REGISTRATION NO. 333-66727
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
---------------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
MIDDLESEX WATER COMPANY
-----------------------------------------------------
(Exact name of registrant as specified in its charter)
NEW JERSEY 22-1114430
------------------------------- ------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 RONSON ROAD, ISELIN, NEW JERSEY 08830
(732) 634-1500
---------------------------------------------------------------------------
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
--------------------
MARION F. REYNOLDS
VICE PRESIDENT, SECRETARY AND TREASURER
MIDDLESEX WATER COMPANY
1500 RONSON ROAD, ISELIN, NEW JERSEY 08830-3020
(732) 634-1500
---------------------------------------------------------
(Name, address, including zip code. and telephone number,
including area code, of agent for service)
---------------------
WITH COPIES TO:
PETER D. HUTCHEON, ESQ. JOHN L. GILLIS, JR., ESQ.
- --------------------------------- --------------------------------------
NORRIS, MCLAUGHLIN & MARCUS, P.A ARMSTRONG, TEASDALE, SCHLAFLY & DAVIS
721 ROUTE 202-206, P.O. BOX 1018 ONE METROPOLITAN SQUARE, SUITE 2600
SOMERVILLE, NEW JERSEY 08876-1018 ST LOUIS, MISSOURI 63102-2740
(908) 722-0700 (314) 621-5070
--------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
---------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
================================================================================
<PAGE>
The information in this prospectus is not complete and may be changed. We may
not sell these securities until the registration statement filed with the
Securities and Exchange Commission is effective. This prospectus is not an offer
to sell these securities and it is not soliciting an offer to buy these
securities in any state where the offer or sale is not permitted.
SUBJECT TO COMPLETION, DATED DECEMBER 15, 1998
PROSPECTUS
[LOGO]
MIDDLESEX WATER COMPANY
450,000 SHARES COMMON STOCK (WITHOUT PAR VALUE)
Our Common Stock is quoted on the Nasdaq National Market under the symbol,
"MSEX." On November 25, 1998, the last reported sale price of the Common Stock
on Nasdaq was $25 per share. See "COMMON STOCK PRICE RANGE AND DIVIDENDS."
BEFORE INVESTING IN THE COMMON STOCK, YOU SHOULD REVIEW
THE SECTION OF THIS PROSPECTUS CALLED "RISK FACTORS"
WHICH BEGINS ON PAGE 6.
--------------------------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED IF
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
================================================================================
PRICE TO UNDERWRITING DISCOUNTS PROCEEDS TO
PUBLIC AND COMMISSIONS(1) THE COMPANY(2)
- --------------------------------------------------------------------------------
Per Share ........ $ $ $
- --------------------------------------------------------------------------------
Total(3) ......... $ $ $
================================================================================
- ----------------
(1) We have agreed to indemnify the Underwriters against certain liabilities,
including liabilities under the Securities Act of 1933, as amended. See
"Underwriting."
(2) Before deducting expenses of the offering payable by us estimated at
$135,000.
(3) We have granted to the Underwriters an option, exercisable within 30 days
after the date of this Prospectus, to purchase up to 67,000 additional
shares of Common Stock upon the same terms and conditions as the shares
offered hereby to cover over-allotments, if any. If the Underwriters
exercise such option in full, the total Price to Public, Underwriting
Discounts and Commissions, and Proceeds to the Company will be increased to
$______, $______ and $______, respectively. See "Underwriting."
----------------------
The Underwriters are offering the shares of Common Stock subject to prior sale
and their acceptance of the shares from us. Our sale of the shares of Common
Stock to the Underwriters is subject to a number of conditions. The Underwriters
expect to deliver the shares of Common Stock to purchasers at the offices of
Edward D. Jones & Co., L.P. in St. Louis, Missouri, on or about December , 1998.
EDWARD D. JONES & CO., L.P. JANNEY MONTGOMERY SCOTT INC.
The date of this Prospectus is ______________, 1998
<PAGE>
[MAP
OF
SERVICE
AREA]
2
<PAGE>
TABLE OF CONTENTS
PAGE
----
PROSPECTUS SUMMARY..........................................................4
THE OFFERING................................................................5
RISK FACTORS................................................................7
FORWARD LOOKING STATEMENTS .................................................9
USE OF PROCEEDS.............................................................9
THE PROJECT.................................................................9
THE COMPANY................................................................10
SELECTED CONSOLIDATED FINANCIAL INFORMATION................................16
MANAGEMENT'S DISCUSSION AND ANALYSIS.......................................18
COMMON STOCK PRICE RANGE AND DIVIDENDS.....................................22
DESCRIPTION OF COMMON STOCK................................................23
DIVIDEND REINVESTMENT PLAN.................................................24
UNDERWRITING...............................................................25
LEGAL MATTERS..............................................................26
EXPERTS....................................................................26
WHERE YOU CAN FIND MORE INFORMATION........................................26
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................26
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS THAT
STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK,
INCLUDING SYNDICATE COVERING TRANSACTIONS AND THE IMPOSITION OF A PENALTY BID.
FOR A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP MEMBERS
MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON NASDAQ
IN ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
3
<PAGE>
- --------------------------------------------------------------------------------
PROSPECTUS SUMMARY
This Prospectus Summary calls your attention to selected information in
this document, but may not contain all the information that is important to you.
Unless otherwise indicated we have assumed, in presenting information about
outstanding shares of common stock, including per share information, that the
Underwriters' over-allotment option will not be exercised. To understand the
offering fully and for a more complete description of the offering you should
read this entire document carefully, including especially the "Risk Factors"
section, as well as the documents we have referred you to. See "Incorporation of
Certain Documents by Reference."
OUR COMPANY
Middlesex Water Company ("Middlesex Water") has operated as a regulated
water utility in central New Jersey since 1897. Since 1992, Middlesex Water has
acquired water systems in other parts of New Jersey and in Delaware, and today
has five operating subsidiaries, one of which has two subsidiaries of its own.
We will refer to Middlesex Water and its subsidiaries as the "Company" in this
Prospectus.
Our primary business is treating, and distributing water on a retail basis
to residential, commercial, industrial and fire protection customers in parts of
New Jersey and Delaware. We also provide water and treatment services on a
wholesale basis under contract to five municipalities and two municipal
utilities authorities. Under a contract with the City of South Amboy, New
Jersey, we operate and maintain that City's 2,600 customer water system. As of
September 30, 1998, we served approximately 67,200 retail customers and seven
contract customers. We also operate a wastewater system serving 2,200 retail
customers and, under contract, a municipal wastewater system in New Jersey.
We are regulated as to rates charged to customers for water and wastewater
services, as to the quality of water we provide and as to certain other matters.
Our revenues and income are significantly affected by the timing and amounts of
rate increases approved by regulatory authorities. See "RISK FACTORS--Our
Business is Subject to Rate Regulation" and "THE COMPANY--Regulation."
OUR STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new service areas and to consider acquisitions
of other water and wastewater systems. In addition, we will try to contract with
municipalities to operate and manage their water systems. We also plan to
continue to increase our customer base in New Jersey and Delaware. We may also
seek to acquire companies in water- and wastewater-related businesses that are
not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our Carl J. Olsen Water Treatment Plant (which
we will refer to as the "CJO Plant") in Edison, New Jersey in order to meet more
stringent regulatory requirements anticipated for water quality and to increase
our capacity to meet peak-day demands for water in the utility system serviced
by the CJO Plant. We will refer to the upgrading and expansion of the CJO Plant
as the "Project". See "THE PROJECT." We will also continue to improve our
central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We operate and maintain the 2,600 customer
water system of the City of South Amboy, New Jersey under a 1995 contract with
that city which is renewable at five year intervals. On December 1, 1998, we
signed a contract to acquire, subject to final ordinance adoption and regulatory
approval, a franchise from the City to provide water service and to install
water system facilities in South Amboy. On December 8, 1998 we signed a contract
with the City of Perth Amboy, New Jersey, to operate and maintain its 8,200
customer water and wastewater systems. We expect to enter into a subcontract
with an experienced sewer contractor for the operation and maintenance of the
wastewater system once bond financings related to the Perth Amboy contract are
completed. We are also currently negotiating with a third New Jersey
municipality to enter into a multi-year treating and pumping contract. Because
we believe contracts with municipalities provide another way for us to expand
our service
- --------------------------------------------------------------------------------
4
<PAGE>
territories and increase the number of customers we serve, we continue to seek
opportunities to enter into contracts with additional municipalities to operate
their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired a 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
OUR ADDRESS AND TELEPHONE NUMBER
Our executive offices are located at 1500 Ronson Road, Iselin, New Jersey
08830-3020 and our telephone number is (732) 634-1500.
THE OFFERING
Common Stock, no par value 450,000 Shares
Common Stock to be outstanding 4,818,847 Shares
after the offering
Nasdaq symbol MSEX
Common Stock 52-week price range $18-$25
(through November 25, 1998)
Annualized dividend rate (1) $1.18 per Share.
Use of proceeds We will use most of the net
proceeds of this offering to
fund part of the cost of the
upgrade and expansion of our
CJO Plant in Edison, New
Jersey. See "THE PROJECT." We
will use the remaining net
proceeds of this offering for
other capital expenditures to
upgrade our utility systems.
- ----------------------------
(1) The annualized dividend rate gives effect to the increase announced
October 22, 1998, in our quarterly dividend to $0.295 per share, payable
to shareholders of record November 16, 1998. We also have a Dividend
Reinvestment and Common Stock Purchase Plan. See "DESCRIPTION OF COMMON
STOCK" and "DIVIDEND REINVESTMENT PLAN."
5
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This summary of financial information as of, and for the years ended,
December 31, 1995, 1996 and 1997 was taken from and should be read along with
the additional financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30, 1997
and 1998 was taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Reports on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
CONSOLIDATED INCOME STATEMENT DATA:
Nine Months Ended Year Ended
September 30, December 31,
-------------------- ---------------------------------
1998 1997 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Operating Revenues $ 32,434 $ 30,241 $ 40,294 $ 38,025 $ 37,847
Operating Expenses 25,241 23,544 31,526 29,802 29,184
Net Income 5,185 4,487 5,861 5,168 5,704
Earnings Applicable
to Common Stock 4,946 4,341 5,635 5,009 5,545
Earnings per Share of Common Stock:
Basic $1.14 $1.03 $1.33 $1.20 $1.36
Diluted 1.13 1.02 1.33 1.20 1.36
Dividends Paid
per Share $.855 $.84 $1.125 $1.105 $1.085
Average Number of Shares
Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296
<CAPTION>
CONSOLIDATED BALANCE SHEET DATA:
As of September 30, As of December 31,
----------------------- ---------------------------------------
1998 1997 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933
Common Equity 54,330 50,839 51,226 49,216 47,644
Convertible Preferred Stock 3,894 3,896 3,894 1,565 1,565
Nonredeemable Preferred Stock 1,102 1,102 1,102 1,102 1,102
Long-term Debt 75,884 52,929 52,918 52,961 52,960
(excluding current portion)
</TABLE>
6
<PAGE>
RISK FACTORS
We have described for you below some risks involved in investing in the
Common Stock offered under this Prospectus. A word of caution: the list is not a
complete list of every risk. You should carefully consider each of the following
factors and all of the information both in this Prospectus and in the other
documents we have filed with the Securities and Exchange Commission which are
incorporated in this Prospectus by reference.
OUR BUSINESS IS SUBJECT TO RATE REGULATION. The New Jersey Board of Public
Utilities, which we call the "BPU" in this Prospectus, regulates all of our
public utility companies in New Jersey. The BPU regulates these utilities with
respect to rates and charges for service, classification of accounts, awards of
new service territory, acquisitions and other matters. That means, for example,
that we cannot raise the rates we charge to our customers without first filing a
petition with the BPU and going through a lengthy administrative and hearing
process. In much the same way, the Delaware Public Service Commission, which we
call the "PSC" in this Prospectus, regulates our public utility companies in
Delaware. We cannot give assurances of when we or our subsidiaries will request
approval for any such matter, nor can we predict whether the BPU or PSC will
approve, deny or reduce the amount of any such requests. See" THE COMPANY --
Regulation -- Regulation of Rates and Services."
WE ARE SUBJECT TO ENVIRONMENTAL AND OTHER GOVERNMENTAL LAWS AND REGULATION.
The U.S. Government, New Jersey, Delaware and local agencies regulate many
aspects of our business. Among the most important of these are our water
diversion rights, our water quality and other environmental matters. We believe
that all of our systems are currently in compliance in all important respects
with these regulations. We cannot predict, however, whether we will be able to
continue to comply with these laws and regulations as they may change in the
future. If we fail to comply with government regulations, it could have a
material adverse effect on our financial condition and our ability to earn
income, which we refer to in this Prospectus as "results of operations."
Federal, state and local governments also regulate the quality of water we
supply to our customers, as well as our water supply, treatment and distribution
systems. We believe that all of our systems are currently in compliance in all
important respects with the primary water quality regulations. Government
agencies continually review these regulations and may propose new, more
restrictive requirements in the future. These may include stricter limitations
on the permissible levels of certain chemicals and compounds in the water. We do
not know what the costs may be to meet stricter limits, if adopted as new laws
or regulations. Those costs could be very high and may adversely affect our
financial condition and results of operations. See "RISK FACTORS -- Our Business
Is Subject To Rate Regulation" and "THE COMPANY -- Regulation -- Water Quality
and Environmental Regulations."
The BPU requires that we conduct management audits on a periodic basis. We
either have completed or are in the process of completing changes recommended by
the BPU in response to our most recent management audit. We do not believe any
of the recommended changes will materially or adversely affect us or our
operations. There can be no assurance, however, that future audits will not
result in changes which materially and adversely affect our financial condition
and results of operations.
WE HAVE LONG-TERM CONTRACTUAL OBLIGATIONS FOR WATER AND WASTEWATER SYSTEM
OPERATION AND MAINTENANCE. We and certain of our subsidiaries have, or are
negotiating to enter into, multi-year contracts to operate and maintain water
systems and wastewater systems. See "THE COMPANY -- Strategy -- Increase
Contract Services." None of these contracts protect us or our subsidiaries
against incurring costs in excess of payments we will receive. While we do not
currently anticipate any cost overruns, there can be no assurance that we will
not experience losses under these contracts. In addition, these contracts may
involve leased municipal employees, which unlike our own employees, are members
of unions who have collective bargaining agreements with their municipal
employers. Any losses or labor difficulties under these contracts may have a
material adverse effect on our financial condition and results of operations.
WE REQUIRE FINANCING FOR EXPANSION AND CONSTRUCTION. We need money to
continue our expansion efforts and to fund our construction program. With the
proceeds from this offering and funds already received from bond issuances, as
well as existing lines of credit from banks, we believe we have sufficient funds
to support planned capital expenditures through 2000. See "MANAGEMENT'S
DISCUSSION AND ANALYSIS-- Liquidity and Capital Resources." We may find in the
future that sufficient capital is not available, or that the cost of capital is
too high for future expansion and construction. Any failure to obtain adequate
capital to finance our expansion and construction programs could have a material
adverse effect on our financial condition and results of operations.
7
<PAGE>
WE ARE DEPENDENT UPON OUR WATER SUPPLY. Our ability to meet the existing
and future water demands of our customers is dependent upon an adequate supply
of water. Unexpected conditions may interfere with our sources of water supply.
Drought and overuse of underground acquifers may limit the availability of
ground water as a source of water supply. These factors might adversely affect
our ability to supply water in sufficient quantity to our customers in
Burlington County, New Jersey and in Delaware. Any interruption in our water
supply could have a material adverse effect on our financial condition and
results of operations. See "THE COMPANY -- Water Supplies and Contracts."
WE HAVE COMPETITION FROM OTHER UTILITIES AND PRIVATIZATION. We face the
risks of competition from other utilities authorized by federal, state or local
agencies. Once a utility regulator grants a service territory to a utility, that
utility is usually the only one permitted to service that territory. Although a
new territory offers some protection against competitors, the pursuit of
additional service territories is competitive, especially in Delaware. Competing
utilities may challenge any future application by the Company for new service
territories. Third parties may also seek to expand their water service by taking
over and/or entering into long-term agreements to operate municipal systems.
Those developments, which we call privatization, might adversely affect the
Company and its long-term contracts to supply water on a wholesale basis to
municipalities. See "THE COMPANY -- Competition" and "--Regulation."
WE ARE SUBJECT TO YEAR 2000 SYSTEM RISK. Software used in many computer
systems and computerized control devices was designed to record only the last
two digits of each year. This software, some of which we own, may not function
properly as of January 1, 2000 because it interprets the new year as 1900. We
have evaluated our own computer systems, to make certain that those systems will
work properly when 1999 becomes 2000. We have also requested certification of
Year 2000 compliance from the vendor of the new Supervisory Control And Data
Acquisition system (which we refer to as "SCADA" in this Prospectus), as well as
the principal vendors of data processing serving our financial reporting,
payroll, billing, customer information and shareholder record systems. The
vendors have certified that their systems have been tested and will work
properly. We believe we may reasonably rely on those certifications. We also
expect to spend up to $10,000 to bring other operating systems, including our
network of desktop personal computers, into Year 2000 compliance. Nonetheless,
we may not have identified every computerized control device of ours which may
be affected by the Year 2000. Even if identified, we may not be able to
reprogram or replace those devices before January 1, 2000. More importantly, we
cannot assess the impact on us of failures of computer systems and control
devices used by others. We are especially concerned about third parties who
provide significant services and materials to process, treat and distribute
water and to process, treat and dispose of wastewater, and about the possible
failure of electric power and telecommunications or the inability to obtain
diesel fuel for the Company's stand-by generators. The occurrence of any such
Year 2000-related problem could have a material adverse effect on our financial
condition and results of operations.
