===============================================================================
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 June 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: June 30, 1997
E'town Corporation (without par value) 7,909,808
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 22
Items 1 - 5
Item 6 (a) - Exhibits 22
(b) - Reports on Form 8-K 22
SIGNATURES 23
<PAGE>
<TABLE>
E'TOWN CORPORATION AND SUBSIDIARIES
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 32,463 $27,265 $ 62,584 $53,025 $ 119,968 $ 109,147
- -------------------------------------------------------------------------------------------------
Operating Expenses:
Operation 11,652 10,931 22,772 21,898 45,681 44,609
Maintenance 1,748 1,624 3,223 3,098 5,984 5,996
Depreciation 3,035 2,367 6,057 4,711 11,239 9,261
Revenue taxes 4,064 3,438 7,843 6,666 14,997 13,725
Real estate, payroll and other taxes 834 819 1,657 1,656 2,953 3,084
Federal income taxes 2,345 1,731 4,236 3,073 7,954 7,272
- -------------------------------------------------------------------------------------------------
Total operating expenses 23,678 20,910 45,788 41,102 88,808 83,947
- -------------------------------------------------------------------------------------------------
Operating Income 8,785 6,355 16,796 11,923 31,160 25,200
- -------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 54 1,115 98 2,214 1,609 3,822
Write-down of non-utility property and
other investments (132)
Federal income taxes (91) (446) (132) (882) (820) (1,525)
Other - net 208 159 282 305 737 773
- -------------------------------------------------------------------------------------------------
Total other income (expense) 171 828 248 1,637 1,526 2,938
- -------------------------------------------------------------------------------------------------
Total Operating and Other Income 8,956 7,183 17,044 13,560 32,686 28,138
- -------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,588 3,452 7,035 6,903 13,932 12,804
Other interest expense - net 786 553 1,772 965 3,452 2,403
Capitalized interest (124) (1,039) (240) (2,002) (1,762) (3,454)
Amortization of debt discount and expense-net 98 96 196 193 398 372
- -------------------------------------------------------------------------------------------------
Total interest charges 4,348 3,062 8,763 6,059 16,020 12,125
- -------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends
of Subsidiary 4,608 4,121 8,281 7,501 16,666 16,013
Preferred Stock Dividends 203 203 406 406 812 812
- -------------------------------------------------------------------------------------------------
Net Income $ 4,405 $ 3,918 $ 7,875 $ 7,095 $ 15,854 $ 15,201
=================================================================================================
Earnings Per Share of Common Stock:
- -------------------------------------------------------------------------------------------------
Primary $ .56 $ .51 $ 1.00 $ .93 $ 2.03 $ 2.02
Fully Diluted $ .55 $ .51 $ 1.00 $ .93 $ 2.02 $ 2.01
- -------------------------------------------------------------------------------------------------
Average Number of Shares Outstanding for
the Calculation of Earnings Per Share:
- -------------------------------------------------------------------------------------------------
Primary 7,915 7,641 7,872 7,608 7,806 7,536
Fully Diluted 8,200 7,935 8,158 7,901 8,094 7,831
- -------------------------------------------------------------------------------------------------
Dividends Paid Per Common Share $ .51 $ .51 $ 1.02 $ 1.02 $ 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>
June 30, December 31,
Assets 1997 1996
- -------------------------------------------------------------------------------------------------
Utility Plant-At Original Cost:
<S> <C> <C>
Utility plant in service $658,513 $ 654,713
Construction work in progress 11,104 7,994
- -------------------------------------------------------------------------------------------------
Total utility plant 669,617 662,707
Less accumulated depreciation and amortization 108,692 102,683
- -------------------------------------------------------------------------------------------------
Utility plant-net 560,925 560,024
- -------------------------------------------------------------------------------------------------
Non-utility Property and Other
Investments - Net 19,688 14,113
- -------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 4,532 3,228
Short-term investments 31 31
Customer and other accounts receivable
(less reserve: 1997, $739, 1996, $566) 18,335 16,187
Unbilled revenues 10,667 9,356
Materials and supplies-at average cost 1,858 2,045
Prepaid insurance, taxes, other 4,476 3,918
- -------------------------------------------------------------------------------------------------
Total current assets 39,899 34,765
- -------------------------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 808 1,064
Unamortized debt and preferred stock expenses 10,252 9,508
Taxes recoverable through future rates 30,435 30,435
Postretirement benefit expense 3,606 3,478
Other unamortized expenses 2,515 1,820
- -------------------------------------------------------------------------------------------------
Total deferred charges 47,616 46,305
- -------------------------------------------------------------------------------------------------
Total $668,128 $ 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>
June 30, December 31,
Capitalization and Liabilities 1997 1996
- -------------------------------------------------------------------------------------------------
Capitalization (Note 3):
<S> <C> <C>
Common shareholders' equity $187,092 $ 183,512
Cumulative preferred stock 12,000 12,000
Long-term debt - net 243,330 193,481
- -------------------------------------------------------------------------------------------------
Total capitalization 442,422 388,993
- -------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks (Note 5) 26,500 69,000
Long-term debt - current portion 30 30
Accounts payable and other liabilities 11,420 16,197
Customers' deposits 297 300
Municipal and state taxes accrued 18,283 13,887
Interest accrued 3,297 3,483
Preferred stock dividends accrued 59 59
- -------------------------------------------------------------------------------------------------
Total current liabilities 59,886 102,956
- -------------------------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 39,419 43,636
Federal income taxes 77,312 75,942
State income taxes 185 185
Unamortized investment tax credits 8,162 8,245
Accumulated postretirement benefits 3,980 3,651
- -------------------------------------------------------------------------------------------------
Total deferred credits 129,058 131,659
- -------------------------------------------------------------------------------------------------
Contributions in Aid of Construction 36,762 31,599
- -------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities
- -------------------------------------------------------------------------------------------------
Total $668,128 $ 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>
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C>
E'town Corporation:
Common Shareholders' Equity:
Common stock without par value, authorized,
15,000,000 shares, issued 1997, 7,940,860 shares;
1996, 7,807,751 shares $ 149,545 $ 145,660
Paid-in capital 1,315 1,315
Capital stock expense (5,160) (5,160)
Retained earnings 42,306 42,434
Less cost of treasury stock; 1997, 31,052 shares;
1996, 25,876 shares (914) (737)
- -------------------------------------------------------------------------------------------------
Total common shareholders' equity 187,092 183,512
- -------------------------------------------------------------------------------------------------
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 11,389 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) 75 87
- -------------------------------------------------------------------------------------------------
Total long-term debt 244,464 194,635
Unamortized discount-net (1,134) (1,154)
- -------------------------------------------------------------------------------------------------
Total long-term debt-net 243,330 193,481
- -------------------------------------------------------------------------------------------------
Total Capitalization $442,422 $ 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>
Six Months Ended
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------
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, 119,052 shares; 1996, 258,673 shares) 3,490 6,993
Issuance of restricted stock (4,044 shares) 123
Exercise of stock options (1997, 10,013 shares) 272
- -------------------------------------------------------------------------------------------------
Balance at End of Period 149,545 145,660
- -------------------------------------------------------------------------------------------------
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 7,875 15,073
Dividends on common stock (1997, $1.02, 1996, $2.04) (8,003) (15,634)
- -------------------------------------------------------------------------------------------------
Balance at End of Period 42,306 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 $187,092 $ 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)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S> <C> <C> <C> <C> <C> <C>
Net Income $ 4,405 $ 3,918 $ 7,875 $ 7,095 $ 15,854 $ 15,201
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 3,035 2,367 6,057 4,711 11,239 9,261
(Increase) decrease in deferred charges (140) (827) (439) (1,322) 245 (214)
Deferred income taxes and investment tax
credits-net 609 (54) 1,287 1,386 4,818 4,589
Capitalized interest and AFUDC (178) (2,154) (338) (4,216) (3,371) (7,276)
Other operating activities-net (10) 84 138 21 422 (115)
Change in current assets and current liabilities
excluding cash, short-term investments and
current portion of debt:
Customer and other accounts receivable (398) 522 (2,148) 123 (2,474) (2,666)
Unbilled revenues (1,446) (1,063) (1,311) (934) (2,289) (44)
Accounts payable and other liabilities 175 (307) (4,780) (4,560) (854) 2,156
Accrued/prepaid interest and taxes (1,669) (1,975) 3,652 1,795 102 310
Other 193 50 304 227 (57) (89)
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,576 561 10,297 4,326 23,635 21,113
- -------------------------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
Proceeds from issuance of common stock 1,782 1,826 3,585 3,777 6,800 7,381
Proceed from issuance of debentures 50,000 50,000 50,000 40,000
Debt and preferred stock issuance and
amortization costs (856) 113 (744) 187 (500) (261)
Repayment of long-term debt (55) (37) (171) (47) (357) (285)
Contributions and advances for
construction-net 711 867 946 1,804 1,663 3,039
Net increase (decrease) in notes
payable - banks (42,500) 13,500 (42,500) 19,000 (19,500) 12,000
Dividends paid on common stock (4,019) (3,894) (8,004) (7,751) (15,887) (15,360)
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities 5,063 12,375 3,112 16,970 22,219 46,514
- -------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding allowance
for funds used during construction) (3,316) (12,457) (6,782) (24,004) (37,903) (67,830)
Purchase of Edison operating contract (5,702) (5,702) (5,702)
Proceeds from sale of land 440 440 440
Development costs of land (excluding
capitalized interest) (24) (80) (61) (116) (258) (188)
- -------------------------------------------------------------------------------------------------
Cash used for investing activities (8,602) (12,537)(12,105) (24,120) (43,423) (68,018)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 1,037 399 1,304 (2,824) 2,431 (391)
Cash and Cash Equivalents at
Beginning of Period 3,495 1,702 3,228 4,925 2,101 2,492
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 4,532 2,101 4,532 $ 2,101 $ 4,532 $ 2,101
=================================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized)$ 4,965 $ 2,705 $ 8,756 $ 5,779 $ 11,942 $ 8,664
Income taxes $ -0- $ 950 $ -0- $ 1,348 $ 4,375 $ 5,040
Preferred stock dividends $ 177 $ 177 $ 354 $ 354 $ 708 $ 708
<FN>
See Notes to Consolidated Financial Statements.
</FN>
-6-
<PAGE>
</TABLE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
STATEMENTS OF CONSOLIDATED INCOME
(In Thousands)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues $ 32,333 $27,263 $ 62,346 $53,023 $ 119,681 $ 109,145
- -------------------------------------------------------------------------------------------------
Operating Expenses:
Operation 11,174 10,685 22,014 21,474 44,253 43,543
Maintenance 1,748 1,624 3,223 3,098 5,984 5,996
Depreciation 3,035 2,367 6,057 4,711 11,239 9,261
Revenue taxes 4,064 3,438 7,843 6,666 14,997 13,725
Real estate, payroll and other taxes 813 801 1,617 1,620 2,866 3,006
Federal income taxes 2,518 1,864 4,519 3,320 8,559 7,642
- -------------------------------------------------------------------------------------------------
Total operating expenses 23,352 20,779 45,273 40,889 87,898 83,173
- -------------------------------------------------------------------------------------------------
Operating Income 8,981 6,484 17,073 12,134 31,783 25,972
- -------------------------------------------------------------------------------------------------
Other Income (Expense):
Allowance for equity funds used during
construction 54 1,115 98 2,214 1,609 3,822
Federal income taxes (55) (439) (101) (872) (691) (1,480)
Other - net 104 138 192 278 366 406
- -------------------------------------------------------------------------------------------------
Total other income (expense) 103 814 189 1,620 1,284 2,748
- -------------------------------------------------------------------------------------------------
Total Operating and Other Income 9,084 7,298 17,262 13,754 33,067 28,720
- -------------------------------------------------------------------------------------------------
Interest Charges:
Interest on long-term debt 3,394 3,253 6,647 6,506 13,152 12,011
Other interest expense - net 781 552 1,767 960 3,447 2,264
Allowance for funds used during construction (42) (961) (77) (1,848) (1,438) (3,148)
Amortization of debt discount and expense-net 89 88 178 176 364 338
- -------------------------------------------------------------------------------------------------
Total interest charges 4,222 2,932 8,515 5,794 15,525 11,465
- -------------------------------------------------------------------------------------------------
Income Before Preferred Stock Dividends 4,862 4,366 8,747 7,960 17,542 17,255
Preferred Stock Dividends 203 203 406 407 812 812
- -------------------------------------------------------------------------------------------------
EARNINGS APPLICABLE TO COMMON STOCK $ 4,659 $ 4,163 $ 8,341 $ 7,553 $ 16,730 $ 16,443
=================================================================================================
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
-7-
<PAGE>
<TABLE>
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(In Thousands)
<CAPTION>
June 30, December 31,
Assets 1997 1996
- -------------------------------------------------------------------------------------------------
Utility Plant-At Original Cost:
<S> <C> <C>
Utility plant in service $658,513 $ 654,713
Construction work in progress 11,104 7,994
- -------------------------------------------------------------------------------------------------
Total utility plant 669,617 662,707
Less accumulated depreciation and amortization 108,692 102,683
- -------------------------------------------------------------------------------------------------
Utility plant-net 560,925 560,024
- -------------------------------------------------------------------------------------------------
Non-utility Property 80 81
- -------------------------------------------------------------------------------------------------
Current Assets:
Cash and cash equivalents 3,894 3,122
Customer and other accounts receivable
(less reserve: 1997, $739, 1996, $566) 17,443 16,725
Unbilled revenues 10,667 9,356
Materials and supplies-at average cost 1,858 2,045
Prepaid insurance, taxes, other 4,099 3,742
- -------------------------------------------------------------------------------------------------
Total current assets 37,961 34,990
- -------------------------------------------------------------------------------------------------
Deferred Charges:
Waste residual management 808 1,064
Unamortized debt and preferred stock expenses 9,750 8,989
Taxes recoverable through future rates 30,435 30,435
Postretirement benefit expense 3,606 3,564
Other unamortized expenses 2,326 1,632
- -------------------------------------------------------------------------------------------------
Total deferred charges 46,925 45,684
- -------------------------------------------------------------------------------------------------
Total $645,891 $ 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>
June 30, December 31,
Capitalization and Liabilities 1997 1996
- -------------------------------------------------------------------------------------------------
Capitalization (Note 3):
<S> <C> <C>
Common shareholder's equity $183,954 $ 182,293
Cumulative preferred stock 12,000 12,000
Long-term debt - net 231,941 181,933
- -------------------------------------------------------------------------------------------------
Total capitalization 427,895 376,226
- -------------------------------------------------------------------------------------------------
Current Liabilities:
Notes payable - banks 21,500 69,000
Long-term debt - current portion 30 30
Accounts payable and other liabilities 11,367 17,093
Customers' deposits 297 300
Municipal and state taxes accrued 18,283 13,887
Interest accrued 2,969 3,158
Preferred stock dividends accrued 59 59
- -------------------------------------------------------------------------------------------------
Total current liabilities 54,505 103,527
- -------------------------------------------------------------------------------------------------
Deferred Credits:
Customers' advances for construction 39,419 43,636
Federal income taxes 75,324 73,950
Unamortized investment tax credits 8,162 8,245
Accumulated postretirement benefits 3,824 3,596
- -------------------------------------------------------------------------------------------------
Total deferred credits 126,729 129,427
- -------------------------------------------------------------------------------------------------
Contributions in Aid of Construction 36,762 31,599
- -------------------------------------------------------------------------------------------------
Commitments and Contingent Liabilities
- -------------------------------------------------------------------------------------------------
Total $645,891 $ 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>
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------
<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 49,918 49,580
- -------------------------------------------------------------------------------------------------
Total common shareholder's equity 183,954 182,293
- -------------------------------------------------------------------------------------------------
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) 75 87
- -------------------------------------------------------------------------------------------------
Total long-term debt 233,075 183,087
Unamortized discount-net (1,134) (1,154)
- -------------------------------------------------------------------------------------------------
Total long-term debt-net 231,941 181,933
- ------------------------------------------------------------------------------------------------
Total Capitalization $427,895 $ 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>
Six Months
Ended
June 30, December 31,
1997 1996
- -------------------------------------------------------------------------------------------------
<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 8,747 16,755
Dividends on common stock (8,004) (15,634)
Dividends on preferred stock (405) (813)
- -------------------------------------------------------------------------------------------------
Balance at End of Period 49,918 49,580
- -------------------------------------------------------------------------------------------------
Total Common Shareholder's Equity $183,954 $ 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)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
- -------------------------------------------------------------------------------------------------
Cash Flows from Operating Activities:
<S> <C> <C> <C> <C> <C> <C>
Income before preferred stock dividend $ 4,862 $ 4,366 $ 8,747 $ 7,960 $ 17,542 $ 17,255
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 3,035 2,367 6,057 4,711 11,239 9,261
(Increase) decrease in deferred charges (149) (845) (438) (1,355) 304 (1,097)
Deferred income taxes and investment tax
credits-net 612 (54) 1,291 1,386 4,758 4,645
Allowance for funds used during construction (96) (2,076) (175) (4,063) (3,046) (6,969)
Other operating activities-net 42 51 155 (41) 264 (292)
Change in current assets and current
liabilities excluding cash, short-term
investments and current portion of debt:
Customer and other accounts receivable (418) (384) (718) 1,054 (1,554) (2,910)
Unbilled revenues (1,446) (1,063) (1,311) (934) (2,289) (44)
Accounts payable and other liabilities 195 (348) (5,729) (4,582) (782) 2,078
Accrued/prepaid interest and taxes (1,773) (2,468) 3,850 1,608 287 131
Other 76 49 187 229 (175) (86)
- -------------------------------------------------------------------------------------------------
Net cash provided by operating activities 4,940 (405) 11,916 5,973 26,548 21,972
- -------------------------------------------------------------------------------------------------
Cash Flows Provided by Financing Activities:
Capital contributed by parent company 823 2,313 1,323 2,890 3,733 6,385
Proceed from issuance of debentures 50,000 50,000 50,000 40,000
Debt and preferred stock issuance and
amortization costs (866) 104 (761) 170 (535) 502
Repayment of long-term debt (8) (8) (12) (15) (27) (33)
Contributions and advances for
construction-net 711 867 946 1,804 1,663 3,039
Net increase in notes payable - banks (47,500) 14,000 (47,500) 19,000 (24,500) 12,000
Dividends paid on common stock and
preferred stock (4,196) (4,071) (8,358) (8,105) (16,595) (16,069)
- -------------------------------------------------------------------------------------------------
Net cash provided by financing activities (1,036) 13,205 (4,362) 15,744 13,739 45,824
- -------------------------------------------------------------------------------------------------
Cash Flows Used for Investing Activities:
Utility plant expenditures (excluding
allowance for funds used during
construction) (3,316) (12,457) (6,782) (24,005) (37,902) (67,830)
- --------------------------------------------------------------------------------------------------
Cash used for investing activities (3,316) (12,457) (6,782) (24,005) (37,902) (67,830)
- -------------------------------------------------------------------------------------------------
Net Increase (Decrease) in Cash and
Cash Equivalents 588 343 772 (2,288) 2,385 (34)
Cash and Cash Equivalents at
Beginning of Period 3,306 1,166 3,122 3,797 1,509 1,543
- -------------------------------------------------------------------------------------------------
Cash and Cash Equivalents at End of Period $ 3,894 $ 1,509 $ 3,894 $ 1,509 $ 3,894 $ 1,509
=================================================================================================
Supplemental Disclosures of Cash
Flow Information:
Cash paid during the year for:
Interest (net of amount capitalized)$ 5,047 $ 2,779 $ 8,529 $ 5,530 $ 11,480 $ 8,162
Income taxes $ -0- $ 950 $ -0- $ 1,348 $ 4,375 $ 4,451
Preferred stock dividends $ 177 $ 177 $ 354 $ 354 $ 708 $ 708
<FN>
See Notes to Consolidated Financial Statements.
</FN>
</TABLE>
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<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 $3.5 million to Elizabethtown for
the six months ended June 30, 1997. The remaining $2.9 million of DRP
proceeds were used to partially finance a 20-year contract (the Edison
Contract) to operate the water system owned by 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 Dedentures (Debentures), $25.0 million of Series A and
$25.0 million of Series B, through the New Jersey Economic Development
Authority. The proceeds were used to repay $50.0 million of balances
outstanding under the Compan's revolving credit agreement. The Debentures
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 June 30,
1997 were 4.10% for Series A and 3.90% 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 $50.0 million of uncommitted lines of
credit. 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 June 30, 1997. These balances were incurred to partially finance
the Edison contract described below. The above lines, together with
internal funds and proceeds of future issuances of debt and preferred
stock by Elizabethtown and sales of common stock by E'town are expected
to be sufficient to finance the Corporation's capital needs.
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<PAGE>
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 June 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 June 30,
1997 is $12.6 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 June 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. In July 1997, E'town's
Board of Directors approved a plan to accelerate the Corporation's
efforts to sell E'town's and Properties' 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 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 (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 106. The total increases in operating revenues resulting from
these petitions are expected to be $.6 million for Elizabethtown and
Mount Holly.
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<PAGE>
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, is currently estimated to cost
$16.5 million, excluding AFUDC. Mount Holly has expended $3.0 million on
the Mansfield Project as of June 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 until the
Mansfield project is placed into service. The other purveyor has agreed
to withdraw its objection to the water allocation permit.
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, 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,
"arnings 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.
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<PAGE>
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.
-16-
<PAGE>
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 June
30, 1997, and the results of operations for the three, six and twelve months
ended June 30, 1997.
