LIABILITIES UNDERTAKING AND INDEMNIFICATION AGREEMENT
UNDERTAKING dated as of June 26, 1997 by LONG ISLAND POWER
AUTHORITY, a corporate municipal instrumentality and political subdivision of
the State of New York ("LIPA") and, as of the closing of the Merger
Agreement (as herein defined), LONG ISLAND LIGHTING COMPANY, a New York
corporation (the "Surviving Corporation"), in favor of LONG ISLAND LIGHTING
COMPANY, a New York corporation ("LILCO"), any successors and assigns of LILCO
pursuant to paragraph 5(b) herein and MARKETSPAN ELECTRIC SERVICES LLC, a New
York limited liability company formerly known as BL TD MANAGEMENT LLC,
MARKETSPAN GENERATION LLC, a New York limited liability company formerly known
as BL GENERATION LLC, MARKETSPAN TRADING SERVICES LLC, a New York limited
liability company formerly known as BL ENERGY MANAGEMENT LLC, MARKETSPAN
UTILITY SERVICES LLC, a New York limited liability company formerly known as
BL UTILITY SERVICES LLC, MARKETSPAN GAS CORPORATION (DBA BROOKLYN UNION), a
New York corporation formerly known as BL GAS, INC., MARKETSPAN CORPORATE
SERVICES LLC, a New York limited liability company formerly known as BL
CORPORATE SERVICES LLC and MARKETSPAN FINANCE CORPORATION (the "Transferee
Subsidiaries"). All references herein to the Surviving Corporation shall mean
LILCO after the Effective Time (as defined in the Merger Agreement). All
references herein to LILCO shall mean Long Island Lighting Company prior to
the Effective Time.
W I T N E S S E T H:
WHEREAS, pursuant to an Agreement and Plan of Exchange and
Merger (the "Merger Agreement") dated as of June 26, 1997 among Parent (used
herein as therein defined), LILCO, LIPA and LIPA Acquisition Corp., a New
York corporation ("LIPA Sub"), LIPA Sub is to merge with and into LILCO;
WHEREAS, pursuant to the Merger Agreement, the assets and
properties of LILCO set forth on Schedule A thereto are to be transferred to
the Transferee Subsidiaries (the "Transferred Assets") and the balance of
LILCO's assets and properties are to be retained by the Surviving Corporation
(the "Retained Assets"); and
WHEREAS, in partial consideration therefor, the Merger
Agreement requires LIPA and the Surviving Corporation to execute and deliver
to LILCO and to each of the Transferee Subsidiaries this Undertaking;
NOW, THEREFORE, in consideration of the premises and other
good and valuable consideration, the receipt and sufficiency of which by LIPA
and the Surviving Corporation are hereby acknowledged, LIPA and the Surviving
Corporation hereby agree as follows:
1. Capitalized terms used herein and not otherwise defined
shall have the meanings assigned to them in the Merger Agreement.
2. LIPA and the Surviving Corporation, jointly and
severally, hereby undertake, assume and agree, subject to the limitations
contained herein, to pay or discharge, when due any and all:
a. Unpaid debts, liabilities or obligations of LIPA, LIPA Sub
or the Surviving Corporation relating to the Retained
Assets, including, without limitation, liabilities or
obligations relating to the Retained Assets resulting or
arising from: (i) claims for personal injury or property
damage, or (ii) non-performance of any contract, commitment
or obligation imposed by law or otherwise; and
b. Legal, accounting, investment banking, engineering and
similar fees, or other transaction expenses ("Transaction
Expenses") incurred by LIPA, LIPA Sub or the Surviving
Corporation in connection with the Merger Agreement and the
other Basic Agreements or the consummation of the
transactions contemplated thereby; and
c. Taxes as defined in Schedule D imposed on LIPA or LIPA Sub
or for which LIPA or LIPA Sub are responsible pursuant to
paragraph 4 of Schedule D; and
d. Liabilities or obligations of LIPA, LIPA Sub or the
Surviving Corporation resulting or arising from any
non-performance by LIPA, LIPA Sub or the Surviving
Corporation of any provision of the Merger Agreement or the
other Basic Agreements; and
e. Liabilities or obligations of LIPA, LIPA Sub or the
Surviving Corporation relating to the indemnification of
Persons who are officers or directors of the Surviving
Corporation or relating to any registration or official
statement or other offering document issued by LIPA, LIPA
Sub or the Surviving Corporation in connection with any
financing required to consummate the transactions
contemplated by the Merger Agreement; and
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f. Debts, liabilities or obligations of LIPA, LIPA Sub or the
Surviving Corporation relating to or arising out of acts or
events occurring after the Closing.