WE HAVE RESTRICTIONS ON DIVIDENDS. Our Restated Certificate of
Incorporation and our Indenture of Mortgage dated as of April 1, 1927, as
supplemented since then, which we call the "Mortgage" in this Prospectus, impose
conditions on our ability to pay dividends. We have paid dividends on our Common
Stock each year since 1912 and have increased the amount of dividends paid each
year since 1973. Our earnings, financial condition, capital requirements,
applicable regulations and other factors, including the timeliness and adequacy
of rate increases, will determine both our ability to pay dividends on Common
Stock and the amount of those dividends. There can be no assurance that we will
continue to pay dividends in the future or, if dividends are paid, that they
will be in amounts similar to past dividends. See "DESCRIPTION OF COMMON STOCK"
and "PRICE RANGE OF COMMON STOCK AND DIVIDENDS."
WE ARE SUBJECT TO ANTI-TAKEOVER MEASURES. Subsection 10A of the New Jersey
Business Corporation Act, known as the Shareholder Protection Act, applies to
us. The Shareholder Protection Act deters merger proposals, tender offers or
other attempts to effect changes in control of the Company that are not
negotiated and approved by our Board of Directors. In addition, we have a
classified Board of Directors, which means only one third of the Directors are
elected each year. A classified Board can make it harder for an acquirer to gain
control by voting its candidates onto the Board of Directors and may also deter
merger proposals and tender offers. Our Board of Directors also has the ability,
subject to obtaining BPU approval, to issue one or more series of preferred
stock having such number of shares, designation, preferences, voting rights,
limitations and other rights as the Board of Directors may fix. This could be
used to discourage, delay or prevent an acquisition. See "DESCRIPTION OF COMMON
STOCK."
8
<PAGE>
FORWARD LOOKING STATEMENTS
We discuss certain matters in this document which are not historical facts,
but which are "forward looking statements." We intend these "forward looking
statements" to qualify for safe harbors from liability established by the
Private Securities Litigation Reform Act of 1995. These "forward looking
statements" include, but are not limited to, future plans, objectives,
expectations and events concerning various matters such as capital expenditures,
earnings, litigation, growth potential, and rate and other regulatory matters.
The "forward looking statements" in this Prospectus reflect what we currently
anticipate will happen in each case. What actually happens could differ
materially from what we currently anticipate will happen. We are not promising
to make any public announcement when we think "forward looking statements" in
this document are no longer accurate, whether as a result of new
information, what actually happens in the future or for any other reason.
USE OF PROCEEDS
The net proceeds from the sale of the 450,000 shares of Common Stock
offered by this Prospectus, after deducting the Underwriters' discount and
estimated offering expenses, are estimated to be $9,466,987 ($10,896,616 if the
Underwriters' over-allotment option is exercised in full). The Company expects
to use approximately $7,100,000 of the net proceeds to fund a portion of the $38
million estimated cost of the Project. The balance of the net proceeds,
approximately $2,366,987, will be used for other capital expenditures to upgrade
our utility systems. The remaining costs of the Project have been financed by
(i) the proceeds of the issuance in March 1998, of the Company's $23 million,
5.35% Series W Mortgage Bond issued in March, 1998 and (ii) $7.9 million from
operations of the Company.
THE PROJECT
The Project is a construction project consisting of the upgrade, expansion
and addition of facilities at the CJO Plant, the Company's principal water
treatment facility, and related water intake station for our utility system in
central New Jersey. The Project includes the installation of new flash mixers
and new chemical storage and feed facilities. The existing conventional
sedimentation basins are being replaced by high rate upflow clarifiers that are
intended to remove turbidity more effectively . The chlorine application point
is being relocated from preclarification to postclarification. The existing
sedimentation basins are to be used as chlorine contact basins. Four additional
filters are being added to the CJO Plant, a new laboratory is being constructed,
and a computerized SCADA system is being added to monitor and control the CJO
Plant and our water supply and distribution system in central New Jersey.
Upgrades are also being made to the heating, ventilating, air conditioning and
the electrical system at the CJO Plant and to the pumping equipment at our raw
water pump station.
The Project will upgrade the CJO Plant to meet the new and anticipated
regulatory changes concerning water quality, as well as increase capacity to
meet peak day demands. The firm capacity of the CJO Plant is being increased
from about 30 million gallons per day, or "mgd" as we call it in this
Prospectus, to 45 mgd (we define firm capacity as the capacity when the largest
unit is out of service).
The Project also involves changes to the raw water pump station which
delivers water from the Delaware & Raritan Canal, which we call the "D&R Canal"
in this Prospectus, to the CJO Plant, a distance of about one mile. The station
capacity is being increased by replacing one existing pump with a larger pump.
The firm capacity of the raw water pump station is being increased from about 35
mgd to 45 mgd. Functional completion of the Project (by which we mean the
ability to produce water) is scheduled for June, 1999, with final completion set
for October, 1999.
The total cost of the Project, including design, engineering and
capitalized interest, will be approximately $38 million. Of this amount, we have
already expended $7.9 million through March 31, 1998 from operations of our
central New Jersey system. In March, 1998, we issued our 5.35% Series W Mortgage
Bonds which provided an additional $23 million. The remainder of the cost of the
Project will be funded through the sale of Common Stock offered under this
Prospectus.
9
<PAGE>
THE COMPANY
OVERVIEW
Middlesex Water Company was incorporated as a water utility company in 1897
and operates water utility systems in central and southern New Jersey and in
Delaware as well as a wastewater utility in southern New Jersey. The water
utility system in central New Jersey, which we call in this Prospectus the
"Middlesex System," produced 90% of the Company's 1997 Revenue. The Middlesex
System treats, stores and distributes water for residential, commercial,
industrial and fire prevention purposes.
Our Middlesex System provides water services to approximately 54,000 retail
customers, primarily in eastern Middlesex County, New Jersey and provides water
on a wholesale basis under contract to the Township of Edison, the Boroughs of
Highland Park and Sayreville, the City of South Amboy and both the Old Bridge
and the Marlboro Township Municipal Utilities Authorities. Under a special
contract, the Middlesex System also provides water treatment and pumping
services to the Township of East Brunswick.
The Middlesex System's retail customers are located in an area of
approximately 55 square miles in Woodbridge Township, the Boroughs of Metuchen
and Carteret, portions of Edison Township and the Borough of South Plainfield in
Middlesex County and a portion of the Township of Clark in Union County. The
retail customers include a mix of residential customers, large industrial
concerns and commercial and light industrial facilities. These retail customers
are located in generally well developed areas of central New Jersey. The
contract customers of the Middlesex System comprise an area of approximately 141
square miles with a population of approximately 267,000. Contract sales to
Edison, Sayreville, Old Bridge and Marlboro are supplemental to the existing
water systems of these customers. The State of New Jersey in the mid-1980's
approved plans to increase available surface water supply to these and other
municipalities in the South River Basin area of the State through contracts with
water suppliers outside the South River Basin. The State saw this as a way to
reduce the use of ground water and depletion of acquifers. Our long-term
contracts to pump treated surface water to East Brunswick, Marlboro, Old Bridge,
Sayreville and South Amboy are consistent with the State approved plan.
We have five wholly-owned subsidiaries:
o Tidewater Utilities, Inc. ("Tidewater"), together with Tidewater's
wholly-owned subsidiary, Public Water Supply Company, Inc. ("Public"),
provide water services to 11,000 retail customers for residential,
commercial and fire protection purposes in over 100 separate community
water systems in Kent, Sussex and New Castle Counties, Delaware. We
refer to our Delaware operations as the "Tidewater Systems" in this
Prospectus. The Tidewater Systems produced approximately 7% of our
total revenues in 1997. Tidewater has another wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., which owns the office
building that Tidewater uses as its business office.
o Pinelands Water Company services 2,200 residential customers in
Burlington County, New Jersey. We refer to this water utility as the
"Pinelands System" in this Prospectus. The Pinelands System produced
approximately 0.6% of our total revenues in 1997.
o Pinelands Wastewater Company services approximately 2,200 primarily
residential retail customers and, under contract, one municipal
wastewater system in Burlington County, New Jersey with about 200
residential customers. We refer to this wastewater utility as the
"Pinelands Wastewater System" in this Prospectus. The Pinelands
Wastewater System produced approximately 1.4% of our total revenues in
1997.
o Utility Service Affiliates, Inc. along with Middlesex Water Company
entered into a five-year contract with the City of South Amboy, New
Jersey to operate and maintain the city's 2,600 customer water system
in May 1995. The contract is renewable for up to three additional
five-year periods. We refer to this subsidiary as "USA" in this
Prospectus. USA produced approximately 1% of our total revenues in
1997. Middlesex Water Company has signed a contract for the
acquisition, subject to final ordinance adoption and BPU approval, of
a franchise to provide water service and to install water system
facilities in South Amboy. If the franchise is acquired, after
adoption of the final ordinance and obtaining BPU approval, USA and
Middlesex Water Company will continue to operate and maintain the
facilities owned by the City.
10
<PAGE>
o Utility Service Affiliates (Perth Amboy) Inc., which we refer to as
"USA (PA)" in this Prospectus, along with Middlesex Water Company,
signed an agreement on December 8, 1998 with the City of Perth
Amboy and the Middlesex County Improvement Authority. Under that
agreement, USA (PA) will operate and maintain the city's water system
and the wastewater system for 20 years beginning on an interim basis
on January 1, 1997 pending completion of certain bond financings. If
those bond financings are not completed by March 31, 1999, the
agreement with Perth Amboy will be rescinded. USA (PA) will be paid a
fixed fee and a variable fee based on increased system billings. Fixed
fee payments to USA (PA) in the agreement rise from $6.4 million in
the first year to $9.7 by year 20. The agreement also will require USA
(PA) to lease from the City all of the City's employees who currently
work on the City's water system or wastewater system. In connection
with the agreement, the Middlesex County Improvement Authority is
going to issue up to $69.5 million in three series of bonds with the
completion of those bond financings expected in late January, 1999.
One of those series of bonds, in principal amount up to $27.5 million,
is to be guaranteed by the Company. The other series of bonds are to
be guaranteed by the City. The Company will also guarantee the
performance of our subsidiary, USA (PA). USA (PA) expects to enter
into a subcontract with a sewer contracting firm for the operation and
maintenance of the City wastewater system once those bond financings
are completed. City employees who now work on the City's wastewater
system would be subleased by the subcontractor from USA (PA). Of the
$6.4 million fixed fee payable to USA (PA) in the first year of the
agreement, $3 million would be payable to the subcontractor. The
variable fee payable by USA (PA) to the subcontractor would be based
on a portion of the increased billings attributable to the wastewater
system. We hope to conclude all aspects of the transactions by January
1999.
STRATEGY
To support our existing and expanding operations, we strive to maintain and
strengthen our position as a reliable supplier of quality water in all of our
systems. We will continue to seek new services and to consider acquisitions of
other water and wastewater systems. In addition, we will try to contract with
additional municipalities to operate and manage their water systems and, in some
cases, their wastewater systems. We also plan to continue to increase our
customer base in New Jersey and Delaware. We may also seek to acquire companies
in water- and wastewater-related businesses that are not regulated utilities.
MAINTAIN AND STRENGTHEN OUR POSITION AS A PROVIDER OF QUALITY WATER. We
believe that we meet or exceed all primary regulatory requirements for water
quality. We also believe that we have adequate supplies to provide water in
sufficient quantities to meet our customers' current requirements in all of our
service areas. In order to maintain and improve our ability to provide quality
water in sufficient quantities, we regularly upgrade our facilities. We are
currently upgrading and expanding our CJO Plant in Edison, New Jersey in order
to meet more stringent regulatory requirements anticipated for water quality and
to increase our capacity to meet peak-day demands for water in the utility
system serviced by the CJO Plant. See "THE PROJECT." We also continue to improve
our central New Jersey distribution system by cleaning and cement lining unlined
pipe.
INCREASE CONTRACT SERVICES. We operate and maintain the 2,600 customer
water system of the City of South Amboy, New Jersey under a 1995 contract with
that city which is renewable at five year intervals. On December 1, 1998 we
signed a contract to acquire, subject to final ordinance adoption and BPU
approval, a franchise from the City to provide water service and to install
water system facilities in South Amboy. On December 8, 1998, we signed a
contract with the City of Perth Amboy, New Jersey, to operate and maintain its
8,200 customers water and wastewater systems. We expect to enter into a
subcontract with an experienced sewer contractor for the operation and
maintenance of the wastewater system once bond financings related to the Perth
Amboy contract are completed. We are also currently negotiating with a third New
Jersey municipality to enter into a multi-year treating and pumping contract.
Because we believe contracts with municipalities provide another way for us to
expand our service territories and increase the number of customers we serve, we
continue to seek opportunities to enter into contracts with additional
municipalities to operate their water systems.
INCREASE CUSTOMER BASE. Since 1992, we have increased our retail customer
base in Delaware from approximately 3,000 to approximately 11,000 today through
acquisitions and customer growth. We have also acquired 2,200 customer water
utility and a 2,200 customer wastewater utility in Burlington, County, New
Jersey. We will continue to seek opportunities to increase our customer base by
acquiring additional service areas, water utilities and other water- or
wastewater-related companies in New Jersey and Delaware. There is significant
economic development and population growth near several of our Delaware service
areas.
11
<PAGE>
<TABLE>
<CAPTION>
SUMMARY OF STATISTICAL INFORMATION
(CONSOLIDATED OPERATIONS)
YEAR ENDED
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
(In thousands)
<S> <C> <C> <C> <C> <C>
REVENUES
Residential $ 16,291 $ 15,091 $ 15,202 $ 14,306 $ 14,042
Commercial 4,576 4,347 4,393 4,282 4,170
Industrial 6,631 6,621 6,669 6,598 6,481
Fire Protection 4,662 4,637 4,543 4,352 4,312
Contract Sales 7,380 6,778 6,658 6,322 6,232
Other 754 551 382 262 242
======== ======== ======== ======== ========
Total $ 40,294 $ 38,025 $ 37,847 $ 36,122 $ 35,479
<CAPTION>
AS OF
DECEMBER 31,
-----------------------------------------------------------------
1997 1996 1995 1994 1993
---- ---- ---- ---- ----
Meters in Service 67,673 63,775 61,332 58,371 57,318
Population Served 271,000 255,000 245,000 233,000 229,000
(Retail)
Miles of Main 1,149 1,067 1,035 972 947
Fire Hydrants 4,850 4,750 4,690 4,558 4,503
Pumpage 17,476 16,791 17,380 16,794 16,789
(million gallons)
</TABLE>
WATER SUPPLIES AND CONTRACTS
Our water utility plant consists of sources of supply, pumping, water
treatment, transmission, distribution and general facilities located in New
Jersey and Delaware. Our New Jersey and Delaware water supply systems are
physically separate and are not interconnected. In addition, in New Jersey, the
Pinelands System is not interconnected with the Middlesex System. In the opinion
of management, we have adequate sources of water supply to meet the current and
anticipated future service requirements of our present customers in New Jersey
and Delaware.
MIDDLESEX SYSTEM:
Our Middlesex System obtains water from both surface sources and from wells
which we call groundwater sources. In 1997, surface sources of water provided
approximately 64% of the Middlesex System's water supply, groundwater from wells
provided approximately 29% and the balance of 7% was purchased from
Elizabethtown Water Company ("Elizabethtown"), a nonaffiliated water utility.
Middlesex System's distribution storage facilities are used to supply water to
its customers at times of peak demand, outages and emergencies.
The principal source of surface supply for the Middlesex System is the D& R
Canal, owned by the State of New Jersey and operated as a water resource by the
New Jersey Water Supply Authority ("NJWSA"). Under a multistate compact, the
NJWSA is entitled to divert water from the Delaware River into the D&R Canal.
This supply, together with water in the Round Valley and Spruce Run Reservoir
System, provide a safe yield of 225 mgd which supplies our Middlesex System and
other large water purveyors contractually regulated by the NJWSA. We have
contracts with the NJWSA to divert a maximum of 20 mgd of untreated water from
the D&R Canal. In addition, we have a one year agreement for an additional 5
mgd, renewed through April 30, 1999. We also have an agreement with
Elizabethtown, effective through December 31, 2005, which provides for the
minimum purchase of 3 mgd of treated water with provisions for additional
purchases. We have also purchased additional water from Elizabethtown on an
emergent basis when construction activity briefly closed the D&R Canal.
Our Middlesex System also derives water from groundwater sources equipped
with electric motor driven deepwell turbine type pumps. The Middlesex System has
32 wells, which provide an aggregate pump capacity of approximately 27 mgd.
TIDEWATER SYSTEMS:
Water supply to Delaware customers is derived from the Tidewater Systems'
115 wells which provided overall system delivery of 512 million gallons during
1997. The Tidewater Systems do not have a central treatment facility.
12
<PAGE>
Several of its water systems in Sussex County and New Castle County, Delaware
have interconnected transmission systems. Treatment is by chlorination and, in
some cases, pH correction and filtration.
PINELANDS SYSTEM:
The Pinelands System obtains its water supply from four wells drilled into
the Mt. Laurel aquifer. The wells are equipped with three electric motor driven
deep well turbine pumps and one is equipped with a electric motor driven
submersible pump. Disinfection is done at individual well sites. The wells have
an aggregate pump capacity of 2.2 mgd.
PINELANDS WASTEWATER SYSTEM:
The Pinelands Wastewater System discharges into the South Branch of the
Rancocas Creek through a tertiary treatment plant that provides clarification,
sedimentation, filtration and disinfection. The total capacity of the plant is
0.5 mgd. Current average flow is 0.3 mgd. Pinelands has a current valid
discharge permit issued by the New Jersey Department of Environmental Protection
("DEP").
PROPERTIES
The water utility properties of our systems consist of source of supply,
pumping, water treatment, transmission and distribution and general facilities.
MIDDLESEX SYSTEM:
The Middlesex System's principal source of surface supply is the D&R Canal
owned by the State of New Jersey and operated as a water resource by the NJWSA.
Water is withdrawn from the D&R Canal at New Brunswick, New Jersey through
our intake and pumping station located on State owned land bordering the Canal.
It is transported through our 54 inch supply main for treatment and distribution
at the CJO Plant. See "THE PROJECT." Facilities at the CJO Plant consist of
source of supply, pumping, water treatment, transmission, storage, laboratory
and general facilities. We monitor water quality at the CJO Plant, at each well
field and throughout the distribution system to determine that federal and state
water quality standards are met. See "THE PROJECT" and "Regulation -Water
Quality and Environmental Regulations."