LIQUIDITY AND CAPITAL RESOURCES
Capital Expenditures Program
Capital expenditures, primarily for water utility plant, were $6.8
million for the first six 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 is currently 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 June 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 until the
Mansfield project is placed into service. The other purveyor has agreed to
withdraw its objection to the water allocation permit.
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 the Mansfield project.
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<PAGE>
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 to issued $50.0 million of tax-exempt
Variable Debentures 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 $50.0 million
of uncommitted lines of credit. 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 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 June 30, 1997 was $4.4 million or $.56
per share as compared to $3.9 million or $.51 per share for the same period
in 1996. Net income for the six months ended June 30, 1997 was $7.9 million
or $1.00 per share as compared to $7.1 million or $.93 per share for the same
period in 1996. Net income for the twelve months ended June 30, 1997 was
$15.9 million or $2.03 per share as compared to $15.2 million or $2.02 per
share for the same period in 1996. Net income increased for the three, six
and twelve month periods primarily due to higher revenues related to an
increase in rates for Elizabethtown effective October 1996. This increase in
revenues was offset somewhat by increases in financing and operating costs,
primarily related to the Plant.
Operating Revenues increased $5.2 million or 19.1%, $9.6 million or 18.0% and
$10.8 million or 9.9% for the three, six and twelve months ended June 30,
1997 compared to the same periods in 1996. These increases resulted from a
rate increase of $21.8 million for Elizabethtown in October 1996, which
accounted for $5.3 million, $10.3 million and $14.3 million of the increases
in operating revenues for the three, six and twelve month periods,
respectively. These increases were somewhat offset however, by decreases in
revenues for all three periods from lower water consumption.
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<PAGE>
The decreases in revenues from reduced water consumption for the three, six
and twelve month periods were $.1 million, less than $.1 million and $2.0
million respectively, for residential customers. The decreases due to
consumption were $.1 million, $.8 million and $1.7 million, respectively, for
wholesale customers and $.1 million, $.4 million and $.5 million,
respectively, for large industrial customers.
Operations Expenses increased $.7 million or 6.6%, $.9 million or 4.0% and
$1.1 million or 2.4% for the three, six and twelve months ended June 30,
1997, respectively, over the comparable periods in 1996. These increases are
attributable primarily to the costs resulting from operation of the Plant,
which went into service in October 1996. Such costs are reflected in
Elizabethtown's rate increase that become effective in October 1996.
Maintenance Expenses increased $.1 million or 7.6%, $.1 million or 4.0% and
decreased less than $.1 million or .2% for the three, six and twelve months
ended June 30, 1997, respectively, over and from the comparable 1996 amounts
due to minor changes in maintenance activities during those periods.
Depreciation Expense increased $.7 million or 28.2% $1.3 million or 28.6% and
$2.0 million or 21.4% for the three, six and twelve month periods ended June
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. Elizabethtown's October 1996
rate increase reflected a full allowance for the depreciation expense
associated with the Plant.
Revenue Taxes increased $.6 million, or 18.2%, $1.2 million or 17.7% and $1.3
million or 9.3% for the three and twelve month periods ended June 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, six and twelve month periods ended June 30, 1997,
compared to the same periods in 1996.
Federal Income Taxes as a component of operating expenses increased $.6
million or 35.5%, $1.2 million or 37.8% and $.7 million or 9.4% for the
three, six and twelve month periods ended June 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 $.7 million or 79.3%, $1.4 million or 84.9%
and $1.4 million or 48.1% for the three, six and twelve month periods ended
June 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 $1.3 million or 42.0%, $2.7 million or 44.6%
and $3.9 million or 32.1% for the three, six and nine month periods ended
June 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
related to the completion of the Plant in October 1996. This increase in
total interest charges was further affected by an increase in short-term
borrowings incurred under the revolving credit agreement to finance the
construction of Elizabethtown's ongoing capital program, the predominant
portion of which was the Plant.
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
-19-
<PAGE>
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, natural disasters 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 later Elizabethtow'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 stronger financial results in the second
quarter from record water consumption since mid-June, management believes
that its original goal to increase earnings per share by approximately 15%
for 1997 is still attainable. This expectation assumes normal water
consumption patterns in 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 will result 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 upon the completion of Mount Holly's Mansfield project for recovery of
the costs of that and other projects. Such rate relief should also enable
Mount Holly to realize rates of return more in line with authorized levels.
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
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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
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 June 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 $12.6 million in Non-Utility
Property and Other Investments - Net in the Consolidated Balance Sheets of
E'town at June 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. Such costs are
capitalized until the property is offered for sale, after which time such
costs are expensed.
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. In
July 1997, E'town's Board of Directors approved a plan to accelerate the
Corporation's efforts to sell E'town's and Properties' real estate
investments. E'town expects to reinvest the net sale proceeds into water and
wastewater investments in efforts to yield a current return.
'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 Corporatio'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 Informatio" 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.
-21-
<PAGE>
PART II - OTHER INFORMATION
Items 1 - 5:
Nothing to Report.
Item 6(a) - Exhibits***
Exhibits to Part I:
Exhibit 10(a)-Contract between Edison Water Company, E'town Corporation
and the Township of Edison to Operate The Water System of
the Township of Edison, New Jersey dated as of June 25, 1997
Exhibit 10(b)-Contract between Elizabethtown Water Company and the
Township of Edison to Provide Water on a Wholesale Basis
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
***Pursuant to Paragraph (b) (4) (iii) (A) of Item 601 of
Regulation S-K Elizabethtown has not filed as an exhibit to this
Form 10-Q certain instruments with respect to long-ter debt as the
total amount of securities authorized thereunder does not exceed
10 percent of the total assets of Elizabethtown and its subsidiar
on a consolidated basis, but hereby agrees to furnish to the SEC
on request any such instruments.
-22-
<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: August 14, 1997
E'TOWN CORPORATION
ELIZABETHTOWN WATER COMPANY
/s/ Gail P. Brady
Gail P. Brady
Treasurer
/s/ Dennis W. Doll
Dennis W. Doll
Controller
-23-
Exhibit 10(a)
AGREEMENT FOR OPERATION, MAINTENANCE AND MANAGEMENT SERVICES FOR
THE TOWNSHIP OF EDISON'S MUNICIPAL WATER SYSTEM
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I. DEFINITIONS
Section 1.1. 2
Section 1.2. 11
ARTICLE II. AGREEMENT
Section 2.1. Operation, Maintenance and Management of
System 12
ARTICLE III. TERM
Section 3.1. Term 13
Section 3.2. Extension 13
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.1. General 15
Section 4.2. Conditions to Township's Obligations 15
Section 4.3. Conditions to Operator Obligations 18
Section 4.4. Satisfaction of Conditions Precedent 21
Section 4.5. Timing of Certain Obligations 23
ARTICLE V. REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1. Township Representations, Warranties and
Covenants 25
Section 5.2. Operator Representations, Warranties and
Covenants 26
ARTICLE VI.
OPERATION, MAINTENANCE, MANAGEMENT OF AND
CAPITAL IMPROVEMENTS TO THE SYSTEM
Section 6.1. General 28
Section 6.2. Inventory 33
Section 6.3. Maintenance Management Program 33
Section 6.4. Software Program 34
Section 6.5. Testing and Laboratory Analysis 34
Section 6.6. Reporting Requirements 36
Section 6.7. Staffing 39
Section 6.8. Licenses 42
Section 6.9. Compliance with Laws, Regulations and
Permits 43
Section 6.10. Safety and Security 44
Section 6.11. Continuity of Service 45
Section 6.12. Emergency Situations 46
Section 6.13. Access to System and Records 47
Section 6.14. Meters and AMR Devices 49
Section 6.15. Water Quality Standards 50
Section 6.16. Operations Committee 50
ARTICLE VII. SYSTEM CAPITAL IMPROVEMENTS
Section 7.1. Minimum Capital Improvements and
Additional Capital Improvements
to the System 52
ARTICLE VIII. FINANCIAL TERMS
Section 8.1. The Initial Concession Payment 55
Section 8.2. The Annual Payment 55
Section 8.3. Revenue Sharing 55
Section 8.4. Establishment and Collection of Rates,
Fees and Charges 56
Section 8.5. Billing and Collections 60
Section 8.6. Application of Rents, Rates, Fees and
Other Charges 61
ARTICLE IX. DEFAULT AND TERMINATION
Section 9.1. General Provisions 63
Section 9.2. Termination for Cause by the Township 63
Section 9.3. Termination for Cause by the Operator 67
Section 9.4. Termination for Unenforceability of
Agreement 73
Section 9.5. Optional Termination by the Township 75
ARTICLE X. MISCELLANEOUS
Section 10.1. Insurance 76
Section 10.2. Indemnification 80
Section 10.3. New Equipment 82
Section 10.4. Enforcement 82
Section 10.5. Assignment 83
Section 10.6. Affirmative Action 83
Section 10.7. Entire Agreement 85
Section 10.8. Notices 86
Section 10.9. Public Notices 87
Section 10.10. Application of Law 87
Section 10.11. Relationship 87
Section 10.12. Public Relations 87
Section 10.13. Notice of Litigation 88
Section 10.14. Cost Substantiation 88
Section 10.15. Unforeseen Events 89
Section 10.16. Dispute Resolution 90
Section 10.17. Provisions Relating to Wheeling 91
Section 10.18. Expiration of the Agreement 92
SCHEDULES
Schedule ABase Service Rate
Schedule BGuaranty Agreement
Schedule CMinimum Administrative Criteria
Schedule DMinimum Capital Improvements
Schedule EMinimum Financial Criteria
Schedule FMinimum Technical Criteria
Schedule GOperating Performance Standards
Schedule HWater Supply Agreements
Schedule IFacilities to Receive Free Services
Schedule JEmployees to be Hired or Paid for the
Contract Partner
Schedule KAnnual Payments
<PAGE>
AGREEMENT FOR
OPERATION, MAINTENANCE AND MANAGEMENT SERVICES FOR
THE TOWNSHIP OF EDISON'S MUNICIPAL WATER SYSTEM
THIS AGREEMENT, made this 25th Day of June, 1997, by and between the
TOWNSHIP OF EDISON, a municipal corporation of the State of New Jersey (the
"Township") and Edison Water Company, a New Jersey corporation doing business
at 600 South Avenue, Westfield, New Jersey 07091-0788 (the "Operator").
W I T N E S S E T H:
WHEREAS, the Township currently owns and operates a water transmission
and distribution system (hereinafter referred to as the "System") within the
Township limits of the Township; and
WHEREAS, the Operator is engaged in the business of operating,
maintaining and managing water utilities; and
WHEREAS, it is the mutual desire of the parties to enter into an
agreement to provide for the operation, maintenance, management and
improvement of the System; and
WHEREAS, the Township Council of the Township has determined that the
public health, safety, and welfare of the residents of the Township can best
be protected by entering into an agreement to provide for the operation,
maintenance, and management of the System;
NOW, THEREFORE, in consideration of the mutual covenants, conditions and
terms contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
<PAGE>
ARTICLE I. DEFINITIONS
Section 1.1. The following definitions shall apply to and are used in
this Agreement:
"Act" means the Water Act hereinafter defined.
"Actual Defeasance Amount" means the amount necessary to completely
effect the Defeasance of the System Indebtedness.
"Additional Capital Improvements" means the additional Capital
Improvements undertaken pursuant to Section 7.1(b).
"Additional Capital Improvements Charge" means that portion of the Total
User Charge Rate that funds any Additional Capital Improvements to the System
pursuant to Section 8.4(c).
"Agreement" means this "Agreement for Operation, Maintenance and
Management Services for the Township of Edison's Municipal Water System"
executed by and between the Township and the Operator.
"AMR" means encoder meters and appurtenances readable on the outside of
the user's structure.
"Annual Payment" means the annual payment paid by the Operator to the
Township in accordance with Section 8.2.
"Authorized Representative" means, in the case of the Operator, the
individual(s) specified in writing by the Operator, as the representative of
the Operator for all purposes of this Agreement and, in the case of the
Township, such representative of the Township designated in writing by the
Township.
"Bankruptcy Code" means The Bankruptcy Code, 11 U.S.C. (101 et seq.), as
amended from time to time and any successor statute thereto.
"Base Service Rate" means that portion of the Total User Charge Rate
paid by customers of the System equal to the rates set forth in Schedule A to
this Agreement.
"Board" means the New Jersey Board of Public Utilities.
"Capital Improvements" means improvements to the System that (a) have a
five year or greater useful life, (b) are non-consumable in nature, (c) cost
in excess of $50,000 per occurrence in the case of water main breaks, (d)
constitute a permanent part of the System, and (e) do not constitute a
maintenance or repair item.
"CERCLA" shall have the meaning set forth in Section 6.9.
"Commencement Date" means the date when the Operator must begin
rendering the Services specified in the Notice to Proceed.
"Contract Date" means the date of execution of this Agreement.
"Contract Year" means a one-year period commencing on July 1 and ending
on June 30 in each year during the term of this Agreement, which in the case
of the first Contract Year shall be the period beginning on the Commencement
Date and ending on June 30, 1998.
"Cost Substantiation" shall have the meaning set forth in Section 10.14.
"Day" means a calendar day of twenty-four hours measured from midnight
to the next midnight.
"Defease" or "Defeasance" means the full payment or provision for the
full payment of the System Indebtedness in accordance with the requirements
of the Local Bond Law (N.J.S.A. 40A:2-1, et seq.) and the Internal Revenue
Code of 1986, as amended.
"DEP" or "Department" means the New Jersey Department of Environmental
Protection or any successor agency.
"EPA" means the United States Environmental Protection Agency or any
successor agency.
"Escrow Agent" means a bank or trust company appointed to hold the
Interim Defeasance Fund and Initial Concession Payment Escrow Account.
"Estimated Defeasance Amount" means $620,000.
"Fiscal Year" means a period of twelve consecutive months commencing on
July 1 and ending in the following June 30 or any other fiscal year
implemented by the Township.
"Fixed Rate Period" shall have the meaning assigned to such term in
Section 8.4(b).
"Guarantor" means E'town Corporation, a New Jersey corporation doing
business at 600 South Avenue, Westfield, New Jersey.
"Guaranty Agreement" means the guaranty agreement between the Guarantor
and the Township included in Schedule B to the Agreement.
"Initial Concession Payment" means $5,076,599.89 (which amount includes
the forgiveness of $246,899.89 previously owed to the Operator and a cash
payment of $4,829,700).
"Initial Concession Payment Escrow Account" means the account
established pursuant to Section 8.1.
"Interim Defeasance Fund" means the fund established pursuant to Section
4.5(c).
"Local Finance Board" means the Local Finance Board of the Division of
Local Government Services of the New Jersey Department of Community Affairs.
"Local Public Contracts Law" means N.J.S.A. 40A:11-1 et seq.
"Minimum Administrative Criteria" means the minimum administrative
requirements applicable to the Operator as set forth in Schedule C to this
Agreement.
"Minimum Capital Improvements" means the minimum Capital Improvements to
the System set forth in Schedule D to this Agreement, together with any
substitute Capital Improvements permitted by Section 7.1(a).
"Minimum Financial Criteria" means the financial requirements applicable
to the Operator as set forth in Schedule E to this Agreement.
"Minimum Technical Criteria" means the technical requirements applicable
to the Operator as set forth in Schedule F to this Agreement.
"Net Revenues" means the total revenues paid to the Operator under a
wheeling agreement after the deduction therefrom of all direct costs incurred
by the Operator (subject to Cost Substantiation) for the purchase,
transmission, treatment and metering of such water and construction and
financing of Capital Improvements necessary to wheel purchased water.
"Notice to Proceed" means a notice issued by the Township after
satisfaction or waiver of all of the conditions precedent set forth in
Article IV that establishes the Commencement Date.
"Operating Standards" means the operating performance standards as set
forth in Schedule G to this Agreement.
"Operations Committee" means the committee established pursuant to
Section 6.16.
"Operator" means Edison Water Company, a New Jersey corporation doing
business at 600 South Avenue, Westfield, New Jersey 07091-0788.
"OSHA" shall have the meaning set forth in Section 6.9.
"Pass-through Charge" means that portion of the Total User Charge Rate
used to reimburse the Operator, on a dollar-for-dollar basis, for additional
costs resulting from the occurrence of an Unforeseen Event pursuant to
Section 8.4(b) or for any loss in revenues as a result of a rate freeze by
the Township on all customers that are 65 years or older provided, however,
in no event shall the Township impose such a rate freeze which reduces total
revenues by more than ten percent (10%) per year, and provided further that
the Township has obtained an opinion of counsel that such a rate freeze is
legal.
"Pass-through Credit" means the reduction in the Total User Charge Rate
to give the Township the benefit, on a dollar-for-dollar basis, of the
reduction in costs resulting from the occurrence of Unforeseen Event pursuant
to Section 8.4(b).
"Permits" means permits, approvals, certifications, authorizations or
consents and/or licenses issued by the EPA, the Department, or any other
federal, state or local regulatory agency or private party that is necessary
for the proper operation of the System.
"Proposal" means the Proposal submitted by the Operator in response to
the RFQ/RFP.
"RFQ/RFP" means the "Request for Qualifications and Proposals for a
Public/Private Agreement for Operation, Maintenance and Management Services
for the Township of Edison, New Jersey" dated September 19, 1996, as amended
by the Township, and subsequent addenda and clarifications, issued by the
Township in connection with procurement of the Services.
"Services" means all of the duties, obligations, and services as defined
herein to be provided by the Operator that are related to the management,
operation, maintenance and Minimum Capital Improvements required to be
undertaken by the Operator, or any combination thereof, of the System, or for
provision of complete operating staff, energy and other consumables,
management, performance, operation and maintenance of the System.
"Substitute Minimum Capital Improvements" shall have the meaning set
forth in Section 7.1(a).
"System" means all of the individual components and elements that
comprise the potable water system of the Township.
"System Indebtedness" means the aggregate amount of $495,000 of General
Obligation Refunding Bonds, Series 1992 dated November 15, 1992 and
previously issued by the Township to finance a portion of the System, which
bonds are scheduled to mature on June 1 in each of the years 1998 and 1999 in
the amount of $110,000; June 1, 2000 in the amount of $105,000; June 1, 2001
in the amount of $95,000; June 1, 2002 in the amount of $60,000; and June 1,
2003 in the amount of $15,000.
"Term" means the term of this Agreement as determined in accordance with
Section 3.1.
"Total User Charge Rate" means the sum of the Base Service Rate, the
Additional Capital Improvements Charge, the Pass-through Charge or
Pass-through Credit, as the case may be, and the Township Administrative Fee.
"Township" means the Township of Edison, a public body corporate and
politic of the State of New Jersey.
"Township Administrative Fee" means the annual fee charged by the
Township beginning in the Contract Year that commences on July 1, 1999 and
included in the Total User Charge Fee pursuant to Section 8.4(d) which amount
shall not exceed $150,000 per year.
"Unforeseen Events" means circumstances beyond the control of the
parties hereto consisting of: (a) changes in rates charged by any outside
supplier of water to the Township from the amount charged for such water at
the time of execution of this Agreement or (b) any of the following acts,
events or conditions or any combination thereof (other than a labor strike by
the Operator, its employees, affiliates or subcontractors) that is (i)
unforeseeable as of the Contract Date, (ii) outside of the control of the
party relying thereon for justification for not performing an obligation or
complying with any condition required of such party under the Agreement; and
(iii) has had or may be reasonably expected to have a direct, material
adverse effect on the System or the operation thereof:
(A) Force Majeure events, such as acts of God, acts of terrorism,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, hurricanes, storms, floods, washouts, droughts
and explosions, civil disturbances, acts of the public enemy, and
war;
(B) Change in Law, defined as (1) the enactment of any law or
regulations after the Contract Date (excluding (x) laws or
regulations adopted at the time of execution of this Agreement but
which have provisions that take effect after the first Contract
Year and (y) pending changes in law reasonably anticipated to be
enacted as of the Contract Date and (z) changes in federal or state
income tax law); or (2) a material modification of or imposition of
any material condition on the issuance, modification or renewal of
any Permit, which, in the case of either (1) or (2) above,
establishes requirements affecting the financing of, improvements
to or operation of the System that are materially more burdensome
than the most stringent requirements in effect as of the Contract
Date;
(C) Judicial/Administrative Determinations, defined as the final
order, judgment, action and/or determination of any federal, state
or local court of competent jurisdiction, administrative agency or
governmental body (other than the Township);
(D) Permit/License Termination, defined as the suspension,
termination, interruption, denial or failure of renewal or issuance
of any Permit (not caused by the action or inaction of either party
hereto) that is necessary to improve, repair or operate the System.
(E) Fines imposed on the Township due to pre-existing conditions
relating to the System.
"Water Companies" means the Elizabethtown Water Company and Middlesex
Water Company.
"Water Act" means the "New Jersey Water Supply Public-Private
Contracting Act", supplementing Title 58 of the Revised Statutes and amending
R.S. 48:2-13 and P.L. 1971, c. 198, enacted May 11, 1995 as Chapter 101 of
the Laws of 1995.
"Water Supply Agreements" means collectively the agreements between the
Township and the Water Companies attached hereto as Schedule H.
Section 1.2. Whenever the context may require, any pronoun that is
used in this Agreement shall include the corresponding masculine, feminine
and neuter forms, and the singular shall include the plural and vice versa.
Unless otherwise noted, the words "include," "includes" and "including" when
used in this Agreement shall be deemed to be followed by the phrase "without
limitation". The words "agree," "agreements," "approval" and "consent" when
used in this Agreement shall be deemed to be followed by the phrase "which
shall not be unreasonably withheld or unduly delayed," except or unless the
context may otherwise specify.
