<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1996 Commission file number 1-8359
NEW JERSEY RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-2376465
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
1415 WYCKOFF ROAD, WALL, NEW JERSEY - 07719 908-938-1480
(Address of principal executive offices) (Registrant's telephone number,
including area code)
Securities registered pursuant to Section 12 (b) of the Act:
COMMON STOCK - $2.50 PAR VALUE NEW YORK STOCK EXCHANGE
(Title of each class) (Name of each exchange on which registered)
Securities registered pursuant to Section 12 (g) of the Act:
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 by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of the Registrant's knowledge, in definitive proxy information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.
YES: X NO:
The aggregate market value of the Registrant's Common Stock held by
non-affiliates was $510,740,027 based on the closing price of $28.375 per share
on December 13, 1996.
The number of shares outstanding of $2.50 par value Common Stock as of December
13, 1996 was 18,084,162.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Registrant's 1996 Annual Report to Stockholders are incorporated
by reference into Part I and Part II of this report.
Portions of the Registrant's definitive Proxy Statement for the Annual Meeting
of Stockholders to be held January 29, 1997, are incorporated by reference into
Part I and Part III of this report.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I Page
<S> <C> <C>
ITEM 1 - Business 1
Business Segments
New Jersey Natural Gas Company
General 2
Throughput 3
Seasonality of Gas Revenues 3
Gas Supply 3
Regulation and Rates 5
Franchises 7
Competition 7
New Jersey Natural Energy Company 8
Commercial Realty & Resources Corp. 8
NJR Energy Corporation 9
Environment 10
Employee Relations 10
Executive Officers of the Registrant 10
ITEM 2 - Properties 11
ITEM 3 - Legal Proceedings 12
ITEM 4 - Submission of Matters to a Vote of Security Holders 17
Information Concerning Forward Looking Statements 18
PART II
ITEM 5 - Market for the Registrant's Common Stock and Related
Stockholder Matters 19
ITEM 6 - Selected Financial Data 19
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations 19
ITEM 8 - Financial Statements and Supplementary Data 19
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 19
PART III
ITEM 10- Directors and Executive Officers of the Registrant 19
ITEM 11- Executive Compensation 19
ITEM 12- Security Ownership of Certain Beneficial Owners and Management 19
ITEM 13- Certain Relationships and Related Transactions 19
PART IV
ITEM 14 - Exhibits, Financial Statement Schedules and Reports on Form 8-K 20
Index to Financial Statement Schedules 21
Signatures 23
Report of Independent Public Accountants 24
Consent of Independent Public Accountants 24
Exhibit Index 25
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS
New Jersey Resources Corporation (the Company or NJR) is a New Jersey
corporation formed in 1982 pursuant to a corporate reorganization. The Company
is an exempt energy services holding company providing retail and wholesale
natural gas and related energy services to customers in 17 states from Texas to
New York. Its subsidiaries include:
1) New Jersey Natural Gas Company (NJNG), a public utility that provides
regulated natural gas energy services to more than 362,000 residential,
commercial and industrial customers in central and northern New Jersey and
participates in capacity release and off-system sales programs;
2) NJR Energy Services Corporation (Energy Services), a sub-holding company of
NJR formed in 1995 to better segregate the Companies energy-related operations
which includes the following wholly-owned subsidiaries:
New Jersey Natural Energy Company (NJNE), formed in 1995 to participate in
the unregulated marketing of natural gas and fuel and capacity management
services; and
NJR Energy Corporation (NJR Energy), an investor in energy-related ventures
through its subsidiaries, New Jersey Natural Resources Company (NJNR), NJNR
Pipeline Company (Pipeline), NJR Storage Corporation (Storage), Natural
Resources Compressor Company (Compressor) and NJRE Operating Company (NJRE
Operating);
3) NJR Development Corporation, a sub-holding company, which includes the
Company's remaining unregulated subsidiaries, as follows:
Paradigm Power, Inc. (PPI), which was formed to invest in gas-fired
generating facilities;
Commercial Realty & Resources Corp. (CR&R), a commercial office real estate
developer; and
NJR Computer Technologies, Inc., an investor in certain information
technologies.
See Note 2 to the Consolidated Financial Statements - Discontinued Operations
in the Company's 1996 Annual Report, filed as Exhibit 13-1 hereto, for a
discussion of the Company's decision to exit the oil and gas production business
and no longer pursue investments in cogeneration and independent power
production facilities. See Item 1. Business - Commercial Realty & Resources
Corp. for a discussion of the sale of certain real estate assets.
In December 1996, NJR Power Services Corporation, a 100% owned subsidiary of
Energy Services, was formed to segregate the Company's unregulated fuel and
capacity management and other wholesale marketing services from its unregulated
retail marketing services.
The Company is an exempt holding company under Section 3(a)(1) of the Public
Utility Holding Company Act of 1935 (PUHCA).
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BUSINESS SEGMENTS
See Note 12 to the Consolidated Financial Statements - Business Segment Data
in the Company's 1996 Annual Report, for business segment financial information.
NEW JERSEY NATURAL GAS COMPANY
General
NJNG provides natural gas service to more than 362,000 customers. Its service
territory encompasses 1,436 square miles, covering 104 municipalities with an
estimated population of 1.3 million.
NJNG's service territory is primarily suburban, with a wide range of cultural
and recreational activities, highlighted by approximately 100 miles of New
Jersey seacoast. It is in proximity to New York, Philadelphia and the
metropolitan areas of northern New Jersey and is accessible through a network of
major roadways and mass transportation. These factors have contributed to NJNG
adding 10,978, 12,465 and 11,222 new customers in 1996, 1995 and 1994,
respectively. This growth rate of more than 3% is expected to continue with
projected additions of 60,000 new customers over the next five years. See
Liquidity and Capital Resources-NJNG in the Company's 1996 Annual Report for a
discussion of NJNG's projected capital expenditure program associated with this
growth in 1997 and 1998.
In assessing the potential for future growth in its service area, NJNG uses
information derived from county and municipal planning boards which describes
housing development in various stages of approval. In addition, builders in
NJNG's service area are surveyed to determine their development plans for future
time periods. Finally, NJNG uses information concerning its service territory
and projected population growth rates from a periodic study prepared by outside
consultants. In addition to customer growth through new construction, NJNG's
business strategy includes aggressively pursuing conversions from other fuels,
such as oil. It is estimated that approximately 40% of NJNG's projected customer
growth will consist of conversions. NJNG will also continue to pursue off-system
sales and non-peak sales, such as natural gas-fueled electric generating
projects.
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Throughput
For the fiscal year ended September 30, 1996, operating revenues and
throughput by customer class were as follows:
<TABLE>
<CAPTION>
Operating Revenues Throughput
------------------ ----------
(Thousands) (thousands of therms)
----------- ---------------------
<S> <C> <C> <C> <C>
Residential $311,081 66% 401,100 32%
Commercial, industrial and other 76,649 16 102,518 8
Firm transportation 13,316 3 45,136 3
-------- --- ------- ---
Total residential and commercial 401,046 85 548,754 43
Interruptible and agency 7,438 1 98,720 8
-------- --- ------- ---
Total system 408,484 86 647,474 51
Off-system 65,904 14 615,819 49
-------- --- ------- ---
Total $474,388 100% 1,263,293 100%
======== === ========= ===
</TABLE>
See NJNG Operations in the Company's 1996 Annual Report for a discussion of
gas and transportation sales. Also see NJNG Operating Statistics in the
Company's 1996 Annual Report for information on operating revenues and
throughput for the past six years. During this period, no single customer
represented more than 10% of operating revenues.
Seasonality of Gas Revenues
As a result of the heat-sensitive nature of NJNG's residential customer base,
therm sales are largely affected by weather conditions. Specifically, customer
demand substantially increases during the winter months when natural gas is used
for heating purposes. See Liquidity and Capital Resources - NJNG in the
Company's 1996 Annual Report for a discussion of the effect of seasonality on
cash flow.
The impact of weather on the level and timing of NJNG's revenues and cash
flows has been affected by a weather-normalization clause (WNC), which provides
for a revenue adjustment if the weather varies by more than one-half of 1% from
normal, or 10-year average, weather. The accumulated adjustment from one heating
season (i.e., October-May) is billed or credited to customers in the subsequent
heating season. See NJNG Operations in the Company's 1996 Annual Report and Item
1. Business - State Regulation for additional information with regard to the
weather-normalization clause.
Gas Supply
A) Firm Natural Gas Supplies
NJNG currently purchases gas from a diverse gas supply portfolio consisting
of both long-term (over six months), winter-term (for the five winter months)
and short-term contracts. In 1996, NJNG purchased gas from 47 suppliers under
contracts ranging from less than one month to seventeen years. NJNG has nine
long-term firm gas purchase contracts and purchased approximately 20% of its gas
in 1996 under one long-term firm gas purchase contract with Alberta Northeast
Gas Limited, which expires in 2006. NJNG does not purchase more than 10% of its
total gas supplies under any other
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single long-term firm gas purchase contract. NJNG believes that its supply
strategy should adequately meet its expected firm load over the next several
years.
B) Firm Transportation and Storage Capacity
In order to deliver the above supplies, NJNG maintains agreements for firm
transportation and storage capacity with several interstate pipeline companies.
The pipeline companies that provide firm transportation service to NJNG's city
gate stations in New Jersey, the maximum daily deliverability of that capacity
and the contract expiration dates are as follows:
<TABLE>
<CAPTION>
Maximum Daily
Pipeline Deliverability (Dths) Expiration Date
- -------- --------------------- ---------------
<S> <C> <C>
Texas Eastern Transmission Corp. 277,949 Various dates after 2000
Iroquois Gas Transmission System, L.P. 40,000 2011
Transcontinental Gas Pipe Line Corp. 22,531 Various dates after 1998
Tennessee Gas Pipeline Co. 10,835 2003
Columbia Gas Transmission Corp. 10,000 2009
Algonquin Gas Transmission Co. 5,000 1997
-------
366,315
=======
</TABLE>
The pipeline companies that provide firm transportation service to NJNG,
which feeds the above pipelines are: Texas Gas Transmission Corporation, CNG
Transmission Corporation, Columbia Gulf Transmission Corporation, Equitrans,
Inc. and Carnegie Interstate Pipeline Company.
In addition, NJNG has storage and related transportation contracts that
provide additional maximum daily deliverability of 102,941 Dths from storage
fields in its Northeast market area. The significant storage suppliers, the
maximum daily deliverability of that storage capacity and the contract
expiration dates are as follows:
<TABLE>
<CAPTION>
Pipeline Maximum Daily Deliverability (Dths) Expiration Date
- -------- ----------------------------------- ---------------
<S> <C> <C>
Texas Eastern Transmission Corp. 94,557 Various dates after 1996
Transcontinental Gas Pipe Line Corp. 8,384 2005
-------
102,941
=======
</TABLE>
NJNG also has significant storage contracts with CNG Transmission Corporation
(maximum daily deliverability of 93,661) and Equitrans, Inc. (maximum daily
deliverability of 9,996), but utilizes its existing transportation contracts to
transport that gas from the storage fields to its city gate.
C) Peaking Supply
To meet its increased winter peak day demand, NJNG, in addition to utilizing
the previously mentioned firm storage services, maintains two liquefied natural
gas (LNG) facilities and purchases firm storage services. See Item
2-Properties-NJNG for additional information regarding the storage facilities
from various interstate pipeline companies. NJNG presently has LNG storage
deliverability of 165,000 Dths per day which represents approximately 26% of its
peak day sendout.
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D) Summary
NJNG expects to be able to meet the current level of gas requirements of its
existing and projected firm customers for the foreseeable future. Nonetheless,
NJNG's ability to provide supply for its present and projected sales will depend
upon its suppliers' ability to obtain and deliver additional supplies of natural
gas, as well as NJNG's ability to acquire supplies directly from new sources.
Factors beyond the control of NJNG and its suppliers may affect its ability to
obtain such supplies. These factors include other parties having control over
the drilling of new wells and the facilities to transport gas to NJNG's city
gate, competition for the acquisition of gas, priority allocations, the
regulatory and pricing policies of federal and state regulatory agencies, as
well as the availability of Canadian reserves for export to the United States.
Regulation and Rates
A) State
NJNG is subject to the jurisdiction of the New Jersey Board of Public
Utilities (BPU) with respect to a wide range of matters, such as rates, the
issuance of securities, the adequacy of service, the manner of keeping its
accounts and records, the sufficiency of gas supply and the sale or encumbrance
of its properties.
Over the last five years, NJNG has been granted three increases in its base
tariff rates, and various increases and decreases in its Levelized Gas
Adjustment clause (LGA). Through its LGA, which is reviewed annually, NJNG
recovers purchased gas costs that are in excess of the level included in its
base rates. LGA recoveries do not include an element of profit and, therefore,
have no effect on earnings.
The following table sets forth information with respect to these rate
changes:
<TABLE>
<CAPTION>
(000's) Annualized Annualized
Amount Amount
Date of Filing Type Per Filing Granted Effective Date
- -------------- ---- ----------- ------- --------------
<S> <C> <C> <C> <C>
April 1993 Base Rates $26,900 $7,500 January 1994
August 1991 Base Rates 15,772 2,200 June 1992
August 1990 Base Rates 14,787 8,300 February 1991
July 1996 LGA 8,000 7,900 December 1996
July 1995 LGA (4,800) (5,200) December 1995
July 1994 LGA 8,800 0 December 1994
July 1993 LGA 4,800 4,800 December 1993
July 1992 LGA (15,814) (17,400)(A) January 1993
July 1991 LGA 33,407 17,100 November 1991
</TABLE>
(A) Comprised of a $12 million billing credit and a $5.4 million reduction in
annual LGA revenues.
See Note 8 to the Consolidated Financial Statements - Regulatory Issues in
the Company's 1996 Annual Report for additional information regarding NJNG's
rate proceedings.
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In September 1991, the BPU adopted a conservation incentive rule which
provides utilities with the opportunity to recover conservation program costs
and lost revenues, and to earn a return on investments in energy efficiency
programs based upon a sharing of savings between utilities and customers. NJNG
filed its "Demand Side Management Resource Plan" (DSM) addressing these issues
with the BPU in February 1992. In June 1995, the BPU approved a Stipulation
Agreement approving NJNG's DSM plan. The Stipulation calls for recovery of $3.5
million of deferred and projected demand side management program costs through a
Demand Side Management Adjustment Clause (DSMAC). The initial DSMAC was approved
by the BPU in November 1995.
In November 1992, NJNG filed a petition with the BPU for approval of a Gas
Service Agreement (GSA) executed between NJNG and Freehold Cogeneration
Associates L.P. (Freehold) in September 1992. The GSA would provide for NJNG to
supply Freehold with between 21,800 and 26,000 Dths of natural gas per day over
a twenty-year period. Freehold had planned to construct and operate a
cogeneration facility in Freehold, New Jersey, and had executed a power purchase
agreement with Jersey Central Power & Light Company (JCP&L). In November 1993,
the BPU ruled that Freehold and JCP&L should attempt to renegotiate the power
purchase agreement within 30 days of receipt of a written order. In February
1994, the BPU approved the GSA conditioned by a side letter agreement in which
Freehold and NJNG agreed to negotiate in good faith to amend the pricing terms
of the GSA to conform it to changes, if any, in the power purchase agreement if
it is renegotiated. The November 1993 BPU order was overturned in litigation not
involving NJNG as a party. Freehold was successful in this litigation. In April
1996, JCP&L and Freehold reached an agreement in which JCP&L bought out its
rights and obligations under the power purchase agreement for $120 million ("Buy
Out Agreement"). Under the Buy Out Agreement, JCP&L indemnified Freehold against
certain potential claims, including any potential claims NJNG may have against
Freehold for breach of the GSA. JCP&L is seeking BPU authorization to recover an
additional $10 million to satisfy all such claims. NJNG believes that by
executing the Buy Out Agreement, Freehold has breached its obligations under the
GSA. NJNG currently is examining possible avenues for legal redress.
In November 1995, the BPU approved a Stipulation Agreement relating to the
1995 Remediation Rider (RA), WNC, DSMAC and LGA. The approval of the Stipulation
allows recovery over seven years of gas remediation costs incurred through June
1995 of $5.1 million, the collection of $1.9 million of gross margin that was
accrued in fiscal 1995 due to the impact of warmer-than-normal weather on the
WNC, and implementation of the initial DSMAC discussed above.
The Stipulation also settled the July 1995 LGA petition and included a
reduction of $5.2 million in gas costs, the continuation of NJNG's current
margin sharing formulas associated with its non-firm sales until the effective
date of the BPU Order in NJNG's 1997-98 LGA, and approval for an extension of
the Financial Risk Management (FRM) Pilot Program designed to provide price
stability to NJNG's system supply portfolio. All of the costs and results of the
FRM program were to be recovered through the LGA. As a result of the approval of
the Stipulation, NJNG's rates did not change.
On July 31, 1996, NJNG filed with the BPU for a net $8 million, or 2%,
increase in its LGA. This LGA filing included updated factors for its Gas Cost
Recovery factor (GCR), WNC, RA and DSMAC. The GCR factor increased by $21.2
million due to the increase in gas costs resulting primarily from the cold
winter weather. This increase is partially offset by a $12 million credit from
the WNC, which reflects the margin impact of 15% colder than normal winter
weather. In addition, the Company requested certain modifications to its WNC to
update various factors to more appropriately reflect current customers' usage
and weather. On December 3, 1996, the BPU granted the Company a $7.9 million
increase in the Company's LGA clause and permitted the Company to implement
certain
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changes in the WNC that would better reflect customers' usage and weather,
including changing the average weather calculation from 10 years to 20 years.
The BPU also approved a further extension of the FRM program, which includes an
80/20 sharing of the costs and results between customers and shareholders,
respectively.
B) Federal
On the federal level, NJNG is subject to regulation by the Federal Energy
Regulatory Commission (FERC). Since the mid-1980's, the FERC has issued a series
of orders, regulations and policy statements (e.g., FERC Orders 380, 436, 451,
500, and 528) intended to transform the natural gas industry from a highly
regulated industry to a less regulated, market-oriented industry. The
culmination of the FERC's deregulatory effort was the issuance of Order 636
which established new rules mandating the unbundling of interstate pipeline
sales for resale and transportation services. The FERC instituted proceedings
through which NJNG's interstate pipeline suppliers have restructured their
services in response to Order 636.
The transition to a more market-oriented interstate pipeline market may offer
long-term benefits. Order 636 has provided NJNG with increased opportunities to
purchase and manage its own, specifically-tailored gas supply portfolio and to
resell its interstate pipeline capacity to other potential customers during
off-peak periods. However, these long-term benefits have been offset by
increases in interstate pipeline demand charges required by Order 636, in
addition to the flow-through of transition costs that pipeline companies have
incurred as a result of the restructuring of their existing gas purchase and
sales arrangements. In the individual pipeline restructuring proceedings
resulting from Order 636, all but one of NJNG's pipeline suppliers have settled
transition cost recovery issues with their customers. These settlements provide
for partial cost absorption by some of NJNG's pipeline suppliers and the orderly
recovery of remaining costs from pipeline customers, including NJNG. The
transition costs of one of NJNG's pipeline suppliers is currently being reviewed
before the FERC; however, at this time, NJNG does not expect to be adversely
affected by the outcome of that proceeding.
NJNG continually reviews its gas supply portfolio requirements in the
post-Order 636 environment. Because of its interconnections with multiple
interstate pipelines, NJNG believes that the Order 636 proceedings will not have
a material impact on its ability to obtain adequate gas supplies at market
rates. However, no assurance can be given in this regard.
Franchises
NJNG holds non-exclusive franchises granted by the 104 municipalities it
serves which gives it the right to lay, maintain and operate public utility
property in order to provide natural gas service within these municipalities. Of
these franchises, 47 are perpetual and the balance expire between 1999 and 2038.
Competition
Although its franchises are non-exclusive, NJNG is not currently subject to
competition from other natural gas distribution utilities with regard to the
transportation of natural gas in its service territory. Due to significant
distances between NJNG's current large industrial customers and the nearest
interstate natural gas pipelines, as well as the availability of its
transportation tariff, NJNG currently does not believe it has significant
exposure to the risk that its distribution system will be bypassed.
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Competition does exist from suppliers of oil, coal, electricity and propane. At
the present time, natural gas enjoys an advantage over alternate fuels as the
preferred choice of fuels in over 95% of new construction due to its efficiency
and reliability. As deregulation of the natural gas industry continues, prices
will be determined by market supply and demand, and while NJNG believes natural
gas will remain competitive with alternate fuels, no assurance can be given in
this regard.
In October 1994, the BPU approved a Stipulation Agreement that provides
NJNG's commercial and industrial customers an expanded menu of transportation
and supplier choices. As a result of the BPU approval, NJNG's sales to its
commercial and industrial customers are subject to competition from other
suppliers of natural gas; however, NJNG continues to provide transportation
service to these customers. Based on its rate design, NJNG's profits would not
be affected by a customer's decision to utilize a sales and transportation or
transportation only service.
NEW JERSEY NATURAL ENERGY COMPANY
NJNE was formed in 1995 to facilitate the unregulated marketing of natural
gas to retail customers and provide fuel and capacity management services to
wholesale customers. At September 30, 1996, NJNE marketed natural gas to 1,459
retail customers. In addition, NJNE provides gas supply and capacity management
services to GPU Service Inc., a major electric utility based in Pennsylvania,
and similar services to Gas Energy, Inc., an independent power producer
operating in New York.
COMMERCIAL REALTY & RESOURCES CORP.
At September 30, 1996, CR&R's completed space totaled 260,000 square feet, of
which 100% was occupied. CR&R also has 193 acres of undeveloped land.
Consistent with the Company's previously disclosed strategy to realign its
asset base more closely with its core energy business, in November 1995, CR&R
sold a substantial portion of its developed real estate assets to Cali Realty
Acquisition Corp. (together with its affiliates, successors and assigns,
"Cali").
The transaction included the sale of 14 buildings containing approximately
582,000 square feet of space, representing over 60 percent of CR&R's office and
flex space in business parks in Monmouth and Atlantic Counties, New Jersey. The
all-cash sale price received at the closing was $52.65 million. The contract of
sale for the transaction contained certain conditions that survived the closing,
and CR&R remains subject to certain indemnity and other obligations with respect
to the properties that were sold.
In addition to the sale of the 14 buildings, the transaction included the
grant of options to Cali to purchase approximately 165 of CR&R's 193 acres of
undeveloped land generally adjacent to these buildings. CR&R has retained
limited rights to sell and develop the lands that are subject to the options.
Separately, CR&R entered into a sale-leaseback transaction with Cali pursuant
to which it conveyed fee title to all of Jumping Brook Corporate Office Park,
including the undeveloped land portion thereof, to Cali in exchange for a $5.8
million promissory note and mortgage on the undeveloped land and a ground lease
of such undeveloped land to CR&R for approximately 99 years, with options to
renew. Upon the receipt of a subdivision by CR&R of the undeveloped land portion
from the improved portion of such office park, which was received in the first
quarter of fiscal 1997, Cali is
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expected to convey fee title to the undeveloped land back to CR&R, and the
ground lease, promissory note and mortgage are expected to be terminated.
In December 1995, CR&R sold its Monmouth Shores Corporate Office Park (MSCOP)
facility in a sale-leaseback transaction for $31.85 million. MSCOP is the
corporate headquarters building for NJNG and NJR. NJNG has entered into a
long-term master lease for the entire building. Prior to this transaction NJNG
leased approximately 79% of the building under a long-term lease. CR&R's pre-tax
gain of approximately $17.8 million was deferred and is being amortized to
income over 25 years in accordance with generally accepted accounting
principles.
The Company used the sale proceeds from the abovementioned transactions to
pay down outstanding debt incurred to develop the real estate assets. The
Company's future earnings from continuing operations will not be materially
affected by the sale based upon the historical earnings generated by the real
estate subsidiary.
See Item 2 - Properties - CR&R for additional information regarding CR&R's
remaining real estate assets.
It is anticipated that any future or further development by CR&R of its
remaining real estate assets will be consistent with CR&R's development strategy
of concentrating on a high percentage of build-to-suit projects. See CR&R
Operations in the Company's 1996 Annual Report for a discussion of CR&R's
financial results.
NJR ENERGY CORPORATION
NJR Energy and its subsidiaries: NJNR, Pipeline, Storage, Compressor and NJRE
Operating, were involved in oil and natural gas development, production,
transportation, storage and other energy-related ventures.
In 1995, the Company adopted a plan to exit the oil and natural gas
production business and pursue the sale of the reserves and related assets of
its affiliates, NJR Energy and NJNR. As discussed in Note 2 to the Consolidated
Financial Statements - Discontinued Operations in the Company's 1996 Annual
Report, the Company has accounted for this segment as a discontinued operation.
Proceeds from the sale of NJR Energy's oil and gas reserves totaled $19.6
million in 1996. Such proceeds, net of related taxes and expenses, were used by
the Company to reduce debt.
NJR Energy's continuing operations consist of its equity investments in the
Iroquois Gas Transmission System, L.P. (Iroquois) and the Market Hub Partners,
L.P. (MHP).
Pipeline is a 2.8% equity participant in Iroquois, a 375-mile natural gas
pipeline from the Canadian border to Long Island. See Item 3e.-Legal Proceedings
for additional information regarding the Iroquois pipeline.
Storage is a 5.67% equity participant in MHP, which is expected to develop,
own and operate a system of five natural gas market centers with
high-deliverability salt cavern storage facilities in Texas, Louisiana,
Mississippi, Michigan and Pennsylvania.
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See NJR Energy Operations in the Company's 1996 Annual Report for a
discussion of NJR Energy's financial results from continuing operations.
ENVIRONMENT
The Company and its subsidiaries are subject to legislation and regulation by
federal, state and local authorities with respect to environmental matters. The
Company believes that it is in substantial compliance with all applicable
environmental laws and regulations.
Although the Company cannot estimate with certainty future costs of
environmental compliance, which among other factors are subject to changes in
technology and governmental regulations, the Company does not presently
anticipate any additional significant future expenditures, other than the
activities described in Note 11 to the Consolidated Financial Statements -
Commitments and Contingent Liabilities in the Company's 1996 Annual Report, for
compliance with existing environmental laws and regulations which would have a
material effect upon the capital expenditures, earnings or competitive position
of the Company or its subsidiaries.
See Item 3b. - Legal Proceedings - Gas Remediation for additional
information regarding gas remediation activities.
EMPLOYEE RELATIONS
The Company and its subsidiaries employed 856 and 880 employees at September
30, 1996 and 1995, respectively. NJNG had 495 and 522 union employees at
September 30, 1996 and 1995, respectively. In December 1995, NJNG reached
agreement with the union on a two-year collective bargaining agreement which
provides, among other things, for annual wage increases of 3.5% and 3.75%,
effective December 7, 1995 and December 8, 1996, respectively.
EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
First Elected
Office(1) Name Age an Officer
- --------- ---- --- ----------
<S> <C> <C> <C>
Chairman, President and
Chief Executive Officer Laurence M. Downes 39 1/86
Senior Vice President, General
Counsel and Corporate Secretary Oleta J. Harden 47 6/84
Senior Vice President and
Chief Financial Officer Glenn C. Lockwood 35 1/90
</TABLE>
(1) All terms of office are one year.
There is no arrangement or understanding between the officers listed above
and any other person pursuant to which they were selected as an officer. The
following is a brief account of their business experience during the past five
years:
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Laurence M. Downes
Chairman, President and Chief Executive Officer
Mr. Downes has held the position of Chairman since September 1996. He held
the position of President and Chief Executive officer since July 1995. From
January 1990 to July 1995, he held the position of Senior Vice President and
Chief Financial Officer.
Oleta J. Harden
Senior Vice President, General Counsel and Corporate Secretary
Mrs. Harden has held her present position since January 1987, except for the
position of General Counsel which she has held since April 1996.
Glenn C. Lockwood
Senior Vice President and Chief Financial Officer
Mr. Lockwood has held the position of Senior Vice President since January
1996. He has held the position of Chief Financial Officer since September 1995.
From January 1994 to September 1995, he held the position of Vice President,
Controller and Chief Accounting Officer. From January 1990 to January 1994, he
held the position of Assistant Vice President, Controller and Chief Accounting
Officer.
ITEM 2. PROPERTIES
NJNG (All properties are in New Jersey)
NJNG owns 10,626 miles of distribution main and services, 325 miles of
transmission main and approximately 373,700 meters. Mains are primarily located
under public roads. Where mains are located under private property, NJNG has
obtained easements from the owners of record.
In addition to mains and services, NJNG owns and operates two LNG storage
plants located in Stafford Township, Ocean County, and Howell Township, Monmouth
County. The two LNG plants have an estimated effective capacity of 19,200 and
150,000 Dths per day, respectively. These facilities are used for peaking supply
and emergencies.
NJNG owns four service centers located in Rockaway Township, Morris County;
Atlantic Highlands and Wall Township, Monmouth County; and Lakewood, Ocean
County. These service centers house storerooms, garages, gas distribution and
appliance service operations and administrative offices. NJNG leases its
headquarters facilities in Wall Township, customer service offices located in
Asbury Park and Wall Township, Monmouth County and a service center in
Manahawkin, Ocean County. These customer service offices support customer
contact, marketing and other functions. NJNG also owns a storage facility in
Long Branch, Monmouth County.
Substantially all of NJNG's properties, not expressly excepted or duly
released, are subject to the lien of an Indenture of Mortgage and Deed of Trust
to Harris Trust and Savings Bank, Chicago, Illinois, dated April 1, 1952, as
amended by twenty-six supplemental indentures (Indenture), as security for
NJNG's bonded debt, which totaled approximately $228 million at September 30,
1996. In addition, under the terms of its Indenture, NJNG could have issued
approximately $206 million of additional first mortgage bonds as of September
30, 1996. In October 1995, NJNG issued $20 million of bonds,
11
<PAGE> 14
which was the remaining portion of its Medium-Term Notes, Series A, consisting
of its 6 7/8% Series CC First Mortgage Bonds due 2010 under its Indenture, as
amended by the twenty-sixth supplemental indenture.
CR&R (All properties are in New Jersey)
At September 30, 1995, CR&R owned and operated 17 buildings consisting of
914,200 square feet of commercial office and mixed-use commercial/industrial
space, of which 886,000 square feet, or 97%, were occupied. CR&R and affiliated
companies, including NJNG, occupied approximately 149,800 square feet in four of
these buildings. These properties were located in Monmouth and Atlantic Counties
in various business parks. See Item 3f.- Legal Proceedings - Real Estate
Properties for a discussion of regulatory matters concerning one of the business
parks.
See Item 1. Business - Commercial Realty & Resources Corp. for a description
of the sale of a majority of CR&R's properties in 1996. As of September 30,
1996, CR&R's completed space totaled 260,000 square feet in three buildings,
with a 100% occupancy rate.
NJR Energy
At September 30, 1995, NJR Energy, as a working-interest participant, had
interests in oil and gas leases in Louisiana, New York, West Virginia and Texas.
Additionally, NJNR had working interests in oil and gas leases in Texas,
Oklahoma, Kansas, Arkansas, Utah and Pennsylvania, and is a participant in a
21-mile natural gas transportation pipeline joint venture, located in Cambria
County and Indiana County, Pennsylvania. NJNR also owned a natural gas gathering
system and was a participant in a 16-mile natural gas pipeline joint venture
located in Utah. See Item 1. Business - NJR Energy Corporation for information
related to the sale of all of the abovementioned properties in 1996.
Pipeline has a 2.8% equity interest in the Iroquois Gas Transmission System,
L.P. which owns and operates the Iroquois pipeline project, a 375-mile pipeline
from the Canadian border in upstate New York to Long Island.
Storage has a 5.67% equity interest in Market Hub Partners, L.P. which
intends to develop, own and operate a system of five natural gas market centers
with high deliverability salt cavern storage facilities in Texas, Louisiana,
Mississippi, Michigan and Pennsylvania.
Capital Expenditure Program
See Liquidity and Capital Resources in the Company's 1996 Annual Report for
a discussion of the Company's anticipated 1996 and 1997 capital expenditures for
each business segment.
ITEM 3. LEGAL PROCEEDINGS
a. Aberdeen
Since June 1993, a total of six complaints, of which five are still pending,
have been filed in New Jersey Superior Court against NJNG and its contractor by
persons alleging injuries arising out of a natural gas explosion and fire on
June 9, 1993, at a residential building in Aberdeen Township, New
12
<PAGE> 15
Jersey. The plaintiffs allege in their respective actions, among other things,
that the defendants were negligent or are strictly liable in tort in connection
with their maintaining, replacing or servicing natural gas facilities at such
building. The plaintiffs separately seek compensatory damages from NJNG and its
contractor. To date, NJNG and its contractors have received demands for damages
totaling $25.2 million from various plaintiffs.
In May 1994, the New Jersey Superior Court ordered that all causes of action
relating to the Aberdeen Township explosion be consolidated for purposes of
discovery.
NJNG's liability insurance carriers are participating in the defense of these
matters. NJNG is unable to predict the extent to which other claims will be
asserted against, or liability imposed on, NJNG. The Company does not believe
that the ultimate resolution of these matters will have a material adverse
effect on its consolidated financial condition or results of operations.
b. Gas Remediation
NJNG has identified eleven former manufactured gas plant (MGP) sites, dating
back to the late 1800's and early 1900's, which it acquired from predecessors,
and which contain contaminated residues from the former gas manufacturing
operations. Ten of the eleven sites in question were acquired by NJNG from a
predecessor in 1952, and the eleventh site was acquired by a predecessor of NJNG
in 1922. All of the gas manufacturing operations ceased at these sites at least
since the mid-1950's and in some cases had been discontinued many years earlier,
and all of the old gas manufacturing facilities were subsequently dismantled by
NJNG or its predecessors. NJNG is currently involved in administrative
proceedings with the New Jersey Department of Environmental Protection and
Energy (NJDEPE) and local government authorities with respect to the plant sites
in question, and is participating in various studies and investigations by
outside consultants to determine the nature and extent of any such contaminated
residues and to develop appropriate programs of remedial action, where
warranted. Since October 1989, NJNG has entered into Administrative Consent
Orders or Memoranda of Agreement with the NJDEPE covering all eleven sites.
These documents establish the procedures to be followed by NJNG in developing a
final remedial clean-up plan for each site.
Most of the cost of such studies and investigations is being shared under an
agreement with the former owner and operator of ten of the MGP sites. See Note
11 to the Consolidated Financial Statements - Commitments and Contingent
Liabilities in the Company's 1996 Annual Report for a discussion of the
regulatory treatment of gas remediation costs.
In March 1995, NJNG filed a complaint in New Jersey Superior Court against
various insurance carriers for declaratory judgment and for damages arising from
such defendants' breach of their contractual obligations to defend and/or
indemnify NJNG against liability for claims and losses (including defense costs)
alleged against NJNG relating to environmental contamination at the former MGP
sites and other sites. NJNG is seeking (i) a declaration of the rights, duties
and liabilities of the parties under various primary and excess liability
insurance policies purchased from the defendants by NJNG from 1951 through 1985,
and (ii) compensatory and other damages, including costs and fees arising out of
defendants' obligations under such insurance policies. The complaint was amended
in July 1996 to name Kaiser-Nelson Steel & Salvage Company (Kaiser-Nelson) and
its successors as additional defendants. The Company is seeking (a) a
declaration of the rights, duties and liabilities of the parties under
agreements with respect to claims against the Company that allege property
damage
13
<PAGE> 16
caused by various substances used, handled or generated by NJNG or the
predecessor in title that were removed from several of the MPG sites by
Kaiser-Nelson, and (b) money damages or compensatory relief for the harm caused
by Kaiser-Nelson's aforementioned actions. There can be no assurance as to the
outcome of these proceedings.
c. South Brunswick Asphalt, L.P.
NJNG has been named a defendant in a civil action commenced in New Jersey
Superior Court by South Brunswick Asphalt, L.P. (SBA) and its affiliated
companies seeking damages arising from alleged environmental contamination at
three sites owned or occupied by SBA and its affiliated companies. Specifically,
the suit charges that tar emulsion removed from 1979 through 1983 by an
affiliate of SBA (Seal Tite, Inc.) from NJNG's former gas manufacturing plant
sites has been alleged by the NJDEPE to constitute a hazardous waste and that
the tar emulsion has contaminated the soil and ground water at the three sites
in question. In February 1991, the NJDEPE issued letters classifying the tar
emulsion/sand and gravel mixture at each site as dry industrial waste, a
non-hazardous classification. On April 4, 1996, in a meeting with all parties to
the litigation and the judge assigned to the case, the NJDEPE confirmed the
non-hazardous classification, which will allow for conventional disposal.
Non-hazardous waste may be disposed of by a number of conventional methods,
which are being explored by the parties.
d. Bridgeport Rental and Oil Service
In January 1992, NJNG was advised of allegations that certain waste oil from
its former manufactured gas plant site in Wildwood, New Jersey may have been
sent by a demolition contractor to the Bridgeport Rental and Oil Service (BROS)
site in Logan Township, New Jersey. That site was designated a Superfund site
and is currently the subject of two lawsuits pending in the U.S. District Court
in New Jersey. NJNG notified its insurance carriers and participated in
settlement discussions as a non-party litigant. See Item 3b. Legal Proceedings -
Gas Remediation, for a description of an action brought by NJNG against various
insurance carriers relating to insurance coverage of liability arising out of
these sites. The two lawsuits have been settled. The consent decree has been
forwarded to the Court for lodging, which, absent public comment or objection,
is expected to be formally docketed before December 31, 1996. NJNG's share of
the settlement was $2,150,000, of which 60% will be paid by the former owner and
operator of the former MGP site in Wildwood. Although it is expected that the
funds paid and placed in trust to reimburse the United States for cleanup costs
to date and to fund the site remediation to conclusion are more than adequate
for that purpose, the consent decree which was received by the Court on
September 30, 1996 provides, according to a formula set forth therein, for a
reopener for assessment of additional costs in excess of the present estimated
amount to complete the cleanup, which is expected to last many years. The
consent decree provides contribution protection from any claims by parties later
brought into the case. However, only after the cleanup is completed will the
final site release be effective to all of the settling parties, including NJNG.
The Company does not believe that the ultimate resolution of these matters will
have a material adverse effect on its consolidated financial condition or
results of operations.
14
<PAGE> 17
e. Iroquois
Pipeline owns a 2.8% equity interest in the Iroquois Gas Transmission System,
L.P. (Iroquois) which has constructed and is operating a 375-mile pipeline from
the U.S. - Canadian border in upstate New York to Long Island.
In late 1991 and early 1992 Iroquois was informed by the United States
Attorney's office for the Northern, Southern and Eastern Districts of New York
that federal criminal and civil investigations of the construction practices in
connection with certain of its pipeline facilities had been commenced. The
investigations were to determine whether Iroquois violated various environmental
and other laws in the construction of such facilities. In addition, beginning in
late 1993, Iroquois was informed by the FERC, the Army Corps of Engineers, the
Department of Transportation (DOT) and the New York Public Service Commission
that each of these agencies had also commenced investigations regarding the
construction of the pipeline facilities.
On May 23, 1996, as part of a "global" resolution of these investigations,
Iroquois Pipeline Operating Company (IPOC) pled guilty to four felony violations
of the Clean Water Act and entered into consent decrees under the Clean Water
Act in four federal judicial districts. Although not a named defendant, Iroquois
signed the plea agreement and consent decrees and is bound by their terms.
Iroquois also entered into a related settlement with the State of New York.
Under these various agreements, Iroquois and IPOC agreed to pay $22 million in
fines and penalties, agreed to remediate 27 wetlands along its pipeline, and
agreed to implement under FERC and DOT orders two ten-year plans to address
certain ground stability and pipeline safety concerns. Iroquois also entered
into a separate settlement with the FERC pursuant to which it agreed to remove,
prospectively, approximately $2 million of initial construction costs from its
rate base for purposes of rate collection and to refund to its customers
approximately $400,000, plus interest, associated with such construction costs
which it had previously collected.
In addition, four former employees of IPOC pled guilty to misdemeanor
violations of the Clean Water Act. On October 16, 1996, the United States filed
indictments against another former employee of IPOC, the environmental
consulting firm Iroquois and IPOC engaged during pipeline construction, and two
of that firm's employees, in connection with the same matters covered by global
settlement.
The Company's proportionate share of the final settlement agreement was
$560,000, or $.03 per share, which was recorded in fiscal 1995. Pipeline's
investment in Iroquois as of September 30, 1996 was $5.6 million.
f. Real Estate Properties
CR&R is the owner of Monmouth Shores Corporate Park (MSCP), located in
Monmouth County, New Jersey. The land comprising MSCP (53 acres) is now
regulated by the provisions of the Freshwater Wetlands Protection Act (the Act),
which restricts building in areas defined as "freshwater wetlands" and their
transition areas.
Based upon an environmental engineer's delineation of the wetland and
transition areas in accordance with the provisions of the Act, CR&R will file
for a Letter of Interpretation from NJDEPE as parcels of land are selected for
development. Based upon the environmental engineer's revised
15
<PAGE> 18
estimated developable yield for MSCP, the Company does not believe that a
reserve against this property was necessary as of September 30, 1996.
g. Bessie-8
NJNR and others (the Joint Venture, et al.) were named in a complaint filed
by the People's Natural Gas Company (People's) before the Pennsylvania Public
Utility Commission (PaPUC). People's sought a determination that the Joint
Venture, et al. were a public utility subject to the jurisdiction of the PaPUC
and an order prohibiting natural gas service by the Joint Venture, et al. until
proper PaPUC authorization was obtained.
In April 1988, an Administrative Law Judge (ALJ) issued an initial decision
denying and dismissing People's complaint, "because the demonstrated activities
of the Bessie-8 joint venture are not within the jurisdiction of the PaPUC to
regulate". An initial decision is subject to adoption, modification or rejection
by the full PaPUC. In April 1989, alternative motions to adopt the ALJ's initial
decision or to subject the Joint Venture, et al. to the jurisdiction of the
PaPUC failed due to 2-2 tie votes. In October 1992, the PaPUC, on its own
initiative and without notice to any of the parties, determined in a 3-0 vote
that the Joint Venture, et al. are a "public utility" under the Pennsylvania
Public Utility Code and granted People's exceptions to the ALJ's April 1988
initial decision. In December 1992, the PaPUC issued a Final Order requiring the
Joint Venture, et al. to apply for a certificate of public convenience or to
cease and desist from providing service through the pipeline.
In January 1993, the Joint Venture, et al. filed two separate Petitions for
Review with the Commonwealth Court of Pennsylvania. The first Petition for
Review challenged the lawfulness of the PaPUC's action in October 1992 in light
of the April 1989 tie vote. On appeal of the Commonwealth Court's order
reversing the PaPUC, the Pennsylvania Supreme Court held that the April 1989 tie
vote did not preclude the PaPUC from taking its October 1992 vote.
The second Petition for Review challenged the merits of the PaPUC's
determination that the Joint Venture, et al. are a "public utility" under the
Pennsylvania Public Utility Code. In July 1996, a three-judge panel of the
Commonwealth Court, in a 2-1 decision, affirmed the PaPUC's determination that
the Joint Venture, et al. were a "public utility" under Pennsylvania law. The
Joint Venture, et al. filed a petition for review with the Pennsylvania Supreme
Court, which petition is now pending before the Court.
In September 1993, Peoples instituted an action in the Court of Common Pleas
of Allegheny County against the Joint Venture, et al. by filing a Praecipe for
Writ of Summons. The Praecipe for Writ of Summons cannot and does not contain
any description of the claim being asserted by Peoples. It merely tolls the
statute of limitations and preserves any claim Peoples may have against the
defendants until resolution of the actions discussed above. This action may
concern a claim by Peoples for losses allegedly sustained as a result of the
activities of the Joint Venture, et al. However, there has been no activity in
this action and the nature of the action has not yet been determined. NJNR is
unable to predict the outcome of these matters. The Company does not believe
that the ultimate resolution of these matters will have a material adverse
effect on its consolidated financial condition or results of operations.
In 1994, the Company wrote-off its $1 million investment in the Bessie-8
pipeline.
16
<PAGE> 19
h. Securities and Exchange Commission (SEC)
On October 18, 1995, the SEC issued an Order Directing Private Investigation
and Designating Officers to Take Testimony in connection with certain
transactions engaged in by subsidiaries of the Company in early 1992. An SEC
investigation is a fact-finding inquiry and not an adversarial proceeding. No
adversarial proceedings have been commenced by the SEC. The Company is
cooperating with the Staff of the SEC in its investigation.
i. Long Branch Pier
In August 1988 and in 1989, NJNG and an electric utility were named
defendants in civil actions in New Jersey Superior Court commenced by the owners
of several businesses and stores destroyed in a fire at the Long Branch
Amusement Pier (the Pier) in New Jersey, which actions were subsequently
consolidated. The plaintiffs allege, among other things, that NJNG had lines
beneath a boardwalk which, the plaintiffs assert, reacted with faulty electric
cables to cause the fire that damaged the Pier. The several plaintiffs assert
compensatory damages against the defendants in an aggregate amount of
approximately $35 million. Pre- trial settlement conferences were unsuccessful
and a trial on the issues of liability commenced in October 1995. In January
1996, after two weeks of jury deliberations, the court declared a mistrial.
Subsequently thereto, the Company and the electric utility have jointly settled
four of the complaints. A new trial date for the remaining complaints has been
scheduled for January 27, 1997.
NJNG is vigorously defending these remaining matters and its liability
insurance carriers are participating in its defense. NJNG is unable to predict
the outcome of such matters but does not believe that their ultimate resolution
will have a material adverse effect on its consolidated financial condition or
results of operations.
j. Various
The Company is party to various other claims, legal actions and complaints
arising in the ordinary course of business. In management's opinion, the
ultimate disposition of these matters will not have a material adverse effect on
its financial condition or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
17
<PAGE> 20
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
The Private Securities Litigation Reform Act of 1995 (the "Act") provides a
"safe harbor" for forward-looking statements where those statements are
identified as forward-looking and are accompanied by meaningful cautionary
statements identifying important factors that could cause actual results to
differ materially from those discussed in the statement. Certain of the
statements contained in this report (other than the financial statements and
other statements of historical fact), including, without limitation, statements
as to management expectations and belief presented in Part I under the caption
"New Jersey Natural Gas Company-Summary", are forward-looking statements.
Forward-looking statements are made based upon management's expectations and
belief concerning future developments and their potential effect upon the
Company. There can be no assurance that future developments will be in
accordance with management's expectations or that the effect of future
developments on the Company will be those anticipated by management.
The Company wishes to caution readers that the assumptions which form the
basis for forward-looking statements with respect to or that may impact
earnings for fiscal 1997 and thereafter include many factors that are beyond the
Company's ability to control or estimate precisely, such as estimates of future
market conditions and the behavior of other market participants. Among the
factors that could cause actual results to differ materially from estimate
reflected in such forward-looking statements are weather conditions, economic
conditions in NJNG's service territory, fluctuations in energy-related commodity
prices, conversion activity and other marketing efforts, the conservation
efforts of NJNG's customers, the pace of deregulation of retail gas markets,
competition for the acquisition of gas, the regulatory and pricing policies of
federal and state regulatory agencies, the availability of Canada's reserves for
export to the United States and other regulatory changes.
While the Company periodically reassesses material trends and uncertainties
affecting the Company's results of operations and financial condition in
connection with its preparation of management's discussion and analysis of
results of operations and financial condition contained in its quarterly and
annual reports, the Company does not, by including this statement, assume any
obligation to review or revise any particular forward-looking statement
referenced herein in light of future events.
18
<PAGE> 21
PART II
Information for Items 5 through 9 of this report appears in the Company's
1996 Annual Report as indicated on the following table and is incorporated
herein by reference, as follows:
Annual Report
Page
-------------
ITEM 5. Market for the Registrant's Common
Equity and Related Stockholder Matters
Market Information - Exchange 46
- Stock Prices & Dividends 25
Dividend Restrictions 38
Holders of Common Stock 24
ITEM 6. Selected Financial Data 24
ITEM 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations 26-30
ITEM 8 Financial Statements and Supplementary Data 31-43
ITEM 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure - None
PART III
Information for Items 10 through 13 of this report is incorporated herein by
reference to the Company's definitive proxy statement for the Annual Meeting of
Stockholders to be held on January 29, 1997, which has been filed with the SEC
pursuant to Regulation 14A on December 19, 1996.
Proxy Page
----------
ITEM 10. Directors and Executive Officers of the Registrant 3 - 7
ITEM 11. Executive Compensation 8 - 13
ITEM 12. Security Ownership of Certain Beneficial Owners and Management 2
ITEM 13. Certain Relationships and Related Transactions 5
19
<PAGE> 22
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) (1) The following Financial Statements of the Registrant and
Independent Auditors' Report, included in the Company's 1996 Annual Report, are
incorporated by reference in Item 8 above:
Consolidated Balance Sheets as of September 30, 1996 and 1995
Consolidated Statements of Income for the Years Ended September 30, 1996,
1995 and 1994
Consolidated Statements of Cash Flows for the Years Ended September 30,
1996, 1995 and 1994
Consolidated Statements of Capitalization as of September 30, 1996 and
1995
Consolidated Statements of Common Stock Equity for the Years Ended
September 30, 1996, 1995 and 1994
Notes to Consolidated Financial Statements
Independent Auditors' Report
(2) Financial Statement Schedules - See Index to Financial
Statement Schedules on page 21.
(3) Exhibits - See Exhibit Index on page 25.
(b) The Company filed the following report on a Form 8-K during the
quarter ended September 30, 1996;
On August 2, 1996, the Company filed a Form 8-K relating to the
rights to purchase a series of the Company's preferred stock.
20
<PAGE> 23
NEW JERSEY RESOURCES CORPORATION
INDEX TO FINANCIAL STATEMENT SCHEDULES
Page
----
Schedule II - Valuation and qualifying accounts and
reserves for each of the three years in the period
ended September 30, 1996 22
Schedules other than those listed above are omitted because they are not
required or are not applicable, or the required information is shown in the
financial statements or notes thereto.
21
<PAGE> 24
SCHEDULE II
NEW JERSEY RESOURCES CORPORATION
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
YEARS ENDED SEPTEMBER 30, 1996, 1995 and 1994
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
BALANCE ADDITIONS BALANCE
AT CHARGED AT END
BEGINNING TO OF
CLASSIFICATION OF YEAR EXPENSE OTHER YEAR
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
($000)
1996:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $422 $1,732 $(1,276)(1) $878
==== ====== ========== ====
Materials and Supplies $172 - $10 $182
==== ====== ========== ====
1995:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $657 $1,487 $(1,722)(1) $422
==== ====== ========== ====
Materials and Supplies $151 $12 $9 (2) $172
==== ====== ========== ====
1994:
Reserves deducted
from assets to which
they apply
Doubtful Accounts $684 $1,762 $(1,789)(1) $657
==== ====== ========== ====
Materials and Supplies $ 48 $1,181 $(1,078)(2) $151
==== ====== ========== ====
</TABLE>
Notes: (1) Uncollectible accounts written off, less recoveries.
(2) Obsolete inventory written off, less salvage.
22
<PAGE> 25
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
NEW JERSEY RESOURCES CORPORATION
--------------------------------
(Registrant)
Date: December 27, 1996 By:/s/Glenn C. Lockwood
--------------------
Glenn C. Lockwood
Senior Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons, on behalf of the
Registrant in the capacities and on the dates included:
<TABLE>
<S> <C>
Dec. 27, 1996 /s/Laurence M. Downes Dec. 27, 1996 /s/Dorothy K. Light
------------------------- -------------------------------
Laurence M. Downes Dorothy K. Light
Chairman, President, Chief Director
Executive Officer and Director
Dec. 27, 1996 /s/Glenn C. Lockwood Dec. 27, 1996 /s/Donald E. O'Neill
------------------------- -------------------------------
Glenn C. Lockwood Donald E. O'Neill
Senior Vice President and Director
Chief Financial Officer
(Principal Accounting Officer)
Dec. 27, 1996 /s/Bruce G. Coe Dec. 27, 1996 /s/Richard S. Sambol
------------------------- -------------------------------
Bruce G. Coe Richard S. Sambol
Director Director
Dec. 27, 1996 /s/Leonard S. Coleman Dec. 27, 1996 /s/Charles G. Stalon
------------------------- -------------------------------
Leonard S. Coleman Charles G. Stalon
Director Director
Dec. 27, 1996 /s/Joe B. Foster Dec. 27, 1996 /s/John J. Unkles, Jr.
------------------------- -------------------------------
Joe B. Foster John J. Unkles, Jr.
Director Director
Dec. 27 , 1996 /s/Hazel S. Gluck Dec. 27, 1996 /s/Gary W. Wolf
------------------------- -------------------------------
Hazel S. Gluck Gary W. Wolf
Director Director
Dec. 27, 1996 /s/Warren R. Haas Dec. 27 1996 /s/George R. Zoffinger
------------------------- -------------------------------
Warren R. Haas George R. Zoffinger
Director Director
Dec. 27, 1996 /s/Lester D. Johnson
-------------------------
Lester D. Johnson
Director
</TABLE>
23
<PAGE> 26
INDEPENDENT AUDITORS' REPORT
To the Shareowners and Board of Directors of New Jersey Resources Corporation:
We have audited the consolidated financial statements of New Jersey Resources
Corporation as of September 30, 1996 and 1995 and for each of the three years in
the period ended September 30, 1996, and have issued our report thereon dated
October 28, 1996; such consolidated financial statements and report are included
in your 1996 Annual Report to Shareowners and are incorporated herein by
reference. Our audits also included the consolidated financial statement
schedule of New Jersey Resources Corporation, listed in Item 14. This
consolidated financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion based on our audits. In
our opinion, such consolidated financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
October 28, 1996
-------------------------------------------
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statements No.
33-52409 and No. 33-57711 of New Jersey Resources Corporation on Forms S-8 and
S-3, respectively, of our reports dated October 28, 1996 appearing in and
incorporated by reference in this Annual Report on Form 10-K of New Jersey
Resources Corporation for the year ended September 30, 1996.
DELOITTE & TOUCHE LLP
Parsippany, New Jersey
December 27, 1996
24
<PAGE> 27
EXHIBIT INDEX
<TABLE>
<CAPTION> Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
3-1 3 Restated Certificate of Incorporation of the
Company, as amended (filed herewith)
3-2 By-laws of the Company, as presently in effect The Company's 5-1
Form 8-K filed on
December 1, 1995
4-1 4 Specimen Common Stock Certificates 33-21872 4-1
4-2 Indenture of Mortgage and Deed of Trust 2-9569 4(g)
with Harris Trust and Savings Bank, as
Trustee, dated April 1, 1952
4-2L Twelfth Supplemental Indenture, Note (1) 4-2L
dated as of August 1, 1984
4-2M Thirteenth Supplemental Indenture, Note (2) 4-2M
dated as of September 1, 1985
4-2N Fourteenth Supplemental Indenture, Note (3) 4-2N
dated as of May 1, 1986
4-2O Fifteenth Supplemental Indenture, Note (4) 4-2O
dated as of March 1, 1987
4-2P Sixteenth Supplemental Indenture, Note (5) 4-2P
dated as of December 1, 1987
4-2Q Seventeenth Supplemental Indenture, Note (6) 4-2Q
dated as of June 1, 1988
4-2R Eighteenth Supplemental Indenture, 33-30034 4-2R
dated as of June 1, 1989
4-2S Nineteenth Supplemental Indenture, Note (8) 4-2S
dated as of March 1, 1991
4-2T Twentieth Supplemental Indenture, Note (9) 4-2T
dated as of December 1, 1992
4-2U Twenty-First Supplemental Indenture, Note (10) 4-2U
dated as of August 1, 1993
</TABLE>
25
<PAGE> 28
<TABLE>
<CAPTION> Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
4-2V Twenty-Second Supplemental Indenture, Note (10) 4-2V
dated as of October 1, 1993
4-2W Twenty-Third Supplemental Indenture, Note (11) 4-2W
dated as of August 15, 1994
4-2X Twenty-Fourth Supplemental Indenture, Note (11) 4-2X
dated as of October 1, 1994
4-2Y Twenty-Fifth Supplemental Indenture, Note (12) 4-2Y
dated as of July 15, 1995
4-2Z Twenty-Sixth Supplemental Indenture, Note (12) 4-2Z
dated as of October 1, 1995
4-3 Term Loan Agreement between New Jersey Note (6) 4-3
Resources Corporation and Union Bank of
Switzerland, dated January 31, 1987
4-4 Revolving Credit Agreement between New Jersey Note (6) 4-4
Resources Corporation and Swiss Bank Corporation,
dated September 6, 1989
4-5 Amended and Restated Note and Credit The Company's 4-5
Agreement between New Jersey Resources Quarterly Report
Corporation and First Fidelity Bank, on Form 10-Q for
dated May 7, 1993 the quarter ended
June 30, 1993
4-5A Dated as of August 29, 1995 (filed herewith)
4-5B Dated as of April 2, 1996 (filed herewith)
4-5C Dated as of September 10, 1996 (filed herewith)
4-6 Revolving Credit Agreement between New Jersey
Resources Corporation and Societe Generale,
dated August 25, 1996 (filed herewith)
4-7 Revolving Credit and Term Loan Agreement Note (8) 4-7
between New Jersey Resources Corporation and
Midlantic National Bank, dated December 20, 1990
</TABLE>
26
<PAGE> 29
<TABLE>
<CAPTION> Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
4-8 Revolving Credit Agreement between New Jersey
Resources Corporation and Union Bank of
Switzerland, dated August 27, 1996 (filed herewith)
4-9 Credit Agreement between New Jersey Resources Note (8) 4-9
Corporation and J.P. Morgan Delaware,
dated August 1, 1991
4-10 Shareholder Rights Plan The Company's
Form 8-K filed on
August 2, 1996
10-2 Retirement Plan for Represented Employees, as 2-73181 10(f)
amended October 1, 1984
10-3 Retirement Plan for Non-Represented Employees, 2-73181 10(g)
as amended October 1, 1985
10-4 Supplemental Retirement Plans covering all Note (3) 10-9
Executive Officers as described in the
Registrant's definitive proxy statement
incorporated herein by reference
10-5 Agreements between NJNG and Texas Eastern
Transmission Company (filed herewith)
10-5A Dated June 21, 1995
10-5B Dated June 21, 1995
10-5C Dated November 15, 1995
10-6 Officer Incentive Plan effective as of October 1, 1986
(filed herewith)
10-7 Lease Agreement between NJNG as Lessee and State
Street Bank and Trust Company of Connecticut,
National Association as Lessor for NJNG's
Headquarters Building dated December 21, 1995 (filed
herewith)
</TABLE>
27
<PAGE> 30
<TABLE>
<CAPTION> Previous Filing
Reg. S-K --------------------------------
Exhibit Item 601 Registration
No. Reference Document Description Number Exhibit
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
10-10 Long-term Incentive Compensation Plan Company's proxy
as amended statement on 14A
10-12 Employment Continuation Agreement of Laurence M.
Downes dated June 5, 1996 (filed herewith)
10-12A Schedule of Officer Employee Continuation
Agreements (filed herewith)
10-13 Agreements between NJNG and Alberta Northeast Note (9) 10-13
Gas Limited, dated February 7, 1991
10-14 Agreement between NJNG and Iroquois Gas Note (9) 10-14
Transmission System, L.P., dated February 7, 1991
10-15 Agreements between NJNG and CNG Transmission
Corporation, (filed herewith)
10-15A Dated December 1, 1993
10-15B Dated December 1, 1993, as amended December 21, 1995
13-1 13 1996 Annual Report to Stockholders. Such
Exhibit includes only those portions thereof
which are expressly incorporated by reference
in this Form 10-K (filed herewith)
21-1 21 Subsidiaries of the Registrant (filed herewith)
23-1 23 Consent of Independent Accountants (filed herewith) See page 24
27-1 27 Financial Data Schedule (filed herewith)
</TABLE>
28
<PAGE> 31
Note (1) 1984 Form 10-K File No. 1-8359
Note (2) 1985 Form 10-K File No. 1-8359
Note (3) 1986 Form 10-K File No. 1-8359
Note (4) 1987 Form 10-K File No. 1-8359
Note (5) 1988 Form 10-K File No. 1-8359
Note (6) 1989 Form 10-K File No. 1-8359
Note (7) 1990 Form 10-K File No. 1-8359
Note (8) 1991 Form 10-K File No. 1-8359
Note (9) 1992 Form 10-K File No. 1-8359
Note (10) 1993 Form 10-K File No. 1-8359
Note (11) 1994 Form 10-K File No. 1-8359
Note (12) 1995 Form 10-K File No. 1-8359
<PAGE> 1
Filed
March 10, 1986
Exhibit 3-1
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW JERSEY RESOURCES CORPORATION
WHEREAS, pursuant to N.J.S.A. Section 14A:9-5(1), a
corporation may restate and integrate in a single certificate the provisions of
its certificate of incorporation as theretofore amended; and
WHEREAS, pursuant to N.J.S.A. Section 14A:9-5(2), if the
proposed restated certificate merely restates and integrates, but does not
substantively amend the certificate of incorporation as theretofore amended, it
may be adopted by the Board; and
WHEREAS, the Board of Directors of New Jersey Resources
Corporation has determined to adopt this Restated Certificate of Incorporation
by a resolution adopted on December 18, 1985;
NOW THEREFORE, New Jersey Resources Corporation hereby
restates its Certificate of Incorporation to read in full as follows:
THIS IS TO CERTIFY THAT, there is hereby organized
a corporation under and by virtue of N.J.S.A. 14A:1-1
et seq., the "New Jersey Business Corporation Act."
1. The name of the corporation is New Jersey Resources
Corporation.
2. The address of the corporation's registered office is New
Jersey Resources Corporation, 1415 Wyckoff Road, P.O. Box 1468, Wall, New Jersey
07719, and the name of the corporation's registered agent at such address is
Oleta J. Harden.
<PAGE> 2
3. The purposes for which the corporation is organized are to
engage in any activity within the purposes for which corporations may be
organized under the "New Jersey Business Corporation Act," N.J.S.A. 14A:1-1 et
seq.
4. The aggregate number of shares which the corporation shall
have authority to issue is 7,700,000 shares, of which 7,500,000 shares shall be
designated as Common Stock of the par value of $5.00 per share and 200,000
shares shall be designated as Preferred Stock of the par value of $100 per
share.
The Board of Directors may authorize the issuance from time to
time of Preferred Stock in one or more series and with such designations,
preferences, relative, participating, optional and other special rights, and
qualifications, limitations or restrictions (which may differ with respect to
each series) as the Board may fix by resolution, except that no shares of any
such series shall have more than one vote each. Without limiting the foregoing,
the Board of Directors is expressly authorized to fix with respect to each
series:
(a) The number of shares which shall constitute such series
and the name of such series;
(b) The rate and the time at which dividends on such series
shall be paid and whether or not such dividends shall be cumulative;
(c) The voting powers, if any, of the holders of such series;
(d) The terms and conditions for the redemption of shares of
such series, and the premium, if any, payable upon such redemption;
2
<PAGE> 3
(e) The rights of such series upon voluntary or involuntary
liquidation, including the premium, if any, payable upon the happening
of such event;
(f) The terms or amount of any sinking funds or
purchase fund for the purchase or redemption of shares
of such series; and
(g) Conversion right or rights, if any.
5. The Board of Directors of the corporation con sists of
twelve (12) Directors, and the name and address of each person who serves as
such Director is:
James S. Abrams
349 Old Oscaleta Road
South Salem, NY 10590
Gordon F. Ahalt
10 Sycamore Lane
Morristown, NJ 07960
Roger E. Birk
542 Navesink River Road
Red Bank, NJ 07701
Bruce G. Coe
86 Buena Vista Avenue
Rumson, NJ 07760
Gerald W. Conway
23 Fairbanks Lane
Basking Ridge, NJ 07920
J. Douglass Corson
20766 Concord Green West
Boca Raton, FL 33433
3
<PAGE> 4
James T. Dolan, Jr.
1540 Ocean Avenue, Unit 23
Sea Bright, NJ 07760
Shirley Ann Jackson
85 Sturbridge Drive
Piscataway, NJ 08854
Donald E. O'Neill
Maryknoll Drive (Box 427)
New Vernon, NJ 07976
William E. Scott
29 Laurel Place
Upper Montclair, NJ 07043
Thomas B. Toohey
3215 Sharpe Road
Wall, NJ 07719
John J. Unkles
45 Rolling Hill Drive
Morristown, NJ 07960
6. Except as otherwise fixed by or pursuant to the provisions
of Paragraph 4 hereof, relating to the rights of the holders of any class or
series of stock having a preference over the Common Stock, or upon liquidation
to elect additional directors, the number of the directors of the Corporation
shall be fixed from time to time by or pursuant to the By-laws of the
Corporation.
Notwithstanding anything contained in the Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the voting power of all the shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or repeal this Paragraph 6 or to adopt any provision
inconsistent therewith.
4
<PAGE> 5
7. (a) The Directors, other than those who may be elected by
the holders of any class or series of stock having a preference over the Common
Stock as to dividends or upon liquidation, shall be classified, with respect to
the time for which they severally hold office, into three classes, as nearly
equal in number as possible, one class to be originally elected for a term
expiring at the annual meeting of stockholders to be held in 1987, another class
to be originally elected for a term expiring at the annual meeting of
stockholders to be held in 1988, and another class to be originally elected for
a term expiring at the annual meeting of stockholders to be held in 1989, with
each class to hold office until its successor is elected and qualified. At each
annual meeting of the stockholders of the Corporation, the successors of the
class of Directors whose term expires at that meeting shall be elected to hold
office for a term expiring at the annual meeting of stock holders held in the
third year following the year of their election.
(b) Except as otherwise provided for or fixed by or pursuant
to the provisions of Paragraph 4 hereof relating to the rights of the holders of
any class or series of stock having a preference over the Common Stock as to
dividends or upon liquidation to elect directors under specified circumstances,
newly created directorships resulting from any increase in the number of
Directors and any vacancies on the Board of Directors resulting from death,
resignation, disqualification, removal or other cause shall be filled by the
affirmative vote of a majority of the remaining Directors then in office, even
though less than a quorum of the Board of Directors. Any Director elected in
accordance with the preceding sentence shall hold office for the remainder of
the full term of the class of Directors in which the new directorship was
created or the vacancy occurred and until such Director's successor shall have
been elected and qualified. No decrease in the number of Directors constituting
the Board of Directors shall shorten the term of any incumbent Director.
5
<PAGE> 6
(c) Notwithstanding anything contained in the Certificate of
Incorporation to the contrary, the affirmative vote of the holders of at least
80% of the voting power of all the shares of the Corporation entitled to vote
generally in the election of directors, voting together as a single class, shall
be required to alter, amend or repeal this Paragraph 7 or to adopt any provision
inconsistent therewith.
8. The Board of Directors shall have power to make, alter,
amend and repeal the By-laws of the Corporation (except so far as the By-laws
adopted by the stockholders shall otherwise provide). Any By-laws made by the
Directors under the powers conferred hereby may be altered, amended or repealed
by the Directors or by the stockholders, provided, however, that if Article I of
the By-laws relating to the terms of office and election of directors and
Article X of the By-laws relating to amendment of the By-laws of the
Corporation, shall be adopted by the Board of Directors, such sections shall not
thereafter be altered, amended or repealed, nor shall any provision inconsistent
therewith be adopted, except by the holders of 80% or more of the voting power
of the then outstanding shares of stock entitled to vote generally in the
election of directors, voting together as a single class. Notwithstanding
anything contained in the Certificate of Incorporation to the contrary, the
affirmative vote of the holders of at least 80% of the voting power of all the
shares of the Corporation entitled to vote generally in the election of
directors, voting together as a single class, shall be required to alter, amend
or repeal this Paragraph 8 or to adopt any provision inconsistent therewith.
9. The vote of stockholders of the Corporation required to
approve any Business Combination shall be as set forth in this Paragraph 9. The
term "Business Combination" shall have the meaning ascribed to it in (a)(B) of
this Paragraph; each other capitalized term used in this Paragraph shall have
the meaning ascribed to it in (c) of this Paragraph.
6
<PAGE> 7
(a) (A) In addition to any affirmative vote required by law or
the Certificate of Incorporation or any resolution adopted pursuant to
Paragraph 9 of the Certificate of Incorporation, and except as
otherwise expressly provided in (b) of this Paragraph 9:
(1) any merger of consolidation of the Corporation or
any Subsidiary with (i) any Interested Stockholder or (ii) any
other corporation or entity (whether or not itself an
Interested Stockholder) which is, or after each merger or
consolidation would be, an Affiliate of an Interested
Stockholder; or
(2) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Stockholder or any
Affiliate of any Interested Stockholder of assets of the
Corporation or any Subsidiary having an aggregate Fair Market
Value of $10,000,000 or more; or
(3) the issuance or transfer by the Corporation or
any Subsidiary (in one transaction or a series of
transactions) of any securities of the Corporation or any
Subsidiary to any Interested Stockholder or any Affiliate of
any Interested Stockholder in exchange for cash, securities,
or other property (or a combination thereof) having an
aggregate Fair Market Value of $10,000,000 or more, other than
the issuance of securities upon the conversion of convertible
securities of the Corporation or any Subsidiary which were not
acquired by such Interested Stockholder (of such Affiliate)
from the Corporation of a Subsidiary; or
(4) the adoption of any plan or proposal for
the liquidation or dissolution of the Corporation
proposed by or on behalf of an Interested
7
<PAGE> 8
Stockholder or any Affiliate of any Interested Stockholder; or
(5) any reclassification of securities (including any
reverse stock split), or recapitalization of the Corporation,
or any merger or consolidation of the Corporation with any of
its Subsidiaries or any other transaction (whether or not with
or into or otherwise involving an Interested Stockholder)
which in any such case has the effect, directly or indirectly,
of increasing the proportionate share of the outstanding
shares of any class or series of stock or securities
convertible into stock of the Corporation or any Subsidiary
which is directly or indirectly beneficially owned by any
Interested Stockholder or any Affiliate or any Interested
Stockholder;
shall not be consummated without the affirmative vote of the holders of
at least 80% of the voting power of the then outstanding shares of
stock of all classes and series of the Corporation entitled to vote
generally in the election of directors ("Voting Stock"), in each case
voting together as single class. Such affirmative vote shall be
required, notwithstanding the fact that no vote may be required, or
that a lesser percentage may be specified, by law or by the Certificate
of Incorporation or any resolution adopted pursuant to the Certificate
of Incorporation or in any agreement with any national securities
exchange or otherwise.
(B) The Term "Business Combination" as used in this Paragraph
9 shall mean any transaction that is referred to in any one or more
clauses (1) through (5) of (a)(A) of this Paragraph.
(b) The provisions of (a) of this Paragraph 9 shall not be
applicable to any Business Combination in respect of which all of the
conditions specified in either of the following paragraphs (A) and (B)
are met,
8
<PAGE> 9
and such Business Combination shall require only such affirmative vote
as is required by law and any of the provisions of the Certificate of
Incorporation and any resolution or resolutions of the Board of
Directors adopted pursuant to the Certificate of Incorporation:
(A) such Business Combination shall have
been approved by a majority of the Disinterested
Directors, or
(B) each of the six conditions specified in the
following clauses (1) through (6) shall have been met:
(1) the aggregate amount of the cash and the
Fair Market Value as of the date of the consummation
of the Business Combination (the "Consummation Date")
of any consideration other than cash to be received
per share by holders of Common Stock in such Business
Combination shall be at least equal to the higher of
the following:
(i) (if applicable) the highest per
share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any
shares of Common Stock beneficially owned by
the Interested Stockholder which were
acquired beneficially by such Interested
Stockholder
(x) within the two-year period immediately
prior to the Announcement Date or (y) in the
transaction in which it became an Interested
Stockholder, whichever is higher; or
9
<PAGE> 10
(ii) the Fair Market Value per share of
Common Stock on the Announcement Date or on
the date on which the Interested Stockholder
became an Interested Stockholder (the
"Determination Date"), whichever is higher;
and
(2) the aggregate amount of the cash and the
Fair Market Value as of the Consummation Date of any
consideration other than cash to be received per
share by holders of shares of any other class or
series of Voting Stock shall be at least equal to the
highest of the following (it being intended that the
requirements of this clause (B)(2) shall be required
to be met with respect to every class and series of
such outstanding Voting Stock, whether or not the
Interested Stockholder beneficially owns any shares
of a particular class or series of Voting Stock):
(i) (if applicable) the highest per
share price (including any brokerage
commissions, transfer taxes and soliciting
dealers' fees) paid in order to acquire any
shares of such class or series of voting
stock owned by the Interested Stockholder
which were acquired beneficially by such
Interested Stockholder (x) within the
two-year period immediately prior to the
Announcement Date or (y) in the transaction
in which it became an Interested
Shareholder, whichever is higher; or
(ii) (if applicable) the highest
preferential amount per share to which
the holders of shares of such class or
10
<PAGE> 11
series of Voting Stock are entitled in the
event of any voluntary or involuntary
liquidation, dissolution or winding up of
the Corporation; and
(3) the consideration to be received by
holders of a particular class or series of
outstanding Voting Stock (including Common Stock)
shall be in cash or in the same form as was
previously paid in order to acquire beneficially
shares of such class or series of Voting Stock that
are beneficially owned by the Interested Stockholder
and, if the Interested Stockholder beneficially owns
shares of any class or series of Voting Stock that
were acquired with varying forms of consideration,
the form of consideration to be received by holders
of such class or series of Voting Stock shall be
either cash or the form used to acquire beneficially
the largest number of shares of such class or series
of Voting Stock beneficially acquired by it prior to
the Announcement Date; and
(4) After such Interested Stockholder has
become an Interested Stockholder and prior to the
consummation of such Business Combination:
(i) except as approved by a majority
of the Disinterested Directors, there shall
have been no failure to declare and pay at
the regular dates therefor the full amount
of any dividends (whether or not cumulative)
payable on any class or series of stock
having a preference over the Common Stock as
to dividends or upon liquidation;
11
<PAGE> 12
(ii) there shall have been (x) no
reduction in the annual rate of dividends
paid on the Common Stock (except as
necessary to reflect any subdivision of the
Common Stock), except as approved by a
majority of the Disinterested Directors, and
(y) an increase in such annual rate of
dividends (as necessary to prevent any such
reduction) in the event of any
reclassification (including any reverse
stock split), recapitalization,
reorganization or any similar transaction
which has the effect of reducing the number
of outstanding shares of the Common Stock,
unless the failure so to increase such an
annual rate was approved by a majority of
the Disinterested Directors; and
(iii) such Interested Stockholder shall
not have become the beneficial owner of any
additional shares of Voting Stock except as
part of the transaction in which it became
an Interested Stockholder; and
(5) after such Interested Stockholder has
become an Interested Stockholder, such Interested
Stockholder shall not have received the benefit,
directly or indirectly (except proportionately as a
stockholder), of any loans, advances, guarantees,
pledges or other financial assistance or tax credits
or other tax advantages provided by the Corporation,
whether in anticipation of or in connection with such
Business Combination or otherwise; and
12
<PAGE> 13
(6) a proxy or information statement
describing the proposed Business Combination and
complying with the requirements of the Securities
Exchange Act of 1934 and the rules and regulations
thereunder (or any subsequent provisions replacing
such Act, rules or regulations) shall be mailed to
public stockholders of the Corporation at least 30
days prior to the consummation of such Business
Combination (whether or not such proxy or information
statement is required to be mailed pursuant to such
Act or subsequent provisions).
(c) For the purposes of this Paragraph 9:
(A) A "person" shall mean any individual, firm,
corporation or other entity, other than any employee stock
plans sponsored by the Corporation for the exclusive benefit
of the Corporation, its subsidiaries and their employees.
(B) "Interested Stockholder" shall mean any person
(other than the Corporation or any Subsidiary or any employee
stock plans sponsored by the Corporation for the exclusive
benefit of the Corporation, its subsidiaries and their
employees) who or which:
(1) is the beneficial owner, directly or
indirectly, of more than 20% of the combined voting
power of the then outstanding shares of Voting Stock;
or
(2) is an Affiliate of the Corporation and
at any time within the two-year period immediately
prior to the date in question was the beneficial
owner, directly or indirectly, of 20% or more of the
combined voting power
13
<PAGE> 14
of the then outstanding shares of Voting
Stock; or
(3) is an assignee of or has otherwise
succeeded to the beneficial ownership of any shares
of Voting Stock that were at any time within the
two-year period immediately prior to the date in
question beneficially owned by any Interested
Stockholder, if such assignment or succession shall
have occurred in the course of a transaction or
series of transactions not involving a public
offering within the meaning of the Securities Act of
1933.
(C) A person shall be a "beneficial owner" of any
Voting Stock:
(1) which such person or any of its
Affiliates or Associates has (a) the right to acquire
(whether such right is exercisable immediately or
only after the passage of time), pursuant to any
agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right
to vote or direct the vote pursuant to any agreement,
arrangement or understanding; or
(2) which are beneficially owned, directly
or indirectly, by any other person with which such
person or any of its Affiliates or Associates has any
agreement, arrangement or understanding for the
purpose of acquiring, holding, voting or disposing of
any shares of Voting Stock.
(D) For the purposes of determining whether a person
is an Interested Stockholder pursuant to (c)(B) of this
Paragraph 9, the number of shares
14
<PAGE> 15
of Voting Stock deemed to be outstanding shall include shares
deemed owned through applications of (c)(C) of this Paragraph
but shall not include any other shares of Voting Stock that
may be issuable pursuant to an agreement, arrangement or
understanding, or upon exercise of conversion rights, warrants
or options, or otherwise.
(E) "Affiliate" and "Associate" shall have the
respective meanings ascribed to such terms in Rule 12b-2 of
the General Rules and Regulations under the Securities
Exchange Act of 1934, as in effect on December 1, 1985.
(F) "Subsidiary" means any corporation more than 50%
of whose outstanding stock having ordinary voting power in the
election of directors is owned, directly or indirectly, by the
Corporation or by a Subsidiary or by the Corporation and one
or more Subsidiaries; provided, however, that for the purposes
of the definition of Interested Stockholder set forth in
(c)(B) of this Paragraph 9, the term "Subsidiary" shall mean
only a corporation of which a majority of any class of equity
security is owned, directly or indirectly, by the Corporation.
(G) "Disinterested Director" means any member of the
Board of Directors of the Corporation who is unaffiliated
with, and not a nominee of, the Interested Stockholder and was
a member of the Board prior to the time that the Interested
Stockholder became an Interested Stockholder, and any
successor of a Disinterested Director who is unaffiliated
with, and not a nominee of, the Interested Stockholder and who
is recommended to succeed a Disinterested Director by a
majority of Disinterested Directors then on the Board of
Directors.
15
<PAGE> 16
(H) "Fair Market Value" means: (1) in the case of
stock, the highest closing sale price during the 30-day period
immediately preceding the date in question of a share of such
stock on the Composite Tape for New York Stock Exchange Listed
Stocks, or, if such stock is not quoted on the Composite Tape,
on the New York Stock Exchange, or, if such stock is not
listed on such Exchange, on the principal United States
securities exchange registered under the Securities Exchange
Act of 1934 on which such stock is listed, or, if such stock
is not listed on any such exchange, the highest closing sales
price or bid quotation with respect to a share of such stock
during the 30-day period preceding the date in question on the
National Association of Securities Dealers, Inc. Automated
Quotations or any system then in use, or if no such quotations
are available, the fair market value on the date in question
of a share of such stock as determined by a majority of the
Disinterested Directors in good faith; and (2) in the case of
stock of any class or series which is not traded on any United
States registered securities exchange or in the
over-the-counter market or in the case of property other than
cash or stock, the fair market value of such property on the
date in question as deter mined by a majority of the
Disinterested Directors in good faith.
(I) In the event of any Business Combination in which
the Corporation survives, the phrase "any consideration other
than cash to be received" as used in (b)(B)(1) and (2) of this
Paragraph 9 shall include the shares of Common Stock and/or
the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
16
<PAGE> 17
(J) "Announcement Date" means the date of first
public announcement of the proposed Business Combination.
(K) "Determination Date" means the date on which the
Interested Stockholder became an Interested Stockholder.
(L) The price determined in accordance with (b)(B)(1)
and (b)(B)(2) of this Paragraph 9 shall be subject to
appropriate adjustment in the event of any stock dividend,
stock split, combination of shares or similar event.
(d) A majority of the Disinterested Directors of the
Corporation shall have the power and duty to determine, on the basis of
information known to them after reasonable inquiry, all facts necessary
to determine compliance with this Paragraph 9, including, without
limitation, (A) whether a person is an Interested Stockholder, (B) the
number of shares of Voting Stock beneficially owned by any person, (C)
whether a person is an Affiliate or Associate of another person, (D)
whether the requirements of (b) of this Paragraph 9 have been met with
respect to any Business Combination, and (E) whether the assets which
are the subject of any Business Combination have, or the consideration
to be received for the issuance or transfer of securities by the
Company or any Subsidiary in any Business Combination has, an aggregate
Fair Market Value of $10,000,000 or more. The good faith determination
of a majority of the Disinterested Directors on such matters shall be
conclusive and binding for all purposes of this Paragraph 9.
17
<PAGE> 18
CERTIFICATE OF ADOPTION
OF THE
RESTATED CERTIFICATE OF INCORPORATION
OF
NEW JERSEY RESOURCES CORPORATION
The undersigned corporation, for the purposes of restating its
Certificate of Incorporation and pursuant to the provisions of Section
14A:9-5(5) of the New Jersey Business Corporation Act, hereby certifies as
follows:
FIRST: The name of the corporation is NEW JERSEY RESOURCES
CORPORATION.
SECOND: The restatement of the Certificate of Incorporation
of New Jersey Resources Corporation has been duly adopted by the Board of
Directors pursuant to N.J.S.A. 14A:9-5(2) on December 18, 1985.
IN WITNESS WHEREOF, New Jersey Resources Corporation has
caused this Certificate to be executed on its behalf by its President. Dated:
March 7, 1986
NEW JERSEY RESOURCES CORPORATION
By:/s/ James T. Dolan, Jr.
-------------------------
James T. Dolan, Jr.,
President
ATTEST:
/s/ Oleta J. Harden
- ------------------------
Oleta J. Harden, Secretary
<PAGE> 19
Filed
December 10, 1986
NEW JERSEY RESOURCES CORPORATION
STATEMENT OF CANCELLATION OF REACQUIRED SHARES
To: The Secretary of State
State of New Jersey
Pursuant to the provisions of Section 14A:7-18, Corporation,
General of the New Jersey Statutes, the undersigned Corporation hereby submits
the following statement of Cancellation of Reacquired Shares:
1. The name of the Corporation is NEW JERSEY RESOURCES
CORPORATION.
2. 19,900 shares of Common Stock, of the par value of $5.00
per share, is the number of shares cancelled, which shares were cancelled as of
October 30, 1986 upon their reacquisition pursuant to a resolution of the
Corporation's Board of Directors adopted on September 24, 1986.
3. The aggregate number of issued shares of the Corporation's
Common Stock, of the par value of $5.00 per share, after giving effect to such
cancellation, as of October 30, 1986, was 3,599,474.
4. The amount of the stated capital of the Corporation, after
giving effect to such cancellation as of October 30, 1986, was $17,997,370.
5. The information called for by Subsections 14A:7-18(2)(e)
and (f) is not applicable to the reacquisition and cancellation of the shares
referred to herein.
<PAGE> 20
Dated this 28th day of November, 1986
NEW JERSEY RESOURCES CORPORATION
By:/s/ James T. Dolan, Jr.
------------------------
James T. Dolan, Jr.
President & CEO
2
<PAGE> 21
Filed
February 2, 1987
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
NEW JERSEY RESOURCES CORPORATION, a corporation of the State
of New Jersey, by it President and Secretary, does hereby certify:
1. The name of the corporation is NEW JERSEY
RESOURCES CORPORATION.
2. At a meeting of the Board of Directors of said New Jersey
Resources Corporation, duly held and convened on November 18, 1986, the Board of
Directors duly approved the following proposed amendment to the Certificate of
Incorporation of New Jersey Resources Corporation and directed that the proposed
amendment be submitted to a vote at a meeting of the shareholders of the
Corporation, to wit: That the first paragraph of Article 4 of the Corporation's
Certificate of Incorporation be amended to state as follows:
"4. The aggregate number of shares which the Corporation shall have
authority to issue is 15,200,000 shares, of which 15,000,000 shares
shall be designated as Common Stock of the par value of $5.00 per share
and 200,000 shares shall be designated as Preferred Stock of the par
value of $100 per share."