The design capacity of the intake and pumping station in New Brunswick, New
Jersey, is 80 mgd. The four electric motor driven vertical turbine pumps
presently installed have an aggregate design capacity of 65 mgd. The station is
designed to permit its pumping capacity to be increased to 80 mgd by the
installation of additional pumping units. The design capacity of our raw water
supply main is 55 mgd. We also have a 58,600 foot transmission main, a long term
lease agreement with the City of Perth Amboy for the use of a 38,800 foot
transmission main, and a long term, nonexclusive "wheeling agreement" with the
East Brunswick system, all used to transport water to several of our contract
customers.
The CJO Plant includes chemical storage and chemical feed equipment, dual
rapid mixing basins, four reinforced concrete mechanical flocculation
compartments, four underground reinforced concrete settling basins, eight rapid
filters containing gravel, sand and anthracite for water treatment and a steel
washwater tank. The firm design capacity of the CJO Plant is now 30 mgd (45 mgd
maximum capacity). The main pumping station at the CJO Plant has a design
capacity of 90 mgd. The four electric motor driven vertical turbine pumps
presently installed have an aggregate capacity of 65 mgd.
In addition to the main pumping station at the CJO Plant, there is a 15 mgd
auxiliary pumping station located in a separate building. It has a dedicated
substation and emergency power supply provided by a diesel-driven generator. It
pumps from the 10 million gallon distribution storage reservoir directly into
the distribution system. We refer to a million gallons as "mg" in this
Prospectus.
We have a RENEW Program in the Middlesex System to clean and line with
cement previously unlined mains. There are approximately 170 miles of unlined
mains in the 670 mile Middlesex System. In 1999, we will clean and line
approximately nine miles of unlined mains.
Middlesex System's storage facilities consist of a 10 mg reservoir at the
CJO Plant, 5 mg and 2 mg reservoirs in Edison, a 5 mg reservoir in Carteret and
a 2 mg reservoir at the Park Avenue Well Field.
13
<PAGE>
We own the properties in New Jersey on which Middlesex System's 32 wells
are located. We also own our headquarters complex at 1500 Ronson Road, Iselin,
New Jersey, consisting of a 27,000 square foot, two story office building and an
adjacent 16,500 square foot maintenance facility.
TIDEWATER SYSTEMS:
The Tidewater Systems' storage facilities include 21 ground level storage
tanks with the following capacities: eleven 30,000 gallon tanks, five 25,000
gallon tanks, three 120,000 gallon tanks, one 135,000 gallon tank, one 82,000
gallon tank and one elevated storage tank with a capacity of 250,000 gallons.
Our Delaware operations are managed from Tidewater's leased offices in
Odessa, Delaware and from Public's leased offices in Millsboro, Delaware.
Tidewater's office property, which is owned by its wholly-owned subsidiary,
White Marsh Environmental Systems, Inc., consists of a 2,400 square foot
building situated on a one (1) acre lot.
PINELANDS SYSTEM:
Pinelands Water Company owns well site properties which are located in
Southampton Township, New Jersey. Pinelands Water storage facility is a 1.2 mg
standpipe.
PINELANDS WASTEWATER SYSTEM
Pinelands Wastewater Company owns a 12 acre site on which its 0.5 mgd
capacity tertiary treatment plant is located.
LEGAL PROCEEDINGS
A Woodbridge, New Jersey motel in our service area originally filed claims
against us in 1990, in the Superior Court, Burlington County, New Jersey
alleging financial losses due to improper water pressure and service and also
seeking punitive damages. Subsequently in 1994, and again in 1997, the motel
suffered outbreaks of legionella, resulting in the 1997, shut-down of the motel
by the New Jersey Department of Health. The motel amended its claims to assert
that we provided water containing the legionella bacteria. The motel is in
bankruptcy. A bank creditor of the motel has joined in the motel's claim against
us in an effort to recover some $3.5 million still owing to the bank. Although
we believe that the motel's claims are not supportable and have expert witness
testimony to that effect, the motel also has an expert who will testify that we
do have responsibility. Claims resulting from the death of a motel guest from
legionella in 1997 have been brought against the motel and the motel in turn has
claimed against us. We have substantial insurance coverage, which we believe
will be sufficient for all claims in this matter other than for punitive
damages. We do not believe the motel's claims for punitive damages will prevail.
While the outcome of this case remains uncertain, we believe that the final
resolution will not have a significant effect on our financial condition or
results of operation.
A 1995 fire at a warehouse in our service territory resulted in multiple
party claims brought both in the Superior Court for Middlesex County, New
Jersey, as well as, with the financial collapse of the principal tenant, in the
Federal Bankruptcy Court. The claims in the State court action are for
unspecified amounts but include claims against us for insufficient water
pressure and supply. The Bankruptcy Court has stayed all claims against the
tenant except, to the extent the tenant is insured, claims brought by us arising
from claims made against us by other tenants and the landlord. Under New Jersey
case law, we will not have financial responsibility to parties to the extent
they receive payments under their own insurance policies. We do not know either
the total amount of claims against us or how much of that amount will be covered
by the parties' own insurance policies. Our counsel in the litigation advises
that the case is unlikely to be resolved rapidly. We believe we have substantial
defenses to the claims against us, although we do not have insurance coverage
for them.
EMPLOYEES
As of September 30, 1998, we had a total of 140 employees in New Jersey,
and a total of 28 employees in Delaware. No employees are represented by a
union. Management considers its relations with its employees to be satisfactory.
Wages and benefits are reviewed annually and are considered competitive within
the industry.
COMPETITION
Our business in our franchised service areas is substantially free from
direct competition with other public utilities, municipalities and other
entities. However, our ability to provide some contract water supply and
wastewater
14
<PAGE>
services and operations and maintenance services is subject to competition from
other public utilities, municipalities and other entities. Although Tidewater
has been granted an exclusive franchise for each of its existing community water
systems, its ability to expand service areas has been affected by the Delaware
Department of Natural Resources and Environmental Control awarding franchises to
other regulated water purveyors, including franchises granted to service
community water systems around and in between the Tidewater Systems service
areas.
REGULATION
We are subject to regulation as to our rates, services and other matters by
the states of New Jersey and Delaware with respect to utility service within
those states and with respect to environmental and water quality matters. We are
also subject to environmental and water quality regulation by the United States
Environmental Protection Agency ("EPA"). In addition, our issuances of
securities, including the Common Stock offered under this Prospectus, is subject
to the prior approval of the BPU.
REGULATION OF RATES AND SERVICES
New Jersey operations are subject to regulation by the BPU. Similarly, our
Delaware operations are subject to regulation by the PSC. These regulatory
authorities have jurisdiction with respect to rates, service, accounting
procedures, the issuance of securities and other matters.
In determining our rates, the BPU and the PSC consider the income,
expenses, rate base of property used and useful in providing service to the
public and a fair rate of return on that property. Rate determinations by the
BPU do not guarantee particular rates of return to the Company for our New
Jersey operations nor do rate determinations by the PSC guarantee particular
rates of return for our Delaware operations. Thus, we may not achieve the rates
of return allowed by the BPU or the PSC.
We filed a petition with the BPU on September 17, 1998 for a 21.9% rate
increase to include the $38 million costs of the Project in our rate base and to
recover certain other of our costs which have increased. The Company anticipates
that a BPU determination with respect to this petition may not be made until the
summer of 1999. There can be no assurance that the rate increase will be granted
or, if granted, that it will be in the amount we requested.
We anticipate that we may file with the PSC during 1999 for a rate increase
for the Tidewater Systems, which may also include a request to combine Tidewater
and Public into a single entity.
WATER QUALITY AND ENVIRONMENTAL REGULATIONS
Both the EPA and the DEP regulate our operations in New Jersey with respect
to water supply, treatment and distribution systems and the quality of the
water, as do the EPA, the DNREC, and the Delaware Department of Health with
respect to operations in Delaware.
Federal, Delaware and New Jersey regulations adopted over the past five
years relating to water quality require expanded types of testing by the Company
to insure that its water meets State and Federal water quality requirements. In
addition, environmental regulatory agencies are reviewing current regulations
governing the limits of certain organic compounds found in the water as
byproducts of treatment. The Company believes the CJO Plant upgrade and
expansion will allow the Company to be in a stronger position to meet any such
future regulations with regard to its Middlesex System. Regular testing of our
water demonstrates that we are in compliance with existing Federal, New Jersey
and Delaware primary water quality standards.
As more fully discussed in the Company's most recent Annual Report on Form
10-K, the Company is subject to regulations of the EPA as to maximum contaminant
levels under the Federal Safe Drinking Water Act. There are also similar state
regulations by the DEP in New Jersey.
The DEP and the Delaware Department of Health monitor the activities of the
Company and review the results of water quality tests performed by the Company
for adherence to applicable regulations. Other regulations applicable to the
Company include the Lead and Copper Rule, the maximum contaminant levels
established for various volatile organic compounds, the Federal Surface Water
Treatment Rule, and the Total Coliform Rule. See "INCORPORATION OF CERTAIN
DOCUMENTS BY REFERENCE" and "WHERE YOU CAN FIND MORE INFORMATION."
15
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(In thousands, except share and per share data)
This selected financial information as of, and for the years ended,
December 31, 1993, 1994, 1995, 1996 and 1997, was taken from and should be read
along with the financial statements contained in our most recent Annual Report
on Form 10-K. Information as of, and for the periods ended, September 30 1997
and 1998 is taken from financial statements that have not been audited but
which, we believe, fairly present our financial position and results of
operations for those periods and should be read along with our most recently
filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND MORE INFORMATION."
<TABLE>
<CAPTION>
Nine Months Ended
September 30, Year Ended December 31,
------------------ ------------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED INCOME
STATEMENT DATA:
Operating Revenues $32,434 $30,241 $40,294 $38,025 $37,847 $36,122 $35,479
Operating Expenses 25,241 23,544 31,526 29,802 29,184 27,670 27,423
Net Income 5,185 4,487 5,861 5,168 5,704 5,495 5,480
Earnings Applicable 4,946 4,341 5,635 5,009 5,545 5,307 5,224
to Common Stock
Earnings per Share
of Common Stock :
Basic $1.14 $1.03 $1.33 $1.20 $1.36 1.33 1.33
Diluted 1.13 1.02 1.33 1.20 1.36 1.33 1.33
Dividends Paid per Share $.855 $.84 $1.125 $1.105 $1.085 $1.0575 $1.0125
of Common Stock :
Average Number of
Shares Outstanding
Basic 4,326,337 4,226,241 4,235,082 4,169,334 4,078,890 4,003,393 3,924,363
Diluted 4,552,763 4,346,792 4,382,345 4,258,740 4,168,296 4,092,799 4,013,769
<CAPTION>
As of September 30, As of December 31,
------------------ -----------------------------------------------------------
1998 1997 1997 1996 1995 1994 1993
---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE
SHEET DATA:
Total Assets $191,415 $156,706 $159,761 $148,660 $144,822 $132,413 $125,676
Utility Plant - Net 152,045 130,853 135,071 121,245 117,933 108,743 105,392
Common Equity 54,330 50,839 51,226 49,216 47,644 44,851 42,839
Convertible Preferred 3,894 3,896 3,894 1,565 1,565 1,565 1,544
Stock
Nonredeemable
Preferred Stock 1,102 1,102 1,102 1,102 1,102 1,226 1,250
Long-term Debt (excluding 75,884 52,929 52,918 52,961 52,960 49,500 37,000
current portion)
</TABLE>
16
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
The following discussion and analysis should be read in conjuction with the
financial statements contained in our most recent Annual Report on Form 10-K and
our most recently filed Quarterly Report on Form 10-Q. See "WHERE YOU CAN FIND
MORE INFORMATION."
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998
Operating Revenues for the nine months ended September 30, 1998, were $2.2
million higher than last year. Rate increases resulted in additional revenues of
$1.2 million. The Middlesex System received regulatory approval from the BPU to
implement a 4.4% rate increase in January, 1998. The Pinelands Water and
Wastewater Companies also increased their rates in January, 1998. This increase
represented the second part of a three part rate increase previously approved by
the BPU. The third increase is scheduled for January 1999.
A subsidiary acquisition added $0.6 million to revenues. The acquisition of
Public by our wholly-owned subsidiary, Tidewater was completed on July 31, 1997.
As a result, the nine months of consolidated revenue for 1997 only include two
months of revenue from Public.
Customer growth contributed $0.4 million to revenues. The customer base of
Tidewater grew by 820 accounts over the twelve month period ended September 30,
1998. This translates to an annual growth rate in customers of 11.6% and is
consistent with the increase of 13.0% in amounts billed for water services to
the customers of Tidewater.
Operating Expenses rose $1.7 million or 7.2% for the nine months ended
September 30, 1998. Some of the reasons for this increase are briefly discussed
here. The Middlesex System changed the composition of the water sources it used
to supply its customers. During 1998, less water was withdrawn from its well
fields and more was purchased from the NJWSA and Elizabethtown. This resulted in
higher purchased water costs and higher chemicals expense of $0.2 million.
Electric power costs for the Middlesex System were higher by about $0.2 million
over last year due primarily to a large credit we received in the 1997 period
from our power provider. Costs associated with the recognition of post
retirement benefits under mandated accounting standards pushed operating
expenses up by $0.3 million. Public's expenses are now included in our
consolidated expenses. Its expenses amounted to $0.3 million for the nine months
ended September 30, 1998.
On a consolidated basis, almost $9.5 million of newly constructed utility
plant or utility plant acquired through acquisition was placed in service since
September 30, 1997. This resulted in higher depreciation expense in the first
nine months of 1998 of $0.2 million or 8% over that period last year.
Taxes other than income taxes includes the taxes that the State of New
Jersey charges regulated water and wastewater utilities based upon gross
receipts from operations in New Jersey. These taxes are called Gross Receipts
and Franchise Taxes. In general, for every dollar of revenue collected from our
New Jersey customers approximately 13.5% is remitted to the State of New Jersey.
As described above, about $1.2 million of additional revenues were recorded by
our New Jersey companies which, in turn, increased the tax expense by just under
$0.2 million.
Other income increased $0.7 million in the first nine months of 1998 over
last year. One of the components of the increase is higher earnings on the
unexpended proceeds from the 5.35% Series W Mortgage Bond issued in March, 1998.
As of September 30, 1998, $11.3 million of the $23.0 million received from the
Series W offering remains in a CJO Plant Construction account maintained by a
trustee. We submit payment requisitions to the trustee for qualified CJO Plant
expenditures. It is our expectation that the balance of the proceeds will be
exhausted by February, 1999. Another piece of the increase pertains to interest
capitalized on the CJO Plant work in process expenditures. Public utilities
refer to this as Allowance for Funds Used During Construction ("AFUDC"). In
general, AFUDC is recorded as a cost of the project until the utility plant is
ready to provide service to customers. The effect is to reduce expenses
currently for the Company and depreciate the capitalized interest along with the
rest of the CJO Plant costs over its estimated useful life.
Interest charges rose $0.5 million which represents our obligation to pay
interest on the 5.35% Series W Mortgage Bond issued in March 1998.
Net Income for the nine months ended September 30, 1998 increased $0.7
million or 15.6% over the comparable 1997 period based upon the discussion
above. The increase in the preferred stock dividend requirement is attributable
17
<PAGE>
to the issuance of preferred stock in July, 1997, to complete the acquisition of
Public. Through September, 1998, nine months worth of the dividend requirements
were recorded while for the same period in 1997 only two months were recorded.
Basic and Diluted Earnings per Share both increased by $0.11 over last
year. There is a $0.01 per share difference between Basic and Diluted Earnings
per Share. This difference is due to the two series of convertible preferred
stock that we have issued. See "-- Accounting Standards."
RESULTS OF OPERATIONS
1997 COMPARED TO 1996
Operating Revenues increased by $2.3 million to $40.3 million due to
favorable weather conditions in New Jersey and Delaware, continued growth in
Tidewater's customer base of 12%, rate increases implemented by the Pinelands
Companies, increased contract revenues from USA and the inclusion of Public's
operating results since August 1997.
Offsetting effects to net income were higher operations and maintenance
expenses of $0.8 million or 4.1%, which reflected increased purchased water of
$0.3 million transmission and distribution expenses of $0.3 million;
administrative and general expenses of $0.3 million and the inclusion of
operating expenses for Public of $0.2 million. These increases were offset by
reductions in purchased power and water treatment expenses of $0.3 million.
Depreciation expense increased 4.8% due to a higher level of depreciable
plant in service. Taxes, other than income taxes increased $0.2 million and were
related primarily to revenue-related taxes. A higher level of taxable income
resulted in a $0.6 million increase in federal taxes.
As a result, Net Income increased 13.4% to $5.9 million in 1997 compared
with $5.2 million in the prior year.
RESULTS OF OPERATIONS
1996 COMPARED TO 1995
Operating Revenues in 1996 were $0.2 million higher than in 1995.
Consumption was lower in all major classes of customers. These decreases were
offset by additional fixed service charges as a result of an increased customer
base in Delaware of 12.5% and the inclusion of revenues from the Pinelands
Companies and USA for a full year in 1996.
Operations and maintenance expenses were $0.9 million or 4.8% higher in
1996 over 1995 due principally to increases in purchased water of $0.3 million;
water treatment of $0.3 million; pumping expenses of $0.2 million; and customer
accounts and administrative and general expenses of $0.3 million; offset by a
decrease in transmission and distribution expenses of $0.2 million.
Depreciation increased $0.1 million or 4.1% due to a higher depreciation
base. Federal income taxes decreased $0.5 million due to lower taxable income.
Interest expenses increased $0.2 million or 5.3% as a result of the long-term
borrowings by Tidewater.
As a result, Net Income decreased $0.5 million or 9.4%.
