FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________ to ________
Commission file number 1-11023
E'TOWN CORPORATION
(Exact name of registrant as specified in its charter)
New Jersey 22-2596330
(State of incorporation) (I.R.S. Employer Identification No.)
600 South Avenue
Westfield, New Jersey 07090
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 654-1234
Title of each class Name of each exchange on which registered
Common Stock, without par value New York Stock Exchange
Commission file number 0-628
ELIZABETHTOWN WATER COMPANY
(Exact name of registrant as specified in its charter)
New Jersey 22-1683171
(State of incorporation) (I.R.S. Employer Identification No.)
600 South Avenue
Westfield, New Jersey 07090
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (908) 654-1234
Title of each class Name of each exchange on which registered
None None
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes __X__ No_____
Indicate the number of shares outstanding of each of the Registrant's classes of
Common Stock as of the latest practicable date
Outstanding at
Class of Common Stock: September 30, 1997
E'town Corporation (without par value) 7,969,748
Elizabethtown Water Company (without par value)* 1,974,902
* All shares are owned by E'town Corporation
===============================================================================
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
INDEX
- -------------------------------------------------------------------------------
PART I - FINANCIAL INFORMATION PAGE
Item 1. Financial Statements
E'TOWN CORPORATION AND SUBSIDIARIES
- Statements of Consolidated Income 1
- Consolidated Balance Sheets 2-3
- Statements of Consolidated Capitalization 4
- Statements of Consolidated Shareholders' Equity 5
- Statements of Consolidated Cash Flows 6
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
- Statements of Consolidated Income 7
- Consolidated Balance Sheets 8-9
- Statements of Consolidated Capitalization 10
- Statements of Consolidated Shareholder's Equity 11
- Statements of Consolidated Cash Flows 12
E'TOWN CORPORATION AND SUBSIDIARIES AND
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
- Notes to Consolidated Financial Statements 13
Item 2. Management's Discussion and Analysis of Consolidated
Financial Condition and Results of Operations 17
PART II - OTHER INFORMATION 23
Items 1 - 5 23
Item 6 (a) - Exhibits 23
(b) - Reports on Form 8-K 23
SIGNATURES 24
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 38,643 $ 28,173 $ 101,227 $ 81,197 $ 130,439 $ 106,868
- ------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation 12,627 11,207 35,399 33,105 47,101 44,331
Maintenance 1,521 1,284 4,744 4,381 6,222 5,742
Depreciation 3,118 2,385 9,175 7,096 11,972 9,393
Revenue taxes 4,794 3,558 12,637 10,224 16,233 13,441
Real estate, payroll and other taxes 773 771 2,430 2,427 2,955 3,140
Federal income taxes 4,034 1,990 8,270 5,064 9,997 6,516
- ------------------------------------------------------------------------------------------------------
Total operating expenses 26,867 21,195 72,655 62,297 94,480 82,563
- ------------------------------------------------------------------------------------------------------
Operating Income 11,776 6,978 28,572 18,900 35,959 24,305
- ------------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 65 1,155 163 3,370 518 4,287
Federal income taxes (44) (466) (176) (1,348) (398) (1,747)
Other - net 60 175 342 481 621 771
- ------------------------------------------------------------------------------------------------------
Total other income (expense) 81 864 329 2,503 741 3,311
- ------------------------------------------------------------------------------------------------------
Total Operating and Other Income 11,857 7,842 28,901 21,403 36,700 27,616
- ------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,861 3,451 10,896 10,354 14,342 13,356
Other interest expense - net 372 753 2,144 1,719 3,069 2,516
Capitalized interest (131) (1,116) (371) (3,117) (778) (3,951)
Amortization of debt discount and expense-net 98 97 294 290 399 379
- ------------------------------------------------------------------------------------------------------
Total interest charges 4,200 3,185 12,963 9,246 17,032 12,300
- ------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
of Subsidiary 7,657 4,657 15,938 12,157 19,668 15,316
Preferred Stock Dividends 203 203 609 609 813 813
- ------------------------------------------------------------------------------------------------------
Net Income $ 7,454 $ 4,454 $ 15,329 $ 11,548 $ 18,855 $ 14,503
======================================================================================================
Earnings Per Share of Common Stock:
- ------------------------------------------------------------------------------------------------------
Primary $ .93.$ .58 $ 1.94 $ 1.51 $ 2.39 $ 1.91
Fully Diluted $ .92.$ .57 $ 1.92 $ 1.50 $ 2.37 $ 1.90
- ------------------------------------------------------------------------------------------------------
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
- ------------------------------------------------------------------------------------------------------
Primary 7,984 7,709 7,910 7,642 7,875 7,608
Fully Diluted 8,267 8,000 8,195 7,934 8,161 7,901
- ------------------------------------------------------------------------------------------------------
Dividends Paid Per Common Share $ .51 $ .51 $ 1.53 $ 1.53 $ 2.04 $ 2.04
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-1-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
September 30, December 31,
1997 1996
Assets (Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Utility Plant-At Original Cost:
Utility plant in service $ 662,198 $ 654,713
Construction work in progress 16,463 7,994
- ------------------------------------------------------------------------------------------------------
Total utility plant 678,661 662,707
Less accumulated depreciation and amortization 111,696 102,683
- ------------------------------------------------------------------------------------------------------
Utility plant-net 566,965 560,024
- ------------------------------------------------------------------------------------------------------
Non-utility Property and Other
Investments - Net 19,796 14,113
- ------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,146 3,228
Short-term investments 31 31
Customer and other accounts receivable
(less reserve: 1997, $826, 1996, $566) 20,342 16,187
Unbilled revenues 12,095 9,356
Materials and supplies-at average cost 1,939 2,045
Prepaid insurance, taxes, other 1,152 3,918
- ------------------------------------------------------------------------------------------------------
Total current assets 38,705 34,765
- ------------------------------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 765 1,064
Unamortized debt and preferred stock expenses 10,208 9,508
Taxes recoverable through future rates 30,435 30,435
Postretirement benefit expense 3,677 3,478
Other unamortized expenses 3,126 1,820
- ------------------------------------------------------------------------------------------------------
Total deferred charges 48,211 46,305
- ------------------------------------------------------------------------------------------------------
Total $ 673,677 $ 655,207
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-2-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
September 30, December 31,
1997 1996
Capitalization and Liabilities (Unaudited)
- ------------------------------------------------------------------------------------------------------
Capitalization (Note 3):
<S> <C> <C>
Common shareholders' equity $ 192,300 $ 183,512
Cumulative preferred stock 12,000 12,000
Long-term debt - net 243,299 193,481
- ------------------------------------------------------------------------------------------------------
Total capitalization 447,599 388,993
- ------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks (Note 5) 28,000 69,000
Long-term debt - current portion 30 30
Accounts payable and other liabilities 12,201 16,197
Customers' deposits 309 300
Municipal and state taxes accrued 12,410 13,887
Federal income taxes accrued 38
Interest accrued 4,518 3,483
Preferred stock dividends accrued 59 59
- ------------------------------------------------------------------------------------------------------
Total current liabilities 57,565 102,956
- ------------------------------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 38,884 43,636
Federal income taxes 77,961 75,942
State income taxes 185 185
Unamortized investment tax credits 8,110 8,245
Accumulated postretirement benefits 4,165 3,651
- ------------------------------------------------------------------------------------------------------
Total deferred credits 129,305 131,659
- ------------------------------------------------------------------------------------------------------
Contributions in Aid of Construction 39,208 31,599
- ------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities
- ------------------------------------------------------------------------------------------------------
Total $ 673,677 $ 655,207
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-3-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands Except Share Amounts)
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
E'town Corporation:
Common Shareholders' Equity:
Common stock without par value, authorized,
15,000,000 shares, issued 1997, 8,000,800
shares; 1996, 7,807,751 shares $ 151,349 $ 145,660
Paid-in capital 1,315 1,315
Capital stock expense (5,160) (5,160)
Retained earnings 45,710 42,434
Less cost of treasury stock; 1997, 31,052
shares; 1996, 25(914)shares (737)
- ------------------------------------------------------------------------------------------------------
Total common shareholders' equity 192,300 183,512
- ------------------------------------------------------------------------------------------------------
Elizabethtown Water Company:
Cumulative Preferred Stock
$100 par value, authorized, 200,000 shares; $5.90
series, issued and outstanding, 120,000 shares 12,000 12,000
Cumulative Preferred Stock:
$25 par value, authorized, 500,000 shares; none issued
- ------------------------------------------------------------------------------------------------------
Long-Term Debt (Note 4):
E'town Corporation:
6 3/4% Convertible Subordinated Debentures, due 2012 11,354 11,548
Elizabethtown Water Company:
7.20% Debentures, due 2019 10,000 10,000
7 1/2% Debentures, due 2020 15,000 15,000
6.60% Debentures, due 2021 10,500 10,500
6.70% Debentures, due 2021 15,000 15,000
8 3/4% Debentures, due 2021 27,500 27,500
8% Debentures, due 2022 15,000 15,000
5.60% Debentures, due 2025 40,000 40,000
7 1/4% Debentures, due 2028 50,000 50,000
Variable Rate Debentures, due 2027 50,000
The Mount Holly Water Company:
Notes Payable (due serially through 2000) 68 87
- ------------------------------------------------------------------------------------------------------
Total long-term debt 244,422 194,635
Unamortized discount-net (1,123) (1,154)
- ------------------------------------------------------------------------------------------------------
Total long-term debt-net 243,299 193,481
- ------------------------------------------------------------------------------------------------------
Total Capitalization $ 447,599 $ 388,993
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-4-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands Except Share Amounts)
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------
Common Stock:
<S> <C> <C>
Balance at Beginning of Period $ 145,660 $ 138,667
Common stock issued under Dividend Reinvestment
and Stock Purchase Plan (1997, 177,992 shares;
1996, 258,673 shares) 5,266 6,993
Issuance of restricted stock (1997, 4,044 shares) 122
Exercise of stock options (1997, 11,013 shares) 301
- ------------------------------------------------------------------------------------------------------
Balance at End of Period 151,349 145,660
- ------------------------------------------------------------------------------------------------------
Paid-in Capital: 1,315 1,315
- ------------------------------------------------------------------------------------------------------
Capital Stock Expense: (5,160) (5,160)
- ------------------------------------------------------------------------------------------------------
Retained Earnings:
Balance at Beginning of Period 42,434 42,995
Net Income 15,329 15,073
Dividends on common stock (1997, $1.53, 1996, $2.04) (12,053) (15,634)
- ------------------------------------------------------------------------------------------------------
Balance at End of Period 45,710 42,434
- ------------------------------------------------------------------------------------------------------
Treasury Stock:
Balance at Beginning of Period (737) (737)
Exercise of stock options (1997, 5,176 shares) (177)
- ------------------------------------------------------------------------------------------------------
Balance at End of Period (914) (737)
- ------------------------------------------------------------------------------------------------------
Total Common Shareholders' Equity $ 192,300 $ 183,512
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-5-
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
- ------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S> <C> <C>
Net Income $ 15,329 $ 11,548
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,175 7,096
(Increase) in deferred charges (1,007) (1,997)
Deferred income taxes and investment tax
credits-net 1,884 2,082
Capitalized interest and AFUDC (534) (6,487)
Other operating activities-net 473 35
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (4,155) 295
Unbilled revenues (2,739) (1,143)
Accounts payable and other liabilities (3,987) (2,291)
Accrued/prepaid interest and taxes 2,362 (89)
Other 104 195
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 16,905 9,244
- ------------------------------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
Proceeds from issuance of common stock 5,388 5,456
Proceed from issuance of debentures 50,000
Debt and preferred stock issuance and
amortization costs (700) 300
Repayment of long-term debt (213) (205)
Contributions and advances for construction-net 2,857 3,367
Net (decrease) increase in notes payable - banks (41,000) 30,500
Dividends paid on common stock (12,053) (11,678)
- ------------------------------------------------------------------------------------------------------
Net cash provided by financing activities 4,279 27,740
- ------------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (15,825) (40,456)
Purchase of Edison operating contract (5,701)
Proceeds from sale of land 461
Development costs of land (excluding
capitalized interest) (201) (183)
- ------------------------------------------------------------------------------------------------------
Cash used for investing activities (21,266) (40,639)
- ------------------------------------------------------------------------------------------------------
Net (Decrease) Increase in Cash and
Cash Equivalents (82) (3,655)
Cash and Cash Equivalents at
Beginning of Period 3,228 4,925
- ------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period 3,146 $ 1,270
======================================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 11,639 $ 7,984
Income taxes $ 2,825 $ 2,648
Preferred stock dividends $ 531 $ 531
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-6-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1997 1996 1997 1996 1997 1996
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 37,815 $ 28,172 $ 100,161 $ 81,195 $ 129,324 $ 106,866
- ------------------------------------------------------------------------------------------------------
Operating Expenses:
Operation 11,575 10,884 33,589 32,358 44,944 43,151
Maintenance 1,498 1,284 4,721 4,381 6,199 5,742
Depreciation 3,046 2,385 9,103 7,096 11,900 9,393
Revenue taxes 4,794 3,558 12,637 10,224 16,233 13,441
Real estate, payroll and other taxes 756 755 2,373 2,375 2,867 3,059
Federal income taxes 4,220 2,160 8,739 5,480 10,619 7,047
- ------------------------------------------------------------------------------------------------------
Total operating expenses 25,889 21,026 71,162 61,914 92,762 81,833
- ------------------------------------------------------------------------------------------------------
Operating Income 11,926 7,146 28,999 19,281 36,562 25,033
- ------------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 65 1,155 163 3,370 518 4,287
Federal income taxes (33) (443) (134) (1,315) (281) (1,645)
Other - net 27 111 219 387 284 413
- ------------------------------------------------------------------------------------------------------
Total other income (expense) 59 823 248 2,442 521 3,055
- ------------------------------------------------------------------------------------------------------
Total Operating and Other Income 11,985 7,969 29,247 21,723 37,083 28,088
- ------------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,671 3,252 10,318 9,759 13,570 12,570
Other interest expense - net 293 753 2,060 1,714 2,986 2,368
Allowance for funds used during construction (50) (1,035) (127) (2,884) (452) (3,641)
Amortization of debt discount and expense-net 89 88 267 264 365 345
- ------------------------------------------------------------------------------------------------------
Total interest charges 4,003 3,058 12,518 8,853 16,469 11,642
- ------------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends 7,982 4,911 16,729 12,870 20,614 16,446
Preferred Stock Dividends 203 203 609 609 813 813
- ------------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 7,779 $ 4,708 $ 16,120 $ 12,261 $ 19,801 $ 15,633
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-7-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
September 30, December 31,
1997 1996
Assets (Unaudited)
- ------------------------------------------------------------------------------------------------------
Utility Plant-At Original Cost:
<S> <C> <C>
Utility plant in service $ 662,197 $ 654,713
Construction work in progress 16,212 7,994
- ------------------------------------------------------------------------------------------------------
Total utility plant 678,409 662,707
Less accumulated depreciation and amortization 111,696 102,683
- ------------------------------------------------------------------------------------------------------
Utility plant-net 566,713 560,024
- ------------------------------------------------------------------------------------------------------
Non-utility Property 80 81
- ------------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 1,866 3,122
Customer and other accounts receivable
(less reserve: 1997, $826, 1996, $566) 19,236 16,725
Unbilled revenues 11,224 9,356
Materials and supplies-at average cost 1,939 2,045
Prepaid insurance, taxes, other 1,152 3,742
- ------------------------------------------------------------------------------------------------------
Total current assets 35,417 34,990
- ------------------------------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 765 1,064
Unamortized debt and preferred stock expenses 9,715 8,989
Taxes recoverable through future rates 30,435 30,435
Postretirement benefit expense 3,677 3,564
Other unamortized expenses 3,018 1,632
- ------------------------------------------------------------------------------------------------------
Total deferred charges 47,610 45,684
- ------------------------------------------------------------------------------------------------------
Total $ 649,820 $ 640,779
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-8-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
September 30, December 31,
Capitalization and Liabilities 1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------
Capitalization (Note 3):
<S> <C> <C>
Common shareholder's equity $ 187,684 $ 182,293
Cumulative preferred stock 12,000 12,000
Long-term debt - net 231,945 181,933
- ------------------------------------------------------------------------------------------------------
Total capitalization 431,629 376,226
- ------------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 23,000 69,000
Long-term debt - current portion 30 30
Accounts payable and other liabilities 11,248 17,093
Customers' deposits 296 300
Municipal and state taxes accrued 12,411 13,887
Federal income taxes accrued 595
Interest accrued 4,374 3,158
Preferred stock dividends accrued 59 59
- ------------------------------------------------------------------------------------------------------
Total current liabilities 52,013 103,527
- ------------------------------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 38,884 43,636
Federal income taxes 75,975 73,950
Unamortized investment tax credits 8,110 8,245
Accumulated postretirement benefits 4,001 3,596
- ------------------------------------------------------------------------------------------------------
Total deferred credits 126,970 129,427
- ------------------------------------------------------------------------------------------------------
Contributions in Aid of Construction 39,208 31,599
- ------------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities
- ------------------------------------------------------------------------------------------------------
Total $ 649,820 $ 640,779
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-9-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CAPITALIZATION
(In Thousands)
<CAPTION>
September 30, December 31,
1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Shareholder's Equity:
Common stock without par value, authorized,
10,000,000 shares, issued 1997 and 1996,
1,974,902 shares $ 15,741 $ 15,741
Paid-in capital 118,780 117,457
Capital stock expense (485) (485)
Retained earnings 53,648 49,580
- ------------------------------------------------------------------------------------------------------
Total common shareholder's equity 187,684 182,293
- ------------------------------------------------------------------------------------------------------
Cumulative Preferred Stock
$100 par value, authorized, 200,000 shares; $5.90
series, issued and outstanding, 120,000 shares 12,000 12,000
Cumulative Preferred Stock:
$25 par value, authorized, 500,000 shares; none issued
- ------------------------------------------------------------------------------------------------------
Long-Term Debt:
7.20% Debentures, due 2019 10,000 10,000
7 1/2% Debentures, due 2020 15,000 15,000
6.60% Debentures, due 2021 10,500 10,500
6.70% Debentures, due 2021 15,000 15,000
8 3/4% Debentures, due 2021 27,500 27,500
8% Debentures, due 2022 15,000 15,000
5.60% Debentures, due 2025 40,000 40,000
7 1/4% Debentures, due 2028 50,000 50,000
Variable Rate Debentures, due 2027 50,000
The Mount Holly Water Company:
Notes Payable (due serially through 2000) 68 87
- ------------------------------------------------------------------------------------------------------
Total long-term debt 233,068 183,087
Unamortized discount-net (1,123) (1,154)
- ------------------------------------------------------------------------------------------------------
Total long-term debt-net 231,945 181,933
- ------------------------------------------------------------------------------------------------------
Total Capitalization $ 431,629 $ 376,226
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-10-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED SHAREHOLDERS' EQUITY
(In Thousands)
<CAPTION>
Nine Months
Ended Year Ended
September 30, December 31,
1997 1996
(Unaudited)
- ------------------------------------------------------------------------------------------------------
<S> <C> <C>
Common Stock: $ 15,741 $ 15,741
- ------------------------------------------------------------------------------------------------------
Paid-in Capital:
Balance at Beginning of Period 117,457 112,157
Capital contributed by parent company 1,323 5,300
- ------------------------------------------------------------------------------------------------------
Balance at End of Period 118,780 117,457
- ------------------------------------------------------------------------------------------------------
Capital Stock Expense: (485) (485)
- ------------------------------------------------------------------------------------------------------
Retained Earnings:
Balance at Beginning of Period 49,580 49,272
Income before preferred stock dividends 16,729 16,755
Dividends on common stock (12,053) (15,634)
Dividends on preferred stock (608) (813)
- ------------------------------------------------------------------------------------------------------
Balance at End of Period 53,648 49,580
- ------------------------------------------------------------------------------------------------------
Total Common Shareholder's Equity $ 187,684 $ 182,293
======================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-11-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED CASH FLOWS
(In Thousands)
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
- ------------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S> <C> <C>
Income before preferred stock dividends $ 16,729 $ 12,870
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 9,103 7,096
(Increase) in deferred charges (1,087) (2,025)
Deferred income taxes and investment tax
credits-net 1,890 2,082
Allowance for funds used during construction (290) (6,253)
Other operating activities-net 248 (57)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (2,511) 2,003
Unbilled revenues (1,868) (1,143)
Accounts payable and other liabilities (5,849) (2,334)
Accrued/prepaid interest and taxes 2,925 (45)
Other 104 193
- ------------------------------------------------------------------------------------------------------
Net cash provided by operating activities 19,394 12,387
- ------------------------------------------------------------------------------------------------------
Cash Flows (Used) and Provided by Financing Activities:
Capital contributed by parent company 1,323 3,332
Proceed from issuance of debentures 50,000
Debt and preferred stock issuance and
amortization costs (726) 274
Repayment of long-term debt (19) (23)
Contributions and advances for construction-net 2,857 3,367
Net increase in notes payable - banks (46,000) 30,500
Dividends paid on common stock and preferred stock (12,584) (12,209)
- ------------------------------------------------------------------------------------------------------
Net cash (used) and provided by financing activities (5,149) 25,241
- ------------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (15,501) (40,456)
- ------------------------------------------------------------------------------------------------------
Cash used for investing activities (15,501) (40,456)
- ------------------------------------------------------------------------------------------------------
Net (Decrease) in Cash and
Cash Equivalents (1,256) (2,828)
Cash and Cash Equivalents at
Beginning of Period 3,122 3,797
- ------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 1,866 $ 969
======================================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized) $ 11,038 $ 7,419
Income taxes $ 2,825 $ 2,648
Preferred stock dividends $ 531 $ 531
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-12-
<PAGE>
E'TOWN CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
E'town Corporation (E'town or Corporation), a New Jersey holding
company, is the parent company of Elizabethtown Water Company
(Elizabethtown or Company), Edison Water Company (Edison) (See Note 9)
and E'town Properties, Inc. (Properties) and owner of a 65% interest in
Applied Watershed Management, LLC (AWM). The Mount Holly Water Company
(Mount Holly) is a wholly owned subsidiary of Elizabethtown.
2. INTERIM FINANCIAL STATEMENTS
The financial statements reflect all adjustments which, in the opinion
of management, are necessary for a fair presentation. The Notes to
Consolidated Financial Statements accompanying the 1996 Annual Report to
Shareholders and the 1996 Form 10-K should be read in conjunction with
this report.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities
and disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period.
Certain prior year amounts have been reclassified to conform to the
current year's presentation.
3. CAPITALIZATION
E'town routinely makes equity contributions to Elizabethtown which
represent a portion of the proceeds of common stock issued under E'town's
Dividend Reinvestment and Stock Purchase Plan (DRP). E'town contributed
$1.3 million from the DRP proceeds of $5.3 million to Elizabethtown for
the nine months ended September 30, 1997. The remaining $4.0 million of
DRP proceeds were used to partially finance Edison Water Company's
operation of the water system of the Township of Edison (See Note 9).
4. LONG-TERM DEBT
On June 4, 1997, Elizabethtown issued a total of $50.0 million of 30-year
Variable Rate Debentures (Debentures), $25.0 million of Series A and
$25.0 million of Series B, to evidence a like amount of Variable Rate
Notes issued through the New Jersey Economic Development Authority
(NJEDA). The proceeds were used to repay $50.0 million of balances
outstanding under the Company's revolving credit agreement. The NJEDA
Notes are remarketed on a weekly basis at which time the interest rates
on each issue are subject to change. The rates in effect as of September
30, 1997 were 3.75% for Series A and 3.65% for Series B.
5. LINES OF CREDIT
On July 25, 1997, Elizabethtown terminated its committed revolving
credit agreement (Agreement). The Agreement was executed in 1994 to
provide up to $60.0 million in revolving short-term financing to
partially finance Elizabethtown's capital program. Elizabethtown
replaced the Agreement with $75.0 million of uncommitted lines of credit
and has borrowings outstanding under these lines of $23.0 million as of
September 30, 1997. E'town Corporation has $5.0 million of uncommitted
lines of credit and has borrowings outstanding under these lines of $5.0
million as of September 30, 1997. The above lines, together with
internal funds and proceeds of future issuances of debt and preferred
stock by Elizabethtown and sales of common stock and issuances of short-
and long-term debt by E'town, are expected to be sufficient to finance
the Corporation's capital needs.
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6. EARNINGS PER SHARE
Primary earnings per share are computed on the basis of the weighted
average number of shares outstanding, plus common stock equivalents,
which reflect the assumption that all stock options are exercised. Fully
diluted earnings per share assume both the conversion of the
6 3/4% Convertible Subordinated Debentures and the common stock
equivalents. Reference is made to Exhibit 11 for the computations of
earnings per share.
7. NON-UTILITY PROPERTY AND OTHER INVESTMENTS
Included in Non-utililty Property and Other Investments at September 30,
1997 is an investment of $1.3 million ($.2 million net of related
deferred taxes) in a limited partnership that owns Solar Electric
Generating System V (SEGS), located in California.
Also included in Non-utility Property and Other Investments at September
30, 1997 is $12.8 million of investments in various parcels of
undeveloped land in New Jersey. The carrying value of each parcel
includes the original cost plus any real estate taxes, interest and,
where applicable, direct costs capitalized while rezoning or governmental
approvals were being sought. Based upon independent appraisals received
at various times prior to 1996, the estimated net realizable value of
each property exceeds its respective carrying value as of September 30,
1997. No information has come to the attention of management since these
appraisals were last performed that would indicate the aggregate carrying
value of these parcels has been impaired.
One of the real estate parcels was sold in June 1997 for $.4 million,
resulting in a gain of less than $.1 million. E'town and Properties are
assessing their position with regard to the remaining real estate
investments.
The Corporation will continue to monitor the relationship between the
carrying and net realizable values of its properties through updated
appraisals and its investment in SEGS based upon information provided by
SEGS management and through cash flow analyses.
8. REGULATORY MATTERS
Rates
Elizabethtown
On October 25, 1996, Elizabethtown received a rate increase under a
stipulation resulting in an increase in annual revenues of $21.8 million.
The rate increase reflects a full allowance for the capital cost as well
as a full allowance for the operating costs of the Canal Road Water
Treatment Plant (Plant). The Plant was placed in service on October 24,
1996 for a cost of $101.6 million plus an Allowance for Funds Used During
Construction (AFUDC) of $13.5 million.
On April 21, 1997, Elizabethtown and Mount Holly filed petitions for rate
increases, to be effective January 1, 1998, for the recovery of costs
associated with Statement of Financial Accounting Standards (SFAS) No.
106 "Employers" Accounting For Postretirement Benefits Other Than
Pensions. The resulting rate increases would reflect recovery over a
fifteen year period of amounts previously deferred on the Consolidated
Balance Sheets for postretirement benefits since 1993 and prospectively,
the difference between the amounts currently recovered in rates and the
full SFAS No. 106 expense on an accrual basis. The petitions were filed
in connection with a generic stipulation signed by several New Jersey
public utilities, as well as the New Jersey Board of Public Utilities and
the New Jersey Division of Ratepayer Advocate. The settlement was
designed to provide a generic mechanism for New Jersey utilities to
recover postretirement costs that have been deferred since the adoption
of SFAS No. 106. The total increases in annual operating revenues
resulting from these petitions are expected to be $.4 million for
Elizabethtown and Mount Holly.
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Mount Holly
In June 1995, Mount Holly petitioned the New Jersey Board of Public
Utilities (BPU) for an increase in rates, to take place in two phases.
The first phase was stipulated for a rate increase effective February
1996 of $.6 million. The second phase would recover the cost of a new
water supply, treatment and transmission system necessary to obtain
water outside a designated portion of an aquifer currently used by Mount
Holly, and to treat and pump the water into the Mount Holly distribution
system. Management believes this project is the most cost-effective
alternative available to Mount Holly to comply with recent state
legislation that restricts the amount of water that can be withdrawn
from an aquifer in certain areas of southern New Jersey. The project,
referred to as the Mansfield project, had been originally estimated to
cost $16.5 million, excluding AFUDC. Mount Holly has expended $3.0
million on the Mansfield Project as of September 30, 1997, excluding
AFUDC. The land for the supply and treatment facilities has been
purchased and test wells have been drilled and can produce the required
supply. On October 5, 1995, the New Jersey Department of Environmental
Protection (NJDEP) granted Mount Holly a water allocation permit for
four wells that are to be the water supply for this project. On October
20, 1995, another water purveyor requested of the NJDEP, and was
subsequently granted, an adjudicatory hearing in opposition to the
permit. On August 5, 1997, Mount Holly settled this matter by entering
into an agreement with the other water purveyor and NJDEP. Under the
agreement Mount Holly will purchase 1.0 million gallons per day from the
other purveyor for a period to include the later of two years or the
date the Mansfield project is placed into service. Purchases are
expected to begin approximately January 1998 or at such date as the
other purveyor has installed the facilities necessary to effect the
transfer of water to the Mount Holly distribution system. The other
purveyor has withdrawn its objection to the water allocation permit.
As a result of the settlement agreement Mount Holly expects to continue
with its plan to construct the Mansfield Project subject to an
acknowledgement by the BPU and the parties to Mount Holly's last rate
case of the need for the Mansfield Project. This acknowledgement should
also indicate that the Mansfield Project is the most cost-effective
alternative for Mount Holly to meet the State restrictions on well water
diversions.
On September 23, 1997, Mount Holly filed a petition with the BPU to
establish a Purchased Water Adjustment Clause (PWAC) to reflect the cost
of water expected to be purchased from the purveyor under the settlement
agreement discussed above. The petition requests an increase in annual
operating revenues of approximately $1.3 million or 40.3%. Mount Holly
has requested deferred accounting treatment, in its PWAC petition, for
the cost of the purchased water until such time as the rate increase
under the PWAC becomes effective. This methodology would ensure that the
recording of the revenues under the PWAC petition would coincide with
the recording of the purchased water expenses under the settlement
agreement.
Mount Holly also expects to petition the BPU in the fourth quarter of
1997 for an increase in base rates resulting from increases in
construction, operating and financing costs incurred since Mount Holly's
last rate increase in January 1996. A decision would be expected by the
third quarter of 1998.
Mount Holly expects to file a separate rate case for the cost of the
Mansfield Project to coincide with the completion of the project and the
expiration of the agreement to purchase water from the other purveyor.
This rate case would replace the second phase of Mount Holly's June 1995
rate request discussed above.
9. EDISON CONTRACT
On June 25, 1997, E'town and Edison Water Company signed an agreement to
operate the water supply system of the Township of Edison for a 20-year
period. E'town formed a wholly-owned subsidiary, Edison Water Company,
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for the purpose of managing the assets and operations of the Edison
Township system. The Edison system serves about 11,000 residential,
commercial and industrial customers. Under the terms of the Edison
Contract, Edison Water Company expects to make expenditures of
approximately $25.0 million over the 20-year period which, under the
terms of the agreement include capital improvements to the water system
as well as payments to the Township of Edison. Of this total
approximately $14.0 million is expected to be expended in the first
three years. An initial payment of $5.7 million was made upon closing.
10. STOCK-BASED COMPENSATION
E'town has a Stock Option (Plan) under which options to purchase shares
of E'town common stock have been granted to certain officers and other
key employees at prices not less than the fair market value at the date
of grant. As permitted under SFAS No. 123, the Corporation applies
Accounting Principles Board Opinion 25 and related Interpretations in
accounting for its Plan. Accordingly, no compensation cost is
recognized for the Plan. In May 1997, options to purchase up to 25,000
shares of common stock at a price of $29.75 were issued. Had
compensation cost for this issuance been determined based on the fair
value at the grant dates for awards under the Plan consistent with the
alternative method prescribed by SFAS No. 123, the effect on E'town's
net income and earnings per share would not be material.
11. NEW ACCOUNTING PRONOUNCEMENTS
The Financial Accounting Standards Board has issued SFAS No. 128,
"Earnings Per Share," which is effective for financial statements issued
after December 15, 1997. The pronouncement simplifies the calculation of
earnings per share in that a calculation of "basic" earnings per share is
reported in lieu of primary earnings per share. Basic earnings per share
includes only the weighted average number of common shares outstanding
for the period and does not consider the dilutive effect of the
Corporation's outstanding stock options. There would be no effect on the
Corporation's calculation of earnings per share if the pronouncement were
applied currently.
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information"
which is effective for financial statements issued after December 15,
1997. The pronouncement requires disclosure of selected information about
operating segments in interim financial reports. Based upon the relative
materiality of the Corporation's business segments to the consolidated
financial statements no additional disclosures would be required.
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF CONSOLIDATED
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
E'town Corporation (E'town or Corporation), a New Jersey holding company, is
the parent company of Elizabethtown Water Company (Elizabethtown or Company),
Edison Water Company (Edison) and E'town Properties, Inc. (Properties) and
owner of a 65% interest in Applied Watershed Management, LLC (AWM). The
Mount Holly Water Company (Mount Holly) is a wholly owned subsidiary of
Elizabethtown. The assets and operating results of Elizabethtown constitute
the predominant portions of E'town's assets and operating results. Mount
Holly contributed 3% of the Company's consolidated operating revenues for
1996. The following analysis sets forth significant events affecting the
financial condition of E'town and Elizabethtown at September 30, 1997, and
the results of operations for the three, nine and twelve months ended
September 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
Capital expenditures, primarily for water utility plant, were $15.8 million
for the first nine months of 1997. Capital expenditures for the three-year
period ending December 31, 1999 are estimated to be
$140.1 million, of which $125.3 million is for utility plant ($105.8 million
for Elizabethtown and $19.5 million for Mount Holly), $14.0 million for
Edison Water Company and $.8 million for non-utility expenditures.