3. Pursuant to the aforesaid directive of the Board of
Directors of New Jersey Resources Corporation, and upon notice duly given to
each stockholder of said Corporation as required by its Bylaws, the Annual
Meeting of Stockholders of said Corporation was held in Wall Township on January
28, 1987, at 10:30 o'clock in the forenoon, at which meeting the proposed
Amendment was duly submitted to and was adopted by the affirmative vote of a
majority of the
<PAGE> 22
votes cast by the holders of shares entitled to vote thereon.
4. At the aforesaid Annual Meeting of Stockholders of the
Corporation held on January 28, 1987, there were 3,604,163 shares of the
Corporation's Common Stock, par value $5.00 per share, entitled to vote thereon.
No shares of any separate class or series of stock were entitled to vote thereon
as a class.
5. At the aforesaid Annual Meeting of Stockholders, 2,554,965
shares were voted FOR the proposed Amendment, and 322,638 shares were voted
AGAINST the Amendment.
IN WITNESS WHEREOF, said New Jersey Resources Corporation, has
caused this Certificate to be signed by its President and Secretary, and its
corporate seal to be hereunto affixed and attested, this 30th day of January,
1987.
NEW JERSEY RESOURCES CORPORATION
/s/ Thomas B. Toohey
--------------------
Thomas B. Toohey
President
(Seal)
Attest:
/s/ Oleta J. Harden
- -------------------
Oleta J. Harden
Secretary
<PAGE> 23
Filed
February 10, 1987
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF DIVISION OF SHARES
NEW JERSEY RESOURCES CORPORATION, a corporation of the State
of New Jersey, hereby certifies under the hands of its President and Secretary,
as follows:
1. The name of the corporation is NEW JERSEY RESOURCES
CORPORATION.
2. At a meeting of the Board of Directors of said New Jersey
Resources Corporation, duly held and convened on January 28, 1987, the said
Board of Directors, acting without shareholder approval pursuant to the
provisions of N.J.S.A. 14A:7-15.1, duly adopted resolutions (a) approving the
division of the shares of Common Stock of the corporation which are issued and
outstanding upon the effective date hereof, into twice the number of shares
issued and outstanding; and (b) amending the Certificate of Incorporation of the
corporation to decrease the par value of each share of Common Stock from $5.00
per share to $2.50 per share.
<PAGE> 24
3. The division of shares will not adversely affect the rights
or preferences of the holders of outstanding shares of any class or series, and
will not increase the number of authorized but unissued shares.
4. The class or series and number of shares thereof subject to
the division is the Common Stock of the corporation, of which 3,698,012 shares
of the par value of $5.00 per share are presently issued and outstanding, and
which as a result of the division will be changed and divided into twice that
number, or 7,396,024 shares of the par value of $2.50 per share. The additional
shares shall be issued to Common Stockholders of record on the effective date as
set forth in this Certificate, each shareholder to receive an additional share
of Common Stock for each share held on that date.
5. The first paragraph of the Fourth Article of the
Certificate of Incorporation of the corporation is hereby amended in its
entirety to state as follows:
"4. The aggregate number of shares which the Corporation
shall have authority to issue is 15,200,000 shares, of which 15,000,000
shares shall be designated as Common Stock of the par value of $2.50
per share and
<PAGE> 25
200,000 shares shall be designated as Preferred Stock of the par value
of $100 per share. The number of shares of Common Stock heretofore
issued and which are presently outstanding, namely 3,698,012 shares of
the par value of $5.00 per share, are hereby changed into twice that
number of shares of the par value of $2.50 per share."
6. The division of shares and the amendment to the Certificate
of Incorporation as set forth herein shall become effective on February 13,
1987.
IN WITNESS WHEREOF, New Jersey Resources Corporation has made
this Certificate under its seal and the hands of its President and Secretary,
this 5th day of February, 1987.
ATTEST: NEW JERSEY RESOURCES CORPORATION
(SEAL)
/s/ Oleta J. Harden /s/ Thomas B. Toohey
- ------------------- ---------------------
Oleta J. Harden Thomas B. Toohey
Secretary President
3
<PAGE> 26
THE PURPOSE OF THIS FORM IS TO SIMPLIFY THE FILING REQUIREMENTS OF THE
SECRETARY OF STATE, AND DOES NOT REPLACE THE NEED FOR COMPETENT LEGAL ADVICE.
CHECK APPROPRIATE STATUTE:
Nonprofit Corporations
must file this form in
DUPLICATE.
/X/ TITLE 14A:1-6(5) New Jersey Business Corporation Act must file this form in
DUPLICATE.
/ / TITLE 15A:1-7(e) New Jersey Nonprofit Corporation Act
CERTIFICATE OF CORRECTION
OF
NEW JERSEY RESOURCES CORPORATION
- --------------------------------------------------------------------------------
(For Use by Domestic and Foreign, Profit and Nonprofit Corporations)
The Undersigned, hereby submits for filing, a Certificate of
Correction, executed in behalf of the above named Corporation, pursuant to the
provisions of the appropriate Statute, checked above, of the New Jersey
Statutes.
1. The Certificate to be corrected is:
Restated Certificate of Incorporation March 10, 1986
------------------------------------- --------------
(Type of Certificate) (Date Filed)
2. The inaccuracy in the Certificate is (indicate inaccuracy or defect):
Paragraphs 7 and 9 (b)(B)(2) of Restated Certificate of Incorporation
filed with the Secretary of State of New Jersey contained typographical errors.
Such Paragraphs were approved in their correct form by the corporation's
shareholders at the 1986 Annual Meeting of Shareholders on January 29, 1986.
3. Ihe Certificate of Correction hereby reads as follows:
A subparagraph (c) shall be added to Paragraph 7 of the Restated
Certificate of Incorporation reading, in its entirety, as follows:
"(c) Subject to the rights of any class or series of stock
having a preference over the Common Stock as to dividends or upon
liquidation to elect Directors under specified circumstances, no member
of the Board of Directors may be removed from office except for cause,
and only then by the affirmative vote of the holders of 80% of the
voting power of the then outstanding shares of stock entitled to vote
generally in the election of Directors, voting together as a single
class."
A subparagraph (iii) shall be added to Paragraph 9(b)(B)(2) of the
Restated Certificate of Incorporation reading, in its entirety, as follows:
"(iii) the Fair Market Value per share of such class or series
of Voting Stock on the Announcement Date or Determination Date,
whichever is higher; and"
- ---------------------- Signature:/s/ Oleta J. Harden
FOR OFFICIAL USE ONLY -----------------------
Name: Oleta J. Harden
-----------------------
Title: Vice-President
-----------------------
(Must be Ch. of Bd. or Pres. or Vice Pres.)
Date: March 17, 1987
-----------------------
<PAGE> 27
Filed
May 10, 1988
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF AMENDMENT
TO
CERTIFICATE OF INCORPORATION
NEW JERSEY RESOURCES CORPORATION, a corporation of the State
of New Jersey, by its President and Secretary, does hereby certify:
1. The name of the corporation is NEW JERSEY
RESOURCES CORPORATION.
2. At a meeting of the Board of Directors of said New Jersey
Resources Corporation, duly held and convened on November 18, 1987, the Board of
Directors by resolution duly approved the following proposed amendment to the
Certificate of Incorporation of New Jersey Resources Corporation and directed
that the proposed amendment be submitted to a vote at a meeting of the
shareholders of the Corporation, to wit: That a Paragraph 10 be added to the
Corporation's Certificate of Incorporation as follows:
"10. To the fullest extent from time to time per mitted by
law, directors and officers shall not be personally liable to
the Corporation or its stockholders for damages for breach of
any duty owed to the Corporation or its stockholders. Unless
otherwise permitted by law, the provisions of this Paragraph
10 shall not relieve a director or officer from liability for
any breach of duty based upon an act or omission (a) in breach
of such person's duty of loyalty to the Corporation or its
stockholders, (b) not in good faith or involving a knowing
violation of law or (c) resulting in receipt by such person
of an improper personal benefit. No amendment or repeal of
this provision shall adversely affect any right or protection
of
<PAGE> 28
a director or officer of the Corporation existing
at the time of such amendment or repeal."
3. Pursuant to the aforesaid resolution of the Board of
Directors of New Jersey Resources Corporation, and upon notice duly given to
each stockholder of said Corporation as required by its Bylaws, the Annual
Meeting of Stockholders of said Corporation was held in Wall Township on
January 27, 1988, at 10:30 o'clock in the forenoon, at which meeting the
proposed Amendment was duly submitted to and was approved by the affirmative
vote of a majority of the votes cast by the holders of shares entitled to vote
thereon.
4. At the aforesaid Annual Meeting of Stockholders of the
Corporation held on January 27, 1988, there were 9,041,219 shares of the
Corporation's Common Stock, par value $2.50 per share, entitled to vote thereon.
No shares of any separate class or series of stock were entitled to vote thereon
as a class.
5. At the aforesaid Annual Meeting of Stockholders, 7,059,925
shares were voted FOR the proposed Amendment, and 562,466 shares were voted
AGAINST the Amendment.
IN WITNESS WHEREOF, said New Jersey Resources Corporation has
caused this Certificate to be signed by its President and Secretary, and its
corporate seal to be hereunto affixed and attested, this 7th day of March,
1988.
NEW JERSEY RESOURCES CORPORATION
/s/ Thomas B. Toohey
--------------------
Thomas B. Toohey
President
(Seal)
Attest:
/s/ Oleta J. Harden
- -------------------
Oleta J. Harden
Secretary
2
<PAGE> 29
Filed
March 19, 1996
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
NEW JERSEY RESOURCES CORPORATION, a Corporation of the State
of New Jersey, by its President and Secretary, does hereby certify:
1. The name of the corporation is NEW JERSEY RESOURCES
CORPORATION.
2. At a meeting of the Board of Directors of said New Jersey
Resources Corporation, duly held and convened on November 29, 1995, the Board of
Directors duly approved the following proposed amendment to the Restated
Certificate of Incorporation of New Jersey Resources Corporation and directed
that the proposed amendment be submitted to a vote at a meeting of the
shareholders of the Corporation, to wit: That the first paragraph of Article 4
of the Corporation's Restated Certificate of Incorporation be amended to state
as follows:
"4. The aggregate number of shares which the Corporation shall have
authority to issue is 50,400,000 shares, of which 50,000,000 shares
shall be designated as Common Stock of the par value of $2.50 per share
and 400,000 shares shall be designated as Preferred Stock of the par
value of $100 per share."
3. Pursuant to the aforesaid directive of the Board of
Directors of New Jersey Resources Corporation, and upon notice duly given to
each stockholder of said Corporation as required by its By-Laws, the Annual
Meeting
<PAGE> 30
of the Stockholders of said Corporation was held at the Robert M. Meyner
Reception Center, Garden State Arts Center, in Holmdel, New Jersey on February
14, 1996 at 10:30 o'clock in the forenoon, at which meeting the proposed
amendment was duly submitted to and was adopted by the affirmative vote of a
majority of the votes cast by the holders of shares entitled to vote thereon.
4. At the aforesaid Annual Meeting of Stockholders of the
Corporation held on February 14, 1996, there were 17,928,239 shares of the
Corporation's Common Stock, par value $2.50 per share, entitled to vote thereon.
No shares of any separate class or series of stock were entitled to vote thereon
as a class.
5. At the aforesaid Annual Meeting of Stockholders, 13,069,267
and 1,560,071 shares were voted FOR and AGAINST the proposed amendment,
respectively, as it relates to the Common Stock, and 9,701,057 and 3,348,880
shares were voted FOR and AGAINST the proposed amendment, respectively, as it
relates to the Preferred Stock.
IN WITNESS WHEREOF, said New Jersey Resources Corporation has
caused this Certificate to be signed by its President and Secretary, and its
corporate seal to be hereunto affixed and attested, this 18th day of March,
1996.
NEW JERSEY RESOURCES CORPORATION
/s/ Laurence M. Downes
----------------------
Laurence M. Downes, President &
CEO
(Seal)
Attest:
/s/ Oleta J. Harden
- -------------------
Oleta J. Harden, Secretary
2
<PAGE> 31
Filed
February 8, 1989
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
NEW JERSEY RESOURCES CORPORATION, a Corporation of the State
of New Jersey, by its President and Secretary, does hereby certify:
1. The name of the corporation is NEW JERSEY
RESOURCES CORPORATION.
2. At a meeting of the Board of Directors of said New Jersey
Resources Corporation, duly held and convened on October 17, 1988, the Board of
Directors duly approved the following proposed amendment to the Restated
Certificate of Incorporation of New Jersey Resources Corporation and directed
that the proposed amendment be submitted to a vote at a meeting of the
shareholders of the Corporation, to wit: That the first paragraph of Article 4
of the Corporation's Restated Certificate of Incorporation be amended to state
as follows:
"4. The aggregate number of shares which the Corporation shall
have authority to issue is 25,200,000 shares, of which
25,000,000 shares shall be designated as Common Stock of the
par value of $2.50 per share and 200,000 shares shall be
designated as Preferred Stock of the par value of $100 per
share."
3. Pursuant to the aforesaid directive of the Board of
Directors of New Jersey Resources Corporation, and
<PAGE> 32
upon notice duly given to each stockholder of said Corporation as required by
its By-Laws, the Annual Meeting of Stockholders of said Corporation was held in
Wall Township on January 25, 1989, at 10:30 o'clock in the forenoon, at which
meeting the proposed amendment was duly submitted to and was adopted by the
affirmative vote of a majority of the votes cast by the holders of shares
entitled to vote thereon.
4. At the aforesaid Annual Meeting of Stockholders of the
Corporation held on January 25, 1989, there were 11,001,550 shares of the
Corporation's Common Stock, par value $2.50 per share, entitled to vote thereon.
No shares of any separate class or series of stock were entitled to vote thereon
as a class.
5. At the aforesaid Annual meeting of Stockholders, 8,057,749
shares were voted FOR the proposed amendment, and 841,742 shares were voted
AGAINST the amendment.
IN WITNESS WHEREOF, said New Jersey Resources Corporation has
caused this Certificate to be signed by its President and Secretary, and its
corporate seal to be hereunto affixed and attested, this 25th day of January,
1989.
NEW JERSEY RESOURCES CORPORATION
/s/ Thomas B. Toohey
--------------------
Thomas B. Toohey, President
(Seal)
Attest:
/s/ Oleta J. Harden
- -------------------
Oleta J. Harden, Secretary
2
<PAGE> 33
Filed
August 1, 1996
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF AMENDMENT
OF RESTATED CERTIFICATE OF INCORPORATION
Pursuant to the provisions of Section 14A:7-2(2) of the New
Jersey Business Corporation Act, the undersigned Corporation executes the
following Certificate of Amendment to its Restated Certificate of Incorporation.
1. The name of the Corporation is NEW JERSEY RESOURCES
CORPORATION.
2. The following resolution, establishing and designating a
series of shares and fixing and determining the relative rights and preferences
thereof was duly adopted by the Board of Directors of the Corporation on the
31st day of July, 1996, pursuant to authority vested in it by the Restated
Certificate of Incorporation:
"RESOLVED, that pursuant to the authority vested in the Board
of Directors of this Corporation in accordance with the provisions of
its Restated Certificate of Incorporation (the "Restated Certificate"),
a series of Preferred Stock of the Corporation be, and it hereby is,
created, and that the designation and amount thereof and the voting
powers, preferences and relative participating, optional and other
special rights of the shares of such series, and
<PAGE> 34
the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount.
The shares of such series shall be designated as Series A
Junior Participating Cumulative Preferred Stock, par value $100 per
share (the "Junior Preferred Stock") and the number of shares
constituting such series shall be 50,000. Such number of shares may be
increased or decreased by resolution of the Board of Directors;
provided, that no decrease shall reduce the number of shares of Junior
Preferred Stock to a number less than the number of shares reserved for
issuance upon the exercise of outstanding options, rights or warrants
or upon the conversion of any outstanding securities issued by the
Corporation convertible into Junior Preferred Stock.
Section 2. Dividends and Distributions.
(A) Subject to the rights of the holders of any shares of any
series of preferred stock (or any similar stock) ranking prior and
superior to the Junior Preferred Stock with respect to dividends, the
holders of shares of Junior Preferred Stock, in preference to the
holders of Common Stock, and of any other junior stock which may be
outstanding, shall be entitled to receive, when, as and if declared by
the Board of Directors out of funds legally available for the purpose,
quarterly dividends payable in cash on the first day of January, April,
July and October in each year (each such date being referred to herein
as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or
fraction of a share of Junior Preferred Stock, in an amount per share
(rounded to the nearest cent) equal to the greater of (a) $2.50 per
share ($10.00 per annum), or (b) subject to the provision for
adjustment hereinafter set forth, 1,000
2
<PAGE> 35
times the aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all non-cash
dividends or other distributions, other than a dividend payable in
shares of Common Stock or a subdivision of the outstanding shares of
Common Stock (by reclassification or otherwise), declared on the Common
Stock since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date, since
the first issuance of any share or fraction of a share of Junior
Preferred Stock. In the event the corporation shall at any time declare
or pay any dividend on Common Stock payable in shares of Common Stock,
or effect Common Stock, or effect a subdivision or combination or
consolidation of the outstanding shares of Common Stock (by
reclassification or otherwise than by payment of a dividend in shares
of Common Stock) into a greater or lesser number of shares of Common
Stock, then in each such case the amount to which holders of shares of
Junior Preferred Stock were entitled immediately prior to such event
under clause (b) of the preceding sentence shall be adjusted by
multiplying such amount by a fraction, the numerator of which is the
number of shares of Common Stock outstanding immediately after such
event and the denominator of which is the number of shares of Common
Stock that were outstanding immediately prior to such event.
(B) The Corporation shall declare a dividend or distribution
on the Junior Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on the
Common Stock (other than a dividend payable in shares of Common Stock);
provided that, in the event no dividend or distribution shall have been
declared on the Common Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $2.50 per share ($10.00 per annum) on the
Junior Preferred Stock shall nevertheless
3
<PAGE> 36
be payable on such subsequent Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on outstanding
shares of Junior Preferred Stock from the Quarterly Dividend Payment
Date next preceding the date of issue of such shares of Junior
Preferred Stock, unless the date of issue of such shares is prior to
the record date for the first Quarterly Dividend Payment Date, in which
case dividends or such shares shall begin to accrue from the date of
issue of such shares, or unless the date of issue is a Quarterly
Dividend Payment Date or is a date after the record date for the
determination of holders of shares of Junior Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend
Payment Date, in either of which events such dividends shall begin to
accrue and be cumulative from such Quarterly Dividend Payment Date.
Accrued but unpaid dividends shall accumulate but shall not bear
interest. Dividends paid on the shares of Junior Preferred Stock in an
amount less than the total amount of such dividends at the time accrued
and payable on such shares shall be allocated pro rata on a
share-by-share basis among all such shares at the time outstanding. The
Board of Directors may fix a record date for the determination of
holders of shares of Junior Preferred Stock entitled to receive payment
of a dividend or distribution declared thereon, which record date shall
be not more than 60 days prior to the date fixed for the payment
thereof.
Section 3. Voting Rights.
The holders of shares of Junior Preferred Stock shall have the
following voting rights.
(A) Each share of Junior Preferred Stock shall entitle the
holder thereof to 1 vote on all matters submitted to a vote of the
shareholders of the Corporation.
4
<PAGE> 37
(B) Except as otherwise provided herein, in the Restated
Certificate, in any other certificate of amendment creating a series of
preferred stock or any similar stock, or by law, the holders of shares
of Junior Preferred Stock and the holders of shares of Common Stock and
any other capital stock of the Corporation having general voting rights
shall vote together as one class on all matters submitted to a vote of
shareholders of the Corporation.
(C) If at any time the Corporation shall not have declared and
paid all accrued and unpaid dividends on the Junior Preferred Stock as
provided in Section 2 hereof for four consecutive Quarterly Dividend
Payment Dates, then, in addition to any voting rights provided for in
paragraphs (A) and (B), the holders of the Junior Preferred Stock shall
have the exclusive right, voting separately as class, to elect two
directors on the Board of Directors of the Corporation (such directors,
the "Preferred Directors"). The right of the holders of the Junior
Preferred Stock to elect the Preferred Directors shall continue until
all such accrued and unpaid dividends shall have been paid. At such
time, the terms of any of the Preferred Directors shall terminate. At
any time when the holders of the Junior Preferred Stock shall have thus
become entitled to elect Preferred Directors, a special meeting of
shareholders shall be called for the purpose of electing such Preferred
Directors, to be held within 30 days after the right of the holders of
the Junior Preferred Stock to elect such Preferred Directors shall
arise, upon notice given in the manner provided by law or the by-laws
of the Corporation for giving notice of a special meeting of
shareholders (provided, however, that such a special meeting shall not
be called if the annual meeting of shareholders is to convene within
said 30 days). At any such special meeting or at any annual meeting at
which the holders of the Junior Preferred Stock shall be entitled to
elect Preferred Directors, the holders of a majority of the then
5
<PAGE> 38
outstanding Junior Preferred Stock present in person or by proxy shall
be sufficient to constitute a quorum for the election of such
directors. The persons elected by the holders of the Junior Preferred
Stock at any meeting in accordance with the terms of the preceding
sentence shall become directors on the date of such election.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Junior Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Junior Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends, or make any other
distributions, on any shares or stock ranking junior (either
as to dividends or upon liquidation, dissolution or
winding-up) to the Junior Preferred Stock;
(ii) declare or pay dividends, or make any other
distributions, on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding-up) with the Junior Preferred Stock except dividends
paid ratably on the Junior Preferred Stock, and all such
parity stock on which dividends are payable or in arrears in
proportion to the total amounts to which the holders of all
such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or
winding-up) with the Junior Preferred Stock, provided that the
6
<PAGE> 39
corporation may at any time redeem, purchase or otherwise
acquire shares of any such parity stock in exchange for shares
of any stock of the Corporation ranking junior (either as to
dividends or upon dissolution, liquidation or winding-up) to
the Junior Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Junior Preferred Stock, or any shares of stock
ranking on a parity (either as to dividends or upon
liquidation, dis solution or winding-up) with the Junior
Preferred Stock, except in accordance with a purchase offer
made in writing or by publication (as determined by the Board
of Directors) to all holders of such shares upon such terms as
the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and
preferences of the respective series classes, shall determine
in good faith will result in fair and equitable treatment
among the respective series or classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
Section 5. Reacquired Shares.
Any shares of Junior Preferred Stock purchased or otherwise
acquired by the Corporation in any manner whatsoever, shall be retired
and cancelled promptly after the acquisition thereof. All such shares
shall upon their cancellation become authorized but unissued shares of
preferred stock, without designation as to series, and may be reissued
as part of a new series of preferred stock to be created by resolution
or
7
<PAGE> 40
resolutions of the Board of Directors, subject to the conditions and
restrictions on issuance set forth herein, in the Restated Certificate,
in any other certificate of amendment creating a series of preferred
stock or any similar stock or as otherwise required by law.
Section 6. Liquidation, Dissolution or
Winding-Up.
Upon any voluntary or involuntary liquidation, dissolution or
winding-up of the Corporation, no distribution shall be made (A) to the
holders of shares of stock ranking junior (either as to dividends or
upon liquidation, dissolution or winding-up) to the Junior Preferred
Stock unless prior thereto, the holders of shares of Junior Preferred
Stock shall have received the higher of (i) $10.00 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon,
whether or not declared, to the date of such payment, or (ii) an
aggregate amount per share, subject to the provision for adjustment
hereinafter set forth, equal to 1,000 times the aggregate amount to be
distributed per share to holders of Common Stock; nor shall any
distribution be made (B) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding-up)
with the Junior Preferred Stock, except distributions made ratably on
the Junior Preferred Stock and all other such parity stock in
proportion to the total amounts to which the holders of all such shares
are entitled upon such liquidation, dissolution or winding-up. In the
event the Corporation shall at any time declare or pay any dividend on
Common Stock payable in shares of Common Stock, or effect a subdivision
or combination or consolidation of the outstanding shares of Common
Stock (by reclassification or otherwise than by payment of a dividend
in shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the aggregate amount to which
holders of
8
<PAGE> 41
shares of Junior Preferred Stock are entitled immediately prior to such
event under the provision in clause (A) of the preceding sentence shall
be adjusted by multiplying such amount by a fraction the numerator of
which is the number of shares of Common Stock outstanding immediately
after such event and the denominator of which is the number of shares
of Common Stock that were outstanding immediately prior to such event.
Section 7. Consolidation, Merger etc.
In case the Corporation shall enter into any consolidation,
merger, combination or other transaction in which the shares of Common
Stock are exchanged for or changed into other stock or securities, cash
and/or any other property, or otherwise changed, then in any such case
each share of Junior Preferred Stock shall at the same time be
similarly exchanged or changed into an amount per share (subject to the
provision for adjustment hereinafter set forth) equal to 1,000 times
the aggregate amount of stock, securities, cash and/or any other
property (payable in kind), as the case may be, into which or for which
each share of Common Stock is changed or exchanged. In the event the
Corporation shall at any time declare or pay any dividend on Common
Stock payable in shares of Common Stock, or effect a subdivision or
combination or consolidation of the outstanding shares of Common Stock
(by reclassification or otherwise than by payment of a dividend in
shares of Common Stock) into a greater or lesser number of shares of
Common Stock, then in each such case the amount set forth in the
preceding sentence with respect to the exchange or change of shares of
Junior Preferred Stock shall be adjusted by multiplying such amount by
a fraction the numerator of which is the number of shares of Common
Stock outstanding immediately after such event and the denominator of
which is the number of shares of Common Stock that were outstanding
immediately prior to such event.
9
<PAGE> 42
Section 8. No Redemption.
The shares of Junior Preferred Stock shall not be redeemable.
Section 9. Rank.
Unless otherwise provided in the Restated Certificate or a
certificate of amendment relating to a subsequent series of preferred
stock of the Corporation, the Junior Preferred Stock shall rank junior
to all other series of the Corporation's preferred stock as to the
payment of dividends and the distribution of assets on liquidation,
dissolution or winding-up, and senior to the Common Stock of the
Corporation.
Section 10. Amendment.
The Restated Certificate, as amended and restated, shall not
be amended in any manner which would materially alter or change the
powers, preferences or special rights of the Junior Preferred Stock so
as to affect them adversely without the affirmative vote of the holders
of at least two-thirds of the outstanding shares of Junior Preferred
Stock, voting together as a single series.
Section 11. Fractional Shares.
Junior Preferred Stock may be issued in fractions of a share
(in one one-thousandths (1/1,000) of a share and integral multiples
thereof) which shall entitle the holder, in proportion to such holder's
fractional shares, to exercise voting rights, receive dividends,
participate in distributions and to have the benefit of all other
rights of holders of Junior Preferred Stock."
10
<PAGE> 43
3. The resolution was adopted by the Board of Directors at a
meeting duly called and held on July 31, 1996, at which a quorum was present
throughout.
4. The Restated Certificate of Incorporation of the
Corporation is amended so that the designation and number of shares of the class
and series acted upon in the resolution, and the relative rights, preferences
and limitations of such class and series are as stated in the resolution.
IN WITNESS WHEREOF, this Certificate of Amendment is executed
on behalf of the Corporation by its President and attested by its Secretary this
31st day of July 1996.
NEW JERSEY RESOURCES CORPORATION
By:/s/ Laurence M. Downes
-------------------------
Laurence M. Downes
President
ATTEST:
By:/s/ Oleta J. Harden
- ----------------------
Oleta J. Harden,
Secretary
11
<PAGE> 1
EXHIBIT 4.5A
FIRST AMENDMENT (the "Amendment"), dated as of April 2, 1996, to the
Amended and Restated Note and Credit Agreement as amended, (the "Agreement"),
dated May 7, 1993, between NEW JERSEY RESOURCES CORPORATION (the "Borrower") and
FIRST UNION NATIONAL BANK (formerly known as First Fidelity Bank, National
Association) (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are parties to the Agreement; and
WHEREAS, the Borrower has requested the Bank to modify the Agreement,
and the Bank is agreeable to such request;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows,
1. Definitions. Except as otherwise stated, capitalized terms defined in the
Agreement and used herein without definition shall have the respective meanings
assigned to them In the Agreement.
2. Amendments to the Agreement.
Section I (the Commitment) of the Agreement is hereby amended by
deleting therefrom 'Twenty Million Dollars ($20,000,000)" and substituting in
its place "Thirty Million Dollars ($30,000,000)"; provided, however, that on
September 30, 1996 the aforementioned amount referenced shall revert back to
Twenty Million Dollars ($20,000,000) and subject to paragraph Ill. 9.4 or
III.C.4, as applicable, any amount outstanding in excess of Twenty Million
Dollars ($20,000,000) shall be repaid on said date."
3. Representations and Warranties. To induce the Bank to enter into this
Amendment, the Borrower hereby represents and warrants that:
(a) The Borrower has the power, authority and legal right to make and
deliver this Amendment and to perform its obligations under the Agreement, as
amended by this Amendment, without any notice, consent, approval or
authorization not already obtained, and the Borrower has taken all necessary
action to authorize the same.
(b) The making and delivery of this Amendment and the performance of the
Agreement as amended by this Amendment do not violate any provision of law, any
regulation, the Borrower's charter or the Borrower's by-laws or result In the
breach of or constitute a default under or require any consent under any
Indenture or other agreement or Instrument to which the Borrower is a party or
by which the Borrower or any of Its property may be bound or affected. The
Agreement as amended by this Amendment constitutes a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally.
(c) The representations and warranties contained in the Agreement are
true and correct on and as of the date of this Amendment and after giving effect
thereto, provided that , for purposes hereof (I) in Section IX (h) of the
Agreement, the reference to the September 30, 1992 audited financial statements
shall be deleted and shall be replaced by "September 30, 1995" and (ii) in
Sections IX a) of the Agreement, the references to "September 30, 1992" shall be
replaced by "September 30, 1995".
<PAGE> 2
(d) No Event of Default or event which, with the giving of notice or
lapse of time or both, would be an Event of Default has occurred and is
continuing under the Agreement as of the date of this Amendment and after giving
effect thereto.
4. Effective Date. This Amendment shall become effective when all of the
following shall have occurred:
(a) The Bank shall have received counterparts of this Amendment, duly
executed by each of the parties hereto.
(b) The Bank shall have received a copy of the resolution of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Amendment, certified by an appropriate officer of the Borrower.
5. Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original and all of which taken together shall
constitute a single instrument with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6. Full Force and Effect. Except as expressly modified by this Amendment, all of
the terms and provisions of the Agreement shall continue in full force and
effect, and all parties hereto shall be entitled to the benefits thereof.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the date set forth above.
New Jersey Resources Corporation
/s/ Glenn C. Lockwood
--------------------------------
Title: Senior VP and CFO
First Union National Bank
/s/ Joseph DiFrancesco
--------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 4.5B
SECOND AMENDMENT (the "Amendment"), dated as of August 29,1995, to the
Amended and Restated Note and Credit Agreement the "Agreement"), dated May 7,
1993, between NEW JERSEY RESOURCES CORPORATION (the "Borrower") and FIRST
FIDELITY BANK, NATIONAL ASSOCIATION, successor by consolidation to First
Fidelity Bank, National Association, New Jersey (the "Bank").
WITNESSETH:
WHEREAS, the Borrower and the Bank are parties to the Agreement; and
WHEREAS, the Borrower has requested the Bank to modify the Agreement,
and the Bank is agreeable to such request;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto here-by agree as follows:
1. Definitions. Except as otherwise stated, capitalized terms defined in the
Agreement and used herein without definition shall have the respective meanings
assigned to them in the Agreement.
2. Amendments to the Agreement. Section X, paragraph F is hereby amended by
adding to the end thereof a new subparagraph as follows:
5. The Borrower may sell its interest in NJR Energy Corporation and/or
New Jersey Natural Resources Company, and/or each of said Principal Subsidiaries
may sell all or substantially all of its properties and assets.
3. Representations and Warranties. To induce the Bank to enter into this
Amendment, the Borrower hereby represents and warrants that:
(a) The Borrower has the power, authority and legal right to make and
deliver this Amendment and to perform its obligations under the Agreement, as
amended by this Amendment, without any notice, consent, approval or
authorization not already obtained, and the Borrower has taken all necessary
action to authorize the same.
(b) The making and delivery of this Amendment and the performance of
the Agreement as amended by this Amendment do not violate any provision of law,
any regulation, the Borrower's charter or the Borrower's by-laws or result in
the breach of or constitute a default under or require any consent under any
indenture or other agreement or instrument to which the Borrower is a party or
by which the Borrower or any of its property may be bound or affected. The
Agreement as amended by this Amendment constitutes a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally.
(c) The representations and warranties contained in Section IX of the
Agreement are true and correct on and as of the date of this Amendment and after
giving effect thereto.
(d) No Event of Default or event which, with the giving of notice or
lapse of time or both, would be an Event of Default has occurred and is
continuing under the Agreement as of the date of this Amendment and after giving
effect thereto.
<PAGE> 2
4. Effective Date. This Amendment shall become effective as of the date hereof
when all of the following shall have occurred:
(a) The Bank shall have received counterparts of this Amendment, duly
executed by each of the parties hereto.
(b) The Bank shall have received a copy of the resolution of the Board
of Directors of the Borrower authorizing the execution, delivery and performance
of this Amendment, certified by an appropriate officer of the Borrower.
5. Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original an, all of which taken together shall
constitute a single instrument with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6. Full Force and Effect. Except as expressly modified by this Amendment, all of
the terms and provisions of the Agreement shall continue in full force and
effect, and all parties hereto shall be entitled to the benefits thereof.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the date set forth above.
NEW JERSEY RESOURCES CORPORATION
/s/ Glenn C. Lockwood
--------------------------------
Title: VP & Controller
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
/s/ Joseph DiFrancesco
--------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 4.5C
THIRD AMENDMENT (the "Amendment"), dated as of September 10, 1996, to the
Amended and Restated Note and Credit Agreement, dated May 7, 1993, between NEW
JERSEY RESOURCES CORPORATION (the "Borrower") and FIRST UNION NATIONAL BANK,
successor by consolidation to First Fidelity Bank, National Association, New
Jersey (the "Bank") as amended (the "Agreement",)
WITNESSETH
WHEREAS, the Borrower and the Bank are parties to the Agreement; and
WHEREAS, the Borrower has requested the Bank to modify the Agreement, and
the Bank is agreeable to such request;
NOW, THEREFORE, in consideration of the premises and mutual agreements
contained herein, the parties hereto hereby agree as follows;
1. Definitions. Except as otherwise stated, capitalized terms defined in the
Agreement and used herein without definition shall have the respective meanings
assigned to them in the Agreement
2. Amendments to the Agreement. Section I is hereby amended by deleting "April
30, 1997 and inserting in its place "April 30, 1998".
3. Representations and Warranties. To induce the Bank to enter into this
Amendment, the Borrower hereby represents and warrants that:
(a) The Borrower has the power, authority and legal right to take and
deliver this Amendment and to perform its obligations under the Agreement, as
amended by this Amendment, without any notice, consent, approval or
authorization not already obtained, and the Borrower has taken all necessary
action to authorize the same.
(b) The making and delivery of this Amendment and the performance of the
Agreement as amended by this Amendment do not violate any provision of law, any
regulation, the Borrower's charter or the Borrower's by-laws or result in the
breach of or constitute a default under or require any consent under any
indenture or other agreement or-instrument to which the Borrower is a party or
by which the Borrower or any of its property may be bound or affected. The
Agreement as amended by this Amendment constitutes a legal, valid and binding
obligation of the Borrower, enforceable against it in accordance with its terms,
except as the enforceability thereof may be limited by any applicable
bankruptcy, reorganization, insolvency, moratorium or other laws affecting
creditors' rights generally.
(c) The representations and warranties contained in Section IX of the
Agreement are true and correct on and as of the date of this Amendment and after
giving effect thereto.
(d) No Event of Default or event which, with the giving of notice or
lapse of time or both, would be an Event of Default has occurred and is
continuing under the Agreement as of the date of this Amendment and after giving
effect thereto.
4. Effective Date. This Amendment shall become effective as of the date here of
when all of the following shall have occurred:
<PAGE> 2
(a) The Bank shall have received counterparts of this Amendment, dated
executed by each of the parties hereto.
(b) The Bank shall have received a copy of the resolution of the Board of
Directors of the Borrower authorizing the execution, delivery and performance of
this Amendment, certified by an appropriate officer of the Borrower.
(c) The Bank shall have received an opinion of counsel to the Borrower,
dated the date hereof, to the effect that this Amendment has been duly
authorized, executed and delivered by a duly authorized officer of the Borrower
and that the Agreement, as amended by this Amendment, constitutes a valid
obligation of the Borrower, legally binding upon it and enforceable (except as
may be limited by any applicable bankruptcy, reorganization, insolvency,
moratorium or other similar laws affecting creditors, rights generally) in
accordance with its terms as so amended.
5. Counterparts. This Amendment may be signed in any number of counterparts,
each of which shall be an original and all of which taken together shall
constitute a single instrument with the same effect as if the signatures thereto
and hereto were upon the same instrument.
6. Full Force and Effect. Except as expressly modified by this Amendment, all of
the terms and provisions of the Agreement shall continue in full force and
effect, and all parties hereto shall be entitled to the benefits thereof.
7. Governing Law. This Amendment shall be governed by and construed in
accordance with the internal laws (and not the law of conflicts) of the State of
New Jersey.
IN WITNESS WHEREOF, the Parties hereto have caused this Amendment to be
duly executed and delivered by their proper and duly authorized officers as of
the date set forth above.
NEW JERSEY RESOURCES CORPORATION
/s/ Glenn C. Lockwood
--------------------------------
Title: Senior VP and CFO
FIRST UNION NATIONAL BANK
/s/ Alan G. Lilienthal
--------------------------------
Title: Vice President
<PAGE> 1
EXHIBIT 4-6
EXECUTION COPY
U.S. $10,000,000
REVOLVING CREDIT AGREEMENT
Dated as of August 25, 1996
between
NEW JERSEY RESOURCES CORPORATION
as Borrower
and
SOCIETE GENERALE
NEW YORK BRANCH
as Bank
<PAGE> 2
NEW JERSEY RESOURCES CORPORATION
U.S. $10,000,000
Dated as of August 25, 1996
Table of Contents
Page Number
-----------
1. DEFINITIONS; INTERPRETATION
1.1. Definitions 1
1.2. Interpretation 5
2. COMMITMENTS; DISBURSEMENT
2.1. Commitment to Lend 5
2.2. Notice of Borrowing 5
2.3. Disbursements 5
2.4. Evidence of Advances 5
3. REPAYMENT
3.1. Repayment 6
3.2. Reduction of the Commitments 6
3.3. Optional Prepayment 6
4. INTEREST
4.l. Basic Rate 6
4.2. Substitution Rate 7
4.3. Interest on Late Payments 7
5. FEES
5.1. Commitment Fee 7
6. TAXES
6.1. Gross-up 7
6.2. Stamp Taxes 9
7. CONDITIONS PRECEDENT
7.1. Conditions to be Satisfied on or
Before the Initial Disbursement Date 9
7.2. Further Conditions to be Satisfied
at or Before Each Disbursement Date 10
i
<PAGE> 3
Page Number
-----------
8. REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties 10
8.2. Repetition of Representations and Warranties 13
9. COVENANTS
9.1. Use of Proceeds 13
9.2. Governmental Authorizations 13
9.3. Financial Statements and Other Information 13
9.4. Notices of Default 15
9.5. Negative Pledge 15
9.6. Consolidation, Merger, Sale of Assets, etc. 15
9.7. Preservation of Existence, Rights
and Franchises; Conduct of Business 16
9.8. Insurance 17
9.9. ERISA Compliance 17
9.10. Payment of Taxes, etc. 17
9.11. Borrower Debt 17
9.12. Interest Coverage 18
9.13. Debt Ratio 18
9.14. Subsidiary Borrowing 18
9.15. Holding Company Act Compliance 19
10. EVENTS OF DEFAULT
10.1. Events of Default 19
10.2. Default Remedies 20
10.3. Right of Setoff 21
10.4. Rights Not Exclusive 21
11. PAYMENTS; COMPUTATIONS
11.1. Making of Payments 21
11.2. Computations 21
12. INTENTIONALLY OMITTED
13. INTENTIONALLY OMITTED
14. INDEMNIFICATION
14.1. Expenses 22
14.2. Other Costs 22
ii
<PAGE> 4
Page Number
-----------
15. CHANGES IN APPLICABLE LAW; INCREASED COSTS
15.l. Changes in Applicable Law 22
15.2. Increased Costs 23
15.3. Alternative Arrangements 24
16. GENERAL
16.1. Choice of Law 24
16.2. Jurisdiction 24
16.3. Loan Currency 24
16-4. Notices 25
16.5. Remedies and Waivers 25
16.6. Amendment 25
16-7. Assignment; Participations 25
16-8. Determinations by the Bank 26
16.9. Survival 26
16.10. Severability of Provisions 26
16.11. Counterparts 27
16.12. Integration of Terms 27
EXHIBIT A - Form of Grid Note
EXHIBIT B-1 - Opinion of Debevoise & Plimpton
EXHIBIT B-2 - Opinion of General Counsel of the Borrower
EXHIBIT C - List of Subsidiaries of the Borrower
EXHIBIT D - Permitted Encumbrances
EXHIBIT E - Permitted Indebtedness
iii
<PAGE> 5
THIS REVOLVING CREDIT AGREEMENT is made as of August 25,1996, between
NEW JERSEY RESOURCES CORPORATION (the "Borrower"), and SOCIETE GENERALE, NEW
YORK BRANCH (the "Bank").
WHEREAS the Borrower wishes to borrow from the Bank, and the Bank is
willing to lend, on a revolving basis, to the Borrower, an aggregate principal
amount of up to $10,000,000, the parties agree as follows.
I. DEFINITIONS; INTERPRETATION
1.1. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated.
"Advance" means an advance made by the Bank to the Borrower pursuant to
Section 2.l.
"Aggregate Advances" means, the sum of the Advances hereunder.
"Applicable Law" means (a) any law or regulation of (i) the
jurisdiction (or any agency, department, instrumentality or taxing authority
thereof) under whose law the Borrower is incorporated, and (ii) any jurisdiction
(or any agency, department, instrumentality or taxing authority thereof) in
which the Borrower's principal office is located and (b) as to the Bank, any law
or regulation of (i) the jurisdiction (or any agency, department,
instrumentality or taxing authority thereof) under whose law the Bank is
organized, (ii) any jurisdiction (or any agency, department, instrumentality or
taxing authority thereof) in which the Bank's principal office is located and
(iii) any jurisdiction (or any agency, department, instrumentality or taxing
authority thereof) in which the Bank's Lending Office is located.
"Business Day" means any day except Saturday, Sunday and any day which
shall be in New York City a legal holiday or a day on which banking institutions
are authorized or required by law or other government action to close.
"Code" means the Internal Revenue Code of 1986, as amended from time to
time.
"Commission" has the meaning assigned to that term in Section 8.l(n).
"Commitment" means, $10,000,000 as reduced in accordance with the terms
hereof.
"Default" means any event or occurrence which with the giving of notice
or the passage of time, or both, would constitute an Event of Default.
<PAGE> 6
"Disbursement Date" in respect of any Advance, has the meaning assigned
to that term in Section 2.2.
"Dollars" or "$" means lawful money of the United States.
"Effective Date" means the earlier of (i) October 1, 1996, if the
conditions precedent set forth in Section 7.1 have been satisfied on or prior to
such date and (ii) the first day after October 1, 1996 on which the conditions
precedent set forth in Section 7.1 have been satisfied if they have not been
satisfied on such date.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the regulations thereunder.
"ERISA affiliate" means each trade or business (whether or not
incorporated) that would be treated together with the Borrower as a single
employer under Section 4001 of ERISA.
"Eurodollar Rate" means, with respect to any Interest Period for an
Advance, the rate of interest quoted by the Bank as the rate at which the Bank
is offering to place a deposit in Dollars, for a term coextensive with such
Interest Period in an amount substantially equal to the amount of the requested
Advance with leading banks in the New York interbank Eurodollar market on the
first day of each Interest Period.
"Event of Default" has the meaning assigned to that term in Section
10.1.
"Grid Note" means a promissory note of the Borrower evidencing Advances
made by the Bank, in substantially the form of Exhibit A.
"IRS" has the meaning assigned to that term in Section 6.l(a)(i).
"Indebtedness", with respect to any Person, means any amount payable by
such Person pursuant to an agreement or instrument involving or evidencing money
borrowed or received, the advance of credit, (other than trade payables incurred
in the ordinary course of business of such Person), a conditional sale or a
transfer with recourse or with an obligation to repurchase, or pursuant to a
lease with substantially the same economic effect as any such agreement or
instrument, to which such Person is a party as debtor, borrower, lessee or
guarantor.
"Indenture" means the Indenture of Mortgage and Deed of Trust dated
April 1, 1952 between New Jersey Natural Gas Company and Harris Trust and
2
<PAGE> 7
Savings Bank, as Trustee, as amended through the Eighteenth
Supplemental Indenture dated June 1, 1989.
"Interest Period" means, with respect to any Advance, the period
commencing on the Disbursement Date, in the case of the initial Interest Period
for an Advance, or on the last day of the prior Interest Period in the case of
any subsequent Interest Period for an Advance. The duration of each such
Interest Period shall be one, two, three or six months (or such shorter period
as the Borrower, and the Bank may agree) as designated by the Borrower in a
Notice of Borrowing delivered to the Bank pursuant to Section 2.2, in the case
of the initial Interest Period for an Advance, or in a notice delivered to the
Bank at least four Business Days prior to the end of the prior Interest Period,
in the case of any subsequent Interest Period for an Advance, provided that:
(a) if the Borrower shall fail timely to elect the duration of an
Interest Period, it will be deemed to have elected a three month Interest
Period;
(b) any Interest Period which would otherwise end on a day which is not
a Business Day shall be extended to the next succeeding Business Day unless such
Business Day falls in another calendar month, in which case such Interest Period
shall end on the next preceding Business Day;
(c) any Interest Period which begins on the last Business Day of a
calendar month (or on a day for which there is no numerically corresponding day
in the calendar month at the end of such Interest Period) shall, subject to
clause (d) below, end on the last Business Day of a calendar month; and
(d) any Interest Period which would otherwise end after the Termination
Date shall end on the Termination Date.
"Lending Office", means the office of the Bank located in New York, New
York or such other office of the Bank as the Bank may have last designated as
its lending office for purposes of this Agreement by notice to the Borrower.
"Long-Term Debt" means obligations of the Borrower for borrowed money
which are by their terms not due (or subject to demand) within one year.
"Margin" means, on a per annum basis, an amount equal to thirty seven
and one half (37.5) basis points.
"Officers' Certificate" means a certificate executed on behalf of the
Borrower by any two officers of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation.
3
<PAGE> 8
"Person" means any corporation, natural person, firm, Joint venture,
partnership, trust, unincorporated organization or government, or any political
subdivision, department or agency of any government.
"Plan" means any plan subject to Title IV of ERISA with respect to
which the Borrower or any ERISA Affiliate would incur a liability to the PBGC or
to such plan pursuant to Title IV of ERISA as a result of the termination of
such plan or withdrawal or partial withdrawal of any person from such plan.
"Plan Event" means the filing of a notice of intent to terminate any
Plan under Section 4041 of ERISA, the receipt of any notice by any Plan that the
PBGC intends to apply for the appointment of a trustee to administer such Plan,
the termination of any Plan, the complete or partial withdrawal of any Person
from any Plan if such withdrawal could result in liability of the Borrower or
any ERISA Affiliate to the PBGC or to such Plan, a "reportable event," as
defined in Section 4043(b) of ERISA, with respect to any Plan and any other
event or condition that would constitute grounds under Section 4042 of ERISA for
the termination of, or for the appointment of a trustee to administer, any Plan.
"Prime Rate" means the rate which the Bank announces from time to time
as its prime rate, the Prime Rate to change when and as such prime rate changes.
The Prime Rate is a reference rate and does not necessarily represent the lowest
or best rate actually charged to any customer. The Bank may make commercial
loans or other loans at rates of interest at, above or below the Prime Rate.
"Principal Subsidiary" means each of New Jersey Natural Gas Company,
NJR Energy Corporation and its subsidiaries, New Jersey Natural Resources
Company and NJNR Pipeline Company, and Commercial Realty & Resources Corp., and
any other Subsidiary having total assets in excess of five percent (5%) of the
total assets of the Borrower and its Subsidiaries on a consolidated basis, all
as set forth in the most recent audited balance sheets of the Borrower and its
Subsidiaries.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as from time to time in effect and any successor to all
or a portion thereof establishing reserve requirements.
"Subsidiary", at any time, means any entity of which more than fifty
percent of the outstanding voting stock or other equity interest entitled
ordinarily to vote in the election of the directors or other governing body
(however designated) of such entity is at the time beneficially owned or
controlled directly or indirectly by the Borrower and/or by one or more such
entities.
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"Termination Date" means September 30, 1997 or the earlier date of
termination in whole of the Commitment pursuant to Section 3.2.
"United States" means the United States of America.
"United States Tax" has the meaning assigned to that term in Section
6.1.
"U.S. Person" means a citizen or resident of the United States, a
corporation, partnership or other entity created or organized in or under the
laws of the United States, or an estate or trust the income of which is subject
to United States federal income taxation regardless of the source.
1.2. Interpretation. The headings in this Agreement are inserted for
convenience only and shall be ignored in construing this Agreement. Unless the
context otherwise requires, words denoting the singular number only shall
include the plural and vice versa. The words "written" and "in writing" include
any means of visible reproduction. Unless otherwise indicated, references to
Sections, Exhibits and Schedules are to be construed as reference to sections of
and exhibits and schedules to this Agreement.
2. COMMITMENTS; DISBURSEMENT
2.1. Commitment to Lend. On the terms and subject to the conditions set
forth herein, the Bank, agrees to make Advances to the Borrower from time to
time from the Effective Date to the Termination Date, in an aggregate principal
amount not exceeding the Bank's Commitment. Within the limits of the Bank's
Commitment, the Borrower may borrow, repay pursuant to Section 3.1 or prepay
pursuant to Section 3.3, and reborrow under this Section 2. 1.
2.2. Notice of Borrowing. If the Borrower wishes to borrow hereunder,
it shall, not later than 11:00 a.m. New York City time on the Business Day on
which it wishes to borrow (the "Disbursement Date"), (a) the amount of the
Advance, which amount shall be an integral multiple of $1,000,000 not less than
$3,000,000 (unless the remaining unused portion of the Commitment is less than
$3,000,000 in which case the amount designated by the Borrower shall equal the
remaining unused portion of the Commitment), (b) the account to which it wishes
the proceeds of the Advance to be credited and (c) the Interest Period for such
Advance. The giving of such notice shall constitute the Borrower's irrevocable
commitment to borrow such amount on such Disbursement Date.
2.3. Disbursement. Subject to the conditions set forth herein, the Bank
shall, on such Disbursement Date, transfer such funds by 3:00 p.m. New York City
time to the account specified by the Borrower pursuant to Section 2.2.
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2.4. Evidence of Advances. The Bank's Advances made pursuant to this
Agreement shall be evidenced on the Grid Note of the Borrower held by the Bank.
Upon making an Advance, the Bank may record on the schedule contained on the
Grid Note the Disbursement Date and the principal amount of the Advance. the
Bank may also promptly so record any payments of principal or interest. In any
legal action or proceeding in respect of this Agreement or any Advance, the
entries made on such schedule shall be prima facie evidence of the existence and
amounts of the Advances made by the Bank and of the amounts due to it under this
Agreement in respect thereof. The failure to record or to record properly any
such amount shall not affect the obligation of the Borrower to repay the actual
principal amount of any Advance made by the Bank with all applicable interest
accruing thereon.
3. REPAYMENT
3.1. Repayment. The Borrower shall repay the principal amount of each
Advance owing to the Bank on the Termination Date.
3.2. Reduction of the Commitment. The Borrower shall have the right,
upon at least FIVE Business Days' notice to the Bank, to terminate in whole or
reduce in part the unused portion of the Commitment of the Bank, provided that
each partial reduction shall be in the aggregate of $1,000,000 or a greater
integral multiple thereof.
3.3. Optional Prepayment. The Borrower may, upon at least five Business
Days' notice to the Bank stating the proposed date and aggregate principal
amount of the prepayment, and if such notice is given the Borrower shall, prepay
the outstanding principal amount of any Advance in whole or ratably in part,
together with accrued interest to the date of such prepayment on the principal
amount prepaid; provided, however, that (a) each partial prepayment shall be in
an aggregate principal amount not less than $1,000,000 or a greater integral
multiple of $500,000 and (b) the Borrower shall be obligated to reimburse the
Bank in respect thereof pursuant to Section 14.2.
4. INTEREST
4.1. Basic Rate. (a) Except as otherwise expressly provided in Section
4.2 or Section 4.3, interest shall accrue on the outstanding principal amount of
each Advance at a rate per annum equal to the sum of its Eurodollar Rate plus
the Margin. The Bank shall give prompt notice to the Borrower of its Eurodollar
Rate after each determination thereof.
(b) Except as otherwise provided herein, accrued interest on the unpaid
principal amount of each Advance owing to the Bank from the date of such
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<PAGE> 11
Advance until the maturity thereof (whether at stated maturity, by
acceleration or otherwise) shall be payable on the last day of an Interest
Period and, if such Interest Period has a duration of more than three months, on
each day which occurs during such Interest Period every three months from the
first day of such Interest Period.
4.2. Substitution Rate. (a) If the Bank shall determine (i) that the
Bank is generally unable to obtain deposits in Dollars in the interbank
Eurodollar market for the applicable Interest Period or (ii) that the Eurodollar
Rate for such Interest Period will not adequately reflect the cost to the Bank
of obtaining deposits in Dollars in the interbank market for such Interest
Period, the Bank shall promptly so notify the Borrower.
(b) If a notice is given pursuant to Section 4.2(a), interest shall
accrue on the Advance during the affected Interest Period at a rate per annum
equal to the Prime Rate. The Borrower, at its discretion, shall have the right
to prepay any Advance subject to the Prime Rate at any time, provided the
Borrower has given the Bank one Business Day prior written notice.
(c) For the purpose of determining the commitment fee payable by the
Borrower under Section 5.1, the unused portion of the Commitment shall not
include the Commitment of the Bank to the extent its obligation to lend is
canceled or suspended pursuant to Section 15.1, and the Bank shall not be
entitled to receive any portion of the commitment fee attributable thereto.
4.3. Interest on Late Payments. If any amount payable by the Borrower
hereunder is not paid on or before the due date thereof, interest shall accrue
on such amount, to the extent permitted by applicable law, during the period
from and including the due date thereof to but excluding the date such amount is
paid, at a rate per annum equal for each day in such period to the sum of two
percent (2%) in excess of the Prime Rate. Interest accruing pursuant to this
Section 4.3 shall be payable from time to time on demand of the Bank.
5. COMMITMENT FEE
5.1. Commitment Fee. The Borrower shall pay to the Bank a commitment
fee on the average daily unused portion of the Commitment from and including the
date hereof to but excluding the Termination Date at a rate per annum of twelve
and one-half (12.5) basis points, payable on the last day of each August,
November, February and May, commencing August 1996, and on the Termination Date.
6. TAXES
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6.1. Gross-up. (a) In the event that any amount is required by
Applicable Law to be withheld or deducted from any payments due to the Bank in
respect of any Advance for or on account of any present or future taxes imposed
by any governmental or other taxing authority of or in the United States
("United States Tax"), the Borrower shall pay to the Bank such additional
amounts as may be necessary in order that the net amount received by the Bank
after the required withholding or other payment (including any required
withholding or other payment on such additional amounts) shall equal the amount
the Bank would have received had no such withholding or other payment been made;
provided, however, that no such additional amounts shall be paid:
(i) if the Bank shall have delivered an Internal Revenue Service
("IRS") Form 4224 to the Borrower pursuant to Section 6.1(c) and (A) the Bank
shall at any time not be entitled to complete exemption from withholding of
United States Tax for any reason other than a change in United States federal
income tax law, regulation or official interpretation after the date hereof or
(B) such withholding or deduction of United States Tax is imposed in respect of
similar payments to United States taxpayers generally; or
(ii) if the Bank shall have delivered an IRS Form 1001 to the Borrower
pursuant to Section 6.1(c) and the Bank shall at any time not be entitled to the
complete exemption from or reduction of United States Tax for any reason other
than an amendment, modification or revocation of an applicable double tax
treaty, or a change in official position regarding the application or
interpretation of such treaty, after the date hereof; or
(iii) if the Bank has delivered an IRS Form 1001 that claims partial
exemption from or reduction of United States Tax, for or on account of any such
taxes imposed at a rate that does not exceed the rate applicable to the Bank on
the date hereof; or
(iv) for or on account of any such taxes that could not have been
imposed but for the Bank's failure to comply with its obligations under Section
6.1(c).
In the event that the Borrower makes payments to the Bank without any
reduction by reason of withholding or other payments of United States Tax, and
it is later determined by any applicable governmental or taxing authority that
the Borrower is liable for withholding or other payments and the Bank would not
be entitled, by virtue of clause (i), (ii), (iii) or (iv) above, to an
additional amount in respect of any such deduction or withholding, then the Bank
shall indemnify the Borrower (on an after-tax basis), for any amounts (other
than interest and penalties, where the failure by the Borrower to deduct or
withhold was not the result of an action or inaction on the part of such Bank)
that the Borrower remits to
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<PAGE> 13
the governmental or taxing authority as a result of such determination. If the
Borrower receives notice of any additional amount due hereunder, it shall,
subject to compliance with Section 3.3 hereof, have the right to prepay the
Aggregate Advances, in whole or in part, of the Bank to which such additional
amount is payable (subject to the provisions of Section 14.2).
(b) All taxes to be paid by the Borrower pursuant to Section 6.1(a)
shall be paid prior to the date on which penalties attach thereto or interest
accrues thereon. If the Bank pays any amount in respect of such taxes or
penalties or interest thereon (other than penalties or interest where the
failure by the Borrower to deduct or withhold was the result of an action or
inaction on the part of the Bank), the Borrower shall reimburse the Bank in
Dollars for such payment on demand. If the Borrower pays any such taxes,
penalties or interest, it shall deliver official tax receipts evidencing such
payment or certified copies thereof to the Bank on or before the thirtieth day
after payment.
(c) The Bank shall deliver to the Borrower an accurate and complete
original signed copy of an IRS Form 1001 or 4224 within 30 days of the signing
of this Agreement, and shall deliver such additional or supplemental forms
thereafter as may be required in order to maintain the effectiveness and
accuracy of such forms. In addition, the Bank shall deliver to the Borrower such
other forms or documentation as the Borrower may reasonably request in order to
comply with United States tax laws. For any period with respect to which the
Bank has failed to provide the Borrower with the appropriate form described
herein (unless such failure is due to a change in law occurring after the date
on which a form originally was required to be provided) the Bank shall not be
entitled to indemnification under subsection (a) with respect to United States
Taxes.
6.2. Stamp Taxes. The Borrower shall pay any registration or transfer
taxes, stamp duties or similar levies, and any penalties or interest that may be
due with respect thereto, that may be imposed by any jurisdiction in connection
with this Agreement or the Grid Note. If the Bank pays any amount in respect of
any such taxes, duties, levies, penalties or interest, the Borrower shall
reimburse the Bank for such payment on demand.
7. CONDITIONS PRECEDENT
7.1. Conditions to be Satisfied on or Before the Initial Disbursement
Date. The obligation of the Bank to make the initial Advance hereunder is
subject to the condition that the Bank receive, on or before the initial
Disbursement Date, one executed copy of each of the documents listed below, each
dated the date of its delivery, in form and substance satisfactory to the Bank:
(a) The Grid Note duly executed and delivered.
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<PAGE> 14
(b) Opinions of Debevoise & Plimpton and of the General Counsel of the
Borrower, in the form of Exhibits B-1 and B-2, respectively.
(c) Copies of all corporate action taken by the Borrower to authorize
this Agreement, the borrowings hereunder and the Grid Note, certified as of the
initial Disbursement Date.
(d) Such other documents as the Bank may reasonably require.
7.2. Further Conditions to be Satisfied at or Before Each Disbursement
Date. The obligation of the Bank to make each Advance hereunder (including its
initial Advance) is subject to the further conditions that (a) the Borrower
shall have complied and shall then be in compliance with all the terms,
covenants and conditions of this Agreement which are binding upon it, (b) there
shall have occurred no Default or Event of Default, (c) the representations and
warranties contained in Section 8.1 shall be true with the same effect as though
such representations and warranties had been made at the initial Disbursement
Date and (d) there shall have been no material adverse change in the business,
properties, condition (financial or otherwise) or operations, present or
prospective, of the Borrower since the date of the financial statements
furnished to the Bank as of the date hereof. The Borrower's notice of borrowing
pursuant to Section 2.2 hereof shall be deemed to constitute a certification to
the foregoing effect.
8. REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties. The Borrower represents and
warrants to the Bank as follows:
(a) The Borrower is a corporation duly organized and validly existing
under the law of New Jersey and has the power and authority to own its property,
to conduct its business as currently conducted and to consummate the
transactions contemplated in this Agreement.
(b) Each Principal Subsidiary is an entity duly organized and validly
existing under the law of its jurisdiction of incorporation or organization and
has the power and authority to own its property and to conduct its business as
currently conducted.
(c) The Borrower has taken all necessary corporate action to authorize
the execution and delivery of this Agreement and all other documents to be
executed and delivered by it in connection with this Agreement, the performance
of its obligations under the Agreement and the Grid Note and the consummation of
the transactions contemplated in this Agreement.
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(d) This Agreement has been duly executed and delivered by the Borrower
and constitutes, and the Grid Note, when duly executed and delivered by the
Borrower, will constitute, a legal, valid and binding obligation of the
Borrower, enforceable against the Borrower in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium and similar laws affecting
creditors' rights generally, and subject, as to enforceability, to general
principles of equity (regardless of whether enforcement is sought in a
proceeding in equity or at law).
(e) All governmental authorizations and actions of any kind necessary
to authorize the Advances or required for the validity or enforceability against
the Borrower of this Agreement or the Grid Note have been obtained or performed
and are valid and subsisting in full force and effect.
(f) No Default or Event of Default has occurred and is continuing or
will occur by reason of the consummation of the transactions contemplated in
this Agreement.
(g) No consent or approval of, or notice to, any creditor of the
Borrower is required by the terms of any agreement or instrument evidencing any
Indebtedness of the Borrower for the execution or delivery of, or the
performance of the obligations of the Borrower under, this Agreement or the Grid
Note or the consummation of the transactions contemplated in this Agreement, and
such execution, delivery, performance and consummation will not result in any
breach or violation of, or constitute a default under, the charter or by-laws of
the Borrower or any Principal Subsidiary or any material agreement, instrument,
judgment, order, law, rule or regulation applicable to the Borrower or any
Principal Subsidiary or to any property of the Borrower or any Principal
Subsidiary.
(h) There are no actions, proceedings or claims pending, or, to the
knowledge of the Borrower, threatened, which would reasonably be expected to
have a materially adverse effect on the business, operations, property or
consolidated financial condition of the Borrower and its Subsidiaries, taken as
a whole, or impair the ability of the Borrower to perform its obligations under,
or affect the validity or enforceability of, this Agreement or the Grid Note.
(i) The Borrower's financial statements for the most recent fiscal year
fairly present the financial condition of the Borrower as of the close of such
fiscal year, have been prepared in accordance with generally accepted accounting
principles, consistently applied, and have been certified by Deloitte & Touche,
or other independent public accountants of recognized national standing, as
fairly presenting the financial condition of the Borrower as at the close of
such fiscal year and the results of its operations for such year.
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<PAGE> 16
(j) There has been no material adverse change since March 31, 1996 in
the business, operations, property or consolidated financial condition of the
Borrower or in the Borrower's ability to perform its obligations under this
Agreement or the Grid Note.
(k) The execution and delivery by the Borrower of this Agreement and
the Grid Note are not subject to any tax, duty, fee or other charge, including,
without limitation, any registration or transfer tax, stamp duty or similar
levy, imposed by or within the United States or any political subdivision or
taxing authority thereof or therein that has not been paid by the Borrower.
(1) The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
(m) The Borrower and its Subsidiaries are exempted from regulation by
the Securities and Exchange Commission (the "Commission") under the Public
Utility Holding Company Act of 1935, as amended (the "Holding Company Act"),
except under Section (a)(2) thereof, pursuant to a filing made with the
Commission under Section 3 of the Holding Company Act. Such filing is in full
force and effect, and no proceedings are pending or, to the knowledge of the
Borrower, threatened for the revocation or denial of such exemption.
(n) The Borrower and its Subsidiaries have filed all material tax
returns and reports required to be filed by them in any jurisdiction, and all
taxes, assessments, fees and other governmental charges or levies imposed upon
the Borrower and each Subsidiary or upon any of their respective properties,
assets, income, profits or franchises, that are due and payable, have been paid
where the failure to so file, or the failure to so pay, would materially affect
the Borrower's ability to perform its obligations hereunder, except for any
taxes, assessments, fees, charges or levies which are being contested in good
faith and for which reserves which are adequate under generally accepted
accounting principles have been established.
(o) No Plan has incurred a material "accumulated funding deficiency"
within the meaning of Section 302 of ERISA or Section 412 of the Code whether or
not such accumulated funding deficiency has been waived. No Plan has engaged in
any "prohibited transaction", as such term is defined in Section 4975 of the
Code, as amended, that might result in a material liability of the Borrower or
any ERISA Affiliate to any person. No Plan Event has occurred that might result
in a material liability of the Borrower or any ERISA Affiliate to the PBGC or to
any Plan.
(p) None of the transactions contemplated in this Agreement (including,
without limitation, the Advances and the use of the proceeds thereof) will
violate or result in a violation of Section 7 of the Securities Exchange Act of
1934, as amended (or any regulations issued pursuant thereto, including, without
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<PAGE> 17
limitation, Regulations G, T, U and X of the Board of Governors of the Federal
Reserve System).
(q) No contractual obligation of the Borrower or any Subsidiary and no
requirement of law materially adversely affects, or insofar as the Borrower may
reasonably foresee may so affect, the business, operations, property or
consolidated financial condition of the Borrower.
(r) All factual information heretofore or contemporaneously furnished
in writing by or on behalf of the Borrower to the Bank for purposes of or in
connection with this Agreement, the Grid Note or any transaction contemplated
hereby is, and all other such factual information hereafter furnished in writing
by or on behalf of the Borrower to the Bank will be, true and accurate in every
material respect on the date as of which such information is dated or certified
and as of the date of execution and delivery of this Agreement and the Grid
Note, are not incomplete by omitting to state any material fact necessary to
make such information not misleading in view of the circumstances under which
such information is given.
(s) Exhibit C contains an accurate list as of the date hereof of all
the presently existing Subsidiaries of the Borrower and accurately sets forth
with respect to each Subsidiary the laws under which it is incorporated or
organized and the percentage of its voting stock owned by the Borrower or any
other Subsidiary (other than directors' qualifying shares). All of the issued
and outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and nonassessable.
8.2. Repetition of Representations and Warranties. Each of the
representations and warranties set forth in Section 8.1 shall be deemed to be
repeated on each Disbursement Date as if made at and as of such time.
9. COVENANTS
9.1. Use of Proceeds. The Borrower shall use the proceeds of the
Advances for its general corporate purposes.
9.2. Governmental Authorizations. The Borrower shall obtain, make and
keep in full force and effect all authorizations from and registrations with
governmental authorities that may be required for the validity or enforceability
against the Borrower of this Agreement or the Grid Note.
9.3. Financial Statements and Other Information. The Borrower will
deliver to the Bank the following:
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(a) as soon as available but in no event more than 45 days after the
end of each of the Borrower's fiscal quarters, consolidated (and company only as
to the Borrower and each Principal Subsidiary) balance sheets of the Borrower
and its Subsidiaries as of the close of such period and consolidated (and
company only as to the Borrower and each Principal Subsidiary) statements of
income and retained earnings and statements of cash flow from the beginning of
the then current fiscal year and from the beginning of such fiscal quarter to
the close of such period, certified by the chief financial officer of the
Borrower and accompanied by a certificate of said officer stating whether any
Default or Event of Default has occurred and, if so, stating the facts with
respect thereto, and providing calculations which establish the Borrower's
compliance with the requirements or restrictions imposed by Sections 9.11, 9.12
and 9.13;
(b) as soon as available but in no event more than 90 days after the
close of each of the Borrower's fiscal years, a copy of the annual audit report
relating to the Borrower and its Subsidiaries on a consolidated basis and
relating to the Borrower and New Jersey Natural Gas Company separately in
reasonable detail satisfactory to the Bank and in each case prepared in
accordance with generally accepted accounting principles by Deloitte & Touche or
other independent public accountants of recognized national standing, together
with financial statements (audited, in the case of the Borrower and New Jersey
Natural Gas Company) consisting of consolidated (and company only as to the
Borrower and each Principal Subsidiary) balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and consolidated (and company
only as to the Borrower and each Principal Subsidiary) statements of income and
cash flow, retained earnings, paid-in capital and surplus of the Borrower and
its Subsidiaries for such fiscal year;
(c) as soon as available but in no event more than 90 days after the
close of each of the Borrower's fiscal years, a letter or opinion of the
accountants who prepared the annual audit report relating to the Borrower and
its Subsidiaries stating whether anything in such accountants' examination has
revealed the occurrence of any event which constitutes a Default or Event of
Default and, if so, stating the facts with respect thereto;
(d) promptly upon receipt thereof, copies of any reports and material
sections of management letters submitted to the Borrower by such accountants in
connection with any annual or interim audit of the books of the Borrower and its
Subsidiaries, together with the Borrower's responses, if any;
(e) as soon as available, copies of all financial statements, reports,
notices and proxy statements sent by the Borrower in a general mailing to all
its stockholders, of all reports on Forms 10-Q, 8-K and 10-K under the
Securities Exchange Act of 1934, of all final prospectuses filed pursuant to
Rule 424(b) under the Securities Act of 1933 and of all other material
information filed by the
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Borrower with any securities exchange or with the Commission or any governmental
authority succeeding to any or all of the functions of the Commission;
(f) copies of the indentures pursuant to which any outstanding debt of
the Borrower or any Subsidiary is issued (other than indentures previously
delivered to the Agent); and
(g) such additional information, reports or statements as the Agent
from time to time may reasonably request.
Any financial statement, report or other information obtained by the Bank
pursuant to this Section 9.3, or by delivery by or on behalf of the Borrower at
or prior to the date hereof, other than documents which are publicly available,
shall be used by the Bank solely for purposes relating to this Agreement,
provided that the Bank may disclose any such information to any governmental
authority, regulatory agency, legislature, court, or any officer, subdivision or
committee thereof, its independent accountants or its counsel, or, if the Bank
is directed to do so by order of any court or any other governmental body having
appropriate authority, to any other Person.
9.4. Notices of Default. The Borrower shall promptly give notice to the
Bank of each Default or Event of Default and each other event that has or would
reasonably expected to have a materially adverse effect on its ability to
perform its obligations under this Agreement or the Grid Note. The notice shall
specify the nature and period of existence of such event and what action the
Borrower has taken or is taking or proposes to take with respect thereto.
9.5. Negative Pledge. (a) The Borrower will not, and will not permit
any Principal Subsidiary other than New Jersey Natural Gas Company to, create or
permit to exist any mortgage, lien or encumbrance, pledge of, or other security
interest in, or file or permit the filing of any financing statement under the
Uniform Commercial Code or similar notice under any other statute with respect
to, any asset of the Borrower or any Principal Subsidiary, except (i), as set
forth in Exhibit D hereto and (ii) security for indebtedness referred to in
Section 9.14 (iii) hereof.
(b) In case any mortgage, lien, encumbrance, pledge or security
interest arises in violation of Section 9.5(a), the Borrower shall make or cause
to be made provision whereby the Grid Note and all other amounts due from the
Borrower hereunder will be secured equally and ratably with all other
obligations secured thereby, and in any case, the Bank shall have the benefit,
to the full extent that it may be entitled thereto under Applicable Law, of any
equitable mortgage, encumbrance, pledge or security interest so equally and
ratably securing the Grid Note and such other amounts. Any violation of Section
9.5(a) shall nevertheless constitute an Event of Default.
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9.6. Consolidation, Merger, Sale of Assets, etc. The Borrower will not
sell or otherwise dispose of any voting securities of any Principal Subsidiary,
and the Borrower will not, and will not permit any Principal Subsidiary to,
directly or indirectly, sell, lease or otherwise dispose of all or substantially
all of its properties and assets, or consolidate with or merge into any other
Person, or permit any other Person to consolidate with or merge into it, except
that:
(a) a Principal Subsidiary may sell or otherwise transfer all or
substantially all of its properties and assets to the Borrower or to another
Subsidiary (which, if not already such, shall thereupon become a Principal
Subsidiary);
(b) a Principal Subsidiary may be consolidated with or merged into any
other Subsidiary (in which case the surviving Subsidiary shall remain or become,
as the case may be, a Principal Subsidiary);
(c) the Borrower may be consolidated with any other Person, or any
other Person may be merged into the Borrower, if
(i) the Borrower is the survivor of such merger or consolidation; and
(ii) upon the consummation of such merger or consolidation and
immediately after giving effect thereto (and deeming the Borrower to have
incurred at the time of such consummation all indebtedness of such other Person
that then remains outstanding), no Default or Event of Default would exist; and
(d) the Borrower may sell or otherwise transfer all or substantially
all of its properties and assets to another corporation, and shall thereupon be
released from all of its obligations under this Agreement and. the Grid Note, if
(i) the acquiring corporation (A) shall be organized and existing under
the laws of the United States of America or any state thereof or the District of
Columbia, and (B) shall expressly assume the obligations of the Borrower under
this Agreement and the Grid Note under documentation satisfactory in form and
substance to the Bank; and
(ii) immediately after giving effect to such transaction and such
assumption (and deeming all Indebtedness of such acquiring corporation
outstanding prior to such transaction and remaining outstanding immediately
after such transaction to have been incurred by such corporation as part of such
transaction and such assumption), no Default or Event of Default would exist.
9.7. Preservation of Existence, Rights and Franchises; Conduct of
Business. The Borrower shall at all times preserve and keep in full force and
effect its corporate existence and that of each of its Principal Subsidiaries,
except as
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<PAGE> 21
permitted by Section 9.6. The Borrower shall at all times preserve and keep in
full force and effect its rights and franchises material to its business and
those of each of its Principal Subsidiaries, and the Borrower shall, and shall
cause each of its Principal Subsidiaries to, take all action necessary to comply
with the rules and regulations, as in effect from time to time, of any
governmental authority to which it is subject, the noncompliance with which
would reasonably be expected to have a material adverse effect on its ability to
perform its obligations under this Agreement or the Grid Note; provided,
however, that nothing in this Section 9.7 shall prevent a consolidation, merger
or transfer of assets that is permitted by Section 9.6, if immediately after,
and giving effect to, such transaction, the Borrower and its Principal
Subsidiaries would be in compliance with this Section 9.7.
9.8. Insurance. The Borrower and each Principal Subsidiary shall
maintain insurance on their property with financially sound and reputable
insurers to the extent and against the risks customary for companies in similar
businesses.
9.9. ERISA Compliance. The Borrower shall not take any action or omit
to take any action, and shall not permit any ERISA Affiliate within its control
to take any action or omit to take any action, with respect to any Plan, that
under ERISA might result in a lien or charge upon the property of the Borrower
or might otherwise materially adversely affect the business, profits, properties
or condition (financial or otherwise) of the Borrower. Without limiting the
generality of the foregoing, the Borrower shall not permit, and shall not permit
any ERISA Affiliate within its control to permit, any Plan to (a) engage in any
"prohibited transaction" as such term is defined in Section 4975 of the Code
without securing an exemption therefor or (b) incur any material "accumulated
funding deficiency", as such term is defined in Section 302 of ERISA, whether or
not waived.
9.10. Payment of Taxes, etc. The Borrower and each Principal Subsidiary
shall pay and discharge, or cause to be paid or discharged, as the same may
become due and payable, all taxes, assessments and other governmental charges,
levies or claims of any kind against it or on or with respect to any of its
property, as well as claims of any kind which, if unpaid, might become a lien
(except as permitted by Section 9.5) upon any of its properties; provided,
however that the foregoing shall not require the Borrower or any Principal
Subsidiary to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge, levy, claim or lien so long as it shall contest the validity
thereof in good faith by appropriate proceedings and shall have set aside on its
books reserves with respect thereto which are adequate under generally accepted
accounting principles.
9.11. Borrower Debt. The Borrower will not incur or permit to exist
Indebtedness of the Borrower to exceed 45%, of the sum of the Borrower's
tangible net worth and its Long Term Debt. As used herein, "tangible net worth"
means the excess of total assets over total liabilities, total assets and total
liabilities each to be
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<PAGE> 22
determined as to both classification of items and amounts in accordance with
generally accepted accounting principles consistently maintained by the Borrower
in the preparation of the financial statements referred to in Section 9.3(b);
provided, that there shall be excluded from total assets (i) all assets which
would be classified as intangible assets under generally accepted accounting
principles, including but not limited to goodwill and deferred charges, (ii)
cash set apart and held in a sinking or other analogous fund established for the
purpose of redemption or other retirement of capital stock, (iii) leasehold
improvements, (iv) applicable reserves, allowances and other similar properly
deductible items and (v) any revaluation or other write-up in book value of
assets subsequent to March 31, 1996.
9.12. Interest Coverage. The Borrower will have in each of its fiscal
years net earnings before income taxes and interest expense in an amount at
least 2 times interest charges during such fiscal year with respect to all
Indebtedness of the Borrower. The Borrower will ensure that New Jersey Natural
Gas Company will comply with item (15) of Section 4.01 B of the Indenture in
connection with the issuance of any additional series of bonds.
9.13. Debt Ratio. The Borrower will cause New Jersey Natural Gas
Company at all times to comply with Section 9.18 of the Indenture whether or not
any Series G Bonds (as defined in the Indenture) are outstanding. The Borrower
will not permit all Indebtedness of the Borrower and its Subsidiaries on a
consolidated basis to exceed 65% of the sum of (x) Indebtedness of the Borrower
and its Subsidiaries on a consolidated basis and (y) consolidated tangible net
worth. As used herein, "consolidated tangible net worth" means the excess of
total consolidated assets over total consolidated liabilities, total
consolidated assets and total consolidated liabilities each to be determined as
to both classification of items and amounts in accordance with generally
accepted accounting principles consistently maintained by the Borrower in the
preparation of the financial statements referred to in Section 9.3(b); provided,
that there shall be excluded from total consolidated assets (i) all assets which
would be classified as intangible assets under generally accepted accounting
principles, including but not limited to goodwill and deferred charges, (ii)
cash set apart and held in a sinking or other analogous fund established for the
purpose of redemption or other retirement of capital stock, (iii) leasehold
improvements, (iv) applicable reserves, allowances and other similar properly
deductible items and (v) any revaluation or other write-up in book value of
assets subsequent to March 31, 1996; and provided, further, that there shall be
excluded from total consolidated liabilities deferred income taxes.
9.14. Subsidiary Borrowing. The Borrower will not permit NJR Energy
Corporation and its Subsidiaries, New Jersey Natural Resources Company and NJNR
Pipeline Company, or Commercial Realty & Resources Corp. to incur or suffer to
exist Indebtedness, except (i) indebtedness to the Borrower or another
Subsidiary, (ii) indebtedness not exceeding $250,000 in the aggregate for each
such Subsidiary and (iii) indebtedness described in Exhibit E and (iv)
indebtedness
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<PAGE> 23
incurred and maintained by Commercial Realty & Resources Corp. with respect to
the purchase of real property.
9.15. Holding Company Act Compliance. The Borrower will maintain in
effect the exemption described in Section 8.l(n) hereof and will comply (and
will cause each Subsidiary to comply) in all material respects with the
provisions of the Holding Company Act to which it is subject.
10. EVENTS OF DEFAULT
10.1. Events of Default. If one or more of the following events of
default (each an "Event of Default") shall occur and be continuing, the Bank
shall be entitled to the remedies set forth in Section 10.2.
(a) the Borrower fails to pay the principal amount of any Advance when
due or interest on any Advance or any other amount payable hereunder within 5
days after such interest or other amount becomes due and payable;
(b) the Borrower defaults in the performance of or compliance with any
covenant, obligation or term contained herein or in the Grid Note and, if such
default is capable of remedy, such default has not been remedied within 30 days
after the Bank shall have given the Borrower written notice of such default;
(c) any representation or warranty made in writing by or on behalf of
the Borrower herein or delivered in connection herewith at any time proves to
have been incorrect in any material respect as of the date made or deemed to
have been repeated;
(d) any Indebtedness (other than the Advances) of the Borrower or any
of its Subsidiaries in excess of $5,000,000 is not paid when due or becomes or
is declared to be due and payable prior to the expressed maturity thereof, or
there shall have occurred an event which would cause any such Indebtedness to
become, or allow any such Indebtedness to be declared to be, due and payable;
(e) the Borrower or any Principal Subsidiary makes an assignment for
the benefit of creditors, or admits in writing its inability to pay its debts as
they become due, or commences a voluntary case under any applicable bankruptcy,
insolvency or other similar law, or files any petition or answer seeking for
itself any reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or
regulation relating to creditors' rights, or a decree or order for relief is
entered in respect of the Borrower or any Principal Subsidiary in an involuntary
case under any applicable bankruptcy, insolvency or other similar law, or the
Borrower or any Principal Subsidiary files any answer admitting or not
contesting the material allegations of a petition filed against the Borrower or
any Principal Subsidiary in any such
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<PAGE> 24
proceeding, or seeks or consents to or acquiesces in the entry of an order for
relief or the appointment of, or taking possession by, any trustee, receiver,
assignee, custodian, sequestrator or liquidator of the Borrower or such
Principal Subsidiary or of all or a substantial part of the properties of the
Borrower or such Subsidiary;
(f) within 60 days after the commencement of an action against the
Borrower or any Principal Subsidiary seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, such action is not dismissed and
all orders or proceedings thereunder affecting the operations or the business of
the Borrower or such Principal Subsidiary are not stayed, or if the stay of any
such order or proceeding is thereafter set aside, or if, within 60 days after
the appointment without the consent or acquiescence of the Borrower or any
Principal Subsidiary of any trustee, receiver, assignee, custodian, sequestrator
or liquidator of the Borrower or such Principal Subsidiary or all or any
substantial part of the properties of the Borrower or such Principal Subsidiary,
such appointment is not vacated;
(g) any governmental authority or court takes any action that, in the
reasonable opinion of the Bank, materially adversely affects the business,
operations, property or financial condition of the Borrower or any Principal
Subsidiary or the ability of the Borrower to perform its obligations under this
Agreement or the Grid Note;
(h) final judgments in an aggregate amount of $500,000 or more are
entered against the Borrower or any Principal Subsidiary and such judgments
remain undischarged, and the execution thereof unstayed for a period of more
than 60 days; or
(i) any Plan or Plans are involuntarily terminated, or a trustee is
appointed to administer any such Plan or Plans under Section 4042 of ERISA or
the PBGC shall institute proceedings to terminate, or to have a trustee
appointed to administer, any such Plan or Plans, and such proceeding shall not
be dismissed within 30 days, or the Borrower or any Subsidiary incurs a
withdrawal liability with respect to any such Plan or Plans under Section 4201
of ERISA, but only if such termination, appointment, institution of proceedings,
or withdrawal liability would result in a liability of the Borrower or any
Subsidiary that would be material to the consolidated financial condition of the
Borrower.
10.2. Default Remedies. If any Event of Default (other than an Event of
Default specified in Section 10.1(e) or 10.1(f)) shall occur and be continuing,
the Bank may, (a) declare the obligations of the Bank hereunder to be
terminated, whereupon such obligations shall forthwith terminate, and (b)
declare all amounts payable hereunder or under the Grid Note by the Borrower
that would otherwise be due after the date of such termination to be immediately
due and payable,
20
<PAGE> 25
whereupon all such amounts shall become immediately due and payable, all without
diligence, presentment, demand of payment, protest or notice of any kind, which
are expressly waived by the Borrower, If an Event of Default specified in
Section 10.1(e) or 10.1(f) occurs, the obligations of the Bank hereunder shall
be immediately terminated and all amounts payable hereunder or under the Grid
Note by the Borrower that would otherwise be due after the date of such Event of
Default shall become immediately due and payable without any declaration or
other act on the part of the Bank.
10.3. Right of Setoff. If any amount payable hereunder is not paid as
and when due, the Borrower authorizes the Bank to proceed at any time and from
time to time, to the fullest extent permitted by law, without prior notice or
demand by right of setoff, banker's lien, counterclaim or otherwise, against any
assets of the Borrower which may at any time be in the possession of the Bank or
any of its affiliates, at any branch or office, and/or against any other
indebtedness at any time owing by the Bank to or for the credit or the account
of the Borrower to the full extent of all amounts payable to the Bank hereunder,
whether or not such amounts shall be due and payable.