LIQUIDITY AND CAPITAL RESOURCES
The table below presents the estimated capital expenditures, in millions
for all our companies for 1998, 1999 and 2000:
1998 1999 2000
---- ---- ----
(in millions)
CJO Plant $16.0 $17.0 $ -
Delaware Systems 3.2 2.0 0.7
RENEW Program 2.1 2.2 2.2
Scheduled upgrades to
existing systems 3.0 4.7 3.6
----- ----- -----
Total $24.3 $25.9 $6.5
----- ----- ----
18
<PAGE>
Our plan to finance these projects is underway. Proceeds from the $23.0
million Series W First Mortgage Bonds and the anticipated common stock offering
will be used to finance the CJO Plant expenditures in 1998 and 1999. Our
Middlesex System will receive $2.2 million from New Jersey Environmental
Infrastructure Trust to cover the cost of the 1999 RENEW Program, which is our
program to clean and line with cement approximately nine miles of unlined mains
in the Middlesex system. There is a total of approximately 170 miles of unlined
mains in the 670 mile Middlesex System. We expect to apply for similar funds in
1999 for the year 2000 RENEW Program. The financing of our Delaware
subsidiaries, capital program will be a combination of a capital contribution
from the Company and long-term debt financing from either a financial
institution or the Company. The debt financing decision will be based upon the
terms of financing available to our Delaware subsidiaries. We expect to be able
to cover the costs of scheduled upgrades to the existing systems with the cash
flow generated from our utility operations through the year 2000. For the nine
months ended September 30, 1998 our consolidated group has expended $18.8
million for capital projects, including $12.2 million for the Project.
The Company currently has six series of First Mortgage Bonds outstanding in
the aggregate principal amount of $72.5 million. In addition, two additional
series of First Mortgage Bonds in the principal amount of $2.2 million have been
delivered in escrow with an expected closing of November 5, 1998. The First
Mortgage Bonds have been issued under and secured by a First Mortgage Bond
Indenture and supplements thereto which constitute a direct first mortgage lien
upon substantially all of the property of the Company. Tidewater borrowed funds
under a $3.5 million 8.05% Amortizing Secured Note due December 20, 2021.
Approximately $3.4 million was outstanding under that note as of September 30,
1998.
From time to time it may be necessary to utilize all or part of the $28.0
million in total lines of credit we have available with three commercial banks
for working capital purposes or provide interim funds until long-term financing
is arranged. At September 30, 1998, we had $4.5 million of loans outstanding
against those lines of credit.
REGULATORY MATTERS
On September 17, 1998, Middlesex filed a petition with the BPU for a base
rate increase of $7.9 million or 21.9%. Approximately 75% of the increase is
necessary to recover the investment in the upgrade and expansion of the CJO
Plant serving our central New Jersey water system. The purpose of the Project is
to meet the new and anticipated regulatory standards concerning water quality,
as well as to increase the plant's production capacity. A decision by the BPU is
expected in the summer of 1999.
On January 29, 1998, the BPU acted upon our November 1996 petition and
approved an increase in our rates for the Middlesex System by 4.4% or $1.5
million. Under the rate increase, the allowed return on equity is 11.0% with an
overall rate of return of 8.56%. The increase included the recovery of
postretirement costs other than pension expenses which are mandated by the
Company's compliance with Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions." The
prior increase in base rates granted by the BPU was $2.8 million, or 9.33%, in
April 1993.
In January 1997, the BPU approved a stipulation agreed to by the parties to
the Pinelands Water and Wastewater Companies' rate cases which were filed in
February 1996. The stipulations allow for a combined rate increase which will
result in $0.4 million additional revenues. The new rates are being phased in
over a three-year period to minimize the impact on customers. Phases one and two
were implemented in January 1997 and 1998, respectively.
ACCOUNTING STANDARDS
In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards ("SFAS") No.128, "Earnings Per Share." This
statement supersedes Accounting Principles Bulletin Opinion No. 15, "Earnings
Per Share," and simplifies the reporting and computing of earnings per share
("EPS"). SFAS No. 128 requires dual presentation of basic and diluted earnings
per share on the face of the income statement and requires a reconciliation of
the basic EPS computation to the diluted EPS computation. At December 31, 1997,
the Company adopted SFAS No. 128.
SFAS No. 130, "Reporting Comprehensive Income," establishes standards for
reporting and display of comprehensive income and its components in a full set
of general-purpose financial statements. At September 30,
19
<PAGE>
1998, the Company did not have any items of comprehensive income that would
affect the current reporting of the Company's financial position, results of
operations or cash flows.
SFAS No. 131, "Disclosures about Segments of an Enterprise and Related
Information," requires that public enterprises report certain information about
operating segments in complete sets of financial statements. Disclosure is not
required for interim financial statements in the initial year of its
application. The Company is evaluating the requirements of SFAS No. 131. Because
the statement relates solely to disclosure provisions, it will not have any
effect on the Company's financial position, results of operations or cash flows.
SFAS No. 132, "Employers' Disclosures about Pensions and Other
Postretirement Benefits," revises and standardizes disclosure requirements for
pension and other postretirement benefit plans but does not change the
measurement or recognition of those plans. This statement is required to be
adopted for the fiscal year ending December 31, 1998.
YEAR 2000
Software used in many computer systems and computerized control devices was
designed to record only the last two digits of each year. This software, some of
which we own, may not function properly as of January 1, 2000 because it
interprets the new year as 1900. We have tested our own computer systems, to
make certain that those systems will work properly when 1999 becomes 2000. We
have also requested certification of Year 2000 compliance from the vendor of the
new SCADA, as well as the principal vendors of data processing serving our
financial reporting, payroll, billing, customer information and shareholder
record systems. The vendors have certified that their systems have been tested
and will work properly. We believe we may reasonably rely on those
certifications. We also expect to spend up to $10,000 to bring certain other
operating systems, including our network of desktop personal computers, into
Year 2000 compliance. Nonetheless, we may not have identified every computerized
control device of ours which may be affected by Year 2000. Even if identified,
we may not be able to reprogram or replace those devices before January 1, 2000.
More importantly, we cannot assess the impact on us of failures of computer
systems and control devices used by others. We are especially concerned about
third parties who provide significant services and materials to process, treat
and distribute water and to process, treat and dispose of wastewater, and about
the possible failure of electric power and telecommunications or the inability
to obtain diesel fuel for the Company's stand-by generators. The occurrence of
any such Year 2000-related problem could have a material adverse effect on our
financial condition and results of operations.
20
<PAGE>
COMMON STOCK PRICE RANGE AND DIVIDENDS
Cash dividends on our Common Stock have been paid each year since 1912, and
the annual dividend has increased for 25 consecutive years. On October 22, 1998,
the Board of Directors declared a quarterly cash dividend of $0.295 per share
payable on December 1, 1998 to shareholders of record on November 16,1998.
The Board of Directors' policy has been to pay cash dividends on the Common
Stock on a quarterly basis. Future cash dividends will be dependent upon our
earnings, financial condition, capital demands and other factors, and will be
determined in accordance with policies established by the Board of Directors.
See "Description of Common Stock" for certain restrictions upon the payment of
cash dividends.
Our Common Stock is listed on the Nasdaq National Market and trades under
the symbol "MSEX." On October 22, 1998, we had 2,271 common shareholders of
record.
The following table sets forth the range of sales prices of the Common
Stock, as reported by the Nasdaq National Market and dividends paid thereon for
the periods indicated.
<TABLE>
<CAPTION>
SALES PRICE
-------------------------
HIGH LOW QUARTERLY CASH DIVIDENDS
---- --- ------------------------
<S> <C> <C> <C> <C>
1998:
Fourth Quarter (through $25 $21 1/4 $0.295
November 25, 1998)
Third Quarter 22 20 1/8 0.285
Second Quarter 21 1/4 19 1/4 0.285
First Quarter 22 1/2 19 7/8 0.285
------
$1.150
======
1997:
Fourth Quarter $22 1/2 $18 $0.285
Third Quarter 19 1/4 16 3/8 0.28
Second Quarter 17 7/8 16 3/8 0.28
First Quarter 18 17 0.28
------
$1.125
======
1996:
Fourth Quarter $18 1/4 $16 3/4 $0.28
Third Quarter 18 16 0.275
Second Quarter 17 1/2 15 1/2 0.275
First Quarter 19 1/4 17 1/4 0.275
------
$1.105
======
</TABLE>
The book value per share of the Common Stock at September 30, 1998 was
$12.20 per share. For a recent closing sale price of the Common Stock, as
reported on the Nasdaq National Market, see the cover page of this Prospectus.
21
<PAGE>
DESCRIPTION OF COMMON STOCK
Our authorized capital stock consists of 10,000,000 shares of Common Stock,
without par value, 149,980 shares (as of October 30, 1998) of Cumulative
Preferred Stock, without par value, and 100,000 shares of Cumulative Preference
Stock, without par value. As of October 30, 1998, there were 4,368,847 shares of
Common Stock outstanding, four series of Cumulative Preferred Stock representing
a total of 45,898 shares outstanding and no shares of the Cumulative Preference
Stock outstanding. The issuance of the Common Stock offered hereby is subject to
approval by the BPU. See "THE COMPANY --Regulation."
The transfer agent for the Common Stock is Registrar and Transfer Company.
Our outstanding Common Stock is traded on the over-the-counter market on the
Nasdaq National Market System.
Certain New Jersey state laws and provisions in our Restated Certificate of
Incorporation may deter or prevent a change in control of us and/or a change in
management, even if desired by a majority of the shareholders. See "--Voting
Rights" and "--Restriction on Acquisitions."
The following is a brief summary of certain information relating to our
Common Stock. This summary does not purport to be complete and is intended to
outline such information in general terms only.
DIVIDEND RIGHTS
Our Restated Certificate of Incorporation provides that whenever full
dividends have been paid on the Preferred Stock and the Preference Stock
outstanding for all past quarterly periods, the Board of Directors may declare
and pay dividends on the Common Stock out of legally available funds.
LIMITATIONS ON PAYMENT OF DIVIDENDS
Under the terms of the Fourth Supplement to the Company's First Mortgage
Bond Indenture, unless the holders of not less than 75% in principal amount of
all first mortgage bonds consent in writing, the Company may not make a payment
as a dividend or other distribution on capital stock issued by the Company or
for the redemption or acquisition of capital stock issued by the Company, if the
aggregate of all such payments made and to be made by the Company, including the
proposed payment, during the period from October 1, 1948 to the date of the
proposed payment would exceed the aggregate of (a) the consolidated net earnings
of the Company for the period, and (b) the proceeds of the sale received by the
Company for all capital stock issued by it subsequent to September 30, 1948;
provided, that a dividend paid or to be paid in capital stock shall not be
included in the aggregate of such payments.
In addition, under the Thirteenth Supplement to the Company's First
Mortgage Bond Indenture, the Company may not declare or pay any dividends on its
Common Stock (except dividends in shares of its Common Stock) or make any
distribution (except in shares of its Common Stock) or purchase or otherwise
acquire any shares of its Common Stock for value if the aggregate amount of such
dividends, distributions, purchases and acquisitions paid or made subsequent to
December 31, 1972 exceeds the sum of the aggregate of the consolidated net
income of the Company (as defined in the Thirteenth Supplemental Indenture)
available for dividends on its Common Stock accumulated subsequent to December
31, 1971, plus $l.0 million.
As of the date of this Prospectus, the payment of dividends by the Company
has not been affected by these limitations.
VOTING RIGHTS
Every holder of the Common Stock is entitled to one vote for each share
held of record. The Company's Restated Certificate of Incorporation and By-laws
provide for a Board of Directors divided into three classes of directors serving
staggered three-year terms. A classified board has the effect of increasing the
time required to effect a change in control of the Board of Directors. The
Company's By-laws provide that nominations for directors must be (i) made in
writing, (ii) received by the Secretary of the Company not less than 21 days
prior to the date fixed for the meeting of stockholders and (iii) accompanied by
the written consent of the nominee to serve as a director. In addition, the
Restated Certificate of Incorporation provides that the By-laws may only be
amended by stockholders if the holders of two-thirds or more of the issued and
outstanding shares of Common Stock vote for the amendment. The Company's
Restated Certificate of Incorporation also provides that stockholders may take
action only at an annual or special meeting upon prior notice and pursuant to a
vote.
22
<PAGE>
No holder of Preferred Stock or Preference Stock (none of which Preference
Stock has been issued) has any right to vote for the election of directors or,
except as otherwise required by law, for any other purpose; provided, however,
that if and whenever dividends on the outstanding Preferred Stock are in arrears
in an amount equal to at least four quarterly dividends, the holders of the
outstanding Preferred Stock of all series, voting as a class, are entitled,
until all dividends in arrears are paid, to elect two members to the Board of
Directors, which two members shall be in addition to the directors elected by
the holders of the Common Stock. Whenever dividends on the outstanding
Preference Stock are in arrears in an amount equal to at least four quarterly
dividends, the holders of the outstanding Preference Stock of all series, voting
as a class, are entitled, until all dividends in arrears are paid, to elect two
members to the Board of Directors, which two members shall be in addition to the
members elected by the holders of the Common Stock and by the holders of the
Preferred Stock. In addition, unless certain tests set forth in the Company's
charter are met, the consent of the holders of a majority of the outstanding
shares of Preferred Stock of all series, voting as a class, is required for
issuance or sale of any additional series of Preferred Stock or any class of
stock ranking prior to or on a parity with the Preferred Stock as to dividends
or distributions. The consent of the holders of two-thirds in interest of the
outstanding Preferred Stock of all series, voting as a class, is required to
create or authorize any stock ranking prior to the Preference Stock as to
dividends or in liquidation, or to create or authorize any obligation or
security convertible into shares of any such stock, except that such consent is
not required with respect to any increase in the number of shares of Preferred
Stock which the Company is authorized to issue or with respect to the creation
and establishment of any series of the Company's Preferred Stock.
LIQUIDATION RIGHTS
Holders of Common Stock are entitled to share on a pro-rata basis, subject
to the rights of holders of the Company's First Mortgage Bonds, Preferred Stock
or Preference Stock, in the assets of the Company legally available for
distribution to shareholders in the event of the Company's liquidation,
dissolution or winding up.
RESTRICTION ON ACQUISITIONS
As a New Jersey corporation with its headquarters and principal operations
in the state the Company, is a "resident domestic corporation" as defined in New
Jersey's Shareholder Protection Act (the "Act"). The Act bars any "business
combination" as defined in that Act, (generally, a merger or other acquisition
transaction) with any person or affiliate of a person who owns 10% or more of
the outstanding voting stock of a resident domestic corporation for a period of
five years after such person first owns 10% or more of such stock, unless the
"business combination" both is approved by the board of directors of the
resident domestic corporation prior to the time that person acquires 10% or more
of the resident domestic corporation's voting stock and meets certain other
statutory criteria.
DIVIDEND REINVESTMENT PLAN
The Company has a Dividend Reinvestment and Common Stock Purchase Plan
("DRIP") under which participating shareholders may have cash dividends on all
or a portion of their shares of Common Stock or Cumulative Preferred Stock
automatically reinvested in newly issued shares of Common Stock and may invest
at the same time up to an additional $25,000 per quarter in newly issued shares
of Common Stock. Under the DRIP, the Company may permit the purchase of shares
of Common Stock at 95% of market value for specified periods as announced by the
Company from time to time. The Company last authorized the purchase of shares of
Common Stock at 95% of market value during the period January 1, to June 1,
1998. As currently in effect, any purchase of shares under the DRIP is at full
market value. No commission or service charge is paid by participants in
connection with any of their purchases under the DRIP.
23
<PAGE>
UNDERWRITING
Subject to the terms and conditions of an Underwriting Agreement among the
Company and Edward D. Jones & Co., L.P. and Janney Montgomery Scott Inc. (the
"Underwriters"), the Underwriters have severally agreed to purchase from the
Company the aggregate number of shares of the Company's Common Stock set forth
opposite their respective names below.
NUMBER
UNDERWRITER OF SHARES
----------- ---------
Edward D. Jones & Co., L.P.......................
Janney Mortgomery Scott Inc. .................... -------
Total................................ 450,000
=======
The Underwriting Agreement provides that the obligations of the
Underwriters to pay for and accept delivery of the Common Stock are subject to
the approval of certain legal matters by counsel and to certain other
conditions. The Underwriters are obligated to take and pay for all of the shares
of the Common Stock offered hereby if any are taken (other than shares of Common
Stock covered by the over-allotment option described below).
The Underwriters have advised the Company that they propose to offer the
Common Stock being purchased by them directly to the public at the initial
public offering price set forth on the cover page of this Prospectus and in part
to certain securities dealers which are members of the National Association of
Securities Dealers, at such prices less a concession which shall not exceed
$_____ per share of Common Stock. After the initial public offering, the public
offering price and concessions may be changed by the Underwriters.
The offering of the Common Stock is made for delivery when, as and if
accepted by the Underwriters and subject to prior sale and to withdrawal,
cancellation or modification of the offer without notice. The Underwriters
reserve the right to reject any order for the purchase of Common Stock in whole
or in part.
The Company has granted to the Underwriters an option for 30 days to
purchase (at the Common Stock Public Price less the Underwriting Discounts and
Commissions shown on the cover page of this Prospectus) up to 67,000 additional
shares of Common Stock. The Underwriter may exercise such option only to cover
over-allotments of shares of Common Stock made in connection with the sale of
the shares offered hereby.
In connection with this offering and in compliance with applicable law, the
Underwriters may over-allot (i.e., sell more Common Stock than is set forth on
the cover page of this Prospectus) and may effect transactions which stabilize,
maintain or otherwise affect the market price of the Common Stock at levels
above those which might otherwise prevail in the open market. Such transactions
may include placing bids for the Common Stock or effecting purchases of the
Common Stock for the purpose of pegging, fixing or maintaining the price of the
Common Stock or for the purpose of reducing a short position created in
connection with the Offering. A short position may be covered by exercise of the
over-allotment option described above in lieu of or in addition to open market
purchases. The Underwriters are not required to engage in any of these
activities and any such activities, if commenced, may be discontinued at any
time.
Neither the Company nor the Underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Common Stock. In addition, neither
the Company nor the Underwriters makes any representation that the Underwriters
will engage in such transactions or that such transactions, once commenced, will
not be discontinued without notice.