Elizabethtown's three-year capital program includes $69.3 million for projects
of a routine nature. This program also includes $56.0 million of major
projects such as new transmission mains, improvements to pumping facilities,
construction of a new operations center in the western portion of our service
territory and other miscellaneous projects. Mount Holly expects to incur
significant capital expenditures later in 1998 and 1999 to construct new
water supply, treatment and transmission facilities as discussed below.
To ensure an adequate supply of quality water from an aquifer serving parts
of southern New Jersey, state legislation requires Mount Holly, as well as
other suppliers obtaining water from designated portions of this aquifer, to
reduce pumpage from its wells. Mount Holly has received approval from the
New Jersey Department of Environmental Protection (NJDEP) for its plan to
develop a new water supply, treatment and transmission system necessary to
obtain water outside the designated portion of the aquifer, and to treat the
water and pump it into the Mount Holly system. This is referred to as the
Mansfield Project. The project was originally estimated to cost $16.5
million, excluding an Allowance for Funds Used During Construction (AFUDC),
of which $13.6 million is anticipated to be spent over the next three years.
Mount Holly has expended $3.0 million on the Mansfield Project as of
September 30, 1997, excluding AFUDC. The land for the supply and treatment
facilities has been purchased and wells have been drilled and can produce the
required supply.
In October 1995, the NJDEP granted Mount Holly a water allocation permit for
four wells that are to be the water supply for the Mansfield Project. Later
that month, another water purveyor requested of the NJDEP, and was
subsequently granted, an adjudicatory hearing in opposition to the permit. On
August 5, 1997 Mount Holly settled this matter by entering into an agreement
with the other water purveyor and NJDEP. Under the agreement Mount Holly will
purchase 1.0 million gallons per day from the other purveyor for a period of
two years or until the Mansfield project is placed into service. The other
purveyor has withdrawn its objection to the water allocation permit.
On September 23, 1997, Mount Holly filed a petition with the BPU to establish
a Purchased Water Adjustment Clause (PWAC) to reflect the cost of water
expected to be purchased from another purveyor under the settlement agreement
discussed above. The petition requests an increase in annual operating
revenues of approximately $1.3 million or 40.3%. Mount Holly has requested
deferred accounting treatment, in its PWAC petition, for the cost of the
purchased water until such time as the rate increase under the PWAC becomes
effective. This methodology would ensure that the recording of the revenues
under the PWAC petition would coincide with the recording of the purchased
water expenses under the settlement agreement.
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Mount Holly also expects to petition the BPU in the fourth quarter of 1997
for an increase in base rates resulting from increases in construction,
operating and financing costs incurred since Mount Holly's last rate increase
in January 1996. A decision is expected by the third quarter of 1998.
Mount Holly expects to file a separate rate case for the cost of the
Mansfield Project to coincide with the completion of the project and the
expiration of the agreement to purchase water from the other purveyor.
On October 25, 1996, Elizabethtown received a rate increase under a
stipulation resulting in an increase in annual revenues of $21.8 million. The
rate increase reflects a full allowance for the estimated capital cost as
well as a full allowance for the operating costs of the Canal Road Water
Treatment Plant (Plant). The Plant was placed in service on October 24, 1996
for a cost of $101.6 million plus an Allowance for Funds Used During
Construction of $13.5 million.
Capital Resources
For the three-year period ending December 31, 1999, Elizabethtown, including
Mount Holly, estimates that 57% of its capital expenditures are expected to
be financed with internally generated funds (after payment of common stock
dividends). The balance will be financed with a combination of contributions
from E'town of the proceeds from the sale of E'town common stock, long-term
debentures, proceeds of tax-exempt New Jersey Economic Development Authority
(NJEDA) bonds and short-term borrowings. The NJEDA has granted preliminary
approval for the financing of almost all of Elizabethtown's major projects
during the next three years and the Mansfield Project. Elizabethtown expects
to pursue tax-exempt financing to the extent that final allocations are
granted by the NJEDA. The Company's senior debt is currently rated A3 and A
by Moody's Investors Service and Standard & Poor's Ratings Group,
respectively. Standard & Poor's, in 1996, reaffirmed the Company's A rating
and upgraded its rating outlook from "negative" to "stable."
Expenditures required for the capital improvements required under the terms
of the contract for Edison Water Company are expected to be financed with a
combination of capital contributions from E'town of the proceeds from the
sale of E'town common stock and, on an interim basis, short-term borrowings.
Efforts to fund expenditures of Edison Water Company with longer-term debt
are in progress.
On June 4, 1997, Elizabethtown issued $50.0 million of 30-year Variable Rate
Debentures to evidence a like amount of Variable Rate Notes issued through
the NJEDA. The proceeds of the issue were used to repay amounts outstanding
under the revolving credit agreement discussed below.
In July 1997, Elizabethtown terminated its revolving credit agreement
(Agreement). The Agreement was executed in 1994 to provide up to $60.0
million in revolving short-term financing to partially fund Elizabethtown's
capital program. Elizabethtown has replaced the Agreement with $75.0 million
of uncommitted lines of credit of which $23.0 million is outstanding as of
September 30, 1997. E'town Corporation has $5.0 million of uncommitted lines
of credit. The above lines, together with internal funds and proceeds of
future issuances of debt and preferred stock by Elizabethtown and sales of
common stock and issuances of short- and long-term debt by E'town are
expected to be sufficient to finance the Corporation's capital needs.
RESULTS OF OPERATIONS
Net Income for the three months ended September 30, 1997 was $7.5 million or
$.93 per share as compared to $4.5 million or $.58 per share for the same
period in 1996. Net income for the nine months ended September 30, 1997 was
$15.3 million or $1.94 per share as compared to $11.5 million or $1.51 per
share for the same period in 1996. Net income for the twelve months ended
September 30, 1997 was $18.9 million or $2.39 per share as compared to $14.5
million or $1.91 per share for the same period in 1996. Net income increased
for the three, nine and twelve month periods primarily due to higher revenues
related to an increase in rates for Elizabethtown effective October 1996 in
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addition to increases in water consumption in Elizabethtown's residential
customer class. This increase in revenues was offset somewhat by increases in
financing and operating costs, primarily related to the Plant.
Operating Revenues increased $10.5 million or 37.2%, $20.0 million or 24.7%
and $23.6 million or 22.1% for the three, nine and twelve months ended
September 30, 1997 compared to the same periods in 1996. These increases
resulted primarily from a rate increase of $21.8 million in annual revenues
for Elizabethtown in October 1996, which accounted for $6.1 million, $16.4
million and $20.2 million of the increases for the three, nine and twelve
month periods, respectively. The remainder of the increases in operating
revenues are primarily the result of increased water consumption by
Elizabethtown's residential customers due to unusually warm, dry weather in
the third quarter of 1997. Edison Water Company contributed $.7 million to
the revenue increases for the three, nine and twelve month periods due to the
assumption by E'town of the operations of that system in July 1997.
Operation Expenses increased $1.4 million or 12.7%, $2.3 million or 6.9% and
$2.8 million or 6.2% for the three, nine and twelve months ended September
30, 1997, respectively, over the comparable periods in 1996. The increases
for the third quarter are attributable primarily to higher variable costs
associated with increases in water consumption. The increases for the nine
and twelve month periods are primarily attributable to the operation of the
Plant, which went into service in October 1996. Such costs are reflected in
Elizabethtown's rate increase that became effective in October 1996.
Maintenance Expenses increased $.2 million or 18.5%, $.4 million or 8.3% and
$.5 million or 8.4% for the three, nine and twelve months ended September 30,
1997, respectively, over the comparable 1996 amounts. These increases are
primarily due to the timing of various preventive maintenance activities
during those periods, a portion of which relate to the Plant.
Depreciation Expense increased $.7 million or 30.7% $2.1 million or 29.3% and
$2.6 million or 27.5% for the three, nine and twelve month periods ended
September 30, 1997, compared to the same periods in 1996. The increases were
due primarily to a higher level of depreciable plant in service, of which the
predominant portion was related to the Plant.
Revenue Taxes increased $1.2 million, or 34.7%, $2.4 million or 23.6% and
$2.8 million or 20.8% for the three, nine and twelve month periods ended
September 30, 1997, compared to the same periods in 1996 based upon the
increases in operating revenues, as discussed above, upon which these taxes
are calculated.
Real Estate, Payroll and Other Taxes Expenses changed by insignificant
amounts for the three and nine month periods and decreased $.2 million or 5.9%
for the twelve month period ended September 30, 1997, compared to the same
periods in 1996.
Federal Income Taxes as a component of operating expenses increased $2.0
million or 102.7%, $3.2 million or 63.3% and $3.5 million or 53.4% for the
three, nine and twelve month periods ended September 30, 1997 compared to the
comparable periods in 1996 due to the changes in the components of taxable
income discussed herein.
Other Income (Expense) decreased $.8 million or 90.6%, $2.2 million or 86.9%
and $2.6 million or 77.6% for the three, nine and twelve month periods ended
September 30, 1997 compared to the same periods in 1996. These decreases are
due primarily to the reduction in AFUDC, the largest portion of which was
recorded while the Plant was under construction. These decreases were offset
by the decreases in associated federal income taxes.
Total Interest Charges increased $1.0 million or 31.9%, $3.7 million or 40.2%
and $4.7 million or 38.5% for the three, nine and twelve month periods ended
September 30,1997 compared to the same periods in 1996 due primarily to a
reduction in the debt component of AFUDC. This reduction in AFUDC was
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related to the completion of the Plant in October 1996. This increase in
total interest charges was further affected by a net increase in short-term
borrowings previously incurred under the revolving credit agreement to
finance the construction of Elizabethtown's ongoing capital program, the
predominant portion of which was the Plant. A portion of these borrowings
were refinanced with long-term debt in June 1997 (see Capital Resources).
Interest expense also increased due to borrowings by E'town to finance
expenditures under the Edison Contract.
ECONOMIC OUTLOOK
Forward Looking Information
Information in this report includes certain forward looking statements within
the meaning of the Federal securities laws. Any forward looking statements
are based upon information currently available and are subject to future
events, risks and uncertainties that could cause actual results to differ
materially from those expressed in the statements. Such events, risks and
uncertainties include, without limitation, actions of regulators, the effects
of weather on water consumption, changes in historical patterns of water
consumption and demand, including changes through increased use of
water-conserving devices, conditions in capital and real estate markets,
increases in operating expenses due to factors beyond the Corporation's
control, changes in environmental regulation and associated costs of
compliance and other claims or assessments made upon the Corporation.
E'town Corporation and Subsidiaries
Consolidated earnings for E'town for the next several years are expected to
be determined by (i) Elizabethtown's ability to increase sales and to further
control operating expenses through improved productivity, (ii) Mount Holly's
and, in the future, Elizabethtown's, ability to obtain adequate and timely
rate relief in connection with future utility plant additions and, to a
lesser degree, (iii) the ability of E'town to generate returns from its
unregulated businesses and (iv) the ability of E'town and Properties to
generate returns from the sale of their real estate for purposes of
reinvestment in water and wastewater businesses. In light of strong
financial results in the second and third quarters, management believes that
its original goal to increase earnings per share by approximately 15% for
1997 is conservative. This expectation assumes normal water consumption
patterns for the fall and winter of 1997 as well as the absence of adverse
conditions which could occur as noted in the description of forward looking
information detailed above.
Elizabethtown and Subsidiary - Regulated Utilities
On October 25, 1996, a rate increase under a stipulation (1996 Stipulation)
went into effect for Elizabethtown. This is resulting in an increase in
annual operating revenues of $21.8 million. Elizabethtown, excluding
Mount Holly, earned a rate of return on common equity of 9.0% in 1996.
Elizabethtown's authorized rate of return on common equity is currently
11.25%. In 1997, Elizabethtown expects to close this gap between its earned
return on common equity in 1996 and its authorized return. This again assumes
normal water consumption patterns in the fall and winter of 1997. Realizing
rates of return in 1998 comparable to authorized levels will require
continued customer additions and the success of ongoing cost control efforts,
as well as rate relief later in that year.
Mount Holly earned a rate of return on common equity of 3.5% in 1996,
compared to an authorized rate of return of 11.25% established in its most
recent rate proceeding. Mount Holly contributed $.02 to E'town's consolidated
earnings per share in 1996. Management expects Mount Holly to increase its
contribution to E'town's earnings per share by obtaining additional rate
relief as discussed below. Such rate relief should also enable Mount Holly to
realize rates of return more in line with authorized levels.
Mount Holly
In June 1995, Mount Holly petitioned the New Jersey Board of Public Utilities
(BPU) for an increase in rates, to take place in two phases. The first phase
was stipulated for a rate increase effective February 1996 of $.6 million.
The second phase would recover the cost of a new water supply, treatment and
transmission system necessary to obtain water outside a designated portion of
an aquifer currently used by Mount Holly, and to treat and pump the water
into the Mount Holly distribution system. Management believes this project is
the most cost-effective alternative available to Mount Holly to comply with
recent state legislation that restricts the amount of water that can be
withdrawn from an aquifer in certain areas of southern New Jersey. The
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project, referred to as the Mansfield project, had been originally estimated
to cost $16.5 million, excluding AFUDC. Mount Holly has expended $3.0 million
on the Mansfield Project as of September 30, 1997, excluding AFUDC. The land
for the supply and treatment facilities has been purchased and test wells
have been drilled and can produce the required supply. On October 5, 1995,
the New Jersey Department of Environmental Protection (NJDEP) granted Mount
Holly a water allocation permit for four wells that are to be the water
supply for this project. On October 20, 1995, another water purveyor
requested of the NJDEP, and was subsequently granted, an adjudicatory hearing
in opposition to the permit. On August 5, 1997, Mount Holly settled this
matter by entering into an agreement with the other water purveyor and NJDEP.
Under the agreement Mount Holly will purchase 1.0 million gallons per day
from the other purveyor for a period to include the later of two years or the
date the Mansfield project is placed into service. Purchases are expected to
begin approximately January 1998 or at such date as the other purveyor has
installed the facilities necessary to effect the transfer of water to the
Mount Holly distribution system. The other purveyor has withdrawn its
objection to the water allocation permit.
As a result of the settlement agreement, Mount Holly expects to continue with
its plan to construct the Mansfield Project subject to an acknowledgement by
the BPU and the parties to Mount Holly's last rate case of the need for the
Mansfield Project. This acknowledgement should also indicate that the
Mansfield Project is the most cost-effective alternative for Mount Holly to
meet the State restrictions on well water diversions. (See Liquidity and
Capital Resources above, for a discussion of rate issues associated with the
settlement agreement for the water allocation permit as well as rate issues
for other increases in costs).
E'town and Properties
The activities of E'town and Properties are not regulated by the BPU.
E'town
On June 25, 1997, E'town and Edison Water Company signed an agreement to
operate the water supply system of the Township of Edison for a 20-year
period. The Edison system serves about 11,000 residential, commercial and
industrial customers. Under the terms of the contract Edison Water Company
expects to make expenditures of approximately $25.0 million over the 20-year
period. Of this total approximately $14.0 million is expected to be expended
in the first three years. An initial payment of $5.7 million was made upon
closing. E'town expects to realize a return on its investment in the project
comparable to that realized by E'town's regulated utility operations. The
earnings effect is expected to be small during the first few years and is
expected to increase after year five.
In order to form AWM, in 1995, the Corporation entered into a three-year
joint venture agreement with Applied Wastewater General Partnership (AWG) a
unit of several privately held and affiliated companies providing design,
engineering, construction and operating services for water and wastewater
facilities. AWM has been pursuing opportunities to design, finance, engineer,
construct, own, operate and/or sell water and wastewater facilities for
municipal and corporate clients, primarily in New Jersey. E'town has agreed
to provide capital contributions to AWM of up to $.5 million to finance AWM's
working capital needs. E'town may provide additional financing for particular
projects of AWM. AWG has been providing the substantial portion of the
operations-related services required to be performed by AWM. Either party may
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<PAGE>
terminate the agreement at any time. E'town formed AWM to expand its range of
services to include wastewater, particularly to the smaller communities that
surround the franchise areas of Elizabethtown and Mount Holly.
Included in Non-Utility Property and Other Investments at September 30, 1997
is an investment of $1.3 million ($.2 million net of related deferred taxes)
in a limited partnership that owns Solar Electric Generating System V (SEGS),
located in California.
Properties
E'town Properties and E'town Corporation own various parcels of undeveloped
land in New Jersey carried as investments of $12.8 million in Non-Utility
Property and Other Investments - Net in the Consolidated Balance Sheets of
E'town at September 30, 1997.
The carrying value of each parcel includes the original cost plus any real
estate taxes, interest and, where applicable, direct costs capitalized while
rezoning or governmental approvals are or were being sought.
One of the parcels was sold in June 1997 for $.4 million at a gain of less
than $.1 million. Based on independent appraisals received at various times
prior to 1996, management believes that the estimated net realizable value of
each property exceeds its respective carrying value as of June 30, 1997.
E'town and Properties are assessing their position with regard to the
remaining real estate investments. E'town expects to reinvest the net
proceeds of any sale into water and wastewater investments in efforts to
yield a current return.
E'town will continue to monitor the relationship between the carrying and net
realizable values of its properties through updated appraisals, when
appropriate, and of its investment in SEGS based on information provided by
SEGS management.
New Accounting Pronouncements
The Financial Accounting Standards Board has issued Statement of Financial
Accounting Standards (SFAS) No. 128, "Earnings Per Share," which is effective
for financial statements issued after December 15, 1997. The pronouncement
simplifies the calculation of earnings per share in that a calculation of
"basic" earnings per share is reported in lieu of primary earnings per share.
Basic earnings per share includes only the weighted average number of common
shares outstanding for the period and does not consider the dilutive effect
of the Corporation's outstanding stock options. There would be no effect on
the Corporation's calculation of earnings per share if the pronouncement were
applied currently.
The Financial Accounting Standards Board has issued SFAS No. 131,
"Disclosures about Segments of an Enterprise and Related Information" which is
effective for financial statements issued after December 15, 1997. The
pronouncement requires disclosure of selected information about operating
segments in interim financial reports. Based upon the relative materiality of
the Corporation's business segments to the consolidated financial statements
no additional disclosures would be required.
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PART II - OTHER INFORMATION
Items 1 - 5:
Nothing to Report.
Item 6(a) - Exhibits
Exhibits to Part I:
Exhibit 4(i) - Indenture dated as of June 1, 1997 from Elizabethtown
Water Company to The Bank of New York, Trustee, relating
to Variable Rate Demand Debentures, due 2027 (Series B)
Exhibit 4(j) - Indenture dated as of June 1, 1997 from Elizabethtown
Water Company to The Bank of New York, Trustee,
relating to Variable Rate Demand Debentures, due 2027
(Series A)
Exhibit 11 - E'town Corporation and Subsidiaries - Statement Regarding
Computation of Per Share Earnings
Exhibit 12 - Elizabethtown Water Company - Computation of Ratio of
Earnings to Fixed Charges and Preferred Dividends and
Computation of Ratio of earnings to Fixed Charges
Exhibit 27 - E'town Corporation and Subsidiaries and Elizabethtown
Water Company and Subsidiary - Financial Data Schedules
Item 6(b) - Reports on Form 8-K
None
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<PAGE>
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Date: November 13, 1997
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
/s/ Gail P. Brady
________________________________
Gail P. Brady
Treasurer
/s/ Dennis W. Doll
________________________________
Dennis W. Doll
Controller
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Exhibit 4(i)
INDENTURE, dated as of June 1, 1997, between ELIZABETHTOWN WATER
COMPANY, a corporation duly organized and existing under and by virtue of the
laws of the State of New Jersey (hereinafter sometimes called the "Company"),
party of the first part, and THE BANK OF NEW YORK, a New York banking
corporation (hereinafter sometimes called the "Trustee"), party of the second
part.
WHEREAS, the Company is empowered to issue debentures for any of the
objects and purposes of the Company;
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized an issue of debentures designated 1997 Series B Variable Rate
Debentures - due 2027 (hereinafter referred to as the "Debentures"), in an
aggregate principal amount of $25,000,000, to be issued under and pursuant to
the provisions hereof; and
WHEREAS, the Debentures and the Trustee's certificate of authentication
to be borne by the Debentures are to be substantially in the following forms,
respectively:
[FORM OF DEBENTURE]
[FACE]
$___________________ No. _______________
ELIZABETHTOWN WATER COMPANY
1997 Series B Variable Rate Debenture - due 2027
ELIZABETHTOWN WATER COMPANY, a corporation duly organized and
existing under the laws of the State of New Jersey (herein referred to as the
"Company"), for value received, hereby promises to pay to Summit Bank, or
registered assigns, on June 1, 2027 or upon the earlier redemption hereof as
hereinafter provided, the principal sum of Twenty-Five Million Dollars in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts. The 1997 Series B
Variable Rate Debentures have been issued to the Bond Trustee to evidence the
obligations of the Company under the Loan Agreement pursuant to which the
Company is obligated for the payment of the principal of, premium, if any, and
interest due on the Bonds issued by the Authority pursuant to the Bond
Indenture. This 1997 Series B Variable Rate Debenture bears interest at the same
rate, and interest on this 1997 Series B Variable Rate Debenture is payable on
the same dates and to the same extent as interest is payable on the Bonds
pursuant to the terms thereof. The interest rate on this Debenture shall in no
event exceed 10%. Principal and interest shall be paid at the principal
corporate trust office of
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The Bank of New York, New York, New York or at the office of the Company,
Westfield, New Jersey, or at the duly designated office of any duly appointed
alternate or successor paying agent.
The obligation of the Company to make payments with respect to the
principal of, premium, if any, and interest on the Debentures shall be fully or
partially, as the case may be, satisfied and discharged to the extent that the
principal of, premium, if any and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Debenture shall not be valid or become obligatory for any purpose
until the certificate of authentication hereon shall have been signed by the
Trustee under the Indenture.
IN WITNESS WHEREOF, ELIZABETHTOWN WATER COMPANY has
caused this Debenture to be signed in its corporate name by its President or one
of its Vice Presidents by his or her signature or a facsimile thereof and by its
Secretary or one of its Assistant Secretaries by his or her signature or a
facsimile thereof, and its corporate seal, or a facsimile thereof, to be
impressed or imprinted hereon.
ELIZABETHTOWN WATER COMPANY
By___________________________
Title
(Seal)
By___________________________
Title
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<PAGE>
[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated: ________ __, 1997
This is one of the Debentures described in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee,
By___________________________
Authorized Signatory.
[REVERSE]
ELIZABETHTOWN WATER COMPANY
1997 Series B Variable Rate Debenture - due 2027
This Debenture is one of a duly authorized issue of Debentures of the
Company (herein referred to as the "Debentures"), limited to the aggregate
principal amount of $25,000,000, except as otherwise provided in the Indenture
referred to below, all issued or to be issued under and pursuant to an indenture
dated as of June 1, 1997 (herein referred to as the "Indenture"), duly executed
and delivered by the Company to The Bank of New York, Trustee (herein referred
to as the "Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights of the holders of the
Debentures, the rights, duties and immunities of the Trustee and the rights and
obligations of the Company thereunder. The Debentures will not be transferable
except to a successor Bond Trustee.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of more than 50% in the aggregate
principal amount of the Debentures at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any indenture supplemental thereto or modifying in any manner the rights
and obligations of the holders of the Debentures and of the Company; provided,
however, that no such supplemental indenture shall (i) extend the fixed
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<PAGE>
maturity of any Debenture, or reduce the principal amount thereof, or reduce the
rate or extend the time of payment of interest thereon, without the consent of
the holder of each Debenture so affected, or (ii) reduce the aforesaid
percentage of Debentures, the holders of which are required to consent to any
such supplemental indenture, without the consent of the holders of all
Debentures then outstanding. It is also provided in the Indenture that prior to
any declaration of the maturity of the Debentures the holders of a majority in
the aggregate principal amount of the Debentures at the time outstanding may on
behalf of the holders of all of the Debentures waive any past default under the
Indenture and its consequences, except a default in the payment of interest on
or the principal of any of the Debentures. Any such consent or waiver by the
registered holder of this Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of this Debenture and of any
Debenture issued in exchange herefor or in place hereof, irrespective of whether
or not any notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this Debenture
or of the Indenture shall alter or impair the obligation of the Company, which
is absolute and unconditional, to pay the principal of and interest on this
Debenture at the time and place and at the rate and in the coin or currency
herein prescribed.
The Debentures are issuable as registered Debentures without coupons,
in denominations of $5,000 and any multiple thereof. This Debenture is
transferable in the manner authorized by law. Upon due presentment of this
Debenture for registration of transfer at the office or agency to be maintained
by the Company in the Borough of Manhattan, City and State of New York, a new
Debenture or Debentures, of authorized denominations, for a like aggregate
principal amount, will be issued to the transferee as provided, and subject to
the limitations, in the Indenture. No service charge will be made for any such
registration of transfer, but the Company may require payment of a sum
sufficient to reimburse it for any tax or other governmental charge that may be
imposed in relation thereto. This Debenture may in like manner be exchanged
without service charge for one or more new Debentures of other authorized
denominations but of the same aggregate principal amount, all subject to the
terms and conditions set forth in the Indenture.
The Debentures are subject to optional and mandatory redemption by the
Company, at the times, and to the extent that, certain New Jersey Economic
Development Authority Water Facilities Bonds (Elizabethtown Water Company
Project -- 1997 Series B) are called for redemption at a price equal to the
principal amount to be redeemed, accrued interest to the date fixed for
redemption and any premium due in respect of such Bonds. As more fully provided
in the Indenture, the Debentures are also redeemable as a whole or in part with
the proceeds of Released Property, at the principal amount thereof plus accrued
interest to the date fixed for redemption.
The Indenture provides that under the circumstances specified therein
funds or certain securities may be deposited with the Trustee in advance of the
maturity or redemption date of any of the Debentures, in trust for the payment
or redemption of such Debentures, and the interest due or to become due thereon,
and that thereupon all obligations of the Company in respect of such Debentures
shall cease and be discharged and the holders thereof
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<PAGE>
shall thereafter be restricted exclusively to such funds or securities for any
and all other claims on their part under the Indenture or with respect to such
Debentures.
The Company, the Trustee, any paying agent and any Debenture registrar
may deem and treat the registered holder hereof as the absolute owner hereof
(whether or not this Debenture shall be overdue and notwithstanding any notice
of ownership or writing hereon) for the purpose of receiving payment of or on
account of the principal hereof and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture registrar shall be affected by any notice to the contrary. So long as
the Bond Trustee (as defined in the Indenture) is the sole registered holder of
this Debenture, and has specified an account for such payments in writing to the
Company, the Trustee and any paying agent, all payments of interest required
hereunder shall be made by wire transfer.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer, trustee or
director, past, present or future, as such, of the Company or of any predecessor
or successor corporation, whether by virtue of any constitution, statute or rule
of law or equity, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released by every
holder hereof, as more fully provided in the Indenture.
----------------------
AND WHEREAS, all acts and things necessary to make the Debentures, when
executed by the Company and authenticated and delivered by the Trustee as in
this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute these presents a valid indenture and agreement, have
been done and performed, and the execution of this Indenture and the issue
hereunder of the Debentures have in all respects been duly authorized, and the
Company, in the exercise of the legal right and power in it vested, executes
this Indenture and proposes to make, execute, issue and deliver the Debentures;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are and are to be authenticated, issued and delivered, and in
consideration of the premises, of the purchase and acceptance of the Debentures
by the holders thereof and of the sum of one dollar to it duly paid by the
Trustee at the execution of these presents, the receipt whereof is hereby
acknowledged, the Company covenants and agrees with the Trustee for the equal
and proportionate benefit of the respective holders from time to time of the
Debentures, as follows:
ARTICLE ONE.
#30165103.1
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<PAGE>
Definitions.
Section 1.01. The terms defined in this Section (except as in this
Indenture otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture which are defined in the Trust Indenture Act of 1939 or
which are by reference in such act defined in the Securities Act of 1933, as
amended (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of the
execution of this Indenture.
"Authority" shall mean the New Jersey Economic Development Authority.
"Board of Directors" shall mean the Board of Directors of the Company
or any committee thereof duly authorized by the Board of Directors to act
hereunder.
"Board Resolution" or "Resolution of the Board of Directors" shall mean
a copy of a resolution certified by the Secretary or an Assistant Secretary of
the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification.
"Company" shall mean Elizabethtown Water Company, and, subject to the
provisions of Article Twelve, shall also include its successors and assigns.
"Debenture" or "Debentures" shall mean any Debenture or Debentures, as
the case may be, authenticated and delivered under this Indenture.
The term "outstanding", when used with reference to Debentures, shall,
subject to the provisions of Section 9.04 and Article Thirteen, mean, as of any
particular time, all Debentures authenticated and delivered by the Trustee under
this Indenture, except
(a) Debentures theretofore canceled by the Trustee or delivered to the
Trustee for cancellation;
(b) Debentures or portions thereof for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust
with the Trustee, provided that if such Debentures or portions are to be
redeemed prior to the maturity thereof, notice of such redemption shall
have been given as in Article Four provided, or provision satisfactory to
the Trustee shall have been made for giving such notice; and
(c) Debentures in lieu of or in substitution for which other Debentures
shall have been authenticated and delivered pursuant to the terms of
Section 2.06, unless proof satisfactory to the Trustee is presented that
any such Debentures are held by holders for value without notice of any
defense.
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<PAGE>
"Debentureholder", "holder of Debentures", "holder", or other similar
terms, shall mean the registered holder of any Debenture. The term "registered
holder" shall mean the person or persons in whose name or names a particular
Debenture shall be registered on the register kept for that purpose in
accordance with the terms of this Indenture.
"Event of Default" shall mean any event specified in Section 7.01
continued for the period of time, if any, therein designated.
"Indenture" shall mean this instrument as originally executed, or, if
amended or supplemented, as so amended or supplemented.
"Loan Agreement" shall mean the Loan Agreement dated as of June 1, 1997
between the Company and the Authority relating to, among other things, the
issuance of $25,000,000 principal amount of Water Facilities Bonds
(Elizabethtown Water Company Project -- 1997 Series B), or if further amended or
supplemented, as so further amended or supplemented.
"Officers' Certificate" shall mean a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company. Each such certificate
shall include the statements provided for in Section 15.06, if and to the extent
required by the provisions thereof.
"Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel who shall be satisfactory to the Trustee, and who may be an employee of
or counsel to the Company. Each such opinion shall include the statements
provided for in Section 15.06, if and to the extent required by the provisions
thereof.
"Person" shall mean an individual, partnership, corporation,
association, joint venture, trust or unincorporated association and shall
include a government or political subdivision thereof and any governmental
agency or public benefit corporation.
"Principal Corporate Trust Office" means the office of the Trustee in
New York, New York at which any particular time its corporate trust business
shall be principally administered, which office at the date hereof is located at
101 Barclay Street, 21st Floor, New York, New York 10286, Attention: Corporate
Trust Trustee Administration, except that, with respect to presentation of
Securities for payment or registration of transfers and exchanges and the
location of the Security Registrar, such term means the office or agency of the
Trustee in said city at which at any particular time its corporate agency
business shall be conducted, which at the date hereof is located at 101 Barclay
Street, New York, New York 10286, Attention: Corporate Trust Services Window.
"Project" shall mean those certain facilities of the Company financed
pursuant to the Loan Agreement and described therein.
"Responsible Officer" when used with respect to the Trustee shall mean
the chairman or vice chairman of the board of directors, the chairman of the
executive committee, the president, any vice president, the secretary, the
treasurer, any senior trust
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<PAGE>
officer, any trust officer, any second or assistant vice president, any
assistant secretary, any assistant treasurer, any assistant cashier, or any
other officer or assistant officer of the Trustee customarily performing
functions similar to those performed by the persons who at the time shall be
such officers, respectively, or to whom any corporate trust matter is referred
because of his knowledge of and familiarity with the particular subject.
"Bonds" shall mean the Authority's $25,000,000 principal amount of
Water Facilities Bonds (Elizabethtown Water Company Project -- 1997 Series B).
"Bond Indenture" shall mean the Trust Indenture (Series B), dated as of
June 1, 1997 between the Authority and the Bond Trustee, pursuant to which the
Bonds are issued, or if further amended or supplemented, as so further amended
or supplemented.
"Bond Trustee" shall mean the trustee under the Bond Indenture for the
time being, whether original or successor.
"Trustee" shall mean the Trustee under this Indenture for the time
being, whether original or successor.
"Trust Indenture Act of 1939", subject to the provisions of Sections
11.01 and 11.02, shall mean the Trust Indenture Act of 1939 as in force at the
date of execution of this Indenture.
Certain other terms are defined in Articles Two, Five, Seven and Eight.
ARTICLE TWO.
Description, Execution and Exchange of Debentures.
Section 2.01. The Debentures shall mature on June 1, 2027.
Section 2.02. The Debentures and the Trustee's certificate of
authentication to be borne by the Debentures shall be substantially of the tenor
and purport as in this Indenture above recited, and may have such letters,
numbers or other marks of identification and such legends or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any law or regulation of any stock exchange on which the
Debentures may be listed, or to conform to usage.
Section 2.03. The Debentures shall be issuable as registered Debentures
without coupons in denominations of $5,000 and multiples thereof.
