwedeemedtoberelevant; (8)Considered thepotential proformaimpactoftheCombination Transactions, including ontheCompany's capitalization ratiosandearnings, dividends andbookvaluepershare;(9)ReviewedtheAgreement; (10)ReviewedtheAgreement andPlanofMerger,datedasofJune26,1997,byandamongBLHoldingCorp.,Lilco,LongIslandPowerAuthority
| |
| ("LIPA")andLIPAAcquisition Corp.(the"LIPAAgreement"
| |
| )providing forthe,acquisition'by LIPAofcertainspecified assetsandproperties ofLilco(the"LIPATransaction"
| |
| );and,(11)Reviewedsuchotherfinancial studiesandanalysesandperformed suchotherinvestigations andtookintoaccountsuchothermattersaswedeemednecessary, including ourassessment ofgeneraeconomic, marketandmonetaryconditions.
| |
| Inpreparing ouropinion,wehaveassumed,withyourconsent,thattheLIPATransaction, ifconsummated, willbeconsummated onthetermscontained intheLIPA'greement.
| |
| Inpreparing ouropinion,wehavealsoassumedandreliedontheaccuracyandcompleteness ofallinformation suppliedorotherwise madeavailabfe tousorpubliclyavailable ordiscussed withorreviewedbyorforusandwehavenotassumedanyresponsibility forindepe'ndently verifying suchinformation orundertaken anindependent evaluation orappraisal ofanyoftheassetsor'liabilities oftheComp'anyorLilco.Inaddition, wehavenotconducted anyphysicalinspection oftheproperties orfacilities oftheCompanyorLilco.Withrespecttothefinancial Forecasts furnished toordiscussed withusbytheCompanyandLilco,wehaveassumedthattheyhavebeenreasonably preparedandreflectthebestcurrently available estimates andjudgmentof"theCompany's orLilco'smanagement astotheexpectedfuturefinancial performance oftheCompanyorLilco,asthecasemaybe,andastotheexpectedfutureprojected outcomesofvariouslegal,regulatory andothercontingencies.
| |
| Inthatregard,Lilco'sfinancial forecasts forthecaseinwhichLilcoretainsownership ofitselectrictransmission anddistribution system,substantially allofitselectricregulatory assetsandcertainotherinterests andtheLIPATransaction isnotconsummated; assume,amongotherthings,(i)thatLilcowillbesubjecttonoreduction inelectricratesforthefive-year periodendingDecember31,2002,(ii)thatLilcowillfullyrecoverinitscurrentandfutureelectricratesallofitscostsreferredtointheNotestoFinancial Statements ofLilcofortheyearendedDecember31,1996,associated withthetransferoftheShorehamNuclearPowerStationtoLIPAanddecommissioning thereof,ontermsnolessfavorable-toLilcothanthetermscurrently ineffect,and(iii)thattherewillbenoadversechangestoLilcoingeneralcompetitive conditions forthetransmission andsaleofelectricity intheareasservicedbyLilcothroughtheconstruction ofnewtransmission linestoLongIslandorotherwise.
| |
| WehaveassumedthattheCombination Transactions willbeaccounted forasapoolingofinterest.
| |
| inthecasewheretheLIPATransaction isnotconsummated andthattheBrooklynUnionMergerwillqualifyatax-freereorganization forU.S.federalincometaxpurposes.
| |
| Ouropinionisnecessarily baseduponmarket,economicandotherconditions astheyexistandcanbeevaluated asofthedatehereof.Wehaveassumedthatinthecourseofobtaining thenecessary regulatory orotherconsentsorapprovals fortheCombination Transactions andtheLIPATransaction, norestrictions, including anydivestiture requirements oramendments ormodifications, willbeimposedthatwillhaveamaterialadverseeffectonthecontemplated benefitsoftheCombination Transactions ortheLIPATransaction.
| |
| Inconnection withthepreparation ofthisopinion,wehavenotbeenauthorized bytheCompanyortheBoardofDirectors tosolicit,norhavewesolicited, third-party indications ofinterestfortheacquisition ofalloranypartoftheCompany.WeexpressnoopinionastowhatthevalueoftheNewcoSharesactuallywillbewhenissuedtotheholdersoftheCompanySharesuponconsummation oftheCombination Transactions orwhatthevalueoftheCompanySharesorLilcoShareswillbebetweenthedatehereofandtheconsummation oftheCombination Transactions.
| |
| Thisopinionisaddressed totheBoardofDirectors oftheCompanyanddoesnotconstitute arecommendation toanyshareholders astohowsuchshareholders shouldvoteontheproposedCombination Transactions.
| |
| Wehaveactedasfinancial advisortotheCompanyinconnection withtheCombination Transactions andwillreceiveafeeforourservices, asignificant portionofwhichiscontingent uponconsummation oftheCombination Transactions.
| |
| We.have,inthepast,providedfinancial, advisoryandfinancing servicestotheCompanyandfinancing servicestoLilcoandhavereceivedfeesfortherendering ofsuchservices.
| |
| Intheordinarycourseofourbusiness, wemayactivelytradethesecurities oftheCompanyorLilcoforourownaccountandfortheaccountsofcustomers and,accordingly, mayatanytimeholdalongorshortpositioninuchsecurities.
| |
| Onthebasisof,andsubjecttotheforegoing andothermatterswhichwedeemrelevant, weareoftheopinionthat,asofthedatehereof,theExchangeRatioofoneNewcoShareforeachCompanyShareisfairtotheholdersoftheCompanySharesfromafinancial pointofviewiftheLIPATransaction isconsummated, underwhichcircumstances eachLilcoSharewillbeexchanged for0.880NewcoShares,andiftheLIPATransaction isnotconsummated, underwhichcircumstances eachLilcoSharewillbeexchanged for0.803NewcoShares.Verytrulyyours,MERRILLLYNCH,PIERCE,FENNER&SMITHINCORPORATED
| |
| [THISPAGEINTENTIONALLY LESTBLANK]
| |
| TheBoardofDirectors LongIslandLightingCompany~175EastOldCountryRoadHicksville, NY11801Gentlemen andLadies:ANNEXFDecember29,1996Youhaverequested ouropinionastothefairness, fromafinancial pointofview,totheholders(the"Stockholders"
| |
| )ofcommonstock,parvalue$5.00pershare("CompanyCommonStock"),ofLongIslandLightingCompany(the"Company"
| |
| )oftheConversion RatiosetforthintheBindingShareExchangeAgreement, datedasofDecember29,1996(the"Agreement"
| |
| ),byandamongBrooklynUnionGasCompany("BrooklynUnion"),LongIslandLightingCompany,andNYECO,anewlycreatedcorporation
| |
| ("NYECO"),
| |
| pursuanttowhichBrooklynUnionandLongIslandLightingCompanyshallcombineandbecomewhollyownedsubsidiaries ofNYECO(the"Transaction"
| |
| ).IntheeventtheTransaction isconsummated, eachissuedandoutstanding shareofCompanyCommon~~Stock,otherthansharesofCompanyCommonStocktobecanceledpursuanttheAgreement, shallbeconverted
| |
| 'ntotherighttoreceive.803(the"Conversion Ratio")sharesofNYECOcommonstock,$.01parvalue,andeachshareofBrooklynUnioncommonstock,otherthansharesofBrooklynUnioncommonstocktobecanceledpursuanttotheAgreement, shallbeconverted intotherighttoreceiveoneshareofNYECOcommonstock.Inamvingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompanyandBrooklynUnion,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompanyandBrooklynUnionrelatingtothebusinessandprospects oftheCompanyandBrooklynUnion,(iii)conducted discussions withmembersoftheseniormanagement oftheCompanywithrespecttothebusinessandprospects oftheCompany,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable tothoseoftheCompanyandBrooklynUnion,(v)reviewedthehistorical marketpricesandtradingvolumesoftheCompanyCommonStockandthecommonstockofBrooklynUnion,(vi)comparedtheproposedfinancial termsoftheTransaction withthefinancial termsofcertainothermergerswhichwebelievetobegenerally comparable totheTransaction, (vii)analyzedtherespective contributions intermsofrevenue,earnings, cashflowandcommonequityoftheCompanyandBrooklynUniontothecombinedcompany,andtherelativeownership ofNYECOaftertheTransaction bythecurrentholdersoftheCompanyCommonStockandBrooklynUnioncommonstock,(viii)considered theproformaeffectoftheTransaction ontheCompany's capitalization ratios,earnings, cashflowandbookvaluepershare,(ix)reviewedtheAgreement, and(x)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information andhave,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) ofttheCompanyorBrooklynUnionoranyoftheirrespective subsidiaries, norhavewebeenfurnished withanyuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenreasonably preparedonbasesreflecting thebestcurrently available estimates and judgments oftheCompany's andBrooklynUnion'smanagement astothefuturefinancial performance ofeachcompany.OurreviewofBrooklynUnion'scurrentandanticipated futureoperations, financial condition andprospects was,withpourconsent,basedentirelyonpublicinformation (except,forcertain1imitedinternalprojections referredtoabove),andwastherefore limitedinscope.Wehavenothelddiscussions withanymembersofBrooklynUnion'sseniormanagement.
| |
| Withyourconsent,wehaveassumedthattheTransaction willbetreatedastax-freetoboththeCompanyandtheStockholders andwillbeaccounted forasapoolingofinterests.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.Dillon,Read&Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withtheTransaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyandBrooklynUnionforourownaccountandfortheaccountsofourcustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| Inrendering thisopinion,weexpressnoviewastotherangeofvaluesatwhichNYECOcommonstockmaytradefollowing consummation oftheTransaction, andwearenotmakinganyrecommendation totheStockholders withrespecttotheadvisability ofdisposing oforretaining suchNYECOcommonstockfollowing theTransaction.
| |
| Baseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thattheConversion Ratioisfair,fromafinancial pointofview,totheStockholders.
| |
| Verytrulyyours,DILLON,READ&CO.INC.
| |
| TheBoardofDirectors LongIslandLightingCompany175EastOldCountryRoadHicksville, NY11801Gentlemen andLadies:June26,1997Youhaverequested ouropinionastothefairness, fromafinancial pointofview,totheLongIslandLightingCompany(the"Company"
| |
| )oftheConsideration tobereceivedpursuanttotheAgreement andPlanofMerger,datedasofJune26,1997(the"LIPAAgreement"
| |
| ),byandamongBLHoldingCorp.("Parent"),theCompany,theLongIslandPowerAuthority
| |
| ("LIPA"),
| |
| andLIPAAcquisition Corp.("LIPASub.")pursuanttowhichLIPASub.willmergewithandintotheCompany(the"LIPATransaction"
| |
| ).PriortotheLIPATransaction, theCompanywillcompleteareorganization pursuanttowhichitsnaturalgasandelectricgeneration businesses, andcertainotherassets,willbedistributed toanewlycreatedsubsidiary orsubsidiaries ofParent.PursuanttotheLIPATransaction, LIPAwillpaytoParent$2,497,500,000 incash(the"Consideration"
| |
| )forthestockoftheCompany,whichwillowntheCompany's electrictransmission anddistribution business("T&DBusiness"
| |
| )andcertainotherassetsoftheCompany,including regulatory assetsofapproximately
| |
| $6.6billion(the"Regulatory Assets")andtheCompany's 18%interestintheNineMilePointTwonuclearplant("NuclearAssets").TheCompanywillalsohaveapproximately
| |
| $3.9billionofdebtandpreferred stockoutstanding andbookvalueofapproximately
| |
| $2.5billionatthetimeofitsmergerwithLIPAub.PursuanttotheLIPATransaction, LIPAandParent(orsubsidiaries thereof)willenterintoancillary agreements pursuanttowhichParent(orsubsidiaries thereof)willprovideelectricity toLIPAandcontinuetomanageessentially allaspectsoftheT&DBusiness("BasicAgreements"
| |
| ).Inarrivingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompany,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompany,including historical andprojected financial information fortheT&DBusiness, theNuclearAssetsandtheRegulatory Assets,(iii)conducted discussions withmembersoftheseniormanagement oftheCompanywithrespecttothebusinessandprospects oftheCompany,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable totheT&DBusiness, (v)comparedpubliclyavailable financial andstockmarketdataforcertainutilities withrelatively highconcentrations ofnucleargeneration tocertainutilities withlittleornonucleargeneration, (vi)reviewedthefinancial termsofcertaintransactions involving transmission anddistribution assets,(vii)considered theproformaeffectoftheLIPATransaction ontheParent'sfinancial condition, (viii)reviewedtheLIPAAgreement, (ix)considered thefinancial termsoftheBasicAgreements, (x)considered theeffectoftheLIPATransaction ontheCompany's pendingshareexchangeagreement withTheBrooklynUnionGasCompany,and(xi)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information andhave,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) oftheCompanyoranyofitssubsidiaries, norhavewebeenfurnished withanysuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenasonablypreparedonbasesrefiecting thebestcurrently available estimates andjudgments ofmanagement asthefuturefinancial performance oftheCompany,theT&DBusiness, theNuclearAssets,andtheRegulatory Assets.Wehavealso,atyourdirection, reliedonyouradviceregarding thetaxconsequences oftheLIPA Transaction.
| |
| Wehavenotattempted toquantifytheregulatory riskinherentintheRegulatory.
| |
| Assets,whichwillcompriseamajorityoftheassetstheCompanywillownatthetimeoftheLIPA,Transaction.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.hDillon,Read&Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withtheLIPATransaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyforourownaccountandfortheaccountsofourcustomers and,accordingly, mayatanytimeholdalongorshortpositioninsuchsecurities.
| |
| IInrendering thisopinion,weexpressnoviewastotherangeofvaluesatwhichtheParentcommonstockmaytradefollowing consummation oftheLIPATransaction, andwearenotmakinganyrecommendation tothestockholders oftheCompanywithrespecttotheadvisability ofdisposing oforretaining.
| |
| suchParentcommonstockfollowing theLIPATransaction.
| |
| 'aseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thatthe'Consideration isfair,fromafinancial.
| |
| pointofview,totheCompany.4'erytrulyyours,DILLON,READ&CO.INC.0,IhA'II1lkI"'AlA,k0 TheBoardtifDirectors
| |
| 'LongIslandLightingCompany"175EastOldCountryRoadHicksville, NY11801June26,1997Gentlemen andLadies:Youhaverequested ouropinionastothefairness, fromafinancial pointofview,totheholders(the"Stockholders"
| |
| )ofcommonstock,'parvalue$5.00pershare("CompanyCommonStock"),ofLongIslandLightingCompany(the"Company"
| |
| )oftheconversion RatiossetforthintheAmendedandRestatedAgreement andPlanofExchange"and Merger,'datedasofJune26,1997(the"Agreement"
| |
| ),byandamongBrooklynUnionGasCompany("BrooklynUnion")andLongIslandLightingCompany,pursuanttowhichBrooklynUnionandLongIslandLightingCompanyshallcombineandbecomewhollyownedsubsidiaries ofBLHoldingCorp.,anewlycreatedholdingcompany(the"Transaction"
| |
| ).IntheeventtheTransaction isconsummated, eachissuedandoutstanding shareofCompanyCommonStock,otherthansharesofCompanyCommonStocktobecanceledpursuanttheAgreement, shallbeconverted intotherighttoreceive.803(the"Original Ratio")shares,oriftheLIPATransaction isconsummated,
| |
| .88(the"LIPARatio")shares,ofBLHoldingCorp.commonstock,$.01parvalue,andeachshareofBrooklynUnioncommonstock,otherthansharesofBrooklynUnioncommonstocktobecanceledpursuanttotheAgreement, tshallbeconverted intotherighttoreceiveoneshareofBLHoldingCorp.commonstock.Inarrivingatouropinion,wehave,amongotherthings:(i)reviewedcertainbusinessandhistorical financial information relatingtotheCompanyandBrooklynUnion,(ii)reviewedcertainfinancial forecasts andotherdataprovidedtousbytheCompanyandBrooklynUnionrelatingtothebusinessandprospects oftheCompanyandBrooklynUnion,(iii)conducted discussions withmembersoftheseniormanagements oftheCompanyandBrooklynUnionwithrespecttothebusinessandprospects oftheCompanyandBrooklynUnion,(iv)reviewedpubliclyavailable financial andstockmarketdatawithrespecttocertainothercompanies inlinesofbusinesswebelievetobegenerally comparable tothoseoftheCompanyandBrooklynUnion,(v)reviewedthehistorical marketpricesandtradingvolumesoftheCompanyCommonStockand'thecommonstockofBrooklynUnion,(vi)comparedtheproposedfinancial termsoftheTransaction withthefinancial termsofcertainothermergerswhichwebelievetobegenerally comparable totheTransaction, (vii)analyzedtherespective contributions intermsofrevenue,earnings, cashfiowandcommonequityoftheCompanyandBrooklynUniontothecombinedcompany,andtherelativeownership ofBLHoldingCorp.aftertheTransaction bythecurrentholdersoftheCompanyCommonStockandBrooklynUnioncommonstock,(viii)considered theproformaeffectoftheTransaction ontheCompany's capitalization ratios,earnings, cashfiowandbookvaluepershare,(ix)reviewedtheAgreement, and(x)conducted suchotherfinancial studies,analysesandinvestigations, andconsidered suchotherinformation, aswedeemednecessary orappropriate.
| |
| Inconnection withourreview,wehavenotindependently verifiedanyoftheforegoing information andhave,withyourconsent,reliedonitsbeingcompleteandaccurateinallmaterialrespects.
| |
| Inaddition, wehavenotmadeanyindependent evaluation orappraisal ofanyoftheassetsorliabilities (contingent orotherwise) oftheCompanyorBrooklynUnionoranyoftheirrespective subsidiaries, norhavewebeenfurnished withanysuchevaluation orappraisal.
| |
| Withrespecttothefinancial forecasts referredtoabove,wehave,atyourdirection, assumedthattheyhavebeenreasonably preparedonbasesrefiecting thebestcurrently available estimates andudgmentsoftheCompany's andBrooklynUnion'smanagement astothefuturefinancial performance ofeachompany.Withyourconsent,wehavereliedonyouradviceregarding thetaxconsequences oftheTransaction.
| |
| Further,ouropinionisbasedoneconomic, monetaryandmarketconditions existingonthedatehereof.
| |
| Dillon,Read&Co.Inc.hasactedasfinancial advisortotheBoardofDirectors oftheCompanyinconnection withthe.Transaction, forwhichwewillreceiveafee.Intheordinarycourseofbusiness, wehavetradedthedebtandequitysecurities oftheCompanyandBrooklynUnion.forour4ownaccountandfortheaccountsofourcustomers and,accordingly, may'tanytimeholdalongorshortpositioninsuchsecurities.
| |
| Inrendering thisopinion,weexpressnoviewastotherangeofvaluesatwhichBLHoldingCorp.commonstockmaytradefollowing consummation oftheTransaction, andwearenotmakinganyrecommendation totheStockholders withrespecttotheadvisability ofdisposing oforretaining suchBLHoldingCorp.commonstockfollowing theTransaction.
| |
| Baseduponandsubjecttotheforegoing, weareoftheopinion,asofthedatehereof,thattheOriginalRatioandtheLIPARatioarefair,fromafinancial pointofview,totheStockholders.
| |
| I.Verytrulyyours,,DILLON,READ&'CO.INC.~\t4K,t',<PK4It0IIII~II144K4 ANNEXGFORMOFCERTIFICATE OFINCORPORATION OFTHEHOLDINGCOMPANYUNDERSECTION402OFTHEBUSINESSCORPORATION LAWOFTHESTATEOFNEWYORKARTICLEINAMEThenameofthecorporation (the"Corporation"
| |
| )is"ARTICLEII,PURPOSEThepurposesforwhichtheCorporation isformedaretoengageinanylawfulactoractivityforwhichcorporations maybeorgariized undertheNYBC1.,buttheCorporation isnotformedtoengageinanyactoractivityrequiring theconsentorapprovalofanystateofficial, department, board,agencyorotherbodywithoutsuchconsentorapprovalfirstbeingobtained.
| |
| eARTICLE<IIIOFFICE<TheofficeoftheCorporation istobelocatedintheCountyof,StateofNewYork.ARTICLEIVCAPITALSTOCKSection1.Theaggregate numberofshareswhichtheCorporation shallhaveauthority toissueshallbe450,000,000 sharesofCommonStock,parvalue$.01persharc,and100,000,000 sharesof.Preferred Stock,parvalue$.01pershare.Section2.TheamountofcapitalstockoftheCorporation shallbe$7,000,000.
| |
| Section3.SharesofPreferred Stockmaybeissuedfromtimetotimeinoneormoreseriesasmaybedetermined fromtimetotimebytheBoardofDirectors.
| |
| Exceptinrcspe'ctoftheparticulars tobefixedbytheBoardofDirectors asprovidedbelow,allsharesofPreferred Stockshallbeofequalrank.AllsharesinanyoneseriesofPreferred Stockshallbealikeineveryparticular exceptthatsharesofanyoneseriesissuedatdifferent timesmaydifferastothe.datesfromwhichdividends thereonshallbecumulative.
| |
| Thevotingrights,ifany,ofeachsuchseriesandthepreferences andrelative, participating, optionalandotherspecialrightsoleachseriesandthequalifications, limitations andrestrictions thereof,ifany,maydifferfromthoseofanyandallotherseries.TheBoardofDirectors shallhavetheauthority tofix.byresolution dulyadoptedpriortotheissuanceofanysharesofaparticular seriesofPreferred Stockdesignated bytheBoard,.of Directors, thevotingrights,ifany,oftheholdersofsharesofsuchseriesandthedesignations, preferences andrelative, participating, optional~ndotherspecialrightsofeachseriesandthequalifications, limitations andrestrictions thereof(the"Preferred tockDesignation"
| |
| ).G-1
| |
| ...Withoutlimitingthegenerality oftheforegoing authority oftheBoardofDirectors, theBoardofDirectors fromtimetotimemay:(a)establish anddesignate, aseriesofPreferred Stock,whichmaybedistinguished bynumber,letterortitlefromotherPreferred StockoftheCorporation oranyseriesthereof;(b)fixandthereafter increaseordecrease(butnotbelowthenumberofsharesthereofthenoutstanding) thenumberofsharesthatshallconstitute suchseries;h(c)providefordividends onsharesofsuchseriesandifprovision ismadefordividends, determine thedividendrateandthedatesonwhichdividends, ifdeclared, shallbepayable,whetherthedividends shallbecumulative and,ifcumulative, forwhatdateordatesdividends shallaccrue,andtheotherconditions, ifany,including rightsofpriority, ifany,uponwhichthedividends shallbepaid;(d)provideastowhetherthesharesofsuchseriesshallberedeemable, andifredeemable, theterms,limitations andrestrictions withrespecttosuchredemption, including withoutlimitation, themannerofselecting sharesforredemption iflessthanallsharesaretoberedeemed, thetimeortimesandthepriceorpricesatwhichthesharesofsuchseriesshallbesubjecttoredemption, inwholeorinpart,andtheamount,ifany,inadditiontoanyaccrueddividends thereonwhichtheholdersofsharesofanyseriesshallbeentitledtoreceiveupontheredemption thereof,whichamountmayvaryatdifferent redemption datesandmaybedifferent withrespecttosharesredeemedthroughtheoperation ofanypurchase, retirement orsinkingfundandwithrespecttosharesotherwise redeemed;
| |
| 'l(e)fixtheamount,inadditiontoanyaccrueddividends thereon,whichtheholdersofsharesofsuchseriesshallbeentitledtoreceiveuponthevoluntary orinvoluntary liquidation, dissolution orwindingupoftheCorporation, w'hichamountmayvaryatdifferent datesandmayvarydepending onwhethersuchliquidation, dissolution orwindingupisvoluntary orinvoluntary, andtodetermine anyotherrights,ifany,tow'hichholdersofthesharesofsuchseriesshallbeentitledintheeventofanyliquidation, dissolution orwindingupoftheCorporation; (f)establish whetherthesharesofsuchseriesshallbesubjecttotheoperation ofapurchase, retiremen orsinkingfundandifso,theterms,limitations andrestrictions withrespectthereto,including withoutlimitation, whethersuchpurchase, retirement orsinkingfundshallbecumulative ornoncumulative, theextenttoandthemannerinwhichsuchfundsshallbeappliedtothepurchase, retirement orredemption ofthesharesofsuchseriesforretirement ortoothercorporate purposesandthetermsandprovisions relativetotheoperation thereof;(g)determine theextentofthevotingrights,ifany,ofthesharesofsuchseriesanddetermine whetherthesharesofsuchserieshavingvotingrightsshallhavemultiplevotespershare;(h)providewhetherornotthesharesofsuchseriesshallbeconvertible intoorexchangeable forsharesofanyotherclassorclassesofcapitalstockoftheCorporation, including CommonStock,Preferred Stockorofanyseriesthereof,andifconvertible orexchangeable, establish theconversion orexchangepriceorrate,theadjustments thereof,andtheothertermsandconditions, ifany,onwhichsuchsharesshallbeconvertible orexchangeable; and(i)provideforanyotherpreferences, anyrelativeparticipating, optionalorotherspecialrights,anyqualifications, limitations orrestrictions thereof,oranyothertermorprovision ofsharesofsuchseriesastheBoardofDirectors maydeemappropriate ordesirable.
| |
| SharesofPreferred StockmaybeissuedbytheCorporation forsuchconsideration asisdetermined bytheBoardofDirectors.
| |
| Section4.TheCommonStockshallbesubjecttotheexpresstermsofthePreferred Stockandanyseriesthereof.Theholdersof,sharesofCommonStockshallbeentitledtoonevoteforeachsuchshareuponallproposals presented totheshareholders onwhichtheholdersofCommonStockareentitledtovote.Exceptasotherwise providedby'aworbytheresolution orresolutions adoptedbytheBoardofDirectors designating thrights,powersandpreferences ofanyseriesofPreferred Stock,theCommonStockshallhavetheexclusive rigG-2 ttovotefortheelectionofDirectors andforallotherpurposes, andholdersofPreferred Stockshallnotbeentitledtoreceivenoticeofanymeetingofshareholders at.whichtheyarenotentitledtovote:Thenumberofauthorized sharesofPreferred'Stock maybeincreased ordecreased (butnotbelowthe'umber, ofsharesthereofthenoutstanding) bytheaffirmative voteoftheholdersofamajorityoftheoutstanding sharesofCommonStock,withoutavoteoftheholdersofthePreferred Stock,orofanyseriesthereof,unlessavoteofanysuchholdersisrequiredpursuanttoanyPreferred StockDesignation.
| |
| TheCorporation shallbeentitledtotreatthepersoninwhosenameanyshareofi}sstockisregistered astheownerthereof'for allpurposes'nd shallnotbeboundtorecognize anyequitable orotherclaimto,orinterestin,suchshareonthepartofanyotherperson,whetherornottheCorporation shallhavenoticethereof,exceptasexpressly providedbyapplicable law.ARTICLEVSHAREHOLDER ACTIONAnyactionrequiredorpermitted tobetakenbytheshareholders oftheCorporation mustbeeffectedatadulycalledannualorspecialmeetingofsuchholdersandmaynotbeeffectedbyanyconsentinwritingbysuchholders.Exceptasotherwise requiredbylawandsubjecttotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation, specialmeetingsofshareholders oftheCorporation foranypurposeorpurposesmaybecalledonlybytheBoardofDirectors pursuanttoaresolution statingthepurposeorpurposesthereofapprovedbyamajorityoftheto}al'number ofDirectors whichtheCorporation wouldhaveiftherewerenovacancies (the"WholeBoard")andanypowerofshareholders tocallaspecialmeetingisspecifically denied.Nobusinessotherthanthatstatedinthenoticeshallbetransacted atanyspecialmeeting.ARTICLEVIELECTIONOFDIRECTORS eUnlessandexcepttotheextentthattheBy-LawsoftheCorporation shallsorequire,theelectionofDirectors oftheCorporation neednotbebywrittenballot.ARTICLEVIIBOARDOFDIRECTORS Section1.Number,ElectionandTerms.Exceptasotherwise fixedbyorpursuanttotheprovisions ofArticleIVhereofrelatingtotherightsoftheholdersofan'yclassorseriesofstockhavingaprefererice oyertheCommonStockastodividends oruponliquidation toelectadditional Directors underspecified cfrcumstances, thenumberoftheDirectors oftheCorporation shallbefixedfromtimetotimeexclusively pursuanttoaresolution adoptedbyamajorityoftheWholeBoard.NodecreaseinthenumberofDirectors,'ow'ever, shallshortenthetermofanyincumbent Director.
| |
| Directors shallbeelectedbytheshareholders oftheCorporation attheirannualmeeting,exceptashereinotherwise providedfornewlycreateddirectorships andvacancies, toserveforoneyearoruntiltheirsuccessors areelectedorchosenandqualified.
| |
| Section2.Shareholder Nomination ofDirectorCandidates; Shareholder Proposal.ofBusiness.
| |
| Advancenoticeofshareholder nominations fortheelectionofDirectors andoftheproposalofbusinessbyshareholders shallbegiveninthemannerprovidedintheBy-LawsoftheCorporation, asamendedandineffectfromtimetotime.Section3.NewlyCreatedDirectorships andVacancies.
| |
| Exceptasotherwise providedfororfixedbyorpursuanttotheprovisions ofArticleIVhereofrelatingtotherightsoftheholdersofanyclassorseriesof~~tockhavingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underpecifiedcircumstances, newlycreateddirectorships resulting fromanyincreaseinthenumberofDirectors andG-3 anyvacancies ontheBoardofdirectors resulting fromdeath,resignation, disqualification, removalorothercauseshallbefilledbytheaffirmative voteofamajorityoftheremaining Directors theninoffice,eventhoughlessthanaquorumoftheBoardofDirectors, andnotbytheshareholders.
| |
| AnyDirectorelectedinaccordance withthepreceding sentenceshallholdofficefortheremainder ofsuchunexpired termoruntilsuchDirector's successor shallhavebeendulyelectedorchosenandqualified.
| |
| Nodecreaseinthenumber'ofDirectors constituting theBoardofDirectors shallshortenthetermofanyincumbent Director.
| |
| Section4.Removal.Subjecttotherightsofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underspecified circumstances, anyDirectormayberemovedfromofficeonlyforcausebytheaffirmative voteoftheholdersofatleasta,majority ofthevotingpowerofallsharesoftheCorporation entitledtovotegenerally intheelectionofDirectors (the"VotingStock")thenoutstanding, votingtogetherasasingleclass.Section5.Amendment, Repeal,Etc.Notwithstanding anythingcontained inthisCertificate ofIncorporation tothecontrary, theaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass,shallberequiredtoalter,amend,adoptanyprovision inconsistent withorrepealthisArticleVII.ARTICLEVIIIBY-LAWSTheBy-LawsmaybealteredorrepealedandnewBy-Lawsmaybeadopted(1)atanyannualorspecialmeetingofshareholders, bytheaffirmative voteoftheholdersofamajorityofthevotingpowerofthestockissuedandoutstanding andentitledtovotethereat,provided, however,thatanyproposedalteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section2.2,2.7or2.10ofArticleHoftheBy-LawsorwithSection3.9or3.11ofArticleIIIoftheBy-Laws,bytheshareholders shallrequiretheaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass;andprovided, further,however,thatinthecaseof"anysuchshareholder actionataspecialmeetingofshareholders, noticeoftheproposedalteration, repealor,adoptionofthenewBy-LaworBy-Lawsmustbcontained inthenoticeofsuchspecialmeeting,or(2)bytheaffirmative voteofamajorityoftheWholeBoard;providedthatanypr'oposed alteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section4.9or4.11oftheArticleIVoftheBy-LawsbytheBoardofDirectors shallrequirethevoteoftwo-thirds oftheWholeBoard.ARTICLEIXAMENDMENT OFCERTIFICATE OFINCORPORATION TheCorporation reservestherightatanytimefromtimetotimetoamend,alter,changeorrepealanyprovision contained inthisCertificate ofIncorporation, andanyotherprovisions authorized bythelawsoftheStateofNewYorkatthetimeinforcemaybeaddedorinserted, inthemannernoworhereafter prescribed bylaw;and,exceptassetforthinArticlesXIVandXV,allrights,preferences andprivileges ofwhatsoever natureconferred uponshareholders, Directors oranyotherpersonswhomsoever byandpursuanttothisCertificate ofIncorporation initspresentformorashereafter amendedaregrantedsubjecttotherightreservedinthisArticle,Notwithstanding anythingcontained inthisCertificate ofIncorporation tothecontrary, theaffirmative voteoftheholdersofatleast80%oftheVotingStockthenoutstanding, votingtogetherasasingleclass,shallberequiredtoalter,amend,adoptanyprovision inconsistent withorrepealArticleV,VII,VIIIorthissentence.
| |
| ARTICLEXAGENTFORSERVICEOFPROCESSTheSecretary ofStateoftheStateofNewYorkisdesignated asagentoftheCorporation uponwhomprocessagainsttheCorporation maybeserved.ThepostofficeaddresstowhichtheSecretary ofStateshallmailacopy-ofanyprocessagainsttheCorporation serveduponhimis:c/oC.TCorporation System,1633BroadwayNewYork,NewYork10019.
| |
| ARTICLEXIREGISTERED AGENTThenameandaddressoftheregistered agentwhichistobetheagentoftheCorporation uponwhomprocessagainstitmaybeserved,areCTCorporation System,1633Broadway, NewYork,NewYork10019.IARTICLEXIIDURATIONrThedurationoftheCorporation shallbeperpetual.
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| ARTICLEXIIINOPREEMPTIVE RIGHTSTheholdersofequitysharesandtheholdersofvotingshares(aseachtermisdefinedinSection622oftheNYBCL)oftheCorporation shallnothaveanypreemptive rights.ARTICLEXIVLIMITEDLIABILITY; INDEMNIFICATION Section1.Eachpersonwhowasorismadeapartyoristhreatened tobemadeapartytoorisinvolvedinanyaction,suitorproceeding, orappealthereof,whethercivil,criminal, administrative orinvestigative (hereinafter a"proceeding"),
| |
| byreasonofthefactthatheorshe,orapersonofwhomheorsheisthelegalrepresentative, isorwasaDirectororofficeroftheCorporation orisorwasservingattherequestoftheCorporation asaDirector, officer,employeeoragentofanothercorporation orofapartnership, jointventure,trust,orotherenterprise, including servicewithrespecttoemployeebenefitplans,whetherthebasisofsuchproceeding isallegedactioninanofficialcapacityasaDirector, officer,employeeoragentorinanyothercapacitywhileservingasaDirector, officer,employeeoragent,.shall beindemnified andheldharmlessbytheCorporation tothefullestextentauthorized bytheNYBCL,asthesameexistsormayhereafter beamended(but,inthecaseofanysuchamendment, onlytotheextentthatsuchamendment permitstheCorporation toprovide'broader indemnification rightsthansaidlawpermitted theCorporation toprovidepriortosuchamendment),
| |
| againstallexpense,liability andloss(including, butnotlimitedto,allattorneys'ees, judgments, fines,ERISAexcisetaxesorpenalties andamountspaidortobepaidinsettlement) reasonably incurredorsufferedbysuchpersoninconnection therewith andsuchindemnification shallcontinueastoapersonwhohasceasedtobea,Director, officer,employeeora'genta'ndshallinuretothebenefitofhisorherheirs,executors andadministrators;
| |
| : provided, however,that,exceptasprovidedinSection2ofthisArticle-XIV, theCorporation shallindemnify anysuchpersonseekingindemnification inconnection withaproceeding (orpartthereof)initi'ated bysuchpersononlyifsuchproceeding (orpartthereof)wasauthorized bytheBoardofDirectors oftheCorporation.
| |
| Therighttoindemnification conferred inthisSection1shallbeacontractrightandshallincludetherighttobepaidbytheCorporation theexpenses(including, withoutlimitation, attorneys'ees) incurredindefending anysuchproceeding inadvanceofitsfinaldisposition;
| |
| : provided, however,that,iftheNYBCLrequires, thepaymentofsuchexpensesincurredbyaDirectororofficerinhisorhercapacityasaDirectororofficer(andnotinanyothercapacityinwhichservicewasorisrenderedbysuchpersonwhileaDirectororofficer,including, withoutlimitation, servicetoanemployeebenefitplan)inadvanceofthefinaldisposition ofaproceeding shallbemadeonlyupondeliverytotheCorporation ofanundertaking, byoronbehalfofsuchDirectororofficer,torepayallamountssoadvancedifitshallultimately bedetermined thatsuchDirectororofficerisnotentitledtobeindemnified underthisArticleXIVorotherwise.
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| TheCorporation may,byactionofitsBoardofDirectors, provideindemnification toemployees andagentsoftheCorporation withthesamescopendeffectastheforegoing indemnification ofDirectors andofficers, oronsuchothertermsandconditions asheBoardofDirectors maydeemnecessary ordesirable.
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| G-5 Section2.IfaclaimunderSection1ofthisArticleXIVisnotpaidinfullbytheCorporation withinthirtydaysafterawrittenclaimhasbeenreceivedbytheCorporation, theclaimantmayatanytimethereafter bringsuitagainsttheCorporation torecovertheunpaid'amountoftheclaimand,ifsuccessful inwholeorinpart,theclaimantshallbeentitledtobepaidalsotheexpense(including, withoutlimitation, attorneys'ees) ofprosecuting suchclaim.Itshallbeadefensetoanysuchaction(otherthananactionbroughttoenforceaclaimforexpensesincurredindefending anyproceeding inadvanceofitsfinaldisposition wheretherequiredundertaking, ifanyisrequired, hasbeentenderedtotheCorporation) thattheclaimanthasnotmetthestandards ofconductwhichmakeitpermissible undertheNYBCLfortheCorporation toindemnify theclaimantfortheamountclaimed,buttheburdenofprovingsuchdefenseshallbeontheCorporation.
| |
| NeitherthefailureoftheCorporation (including itsBoardofDirectors, oranypartthereof,independent legalcounsel,oritsshareholders) tohavemadeadetermination priortothecommencement ofsuchactionthatindemnification oftheclaimantisproperinthecircumstances becauseheorshehasmettheapplicable standardofconductsetforthintheNYBCL,noranactualdetermination bytheCorporation (including itsBoardofDirectors, oranypartthereof,independent legalcounsel,oritsshareholders) thattheclaimanthasnotmetsuchapplicable standardofconduct,shallbeadefensetotheactionorcreateapresumption thattheclaiinant hasnotmettheapplicable standardofconduct.Section3.Therighttoindemnification andthepaymentofexperises incurredindefending aproceeding inadvanceofitsfinaldisposition conferred inthisArticleXIVshallnotbe*exclusive ofanyoth'errightwhichanypersonmayhaveorhereafter acquireunderanystatute,provision oftheCertificate ofIncorporation, By-Law,agreement, voteofshareholders ordisinterested Directors orotherwise.
| |
| Section4.TheCorporation maymaintaininsurance, atitsexpense,toprotectitselfandanyDirector, officer,employeeoragentoftheCorporation oranothercorporation, partnership, jointventure,trustorotherenterprise againstanyexpense,liability orloss,tothefullestextentallowedbylaw,whetherornottheCorporation wouldhavethepowertoindemnify suchpersonagainstsuchexpense,liability or.lossundertheNYBCL.ARTICLEXVDIRECTORLIABILITY ADirectoroftheCorporation shallnotbepersonally liabletotheCorporation oritsshareholders fordamagesforanybreachofdutyinsuchcapacityexceptthattheliability ofaDirectorshallnotbesolimitedif(1)ajudgmentorotherfinaladjudication adversetohimestablishes thathisactsoromissions wereinbadfaithorinvolvedintentional misconduct oraknowingviolation oflaworthathepersonally gainedinfactafinancial profitorotheradvantage towhichhewasnotlegallyentitledorthathisactsviolatedSection719oftheNYBCL,or(2)hisactsoromissions occurredpriortotheadoptionofthisprovision.
| |
| Noamendment toorrepealofthisArticleXVshallapplytoorhaveanyeffectontheliabilit'y orallegedliability ofanyDirectoroftheCorporation fororwithrespecttoanyactsoromissions ofsuchDirectoroccurring priortosuchamendment orrepeal.IftheNYBCLisamendedhereafter toexpandorlimitthe'liability ofadirector',
| |
| thentheliability ofaDirectoroftheCorporation shallbeexpandedtotheextentrequiredoxlimitedtotheextentpermitted bytheNYBCL,assoamended.
| |
| AFORMOFBY-LAWSOFTHEHOLDINGCOMPANYINCORPORATED UNDERTHELAWSOFTHESTATEOFNEWYORKANNEXHARTICLEI,OFFICESANDRECORDSSection1.1.NewYorkOffice.TheofficeoftheCorporation intheStateofNewYorkshallbelocatedintheCountyofSection1.2.OtherOffices.Thecorporation mayhavesuchotheroffices,eitherwithinorwithouttheStateofNewYork,astheBoardofDirectors maydesignate orasthebusinessoftheCorporation mayfromtimetotimerequire.Section1.3.BooksandRecords.ThebooksandrecordsoftheCorporation maybekeptoutsidetheStateofNewYorkatsuchplaceorplacesasmayfromtimetotimebedesignated bytheBoardofDirectors.
| |
| ARTICLEIISHAREHOLDERS II~~~~Section2.1.AnnualMeeting.'he annualmeetingoftheshareholders oftheCorporation shallbeheldns'uchdateandatsuchtimeasmaybefixedbyresolution oftheBoardofDirectors.
| |
| ISection2.2.SpecialMeeting.=Exceptasotherwise requiredbylawandsubjecttotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation, special'meetings ofshareholders oftheCorporation foranypurposeorpurposesmaybecalledonlybytheBoardofDirectors pursuanttoaresolution statingthepurposeorpurposesthereofapprovedbyamajorityofthetotalnumberofDirectors whichtheCorporation wouldhaveiftherewerenovacancies (the"WholeBoard").Section23.PlaceofMeeting.TheBoardofDirectors maydesignate theplaceofmeetingfor'nyannualmeetingorforanyspecialmeetingoftheshareholders.
| |
| Ifnodesignation issomade,theplaceofmeetingshallbetheprincipal officeoftheCorporation.
| |
| Section2.4.Notice.ofMeeting.Writtenorprintednotice,statingtheplace,dayandhourofthemeetingandthepurposeorpurposesforwhichthemeetingiscalled,shallbedelivered bytheCorporation.not lessthan10calendardaysnormorethan50calendardaysbeforethedateofthemeeting,eitherpersonally orbymail,toeachshareholder ofrecordentitledtovoteatsuchmeeting.Ifmailed,suchnoticeshallbedeemedtobedelivered whendeposited intheUnitedStatesmailwithpostagethereonprepaid,addressed totheshareholder atsuchperson'saddressasit.appearsonthestocktransferbooksoftheCorporation.
| |
| Suchfurthernoticeshallbegivenasmayberequiredbylaw.Onlysuchbusinessshallbeconducted ataspecialmeetingof'shareholders asshallhavebeenbroughtbeforethemeetingpursuant, totheCorporation's noticeofmeeting.Meetingsmaybeheldwithoutnoticeifallshareholders entitledtovotearepresent,orifnoticeiswaivedbythosenotpresentinaccordance withSection6.4oftheseBy-Laws.Any'previously scheduled meetingof,theshareholders maybeostponed, andanyspecialmeetingoftheshareholders maybecanceled, byresolution oftheBoardofDirectors ponpublicnoticegivenpriortothedatepreviously scheduled forsuchmeetingofshareholders.
| |
| H-I Section2.5.QuorumandAdjournment; Voting.Exceptasotherwise providedbylaworbythCertificate ofIncorporation, theholdersofamajorityofthevotingpowerofalloutstanding sharesoftheCorporation entitledtovotegenerally intheelectionofDirectors (the"VotingStock"),represented inpersonorbyproxy,shallconstitute aquorumatameetingofshareholders, exceptthatwhenspecified businessistobevotedonbyaclassorseriesofstockvotingasaclass,theholdersofamajorityofthesharesofsuchclassorseriesshallconstitute aquorumofsuchclassorseriesforthetransaction ofsuchbusiness.