<PAGE>
ARTICLE II. AGREEMENT
Section 2.1. Operation, Maintenance and Management of System. On and
after the Commencement Date, the Township and the Operator, in combination
with each other in the manner herein described, shall operate, maintain and
manage the System on the terms and conditions set forth in this Agreement.
<PAGE>
ARTICLE III. TERM
Section 3.1. Term. The Term of this Agreement shall commence on the
Commencement Date and unless earlier terminated in accordance with the terms
hereof, shall expire on the twentieth anniversary date of the Commencement
Date, subject to such renewal as is contemplated in this Article III.
Section 3.2. Extension. The Term of this Agreement may be extended by
the parties hereto upon substantially similar terms for up to two additional
five (5) year periods. The Township shall notify the Operator, in writing,
of its desire to extend the Agreement at least twelve (12) months prior to
the expiration of the original Term or of any extension period. Such notice
shall identify the period of the proposed extension and any proposed
modifications to the terms and conditions of this Agreement that would be
effective during such extension period. The Operator shall respond, in
writing, to the Township's request for an extension within ninety (90) Days
of the Township's notice requesting an extension, which response shall
specify the Operator's acceptance, rejection or counter-proposals with
respect to the Township's proposed modifications, if any. Unless otherwise
extended by agreement of the parties, if the Township and the Operator have
not agreed, in writing, on the proposed extension and the modification, if
applicable, of this Agreement six (6) months prior to the expiration of the
original Term or any extension period, as applicable, this Agreement shall
terminate on the last Day of the original Term or the extension period, as
the case may be.
<PAGE>
ARTICLE IV. CONDITIONS PRECEDENT
Section 4.1. General. The issuance of a Notice to Proceed and the
establishment of the Commencement Date shall be subject to the satisfaction
or waiver of the conditions precedent set forth in this Article IV.
Section 4.2. Conditions to Township's Obligations. The Township shall
be under no obligation to issue a Notice to Proceed or to perform any of its
other obligations under the terms of this Agreement (other than those
obligations arising or relating to actions required to be taken by or on
behalf of the Township prior to issuance of the Notice to Proceed) unless the
following conditions have been satisfied or waived by the Township (in
writing):
(a) The Board and the Local Finance Board shall have finally
approved this Agreement and the time for appeal of such decision shall have
expired.
(b) The Operator and the Guarantor shall have been validly
organized and created and each shall be validly existing under the laws of
the jurisdiction in which it was incorporated, as evidenced by delivery of
(1) certified copies of the certificate of incorporation and the certificate
of good standing or their equivalent under applicable law; (2) an opinion of
counsel to the Operator and the Guarantor to such effect; and (3) such other
documentation as the Township may reasonably require to evidence satisfaction
of the requirements set forth in this Section 4.2(b).
(c) The Guarantor shall have delivered the Guaranty Agreement to
the Township and an opinion of counsel to the Guarantor stating that no
litigation is pending or threatened against the Guarantor which would impair
its ability to perform its duties under the Guaranty Agreement.
(d) The Operator shall have delivered to the Township (1) a
certificate of an Authorized Officer of the Operator, to the effect that each
of the representations of the Operator set forth in Section 5.2 are true and
correct and (2) an opinion of counsel to the Operator, in a form which is
reasonably satisfactory to the Township, to the effect set forth in Section
5.2(a) through (d).
(e) The Operator, its employees and/or its subcontractors, if
applicable, shall have obtained all applicable Permits that are necessary for
the operation, maintenance and management of the System, and that are not
expressly required to be obtained by the Township hereunder.
(f) The Operator shall have submitted to the Township all
appropriate certificates of insurance and, at the Township's option, copies
of all applicable endorsements to insurance policies, as are required by this
Agreement.
(g) No material action, suit, proceeding or official investigation
shall have been threatened, publicly announced or commenced by any federal,
state or local governmental authority or agency, or any other person, or in
any federal, state or local court, that seeks to enjoin, assess civil or
criminal penalties against, assess civil damage against or obtain any
judgment, order or consent decree with respect to the Operator, the
Guarantor, the Agreement or the Guaranty Agreement or any actions
contemplated in the Agreement or the Guaranty Agreement;
(h) No receiver, liquidator, custodian or trustee of the Operator
or the Guarantor or of a major part of either entity's property shall have
been appointed subsequent to the Contract Date, and no petition to reorganize
the Operator or the Guarantor pursuant to the Bankruptcy Code or any similar
statute that is applicable to the Operator or the Guarantor shall have been
filed subsequent to the Contract Date; and no adjudication of bankruptcy or a
filing for voluntary bankruptcy under the provisions of the Bankruptcy Code
or any other similar statute which is applicable to the Operator or the
Guarantor shall have been filed.
(i) No indictment or conviction has been returned against any
official of the Operator or the Guarantor with respect to any business
transaction, whether or not related to the transactions contemplated by the
terms of this Agreement or the Guaranty Agreement.
(j) The Operator and/or the Guarantor meets or exceeds the Minimum
Administrative Criteria, Minimum Financial Criteria and Minimum Technical
Criteria.
(k) No change shall have occurred subsequent to the Contract Date
in any applicable federal, state or local law, or any applicable federal,
state or local statute, regulation thereunder or written interpretation
thereof by any applicable regulatory authority, that would make the execution
or delivery by either party of this Agreement or the compliance by the
Township with the terms and conditions hereof or the consummation by the
Township of the transactions contemplated hereby, a violation of such law,
statute or regulation, or that would constitute a "Change in Law" as defined
in the definition of Unforeseen Events.
(l) The Operator shall have paid the greater of the Estimated
Defeasance Amount or the Actual Defeasance Amount, the System Indebtedness
shall have been Defeased and the Township shall have received an opinion of
nationally recognized bond counsel, in a form that is reasonably satisfactory
to the Township, to the effect that the System Indebtedness has been Defeased
and that the Defeasance of the System Indebtedness will not adversely affect
the tax-exempt status of such System Indebtedness.
Section 4.3. Conditions to Operator Obligations. The Operator shall
be under no obligation to perform any obligations under the terms of the
Agreement (other than obligations arising or relating to actions required to
be taken by or on behalf of the Operator prior to issuance of the Notice to
Proceed) unless the following conditions have been satisfied or waived by the
Operator (in writing):
(a) The Board and the Local Finance Board shall have finally
approved this Agreement and the time for appeal of such decision shall have
expired.
(b) As promptly as possible after the satisfaction of the
conditions contained in Section 4.3(a) and 4.3(l), the Township shall have
delivered to the Operator a certificate of an Authorized Representative of
the Township to the effect that the System Indebtedness has been Defeased and
that, in all other respects, each of the representations of the Township that
are set forth in Section 5.1 are true and correct.
(c) The Township shall deliver an opinion of counsel to the
Township to the effect that the Township is authorized to enter into this
Agreement.
(d) No material action, suit, proceeding or official investigation
shall have been threatened, publicly announced or commenced by any federal,
state or local governmental authority or agency, or in any federal, state or
local court, that seeks to enjoin, assess civil or criminal penalties
against, assess civil damage against or obtain any judgment, order or consent
decree with respect to the Township or to the Agreement or any actions
contemplated in the Agreement as a result of the Township's negotiation,
execution, delivery or performance of any such agreement or its participation
or intended participation in any transaction contemplated thereby.
(e) No change shall have occurred subsequent to the Contract Date
in any applicable federal, state or local law, or any applicable federal,
state or local statute, regulation thereunder or written interpretation
thereof by any applicable regulatory authority, that would make the execution
or delivery by either party to this Agreement (or the execution or delivery
by the Guarantor of the Guaranty Agreement), the compliance by the Operator
and the Guarantor with the terms and conditions hereof and of the Guaranty
Agreement, as applicable, or the consummation by the Operator and the
Guarantor of the transactions contemplated hereby and in the Guaranty
Agreement, as applicable, a violation of such law, statute or regulation, or
that would constitute a "Change in Law" as defined in the definition of
Unforeseen Events.
(f) The Township shall have enacted by the Commencement Date, all
municipal laws, ordinances, or regulations necessary for the performance of
this Agreement.
Section 4.4. Satisfaction of Conditions Precedent. (a) The parties
hereto shall exercise good faith and due diligence in satisfying the
conditions precedent required by this Article IV and shall promptly proceed
to perform or cause to be performed those conditions precedent, or portions
thereof, that are within each party's control.
(b) If the Commencement Date has not occurred on or prior to two
hundred and seventy Days (270) after the Contract Date, the period in which
the conditions precedent can be satisfied or waived may be extended by joint
agreement of the Township and Operator, for a period of time to be agreed
upon by the Township and Operator, on the same terms and conditions set forth
in this Agreement, except to the extent expressly provided below.
(c) In the event that the Commencement Date shall not have
occurred on or before the two hundred and seventieth (270th) Day after the
Contract Date or prior to the last Day of any extension period elected
pursuant to Section 4.4(b), then either party, by notice in writing to the
other party, may terminate this Agreement. If the reason for such
termination is the fault of neither party to the Agreement, then all amounts
paid by the Operator to the Township prior to such termination shall be
returned to such Operator and each partner shall bear its respective expenses
attributable to the Agreement. In the event that such termination is the
fault of the Township for failure to meet conditions precedent within its
control, then the Township shall be responsible for all reasonable, direct
fees and expenses of the Operator attributable to the Agreement. In the
event that such termination is the fault of the Operator for failure to meet
conditions precedent within its control, then the Township shall be entitled
to retain all amounts, including the Estimated Defeasance Amount and Initial
Concession Payment, paid by the Operator to the Township prior to such
termination, and each partner shall bear its respective expenses attributable
to the Agreement.
(d) The Operator and the Township shall each provide an executed
acknowledgment to the other of the date that each of the respective
conditions precedent to its obligations under this Agreement have been met or
waived and such acknowledgement shall be given within thirty (30) Days of the
date on which such condition is met or waived. The Township shall furnish
the Notice to Proceed to the Operator within thirty (30) Days after the last
of the conditions precedent have been waived or satisfied, as provided in
this Article IV, and such Notice to Proceed shall set forth the Commencement
Date, which shall be not later than fifteen (15) Days after the issuance of
such Notice to Proceed. Neither party will be permitted to terminate this
Agreement for failure to satisfy any condition precedent that is entirely and
reasonably within such party's control or which failure is determined to be
the Township's fault or the Operator's fault, as the case may be, as set
forth in Section 4.4(c).
Section 4.5. Timing of Certain Obligations. (a) Pursuant to the Water
Act, this Agreement must be submitted to the Local Finance Board and the
Board for review and approval. The Township shall be responsible for
obtaining such review and approval, and the Operator shall cooperate with the
Township in providing any assistance and information that is required in
order to obtain such review and approval. In the event that the Local
Finance Board and/or the Board conditionally approve this Agreement or any
portion thereof and premise future approval on the acceptance of certain
proposed terms and conditions by the parties, to the extent that such terms
and conditions are immaterial terms and conditions in that such terms and
conditions do not (i) materially and adversely affect the rates to be charged
by the Township or the amount of the Initial Concession Payment and/or the
Annual Payment to be paid to the Township; (ii) impose restrictions on the
Township's use of the Initial Concession Payment and/or the Annual Payment;
or (iii) materially and adversely impact the cost to operate and maintain the
System (or any portion thereof), the parties shall accept such terms and
conditions and shall modify this Agreement to include such terms and
conditions. If the proposed terms and conditions imposed by the Local
Finance Board or the Board are material terms and conditions in that such
terms and conditions (i) materially and adversely affect the rates to be
charged by the Township or the amount of the Initial Concession Payment
and/or the Annual Payment to be paid to the Township; (ii) impose
restrictions on the Township's use of the Initial Concession Payment and/or
the Annual Payment; or (iii) materially and adversely impact the cost to
operate and maintain the System (or any portion thereof), the parties shall
cooperate in good faith to negotiate acceptable terms and conditions to this
Agreement that will satisfy the concerns of the Local Finance Board or the
Board, as appropriate.
(b) On the Contract Date, the Operator shall pay to the Township the
full amount of the Initial Concession Payment less any outstanding balances
due to the Operator or subsidiaries thereof in accordance with, and subject
to, Section 8.1(a).
(c) The Operator shall have paid, in cash, the Estimated Defeasance
Amount into an escrow account (the "Interim Defeasance Fund") to be
established promptly upon the satisfaction of the condition described in
Section 4.2(a) and 4.3(a). Following the Notice to Proceed, the Township may
withdraw moneys from said Interim Defeasance Fund for the Defeasance of the
System Indebtedness. Any deficiency in the amount on deposit in the Interim
Defeasance Fund required for the Defeasance of the System Indebtedness shall
be paid by the Operator with an appropriate adjustment to the Base Service
Rate to reflect such additional payment. Any excess amounts remaining in the
Interim Defeasance Fund following Defeasance of the System Indebtedness shall
be paid to the Township.
<PAGE>
ARTICLE V. REPRESENTATIONS, WARRANTIES AND COVENANTS
Section 5.1. Township Representations, Warranties and Covenants. The
Township hereby represents, warrants and covenants to the Operator as follows:
(a) The Township is a municipal corporation duly created and existing
pursuant to the laws of the State of New Jersey. The Township has the
requisite power and authority to enter into this Agreement.
(b) The Township has the legal capacity and authority to assess the
rates and collect the fees for the Services to customers of the System that
are required to be established by the Township pursuant to Article VIII. The
Township has and will, to the best of its ability, maintain for the Term of
this Agreement the legal capacity and authority to impose liens for the
nonpayment of such rates and fees. Other than the System Indebtedness and
any indebtedness incurred for Additional Capital Improvements if such are
undertaken and paid for by the Township, there are and will be no liens,
notes, bonds, mortgages, encumbrances, or other entitlement to the revenues
of the System (other than connection fees, if any, which shall be retained by
the Township) whose claim is equal to or prior to the Operator's entitlement
to the revenues of the System pursuant to this Agreement, and no such liens,
notes, bonds, mortgages, or encumbrances or entitlement to the revenues
(other than connection fees) will be issued or imposed by the Township during
the Term of this Agreement which affect the priority of the Operator's rights
to the revenues provided for in this Agreement.
(c) To the Township's knowledge, there are no claims, suits, actions
pending or judgments entered which, if successful, would create an
encumbrance upon the revenues of the System which would have a priority over
the Operator's entitlement to the revenues of the System pursuant to this
Agreement or which otherwise would have a material adverse effect on the
ability of either the Operator or the Township to perform its obligations
hereunder.
(d) The Township has or holds, and will continue to have or hold
throughout the Term of this Agreement, all appropriate Permits necessary to
effectuate its responsibilities under this Agreement.
Section 5.2. Operator Representations, Warranties and Covenants. The
Operator represents, warrants and covenants to the Township as follows:
(a) The Operator is a corporation duly organized and validly existing
in good standing in the State of New Jersey and is qualified and authorized
to do business in the State of New Jersey.
(b) The Operator has full power and authority to enter into this
Agreement and to perform its duties and obligations hereunder. This
Agreement has been duly authorized, executed and delivered by the Operator,
is enforceable in accordance with its terms and the authorization, execution,
delivery and performance of this Agreement by the Operator will not violate
any law, judgment, order, ruling or regulation applicable to the Operator and
does not constitute a breach of or default under any agreement or instrument
by which the Operator is bound.
(c) The Operator (or the Operator's personnel, where appropriate) has
or holds, and will continue to have or hold throughout the Term of this
Agreement, all Permits necessary to operate, maintain and manage the System
and required to be obtained by the Operator in accordance with this Agreement.
(d) No litigation is pending or threatened against the Operator which
would impair its ability to perform its duties and obligations under this
Agreement.
(e) At all times during the Term of this Agreement, the Operator shall
keep the System free from any and all liens and encumbrances arising out of
or in connection with (i) its operation, maintenance and management of the
System, or (ii) any acts, omissions or debts of the Operator, the Guarantor,
any of their subsidiaries, or any of their subcontractors.
(f) At all times during the Term of this Agreement, the Operator and/or
the Guarantor shall meet and maintain the Minimum Administrative Criteria,
Minimum Financial Criteria and Minimum Technical Criteria.
<PAGE>
ARTICLE VI.
OPERATION, MAINTENANCE, MANAGEMENT OF AND
CAPITAL IMPROVEMENTS TO THE SYSTEM
Section 6.1. General. The Operator shall do the following with
respect to the System:
(a) The Operator shall manage, operate, maintain, repair and improve
the System at all times on behalf of the Township in compliance with all
federal, state and local laws, regulations and Permits and in accordance with
this Agreement. The Operator, at all times, shall keep the System in good
repair and working order and shall manage, operate, maintain, repair and
improve the System in an efficient and economical manner, all in accordance
with this Agreement, and otherwise in accordance with prudent industry and
utility practice.
(b) The Operator shall provide, at its cost and expense, all labor,
materials, machinery, vehicles, equipment, office equipment (copiers,
typewriters, computers, etc.), fuel, power, chemicals, supplies, materials,
spare parts, expendables, consumables, testing and laboratory analysis, and
all else necessary therefor or incidental thereto for the management,
operation, maintenance, repair and improvement of the System in accordance
with this Agreement and in accordance with applicable laws, ordinances and
regulations.
(c) The Operator shall as promptly as is reasonable respond to all
customer problems and emergencies relating to the System and shall maintain
at all times during the Term of this Agreement a toll-free twenty-four (24)
hour telephone number where users of the System can report any emergencies
from anywhere within the Township.
(d) The Operator shall provide, during the Term of this Agreement, free
Service to the Township offices, public buildings and other entities
identified in Schedule I to this Agreement. The Township shall use its best
efforts to ensure that the recipients of such free Service (i) will not
unreasonably waste free water through improper maintenance of its facilities
within such recipients' control; and (ii) will implement reasonable water
conservation efforts including any reasonable efforts required by the
Operator. The Operator may, at its expense, install meters for the
measurement of such free water. The Township shall not be required to pay
any hydrant fee or any other water service related fees during the Term of
this Agreement. The Operator shall also comply with the provisions of
N.J.S.A 40A:31-10. The Township will not commit to provide any free Service
to any public or private resident of the Township after the Contract Date
without the prior written consent of the Operator; provided, however, that
such consent shall not be withheld for any public use similar in kind and
scope to municipal public users that receive free water service as of the
Contract Date.
(e) If, during the course of excavation work necessary to make repairs
and/or improvements to the System, hazardous or toxic waste or materials (as
defined in applicable federal and/or state laws and regulations) are
uncovered by the Operator, it shall not be the obligation of the Operator to
remove and dispose of such hazardous substance. The Operator shall, however,
immediately notify the Township upon becoming aware of the presence of such
hazardous or toxic waste or materials, and shall immediately notify such
other governmental agencies as may be required by law and shall take such
further actions which in its opinion is necessary to assist the Township in
protecting the health, safety and welfare of the public. The parties legally
responsible for the disposal, discharge, spill or leak shall pay all costs
for such removal of the offending materials and any clean-up activities
associated with such disposal, discharge, spill or leak.
(f) The Operator's response time for various customer inquiries and
System problems under normal conditions shall be as follows:
========================----------------------======================
Initiate Contact Initiate
Condition with Complainants Investigation/Work
========================----------------------======================
billing inquiry same Day when 2 business Days
possible or within 1
business Day
========================----------------------======================
water main break not applicable as soon as possible
but not later than 2
hours
========================----------------------======================
water service complaint 2 business hours 1 business Day
- ----------------------------------------------======================
utility mark out not applicable 3 business Days
(completion); less
for emergencies
- ----------------------------------------------======================
(g) The Operator shall perform periodic testing of the System,
including, without limitation, testing of the meters and AMR equipment
installed in the System in accordance with prudent industry and utility
practice. Process meters shall be calibrated in accordance with manufacturer
requirements. All generators shall be exercised at least on a weekly basis
provided that the Operator shall use its best efforts to schedule such
exercising at times to minimize inconvenience to residents resulting from
noise.
(h) All sludges, scum, grit, screenings, trash and refuse generated by
or resulting from the operations or maintenance of the System shall be
disposed of in accordance with applicable regulations pertaining thereto.
(i) The levels of the storage reservoirs and storage tanks, if any,
shall be monitored and controlled to ensure proper pressures for satisfactory
service and fire fighting capabilities within the System.
(j) All hydrants shall be flushed at least once a year and the
condition of, and maintenance performed on, the hydrants shall be recorded.
All hydrants found to be broken or inoperable shall be bagged and shall
immediately (within two (2) business Days after discovery) be replaced or
repaired.
(k) All water mains that become frozen or break shall be repaired or
replaced so as to minimize disruption of customer service.
(l) All inoperable, inaccurate or broken water meters shall be
immediately replaced upon discovery.
(m) Maintenance and operations of the System shall include: routine
painting and repairs of structures, both interior and exterior; upon
discovery removal and replacement of broken or inoperable valves critical to
the safe operation of the System and/or hydrants; repair of main and service
breaks; calibration of instrumentation on a twice a year basis; hydrant
flushing (once a year) and maintenance; removal and replacement of broken,
inaccurate or inoperable customer meters; reading of meters as required for
billing purposes; disposal of all sludges, scums, screenings, grit, debris,
trash, etc. from the System; sampling, testing analysis, reporting, billing
and collections; and all else necessary therefor or incidental thereto to
protect the health, safety and welfare of the users and as required by
industry standards and utility practices.