The Company and its directors and executive officers have agreed to enter
into lock-up agreements pursuant to which they will agree that, subject to
certain customary exceptions, they will not, without the prior written consent
of Edward D. Jones & Co., L.P., for a period of 60 days from and after the date
of this Prospectus, sell, offer to sell, contract to sell, or otherwise dispose
of, directly or indirectly, any shares of Common Stock of the Company or any
securities convertible into, or exercisable or exchangeable for, Common Stock of
the Company (other than shares issuable pursuant to a plan for employees in
effect on the date of this Prospectus).
The Company has agreed to indemnify the Underwriters and persons who
control the Underwriters against certain liabilities that may be incurred in
connection with the offering contemplated hereby, including liabilities under
the Securities Act of 1933, as amended, or to contribute to payments the
Underwriters may be required to make in respect thereof.
24
<PAGE>
LEGAL MATTERS
Certain legal matters in connection with the validity of the Common Stock
offered hereby will be passed upon for the Company by Norris, McLaughlin &
Marcus, P.A., Somerville, New Jersey. Certain legal matters will be passed upon
for the Underwriters by Armstrong, Teasdale, Schlafly & Davis, St. Louis,
Missouri.
EXPERTS
The financial statements incorporated in this Prospectus by reference from
the Company's Annual Report on Form 10-K for the year ended December 31, 1997
have been audited by Deloitte & Touche, independent auditors, as stated in their
report, which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and special reports, proxy statements, and other
information with the Securities and Exchange Commission (the "Commission"). You
may read and copy any of the reports and other information we file at the
Commission's public reference facilities located in Washington at Judiciary
Plaza, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, in New York
located at 7 World Trade Center, Suite 1300, New York, New York 10048, and in
Chicago located at Northwest Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. You may call the SEC at 1-800-SEC-0330 for further
information about the public reference rooms. Copies of such material can also
be obtained from the Public Reference Section of the commission at 450 Fifth
Street, N.W., Washington, D.C. 20549 at prescribed rates. Our SEC filings are
also available to the public over the Internet at the Commission's web site
which is located at the following address: http://www.sec.gov.
This Prospectus is a part of a registration statement on Form S-3 (which,
together with all exhibits filed along with it, will be referred to as the
"Registration Statement") which we filed with the Commission to register the
securities we are offering. Certain information and details which may be
important to specific investment decisions may be found in other parts of the
Registration Statement, including its exhibits, but are left out of this
Prospectus in accordance with the rules and regulations of the Commission. To
see more detail, you may wish to review the Registration Statement and its
exhibits. Copies of the Registration Statement and its exhibits are on file at
the offices of the Commission and may be obtained upon payment of the prescribed
fee or may be examined without charge at the public reference facilities of the
Commission described above.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The Commission's rules allow us to "incorporate by reference" the
information we file with the Commission, which means we can disclose important
information to you by referring you to those documents. The information
incorporated by reference is an important part of this Prospectus. We
incorporate by reference the documents listed below, which already have been
filed with the Commission, and certain information we may file in the future
will automatically update and take the place of information already filed. The
following documents are incorporated by reference as of the date each was filed:
(a) the Company's Quarterly Reports on Form 10-Q for the quarters ended March
31, 1998, June 30, 1998 and September 30, 1998; (b) the Company's Annual Report
on Form 10-K for the year ended December 31, 1997; and (c) the Company's Current
Report on Form 8-K filed on September 11, 1998.
In addition to the documents already filed, all reports and other documents
which we file in the future with the Commission pursuant to Sections 13(a),
13(c), 14 and 15(d) of the Securities Exchange Act of 1934, before this stock
offering ends, shall also be incorporated by reference in this Prospectus.
You may request a copy of any of these filings. Such requests should be
directed to: Ms. Marion F. Reynolds, Vice President, Secretary and Treasurer,
Middlesex Water Company, 1500 Ronson Road, Iselin, New Jersey 08830, phone no.
(732) 634-1500. You will not be charged for these copies unless you request
exhibits, for which we will charge you a minimal fee. However, you will not be
charged for exhibits in any case where the exhibit you request is specifically
incorporated by reference into another document which is incorporated by this
Prospectus.
25
<PAGE>
- --------------------------------------------------------------------------------
NO DEALER, SALESPERSON OR OTHER INDIVIDUAL HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR MAKE ANY REPRESENTATIONS WHICH ARE NOT CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERING OF SHARES OF COMMON STOCK COVERED IN
THIS PROSPECTUS. IF GIVEN OR MADE, SUCH REPRESENTATIONS MUST NOT BE RELIED UPON
AS HAVING BEEN AUTHORIZED BY MIDDLESEX WATER COMPANY OR ANY OF THE UNDERWRITERS.
THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN
OFFER TO BUY, ANY SHARES OF COMMON STOCK OFFERED HEREBY IN ANY JURISDICTION
WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE
HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE
HEREOF.
450,000 Shares
MIDDLESEX WATER COMPANY
COMMON STOCK
------------
PROSPECTUS
------------
EDWARD D. JONES & CO., L.P.
JANNEY MONTGOMERY
SCOTT INC.
____________, 1998
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The costs and expenses, other than underwriting discounts and commissions,
payable by the Company in connection with this Offering (all amounts are
estimated except the registration fee) are as follows:
TO BE PAID
BY THE
ITEM COMPANY
---- -----------
Securities and Exchange Commission registration fee...... 3,198
National Association of Securities Dealers, Inc. fee..... 1,700
Nasdaq listing fee....................................... 10,340
Accounting fees and expenses............................. 20,000
Legal fees and expenses.................................. 66,000
Printing................................................. 25,000
Blue Sky fees and expenses .............................. 5,000
Transfer agent fees and expenses ........................ 1,000
Miscellaneous ........................................... 2,762
--------
Total............................................ $135,000
========
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 14A:3-5 of the New Jersey Business Corporation Act (the "NJBCA")
gives the Company power to indemnify each of its directors and officers against
expenses and liabilities in connection with any proceeding involving him by
reason of his being or having been a director or officer if (a) he acted in good
faith and in a manner he reasonably believed to be in, or not opposed to, the
best interests of the Company, and (b) with respect to any criminal proceeding,
he had no reasonable cause to believe his conduct was unlawful. However, in a
proceeding by or in the right of the Company, there shall be no indemnification
in respect of any liabilities or expenses if the officer or director shall have
been adjudged liable to the Company unless the Court in such proceeding
determines he is entitled to indemnity for such liabilities and/or expenses. No
indemnification shall be made to or on behalf of a director or officer if a
judgment or other final adjudication adverse to such director or officer
establishes that his acts or omissions (a) were in breach of his duty of loyalty
to the Company and its shareholders, (b) were not in good faith or involved a
knowing violation of law or (c) resulted in receipt by the director or officer
of an improper personal benefit. The NJBCA defines an act or omission in breach
of a person's duty of loyalty as an act or omission which that person knows or
believes to be contrary to the best interests of the Corporation or its
shareholders in connection with a matter in which he has a material conflict of
interest. If a director or officer is successful in a proceeding, the statute
mandates that the Company indemnify him against expenses.
Article V of the Company's By-laws provides:
"Any present or future director or officer of the Company and any
present or future director or officer of any other corporation serving as
such at the request of the Company because of the Company's interest in
such other corporation, or the legal representative of any such director or
officer, shall be indemnified by the Company against reasonable costs,
expenses (exclusive of any amount paid to the Company in settlement), and
counsel fees paid or incurred in connection with any action, suit, or
proceeding to which any such director or officer or his legal
representative may be made a party by reason of his being or having been
such director or officer; provided, ( 1 ) said action, suit, or proceeding
shall be prosecuted against such director or officer or against his legal
representative to final determination, and it shall not be finally adjudged
in said action, suit, or proceeding that he had been derelict in the
performance of his duties as such director or officer; or (2) said action,
suit or proceeding shall be settled or otherwise terminated as against such
director or officer or his legal representative without a final
determination on the merits, and it shall be determined by the Board of
Directors (or, at the option of the Board of Directors, by a disinterested
person or persons selected by the Board of Directors to determine the
II-1
<PAGE>
matter) that said director or officer had not in any substantial way been
derelict in the performance of his duties as charged in such action, suit,
or proceeding. The right of indemnification provided by this By-law shall
be in addition to and not in restriction or limitation of any other
privilege or power which the Company may have with respect to the
indemnification or reimbursement of directors, officers, or employees."
The Company has in effect a $20,000,000.00 policy of insurance indemnifying
it against certain liabilities to directors and officers of the Company, and
indemnifying directors and officers of the Company against certain of the
liabilities which they may incur in acting in their capacities as such, all
within specific limits. The insurance was purchased from the Federal Insurance
Company, a subsidiary of the Chubb Group of Insurance Companies, for a term
expiring May 31, 2001.
Pursuant to Section 14A:2-7 of the NJBCA, the Company's shareholders
adopted an amendment to the Company's Certificate of Incorporation which
provides that a director or officer shall not be personally liable to the
Company or its shareholders for damages for breach of any duty owed to the
Company or its shareholders, except that such provision 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 Company or its
shareholders, (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.
ITEM 16. EXHIBITS
Exhibit
No. Document Description
- ------- --------------------
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as
amended, is incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
3.2 Bylaws of the Company, as amended, is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
4.1 Form of Common Stock Certificate, is incorporated
by reference to Exhibit 2(a) filed with the
Company's Registration Statement No. 2-55058
4.2 Articles 7A through 7F, 8, 9 and 10 of the Restated
Certificate of Incorporation as amended are
incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the
Year ended December 31, 1997.
5* Opinion of Counsel Re: Legality of Securities Registered
10.24 Operating Agreement between the City of Perth Amboy, the Middlesex
County Improvement Authority and Utility Service Affiliates, Inc.
10.25 Assignment and Acceptance Agreement between Utility Service
Affiliates, Inc. and Utility Service Affiliates (Perth Amboy), Inc.
23.1* Independent Auditors' Consent
23.2* Consent of Counsel is included in its legal opinion as Exhibit 5
24* Power of Attorney (is included as a part of the
signature page of this registration statement)
- ---------
* Previously filed.
ITEM 17. UNDERTAKINGS
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended (the "1933 Act"), may be available to directors, officers
and controlling persons of the Company pursuant to the New Jersey Business
Corporation Act, the By-laws of the Company, the Underwriting Agreement, or
otherwise, the Company has been advised that, in the opinion of the Securities
and Exchange Commission, such indemnification is against public policy as
expressed in the 1933 Act and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Company of expenses incurred or paid by a director, officer, or controlling
person of the Company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Company will, unless in the
opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the 1933 Act and
will be governed by the final adjudication of such issue.
II-2
<PAGE>
The undersigned Company hereby undertakes that:
(1) For purposes of determining any liability under the 1933 Act, the
information omitted from the form of prospectus filed as part of a
registration statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the 1933 Act shall be deemed to be part of the registration
statement as of the time it was declared effective.
(2) For purposes of determining any liability under the Securities Act
of 1933, each filing of the Registrant's annual report pursuant to Section
13(a) or Section 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is
incorporated by reference in the Registration Statement shall be deemed to
be a new Registration Statement relating to the securities offered therein,
and the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) For the purposes of determining any liability under the 1933 Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the Township of Woodbridge, State of New Jersey on the 15th day
of December, 1998.
MIDDLESEX WATER COMPANY
By: /s/ J. RICHARD TOMPKINS
--------------------------------------
J. Richard Tompkins
President and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed by the following persons in the
capacities and on the dates indicated below.
<TABLE>
<CAPTION>
Person Capacity Date
------ -------- ----
<S> <C> <C>
/s/ J. RICHARD TOMPKINS
- ----------------------------------- Chairman of the Board, December 15, 1998
J. Richard Tompkins President, Chief Executive
Officer and Director
*
- ----------------------------------- Director December 15, 1998
John C. Cutting
*
- ----------------------------------- Director December 15, 1998
Ernest C. Gere
*
- ----------------------------------- Director December 15, 1998
John P. Mulkerin
*
- ----------------------------------- Director December 15, 1998
Stephen H. Mundy
*
- ----------------------------------- Director December 15, 1998
Philip H. Reardon
*
- ----------------------------------- Director December 15, 1998
Richard A. Russo
*
- ----------------------------------- Director December 15, 1998
William E. Scott
*
- ----------------------------------- Director December 15, 1998
Jeffries Shein
/s/ A. BRUCE O'CONNOR
- ----------------------------------- Vice President and Controller December 15, 1998
A. Bruce O'Connor (Chief Financial Officer)
*By: /s/ J. RICHARD TOMPKINS
--------------------------------------
J. Richard Tompkins
Attorney-in-Fact
</TABLE>
II-4
<PAGE>
EXHIBIT INDEX
Exhibit
No. Document Description
- ------- --------------------
1.1* Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation of the Company, as
amended, is incorporated herein by reference to
Exhibit 3.1 to the Company's Annual Report on
Form 10-K for the year ended December 31, 1997.
3.2 Bylaws of the Company, as amended, is incorporated herein by
reference to Exhibit 3.2 to the Company's Annual Report on Form
10-K for the year ended December 31, 1997.
4.1 Form of Common Stock Certificate, is incorporated
by reference to Exhibit 2(a) filed with the
Company's Registration Statement No. 2-55058
4.2 Articles 7A through 7F, 8, 9 and 10 of the Restated
Certificate of Incorporation as amended are
incorporated herein by reference to Exhibit 3.1 to
the Company's Annual Report on Form 10-K for the
Year ended December 31, 1997.
5* Opinion of Counsel Re: Legality of Securities Registered
10.24 Operating Agreement between the City of Perth Amboy, the Middlesex
County Improvement Authority and Utility Service Affiliates, Inc.
10.25 Assignment and Acceptance Agreement between Utility Service
Affiliates, Inc. and Utility Service Affiliates (Perth Amboy), Inc.
23.1* Independent Auditors' Consent
23.2* Consent of Counsel is included in its legal opinion as Exhibit 5
24* Power of Attorney (is included as a part of the
signature page of this registration statement)
- --------------
*Previously filed.
AGREEMENT BETWEEN THE CITY OF PERTH AMBOY,
IN THE COUNTY OF MIDDLESEX, NEW JERSEY,
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
AND UTILITY SERVICE AFFILIATES, INC.,
A SUBSIDIARY OF
MIDDLESEX WATER COMPANY,
FOR OPERATION, MAINTENANCE AND MANAGEMENT SERVICES
FOR THE CITY'S WATER SYSTEM AND WASTEWATER SYSTEM
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE I. DEFINITIONS.......................................................................................... 3
SECTION 1.1. DEFINITIONS................................................................................ 3
SECTION 1.2. RULES OF INTERPRETATION....................................................................18
ARTICLE II. GENERAL PROVISIONS..................................................................................19
SECTION 2.1. OPERATION, MAINTENANCE AND MANAGEMENT OF SYSTEM ...........................................19
SECTION 2.2. TERM ......................................................................................19
SECTION 2.3. AUTHORITY FINANCING .......................................................................19
ARTICLE III. CONDITIONS PRECEDENT...............................................................................22
SECTION 3.1. GENERAL ...................................................................................22
SECTION 3.2. CONDITIONS TO CITY'S OBLIGATIONS ..........................................................22
SECTION 3.3. CONDITIONS TO AUTHORITY OBLIGATIONS .......................................................23
SECTION 3.4. CONDITIONS TO COMPANY OBLIGATIONS .........................................................24
SECTION 3.5. SATISFACTION OF CONDITIONS PRECEDENT ......................................................25
SECTION 3.6. TIMING OF CERTAIN OBLIGATIONS .............................................................27
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS...............................................................29
SECTION 4.1. CITY REPRESENTATIONS, WARRANTIES AND COVENANTS ............................................29
SECTION 4.2. COMPANY AND/OR GUARANTOR REPRESENTATIONS, WARRANTIES AND COVENANTS.........................30
SECTION 4.3. TAX COVENANTS OF THE CITY AND THE COMPANY .................................................33
SECTION 4.4. AUTHORITY REPRESENTATIONS, WRRANTIES AND COVENANTS ........................................34
ARTICLE V.
CITY RESPONSIBILITIES...................................................................................35
SECTION 5.1. GENERAL RESPONSIBILITIES ..................................................................35
SECTION 5.2. ESTABLISHMENT AND COLLECTION OF RENTS, RATES, FEES AND CHARGES.............................35
SECTION 5.3. ACCESS AND EASEMENTS ......................................................................36
ARTICLE VI.
OPERATION, MAINTENANCE AND MANAGEMENT OF THE SYSTEM.....................................................37
SECTION 6.1. GENERAL ...................................................................................37
SECTION 6.2. MATERIALS, LABOR, VEHICLES, ETC. ..........................................................37
SECTION 6.3. HAZARDOUS SUBSTANCES ......................................................................38
SECTION 6.4. RESPONSE REQUIREMENTS FOR PROBLEMS, COMPLAINTS AND INQUIRIES ..............................39
SECTION 6.5. INVENTORY/EQUIPMENT/VEHICLES ..............................................................39
SECTION 6.6. MAINTENANCE MANAGEMENT PROGRAM ............................................................41
SECTION 6.7. SOFTWARE PROGRAM ..........................................................................42
SECTION 6.8. TESTING AND LABORATORY ANALYSIS ...........................................................42
SECTION 6.9. REPORTING REQUIREMENTS ....................................................................43
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 6.10. STAFFING .................................................................................45
SECTION 6.11. LICENSES .................................................................................48
SECTION 6.12. COMPLIANCE WITH LAWS, REGULATIONS AND PERMITS ............................................48
SECTION 6.13. SAFETY AND SECURITY ......................................................................50
SECTION 6.14 CONTINUITY OF SERVICE ....................................................................50
SECTION 6.15. EMERGENCY SITUATIONS .....................................................................51
SECTION 6.16. PROVISIONS SPECIFIC TO WATER SYSTEM ......................................................53
SECTION 6.17. PROVISIONS SPECIFIC TO WASTEWATER SYSTEM .................................................55
SECTION 6.18. OPERATIONS COMMITTEE .....................................................................57
SECTION 6.19. UNBILLED SERVICES ........................................................................58
SECTION 6.20. BILLING AND COLLECTIONS ..................................................................59
ARTICLE VII.