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| TheChairmanofthemeetingmayadjournthemeetingfromtime'otime,whetherornotthereissuchaquorum.Nonoticeofthetimeandplaceofadjourned meetingsneedbegivenexceptasrequiredbylaw.Theshareholders presentatadulycalledmeetingatwhichaquorumispresentmaycontinuetotransactbusinessuntiladjournment, notwithstanding thewithdrawal ofenoughshareholders toleavelessthanaquorum.Section2,6,Proxies.Atallmeetingsofshareholders, ashareholder mayvotebyproxyexecutedinwriting(orin.suchmannerprescribed bytheNewYorkBusinessCorporation Law(the"NYBCL"))
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| bytheshareholder, orbysuchperson'sdulyauthorized attorneyinfact.Section2.7.NoticeofShareholder BusinessandNominations.
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| (A)ArvuialMeetingsofShareholders.
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| (1)Nominations ofpersonsforelectiontotheBoardofDirectors oftheCorporation andtheproposalofbusinesstobeconsidered bytheshareholders maybemadeatanannualmeetingofshareholders,(a) pursuanttotheCorporation's noticeofmeetingpursuanttoSection2.4of,theseBy-Laws,(b)byoratthedirection ofthe,BoardofDirectors or(c)byanyshareholder oftheCorporation whowasashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisBy-Law,whoisentitledtovoteatthemeetingandwhocomplieswiththenoticeprocedures setforthinthisBy-Law.(2)Fornominations orotherbusinesstobeproperlybroughtbeforeanannualmeetingbyashareholder pursuanttoclause(c)ofparagraph (A)(1)ofthisBy-Law,theshareholder musthavegiventimelynoticethereofinwritingtotheSecretary oftheCorporation andsuchotherbusinessmust,otherwise beapgopermatterfo~shareholder action.Tobetimely,as)>areholder's noticeshallbedelivered totheSecretary attheprincipa~
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| executive officesoftheCorporation notlaterthanthecloseofbusinessonthe60thcalendardaynorearlierthanthecloseofbusinessonthe90thcalendardaypriortothefirstanniversary ofthepreceding-year'sannualmeeting;provided, however,thatintheeventthatthedateoftheannualmeetingismorethan30calendardaysbeforeormorethan60calendardaysaftersuchanniversary date,noticebytheshareholder tobetimelymustbesodelivered notearlierthanthecloseofbusinessonthe90thcalendardaypriortosuchannual,meetingandnotlaterthanthecloseofbusinessonthelaterofthe60thcalendardaypriortosuchannualmeetingorthe10thcalendardayfollowing thecalendardayonwhichpublicannouncement ofthedateofsuchmeetingisfirstmadebytheCorporation.
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| Forpurposesofdetermining whetherashareholder's noticeshallhavebeendelivered inatimelymannerfortheannualmeeting,of shareholders inI99',thefirstanniversary ofthepreviousyear'meetingshallbe.,deemed tobe,199.,Innoeventshallthepublicannouncement ofanadjournment ofanannualmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.Suchshareholder's noticeshallsetforth(a)astoeachpersonwhomtheshareholder proposestonominateforelectionorreelection asaDirectorallinformation relatingtosuchpersonthatisrequiredtobedisclosed in,solicitations ofproxiesforelectionofDirectors inanelectioncontest,orisotherwise
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| : required, ineachcasepursuanttoRegulation 14AundertheSecurities ExchangeActof1934,asamended(the"Exchange Act")andRule14a-.11.thereunder (including suchperson'swrittenconsenttobeingnamedintheproxystatement asanomineeandtoservingasaDirectorifelected);
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| (b)astoanyotherbusinessthattheshareholder proposestobringbeforethemeeting,abriefdescription ofthebusinessdesiredto,bebroughtbeforethemeeting,thereasonsforconducting suchbusinessatthemeetingandany.materialinterestinsuchbusinessofsuchshareholder andthebeneficial owner,ifany,onwhosebehalftheproposalismade;and(c)astotheshareholder givingthenoticeandthebeneficial owner,ifany,onwhosebehalfthenomination orproposalismade(i)thenameandaddressofsuchshareholder, astheyappearontheCorporation's books,andofsuchbeneficial ownerand(ii)theclassandnumberofsharesoftheCorporation whichareownedbeneficially andofrecordbysucshareholder andsuchbeneficial owner.H-2 t(3)Notwithstanding anythinginthesecondsentenceofparagraph (A)(2)ofthisBy-Lawtothecontrary, intheeventthatthenumberofDirectors tobeelectedtotheBoardofDirectors oftheCorporation isincreased andthereisnopublicannouncement bytheCorporation namingallofthenomineesforDirectororspecifying thesizeoftheincreased BoardofDirectors atleast70calendardayspriortothefirstanniversary ofthepreceding year'sannualmeeting,ashareholder's noticerequiredbythisBy-Lawshallalsobeconsidered timely,butonlywithrespecttonomineesforanynewpositions createdbysuchincrease, ifitshallbedelivered totheSecretary attheprincipal executive officesoftheCorporation notlaterthanthecloseofbusinessonthe10thcalendardayfollowing thedayonwhichsuchpublicannouncement is.firstmadebytheCorporation.
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| (B)SpecialMeetingsofShareliolders.
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| Nominations ofpersonsforelectiontothe'Board ofDirectors maybemadeataspecialmeetingofshareholders atwhichDirectors aretobeelectedpursuanttotheCorporation',s noticeofmeeting(a)byoratthedirection oftheBoardofDirectors or(b)providedthattheBoardofDirectors hasdetermined thatDirectors shallbeelectedatsuchmeeting,byanyshareholder oftheCorporation whoisashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisBy-Law,whoshallbeentitledtovoteatthemeetingandwhocomplieswiththenoticeprocedures setforthinthisBy-Law.IntheeventtheCorporation callsaspecialmeetingofshareholders forthepurposeofelectingoneormoreDirectors totheBoardofDirectors, anyshareholder maynominateapersonorpersons(asthecasemaybe),forelectiontosuchposition(s) asspecified intheCorporation's noticeofmeetingpursuanttoclause(b)ofthepreceding
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| : sentence, iftheshareholder's noticecomplying withtherequirements ofclauses(a)and(c)ofparagraph (A)(2)ofthisBy-Lawshallbedelivered totheSecretary attheprincipal executive officesoftheCorporation notearlierthanthecloseofbusinessonthe90thcalendardaypriortosuchspecialmeetingandnotlaterthanthecloseofbusinesson-thelaterofthe60thcalendardaypriortosuchspecialmeetingorthe10thcalendardayfollowing thedayonwhichpublicannouncement isfirstmadeofthedateofthespecialmeetingandofthenomineesproposedbytheBoardofDirectors tobeelectedatsuchmeeting.Innoeventshallthepublicannouncement ofanadjournment ofaspecialmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.(C)General.(1)Onlysuchpersonswhoarenominated inaccordance withtheprocedures setforthinthisBy-LawshallbeeligibletoserveasDirectors andonlysuchbusinessshallbeconducted atameetingofshareholders asshallhavebeenbroughtbeforethemeetinginaccordance with.theprocedures setforth,inthisBy-Law.Exceptasotherwise providedbylaw,theCertificate ofIncorporation ortheseBy-Laws,theChairmanofthemeetingshallhavethepoweranddutytodetermine whetheranomination oranybusinessproposedtobebroughtbeforethemeetingwasmadeorproposed, asthecasemaybe,inaccordance withtheprocedures setforthinthisBy-Lawand,ifanyproposednomination orbusinessisnotincompliance wit6thisBy-Law,todeclarethatsuchdefective proposalornomination shallbedisregarded.
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| (2)ForpurposesofthisBy-Law,"publicannouncement" shallmean'disclosure inapressreleasereportedbytheDowJonesNewsService,Associated Pressorcomparable nationalnewsserviceorinadocumentpubliclyfiledbytheCorporation withtheSecurities andExchangeCommission pursuanttoSection13,14or15(d)oftheExchangeAct.(3)Notwithstanding theforegoing provisions ofthisBy-Law,ashareholder shallalsocomplywithallapplicable requirements oftheExchangeActandtherulesandregulations thereunder withrespecttothematterssetforthinthisBy-Law.NothinginthisBy-Lawshallbedeemedtoaffectanyrights(i)ofshareholders torequestinclusion ofproposals intheCorporation's proxystatement pursuant'to Rule14a-8undertheExchangeActor(ii)oftheholdersofanyseriesofPreferred StocktoelectDirectors underanapplicable Preferred StockDesignation (asdefinedintheCertificate ofIncorporation).
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| Section2.8,Procedure forElectionofDirectors; RequiredVote.ElectionofDirectors atallmeetingsoftheshareholders atwhichDirectors aretobeelectedshallbebyballot,and,subjecttotherightsoftheholdersofanyseriesofPreferred StocktoelectDirectors underanapplicable Preferred StockDesignation, aplurality ofthevotescastthereatshallelectDirectors.
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| Exceptasotherwise providedbylaw,theCertificate ofIncorporation, Preferred StockDesignation, ortheseBy-Laws,inallmattersotherthantheelectionofDirectors, theaffirmative tvoteofamajorityofthevotingpowerofthe.sharespresentinpersonorrepresented byproxyatthemeetingandentitledtovoteonthemattershallbetheactoftheshareholders.
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| H-3 Section2.9.Inspectors ofElections; OpeningandClosingthePolls.TheBoardofDirectors byresolution shall.appoint,orshallauthorize anofficeroftheCorporation toappoint,oneormoreinspectors, whichinspector orinspectors mayincludeindividuals whoservetheCorporation inothercapacities, including, withoutlimitation, asofficers, employees, agentsorrepresentatives, toactatthemeetingsofshareholders andmakeawrittenreportthereof.Oneormorepersonsmaybedesignated asalternate inspector(s) toreplaceanyinspector who'fails toact.Ifnoinspector oralternate hasbeenappointed toactorisabletoactatameeting,ofshareholders, theChairmanofthemeetingshallappointoneormoreinspectors toactatthemeeting.Eachinspector, beforedischarging suchperson'sduties,shalltakeandsignanoathfaithfully toexecutethedutiesofinspector withstrictimpartiality andaccording tothebestofsuchperson'sability.Theinspector(s) shallhavethedutiesprescribed bylaw.TheChairmanofthemeetingshallfixandannounceatthemeetingthedateandtimeoftheopeningandtheclosingofthepollsforeachmatteruponwhichtheshareholders willvoteatameeting.'ection2.10.NoShareholder ActionbyWrittenConsent.Anyactionrequiredor'ermitted tobetakenbytheshareholders oftheCorporation mustbeeffectedatadulycalledannualorspecialmeetingofsuchholdersandmaynotbeeffectedbyanyconsentinwritingbysuchholders.ARTICLEIII~~BOARDOFDIRECTORS Section3.1.GeneralPowers.ThebusinessandaffairsoftheCorporation shallbemanagedunderthedirection oftheBoardofDirectors.
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| Inadditiontothepowersandauthorities bytheseBy-Lawsexpressly conferred uponthem,theBoardofDirectors mayexerciseallsuchpowersoftheCorporation anddo'allsuchlawfulactsandthingsasarenotbystatuteorbytheCertificate ofIncorporation orbytheseBy'-Lawsrequiredtobeexercised ordonebytheshareholders.
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| ADirectorofthisCorporation neednotbeashareholder therein.Section3,2.NumberandTenure.Exceptasotherwise fixedbyorpursuanttotheprovisions ofArticleIVoftheCertificate ofIncorporation relatingtotherightsoftheholdersofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectadditional Directors underspecified circumstances, thenumberoftheDirectors oftheCorporation shallbefixedfromtimetotimeexclusively pursuanttoaresolution adoptedbyamajorityoftheWholeBoard.NodecreaseinthenumberofDirectors, however,'hall shortenthetermofanyincumbent Director.
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| Directors shallbeelectedbytheshareholders oftheCorporation attheirannualmeeting,exceptashereinotherwise providedforvacancies andnewlycreateddirectorships, inthemanner,providedinArticleII,hereof,toserveforoneyearoruntiltheirsuccessors are.electedorchosenandqualified.
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| Section33.RegularMeetings.
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| AregularmeetingoftheBoardofDirectors shallbeheldwithoutothernoticethanthisBy-Lawimmediately after,andatthesameplaceas,theannualmeetingofshareholders.
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| TheBoardofDirectors may,byresolution, provide,the'time andplacefortheholdingofadditional regularmeetingswithoutothernoticethansuchresolution.
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| Section3.4.SpecialMeetings.
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| SpecialmeetingsoftheBoardofDirectors shallbecalledattherequestoftheChairmanoftheBoard,thePresident oramajorityoftheBoardofDirectors theninoffice,Thepersonorpersonsauthorized tocallspecialmeetingsoftheBoardofDirectors mayfixtheplaceandtimeofthemeetings.
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| Section3.5.Notice.NoticeofanyspecialmeetingofDirectors shallbegiventoeachDirectoratsuchperson'sbusinessorresidence inwritingbyhanddelivery, first-class orovernight mailorcourierservice,telegramorfacsimile transmission, ororallybytelephone.
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| Ifmailedbyfirst-class mail,suchnoticeshallbedeemedadequately delivered whendeposited intheUnitedStatesmailssoaddressed, withpostagethereonprepaid,atleast5calendardaysbeforesuchmeeting.Ifbytelegram, overnight mailorcourierservice,suchnoticeshallbedeemedadequately delivered whenthetelegramisdelivered tothetelegraph companyorthenoticeisdelivered totheovernight mailorcourierservicecompanyatleast&hoursbeforesuchmeeting.IfbyHP facsimile transmission, suchnoticeshallbedeemedadequately delivered whenthenoticeistransmitted atleast~~12hoursbeforesuchmeeting.Ifbytelephone orbyhanddelivery, thenoticeshallbegivenatleast12hourspriortothetimesetforthemeeting.Neitherthebusinesstobetransacted at,northepurposeof,anyregularorspecialmeetingoftheBoardofDirectors needbespecified inthenoticeofsuchmeeting,exceptforamendments totheseBy-Laws.AmeetingmaybeheldatanytimewithoutnoticeifalltheDirectors arepresentorifthosenotpresentwaivenoticeofthemeetingeitherbeforeoraftersuchmeeting.Section3.6.ActionbyConsentofBoardofDirectors.
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| Anyactionrequiredorpermitted tobetakenatanymeetingoftheBoardofDirectors orofanycommittee thereofmaybetakenwithoutameetingif'allmembersoftheBoardorcommittee; asthecasemaybe,consenttheretoinwriting,andthewritingorwritingsarefiledwiththeminutesofproceedings oftheBoardorcommittee.
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| Section3.7.Conference Telephone Meetings.
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| MembersoftheBoardofDirectors oranycommittee thereof'may participate inameeting'oftheBoardofDirectors orsuchcommittee bymeansofconference telephone orsimilarcommunications equipment bymeansofwhichallpersonsparticipating inthemeetingcanheareachother,andsuchparticipation inameetingshallconstitute presenceinpersonatsuchmeeting.Section3.8.Quorum.SubjecttoSection3.9,awholenumberofDirectors equaltoatleastamajorityoftheWholeBoardshallconstitute aquorumforthetransaction ofbusiness, butifatanymeetingoftheBoardofDirectors thereshallbelessthanaquorumpresent,amajorityoftheDirectors presentmayadjournthemeetingfromtimetotimewithoutfurthernotice.TheactofthemajorityoftheDirectors presentatameetingatwhichaquorumispresentshallbetheactoftheBoardofDirectois.
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| The'Diiectors presentat'adulyorganized meetingmaycontinuetotransactbusinessuntiladjournment, notwithstanding thewithdrawal ofenoughDirectors toleavelessthanaquoru'm'."
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| ISection3.9.Vacancies.
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| Exceptasotherwise providedfororfixedbyorpursuanttotheprovisions of~~~~~~~ArticleIVoftheCertificate ofIncorporation relatmgtotherightsoftheholdersofanyclassorseriesofstockhavingapreference oyertheCommonStockastodividendS oruponliquidation toelectDirectors underspecified circumstances, newlycreateddirectorships resulting fromanyincreaseinthenumberofDirectors andanyvacancies ontheBoardofDirectors resulting fromdeath,resignation, disqualification, removalorothercauseshallbefilledbytheaffirmative voteofamajorityoftheremaining Directors theninoffice,eventhoughlessthanaquorumoftheBoardofDirectors.
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| AnyDirectorelectedinaccordance withthepreceding sentenceshallholdofficefortheremainder ofsuchunexpired termoruntilsuchDirector's successor shallhavebeendulyelectedorchosenandqualified.
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| NodecreaseinthenumberofDirectors constituting theBoardofDirectors shallshortenthetermofariyincumbent Director.
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| Section3.10.Committees.
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| (a)TheBoardofDirectors may,byresolution adoptedbyamajorityoftheWholeBoard,designate committees toexercise, subjecttoapplicable provisions oflaw,anyorallthepowersoftheBoardinthemanagement ofthebusinessandaffairsoftheCorporation whentheBoardisnotinsession,including withoutlimitation thepowertodeclaredividends andtoauthorize theissuanceoftheCorporation's capitalstock.Eaciisuchcommittee shall,consistoftwoormore,Directors of,theCorporation.
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| TheBoardmaydesignate oneormoreDirectors asalternate membersofanycommittee, whomayreplaceanyabsentordisqualified memberatanymeetingofthecommittee, Anysuchcommittee maytotheextentpermitted bylawexercisesuchpowersandshallhavesuchresponsibilities asshallbespecified inthedesignating resolution.
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| Intheabsenceordisqualification ofanymemberofsuchcommittee orcommittees, thememberormembersthereofpresentatanymeetingandnotdisqualified fromvoting,whetherornotconstituting aquorum,mayunanimously appointanothermemberoftheBoardtoactatthemeetingintheplaceofanysuchabsentordisqualified member.Eachcommittee shallkeepwrittenminutesofitsproceedings andshallreportsuchproceedings totheBoardwhenrequired.
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| (b)Amajorityofanycommittee maydetermine itsactionandfixthetimeandplaceofitsmeetings, unlessheBoardshallotherwise provide.Noticeofsuchmeetingsshallbegiventoeachmemberofthecommittee inH-5 themannerprovidedforinSection3.5oftheseBy-Laws.TheBoardshall.havepoweratanytimetofillvacancies in,tochangethemembership ofortodissolveanysuchcommittee:
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| NothinghereinshallbedeemedtopreventtheBoardfromappointing oneormorecommittees consisting inwholeorinpartofpersonswhoarenotDirectors oftheCorporation;
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| : provided, however,thatnosuchcommittee shallhaveormayexerciseanyauthority oftheBoard.Section3.11.Removal.Subjecttotherightsofanyclassorseriesofstockhavingapreference overtheCommonStockastodividends oruponliquidation toelectDirectors underspecified circumstances, anyDirectormayberemovedfromofficeonlyforcausebythe,affirmative voteoftheholdersofatleastamajorityofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass.Section3.12.Records.TheBoardofDirectors shallcausetobekeptarecordcontaining theminutesoftheproceedings ofthemeetingsoftheBoardandoftheshareholders, appropriate stockbooksandregisters andsuchbooksofrecordsandaccountsasmay.benecessary fortheproperconductofthebusinessoftheCorporation.
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| ARTICLEIVOFFICERSSection4.1,ElectedOfficers.
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| TheelectedofficersoftheCorporation shallbeaChairmanoftheBoardofDirectors, aChiefExecutive Officer,aPresident, aSecretary, aTreasurer, andsuchotherofficers(including, withoutlimitationSenior VicePresidents andExecutive VicePresidents andVicePresidents) astheBoardofDirectors fromtimetotimemaydeemproper.TheChairmanoftheBoardshallbechosenfromamongtheDirectors.
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| AllofficerselectedbytheBoardofDirectors shalleachhavesuchpowersanddutiesasgenerally pertaintotheirrespective offices,subjecttothespecificprovisions ofthisArticleIV.Suchofficersshallalsohavesuchpowers,and dutiesasfromtimetotimemaybeconferred bytheBoardofDirectors orbyanycommittee thereof.TheBoardoranycommittee thereofmayfromtimetotimeelectsuchotherofficer(including oneormoreVicePresidents, Controllers, Assistant Secretaries andAssistant Treasurers),
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| asmaybenecessary ordesirable fortheconductofthebusinessoftheCorporation.
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| SuchotherofficersandagentsshallhavesuchdutiesandshallholdtheirofficesforsuchtermsasshallbeprovidedintheseBy-Lawsorasmaybeprescribed bytheBoardorsuchcommittee, asthecasemaybe.'ection4.2.ElectionandTermofOffice.ExceptasprovidedinSection4.11,theelectedofficersoftheCorporation shallbeelected'annually bytheBoardofDirectors attheregularmeetingoftheBoardofDirectors heldaftertheannualmeetingoftheshareholders.
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| Iftheelectionofofficersshallnotbeheldatsuchmeeting,suchelectionshallbeheldassoonthereafter asconvenient.
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| Eachofficershallholdofficeuntilsuchperson'ssuccessor shallhavebeendulyelectedandshallhavequalified oruntilsuchperson'sdeathoruntilheshallresignorberemovedpursuanttoSection4.9.hSection4.3.ChairmanoftheBoard.TheChairmanoftheBoardshallpresideatallmeetingsoftheshareholders andoftheBoardofDirectors.
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| TheChairmanoftheBoardshallperformallsuchotherdutiesasareproperlyrequiredofhimbytheBoard"ofDirectors.
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| TheChairmanoftheBoardmayalsoserveasPresident, ifsoelectedbytheBoard.TheDirectors alsomayele'ctaVice-Chairman toactintheplaceoftheChairmanuponhisorherabsenceorinability t6act.Section4.4.ChiefExecutive Officer.'he ChiefExecutive OfficeroftheCorporation shallberesponsible forthegeneralmahagement oftheaffairsoftheCorporation andshallmakereports'to theBoardofDirectors andtheshareholders, andshallseethatallordersandresolutions oftheBoardofDirectors andofanycommittee thereofarecarriedintoeffect.Section4,5.President.
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| ThePresident shallactinageneralexecutive capacityandshallassisttheChiefExecutive Officerintheadministration andoperation oftheCorporation's businessandgeneral.supervision oH-6 titspoliciesandaffairs.ThePresident, ifheorsheisalsoaDirector, shall,intheabsenceoforbecauseoftheinability toactoftheChairmanoftheBoard,performalldutiesoftheChairmanoftheBoardandpresideatallmeetingsofshareholders andoftheBoardofDirectors.
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| 1,,/Section4.6.VicePresidents.
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| EachSeniorVicePresident andExecutive Vice'President andanyVicePresident shallhavesuchpowersandshallperformsuchdutiesasshallbeassignedtohimbytheBoardofDirectors.
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| Section4.7.Treasurer.
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| TheTreasurer shallexercisegeneralsupervision overthereceipt,custodyanddisbursement ofcorporate funds."The Treasurer shallcausethefundsoftheCorporation tobedeposited insuchbanksasmaybeauthorized bytheBoardofDirectors, orinsuchbanksasmaybedesignated asdepositories inthemannerprovidedbyresolution oftheBoardofDirectors.
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| TheTreasurer shallhavesuchfurtherpowersanddutiesandshallbesubjecttosuchdirections asmaybegrantedorimposedfromtimetotimebytheBoardofDirectors.
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| Section4.8.Secretary.
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| (a)TheSecretary shallkeeporcausetobekeptinoneormorebooksprovidedforthatpurpose,theminutesofallmeetingsoftheBoard,thecommittees oftheBoardandtheshareholders; theSecretary shallseethatallnoticesaredulygiveninaccordance withtheprovisions oftheseBy-Lawsandasrequiredbylaw;shallbecustodian oftherecordsandthesealoftheCorporation andaffixandattestthesealtoallstockcertificates oftheCorporation (unlessthesealoftheCorporation onsuchcertificates shallbeafacsimile, ashereinafter provided) andaffixandattestthesealtoallotherdocuments tobeexecutedonbehalfoftheCorporation underitsseal;andshallseethatthebooks,reports,statements, certificates andotherdocuments andrecordsrequiredbylawtobekeptandfiledareproperly:kept andfiled;andingeneral,shallperformallthedutiesincidenttotheofficeofSecretary andsuchotherdutiesasfromtimetotimemaybeassignedtothetSecretary bytheBoard.(b)Assistant Secretaries shallhavesuchoftheauthority andperformsuchofthedutiesoftheSecretary asmaybeprovidedintheseBy-LawsorassignedtothembytheBoardofDirectors orbytheSecretary.
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| DuringtheSecretary's absenceorinability, theSecretary's authority anddutiesshallbepossessed bysuchAssistant Secretaiy orAssistant Secretaries astheBoardofDirectors maydesignate.
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| Section4.9.Removal.Anyofficerelected,oragentappointed, bytheBoardofDirectors mayberemovedbytheaffirmative voteofamajorityoftheWholeBoardwhenever, intheirjudgment, thebestinterests oftheCorporation wouldbeservedthereby,exceptthattheofficerselectedascontemplated bySection4.11mayberemovedfromtheofficesspecified thereinduringthetermsspecified thereinonlybythevoteoftwo-thirdsoftheWholeBoard.Noelectedofficershallhaveanyconuactual rightsagainsttheCorporation forcompensation byvirtueofsuchelectionbeyondthedateof.theelectionofsuchperson'ssuccessor, suchperson'death,suchperson'sresignation orsuchperson'sremoval,whichever eventshallfirstoccur,exceptasotherwise providedinanemployment contractorunderanemployeedeferredcompensation plan.Section4.10.Vacancies.
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| Anewlycreatedelectedofficeandavacancyinanyelectedofficebecauseofdeath,resignation, orremovalmaybefilledbytheBoardofDirectors fortheunexpired portionofthetermatanymeetingoftheBoardofDirectors..
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| Section4.11.CertainOfficers.
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| Notwithstanding anyprovision hereintothecontrary, effective asof[thefirstanniversary oftheEffective Time],Dr.WilliamI.'Catacosinos shallbeelectedChairmanoftheBoardofDirectors andChairmanoftheExecutive Committee of'theBoardofDirectors andMr.RobertB.CatellshallbeelectedChiefExecutive OfficeroftheCorporation, ineachcase,foratermendingattheregularmeetingofttheBoardofDirectors heldafterthe[next]annualmeetingofshareholders.
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| ThisSection4.11maybemodifiedonlybytheaffirmative voteoftwo-thirds oftheWholeBoard.H-7 ARTICLEV>>~STOCKCERTIFICATES
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| 'ANDTRANSFERS
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| 'ection5.1.Stock,Certificates andTransfers.
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| Theinterestofeachshareholder oftheCorporation shallbe,evidenced bycertificates'or sharesof,stockinsuchformastheappropriate, officersoftheCorporation mayfromtime,totimeptescribe.
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| Theshares,ofthestockof.theCorporation shallbetransferred onthe,booksof.theCorporation bytheholderthereofinpersonorbysuchperson'sattorney, uponsurrender forcancellation ofcertificates foratleastthesamenumberofshares,withanassignment andpoweroftransferendorsedthereonorattachedthereto,dulyexecuted, withsuchproofoftheauthenticity ofthesignature astheCorporation oritsagentsmayreasonably require.Thecertificates, of.stockshallbesigned,countersigned andregistered insuchmannerastheBoardof,Directors mayby,resolution prescribe, whichresolution maypermitalloranyofthesignatures onsuchcertIficates tobeinfacsimile.
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| Incaseanyoffic'ei, transferagentorregistrar whohassignedorwhosefacsimile signature hasbeen,',placed uponacertificate hasceasedtobesuchofficer,'transfer agentorregistrar, beforesuchcertificate isissued,itmaybeissuedbytheCorporation withthesameeffectasifheweresuchofficer,transferagentorregistrar atthedateofissue.Section5.2.>>Lost,StolenorDestroyed Certificates, Nocertificate
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| -forsharesofstockintheCorporation shallbeissuedinplaceofanycertificate allegedtohavebeenlost,destroyed orstolen,exceptonproduction ofsuchevidenceofsuchloss,'""destruction ortheftandondeliverytothe'Corporation-of abondofindemnity ih'sucli'amount, uponsuchtermsandsecuredbysuch"surety, astheBoardofDirectors'or anyfinancial officei-'may in.its'o'r'uch person'sdiscretion require."IIIW'>>.*'.~ww'-ARTICLEVIMISCELLANEOUS PROVISIONS:
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| ISection6.1.FiscalYear.[ThefiscalyearoftheCorporation shallbeginonthefirstdayofJanuaryandendonthethirty-first,day ofDecemberofeachyear.]t>>Ir,,Section6.2.,Dividends.
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| TheBoardofDirectors mayfromtimetotimedeclar'e, andtheCorporationmay pay,dividends onitsoutsta'nding sharesinthemanneranduponthetermsandconditions, providedbylawandtheCertificate ofIncorporation.
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| Section'6,3; Seal;fhecorporate seal'shall haveinscribed thereonthewords"Corporate Seal,"theyearofincorporation andaroundthemargin'thereof thewords"NewYork',.rWI'IrWI*WIIWSection6.4,w>>Waiver, of;Notice.
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| Wheneverany'otice isrequiredtobegiventoany,shareholder orDirectorof;theCorporation under;the provisions, oftheNYBCLortheseBy-Laws,awaiverthereofinwriting,signedby;thepersonorpersonsentitledtosuchnotice,,whether beforeorafterthetimestatedtherein,shallbedeemedequivalent tothegiving',of suchnotice.Neitherthebusinesstobetransacted at,northepurposeof,anyannualorspecialmeetingofthe.shareholders, ortheBoardofDirectors orcommittee thereofneedbespecified inanywaiverofnoticeofsuchmeeting.Section6.5."Audits,"*
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| Theaccourits,'books andrecordsofthe'.Corpora'tion'hall be'audited u'ponthecon'clusio'nr ofeachfiscalyearbyanindependent certified publicacc'oun'tant selectedbythe,BoardofDirectors, andit"shallbethedutyoftheBoardofDirectors tocausesuchaudittobedoneannualfy.
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| 'vSection6,6.,Resignations.
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| AnyDirectororanyofficerqwhetherelectedorappointed, mayresignatanytimebygivingwrittenrioticeof.suchresignation'to>the Chairman'of theBoard,theChiefExecutive.
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| Officer,thePresident ortheSecretary, andsuchresignation shallbedeemedtobeeffective asoftheclose'of.business onthedatesaidnoticeisreceived.by the..Chairman, oftheBoard;theChiefExecutive, Officer,thePresident ortheSecretary, oratsuchlatertimeasis.specified therein.No'formal actionshallberequiredoftheBoardofDirectors ortheshareholders tomakeanysuchresignation effective.
| |
| H-8 ARTICLEVIICONTRACTS, PROXIES,ETC.Section7.1.Contracts.
| |
| Exceptasotherwise requiredbylaw,theCertificate ofIncorporation, aPreferred StockDesignation, ortheseBy-Laws,anycontracts orotherinstruments maybeexecutedanddelivered inthenameandonthebehalfoftheCorporation bysuchofficerorofficersoftheCorporation astheBoardofDirectors mayfromtimetotimedirect.Suchauthority maybegeneralorconfinedtospecificinstances astheBoardmaydetermine.
| |
| TheChairmanoftheBoard,theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident mayexecutebonds,contracts, deeds,leasesandotherinstruments tobemadeorexecutedfororonbehalfoftheCorporation.
| |
| Subjecttoanyrestrictions imposedbytheBoardofDirectors, theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident oftheCorporation maydelegatecontractual powerstoothersundersuchperson'jurisdiction, itbeingunderstood, however,thatanysuchdelegation ofpowershallnotrelievesuchofficerofresponsibility withrespecttotheexerciseofsuchdelegated power.Section7.2,Proxies.Unlessotherwise providedbyresolution adoptedbytheBoardofDirectors, theChairmanoftheBoard,theChiefExecutive Officer,thePresident oranySeniorVicePresident, Executive VicePresident orVicePresident mayfromtimetotimeappointanattorneyorattorneys oragentoragentsoftheCorporation, inthenameandonbehalfoftheCorporation, tocastthevoteswhichtheCorporation maybeentitledtocastastheholderofstockorothersecurities inanyothercorporation, anyofwhosestockorothersecurities maybeheldbytheCorporation, atmeetingsoftheholdersofthestockorothersecurities ofsuchothercorporation, ortoconsentinwriting,inthenameoftheCorporation assuchholder,toanyactionbysuchothercorporation, andmayinstructthepersonorpersonspoappointed astothemannerofcastingsuchvotesorgivingsuchconsent,andmayexecuteorcau'setobeexecutedinth'enameandonbehalfoftheCorporation andunderitscorporate sealorotherwise, allsuchwrittenproxiesorotherinstruments ashemaydeemnecessary orproperinthepremises.
| |
| ARTICLEVIIIAMENDMENTS Section8.1.Amendments.
| |
| Exceptasotherwise specified herein,theBy-LawsmaybealteredorrepealedandnewBy-Lawsmaybeadopted(1)atanyannualorspecialmeetingofshareholders bytheaffirmative voteoftheholdersofamajorityofthevotingpowerofthestockissuedandoutstanding andentitledtovotethereat,provided, however,thatanyproposedalteration orrepealof,ortheadoptionofanyBy-Lawinconsistent with,Section2.2,2.7or2.10ofArticleIIorSection3.9or3.11ofArticleIIIoftheBy-Lawsbytheshareholders shallrequiretheaffirmative voteoftheholdersofatleast80%ofthevotingpowerofallVotingStockthenoutstanding, votingtogetherasasingleclass,andprovided, further,however,that,inthecaseofanysuchshareholder actionataspecialmeetingofshareholders, noticeoftheproposedalteration, repealoradoptionofthenewBy-LaworBy-Lawsmustbecontained inthenoticeofsuchspecialmeeting,or(2)bytheaffirmative voteofamajorityoftheWholeBoard.H-9
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| AnnexISECTION623ANDSECTION910OFTHENEWYORKBUSINESSCORPORATION LAW5623.Procedure toenforce,shareholder's righttoreceivepaymentforshares(a)Ashareholder intending toenforcehisrightunderasectionofthischaptertoreceivepaymentforhissharesiftheproposedcorporate actionreferredtothereinistakenshallfilewiththecorporation, beforethemeetingofshareholders atwhichtheactionissubmitted toavote,oratsuchmeetingbutbeforethevote,writtenobjection totheaction.Theobjection shallincludeanoticeofhiselectiontodissent,hisnameandresidence address,thenlimberandclassesofsharesastowhichhedissentsandademandforpaymentofthefairvalueofhissharesiftheactionistaken.Suchobjection is"notreq'uired fromanyshareholder towhomthecorporation didnotgivenoticeofsuchmeetinginaccordance withthischapterorw'heretheproposedactionisauthorized bywrittenconsentofshareholders withoutameeting.(b)Withintendaysaftertheshareholders'uthorization date,whichtermasusedinthissectionmeansthedateonwhichtheshareholders'ote authorizing suchactionwastaken,orthedateonwhichsuchconsentwithoutameetingwasobtainedfromtherequisite shareholders, thecorporation shallgivewrittennoticeofsuchauthorization orconsentbyregistered mailtoeachshareholder whofiledwrittenobjection orfromwhomwrittenobjection wasnotrequiied, excepting anyshareholder whovotedfororconsented inwritingtotheproposedactionandwhotherebyisdeemedtohayeelectednottoenforcehisrighttoreceivepaymentforhisshares.(c)Withintwentydaysafterthegivingofnoticetohim,anyshareholder fromwhomwrittenobjection wasnotrequiredandwhoelectstodissentshallfile.withthecorporation awrittennoticeofsuchelection, statinghisnameandresidence address,thenumberandclassesofsharesastowhichhedissentsandademandforpaymentofthefairvalueofhissha'res.Anyshareholder whoelectstodissentfromamergerundersection905(Mergerofsubsidiary corporation) orparagraph (c)ofsection907(Mergerorconsolidation ofdomesticandforeigncorporations) orfromashareexchangeunderparagraph (g)ofsection913(Shareexchanges) shallfileawrittenoticeofsuchelection'o, dissentwithintwentydaysafterthegivingtohimofacopyoftheplanofmergerorxchangeoranoutlineofthematerialfeaturesthereofundersection905or913.(d)Ashareholder maynotdissentastolessthanallof'theshares,astowhichhehasarighttodissent,heldbyhimofrecord,thatheownsbeneficially.
| |
| Anomineeorfiduciary maynotdissentonbehalfofanybeneficial ownerastolessthanallofthesharesofsuchowner,astowhichsuchnomineeorfiduciary hasarighttodissent,heldofrecordby'suchnomineeorfiduciary.
| |
| (e)Uponconsummation,,pf thecorporate action,theshareholder shallceasetohaveanyoftherightsofashareholder excepttherighttobepaidthefairvalueofhissharesandanyotherrightsunderthissection.Anoticeofelectionmaybe,withdrawn bytheshareholder atanytimepriortohisacceptance inwritingofanoffermadebythecorporation, asprovidedinparagraph (g),but,innocaselaterthansixtydaysfromthedateofconsummation ofthecorporate actionexceptthatifthecorporation failstomakeatimelyoffer,asprovidedinparagraph (g),thetimefor,withdrawing anoticeofelectionshallbeextendeduntilsixtydaysfromthedateanofferismade.Uponexpiratiop ofsuchtime,withdrawal ofanoticeofelectionshallrequirethewrittenconsentofthecorporation.