Each Debenture shall be dated the date of its authentication. Each
Debenture shall bear interest at the same rate, and interest and premium, if
any, on each Debenture
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<PAGE>
shall be payable on the same dates, and to the same extent that interest is
payable on the Bonds pursuant to the terms thereof.
The obligation of the Company to make payments with respect to the
principal of, premium, if any, and interest on the Debentures shall be fully or
partially, as the case may be, satisfied and discharged to the extent that the
principal of, premium, if any, and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.
Section 2.04. The Debentures shall be signed on behalf of the Company
by its President or a Vice President, and by its Secretary or an Assistant
Secretary, and its corporate seal, or a facsimile thereof, shall be thereon
impressed or imprinted. The signature of any such President, Vice President,
Secretary or Assistant Secretary may be facsimile. The Company may use the
signature or facsimile signature or any person who shall be any such officer of
the Company at the time of the execution of Debentures, irrespective of the date
as of which the same shall be authenticated, or of any person who shall have
been any such officer of the Company, notwithstanding the fact that at the time
the Debentures shall be authenticated and delivered or disposed of, he shall
have ceased to be such officer of the Company.
The Company may deliver Debentures executed by the Company to the
Trustee for authentication. The Trustee shall thereupon authenticate and make
available for delivery said Debentures to or upon the written orders of the
Company. Only such Debentures as shall bear thereon a certificate of
authentication substantially in the form herein before recited, executed by the
Trustee, shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee upon any Debenture
executed by the Company shall be conclusive evidence that the Debenture so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
Section 2.05. The Company shall keep at the office or agency to be
maintained by the Company as provided in Section 5.02 a register or registers in
which, subject to such reasonable regulations as it may prescribe, it will
register all Debentures, and upon due presentment for registration or transfer
of any Debenture at such office or agency, the Company shall execute and
register and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new Debenture or Debentures for a like aggregate
principal amount of Debentures of any authorized denominations, bearing numbers
not contemporaneously outstanding.
The several authorized denominations of Debentures shall be
interchangeable in equal aggregate principal amounts. Debentures to be exchanged
shall be surrendered at the office or agency to be maintained by the Company for
the purpose as provided in Section 5.02 and the Company shall execute and
register and the Trustee shall authenticate and deliver in exchange therefor the
Debenture or Debentures which the Debenture holder making the exchange shall be
entitled to receive, bearing numbers not contemporaneously outstanding.
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<PAGE>
All Debentures presented or surrendered for registration of transfer,
exchange, redemption or payment shall (if so required by the Company or the
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee duly
executed by, the registered holder or his attorney duly authorized in writing.
For any exchange or registration of transfer of Debentures, the
Company, at its option, may require the payment of a sum sufficient to reimburse
it for any tax or other governmental charge that may be imposed in relation
thereto. No service charge shall be made for any such transaction.
The Company shall not be required to make registration of transfers or
exchanges of Debentures for a period of fifteen days next preceding any
selection of Debentures to be redeemed, nor shall it be required to make
registration of transfers or exchange of any Debentures or portions thereof
called or being called for redemption, except, in the case of any Debenture to
be redeemed in part only, the portion thereof not being redeemed.
Section 2.06. In case any Debenture shall become mutilated or be
destroyed, lost or stolen, the Company in its discretion may issue a new
Debenture of like tenor bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Debenture or in lieu of and
substitution for the Debenture so destroyed, lost or stolen. In every case the
applicant for a substituted Debenture shall furnish to the Company and to the
Trustee such security or indemnity as may be required by them to save each of
them, and, if requested, any paying agents and Debenture registrars of the
Company, harmless from all risk, however remote, and the applicant shall also
furnish to the Company and to the Trustee evidence to their satisfaction of the
mutilation, destruction, loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee shall authenticate any such substituted Debenture
and deliver the same upon the written request or authorization of any officer of
the Company. Upon the issue of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any stamp tax or other
governmental charge that may be imposed incident thereto and any other expenses,
including counsel fees and expenses, of the Company, the Trustee and any paying
agent or Debenture registrar, connected therewith. In case any Debenture which
has matured or is about to mature shall become mutilated or be destroyed, lost
or stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to save each of them harmless, and evidence to the satisfaction of the Company
and the Trustee of the mutilation, destruction, loss or theft of such Debenture
and of the ownership thereof.
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture which is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Debenture shall be found at any time, or be
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debentures duly
issued hereunder. All Debentures shall be held and owned upon the express
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<PAGE>
condition that the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures and
shall preclude any and all other rights or remedies, notwithstanding any law or
statute existing or hereinafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
Section 2.07. All Debentures surrendered for the purpose of payment,
redemption, exchange or registration of transfer shall be delivered to the
Trustee and canceled by it, and no Debentures shall be issued in lieu of any
thereof except as expressly required or permitted by any of the provisions of
this Indenture. With the consent of the Company, the Trustee may, but shall not
be required to, destroy canceled Debentures and deliver a certificate thereof to
the Company. If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee, or surrendered to the Trustee, for cancellation.
Section 2.08. Nothing in this Indenture or in the Debentures, expressed
or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and the holders of the Debentures,
any legal or equitable right, remedy or claim under or in respect of this
Indenture, or under any covenant, condition or provision herein contained, all
of the covenants, conditions and provisions herein being for the sole benefit of
the parties hereto and of the holders of the Debentures.
Section 2.09. The Company in issuing the Debentures may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to holders of Debentures;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Debentures or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debentures, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE THREE.
Issue of Debentures.
Section 3.01. Debentures not to exceed the aggregate principal amount
of $25,000,000, except as provided in Section 2.06, may, upon the execution of
this Indenture or from time to time thereafter, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Company signed by its President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary, without further
action by the Company. As a general matter, the Debentures issued under this
Indenture evidence indebtedness under the Loan Agreement and are not
transferable except to a successor Bond Trustee.
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ARTICLE FOUR.
Redemption of Debentures.
Section 4.01. The Debentures are redeemable prior to maturity, in
accordance with the provisions of this Article Four, at the principal amount
thereof and accrued interest to the date fixed for redemption (but if the date
fixed for redemption is a semi-annual interest payment date, the interest
installment payable on such date shall be paid to the holder at the close of
business on the record date for such interest payment date), together, in
certain cases, with a premium, all as set forth in the form of Debenture
provided for herein. The Trustee, upon the request of the Company (evidenced by
a copy of a Board Resolution, delivered to the Trustee at least 60 days prior to
the redemption date) and notification by the Bond Trustee, signed by a Vice
President or Trust Officer (delivered to the Trustee at least 35 days prior to
the redemption date), that an equal principal amount of Bonds are to be redeemed
and specifying the premium, if any, to be paid on such redemption, shall, for
and on behalf of and in the name of the Company, mail or cause to be mailed a
notice of redemption with respect to the principal amount of Debentures
specified in such request.
Section 4.02. In case of a redemption of a part only of the Debentures,
the Trustee shall select the particular Debentures or parts thereof, which shall
be $5,000 or multiples thereof, so to be redeemed according to such method as
the Trustee shall deem proper in its discretion.
Notice of redemption to the holder of any Debenture which is to be
redeemed in whole or in part shall be mailed by or on behalf of the Company, not
less than thirty days prior to the date fixed for redemption, to him at his last
address appearing upon the registry books.
Failure duly to give such notice by mailing to the holder of any
Debenture designated for redemption in whole or in part shall not affect the
validity of the proceedings for the redemption of any other Debenture.
The notice of redemption to each holder of Debentures to be redeemed
shall specify the Debentures or parts thereof held by such holder to be
redeemed, which shall be $5,000 or multiples thereof, the date fixed for
redemption, the CUSIP numbers (if any) of such Debentures, the redemption price
at which Debentures are to be redeemed and the place where payment of the
redemption price is to be made upon surrender of the Debentures, and shall state
that interest accrued to the date fixed for redemption will be paid in the
manner specified in said notice, that from said date interest thereon will cease
to accrue, and, in the case of any Debenture which is to be redeemed in part
only, that on and after the redemption date, upon surrender of such Debenture, a
new Debenture or Debentures of authorized denominations in aggregate principal
amount equal to the unremedied portion of such Debenture will be issued. Such
notice shall also state that it is subject to the receipt of the redemption
moneys by the Trustee prior to the date fixed for redemption, and that such
notice, and the Company's request to the Trustee to mail such notice, shall be
of no effect unless such moneys are received prior to such date.
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Section 4.03. Notice of redemption having been mailed, and the Trustee
having prior to the date fixed for redemption specified in the notice of
redemption received for the purpose an amount in cash sufficient to redeem all
of the Debentures called for redemption, the Debentures called for redemption
shall become due and payable on such date fixed for redemption.
Section 4.04. On and after the date fixed for redemption, if the moneys
for the redemption of the Debentures to be redeemed shall have been received by
the Trustee, such Debentures shall cease to bear interest. All moneys on deposit
with the Trustee for the redemption of Debentures shall, subject to the
provisions of Section 13.04 hereof, be held in trust for account of the holders
of the Debentures so to be redeemed, and shall be paid to them, respectively,
upon presentation and surrender of said Debentures.
If any Debenture of a denomination larger than $5,000 shall be called
for redemption in part only, upon presentation of any such Debenture so called
for redemption, the payment with respect to said Debenture shall be made and
Debentures for the unpaid balance of the principal amount of the Debenture so
presented shall be authenticated and delivered by the Trustee without charge
therefor to the holder thereof. On and after the date fixed for such redemption,
interest shall be payable only on the portion of such Debenture not so called
for redemption and only such portion shall be deemed outstanding and continue to
be entitled to the benefits of this Indenture.
Anything in this Indenture contained to the contrary notwithstanding,
if the giving of the notice of redemption shall have been completed as provided
in Section 4.02, or if provision satisfactory to the Trustee for the giving of
such notice shall have been made, and if the Company shall have deposited in
trust with the Trustee funds sufficient to redeem the Debentures (or parts
thereof) to be redeemed on the date fixed for redemption, together with interest
accrued to the date fixed for redemption, then all obligations of the Company in
respect of such Debentures (or parts thereof) shall cease and be discharged and
the holders of such Debentures or parts thereof) shall thereafter be restricted
exclusively to such funds for any and all claims of whatsoever nature on their
part under this Indenture or in respect to such Debentures (or parts thereof).
ARTICLE FIVE.
Particular Covenants of the Company.
The Company covenants as follows:
Section 5.01. The Company will duly and punctually pay or cause to be
paid the principal of, premium, if any, and interest on each of the Debentures
at the time and place and in the manner provided herein and in the Debentures.
Section 5.02. As long as any of the Debentures remain outstanding, the
Company will maintain an office or agency or offices or agencies in the
Borough of
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Manhattan, City and State of New York, where the Debentures may be presented for
registration of transfer and exchange as in this Indenture provided, and where
notices and demands to or upon the Company in respect of the Debentures or of
this Indenture may be served, and where the Debentures may be presented for
payment. Until otherwise designated by the Company in a notice to the Trustee,
such office or agency for all of the above purposes shall be the principal
corporate trust office of the Trustee in the Borough of Manhattan, City and
State of New York.
Section 5.03. The Company, whenever necessary to avoid or fill a
vacancy in the office of Trustee, will appoint, in the manner provided in
Section 8.10, a Trustee, so that there shall at all times be a Trustee
hereunder.
Section 5.04. (a) If the Company shall appoint a paying agent other
than the Trustee, it will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section,
(1) that it will hold all sums held by it as such agent for the payment
of the principal of, premium, if any, or interest on the Debentures
(whether such sums have been paid to it by the Company or by any other
obligor on the Debentures) in trust for the benefit of the holders of the
Debentures, or of the Trustee, as the case may be,
(2) that it will give the Trustee notice of any failure by the Company
(or by any other obligor on the Debentures) to make any payment of the
principal of or interest on the Debentures when the same shall be due and
payable, and
(3) that at any time during the continuance of any Event of Default
upon the written request of the Trustee, it will forthwith pay to the
Trustee all sums so held by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest on, the
Debentures, set aside, segregate and hold in trust for the benefit of the
holders of the Debentures, a sum sufficient to pay such principal, premium, if
any, or interest so becoming due and payable and will notify the Trustee of any
failure (by it or any other obligor on the Debentures) to take such action.
(c) Whenever the Company shall have one or more paying agents, it will,
prior to each due date of the principal of, premium, if any, or interest on, the
Debentures, deposit with a paying agent a sum sufficient to pay the principal,
premium, if any, or interest, so becoming due, such sum to be held in trust for
the benefit of the persons entitled to such principal, premium, if any, or
interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
(d) Anything in this Section to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture,
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or for any other reason, pay or cause to be paid to the Trustee all sums held in
trust by it, or any paying agent hereunder, as required by this Section, such
sums to be held by the Trustee upon the trusts herein contained.
(e) Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Section 13.04 hereof.
Section 5.05. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, it will not create, assume or incur,
or in any other manner become directly or indirectly liable in respect of, any
indebtedness, in addition to its 7.20% Debentures due 2019, its 7 1/2%
Debentures due 2020, its 6.60% Debentures due 2021, its 6.70% Debentures due
2021, its 8 3/4% Debentures due 2021, its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028, its 5.60% Debentures due 2025, its 1997 Series A Variable
Rate Debentures and the Debentures, except the following:
(a) current operating liabilities and current or other obligations
(other than for borrowed money) incurred in the ordinary course of
business;
(b) Current Indebtedness;
(c) indebtedness (in addition to that referred to in subdivisions (a) and
(b) above and (d) below) in an aggregate amount not in excess of
$10,000,000 at any one time outstanding; and
(d) indebtedness (in addition to that referred to in subdivisions (a),
(b) and (c) above) in an aggregate amount not in excess of the sum of
$20,000,000 plus 65% of the Amount of Net Property Additions at the time
the Company first becomes liable in respect of any such indebtedness.
The Company covenants that, so long as any Debentures shall be
outstanding under this Indenture, it will not create, assume or incur, or in any
manner become directly or indirectly liable in respect of, any indebtedness (in
addition to (as hereinafter defined) its 7.20% Debentures due 2019, its 7 1/2%
Debentures due 2020, its 6.60% Debentures due 2021, its 6.70% Debentures due
2021, its 8 3/4% Debentures due 2021, its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028, its 5.60% Debentures due 2025, its 1997 Series A Variable
Rate Debentures, the Debentures and that referred to in subdivisions (a), (b)
and (c) above), unless the Gross Income of the Company, for a period of 12
consecutive calendar months within the 15 calendar months immediately preceding
the incurring by the Company of such indebtedness, shall have been at least
equal to twice the Annual Interest Charges.
The term "Current Indebtedness" as used herein shall mean indebtedness
in an aggregate amount not in excess of 20% of the total capitalization of the
Company at the time and which is expressed to be payable on demand or to mature
less than one year after the date of creation or issuance thereof. The total
capitalization of the Company shall be deemed to consist of the sum of (i) the
principal amount of all outstanding indebtedness of the Company represented by
bonds, debentures, notes or other evidences of indebtedness (other
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than Current Indebtedness), (ii) the aggregate of the par or stated value
represented by all issued and outstanding capital stock of all classes of the
Company, including premiums received on the issue of such capital stock, and
(iii) the surplus of the Company, including earned, capital, paid-in and other
surplus.
The term "Amount of Net Property Additions" as used herein shall mean
the balance, if any, remaining after deducting the Retirements from the Amount
of Property Additions, as of any particular time.
The term "Amount of Property Additions" as used herein shall mean the
Cost or, if less, the fair value to the Company at the time of the actual
acquisition by the Company, of Property Additions.
The term "Property Additions" as used herein shall mean all tangible
property owned by the Company and made, constructed or otherwise acquired by it
subsequent to December 31, 1975, which the Company is authorized to acquire, own
and operate and which is used or useful in the business of impounding, storing,
transmitting, producing, manufacturing, transporting, distribution or supplying
water for any and all purposes. Permanent improvements, extensions, additions or
replacements in the process or construction or erection, shall be included as
Property Additions as of any particular time, insofar as actually constructed or
erected after December 31, 1975, and before such particular time. There shall
not be included as Property Additions (a) Excepted Property, (b) going value or
good will, as such, (c) any item of property retired the retirement of which has
not been credited to utility plant account, (d) any item of property acquired to
replace a similar item of property whose retirement has not been credited to
utility plant account, or any item of property whose cost has been charged or is
properly chargeable to repairs, maintenance or other operating expense account
or whose cost has been charged or is not properly chargeable to utility plant
account, or (e) any property not located in the State of New Jersey or in a
State contiguous thereto.
The term "Retirements" as used herein shall mean the Cost of Fundable
Property which, subsequent to December 31, 1975, shall have become worn out or
permanently unserviceable, or shall have been lost, sold, destroyed, abandoned,
surrendered on lapse of title, taken by eminent domain, purchased by any
governmental or public body pursuant to any right reserved to or vested in it,
or otherwise disposed of by the Company or retired from service for any reason,
or shall have permanently ceased to be used or useful in the business of the
Company. Accounting adjustments of utility plant accounts or reclassification of
utility plant accounts or amortization of any plant account to comply with any
order of any regulatory body and which do not represent or reflect the permanent
retirement from a plant account subsequent to December 31, 1975 of any Fundable
Property shall not be included in Retirements.
The term "Fundable Property" as used herein shall mean (a) all property
owned by the Company on December 31, 1975 (except such property as would not be
included in Property Additions if acquired subsequent to December 31, 1975) and
(b) Property Additions.
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The term "Cost" as used herein, when used with respect to any
particular property, shall mean the cost (or, if not known, estimated cost)
thereof to the person first devoting it to public service, without deducting
therefrom applicable reserves for depreciation and/or retirements and/or
depletion and/or obsolescence. In determining Cost in cases in which property,
part of which constitutes Fundable Property and part does not, is or has been
acquired for a consideration not divided between such parts, or, in cases where
the consideration given for property is not allocated to the various items of
property acquired, the consideration may be allocated to the various parts and
items of property acquired in any reasonable manner which is in accordance with
the requirements of any systems of accounting with which the Company is
compelled to comply by any provision of law, or, if there be no such
requirements, in accordance with good accounting practice.
The term "Gross Income" as used herein shall mean gross operating
revenues from all sources (whether or not subject to refund) after deducting
therefrom operating expenses. In computing gross operating revenues, there shall
be included net non-operating revenues, if any (including income from
securities, whether of subsidiaries or not), in an amount not more than 20% of
Gross Income after deducting therefrom net non-operating revenues. In computing
operating expenses, there shall be included all operating expenses, including
accruals for taxes (except that taxes on undistributed earnings, income and
excess profits and any like taxes measured by income and charges in lieu of any
thereof made because of the deferment in payment of any such tax shall be
excluded from operating expenses, and any credit to income subsequently made on
account of any such prior charge shall be excluded from gross operating
revenues), rentals, insurance, actual charges for current repairs and
maintenance and charges to expense or income to provide for depreciation,
renewals, replacements, depletion or retirement of property and for property
loss (but excluding interest, charges deducted in computing net non-operating
revenues and charges to income for the amortization (i) of debt discount and
expense and (ii) of utility plant account or amounts transferred therefrom). If
any of the property owned by the Company at the time any computation of Gross
Income is made shall have been acquired during or after any period for which
Gross Income is to be computed, the Gross Income of such property (computed in
the manner in this Section provided for the computation of the Gross Income of
the Company) during such period or such part of such period as shall have
preceded the acquisition thereof, to the extent that the same have not otherwise
been included and can be determined, shall be included in the Gross Income of
the Company for all purposes of this Indenture, and the Gross Income which can
be determined of any property disposed of by the Company during or after such
period shall not be treated as Gross Income of the Company.
The term "Annual Interest Charges" as used herein shall mean the
interest requirements for twelve months upon all indebtedness of the Company
(including any indebtedness, whether or not created or assumed by the Company,
on which the Company customarily pays interest charges or which is secured by a
lien on any property of the Company, but excluding (a) indebtedness represented
by customers' deposits, (b) current operating liabilities and current or other
obligations (other than for borrowed money) incurred in the ordinary course of
business, (c) indebtedness for the purchase, payment or redemption of which
money in the necessary amount shall have been deposited in trust, and (d)
Current Indebtedness) to be outstanding upon the incurring by the Company of the
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indebtedness in connection with which the computation is made; provided,
however, that the interest requirements on the Debentures shall be determined by
reference to the rate in effect on the date next preceding the date of such
computation.
Section 5.06. The Company covenants that, so long as any Debentures
shall be outstanding under the Indenture, it will not at any time mortgage or
pledge, or permit any other lien (other than Excepted Encumbrances) to become a
lien on, any property owned by the Company just prior to such time, to secure
any other indebtedness, without making effective provision whereby the
Debentures shall (so long as any such other indebtedness shall be so secured) be
secured (along with any other indebtedness similarly entitled to be equally and
ratably secured) by a direct lien (on all the property, other than Excepted
Property, owned by the Company just prior to the time such other lien shall have
become a lien on any of the property of the Company) prior to the lien or liens
securing any and all such other indebtedness; provided, however, that this
restriction shall not be applicable to nor prevent
(a) the pledging by the Company of its assets as security for the
payment of any tax, assessment or other similar charge demanded of the
Company by any governmental authority or public body so long as the Company
in good faith contests its liability to pay the same, or as security to be
deposited with any governmental authority or public body for any purpose at
any time required by law or governmental regulation as a condition to the
transaction of any business or the exercise of any privilege, license or
right; or
(b) the pledging by the Company of any assets for the purpose of
securing a stay or discharge or for any other purpose in the course of any
legal proceeding in which the Company is a party; or
(c) making good faith deposits in connection with tenders, contracts or
leases to which the Company is a party.
The Company covenants that, so long as any Debentures shall be
outstanding under this Indenture, if, upon any consolidation or merger of the
Company with or into any other corporation, or upon any sale or conveyance of
all or substantially all of the property of the Company as an entirety, or upon
any acquisition by the Company of the property of another corporation
substantially as an entirety or upon any merger of any other corporation into
the Company, any of the property (other than Excepted Property) owned by the
Company just prior thereto, would thereupon become subject to any lien (other
than Excepted Encumbrances), the Company, prior to such consolidation, merger,
sale, conveyance or acquisition, will take appropriate action whereby the
Debentures shall (so long as such property shall be subject to such lien) be
secured (along with any other indebtedness similarly entitled to be equally and
ratably secured) by a direct lien on such portion of the property of the Company
prior to all other liens, other than Excepted Encumbrances and other than any
liens existing thereon just prior to such consolidation, merger, sale,
conveyance or acquisition.
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Any instrument creating a lien pursuant to the requirements of this
Section shall contain reasonable and customary provisions for the enforcement of
such lien and for the release of, or substitution for, the property subjected to
such lien. Such direct lien shall be evidenced by an appropriate instrument or
instruments executed and delivered to the Trustee (or to the extent legally
necessary, to another trustee as additional or separate trustee). The Trustee,
subject to the provisions of Section 8.01 hereof, may receive an Opinion of
Counsel as conclusive evidence that any such instrument is in customary form and
complies with the foregoing provisions of this paragraph; and the Trustee shall
not be under any duty or responsibility to any holder of any Debenture with
respect to the form, validity or enforceability of any such instrument which it
may accept in reliance in good faith upon any such opinion.
If the Company shall fail to create a direct lien to secure the
Debentures, as required by the foregoing provisions of this Section, an
equitable lien shall exist to the same extent and on the same property as though
the Company had created such direct lien.
The term "Excepted Encumbrances" as used herein shall mean as of any
particular time any of the following:
(i) liens for taxes, assessments or governmental charges not
delinquent and liens for workmen's compensation awards and similar
obligations not delinquent and liens for taxes, assessments or governmental
charges delinquent but the validity of which is being contested at the time
by the Company in good faith by appropriate proceedings diligently
conducted;
(ii) any liens securing indebtedness neither assumed nor guaranteed
by the Company nor on which it customarily pays interest, existing in or
relating to real estate acquired by the Company for transmission,
distribution or right-of-way purposes, or in connection with its usual
operations;
(iii) easements or reservations in any property of the Company created
for the purpose of roads, railroads, railroadside tracks, electric lines,
pipe lines, sewers, water and gas transmission and distribution mains,
conduits, water rights of the State of New Jersey or others, building and
use restrictions and defects of title to, or leases of, any parts of the
property of the Company which do not in the opinion of the Company's
counsel materially impair the use of the property as an entirety in the
operation of the business of the Company;
(iv) undetermined liens and charges incidental to current
construction, including mechanics', laborers', materialmen's and similar
liens not delinquent;
(v) any obligations or duties affecting the property of the Company
to any municipality or public authority with respect to any franchise,
grant, license, permit or certificate;
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(vi) rights reserved to or vested in any municipality or public
authority to control or regulate any property of the Company or to use such
property in a manner which does not materially impair the use of such
property for the purposes for which it is held by the Company;
(vii) judgments in course of appeal or otherwise in contest and
secured by sufficient bond or security;
(viii) any irregularities in or deficiencies of title to any rights of
way for mains or pipes and/or appurtenances thereto or other improvements
thereon and to any real estate used or to be used primarily for right of
way purposes, provided that the Company shall have obtained from the
apparent owner of the lands or estates covered by any such right of way an
instrument purporting by its terms to grant the use thereof for the
construction, operation or maintenance of such main, pipe, appurtenance or
improvement for which the same are used or are to be used, or provided that
the Company has power, under eminent domain or similar statutes, to remove
such irregularities or deficiencies; or
(ix) any other lien on any property owned by the Company to secure
any indebtedness so long as the aggregate principal amount of all such
indebtedness is not in excess of $10,000,000.
The term "Excepted Property" as used herein shall mean (a) cash, bonds,
stocks, obligations and other securities; (b) choses in action, accounts and
bills receivable, judgments and other evidences of indebtedness and contracts,
leases and operating agreements; (c) stock in trade, merchandise, equipment,
apparatus, materials or supplies manufactured or acquired for the purpose of
sale and/or resale in the usual course of business or consumable in the
operation of any of the properties of the Company or held for the purpose of
repairing or replacing (in whole or in part) any rolling stock, buses, motor
coaches, trucks, automobiles or other vehicles or aircraft; (d) timber, gas,
oil, minerals (including developed and undeveloped natural gas reserves and
natural gas in underground storage or otherwise), mineral rights and royalties;
(e) materials or products generated, manufactured, produced or purchased by the
Company for sale, distribution or use in the ordinary course of its business;
(f) office furniture and equipment, tools, rolling stock, buses, motor coaches,
trucks, automobiles and other vehicles and aircraft; and (g) the Company's
franchise to be a corporation.
Section 5.07. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, it will not declare or pay any
dividends or make any other distribution (except dividends payable or
distributions made in shares of capital stock of the Company) on or in respect
of any of its Common Stock, or purchase or otherwise acquire for a consideration
any shares of its Common Stock (except out of the proceeds derived from the sale
of additional shares of its Common Stock subsequent to April 1, 1997, if the
aggregate of such dividends and distributions and such consideration for
purchase or other acquisition of shares of its Common Stock made by the Company
after December 31, 1975 would exceed the sum of (a) the earned surplus of the
Company accumulated after December 31, 1975 and determined without any deduction
on account of such dividends,
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distributions or acquisitions and (b) $10,000,000. The term "consideration" as
used in this Section shall mean cash or fair value if the consideration be other
than cash. Charges to earned surplus with corresponding credits to utility plant
acquisition adjustment account or utility plant adjustment account or any
similar account or to any reserve for the purpose of ultimately disposing
thereof and any provisions for amortization of any amounts included in utility
plant acquisition account or utility plant adjustment account or in any similar
account shall be disregarded in determining earned surplus accumulated after
December 31, 1975.
Section 5.08. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, if the Proceeds of Released Property
in any period of 12 consecutive calendar months shall amount to $5,000,000 or
more, and if, immediately subsequent to the receipt of such $5,000,000 (or the
part hereof making the total thereof $5,000,000 or more), the ratio of the
aggregate principal amount of all outstanding indebtedness of the Company
represented by bonds, debentures, notes or other evidences of indebtedness
(other than Current Indebtedness) to the net book value of the Company's utility
plant accounts exceeds 60%, then the Company will use such Proceeds of Released
Property to redeem all or any portion of Debentures or redeem to all or any
portion of 7.20% Debentures due 2019 issued by the Company (herein called the
"7.20% Debentures due 2019") or to redeem all or any portion of 7 1/2%
Debentures due 2020 issued by the Company (herein called the "7 1/2% Debentures
due 2020") or to redeem all or any portion of 6.60% Debentures due 2021 issued
by the Company (herein called the "6.60% Debentures due 2021") or to redeem all
or any portion of 6.70% Debentures due 2021 issued by the Company (herein called
the "6.70% Debentures due 2021") or to redeem all or any portion of 8 3/4%
Debentures due 2021 issued by the Company (herein called the "8 3/4% Debentures
due 2021") or to redeem all or any portion of 8% Debentures due 2022 issued by
the Company (herein called the "8% Debentures due 2022") or to redeem all or any
portion of 7 1/4% Debentures due 2028 issued by the Company (herein called the
"7 1/4% Debentures due 2028") or to redeem all or any portion of 5.60%
Debentures due 2025 issued by the Company (herein called the "5.60% Debentures
due 2025") or to redeem all or any portion of other debentures issued by the
Company under indentures having a provision substantially similar to this
Section 5.08 ("Subsequent Debentures") at the earliest practicable date at a
redemption price equal to the principal amount thereof plus accrued interest to
the date of redemption; provided, however, that the Company shall not be
required so to use any part of such Proceeds of Released Property as to which
the Company shall have given to the Trustee (within 30 days after such receipt)
an Officers' Certificate stating that the Company intends, within a period of
one year thereafter, to apply such part to the making, constructing or otherwise
acquiring of Property Additions. If any such Officers' Certificate shall so
state, the Company covenants so to apply such part within such one year as
stated in such Officers' Certificate or, to the extent that it does not so apply
such part, to use such part within such one year to redeem Debentures or to
redeem 7.20% Debentures due 2019 or to redeem 7 1/2% Debentures due 2020 or to
redeem 6.60% Debentures due 2021 or to redeem 6.70% Debentures due 2021 or to
redeem 8 3/4% Debentures due 2021 or to redeem 8% Debentures due 2022 or to
redeem 7 1/4% Debentures due 2028 or to redeem 5.60% Debentures due 2025 or to
redeem Subsequent Debentures.
In lieu of using any such Proceeds of Released Property for redemption
as aforesaid, the Company may deliver to the Trustee for cancellation Debentures
or may
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deliver for cancellation to the trustee under the indenture pursuant to which
the 7.20% Debentures due 2019 were issued 7.20% Debentures due 2019, or may
deliver for cancellation to the trustee under the indenture pursuant to which
the 7 1/2% Debentures due 2020 were issued 7 1/2% Debentures due 2020, or may
deliver for cancellation to the trustee under the indenture pursuant to which
the 6.60% Debentures due 2021 were issued 6.60% Debentures due 2021, or may
deliver for cancellation to the Trustee under the indenture pursuant to which
the 6.70% Debentures due 2021 were issued 6.70% Debentures due 2021, or may
deliver for cancellation to the trustee under the indenture pursuant to which
the 8 3/4% Debentures due 2021 were issued 8 3/4% Debentures due 2021, or may
deliver for cancellation to the trustee under the indenture pursuant to which
the 8% Debentures due 2022 were issued 8% Debentures due 2022, or may deliver
for cancellation to the trustee under the indenture pursuant to which the 7 1/4%
Debentures due 2028 were issued 7 1/4% Debentures due 2028, or may deliver for
cancellation to the Trustee under the Indenture pursuant to which the 5.60%
Debentures due 2025 were issued 5.60% Debentures due 2025, or may deliver for
cancellation to the trustee under any indenture pursuant to which any Subsequent
Debentures were issued such Subsequent Debentures, in each case with all
unmatured coupons, if any, appertaining thereto, theretofore reacquired by the
Company and not theretofore so delivered, and in any such case the obligation of
the Company to use such Proceeds of Released Property for redemption shall be
reduced to the extent of the aggregate principal amount of Debentures or the
7.20% Debentures due 2019 or 7 1/2% Debentures due 2020 or 6.60 Debentures due
2021 or 6.70% Debentures due 2021 or 8 3/4% Debentures due 2021 or 8% Debentures
due 2022 or 7 1/4% Debentures due 2028 or 5.60% Debentures due 2025 or
Subsequent Debentures so delivered. All Debentures so delivered to the Trustee
shall be canceled by the Trustee.
The term "Proceeds of Released Property" as used herein and in the
Debentures shall mean the aggregate amount of the consideration received or to
be received by the Company on the actual sale or other actual disposition
(subsequent to the execution of this Indenture) of any property included in
utility plant accounts (including therein an amount equivalent to any part of
such consideration consisting of other than cash at the fair value thereof to
the Company at the time of such sale or other disposition, as determined in good
faith by the Board of Directors of the Company, and excluding therefrom an
amount equivalent to any consideration received or to be received by the Company
on the sale or other disposition of any property (i) which property shall have
become worn out or permanently unserviceable and the book value of which shall
have been credited to utility plant accounts upon the retirement thereof or (ii)
to the extent that the consideration so received or to be received shall
constitute Property Additions) after deducting from such amount, to the extent
paid or payable by the Company, all expenses and all taxes (including income
taxes, if any) upon or in respect of any such sale or other disposition.