10.4. Rights Not Exclusive. The rights provided for herein are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law.
11. PAYMENTS COMPUTATIONS
11.1. Making of Payments. Each payment by the Borrower under this
Agreement or the Grid Note shall be made in Dollars, in same-day funds or such
other funds as the Bank may at the time determine to be customary for the
settlement in New York City of international banking transactions denominated in
Dollars, by 11:00 am New York City time on the date such payment is due, to the
Bank by deposit to such account as the Bank may have last designated by notice
to the Borrower.
11.2. Computations. Interest and the commitment fees payable hereunder
shall be computed on the basis of a 360-day year and actual days elapsed.
12. INTENTIONALLY OMITTED
13. INTENTIONALLY OMITTED
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14. INDEMNIFICATION
14.1. Expenses. The Borrower shall reimburse the Bank on demand for all
reasonable expenses (including the reasonable fees and expenses of the Bank's
counsel) incurred as a consequence of, or in connection with the negotiation,
preparation or execution of this Agreement or any amendment to this Agreement
and the preservation or enforcement of any right of the Bank under this
Agreement or the Grid Note.
14.2. Other Costs. If the Borrower (a) fails, after giving the notice
referred to in Section 2.2, to fulfill the conditions set forth in Section 7 at
or before the respective times specified for their fulfillment or otherwise
defaults in its irrevocable commitment pursuant to Section 2.2, (b) fails to pay
any amount payable hereunder as and when due or (c) makes, for any reason
whatsoever, any prepayment of principal of any Advance on any day other than the
last day of an Interest Period, the Borrower shall reimburse the Bank on demand
for all losses, additional costs or expenses, that it may reasonably incur as a
consequence thereof including, without limitation, any loss incurred by the Bank
in connection with its reemployment of the amount so prepaid or of those funds
acquired by the Bank to fund an Advance, as the case may be, but excluding any
loss of anticipated profits.
15. CHANGES IN APPLICABLE LAW; INCREASED COSTS
15.l. Changes in Applicable Law. The Bank shall forthwith advise the
Borrower if it determines that:
(a) after the date hereof, the adoption of or any change in any
Applicable Law or in the interpretation thereof by any governmental or other
regulatory authority administering such Applicable Law or by any court of
competent jurisdiction, and/or
(b) compliance by the Bank with any requirement or directive arising
after the date hereof from any central bank or other regulatory authority
administering Applicable Law (whether or not such requirement or directive has
the force of law),
makes it (or makes it apparent that it will become) unlawful to comply with, or
otherwise prevents the Bank from complying with, some or all of the obligations
contemplated by this Agreement. Such notice shall specify the obligations whose
performance is thereby prevented. Such notice may, at the option of the Bank,
demand prepayment by the Borrower of any outstanding Advance made by such Bank
if in accordance with this Section 15.1 it is unlawful for the Bank to continue
to fund or maintain such Advance or any portion thereof
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The obligations so specified in such notice shall forthwith be canceled
or suspended to the extent specified in such notice, effective whenever such
performance is so prevented and, if so demanded in such notice, the Borrower
shall, on or prior to the later or (i) two Business' Days after receipt of such
notice or (ii) the date as of which such performance is prevented, prepay the
outstanding amount specified therein in full, or any lesser portion thereof
necessary to eliminate such situation, with accrued interest thereon. Each
prepayment made by the Borrower pursuant to this Section 15.1 shall be
distributed to the Bank.
15.2. Increased Costs. If as a result of:
(a) after the date hereof, the adoption of or any change in any
Applicable Law or in the interpretation thereof by any governmental or other
regulatory authority administering such Applicable Law or by any court of
competent jurisdiction, and/or
(b) compliance by the Bank with any requirement or directive arising
after the date hereof from any central bank or other fiscal, monetary or any
other regulatory authority administering Applicable Law (whether or not such
requirement or directive has the force of law),
(x) the capital required to be maintained by the Bank as a result of its
Commitment or its Advances shall be increased such that the rate of return on
the Bank's capital with respect to its Commitment and Advances is reduced below
that which the Bank could have achieved but for such adoption, change or
compliance (taking into account the Bank's policies regarding capital adequacy),
or (y) there shall be any increase in the cost to the Bank of making,
maintaining or giving effect to its obligations under this Agreement (including,
without limitation, any increased costs resulting from any reserve requirements)
or making or maintaining any Advance or any reduction in any amounts receivable
by the Bank under this Agreement (other than such an increase in costs or
reduction in amounts receivable attributable to (i) a tax on or measured by the
net income of the Bank imposed by the jurisdiction in which it is constituted or
doing business; or (ii) without prejudice to the Bank's rights under Section
6.1, United States Tax or any tax described in clause (i) imposed by withholding
with respect to a payment hereunder); then the Borrower shall from time to time,
forthwith on receipt of a certificate from the Bank, pay to the Bank such
amounts as are certified therein to be sufficient to indemnify the Bank against
such increased cost, reduction in any amount so receivable and/or reduction in
rate of return on capital. The certificate provided by the Bank shall be prima
facie evidence of the amounts claimed (provided that such certificate is
accompanied by a statement of the details on which the calculation of such
amounts was based).
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15.3. Alternative Arrangements. If a determination or certification in
accordance with Section 15.1 or 15.2 above is made by, or any of the
circumstances specified in Section 6.1, 15.1 or 15.2 above shall arise in
relation to the Bank, the Bank shall, in consultation with the Borrower, during
a period ending not later than 30 days after the giving of such notice under
Section 15.1 or such certificate under Section 15.2 or after the date on which
any tax under Section 6.1 becomes payable, as the case may be, use its
reasonable endeavors to make alternative arrangements that remove or minimize
the application of Section 6.1 or this Section 15, as the case may be, and that
are not in the sole judgment of such Bank otherwise disadvantageous to it.
16. GENERAL
16.l. Choice of Law. This Agreement shall be governed by and construed
in accordance with the law of the State of New York.
16.2. Jurisdiction (a) Any action or proceeding relating in any way to
this Agreement or the Grid Note may be brought and enforced in the courts of the
State of New York or of the United States of America for the Southern District
of New York, and the Borrower irrevocably submits to the jurisdiction of each
such court. Any process or other legal summons for the purpose of any such
action or proceeding may be served by mailing a copy thereof by registered mail
addressed to the Borrower as provided for notices hereunder.
(b) The Borrower irrevocably waives, to the fullest extent permitted by
law, any objection that it may now or hereafter have to the laying of venue of
any such action or proceeding relating in any way to this Agreement or the Grid
Note brought in the Supreme Court of the State of New York, County of New York,
or the United States District Court for the Southern District of New York and
any claim that any such action or proceeding brought in any such court has been
brought in an inconvenient forum.
(c) The Borrower further irrevocably waives, to the fullest extent
permitted by Applicable Law, any claim that any action or proceeding commenced
by the Bank relating in any way to this Agreement or the Grid Note should be
dismissed or stayed by reason, or pending the resolution, of any action or
proceeding commenced by the Borrower relating in any way to this Agreement or
the Grid Note, whether or not commenced earlier. To the fullest extent permitted
by Applicable Law, the Borrower shall take all measures necessary for any such
action or proceeding commenced by the Bank to proceed to judgment prior to the
entry of judgment in any such action or proceeding commenced by the Borrower.
16.3. Loan Currency. Each reference in this Agreement to Dollars is of
the essence. The obligation of the Borrower in respect of any amount due under
this Agreement or the Grid Note shall, notwithstanding any payment in any other
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<PAGE> 29
currency (whether pursuant to a judgment or otherwise), be discharged only to
the extent of the amount in Dollars that the person entitled to receive such
payment may, in accordance with normal banking procedures, purchase with the sum
paid in such other currency (after premium and costs of exchange) on the
Business Day immediately following the date on which such person received such
payment. If the amount in Dollars that may be so purchased for any reason falls
short of the amount originally due, the Borrower shall pay such additional
amounts, in Dollars, as may be necessary to compensate for such shortfall. Any
obligation of the Borrower not discharged by such payment shall be due as a
separate and independent obligation and, until discharged as provided herein,
shall continue in full force and effect.
16.4. Notices. Except as otherwise expressly provided herein, all
notices pursuant to this Agreement shall be given by telecopier, telex, cable or
by notice in writing hand-delivered or by airmail, postage prepaid. All such
notices shall be sent to the telecopier, telex number or address (as the case
may be) in the case of the Borrower, to New Jersey Resources Corporation, 1350
Campus Parkway, P.O. Box 1468, Wall, New Jersey 07719, Attention: Senior Vice
President and Chief Financial Officer, or, in the case of the Bank, to Societe
Generale, New York Branch, 1221 Avenue of the Americas, New York, New York
10020, Attention: Gordon Eadon, or to such other number or address as such
recipient may have last specified by notice to the other parties. All such
notices shall be effective upon receipt.
16.5. Remedies and Waivers. No failure or delay on the part of the Bank
in exercising any right hereunder shall operate as a waiver of, or impair, any
such right. No single or partial exercise of any such right shall preclude any
other or further exercise thereof or the exercise of any other right. No waiver
of any such right shall be effective unless given in writing. No waiver of any
such right shall be deemed a waiver of any other right hereunder.
16.6. Amendment. This Agreement may be amended only by an instrument in
writing executed by the Borrower and the Bank.
16.7. Assignment, Participation's. (a) This Agreement shall be binding
upon and inure to the benefit of the Borrower and the Bank and their respective
successors and assigns; provided, however, that the Borrower may not assign any
of its rights or obligations under this Agreement without the prior written
consent of the Bank.
(b) With the consent of the Borrower (which consent shall not be
unreasonably withheld), the Bank may at any time assign or otherwise transfer
its Grid Note or any of its rights or obligations hereunder in whole or in part
provided, however, that no such assignment or transfer shall result in any
additional liability of the Borrower on account of United States Taxes or for
increased costs under
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<PAGE> 30
Section 6.1 or 15.2 or violate any applicable provision of the securities law of
the United States or any state thereof. The Borrower shall, from time to time at
the request of the Bank, execute and deliver such documents as may be necessary
to give full force and effect to such assignment or transfer, including, without
limitation, a new Grid Note in exchange for any Grid Note held by the Bank. if
the Bank assigns or otherwise transfers any of its rights or obligations
hereunder, each reference in this Agreement to the Bank shall be deemed to be a
reference to the Bank and the person or persons to whom such rights or
obligations were assigned or transferred to the extent of their respective
interests.
(c) The Bank may at any time grant to one or more banks or other
institutions (each a "Participant") participating interests in its Commitment or
any or all of its Advances provided that the Bank shall not grant a
participation in its Commitment unless (A) such participation involves an amount
equal to $1,000,000 or any greater multiple of $500,000 and (B) after giving
effect thereto the Bank has either no remaining unparticipated Commitment or an
unparticipated Commitment of at least $1,000,000. In the event of any such grant
by the Bank of a participating interest to a Participant, the Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrower
shall continue to deal solely and directly with the Bank in connection with the
Bank's rights and obligations under this Agreement. Any agreement pursuant to
which the Bank may grant such a participating interest shall provide that the
Bank shall retain the sole right and responsibility to enforce the obligations
of the Borrower hereunder including, without limitation, the right to approve
any amendment, modification or waiver of any provision of this Agreement. Each
Participant shall be entitled to the benefits of Sections 6, 14 and 15 hereof to
the extent that the Bank would be entitled to such benefits if the participation
had not been granted.
16.8. Determinations by the Bank. Except as otherwise provided herein,
each determination by the Bank hereunder shall, in the absence of manifest
error, be conclusive and binding on the parties.
16.9. Survival. The obligations of the Borrower under Section 6.1,
Section 6.2, Section 14 and Section 15 shall survive the repayment of the
Advances and the cancellation of the Grid Note and the termination of the other
obligations of the Borrower hereunder.
16.10. Severability of Provisions. Any provision of this Agreement that
is prohibited or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
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<PAGE> 31
16.11. Counterparts. This Agreement may be executed in any number of
counterparts, and all such counterparts taken together shall be deemed to
constitute one and the same agreement.
16.12. Integration of Terms. This Agreement contains the entire
agreement of the parties relating to the subject matter hereof and supersedes
all oral statements and prior writings with respect thereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed and delivered in New York City as of the date and year first written
above.
NEW JERSEY RESOURCES
CORPORATION
By: /s/ Glenn Lockwood
-------------------------
Name: Glenn Lockwood
Title: SR. VP & CFO
SOCIETE GENERALE,
NEW YORK BRANCH
By: /s/ Gordon Eadon
-------------------------
Name: Gordon Eadon
Title: Vice President
27
<PAGE> 32
EXHIBIT A
PROMISSORY NOTE
New York, New York
$10,000,000 August 25, 1996
FOR VALUE RECEIVED, the undersigned, NEW JERSEY RESOURCES CORPORATION
(the "Borrower"), unconditionally promises to pay to the order of SOCIETE
GENERALE, NEW YORK BRANCH (the "Bank") at the Bank's office located at 1221
Avenue of the Americas, New York, New York 10020, in immediately available
funds, on the dates and in the manner set forth in the Agreement (as defined
below), the principal sum of Ten Million Dollars (US $10,000,000) or the unpaid
principal amount of all Advances made by the Bank to the Borrower made pursuant
to this promissory note and the Agreement, whichever is less.
The Borrower further promises to pay interest (computed for the actual
number of days elapsed on the basis of a year of 360 days) in like money and
funds on the daily outstanding balance of each Advance for the period commencing
on the date of such Advance until the Advance is repaid in full, at such rate
and in the manner set forth in the Agreement.
All payments of principal of an interest on this promissory note shall
be made by the Borrower not later than 12:00 noon (New York time) on the date
when due to the Bank at its office located on the date hereof at 1221 Avenue of
the Americas, New York New York 10020 in lawful money of the United States of
America, in immediately available funds without setoff, deduction or
counterclaim and free and clear of any present of future taxes, levies, imposts,
duties, fees, assessments or other charges. If any day on which a payment is due
hereunder is not a business day, which for purposes of this promissory note
shall mean a day other than Saturday or Sunday or other than a day on which
commercial banks in New York City are authorized or required to close, then such
payment shall be due on the following business day and such additional time
shall be included in the calculation of interest.
The Borrower agrees to pay costs of collection (including reasonable
legal fees and disbursements of counsel) if default is made in the payment of
the principal of or interest on this promissory note.
This promissory note is the grid note referred to in the Credit
Agreement dated as of August 25, 1996 (the "Agreement") between the Borrower and
the Bank, which provides for the prepayment of this note on certain events, the
acceleration of
28
<PAGE> 33
its maturity and other terms and conditions relating to this note, all of which
are herein incorporated by reference.
The Borrower hereby irrevocably submits to the non-exclusive
jurisdiction of any United States Federal or New York State court sitting in New
York City in any action or proceeding arising out of or relating to this
promissory note, and hereby consents that personal jurisdiction over the
Borrower may be obtained by mailing a summons to the Borrower by registered mail
or certified mail, return receipt requested, within or without such court's
jurisdiction,, or by personal service, provided a reasonable time for appearance
is allowed. The Borrower hereby waives all objections as to venue, inconvenient
forum and the like. The Borrower hereby waives trial by jury in any legal
proceeding arising out of or relating to this promissory note.
Presentment, demand, protest and notices of any kind with respect to
this promissory note are hereby expressly waived by the Borrower.
The promissory note shall be governed by and construed in accordance
with the laws of the State of New York.
NEW JERSEY RESOURCES CORPORATION
By: SPECIMEN ONLY - DO NOT SIGN
-------------------------------
Name:
Title:
29
<PAGE> 34
EXHIBIT B-1
OPINION OF DEBEVOISE & PLIMPTON
[Letterhead of Debevoise & Plimpton]
August 25, 1996
Societe Generale
New York Branch
1221 Avenue of the Americas
New York, New York 10020
Ladies and Gentlemen:
We have acted as special counsel to New Jersey Resources Corporation, a
New Jersey corporation (the "Borrower"), in connection with the Revolving
Credit Agreement, dated as of August 25, 1996 (the "Credit Agreement"), between
the Borrower and Societe Generale, New York Branch (the "Bank"). This opinion is
being delivered to you pursuant to Section 7.l(b) of the Credit Agreement
capitalized terms not otherwise defined herein are used with the meanings given
to them in the Credit Agreement.
In so acting, we have reviewed the Credit Agreement and the promissory
note, dated August 25, 1996 (the "Grid Note") delivered by the Borrower to you
pursuant to the Credit Agreement (collectively, the "Loan Documents"). We have
also examined and relied upon the representations and warranties as to factual
matters contained in or made pursuant to the Loan Documents and certificates of
officers of the Borrower and examined and relied upon the originals, or copies
certified or otherwise identified to our satisfaction, of such records,
documents, certificates and other instruments, and have made such other
investigations, as in our judgment are necessary or appropriate to enable us to
render the opinion expressed below.
30
<PAGE> 35
We are of the opinion that:
1. Each Subsidiary listed on Schedule A hereto (the "Delaware and New
York Subsidiaries") is validly existing and in good standing under the law of
its jurisdiction of incorporation and has the power and authority to use its
property and to conduct its business as currently conducted and to enter into
and perform its obligations under the Loan Documents.
2. Each of the Loan Documents constitutes a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its respective terms, except as such enforceability may be limited by (a)
bankruptcy, insolvency, reorganization, moratorium or other similar laws of
general applicability relating to or affecting the enforcement of creditors'
rights and (b) the application of general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at law).
We express no opinion as to (i) whether a federal or state court outside of the
State of New York would give effect to the choice of New York law set forth in
Section 16.1 of the Credit Agreement, (ii) the provisions of the first sentence
of Section 16.2 (a) of the Credit Agreement relating to the subject matter
jurisdiction of a Federal Court sitting in the City of New York to adjudicate
any controversy relating to the Loan Documents and (iii) the provisions of
Section 16.3 relating to the creation of an independent right to enforce
obligations which have previously been reduced to judgment. For purposes of this
paragraph, we note that (x) provisions of the Loan Documents which permit the
Agent or any lender to take action or make determinations may be subject to a
requirement that such action be taken or such determinations be made on a
reasonable basis and in good faith and (y) a holder of a Grid Note may, under
certain circumstances, be called upon to prove the outstanding amount of the
Loans evidenced thereby.
3. The Borrower is not an "investment company" within the meaning of
the Investment Company Act of 1940, as amended.
4. None of the transactions contemplated in the Credit Agreement
(including, without limitation, the borrowings thereunder and the use of the
proceeds thereof) will violate or result in a violation of Section 7 of the
Securities Exchange Act of 1934, as amended (or any regulations issued pursuant
thereto, including without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System).
31
<PAGE> 36
In rendering the opinion in numbered paragraph 2 above, we have
assumed, with your permission, that the Borrower is duly incorporated and
validly existing under the laws of the State of New Jersey, has the requisite
corporate power and authority to executed, deliver and perform each of the Loan
Documents to which it is a party, has duly authorized each of the Loan Documents
to which it is a party and has duly executed and delivered each such Loan
Document.
This opinion is limited to laws of the State of New York, the federal
laws of the United States of America and the General Corporation Law of the
State of Delaware. This opinion is being delivered solely for your benefit in
connection with the transactions contemplated by the Loan Documents and may not
be relied on by you for any other purpose or by any other person.
Very truly yours,
32
<PAGE> 37
Schedule A
Delaware and New York Subsidiaries
Name Place of Incorporation
---- ----------------------
33
<PAGE> 38
EXHIBIT B-2
OPINION OF BORROWER'S GENERAL COUNSEL
[Letterhead of Oleta J. Harden, Esq.]
August 25, 1996
Societe Generale
New York Branch
121 Avenue of the Americas
New York, New York 10020
Ladies and Gentleman:
I am Senior Vice President, General Counsel and Secretary of New Jersey
Resources Corporation, a New Jersey corporation (the "Borrower"). This opinion
is delivered to you pursuant to Section 7.1 (b) of the Revolving Credit
Agreement dated as of August 25, 1996 (the "Credit Agreement"), between the
Borrower and Societe Generale, New York Branch (the "Bank"). Unless otherwise
defined herein, capitalized terms used herein shall have the meanings assigned
to them in the Credit Agreement.
I have reviewed the Credit Agreement and the promissory note, dated
August 25, 1996 (the "Grid Note") delivered by the Borrower to you pursuant to
the Credit Agreement (collectively, the "Loan Documents"). In delivering this
opinion, I have examined and relied upon the representations and warranties as
to factual matters contained in or made pursuant to the Loan Documents and
certificates of officers of the Borrower and examined and relied upon the
originals, or copies certified or otherwise identified to my satisfaction, of
such records, documents, certificates and other instruments, and have made such
other investigations, as in my judgment are necessary or appropriate to enable
me to render the opinion expressed below.
34
<PAGE> 39
Based upon the foregoing, I am of the opinion that:
1. The Borrower is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of New Jersey. The Borrower has
the necessary corporate power and authority to execute, deliver and perform its
obligations under the Loan Documents, to own its property and to carry on its
business as now conducted.
2. Each Subsidiary listed on Schedule A hereto (each, a 'New Jersey
Subsidiary') is an entity duly organized and validly existing under the laws of
the State of New Jersey and has the power and authority to own its property and
to carry on its business as now conducted.
3. The execution, delivery and performance by the Borrower of the Loan
Documents has been duly authorized by all necessary corporate action and the
Loan Documents have been duly executed and delivered by the Borrower and
constitute the legal, valid and binding obligation of the Borrower.
4. To the best of my knowledge, no authorization, consent or approval
of, and no filing or registration with, any governmental authority on behalf of
the Borrower, is required in connection with the execution, delivery or
performance by the Borrower of any of the Loan Documents or the consummation of
the transactions contemplated by the Loan Documents.
5. To the best of my knowledge, no consent or approval of, or notice
to, any creditor of the Borrower is required by the terms of any agreement or
instrument evidencing any indebtedness of the Borrower for the execution,
delivery, or performance of the obligations of the Borrower under the Loan
Documents or the consummation of the transactions contemplated by the Loan
Documents.
6. Execution, delivery, performance and consummation of the
transactions contemplated in the Credit Agreement will not result in any breach
or violation of, or constitute a default under, the charter or by-laws of the
Borrower or any Subsidiary, or, to my knowledge, any agreement, instrument,
judgment, order, law, rule or regulation applicable to the Borrower or any
Subsidiary.
7. There is no action, proceeding or claim pending or threatened
against the Borrower or any Subsidiary which could reasonably be expected to
have a materially adverse effect on the business, operations, property or
consolidated financial condition of the Borrower and its Subsidiaries or impair
the ability of the Borrower to perform its obligations under, or affect the
validity or enforceability of, the Loan Documents.
35
<PAGE> 40
8. The Borrower and its Subsidiaries are exempted from regulation by
the Commission under the Public Utility Holding Company Act of 1935, as amended,
except under Section 9 (a) (2) thereof, pursuant to a filing made with the
Commission under Section 3 of said Act. Such filing is in full force and effect,
and no proceedings are pending or, to my knowledge threatened for the revocation
or denial of such exemption.
9. All of the issued and outstanding shares of capital stock of the
Subsidiaries listed on Exhibit C to the Credit Agreement have been duly
authorized and issued and are fully paid and nonassessable.
I am a member of the bar of the State of New Jersey and, except for the
laws of the State of New Jersey and the federal laws of the United States of
America, this opinion shall not be construed as including an opinion concerning
the laws of any other jurisdiction. This opinion is being delivered solely for
your benefit in connection with the transactions contemplated by the Loan
Documents and may not be relied on by you for any other purpose or by any other
person.
Very truly yours,
Oleta J. Harden, Esq.
36
<PAGE> 41
Schedule A
New Jersey Subsidiaries
37
<PAGE> 42
EXHIBIT C
SUBSIDIARIES OF BORROWER
Delaware and New York Subsidiaries
Name Place of Incorporation
---- ----------------------
Lighthouse One, Inc. New York
Lighthouse II, Inc. Delaware
NJR Computer Technologies, Inc. Delaware
NJR Storage Corporation Delaware
New Jersey Subsidiaries
New Jersey Natural Gas Company
Coastal Energy Resources, Inc.
New Jersey Computer Resources, Inc.
Resources Energy Storage, Inc.
NJR Development Corporation (f/k/a Paradigm Resources Corporation)
Subsidiaries
Commercial Realty & Resources Corp.
Paradigm Power, Inc.
NJR Energy Services Corporation
Subsidiaries
New Jersey Natural Energy Company.
NJR Energy Corporation
38
<PAGE> 43
Subsidiaries
Natural Resources Compressor Company
New Jersey Natural Resources Company
NJNR Pipeline Company
39
<PAGE> 44
EXHIBIT D
PERMITTED ENCUMBRANCES
(i) Liens for taxes not delinquent or being contested in good faith and
by appropriate proceedings and for which reserves adequate under generally
accepted accounting principles are being maintained;
(ii) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance;
(iii) Deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business;
(iv) Mechanics', workmen's, materialmen's or other like liens arising
in the ordinary course of business with respect to obligations which are not due
or which are being contested in good faith;
(v) Minor imperfections of title on real estate, provided such
imperfections do not render title unmarketable;
(vi) Any mortgage, encumbrance or other lien upon, or security interest
in, any property hereafter acquired by the Borrower or any Subsidiary, created
contemporaneously with such acquisition to secure or provide for the payment or
financing of any part of the purchase price thereof, or the assumption of any
such mortgage, encumbrance or lien upon, or security interest in, property
hereafter acquired existing at the time if such acquisition, or the acquisition
of any such property subject to any such mortgage, encumbrance or other lien or
security interest without the assumption thereof, provided that each such
mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired; and
(vii) UCC Financing Statements executed from time to time in favor of
BLC Corporation, as Lessor and Secured Party, under a Master Leasing Agreement
dated as of September 1, 1985, between the Lessor and the Borrower herein,
evidencing the Lessor's interest in various vehicles, office furnishings and
business equipment leased by the Borrower.
40
<PAGE> 45
EXHIBIT E
PERMITTED INDEBTEDNESS
None
41
<PAGE> 1
Exhibit 4-8
U.S. $30,000,000
REVOLVING CREDIT AGREEMENT
DATED AS OF AUGUST 27, 1996
AMONG
NEW JERSEY RESOURCES CORPORATION
AS BORROWER,
UNION BANK OF SWITZERLAND
NEW YORK BRANCH
AS AGENT
AND
UNION BANK OF SWITZERLAND
THE BANK OF TOKYO MITSUBISHI, LTD. AS LENDERS
<PAGE> 2
NEW JERSEY RESOURCES CORPORATION
U.S. $30,000,000
DATED AS OF AUGUST 27, 1996
TABLE OF CONTENTS
Page Number
1. DEFINITIONS; INTERPRETATION
1.1. Definitions 1
1.2. Interpretation 4
2. COMMITMENTS; DISBURSEMENT
2.1. Commitment to Lend 4
2.2. Notice of Borrowing 4
2.3. Disbursements 4
2.4. Evidence of Advances 5
2.5. Extension of Commitment 5
3. REPAYMENT
3.1. Repayment 5
3.2. Reduction of the Commitments 5
3.3. Optional Prepayment 5
4. INTEREST
4.1. Basic Rate 5
4.2. Substitution Rate 5
4.3. Interest on Late Payments 6
5. FEES
5.1. Commitment Fee 6
5.2. Agency Fees 6
6. TAXES
6.1. Gross-up 6
6.2. Stamp Taxes 7
7. CONDITIONS PRECEDENT
7.1. Conditions to be Satisfied on or
Before the Initial Disbursement Date 7
7.2. Termination of Existing Revolving Credit
Agreement 8
7.3. Further Conditions to be Satisfied at or
Before Each Disbursement Date 8
8. REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties 8
8.2. Repetition of Representations and Warranties 10
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<PAGE> 3
Page Number
9. COVENANTS
9.1. Use of Proceeds 10
9.2. Governmental Authorizations 10
9.3. Financial Statements and Other Information 10
9.4. Notices of Default 11
9.5. Negative Pledge 12
9.6. Consolidation, Merger, Sale of Assets, etc. 12
9.7. Preservation of Existence, Rights and
Franchises;
Conduct of Business 13
9.8. Insurance 13
9.9. ERISA Compliance 13
9.10. Payment of Taxes, etc. 13
9.11. Borrower Debt 13
9.12. Interest Coverage 13
9.13. Debt Ratio 13
9.14. Subsidiary Borrowing 14
9.15. Holding Company Act Compliance 14
10. EVENTS OF DEFAULT
10.1. Events of Default 14
10.2. Default Remedies 15
10.3. Right of Setoff 15
10.4. Rights Not Exclusive 15
11. PAYMENTS; COMPUTATIONS
11.1. Making of Payments 16
11.2. Computations 16
12. APPLICATION, DISTRIBUTION AND SHARING OF PAYMENTS
12.1. Sharing of Payments 16
13. THE AGENT
13.1. The Agent 16
13.2. Covenant to Reimburse 17
13.3. Non-Receipt of Funds by the Agent 17
14. INDEMNIFICATION
14.1. Expenses 17
14.2. Other Costs 18
15. CHANGES IN APPLICABLE LAW; INCREASED COSTS
15.1. Changes in Applicable Law 18
15.2. Increased Costs 18
15.3. Alternative Arrangements 19
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<PAGE> 4
Page Number
16. GENERAL
16.1. Choice of Law 19
16.2. Jurisdiction 19
16.3. Loan Currency 19
16.4. Notices 20
16.5. Remedies and Waivers 20
16.6. Amendment 20
16.7. Assignment; Participations 20
16.8. Determinations by the Agent or any Bank 21
16.9. Survival 21
16.10. Severability of Provisions 21
16.11. Counterparts 21
16.12. Integration of Terms 21
SCHEDULE I - Details of Banks and Commitments
EXHIBIT A - Form of Grid Note
EXHIBIT B - Substance of Opinions of Counsel to the Borrower
EXHIBIT C - List of Subsidiaries of the Borrower
EXHIBIT D - Permitted Encumbrances
EXHIBIT E - Permitted Indebtedness
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<PAGE> 5
THIS REVOLVING CREDIT AGREEMENT is made as of August 27, 1996,
among NEW JERSEY RESOURCES CORPORATION, as borrower (the "Borrower"), UNION BANK
OF SWITZERLAND, New York Branch, as agent (the "Agent") and UNION BANK OF
SWITZERLAND and THE BANK OF TOKYO MITSUBISHI, LTD. (the "Banks").
WHEREAS the Borrower wishes to be able to borrow from the
Banks, and the Banks, severally but not jointly, are willing to lend, on a
revolving basis, to the Borrower, an aggregate principal amount of up to
$30,000,000, the parties agree as follows.
1. DEFINITIONS; INTERPRETATION
1.1. Definitions. For purposes of this Agreement, the
following terms shall have the meanings indicated.
"Advance" means an advance made by a Bank to the Borrower
pursuant to Section 2.1.
"Aggregate Advances" means, with respect to each Bank, the sum
of its Advances hereunder.
"Applicable Law" means (a) any law or regulation of (i) the
jurisdiction (or any agency, department, instrumentality or taxing authority
thereof) under whose law the Borrower is incorporated, and (ii) any jurisdiction
(or any agency, department, instrumentality or taxing authority thereof) in
which the Borrower's principal office is located and (b) as to any Bank, any law
or regulation of (i) the jurisdiction (or any agency, department,
instrumentality or taxing authority thereof) under whose law such Bank is
organized, (ii) any jurisdiction (or any agency, department, instrumentality or
taxing authority thereof) in which such Bank's principal office is located and
(iii) any jurisdiction (or any agency, department, instrumentality or taxing
authority thereof) in which such Bank's Lending Office is located.
"Borrowing" means the aggregate of the Advances made on any
Disbursement Date.
"Business Day" means any day except Saturday, Sunday and any
day which shall be in New York City or London a legal holiday or a day on which
banking institutions are authorized or required by law or other government
action to close.
"Code" means the Internal Revenue Code of 1986, as amended
from time to time.
"Commission" has the meaning assigned to that term in Section
8.1(n).
"Commitment" means, in relation to any Bank, the obligation to
lend the amount specified opposite its name in Schedule I, in each case as
reduced in accordance with the terms hereof.
"Default" means any event or occurrence which with the giving
of notice or the passage of time, or both, would constitute an Event of Default.
"Disbursement Date" in respect of any Advance, has the meaning
assigned to that term in Section 2.2.
"Dollars" or "$" means lawful money of the United States.
"Effective Date" means October 1,1996.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended, and the regulations thereunder.
"ERISA Affiliate" means each trade or business (whether or not
incorporated) that would be treated together with the Borrower as a single
employer under Section 4001 of ERISA.
<PAGE> 6
"Event of Default" has the meaning assigned to that term in
Section 10.1.
"Grid Note" means a promissory note of the Borrower evidencing
Advances made by a Bank, in substantially the form of Exhibit A.
"IRS" has the meaning assigned to that term in Section
6.1(a)(i).
"Indebtedness" with respect to any Person, means any amount
payable by such Person pursuant to an agreement or instrument involving or
evidencing money borrowed or received, the advance of credit, (other than trade
payables incurred in the ordinary course of business of such Person), a
conditional sale or a transfer with recourse or with an obligation to
repurchase, or pursuant to a lease with substantially the same economic effect
as any such agreement or instrument, to which such Person is a party as debtor,
borrower, lessee or guarantor.
"Indenture" means the Indenture of Mortgage and Deed of Trust
dated April l, 1952 between New Jersey Natural Gas Company and Harris Trust and
Savings Bank, as Trustee, as amended through the Twenty-sixth supplemental
Indenture dated October 1, 1995.
"Interest Period" means, with respect to any Advance, the
period commencing on the Disbursement Date, in the case of the initial Interest
Period for an Advance, or on the last day of the prior Interest Period in the
case of any subsequent Interest Period for an Advance. The duration of each such
Interest Period shall be one, two, three or six months (or such shorter period
as the Borrower, the Agent and the Banks may agree) as designated by the
Borrower in a Notice of Borrowing delivered to the Agent pursuant to Section
2.2, in the case of the initial Interest Period for an Advance, or in a notice
delivered to the Agent at least four Business Days prior to the end of the prior
Interest Period, in the case of any subsequent Interest Period for an Advance,
provided that:
(a) if the Borrower shall fail timely to elect the duration of
an Interest Period, it will be deemed to have elected a three month
Interest Period;
(b) any Interest Period which would otherwise end on a day
which is not a Business Day shall be extended to the next succeeding
Business Day unless such Business Day falls in another calendar month,
in which case such Interest Period shall end on the next preceding
Business Day;
(c) any Interest Period which begins on the last Business Day
of a calendar month (or on a day for which there is no numerically
corresponding day in the calendar month at the end of such Interest
Period) shall, subject to clause (d) below, end on the last Business
Day of a calendar month; and
(d) any Interest Period which would otherwise end after the
Termination Date shall end on the Termination Date.
"Lending Office", with respect to any Bank, means the office
of such Bank named in Schedule I or such other office of such Bank as such Bank
may have last designated as its lending office for purposes of this Agreement by
notice to the Agent and the Borrower.
"Long-Term Debt" means obligations of the Borrower for
borrowed money which are by their terms not due (or subject to demand) within
one year.
"Majority Banks" means Banks whose Aggregate Advances total
more than fifty percent (50%) of the Banks' Aggregate Advances.
"Margin" means, on a per annum basis, 30 basis points.
Notwithstanding the foregoing, the Borrower agrees that if the rating (by either
Rating Agency) of the First Mortgage Bonds of New Jersey Natural Gas Company is
equal to BBB+ (or its equivalent) or below, the Borrower shall negotiate in good
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<PAGE> 7
faith with the Agent to reset the rate to an amount which is consistent with the
market rate for customers with a credit rating equal to that of the Borrower.
"Officers' Certificate" means a certificate executed on behalf
of the Borrower by any two officers of the Borrower.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means any corporation, natural person, firm, joint
venture, partnership, trust, unincorporated organization or government, or any
political subdivision, department or agency of any government.
"Plan" means any plan subject to Title IV of ERISA with
respect to which the Borrower or any ERISA Affiliate would incur a liability to
the PBGC or to such plan pursuant to Title IV of ERISA as a result of the
termination of such plan or withdrawal or partial withdrawal of any person from
such plan.
"Plan Event" means the filing of a notice of intent to
terminate any Plan under Section 4041 of ERISA, the receipt of any notice by any
Plan that the PBGC intends to apply for the appointment of a trustee to
administer such Plan, the termination of any Plan, the complete or partial
withdrawal of any Person from any Plan if such withdrawal could result in
liability of the Borrower or any ERISA Affiliate to the PBGC or to such Plan, a
"reportable event," as defined in Section 4043(b) of ERISA, with respect to any
Plan and any other event or condition that would constitute grounds under
Section 4042 of ERISA for the termination of, or for the appointment of a
trustee to administer, any Plan.
"Prime Rate" means the rate which the Agent announces from
time to time as its prime rate, the Prime Rate to change when and as such prime
rate changes. The Prime Rate is a reference rate and does not necessarily
represent the lowest or best rate actually charged to any customer. The Agent
may make commercial loans or other loans at rates of interest at, above or below
the Prime Rate.
"Principal Subsidiary" means each of New Jersey Natural Gas
Company, NJR Storage Corp., New Jersey Natural Energy Company, New Jersey
Natural Resources Company and NJNR Pipeline Company, and Commercial Realty &
Resources Corp., and any other Subsidiary having total assets in excess of five
percent (5%) of the total assets of the Borrower and its Subsidiaries on a
consolidated basis, all as set forth in the most recent audited balance sheets
of the Borrower and its Subsidiaries.
"Pro Rata Share" means, with respect to any Bank and any
Advance, the amount that bears the same relation to the principal amount of such
Advance, as the case may be, as such Bank's Commitment bears to the Total
Commitment.
"Quoted Rate" means, with respect to any Interest Period for a
Borrowing, the rate of interest (expressed as an annual rate) determined by the
Agent to be the arithmetic mean (rounded up to the nearest one sixteenth of one
percent (1/16%)) of the respective rates of interest communicated by the several
Reference Banks to the Agent as the rates at which each such Reference Bank is
offering to place a deposit in Dollars, for a term coextensive with such
Interest Period in an amount substantially equal to the amount of such Reference
Bank's Pro Rata Share of such Borrowing, with leading banks in the London
interbank marker at approximately 11:00 a.m. London time on the second Business
Day next preceding the Disbursement Date for such Borrowing; provided, however,
that if any of the Reference Banks fails so to communicate a rate, the Quoted
Rate shall be determined on the basis of the rates communicated to the Agent by
the remaining Reference Bank or Reference Banks.
"Rating Agency" means Moody's Investors Service Inc., Standard
and Poor's Corporation and their respective successors and assigns.
"Reference Banks" means the respective principal New York
offices of Union Bank of Switzerland and The Bank Of Tokyo-Mitsubishi, Ltd..
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<PAGE> 8
"Regulation D" means Regulation D of the Board of Governors of
the Federal Reserve System as from time to time in effect and any Successor to
all or a portion thereof establishing reserve requirements.
"Subsidiary" at any time, means any entity of which more than
fifty percent of the outstanding voting stock or other equity interest entitled
ordinarily to vote in the election of the directors or other governing body
(however designated) of such entity is at the time beneficially owned or
controlled directly or indirectly by the Borrower and/or by one or more such
entities.
"Termination Date" means October 1, 1999 unless extended
pursuant to Section 2.5 or the earlier date of termination in whole of the
Commitments pursuant to Section 3.2.
"Total Commitment" means the sum of the Commitments of all of
the Banks in effect from time to time.
"United States" means the United States of America.
"United States Tax" has the meaning assigned to that term in
Section 6.1.
"U.S. Person" means a citizen or resident of the United
States, a corporation, partnership or other entity created or organized in or
under the laws of the United States, or an estate or trust the income of which
is subject to United States federal income taxation regardless of the source.
1.2. Interpretation. The headings in this Agreement are
inserted for convenience only and shall be ignored in construing this Agreement.
Unless the context otherwise requires, words denoting the singular number only
shall include the plural and vice versa. The words "written" and "in writing"
include any means of visible reproduction. Unless otherwise indicated,
references to Sections , Exhibits and Schedules are to be construed as reference
to sections of and exhibits and schedules to this Agreement.
2. COMMITMENTS; DISBURSEMENT
2.1. Commitment to Lend. On the terms and subject to the
conditions set forth herein, each Bank severally but not jointly, agrees to make
from time to time on or prior to the Termination Date, in an aggregate principal
amount not exceeding such Bank's Commitment, one or more Advances through its
Lending Office to the Borrower. Within the limits of each Bank's Commitment, the
Borrower may borrow, repay pursuant to Section 3.1 or prepay pursuant to Section
3.3, and reborrow under this Section 2.1.
2.2. Notice of Borrowing. If the Borrower wishes to borrow
hereunder, it shall, not later than 5:00 p.m. New York City time on the fourth
Business Day preceding the date on which it wishes to borrow, give the Agent
notice of (a) such date (a "Disbursement Date"), (b) the amount of the
Borrowing, which amount shall be an integral multiple of $1,000,000 not less
than $3,000,000 (unless the remaining unused portion of the Total Commitment is
less than $3,000,000 in which case the amount designated by the Borrower shall
equal the remaining unused portion of the Total commitment), (c) the account to
which it wishes the proceeds of the Borrowing to be credited and (d) the
Interest Period for such Borrowing. The giving of such notice shall constitute
the Borrower's irrevocable commitment to borrow such amount on such Disbursement
Date.
2.3. Disbursements. The Agent shall promptly, on the third
Business Day prior to the anticipated Disbursement Date, give notice to each
Bank of (a) the Disbursement Date for such Borrowing, (b) the amount of the
Advance to be made by such Bank on such Disbursement Date, which amount shall be
such Bank's Pro Rata Share of such Borrowing, and (c) the Interest Period. By
11:00 a.m. New York City time on each Disbursement Date, each Bank shall,
subject to the conditions set forth herein, make available to the Agent an
amount equal to the amount of the Advance to be made by such Bank on such
Disbursement Date, in same-day funds, by deposit to such account as the Agent
may have
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<PAGE> 9
theretofore designated by notice to the Banks. Subject to the conditions set
forth herein, the Agent shall, on such Disbursement Date, transfer such funds by
12 noon New York City time to the account specified by the Borrower pursuant to
Section 2.2.
2.4. Evidence of Advances. Each Bank's Advance made pursuant
to this Agreement shall be evidenced on the Grid Note of the Borrower held by
such Bank. Upon making an Advance, each Bank shall record on the schedule
contained on the Grid Note the Disbursement Date and the principal amount of the
Advance. Each Bank shall also promptly so record any payments of principal or
interest. In any legal action or proceeding in respect of this Agreement or any
Advance, the entries made on such schedule shall be prima facie evidence of the
existence and amounts of the Advances made by such Bank and of the amounts due
to it under this Agreement in respect thereof. The failure to record or to
record properly any such amount shall not affect the obligation of the Borrower
to repay the actual principal amount of any Advance made by any Bank with all
applicable interest accruing thereon.
2.5 Extension of Commitment. At least 6 months but not more
than 12 months before the Termination Date, the Borrower may request the Agent
and the Banks, by giving written notice of such request to the Agent, to extend
the Termination Date of the Agreement for one year, specifying the terms and
conditions, including fees, to be applicable to such extension. The Agent shall
promptly notify the Banks of such request, and, no later than 90 days from the
date on which the Agent shall have received notice from the Borrower pursuant to
the preceding sentence, the Agent shall notify the Borrower of the consent or
non-consent to such extension request. No extension shall be effective without
the consent of the Banks. The consent of the Banks shall be conditional upon the
preparation, execution and delivery of legal documentation in form and substance
satisfactory to the Banks and their counsel incorporating substantially the
terms and conditions contained in the extension request as the same may be
modified by agreement among the Borrower and the Banks. In no event shall the
Termination Date be extended beyond October 1, 2002.
3. REPAYMENT
3.1. Repayment. The Borrower shall repay the principal amount
of each Advance owing to such Bank on the Termination Date.
3.2. Reduction of the Commitments. The Borrower shall have the
right, upon at least five Business Days' notice to the Agent, to terminate in
whole or reduce ratably in part the unused portions of the respective
Commitments of the Banks, provided that each partial reduction shall be in the
aggregate of $1,000,000 or a greater integral multiple thereof.
3.3. Optional Prepayment. The Borrower may, upon at least five
Business Days' notice to the Agent stating the proposed date and aggregate
principal amount of the prepayment, and if such notice is given the Borrower
shall, prepay the outstanding principal amount of any Borrowing in whole or
ratably in part, together with accrued interest to the date of such prepayment
on the principal amount prepaid; provided, however, that (a) each partial
prepayment shall be in an aggregate principal amount not less than $1,000,000 or
a greater integral multiple of $500,000 and (b) the Borrower shall be obligated
to reimburse the Banks in respect thereof pursuant to Section 14.2.
4. INTEREST
4.1. Basic Rate. (a) Except as otherwise expressly provided in
Section 4.2 or Section 4.3, interest shall accrue on the outstanding principal
amount of each Advance at a rate per annum equal to the sum of the Quoted Rate
plus the Margin. The Agent shall give prompt notice to the Borrower and each
Bank of the Quoted Rate after each determination thereof. Each Reference Bank
shall use reasonable efforts to furnish in a timely manner a quotation for use
in the determination of the Quoted Rate.
(b) Except as otherwise provided herein, accrued interest on
the unpaid principal amount of each Advance owing to each Bank from the date of
such Advance until the maturity thereof
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<PAGE> 10
(whether at stated maturity, by acceleration or otherwise) shall be payable on
the last day of an Interest Period and, if such Interest Period has a duration
of more than three months, on each day which occurs during such Interest Period
every three months from the first day of such Interest Period.
4.2. Substitution Rate. (a) If none of the Reference Banks
shall communicate a rate to the Agent for the purpose of making any
determination of the Quoted Rate, or if the Majority Banks shall determine and
so advise the Agent (i) that the Banks are generally unable to obtain deposits
in Dollars in the London inter-bank market for the applicable Interest Period or
(ii) that the Quoted Rate for such Interest Period will not adequately reflect
the cost to the Majority Banks of obtaining deposits in Dollars in the London
inter-bank market for such Interest Period, the Agent shall promptly (but in any
event not later than 5:00 p.m. New York time on the second Business Day
preceding the Disbursement Date), so notify the Borrower and the Banks.
(b) If a notice is given pursuant to Section 4.2(a), interest
shall accrue on each Bank's Advance during the affected Interest Period at a
rate per annum equal to the Prime Rate. The Borrower, at its discretion, shall
have the right to prepay any Borrowing subject to the Prime Rate at any time,
provided the Borrower has given the Bank one Business Day prior written notice.
(c) For the purpose of determining the commitment fee payable
by the Borrower under Section 5.1, the unused portion of the Total Commitment
shall not include the Commitment of any Bank to the extent its obligation to
lend is canceled or suspended pursuant to Section 15.1, and such Bank shall not
be entitled to receive any portion of the commitment fee attributable thereto.
4.3. Interest on Late Payments. If any amount payable by the
Borrower hereunder is not paid on or before the due date thereof, interest shall
accrue on such amount to the extent permitted by applicable law, during the
period from and including the due date thereof to but excluding the date such
amount is paid, at a rate per annum equal for each day in such period to the sum
of 2% plus the Base Rate. For purposes hereof, the "Base Rate" means, for any
day, the higher of (x) the rate announced from time to time by the Agent as its
prime rate on such date, changing as and when such prime rate changes and (y)
1/2 of 1% in excess of the average rate quoted to the Agent at approximately
11:00 a.m. (New York City time) on such day (or, if such day is not a Business
Day, on the next preceding Business Day) for overnight Federal Funds
transactions arranged by New York Federal Funds brokers selected by Agent on
such date.
5. FEES
5.1. Commitment Fee. The Borrower shall pay to the Agent for
the account of the Banks a commitment fee on the average daily unused portion of
the Total Commitment from and including the date hereof to but excluding the
Termination Date at a rate per annum of one eighth of one percent (1/8%),
payable on the last day of each February, May, August and November, commencing
February 28, 1991, and on the Termination Date.
5.2. Agency Fees. The Borrower shall pay to the Agent for its
own account agency fees in the amounts and at the times separately agreed upon
between the Borrower and the Agent.
6. TAXES
6.1. Gross-up. (a) In the event that any amount is required by
Applicable Law to be withheld or deducted from any payments due to a Bank in
respect of any Advance for or on account of any present or future taxes imposed
by any governmental or other taxing authority of or in the United States
("United States Tax"), the Borrower shall pay to the Agent for distribution to
such Bank such additional amounts as may be necessary in order that the net
amount received for distribution to such Bank after the required withholding or
other payment (including any required withholding or other payment on such
additional amounts) shall equal the amount the Agent would have received for
distribution to such Bank
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<PAGE> 11
had no such withholding or other payment been made; provided, however, that no
such additional amounts shall be paid:
(i) if such Bank shall have delivered an Internal Revenue
Service ("IRS") Form 4224 to the Borrower pursuant to Section 6.1(c)
and (A) such Bank shall at any time not be entitled to complete
exemption from withholding of United States Tax for any reason other
than a change in United States federal income tax law, regulation or
official interpretation after the date hereof or (B) such withholding
or deduction of United States Tax is imposed in respect of similar
payments to United States taxpayers generally; or
(ii) if such Bank shall have delivered an IRS Form 1001 to the
Borrower pursuant to Section 6.1(c) and such Bank shall at any time not
be entitled to the complete exemption from or reduction of United
States Tax for any reason other than an amendment, modification or
revocation of an applicable double tax treaty, or a change in official
position regarding the application or interpretation of such treaty,
after the date hereof; or
(iii) in the case of a Bank that has delivered an IRS Form
1001 that claims partial exemption from or reduction of United States
Tax, for or on account of any such taxes imposed at a rate that date
not exceed the rate applicable to such Bank on the date hereof; or
(iv) for or on account of any such taxes that could not have
been imposed but for such Bank's failure to comply with its obligations
under Section 6.1(c).
In the event that the Borrower or the Agent makes payments to
any Bank without any reduction by reason of withholding or other payments of
United States Tax, and it is later determined by any applicable governmental or
taxing authority that the Borrower or the Agent is liable for withholding or
other payments and such Bank would not be entitled, by virtue of clause (i),
(ii), (iii) or (iv) above, to an additional amount in respect of any such
deduction or withholding, then such Bank shall indemnify the Borrower or the
Agent, as the case may be (on an after-tax basis), for any amounts (other than
interest and penalties, where the failure by the Borrower or the Agent, as the
case may be, to deduct or withhold was not the result of an action or inaction
on the part of such Bank) that the Borrower or the Agent, as the case may be,
remits to the governmental or taxing authority as a result of such
determination. If the Borrower receives notice of any additional amount due
hereunder, it shall, subject to compliance with Section 3.3 hereof, have the
right to prepay the Aggregate Advances, in whole or in part, of any Bank to
which such additional amount is payable.
(b) All taxes to be paid by the Borrower pursuant to Section
6.1(a) shall be paid prior to the date on which penalties attach thereto or
interest accrues thereon. If any Bank pays any amount in respect of such taxes
or penalties or interest thereon (other than penalties or interest where the
failure by the Borrower or Agent, as the case may be, to deduct or withhold was
the result of an action or inaction on the part of such Bank), the Borrower
shall reimburse such Bank in Dollars for such payment on demand. If the Borrower
pays any such taxes, penalties or interest, it shall deliver official tax
receipts evidencing such payment or certified copies thereof to the Agent on or
before the thirtieth day after payment.
(c) Each Bank that is not a U.S. Person shall deliver to the
Borrower an accurate and complete original signed copy of an IRS Form 1001 or
4224 within 30 days of the signing of this Agreement, and shall deliver such
additional or supplemental forms thereafter as may be required in order to
maintain the effectiveness and accuracy of such forms. In addition, such Bank
shall deliver to the Borrower such other forms or documentation as the Borrower
may reasonably request in order to comply with United States tax laws. For any
period with respect to which a Bank has failed to provide the Borrower with the
appropriate form described herein (unless such failure is due to a change in law
occurring after the date on which a form originally was required to be provided)
such Bank shall not be entitled to indemnification under subsection (a) with
respect to United States Taxes.
6.2. Stamp Taxes. The Borrower shall pay any registration or
transfer taxes, stamp duties or similar levies, and any penalties or interest
that may be due with respect thereto, that may be
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<PAGE> 12
imposed by any jurisdiction in connection, with this Agreement or the Grid
Notes. If the Agent or any Bank pays any amount in respect of any such taxes,
duties, levies, penalties or interest, the Borrower shall reimburse the Agent or
such Bank for such payment on demand.
7. CONDITIONS PRECEDENT
7.1. Conditions to be Satisfied on or Before the Effective
Date. The obligation of the Banks to make the initial Advances hereunder is
subject to the condition that the Agent receive, on or before the Effective
Date, one executed copy and certified copies or additional executed copies
sufficient for all the Banks of each of the documents listed below, each dated
the date of its delivery, in form and substance satisfactory to the Agent:
(a) The Grid Notes for distribution by the Agent to each Bank,
duly executed and delivered.
(b) Opinions of Debovise & Plimpton, counsel to the Borrower,
as to the matters set forth in Exhibit B.
(c) Copies of all corporate action taken by the Borrower to
authorize this Agreement, the borrowings hereunder and the Grid Notes, certified
as of the date hereof.
(d) Such other documents as the Agent may reasonably require.
7.2 Termination of Existing Revolving Credit Agreement.
Reference is made to that certain Revolving Credit Agreement, dated as of
December 31,1990, by and among Borrower, the Lenders party thereto and Union
Bank of Switzerland, New York Branch, as Agent (as amended, the "Existing Credit
Agreement"). The Borrower hereby requests that the "Commitments" under the
Existing Credit Agreement be terminated immediately upon this Agreement becoming
effective. Each Bank party hereto that is also party to the Existing Credit
Agreement agrees that;
(a) the Existing Credit Agreement, and all "Commitments" and
all other obligations under the Existing Credit Agreement (other than
obligations which, by their terms, are contemplated to survive termination of
the Existing Credit Agreement) shall cease and be terminated on the Effective
Date; and
(b) to the extent that any notice is required under the
Existing Credit Agreement in order to effect the termination contemplated in
this Section 7.2, such requirement is hereby waived;
7.3. Further Conditions to be Satisfied at or Before Each
Disbursement Date. The obligation of each Bank to make each Advance hereunder
(including its initial Advance) is subject to the further conditions that (a)
the Borrower shall have complied and shall then be in compliance with all the
terms, covenants and conditions of this Agreement which are binding upon it, (b)
there shall have occurred no Default or Event of Default, (c) the
representations and warranties contained in Section 8.1 shall be true with the
same effect as though such representations and warranties had been made at the
initial Disbursement Date and (d) there shall have been no material adverse
change in the business, properties, condition (financial or otherwise) or
operations, present or prospective, of the Borrower since the date of the
financial statements furnished to the Agent as of the date hereof. The
Borrower's notice of borrowing pursuant to Section 2.2 hereof shall be deemed to
constitute a certification to the foregoing effect.
8. REPRESENTATIONS AND WARRANTIES
8.1. Representations and Warranties. The Borrower represents
and warrants to each Bank as follows:
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<PAGE> 13
(a) The Borrower is a corporation duly organized and validly
existing under the law of New Jersey and has the power and authority to own its
property, to conduct its business as currently conducted and to consummate the
transactions contemplated in this Agreement.
(b) Each Principal Subsidiary is an entity duly organized and
validly existing under the law of its jurisdiction of incorporation or
organization and has the power and authority to own its property and to conduct
its business as currently conducted.
(c) The Borrower has taken all necessary corporate action to
authorize the execution and delivery of this Agreement and all other documents
to be executed and delivered by it in connection with this Agreement, the
performance of its obligations under the Agreement and the Grid Notes and the
consummation of the transactions contemplated in this Agreement.
(d) This Agreement has been duly executed and delivered by the
Borrower and constitutes, and each of the Grid Notes, when duly executed and
delivered by the Borrower, will constitute, a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law).
(e) All governmental authorizations and actions of any kind
necessary to authorize the Advances or required for the validity or
enforceability against the Borrower of this Agreement or the Grid Notes have
been obtained or performed and are valid and subsisting in full force and
effect.
(f) No Default or Event of Default has occurred and is
continuing or will occur by reason of the consummation of the transactions
contemplated in this Agreement.
(g) No consent or approval of, or notice to, any creditor of
the Borrower is required by the terms of any agreement or instrument evidencing
any Indebtedness of the Borrower for the execution or delivery of, or the
performance of the obligations of the Borrower under, this Agreement or the Grid
Notes or the consummation of the transactions contemplated in this Agreement,
and such execution, delivery, performance and consummation will not result in
any breach or violation of, or constitute a default under, the charter or
by-laws of the Borrower or any Principal subsidiary or any material agreement,
instrument, judgment, order, law, rule or regulation applicable to the Borrower
or any Principal Subsidiary or to any property of the Borrower or any Principal
Subsidiary.
(h) There are no actions, proceedings or claims pending, or,
to the knowledge of the Borrower, threatened, which would reasonably be expected
to have a materially adverse effect on the business, operations, property or
consolidated financial condition of the Borrower and its Subsidiaries, taken as
a whole, or impair the ability of the Borrower to perform its obligations under,
or affect the validity or enforceability of, this Agreement or the Grid Notes.
(i) The Borrower's financial statements for the most recent
fiscal year fairly present the financial condition of the Borrower as of the
close of such fiscal year, have been prepared in accordance with generally
accepted accounting principles, consistently applied, and have been certified by
Deloitte & Touche, or other independent public accountants of recognized
national standing, as fairly presenting the financial condition of the Borrower
as at the close of such fiscal year and the results of its operations for such
year.
(j) There has been no material adverse change since December
31, 1995 in the business, operations, property or consolidated financial
condition of the Borrower or in the Borrower's ability to perform its
obligations under this Agreement or the Grid Notes.
(k) The execution and delivery by the Borrower of this
Agreement and the Grid Notes are not subject to any tax, duty, fee or other
charge, including, without limitation, any registration or
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<PAGE> 14
transfer tax, stamp duty or similar levy, imposed by or within the United States
or any political subdivision or taxing authority thereof or therein that has not
been paid by the Borrower.
(l) The Borrower is not an "investment company" within the
meaning of the Investment Company Act of 1940, as amended.
(m) The Borrower and its Subsidiaries are exempted from
regulation by the Securities and Exchange Commission (the "Commission") under
the Public Utility Holding Company Act of 1935, as amended (the "Holding Company
Act"), except under Section 9(a)(2) thereof, pursuant to a filing made with the
Commission under Section 3 of the Holding Company Act. Such filing is in full
force and effect, and no proceedings are pending or, to the knowledge of the
Borrower, threatened for the revocation or denial of such exemption.
(n) The Borrower and its Subsidiaries have filed all material
tax returns and reports required to be filed by them in any jurisdiction, and
all taxes, assessments, fees and other governmental charges or levies imposed
upon the Borrower and each Subsidiary or upon any of their respective
properties, assets, income, profits or franchises, that are due and payable,
have been paid where the failure to so file, or the failure to so pay, would
materially affect the Borrower's ability to perform its obligations hereunder,
except for any taxes, assessments, fees, charges or levies which are being
contested in good faith and for which reserves which are adequate under
generally accepted accounting principles have been established.
(o) No Plan has incurred a material "accumulated funding
deficiency" within the meaning of Section 302 of ERISA or Section 412 of the
Code whether or not such accumulated funding deficiency has been waived. No Plan
has engaged in any "prohibited transaction", as such term is defined in Section
4975 of the Code, as amended, that might result in a material liability of the
Borrower or any ERISA Affiliate to any person. No Plan Event has occurred that
might result in a material liability of the Borrower or any ERISA Affiliate to
the PBGC or to any Plan.
(p) None of the transactions contemplated in this Agreement
(including, without limitation, the Borrowings and the use of the proceeds
thereof) will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended (or any regulations issued pursuant thereto,
including, without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System).
(q) No contractual obligation of the Borrower or any
Subsidiary and no requirement of law materially adversely affects, or insofar as
the Borrower may reasonably foresee may so affect, the business, operations,
property or consolidated financial condition of the Borrower.
(r) All factual information heretofore or contemporaneously
furnished in writing by or on behalf of the Borrower to the Banks for purposes
of or in connection with this Agreement, the Grid Notes or any transaction
contemplated hereby is, and all other such factual information hereafter
furnished in writing by or on behalf of the Borrower to the Banks will be true
and accurate in every material respect on the date as of which such information
is dated or certified and as of the date of execution and delivery of this
Agreement and the Grid Notes, and not incomplete by omitting to state any
material fact necessary to make such information not misleading in view of the
circumstances under which such information is given.
(s) Exhibit C contains an accurate list as of the date hereof
of all the presently existing Subsidiaries of the Borrower and accurately sets
forth with respect to each Subsidiary the laws under which it is incorporated or
organized and the percentage of its voting stock owned by the Borrower or any
other Subsidiary (other than directors' qualifying shares). All of the issued
and outstanding shares of capital stock of such Subsidiaries have been duly
authorized and issued and are fully paid and nonassessable.
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<PAGE> 15
8.2. Repetition of Representations and Warranties. Each of the
representations and warranties set forth in Section 8.1 shall be deemed to be
repeated on each Disbursement Date as if made at and as of such time.
9. COVENANTS
9.1. Use Or Proceeds. The Borrower shall use the proceeds of
the Advances for its general corporate purposes.
9.2. Governmental Authorizations. The Borrower shall obtain,
make and keep in full force and effect all authorizations from and registrations
with governmental authorities that may be required for the validity or
enforceability against the Borrower of this Agreement or the Grid Notes.
9.3. Financial Statements and Other Information. The Borrower
will deliver to the Agent, with a copy for each Bank, the following:
(a) as soon as available but in no event more than 45 days
after the end of each of the Borrower's fiscal quarters, consolidated (and
company only as to the Borrower and each Principal Subsidiary) balance sheets of
the Borrower and its Subsidiaries as of the close of such period and
consolidated (and company only as to the Borrower and each Principal Subsidiary)
statements of income and retained earnings and statements of cash flow from the
beginning of the then current fiscal year and from the beginning of such fiscal
quarter to the close of such period, certified by the chief financial officer of
the Borrower and accompanied by a certificate of said officer stating whether
any Default or Event of Default has occurred and, if so, stating the facts with
respect thereto, and providing calculations which establish the Borrower's
compliance with the requirements or restrictions imposed by Sections 9.11, 9.12
and 9.13;
(b) as soon as available but in no event more than 90 days
after the close of each of the Borrower's fiscal years, a copy of the annual
audit report relating to the Borrower and its Subsidiaries on a consolidated
basis and relating to the Borrower and New Jersey Natural Gas Company separately
in reasonable detail satisfactory to the Agent and in each case prepared in
accordance with generally accepted accounting principles by Deloitte & Touche or
other independent public accountants of recognized national standing, together
with financial statements (audited, in the case of the Borrower and New Jersey
Natural Gas Company) consisting of consolidated (and company only as to the
Borrower and each Principal Subsidiary) balance sheets of the Borrower and its
Subsidiaries as of the end of such fiscal year and consolidated (and company
only as to the Borrower and each Principal Subsidiary) statements of income and
cash flow, retained earnings, paid-in capital and surplus of the Borrower and
its Subsidiaries for such fiscal year;
(c) as soon as available but in no event more than 90 days
after the close of each of the Borrower's fiscal years, a letter or opinion of
the accountants who prepared the annual audit report relating to the Borrower
and its Subsidiaries stating whether anything in such accountants' examination
has revealed the occurrence of any event which constitutes a Default or Event of
Default and, if so, stating the facts with respect thereto;
(d) promptly upon receipt thereof, copies of any reports and
material sections of management letters submitted to the Borrower by such
accountants in connection with any annual or interim audit of the books of the
Borrower and its Subsidiaries, together with the Borrower's responses, if any;
(e) as soon as available, copies of all financial statements,
reports, notices and proxy statements sent by the Borrower in a general mailing
to all its stockholders, of all reports on Forms 10-Q, 8-K and 10-K under the
Securities Exchange Act of 1934, of all final prospectuses filed pursuant to
Rule 424(b) under the Securities Act of 1933 and of all other material
information filed by the Borrower with any securities exchange or with the
Commission or any governmental authority succeeding to any or all of the
functions of the Commission;
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<PAGE> 16
(f) copies of the indentures pursuant to which any outstanding
debt of the Borrower or any Subsidiary is issued (other than indentures
previously delivered to the Agent); and
(g) such additional information, reports or statements as the
Agent from time to time may reasonably request.
Any financial statement, report or other information obtained
by any Bank pursuant to this Section 9.3, or by delivery by or on behalf of the
Borrower at or prior to the date hereof, other than documents which are publicly
available, shall be used by such Bank solely for purposes relating to such
Bank's participation in the Advances, provided that any Bank may disclose any
such information to any governmental authority, regulatory agency, legislature,
court, or any officer, subdivision or committee thereof, its independent
accountants or its counsel, or, if such Bank is directed to do so by order of
any court or any other governmental body having appropriate authority, to any
other Person.
9.4. Notices Of Default. The Borrower shall promptly give
notice to the Agent of each Default or Event of Default and each other event
that has or would be reasonably expected to have a materially adverse effect on
its ability to perform its obligations under this Agreement or the Grid Notes.
The notice shall specify the nature and period of existence of such event and
what action the Borrower has taken or is taking or proposes to take with respect
thereto.
9.5. Negative Pledge. (a) The Borrower will not, and will not
permit any Principal Subsidiary other than New Jersey Natural Gas Company to,
create or permit to exist any mortgage, lien or encumbrance, pledge of, or other
security interest in, or file or permit the filing of any financing statement
under the Uniform Commercial Code or similar notice under any other statute with
respect to, any asset of the Borrower or any Principal Subsidiary, except (i),
as set forth in Exhibit D hereto and (ii) security for indebtedness referred to
in Section 9.14 (iii) hereof.
(b) In case any mortgage, lien, encumbrance, pledge or
security interest arises in violation of Section 9.5(a), the Borrower shall make
or cause to be made provision whereby the Grid Notes and all other amounts due
from the Borrower hereunder will be secured equally and ratably with all other
obligations secured thereby, and in any case, the Banks shall have the benefit,
to the full extent that they may be entitled thereto under Applicable Law, of
any equitable mortgage, encumbrance, pledge or security interest so equally and
ratably securing the Grid Notes and such other amounts. Any violation of Section
9.5(a) shall nevertheless constitute an Event of Default.
9.6. Consolidation, Merger, Sale of Assets, etc. The Borrower
will not sell or otherwise dispose of any voting securities of any Principal
Subsidiary, and the Borrower will not, and will not permit any Principal
Subsidiary to, directly or indirectly, sell, lease or otherwise dispose of all
or substantially all of its properties and assets, or consolidate with or merge
into any other Person, or permit any other Person to consolidate with or merge
into it, except that
(a) a Principal Subsidiary may sell or otherwise transfer all
or substantially all of its properties and assets to the Borrower or to another
Subsidiary (which, if not already such, shall thereupon become a Principal
Subsidiary);
(b) a Principal Subsidiary may be consolidated with or merged
into any other Subsidiary (in which case the surviving Subsidiary shall remain
or become, as the case may be, a Principal Subsidiary);
(c) the Borrower may be consolidated with any other Person, or
any other Person may be merged into the Borrower, if
(i) the Borrower is the survivor of such merger or
consolidation and
(ii) upon the consummation of such merger or consolidation and
immediately after giving effect thereto (and deeming the Borrower to
have incurred at the time of such
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<PAGE> 17
consummation all indebtedness of such other Person that then remains
outstanding), no Default or Event of Default would exist; and
(d) the Borrower may sell or otherwise transfer all or
substantially all of its properties and assets to another corporation, and shall
thereupon be released from all of its obligations under this Agreement and the
Grid Notes, if
(i) the acquiring corporation (A) shall be organized and
existing under the laws of the United States of America or any state
thereof or the District of Columbia, and (B) shall expressly assume the
obligations of the Borrower under this Agreement and the Grid Notes
under documentation satisfactory in form and substance to the Banks;
and
(ii) immediately after giving effect to such transaction and
such assumption (and deeming all Indebtedness of such acquiring
corporation outstanding prior to such transaction and remaining
outstanding immediately after such transaction to have been incurred by
such corporation as part of such transaction and such assumption), no
Default or Event of Default would exist
9.7. Preservation of Existence, Rights and Franchises; Conduct
of Business. The Borrower shall at all times preserve and keep in full force and
effect its corporate existence and that of each of its Principal Subsidiaries,
except as permitted by Section 9.6. The Borrower shall at all times preserve and
keep in full force and effect its rights and franchises material to its business
and those of each of its Principal Subsidiaries, and the Borrower shall, and
shall cause each of its Principal Subsidiaries to, take all action necessary to
comply with the rules and regulations, as in effect from time to time, of any
governmental authority to which it is subject, the noncompliance with which
would reasonably be expected to have a material adverse effect on its ability to
perform its obligations under this Agreement or the Grid Notes; provided,
however, that nothing in this Section 9.7 shall prevent a consolidation, merger
or transfer of assets that is permitted by Section 9.6, if immediately after,
and giving effect to, such transaction, the Borrower and its Principal
Subsidiaries would be in compliance with this Section 9.7.
9.8. Insurance. The Borrower and each Principal Subsidiary
shall maintain insurance on their property with financially sound and reputable
insurers to the extent and against the risks customary for companies in similar
businesses.
9.9. ERISA Compliance. The Borrower shall not take any action
or omit to take any action, and shall not permit any ERISA Affiliate within its
control to take any action or omit to take any action, with respect to any Plan,
that under ERISA might result in a lien or charge upon the property of the
Borrower or might otherwise materially adversely affect the business, profits,
properties or condition (financial or otherwise) of the Borrower. Without
limiting the generality of the foregoing, the Borrower shall not permit, and
shall not permit any ERISA Affiliate within its control to permit, any Plan to
(a) engage in any "prohibited transaction", as such term is defined in Section
4975 of the Code without securing an exemption therefor or (b) incur any
material "accumulated funding deficiency", as such term is defined in Section
302 of ERISA, whether or not waived.
9.10. Payment of Taxes, etc. The Borrower and each Principal
Subsidiary shall pay and discharge, or cause to be paid or discharged, as the
same may become due and payable, all taxes, assessments and other governmental
charges, levies or claims of any kind against it or on or with respect to any of
its property, as well as claims of any kind which, if unpaid, might become a
lien (except as permitted by Section 9.5) upon any or its properties; provided,
however. that the foregoing shall not require the Borrower or any Principal
Subsidiary to pay or discharge, or cause to be paid or discharged, any such tax,
assessment, charge, levy, claim or lien so long as it shall contest the validity
thereof in good faith by appropriate proceedings and shall have set aside on its
books reserves with respect thereto which are adequate under generally accepted
accounting principles.
9.11. Borrower Debt. The Borrower will not incur or permit to
exist Indebtedness of the Borrower to exceed 45%, of the sum of the Borrower's
tangible net worth and its Long Term Debt. As
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used herein, "tangible net worth" means the excess of total assets over total
liabilities, total assets and total liabilities each to be determined as to both
classification of items and amounts in accordance with generally accepted
accounting principles consistently maintained by the Borrower in the preparation
of the financial statements referred to in Section 9.3(b); provided, that there
shall be excluded from total assets (i) all assets which would be classified as
intangible assets under generally accepted accounting principles, including but
not limited to goodwill and deferred charges, (ii) cash set apart and held in a
sinking or other analogous fund established for the purpose of redemption or
other retirement of capital stock, (iii) leasehold improvements, and (iv)
applicable reserves, allowances and other similar properly deductible items.
9.12. Interest Coverage. The Borrower will have in each of its
fiscal years net earnings before income taxes and interest expense in an amount
at least 2 times interest charges during such fiscal year with respect to all
Indebtedness of the Borrower. The Borrower will ensure that New Jersey Natural
Gas Company will comply with item (15) of Section 4.01 B of the Indenture in
connection with the issuance of any additional series of bonds.
9.13. Debt Ratio. The Borrower will cause New Jersey Natural
Gas Company at all times to comply with Section 9.18 of the Indenture whether or
not any Series G Bonds (as defined in the Indenture) are outstanding. The
Borrower will not permit all Indebtedness of the Borrower and its Subsidiaries
on a consolidated basis to exceed 65% of the sum of (x) Indebtedness of the
Borrower and its Subsidiaries on a consolidated basis and (y) consolidated
tangible net worth. As used herein, "consolidated tangible net worth" means the
excess of total consolidated assets over total consolidated liabilities, total
consolidated assets and total consolidated liabilities each to be determined as
to both classification of items and amounts in accordance with generally
accepted accounting principles consistently maintained by the Borrower in the
preparation of the financial statements referred to in Section 9.3(b); provided,
that there shall be excluded from total consolidated assets (i) all assets which
would be classified as intangible assets under generally accepted accounting
principles, including but not limited to goodwill and deferred charges, (ii)
cash set apart and held in a sinking or other analogous fund established for the
purpose of redemption or other retirement of capital stock, (iii) leasehold
improvements, and (iv) applicable reserves, allowances and other similar
properly deductible items; and provided further, that there shall be excluded
from total consolidated liabilities deferred income taxes.
9.14. Subsidiary Borrowing. The Borrower will not permit New
Jersey Natural Resources Company and NJNR Pipeline Company, or Commercial Realty
& Resources Corp. to incur or suffer to exist Indebtedness, except (i)
indebtedness to the Borrower or another Subsidiary, and (ii) indebtedness not
exceeding $250,000 in the aggregate for each such Subsidiary.
9.15. Holding Company Act Compliance. The Borrower will
maintain in effect the exemption described in Section 8.1 (m) hereof and will
comply (and will cause each Subsidiary to comply) in all material respects with
the provisions of the Holding Company Act to which it is subject.
10. EVENTS OF DEFAULT
10.1. Events of Default. If one or more of the following
events of default (each an "Event of Default") shall occur and be continuing,
the Agent and the Banks shall be entitled to the remedies set forth in Section
10.2:
(a) the Borrower fails to pay the principal amount of any
Advance when due or interest on any Advance or any other amount payable
hereunder within 5 days after such interest or other amount becomes due and
payable;
(b) the Borrower defaults in the performance of or compliance
with any covenant, obligation or term contained herein or in any Grid Note and,
if such default is capable of remedy, such default has not been remedied within
30 days after the Agent shall have given the Borrower written notice of such
default;
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<PAGE> 19
(c) any representation or warranty made in writing by or on
behalf of the Borrower herein or delivered in connection herewith at any time
proves to have been incorrect in any material respect as of the date made or
deemed to have been repeated;
(d) any Indebtedness (other than the Advances) of the Borrower
or any of its Subsidiaries in excess of $5,000,000 is not paid when due or
becomes or is declared to be due and payable prior to the expressed maturity
thereof, or there shall have occurred an event which would cause any such
Indebtedness to become, or allow any such Indebtedness to be declared to be, due
and payable;
(e) the Borrower or any Principal Subsidiary makes an
assignment for the benefit of creditors, or admits in writing its inability to
pay its debts as they become due, or commences a voluntary case under any
applicable bankruptcy, insolvency or other similar law, or files any petition or
answer seeking for itself any reorganization, arrangement, composition,
readjustment, liquidation, dissolution or similar relief under any present or
future statute, law or regulation relating to creditors' rights, or a decree or
order for relief is entered in respect of the Borrower or any Principal
Subsidiary in an involuntary case under any applicable bankruptcy, insolvency or
other similar law, or the Borrower or any Principal Subsidiary files any answer
admitting or not contesting the material allegations of a petition filed against
the Borrower or any Principal Subsidiary in any such proceeding, or seeks or
consents to or acquiesces in the entry of an order for relief or the appointment
of, or taking possession by, any trustee, receiver, assignee, custodian,
secuestrator or liquidator of the Borrower or such Principal Subsidiary or of
all or a substantial part of the properties of the Borrower or such Subsidiary;
(f) within 60 days after the commencement of an action against
the Borrower or any Principal Subsidiary seeking any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief under any present or future statute, law or regulation, such action is
not dismissed and all orders or proceedings thereunder affecting the operations
or the business of the Borrower or such Principal Subsidiary are not stayed, or
if the stay of any such order or proceeding is thereafter set aside, or if,
within 60 days after the appointment without the consent or acquiescence of the
Borrower or any Principal Subsidiary of any trustee, receiver, assignee,
custodian, sequestrator or liquidator of the Borrower or such Principal
Subsidiary or all or any substantial part of the properties of the Borrower or
such Principal Subsidiary, such appointment is not vacated;
(g) any governmental authority or court takes any action that,
in the reasonable opinion of the Majority Banks, materially adversely affects
the business, operations, property or financial condition of the Borrower or any
Principal Subsidiary or the ability of the Borrower to perform its obligations
under this Agreement or the Grid Notes;
(h) final judgments in an aggregate amount of $500,000 or more
are entered against the Borrower or any Principal Subsidiary and such judgments
remain undischarged, and the execution thereof unstayed for a period of more
than 60 days; or
(i) any Plan or Plans are involuntarily terminated, or a
trustee is appointed to administer any such Plan or Plans under Section 4042 of
ERISA or the PBGC shall institute proceedings to terminate, or to have a trustee
appointed to administer, any such Plan or Plans, and such proceeding shall not
be dismissed within 30 days, or the Borrower or any Subsidiary incurs a
withdrawal liability with respect to any such Plan or Plans under Section 4201
of ERISA, but only if such termination, appointment, institution of proceedings,
or withdrawal liability would result in a liability of the Borrower or any
Subsidiary that would be material to the consolidated financial condition of the
Borrower.
10.2. Default Remedies. If any Event of Default (other than an
Event of Default specified in Section 10.1(e) or 10.1(f)) shall occur and be
continuing, the Agent may with the consent of the Majority Banks, and shall upon
the request of the Majority Banks, (a) declare the obligations of each Bank
hereunder to be terminated, whereupon such obligations shall forthwith
terminate, and (b) declare all amounts payable hereunder or under the Grid Notes
by the Borrower that would otherwise be due after the date of such termination
to be immediately due and payable, whereupon all such amounts shall
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<PAGE> 20
become immediately due and payable, all without diligence, presentment, demand
of payment, protest or notice of any kind, which are expressly waived by the
Borrower. If an Event of Default specified in Section 10.1(e) or 10.1(f) occurs,
the obligations of each Bank hereunder shall be immediately terminated and all
amounts payable hereunder or under the Grid Notes by the Borrower that would
otherwise be due after the date of such Event of Default shall become
immediately due and payable without any declaration or other act on the part of
the Agent or the Banks.
10.3. Right of Setoff. If any amount payable hereunder is not
paid as and when due, the Borrower authorizes each Bank to proceed at any time
and from time to time, to the fullest extent permitted by law, without prior
notice or demand, by right of setoff, banker's lien, counterclaim or otherwise,
against any assets of the Borrower which may at any time be in the possession of
such Bank or any of its affiliates, at any branch or office, and/or against any
other indebtedness at any time owing by such Bank to or for the credit or the
account of the Borrower to the full extent of all amounts payable to the Banks
hereunder, whether or not such amounts shall be due and payable. Any Bank so
proceeding shall forthwith give notice to the Agent and the Borrower of any
action taken by such Bank pursuant to this Section , provided that the failure
to give such notice shall not affect the validity of any such action.
10.4. Rights Not Exclusive. The rights provided for herein are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law.
11. PAYMENTS; COMPUTATIONS.
11.1. Making of Payments. Each payment by the Borrower under
this Agreement or the Grid Notes shall be made in Dollars, in same-day funds or
such other funds as the Agent may at the time determine to be customary for the
settlement in New York City of international banking transactions denominated in
Dollars, by 11:00 a.m. New York City time on the date such payment is due, to
the Agent by deposit to such account as the Agent may have last designated by
notice to the Borrower.
11.2. Computations. Interest and the commitment fees payable
hereunder shall be computed on the basis of a 360-day year and actual days
elapsed.
12. APPLICATION, DISTRIBUTION AND SHARING OF PAYMENTS.
12.1. Sharing of Payments. If any Bank at any time obtains
total or partial payment of any amount payable hereunder other than pursuant to
Section 4.2, 15.1 or 15.2 or by distribution by the Agent pursuant to Section
6.1, such Bank shall forthwith pay to the Agent the amount so obtained, and the
Agent shall apply and distribute such amount were a payment was made by the
Borrower; provided, however, that, if any Bank at any time obtains total or
partial payment of any amount payable thereunder by exorcising a right of
setoff, banker's lien or counterclaim, such Bank shall forthwith purchase from
the other Banks such participations in the Aggregate Advances made by such other
Banks as shall be necessary to cause such purchasing Bank to share such amount
ratably with such other Banks; and provided further, however, that, if all or
any of such amount is thereafter recovered from such purchasing Bank, the
purchase shall be rescinded and the purchase price restored to the extent of
such recovery, but with such adjustments of interest as shall be equitable. Any
Bank so purchasing a direct participation from another Bank pursuant to this
Section 12.1 may, to the fullest extent permitted by law, exercise all of its
rights of collection with respect to such participation as fully as if such Bank
were the direct creditor of the Borrower in the amount of such participation.
Nothing herein contained shall in any way affect the right of any Bank to retain
any amount obtained with respect to indebtedness other than indebtedness under
this Agreement or any Grid Note.
13. THE AGENT
13.1. The Agent. (a) Each Bank authorizes the Agent to
exercise on its behalf the powers specifically delegated to the Agent herein and
all other powers reasonably incidental thereto. The relationship between the
Agent and each Bank is that of agent and principal only, and nothing herein
shall
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be deemed to constitute the Agent a trustee for any Bank or to impose on the
Agent any obligations other than those for which express provision is made
herein.
(b) Neither the Agent nor any director, officer, employee or
agent of the Agent shall have any responsibility for (i) any failure of the
Borrower to fulfill any obligation under this Agreement or the Grid Notes, (ii)
the truth of any representation or warranty made by the Borrower in this
Agreement or any other document delivered in connection with this Agreement or
(iii) the validity or enforceability against the Borrower of this Agreement or
the Grid Notes.
(c) Neither the Agent nor any of the directors, officers,
employees or agents of the Agent shall have any responsibility for any action
taken or omitted to be taken in connection with this Agreement or the Grid
Notes, except for gross negligence or willful misconduct.
(d) The Agent shall be entitled to rely in good faith on any
document believed by it to be genuine and to have been sent or signed by the
proper person and on the opinions and statements of any legal counsel or other
professional advisors selected by it and shall not be liable to any other party
for any consequence of any such reliance.
(e) Each Bank acknowledges that it has made such independent
investigation and evaluation of the creditworthiness of the Borrower as it has
judged appropriate and prudent in connection with the making of its Aggregate
Advances. Except as expressly provided herein, the Agent shall have no duty to
provide any Bank with any credit or other information with respect to the
Borrower.
(f) The Agent and its affiliates may, without liability to
account to any Bank therefor, make loans to, accept deposits from, and generally
engage in any kind of business with the Borrower as though it were not the
Agent.
(g) The Agent may treat each Bank as the holder of each Grid
Note delivered for such Bank pursuant to this Agreement for all purposes
whatsoever unless and until the Agent receives notice, in form and substance
satisfactory to it, of a transfer or assignment thereof and the written
agreement of the person or persons to whom such Grid Note has been transferred
or assigned to be bound by the terms hereof.
(h) The Agent may resign at any time by giving written notice
to the Banks and the Borrower or be removed with or without cause by the
Majority Banks by notice to the Agent and the Borrower. Upon the giving of
either such notice, the Majority Banks shall have the right to appoint another
Bank as successor Agent. If a successor Agent has not been so appointed and
accepted such appointment on or before the sixtieth day after such notice is
given, the retiring Agent may appoint a successor Agent. Upon the acceptance of
appointment as Agent hereunder by a successor Agent and notice of such
acceptance to the Borrower and the Banks, such successor agent shall succeed to
and become vested with all the rights, powers, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. Notwithstanding the resignation or removal of
any retiring Agent hereunder, the provisions of this Section 13 shall continue
to inure to the benefit of such Agent in respect of any action taken or omitted
to be taken by such Agent in its capacity as such.
13.2. Covenant to Reimburse. Each Bank shall reimburse the
Agent (to the extent not reimbursed by the Borrower) ratably in accordance with
the proportionate share of such Bank determined, if the Agent seek such
reimbursement, with respect to a time when there are no Advances outstanding
hereunder, on the basis of the respective Commitments of the Banks, or, it
thereafter, on the basis of respective principal amounts of the Aggregate
Advances maintained at the time for all expenses incurred by the Agent in the
exercise of its responsibilities as Agent, including, without limitation, the
reasonable fees and expenses of legal and other professional advisors.