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| Inordertobeeffective, withdrawal ofanoticeofelectionmustbeaccompanied bythereturntothecorporation ofanyadvance.paymentmadetotheshareholder asprovidedinparagraph (g).Ifanoticeofelectioniswithdrawn, orthecorporate actionisrescinded, oracourtshalldetermine thattheshareholder isnotentitled'toreceivepaymentforhisshares,ortheshareholder shallotherwise losehisdissenter's rights,heshallnothavetherighttoreceivepaymentforhissharesandheshallbereinstated toallhisrightsasashareholder asoftheconsummation ofthecorporate action,including anyintervening preemptive rightsand'therighttopaymentofanyintervening dividendorotherdistribution or,ifanysuchrightshaveexpiredoranysuchdividendordistribution otherthanincashhasbeencompleted, inlieuthereof,attheelectionofthecorporation, thefairvaluethereofincashasdetermined bytheboardasofthetimeofsuchexpiration orcompletion, butwithoutprejudice otherwise toanycorporate proceedings thatmayhavebeentakenintheinterim.(f)Atthetimeoffilingthenoticeofelectiontodissentorwithinonemonththereafter theshareholder ofharesrepresented bycertificates shallsubmitthecertificates representing hissharestothecorporation, ortoits transferagent,whichshallforthwith noteconspicuously thereonthatanoticeofelectionhasbeenfiledandshalreturnthecertificates totheshareholder, orotherpersonwho,submitted them.onhisbehalf.Anyshareholder ofsharesrepresented bycertificates whofailstosubmithiscertificates for.suchnotationashereinspecified shall,attheoptionofthecorporation exercised bywrittennoticetohimwithinforty-five daysfromthedateoffilingofsuchnoticeofelectiontodissent,losehisdissenter's rightsunlessacourt,forgoodcauseshown,shallotherwise direct.Upontransferofacertificate bearingsuchnotation, eachnewcertificate issuedthereforshallbearasimilarnotationtogetherwiththenameoftheoriginaldissenting holderofthesharesandatransferee shallacquirenorightsinthecorporation except'hose whichtheoriginaldissenting shareholder hadatthetimeoftransfer.
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| ~(g)Withinfifteendaysaftertheexpiration of,theperiodwithinwhichshareholders mayfiletheirnoticesofelectiontodissent,orwithinfifteendaysaftertheproposedcorporate actionisconsummated, whichever islater(butinnocaselaterthanninetydaysfromtheshareholders'uthorization date),thecorporation or,inthecaseofamergerorconsolidation, thesurviving ornewcorporation, shall,makeawrittenofferbyregistered mailtoeachshareholder whohasfiledsuchnoticeofelectiontopayforhissharesataspecified pricewhichthecorporation considers tobetheirfairvalue.Suchoffershallbeaccompanied bya'statement'etting forththeaggregate numberofshareswithrespecttowhichnoticesofelectiontodissenthavebeenreceivedandtheaggregate numberofholdersofsuchshares.Ifthecorporate actionhasbeenconsummated, suchoffershallalsobeaccompanied by(1)advancepaymenttoeachsuchshareholder whohassubmitted thecertificates representing hissharestothecorporation, asprovidedinparagraph (f),ofanamountequaltoeightypeicentoftheamountofsuchoffer,or(2)astoeachshareholder whohasnot'etsubmitted hiscertificates astatement thatadvancepaymenttohimofanamountequaltoeightypercentof-theamountofsuchofferwillbe,madebythecorporation promptlyuponsubmission ofhiscertificates.
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| Ifthecorporate actionhasnotbeenconsummated atthetimeofthemakingoftheoffer,suchadvancepaymentorstatement astoadvancepaymentshallbesenttoeachshareholder entitledtheretoforthwith uponconsummation ofthecorporate action.Everyadvance.paymentorstatement astoadvancepaymentshallincludeadvicetotheshareholder totheeffectthatacceptance ofsuchpaymentdoesnotconstitute awaiverofanydissenters'ights.
| |
| Ifthecorporate actionhasnotbeenconsummated upontheexpiration oftheninetydayperiodaftertheshareholders'uthorization date,theoffermay-bconditioned upontheconsummation ofsuchaction.Suchoffershallbemadeatthesamepricepersharetoaldissenting shareholders ofthesameclass,orifdividedintoseries,ofthesameseriesandshallbeaccompanied byabalancesheetofthecorporation whosesharesthedissenting shareholder holdsasofthelatestavailable date,whichshallnotbeearlierthantwelvemonthsbeforethemakingofsuchoffer,andaprofitandlossstatement orstatements fornotJessthanatwelvemonthperiodendedonthedateofsuchbalancesheetor,ifthecorporation wasnotinexistence throughout suchtwelvemonthperiod,fortheportionthereofduringwhichitwasinexistence.
| |
| Notwithstanding theforegoing, thecorporation shallnotberequiredtofurnishabalancesheetorprofitandlossstatement orstatements toanyshareholder towhomsuchbalancesheetorprofitandlossstatement orstatements werepreviously furnished, norifinconnection withobtaining theshareholders'uthorization fororconsenttotheproposedcorporate actiontheshareholders werefurnished withaproxyorinformation statement, whichincludedfinancial statements, pursuanttoRegulation 14A"or"Regulation 14CoftheUnitedStatesSecurities andExchangeCommission.
| |
| Ifwithinthirtydaysafterthemakingofsuchoffer,thecorporation makingtheofferandanyshareholder agreeuponthepricetobe'paidforhisshares,paymentthereforshallbemadewithinsixtydaysafterthemakingofsuchofferortheconsummation oftheproposedcorporate action,whichever islater,uponthesurrender ofthecertificates foranysuchsharesrepresented bycertificates.
| |
| (h)Thefollowing procedure shallapplyifthecorporation failstomakesuchofferwithinsuchperiodoffifteendays,orifitmakestheofferandanydissenting shareholder orshareholders failtoagreewithitwithintheperiodofthirtydaysthereafter uponthepricetobepaidfortheirshares:(1)Thecorporation shall,withintwentydaysaftertheexpiration ofwhichever isapplicable ofthetwoperiodslastmentioned, institute aspecialproceeding inthesupremecourtinthejudicialdistrictinwhichtheofficeofthecorporation islocatedtodetermine therightsofdissenting shareholders andtofixthefairvalueoftheirshares.If,inthecaseofmergerorconsolidation, the'surviving ornewcorporation isaforeigncorporation withoutanofficeinthisstate,suchproceeding shallbebroughtinthecountywheretheofficofthedomesticcorporation, whosesharesaretobe'valued, waslocated.I-2 t(2)Ifthecorporation failstoinstitute suchproceeding withinsuchperiodoftwentydays,any~dissenting shareholder mayinstitute suchproceeding forthesamepurposenotlaterthanthirtydaysaftertheexpiration ofsuchtwentydayperiod.Ifsuchproceeding isnotinstituted withinsuchthirtydayperiod,alldissenter's rightsshallbelostunlessthesupremecourt,forgoodcauseshown,shallotherwise direct.(3)Alldissenting shareholders, excepting thosewho,asprovidedinparagraph (g),haveagreedwiththecorporation upon,thepricetobepaidfortheirshares,shallbemadepartiestosuchproceeding, whichshallhavetheeffectofanactionquasiinremagainsttheirshares.Thecorporation shallserveacopyofthepetitioninsuchproceeding uponeachdissenting shareholder whoisaresidentofthisstateinthemannerprovidedbylawfortheserviceofasummons,anduponeachnonresident dissenting shareholder eith'erbyregistered mailandpublication, orinsuchother'manner asispermitted bylaw.Thejurisdiction ofthecourtshallbeplenaryandexclusive.
| |
| (4)Thecourtshalldetermine whethereachdissenting shareholder, astowhomthecorporatiOn requeststhecourttomakesuchdetermination, isentitledtoreceivepaymentforhisshares.Ifthecorporation doesnotrequestanysuchdetermination orifthecourtfindsthatanydissenting shareholder issoentitled, itshallproceedtofixthe'alueoftheshares,which,forthepurposesofthissection,shallbe"thefairvalueasofthecloseofbusinessonthedaypriortotheshareholders'uthorization date.Infixingthefairvalueoftheshares,thecourtshallconsiderthenatureofthetransaction givingrisetotheshareholder's righttoreceivepaymentforsharesandits,effects onthecorporation anditsshareholders, theconceptsandmethodsthencustomary iti.therelevantsecurities andfinancial marketsfordetermining fairvalueofsharesofacorporation, engaginginasimilartransaction undercomparable circumstances andallotherrelevantfactors.Thecourtshalldetermine thefairvalueoftheshareswithoutajuryandwithoutreferraltoanappraiser orreferee.Uponapplication bythecorporation orby.anyshareholder whoisapartytotheproceeding, thecourtmay,initsdiscretion, permitpretrialdisclosure, including, butnotlimitedto,disclosure ofany*expert'sreportsrelatingtothefairvalueoftheshareswhetherornot.,intended foruseatthetrialinthelproceeding andnotwithstanding subdivision (d)ofsection3101.ofthecivilpracticelawandrules.(5)Thefinalorderintheproceeding shallbeenteredagainstthecorporation infavorofeachdissenting shareholder whoisapartytotheproceeding andisentitledtheretoforthevalueofhissharessodetermined (6)Thefinalordershallinclude,anallowance forinterestat,suchrateasthecourtfindstobeequitable, fromthedatethecorporate actionwasconsummated tothedateofpayment.Indetermining therateofinterest, thecourtshallconsiderallrelevantfactors,including therateofinterestwhichthecorporation wouldhavehadtopaytoborrowmoneyduringthependencyoftheproceeding.
| |
| Ifthecourtfindsthattherefusalofanyshareholder toacceptthecorporate offerofpaymentforhisshareswasarbitraryvexatious orotherwise notingoodfaith,nointerestshallbeallowedtohim.(7)Eachpartytosuchproceeding shallbearitsowncostsandexpenses, including thefeesandexpensesofitscounselandofanyexpertsemployedbyit.Notwithstanding theforegoing, thecourtmay,initsdiscretion, apportion andassessalloranypartofthecosts,expensesandfeesincurredbythe'corporation againstanyorallofthedissenting shareholders whoarepartiestotheproceeding, including anywhohavewithdrawn'their notices'of electionasprovidedinparagraph (e),ifthecourtfindsthattheirrefusaltoacceptthecorporate offerwasarbitrary, vexatious orotherwise notingoodfaith.Thecourtmay,initsdiscretion, appottion andassessalloranypartofthecosts,expensesandfeesincurredbyanyorallofthedissenting shareholders whoarepartiestotheproceeding againstthecorporation ifthecourt,findsanyofthefollowing:
| |
| (A)thatthefairvalueofthesharesasdetermined materially exceedstheamountwhichthecorporation offeredtopay;(B)thatnoofferorrequiredadvancepaymentwasmadebythecorporation; (C)thatthecorporation failedtoinstitute thespecialproceeding withintheperiodspecified therefor; or(D)thattheactionofthecorporation incomplying withitsobligations asprovidedinthissectionwasarbitrary, vexatious orotherwise notingoodfaith.Inmakinganydetermination asprovidedinclause(A),thecourtmayconsiderthedollaramountorthepercentage, orboth,bywhichthefairvalueofthesharesasdetermined exceedsthecorporate offer.I-3 (8)Withinsixtydaysafterfinaldetermination oftheproceeding, thecorporation shallpaytoeacdissenting, shareholder theamountfoundtobeduehim,uponsurrender ofthecertificates foranysuchsharesrepresented bycertificates.
| |
| (i)Sharesacquiredbythecorporation uponthepaymentoftheagreedvaluetherefororoftheamountdueunderthefinalorder,asprovidedinthissection,shallbecometreasurysharesorbecancelled asprovidedinsection515(Reacquired shares),exceptthat,inthecaseofamergerorconsolidation, theymaybeheldanddisposedofastheplanofmergerorconsolidation mayotherwise provide.(j)Nopaymentshallbemadetoadissenting shareholder underthissectionatatimewhenthecorporation isinsolvent orwhensuchpaymentwouldmakeitinsolvent.
| |
| Insuchevent,thedissenting shareholder shall,athisoption:(1)Withdrawhisnoticeofelection, whichshallinsucheventbedeemedwithdrawn withthewritten,consentofthecorporation; or(2)Retainhisstatusasaclaimantagainstthecorporation and,ifitisliquidated, besubordinated totherightsofcreditors ofthecorporation, buthaverightssuperiortothenon-dissenting shareholders, andifitisnotliquidated; retainhis,righttobepaidforhisshares,whichrightthecorporation shallbeobligedtosatisfy,whentherestrictions ofthisparagraph donotapply.(3)Thedissenting shareholder shallexercisesuchoptionundersubparagraph'1) or(2)bywrittennoticefiledwiththecorporation withinthirtydaysafterthecorporation hasgivenhimwrittennoticethatpaymentforhissharescannotbemadebecauseoftherestrictions ofthisparagraph.
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| Ifthedissenting shareholder failstoexercisesuchoptionasprovided, thecorporation shallexercisetheoptionbywrittennoticegiventohimwithintwentydaysaftertheexpiration ofsuchperiodofthirtydays.-r(k)Theenforcement byashareholder ofhisrighttoreceivepaymentforhissharesinthemannerprovidedhereinshallexcludetheenforcement bysuchshareholder ofanyotherrighttowhichhemightotherwise bentitledbyvirtueofshareownership, exceptasprovidedinparagraph (e),andexceptthatthissectionshallnexcludetherightofsuchshareholder tobringormaintainanappropriate actiontoobtainreliefonthegrounthatsuchcorporate actionwillbeorisunlawfulorfraudulent astohim.(1)Exceptasotherwise expressly providedinthissection,anynoticetobegivenbyacorporation toashareholder underthissectionshallbegiveninthemannerprovidedinsection'605 (Noticeofmeetingsofsh'areholders).
| |
| (m)Thissectionshallnotapplytoforeigncorporations exceptasprovidedinsubparagraph (e)(2)ofsection907(Mergerorconsolidation ofdomesticandforeigncorporations).
| |
| g910.Rightofshareholder toreceivepaymentforsharesuponmergerorconsolidation, orsale,lcasc,exchangeorotherdisposition ofassets,orshareexchange(a)Ashareholder ofadomesticcorporation shall,subjecttoandbycomplying withsection623(Procedure toenforceshareholder's righttoreceivepaymentforshares),havetherighttoreceivepaymentofthefairvalueofhissharesandtheotherrightsandbenefitsprovidedbysuchsection,inthefollowing cases:(1)Anyshareholder entitledtovotewhodoesnotassenttothetakingofanactionspecified insubparagraphs (A),(B)and(C).(A)Anyplanofmergerorconsolidation towhichthecorporation isaparty;exceptthattherighttoreceivepaymentofthefairvalueofhissharesshallnotbeavailable:
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| (i)Toashareholder oftheparentcorporation inamergerauthorized bysection905(Mergerofparentandsubsidiary corporations),
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| orparagraph (c)ofsection907(Mergerorconsolidation domesticandforeigncorporations);
| |
| andI-4 e(ii)Toashareholder ofthesurviving corporation inamergerauthorized bythisarticle,otherthanamergerspecified insubparagraph (i),unlesssuchmergereffectsoneormoreofthechangesspecified insubparagraph (b)(6)ofsection806(Provisions astocertainproceedings) intherightsofthesharesheldbysuchshareholder.
| |
| (B)Anysale,lease,exchangeorotherdisposition ofallorsubstantially alloftheassetsofacorporation whichrequiresshareholder approvalundersection909(Sale,lease,exchangeorotherdisposition ofassets)otherthanatransaction whollyforcashwheretheshareholders'pproval thereofisconditioned uponthedissolution ofthecorporation andthedistribution ofsubstantially allofitsnetassetstotheshareholders inaccordance withtheirrespective interests withinoneyearafterthedateofsuchtransaction.
| |
| (C)Anyshareexchangeauthorized bysection913inwhichthecorporation isparticipating asasubjectcorporation; exceptthattherighttoreceivepaymentofthefairvalueofhissharesshallnotbeavailable toashareholder whoseshareshavenotbeenacquiredintheexchange.
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| (2)Anyshareholder ofthesubsidiary corporation inamergerauthorized bysection905orparagraph (c)ofsection907,orinashareexchangeauthorized byparagraph (g)ofsection913,whofileswiththecorporation awrittennoticeofelectiontodissentasprovidedinparagraph (c)ofsection623.
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| [THISPAGEINTENTIONALLY LEFTBLANK]
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| t,,;piiiz,..-,'.:,ANNEX J:"QUESTIONS ANDANSWERSANDSUMMARYABOUTBROOKLYNUNION'S,*HOLDINGCOMPANYPROPOSALANDTHEKEYSPAN/HAREEXCHANGE",
| |
| ,ThisAnnexJdescribes theiBrooklyn'nioh holdingcompanyprop'osal anddiscusses theepee'ts'of theKeySpan'hare'exchange.
| |
| Foradescriptioti'of iheproposedL'ILCO'Combination, the'IPATr'ansaction andtheirepee'ts,seethe"JointProxyStatement/Prospectus.
| |
| Ig",Thefollowing Questions andAnswersandSununaryhighlight selectedinformatiohi onProposa22atourSpecialMeetingregarding BrooklynUnion'sholdingcompanyproposalaiidtheKeySpans1iareex'change, andmaynotcontainall,oftheinformation thatisimportant toyou.Foramorecompletediscussioii ofBrooklynUnioti'sholding'ompany, proposalandthe,KeySpansliareexchang'e, youshouldreadcarefully thiseiitiredocumentantitheattachedannexesandthe,documents referredtoyou'Forexample,'tlute AmendedandRestatedAgreeinent andPlanofExchangeattachedtothisJointProxyStatement/Prospectits asAiinexKprovidesfor,theKeySpanshare,exchange, andgeySpan's restate'd certificate'of incorporati on'andby-la>vs'Annex L)setout,amongothertliings,provjsions governing certainrights'of KeySpan's shareholrlers.
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| Theinformation inAnnexJshouldalsobereviewed.
| |
| in,conjunction withtheinforntatioti providedelsewhere inthisJointProxyStatement/Prospectus asitrelatestotheLILCOCombination andLIPATransaction siircethosetransactioris,.and theagreements governing themwillaccttherightsofBrooklynUnion'sandKeySpan's shareholders.
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| Seealso"WhereYouCanFindMoreInformation" ionpage,110of,thisJointProxyStateinent/Prospectus.
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| '"1.'hatis'Brooklyn Union'sholdiiigcompanyentities.,We, alsobelievethat,aholdingcompany'proposal?
| |
| )Vhy,'t's itbeiiig'proposed?
| |
| structure shouldprovidegreateropportunities forBrooklynUnioni~proposing toestablish agrowthandenhancedvalues,greaterflexibility inholdingcompanystructure througha,shatedeveloping newbusinesses, andgreaterflexibility
| |
| : exchange, withthenewholdingcompanyregarding thetiming,methodandamountof~~,,beingcalledKeySpanEnergyCorporation.
| |
| financings'and'acquisitions, throughthe",After,theshareexchange, BrooklynUniondiscernible separation'betwee'n our'u'tility andwillcontinuetooperateitspresentutilitynon-utility businesses andrelaxed"constraints on,businessasasubsidiary ofKeySpan,anditisunregulated activities.
| |
| r;intendedthatcertain,ifnotall,ofBrooklyn, Union'syon-utility subsidiaries willeventually Itisimpossible forustop'redictwith'c'eitainty becomeseparatedirectsubsidiaries ofwhenthebusinesscombination withLII.COwill,KeySpan..New,non-utility subsidiaries alsobeconsummated."
| |
| By"p'roceeding withthewillbesetupasseparatedirectsubsidiaries ofKeySpanrestructuring'at thi'stimeBrooklynKeySpan.'nionwillhaveadditional flexibility tomakeinvestm'ents inunregulated businesses whetherorWeareveryenthusiastic aboutourholdingnottheLILCOtransaction isconsummated.
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| companyproposal.
| |
| WebelieveitwillgiveusBrookfynUnion'sabilitytomakefurther'hefinancial anti'regulatory flexibility toinvestments inunregulated businesses is'ompete moreeffectively intheincre'asihgly restricted byaPSCorderandissubjecttocertaincompetitive energyindustryby'relaxing restrictions iinderitsdgreement withLILCO."constraints imposedbytheNewYorkPublicServiceCommission
| |
| ("PSC")onincremental YourBoardofDirectors hasunanimously investments'ri unregulated operations,'annual approvedourholdingcompanyproposalandthe"-inv'estments,"
| |
| amountsinvestedin'anysingleshareexchange'and believestheiradoptionisinlineofbusiness, andfinancial
| |
| 'ratiosof'hebestinterests ofBrooklynUnionanditssubsidiaries.
| |
| Relaxingconstraints
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| 'andshareholders.
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| Your'Board recommends thateliminating time-lags associated withyoii'vote'"IVOR" thatproposalandadoption'egulatory "decisi6ns shouldallow'ore'rapid oftheAmendedandRestated'Agreement andmovesinanindustrywherecompetitors doPlanofExchangeatthe'Brooklyn Unionnothhvethesameconstraints asregulated Meeting."
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| vv Whattypeofbusinesses willKeySpanengagein?InadditiontobecomingtheparentholdingcompanyofBrooklyn, Unionandallnoir-utilitysubsidiaries wecreateinthefuture,itisourintention thatKeySpaneventually willowndirectlycertain,ifnotall,ofourprincipal investments inexistingnon-utility businesses.
| |
| Thesecurrently includegasandoilexploration andproduction, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergy-related services.
| |
| KeySpanwillalsobeabletoinvestdirectlyincertainotherbusinesses andventuresthatshouldstrengthen ourabilitytoprovidetotalenergyservicesinanincreasingly competitive marketplace.
| |
| Theprincipal executive officesofBrooklyn'nion arelocatedatOneMetroTech Center,Brooklyn, NewYork11201-3850, anditstelephone numberis(718)403-2000.
| |
| KeySpan's principal executive officesareatthesameaddress;itstelephone numberis(718)403-1000.
| |
| IIIHowdoestherestructuring affecttheproposedbusinesscombination withLILCO?JheKeySpanrestructuring andtheLILCOCombination arenotconditioned ononeanother.IfBrooklynUnion'sshareholders approvetheJroldingcompanyyroposal, wewillproceedwiththerestructuring regardless ofwhethertheLILCOCombination isapprovedorconsummated.
| |
| IfBrooklynUnion'sshareholders approvebothproposals, weintendtoproceedwiththerestructuring firstandhaveKeySpanassumeBrooklynUnion'srightsandobligations, underthe,BrooklynUnion/LILCO Agreement withLILCO.Inthatcase,KeySpaneffectively willbe.replacing BrooklynUnionastheentitythatwillengageinashareexchangewithBLHoldingCorp.("BL"),theholdingcompanyforbothBrooklynUnionandLILCO.OnceBrooklynUnionandthenon-utility subsidiaries becomeindirectsubsidiaries ofBLweexpecttoeventually dissolveKeySpanasalegalentitysothattherewouldonlybeoneholdingcompanyforBrooklynUnion,thenon-utility subsidiaries andLILCO.Ineffect,consummating theLILCOCombination aswedescribed intheJoint.ProxyStatement/Prospectus willalsoenableBrooklynUniontoputitselfinaholdingcompanystructure.
| |
| Shareholder approvaloftheKeySpanholdingcompanyproposal, however,willallowustotakeadvantage oftheholdingcompanystructure priortotheclosingoftheLILCOCombination.
| |
| ThisAnnexJgenerally discusses thereasonsforandeffectsoftheKeySpanrestructuring separatefromtheLILCOCombination.
| |
| Foradiscussion oftheLILCOCombination, the-relatedLIPATransaction andadescription ofthecombinedentityaftertheLILCOCombination, pleaseseetheJointProxyStatement/Prospectus.
| |
| WlratistheKeySpanshareexchange?
| |
| TheKeySpanshareexchangeisthe,meansbywhichourholdingcompanystructure willbeestablished.
| |
| IfBrooklynUnion'sshareholders approveourholdingcompanyproposalandadopttherelatedAmendedandRestatedAgreement andPlanofExchangeatourSpecialMeeting,BrooklynUnioncommonshareholders Sillautomatically becomeholdersofcommonstockofKeySpanonthebasisofoneshareofBrooklynUnionforoneshareofKeySpan.Followirig theshareexchange, KeySpanwillownallofBrooklynUnion'soutstanding commonstock,'nd itisintendedthatnewnon-utility subsidiaries alsowillbeestablished asseparatedirectsubsidiaries ofKeySpanandcertain,ifnotall,ofBrooklynUnion'snon-utility subsidiaries eventually willbecomeseparatesubsidiaries ofKeySpan.FWillIhavetoexchangemyBrooklynUnionstockcertificates fornewKeySpancertificates?
| |
| No.Yourpresentcertificates forBrooklynUnioncommonstockwillautomatically represent anequalnumberofsharesofKeySpancommonstockwhen,theexchangeoccursandwillnolongerrepresent BrooklynUnioncommonstock.~WhenwilltheKeySpanshareexchangeoc-cur'?Weexpecttheexchangetooccurinthethirdquarterofcalendar1997,assumingJ-2 shareholder approvalattheBrooklynUnionMeeting.Ifapproved, wewillproceedwiththeKeySpanrestructuring regardless ofwhethertheBrooklynUnion/LILCO Agreement withLILCOisalsoapproved.
| |
| IVherewillmyKeySpancommonstockbetraded?IVhatwillbethetickersymbol?KeySpancommonstockwillbelistedontheNewYorkStockExchange, andwilltradeunderthetickersymbol."KSE".BrooklynUnion'scommonstockispresently listedandprincipally tradedontheNewYorkStockExchange.
| |
| ThereportedclosingpriceofourcommonstockonJune23,1997was$28'.Aftertheshareexchange, BrooklynUnion'scommonstockwillnolongertradeandwillbedelisted.
| |
| IVillmydividends beaffected?
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| Whilefuturedividends onKeySpancommonstockwilldependontheearnings, financial condition andcapitalrequirements ofKeySpanandBrooklynUnionandthedividends
| |
| : Brooklyn, UnionpaystoKeySpan,weexpecttocontinueBrooklynUnion'spolicyofpayinganappropriate percentage ofearningstoshareholders.
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| Inthefuture,dividends fromKeySpan's othersubsidiaries mayalsobeasourceoffundsforKeySpan's dividendpayments.
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| KeySpanpresently expectstopayquarterly commonstockdividends atleastequalto,andonapproximately thesamescheduleas,thedividendmostrecentlydeclaredonBrooklynUnion'scommonstock.fTheSeptember 25,1996NewYorkPublicServiceCommission orderapproving ourholdingcompanyproposalimposescertainlimitations ondividends thatBrooklynUnionmaypaytoKeySpanaftertheshareexchange.
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| Generally, BrooklynUnionmaynotpayKeySpanmorethan100%ofincomeavailable fordividends.
| |
| Undercertaincircumstances, furtherlimitsmaybeplacedupontheamountofdividends BrooklynUnionmaypaytoKeySpan.'See pagesJ-15-J-17) 10.Thedividendpolicy.for.theHoldingCompanyaftertheLILCOCombination isdescribed onpages2and63oftheJointProxyStatement/Prospectus.
| |
| IV/rataretheFederalincometaxconsequences tocommonshareholders?
| |
| Ifashareholder exchanges solelyBrooklyn,UnioncommonstocksolelyforKeySpancommonstock,thatshareholder willnotrecognize anygainorlossunderFederalincometaxlaws.(SeepagesJ-17-J-18)
| |
| IVi/lBrooklynUnionpreferred stockorbondsbeerchanged?
| |
| BrooklynUnionwillredeemtheoutstanding preferred stockpriortotheconsummation oftheKeySpanshareexchangeifProposal2isapprovedbyBrooklynUnioncommonshareholders attheBrooklynUnionMeeting.BrooklynUnion'sbondswillnotchangeandwillcontinuetobeobligations ofBrooklynUnion.(SeepageJ-19)"'V/rowillmanageKeySpan?Anew,BoardofDirectors ofKeySpanwillbeelectedbeforetheKeySpanshareexchangebyBrooklynUnionassoleshareholder ofKeySpan.ItwillconsistofanumberofexistingBrooklynUniondirectors andvacancies willbefilledinthefuture.CertainexistingofficersofBrooklynUnionwillalsoserveasofficersofKeySpan.RobertB.Catellwillbechairman, president andchiefexecutive officerandadirectorofKeySpan,andwillcontinueaschairmanandchiefexecutive officerandadirectorofBrooklynUnion.TheSeptember 25,1996NewYorkPublicServiceCommission orderapproving ourholdingcompanyproposalcontainscertainrestrictions onBoardandmanagerial interlocks betweenBrooklynUnionandKeySpanandothersubsidiaries ofKeySpan.(SeepageJ-30)J-3 1213.14.Howwillmyparticipation irithedividendreinveslment planbeaffected?
| |
| AllsharesofBrooklynUni'oncommonstockheldunderourDividendReinvestment andStockPurchasePlanwillbeautomatically exchanged forsharesofKeySpancommonstock.WewillcontinuetheDividendReinvestment andStockPurchasePlanwithKeySpancommonstockaftertheshareexchang'e.
| |
| Foradescription oftheeffectsoftheLILCOCom6ination ontheseplans,seepageJ-14andpage72ofthe"JointProxyStatement/Prospectus.
| |
| WhatdoIneedtodonow?Justmailyoursignedproxycardintheenclosedpostage-paid returnenvelopeassoonaspossible, sothatyoursharesmayberepresented attheBrooklynUnionMeeting.Themeetingwilltakeplaceat3:00p.ni.onAugust7,1997atOperaHouse,BrooklynAcademyofMusic,30Lafayette Avenue,Brooklyn, NewYork.Whatsliareholder voteisrequiredforapprovalofourholdingcompanyproposalandlheKeySpanshareexchange?
| |
| HoldersofrecordofBrooklynUnioncommonstockonJune26,1997areentitledtovoteat'theBrooklynUnionMeeting.Two-thirds oftheoutstanding sharesofBrooklynUnioncommonstoclemustbevoted"FOR"Proposal2atourSpecialMeetinginordertoapproveourholdingcompanyproposalandtheKeySpanshareexchange.
| |
| andLong-Term Performance Incentive Compensation Planwillbeamendedtoprovideforownership ofcommonsharesofKeySpaninsteadof.BrooklynUnioncommonstock,'nd KeySpanwilltakeoverresponsibility fortheseplans.AllexistingsharesofBrooklynUnioncommonstockheldintheseplans,orsubjecttoplanoptionsorperformance awards,willautomatically becomeanequalnumberofcommonsharesorstockoptionsorperformance awardsofKeySpan,andKeySpanwillbetheissueroffuturestockoptionsandawards.Uponconsummation oftheLILCOCombination described elsewhere inthisJointProxyStatement/Prospectus, theHoldingCompanywillassumetheseplans'andtheshares,optionsandawardsgrantedunderthem,SeepageJ-18andpage72oftheJointProxyStatement/Prospectus.
| |
| '7.1VItatwillhapp'entoBrooklynUnion'sretirement andotheremployeebenefitplans?KeySpanwilltakeoverresponsibility forallBrooklynUnionretirement andemployeebenefitplans,-such asourdefinedbenefitanddefinedcontribution pensionplans,healthplansanddisability plans.Benefitsprovidedforintheseplanswillnotbechangedasaresult"of ourrestructuring intoaholdingcompany'.
| |
| Foradescription oftheeffectsoftheLILCOCombination ontheseplans,seepage72'ofthe'ointProxyStatemen't/Prospectus.
| |
| SUMMARYOFOTHERSELECTEDINFORMATION:
| |
| 15.WhocanIcallifIhaveanyquestions?
| |
| Wehavesetupaspecialnumberforyou.Youare'welcome tocallGeorgeson
| |
| &CompanyInc.,whichisassisting inourproxysolicitation, tollfree,at1-800-223-2064.
| |
| FORBROOKLYNUNIONEMPLOYEES ANDRETIREEiS:
| |
| CertainConsiderations (seepagesJ-10-J-11)
| |
| Certainfactorsforyourconsideration indetermining whethertovote"FOR"ourholdingcompanyproposalandtoadopttherelatedAmendedandRestatedAgreement andPlanofExchangearediscussed under"Proposal 2:HoldingCompanyandAdoptionoftheKeySpanExchangeAgreement-CertainConsiderations."
| |
| 16.Howwillstock-based employeebenefitplansbeaffected?
| |
| BrooklynUnion'sEmployeeSavingsPlan,DiscountStockPurchase'Plan forEmployees, Regulatory Approvals (seepageJ-13),TheNewYorkPublicServiceCommission approvedourholdingcompanyrestructuring byanorderdatedSeptember 25,1996.This,orderalsoJ-4 pprovedanewrateplanthatbecameeffective onOctoberI,1996andcertaincustomerprotection, provisions.
| |
| Thenewrateplanwillcontinuetoapply,eveniftheholdingcompanyproposalandtheAmendedandRestatedAgreement andPlanofExchangearenotadoptedattheBrooklynUnion."Meeting.PConditions totheKeySpanShareExchange(seepagesJ-13-,J-l4)
| |
| Completion oftheshareexchangedependsonthesatisfaction ofcertainconditions, including:
| |
| (a)commonshareholder approvalattheBrooklynUnionMeeting;(b)KeySpan's commonsharesbeinglistedontheNewYorkStockExchange; (c)redemption ofBrooldynUnion'soutstanding preferred stock;and(d)KeySpan's restatedcertificate'of incorporation (s'eeAnnexLtothisJointProxyStatement/
| |
| Prospectus) andacertifiCate ofexchangebeingfiledwiththeNewYorkDepartment ofState.,KeySpan',s restatedcertificate ofincorporation.and (by-laws,whichwillgoverncertainrights.ofKeySpan's shareholders aftertheshareexchange, SeeAnnexL.Amendment orTermination of,theExchangeAgreement (seepageJ-IS)TheBrooklynUnionandKeySpanBoardsofDirectors mayamendanyofthetermsoftheAmendedandRestatedAgreement andPlanofExchangeatanytimebeforeo'rafteritsadoptionbyBrooklynUnioncommonshareholders.
| |
| Noamendment, however,maymaterially andadversely affecttherightsofBrooklynUnion'sshareholders.
| |
| iATheAgreement, maybeterminated andtheshareexchangeabandoned atanytimebeforeoraftershareholders adopttheAgreement, ifBrooklynUnion'sBoardofDirectors determines thatthecompletion oftheKeySpanshareexchangewouldnotbeinthebestinterests ofBrooklynUnionorourshareholders.
| |
| CertainOtherConsequences ofShareholder AdoptionoftheExchangeAgreement seepagesJ-14andJ-18-J-24) eAmendedandRestatedAgreement andPlanofExchangeprovidesthataftertheshareexchange, sharesofKeySpancommonstockandKeySpanstockoptionsandperformance awards(insteadofBrooklynUnioncommonstockstock optionsandperformance awards)willbeissued,grantedorawardedbyKeySpanunderBrooklynUnion'sformeremployeestockplans,allofwhichhavebeenpreviously approvedbyBrooklynUnionshareholders.
| |
| Theresponsibility forthesestockplanswillbetakenoverbyKeySpan.Inaddition, sharesofKeySpancommonstock(insteadofBrooklynUnioncommonstock)willbeissuedaftertheshareexchangeundertheDividendReinvestment andStockPurchasePlan.Foradescription oftheeffectsoftheLILCOCombination ontheseplans,seepage72oftheJointProxyStatement/Prospectus.
| |
| SincetheAmendedandRestatedAgreement andPlanofExchangeisconditioned onKeySpan's restatedcertificate ofincorporation beingfiledpriortotheshareexchangewiththeNewYorkDepartment ofState,avotebyBrooklynUnionommonshareholders foradoptionofProposal2andatAgreement willconstitute approvalofComparative Shareholders'ights (seepagesJ-22-J-24)
| |
| WhentheKeySpanshareexchangeiscomplctcd, holdersofBrooklynUnioncommonstockwillautomatically becomeholdersofKeySpancommonstock,andtheirrightswillbegovernedbyKeySpan's restatedcertificate ofincorporation andby-lawsinsteadofthoseofBrooklynUnion.SeeAnnexI..'KeySpan's restatedcertificate ofincorporation willgiveKeySpanbroadcorporate powerstoengageinanylawfulactoractivityforwhichacorporation maylieformedunderNewYorkjaw.Incontrast,
| |
| -~BrooklynUnion'scorporate purposesarethoserelatedtogas,electricity orotherformsofenergyandrelatedactivities.
| |
| Certainotherdifferences betweentherightsofkolders*of KeySpancommonstockandthoseofholdersofBrooklynUnioncommonstockaresummarized onpagesJ-23-J-24.
| |
| Alloutstanding sharesofBrooklynUnionpreferred stockwillberedeemedpriortotheKeySpanshareexchangeifProposal2isapprovedbyBrooklynUnioncommonshareholders.
| |
| Foradescription oftherightsofholdersofBLstockaftertheLILCOCombination, seepage63oftheJointProxyStatement/Prospectus.
| |
| J-5 Regulation ofKeySpanandBrooklynUnion(seepagesJ-25-J>>27)Following theKeySpanshareexchange, KeySpan,astheparentcompanyofBrooklynUnion,willhavetocomplywiththeprovisions oftheNewYorkPublicServiceCommission's orderofSeptember 25,1996.BrooklynUnionwillcontinuetoberegulated bythePSCasbefore.ThePSCordercontainsrestrictions onKeySpan's investments innon-utility subsidiaries andotherbusinesses, transactions betweenBrooklynUnionandKeySpanandotherKeySpansubsidiaries, loans,guarantees orpledgesbyBrooklynUnionforthebenefitofKeySpan'or KeySpan's subsidiaries, andonBoardandmanagerial interlocks.
| |
| Theregulation ofKeySpanandBrooklynUnioncouldultimately changeasaresultoftheregulatory implications associated withthebusinesscombination withLILCO.Seepage47oftheJointProxyStatement/Prospectus.
| |
| BrooklynUnioncurrently isnotsubjecttothefederalPublicUtilityHoldingCompanyActof1935.WhentheKeySpanshareexchangeoccurs,KeySpanwillbecomea"publicutilityholdingcompany"andwillfileanexemption statement withtheSecurities andExchangeCommission toexemptitandeachofitssubsidiaries fromthatAct(exceptforthoseprovisions requiring approvalofcertainacquisitions andinvestments).
| |
| Foradescription oftheregulation ofBLaftertheLILCOCombination, seepage54ofthisJointProxyStatement/Prospectus.
| |
| 'ewRatePlanofBrooklynUnion(seepageJ-27)TheSeptember 25,1996NewYorkPublicServiceCommission orderincludesanewrateplanthattookeffectonOctober1,1996andwillremainineffectuntilSeptember 30,2002.Therateplanessentially freezesthenon-gascomponent ofBrooklynUnion'soverallratesforsixyears,butprovidesfortheelimination ofanyceilingonearningsaswellastheretention ofcostsavingsandrevenuegrowthfortheshareholders.'The rateplanwillcontinuetogovernBrooklynUnion'sutilityratesandchargesevenifcommonshareholders donotapprovetheholdingcompanyproposalandadopttheAmendedandRestatedAgreement andPlanofExchangeattheBrooklynUnionMeeting.Inthatevent,unlesstheLILCOCombination isconsummated, BrooklynUnionwillnotbeabletorealizethebenefitsweexpectfromaholdingcompanystructure, whichwebelieveisnecessary inthefuturederegulated competitive environment oftheenergyindustry.
| |
| Statutory Appraisal Rights(seepagesJ-27-J-29 andAnnexItothisJointProxyStatement/
| |
| Prospectus)
| |
| HoldersofsharesofBrooklynUnioncommonstockwhodonotvotefortheholdingcompanyproposalandadoptionoftheAmendedandRestatedAgreement andPlanofExchange, andwhotimelydissentandfollowtheprocedures inSections623and910oftheNewYorkBusinessCorporation-Law,willthenhavecertainrightsasaresultoftheshareexchangetodemandpaymentincashforthe"fairvalue"oftheirBrooklynUnioncommonshares.Failuretotakeanyrequiredprocedures onatimelybasismayresultinthelossofthoserights.Theamountobtainable uponavalidexerciseofthoserightsissubjecttodetermination byjudicialproceedings, andcannotbepredicted.
| |
| SincetheBrooklynUnionpreferred stockisnotbeingexchanged intheshareexchangebutwillberedeemedpursuanttoitstermspriortotheKeySpanshareexchangeifProposal2isapprovedbyBrooklynUnioncommonshareholders, holdersofBrooklynUnionpreferred stockarenotentitledtostatutory appraisal rights.
| |
| tBROOKLYNUNIONPROPOSAL2:HOLDINGCOMPANYANDADOPTIONOFTHEKEYSPANEXCHANGEAGREEMENT TliisAnnexJdescribes theBrooklynUnionholdingcompanyproposalanddiscusses theeffectsoftheKeySpanshareexchange.
| |
| Foradescription oftheproposedLILCOCombinatioir, theLIPATransaction andtheireffects,seetheJointProxyStatement/Prospectus.
| |
| Themanagement'and theBoardofDirectors ofBrooklynUnionunanimously believethatitisinthebestinterests ofBrooklynUnionanditsshareholders torestructure BrooklynUnionsothatitwillbecomeaseparatesubsidiary ofanewparentholdingcompany,withthepresentholdersofBrooklynUnioncommonstockbecomingtheholdersofthecommonstockofthenewparent.Tocarryoutsuchrestructuring, BrooklynUnionhascausedtobeincorporated aNewYorkcorporation, KeySpanEnergyCorporation (referred tointhisJointProxyStatement/Prospectus as"KeySpan"),
| |
| whichnowhasanominalamountofstockoutstanding andnopresentbusinessorproperties ofitsown.Allofthecurrently outstanding sharesofKeySpan's commonstock,parvalue$.33Mpershare("KeySpan commonstock"),areownedbyBrooklynUnion.TheBoard,ofDirectors ofeachofBrooklynUnionandKeySpanhasadoptedtheAmendedandRestatedAgreement andPlanofExchangeunderwhich,subjecttoadoptionbyBrooklynUnion'sshareholders andthesatisfaction ofotherconditions, BrooklynUnionwillbecomeasubsidiary ofKeySpanthroughtheexchangeoftheoutstanding sharesofBrooklynUnioncommonstockonashare-for-share basisforsharesofKeySpancommonstock(referred tointhis'oint ProxyStatement/Prospectus asthe"KeySpanshareexchange" orthe"KeySpanexchange").
| |
| Itisintendedthataftertheconsummation oftheKeySpanshareexchange, allnewnon-utilitysubsidiaries willbeestablished asdirectsubsidiaries ofKeySpan,certain,ifnotall,ofBrooklynUnion'sexistingsubsidiaries involvedinnon-utility operations (collectively, the"non-utility subsidiaries")
| |
| eventually willbetransferred toKeySpanandbecomesubsidiaries ofKeySpanandsuchsubsidiaries will,totheextentcticable, conductthenon-utility businessoftheconsolidated entity.See"-TheShareExchange-TransferfBrooklynUnion'sNon-Utility Subsidiaries toKeySpan."
| |
| TheKeySpanExchangeAgreement isattachedtothisJointProxyStatement/Prospectus asAnnexKandisincorporated hereinbyreference.'rooklyn Unionissubjecttoregulation bytheNewYorkPublicServiceCommission (the"PSC")undertheNewYorkPublicServiceLaw(the"PublicServiceLaw").OnSeptember 25,1996,thePSCissuedanorder(the"PSCOrder")approving theholdingcompanyrestructuring andthetermswithwhichBrooklynUnionandKeySpanhaveagreedtocomplyintheiron-goingrelationships andactivities, including anewrateplanandcertaincustomerprotection provis'ions.
| |
| 'easonsfortheHoldingCompanyStructure andKeySpanShareExchangeGeneralTheproposedholdingcompanystructure isintendedtoprovideBrooklynUnionanditssubsidiaries withthefinancial andregulatory flexibility tocompetemoreeffectively inanincreasingly competitive energyindustrybyrelaxingconstraints imposedbythePSConincremental investments inunregulated operations, annualinvestments, amountsinvestedinany.singlelineofbusiness, andfinancial ratiosofsubsidiaries.