CAPITAL IMPROVEMENTS TO THE SYSTEM......................................................................61
SECTION 7.1. ONGOING CAPITAL IMPROVEMENTS .............................................................61
SECTION 7.2. ADDITIONAL CAPITAL IMPROVEMENTS TO THE SYSTEM.............................................62
SECTION 7.3. DESIGN AND PERFORMANCE STANDARDS .........................................................64
SECTION 7.4. TERMINATION OF ADDITIONAL CAPITAL IMPROVEMENTS ...........................................64
SECTION 7.5. CAPITAL IMPROVEMENT FUND .................................................................65
ARTICLE VIII.
RATES, REVENUES, SERVICE FEE AND ADJUSTMENTS............................................................67
SECTION 8.1. RATES, FEES AND OTHER CHARGES ............................................................67
SECTION 8.2. REVENUES .................................................................................67
SECTION 8.3. SERVICE FEE ..............................................................................67
SECTION 8.4. ADJUSTMENTS TO THE SERVICE FEE ...........................................................67
SECTION 8.5. ADJUSTMENTS TO THE RATES .................................................................70
ARTICLE IX.
DEFAULT AND TERMINATION ................................................................................72
SECTION 9.1. GENERAL PROVISIONS .......................................................................72
SECTION 9.2. TERMINATION BY THE CITY ..................................................................72
SECTION 9.3. TERMINATION BY THE COMPANY ...............................................................75
SECTION 9.4. NO CONSEQUENTIAL DAMAGES .................................................................78
SECTION 9.5. CONTINUITY OF SERVICE UPON TERMINATION ...................................................78
SECTION 9.6. ENFORCEMENT RIGHTS OF THE AUTHORITY ......................................................78
SECTION 9.7. EFFECT OF TERMINATION ....................................................................79
ARTICLE X.
MISCELLANEOUS...........................................................................................80
SECTION 10.1. INSURANCE ................................................................................80
SECTION 10.2. PERFORMANCE BONDS ........................................................................86
SECTION 10.3. INDEMNIFICATION ..........................................................................87
SECTION 10.4. ACCESS TO SYSTEM AND RECORDS .............................................................93
SECTION 10.5. AUTHORITY TO CONTEST .....................................................................95
SECTION 10.6. ENFORCEMENT ..............................................................................95
SECTION 10.7. ASSIGNMENT ...............................................................................95
SECTION 10.8. AFFIRMATIVE ACTION .......................................................................96
SECTION 10.9. ENTIRE AGREEMENT .........................................................................98
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SECTION 10.10. NOTICES ................................................................................ 99
SECTION 10.11. APPLICATION OF LAW ..................................................................... 99
SECTION 10.12. RELATIONSHIP ........................................................................... 99
SECTION 10.13. PUBLIC RELATIONS .......................................................................100
SECTION 10.14. NOTICE OF LITIGATION ...................................................................100
SECTION 10.15. UNCONTROLLABLE CIRCUMSTANCES ...........................................................101
SECTION 10.16. DISPUTE RESOLUTION .....................................................................101
SECTION 10.17. NO THIRD PARTY RIGHTS ..................................................................102
SECTION 10.18. NO SET-OFF .............................................................................102
SECTION 10.19. PAYMENTS AND INTEREST ..................................................................102
SECTION 10.20. COST SUBSTANTIATION ....................................................................102
SECTION 10.21. PUBLIC NOTICES .........................................................................103
SECTION 10.22. SURVIVAL ...............................................................................103
SECTION 10.23. AMENDMENT ..............................................................................103
SECTION 10.24. HEADINGS ...............................................................................103
SECTION 10.25. PIPELINE LEASE AMENDMENT ...............................................................104
SECTION 10.26. COMBINED SEWER OVERFLOW ...............................................................104
SECTION 10.27. SETTLEMENT OF LITIGATION ..............................................................104
SECTION 10.28. NON-WAIVER ............................................................................104
SECTION 10.29. SEVERABILITY ..........................................................................104
SECTION 10.30. COUNTERPARTS ..........................................................................104
</TABLE>
SCHEDULE A
FORM OF CITY BOND GUARANTY AGREEMENT..............................A-1
SCHEDULE B
FORM OF CITY CONTINUING DISCLOSURE AGREEMENT......................B-1
SCHEDULE C
CITY CONTRACTS....................................................C-1
SCHEDULE D
CITY FACILITIES...................................................D-1
SCHEDULE E
CITY FEES.........................................................E-1
SCHEDULE F
EMPLOYEE LEASE PAYMENT............................................F-1
SCHEDULE G
FIXED FRANCHISE FEE...............................................G-1
SCHEDULE H
FIXED SERVICE FEE.................................................H-1
SCHEDULE I
FORM OF GUARANTOR BOND GUARANTY AGREEMENT.........................I-1
SCHEDULE J
FORM OF GUARANTOR CONTINUING DISCLOSURE AGREEMENT.................J-1
<PAGE>
SCHEDULE K
FORM OF GUARANTOR PERFORMANCE GUARANTY AGREEMENT..................K-1
SCHEDULE L
INITIAL FACILITIES................................................L-1
SCHEDULE M
LEASED EMPLOYEES..................................................M-1
SCHEDULE N
MCUA FEES.........................................................N-1
SCHEDULE O
NON-PROFIT FACILITIES.............................................O-1
SCHEDULE P
ONGOING CAPITAL IMPROVEMENTS......................................P-1
SCHEDULE Q
OUTSTANDING CITY INDEBTEDNESS.....................................Q-1
SCHEDULE R
PERMITS...........................................................R-1
SCHEDULE S
REQUISITION PAPERS................................................S-1
SCHEDULE T
RATES.............................................................T-1
SCHEDULE U
DESCRIPTION OF WASTEWATER SYSTEM..................................U-1
SCHEDULE V
DESCRIPTION OF WATER SYSTEM.......................................V-1
SCHEDULE W
CERTIFICATE OF COMPLETION AND ACCEPTANCE..........................W-1
SCHEDULE X
MINIMUM VARIABLE FRANCHISE FEE.....................................X-1
SCHEDULE Y
AMENDMENT TO PIPELINE LEASE AGREEMENT..............................Z-1
SCHEDULE AA
ASSIGNMENT AND ACKNOWLEDGMENT.....................................AA-1
SCHEDULE BB
SETTLEMENT AGREEMENT..............................................BB-1
<PAGE>
AGREEMENT BETWEEN THE CITY OF PERTH AMBOY,
IN THE COUNTY OF MIDDLESEX, NEW JERSEY,
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
AND UTILITY SERVICE AFFILIATES, INC.,
A SUBSIDIARY OF MIDDLESEX WATER COMPANY FOR
OPERATION, MAINTENANCE AND MANAGEMENT SERVICES
FOR THE CITY'S WATER SYSTEM AND WASTEWATER SYSTEM
THIS AGREEMENT, made this 1st Day of January, 1999, by and among the
CITY OF PERTH AMBOY, a municipal corporation of the State of New Jersey (the
"City"), the MIDDLESEX COUNTY IMPROVEMENT AUTHORITY (the "Authority"), a public
body corporate and politic of the State of New Jersey, and UTILITY SERVICE
AFFILIATES, INC., a subsidiary of Middlesex Water Company, a corporation duly
organized and existing under the laws of the State of New Jersey (the
"Company").
W I T N E S S E T H:
WHEREAS, the City currently operates the water production, transmission
and distribution system (the "Water System") as well as a wastewater collection
system (the "Wastewater System" and together with the Water System, the
"System") as more specifically described herein, in the City; and
WHEREAS, the City determined that the most efficient means to provide
water and wastewater services to the residents and property owners within the
City and to otherwise protect the health, safety and welfare was to lease the
System, together with a franchise to operate the System, to the Authority as
well as to secure a long-term agreement with a private utility experienced in
providing services of the type provided in the City; and
WHEREAS, the City prepared and distributed a Request for Proposals on
August 2, 1997 (the "RFP") pursuant to the Water Act
<PAGE>
and the Sewer Act (each as defined herein) for the long-term operation,
maintenance and management of the System; and
WHEREAS, on October 15, 1997, the City received proposals from the
Middlesex Water Company, on behalf of the Company, as well as from U.S. Water
L.L.C., United Water Resources, E'Town Corporation, and Utili Serv (the
"Respondents") in response to such RFP; and
WHEREAS, the City determined based on an evaluation of those proposals
and the negotiations that followed with certain of the Respondents that this
Agreement with the Company would provide the most complete, dependable,
environmentally sound and cost effective agreement for the benefit of the
residents, employees, taxpayers and ratepayers within the City; and
WHEREAS, the City, Authority and the Company have agreed to the terms
and conditions under which the Company shall provide certain services in
exchange for certain fees, all as described herein;
NOW, THEREFORE, in consideration of the mutual covenants conditions and
terms contained herein, the parties hereto, intending to be legally bound
hereby, agree as follows:
2
<PAGE>
ARTICLE I. DEFINITIONS
SECTION 1.1. DEFINITIONS. The following definitions shall
apply to and are used in this Agreement:
"Acts" means the Wastewater Act and the Water Act.
"Additional Capital Improvements" means any Capital Improvements to
the System other than the Ongoing Capital Improvements.
"Additional Indebtedness" shall have the meaning set forth in
Section 7.2.
"Additional Revenues" means, in any Contract Year, the aggregate amount
of Revenues received during each Contract Year less the Base Revenue Amount for
such Contract Year.
"Agreement" means this "Agreement Between the City of Perth Amboy, in
the County of Middlesex, New Jersey, the Middlesex County Improvement Authority
and Utility Services Affiliates, Inc., a subsidiary of Middlesex Water Company
for Operation, Maintenance and Management Services for the City's Water System
and Wastewater System" executed by and among the City, the Authority and the
Company.
"Authority" means the Middlesex County Improvement Authority.
"Authority Act" means the county improvement authorities law at
N.J.S.A. 40:37A-44 et seq, as amended and supplemented from time to time.
"Authority Administrative Expenses" means the fees and expenses of the
Authority payable by the City pursuant to the Authority Bond Resolutions.
3
<PAGE>
"Authority Bond Resolutions" means collectively, the Authority Series A
Bond Resolution, the Authority Series B Bond Resolution and the Authority Series
C Bond Resolution.
"Authority Indebtedness" means the Series A Authority Indebtedness, the
Series B Authority Indebtedness and the Series C Authority Indebtedness.
"Authority Series A Bond Resolution" means the general bond resolution
of the Authority authorizing the Authority Series A Indebtedness entitled
"Resolution Authorizing the Issuance of Utility System Revenue Bonds (Perth
Amboy Franchise Acquisition Project) Series A of the Middlesex County
Improvement Authority".
"Authority Series A Indebtedness" means not to exceed $17,500,000
aggregate principal amount of Utility System Revenue Bonds (Perth Amboy
Franchise Acquisition Project) Series 1998A and any other bonds or notes issued
pursuant to the Authority Series A Bond Resolution.
"Authority Series B Bond Resolution" means the general bond resolution
of the Authority authorizing the Authority Series B Indebtedness entitled
"Resolution Authorizing the Issuance of Utility System Revenue Bonds (Perth
Amboy Franchise Acquisition Project) Series B of the Middlesex County
Improvement Authority".
"Authority Series B Indebtedness" means not to exceed $24,500,000
aggregate principal amount of Utility System Revenue Bonds (Perth Amboy
Franchise Acquisition Project) Series 1998B and any other bonds or notes issued
pursuant to the Authority Series B Bond Resolution.
"Authority Series C Bond Resolution" means the general bond resolution
of the Authority authorizing the Authority Series C
4
<PAGE>
Indebtedness entitled "Resolution Authorizing the Issuance of Taxable Utility
System Revenue Bonds (Perth Amboy Franchise Acquisition Project) Series C of the
Middlesex County Improvement Authority".
"Authority Series C Indebtedness" means not to exceed $27,500,000
aggregate principal amount of Taxable Utility System Revenue Bonds (Perth Amboy
Franchise Acquisition Project) Series 1998C and any other bonds or notes issued
pursuant to the Authority Series C Bond Resolution.
"Authorized Representative" means (i) with respect to the Authority:
the Chairperson, the Vice Chairperson, the Treasurer, the Secretary or the
Assistant Secretary of the Authority, or the Executive Director and, when used
with reference to an act or document, also means any other person who shall be
authorized by resolution or the by-laws of the Authority to perform such act or
to execute such document or any other person or persons who shall be authorized
by resolution of the Authority to act on behalf of the Authority or by a written
certificate duly executed and delivered on behalf of the Authority by the
Chairperson or the Executive Director of the Authority, which certificate shall
set forth such authorization and shall contain the specimen signature of each
such person, (ii) with respect to the City: the Mayor or the Business
Administrator or any other person or person who shall be authorized to act on
behalf of the City by virtue of a written certificate duly executed and
delivered on behalf of the City by the Mayor, which certificate shall set forth
such authorization and shall contain the specimen signature of each such person,
(iii) with respect to the Company: the President of the Company or any
5
<PAGE>
other person or persons who shall be authorized to act on behalf of the Company
by virtue of a written certificate duly executed and delivered on behalf of the
Company by the Company's President, which certificate shall set forth such
authorization and shall contain the specimen signature of each such person, and
(iv) with respect to the System Trustee, Trustee or the Paying Agent: any
officer of the System Trustee, Trustee or the Paying Agent respectively
authorized by the System Trustee, Trustee or the Paying Agent to act or execute
documents on behalf of the System Trustee, Trustee or the Paying Agent, as the
case may be.
"Bankruptcy Code" means the Bankruptcy Code, 11 U.S.C. 101, et
seq., as amended from time to time and any successor statute
thereto.
"Base Revenue Amount" means $9,466,000 for each of the first two
Contract Years (prorated for the first Contract Year) and, in each Contract Year
thereafter, an amount equal to the previous Contract Year's Base Revenue Amount
plus an amount equal to such previous Contract Years' Base Revenue Amount
multiplied by the Rate Increase for such Contract Year.
"Board" means the New Jersey Board of Public Utilities.
"Business Day" means any Day other than (a) a Saturday or Sunday, (b) a
Day which banking institutions in any of the cities in which the corporate trust
offices of the Trustee and the System Trustee are located are not required or
authorized to remain closed or (c) a day on which the New York Stock Exchange is
closed.
"Capital Improvements" means improvements to the System that do not
constitute a Repair or Replacement Item. Title to all
6
<PAGE>
Capital Improvements shall be made in the name of the City and shall vest in the
City.
"Capital Improvement Allocation" means six hundred fifty thousand
dollars ($650,000) per Year.
"Capital Improvement Fund" means the fund established by the Company in
the Revenue Agreement with the System Trustee pursuant to Section 7.5 which
shall be initially funded for the first five (5) Contract Years with the
proceeds from the Authority Series B Indebtedness by a deposit of an amount (net
funded) that will be sufficient to fund the Capital Improvement Allocation for
each of the first five (5) Years of the Contract and for each Year thereafter by
deposit by the Company of a portion of its Fixed Service Fee, in monthly
installments, in an amount equal to the one-twelfth of the Capital Improvement
Allocation.
"CERCLA" means the Comprehensive Environmental Response,
Compensation and Liability Act, as amended.
"City" means the City of Perth Amboy, a public body corporate and
politic of the State of New Jersey.
"City Bond Guaranty" means a guaranty by the City of the principal of
and interest on the Authority Series A Indebtedness and the Authority Series B
Indebtedness as evidenced by an ordinance of the City finally adopted on
September 9, 1998 entitled "An Ordinance of the City of Perth Amboy, in the
County of Middlesex, New Jersey, Guarantying Certain Bonds and/or Notes of the
Middlesex County Improvement Authority, Authorizing a Guaranty Agreement, a
Lease and Franchise Acquisition Agreement, a Continuing Disclosure Agreement, a
Revenue Collection and Disbursement Agreement and an Operating Agreement in
Connection
7
<PAGE>
with the Improvement and Enhancement of the City's Water and Wastewater Systems,
Amending the City Code in Order to Change the Rates and Fees to be Charged for
the Provision of Water and Sewer Services and Combining the City's Water and
Sewer Utilities Into One Utility For All Purposes Including the Local Budget
Law".
"City Bond Guaranty Agreement" means the bond guaranty agreement among
the City, the Trustee and the Authority in the form included in Schedule A and
dated as of the date of the first day of the month in which the Authority
Indebtedness is issued with such changes as may be agreed to by the City and the
Authority.
"City Continuing Disclosure Agreement" means the continuing disclosure
agreement among the City, the Authority and the Trustee in the form included in
Schedule B and dated as of the first day of the month in which the Authority
Indebtedness is issued with such changes as may be agreed to by the City and the
Authority.
"City Contracts" means those contracts listed in Schedule C.
"City Facilities" means the facilities listed in Schedule D.
"City Fees" means the fees to be charged by the City as set
forth in Schedule E.
"Commencement Date" means the date when the Company shall begin
rendering the Services specified in the Notice to Proceed.
"Company" means Utility Service Affiliates, Inc., a subsidiary
of Middlesex Water Company.
"Contract Date" means the date of execution of this Agreement.
"Contract Year" means a one Year period commencing on July 1
and ending on June 30 in each Year during the Term of this Agreement which, in
the case of the first Contract Year, shall be
8
<PAGE>
the period beginning on the Commencement Date and ending on June 30, 1999.
"Cost Substantiation" means the process by which certain costs to be
incurred by the parties hereto in the performance of their obligations hereunder
shall be substantiated. In accordance with such process, all such costs shall be
reasonably documented and accompanied by a certificate, signed by an Authorized
Representative of the City or the Company, as the case may be, stating the
reason for incurring the cost, the amount of the cost, including labor,
materials and a fixed overhead component (which may be a percentage of labor and
materials), the event or Section of this Agreement giving rise to the requesting
party's right to incur such cost, and that such cost represents a competitive
price for the service or materials supplied and any other information that is
reasonably requested by the other party in order to assist in the evaluation,
approval and payment of the certificate.
"County" shall have the meaning set forth in Section 10.8(e).
"Day" means a calendar day of twenty-four (24) hours measured from
midnight to the next midnight.
"DEP" means the State of New Jersey Department of Environmental
Protection or any successor agency.
"Draw Date" means the Business Day when the Company and/or the City
requires that funds be withdrawn from the Project Fund and disbursed to the
Company and/or the City pursuant to the Authority Series B Bond Resolution.