13.3. Non-Receipt of Funds by the Agent. (a) Unless the Agent
has received written notice from the Borrower prior to the date on which any
payment by the Borrower is due hereunder that
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<PAGE> 22
the Borrower does not intend to make such payment as and when due, the Agent may
assume that the Borrower has so made such payment and, in reliance upon such
assumption, the Agent may (but shall not be required to) make available to each
Bank on the date such payment is due an amount equal to the portion of such
assumed payment that such Bank is entitled to hereunder. If the Borrower has not
in fact made such payment to the Agent, each such Bank shall, on demand, repay
to the Agent the amount so made available to it, together with interest on such
amount accrued for each day from and including such payment date to but
excluding the date of such repayment at a rate per annum determined and
certified by the Agent to be its cost of funds.
(b) On each Disbursement Date, the Agent shall be entitled to
assume that each Bank (other than any Bank that has given the Agent notice to
the contrary) has made funds available to the Agent as required by Section 2.3,
and the Agent, acting in reliance upon such assumption, may (but shall not be
required to) transfer funds to the Borrower in an amount equal to the aggregate
of the respective amounts due from all Banks from which no such notice has been
received. If any Bank that has not given such notice fails to make funds
available as required by Section 2.3 and the Agent has credited to the Borrower
an amount equal to such aggregate, the Agent shall be entitled at its option to
recover an amount equal to the expected Advance of such Bank on demand from
either such Bank or the Borrower (without prejudice to the rights of the
Borrower against such Bank) together with interest on such amount accrued for
each day from and including the Disbursement Date, to but excluding the date of
such recovery at a rate per annum determined and certified by the Agent to be
its cost of funds.
14. INDEMNIFICATION
14.1. Expenses. The Borrower shall reimburse the Agent on
demand for all reasonable expenses (including the reasonable fees and expenses
of the Agent's counsel) incurred as a consequence of, or in connection with the
negotiation, preparation or execution of this Agreement or any amendment to this
Agreement and the preservation or enforcement of any right of the Agent or any
Bank under this Agreement or the Grid Notes.
14.2. Other Costs. If the Borrower (a) fails, after giving the
notice referred to in Section 2.2, to fulfill the conditions set forth in
Section 7 at or before the respective times specified for their fulfillment or
otherwise defaults in its irrevocable commitment pursuant to Section 2.2, (b)
fails to pay any amount payable hereunder as and when due or (c) makes, for any
reason whatsoever, any prepayment of principal of any Advance on any day other
than the last day of an Interest Period, the Borrower shall reimburse each Bank
on demand for all losses, additional costs or expenses, that it may reasonably
incur as a consequence thereof including, without limitation, any loss incurred
by each Bank in connection with its reemployment of the amount so prepaid or of
those funds acquired by each Bank to fund an Advance, as the case may be, but
excluding any loss of anticipated profits.
15. CHANGES IN APPLICABLE LAW; INCREASED COSTS
15.1 Changes in Applicable Law. Each Bank shall forthwith
advise the Agent and the Borrower if it determines that:
(a) after the date hereof, the adoption of or any change in
any Applicable Law or in the interpretation thereof by any governmental
or other regulatory authority administering such Applicable Law or by
any court of competent jurisdiction, and/or
(b) compliance by such Bank with any requirement or directive
arising after the date hereof from any central bank or other regulatory
authority administering Applicable Law (whether or not such requirement
or directive has the force of law),
makes it (or makes it apparent that it will become) unlawful to comply with, or
otherwise prevents such Bank from complying with, some or all of the obligations
contemplated by this Agreement. Such notice shall specify the obligations whose
performance is thereby prevented. Such notice may, at the option of such Bank,
demand prepayment by the Borrower of any outstanding Advance made by such Bank
if in
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accordance with this Section 15.1 it is unlawful for such Bank to continue to
fund or maintain such Advance or any portion thereof.
The obligations so specified in such notice shall forthwith be
canceled or suspended to the extent specified in such notice, effective whenever
such performance is so prevented and, if so demanded in such notice, the
Borrower shall, on or prior to the later of (i) two Business' Days after receipt
of such notice or (ii) the date as of which such performance is prevented,
prepay the outstanding amount specified therein in full, or any lesser portion
thereof necessary to eliminate such situation, with accrued interest thereon.
Each prepayment made by the Borrower pursuant to this Section 15.1 shall be
distributed to the Bank entitled thereto.
15.2. Increased Costs. If as a result of:
(a) after the date hereof, the adoption of or any change in
any Applicable Law or in the interpretation thereof by any governmental
or other regulatory authority administering such Applicable Law or by
any court of competent jurisdiction, and/or
(b) compliance by any Bank with any requirement or directive
arising after the date hereof from any central bank or other fiscal,
monetary or any other regulatory authority administering Applicable Law
(whether or not such requirement or directive has the force of law),
(x) the capital required to be maintained by any Bank as a result of its
Commitment or its Advances shall be increased such that the rate of return on
such Bank's capital with respect to its Commitment and Advances is reduced below
that which such Bank could have achieved but for such adoption, change or
compliance (taking into account such Bank's policies regarding capital
adequacy), or (y) there shall be any increase in the cost to any Bank of making,
maintaining or giving effect to its obligations under this Agreement (including,
without limitation, any increased costs resulting from any reserve requirements)
or making or maintaining any Advance or any reduction in any amounts receivable
by any Bank under this Agreement (other than such an increase in costs or
reduction in amounts receivable attributable to (i) a tax on or measured by the
net income of such Bank imposed by the jurisdiction in which it is constituted
or doing business; or (ii) without prejudice to such Bank's rights under Section
6.1, United States Tax or any tax described in clause (i) imposed by withholding
with respect to a payment hereunder); then the Borrower shall from time to time,
forthwith on receipt of a certificate from such Bank, pay to such Bank such
amounts as are certified therein to be sufficient to indemnify such Bank against
such increased cost, reduction in any amount so receivable and/or reduction in
rate of return on capital. The certificate provided by the Bank shall be prima
facie evidence of the amounts claimed (provided that such certificate is
accompanied by a statement of the details on which the calculation of such
amounts was based).
15.3. Alternative Arrangements. If a determination or
certification in accordance with Section 15.1 or 15.2 above is made by, or any
of the circumstances specified in Section 6.1, 15.1 or 15.2 above shall arise in
relation to, any Bank, such Bank shall, in consultation with the Borrower,
during a period ending not later than 30 days after the giving of such notice
under Section 15.1 or such certificate under Section 15.2 or after the date on
which any tax under Section 6.1 becomes payable, as the case may be, use its
reasonable endeavors to make alternative arrangements that remove or minimize
the application of Section 6.1 or this Section 15, as the case may be, and that
are not in the sole judgment of such Bank otherwise disadvantageous to it.
16. GENERAL
16.1. Choice of Law. This Agreement shall be governed by and
construed in accordance with the law of the State of New York.
16.2. Jurisdiction. (a) Any action or proceeding relating in
any way to this Agreement or any Grid Note may be brought and enforced in the
courts of the State of New York or of the United States of America for the
Southern District of New York, and the Borrower irrevocably submits to the
jurisdiction of each such court. Any process or other legal summons for the
purpose of any such action or
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<PAGE> 24
proceeding may be served by mailing a copy thereof by registered mail addressed
to the Borrower as provided for notices hereunder.
(b) The Borrower irrevocably waives, to the fullest extent
permitted by law, any objection that it may now or hereafter have to the laying
of venue of any such action or proceeding relating in any way to this Agreement
or any Grid Note brought in the Supreme Court of the State of New York, County
of New York, or the United States District Court for the Southern District of
New York and any claim that any such action or proceeding brought in any such
court has been brought in an inconvenient forum.
(c) The Borrower further irrevocably waives, to the fullest
extent permitted by Applicable Law, any claim that any action or proceeding
commenced by the Agent or any Bank relating in any way to this Agreement or any
Grid Note should be dismissed or stayed by reason, or pending the resolution, of
any action or proceeding commenced by the Borrower relating in any way to this
Agreement or any Grid Note, whether or not commenced earlier. To the fullest
extent permitted by Applicable Law, the Borrower shall take all measures
necessary for any such action or proceeding commenced by the Agent or any Bank
to proceed to judgment prior to the entry of judgment in any such action or
proceeding commenced by the Borrower.
16.3. Loan Currency. Each reference in this Agreement to
Dollars is of the essence. The obligation of the Borrower in respect of any
amount due under this Agreement or the Grid Notes shall, notwithstanding any
payment in any other currency (whether pursuant to a judgment or otherwise), be
discharged only to the extent of the amount in Dollars that the person entitled
to receive such payment may, in accordance with normal banking procedures,
purchase with the sum paid in such other currency (after premium and costs of
exchange) on the Business Day immediately following the date on which such
person receives such payment. If the amount in Dollars that may be so purchased
for any reason falls short of the amount originally due, the Borrower shall pay
such additional amounts, in Dollars, as may be necessary to compensate for such
shortfall. Any obligation of the Borrower not discharged by such payment shall
be due as a separate and independent obligation and, until discharged as
provided herein, shall continue in full force and effect.
16.4. Notices. Except as otherwise expressly provided herein,
all notices pursuant to this Agreement shall be given by telecopier, telex cable
or by notice in writing hand-delivered or by airmail, postage prepaid. All such
notices shall be sent to the telecopier, telex number or address (as the case
may be) specified for the intended recipient in Schedule I, or, in the case of
the Borrower, to New Jersey Resources Corporation, 1350 Campus Parkway, P.O. Box
1468, Wall, New Jersey 07719, Attention: Senior Vice President and Chief
Financial Officer, or, in the case of the Agent, to Union Bank of Switzerland,
New York Branch, 299 Park Avenue, New York, New York 10171 Attention: Robert W.
Casey, Jr., or to such other number of addresses as such recipient say have last
specified by notice to the other parties. All such notices shall be effective
upon receipt.
16.5. Remedies and Waivers. No failure or delay on the part of
the Agent or any Bank in exercising any right hereunder shall operate as a
waiver of, or impair, any such right. No single or partial exercise of any such
right shall preclude any other or further exercise thereof or the exercise of
any other right. No waiver of any such right shall be effective unless given in
writing. No waiver of any such right shall be deemed a waiver of any other right
hereunder.
16.6. Amendment. This Agreement may be amended only by an
instrument in writing executed by the Borrower and the Majority Banks; provided,
however, that execution of such instrument by the Borrower and all the Banks
shall be required for any amendment that (a) subjects the Banks to any
additional obligation hereunder, (b) reduces the Advances or any fee payable
hereunder, (c) alters any provision of Section 4, (d) postpones any date fixed
for, or changes the currency of, payment of the Advances or any other amount
payable by the Borrower under this Agreement or any of the Grid Notes, (e)
changes the number of Banks, or the manner of determining the number of Banks,
required for the Banks or any of them to take any action hereunder or (f) alters
Sections 6, 12, 15 or this Section 16.6; and
-20-
<PAGE> 25
provided further, that amendment of any provision of this Agreement affecting
the rights or duties of the Agent hereunder shall, in addition, require
execution of such instrument by the Agent.
16.7. Assignment; Participations. (a) This Agreement shall be
binding upon and inure to the benefit of the Borrower, the Agent and each Bank
and their respective successors and assigns; provided, however, that the
Borrower may not assign any of its rights or obligations under this Agreement
without the prior written consent of the Agent and all the Banks.
(b) Any Bank may at any time assign or otherwise transfer its
Grid Note or any of its rights or obligations hereunder in whole or in part;
provided, however, that if the assignee or transferee is other than an office,
Subsidiary or affiliate of such Bank, such assignment or transfer shall not be
made without the consent of the Borrower and notification to the Agent; and
provided further, that no such assignment or transfer shall result in any
additional liability of the Borrower on account of United States Taxes or for
increased costs under Section 6.1 or 15.2 or violate any applicable provision of
the securities laws of the United States or any state thereof. The Borrower
shall, from time to time at the request of any Bank, execute and deliver such
documents as may be necessary to give full force and effect to such assignment
or transfer, including, without limitation, a new Grid Note in exchange for any
Grid Note held by such Bank. If any Bank assigns or otherwise transfers any of
its rights or obligations hereunder, subject to Section 13.1(h), each reference
in this Agreement to such Bank shall be deemed to be a reference to such Bank
and the person or persons to whom such rights or obligations were assigned or
transferred to the extent of their respective interests.
(c) Any Bank may at any time grant to one or more banks or
other institutions (each a "Participant") participating interests in its
Commitment or any or all of its Advances provided that no Bank shall grant a
participation in its Commitment unless (A) such participation involves an amount
equal to $1,000,000 or any greater multiple of $500,000 and (B) after giving
effect thereto such Bank has either no remaining unparticipated Commitment or an
unparticipated Commitment of at least $1,000,000. In the event of any such grant
by a Bank of a participating interest to a Participant, such Bank shall remain
responsible for the performance of its obligations hereunder, and the Borrowers
and the Agent shall continue to deal solely and directly with such Bank in
connection with such Bank's rights and obligations under this Agreement. Any
agreement pursuant to which any Bank may grant such a participating interest
shall provide that such Bank shall retain the sole right and responsibility to
enforce the obligations of the Borrower hereunder including, without limitation,
the right to approve any amendment, modification or waiver of any provision of
this Agreement, provided that such participation agreement may provide that such
Bank will not agree to any modification, amendment or waiver of this Agreement
described in clause (a), (b), (c) or (d) of Section 16.6 without the consent of
the Participant. Each Participant shall be entitled to the benefits of Sections
6, 14 and 15 hereof to the extent that such Bank would be entitled to such
benefits if the participation had not been granted.
16.8. Determinations by the Agent or any Bank. Except as
otherwise provided herein, each determination by the Agent or any Bank hereunder
shall, in the absence of manifest error, be conclusive and binding on the
parties.
16.9. Survival. The obligations of the Borrower under Section
6.1, Section 6.2, Section 14 and Section 15 shall survive the repayment of the
Advances and the cancellation of the Grid Notes and the termination of the other
obligations of the Borrower hereunder.
16.10. Severability of Provisions. Any provision Of this
Agreement that is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions hereof or
affecting the validity or enforceability of such provision in any other
jurisdiction.
16.11. Counterparts. This Agreement may be executed in any
number of counterparts, and all such counterparts taken together shall be deemed
to constitute one and the same agreement.
-21-
<PAGE> 26
16.12. Integration of Terms. This Agreement contains the
entire agreement of the parties relating to the subject matter hereof and
supersedes all oral statements and prior writings with respect thereto.
IN WITNESS WHEREOF, the parties have caused this Agreement to
be duly executed and delivered in New York City as of the date and year first
written above.
Borrower:
NEW JERSEY RESOURCES CORPORATION
By: /S/ GLENN C LOCKWOOD
-----------------------------------
Agent and Bank:
UNION BANK OF SWITZERLAND
New York Branch
By: /S/ ROBERT W CASEY
-----------------------------------
By:
-----------------------------------
Bank:
THE BANK OF TOKYO MITSUBISHI, LTD.
By: /S/ MICHAEL C ROMER
-----------------------------------
-22-
<PAGE> 27
SCHEDULE I
DETAILS OF BANKS AND COMMITMENTS
Union Bank of Switzerland, New York Branch:. Commitment: $20,000,000
Lending Branch: New York
Address for notices: 299 Park Avenue
New York, New York 10171
Attention: Paul Morrison.
Telex No: 129299
Fax: 212-821-3878
The Bank Of Tokyo Mitsubishi, Ltd. Commitment: $10,000,000
Lending Branch:
Address for notices: 1251 Avenue of the Americas
New York, New York 10020
Attention: Stephen E. Goddard
Telex No: 229049
Fax: 212-782-6445
<PAGE> 28
EXHIBIT A
PROMISSORY NOTE
U.S. $ 20,000,000 00 Dated: October 1, 1996
FOR VALUE RECEIVED, the undersigned, NEW JERSEY RESOURCES
CORPORATION, a New Jersey corporation (the "Borrower"), HEREBY PROMISES TO PAY
to the order of
UNION BANK OF SWITZERLAND, NEW YORK BRANCH
(the "Bank") for the account of its Lending Office (as defined in the Credit
Agreement referred to below) the principal amount of each Advance (as defined
below) owing to the Bank by the Borrower pursuant to the Credit Agreement (as
defined below) on the Termination Date (as defined in the Credit Agreement).
The Borrower promises to pay interest on the unpaid principal
amount of each Advance from the date of such Advance until such principal amount
is paid in full, at such interest rates, and payable at such times, as are
specified in the Credit Agreement.
Both principal and interest are payable in lawful money of the
United States of America to Union Bank of Switzerland, New York Branch ("UBS"),
as Agent, at 299 Park Avenue, New York, New York 10171, in same-day funds. Each
Advance owing to the Bank by the Borrower and the maturity thereof, and all
payments made on account of principal thereof, shall be recorded by the Bank
and, prior to any transfer hereof, endorsed on the grid attached hereto which is
part of this Promissory Note.
This Promissory Note is one of the Notes referred to in, and
is entitled to the benefits of, the Revolving Credit Agreement dated as of
August 27, 1996 (the "Credit Agreement"), among the Borrower, the Bank and
certain other banks parties thereto, and UBS, as Agent for the Bank and such
other banks.
The Credit Agreement, among other things, (i) provides for the
making of advances (the "Advances") by the Bank to the Borrower from time to
time in an aggregate amount not to exceed at any time outstanding the U.S.
dollar amount first above mentioned, the indebtedness of the Borrower resulting
from each such Advance being evidenced by this Promissory Note, and (ii)
contains provisions for acceleration of the maturity hereof upon the happening
of certain stated events and also for prepayments on account of principal hereof
prior to the maturity hereof upon the terms and conditions therein specified.
This Promissory Note shall be governed by, and construed in
accordance with, the laws of the State of New York.
NEW JERSEY RESOURCES CORPORATION
By: ______________________________
Title:
<PAGE> 29
GRID
<TABLE>
<CAPTION>
=====================================================================================================================
AMOUNT OF UNPAID PRINCIPAL
DISBURSEMENT DATE AMOUNT OF ADVANCE MATURITY OF PRINCIPAL PAID BALANCE NOTATION MADE BY
ADVANCE OR PREPAID
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
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- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
=====================================================================================================================
</TABLE>
<PAGE> 30
[OPINION OF COUNSEL]
Union Bank of Switzerland
299 Park Avenue
New York, New York 10171
Re: $30,000,000 Revolving Credit and Term Loan for
New Jersey Resources Corporation
New Jersey Resources Corporation (hereinafter the "Company") or
"Borrower") has entered into a revolving Credit and Term Loan Agreement
(hereinafter the "Agreement") with UNION BANK OF SWITZERLAND, New York Bank, as
agent (hereinafter the "Agent"), and UNION BANK OF SWITZERLAND, New York Branch
and THE BANK OF TOKYO MITSUBISHI, LTD., (hereinafter the "Banks").
We are New Jersey counsel to the Company and in that capacity are
familiar with the affairs of the Company, including those relating to the
transactions that are contemplated by the Agreement. We have examined such
corporate records of the Company and other instruments, documents and
certificates as we have deemed necessary for a basis of this opinion which is
being rendered to you as part of the Agreement. We have also engaged in
conferences with officers of the Company and have ascertained or verified to our
satisfaction such additional facts and made such further investigation as we
deemed necessary as a basis for this opinion. Our opinion in this regard is
limited to the laws of the State of New Jersey. Based upon the foregoing we are
of the opinion that:
(i). The Borrower is a corporation duly organized and validly existing
under the law of New Jersey and has the power and authority to own its property,
to conduct its business as currently conducted and to consummate the
transactions contemplated in the Agreement.
(ii). Each Subsidiary is an entity duly organized and validly existing
under the law of its jurisdiction of incorporation or organization and has the
power and authority to own its property and to conduct its business as currently
conducted.
(iii). The Borrower has taken all necessary action to authorize the
execution and delivery of the Agreement and all other documents to be executed
and delivered by it in connection with the Agreement, the performance of its
obligations and under the Agreement and Grid Notes and the consummation of the
transactions contemplated in the Agreement.
(iv). The Agreement has been duly executed and delivered by the
Borrower and constitutes, and each of the Grid Notes, when duly executed and
delivered by the Borrower, will constitute, a legal, valid and binding
obligation of the Borrower, enforceable against the Borrower in accordance with
its terms, subject to applicable bankruptcy, insolvency, moratorium and similar
laws affecting creditors' rights generally, and subject, as to enforceability,
to general principles of equity (regardless of whether enforcement is sought in
a proceeding in equity or at law).
(v). All governmental authorizations and actions of any kind necessary
to authorize the Advances or required for the validity or enforceability against
the Borrower of the Agreement or Grid Notes have been obtained or performed and
are valid and subsisting in full force and effect.
(vi). No consent or approval of, or notice to, any creditor of the
Borrower is required by the terms of any agreement or instrument evidencing any
indebtedness of the Borrower for the execution or delivery of, or the
performance of the obligations of the Borrower under the Agreement or the Grid
Notes or the consummation of the transactions contemplated in the Agreement, and
such execution, delivery, performance and consummation will not result in any
breach or violation of, or constitute a default under, the charter or by-laws of
the Borrower or any subsidiary or any agreement, instrument, judgment, order,
<PAGE> 31
law, rule or regulation applicable to the Borrower or any Subsidiary or to any
property of the Borrower or any Subsidiary.
(vii). There are not actions, proceedings or claims pending or, to our
best knowledge, threatened the adverse determination of which would have a
materially adverse effect on the business, operations, property or consolidated
financial condition of the Borrower and its Subsidiaries or impair the ability
of the Borrower to perform its obligations under, or affect the validity or
enforceability of, the Agreement or the Grid Notes.
(viii.) The Borrower is not an "investment company" within the meaning
of the Investment Company Act of 1940, as amended.
(ix). The Borrower and its Subsidiaries are exempted from regulation by
the Commission under the Holding Company Act, except under Section 9(a)(2)
thereof, pursuant to a filing made with the Commission under Section 3 of said
Act. Such filing is in full force and effect, and no proceedings are pending or,
to our best knowledge, threatened for the revocation or denial of such
exemption.
(x). None of the transactions contemplated in the Agreement (including,
without limitation, the borrowings thereunder and the use of the proceeds
thereof) will violate or result in a violation of Section 7 of the Securities
Exchange Act of 1934, as amended (or any regulations issued pursuant thereto,
including without limitation, Regulations G, T, U and X of the Board of
Governors of the Federal Reserve System).
(xi). All of the issued and outstanding shares of capital stock of the
subsidiaries listed on Exhibit C to the Agreement have been duly authorized and
issued and are fully paid and nonassessable.
Very truly yours,
<PAGE> 32
NEW JERSEY RESOURCES CORPORATION
EXHIBIT C
LIST OF SUBSIDIARIES
<TABLE>
<CAPTION>
% OF VOTING STOCK OWNED
NAME PLACE OF INCORPORATION BY THE BORROWER
- ------------------------------ ---------------------- -------------------------------------
<S> <C> <C>
1. New Jersey New Jersey 100% of common stock (96.0% of voting
Natural Gas stock, inclusive of 210,045 shares of
Company outstanding redeemable cumulative
Preferred Stock not
owned by the
Borrower).
2. NJR Energy Services Corp. New Jersey 100% (all common stock)
subsidiaries:
New Jersey 100% (all common stock)
New Jersey Natural
Energy Company
NJR Energy Corporation New Jersey 100% (all common stock)
subsidiaries:
. New Jersey New Jersey 100% (all common stock)
Natural
Resources
Company
NJNR Pipeline New Jersey 100% (all common stock)
Company
New Jersey Storage Corp. New Jersey 100% (all common stock)
3. NJR Development Corp. New Jersey 100% (all common stock)
Subsidiary:
Commercial New Jersey 100% (all common stock)
Realty &
Resources Corp.
</TABLE>
<PAGE> 33
NEW JERSEY RESOURCES CORPORATION
EXHIBIT D
PERMITTED ENCUMBRANCES
(i) Liens for taxes not delinquent or being contested in good faith and
by appropriate proceedings and for which reserves adequate under generally
accepted accounting principles are being maintained;
(ii) Deposits or pledges to secure obligations under workmen's
compensation, social security or similar laws, or under unemployment insurance;
(iii) Deposits or pledges to secure bids, tenders, contracts (other
than contracts for the payment of money), leases, statutory obligations, surety
and appeal bonds and other obligations of like nature arising in the ordinary
course of business;
(iv) Mechanics', workmen's, materialmen's or other like liens arising
in the ordinary course of business with respect to obligations which are not due
or which are being contested in good faith;
(v) Minor imperfections of title on real estate, provided such
imperfections do not render title unmarketable;
(vi) Any mortgage, encumbrance or other lien upon, or security interest
in, any property hereafter acquired by the Borrower or any Subsidiary, created
contemporaneously with such acquisition to secure or provide for the payment or
financing of any part of the purchase price thereof, or the assumption of any
such mortgage, encumbrance or lien upon, or security interest in, property
hereafter acquired existing at the time of such acquisition, or the acquisition
of any such property subject to any such mortgage, encumbrance or other lien or
security interest without the assumption thereof, provided that each such
mortgage, encumbrance, lien or security interest shall attach only to the
property so acquired;
(vii) Any pledge or assignment of, encumbrance or other liens upon, or
security interest in, the partnership interest of the Company or its
Subsidiaries in Iroquois Gas Transmission System L.P., a Delaware limited
partnership, or any other partnership created in connection with the
development, construction, financing or operation of the Iroquois pipeline which
will transport natural gas from Canada to the north-eastern section of the
United States.
<PAGE> 34
EXTRACT FROM THE MINUTES OF A JOINT MEETING OF THE BOARDS OF DIRECTORS OF
NEW JERSEY RESOURCES CORPORATION, NEW JERSEY NATURAL GAS COMPANY,
AND COMMERCIAL REALTY & RESOURCES CORP., HELD ON ______, 1996
RESOLVED, that the Company enter into a three-year Revolving Credit
Facility with Union Bank of Switzerland, as Agent for the Participating Banks,
in the amount of $30,000,000, substantially upon the terms and conditions set
forth in the Summary of Terms and Conditions submitted at this meeting, which
are hereby approved, and upon such other or further terms and conditions as
shall be approved by the appropriate officers of the Company, the proceeds of
which shall be used to refinance the existing $30,000,000 Term Loan with the
said Participating Banks; and it is further
RESOLVED, that the appropriate officers of the Company are hereby
authorized to execute and deliver an appropriate loan agreement, promissory note
and such other documents and certificates on behalf of the Company as may be
deemed necessary or appropriate to carry out the intent of the foregoing
resolution.
* * * * * * * * * * * * * * * * * * *
I hereby certify this ___ day of October, 1996 that the foregoing is a
true and correct extract from the Minutes of a joint meeting of the Boards of
Directors of New Jersey Resources Corporation, New Jersey Natural Gas Company,
and Commercial Realty & Resources Corp. held on _________, 1996 and that the
resolutions set forth in such extract were duly adopted and have not been
amended or rescinded and are in full force and effect.
--------------------------
Name:
Title:
<PAGE> 35
NEW JERSEY RESOURCES CORPORATION
CERTIFICATE OF INCUMBENCY
I, ________, Senior Vice President, General Counsel and Secretary, do
hereby certify that each of the following persons listed below have been duly
elected to the office or offices set forth opposite his or her name and have
held such office or offices at all times since ____________, 1996 through and
including the date hereof, and the signature appearing opposite his or her name
is his or her genuine signature:
<TABLE>
<CAPTION>
NAME TITLE SIGNATURE
- ---- ----- ---------
<S> <C> <C>
Laurence M. Downes President, CEO ________________________
Glenn C. Lockwood Senior Vice President & Chief ________________________
Financial Officer
,
_________________________
Name:Title:
Dated: October 1, 1996
</TABLE>
<PAGE> 36
E&A INCENTIVE PLAN
<PAGE> 1
EXHIBIT 10-5A
Contract #:331400
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
This Service Agreement, made and entered into this 21st day of June,
1995, by and between TEXAS EASTERN TRANSMISSION CORPORATION, a Delaware
Corporation (herein called "Pipeline") and NEW JERSEY NATURAL GAS COMPANY
(herein called "Customer", whether one or more),
W I T N E S S E T H:
WHEREAS, there currently exists between Pipeline and Customer two
service agreements under Rate Schedule FTS-4 (Pipeline's Contract Nos. 330403
and 330875) which specify an MDQ of 5,000 dth and 35,000 dth, respectively; and
WHEREAS, Pipeline and Customer desire to enter into one service
agreement under Rate Schedule FTS-4 which shall supersede the two existing Rate
Schedule FTS-4 service agreements; and
WHEREAS, transportation rights under the new Rate Schedule FTS-4
service agreement are consistent with the existing rights under the two existing
Rate Schedule FTS-4 service agreements it supersedes;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do covenant and agree as
follows:
ARTICLE I
SCOPE OF AGREEMENT
Subject to the terms, conditions and limitations hereof and of
Pipeline's Rate Schedule FTS-4, Pipeline agrees to deliver on a firm basis for
Customer's account quantities of natural gas up to the following quantity:
Maximum Daily Quantity (MDQ) 40,000 dth;
provided, however, during the period from April 1 of each calendar year
continuing through October 31 of that year, Customer may not tender, without the
consent of Pipeline, a daily quantity in excess of the product of the
Penn-Jersey Summer Capacity Factor multiplied by 5,000 dth (plus Applicable
Shrinkage) plus the product of the Southern Route Summer Capacity Factor
multiplied by 35,000 dth (plus Applicable Shrinkage).
<PAGE> 2
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
Pipeline shall receive for Customer's account, at the Point(s) of
Receipt, for transportation hereunder daily quantities of gas up to Customer's
MDQ, plus Applicable Shrinkage. Pipeline shall transport and deliver for
Customer's account, at the Point(s) of Delivery, such daily quantities tendered
up to such Customer's MDQ.
Pipeline shall not be obligated to, but may at its discretion, receive
at any Point of Receipt on any day a quantity of gas in excess of the applicable
Maximum Daily Receipt Obligation (MDRO), plus Applicable Shrinkage, but shall
not receive in the aggregate at all Points of Receipt on any day a quantity of
gas in excess of the applicable MDQ, plus Applicable Shrinkage, as specified in
the executed service agreement. Pipeline shall not be obligated to, but may at
its discretion, deliver at any Point of Delivery on any day a quantity of gas in
excess of the applicable Maximum Daily Delivery Obligation (MDDO), but shall not
deliver in the aggregate at all Points of Delivery on any day a quantity of gas
in excess of the applicable MDQ, as specified in the executed service agreement.
ARTICLE II
TERM OF AGREEMENT
This Service Agreement shall commence on July 1, 1995, and shall
continue in force and effect until December 1, 2008, and from year to year
thereafter unless terminated by either party upon twelve months' prior written
notice. Subject to Section 22 of Pipeline's General Terms and Conditions and
without prejudice to such rights, this Service Agreement may be terminated at
any time by Pipeline in the event Customer fails to pay part or all of the
amount of any bill for service hereunder and such failure continues for thirty
(30) days after payment is due; provided, Pipeline gives thirty (30) days prior
written notice to Customer of such termination and provided further such
termination shall not be effective if, prior to the date of termination,
Customer either pays such outstanding bill or furnishes a good and sufficient
surety bond guaranteeing payment to Pipeline of such outstanding bill.
Any portions of this Service Agreement necessary to correct or cash-out
imbalances under this Service Agreement as required by the General Terms and
Conditions of Pipeline's FERC Gas Tariff, Volume No. 1, shall survive the other
parts of this Service Agreement until such time as such balancing has been
accomplished.
2
<PAGE> 3
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
ARTICLE III
RATE SCHEDULE
This Service Agreement in all respects shall be and remain subject to
the applicable provisions of Rate Schedule FTS-4 and of the General Terms and
Conditions of Pipeline's FERC Gas Tariff on file with the Federal Energy
Regulatory Commission, all of which are by this reference made a part hereof.
Customer shall pay Pipeline for all services rendered hereunder and for
the availability of such service in the period stated, the applicable prices
established under Pipeline's Rate Schedule FTS-4 as filed with the Federal
Energy Regulatory Commission and as the same may be hereafter legally amended or
superseded.
Customer agrees that Pipeline shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in (a) the
rates and charges applicable to service pursuant to Pipeline's Rate schedule
FTS-4, (b) Pipeline's Rate Schedule FTS-4 pursuant to which service hereunder is
rendered or (c) any provision of the General Terms and Conditions applicable to
Rate Schedule FTS-4; provided however, Pipeline shall not have the right without
the consent of Customer to make any filings pursuant to Section 4 of the Natural
Gas Act to change the MDQ specified in Article I, to change the term of the
service agreement as specified in Article II, to change Point(s) of Receipt
specified in Article IV, to change the Point(s) of Delivery specified in Article
IV or to change the firm character of the service hereunder. Pipeline agrees
that Customer may protest or contest the aforementioned filings, or may seek
authorization from duly constituted regulatory authorities for such adjustment
of Pipeline's existing FERC Gas Tariff as may be found necessary to assure that
the provisions in (a), (b), or (c) above are just and reasonable.
ARTICLE IV
POINT(S) OF RECEIPT AND POINT(S) OF DELIVERY
Natural gas to be received by Pipeline for Customer's account for
service hereunder shall be received on the outlet side of the measuring station
at or near the following designated Point(s) of Receipt, and natural gas to be
delivered by Pipeline for Customer's account hereunder shall be delivered at the
outlet side of the measuring stations at or near the following designated
Point(s) of Delivery, in accordance with the Maximum Daily Receipt Obligation
(MDRO) plus Applicable Shrinkage, Maximum Daily Delivery Obligations (MDDO),
receipt and delivery pressure obligations and measurement responsibilities
indicated below for each:
3
<PAGE> 4
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
<TABLE>
<CAPTION>
Maximum Daily Receipt
Point of Receipt Pressure Measurement
Receipt Obligation Obligation Responsibilities
------- ---------- ---------- ----------------
<C> <C> <C> <C>
1. A point of 5,000 dth plus At any Pipeline
interconnection applicable pressure
between the shrinkage requested by
facilities of CNG Pipeline not
Transmission to exceed
Corporation and the maximum
Pipeline at the allowable
Leidy Storage Field operating
in Potter County, pressure
Pennsylvania
(Pipeline's M&R No.
75931)
2. A point of 35,000 dth plus At any Pipeline
interconnection applicable pressure
between the shrinkage requested by
facilities of CNG Pipeline not
Transmission to exceed
Corporation and the maximum
Pipeline at allowable
Pipeline's operating
Compressor Station pressure
23 (Chambersburg) in
Franklin County,
Pennsylvania
(Pipeline's M&R No.
79923)
</TABLE>
<TABLE>
<CAPTION>
Maximum Daily Delivery
Point of Delivery Pressure Measurement
Delivery Obligation Obligation Responsibilities
-------- ---------- ---------- ----------------
<C> <C> <C> <C>
1. In Middlesex County, 40,000 dth 350 psig Pipeline
New Jersey and
designated by
Pipeline as
Measuring Station
70953
</TABLE>
further provided, however, that, until changed by a subsequent Agreement between
Pipeline and Customer, Pipeline's aggregate maximum daily delivery obligation at
the point of delivery described above, including Pipeline's maximum daily
delivery obligations under this and all other Service Agreements existing
between Pipeline and Customer, shall in no event exceed the following:
Point of Aggregate Maximum Daily
Delivery Delivery Obligation
-------- -------------------
No. 1 314,863 dth
4
<PAGE> 5
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
ARTICLE V
QUALITY
All natural gas tendered to Pipeline for Customer's account shall
conform to the quality specifications set forth in Section 5 of Pipeline's
General Terms and Conditions. Customer agrees that in the event Customer tenders
for service hereunder and Pipeline agrees to accept natural gas which does not
comply with Pipeline's quality specifications, as expressly provided for in
Section 5 of Pipeline's General Terms and Conditions, Customer shall pay all
costs associated with processing of such gas as necessary to comply with such
quality specifications.
ARTICLE VI
ADDRESSES
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Pipeline's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Service Agreement, or any notice
which any party may desire to give to the other, shall be in writing and shall
be considered as duly delivered when mailed by registered,
certified, or regular mail to the post office address of the parties hereto,
as the case may be, as follows:
(a) Pipeline: TEXAS EASTERN TRANSMISSION CORPORATION
5400 Westheimer Court
Houston, TX 77056-5310
(b) Customer: New Jersey Natural Gas Company
1415 Wyckoff Road
P.O. Box 1464
Wall, New Jersey 07719
or such other address as either party shall designate by formal written notice.
ARTICLE VII
ASSIGNMENTS
Any Company which shall succeed by purchase, merger, or consolidation
to the properties, substantially as an entirety, of Customer, or of Pipeline, as
the case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Service Agreement; and either
Customer or Pipeline may assign or pledge this Service Agreement under the
provisions of any mortgage, deed of trust, indenture,
5
<PAGE> 6
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
The interpretation and performance of this Service Agreement shall be
in accordance with the laws of the State of Texas without recourse to the law
governing conflict of laws.
This Service Agreement and the obligations of the parties are subject
to all present and future valid laws with respect to the subject matter, State
and Federal, and to all valid present and future orders, rules, and regulations
of duly constituted authorities having jurisdiction.
ARTICLE IX
CANCELLATION OF PRIOR CONTRACT(S)
This Service Agreement supersedes and cancels, as of the effective date
of this Service Agreement, the contract(s) between the parties hereto as
described below:
Service Agreement dated _______________, between Pipeline and
Customer under Pipeline's Rate Schedule FTS-4 (Pipeline's
Contract Nos. 330403 and 330875)
6
<PAGE> 7
SERVICE AGREEMENT
FOR RATE SCHEDULE FTS-4
(Continued)
IN WITNESS WHEREOF, the parties hereto have caused this Service
Agreement to be signed by their respective Presidents, Vice Presidents or other
duly authorized agents and their respective corporate seals to be hereto affixed
and attested by their respective Secretaries or Assistant Secretaries, the day
and year first above written.
TEXAS EASTERN TRANSMISSION CORPORATION
By /s/ Robert B. Evans
-------------------------------------
Vice President
ATTEST:
/s/ Robert W. Reed
- -----------------------------
ROBERT W. REED
CORPORATE SECRETARY
NEW JERSEY NATURAL GAS COMPANY
By /s/ Gary A. Edinger
-------------------------------------
Gary A. Edinger
Senior Vice President-Gas Supply
ATTEST:
/s/ Oleta J. Harden
- -----------------------------
Oleta J. Harden
Senior Vice President &
General Counsel
7
<PAGE> 1
EXHIBIT 10-5B
Contract #: 400188
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
This Service Agreement, made and entered into this 21st day of June,
1995, by and between TEXAS EASTERN TRANSMISSION CORPORATION, a Delaware
Corporation (herein called "Pipeline") and NEW JERSEY NATURAL GAS COMPANY
(herein called "Customer," whether one or more),
W I T N E S S E T H:
WHEREAS, there currently exists between Pipeline and Customer five
service agreements under Rate Schedule SS-1 (Pipeline's Contract Nos. 400118,
400162, 400163, 400207 and 411999) which specify an MDWQ of 59,171 dth and an
MSQ of 3,550,230 dth, an MDWQ of 588 dth and an MSQ of 69,445 dth, an MDWQ of
1,095 dth and an MSQ of 65,700 dth, an MDWQ of 2,257 dth and an MSQ of 266,561
dth, and an MDWQ of 303 dth and an MSQ of 21,210 dth, respectively; and
WHEREAS, Pipeline and Customer desire to enter into one service
agreement under Rate Schedule SS-1 which shall supersede the five existing Rate
Schedule SS-1 service agreements referenced above; and
WHEREAS, withdrawal rights under the new Rate Schedule SS-1 service
agreement are consistent with the existing rights of the five existing Rate
Schedule SS-1 service agreements it supersedes;
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do covenant and agree as
follows:
ARTICLE I
SCOPE OF AGREEMENT
Subject to the terms, conditions and limitations hereof and of
Pipeline's Rate Schedule SS-1, Pipeline agrees to provide firm service for
Customer under Rate Schedule SS-1 and to receive and store for Customer's
account quantities of natural gas up to the following quantity:
Maximum Daily Injection Quantity (MDIQ) 20,423 dth
Maximum Storage Quantity (MSQ) 3,973,146 dth
Pipeline agrees to withdraw from storage for Customer, at Customer's
request, quantities of gas up to Customer's Maximum Daily Withdrawal Quantity
(MDWQ) of 63,414 dekatherms, or such lesser quantity as determined pursuant to
Rate Schedule SS-1, from Customer's Storage Inventory, plus Applicable
Shrinkage, and to deliver for Customer's account such quantities. Pipeline's
obligation to withdraw gas on any day is governed by the provisions of Rate
Schedule SS-1, including but not limited to Section 6.
<PAGE> 2
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
ARTICLE II
TERM OF AGREEMENT
The term of this Service Agreement shall commence on July 1, 1995 and
shall continue in force and effect until April 30, 2000 and year to year
thereafter unless this Service Agreement is terminated as hereinafter provided.
This Service Agreement may be terminated by either Pipeline or Customer upon
five (5) years prior written notice to the other specifying a termination date
of any year occurring on or after the expiration of the primary term. Subject to
Section 22 of Pipeline's General Terms and Conditions and without prejudice to
such rights, this Service Agreement may be terminated at any time by Pipeline in
the event Customer fails to pay part or all of the amount of any bill for
service hereunder and such failure continues for thirty (30) days after payment
is due; provided, Pipeline gives thirty (30) days prior written notice to
Customer of such termination and provided further such termination shall not be
effective if, prior to the date of termination, Customer either pays such
outstanding bill or furnishes a good and sufficient surety bond guaranteeing
payment to Pipeline of such outstanding bill.
THE TERMINATION OF THIS SERVICE AGREEMENT WITH A FIXED CONTRACT TERM OR
THE PROVISION OF A TERMINATION NOTICE BY CUSTOMER TRIGGERS PREGRANTED
ABANDONMENT UNDER SECTION 7 OF THE NATURAL GAS ACT AS OF THE EFFECTIVE DATE OF
THE TERMINATION. PROVISION OF A TERMINATION NOTICE BY PIPELINE ALSO TRIGGERS
CUSTOMER'S RIGHT OF FIRST REFUSAL UNDER SECTION 3.13 OF THE GENERAL TERMS AND
CONDITIONS ON THE EFFECTIVE DATE OF THE TERMINATION.
In the event there is gas in storage for Customer's account on April 30
of the year of termination of this Service Agreement, this Service Agreement
shall continue in force and effect for the sole purpose of withdrawal and
delivery of said gas to Customer for an additional one-hundred and twenty (120)
days.
ARTICLE III
RATE SCHEDULE
This Service Agreement in all respects shall be and remain subject to
the applicable provisions of Rate Schedule SS-1 and of the General Terms and
Conditions of Pipeline's FERC Gas Tariff on file with the Federal Energy
Regulatory Commission, all of which are by this reference made a part hereof.
2
<PAGE> 3
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
Customer shall pay Pipeline, for all services rendered hereunder and
for the availability of such service in the period stated, the applicable prices
established under Pipeline's Rate Schedule SS-1 as filed with the Federal Energy
Regulatory Commission and as the same may be hereafter revised or changed.
Customer agrees that Pipeline shall have the unilateral right to file
with the appropriate regulatory authority and make changes effective in (a) the
rates and charges applicable to service pursuant to Pipeline's Rate Schedule
SS-1, (b) Pipeline's Rate Schedule SS-1, pursuant to which service hereunder is
rendered or (c) any provision of the General Terms and Conditions applicable to
Rate Schedule SS-1. Notwithstanding the foregoing, Customer does not agree that
Pipeline shall have the unilateral right without the consent of Customer
subsequent to the execution of this Service Agreement and Pipeline shall not
have the right during the effectiveness of this Service Agreement to make any
filings pursuant to Section 4 of the Natural Gas Act to change the MDIQ, MSQ and
MDWQ specified in Article I, to change the term of the service agreement as
specified in Article II, to change Point(s) of Receipt specified in Article IV,
to change the Point(s) of Delivery specified in Article IV, or to change the
firm character of the service hereunder. Pipeline agrees that Customer may
protest or contest the aforementioned filings, and Customer does not waive any
rights it may have with respect to such filings.
ARTICLE IV
POINT(S) OF RECEIPT AND POINT(S) OF DELIVERY
The natural gas received by Pipeline for Customer's account for storage
injection pursuant to this Service Agreement shall be those quantities scheduled
for delivery pursuant to Service Agreements between Pipeline and Customer under
Rate Schedules CDS, FT-1, SCT, PTI or IT-1 which specify as a Point of Delivery
the "SS-1 Storage Point". For purposes of billing of Usage Charges under Rate
Schedules CDS, FT-1, SCT, PTI or IT-1, deliveries under Rate Schedules CDS,
FT-1, SCT, PTI or IT-1 for injection into storage scheduled directly to the
"SS-1 Storage Point" shall be deemed to have been delivered 60% in Market Zone 2
and 40% in Market Zone 3. In addition, at Customer's request any positive or
negative variance between scheduled deliveries and actual deliveries on any day
at Customer's Points of Delivery under Rate Schedules CDS, FT-1, SCT, or IT-1
shall be deemed for billing purposes delivered at the Point of Delivery and
shall be injected into or withdrawn from storage for Customer's account. In
addition to accepting gas for storage injection at the SS-1 Storage Point,
Pipeline will accept gas
3
<PAGE> 4
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
tendered at points of interconnection between Pipeline and third party
facilities at Oakford and Leidy Storage Fields provided that such receipt does
not result in Customer tendering aggregate quantities for storage in excess of
the Customer MDIQ.
The Point(s) of Delivery at which Pipeline shall deliver gas shall be
specified in Exhibit A of the executed service agreement.
Exhibit A and B are hereby incorporated as part of this Service
Agreement for all intents and purposes as if fully copied and set forth herein
at length.
ARTICLE V
QUALITY
All natural gas tendered to Pipeline for Customer's account shall
conform and be subject to the provisions of Section 5 of the General Terms and
Conditions. Customer agrees that in the event Customer tenders for service
hereunder and Pipeline agrees to accept natural gas which does not comply with
Pipeline's quality specifications, as expressly provided for in Section 5 of
Pipeline's General Terms and Conditions, Customer shall pay all costs associated
with processing of such gas as necessary to comply with such quality
specifications.
ARTICLE VI
ADDRESSES
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Pipeline's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Service Agreement, or any notice
which any party may desire to give to the other, shall be in writing and shall
be considered as duly delivered when mailed by registered, certified, or
regular mail to the post office address of the parties hereto, as the case may
be, as follows:
(a) Pipeline: Texas Eastern Transmission Corporation
5400 Westheimer Court
Houston, Texas 77056-5310
(b) Customer: NEW JERSEY NATURAL GAS COMPANY
1415 WYCKOFF ROAD
P. O. BOX 1464
WALL, NJ 07719
4
<PAGE> 5
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
or such other address as either party shall designate by formal written notice.
ARTICLE VII
ASSIGNMENTS
Any Company which shall succeed by purchase, merger, or consolidation
to the properties, substantially as an entirety, of Customer, or of Pipeline, as
the case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Service Agreement; and either
Customer or Pipeline may assign or pledge this Service Agreement under the
provisions of any mortgage, deed of trust, indenture, bank credit agreement,
assignment, receivable sale, or similar instrument which it has executed or may
execute hereafter; otherwise, neither Customer nor Pipeline shall assign this
Service Agreement or any of its rights hereunder unless it first shall have
obtained the consent thereto in writing of the other; provided further, however,
that neither Customer nor Pipeline shall be released from its obligations
hereunder without the consent of the other. In addition, Customer may assign its
rights to capacity pursuant to Section 3.14 of the General Terms and Conditions.
To the extent Customer so desires, when it releases capacity pursuant to Section
3.14 of the General Terms and Conditions, Customer may require privity between
Customer and the Replacement Customer, as further provided in the applicable
Capacity Release Umbrella Agreement.
ARTICLE VIII
INTERPRETATION
The interpretation and performance of this Service Agreement shall be
in accordance with the laws of the State of Texas without recourse to the law
governing conflict of laws.
This Service Agreement and the obligations of the parties are subject
to all present and future valid laws with respect to the subject matter, State
and Federal, and to all valid present and future orders, rules, and regulations
of duly constituted authorities having jurisdiction.
5
<PAGE> 6
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
ARTICLE IX
CANCELLATION OF PRIOR CONTRACT(S)
This Service Agreement supersedes and cancels, as of the effective date
of this Service Agreement, the contract(s) between the parties hereto as
described below:
Service Agreement(s) dated, ___________________________
between Pipeline and Customer under Pipeline's Rate
Schedule SS-1 (Pipeline's Contract Nos. 400118, 400162,
400163, 400207 and 411999).
6
<PAGE> 7
SERVICE AGREEMENT
FOR RATE SCHEDULE SS-1
(Continued)
IN WITNESS WHEREOF, the Parties hereto have caused this Service
Agreement to be signed by their respective Presidents, Vice Presidents, or other
duly authorized agents and their respective corporate seals to be hereto affixed
and attested by their respective Secretaries or Assistant Secretaries, the day
and year first above written.
TEXAS EASTERN TRANSMISSION CORPORATION
By /s/ Robert B. Evans
-----------------------------------
Vice President
ATTEST:
/s/ Robert W. Reed
- -----------------------------
ROBERT W. REED
CORPORATE SECRETARY
NEW JERSEY NATURAL GAS COMPANY
By /s/ Gary A. Edinger
--------------------------------
Gary A. Edinger
Senior Vice President-Gas Supply
ATTEST:
/s/ Oleta J. Harden
- -----------------------------
Oleta J. Harden
Senior Vice President &
General Counsel
7
<PAGE> 8
Contract #: 400188
EXHIBIT A, POINT(S) OF DELIVERY, DATED 6/21/95,
TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE SS-1
BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION
("Pipeline") AND NEW JERSEY NATURAL GAS COMPANY
("Customer"), DATED 6/21/95:
<TABLE>
<CAPTION>
Maximum Daily Delivery
Point of Delivery Pressure Measurement
Delivery Description Obligation Obligation Responsibilities Owner Operator
- -------- ----------- ---------- ---------- ---------------- ----- --------
<S> <C> <C> <C> <C> <C> <C>
1. 70060 New Jersey Natural 17,828 dth 400 pounds TE TE New Jersey
Somerset Co., NJ per square Natural
inch gauge
2. 70059 New Jersey Natural 5,190 dth 100 pounds TE TE New Jersey
Middlesex Co., NJ per square Natural
inch gauge
3. 70953 New Jersey Natural- 38,590 dth 325 pounds TE TE New Jersey
Freehold per square Natural
Middlesex Co., NJ inch gauge
4. 71076 New Jersey Natural- 7,447 dth 300 pounds TE TE New Jersey
Hanover per square Natural
Morris Co., NJ inch gauge
5. 71423 New Jersey Natural- 2,257 dth 150 pounds TE TE New Jersey
Montville per square Natural
Morris Co., NJ inch gauge
6. 70087 Algonquin - 1,058 dth As requested TE TE Algonquin
Lambertville by customer,
NJ, Hunterdon CO., not to exceed
NJ 750 PSIG
7. 71078 Algonquin - Hanover, 1,516 dth As requested TE TE Algonquin
NJ Morris CO., NJ by customer,
not to exceed
750 PSIG
8. 72210 New Jersey Natural None 325 pounds TE TE New Jersey
Jamesburg per square Natural
Middlesex Co., NJ inch gauge
9. 79828 AGT - New Jersey 0 N/A N/A N/A N/A
Natural for
nomination purposes
</TABLE>
provided, however, that until changed by a subsequent Agreement between Pipeline
and Customer, Pipeline's aggregate maximum daily delivery obligations at each of
the points of delivery described above, including Pipeline's maximum daily
delivery obligations under this and all other Service Agreements existing
between Pipeline and Customer, shall in no event exceed the following:
A-1
<PAGE> 9
Contract #: 400188
EXHIBIT A, POINT(S) OF DELIVERY (continued)
NEW JERSEY NATURAL GAS COMPANY
<TABLE>
<CAPTION>
Aggregate Maximum
Point of Delivery Daily Delivery Obligation
----------------- -------------------------
<S> <C>
No.1 49,828 dth
No.2 5,190 dth
No.3 314,863 dth
No.4 14,533 dth
No.5 5,190 dth
No.6 4,649 dth
No.7 2,776 dth
</TABLE>
SIGNED FOR IDENTIFICATION:
PIPELINE: /s/ Robert B. Evans
--------------------------
CUSTOMER: /s/ Gary A. Edinger
--------------------------
SUPERSEDES EXHIBIT A DATED
----------
A-2
<PAGE> 10
Contract #: 400188
EXHIBIT B, WITHDRAWAL QUANTITIES, DATED 6/21/95
TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE SS-1
BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("PIPELINE")
AND NEW JERSEY NATURAL GAS COMPANY ("CUSTOMER"), DATED 6/21/95:
Pipeline shall not be obligated to withdraw for Customer on any day a total
daily quantity in excess of the following:
(A) the MDWQ if Customer's Storage Inventory is equal to or less than
3,973,146 Dth, but more than 929,300 Dth;
(B) a daily entitlement of 53,370 Dth if Customer's Storage Inventory is
equal to or less than 929,300 Dth, but more than 545,000 Dth;
(C) a daily entitlement of 43,279 Dth if Customer's Storage Inventory is
equal to or less than 545,000 Dth, but more than 146,900 Dth;
(D) a daily entitlement of 2,558 Dth if Customer's Storage Inventory is
equal to or less than 146,900 Dth.
B-1
<PAGE> 11
Contract #:400188
EXHIBIT B, (Continued)
NEW JERSEY NATURAL GAS COMPANY
If at any time during the period from November 16 through April 15 of each
contract year the aggregate storage inventory of all Customers under Rate
Schedule SS-1 equals or is less than 30% of the aggregate MSQ of all Customers
under Rate Schedule SS-1, then for the balance of the period ending April 15 for
such contract year injections into storage or transfers of title of gas in
storage inventory shall not be included in Customer's Storage Inventory for
purposes of determining Customer's daily withdrawal rights pursuant to this
Exhibit B. Pipeline shall notify Customer verbally and then in writing when the
aggregate storage inventory of all Customers under Rate Schedule SS-1 and/or
when Customer's individual storage inventory equals or is less than 40% and 30%
of the aggregate MSQ or Customer's individual MSQ, respectively.
SIGNED FOR IDENTIFICATION:
PIPELINE: /s/ Robert B. Evans
---------------------------
CUSTOMER: /s/ Gary A. Edinger
---------------------------
SUPERSEDES EXHIBIT B DATED:
---------
B-2
<PAGE> 1
EXHIBIT 10-5C
Contract #: 820007
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
This Service Agreement, made and entered into this 15th day of November,
1995, by and between TEXAS EASTERN TRANSMISSION CORPORATION, a Delaware
Corporation (herein called "Pipeline") and NEW JERSEY NATURAL GAS COMPANY
(herein called "Customer", whether one or more),
W I T N E S S E T H:
WHEREAS, Customer and Pipeline currently are parties to service agreements
under Pipeline's Rate Schedule CDS (Pipeline Contract Nos. 800226, 800300 and
800391) which specify an MDQ of 100,405 dth, 5,439 dth and 3,671 dth,
respectively; and
WHEREAS, Customer and Pipeline desire to enter into this Service Agreement
to supersede Customer's existing Rate Schedule CDS service agreements (Pipeline
Contract Nos. 800226, 800300 and
800391);
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements herein contained, the parties do covenant and agree as
follows:
ARTICLE I
SCOPE OF AGREEMENT
Subject to the terms, conditions and limitations hereof, of Pipeline's
Rate Schedule CDS, and of the General Terms and Conditions, transportation
service hereunder will be firm. Subject to the terms, conditions and limitations
hereof and of Sections 2.3 and 2.4 of Pipeline's Rate Schedule CDS, Pipeline
shall deliver to those points on Pipeline's system as specified in Article IV
herein or available to Customer pursuant to Section 14 of the General Terms and
Conditions (hereinafter referred to as Point(s) of Delivery), for Customer's
account, as requested for any day, natural gas quantities up to Customer's MDQ.
Customer's MDQ is as follows:
Maximum Daily Quantity (MDQ) 109,560 dth;
provided, however, subject to the provision of at least two (2) years
prior written notice to the other party hereto, either Customer or
Pipeline shall have the right to reduce the MDQ under this Service
Agreement, with such reduction to be effective as of November 1, 2000 or
any November 1 thereafter, by a quantity not
<PAGE> 2
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
in excess of 36,520 dth in any given year. In the event either Customer or
Pipeline exercises its right to reduce the MDQ of this Service Agreement
as set forth in this ARTICLE I, any such reductions will be subject to
either Pipeline's right of pregranted abandonment or Customer's right of
first refusal, as applicable, as set forth in ARTICLE II of this Service
Agreement.
Subject to variances as may be permitted by Sections 2.4 of Rate Schedule
CDS or the General Terms and Conditions, Customer shall deliver to Pipeline and
Pipeline shall receive, for Customer's account, at those points on Pipeline's
system as specified in Article IV herein or available to Customer pursuant to
Section 14 of the General Terms and Conditions (hereinafter referred to as
Point(s) of Receipt) daily quantities of gas equal to the daily quantities
delivered to Customer pursuant to this Service Agreement up to Customer's MDQ,
plus Applicable Shrinkage as specified in the General Terms and Conditions.
Pipeline shall not be obligated to, but may at its discretion, receive at
any Point of Receipt on any day a quantity of gas in excess of the applicable
Maximum Daily Receipt Obligation (MDRO), plus Applicable Shrinkage, but shall
not receive in the aggregate at all Points of Receipt on any day a quantity of
gas in excess of the applicable MDQ, plus Applicable Shrinkage. Pipeline shall
not be obligated to, but may at its discretion, deliver at any Point of Delivery
on any day a quantity of gas in excess of the applicable Maximum Daily Delivery
Obligation (MDDO), but shall not deliver in the aggregate at all Points of
Delivery on any day a quantity of gas in excess of the MDQ.
In addition to the MDQ and subject to the terms, conditions and
limitations hereof, Rate Schedule CDS and the General Terms and Conditions,
Pipeline shall deliver within the Access Area under this and all other service
agreements under Rate Schedules CDS, FT-1, and/or SCT, quantities up to
Customer's Operational Segment Capacity Entitlements, excluding those
Operational Segment Capacity Entitlements scheduled to meet Customer's MDQ, for
Customer's account, as requested on any day.
ARTICLE II
TERM OF AGREEMENT
The term of this Service Agreement shall commence on the later of (i)
November 1, 1995 or (ii) the first day of the first month after the date
Customer fully executes this Service Agreement, and shall continue in force and
effect until October 31, 2002 and year to year thereafter unless this Service
2
<PAGE> 3
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
Agreement is terminated as hereinafter provided. Subject to the MDQ termination
limitations set forth in Article I of this Service Agreement, this Service
Agreement may be terminated by either Pipeline or Customer upon two (2) years
prior written notice to the other specifying a termination date of any year
occurring on or after the expiration of the primary term. Subject to Section 22
of Pipeline's General Terms and Conditions and without prejudice to such rights,
this Service Agreement may be terminated at any time by Pipeline in the event
Customer fails to pay part or all of the amount of any bill for service
hereunder and such failure continues for thirty (30) days after payment is due;
provided, Pipeline gives thirty (30) days prior written notice to Customer of
such termination and provided further such termination shall not be effective
if, prior to the date of termination, Customer either pays such outstanding bill
or furnishes a good and sufficient surety bond guaranteeing payment to Pipeline
of such outstanding bill.
THE TERMINATION OF THIS SERVICE AGREEMENT WITH A FIXED CONTRACT TERM OR
THE PROVISION OF A TERMINATION NOTICE BY CUSTOMER TRIGGERS PREGRANTED
ABANDONMENT UNDER SECTION 7 OF THE NATURAL GAS ACT AS OF THE EFFECTIVE DATE OF
THE TERMINATION. PROVISION OF A TERMINATION NOTICE BY PIPELINE ALSO TRIGGERS
CUSTOMER'S RIGHT OF FIRST REFUSAL UNDER SECTION 3.13 OF THE GENERAL TERMS AND
CONDITIONS ON THE EFFECTIVE DATE OF THE TERMINATION.
Any portions of this Service Agreement necessary to correct or cash-out
imbalances under this Service Agreement as required by the General Terms and
Conditions of Pipeline's FERC Gas Tariff, Volume No. 1, shall survive the other
parts of this Service Agreement until such time as such balancing has been
accomplished.
ARTICLE III
RATE SCHEDULE
This Service Agreement in all respects shall be and remain subject to the
applicable provisions of Rate Schedule CDS and of the General Terms and
Conditions of Pipeline's FERC Gas Tariff on file with the Federal Energy
Regulatory Commission, all of which are by this reference made a part hereof.
Customer shall pay Pipeline, for all services rendered hereunder and for
the availability of such service in the period stated, the applicable prices
established under Pipeline's Rate Schedule CDS as filed with the Federal Energy
Regulatory Commission, and as same may hereafter be legally amended or
superseded.
3
<PAGE> 4
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
Customer agrees that Pipeline shall have the unilateral right to file with
the appropriate regulatory authority and make changes effective in (a) the rates
and charges applicable to service pursuant to Pipeline's Rate Schedule CDS, (b)
Pipeline's Rate Schedule CDS pursuant to which service hereunder is rendered or
(c) any provision of the General Terms and Conditions applicable to Rate
Schedule CDS. Notwithstanding the foregoing, Customer does not agree that
Pipeline shall have the unilateral right without the consent of Customer
subsequent to the execution of this Service Agreement and Pipeline shall not
have the right during the effectiveness of this Service Agreement to make any
filings pursuant to Section 4 of the Natural Gas Act to change the MDQ specified
in Article I, to change the term of the agreement (including the notice of
termination) as specified in Article II, to change Point(s) of Receipt specified
in Article IV, to change the Point(s) of Delivery specified in Article IV, or to
change the firm character of the service hereunder. Pipeline agrees that
Customer may protest or contest the aforementioned filings, and Customer does
not waive any rights it may have with respect to such filings.
ARTICLE IV
POINT(S) OF RECEIPT AND POINT(S) OF DELIVERY
The Point(s) of Receipt and Point(s) of Delivery at which Pipeline shall
receive and deliver gas, respectively, shall be specified in Exhibit(s) A and B
of the executed service agreement. Customer's Zone Boundary Entry Quantity and
Zone Boundary Exit Quantity for each of Pipeline's zones shall be specified in
Exhibit C of the executed service agreement.
Exhibit(s) A, B and C are hereby incorporated as part of this Service
Agreement for all intents and purposes as if fully copied and set forth herein
at length.
ARTICLE V
QUALITY
All natural gas tendered to Pipeline for Customer's account shall conform
to the quality specifications set forth in Section 5 of Pipeline's General Terms
and Conditions.
4
<PAGE> 5
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
Customer agrees that in the event Customer tenders for service hereunder
and Pipeline agrees to accept natural gas which does not comply with Pipeline's
quality specifications, as expressly provided for in Section 5 of Pipeline's
General Terms and Conditions, Customer shall pay all costs associated with
processing of such gas as necessary to comply with such quality specifications.
Customer shall execute or cause its supplier to execute, if such supplier has
retained processing rights to the gas delivered to Customer, the appropriate
agreements prior to the commencement of service for the transportation and
processing of any liquefiable hydrocarbons and any PVR quantities associated
with the processing of gas received by Pipeline at the Point(s) of Receipt under
such Customer's service agreement.
In addition, subject to the execution of appropriate agreements, Pipeline
is willing to transport liquids associated with the gas produced and tendered
for transportation hereunder.
ARTICLE VI
ADDRESSES
Except as herein otherwise provided or as provided in the General Terms
and Conditions of Pipeline's FERC Gas Tariff, any notice, request, demand,
statement, bill or payment provided for in this Service Agreement, or any notice
which any party may desire to give to the other, shall be in writing and shall
be considered as duly delivered when mailed by registered, certified, or
regular mail to the post office address of the parties hereto, as the case may
be, as follows:
(a) Pipeline: TEXAS EASTERN TRANSMISSION CORPORATION
5400 Westheimer Court
Houston, TX 77056-5310
(b) Customer: NEW JERSEY NATURAL GAS COMPANY
1415 WYCKOFF ROAD
P. O. BOX 1464
WALL, NJ 07719
or such other address as either party shall designate by formal written notice.
5
<PAGE> 6
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
ARTICLE VII
ASSIGNMENTS
Any Company which shall succeed by purchase, merger, or consolidation to
the properties, substantially as an entirety, of Customer, or of Pipeline, as
the case may be, shall be entitled to the rights and shall be subject to the
obligations of its predecessor in title under this Service Agreement; and either
Customer or Pipeline may assign or pledge this Service Agreement under the
provisions of any mortgage, deed of trust, indenture, bank credit agreement,
assignment, receivable sale, or similar instrument which it has executed or may
execute hereafter; otherwise, neither Customer nor Pipeline shall assign this
Service Agreement or any of its rights hereunder unless it first shall have
obtained the consent thereto in writing of the other; provided further, however,
that neither Customer nor Pipeline shall be released from its obligations
hereunder without the consent of the other. In addition, Customer may assign its
rights to capacity pursuant to Section 3.14 of the General Terms and Conditions.
To the extent Customer so desires, when it releases capacity pursuant to Section
3.14 of the General Terms and Conditions, Customer may require privity between
Customer and the Replacement Customer, as further provided in the applicable
Capacity Release Umbrella Agreement.
ARTICLE VIII
INTERPRETATION
The interpretation and performance of this Service Agreement shall be in
accordance with the laws of the State of Texas without recourse to the law
governing conflict of laws.
This Service Agreement and the obligations of the parties are subject to
all present and future valid laws with respect to the subject matter, State and
Federal, and to all valid present and future orders, rules, and regulations of
duly constituted authorities having jurisdiction.
6
<PAGE> 7
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
ARTICLE IX
CANCELLATION OF PRIOR CONTRACT(S)
This Service Agreement supersedes and cancels, as of the effective date of
this Service Agreement, the contract(s) between the parties hereto as described
below:
The restated service agreements, tendered but not signed, between Pipeline
and Customer under Pipeline's Rate Schedule CDS (Pipeline's Contract Nos.
800226, 800300 and 800391) reflecting Pipeline's implementation of Order
No. 636, et seq.
7
<PAGE> 8
SERVICE AGREEMENT
FOR RATE SCHEDULE CDS
(Continued)
IN WITNESS WHEREOF, the parties hereto have caused this Service Agreement
to be signed by their respective Presidents, Vice Presidents or other duly
authorized agents and their respective corporate seals to be hereto affixed and
attested by their respective Secretaries or Assistant Secretaries, the day and
year first above written.
TEXAS EASTERN TRANSMISSION CORPORATION
By /s/ Robert B. Evans
-------------------------------------
Vice President
ATTEST:
/s/ Robert W. Reed
- -------------------------
ROBERT W. REED
CORPORATE SECRETARY
NEW JERSEY NATURAL GAS COMPANY
By /s/ Gary A. Edinger
-------------------------------------
Gary A. Edinger
Senior Vice President-Energy Services
ATTEST:
/s/ Oleta J. Harden
- ----------------------
Oleta J. Harden
Secretary
8
<PAGE> 9
Contract #:820007
EXHIBIT A, TRANSPORTATION PATHS
FOR BILLING PURPOSES, DATED, 11/15/95.
TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE CDS
BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("Pipeline"), AND
NEW JERSEY NATURAL GAS COMPANY ("Customer"),
DATED: 11/15/95
(1) Customer's firm Point(s) of Receipt:
<TABLE>
<CAPTION>
Maximum Daily
Receipt
Obligation (plus
Point of Applicable Measurement
Receipt Description Shrinkage) (dth) Responsibilities Owner Operator
- -------- ----------- ---------------- ---------------- ------ --------
<S> <C> <C> <C> <C> <C>
70217 UNITED GAS KOSCIUSKO, MS 2,792 UNIT GAS PL UNIT GAS UNIT GAS PL
ATTALA CO., MS PL
71200 CHEVRON - VENICE, LA 1,475 CHEVRON USA CHEVRON CHEVRON USA
PAQUEMINES USA
PA., LA
71750 COLUMBIA GULF - ST. LANDRY 2,196 COL GULF COL GULF COL GULF
PA., LA ST. LANDRY PA., LA
72601 SEAGULL SHORELINE SYSTEM - 6,542 SEAGULL SHOR SEAGULL SEAGULL
MATAGORDA CO., TX. SHOR SHOR
MATAGORDA CO., TX
</TABLE>
* Included in Firm Receipt Point Entitlements as set forth in Section 14 of
Pipeline's General Terms and Conditions at the Kosciusko, Mississippi
Point of Receipt.
(2) Customer shall have Pipeline's Master Receipt Point List ("MRPL").
Customer hereby agrees that Pipeline's MRPL as revised and published by
Pipeline from time to time is incorporated herein by reference.
Customer hereby agrees to comply with the Receipt Pressure obligation as set
forth in Section 6 of Pipeline's General Terms and Conditions at such Point(s)
of Receipt.
A-1
<PAGE> 10
Contract #820007
EXHIBIT A, TRANSPORTATION PATHS, continued
NEW JERSEY NATURAL GAS COMPANY
<TABLE>
<CAPTION>
Transportation
Transportation Path Path Quantity (Dth/D)
------------------- ---------------------
<S> <C>
M1 to M3 109,560
</TABLE>
SIGNED FOR IDENTIFICATION
PIPELINE: /s/ Robert B. Evans
--------------------------------
CUSTOMER: /s/ Gary A. Edinger
--------------------------------
SUPERSEDES EXHIBIT A DATED
---------------
A-2
<PAGE> 11
Contract #:820007
EXHIBIT B, POINT(S) OF DELIVERY, DATED 11/15/95,
TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE CDS
BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION ("Pipeline"), AND
NEW JERSEY NATURAL GAS COMPANY ("Customer"),
DATED 11/15/95:
<TABLE>
<CAPTION>
Maximum Daily
Point of Delivery Delivery Pressure Measurement
Delivery Description Obligation Obligation Responsibilities Owner Operator
- -------- ----------- ------------- ----------------- ---------------- ----- --------
(dth)
<S> <C> <C> <C> <C> <C> <C>
1. 70011 COLUMBIA GAS (MFGRS.) 3,671 AS PROVIDED IN TX EAST TRAN TX EAST COL GAS
- EAGLE, PA CHESTER SECTION 6 OF THE TRAN TRAN
CO., PA GENERAL TERMS AND
CONDITIONS OF
PIPELINE'S FERC
GAS TARIFF
2. 70059 NEW JERSEY NATURAL - 4,636 100 POUNDS PER TX EAST TRAN TX EAST NJ NAT GAS
PERTH AMBOY, NJ SQUARE INCH GAUGE TRAN
MIDDLESEX CO., NJ
3. 70060 NEW JERSEY NATURAL - 44,511 400 POUNDS PER TX EAST TRAN TX EAST NJ NAT GAS
BOUND BROOK, NJ SQUARE INCH GAUGE TRAN
SOMERSET CO., NJ
4. 70087 ALGONQUIN - 4,649 AS REQUESTED BY TX EAST TRAN TX EAST ALGONQUIN
LAMBERTVILLE, NJ CUSTOMER, NOT TO TRAN
HUNTERDON CO., NJ EXCEED 750 PSIG
5. 70953 NEW JERSEY NATURAL - 100,450 325 POUNDS PER TX EAST TRAN TX EAST NJ NAT GAS
FREEHOLD, NJ SQUARE INCH GAUGE TRAN
MIDDLESEX CO., NJ
6. 71076 NEW JERSEY NATURAL - 12,982 300 POUNDS PER TX EAST TRAN TX EAST NJ NAT GAS
HANOVER, NJ MORRIS SQUARE INCH GAUGE TRAN
CO., NJ
7. 71078 ALGONQUIN - HANOVER, 2,776 AS REQUESTED BY TX EAST TRAN TX EAST ALGONQUIN
NJ MORRIS CO., NJ CUSTOMER, NOT TO TRAN
EXCEED 750 PSIG
8. 71423 NEW JERSEY NATURAL - 4,636 100 POUNDS PER TX EAST TRAN TX EAST NJ NAT GAS
MONTVILLE, NJ MORRIS SQUARE INCH GAUGE TRAN
CO., NJ
9. 72210 NEW JERSEY NATURAL - NONE 325 POUNDS PER TE EAST TRAN TX EAST NJ NAT GAS
JAMESBURG, MIDDLESEX, SQUARE INCH GAUGE TRAN
NJ
</TABLE>
B-1
<PAGE> 12
Contract #: 820007
EXHIBIT B, POINT(S) OF DELIVERY (Continued)
NEW JERSEY NATURAL GAS COMPANY
<TABLE>
<CAPTION>
Maximum Daily
Point of Delivery Delivery Pressure Measurement
Delivery Description Obligation Obligation Responsibilities Owner Operator
- -------- ----------- ------------- ----------------- ---------------- ----- --------
(dth)
<S> <C> <C> <C> <C> <C> <C>
10. 79513 SS-1 STORAGE POINT 20,423 N/A N/A N/A N/A
04/01-10/31
20,423
11/01-03/31
11. 79560 SS STORAGE INJECTION SUCH QUANTITIES N/A N/A N/A N/A
POINT ACCEPTED BY
PIPELINE NOT TO
EXCEED 31,143
12. 79828 AGT - NEW JERSEY -0- N/A N/A N/A N/A
NATURAL - FOR
NOMINATION
PURPOSES
</TABLE>
provided, however, that until changed by a subsequent Agreement between Pipeline
and Customer, Pipeline's aggregate maximum daily delivery obligations under this
and all other firm Service Agreements existing between Pipeline and Customer,
shall in no event exceed the following:
B-2
<PAGE> 13
Contract #: 820007
EXHIBIT B, POINT(S) OF DELIVERY (Continued)
NEW JERSEY NATURAL GAS COMPANY
<TABLE>
<CAPTION>
Aggregate Maximum Daily
Point of Delivery Delivery Obligation (dth)
----------------- -------------------------
<S> <C>
No. 2 5,190
No. 3 49,828
No. 4 4,649
No. 5 314,863
No. 6 14,533
No. 7 2,776
No. 8 5,190
No. 10 20,423
</TABLE>
and further provided, however, that Pipeline's maximum daily delivery obligation
shall not exceed 374,734 dth in the aggregate at Points of Delivery 70059,
70060, 70953, 71076, 71078, 71423 and 72210.
SIGNED FOR IDENTIFICATION
PIPELINE: /s/ Robert B. Evans
----------------------------
CUSTOMER: /s/ Gary A. Edinger
----------------------------
SUPERSEDES EXHIBIT B DATED
--------------------
B-3
<PAGE> 14
Contract #:820007
EXHIBIT C, ZONE BOUNDARY ENTRY QUANTITY AND ZONE BOUNDARY EXIT QUANTITY,
DATED 11/15/95, TO THE SERVICE AGREEMENT UNDER RATE SCHEDULE CDS
BETWEEN TEXAS EASTERN TRANSMISSION CORPORATION
("PIPELINE") AND NEW JERSEY NATURAL GAS COMPANY
("CUSTOMER"), DATED 11/15/95:
ZONE BOUNDARY ENTRY QUANTITY
Dth/D
To
<TABLE>
<CAPTION>
=============================================================================================================================
FROM STX ETX WLA ELA M1-24 M1-30 M1-TXG M1-TGC M2-24 M2-30 M2-TXG M2-TGC M2 M3
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STX 3,122
- -----------------------------------------------------------------------------------------------------------------------------
ETX 11,685 4,724
- -----------------------------------------------------------------------------------------------------------------------------
WLA 1,437 3,122
- -----------------------------------------------------------------------------------------------------------------------------
ELA 87,038
- -----------------------------------------------------------------------------------------------------------------------------
M1-24 11,685
- -----------------------------------------------------------------------------------------------------------------------------
M1-30 87,038
- -----------------------------------------------------------------------------------------------------------------------------
M1-TXG 6,161
- -----------------------------------------------------------------------------------------------------------------------------
M1-TGC 6,244
- -----------------------------------------------------------------------------------------------------------------------------
M2-24
- -----------------------------------------------------------------------------------------------------------------------------
M2-30
- -----------------------------------------------------------------------------------------------------------------------------
M2-TXG
- -----------------------------------------------------------------------------------------------------------------------------
M2-TGC
- -----------------------------------------------------------------------------------------------------------------------------
M2 109,560
- -----------------------------------------------------------------------------------------------------------------------------
M3
=============================================================================================================================
</TABLE>
C-1
<PAGE> 15
Contract #:820007
EXHIBIT C (Continued)
NEW JERSEY NATURAL GAS COMPANY
ZONE BOUNDARY EXIT QUANTITY
Dth/D
To
<TABLE>
<CAPTION>
=============================================================================================================================
FROM STX ETX WLA ELA M1-24 M1-30 M1-TXG M1-TGC M2-24 M2-30 M2-TXG M2-TGC M2 M3
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STX
- -----------------------------------------------------------------------------------------------------------------------------
ETX
- -----------------------------------------------------------------------------------------------------------------------------
WLA
- -----------------------------------------------------------------------------------------------------------------------------
ELA
- -----------------------------------------------------------------------------------------------------------------------------
M1-24 11,685
- -----------------------------------------------------------------------------------------------------------------------------
M1-30 87,038
- -----------------------------------------------------------------------------------------------------------------------------
M1-TXG 6,161
- -----------------------------------------------------------------------------------------------------------------------------
M1-TGC 6,244
- -----------------------------------------------------------------------------------------------------------------------------
M2-24
- -----------------------------------------------------------------------------------------------------------------------------
M2-30
- -----------------------------------------------------------------------------------------------------------------------------
M2-TXG
- -----------------------------------------------------------------------------------------------------------------------------
M2-TGC
- -----------------------------------------------------------------------------------------------------------------------------
M2 109,560
- -----------------------------------------------------------------------------------------------------------------------------
M3
=============================================================================================================================
</TABLE>
SIGNED FOR IDENTIFICATION:
PIPELINE: /s/ Robert B. Evans
---------------------------
CUSTOMER: /s/ Gary a. Edinger
---------------------------
SUPERCEDES EXHIBIT C DATED
----------
C-2
<PAGE> 1
EXHIBIT 10-6
New Jersey Resources Corporation
Officer Incentive Plan
Purpose
The purpose of the New Jersey Resources Corporation Officer Incentive
Compensation Plan (the "Plan") is to provide a meaningful incentive opportunity
geared to the achievement of specified corporate and individual goals for
officers of the Company who contribute to the operating efficiency and success
of the Company.
Participation
Participation will be limited to officers of the Corporation, and subsidiaries
whose Board of Directors adopt this Plan. Participation will be determined on
the basis of responsibility level within the Company, and each participant will
be assigned to an Incentive Plan Group which reflects his/her company unit and
level of responsibility. The Chief Executive officer will recommend specific
participants, and their incentive Plan Group to the Board of Directors.
If an individual becomes eligible for Plan participation after the beginning of
the Plan Year, which shall correspond to the Company's fiscal year, the Chief
Executive Officer will take into consideration factors such as (a) the
individuals overall contribution and (b) the portion of the year the individual
participated in the Plan in determining the size of any award.
If a participant's employment is terminated during a Plan Year for reason of
death, disability, or normal or early retirement, the Chief Executive Officer
shall have discretion in recommending an incentive award commensurate with the
individuals service and contribution for that portion of the Plan Year that the
participant was employed. In case of death where an incentive award is to be
paid, the Company shall make payment according to the participant's beneficiary
designation form which shall be maintained under this Plan.
In the event a participant is transferred from one position to another during
the Plan Year and such transfer shall have an affect either on the participant's
qualification, basis for award, or on the amount available as an incentive
award, the participant's award shall be prorated accordingly for the Plan Year.
Should a transfer result in a demotion of the participant, any award would be at
the sole discretion of the Board of Directors.
<PAGE> 2
No participant and no person claiming by, under, or through a participant shall
have at any time a vested right or interest in any incentive award proposed or
determined under the terms, conditions, and provisions of this Plan. All
determinations, decisions, and directions shall be made by Board of Directors
giving due consideration to recommendations of the Chief Executive Officer, and
shall be final and conclusive. The interest of any participant or of any person
claiming by, under, or through such participant shall not be assignable or
transferable either by voluntary or involuntary assignment or by operation of
the law and shall not be subject to the claims of any creditor of a participant.
Corporate Objectives
The Chief Executive Officer will propose for Board of Directors approval,
corporate and subsidiary objectives on which overall awards will be determined
for each Incentive Plan Group. Such objectives, and the measures used, will be
based on key financial, operating efficiency, and/or other objectives of the
Company as determined from time to time. Each measure will be stated in terms of
"target", "threshold", and "maximum" performance levels.
The applicable corporate and/or subsidiary actual results for the Plan Year must
equal or exceed the "threshold" level or performance before any incentive award
is triggered for each Incentive Plan Group. The "maximum" performance level,
when achieved, will produce the maximum incentive award opportunity. A separate
"minimum hurdle" level of annual Company-wide profitability may be established
by the Board of Directors before any incentive awards will be paid, such as
payment of dividends on common stock.
Performance objectives, once established, will not be modified unless unforeseen
circumstances occur which would have substantially influenced the setting of
goals had such circumstances been known at that time. These may include but are
not limited to acquisitions, divestitures, natural catastrophe, or other events
of similar magnitude. Any such change will require the approval of the Board of
Directors.
Incentive Opportunities
A Target Award will be established for each Incentive Group each year. The
Target Award will be earned for achievement of "target" performance. "Threshold"
and "maximum" performance incentive award levels will be established in relation
to the target performance levels. Target, threshold, and maximum award levels
will be recommended by
<PAGE> 3
the Chief Executive Officer for approval by the Board of Directors as
appropriate from time to time.
Total incentive opportunities will be identified for each Incentive Plan Group
in two portions, a Group Performance Award and an Individual Performance Award,
with the Group Performance Award portion decreasing in successively lower-level
Incentive Plan Groups.
Individual Goals and Objectives
Each participant, except the Chief Executive Officer, will be rated by their
immediate supervisors on attainment of individual goals and objectives at the
end of each Plan Year. Such ratings will be expressed on a scale of 0 to 120% of
target as the Individual Performance Rating. The Chief Executive Officer will
not be rated individually but will be rewarded based 100% on attainment of
corporate objectives.
Determining Participant Awards
Incentive awards will be based on each participant's salary grade midpoint.
Actual corporate performance will be measured in relation to defined corporate
objectives to determine the "Funded Award" percentage for each participant.
Approval
The Chief Executive Officer will reserve full authority to approve, adjust, or
disapprove each officer Incentive Award.
Form and Timing of Payment
Payment of incentive awards shall be made in cash less applicable Social
Security deductions and required federal, state, and local income tax
withholding. The incentive awards shall be paid to participants as near to the
end of the Plan Year as the Board of Directors determines to be reasonable and
proper. Incentive awards will be based on the participant's actual base salary
earnings over the course of the Plan Year.
Merger, Consolidation, or Other Acquisition
In the event of a merger, consolidation, or acquisition in which New Jersey
Resources Corporation is not the surviving corporation, the Plan Year will be
deemed to have ended as of the date of such event. At the time of such event,
performance levels will be determined (in terms of actual results relative to
target performance) by the Chief Executive Officer with the approval of the
Board of Directors
<PAGE> 4
and appropriate incentives will be paid as soon as practical.
Continuation, Amendment, and Termination
Unless affected by terms of merger, consolidation, or acquisition, this Plan
shall continue in effect until such time as it shall be amended, suspended, or
terminated by resolution of the Board of Directors which specifically reserves
the right to such amendment, modification, suspension, or termination of the
Plan at any time as it shall be determined to be in the beat interests of the
Company.