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| Relaxingconstraints andeliminating time-lags associated withregulatory decisions shouldallowmorerapidmovesinanindustrywherecompetitors donothavethesameconstraints asregulated entities.
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| TheBoardofDirectors ofBrooklynUnionbelievesthataholdingcompanystructure willprovidegreateropportunity forgrowthandenhancedvalues,andgreaterfiexibility indeveloping andoperating newbusinesses andgreaterflexibility regarding thetiming,methodandamountoffinancings andacquisitions, throughtheseparation betweentheutilityandnon-utility businesses andrelaxedconstraints onunregulated activities.
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| TheBrooklynUnionBoardlievesthataseparation betweenutilityandnon-utility businesses willservetoprotectthefinancial integrity ofeutilitybusinessfromrisksinvolvedinnon-utility businesses andventures, andprovidegreaterfiexibility J-7 regarding thetiming,methodandainount'of"financings hndacquisitions.
| |
| UndertheBrooklynUnion/LILC Agreement, BrooklynUnion.and KeySpanwill'require LILCO's"cons'ent toundertake certainactions.Seepages67to78oftheJointProxyStatement/Prospectus.
| |
| Competing intheNeiv'egulatory Eitvirontnent TheBoardofDirectors ofBrooklynUnionbelievesthattheproposedholdingcompanystructure tsessential forBrooklynUnionto,continue tooperateassuccessfully inthe,futureasithasinthepast.Adecadeago,thepriceofgaswascontrolled byregulation.and statutesfromtheoriginalproducerandsupplierthroughtheultimateend-user.
| |
| Curre'ntly, thereisnolongerregulation overthesalepriceofnaturalgasasacommodity, andtheregulation ofinterstate transmission atthefederallevelhasbeen.relaxed.Similarregulatory initiatives aretakingplaceatthestatelevel,including inNewYork,toextendcompetition intotheretailsector.iThe,regulatory developments at'hefederallevelhaveresultedinamplesuppliesofthe,naturalgascommodity aggressive competition amonggasutilities, aswellasunregulated gasmarketing broker'sandsuppliers atthegassource,anddeclining prices,inrealdollarterms,fornaturalgasforallconsumers'over thelastdecade.Interstate pipelinecapacityrightsarealsobecomingacommodity whichcannowbeboughtorsoldforshortorlongperiodsoftime.Thus,entitieslikeBrooklynUnionhavetheopportunity tomarkettemporarily unusedpipelinecapacityforthebenefitoftheircustomers andshareholders.
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| sIIInaddition, therehavebeenseveralothersignificant regulatory initiatives affecting utilitycompanies andtheircustomers.
| |
| Localtransportatio'n ofgaspurchased byend-users fromthirdpartysellershasbeenavailable inNewYorksince1984,butuntil'recently theprincipal beneficiaries ofthisavailability hadbeenlargenon-corecommercial andindustrial customers:
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| Throughfurtherregulatory modifications, directaccesstogassoldbythirdpartieshasbecome'available forthefirsttimetoBrooklynUnion'scorecustomers, including residential custoiners.
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| Similarinitiatives are'taking placeatthefederalandstatelevelsintheelectricindustry, asincreasin wholesale andretailcompetition intheelectricgeneration sectorislikelytoemergeoverthenextfewyears.Thesedevelopments.
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| intensify thealreadyfiercely.
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| competitive environment inwhichtraditional providers ofalternative energysources,primarily fueloildealers,aggressively competeinmostofBrooklynUnion'smarkets.Thedistinctions betweenenergysourcesisincreasingly blurred,asoil,gasandelectricity cometobeviewedassomewhatinterchangeable commodities, subjecting BrooklynUniontogreatercompetition.,
| |
| lbNntMoreover, anewrateplan(including thesix-yearratefreeze)tookeffectonOctober1,1996,andwillcontinuetogoverntheutilityratesofBrooklynUnionevenifcommonshareholders ofBrooklynUniondonotapprovetheholdingcompanyproposalandadopttheKeySpanExchangeAgreement.
| |
| Inthatevent,BrooklynUnionwillnotbeabletorealizethebenefitsitexpectsfromaholdingcompanystructure unlesstheLILCOCombination isconsummated.
| |
| See"-"TheKeySpanShareExchange-""NewRatePlanofBrooklyn"Union'elow.
| |
| Flexibility ofUtilityandNon-Utility Businesses BrooklynUrlionhasbeenoperating
| |
| 'undertheregulatory constraints ofthePSCwhichlimit(i)thetotalamountofthe'incremental investment'in'its unregulated operations,'(ii) theamountthatcanbeinvestedannually,'iii) the'cumulative amount'that'can beirivested inanysinglelineofbusiness, and(iv)thedebt-equity ratiosofitssubsidiaries.
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| Thesearesignificant constraints onBrooklynUnion'sabilitytomoverapidlyinanincreasingly competitive environment.
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| : Moreover, theliinitation ofinvestment toexistinglinesofbu'siness isalsoconstraining becausetheindustryischarigIng
| |
| 'sorapidlythatnewlinesofbusinessarearisingthatwerenotevenenvisioned atthetimethatthesePSCregulatory limitswereadopted.'Asdiscussed belowunder"-''TheKeySpanShareExchange-TransferofBrooklynUnion'sNon-Utility Subsidiaries toKeySpan",
| |
| aftertheholdingcompanyrestructuring, all.newnon-utility subsidiaries willestablished asdirectsubsidiaries of.KeySpanandcertain,ifnotall,ofcurrentnon-utility subsidiaries ofBrooklJ-8 nioneventually willbetransferred toandbecome,orbecomeownedthrough,separatesubsidiaries ofKeySpan.BrooklynUnionbelievesthefinancial andregulatory flexibility providedbythisholdingcompanyst~cturewillenableittooperatemoreeffectively inthechangingenvironment andmoreeasilyaddressthenewlevelsofcompetition.
| |
| BrooklynUnionmayrequestarulingfromtheInternalRevenueServicethatitmaycauseitsnon-utilitysubsidiaries tobedistributed toKeySpanfollowing theshareexchange(andthustobecome,orbecomeownedthrough,separatesubsidiaries ofKeySpan)withouttherecognition ofgainbyBrooklynUnion.BrooklynUnionbelievesthatitwillbeabletoderivesignificant benefitsfromtheconsummation oftheshareexchangewhetherornottherulingisobtained.
| |
| Asmanyintheenergyindustrybelieve,thenewcompetitive environment mayleadtoadditional consolidation, verticalexpansion, andotherstrategic alliances, asenergycompanies mayberequiredtoofferafullrangeofenergyservicestocompeteeffectively inordertoretainandattractcustomers.
| |
| Forexample,consolidations betweenBrooklynUnionandotheroperating utilities (e.g.,throughmergerand/oracquisition) couldresultineconomies ofscaleandsynergies byenablingtheconsolidated companytotakeadvantage ofcommonneedsandcomplementary strengths.
| |
| Verticalintegration couldalsoenableutilities to'offercustomers morecompleteenergypackages.
| |
| Strategic alliances withunregulated thirdpartyparticipants and/ordiversification intounrelated fieldsmayalsohelpprotectagainstthemarketandfinancial riskstowhichBrooklynUnionisnow,andincreasingly willbe,'exposed.
| |
| Thus,KeySpanmaywishtoincreaseits-investment inunregulated energy-related businesses, whetherthroughadditional "groundfloor"investment, theacquisition ofexistingenergyandenergyservicesproviders, ortheformation ofstrategic alliances withindustrypartners.
| |
| KeySpanwillcontinuetoseektoinvestinthecurrentlinesofbusiness,'uch asexploration andproduction, pipelinetransportation andgasstorage,andwillengageinenergymarketing andotherenergy-related activities.
| |
| AlthoughKeySpanhasnotidentified otherspecificbusinessopportunities, itbelievesthatsuchactivities wouldlikelyincludeareaswithwhichBrooklynUnionisalreadyfamiliar, suchasinformation systems,environmental ervices,gasappliance
| |
| : services, engineering
| |
| : services, financial
| |
| : services, meterreading,andbillingandcollection
| |
| .ervices.
| |
| Underaholdingcompanystructure, KeySpanshouldbeabletotakeadvantage ofopportunities inatimelyfashionandcompetemoreeffectively againstotherenergycompanies.
| |
| Exceptfortherestrictions setforthinthePSCOrderanddiscussed in"-TheKeySpanShareExchange-ThePSCOrder,"KeySpanbelievesitshouldnototherwise berequiredtoobtainPSCapprovalforinvestments innon-utility businesses, wouldnotbesubjecttothelimitations imposedundercertainprovisions ofNewYorklawapplicable toBrooklynUnion,andthusshouldbeabletocompetemoreeffectively againstotherentitiesnotsubjecttosimilarconstraints.
| |
| Financing Flexibility UnderSection69ofthePublicServiceLaw,BrooklynUnioncannotjssuedebtorequitysecurities forotherthanutilitypurposes.
| |
| Thus,thepractical limitofitsinvestment, innon-utility businesses istheamountofBrooklynUnion'sretainedearnings.
| |
| Thislimithasnotposedapractical probleminthepastbecauseBrooklynUnion'snon-utility businesses wereclearlydefinedandlimitedinscopeandmagnitude.
| |
| Now,however,suchalimitisinappropriate inthenewenvironment, especially inlightofthefactthatBrooklynUnion'sprincipal present,andlikelyfuture,competitors arenotsubjecttosimilarconstraints'.
| |
| TheBoardofDirectors ofBrooklynUnionbelievesthatthebestwaybothtoreducethe,regulatory constraints described above,andtoensurethatutilitycustomers continuetobeinsulated frompotential risksresulting frominvestments innon-utility businesses andventures, istoadoptaholdingcompanystructure, whileproviding sufficient protection tocustomers toassurethatBrooklynUnionwillcontinuetoprovidesafe,adequateandreliableserviceatjustandreasonable rates.ItAftertheKeySpanshareexchange, financing ofunregulated activities ofKeySpananditsdirectnon-utility ubsidiaries willnotrequirePSCapproval.
| |
| Inaddition, thecapitalstructure ofeachdirectnon-utility subsidiary aybeappropriately tailoredtosuititsindividual business.
| |
| Also,undertheholdirtgcompanystructure, KeySpanJ-9 wouldnotneedPSCapprovaltoissuedebtorequitysecurities tofinancetheacquisition ofthestock'orassetsoothercompanies.
| |
| Theabilitytoraisecapitalforacquisitions withoutprior'PSCapprovalshouldallovercompetition onalevelbasiswithotherpotential acquirors, someofwhicharealreadyholdingcompanies.
| |
| Underaholdingcompanystructure, theissuanceofdebtorequitysecurities byKeySpantofinancetheacquisition ofthestockorassetsofanothercompanyshouldnotadversely affect-Brooklyn Union'scapitaldevotedtoandavailable, forregulated utilityoperations.
| |
| ICertainConsiderations FuturePerfonnance ofKeySpanCommonStockCannotBeAssuredThepurposeoftheKeySpanshareexchangeistoestablish aholdingcompanystructure thatwillenhancetheabilitytotakeadvantage ofbusinessopportunities outsideofBrooklynUnion'spresentmarkets.TheBoardofDirectors believestheKeySpanshareexchangeandholdingcompanystructure tobeinthebestinterests ofBrooklynUnionanditsshareholders.
| |
| Nevertheless, thesuccessofKeySpaninrealizing itsgoalsandthefutureperformance ofKeySpancommonstockcannotbeassured.Dividends onKeySpanCommonStockWillInitially DependonCommonStockDividends PaidbyBrooklynUnionKeySpan,doesnotnow,norwillitimmediately aftertheKeySpanshareexchange, conductdirectlyanybusinessoperations fromwhichitwillderiveanyrevenues.
| |
| KeySpanplanstoobtainfundsforitsownoperations fromdividends paidtoKeySpanbyitssubsidiaries, andfromsalesofsecurities ordebtincurredbyKeySpan.Dividends onKeySpancommonstockwillinitially dependupontheearnings, financial condition andcapitalrequirements ofBrooklynUnion,andthedividends thatBrooklynUnionpaystoKeySpan.Inthefuture,dividends fromKeySpan's subsidiaries otherthanBrooklynUnion,may alsobeasourceoffundsfordividendpaymentsbyKeySpan.Although, ithasnopresentintention todoso,BrooklynUnionmayissuepreferred stockinthefuturetomeetitscapitalrequirements.
| |
| Suchpreferred stockwouldhavedividendrightswhicharepreferential tothepaymentofdividends byBrooklynUniontoKeySpan.ThePSCOrderalsoimposescertainlimitations onthedividends thatBrooklynUnionmaypaytoKeySpaaftertheKeySpanshareexchange.
| |
| Generally, BrooklynUnionmaynotpayKeySpanmorethan100%ofincomeavailable fordividends.
| |
| Also,ifthereisasignificant reduction inservicequalitybyBrooklynUnion(according tospecificguidelines) orifcertainspecified creditratingagenciesdowngrade BrooklynUnion'sdebtratingstospecified levels,furtherlimitsmaybeplacedupontheamountofdividends BrooklynUnionmaypaytoKeySpan.See"-TheKeySpanShareExchange-DividendPolicy."KeySpanpresently expectstopayquarterly dividends onKeySpancommonstockatleastequaltotherate,andonapproximately thesameschedule, asthedividendmostrecentlydeclaredbyBrooklynUniononitscommonstock.Whilefuturedividends willdependontheearnings, financial condition andcapitalrequirements ofBrooklynUnionanditsothersubsidiaries, KeySpanpresently expectstocontinueapolicyofpayinganappropriate percentage ofearningstoshareholders.
| |
| Itis.anticipated thattheinterimannualized dividendratepaidtotheHoldingCompanycommonshareholders aftercompletion oftheLILCOCombination andtheLIPATransaction willbe$L78percommonshare,subjecttoapprovalanddeclaration bytheHoldingCompanyBoardofDirectors.
| |
| Thisdividendrateisintendedtobeinplacefromtheclosingofthesetransactions untilsuchtimeastheHoldingCompany's Boardhasestablished itsformaldividendpolic'y.Thepaymentofdividends bytheHoldingCompanyinthefuture,however,willdepe'ndonbusinessconditions, resultsofoperations, financial conditions, andotherfactors.SeepageoftheJointProxyStatement/Prospectus.
| |
| FNon-UtilityBusinesses BrooklynUnion'sprincipal non-utility subsidiaries participate andowninvestments ingasandoilexploration andproduction, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergy-relatedservices.
| |
| BrooklynUnionwilleventually transfercertain,ifnotall,ofthesesubsidiaries andinvestment toKeySpanfollowing theKeySpanshareexchange, subjecttoreceiptofcertaintaxrulings.Similarly, newno tilitysubsidiaries willbeestablished asdirectsubsidiaries ofKeySpan.See"-TheKeySpanShareExchange-TransferofBrooklynUnion'sNon-Utility Subsidiaries toKeySpan."
| |
| Itisthecurrentintention ofKeySpanforthenon-utility subsidiaries toengageprimarily inenergy-related businesses whichwillnotberegulated bystateorfederalagencieswhichregulatepublicutilities.
| |
| Suchbusinesses mayencounter competitive andotherfactorsnotpreviously experienced byBrooklynUnion,andmayhavedifferent, andperhapsgreater,investment risksthanthoseinvolvedintheregulated naturalgasutilitybusinessofBrooklynUnion.Therecanbenoassurance thatsuchbusinesses willbesuccessful or,ifunsuccessful, thattheywillnothaveadirectorindirectadverseeffectonKeySpan.Asisthecasenow,anylossesincurredbysuchbusinesses willnotberecoverable inutilityratesofBrooklynUnion.Forfurtherinformation regarding BrooklynUnion'snon-utility subsidiaries, seeNotes3,7,8and10tothe1996Consolidated Financial Statements and"Management's Discussion andAnalysisofFinancial Condition andResultsofOperations" inBrooklynUnion'sAnnualReportonForm10-K/AforthefiscalyearendedSeptember 30,1996.Comparable earningsfr'omBrooklynUnion'sunregulated businesses (excluding 1996after-tax gainsfromaninitialpublicofferingofasubsidiary andthesaleofaplant($33,5million)andanafter-tax reorganization charge($7.8million))
| |
| were$14.8million,or30centspershareinfiscal1996,$12.8million,or27centspersharein1995,and$10.4million,or22centsper'harein1994.BrooklynUnion'stotalinvestment inthesebusinesses, computedinaccordance withPSCspecifications asapercentage ofconsolidated capitalization, was13.4%,14.2%and12.8%asofSeptember 30,1996,1995and1994,respectively.
| |
| KeySpanwillobtainfundstoinvestinnon-utility subsidiaries andotherbusinesses fromdividends itreceivesfromBrooklynUnion,borrowings andotherfinancings, anddividends KeySpanmayinthefuturereceivefromanynon-utility subsidiaries.
| |
| Therecanbenoassurance thatnon-utility subsidiaries willhaveearningsorpayanydividends toKeySpanintheforeseeable future.Implementation oftheNeivRatePlanThenewrateplan(including thesix-yearratefreeze)tookeffectasofOctober1,1996andwillcontinuetogovernutilityratesandchargesofBrooklynUnionevenifcommonshareholders ofBrooklynUniondonotapprovetheholdingcompanyproposaland'adopt theKeySpanExchangeAgreement.
| |
| Inthatevent,BrooklynUnionwillnotbeabletorealizethebenefitsitexpectsfromaholdingcompanystructure priortotheconsummation ofthebusinesscombination withLILCO.Seealso"-TheKeySpanShareExchange-NewRatePlanofBrooklynUnion"below..CertainRestrictions inthePSCOrderAssummarized above,thePSCOrderimposescertainlimitations onthedividends thatBrooklynUnionmaypaytoKeySpanaftertheKeySpanshareexchange.
| |
| Seealso"-TheKeySpanShareExchange-DividendPolicy."ThePSCOrderalsocontainsrestrictions onKeySpan's investments innon-utility subsidiaries andotherbusinesses, transactions betweenBrooklynUnionandKeySpanoranyothersubsidiary ofKeySpan,loans,guarantees orpledgesbyBrooklynUnionforthebenefitofKeySpanoranyothersubsidiary ofKeySpan,andBoardandmanagerial interlocks betweenBrooklynUnionandKeySpanoranyothersubsidiary ofKeySpan.See"-TheKeySpanShareExchange-ThePSCOrder"and"-Management
| |
| -Restric'tions onBoardandManagement Interlocks betweenKeySpanandB'rooklyn Union."Therecanbenoassurance astotheeffect,tfany,thatsuchrestrictions willhaveonthebusinessoroperations ofKeyspan,BrooklynUnionorthenon-utility subsidiaries.
| |
| Inconnection withtheproposedLILCOCombination, BrooklynUnionandLILCOhavefiledapetition, withthePSCrequesting, amongotherthings,theremovalorrelaxation ofcertainoftherestrictions described herein.ThePSChasnotacteduponsuchpetitionasofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetitionwillbegranted.OtlterRestrictions UndertheBrooklynUnion/LILCO Agreement, BrooklynUnionandKeySpanwillrequireLILCO'sconsentundertake certainactions.Seepages67to78ofthisJointProxyStatement/Prospectus.
| |
| Relationship BetweentheKeySpanShareExchangeandtheLILCOCombination rTheKeySpanshareexchangeandtheLILCOCombination arenotconditioned ononeanother.IfBrooklynUnion'sshareholders approvetheholdingcompanyproposal, wewilleffecttheKeySpanshareexchangeregardless ofwhethertheLILCOCombination isapprovedor'consummated.
| |
| IfBrooklynUnion'sshareholders approveboththeholdingcompanyproposalandtheLILCOCombination
| |
| : proposal, BrooklynUnionintendstoproceedwiththeKeySpanshareexchangefirst.Inthatcase,KeySpanwillassumeBrooklynUnion'srightsandobligations undertheBrooklynUnion/LILCO Agreement withLILCOandeffectively willbereplacing BrooklynUnionastheentitythatwillengageinabindingshareexchangewiththeHoldingCompany.IfandwhentheLILCOCombination closesandBrooklynUnionandthenon-utility subsidiaries becomeindirectsubsidiaries oftheHoldingCompany,weanticipate thatKeySpanwillbedissolved sothattherewouldonlybeoneholdingcompanyforBrooklynUnion,thenon-utility subsidiaries andLILCO.*TheLILCOCombination described intheJointProxyStatement/Prospectus willalsoresult.inaholdingcompany,,structure.
| |
| Shareholder approvaloftheKeySpanholdingcompanyproposal, however,willallowBrooklynUniontotakeadvantage oftheholdingcompanystructure priorto,andregardless of,theclosingoftheLILCOCombination.
| |
| BrooklynUnion'sabilitytomakeinvestments inunregulated businesses issubjecttocertainrestrictions underitsagreement withLILCO.BrooklynUnionmaytransferthenon-utility subsidiaries directlytotheHoldingCompanyiftheLILCOCombination isconsummated priortothetimethatatransfertoKeySpanofsuchsubsidiaries occurs.ThisAnnexJdescribes theBrooklynUnionholdingcompanyproposalanddiscusses theeffectsoftheKeySpanshareexchange.
| |
| Foradescription oftheproposedLILCOCombination, theLIPATransaction andtheireffects,seetheJointProxyStatement/Prospectus.
| |
| A.THEKEYSPANSHAREEXCHANGETheKeySpanExchangeAgreement TheKeySpanExchangeAgreement hasbeenunanimously adopted'by theBoardsofDirectors ofBrooklynUnionandKeySpanandis'subject toadoptionbytheholdersofatleasttwo-thirds oftheoutstanding sharesofBrooklynUnioncommonstock'.See"-VoteRequired" below.IntheKeySpanshareexchange, (i)eachshareofBrooklynUnioncommonstockoutstanding immediately priortotheeffective timeoftheKeySpanshareexchangewillbeexchanged foronenewshareofKeySpancommonstock,(ii)KeySpanwillbecometheownerofalloutstanding BrooklynUnioncommonstock,and(iii)thesharesofKeySpancommonstockheldbyBrooklynUnionimmediately priortotheKeySpanshareexchangewillbecancelled.
| |
| Asaresult,uponcompletion oftheKeySpanshareexchange, KeySpanwillbecomeaholdingcompany,BrooklynUnionwillbecomeasubsidiary ofKeySpan,andallsharesofKeySpancommonstockoutstanding immediately aftertheKeySpanshareexchangewillbeownedbytheformer,holdersofBrooklynUnioncommonstockoutstanding immediately priortotheKeySpanshareexchange.
| |
| Itisintendedthatfollowing theKeySpanshareexchange, certain,ifnotallofBrooklynUnion'sexistingnon-utility subsidiaries eventually willbetransferred toKeySpanandbecomesubsidiaries ofKeySpan.See"-TransferofBrooklynUnion'sNon-Utility Subsidiaries toKeySpan."
| |
| TheKeySpanExchangeAgreement isattachedtothisJointProxyStatement/Prospectus asPnnexKandisincorporated hereinbyreference.
| |
| TheKeySpan"shareexchangeisc'onditioned onBrooklynUnio'nredeeming itspreferred stockifthecommonshareholders votefortheholdingcompanyproposal.
| |
| Underthetermsofthepreferred stock,thenoticeofredemption mustbemailedatleast30dayspriortotheredemption date.BrooklynUnionintendstoconsummate theKeySpanshareexchangeaftertheredemption date.Anoticeofredemption willbesenttoholdersofBrooklynUnionpreferred stockpromptlyaftertheBrooklynUnionMeeting,assumingthatshareholders votetoapprovethe,holdingcompanyproposal.
| |
| Thenoticeofredemption willincludeinstructio forholdersofpreferred stocktofollowinsurrendering theircertificates evidencing suchstocktoreceivetJ-.12 Iedemption priceinpaymenttherefor.
| |
| DebtofBrooklynUnionwillremainunchanged andwillcontinueasoutstanding obligations ofBrooklynUnionaftertheKeySpanshare'exchange.
| |
| VoteRequiredUnderNewYorklaw,theaffirmative voteoftheholdersofrecordon'therecorddateoftwo-thirds oftheoutstanding sharesofBrooklynUnioncommonstockisrequiredtoapprovetheholdingcompanyproposalandadopttheKeySpanExchangeAgreement.
| |
| Becausetherequirement forthisproposalistheaffirmative voteoftwo-thirds oftheoutstanding commonshares,brokernon-votes andabstentions willhavetheeffectofa"no"vote."HoldersofBrooklynUnionpreferred stockareentitledtoreceivenoticeoftheSpecialMeeting,butarenotentitledtovoteontheholdingcompanyproposalandtheKeySpanExchangeAgreement attheBrooklynUnionMeeting.Regulatory Approvals NewYorkPublicServiceLaw1V'nderSection'70 ofthePublicServiceLaw,anytransferofutilitystocksu'chaswilloccurintheKeySpanshareexchangeestbeapprovedinadvancebythePSC.OnSeptember 25,1996,thePSCissueditsorderapproving theholdingcompany'restructuring.
| |
| ThePSCOrderalsocontainstermswithwhichBrooklynUnionandKeySpanhaveagreedtocomplyintheiron-goingrelationship andactivities, including thenewrateplanandcertaincustomerprotection provisions.
| |
| ThetermofthePSCOrderextendstoSeptember 30,2002,unlessterminated byanearlierPSCorder.I'VPublicUtilityHoldingCompanyActof1935(the"HoldingCompanyAct")BrooklynUnioncurrently isnotsubjecttotheHoldingCompanyActbecauseitisnota"publicutilityIdingcompany".
| |
| AsaresultoftheKeySpanshareexchange, KeySpanwillbecomeapublicutilityholdingompanyundertheHoldingCompanyAct.PursuanttotheKeySpanExchangeAgreement, simultaneously withtheeffectiveness oftheKeySpanshareexchange, KeySpanwillfilewiththeSECanexemption statement'o exemptitselfanditssubsidiaries fromallprovisions oftheHoldingCompanyAct(exceptwithrespecttocertainacquisitions andinvestments) pursuanttothe"intrastate" exemption providedbySection3(a)(1)ofthatAct.Thebasisforexemption isthatKeySpanandBrooklynUnionareeachorganized andcarryontheirbusinesssubstantially intheStateofNewYork,andneitherKeySpannorBrooklynUnionwillderiveanymaterialpartofitsincomefromapublicutilitycompanyorganized outsideofthe'StateofNewYork.Tomaintainitsexemption, KeySpanmust,fileastatement, eachyearpriortoMarch1withtheSEC.TheSEChasauthority undertheHoldingCompanyActtochallenge theavailability ofKeySpan's exemption.
| |
| See"-Regulation ofKeySpanandBrooklynUnion."Conditions toEffectiveness oftheKeySpanShareExchangeTheKeySpanshareexchangeissubjecttothesatisfaction ofthe,following conditions (inadditiontoadoptionoftheKeySpanExchangeAgreement bytheholdersofBrooklynUnioncommonstock):(i)allnecessary orders,authorizations, approvals orwaiversfromthePSCandallotherjurisdictive regulatory bodies,boardsoragencieshavebeenreceived, remaininfullforceandeffect,anddonotinclude,inthesolejudgmentoftheBoardofDirectors ofBrooklynUnion,unacceptable conditions; (ii)alloutstanding Brookly'n Unionpreferred stockhavebeenredeemedpursuanttoitsterms;(iii)sharesofKeySpancommonstocktobeissuedinconnection withtheKeySpanexchangehavebeenlisted,subjecttoofficialnoticeofissuance, bytheNewYorkStockExchange; and(iv)KeySpan's restatedcertificate, ofincorporation (AnnexLtothisJointProxyStatement/Prospectus) hasbeenfiledwiththeNewYorkDepartment ofState(the"Department"
| |
| ).I'ollowing satisfaction oftheseconditions, theKeySpan,shareexchangewillbecomeeffective immediately llowingthecloseofbusinessonthedateoffilingwiththeDepartment ofacertificate ofexchangepursuantto mSection913(d)oftheNewYorkBusinessCorporation Law.BrooklynUnion.cannotpredictwhenallcondition.
| |
| willbesatisfied, butexpectsthattheKeySpanshare'exchange willbecome'effective inthethirdquarterofcalendar1997.ExchangeofStockCertificates IftheKeySpanshareexchangeiseffected, itwill-notbenecessary forholdersofBrooklynUnioncommonstocktophysically exchangetheirexistingstockcertificates forcertificates ofKeySpancommonstock.Thecertificates whichrepresent sharesofBrooklynUnioncommonstockoutstanding immediately priortotheeffective timeoftheKeySpanshareexchangewillautomatically represent anequalnumberofsharesofKeySpancommonstockimmediately aftertheeffective timeandwillnolonger,represent BrooklynUnion,commonstock.Newcertificates bearingthenameofKeySpanwillbeissuedaftertheKeySpanshareexchange, ifandascertificates representing sharesofBrooklynUnioncommonstockoutstanding immediately priortotheKeySpanshareexchangearepresented forexchangeortransfer.
| |
| TheKeySpanshareexchangeisconditioned onBrooklynUnionredeeming itspreferred stockifthecommonshareholders votefortheholdingcompanyproposal.
| |
| Underthetermsofthepreferred stock,thenoticeofredemption mustbemailedatleast30dayspriortotheredertiption date.BrooklynUnionintendstoconsummate theKeySpanshareexchangeaftertheredemption date.Anotice,ofredemption willbesent,toholdersofBrooklynUnion,preferred stockpromptlyaftertheBrooklynUnionMeeting,assumingtPatshareholders votetoapprovetheholdingcompanyproposal.
| |
| Thenoticeofredemption willincludeinstructions forholdersofpreferred stocktofollowinsurrendering theircertificates, evidencing suchstocktoreceivetheredemption priceinpaymenttherefor.
| |
| DebtofBrooklynUnionwillremainunchanged andwillcontinueasoutstanding obligations ofBrooklynUnionaftertheKeySpanshareexchange.
| |
| TransferofBrooklynUnion'sNon-Utility Subsidiaries toKeySpanBrooklynUnion'sprincipal non-utility subsidiaries currently participate andowninvestments ingasando'xploration andproduction, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergrelatedservices.
| |
| AftertheKeySpanshareexchange, itisintendedthatBrooklynUnionwilltransfertoKeySpan,ortotheHoldingCompanyintheeventthattheLILCOCombination isconsummated priortosuchtransfer, certain,ifnotmost,ofthesenon-utility subsidiaries andinvestments.
| |
| BrooklynUnionmayrequestarulingfromtheInternalRevenueServicethatitmaycauseitsnon-utility subsidiaries tobedistributed toKeySpanfollowing theshareexchange(andthustobecome,orbecomeownedthrough,separatesubsidiaries ofKeySpan)withoutthe'recognition ofgainbyBrooklynUnion.BrooklynUnionbelievesthatitwillbeabletoderivesignificant benefitsfromtheconsummation oftheshareexchangewhetherornottherulingisobtained.
| |
| Otherthanfortheforegoing subsidiaries andinvestments, andexceptfordividends orotherdistributions withrespecttoBrooklynUnioncommonstockheldby.KeySpan, itisexpectedthatBrooklynUnionwillnottransferatlessthanafairconsideration anyofitsotherassetstoKeySpanoranyKeySpansubsidiaries.
| |
| BrooklynUnionwilldevelopaccounting andotherprocedures totheextentdetermined tobenecessary orappropriate toensureseparation ofutilityandnon-utility businesses.
| |
| See"-ThePSC'Order" below.DividendReinvestment andStockPurchasePlanSharesofBrooklynUnioncommonstockheldinitsDividendReinvestment andStockPurchasePlan(including uncertificated wholeandfractional shares)willautomatically becomealikenumberofsharesofKeySpancommonstockattheeffective timeoftheKeySpanshareexchange.
| |
| Attheeffective time,KeySpanwillsucceedtothePlanasineffectimmediately priortotheeffective time,andsharesofKeySpancommonstockwillbeissuedunderthePlanonandaftertheeffective time.KeySpanwillfileapost-effective amendment toBrooklynUnion'sregistration statement onFormS-3forthePlanshortlyaftertheeffective timeoftKeySpanexchange.
| |
| mendmentorTermination oftheKeySpanExchangeAgreement TheBoardsofDirectors ofBrooklynUnionandKeySpanmayamendanyofthetermsoftheKeySpanExchangeAgreement atanytimebeforeorafteritsadoptionbytheholdersofBrooklynUnioncommonstockandpriortotheeffective time,butnosuchamendment may,inthesolejudgmentoftheBoardofDirectors ofBrooklynUnion,materially andadversely affecttherightsofBr'ooklyn Union'sshareholders.
| |
| TheKeySpanExchangeAgreement maybeterminated andthe'KeySpan shareexchangeabandoned atanytimebeforeoraftertheshareholders ofBrooklynUnionadopttheKeySpanExchangeAgreement, andpriortotheeffective time,iftheBoardofDirectors ofBrooklynUniondetermines; initssolejudgment, thatconsummation oftheKeySpanexchangewould,foranyreason,beinadvisable ornotbeinthebestinterests ofBrooklynUnionoritsshareholders.
| |
| ListingofKeySpanCommonStockKeySpanisapplyingtohaveitscommonstocklistedontheNewYorkStockExchange.
| |
| Itisex'pected thatsuchlistingwillbecomeeffective attheeffective timeoftheKeySpanshareexchange.
| |
| ThestockexchangetickersymbolofKeySpancommonstockwillbe"KSE",andquotations willbecarriedinnewspapers asthey.havebeenforBrooklynUnioncommonstock.Following theKeySpanshareexchange, BrooklynUnioncommonstockwillnolongertradeandwillbedelistedandnolongerregistered pursuanttoSection12oftheSecurities ExchangeActof1934.BrooklynUnionCommonStockMarketPricesandDividends jlBrooklynUnioncommonstockislistedandprincipally tradedontheNewYorkStockExchange.
| |
| See"Questions
| |
| &AnswersontheBrooklynUnion/LIL'CO Combination andLIPATransac'tion; SummaryofJointProxyStatement/Prospectus
| |
| -Comparative Dividen'ds andMarketPrices-BrooklynUnion"'in theJointProxyStatement/Prospectus forthedividends paidandthehighandlowsalespricesofBrooklynUnioncommonstockrthefiscalperiodsindicated asreportedinTheWallStreetJournalasNewYorkStockExchangeComposite ransactions.IIDividendPolicyIKeySpandoesnotnow,norwillitimmediately aftertheKeySpanshareexchange, conductdirectlyanybusinessoperations fromwhichitwillderiveanyrevenues.
| |
| KeySpanplanstoobtainfundsforitsownoperations fromdividends paidtoKeySpanonthestockofitssubsidiaries, andfromsalesofsecurities ordebtincurredbyKeySpan.Dividends onKeySpancommonstockwillinitially dependupontheearriings, financial condition andcapitalrequirements ofBrooklynUnion,andthedividends paidbyBrooklynUniontoKeySpan.KeySpanpresently expectstocontinueBrooklynUnion'spolicyofpayinganappropriate percentage ofearnings'o shareholders.
| |
| Inthefuture,dividends fromKeySpan's subsidiaries otherthanBrooklynUnionmayalsobeasourceoffundsfordividendpaymentsbyKeySpan.Paymentofdividends onBrooklynUnioncommonstockwillcontinuetobesubjecttothepriorrightsofholdersofBrooklynUnionpreferred stock.KeySpanpresently expectstopayquarterly dividends onKeySpancommonstockatleastequaltotherate,andonapproximately thesamescheduleas,thedividendmostrecentlydeclaredbyBrooklynUniononitscommonstock.Thequarterly dividendmostrecentlydeclaredbyBrooklynUnion'sBoardofDirectors onBrooklynUnioncommonstockwas$.365persharepayableAugust1,1997toholdersofrecordonJuly8,1997.Theamountofdividends paidbyBrooklynUniontoKeySpanfollowing theKeySpanshareexchange, isexpectedtobegreaterthantheamountofdividends KeySpanpaysonitscommonstock,sinceKeySpanwillneedfundsforitsholdingcompanyactivities.