Section 6.2. Inventory. The Operator will be responsible for
submitting a complete inventory listing the quantity and condition of all
spare parts, equipment, tools, supplies, materials and chemicals within eight
(8) weeks of assuming responsibility for operation and maintenance of the
System, which inventory shall be subject to verification by the Township at
the Township's option and shall provide the Township with similar items upon
the termination of the Agreement.
Section 6.3. Maintenance Management Program. The Operator shall
develop and implement a comprehensive computer-based maintenance management
program that develops readily available historical data, including an
inventory of spare parts and provisions for enforcing existing equipment
warranties and guarantees and maintaining all warranties on new equipment
purchased after the Commencement Date, and of providing documentation thereof
to the Township for the System. Such a comprehensive maintenance management
program shall include preventative, predictive, and corrective maintenance
for all components of the System.
The Operator shall maintain a comprehensive maintenance program for all
functions of the System that includes preventative, predictive, and
corrective maintenance for all: buildings and structures; vehicles and other
related rolling stock; electrical systems and instrumentation; mechanical
equipment; laboratory, monitoring and sampling equipment; heating,
ventilation and air conditioning; communication equipment; computer system
equipment; chemical feed facilities; transmission and distribution
facilities; pumping facilities; auxiliary power facilities; SCADA system; and
other structures.
The maintenance management program shall:
Ensure efficiency, long-term reliability and conservation of capital
investment in accordance with industry standards;
Be otherwise in accordance with industry standards; local, state and
federal codes; manufacturer's equipment recommendations; and an O&M
Manuals be developed by the Operators;
Provide for timely generation and/or updating of O&M Manuals;
Be documented as required by the Township; and
Provide enforcement of existing equipment warranties or guarantees and
maintain all warranties on new equipment purchased after the
Commencement Date of the Agreement.
Any modifications or major maintenance affecting the appearance of the
facilities in the System will be performed only after receipt of the prior
written approval of the Township.
Section 6.4. Software Program. The Operator shall provide
computerized software packages for all functions of the System. Upon the
termination of the Agreement, the Operator shall provide all data with
respect to the System to the Township.
Section 6.5. Testing and Laboratory Analysis. The Operator, at its
sole cost and expense, shall perform, or cause to be performed, all
laboratory sampling and analyses, and reporting, as necessary for compliance
with all federal, state, local or other regulations and requirements having
the force of law, as well as that which is customary for process (i.e.
corrosion control) monitoring and control.
Sampling and testing procedures shall conform to the current edition of
Standard Methods for the Examination of Water or be in accordance with the
testing requirements of the applicable regulations or Permits. All testing,
with the exception of process control testing, shall be performed by a New
Jersey certified laboratory and the Operator shall prepare the data received
from the testing laboratory for all applicable regulations or Permits
monitoring and operating reports and shall deliver such results to the
appropriate state and regulatory agencies.
Testing for the System shall include, but not be limited to, coliform
determinations, pH, color, sodium, hardness, iron, manganese, lead, copper,
heavy metals, THMs, VOCs, corrosiveness, alkalinity, magnesium, calcium,
turbidity, fluoride, cryptosporidium, and giardia lamblia cysts and all other
tests required or to be required by the DEP or the EPA. The number,
frequency and location of tests shall be in accordance with the applicable
provisions of the regulations, including the Lead and Copper Rule, 40 CFR
141, et seq, as the same may be amended or supplemented from time to time.
Section 6.6. Reporting Requirements. (a) The Operator shall comply
with all reporting requirements related to its operations and the operation,
maintenance and management of the System, as mandated by federal, state and
local laws regulations, and Permits.
(b) The Operator shall provide comprehensive monthly, year-to-date and
annual reports in a format satisfactory to the Township and regulatory
agencies for each function or activity of the System, including, but not
limited to:
Operating parameters laboratory analyses, maintenance plans and
activities including conditions of the System, water quality results,
water purchased vs. water sold, equipment and parts inventories,
manpower utilization, repairs, service calls and responses and other
relevant information; and
Safety reports regarding accidents, injuries, and damages to Township
property and other relevant information;
(c) The Operator shall maintain up-to-date financial records as they
apply to the Services rendered under the terms of this Agreement. All
financial statements shall be prepared in accordance with Generally Accepted
Accounting Principles, consistently applied.
(d) The Operator shall provide the Township with its periodic financial
reports as they apply to the Services rendered under the terms of this
Agreement. At a minimum, such reports shall include the following:
(i) Monthly reports on or before the twenty-fifth (25th) Day of each
month and a cumulative report as of the end of each Contract Year as follows:
(A) a summary account activity report showing the aggregate
balance of accounts receivable from customers at the end of the
preceding month, billings to customers for the preceding month,
collections from customers during the preceding month, adjustments to
customers' accounts and aggregate balances of accounts receivable from
customers at the beginning of the preceding month. The report shall
provide a breakdown as classes of customers and components of billings,
collections and adjustments as to Base Service Rate, the Pass-through
Charge, Pass-through Credit, Additional Capital Improvements Charge, and
Township Administration Fee.
(B) a report showing the total cubic feet of water purchased and
sold for the preceding month and the total cubic feet of water sold for
the Contract Year, the corresponding billings for the preceding month
and Contract Year as set forth in the summary account activity report
pursuant to Section 6.6(d)(i)(A).
(C) a cumulative analysis as of the end of the preceding month
showing the following information with respect to any Pass-through
Charge or Pass-through Credit, any Additional Capital Improvements
Charge and any Township Administrative Fee:
(I) Total amount of Pass-through Credit or Pass-through
Charge, Additional Capital Improvements Charge, and Township
Administrative Fee to be recovered during the Fiscal Year pursuant
to Section 8.4(b), (d) and (e);
(II) Total amount of Pass-through Credit or Pass-through
Charge, Additional Capital Improvements Charge, and Township
Administrative Fee (a) collected within the Total User Charge Rate
as of the end of the preceding month and (b) paid to the Township
or Operator, as applicable, as of the end of the preceding month;
(III) The balance of the Pass-through Credit or
Pass-through Charge, Additional Capital Improvements Charge, and
Township Administrative Fee to be recovered or the excess
Pass-through Credit or Pass-through Charge, Additional Capital
Improvements Charge and Township Administrative Fee collected;
(2) On or before each January 25, April 25, July 25, and October 25, a
quarterly detailed accounts receivable trial balance showing the individual
customers and their respective account balances as of the preceding December
31, March 31, June 30 and September 30, respectively, as reconciled with the
ending balance of accounts receivables in the summary account activity report
submitted pursuant to Section 6.6(d)(i)(A).
(3) The Operator shall deliver a year-end report to the Township
consisting of a compilation of the monthly and quarterly reports set forth
above certified by an officer of the Operator and delivered to the Township
within sixty (60) Days of the end of each Contract Year. The Operator shall
also deliver a certified audit of the financial statements of the Guarantor
and its subsidiaries on a consolidated basis prepared in accordance with
Generally Accepted Accounting Principles, consistently applied and certified
by a certified public accountant within one hundred and twenty (120) Days of
the end of the Operator's fiscal year.
(4) The Operator shall provide such other reports as may be reasonably
requested from time to time by the Township.
Section 6.7. Staffing. (a) The Operator shall provide a staff of
qualified and experienced employees who have direct experience in operating,
maintaining and managing potable water systems similar in nature and
character to the System and shall provide such additional third party support
as may be needed to perform its duties and obligations hereunder. Said third
parties shall be equally qualified for the particular services to be
performed and shall not have any direct claim against the Township
whatsoever. The Operator shall at all times maintain the necessary number of
employees, staff and third-party contractors to operate, maintain and manage
the System in accordance with this Agreement, to adequately maintain the
System in good repair, to adequately operate the system to provide good
service to the users, and to protect the health, welfare and safety of the
citizens of the Township.
(b) The Operator shall provide: (i) qualified management, supervisory,
technical, laboratory, operating personnel, and personnel with licenses as
required by the State of New Jersey for operation of the System; (ii) a
project manager to oversee all activities of the Operator related to the
System; (iii) specialists, as may be necessary, in water quality control,
instrumentation, troubleshooting, emergency management, and similar
circumstances; and (iv) office and clerical support staff as necessary.
(c) The Operator shall provide a technical support group that will
provide on-call backup advice and water quality expertise control,
management, maintenance and plant repair to assist the operational staff and
ensure performance of obligations hereunder.
(d) The Operator shall provide and maintain an organizational chart
that lists job classification, the number of staff proposed for the
transition phase and for the full time operation. The organization chart,
which may be revised at the discretion of the Operator consistent with the
operation, maintenance and management of the System in accordance with this
Agreement, shall indicate the staffing for the System, including
laboratory/testing personnel and the licensed individuals/positions necessary
to satisfy regulatory requirements and to provide operations and maintenance
services in a responsible professional manner. The Operator shall notify the
Township of any proposed material revisions within its control to staffing
and/or personnel for the System no later than thirty (30) Days prior to the
proposed effective date of such proposed revisions, and the Township shall
have the right to review and comment upon any such proposed revisions. The
Operator shall in good faith consider any comments provided by the Township,
and shall respond to the Township in writing regarding any such comments.
The Operator shall notify the Township of any proposed material revisions
outside of its control to staffing and/or personnel for the System or soon as
reasonably possible.
The Township shall have the right to approve the individuals designated
from time to time by the Operator as the Project Manager and the licensed
operator to manage and oversee the Services to be provided under this
Agreement; provided however that said approval shall not be unreasonably
withheld. The Township will forward all complaints about the Operator's
employees or staff in writing to the Operator, who will address such
complaints with the offending employee or staff in an appropriate and timely
manner. If the basis for any such complaint is not corrected to the
reasonable satisfaction of the Township, the Township shall have the right to
require the Operator to remove or replace any such personnel interacting with
Township officials and/or the public.
(e) The Operator shall provide ongoing training programs for all
personnel in operations and maintenance procedures, management, laboratory
and process control, QA/QC, right-to-know, safety, etc. as required for
proper performance of their duties and for professional development.
(f) The Operator and/or Elizabethtown Water Company shall directly
employ as many of the (20) persons identified in Schedule J to this Agreement
as it deems necessary (but not less than nine (9) of such persons) and shall
pay the Township for the salaries and benefits (including any reasonable
raises) of any of such persons that it does not employ until the earlier of
(i) the date such person replaces an existing employee of the Township; (ii)
the date such person refuses an offer of employment (or such offer expires)
from the Operator and/or Elizabethtown Water Company at his/her current
salary; or (iii) the second anniversary of the Commencement Date. In no
event shall the Operator be required to pay for any person that is not
employed by either the Township, the Operator and/or Elizabethtown Water
Company. Any such persons who are so employed by the Operator and/or
Elizabethtown Water Company shall work under the direct management and
supervision of the Operator and/or Elizabethtown Water Company, and the
Operator and/or Elizabethtown Water may terminate its employment of any such
employees services for cause. The use of such employees by the Operator
and/or Elizabethtown Water Company in the performance of the Services shall
in no way relieve or excuse the Operator from performing the Services in
accordance with the terms of this Agreement or from any liability resulting
from its failure to so perform as provided hereunder.
Section 6.8. Licenses. The Operator shall acquire and hold, or cause
its personnel to acquire and hold, all required federal, state and local
approvals, licenses, and certifications necessary to operate, maintain and
manage the System required to be obtained by the Operator in accordance with
this Agreement. In accordance with N.J.S.A. 58:11-64 et seq. and N.J.A.C.
7:10-13, the minimum class of license required is a W-3 license for the water
distribution facilities.
Section 6.9. Compliance with Laws, Regulations and Permits. (a)The
Operator shall comply with the Safe Drinking Water Act ("SDWA"), the Resource
Conservation Recovery Act, as amended ("RCRA"), the Comprehensive
Environmental Response, Compensation and Liability Act, as amended
("CERCLA"), the Occupational Safety and Health Act ("OSHA") and any and all
other applicable local, state and federal laws, codes, ordinances and
regulations as they pertain to the System. The Operator shall pay all
regulatory fines and penalties, without limitations, assessed against the
Township and/or the Operator for the Operator's non-compliance therewith.
The Operator shall, where applicable, comply with, satisfy, and pay all
costs or fees associated with, all regulatory requirements pertaining to the
above including, but not limited to, public notification in the event of
non-compliance with drinking water standards, including those associated with
the Lead and Copper Rule.
All repairs and/or improvements to the System shall be made by the
Operator in accordance with existing Township ordinances for work in the
Township.
(b) The Township is the named permittee for various Permits and
appraisals for the system. The Operator shall be responsible for obtaining,
including filling out required application forms, supplying required data,
and payment of required fees, and maintaining all necessary existing and/or
additionally required state, federal and local Permits, licenses and other
governmental or private party approvals for the operation of the System and
the equipment owned by the Township and used in connection with the System or
provided by the Township for such use. All additional Permits and approvals
shall be in the name of the Township as the permittee; however, the Operator
shall comply with all requirements pertaining thereto in accordance with this
Agreement.
Section 6.10. Safety and Security. The Operator shall provide for and
maintain security and safety for the System. Fences shall be maintained in
neat order and structural integrity. Gates, access points and doors shall be
kept locked, structures shall be protected from unauthorized entry and
security alarms shall be maintained.
The Operator shall conduct all operations, maintenance and management of
any facilities in compliance with applicable health and safety regulations
including, but not limited to: OSHA, general industry regulations including
requirements for confined space entry, respiratory protection and hazard
communication; EPA regulations on emergency planning and notification under
CERCLA, 40 CFR Part 355; and EPA regulations on hazardous chemical reporting
and community right-to-know, 40 CFR Part 370, and any other applicable
regulations as may be enacted during the Term of this Agreement.
Section 6.11. Continuity of Service. The Operator shall cooperate in
good faith with the Township, its agents, contractors, and subcontractors and
shall provide for the orderly transition of Services from the Township and/or
its contractors to the Operator without interruption or disruption of
Services and without adverse impacts to the users of the System or to the
Township.
In the event of termination or non-renewal of this Agreement, the
Operator shall provide for continuity of the Services and the transition of
operations back to the Township or to another contract partner designated by
the Township as of the earlier to occur of the expiration of the Agreement or
the earlier termination thereof in accordance with the provisions of this
Agreement.
The Operator shall make such provisions as are necessary to ensure that
no portion of the System shall be shut down for any period of time due to
strikes, lock-outs or labor problems.
In the event of a labor action, stoppage or dispute that disrupts or
prevents the Operator's employees or its subcontractors employees from
entering upon and working on any part of the System, the Operator shall, at
its sole cost, seek appropriate legal injunctions, remedies, or court
orders. In any event, the Operator shall continue to operate the System
through the use of office personnel, management, or other resources at its
disposal. The Operator shall always maintain operation of the System to
protect the health, welfare, and safety of the users of the System and the
residents of the Township.
Section 6.12. Emergency Situations. The Operator shall promptly
(within two (2) hours) respond to all customer problems and emergencies
relating to the System and shall maintain at all times during the Term of
this Agreement a toll-free twenty-four (24) hour telephone number where users
of the System can report any emergencies.
The Operator shall immediately notify the Township of any activity,
problem, or circumstance should reasonably become aware that threatens the
safety, health or welfare of the users of the System or the residents of the
Township.
In the event of damage or destruction of the potable water facilities or
any emergency which, in the reasonable judgment of the Operator, is likely to
result in material loss or damage to the System or constitute a material
threat to human health or safety, the Operator may suspend operation of the
System. Emergency repairs as are necessary to mitigate or reduce such loss,
damage or threat to human health or safety shall be done in consultation with
the Township. Notification of emergency/non-compliance events within the
System shall be in accordance with Permit requirements and an emergency plan
to be developed by the Operator and submitted to and approved by the Township
and the DEP and any subsequent amendments or modifications thereto.
The Operator's response to emergencies and unusual circumstances shall
be in accordance with applicable regulations and requirements and with such
personnel and equipment as necessary to maintain or restore the operations of
the System in a timely manner with the least possible disruption or
inconvenience to the users of the System.
Section 6.13. Access to System and Records. The Township shall have
the right from time to time or at any time, upon reasonable notice, to
inspect the System and/or the operation thereof by the Operator.
The Operator shall make provision for, and shall permit and facilitate
twenty-four (24) hour per Day access to the System by Township personnel.
Visits may be made at any time by any of the Township's employees or agents
so designated by the Township. Keys for the facilities or structures in the
System shall be provided to the Township's Public Works Director by the
Operator in accordance with the Operator's existing physical security plan
and key control program. It is understood that all visitors shall comply
with the Operator's operating and safety procedures.
The Township, through its consulting engineer, shall have the right from
time to time and at any time to inspect the System (or any portion thereof)
and/or the operation thereof by the Operator, provided that the Township or
its consulting engineer provides prior reasonable notice to the Operator.
The Township, through its consulting engineer, and at the sole cost and
expense of the Township (which may be part of the Township Administrative
Fee) may perform an annual inspection in the System, which shall be scheduled
with the Operator at least two (2) weeks in advance. In the event that such
inspection reveals a lack of repairs or necessary maintenance to the System
facilities or equipment, the Township's consulting engineer shall identify
such items to the Contractor Partner in writing. The Operator shall perform
such repairs or maintenance identified in the consulting engineer's report.
All such repairs or maintenance shall be performed on a mutually agreeable
schedule. Once the identified repairs or maintenance have been completed,
the Township's consulting engineer shall reinspect the System, and the
Operator shall reimburse the Township for the actual cost of reinspection if
such reinspection reveals that the repairs or maintenance have not been
performed. The cost of all such repairs and maintenance are to be borne by
the Operator as part of the Base Service Rate.
The Township shall have the right to continuously monitor and review the
performance of the System, including any facilities therein, and the
operation, maintenance and management thereof by the Operator and, if the
Township so chooses, the Township shall be entitled to hire a consulting
engineer and/or other consultant at its cost (which cost may be included in
the Township Administrative Fee) for purposes of conducting such monitoring
and review activities.
The Operator shall keep such records of all pertinent operating data and
information relating to the System, including separate accounting and
financial records, as prudent industry and utility practice shall require and
as otherwise required by the provisions of this Agreement. The Township
shall have continuous and unrestricted access to all components of the
System, including, without limitation, all operating, monitoring and
financial data and information relating to the operation, maintenance and
management of the System required to be kept by the Operator in accordance
with this Agreement. The Operator shall be obligated to provide the
Township, upon reasonable request, with copies of all operating data,
accounting, financial and other information kept by the Operator in its
performance of its obligations hereunder.
Section 6.14. Meters and AMR Devices. (a) During the Term of this
Agreement, the Operator shall install, at its sole cost and expense, an AMR
for each customer of the System whose meter is two (2) inches or smaller and
becomes more than ten (10) years old, such that no meter within the System is
greater than 10 years old. Those meters that are larger than two (2) inches
shall be tested by the Operator every five (5) years and, if necessary,
either replaced or repaired.
(b) The Township shall provide all reasonable and necessary assistance
to the Operator in order to expedite the installation/replacement process.
Notwithstanding anything in this Agreement to the contrary, failure to
install or replace meters due to circumstances beyond the control of the
Operator, including denial of access for purposes of replacement, shall not
constitute a default by the Operator under this Agreement.
(c) The Operator shall install state-of-the-art AMRs and shall assign
title thereto and all manufacturing warranties and representations to the
Township upon the termination or expiration of this Agreement.
Section 6.15. Water Quality Standards. The Operator shall comply with
the Safe Drinking Water Act and all other federal, state and local
regulations concerning safe drinking water standards during the Term of this
Agreement. The Operator agrees to indemnify and hold the Township harmless
from any fines or penalties assessed by the appropriate regulatory agencies
during the Term of the Agreement for any and all violations committed by the
Operator, its agent, servants or employees and from any fees or costs
incurred as a result of failure to comply with regulatory requirements.
Section 6.16. Operations Committee. The Township and the Operator
shall establish a formal Operations Committee, consisting of the Township
Public Works Director and two (2) employees of the Operator or its affiliated
companies (at least one of whom must be an officer of the Operator) which
shall meet, with a frequency to be determined by the parties, to discuss
issues related to the operation, maintenance and management of the System; to
receive and review reports; and to confer generally as a means of enhancing
communication between the Township and the Operator. In addition to such
meetings, representatives of the Operator shall be available to meet with the
Mayor and members of the Council of the Township or their authorized
representatives, as reasonably requested by the Township.
<PAGE>
ARTICLE VII. SYSTEM CAPITAL IMPROVEMENTS
Section 7.1. Minimum Capital Improvements and Additional Capital
Improvements to the System. (a) The Township and the Operator have agreed
that the Operator will, within the time period identified, construct the
Minimum Capital Improvements in order to meet the Operating Standards by the
fourth (4th) anniversary of the Commencement Date. The cost of such Minimum
Capital Improvements is included in the Base Service Rate. The Operator
reserves the right to substitute different Capital Improvements of similar
cost (the "Substitute Minimum Capital Improvement") as it deems necessary in
order to either (i) meet the Operating Standards in a timely manner or (ii)
if the Operating Standards have been met, make such other Capital
Improvements as the Township and the Operator agree are necessary or useful
to the System. In the event that the Operator completes all of the Minimum
Capital Improvement (including all Substitute Minimum Capital Improvements)
and the Operating Standards have not been achieved, then the Operator shall
spend up to an additional one million dollars ($1,000,000) to achieve such
Operating Standards. In the event that the Operator spends such additional
one million dollars ($1,000,000) to meet the Operating Standards but does not
achieve the Operating Standards, all other Capital Improvements shall be
treated as Additional Capital Improvements pursuant to Section 7.1(b).