"Draw Papers" shall have the meaning assigned to such term in Section
7.6 and as set forth in Schedule S.
9
<PAGE>
"Employee Lease Payment" means the amount due to the City from the
Company for the leasing of the employees pursuant to Section 6.10(a) as set
forth in Schedule F and includes the amounts equal to the amount of wages,
benefits, health insurance, workers compensation insurance, standby payments,
uniforms, overtime and other similar expenses.
"EPA" means the United States Environmental Protection Agency
or any successor agency.
"Fixed Franchise Fee" means the payment due to the City from the
Authority in accordance herewith and in accordance with the Revenue Agreement in
the amounts set forth in Schedule G.
"Fixed Service Fee" means the annual amount as set forth in Schedule H
to be paid by the City to the Company pursuant to the Revenue Agreement in
monthly installments.
"Franchise Fee" means the Fixed Franchise Fee and the Variable
Franchise Fee.
"General Fund" shall have the meaning given to such term in the Revenue
Agreement but shall not refer to the General Fund established under Article IV
of each of the Authority Bond Resolutions.
"Growth Revenues" means all amounts billed to the customers of the
System during the applicable Contract Year (prorated for the first Contract
Year) less the Base Revenue Amount (prorated for the first Contract Year)
provided that in no event shall such Growth Revenues be less than zero (0)
dollars.
"Guarantor" means Middlesex Water Company, a New Jersey corporation
doing business at 1500 Ronson Road, Iselin, New Jersey.
10
<PAGE>
"Guarantor Bond Guaranty" means a guaranty by the Guarantor of the
principal of and interest on the Authority Series C Indebtedness.
"Guarantor Bond Guaranty Agreement" means the bond guaranty agreement
among the Guarantor, the Trustee and the Authority in the form included in
Schedule I and dated as of the first day of the month in which the Authority
Indebtedness is issued with such changes as may be agreed to by the Guarantor,
the City and the Authority.
"Guarantor Continuing Disclosure Agreement" means the continuing
disclosure agreement among the Guarantor, the Authority and the Trustee in the
form included in Schedule J and dated as of the first day of the month in which
the Authority Indebtedness is issued with such changes as may be agreed to by
the Guarantor, the City and the Authority.
"Guarantor Performance Guaranty Agreement" means the performance
guaranty agreement among the Guarantor, the City and the Authority in the form
included in Schedule K and dated as of the first day of the month in which the
Authority Indebtedness is issued with such changes as may be agreed to by the
Guarantor, the City and the Authority.
"Health, Safety and Welfare" means, as of the relevant date, that the
System is in compliance with all applicable laws and regulations.
"Initial Facilities" means the description of the System as set forth
in Schedule L as supplemented by a video of the System to be completed by the
Company within the first two (2) years after the Commencement Date.
11
<PAGE>
"Lease Agreement" means the Lease Agreement between the Authority and
the City dated as of the first day of the month in which the Authority
Indebtedness is issued.
"Leased Employees" means those persons listed in Schedule M, as may be
revised from time to time.
"Local Finance Board" means the Local Finance Board of the
Division of Local Government Services of the State of New Jersey,
Department of Community Affairs.
"MCUA" means the Middlesex County Utilities Authority, a
political subdivision of the State.
"MCUA Fees" means the amounts set forth in Schedule N.
"Minimum Variable Franchise Fee" means the amounts set forth in
Schedule X.
"Non-Profit Facilities" means the facilities listed in
Schedule O.
"Notice to Proceed" means a notice issued by the City after
satisfaction or waiver of all of the conditions precedent set forth in Article
III that establishes the Commencement Date.
"Ongoing Capital Improvements" means the Capital Improvements to the
System, including all work and materials necessary therefor or incidental
thereto, as set forth in Schedule P.
"Operations Committee" means the committee established
pursuant to Section 6.18.
"OSHA" means the Occupational Safety and Health Act.
"Outstanding" shall have the meaning assigned to such term in the
Authority Bond Resolutions and, for purposes of any bonds or notes of the City
issued with respect to the System, Outstanding shall mean that such City bonds
or notes have not been paid.
12
<PAGE>
"Outstanding City Indebtedness" means the City bonds and notes as
described in Schedule Q.
"Permitted Encumbrances" shall have the meaning assigned to such term
in the Lease Agreement.
"Permits" or "Permit" means easements, permits, approvals,
certifications, authorizations or consents and/or licenses issued by the EPA,
the DEP, or any other Federal, State or local regulatory agency or private party
that are necessary for the proper operation and expansion or improvement of the
System, including the current permits held by the City as listed in Schedule R.
"POSHA" means the Public Occupational Safety and Health Act.
"Primary Financing Documents" means this Agreement, the City Bond
Guaranty, the City Bond Guaranty Agreement, the City Continuing Disclosure
Agreement, the Guarantor Bond Guaranty Agreement, the Guarantor Continuing
Disclosure Agreement, the Guarantor Performance Guaranty Agreement, the Lease
Agreement, the Revenue Agreement and any other documents, certificates or other
instruments necessary or required in connection with such issuance of the
Authority Indebtedness and the execution of this Agreement.
"Project Fund" shall have the meaning assigned to such term in the
Authority Series B Bond Resolution.
"Rate Increase" means the blended annual percentage increase in the
Rates as described in Schedule T and as may be revised from time to time
pursuant to Section 8.5.
"Rates" means the Rates to be charged to the customers of the System as
set forth in Schedule T and as may be revised from time to time pursuant to
Section 8.5.
13
<PAGE>
"RCRA" means the Resource Conservation Recovery Act, as
amended.
"Rebatable Arbitrage" shall have the meaning assigned to such term in
the Authority Bond Resolutions.
"Repair and Replacement Item" means any work on the System
costing less than $500 per incident or occurrence which is
generally the result of actual or imminent failure of a portion of
the existing utility plant in service or the replacement of a
facility or items in operation necessary for the System. For
purposes of computing such $500 the Company shall not include labor costs, but
shall include the cost of materials and outside contractor's charges.
"Revenues" means any and all rents, Rates, fees or other charges or
amounts for direct or indirect use of the System received by the System Trustee
during the Term of the Agreement, including, but not limited to, City Fees,
Growth Revenues and Revenues from the sale of excess water pursuant to Section
6.16(c), penalties, miscellaneous income and investment income but excluding
fees or expenses charged to users of the System to reimburse the City or the
Company for any direct expenses incurred by such parties as identified in
Schedule E.
"Revenue Agreement" means the revenue collection and disbursement
agreement between the City, the Company, the Authority and the System Trustee
dated as of the first day of the month in which the Authority Indebtedness is
issued.
"Revenue Fund" shall have the meaning assigned to such term in the
Revenue Agreement, but shall not refer to the Revenue Fund
14
<PAGE>
established under Article V under each of the Authority Bond Resolutions.
"SDWA" means the Safe Drinking Water Act.
"Service Fee" means the Fixed Service Fee and the Variable
Service Fee.
"Services" means all of the duties, obligations, and services
to be provided by the Company that are related to the operation,
maintenance, management and improvement of the System as described
herein.
"State" means the State of New Jersey.
"System" means the Water System and the Wastewater System.
"System Trustee" shall have the meaning assigned to such term in the
Revenue Agreement.
"Term" means the term of this Agreement as determined in accordance
with Section 2.2.
"Trustee" shall have the meaning assigned to such term in the
applicable Authority Bond Resolutions.
"Uncontrollable Circumstances" means circumstances beyond the control
of the parties hereto consisting of: any of the following acts, events or
conditions or any combination thereof that are outside of the control of the
party relying thereon for justification for not performing an obligation or
complying with any condition required of such party under the Agreement, and has
had or may be reasonably expected to have a direct, material adverse effect on
the System or the operation thereof:
(a) Force Majeure events, such as acts of God, acts of terrorism,
insurrections, riots, epidemics, landslides, lightning,
earthquakes, fires, hurricanes, storms,
15
<PAGE>
floods, washouts, droughts and explosions, civil
disturbances, work actions (other than a labor strike by the
Company, its employees, affiliates or subcontractors), acts
of the public enemy, and war;
(b) Change in Law, defined as (1) the enactment of any law or
regulations after the Contract Date (excluding (x) laws
or regulations adopted at the time of execution of this
Agreement but which have provisions that take effect
after the first Contract Year and (y) pending changes in
law reasonably anticipated to be enacted as of the
Contract Date and (z) changes in Federal or State income
tax law); or (2) a material modification of or imposition
of any material condition on the issuance, modification
or renewal of any Permit, which, in the case of either
(1) or (2) above, establishes requirements affecting the
financing of, improvements to or operation of the Water
System that are materially more burdensome than the most
stringent requirements in effect as of the Contract Date;
(c) Judicial/Administrative Determinations, defined as the final
order, judgment, action and/or determination of any Federal,
State or local court of competent jurisdiction, administrative
agency or governmental body (other than the City);
(d) Permit/License Termination, defined as the suspension,
termination, interruption, denial or failure of renewal or
issuance of any Permit (not caused by the action or inaction
of either party hereto) that is necessary to improve, repair
or operate the Water System;
16
<PAGE>
(e) Regulatory Changes, resulting in a material increase in the
cost to test the water in the System and/or treat the water in
the System; and
(f) Cost Overruns, with respect to the Ongoing Capital
Improvements not otherwise payable from the Project Fund or
the Capital Improvement Fund.
"Variable Franchise Fee" means the amount remaining at the end of each
Contract Year in the General Fund after the payment of the Variable Service Fee
from the General Fund.
"Variable Service Fee" means the amount due to the Company in
accordance with the Revenue Agreement equal to (a) one half (1/2) of the Growth
Revenues plus, (b), if earned, one hundred ten thousand dollars ($110,000) per
Contract Year (prorated for the first and the last Contract Years) provided that
such amount does not violate the provisions of Section 4.3(b).
"Wastewater Act" means the New Jersey Wastewater Treatment
Public-Private Contracting Act, supplementing Title 58 of the
Revised Statutes and amending P.L. 1971, c. 198 enacted August 14,
1995 as Chapter 216 of the Laws of 1995.
"Wastewater System" means all of the individual components and elements
that comprise the wastewater system of the City as more specifically set forth
in Schedule U, together with any and all Capital Improvements to the Wastewater
System as same shall be acquired, constructed and/or reconstructed from time to
time and as may be expanded pursuant to Section 10.23.
17
<PAGE>
"Water Act" means the New Jersey Water Supply Public-Private
Contracting Act, supplementing Title 58 of the Revised Statutes and
amending P.L. 1971, c. 198 enacted May 11, 1995 as Chapter 101 of
the Laws of 1995 (N.J.S.A. 58:26-19 et seq.).
"Water System" means the potable water production, transmission and
distribution system as set forth in Schedule V, together with any and all
Capital Improvements to the Water System as same shall be acquired, constructed
and/or reconstructed from time to time and as may be expanded pursuant to
Section 10.23.
"Withdrawal Date" means the first Business Day of each month commencing
on the first Business Day of the first full month following the Commencement
Date.
"Year" means a period of time consisting of three hundred sixty-five
(365) Days.
SECTION 1.2. Rules of Interpretation. Whenever the context may require,
any pronoun that is used in this Agreement shall include the corresponding
masculine, feminine and neuter forms, and the singular shall include the plural
and vice versa. Unless otherwise noted, the words "include," "includes" and
"including" when used in this Agreement shall be deemed to be followed by the
phrase "without limitation". The words "agree," "agreements," "approval" and
"consent" when used in this Agreement shall be deemed to be followed by the
phrase "which shall not be unreasonably withheld or unduly delayed," except or
unless the context may otherwise specify. All references to Schedules,
Sections or Articles shall refer to Schedules, Sections or Articles in this
Agreement.
18
<PAGE>
ARTICLE II. GENERAL PROVISIONS
SECTION 2.1. Operation, Maintenance and Management of System. On and
after the Commencement Date, the City, the Authority and the Company, in
combination with each other in the manner herein described, shall operate,
maintain and manage the System on the terms and conditions set forth in this
Agreement. In connection therewith, the Company shall provide all of the
Services described herein.
SECTION 2.2. Term. (a) The Term of this Agreement shall commence on the
Commencement Date and unless earlier terminated in accordance with the terms
hereof, shall expire on the twentieth (20th) anniversary date of the
Commencement Date.
(b) The execution or termination of this Agreement shall in no way
relieve the City and/or the Guarantor of its obligations and responsibilities
under the remaining Primary Financing Documents.
SECTION 2.3. Authority Financing. (a) On or before the March 31, 1999,
the Authority shall lease the System from the City pursuant to the Lease
Agreement and issue the Authority Indebtedness. Simultaneously, the Authority
shall acquire a franchise to operate the System for the Franchise Fee and issue
the Authority Indebtedness.
(b) The Authority shall use the proceeds from the Authority
Indebtedness to provide (i) all costs of issuance associated with the issuance
of the Authority Indebtedness, (ii) deposits to the bond reserve funds for the
applicable series of Authority Indebtedness equal to maximum annual debt service
or such other amount permitted by the Internal Revenue Code of 1986, as amended
and determined by the City and the Authority, (iii) a deposit to
19
<PAGE>
the Operating Fund (defined in the Revenue Agreement) equal to approximately
nine hundred thousand dollars ($900,000), (iv) the Fixed Franchise Fee (net
funded) for the first six (6) Contract Years, (v) a deposit to the Project Fund
for the cost (net funded) of the Ongoing Capital Improvements and the refunding
of all outstanding debt of the City issued for the Ongoing Capital Improvements
(net of any unspent bond or note proceeds on deposit with the City), (vi) a
deposit to an escrow fund for the refunding of all of the Outstanding City
Indebtedness, (vii) a deposit to the Capital Improvement Fund for the first five
(5) Years of the Capital Improvement Allocation (net funded), and (viii) a
payment to the City of two million one hundred and thirty thousand dollars
($2,130,000) for all outstanding but unpaid System billings.
(c) The parties have directed the System Trustee to provide from the
Revenues for the payment of the principal of and interest on the Authority
Indebtedness together with all Authority Administrative Expenses, when due.
Notwithstanding anything herein to the contrary, (i) upon the expiration and/or
termination of this Agreement, the City shall continue to provide for the
collection of all Revenues and the payment of all amounts, if any, due to the
Authority for the Authority Indebtedness and the Authority Administrative
Expenses from such Revenues and (ii) the City's obligations under the City Bond
Guaranty shall remain unaffected by any City obligations hereunder or under any
other financing document, including without limitation the Revenue Agreement and
the Lease Agreement.
(d) Subsequent to the Commencement Date and prior to the issuance of
the Authority Indebtedness, all Revenues shall be held
20
<PAGE>
in trust by the City to be turned over to the System Trustee upon the issuance
of the Authority Indebtedness.
(e) In connection with the issuance of the Authority Indebtedness, the
City, the Company and the Authority shall execute, as applicable, all of the
other Primary Financing Documents.
(f) Following the Commencement Date, and until the Authority
Indebtedness is issued, the Company shall provide for all of the costs of the
Services and shall be immediately reimbursed for such costs, with interest, from
the Revenues or directly from the City upon the issuance of the Authority
Indebtedness. If the Authority Indebtedness is not issued by March 31, 1999, the
City shall directly reimburse the Company for such costs.
21
<PAGE>
ARTICLE III. CONDITIONS PRECEDENT
SECTION 3.1. General. The issuance of a Notice to Proceed and the
establishment of the Commencement Date shall be subject to the satisfaction or
waiver of the conditions precedent set forth in this Article III.
SECTION 3.2. Conditions to City's Obligations. The City shall be under
no obligation to issue a Notice to Proceed or to perform any of its other
obligations under this Agreement (other than those obligations arising or
relating to actions required to be taken by or on behalf of the City prior to
the issuance of the Notice to Proceed) unless the following conditions have been
satisfied by the Company or waived by the City (in writing):
(a) The Board and the Local Finance Board shall have finally approved
this Agreement and the time for appeal of such decisions shall have expired.
(b) The Company and the Guarantor shall each have delivered to the City
its certificate of incorporation and certificate of good standing.
(c) The Company and the Guarantor shall each have delivered an opinion
of counsel to the effect that the Company and the Guarantor, as applicable, have
been validly organized and created and shall be validly existing under the laws
of the jurisdiction in which it was incorporated.
(d) The Guarantor shall have delivered the Guaranty Agreement to the
City and an opinion of counsel to the Guarantor stating that the Guarantor is
authorized to enter into, execute, deliver and perform its obligations under the
Guaranty Agreement, the Guaranty Agreement is valid and binding upon the
Guarantor and no litigation
22
<PAGE>
is pending or threatened against the Guarantor which would impair its ability to
perform its duties under the Guaranty Agreement.
(e) The Company shall have delivered to the City (1) a certificate of
an Authorized Representative of the Company, to the effect that each of the
representations, warranties and covenants set forth in Section 4.2 are true and
correct and (2) an opinion of counsel to the effect set forth in Sections
4.2(a), (b), (c), (f), (g), (h) and (i).
(f) The Company, its employees and/or its subcontractors, if
applicable, shall have obtained all applicable Permits, if any, that are
necessary for the operation, maintenance and management of the System, and that
are not expressly required to be obtained by the City hereunder.
(g) The Company shall have submitted to the City, the Trustee and the
Authority all appropriate certificates of insurance and all applicable
endorsements to such insurance policies, as are required by this Agreement.
SECTION 3.3. Conditions to Authority Obligations. The Authority shall
be under no obligation to perform any obligations under the terms of the
Agreement (other than obligations arising or relating to actions required to be
taken by or on behalf of the Authority) unless the following conditions have
been satisfied or waived by the Authority (in writing):
(a) The Company and the City shall have delivered to the Authority (1)
a certificate of an Authorized Representative of the Company and the City
Representatives to the effect that each of the representations, warranties and
covenants of the Company and the City that are set forth in Section 4.1, 4.2 and
4.3 are true and
23
<PAGE>
correct and (2) an opinion of counsel to the effect set forth in Section
4.1(a),(b),(c),(d),(f) and (g) and 4.2(a),(b),(c),(f),(g) and (i).