| |
| fThePSCOrdercontainsconditions imposinglimitations ondividendpaymentsbyBrooklynUnion'oKeySpan.Theselimitations aredesignedtoensuremaintenance ofBrooklynUnion'sfinancial
| |
| : strength, itsabilityraisecapitalsufficient tofinancerequiredinvestment initsutilityplant,andtoprotectBrooklynUnion'sabilityprovidesafe,adequateandreliableutilityservice.Thelimitations areasfollows:(I)BrooklynUnion'slevel ofdividendpaymentscannotexceed100%%uoofits'income available fordividends, calculated onatwo-yearrollinaveragebasis;(2)intheeventthatBrooklynUnionfailstoachievecertainservicelevelsprescribed inthePSCOrder,Brooklyn, Unionwillberequiredtoshow.cause-why itshouldnotbeprohibited fromincreasing thelevelofdividepd.payments; (3)intheevent.thatKeySJianhasrateddebt,andthedebtisratedordowngraded toBBB,KeySpanwillberequiredtoshowcausetothe,PSC,whydividends fromBrooklynUniontoKeySpanshouldnotbelimitedto75%ofincomeavailable fordividends; and(4)undercertainconditions, dividends paidbyBrooklynUnion',to KeySpan.ma'y belimitedto75%ofincomeavailable fordividends (calculated onatwo-yearrollingaveragebasis),50%of,'inc'ome available fordividends (calculated onatwo-yearrollingaveragebasis)orsuspended; intheeventofadowngrade ofBrooklynUnion'sseniordebtsecurities byatleasttwoofthefollowing creditratingagencies:
| |
| Standard&Poor'sRatingGroup,Moody'sInvestors ServiceandFitchInvestors ServiceL.P.Inconnection withtheproposedLILCOCombination, BrooklynUnionandLILCOhavefiledapetitionwiththePSCrequesting, amongotherthings,theremovalorrelaxation ofcertainoftherestrictions described herein.ThePSChasnotacteduponsuchpetitionasofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetitionwillbegranted."''nderthe'Brooklyn Union/LILCO Agreemenf, KeySpanwillberestricted in,amongotherthings,itsabilitytopayextraordinary dividends.
| |
| Seepages79to80oftheJointProxyStatement/Prospectus.
| |
| 1!II1IThefollowing tablesummarizes thedowngrade eventswithrespecttoBrooklynUnion'sseniordebtwhichwillcausealimitation, thenatureofthelimitation, andtheeventsthatwillleadtoremovalofthelimitation, ondividends thatBrooklynUnioncanpaytoKeySpan:BrooklynUnionDowngrade Event.;-,Downgrade toBBB+and,downgrade isinany-part'.;
| |
| duetotheperformance, or"concernsaboutthefinancial condition ofKeySpanoranysubsidiary ofKeySpanotherthanBrooklynUnion'owngrade toBBBanddowngrade issofelydue,to,,theperformance or,concernsaboutthe,,financial condition; of,BrooklynUnionDowngrade toBBBand"downgrade isinanypart-due'totheperformance or"concerns'abottt the'inancial condition of''KeySpanorany'subsidiary ofKeySpanothet'hin
| |
| 'rookly'n UnionDowngrade toBBBandratingnot,restored toatleastBBB+within2,yearsDowngrade to'BBB-'ot,',~$uALimitation Dividends limitedto75%ofincomeavailable for,dividends
| |
| .Dividends limitedto75%ofincome,available fordividends, PrDividends limitedto50%of.incomeavailable for'dividends Dividends suspended
| |
| ~Dividends suspended Limitation RemovedWhenpriorratingrestoredWhenpriorratingr'estored Whenpriorrating.restoredrWhenratingrestoredtoatleastBBB+llWhenratingrestoredtoatleastBBB Theconditions ofthe.PSCOrderimposingtheselimitations willcontinuethroughout thetermoftheagreement thatwasapprovedbythePSCOrder,whichendsonSeptember 30,.2002.
| |
| However,thePSCOrderprovidesforreviewoftheagreement todetermine whethermodifications areappropriate.
| |
| ,~hh,VCBrooklynUnion's,Standard,&,
| |
| Poor'sandMoody'sunsecured seniordebtratingsare,A,and.Al,respectively.
| |
| Following theannouncement oftheLILCOCombination,,Standard
| |
| &Poor's,placed BrooklynUniononcreditwatchwithnegativeimplications.
| |
| CertainFederalIncomeTaxConsequences
| |
| 'rooklynUnionandKeySpanhavereceivedanopinionfromSullivan&Cromwell,"their specialcounsel,that'theKeySpanshareexchangeandtheredemption oftheBrooklynUnionpreferred stockwillhav'ethetaxconsequences described belo'w.Theopinion'is basedoncertainrepresentations madebyBrooklynUnionandKeySpan'and certainassumptions, including an'assumption thatalloftheoutstanding BrooklynUnionpreferred stockwillberedeemedpriortotheconsummation ofthe'KeySpan shareexchange.
| |
| Thetaxconsequences oftheKeySpanshareexchangemaybesignificantly different fromthosedescribed belowifalloftheBrooklynUnionpreferred stockisnotredeemedpriortotheexchange.
| |
| fhediscussion belowdoesnotcoverthetaxconsequences ofthe'KeySpan shareexchan'ge ortheredemption'of Brooklyn'nion preferred stockunderstate,localorforeignincomeorothertaxlaws.SHAREHOLDERS OFBROOKLYNUNIONAREURGED'TOCONSULTWITHTHEIROWNTAXADVISORSWITHRESPECTTOTHEEFFECTSOFSUCH'LAWS ANDWITHRESPECTTOTHETAX*CONSEQUENCES OF'THEKEYSPANSHAREEXCHANGEIFALLOFTHEBROOKLYN'UNION PREFERRED STOCKISNOT'REDEEMED PRIORTOTHEEXCHANGE.
| |
| Thediscussion belowdoesnotaddressallmaterialtaxconsequences withrespecttotheKeySpanshareexchangeortheredemption ofBrooklynUnionpreferred stockanddoesnottakeintoaccountthespecificcircumstances ofanyparticular investors (suchastax-exempt
| |
| : entities, certaininsurance companies,'roker-dealers,investors thatholdBrooklynUnionstockasotherthanacapitalassetoraspartofastraddleorahedgingrconversion transaction, orinvestors whosefunctional currency.
| |
| isnottheU.S.dollar),someofwhichmaybesubjectto~special rules.Thesummaryonlyaddresses aholderofBrooklynUnionstockthatis(i)acitizenorresidentoftheU.S.,(ii)acorporation organized underthelawsoftheU.S.,oranystate,or(iii)otherwise subjectto'U.S.federal'ncome taxationonanetincomebasisinrespectofitsBrooklynUnionstock;r,TI'fSKeySpanShaieExchange',IIThe.materialfederalincome.taxconsequences oftheKeySpanshareexchangeareasfollows:(1)nogainorlosswillberecognized byaholderofBrooklynUnioncommonstockupontheexchangesolelyofsuchholder'sBrooklynUnioncommonstocksolelyforKeySpancommonstock;(2)thebasisofsharesofKeySpancommonstockreceivedordeemedreceivedby,aformerholderofsharesofBrooklynUnioncommonstockinanexchangedescribed in(1)aboveintheaggregate willequal"thebasis'ofsuchformerholder'ssharesofBrooklynUnioncommonstocksoactuallyordeemed'exchanged, aridth'eholding'eriod
| |
| 'forsuchsharesofKeySpancommonstockwillincludetheholding'eriod'ofthesharesofBrooklynUnioncommonstocKsoactuallyor'deemed exchanged totheextentthatsuchsharesofBrooklynUnioncommonstockwere'held asacapitalassetattheeffective timeofthe.KeySpanshareexchange; (3)nogain.or loss,will.berecognized byKeySpanorBrooklynUniononaccountoftheKeySpanshareexchangeortheissuanceofsharesof,KeySpan commonstocktotheformerholdersofsharesofBrooklyn, UnioncommonstockpursuanttotheKeySpanExchangeAgreement; and(4)theconsummation oftheKeySpanshareexchan'ge willnotresultinthetermination oftheexistence
| |
| .,oftheaffiliated groupofcorporations ofwhichBrooklynUnionhasbeenthe.commonparent,andBrooklyneUnionwillbeincludedinsuchaffiliated groupofcorporations ofwhichKeySpanwillbecomethe,new,commonparent.)y'I Shareholders ofBrooklynUnionwillberequiredtoattachtotheirincometaxreturnsacompletestatemenofallthefactsrelatingtotheKeySpanshareexchange.
| |
| Thefactstobedisclosed includetheshareholder's basisinthesharesofBrooklynUnioncommonstocktransferred toKeySpanandthenatureandamountofsharesofKeySpancommonstockreceivedintheKeySpanshareexchange.
| |
| Shareholders ofBrooklynUnionwillalsoberequiredtokeeppermanent recordsofanyinformatidn relatingtotheKeySpanshareexchangethatisrequiredtobefiledwiththeirincometaxreturns.Redemption ofPreferred StockExcepttotheextentdescribed intheparagraph below,aholderofBrooklynUnionpreferred stockwillrecognize'ain orlossforfederalincometaxpurposesinanamountequaltothedifference betweenthecashreceiveduponredemption anditstaxbasisinsuchBrooklynUnionpreferred stock.Suchgainorlosswillbecapitalgainorlossandwillbelong-term capitalgainorlossifsuchshareholder hashelditsBrooklynUnionpreferred stockformorethanoneyearatthetimesuchstockisredeemed.
| |
| AholderofBrooklynUnionpreferred stockwhoalsoownssharesofBrooklynUnioncommonstockmaynot,beabletorecognize lossontheredemption ofitspreferred stockiftheKeySpanshareexchangeandtheredemption ofBrooklyn Unionpreferred stockwereregardedasintegrated stepsinarelatedtransaction.
| |
| PERSONSWHOAREHOLDERSOFBOTHSHARESOFBROOKLYNUNIONCOMMONSTOCKANDSHARESOFBROOKLYNUNIONPREFERRED STOCKSHOULD,THEREFORE, CONSULTWITHTHEIROWNTAXADVISORSASTOTHEFEDERALINCOMETAXCONSEQUENCES TOTHEMOFTHEREDEMPTION OFTHEIRBROOKLYNUNIONPREFERRED STOCK.BrooklynUnionEmployeePlansETheKeySpanExchangeAgreement providesthatBrooklyn, Union'sEmployeeSavingsPlan,DiscountStockPurchasePlanforEmployees, andLong-Term Performance Incentive Compensation Plan(together, th"Brooklyn UnionStockPlans"),alongwithotheremployeebenefitplansmaintained byBrooklynUnion(collectively withtheBrooklynUnionStockPlans,the"Brooklyn UnionEmployeePlans"),suchasthedefinedbenefitanddefinedcontribution pensionplans,healthplansanddisability plans,willbeamendedtoprovide'for KeySpantakingoverresponsibility forsuchPlansuponconsummation oftheKeySpanshareexchange.
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| TheBrooklynUnionStockPlanswerepreviously approvedbyBrooklynUnionshareholders.
| |
| Aftertheconsummation oftheKeySpanshareexchange, KeySpanwillassumesuchplansbutmayfurtheramend,suspend,revokeorterminate suchplans.See"-StockandBenefit-Plans"intheJointProxyStatement/Prospectus.
| |
| StockBasedP1ans/IftheKeySpanshareexchangeisconsummated, sharesofBrooklynUnioncommonstockthenheldundertheBrooklynUnionStockPlanswillautomatically becomealikenumberofsharesofKeySpancommonstock.Also,theBrooklynUnionStockPlansasthenamendedwillprovideforsharesofKeySpancommonstock,insteadofBrooklynUnioncommonstock,beingissuedanddelivered inthefutureundersuchPlans.Uponconsummation oftheKeySpanshareexchange, alloutstanding stockoptionsunderBrooklynUnion'sLong-Term Performance Incentive Compensation Planwillbeconverted intooptionstoacquire,onthesametermsandconditions aswereapplicable undersuchstockoptionsimmediately'rior totheshareexchange, suchnumberofsharesofKeySpancommonstockastheholdersofsuchoptionswouldhavebeenentitledtoreceivepursuanttotheKeySpanshareexchangehadsuchholdersexercised suchstockoptionsinfullimmediately priortotheKeySpanshareexchange, atapricepersharebfKeySpancommonstockequaltothepershareoptionpriceofBrooklynUnioncommonstock.KeySpanwillissuefutureoptionsonitscommonstockundersuchPlaInaddition, Performance SharesgrantedandtobegrantedundersuchPlanwillbetreatedinacomparabl armer.KeySpanwillfilepost-effective amendments toBrooklynUnion'sregistration statements on'FormS-8fortheamendedBrooklyn, UnionStockPlansshortlyaftertheeffective timeoftheKeySpanshareexchange.
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| Non-Stock BasedPlansW1I...'ponconsummation oftheKeySpanshareexchange, KeySpanwilltake'over responsibility,fot; allofBrooklyn.Union's retirement andotheremployeebenefitplans,such.asthedefinedbenefitand,defined contribution pensionplans,healthplansanddisability plans.Benefitsprovidedforinthesenon-,stock basedplanswillnotbechangedasaresultoftheholdingcompanyrestructuring andKeySpanshareexchange.
| |
| 'IRedemption ofBrooklyn, UnionPreferred Stock;,,~TheKeySpanshareexchangeisconditioned ontheredemption ofallBrooklynUnionpreferred stock'after thevotebyBrooklynUnioncommonshareholders andbeforetheconsummation oftheshareexchange.
| |
| HoldersofBrooklynUnionpreferred stockwillnotbecomeholdersofKeySpanpreferred orcommonstockasaresultoftheKeySpanshareexchange.
| |
| Underthetermsofthepreferred stock,thenoticeofredemption mustbemailedatleast30dayspriortotheredemption date.BrooklynUnionintendstoconsummate theKeySpanshareexchange'after theredemption'date.
| |
| Anoticeofredemption willbesenttoholdersofBrooklynUnionpreferred stockpromptlyaftertheBrooklynUnionMeeting,assumingthatshareholders votetoapprovetheholdingcompanyproposal.
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| Thenoticeofredemption willincludeinstructions forholdersofpreferred stocktofollowinsurrendering theircertificates evidencing suchstocktoreceivetheredemption priceinpaymenttherefor.
| |
| IIt1+KeySpanCapitalStock'""'incetheKeySpaiiExchangeAgreement isconditioned onKeySpan's restatedcertificate ofincorporation b'eiiigfilepriortotheKeySpanshareexchangewiththeNekYorkDepartriient ofState,avotebyBrooklynUnionconimon'hareholders foradoptionof'the"KeySpan'xchange Agreement
| |
| 'willconstitute approvalofeySpan'srestated.certificat ofincorporation'and by-laws.'he KeySpanrestatedcertificat ofincoiporation''d by-lawswillgoveriicertainrights'of KeySpansshareholders aftertheKeySpanshareexchangeasdiscussed under'his captionandun'der"-Comparative Shareholders'ights" below.'Thefollowing statements withrespecttoKeySpancommonstockarebasedoncertainprovisions ofKeySpansrestated'certificat ofincorporation and"by-'laws",''as tobein'effect'as of'heeffective timeoftheKeySpanshareexchange."A cop'yofKeySpan's restatedcertificate ofincorpo'ration andby-lawssub'stantially inthe'formtob'eiiieffectatthe'effective tim'eoftheKeySpanshareexchange, areattachedasAnnexLheretoandareinco'rporated he'reinbyreference.
| |
| EI">>KeySphnisauthorized toissue210,000,000 sharesofcommonstockand10,000,000 sharesofpreferred stock.KeySpanpreferred stockmaybeissuedfromtimetotimeinseries.asKeySpan's Bo'ardofDirectors maydetermine, andtherespective dividendrates,redemption terms(ifany),amounts'payableon'liquidation,:voting rights(ifany),numberofvotespershare,conversion rights(ifany),andothertermswillbefixedbyKeySpan's BoardofDirectors withrespecttoanysuchseriespriortoissuance.
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| ""'Whenissuedinthe'KeySpan shareexchange',
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| shar'e'sofKeySpancommon'tock will'be'fully paidandnonassessable.
| |
| HoldersofKeySpancommonstockandpreferred stockaienotentitledtopreeniptive rights.-aiI>ih1V.Diyidends,.SubjecttopriorrightsofKeySpanpreferred stock(ifanyshouldbecomeoutstanding),
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| KeySpancommonstockisentitledtosuchdiv'idends asmaybedeclaredbyKeySpan's BoardofDirectors, andKeySpanmaypurchaseorotherwise acquireoutstanding sharesofcommonstock,outoffundslegallyavailable therefor.,
| |
| Assummarized above,thePSCOrderand.theBrooklynUnion/LILCO Agreement impose'certainmitations onthedividends thatBrooklynUnionmaypaytoKeySpan.aftertheshareexchange.
| |
| See
| |
| "-DividendPolicy."Atleastinitially aftertheKeySpanexchange, dividends onKeySpancommonstockwilldependondividends paidbyBrooklynUniononitscommonstockownedby.KeySpan.
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| Liquidation Rights'ponliquidation ofKeySpan,anynetassetsremaining afterpayment.to theholders(ifany)ofKeySpanpreferred stockofthefullamountstowhichthey,areentitledtoreceivearedistributable proratatotheholdersofKeySpancommonstock.VotingRightsIIHoldersofKeySpancommonstockareentitledtoonevotepershare.There'are nocumulative votingrights.KeySpan's BoardofDirectors isdividedintothreeclasses,withdirectors electedgenerally toservefortermsofthreeyears.'TransferAgentandRegistrar jThetransferagentandregistrar forKeySpancommonstockwillbeFirstChicagoTrustCompany.ofNewYork,JerseyCity,NewJersey.I'ndemnification andLimitation ofLiability AsdotheBrooklynUnionby-laws,theKeySpanby-lawswillprovidethatKeySpanshallindemnify tothefullextentpermitted bylawanypersonmade,orthreatened tobemade,apartytoanyaction,,suit orproceeding, whethercivil,criminal, administrative orinvestigative, by.reasonofthefactthatsuchpersonorsuchperson'testatororintestate isorwasadirector, officeroremployeeofKeySpan,.orservesorservedattherequestofKeySpanwithanyotherenterprise asadirector, officeroremployee; expensesincurredbyanysuchpersonindefending anysuchaction,suitorproceeding willbepaidorreimbursed byKeySpanpromptlyuponreceiptbyitofanundertaking ofsuchpersontorepaysuchexpensesifitshallultimately bedetermined thatsuchpersoisnotentitledtobeindemnified byKeySpan.Noamendment ofthisby-lawprovision willimpairtherightsofanypersonarisingatanytimewithrespecttoeventsoccurring priortosuchamendment.
| |
| t'sdoesBrooklynUnion'scertificate ofincorporation, KeySpan's restatedcertificate ofincorporation willprovidethatnodirectorshallhavepersonalliability toKeySpanoritsshareholders fordamagesforanybreachofdutyinsuchcapacity, exceptfortheliability foractsoromissions inbadfaithorinvolving intentional misconduct oraknowingviolation oflaw,orifheorshepersonally gainedinfactafinancial profitorotheradvantage towhichheorshewasnotlegallyentitledorifsuchactviolatedSection719oftheNewYorkBusinessCorporation Law.Anyamendment orrepealofsuchliability limitation provision maynotapplytoorhaveanyeffectontheliability orallegedliability ofanydirectorfororwithrespecttoanyactsoromissions ofsuchdirector, occurring priortosuchamendment orrepeal.PossibleEgectofCertainKeySpanProvisions andtheNeiv'York Laiv.Itisnottheintention ofthe.BoardofDirectors todiscourage legitimate offerstoenhanceshareholder yalue.However,certainprovisions oftheKeySpan's restatedcertificate, ofincorporation andby-lawsmayhavetheeffectofdiscouraging unilateral tenderoffersorotherattemptstotakeoverandacquirethebusinessofKeySpan.Theseprovisions, manyofwhicharepresently contained inBrooklynUnion'scertificate ofincorporation orby-lawsorotherwise applytoBrooklynUnion,mightdiscourage apotentially interested purchaser fromattempting aunilateral takeoverbidforKeySpanontermswhichsomeshareholders mightfavor.Iftheydiscourage potential takeoverbids,theseprovisions mightlimittheopportunity forKeySpan's shareholders toselltheirsharesatapremiumoverthenprevailing marketprices.SNon-Cumulative Voting.NeitherBrooklynUnionnorKeySpanprovidesforcumulative voting,inthelectionofdirectors.
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| Theprocedure knownascumulative votingpermitsshareholders tomultiplythenumbero votestowhichtheymaybeentitledbythetotalnumberofdirectors tobeelectedinthesameelectionbytheholdersoftheclassorclassesofsharesofwhichtheirsharesareapartandtocasttheirwholenumberofvotesforonecandidate ortodistribute themamonganytwoormorecandidates.
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| Undercumulative voting,itispossibleforrepresentation ontheBoardofDirectors tobeobtainedbyanindividual orgroupofindividuals whoownlessthanamajorityofthevotingstock.Suchashareholder orgroupmayhaveinterests andgoalswhicharenotconsistent with,andindeedmightbeinconflictwith,thoseofamajorityoftheshareholders.
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| TheBoardofDirectors believesthateachdirectorshouldrepresent allshareholders, ratherthantheinterests ofanyspecialconstituency, andthatthepresenceonKeySpan's Boardofoneormoredirectors representing suchaconstituency coulddisruptandimpairtheefficient management ofKeySpan.Thelackofcumulative votingcoulddiscourage theaccumulation ofblocksofKeySpancommonstockandtherefore couldtendtomaketemporary increases inthemarketpriceofKeySpancommonstock,whichcouldresulttherefrom, lesslikelytooccur.Therefore, intheselimitedinstances, shareholders maynotbeabletoselltheirsharesofKeySpancommonstockatamarketpricetemporarily influenced bythistypeofactivity.
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| AdvanceNoticeofBusinesstobeBroughtBeforeShareliolder Meetings.
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| AsunderBrooklynUnion'sby-laws,underKeySpan's by-lawsshareholders mustprovideKeySpanpriorwrittennoticeofanybusinesstobebroughtbeforeanannualorspecialmeeting(including thenomination ofdirectors) inorderforittobeconsidered.
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| Withrespecttoanyannualmeeting,suchby-lawsrequirethewrittennoticetobereceivedbytheSecretary ofKeySpannoearlierthan90daysnorlaterthan60dayspriortothefirstanniversary ofthepreceding year'sannualmeeting,exceptthatifthedateoftheannualmeetingismorethan30daysbeforeormorethan60days'aftersuchanniversary date,suchby-lawsrequirethewrittennoticetobereceivedbytheSecretary ofKeySpannoearlierthan90daysnorlaterthanthelaterof60dayspriortothedateof,or10daysafterthepublicannouncement of,suchannualmeeting.Withrespecttoanyspecialmeeting,suchby-lawsrequirethewrittennoticetobereceivedbytheSecretary ofKeySpannoearlierthan90norlaterthanthelaterof60dayspriorto,or10daysaftertheannouncement of,suchspecialmeeting.Theseby-lawprovisions provideamoreorderlyprocedure forconducting shareholder meetingsandprovidetheBoardofDirectors withameaningful opportunity priortoshareholder meetingstoinformshareholders, totheextentdeemednecessary ordesirable bytheBoardofDirectors, ofanybusinessproposedtobeconducted atsuchmeetings, togetherwithanyrecommendation oftheBoardofDirectors.
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| Also,byrequiring advancenoticeofnominations byshareholders, theseby-lawprovisions affordtheBoardofDirectors ameaningful opportunity toconsiderthequalifications oftheproposednomineesand,totheextentdeemednecessary ordesirable bytheBoardofDirectors, toinformshareholders aboutsuchqualifications.
| |
| Ontheotherhand,theseby-lawprovisions mayprovidesufficient timeforKeySpantoinstitute litigation ortakeother'steps torespondtosuchbusiness, ortopreventsuchbusinessfrombeingactedupon,ifsuchresponseorprevention isthoughttobenecessary ordesirable.
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| Withrespecttotheelectingofdirectors, theseby-lawprovisions maytendtoinhibitshareholders whodo'nothaveanyintention ofcontrolling KeySpanoritsBoardofDirectors from'participating inthenomination process;suchprovisions mayalsoprovidesufficient timeforKeySpantoinstitute litigation ortakeotherstepstopreventthenomineefrombeingelectedorservingifsuchprevention isthoughttobenecessary ordesirable.
| |
| *"Blank-Check" Preferred StockKeySpan's restatedcertificate ofincorporation will,authorize theissuanceof10,000,000 sharesofKeySpanpreferred stock.Inaddition, aftergivingeffecttotheKeySpanshareexchange, approximately 159,000,000 sharesofKeySpancommonstockwillbeauthorized butunissuedandnotreservedforissuance.
| |
| Aneffectoftheexistence ofunissuedKeySpancommonstockandpreferred stockmaybetoenabletheKeySpanBoardofDirectors torendermoredifficult ordiscourage ati'ansaction toobtaincontrolofKeySpan.SuchsharesmightbeissuedbytheBoardofDirectors withoutshareholder approvalin-transactions thatmightpreventorrendermoredifficult orcostlythecompletion ofatakeovertransaction, asbydilutingvotingorotherrightsoftheproposedacquiror.
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| Inthisregard,KeySpan's restatedcertificate ofincorporation (asdoesBrooklynUnion's)willgranttheBoardofDirectors broadpowertoestablish therightsandpreferences oftheauthorized andunissuedpreferred stock,oneor'moreclassesorseriesofwhichcouldbeissuedentitling olderstovoteseparately asaclassonanyproposedmergerorconsolidation, toconvert.suchstockintoshares ofKeySpancommonstockorpossiblyothersecurities, todemandredemption ataspecified priceunderprescribed circumstances relatedtoachangeofcontrol,ortoexerciseotherrightsdesignedtoimpedeatakeover.
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| Section912oftheNewYorkBusinessCorporatiotr Law.Section912oftheNewYorkBusinessCorporation Lawwouldprohibita"business combination" (asdefinedinSection912,generally including
| |
| : inergers, salesandleasesofassets,issuances ofsecurities andsimilartransaction's) byKeySpanorasubsidiary withan"interested shareholder" (asdefinedinSection912,generally thebeneficial ownerof20percentormoreofKeySpan's votingstock)withinfiveyearsafterthepersonorentitybecomesaninterested shareholder, unless(i)priortothepersonorentitybecominganinterested shareholder, thebusinesscombination orthetransaction pursuanttowhichsuchpersonorentitybecameaninterested shareholder shallh'avebeenapprovedbyKeySpan's BoardofDirectors, or(ii)thebusinesscombination isapprovedbytheholdersofamajorityoftheoutstanding votingstockofKeySpan,excluding sharesheldbytheinterested shareholder, atameetingcalledforsuchpurposenotearlierthanfiveyearsaftersuchinterested shar'eholder's stockacquisition-date.
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| Section70oftheNewYorkPublicServiceLaw.UnderSection70ofthePublicServiceLaw,unlessauthorized bythePSC,nogas'corporation orelectriccorporation maydirectlyorindirectly acquirethestockorbondsofanyothercorporation incorporated for,orengagedin,thesameorasimilarbusiness, orproposing tooperateoroperating underafranchise fromNewYorkStateoranyotherstateoranyothermunicipality.
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| Ingeneral,nostockcorporation otherthanagascorporation orelectriccorporation orstreetrailroadcorporation maypurchaseoracquire,takeorhold,morethantenpercent(10%)ofthevotingcapitalstockofanygascorporation orelectriccorporation organized orexistingunderorbyvirtueofthelawsofNewYorkunlesswiththeconsentof,andsubjecttothetermsandconditions setby,thePSC.NoconsentmaybegivenbythePSCtoanysuchacquisition unlessithasbeenshownthatsuchacquisition isinthepublicinterest.
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| Anycontract, assignment, transferoragreement fortransferofanystockinviolation ofSection70willbevoidandofnoeffect,andnosuchtransferorassignment maybemadeuponthebooksofanysuchgascorporation orelectriccorporation, orwillberecognized aseffective foranypurpose.A"gascorporation" isdefinedtogenerally includeanycorporation, company,partnership andpersonowning,operating ormanaginganygasplant.OtherProvisions.
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| Someotherprovisions ofKeySpan's restatedcertificate ofincorporation andby-lawsmayalsotendtodiscourage potential offerstotakeoverandacquirethebusinessofKeySpan.KeySpan's BoardofDirectors willbedividedintothreeclasses,withdirectors ineachclassgenerally beingelectedtoserveathree-year term.Also,specialshareholder meetingsmaybecalledonlybythechairmanoftheBoardofDirectors orbytheBoardpursuanttoaresolution adoptedbyamajorityoftheentireBoard.KeySpan's restatedcertificate ofincorporation alsoprovidesthatdirectors maynotberemovedwithoutcausebytheshareholders, exceptinthecaseofadirectorelectedbytheholdersofanyclassorseriesofstock(otherthanKeySpancommonstock),votingasaclassorseries,whensoentitledbytheapplicable provisions ofKeySpan's restatedcertificate ofincorporation.
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| Finally,certainprovisions (relating to,forexample,limitation ondirectorliabilities, theabilitytocallspecialmeetingsofshareholders, presiding atmeetingsofshareholders, classified BoardofDirectors, electionandremovalofdirectors, advancenoticerequirements forshareholder proposals, and,nomination ofdirectors atshareholder
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| : meetings, andindemnification) mayonlybeamendedbytheaffirmative voteofnotlessthantwo-thirds ofthesharesentitledtovoteatashareholder meeting.BrooklynUnion'scertificate ofincorporation andby-lawspresently containanumberoftheseprovisions.
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| HComparative Shareholders'ights BrooklynUnionandKeySpanarebothNewYorkcorporations.
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| WhentheKeySpanshareexchangebecomeseffective, holdersofBrooklynUnioncommonstock'will becomeholdersofKeySpancommonstock,andtheirrightswillbegovernedbyKeySpan's restatedcertificate ofincorporation andby-lawsinsteadofthoseofBrooklynUnion.Certaindifferences betweentherightsofholdersofKeySpancommonstockandthoseofholdersof~BrooklynUnioncommonstockaresummarized below.Suchsummaryisqualified initsentiretybyreference to~
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| theinformation includedintheexhibitshereto,inexhibitstotheRegistration Statement ofwhichthisJointProxyStatement/Prospectus isapart,andinmaterials incorporated hereinbyreference.
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| PurposeClauseThecorporate purposesforwhichBrooklynUnionmayengageinbusinessarethoserelatedtogas,electricity orotherformsofenergyandrelatedactivities.
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| KeySpanisauthorized toengageinanyandalllawfulactsandactivities.
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| Authorized SharesAuthorized KeySpanandBrooklynUnioncommonstockis210,000,000 and70,000,000 shares,respectively.
| |
| AsofJune,23,1997,therewere50,364,212 sharesofBrooklynUnioncommonstockoutstanding and1,500,000 sharesofBrooklynUnioncommonstockreservedforissuanceuponexerciseofoutstanding stockoptions.Inaddition, undertheBrooklynUnionStockOptionAgreement, BrooklynUnionhasgrantedtoLILCOanoptiontopurchase, undercertaincircumstances, upto9,948,682 sharesofBrooklynUnioncommonstock.Uptoapproximately 51,864,212 sharesofKeySpancommonstockmaybeissuedintheKeySpanshareexchange.
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| Theadditional authorized butunissuedsharesofKeySpancommonstockwillbeavailable forissuanceundertheDividendReinvestment andStockPurchasePlanandtheBrooklynUnionStockPlans,aswellaspossiblyforstocksplits,stockdividends, equityfinancings, andforothergeneralcorporate purposes(including,
| |
| : possibly, acquisitions),
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| noneofwhichisundercurrentconsideration.
| |
| Inadditiontothecurrently outstanding sharesofBrooklynUnionpreferred stock,asoftheRecordDate,therewere831,000and2,000,000 authorized butunissuedsharesofBrooklynUnion$100preferred stockandBrooklynUnion$25preferred stock,respectively.
| |
| Therewillbe10,000,000 authorized sharesofKeySpanpreferred stock,allofwhichareunissued.
| |
| IPreferred StockTherespective BoardsofDirectors ofKeySpanandBrooklynUnionareauthorized toissuepreferred stockinseries.Thevotingrightsandcertainpreferences oftheBrooklynUnionpreferred stockaredetermined inBrooklynUnion'scertificate ofincorporation.
| |
| BrooklynUnionpreferred stockisgenerally notentitledtovotebutonlyhaslimitedvotingrightsasrequiredbylawandassetoutintheBrooklynUnion'scertificate ofincorporation, whichrightsgenerally ariseonlyintheeventofcertainarrearages inpaymentofdividends andcertaincorporate transactions affecting BrooklynUnionpreferred stock.BrooklynUnionpreferred stockissubjecttoredemption andsinkingfundprovisions.
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| KeySpan's restatedcertificate ofincorporation willnotestablish votingrights,preferences orotherrightswithrespecttoKeySpanpreferred stock.KeySpan's BoardofDirectors isgivenfullauthority toestablish anddesignate eachparticular seriesofpreferred stockandtofixtherights,preferences andlimitations ofeachparticular series,andtherelativerights,preferences andlimitations betweenseries,asfollows:(i)theserialdesignation; (ii)thenumberofsharesinsuchseries;(iii)thedividendrateorratesandthedateordatesuponwhichsuchdividends shallbepayable;(iv)whetherdividends onsuchserieswillbecumulative, and,ifso,fromwhichdateordates;(v)liquidation preferences; (vi)provisions, ifany,relatingtooptionalredemption byKeySpanandsinkingorothersimilarfunds;(vii)provisions, ifany,relatingtotheconversion orexchangeofsharesofsuchseriesintosharesofanyclassofstock(exceptthatconversion orexchangemaynotbemadeintoshareshavingsuperiordividendorliquidation preferences);
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| (viii)thevotingrights,ifany,inadditiontothoserequiredbylawandthenumberofvotespershare;and(ix)anyotherrelativerights,preferences orlimitations ofsuchseriesnotinconsistent withapplicable law.Management believesthattheabilitytoissueKeySpanpreferred stockwillprovideimportant flexibility toeySpan.
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| ParValue'TheparvalueofKeySpanpreferred stockdiffersfromthoseofBrooklynUnionpreferred stock.Adesignated parvalueisnotrequiredundertheNewYorkBusinessCorporation Lawandinmoderncorporate practiceparvaluedoesnotserveanyusefulpurpose.Itisanticipated thatthedifference inparvalueswillnotaffectthemarketvalueofKeySpanpreferred stock.TheparvaluepershareofKeySpancommonstock,$.33M,isidentical totheparvaluepershareofBrooklynUnioncommonstock.Classified BoardJAsisthecasewithBrookfynUnion,KeySpan's restatedcertificate ofincorporation'and.by-'laws willprovide(i)fortheBoardtodetermine thenumberofdirectors; and(ii)forthedivisionoftheBoardintothreecia'sseswithdirectors ineachclassgenerally beingelectedforathree-year term.See"-Management" below.I4IIOtherProvisions KeySpan's restatedcertificate ofincorporation willprovidethatdirectors maynotberemovedwithoutcausebytheshareholders, exceptinthecaseofadirectorelectedbytheholdersofanyclassorseriesofstock(otherthanKeySpancommonstock),votingasaclassorseries,whensoentitledbytheapplicable provisions ofKeySpan's restatedcertificate ofincorporation.
| |
| Also,certainprovisions (relating to,forexample,preferred stock,liinitation ondirectorliabilities, theabilitytocallspecialmeetingsofshareholders, classified BoardofDirectors, electionandremovalofdirectors, "advancenoticerequirements forshareholder proposals andnomination ofdirectors at'shareholder meetings) mayonlybeamendedbytheaffirmative voteofnotless'th'an two-thirds ofthesharesthenentitledtovoteatshareholder meetings.
| |
| Otherprovisions ofKeySpan's restatedcertificate ofincorporation orby-lawsmaybeamended,repealedoradoptedbyavoteoftheshareholders ofKeySpanatthetimeentitledtovoteatanyshareholder meetingor,inthecaseoftheKeySpanby-laws,bytheBoardofDirecto.of.KeySpan.Seealso"-KeySpanCapitalStock".Forinformation regarding theHoldingCompanycommonstockandpreferred stockandacomparison ofcertainshareholder rightsafter,consummation oftheLILCOCombination, see"Description ofHoldingCompanyCapitalStock"and"Comparison ofShareholders'ights" intheJointProxyStatement/Prospectus.
| |
| IBusinessBrooklynUniondistributes naturalgasatretail,primarily inaterritory ofapproximately 187squaremiles,whichincludestheBoroughsofBrooklynandStatenIslandandtwo-thirds oftheBoroughofQueensinNewYorkCity.Thepopulation oftheterritory servedisapproximately 4,000,000.
| |
| AsofSeptember 30,1996,BrooklynUnionhadapproximately 1,126,000 activemeters,ofwhichapproximately 1,089,000 wereresidential.
| |
| BrooklynUnionissubjecttotheregulatory jurisdiction ofthePSC.AftertheKeySpanshareexchange, BrooklynUnionwillcontinuetocarryonitscurrentutilitybusinessasasubsidiary ofKeySpan.BrooklynUnion'sprincipal non-utility subsidiaries currently participate andowninvestments ingasandoilexploration andproduction, gaspipelinetransportation andstorage,cogeneration, marketing andotherenergy-relatedservices.
| |
| Itisanticipated thatcertain,ifnotall,ofthesesubsidiaries eventually willbecomeseparatesubsidiaries ofKeySpanaftertheKeySpanshareexchange.
| |
| OnSeptember 20,1996,BrooklynUnionsoldinaninitialpublicofferingapproximately 34%ofitsinterestinTheHoustonExploration Company("THEC").
| |
| THECisanaturalgasandoilexploration andproductio companywithprovenreservesofapproximately 320billioncubicfeetofnaturalgas.
| |
| t~'Immediately aftertheKeySpansh'areexchangeoccurs,KeySpanwillhaveno'material assetsotherthanitsdirect'owneiship'of allofBrooklynUnion'soutstanding commonstockanditsindirectownership ofallofthecommonstockofBrooklynUnion'sexistingnon-utility subsidiaries.
| |
| See-"-TransferofBrooklynUnion'sNon-"UtilitySubsidiaries toKeySpan."
| |
| Itisexpectedthat,inthefuture,KeySpanwillexpandintosomeother businesses andventures.
| |
| Forfurtherinformation regarding BrooklynUnion'snon-utility subsidiaries, seeNotes3,7,'and10tothe,1'996Consolidated Financial Statements and"Management's Discussion andAnalysisofFinancial Condition andResultsofOperations",
| |
| in,BrooklynUnion'sProxyStatement datedDecember30,1996foritsannual'ineeting ofsliareholders Iteldon'February
| |
| '6,1997.Financial andadditional infoimation regarding Brooklyn,Unionisalso'included intheJointProxyStatement/Prospectus.
| |
| 'sFor.'information regarding LILCO'sbusinessandcondition, see"Selected Information Concerning BrooklynUnionandLILCO"andtheUnaudited ProFormaCombinedConsolidated andCondensed Finaricial Statemenis "included intheJointProxyStatement/Prospectus, andthe-financial andadditional'nformation r'egarding" L'ILCOincorporated byreference thereinaslist'edunder"Where'You CanFindMoreInform'ation".,
| |
| in'he'oint ProxyStatement/Prospectus.'
| |
| USllhRepilatIon ofKeySpanandBrooklynUnionl't4NRegulation ofKeySpan'l
| |
| '4KeySp'anmustcomplywiththePSCOrder'.Asdiscussed andrefe'rred tobelowurider"-ThePSCOrder",therearerestrictions onKeySpan's investments, transactions betweenBrooklynUnionandKeySpanandotherKeySpansubsidiaries, restrictions onloans,guarantees orpledgesforthebenefitofKeySpanand,other KeySpan,subsidiaries, andrestrictions onBoardandmanagerial interlocks betweenBrooklynUnion"andKeySpanandotherKeySpansubsidiaries.
| |
| Inconnection withtheproposedLILCOCombination, BrooklynUnionandLILCOhavefiledapetitionwiththe"PSCrequesting, amongotherthings,theremovalorrelaxation ofcertainoftherestrictions'described herein.ThePSChasnotacteduponsuchpetitionasofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetttionwillbegranted.AsaresultoftheKeySpanshareexchange, KeySpanwillbecomea"publicutilityholdingcompany"undertheHoldingCompanyAct.Simultaneously withtheeffectiveness oftheshareexchange, KeySpanwill.filewiththeSECanexemption statement to'xemptitselfanditssubsidiaries fromallprovisions oftheHoldingCompanyA'ctlexceptwithrespect"tocertain'acquisitions andinvestments) pursuanttothe"intrastate" exemption ifiSection3(a)(1)ofthatAct.Tomaintainthisex'emptiori, KeySpanmustfileastatement eachyearpriortoMarch1withtheSEC.TheSEChasautho'rity undertheHolding'ompany A'cttochallenge theavailability ofKeySpan's exemption.