(b) The Township may request the Operator and/or the Operator may
propose to make additional Capital Improvements to the System (the
"Additional Capital Improvements"), the plans for which shall be either
designed by the Township, or otherwise at its option prepared by the Operator
and subject to the review and approval of the Township and its consulting
engineer. The Additional Capital Improvements and the amortization schedule
for such Additional Capital Improvements to be undertaken by the Township or
the Operator shall be agreed to by the Township and the Operator prior to the
installation or acquisition thereof. Such Additional Capital Improvements
shall be financed and installed by the Operator unless the Township, in its
sole discretion, determines to undertake such improvements itself. If the
Operator and the Township agree on the proposed plan to implement and finance
such Additional Capital Improvements, the Operator and/or the Township, as
applicable, shall be entitled to recover the cost of such Additional Capital
Improvements through a mutually agreed upon amortization schedule together
with a return on the unamortized balance thereof at a mutually agreed upon
rate over the useful life of such Additional Capital Improvements as an
Additional Capital Improvements Charge to be included in the Total User
Charge Rate. In the event that the costs of such Additional Capital
Improvement are paid for by the Township, the Operator shall forward the
Additional Capital Improvements Charge directly to the Township within thirty
(30) Days of the receipt thereof.
(c) All Capital Improvements shall be constructed or installed by the
Operator subject to applicable law and shall be the property of the Township.
<PAGE>
ARTICLE VIII. FINANCIAL TERMS
Section 8.1. The Initial Concession Payment. On the Contract Date,
the Operator shall pay the Township the Initial Concession Payment. The
Township shall establish a special escrow account to be held by the Escrow
Agent and to be designated "Initial Concession Payment Escrow Account." The
Township shall deposit the cash portion of the Initial Concession Payment in
said escrow account. The Initial Concession Payment and all interest earned
in the cash portion of the Initial Concession Payment Escrow Account shall be
payable to the Township upon the Commencement Date. Upon the termination of
this Agreement the amount so deposited along with all interest earned in said
escrow account shall be payable in accordance with Section 4.4.
Section 8.2. The Annual Payment. Commencing on the Commencement Date
and on the first Day of each month thereafter during the Term of this
Agreement, the Operator shall pay the Township one-twelfth of the Annual
Payment, in the amounts specified in Schedule K to the Agreement.
Section 8.3. Revenue Sharing. If, during any Contract Year, the water
sold by the Operator shall exceed an annual average of 6.5 million gallons of
water per Day, then the Operator shall pay over to the Township, on or before
ninety (90) Days following the end of such Contract Year, ten (10%) percent
of the Base Service Rate (in effect during the Contract Year such excess
water was sold) for the sale of such excess water.
Section 8.4. Establishment and Collection of Rates, Fees and Charges.
(a) Beginning on the Commencement Date through June 30, 2002 (the "Fixed
Rate Period") the Total User Charge Rate shall equal the Base Service Rate.
Prior to the beginning of each Contract Year thereafter, the Township, to the
extent permitted or required by law, shall establish the Total User Charge
Rate for such Contract Year, which shall include at least the Base Service
Rate, the Pass-through Charge and/or Pass-through Credit, the Additional
Capital Improvement Charge and the Township Administrative Fee. The Total
User Charge Rate may not be adjusted except as explicitly set forth in
accordance with the terms and conditions of this Agreement.
(b) Any increases or decreases in costs incurred by the Operator
resulting from an Unforeseen Event as contemplated in Section 10.15 shall be
included as a Pass-through Charge or a Pass-through Credit, as the case may
be, using the estimated volume of billable water usage for the year in which
such Pass-through Charge or Pass-through Credit is incurred provided however
that any Pass-through Charge or Pass-through Credit incurred during the Fixed
Rate Period shall be paid or received by the Operator and compounded annually
at the rate of eight and seventy-five hundredths per centum (8.75%) per annum
until the end of the Fixed Rate Period. Upon the end of such Fixed Rate
Period the total amount of such Pass-through Charge and/or Pass-through
Credit shall be amortized over the remaining Term of the Agreement unless
otherwise directed by the Township with interest on the unamortized balance
thereof at the rate of eight and seventy-five hundredths per centum (8.75%)
per annum. The Operator and the Township shall calculate and agree to the
amount of such increases or decreases, and complete such calculation in a
timely manner for such increases or decreases to be included in the Total
User Charge Rate. In the event that at the end of such Contract Year the
amount of such Pass-through Charge or Pass-through Credit actually collected
or to be credited is less than or greater than the actual amount of the
Pass-through Charge or the Pass-through Credit, then the amount of the short
fall or the excess, as the case may be, shall be recouped or credited, as
applicable, in the Total User Charge Rate in the subsequent Contract Year as
a Pass-through Charge or Pass-through Credit, as applicable. In the event
any Pass-through Charge represents amounts paid by the Township, such
Pass-through Charge shall be paid to the Township within thirty (30) Days of
the receipt thereof by the Operator.
(c) The Township, in consultation with the Operator and using the
estimated volume of billable water usage determined pursuant to Section
8.4(b), shall determine the amount of the Additional Capital Improvements
Charge that shall be included in the Total User Charge Rate that will take
effect in the immediately following Contract Year provided however that any
Additional Capital Improvements Charge incurred during the Fixed Rate Period
shall be paid by the Operator and compounded annually at the rate of eight
and seventy-five hundredths per centum (8.75%) per annum until the end of the
Fixed Rate Period. Upon the end of such Fixed Rate Period the total amount
of such Additional Capital Improvements Charge shall be amortized over the
remaining Term of the Agreement unless otherwise directed by the Township
with interest on the unamortized balance thereof at the rate of eight and
seventy-five hundredths per centum (8.75%) per annum. In the event that at
the end of any Contract Year the amount of the Additional Capital
Improvements Charge actually collected is less than or greater than the
actual amount of such Additional Capital Improvements Charge, than the
shortfall or the excess, as the case may be, shall be recouped or credited,
as applicable, in the Total User Charge Rate in the subsequent Contract Year
as an Additional Capital Improvements Charge. The Additional Capital
Improvements Charge incurred by the Township during the Fixed Rate Period
shall be paid to the Township by the Operator. The Additional Capital
Improvements Charge incurred by the Township after the Fixed Rate Period
shall be forwarded to the Township within thirty (30) Days of receipt thereof
by the Operator from the users.
(d) The Township, in consulating with the Operator and using the
estimated volumes of billable water usage pursuant to Section 8.4(b), shall
on or before each Contract Year, determine the amount of the Township
Administrative Fee that will be necessary to enable it to monitor the
administrative, financial and technical aspects of the Agreement as well as
recover any other costs of the Township directly related to the System, which
amount shall be included in the Total User Charge Rate that will take effect
in the immediately following Contract Year provided however that any Township
Administrative Fee incurred during the Fixed Rate Period shall be paid to the
Township by the Operator and compounded annually at the rate of eight and
seventy-five hundredths per centum (8.75%) per annum until the end of the
Fixed Rate Period. Upon the end of such Fixed Rate Period the total amount
of such Township Administrative Fee shall be amortized over the remaining
Term of the Agreement unless otherwise directed by the Township with interest
on the unamortized balance thereof at the rate of eight and seventy-five
hundredths per centum (8.75%) per annum. In the event that at the end of any
Contract Year the amount of the Township Administrative Fee actually
collected is less than or greater than the actual amount of such Township
Administrative Fee, then the shortfall or the excess, as the case may be,
shall be recouped or credited, as applicable, in the Total User Charge Rate
in the subsequent Contract Year as a Township Administrative Fee. The
Township Administrative Fee shall be forwarded to the Township from the
Operator in twelve (12) monthly installments. The Township Administrative
Fee incurred after the Fixed Rate Period shall be forwarded to the Township
within thirty (30) Days of the receipt thereof by the Operator from the
Customers.
(e) The Township shall be the sole authority in determining and
establishing the connection fees and facility charges to be charged to new
customers of the System connecting with the System on and after the
Commencement Date. All such connection fees shall be established in
accordance with the provisions of N.J.S.A. 40A:31-11 and all other charges
shall be established per municipal ordinance. All such connection fees and
facilities charges shall be billed and collected by and be the property of
the Township. The Operator shall complete all the connection work and shall
receive the tapping fee for such work at cost.
Section 8.5. Billing and Collections. (a) On and after the
Commencement Date, the Operator, as agent for the Township, shall be
responsible for the preparation, delivery, maintenance and collection of all
bills and invoices to the customers of the System and all costs and expenses
associated therewith. The Operator shall design the format and content
(which shall be reasonably acceptable to the Township) of the bills for the
Service.
(b) The Township shall exercise on its own behalf and on behalf of the
Operator all powers which it may have in collection matters and shall use
statutory powers pertaining to any and all remedies granted to municipalities
for purposes of collection including the imposition of liens for unpaid
fees. The Operator, in addition to other monies paid to the Township
pursuant to the terms hereof, shall reimburse the Township for any and all
reasonable costs and expenses incurred by the Township in connection with the
use of its statutory powers and remedies to enforce such collections. The
Operator may terminate water to any customer of the System not in compliance
with their obligation to pay the established rates in accordance with their
terms.
(c) The Operator shall promptly (within twenty-four (24) hours or the
next business Day following a holiday or weekend) respond to all customer
billing and collection questions, problems, and inquiries and shall maintain
a toll free telephone number for users of the System to handle such
questions, problems and inquires, as well as any emergencies, as may arise.
The Operator shall provide the Township, upon request, a copy of the
Operator's written policy in dealing with customer service and complaints
relating to billing and collection matters.
(d) The Operator shall provide, within the geographical limits of the
Township, a collection office (such as a bank) where customers of the System
may pay their bills during normal business hours Monday through Friday. The
Operator shall also provide a drop box for the customer's use to be located
in the Township municipal building unless such drop box is no longer
necessary.
(e) The Operator shall conduct at least quarterly readings to the
extent possible of all customers and shall bill such customers accordingly.
Section 8.6. Application of Rents, Rates, Fees and Other Charges. (a)
On or after the Commencement Date, all rents, rates, fees or other charges
for direct or indirect use of the Services of the System (other than
connection fees and facilities charges retained by the Township) shall be
paid to and collected by the Operator and, except as otherwise provided
herein, shall be retained by and become the property of the Operator.
(b) Notwithstanding anything in this Agreement to the contrary, any
rents, rates, fees, accounts receivables, or other charges' for direct or
indirect use of the System (including connection fees and facilities charges)
that are collected by the Operator on or after the Commencement Date and are
in payment for Services rendered by the System prior to the Commencement
Date, including any credits or rebates, shall be paid over to the Township by
the Operator within thirty (30) Days after receipt thereof by the Operator.
(c) Notwithstanding anything in this Agreement to the contrary, any
rents, rates, fees, accounts receivables, or other charges for direct or
indirect use of the Services of the System that are collected by the Township
on or after the termination date or expiration date of this Agreement and are
in payment for Services rendered by the Operator for the System prior to such
termination date or expiration date shall be paid over to the Operator by the
Township within thirty (30) Days after receipt thereof by the Township.
<PAGE>
ARTICLE IX. DEFAULT AND TERMINATION
Section 9.1. General Provisions. During the Term of this Agreement,
this Agreement may be terminated prior to its stated expiration date by the
Township or the Operator on the terms and conditions set forth in this
Article IX and as otherwise specified in this Agreement. The rights of the
Township and the Operator to terminate this Agreement shall be strictly
construed in accordance with the provisions of this Article IX.
Section 9.2. Termination for Cause by the Township. (a) Upon the
happening of any of the following events of default by the Operator, the
Township shall have the right to terminate this Agreement:
(i) the failure of the Operator to perform or observe any of its
material covenants, agreements, obligations and/or duties created by this
Agreement;
(ii) the persistent and repeated failure by the Operator to
operate, maintain and/or manage the System and complete the Minimum Capital
Improvements and Additional Capital Improvements in accordance with the
material terms and provisions of this Agreement;
(iii) a determination that any representation, warranty or covenant
made by the Operator is false and/or misleading in any material respect;
(iv) the commencement of any bankruptcy, insolvency, liquidation
and/or similar proceeding against the Operator, the Guarantor and/or any of
their subsidiaries and/or related companies which materially and adversely
affects the Operator's ability to perform its duties or obligations under
this Agreement or the Guarantor's ability to perform its duties and
obligations under the Guaranty Agreement; the consent by the Operator, the
Guarantor and/or any of their subsidiaries and/or related companies, to the
appointment of and/or taking possession by a receiver, liquidator, assignee,
trustee and/or custodian of the Operator, the Guarantor and/or any of their
subsidiaries and/or related companies, and/or any substantial part of their
respective assets which materially and adversely affects the Operator's
ability to perform its duties or obligations under this Agreement and/or the
Guarantor's ability to perform its duties or obligations under the Guaranty
Agreement; the making by the Operator, the Guarantor and/or any of their
subsidiaries and/or related companies, of any assignment for the benefit of
creditors that would materially and adversely affect the Operator's ability
to perform its duties or obligations under this Agreement and/or the
Guarantor's ability to perform its duties or obligations under the Guaranty
Agreement; and/or the failure by the Operator, the Guarantor and/or any of
their subsidiaries and/or related companies, to generally pay its debts as
they come due; or
(v) the failure by the Operator to make any payment required to be
made by the Operator pursuant to the terms of this Agreement within fifteen
(15) Days of its receipt of notice from the Township that any such payment is
overdue.
(b) Upon the happening of any event described in Section 9.2(a)(i) or
(iii), the Township shall provide written notice to the Operator setting
forth in detail the alleged failure and/or deficiency of the Operator. The
Operator shall have thirty (30) Days after receipt of such written notice
from the Township to cure and/or correct such failure and/or deficiency or to
deliver to the Township a written notice alleging that no such event
described in Section 9.2(a)(i) or (iii) has occurred and setting forth in
detail its reasoning as to why no such event has occurred. In the event that
the Operator does not cure and/or correct such failure and/or deficiency
within said thirty (30) Day period or deliver to the Township the written
notice described in the preceding sentence within said thirty (30) Day
period, the Township shall provide the Operator with a second written notice
affording the Operator an additional fifteen (15) Days to cure and/or correct
such failure and/or deficiency. If the Operator fails to cure and/or correct
the failure and/or deficiency within such additional fifteen (15) Day period,
the Township may terminate the Agreement by providing written notice thereof
to the Authorized Representative of the Operator.
(c) Upon the happening of any event described in Section of Section
9.2(a)(ii), (iv) or (v), the Township shall have the right to immediately
terminate this Agreement upon thirty (30) Days prior written notice to the
Operator. The Township and the Operator specifically agree that this
Agreement shall terminate immediately after the thirty (30) Days from the
receipt of such written notice to the Operator.
(d) If the Township terminates this Agreement in accordance with the
provisions of this Section 9.2, the Township shall pay to the Operator, the
sum determined in accordance with the following formula: A + B + C - D + E -
F + G
Where: A = The unamortized amount of the greater of
the Estimated Defeasance Amount and the Actual Defeasance
Amount (assuming level debt service amortized over the
Term of the Agreement from the Commencement Date with
simple interest at the rate of five per centum (5%) per
annum) less the actual third party costs to the Township
(legal, financial and technical) related to the issuance
of new debt and the selection of a new Operator.
Where: B = The unamortized amount of the Additional
Capital Improvements and Township Administrative Fee paid
by the Operator.
Where: C = The unamortized cost of the Minimum
Capital Improvements (assuming level debt service
amortized over the Term of the Agreement from the date of
the completion of such Minimum Capital Improvements with
simple interest at the rate of five per centum (5%) per
annum).
Where: D = The amount, if any, necessary to enable
the Township to restore the System so that it is
operational by the Township as a stand-alone System
without the Operator.
Where: E = Any outstanding Pass-through Charge
required to be charged to the customers pursuant to
Section 8.4(b).
Where: F = Any outstanding Pass-through Credit
required to be credited to the Township pursuant to
Section 8.4(b).
Where: G = Any amounts due to the Operator pursuant
to Section 10.17(c) relating to wheeling arrangements.
The sum to be paid by the Township to the Operator in accordance with
the preceding sentence shall be paid within six (6) months after the date of
the negotiated settlement between the Township and the Operator or a final
determination by the arbitration panel established in accordance with Section
10.16, as the case may be.
(e) In addition to the monetary remedies set forth above and in
addition to the Township's independent rights under the Guaranty Agreement,
the Township shall be entitled to pursue a claim against the Operator for any
nonmonetary remedies available and any additional actual damages suffered by
the Township as a result of any default by the Operator, plus attorneys'
fees. Notwithstanding anything in this Agreement to the contrary, the
Operator shall not be responsible to the Township for any indirect,
third-party or consequential damages arising from a breach of this Agreement.
Section 9.3. Termination for Cause by the Operator. (a) Upon the
happening of any of the following events of default by the Township, the
Operator shall have the right to terminate this Agreement:
(i) the failure of the Township to perform or observe any of its
material covenants, agreements, obligations and/or duties created by this
Agreement;
(ii) the failure of the Township Council to enact an ordinance
establishing the Total User Charge Rate for the System (if such ordinance is
deemed necessary in addition to the approval of this Agreement) within ninety
(90) Days of the Township's receipt of notice of such default provided such
failure is not the result of an Unforeseen Event.
(iii) a determination that any representation, warranty or covenant
made by the Township is false and/or misleading in any material respect;
(iv) the commencement of any bankruptcy, insolvency, liquidation
and/or similar proceeding against the Township which materially and adversely
affects the Township's ability to perform its duties or under this Agreement;
the consent by the Township to the appointment of and/or taking possession by
a receiver, liquidator, assignee, trustee and/or custodian of the Township,
and/or any substantial part of its assets which materially and adversely
affects the Township's ability to perform its duties or obligations under
this Agreement; the making by the Township of any assignment for the benefit
of creditors which materially and adversely affects the Township's ability to
perform its duties or obligations under this Agreement; and/or the failure by
the Township to generally pay its debts as they come due; or
(v) the failure by the Township to make any payment required to be
made by the Township pursuant to the terms of this Agreement within sixty
(60) Days of its receipt of notice from the Operator that any such payment is
overdue.
(b) Upon the happening of any event described in Section 9.3(a)(i) or
(iii) above, the Operator shall provide written notice to the Township
setting forth in detail the alleged failure and/or deficiency of the
Township. The Township shall have thirty (30) Days after receipt of such
written notice from the Operator to cure and/or correct such failure and/or
deficiency or to deliver to the Operator a written notice alleging that no
such event described in Section 9.3(a)(i) or (iii) has occurred and setting
forth in detail its reasoning as to why no such event has occurred. In the
event that the Township does not cure and/or correct such failure and/or
deficiency within said thirty (30) Day period or deliver to the Operator the
written notice described in the preceding sentence within said thirty (30)
Day period, the Operator shall provide the Township with a second written
notice affording the Township an additional fifteen (15) Days to cure and/or
correct such failure and/or deficiency. If the Township fails to cure and/or
correct the failure and/or deficiency within such second fifteen (15) Day
period, the Operator may terminate the Agreement by providing written notice
thereof to the Authorized Representative of the Township.
(c) Upon the happening of any event described in Section 9.3(a)(ii),
(iv) or (v), the Operator shall have the right to terminate this Agreement
upon thirty (30) Days prior written notice to the Township. The Operator and
Township specifically agree that this Agreement shall terminate immediately
after thirty (30) Days from the receipt of such written notice by the
Township.
(d)(i) The parties agree that with respect to this Section 9.3(d), the
Agreement is not an executory contract subject to assumption as defined by
the Bankruptcy Code. The parties further specifically acknowledge that this
provision is intended to "bankruptcy-proof" the Agreement, that this
provision is critical to the Agreement and was "bargained for" and part of
the consideration for the Agreement.
(ii) To the extent a court of competent jurisdiction holds this
Agreement to be an executory contract subject to assumption by the Township
as a debtor pursuant to the Bankruptcy Code, the Township and Operator
specifically acknowledge that this Agreement falls within the provisions of
11 U.S.C. Section 365(c)(i)(a) to the extent that the trustee may not assume
or assign it without the consent of the Operator in that "applicable law
excuses the party, other than the debtor, to such contract or lease from
accepting performance from or rendering performance to an entity other than
the debtor or the debtor-in-possession, whether or not such contract or lease
prohibits or restricts assignment of rights or delegation of duties."
(iii) Alternatively, to the extent a court of competent
jurisdiction holds that the Agreement is an executory contract subject to
assumption and not within the exception of 11 U.S.C. Section 365(c)(i)(a),
the Township and Contract Party specifically agree to the following:
(A) The Township or the debtor-in-possession agrees to
perform all obligations under the Agreement, including curing all
defaults and making ongoing payments, or, in the event it chooses
not to do so, will move as soon as practicable to reject the
executory contract under applicable bankruptcy law.
(B) Since the Township is a public body corporate and
politic of the State of New Jersey and therefore is in a special
legal position and has certain unique legal attributes, no other
entity can provide "adequate assurance of future performance" as
that term is defined under the Bankruptcy Code and therefore the
Agreement cannot be assigned.
(e) If the Operator terminates this Agreement in accordance with the
provisions of this Section 9.3, the Township shall pay the Operator, the sum
determined in accordance with the following formula: A + B + C + D - E + F
Where: A = The sum of (1) the unamortized amount of
the Initial Concession Payment (assuming level debt
service amortized over the Term of the Agreement from the
Commencement Date with simple interest at the rate of ten
per centum (10%) per annum) and (2) the unamortized
amount of the greater of the Estimated Defeasance Amount
and the Actual Defeasance Amount (assuming level debt
service amortized over ten (10) years from the
Commencement Date with simple interest at the rate of ten
per centum (10%) per annum) together with the cost to the
Operator of third-party transaction costs (legal and
financial) related to the defeasance of the Operator's
debt associated with the transaction, not to exceed
$25,000.