3. Notwithstanding anything to the contrary contained above,
the debts, liabilities and obligations assumed by LIPA and the Surviving
Corporation shall not include any:
a. Unpaid debts, liabilities or obligations of Parent, LILCO or
the Transferee Subsidiaries relating to the Transferred
Assets, including, without limitation, liabilities or
obligations relating to the Transferred Assets resulting or
arising from: (i) claims for personal injury or property
damage, or (ii) non-performance of any contract, commitment
or obligation imposed by law or otherwise; or
b. Except as provided in Section 6.8 of the Generation Purchase
Right Agreement, Transaction Expenses incurred by Parent,
LILCO or the Transferee Subsidiaries in connection with the
Merger Agreement or the other Basic Agreements or the
consummation of the transactions contemplated thereby; or
c. Taxes as defined in Schedule D imposed on Parent, LILCO or
the Transferee Subsidiaries or for which Parent, LILCO or
the Transferee Subsidiaries are responsible pursuant to
paragraphs 3 and 4 of Schedule D; or
d. Liabilities or obligations of LILCO or the Transferee
Subsidiaries resulting or arising from any non-performance by
LILCO or the Transferee Subsidiaries of any provision of the
Merger Agreement or any other Basic Agreement; or
e. Liabilities or obligations of Parent, LILCO or the
Transferee Subsidiaries arising under the Merger Agreement
or the other Basic Agreements; or
f. Debts, liabilities or obligations incurred by Parent, LILCO
or the Transferee Subsidiaries after the Closing; or
g. Liabilities or obligations of Parent, LILCO or the
Transferee Subsidiaries relating to severance, change of
control or similar payments payable to executives of LILCO
in connection with the Closing; or
h. Liabilities or obligations of Parent, LILCO or the Transferee
Subsidiaries relating to the indemnification of
Persons who were officers or directors of LILCO
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prior to the Closing or relating to any proxy or
registration statement issued by LILCO or The Brooklyn Union
Gas Company or any affiliate or successor of either in
connection with the transactions contemplated by the Merger
Agreement; or
i. Liabilities or obligations of Parent, LILCO or the
Transferee Subsidiaries relating to Company
Dissenting Shares or any other shares of any Person
exercising their rights under Section 410 of the
NYBCL; or
j. Liabilities or obligations of LILCO or the Transferee
Subsidiaries relating to or arising out of any filing or
other submission by Parent, LILCO or the Transferee
Subsidiaries with any Governmental Authority; or
k. Liabilities or obligations of LIPA or LIPA Sub relating to or
arising out of any information provided by Parent, LILCO or
the Transferee Subsidiaries to LIPA in writing for inclusion
in any filing or other submission by LIPA or LIPA Sub with any
Governmental Authority or in any offering document prepared by
LIPA or LIPA Sub in connection with any financing required to
consummate the transactions contemplated by the Merger
Agreement.
4. Nothing contained herein shall require LIPA or the
Surviving Corporation to pay or discharge any debt, liability or obligation to
any third party expressly assumed hereby so long as LIPA or the Surviving
Corporation shall in good faith contest or cause to be contested the amount or
validity thereof (and perform their obligations (to the extent applicable)
pursuant to Section 5 hereof), in which case LIPA or the Surviving Corporation,
as the case may be, shall give LILCO and the Transferee Subsidiaries written
notice of its action and the basis therefor and keep LILCO and the Transferee
Subsidiaries informed of the progress and disposition thereof.
5. a. Other than as specifically stated above, neither LIPA
nor the Surviving Corporation assumes any debt, liability or obligation of LILCO
by this Undertaking, and it is expressly understood and agreed that all debts,
liabilities and obligations not assumed hereunder by LIPA or the Surviving
Corporation shall remain the sole obligation of LILCO, its successors and
assigns and, subject to the provisions of Paragraph 5(b) herein, no person, firm
or corporation other than LILCO and the Transferee Subsidiaries shall have any
rights under this Undertaking or the provisions contained herein.
b. Effective upon the Closing Date, LILCO may assign its
rights, obligations and interests hereunder to the Parent or any affiliate
thereof.