<PAGE> 1
==============================================================================
Exhibit 10-7
AMENDED AND RESTATED LEASE AGREEMENT
dated as of December 21, 1995
between
STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, not in its individual
capacity but solely as Owner Trustee
as Lessor
and
NEW JERSEY NATURAL GAS COMPANY,
a New Jersey corporation,
as Lessee
-------------------------
New Jersey Natural Gas Company
Leveraged Lease of
Monmouth Shores Corporate Office Park
building and site
<PAGE> 2
Wall, New Jersey
==============================================================================
-2-
<PAGE> 3
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 1. Definitions and Construction........................................................................ 1
SECTION 2. Lease; Lease Term................................................................................... 1
(a) Lease.......................................................................................... 1
(b) Lease Term..................................................................................... 1
(c) Descriptions................................................................................... 2
SECTION 3. Rent; Adjustments to Rent........................................................................... 2
(a) Basic Rent..................................................................................... 2
(b) Supplemental Rent.............................................................................. 2
(c) Method of Payment.............................................................................. 3
(d) Adjustments to Rent............................................................................ 4
(e) Sufficiency of Basic Rent and
Supplemental Rent.............................................................................. 4
SECTION 4. Net Lease .......................................................................................... 4
SECTION 5. Use of the Facility and Relinquishment of Possession................................................ 6
(a) Use........................................................................................... 6
(b) Termination.................................................................................... 7
SECTION 6. Warranty of the Lessor.............................................................................. 8
(a) Quiet Enjoyment................................................................................ 8
(b) Disclaimer of Other Warranties................................................................. 9
(c) Enforcement of Certain Warranties.............................................................. 10
(d) Title Insurance................................................................................ 10
SECTION 7. Liens............................................................................................... 11
SECTION 8. Operation and Maintenance; Modifications;
Identification............................................................................ 12
(a) Operation and Maintenance...................................................................... 12
(b) Inspection..................................................................................... 13
(c) Modifications.................................................................................. 13
(d) Title to Modifications......................................................................... 14
(e) Removal of Property............................................................................ 15
(f) Trade Fixtures and Other Equipment............................................................. 15
(g) Contest of Requirements of Law................................................................. 16
</TABLE>
-1-
<PAGE> 4
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
(h) Improvements.................................................................................... 17
(i) Reports......................................................................................... 18
(j) Environmental Compliance........................................................................ 18
SECTION 9. Event of Loss........................................................................................ 20
(a) Damage, Loss or Casualty Event.................................................................. 20
(b) Repair.......................................................................................... 21
(c) Casualty Event; Requisition of
Title; Requisition of Use; Payment
of Casualty Value............................................................................... 22
(i) Casualty During Basic Term............................................................... 22
(ii) Casualty During a Renewal Term........................................................... 24
(iii) Requisition of Title or
Requisition of Use....................................................................... 24
(d) Condemnation Other Than Requisition
of Use or Requisition of Title................................................................ 26
(e) Application of Payments on an Event
of Loss....................................................................................... 27
(f) Application of Payments Not Relating
to an Event of Loss........................................................................... 28
(g) Application During Event of Default............................................................. 29
SECTION 10. Insurance........................................................................................... 30
(a) Required Insurance.............................................................................. 30
(b) Other Insurance................................................................................. 31
(c) Self-Insurance.................................................................................. 31
(d) [Intentionally Omitted.......................................................................... 32
(e) Policy Provisions and Endorsements.............................................................. 32
(f) Adjustment of Insurance Requirements............................................................ 33
(g) Evidence of Insurance........................................................................... 33
SECTION 11. Rights To Sublease; Assignment by Lessor
as Security....................................................................................... 34
(a) Sublease by the Lessee.......................................................................... 34
(b) Sublessee Non-Disturbance;
</TABLE>
-2-
<PAGE> 5
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Assignment of Existing Leases................................................................... 34
(c) Assignment by the Lessor to the
Indenture Trustee as Security for
the Lessor's Obligations........................................................................ 36
(d) Other Assignments by the Lessor................................................................. 37
(e) Attornment...................................................................................... 37
(f) Corporate Change................................................................................ 37
(g) Lessee Assignment............................................................................... 38
SECTION 12. Lease Renewal Options................................................................................ 38
SECTION 13. Notices for Renewal; Determination of
Fair Market Rental Value........................................................................ 39
(a) Notices for Renewal............................................................................. 39
(b) Determination of Fair Market Rental
Value........................................................................................... 40
(c) Assistance with Disposition..................................................................... 40
SECTION 14. Obsolescence or Uneconomic Usefulness
Termination........................................................................................ 40
(a) Termination Notices............................................................................. 40
(b) Events Prior to Termination Date................................................................ 41
SECTION 15. Events of Default.................................................................................... 43
(a) Payments of Basic Rent, Casualty
Value, Termination Value and EBO
Price........................................................................................... 44
(b) Certain Other Supplemental Rent
Payments........................................................................................ 44
(c) Insurance....................................................................................... 44
(d) Other Covenants................................................................................. 44
(e) Representations and Warranties.................................................................. 44
(f) Receivership, etc............................................................................... 45
SECTION 16. Remedies ............................................................................................ 45
(a) Remedies........................................................................................ 45
(b) No Release...................................................................................... 50
(c) Remedies Cumulative............................................................................. 50
</TABLE>
-3-
<PAGE> 6
TABLE OF CONTENTS
-----------------
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
SECTION 17. Notices............................................................................................ 51
SECTION 18. Successors and Assigns............................................................................. 51
SECTION 19. Right To Perform for the Lessee.................................................................... 51
SECTION 20. Additional Covenants............................................................................... 52
SECTION 21. Right of First Offer............................................................................... 52
SECTION 22. Purchase Options................................................................................... 54
(a) Purchase Options.............................................................................. 54
(b) Determination of Fair Market Sales
Value......................................................................................... 54
(c) [Intentionally Omitted]....................................................................... 55
(d) Purchase Procedure............................................................................ 55
(e) Apportionments................................................................................ 57
(f) Termination under Participation
Agreement..................................................................................... 57
SECTION 23. Granting of Easements.............................................................................. 58
(a) Grant......................................................................................... 58
(b) Cooperation................................................................................... 58
SECTION 24. Amendments and Miscellaneous....................................................................... 58
(a) Amendments in Writing......................................................................... 58
(b) Severability of Provisions.................................................................... 58
(c) True Lease.................................................................................... 59
(d) GOVERNING LAW................................................................................. 59
(e) Headings...................................................................................... 59
(f) Concerning the Owner Trustee.................................................................. 59
(g) Lien of the Indenture......................................................................... 60
(h) Counterpart Execution......................................................................... 60
(i) Estoppel Certificates......................................................................... 60
(j) No Merger..................................................................................... 60
(k) Recordation................................................................................... 60
(l) Signs; Name................................................................................... 61
(m) Rule Against Perpetuities..................................................................... 61
</TABLE>
-4-
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Appendix, Schedules and Exhibits:
- ---------------------------------
Appendix A - Definitions and Rules of Usage
Schedule 1 - Basic Rent
Schedule 2 - Casualty Value
Schedule 3 - Termination Value
Schedule 4 - EBO Date and EBO Price
Exhibit A - Description of Premises
Exhibit B - Legal Description of Site
</TABLE>
-5-
<PAGE> 8
AMENDED AND RESTATED LEASE AGREEMENT
AMENDED AND RESTATED LEASE AGREEMENT dated as of December 21, 1995,
between STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT, NATIONAL
ASSOCIATION, a national banking association, not in its individual capacity but
solely as Owner Trustee, as the Lessor, and NEW JERSEY NATURAL GAS COMPANY, a
New Jersey corporation, as the Lessee.
WHEREAS, the Lessor is the owner of the Facility;
WHEREAS, the Lessee desires to lease from the Lessor the Facility upon
the terms and subject to the conditions set forth herein; and
WHEREAS, the Lessor is willing to lease the Facility to the Lessee upon
the terms and subject to the conditions set forth herein;
WHEREAS, the Lessor and the Lessee desire to amend and restate that
certain Lease Agreement dated as of December 20, 1995 by and between Seller, as
lessor, and the Lessee, as lessee by the execution and delivery of this Lease;
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements herein contained and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
S1. DEFINITIONS AND CONSTRUCTION. For purposes of this Lease (including
the foregoing recitals), capitalized terms used herein and not otherwise defined
in this Lease shall have the meanings (and rules of usage) assigned to them in
Appendix A. Any term defined by reference to an agreement, instrument or other
document shall have the meaning so assigned to it whether or not such document
is in effect. Unless otherwise indicated, references in this Lease to sections,
paragraphs, clauses, appendices, schedules and exhibits are to the same
contained in or attached to this Lease.
S2. LEASE; LEASE TERM.
<PAGE> 9
Lease Agreement
(a) LEASE. Upon the terms and subject to the conditions of this Lease,
the Lessor hereby leases to the Lessee, and the Lessee hereby leases from the
Lessor, the Facility.
(b) LEASE TERM. The interim term of this Lease (the "Interim Term")
shall commence on the Closing Date and shall terminate at 11:59 p.m., New York
City time, on the day before the Basic Term Commencement Date or such earlier
date as provided herein. The basic term (the "Basic Term") shall commence on
(and include) the Basic Term Commencement Date and shall terminate at 11:59
p.m., New York City time, on June 30, 2021 or such earlier date as provided
herein. The term of this Lease shall also include each Renewal Term hereunder.
(c) DESCRIPTIONS. The Premises to be leased on the Closing Date is
described in Exhibit A, and the Site to be leased on the Closing Date is
described in Exhibit B.
S3. RENT; ADJUSTMENTS TO RENT.
(a) BASIC RENT. The Lessee shall pay to the Lessor, as basic rent
("Basic Rent") for the Premises, the following amounts:
(i) on each Rent Payment Date occurring during the Basic Term,
the amounts (payable in advance) set forth on Schedule 1;
(ii) on each Rent Payment Date occurring during a Renewal
Term, if any, an amount determined as provided in Sections 12 and 13.
(b) SUPPLEMENTAL RENT. The Lessee shall pay to the Lessor during the
Lease Term, or (in the case of Excepted Rights and Payments) to whoever shall be
entitled thereto, as supplemental rent ("Supplemental Rent"), the following
amounts:
(i) if and when due, any amount payable hereunder as
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Lease Agreement
Casualty Value, Termination Value or EBO Price; and
(ii) when due, amounts payable by the Lessor in respect of
Make-Whole Amount (other than any Make-Whole Amount payable pursuant to
Section 7.4(b) of the Indenture) and any other amounts (other than
principal and interest) payable on the Facility Notes or under the
Indenture except to the extent such amounts are payable as a result of
(x) an Indenture Event of Default that is not also an Event of Default,
or (y) a refinancing of the Facility Notes not made at the Lessee's
request unless such refinancing results from an Event of Default; and
(iii) when due, or when no due date is specified, on demand,
any amount (other than Basic Rent, Casualty Value, Termination Value or
EBO Price) that the Lessee is required to pay to the Lessor (or any
co-trustee or separate trustee appointed pursuant to the Trust
Agreement), the Owner Participant, the Indenture Trustee (or any note
registrar, paying agent, co-trustee or additional trustee appointed
pursuant to the Indenture), any Loan Participant, any Indemnified
Person and any Related Party to any Indemnified Person, under this
Lease or any other Transaction Document to which the Lessee is a party;
(iv) on demand to the extent permitted by Applicable Law,
interest on (A) any Basic Rent not paid when due and (B) any other Rent
not paid when due, in each case from and including the due date thereof
to but excluding the date of payment thereof (unless payment is made
after 12:00 noon, local time at the place of receipt, in which event
such date of payment shall be included) at a rate per annum equal to
the Default Rate; and
(v) when due, any other amounts, liabilities and obligations
other than Basic Rent which the Lessee has assumed or is otherwise
obligated to pay under this Lease or any other Transaction Document.
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Lease Agreement
(c) METHOD OF PAYMENT. Subject to Section 11(c), each payment of Rent
shall be made in immediately available funds no later than 12:00 noon, New York
City time, on the date such payment shall be due and payable hereunder, and
shall be paid either (i) in the case of payments other than Excepted Rights and
Payments, as provided in Section 11(c), or if Section 11(c) is inapplicable,
then to the Lessor by wire transfer to the bank account of the Lessor specified
in Schedule 2 to the Participation Agreement or such other account at such other
place as may be specified in writing from time to time by the Lessor (any such
notification by the Lessor being effective for any payment of Rent due not
earlier than five (5) Business Days after the date the Lessee receives such
notification, and such bank account to be located in the contiguous continental
United States), or (ii) in the case of payments with respect to Excepted Rights
and Payments, to such Person as shall be entitled to receive such payment at
such address as such Person may specify by notice to the Lessee (the address for
the Lessor to be its address determined in accordance with Section 17);
provided, however, that with respect to payments to the Owner Participant with
respect to Excepted Rights and Payments, all such payments shall be paid by wire
transfer to the account of the Owner Participant specified in Schedule 2 to the
Participation Agreement or such other account at such other place as may be
specified in writing from time to time by the Owner Participant (any such
notification by the Owner Participant being effective for any such payment due
not earlier than five (5) Business Days after the date the Lessee receives such
notification, and such bank account to be located in the contiguous continental
United States). If the date on which any payment of Rent is due hereunder is not
a Business Day, such payment shall be made as aforesaid on the next succeeding
Business Day, with the same force and effect as if made on the nominal due date
provided for in this Lease. Payments shall in all events only be made within the
contiguous continental United States.
(d) ADJUSTMENTS TO RENT. The amounts of Casualty Value and Termination
Value set forth, respectively, in Schedule 2 and Schedule 3, and the EBO Price
set forth in Schedule 5, shall in
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Lease Agreement
each case be adjusted (upward or downward, except in the case of the EBO Price
which shall be adjusted upward only) in accordance with the requirements of
Section 11.1(d) of the Participation Agreement.
(e) SUFFICIENCY OF BASIC RENT AND SUPPLEMENTAL RENT. Notwithstanding
any other provision of this Lease or of any other Transaction Document, (i) the
amount of the installment of Basic Rent payable on each Rent Payment Date shall
be at least equal to the aggregate amount of principal (other than principal due
by reason of prepayment or acceleration) and accrued interest due and payable on
such Rent Payment Date in respect of all Facility Notes then Outstanding and
(ii) the amount of each payment of Casualty Value, Termination Value or EBO
Price (when added to all other amounts required to be paid by the Lessee under
this Lease in respect of any Event of Loss or termination of this Lease) shall
be at least equal to an amount sufficient, as of the date of payment, to pay in
full the principal of, Make-Whole Amount (except any Make-Whole Amount owed
pursuant to Section 7.4(b) of the Indenture), if any, and accrued interest on
all Outstanding Facility Notes on and as of such date of payment.
S4. NET LEASE. This Lease is a net lease and the Lessee hereby
acknowledges and agrees that the Lessee shall pay all costs, charges, Taxes
(other than Taxes imposed on, based on or measured by net income), assessments
and other expenses of every character, foreseen or unforeseen, for the payment
of which the Lessee or, subject to the exclusions set forth in Section 7.1(b) of
the Participation Agreement, any Indemnitee is or shall become liable by reason
of the Lessee's or such Indemnitee's estate, right, title or interest in the
Premises and the Site, or that are connected with or arise out of the
possession, use, occupancy, maintenance, ownership, leasing, subleasing, repair,
rebuilding or improvement of, or addition to, the Premises or the Site or any
portion of either thereof, or that are connected with or arise out of any
obligation of the Lessee under any of the Transaction Documents, or any interest
thereunder, including, without limitation, those specifically referred to in
this Lease. The Lessee's obligation to pay all Rent hereunder, and the rights
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Lease Agreement
of the Lessor in and to such Rent, shall be absolute, unconditional and
irrevocable and shall not be affected by any circumstance of any character,
including, without limitation: (i) any set-off, abatement, counterclaim,
suspension, recoupment, reduction, deduction, deferment, diminution, rescission,
defense or other right or claim that the Lessee or any Affiliate thereof may
have against the Lessor, the Owner Participant, the Indenture Trustee, any Loan
Participant, any vendor or manufacturer of or contractor or subcontractor for
the Premises or any part of any thereof, or any other Person for any reason
whatsoever; (ii) any defect in, failure of or Lien on the title,
merchantability, condition, design, quality, compliance with specifications,
operation or fitness for use of all or any part of the Premises or the Site or
the failure of the Premises or the Site to comply with Applicable Law; (iii) any
damage to, or removal, abandonment, dismantling, requisition, taking, salvage,
contamination, release of Hazardous Substances, condemnation, loss, theft or
destruction of all or any part of the Premises or the Site or any interference,
interruption or cessation in the use or possession of the Premises or the Site
or any part thereof by the Lessee or by any other Person for any reason
whatsoever or of whatever duration; (iv) any restriction, prevention or
curtailment of or interference with any use of all or any part of the Premises
or the Site, including eviction; (v) to the maximum extent permitted by law, any
receivership, conservatorship, insolvency, bankruptcy, reorganization or similar
proceeding by or against the Lessee, the Lessor, the Owner Participant, the
Indenture Trustee, any Loan Participant, the Remainderman or any other Person;
(vi) the invalidity, illegality or unenforceability of this Lease, any other
Transaction Document or any other instrument referred to herein or therein or
any other infirmity herein or therein or any lack of right, power or authority
of the Lessor, the Lessee, the Owner Participant, the Indenture Trustee, the
Remainderman, any Loan Participant or any other Person to enter into this Lease,
any other Transaction Document or to perform the obligations hereunder or
thereunder or consummate the transactions contemplated hereby or thereby or any
doctrine of Force Majeure, impossibility, frustration or failure of
consideration; (vii) the breach or failure of any warranty or
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Lease Agreement
representation made in this Lease or any other Transaction Document by the
Lessee, the Lessor, the Owner Participant, the Indenture Trustee, any Loan
Participant, the Remainderman or any other Person; (viii) any change, waiver,
extension, indulgence or other action or omission or breach in respect of any
obligation or liability of or by the Lessor, the Owner Participant, the
Indenture Trustee, the Remainderman or any Loan Participant; (ix) any claim that
the Lessee has or might have against any Person, including without limitation
the Lessor, any vendor, manufacturer, contractor, the Owner Participant, the
Indenture Trustee, the Remainderman or any Loan Participant; (x) any failure on
the part of the Lessor to perform or comply with any of the terms of this Lease,
any other Transaction Document or of any other agreement whether or not related
to the Overall Transaction; (xi) any action by any court, administrative agency
or other Governmental Authority; or (xii) any other circumstance or happening
whatsoever, whether or not similar to any of the foregoing. The Lessee hereby
waives, to the extent permitted by Applicable Law, any and all rights that it
may now have or that at any time hereafter may be conferred upon it, by statute
or otherwise, to modify, terminate, cancel, quit or surrender this Lease or to
effect or claim any diminution or reduction of Rent payable by the Lessee
hereunder, except in accordance with the express terms hereof. The Lessee agrees
that, if for any reason whatsoever this Lease shall be terminated in whole or in
part by operation of law or otherwise (other than a termination of the entire
Lease expressly provided for in this Lease), then, except as provided herein,
the Lessee shall pay, to the maximum extent permitted by Applicable Law, to the
Lessor or any other Person entitled thereto, an amount equal to each installment
of Basic Rent and all Supplemental Rent at the time such payment would have
become due and payable in accordance with the terms hereof had this Lease not
been terminated in whole or in part. Each payment of Rent made by the Lessee
hereunder shall be final and the Lessee shall not seek or have any right to
recover all or any part of such payment from the Lessor or any Person for any
reason whatsoever. All covenants, agreements and undertakings of the Lessee
herein shall be performed at its cost, expense and risk unless expressly
otherwise stated. Nothing in this Section 4 or
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Lease Agreement
elsewhere shall be construed as a guaranty by the Lessee of any Fair Market
Sales Value, Fair Market Rental Value, residual value, utility or useful life of
the Facility or as a guaranty of the Facility Notes. The Lessee's absolute and
irrevocable covenant to pay Rent, as provided in this Section 4, shall not
affect the Lessee's rights, at law or in equity, otherwise to enforce the
Lessor's obligations under this Lease or any other Transaction Documents.
S5. USE OF THE FACILITY AND RELINQUISHMENT OF POSSESSION.
(a) USE. The Facility shall be used by the Lessee as an office
building, and for no other purpose. The Lessee shall maintain in full force and
effect all Governmental Actions necessary for such use, occupancy or operation
of the Facility.
(b) TERMINATION. Unless the Lessee has theretofore acquired the
Facility as provided herein or in the Participation Agreement, on the Lease
Termination Date, the Lessee shall vacate and surrender possession of the
Facility to the Lessor (or to a Person specified by the Lessor to the Lessee in
writing). At the time of such surrender, the Facility and the Site shall be free
and clear of all Liens (other than Liens described in clauses (a) (excluding the
rights and interests of the Lessee in the Transaction Documents), (b), (c), (g),
(h) and (i) of the definition of "Permitted Liens" and Remainderman Liens);
broom clean in all areas vacated by the Lessee or its Affiliates and in the
condition and state of repair required by Section 8(a)(i). Simultaneously with
such surrender, the Lessee shall deliver to the Lessor (or to such Person) the
following items:
(i) originals or clear copies, if same are required to be left on
the Premises, of all transferable operating licenses, other
licenses, certificates of occupancy, other certificates,
permits, authorizations and approvals relating to the use and
occupancy of the Premises and the Site,
(ii) to the extent in the possession of the Lessee or
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Lease Agreement
any Affiliate thereof: (x) plans and specifications for all
mechanical, electrical and HVAC Systems pertaining to the
Premises, (y) as-built drawings, blueprints, operating and
repair manuals, engineering logs and preventative maintenance
records relating to the Premises or the Site, and (z) plans
and specifications for any Modifications whether made by
Lessee or made by tenants at the Premises and, with respect to
those made by tenants, any consents of the Lessee related
thereto,
(iii) the current rent roll for the Premises (listing each tenant
which is not an Affiliate of the Lessee by name, and
specifying with respect to each such tenant, the square
footage of such tenant's space, the rental rate per square
footage, the rental rate per month, any amount owed for
special tenant services, parking charges, prepaid rent, if
any, and security deposit, if any), together with (1) the
amount of any rent paid by any tenant at the Premises to the
Lessee or any Affiliate of the Lessee attributable to any
period after the Lease Termination Date and (2) with respect
to security deposits, either (x) all security deposits then
held by the Lessee or any Affiliate of the Lessee with respect
to any such tenants or (y) an assignment of all of the
Lessee's or such Affiliate's rights with respect to such
security deposits not theretofore rightfully applied and not
so held,
(iv) for all lessees and sublessees which are not Affiliates of the
Lessee, the originals (if available) or true copies of all
then existing leases (other than this Lease) and subleases of
the Premises (together with all amendments thereto) to which
the Lessee or any Affiliate of the Lessee is a party or which
shall be in the possession or control of the Lessee or any
such Affiliate, and
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Lease Agreement
(v) keys to the Building and all locks located therein in the
possession of the Lessee or any Affiliate of the Lessee.
In addition, in connection with such surrender, the Lessee shall also use
commercially reasonable efforts to assign to the Lessor (or such Person) (x) all
then existing maintenance and management contracts relating to the Premises and
the Site with Persons other than Affiliates of the Lessee, (y) all then existing
warranties against dealers, manufacturers, vendors, contractors and
subcontractors relating to the Premises, the Site or any portion thereof not
theretofore assigned to the Lessor, and (z) all then existing claims against
dealers, manufacturers, vendors, contractors and subcontractors which are not
Affiliates of the Lessee relating to the Premises, the Site or any portion
thereof not theretofore assigned to the Lessor; provided, however, that the
Lessee shall not be required to make any payment in order to obtain any consent
to any such assignment unless the Lessor shall pay or reimburse the Lessee, on
an After-Tax Basis, for the amount of any such payment. The obligations of the
Lessee under this Section 5(b) shall survive the termination of the Lease.
S6. WARRANTY OF THE LESSOR.
(a) QUIET ENJOYMENT. The Lessor covenants and warrants that, unless an
Event of Default shall have occurred and be continuing, the Lessee's quiet and
peaceable possession, use and enjoyment of the Facility in accordance with this
Lease, shall not be interfered with or disturbed by the Lessor or any other
Person lawfully claiming by, through or under the Lessor; provided, however,
that the Lessor shall not be liable to the Lessee for any violation of this
Section 6(a) by the Indenture Trustee or any Loan Participant. The right of
quiet enjoyment under this Lease described above is independent of, and shall
not affect, the Lessor's rights otherwise to initiate legal actions seeking to
enforce the obligations of the Lessee under this Lease or Lessor's rights under
Section 19.
(b) DISCLAIMER OF OTHER WARRANTIES. The warranty set forth
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Lease Agreement
in Section 6(a) is in lieu of all other warranties of the Lessor, whether
written, oral or implied, with respect to this Lease or the Premises, the Site
or the Estate for Years, other than as expressly provided by the Lessor in the
Transaction Documents. Subject to Section 6(a), the Premises and the Site are
leased in their present condition without representation or warranty by the
Lessor and subject to the rights of the parties in possession, to the existing
state of title, to all Applicable Laws now or hereafter in effect and, without
limiting the generality of the foregoing, to all present and future Liens
(exclusive, however, of Lessor Liens and Owner Participant Liens). The Lessee
has examined the Facility and the Site and title thereto and has found all of
the same satisfactory for all purposes. NONE OF THE LESSOR, THE BANK , THE
REMAINDERMAN NOR THE OWNER PARTICIPANT HAS MADE AN INSPECTION OF THE PREMISES
AND THE SITE OR OF ANY FIXTURE OR OTHER ITEM CONSTITUTING A PORTION THEREOF,
AND, EXCEPT AS PROVIDED IN SECTION 6(a), NONE OF THE LESSOR, THE BANK, THE
REMAINDERMAN NOR THE OWNER PARTICIPANT MAKES ANY WARRANTY OR REPRESENTATION,
EXPRESS OR IMPLIED OR OTHERWISE, WITH RESPECT TO THE SAME OR THE LOCATION, USE,
DESCRIPTION, DESIGN, MERCHANTABILITY, FITNESS FOR USE FOR ANY PARTICULAR
PURPOSE, CONDITION, VALUE, HABITABILITY OR DURABILITY THEREOF, OR AS TO THE
TITLE THERETO OR OWNERSHIP THEREOF OR OTHERWISE (EXCEPT THAT THE LESSOR, IN ITS
INDIVIDUAL CAPACITY, REPRESENTS AND WARRANTS THAT ON THE CLOSING DATE, THE
LESSOR SHALL HAVE RECEIVED WHATEVER RIGHT, TITLE AND INTEREST TO THE FACILITY AS
WAS CONVEYED TO THE LESSOR BY THE LESSEE, THE SELLER OR ANY AFFILIATE THEREOF
AND THE PREMISES AND THE SITE WILL BE FREE OF LESSOR LIENS ATTRIBUTABLE TO THE
LESSOR IN ITS INDIVIDUAL CAPACITY), IT BEING AGREED THAT ALL RISKS INCIDENT
THERETO ARE TO BE BORNE BY THE LESSEE. IN THE EVENT OF ANY DEFECT OR DEFICIENCY
OF ANY NATURE IN THE PREMISES AND THE SITE OR ANY FIXTURE OR OTHER ITEM
CONSTITUTING A PORTION THEREOF, WHETHER PATENT OR LATENT, NONE OF THE LESSOR,
THE BANK, THE REMAINDERMAN NOR THE OWNER PARTICIPANT SHALL HAVE RESPONSIBILITY
OR LIABILITY WITH RESPECT THERETO. THE PROVISIONS OF THIS SECTION 6(b) HAVE BEEN
NEGOTIATED AND ARE INTENDED TO BE A COMPLETE EXCLUSION AND NEGATION BY THE
LESSOR, THE BANK, THE REMAINDERMAN AND THE OWNER PARTICIPANT OF, AND THE LESSEE
DOES HEREBY DISCLAIM, ANY AND ALL WARRANTIES BY THE LESSOR, THE BANK,
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Lease Agreement
THE REMAINDERMAN AND THE OWNER PARTICIPANT OTHER THAN AS SET FORTH IN SECTION
6(a), EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR OF HABITABILITY OR OF COMPLIANCE WITH APPLICABLE
LAWS, WITH RESPECT TO THE PREMISES AND THE SITE OR ANY FIXTURE OR OTHER ITEM
CONSTITUTING A PORTION THEREOF, WHETHER ARISING PURSUANT TO THE UNIFORM
COMMERCIAL CODE OR ANOTHER LAW NOW OR HEREAFTER IN EFFECT OR OTHERWISE, EXCEPT
THAT THE LESSOR HEREBY REPRESENTS AND WARRANTS THAT THE PREMISES AND THE SITE
ARE AND SHALL BE FREE OF LESSOR LIENS ARISING BY, THROUGH OR UNDER IT.
(c) ENFORCEMENT OF CERTAIN WARRANTIES. Unless an Event of Default shall
have occurred and be continuing and the Lessor shall have notified the Lessee
that the Lessee is no longer permitted to continue enforcement of its rights
under this Section 6(c), the Lessor authorizes the Lessee (directly or through
agents), at the Lessee's expense, to assert for the Lessor's account, during the
Lease Term, all of the Lessor's rights (if any) under any applicable warranty
and any other claim (under this Lease or any Bill of Sale) that the Lessee or
the Lessor may have against the Seller or any vendor, manufacturer, contractor
or subcontractor with respect to the Premises, the Site or any Modification, and
the Lessor agrees to cooperate, at the Lessee's expense (on an After-Tax Basis
to the Owner Participant or the Lessor to the extent a Tax is imposed on Lessor
rather than the Owner Participant, to the extent the Lessee would be liable to
indemnify the Owner Participant with respect to any recovery from such claim
under the terms of the Tax Indemnification Agreement), with the Lessee and its
agents in asserting such rights. Any amount recovered by the Lessee under any
such warranty or other claim against any vendor, manufacturer, contractor or
subcontractor shall be applied in accordance with Section 9(f) or (g), as
applicable.
(d) TITLE INSURANCE. The Lessee has obtained title insurance policies
in favor of the Lessor, the Indenture Trustee and the Remainderman as set forth
in Section 3.1(18) of the Participation Agreement. During the Lease Term,
proceeds of any recovery under any or all of said title insurance policies (but
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Lease Agreement
in the case of any proceeds of title insurance received by the Indenture
Trustee, prior to the foreclosure of the Lien of the Indenture or assignment in
lieu of foreclosure (whether to the Indenture Trustee, its designee or any other
Person)) shall be applied as follows:
(i) If the proceeds relate to a total failure of title, then
(without limiting any rights of the Lessor or the Owner Participant
under the Participation Agreement for a breach of any warranty of title
made by the Lessee or the Seller) such total failure of title shall be
treated as a Requisition of Title with respect to which the Lessor
shall have accepted the Lessee's rejectable offer under Section
9(c)(iii), and the Lessee shall purchase the Facility on the first
Determination Date occurring at least thirty (30) days after the date
the Title Underwriter confirms in writing the total failure of title
(which date shall be deemed the Event of Loss Purchase Date) pursuant
to the provisions of Section 11.2(a) of the Participation Agreement,
which purchase shall be deemed an Event of Loss Purchase. In such
event, upon compliance with all of the provisions of Section 11.2(a) of
the Participation Agreement, all such title insurance proceeds shall be
allocated among (x) the Lessor, as owner of the Building and the Estate
for Years and as holder of rights under the Option and Estate for Years
Agreement and the Three Party Agreement, (y) the Remainderman, as owner
of the Remainder and as holder of rights under the Option and Estate
for Years Agreement and the Three Party Agreement and (z) the Lessee,
as their respective interests may appear.
(ii) If the proceeds relate to title defects, events or
circumstances which constitute less than a total failure of title, (A)
said proceeds shall be used to cure such title defects, events or
circumstances (or to reimburse any Person who has effected, in whole or
in part, such cure), and shall be held, pending such use, in accordance
with the provisions of Sections 9(f)(i) and (if applicable) 9(g) and
(B) the balance, if any, shall be distributed in accordance with
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Lease Agreement
Section 9(f)(iii).
S7. LIENS. The Lessee shall not directly or indirectly create, grant, incur or
suffer to exist any Lien on or with respect to the Facility or the Site, the
Lessor's title thereto or interest therein, as the case may be, or any title or
interest of the Lessee therein, except Permitted Liens. The Lessee, at its own
expense, shall promptly take such action as may be necessary duly to discharge
any such Lien that may arise. WITHOUT LIMITING THE OBLIGATION OF THE BANK OR THE
OWNER PARTICIPANT TO DISCHARGE LESSOR LIENS OR OWNER PARTICIPANT LIENS,
RESPECTIVELY, NOTICE IS HEREBY GIVEN THAT THE LESSOR IS NOT AND SHALL NOT BE
LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE
LESSEE, OR TO ANYONE HOLDING THE FACILITY, THE SITE OR ANY PART THEREOF THROUGH
OR UNDER THE LESSEE, AND THAT NO MECHANICS' OR OTHER LIENS FOR ANY SUCH LABOR,
SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR IN
AND TO THE FACILITY, THE SITE OR ANY PART THEREOF.
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Lease Agreement
S8. OPERATION AND MAINTENANCE; MODIFICATIONS; IDENTIFICATION.
(a) OPERATION AND MAINTENANCE.
(i) STANDARD. The Lessee shall do each of the following: (1)
operate and maintain all parts of the Premises and the Site in good
repair and condition and will take all actions and will make all
Modifications (if any), structural or nonstructural changes, repairs
and upgrades which may be required to keep all parts of the Premises
and the Site in good repair and condition consistent with customary
standards applicable to the maintenance of first class commercial
office buildings of similar age and size in the area of Wall Township,
New Jersey and consistent with the condition delivered to the Lessee on
the Basic Term Commencement Date (ordinary wear and tear excepted); (2)
operate and maintain the Premises and the Site and make Modifications
(if any) in compliance in all material respects with all Applicable
Laws and applicable Governmental Actions; (3) operate and maintain the
Premises and the Site in at least substantially the same manner and in
accordance with the same standards as the Lessee or its Affiliates
maintains any other similar property owned, leased or subleased by the
Lessee or any such Affiliate and without in any way discriminating
against the Premises or the Site, whether by reason of its leased
status or otherwise; (4) operate, service, maintain or repair the
Premises and the Site in all material respects as may be required to
comply with the conditions of all insurance policies required to be
maintained pursuant to Section 10; and (5) comply in all material
respects with all easements existing from time to time with respect to
the Premises and the Site and maintain all services of public
utilities, in each case as may be necessary for the use and operation
of the Premises and the Site as a first class commercial office
building in the area of Wall Township, New Jersey. Neither the Lessor
nor the Remainderman shall have any obligation to operate, service,
maintain, alter, repair, rebuild or replace the Premises and the Site
or any part thereof, and
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Lease Agreement
the Lessee expressly waives the right to perform any such action at the
expense of the Lessor pursuant to any Applicable Law.
(ii) PAYMENT OF TAXES AND OTHER IMPOSITIONS. Without limiting
the provisions of Section 7.1 of the Participation Agreement, upon the
written request of the Lessor or the Remainderman, the Lessee shall
provide the Lessor or the Remainderman as the case may be, with
evidence of the payment of any Taxes, utility charges or other
impositions, the failure of which to be paid would cause the imposition
of a Lien (other than a Permitted Lien) upon the Premises or the Site.
(iii) ENCROACHMENTS. The Lessee shall undertake no addition to
or improvement of the Premises which encroaches onto property not a
part of the Site unless it shall have obtained a license, easement,
encroachment or other agreement in form and substance reasonably
satisfactory to the Lessor and the Remainderman from the Person owning
the property into which the addition or improvement encroaches.
(b) INSPECTION. Upon not less than five (5) Business Days' notice to
the Lessee (unless an Event of Default shall have occurred and be continuing, in
which case no such notice shall be required), the Lessor, the Remainderman, the
Indenture Trustee, any Participant and their respective authorized
representatives shall, at such party's sole cost, risk and expense (unless an
Event of Default shall have occurred and be continuing, in which case at the
Lessee's cost and expense), have the right to inspect and/or environmentally
assess the Premises and the Site from time to time during normal business hours;
provided, however, that (i) any inspection pursuant to this Section 8(b) shall
be subject to rights of existing tenants and subtenants, Applicable Law and the
Lessee's standard security and safety rules established from time to time and
(ii) each Person conducting any inspection pursuant to this Section 8(b) shall
be accompanied by an authorized representative of the Lessee unless an Event of
Default shall have occurred and be continuing, in which case no such
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Lease Agreement
accompaniment shall be required. No inspection pursuant to this Section 8(b)
shall unreasonably interfere with the use, operation or maintenance of the
Premises or the Site or the normal conduct of the business of the Lessee or any
Affiliate tenant or occupant thereof or that of any applicable sublessee. No
person entitled to make any inspection or inquiry referred to in this Section
8(b) shall have any duty to make any such inspection or inquiry, or shall incur
any obligation or liability by reason of not making any such inspection or
inquiry.
(c) MODIFICATIONS. The Lessee, at its cost and expense and subject to
Section 8(g), shall make any Modification required by any Applicable Law or
Governmental Action or as required in order for the Lessee to maintain any
insurance policy required to be maintained by the Lessee pursuant to Section 10.
In addition, the Lessee, at its cost and expense, from time to time may make any
Modification that the Lessee may deem desirable in the conduct of its business,
subject to the immediately succeeding sentence. All Modifications made pursuant
to either of the first two sentences of this Section 8(c) shall be completed in
a good and workmanlike manner and in a manner that does not (i) decrease the
Fair Market Sales Value, utility, residual value or remaining useful life of the
Site or the Premises from that immediately prior to making such Modification
assuming that the Facility was in the condition required by this Lease or (ii)
cause the Premises or the Site to be characterized as "limited use property"
within the meaning of Revenue Procedure 76-30, 1976-2 C.B. 647; provided,
however, that Modifications required by Applicable Law or insurance requirements
which are completed in a good and workmanlike manner shall in all cases be
deemed to have satisfied the requirements of this sentence. All such
Modifications, upon completion, and the making of all such Modifications shall
comply with all Applicable Laws and with the applicable conditions of all
insurance policies required to be maintained by the Lessee pursuant to Section
10.
(d) TITLE TO MODIFICATIONS. Title to each Modification shall vest as
follows:
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(i) in the case of each Nonseverable Modification the Lessor
shall, without further act, effective on the date such Nonseverable
Modification shall have been incorporated into the Premises or the
Site, acquire title to such Nonseverable Modification;
(ii) in the case of each Severable Modification which is in
replacement of or in substitution for a portion of the Premises, the
Lessor shall, without further act, effective on the date such Severable
Modification shall have been incorporated into the Premises or the
Site, acquire title to such Severable Modification; and
(iii) in the case of each Severable Modification which does
not become the property of the Lessor pursuant to clause (ii), the
Lessee shall retain title to such Severable Modification.
Immediately upon title to a Modification vesting in the Lessor pursuant
to subparagraphs (i) or (ii) of this Section 8(d), such Modification shall,
without further act, become subject to this Lease and be deemed part of the
Facility for all purposes hereof. Modifications, title to which remains in the
Lessee pursuant to subparagraph (iii) of this Section 8(d), shall not be or be
deemed to be a part of the Facility.
(e) REMOVAL OF PROPERTY. Subject to compliance with Applicable Law and
any applicable insurance requirements under insurance policies maintained by the
Lessee under Section 10, the Lessee may remove from time to time any Severable
Modification to which the Lessee has title in accordance with Section 8(d)(iii),
and any other property to which the Lessee shall have title; provided, however,
that the Lessee, at its expense and in any event prior to the Lease Termination
Date (or in the event of a termination under Section 16(a), promptly
thereafter), shall repair any damage to the Premises or the Site caused by such
removal. If any Part is removed by the Lessee from the Premises for the purpose
of making any Modification or of replacement
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Lease Agreement
thereof with another Part, title to such removed Part shall remain the property
of the Lessor, no matter where such removed Part is located, until such time as
the Modification has been completed or the Part constituting a replacement
thereof shall have been incorporated into the Premises, at which time, without
further act, title to such removed Part shall vest in the Lessee or in such
Person as shall be designated by the Lessee, free of the Lien of the Indenture,
and such Part shall not thereafter be part of the Premises. Each replacement
Part shall be free and clear of all Liens (except Permitted Liens), shall upon
installation become a part of the Premises (with title thereto vesting in the
Lessor), and shall be in as good operating condition as, and shall have a Fair
Market Sales Value, residual value, utility and remaining useful life at least
equal to, that of the Part removed, it being assumed for purposes of this
sentence that such removed Part was in at least the condition and state of
repair required by Section 8(a).
(f) TRADE FIXTURES AND OTHER EQUIPMENT. The trade fixtures, personal
property, machinery, equipment and the like in the Premises which are owned by
the Lessee or are owned by the Seller and were not transferred to the Lessor
under the Bill of Sale are acknowledged by the Lessor to be the property of the
Lessee and the Seller, respectively (and do not constitute part of the Facility)
and, without the Lessor's prior written approval, the Lessee or the Seller, as
the case may be, may make such improvements and alterations thereto as it may
desire, at its own expense. Subject to Section 8(e), any such trade or other
fixtures and any trade or other fixture of the Lessee hereafter made or
installed by or for the Lessee and not constituting a Nonseverable Modification
or a Severable Modification title to which has passed to the Lessee, shall
remain the property of the Lessee or the Seller, as the case may be, and in case
of damage or destruction thereto by fire or other causes, the Lessee or the
Seller, as the case may be, shall have the right to recover the value thereof as
its own loss from any insurance company with which it has insured the same, or
to claim an award in the event of condemnation but in either case only in the
event the amount of insurance proceeds or condemnation awards
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Lease Agreement
otherwise payable with respect to the Facility is not reduced. The Lessee may
remove all or any of such things, at any time during the Lease Term (or in the
case of a termination under Section 16(a), promptly thereafter) or, at its
option, the Lessee may abandon the same, in whole or in part, to the Lessor at
the expiration or earlier termination of the Lease Term by vacating the Premises
without removing the same, in which case title to such property shall vest in
the Lessor and such property shall become part of the Premises for the purposes
of Section 5(b); provided that in the case of any such removal by the Lessee,
the Lessee shall repair any damage to the Premises or the Site caused by such
removal; and provided, further, that the Lessee shall pay, or reimburse the
Lessor or the Remainderman, as the case may be, for, any reasonable costs
incurred by the Lessor in connection with the removal or disposal by it of such
abandoned property.
(g) CONTEST OF REQUIREMENTS OF LAW. If, with respect to any requirement
of Applicable Law or any Governmental Action relating to the use, operation or
maintenance of the Premises or the Site, (i) the Lessee is contesting diligently
and in good faith by appropriate proceedings such requirement or Governmental
Action (in which case such contest shall be completed prior to the date the
Facility is to be returned to the Lessor hereunder), or (ii) compliance with
such requirement or Governmental Action shall have been excused or exempted by a
valid nonconforming use permit, waiver, extension or forbearance exempting the
Premises or the Site from such requirement or Governmental Action or (iii) the
Lessee shall be making a good faith effort and shall be diligently taking
appropriate steps to comply with such requirement or Governmental Action (in
which case such compliance shall be effected prior to the date the Facility is
to be returned to the Lessor hereunder), then the failure by the Lessee to
comply with such requirement or Governmental Action shall not constitute a
Default or Event of Default hereunder; provided, however, that in the case of
each of clauses (i) through (iii) above, such contest or noncompliance does not
involve (A) a material risk of foreclosure, sale, forfeiture or loss of, or
imposition of any Lien other than a Permitted Lien on, any part
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Lease Agreement
of the Premises or the Site, (B) a material risk of extending the ultimate
imposition of such Applicable Law or Governmental Action beyond the termination
of the Basic Term or the current Renewal Term, as the case may be (unless there
shall have been furnished indemnification reasonably satisfactory to the Lessor
and the Remainderman), (C) a risk of any material civil liability or any risk of
criminal liability being imposed on the Lessor, the Site, the Premises, the
Owner Participant, the Indenture Trustee, any Loan Participant or the
Remainderman (unless, with respect to civil liability, there shall have been
furnished indemnification satisfactory to each such party), (D) any interference
with the payment of Rent, (E) risk of any material adjustment of, or material
interference with, the use, possession or disposition of the Premises or the
Site or (F) a material risk of reduction of the value, utility or remaining
useful life of the Premises or the Site; provided, however, that the Lessee
shall not be obligated to cure any noncompliance with respect to the Premises or
the Site including, without limitation, any prior nonconforming structure or
uses to the extent such noncompliance does not constitute a current violation of
Applicable Law. The Lessee shall provide the Lessor and the Indenture Trustee
with notice of any contest of the type described in clause (i) above in detail
sufficient to enable the Lessor and the Indenture Trustee to ascertain whether
such contest may have any material adverse effect of the types described in
clauses (A) through (F) above. Notwithstanding the foregoing, compliance with
Applicable Laws regarding Taxes and contests of Taxes shall not be subject to
this Section 8(g), but rather shall be subject to the provisions of Section 7.1
of the Participation Agreement or the provisions of the Tax Indemnification
Agreement, whichever is applicable to the Taxes at issue.
(h) IMPROVEMENTS. The Lessee shall not construct, or cause to be
constructed, any additional building or buildings, any additional structure or
structures, or any comparable additional improvement or improvements, in each
case that would materially increase the gross square footage of the Building or
any other building or structure on the Site or that would reduce the value of
the Building or any other building or structure on the Site
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Lease Agreement
(each an "Additional Improvement" and collectively, "Additional Improvements")
without the Lessor's and the Remainderman's prior written consent (which consent
shall not be unreasonably withheld or delayed and shall not be conditioned upon
the payment to the Lessor or the Owner Participant of any fee for receipt of
such consent); provided, however, that the Lessor's consent shall not be
required for any Additional Improvement if the following conditions are
satisfied with respect thereto:
(i) the scheduled period of construction from commencement of
construction until such Additional Improvement is under roof and
enclosed shall not extend beyond the date which is one (1) year prior
to the end of the Lease Term; and
(ii) the Lessee shall deliver to the Lessor certificates of
any additional insurance which the Lessee shall obtain in connection
with construction of such Additional Improvement, with the Additional
Insureds being named additional insureds thereunder; provided, however,
that in the case of any insurance obtained by the Lessee from any
contractors, the Lessee shall not be required to deliver such insurance
certificates to the Lessor, but shall use commercially reasonable
efforts to so obtain such certificates.
Title to all Additional Improvements shall, without further act, automatically
vest in the name of the Lessor.
(i) REPORTS. To the extent permissible under Applicable Law, the Lessee
shall, at the Lessee's cost and expense, prepare (or cause to be prepared) and
file in a timely fashion, or, if the Lessor shall be required pursuant to
Applicable Law to file, the Lessee, at the Lessee's cost and expense, shall
prepare or cause to be prepared and delivered to the Lessor within a reasonable
time prior to the date for filing, and the Lessor shall, upon receipt thereof
from the Lessee, file all reports, applications, permits, requests or other
filings with respect to the Premises or the Site or the condition or operation
thereof
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that shall be required to be filed with any Governmental Authority and if, in
the Lessee's reasonable judgment, it is necessary or appropriate for the Lessor
to sign, approve or join in any such report, application, permit, request or
other filing, the Lessor shall not unreasonably refuse to sign, approve or join
therein promptly after the receipt of the Lessee's written request therefor and
reasonable opportunity to review same (with appropriate consultants reasonably
acceptable to the Lessee), and any reasonable out-of-pocket expenses incurred by
the Lessor, the Owner Participant or the Remainderman in connection therewith
shall be promptly paid on an After-Tax Basis by the Lessee upon receipt of bills
therefor.
(j) ENVIRONMENTAL COMPLIANCE.
(i) The Lessee shall promptly notify the Owner Participant,
the Lessor, the Indenture Trustee and the Remainderman, with reasonable
detail, in writing of (A) any fact, circumstance, condition,
occurrence, omission or release (as that term is defined under
Environmental Laws) at, around, under or from the Site or the Premises
that may result in material expense relating to any Environmental Laws
or Hazardous Substances, such notice to be given no later than ten days
after the condition is discovered or such occurrence takes place, and
(B) any pending or threatened Claim against the Lessee, the Site or the
Premises relating to an alleged violation of Environmental Laws, such
notice to be given no later than ten days after such Claim is commenced
or threatened. Upon request, the Lessee shall provide copies of all
written communications and other documents relating to any such notice.
(ii) The Lessee shall take any and all actions, at the
Lessee's sole cost and expense, necessary to conduct and complete any
investigation, study, sampling and testing and undertake any cleanup,
removal, remedial, corrective, responsive or other action, in each case
as necessary to abate, correct, remove and clean up or remediate any
violation of applicable Environmental Laws or any release
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Lease Agreement
at, on, under, around or from the Site or the Premises in compliance
with Environmental Laws.
(iii) The Lessee will not cause or permit the use, release,
generation, treatment, storage, recycling or disposal (as those terms
are defined under Environmental Laws) of any Hazardous Substances on
the Site or the Premises or the transportation of Hazardous Substances
to or from the Site or the Premises, other than in de minimis
quantities in the ordinary course of business and in compliance with
Environmental Laws. The Lessee will not permit the Site or the Premises
to be used or operated by the Lessee, its sublessees, and/or its and
their respective agents, employees, contractors and invitees in a
manner which creates any liability under any Environmental Laws.
(iv) The Lessee shall comply with all Environmental Laws now
or hereafter applicable to the use, modification, operation,
construction or maintenance of the Site or the Premises and the Lessee
shall have sole responsibility for all expenses (including attorney,
professional or consultant fees or costs) associated with such
compliance, including compliance with any such Environmental Laws
directed to any Participant, the Owner Trustee, the Indenture Trustee,
the Lessor or the Remainderman or to which any Participant, the Owner
Trustee, the Indenture Trustee, the Lessor or the Remainderman may
become subject with respect to its interests in the Premises and the
Site. The Lessee covenants that it shall not install or permit the
installation by the Lessee, its sublessees and/or its or their
respective agents, employees, contractors and invitees of any above
ground or underground storage tanks (other than septic tanks), surface
impoundments or asbestos containing materials.
(v) The Lessee shall (on its behalf and on behalf of the
Lessor), at the Lessee's sole cost and expense, comply with the
Industrial Site Recovery Act, N.J.S.A. 13:1K-6 et seq. ("ISRA"). The
Lessee shall (on its behalf and on
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behalf of the Lessor), at the Lessee's sole cost and expense, make all
submissions to, provide all information to, and comply with all
requirements of, the Department of Environmental Protection or its
successor.
S9. EVENT OF LOSS.
(a) DAMAGE, LOSS OR CASUALTY EVENT.
(i) If an Event of Loss shall occur, or if any substantial
part of the Premises or the Site shall suffer damage, destruction,
loss, condemnation, confiscation, theft or seizure that does not
constitute an Event of Loss, the Lessee shall promptly, and in any case
within ten (10) days after such event, so notify the Lessor, the
Remainderman and the Indenture Trustee and, at the Lessee's sole
expense, shall diligently pursue collection of insurance or
condemnation proceeds in a manner reasonably acceptable to the Lessor,
the Owner Participant and the Remainderman.
(ii) If a Casualty shall occur, the Lessee shall, within
ninety (90) days of the occurrence of such Casualty, notify the Lessor
and the Remainderman in writing of its election to either (A) so long
as no Default or Event of Default shall have occurred and be
continuing, reconstruct the Premises and the Site pursuant to Section
9(b)(ii) or (B) whether or not a Default or an Event of Default shall
have occurred and be continuing, (x) if such Casualty occurs during the
Basic Term, make an irrevocable, rejectable purchase offer for the
Facility pursuant to Section 9(c)(i) or (y) if such Casualty occurs
during any Renewal Term, make an irrevocable, rejectable purchase offer
for the Facility pursuant to Section 9(c)(ii). For any Casualty which
occurs during the Basic Term, failure to give such a notice within such
90-day period or, if the Lessee has given notice pursuant to clause (A)
of this Section 9(a)(ii) that it will reconstruct the Premises and the
Site, failure of the Lessee to reconstruct the Premises and the Site in
accordance with Section 9(b)(ii), shall be deemed to be a rejectable
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Lease Agreement
purchase offer for the Facility pursuant to clause (B)(x) of this
Section 9(a)(ii) and Section 9(c), and for any Casualty which occurs
during any Renewal Term, failure to give such notice within such 90-day
period shall be deemed to be an election of the provisions of clause
(B)(y) of this Section 9(a)(ii). Unless the Lessee shall elect to
reconstruct the Premises and the Site, such Casualty shall be a
"Casualty Event" and constitute an Event of Loss.
(b) REPAIR.
(i) If the Premises or the Site or any part thereof shall
suffer damage that does not constitute a Casualty or an Event of Loss,
the Lessee shall make or cause to be made such repairs as are necessary
to ensure that the Premises and the Site are restored to the condition
and value thereof immediately preceding such damage, assuming the
Premises and the Site had been maintained in the condition and state of
repair required under Section 8(a)(i); provided, however, that the
Lessee shall have the right to use any insurance proceeds received by
reason of such damage for such repairs pursuant to the terms and
conditions of Section 9(f); and provided, further, that such repairs
shall be commenced promptly (in any event within six (6) months of such
damage subject to Force Majeure delays) and be completed promptly
(subject to Force Majeure delays), but in any event such repairs shall
be completed not later than the Lease Termination Date.
(ii) So long as no Event of Default shall have occurred and be
continuing, if a Casualty occurs and the Lessee has given notice
pursuant to Section 9(a)(ii) that it will reconstruct the Premises and
the Site, then the Lessee shall promptly commence the reconstruction of
the Premises and the Site (such that the resulting Premises and the
Site shall have a Fair Market Sales Value, residual value, utility and
remaining useful life at least equal to that which the Premises and the
Site had immediately prior to its destruction or damage (assuming that
the Premises and the
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Site had been maintained in the condition required under the terms of
this Lease) and otherwise be in the condition and state of repair
required under Section 8(a)(i)) and shall thereafter promptly complete
the reconstruction (subject to Force Majeure delays), but in any event
such reconstruction shall be completed not later than the Lease
Termination Date.
(iii) Should any damage, loss, condemnation, requisition by a
Governmental Authority, confiscation, theft or seizure occur with
respect to the Premises or the Site (whether or not constituting an
Event of Loss), no Rent shall be abated hereunder at any time by virtue
thereof.
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(c) CASUALTY EVENT; REQUISITION OF TITLE; REQUISITION OF USE; PAYMENT
OF CASUALTY VALUE.
(i) CASUALTY DURING BASIC TERM. In the event the Lessee shall
elect (or be deemed to have elected) pursuant to Section 9(a)(ii)(B)(x)
to make an irrevocable, rejectable offer to purchase the Facility
(which, for this purpose, shall include, without limitation, all rights
of the Lessor under the Option and Estate For Years Agreement and the
Three Party Agreement and the Ground Lease, if applicable), then the
Lessee shall purchase the Facility on a Determination Date (which shall
be the Determination Date next following the date one hundred fifty
(150) days following the occurrence of the Casualty Event) at a
purchase price equal to the sum of (A) Casualty Value determined as of
such Determination Date, plus (B) all Supplemental Rent due and owing
on such Determination Date, plus (C) all Basic Rent payable in arrears
and due and owing on such Determination Date (it being understood that
the Lessee shall pay when due any Basic Rent due and payable on a Rent
Payment Date which occurs on or after the date of such Casualty Event
but prior to the Determination Date), plus (D) without duplication of
any such amounts included within clauses (A), (B) and (C) above, all
accrued and unpaid interest on the Facility Notes together with all
other amounts due under the Indenture and the other Transaction
Documents as of the Determination Date.
If the Lessee has elected (or is deemed to have elected)
pursuant to Section 9(a)(ii)(B)(x) to make an irrevocable, rejectable
offer to purchase the Facility and the Lessor accepts such offer by a
writing signed by the Lessor with a copy to the Indenture Trustee or
fails to expressly reject such offer in the manner provided in the
final paragraph of this Section 9(c)(i) within sixty (60) days from the
date of the Lessee's offer or deemed offer, the Lessee shall pay the
purchase price specified in the immediately preceding paragraph to the
Indenture Trustee (so long as the Indenture has not been satisfied or
discharged)
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or thereafter to the Lessor, on the Determination Date specified in the
immediately preceding paragraph. Upon payment in full of all amounts
payable pursuant to the immediately preceding paragraph, (x) the Lease
Term shall end, (y) the obligations of the Lessee hereunder (other than
any obligations expressed herein as surviving termination of this
Lease) shall terminate as of the date of such payment and (z) the
Lessor shall Transfer to the Lessee, or if the Lessee shall so
designate, to the property damage insurer, all right, title and
interest of the Lessor in, to and under the Facility.
Anything herein to the contrary notwithstanding, if the Lessee
shall fail to pay all amounts due under and pursuant to this Section
9(c)(i), no sale shall be consummated, this Lease shall continue in
full force and effect and it shall be deemed that Lessee has rescinded
its offer pursuant to Section 9(a)(ii)(B)(x) and the Lessee shall be
required to repair, replace, restore or rebuild in accordance with
Section 9(a)(ii)(A).
In the event that the Lessor expressly rejects in writing the
offer of the Lessee to purchase the Facility as provided in the first
paragraph of this Section 9(c)(i) at the purchase price stated therein
(which rejection shall be effective only if it is signed by an
Authorized Officer of the Lessor and so long as the Indenture has not
been satisfied and discharged consented to in writing by the Indenture
Trustee, it being agreed that such consent shall be deemed to have been
given if the Lessor shall have irrevocably deposited with the Indenture
Trustee an amount equal to the principal amount of, accrued and unpaid
interest on and Make-Whole Amount, if any, and any other amounts due
and owing under the Indenture with respect to the Outstanding Facility
Notes), the Lessee shall, on the date that would otherwise have been
the purchase date pursuant to the first paragraph of this Section
9(c)(i), pay the following amount to the Indenture Trustee (so long as
the Indenture has not been satisfied and discharged) or thereafter to
the Lessor (or, with respect to Supplemental Rent, the Person entitled
thereto) or such amount shall be retained (in the case of the proceeds
of insurance) by the Indenture Trustee (so long as the Indenture has
not been satisfied or discharged) or
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Lease Agreement
thereafter by the Lessor: the sum of (A) the amounts payable by the
Lessee under Section 9(e)(ii), plus (B) all Supplemental Rent then due
plus (C) all Basic Rent payable in arrears due and owing on such
payment date (it being understood that Lessee shall pay when due any
Basic Rent due on any Rent Payment Date which occurs on or after the
date of such Event of Loss but before such payment date), plus (D)
without duplication of any amounts included within clauses (A), (B) and
(C) above, all accrued and unpaid interest on the Facility Notes
together with all other amounts due under the Indenture and the other
Transaction Documents as of such payment date. Upon payment in full of
such amount (1) the Lease Term shall end and (2) the obligations of the
Lessee hereunder (other than any obligations expressed herein as
surviving termination of this Lease) shall terminate as of the date of
such payment.
(ii) CASUALTY DURING A RENEWAL TERM. In the event the Lessee
shall elect (or be deemed to have elected) pursuant to Section 9(a)(ii)
to have a Casualty constitute a Casualty Event during any Renewal Term,
and to make an irrevocable, rejectable offer to purchase the Facility
(which, for this purpose, shall include, without limitation, all rights
of the Lessor under the Option and Estate For Years Agreement and the
Three Party Agreement and the Ground Lease, if applicable), then the
Lessee shall purchase the Facility on a Determination Date (which shall
be the Determination Date next following the date one hundred fifty
(150) days following the occurrence of the Casualty Event) at a
purchase price equal to the sum of (A) Casualty Value determined as of
such Determination Date, plus (B) all Supplemental Rent due and owing
on such Determination Date, plus (C) all Basic Rent payable in arrears
and due and owing on such Determination Date (it being understood that
the Lessee shall pay when due any Basic Rent due and payable on
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Lease Agreement
a Rent Payment Date which occurs on or after the date of such Casualty
Event but prior to the Determination Date), plus (D) without
duplication of any such amounts included within clauses (A), (B) and
(C) above, all accrued and unpaid interest on the Facility Notes
together with all other amounts due under the Indenture and the other
Transaction Documents as of the Determination Date. Casualty Value
during any Renewal Term shall equal a value based on a straight-line
amortization of the difference between the Fair Market Sales Value of
the Facility as of the commencement of such Renewal Term and the
estimated Fair Market Sales Value of the Facility as of the expiration
of such Renewal Term; provided, however, that both such Fair Market
Sales Values shall be determined or estimated prior to the commencement
of such Renewal Term pursuant to the Appraisal Procedure.
(iii) REQUISITION OF TITLE OR REQUISITION OF USE. The giving
of notice by the Lessee pursuant to Section 9(a)(i) that a Requisition
of Title or a Requisition of Use shall have occurred shall be deemed to
be an irrevocable, rejectable offer by the Lessee to purchase the
Facility (which for this purpose shall include, without limitation, all
rights of the Lessor under the Option and Estate For Years Agreement
and the Three Party Agreement and the Ground Lease, if applicable) on a
Determination Date (which shall be the Determination Date next
following the date one hundred fifty (150) days following the
occurrence of such Requisition of Use or Requisition of Title) at a
purchase price equal to the sum of (A) Casualty Value determined as of
such Determination Date, plus (B) all Supplemental Rent due and owing
on such Determination Date, plus (C) all Basic Rent payable in arrears
and due and owing on such Determination Date (it being understood that
Lessee shall pay when due any Basic Rent due and payable on a Rent
Payment Date which occurs on or after the date of such Requisition of
Use or Requisition of Title but prior to the Determination Date), plus
(D) without duplication of any amounts included within clauses (A), (B)
and (C) above, all
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accrued and unpaid interest on the Facility Notes together with all
other amounts due under the Indenture and the other Transaction
Documents as of such Determination Date.
If the Lessor accepts such offer by a writing signed by the
Lessor with a copy to the Indenture Trustee or fails to expressly
reject such offer in the manner provided in the final paragraph of this
Section 9(c)(iii) within sixty (60) days from the date of the Lessee's
offer, the Lessee shall on the Determination Date specified in the
first paragraph of this Section 9(c)(iii), pay the purchase price
specified in the first paragraph of this Section 9(c)(iii) to the
Indenture Trustee so long as the Indenture has not been satisfied and
discharged) or thereafter to the Lessor. Upon payment in full of all
amounts described in clauses (A), (B), (C) and (D) of the first
paragraph of this Section 9(c)(iii), (x) the Lease Term shall end, (y)
the obligations of the Lessee hereunder (other than any obligations
expressed herein as surviving termination of this Lease) shall
terminate as of the date of such payment.
Anything herein to the contrary notwithstanding, if the Lessee
shall fail to pay all amounts due under and pursuant to this Section
9(c)(iii), no sale shall be consummated, this Lease shall continue in
full force and effect and it shall be deemed that Lessee has rescinded
its offer pursuant to the first paragraph of this Section 9(c)(iii) and
the Lessee shall be required to pursue collection of condemnation
proceeds in accordance with Section 9(a)(i).
In the event that the Lessor expressly rejects in writing the
offer of the Lessee to purchase the Facility as provided in the first
paragraph of this Section 9(c)(iii) at the purchase price stated
therein (which rejection shall be effective only if it is signed by an
Authorized Officer of the Lessor and so long as the Indenture has not
been satisfied and discharged consented to in writing by the Indenture
Trustee, it being agreed that such consent shall be deemed to have been
given if the Lessor shall have
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irrevocably deposited with the Indenture Trustee the principal amount
of, accrued and unpaid interest on and Make-Whole Amount, if any, and
any other amounts due and owing under the Indenture with respect to the
Outstanding Facility Notes), the Lessee shall, on the date that would
otherwise have been the purchase date pursuant to the first paragraph
of this Section 9(c)(iii), pay the following amount to the Indenture
Trustee (so long as the Indenture has not been satisfied and
discharged) or thereafter to the Lessor (or, with respect to
Supplemental Rent, the Person entitled thereto) or such amount shall be
retained (in the case of the proceeds of insurance) by the Indenture
Trustee (so long as the Indenture has not been satisfied or discharged)
or thereafter by the Lessor: the sum of (A) the amounts payable by the
Lessee under Section 9(e)(ii), plus (B) all Supplemental Rent then due
plus (C) all Basic Rent payable in arrears due and owing on such
payment date (it being understood that Lessee shall pay when due any
Basic Rent due on any Rent Payment Date which occurs on or after the
date of such Event of Loss but before such payment date), plus (D)
without duplication of any amounts included within clauses (A), (B) and
(C) above, all accrued and unpaid interest on the Facility Notes
together with all other amounts due under the Indenture and the other
Transaction Documents as of such payment date. Upon payment in full of
such amount (1) the Lease Term shall end and (2) the obligations of the
Lessee hereunder (other than any obligations expressed herein as
surviving termination of this Lease) shall terminate as of the date of
such payment.
(d) CONDEMNATION OTHER THAN REQUISITION OF USE OR REQUISITION OF TITLE.
In the case of a taking or condemnation not constituting a Requisition of Use or
a Requisition of Title, (i) this Lease shall continue (but not beyond the Lease
Term), and each and every obligation of the Lessee hereunder and under each
Transaction Document shall remain in full force and effect, and (ii) the Lessee
shall, at its own expense and to the extent reasonably practicable, reconstruct
or restore the affected portion of the Premises and the Site to the condition
existing
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immediately prior thereto (assuming that immediately prior thereto, the Premises
and the Site were in the condition required by Section 8(a)); provided that the
Lessee shall have the right to use any amounts received by reason of such taking
or condemnation for such reconstruction and restoration in accordance with
Section 9(f)(i). Any such amounts not so used shall be divided among the Lessor,
the Remainderman and the Lessee as their respective interests shall appear.
(e) APPLICATION OF PAYMENTS ON AN EVENT OF LOSS. Payments received by
the Lessor (other than proceeds of insurance carried by the Lessor or the Owner
Participant pursuant to Section 10(b)(ii), which shall be the unencumbered
property of such party), the Lessee (other than proceeds of insurance carried by
or on behalf of the Lessee described in Section 10(b)(i) (but only if the amount
of insurance proceeds otherwise payable with respect to the Facility is not
reduced as a result thereof), which shall be the unencumbered property of the
Lessee) or the Indenture Trustee from any Governmental Authority, insurer or
other Person, plus the amount of any payments which would have been due from an
insurer but for the Lessee's self-insurance or policy deductibles, as a result
of an Event of Loss shall be applied as follows (with any proceeds received
prior to the acceptance (or deemed acceptance) or rejection of any rejectable
purchase offer being held by the Indenture Trustee (or after release of the Lien
of the Indenture on the Indenture Estate in accordance with its terms, by the
Lessor), and invested at the direction of the Lessee, until such rejectable
purchase offer is accepted (or deemed accepted) or rejected):
(i) in connection with an Event of Loss, if the Lessor shall
accept (or be deemed to have accepted) the Lessee's rejectable purchase
offer under Section 9(c), (x) so much of such payments as shall not
exceed the amount of Casualty Value and all other amounts required to
be paid by the Lessee pursuant to Section 9(c) shall be applied in
reduction of the Lessee's obligation to pay such amounts if not already
paid by the Lessee or, if all such amounts have already been paid by
the Lessee, shall be applied to
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reimburse the Lessee for its payment of such amounts, and (y) any such
payments that shall exceed the aggregate of the amounts payable
pursuant to clause (x) above shall, in the case of insurance maintained
by the Lessee pursuant to Section 10(a), be paid to, or retained by,
and shall become the unencumbered property of the Lessee, and in the
case of amounts received with respect to any Requisition of Title or
Requisition of Use, or payments received from any other Person with
respect to a Casualty, be divided among the Lessor, the Remainderman
and the Lessee as their respective interests shall appear; or
(ii) in connection with an Event of Loss, if the Lessor shall
reject the Lessee's rejectable purchase offer under Section 9(c),
(A) the Lessor shall be entitled to all such
insurance payments with respect to the Premises and the Lessee
shall pay to the Lessor an amount equal to the Lessee's
self-insurance and deductibles with respect to the Premises;
and
(B) in the case of amounts received with respect to
any Requisition of Title or Requisition of Use, all such
amounts shall be paid to the Lessee, the Lessor and the
Remainderman as their respective interests shall appear.
(f) APPLICATION OF PAYMENTS NOT RELATING TO AN EVENT OF LOSS. Payments
received by the Lessor (other than proceeds of insurance carried by the Lessor
or the Owner Participant pursuant to Section 10(b)(ii)), by the Lessee (other
than proceeds of insurance carried by or on behalf of the Lessee described in
Section 10(b)(i), but only if the amount of insurance proceeds otherwise payable
with respect to the Facility is not reduced as a result thereof) or by the
Indenture Trustee from any Governmental Authority, insurer or other Person, plus
the amount of any payments which would have been due from an insurer (but for
the Lessee's self-insurance or policy deductibles) or with
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respect to any event giving rise to payment of an amount referred to in the
second sentence of Section 6(c), or with respect to any destruction, damage,
loss, condemnation, confiscation, theft, seizure of or requisition of title to
the Facility or any part thereof, in each case not constituting an Event of
Loss, shall be applied as follows:
(i) all such payments from insurers or from other Persons
including Governmental Authorities, but excluding payments attributable
to the Lessee's policy deductibles and self-insurance, shall be held by
the Lessee for use in connection with any restoration or rebuilding of
the Premises; provided, however, that any payments that are (x) in
excess of $1,000,000 or (y) received after the occurrence and during
the continuance of a Default or an Event of Default, shall be held by
the Indenture Trustee (or after release of the Lien of the Indenture on
the Indenture Estate in accordance with its terms, by the Lessor) as
security for the obligations of the Lessee under Section 9(b) of this
Lease, but any amounts so held shall be released and paid over to the
Lessee from time to time so long as no Default or Event of Default has
occurred and is then continuing, in each case upon presentation to the
Indenture Trustee and the Lessor of a Lessee Request specifying the
amount so to be released, and certifying that (A) the funds requested
will, to the extent not applied to reimburse the Lessee for such
expenditures already made, be applied to the payment of such
expenditures incurred and that such expenditures are due and owing (or
will be due and owing within the next sixty (60) days), (B) there exist
no Liens (other than Permitted Liens) with respect to such repair,
rebuilding or restoration, (C) the amounts remaining to be disbursed
are sufficient to complete such repair, rebuilding and restoration and
(D) such costs and expenses were not the subject of a previous Lessee
Request hereunder; and
(ii) the balance, if any, of any payments representing
proceeds of such insurance remaining after completion of such repair,
rebuilding and restoration and the payment
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therefor, shall be paid to the Lessee; and
(iii) the balance, if any, of any payments representing
condemnation proceeds or like proceeds or any other payment remaining
after completion of such repair, rebuilding and restoration and the
payment therefor, shall be paid to the Lessor, the Remainderman and the
Lessee as their respective interests may appear.
If the Lessor or the Indenture Trustee shall in good faith desire to
dispute the information contained in any Lessee Request, the Lessor or the
Indenture Trustee, as the case may be, shall so notify the Lessee and the Lessor
or the Indenture Trustee, as the case may be, in writing within ten (10)
Business Days after the giving of such Lessee Request, specifying the amount
intended to be disputed and the nature of the dispute. After such ten (10)
Business Day period has elapsed, if the Lessor or the Indenture Trustee has not
disputed the information contained in the Lessee Request, the Person holding
such amounts shall promptly disburse to the Lessee out of such amounts the
amount of such Lessee Request.
(g) APPLICATION DURING EVENT OF DEFAULT. Notwithstanding the foregoing
provisions of this Section 9 or the provisions of Section 10, if a Default or an
Event of Default shall have occurred and be continuing, any amount that would
otherwise be payable to or for the account of, or that would otherwise be
retained by, the Lessee pursuant to the second sentence of Section 6(c) or
Section 10 or this Section 9 shall be held by the Indenture Trustee (or after
release of the Lien of the Indenture on the Indenture Estate in accordance with
its terms, by the Lessor), as security for the obligations of the Lessee under
this Lease until such time thereafter as no such Default or Event of Default
shall be continuing, unless this Lease theretofore shall have been declared in
default pursuant to Section 16, in which event such amount shall be applied in
accordance with the provisions of this Lease; provided, however, that if a
rejectable purchase offer is made (or deemed made) by the Lessee pursuant to
Section 9(c)(i) or 9(c)(iii) and such offer is accepted and the
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Transfer in connection therewith is consummated and payment in full of any
Outstanding Facility Notes and all other amounts due under the Transaction
Documents to the Lessor, the Indenture Trustee or any Participant is duly
provided for, then contemporaneously with such Transfer and payment of such
amounts, the Lessee shall be entitled to receive from the Indenture Trustee (or
from the Lessor, as applicable) all such amounts unencumbered by any interest
the Lessor.
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Lease Agreement
S10. INSURANCE.
(a) REQUIRED INSURANCE. The Lessee shall carry and maintain, or cause
to be carried and maintained, at the Lessee's sole cost and expense, commercial
general liability insurance (including contractual liability insurance) for
claims for injuries or death sustained by persons or damage to property while on
the Site or the Premises, and all risk property insurance coverage, including
flood and earthquake, in each case in amounts and on terms and conditions that
are consistent with the Lessee's then current practices and with insurance
companies rated at least "A-X" by A.M. Best; provided, however, that such all
risk property insurance coverage shall at all times be in an amount at least
equal to the greater of (w) the replacement cost of the Premises and (x) the
outstanding principal balance of and accrued interest on the Facility Notes
(unless all risk property insurance coverage in such amount cannot be obtained
by the Lessee, in which event the Lessee shall obtain an unconditional
irrevocable sight draft letter of credit in favor of the Indenture Trustee and
issued by a bank or other financial institution having a capital and surplus of
at least $500,000,000 and a senior unsecured debt rating of A (by S&P) and A2
(by Moody's), which letter of credit shall have a face amount not less than the
excess of (y) the amount of all risk property insurance coverage required
pursuant to this proviso over (z) the amount of all risk property insurance
coverage actually obtained by the Lessee); and provided, further, however, that
the commercial general liability insurance shall at all times be in an amount at
least equal to $35,000,000 per occurrence and not subject to an annual
aggregate. In the event the provider of such Letter of Credit ceases to meet the
standards set forth above, the Lessee will promptly and in any event within
thirty (30) days substitute a new provider meeting such standards. The policies
maintained by the Lessee pursuant to this clause (a) may, at the Lessee's
option, be carried and maintained by the Lessee under the Lessee's blanket
insurance policies. Each policy maintained by the Lessee pursuant to this clause
(a) shall (i) in the case of commercial general liability coverage, name
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Lease Agreement
the Lessor, the Remainderman, the Owner Participant, Dana Lease Finance
Corporation, Dana Commercial Credit Corporation, Dana Credit Corporation, Dana
Corporation, each Loan Participant and, so long as the Lien of the Indenture
shall not have been discharged, the Indenture Trustee, as additional insureds
(collectively, (the "Additional Insureds") thereunder and (ii) in the case of
all risk property insurance coverage, name the Lessor, the Remainderman, the
Owner Participant and each Loan Participant as additional insureds, name the
Indenture Trustee as sole loss payee thereunder so long as any Facility Notes
are Outstanding, and thereafter name the Lessor as sole loss payee, and, so long
as the Lien of the Indenture shall not have been discharged, name the Indenture
Trustee as mortgagee under a mortgagee endorsement in form and substance
satisfactory to the Indenture Trustee. The obligation to pay premiums under the
policies described in this clause (a) shall be the sole obligation of the Lessee
and not that of any other insured.
(b) OTHER INSURANCE.
(i) Nothing in this Section 10 shall prohibit the Lessee from
maintaining at its expense insurance on or with respect to the Facility
or the operation, use and occupancy of the Facility, naming the Lessee
as insured and/or loss payee for an amount greater than the insurance
required to be maintained under this Section 10.
(ii) Nothing in this Section 10 shall prohibit the Lessor, the
Owner Participant or the Remainderman from maintaining at its expense
other insurance on or with respect to the Facility, the Site, or the
operation, use and occupancy of the Facility or the Site, naming the
Lessor, the Owner Participant or the Remainderman as insured and/or
loss payee, unless such insurance would conflict with or otherwise
limit the availability of insurance required to be maintained under
Section 10(a).
(c) SELF-INSURANCE. For so long as the Lessee shall maintain the debt
ratings and net worth described in Section
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Lease Agreement
10(f), (i) the Lessee may satisfy an amount not to exceed $2,500,000 of the all
risk property insurance requirements set forth in Section 10(a)(w) through
self-insurance by the Lessee (by means of a deductible, self-insured retention
or otherwise) and (ii) the Lessee may maintain a deductible on its commercial
general liability insurance not in excess of $2 million. In the event the annual
audited financial statements of the Lessee for the years ending 5, 10, 15 and 20
years after the date hereof show that the Lessee's net worth for each such year
(the "Test Year") has increased by at least 10% from its net worth for the
immediately preceding Test Year, the Lessee may increase the deductible on its
commercial general liability insurance under this Section 10(c) by an amount
equal to the product obtained by multipying (1) the percentage increase in net
worth for such Test Year by (2) 2,000,000, but in no event shall such deductible
ever be in excess of $3 million.
(d) [INTENTIONALLY OMITTED].
(e) POLICY PROVISIONS AND ENDORSEMENTS. All policies of insurance
carried in accordance with Section 10(a) shall provide in the policy or by
endorsement to the extent available from the carriers satisfying the
requirements of Section 10(a) selected by the Lessee in good faith that:
(i) All liability insurance shall provide that, insofar as the
policy is written to cover more than one insured, all terms,
conditions, insuring agreements and endorsements, with the exception of
limits of liability and deductibles, shall operate in the same manner
as if there were a separate policy covering each insured;
(ii) The insurer thereunder waives all rights of subrogation
against the Lessor, the Indenture Trustee, each Participant and the
Remainderman, and waives any right of set-off and counterclaim and any
other right to deduction whether by attachment or otherwise;
(iii) Such insurance shall be primary (which may
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Lease Agreement
include umbrella policies) as to the Lessor, the Bank, the Indenture
Trustee, each Participant and the Remainderman, without right of
contribution of any other insurance carried by or on behalf of the
Lessor, the Indenture Trustee, any Participant or the Remainderman;
(iv) Such insurance shall remain in full force and effect
until the Lessor, the Owner Participant, the Indenture Trustee and the
Remainderman are notified in writing at least thirty (30) days (or ten
(10) days, in the case of non-payment of premiums) in advance of any
cancellation or non-renewal or material change in the terms and
conditions thereof;
(v) the respective interests of the Lessor, the Remainderman,
the Indenture Trustee, the Loan Participants and the Owner Participant
under all insurance policies required under Section 10(a) shall not be
invalidated by any action or inaction of the Lessee or any other Person
(other than the beneficiary of such respective interest) and such
insurance shall insure the Lessor, the Remainderman, the Indenture
Trustee, the Loan Participants and the Owner Participant as their
interests may appear, regardless of any breach or violation of any
warranty, declaration or condition contained in such policies by the
Lessee or any other Person (other than the beneficiary of such
respective interest); and
(vi) With respect to the commercial general liability
insurance maintained by the Lessee pursuant to this Section 10, (i)
such coverage shall at all times maintain a retroactive date on or
before the Closing Date (whether by purchasing an extended reporting
period or otherwise) and (ii) if on the Lease Termination Date such
coverage is not maintained on an "occurrence form" basis, such coverage
shall continue for a period of seven (7) years after the Lease
Termination Date (whether by purchasing an extended reporting period or
otherwise).
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Lease Agreement
(f) ADJUSTMENT OF INSURANCE REQUIREMENTS. In the event that, on any
date, the senior long term debt rating of the Lessee, as given by Moody's
Investors Service, Inc. ("Moody's") and Standard and Poor's Corporation ("S&P")
in their regular rating reports, is lower than BBB+ (as given by S&P) or Baa1
(as given by Moody's) or the Lessee's net worth is less than 60% of its net
worth reflected in its most recent (as of the date hereof) audited financial
statements, then the Lessee shall promptly (and in any event within thirty (30)
days) obtain and maintain insurance in the full amounts required under Section
10(a) and with insurance companies meeting the criteria set forth therein,
subject to deductibles of no more than $150,000 with respect to all risk
property insurance and $200,000 with respect to liability insurance.
(g) EVIDENCE OF INSURANCE. The Lessee shall deliver to the Lessor, each
Participant, the Remainderman and the Indenture Trustee at least two (2) days
before the Closing Date and annually thereafter, certificates of insurance
evidencing the provisions described in this Section 10 executed by the insurer
or its duly authorized agent. Without limiting the foregoing, each such
certificate shall set forth the insurance obtained in accordance with this
Section 10 and state that such insurance is in full force and effect, all
premiums then due and payable thereon have been paid and, in the opinion of the
signer, such insurance complies with the provisions of this Lease. During the
Lease Term, if an Event of Default has occurred and is continuing and the Lessor
or (so long as the Indenture has not been satisfied and discharged) the
Indenture Trustee so requests, the Lessee shall deliver to the Lessor and the
Indenture Trustee copies of all insurance policies required by this Section 10.
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Lease Agreement
S11. RIGHTS TO SUBLEASE; ASSIGNMENT BY LESSOR AS SECURITY.
(a) SUBLEASE BY THE LESSEE. So long as no Default or Event of Default
shall have occurred and be continuing, the Lessee may, without the consent of
the Lessor, (A) sublease all or any portion of the Facility to any Affiliate of
the Lessee, or (B) sublease less than substantially all of the Facility to any
Person; provided, however, that in each of the foregoing cases (i) such sublease
shall be expressly subject and subordinate to this Lease, the Indenture and the
Mortgage, (ii) such sublease shall not release the Lessee from any of its
obligations as the Lessee hereunder, (iii) such sublease will not cause all or
any portion of the Facility to constitute "tax exempt use property" within the
meaning of Section 168(g) or (h) of the Code (or any successor provisions
thereto), (iv) such sublessee is not subject to any bankruptcy or insolvency
proceedings and is generally paying its debts as they become due, and (v) the
term of such sublease shall not extend beyond the Lease Termination Date. The
rights of any sublessee and the obligations of the sublessor under any future
sublease (each, a "Future Sublease") shall not be inconsistent with the
obligations of the Lessee and, during the Lease Term, the rights of the Lessor
under this Lease.
(b) SUBLESSEE NON-DISTURBANCE; ASSIGNMENT OF EXISTING
LEASES.
(i) Notwithstanding the provisions of clause (i) of the
proviso to the first sentence of Section 11(a), with respect to any
tenants and subtenants under any lease or sublease described on
Schedule 8 to the Participation Agreement (collectively, the "Existing
Leases"), such tenants and subtenants shall be entitled to all rights
of non-disturbance available under, and other rights expressly set
forth in, their respective Existing Leases as currently in effect, as
well as all rights of non-disturbance available under Applicable Law.
(ii) The Lessor hereby grants, transfers, assigns and conveys
to the Lessee, during the Lease Term and subject to
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the rights of the Indenture Trustee therein pursuant to the Security
Documents, all of the right, title and interest of the Lessor in and to
the Existing Leases (with all extensions, renewals, amendments and
modifications, if any, from time to time), and the Lessee hereby
assumes all of the obligations of the Lessor under the Existing Leases.
Unless an Event of Default shall have occurred and be continuing, the
Lessor hereby covenants and agrees that the Lessee shall have the right
to enforce, terminate, extend, renew or otherwise amend or modify any
of the Existing Leases; provided, however, that no amendment or
modification shall be entered into which would not be permitted to be
included in a sublease permitted by the other provisions of this Lease.
It is understood and agreed that the grant and assignment of the
Existing Leases in this clause (ii) is subject and subordinate to the
Lien of the Mortgage and the other Security Documents, notwithstanding
that this Lease (or a memorandum hereof) is being filed for record in
the appropriate recording office prior to recordation of the Mortgage
and other Security Documents.
(iii) To secure the prompt and full performance and payment by
the Lessee of its obligations under the Transaction Documents, the
Lessee hereby assigns to the Lessor, subject to the conditions
hereinafter set forth, all of the Lessee's right, title and interest in
and to all Existing Leases and all rents, issues and profits accruing
thereunder, and all guarantees and security deposits with respect to
such Existing Leases; provided, however, that such assignment, although
presently effective, is given solely as security, and the Lessor hereby
irrevocably waives the right to exercise the Lessor's rights pursuant
to this clause (ii) until and unless an Event of Default shall have
occurred and be continuing. The Lessee hereby irrevocably directs each
tenant under any such Existing Lease (each, an "Existing Subtenant") to
pay to the Lessor the rentals or other sums payable under such Existing
Subtenant's sublease when, as and if directed to do so by the Lessor in
a written notice to such Existing Subtenant in which the Lessor shall
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Lease Agreement
certify that an Event of Default shall have occurred and be continuing
under this Lease. The Lessee hereby irrevocably notifies and directs
each Existing Subtenant to pay such amounts to the Lessor in the event
such Existing Subtenant receives any such notice from the Lessor, and
the Lessee hereby irrevocably waives any claims for non-payment of such
rentals or other sums that might arise as a result of such payments to
the Lessor.