Where: B = The unamortized cost of the Additional
Capital Improvements and Township Administrative Fee paid
by the Operator.
Where: C = The unamortized cost of the Minimum
Capital Improvements (assuming level debt service
amortized over the Term of the Agreement from the date of
the completion of such Minimum Capital Improvements with
simple interest at the rate of ten per centum (10%) per
annum).
Where: D = Any outstanding Pass-through Charge
permitted to be charged to the customers of the System
pursuant to Section 8.4(b).
Where: E = Any outstanding Pass-through Credit
required to be credited to the Township pursuant to
Section 8.4(b).
Where: F = Any amounts due to the Operator pursuant
to Section 10.17(c) relating to wheeling arrangements.
The sum to be paid by the Township to the Operator in accordance with
the preceding sentence shall be paid within six (6) months after the date of
the negotiated settlement between the Operator and the Township or a final
determination by the arbitration panel established in accordance with Section
10.16, as the case may be.
(f) In addition to the monetary remedies set forth above, the Operator
shall be entitled to pursue a claim against the Township for any nonmonetary
remedies and any additional actual damages suffered by the Operator as a
result of a default by the Township, plus attorneys' fees. Notwithstanding
anything contained in this Agreement to the contrary, the Township shall not
be responsible to the Operator for any indirect, third-party or consequential
damages arising from a breach of this Agreement.
Section 9.4. Termination for Unenforceability of Agreement. (a) If any
court, agency and/or other entity with competent jurisdiction shall finally
determine that this Agreement is unenforceable and/or prohibited by law, or,
if for any reason the Township Council is legally prohibited from enacting
any ordinance establishing the rates for the supply of service to the
customers of the System that are required to be established by the Township
in accordance with the provisions hereof, or any such ordinance so enacted
shall fail to become legally effective or shall no longer be legally
effective, then the Township and the Operator shall each have the right to
terminate this Agreement, upon thirty (30) Days' prior written notice to the
other party.
(b) If this Agreement is terminated pursuant to this Section 9.4, the
Township shall pay the Operator the sum determined in accordance with the
following formula:
A + B + C - D + E - F + G
Where: A = The sum of (1) the unamortized amount of
the Initial Concession Payment (assuming level debt
service amortized over the Term of the Agreement from the
Commencement Date with simple interest at the rate of
five per centum (5%) per annum) and (2) the unamortized
amount of the Actual Defeasance Amount (assuming level
debt service amortized over ten (10) years from the
Commencement Date with simple interest at the rate of
five per centum (5%) per annum).
Where: B = The unamortized cost of the Additional
Capital Improvements and Township Administrative Fee paid
by the Operator.
Where: C = The unamortized cost of the Minimum
Capital Improvements (assuming level debt service
amortized over the Term of the Agreement from the date of
the completion of such Minimum Capital Improvement with
simple interest at the rate of five per centum (5%) per
annum).
Where: D = Fifty per cent (50%) of the amount, if
any, necessary to enable the Township to restore the
system so that it is operational by the Township as a
stand-alone system without the Operator.
Where: E = Any outstanding Pass-through Charge
permitted to be charged to the customers of the System
pursuant to Section 8.4(b).
Where: F = Any outstanding Pass-through Credit
required to be credited to the Township pursuant to
Section 8.4(b).
Where: G = Any amounts due to the Operator pursuant
to Section 10.17(c) relating to wheeling arrangements.
The sum to be paid by the Township to the Operator in accordance with
the preceding sentence shall be paid within six (6) months after the date of
the negotiated settlement between the Township and the Operator, or a final
determination of the arbitration panel established in accordance with Section
10.16, as the case may be.
(c) Upon termination of this Agreement in accordance with this Section
9.4, the payments to be received by the Operator from the Township in
accordance with this Section 9.4 shall constitute total satisfaction of any
right, claim, cause of action and/or entitlement that the Operator has or may
have against the Township hereunder.
Section 9.5. Optional Termination by the Township. The Township
may, at its sole option and discretion, at any time after the tenth (10th)
anniversary of this Agreement, terminate this Agreement for any reason
whatsoever, upon ninety (90) Days' prior written notice to the Operator
provided that the Township pays the amount determined pursuant to Section
9.3(e) as of the termination date provided however that the rate of interest
utilized for the calculation of the termination payment in Section 9.3(e)(A)
and (C) shall be eight and seventy-five hundredths per centum (8.75%) per
annum.
<PAGE>
ARTICLE X. MISCELLANEOUS
Section 10.1. Insurance. (a) The Operator shall not commence the
performance of the Services under this Agreement until it has provided
insurance of the types and in such amounts as set forth herein and such
insurance has been approved by the Township. The Operator shall maintain
such insurance in full force and effect for the duration of this Agreement.
The insurance policies provided by the Operator at its expense and more
particularly described hereafter shall specifically designate the Township as
an additional insured.
The Operator shall be solely responsible for all injuries to persons or
property occurring on account of the performance of Services hereunder,
regardless who is performing the Services.
Certificates, in triplicate, from the insurance carrier, stating the
limits of liability and the expiration date for each policy and type of
coverage listed below shall be filed with the Township before Services are
begun. The certificates shall contain the following express obligation:
"This is to certify that the policies of insurance described herein
have been issued to the insured for whom this certificate is
executed and are in force at this time. In the event of
cancellation or material change in a policy affecting the
certificate holder, thirty (30) Days prior written notice will be
given the certificate holder."
Such certificates shall specifically refer to this Agreement and
article, and the following paragraphs in accordance with which the insurance
is being furnished, and state that such insurance is as required by such
paragraphs of this Agreement. Such coverage shall be with acceptable
insurance companies only which possesses an A.M. Best Company rating of at
least AX. All insurance policies herein required of the Operator shall be
written by a company duly authorized and licensed to do business in the State
of New Jersey and be executed by some agent therein duly licensed as an agent
in said state.
Insurance shall include the type of insurance specified below in not
less than the amounts stated and whatever other insurance may be necessary to
provide complete protection to the Township and Operator against liability,
damage and accident of every kind. Neither approval by the Township, nor a
failure to disapprove insurance furnished by Operator, shall release the
Operator from full responsibility for liability, damages, and accidents as
set forth herein.
The Operator shall take out and maintain during the Term of this
Agreement the following types of insurance in an amount, for each policy, not
less than the amounts stated:
(i) Worker's Compensation and Employer's Liability Insurance in accordance
with the requirements of the General Laws of the State of New Jersey and
all other applicable laws and regulations. If any class of employees
engaged in hazardous work cannot be protected by Workmen's Compensation
and Liability Insurance, the Operator shall provide adequate insurance
for each class of employees.
The Operator shall take out and maintain during the Term of this
Agreement the applicable statutory Worker's Compensation Insurance with
an insurance company authorized to write such insurance covering all of
its employees, and in the case of any work sublet, the Operator shall
require the subcontractor similarly to provide statutory Worker's
Compensation Insurance for the latter's employees. The Operator shall
take out and maintain during the Term of this Agreement, Employer's
Liability Insurance with a minimum limit of $1,000,000 (or $500,000 in
the case of any subcontractor) with an insurance company authorized to
write such insurance and the Operator shall require each of its
subcontracts similarly to maintain Employer's Liability Insurance on its
employees.
(ii) Public Liability Insurance
(A) The Operator shall maintain during the Term of this Agreement
such Public Liability Insurance as shall protect it against claims
for damages resulting from (a) bodily injury, including wrongful
death, and (b) property damages, which may arise from the
performance of Services hereunder regardless of by whom performed
(including any subcontractors). The minimum acceptable limits of
liability to be provided by such Public Liability Insurance shall
be as follows:
Bodily Injury Limits and Property Damage - $5,000,000 each
occurrence/annual aggregate by the Operator (or $1,000,000 each
occurrence annual aggregate by each subcontractor).
(B) The Public Liability Insurance required by the preceding
subparagraph shall include the following extensions of coverage:
(I) The coverage shall be provided under a Comprehensive General
Liability form of policy or similar thereto.
(II) XCU Coverage - If the Agreement requires any work procedures
involving blasting, excavating, tunneling or other
underground work, the liability coverage shall include
Standard Blasting or Explosion Coverage Standard Collapse
Coverage and Standard Underground Coverage, commonly
referred to as XCU property damage liability coverage with
limits of $1,000,000 CSL.
(III)The property damage coverage shall include a Broad Form
Property Damage Endorsement.
(IV) Contractual Liability coverage shall be included.
(V) Protective Liability coverage shall be included to protect
the Operator against claims arising out of operations
performed by its subcontractors.
(VI) Products Liability and/or Completed Operations coverage
shall be included.
(iii) Automobile Liability and Property Damage Insurance
The Operator shall take out and maintain or cause any subcontractor
to take out and maintain during the Term of the Agreement such
Automobile Liability Insurance as shall protect it against claims
for damages resulting from bodily injury, including wrongful death,
and property damage, which may arise from the operations of any
owned, hired or non-owned automobiles used by or for it (or
subcontractors) in connection with the performance of Services
hereunder. The minimum acceptable limits of liability to be
provided by such Automobile Liability Insurance shall be as follows:
Bodily Injury Limits and Property Damage - $5,000,000 each
occurrence/annual aggregate by the Operator (or $1,000,000 each
occurrence/annual aggregate by each subcontractor).
(iv) Excess Umbrella Liability in an amount not less than $10,000,000.
If at any time the Operator fails to maintain any of the foregoing
policies, or if a company issuing any such policy shall become unsatisfactory
to the Township, the Operator shall, upon notice to that effect from the
Township, promptly obtain a new policy, submit the same to the Township for
its approval and submit a Certificate thereof as hereinabove provided. Upon
failure of the Operator to furnish, deliver and maintain such insurance as
above provided, this Agreement, at the election of the Township, may be
forthwith declared suspended, discontinued or terminated. Failure of the
Operator to take out and/or maintain or the taking out and/or maintenance of
any required insurance, shall not relieve the Operator of any liability under
the Agreement.
(b) The Township shall maintain insurance on the System during the Term
of the Agreement substantially similar in kind, scope and amount as that
maintained by the Township as of the Contract Date. If any damage occurs to
the System during the Term of this Agreement that is an insured risk under
the policies described in Sections 10.1(a)(i), (ii), (iii) and (iv), the
Operator agrees that its policies provide the primary coverage and should be
used as the first basis of recovery. The Operator, however, may request the
Township to file a claim under its insurance policy or above-referenced
policies for any amounts not covered under the policies maintained by the
Operator, and if insurance proceeds are paid to the Township for such
amounts, the Township will reimburse the Operator but solely from such
proceeds for the actual, documented cost it incurs, subject to Cost
Substantiation, to repair the damage to the System in an amount not to exceed
such insurance proceeds.
Section 10.2. Indemnification. Notwithstanding anything to the
contrary in this Agreement:
(a) The Operator shall indemnify, defend and hold harmless the
Township, its elective and appointive officers, and its duly authorized
agents, servants and employees from any costs, expenses or liabilities
(including costs, expenses or liabilities to third parties and attorney's
fees) which are caused by or arise from the Operator's breach of this
Agreement or the negligent or willful acts or omissions of the Operator or
its agents, servants, employees or subcontractors provided such cost,
expenses or liabilities do not arise as a result of the negligent or willful
acts or omissions of the Township.
(b) To the extent permitted by law, the Township shall indemnify,
defend and hold harmless the Operator, its officers, authorized agents,
servants and employees for any costs, expenses or liabilities (including
costs, expenses or liabilities to third parties and attorney's fees) which
are caused by or arise from the Township's breach of this Agreement or the
negligent or willful acts or omissions of the Township or its agents,
servants, employees provided such costs, expenses or liabilities do not arise
as a result of the negligent or willful acts or omissions of the Operator.
(c) To the extent permitted by law, the Township shall indemnify and
hold the Operator harmless from any and all fines or penalties assessed by
the appropriate regulatory agencies or other losses or damages suffered
during the Term of this Agreement as a result of any and all violations
committed by the Township and for all conditions which existed prior to the
Commencement Date and which constitute violations of any federal, state or
local laws or regulations in effect on the Commencement Date. Nevertheless,
the Operator shall operate the System in compliance with all laws and Permits
as required by this Agreement. The Operator shall indemnify and hold the
Township harmless from any fines or penalties assessed by the regulatory
agencies during the Term of this Agreement for any and all violations of
applicable laws or Permits committed by the Operator, its agents, servants or
employees.
(d) The Operator shall have no obligation to indemnify the Township for
any fines or penalties assessed for conditions that pre-exist the
Commencement Date and that constitute violations of any current federal,
state or local water quality laws or regulations. The Township shall
disclose to the Operator any and all such conditions known to the Township as
soon as practicable.
(e) Each party's indemnification shall include the reimbursement to the
other of all legal fees and expenses reasonably incurred, unless it is
determined that such other party bears responsibility for the claims asserted.
Section 10.3. New Equipment. Any new equipment installed in the system
by the Operator during the Term of this Agreement shall, when installed be
the property of the Township. The Operator will properly operate the
equipment and maintain such equipment in good working order during the Term
of the Agreement. The Operator shall maintain books and records regarding
any such new equipment.
Section 10.4. Enforcement. The failure on the part of any party to
enforce any provision of this Agreement shall not be construed as a waiver of
its right to enforce such provision in the future.
Section 10.5. Assignment. The services to be rendered hereunder by the
Operator are personal and shall not be assigned by any act of the Operator or
by operation of law.
Section 10.6. Affirmative Action. During the performance of this
Agreement, the Operator shall conform with the following requirements:
(a) The Operator or any subcontractor, where applicable, shall not
discriminate against any employee or applicant for employment because of age,
race, creed, color, national origin, ancestry, marital status, sex,
affectional or sexual orientation. The Operator will take affirmative action
to ensure that such applicants are recruited and employed, and that employees
are treated during employment, without regard to their age, race, creed,
color, national origin, ancestry, marital status, sex, affectional or sexual
orientation. Such action shall include, but not be limited to the following:
employment, upgrading, demotion, or transfer; recruitment or recruitment
advertising; layoff or termination, rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The
Operator agrees to post in conspicuous places, available to employees and
applicants for employment, notices compliance officer setting forth to be
provided by the public Agency provisions of this nondiscrimination clause.
(b) The Contractor or any subcontractor, where applicable, shall, in all
solicitations or advertisements for employees placed by or on behalf of the
Operator, state that all qualified applicants will receive consideration for
employment without regard to age, race, creed, color, national origin,
ancestry, marital status, sex, affectional or sexual orientation;
(c) The Operator or any subcontractor, where applicable, shall send to
each labor union or representative or workers with which it has a collective
bargaining agreement or other contract or understanding, a notice, to be
provided by the agency contracting officer advising the labor union or
workers' representative of the Operator's commitments under this act and
shall post copies of this notice in conspicuous places available to employees
and applicants for employment.
(d) The Operator or any subcontractor, where applicable, shall comply
with the regulations promulgated by the New Jersey State Treasurer pursuant
to P.L. 1975, c.127, as amended and supplemented from time to time, with the
Americans with Disabilities Act.
(e) The Operator or any subcontractor, where applicable, shall attempt
in good faith to employ minority and female workers consistent with the
applicable county employment goals prescribed by N.J.A.C. 17:27-5.2
promulgated by the New Jersey State Treasurer pursuant to P.L. 1975, c.127,
as amended and supplemented from time to time or in accordance with a binding
determination of the applicable county employment goals determined by the
Affirmative
21255-004 114412.10
Action Office pursuant to N.J.A.C. 17:27-5.2 promulgated by the
New Jersey State Treasurer pursuant to P.L. 1975, c.127, as
amended and supplemented from time to time.
(f) The Operator or any subcontractor, where applicable,
shall inform in writing appropriate recruitment agencies in the
area, including employment agencies, placement bureaus, colleges,
universities, labor unions, that it does not discriminate on the
basis of age, creed, color, national origin, ancestry, marital
status, sex, affectional or sexual orientation, and that it will
discontinue the use of any recruitment agency which engages in
direct or indirect discriminatory practices.
(g) The Operator or any subcontractor, where applicable,
shall revise any of its testing procedures, if necessary, to
assure that all personnel testing conforms with the principles of
job-related testing, as established by the statutes and court
decisions of the State of New Jersey, and applicable Federal
court decisions.
(h) The Operator and any of its subcontractors, where
applicable, shall furnish such reports or other documents to the
Affirmative Action Office as may be requested by the office from
time to time in order to carry out the purposes of these
regulations, and public agencies shall furnish such information
as may be requested by the Affirmative Action Office for
conducting a compliance investigation pursuant to Subchapter 10
of the Administrative Code (NJAC 17:27).
Section 10.7. Entire Agreement. This Agreement contains
the entire agreement between the parties hereto relating to the
<PAGE>
21255-004 114412.10
operation, maintenance and management of the System and
supersedes all previous or contemporaneous communications,
representations, or agreements. This Agreement may be modified
only by written amendment signed by the parties hereto.
Section 10.8. Notices. All notices given pursuant to the
terms of this Agreement shall be in writing and delivered in
person or transmitted by certified mail, return receipt
requested, postage prepaid.
Notices required to be given to the Operator shall be
addressed as follows:
Edison Water Company
600 South Avenue
Westfield, NJ 07091-0788
Attn: Henry Patterson, III
Phone: (908) 654-1234
Facsimile: (908) 232-2719
with a copy to the Guarantor as follows:
E'town Corporation
600 South Avenue
Westfield, NJ 07091-0788
Attn: Henry Patterson, III
Phone: (908) 654-1234
Facsimile: (908) 232-2719
Notices required to be given to the Township shall be
addressed as follows:
Township of Edison
100 Municipal Boulevard
Edison, NJ 08817-3399
Attn: Business Administrator
and Township Attorney
Phone: (908) 248-7200
Facsimile: (908) 287-6679
Section 10.9. Public Notices. The Township shall issue all
public notices associated with non-compliance with regulatory
requirements for drinking water standards, if and as required,
and the Operator shall prepare such notice(s) in compliance with
the applicable regulation, submit such to the Township, and pay
all costs incurred by the Township associated therewith and shall
provide all necessary support that the Township may reasonably
require.
Section 10.10. Application of Law. This Agreement shall be
governed in accordance with the laws of the State of New Jersey.
Section 10.11. Relationship. The relationship of the
Operator to the Township is that of independent contractor and
not one of employment. None of the employees or agents of the
Operator shall be considered employees of the Township. For the
purposes of all state, local and federal laws and regulations,
the Operator shall exercise primary management and operational
decision making authority. Nothing contained herein shall be
construed to place the parties in the relationship of partners or
joint venturers and neither party shall have the power to
obligate or bind the other party in any manner whatsoever.
Section 10.12. Public Relations. The Operator shall
develop, with the advice and consent of the Township, a
communications, publicity and community relations program in
order to keep the Township and System users informed about the
operation and maintenance of the System. The Operator will deal
in a professional manner with community groups concerned with any
aspect of the operation of the System. The Operator shall
prepare written summaries of all formal meetings with the
Township and/or community groups and provide the Township with a
copy.
Section 10.13. Notice of Litigation. In the event the
Operator or Township receives notice of or undertakes the defense
or the prosecution of any actions, claims, suits, administrative
or arbitration proceedings or investigations in connection with
the System, the party receiving such notice or undertaking such
prosecution shall give the other party timely notice of such
proceedings and will inform the other party in advance of all
hearings regarding such proceedings.
Section 10.14. Cost Substantiation. With respect to any
costs and expenses incurred or to be incurred by the parties
hereto in the performance of their obligations hereunder, all
such costs and expenses shall be reasonably documented and
accompanied by a certificate, signed by an Authorized
Representative of the Township or the Operator, as the case may
be, stating the reason for incurring the cost, the amount of the
cost, including labor, materials and a fixed overhead, the event
or Section of this Agreement giving rise to the requesting
party's right to incur such cost, and that such cost represents a
competitive price for the service or materials supplied and any
other information that is reasonably requested by the other party
in order to assist in the evaluation and approval of the
certificate; provided, however, that such amounts shall not
include any contingency amounts.
Section 10.15. Unforeseen Events. (a) If an Unforeseen
Event occurs causing change in the operations of the System or
the operational costs, the Operator shall prepare a proposal to
be submitted to the Township and the Township's consulting
engineer that describes the cause of the changes, the extent of
the changes, the anticipated duration of the changes, the cost
impact (increase or decrease) of the changes, and the duration of
time that such anticipated cost increases or decreases will be in
effect. Such cost increases or decreases will be a Pass-through
Charge or Pass-through Credit, as the case may be, and shall be
recovered in the following year or over several years.
If an Unforeseen Event occur that causes a material adverse
change in the operations of the System or the operational costs
of the System, the Operator shall prepare a proposal to be
submitted to the Township and the Township's consulting engineer
that describes the cause of the changes, the extent of the
changes, the anticipated duration of the changes, the cost impact
(increase or decrease) of the changes, and the duration of time
that such anticipated cost increases or decreases will be in
effect. If the Township approves such Proposal, such cost
increase or decrease shall be recovered in accordance with
Section 10.15(a). Notwithstanding the above, if Unforeseen Event
occurs that has a material adverse impact on the System and the
cost of operating the System either party may terminate this
Agreement pursuant to Section 9.4. The Operator and/or Township
shall also submit proposals to decrease the rates if an
Unforeseen Event occurs that causes a decrease in costs.
Notwithstanding anything herein to the contrary, an Unforeseen
Event as defined in Section (a) of such definition shall become a
Pass-through Charge or Pass-through Credit, as applicable,
immediately upon the payment or receipt thereof by the Operator
without consulting the Township.