Section 5.09. The Company will deliver to the Trustee within 120 days
after the end of each fiscal year of the Company the Officers' Certificate
required by Section 314(a)(4) of the Trust Indenture Act. See Section 314(a)(4)
of the Trust Indenture Act.
Section 5.10. The Company will deliver to the Trustee true and correct
copies of the Loan Agreement and the Bond Indenture as originally executed and
all amendments or supplements thereto.
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ARTICLE SIX.
Debentureholders' Lists and Reports by the Company and the Trustee.
Section 6.01. The Company shall deliver to the Trustee, semi-annually,
not more than 15 days after each record date, the information required by
Section 312(a) of the Trust Indenture Act. See Section 312 of the Trust
Indenture Act.
Section 6.02. See Section 312 of the Trust Indenture Act.
Section 6.03. See Section 314(a) of the Trust Indenture Act.
Section 6.04. On or before June 1 in each year, beginning June 1, 1997,
so long as any Debentures are outstanding hereunder, the Trustee shall transmit
by mail to the Debentureholders the report required by Section 313(a) of the
Trust Indenture Act, if such report is required. See Trust Indenture Act
Sections 311(b) and 313.
ARTICLE SEVEN.
Remedies of the Trustee and Debentureholders on Event of
Default.
Section 7.01. In case one or more of the following Events of Default
shall have occurred and be continuing, that is to say:
(a) default in the due and punctual payment of any installment of
interest upon any of the Debentures as and when the same shall become due
and payable, and continuance of such default for a period of thirty days;
or
(b) default in the due and punctual payment of the principal of any of
the Debentures as and when the same shall become due and payable either at
maturity, by declaration as authorized by this Indenture, or otherwise; or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants, conditions or agreements on the part of the Company
in the Debentures or in this Indenture contained for a period of sixty days
after the date on which written notice of such failure, requiring the same
to be remedied, shall have been given to the Company by the Trustee, or to
the Company and the Trustee by the holders of at least 25% in aggregate
principal amount of the Debentures at the time outstanding; or
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(d) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving a petition seeking reorganization of the Company under Title 11,
United States Code or any other similar applicable Federal or State law,
and such decree or order shall have continued undischarged and unstayed for
a period of sixty days; or a decree or order of a court having jurisdiction
in the premises for the appointment of a receiver or liquidator or trustee
or assignee in bankruptcy or insolvency of the Company or of all or
substantially all of its property, or for the winding up or liquidation of
its affairs shall have been entered, and such decree or order shall have
remained in force undischarged and unstayed for a period of sixty days; or
(e) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under Title 11, United States Code or any other
similar applicable Federal or State law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or of
all or substantially all of its property, or shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due; or
(f) an event of default, as defined in (i) any indenture or trust
agreement securing or protecting any debt of the Company now or hereafter
outstanding aggregating more than $10,000,000, or (ii) the Bond Indenture,
shall happen and be then continuing and such debt shall be or become due
and payable, prior to the date on which the same would otherwise become due
and payable, provided that, in the case of clause (i), such acceleration
shall not be rescinded or annulled within ten days after written notice
thereof to the Company from the Trustee or to the Company and the Trustee
from the holders of not less than 25% in principal amount of the Debentures
then outstanding hereunder;
then and in each and every such case, so long as such Event of Default shall not
have been remedied, unless the principal of all the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Debentures then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
the Debentureholders), may declare the principal of all the Debentures then
outstanding to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due payable, anything in this
Indenture or in the said Debentures contained to the contrary notwithstanding.
This provision, however, is subject to the condition that if, at any time after
the principal of the Debentures shall have been so declared due and payable, but
before the Debentures shall have become due by their terms and before any
judgment or decree for the payment of the monies due shall have been obtained or
entered as hereinafter provided, the Company shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon all
the Debentures then outstanding and the principal of any and all Debentures then
outstanding which shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of such interest is
enforceable under
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applicable law, upon overdue installments of interest, at the rate per annum
expressed in the Debentures to the date of such payment or deposit) and the
amount payable to the Trustee under Section 8.06, and any and all defaults under
the Indenture, other than the nonpayment of principal on Debentures then
outstanding which shall not have become due by their terms, shall have been
remedied or provisions shall have been made therefor to the satisfaction of the
Trustee -- then and in every such case the holders of a majority in aggregate
principal amount of the Debentures then outstanding, by written notice to the
Company and to the Trustee, may waive all defaults and rescind and annul such
declaration and its consequences; but no such waiver or rescission and annulment
shall extend to or shall affect any subsequent default, or shall impair any
right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company and the Trustee shall be restored respectively to their former positions
and rights hereunder, and all rights, remedies and powers of the Company and the
Trustee shall continue as though no such proceedings had been taken, subject to
any applicable order or ruling in a court of competent jurisdiction.
Section 7.02. The Company covenants that (1) in case default shall be
made in the payment of any installment of interest on any of the Debentures, as
and when the same shall become due and payable, and such default shall have
continued for a period of thirty days, or (2) in case default shall be made in
the payment of the principal of any of the Debentures when the same shall have
become due and payable, whether upon maturity of the Debentures or upon
declaration as authorized by this Indenture or otherwise -- then, upon demand of
the Trustee, the Company will pay to the Trustee, for the benefit of the holders
of the Debentures then outstanding, the whole amount that then shall have become
due and payable on all such Debentures for principal or interest, as the case
may be, with interest upon the overdue principal and (to the extent that payment
of such interest is enforceable under applicable law) upon overdue installments
of interest at the rate per annum expressed in the Debentures; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, and the amount payable to the Trustee under Section
8.06.
In case the Company shall fail forthwith to pay such amounts upon such
demand, the Trustee, in its own name and as trustee of an express trust, shall
be entitled and empowered to institute any action or proceedings at law or in
equity for the collection of the sums so due and unpaid, and may prosecute any
such action or proceeding to judgment or final decree, and may enforce any such
judgment or final decree against the Company or other obligor upon the
Debentures and collect in the manner provided and to the extent permitted by law
out of the property of the Company or other obligor upon the Debentures wherever
situated the monies adjudged or decreed to be payable.
The Trustee shall be entitled and empowered, either in its own name or
as trustee of an express trust, or as attorney-in-fact for the holders of the
Debentures, or in any one or more of such capacities, to file such proof of
debt, amendment of proof of debt, claim, petition or other document as may be
necessary or advisable in order to have the
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claims of the Trustee and of the holders of the Debentures allowed in any equity
receivership, insolvency, bankruptcy, liquidation, readjustment, reorganization
or other judicial proceedings relative to the Company or any other obligor on
the Debentures or their creditors, or affecting their property. The Trustee is
hereby irrevocably appointed (and the successive respective holders of the
Debentures by taking and holding the same shall be conclusively deemed to have
so appointed the Trustee) the true and lawful attorney-in-fact of the respective
holders of the Debentures, with authority to make and file in the respective
names of the holders of the Debentures or on behalf of the holders of the
Debentures as a class, subject to deduction from any such claims of the amounts
of any claims filed by any of the holders of the Debentures themselves, any
proof of debt, amendment of proof of debt, claim, petition or other document in
any such proceedings and to receive payment of any sums becoming distributable
on account thereof, and to execute any such other papers and documents and to do
and perform any and all such acts and things for and on behalf of such holders
of the Debentures as may be necessary or advisable in the opinion of the Trustee
in order to have the respective claims of the Trustee and of the holders of the
Debentures against the Company or its property allowed in any such proceeding,
and to receive payment of or on account of such claims; provided, however, that
nothing contained in this Indenture shall be deemed to give to the Trustee any
right to accept or consent to any plan of reorganization or otherwise by action
of any character in any such proceeding to waive or change in any way any right
of any Debentureholder.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Debentures, subject to the provisions of this Indenture.
In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 7.03. Any monies collected by the Trustee pursuant to Section
7.02, shall be applied in the order following, at the date or dates fixed by the
Trustee, upon presentation of the several Debentures, and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of collection and of all
amounts
payable to the Trustee under Section 8.06;
Second: In case the principal of the outstanding Debentures shall
not have become due and be unpaid, to the payment of interest on the
Debentures, in the order of the maturity of the installments of such
interest, with interest (so far as may be
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lawful and if such interest has been collected by the Trustee) upon the
overdue installments of interest at the rate per annum expressed in the
Debentures, such payments to be made ratably to the persons entitled
thereto, without discrimination or preference;
Third: In case the principal of the outstanding Debentures shall have
become due, by declaration as authorized by this Indenture or otherwise, to
the payment of the whole amount then owing and unpaid upon the Debentures
for principal and interest, with interest on the overdue principal and (so
far as may be lawful and if such interest has been collected by the
Trustee) upon overdue installments of interest at the rate per annum
expressed in the Debentures; and in case such monies shall be insufficient
to pay in full the whole amount so due and unpaid upon the Debentures, then
to the payment of such principal and interest, without preference or
priority of principal over interest, or of interest over principal, or of
any installment of interest over any other installment of interest, or of
any Debenture over any other Debenture, ratably to the aggregate of such
principal and accrued and unpaid interest; and
Fourth: To the payment of the remainder, if any, to the Company, its
successors or assigns, or to whomsoever may be lawfully entitled to
receive the same, or as a court of competent jurisdiction may direct.
Section 7.04. Except as otherwise expressly provided in this Section,
no holder of any Debenture shall have any right by virtue or by availing of any
provision in this Indenture or otherwise to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture,
for the appointment of a receiver or trustee, for the execution of any trust or
power hereof, or for any other remedy hereunder, unless such holder previously
shall have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the holders of not less than
25% in aggregate principal amount of the Debentures then outstanding shall have
made written request upon the Trustee either to proceed to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name as trustee hereunder and shall have offered or caused the holders of the
Bonds to have offered, to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee within a reasonable time (which in no event shall be
less than sixty days) after its receipt of such notice, request and offer of
indemnity, shall have failed to proceed to exercise such powers or to institute
any such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by the taker and holder of every Debenture with every other
taker and holder and the Trustee, that no one or more holders of Debentures
shall have any right in any manner whatever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Debentures. For the protection and enforcement
of the provisions of this Section, each and every Debentureholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
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Nothing herein contained shall, however, affect or impair the right,
which is absolute and unconditional, of any Debentureholder to receive and to
institute suit to enforce the payment of the principal of and interest on his
Debentures at and after the respective due dates (including, subject to the
provisions of Section 7.01, maturity by declaration pursuant to this Indenture
or otherwise) of such principal or interest, or the obligation of the Company,
which is also absolute and unconditional, to pay the principal of and interest
on each of the Debentures to the respective holders thereof at the times and
places in the Debentures expressed.
Section 7.05. No delay or omission of the Trustee or of any holder of
any of the Debentures to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article or by
law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 7.06. See Section 316(a)(1) of the Trust Indenture Act.
Section 7.07. See Section 315(b) of the Trust Indenture Act.
Section 7.08. See Section 315(e) of the Trust Indenture Act.
ARTICLE EIGHT.
Concerning the Trustee.
Section 8.01. See Trust Indenture Act, including Section 315(a), (b),
(c) and (d) thereof.
Section 8.02. Except as otherwise provided in Section 8.01:
(a) The Trustee may rely and shall be protected in acting or refraining
from acting upon any resolution, Officers' Certificate, certificate of
auditors, or any other certificate, statement, instrument, opinion, report,
notice, request, consent, order, appraisal, bond, debenture or other paper
or document, including without limitation documents delivered to it
pursuant to Section 5.10 (which documents the Trustee may rely on as not
being amended or supplemented other than to the extent any amendments or
supplements have been delivered to it) believed by it to be genuine and to
have been signed or presented by the proper party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of
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the Board of Directors may be evidenced to the Trustee by a copy thereof
certified by the Secretary or an Assistant Secretary of the Company;
(c) The Trustee may consult with counsel of its selection and any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(d) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of
this Indenture, unless such Debentureholders or the holders of the Bonds
shall have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein or
thereby;
(e) The Trustee shall not be personally liable for any action taken or
omitted by it in good faith and believed by it to be authorized or within
the discretion or rights or powers conferred upon it by this Indenture;
(f) Prior to the occurrence of an Event of Default hereunder and after
the curing or waiving of all Events of Default, the Trustee shall not be
bound to make any investigation into the facts or matters stated in any
resolution, certificate, statement, instrument, opinion, report, notice,
request, consent, order, approval, bond, debenture or other paper or
document unless requested in writing so to do by the holders of not less
than a majority in principal amount of the Debentures then outstanding;
provided, however, that if the payment within a reasonable time to the
Trustee of the costs, expenses or liabilities likely to be incurred by it
in the making of such investigation is, in the opinion of the Trustee, not
reasonably assured to the Trustee by the security afforded to it by the
terms of this Indenture, the Trustee may require reasonable indemnity
against such expense or liability as a condition to so proceeding. The
reasonable expense of every such investigation shall be paid by the Company
or, if paid by the Trustee, shall be repaid by the Company upon demand;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it hereunder;
and
(h) None of the provisions of this Indenture shall require the Trustee
to expend or risk its own funds or otherwise incur any personal financial
liability in the performance of any of its duties hereunder, or in the
exercise of any of its rights or powers, if it shall have reasonable
grounds for believing that repayment of such funds or adequate indemnity
against such risk or liability is not reasonably assured to it.
Section 8.03. The recitals contained herein and in the Debentures
(other than the certificate of authentication on the Debentures) shall be
taken as the statements of the Company, and the Trustee assumes no
responsibility for the correctness of the same. The
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Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Debentures. The Trustee shall not be accountable for the use
or application by the Company of any of the Debentures or of the proceeds of
such Debentures, or for the use or application of any moneys paid over by the
Trustee in accordance with any provision of this Indenture, or for the use or
application of any moneys received by any paying agent.
Section 8.04. The Trustee or any paying agent or any Debenture
registrar, in its individual or any other capacity, may become the owner or
pledgee of Debentures with the same rights it would have if it were not Trustee,
paying agent or Debenture registrar.
Section 8.05. Subject to the provisions of Section 13.04, all moneys
received by the Trustee shall, until used or applied as herein provided, be held
in trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any moneys received by it hereunder
except such as it may agree in writing with the Company to pay thereon. So long
as no Event of Default shall have occurred and be continuing, all interest
allowed on any such moneys shall be paid from time to time upon the written
order of the Company, signed by its President, a Vice President, its Treasurer
or an Assistant Treasurer.
Section 8.06. The Company covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, such compensation as
the Company and the Trustee shall from time to time agree to in writing (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
the Trustee for, and to hold it harmless against, any and all loss, damage,
claims, liability or expense incurred without negligence or bad faith on the
part of the Trustee, and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section to compensate the Trustee, to pay or reimburse the
Trustee for expenses, disbursements and advances and to indemnify the Trustee
shall constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Debentures upon all property and
funds held or collected by the Trustee as such, except funds held in trust for
the benefit of the holders of particular Debentures.
Section 8.07. Except as otherwise provided in Section 8.01, whenever in
the administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by an Officers'
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Certificate, and such certificate shall be full warrant to the Trustee for any
action taken, suffered or omitted by it under the provisions of this Indenture
upon the faith thereof.
Section 8.08. See Section 310(b) of the Trust Indenture Act. In
addition, excluded from the operation of Section 310(b)(1) of the Trust
Indenture Act are the following: the Indenture dated as of December 1, 1989
between the Company and Citibank, N.A., Trustee, pursuant to which the Company's
7.20% Debentures due 2019 are outstanding, the Indenture dated as of October 1,
1990 between the Company and Citibank, N.A., Trustee, pursuant to which the
Company's 7 1/2% Debentures due 2020 are outstanding, the Indenture dated as of
August 1, 1991 between the Company and The Bank of New York, Trustee, pursuant
to which the Company's 6.60% Debentures due 2021 are outstanding, and the
Indenture dated as of August 1, 1991 between the Company and The Bank of New
York, Trustee, pursuant to which the Company's 6.70% Debentures due 2021 are
outstanding, the Indenture dated as of October 1, 1991 between the Company and
The Bank of New York, Trustee, pursuant to which the Company's 8 3/4% Debentures
due 2021 are outstanding, the Indenture dated as of September 1, 1992 between
the Company and The Bank of New York, Trustee, pursuant to which the Company's
8% Debentures due 2022 are outstanding, the Indenture dated as of November 1,
1993 between the Company and The Bank of New York, Trustee, pursuant to which
the Company's 7 1/4% Debentures due 2028 are outstanding, and the Indenture
dated as of December 1, 1995 between the Company and The Bank of New York,
Trustee, pursuant to which the Company's 5.60% Debentures due 2025 are
outstanding.
Section 8.09. The Trustee hereunder shall at all times be a corporation
organized and doing business under the laws of the United States or any State or
Territory or of the District of Columbia authorized under such laws to exercise
corporate trust powers, having a combined capital and surplus of at least
$5,000,000, subject to supervision or examination by Federal, State,
Territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.10.
Section 8.10. (a) The Trustee, or any successor hereafter appointed,
may at any time resign and be discharged from the trust hereby created by
mailing notice thereof to the Company and to the Debentureholders whose names
and addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of Section 6.02(a) hereof. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors of
the Company, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within thirty days after
the mailing of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor trustee,
or any Debentureholder who has been a bona fide
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holder of a Debenture or Debentures for at least six months may, subject to the
provisions of Section 7.08, on behalf of himself and all others similarly
situated, petition any such court for the appointment of a successor trustee.
Such court may thereupon after such notice, if any, as it may deem proper and
prescribe, appoint a successor trustee.
(b) In case at any time any of the following shall occur--
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act after written request therefor by
the Company or by any Debentureholder who has been a bona fide holder of a
Debenture or Debentures for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with the
provisions of Section 8.09 and shall fail to resign after written request
therefor by the Company or by any such Debentureholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.08, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
appoint a successor trustee.
(d) Any resignation or removal of the Trustee and any appointment of a
successor trustee pursuant to any of the provisions of this Section shall become
effective upon acceptance of appointment by the successor trustee as provided in
Section 8.11.
Section 8.11. Any successor trustee appointed as provided in Section
8.10 shall execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein. The predecessor trustee shall, nevertheless, at the
written request of the successor trustee, and upon payment of any amount then
due it pursuant to Section 8.06, pay over to
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the successor trustee all moneys at the time held by it hereunder; and the
Company and the predecessor trustee shall execute and deliver such instruments
and do such other things as may reasonably be required for more fully and
certainly vesting and confirming in the successor trustee all such rights,
powers, duties and obligations. Any Trustee ceasing to act shall nevertheless
retain a lien on all funds held or collected by such Trustee to secure any
amount due it pursuant to Section 8.06.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Company shall mail notice of the succession of such trustee
hereunder to all Debentureholders at their last addresses appearing upon the
register. If the Company fails to mail such notice in the prescribed manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 8.12. Any corporation into which the Trustee may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be qualified under the provisions of
Section 8.08 and eligible under the provisions of Section 8.09, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to the
trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor trustee or
authenticate Debentures in the name of any predecessor trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 8.13. See Section 311 of the Trust Indenture Act.
ARTICLE NINE.
Concerning the Debentureholders.
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Section 9.01. Whenever in this Indenture it is provided that the
holders of a specified percentage in aggregate principal amount of the
Debentures may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action),
the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by Debentureholders in
person or by attorney or proxy appointed in writing, or (b) by the record of the
holders of Debentures voting in favor thereof at any meeting of Debentureholders
duly called and held in accordance with the provisions of Article Ten, or (c) by
a combination of such instrument or instruments and any such record of such a
meeting of Debentureholders.
Section 9.02. Subject to the provisions of Section 8.01, proof of the
execution of any instrument by a Debentureholder or his attorney or proxy and
proof of the holding by any person of any of the Debentures shall be sufficient
for any purpose of this Indenture if made in accordance with such reasonable
rules and regulations as may be prescribed by the Trustee or in such manner as
shall be satisfactory to the Trustee. The ownership of Debentures shall be
proved by the register of such Debentures or by a certificate of the Debenture
registrar.
The record of any Debentureholders' meeting shall be proved in the
manner provided in Section 10.06.
Section 9.03. The Company, the Trustee, any paying agent and any
Debenture registrar may deem and treat the person in whose name any Debenture
shall be registered upon the register as the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding any notice
of ownership or writing thereon), for the purpose of receiving payment of or on
account of the principal of and interest and premium, if any, on such Debenture
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Debenture registrar shall be affected by any notice to the
contrary. All such payments so made to any such registered holder, for the time
being or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for moneys payable
upon any such Debenture.
Section 9.04. In determining whether the holders of the requisite
aggregate principal amount of Debentures have concurred in any direction,
consent or waiver under this Indenture, Debentures which are owned by the
Company or any other obligor on the Debentures or by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Debentures shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
Debentures which the Trustee knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section, if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right to vote such Debentures and
that the pledgee is not a person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
such other obligor.
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In case of a dispute as to such right, any decision by the Trustee taken upon
the advice of counsel shall be full protection to the Trustee.
Section 9.05. Any demand, request, waiver, consent or vote of the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor or in place thereof, irrespective of whether or not
any notation in regard thereto is made upon such Debenture. Any action taken by
the holders of the majority or percentage in aggregate principal amount of the
Debentures specified in this Indenture in connection with such action shall be
conclusively binding upon the Company, the Trustee and the holders of all the
Debentures.
ARTICLE TEN.
Debentureholders' Meetings.
Section 10.01. A meeting of Debentureholders may be called at any time
and from time to time pursuant to the provisions of this Article Ten for any of
the following purposes:
(1) to give any notice to the Company or to the Trustee, or to give any
directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Debentureholders pursuant to any of the provisions of Article
Seven;
(2) to remove the Trustee and appoint a successor trustee pursuant
to the provisions of Article Eight;
(3) to consent to the execution of an indenture or indentures
supplemental hereto pursuant to the provisions of Section 11.02; or
(4) to take any other action authorized to be taken by or on behalf of
the holders of any specified aggregate principal amount of the Debentures
under any other provision of this Indenture, or authorized or permitted by
law.
Section 10.02. The Trustee may at any time call a meeting of
Debentureholders to take any action specified in Section 10.01, to be held at
such time and at such place in the Borough of Manhattan, City and State of New
York, as the Trustee shall determine. Notice of every meeting of the
Debentureholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
not less than fifteen days prior to the date fixed for the meeting to the
Debentureholders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with the provisions of Section 6.02(a)
hereof or obtained in accordance with the provisions of Section 6.01 hereof.
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Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.03. In case at any time the Company, pursuant to a
resolution of its Board of Directors or the holders of at least 20% in aggregate
principal amount of the Debentures then outstanding, shall request the Trustee
to call a meeting of Debentureholders to take any action specified in Section
10.01, by written request setting forth in reasonable detail the action proposed
to be taken at the meeting and the time and place in the Borough of Manhattan,
City and State of New York, for such meeting, the Trustee shall mail notice of
such meeting as provided in Section 10.02 within twenty days after receipt of
such request.
Section 10.04. To be entitled to vote at any meeting of
Debentureholders a person shall (a) be a holder of one or more Debentures or (b)
be a person appointed by an instrument in writing as proxy for the holder or
holders of Debentures by a holder of one or more Debentures. The only persons
who shall be entitled to be present or to speak at any meeting of
Debentureholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.05. Notwithstanding any other provision of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Debentureholders, in regard to proof of the holding of Debentures
and of the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit. Except as otherwise permitted or
required by any such regulations, the holding of Debentures shall be proved in
the manner specified in Section 9.02 and the appointment of any proxy shall be
proved in the manner specified in Section 9.02. Pursuant to the foregoing
authority the Trustee may fix, in advance, a date as a record date for
determining the Debentureholders entitled to notice of, or to vote at, any
meeting, such date to be not less than fifteen nor more than forty-five days
prior to the date fixed for such meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by request of
the Company or Debentureholders as provided in Section 10.03, in which case the
Company or such Debentureholders, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Debentures represented at the meeting and entitled to vote.
Subject to the provisions of Section 9.04, at any meeting each
Debentureholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Debentures, provided, however, that no vote shall be cast or counted
at any meeting in respect of any
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Debentures challenged as not outstanding and ruled by the chairman of the
meeting to be not outstanding. The chairman of the meeting shall have no right
to vote other than by virtue of Debentures held by him or instruments in writing
as aforesaid duly designating him as the person to vote on behalf of other
Debentureholders. Any meeting of Debentureholders duly called pursuant to the
provisions of Section 10.02 or 10.03 may be adjourned from time to time, and the
meeting may be held as so adjourned without further notice.
Section 10.06. The vote upon any resolution submitted to any meeting of
Debentureholders shall be by written ballots on which shall be subscribed the
signatures of the holders of Debentures or of their representatives by proxy.
The permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Debentureholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more person having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.02. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.07. Nothing in this Article Ten contained shall be deemed or
construed to authorize or permit, by reason of any call of a meeting of
Debentureholders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Debentureholders under any
of the provisions of this Indenture or of the Debentures.
ARTICLE ELEVEN.
Supplemental Indentures.
Section 11.01. The Company, when authorized by a resolution of its
Board of Directors, and the Trustee, subject to the conditions and restrictions
of this Indenture contained, may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act of 1939 as then in effect) for one or more
of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Twelve;
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(b) to add to the covenants and agreements of the Company in this
Indenture contained such further covenants and agreements thereafter to be
observed, and to surrender any right or power herein reserved to or
conferred upon the Company; and
(c) to cure any ambiguity or to correct or supplement any defective or
inconsistent provisions contained in this Indenture or in any supplemental
indenture.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this Section
may be executed by the Company and the Trustee without the consent of the
holders of any of the Debentures at the time outstanding, notwithstanding any of
the provisions of Section 11.02.
Section 11.02. With the consent (evidenced as provided in Section 9.01)
of the holders (or persons entitled to vote, or to give consents respecting the
same) of more than 50% in aggregate principal amount of the Debentures at the
time outstanding, the Company, when authorized by a resolution of its Board of
Directors, and the Trustee may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act of 1939 as then in effect) for the purpose
of adding any provisions to or changing in any manner or eliminating any of the
provisions of this Indenture or of any supplemental indenture or of modifying in
any manner the rights and obligations of the holders of the Debentures and of
the Company; provided, however, that no such supplemental indenture shall (i)
extend the fixed maturity of any Debenture, or reduce the principal amount
thereof, or reduce the rate or extend the time of payment of interest thereon,
without the consent of the holder of each Debenture so affected, or (ii) reduce
the aforesaid percentage of Debentures, the holders of which are required to
consent to any such supplemental indenture, without the consent of the holders
of all Debentures then outstanding.
Upon the request of the Company, accompanied by a copy of a resolution
of its Board of Directors certified by the secretary or an assistant secretary
of the Company authorizing the execution of any such supplemental indenture, and
upon the filing with the Trustee of evidence of the consent of Debentureholders
as aforesaid, the Trustee shall join with the Company in the execution of such
supplemental indenture unless such supplemental indenture affects the Trustee's
own rights, duties or immunities under this Indenture or otherwise, in which
case the Trustee may in its discretion but shall not be obligated to enter into
such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders under
this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
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Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Company
shall mail a notice, setting forth in general terms the substance of such
supplemental indenture, to all Debentureholders at their last addresses
appearing upon the register. Any failure of the Company to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the validity
of any such supplemental indenture.
Section 11.03. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article, this Indenture shall be and be
deemed to be modified and amended in accordance therewith and the respective
rights, limitation of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Company and the holders of Debentures shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.04. Debentures authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this
Article, or after any action taken at a Debentureholders' meeting pursuant to
Article Ten, may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture or as to any action taken at
any such meeting; and, in such case, suitable notation may be made upon
outstanding Debentures after proper presentation and demand. If the Company or
the Trustee shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture, or
to any action taken at any such meeting, may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Debentures then
outstanding, upon demand of, and without cost to, the holders thereof, upon
surrender of such Debentures.
Section 11.05. The Trustee, subject to the provisions of Section 8.01,
may receive an Opinion of Counsel as conclusive evidence that any supplemental
indenture executed pursuant to this Article Eleven is authorized or permitted by
the terms of this Indenture and that it is not inconsistent therewith.
ARTICLE TWELVE.
Consolidation, Merger and Sale.
Section 12.01. Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or into
any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale
or conveyance (or successive sales or conveyances) of the property and assets of
the Company (or of its successor or successors) as an entirety or substantially
as an entirety, to any other corporation (whether or not affiliated with the
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Company) authorized to acquire the same; provided, however, and the Company
hereby covenants and agrees that, upon any such consolidation, merger, sale or
conveyance, the due and punctual payment of the principal of and interest on all
the Debentures, according to their tenor, and the due and punctual performance
and observance of all the terms, covenants and conditions of this Indenture to
be kept or performed by the Company, shall be expressly assumed, by indenture
supplemental hereto, satisfactory in form to the Trustee, executed and delivered
to the Trustee by the corporation formed by such consolidation, or into which
the Company shall have been merged, or by the corporation which shall have
acquired such property and assets. In the event of any such sale or conveyance
the predecessor Company may be dissolved, wound up and liquidated at any time
thereafter.
Section 12.02. In case of any such consolidation, merger, sale or
conveyance and upon the execution by the successor corporation of an indenture
supplemental hereto, as provided in Section 12.01, such successor corporation
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the party of the first part. Such successor
corporation thereupon may issue either in its own name or in the name of the
Company, with such suitable reference, if any, to such consolidation, merger,
sale or conveyance as may be required by the Trustee, any or all of the
Debentures issuable hereunder which theretofore shall not have been issued by
the Company and delivered to the Trustee; and, upon the written order of such
successor corporation, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Debentures which previously shall have been
executed by the Company and any Debentures which such successor corporation
thereafter shall cause to be executed in accordance with the provisions of this
Indenture and delivered to the Trustee for that purpose. All the Debentures so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Debentures theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such Debentures had been issued at
the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate).
Nothing contained in this Indenture or in any of the Debentures shall
prevent the Company from consolidating with, or merging into itself, or
acquiring by purchase or otherwise all or any part of the property of, any other
corporation (whether or not affiliated with the Company).
Section 12.03. The Trustee, subject to the provisions of Section 8.01,
may receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale or conveyance, and any such assumption, complies
with the provisions of this Article.
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ARTICLE THIRTEEN.
Satisfaction and Discharge of Indenture; Deposited Moneys.
Section 13.01. If:
(1) Either (i) the Company shall deliver to the Trustee for
cancellation all Debentures (other than Debentures deemed not to be outstanding
under clause (c) of the definition thereof) not theretofore canceled or
delivered to the Trustee for cancellation, or (ii) the Company shall have
deposited in trust with the Trustee cash sufficient to pay at maturity or upon
redemption (after notice of redemption has been duly given or provided for) all
of the Debentures (other than Debentures deemed not to be outstanding under
clause (c) of the definition thereof) not theretofore canceled or delivered to
the Trustee for cancellation, including principal, premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, or (iii) the Company shall have deposited in trust with the Trustee
direct obligations of the United States or obligations the principal of and
interest on which are fully guaranteed by the United States, and which are not
subject to prepayment, redemption or call prior to their stated maturity, in
such amounts and maturing at such times that the proceeds of said obligations,
together with the income that can be predetermined will accrue thereon by
reference to the terms thereof (without consideration of any reinvestment
thereof), to be received upon their respective maturities and interest payment
dates will provide funds sufficient to pay the principal, premium, if any, and
interest due or to become due to the date of maturity or to the redemption date,
as the case may be, with respect to all of the Debentures (other than Debentures
deemed not to be outstanding under clause (c) of the definition thereof) not
theretofore canceled or delivered to the Trustee for cancellation, provided that
the Trustee shall have been irrevocably instructed to apply the proceeds of said
obligations to the payment of such principal, premium and interest with respect
to such Debentures, or (iv) the Company shall have deposited in trust with the
Trustee any combination of cash or obligations referred to in (ii) and (iii),
(2) the Company shall pay or cause to be paid all other sums payable
with respect to the Debentures, and
(3) the Company shall deliver to the Trustee and the Bond Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of the entire indebtedness on the Debentures have been complied with,
then
(a) this Indenture shall cease to be of further effect (except as
otherwise provided herein) and on or after such maturity date or redemption
date, as the case may be, the Trustee, on demand of, and at the expense of,
the Company, shall execute proper instruments acknowledging satisfaction
and discharge of this Indenture; and
(b) all obligations of the Company in respect of the Debentures shall
cease and be discharged and the holders of such Debentures shall
thereafter be restricted
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exclusively to such funds for any and all claims of whatever nature on
their part under this Indenture or with respect to such Debentures;
provided, however, that, in no event shall the Company be discharged from
(i) any payment obligation in respect of Debentures deemed not to be
outstanding under clause (c) of the definition thereof if such obligations
continue to be valid obligations under applicable law, (ii) any obligations
under Sections 2.05 and 2.06 (except that Debentures issued upon
registration of transfer or exchange or in lieu of mutilated, lost,
destroyed or stolen Debentures shall not be deemed to be such obligations)
or (iii) any obligations under Sections 6.01, 8.06, 13.02, 13.03 and 13.04;
further provided, however, that the rights and privileges of the Trustee
under this Indenture shall survive any such discharge.
The Company hereby agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Debentures, and without bad faith or
negligence.
Section 13.02. All moneys deposited with the Trustee pursuant to
Section 13.01 shall be held in trust and applied by it to the payment, to the
holders of the particular Debentures for the payment or redemption of which such
moneys have been deposited with the Trustee, of all sums due and to become due
thereon for principal, premium, if any, and interest.