| |
| IIKeySpanbelievesthatitwillbeexemptfromallprovisions oftheHoldingCompanyActexceptSectio'n9(a)(2)'.'Section 9(a)(2)requiresSECapprovalofthedirectorindirectacquisition byKeySpanoffivepercent(5%)ormoreofthe-voting'securities ofanyotherpublicutilitycompany.Therearealsopresently limitsontheextenttowhich'Ke'ySpan and'tsnon-utility subsidiaries canenterinto'usinesses whicharenot"functionally related"tothepublicutility'usines's''without
| |
| 'raisingpotential issuesabout'KeySpan's exempts'tatus.SECpoliciesregarding'the'scope ofpermissible non-utility activities ofapublicutilityholdingcompanyaresubject'tochange,but'ndercurrentlawKeySpanwouldberequiredtoremainengagedprimarily"-and predominantly inthepublicutilitybusinesswhichcouldlimitotheractivities inwhichKeySpanmightwishtoengage.p'4Regulation ofBrooklynUnionBrooklynUnionwillcontinuetobesubjecttoregulation by"thePSC;after theKeySpanshareexchange.
| |
| .Brooklyn Union'sutilityretailsales,whichincludesalesofgas,transportation andbalancing
| |
| : services, willJ-K continuetobemadeprimarily underrateschedules andtariffsfiledwithandsubjecttothejurisdiction'of thePSC.See"-NewRatePlanofBrooklynUnion"below.Inaddition, BrooklynUnionwillcontinuetobesubjecttoregulation bythePSC,asithasbeeninthepast,regarding,issuances ofsecurities, capitalratio..maintenance, andthemaintenance ofitsbooksandrecords.fhIThePSCOrderNon-Utility CapitalLimits*Unlessotherwise approvedbythePSCduringthetermofthePSCOrder,KeySpanmay"'only investinthefollowing categories ofnon-utility businesses (the"Complying Investments"
| |
| ):(i)energy-related businesses; (ii)businesses providing water,environmental andtechnical services; (iii)telecommunications'businesses; (iv)businesses thatoperateprimarily, withinBrooklynUnion'sserviceareaandcontribute totheeconomyofthatareathroughsuchmeansassignificant increased employment andimprovement ofhousingstock;and(v)financial servicesbusinesses.
| |
| Inaddition, KeySpan's investment innon-utility businesses willbelimitedtoapercentage ofKeySpan's TotalCapital:startingat35%forfiscalyear1997,andincreasing at.arateoffivpercentage pointsperyearuntilreaching50%forfiscalyear2000andthereafter.
| |
| BrooklynUnion'sinvestments inthelinesofbusinessdescribed in(iv)and(v)abovewillbelimitedtoanaggregate fivepercent(5%)ofKeySpan's TotalCapitalovertheentiretermofthePSCOrder."TotalCapital"referstothesumofanentity'scommonshareholders'quity, preferred stock,longtermdebt(including notespayable),
| |
| butdoesnotinclude'nycashorcashequivalents appearing ontheentity'sconsolidated balancesheets.Theincreases ininvestment authority detailedabovewillnotoccuriftherehasbeen.amaterialviolation ofthePSCOrder,asdetermined bythePSC.If'(i)KeySpanoritssubsidiaries investinoracquireautilitycompanyorComplying Investment, (ii)aportionoftheactivities ofsuchacquiredentityarenon-Complying Investments, and(iii)allsuchnon-Complying Investments intheaggregate amounttomoiethanonepercent(1%)oftheassetsofKeySpan,thenKeySpanorthesubsidiaries owningsuchnon-Complying Investments mustdivestitselforthemselves ofsuchinvestments withinatwo-yearperiod.Prohibitions ofAfhliateLoans,Guarantees andPledgesUnderthePSCOrder,BrooklynUnionisprohibited frommakingloansto,orpr'oviding guarantees orother.creditsupportfortheobligations of,KeySpanoranyothersubsidiary ofKeySpan.Likewise, BrooklynUnionmaynotpledgeitsassetsfortheobligations ofanyotherentity,including KeySpanoranyothersubsidiary ofKeySpan.Finally,KeySpanmaynotpledgethedividends, revenuesorreceivables receivedorexpectedfromBrooklynUnionoxanyothersubsidiary tosupportitsobligations.
| |
| VProhibitions ofAffiliate Transactions andOtherRestrictions ThePSCOrdergenerally prohibits anytransaction betweenBrooklynUnionandKeySpanorany.othersubsidiary ofKeySpan,exceptfortheprovision ofcertaincorporate administrative
| |
| : services, certain"grandfathered" transactions aslistedtherein,transactions permitted asamatterofgenericpolicybythePSC,andtariffedtransactions.
| |
| Inaddition, KeySpananditssubsidiaries arerequiredbythePSCOrdertooperateasseparateentities, andthePSCOrderprescribes capitalratiomaintenance requirements forBrooklynUnion.Finally,thePSCOrdersetsoutguidelines fortheallocation ofcostsamongKeySpan,BrooklynUnionandtheothersubsidiaries ofKeySpan.Restrictions onBoardandManagement Interlocks Inordertoaddressconcernsregarding thepossiblediversion oftheattention ofBrooklynUnion'smanagement away,fromtheutilitybusiness, aswellastoavoidpotential conflicts ofinterestwiththemanagement ofKeySpan,thePSCOrdercontainsrestrictions regarding thecomposition oftheBoardsand emanagements ofBrooklynUnionandKeySpanandothersubsidiaries ofKeySpan.See"-Management-Restrictions'on BoardandManagement Interlocks betweenKeySpanandBrooklynUnion."Inconnection withtheproposedLILCO'Combination, BrooklynUnionandLILCOhavefiledapetitionwiththePSCrequesting, amongotherthings,theremovalorrelaxation ofcertainoftherestrictions described herein.ThePSChasnotacteduponsuchpetitionas"ofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetitionwillbegranted.hNewRatePlanofBrooklynUnionThePSCOrderincludesanewrateplanthattookeffectonOctober,1,1996andwillremainineffectuntilSeptember 30,2002.Infiscal1997,thenon-gascomponent incustomerbillswillbereducedbyatleast$3million,withsubsequent billssubjecttospecificpricecaiisthroughSeptember 30,2002.Hence,the,non-gascost.component ofcustomerrates,intheaggregate, willremainconstantforthesubsequent fiveyears;however,rates,tocertaincustomerclassesmayincreaseinordertorefiectmoreappropriately theirrespective costresponsibilities.
| |
| BrooklynUnionalsowillbeabletochargeforvariousancillary services.
| |
| Thenewrateplanessentially freezesBrooklynUnion'sdistribution ratesforsixyears,butatthesametime,containsanumberofprovisions designedtomaximizeBrooklynUnion'soverallearningsandprotectBrooklynUnion'sfinancial condition.
| |
| Thereisnospecificauthorized rateofreturnoncommonequityandBrooklynUniongenerally isnotsubjecttoanyearningscap.Inaddition, BrooklynUniongenerally isnotrequiredtosharewithcustomers anylevelofearningsorcostsavingsrelatedtoutilityoperations, However,incentive provisions remainfortheretention of20%ofnetrevenuesfromoff-system transactions, aswellasincentives relatedtototalexpenditures relatedtoinvestigation andremediation ofthesitesofformermanufactured gasplantfacilities.
| |
| Theplanalsocontainsprovisions forrateadjustments tiedtothelevelofinfiation, exogenous costsorBrooklynUnion'sfinancial condition.
| |
| tTherateplaitalsoprovidesBrooklynUnionwithsubstantial pricingflexibility toenhanceitsabilitytocompeteagainstalternative fuelsources(primarily fueloil)inpriceelasticfirmmarkets,andto"unbundle" thecostofcertainservicesfrombaseratestoensurethatonlythecustomers thatusethoseservicesliavetopayforthem.Italsoincludesmechanisms toallowBrooklynUniontosetpricesforcertaincustomersegmentsdesignedfopricegascompetitively withalternative sourcesofenergy.TherateplanwillcontinuetogovernBrooklynUnion'sutilityratesandchargesevenifcommonshareholders donotapprovetheholdingcompanyproposalandadoptth'eKeySpanExchangeAgreement atBrooklynUnion'sSpecialMeeting.Inthatevent,BrooklynUnionwillnotbeable"torealizethebenefitsitexpectsfromaholdingcompanystructure, whichitbelievesisnecessary inthefuture'deregulated competitive environment oftheenergyindustry.
| |
| AlStatutory Appraisal RightsSection910oftheNYBCLsetsforththerightsofshareholders ofBrooklynUnionwhoobjecttotheadoptionoftheKeySpanshareexchangeagreement.
| |
| AnyrecordholderofBrooklynUnionCo'mmon'Stock asoftherecorddatewhodoesnotvoteinfavoroftheadoptionoftheKeySpanExchangeAgreement, orwhodulyrevokeshisorhervoteinfavoroftheadoptionoftheKeySpanExchangeAgreement, may,iftheKeySpanshareexchangeisconsummated, obtainpayment,incash,forthefairmarketvalueofsuchholder'ssharesbystrictlycomplying withtherequirements ofSection623oftheNYBCL.InasmuchasBrooklynUnionpreferred stockisnotbeingexchanged andwillberedeemedpursuanttotheirtermsimmediately priortotheconsummation oftheKeySpanshareexchange, theholdersofthatstockdonothavestatutory appraisal rights.Thefollowing summaryoftheapplicable provisions ofSections623and910isnotintendedtobeacomplete'tatement ofsuchprovisions,and isqualified initsentiretybyreference tothefulltextofSections623and910,copiesofwhicheareattachedtothisJointProxyStatement/Prospectus asAnnexI.Apersonhavingabeneficial interestinsharesofBrooklynUnioncommonstockthatareheldofrecordinthenameofanotherperson, suchasabrokerornominee,mustactpromptlytocausetherecordholdertofollowthestepssummarized belowproperlyandinatimelymannertoperfectwhateverappraisal rightsthebeneficial ownermayhave.THISSUMMARYANDANNEXISHOULDBEREVIEWEDCAREFULLY BYANYCOMMONSHAREHOLDER OFBROOKLYNUNIONWHOWISHESTOEXERCISESTATUTORY APPRAISAL RIGHTSORWHOWISHESTOPRESERVETHERIGHTTODOSOBECAUSEFAILURETOSTRICTLYCOMPLYWITHANYOFTHEPROCEDURAL REQUIREMENTS OFSECTION623ORSECTION910MAYRESULTINATERMINATION ORWAIVEROFAPPRAISAL RIGHTSUNDERSECTION623ANDSECTION910.Thedissenting BrooklynUnionshareholder mustfilewithBrooklynUnionbeforethetakingofthevoteontheadoptionoftheKeySpanExchangeAgreement awrittenobjection including anoticeofelectiontodissent,suchholder'snameandresidence address,thenumberandclassofshares(Brooklyn Unioncommonstock)astowhichsuchholderdissents(whichnumbermaynotbelessthanall'ofthesharesastowhichsuchholderhastherighttodissent)andademandforpaymentofthefairvalueofsuchsharesiftheKeySpanshareexchangeisconsummated.
| |
| Anysuchwrittenobjection shouldbeaddressed to:TheBrooklynUnionGasCompany,OneMetroTech Center,Brooklyn, NewYork11201-3851, Attention:
| |
| Secretary.
| |
| 4Forpurposesofperfecting appraisal rightspursuanttoSection623,thewrittenobjection ofa'olderofsharesofBrooklynUnioncommonstockwhichisaddressed asprovidedaboveshallbedeemedfiledwithBrooklynUnionuponreceiptofsuchobjection byBrooldynUnion.NeithervotingagainstnorfailuretovotefortheKeySpanExchangeAgreement willconstitute thewrittenobjection requiredtobefiledbyanobjecting shareholder.
| |
| FailuretovoteagainsttheKeySpanExchangeAgreement, however,willnotconstitute awaiverofrightsu'nderSections623and910;Iirovided thatawrittenobjection hasbeenproperlyfiled.Ashareholder votingtoadopttheKeySpanExchangeAgreement willbedeemedtohavewaivedsuchshareholder's appraisal rights.,Ashareholder maynotdissentastolessthanallthesharesofBrooklynUnioncommonstockheldofrecord~thatsuchholderbeneficially owns.Anomineeorfiduciary maynotdissentonbehalfofanybeneficial owneras~tolessthanallthesharesofBrooklynUnioncommonstockofsuchbeneficial owner,astowhichsuchnomineeorfiduciary hasarighttodissent,heldofrecordbysuchnomineeorfiduciary.
| |
| Furthermore, ifthesharesofBrooklynUnioncommonstockareownedofrecordinafiduciary
| |
| : capacity, suchasbyatruste'e, guardianorcustodian, thedemandmustbemadeinthatcapacity, andifthesharesofBrooklynUnioncommonstockareownedofrecordbymorethanoneperson,asinajointtenancyortenancyincommon,thedemandmustbemadebyorforallownersofrecord.Anauthorized agent,including oneoftwoormorejointowners,mayexecutethedemandforappraisal foraholderofrecord;however,suchagentmustidentifytherecordownerorownersandexpressly stateinsuchdemandthattheagentisactingasagentfortherecordownerorownersofsuchsharesofBrooklynUnioncommonstock.Arecordholder,suchasabrokeroranagent,whoholdssharesofBrooklynUnioncommonstockasanomineeforbeneficial owners,someofwhomdesiretodemandappraisal, mustexerciseappraisal rightsonbehalfofsuchbeneficial'owners whodesiretodemandappraisal withrespecttothesharesofBrooklynUnioncommonstockheldforsuchbeneficial owners.WithintendaysafterthevoteofBrooklynUnionshareholders authorizing theadoptionoftheKeySpanExchangeAgreement, BrooklynUnionorKeySpan,asthecasemaybe,mustgivewrittennoticeofsuchauthorization toeachdissenting BrooklynUnionshareholder.
| |
| Atthetimeoffilinganoticeofelectiontodissentorwithinonemonththereafter, adissenting BrooklynUnionshareholder mustsubmitcertificates representing suchholder'ssharesofBrooklynUnioncommonstocktoBrooklynUnionoritstransferagentfornotationthereonoftheelectiontodissent,afterwhichsuchcertificates willbereturnedtosuchshareholder.
| |
| Anysuchshareholder whofailstosubmitsuchcertificates fornotationwill,attheelectionofBrooklynUnionqrKeySpan(exercised bywrittennoticetosuchholderwithin45daysfromthedateoffilingofthenoticeofelectiontodissent),
| |
| losesuchholder'sappraisal rightsunlessacourt,forgoodcauseshown,otherwise directs.
| |
| B.MANAGEMENT Directors andOfficersofKeySpan.KeySpan's restatedcertificate ofincorporation andby-laws,asoftheeffective time'oftheKeySpanshareexchange, willdivideKeySpan's BoardofDirectors intothreeclassesofthreedirectors each;withdirectors ineachclassgenerally beingelectedforathree-year term.KeySpan's by-lawswillpermittheBoardofDirectors tofixfromtimetotimethenumberofdirectors inarangeof9to12,andtheBoardhas'ixeditsinitialsizeat9,effective'as oftheeffective timeoftheKeySpanshareexchange.
| |
| Priortotheeffective timeoftheKeySpanshareexchange, BrooklynUnion,asthesoleshareholder ofKeySpan,willelectasKeySpandirectors RobertB.CatellandAlanH.Fishmanforone-yeartermsexpiringatKeySpan's annualmeetingin1998,KennethI.ChenaultandEdwardD.Millerfortwo-yeartermsexpiringin1999,andJamesQ.Riordanforathree-year termexpiringin2000.BrooklynUnion,assuchsoleshareholder, willalsoelectsuchothers,ifany,whomaybeselectedtofilloneormoreoftheBoard'sfourvacancies priortocompletion'f theKeySpan.share
| |
| : exchange, AllofMessrs.Catell,Chenault, Fishman,MillerandRiordanarecurrently BrooklynUniondirectors.
| |
| Asoftheeffective time'oftheKeySpanshareex'change,'Messrs.
| |
| ChenaultandFishmanwillresignfromBrooklynUnion'sBoardofDirectors; Messrs.Catell,MillerandRiordanwillserveontheBoardsofDirectors ofbothKeySpanandBrooklynUnion.RobertB.CatellisandwillbetheonlydirectorofKeySpanuntilKeySpan's restatedcertificate ofincorporation isfiledshortlybeforetheeffective timeoftheKeySpanshareexchangeandBrooklynUnion,asKeySpan's soleshareholder, electsthedirectors namedaboveandsuchothers,ifany,selectedpriortothecompletion oftheKeySpanshareexchangetofillKeySpanBoardvacancies.
| |
| Aftercompletion oftheKeySpanshareexchange, KeySpanBoardvacancies maybefilledbyactionofKeySpan's BoardofDirectors, Asoftheeffective timeoftheKeySpanshareexchange, theBoardofDirectors ofKeySpanwillappointthefollowing individuals astheofficers'f KeySpan:RobertB.CatellChairman, President andChiefExecutive OfficerCraigG.MatthewsExecutive VicePresident
| |
| -UtilityDivisionVincentD.Enright,SeniorVicePresident, ChiefFinancial OfficerandChiefAccounting OfficerMauriceK.ShawSeniorVicePresident
| |
| -Corporate AffairsDavidL.Phillips,
| |
| ~SeniorVicePresident
| |
| -Strategic PlanningandCorporate Development SeniorVicePresident
| |
| -EnergyMarketing GroupVicePresident andGeneralAuditorVicePresident
| |
| -BusinessA'lliances aridInvestments VicePresident, Secretary andTreasurer VicePresident
| |
| -InvestorRelations WilliamK.FeraudoRogerJ.WalzTheodoreSparRobertR.Wieczorek JanC.Childress tWithin15daysaftertheexpiration oftheperiodwithinwhichshareholders ofBrooklynUnionmayfiletheirnoticesofelectiontodissent,orwithin15daysaftertheeffective timeoftheKeySpanshareexchange, whichever islater(butinno'caselaterthan90daysaftertheshareholders'ote adoptingtheKeySpanExchangeAgreement),
| |
| BrooklynUnionorKeySpan,as"thecasemaybe,mustmakeawrittenoffer(which,iftheKeySpanshareexchangehasnotbeenconsummated, maybeconditioned uponsuchconsummation) toeachshareholder whohasfiledanoticeofelectiontodissenttopayforsuchholder'ssharesofBrooklynUnioncommonstockataspecified pricewhichBrooklynUnionorKeySpan,asthecasemaybe,considers tobetheirfairvalue.IfBrooklynUnionorKeySpan,asthecasemaybe,andthedissenting shareholder areuiiabletoagreeas"to'suchvalue,Section623(h)oftheNYBCLprovidesforjudicialdetermination offairvalue.Intheeventofsuchadisagreement, acourtproceeding shallbecommenced byBrooklynUnionorKeySpan,'s thecasemaybe,intheSupremeCourtoftheStateofNewYork,CountyofKings,orbythedissenting shareholder ifBrooklynUnionorKeySpan,asthecasemaybe,failstocommencetheproceeding withinthetimerequiredbySection623oftheNYBCL.BrooklynUnionandKeySpanintendtocommencesuchaproceeding intheeventofsuchadisagreement.
| |
| H1
| |
| .Mr.CatellisandwillcontinueasChairmanandChiefExecutive OfficerofBrooklynUnion;Mr.MatthewsisandwillcontinueasPresident andChiefOperating OfficerofBrooklynUnion;Mr.EnrightisandwillcontinueasSeniorVicePresident andChiefFinancial OfficerofBrooklynUnion;Mr.Walzisand,willcontinueasVicePresident andGeneralAuditorofBrooklynUnion;andMr.Wieczorek isandwillcontinueasVicePresident, Secretary andTreasurer ofBrooklynUnion.Asoftheeffective timeoftheKeySpanshareexchange, Messrs.Phillips, Shaw,Feraudo,SparandChildress willnolongerbeofficersofBrooklynUnion.liForfurtherinformation concerning personstobecomedirectors orofficersofKeySpan,seetheinformation contained inBrooklynUnion'sProxyStatement datedDecember30,1996foritsannualmeetingheldonFebruary6,1997,whichthroughBrooklynUnion'sAnnualReportonForm10-K/AforthefiscalyearendedSeptember 30,1996,isincorporated hereinbyreference.
| |
| Forcertaininformation concerning inanagement oftheHoldingCompanyfollowing theLILCOCombination, see"TheCompanyFollowing theCombination andtheLIPATransaction" intheJointProxyStatement/Prospectus.
| |
| Restrictions onBoardandManagement Interlocks betweenKeySpanandBrooklynUnionInordertoaddress.concernsregarding thepossiblediversion oftheattention ofBrooklynUnion'smanagement awayfromtheutilitybusiness, aswellastoavoidpotential conflicts ofinterestwiththeBoardandmanagement ofKeySpan,thePSCOrdersetsforththefollowing restrictions regarding thecomposition ofthemanagements ofBrooklynUnionandKeySpan.Inconnection.
| |
| withtheproposedLILCOCombination, BrooklynUnionandLILCOhavefiledapetitionwiththePSCrequesting, amongotherthings,theremovalorrelaxation ofcertainoftherestrictions described herein.ThePSChasnotacteduponsuchpetitionasofthedateofthisJointProxyStatement/Prospectus, andtherecanbenoassurance thatanyorallofthereliefrequested inthepetitionwillbegranted.Composition oftheBo'ardsofDirectors BrooklynUnion'sBoardofDirectors mustincludeatleastamajorityofoutsidedirectors (i.e.,individuals
| |
| ~notemployedbyBrooklynUnion,KeySpanoranyoftheiraffiliates).
| |
| Nomorethantwodirectors ofBrooklyn~Unionmaybeinsidedirectors (i.e.,individuals employedbyBrooklynUnion,KeySpanoranyoftheiraffiliates),
| |
| withatleastonesuchinsidedirectorbeinganoperating officerofBrooklynUnion.Nomorethanfourdirectors ofBrooklynUnionmayeitherbeinsidedirectors ordirectors ofKeySpan.Finally,thenomination ofdirectors toBrooklynUnion'sBoardmustbemadebyacommittee composedentirelyofoutsidedirectors.
| |
| Common0JJicersWithintheHoldingCompanySystemff4'omorethanfiveofficersofBrooklynUnionmayalsoserveasofficersofKeySpan.ThemaximumnumberofBrooklynUnion'sofficerswhomayalsoserveasofficersofKeySpanwillbereducedtofour,ortothree,ifandwhenKeySpan's investment inBrooklynUnion,expressed astheratioofBrooklynUnion'sTotalCapitaltoKeySpan's TotalCapital,fallsto60%or50%,respectively.
| |
| TheSecretary andTreasurer ofBrooklyn, Unionmayserveintheequivalent positionofKeySpanoranothersubsidiary ofKeySpan,butnootherofficerofBrooklynUnionmayserveasanofficerofanotheroperating subsidiary ofKeySpan.C.OTHERINFORMATION Independent PublicAccountants ArthurAndersenLLP,independent publicaccountants, hasbeenappointed bytheBoardofDirectors ofKeySpantoserveasindependent publicaccountants ofKeySpanforthe1997fiscalyear.ArthurAndersenLLPhasbeentheindependent publicacco'untants ofBrooklynUnionsince1932.ArthurAndersenLLPhasalsobeenappointed bytheBoardofDirectors ofBrooklynUniontoserveasindependent publicaccountants ofBrooklynUnion.Shareholders ofBrooklynUnionvotedtoratifysuchappointment atBrooldynUnion'sannualmeetingofshareholders heldonFebruary6,1997.
| |
| ValidityofKeySpanCommonStockThevalidityofthesharesofKeySpancommonstocktobeissuedintheKeySpanshareexchangewillbe'asseduponbyCullenandDykman,generalcounseltoBrooklynUnionandKeySpan,177MontagueStreet,Brooklyn, NewYork11201,andbySullivan8'cCromwell, specialcounseltoBrooklynUnionandKeySpan,125BroadStreet,NewYork,NewYork10004.DeadlineforShareholder Proposals InordertobeincludedinKeySpan's proxystatement andformofproxyrelatingtoits1998AnnualMeeting(ifcommonshareholders adopttheKeySpanExchangeAgreement andtheKeySpanshareexchangeoccurs)orinBrooklynUnion's1998AnnualMeetingproxystatement andformofproxy(iftheKeySpanExchangeAgreement isnotadoptedbycommonshareholders),
| |
| proposals fromshareholders tobepresented atthe1998AnnualMeetingmustbereceivedbytheSecretary ofKeySpanorBrooklynUnion,asthecasemaybe,atOneMetroTech Center,Brooklyn, NewYork11201-3851, nolaterthanSeptember 1,1997.Mattersintendedtobepresented byholdersofKeySpanorBrooklynUnionCommonStock,asthecasemaybe,atthe1998AnnualMeetingmustbestatedinwriting,anddelivered totheappropriate Secretary bysuchshareholders duringtheperiodbetween90and60dayspriortothedateofthemeeting,whichisexpectedtobeheldonFebruary5,1998.IfBrooklynUnioncommonshareholders adopttheKeySpanExchangeAgreement andtheKeySpanshareexchangeoccurs,BrooklynUnionwillnolongerbepubliclyheldandKeySpanwillbethesoleownerofBrooklynUnioncommonstockaftertheKeySpanshareexchange.
| |
| Insuchevent,therewillbenoregularly, scheduled meetingsofshareholders ofBrooklynUnion'in1998orthereafter.
| |
| IftheLILCOCombination isconsummated, therewillbenoregularly scheduled meetingsofshareholders ofKeySpanthereafter.
| |
| eIncorporated Documents Foradescription ofmaterialinformation concerning anddocuments incorporated byreference byBrooklynUnionandLILCO,including financial statements andproformaandotherfinancial information~
| |
| seetheJointProxyStatement/Prospectus
| |
| -"WhereYouCanFindMoreInformation."
| |
| Copiesofanysuchmaterials maybeobtainedinaccordance withtheprocedures setforththerein.BrooklynUnion'sBoardofDirectors hasunanimously approvedtheholdingcompanystructure andadoptedtheKeySpanExchangeAgreement, believestheholdingcompanystructure andtheKeySpanshareexchangetobeinthebestinterests ofBrooklynUnionanditsshareholders, andrecommends thattheholdersofBrooklynUnioncommonstockvote"FOR"theholdingcompanyproposalandadoptionoftheKeySpanExchangeAgreement attheBrooklynUnionMeeting.
| |
| rt'tlPPPIr[THISPAGEINTENTIONALLY LEFTBLANK]VI ANNEXKAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGEThisAMENDEDANDRESTATEDAGREEMENT ANDPLANOFEXCHANGE(the"Agreement"
| |
| ),datedasofJune26,1997,isbetweenTHEBROOKLYNUNIONGASCOMPANY,aNewYorkcorporation andthecorporation vlhosesharesofCommonStock,parvalue$.33Npershare,willbeacquiredpursuanttothe"Exchange" providedforinthisAgreement (the"SubjectCorporation"
| |
| ),andKEYSPANENERGYCORPORATION, aNewYorkcorporation andthecorporation whichwillacquiretheforegoing sharesofCommonStockoftheSubjectCorporation (the"Acquiring Corporation"
| |
| ).TheSubjectCorporation andtheAcquiring Corporation arehereinafter referredto,collectively, asthe"Corporations".
| |
| WITNESSETH:
| |
| WHEREAS,theauthorized capitaloftheSubjectCorporation is$163,333,100, consisting of(a)70,000,000 sharesofCommonStock,parvalue$.335pershare("SubjectCorporation CommonStock"),ofwhich50,362,161 sharesareissuedandoutstanding (whichnumberofissuedandoutstanding sharesissubjecttochangepriortotheEffective Time(ashereinafter defined)oftheExchangepursuanttothedividendreinvestment andstockpurchaseplan("DividendReinvestment Plan")andtheEmployeeSavingsPlan,DiscountStockPurchasePlanforEmployees andLong-Term Performance Incentive Compensation Plan(eachan"Employee Plan"andcollectively the"Employee Plans")oftheSubjectCorporation, (b)900,000sharesofCumulative Preferred Stock,parvalue$100pershare("SubjectCorporation
| |
| $100Preferred Stock"),ofwhich66,000sharesareissuedandoutstanding inoneseriesdesignated "4.60%Cumulative Preferred Stock,SeriesB,$100parvalue",and(c)2,000,000 shaiesofCumulative Preferred Stock,parvalue$25pershare("SubjectCorporation
| |
| $25Preferred Stock"),ofwhichnosharesareissuedandoutstanding; WHEREAS,theAcquiring Corporation isawholly-owned subsidiary oftheSubjectCorporation withauthorized capitalstockconsisting of70,000,000 sharesofCommonStock,parvalue$.33Npershare("Acquiring Corporation CommonStock"),ofwhich10sharesareissuedandoutstanding andownedbytheSubjectCorporation; WHEREAS,theBoardsofDirectors oftheCorporations deemitdesirable andinthebestinterests oftheCorporations andtheshareholders oftheSubjectCorporation that,attheEffective Time,(a)theAcquiring Corporation acquireandbecometheownerandholderofeachshareofSubjectCorporation CommonStockissuedandoutstanding attheEffective Time,(b)eachshareofSubjectCorporation CommonStockissuedandoutstanding immediately priortotheEffective Timebeautomatically exchanged for'oneshareofAcquiring Corporation CommonStock,and(c)eachholderofsharesofSubjectCorporation CommonStockissuedandoutstanding immediately priortotheEffective TimebecomestheholderofalikenumberofsharesofAcquiring Corporation CommonStock,allonthetermsandconditions hereinafter setforth;WHEREAS,theSubjectCorporation, LongIslandLightingCompany,aNewYorkcorporation
| |
| ("LILCO"),
| |
| andBLHoldingCorp.,aNewYorkcorporation
| |
| ("BL"),haveenteredintoanAmendedandRestatedAgreement andPlanofExchangeandMerger,datedasofJu'ne26,1997(the"BLAgreement"
| |
| ),pursuanttowhichaftertheEffective Timeandsubjecttoandinaccordance withthetermsandconditions oftheBLAgreement eachholderofsharesofAcquiring Corporation CommonStockissuedandoutstanding immediately priortotheeffective timeofthemergerprovidedforintheBLAgreemcnt willbecometheholderofalikenumberofsharesofBLcommonstock,parvalue$0.01pershare("BLCommonStock"),andeachholderofsharesofLILCOcommonstock,parvalue$5.00pershare("LILCOCommonStock"),issuedandoutstanding immediately priortotheeffective timeoftheLILCOmandatory shareexchangewillbecomeaholderofaspecified numberofsharesofBLCommonStock,withtheresultthatallissuedandoutstanding Acquiring Corporation CommonStockandallissuedandoutstanding LILCOCommonStockwillbecomeownedbyBLandtheAcquiring Corporation andLILCOwillbecomesubsidiaries ofBL;K-1
| |
| 'HEREAS,asaresultoftheBLAgreement andthetransactions providedfortherein,theBoardsofDirectors oftheCorporations deemitdesirable andinthebestinterests oftheCorporations andtheshareholders oftheSubjectCorporation thattheAgreement andPlanofExchange, datedasofDecember18,1996,betweentheSubjectCorporation andtheAcquiring Corporation relatingtotheExchangebeamendedandrestatedtotakeintoaccountthetermsandconditions oftheBLAgreement andthetransactions providedfortherein;andWHEREAS,theBoardsofDirectors oftheCorporations haveeachapprovedandadopted,orwillratifyandadopt,thisAgreement, andthe-Board ofDirectors oftheSubjectCorporation isrecommending thattheshareholders oftheSubjectCorporation approveandadopttheExchangeandthisAgreement pursuanttoSection913oftheNewYorkBusinessCorporation Law(the"BCL").NOW,THEREFORE, theCorporations herebyagreeasfollows:ARTICLEIfTheExchangeandthisAgreement shallbesubmitted totheholdersofSubjectCorporation CommonStockforapprovalandadoptionasprovidedbySection913oftheBCL.Theaffirmative voteoftheholdersofatleasttwo-thirds oftheissuedandoutstanding SubjectCorporation CommonStockshallbenecessary toapproveandadopttheExchangeandthisAgreement.
| |
| 'RTICLEIISubjecttothetermsandconditions ofthisAgreement, theExchangeshallbecomeeffective immediately following thecloseofbusinessonthedateoffilingwiththeNewYorkDepartment ofState(the"Department ofState")ofacertificate ofexchangepursuanttoSection913(d)oftheBCL("Certificate"
| |
| ),oratsuchlatertimeanddateasmaybestatedintheCertificate (thetimeanddateatandonwhichtheExchangebecomeseffective beingreferredtohereinasthe"Effective Time").ARTICLEIIIA.AttheEffective Time:(1)eachshareofSubjectCorporation CommonStockissuedandoutstanding immediately priortotheEffective Timeshallbeautomatically, exchanged foroneshareofAcquiring Corporation CommonStock,whichshares,shallbefullypaidandnonassessable bytheAcquiring Corporation; (2)theAcquiring Corporation shallacquireandbecometheownerandholderofeachissuedandoutstanding shareofSubjectCorporation CommonStocksoexchanged; (3)eachshareofAcquiring Corporation CommonStockissuedandoutstanding immediately priortotheEffective Timeshallbecancelled andshallthereupon constitute anauthorized andunissuedshareofAcquiring Corporation CommonStock;(4)'achshareofSubjectCorporation CommonStockheldundertheDividendReinvestment PlanoranEmployeePlan(including fractional anduncertificated shares)immediately priortotheEffective Timeshallbeautomatically exchanged foralikenumberofshares(including fractional anduncertificated shares)ofAcquiring Corporation CommonStock,whichsharesshallbeheldunderandpursuanttotheDividendReinvestment PlanorbeissuedundersuchEmployeePlan,asthecasemaybe,ashereinafter provided; (5).eachunexpired andunexercised optiontopurchaseSubjectCorporation CommonStock("SubjectCorporation StockOption")undertheLong-Term Performance Incentive Compensation Plan(the~"Incentive Plan"),whethervestedorunvested, willbeautomatically converted intoanoption~K-2 (a"Substitute Option")topurchaseanumberofsharesofAcquiring Corporation CommonStockequaltothenumberofsharesofSubjectCorporation CommonStockthatcouldhavebeenpurchased immediately priortotheEffective Time(assuming fullvesting)undersuchSubjectCorporation StockOption,atapricepershareofAcquiring Corporation CommonStockequaltothepershareoptionexercisepricespecified insuckSubjectCorporation StockOption.Inaccordance withSection424(a)oftheInternalRevenueCodeof1986,asamended,eachSubstitute Optionshallprovidetheoptionholderwithrightsandbenefitsthatarenolessandnomorefavorable tohimthanwereprovidedundertheSubjectCorporation StockOption;and(6)theformerholdersofSubjectCorporation CommonStockshallbeentitledonlytoreceivesharesofAcquiring Corporation CommonStockinexchangethereforasprovidedinthisAgreement;
| |
| : provided, however,thateachsuchshareholder complying withSections623and910oftheBCLshallhavetherighttoreceivepaymentofthefairvalueofsuchshareholder's SubjectCorporation CommonStockandshallhavetheotherrightsandbenefitsprovidedinsuchSections.
| |
| B.SharesofSubjectCorporation
| |
| $100Preferred StockandSubjectCorporation
| |
| $25Preferred Stockshallnotbeexchanged orotherwise affectedbytheExchangeand,totheextentprovidedintheSubjectCorporation's RestatedCertificate ofIncorporation andtheBCL,shallcontinuetobeauthorized sharesofSubjectCorporation
| |
| $100Preferred StockorSubjectCorporation
| |
| $25Preferred Stock,asthecasemaybe.AllsharesofSubjectCorporation
| |
| $100Preferred Stockandallshares,ifany,ofSubjectCorporation
| |
| $25Preferred Stockissuedandoutstanding following approvalandadoptionoftheExchangeandthisAgreement asprovidedforinArticleIofthisAgreement shallpromptlybecalledforredemption bytheSubjectCorporation andshallberedeemedpriortotheEffective Time.C.PriortotheEffective Time,theAcquiring Corporation's Certificate ofIncorporation shallbeamendedandrestatedassetforthasAttachment 1tothisAgreem'ent, andtheAcquiring Corporation's By-LawsshallbeassetforthasAttachment 2tothisAgreement.
| |
| 'D.AsoftheEffective Time,theAcquiring Corporation shallsucceedtotheDividendReinvestment Planasineffectimmediately priortotheEffective Time,andtheDividendReinvestment Planshallbeappropriately modifiedtoprovidefortheissuanceordeliveryofAcquiring Corporation CommonStockonandaftertheEffective Timepursuantthereto.E.AsoftheEffective Time,(1)theEmployeePlansshallbeappropriately amendedtoprovidefortheissuance"ordeliveryofAcquiring Corporation CommonStock,andtheAcquiring Corporation shallagreetoissueordeliver'Acquiring Corporation CommonStock,and(2)theIncentive Planshallalsobeappropriately amendedtoprovidefortheissuanceofoptionsbytheAcquiring Corporation topurchaseAcquiring Corporation CommonStock,ineachcaseonandaftertheEffective Timepursuantthereto.ARTICLEIVA.ThefilingoftheCertificate withtheDepartment ofStateandtheconsummation oftheExchangeshallbesubjecttosatisfaction ofthefollowing conditions atorpriortotheEffective Time:(1)theaffirmative voteoftheholdersofSubjectCorporation CommonStockprovidedforinArticle,I ofthisAgreement shallhavebeenreceived; (2)suchorders,authorizations, approvals orwaiversfromtheNew'orkPublicServiceCommission andallotherjurisdictive regulatory bodies,boardsoragenciesrequiredtoconsummate theExchangeandrelatedtransactions shallhavebeenreceived, shallremaininfullforceandeffect,andshallnotinclude,inthesole'judgment oftheBoardofDirectors oftheSubjectCorporation, unacceptable conditionS; (3)allsharesofSubjectCorporation
| |
| $100Preferred Stockandallshares,ifany,ofSubjecttCorporation
| |
| $25Preferred Stockissuedandoutstanding shallhavebeencalledforredemption bytheSubjectCorporation, allsuchsharesshallhavebeenredeemedandtheredemption priceorprices,including K-3 accruedandunpaiddividends, shallhavebeenpaidinfull,andattheEffective TimenosharesofSubjectCorporation
| |
| $100Preferred StockandSubjectCorporation
| |
| $25Preferred Stockshallbeissuedandoutstanding; (4)theAcquiring Corporation CommonStocktobeissuedinconnection withtheExchangeshallhavebeenlisted,subjecttoofficialnoticeofissuance, bytheNewYorkStockExchange; and(5)theRestatedCertificate ofIncorporation oftheAcquiring Corporation shallhavebeenfiledwiththeDepartment ofState.B.Simultaneously withtheEffective Time,theAcquiring Corporation shall.fileanexemption statement onFormU-3A-2withtheSecurities andExchangeCommission forthepurposeofexempting itandeachofitssubsidiaries assuchfromallprovisions ofthePublicUtilityHoldingCompanyActof1935(exceptSection9(a)(2)thereof).
| |
| ARTICLEVA.Following theEffective Time,eachholderofanoutstanding certificate orcertificates theretofore representing sharesofSubjectCorporation CommonStockmay,butshallnotberequiredto,surrender thesametotheAcquiring Corporation's TransferAgentforcancellation andreissuance ofariewcertificate orcertificates insuchholder'snameorforcancellation andtransfer, andeachsuchholderortransferee shallbeentitledtoreceiveacertificate orcertificates representing thesamenumberofsharesofAcquiring Corporation CommonStockasthesharesofSubjectCorporation CommonStockpreviously represented bythecertificate orcertificates surrendered.