Section 10.16. Dispute Resolution. Any disputes arising
under this Agreement shall be referred to the Operations
Committee for resolution. If the dispute cannot be resolved by
the Operations Committee to the satisfaction of both the Township
and the Operator, such dispute shall be referred to a committee
comprised of one senior officer selected by the Operator and one
senior official of the Township designated by the Mayor. If the
dispute still is not resolved to the satisfaction of both the
Township and the Operator, either party shall be entitled to
refer the dispute to an arbitration panel comprised in the
following manner: The Township and the Operator shall each
select one (1) independent third party to serve as an arbitrator
and shall together select one (1) additional mutually acceptable
independent third party to serve as an arbitrator, so that a
panel of three (3) independent third-party arbitrators will be
formed. The decision of said panel on any disputes arising under
this Agreement shall be binding on both the Township and the
Operator.
Section 10.17. Provisions Relating to Wheeling. (a) To
fully utilize the System for the mutual benefit of both the
Township and the Operator, the Operator may, pursuant to
applicable law, explore opportunities to sell to customers
outside of the Township surplus water produced and supplied by
parties other than the Township, transported by the System, and
not needed to fulfill the terms of this Agreement; provided,
however, that such agreements shall not (i) impair the ability of
the Operator to provide the Services contemplated by this
Agreement, or (ii) unduly burden or cause extraordinary wear and
tear on the System facilities or structures. The Operator shall
notify the Township and its consulting engineer in writing and in
advance of its intention to explore such opportunities, and the
Township shall have the unqualified right to reject the
Operator's proposed arrangement.
(b) The Township shall annually receive ten percent (10%)
of the Net Revenues to the Operator of any such sales.
(c) If this Agreement is terminated prior to the expiration
of the Term hereof for any reason (other than a termination under
Section 9.2 and Section 9.4) and a wheeling arrangement pursuant
to Section 10.17(a) is in effect and the Operator has not
invested any capital relative to the arrangement, the Operator
shall continue to receive its share all of the Net Revenues from
the date of termination of this Agreement and continuing until
the termination of such wheeling arrangement.
(d) In the event that the Operator invested capital in
order to effectuate the wheeling arrangement, at the Township's
sole discretion, the Township may either (i) reimburse the
Operator for any and all unrecovered or unamortized capital costs
of the Operator associated with the wheeling arrangement as part
of the termination fee set forth in Sections 9.2, 9.3, 9.4 and
9.5, or (ii) share a percentage of the Townships's share of the
Net Revenues provided for in Section 10.17(c) to enable the
Operator to recover its unrecovered capital investment over a
period of ten (10) years or the remaining period under any
financing or loan agreements of the Operator, whichever is
shorter.
Section 10.18. Expiration of the Agreement. Upon the
expiration of this Agreement, the parties hereto shall determine
the amount of any unamortized Additional Capital Improvements,
Township Administrative Fees and Pass-through Charges or
Pass-through Credit and shall make provisions for the payment
thereof to/from the Operator from/to the Township, as applicable.
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their
hands and fixed their seals as of the date first above written.
ATTEST: TOWNSHIP OF EDISON
By:
Name: George A. Spadoro
Title: Mayor
ATTEST: EDISON WATER COMPANY
By:
Name: Henry S. Patterson,
III
Title: President
<PAGE>
SCHEDULE A
BASE SERVICE RATE
<PAGE>
SCHEDULE B
GUARANTY AGREEMENT
THIS GUARANTY, made as of this ____ day of ______, 1997, by
E'town Corporation, a New Jersey corporation (the "Guarantor"),
to and for the benefit of the Township of Edison, New Jersey
("Township");
WITNESSETH
WHEREAS, the Township intends to enter into a Agreement (the
"Agreement") with _________________ (the "Company"), a subsidiary
of the Guarantor for the operation, maintenance and management of
the Township's water system (the "System"); and
WHEREAS, the Township has required the Company under the
Agreement to provide this guaranty (the "Guaranty") from the
Guarantor pursuant the Agreement; and
WHEREAS, the Guarantor acknowledges that the Township would
not enter into the Agreement unless the Guarantor provided this
Guaranty and the Guarantor will receive benefit because of the
Agreement; and
WHEREAS, the Guarantor is willing to provide such Guaranty;
NOW THEREFORE, as an inducement to the Township to enter
into the Agreement, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the Guarantor agrees as follows:
(1) The Guarantor hereby guarantees the full and prompt
performance by the Company of all the Company's obligations under
the Agreement when due (the "Obligations") in accordance with the
terms and conditions contained herein.
(2) The Guarantor further guarantees that in the event the
Company fails to duly and properly perform and satisfy when due
any and all of its Obligations under the Agreement, Guarantor
will, upon written demand of the Township, setting forth the
specific failure of the Company, promptly perform and satisfy
those Obligations set forth in such demand.
(3) The obligations of the Guarantor under this Guaranty
(i) shall be absolute, irrevocable and unconditional under any and
all circumstances without regard to the genuineness, validity,
legality or enforceability of the Agreement (unless the Township,
its successors or assigns, asserts any claim or defense based on
any alleged invalidity, illegality or unenforceability of the
Agreement or any term thereof) or of any term thereof, or lack of
power or authority of any party (other than the Township) to
enter into the Agreement, or any substitution, release or
exchange of any other guaranty of or any security for the
Obligations, and irrespective of any other circumstances which
might otherwise constitute a legal or equitable discharge or
defense of a surety or guarantor, (ii) are in no way conditional
upon any attempt to enforce performance or compliance by the
Company and (iii) shall remain in full force and effect until the
performance by the Company of all of its performance and payment
Obligations under the Agreement. This Guaranty shall continue to
be effective or be automatically reinstated, as the case may be,
if at any time any payment by or on behalf of the Company or the
Guarantor in respect of the Obligations is rescinded or must
otherwise be restored by the Township to the Company or such
Guarantor, as the case may be, or any assignee of the Township
for any reason whatsoever, including, but not limited to, any
proceedings in bankruptcy or reorganization, as though such
payment had not been made and the Guarantor agrees that it shall
indemnify the Township on demand for all costs and expenses
(including, without limitation, fees and expenses of counsel)
incurred by the Township in connection with any such rescission
or restoration. Without limiting the generality of the
foregoing, the obligations of the Guarantor shall not be
affected, reduced, modified or impaired upon the happening from
time to time of any of the following events, whether or not with
notice to or the consent of Guarantor:
(a) the failure to give notice to Guarantor of the
occurrence of a default by the Company under the terms and
provisions of the Agreement;
(b) the modification or amendment (in accordance with
the terms of the Agreement) (whether material or otherwise)
of any obligation, covenant or agreement set forth in the
Agreement;
(c) any failure, omission, delay by or lack on the
part of the Township to assert or exercise any right, power
or remedy conferred on the Township in the Agreement or this
Guaranty;
(d) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or
substantially all of the Township's and/or the Company's
assets, the marshalling of the Township's and/or the
Company's assets and liabilities, the receivership,
insolvency, bankruptcy, assignment for the benefit of
creditors, reorganization, arrangement, composition with
creditors, or readjustments of, or other similar proceedings
affecting the Township and/or the Company or the Guarantor
or any of the assets of any of them;
(e) the assignment (in accordance with the terms of
the Agreement) of any right, title or interest of the
Township in the System or the Agreement to any other person,
including, without limitation, any person providing
financing to the Township and any entity purchasing an
interest in the System pursuant to a leverage lease or
similar arrangement; or
(f) any other cause or circumstance, foreseen or
unforeseen, whether similar or dissimilar to any of the
foregoing;
it being the intent of Guarantor that its obligations
hereunder shall not be discharged except by payment for
and/or performance of the Company's Obligations, and then
only to the extent of such payment or performance.
(4) Guarantor hereby waives diligence, presentment, demand
of payment, protest and all notices whatsoever, including,
without limitation, notice of (1) any alteration or modification
of the Agreement, provided such alteration or modification has
been duly executed by the Company, (2) the Township's acceptance
and reliance on this Guaranty and (3) notice of default or demand
in the case of default, provided such notice or demand has been
given to or made upon the Company, and any requirement that the
Township exhaust any right, power or remedy or proceed against
the Company under the Agreement or any other agreement or
instrument referred to herein or therein or against any other
person under any other guarantee of, or security for, any of the
Obligations.
(5) If a demand, in accordance with Section 2 of this
Guaranty, is made upon the Guarantor and the Guarantor duly and
properly performs the obligations of the Company set forth in the
demand, then (a) after satisfaction in full of all of the
Obligations, the Guarantor shall be subrogated to the rights of
the Company against the Township, and (b) the Township shall
suspend the pursuit of any remedy against the Company in respect
of any such Obligations which have been fully satisfied by
Guarantor hereunder;
(6) The Guarantor hereby represents and warrants that:
(a) it is a corporation duly organized and existing
under the laws of the State of New Jersey and qualified to
do business therein; it is not in default under any
provisions of the laws of said state or under its
certificate of incorporation; it has corporate power under
said laws and under its certificate of incorporation to
enter into and perform all agreements on its part herein
contained; it has, by proper corporation action, duly
authorized the entering into and the execution and delivery
of this Guaranty; and entering into this Guaranty and
performance hereunder is not an event of default or
otherwise contrary to any obligation by which it is bound;
and this Guaranty has been duly and validly executed and
delivered by the Guarantor and constitutes its legal, valid
and binding obligation, enforceable in accordance with its
terms (except as such enforceability may be limited by
applicable bankruptcy, insolvency, reorganization,
moratorium or similar laws affecting rights of creditors of
Guarantor generally); and
(b) there is no action or proceeding pending or
threatened against it before any court or administrative
agency that could reasonable adversely affect its ability to
perform its obligations under this Guaranty and all
authorizations, consents and approvals of governmental
bodies or agencies required in connection with the execution
and delivery of this Guaranty or in connection with the
performance of its obligations hereunder have been obtained
as required hereunder or by law.
(7) This Guaranty shall be governed by the laws of the
State of New Jersey, and the Guarantor hereby agrees to service
of process in the State of New Jersey for any claim or
controversy arising out of this Guaranty or relating to any
breach and to submit to the exclusive jurisdiction of any court
of competent jurisdiction in the State.
(8) This Guaranty shall be binding upon and enforceable
against the Guarantor, its successors and assigns, and is for the
benefit of the Township, its successors, agents and assigns.
IN WITNESS WHEREOF, Guarantor has executed this instrument
the day and year first above written.
Attest: E'TOWN CORPORATION
By:
Name:
Title:
<PAGE>
SCHEDULE C
MINIMUM ADMINISTRATIVE CRITERIA
A Operator has the corporate resources, staff and personnel
necessary to provide all of the required management,
financial, and support Services as specified in the
Agreement. An organizational chart must be maintained which
sets forth the staff and personnel to be utilized in
connection with the Services described in the Agreement.
<PAGE>
SCHEDULE D
MINIMUM CAPITAL IMPROVEMENTS
1. Cleaning and Lining of Water Mains
- -------------------------===========================================
Approx
Length
Year Diameter (ft) Location
- -------------------------===========================================
- --------------------------------------------------------------------
1,998 16" 2,600 Along Brunswick Ave from Plainfield Ave
to Hana Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 3,700 Along Rt 27 from 20" main near Sycamore
Ave to Division St
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 2,850 Along Plainfield Ave from Rt 27 to 12"
main north of Central Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 3,300 Along Plainfield Ave from Brunswick Ave
to Division St
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,700 Along Division St from Rt 27 to
Plainfield Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 4,900 Along Loring Ave from Rt 27 to Woodbridge
Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
16" 3,200 Along Kilmer Rd from S. Truman Dr to
Plainfield Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,400 Along Colton Rd & Raleigh Rd from Rt 27
to Winthrop Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 1,500 Along Winthrop Rd from Cambridge Rd to
Blvd of the Eagles
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,400 Along Cambridge Rd from Winthrop Rd to
Eastlick Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 850 Along Eastlick Rd from Cambridge Rd to
Stony Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,200 Along Stony Rd from Eastlick Rd to Eden
Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
8" 950 Along Jefferson Blvd from Loring Ave to
Plainfield Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 2,450 Along Plainfield Ave from Brunswick Ave
to designated pt on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Subtotal 32,000
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
1,999 10" 3,550 Along Woodbridge Ave from Loring Ave to
end of 10" main near Crowells Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
16" 2,800 Along Woodbridge Ave from Loring Ave to
Old Post Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 6,500 Along Woodbridge Ave from Old Post Rd to
Mill Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 5,000 Along Woodbridge Ave from Mill Rd to Old
Post Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 5,950 Along Woodbridge Ave from Old Post Rd to
a point
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 5,200 Along Old Post Rd from Woodbridge Ave to
Rt 1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 2,500 Along Old Post Rd from JCP&L ROW to Rt 1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
8" 750 Along Old Post Rd from Rt 1 to Mill Rd
- --------------------------------------------------------------------
- -------------------------===========================================
10" 5,400 Along Miko Rd, Idlewild Rd from Old Post
Rd to Rt 27
- -------------------------===========================================
- --------------------------------------------------------------------
10" 1,550 Along Rt 27 from Idlewild Rd to Fitch Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,200 Along Rt 27 from Talmadge Rd to Municipal
Blvd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 1,700 Along Duclos Lane from Woodbridge Ave to
Rose St
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 1,600 Along Fox Rd from Woodbridge Ave to Leo St
- --------------------------------------------------------------------
- -------------------------===========================================
Subtotal 43,700
- -------------------------===========================================
- -------------------------===========================================
Approx
Length
Year Diameter (ft) Location
- -------------------------===========================================
- --------------------------------------------------------------------
2,000 16" 1,300 Along Meadow Rd from Woodbridge Ave to
Clifton St
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 4,100 Along Meadow Rd from Clifton St to end as
shown on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 2,400 Along Executive Ave from Corporation ROW
to Mill Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,500 Along Mill Rd from Distribution Blvd to
point shown on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 1,600 Along Distribution Blvd from Mill Rd to
the 16" main
- --------------------------------------------------------------------
- --------------------------------------------------------------------
16" 1,300 Along Distribution Blvd from 16" main to
point shown on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
16" 2,300 Along ROW paralleling College Dr from
Mill Rd to Distrib. Blvd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 3,000 Along Midvale Rd from Meadow Rd to loop
back to Meadow Rd
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 2,900 Along ROW near Horizon Dr
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 4,000 Along Brotherhood St & ROW from Brunswick
Ave to point on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 4,900 Along PA RR & Rt 287 from Talmadge Rd
south to 12" main
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 3,400 Along National Rd from Talmadge Rd to 10"
main on map
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 800 Crossing Rt 287 from National Rd to
Durham Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
12" 3,500 Along New Durham Rd from Talmadge Rd to
Durham Ave
- --------------------------------------------------------------------
- --------------------------------------------------------------------
10" 2,300 Along New Durham Rd & Reider Rd from
Durham Ave to point near Susan Place
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Subtotal 39,300
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
- --------------------------------------------------------------------
TOTAL 115,000
- --------------------------------------------------------------------
2. Looping of dead-end mains on Irving St. & Hillside Ave. by
June, 1998
3. Replace 1,500 lineal ft. of 4" diameter main on Westervelt Ave
with 8" main by June, 1998
4. Station B-3 Upgrades after completion of main cleaning and
lining
*Provide automatic feed of water into the B-3 reservoir
through an electrically operated valve
*Retrofit and upgrade station piping
*Perform interior cleaning and exterior cosmetic
improvements to the reservoir
*Replace the hydrant
*Perform minor electrical system improvements to address
safety issues
*Perform general building interior housekeeping (painting,
cleanup, repairs)
*Test and rehabilitate selected pumps and motors
5. Sealing and Capping of Five (5) abandoned Township wells by
June, 1998
*Pull out equipment and casing
*Fill wells with concrete
*Seal and cap wells
6. Provide SCADA Systems by June, 1999
*Installation of remote terminal units, communication
lines, emulation packages and wiring
*Provision of personal computer, printer and training
7. Meter Replacement - ongoing
*Replace all meters that are 10 years old or older within
first 5 years of contract with meter and encoder register
pad
*Replace meters sized 2 inches and below again after ten
years with new meters only
*Replace or repair meters larger than 2 inches at least
every 10 years after initial replacement
<PAGE>
SCHEDULE E
MINIMUM FINANCIAL CRITERIA
(1) The Operator or Guarantor shall maintain a net
worth of at least Five Million Dollars
($5,000,000).
(2) The Operator or Guarantor shall maintain annual
pre-tax earnings of at least One Million Dollars
($1,000,000) per year.
(3) The Operator or Guarantor shall maintain cash
and/or cash equivalents (such as marketable
securities) of at least Two Million Five Hundred
Thousand Dollars ($2,500,000). [A portion of the
"cash equivalent" can include an unencumbered line
of credit up to One Million Dollars ($1,000,000)
that the Operator or Guarantor can access during
the Term of the Agreement.]
<PAGE>
SCHEDULE F
MINIMUM TECHNICAL CRITERIA
(1) The Operator shall maintain in its employ at least
three supervisory personnel experienced in providing
supervision, trouble shooting, evaluations, and other
technical information in support of operation and
maintenance of water facilities.
(2) The Operator shall maintain in its employ at least
three supervisory personnel with current public water
distribution systems license classification pursuant to
N.J.S.A. 58:11-64 et. seq. and N.J.A.C. 7:10-13 of W3
or higher for operation of water facilities in
accordance with Department permits.
(3) The Operator shall maintain in its employ sufficient
technical, managerial, administrative, office, field,
clerical and accounting staff to efficiently and
effectively render the Services as specified herein.
(4) The Operator must continuously own or lease, or
evidence a commitment to own or lease a sufficient
number and type of vehicles and equipment to render the
required Services.
(5) The Operator shall continuously conduct System
evaluations and engineering reviews and to implement
improvements in operations and maintenance practices to
improve performance, efficiency and reliability.
(6) The Operator shall maintain an emergency contingency
plan.
<PAGE>
21255-004 114412.10
SCHEDULE G
OPERATING PERFORMANCE STANDARDS
====================================================================
1. FIRE FLOWS*
====================================================================
- --------------------------------------------------------------------
Type of Development Fire Flow Duration (Hrs.)
(Min.)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Single-family house 1000 gpm 2
(>100' between houses)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Single-family house 1000 gpm 2
(<100' between houses)
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Multi-family house (max. 4) 1,000 gpm 2
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Apartment building 1,500 gpm 2
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Commercial (light) 1,750 gpm 2
Commercial (medium) 2,500 gpm 3
Commercial (heavy) 3,000 gpm 3
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Industrial 3,500 gpm 3
- --------------------------------------------------------------------
====================================================================
2. PRESSURE
====================================================================
- --------------------------------------------------------------------
20 psi at street level under all flow conditions, including fire
and
30 psi at street level under peak day flow conditions
- --------------------------------------------------------------------
====================================================================
3. WATER QUALITY
====================================================================
- --------------------------------------------------------------------
Turbidity < .5 NTU at 95% of samples
within any given month
- --------------------------------------------------------------------
- --------------------------------------------------------------------
Iron < .3 mg/l
- --------------------------------------------------------------------
*Provided (i) that the mains serving the location in question and
giving effect for the location of the place of measurement within
the System, could provide such flows if in good condition and
operated in accordance with prudent utility practice, and (ii)
giving effect for (i) above, any deviation from the schedule does
not materially adversely affect the ISO rating of the System and
the cost and availability of insurance for users of the System.
Provided further that the coefficient of the pipes shall be C=85
for the calculation of whether the required fire flow can be
delivered.
<PAGE>
21255-004 114412.10
SCHEDULE H
WATER SUPPLY AGREEMENTS
THIS AGREEMENT made this ______________ ___, 1997
BETWEEN
ELIZABETHTOWN WATER COMPANY, a public utility and
corporation organized under the laws of the State of
New Jersey, with its principal office at 600 South
Avenue, Town of Westfield, County of Union, State of
New Jersey,
hereinafter referred to as "Elizabethtown,"
AND
TOWNSHIP OF EDISON, in the County of Middlesex, a
municipal corporation organized under the laws of the
State of New Jersey, Township of Edison, County of
Middlesex, State of New Jersey,
hereinafter referred to as "Edison."
WHEREAS, Edison desires to obtain a supply of water to
be used by the Township and its inhabitants; and
WHEREAS, Elizabethtown has a Rate Schedule No. ED-8,
Service to Other Systems Under Contract, filed under authority of
the Board of Public Utilities, and Edison desires to obtain a
supply of water under that rate schedule and subject to its
provisions, as may be amended and supplemented under approval of
the Board of Public Utilities; and
WHEREAS, Elizabethtown and Edison presently have a
contract for water supply dated December 27, 1967, which expires
on December 27, 1997 and which requires certain amendments and
the parties desire to have this Agreement supersede said contract.
W I T N E S S E T H:
Elizabethtown agrees to sell, deliver and transport to
Edison, and Edison agrees to purchase and accept water from the
water sources or supply of Elizabethtown at the rates set forth
in the Rate Schedule No. ED-8, Service to Other Systems Under
Contract and subject to its provisions as may be amended and
supplemented under approval of the Board of Public Utilities.
It is further agreed between Elizabethtown and Edison
that:
1. The Term of this agreement shall be thirty (30)
years.