Section 13.03. In connection with the satisfaction and discharge of
this Indenture all moneys then held by any paying agent under the provisions of
this Indenture shall, upon demand of the Company or Trustee, be paid to the
Trustee and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
Section 13.04. In case the holder of any Debenture entitled to payment
hereunder at any time outstanding hereunder shall not, within two years after
the maturity date of such Debenture or the date fixed for the redemption of any
such Debenture, claim the amount on deposit with the Trustee or other depositary
for the payment of such Debenture, the Trustee or other depositary shall pay
over to or upon the written order of the Company the amount so deposited, upon
receipt of a request signed by the President or a Vice President of the Company,
and thereupon the Trustee or other depositary shall be released from any and all
further liability with respect to the payment of such Debenture and the holder
of said Debenture shall be entitled (subject to any applicable statute of
limitations) to look only to the Company as an unsecured creditor for the
payment thereof.
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ARTICLE FOURTEEN.
Immunity of Incorporators, Stockholders, Officers,
Trustees and Directors.
Section 14.01. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of any Debenture, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer, trustee or director, as such, past, present or future, of
the Company or of any predecessor or successor corporation, either directly
through the Company or any such predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law or equity, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers,
trustees or directors of the Company, as such, or of any predecessor or
successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debentures
or implied therefrom; and that any and all such liability is hereby expressly
waived and released by every holder of Debentures as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Debentures.
ARTICLE FIFTEEN.
Miscellaneous Provisions.
The provisions of the Trust Indenture Act which impose duties on any
person (including provisions automatically deemed included in an indenture by
the Trust Indenture Act unless the indenture provides that such provisions are
excluded which provision is hereby expressly excluded other than Section
316(a)(2) of the Trust Indenture Act) are a part of and govern this Indenture.
If any provision hereof limits, qualifies or conflicts with any of the duties
imposed by operation of the Trust Indenture Act, the Trust Indenture Act shall
control.
Section 15.01. All the covenants, stipulations, promises and agreements
in this Indenture contained by or in behalf of the Company shall bind its
successors and assigns, whether so expressed or not.
Section 15.02. Any act or proceeding by any provision of this Indenture
authorized or required to be done or performed by any board, committee or
officer of the Company shall and may be done and performed with like force and
effect by the like board, committee or officer of any corporation that shall at
the time be the lawful successor of the Company.
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<PAGE>
Section 15.03. The Company by instruments in writing executed by
authority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company and as to any successor
corporation.
Section 15.04. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Debentures to or on the Company may be given or served by being
deposited postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows:
Elizabethtown Water Company, 600 South Avenue, Westfield NJ 07090. Any notice,
election, request or demand by any Debentureholder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made at the principal corporate trust office of the Trustee in the Borough of
Manhattan, City and State of New York.
Section 15.05. This Indenture and each Debenture shall be deemed to be
a contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said state.
Section 15.06. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company may
be based, in so far as it relates to legal matters, upon a certificate or
opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based (in so far as it
relates to factual matters information with respect to which is in the
possession of the Company) upon the certificate, statement or opinion of or
representations by an officer or officers of the Company, unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate,
#30165103.1
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<PAGE>
statement or opinion may be based as aforesaid are erroneous, or in the exercise
of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, in so far as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Section 15.07. In any case where the date of maturity of interest on or
principal of the Debentures or the date fixed for redemption of any Debenture
shall be a Sunday or legal holiday or a date on which banking institutions in
the city of payment are authorized by law to close, then payment of interest,
principal or premium may be made on the next succeeding day not a Sunday or a
legal holiday or a date on which banking institutions in the city of payment are
authorized by law to close with the same force and effect as if made on the
nominal date and no interest shall accrue for the period after such nominal
date.
Section 15.08. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with another provision included in this
Indenture which is required to be included in this Indenture by any of Sections
310 to 317, inclusive, of the Trust Indenture Act of 1939, such required
provision shall control.
Section 15.09. In case any one or more of the provisions contained in
this Indenture or in the Debentures shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
such Debentures, but this Indenture and such Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 15.10. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
The Bank of New York, the party of the second part, hereby accepts the
trusts in this Indenture declared and provided, upon the terms and conditions
hereinabove set forth.
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<PAGE>
IN WITNESS WHEREOF, Elizabethtown Water Company, the party of the first
part, has caused this Indenture to be signed in its corporate name and
acknowledged by its President, or one of its Vice Presidents, and its corporate
seal to be affixed hereunto, duly attested by its Secretary or an Assistant
Secretary; and The Bank of New York, the party of the second part, has caused
this Indenture to be signed and acknowledged by one of its Responsible Officers,
all as of the day and year first above written.
ELIZABETHTOWN WATER COMPANY,
(Seal)
By
Vice President
Attest:
Secretary
THE BANK OF NEW YORK,
as Trustee
By
Title
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<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF UNION )
On this fourth day of June, 1997, before me, the subscriber, a Notary
Public within and for the County of Union, in the State of New Jersey,
personally appeared Gail P. Brady, to me personally known, who, being by me duly
sworn, did say that she resides at 49 Howell Drive, Verona, New Jersey and is a
Vice President of Elizabethtown Water Company, one of the corporations described
in and which executed the foregoing instrument; that she knows the corporate
seal of the said corporation and that the seal affixed to said instrument is the
corporate seal of said corporation; and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors and
that she subscribed her name thereto by like authority; and said Walter M.
Braswell acknowledged said instrument to be the free act and deed of said
corporation.
My commission as Notary Public as aforesaid expires
-------------------------------
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<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this fourth day of June, 1997, before me, the subscriber, a Notary
Public within and for the County of New York, in the State of New York,
personally appeared
, to me personally known, who, being by me duly
sworn, did say that
he resides at and is an Assistant Vice President of The Bank of New York, one of
the corporations described in and which executed the foregoing instrument; that
he knows the corporate seal of the said corporation and that the seal affixed to
said instrument is the corporate seal of said corporation; and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors and that he subscribed his name thereto by like
authority; and said acknowledged said instrument to be the free act and deed of
said corporation.
My commission as Notary Public as aforesaid expires
-------------------------------
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EXECUTION COPY
- -----------------------------------------------------------
ELIZABETHTOWN WATER COMPANY
TO
THE BANK OF NEW YORK, TRUSTEE
-----------
INDENTURE
Dated as of June 1, 1997
--------------
1997 Series B Variable Rate Debentures due 2027
- -----------------------------------------------------------
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TABLE OF CONTENTS
Page
ARTICLE ONE.
Definitions
Section 1.01....................................... 6
ARTICLE TWO.
Description, Execution and Exchange of Debentures
Section 2.01....................................... 8
Section 2.02....................................... 8
Section 2.03....................................... 9
Section 2.04....................................... 9
Section 2.05...................................... 10
Section 2.06...................................... 10
Section 2.07...................................... 11
Section 2.08...................................... 11
Section 2.09...................................... 12
ARTICLE THREE.
Issue of Debentures
Section 3.01...................................... 12
ARTICLE FOUR.
Redemption of Debentures
Section 4.01...................................... 12
Section 4.02...................................... 12
Section 4.03...................................... 13
Section 4.04...................................... 13
ARTICLE FIVE.
Particular Covenants of the Company
Section 5.01...................................... 14
Section 5.02...................................... 14
Section 5.03...................................... 14
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Section 5.04...................................... 14
Section 5.05...................................... 15
Section 5.06...................................... 18
Section 5.07...................................... 21
Section 5.08...................................... 21
Section 5.09...................................... 23
Section 5.10...................................... 23
ARTICLE SIX.
Debentureholders' Lists and Reports by
the Company and the Trustee
Section 6.01...................................... 23
Section 6.02...................................... 23
Section 6.03...................................... 23
Section 6.04...................................... 23
ARTICLE SEVEN.
Remedies of the Trustee and
Debentureholders on Event of Default
Section 7.01...................................... 24
Section 7.02...................................... 25
Section 7.03...................................... 27
Section 7.04...................................... 28
Section 7.05...................................... 28
Section 7.06...................................... 28
Section 7.07...................................... 28
Section 7.08...................................... 29
ARTICLE EIGHT.
Concerning the Trustee
Section 8.01...................................... 29
Section 8.02...................................... 29
Section 8.03...................................... 30
Section 8.04...................................... 30
Section 8.05...................................... 30
Section 8.06...................................... 30
Section 8.07...................................... 31
Section 8.08...................................... 31
Section 8.09...................................... 32
Section 8.10...................................... 32
Section 8.11...................................... 33
Section 8.12...................................... 33
Section 8.13...................................... 34
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ARTICLE NINE.
Concerning the Debentureholders
Section 9.01...................................... 34
Section 9.02...................................... 34
Section 9.03...................................... 34
Section 9.04...................................... 35
Section 9.05...................................... 35
ARTICLE TEN.
Debentureholders' Meetings
Section 10.01..................................... 35
Section 10.02..................................... 36
Section 10.03..................................... 36
Section 10.04..................................... 36
Section 10.05..................................... 37
Section 10.06..................................... 37
Section 10.07..................................... 38
ARTICLE ELEVEN.
Supplemental Indentures
Section 11.01..................................... 38
Section 11.02..................................... 38
Section 11.03..................................... 39
Section 11.04..................................... 39
Section 11.05..................................... 40
ARTICLE TWELVE.
Consolidation, Merger and Sale
Section 12.01..................................... 40
Section 12.02..................................... 40
Section 12.03..................................... 41
ARTICLE THIRTEEN.
Satisfaction and Discharge of Indenture; Deposited Moneys
Section 13.01..................................... 41
Section 13.02..................................... 42
Section 13.03..................................... 42
Section 13.04..................................... 43
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ARTICLE FOURTEEN.
Immunity of Incorporators, Stockholders, Officers,
Trustees and Directors
Section 14.01..................................... 43
ARTICLE FIFTEEN.
Miscellaneous Provisions
Section 15.01..................................... 44
Section 15.02..................................... 44
Section 15.03..................................... 44
Section 15.04..................................... 44
Section 15.05..................................... 44
Section 15.06..................................... 44
Section 15.07..................................... 45
Section 15.08..................................... 45
Section 15.09..................................... 46
Section 15.10..................................... 46
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Exhibit 4 (j)
INDENTURE, dated as of June 1, 1997, between ELIZABETHTOWN WATER
COMPANY, a corporation duly organized and existing under and by virtue of the
laws of the State of New Jersey (hereinafter sometimes called the "Company"),
party of the first part, and THE BANK OF NEW YORK, a New York banking
corporation (hereinafter sometimes called the "Trustee"), party of the second
part.
WHEREAS, the Company is empowered to issue debentures
for any of the objects and purposes of the Company;
WHEREAS, for its lawful corporate purposes, the Company has duly
authorized an issue of debentures designated 1997 Series A Variable Rate
Debentures - due 2027 (hereinafter referred to as the "Debentures"), in an
aggregate principal amount of $25,000,000, to be issued under and pursuant to
the provisions hereof; and
WHEREAS, the Debentures and the Trustee's certificate of
authentication to be borne by the Debentures are to be substantially in the
following forms, respectively:
[FORM OF DEBENTURE]
[FACE]
$___________________ No. _______________
ELIZABETHTOWN WATER COMPANY
1997 Series A Variable Rate Debenture - due 2027
ELIZABETHTOWN WATER COMPANY, a corporation duly organized and
existing under the laws of the State of New Jersey (herein referred to as the
"Company"), for value received, hereby promises to pay to Summit Bank, or
registered assigns, on June 1, 2027 or upon the earlier redemption hereof as
hereinafter provided, the principal sum of Twenty-Five Million Dollars in such
coin or currency of the United States of America as at the time of payment shall
be legal tender for the payment of public and private debts. The 1997 Series A
Variable Rate Debentures have been issued to the Bond Trustee to evidence the
obligations of the Company under the Loan Agreement pursuant to which the
Company is obligated for the payment of the principal of, premium, if any, and
interest due on the Bonds issued by the Authority pursuant to the Bond
Indenture. This 1997 Series A Variable Rate Debenture bears interest at the same
rate, and interest on this 1997 Series A Variable Rate Debenture is payable on
the same dates and to the same extent as interest is payable on the Bonds
pursuant to the terms thereof. The interest rate on this Debenture shall in no
event exceed 10%. Principal and interest shall be paid at the principal
corporate trust office of The Bank of New York, New York, New York or at the
office of the Company, Westfield, New Jersey, or at the duly designated office
of any duly appointed alternate or successor paying agent.
The obligation of the Company to make payments with respect to the
principal of, premium, if any, and interest on the Debentures shall be fully or
partially, as the case may be, satisfied and discharged to the extent that the
principal of, premium, if any and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.
Reference is hereby made to the further provisions of this Debenture
set forth on the reverse hereof, and such further provisions shall for all
purposes have the same effect as though fully set forth at this place.
This Debenture shall not be valid or become obligatory for any
purpose until the certificate of authentication hereon shall have been signed by
the Trustee under the Indenture.
IN WITNESS WHEREOF, ELIZABETHTOWN WATER COMPANY has caused this
Debenture to be signed in its corporate name by its President or one of its Vice
Presidents by his or her signature or a facsimile thereof and by its Secretary
or one of its Assistant Secretaries by his or her signature or a facsimile
thereof, and its corporate seal, or a facsimile thereof, to be impressed or
imprinted hereon.
ELIZABETHTOWN WATER COMPANY
By___________________________
Title
(Seal)
By___________________________
Title
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[FORM OF TRUSTEE'S CERTIFICATE OF AUTHENTICATION]
Dated: ________ __, 1997
This is one of the Debentures described in the within-mentioned
Indenture.
THE BANK OF NEW YORK,
as Trustee,
By___________________________
Authorized Signatory.
[REVERSE]
ELIZABETHTOWN WATER COMPANY
1997 Series A Variable Rate Debenture - due 2027
This Debenture is one of a duly authorized issue of Debentures of the
Company (herein referred to as the "Debentures"), limited to the aggregate
principal amount of $25,000,000, except as otherwise provided in the Indenture
referred to below, all issued or to be issued under and pursuant to an indenture
dated as of June 1, 1997 (herein referred to as the "Indenture"), duly executed
and delivered by the Company to The Bank of New York, Trustee (herein referred
to as the "Trustee"), to which Indenture and all indentures supplemental thereto
reference is hereby made for a description of the rights of the holders of the
Debentures, the rights, duties and immunities of the Trustee and the rights and
obligations of the Company thereunder. The Debentures will not be transferable
except to a successor Bond Trustee.
In case an Event of Default, as defined in the Indenture, shall have
occurred and be continuing, the principal of all of the Debentures may be
declared, and upon such declaration shall become, due and payable, in the
manner, with the effect and subject to the conditions provided in the Indenture.
The Indenture contains provisions permitting the Company and the
Trustee, with the consent of the holders of more than 50% in the aggregate
principal amount of the Debentures at the time outstanding, evidenced as in the
Indenture provided, to execute supplemental indentures adding any provisions to
or changing in any manner or eliminating any of the provisions of the Indenture
or of any indenture supplemental thereto or modifying in any manner the rights
and obligations of the holders of the Debentures and of the Company; provided,
however, that no such supplemental indenture shall (i) extend the fixed maturity
of any Debenture, or reduce the principal amount thereof, or reduce the rate or
extend the time of payment of interest thereon, without the consent of the
holder of each Debenture so affected, or (ii) reduce the aforesaid percentage of
Debentures, the holders of which are required to consent to any such
supplemental indenture, without the consent of the holders of all Debentures
then outstanding. It is also provided in the Indenture that prior to any
declaration of the maturity of the Debentures the holders of a majority in the
aggregate principal amount of the Debentures at the time outstanding may on
behalf of the holders of all of the Debentures waive any past default under the
Indenture and its consequences, except a default in the payment of interest on
or the principal of any of the Debentures. Any such consent or waiver by the
registered holder of this Debenture shall be conclusive and binding upon such
holder and upon all future holders and owners of this Debenture and of any
Debenture issued in exchange herefor or in place hereof, irrespective of whether
or not any notation of such consent or waiver is made upon this Debenture.
No reference herein to the Indenture and no provision of this
Debenture or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of and
interest on this Debenture at the time and place and at the rate and in the coin
or currency herein prescribed.
The Debentures are issuable as registered Debentures without coupons,
in denominations of $5,000 and any multiple thereof. This Debenture is
transferable in the manner authorized by law. Upon due presentment of this
Debenture for registration of transfer at the office or agency to be maintained
by the Company in the Borough of Manhattan, City and State of New York, a new
Debenture or Debentures, of authorized denominations, for a like aggregate
principal amount, will be issued to the transferee as provided, and subject to
the limitations, in the Indenture. No service charge will be made for any such
registration of transfer, but the Company may require payment of a sum
sufficient to reimburse it for any tax or other governmental charge that may be
imposed in relation thereto. This Debenture may in like manner be exchanged
without service charge for one or more new Debentures of other authorized
denominations but of the same aggregate principal amount, all subject to the
terms and conditions set forth in the Indenture.
The Debentures are subject to optional and mandatory redemption by
the Company, at the times, and to the extent that, certain New Jersey Economic
Development Authority Water Facilities Bonds (Elizabethtown Water Company
Project -- 1997 Series A) are called for redemption at a price equal to the
principal amount to be redeemed, accrued interest to the date fixed for
redemption and any premium due in respect of such Bonds. As more fully provided
in the Indenture, the Debentures are also redeemable as a whole or in part with
the proceeds of Released Property, at the principal amount thereof plus accrued
interest to the date fixed for redemption.
The Indenture provides that under the circumstances specified therein
funds or certain securities may be deposited with the Trustee in advance of the
maturity or redemption date of any of the Debentures, in trust for the payment
or redemption of such Debentures, and the interest due or to become due thereon,
and that thereupon all obligations of the Company in respect of such Debentures
shall cease and be discharged and the holders thereof shall thereafter be
restricted exclusively to such funds or securities for any and all other claims
on their part under the Indenture or with respect to such Debentures.
The Company, the Trustee, any paying agent and any Debenture
registrar may deem and treat the registered holder hereof as the absolute owner
hereof (whether or not this Debenture shall be overdue and notwithstanding any
notice of ownership or writing hereon) for the purpose of receiving payment of
or on account of the principal hereof and interest due hereon and for all other
purposes, and neither the Company nor the Trustee nor any paying agent nor any
Debenture registrar shall be affected by any notice to the contrary. So long as
the Bond Trustee (as defined in the Indenture) is the sole registered holder of
this Debenture, and has specified an account for such payments in writing to the
Company, the Trustee and any paying agent, all payments of interest required
hereunder shall be made by wire transfer.
No recourse shall be had for the payment of the principal of or the
interest on this Debenture, or for any claim based hereon, or otherwise in
respect hereof, or based on or in respect of the Indenture or any indenture
supplemental thereto, against any incorporator, stockholder, officer, trustee or
director, past, present or future, as such, of the Company or of any predecessor
or successor corporation, whether by virtue of any constitution, statute or rule
of law or equity, or by the enforcement of any assessment or penalty or
otherwise, all such liability being, by the acceptance hereof and as part of the
consideration for the issue hereof, expressly waived and released by every
holder hereof, as more fully provided in the Indenture.
----------------------
AND WHEREAS, all acts and things necessary to make the Debentures,
when executed by the Company and authenticated and delivered by the Trustee as
in this Indenture provided, the valid, binding and legal obligations of the
Company, and to constitute these presents a valid indenture and agreement, have
been done and performed, and the execution of this Indenture and the issue
hereunder of the Debentures have in all respects been duly authorized, and the
Company, in the exercise of the legal right and power in it vested, executes
this Indenture and proposes to make, execute, issue and deliver the Debentures;
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
That in order to declare the terms and conditions upon which the
Debentures are and are to be authenticated, issued and delivered, and in
consideration of the premises, of the purchase and acceptance of the Debentures
by the holders thereof and of the sum of one dollar to it duly paid by the
Trustee at the execution of these presents, the receipt whereof is hereby
acknowledged, the Company covenants and agrees with the Trustee for the equal
and proportionate benefit of the respective holders from time to time of the
Debentures, as follows:
ARTICLE ONE.
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Definitions.
Section 1.01. The terms defined in this Section (except as in this
Indenture otherwise expressly provided or unless the context otherwise requires)
for all purposes of this Indenture and of any indenture supplemental hereto
shall have the respective meanings specified in this Section. All other terms
used in this Indenture which are defined in the Trust Indenture Act of 1939 or
which are by reference in such act defined in the Securities Act of 1933, as
amended (except as herein otherwise expressly provided or unless the context
otherwise requires), shall have the meanings assigned to such terms in said
Trust Indenture Act and in said Securities Act as in force at the date of the
execution of this Indenture.
"Authority" shall mean the New Jersey Economic
Development Authority.
"Board of Directors" shall mean the Board of Directors of the Company
or any committee thereof duly authorized by the Board of Directors to act
hereunder.
"Board Resolution" or "Resolution of the Board of Directors" shall
mean a copy of a resolution certified by the Secretary or an Assistant Secretary
of the Company to have been duly adopted by the Board of Directors and to be in
full force and effect on the date of such certification.
"Company" shall mean Elizabethtown Water Company, and, subject to the
provisions of Article Twelve, shall also include its successors and assigns.
"Debenture" or "Debentures" shall mean any Debenture or Debentures,
as the case may be, authenticated and delivered under this Indenture.
The term "outstanding", when used with reference to Debentures,
shall, subject to the provisions of Section 9.04 and Article Thirteen, mean, as
of any particular time, all Debentures authenticated and delivered by the
Trustee under this Indenture, except
(a) Debentures theretofore canceled by the Trustee or
delivered to the Trustee for cancellation;
(b) Debentures or portions thereof for the payment or redemption of
which moneys in the necessary amount shall have been deposited in trust
with the Trustee, provided that if such Debentures or portions are to be
redeemed prior to the maturity thereof, notice of such redemption shall
have been given as in Article Four provided, or provision satisfactory to
the Trustee shall have been made for giving such notice; and
(c) Debentures in lieu of or in substitution for which other
Debentures shall have been authenticated and delivered pursuant to the
terms of Section 2.06, unless proof satisfactory to the Trustee is
presented that any such Debentures are held by holders for value without
notice of any defense.
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"Debentureholder", "holder of Debentures", "holder", or other similar
terms, shall mean the registered holder of any Debenture. The term "registered
holder" shall mean the person or persons in whose name or names a particular
Debenture shall be registered on the register kept for that purpose in
accordance with the terms of this Indenture.
"Event of Default" shall mean any event specified in Section 7.01
continued for the period of time, if any, therein designated.
"Indenture" shall mean this instrument as originally executed, or, if
amended or supplemented, as so amended or supplemented.
"Loan Agreement" shall mean the Loan Agreement dated as of June 1,
1997 between the Company and the Authority relating to, among other things, the
issuance of $25,000,000 principal amount of Water Facilities Bonds
(Elizabethtown Water Company Project -- 1997 Series A), or if further amended or
supplemented, as so further amended or supplemented.
"Officers' Certificate" shall mean a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Company. Each such certificate
shall include the statements provided for in Section 15.06, if and to the extent
required by the provisions thereof.
"Opinion of Counsel" shall mean an opinion in writing signed by legal
counsel who shall be satisfactory to the Trustee, and who may be an employee of
or counsel to the Company. Each such opinion shall include the statements
provided for in Section 15.06, if and to the extent required by the provisions
thereof.
"Person" shall mean an individual, partnership, corporation,
association, joint venture, trust or unincorporated association and shall
include a government or political subdivision thereof and any governmental
agency or public benefit corporation.
"Principal Corporate Trust Office" means the office of the Trustee in
New York, New York at which any particular time its corporate trust business
shall be principally administered, which office at the date hereof is located at
101 Barclay Street, 21st Floor, New York, New York 10286, Attention: Corporate
Trust Trustee Administration, except that, with respect to presentation of
Securities for payment or registration of transfers and exchanges and the
location of the Security Registrar, such term means the office or agency of the
Trustee in said city at which at any particular time its corporate agency
business shall be conducted, which at the date hereof is located at 101 Barclay
Street, New York, New York 10286, Attention: Corporate Trust Services Window.
"Project" shall mean those certain facilities of the Company financed
pursuant to the Loan Agreement and described therein.
"Responsible Officer" when used with respect to the Trustee shall
mean the chairman or vice chairman of the board of directors, the chairman of
the executive committee, the president, any vice president, the secretary, the
treasurer, any senior trust officer, any trust officer, any second or assistant
vice president, any assistant secretary, any assistant treasurer, any assistant
cashier, or any other officer or assistant officer of the Trustee customarily
performing functions similar to those performed by the persons who at the time
shall be such officers, respectively, or to whom any corporate trust matter is
referred because of his knowledge of and familiarity with the particular
subject.
"Bonds" shall mean the Authority's $25,000,000 principal amount of
Water Facilities Bonds (Elizabethtown Water Company Project -- 1997 Series A).
"Bond Indenture" shall mean the Trust Indenture (Series A), dated as
of June 1, 1997 between the Authority and the Bond Trustee, pursuant to which
the Bonds are issued, or if further amended or supplemented, as so further
amended or supplemented.
"Bond Trustee" shall mean the trustee under the Bond Indenture for
the time being, whether original or successor.
"Trustee" shall mean the Trustee under this Indenture for the time
being, whether original or successor.
"Trust Indenture Act of 1939", subject to the provisions of Sections
11.01 and 11.02, shall mean the Trust Indenture Act of 1939 as in force at the
date of execution of this Indenture.
Certain other terms are defined in Articles Two, Five, Seven and
Eight.
ARTICLE TWO.
Description, Execution and Exchange of Debentures.
Section 2.01. The Debentures shall mature on June 1, 2027.
Section 2.02. The Debentures and the Trustee's certificate of
authentication to be borne by the Debentures shall be substantially of the tenor
and purport as in this Indenture above recited, and may have such letters,
numbers or other marks of identification and such legends or endorsements
printed, lithographed or engraved thereon as the Company may deem appropriate
and as are not inconsistent with the provisions of this Indenture, or as may be
required to comply with any law or with any rule or regulation made pursuant
thereto or with any law or regulation of any stock exchange on which the
Debentures may be listed, or to conform to usage.
Section 2.03. The Debentures shall be issuable as registered
Debentures without coupons in denominations of $5,000 and multiples thereof.
Each Debenture shall be dated the date of its authentication. Each
Debenture shall bear interest at the same rate, and interest and premium, if
any, on each Debenture shall be payable on the same dates, and to the same
extent that interest is payable on the Bonds pursuant to the terms thereof.
The obligation of the Company to make payments with respect to the
principal of, premium, if any, and interest on the Debentures shall be fully or
partially, as the case may be, satisfied and discharged to the extent that the
principal of, premium, if any, and interest on the Bonds shall have been paid or
shall be deemed to have been paid in accordance with the Bond Indenture.
Section 2.04. The Debentures shall be signed on behalf of the Company
by its President or a Vice President, and by its Secretary or an Assistant
Secretary, and its corporate seal, or a facsimile thereof, shall be thereon
impressed or imprinted. The signature of any such President, Vice President,
Secretary or Assistant Secretary may be facsimile. The Company may use the
signature or facsimile signature or any person who shall be any such officer of
the Company at the time of the execution of Debentures, irrespective of the date
as of which the same shall be authenticated, or of any person who shall have
been any such officer of the Company, notwithstanding the fact that at the time
the Debentures shall be authenticated and delivered or disposed of, he shall
have ceased to be such officer of the Company.
The Company may deliver Debentures executed by the Company to the
Trustee for authentication. The Trustee shall thereupon authenticate and make
available for delivery said Debentures to or upon the written orders of the
Company. Only such Debentures as shall bear thereon a certificate of
authentication substantially in the form herein before recited, executed by the
Trustee, shall be entitled to the benefits of this Indenture or be valid or
obligatory for any purpose. Such certificate by the Trustee upon any Debenture
executed by the Company shall be conclusive evidence that the Debenture so
authenticated has been duly authenticated and delivered hereunder and that the
holder is entitled to the benefits of this Indenture.
Section 2.05. The Company shall keep at the office or agency to be
maintained by the Company as provided in Section 5.02 a register or registers in
which, subject to such reasonable regulations as it may prescribe, it will
register all Debentures, and upon due presentment for registration or transfer
of any Debenture at such office or agency, the Company shall execute and
register and the Trustee shall authenticate and deliver in the name of the
transferee or transferees a new Debenture or Debentures for a like aggregate
principal amount of Debentures of any authorized denominations, bearing numbers
not contemporaneously outstanding.
The several authorized denominations of Debentures shall be
interchangeable in equal aggregate principal amounts. Debentures to be exchanged
shall be surrendered at the office or agency to be maintained by the Company for
the purpose as provided in Section 5.02 and the Company shall execute and
register and the Trustee shall authenticate and deliver in exchange therefor the
Debenture or Debentures which the Debenture holder making the exchange shall be
entitled to receive, bearing numbers not contemporaneously outstanding.
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All Debentures presented or surrendered for registration of transfer,
exchange, redemption or payment shall (if so required by the Company or the
Trustee) be duly endorsed by, or be accompanied by a written instrument or
instruments of transfer in form satisfactory to the Company and the Trustee duly
executed by, the registered holder or his attorney duly authorized in writing.
For any exchange or registration of transfer of Debentures, the
Company, at its option, may require the payment of a sum sufficient to reimburse
it for any tax or other governmental charge that may be imposed in relation
thereto. No service charge shall be made for any such transaction.
The Company shall not be required to make registration of transfers
or exchanges of Debentures for a period of fifteen days next preceding any
selection of Debentures to be redeemed, nor shall it be required to make
registration of transfers or exchange of any Debentures or portions thereof
called or being called for redemption, except, in the case of any Debenture to
be redeemed in part only, the portion thereof not being redeemed.
Section 2.06. In case any Debenture shall become mutilated or be
destroyed, lost or stolen, the Company in its discretion may issue a new
Debenture of like tenor bearing a number not contemporaneously outstanding, in
exchange and substitution for the mutilated Debenture or in lieu of and
substitution for the Debenture so destroyed, lost or stolen. In every case the
applicant for a substituted Debenture shall furnish to the Company and to the
Trustee such security or indemnity as may be required by them to save each of
them, and, if requested, any paying agents and Debenture registrars of the
Company, harmless from all risk, however remote, and the applicant shall also
furnish to the Company and to the Trustee evidence to their satisfaction of the
mutilation, destruction, loss or theft of the applicant's Debenture and of the
ownership thereof. The Trustee shall authenticate any such substituted Debenture
and deliver the same upon the written request or authorization of any officer of
the Company. Upon the issue of any substituted Debenture, the Company may
require the payment of a sum sufficient to cover any stamp tax or other
governmental charge that may be imposed incident thereto and any other expenses,
including counsel fees and expenses, of the Company, the Trustee and any paying
agent or Debenture registrar, connected therewith. In case any Debenture which
has matured or is about to mature shall become mutilated or be destroyed, lost
or stolen, the Company may, instead of issuing a substitute Debenture, pay or
authorize the payment of the same (without surrender thereof except in the case
of a mutilated Debenture) if the applicant for such payment shall furnish to the
Company and to the Trustee such security or indemnity as may be required by them
to save each of them harmless, and evidence to the satisfaction of the Company
and the Trustee of the mutilation, destruction, loss or theft of such Debenture
and of the ownership thereof.
Every Debenture issued pursuant to the provisions of this Section in
substitution for any Debenture which is destroyed, lost or stolen shall
constitute an additional contractual obligation of the Company, whether or not
the destroyed, lost or stolen Debenture shall be found at any time, or be
enforceable by anyone, and shall be entitled to all the benefits of this
Indenture equally and proportionately with any and all other Debentures duly
issued hereunder. All Debentures shall be held and owned upon the express
condition that the foregoing provisions are exclusive with respect to the
replacement or payment of mutilated, destroyed, lost or stolen Debentures and
shall preclude any and all other rights or remedies, notwithstanding any law or
statute existing or hereinafter enacted to the contrary with respect to the
replacement or payment of negotiable instruments or other securities without
their surrender.
Section 2.07. All Debentures surrendered for the purpose of payment,
redemption, exchange or registration of transfer shall be delivered to the
Trustee and canceled by it, and no Debentures shall be issued in lieu of any
thereof except as expressly required or permitted by any of the provisions of
this Indenture. With the consent of the Company, the Trustee may, but shall not
be required to, destroy canceled Debentures and deliver a certificate thereof to
the Company. If the Company shall acquire any of the Debentures, however, such
acquisition shall not operate as a redemption or satisfaction of the
indebtedness represented by such Debentures unless and until the same are
delivered to the Trustee, or surrendered to the Trustee, for cancellation.
Section 2.08. Nothing in this Indenture or in the Debentures,
expressed or implied, shall give or be construed to give to any person, firm or
corporation, other than the parties hereto and the holders of the Debentures,
any legal or equitable right, remedy or claim under or in respect of this
Indenture, or under any covenant, condition or provision herein contained, all
of the covenants, conditions and provisions herein being for the sole benefit of
the parties hereto and of the holders of the Debentures.
Section 2.09. The Company in issuing the Debentures may use "CUSIP"
numbers (if then generally in use), and, if so, the Trustee shall use "CUSIP"
numbers in notices of redemption as a convenience to holders of Debentures;
provided that any such notice may state that no representation is made as to the
correctness of such numbers either as printed on the Debentures or as contained
in any notice of a redemption and that reliance may be placed only on the other
identification numbers printed on the Debentures, and any such redemption shall
not be affected by any defect in or omission of such numbers.
ARTICLE THREE.