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6. a. LIPA and the Surviving Corporation (jointly and
severally, the "Indemnifying Party") shall indemnify and hold harmless LILCO
and the Transferee Subsidiaries, and their respective agents, representatives,
employees, officers and directors (each individually, an "Indemnified Party"
and collectively, the "Indemnified Parties") against any action, proceeding,
claim, judgment, settlement, damage, loss, injury, cost or expense, including,
without limitation, reasonable fees and expenses of attorneys and other
professionals (collectively, "Loss"), arising out of or relating to any debt,
liability or obligation assumed by LIPA and the Surviving Corporation hereby.
b. An Indemnified Party seeking indemnification pursuant to
Section 6(a) herein with respect to a claim, action or proceeding shall give
prompt notice to the Indemnifying Party of the assertion of any claim, or the
commencement of any action or proceeding, in respect of which indemnity may be
sought hereunder; provided that the failure to give such notice shall not
affect the Indemnified Party's rights to indemnification hereunder, except to
the extent that the Indemnifying Party is actually prejudiced thereby. The
Indemnifying Party shall be entitled to control the handling of any such claim
and to defend or settle any such claim, in its or their sole discretion, with
counsel of its own choosing that is reasonably acceptable to the Indemnified
Party; provided, however, that, in the case of any such settlement, the
Indemnifying Party shall obtain written release of all liability of the
Indemnified Party, in form and substance reasonably acceptable to the
Indemnified Party. Notwithstanding the foregoing, each Indemnified Party shall
have the right to employ its own separate counsel in connection with, and to
participate in (but, except as provided below, not control) the defense of,
such claim, but the fees and expenses of such counsel incurred after notice
from the Indemnifying Party of its assumption of the defense thereof shall be
at the expense of such Indemnified Party unless:
(i) the employment of counsel by such Indemnified Party has
been authorized by the Indemnifying Party;
(ii) counsel to such Indemnified Party shall have reasonably
concluded that there may be a conflict on any significant
issue between the Indemnifying Party and such Indemnified
Party in the conduct of the defense of such claim; or
(iii) the Indemnifying Party shall not in fact have employed
counsel reasonably acceptable to the Indemnified Party to
assume the defense of such claim within twenty (20) days
following the receipt by the Indemnifying Party of the
notice specified in the first sentence of this Section
6(b), in each of which
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cases the fees and expenses of counsel for such
Indemnified Party shall be at the expense of the
Indemnifying Party;
provided, however, that, with respect to clauses (ii) and (iii) of this
sentence, the Indemnifying Party shall not be obligated to pay the fees and
expenses of more than one law firm, plus local counsel if necessary in each
relevant jurisdiction, for all such Indemnified Parties with respect to any
claims arising out of the same events or facts or the same series of events or
facts. The Indemnifying Party shall not be entitled, without the consent of
such Indemnified Party, to assume or control the defense of any claim as to
which counsel to such Indemnified Party shall have reasonably made the
conclusion that there may be a conflict on any significant issue between the
Indemnifying Party and such Indemnified Party in the conduct of the defense of
such claim as set forth in clause (ii) above, provided that the foregoing
limitation shall apply only with respect to those issues for which there may
be such a conflict.
7. This Undertaking shall be governed by the laws of the
State of New York. Any dispute with respect to the interpretation or
enforcement hereof shall be submitted to an alternative dispute resolution
procedure to be agreed by the parties.
8. All notices and other communications given or made
pursuant to this Undertaking shall be given or made in accordance with Section
11.2 of the Merger Agreement.
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IN WITNESS WHEREOF, this Undertaking has been executed as of
the date first above written.
LONG ISLAND POWER AUTHORITY
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chairman
By: /s/ ▇▇▇▇▇▇▇ ▇▇▇▇
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Name: ▇▇▇▇▇▇▇ ▇▇▇▇
Title: Deputy Chairman
IN WITNESS WHEREOF, this Undertaking has been executed as of
the 28th day of May, 1998.
LONG ISLAND LIGHTING COMPANY
By: /s/ ▇▇▇▇ ▇▇▇▇▇▇▇▇
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Name: ▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Executive Director
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