2. Elizabethtown will meter all water supplied to
Edison at the existing Truman Drive Meter (hereinafter called the
"Truman Drive Meter Station") and at the existing meter on
Talmadge Road (hereinafter called "Talmadge Road Meter Station"
and together with the Truman Drive Meter Station, the "Meter
Stations") and at such other points as may be designated by
mutual agreement. As further consideration for this Agreement
and pursuant to the provisions of the County and Municipal Water
Supply Act, N.J.S.A. 40A:31-1 (the "Water Supply Act"),
Elizabethtown agrees to expand and upgrade the Talmadge Road
Booster Station in order to enhance the volume, pressure and
quality of water to be supplied by Elizabethtown to Edison as
follows:
(a) Install two new ten thousand (10,000) gallon per
minute (gpm) pumps with three hundred (300) horsepower
motors;
(b) Install a variable frequency drive and controls to
the motor, which will allow the pump to maintain
reasonably constant pressure in the system, regardless
of fluctuations in system demand;
(c) Install an enclosed diesel driven standby power
generator;
(d) Install an automatic transfer switch;
(e) Upgrade station piping;
(f) Upgrade electrical wiring; and
(g) Install remote sensory units and switches to allow
for twenty-four (24) hour monitoring and control of the
Station at Elizabethtown's central control room in
Netherwood.
All expenses associated therewith shall be solely at the
expense of Elizabethtown. In order to enable Elizabethtown to
undertake such improvements, Edison, pursuant to the Water Supply
Act, hereby grants an exclusive license to Elizabethtown for the
term of this Agreement to enable it to operate, maintain and make
the improvements to the Talmadge Road Booster Station. All
improvements shall be owned by Elizabethtown.
3. Elizabethtown will not be required to supply water
at a total rate of flow greater than four and one-half million
(4,500,000) gallons per day through the Meter Stations unless
notified at least twenty-four (24) hours in advance by Edison or
its operator and in that event, the total rate of flow shall not
exceed seven million and seven hundred fifty thousand (7,750,000)
gallons per day, unless written permission of Elizabethtown is
obtained as a supplement hereto, except that these rates of flow
and daily quantities may be exceeded on reasonable notice in case
of fire or other catastrophe requiring an emergency supply of
water.
<PAGE>
21255-004 114412.10
4. Initially, Edison will furnish Elizabethtown with
a statement of its total minimum daily requirements for the Meter
Stations, which will not be less than four million five hundred
thousand (4,500,000) gallons per day. Thereafter, Edison or its
operator will submit to Elizabethtown, at intervals of six (6)
months, a written statement of its total minimum daily
requirements for the following six (6) months, which minimum for
the Meter Stations shall not be less than four million five
hundred thousand (4,500,000) gallons per day. This statement
shall fix the rate category for the period, as indicated in the
filed rate schedule.
5. The charge for the amount of water supplied shall
be determined by the total daily quantity supplied through the
Meter Stations multiplied by the rate for the category fixed for
each six-month period. The daily charge to be paid by Edison
shall not be less than the stated total minimum daily
requirements for the Meter Stations multiplied by the rate for
the category fixed for the six (6) month period.
6. Elizabethtown shall provide a continuous, regular
and uninterrupted supply of water to Edison. Elizabethtown
undertakes to supply such continuous and regular service to
Edison subject to interruptions by reason of acts of God,
accident, strike, legal process, State or municipal interference
or other causes whatsoever beyond its control and shall not be
liable for damages to Edison by reasons of interruptions in the
supply of water to Edison's system.
7. This contract shall go into effect on _________
__, 1997.
<PAGE>
21255-004 114412.10
IN WITNESS WHEREOF, the Elizabethtown Water Company has
caused these presents to be signed by its Senior Vice President
and its corporate seal to be affixed hereto and attested by its
Secretary, and the Township of Edison, in the County of
Middlesex, has caused these presents to be signed by its Mayor,
and its corporate seal to be affixed hereto and attested by its
Clerk, the day and year first above written.
ELIZABETHTOWN WATER COMPANY
By:_________________________
Norbert Wagner
Senior Vice President
Attest;
_____________________________
Walter M. Braswell, Secretary
TOWNSHIP OF EDISON, in the
County of Middlesex
By:__________________________
George A. Spadoro
Mayor
Attest:
______________________________
Reina A. Murphy, Clerk
<PAGE>
SCHEDULE I
FACILITIES TO RECEIVE FREE SERVICE
<PAGE>
21255-004 114412.10
Building Address Description
Municipal Complex 100 Municipal Blvd. Municipal Bldg.
Senior Citizen Bldg. 2963 Woodbridge Ave. Recreation Center
Toth Health Center 80 Idlewild Road Health Center
Animal Shelter 125 Municipal Blvd. Shelter
Stelton Community Center 328 Plainfield Ave. Recreation Center
Fire House #1 Plainfield Ave at Township House
Fire House #2 Simpson Township House
Lincoln Hwy at
Langstaff Ave
Free Public Library Plainfield Ave at Library
Division St
Parks & Bldgs Maint. Garage Now St (off Maintenance Garage
Municipal Garage Woodbridge) Maintenance Garage
745 New Durham Road
Water Utility Office Langstaff Ave (North of Highway 27)
Sewer Dept. Pump Station National Road Pump Station
Sewer Dept. Pump Station Woodbridge Avenue Pump Station
(West of NJ Turnpike)
Sewer Dept. Pump Station Marina Drive-Marina Pump Station
Sewer Dept. Pump Station Apts. Pump Station
Brunswick Avenue
(near Nursing Home)
Sewer Dept. Pump Station Bartha Ave (off Pump Station
Sutton's Lane)
First Aid Squad Building Lakeview Drive First Aid
<PAGE>
21255-004 114412.10
<PAGE>
SCHEDULE J
EMPLOYEES TO BE HIRED OR PAID FOR BY OPERATOR
Bolger, Mathew
Schappauf Jr., Peter
Sperber, Lothar
Valentino, Lawrence
Petty, Timothy
Ghilino Jr., Louis N.
Morgan, Harry
Pinter, Joseph A.
Combenakis, Steven
Wood, William Craig
Singley, Hubert
Richardson, Arnold R.
Dreyfus, David
Catalano, Donald
Leight, Christopher
Christie, Carole
Bobrowski III, John
Kennedy, Alexander
Lucey, Joseph M.
Stebila, Joseph
<PAGE>
SCHEDULE K
ANNUAL PAYMENTS
Year Amount
July 1, 1997 - June 30, 1998 845,399
July 1, 1998 - June 30, 1999 874,988
July 1, 1999 - June 30, 2000 321,368
July 1, 2000 - June 30, 2001 332,615
July 1, 2001 - June 30, 2002 344,257
July 1, 2002 - June 30, 2003 356,306
July 1, 2003 - June 30, 2004 368,777
July 1, 2004 - June 30, 2005 381,684
July 1, 2005 - June 30, 2006 395,043
July 1, 2006 - June 30, 2007 408,869
July 1, 2007 - June 30, 2008 423,180
July 1, 2008 - June 30, 2009 437,991
July 1, 2009 - June 30, 2010 453,321
July 1, 2010 - June 30, 2011 469,187
July 1, 2011 - June 30, 2012 485,608
July 1, 2012 - June 30, 2013 502,605
July 1, 2013 - June 30, 2014 520,196
July 1, 2014 - June 30, 2015 538,403
July 1, 2015 - June 30, 2016 557,247
July 1, 2016 - June 30, 2017 576,750
Exhibit 10(b)
Contract betweent Elizabethtown Water Company and
the Township of Edison to Provide Water on a Wholesale Basis
THIS AGREEMENT made this 25th day of June, 1997
BETWEEN
ELIZABETHTOWN WATER COMPANY, a public utility and corporation
organized under the laws of the State of New Jersey, with its
principal office at 600 South Avenue, Town of Westfield, County of
Union, State of New Jersey,
hereinafter referred to as "Elizabethtown,"
AND
TOWNSHIP OF EDISON, in the County of Middlesex, a municipal
corporation organized under the laws of the State of New Jersey,
Township of Edison, County of Middlesex, State of New Jersey,
hereinafter referred to as "Edison."
WHEREAS, Edison desires to obtain a supply of water to be used by
the Township and its inhabitants; and
WHEREAS, Elizabethtown has a Rate Schedule No. ED-8, Service to
Other Systems Under Contract, filed under authority of the Board of Public
Utilities, and Edison desires to obtain a supply of water under that rate
schedule and subject to its provisions, as may be amended and supplemented
under approval of the Board of Public Utilities; and
WHEREAS, Elizabethtown and Edison presently have a contract for
water supply dated December 27, 1967, which expires on December 27, 1997 and
which requires certain amendments and the parties desire to have this
Agreement supersede said contract.
W I T N E S S E T H:
Elizabethtown agrees to sell, deliver and transport to Edison, and
Edison agrees to purchase and accept water from the water sources or supply
of Elizabethtown at the rates set forth in the Rate Schedule No. ED-8,
Service to Other Systems Under Contract and subject to its provisions as may
be amended and supplemented under approval of the Board of Public Utilities.
It is further agreed between Elizabethtown and Edison that:
1. The Term of this agreement shall be thirty (30) years.
2. Elizabethtown will meter all water supplied to Edison at the
existing Truman Drive Meter (hereinafter called the "Truman Drive Meter
Station") and at the existing meter on Talmadge Road (hereinafter called
"Talmadge Road Meter Station" and together with the Truman Drive Meter
Station, the "Meter Stations") and at such other points as may be designated
by mutual agreement. As further consideration for this Agreement and
pursuant to the provisions of the County and Municipal Water Supply Act,
N.J.S.A. 40A:31-1 (the "Water Supply Act"), Elizabethtown agrees to expand
and upgrade the Talmadge Road Booster Station in order to enhance the volume,
pressure and quality of water to be supplied by Elizabethtown to Edison as
follows:
(a) Install two new ten thousand (10,000) gallon per minute (gpm)
pumps with three hundred (300) horsepower motors;
(b) Install a variable frequency drive and controls to the motor,
which will allow the pump to maintain reasonably constant pressure
in the system, regardless of fluctuations in system demand;
(c) Install an enclosed diesel driven standby power generator;
(d) Install an automatic transfer switch;
(e) Upgrade station piping;
(f) Upgrade electrical wiring; and
(g) Install remote sensory units and switches to allow for
twenty-four (24) hour monitoring and control of the Station at
Elizabethtown's central control room in Netherwood.
All expenses associated therewith shall be solely at the expense of
Elizabethtown. In order to enable Elizabethtown to undertake such
improvements, Edison, pursuant to the Water Supply Act, hereby grants an
exclusive license to Elizabethtown for the term of this Agreement to enable
it to operate, maintain and make the improvements to the Talmadge Road
Booster Station. All improvements shall be owned by Elizabethtown.
3. Elizabethtown will not be required to supply water at a total
rate of flow greater than four and one-half million (4,500,000) gallons per
day through the Meter Stations unless notified at least twenty-four (24)
hours in advance by Edison or its operator and in that event, the total rate
of flow shall not exceed seven million seven hundred fifty thousand
(7,750,000) gallons per day, unless written permission of Elizabethtown is
obtained as a supplement hereto, except that these rates of flow and daily
quantities may be exceeded on reasonable notice in case of fire or other
catastrophe requiring an emergency supply of water.
4. Initially, Edison will furnish Elizabethtown with a statement
of its total minimum daily requirements for the Meter Stations, which will
not be less than four million five hundred thousand (4,500,000) gallons per
day. Thereafter, Edison or its operator will submit to Elizabethtown, at
intervals of six (6) months, a written statement of its total minimum daily
requirements for the following six (6) months, which minimum for the Meter
Stations shall not be less than four million five hundred thousand
(4,500,000) gallons per day. This statement shall fix the rate category for
the period, as indicated in the filed rate schedule.
5. The charge for the amount of water supplied shall be
determined by the total daily quantity supplied through the Meter Stations
multiplied by the rate for the category fixed for each six-month period. The
daily charge to be paid by Edison shall not be less than the stated total
minimum daily requirements for the Meter Stations multiplied by the rate for
the category fixed for the six (6) month period.
6. Elizabethtown shall provide a continuous, regular and
uninterrupted supply of water to Edison. Elizabethtown undertakes to supply
such continuous and regular service to Edison subject to interruptions by
reason of acts of God, accident, strike, legal process, State or municipal
interference or other causes whatsoever beyond its control and shall not be
liable for damages to Edison by reasons of interruptions in the supply of
water to Edison's system.
7. This contract shall go into effect on July 1, 1997.
<PAGE>
IN WITNESS WHEREOF, the Elizabethtown Water Company has caused
these presents to be signed by its Senior Vice President and its corporate
seal to be affixed hereto and attested by its Secretary, and the Township of
Edison, in the County of Middlesex, has caused these presents to be signed by
its Mayor, and its corporate seal to be affixed hereto and attested by its
Clerk, the day and year first above written.
ELIZABETHTOWN WATER COMPANY
By:_________________________
Norbert Wagner
Senior Vice President
Attest:
_____________________________
Walter M. Braswell, Secretary
TOWNSHIP OF EDISON, in the
County of Middlesex
By:__________________________
George A. Spadoro
Mayor
Attest:
______________________________
Reina A. Murphy, Clerk
<TABLE>
Exhibit 11
E'TOWN CORPORATION AND SUSIDIARY
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
PRIMARY
EARNINGS
Income Before Preferred Stock
<S> <C> <C> <C> <C> <C> <C>
Dividends of Subsidiary $ 4,608 $ 4,121 $ 8,281 $ 7,501 $ 16,666 $ 16,013
Deduct: Preferred Stock Dividends (203) (203) (406) (406) (812) (812)
------------------------------------------------------
Net Income Available for Common Stock $ 4,405 $ 3,918 $ 7,875 $ 7,095 $ 15,854 $ 15,201
======================================================
SHARES
Weighted Average Number of Common Shares 7,884 7,639 7,808 7,604 7,770 7,532
Outstanding Assuming Exercise of Options
Reduced By the Number of Shares Which
Could Have Been Purchased From Exercise
of Such Options 31 2 64 4 36 4
Weighted Average Number of Common Shares -----------------------------------------------------
Outstanding As Adjusted 7,915 7,641 7,872 7,608 7,806 7,536
------------------------------------------------------
Primary Earnings Per Share of Common Stock $ .56 $ .51 $ 1.00 $ .93 $ 2.03 $ 2.02
======================================================
ASSUMING FULL DILUTION
EARNINGS
Income Before Preferred Stock Dividends
of Subsidiary $ 4,608 $ 4,121 $ 8,281 $ 7,501 $ 16,666 $ 16,013
Deduct: Preferred Stock Dividends (203) (203) (406) (406) (812) (812)
Add: After Tax Interest Expense Applicable
to 6 3/4% Convertible Subordinated
Debentures 125 128 249 257 505 519
-----------------------------------------------------
Adjusted Net Income $ 4,530 $ 4,046 $ 8,124 $ 7,352 $ 16,359 $ 15,720
======================================================
SHARES
Weighted Average Number of Common Shares 7,884 7,639 7,808 7,604 7,770 7,532
Outstanding Assuming Exercise of Options
Reduced By the Number Of Shares Which
Could Have Been Purchased With the
Proceeds From Exercise of Such Options 31 2 64 4 36 4
Assuming Conversion Of 6 3/4% Convertible
Subordinated Debentures (a) 285 294 286 293 288 295
-----------------------------------------------------
Weighted Average Number of Common Shares --
Outstanding as Adjusted 8,200 7,935 8,158 7,901 8,094 7,831
------------------------------------------------------
Fully Diluted Earnings Per Share
of Common Stock $ .55 $ .51 $ 1.00 $ .93 $ 2.02 $ 2.01
======================================================
<FN>
(a) Convertible at $40 per share.
</FN>
</TABLE>
<TABLE>
Exhibit 12
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARIES
Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividends
(In Thousands Except Ratios)
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
EARNINGS:
<S> <C> <C> <C> <C> <C> <C>
Income before preferred stock dividends $ 4,862 $ 4,366 $ 8,747 $ 7,960 $ 17,542 $ 17,255
Federal income taxes 2,573 2,303 4,620 4,192 9,250 9,122
Interest charges 4,222 2,932 8,515 5,794 15,525 11,465
------------------------------------------------------
Earnings available to cover fixed charges 11,657 9,601 21,882 17,946 42,317 37,842
------------------------------------------------------
FIXED CHARGES AND PREFERRED DIVIDENDS:
Interest on long-term debt 3,394 3,253 6,647 6,506 13,152 12,011
Preferred dividend requirement (1) 310 310 620 621 1,240 1,241
Other interest 781 552 1,767 960 3,447 2,264
Amortization of debt discount - net 89 88 178 176 364 338
------------------------------------------------------
Total fixed charges 4,574 4,203 9,212 8,263 18,203 15,854
------------------------------------------------------
Ratio of Earnings to Fixed Charges
and Preferred Dividends 2.55 2.28 2.38 2.17 2.32 2.39
======================================================
(1) Preferred Dividend Requirement:
Preferred dividends 203 203 406 407 812 812
Effective tax rate 34.61% 34.53% 34.56% 34.50% 34.53% 34.58%
------------------------------------------------------
Preferred dividend requirement $ 310 $ 310 $ 620 $ 621 $ 1,240 $ 1,241
======================================================
<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>
Exhibit 12
ELIZABETHTOWN WATER COMPANY AND SUBSIDIARY
Computation of Ratio of Earnings to Fixed Charges
(In Thousands Except Ratios)
Three Months Ended Six Months Ended Twelve Months Ended
June 30, June 30, June 30,
1997 1996 1997 1996 1997 1996
EARNINGS:
<S> <C> <C> <C> <C> <C> <C>
Income before preferred stock dividends $ 4,862 $ 4,366 $ 8,747 $ 7,960 $ 17,542 $ 17,255
Federal income taxes 2,573 2,303 4,620 4,192 9,250 9,122
Interest charges 4,222 2,932 8,515 5,794 15,525 11,465
------------------------------------------------------
Earnings available to cover fixed charges 11,657 9,601 21,882 17,946 42,317 37,842
------------------------------------------------------
FIXED CHARGES:
Interest on long-term debt 3,394 3,253 6,647 6,506 13,152 12,011
Other interest 781 552 1,767 960 3,447 2,264
Amortization of debt discount - net 89 88 178 176 364 338
------------------------------------------------------
Total fixed charges 4,264 3,893 8,592 7,642 16,963 14,613
------------------------------------------------------
Ratio of Earnings to Fixed Charges 2.73 2.47 2.55 2.35 2.49 2.59
======================================================
<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>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000764403
<NAME> E'TOWN CORPORATION
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 560,925
<OTHER-PROPERTY-AND-INVEST> 19,688
<TOTAL-CURRENT-ASSETS> 39,899
<TOTAL-DEFERRED-CHARGES> 47,616
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 668,128
<COMMON> 148,632
<CAPITAL-SURPLUS-PAID-IN> (3,845)
<RETAINED-EARNINGS> 42,306
<TOTAL-COMMON-STOCKHOLDERS-EQ> 187,093
0
12,000
<LONG-TERM-DEBT-NET> 243,330
<SHORT-TERM-NOTES> 26,500
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
30
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 199,176
<TOT-CAPITALIZATION-AND-LIAB> 668,129
<GROSS-OPERATING-REVENUE> 32,463
<INCOME-TAX-EXPENSE> 2,345
<OTHER-OPERATING-EXPENSES> 21,333
<TOTAL-OPERATING-EXPENSES> 23,678
<OPERATING-INCOME-LOSS> 8,785
<OTHER-INCOME-NET> 171
<INCOME-BEFORE-INTEREST-EXPEN> 8,956
<TOTAL-INTEREST-EXPENSE> 4,348
<NET-INCOME> 4,608
203
<EARNINGS-AVAILABLE-FOR-COMM> 4,405
<COMMON-STOCK-DIVIDENDS> 4,019
<TOTAL-INTEREST-ON-BONDS> 3,588
<CASH-FLOW-OPERATIONS> 4,576
<EPS-PRIMARY> .56
<EPS-DILUTED> .56<F1>
<FN>
<F1>IN THOUSANDS EXCEPT PER SHARE AMOUNTS
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000032379
<NAME> ELIZABETHTOWN WATER CO
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 560,925
<OTHER-PROPERTY-AND-INVEST> 80
<TOTAL-CURRENT-ASSETS> 37,961
<TOTAL-DEFERRED-CHARGES> 46,925
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 645,891
<COMMON> 15,741
<CAPITAL-SURPLUS-PAID-IN> 118,295
<RETAINED-EARNINGS> 49,918
<TOTAL-COMMON-STOCKHOLDERS-EQ> 183,954
0
12,000
<LONG-TERM-DEBT-NET> 231,941
<SHORT-TERM-NOTES> 21,500
<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> 196,466
<TOT-CAPITALIZATION-AND-LIAB> 645,891
<GROSS-OPERATING-REVENUE> 32,333
<INCOME-TAX-EXPENSE> 2,518
<OTHER-OPERATING-EXPENSES> 20,834
<TOTAL-OPERATING-EXPENSES> 23,352
<OPERATING-INCOME-LOSS> 8,981
<OTHER-INCOME-NET> 103
<INCOME-BEFORE-INTEREST-EXPEN> 9,084
<TOTAL-INTEREST-EXPENSE> 4,222
<NET-INCOME> 4,862
203
<EARNINGS-AVAILABLE-FOR-COMM> 4,659
<COMMON-STOCK-DIVIDENDS> 4,019
<TOTAL-INTEREST-ON-BONDS> 3,394
<CASH-FLOW-OPERATIONS> 4,941
<EPS-PRIMARY> 0
<EPS-DILUTED> 0<F1>
<FN>
<F1>IN THOUSANDS OF DOLLARS
</FN>
</TABLE>