Issue of Debentures.
Section 3.01. Debentures not to exceed the aggregate principal amount
of $25,000,000, except as provided in Section 2.06, may, upon the execution of
this Indenture or from time to time thereafter, be executed by the Company and
delivered to the Trustee for authentication, and the Trustee shall thereupon
authenticate and deliver said Debentures to or upon the written order of the
Company signed by its President or a Vice President and by its Treasurer or an
Assistant Treasurer or its Secretary or an Assistant Secretary, without further
action by the Company. As a general matter, the Debentures issued under this
Indenture evidence indebtedness under the Loan Agreement and are not
transferable except to a successor Bond Trustee.
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ARTICLE FOUR.
Redemption of Debentures.
Section 4.01. The Debentures are redeemable prior to maturity, in
accordance with the provisions of this Article Four, at the principal amount
thereof and accrued interest to the date fixed for redemption (but if the date
fixed for redemption is a semi-annual interest payment date, the interest
installment payable on such date shall be paid to the holder at the close of
business on the record date for such interest payment date), together, in
certain cases, with a premium, all as set forth in the form of Debenture
provided for herein. The Trustee, upon the request of the Company (evidenced by
a copy of a Board Resolution, delivered to the Trustee at least 60 days prior to
the redemption date) and notification by the Bond Trustee, signed by a Vice
President or Trust Officer (delivered to the Trustee at least 35 days prior to
the redemption date), that an equal principal amount of Bonds are to be redeemed
and specifying the premium, if any, to be paid on such redemption, shall, for
and on behalf of and in the name of the Company, mail or cause to be mailed a
notice of redemption with respect to the principal amount of Debentures
specified in such request.
Section 4.02. In case of a redemption of a part only of the
Debentures, the Trustee shall select the particular Debentures or parts thereof,
which shall be $5,000 or multiples thereof, so to be redeemed according to such
method as the Trustee shall deem proper in its discretion.
Notice of redemption to the holder of any Debenture which is to be
redeemed in whole or in part shall be mailed by or on behalf of the Company, not
less than thirty days prior to the date fixed for redemption, to him at his last
address appearing upon the registry books.
Failure duly to give such notice by mailing to the holder of any
Debenture designated for redemption in whole or in part shall not affect the
validity of the proceedings for the redemption of any other Debenture.
The notice of redemption to each holder of Debentures to be redeemed
shall specify the Debentures or parts thereof held by such holder to be
redeemed, which shall be $5,000 or multiples thereof, the date fixed for
redemption, the CUSIP numbers (if any) of such Debentures, the redemption price
at which Debentures are to be redeemed and the place where payment of the
redemption price is to be made upon surrender of the Debentures, and shall state
that interest accrued to the date fixed for redemption will be paid in the
manner specified in said notice, that from said date interest thereon will cease
to accrue, and, in the case of any Debenture which is to be redeemed in part
only, that on and after the redemption date, upon surrender of such Debenture, a
new Debenture or Debentures of authorized denominations in aggregate principal
amount equal to the unremedied portion of such Debenture will be issued. Such
notice shall also state that it is subject to the receipt of the redemption
moneys by the Trustee prior to the date fixed for redemption, and that such
notice, and the Company's request to the Trustee to mail such notice, shall be
of no effect unless such moneys are received prior to such date.
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Section 4.03. Notice of redemption having been mailed, and the
Trustee having prior to the date fixed for redemption specified in the notice of
redemption received for the purpose an amount in cash sufficient to redeem all
of the Debentures called for redemption, the Debentures called for redemption
shall become due and payable on such date fixed for redemption.
Section 4.04. On and after the date fixed for redemption, if the
moneys for the redemption of the Debentures to be redeemed shall have been
received by the Trustee, such Debentures shall cease to bear interest. All
moneys on deposit with the Trustee for the redemption of Debentures shall,
subject to the provisions of Section 13.04 hereof, be held in trust for account
of the holders of the Debentures so to be redeemed, and shall be paid to them,
respectively, upon presentation and surrender of said Debentures.
If any Debenture of a denomination larger than $5,000 shall be called
for redemption in part only, upon presentation of any such Debenture so called
for redemption, the payment with respect to said Debenture shall be made and
Debentures for the unpaid balance of the principal amount of the Debenture so
presented shall be authenticated and delivered by the Trustee without charge
therefor to the holder thereof. On and after the date fixed for such redemption,
interest shall be payable only on the portion of such Debenture not so called
for redemption and only such portion shall be deemed outstanding and continue to
be entitled to the benefits of this Indenture.
Anything in this Indenture contained to the contrary notwithstanding,
if the giving of the notice of redemption shall have been completed as provided
in Section 4.02, or if provision satisfactory to the Trustee for the giving of
such notice shall have been made, and if the Company shall have deposited in
trust with the Trustee funds sufficient to redeem the Debentures (or parts
thereof) to be redeemed on the date fixed for redemption, together with interest
accrued to the date fixed for redemption, then all obligations of the Company in
respect of such Debentures (or parts thereof) shall cease and be discharged and
the holders of such Debentures or parts thereof) shall thereafter be restricted
exclusively to such funds for any and all claims of whatsoever nature on their
part under this Indenture or in respect to such Debentures (or parts thereof).
ARTICLE FIVE.
Particular Covenants of the Company.
The Company covenants as follows:
Section 5.01. The Company will duly and punctually pay or cause to be
paid the principal of, premium, if any, and interest on each of the Debentures
at the time and place and in the manner provided herein and in the Debentures.
Section 5.02. As long as any of the Debentures remain outstanding,
the Company will maintain an office or agency or offices or agencies in the
Borough of Manhattan, City and State of New York, where the Debentures may be
presented for registration of transfer and exchange as in this Indenture
provided, and where notices and demands to or upon the Company in respect of the
Debentures or of this Indenture may be served, and where the Debentures may be
presented for payment. Until otherwise designated by the Company in a notice to
the Trustee, such office or agency for all of the above purposes shall be the
principal corporate trust office of the Trustee in the Borough of Manhattan,
City and State of New York.
Section 5.03. The Company, whenever necessary to avoid or fill a
vacancy in the office of Trustee, will appoint, in the manner provided in
Section 8.10, a Trustee, so that there shall at all times be a Trustee
hereunder.
Section 5.04. (a) If the Company shall appoint a paying agent other
than the Trustee, it will cause such paying agent to execute and deliver to the
Trustee an instrument in which such agent shall agree with the Trustee, subject
to the provisions of this Section,
(1) that it will hold all sums held by it as such agent for the
payment of the principal of, premium, if any, or interest on the
Debentures (whether such sums have been paid to it by the Company or by
any other obligor on the Debentures) in trust for the benefit of the
holders of the Debentures, or of the Trustee, as the case may be,
(2) that it will give the Trustee notice of any failure by the
Company (or by any other obligor on the Debentures) to make any payment of
the principal of or interest on the Debentures when the same shall be due
and payable, and
(3) that at any time during the continuance of any Event of Default
upon the written request of the Trustee, it will forthwith pay to the
Trustee all sums so held by such paying agent.
(b) If the Company shall act as its own paying agent, it will, on or
before each due date of the principal of, premium, if any, or interest on, the
Debentures, set aside, segregate and hold in trust for the benefit of the
holders of the Debentures, a sum sufficient to pay such principal, premium, if
any, or interest so becoming due and payable and will notify the Trustee of any
failure (by it or any other obligor on the Debentures) to take such action.
(c) Whenever the Company shall have one or more paying agents, it
will, prior to each due date of the principal of, premium, if any, or interest
on, the Debentures, deposit with a paying agent a sum sufficient to pay the
principal, premium, if any, or interest, so becoming due, such sum to be held in
trust for the benefit of the persons entitled to such principal, premium, if
any, or interest, and (unless such paying agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
(d) Anything in this Section to the contrary notwithstanding, the
Company may, at any time, for the purpose of obtaining a satisfaction and
discharge of this Indenture, or for any other reason, pay or cause to be paid to
the Trustee all sums held in trust by it, or any paying agent hereunder, as
required by this Section, such sums to be held by the Trustee upon the trusts
herein contained.
(e) Anything in this Section to the contrary notwithstanding, the
agreement to hold sums in trust as provided in this Section is subject to the
provisions of Section 13.04 hereof.
Section 5.05. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, it will not create, assume or incur,
or in any other manner become directly or indirectly liable in respect of, any
indebtedness, in addition to its 7.20% Debentures due 2019, its 7 1/2%
Debentures due 2020, its 6.60% Debentures due 2021, its 6.70% Debentures due
2021, its 8 3/4% Debentures due 2021, its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028, its 5.60% Debentures due 2025, its 1997 Series B Variable
Rate Debentures due 2027 and the Debentures, except the following:
(a) current operating liabilities and current or other obligations
(other than for borrowed money) incurred in the ordinary course of
business;
(b) Current Indebtedness;
(c) indebtedness (in addition to that referred to in
subdivisions (a) and (b) above and (d) below) in an
aggregate amount not in excess of $10,000,000 at any one
time outstanding; and
(d) indebtedness (in addition to that referred to in subdivisions
(a), (b) and (c) above) in an aggregate amount not in excess of the sum of
$20,000,000 plus 65% of the Amount of Net Property Additions at the time
the Company first becomes liable in respect of any such indebtedness.
The Company covenants that, so long as any Debentures shall be
outstanding under this Indenture, it will not create, assume or incur, or in any
manner become directly or indirectly liable in respect of, any indebtedness (in
addition to (as hereinafter defined) its 7.20% Debentures due 2019, its 7 1/2%
Debentures due 2020, its 6.60% Debentures due 2021, its 6.70% Debentures due
2021, its 8 3/4% Debentures due 2021, its 8% Debentures due 2022, its 7 1/4%
Debentures due 2028, its 5.60% Debentures due 2025, its 1997 Series B Variable
Rate Debentures, the Debentures and that referred to in subdivisions (a), (b)
and (c) above), unless the Gross Income of the Company, for a period of 12
consecutive calendar months within the 15 calendar months immediately preceding
the incurring by the Company of such indebtedness, shall have been at least
equal to twice the Annual Interest Charges.
The term "Current Indebtedness" as used herein shall mean
indebtedness in an aggregate amount not in excess of 20% of the total
capitalization of the Company at the time and which is expressed to be payable
on demand or to mature less than one year after the date of creation or issuance
thereof. The total capitalization of the Company shall be deemed to consist of
the sum of (i) the principal amount of all outstanding indebtedness of the
Company represented by bonds, debentures, notes or other evidences of
indebtedness (other than Current Indebtedness), (ii) the aggregate of the par or
stated value represented by all issued and outstanding capital stock of all
classes of the Company, including premiums received on the issue of such capital
stock, and (iii) the surplus of the Company, including earned, capital, paid-in
and other surplus.
The term "Amount of Net Property Additions" as used herein shall mean
the balance, if any, remaining after deducting the Retirements from the Amount
of Property Additions, as of any particular time.
The term "Amount of Property Additions" as used herein shall mean the
Cost or, if less, the fair value to the Company at the time of the actual
acquisition by the Company, of Property
Additions.
The term "Property Additions" as used herein shall mean all tangible
property owned by the Company and made, constructed or otherwise acquired by it
subsequent to December 31, 1975, which the Company is authorized to acquire, own
and operate and which is used or useful in the business of impounding, storing,
transmitting, producing, manufacturing, transporting, distribution or supplying
water for any and all purposes. Permanent improvements, extensions, additions or
replacements in the process or construction or erection, shall be included as
Property Additions as of any particular time, insofar as actually constructed or
erected after December 31, 1975, and before such particular time. There shall
not be included as Property Additions (a) Excepted Property, (b) going value or
good will, as such, (c) any item of property retired the retirement of which has
not been credited to utility plant account, (d) any item of property acquired to
replace a similar item of property whose retirement has not been credited to
utility plant account, or any item of property whose cost has been charged or is
properly chargeable to repairs, maintenance or other operating expense account
or whose cost has been charged or is not properly chargeable to utility plant
account, or (e) any property not located in the State of New Jersey or in a
State contiguous thereto.
The term "Retirements" as used herein shall mean the Cost of Fundable
Property which, subsequent to December 31, 1975, shall have become worn out or
permanently unserviceable, or shall have been lost, sold, destroyed, abandoned,
surrendered on lapse of title, taken by eminent domain, purchased by any
governmental or public body pursuant to any right reserved to or vested in it,
or otherwise disposed of by the Company or retired from service for any reason,
or shall have permanently ceased to be used or useful in the business of the
Company. Accounting adjustments of utility plant accounts or reclassification of
utility plant accounts or amortization of any plant account to comply with any
order of any regulatory body and which do not represent or reflect the permanent
retirement from a plant account subsequent to December 31, 1975 of any Fundable
Property shall not be included in Retirements.
The term "Fundable Property" as used herein shall mean (a) all
property owned by the Company on December 31, 1975 (except such property as
would not be included in Property Additions if acquired subsequent to December
31, 1975) and (b) Property Additions.
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The term "Cost" as used herein, when used with respect to any
particular property, shall mean the cost (or, if not known, estimated cost)
thereof to the person first devoting it to public service, without deducting
therefrom applicable reserves for depreciation and/or retirements and/or
depletion and/or obsolescence. In determining Cost in cases in which property,
part of which constitutes Fundable Property and part does not, is or has been
acquired for a consideration not divided between such parts, or, in cases where
the consideration given for property is not allocated to the various items of
property acquired, the consideration may be allocated to the various parts and
items of property acquired in any reasonable manner which is in accordance with
the requirements of any systems of accounting with which the Company is
compelled to comply by any provision of law, or, if there be no such
requirements, in accordance with good accounting practice.
The term "Gross Income" as used herein shall mean gross operating
revenues from all sources (whether or not subject to refund) after deducting
therefrom operating expenses. In computing gross operating revenues, there shall
be included net non-operating revenues, if any (including income from
securities, whether of subsidiaries or not), in an amount not more than 20% of
Gross Income after deducting therefrom net non-operating revenues. In computing
operating expenses, there shall be included all operating expenses, including
accruals for taxes (except that taxes on undistributed earnings, income and
excess profits and any like taxes measured by income and charges in lieu of any
thereof made because of the deferment in payment of any such tax shall be
excluded from operating expenses, and any credit to income subsequently made on
account of any such prior charge shall be excluded from gross operating
revenues), rentals, insurance, actual charges for current repairs and
maintenance and charges to expense or income to provide for depreciation,
renewals, replacements, depletion or retirement of property and for property
loss (but excluding interest, charges deducted in computing net non-operating
revenues and charges to income for the amortization (i) of debt discount and
expense and (ii) of utility plant account or amounts transferred therefrom). If
any of the property owned by the Company at the time any computation of Gross
Income is made shall have been acquired during or after any period for which
Gross Income is to be computed, the Gross Income of such property (computed in
the manner in this Section provided for the computation of the Gross Income of
the Company) during such period or such part of such period as shall have
preceded the acquisition thereof, to the extent that the same have not otherwise
been included and can be determined, shall be included in the Gross Income of
the Company for all purposes of this Indenture, and the Gross Income which can
be determined of any property disposed of by the Company during or after such
period shall not be treated as Gross Income of the Company.
The term "Annual Interest Charges" as used herein shall mean the
interest requirements for twelve months upon all indebtedness of the Company
(including any indebtedness, whether or not created or assumed by the Company,
on which the Company customarily pays interest charges or which is secured by a
lien on any property of the Company, but excluding (a) indebtedness represented
by customers' deposits, (b) current operating liabilities and current or other
obligations (other than for borrowed money) incurred in the ordinary course of
business, (c) indebtedness for the purchase, payment or redemption of which
money in the necessary amount shall have been deposited in trust, and (d)
Current Indebtedness) to be outstanding upon the incurring by the Company of the
indebtedness in connection with which the computation is made; provided,
however, that the interest requirements on the Debentures shall be determined by
reference to the rate in effect on the date next preceding the date of such
computation.
Section 5.06. The Company covenants that, so long as any Debentures
shall be outstanding under the Indenture, it will not at any time mortgage or
pledge, or permit any other lien (other than Excepted Encumbrances) to become a
lien on, any property owned by the Company just prior to such time, to secure
any other indebtedness, without making effective provision whereby the
Debentures shall (so long as any such other indebtedness shall be so secured) be
secured (along with any other indebtedness similarly entitled to be equally and
ratably secured) by a direct lien (on all the property, other than Excepted
Property, owned by the Company just prior to the time such other lien shall have
become a lien on any of the property of the Company) prior to the lien or liens
securing any and all such other indebtedness; provided, however, that this
restriction shall not be applicable to nor prevent
(a) the pledging by the Company of its assets as security for the
payment of any tax, assessment or other similar charge demanded of the
Company by any governmental authority or public body so long as the
Company in good faith contests its liability to pay the same, or as
security to be deposited with any governmental authority or public body
for any purpose at any time required by law or governmental regulation as
a condition to the transaction of any business or the exercise of any
privilege, license or right; or
(b) the pledging by the Company of any assets for the purpose of
securing a stay or discharge or for any other purpose in the course of any
legal proceeding in which the Company is a party; or
(c) making good faith deposits in connection with tenders, contracts
or leases to which the Company is a party.
The Company covenants that, so long as any Debentures shall be
outstanding under this Indenture, if, upon any consolidation or merger of the
Company with or into any other corporation, or upon any sale or conveyance of
all or substantially all of the property of the Company as an entirety, or upon
any acquisition by the Company of the property of another corporation
substantially as an entirety or upon any merger of any other corporation into
the Company, any of the property (other than Excepted Property) owned by the
Company just prior thereto, would thereupon become subject to any lien (other
than Excepted Encumbrances), the Company, prior to such consolidation, merger,
sale, conveyance or acquisition, will take appropriate action whereby the
Debentures shall (so long as such property shall be subject to such lien) be
secured (along with any other indebtedness similarly entitled to be equally and
ratably secured) by a direct lien on such portion of the property of the Company
prior to all other liens, other than Excepted Encumbrances and other than any
liens existing thereon just prior to such consolidation, merger, sale,
conveyance or acquisition.
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Any instrument creating a lien pursuant to the requirements of this
Section shall contain reasonable and customary provisions for the enforcement of
such lien and for the release of, or substitution for, the property subjected to
such lien. Such direct lien shall be evidenced by an appropriate instrument or
instruments executed and delivered to the Trustee (or to the extent legally
necessary, to another trustee as additional or separate trustee). The Trustee,
subject to the provisions of Section 8.01 hereof, may receive an Opinion of
Counsel as conclusive evidence that any such instrument is in customary form and
complies with the foregoing provisions of this paragraph; and the Trustee shall
not be under any duty or responsibility to any holder of any Debenture with
respect to the form, validity or enforceability of any such instrument which it
may accept in reliance in good faith upon any such opinion.
If the Company shall fail to create a direct lien to secure the
Debentures, as required by the foregoing provisions of this Section, an
equitable lien shall exist to the same extent and on the same property as though
the Company had created such direct lien.
The term "Excepted Encumbrances" as used herein shall mean as of any
particular time any of the following:
(i) liens for taxes, assessments or governmental charges not
delinquent and liens for workmen's compensation awards and similar
obligations not delinquent and liens for taxes, assessments or
governmental charges delinquent but the validity of which is being
contested at the time by the Company in good faith by appropriate
proceedings diligently conducted;
(ii) any liens securing indebtedness neither assumed nor guaranteed
by the Company nor on which it customarily pays interest, existing in or
relating to real estate acquired by the Company for transmission,
distribution or right-of-way purposes, or in connection with its usual
operations;
(iii) easements or reservations in any property of the Company
created for the purpose of roads, railroads, railroadside tracks, electric
lines, pipe lines, sewers, water and gas transmission and distribution
mains, conduits, water rights of the State of New Jersey or others,
building and use restrictions and defects of title to, or leases of, any
parts of the property of the Company which do not in the opinion of the
Company's counsel materially impair the use of the property as an entirety
in the operation of the business of the Company;
(iv) undetermined liens and charges incidental to current
construction, including mechanics', laborers', materialmen's and similar
liens not delinquent;
(v) any obligations or duties affecting the property of the
Company to any municipality or public authority with respect to any
franchise, grant, license, permit or certificate;
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(vi) rights reserved to or vested in any municipality or public
authority to control or regulate any property of the Company or to use
such property in a manner which does not materially impair the use of such
property for the purposes for which it is held by the Company;
(vii) judgments in course of appeal or otherwise in
contest and secured by sufficient bond or security;
(viii) any irregularities in or deficiencies of title to any rights
of way for mains or pipes and/or appurtenances thereto or other
improvements thereon and to any real estate used or to be used primarily
for right of way purposes, provided that the Company shall have obtained
from the apparent owner of the lands or estates covered by any such right
of way an instrument purporting by its terms to grant the use thereof for
the construction, operation or maintenance of such main, pipe,
appurtenance or improvement for which the same are used or are to be used,
or provided that the Company has power, under eminent domain or similar
statutes, to remove such irregularities or deficiencies; or
(ix) any other lien on any property owned by the Company to secure
any indebtedness so long as the aggregate principal amount of all such
indebtedness is not in excess of $10,000,000.
The term "Excepted Property" as used herein shall mean (a) cash,
bonds, stocks, obligations and other securities; (b) choses in action, accounts
and bills receivable, judgments and other evidences of indebtedness and
contracts, leases and operating agreements; (c) stock in trade, merchandise,
equipment, apparatus, materials or supplies manufactured or acquired for the
purpose of sale and/or resale in the usual course of business or consumable in
the operation of any of the properties of the Company or held for the purpose of
repairing or replacing (in whole or in part) any rolling stock, buses, motor
coaches, trucks, automobiles or other vehicles or aircraft; (d) timber, gas,
oil, minerals (including developed and undeveloped natural gas reserves and
natural gas in underground storage or otherwise), mineral rights and royalties;
(e) materials or products generated, manufactured, produced or purchased by the
Company for sale, distribution or use in the ordinary course of its business;
(f) office furniture and equipment, tools, rolling stock, buses, motor coaches,
trucks, automobiles and other vehicles and aircraft; and (g) the Company's
franchise to be a corporation.
Section 5.07. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, it will not declare or pay any
dividends or make any other distribution (except dividends payable or
distributions made in shares of capital stock of the Company) on or in respect
of any of its Common Stock, or purchase or otherwise acquire for a consideration
any shares of its Common Stock (except out of the proceeds derived from the sale
of additional shares of its Common Stock subsequent to April 1, 1997, if the
aggregate of such dividends and distributions and such consideration for
purchase or other acquisition of shares of its Common Stock made by the Company
after December 31, 1975 would exceed the sum of (a) the earned surplus of the
Company accumulated after December 31, 1975 and determined without any deduction
on account of such dividends, distributions or acquisitions and (b) $10,000,000.
The term "consideration" as used in this Section shall mean cash or fair value
if the consideration be other than cash. Charges to earned surplus with
corresponding credits to utility plant acquisition adjustment account or utility
plant adjustment account or any similar account or to any reserve for the
purpose of ultimately disposing thereof and any provisions for amortization of
any amounts included in utility plant acquisition account or utility plant
adjustment account or in any similar account shall be disregarded in determining
earned surplus accumulated after December 31, 1975.
Section 5.08. The Company covenants that, so long as any Debentures
shall be outstanding under this Indenture, if the Proceeds of Released Property
in any period of 12 consecutive calendar months shall amount to $5,000,000 or
more, and if, immediately subsequent to the receipt of such $5,000,000 (or the
part hereof making the total thereof $5,000,000 or more), the ratio of the
aggregate principal amount of all outstanding indebtedness of the Company
represented by bonds, debentures, notes or other evidences of indebtedness
(other than Current Indebtedness) to the net book value of the Company's utility
plant accounts exceeds 60%, then the Company will use such Proceeds of Released
Property to redeem all or any portion of Debentures or redeem to all or any
portion of 7.20% Debentures due 2019 issued by the Company (herein called the
"7.20% Debentures due 2019") or to redeem all or any portion of 7 1/2%
Debentures due 2020 issued by the Company (herein called the "7 1/2% Debentures
due 2020") or to redeem all or any portion of 6.60% Debentures due 2021 issued
by the Company (herein called the "6.60% Debentures due 2021") or to redeem all
or any portion of 6.70% Debentures due 2021 issued by the Company (herein called
the "6.70% Debentures due 2021") or to redeem all or any portion of 8 3/4%
Debentures due 2021 issued by the Company (herein called the "8 3/4% Debentures
due 2021") or to redeem all or any portion of 8% Debentures due 2022 issued by
the Company (herein called the "8% Debentures due 2022") or to redeem all or any
portion of 7 1/4% Debentures due 2028 issued by the Company (herein called the
"7 1/4% Debentures due 2028") or to redeem all or any portion of 5.60%
Debentures due 2025 issued by the Company (herein called the "5.60% Debentures
due 2025") or to redeem all or any portion of other debentures issued by the
Company under indentures having a provision substantially similar to this
Section 5.08 ("Subsequent Debentures") at the earliest practicable date at a
redemption price equal to the principal amount thereof plus accrued interest to
the date of redemption; provided, however, that the Company shall not be
required so to use any part of such Proceeds of Released Property as to which
the Company shall have given to the Trustee (within 30 days after such receipt)
an Officers' Certificate stating that the Company intends, within a period of
one year thereafter, to apply such part to the making, constructing or otherwise
acquiring of Property Additions. If any such Officers' Certificate shall so
state, the Company covenants so to apply such part within such one year as
stated in such Officers' Certificate or, to the extent that it does not so apply
such part, to use such part within such one year to redeem Debentures or to
redeem 7.20% Debentures due 2019 or to redeem 7 1/2% Debentures due 2020 or to
redeem 6.60% Debentures due 2021 or to redeem 6.70% Debentures due 2021 or to
redeem 8 3/4% Debentures due 2021 or to redeem 8% Debentures due 2022 or to
redeem 7 1/4% Debentures due 2028 or to redeem 5.60% Debentures due 2025 or to
redeem Subsequent Debentures.
In lieu of using any such Proceeds of Released Property for
redemption as aforesaid, the Company may deliver to the Trustee for cancellation
Debentures or may deliver for cancellation to the trustee under the indenture
pursuant to which the 7.20% Debentures due 2019 were issued 7.20% Debentures due
2019, or may deliver for cancellation to the trustee under the indenture
pursuant to which the 7 1/2% Debentures due 2020 were issued 7 1/2% Debentures
due 2020, or may deliver for cancellation to the trustee under the indenture
pursuant to which the 6.60% Debentures due 2021 were issued 6.60% Debentures due
2021, or may deliver for cancellation to the Trustee under the indenture
pursuant to which the 6.70% Debentures due 2021 were issued 6.70% Debentures due
2021, or may deliver for cancellation to the trustee under the indenture
pursuant to which the 8 3/4% Debentures due 2021 were issued 8 3/4% Debentures
due 2021, or may deliver for cancellation to the trustee under the indenture
pursuant to which the 8% Debentures due 2022 were issued 8% Debentures due 2022,
or may deliver for cancellation to the trustee under the indenture pursuant to
which the 7 1/4% Debentures due 2028 were issued 7 1/4% Debentures due 2028, or
may deliver for cancellation to the Trustee under the Indenture pursuant to
which the 5.60% Debentures due 2025 were issued 5.60% Debentures due 2025, or
may deliver for cancellation to the trustee under any indenture pursuant to
which any Subsequent Debentures were issued such Subsequent Debentures, in each
case with all unmatured coupons, if any, appertaining thereto, theretofore
reacquired by the Company and not theretofore so delivered, and in any such case
the obligation of the Company to use such Proceeds of Released Property for
redemption shall be reduced to the extent of the aggregate principal amount of
Debentures or the 7.20% Debentures due 2019 or 7 1/2% Debentures due 2020 or
6.60 Debentures due 2021 or 6.70% Debentures due 2021 or 8 3/4% Debentures due
2021 or 8% Debentures due 2022 or 7 1/4% Debentures due 2028 or 5.60% Debentures
due 2025 or Subsequent Debentures so delivered. All Debentures so delivered to
the Trustee shall be canceled by the Trustee.
The term "Proceeds of Released Property" as used herein and in the
Debentures shall mean the aggregate amount of the consideration received or to
be received by the Company on the actual sale or other actual disposition
(subsequent to the execution of this Indenture) of any property included in
utility plant accounts (including therein an amount equivalent to any part of
such consideration consisting of other than cash at the fair value thereof to
the Company at the time of such sale or other disposition, as determined in good
faith by the Board of Directors of the Company, and excluding therefrom an
amount equivalent to any consideration received or to be received by the Company
on the sale or other disposition of any property (i) which property shall have
become worn out or permanently unserviceable and the book value of which shall
have been credited to utility plant accounts upon the retirement thereof or (ii)
to the extent that the consideration so received or to be received shall
constitute Property Additions) after deducting from such amount, to the extent
paid or payable by the Company, all expenses and all taxes (including income
taxes, if any) upon or in respect of any such sale or other disposition.
Section 5.09. The Company will deliver to the Trustee within 120 days
after the end of each fiscal year of the Company the Officers' Certificate
required by Section 314(a)(4) of the Trust Indenture Act. See Section 314(a)(4)
of the Trust Indenture Act.
Section 5.10. The Company will deliver to the Trustee true and
correct copies of the Loan Agreement and the Bond Indenture as originally
executed and all amendments or supplements thereto.
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ARTICLE SIX.
Debentureholders' Lists and Reports by
the Company and the Trustee.
Section 6.01. The Company shall deliver to the Trustee,
semi-annually, not more than 15 days after each record date, the information
required by Section 312(a) of the Trust Indenture Act. See Section 312 of the
Trust Indenture Act.
Section 6.02. See Section 312 of the Trust Indenture
Act.
Section 6.03. See Section 314(a) of the Trust
Indenture Act.
Section 6.04. On or before June 1 in each year, beginning June 1,
1997, so long as any Debentures are outstanding hereunder, the Trustee shall
transmit by mail to the Debentureholders the report required by Section 313(a)
of the Trust Indenture Act, if such report is required. See Trust Indenture Act
Sections 311(b) and 313.
ARTICLE SEVEN.
Remedies of the Trustee and Debentureholders on Event of
Default.
Section 7.01. In case one or more of the following Events of Default
shall have occurred and be continuing, that is to say:
(a) default in the due and punctual payment of any installment of
interest upon any of the Debentures as and when the same shall become due
and payable, and continuance of such default for a period of thirty days;
or
(b) default in the due and punctual payment of the principal of any
of the Debentures as and when the same shall become due and payable either
at maturity, by declaration as authorized by this Indenture, or otherwise;
or
(c) failure on the part of the Company duly to observe or perform any
other of the covenants, conditions or agreements on the part of the
Company in the Debentures or in this Indenture contained for a period of
sixty days after the date on which written notice of such failure,
requiring the same to be remedied, shall have been given to the Company by
the Trustee, or to the Company and the Trustee by the holders of at least
25% in aggregate principal amount of the Debentures at the time
outstanding; or
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(d) a decree or order by a court having jurisdiction in the premises
shall have been entered adjudging the Company a bankrupt or insolvent, or
approving a petition seeking reorganization of the Company under Title 11,
United States Code or any other similar applicable Federal or State law,
and such decree or order shall have continued undischarged and unstayed
for a period of sixty days; or a decree or order of a court having
jurisdiction in the premises for the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of the
Company or of all or substantially all of its property, or for the winding
up or liquidation of its affairs shall have been entered, and such decree
or order shall have remained in force undischarged and unstayed for a
period of sixty days; or
(e) the Company shall institute proceedings to be adjudicated a
voluntary bankrupt, or shall consent to the filing of a bankruptcy
proceeding against it, or shall file a petition or answer or consent
seeking reorganization under Title 11, United States Code or any other
similar applicable Federal or State law, or shall consent to the filing of
any such petition, or shall consent to the appointment of a receiver or
liquidator or trustee or assignee in bankruptcy or insolvency of it or of
all or substantially all of its property, or shall make an assignment for
the benefit of creditors, or shall admit in writing its inability to pay
its debts generally as they become due; or
(f) an event of default, as defined in (i) any indenture or trust
agreement securing or protecting any debt of the Company now or hereafter
outstanding aggregating more than $10,000,000, or (ii) the Bond Indenture,
shall happen and be then continuing and such debt shall be or become due
and payable, prior to the date on which the same would otherwise become
due and payable, provided that, in the case of clause (i), such
acceleration shall not be rescinded or annulled within ten days after
written notice thereof to the Company from the Trustee or to the Company
and the Trustee from the holders of not less than 25% in principal amount
of the Debentures then outstanding hereunder;
then and in each and every such case, so long as such Event of Default shall not
have been remedied, unless the principal of all the Debentures shall have
already become due and payable, either the Trustee or the holders of not less
than 25% in aggregate principal amount of the Debentures then outstanding
hereunder, by notice in writing to the Company (and to the Trustee if given by
the Debentureholders), may declare the principal of all the Debentures then
outstanding to be due and payable immediately, and upon any such declaration the
same shall become and shall be immediately due payable, anything in this
Indenture or in the said Debentures contained to the contrary notwithstanding.