(iv) The Lessee shall not enter into any renewals of the
Existing Leases unless such Existing Leases, as renewed, are subject
and subordinate to this Lease. The Lessee may not permit or suffer to
exist any Lien (other than the Lien of the First Mortgage Bonds) on any
sublease of the Premises without the prior written consent of the
Lessor and the Indenture Trustee, except Permitted Liens. The Lessee
shall, within ten (10) Business Days after the execution of any
sublease with a sublessee that is not an Affiliate of the Lessee,
deliver to the Lessor, the Remainderman and the Indenture Trustee a
conformed copy thereof (with acknowledgments, if any) and a conformed
copy of any short form lease or memorandum of lease. Any sublease not
permitted by this Section 11(b) shall be void.
(c) ASSIGNMENT BY THE LESSOR TO THE INDENTURE TRUSTEE AS SECURITY FOR
THE LESSOR'S OBLIGATIONS. To secure the Secured Indebtedness, the Lessor will
assign to the Indenture Trustee, for the benefit of the Loan Participants (i)
its right, title and interest in and to this Lease (including the right to
receive all payments of Rent but excluding any Excepted Rights and Payments), to
the extent provided in the Indenture, and (ii) its right, title and interest in
and to the Facility. The Lessee hereby (w) consents to such assignment and to
the terms of the Indenture, (x) agrees (and the Lessor hereby authorizes and
directs the Lessee) to pay directly to the Indenture Trustee at the Indenture
Trustee's Office on behalf of the Lessor (until the Lien of the Indenture on the
Indenture Estate shall have been released in accordance with its terms, and
evidence thereof shall have been delivered to the Lessee) all amounts of Rent
(other than payments
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Lease Agreement
with respect to Excepted Rights and Payments) due or to become due to the
Lessor, (y) agrees that the right of the Indenture Trustee to any such payments
shall be absolute and unconditional and shall not be affected by any
circumstances whatsoever, including, without limitation, those circumstances set
forth in Section 4, and (z) agrees that, to the extent provided in the Indenture
(until the Lien of the Indenture on the Indenture Estate shall have been
released in accordance with its terms), the Indenture Trustee shall have or
shall share with the Lessor such rights of the Lessor hereunder (other than
Excepted Rights and Payments) as are specified in the Indenture.
(d) OTHER ASSIGNMENTS BY THE LESSOR. During the Lease Term, the Lessor
may transfer, sell or convey the Facility or assign its rights and obligations
under this Lease only in accordance with the Transaction Documents, including,
without limitation, the limitations contained in Section 4.8 of the Indenture
and Sections 21 and 22 of this Lease.
(e) ATTORNMENT. In the event of (i) the foreclosure of any mortgage or
deed of trust made by the Lessor covering the Facility (including, without
limitation, the Indenture and the Mortgage), (ii) the giving of a deed in lieu
of foreclosure by the Lessor with respect to the Facility, (iii) the filing of a
petition in bankruptcy or other similar insolvency proceeding by or against the
Lessor, or (iv) any other permitted transfer by the Lessor of title to the
Facility, then the Lessee shall, at the request of the mortgagee, beneficiary of
the deed of trust, trustee in bankruptcy, receiver or transferee, as the case
may be, attorn to the purchaser or other transferee of the Facility, including
the Indenture Trustee, or the mortgagee or beneficiary of the deed of trusts
upon any such foreclosure, sale, filing or transfer, and recognize such
purchaser or other transferee as the Lessor under this Lease.
(f) CORPORATE CHANGE. The Lessee shall not be a party to any Corporate
Change unless: (a) the successor corporation (if other than the Lessee) formed
by such consolidation or into which the Lessee shall be merged or the Person
that shall acquire by
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Lease Agreement
sale, conveyance, transfer or lease all or substantially all the assets of the
Lessee shall (i) be a corporation duly organized, validly existing and in good
standing under the laws of the United States of America, any state thereof or
the District of Columbia and qualified to transact business in the State of New
Jersey and (ii) execute and deliver to the Owner Participant, each Loan
Participant, the Remainderman, the Owner Trustee and the Indenture Trustee an
agreement in form and substance reasonably satisfactory to the Owner
Participant, each Loan Participant, the Remainderman, the Owner Trustee and the
Indenture Trustee in which such successor corporation shall assume the due and
punctual performance of each covenant and condition of this Lease and all other
Transaction Documents to which the Lessee is a party to be performed or observed
by the Lessee, (b) such transaction shall not cause a Default or Event of
Default to occur and (c) the Lessee shall have delivered to the Owner
Participant, each Loan Participant, the Remainderman, the Owner Trustee and the
Indenture Trustee an opinion of outside counsel addressed to, and in form and
substance reasonably satisfactory to, the Owner Participant, each Loan
Participant, the Remainderman, the Owner Trustee and the Indenture Trustee to
the effect that (i) the surviving corporation is a corporation duly organized,
validly existing and in good standing in the state of its incorporation and the
State of New Jersey, (ii) the agreement executed and delivered by the surviving
corporation pursuant to this Section 11(f) is within its corporate power, has
been duly authorized, executed and delivered by the surviving corporation and
constitutes the legal, valid and binding agreement of the surviving corporation
enforceable against it in accordance with its terms and (iii) all of the
Transaction Documents to which the Lessee is a party will, upon the consummation
of such transaction, be the legal, valid and binding obligations of the
surviving corporation enforceable against it in accordance with the terms
thereof, except as such enforceability may be limited by applicable bankruptcy,
insolvency, or similar laws affecting creditors generally and by general
equitable principles. Upon any such consolidation or merger, or any sale,
conveyance, transfer or lease of the assets of the Lessee as an entirety or
substantially as an entirety in
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accordance with this Section 11(f), the successor corporation formed by such
consolidation or into which the Lessee shall be merged or to which such sale,
conveyance, transfer or lease shall be made shall succeed to, and be substituted
for, and may exercise every right and power of, the Lessee under the Transaction
Documents to which the Lessee is a party.
(g) LESSEE ASSIGNMENT. The Lessee shall not assign its right, title and
interest in, to or under this Lease except as permitted by Section 11(b), 11(f)
or this Section 11(g).
Other than pursuant to the Indenture of Mortgage and Deed of Trust
dated April 1, 1952 securing the First Mortgage Bonds, this Lease shall not be
mortgaged or pledged by the Lessee, nor shall the Lessee mortgage or pledge the
interests of the Lessee in and to the Facility or any portion thereof. Any such
mortgage or pledge shall be void.
S12. LEASE RENEWAL OPTIONS. Subject to the notice requirement set forth in
Section 13(a) or 13(b), as the case may be, and to the provisions of Section
13(c), the Lessee shall (provided that at the time of any notice pursuant to
Section 13(a) and at the commencement of any Renewal Term no Event of Default
shall have occurred and be continuing) have and is hereby granted the right and
option to renew the term of this Lease at the end of the Basic Term or any
Renewal Term, as the case may be, as follows:
(a) The Lessee may renew the term of this Lease for up to two
(2) periods which in the aggregate shall not exceed seven (7) years,
the first such renewal for a period of four (4) years and the second
such renewal for a period of three (3) years (each, a "Fixed Rate
Renewal Term") at a fixed rental per annum equal to the Basic Rent
payable with respect to the final year of the Basic Lease Term (the
"Fixed Rental Amount"); provided; however, that the Lessee may not
select a Fixed Rate Renewal Term at any time after the Lessee has
selected a Fair Market Value Renewal Term. During each Fixed Rate
Renewal Term, the Lessee shall pay to the Lessor the Fixed Rental
Amount in semiannual
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installments payable in advance on each January 1 and July 1 during
such Fixed Rate Renewal Term.
(b) The Lessee may renew the term of this Lease for a period
of five (5) years (a "Fair Market Value Renewal Term") at a rental
payment equal to the then Fair Market Rental Value of the Facility
(determined in accordance with Section 13(b) for such renewal;
provided, however, that the Lessee may select no more than four (4)
Fair Market Value Renewal Terms. During each Fair Market Value Renewal
Term, the Lessee shall pay to the Lessor the Fair Market Rental Value
of the Facility for such a renewal in semiannual installments payable
in advance on each Rent Payment Date during such Fair Market Value
Renewal Term.
If the Lessee has exercised its option for a Renewal Term,the Lessee
shall be responsible for payment and performance of all of the Lessor's
obligations under the Ground Lease other than the payment of Basic Ground Rent
(as defined in the Ground Lease), including the obligation and responsibility
for the repair, replacement, maintenance and operation of the Premises and the
Site and, as between the Lessee, the Lessor and the Remainderman, the Lessee
hereby acknowledges that neither the Lessor nor the Remainderman shall have any
responsibility with respect thereto during any such Renewal Term; provided,
however, that the Lessee need not pay and shall not be responsible for the
payment of Basic Ground Rent during any Renewal Term.
S13. NOTICES FOR RENEWAL; DETERMINATION OF FAIR MARKET RENTAL
VALUE.
(a) NOTICES FOR RENEWAL. In the event that, prior to the expiration
date of the Basic Term or the then current Renewal Term, the Lessee desires to
exercise its option to renew this Lease for a Renewal Term pursuant to Section
12, then the Lessee shall give to the Lessor and Remainderman irrevocable notice
of its election not earlier than two (2) years nor later than eighteen (18)
months prior to the expiration date of the Basic Term or current Renewal Term,
as the case may be.
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(b) DETERMINATION OF FAIR MARKET RENTAL VALUE FOR FAIR MARKET VALUE
RENEWAL TERMS. If the Lessee shall give to the Lessor and the Remainderman
notice of its election to renew this Lease pursuant to Section 13(a) for a Fair
Market Value Renewal Term, then not earlier than eighteen (18) months nor later
than twelve (12) months prior to the expiration date of the Basic Term or of the
then-current Renewal Term, as the case may be, the Lessee and the Lessor shall
attempt to agree upon the Fair Market Rental Value of the Facility for such Fair
Market Value Renewal Term. If the Lessee and the Lessor are unable to agree upon
such Fair Market Rental Value, such value shall be determined by the Appraisal
Procedure.
(c) ASSISTANCE WITH DISPOSITION. From and after the date on which the
Lessee could last give a notice of its election to renew the Lease Term with no
such notice having been given, the Lessee shall cooperate with the reasonable
requests of the Lessor in its effort to sell or lease the Facility and the
Remainder for a term following the Lease Termination Date including, but not
limited to, making the Facility and the Site available for inspection upon
reasonable advance notice and subject to the provisions of Section 8(b).
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S14. OBSOLESCENCE OR UNECONOMIC USEFULNESS TERMINATION.
(a) TERMINATION NOTICES. So long as no Event of Default shall have
occurred and be continuing on the date the Termination Notice is delivered or on
the Termination Date, if, at any time during the Lease Term, following the tenth
anniversary of the Closing Date, the Lessee's Board of Directors shall have
determined that the Facility is obsolete or uneconomic for use or surplus to the
needs of the Lessee, the Lessee shall, on not more than two (2) occasions and
not closer than eighteen (18) months apart, have the option to terminate this
Lease on any Determination Date that is specified by the Lessee (a "Termination
Date") in a notice to the Lessor (a "Termination Notice") given at least six (6)
months prior to the Termination Date (which notice may be given prior to such
tenth anniversary of the Closing Date but no earlier than the ninth anniversary
of the Closing Date) and accompanied by a certified resolution of the Board of
Directors of the Lessee evidencing such determination.
(b) EVENTS PRIOR TO TERMINATION DATE. Not more than sixty (60) nor less
than thirty (30) days prior to the Termination Date, the Lessee shall deliver an
Officer's Certificate to the Lessor, the Remainderman, the Indenture Trustee and
each Loan Participant specifying (a) the Termination Date, (b) that the
principal amount of the Outstanding Facility Notes will be prepaid on such date,
(c) that a Make-Whole Amount may be payable, (d) the date when such Make-Whole
Amount will be calculated, (e) the Estimated Make-Whole Amount, (f) the accrued
interest applicable to such prepayment, and (g) the Sections of this Lease and
the Indenture pursuant to which such prepayment shall be made. Two (2) Business
Days prior to the Termination Date, the Lessee shall provide the Lessor, the
Indenture Trustee and each Loan Participant written notice of the Make-Whole
Amount, if any, payable in connection with the termination of this Lease and a
reasonably detailed calculation of the Make-Whole Amount determined as of the
Termination Date and calculated three (3) Business Days prior to such date.
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During the period commencing with the date on which such Termination
Notice is given until the Termination Date, the Lessee, as non-exclusive agent
for the Lessor, shall undertake on behalf of the Lessor to obtain cash bids for
the purchase of the Facility and shall use commercially reasonable efforts to
effect the sale of the Facility. The Lessee may use a third party as its agent
in connection with any such sale. The Lessor shall also have the right, at its
own expense, (but no obligation) to obtain cash bids for the purchase thereof,
either directly or through agents other than the Lessee. The Lessee shall
certify to the Lessor in writing the amount and terms of each bid received by
the Lessee and the name and address of the person submitting a bid (which Person
shall not be the Lessee or any Affiliate of the Lessee but may be the Lessor or
the Owner Participant). On the Termination Date, the Lessor shall (subject to
receipt of the net sales price and all additional payments specified in the
second and third following sentences), Transfer its interest in the Facility
(which, of this purpose, shall include, without limitation, all rights of the
Lessor under the Option and Estate for Years Agreement and the Three Party
Agreement and the Ground Lease, if applicable) for cash to bidder which shall
have submitted the highest bid prior to such date (which Person shall not be the
Lessee, a Person related to the Lessee or any Affiliate of the Lessee, but may
be the Lessor or the Owner Participant). The purchase price for such sale shall
be paid on the Termination Date in immediately available funds. The total sales
price realized upon the sale of the Facility, subject to the terms of the
Indenture and the Lien of the Security Documents, shall be retained by the
Lessor. In addition, on the Termination Date, the Lessee shall pay to the
Indenture Trustee (so long as the Indenture has not been satisfied and
discharged), or thereafter to the Lessor (or, in the case of Supplemental Rent,
the Person entitled thereto) the sum of (A) the excess, if any, of the
Termination Value determined as of the Termination Date over the net sales
proceeds actually paid to the Lessor plus (B) all accrued and unpaid Basic Rent
due and unpaid as of the Termination Date, plus (C) all Supplemental Rent owing
by the Lessee to and including the Termination Date, including the Make-Whole
Amount, if any,
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determined as of the Termination Date, plus (D) without duplication of amounts
included within clauses (A), (B) and (C) above, all accrued and unpaid interest
on the Facility Notes together with all other amounts due under the Indenture
and the other Transaction Documents.
Notwithstanding the foregoing, the Lessor may elect to retain, rather
than sell, the Facility (which, for this purpose, shall include, without
limitation, all rights of the Lessor under the Option and Estate For Years
Agreement and the Three Party Agreement and the Ground Lease, if applicable) by
giving irrevocable written notice to that effect to the Lessee and the Indenture
Trustee (so long as the Indenture has not been satisfied and discharged);
provided, however, that such irrevocable notice is given no later than ninety
(90) days prior to the scheduled Termination Date and, provided, further, that
any such irrevocable notice is signed by an Authorized Officer of the Lessor and
consented to in writing by an Authorized Officer of the Indenture Trustee (so
long as the Indenture has not been satisfied and discharged). It shall be a
condition precedent to the Lessor's right of retention that on or prior to the
scheduled Termination Date, the Lessor shall have deposited with the Indenture
Trustee all amounts then unpaid and outstanding under the Security Documents to
the date of payment (including, without limitation, any Make-Whole Amount and
all other amounts due on or with respect to the Facility Notes). If the Lessor
elects to retain the Facility pursuant to this paragraph, the Lessee shall pay
to the Indenture Trustee (so long as the Indenture has not been satisfied and
discharged), or thereafter to the Lessor or to whoever is entitled thereto, on
the scheduled Termination Date, the amounts set forth in clauses (B), (C), and
(D) of the preceding paragraph. If the Lessor expressly elects in writing to
retain Lessor's interest in the Facility as provided in this Section 14, such
election shall be deemed effective only if it is consented to in writing by an
Authorized Officer of the Indenture Trustee (so long as the Indenture has not
been satisfied and discharged, it being agreed that such consent shall be deemed
to have been given if the Lessor shall have irrevocably deposited with the
Indenture Trustee the amounts required by the second
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sentence of this paragraph).
If a sale shall not have occurred on or as of the Termination Date,
then Lessee may at its option (i) elect to terminate the Lease, upon payment to
the Indenture Trustee (so long as the Indenture has not been satisfied and
discharged), or thereafter to the Lessor or to whomever is entitled thereto, on
the scheduled Termination Date the amounts set forth in clauses (B), (C) and (D)
of the second paragraph of this Section 14(b) plus the Termination Value as of
such Termination Date and return the Facility to the Lessor in accordance with
Section 5 or (ii) revoke its Termination Notice in which case this Lease shall
continue in full force and effect, and Lessee shall not be required to pay the
Termination Value or any Make-Whole Amount. In addition to any revocation
described in the preceding sentence, Lessee shall be entitled to revoke its
Termination Notice at any other time at least thirty (30) days prior to the
Termination Date with the same effect as a revocation pursuant to the
immediately preceding clause (ii). In the event of any such revocations, the
Lessee will pay all reasonable fees and expenses (including reasonable
attorney's fees and expenses) of the Lessor, the Owner Participant, the
Indenture Trustee, the Remainderman and the Loan Participants incurred in
connection with such revoked Termination Notice. If the Lessee shall fail to pay
all amounts due under and pursuant to this Section 14 on the scheduled
Termination Date, no sale shall be consummated, this Lease shall continue in
full force and effect and it shall be deemed that Lessee has revoked its
Termination Notice.
Upon compliance by the Lessee with the provisions of this Section 14
(other than those which expressly provide that the term of this Lease shall
continue), the obligation of the Lessee to pay Basic Rent after the Termination
Date shall cease, the Lease Term shall end and the obligations of the Lessee
hereunder (other than any such obligation expressly surviving termination of
this Lease) shall terminate as of the Termination Date. The Lessor shall be
under no duty to solicit bids, to inquire into the efforts of the Lessee to
obtain bids or otherwise to take any
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action in connection with any such sale other than to sell its interest in the
Facility as provided above.
S15. EVENTS OF DEFAULT. The term "Event of Default", wherever used herein, shall
mean any of the following events (whatever the reason for such Event of Default
and whether it shall be voluntary or involuntary, or come about or be effected
by operation of law, or be pursuant to or in compliance with any judgment,
decree or order of any court or any Applicable Law or Governmental Action):
(a) PAYMENTS OF BASIC RENT, CASUALTY VALUE, TERMINATION VALUE AND EBO
PRICE. The Lessee shall fail to make, or cause to be made any payment of Basic
Rent, Casualty Value, Termination Value, EBO Price or any other amounts payable
under Section 9, 14 or 22 within five (5) Business Days after the same shall
become due; or
(b) CERTAIN OTHER SUPPLEMENTAL RENT PAYMENTS. The Lessee shall fail to
make, or cause to be made any payment of Supplemental Rent (other than (i)
Casualty Value, Termination Value, EBO Price or any other amounts payable under
Section 9, 14 or 22 and (ii) any payment with respect to Excepted Rights and
Payments (unless the Lessor elects to have such failure constitute an Event of
Default)) after the same shall become due, and such failure shall continue,
after the Lessee shall have received a notice from the Lessor specifying such
failure and requiring it to be remedied, for a period of thirty (30) days; or
(c) INSURANCE. The Lessee shall fail to carry or maintain
any insurance required under Section 10(a); or
(d) OTHER COVENANTS. The Lessee shall fail to perform or observe any
covenant or agreement (other than those referred to in clauses (a) through (c)
above) to be performed or observed by it under this Lease or any other
Transaction Document (other than the Tax Indemnification Agreement) to which it
is a party, and such failure shall continue, after the earlier of the date the
Lessee has Actual Knowledge of such failure or the date the
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Lessee shall have been given a notice specifying such failure and requiring it
to be remedied, for a period of thirty (30) days (or such longer period, not to
extend beyond the earlier of (A) the expiration of one hundred eighty (180) days
from the Lessee's receipt of such notice and (B) the last day of the Lease Term,
as may be necessary to remedy any such failure that cannot, with reasonable
diligence, be remedied within such thirty (30) day period, so long as the Lessee
is diligently proceeding to remedy such failure); or
(e) REPRESENTATIONS AND WARRANTIES. Any representation or warranty made
by the Lessee or the Seller in this Lease or in any other Transaction Document
(other than the Tax Indemnification Agreement) or in any certificate required to
be delivered hereunder or thereunder shall prove to have been incorrect in any
material respect when such representation or warranty was made, unless the fact,
circumstance or condition that is the subject of such representation or warranty
is remedied, cured or made true within thirty (30) days after the earlier of the
date the Lessee or the Seller has Actual Knowledge that a representation or
warranty made by it was incorrect in any material respect or the date the Lessee
or the Seller, as the case may be, shall have received notice specifying the
breach thereof from the Lessor; or
(f) RECEIVERSHIP, ETC. The Lessee shall file any petition for
dissolution or liquidation of the Lessee, or the Lessee shall commence a
voluntary case under any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect, or the Lessee shall consent to the entry of an order
for relief in an involuntary case under any such law, or the Lessee shall fail
generally to pay its debts as such debts become due (within the meaning of the
Bankruptcy Code), or the Lessee shall fail promptly to satisfy or discharge any
execution, garnishment or attachment of such consequence as will impair its
ability to carry out its obligations under this Lease or any other Transaction
Document or a receiver, custodian or trustee (or other similar official) shall
be appointed for the Lessee or shall take possession of any substantial part of
the Lessee's property, or the Lessee shall execute a general assignment for
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the benefit of its creditors, or the Lessee shall enter into an agreement of
composition with its creditors, or the Lessee shall take any corporate action in
furtherance of any of the foregoing; or an involuntary petition in bankruptcy
shall be filed against the Lessee which results in an order for relief being
entered or, notwithstanding that an order for relief has not been entered, the
petition is not dismissed within ninety (90) days of the date of the filing of
the petition, or any petition under any law relating to bankruptcy, insolvency
or relief of debtors shall be filed against the Lessee for reorganization,
composition, extension or arrangement with creditors which either (i) results in
a finding or adjudication of insolvency of the Lessee or (ii) is not dismissed
within ninety (90) days of the date of the filing of such petition.
The Lessee covenants that it will give notice to the Lessor, the
Remainderman, and the Indenture Trustee upon its obtaining Actual Knowledge of
any Default under this Lease.
S16. REMEDIES.
(a) REMEDIES. Upon the occurrence of any Event of Default and at any
time thereafter so long as the same shall be continuing the Lessor at its option
may, by notice to the Lessee, declare this Lease to be in default and at any
time thereafter exercise one or more of the following remedies as the Lessor in
its sole discretion shall elect:
(i) the Lessor may, by notice to the Lessee, terminate this
Lease as of the date specified in such notice; provided, however, (A)
no reletting, reentry or taking of possession of the Facility by the
Lessor will be construed as an election on the Lessor's part to
terminate this Lease unless a written notice of such intention is given
to the Lessee, (B) notwithstanding any reletting, reentry or taking of
possession, the Lessor may at any time thereafter elect to terminate
this Lease for a continuing Event of Default and (C) no act or thing
done by the Lessor or any of its agents, representatives or employees
and no agreement
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accepting a surrender of the Facility shall be valid unless the same be
made in writing and executed by the Lessor;
(ii) the Lessor may (A) demand that the Lessee, and the Lessee
shall upon the written demand of the Lessor, return the Facility
promptly to the Lessor in the manner and condition required by, and
otherwise in accordance with all of the provisions of Section 5 as if
the Facility was being returned at the end of the Lease Term, and the
Lessor shall not be liable for the reimbursement of the Lessee for any
costs and expenses incurred by the Lessee in connection therewith and
(B) without prejudice to any other remedy which the Lessor may have for
possession of the Facility, enter upon the Facility and take immediate
possession of (to the exclusion of the Lessee) the Facility and expel
or remove the Lessee and any other Person who may be occupying the
Facility, by summary proceedings or otherwise, all without liability to
the Lessee for or by reason of such entry or taking possession, whether
for the restoration of damage to property caused by such taking or
otherwise and, in addition to the Lessor's other damages, the Lessee
shall be responsible for the reasonably necessary costs and expenses of
reletting, including brokers fees and the costs of any alterations or
repairs made by the Lessor. The provisions of this Section 16(a)(ii)
shall operate as a notice to quit and shall be deemed to satisfy any
other requirement or provisions of Applicable Law which may require the
Lessor to provide a notice to quit or of the Lessor's intention to
re-enter the Facility and any such requirements or provisions are
hereby waived to the fullest extent permitted by Applicable Law by the
Lessee;
(iii) the Lessor may sell all or any part of the Facility at
public or private sale, as the Lessor may determine, free and clear of
any rights of the Lessee and without any duty to account to the Lessee
with respect to such action or inaction or any proceeds with respect
thereto (except to the extent required by paragraph (vi) below if the
Lessor shall elect to exercise its rights thereunder) in
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which event the Lessee's obligation to pay Basic Rent hereunder for
periods commencing after the date of such sale shall be terminated
(except to the extent that Basic Rent is to be included in computations
under Section 16(a)(v) or (vi) below if the Lessor shall elect to
exercise its rights thereunder);
(iv) the Lessor may hold, keep idle or lease to others all or
any part of the Facility as the Lessor in its sole discretion may
determine, free and clear of any rights of the Lessee and without any
duty to account to the Lessee with respect to such action or inaction
or for any proceeds with respect to such action or inaction, except
that the Lessee's obligation to pay Basic Rent from and after the
occurrence of an Event of Default shall be reduced by the
net proceeds, if any, received by the Lessor from leasing the Facility
to any Person other than the Lessee for the same periods or any portion
thereof (the Lessee acknowledges and agrees, however, that the Lessor
shall have no duty or obligation to relet the Facility);
(v) the Lessor may, whether or not the Lessor shall have
exercised or shall thereafter at any time exercise any of its rights
under Section 16(a)(ii), (iii) or (iv) with respect to the Facility,
demand, by written notice to the Lessee specifying a date (the "Final
Payment Date") not earlier than ten (10) days after the date of such
notice, that the Lessee pay to the Lessor, and the Lessee shall pay to
the Lessor, on the Final Payment Date, as liquidated damages for loss
of a bargain and not as a penalty (the parties agreeing that the
Lessor's actual damages would be difficult to predict, but the
aforementioned liquidated damages represent a reasonable approximation
of such amount) (in lieu of Basic Rent due after the Final Payment
Date), an amount equal to the sum of (A)(1) if the Final Payment Date
is a Rent Payment Date, all accrued and unpaid Basic Rent payable in
arrears and due and unpaid as of the Final Payment Date or (2) if the
Final Payment Date is not a Rent Payment Date, the accrued arrears
Basic Rent due and payable
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on such Final Payment Date (it being understood, in the case of clauses
(1) and (2) above, that the Lessee shall pay when due any Basic Rent
due on a Rent Payment Date which occurs on or after the Event of
Default but prior to the Final Payment Date), plus (B) without
duplication of any amounts included within clause (A) above or (C)
below, all Supplemental Rent (to be paid directly to the Person
entitled thereto) due as of such Final Payment Date and all accrued and
unpaid interest on the Outstanding Facility Notes together with all
other amounts, including, without limitation, the Make-Whole Amounts,
if any, due under the Indenture and the other Transaction Documents as
of the Final Payment Date, plus (C) whichever one of the following
amounts the Lessor, in its sole discretion, shall specify in such
notice (together with interest on such amount at the Default Rate from
the Final Payment Date specified in such notice to the date of actual
payment):
(1) if the Facility has not been sold, an amount
equal to the excess, if any, of the Casualty Value computed as
of the Final Payment Date, over the Fair Market Sales Value of
the Facility as of the Final Payment Date (such Fair Market
Sales Value to be determined by mutual agreement of the Lessor
and the Lessee, or if they cannot agree within ten (10) days
after such notice, by the Appraisal Procedure);
(2) if the Facility has not been sold, an amount
equal to the excess, if any, of the Casualty Value computed as
of the Final Payment Date over the present value of the Fair
Market Rental Value for the Facility for the balance of the
Lease Term discounted semiannually at the Debt Rate (such Fair
Market Rental Value to be determined by mutual agreement of
the Lessor and the Lessee, or if they cannot agree within ten
(10) days of such notice, by the Appraisal Procedure);
(3) if the Facility has not been sold, an amount
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equal to the excess of (a) the present value as of the Final
Payment Date of all installments of Basic Rent through the end
of the Basic Term or the then applicable Renewal Term,
discounted semiannually at the Debt Rate, over (b) the present
value as of such Final Payment Date of the Fair Market Rental
Value of the Facility (such Fair Market Rental Value to be
determined by mutual agreement of the Lessor and the Lessee,
or if they cannot agree within ten (10) days of such notice,
the Appraisal Procedure) through the end of the Basic Term or
the then applicable Renewal Term, discounted at the Debt Rate;
or
(4) if the Facility has not been sold, the greater of
(a) Casualty Value, (b) such discounted Fair Market Rental
Value, (c) such discounted Fair Market Sales Value and (d)
such discounted Basic Rent computed as of the Final Payment
Date and upon payment of such amount, and the amount of any
unpaid Rent referred to in Section 16(b), the Lessor shall
convey to the Lessee all of the Lessor's right, title and
interest in and to the Facility (which, for this purpose,
shall include, without limitation, all rights of the Lessor
under the Option and Estate for Years Agreement and the Three
Party Agreement and the Ground Lease, if applicable) without
recourse or warranty, but free and clear of all Lessor Liens;
(vi) if the Lessor shall have sold the Facility pursuant to
Section 16(a)(iii), the Lessor, in lieu of exercising its rights under
Section 16(a)(v), may, if it shall so elect, demand that the Lessee pay
to the Lessor, and the Lessee shall pay to the Lessor, on the date of
such sale, as liquidated damages for loss of a bargain and not as a
penalty (the parties agreeing that the Lessor's actual damages would be
difficult to predict, but the aforementioned liquidated damages
represent a reasonable approximation of such amount) (in lieu of Basic
Rent for the portion of the Facility so sold due for periods commencing
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on or after the Determination Date coinciding with such date of sale
(or, if the sale date is not a Determination Date, the Determination
Date next preceding the date of such sale)), an amount equal to the sum
of (A)(1) if the sale date is a Determination Date, all such accrued
and unpaid Basic Rent payable in arrears and due and unpaid as of such
sale date or (2) if the sale date is not a Determination Date, the
accrued arrears Basic Rent due and payable on such sale date (it being
understood that, in the case of clauses (1) and (2) above, the Lessee
shall pay when due any Basic Rent due on a Rent Payment Date which
occurs on or after the Event of Default but prior to such sale date),
plus (B) (without duplication of any amounts in clause (A) above or
clause (C) below) all Supplemental Rent due as of the date of sale and
all accrued and unpaid interest on the Outstanding Facility Notes
together with all other amounts, including, without limitation, the
Make-Whole Amount, if any, due under the Indenture and the other
Transaction Documents as of such sale date, plus (C) the amount of any
excess of the Casualty Value, computed as of such Casualty Date, over
the net proceeds of such sale, together with interest at the Default
Rate on such excess from such Determination Date to the date of sale,
plus (D) interest at the Default Rate on all of the foregoing amounts
from the date of such sale until the date of payment;
(vii) the Lessor may exercise any other right or remedy that
may be available to it under Applicable Law or in equity, or proceed by
appropriate court action (legal or equitable) to enforce the terms
hereof or to recover damages for the breach hereof. Separate suits may
be brought to collect any such damages for any semiannual lease
period(s), and such suits shall not in any manner prejudice the
Lessor's right to collect any such damages for any subsequent
semiannual lease period(s), or the Lessor may defer any such suit until
after the expiration of the Basic Term or the then current Renewal
Term, in which event such suit shall be deemed not to have accrued
until the expiration of the Basic Term, or the then current Renewal
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Lease Agreement
Term; or
(viii) the Lessor may retain and apply against the
Lessor's damages all sums which the Lessor would, absent such Event of
Default, be required to pay to, or turn over to, the Lessee pursuant to
the terms of this Lease, including, without limitation, any sums which
the Lessor may be required to pay to Lessee under Section 9.
(b) NO RELEASE. Except as otherwise provided in Section 16(a), no
rescission or termination of this Lease, in whole or in part, or repossession of
the Facility or exercise of any remedy under Section 16(a) shall relieve the
Lessee of any of its obligations under this Lease. In addition, except as
aforesaid, the Lessee shall be liable for any and all unpaid Basic Rent (other
than Basic Rent payable on or after the date that Casualty Value or Termination
Value, or any amount determined by reference to Casualty Value or Termination
Value, is payable) and all Supplemental Rent due and accrued hereunder before,
after or during the exercise of any of the foregoing remedies, including all
legal fees and other costs and expenses on an After-Tax Basis incurred by the
Lessor, the Indenture Trustee or any Participant by reason of the occurrence of
any Event of Default or the exercise of the Lessor's remedies with respect
thereto. At any public sale of the Facility or any part thereof pursuant to this
Section 16, any Participant, the Lessor or the Indenture Trustee may bid for and
purchase such property.
(c) REMEDIES CUMULATIVE. No remedy under this Section 16 is intended to
be exclusive, but each shall be cumulative and in addition to any other remedy
provided thereunder or otherwise available to the Lessor at law or in equity. No
express or implied waiver by the Lessor of any Default or Event of Default
hereunder shall in any way be, or be construed to be, a waiver of any future or
subsequent Default or Event of Default. The failure or delay of the Lessor in
exercising any right granted it hereunder upon any occurrence of any of the
contingencies set forth herein shall not constitute a waiver of any such right
upon the continuation or recurrence of any such contingency or similar
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contingencies and any single or partial exercise of any particular right by the
Lessor shall not exhaust the same or constitute a waiver of any other right
provided herein.
S17. NOTICES. All communications, declarations, demands, requests and notices
provided for in this Lease shall be in writing and addressed, delivered and
deemed effective as specified in Section 11.3 of the Participation Agreement
(except for telephonic notice to the Lessee expressly permitted under Section
19, which telephonic notice shall be made to the Lessee, to the attention of the
Treasurer of the Lessee (currently Tim Hearne) at (908) 938-1480 (or such other
Person and/or telephone number as the Lessee may from time to time specify in a
written notice made in accordance with this Section 17), with written notice
delivered in accordance with the provisions of this Section 17 promptly
thereafter). So long as any Facility Notes remain Outstanding, the Lessee shall
give the Indenture Trustee copies of any notices required to be given to the
Lessor pursuant to this Lease.
S18. SUCCESSORS AND ASSIGNS. This Lease, including all agreements, covenants,
indemnities, representations and warranties contained herein, shall be binding
upon and inure to the benefit of the Lessor and the Lessee and their respective
successors and permitted assigns.
S19. RIGHT TO PERFORM FOR THE LESSEE. Subject to the provisions of the
Indenture, if the Lessee shall fail to make any payment to be made by it
hereunder or shall fail to perform or comply with any of its other agreements
contained herein, and the Lessee shall not be diligently curing such failure,
then (subject to the requirements of the next sentence of this Section 19)
unless and until the Lessee shall make such payment or perform or comply with
such agreement, the Owner Participant or the Lessor may, to the extent not
prohibited by Applicable Law, but shall not be obligated to, itself make any
such payment or perform or comply with any such agreement as the Lessee shall be
obligated to pay, perform or comply with under this Lease, and the amount of
such payment and the amount of the reasonable out-of-pocket
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Lease Agreement
expenses of the Owner Participant or the Lessor incurred in connection with such
payment or the performance or compliance with such agreement (including, without
limitation, reasonable legal fees), as the case may be, together with interest
thereon at the Default Rate, shall be deemed Supplemental Rent, payable by the
Lessee on an After-Tax Basis upon demand. The Owner Participant and the Lessor
shall provide the Lessee with the following notice with respect to its making
any such payment or performing any such agreement: (i) if such payment or
performance shall result from the Lessee's failure to carry or maintain
insurance required pursuant to Section 10(a) of this Lease, the Owner
Participant or the Lessor shall give the Lessee notice thereof promptly after
taking any action in accordance with the preceding sentence; (ii) if such
payment or performance shall result from an emergency, the Owner Participant or
the Lessor shall give the Lessee prior notice thereof before taking any action
in accordance with the preceding sentence; provided, however, that such notice
may be telephonic or facsimile with written notice delivered promptly
thereafter, all in accordance with the provisions of Section 17; and (iii) if
such payment or performance shall occur in any other situation, the Owner
Participant or the Lessor shall give the Lessee 10 Business Days' prior notice
before taking any action in accordance with the preceding sentence.
S20. ADDITIONAL COVENANTS. The Lessee agrees to pay as Supplemental Rent to the
Person or Persons entitled thereto all amounts payable by it under the
provisions of Article VII of the Participation Agreement and Section 11.2 of the
Participation Agreement and under the provisions of the Tax Indemnification
Agreement, which provisions are incorporated herein by this reference as fully
as if set forth in full at this place. The Lessee agrees to comply with its
covenants and agreements set forth in Section 6.1 of the Participation
Agreement, which covenants and agreements are incorporated herein by this
reference as fully as if set forth in full at this place.
S21. RIGHT OF FIRST OFFER.
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(a) In the event that the Indenture Trustee at any time permits the
Lessor to sell, transfer, convey or otherwise alienate the Facility (which for
so long as any Facility Notes are Outstanding the Lessor acknowledges can be
done only with the consent of the Indenture Trustee acting at the direction of
all of the Loan Participants and upon such terms as the Loan Participants may
agree to in their sole discretion, unless such sale, transfer or conveyance is
to a successor trustee or co-trustee permitted by the terms of the Trust
Agreement and the Participation Agreement or to the purchaser of the Facility
pursuant to Section 14), and provided that no Event of Default shall have
occurred and be continuing, before the Lessor may offer to sell, transfer,
convey or otherwise alienate (other than any easement or other interest which
the Lessor shall grant or convey pursuant to Section 23(a)) the Facility to a
third Person (other than any Affiliate or designee of the Lessee) other than to
any successor trustee or co-trustee permitted by the terms of the Trust
Agreement and the Participation Agreement and other than to the purchaser of the
Facility pursuant to Section 14, including in response to any unsolicited offer
by a potential purchaser or potential transferee and prior to the acceptance of
such offer or the making of a counteroffer, the Lessor shall offer, in writing,
that interest in the Facility, and does hereby grant a right of first offer to
purchase that interest in the Facility, to the Lessee for purchase at a price
(the "Determined Price"), which Determined Price shall in any case never be less
than all amounts due and owing by the Lessor under the Indenture, and upon terms
(the "Determined Terms") specified by the Lessor. Such offer may be accepted by
the Lessee at any time within sixty (60) days after the date of receipt by the
Lessee of the notice of the offer and the Determined Price and Determined Terms
by irrevocable written notice of the acceptance of such offer specifying the
closing date for such purchase which shall not be more than thirty (30) days
after the date of such written acceptance, and such purchase shall be made in
accordance with Section 22(d)(i) (substituting "Determined Price" and
"Determined Date" for "EBO Price" and "EBO Date", respectively) and Section 6.5
of the Indenture. In the event that the Lessee does not elect to purchase the
Facility for the Determined Price and upon
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Lease Agreement
the Determined Terms, concurrently with the prepayment of all, but not less than
all, of the Facility Notes pursuant to Section 6.4 of the Indenture and payment
of all amounts due thereunder, the Facility may be sold by the Lessor at the
Determined Price and upon the Determined Terms at any time during the period of
two hundred seventy (270) days following the giving by the Lessee of a notice
that it does not intend to exercise its right of first offer (or in the case of
the deemed waiver by the Lessee of its right of first offer, during the period
of 270 days following the expiration of the aforementioned 30-day period during
which the Lessee shall have the right to accept the offer), without the need to
offer the Facility to the Lessee pursuant to the provisions of this Section 21.
The Facility shall not be sold (1) at any price or upon any terms materially
more favorable to the purchaser than those contained in the offer to the Lessee
or (2) at a time after such 270-day period, in each case without first having
again complied with the provisions of this Section 21. Any failure of the Lessee
to exercise its rights pursuant to this Section 21 shall in no event diminish,
waive or extinguish its rights with respect to any subsequent proposed sale or
transfer.
(b) If the Lessee shall not exercise its right to purchase under clause
(a) of this Section 21, the Lessee shall, upon written request after the
expiration of the thirty (30) day period applicable thereto, deliver to the
Lessor a recordable statement certifying any waiver of or refusal to exercise
such right of first offer.
(c) The foregoing provisions of this Section 21 shall not be applicable
to a foreclosure sale of the Facility pursuant to the Indenture.
S22. PURCHASE OPTIONS.
(a) PURCHASE OPTIONS. So long as no Event of Default shall have
occurred and be continuing, the Lessee shall have and is hereby granted the
following rights and options:
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Lease Agreement
(i) to purchase the Facility or the Beneficial Interest on the
EBO Date at the EBO Price by not more than eighteen (18) months nor
less than six (6) months prior irrevocable written notice;
(ii) to purchase the Facility at the end of the Basic Term at
the then Fair Market Sales Value by not more than twenty-four (24)
months nor less than eighteen (18) months irrevocable prior written
notice, unless the Lessee shall have exercised its Renewal Option in
which case by not less than six (6) months irrevocable prior written
notice; and
(iii) to purchase the Facility at the end of any Renewal Term
at the then Fair Market Sales Value by not more than twenty-four (24)
months nor less than eighteen (18) months irrevocable prior written
notice, unless the Lessee shall have exercised its Renewal Option in
which case by not less than six (6) months irrevocable prior written
notice,
in the case of clause (i), in accordance with the purchase procedure set forth
in Section 22(d)(i), and in the case of clause (ii) or (iii), in accordance with
Section 22(d)(ii).
(b) DETERMINATION OF FAIR MARKET SALES VALUE. If the Lessee shall give
to the Lessor notice of its election to purchase pursuant to clause (ii) or
(iii) of Section 22(a), then commencing not later than nine (9) months prior to
the expiration date of the Basic Term or then-current Renewal Term, as the case
may be, the Lessee and the Lessor shall attempt to agree upon the Fair Market
Sales Value of the Facility. If the Lessee and the Lessor are unable to agree
upon the Fair Market Sales Value, such value shall be determined by the
Appraisal Procedure.
(c) [INTENTIONALLY OMITTED].
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Lease Agreement
(d) PURCHASE PROCEDURE.
(i) If the Lessee shall have exercised its option pursuant to
Section 22(a)(i), and does not elect to purchase the Beneficial
Interest in accordance with Section 11.2 of the Participation
Agreement, the Lessee shall purchase the Lessor's interest in the
Facility (which for this purpose shall include, without limitation, all
rights of the Lessor under the Option and Estate For Years Agreement
and the Three Party Agreement and the Ground Lease, if applicable) on
the EBO Date at a purchase price equal to the sum of (A) the EBO Price,
plus (B) all Supplemental Rent (including, without limitation, the
Make-Whole Amount, if any, due on the Facility Notes) due and owing on
the EBO Date, plus (C) all Basic Rent payable in arrears and due and
owing on the EBO Date (it being understood that the Lessee shall pay
when due any Basic Rent due and payable on a Rent Payment Date which
occurs on or after the date it exercises its option pursuant to Section
22(a)(i) but prior to the EBO Date), plus (D) without duplication of
any amounts included within clauses (A), (B) and (C) above, all accrued
and unpaid interest on the Facility Notes together with all other
amounts due under the Indenture and the other Transaction Documents as
of the EBO Date. The Lessee shall pay the purchase price specified in
the preceding sentence to the Indenture Trustee (so long as the
Indenture has not been satisfied and discharged) or thereafter to the
Lessor on the EBO Date. Upon payment in full of all amounts described
in clauses (A), (B), (C) and (D) of the preceding sentence, (x) the
Lease Term shall end, (y) the obligations of the Lessee hereunder
(other than any obligations expressed herein as surviving termination
of this Lease) shall terminate as of the date of such payment and (z)
the Lessor shall Transfer to the Lessee all right, title and interest
of the Lessor in, to and under the Facility. Anything herein to the
contrary notwithstanding, if the Lessee shall fail to pay all amounts
due under and pursuant to this Section 22(d)(i), no purchase shall be
consummated, this Lease shall continue in full force and effect and it
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Lease Agreement
shall be deemed that Lessee has rescinded its election pursuant to
Section 22(a)(i).
If the Lessee shall elect to purchase the Beneficial Interest
in accordance with Section 11.2(a) of the Participation Agreement, the
Lessee shall comply with the provisions thereof on or prior to the EBO
Date, and shall pay to the Lessor on the EBO Date (A) the EBO Price,
less the aggregate principal amount of the Facility Notes so
assumed, plus (B) all Supplemental Rent due and owing on the EBO Date
to the Lessor and the Owner Participant, plus (C) all Basic Rent
payable in arrears and due and owing on the EBO Date (it being
understood that the Lessee shall pay when due any Basic Rent due and
payable on a Rent Payment Date which occurs on or after the date it
exercises its option pursuant to Section 22(a)(i) but prior to the EBO
Date). Upon payment in full of all amounts described in clauses (A),
(B) and C of the preceding sentence, the Lessor shall Transfer to the
Lessee all right, title and interest of the Lessor in, to and under the
Facility. Any payment obligations of the Lessee under this Section
22(d)(i) shall be Supplemental Rent.
(ii) If the Lessee shall purchase the Facility, pursuant to
Section 16(a)(v), Section 21 (unless the Lessee assumes the obligations
of the Lessor under the Indenture and the Facility Notes in connection
with such purchase) or clause (ii) or (iii) of Section 22(a), the
Lessee may designate another Person to acquire the Facility, and the
Lessee (or its designee) shall accept from the Lessor a deed with
respect to the Estate for Years and the Building containing
representations and warranties of grantor to the Lessee regarding
Lessor Liens, and a bill of sale for the Personalty constituting a part
of the Facility, subject to the then existing title to the Facility,
but free of, and with a warranty from the Lessor and the Owner
Participant against, any Lessor Liens and Owner Participant Liens. Upon
the date fixed for the purchase of the Facility hereunder, (1) the
Lessee shall pay (or shall cause its designee to
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Lease Agreement
pay) by wire transfer of immediately available funds the applicable
purchase price, (2) in addition thereto, the Lessee will pay to the
Lessor (or, in the case of Supplemental Rent payable to any Indemnified
Person or any Related Party to any such Indemnified Person, to the
Indemnified Person or Related Party to any Indemnified Person entitled
thereto) all unpaid Rent due such Person for any period through and
including such purchase date (other than any Basic Rent due in advance
on such purchase date), (3) if the applicable purchase date is not a
Rent Payment Date, the Lessor shall pay to the Lessee (or the Lessee
shall have the right to deduct from any amounts payable to the Lessor
or the Owner Participant under clauses (1) and (2) above) the portion
of any Basic Rent theretofore paid by the Lessee relating to any period
occurring after the applicable purchase date; and (4) upon payment by
the Lessee (or its designee) of the amounts specified in clauses (1)
and (2) above and the costs hereinafter defined, net of the amount due
the Lessee under clause (3) above, the Lessor shall effect a Transfer
to the Lessee or its designee of the Facility or applicable portion
thereof and this Lease shall terminate. All reasonable charges incident
to such conveyance, including, without limitation, the Lessee's, the
Lessor's, the Indenture Trustee's, each Loan Participant's and the
Owner Participant's reasonable attorneys' fees, escrow fees, recording
fees, title insurance premiums and (except to the extent required
otherwise by Applicable Law) all applicable sales, use, transfer,
transaction and similar taxes, as well as Taxes required to be paid in
order to record the transfer documents (but not any taxes imposed on,
based on or measured by gross or net income, capital gains taxes or any
minimum tax or alternative minimum tax, gross receipts, capital or net
worth, franchise, excess profits or conduct of business (other than
Taxes which are, or are in the nature of, sales, use, transfer,
transaction, rental, ad valorem or property Taxes), payable by the
Lessor upon or with respect to the sale or disposition by it of all or
any part of its interest) that may be imposed by reason of such
conveyance and assignment and the delivery of such deed
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shall be paid by the Lessee in all cases, except that if the purchase
shall be in connection with the Lessee's exercise of its rights under
Section 22(a)(ii) or Section 22(a)(iii) of this Lease, all New Jersey
transfer Taxes shall be paid by the Lessor to the extent such Taxes do
not exceed 3/4 of 1% of the Lessor's Purchase Price.
(e) APPORTIONMENTS. Upon termination of this Lease resulting in
delivery of the Lessor's title to the Facility to the Lessee, there shall be no
apportionment of space tenant rents, water and sewer rents, taxes, insurance or
other charges payable with respect to the Facility, all of such rents, taxes,
insurance or other charges due and payable with respect to the Facility prior to
termination being payable by the Lessee hereunder and all due after such time
being payable by the Lessee as the then owner of the Facility.
(f) TERMINATION UNDER PARTICIPATION AGREEMENT. This Lease is subject to
termination as provided in, and subject to the provisions of, Section 11.2 of
the Participation Agreement.
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Lease Agreement
S23. GRANTING OF EASEMENTS.
(a) GRANT. The Lessor shall, from time to time within thirty (30) days
after the Lessee's request given to the Lessor (which request shall specify the
recipient of such easement, declaration, license, right of way or release),
grant easements, declarations, licenses and rights of way, and release then
existing easements, declarations, licenses and rights of way affecting the
Facility; provided, that such grant or release does not reduce the Fair Market
Sales Value, residual value, utility or remaining useful life of the Facility or
the Site or interfere with the continued use of the Premises or the Site for a
first class Wall Township, New Jersey office building of similar age and size as
the Premises and the use to which the Premises are then generally being put. The
Lessee shall pay, or reimburse, the Lessor, the Remainderman and the Indenture
Trustee on an After- Tax Basis for all reasonable out-of-pocket expenses and
reasonable attorneys' fees incurred by the Lessor in performing its obligations
under this Section 23 or incurred by Indenture Trustee under the related
provisions of the Indenture.
(b) COOPERATION. The Lessee and Lessor shall reasonably cooperate with
each other and the Lessor shall comply with any provisions of the Indenture
regarding the subject matter of this Section 23.
S24. AMENDMENTS AND MISCELLANEOUS.
(a) AMENDMENTS IN WRITING. The provisions of this Lease may not be
waived, altered, modified, amended, supplemented or terminated in any manner
whatsoever except by written instrument signed by the Lessor and the Lessee. It
is understood and agreed by the parties hereto that any waiver, alteration,
modification, amendment, supplement or termination of this Lease that requires
the consent of the Indenture Trustee or all the Loan Participants or a Majority
in Interest thereof (in each case as provided in the Indenture) shall not be
effective unless and until such consent shall have been obtained as provided in
accordance with the provisions of the Indenture.
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Lease Agreement
(b) SEVERABILITY OF PROVISIONS. Any provision of this Lease that may be
determined by competent authority to be prohibited or unenforceable in any
jurisdiction shall not invalidate or render unenforceable such provision in any
other jurisdiction. To the extent permitted by Applicable Law, the Lessee hereby
waives any provision of law that renders any provision hereof prohibited or
unenforceable in any respect.
(c) TRUE LEASE. This Lease is intended as, and shall constitute, an
agreement of lease, and nothing herein shall be construed as conveying to the
Lessee any right, title or interest in or to the Premises or the Site except as
a lessee. It is the intention of the Lessee, the Owner Participant and the Owner
Trustee for income tax purposes to treat the Owner Participant as the owner and
lessor of the Facility and that the Lease be characterized as a "true lease" for
income tax purposes.
(d) GOVERNING LAW. THIS LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW JERSEY (WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES).
(e) HEADINGS. The division of this Lease into sections and subsections,
the provision of a table of contents and the insertion of headings are for
convenience of reference only and shall not affect the construction or
interpretation of this Lease.
(f) CONCERNING THE OWNER TRUSTEE. The Bank is entering into this Lease
solely as Owner Trustee under the Trust Agreement and not in its individual
capacity. Accordingly, except as otherwise expressly set forth herein or in the
other Transaction Documents, each of the representations, warranties,
undertakings and agreements herein made on the part of the Owner Trustee as the
Lessor is made and intended not as a personal representation, warranty,
undertaking or agreement by or for the purpose or with the intention of binding
the Bank personally, but is made and intended for the purpose of binding only
the Trust Estate; this
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Lease Agreement
Lease is executed and delivered by the Owner Trustee solely in the exercise of
the powers expressly conferred upon it as trustee under the Trust Agreement; and
no personal liability or responsibility is assumed hereunder by or shall at any
time be enforceable against the Bank, or any successor in trust on account of
any action taken or omitted to be taken or any representation, warranty,
undertaking or agreement hereunder of the Owner Trustee, either expressed or
implied, all such personal liability, if any, being expressly waived by the
Lessee, except that the Lessee or any Person acting by, through or under it,
making a claim hereunder, may look to the Trust Estate for satisfaction of the
same and the Bank or its successor in trust, as applicable, shall be personally
liable for its own gross negligence or willful misconduct (or negligence, in the
case of the handling, holding and transfer of funds), in the performance of its
duties as Owner Trustee or otherwise. If a successor owner trustee is appointed
in accordance with the terms of the Trust Agreement, such successor owner
trustee, without any further act, shall succeed to all the rights, duties,
immunities and obligations of the Owner Trustee hereunder and the predecessor
owner trustee shall be released from all further duties and obligations
hereunder.
(g) LIEN OF THE INDENTURE. The Lessee hereby agrees that any property
subject to the Lien of the Indenture that is to be transferred by the Lessor
hereunder shall be transferred subject to such Lien unless the Outstanding
Facility Notes are paid in full in connection with such transfer.
(h) COUNTERPART EXECUTION. This Lease may be executed in
any number of counterparts and by each of the parties hereto in
separate counterparts, all such counterparts together
constituting but one and the same instrument.
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Lease Agreement
(i) ESTOPPEL CERTIFICATES. Each party hereto agrees, at any time and
from time to time, upon not less than thirty (30) days' prior written notice
from the other party, to execute, acknowledge and deliver to the requesting
party a statement in writing (v) certifying that this Lease is unmodified and in
full force and effect (or if there have been modifications, that this Lease is
in full force and effect as modified and stating the modifications hereto); (w)
stating the dates to which the Basic Rent and other specified charges hereunder
have been paid by the Lessee; (x) stating whether or not such party has
knowledge that the Lessee is in default in the performance of any covenant,
agreement or condition contained in this Lease, and, if such party has knowledge
of such a default, specifying each such default; (y) stating the address to
which notices to such party shall be sent; and (z) stating such other matters as
such requesting party may reasonably request.
(j) NO MERGER. There shall be no merger of this Lease or the leasehold
estate hereby created with the Estate for Years or any other estate in the Site
or the Premises by reason of the fact that the same Person acquires, holds,
directly or indirectly, this Lease or the leasehold estate hereby created or any
interest herein or in such leasehold estate and the Estate for Years, the Site
or the Premises or any interest in any thereof, such merger to occur only upon
recordation of an instrument to such effect in the Recorder's Office of Monmouth
County, New Jersey; provided, however, that at the time of such recordation, the
Indenture is no longer a Lien on the Estate for Years.
(k) RECORDATION. The Lessor and the Lessee agree that the Memorandum of
Lease shall be recorded in the Office of the Monmouth County, New Jersey
Recorder of Deeds, at the cost of the Lessee.
(l) SIGNS; NAME. The Lessee shall have the exclusive right to place its
signs in, on and about the Premises and the Site; provided, however, that such
signs are purchased and installed at the sole cost and expense of the Lessee and
are removed from the
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Lease Agreement
Premises at the expiration or earlier termination of the Lease Term at the
Lessee's sole cost and expense. The Lessee shall have the exclusive right to
name the Facility. The Lessor shall not be permitted to erect or place signs in,
on or about the Premises and the Site or to change the name of the Facility
during the Lease Term.
(m) RULE AGAINST PERPETUITIES. If any rule of law shall forbid or
frustrate the vesting of the title to the Facility, the Beneficial Interest or
any other interest as provided herein or the exercise of any option or right of
first refusal herein, then such vesting of title shall occur and any option or
right of first refusal shall only be exercisable not later than 21 years less
one day after the death of the last survivor of any of the descendants living on
the Closing Date of John D. Rockefeller, Jr. (excluding Michael Rockefeller, son
of Nelson A. Rockefeller, and any descendants of said Michael Rockefeller).
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IN WITNESS WHEREOF, each of the parties hereto has caused this Lease to
be duly executed in New York, New York, by an officer thereunto duly authorized
as of the date and year first above written.
STATE STREET BANK AND TRUST
COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, a
national banking
association, not in its
individual capacity but
solely as Owner Trustee
under the Trust Agreement
dated as of December 21,
1995, as the Lessor
By /s/ ROMANO I PELUSO
Name: Romano I Peluso
Title: Vice President
NEW JERSEY NATURAL GAS COMPANY, a
New Jersey corporation, as the
Lessee
By /s/ TIM HEARNE
Name: Tim Hearne
Title: Treasurer
The address of the within named Lessor is:
State Street Bank and Trust Company
of Connecticut, National Association
750 Main Street, Suite 1114
Hartford, Connecticut 06103
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Attention: Corporate Trust Department
The address of the within named Lessee is:
New Jersey Natural Gas Company
1415 Wyckoff Road
Wall, New Jersey 07719
Attention:
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<PAGE> 88
STATE OF NEW YORK )
) SS.
COUNTY OF NEW YORK )
I, Thaddeus J. Tracy a notary public in and for said County, in the
State aforesaid, do hereby certify that Romano I. Peluso personally known to me
to be a Vice President of STATE STREET BANK AND TRUST COMPANY OF CONNECTICUT,
NATIONAL ASSOCIATION, a national banking association, and personally known to me
to be the same person whose name is subscribed to the foregoing instrument,
appeared before me this day in person and acknowledged that as such Vice
President, he signed and delivered the said instrument and caused the seal of
said national banking association to be affixed thereto, pursuant to authority
given by the Board of Directors of said national banking association as his free
and voluntary act and as the free and voluntary act and deed of said national
banking association, for the uses and purposes therein set forth.
Given under my hand and official seal this 22 day of December, 1995.
/s/ Thaddeus J. Tracy
---------------------------------
Notary Public
Commission expires: _____________
[SEAL]
<PAGE> 89
STATE OF NEW JERSEY )
) SS.
COUNTY OF MONMOUTH )
I, Angela M. Crosby a notary public in and for said County, in the
State aforesaid, do hereby certify that Tim Hearne personally known to me to be
the Treasurer of NEW JERSEY NATURAL GAS COMPANY, a New Jersey corporation, and
personally known to me to be the same person whose name is subscribed to the
foregoing instrument, appeared before me this day in person and acknowledged
that as such Treasurer, he signed and delivered the said instrument and caused
the seal of said New Jersey corporation to be affixed thereto, pursuant to
authority given by the Board of Directors of said New Jersey corporation as his
free and voluntary act and as the free and voluntary act and deed of said New
Jersey corporation, for the uses and purposes therein set forth.
Given under my hand and official seal this 22nd day of December,
1995.
/s/ Angela M. Crosby
--------------------------------
Notary Public
Commission expires: _____________
[SEAL]
<PAGE> 90
APPENDIX A
DEFINITIONS AND RULES OF USAGE
<PAGE> 91
LEASE AGREEMENT
SCHEDULE 1 TO
THE LEASE
---------
Basic Rent
----------
Rent Basic Rent Basic Rent Total
Payment Date In Arrears In Advance Basic Rent Payment
- ------------ ---------- ---------- ------------------
July 1, 1996 0.00 1,141,955.00 1,141,955.00
January 1, 1997 0.00 1,141,955.00 1,141,955.00
July 1, 1997 0.00 1,141,955.00 1,141,955.00
January 1, 1998 0.00 1,141,955.00 1,141,955.00
July 1, 1998 0.00 1,141,955.00 1,141,955.00
January 1, 1999 0.00 1,141,955.00 1,141,955.00
July 1, 1999 0.00 1,141,955.00 1,141,955.00
January 1, 2000 0.00 1,141,955.00 1,141,955.00
July 1, 2000 0.00 1,292,378.00 1,292,378.00
January 1, 2001 0.00 1,292,378.00 1,292,378.00
July 1, 2001 0.00 1,292,378.00 1,292,378.00
January 1, 2002 0.00 1,292,378.00 1,292,378.00
July 1, 2002 0.00 1,292,378.00 1,292,378.00
January 1, 2003 0.00 1,292,378.00 1,292,378.00
July 1, 2003 0.00 1,292,378.00 1,292,378.00
January 1, 2004 0.00 1,292,378.00 1,292,378.00
July 1, 2004 0.00 1,292,378.00 1,292,378.00
January 1, 2005 0.00 1,292,378.00 1,292,378.00
July 1, 2005 0.00 1,461,702.00 1,461,702.00
January 1, 2006 0.00 1,461,702.00 1,461,702.00
July 1, 2006 0.00 1,461,702.00 1,461,702.00
January 1, 2007 0.00 1,461,702.00 1,461,702.00
July 1, 2007 0.00 1,461,702.00 1,461,702.00
January 1, 2008 0.00 1,461,702.00 1,461,702.00
July 1, 2008 0.00 1,461,702.00 1,461,702.00
January 1, 2009 0.00 1,461,702.00 1,461,702.00
July 1, 2009 0.00 1,461,702.00 1,461,702.00
January 1, 2010 0.00 1,461,702.00 1,461,702.00
July 1, 2010 0.00 1,656,228.00 1,656,228.00
January 1, 2011 0.00 1,656,228.00 1,656,228.00
July 1, 2011 0.00 1,656,228.00 1,656,228.00
January 1, 2012 0.00 1,656,228.00 1,656,228.00
July 1, 2012 0.00 1,656,228.00 1,656,228.00
January 1, 2013 0.00 1,656,228.00 1,656,228.00
July 1, 2013 0.00 1,656,228.00 1,656,228.00
January 1, 2014 0.00 1,656,228.00 1,656,228.00
July 1, 2014 0.00 1,656,228.00 1,656,228.00
January 1, 2015 0.00 1,656,228.00 1,656,228.00
July 1, 2015 0.00 1,886,982.00 1,886,982.00
January 1, 2016 0.00 1,886,982.00 1,886,982.00
July 1, 2016 0.00 1,886,982.00 1,886,982.00
January 1, 2017 0.00 1,886,982.00 1,886,982.00
July 1, 2017 0.00 1,886,982.00 1,886,982.00
January 1, 2018 0.00 1,886,982.00 1,886,982.00
July 1, 2018 0.00 1,886,982.00 1,886,982.00
January 1, 2109 0.00 1,886,982.00 1,886,982.00
July 1, 2019 0.00 1,886,982.00 1,886,982.00
January 1, 2020 0.00 1,886,982.00 1,886,982.00
July 1, 2020 0.00 2,116,948.00 2,116,948.00
January 1, 2021 0.00 2,116,948.00 2,116,948.00
July 1, 2021 0.00 0.00 0.00
<PAGE> 92
SCHEDULE 2 TO
THE LEASE
---------
Casualty Value
--------------
[Monthly]
Determination Casualty
Date Value
------------- --------
<PAGE> 93
Lease Agreement
SCHEDULE 2 To
THE LEASE
Casual Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
February 1, 1996 35,844,459
March 1, 1996 36,081,816
April 1, 1996 36,319,572
May 1, 1996 36,556,043
June 1, 1996 36,792,948
July 1, 1996 37,028,564
August 1, 1996 36,121,867
September 1, 1996 36,357,550
October 1, 1996 36,591,936
November 1, 1996 36,926,741
December 1, 1996 37,061,968
January 1, 1997 37,295,896
February 1, 1997 36,386,948
March 1, 1997 36,620,365
April 1, 1997 36,854,195
May 1, 1997 37,087,768
June 1, 1997 37,321,754
July 1, 1997 37,555,483
August 1, 1997 36,646,336
September 1, 1997 36,879,553
October 1, 1997 37,112,508
November 1, 1997 37,345,872
December 1, 1997 37,579,648
January 1, 1998 37,813,166
February 1, 1998 36,903,906
March 1, 1998 37,136,808
April 1, 1998 37,370,219
May 1, 1998 37,603,414
June 1, 1998 37,837,020
July 1, 1998 38,070,412
August 1, 1998 37,160,924
September 1, 1998 37,393,797
October 1, 1998 37,626,450
November 1, 1998 37,859,511
December 1, 1998 38,092,980
January 1, 1999 38,326,234
February 1, 1999 37,416,608
March 1, 1999 37,649,341
April 1, 1999 37,882,481
May 1, 1999 38,115,423
June 1, 1999 38,348,773
July 1, 1999 38,581,927
August 1, 1999 37,672,199
September 1, 1999 37,904,830
</TABLE>
1 of 12
<PAGE> 94
<TABLE>
<S> <C>
October 1, 1999 38,137,259
November 1, 1999 38,370,093
</TABLE>
2 of 12
<PAGE> 95
Lease Agreement
SCHEDULE 2 TO
The Lease
Casualty Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
December 1, 1999 38,603,334
January 1, 2000 38,836,377
February 1, 2000 37,926,538
March 1, 2000 38,159,056
April 1, 2000 38,391,980
May 1, 2000 38,624,852
June 1, 2000 38,858,132
July 1, 2000 39,091,362
August 1, 2000 38,029,805
September 1, 2000 38,261,020
October 1, 2000 38,492,172
November 1, 2000 38,723,720
December 1, 2000 38,955,666
January 1, 2001 39,187,555
February 1, 2001 38,124,647
March 1, 2001 38,354,501
April 1, 2001 38,584,743
May 1, 2001 38,815,062
June 1, 2001 39,045,772
July 1, 2001 39,276,561
August 1, 2001 38,212,546
September 1, 2001 38,441,287
October 1, 2001 38,670,095
November 1, 2001 38,899,283
December 1, 2001 39,128,854
January 1, 2002 39,358,497
February 1, 2002 38,293,328
March 1, 2002 38,520,906
April 1, 2002 38,748,856
May 1, 2002 38,976,886
June 1, 2002 39,205,291
July 1, 2002 39,433,778
August 1, 2002 38,367,445
September 1, 2002 38,593,851
October 1, 2002 38,820,327
November 1, 2002 39,047,168
December 1, 2002 39,274,374
January 1, 2003 39,501,655
February 1, 2003 38,434,109
March l,'2003 38,659,293
April 1, 2003 38,884,833
May 1, 2003 39,110,454
June 1, 2003 39,336,433
July 1, 2003 39,562,496
</TABLE>
3 of 12
<PAGE> 96
<TABLE>
<S> <C>
August 1, 2003 38,493,722
September 1, 2003 38,717,672
</TABLE>
4 of 12
<PAGE> 97
Lease Agreement
SCHEDULE TO
THE LEASE
Casualty Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
October 1, 2003 38,941,692
November 1, 2003 39,166,060
December 1, 2003 39,390,777
January 1, 2004 39,615,570
February 1, 2004 38,545,517
March 1, 2004 38,768,180
April 1, 2004 38,991,180
May 1, 2004 39,214,244
June 1, 2004 39,437,650
July 1, 2004 39,661,121
August 1, 2004 38,589,739
September 1, 2004 38,811,062
October 1, 2004 39,032,438
November 1, 2004 39,254,143
December 1, 2004 39,476,181
January 1, 2005 39,698,275
February 1, 2005 38,625,506
March 1, 2005 38,845,433
April 1, 2005 39,065,680
May 1, 2005 39,286,118
June 1, 2005 39,506,890
July 1, 2005 39,727,836
August 1, 2005 39,482,927
September 1, 2005 38,700,019
October 1, 2005 39,917,283
November 1, 2005 39,134,848
December 1, 2005 39,352,718
January 1, 2006 39,570,763
February 1, 2006 38,322,924
March 1, 2006 39,537,067
April 1, 2006 38,751,492
May 1, 2006 38,966,216
June 1, 2006 39,181,226
July 1, 2006 39,396,538
August 1, 2006 38,145,948
September 1, 2006 38,357,322
October 1, 2006 39,568,975
November 1, 2006 38,780,893
December 1, 2006 38,993,078
January l, 2007 39,205,547
February 1, 2007 37,952,096
March 1, 2007 38,160,599
April 1, 2007 38,369,327
May 1, 2007 38,578,326
June 1, 2007 38,787,573
</TABLE>
5 of 12
<PAGE> 98
<TABLE>
<S> <C>
July 1, 2007 38,997,084
</TABLE>
6 of 12
<PAGE> 99
Lease Agreement
SCHEDULE 2 To
THE LEASE
Casualty Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
August 1, 2007 37,740,655
September 1, 2007 37,946,152
October 1, 2007 38,151,998
November 1, 2007 38,357,851
December 1, 2007 38,564,041
January 1, 2008 38,770,476
February 1, 2008 37,511,391
March 1, 2008 37,714,218
April 1, 2008 37,917,256
May 1, 2008 39,120,539
June 1, 2008 39,324,035
July 1, 2008 38,527,779
August 1, 2008 37,266,430
September 1, 2009 37,466,988
October 1, 2008 37,667,784
November 1, 2008 37,868,786
December 1, 2008 38,069,998
January 1, 2009 38,271,449
February 1, 2009 37,007,750
March 1, 2009 37,205,951
April 1, 2009 37,404,352
May 1, 2009 37,603,021
June 1, 2009 37,601,993
July 1, 2009 38,001,035
August 1, 2009 36,735,308
September 1, 2009 36,931,483
October 1, 2009 37,127,924
November 1, 2009 37,324,568
December 1, 2009 37,521,414
January 1, 2010 37,710,531
February 1, 2010 36,451,107
March 1, 2010 36,645,591
April 1, 2010 36,840,282
May 1, 2010 37,035,500
June 1, 2010 37,230,931
July 1, 2010 37,426,893
August 1, 2010 35,962,310
September r 1, 2010 36,154,169
October 1, 2010 36,346,561
November 1, 2010 36,539,171
December 1, 2010 36,732,000
January 1, 2011 38,059,880
February 1, 2011 36,592,568
March 1, 2011 36,781,706
April 1, 2011 36,971,066
May 1, 2011 37,161,407
</TABLE>
7 of 12
<PAGE> 100
Lease Agreement
SCHEDULE 2 TO
THE LEASE
Casualty Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
June 1, 2011 37,351,977
July 1, 2011 37,543,536
August 1, 2011 36,073,857
September 1, 2011 36,260,635
October 1, 2011 36,448,400
November 1, 2011 36,636,402
December 1, 2011 36,824,642
January 1, 2012 37,013,878
February 1, 2012 35,541,872
March 1, 2012 35,726,333
April 1, 2012 35,911,035
May 1, 2012 36,096,845
June 1, 2012 36,282,904
July 1, 2012 36,470,081
August 1, 2012 34,996,426
September 1, 2012 35,179,259
October 1, 2012 35,363,218
November 1, 2012 35,547,445
December 1, 2012 35,731,941
January 1, 2013 35,917,575
February 1, 2013 34,442,220
March 1, 2013 34,623,373
April 1, 2013 34,804,807
May 1, 2013 34,987,524
June 1, 2013 35,170,532
July 1, 2013 35,354,833
August 1, 2013 33,877,984
September 1, 2013 34,057,666
October 1, 2013 34,238,653
November 1, 2013 34,419,952
December 1, 2013 34,601,565
January 1, 2014 34,784,495
February 1, 2014 33,306,108
March 1, 2014 33,484,275
April 1, 2014 33,662,771
May 1, 2014 33,842,741
June 1, 2014 34,023,050
July 1, 2014 34,204,846
August 1, 2014 32,725,153
September 1, 2014 32,902,041
October 1, 2014 33,080,428
November 1, 2014 33,259,180
December 1, 2014 33,438,298
January 1, 2015 33,618,930
</TABLE>
8 of 12
<PAGE> 101
<TABLE>
<S> <C>
February 1, 2015 32,137,896
March 1, 2015 32,313,470
</TABLE>
9 of 12
<PAGE> 102
LEASE AGREEMENT
SCHEDULE 2 TO
THE LEASE
Casualty Value
<TABLE>
<CAPTION>
Casualty Casualty
Date Value
<S> <C>
April 1, 2015 32,489,427
May 1, 2015 32,667,332
June 1, 2015 32,845,636
July 1, 2015 33,025,903
August 1, 2015 31,312,163
September 1, 2015 31,485,820
October 1, 2015 31,661,457
November 1, 2015 31,837,525
December 1, 2015 32,014,025
January 1, 2016 32,192,523
February 1, 2016 30,476,779
March 1, 2016 31,649,465
April 1, 2016 30,820,605
May 1, 2016 30,995,224
June 1, 2016 31,170,315
July 1, 2016 31,347,905
August 1, 2016 29,631,010
September 1, 2016 29,801,591
October 1, 2016 29,974,691
November 1, 2016 30,140,304
December 1, 2016 30,322,432
January 1,2017 30,499,102
February 1,2017 28,791,039
March 1, 2017 28,950,497
April 1, 2017 29,120,495
May 1, 2017 29,293,281
June 1, 2017 29,466,630
July 1, 2017 29,642,787
August 1, 2017 27,923,9S7
September 1, 2017 28,092,697
October 1, 2017 28,264,270
November 1, 2017 28,436,451
December 1, 2017 28,609,244
January 1, 2018 28,794,997
February 1, 2028 27,065,299
March 1, 2018 27,233,321
April 1, 2019 27,401,984
May 1, 2018 27,573,772
June 1, 2018 27,746,226
July 1, 2018 27,921,829
August 1, 2010 26,201,912
September 1, 2010 26,369,670
October 1, 2018 26,540,606
November 1, 2019 26,712,260
</TABLE>
10 of 12
<PAGE> 103
<TABLE>
<S> <C>
December 1, 2018 26,884,635
January 1, 2019 27,060,218
</TABLE>
11 of 12
<PAGE> 104
Lease Agreement
SCHEDULE 2 TO
THE LEASE
Casualty Value
<TABLE>
<CAPTION>
Determination Casualty
Date Value
<S> <C>
February 1, 2019 25,340,000
March 1, 2019 25,507,516
April 1, 2019 25,675,787
May 1, 2019 25,847,553
June 1, 2019 26,020,103
July 1, 2019 26,196,174
August 1, 2019 24,476,158
September 1, 2019 24,643,939
October 1, 2019 24,815,274
November 1, 2019 24,997,452
December 1, 2019 25,160,477
January 1, 2020 25,337,089
February 1, 2020 23,617,317
March 1, 2020 23,785,408
April 1, 2020 23,954,395
May 1, 2020 24,127,525
June 1, 2020 24,301,583
July 1, 2020 24,479,837
August 1, 2020 22,530,036
September 1, 2020 22,698,139
October 1, 2020 22,870,476
November 1, 2020 23,043,802
December 1, 2020 23,218,123
January 1, 2021 23,396,719
February 1, 2021 21,445,997
March 1, 2021 21,613,225
April 1, 2021 21,781,491
May 1, 2021 21,951,148
June 1, 2021 22,121,846
July 1, 2021 22,293,944
</TABLE>
12 of 12
<PAGE> 105
SCHEDULE 3 TO
THE LEASE
---------
Termination Value
-----------------
[Monthly]
Determination Termination
Date Value
------------- -----------
<PAGE> 106
Lease Agreement
SCHEDULE 3 TO
THE LEASE
Termination Value
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
February 1, 1996 35,844,499
March 1, 1996 36,091,816
April 1, 1996 36,319,572
May 1, 1996 36,556,043
June 1, 1996 36,792,948
July 1, 1996 37,028,564
August 1, 1996 36,121,867
September 1, 1996 36,357,550
October 1, 1996 36,591,936
November 1, 1996 36,826,741
December 1, 1996 37,061,968
January 1, 1997 37,295,896
February 1, 1997 36,386,948
March 1, 1997 36,620,365
April 1, 1997 36,854,195
May 1, 1997 37,087,768
June 1, 1997 37,321,754
July 1, 1997 37,555,483
August 1, 1997 36,646,336
September 1, 1997 36,879,553
October 1, 1997 37,112,508
November 1, 1997 37,345,872
December 1, 1997 37,579,648
January 1, 1999 37,813,166
February 1, 1998 36,903,806
March 1, 1998 37,136,808
April 1, 1998 37,370,219
May 1, 1998 37,603,414
June 1, 1998 37,837,020
July 1, 1998 38,070,412
August 1, 1998 37,160,924
September 1, 1998 37,393,797
October 1, 1998 37,626,450
November 1, 1998 37,859,511
December 1, 1998 38,092,980
January 1, 1999 38,326,234
February 1, 1999 37,416,608
March 1, 1999 37,649,341
April 1, 1999 37,882,481
May 1, 1999 38,115,423
June 1, 1999 39,348,773
July 1, 1999 38,581,927
August 1, 1999 37,672,199
September 1, 1999 37,904,830
October 1, 1999 38,137,259
</TABLE>
1 of 13
<PAGE> 107
<TABLE>
<S> <C>
November 1, 1999 38,370,093
</TABLE>
2 of 13
<PAGE> 108
Lease Agreement
SCHEDULE 3 To
THE LEASE
Termination Value
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
December 1, 1999 38,603,334
January 1, 2000 38,836,377
February 1, 2000 37,926,538
March 1, 2000 38,159,056
April 1, 2000 38,391,980
May 1, 2000 38,624,852
June 1, 2000 38,858,132
July 1, 2000 39,091,362
August 1, 2000 38,029,805
September 1, 2000 38,261,020
October 1, 2000 38,492,172
November 1, 2000 38,723,720
December 1, 2000 38,955,666
January 1, 2001 39,187,555
February 1, 2001 38,124,647
March 1, 2001 38,354,501
April 1, 2001 38,584,743
May 1, 2001 38,815,062
June 1, 2001 39,045,772
July 1, 2001 39,276,561
August 1, 2001 38,212,546
September 1, 2001 38,441,287
October 1, 2001 38,670,095
November 1, 2001 38,899,283
December 1, 2001 39,128,854
January 1, 2002 39,358,497
February 1, 2002 38,293,328
March 1, 2002 38,520,906
April 1, 2002 38,748,856
May 1, 2002 38,976,886
June 1, 2002 39,205,291
July 1, 2002 39,433,778
August 1, 2002 38,367,445
September 1, 2002 38,593,851
October 1, 2002 38,820,327
November 1, 2002 39,047,168
December 1, 2002 39,274,374
January 1, 2003 39,501,655
February 1, 2003 38,434,108
March l,'2003 38,659,293
April 1, 2003 38,884,833
May 1, 2003 39,110,454
June 1, 2003 39,336,433
July 1, 2003 39,562,496
August 1, 2003 38,493,722
</TABLE>
3 of 13
<PAGE> 109
<TABLE>
<S> <C>
September 1, 2003 38,717,672
</TABLE>
4 of 13
<PAGE> 110
Lease Agreement
SCHEDULE 3 to
The Lease
Termination Value
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
October 1, 2003 38,941,692
November 1, 2003 39,166,060
December 1, 2003 39,390,777
January 1, 2004 39,615,570
February 1, 2004 38,545,517
March 1, 2004 38,768,180
April 1, 2004 38,991,180
May I , 2004 39,214,244
June 1, 2004 39,437,650
July 1, 2004 39,661,121
August 1, 2004 38,589,739
September 1, 2004 38,811,062
October 1, 2004 39,032,438
November 1, 2004 39,254,143
December 1, 2004 39,476,181
January 1, 2005 39,696,275
February 1, 2005 38,625,506
March 1, 2005 38,845,433
April 1, 2005 39,065,168
May 11 2005 39,286,118
June 1, 2005 39,506,880
July 1, 2005 39,727,836
August 1, 2005 38,482,927
September 1, 2005 38,700,019
October 1, 2005 38,917,283
November 1, 2005 39,134,948
December 1, 2005 39,352,718
January 1, 2006 39,570,763
February 1, 2006 38,322,924
March 1, 2006 38,537,067
April 1, 2006 38,751,492
May 1, 2006 38,966,216
June 1, 2006 39,181,226
July 1, 2006 39,396,538
August 1, 2006 38,145,948
September 1, 2006 38,357,322
October 1, 2006 38,568,975
November 1, 2006 38,780,893
December 1, 2006 38,993,078
January 1, 2007 39,205,547
February 1, 2007 37,952,096
March 1, 2007 38,160,589
April 1, 2007 38,369,327
May 1, 2007 38,579,326
</TABLE>
5 of 13
<PAGE> 111
<TABLE>
<S> <C>
June 1, 2007 38,787,573
July 1, 2007 38,997,084
</TABLE>
6 of 13
<PAGE> 112
Lease Agreement
SCHEDULE 3 TO
The Lease
Termination
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
August 1, 2007 37,740,655
September 1, 2007 37,946,152
October 1, 2007 38,151,888
November 1, 2007 38,357,851
December 1, 2007 38,564,041
January 1, 2008 38,770,476
February 1, 2008 37,511,391
March 1, 2008 37,714,218
April 1, 2008 37,917,256
May 1, 2008 38,120,539
June 1, 2008 38,324,035
July 1, 2008 38,527,779
August 1, 2008 37,266,430
September 1, 2008 37,466,988
October 1, 2008 37,667,784
November 1, 2008 37,868,786
December 1, 2008 38,069,998
January 1, 2009 38,271,449
February 1, 2009 37,007,750
March 1, 2009 37,205,951
April 1, 2009 37,404,352
May 1, 2009 37,603,021
June 1, 2009 37,801,993
July 1, 2009 38,001,035
August 1, 2009 36,735,308
September 1, 2009 36,931,483
October 1, 2009 37,127,924
November 1, 2009 37,324,568
December 1, 2009 37,521,414
January 1, 2010 37,718,531
February 1, 2010 36,451,107
March 1, 2010 36,645,591
April 1, 2010 36,840,282
May 1, 2010 37,035,500
June 1, 2010 37,230,931
July 1, 2010 37,426,893
August 1, 2010 35,962,310
September 1, 2010 36,154,169
October 1, 2010 36,346,561
November 1, 2010 36,539,171
December 1, 2010 36,732,000
January 1, 2011 38,059,880
February 1, 2011 36,592,568
March 1, 2011 36,781,706
</TABLE>
7 of 13
<PAGE> 113
<TABLE>
<S> <C>
April 1, 2011 36,971,066
May 1, 2011 37,161,407
</TABLE>
8 of 13
<PAGE> 114
Lease Agreement
SCHEDULE 3 To
THE LEASE
Termination Value
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
June 1, 2011 37,351,977
July 1, 2011 37,543,536
August 1, 2011 36,073,857
September 1, 2011 36,260,635
October 1, 2011 36,448,400
November 1, 2011 36,636,402
December 1, 2011 36,824,642
January 1, 2012 37,013,878
February 1, 2012 35,541,872
March 1, 2012 35,726,333
April 1, 2012 35,911,035
May 1, 2012 36,096,845
June 1, 2012 36,282,904
July 1, 2012 36,470,081
August 1, 2012 34,996,426
September 1, 2012 35,179,259
October 1, 2012 35,363,218
November 1, 2012 35,547,445
December 1, 2012 35,731,941
January 1, 2013 35,917,575
February 1, 2013 34,442,220
March 1, 2013 34,623,373
April 1, 2013 34,804,807
May 1, 2013 34,987,524
June 1, 2013 35,170,532
July 1, 2013 35,354,833
August 1, 2013 33,877,984
September 1, 2013 34,057,666
October 1, 2013 34,238,653
November 1, 2013 34,419,952
December 1, 2013 34,601,565
January 1, 2014 34,784,495
February 1, 2014 33,306,108
March 1, 2014 33,484,275
April 1, 2014 33,662,771
May 1, 2014 33,842,741
June 1, 2014 34,023,050
July 1, 2014 34,204,846
August 1, 2014 32,725,153
September 1, 2014 32,902,041
October 1, 2014 33,080,428
November 1, 2014 33,259,180
December 1, 2014 33,438,298
January 1, 2015 33,618,930
February 1, 2015 32,137,896
</TABLE>
9 of 13
<PAGE> 115
<TABLE>
<S> <C>
March 1, 2015 32,313,470
</TABLE>
10 of 13
<PAGE> 116
Lease Agreement
SCHEDULE 3 To
THE LEASE
Termination Value
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
April 1, 2015 32,489,427
May 1, 2015 32,667,332
June 1, 2015 32,845,636
July 1, 2015 33,025,903
August 1, 2015 31,312,163
September 1, 2015 31,485,820
October 1, 2015 31,661,457
November 1, 2015 31,837,525
December 1, 2015 32,014,025
January 1, 2016 32,192,523
February 1, 2016 30,476,778
March 1, 2016 30,648,465
April 1, 2016 30,820,605
May 1, 2016 30,995,224
June 1, 2016 31,170,315
July 1, 2016 31,347,905
August 1, 2016 29,631,010
September 1, 2016 29,801,591
October 1, 2016 29,974,691
November 1, 2016 30,148,304
December 1, 2016 30,322,432
January 1, 2017 30,499,102
February 1, 2017 28,781,039
March 1, 2017 28,950,497
April 1, 2017 29,120,495
May 1, 2017 29,293,281
June 1, 2017 29,466,630
July 1, 2017 29,642,787
August 1, 2017 27,923,957
September 1, 2017 28,092,697
October 1, 2017 28,264,270
November 1, 2017 28,436,451
December 1, 2017 28,609,244
January 1, 2018 28,784,897
February 1, 2018 27,065,299
March 1, 2018 27,233,321
April 1, 2018 27,401,984
May 1, 2018 27,573,772
June 1, 2018 27,746,226
July 1, 2018 27,921,829
August 1, 2018 26,201,912
September 1, 2018 26,369,670
October 1, 2018 26,540,606
November 1, 2018 26,712,260
</TABLE>
11 of 13
<PAGE> 117
<TABLE>
<S> <C>
December 1, 2018 26,884,635
January 1, 2019 27,060,218
</TABLE>
12 of 13
<PAGE> 118
Lease Agreement
SCHEDULE 3 to
The Lease
<TABLE>
<CAPTION>
Determination Termination
Date Value
<S> <C>
February 1, 2019 25,340,000
March 1, 2019 25,507,516
April 1, 2019 25,675,787
May 1, 2019 25,847,553
June 1, 2019 26,020,103
July 1, 2019 26,196,174
August 1, 2019 24,476,158
September 1, 2019 24,643,939
October 1, 2019 24,815,274
November 1, 2019 24,987,452
December 1, 2019 25,160,477
January 1, 2020 25,337,089
February 1, 2020 23,617,317
March 1, 2020 23,785,408
April 1, 2020 23,954,385
May 1, 2020 24,127,525
June 1, 2020 24,301,583
July 1, 2020 24,479,837
August 1, 2020 22,530,036
September 1, 2020 22,698,139
October 1, 2020 22,870,476
November 1, 2020 23,043,802
December 1, 2020 23,218,123
January 1, 2021 23,396,718
February 1, 2021 21,445,987
March 1, 2021 21,613,225
April 1, 2021 21,781,491
May 1, 2021 21,951,148
June 1, 2021 22,121,846
July 1, 2021 22,293,944
</TABLE>
13 of 13
<PAGE> 119
SCHEDULE 4 TO
THE LEASE
---------
EBO Date and EBO Price
----------------------
EBO Date: January 1, 2017
EBO Price: $31,531,500
<PAGE> 120
Lease Agreement
SCHEDULE 1 TO
THE LEASE
Basic Rent
<TABLE>
<CAPTION>
Rent Payment Date Basic Rent Basic Rent Total Basic
In Arrears In Advance Rent Payment
<S> <C> <C> <C>
July 1, 1996 0.00 1,141,955.00 1,141,955.00
January 1, 1997 0.00 1,141,955.00 1,141,955.00
July 1, 1997 0.00 1,141,955.00 1,141,955.00
January 1, 1998 0.00 1,141,955.00 1,141,955.00
July 1, 1998 0.00 1,141,955.00 1,141,955.00
January 1, 1999 0.00 1,141,955.00 1,141,955.00
July 1, 1999 0.00 1,141,955.00 1,141,955.00
January 1, 2000 0.00 1,141,955.00 1,141,955.00
July 1, 2000 0.00 1,292,378.00 1,292,378.00
January 1, 2001 0.00 1,292,378.00 1,292,378.00
July 1, 2001 0.00 1,292,378.00 1,292,378.00
January 1, 2002 0.00 1,292,370.00 1,292,378.00
July 1, 2002 0.00 1,292,378.00 1,292,378.00
January 1, 2003 0.00 1,292,378.00 1,292,378.00
July 1, 2003 0.00 1,292,378.00 1,292,378.00
January 1, 2004 0.00 1,292,378.00 1,292,378.00
July 1, 2004 0.00 1,292,378.00 1,292,378.00
January 1, 2003 0.00 1,292,370.00 1,292,378.00
July 1, 2003 0.00 1,461,702.00 1,461,702.00
January 1, 2006 0.00 1,461,702.00 1,461,702.00
July 1, 2006 0.00 1,461,702.00 1,461,702.00
January 1, 2007 0.00 1,461,702.00 1,461,702.00
July 1, 2007 0.00 1,461,702.00 1,461,702.00
January 1, 2008 0.00 1,461,702.00 1,461,702.00
July 1, 2008 0.00 1,461,702.00 1,461,702.00
January 1, 2009 0.00 1,461,702.00 1,461,702.00
July 1, 2009 0.00 1,461,702.00 1,461,702.00
January 1, 2010 0.00 1,461,702.00 1,461,702.00
July 1, 2010 0.00 1,656,228.00 1,656,228.00
January 1, 2011 0.00 1,656,228.00 1,656,228.00
July 1, 2011 0.00 1,656,228.00 1,656,228.00
January 1, 2012 0.00 1,656,228.00 1,656,228.00
July 1, 2012 0.00 1,656,228.00 1,656,220.00
January 1, 2013 0.00 1,656,228.00 1,656,228.00
July 1, 2013 0.00 1,636,228.00 1,656,228.00
January 1, 2014 0.00 1,656,228.00 1,656,228.00
July 1, 2014 0.00 1,656,228.00 1,656,228.00
January 1, 2015 0.00 1,656,228.00 1,656,228.00
July 1, 2015 0.00 1,986,982.00 1,886,982.00
January 1, 2016 0.00 1,886,982.00 1,886,982.00
July 1, 2016 0.00 1,886,982.00 1,886,982.00
January 1, 2017 0.00 l,886,982.00 1,886,982.00
</TABLE>
<PAGE> 121
<TABLE>
<S> <C> <C> <C>
July 1, 2017 0.00 1,886,902.00 1,886,982.00
January 1, 2018 0.00 1,886,982.00 1,886,982.00
July 1, 2018 0.00 1,886,982.00 1,886,982.00
January 1, 2019 0.00 1,886,982.00 1,886,982.00
July 1, 2019 0.00 1,886,982.00 1,886,982.00
January 1, 2020 0.00 1,886,982.00 1,886,982.00
July 1, 2020 0.00 2,116,948.00 2,116,948.00
January 1, 2021 0.00 2,116,948.00 2,116,949.00
July 1, 2021 0.00 0.00 0.00
</TABLE>
<PAGE> 122
EXHIBIT A TO
THE LEASE
Description of the Premises
---------------------------
The building is a two (2) story brick office building shown on the
ALTA/ACSM Land Title Survey of Lot 24, Block 913, Township of Wall, Monmouth
County, New Jersey, as certified by Bruce R. Blair, Professional Land Surveyor,
on December 19, 1995. The building is located on the Site described in Exhibit B
to this Lease.