| |
| Untilsosurrendered orpresented forexchangeortransfer, eachoutstanding certificate which,immediately priortotheEffective Time,represents SubjectCorporation CommonStockshallbedeemedandshallbetreatedforallpurposestorepresent theownership ofthesamenumberofsharesofAcquiring Corporation CommonStockasthoughsuchsurrender orexchangeortransferhadtakenplace.TheholdersofSubjectCorporation CommonStockattheEffective TimeshallhavenorightatandaftertheEffective TimetohavetheirsharesofSubjectCorporation CommonStocktransferred onthestocktransferbooksoftheSubjectCorporation (suchstocktransferbooksbeingdeemedclosedforthispurposeattheEffective Time),andatandaftertheEffective TimesuchstocktransferbooksmaybedeemedtobethestocktransferbooksoftheAcquiring Corporation.
| |
| B.Following theEffective Time,theSubjectCorporation shallassigntotheAcquiring Corporation, andtheAcquiring Corporation shallbesubstituted forandshallassume,alloftheSubjectCorporation's rightsandobligations undertheBLAgreement (andassuchAgreement mayhereafter beamended),
| |
| whichassignment, substitution andassumption shallbecomeeffective asoftheEffective Time,andtheAcquiring Corporation herebyagreestoexecuteanyamendment totheBLAgreement necessary toprovidethebenefitsthereofto,theAcquiring Corporation.
| |
| TheSubjectCorporation, asthesoleshareholder oftheAcquiring Corporation, herebyapprovesandadoptstheBLAgreement andthetransactions providedfortherein,asprovidedbytheBCL.ARTICLEVIA.ThisAgreement maybeamended,modifiedorsupplemented, orcompliance withanyprovision hereofmaybewaived,atanytimepriortotheEffective Time(including, withoutlimitation, afterreceiptoftheaffirmative voteofholdersofSubjectCorporation CommonStockasprovidedinArticleIV(1)hereof),bythemutualconsentoftheBoardsofDirectors oftheSubjectCorporation andtheAcquiring Corporation atanytimepriortotheEffective Time;,provided, however,thatnosuchamendment, modification, supplement orwaivershallbemadeoreffectedifsuchamendment, modification, supplement orwaiver,would,inthesole.judgmentoftheBoardofDirectors oftheSubjectCorporation, materially andadversely affecttheshareholders oftheSubjectCorporation.
| |
| B.ThisAgreement maybeterminated andtheExchangeandrelatedtransactions abandoned, atanytimepriortotheEffective Time(including, withoutlimitation, afterreceiptoftheaffirmative voteofholdersofK-4 SubjectCorporation CommonStockasprovidedinArticleIV(1)hereof),iftheBoardofDirectors oftheSubjectCorporation determines, initssolejudgmeht, thatconsummation oftheExchangewouldforanyreasonbeinadvisable ornotinthebestinterests oftheSubjectCorporation oritsshareholders.
| |
| INWITNESSWHEREOF,eachoftheCorporations, pursuanttoauthorization andapprovalgivenbyitsBoardofDirectors, hascausedthisAgreement tobeexecutedasofthedatefirstabovewritten.THEBROOKLYNUNIONGASCOMPANYBy:/s/CRAIGG.MATTHEwsCraigG.MatthewsPresident andChiefOperating OfficerKEYSPANENERGYCORPORATION By:/S/ROBERTB.CATELLRobertB.CatellChairman, President andChiefExecutive OfficerK-5
| |
| [THISPAGEINTENTIONALLY LEFTBLANK]
| |
| ANNEXL(Attachment 1totheKeySpanExchangeAgreement)
| |
| RESTATEDCERTIFICATE OFINCORPORATION OFKEYSPANENERGYCORPORATION'nder Section807oftheBusinessCorporation Law)'heundersigned, beingtheChairmanandtheSecretary ofKeySpanEnergyCorporation, aNewYorkcorporation, herebycertifythat:FIRST.ThenameoftheCorporation isKeySpanEnergyCorporation.
| |
| SECOND.TheCertificate ofIncorporation oftheCorporation wasfiledbytheDepartment ofStateonJune25,1996.THIRD.TheCertificate ofIncorporation oftheCorporation isamendedorchangedtoeffectoneormoreamendments orchangesauthorized bytheBusinessCorporation LawoftheStateofNewYork,namely:toincreasethenumberofsharesofCommonStock-,which theCorporation hasauthority toissuefromseventymillion(70,000,000) totwohundredandtenmillion(210,000,000);
| |
| toauthorize aclassoftenmillion(10,000,000) sharesofPreferred Stock,withaparvalueof$1.00pershare;toprovidethatnoholderofCommonStockorPreferred'Stock shallbeentitledasamatterofrightto'anypreemptive rightsasnoworhereafter providedbythelawsoftheStateofNewYork;toprovidethat,exceptasmayberequiredbylaworasmaybeprovidedbytheBoardofDirectors inrespectofanyparticular seriesofPreferred Stock,allvotingrightsofthetCorporation shallbevestedexclusively intheholdersofCommonStockwhoshallhaveonevotepershareonallmatters;toprovidefortheadoption, amendment orrepealofBy-LawsbytheBoardofDirectors; toprovideforthecallingofspecialmeetingsofshareholders; toprovideforthesizeoftheBoardofDirectors tobefixedbyorpursuanttotheBy-Laws,theBoardofDirectors tobeclassified intothreeclasses,fillingvacancies ontheBoardofDirectors, andremovalofdirectors; toprovidefortwo-thirds votinginrespectofamendingcertainprovisions oftheCertificate ofIncorporation; andtoprovidefortwo-thirds votinginrespectofamending, repealing oradoptingcertainBy-LawsbyactionoftheBoardofDirectors ortheshareholders.
| |
| NThetextoftheCertificate ofIncorporation isherebyrestatedassoamendedorchangedtoreadasfollows:1.Thenameofthecorporation shallbeKeySpanEnergyCorporation (the"Corporation"
| |
| ).2.Thepurpos'eforwhichtheCorporation isformedistoengageinanylawfulactoractivityforwhichcorporations maybeformedunder'heBusinessCorporation LawoftheStateofNewYork;providedthattheCorporation isnotformedtoengageinanyactoractivitywhichrequirestheconsentorapprovalofanystateofficial, department, board,agencyorotherbody,withoutsuchconsentorapprovalfirstbeingobtained.
| |
| 3.TheofficeoftheCorporation intheStateofNewYorkistobelocatedintheCityofNewYork,CountyofKings.4.Theaggregate numberofshareswhichtheCorporation shallhaveauthority toissueis(a)twohundredandtenmillion(210,000,000) sharesofCommonStock,withaparvalueof$.33Mpershare(the"CommonStock"),andtenmillion(10,000,000) sharesofPreferred Stock,withaparvalueof$1.00pershare(the"Preferred Stock").Therelativerights,preferences andlimitations ofthesharesofsuchclassesofstockareasfollows:nNH'A.ThePreferred StockmaybeissuedfromtimetotimebytheBoardofDirectors assharesofoneormoreseriesofPreferred Stock,andtheBoardofDirectors isexpressly authorized, priortoissuance, inthe resolution.
| |
| orresolutions providing fortheissueofsharesofeachparticular series,toestablish anddesignate eachparticular seriesandtofixtherights,preferences andlimitations ofeachparticular series,andtherelativerights,preferences andlimitations betweenseries,asfollows:I(i)Thedistinctive serialdesignation ofsuchserieswhichshalldistinguish itfromotherseries;(ii)Thenumberofsharesincludedinsuchseries,whichnumbermaybeincreased ordecreased fromtimetotimeunlessotherwise providedbytheBoardofDirectors increatingsuchseries;,4(iii)Theannualorotherdividendrateorrates(ormethodofdetermining suchrateorrates)forsharesofsuchseriesandthedateordatesuponwhichsuchdividends shallbepayable;l'r(iv)Whetherdividends onthesharesofsuchseriesshallbecumulative, and,inthecaseofsharesofanyserieshavingcumulative dividendrights,thedateordates(ormethodfordetermining suchdateordates)fromwhichdividends onthesharesofsuchseriesshallbecumulative;
| |
| "(v}Theamountoramountswhichshallbe.paidoutoftheassetsoftheCorporation totheholdersof'hesharesofsuchseriesuponvoluntary orinvoluntary liquidation, dissolution, orwindingupoftheCorporation; (vi)Thepri'ceorprices(cashorotherwise) atwhich,theperiodorperiodswithinwhichandthe.termsandconditions uponwhich,-if any,thesharesofsuchseriesmaybe'purchased, redeemedoracquired(by'xchangeorotherwise),
| |
| inwholeorinpart,attheoptionoftheCorporation;
| |
| ~(vii)Provision orprovisions, ifany,,fortheCorporation topurchase, redeemoracquire(byexchangeor,otherwise),
| |
| inwholeorinpart,sharesofsuchseriespursuanttoasinkingorothersimilarfund,andthepriceorprices(cashorotherwise) atwhich,theperiodorperiodswithinwhich,and theter'msandcondi-'ionsuponwhichthesharesofsuchseriesshallbesopurchased, redeemedorac'quired, inwhole'orinpart,pursuanttosuchprovision orprovisions;,
| |
| i(viii)The'period or'eriods withinwhichandthetermsandconditions, including thepriceorpricesortherateor'ratesofconveision orexchangeandthetermsandconditions ofanyadjustments thereof,"uponwhich,ifany,thesharesofsuchseriesshallbeconvertible orexchangeable, inwholeorinpart,attheoptionoftheholderorthe'Corporation orbothintosharesofanyclassofstockorintosharesofan/other'series,ofPreferred Stock,except'nto shareshavingrightsorpreferences astodividends orthedistribution ofassetsuponliquidation, dissolution orwinding'p oftheCorporation whicharepriororsuperiorinranktothoseofthesharesbeingconverted orexchanged;
| |
| 'I(ix)Thevotingrights,ifany,ofthesharesofsuchseriesinadditiontothoserequiredbylaw,including the:number'f votespershare(whichmaybefractional ormoreorless'than one)andanyrequirement fortheapprovalbytheholdersofuptotwo-thirds ofthesharesofPreferred Stock,orofthe=sharesofoneormoreseries,orofboth,asacondition tospeci6edcorporate actionoi amendments totheCertificate ofIncorporation; and(x)Anyotherrelativerights,preferences orlimitations ofthesharesofsuchseriesnotinconsistent withapplicable law.B.Allissuedandoutstanding seriesofPreferred Stock(i)shallrankpriororsuperiortotheCommonStockinrespectoftherighttoreceivedividends andtherighttoreceivepaymentsoutoftheassetsoftheCorporation uponvoluntary orinvoluntary liquidation, dissolution orwindingupoftheCorporation, (ii)shallbeofequalrank,regardless ofseries,and(iii)shallbeidentical inallrespectsexceptasprovidedinparagraph AofthisArticle4.Thesharesofanyparticular seriesofthePreferred Stockshallbeidentical witheachotherinallrespectsexceptastothedatefromandafterwhichdividends thereupon shallbecumulative oraccrueifdeclared.
| |
| Incasedividends oramountspayableonliquidation, dissolution ozwindingupofthe,Corporation arenotpaidinfullonthePreferred Stock,thesharesofallseriesofthePreferred Stockshallshareratablyinthepaymentofdividends, including accumulations, ifany,inaccordance withthesumswhichwouldbepayable'on such.shares~ifalldividends weredeclaredandpaidinfull,andinanydistribution ofassetsotherthanbywayofdividends in~
| |
| accordance withthesumswhichwouldbe.payableonsuchdistributions ifallsumspayable,weredischarged infull.All'Preferred Stockredeemed, purchased<<or otherwiseacquired bytheCorporation (including sharessurrendered forconversion orexchangeoracquiredbyconversion orexchangeorotherwise) shallbecancelled andthereupon restoredtothestatusofhuthorized andunissuedsharesiofPreferred Stockundesignated astoIIII'IIC;No'holder ofsharesoftheCorporation ofanyclassorseries,noworhereafter authorized, shallhaveanypreferential orpreemptive righttosubscribe for,purchaseorreceive,orhaveany'preferential orpreemptive rightwithrespectto;anysharesoftheCorporation ofanyclass"orserieswhatsoever, noworhereafter authorized, oranyoptionsorwarrantsforanysuchsha'res,'r anyrightstosubscribe foror-purchase anysuchshares,oranysecurities convertible intoorexchangeable foranysuchshare's'whatsoever,'hether noworhereafter authorized andwhetherissuedforcashorotherconsideration orbywayofdividendorotherwise, whichmayatanytimebeissued,sold,delivered
| |
| 'orofferedbytheCorporation;
| |
| *D.'xceptas'mayfromtimetotimeb'erequiredbylawandexceptasotherwise may'eprovidedbytheBoardofDirecto'rs inaccordance withparagraph AofthisAiticl'e4inrespectofanyparti'cular seriesofPreferred Stock,allvotingrightsoftheCorp'oration shallbevestedexclusively intheholdersoftheCommonStockwhoshallbeentitledtoonevotepershareonallmatters.'ltI5.TheSecretary ofStateoftheStateofNewYorkisdesignated astheagentoftheCorporation uponwhomanyprocessinanyactionorproceeding against,itmaybeserved.ThepostofficeaddresstowhichtheSecretary ofStateshallmailacopyofanysuchprocess,served,uponhimisCullenandDykman,177MontagueStreet,Brooklyn, NewYork11201-3611, Attention:
| |
| LanceMyers,Esq.6,NodirectoroftheCorporation shall.havepersonalliability,to theCorporation oritsshareholders fordamagesforanybreachofdutyinsuchcapacity, providedthattheforegoing shallnoteliminate orlimittheliability ofanydirectorifajudgmentorotherfinaladjudication adversetosuchdirectorestablishes thatsuchdirector's actsohio'missions wereinbadfaithorinvolvedintentional misconduct oraknowingviolation of.laworthatsuchdirectorpersonally gainedinlfactafinancial profitorotheradvantage towhichsuch'director wasnotlegallyentitledorthatsuchdirector's actviolatedSection719oftheBusinessCorporation Law'ofNewYork.Noamendment.t'o orrepealofthisArticle6shallapplytoor"haveanyeffectontheliability orallegedliability ofanydirectoroftheCorporation fororwithrespecttoanyactsoromissions ofsuchdirectoroccurring priortosuchamendment orrepeal.IftheBusinessCorporation LawofNewYorkisamendedhereafter toexpandorlimittheliability ofadip:ctor, thentheliability ofadirectoroftheCorporation shallbeexpandedtotheextentrequiredorlimitedtotheextentpermitted bytheBusinessCorporation Law'ofNew'York, assoamended.7.Subjecttothevoting'provisions ofArticle11,By'-'Laws'maylbe adopted,amendedorrepealedby'theBoardofDirectors bythevoteofamajorityofthedirectors presentatameetingoftheBoardatwhichaquorumispresent.DI,I8.Subjecttothe-rights ofjioldersofanyclassorseriesofstock,noworhereafter authorized, rankingpriororsuperiortotheCommonStockinrespectof.therighttoreceivedividends ortherighttoreceivepaymentsoutoftheassetsoftheCorporation uponvoluntary orinvoluntary liquidation, dissolution or,windingupoftheCorporation withrespecttosuchclassorseriesofstock,specialmeetingsofshareholders maybecalledonlybytheChairmanorbytheBoardofDirectors pursuanttoaresolution adoptedbya,majority ofthetotal,numberofdirectors whichtheCorporation wouldhaveif,therewerenovacancies.
| |
| P"II9.Thefollowing provisions shallrelatetotheBoard.ofDirectors oftheCorporation:
| |
| A.ThesizeoftheBoardofDirectors shallbefixedbyorpursuanttotheBy-Laws.TheBoardofDirectors shallbedividedintothreeclassesdesignated ClassI,ClassIIandClassIII.Suchclassesshallbeasnearlyequalinnumberasthethentotalnumberofdirectors constituting theentireBoardpermits.Atthefirstannualmeetingofshareholders, oranyspecialmeetinginlieuthereof,ClassI,ClassIIandClassIIIdirectors shallbeelected fortermsexpiringatthenextsucceeding annualmeeting,thesecondsucceeding annualmeetingandthethirdsucceeding annualmeeting,respectively, anduntiltheirrespective successors areelectedandqualified.
| |
| Ateachannualmeetingofshareholders aftersuchfirstannual(orspecial).
| |
| meetingofshareholders; thedirectors chosentosucceedthoseintheclasswhosetermsthenexpireshallbeelectedbyshareholders fortermsexpiringatthethirdsucceeding annualmeetingafterelection, orforsuchlessertermforwhichoneormoremaybenominated inaparticular caseinordertoassurethatthenumberofdirectors ineachclassshallbeappropriately constituted, anduntiltheirrespective successors areelectedandqualified.
| |
| Newlycreateddirectorships oranydecreaseindirectorships resulting fromincreases ordecreases inthenumberofdirectors shallbesoapportioned amongtheclassesofdirectors astomakeallthe,classesasnearlyequalinnumberaspossible.
| |
| Vacancies ontheBoardofDirectors atanytimeforanyreasonexcepttheremovalofdirectors without,causemaybefilledbyamajorityofthedirectors theninoffice,althoughlessthanaquorum.Notwithstanding theforegoing, whenevertheholdersofanyoneormoreclassesorseriesofstock(otherthantheCommonStock),noworhereafter authorized, shallhavetheright,votingseparately orbyclassorseries,toelectdirectors atanannualorspecialmeetingofshareholders, theelection, termofoffice,fillingofvacancies andotherfeaturesofsuchdirectorships shallbegovernedbyanyprovisions oftheCertificate ofIncorporation applicable thereto,andsuchdirectors soelectedshallnotbedividedintooneor'moreclassespursuanttothisArticle9Aunlessexpressly providedbysuchprovisions.
| |
| B.Directors mayberemovedforcausebyavoteofshareholders entitledtovotethereon,orbyactionoftheBoardofDirectors.
| |
| Directors shallnotbe'removed witltoutcausebyshareholders, exceptinthecaseofadirectorelectedbytheholdersofanyclassorseries(otherthantheCommonStock),noworhereafter authorized, votingasaclassorseries,whensoentitledbytheprovisions oftheCertificate ofIncorporation applicable thereto.10.InadditiontoanyvotethatmayberequiredbylaworintheCertificate ofIncorporation"in respectofanyclassorseriesofstock,noworhereafter authorized, rankingpriororsuperiorinrightofpaymenttotheCommonStockinrespectoftherighttoreceivedividends ortherighttoreceivepaymentsoutoftheassetsoftheCorporation uponanyvoluntary orinvoluntary liquidation, dissolution orwindingupoftheCorporation, theprovisions ofArticles4C,6,7,8,9,10and11oftheCertificate ofIncorporation, shallnotbeamendedorrepealed, oranewprovision adoptedinconsistent therewith, withouttheaffirmative voteofnotlessthantwo-thirdsofthesharesentitledtovotethereonatsuchannualorspecialmeetingofshareholders atwhichanysuchactionisproposed.
| |
| 11.Exceptasotherwise providedintheCertificate ofIncorporation inrespectofanyclassorseriesofstock,noworhereafter authorized, rankingpriororsuperiormrightofpaymenttotheCommonStockinrespectoftherighttoreceivedividends ortherighttoreceivepaymentsoutoftheassetsoftheCorporation uponanyvoluntary orinvoluntary liquidation, dissolution orwindingupoftheCorporation, theBy-LawsoftheCorporation maybeamendedorrepealed, oriiewBy-Lawsmaybeadopted,either(a)byavoteofshareholders entitledtovoteatanyannualorspecialmeetingofshareholders, or(b)byavoteofthemajorityoftheentireBoardofDirectors atanyregularorspecialmeetingofdirectors;
| |
| : provided, however,thatanyamendment orrepealof,ortheadoptionofanynewBy-Laworprovision inconsistent with,ArticleI(Section1.2-"SpecialMeetings",
| |
| IA-"Presiding atMeetings" or1.12-"NoticeofShareholder BusinessandNominations"),
| |
| ArticleII(Section2.1-"NumberofDirector's",
| |
| 2.2-"Elections, TermsandVacancies" or2.9-"RemovalofDirectors"
| |
| ),ArticleVl-"Indemnification",
| |
| orArticleVIII-"Amendments toBy-Laws"oftheBy-Laws,ifbyactionofsuchshareholders, shall'beonlyupontheaffirmative voteofnotlessthantwo-thirds ofthesharesentitledtovotethereonatsuchannualorspecialmeetingofshareholders atwhichanysuchactionisproposedand,ifbyactionoftheBoardofDirectors, shallbeonlyupontheapprovalofnotlessthantwo-thirds oftheentireBoardofDirectors atanyregularorspecialmeetingofdirectors.
| |
| FOURTH.,Theforegoing
| |
| 'Restated Certificate of-Incorporation wasauthorized bytheBoardofDirectors oftheCorporation byunanimous written,consentdated.June,1997,followedbytheunanimous" writtenconsentoftheshareholder oftheCorporation datedJune,1997.t
| |
| 'INWITNESSWHEREOF,theundersigned havesubscribed thisRestatedCertificate ofIncorporation andIaffirmthestatements contained hereinastrueunderthepenalties of.perjurythisdayof.,",1997.KEYSPANENERGYCORPORATION ByRobertB.CatellChairtnan, President andChiefExecutive OfftcerByRobertR.Wieczorek VicePresident, Secretary andTreasurer (Attachment 2totheKeySpanExchangeAgreement)
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| KEYSPANENERGYCORPORATION BY-LAWSL-7 ARTICLEIMEETINGSSection1.1Section1.2Section1.3Section1.4Section1.5Section1.6Section1.7Section1.8Section1.9Section1.10Section1.11Section1.12Section1.13Section1.14>KEYSPAN,ENERGY CORPORATION INDEXOFSHAREHOLDERS AnnualMeetingsSpecialMeetingsPlaceofMeetingsPresiding atMeetingsQuorumAdjournment NoticeofMeetings.WaiverandConsent.FixingRecordDate.ListofShareholders atMeetingsProxiesNoticeofShareholder BusinessandNominations
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| ..Inspectors ofElections VoteofShareholders
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| .Page1111122333ARTICLEIIBOARDOFSection2.1Section2.2Section2.3Section2.4Section2.5Section2.6Section2.7Section2.8Section2.9Section2.10Section2.11Section2.12Section2.13DIRECTORS NumberofDirectors
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| .Elections, TermsandVacancies.
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| MeetingsoftheBoard.NoticeandAdjournment FiscalYear.Quorum.Unanimous WrittenConsentResignation ofDirectors RemovalofDirectors
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| .Compensation ofDirectors
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| .TimeandPlaceofMeetings.
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| ~.SpecialMeetings.Telephonic Meetings8g~910101010101010ARTICLEIIICOMMITTEES Section3.1Section3.2Section3.3Section3.4Section3.5Section3.6Section3.7Section3.8Section3.9Section3.10Section3.11Section3.12Organization andAuthority
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| .Executive Committee
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| .Organization andNominating Committee AuditCommittee
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| .ActionbyaCommittee..............
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| Quorum.ReportstoBoardofDirectors
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| ..................
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| Compensation ofCommittee Members.Resignation andRemovalofCommittee MembersUnanimous WrittenConsent.PlaceofCommittee MeetingsNotice......................
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| 111111121212121212"0 ARTICLEIVPageOFFICERSSection4.1Section4.2Section4.3Section4.4Section4.5Section4.6Section4.7Section4.8Section4.9Section4.10Section4.11ANDTHEIRDUTIESOfficersTermofOffice;Resignation; Removal;Vacancies PowersandDuties.SalariesChairman.ViceChairman.President VicePresident
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| 'ecretary
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| .Treasurer
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| ~Comptroller
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| .1313131414141414151515ARTICLEVSHARESSection5.1Section5.2Section5.3Section5.4Section5.5ection5.6CERTIFICATED SHARESCertificates, Registrar andTransferAgent.Authorization ofFacsimile Signatures andSeal.TransferofCertificated SharesLost,StolenorDestroyed ShareCertificates UNCERTIFICATED SHARESUncertificated Shares.TransferofUncertificated Shares.161616171717ARTICLEVIINDEMNIFICATION Section6.1GeneralApplicability
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| .Section6.2ScopeofIndemnification Section6.3OtherIn'demnification Provisions.
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| Section6.4SurvivalofIndemnification
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| .Section6.5Inability toLimitIndemnification Section6.6Severability 181818191919ARTICLEVIIOTHERMATTERSSection7.1BookstobeKept.Section7.2InterestofDirectors andOfficersinTransactions Section7.3Corporate SealSection7.4WhenNoticeorLapseofTimeUnnecessary 20202121ARTICLEVIIIAMENDMENTS TOBY-LAWSSection8.1ByDirectors
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| .ection8.2ByShareholders 2121 KEYSPANENE<RGYCORPORATION (the"Company"
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| )By-LawsARTICLEIr~MEETINGSOFSHAREHOLDE<RS Section1.1AnnualMeetingsTheannualmeetingoftheshareholders oftheCompanyshallbeheldatsuchdateandtimeasmaybedesignated bytheBoardofDirectors, duringthemonthofFebruaryorMarchofeachyearfortheelectionofDirectors orforanyotherproperbusinesswhichmaybetransacted atanannualmeeting.Section1.2SpecialMeetingsSubjecttotherightsoftheholdersofanyseriesofstockhavingapreference overtheCommonStock,oftheCompanyastodividends oruponliquidation
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| ("Preferred Stock")withrespecttosuchseriesofPreferred Stock,specialshareholders'eetings maybecalledonlybytheChairmanorbytheBoardofDirectors pursuanttoaresolution adoptedbyamajorityofthetotalnumberofDirectors whichtheCompanywouldhaveiftherewerenovacancies.
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| Atanyspecialmeeting,onlysuchbusinessmaybetransacted whichisrelatedtothepurpose(s) setforthinthenoticeofsuchspecialmeetinggivenpttrsuant toSection1.7oftheseBy-laws.Section1.3PlaceofMeetingsShareholders'eetings shallbeheldattheprincipal officeoftheCompanyoratsuchotherplaceasdesignated fromtimetotimebytheBoardofDirectors andstatedinthenoticeofsuchmeeting.Section1.4Presiding atMeetingsAtallshareholders'eetings, theChairman, thePresident oraVicePresident, shallactasChairmanofthemeetingasprovidedforinSections4.5,4.7and4.8andtheSecretary orAssistant Secretary shallactasSecretary ofthemeetingasprovidedforinSection4.9.Section1.5QuorumHoldersofamajorityofthesharesoftheCompanyentitledt'ovotemustbepresent,inpersonorbyproxy,ateachshareholders'eeting toconstitute aquorumatsuchmeeting,lessthanamajority, however,havingthepowertoadjourn.Whenaspecified itemofbusinessisrequiredtobevotedonbyaclassorseries,votingasaclass,theholdersofamajorityofthesharesofsuchclassorseriesshallconstitute aquorumforthetransaction ofsuchspecified itemofbusiness.
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| Whenaquorumisoncepresenttoorganizeameeting,itisnotbroke'nbythesubsequent withdrawal ofanysharcholdcrs.
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| ExceptasmaybeprovidedbyorpursuanttotheCertificate ofIncorporation, atallshareholders'eetings eachshareholder entitledtovoteshallbeentitledtoonevoteforeachshareheldbyhimorher,andmayvoteandotherwise acteitherinpersonorbyproxy,asprovidedforinSection1.11.\Section1,6Adjourntnent TheChairmanofthemeeting,oramajorityofthesharessorepresented atthemeeting,mayadjournthemeetingdespitetheabsenceofaquorum.Whenashareholders'eeting isadjourned toanothertimeorplace,itshallnotbenecessary togiveanynoticeoftheadjourned meetingifthetimeandplacetowhichthemeetingisadjourned areannounced atthemeetingatwhichtheadjournment istaken,andattheadjourned meetinganybusinessmaybetransacted thatmighthavebeentransacted ontheoriginaldateofthemeeting.However,ifaftertheadjournment theBoardofDirectors fixesanewrecorddatefortheadjourned meeting,anoticeoftheadjourned meetingshallbegiventoeachshareholder ofrecordonthenewrecorddateentitledtonoticeunderthisSection1.6.
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| I,Section1',,Notice ofMeetingsIII'Writtennotice"of thedate,timeandplaceofeveryshareholders'eeting shall'begivenpersonally, orbyfirstclassmail(notlessthanten(10)norinore'than fifty(50)daysbeforeth'e'date"of'the"meeting) orbgthirdclassmail,(not lessthantwenty-four (24)normorethanfifty(50)daysbeforethedateofthemeeting)orasotherwise inaybepermitted bylaw,to"eachshareholder ofrecordasofthedatefixedby(heBoardofDirectors, pursuanttoSection1.9hereof,andsuchothernoticeshallbegivenasmay'berequiredbylaw'.'"lI:Noticeofaspecialshareholders'eeting shallindicatethatitisbeingissuedbyoratthedirection ofthepersonorpersonscallingthemeetingandshallstatethepurpose(s) forwhichthemeetingiscalled.'IilIlIfmailed,suchnoticeshallbedeemedgivenwhendeposited intheUnitedStatesmail,withpostagethereonprepaid,directedtotheshareholder athisorheraddressasitappearsontheshareholders'ist, record,or,ifheorshe,shall havefiledwiththeSecretary oftheCompanya,written requestthatnoticesto'himor.herbe'mailed to,someotheraddress,.then directedtohimorheratsuchotheraddress.~~,llIfIl[Section1.8waiverandConsentNoticeofmeetingneednotbegiventoanyshareholder'who submits'asigned'waiver ofnotice,iripersonorbyproxy;whetherbeforeorafterthemeeting.Theattendance ofanyshareholder
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| 'ataineeting, inpersonorbyproxy,withoutobjecting tothelackofnoticeofsuchmeetingprior'tothe'onclusion ofMe"'meeting",
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| shallconstitute awaiverofnoticebysuchshareholder.
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| l,IlIIThetransactions ofanyshareholders'eeting, howevercalledandnoticed,areasvalidasthoughhadat'ameetingdulyheldafterregularcallandnotice,ifaquorumispresenteitherinpersonorbypr'oxy,andif,eitherbeforeorafterthemeeting,eachofthepersonsentitledtovote,notpresentinpersonorbyproxy,signsawrittenwaiverofnotice,oraconsenttotheholdingofthemeeting,oranapprovaloftheminutesthereof.IAllsuchwaivers,consentsorapprovals shallbefiledwiththecorporate recordsorm'adeapartoftheinutesofthemeeting.Executors, administrators, guardians,
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| : trustees, andotherfiduciaries entitledtovotesharesmaysignsuchwaivers,consentsandapprovals.
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| I~IlI''ection1,9"FixingRecordDateIII~Fqrthepurposeofdetermining theshareholders entitledtonoticeofortovoteatanyshareholders'eeting oranyadjournment-thereof, orforthepurposeofdetermining shareholders entitledtoreceivepaymentofanydividendortheallotment ofanyrights,orforthepurposeofanyotheraction,theBoardofDirectors mayfix,inadvance,adateastherecorddateforanysuchdetermination.
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| Suchdateshallnotbemorethanfifty(50)norlessthanten(10)daysbeforethedateofsuchmeeting,normore.thanfifty(50)days,beforethedateofsuchaction.,1IltI'ISection1.10ListofShareholders atMeetingsAlistof'shareholders asoftherecorddate,certified by"the,Secretary oranyAssistant Secretary'or byatr'ansfer agent,shallbeproducedatanyshareholders'eeting upontherequestthereatorpriortheretoofanysh'areholdhr.
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| Iftherighttovoteatanymeetingischallenged, theinspectors, orthepersonpresiding thereat,shallrequiresuchlistofshareholders tobeproducedas"evidenc'e oftherightofthepersonschallenged tovoteatsuchmeeting',
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| andallpersonswhoappearfromsuchlisttobeshareholders entitledtovotethereatmayvoteats'uchmeeting'.'
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| b~',lSection1.11Proxies.rn(a)-.,Generally.
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| EverypersonentitledtovoteorexecuteconsentsshallPavetheright..to dosoeitherinpersonor.,byoneormoreagentsauthorized, byawrittenproxyexecutedbysuchpersonorhisdulyauthorized gent-andfiledwiththeSecretary, oftheCompany.Anyexecutor, administrator, guardiani,trustee orotherduciary,may,giveproxies.
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| (b)TermofProxies.Aproxyisnotvalidaftertheexpiration ofeleven(11)monthsfromthedateofitexecution, unlessthelengthoftimeforwhichsuchproxyistocontinueinforceisotherwise specified therein,whichinnocaseshallexceedseven(7)yearsfromthedateofitsexecution.
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| (c)Revocation andSuspension ofProxies.Anyproxydulyexecutedcontinues infullforceandeffectandisnotrevokeduntilaninstrument revokingit,oruntiladulyexecutedproxybearingalaterdate,isfiledwiththeSecretary oftheCompany.Aproxyisnotrevokedbythedeathorincapacity ofthemakerunless,beforethevoteiscountedortheauthority isexercised, writtennoticeofthedeathorincapacity isgiventotheCompany.Notwithstanding thatavalidproxyisoutstanding, ifthepersonexecuting theproxyispresentatthemeetingandelectstovoteinperson,thenthepowersoftheproxyholderaresuspended, exceptinthecaseofaproxycoupledwithaninterest(whichstatesthatfactonitsface).(d)VotingbyTivoorMoreProxies.Ifanyinstrument ofproxydesignates twoormorepersonstoactasproxy,intheabsenceofanyprovision intheproxytothecontrary, thepersonsdesignated mayrepresent andvotethesharesinaccordance withthevoteorconsentofthemajorityofthepersonsnamedassuchproxies.Ifonlyonesuchproxyispresent,suchproxymayvotealltheshares,andallthesharesstandinginthenameoftheprincipal(s) forwhomsuchproxyactsshallbedeemedrepresented forthepurposeofobtaining aquorum.Theforegoing provisions shallapplytothevotingofsharesbyproxiesforanytwoormoreadministrators, executors,
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| : trustees, orotherfiduciaries, unlessaninstrument ororderofcourtappointing themotherwise directs.(e)Director's Determination ofExecution andUseofProxies.TheBoardofDirectors may,inadvanceofanyannualorspecialmeetingoftheshareholders, prescribe additional regulations concerning themannerofexecution andfilingofproxiesandthevalidation ofthesame,whichareintendedtobevotedatanysuchmeeting.Section1.12NoticeofShareholder BusinessandNominations A.AnnualShareholders'eetings (1)Nominations ofpersonsforelectiontotheBoardofDirectors oftheCompanyandtheproposalofbusinesstobeconsidered bytheshareholders maybemadeatanannualshareholders'eeting (a)pursuanttotheCompany's noticeofmeeting,(b)byoratthedirection oftheBoardofDirectors or(c)byanyshareholder oftheCompanywhowasashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisSection1.12whoisentitledtovoteatthemeetingandwho'complies withthenotice'of procedu'res setforthinthisSection1.12.(2)Fornominations orotherbusinesstobeproperlybroughtbeforeanannualmeetingbyashareholder pursuanttoclause(c)ofparagraph (A)(1)ofthisSection1.12ofArticleI,theshareholder musthavegiventimelynoticethereofinwritingtotheSecretary oftheCompanyandsuchotherbusinessmustotherwise beapropermatterforshareholder action.Tobetimely,ashareholder's noticeshallbedelivered totheSecretary attheprincipal executive officesoftheCompanynotlaterthanthecloseofbusinessonthe60thdaynorearlierthanthecloseofbusinessonthe90thdaypriortothefirstanniversary ofthepreceding year'sannualmeeting;provided, however,thatintheeventthatthedateoftheannualmeetingismorethan30daysbeforeormorethan60daysaftersuchanniversary date,noticebytheshareholder tobetimelymustbesodelivered notearlierthanthecloseofbusinessonthe90thdaypriortosuchannualmeetingandnolaterthanthecloseofbusinessonthelaterofthe60thdaypriortosuchannualmeetingorthe10thdayfollowing thedayonwhichpublicannouncement ofthedateofsuchmeetingisfirstmadebytheCompany.Innoeventshallthepublicannouncement ofanadjournment ofanannualmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.Suchshareholder's noticeshallsetforth(a)astoeachpersonwhomtheshareholder proposestonominateforelectionorreelection asaDirectorallinformation relatingtosuchpersonthatisrequiredtobedisclosed insolicitations ofproxiesforelectionofDirectors inanelectioncontest,orisotherwise
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| : required, ineachcasepursuanttoRegulation 14AundertheSecurities ExchangeActof1934,a~amended(the"Exchange Act")andRule14a-11thereunder (including suchperson'swrittenconsenttobeih~
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| amedintheproxystatement asanomineeandtoservingasaDirectorifelected);
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| (b)astoanyotherbusinessthat,theshareholder proposestobringbeforethemeeting,abriefdescription ofthebusinessdesiredtobebroughtbeforethemeeting,thereasonsforconducting suchbusinessatthemeetingandanymaterialinterestinsuchbusinessofsuchshareholder andthebeneficial owner,ifany,onwhosebehalf,theproposalismade;and(c)asto,theshareholder givingthenoticeandthebeneficial owner,ifany,onwhose.behalfthenomination orproposalismade(i)thenameandaddressofsuchshareholder, astheyappearontheCompany's books,andofsuchbeneficial ownerand(ii)theclassandnumberofsharesoftheCompanywhichareownedbeneficially andofrecordbysuchshareholder andsuchbeneficial owner.(3)Notwithstanding anythinginthesecondsentenceofparagraph (A)(2)ofthisSection1.12ofArticleItothecontrary, intheeventthatthenumberofDirectors tobeelectedtotheBoardofDirectors oftheCompanyisincreased andthereisnopublicannouncement bytheCompanynamingallofthenomineesforDirectororspecifying thesizeoftheincreased BoardofDirectors atleast70dayspriortothefirstanniversary ofthepreceding year-'sannualmeeting,ashareholder's noticerequiredbyparagraph (A)ofSection1.12ofArticleIshallalsobeconsidered timely,but'onlywithrespecttonomineesforanynewpositions createdbysuchincrease, ifitshallbedelivered totheSecretary attheprincipal executive officesoftheCompanynotlaterthanthecloseofbusinessonthe10thdayfollowing thedayonwhichsuchpublicannouncement isfirstmadebytheCompany.B.SpecialShareholders'eetings Onlysuchbusinessshallbeconducted ataspecialshareholders'eeting asshallhavebeenbroughtbeforethemeetingpursuanttotheCompany's noticeofmeeting.Nominations ofpersonsforelectiontotheBoardofDirectors maybemadeataspecialshareholders'eeting atwhichDirectors aretobeelectedpursuanttotheCompany's noticeofmeeting(a)byoratthedirection oftheBoardofDirectors or(b)providedthattheBoardofDirectors hasdetermined thatDirectors shallbeelectedatsuchmeeting,byanyshareholder oftheCompanywhoisashareholder ofrecordatthetimeofgivingofnoticeprovidedforinthisSection1.12whoisentitledtooteatthemeetingandwhocomplieswiththenoticeprocedures setforthinthisSection1.12.Intheeventtheompanycallsaspecialshareholders'eeting forthepurposeofelectingoneormoreDirectors totheBoardofDirectors, anysuchshareholder maynominateapersonorpersons(asthecasemaybe),forelectiontosuchposition(s) as'specified intheCompany's noticeofmeeting,iftheshareholder's noticerequiredbyparagraph (A)(2)ofthisSection1.12ofArticleIshallbedelivered totheSecretary attheprincipal executive officesoftheCompanynotearlierthanthecloseofbusinessonthe90thdaypriortosuchspecialmeetingandnotlaterthanthecloseofbusinessonthelaterofthe60thdaypriortosuchspecialmeetingorthe10thdayfollowing thedayonwhichpublicannouncement isfirstmadeofthedateofthespecialmeetingandofthenomineesproposedbytheBoardofDirectors tobeelectedatsuchmeeting.Innoeventshallthepublicannouncement ofanadjournment ofaspecialmeetingcommenceanewtimeperiodforthegivingofashareholder's noticeasdescribed above.C.General(1)Onlysuchpersonswhoarenominated inaccordance withtheprocedures setforthinthisSection1.12ofArticleIshallbeeligibletoserveasDirectors andonlysuchbusinessshallbeconducted atashareholders'eeting asshallhavebeenbroughtbeforethemeetinginaccordance withtheprocedures setforthinthisSection1.12ofArticleI.Exceptasotherwise providedbylaw,theChairmanofthemeetingshallhavethepower,anddutytodetermine whetheranomination oranybusinessproposedtobebroughtbeforethemeetingwasmadeorproposed, asthecasemaybe,inaccordance withtheprocedures setforthinthisSection1.12ofArticleIand,ifanyproposednomination orbusinessisnotincompliance withthisSection1.12ofArticleI,todeclarethats'uchdefective proposalornomination shallbedisregarded.