This provision, however, is subject to the condition that if, at any time after
the principal of the Debentures shall have been so declared due and payable, but
before the Debentures shall have become due by their terms and before any
judgment or decree for the payment of the monies due shall have been obtained or
entered as hereinafter provided, the Company shall pay or shall deposit with the
Trustee a sum sufficient to pay all matured installments of interest upon all
the Debentures then outstanding and the principal of any and all Debentures then
outstanding which shall have become due otherwise than by acceleration (with
interest upon such principal and, to the extent that payment of such interest is
enforceable under applicable law, upon overdue installments of interest, at the
rate per annum expressed in the Debentures to the date of such payment or
deposit) and the amount payable to the Trustee under Section 8.06, and any and
all defaults under the Indenture, other than the nonpayment of principal on
Debentures then outstanding which shall not have become due by their terms,
shall have been remedied or provisions shall have been made therefor to the
satisfaction of the Trustee -- then and in every such case the holders of a
majority in aggregate principal amount of the Debentures then outstanding, by
written notice to the Company and to the Trustee, may waive all defaults and
rescind and annul such declaration and its consequences; but no such waiver or
rescission and annulment shall extend to or shall affect any subsequent default,
or shall impair any right consequent thereon.
In case the Trustee shall have proceeded to enforce any right under
this Indenture and such proceedings shall have been discontinued or abandoned
because of such rescission or annulment or for any other reason or shall have
been determined adversely to the Trustee, then and in every such case the
Company and the Trustee shall be restored respectively to their former positions
and rights hereunder, and all rights, remedies and powers of the Company and the
Trustee shall continue as though no such proceedings had been taken, subject to
any applicable order or ruling in a court of competent jurisdiction.
Section 7.02. The Company covenants that (1) in case default shall be
made in the payment of any installment of interest on any of the Debentures, as
and when the same shall become due and payable, and such default shall have
continued for a period of thirty days, or (2) in case default shall be made in
the payment of the principal of any of the Debentures when the same shall have
become due and payable, whether upon maturity of the Debentures or upon
declaration as authorized by this Indenture or otherwise -- then, upon demand of
the Trustee, the Company will pay to the Trustee, for the benefit of the holders
of the Debentures then outstanding, the whole amount that then shall have become
due and payable on all such Debentures for principal or interest, as the case
may be, with interest upon the overdue principal and (to the extent that payment
of such interest is enforceable under applicable law) upon overdue installments
of interest at the rate per annum expressed in the Debentures; and, in addition
thereto, such further amount as shall be sufficient to cover the costs and
expenses of collection, and the amount payable to the Trustee under Section
8.06.
In case the Company shall fail forthwith to pay such amounts upon
such demand, the Trustee, in its own name and as trustee of an express trust,
shall be entitled and empowered to institute any action or proceedings at law or
in equity for the collection of the sums so due and unpaid, and may prosecute
any such action or proceeding to judgment or final decree, and may enforce any
such judgment or final decree against the Company or other obligor upon the
Debentures and collect in the manner provided and to the extent permitted by law
out of the property of the Company or other obligor upon the Debentures wherever
situated the monies adjudged or decreed to be payable.
The Trustee shall be entitled and empowered, either in its own name
or as trustee of an express trust, or as attorney-in-fact for the holders of the
Debentures, or in any one or more of such capacities, to file such proof of
debt, amendment of proof of debt, claim, petition or other document as may be
necessary or advisable in order to have the claims of the Trustee and of the
holders of the Debentures allowed in any equity receivership, insolvency,
bankruptcy, liquidation, readjustment, reorganization or other judicial
proceedings relative to the Company or any other obligor on the Debentures or
their creditors, or affecting their property. The Trustee is hereby irrevocably
appointed (and the successive respective holders of the Debentures by taking and
holding the same shall be conclusively deemed to have so appointed the Trustee)
the true and lawful attorney-in-fact of the respective holders of the
Debentures, with authority to make and file in the respective names of the
holders of the Debentures or on behalf of the holders of the Debentures as a
class, subject to deduction from any such claims of the amounts of any claims
filed by any of the holders of the Debentures themselves, any proof of debt,
amendment of proof of debt, claim, petition or other document in any such
proceedings and to receive payment of any sums becoming distributable on account
thereof, and to execute any such other papers and documents and to do and
perform any and all such acts and things for and on behalf of such holders of
the Debentures as may be necessary or advisable in the opinion of the Trustee in
order to have the respective claims of the Trustee and of the holders of the
Debentures against the Company or its property allowed in any such proceeding,
and to receive payment of or on account of such claims; provided, however, that
nothing contained in this Indenture shall be deemed to give to the Trustee any
right to accept or consent to any plan of reorganization or otherwise by action
of any character in any such proceeding to waive or change in any way any right
of any Debentureholder.
All rights of action and of asserting claims under this Indenture, or
under any of the Debentures, may be enforced by the Trustee without the
possession of any of the Debentures, or the production thereof on any trial or
other proceeding relative thereto, and any such suit or proceeding instituted by
the Trustee shall be brought in its own name as trustee of an express trust, and
any recovery of judgment shall be for the ratable benefit of the holders of the
Debentures, subject to the provisions of this Indenture.
In case of an Event of Default hereunder the Trustee may in its
discretion proceed to protect and enforce the rights vested in it by this
Indenture by such appropriate judicial proceedings as the Trustee shall deem
most effectual to protect and enforce any of such rights, either at law or in
equity or in bankruptcy or otherwise, whether for the specific enforcement of
any covenant or agreement contained in this Indenture or in aid of the exercise
of any power granted in this Indenture, or to enforce any other legal or
equitable right vested in the Trustee by this Indenture or by law.
Section 7.03. Any monies collected by the Trustee pursuant to Section
7.02, shall be applied in the order following, at the date or dates fixed by the
Trustee, upon presentation of the several Debentures, and stamping thereon the
payment, if only partially paid, and upon surrender thereof if fully paid:
First: To the payment of costs and expenses of
collection and of all amounts payable to the Trustee under
Section 8.06;
Second: In case the principal of the outstanding Debentures shall not
have become due and be unpaid, to the payment of interest on the
Debentures, in the order of the maturity of the installments of such
interest, with interest (so far as may be lawful and if such interest has
been collected by the Trustee) upon the overdue installments of interest
at the rate per annum expressed in the Debentures, such payments to be
made ratably to the persons entitled thereto, without discrimination or
preference;
Third: In case the principal of the outstanding
Debentures shall have become due, by declaration as authorized by this
Indenture or otherwise, to the payment of the whole amount then owing and
unpaid upon the Debentures for principal and interest, with interest on
the overdue principal and (so far as may be lawful and if such interest
has been collected by the Trustee) upon overdue installments of interest
at the rate per annum expressed in the Debentures; and in case such monies
shall be insufficient to pay in full the whole amount so due and unpaid
upon the Debentures, then to the payment of such principal and interest,
without preference or priority of principal over interest, or of interest
over principal, or of any installment of interest over any other
installment of interest, or of any Debenture over any other Debenture,
ratably to the aggregate of such principal and accrued and unpaid
interest; and
Fourth: To the payment of the remainder, if any, to
the Company, its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same, or as a court of
competent jurisdiction may direct.
Section 7.04. Except as otherwise expressly provided in this Section,
no holder of any Debenture shall have any right by virtue or by availing of any
provision in this Indenture or otherwise to institute any suit, action or
proceeding in equity or at law upon or under or with respect to this Indenture,
for the appointment of a receiver or trustee, for the execution of any trust or
power hereof, or for any other remedy hereunder, unless such holder previously
shall have given to the Trustee written notice of default and of the continuance
thereof, as hereinbefore provided, and unless also the holders of not less than
25% in aggregate principal amount of the Debentures then outstanding shall have
made written request upon the Trustee either to proceed to exercise the powers
hereinbefore granted or to institute such action, suit or proceeding in its own
name as trustee hereunder and shall have offered or caused the holders of the
Bonds to have offered, to the Trustee such reasonable indemnity as it may
require against the costs, expenses and liabilities to be incurred therein or
thereby, and the Trustee within a reasonable time (which in no event shall be
less than sixty days) after its receipt of such notice, request and offer of
indemnity, shall have failed to proceed to exercise such powers or to institute
any such action, suit or proceeding; it being understood and intended, and being
expressly covenanted by the taker and holder of every Debenture with every other
taker and holder and the Trustee, that no one or more holders of Debentures
shall have any right in any manner whatever by virtue or by availing of any
provision of this Indenture to affect, disturb or prejudice the rights of the
holders of any other of such Debentures, or to obtain or seek to obtain priority
over or preference to any other such holder, or to enforce any right under this
Indenture, except in the manner herein provided and for the equal, ratable and
common benefit of all holders of Debentures. For the protection and enforcement
of the provisions of this Section, each and every Debentureholder and the
Trustee shall be entitled to such relief as can be given either at law or in
equity.
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Nothing herein contained shall, however, affect or impair the right,
which is absolute and unconditional, of any Debentureholder to receive and to
institute suit to enforce the payment of the principal of and interest on his
Debentures at and after the respective due dates (including, subject to the
provisions of Section 7.01, maturity by declaration pursuant to this Indenture
or otherwise) of such principal or interest, or the obligation of the Company,
which is also absolute and unconditional, to pay the principal of and interest
on each of the Debentures to the respective holders thereof at the times and
places in the Debentures expressed.
Section 7.05. No delay or omission of the Trustee or of any holder of
any of the Debentures to exercise any right or power accruing upon any Event of
Default shall impair any such right or power or shall be construed to be a
waiver of any such default or an acquiescence therein; and, subject to the
provisions of Section 7.04, every power and remedy given by this Article or by
law to the Trustee or to the Debentureholders may be exercised from time to
time, and as often as shall be deemed expedient, by the Trustee or by the
Debentureholders.
Section 7.06. See Section 316(a)(1) of the Trust
Indenture Act.
Section 7.07. See Section 315(b) of the Trust
Indenture Act.
Section 7.08. See Section 315(e) of the Trust
Indenture Act.
ARTICLE EIGHT.
Concerning the Trustee.
Section 8.01. See Trust Indenture Act, including Section 315(a), (b),
(c) and (d) thereof.
Section 8.02. Except as otherwise provided in Section
8.01:
(a) The Trustee may rely and shall be protected in acting or
refraining from acting upon any resolution, Officers' Certificate,
certificate of auditors, or any other certificate, statement, instrument,
opinion, report, notice, request, consent, order, appraisal, bond,
debenture or other paper or document, including without limitation
documents delivered to it pursuant to Section 5.10 (which documents the
Trustee may rely on as not being amended or supplemented other than to the
extent any amendments or supplements have been delivered to it) believed
by it to be genuine and to have been signed or presented by the proper
party or parties;
(b) Any request, direction, order or demand of the Company mentioned
herein shall be sufficiently evidenced by an Officers' Certificate (unless
other evidence in respect thereof be herein specifically prescribed); and
any resolution of the Board of Directors may be evidenced to the Trustee
by a copy thereof certified by the Secretary or an Assistant Secretary of
the Company;
(c) The Trustee may consult with counsel of its selection and any
Opinion of Counsel shall be full and complete authorization and protection
in respect of any action taken or suffered or omitted by it hereunder in
good faith and in accordance with such Opinion of Counsel;
(d) The Trustee shall be under no obligation to exercise any of the
trusts or powers vested in it by this Indenture at the request, order or
direction of any of the Debentureholders, pursuant to the provisions of
this Indenture, unless such Debentureholders or the holders of the Bonds
shall have offered to the Trustee reasonable security or indemnity against
the costs, expenses and liabilities which may be incurred therein or
thereby;
(e) The Trustee shall not be personally liable for any action taken
or omitted by it in good faith and believed by it to be authorized or
within the discretion or rights or powers conferred upon it by this
Indenture;
(f) Prior to the occurrence of an Event of Default hereunder and
after the curing or waiving of all Events of Default, the Trustee shall
not be bound to make any investigation into the facts or matters stated in
any resolution, certificate, statement, instrument, opinion, report,
notice, request, consent, order, approval, bond, debenture or other paper
or document unless requested in writing so to do by the holders of not
less than a majority in principal amount of the Debentures then
outstanding; provided, however, that if the payment within a reasonable
time to the Trustee of the costs, expenses or liabilities likely to be
incurred by it in the making of such investigation is, in the opinion of
the Trustee, not reasonably assured to the Trustee by the security
afforded to it by the terms of this Indenture, the Trustee may require
reasonable indemnity against such expense or liability as a condition to
so proceeding. The reasonable expense of every such investigation shall be
paid by the Company or, if paid by the Trustee, shall be repaid by the
Company upon demand;
(g) The Trustee may execute any of the trusts or powers hereunder or
perform any duties hereunder either directly or by or through agents or
attorneys and the Trustee shall not be responsible for any misconduct or
negligence on the part of any agent or attorney appointed by it hereunder;
and
(h) None of the provisions of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any personal
financial liability in the performance of any of its duties hereunder, or
in the exercise of any of its rights or powers, if it shall have
reasonable grounds for believing that repayment of such funds or adequate
indemnity against such risk or liability is not reasonably assured to it.
Section 8.03. The recitals contained herein and in the Debentures
(other than the certificate of authentication on the Debentures) shall be taken
as the statements of the Company, and the Trustee assumes no responsibility for
the correctness of the same. The Trustee makes no representations as to the
validity or sufficiency of this Indenture or of the Debentures. The Trustee
shall not be accountable for the use or application by the Company of any of the
Debentures or of the proceeds of such Debentures, or for the use or application
of any moneys paid over by the Trustee in accordance with any provision of this
Indenture, or for the use or application of any moneys received by any paying
agent.
Section 8.04. The Trustee or any paying agent or any Debenture
registrar, in its individual or any other capacity, may become the owner or
pledgee of Debentures with the same rights it would have if it were not Trustee,
paying agent or Debenture registrar.
Section 8.05. Subject to the provisions of Section 13.04, all moneys
received by the Trustee shall, until used or applied as herein provided, be held
in trust for the purposes for which they were received, but need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any moneys received by it hereunder
except such as it may agree in writing with the Company to pay thereon. So long
as no Event of Default shall have occurred and be continuing, all interest
allowed on any such moneys shall be paid from time to time upon the written
order of the Company, signed by its President, a Vice President, its Treasurer
or an Assistant Treasurer.
Section 8.06. The Company covenants and agrees to pay to the Trustee
from time to time, and the Trustee shall be entitled to, such compensation as
the Company and the Trustee shall from time to time agree to in writing (which
shall not be limited by any provision of law in regard to the compensation of a
trustee of an express trust) for all services rendered by it in the execution of
the trusts hereby created and in the exercise and performance of any of the
powers and duties hereunder of the Trustee, and the Company will pay or
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in accordance with
any of the provisions of this Indenture (including the reasonable compensation
and the expenses and disbursements of its counsel and of all persons not
regularly in its employ) except any such expense, disbursement or advance as may
arise from its negligence or bad faith. The Company also covenants to indemnify
the Trustee for, and to hold it harmless against, any and all loss, damage,
claims, liability or expense incurred without negligence or bad faith on the
part of the Trustee, and arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of defending
itself against any claim of liability in the premises. The obligations of the
Company under this Section to compensate the Trustee, to pay or reimburse the
Trustee for expenses, disbursements and advances and to indemnify the Trustee
shall constitute additional indebtedness hereunder. Such additional indebtedness
shall be secured by a lien prior to that of the Debentures upon all property and
funds held or collected by the Trustee as such, except funds held in trust for
the benefit of the holders of particular Debentures.
Section 8.07. Except as otherwise provided in Section 8.01, whenever
in the administration of the trusts of this Indenture the Trustee shall deem it
necessary or desirable that a matter be proved or established prior to taking or
suffering or omitting any action hereunder, such matter (unless other evidence
in respect thereof be herein specifically prescribed) may be deemed to be
conclusively proved and established by an Officers' Certificate, and such
certificate shall be full warrant to the Trustee for any action taken, suffered
or omitted by it under the provisions of this Indenture upon the faith thereof.
Section 8.08. See Section 310(b) of the Trust Indenture Act. In
addition, excluded from the operation of Section 310(b)(1) of the Trust
Indenture Act are the following: the Indenture dated as of December 1, 1989
between the Company and Citibank, N.A., Trustee, pursuant to which the Company's
7.20% Debentures due 2019 are outstanding, the Indenture dated as of October 1,
1990 between the Company and Citibank, N.A., Trustee,
pursuant to which the Company's 7 1/2% Debentures due 2020 are outstanding, the
Indenture dated as of August 1, 1991 between the Company and The Bank of New
York, Trustee, pursuant to which the Company's 6.60% Debentures due 2021 are
outstanding, and the Indenture dated as of August 1, 1991 between the Company
and The Bank of New York, Trustee, pursuant to which the Company's 6.70%
Debentures due 2021 are outstanding, the Indenture dated as of October 1, 1991
between the Company and The Bank of New York, Trustee, pursuant to which the
Company's 8 3/4% Debentures due 2021 are outstanding, the Indenture dated as of
September 1, 1992 between the Company and The Bank of New York, Trustee,
pursuant to which the Company's 8% Debentures due 2022 are outstanding, the
Indenture dated as of November 1, 1993 between the Company and The Bank of New
York, Trustee, pursuant to which the Company's 7 1/4% Debentures due 2028 are
outstanding, and the Indenture dated as of December 1, 1995 between the Company
and The Bank of New York, Trustee, pursuant to which the Company's 5.60%
Debentures due 2025 are outstanding.
Section 8.09. The Trustee hereunder shall at all times be a
corporation organized and doing business under the laws of the United States or
any State or Territory or of the District of Columbia authorized under such laws
to exercise corporate trust powers, having a combined capital and surplus of at
least $5,000,000, subject to supervision or examination by Federal, State,
Territorial, or District of Columbia authority. If such corporation publishes
reports of condition at least annually, pursuant to law or to the requirements
of the aforesaid supervising or examining authority, then for the purposes of
this Section, the combined capital and surplus of such corporation shall be
deemed to be its combined capital and surplus as set forth in its most recent
report of condition so published. In case at any time the Trustee shall cease to
be eligible in accordance with the provisions of this Section, the Trustee shall
resign immediately in the manner and with the effect specified in Section 8.10.
Section 8.10. (a) The Trustee, or any successor hereafter appointed,
may at any time resign and be discharged from the trust hereby created by
mailing notice thereof to the Company and to the Debentureholders whose names
and addresses appear in the information preserved at the time by the Trustee in
accordance with the provisions of Section 6.02(a) hereof. Upon receiving such
notice of resignation, the Company shall promptly appoint a successor trustee by
written instrument, in duplicate, executed by order of the Board of Directors of
the Company, one copy of which instrument shall be delivered to the resigning
Trustee and one copy to the successor trustee. If no successor trustee shall
have been so appointed and have accepted appointment within thirty days after
the mailing of such notice of resignation, the resigning Trustee may petition
any court of competent jurisdiction for the appointment of a successor trustee,
or any Debentureholder who has been a bona fide holder of a Debenture or
Debentures for at least six months may, subject to the provisions of Section
7.08, on behalf of himself and all others similarly situated, petition any such
court for the appointment of a successor trustee. Such court may thereupon after
such notice, if any, as it may deem proper and prescribe, appoint a successor
trustee.
(b) In case at any time any of the following shall
occur--
(1) the Trustee shall fail to comply with the provisions of
Section 310(b) of the Trust Indenture Act after written request therefor
by the Company or by any Debentureholder who has been a bona fide holder
of a Debenture or Debentures for at least six months, or
(2) the Trustee shall cease to be eligible in accordance with
the provisions of Section 8.09 and shall fail to resign after written
request therefor by the Company or by any such Debentureholder, or
(3) the Trustee shall become incapable of acting, or shall be
adjudged a bankrupt or insolvent, or a receiver of the Trustee or of its
property shall be appointed, or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, the Company may remove the Trustee and appoint a
successor trustee by written instrument, in duplicate, executed by order of the
Board of Directors of the Company, one copy of which instrument shall be
delivered to the Trustee so removed and one copy to the successor trustee, or,
subject to the provisions of Section 7.08, any Debentureholder who has been a
bona fide holder of a Debenture or Debentures for at least six months may, on
behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the removal of the Trustee and the appointment of a
successor trustee. Such court may thereupon after such notice, if any, as it may
deem proper and prescribe, remove the Trustee and appoint a successor trustee.
(c) The holders of a majority in aggregate principal amount of the
Debentures at the time outstanding may at any time remove the Trustee and
appoint a successor trustee.
(d) Any resignation or removal of the Trustee and any appointment of
a successor trustee pursuant to any of the provisions of this Section shall
become effective upon acceptance of appointment by the successor trustee as
provided in Section 8.11.
Section 8.11. Any successor trustee appointed as provided in Section
8.10 shall execute, acknowledge and deliver to the Company and to its
predecessor trustee an instrument accepting such appointment hereunder, and
thereupon the resignation or removal of the predecessor trustee shall become
effective and such successor trustee, without any further act, deed or
conveyance, shall become fully vested with all the rights, powers, duties and
obligations of its predecessor hereunder, with like effect as if originally
named as trustee herein. The predecessor trustee shall, nevertheless, at the
written request of the successor trustee, and upon payment of any amount then
due it pursuant to Section 8.06, pay over to the successor trustee all moneys at
the time held by it hereunder; and the Company and the predecessor trustee shall
execute and deliver such instruments and do such other things as may reasonably
be required for more fully and certainly vesting and confirming in the successor
trustee all such rights, powers, duties and obligations. Any Trustee ceasing to
act shall nevertheless retain a lien on all funds held or collected by such
Trustee to secure any amount due it pursuant to Section 8.06.
No successor trustee shall accept appointment as provided in this
Section unless at the time of such acceptance such successor trustee shall be
qualified under the provisions of Section 8.08 and eligible under the provisions
of Section 8.09.
Upon acceptance of appointment by a successor trustee as provided in
this Section, the Company shall mail notice of the succession of such trustee
hereunder to all Debentureholders at their last addresses appearing upon the
register. If the Company fails to mail such notice in the prescribed manner
within 10 days after the acceptance of appointment by the successor trustee, the
successor trustee shall cause such notice to be mailed at the expense of the
Company.
Section 8.12. Any corporation into which the Trustee may be merged or
with which it may be consolidated, or any corporation resulting from any merger
or consolidation to which the Trustee shall be a party, or any corporation
succeeding to the business of the Trustee, shall be the successor of the Trustee
hereunder, provided such corporation shall be qualified under the provisions of
Section 8.08 and eligible under the provisions of Section 8.09, without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, anything herein to the contrary notwithstanding.
In case at the time such successor to the Trustee shall succeed to
the trusts created by this Indenture any of the Debentures shall have been
authenticated but not delivered, any such successor to the Trustee may adopt the
certificate of authentication of any predecessor trustee, and deliver such
Debentures so authenticated; and in case at that time any of the Debentures
shall not have been authenticated, any successor to the Trustee may authenticate
such Debentures either in the name of any predecessor hereunder or in the name
of the successor trustee; and in all such cases such certificates shall have the
full force which it is anywhere in the Debentures or in this Indenture provided
that the certificate of the Trustee shall have; provided, however, that the
right to adopt the certificate of authentication of any predecessor trustee or
authenticate Debentures in the name of any predecessor trustee shall apply only
to its successor or successors by merger, conversion or consolidation.
Section 8.13. See Section 311 of the Trust Indenture
Act.
ARTICLE NINE.
Concerning the Debentureholders.
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Section 9.01. Whenever in this Indenture it is provided that the
holders of a specified percentage in aggregate principal amount of the
Debentures may take any action (including the making of any demand or request,
the giving of any notice, consent or waiver or the taking of any other action),
the fact that at the time of taking any such action the holders of such
specified percentage have joined therein may be evidenced (a) by any instrument
or any number of instruments of similar tenor executed by Debentureholders in
person or by attorney or proxy appointed in writing, or (b) by the record of the
holders of Debentures voting in favor thereof at any meeting of Debentureholders
duly called and held in accordance with the provisions of Article Ten, or (c) by
a combination of such instrument or instruments and any such record of such a
meeting of Debentureholders.
Section 9.02. Subject to the provisions of Section 8.01, proof of the
execution of any instrument by a Debentureholder or his attorney or proxy and
proof of the holding by any person of any of the Debentures shall be sufficient
for any purpose of this Indenture if made in accordance with such reasonable
rules and regulations as may be prescribed by the Trustee or in such manner as
shall be satisfactory to the Trustee. The ownership of Debentures shall be
proved by the register of such Debentures or by a certificate of the Debenture
registrar.
The record of any Debentureholders' meeting shall be proved in the
manner provided in Section 10.06.
Section 9.03. The Company, the Trustee, any paying agent and any
Debenture registrar may deem and treat the person in whose name any Debenture
shall be registered upon the register as the absolute owner of such Debenture
(whether or not such Debenture shall be overdue and notwithstanding any notice
of ownership or writing thereon), for the purpose of receiving payment of or on
account of the principal of and interest and premium, if any, on such Debenture
and for all other purposes, and neither the Company nor the Trustee nor any
paying agent nor any Debenture registrar shall be affected by any notice to the
contrary. All such payments so made to any such registered holder, for the time
being or upon his order, shall be valid, and, to the extent of the sum or sums
so paid, effectual to satisfy and discharge the liability for moneys payable
upon any such Debenture.
Section 9.04. In determining whether the holders of the requisite
aggregate principal amount of Debentures have concurred in any direction,
consent or waiver under this Indenture, Debentures which are owned by the
Company or any other obligor on the Debentures or by any person directly or
indirectly controlling or controlled by or under direct or indirect common
control with the Company or any other obligor on the Debentures shall be
disregarded and deemed not to be outstanding for the purpose of any such
determination, except that for the purpose of determining whether the Trustee
shall be protected in relying on any such direction, consent or waiver only
Debentures which the Trustee knows are so owned shall be so disregarded.
Debentures so owned which have been pledged in good faith may be regarded as
outstanding for the purposes of this Section, if the pledgee shall establish to
the satisfaction of the Trustee the pledgee's right to vote such Debentures and
that the pledgee is not a person directly or indirectly controlling or
controlled by or under direct or indirect common control with the Company or any
such other obligor. In case of a dispute as to such right, any decision by the
Trustee taken upon the advice of counsel shall be full protection to the
Trustee.
Section 9.05. Any demand, request, waiver, consent or vote of the
holder of any Debenture shall be conclusive and binding upon such holder and
upon all future holders and owners of such Debenture, and of any Debenture
issued in exchange therefor or in place thereof, irrespective of whether or not
any notation in regard thereto is made upon such Debenture. Any action taken by
the holders of the majority or percentage in aggregate principal amount of the
Debentures specified in this Indenture in connection with such action shall be
conclusively binding upon the Company, the Trustee and the holders of all the
Debentures.
ARTICLE TEN.
Debentureholders' Meetings.
Section 10.01. A meeting of Debentureholders may be called at any
time and from time to time pursuant to the provisions of this Article Ten for
any of the following purposes:
(1) to give any notice to the Company or to the Trustee, or to give
any directions to the Trustee, or to consent to the waiving of any default
hereunder and its consequences, or to take any other action authorized to
be taken by Debentureholders pursuant to any of the provisions of Article
Seven;
(2) to remove the Trustee and appoint a successor
trustee pursuant to the provisions of Article Eight;
(3) to consent to the execution of an indenture or
indentures supplemental hereto pursuant to the provisions of
Section 11.02; or
(4) to take any other action authorized to be taken by or on behalf
of the holders of any specified aggregate principal amount of the
Debentures under any other provision of this Indenture, or authorized or
permitted by law.
Section 10.02. The Trustee may at any time call a meeting of
Debentureholders to take any action specified in Section 10.01, to be held at
such time and at such place in the Borough of Manhattan, City and State of New
York, as the Trustee shall determine. Notice of every meeting of the
Debentureholders, setting forth the time and the place of such meeting and in
general terms the action proposed to be taken at such meeting, shall be mailed
not less than fifteen days prior to the date fixed for the meeting to the
Debentureholders whose names and addresses appear in the information preserved
at the time by the Trustee in accordance with the provisions of Section 6.02(a)
hereof or obtained in accordance with the provisions of Section 6.01 hereof.
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Any meeting of Debentureholders shall be valid without notice if the
holders of all Debentures then outstanding are present in person or by proxy or
if notice is waived before or after the meeting by the holders of all Debentures
outstanding, and if the Company and the Trustee are either present by duly
authorized representatives or have, before or after the meeting, waived notice.
Section 10.03. In case at any time the Company, pursuant to a
resolution of its Board of Directors or the holders of at least 20% in aggregate
principal amount of the Debentures then outstanding, shall request the Trustee
to call a meeting of Debentureholders to take any action specified in Section
10.01, by written request setting forth in reasonable detail the action proposed
to be taken at the meeting and the time and place in the Borough of Manhattan,
City and State of New York, for such meeting, the Trustee shall mail notice of
such meeting as provided in Section 10.02 within twenty days after receipt of
such request.
Section 10.04. To be entitled to vote at any meeting of
Debentureholders a person shall (a) be a holder of one or more Debentures or (b)
be a person appointed by an instrument in writing as proxy for the holder or
holders of Debentures by a holder of one or more Debentures. The only persons
who shall be entitled to be present or to speak at any meeting of
Debentureholders shall be the persons entitled to vote at such meeting and their
counsel and any representatives of the Trustee and its counsel and any
representatives of the Company and its counsel.
Section 10.05. Notwithstanding any other provision of this Indenture,
the Trustee may make such reasonable regulations as it may deem advisable for
any meeting of Debentureholders, in regard to proof of the holding of Debentures
and of the appointment of proxies, and in regard to the appointment and duties
of inspectors of votes, the submission and examination of proxies, certificates
and other evidence of the right to vote, and such other matters concerning the
conduct of the meeting as it shall think fit. Except as otherwise permitted or
required by any such regulations, the holding of Debentures shall be proved in
the manner specified in Section 9.02 and the appointment of any proxy shall be
proved in the manner specified in Section 9.02. Pursuant to the foregoing
authority the Trustee may fix, in advance, a date as a record date for
determining the Debentureholders entitled to notice of, or to vote at, any
meeting, such date to be not less than fifteen nor more than forty-five days
prior to the date fixed for such meeting.
The Trustee shall, by an instrument in writing, appoint a temporary
chairman of the meeting, unless the meeting shall have been called by request of
the Company or Debentureholders as provided in Section 10.03, in which case the
Company or such Debentureholders, as the case may be, shall in like manner
appoint a temporary chairman. A permanent chairman and a permanent secretary of
the meeting shall be elected by vote of the holders of a majority in principal
amount of the Debentures represented at the meeting and entitled to vote.
Subject to the provisions of Section 9.04, at any meeting each
Debentureholder or proxy shall be entitled to one vote for each $1,000 principal
amount of Debentures, provided, however, that no vote shall be cast or counted
at any meeting in respect of any Debentures challenged as not outstanding and
ruled by the chairman of the meeting to be not outstanding. The chairman of the
meeting shall have no right to vote other than by virtue of Debentures held by
him or instruments in writing as aforesaid duly designating him as the person to
vote on behalf of other Debentureholders. Any meeting of Debentureholders duly
called pursuant to the provisions of Section 10.02 or 10.03 may be adjourned
from time to time, and the meeting may be held as so adjourned without further
notice.
Section 10.06. The vote upon any resolution submitted to any meeting
of Debentureholders shall be by written ballots on which shall be subscribed the
signatures of the holders of Debentures or of their representatives by proxy.
The permanent chairman of the meeting shall appoint two inspectors of votes, who
shall count all votes cast at the meeting for or against any resolution and who
shall make and file with the secretary of the meeting their verified written
reports in duplicate of all votes cast at the meeting. A record in duplicate of
the proceedings of each meeting of Debentureholders shall be prepared by the
secretary of the meeting and there shall be attached to said record the original
reports of the inspectors of votes on any vote by ballot taken thereat and
affidavits by one or more person having knowledge of the facts, setting forth a
copy of the notice of the meeting and showing that said notice was mailed as
provided in Section 10.02. The record shall be signed and verified by the
affidavits of the permanent chairman and secretary of the meeting and one of the
duplicates shall be delivered to the Company and the other to the Trustee to be
preserved by the Trustee, the latter to have attached thereto the ballots voted
at the meeting.
Any record so signed and verified shall be conclusive evidence of the
matters therein stated.
Section 10.07. Nothing in this Article Ten contained shall be deemed
or construed to authorize or permit, by reason of any call of a meeting of
Debentureholders or any rights expressly or impliedly conferred hereunder to
make such call, any hindrance or delay in the exercise of any right or rights
conferred upon or reserved to the Trustee or to the Debentureholders under any
of the provisions of this Indenture or of the Debentures.
ARTICLE ELEVEN.
Supplemental Indentures.
Section 11.01. The Company, when authorized by a resolution of its
Board of Directors, and the Trustee, subject to the conditions and restrictions
of this Indenture contained, may from time to time and at any time enter into an
indenture or indentures supplemental hereto (which shall conform to the
provisions of the Trust Indenture Act of 1939 as then in effect) for one or more
of the following purposes:
(a) to evidence the succession of another corporation to the Company,
or successive successions, and the assumption by the successor corporation
of the covenants, agreements and obligations of the Company pursuant to
Article Twelve;
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(b) to add to the covenants and agreements of the Company in this
Indenture contained such further covenants and agreements thereafter to be
observed, and to surrender any right or power herein reserved to or
conferred upon the Company; and
(c) to cure any ambiguity or to correct or supplement any defective
or inconsistent provisions contained in this Indenture or in any
supplemental indenture.
The Trustee is hereby authorized to join with the Company in the
execution of any supplemental indenture authorized or permitted by the terms of
this Indenture and to make any further appropriate agreements and stipulations
which may be therein contained, but the Trustee shall not be obligated to enter
into any such supplemental indenture which affects the Trustee's own rights,
duties or immunities under this Indenture or otherwise.