The Personalty is described on Schedule A-1 to this Exhibit.
<PAGE> 123
Schedule A-1 to
Exhibit A to the Lease
Personalty
----------
The Personalty shall include all fixtures in the Building and the
following:
DOCK LEVELER & BUMPERS INCLUDING: PIT MOTOR, DISCONNECT
SWITCH.
WIRING AND CONDUIT TO AND INCLUDING CIRCUIT BREAKER.
ROLL-UP DOOR
ALL TOILET FIXTURES (PAPER TOWEL DISPENSER, TOILET TISSUE
DISPENSER, GRAB BAR, SOAP DISPENSER, TOWEL BAR, TISSUE BOX,
SANITARY NAPKIN DISPOSAL RECESSED NAPKIN DISPENSER, SURFACE
MOUNTED DISPENSER).
MIRROR
VANITY TOP & BLACKSPLASH
LINEN CLOSET SHELVES
MAHOGANY WOOD BENCH IN SHOWER AREA
ADJUSTABLE SHELVES IN PROJECTION ROOM
RAISED PLATFORM-PROJ. ROOM
PROJECTION SCREEN
CABINETS & LAMINATED TOP IN PANTRY AREA
ALL SPECIAL POWER CONNECTIONS FOR PANTRY EQUIPMENT INCLUDING
RECEPTACLES, WIRING, CONDUIT TO AND INCLUDING JUNCTION BOX
AND CIRCUIT BREAKER.
COLD WATER PIPING FROM ICE MAKER TO FIRST BRANCH
PANTRY SINK AND PLUMBING TO FIRST BRANCH
HOT WATER PIPING FROM DISHWASHER TO FIRST BRANCH
RUBBER TREAD ON STAIRS AND LANDING
<PAGE> 124
ELEVATORS #1 AND #2 INCLUDING LIGHTING AND SERVICE OUTLETS, HOISTWAY
ENTRANCES, SIGNAL EQUIPMENT, INSERTS, CAB FRAME, PLATFORM INTERIOR,
PLASTIC LAMINATE PANELS GUIDE SHOES, AUTOMATIC LEVELING DEVICE,
HYDRAULIC PLUNGER, CYLINDER ASSEMBLY, CASING, HYDRAULIC POWER UNIT,
ELECTRIC CONTROLLER UNIT, PIPING ALL POWER CONNECTIONS TO AND INCLUDING
DISCONNECT SWITCH AND CIRCUIT BREAKER #10 IN PANEL
MAHOGANY PANELING TO CONCEAL MOVABLE PARTITION
ALL CABINETS INCLUDING BACKSPLASH AND DESK UNIT
PROJECTION SCREEN IN BOARD ROOM
MOVABLE WALL PANELS INCLUDING SLIDING TRACK IN MEETING ROOM
GENERATOR AND PAD
MOVABLE PARTITIONS INCLUDING THOSE IN CONF. ROOM AREA
ALL CABINETS
1.5 HOUR FIRE CURTAIN INCLUDING HOUSING (ATLAS DOOR AND
MISCELLANEOUS IRON WORK AND SHEETROCK AND SEALING)
"FLEXCO" BLACK RAISED 12"x 12" RUBBER TILES
RAISED FLOOR - COMPUTER ROOM INCLUDING STRUCTURAL SUPPORT
CABINETS IN BOARD ROOM
ACOUSTICAL LOUVERS (TO THE EXTENT ATTACHED TO OR MADE PART
OF THE BUILDING)
CARPET TILE AND BROADLOOM
VINYL BASE (TOTAL 13,000 LN FT)
-2-
<PAGE> 125
MOVABLE PARTITION IN MAILROOM
ALL SHELVES INCLUDING THOSE IN STORAGE AREA AND CRT.
TRAINING ROOM
COUNTER AND CABINETS IN KITCHEN AREA
CARPET TILE AND BROADLOOM
VINYL BASE (EXCEPT TO THE EXTENT NOT ATTACHED TO THE
BUILDING)
HALON FIRE SUPPRESSION SYSTEMS INCLUDING: CONTROL PANEL,
PURGE SWITCH IONIZATION DETECTORS, PHOTOELECTRIC DETECTORS,
AUDIO AND VISUAL ALARMS, STORAGE TANKS, PIPING, NOZZLES,
VALVES, ETC.
ALL ELECTRIC WIRING, CONDUIT, SWITCHES, ETC. REQUIRED FOR
OPERATION OF THE SYSTEM
VIDEO DATA SYSTEM INCLUDING 12" MONITOR CHARACTER
GENERATOR TV TYPEWRITER, MF MODULATOR AND AMPLIFIER, CONTROL
CENTER, TV SETS AND MOUNTING SUPPORTS
ALL ELECTRIC WIRING, CONDUIT, SWITCHES, ETC. REQUIRED FOR
OPERATION OF THE SYSTEM
CARD ACCESS SYSTEM INCLUDING CARD READERS, CONSOLE, TERMINAL
PROCESSORS, POWER UNIT, DOOR OPEN ALARM SWITCH, POWER LOCK,
ALL ELECTRIC WIRING, CONDUIT, SWITCHES, ETC. REQUIRED FOR
OPERATION OF THE SYSTEM
TV SURVEILLANCE SYSTEM INCLUDING CCTV CAMERAS, TV SCREENS,
SEQUENTIAL SWITCHER
ALL ELECTRIC WIRING, CONDUIT, SWITCHES, ETC. REQUIRED FOR
OPERATION OF THE SYSTEM
STEEL LADDER TO ROOF HATCH
STEEL OVERHEAD DOORS IN LOADING AREA AND SHEETROCKING
ELEVATOR SUMP PUMPS PP-1, PP-2, PLUMBING TO FIRST BRANCH AND
-3-
<PAGE> 126
PIT
VENDING MACHINE PLUMBING CONNECTIONS TO 1ST BRANCH
COUNTERS IN KITCHEN AREA
WASTE CONNECT TO 2" WASTE LINE GOING DOWN IN WALL ON LINE TO FIRST
BRANCH
HW BOOSTER INCLUDING PLUMBING TO SINKS AND STAND
GREASE INTERCEPTOR INCLUDING PLUMBING TO 1ST BRANCH
(3) SINKS INCLUDING HW/CW LINES TO FIRST BRANCH
HAND SINK, INCLUDING HW/CW LINE TO FIRST BRANCH
COMPUTER FACILITY HVAC:
WATER ALARM CIRCUIT, INCLUDING ALARM AT GUARD ST; CHILLER #3 CONTROL
PANEL AND CONNECTIONS TO EQUIP AND TMCC-1 CONTROL CONNECTION FROM
COOLING TOWER #3 TO TMCC-1 CHILLER #3 WATER TEMP ALARM AT GUARD ST AND
WIRING
CHILLER #3 SYSTEM INCLUDING CONDENSER #3 CIRCULATING PUMPS 4-1 AND 4-2,
EXPANSION TANK, AIRTROL, PLUMBING TO COMPUTER ROOM UNITS, COOLING TOWER
#3 PLUMBING TO TOWER FROM CONDENSER #3, PLUMBING AFTER COLD WATER
MAKE-UP TO MOTOR, DP-3
TELCO BACKBOARDS
RAISED FLOOR IN ELECTRIC CLOSET
TELEPHONE RECEPTACLES, WIRING AND CONDUIT
EMERGENCY DISTRIBUTION PANEL FOR GENERATOR
AUTOMATIC TRANSFER SWITCH FOR GENERATOR
ALL SIGNAL WIRING FOR EQUIPMENT (SUCH AS CRT'S)
TO CPU'S IN COMPUTER RM. OR TO TELEPHONE CLOSET
TELCO BLACKBOARDS
ELECTRIC RELOCK LIGHTING HOOK-UP
-4-
<PAGE> 127
VENETIAN BLINDS
FLAT WIRE FOR CRT EQUIPMENT
SUMP PUMP UNDER COMPUTER FLOOR
AUDIO VISUAL EQUIPMENT INCLUDING SOUND SYSTEM (EXCEPT TO THE
EXTENT NOT INSTALLED IN OR ATTACHED TO THE BUILDING)
CAFETERIA MOSAIC
DISPLAY AREA FOR APPLIANCES
FIRE EXTINGUISHERS AND HOSE CABINETS (2 oz.)
REFRIG IN BATHROOMS INCLUDING INSTALLATION AND ELECTRIC
TOILET PARTITIONS AND SUPPORTS
ALL SIGNAL WIRING FOR EQUIPMENT (SUCH AS CRT'S)
TO CPU'S IN COMPUTER ROOM OR TO TELEPHONE CLOSET
TELCO BLACKBOARDS
ALL SIGNAL WIRING FOR EQUIPMENT (SUCH AS CRT'S)
TO CPU'S IN COMPUTER RM. OR TO TELEPHONE CLOSET
COMPUTER, NETWORK CONTROL CPU ROOMS:
ALL EQUIPMENT CONNECTIONS (WIRING, CONDUIT, JUNCTION BOXES) TO AND
INCLUDING PMC DISTRIBUTION MODULE WIRING AND CONDUIT FROM PMC
DISTRIBUTION MODULE TO PMC SYNTHESIZER TO AND INCLUDING CHECK METER,
CIRCUIT BREAKER IN PANEL EDP AND BYPASS TRANSFORMER
COMPUTER ROOM CHILLER, WIRING AND CONDUIT TO AND INCLUDING
CHECK METER AND CIRCUIT BREAKER IN TMCC-1
6 AIR CONDITIONERS FOR COMPUTER, NETWORK CONTROL AND CPU
ROOMS INCLUDING DUCTWORK, STRUCTURAL SUPPORTS,
PLUMBING/CONDENSATION CONNECTIONS (NOTE: 5 UNITS + 1 UNIT IN
-5-
<PAGE> 128
PHONE AND GENERATOR ROOM)
WIRING, CONDUIT AND TRANSFORMER BETWEEN GENERATOR AND
EMERGENCY DISTRIBUTION PANEL
THE FOLLOWING ELECTRIC CIRCUITS FROM THE EQUIPMENT TO AND
INCLUDING THE CIRCUIT BREAKER:
<TABLE>
<CAPTION>
PANEL NO. CIRCUIT NO. SERVICE
<S> <C> <C>
EDP 5 THRU 10 COMPUTER RMS. A/C
11 PMC SYNTHESIZER
RPA 2,6,7,33,34 CRT RECEPTACLES
10 VIDEO DATA SYSTEM
RBP 2 HALON SYSTEM
3 PLUGMOLD
5 CARD ACCESS SYSTEM
7 TV SURVEILLANCE SYS
9 PHONE EQ CLOSET
10 CRT RECEPTACLES
11 VIDEO DATA SYSTEM
13, 15 TELEPHONE ROOM
14, 17 ELEVATOR CONTROLLERS
32, 34, 37, 38, 41 CRT RECEPTACLES
42, 49, 50, 53, 71 CRT RECEPTACLES
RPC 14, 15, 16, 17, 20 CRT RECEPTACLES
21, 24, 25, 28, 29, 31 CRT RECEPTACLES
32, 37, 38, 41, 42, 47 CRT RECEPTACLES
48, 53, 54, 57, 60, 63 CRT RECEPTACLES
64, 74, 78, 82 CRT RECEPTACLES
KP 2 FREEZER
</TABLE>
-6-
<PAGE> 129
<TABLE>
<S> <C> <C>
4, 6 REFRIGERATORS
7 ICE MAKER
8 WARMER
9 COFFEE MACHINE
10 BOOSTER HEATER
12, 14, 16 VENDING MACHINES
11 OVEN
PMC ALL CIRCUITS COMPUTER HARDWARE
</TABLE>
SECURITY STATION DESK (2ND FLOOR), & RECEPTIONIST DESK (1ST
FLOOR)
FENCING AROUND COOLING TOWER
REMOVABLE TILES IN CEILING GRID SYSTEM.
GAS CONTROL CENTER EQUIPMENT
HVAC
HALON SYSTEM
ACCESS FLOORING
GENERATOR
INFORMATION SERVICES EQUIPMENT
RAISED FLOOR
HVAC & POWER DISTRIBUTION EQUIPMENT
-7-
<PAGE> 130
THE FOLLOWING ITEMS ARE SPECIFICALLY EXCLUDED FROM THE PERSONALTY:
FLOOR MATS - VESTIBULE
PANTRY EQUIPMENT:
ICE MAKER
DISHWASHER
REFRIGERATOR
MICROWAVE OVEN
MOVABLE PARTITIONS IN BOARD ROOM INCLUDING SLIDING DOOR
TRACK
ACOUSTICAL LOUVERS (EXCEPT TO THE EXTENT ATTACHED TO OR
MADE PART OF THE BUILDING)
VENDING MACHINES
CHALKBOARD IN TRAINING ROOM
REMOVABLE RAILINGS IN PIVOT WINDOW
XEROX MACHINES & WIRING CONDUIT
KITCHEN AREA EQUIPMENT: INCLUDING CONVECTION OVEN, (2)
REFRIGERATORS, FREEZER & ICE MAKER
DICTAPHONE
PMC SYNTHESIZER
BOARD ROOM LECTERN INCLUDING LIGHT
CAFETERIA EQUIP PER CHANGE ORDER 40
CAFETERIA POTS AND MISC. EQUIPMENT.
CARPETING NOT AFFIXED TO THE BUILDING
AUDIO VISUAL EQUIPMENT NOT INSTALLED IN OR ATTACHED TO
-8-
<PAGE> 131
THE BUILDING
COMPACTOR
GAS CONTROL CENTER EQUIPMENT
----------------------------
P.C. BASED COMPUTER SYSTEM
RADIO BASE STATION
DISPATCHER CONSOLE
MAPBOARD
UNINTERRUPTIBLE POWER SUPPLY
KITCHEN EQUIPMENT
INFORMATION SERVICES EQUIPMENT
------------------------------
SURGE PROTECTOR
UPS SYSTEM
-9-
<PAGE> 132
EXHIBIT B TO
THE LEASE
Legal Description of the Site
LEGAL DESCRIPTION
BLOCK 913 TAX LOT 24
TOWNSHIP OF WALL
COUNTY OF MONMOUTH, STATE OF NEW JERSEY
BEGINNING at a point in the new Westerly sideline of Wyckoff Road (35 feet
Westerly from the centerline thereof) at a point formed by the intersection of
said line with the centerline of South Brook, said beginning point being distant
North 59 degrees 32 minutes 57 seconds West, a distance of 35.00 feet from a
point in the centerline of Wyckoff Road, said point in turn being distance South
30 degrees 27 minutes 03 seconds West, a distance of 403.25 feet from the point
of intersection of the centerline of Wyckoff Road with the centerline of New
Jersey State Highway Route #34, said point of intersection being station
385+08.40, Route 34 centerline and station 20+00 Wyckoff Road centerline as
indicated on a Map entitled "New Jersey State Highway Department General
Property Map Route 34 (1953) Section 2 from Route 38 to Route 33 Showing
Existing Right of Way and Parcels to be Acquired in the Township of Wall, County
of Monmouth", dated June 1961, and from said beginning point running, thence;
1. Along said sideline, South 30 degrees 27 minutes 03 seconds
West, a distance of 405.54 feet to an angle point in the
same, thence;
2. Still along said sideline, South 27 degrees 08 minutes 21 seconds West,
a distance of 660.37 feet to a point in the line of lands now or
formerly Commercial Realty and Resources Corp., thence;
3. Along said sideline, North 64 degrees 26 minutes 50 seconds
West, a distance of 287.19 feet to an iron pipe found,
thence;
4. Still along the same, South 25 degrees 33 minutes 10 seconds
West, a distance of 35.00 feet to a point and new corner,
thence;
<PAGE> 133
5. The following six (6) courses along the line of a Minor Subdivision
approved by Wall Township, dated March 9, 1984, North 64 degrees 26
minutes 50 seconds West, a distance of 210.00 feet, thence;
6. North 42 degrees 56 minutes 50 seconds West, a distance of
300.00 feet, thence;
7. North 12 degrees 33 minutes 10 seconds East, a distance of
210.00 feet, thence;
8. North 44 degrees 41 minutes 50 seconds West, a distance of
227.00 feet, thence;
9. North 07 degrees 54 minutes 46 seconds West, a distance of
262.82 feet, thence;
10. North 46 degrees 22 minutes 00 seconds East, a distance of 400.73 feet
more or less, to the middle of South Brook, being the original line of
the entire tract conveyed to Gas Associated Services by deed recorded
in the Monmouth County Clerk's Office in book 4187, page 20, of which
this parcel is part, thence;
11. Down the middle of said South Brook, its various courses, a total
distance of 1,151 feet more or less to the point and place of
beginning.
Containing 22.16 acres of land more or less, together with Easement Rights in
the land described in Deed of Easement/Right of Way and Conveyance of Sewer
Facilities recorded December 17, 1985 in Deed Book 4618, Page 519.
-2-
<PAGE> 1
EXHIBIT 10-12
EMPLOYMENT CONTINUATION AGREEMENT
THIS AGREEMENT between New Jersey Resources Corporation, a New Jersey
corporation (the "Company"), and Laurence M. Downes (the "Executive"), dated
as of this 5th day of June, 1996.
W I T N E S S E T H :
WHEREAS, the Company has employed the Executive in an officer position
with the Company or affiliate thereof and has determined that the Executive
holds an important position with same;
WHEREAS, the Company believes that, in the event it is confronted with
a situation that could result in a change in ownership or control of the
Company, continuity of management will be essential to its ability to evaluate
and respond to such situation in the best interests of shareholders;
WHEREAS, the Company understands that any such situation will present
significant concerns for the Executive with respect to his financial and job
security;
WHEREAS, the Company desires to assure itself of the Executive's
services during the period in which it is confronting such a situation, and to
provide the Executive certain financial assurances to enable the Executive to
perform the responsibilities of his position without undue distraction and to
exercise his judgment without bias due to his personal circumstances;
WHEREAS, to achieve these objectives, the Company and the Executive
desire to enter into an agreement providing the Company and the Executive with
certain rights and obligations upon the occurrence of a Change of Control or
Potential Change of Control (as defined in Section 2);
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is hereby agreed by and between the Company and the
Executive as follows:
<PAGE> 2
1. Operation of Agreement.
(a) Effective Date. The effective date of this Agreement shall
be the date on which a Change of Control occurs (the "Effective Date"), provided
that, except as provided in Section 1(b), if the Executive is not employed by
the Company on the Effective Date, this Agreement shall be void and without
effect.
(b) Termination of Employment Following a Potential Change of
Control. Notwithstanding Section 1(a), if (i) the Executive's employment is
terminated by the Company Without Cause (as defined in Section 6(c)) after the
occurrence of a Potential Change of Control and prior to the occurrence of a
Change of Control and (ii) a Change of Control occurs within one year of such
termination, the Executive shall be deemed, solely for purposes of determining
his rights under this Agreement, to have remained employed until the date such
Change of Control occurs and to have been terminated by the Company Without
Cause immediately after this Agreement becomes effective.
2. Definitions.
(a) Change of Control. For the purposes of this Agreement, a
"Change of Control" shall be deemed to have occurred if:
(i) any Person (as defined below) has acquired,
"beneficial ownership" (within the meaning of Rule 13d-3, as
promulgated under Section 13(d) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act")) of securities of the Company
representing 25% or more of the combined Voting Power (as defined
below) of the Company's securities;
(ii) within any 24-month period, the persons who were
directors of the Company immediately before the beginning of such
period (the "Incumbent Directors") shall cease (for any reason other
than death) to constitute at least a majority of the Board or the board
of directors of any successor to the Company, provided that any
director who was not a director at the beginning of such period shall
be deemed to be an Incumbent Director if such director (A) was elected
to the Board by, or on the recommendation of or with the approval of,
at least two-thirds of the directors who then qualified as Incumbent
Directors either actually or by prior operation of this Section
2(a)(ii) and (B) was not designated by a person who has entered into
2
<PAGE> 3
an agreement with the Company to effect a Corporate Event, as described
in Section 2(a)(iii); or
(iii) the stockholders of the Company approve a
merger, consolidation, share exchange, division, sale or other
disposition of all or substantially all of the assets of the Company (a
"Corporate Event"), as a result of which the shareholders of the
Company immediately prior to such Corporate Event shall not hold,
directly or indirectly, immediately following such Corporate Event a
majority of the Voting Power of (x) in the case of a merger or
consolidation, the surviving or resulting corporation, (y) in the case
of a share exchange, the acquiring corporation or (z) in the case of a
division or a sale or other disposition of assets, each surviving,
resulting or acquiring corporation which, immediately following the
relevant Corporate Event, holds more than 10% of the consolidated
assets of the Company immediately prior to such Event.
(b) Potential Change of Control. For the purposes of this
Agreement, a "Potential Change of Control" shall be deemed to have occurred if:
(i) a Person commences a tender offer for securities
representing at least 20% of the Voting Power of the Company's
securities;
(ii) the Company enters into an agreement the
consummation of which would constitute a Change of Control;
(iii) proxies for the election of directors of the
Company are solicited by anyone other than the Company; or
(iv) any other event occurs which is deemed to be a
Potential Change of Control by the Board.
(c) Person Defined. For purposes of this Section 2, "Person"
shall have the meaning ascribed to such term in Section 3(a)(9) of the Exchange
Act, as supplemented by Section 13(d)(3) of the Exchange Act; provided, however,
that Person shall not include (i) the Company or any subsidiary of the Company
or (ii) any employee benefit plan sponsored by the Company or any subsidiary of
the Company.
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(d) Voting Power Defined. A specified percentage of "Voting
Power" of a company shall mean such number of the Voting Securities as shall
enable the holders thereof to cast such percentage of all the votes which could
be cast in an annual election of directors (without consideration of the rights
of any class of stock other than the common stock of the company to elect
directors by a separate class vote); and "Voting Securities" shall mean all
securities of a company entitling the holders thereof to vote in an annual
election of directors (without consideration of the rights of any class of stock
other than the common stock of the company to elect directors by a separate
class vote).
3. Employment Period. Subject to Section 6 of this Agreement, the
Company agrees to continue the Executive in its employ, and the Executive agrees
to remain in the employ of the Company, for the period (the "Employment Period")
commencing on the Effective Date and ending on the third anniversary of the
Effective Date.
4. Position and Duties.
(a) No Reduction in Position. During the Employment Period,
the Executive's position (including titles), authority and responsibilities
shall be at least commensurate with those held, exercised and assigned
immediately prior to the Effective Date. It is understood that, for purposes of
this Agreement, such position, authority and responsibilities shall not be
regarded as not commensurate merely by virtue of the fact that a successor shall
have acquired all or substantially all of the business and/or assets of the
Company as contemplated by Section 12(b) of this Agreement. The Executive's
services shall be performed at the location where the Executive was employed
immediately preceding the Effective Date.
(b) Business Time. From and after the Effective Date, the
Executive agrees to devote substantially all of his attention during normal
business hours to the business and affairs of the Company, to the extent
necessary to discharge his responsibilities hereunder, except for (i) time spent
in managing his personal, financial and legal affairs, serving on corporate,
civic or charitable boards or committees or working for any charitable or civic
organization, in each case only if and to the extent not materially interfering
with the performance of such responsibilities, and (ii) periods of vacation and
sick leave to which he is entitled. It is expressly understood and agreed that
the Executive's continuing to serve on any boards and committees on which he is
serving or with which he is otherwise
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associated immediately preceding the Effective Date shall be deemed not to
interfere with the performance of the Executive's services to the Company.
5. Compensation.
(a) Base Salary. During the Employment Period, the Executive
shall receive a base salary at a monthly rate at least equal to the monthly
salary paid to the Executive by the Company and any of its affiliated companies
immediately prior to the Effective Date. The base salary shall be reviewed at
least once each year after the Effective Date, and may be increased (but not
decreased) at any time and from time to time by action of the Board or any
committee thereof or by any individual having authority to take such action in
accordance with the Company's regular practices. The Executive's base salary, as
it may be increased from time to time, shall hereafter be referred to as "Base
Salary". Neither the Base Salary nor any increase in Base Salary after the
Effective Date shall serve to limit or reduce any other obligation of the
Company hereunder.
(b) Annual Bonus. During the Employment Period, in addition to
the Base Salary, for each fiscal year of the Company ending during the
Employment Period, the Executive shall be afforded the opportunity to receive an
annual bonus on terms and conditions no less favorable to the Executive (taking
into account reasonable changes in the Company's goals and objectives) than the
annual bonus opportunity that had been made available to the Executive for the
fiscal year ended immediately prior to the Effective Date (the "Annual Bonus
Opportunity"). Any amount payable in respect of the Annual Bonus Opportunity
shall be paid as soon as practicable following the year for which the amount (or
prorated portion) is earned or awarded, but not later than 90 days after the
close of the calendar year for which the bonus is payable, unless electively
deferred by the Executive pursuant to any deferral programs or arrangements that
the Company may make available to the Executive.
(c) Long-term Incentive Compensation Programs. During the
Employment Period, the Executive shall participate in all long-term incentive
compensation programs ("LTICP") for key executives at a level that is
commensurate with the Executive's participation in such plans immediately prior
to the Effective Date, or, if more favorable to the Executive, at the level made
available to the Executive or other similarly situated officers at any time
thereafter.
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(d) Benefit Plans. During the Employment Period, the Executive
(and, to the extent applicable, his dependents) shall be entitled to participate
in or be covered under all pension, retirement, deferred compensation, savings,
medical, dental, health, disability, severance, group life, accidental death and
travel accident insurance plans and programs of the Company and its affiliated
companies at a level that is commensurate with the Executive's participation in
such plans immediately prior to the Effective Date, or, if more favorable to the
Executive, at the level made available to the Executive or other similarly
situated officers at any time thereafter.
(e) Expenses. During the Employment Period, the Executive
shall be entitled to receive prompt reimbursement for all reasonable expenses
incurred by the Executive in accordance with the policies and procedures of the
Company as in effect immediately prior to the Effective Date. Notwithstanding
the foregoing, the Company may apply the policies and procedures in effect after
the Effective Date to the Executive, if such policies and procedures are more
favorable to the Executive than those in effect immediately prior to the
Effective Date.
(f) Vacation, Perquisites and Fringe Benefits. During the
Employment Period, the Executive shall be entitled to paid vacation, perquisites
and fringe benefits at a level that is commensurate with the paid vacation,
perquisites and fringe benefits available to the Executive immediately prior to
the Effective Date, or, if more favorable to the Executive, at the level made
available from time to time to the Executive or other similarly situated
officers at any time thereafter.
(g) Indemnification. The Company agrees that if the Executive
is made a party, or is threatened to be made a party, to any action, suit or
proceeding, whether civil, criminal, administrative or investigative (a
"Proceeding"), by reason of the fact that he is or was a director, officer or
employee of the Company, the Executive shall be indemnified and held harmless by
the Company to the fullest extent legally permitted or authorized by agreement,
or by the Company's certificate of incorporation or bylaws or resolutions of the
Board or, if greater, by the laws of the State of New Jersey, against all cost,
expense, liability and loss (including, without limitation, attorney's fees,
judgments, fines, ERISA excise taxes or penalties and amounts paid or to be paid
in settlement) reasonably incurred or suffered by the Executive in connection
therewith. The Company agrees to continue and maintain a directors' and
officers' liability insurance policy covering Executive to the extent the
Company provides such coverage for its other executive officers.
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(h) Office and Support Staff. The Executive shall be entitled
to an office with furnishings and other appointments, and to secretarial and
other assistance, at a level that is at least commensurate with that provided to
the Executive immediately prior to the Effective Date.
6. Termination.
(a) Death, Disability or Retirement. Subject to the provisions
of Section 1 hereof, this Agreement shall terminate automatically upon the
Executive's death, termination due to "Disability" (as defined below) or
voluntary retirement under any of the Company's retirement plans as in effect
from time to time. For purposes of this Agreement, Disability shall mean the
Executive has been incapable of substantially fulfilling the positions, duties,
responsibilities and obligations set forth in this Agreement because of
physical, mental or emotional incapacity resulting from injury, sickness or
disease for a period of at least six consecutive months. The Company and the
Executive shall agree on the identity of a physician to resolve any question as
to the Executive's disability. If the Company and the Executive cannot agree on
the physician to make such determination, then the Company and the Executive
shall each select a physician and those physicians shall jointly select a third
physician, who shall make the determination. The determination of any such
physician shall be final and conclusive for all purposes of this Agreement. The
Executive or his legal representative or any adult member of his immediate
family shall have the right to present to such physician such information and
arguments as to the Executive's disability as he, she or they deem appropriate,
including the opinion of the Executive's personal physician.
(b) Voluntary Termination. Notwithstanding anything in this
Agreement to the contrary, following a Change of Control the Executive may, upon
not less than 30 days' written notice to the Company, voluntarily terminate
employment for any reason (including early retirement under the terms of any of
the Company's retirement plans as in effect from time to time), provided that
any termination by the Executive pursuant to Section 6(d) on account of Good
Reason (as defined therein) shall not be treated as a voluntary termination
under this Section 6(b).
(c) Cause. The Company may terminate the Executive's
employment for Cause. For purposes of this Agreement, "Cause" means (i) the
Executive's conviction of a felony or the entering by the Executive of a plea of
nolo contendere to a felony charge, (ii) the Executive's gross neglect, willful
malfeasance
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or willful gross misconduct in connection with his employment hereunder which
has had a material adverse effect on the business of the Company and its
subsidiaries, unless the Executive reasonably believed in good faith that such
act or nonact was in or not opposed to the best interests of the Company, or
(iii) repeated material violations by the Executive of his obligations under
Section 4 of this Agreement, which violations are demonstrably willful and
deliberate on the Executive's part and which result in material damage to the
Company's business or reputation.
(d) Good Reason. Following the occurrence of a Change of
Control, the Executive may terminate his employment for Good Reason. For
purposes of this Agreement, "Good Reason" means the occurrence of any of the
following, without the express written consent of the Executive, after the
occurrence of a Change of Control:
(i) (A) the assignment to the Executive of any duties
inconsistent with the Executive's position, authority or
responsibilities as contemplated by Section 4 of this Agreement, or (B)
any other material adverse change in such position, including titles,
authority or responsibilities;
(ii) any failure by the Company to comply with any of
the provisions of Section 5 of this Agreement, other than an
insubstantial or inadvertent failure remedied by the Company promptly
after receipt of notice thereof given by the Executive;
(iii) the Company's requiring the Executive to be
based at any office or location more than 35 miles (or such other
distance as shall be set forth in the Company's relocation policy as in
effect at the Effective Time) from that location at which he performed
his services specified under the provisions of Section 4 immediately
prior to the Change of Control, except for travel reasonably required
in the performance of the Executive's responsibilities;
(iv) any other material breach of this Agreement by
the Company; or
(v) any failure by the Company to obtain the
assumption and agreement to perform this Agreement by a successor as
contemplated by Section 12(b).
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In no event shall the mere occurrence of a Change of Control, absent any further
impact on the Executive, be deemed to constitute Good Reason.
(e) Notice of Termination. Any termination by the Company for
Cause or by the Executive for Good Reason shall be communicated by Notice of
Termination to the other party hereto given in accordance with Section 13(e).
For purposes of this Agreement, a "Notice of Termination" means a written notice
given, in the case of a termination for Cause, within 10 business days of the
Company's having actual knowledge of the events giving rise to such termination,
and in the case of a termination for Good Reason, within 180 days of the
Executive's having actual knowledge of the events giving rise to such
termination, and which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated, and (iii) if the termination date
is other than the date of receipt of such notice, specifies the termination date
of the Executive's employment (which date shall be not more than 15 days after
the giving of such notice). The failure by the Executive to set forth in the
Notice of Termination any fact or circumstance which contributes to a showing of
Good Reason shall not waive any right of the Executive hereunder or preclude the
Executive from asserting such fact or circumstance in enforcing his rights
hereunder.
(f) Date of Termination. For the purpose of this Agreement,
the term "Date of Termination" means (i) in the case of a termination for which
a Notice of Termination is required, the date of receipt of such Notice of
Termination or, if later, the date specified therein, as the case may be, and
(ii) in all other cases, the actual date on which the Executive's employment
terminates during the Employment Period.
7. Obligations of the Company upon Termination.
(a) Death or Disability. If the Executive's employment is
terminated during the Employment Period by reason of the Executive's death or
Disability, this Agreement shall terminate without further obligations to the
Executive or the Executive's legal representatives under this Agreement other
than those obligations accrued hereunder at the Date of Termination, and the
Company shall pay to the Executive (or his beneficiary or estate) (i) the
Executive's full Base Salary through the Date of Termination (the "Earned
Salary"), (ii) any vested amounts or vested benefits owing to the Executive
under the Company's otherwise applicable
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employee benefit plans and programs, including any compensation previously
deferred by the Executive (together with any accrued earnings thereon) and not
yet paid by the Company and any accrued vacation pay not yet paid by the Company
(the "Accrued Obligations"), and (iii) any other benefits payable due to the
Executive's death or Disability under the Company's plans, policies or programs
(the "Additional Benefits").
Any Earned Salary shall be paid in cash in a single lump sum
as soon as practicable, but in no event more than 30 days (or at such earlier
date required by law), following the Date of Termination. Accrued Obligations
and Additional Benefits shall be paid in accordance with the terms of the
applicable plan, program or arrangement.
(b) Cause and Voluntary Termination. If the Executive's
employment shall be terminated for Cause or voluntarily terminated by the
Executive (other than on account of Good Reason following a Change of Control),
the Company shall pay the Executive (i) the Earned Salary in cash in a single
lump sum as soon as practicable, but in no event more than 10 days, following
the Date of Termination, and (ii) the Accrued Obligations in accordance with the
terms of the applicable plan, program or arrangement.
(c) Termination by the Company other than for Cause and
Termination by the Executive for Good Reason.
(i) Lump Sum Payments. If, during the Employment
Period, the Company terminates the Executive's employment other than
for Cause, or following a Change of Control the Executive terminates
his employment for Good Reason, the Company shall pay to the Executive
the following amounts:
(A) the Executive's Earned Salary;
(B) a cash amount (the "Severance Amount") equal
to three times the sum of (x) the
Executive's annual Base Salary and (y) an
amount equal to the average of the annual
bonuses paid to the Executive with respect
to
- -------------------
(1) Three times in the case of chief executive officer.
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each of the last three calendar years ended
prior to the Change of Control (or, if at
the Date of Termination, the Executive has
been employed for less than three full
calendar years, for the number of full
calendar years during which the Executive
was employed);
(C) the Accrued Obligations.
The Earned Salary and Severance Amount shall be paid in cash in a
single lump sum as soon as practicable, but in no event more than 30
days (or at such earlier date required by law), following the Date of
Termination. Accrued Obligations shall be paid in accordance with the
terms of the applicable plan, program or arrangement.
(ii) Continuation of Benefits. If, during the
Employment Period, the Company terminates the Executive's employment
other than for Cause, or following a Change of Control the Executive
terminates his employment for Good Reason, the Executive (and, to the
extent applicable, his dependents) shall be entitled, after the Date of
Termination until the earlier of (1) the [second](2) anniversary of the
Date of Termination (the "End Date") and (2) the date the Executive
becomes eligible for comparable benefits under a similar plan, policy
or program of a subsequent employer, to continue participation in all
of the Company's employee and executive welfare and fringe benefit
plans (the "Benefit Plans"). To the extent any such benefits cannot be
provided under the terms of the applicable plan, policy or program, the
Company shall provide a comparable benefit under another plan or from
the Company's general assets. The Executive's participation in the
Benefit Plans will be on the same terms and conditions that would have
applied had the Executive continued to be employed by the Company
through the End Date.
(iii) Vesting and Exercisability of Stock Options.
If, during the Employment Period, the Company terminates the
Executive's employment other than for Cause, or the Executive
terminates his employment for Good Reason, all outstanding options held
by the Executive
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(2) Third anniversary in the case of chief executive officer.
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to purchase shares of Common Stock of the Company ("Options") shall
become fully vested on the date of such termination of employment and
the Executive shall have the right to exercise the Options, whether or
not such Options would otherwise be exercisable, for a period of ninety
days following such termination of employment (or, if less, until the
end of the stated term of the Options).
(d) Discharge of the Company's Obligations. Except as
expressly provided in the last sentence of this Section 7(d), the amounts
payable to the Executive pursuant to this Section 7 (whether or not reduced
pursuant to Section 7(e)) following termination of his employment shall be in
full and complete satisfaction of the Executive's rights under this Agreement
and any other claims he may have in respect of his employment by the Company or
any of its subsidiaries. Such amounts shall constitute liquidated damages with
respect to any and all such rights and claims and, upon the Executive's receipt
of such amounts, the Company shall be released and discharged from any and all
liability to the Executive in connection with this Agreement or otherwise in
connection with the Executive's employment with the Company and its
subsidiaries. Nothing in this Section 7(d) shall be construed to release the
Company from its commitment to indemnify the Executive and hold the Executive
harmless from and against any claim, loss or cause of action arising from or out
of the Executive's performance as an officer, director or employee of the
Company or any of its subsidiaries or in any other capacity, including any
fiduciary capacity, in which the Executive served at the request of the Company
to the maximum extent permitted by applicable law.
(e) Limit on Payments by the Company.
(i) Application of Section 7(e). In the event that
any amount or benefit paid or distributed to the Executive pursuant to
this Agreement, taken together with any amounts or benefits otherwise
paid or distributed to the Executive by the Company or any affiliated
company (collectively, the "Covered Payments"), would be an "excess
parachute payment" as defined in Section 280G of the Internal Revenue
Code of 1986, as amended (the "Code"), and would thereby subject the
Executive to the tax (the "Excise Tax") imposed under Section 4999 of
the Code (or any similar tax that may hereafter be imposed), the
provisions of this Section 7(e) shall apply to determine the amounts
payable to Executive pursuant to this Agreement.
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(ii) Calculation of Benefits. Immediately following
delivery of any Notice of Termination, the Company shall notify the
Executive of the aggregate present value of all termination benefits to
which he would be entitled under this Agreement and any other plan,
program or arrangement as of the projected Date of Termination,
together with the projected maximum payments, determined as of such
projected Date of Termination that could be paid without the Executive
being subject to the Excise Tax.
(iii) Imposition of Payment Cap. If the aggregate
value of all compensation payments or benefits to be paid or provided
to the Executive under this Agreement and any other plan, agreement or
arrangement with the Company exceeds the amount which can be paid to
the Executive without the Executive incurring an Excise Tax, then the
amounts payable to the Executive under this Section 7 shall be reduced
(but not below zero) to the maximum amount which may be paid hereunder
without the Executive becoming subject to such an Excise Tax (such
reduced payments to be referred to as the "Payment Cap"). In the case
of the Chief Executive Officer, this projected Payment Cap will only
apply if it will result in his receiving a greater net after tax amount
than he would have received without applying such limt. In the event
that the Executive receives reduced payments and benefits hereunder,
the Executive shall have the right to designate which of the payments
and benefits otherwise provided for in this Agreement that he will
receive in connection with the application of the Payment Cap.
(iv) Application of Section 280G. For purposes of
determining whether any of the Covered Payments will be subject to the
Excise Tax and the amount of such Excise Tax,
(A) (x) whether there are Covered Payments as
"parachute payments" within the meaning of
Section 280G of the Code, and (y) whether
there are "parachute payments" in excess of
the "base amount" (as defined under Section
280G(b)(3) of the Code) shall be determined
in the good faith by the Company's
independent certified public accountants
appointed prior to the Effective Date or tax
counsel selected by such accountants (the
"Accountants"), and
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(B) the value of any non-cash benefits or any
deferred payment or benefit shall be
determined by the Accountants in accordance
with the principles of Section 280G of the
Code.
(v) Adjustments in Respect of the Payment Cap. If the
Executive receives reduced payments and benefits under this Section
7(e)(or this Section 7(e) is determined not to be applicable to the
Executive because the Accountants conclude that Executive is not
subject to any Excise Tax) and it is established pursuant to a final
determination of a court or an Internal Revenue Service proceeding (a
"Final Determination") that, notwithstanding the good faith of the
Executive and the Company in applying the terms of this Agreement, the
aggregate "parachute payments" within the meaning of Section 280G of
the Code paid to the Executive or for his benefit are in an amount that
would result in the Executive's being subject to an Excise Tax, then
any amounts actually paid to or on behalf of the Executive which are
treated as excess parachute payments shall be deemed for all purposes
to be a loan to the Executive made on the date of receipt of such
excess payments, which the Executive shall have an obligation to repay
to the Company on demand, together with interest on such amount at the
applicable Federal rate (as defined in Section 1274(d) of the Code)
from the date of the payment hereunder to the date of repayment by the
Executive. If the Executive receives reduced payments and benefits by
reason of this Section 7(e) and it is established pursuant to a Final
Determination that the Executive could have received a greater amount
without exceeding the Payment Cap, then the Company shall promptly
thereafter pay the Executive the aggregate additional amount which
could have been paid without exceeding the Payment Cap, together with
interest on such amount at the applicable Federal rate (as defined in
Section 1274(d) of the Code) from the original payment due date to the
date of actual payment by the Company.
8. Non-exclusivity of Rights. Except as expressly provided herein,
nothing in this Agreement shall prevent or limit the Executive's continuing or
future participation in any benefit, bonus, incentive or other plan or program
provided by the Company or any of its affiliated companies and for which the
Executive may qualify, nor shall anything herein limit or otherwise prejudice
such rights as the Executive may have under any other agreements with the
Company or any of its affiliated companies, including employment agreements or
stock option agreements.
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Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of the Company or any of its affiliated
companies at or subsequent to the Date of Termination shall be payable in
accordance with such plan or program.
9. No Mitigation or Offset. The Executive shall have no obligation to
seek other employment and, except as expressly provided in Sections 7(c)(ii),
there shall be no offset against amounts due to Executive under this Agreement
on account of any remuneration attributable to subsequent employment that he may
obtain. The Company's obligation to make the payments provided for in this
Agreement and otherwise to perform its obligations hereunder shall not be
affected by any circumstances, including, without limitation, any set-off,
counterclaim, recoupment, defense or other right which the Company may have
against the Executive or others, including, without limitation, any claim
arising due to the Executive's violation of his covenants under Section 11(a)
hereof. In the event that the Executive shall in good faith give a Notice of
Termination for Good Reason and it shall thereafter be determined that Good
Reason did not exist, the employment of the Executive shall, unless the Company
and the Executive shall otherwise mutually agree, be deemed to have terminated,
at the date of giving such purported Notice of Termination, by mutual consent of
the Company and the Executive and the Executive shall be entitled to receive
only his Earned Salary and the Accrued Obligations which he would have been
entitled to receive upon a voluntary termination.
10. Legal Fees and Expenses. If the Executive asserts any claim in any
contest (whether initiated by the Executive or by the Company) as to the
validity, enforceability or interpretation of any provision of this Agreement,
the Company shall pay the Executive's legal expenses (or cause such expenses to
be paid) including, without limitation, his reasonable attorney's fees, on a
quarterly basis, upon presentation of proof of such expenses in a form
acceptable to the Company, provided that the Executive shall reimburse the
Company for such amounts, plus simple interest thereon at the 90-day United
States Treasury Bill rate as in effect from time to time, compounded annually,
if the Executive shall not prevail, in whole or in part, as to any material
issue as to the validity, enforceability or interpretation of any provision of
this Agreement.
11. Confidential Information; Company Property. By and in consideration
of the salary and benefits to be provided by the Company hereunder, including
the severance arrangements set forth herein, the Executive agrees that:
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(a) Confidential Information. The Executive shall hold in a
fiduciary capacity for the benefit of the Company all secret or confidential
information, knowledge or data relating to the Company or any of its affiliated
companies, and their respective businesses, (i) obtained by the Executive during
his employment by the Company or any of its affiliated companies and (ii) not
otherwise public knowledge (other than by reason of an unauthorized act by the
Executive). After termination of the Executive's employment with the Company,
the Executive shall not, without the prior written consent of the Company,
unless compelled pursuant to an order of a court or other body having
jurisdiction over such matter, communicate or divulge any such information,
knowledge or data to anyone other than the Company and those designated by it.
The Executive acknowledges and agrees that the covenants and obligations of the
Executive with respect to confidentiality relate to special, unique and
extraordinary matters and that a violation of any of the terms of such covenants
and obligations will cause the Company irreparable injury for which adequate
remedies are not available at law. Therefore, the Executive agrees that the
Company shall be entitled to an injunction, restraining order or such other
equitable relief (without the requirement to post bond) restraining Executive
from committing any violation of the covenants and obligations contained in this
Section 11(a). These remedies are cumulative and are in addition to any other
rights and remedies the Company may have at law or in equity.
(b) Company Property. Except as expressly provided herein,
promptly following the Executive's termination of employment, the Executive
shall return to the Company all property of the Company and all copies thereof
in the Executive's possession or under his control, except that the Executive
may retain his personal notes, diaries, Rolodexes, calendars and correspondence.
12. Successors.
(a) This Agreement is personal to the Executive and, without
the prior written consent of the Company, shall not be assignable by the
Executive otherwise than by will or the laws of descent and distribution. This
Agreement shall inure to the benefit of and be enforceable by the Executive's
legal representatives.
(b) This Agreement shall inure to the benefit of and be
binding upon the Company and its successors. The Company shall require any
successor to all or substantially all of the business and/or assets of the
Company, whether direct
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or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and
to the same extent as the Company would be required to perform if no such
succession had taken place.
13. Miscellaneous.
(a) Applicable Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New Jersey, applied
without reference to principles of conflict of laws.
(b) Arbitration. Except to the extent provided in Section
11(a), any dispute or controversy arising under or in connection with this
Agreement shall be resolved by binding arbitration. The arbitration shall be
held in Newark, New Jersey and except to the extent inconsistent with this
Agreement, shall be conducted in accordance with the Expedited Employment
Arbitration Rules of the American Arbitration Association (or such other
voluntary arbitration rules applicable to employment contract disputes) in
effect at the time of the arbitration, supplemented, as necessary, by those
principles which would be applied by a court of law or equity. The arbitrator
shall be acceptable to both the Company and the Executive. If the parties cannot
agree on an acceptable arbitrator, the dispute shall be heard by a panel of
three arbitrators, one appointed by each of the parties and the third appointed
by the other two arbitrators.
(c) Amendments. This Agreement may not be amended or modified
otherwise than by a written agreement executed by the parties hereto or their
respective successors and legal representatives.
(d) Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the matters referred to
herein. No other agreement relating to the terms of the Executive's employment
by the Company, oral or otherwise, shall be binding between the parties unless
it is in writing and signed by the party against whom enforcement is sought.
There are no promises, representations, inducements or statements between the
parties other than those that are expressly contained herein. The Executive
acknowledges that he is entering into this Agreement of his own free will and
accord, and with no duress, that he has read this Agreement and that he
understands it and its legal consequences.
17
<PAGE> 18
(e) Notices. All notices and other communications hereunder
shall be in writing and shall be given by hand-delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid,
addressed as follows:
If to the Executive: at the home address the Executive noted on the
records of the Company
If to the Company: New Jersey Resources Corporation
1415 Wyckoff Road
Wall, New Jersey 07719
Attn.: Secretary
or to such other address as either party shall have furnished to the
other in writing in accordance herewith. Notice and communications shall be
effective when actually received by the addressee.
(f) Tax Withholding. The Company shall withhold from any
amounts payable under this Agreement such Federal, state or local taxes as shall
be required to be withheld pursuant to any applicable law or regulation.
(g) Severability; Reformation. In the event that one or more
of the provisions of this Agreement shall become invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby. In the
event that any of the provisions of any of Section 11(a) are not enforceable in
accordance with its terms, the Executive and the Company agree that such Section
shall be reformed to make such Section enforceable in a manner which provides
the Company the maximum rights permitted at law.
(h) Waiver. Waiver by any party hereto of any breach or
default by the other party of any of the terms of this Agreement shall not
operate as a waiver of any other breach or default, whether similar to or
different from the breach or default waived. No waiver of any provision of this
Agreement shall be implied from any course of dealing between the parties hereto
or from any failure by either party hereto to assert its or his rights hereunder
on any occasion or series of occasions.
(i) Counterparts. This Agreement may be executed in
18
<PAGE> 19
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
(j) Captions. The captions of this Agreement are not part of
the provisions hereof and shall have no force or effect.
IN WITNESS WHEREOF, the Executive has hereunto set his hand
and the Company has caused this Agreement to be executed in its name on its
behalf, and its corporate seal to be hereunto affixed and attested by its
Secretary, all as of the day and year first above written.
NEW JERSEY RESOURCES CORPORATION
/s/ OLETA J. HARDEN
--------------------------------------------
By:
Title: Senior Vice President and Secretary
WITNESSED:
/s/ ANGELA M. CROSBY
- --------------------
/s/ LAURENCE M. DOWNES
----------------------
EXECUTIVE
WITNESSED:
/s/ CHARLOTTE WOOD
- ------------------
19
<PAGE> 1
EXHIBIT 10-12A
SCHEDULE OF OFFICER EMPLOYMENT CONTINUATION AGREEMENTS
Pursuant to Rule 12b-31, the following sets forth the material
differences of all other Officer Employment Continuation Agreement from Mr.
Downes', which is filed herewith as Exhibit 10-12.
<TABLE>
<CAPTION>
NAME CAPACITY IN WHICH SERVED DATE OF AGREEMENT
---- ------------------------ -----------------
<S> <C> <C>
Hugo C. Bottino Vice President, Human Resources June 5, 1996
Roy J. Churchman Assistant Vice President, Business
Planning and Analysis June 14, 1996
Francis X. Colford Vice President and Controller June 5, 1996
Jay B. Corn Vice President, Corporate Development November 1, 1996
Mark C. Darrell Vice President and Assistant General
Counsel June 7, 1996
John A. Dorsey Assistant Vice President, Public Affairs June 7, 1996
Gary A. Edinger Senior Vice President, Energy Delivery June 7, 1996
Oleta J. Harden Senior Vice President, General Counsel
and Secretary June 5, 1996
Timothy C. Hearne Senior Vice President, Financial and
Administrative Services June 5, 1996
David M. Klucsik Vice President, External Affairs June 5, 1996
Thomas J. Kononowitz Senior Vice President, Marketing Services June 5, 1996
Glenn C. Lockwood Senior Vice President and Chief Financial
Officer June 14, 1996
James J. Maher Assistant Vice President, Marketing June 26, 1996
MaryAnn Martin Vice President, Consumer and Community
Relations June 11, 1996
Joseph P. Shields Senior Vice President, Energy Services June 5, 1996
Wayne K. Tarney Senior Vice President, Customer Services June 5, 1996
George D. Walling Assistant Vice President, Customer Services June 7, 1996
Deborah Zilai Vice President, Information Systems and
Services June 5, 1996
</TABLE>
I. THE FOLLOWING TERMS APPLY TO THE AGREEMENTS OF ALL THE OFFICERS LISTED ABOVE:
a) If, during the Employment Period, the Company terminates the Executive's
employment other than for Cause, or following a Change of Control the Executive
terminates his employment for Good Reason, the Executive (and, to the extent
applicable, his dependents) shall be entitled, after the Date of Termination
until the earlier of (1) the second anniversary of the Date of Termination (the
"End Date") and (2) the date the Executive becomes eligible for comparable
benefits under a similar plan, policy or program of a subsequent employer, to
continue
<PAGE> 2
participation in all of the Company's employee and executive welfare and fringe
benefit plans (the "Benefit Plans").
b) If the aggregate value of all compensation payments or benefits to be paid
or provided to the Executive under his or her Agreement and any other plan,
agreement or arrangement with the Company exceeds the amount which can be paid
to the Executive without the Executive incurring an Excise Tax, then the amounts
payable to the Executive under Section 7 shall be reduced (but not below zero)
to the maximum amount which may be paid hereunder without the Executive becoming
subject to such an Excise Tax.
II. The following officers' agreements provide for a Severance Amount that is
equal to two-times the sum of his or her annual base salary and the average of
the annual bonuses paid to him or her for the last three calendar years ended
prior to the Change of Control:
Bottino Klucsik
Colford Kononowitz
Corn Lockwood
Edinger Martin
Harden Shields
Hearne
III. The following officers' agreements provide for a Severance Amount that is
equal to one-times the sum of his or her annual base salary and the average of
the annual bonuses paid to him or her for the last three calendar years ended
prior to the Change of Control:
Churchman Tarney
Darrell Walling
Dorsey Zilai
Maher
-2-
<PAGE> 1
EXHIBIT 10-15A
SERVICE AGREEMENT
APPLICABLE TO THE STORAGE OF NATURAL GAS
UNDER RATE SCHEDULE GSS
(SECTION 7(c))
AGREEMENT made as of this 1st day of December, 1993, by and
between CNG TRANSMISSION CORPORATION, a Delaware corporation, hereinafter called
"Pipeline," and NEW JERSEY NATURAL GAS COMPANY, a New Jersey corporation,
hereinafter called "Customer."
WITNESSETH: That in consideration of the mutual covenants
herein contained, the parties hereto agree that Pipeline will store natural gas
for Customer during the term, at the rates and on the terms and conditions
hereinafter provided and, with respect to gas delivered by each of the parties
to the other, under and subject to Pipeline's Rate Schedule GSS and all of the
General Terms and Conditions contained in Pipeline's FERC Gas Tariff and any
revisions thereof that may be made effective hereafter:
ARTICLE I
QUANTITIES
Beginning as of October 1, 1993 and thereafter for the
remaining term of this agreement, Customer agrees to deliver to Pipeline and
Pipeline agrees to receive for storage in Pipeline's underground storage
properties, and Pipeline agrees to inject or cause to be injected into storage
for Customer's account, store, withdraw from storage, and deliver to Customer
and Customer agrees to receive, quantities of natural gas as set forth on
Exhibit A, attached hereto.
ARTICLE II
RATE
A. For storage service rendered by Pipeline to Customer
hereunder, Customer shall pay Pipeline in accordance with Rate Schedule GSS
contained in Pipeline's effective FERC Gas Tariff or any effective superseding
rate schedule. Said rate schedule or superseding rate schedule and any revisions
thereof which shall be filed and made effective shall apply to and be a part of
this Agreement. Pipeline shall have the right to propose to and file with the
Federal Energy Regulatory Commission or other body having jurisdiction, changes
and revisions of any effective rate schedule, or to propose and file superseding
rate schedules, for the purpose of changing the rate, charges, and other
provisions thereof effective as to Customer; provided, however, that any request
by Pipeline to amend the
<PAGE> 2
terms and conditions of Rate Schedule GSS must be consistent with the terms and
conditions of Article VII, Part 2, Paragraph (F) of the Stipulation filed on
March 31, 1993 by Pipeline in Docket No. RS92-14 and conform to the requirements
of Section 7 (b) of the Natural Gas Act, if applicable, and provided further
that Pipeline and Customer agree that they will not seek to place in effect a
change in any aspect of the terms and conditions under Section 8 of Rate
Schedule GSS for a period of two years from the date of such request. The filing
of requests, changes and revisions of Rate Schedule GSS shall be without
prejudice to the right of Customer to contest or oppose such requests, filings
or revisions and their effectiveness.
B. The Storage Demand Charge and the Storage Capacity Charge
provided in the aforesaid rate schedule shall commence on October 1, 1993.
ARTICLE III
TERM OF AGREEMENT
Subject to all the terms and conditions herein, this Agreement
shall be effective as of October 1, 1993, and shall continue in effect for a
primary term through and including March 31, 2006, and for subsequent annual
terms of April 1 through March 31 thereafter, until either party terminates this
Agreement by giving written notice to the other at least twenty-four months
prior to the start of an annual term.
ARTICLE IV
POINTS OF RECEIPT AND DELIVERY
The Points of Receipt for Customer's tender of storage
injection quantities, and the Point(s) of Delivery for withdrawals from storage
shall be specified on Exhibit A, attached hereto.
ARTICLE V
SPECIAL OPERATING CONDITIONS
For the sole purpose of calculating Customer's Storage Gas
Balance to determine the initial decline in Customer's Daily Entitlement,
Pipeline shall multiply Customer's actual Storage Gas Balance by a factor of
1.176. For purposes other than calculating the initial decline in Customer's
Daily Entitlement, Customer's Storage Gas Balance shall remain equal to
Customer's actual inventory in storage.
- 2 -
<PAGE> 3
ARTICLE VI
MISCELLANEOUS
A. No change, modification or alteration of this Agreement
shall be or become effective until executed in writing by the parties hereto;
provided, however, that the parties do not intend that this Article VI.A.
requires a further written agreement either prior to the making of any request
or filing permitted under Article II hereof or prior to the effectiveness of
such request or filing after Commission approval, provided further, however,
that nothing in this Agreement shall be deemed to prejudice any position the
parties may take as to whether the request, filing or revision permitted under
Article II must be made under Section 7 or Section 4 of the Natural Gas Act.
B. Any notice, request or demand provided for in this
Agreement, or any notice which either party may desire to give the other, shall
be in writing and sent to the following addresses:
Pipeline: CNG Transmission Corporation
445 West Main Street
Clarksburg, West Virginia 26301
Attention: Vice President, Marketing
and Customer Services
Customer: New Jersey Natural Gas Company
1415 Wyckoff Road
P.O. Box 1464
Wall, NJ 07719
Attention: Gary Edinger
or at such other address as either party shall designate by formal written
notice.
C. No presumption shall operate in favor of or against either
party hereto as a result of any responsibility either party may have had for
drafting this Agreement.
D. The subject headings of the provisions of this Agreement
are inserted for the purpose of convenient reference, and are not intended to
become a part of or to be considered in any interpretations of such provisions.
- 3 -
<PAGE> 4
ARTICLE VII
PRIOR CONTRACTS
This Service Agreement shall supersede and cancel, as of the
effective date, the Service Agreements for storage service between Customer and
Pipeline dated June 1, 1993.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be signed by their duly authorized officials as of the day and year
first above written.
CNG TRANSMISSION CORPORATION
(PIPELINE)
BY: /s/ Joseph A. Curia
-----------------------------
ITS: VICE PRESIDENT
NEW JERSEY NATURAL GAS COMPANY
(CUSTOMER)
BY: /s/ GARY A. EDINGER
ITS: Vice President-Gas Supply
-----------------------------
(TITLE)
- 4 -
<PAGE> 5
EXHIBIT A
TO THE GSS (SECTION 7(c))
STORAGE SERVICE AGREEMENT
DATED DECEMBER ___ , 1993
BETWEEN CNG TRANSMISSION CORPORATION AND
NEW JERSEY NATURAL GAS COMPANY
A. QUANTITIES
The quantities of natural gas storage service which Customer may
utilize under this service Agreement, as well as Customer's applicable
Billing Determinants, are as follows:
1. Storage Capacity of 4,353,382 Dekatherms (Dt), and
2. Storage Demand of 45,911 Dt per day.
B. POINTS OF RECEIPT AND DELIVERY
1. The Points of Receipt for Customer's tender of storage injection
quantities, and the maximum quantities and character of service for
each point shall be as set forth below. Pipeline will use due care and
diligence to assure, and Customer will use due care and diligence to
cause its transporter to assure, that uniform pressures will be
maintained at the Receipt Points as reasonably may be required to
render service hereunder, but Pipeline will not be required to accept
gas at less than the minimum pressures specified herein. Pipeline will
not be required to accept gas for injection into storage at the points
specified in B.1.b., below, unless either (i) Customer tenders at the
same time no less than 4,599 Dt per day at the Leidy Interconnection or
(ii) Customer, during that Summer Period, has already tendered 694,449
Dt or more at the Leidy Interconnection.
a. Up to 24,185 Dt per Day at the interconnection of the facilities of
Pipeline and Texas Eastern Transmission Corporation ("Texas
Eastern") or Transcontinental Gas Pipe Line Corporation ("Transco")
or other pipeline(s) in Clinton County, Pennsylvania, known as the
Leidy Interconnection, at a pressure of not less than one thousand
(1,000) pounds per square inch gauge ( "psig").
b. Up to 24,185 Dt per Day at the "Texas Eastern Market Zone 2 Point"
which shall consist of any combination of the following points:
<PAGE> 6
EXHIBIT A
DECEMBER __, 1993 (GSS SECTION 7(c)) AGREEMENT
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 2 OF 4
1. The interconnection of the facilities of Pipeline and Texas Eastern or
other pipeline(s) in Westmoreland County, Pennsylvania, known as the
Oakford Interconnection, at a pressure of not less than five hundred
seventy-five (575) psig.
2. An existing point of interconnection between Pipeline and Texas Eastern
Transmission Corporation ("Texas Eastern") located in Noble County,
Ohio, at Texas Eastern Measuring Station 450, at the operating pressure
existing at the point of delivery.
3. An existing point of interconnection between Pipeline and Texas Eastern
located in Monroe County, Ohio, at Texas Eastern Measuring Station 471,
at a pressure of not less than two hundred (200) psig.
4. An existing point of interconnection between Pipeline and Texas Eastern
located in Monroe County, Ohio, at Texas Eastern Measuring Station 983,
at a pressure of not less than three hundred (300) psig.
5. An existing point of interconnection between Pipeline and Texas Eastern
located in Monroe County, Ohio, at Texas Eastern Measuring Station 004,
at the pressure provided for in the General Terms and Conditions of
Texas Eastern's FERC Gas Tariff.
6. An existing point of interconnection between Pipeline and Texas Eastern
located in Marshall County, West Virginia at Texas Eastern Measuring
Station 372, at the operating pressure existing at the point of
delivery.
7. An existing point of interconnection between Pipeline and Texas Eastern
located in Green County, Pennsylvania at Texas Eastern Measuring
Station 037, at the pressure provided for in the General Terms and
Conditions of Texas Eastern's FERC Gas Tariff.
<PAGE> 7
EXHIBIT A
DECEMBER __, 1993 (GSS SECTION 7(c)) AGREEMENT
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 3 OF 4
8. An existing point of interconnection between Pipeline
and Texas Eastern located in Somerset County,
Pennsylvania at Texas Eastern Measuring Station 051,
at the pressure provided for in the General Terms and
Conditions of Texas Eastern's FERC Gas Tariff.
2. The quantity of gas which Customer shall be entitled to tender to
Pipeline for injection into storage at the Leidy Interconnection on a
firm basis on any Day during the Storage Year shall be one-one hundred
eightieth (1/180th) of Customer's Storage Capacity whenever Customer's
Storage Gas Balance is less than or equal to one half of Customer's
Storage Capacity, and one-two hundred fourteenth (1/214th) of
Customer's Storage Capacity whenever Customer's Storage Gas Balance is
greater than one half of Customer's Storage Capacity.
3. The Points of Delivery for withdrawals from storage, and the maximum
quantities and character of service for each point, shall be as set
forth below. Pipeline will use due care and diligence to assure, and
Customer will use due care and diligence to cause its transporter to
assure, that uniform pressures will be maintained at the Delivery
Points as reasonably may be required to render service hereunder, and
Pipeline will use due care and diligence to deliver gas (or cause gas
to be delivered) within the pressure limitations specified herein.
a. Up to 4,599 Dt per Day on a firm basis (and up to 41,312 Dt
per Day on an interruptible basis, if, in Pipeline's sole
opinion, its operating or other circumstances permit) at the
interconnection of the facilities of Pipeline and Texas
Eastern Transmission Corporation ("Texas Eastern") or
Transcontinental Gas Pipe Line Corporation ("Transco") or
other pipeline(s) in Clinton County, Pennsylvania, known as
the Leidy Interconnection, at a pressure of not less than
one-thousand, two-hundred (1,200) psig.
b. Up to 45,911 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern or other pipeline(s)
in Westmoreland County, Pennsylvania, known as the Oakford
Interconnection, at a pressure of not less than eight hundred
fifty (850) psig.
<PAGE> 8
EXHIBIT A
DECEMBER ___, 1993 (GSS SECTION 7(c)) AGREEMENT
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 4 OF 4
c. Up to 45,911 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and Texas
Eastern, in Franklin County, Pennsylvania, known as the
Chambersburg Interconnection, on an interruptible basis if
operating conditions permit, at a pressure of not more than
seven hundred (700) psig.
d. Up to 45,911 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and Texas
Eastern, in Greene County, Pennsylvania, known as the Crayne
Interconnection, on an interruptible basis if operating
conditions permit, at a pressure of not more than eight
hundred sixty-five (865) psig.
<PAGE> 1
EXHIBIT 10-15B
SERVICE AGREEMENT
APPLICABLE TO TRANSPORTATION OF NATURAL GAS
UNDER RATE SCHEDULE FTNN
AGREEMENT made as of this 1st day of December, 1993, by and between CNG
TRANSMISSION CORPORATION, a Delaware corporation, hereinafter called "Pipeline,"
and NEW JERSEY NATURAL GAS COMPANY, a New Jersey corporation, hereinafter called
"Customer."
WITNESSETH: That, in consideration of the mutual covenants herein
contained, the parties hereto agree as follows:
ARTICLE I
QUANTITIES
A. During the term of this Agreement, Pipeline will transport for
Customer, on a firm basis, and Customer may furnish, or cause to be furnished,
to Pipeline natural gas for such transportation, and Customer will accept, or
cause to be accepted, delivery from Pipeline of the quantities Customer has
tendered for transportation.
B. The maximum quantities of gas which Pipeline shall deliver and which
Customer may tender shall be as set forth on Exhibit A, attached hereto.
ARTICLE II
RATE
A. Unless otherwise mutually agreed in a written amendment to this
Agreement, beginning on October 1, 1993, Customer shall pay Pipeline for
transportation services rendered pursuant to this Agreement, the maximum rates
and charges provided under Rate Schedule FTNN set forth in Pipeline's effective
FERC Gas Tariff, including applicable surcharges and the Fuel Retention
Percentage.
B. Pipeline shall have the right to propose, file and make effective
with the Federal Energy Regulatory Commission or any other body having
jurisdiction, revisions to any applicable rate schedule, or to propose, file,
and make effective superseding rate schedules for the purpose of changing the
rate, charges, and other provisions thereof effective as to Customer; provided,
however, that (i) Section 2 of Rate Schedule FTNN "Applicability and Character
of Service," (ii) term, (iii) quantities, and (iv) points of receipt and points
of delivery shall not be subject to unilateral change under this Article. Said
rate schedule or superseding rate schedule and any revisions thereof which shall
be filed and made effective shall apply to and become a part of this Service
Agreement. The filing of such
<PAGE> 2
changes and revisions to any applicable rate schedule shall be without prejudice
to the right of Customer to contest or oppose such filing and its effectiveness.
ARTICLE III
TERM OF AGREEMENT
Subject to all the terms and conditions herein, this Agreement shall be
effective as of October 1, 1993, and shall continue in effect for a primary term
through and including March 31, 2005, and from year to year thereafter, until
either party terminates this Agreement by giving written notice to the other at
least twelve months prior to the start of the next contract year.
ARTICLE IV
POINTS OF RECEIPT AND DELIVERY
The Points of Receipt and Delivery and the maximum quantities for each
point for all gas that may be received for Customer's account for transportation
by Pipeline shall be as set forth on Exhibit A.
ARTICLE V
REGULATORY APPROVAL
Performance under this Agreement by Pipeline and Customer shall be
contingent upon Pipeline and Customer receiving all necessary regulatory or
other governmental approvals upon terms satisfactory to each. Should Pipeline or
Customer be denied such approvals to provide or continue the service
contemplated herein or to construct and operate any necessary facilities
therefor upon the terms and conditions requested in the application therefor,
then Pipeline's and Customer's obligations hereunder shall terminate.
ARTICLE VI
INCORPORATION BY REFERENCE OF TARIFF PROVISIONS
To the extent not inconsistent with the terms and conditions of this
Agreement, the following provisions of Pipeline's effective FERC Gas Tariff, and
any revisions thereof that may be made effective hereafter are hereby made
applicable to and a part hereof by reference:
1. All of the provisions of Rate Schedule FTNN, or any
effective superseding rate schedule or otherwise applicable rate schedule; and
2. All of the provisions of the General Terms and Conditions,
as they may be revised or superseded from time to time.
- 2 -
<PAGE> 3
ARTICLE VII
MISCELLANEOUS
A. No change, modification or alteration of this Agreement
shall be or become effective until executed in writing by the parties hereto;
provided, however, that the parties do not intend that this Article VII.A.
requires a further written agreement either prior to the making of any request
or filing permitted under Article II hereof or prior to the effectiveness of
such request or filing after Commission approval, provided further, however,
that nothing in this Agreement shall be deemed to prejudice any position the
parties may take as to whether the request, filing or revision permitted under
Article II must be made under Section 7 or Section 4 of the Natural Gas Act.
B. Any notice, request or demand provided for in this
Agreement, or any notice which either party may desire to give the other, shall
be in writing and sent to the following addresses:
Pipeline: CNG Transmission Corporation
445 West Main Street
Clarksburg, West Virginia 26301
Attention: Vice President, Marketing
and Customer Services
Customer: New Jersey Natural Gas Company
1415 Wyckoff Road
P.O. Box 1464
Wall, NJ 07719
Attention: Gary Edinger
or at such other address as either party shall designate by formal written
notice.
C. No presumption shall operate in favor of or against either
party hereto as a result of any responsibility either party may have had for
drafting this Agreement.
D. The subject headings of the provisions of this Agreement
are inserted for the purpose of convenient reference and are not intended to
become a part of or to be considered in any interpretation of such provisions.
ARTICLE VIII
PRIOR CONTRACTS
If this Service Agreement becomes effective as an executed
Service Agreement, it shall supersede and cancel, as of its effective date, the
Service Agreements between Customer and Pipeline Applicable to Transportation of
Natural Gas under Rate Schedule TF dated January 18, 1988,
- 3 -
<PAGE> 4
and November 1, 1992, the Service Agreement between Customer and Pipeline
Applicable to the Sales of Natural Gas Under Rate Schedule CD dated November 1,
1992, the Service Agreement between Customer and Pipeline Applicable to the
Storage of Natural Gas under Rate Schedule GSS dated November 1, 1992, and the
Service Agreements between Customer and Pipeline Applicable to the Sales of
Natural Gas dated September 16, 1988, (Seasonal Sales Service) and February 1,
1989 (APEC), and the Precedent Agreement between Customer and Pipeline dated
April 16, 1991. Otherwise, each of these instruments shall remain in full force
and effect unless it shall have expired by its own terms.
IN WITNESS WHEREOF, the parties hereto intending to be legally
bound, have caused this Agreement to be signed by their duly authorized
officials as of the day and year first written above.
CNG TRANSMISSION CORPORATION
(PIPELINE)
BY: /s/ JOSEPH A. CURIA
------------------------------
ITS: VICE PRESIDENT
NEW JERSEY NATURAL GAS COMPANY
(CUSTOMER)
BY: /s/ GARY A. EDINGER
------------------------------
ITS: Vice President - Gas Supply
------------------------------
(TITLE)
- 4 -
<PAGE> 5
REVISED EXHIBIT A
DATED DECEMBER 21, 1995
TO THE FTNN SERVICE AGREEMENT
DATED DECEMBER 1, 1993
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
AGREEMENT made as of this 21st day of December, 1995, by and
between CNG TRANSMISSION CORPORATION, a Delaware corporation, hereinafter called
"Pipeline," and NEW JERSEY NATURAL GAS COMPANY, a New Jersey corporation,
hereinafter called "Customer."
Pipeline and Customer agree to revise the provisions of
Exhibit A of the "Service Agreement Applicable To Transportation Of Natural Gas
Under Rate Schedule FTNN" between Pipeline and Customer dated December 1, 1993,
as reflected below, effective January 1, 1996.
A. QUANTITIES
The maximum quantities of gas which Pipeline shall deliver and which
Customer may tender shall be as follows:
1. A Maximum Daily Transportation Quantity (MDTQ) of 53,065 dekatherms
("Dt").
2. A Maximum Annual Transportation Quantity (MATQ) of 19,368,725 Dt.
B. POINTS OF RECEIPT
1. TOTAL ENTITLEMENTS
The Points of Receipt and the maximum quantities for each point shall
be as set forth below. Pipeline will use due care and diligence to
assure, and Customer will use due care and diligence to cause its
transporter to assure, that uniform pressures will be maintained at the
Receipt Points as reasonably may be required to render service
hereunder, but Pipeline will not be required to accept gas at less than
the minimum pressures specified herein. In addition to the quantities
specified below, Customer may increase the quantities furnished to
Pipeline at each receipt point so long as such quantities, when reduced
by the fuel retention percentage specified in Pipeline's
<PAGE> 6
REVISED EXHIBIT A DATED DECEMBER 21, 1995
TO THE FTNN SERVICE AGREEMENT DATED DECEMBER 1, 1993
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 2 OF 5
currently effective FERC Gas Tariff, do not exceed the quantity limitation
specified below for each receipt point.
a. Up to 30,942 Dt per Day at the interconnection of the facilities of
Pipeline and Texas Gas Transmission Corporation, Texas Eastern
Transmission Corporation ("Texas Eastern"), ANR Pipeline Company,
Trunkline Gas Company, or other pipeline(s) in Warren County, Ohio,
known as the Lebanon Interconnection, at a pressure of not less than
five hundred thirty-one (531) pounds per square inch gauge ("psig").
b. Up to 18,048 Dt per Day at the interconnection of the facilities of
Pipeline and Texas Eastern or other pipeline(s) in Westmoreland County,
Pennsylvania, known as the Oakford Interconnection, at a pressure of not
less than five hundred seventy-five (575) psig.
c. Up to 721 Dt per day at Pipeline's Appalachian Aggregation Point known
as Finnefrock Station, located on Line 280 in Clinton County,
Pennsylvania.
d. Up to a combined maximum daily quantity of 1,779 Dt at the following
Appalachian Aggregation Points:
(1) Cornwell Station, Located in Kanawha County, West Virginia;
(2) Bridgeport Station, located on Line TL-373 in Harrison County,
West Virginia; and
(3) Hastings Station (wet gas), located in Wetzel County, West
Virginia,
with the specific allocation of quantities among these points to be
determined by mutual agreement.
e. Up to a combined maximum daily quantity of 1,575 Dt per Day at
the following Tennessee Gas Pipeline Company ("Tennessee")
points:
(1) a point located on the facilities of Tennessee known as South
Webster; and
(2) an existing point of interconnection between the facilities of
Pipeline and Tennessee in Kanawha County, West Virginia, known
as the Cornwell Interconnection, at a pressure of not less
than four hundred seventy-five (475) psig.
<PAGE> 7
REVISED EXHIBIT A DATED DECEMBER 21, 1995
TO THE FTNN SERVICE AGREEMENT DATED DECEMBER 1, 1993
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 3 OF 5
with the specific allocation of quantities among these points
to be determined by mutual agreement.
f. Any secondary receipt point on Pipeline's current Master
Receipt and Delivery Point List.
2. MARQ RENEGOTIATION PROVISION
Customer shall have the right to reduce its Maximum Appalachian Receipt
Quantity ("MARQ') (as such term is defined in Section 5.1.C of CNG's
Rate Schedule FTNN), in whole or in part, as of January 1, 2001, in
accordance with the terms of the Letter Agreement among Pipeline,
Customer, Long Island Lighting Company, and Pubic Service Electric and
Gas Company dated July 7, 1995. Pipeline and Customer shall enter into
negotiations sufficiently in advance of January 1, 2001, to implement
any resulting change in Primary Receipt Points. This renegotiation
provision shall in no way affect the quantities stated in Paragraph A,
above, except by mutual agreement of the Parties.
C. POINTS OF DELIVERY
The Points of Delivery and the maximum quantities for such points shall
be as set forth below. Pipeline will use due care and diligence to
assure, and Customer will use due care and diligence to cause its
transporter to assure, that uniform pressures will be maintained at the
Delivery Points as reasonably may be required to render service
hereunder, and Pipeline will use due care and diligence to deliver gas
(or to cause gas to be delivered) within the pressure limitations
specified herein.
1. Up to 35,000 Dt per Day at an existing point of
interconnection between the facilities of Pipeline and Texas
Eastern, in Franklin County, Pennsylvania, known as the
Chambersburg Interconnection, at a pressure of not more than
seven hundred (700) psig; provided, however, that the
nomination of this point as a Delivery Point under the Rate
Schedule GSS (Part 284) Service Agreement between Customer and
Pipeline dated December 1, 1993, whether made by Customer or
by Customer's agent, assignee, or Replacement Customer, shall
reduce Customer's entitlement to delivery of Transportation
Quantities at this point by an equivalent quantity; and
provided further, however, that the nomination of this point
as a Delivery Point under this transportation Service
Agreement, whether made by Customer or by Customer's agent,
assignee, or Replacement Customer, shall reduce Customer's
entitlement to receive deliveries of gas withdrawn from
storage at this point under the above-referenced Rate Schedule
GSS (Part 284) Service Agreement
<PAGE> 8
REVISED EXHIBIT A DATED DECEMBER 21, 1995
TO THE FTNN SERVICE AGREEMENT DATED DECEMBER 1, 1993
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 4 OF 5
by an equivalent quantity. The foregoing limitations on
deliveries at the Chambersburg Interconnection shall not be
affected by any capacity release or assignment of this Service
Agreement or the above-referenced Rate Schedule GSS (Part 284)
Service Agreement.
2. Up to 18,065 Dt per Day at the interconnection of the
facilities of Pipeline and Texas Eastern, Transcontinental Gas
Pipe Line Corporation or other pipeline(s) in Clinton County,
Pennsylvania, known as the Leidy Interconnection, at a
pressure of not less than one-thousand, two-hundred (1,200)
psig.
3. Up to 53,065 Dt per Day at points of injection into Pipeline's
storage pools; provided, however, that all nominations under
this Agreement for injection into storage shall be subject to
Pipeline's confirmation of a corresponding nomination for
injection of such gas into Pipeline's storage pool(s), under a
valid Service Agreement for storage service by Pipeline;
provided further, however, that this requirement shall not
affect Customer's ability to inject gas into storage in
accordance with Section 9 of Rate Schedule FTNN.
4. Any secondary delivery point on Pipeline's current Master
Secondary Receipt and Delivery Point List.
D. SUPERSEDED AGREEMENT
This Revised Exhibit A shall supersede and cancel, as of its effective
date, the original Exhibit A to the "Service Agreement Applicable To
Transportation Of Natural Gas Under Rate Schedule FTNN" between
Pipeline and Customer, dated December 1, 1993.