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| ,(2)ForpurposesofthisSection1.12ofArticleI,."public announcement" shallmeandisclosure inapressreleasereportedbytheDowJonesNewsService,Associated Pressorcomparable nationalnewsserviceorinaocumentpubliclyfiledbytheCompanywiththeSecurities andExchangeCommission pursuanttoSection13,4,or15(d)oftheExchangeAct.
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| (3)Notwithstanding'the foregoing" provisions ofthisSection1.12'ofArticle',
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| 'ashareholder shallalscomplywithallapplicable reqilirements oftheExchangeActandthe'rules andregulations thereunder withrespecttothematterssetforthinthisSection1.12ofArticleI.Nothin'ginthisSection1.12of'ArticleIshallbedeemedtoaffectanyrights(i)ofshareholders torequestinclusion ofproposals intheCompany's proxystatement pursuanttoRule14a-8'under theExchangeActor(ii)oftheholders'of anyseri'esof-Preferred StocktoelectDirectors underspecified'ciicu'mstances.
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| 1Section1.13Inspectors ofElections Votingatshareholders'eetings neednotbeconducted byinspectors.
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| unlessashareholder presentinpersonorbyproxyandentitledtovoteatsuchmeetingsorequests, TheBoardofDirectors, inadvance,of anyshareholders'eetingmay appointoneormoreinspectors to,actatthemeetingoranyadjournment thereof.Ifinspectors arenotsoappointed, thepersonpresiding atashareholders'eeting may,andontherequestofanyshareholder entitledtovote,thereatshall,appointtwoinspectors.
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| Incaseanypersonappointed failstoappearoract,thevacancymaybefilledbyappointment madebytheBoardinadvanceofthe,meetingoratthemeetingbythepersonpresiding thereat.Eychinspector, beforeenteringuponthedischarge ofhisorherduties,;shall takeandsignanoathfaithfully toexecutethedutiesofinspector atsuchmeetingwithstrictimpartiality andaccording tothebestofhisorherability.Theinspectors shalldetermine thenumberofsharesoutstanding andthevotingpowerofeach,thesharesrepresented atthemeeting,theexistence ofaquorumandthevalidityandeffectofproxies,andshallreceivevotes,ballotsorconsents, hearanddetermine allchallenges andquestions arisinginconnection withtherighttovote,countandtabulateallvotes,ballotsorconsents, determinethe result,anddosuchactsasarepropertoconducttheelectionorvotewith,fairness,,to all,shareholders..On requestofthepersonpresiding at,themeetingoranyshareholder entitledtovotethereat,theinspectors shallmake,areportinwritingofanychallenge, questionormatterdetermined bythemandexecuteacertificate ofanyfactfoundby.them.5~Section1.14VoteofShareholders Subjecttotherightsofholders ofanyseriesofPreferred'Stock,'Directois"shall, exceptasotherwise requiredbylaworbytheCertificate of'Incorporation,
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| 'beelectedbyaplurality ofthevotescas'tatameetingofshareholders bytheholdersofsharesentitledtovoteintheelection.
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| Subjecttotherightsofholder'sofanyseriesofPreferred Stock,wheneveranycoiporate action,otherthantheelectionofDirectors,'is tobetakenbyvoteoftheshareholders, itshall,exceptasotherwise re'quired bylaworbytheCertific'ate ofIncorporation, be"authorized byamajorityofthevotescastatameetingofshareholders bytheholdersofsharesentitledtovotethereon.ARTICLEHBOARDOFDIRECTORS
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| /Section2.1NumberofDirectors TheaffairsofthisCompanyshallbemanagedbynolessthan.ninenormorethantwelveDirectors asfixedbyresolution adoptedbyamajorityoftheentireB'oard.~,Section2.2Elections, TermsandVacancies fTheBoardofDirectors shallbedividedintothreeclassesdesignated ClassI,ClassIIandClassIII.SuchclassesshallbeasnearlyequalinnumberasthethentotalnumberofDirectors constituting theentireBoardpermits.Atthefirstannualmeeting'ofshareholders,'r-any specialmeetinginlieuthereof,ClassI,ClassIIandClassIIIDirectors shallbeelectedfortermsexpiringatthenextsucceeding annu'almeeting,thesecondsucceeding annualmeetingandthethirdsucceeding annualmeetin'g, respectively, anduntiltheirrespectiv successors areelectedandqualified.
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| Ateachannualshareholders'eeting aftersuch'firstannual(orspecialI14 ectingofshareholders, theDirectors chosentosucceedthoseintheclasswhosetermsthenexpireshallbeelectedbyshareholders fortermsexpiringatthethirdsucceeding annualmeetingafterelection, orforsuchlessertermforwhichoneormoremaybe'nominated inaparticular caseinordertoassurethatthenumberofDirectors ineachclassshallbeappropriately constituted anduntiltheirrespective successors areelectedandqualified.
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| NewlycreatedDirectorships oranydecreaseinDirectorships resulting fromincreases ordecreases inthenumberofDirectors shallbesoapportioned amongtheclassesofDirectors astomakealltheclassesasnearlyequalinnumberaspossible.
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| Vacancies ontheBoardatanytimeandforanyreasonexcepttheremovalofDirectors withoutcausemaybefilledbyamajorityofthe,Directors theninoffice,althoughlessthanaquorum.ADirectorelectedtofillavacancy,unlesselectedbytheshareholders, shallholdofficeuntilthenextmeetingofshareholders atwhichtheelectionofDirectors isintheregularorderofbusiness, anduntil'his orhersuccessor hasbeenelectedandqualified.
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| Notwithstanding theforegoing, whenevertheholdersofanyoneormoreclassesorseriesofStock(otherthantheCommonStock),noworhereafter authorized, shallhavetheright,votingseparately byclassorseries,toelectDirecto'rs atanaiinual'or specialshareholders'neeting, theelection, termofoffice,fillingofvacancies andotherfeaturesofsuchDirdctorships shallbegovernedbyanytermsoftheCertificate ofIncorporation oftheCompanyapplicable thereto,andsuchDirectors soelectedshallnotbedividedintoclassespursuanttothisSection2.2unlessexpressly providedbysuchterms.Section29MeetingsoftheBoardAnannualmeetingoftheBoardofDirectors shallbeheldineachyearassoonaspracticable aftertheannualmeetingofshareholders, Regularmeetingsofthe,Boardshallbeheld.atsuchtimesasmaybefixedbytheBoard.NonoticeneedbegivenofannualorregularmeetingsoftheBoardofDirectors.
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| Section2.4NoticeandAdjourmnenr NoticeofeachspecialmeetingoftheBoardshallbegiventoeachdirectoreitherbymailnotlaterthanoon,NewYorktime,onthefifthbusinessdaypriorto"themeetingorby'telegram, byfacsimile transmission, ywrittenmessageororallytotheDirectors notlaterthannoon,NewYorktime,onthedaypriortothemeeting.Noticesshall'bedeemedtohavebeengivenbymailwhendeposited intheUnitedStatesmail,bytelegramatthetimeoffiling,byfacsimile transmission uponconfirmation ofreceipt,and,bymessenger atthetimeofdeliverybythemessenger.
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| Noticesbymail,telegram, facsimile transmission ormessenger shallbesenttoeachDirectorattheaddressorfacsimile numberdesignated byhimorherforthatpu'rpose, or,ifnonehasbeensodesignated, athisorherlastknownresidence or'business address.NoticeofameetingoftheBoardofDirectors neednotbegiventoanyDirectorwhosubmitsasignedwaiverofnoticewhetherbeforeorafterthemeeting,orwhoattendsthemeetingwithoutprotesting, priortheretooratitscommencement, thelackofnoticetohimorher.Anoticeorwaiverofnoticeneednot,specifythepurposeofanymeetingoftheBoardofDirectors.
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| AmajorityoftheDirectors present,whetherornotaquorumispresent,mayadjournanymeetingtoanothertimeandplace.Noticeofanyadjournment ofameetingtoanothertimeorplaceshallbegiveninthemannerdescribed abovetotheDirectors whowerenotpresentatthetimeoftheadjournment and,unlesssuchtimeandplaceareannounced atthemeeting,totheotherDirectors.
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| Section2SFiscalYearThefiscalyearoftheCompanyshallbefixedbytheBoardofDirectors.
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| Section2.6QuandUnlessagreaterquorumisrequiredbylaw,amajorityofthenumberofdirectors atthetimeservingontheBoardofDirectors shallconstitute aquorumforthetransaction ofbusiness, orofanyspecified itemofbusiness,
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| : provided, however,thataquorumshallnotconsistoflessthanone-third oftheentireBoardofDirectors.
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| Exceptwhereotherwise providedbylaworintheCertificate ofIncorporation ortheseBy-Laws,thevoteofamajorityftheDirectors presentatameetingatthetimeofsuchvote,ifaquorumisthenpresent,shallbetheactoftheoard.
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| Section2.7"'nanimous WrittenConsentAnyaction,authorized, inwriting,byalloftheDirectors entitledtovotethereonandfiledwiththeminutesoftheCompanyshallbetheactoftheBoardwiththesameforceandeffectasifthesamehadbeenpassedbyunanimous voteatadulycalledmeetingoftheBoard.Section2.8Resignation ofDirectors AnyDirectoroftheCompanymayresignatanytime.Suchresignation shallbemadeinwritingandshalltakeeffectatthetimespecified therein,or,ifnotimebespecified, atthetimeofitsreceiptbytheChairmanorSecretary.
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| Theacceptance ofaresignation shallnotbenecessary tomakeiteffective unlesssospecified therein.Section2.9RemovalofDirectors Directors mayberemovedforcausebyavoteofshareholders entitledtovotethereon,orbyactionoftheBoardofDirectors.
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| Directors shallnotberemovedwithoutcausebyvoteoftheshareholders, exceptinthecaseofaDirectorelectedbytheholdersofanyclassorseries(otherthantheCommonStock),noworhereafter authorized, votingasaclassorseries,whensoentitledbytheprovisions oftheCertificate ofIncorporation applicable thereto.Section2.10Compensation ofDirectors MembersoftheBoardshallreceivesuchfeesandcompensation fixedfromtimetotimebytheBoardandshallbereimbursed forreasonable expensesforattending BoardMeetings.
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| Section2.11TimeandPlaceofMeetingsMeetingsoftheBoardofDirectors shallbeheldinsuchmonthonsuchdayatsuchhourandatsuchplacastheBoardmayfromtimetotimedirect.Section2.12SpecialMeetingsSpecialmeetingsoftheBoardmaybeheldonthecalloftheChairman, thePresident ortheSecretary oruponwrittenrequestofamajorityoftheDirectors "atthetimeservingontheBoardaddressed totheSecretary.
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| Section2.13Telephonic MeetingsAnyoneormoremembersoftheBoardoranycommittee oftheBoardmayparticipate inameetingoftheBoardorcommittee bymeansofaconference telephone orsimilarcommunications equipment allowingallpersonsparticipating inthemeetingtoheareachotheratthesametime',andparticipation bysuchmeansshallconstitute'presence inpersonatameeting.L-16 ARTICLEIIICOMMITTEES Section3.1Organization andAuthority TheBoardofDirectors, byresolution adoptedbyamajorityoftheentireBoard,maydesignate fromamongitsmembers,suchcommittees astheBoardofDirectors mayfromtimetotimedetermine, including thosecreatedbySections3.2,3.3and3.4ofthisArticleIII,eachconsisting ofthreeormoreDirectors, andeachofwhich,totheextentprovidedintheresolution, shallhavealltheauthority oftheBoard,exceptthatnosuchcommittee shallhaveauthority asto(1)thesubmission toshareholders ofanyactionthatneedsshareholders'pproval; (2)thefillingofvacancies intheBoardorinanycommittee thereof;(3)thefixingofcompensation oftheDirectors forservingontheBoardoronanycommittee thereof;(4)theamendment orrepealoftheBy-Laws,ortheadoptionofnewBy-Laws;(5)theamendment orrepealofanyresolution oftheBoardwhich,byitsterms,shallnotbesoamendable orrepealable; (6)thefixingorchangingofthesizeoftheBoard;or(7)theremovalorindemnification ofDirectors.
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| Intheeventoftheabsenceofanymember(s) fromameetingofacommittee replacements maybemadefromDirectors designated asalternate membersofsuchcommittee bytheBoard.TheChairman, orinhisabsenceorshouldhesodirect,thePresident, orinhisabsence,aVicePresident, ifsuchoffi'cers'are membersofthecommittee, shallpresideatmeetingsofthecommittee, otherwise thepresiding officershallbedesignated bymajorityvoteofthecommittee.
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| Vacancies inthemembership ofthecommittee shallbefilledbytheBoardofDirectors ataregularorspecialmeetingoftheBoardofDirectors.
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| UnlesstheBoardofDirectors otherwise
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| : provides, eachcommittee designated bytheBoardmayadopt,amendandrepealrulesfortheconductofitsbusiness.
| |
| Section3.2Executive Committee E~ThereshallbeanExecutive Committee ofnotmorethansix(6)Directors tobe,designated bytheBoard.eExecutive Committee shallhaveandmayexercisealloftheauthority andpowersoftheBoardsubjecttoimitations prescribed bylawortheseby-laws.TheSecretary oftheCompanyshallbetheSecretary oftheExecutive Committee.
| |
| Section3;3Organization andNominating Committee ThereshallbeanOrganization andNominating Committee ofnotmorethansix(6)Directors tobedesignated bytheBoard.TheOrganization andNominating Committee shallhaveandmayexercisealloftheauthority andpowersoftheBoardnecessary toaddressexecutive compensation, reviewmanagement succession plansandrecommend nomineestotheBoard,subjecttolimitations prescribed bylawortheseby-laws.TheSecretary oftheCompanyshallbetheSecretary oftheOrganization andNominating Committee.
| |
| Section3.4AuditCommittee ThereshallbeanAuditCommittee ofnotmorethansix(6)Directors tobedesignated bytheBoard.TheAuditCommittee shallhaveandmayexercisealloftheauthority andpowersoftheBoard,necessary toreviewandmonitoraccounting andcontrolprocedures, generalauditingandbusinesspractices, externalfinancial reporting practices, andethicalstandards fortheCompany,subjecttolimitations prescribed bylawortheseby-laws.TheSecretary oftheCompanyshallbetheSecretary oftheAuditCommittee.
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| Section3.5Actionb'yaCommittee Thea'ctofamajorityofthemembersofacommittee presentatanymeetingatwhichaquorumispresentshallbetheactofsuchcommittee.
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| Themembersofacommittee shallactonlyasacommittee, andtheindividual embersthereofshallhavenoindividual powersassuch.Eachcommittee maymakesuchrulesasitmaydeempedientfortheregulation andcarryingonofitsmeetingsandproceedings.
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| Section3.6QuorumIAmajorityofthemembersofacommittee shallconstitute aquorum.Section3.7ReportstoBoardofDirectors "Each'such committee shallkeeparecordofitsproceedings andmakereportstotheBoardatitsnext'regular meeting."
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| JJ(HJ;Section3.8,Compensation ofCommittee MembersIMembers'f committees ofthe'Boardshallreceivesuchfeesandcompensation asfixedfromtimetotimebytheBoardandshallbereimbursed forreasonable exp'enses foratte'nding committee meetings.
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| IJIIII~I,I'Section3.9Resignation andRemovalofCommiltee Members,Anymemberofanycommittee mayresignatanytime.Suchresignation shallbemadeinwritingand,shall takeeffectatthetimespecified therein,,or, ifnotimebespecified, atthetimeofitsreceiptbytheChairmanorSecretary.
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| Theacceptance ofaresignation shallnotbenecessary tomakeiteffective unlesssospecified therein.Committee membersmayberemovedbyactionoftheBoardofDirectors, withorwithoutcause.Section3.10Unanimous WrittenConsentAnyactionauthorized inwriting,byallofthemembersofacommittee andfiledwiththeminutesofthe.,Company'shall.be theactofthatcommittee withthesameforceandeffectasif;thesamehadbeenpassedbyunanimous vote'athdulycalled'meetingofsuchcommittee.
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| ('JSection3.11PlaceofCommittee MeetingsthemembersoftheasnoticeofspecialMeetingsofeachcommittee shallbeheldinsuchmonthonsuchdayatsuchhourandatsuchplaceassuchcommittee mayfromtimetotimedirect.~'Ji~'HI.Section3.12JNoiice,JI~'..'rUnlessotherwise providedbyresolution oftheBoardorbyvoteofamajority'ofrelevantcommittee, noticeofcommittee meetingsshallbegiveninthesamemannermeetingsoftheBoardistobegivenunderSection2.4oftheseBy-Laws.'(ARTICL'EIVOFFICERSANDTHEIRDUTIESJI.Section4,1OfficersAssoonasmaybeaftertheelectionoftheDirectors atameetingoftheshareholders, theBoardofDirectors shallelectoneofitsnumberPresident, andmayelectoneofitsnumberChairman.
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| ThePresident shallbetheChiefExecutive OfficerexceptthatifaChairmanbeelected,theBoardmaydesignate eithertheChairmanorthePresident asChiefExecutive Officer.Anytwoormoreofficesmaybeheldbythesameperson,excepttheofficesofPresident'and Secretary.
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| TheBoardmayelectorappointsuchotherofficersandagentsasit'maydeeproper.I.'I" Section4.2TennafOfjice;Resignation; Removal;Vacancies Exceptasotherwise providedintheresolution of.theBoardofDirectors electingorappointing anyofficer,allofficersshallbeelectedorappointed toholdofficeuntilthemeetingoftheBoardofDirectors following thenextsucceeding annualmeetingofshareholders.
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| Eachofficershallholdofficeforthetermforwhichheorsheiselectedorappointed, anduntilhisorhersuccessor hasbeenelectedorappointed andqualified.
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| AnyofficermayresignatanytimebygivingwrittennoticetotheBoardortotheChairman, ifany,orthePresident ortheSecretary oftheCompany.Suchresign'ation shalltakeeffectattlietimespecified therein,andunless'otherwise specified thereinrioacceptance ofsuchresignation shallbenecessary tomakeiteffective.
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| AnyofficermayberemovedbytheBoard,withorwithoutcause,atanytime.Removalofanofficerwithoutcauseshallbewithoutprejudice tohisorhercontractrights,ifany,"withtheCompany,buttheelectionorappointment ofanofficershallnotofitselfcreatecontractrights.'Any vacancyoccurring inanyofficeoftheCompanybydeath,resignation, removalorotherwise maybe'filled fortheunexpired portionofthetermbytheBoard.Section4.3PowersandDutiesTheofficersoftheCompanyshallhavesuchauthority andperformsuchdutiesinthemanagement oftheCompanyasmaybeprescribed bytheBoardofDirectors and,totheextentnotsoprescribed, asgenerally pertaintotheirrespective offices,subjecttothecontroloftheJ3oard.Securities ofothercompanies heldbytheCompanymaybevotedbyanyofficerdesignated by;,'heBoardand,intheabsenceofanysuchdesignation, bytheChairman, thePresident, anyVicePresident, theSecretary ortheTreasurer.
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| TheBoardmayrequireanyofficer,agentoremployeetogivesecurityforthefaithfulperformance ofhisduties.Section4.4SalariesSalariesofallofficersoftheCompanyshallbefixedbytheBoardfromtimetotime;andsalariesofallitheremployees oftheCompanyshallberegulated bytheChiefExecutive Officer.Section4.5ChairmanTheChairmanshallpresideatallmeetingsoftheshareholders andtheBoardofDirectors atwhichheorsheshallbepresent.WhentheChairmanisalsodesignated theChiefExecutive Officer,heorsheshallhavegeneralandactivemanagement ofthebusinessoftheCompanyandshallseethatallordersandpoliciesoftheBoardofDirectors arecarriedintoeffect.Section4.6ViceChairmanTheViceChairmanshalldoandperformallsuchdutiesasshallbeassignedtohimorherbytheChairmanorrequiredbytheBoardofDirectors.
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| Section4.7President IntheabsenceofaChairmanorshouldtheChairmansodirect,thePresident shallpresideatallmeetingsoftheshareholders andoftheBoardofDirectors atwhichheorsheshallbepresent.InthecaseoftheChairmanhavingbeendesignated asChiefExecutive Officer,thePresident shall(subjecttothedirection oftheChairman) exercisegeneralcontrolandsupervision over,alltheaffairsoftheCompanyandgenerally doandperformthosedutiesasusuallyappertain totheofficeofthePresident, orwhichmaybeassignedtohimorhcrbytheBoardofDirectors.
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| ShouldtherebenoChairmanorshouldthePresident bedesignated ChiefExecutive OfficeroftheCompany,thePresident shallhavegeneralandactivemanagement ofthebusinessoftheCompanyandshallseeatallordersandpoliciesoftheBoardofDirectors arecarriedintoeffect;andthesalariesofallemployees ofeCompany,otherthanofficers, shallberegulated byhimorher.IftheofficeoftheChairmanbevacated,due totheincumbent's death,retirement, orinability toact,orshouldtheDirectors electtoleavesuchofficevacant,thePresident shallbetheChiefExecutive OfficerandshallassumeallthedutiesasoutlinedinSection4.5ofthisArticleIV,untildirectedotherwise bytheBoardofDirectors.'ection 4.8VicePresident
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| ,TheVicePresidents, respectively, shalldoandperformallsuchdutiesasshallbeassignedtothembytheChairmanor,thePresident orrequiredofthembytheBoardofDirectors.
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| Ifdesignated bythe,BoardofDirectors asamemberoftheExecutive Committee, a.VicePresident shallperformthedutiesofPresident incaseofthePresident's absenceorinability toactorincaseofavacancyinthatoffice.AnAssistant VicePresident intheabsenceordisability ofaVicePresident mayatthediscretion oftheChairmanorthePresident performthedutiesofaVicePresident andshallperformsuchotherdutiesasmaybeassignedtohimorher.Section4.9Secretary ItshallbethedutyoftheSecretary tokeepandattesttruerecordsoftheproceedings ofallmeetingsoftheBoardandExecutive Committee, toseethatallnoticesaredulygiven<inaccordance withtheprovisions oftheseBy-Lawsorasrequiredbylawandsafelykeepandaccountfor'alldocuinents, papersandpropertyoftheCompanywhichmaycomeintohisorherpossession.
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| Heorsheshallbethecustodian oftheCorporate SealoftheCompanyandshallaffixandattestthesamewheneveritisnecessary andpropersotodo,andshallperformsuchotherdutiesasmaybeassignedtohimbytheBoard.Intheabsenceordisability oftheSecretary, anAssistant Secretary oranyVicePresident shallperformhisdutiesandsuchotherdutiesasmaybeassignedtohimorher.Section4.10Treasurer TheTreasurer shallhavethecustodyofallmoney,funds,securities andvaluablepapersoftheCompany.Heorsheshallfurnishsuchsecurityforthefaithfulperformance ofhisorherduties'as mayberequiredbytheBoardofDirectors.
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| HeorsheshallreceiveallmoneyduetotheCompanyanddeposit,thesameinitscorporate nameinsuchBanksorTrustCompanies astheBoardofDirectors shalldetermine.'I Heorsheshallsignallchecks,draftsorordersforthepaymentofmoney;andperformsuchotherduties'asmayberequiredofhimorherbytheBoardofDirectors.
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| AnAssistant Treasurer shall,intheabsenceordisability'f theTreasurer, performhisorherdutiesandsuchotherdutiesasmaybeassignedtohimorher.Intheabsenceordisability oftheTreasurer andAssistant Treasurers, anyVicePresident shallperformhisorherdutiesandsuchotherdutiesasmaybeassignedtohimorher.TheTreasurer shall,whendirectedbytheBoardofDirectors, openspecialaccountsintheCompany's depositories; allchecks,draftsorordersforthepaymentofmoneyoutofsuchspecialaccountsshallbesignedinsuchmannerandbysuchofficersoremployees oftheCompanyastheBoardofDirectors shalldesignate; suchchecks,draftsorordersforthepaymentofmoneyshallalsobesigned,if,asandwhensodirectedbyresolution oftheBoardofDirectors, bysuchpersonsandinsuchmannerastheBoardofDirectors shalldetermine.
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| Section4.11Comptroller TheComptroller shallhavechargeofaccounting andrelatedrecords.Heorsheshallsignchecks,draftsorordersforthepaymentofmoney;suchchecks,draftsandorderstobealsosignedbytheTreasurer, andperformsuchotherdutiesasmayberequiredofhimorherbytheBoardofDirectors.
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| AnAssistant, Comptroller shall,intheabsenceordisability oftheComptroller, performhisorherdutiesandsuchotherduties'asmaybeassignedtohimorher.Intheabsenceordisability oftheComptroller andAssistant Comptroller, theChairman, thePresident or.aVicePresident, shallsignallchecks;draftsorordersforthepaymentofmoney;suchchecksdraftsandorderstobealsosignedbyanyotherauthorized officer.L-20 ARTICLEV~SHARESCERTIFICATED SHARE~SSection5.1Certijicates, Registrar andTransferAgentTheSharesoftheCompanymayberepresented bycertificates insuchformsastheBoardofDirectors mayprescribe, signedbytheChairman, thePresident oraVicePresident andtheSecretary oranAssistant Secretary ortheTreasurer oranAssistant Treasurer, andsealedwiththesealoftheCompanyandregistered bysuch'Bank orTrustCompanyasmaybedesignated bytheBoard.IftheCompanyisauthorized toissuesharesofmorethanoneclass,eachcertificate representing sharesissuedbytheCompanyshallsetforthuponthe,faceorbackofthecertificate, orshallstatethattheCompanywillfurnishtoanyshareholder uponrequestandwithoutcharge,afullstatement ofthedesignation, relativerights,preferences andlimitations ofthesharesofeachclassauthorized tobeissuedandthedesignation, relativerights,preferences andlimit'ations ofeachseriesofanyclassofpreferred sharesauthorized tobe'issuedinseriessofarasthesamehavebeenfixedandtheauthority'of theBoardofDirectors todesignate andfixtherelativerights,preferences andlimitations ofotherseries.Eachcertificate representing sharesshallstateuponthefacethereof(1)thattheCompanyisformedunderthelawsoftheStateofNewYork;(2)thenameofthepersonorpersonstowhomissued;and(3)thenumberandclassofshares,andthedesignation oftheseries,ifany,whichsuchcertificate represents.
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| Section5.2Authorization ofFacsimile Signanires andSealTheBoardofDirectors mayauthorize thesignatures oftheChairman, thePresident, aVicePresident, theSecretary oranAssistant Secretary, andtheCorporate SealoftheCompany,tobefacsimiled, engravedorrinted.ISection5.3TransferofCertificared SharesTheSharesoftheCompanyshallbetransferable orassignable inpersonorbyattorney, onlyonthebooksoftheCompany,uponthesurrender ofthecertificate representing thesharestobetransferred orassignedwithproperendorsement
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| 'onthecertificate oronaseparateaccompanying
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| : document, togetherwithsuchevidenceofthepaymentoftransfertaxesandcompliance withotherprovisions oflawastheCompanyoritstransferagentmayrequire.TheTransferAgentoftheCompanyshallbesuchBankorTrustCompanyasmaybedesignated bytheBoard.Section5.4Lost,StolenorDestroyed ShareCertificates TheCompanymayissueanewcertificate forsharesinplaceofanycertificate theretofore issuedbyit,allegedtohavebeenlostor'destroyed, andtheCompanymayrequiretheownerofthelostordestroyed certificate, orsuchow'ner'slegalrepresentative, togivetheCompa'nyabondsufficient toindemnify itagainstanyclaimthatmaybemadeagainstitonaccountoftheallegedlossordestruction ofanysuchcertificate ortheissuanceofanysuchnewcertificate.
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| ''UNCERTIFICATED SHARES'Section5.5Uncertificared SharesThesharesoftheCompanymaybeuncertificated shares.Withinareasonable timeaftertheissuance, orwithintwobusinessdaysafteratransfer, ofuncertificated shares,theCompanyshallsendawrittennoticetotheisteredownerofsuchsharesandtoanyotherpartyrequiredbylawtoreceivesuchnotice.Eachsuchnoticeallstate(1)thattheCompanyisformedunderthelawsoftheStateofNew.York;(2)thenameoftheperson orpersonstowhomissued;(3)thenumberandclassofshares,andthedesignation oftheseries,ifany,witrespecttowhichsuchnoticewasissued;and(4)anyotherinformation requiredbylawtobecontained therein.IftheCompanyisauthorized toissuesharesofmorethanoneclass,eachsuchnoticeshallcontain,orshallstatethattheCompanywillfurnishtoanyshareholder uponrequest.and withoutcharge,afullstatement ofthedesignation, relativerights,preferences andlimitations ofthesharesofeachclassauthorized tobeissuedandthedesignation, relativerights,preferences andlimitations ofeachseriesofanyclassofpreferred sharesauthorized tobeissuedinseriessofarasthesamehavebeenfixedandtheauthority oftheBoardofDirectors todesignate andfixtherelativerights,preferences andlimitations ofotherseries.Exceptasotherwise expressly providedbylaw,therightsandobligations oftheholdersofuncertificated sharesrepresenting sharesofthesameclassandseriesshallbeidentical.
| |
| Section5.6TransferofUncerrijicaled SfiaresSharesoftheCompanyshallbetransferable ontherecordofshareholders uponpresentation totheCompanyoratransferagentofatransferrequestindicating thesharesrequested tobetransferred, withproperendorsement onaseparateaccompanying
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| : document, togetherwithsuchevidenceofthepaymentoftransfertaxesandcompliance withotherprovisions oflawastheCompanyoritstransferagentmayrequire.IARTICLEVIINDEMNIFICATION Section6.1GeneralApplicability Excepttotheextentexpressly prohibited bytheNewYorkBusinessCorporation,Law, theCompanyshallindemnify eachpersonmade,orthreatened tobemade,apartytoanyactionorproceeding, whethercriminalorcivil,byreasonofthefactthatsuchpersonorsuchperson'stestatororintestate isorwasaDirectororOfficeroftheCompany,againstjudgments, fines,penalties, amountspaidinsettlement andreasonable expenseincluding attorney's feesandexpenses, reasonably incurredinenforcing suchperson'srighttoindemnificatio incurredinconnection withsuchactionorproceeding, oranyappealtherein,providedthatnosuchindemnification shallbemadeifajudgmentorother,final adjudication adversetosuchpersonestablishes thatsuchperson'sactswerecommitted inbadfaithorweretheresultofactiveanddeliberate dishonesty andwerematerialtothecauseofactionsoadjudicated, orthatsuchpersonpersonally gainedinfactafinancial profitorotheradvantage towhichsuchpersonwasnot,legally
| |
| : entitled, andprovidedfurtherthat.nosuchindemnification shallberequiredwithrespecttoanysettlement orothernonadjudicated disposition ofanythreatened orpendingactionorproceeding unlesstheCompanyhasgivenitspriorconsenttosuchsettlement orotherdisposition.
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| Section6.2ScopeofIndemnification
| |
| ,TheCompany,shalladvanceorpromptlyreimburse uponrequesttoanypersonentitledtoindemnification hereunder allreasonable,
| |
| : expenses, including attorney's feesandexpenses, reasonably incurredindefending anyactionorproceeding inadvanceofthefinaldisposition thereofuponreceiptofanundertaking byoronbehalfofsuchpersontorepaysuchamountifsuchpersonisultimately foundnottobe,entitledtoindemnification or,whereindemnification isgranted,totheextenttheexpensessoadvancedorreimbursed exceedtheamounttowhichsuchpersonisentitled;
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| : provided, however,thatsuchpersonshallcooperate ingoodfaithwithanyrequestbytheCompanythatcommoncounselbeusedbythepartiestoanactionorproceeding whoaresimilarly situatedunlesstodosowouldbeinappropriate duetoactualorpotential differing interests betweenoramong'suchparties.Section6.3OtherIndemnification Provisions Nothing,hereinshalllimitoraffectanyrightofanyDirector, Officerorothercorporate personnel otherwise thanhereunder toindemnification orexpenses, including attorney's fees,underanystatute,rule,regulatio certificate ofincorporation, by-law,insurance policy,contractorotherwise; withoutaffecting orlimitingtlL-22 ghtsofanyDirector, Officerorothercorporate personnel pursuanttothisArticleVl,theCompanyisauthorized toenterintoagreements withanyofitsDirectors, Officersorothercorporate personnel extending rightstoindemnification andadvancement ofexpensestothefullestextentpermitted byapplicable law.Unlesslimitedbyresolution oftheBoardoEDirectors'or otherwise, theCompanyshalladvancethepaymentofexpensestothefullestextentpermitted byapplicable lawto,andshallindemnify, anyDirector, Officerorothercorporate personwhoisorwasservingattherequestoftheCompany,asadirector, officer,partner,trustee,employeeoragentof'another corporation, whetherforprofitornot-for-profit; orapartnership, jointventure,trustorotherenterprise, whetherornotsuchotherenterprise shallbeobligated foindemnify suchperson.IPSection6.4SurvivalofIndemnification AnythingintheseBy-lawstothecontrarynotwithstanding, noelimination oramendment ofthisArticleVladversely affecting therightofanypersontoindemnification oradvancement ofexpenseshereunder shallbeeffective untilthe60thdayfollowing noticetosuchpersonofsuchaction,andnoelimination oforAmendment tothisArticleVIshalldepriveanysuchperson'srightshereunder arisingoutofallegedoractualoccurrences, actsorfailurestoactpriortosuch60thday.hI'I'Section6SInability toLimitIndemnification TheCompanyshallnot,exceptbyelimination oramendment ofthisArticleVIinamannerconsistent withthepreceding Section6.4andwiththeprovisions ofArticleVIII("Amendments toBy-Laws"),takeanycorporate actionorenterintoanyagreement whichprohibits, orotherwise limitstherightsofany,personto,indemnification inaccordance withtheprovisions ofthisArticleVI.Theindemnification ofanypersonprovidedbythisArticleVIshallcontinueaftersuchpersonhasceasedtobeaDirectororOfficerof'theCompanyandshallinuretothebenefitofsuchperson'sheirs,executors, administra'tors andlegalrepresentatives.
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| tSection6,6Severability Incaseanyprovision inthisArticleVIshallbedetermined atanytimetobeunenforceable inanyrespect,theotherprovisions ofthisArticleVIshallnotinanywaybeaffectedorimpairedthereby,an'dtheaffectedprovision shallbegiventhefullestpossibleenforcement inthe"circumstances, itbeingtheintention oftheCompanytoaffordindemnification andadvancement ofexpenses'to itsDirectors or'fficers, actinginsuchcapacities orintheothercapacities mentioned herein,to*thefullestextentpermitted bylaw.ARTICLEVHOTHER'MATTERS IPIIWSection7w1BookstobeKeptWTheCompanyshallkeep(a)correctandcompletebooksandrecordsofaccount,(b)minutesoftheproceedings oftheshareholders, BoardofDirectors andExecutive Committee, ifany,'and(c)acurrentlistoftheDirectors andOfficersandtheirrbsidence addresses.
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| TheCompanyshallalsokeep,atitsofficelocatedintheCountyofKingsintheStateofNewYorkorattheofficeofitstransferagentorregistrar intheStateofNewYork,ifany,arecordcontaining thenamesandaddresses ofallshareholders, thenumberand'class ofsharesheldbyeachandthedateswhentheyrespectively becametheow'nersofrecordthereof.Anyoftheforegoing books,minutesorrecordsmaybeinwrittenformorinanyotherformcapableofbeingconverted intowrittenformwithinareasonable time.INSection7.2InterestofDirectors and0+cersinTransactions Intheabsenceoffraud,nocontractorothertransaction betweentheCompany'nd oneor'moreofitsirectors, orbetweentheCompanyandanyothercompany,firm,association orotherentityinwhichoneororeofitsDirectors areDirectors orOfficers, orhaveasubstantial financial
| |
| : interest, shallbeeithervoidorL-23 voidable,'rrespective ofwhethersuchint'crested DirectororDirectors arepresentatthemeetingoftheBoardoDirectors, orofacommittee thereof;whichapproves, suchcontractortransaction andirrespective ofwhetherhis,herortheirvotesarecountedfor.suchpurpose:IC%(1)Ifthe.materialfactsas.tosuchDirector's interestinsuchcontractortransaction andastoanysuchcommon-Directorship, officership orfinancial interestaredisclosed ingoodfaithorknowntotheBoardofDirectors, oracommittee thereof,andtheBoardorcominittee approvessuchcontractortransaction byavotesufficient forsuchpurposewithoutcountingthevoteofsuchinterested Directoror,ifthevotesofthedisinterested Directors areinsufficient toconstitute anactoftheBoardunderArticleIIhereof,byunanimous voteofthedisinterested Directors; or(2)IfthematerialfactsastosuchDirector's interestinsuchcontractortransaction an'das'oanysuchcommonDirectorship, officership orfinancial interestare,disclosed ingoodfaith,orknowntotheshareholders entitledto,votethereon,and,such.
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| contractortransaction is,approvedbyvoteofsuch,shareholders.,
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| Iftherewasnosuch'disclosure orknowledge, orifthevoteofsuchinterested Directorwasnecessary fortheapprovalofsuchcontractortransaction atameetingoftheBoardorcommittee atwhichitwasapproved, theCompanymayavoidthecontractortransaction unlessthepartyorpartiestheretoshallestablish affirmatively thatthecontractortransaction wasfairandreasonable astotheCompanyatthetimeitwas'appiovcd bytheBoard,a.committee.
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| ortheshareholders..
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| (kjSection7,3'orporate SealTheBoard.ofDirectors mayadoptacorporate seal,altersuchsealatpleasure, andauthorize ittobeusedbycausingitora,facsimile tobeaffixedor,impressed orreproduced inanyothermanner.Section7.48'hetiNoticeorLapseofTimeUnnecessary WheneverforanyreasontheCompanyortheBoardofDirectors oranycommittee thereofisauthorized ttakeanyactionafternoticetoanypersonorpersonsorafterthelapseofaprescribed periodoftime,suchactionmaybetaken,without,noticeandwithoutthe,lapseofsuchperiodoftimeifatanytimebeforeoraftersuchactionis,completed thepersonorpersonsentitledtopuchnoticeorentitledtoparticipate.
| |
| intheactiontobetakenor,'inthecaseofashareholder, hisorherattorney-in-fact, submitasignedwaiverofnoticeofsuchrequirements.
| |
| ARTICLE,VHI AMENDMENTS TOBY-LAWSSection8.1,ByDirectors dBy-lawsmaybeadopted;amended,orrepealedornewBy-lawsmaybeadoptedbythevoteofamajorityof:theentireBoardofDirectors, atanyregular,or,specialmeetingoftheBoardatwhicha'quorumispresent;provided, however;thatanyadoptionof,amendment toorrepealofanynewBy-laworprovision inconsistent with.ArticleI(Section1.2-"Special.
| |
| meetings",
| |
| 1.4-"Presiding atMeetings" or1.12-,"Notice ofShareholder BusinessandNominations"),
| |
| ArticleII(Section2:1-,"Number;of Directors",
| |
| 2;2-"Elections, TermsandVacancies" or,2.9-"RemovalofDirectors,");
| |
| ArticleVI-"Indemnification" orthisArticleVIH-"Amendments toBy-Laws"hereof,ifbyactionoftheBoard,shallbeonlyupontheapprovalofnotlessthantwo-thirds oftheentireBoardatanysuchregularorspecialmeetingoftheBoardofDirectors.
| |
| ,Section8.2ByShareholders By-lawsmaybeadopted,amended,orrepealedbythevoteofamajorityoftheshareholders entitled' voteintheelectionofanyDirectors (ashereinprovided) atanyannual.orspecialshareholders'eeting atwhic quorumispresent,ifnoticeofsuchproposedactionshallhavebeengiveninaccordance withthenoticerequirements ofSection1.12oftheseBy-laws;provided, however,thatanyadoptionof,amendment toorrepealofanynewBy-lawsorprovision inconsistent withArticleI(Section1.2-"Specialmeetings",
| |
| 1.4-"Presiding atMeetings" or1.12"NoticeofShareholder BusinessandNominations"),
| |
| ArticleII(Section2.1-"NumberofDirectors",
| |
| 2.2-"Elections, TermsandVacancies" or2.9-"RemovalofDirectors"
| |
| ),ArticleVI-"Indemnification" orthisArticleVIII-"Amendments toBy-Laws"hereof,ifbyactionofshareholders, shallbeonlyupontheaffirmative voteofnotlessthantwo-thirds ofthesharesentitledtovotethereonatsuchannualorspecialshareholders'eeting atwhichanysuchactionisproposed.
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