Any supplemental indenture authorized by the provisions of this
Section may be executed by the Company and the Trustee without the consent of
the holders of any of the Debentures at the time outstanding, notwithstanding
any of the provisions of Section 11.02.
Section 11.02. With the consent (evidenced as provided in Section
9.01) of the holders (or persons entitled to vote, or to give consents
respecting the same) of more than 50% in aggregate principal amount of the
Debentures at the time outstanding, the Company, when authorized by a resolution
of its Board of Directors, and the Trustee may from time to time and at any time
enter into an indenture or indentures supplemental hereto (which shall conform
to the provisions of the Trust Indenture Act of 1939 as then in effect) for the
purpose of adding any provisions to or changing in any manner or eliminating any
of the provisions of this Indenture or of any supplemental indenture or of
modifying in any manner the rights and obligations of the holders of the
Debentures and of the Company; provided, however, that no such supplemental
indenture shall (i) extend the fixed maturity of any Debenture, or reduce the
principal amount thereof, or reduce the rate or extend the time of payment of
interest thereon, without the consent of the holder of each Debenture so
affected, or (ii) reduce the aforesaid percentage of Debentures, the holders of
which are required to consent to any such supplemental indenture, without the
consent of the holders of all Debentures then outstanding.
Upon the request of the Company, accompanied by a copy of a
resolution of its Board of Directors certified by the secretary or an assistant
secretary of the Company authorizing the execution of any such supplemental
indenture, and upon the filing with the Trustee of evidence of the consent of
Debentureholders as aforesaid, the Trustee shall join with the Company in the
execution of such supplemental indenture unless such supplemental indenture
affects the Trustee's own rights, duties or immunities under this Indenture or
otherwise, in which case the Trustee may in its discretion but shall not be
obligated to enter into such supplemental indenture.
It shall not be necessary for the consent of the Debentureholders
under this Section to approve the particular form of any proposed supplemental
indenture, but it shall be sufficient if such consent shall approve the
substance thereof.
#30160546.5
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<PAGE>
Promptly after the execution by the Company and the Trustee of any
supplemental indenture pursuant to the provisions of this Section, the Company
shall mail a notice, setting forth in general terms the substance of such
supplemental indenture, to all Debentureholders at their last addresses
appearing upon the register. Any failure of the Company to mail such notice, or
any defect therein, shall not, however, in any way impair or affect the validity
of any such supplemental indenture.
Section 11.03. Upon the execution of any supplemental indenture
pursuant to the provisions of this Article, this Indenture shall be and be
deemed to be modified and amended in accordance therewith and the respective
rights, limitation of rights, obligations, duties and immunities under this
Indenture of the Trustee, the Company and the holders of Debentures shall
thereafter be determined, exercised and enforced hereunder subject in all
respects to such modifications and amendments, and all the terms and conditions
of any such supplemental indenture shall be and be deemed to be part of the
terms and conditions of this Indenture for any and all purposes.
Section 11.04. Debentures authenticated and delivered after the
execution of any supplemental indenture pursuant to the provisions of this
Article, or after any action taken at a Debentureholders' meeting pursuant to
Article Ten, may bear a notation in form approved by the Trustee as to any
matter provided for in such supplemental indenture or as to any action taken at
any such meeting; and, in such case, suitable notation may be made upon
outstanding Debentures after proper presentation and demand. If the Company or
the Trustee shall so determine, new Debentures so modified as to conform, in the
opinion of the Trustee and the Board of Directors of the Company, to any
modification of this Indenture contained in any such supplemental indenture, or
to any action taken at any such meeting, may be prepared by the Company,
authenticated by the Trustee and delivered in exchange for the Debentures then
outstanding, upon demand of, and without cost to, the holders thereof, upon
surrender of such Debentures.
Section 11.05. The Trustee, subject to the provisions of Section
8.01, may receive an Opinion of Counsel as conclusive evidence that any
supplemental indenture executed pursuant to this Article Eleven is authorized or
permitted by the terms of this Indenture and that it is not inconsistent
therewith.
ARTICLE TWELVE.
Consolidation, Merger and Sale.
Section 12.01. Nothing contained in this Indenture or in any of the
Debentures shall prevent any consolidation or merger of the Company with or into
any other corporation or corporations (whether or not affiliated with the
Company), or successive consolidations or mergers in which the Company or its
successor or successors shall be a party or parties, or shall prevent any sale
or conveyance (or successive sales or conveyances) of the property and assets of
the Company (or of its successor or successors) as an entirety or substantially
as an entirety, to any other corporation (whether or not affiliated with the
Company) authorized to acquire the same; provided, however, and the Company
hereby covenants and agrees that, upon any such consolidation, merger, sale or
conveyance, the due and punctual payment of the principal of and interest on all
the Debentures, according to their tenor, and the due and punctual performance
and observance of all the terms, covenants and conditions of this Indenture to
be kept or performed by the Company, shall be expressly assumed, by indenture
supplemental hereto, satisfactory in form to the Trustee, executed and delivered
to the Trustee by the corporation formed by such consolidation, or into which
the Company shall have been merged, or by the corporation which shall have
acquired such property and assets. In the event of any such sale or conveyance
the predecessor Company may be dissolved, wound up and liquidated at any time
thereafter.
Section 12.02. In case of any such consolidation, merger, sale or
conveyance and upon the execution by the successor corporation of an indenture
supplemental hereto, as provided in Section 12.01, such successor corporation
shall succeed to and be substituted for the Company, with the same effect as if
it had been named herein as the party of the first part. Such successor
corporation thereupon may issue either in its own name or in the name of the
Company, with such suitable reference, if any, to such consolidation, merger,
sale or conveyance as may be required by the Trustee, any or all of the
Debentures issuable hereunder which theretofore shall not have been issued by
the Company and delivered to the Trustee; and, upon the written order of such
successor corporation, instead of the Company, and subject to all the terms,
conditions and limitations in this Indenture prescribed, the Trustee shall
authenticate and shall deliver any Debentures which previously shall have been
executed by the Company and any Debentures which such successor corporation
thereafter shall cause to be executed in accordance with the provisions of this
Indenture and delivered to the Trustee for that purpose. All the Debentures so
issued shall in all respects have the same legal rank and benefit under this
Indenture as the Debentures theretofore or thereafter issued in accordance with
the terms of this Indenture as though all of such Debentures had been issued at
the date of the execution hereof.
In case of any such consolidation, merger, sale or conveyance such
changes in phraseology and form (but not in substance) may be made in the
Debentures thereafter to be issued as may be appropriate).
Nothing contained in this Indenture or in any of the Debentures shall
prevent the Company from consolidating with, or merging into itself, or
acquiring by purchase or otherwise all or any part of the property of, any other
corporation (whether or not affiliated with the Company).
Section 12.03. The Trustee, subject to the provisions of Section
8.01, may receive an Opinion of Counsel as conclusive evidence that any such
consolidation, merger, sale or conveyance, and any such assumption, complies
with the provisions of this Article.
#30160546.5
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<PAGE>
ARTICLE THIRTEEN.
Satisfaction and Discharge of Indenture; Deposited Moneys.
Section 13.01. If:
(1) Either (i) the Company shall deliver to the Trustee for
cancellation all Debentures (other than Debentures deemed not to be outstanding
under clause (c) of the definition thereof) not theretofore canceled or
delivered to the Trustee for cancellation, or (ii) the Company shall have
deposited in trust with the Trustee cash sufficient to pay at maturity or upon
redemption (after notice of redemption has been duly given or provided for) all
of the Debentures (other than Debentures deemed not to be outstanding under
clause (c) of the definition thereof) not theretofore canceled or delivered to
the Trustee for cancellation, including principal, premium, if any, and interest
due or to become due to such date of maturity or redemption date, as the case
may be, or (iii) the Company shall have deposited in trust with the Trustee
direct obligations of the United States or obligations the principal of and
interest on which are fully guaranteed by the United States, and which are not
subject to prepayment, redemption or call prior to their stated maturity, in
such amounts and maturing at such times that the proceeds of said obligations,
together with the income that can be predetermined will accrue thereon by
reference to the terms thereof (without consideration of any reinvestment
thereof), to be received upon their respective maturities and interest payment
dates will provide funds sufficient to pay the principal, premium, if any, and
interest due or to become due to the date of maturity or to the redemption date,
as the case may be, with respect to all of the Debentures (other than Debentures
deemed not to be outstanding under clause (c) of the definition thereof) not
theretofore canceled or delivered to the Trustee for cancellation, provided that
the Trustee shall have been irrevocably instructed to apply the proceeds of said
obligations to the payment of such principal, premium and interest with respect
to such Debentures, or (iv) the Company shall have deposited in trust with the
Trustee any combination of cash or obligations referred to in (ii) and (iii),
(2) the Company shall pay or cause to be paid all
other sums payable with respect to the Debentures, and
(3) the Company shall deliver to the Trustee and the Bond Trustee an
Officers' Certificate and an Opinion of Counsel, each stating that all
conditions precedent herein provided for relating to the satisfaction and
discharge of the entire indebtedness on the Debentures have been complied with,
then
(a) this Indenture shall cease to be of further effect (except as
otherwise provided herein) and on or after such maturity date or
redemption date, as the case may be, the Trustee, on demand of, and at the
expense of, the Company, shall execute proper instruments acknowledging
satisfaction and discharge of this Indenture; and
(b) all obligations of the Company in respect of the Debentures shall
cease and be discharged and the holders of such Debentures shall
thereafter be restricted exclusively to such funds for any and all claims
of whatever nature on their part under this Indenture or with respect to
such Debentures; provided, however, that, in no event shall the Company be
discharged from (i) any payment obligation in respect of Debentures deemed
not to be outstanding under clause (c) of the definition thereof if such
obligations continue to be valid obligations under applicable law, (ii)
any obligations under Sections 2.05 and 2.06 (except that Debentures
issued upon registration of transfer or exchange or in lieu of mutilated,
lost, destroyed or stolen Debentures shall not be deemed to be such
obligations) or (iii) any obligations under Sections 6.01, 8.06, 13.02,
13.03 and 13.04; further provided, however, that the rights and privileges
of the Trustee under this Indenture shall survive any such discharge.
The Company hereby agrees to reimburse the Trustee for any costs or
expenses thereafter reasonably and properly incurred by the Trustee in
connection with this Indenture or the Debentures, and without bad faith or
negligence.
Section 13.02. All moneys deposited with the Trustee pursuant to
Section 13.01 shall be held in trust and applied by it to the payment, to the
holders of the particular Debentures for the payment or redemption of which such
moneys have been deposited with the Trustee, of all sums due and to become due
thereon for principal, premium, if any, and interest.
Section 13.03. In connection with the satisfaction and discharge of
this Indenture all moneys then held by any paying agent under the provisions of
this Indenture shall, upon demand of the Company or Trustee, be paid to the
Trustee and thereupon such paying agent shall be released from all further
liability with respect to such moneys.
Section 13.04. In case the holder of any Debenture entitled to
payment hereunder at any time outstanding hereunder shall not, within two years
after the maturity date of such Debenture or the date fixed for the redemption
of any such Debenture, claim the amount on deposit with the Trustee or other
depositary for the payment of such Debenture, the Trustee or other depositary
shall pay over to or upon the written order of the Company the amount so
deposited, upon receipt of a request signed by the President or a Vice President
of the Company, and thereupon the Trustee or other depositary shall be released
from any and all further liability with respect to the payment of such Debenture
and the holder of said Debenture shall be entitled (subject to any applicable
statute of limitations) to look only to the Company as an unsecured creditor for
the payment thereof.
#30160546.5
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<PAGE>
ARTICLE FOURTEEN.
Immunity of Incorporators, Stockholders, Officers,
Trustees and Directors.
Section 14.01. No recourse under or upon any obligation, covenant or
agreement of this Indenture, or of any Debenture, or for any claim based thereon
or otherwise in respect thereof, shall be had against any incorporator,
stockholder, officer, trustee or director, as such, past, present or future, of
the Company or of any predecessor or successor corporation, either directly
through the Company or any such predecessor or successor corporation, whether by
virtue of any constitution, statute or rule of law or equity, or by the
enforcement of any assessment or penalty or otherwise; it being expressly
understood that this Indenture and the obligations issued hereunder are solely
corporate obligations, and that no such personal liability whatever shall attach
to, or is or shall be incurred by, the incorporators, stockholders, officers,
trustees or directors of the Company, as such, or of any predecessor or
successor corporation, or any of them, because of the creation of the
indebtedness hereby authorized, or under or by reason of the obligations,
covenants or agreements contained in this Indenture or in any of the Debentures
or implied therefrom; and that any and all such liability is hereby expressly
waived and released by every holder of Debentures as a condition of, and as a
consideration for, the execution of this Indenture and the issue of such
Debentures.
ARTICLE FIFTEEN.
Miscellaneous Provisions.
The provisions of the Trust Indenture Act which impose duties on any
person (including provisions automatically deemed included in an indenture by
the Trust Indenture Act unless the indenture provides that such provisions are
excluded which provision is hereby expressly excluded other than Section
316(a)(2) of the Trust Indenture Act) are a part of and govern this Indenture.
If any provision hereof limits, qualifies or conflicts with any of the duties
imposed by operation of the Trust Indenture Act, the Trust Indenture Act shall
control.
Section 15.01. All the covenants, stipulations, promises and
agreements in this Indenture contained by or in behalf of the Company shall bind
its successors and assigns, whether so expressed or not.
Section 15.02. Any act or proceeding by any provision of this
Indenture authorized or required to be done or performed by any board, committee
or officer of the Company shall and may be done and performed with like force
and effect by the like board, committee or officer of any corporation that shall
at the time be the lawful successor of the Company.
#30160546.5
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<PAGE>
Section 15.03. The Company by instruments in writing executed by
authority of its Board of Directors and delivered to the Trustee may surrender
any of the powers reserved to the Company and thereupon such power so
surrendered shall terminate both as to the Company and as to any successor
corporation.
Section 15.04. Any notice or demand which by any provision of this
Indenture is required or permitted to be given or served by the Trustee or by
the holders of Debentures to or on the Company may be given or served by being
deposited postage prepaid in a post-office letterbox addressed (until another
address is filed in writing by the Company with the Trustee), as follows:
Elizabethtown Water Company, 600 South Avenue, Westfield NJ 07090. Any notice,
election, request or demand by any Debentureholder to or upon the Trustee shall
be deemed to have been sufficiently given or made, for all purposes, if given or
made at the principal corporate trust office of the Trustee in the Borough of
Manhattan, City and State of New York.
Section 15.05. This Indenture and each Debenture shall be deemed to
be a contract made under the laws of the State of New York, and for all purposes
shall be construed in accordance with the laws of said state.
Section 15.06. Upon any application or demand by the Company to the
Trustee to take any action under any of the provisions of this Indenture, the
Company shall furnish to the Trustee an Officers' Certificate stating that all
conditions precedent, if any, provided for in this Indenture relating to the
proposed action have been complied with and an Opinion of Counsel stating that
in the opinion of such counsel all such conditions precedent have been complied
with.
Each certificate or opinion provided for in this Indenture and
delivered to the Trustee with respect to compliance with a condition or covenant
provided for in this Indenture shall include (1) a statement that the person
making such certificate or opinion has read such covenant or condition; (2) a
brief statement as to the nature and scope of the examination or investigation
upon which the statements or opinions contained in such certificate or opinion
are based; (3) a statement that, in the opinion of such person, he has made such
examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
complied with; and (4) a statement as to whether or not, in the opinion of such
person, such condition or covenant has been complied with.
Any certificate, statement or opinion of an officer of the Company
may be based, in so far as it relates to legal matters, upon a certificate or
opinion of or representations by counsel, unless such officer knows that the
certificate or opinion or representations with respect to the matters upon which
his certificate, statement or opinion may be based as aforesaid are erroneous,
or in the exercise of reasonable care should know that the same are erroneous.
Any certificate, statement or opinion of counsel may be based (in so far as it
relates to factual matters information with respect to which is in the
possession of the Company) upon the certificate, statement or opinion of or
representations by an officer or officers of the Company, unless such counsel
knows that the certificate, statement or opinion or representations with respect
to the matters upon which his certificate, statement or opinion may be based as
aforesaid are erroneous, or in the exercise of reasonable care should know that
the same are erroneous.
Any certificate, statement or opinion of an officer of the Company or
of counsel may be based, in so far as it relates to accounting matters, upon a
certificate or opinion of or representations by an accountant or firm of
accountants in the employ of the Company, unless such officer or counsel, as the
case may be, knows that the certificate or opinion or representations with
respect to the accounting matters upon which his certificate, statement or
opinion may be based as aforesaid are erroneous, or in the exercise of
reasonable care should know that the same are erroneous.
Section 15.07. In any case where the date of maturity of interest on
or principal of the Debentures or the date fixed for redemption of any Debenture
shall be a Sunday or legal holiday or a date on which banking institutions in
the city of payment are authorized by law to close, then payment of interest,
principal or premium may be made on the next succeeding day not a Sunday or a
legal holiday or a date on which banking institutions in the city of payment are
authorized by law to close with the same force and effect as if made on the
nominal date and no interest shall accrue for the period after such nominal
date.
Section 15.08. If and to the extent that any provision of this
Indenture limits, qualifies or conflicts with another provision included in this
Indenture which is required to be included in this Indenture by any of Sections
310 to 317, inclusive, of the Trust Indenture Act of 1939, such required
provision shall control.
Section 15.09. In case any one or more of the provisions contained in
this Indenture or in the Debentures shall for any reason be held to be invalid,
illegal or unenforceable in any respect, such invalidity, illegality or
unenforceability shall not affect any other provisions of this Indenture or of
such Debentures, but this Indenture and such Debentures shall be construed as if
such invalid or illegal or unenforceable provision had never been contained
herein or therein.
Section 15.10. This Indenture may be executed in any number of
counterparts, each of which shall be an original; but such counterparts shall
together constitute but one and the same instrument.
The Bank of New York, the party of the second part, hereby accepts
the trusts in this Indenture declared and provided, upon the terms and
conditions hereinabove set forth.
#30160546.5
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IN WITNESS WHEREOF, Elizabethtown Water Company, the party of the
first part, has caused this Indenture to be signed in its corporate name and
acknowledged by its President, or one of its Vice Presidents, and its corporate
seal to be affixed hereunto, duly attested by its Secretary or an Assistant
Secretary; and The Bank of New York, the party of the second part, has caused
this Indenture to be signed and acknowledged by one of its Responsible Officers,
all as of the day and year first above written.
ELIZABETHTOWN WATER COMPANY,
(Seal)
By
Vice President
Attest:
Secretary
THE BANK OF NEW YORK,
as Trustee
By
Title
#30160546.5
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<PAGE>
STATE OF NEW JERSEY )
) ss.:
COUNTY OF UNION )
On this fourth day of June, 1997, before me, the subscriber, a Notary
Public within and for the County of Union, in the State of New Jersey,
personally appeared Gail P. Brady, to me personally known, who, being by me duly
sworn, did say that she resides at 49 Howell Drive, Verona, New Jersey and is a
Vice President of Elizabethtown Water Company, one of the corporations described
in and which executed the foregoing instrument; that she knows the corporate
seal of the said corporation and that the seal affixed to said instrument is the
corporate seal of said corporation; and that said instrument was signed and
sealed in behalf of said corporation by authority of its Board of Directors and
that she subscribed her name thereto by like authority; and said Walter M.
Braswell acknowledged said instrument to be the free act and deed of said
corporation.
My commission as Notary Public as aforesaid expires
-------------------------------
#30160546.5
<PAGE>
STATE OF NEW YORK )
) ss.:
COUNTY OF NEW YORK)
On this fourth day of June, 1997, before me, the subscriber, a Notary
Public within and for the County of New York, in the State of New York,
personally appeared
, to me personally known, who, being
by me duly sworn, did say that he resides
at and is an Assistant Vice President of The Bank of New York, one of the
corporations described in and which executed the foregoing instrument; that he
knows the corporate seal of the said corporation and that the seal affixed to
said instrument is the corporate seal of said corporation; and that said
instrument was signed and sealed in behalf of said corporation by authority of
its Board of Directors and that he subscribed his name thereto by like
authority; and said acknowledged said instrument to be the free act and deed of
said corporation.
My commission as Notary Public as aforesaid expires
-------------------------------
#30160546.5
<PAGE>
EXECUTION COPY
-----------------------------------------------------------
ELIZABETHTOWN WATER COMPANY
TO
THE BANK OF NEW YORK, TRUSTEE
-----------
INDENTURE
Dated as of June 1, 1997
--------------
1997 Series A Variable Rate Debentures due 2027
-----------------------------------------------------------
#30160546.5
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE ONE.
Definitions
Section 1.01.............................................. 6
ARTICLE TWO.
Description, Execution and Exchange of Debentures
Section 2.01.............................................. 8
Section 2.02.............................................. 8
Section 2.03.............................................. 9
Section 2.04.............................................. 9
Section 2.05............................................. 10
Section 2.06............................................. 10
Section 2.07............................................. 11
Section 2.08............................................. 11
Section 2.09............................................. 12
ARTICLE THREE.
Issue of Debentures
Section 3.01............................................. 12
ARTICLE FOUR.
Redemption of Debentures
Section 4.01............................................. 12
Section 4.02............................................. 12
Section 4.03............................................. 13
Section 4.04............................................. 13
ARTICLE FIVE.
Particular Covenants of the Company
Section 5.01............................................. 14
Section 5.02............................................. 14
Section 5.03............................................. 14
#30160546.5
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Section 5.04............................................. 14
Section 5.05............................................. 15
Section 5.06............................................. 18
Section 5.07............................................. 21
Section 5.08............................................. 21
Section 5.09............................................. 23
Section 5.10............................................. 23
ARTICLE SIX.
Debentureholders' Lists and Reports by
the Company and the Trustee
Section 6.01............................................. 23
Section 6.02............................................. 23
Section 6.03............................................. 23
Section 6.04............................................. 23
ARTICLE SEVEN.
Remedies of the Trustee and
Debentureholders on Event of Default
Section 7.01............................................. 24
Section 7.02............................................. 25
Section 7.03............................................. 27
Section 7.04............................................. 28
Section 7.05............................................. 28
Section 7.06............................................. 28
Section 7.07............................................. 28
Section 7.08............................................. 29
ARTICLE EIGHT.
Concerning the Trustee
Section 8.01............................................. 29
Section 8.02............................................. 29
Section 8.03............................................. 30
Section 8.04............................................. 30
Section 8.05............................................. 30
Section 8.06............................................. 30
Section 8.07............................................. 31
Section 8.08............................................. 31
Section 8.09............................................. 32
Section 8.10............................................. 32
Section 8.11............................................. 33
Section 8.12............................................. 33
Section 8.13............................................. 34
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ARTICLE NINE.
Concerning the Debentureholders
Section 9.01............................................. 34
Section 9.02............................................. 34
Section 9.03............................................. 34
Section 9.04............................................. 35
Section 9.05............................................. 35
ARTICLE TEN.
Debentureholders' Meetings
Section 10.01............................................ 35
Section 10.02............................................ 36
Section 10.03............................................ 36
Section 10.04............................................ 36
Section 10.05............................................ 37
Section 10.06............................................ 37
Section 10.07............................................ 38
ARTICLE ELEVEN.
Supplemental Indentures
Section 11.01............................................ 38
Section 11.02............................................ 38
Section 11.03............................................ 39
Section 11.04............................................ 39
Section 11.05............................................ 40
ARTICLE TWELVE.
Consolidation, Merger and Sale
Section 12.01............................................ 40
Section 12.02............................................ 40
Section 12.03............................................ 41
ARTICLE THIRTEEN.
Satisfaction and Discharge of Indenture; Deposited Moneys
Section 13.01............................................ 41
Section 13.02............................................ 42
Section 13.03............................................ 42
Section 13.04............................................ 43
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ARTICLE FOURTEEN.
Immunity of Incorporators, Stockholders, Officers,
Trustees and Directors
Section 14.01............................................ 43
ARTICLE FIFTEEN.
Miscellaneous Provisions
Section 15.01............................................ 44
Section 15.02............................................ 44
Section 15.03............................................ 44
Section 15.04............................................ 44
Section 15.05............................................ 44
Section 15.06............................................ 44
Section 15.07............................................ 45
Section 15.08............................................ 45
Section 15.09............................................ 46
Section 15.10............................................ 46
#30160546.5
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<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES Exhibit 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1997 1996 1997 1996 1997 1996
PRIMARY
EARNINGS
Income Before Preferred Stock
<S> <C> <C> <C> <C> <C> <C>
Dividends of Subsidiary $ 7,657 $ 4,657 $ 15,938 $ 12,157 $ 19,668 $ 15,316
Deduct: Preferred Stock Dividends (203) (203) (609) (609) (812) (813)
-------------------------------------------------------------
Net Income Available for Common Stock $ 7,454 $ 4,454 $ 15,329 $ 11,548 $ 18,856 $ 14,503
=============================================================
SHARES
Weighted Average Number of Common Shares 7,945 7,703 7,854 7,637 7,831 7,602
Outstanding Assuming Exercise of Options
Reduced By the Number of Shares Which
Could Have Been Purchased From Exercise
of Such Options 39 6 56 4 44 5
Weighted Average Number of Common Shares
-------------------------------------------------------------
Outstanding As Adjusted 7,984 7,709 7,910 7,641 7,875 7,607
-------------------------------------------------------------
Primary Earnings Per Share of
Common Stock $ .93 $ .58 $ 1.94 $ 1.51 $ 2.39 $ 1.91
=============================================================
ASSUMING FULL DILUTION
EARNINGS
Income Before Preferred Stock
Dividends o$ Subsidiary $ 7,657 $ 4,657 $ 15,938 $ 12,157 $ 19,668 $ 15,316
Deduct: Preferred Stock Dividends (203) (203) (609) (609) (812) (813)
Add: After Tax Interest Expense
Applicable to 6 3/4% Convertible
Subordinated Debentures 126 129 374 386 502 516
------------------------------------------------------------
Adjusted Net Income $ 7,580 $ 4,583 $ 15,703 $ 11,934 $ 19,358 $ 15,019
=============================================================
SHARES
Weighted Average Number of Common Shares 7,945 7,703 7,854 7,637 7,831 7,602
Outstanding Assuming Exercise of
Options Reduced By the Number Of Shares
Which Could Have Been Purchased With
the Proceeds From Exercise of
Such Options 39 6 56 4 44 5
Assuming Conversion Of 6 3/4% Convertible
Subordinated Debentures (a) 283 291 285 293 286 294
Weighted Average Number of Common Shares
-------------------------------------------------------------
Outstanding as Adjusted 8,267 8,000 8,195 7,934 8,161 7,901
-------------------------------------------------------------
Fully Diluted Earnings Per Share
of Common Stock $ .92 $ .57 $ 1.92 $ 1.50 $ 2.37 $ 1.90
=============================================================
<FN>
(a) Convertible at $40 per share.
</FN>
</TABLE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARIES Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
(In Thousands Except Ratios)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1997 1996 1997 1996 1997 1996
EARNINGS:
<S> <C> <C> <C> <C> <C> <C>
Income before preferred stock dividends $ 7,982 $ 4,911 $ 16,729 $ 12,870 $ 20,614 $ 16,446
Federal income taxes 4,253 2,603 8,873 6,795 10,900 8,692
Interest charges 4,003 3,058 12,518 8,853 16,469 11,642
-------------------------------------------------------------
Earnings available to cover fixed charges 16,238 10,572 38,120 28,518 47,983 36,780
-------------------------------------------------------------
FIXED CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 3,671 3,252 10,318 9,759 13,570 12,570
Preferred dividend requirement (1) 311 311 932 931 1,243 1,243
Other interest 293 753 2,060 1,714 2,986 2,368
Amortization of debt discount - net 89 88 267 264 365 345
-------------------------------------------------------------
Total fixed charges 4,364 4,404 13,577 12,668 18,164 16,526
-------------------------------------------------------------
Ratio of Earnings to Fixed Charges
and Preferred Dividends 3.72 2.40 2.81 2.25 2.64 2.23
=============================================================
(1) Preferred Dividend Requirement:
Preferred dividends 203 203 609 609 813 813
Effective tax rate 34.76% 34.64% 34.66% 34.55% 34.59% 34.58%
-------------------------------------------------------------
Preferred dividend requirement 311 311 932 931 1,243 1,243 $ $
=============================================================
<FN>
Earnings to Fixed Charges and Preferred Dividends represents the sum of
Income Before Preferred Stock Dividends, Federal income taxes and Interest
Charges (which is reduced by Allowance for Debt Funds Used During
Construction), divided by Fixed Charges. Fixed Charges and Preferred
Dividends consist of interest on long and short-term debt (which is not
reduced by Allowance for Debt Funds Used During Construction), dividends
on Preferred Stock on a pre-tax basis and Amortization of debt discount.
</FN>
</TABLE>
Page 1 of 2
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARIES Exhibit 12
Computation of Ratio of Earnings to Fixed Charges
(In Thousands Except Ratios)
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1997 1996 1997 1996 1997 1996
EARNINGS:
<S> <C> <C> <C> <C> <C> <C>
Income before preferred stock dividends $ 7,982 $ 4,911 $ 16,729 $ 12,870 $ 20,614 $ 16,446
Federal income taxes 4,253 2,603 8,873 6,795 10,900 8,692
Interest charges 4,003 3,058 12,518 8,853 16,469 11,642
-------------------------------------------------------------
Earnings available to cover fixed charges 16,238 10,572 38,120 28,518 47,983 36,780
-------------------------------------------------------------
FIXED CHARGES:
Interest on long-term debt 3,671 3,252 10,318 9,759 13,570 12,570
Other interest 293 753 2,060 1,714 2,986 2,368
Amortization of debt discount - net 89 88 267 264 365 345
-------------------------------------------------------------
Total fixed charges 4,053 4,093 12,645 11,737 16,921 15,283
-------------------------------------------------------------
Ratio of Earnings to Fixed Charges 4.01 2.58 3.01 2.43 2.84 2.41
=============================================================
<FN>
Earnings to Fixed Charges represents the sum of Income Before Preferred Stock
Dividends, Federal income taxes and Interest Charges (which is reduced by
Allowance for Debt Funds Used During Construction), divided by Fixed Charges.
Fixed Charges consist of interest on long and short-term debt (which is not
reduced by Allowance for Debt Funds Used During Construction), and
Amortization of debt discount.
</FN>
</TABLE>
Page 2 of 2
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 566,965
<OTHER-PROPERTY-AND-INVEST> 19,796
<TOTAL-CURRENT-ASSETS> 38,705
<TOTAL-DEFERRED-CHARGES> 48,211
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 673,677
<COMMON> 150,435
<CAPITAL-SURPLUS-PAID-IN> (3,845)
<RETAINED-EARNINGS> 45,710
<TOTAL-COMMON-STOCKHOLDERS-EQ> 192,300
0
12,000
<LONG-TERM-DEBT-NET> 243,299
<SHORT-TERM-NOTES> 28,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 198,048
<TOT-CAPITALIZATION-AND-LIAB> 673,677
<GROSS-OPERATING-REVENUE> 38,643
<INCOME-TAX-EXPENSE> 4,034
<OTHER-OPERATING-EXPENSES> 22,833
<TOTAL-OPERATING-EXPENSES> 26,867
<OPERATING-INCOME-LOSS> 11,776
<OTHER-INCOME-NET> 81
<INCOME-BEFORE-INTEREST-EXPEN> 11,857
<TOTAL-INTEREST-EXPENSE> 4,200
<NET-INCOME> 7,657
203
<EARNINGS-AVAILABLE-FOR-COMM> 7,454
<COMMON-STOCK-DIVIDENDS> 4,049
<TOTAL-INTEREST-ON-BONDS> 3,861
<CASH-FLOW-OPERATIONS> 16,905
<EPS-PRIMARY> .93
<EPS-DILUTED> .92<F1>
<FN>
<F1>All amounts in thousands of dollars except per share amounts.
</FN>
</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 566,713
<OTHER-PROPERTY-AND-INVEST> 80
<TOTAL-CURRENT-ASSETS> 35,417
<TOTAL-DEFERRED-CHARGES> 47,610
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 649,820
<COMMON> 15,741
<CAPITAL-SURPLUS-PAID-IN> 118,295
<RETAINED-EARNINGS> 53,648
<TOTAL-COMMON-STOCKHOLDERS-EQ> 187,684
0
12,000
<LONG-TERM-DEBT-NET> 231,945
<SHORT-TERM-NOTES> 23,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 30
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 195,161
<TOT-CAPITALIZATION-AND-LIAB> 649,820
<GROSS-OPERATING-REVENUE> 37,815
<INCOME-TAX-EXPENSE> 4,220
<OTHER-OPERATING-EXPENSES> 21,669
<TOTAL-OPERATING-EXPENSES> 25,889
<OPERATING-INCOME-LOSS> 11,926
<OTHER-INCOME-NET> 59
<INCOME-BEFORE-INTEREST-EXPEN> 11,985
<TOTAL-INTEREST-EXPENSE> 4,003
<NET-INCOME> 7,982
203
<EARNINGS-AVAILABLE-FOR-COMM> 7,779
<COMMON-STOCK-DIVIDENDS> 4,049
<TOTAL-INTEREST-ON-BONDS> 3,671
<CASH-FLOW-OPERATIONS> 19,394
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1>
<FN>
<F1>All amounts in thousands of dollars except per share amounts.
</FN>
</TABLE>