<PAGE> 9
REVISED EXHIBIT A DATED DECEMBER 21, 1995
TO THE FTNN SERVICE AGREEMENT DATED DECEMBER 1, 1993
BETWEEN CNG TRANSMISSION CORPORATION
AND NEW JERSEY NATURAL GAS COMPANY
PAGE 5 OF 5
IN WITNESS WHEREOF, the parties hereto intending to be legally bound,
have caused this Revised Exhibit A to be signed by their duly authorized
officials, as of the day and year first written above.
CNG TRANSMISSION CORPORATION
(PIPELINE)
BY: /s/ Joseph A. Curia
-------------------------------------------
ITS: VICE PRESIDENT
NEW JERSEY NATURAL GAS COMPANY
(CUSTOMER)
BY: /s/ Gary A. Edinger
-------------------------------------------
ITS: Senior Vice President - Energy Services
-------------------------------------------
(TITLE)
<PAGE> 1
Exhibit 13-1
Financial Highlights (Thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FISCAL YEARS ENDED SEPTEMBER 30, 1996 1995 1994
<S> <C> <C> <C>
OPERATING RESULTS
Operating Revenues $548,512 $454,593 $497,075
Operating Income $ 59,600 $ 59,268 $ 54,980
Income from Continuing Operations $ 37,068 $ 33,919 $ 31,729
Net Income $ 37,068 $ 24,785 $ 32,995
Return on Average Equity* 13.4% 12.8% 12.7%
-----------------------------------------
COMMON STOCK INFORMATION
Earnings per Share from Continuing Operations $ 2.06 $ 1.93 $ 1.86
Earnings per Share $ 2.06 $ 1.41 $ 1.93
Annual Dividend Rate at Year End $ 1.56 $ 1.52 $ 1.52
Market Price at Year End $ 28.00 $ 25.88 $ 21.13
Book Value per Share $ 15.15 $ 14.55 $ 14.46
Shares Outstanding at Year End** 18,084 17,793 17,303
Average Shares Outstanding 18,030 17,605 17,096
-----------------------------------------
OPERATING DATA
Utility
Utility Customers at Year End 363 352 340
Firm Sales (bcf) 54.9 45.8 50.5
Capacity Release and Off-System Sales (bcf) 61.6 62.6 46.7
Total Throughput (bcf) 126.3 120.8 105.4
Gross Margin $164,835 $150,273 $152,323
Energy Marketing
Retail Sales and Gas under Management (bcf) 37.6 11.5 2.7
-----------------------------------------
</TABLE>
*Continuing Operations
**Net of treasury shares
New Jersey Natural Gas Service Territory
[County Map Graphic]
1
<PAGE> 2
Consolidated Financial Statistics New Jersey Resources Corporation
(Thousands, except per share data)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SELECTED FINANCIAL DATA
Fiscal years ended September 30, 1996 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------
OPERATING REVENUES $ 548,512 $ 454,593 $ 497,075 $ 446,652 $ 392,041 $ 326,127
-------------------------------------------------------------------------------
OPERATING EXPENSES
Gas purchases 327,991 251,086 286,352 251,856 205,920 168,042
Operation and maintenance 69,488 59,233 64,194 57,509 55,887 55,939
Depreciation and amortization 23,229 23,022 21,236 21,237 19,757 18,132
Gross receipts tax, etc. 49,533 46,017 53,744 52,712 52,607 45,489
Federal income taxes 18,671 15,967 16,569 13,726 11,543 5,189
-------------------------------------------------------------------------------
Total operating expenses 488,912 395,325 442,095 397,040 345,714 292,791
-------------------------------------------------------------------------------
OPERATING INCOME 59,600 59,268 54,980 49,612 46,327 33,336
Other income, net 68 362 30 713 574 (316)
Interest charges, net 21,001 24,082 21,619 20,130 21,499 22,523
-------------------------------------------------------------------------------
INCOME BEFORE PREFERRED STOCK DIVIDENDS 38,667 35,548 33,391 30,195 25,402 10,497
Preferred stock dividends 1,599 1,629 1,662 2,022 2,464 1,012
-------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 37,068 33,919 31,729 28,173 22,938 9,485
Loss from discontinued operations, net -- (9,134) 545 (1,011) (691) (1,091)
Cumulative effect of change in accounting
for income taxes -- -- 721 -- -- --
-------------------------------------------------------------------------------
NET INCOME $ 37,068 $ 24,785 $ 32,995 $ 27,162 $ 22,247 $ 8,394
-------------------------------------------------------------------------------
CAPITALIZATION
Common stock equity $ 273,921 $ 258,919 $ 250,163 $ 230,313 $ 214,703 $ 164,731
Redeemable preferred stock 20,880 21,004 22,070 22,340 32,610 32,880
Long-term debt 303,363 352,227 323,590 310,996 251,955 262,737
-------------------------------------------------------------------------------
TOTAL CAPITALIZATION $ 598,164 $ 632,150 $ 595,823 $ 563,649 $ 499,268 $ 460,348
-------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT
Utility plant $ 811,484 $ 736,434 $ 691,757 $ 637,580 $ 588,908 $ 552,519
Accumulated depreciation (196,354) (182,080) (168,299) (155,618) (141,364) (127,047)
Real estate properties 45,010 49,509 104,309 102,369 99,522 96,832
Accumulated depreciation (4,942) (7,728) (12,602) (10,660) (8,758) (7,577)
Oil and gas properties -- -- 63,224 64,576 57,398 53,423
Accumulated amortization -- -- (38,012) (32,597) (28,478) (24,241)
-------------------------------------------------------------------------------
PROPERTY, PLANT AND EQUIPMENT, NET $ 655,198 $ 596,135 $ 640,377 $ 605,650 $ 567,228 $ 543,909
-------------------------------------------------------------------------------
CAPITAL EXPENDITURES
Utility plant $ 48,216 $ 47,286 $ 54,506 $ 53,420 $ 37,864 $ 43,014
Real estate properties 7,862 5,214 2,619 2,869 4,397 6,321
Equity investments 2,937 5,259 462 296 875 2,469
Oil and gas properties -- 1,250 1,517 9,216 5,333 8,016
-------------------------------------------------------------------------------
TOTAL CAPITAL EXPENDITURES $ 59,015 $ 59,009 $ 59,104 $ 65,801 $ 48,469 $ 59,820
-------------------------------------------------------------------------------
TOTAL ASSETS $ 855,187 $ 826,364 $ 797,347 $ 738,662 $ 668,605 $ 651,861
-------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------
COMMON STOCK DATA
Earnings per share from continuing
operations $ 2.06 $ 1.93 $ 1.86 $ 1.70 $ 1.60 $ .69
Earnings per share $ 2.06 $ 1.41 $ 1.93 $ 1.64 $ 1.55 $ .61
Dividends declared per share $ 1.55 $ 1.52 $ 1.52 $ 1.52 $ 1.52 $ 1.50
Payout ratio* 75% 79% 82% 90% 95% 217%
Market price at year end $ 28.00 $ 25.88 $ 21.13 $ 29.13 $ 22.38 $ 19.75
Dividend yield at year end 5.6% 5.9% 7.2% 5.2% 6.8% 7.7%
Price-earnings ratio 14 18 11 18 14 32
Book value per share $ 15.15 $ 14.55 $ 14.46 $ 13.69 $ 13.18 $ 11.80
Market to book ratio at year end 1.8 1.8 1.5 2.1 1.7 1.7
Shares outstanding at year end 18,084 17,793 17,303 16,820 16,286 13,965
Average shares outstanding 18,030 17,605 17,096 16,607 14,334 13,750
Number of shareowner accounts 19,423 19,896 19,218 19,319 18,521 17,585
-------------------------------------------------------------------------------
RETURN ON AVERAGE EQUITY* 13.4% 12.8% 12.7% 12.2% 12.7% 5.5%
RETURN ON AVERAGE EQUITY 13.4% 9.3% 13.2% 11.7% 12.3% 4.9%
-------------------------------------------------------------------------------
</TABLE>
*Using income from continuing operations
24
<PAGE> 3
Operating Statistics New Jersey Natural Gas Company
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Fiscal years ended September 30, 1996 1995 1994 1993 1992 1991
-------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES (thousands)
Residential $311,081 $282,015 $308,196 $284,638 $263,108 $220,752
Commercial, industrial and other 76,649 76,483 87,958 81,285 73,809 65,048
Firm transportation 13,316 4,864 255 -- -- --
-------------------------------------------------------------------------------------------
Total residential and commercial 401,046 363,362 396,409 365,923 336,917 285,800
Interruptible and agency 7,438 10,869 15,645 21,115 19,470 30,248
-------------------------------------------------------------------------------------------
Total system 408,484 374,231 412,054 387,038 356,387 316,048
Off-system 65,904 52,431 68,267 49,549 26,716 1,744
-------------------------------------------------------------------------------------------
TOTAL OPERATING REVENUES $474,388 $426,662 $480,321 $436,587 $383,103 $317,792
===========================================================================================
Throughput (thousands of therms)
Residential 401,100 339,254 385,144 363,440 347,859 297,106
Commercial, industrial and other 102,518 102,910 119,343 110,468 104,175 90,047
Firm transportation 45,136 16,007 868 -- -- --
-------------------------------------------------------------------------------------------
Total residential and commercial 548,754 458,171 505,355 473,908 452,034 387,153
Interruptible and agency 98,720 124,256 81,683 75,556 69,311 121,903
-------------------------------------------------------------------------------------------
Total system throughput 647,474 582,427 587,038 549,464 521,345 509,056
Off-system and capacity release 615,819 625,984 467,275 209,369 118,198 3,880
-------------------------------------------------------------------------------------------
TOTAL THROUGHPUT 1,263,293 1,208,411 1,054,313 757,833 639,543 512,936
===========================================================================================
CUSTOMERS AT YEAR END
Residential 338,906 329,237 318,003 309,215 300,327 292,551
Commercial, industrial and other 21,897 22,199 21,938 21,112 20,307 19,605
Firm transportation 2,002 880 27 -- -- --
-------------------------------------------------------------------------------------------
Total residential and commercial 362,805 352,316 339,968 330,327 320,634 312,156
Interruptible and agency 40 38 37 36 36 41
Off-system and capacity release 29 23 17 4 4 1
-------------------------------------------------------------------------------------------
TOTAL CUSTOMERS AT YEAR END 362,874 352,377 340,022 330,367 320,674 312,198
===========================================================================================
INTEREST COVERAGE RATIO 3.96 3.45 3.63 3.50 3.23 2.08
===========================================================================================
AVERAGE THERM USE PER CUSTOMER
Residential 1,184 1,031 1,211 1,175 1,158 1,016
Commercial 4,682 4,636 5,287 5,013 4,899 4,245
===========================================================================================
DEGREE DAYS 5,715 4,877 5,064 5,048 4,965 4,208
WEATHER AS A PERCENT OF NORMAL 115% 98% 102% 103% 97% 79%
MAXIMUM DAY SENDOUT (thousands of therms) 4,722 4,527 5,320 4,203 3,971 3,707
NUMBER OF EMPLOYEES 827 827 814 795 771 774
===========================================================================================
</TABLE>
Two-Year Stock History New Jersey Resources Corporation
- -------------------------------------------------------------------------------
The range of high and low sales prices as reported in The Wall Street Journal
and dividends paid per share were as follows.
<TABLE>
<CAPTION>
1996 1995 Dividends Paid
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Fiscal Quarter High Low High Low 1996 1995
FIRST $30 1/2 $24 1/4 $23 $19 3/4 $.38 $.38
SECOND $29 7/8 $26 3/4 $23 3/8 $21 1/2 $.38 $.38
THIRD $29 5/8 $26 5/8 $24 1/8 $21 7/8 $.39 $.38
FOURTH $29 3/8 $26 $25 7/8 $21 7/8 $.39 $.38
====================================================================================
</TABLE>
25
<PAGE> 4
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITIONS AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Consolidated
Net income was $37.1 million in 1996, compared with $24.8 million in 1995 and
$33 million in 1994. As discussed in Note 2 to the Consolidated Financial
Statements--Discontinued Operations, the 1995 results included a loss of $9.1
million, or $.52 per share, associated primarily with exiting the Company's
oil and gas production business. Income from continuing operations was $37.1
million, $33.9 million and $31.7 million in 1996, 1995 and 1994, respectively.
The increase in income from continuing operations each year was primarily the
result of the impact of customer growth and higher margins from emerging
markets of New Jersey Natural Gas Company (NJNG), the principal subsidiary of
New Jersey Resources Corporation (the Company), and the improved results of the
Company's unregulated energy services company, New Jersey Natural Energy
Company (NJNE).
Earnings per share were $2.06 in 1996, $1.41 in 1995 and $1.93 in 1994.
Earnings per share from continuing operations were $2.06, $1.93 and $1.86 in
1996, 1995 and 1994, respectively.
Dividends declared per share were $1.55 in 1996 and $1.52 in 1995 and 1994.
NJNG OPERATIONS
Federal Energy Regulatory Commission Order No. 636 (Order 636), which was
designed to increase competition in the natural gas industry, required
interstate pipeline companies to unbundle their sales and transportation
services. The transition to a more deregulated interstate pipeline market has
provided NJNG the opportunity to purchase and manage its own, specifically
tailored gas supply portfolio, and to resell its pipeline capacity to other
customers during off-peak periods.
The unbundling process is now being brought to the local distribution company
level, whereby NJNG's commercial and industrial customers now have a choice as
to their energy supplier and still use NJNG to transport their gas.
NJNG's financial results are summarized as follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
-----------------------------------------
<S> <C> <C> <C>
Gross margin
Residential and commercial $147,078 $141,245 $146,778
Film transportation 12,573 4,691 250
Interruptible and agency 610 363 1,844
Off-system and capacity
release 4,574 3,974 3,451
-------- -------- --------
Total gross margin $164,835 $150,273 $152,323
======== ======== ========
Operating income before
income taxes $ 71,976 $ 67,211 $ 65,663
-------- -------- --------
Net income $ 35,606 $ 33,703 $ 32,142
======== ======== ========
</TABLE>
Gross Margin
Gross margin, defined as gas revenues less gas costs and gross receipts and
franchise taxes (GRFT), provides a more meaningful basis for evaluating natural
gas distribution operations than gross revenues, since gas costs and GRFT are
passed through to customers and, therefore, have no effect on earnings. Gas
costs are charged to operating expenses on the basis of therm sales at the base
and Levelized Gas Adjustment (LGA) cost rates included in NJNG's tariff. The LGA
clause allows NJNG to recover gas costs that exceed the level reflected in its
base rates. GRFT are also calculated on a per-therm basis and exclude sales to
other utilities and off-system sales.
Residential and Commercial
Since fiscal 1993, NJNG's residential and commercial (i.e., firm) gross margin
has been subject to a Weather-Normalization Clause (WNC) which provides for a
revenue adjustment if the weather varies by more than one-half of one percent
from normal, or 10-year average, weather. The accumulated adjustment from one
heating season (i.e., October-May) is billed or credited to customers in the
subsequent heating season.
Gross margin from sales to firm customers increased by $5.8 million, or 4%, in
1996 due to a 14% increase in firm therm sales and decreased by $5.5 million,
or 4%, in 1995 due to a 14% decrease in firm therm sales.
Therm sales to firm customers were 504 million in 1996, compared with 442
million in 1995 and 504 million in 1994. The increase in therm sales in 1996
was due to 17% colder weather and customer growth. The decrease in therm sales
in 1995 was due to 4% warmer weather and lower average customer usage which
more than offset customer growth. The usage level imbedded in rates is not
protected by the WNC.
The weather in 1996 was 15% colder than normal which, due to the WNC, resulted
in $11.9 million of gross margin being deferred for future credit to customers.
In 1995, warmer-than-normal weather resulted in $1.9 million of gross margin
being accrued for recovery from customers in 1996. In 1994, colder-than-normal
weather resulted in $2.7 million being deferred and credited to customers
in 1995.
NJNG added 10,978 and 12,465 new customers, and converted the heating systems
of another 891 and 923 existing customers in 1996 and 1995, respectively. The
growth in 1996 represents an annual increase of approximately 22 million
therms, or 4%, in sales to firm customers. NJNG remains one of the
fastest-growing natural gas distribution companies in the country, and expects
to maintain a customer growth rate of more than 3% in the future.
- - 26
<PAGE> 5
New Jersey Resources Corporation
In 1997 and 1998, NJNG expects to add 12,000 and 12,500 new customers,
respectively, and convert to natural gas heat an additional 750 existing
customers each year. This would result in a sales increase of approximately 19
million therms per year, assuming normal weather and average use, and would
increase gross margin under present rates by approximately $6 million per year.
Future therm sales will continue to be affected by weather, the economic
conditions in NJNG's service territory, conversion activity and other marketing
efforts, as well as the conservation efforts of NJNG's customers.
Firm Transportation
At September 30, 1996 and 1995, NJNG provided firm transportation service to
2,002 and 880 commercial and industrial customers, respectively. NJNG
transported 45 million therms for its firm customers in 1996, compared with 16
million in 1995. NJNG expects 1,200 more customers to utilize this service in
1997 as the deregulated gas markets continue to develop. NJNG's gross margin
should not be impacted by customers who utilize the firm transportation service
and purchase their gas from another supplier, as its tariffs are designed such
that no profit is earned on the commodity portion of sales to firm customers.
Interruptible and Agency
NJNG services 40 customers through interruptible sales and/or transportation
tariffs and through May 31, 1995 served certain of these customers through
agency sales agreements. Sales made under the interruptible sales tariff are
priced on market-sensitive oil and gas parity rates. Although therms sold and
transported to interruptible customers represented 8% of total therm throughput
in 1996 and 10% in 1995, they accounted for less than 1% of the total gross
margin in each year due primarily to the regulated margin-sharing formulas that
govern these sales. Under these formulas, NJNG retains 5% of the gross margin
from transportation sales and 10% of the gross margin from interruptible sales,
with the balance credited to firm customers through the LGA clause.
Interruptible therm sales were 14 million in 1996, compared with 30 million in
1995 and 42 million in 1994. In addition, NJNG transported $85 million, 94
million and 38 million therms in 1996, 1995 and 1994, respectively, for its
interruptible customers.
In June 1995, the agency sales function was transferred to NJNE. Gross margin
from agency sales agreements totaled $1.4 million in 1994.
Off-System and Capacity Release
In order to reduce the overall cost of its gas supply commitments, NJNG has
entered into contracts to sell gas to customers who are outside of its
franchise territory. These off-system sales enable NJNG to spread its fixed
demand costs, which are charged by pipelines to access their supplies
year-round, over a larger and more diverse customer base. NJNG also
participates in the capacity release market on the interstate pipeline system
when the capacity is not needed for its own system requirements. Effective
January 1994, NJNG retains 20% of the gross margin from these emerging markets.
NJNG's off-system sales totaled 238 million therms and generated $1.6 million of
gross margin in 1996, compared with 246 million therms and $1.6 million of gross
margin in 1995 and 260 million therms and $2.2 million of gross margin in 1994.
The gross margin generated by the capacity release program increased to $3
million in 1996, compared with $2.4 million in 1995 and $1.2 million in 1994.
The increase in 1996 was due primarily to the impact of colder weather on the
value of capacity.
Operating Income before Income Taxes
Operating income before income taxes increased by 7% to $72 million in 1996, as
the increase in gross margin more than offset higher operation and maintenance
expenses associated primarily with the impact of growth and colder weather on
operations. Operating income before income taxes increased by 2% to $67.2
million in 1995, due to lower operation and maintenance expenses resulting
primarily from lower health care and inventory costs, which more than offset
the decrease in firm margin and the transfer of the agency sales function.
Summary
The 6% increase in NJNG's earnings in 1996 reflected continued customer growth
and higher margins from emerging markets. NJNG expects to continue to generate
incremental margins from growth in its core markets and aggressively pursue new
markets to diversify and improve its demand profile while continuing its cost
containment programs, as it remains committed to providing a proper return to
its investors. Also, the continuation of the WNC should reduce the variability
of both customer bills and NJNG's earnings due to weather fluctuations.
NJNE OPERATIONS
NJNE was formed in 1995 to facilitate the unregulated marketing of natural gas
and fuel and capacity management services.
NJNE's financial results are summarized as follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995
--------- ----------
<S> <C> <C>
Revenues .......................... $78,869 $23,711
Operating income before
income taxes ..................... $ 3,633 $ 1,206
Net income ........................ $ 2,329 $ 783
--------- ---------
</TABLE>
NJNE had 1,459 and 808 retail customers at September 30, 1996 and 1995,
respectively. Retail sales increased to 8.9 billion cubic feet (bcf) from 4.6
bcf and gross margin from these sales increased to $3.4 million from $1.7
million in 1996 and 1995, respectively, reflecting this customer growth.
27
<PAGE> 6
New Jersey Resources Corporation
- -------------------------------------------------------------------------------
In August 1995, NJNE entered into a three-year fuel management agreement with
GPU Service Inc. to manage their gas purchases and interstate pipeline
capacity. Total gas under management increased to 28.7 bcf, compared with
6.9 bcf, and gross margin from fuel and capacity management services increased
to $2.6 million from $437,000 in 1996 and 1995, respectively, reflecting
primarily this agreement.
CR&R OPERATIONS
Commercial Realty & Resources Corporation's (CR&R) financial results are
summarized as follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Revenues $ 4,272 $12,770 $12,466
Operating income (loss) before
income taxes $ (323) $ 6,367 $ 5,426
Income (loss) before SFAS 109* $(1,494) $ (67) $ 349
Net income (loss) $(1,494) $ (67) $ 1,009
------- ------- -------
</TABLE>
*Effective in 1994
In November 1995, CR&R sold certain of its real estate assets for $52.65
million in cash. This transaction required the one-time write-off of
unamortized commissions and other costs totaling $1.8 million, which is
reflected in operating income (loss) before income taxes. The transaction also
included the issuance of options to the buyer to purchase adjacent undeveloped
land parcels at various prices.
In December 1995, CR&R sold a 157,000-square foot office building for $31.85
million in a sale-leaseback transaction. CR&R's pre-tax gain on this
transaction was $17.8 million, which is included in Deferred revenue and is
being amortized over 25 years in accordance with generally accepted accounting
principles. The primary tenant of the facility, NJNG, is leasing the building
under a long-term master lease agreement and will continue to occupy a majority
of the space in the building. Prior to the transaction, NJNG leased about 79%
of the building under a long-term lease.
In September 1996, CR&R entered into a contract to sell 11 acres of undeveloped
land for $550,000. This transaction is expected to close in the first quarter
of fiscal 1997 and resulted in a pre-tax loss in 1996 of $560,000.
CR&R's completed space totaled 260,000 square feet at September 30, 1996,
compared with 914,200 square feet in each of the prior two years. The occupancy
rate of CR&R's total portfolio at September 30, 1996 was 100%.
CR&R's earnings before the effect of SFAS 109 (See Note 7) decreased by $416,000
in 1995, as expenses associated with evaluating CR&R's strategic alternatives
more than offset lower interest costs realized from refinancing activity.
NJR ENERGY OPERATIONS
See Note 2 to the Consolidated Financial Statements -- Discontinued Operations
for a discussion of the Company's decision to exit the oil and gas production
business and account for this segment as a discontinued operation. NJR Energy
Corporation's (NJR Energy) continuing operations consist of its equity
investments in the Iroquois Gas Transmission System, L.P. (Iroquois) and the
Market Hub Partners, L.P. (MHP).
NJR Energy's financial results from continuing operations are summarized as
follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Revenues $ 2,207 $ 557 $ 765
Operating income before income taxes $ 2,035 $ 27 $ 99
Net income (loss) $ 555 $(1,185) $ (712)
------- ------ -------
</TABLE>
The higher earnings in 1996 reflect improved results from its investment in
Iroquois and decreased interest expense. All periods include interest expense
related to debt remaining after the sale of its oil and gas reserves as
discussed in Note 2. NJR Energy plans to further reduce such debt from the cash
flow generated by its equity investments. NJR Energy's 1995 results included a
provision of $560,000 related to its investment in Iroquois.
LIQUIDITY AND CAPITAL RESOURCES
Consolidated
The Company meets the common equity requirements of each subsidiary, if any,
through new issuances of its common stock, including the proceeds from its
Automatic Dividend Reinvestment Plan (DRP). In April 1996, the DRP was amended
to allow for the purchase of shares in the open market to satisfy the plan's
needs. Effective July 1, 1996, shares needed for the DRP were purchased on the
open market. The Company can switch funding options every 90 days. During 1996,
the Company raised $5.7 million from its DRP, compared with $10.8 million in
1995 and $12.1 million in 1994. The Company provides the debt requirements for
its unregulated companies, while NJNG satisfies its debt needs by issuing
short-term and long-term debt based upon its own financial profile.
It is the Company's objective to maintain a consolidated capital structure that
reflects the different characteristics of each business segment and provides
adequate financial flexibility for accessing capital markets as required. Based
upon its existing mix of investments, it is the Company's goal to maintain a
common equity ratio in a range of 45% to 50%.
28
<PAGE> 7
New Jersey Resources Corporation
- --------------------------------------------------------------------------------
In order to meet the working capital and external debt financing requirements
of the unregulated companies, as well as its own working capital needs, the
Company maintains committed credit facilities totaling $135 million with a
number of banks and has a $10 million credit facility available on an offering
basis.
At September 30, the Company's consolidated capital structure was as follows:
<TABLE>
<CAPTION>
1996 1995
--------------------
<S> <C> <C>
Common stock equity 46% 41%
Preferred stock 3 3
Long-term debt 51 56
--------------------
Total 100% 100%
</TABLE>
NJNG
The seasonal nature of NJNG's operations creates large short-term cash
requirements, primarily to finance gas purchases and customer accounts
receivable. NJNG obtains working capital for these requirements, as well as for
the temporary financing of construction expenditures, sinking fund needs and
GRFT payments through the issuance of commercial paper and short-term bank
loans. To support the issuance of commercial paper, NJNG maintains committed
credit facilities totaling $65 million with a number of commercial banks and
has an additional $20 million in lines of credit available on an offering
basis.
Capital Requirements
NJNG's capital requirements for 1994 through 1996 and projected amounts through
1998 are as follows:
<TABLE>
<CAPTION>
Maturities and Redemption
Construction redemption of of preferred
(thousands) expenditures long-term debt stock Total
------------------------------------------------------------------
<S> <C> <C> <C> <C>
1994 $ 54,506 $ 14,064 $ 270 $ 68,840
1995 $ 47,286 $ 34,564 $ 1,066 $ 82,916
1996 $ 48,216 $ 7,364 $ 124 $ 55,704
1997 $ 54,200 $ 8,180 $ 120 $ 62,500
1998 $ 50,000 $ 13,500 $ 120 $ 63,620
-------------------------------------------------------------------
</TABLE>
The level of construction expenditures results primarily from the need for
services, mains and meters to support NJNG's continued customer growth, and
general system renewals and improvements. Optional redemption activity included
$6 million of First Mortgage Bonds in 1996, $31 million of First Mortgage Bonds
and $796,000 of preferred stock in 1995 and $10.5 million of First Mortgage
Bonds in 1994. Based on current market conditions, NJNG expects to optionally
redeem the remaining $8.2 million balance of its 8.5% Series P Bonds in 1997
and $13.5 million of its 9% Series Q Bonds in 1998.
<TABLE>
<CAPTION>
Financing
(Thousands) 1996 1995 1994
---------------------------------
<S> <C> <C> <C>
Cash flow $ 66,955 $ 59,778 $ 65,619
External financing
Common stock $ 5,037 $ 9,619 $ 10,887
Long-term debt $ 26,000 $ 53,500 $ 44,500
---------------------------------
</TABLE>
Cash flow, defined as net income adjusted for depreciation, amortization of
deferred charges and the change in deferred income taxes, represents the cash
generated from operations available for capital expenditures, dividends,
working capital and other requirements. Cash flow increased by 12% in 1996 due
primarily to higher earnings and higher deferred tax benefits. Cash flow
decreased by 9% in 1995 due to the reversal of certain deferred tax benefits,
which more than offset higher earnings.
NJNG's external financing requirements in 1997 and 1998 are expected to average
about $33 million annually and are expected to be met through additional
issuances of short-term and long-term debt. The timing and mix of these
issuances will be geared toward maintaining a common equity ratio in a range of
50% to 55%, which is consistent with maintaining NJNG's current short-term and
long-term credit ratings and providing access to external capital.
NJNE
NJNE's financing requirements, if any, are met by the Company's committed
credit facilities. NJNE generated cash flow of $2.6 million and $431,000 in
1996 and 1995, respectively, and as of September 30, 1996 had not made any
significant capital investments. Accordingly, NJNE did not require any external
financing as of September 30, 1996.
CR&R
CR&R's capital requirements and financing activity for 1994 through 1996 were as
follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
---------------------------------
<S> <C> <C> <C>
Capital expenditures $ 7,862 $ 5,214 $ 2,619
Cash flow $ (11,490) $ 2,611 $ 3,987
External financing
Long-term debt $(58,379) $ 2,302 $ (1,734)
---------------------------------
</TABLE>
Proceeds from asset sales in 1996 totaled $84.5 million, which, net of related
taxes and expenses, were used by the Company to reduce debt. CR&R's negative
cash flow in 1996 reflects the decrease in deferred taxes related to these
sales.
CR&R's future capital expenditures will be limited to the fit-up of existing
tenant space, the development of existing acreage and additional investments, as
approved by the Board of Directors, made for the purpose of preserving the
value of particular real estate holdings.
29
<PAGE> 8
Under these parameters, in 1994 the Board of Directors approved the construction
of a 76,300 square foot flex building on 10 acres of land in its Monmouth Shores
Corporate Park (MSCP) which was completed in 1996 and is 100% occupied. The
total project cost was $6.8 million. CR&R is also constructing a 98,000 square
foot addition to an existing building at a cost of approximately $5.4 million.
This additional space has been pre-leased and is expected to be completed in
January 1997. CR&R currently has 193 acres of undeveloped land.
External financing activity in 1994 included the refinancing of CR&R's 11 5/8%,
$13.8 million mortgage. Funds for this refinancing were obtained from the
Company's bank credit facilities.
Capital expenditures are projected to be $1.2 million in 1997 in connection with
the completion of the above-mentioned addition. Such expenditures are expected
to be funded through internal generation and the Company's committed credit
facilities.
NJR ENERGY
NJR Energy's capital requirements and financing activity for 1994 through 1996
were as follows:
(Thousands) 1996 1995 1994
---------------------------
Capital expenditures and
equity investments........... $ 2,937 $6,509 $1,979
Cash flow....................... $ (1,174) $4,875 $4,783
External financing
Common stock................. $ 600 $1,200 $1,200
Long-term debt............... $(16,073) $ (582) $(5,179)
----------------------------
Proceeds from the sale of NJR Energy's oil and gas reserves totaled $19.6
million in 1996, which, net of related taxes and expenses, were used by the
Company to reduce debt. NJR Energy's negative cash flow in 1996 reflects the
decrease in deferred taxes related to these sales.
NJR Energy formed NJR Storage Corporation (Storage) in December 1994 to
participate in MHP, which is expected to develop, own and operate a system of
five natural gas market centers with high-deliverability salt cavern storage
facilities. The market centers are expected to be strategically located in
Texas, Louisiana, Mississippi, Michigan and Pennsylvania. As of September 30,
1996, Storage's 5.67% equity investment in MHI totaled $8 million.
Effects of Inflation
Under the ratemaking process, the recovery of utility plant costs through
depreciation and the allowed return on plant investment are limited to levels
based upon the historical cost of utility plant, which is significantly less
than current replacement costs. The Company believes, based on past practices,
that NJNG will be allowed to earn on the increased cost of its investment when
replacement of the facilities is included in rate base. The Company's other
operations have not been significantly affected by inflation.
New Accounting Standards
See Note 1 to the Consolidated Financial Statements for a discussion of new
accounting standards.
Summary
The Company is confident that it will have adequate cash flow and proper access
to both the short-term and long-term capital needed to meet the projected
capital and dividend requirements of each subsidiary. The Company and NJNG will
also explore various alternatives to take advantage of favorable interest rates
and its share repurchase program to reduce their overall cost of capital. In
addition, NJNG is committed to providing quality service to its customers and a
fair return to the Company's shareowners, without the need for base rate
increases. The Company will continue to take steps to align its asset base with
its new strategic direction, which is focused on its core natural gas
distribution, emerging markets, retail marketing and wholesale energy
businesses.
Certain matters discussed in this annual report are "forward-looking statements"
intended to qualify for safe harbors from liability established by the Private
Securities Litigation Reform Act of 1995. Such statements address future plans,
objectives, expectations and events concerning various matters such as capital
expenditures, earnings, litigation, rate and other regulatory matters, liquidity
and capital resources, and accounting matters. Actual results in each case could
differ materially from those currently anticipated in such statements, by reason
of factors such as gas industry restructuring, including ongoing state and
federal activities, future economic conditions, legislation, regulation,
competition, and other circumstances affecting anticipated rates, revenues and
costs.
30
<PAGE> 9
Financial Statement Responsibility New Jersey Resources Corporation
- --------------------------------------------------------------------------------
The management of New Jersey Resources Corporation and its subsidiaries is
responsible for the integrity and objectivity of the financial statements and
related disclosures of the Company. These statements and disclosures have been
prepared using management's best judgment and are in conformity with generally
accepted accounting principles applied on a consistent basis. The financial
statements have been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report.
To meet its responsibilities with respect to financial information, management
maintains and enforces a system of financial accounting controls, which is
designed to give reasonable assurance as to the reliability of the financial
records and the protection of assets. This system is augmented by written
policies and procedures, an organizational structure that provides for
appropriate division of responsibility and careful selection and training of
personnel.
This system is also tested by the Company's Internal Audit Department.
Management believes the system is effective and provides reasonable assurance
that all transactions are properly recorded.
In addition, the Company has a Code of Conduct that requires all employees to
maintain the highest level of ethical standards and requires key management
personnel to formally declare their compliance with the Code annually.
The Board of Directors, through its Audit Committee, which is currently composed
of eight outside directors, oversees management's responsibilities for
accounting, internal controls and financial reporting. The Audit Committee meets
periodically with management, the internal auditors and independent auditors to
discuss auditing and financial matters and to assure that each is carrying out
its responsibilities. Both the internal and independent auditors have access to
the Audit Committee at any time.
Independent Auditors' Report [Deloitte & Touche LLP Logo]
- --------------------------------------------------------------------------------
To the Shareowners and Board of Directors of New Jersey Resources Corporation:
We have audited the accompanying consolidated balance sheets and consolidated
statements of capitalization of New Jersey Resources Corporation and its
subsidiaries as of September 30, 1996 and 1995 and the related consolidated
statements of income, common stock equity and cash flows for each of the three
years in the period ended September 30, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of the companies at September 30, 1996
and 1995 and the results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996 in conformity with
generally accepted accounting principles.
We have also previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheets and consolidated statements of
capitalization as of September 30, 1994, 1993, 1992, and 1991, and the related
consolidated statements of income, common stock equity and cash flows for the
years ended September 30, 1993, 1992 and 1991 (none of which are presented
herein) and we expressed unqualified opinions on those consolidated financial
statements. In our opinion, the information set forth in the Selected Financial
Data for each of the six years in the period ended September 30, 1996 for the
Company, presented on page 24, is fairly stated on all material respects, in
relation to the consolidated financial statements from which it has been
derived.
/s/ Deloitte & Touche LLP
Parsippany, New Jersey
October 28, 1996
31
<PAGE> 10
sConsolidated Statements of Income New Jersey Resources Corporation
(Thousands, except per share data)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal years ended September 30, 1996 1995 1994
------------------------------------------
OPERATING REVENUES $548,512 $454,593 $497,075
OPERATING EXPENSES ------------------------------------------
Gas purchases 327,991 251,086 286,352
Operation and maintenance 69,488 59,233 64,194
Depreciation and amortization 23,229 23,022 21,236
Gross receipts tax, etc. 49,533 46,017 53,744
Federal income taxes 18,671 15,967 16,569
------------------------------------------
Total operating expenses 488,912 395,325 442,095
------------------------------------------
OPERATING INCOME 59,600 59,268 54,980
------------------------------------------
OTHER INCOME, NET 68 362 30
------------------------------------------
INTEREST CHARGES, NET
Long-term debt 20,123 22,630 20,413
Short-term debt and other 878 1,452 1,206
------------------------------------------
Total interest charges, net 21,001 24,082 21,619
------------------------------------------
INCOME BEFORE PREFERRED STOCK DIVIDENDS 38,667 35,548 33,391
Preferred stock dividends 1,599 1,629 1,662
------------------------------------------
INCOME FROM CONTINUING OPERATIONS 37,068 33,919 31,729
Discontinued Operations
Loss from operations, net -- (439) 545
Loss from disposal, less income
tax benefits of $4,681 -- (8,695) --
Cumulative effect of change in accounting
for income taxes -- -- 721
------------------------------------------
NET INCOME $ 37,068 $ 24,785 $ 32,995
==========================================
EARNINGS PER COMMON SHARE FROM
CONTINUING OPERATIONS $ 2.06 $ 1.93 $ 1.86
Loss from discontinued operations -- (.52) .03
Cumulative effect of change in accounting
for income taxes -- -- .04
-----------------------------------------
EARNINGS PER COMMON SHARE $ 2.06 $ 1.41 $ 1.93
=========================================
DIVIDENDS PER COMMON SHARE $ 1.55 $ 1.52 $ 1.52
=========================================
AVERAGE SHARES OUTSTANDING 18,030 17,605 17,096
=========================================
</TABLE>
Consolidated Statements of Common Stock Equity
(Thousands)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Number of Common Premium on Treasury Stock Retained
Shares Stock Common Stock and Other Earnings
---------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1993 16,820 $ 42,050 $182,996 $ (750) $ 6,017
Net income 32,995
Common stock issued under
stock plans 483 1,206 10,918
Cash dividends declared (26,019)
Reduction of ESOP term loan
and other 750
--------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1994 17,303 43,256 193,914 -- 12,993
Net income 24,785
Common stock issued under
stock plans 490 1,225 9,585
Cash dividends declared (26,790)
Unearned compensation (49)
--------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1995 17,793 44,481 203,499 (49) 10,988
Net income 37,068
Common stock issued under
stock plans 325 814 6,017
Cash dividends declared (27,969)
Treasury stock and other (34) (928)
-------------------------------------------------------------------
BALANCE AT SEPTEMBER 30, 1996 18,084 $ 45,295 $209,516 $ (977) $ 20,087
===================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
32
<PAGE> 11
Consolidated Statements
of Cash Flows
(Thousands) New Jersey Resources Corporation
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Fiscal years ended September 30, 1996 1995 1994
-------------------------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 37,068 $ 24,785 $ 32,995
Adjustments to reconcile net income
to cash flows
Depreciation and amortization 23,229 27,280 27,595
Amortization of deferred charges 3,385 2,022 2,701
Deferred income taxes (7,211) 6,523 14,075
Loss from disposal of discontinued
operations -- 8,695 --
Cumulative effect of change in
accounting for income taxes -- -- (721)
Changes in working capital 3,232 9,458 (30,711)
Other, net (1,924) (480) (4,494)
--------------------------------
Net cash flows from operating activities 57,779 78,283 41,440
--------------------------------
CASH FLOWS (USED IN) FROM FINANCING
ACTIVITIES
Proceeds from long-term debt 20,000 67,000 50,250
Proceeds from common stock 6,868 10,819 12,087
Payments of long-term debt (81,564) (35,238) (28,580)
Payments of preferred stock (124) (1,066) (270)
Payments of common stock dividends (27,663) (26,605) (25,836)
Net change in short-term debt (1,400) (30,600) (12,100)
--------------------------------
Net cash flows (used in) from financing
activities (83,883) (15,690) 19,751
--------------------------------
CASH FLOWS FROM (USED IN) INVESTING
ACTIVITIES
Expenditures for
Utility plant (48,216) (47,286) (54,506)
Real estate properties (7,862) (5,214) (2,619)
Equity investments (2,937) (5,259) (462)
Oil and gas properties -- (1,250) (1,517)
Cost of removal (3,757) (4,470) (4,875)
Proceeds from sale of assets 98,619 -- 3,184
-------------------------------
Net cash flows from (used in) investing
activities 35,847 (63,479) (60,795)
-------------------------------
Net change in cash and temporary
investments 9,743 (886) 396
Cash and temporary investments at
beginning of the year 1,065 1,951 1,555
-------------------------------
Cash and temporary investments at end
of the year $10,808 $ 1,065 $ 1,951
===============================
CHANGES IN COMPONENTS OF WORKING CAPITAL
Construction Fund $ 6,000 $(12,500) $ --
Receivables (4,805) (1,486) (4,055)
Inventories (11,630) 5,480 3,747
Deferred gas costs (3,380) 12,353 (6,560)
Purchased gas 2,402 14,154 (9,865)
Accrued and prepaid taxes, net (734) (4,895) (19,193)
Customers' credit balances
and deposits 7,805 1,560 2,841
Other, net 7,574 (5,208) 2,374
-------------------------------
Total $ 3,232 $ 9,458 $(30,711)
===============================
SUPPLEMENTAL DISCLOSURES OF CASH
FLOWS INFORMATION
Cash paid during the year for
Interest (net of amount capitalized) $18,198 $ 23,067 $ 19,455
Income taxes $24,781 $ 8,426 $ 6,734
Non-cash investing and financing
activities
Capital lease $31,850 -- --
===============================
The accompanying notes are an integral part of these statements.
</TABLE>
33
<PAGE> 12
Consolidated Balance Sheets New Jersey Resources Corporation
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
(Thousands)
September 30, 1996 1995
---------- ----------
<S> <C> <C>
ASSETS
PROPERTY, PLANT AND EQUIPMENT
Utility plant at cost $ 811,484 $ 736,434
Real estate properties, at cost 45,010 49,509
-------------------------
856,494 785,943
Accumulated depreciation and amortization (201,296) (189,808)
-------------------------
Property, plant and equipment, net 655,198 596,135
-------------------------
CURRENT ASSETS
Cash and temporary investments 10,808 1,065
Construction fund 6,500 12,500
Customer accounts receivable 27,900 23,598
Unbilled revenues 6,884 6,366
Allowance for doubtful accounts (878) (422)
Gas in storage, at average cost 39,484 26,703
Materials and supplies, at average cost 7,292 8,443
Prepaid state taxes 16,297 18,041
Deferred gas costs 20,478 17,098
Assets held for sale, net -- 66,997
Other 5,197 5,512
-------------------------
Total current assets 139,962 185,901
-------------------------
DEFERRED CHARGES AND OTHER
Equity investments 13,924 10,709
Regulatory assets 37,150 22,934
Other 8,953 10,685
-------------------------
Total deferred charges and other 60,027 44,328
-------------------------
TOTAL ASSETS $ 855,187 $ 826,364
=========================
CAPITALIZATION AND LIABILITIES
CAPITALIZATION
Common stock equity $ 273,921 $ 258,919
Redeemable preferred stock 20,880 21,004
Long-term debt 303,363 352,227
-------------------------
Total capitalization 598,164 632,150
-------------------------
CURRENT LIABILITIES
Current maturities of long-term debt 1,501 2,364
Short-term debt 35,000 16,400
Purchased gas 33,638 31,236
Accounts payable and other 32,183 24,924
Dividends payable 7,066 6,761
Accrued taxes 6,032 8,510
Customers' credit balances and deposits 23,845 16,040
-------------------------
Total current liabilities 139,265 106,235
-------------------------
DEFERRED CREDITS
Deferred income taxes 52,010 51,851
Deferred investment tax credits 11,280 11,628
Deferred revenue 21,816 3,300
Other 32,652 21,200
-------------------------
Total deferred credits 117,758 87,979
-------------------------
COMMITMENTS AND CONTINGENCIES (NOTE 11)
TOTAL CAPITALIZATION AND LIABILITIES $ 855,187 $ 826,364
=========================
</TABLE>
The accompanying notes are an integral part of these statements.
34
<PAGE> 13
Consolidated Statements
of Capitalization New Jersey Resources Corporation
(Thousands)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
September 30, 1996 1995
-------- --------
<S> <C> <C>
COMMON STOCK EQUITY
Common stock, $2.50 par value, authorized 50,000,000 shares;
issued shares 1996, 18,117,562; 1995, 17,792,517 $ 45,295 $ 44,481
Premium on common stock 209,516 203,499
Treasury stock at cost and other; 1996, 33,400 shares (977) (49)
Retained earnings 20,087 10,988
-------- --------
Total common stock equity 273,921 258,919
-------- --------
REDEEMABLE PREFERRED STOCK
New Jersey Natural Gas Company
$100 par value, cumulative; authorized shares
1996, 518,800; 1995, 520,045, outstanding shares
4-3/4% series - 1995, 45 -- 4
5.65% series - 1996, 8,800; 1995, 10,000 880 1,000
7.72% series - 1996 and 1995, 200,000 20,000 20,000
-------- --------
Total redeemable preferred stock 20,880 21,004
-------- --------
</TABLE>
LONG-TERM DEBT
<TABLE>
<CAPTION>
New Jersey Natural Gas Company
First mortgage bonds Maturity Date
- ------------------------------ -------------
<S> <C> <C> <C> <C>
10% Series N May 1, 2001 -- 5,000
8.5% Series P March 1, 2002 6,818 8,182
9% Series Q December 1, 2017 13,500 13,500
10.10% Series S June 1, 2009 20,000 20,000
7.05% Series T March 1, 2016 9,545 9,545
7.25% Series U March 1, 2021 15,000 15,000
7.50% Series V December 1, 2002 25,000 25,000
5-3/8% Series W August 1, 2023 10,300 10,300
6.27% Series X November 1, 2009 30,000 30,000
6.25% Series Y August 1, 2024 10,500 10,500
8.25% Series Z October 1, 2004 25,000 25,000
Variable Series AA August 1, 2030 25,000 25,000
Variable Series BB August 1, 2030 16,000 16,000
6.88% Series CC October 1, 2010 20,000 --
Capital lease obligation 31,700 --
Short-term debt refinanced -- 20,000
-------- --------
Total 258,363 233,027
-------- --------
New Jersey Resources Corporation
Revolving credit agreements,
at floating rates October 1, 1997 - January 1, 1999 45,000 119,200
-------- --------
Total long-term debt 303,363 352,227
-------- --------
TOTAL CAPITALIZATION $598,164 $632,150
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
35
<PAGE> 14
Notes to Consolidated
Financial Statements New Jersey Resources Corporation
- ------------------------------------------------------------------------------
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of the Business
New Jersey Resources Corporation (the Company) is an energy services
holding company providing retail and wholesale natural gas and related energy
services to customers in 17 states from Texas to New York. Its principal
subsidiary, New Jersey Natural Gas Company (NJNG), provides regulated natural
gas energy services and other energy-related services in central and northern
New Jersey and participates in capacity release and off-system sales programs.
Other subsidiaries include: New Jersey Natural Energy Company (NJNE), an
unregulated marketer of natural gas and fuel and capacity management services,
Commercial Realty and Resources Corp. (CR&R), a commercial office real estate
developer, and NJR Energy Corporation (NJR Energy), an investor in
energy-related ventures.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and
its subsidiaries. Significant intercompany accounts and transactions have been
eliminated.
Regulatory Accounting
NJNG maintains its accounts in accordance with the Uniform System of Accounts as
prescribed by the New Jersey Board of Public Utilities (the BPU). As a result of
the ratemaking process, the accounting principles applied by NJNG differ in
certain respects from those applied by unregulated businesses.
Utility Plant and Depreciation
Depreciation is computed on a straight-line basis for financial statement
purposes, using rates based on the estimated average lives of the various
classes of depreciable property. The composite rate of depreciation was 3.12% of
average depreciable property in 1996, 3.05% in 1995 and 3% in 1994. When
depreciable properties are retired, the original cost thereof, plus cost of
removal less salvage, is charged to accumulated depreciation.
Utility Revenues
Customers are billed through monthly cycle billings on the basis of one month's
actual or estimated usage. Revenues are based upon service rendered.
Gas Purchases
NJNG's tariff includes a Levelized Gas Adjustment (LGA) clause, which is
normally revised on an annual basis. Under this clause, NJNG projects its cost
of gas, net of supplier refunds and credits from non-firm sales and
transportation activities, over the subsequent 12 months and recovers the
excess, if any, of such projected costs over those included in its base rates
through monthly levelized charges to customers. Any under- or over-recoveries
are deferred and reflected in the LGA clause in the subsequent year.
Gross Receipts Tax, Etc.
Gross receipts tax, etc. consists principally of New Jersey gross receipts and
franchise taxes (GRFT), which are eventually paid to the municipalities in which
NJNG has utility plant facilities, and a surtax paid to the state. These taxes
are calculated on a per-therm basis and are paid in lieu of personal property
and state income taxes. Such amounts represent approximately 90% of the Gross
receipts tax, etc. figures.
Federal Income Taxes
Through September 30, 1993, deferred federal income taxes were provided for
timing differences between book and taxable income, except that NJNG provided
such taxes only to the extent permitted for ratemaking purposes. Effective
October 1, 1993, deferred federal income taxes are calculated in conformance
with Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes" (SFAS 109) (See Note 7: Federal Income Taxes).
Investment tax credits have been deferred and are being amortized as a reduction
to the tax provision over the average lives of the related property.
Capitalized Interest
The Company's capitalized interest totaled $1.4 million in 1996 and $2.6 million
in 1995 and 1994.
Financial Instruments and Risk Management
Gains and losses related to qualifying hedges of firm commitments or anticipated
transactions are deferred and recognized in income or as adjustments of carrying
amounts when the hedged transaction occurs (See Note 10: Financial Instruments
and Risk Management).
Regulatory Assets
Regulatory Assets at September 30, 1996 and 1995 consist of the following items
that are being amortized through rates over remaining time periods ranging from
1 to 7 years, except for $28.3 million of projected remediation costs, without
any return on the unamortized balances.
(Thousands) 1996 1995
-------------------
Remediation costs (Note 11)....... $34,342 $19,632
Postretirement costs (Note 9)..... 2,235 1,474
Other............................. 573 1,828
-------------------
Total............................. $37,150 $22,934
===================
Included in Other Deferred Credits are the following items:
(Thousands) 1996 1995
-------------------
Remediation costs (Note 11)....... $28,300 $14,000
Postretirement costs (Note 9)..... 2,302 1,594
-------------------
Total.............................. $30,602 $15,594
===================
36
<PAGE> 15
New Jersey Resources Corporation
- --------------------------------------------------------------------------------
Statements of Cash Flows
For purposes of reporting cash flows, all temporary investments with maturities
of three months or less are considered cash equivalents.
New Accounting Standards
In 1995, the Financial Accounting Standards Board (FASB) issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
Be Disposed Of" (SFAS 121), which requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. In performing this review an
undiscounted operating cash flow before interest test is used and any resulting
impairment required would be measured based on the fair value of the asset. The
Company is evaluating the requirements of SFAS 121 which must be adopted by
fiscal 1997 and currently believes that it will not have a material impact on
its consolidated financial condition or results of operations.
In 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based Compensation"
(SFAS 125), which established accounting and disclosure requirements using a
fair value-based method of accounting for stock-based employee compensation
plans. Under SFAS 123 the Company may either adopt the new fair value-based
accounting method or continue the intrinsic value-based method established in
Accounting Principles Board Opinion No. 25 and provide pro forma disclosures of
net income and earnings per share as if the accounting provisions of SFAS 123
had been adopted. The Company plans to adopt only the disclosure requirements of
SFAS 123, which must be adopted by fiscal 1997. Therefore, such adoption will
have no effect on the Company's consolidated financial condition or results of
operations.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
reporting.
Use of Estimates
The consolidated financial statements of the Company include estimates and
assumptions of certain assets, liabilities, revenues and expenses and the
disclosure of certain contingent assets and liabilities. Actual future results
may differ from such estimates.
2. DISCONTINUED OPERATIONS
In 1995, the Company adopted a plan to exit the oil and natural gas production
business and pursue the sale of the reserves and related assets of its
affiliates, NJR Energy and New Jersey National Resources Company. The Company
accounted for this segment as a discontinued operation and recorded a loss from
the disposal of $9.1 million, or $.52 per share. This charge was based on losses
during the year prior to discontinued operations status, estimates of the
anticipated loss from operations until the assets were sold, the estimated loss
on the sale of the remaining reserves, and other costs related in the closing of
its offices in Dallas and Tulsa. The Company completed the sale of its oil and
gas properties in 1996 for $19.6 million and used the proceeds to reduce
outstanding debt. Based upon the results of the asset sales and costs incurred
to date, the Company currently estimates that the reserve established in 1995
for the discontinued operations is adequate.
In 1995, the Company announced that its efforts in the wholesale electric power
generation market would be focused on gas sales and fuel management services,
rather than seeking long-term investments in gas-fired generating facilities.
Accordingly, the Company accounted for its subsidiary in this business as
discontinued operation.
The 1994 results from discontinued operations included an after-tax gain of $2.1
million from the termination of a power purchase agreement, partially offset by
losses from the oil and gas operations.
3. COMMON STOCK
At September 30, 1996, there were 2,077,264 shares reserved for issuance under
the Company's Automatic Dividend Reinvestment, Employee Stock Ownership and
Retirement Savings Plan.
A total of 750,000 shares are reserved for issuance to key employees under the
Executive Long-Term Incentive Compensation Plan (the Plan) at the discretion of
the Board of Directors. At September 30, 1996, there were 483,786 shares
reserved for issuance or grant under the plan. All options granted under the
Plan have been non-qualified stock options, allow for the purchase of common
stock at prices equal to the average market value for the 20 trading days
preceding the date of grant, vest over four years and must be exercised within
10 years.
A total of 175,000 shares are reserved for issuance to outside directors under
the Restricted Stock and Stock Option Program for Outside Directors (the
Program). Under the Program, each Director received an award of 200 shares of
restricted stock which vests evenly over four years. Each director was also
granted 5,000 options and will receive an annual grant of 1,000 options. In
1996, a total of 600 shares were issued and 150 shares were forfeited. At
September 30, 1996, there were 85,950 shares reserved for issuance or grant
under the Program. All options granted under the Program allow for purchase of
common stock at prices equal to the closing price on the date of grant, vest
over five years and must be exercised within 10 years.
37
<PAGE> 16
New Jersey Resources Corporation
********************************************************************************
The following table summarizes the stock option activity for the past three
years:
<TABLE>
<CAPTION>
(Thousands) Shares Price Range
----------------------------
<S> <C> <C>
Outstanding at
September 30, 1993 90,936 $ 19.01 - $ 22.25
Granted 57,222 26.00
Exercised (1,220) 22.25
Forfeited (8,449) 22.25 - 26.00
-----------------------------
Outstanding at
September 30, 1994 138,489 19.01 - 26.00
Granted 139,672 22.875 - 24.375
Forfeited (68,094) 19.01 - 26.00
-----------------------------
Outstanding at
September 30, 1995 210,067 19.01 - 26.00
Granted 148,750 27.75 - 29.00
Exercised (54,027) 19.01 - 26.00
Forfeited (33,994) 22.25 - 27.75
-----------------------------
Outstanding at
September 30, 1996 270,796 $ 22.25 - $ 29.00
=============================
Exercisable at
September 30, 1996 43,969 $ 22.25 - $ 26.00
=============================
</TABLE>
In September 1996, the Board of Directors authorized the repurchase of up to
one million of the Company's common shares and the Company repurchased 33,400
shares of its common stock at a cost of $933,000.
4. REDEEMABLE PREFERRED STOCK
Under the terms of its preferred stock agreements, NJNG purchases 1,200 shares
of the 5.65% series annually at par plus accumulated dividends. The series is
redeemable at NJNG's option for $102 per share plus accumulated dividends at
any time. In 1996 and 1995, NJNG redeemed a total of 45 and 9,455 shares,
respectively, of the 4 3/4% series. The 7.72% series is subject to mandatory
redemption in 2001 at par and optional redemption from 1998 to 2000 at prices
declining from $101.72 to $100 per share plus accumulated dividends.
Preferred stockholders are entitled to one vote per share on all NJNG matters
and have priority as to dividends. The agreements prohibit the distribution
of common stock dividends unless NJNG is in compliance with all their
provisions. In addition, whenever preferred dividends are in arrears in an
amount equal to four quarterly dividends, preferred stockholders may elect a
number of directors necessary to constitute one less than a majority of NJNG's
Board of Directors, until such dividends are paid in full.
The Company has 400,000 shares of authorized and unissued $100 par value
preferred stock. The Company has created and reserved for issuance 50,000
shares of Series A Junior Participating Cumulative Preferred Stock (Series A
Stock) in connection with the adoption of the Company's shareholder rights plan.
On July 31, 1996, the Board of Directors adopted a shareholder rights plan that
provides for the distribution of one right for each share of common stock
outstanding on August 15, 1996. Each right entitles its holder to purchase
1/1000 of one share of the Series A Stock at an exercise price of $55.
The rights plan provides that after a person or group acquires 10% or more of
the Company's common stock, each of the rights, except for the holder of the
10%, becomes the right to acquire shares of the Company's common stock having a
market value equal to twice the exercise price. If a person or group acquires
at least 10%, but less than 50%, the Board of Directors may exchange each right
for one share of the Company's common stock. The rights may be redeemed for
$.01 per right at any time prior to the first public announcement or
communication to the Company that a person or group has crossed the 10%
threshold.
5. LONG-TERM DEBT, DIVIDENDS AND RETAINED EARNINGS RESTRICTIONS
Annual redemption requirements for the next five years are as follows: 1997,
$1.5 million; 1998, $21.4 million; 1999, $28.2 million; 2000 and 2001, $3.2
million.
NJNG's mortgage secures its first mortgage bonds and represents a lien on
substantially all its property, including gas supply contracts. Certain
indentures supplemental to the mortgage include restrictions as to cash
dividends and other distributions on NJNG's common stock, which restrictions
apply so long as certain series of first mortgage bonds are outstanding. Under
the most restrictive provision, approximately $35.5 million of NJNG's retained
earnings was available at September 30, 1996.
In October 1993, NJNG received approval from the BPU to issue up to $75 million
under a Medium-Term Note (MTN) Program. In October 1995, NJNG issued $20
million of its 6 7/8% Series CC First Mortgage Bonds due 2010 under the MTN
Program and used the proceeds to reduce its outstanding short-term debt.
Accordingly, at September 30, 1995, $20 million of short-term debt was
reclassified as long-term debt for financial reporting purposes.
In August 1995, NJNG entered into a loan agreement with the New Jersey Economic
Development Authority (the Authority) under which the Authority loaned to NJNG
the proceeds from the Authority's $16 million Natural Gas Facilities Revenue
Bonds, Series 1995B (the EDA Bonds). The rates of interest on the EDA Bonds are
variable, currently set at a daily mode, and may be changed from time to time
by NJNG to daily, weekly, flexible or long-term interest rate modes, not to
exceed 12% per annum, and mature on August 1, 2030. To provide initial
liquidity support for the mandatory and optional tender provisions of the EDA
Bonds, NJNG also entered into a standby bond purchase agreement with a bank. To
secure its loan from the Authority, NJNG issued $3.5 million of its First
Mortgage Bonds, Adjustable Rate Series BB (Series BB Bonds), with interest
rates and maturity dates similar to those of the EDA Bonds.
- -38
<PAGE> 17
New Jersey Resources Corporation
- -------------------------------------------------------------------------------
The remaining proceeds from the EDA Bonds were deposited into a project
construction fund with the indenture trustee for the EDA Bonds. NJNG may obtain
such funds in reimbursement of its qualified expenditures relating to the
project upon delivering an equivalent amount of its Series BB Bonds to the
indenture trustee. In August 1996, NJNG issued an additional $6 million of its
Series BB Bonds and received the proceeds from the construction fund. The $9.5
million of outstanding Series BB Bonds, together with the remaining $6.5
million of proceeds from the EDA Bonds in the project construction fund, are
held as security for the EDA Bonds.
In August 1996, NJNG redeemed the outstanding $6 million balance of its 10%
Series N First Mortgage Bonds due 2001.
In December 1995, the BPU approved NJNG's petition to enter into a master lease
agreement for its headquarters building for a 25.5 year term that ends in 2021,
with two five-year renewal options. The present value of the agreement's
minimum lease payments totaled $31.7 million at September 30, 1996, and is
reflected as both a capital lease and a capital lease obligation, which are
included in Utility Plant and Long-Term Debt, respectively, in the Consolidated
Balance Sheets at September 30, 1996. In accordance with its ratemaking
treatment, NJNG records rent expense as if the lease was an operating lease.
Minimum annual lease payments are $2.3 million in 1997 through 1999, $2.4
million in 2000 and $2.6 million in 2001, with $63.3 million over the remaining
term of the lease. Approximately 21% of the building, representing
approximately $100,000 of minimum annual lease payments through 1999, is
presently subleased to other tenants.
The Company has six committed revolving credit agreements totaling $135 million
which provide for bank loans at negotiable rates at or below the prime rate. At
September 30, 1996, a total of $45 million was outstanding under these
agreements, of which $20 million matures in 1998 and $25 million matures in
1999.
The Company had two interest rate swap agreements, having an aggregate notional
amount of $45 million, to eliminate the impact of changes in interest rates on
a portion of its floating rate long-term debt. The agreements effectively fixed
the Company's interest rate on $15 million of its floating rate revolving
credit facilities at 9.5% through 1999 and on $30 million of its floating rate
debt at 9% through 1996. In April 1996, the Company terminated its $30 million
swap agreement at a cost of $548,000, which is being amortized over the
original term of the swap agreement. In the event of nonperformance by the
counterparty, the Company's interest cost on the $15 million of long-term debt
would revert to a floating rate based on a three- or six-month LIBOR. However,
the Company does not anticipate nonperformance by the counterparty.
The Company's remaining long-term debt outstanding under revolving credit
agreements at September 30, 1996 and 1995 totaled $30 million and $74.2
million, with a weighted average interest rate of 5.7% and 6.3%, respectively.
6. SHORT-TERM DEBT AND CREDIT FACILITIES
Committed credit facilities of NJNG support the issuance of commercial paper
and provide for bank loans at negotiable rates at or below the prime rate.
These credit facilities total $65 million and require commitment fees on the
unused amounts. In addition, the Company has $10 million and NJNG has $20
million in lines of credit that are available on an offering basis without
payment of a commitment fee. A comparison of pertinent data follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
------- ------ -------
<S> <C> <C> <C>
Bank credit facilities $65,000 $65,000 $71,000
Maximum amount outstanding $44,100 $78,700 $74,000
Average daily amount outstanding
Notes payable to banks $ 4,900 $ 6,600 $ 9,200
Commercial paper $13,100 $24,200 $30,300
Weighted average interest rate
Notes payable to banks 5.73% 5.87% 4.00%
Commercial paper 5.70% 5.63% 3.88%
Amount outstanding at year end
Notes payable to banks - $ 3,400 $ 5,000
Commercial paper $35,000 $33,000 $62,000
Interest rate at year end
Notes payable to banks - 6.03% 4.88%
Commercial paper 5.43% 5.83% 4.93%
------- ------ -------
</TABLE>
7. FEDERAL INCOME TAXES
The Company's federal income tax returns have been examined by the Internal
Revenue Service through 1993 and all significant matters have been settled.
Effective October 1, 1993, the Company adopted SFAS No. 109, which requires the
implementation of a liability method for the financial reporting of income
taxes, as compared with the deferred method. Under the liability method,
deferred tax balances must be recorded for all temporary differences and are
adjusted to reflect changes in tax rates. Previously, deferred tax balances
were not recorded for certain ratemaking items and were not adjusted to reflect
changes in tax rates. The cumulative effect of adopting SFAS 109 on the
Company's unregulated operations was a credit to net income of $721,000, or
$.04 per share, in 1994. The effect on NJNG was to decrease its deferred tax
liability by $375,000 with an offsetting regulatory liability, as the Company
believes it is probable that the effects of SFAS 109 on NJNG will be payable to
customers in the future.
39
<PAGE> 18
New Jersey Resources Corporation
- --------------------------------------------------------------------------------
Federal income tax expense applicable to continuing operations differs from the
amount computed by applying the statutory rate to pre-tax income for the
following reasons:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Tax expense at statutory rate of 35% $20,081 $18,094 $17,613
Increase (reduction resulting from
Depreciation and cost of removal (854) (1,410) (1,032)
Amortization of investment tax credits (348) (397) (394)
Section 1341 refunds -- (990) --
Other (172) 862 398
------- ------- -------
Provision for federal income taxes $18,707 $16,159 $16,585
======= ======= =======
</TABLE>
The provision for federal income taxes is composed of the following:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Current $ 26,643 $11,561 $10,392
-------- ------- -------
Deferred
Excess tax depreciation 6,329 6,460 3,487
Deferred gain on sale of real estate (12,255) -- --
Weather-normalization clause (4,705) 1,545 (477)
Gross receipts and franchise taxes -- -- (3,580)
Alternative minimum tax 687 2,576 1,057
Contributions 75 319 1,943
Deferred gas costs 2,305 (3,970) 2,322
Coal gas costs and other (24) (1,935) 1,835
-------- ------- -------
Total deferred (7,588) 4,995 6,587
-------- ------- -------
Amortization of investment tax credits (348) (397) (394)
-------- ------- -------
Total provision $ 18,707 $16,159 $16,585
======== ======= =======
Charged to: Operating expenses $ 18,671 $15,967 $16,569
Other income, net 36 192 16
-------- ------- -------
Total provision $ 18,707 $16,159 $16,585
======== ======= =======
</TABLE>
The Company has utilized all alternative minimum tax credit carry-forwards at
September 30, 1996.
The tax effects of significant temporary differences comprising the Company's
net deferred income tax liability at September 30, 1996 and 1995, were as
follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995
---- ----
<S> <C> <C>
Current
Deferred gas costs $ 8,431 $ 5,984
Weather-normalization clause (4,126) 547
Other (4,249) (1,006)
-------- -------
Current deferred tax liability, net $ 56 $ 5,525
======== =======
Non-current
Property related items $ 74,424 $64,092
Deferred gain on sale of real estate (12,255) --
Customer contributions (3,451) (4,080)
Capitalized overhead and interest (4,587) (4,989)
Alternative minimum taxes -- (2,577)
Unamortized investment tax credits (4,315) (4,315)
Coal gas costs and other 2,194 3,720
-------- -------
Non-current deferred tax liability, net $ 52,010 $51,851
======== =======
</TABLE>
8. REGULATORY ISSUES
NJNG's Weather Normalization Clause (WNC) provides for a revenue adjustment if
the weather varies by more than one-half of one percent from the 10-year
average, or normal, weather. The accumulated adjustment from one hearing season
(i.e., October-May) is billed or credited to customers in the subsequent
heating season.
In November 1995, the BPU approved a Stipulation Agreement (the Stipulation)
relating to the 1995 Remediation Rider (RA), WNC, Demand Side Management
Adjustment Clause (DSMAC) and LGA clause. The approval of the Stipulation
allowed recovery over seven years of gas remediation costs incurred through
June 1995 of $9.1 million, the collection of $1.9 million of gross margin that
was accrued in fiscal 1995 due to the impact of warmer-than-normal weather on
the WNC, and implementation of the initial DSMAC which is designed to recover
$3.5 million of deferred and projected demand side management program costs.
The Stipulation also provided for the extension of the WNC on a permanent
basis.
The Stipulation also settled the July 1995 LGA petition and included a
reduction of $5.2 million in gas costs, the continuation of NJNG's current
margin-sharing formulas associated with its non-firm sales until the effective
date of the BPU Order in NJNG's 1997-98 LGA, and approval for an extension of
the Financial Risk Management (FRM) Pilot Program designed to provide price
stability to NJNG's system supply portfolio. All of the costs and results of
the FRM program are to be recovered through the LGA.
As a result of the approval of the Stipulation, NJNG's rates did not change.
40
<PAGE> 19
New Jersey Resources Corporation
- -------------------------------------------------------------------------------
In July 1996, NJNG filed for a net $8 million, or 2%, increase in its LGA. This
LGA filing included updated components for its Gas Cost Recovery (GCR) factor,
WNC, RA and DSMAC. The GCR factor increased by $21.2 million due to the
increase in gas costs, resulting primarily from the cold winter weather in
1996. This increase is partially offset by a $12 million credit from the WNC,
which reflects the margin impact of 15% colder-than-normal winter weather. In
addition, NJNG requested certain modifications to its WNC to update various
factors to more appropriately reflect current customers' usage and weather. A
decision is expected in the first quarter of fiscal 1997.
9. EMPLOYEE BENEFIT PLANS
Pension Plans
The Company has two trusteed, noncontributory defined benefit retirement plans
covering all regular, full-time employees with more than one year of service.
Plan benefits are based on years of service and average compensation during the
last five years of employment. The Company makes annual contributions to the
plans consistent with the funding requirements of federal law and regulations.
The components of the net pension cost are as follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995 1994
-------------------------------------------
<S> <C> <C> <C>
Service cost - benefits
earned during the period $1,748 $1,482 $1,733
Interest cost on projected
benefit obligation 3,147 2,989 2,812
Return on plan assets (3,617) (3,326) (3,160)
Net amortization and deferral (152) (172) (159)
-------------------------------------------
Net cost $1,126 $973 $1,226
===========================================
</TABLE>
Plan assets consist primarily of corporate equities and obligations, U.S.
Government obligations and cash equivalents. A reconciliation of the funded
status of the plans to the amounts recognized in the Consolidated Balance
Sheets is presented below:
<TABLE>
<CAPTION>
(Thousands) 1996 1995
----------------------
<S> <C> <C>
Plan assets at fair value $48,627 $43,752
-----------------------
Actuarial present value of plan benefits
Vested benefits (33,239) (30,532)
Non-vested benefits (2,231) (1,991)
Impact of estimated future
compensation changes (9,825) (10,019)
------------------------
Projected plan benefits (45,295) (42,542)
-------------------------
Plan assets in excess of
projected plan benefits 3,332 1,210
Unrecognized net assets at beginning
of the year (2,363) (2,669)
Unrecognized prior service costs 1,799 1,599
Unrecognized net gain (5,958) (2,204)
------------------------
Net pension liability recognized in the
Consolidated Balance Sheets $(3,190) $(2,064)
========================
</TABLE>
The assumptions used in determining the actuarial present value of
the projected benefit obligation were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------
<S> <C> <C>
Discount rate 7.75% 7.5%
Compensation increase 4.50% 4.25%
Long-term rate of return on plan assets 9.50% 9.0%
=====================
</TABLE>
Other Postretirement Benefits
Effective October 1, 1993, the Company adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions"(SFAS 106), which
requires an accrual method of accounting for postretirement benefits, similar to
that presently in effect for pension plans. Previously, certain health care and
life insurance benefits were charged to expense when paid. Under the accrual
method, the cost of providing postretirement benefits will be recognized over
the employee's service period. The Company's transition obligation associated
with SFAS 106 is $8.6 million, which is being amortized over 20 years, and its
annual expense has increased from approximately $400,000 to $1.5 million, of
which over 95% relates to NJNG. As part of its January 1994 base rate order,
NJNG is permitted to recover approximately 50% of its SFAS 106 expense
currently and defer the balance with ultimate expected recovery of the deferred
portion no later than that prescribed by generally accepted accounting
principles. At September 30, 1996, $2.2 million of SFAS 106 expenses were
deferred and are included in Regulatory Assets in the Consolidated Balance
Sheets.
A reconciliation of the accumulated postretirement benefit obligation (APBO)
to the amount recognized in the Consolidated Balance Sheets is presented below:
<TABLE>
<CAPTION>
(Thousands) 1996 1995
--------------------------
<S> <C> <C>
Retirees $ (1,939) $ (1,335)
Fully eligible participants (2,694) (3,071)
Other active participants (7,828) (6,100)
--------------------------
Total APBO (12,461) (10,506)
Plan assets 1,000 575
Unrecognized net loss 659 759
Unrecognized transition obligation 7,310 7,740
Unrecognized prior service costs 1,448 --
-------------------------
Net liability recognized in the
Consolidated Balance Sheets $(2,044) $(1,432)
===========================
</TABLE>
The components of the net postretirement benefit cost are as follows:
<TABLE>
<CAPTION>
(Thousands) 1996 1995
-------------------------
<S> <C> <C>
Service cost $404 $385
Interest cost 768 748
Amortization of transition obligation 430 430
Deferral of current expense (833) (794)
-------------------------
Total annual net expense $769 $769
=========================
</TABLE>
41
<PAGE> 20
New Jersey Resources Corporation
- -------------------------------------------------------------------------------
The assumed health care cost trend rate used in measuring the APBO as of
September 30, 1996 was 11%, declining 1% each year to 6% in 2001, and then
remaining constant thereafter for participants under age 65. For participants
age 65 and older the trend rate was 8% in 1996, declining 1% each year to 6% in
1998, and then remaining constant thereafter. A 1% increase in the trend rates
would increase the APBO as of September 30, 1996, by $1.4 million and would
increase the annual service and interest costs by $176,000. The assumed
discount rate used in determining the APBO was 7.75% and 7.5% at September 30,
1996 and 1995, respectively.
10. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
NJNE enters into fixed-price contracts to sell natural gas. As of September
30, 1996, NJNE entered into futures contracts to buy 5.2 bcf of natural gas
through March 1998 at prices ranging from $1.89 to $2.70 per mmbtu and had a
deferred unrealized gain of $251,000 related to these contracts.
In March 1992, NJR Energy entered into long-term, fixed-price contracts to sell
natural gas to a gas marketing company. In October 1994, in conjunction with a
shift in capital allocation policy, NJR Energy entered into a swap agreement
which hedges its risk for sales volumes under the contract which were in excess
of the estimated production from natural gas reserves owned at that time. As
discussed in Note 2: Discontinued Operations, NJR Energy has sold its natural
gas reserves pursuant to plan to exit the oil and gas production business. In
order to hedge its risk for sales volumes under such contract that would have
otherwise been fulfilled by its producing reserve base, NJR Energy entered
into a second swap agreement in June 1995. In connection with the second swap,
NJR Energy received $3.3 million, which is included in Deferred Revenue and is
being amortized to income over the 15-year life of the agreement. Under the
terms of the swap agreements, NJR Energy will pay to the counterparties the
identical fixed price it receives from the gas marketing company (the fixed
price) in exchange for the payment by the counterparties of an index price plus
a spread per mmbtu (the floating price) for the total volumes under the gas
sales contract. The swap agreements were effective as of November 1995, and
will expire on the same date as the underlying gas sales contract.
In order to secure the physical gas supply to meet the delivery requirements
under its gas sales contracts, NJR Energy entered into a long-term purchase
contract effective in November 1995, with a second gas marketing company for
the identical volumes it is obligated to sell under the above-mentioned gas
sales contract. NJR Energy has agreed to pay the supplier the identical
floating price it is receiving under the swap agreements. In conjunction with
this contract, NJR Energy received $1.9 million, which is included in Deferred
Revenue and is being amortized to income over the life of the agreement.
The net result of the above swap agreements and purchase contract is that the
Company has hedged both its price and volume risk associated with its
long-term, fixed-price sales contract. The respective obligations of NJR Energy
and the counterparties under the swap agreements are guaranteed, subject to a
maximum amount, by the Company and the respective counterparties' parent
corporations. In the event of nonperformance by the counterparties and their
parent corporation, NJR Energy's financial results would be impacted by the
difference, if any, between the fixed price it is receiving under the gas sales
contract compared with the floating price the Company is paying under the
purchase contract. However, the Company does not anticipate nonperformance by
the counterparties.
The fair value of cash and temporary investments, accounts receivable, accounts
payable, commercial paper and borrowings under revolving credit facilities are
estimated to equal their carrying amounts due to the short maturity of those
instruments. The estimated fair value of long-term debt is based on quoted
market prices for similar issues and the fair value of interest rate swap
agreements is based on the estimated amount the Company would receive to pay to
terminate the agreements. At September 30, 1996, the carrying amount of
long-term debt was $273 million with a fair market value of $277.5 million and
the Company would have to pay approximately $1.3 million to terminate its
interest rate swap agreement.
11. COMMITMENTS AND CONTINGENT LIABILITIES
Capital expenditures are estimated at $57.9 million and $50.1 million in fiscal
1997 and 1998, respectively, and consist primarily of NJNG's construction
program to support its customer growth and maintain its distribution system.
NJNG is participating in environmental investigations and the preparation of
proposals for remedial action at 11 former manufactured gas plant (MGP) sites.
Through the RA approved by the BPU, NJNG is recovering expenditures incurred
through June 1995 over a seven-year period. Costs incurred subsequent to June
30, 1995 will be reviewed annually and, subject to BPU approval, recovered over
seven-year periods. As of September 30, 1995, NJNG had estimated that it would
incur additional expenditures of $14 million over the next five years for
further investigation and remedial action at these sites and, accordingly
reflected this amount in both Regulatory Assets and Other Deferred Credits. In
1996, NJNG, with the assistance of an outside consulting firm, completed an
environmental review of the sites, including a review of its potential liability
for investigation and remedial action for periods significantly beyond the
five-year period. On the basis of such review, NJNG has estimated that,
exclusive of insurance recoveries, if any, total future expenditures to
remediate and monitor known MGP sites will range from $27.5 million to $60
million. NJNG's estimates of these liabilities are based upon currently
available facts, existing technology and presently enacted laws and regulations.
Where available information is sufficient to estimate the amount of the
liability, it is NJNG's policy to accrue the full amount of such estimate. Where
the information is sufficient only to establish a range of probable liability
and no point within the range is more likely than any other, it is NJNG's policy
to accrue the lower end of the range. Accordingly, in the second quarter of
fiscal 1996, NJNG increased its accrued liability and corresponding regulatory
asset to $27.5 million. The actual costs to be incurred by NJNG are dependent
upon
42
<PAGE> 21
New Jersey Resources Corporation
- ------------------------------------------------------------------------------
several factors, including final determination of remedial action, changing
technologies and governmental regulations, the ultimate ability of other
responsible parties to pay and any insurance recoveries. NJNG will continue to
seek recovery of such costs through the RA.
NJNR Pipeline Company, a wholly-owned subsidiary of NJR Energy, owns a 2.8%
equity interest in the Iroquois Gas Transmission System, L.P. (Iroquois) which
has constructed and is operating a 375-mile, natural gas pipeline from the
Canadian border to Long Island. The Company has guaranteed a pro-rata share of
a debt service letter of credit obtained by Iroquois which totaled $944,000 at
September 30, 1996. The Company does not expect to incur any cash requirements
under the guarantee.
The Company is party to various claims, legal actions and complaints arising in
the ordinary course of business and other investigations. In management's
opinion, the ultimate disposition of these matters will not have a material
adverse effect on either its financial condition or results of operations.
12. BUSINESS SEGMENT DATA
Information related to the Company's various business segments, excluding
capital expenditures, which are presented in the Consolidated Statements of
Cash Flows, is detailed below:
<TABLE>
<CAPTION>
(Thousands)
Fiscal years ended September 30, 1996 1995 1994
- ----------------------------------------------------------------------------
<S> <C> <C> <C>
OPERATING REVENUES
Natural gas distribution $ 474,388 $ 426,662 $ 480,321
Energy marketing 78,869 23,711 7,001
Real estate 4,272 12,770 12,466
Oil and gas and other 2,275 557 765
---------------------------------------
Total before eliminations 559,804 463,700 500,553
Eliminations
(intersegment revenues) (11,292) (9,107) (3,478)
---------------------------------------
TOTAL $ 548,512 $454,593 $ 497,075
---------------------------------------
DEPRECIATION AND AMORTIZATION
Natural gas distribution $ 22,513 $ 20,944 $ 19,270
Real estate 542 1,985 1,941
Oil and gas and other 174 93 25
---------------------------------------
TOTAL $ 23,229 $ 23,022 $ 21,236
---------------------------------------
OPERATING INCOME BEFORE
INCOME TAXES
Natural gas distribution $ 71,976 $ 67,211 $ 65,663
Energy marketing 3,633 1,206 --
Real estate (323) 6,367 5,426
Oil and gas and other 2,985 451 460
---------------------------------------
TOTAL $ 78,271 $ 75,235 $ 71,549
---------------------------------------
ASSETS AT YEAR END
Natural gas distribution $ 778,896 $ 690,566 $ 660,166
Energy Marketing 8,664 5,229 --
Real estate 40,414 95,572 94,516
Oil and gas and other 27,213 34,997 42,665
---------------------------------------
TOTAL $ 855,187 $ 826,364 $ 797,347
---------------------------------------
</TABLE>
13. SELECTED QUARTERLY DATA (UNAUDITED)
A summary of financial data for each fiscal quarter of 1996 and 1995 follows.
Due to the seasonal nature of the Company's utility business, quarterly amounts
vary significantly during the year. In the opinion of management, the
information furnished reflects all adjustments necessary for a fair
presentation of the results of the interim periods.
<TABLE>
<CAPTION>
(Thousands except First Second Third Fourth
per share data) Quarter Quarter Quarter Quarter
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
1996
Operating revenues $159,739 $233,917 $94,456 $ 60,400
Operating income $ 18,288 $ 32,225 $ 7,767 $ 1,320
Net income from continuing
operations $ 12,422 $ 26,941 $ 2,229 $ (4,524)
Net income $ 12,422 $ 26,941 $ 2,229 $ (4,524)
Earnings per common share from
continuing operations $ .69 $ 1.50 $ .12 $ (.25)
Earnings per common share $ .69 $ 1.50 $ .12 $ (.25)
-----------------------------------------
1995
Operating revenues $128,965 $197,329 $74,444 $ 53,855
Operating income $ 18,451 $ 32,204 $ 6,688 $ 1,925
Net income from continuing
operations $ 11,409 $ 25,679 $ 1,209 $ (4,378)
Net income $ 11,240 $ 25,494 $(7,480) $ (4,469)
Earnings per common share from
continuing operations $ .65 $ 1.46 $ .07 $ (.25)
Earnings per common share $ .65 $ 1.45 $ (.42) $ (.25)
-----------------------------------------
</TABLE>
43
<PAGE> 1
EXHIBIT 21-1
SUBSIDIARIES OF THE REGISTRANT
SUBSIDIARY STATE OF INCORPORATION
New Jersey Natural Gas Company New Jersey
NJR Energy Services Corp. New Jersey
Subsidiaries:
New Jersey Natural Energy Company New Jersey
NJR Power Services Corporation New Jersey
NJR Energy Corp. New Jersey
Subsidiaries:
New Jersey Natural Resources Company New Jersey
NJNR Pipeline Company New Jersey
NJR Storage Corporation Delaware
Natural Resources Compressor Company New Jersey
NJRE Operating Company Oklahoma
NJR Development Corp. New Jersey
Subsidiaries:
Commercial Realty & Resources Corp. New Jersey
NJR Computer Technologies, Inc. New Jersey
Paradigm Power, Inc. New Jersey
Subsidiaries:
Lighthouse One, Inc. New York
Lighthouse II, Inc. Delaware
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM NEW JERSEY
RESOURCES CORPORATION'S 1996 ANNUAL REPORT TO STOCKHOLDERS INCLUDING THE
CONSOLIDATED STATEMENTS OF INCOME, CONSOLIDATED STATEMENTS OF CASH FLOWS,
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF COMMON STOCK EQUITY
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 615,130
<OTHER-PROPERTY-AND-INVEST> 40,068
<TOTAL-CURRENT-ASSETS> 139,962
<TOTAL-DEFERRED-CHARGES> 60,027
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 855,187
<COMMON> 45,295
<CAPITAL-SURPLUS-PAID-IN> 208,539
<RETAINED-EARNINGS> 20,087
<TOTAL-COMMON-STOCKHOLDERS-EQ> 273,921
20,000
880
<LONG-TERM-DEBT-NET> 271,663
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 35,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 1,501
0
<CAPITAL-LEASE-OBLIGATIONS> 31,700
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 220,522
<TOT-CAPITALIZATION-AND-LIAB> 855,187
<GROSS-OPERATING-REVENUE> 548,512
<INCOME-TAX-EXPENSE> 18,671
<OTHER-OPERATING-EXPENSES> 470,241
<TOTAL-OPERATING-EXPENSES> 488,912
<OPERATING-INCOME-LOSS> 59,600
<OTHER-INCOME-NET> 68
<INCOME-BEFORE-INTEREST-EXPEN> 59,668
<TOTAL-INTEREST-EXPENSE> 21,001
<NET-INCOME> 38,667
1,599
<EARNINGS-AVAILABLE-FOR-COMM> 37,068
<COMMON-STOCK-DIVIDENDS> 27,969
<TOTAL-INTEREST-ON-BONDS> 15,420
<CASH-FLOW-OPERATIONS> 57,779
<EPS-PRIMARY> 2.06
<EPS-DILUTED> 2.06
</TABLE>