(b) There is no Federal, State or local law or regulation thereunder or
written interpretation thereof by any applicable regulatory authority, that
would make the execution or delivery by the Company and the City of this
Agreement, the compliance by the Company or the City with the terms and
conditions hereof and thereof, or the consummation by the Company and the City
of the transactions contemplated hereby or thereby, a violation of such law or
regulation.
(c) The Board and the Local Finance Board shall have finally approved
this Agreement and the time for appeal of such decisions shall have expired.
SECTION 3.4. Conditions to Company Obligations. The Company shall be
under no obligation to perform any obligations under the terms of the Agreement
(other than obligations arising or relating to actions required to be taken by
or on behalf of the Company prior to the issuance of the Notice to Proceed)
unless the following conditions have been satisfied or waived by the Company (in
writing):
(a) The Board and the Local Finance Board shall have finally approved
this Agreement and the time for appeal of such decisions shall have expired.
(b) As promptly as possible after the satisfaction of the conditions
contained in Sections 3.2(a) and 3.3(a), the City shall have delivered to the
Company (1) a certificate of an Authorized Representative of the City to the
effect that each of
24
<PAGE>
the representations, warranties and covenants of the City that are set forth in
Section 4.1 are true and correct and (2) an opinion of counsel to the effect set
forth in Sections 4.1(a), (b), (c), (d), (f) and (g).
(c) There is no Federal, State or local law or regulation thereunder or
written interpretation thereof by any applicable regulatory authority, that
would make the execution or delivery by the Company of this Agreement or the
Guarantor of the Guarantor Performance Guaranty Agreement and the Guarantor Bond
Guaranty Agreement, the compliance by the Company or Guarantor, as applicable,
with the terms and conditions hereof and thereof, or the consummation by the
Company or Guarantor, as applicable, of the transactions contemplated hereby or
thereby, a violation of such law or regulation.
SECTION 3.5. Satisfaction of Conditions Precedent. (a) The parties
hereto shall exercise good faith and due diligence in seeking to satisfy the
conditions precedent required by this Article III and shall promptly proceed to
perform or cause to be performed those conditions precedent, or portions
thereof, that are within each party's control.
(b) If the Commencement Date has not occurred on or prior to two
hundred seventy (270) Days after the Contract Date, the period in which the
conditions precedent can be satisfied or waived may be extended by joint
agreement of the City and Company, for a period of time to be agreed upon by the
City and Company, on the same terms and conditions set forth in this Agreement,
except to the extent expressly provided below.
25
<PAGE>
(c) In the event that the Commencement Date shall not have occurred on
or prior to two hundred seventy (270) Days after the Contract Date or prior to
the last Day of any extension period elected pursuant to Section 3.5(b), then
either party, by notice in writing to the other party, may terminate this
Agreement. If the reason for such termination is the fault of neither party to
the Agreement, then all amounts paid by the Company to the City prior to such
termination shall be returned to such Company and each party shall bear its
respective expenses attributable to the Agreement. In the event that such
termination is the fault of one of the parties for failure to meet conditions
precedent within its control, then that party shall be responsible for all
reasonable fees and expenses of the other party attributable to the Agreement,
provided that in no event shall such sum exceed one hundred thousand dollars
($100,000).
(d) The Company and the City shall each provide an executed
acknowledgment to the other of the date that each of the respective
conditions precedent to its obligations under this Agreement have been met or
waived and such acknowledgment shall be given within thirty (30) Days of the
date on which such conditions are met or waived. The City shall furnish the
Notice to Proceed to the Company within thirty (30) Days after the execution of
such acknowledgments, and such Notice to Proceed shall set forth the
Commencement Date, which shall be not later than fifteen (15) Days after the
issuance of such Notice to Proceed. Neither party shall be permitted to
terminate this Agreement for failure to satisfy any condition precedent that is
entirely and reasonably within such
26
<PAGE>
party's control or is such party's fault, as set forth in Section 3.5(c).
SECTION 3.6. Timing of Certain Obligations. Pursuant to the Acts, this
Agreement must be submitted to the DEP for its review and to the Board and the
Local Finance Board for review and approval. The City shall be responsible for
obtaining such review and approval, as applicable, and the Company shall
cooperate with the City in providing any assistance and information that is
required in order to obtain such review and approval. In the event that the
Board and/or the Local Finance Board conditionally approve this Agreement or any
portion thereof and premise future approval on the acceptance of certain
proposed terms and conditions by the parties, to the extent that such terms and
conditions are immaterial terms and conditions in that such terms and conditions
do not increase the cost to operate, maintain, manage or improve the System (or
any portion thereof), or materially and adversely affect the obligations, rights
and remedies of the parties, as provided herein, the parties shall accept such
terms and conditions and shall modify this Agreement to include such terms and
conditions. If the proposed terms and conditions imposed by the Board and/or the
Local Finance Board are material terms and conditions in that such terms and
conditions increase the cost to operate, maintain, manage or improve the System
(or any portion thereof) or materially and adversely affect the obligations,
rights and remedies of the parties as provided herein, the parties shall attempt
to renegotiate the terms and conditions to this Agreement in order to satisfy
the concerns of the Board and/or the Local Finance Board. If the parties are
unable to renegotiate the terms
27
<PAGE>
and conditions of this Agreement within ninety (90) days of the later of the
Board's or the Local Finance Board's determination as described above, any party
may terminate this Agreement without prejudice upon written notice to the other
parties hereto.
28
<PAGE>
ARTICLE IV.
REPRESENTATIONS, WARRANTIES AND COVENANTS
SECTION 4.1. City Representations, Warranties and Covenants. The City
hereby represents, warrants and covenants to the Company and the Authority as
follows:
(a) The City is a municipal corporation duly created and existing
pursuant to the laws of the State of New Jersey. The City has the full legal
right, power and authority to enter into this Agreement and to perform its
duties and obligations hereunder. This Agreement has been duly authorized,
executed and delivered by the City and constitutes a legal valid and binding
obligation of the City, enforceable against it in accordance with its terms, and
the authorization, execution, delivery and performance of this Agreement by the
City shall not violate any law, judgment, order, ruling or regulation applicable
to the City and does not constitute a breach of or default under any agreement
or instrument by which the City is bound.
(b) The City has the legal capacity and authority to assess the Rates
and collect the Revenues for the Services to customers of the System.
(c) The City has enacted all municipal laws, ordinances or regulations
necessary for the performance of this Agreement.
(d) The City has or holds all Permits necessary to effectuate its
responsibilities under this Agreement.
(e) The City shall continue to have or hold throughout the Term of this
Agreement all Permits necessary to effectuate its responsibilities under this
Agreement.
29
<PAGE>
(f) No material action, suit, proceeding or official investigation
shall have been threatened, publicly announced or commenced by any Federal,
State or local governmental authority or agency, or in any Federal, State or
local court, that seeks to enjoin, assess civil or criminal penalties against,
assess civil damage against or obtain any judgment, order or consent decree with
respect to the City or to the Agreement or any actions contemplated in the
Agreement, as a result of the City's negotiation, execution, delivery or
performance of such Agreement or its participation or intended participation in
any transaction contemplated thereby.
(g) No Federal, State or local law or regulation or written
interpretation thereof by any applicable regulatory authority, that would make
the execution or delivery by the City of this Agreement, the compliance by the
City with the terms and conditions hereof or the consummation by the City of the
transactions contemplated hereby, a violation of such law or regulation.
(h) The City is in compliance with all applicable laws, regulations and
administrative consent orders governing the System and there are no known
environmental conditions and/or problems that the City has failed to bring to
the attention of the Company.
SECTION 4.2. Company and/or Guarantor Representations, Warranties and
Covenants. The Company represents, warrants and covenants to the City and the
Authority as follows:
(a) The Company is a corporation duly organized and validly existing in
good standing in the State of New Jersey and is qualified and authorized to do
business in the State of New Jersey.
(b) The Company has full power and authority to enter into this
Agreement and to perform its duties and obligations hereunder.
30
<PAGE>
This Agreement has been duly authorized, executed and delivered by the Company,
and the authorization, execution, delivery and performance of this Agreement by
the Company shall not violate any law, judgment, order, ruling or regulation
applicable to the Company. This Agreement constitutes a legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms
and does not constitute a breach of or default under any agreement or instrument
by which the Company is bound.
(c) The Company (or the Company's personnel, where appropriate) has or
holds all Permits necessary to operate, maintain and/or manage the System.
(d) The Company (or the Company's personnel, where appropriate) shall
continue to have or hold throughout the Term of this Agreement, all Permits
necessary to operate, maintain and/or manage the System.
(e) At all times during the Term of this Agreement, the Company shall
keep the System free from any and all liens and encumbrances (except for
Permitted Encumbrances) arising out of or in connection with (i) its operation,
maintenance and/or management of the System or (ii) any acts, omissions or debts
of the Company, any of its subsidiaries or any of its subcontractors.
(f) No material action, suit, proceeding or official investigation
shall have been threatened, publicly announced or commenced by any Federal,
State or local governmental authority or agency, or any other person or in any
Federal, State or local court, that seeks to enjoin, assess civil or criminal
penalties against, assess civil damage against or obtain any judgment, order
31
<PAGE>
or consent decree with respect to the Company, the Guarantor or the Agreement or
any actions contemplated in the Agreement;
(g) No receiver, liquidator, custodian or trustee of the Company or the
Guarantor or of a major part of its or the Guarantor's property shall have been
appointed; no petition to reorganize the Company or the Guarantor pursuant to
the Bankruptcy Code or any similar statute that is applicable to the Company or
the Guarantor shall have been filed, and no adjudication of bankruptcy or a
filing for voluntary bankruptcy under the provisions of the Bankruptcy Code or
any other similar statute which is applicable to the Company or the Guarantor
shall have been filed.
(h) Except as otherwise disclosed to the City or the Guarantor, no
indictment or conviction has been returned against any official of the Company
or the Guarantor with respect to any business transaction, whether or not
related to the transactions contemplated by the terms of this Agreement.
(i) Except as otherwise disclosed to the City, there is no Federal,
State or local law or regulation thereunder or written interpretation thereof by
any applicable regulatory authority, that would make the execution or delivery
by the Company of this Agreement or by the Guarantor of the Guarantor
Performance Guaranty Agreement and the Guarantor Bond Guaranty, the compliance
by the Company or Guarantor, as applicable, with the terms and conditions hereof
and thereof, or the consummation by the Company or Guarantor, as applicable, of
the transactions contemplated hereby or thereby, a violation of such law or
regulation.
32
<PAGE>
SECTION 4.3. Tax Covenants of the City and the Company. (a) The City
and the Company acknowledge and agree that this Agreement is intended to conform
to the requirements of the Internal Revenue Code of 1986, as amended, all
regulations promulgated thereunder and Revenue Procedure 97-13, 1997-5 I.R.B. 18
(the "IRS Rules"), and is to be interpreted consistently therewith.
(b) Notwithstanding any provisions herein to the contrary, the City and
Company agree that the City and the Authority shall be under no obligation to,
and shall not, pay compensation for Services to the Company for any annual
period, if such payment, or any portion thereof, would result in less than
eighty percent (80%) of Company's compensation for Services for such Contract
Year being based on a periodic fixed fee, as such term is defined in Rev. Proc.
97-13 or such greater amount which is permitted to be paid to the Company under
the then applicable law. The foregoing eighty percent (80%) limitation only
applies to the Contract Year in which the Variable Service Fee accrues and not
when such Variable Service Fee is paid. For all purposes of this Agreement, all
payments to the Company shall be subject to the requirements of the IRS Rules.
(c) The City, the Company and the Authority agree that, for so long as
tax-exempt obligations are Outstanding with respect to the System, this
Agreement shall not be amended or revised except with an opinion of a nationally
recognized bond counsel firm that such amendments or revisions shall not affect
the tax-exempt status of any obligations issued as tax-exempt obligations which
are Outstanding with respect to the System.
(d) The City shall be obligated to pay Rebatable Arbitrage as well as
any fines or penalties that may be imposed by the Federal
33
<PAGE>
government or the State in accordance with the Authority Bond Resolutions.
SECTION 4.4. Authority Representations, Warranties and
Covenants. The Authority represents, warrants and covenants to the
City and the Company as follows:
(a) The Authority is a public body corporate and politic of the State.
(b) The Authority has full power and authority to enter into the
applicable Primary Financing Documents and to perform its duties and obligations
hereunder. The applicable Primary Financing Documents have been duly authorized,
executed and delivered by the Authority, are enforceable in accordance with
their terms and the authorization, execution, delivery and performance of the
applicable Primary Financing Documents by the Authority shall not violate any
law, judgment, order, ruling or regulation applicable to the Authority and does
not constitute a breach of or default under any agreement or instrument by which
the Authority is bound.
(c) No litigation is pending against the Authority which would impair
materially its ability to perform its duties and obligations under the
applicable Primary Financing Documents.
34
<PAGE>
ARTICLE V.
CITY RESPONSIBILITIES
SECTION 5.1. General Responsibilities. The City shall do the following:
(a) Promptly procure and continually maintain in full force and effect
and in accordance with their respective terms those Permits that it is
responsible for under the terms of this Agreement;
(b) Adopt all resolutions and enact all ordinances necessary to carry
out the provisions of this Agreement and enforce all such resolutions and/or
ordinances;
(c) At all times, provide access to the System for the
Company, its agents, and employees; and
(d) Designate an Authorized Representative to act as liaison with the
Company in connection with the performance of Services by the Company.
(e) Refrain from enacting any ordinance and/or adopting any resolution
that would impair the ability of the City or the Company to comply with this
Agreement.
(f) Promptly pay all debt service when due on any bonds or notes of the
City issued with respect to the System.
SECTION 5.2. Establishment and Collection of Rents, Rates, Fees and
Charges. The City shall establish all rents, Rates, City Fees and other charges
to be collected from the customers of the System by the Company, which rents,
Rates, City Fees and charges shall be at least sufficient to pay all amounts due
to the Company hereunder as well as all amounts due under the Authority Bond
Resolutions at the times required herein and therein except as may
35
<PAGE>
be permitted hereunder and thereunder. The Rates may be increased from time to
time in accordance with Article VIII.
SECTION 5.3. Access and Easements. The City shall acquire and maintain
all access, rights-of-way and easements necessary for the Company to operate,
maintain and manage the System.
36
<PAGE>
ARTICLE VI.
OPERATION, MAINTENANCE AND
MANAGEMENT OF THE SYSTEM
SECTION 6.1. General. The Company shall manage, operate, maintain and
repair the System at all times on behalf of the City and the Authority in
compliance with all Federal, State and local laws, regulations and Permits and
in accordance with this Agreement. The Company, at all times, shall keep the
System in good repair and working order and shall manage, operate, maintain and
repair the System in an efficient and economical manner, all in accordance with
this Agreement.
Notwithstanding anything to the contrary, the City shall retain the
right to develop any of the lands upon which any portion of the System is
located for commercial or recreational purposes; provided however, that an
exercise of any such development rights of the City shall in no respect
interfere with the operation, maintenance or management of the System.
SECTION 6.2. Materials, Labor, Vehicles, etc. The Company shall
provide, at its cost and expense, all labor (including all Leased Employees and
others), materials, machinery, vehicles, equipment, office equipment (copiers,
typewriters, computers, etc.), fuel, power, chemicals, supplies, materials,
spare parts, expendables, consumables, testing and laboratory analysis and all
else necessary therefor or incidental thereto necessary for the management,
operation, maintenance or repair of the System in accordance with this Agreement
and in accordance with applicable laws, ordinances and regulations.
Notwithstanding the above, the City shall provide the Company with space at the
main pump station
37
<PAGE>
located at Second Street and Sadowski Parkway in the City. The Company shall,
however, be responsible for the costs of all utilities associated with its use
of such facilities and indemnify the City for any liability the City may incur
as a result of the use of such facilities by the Company.
SECTION 6.3. Hazardous Substances. If, while providing the Services
and/or during the course of excavation work necessary to make repairs and/or
improvements to the System, hazardous or toxic waste or materials (as defined in
applicable Federal and/or State laws and regulations) are discovered by the
Company, it shall not be the obligation of the Company to remove and dispose of
such hazardous substance. The Company shall, however, immediately notify the
City upon becoming aware of the presence of such hazardous or toxic waste or
materials, and shall immediately notify such other governmental agencies as may
be required by law and shall take such further actions to assist the City in
protecting the Health, Safety and Welfare of the public. The City shall
indemnify the Company for any and all costs or expenses it may incur in
connection with this Section. If a hazardous substance impairs the operation of
the System, the City shall remediate the hazardous substance so as to permit the
Company to operate the System pursuant to this Agreement. The City shall pay for
all costs for the removal of the hazardous substance and any clean-up activities
associated with such disposal, discharge, spill or leak. The City shall have the
right to pursue the parties legally responsible for the disposal, discharge,
spill or leak for the costs of the removal of the offending materials and any
clean-up activities. Water treatment plant residuals (e.g. iron and heavy
38
<PAGE>
metals) are to be removed and disposed of at the Company's sole expense.
SECTION 6.4. Response Requirements for Problems, Complaints and
Inquiries. The Company's response time for various customer inquiries and System
problems under normal conditions shall be as follows:
=========================================================================
INITIATE
INITIATE CONTACT INVESTIGATION
CONDITION WITH COMPLAINANTS AND/OR WORK
- -------------------------------------------------------------------------
billing inquiry same Day when 2 Business Days
possible or within
1 Business Day
- -------------------------------------------------------------------------
water or sewer main not applicable as soon as possible
break or blockage but not later than
1 hour
- -------------------------------------------------------------------------
water service 2 business hours 1 Business Day
complaint
- -------------------------------------------------------------------------
utility mark out of not applicable 3 Business Days
sewer mains and the (completion); less
Water System for emergencies
=========================================================================
SECTION 6.5. Inventory/Equipment/Vehicles. The City shall provide the
Company with a complete inventory (subject to the applicable threshold set by
the Department of Community Affairs of the State) listing the quantity and
condition of all spare parts, equipment, tools, supplies, materials and
chemicals within two (2) weeks of the Commencement Date, Company assuming
responsibility for operation and maintenance of the System, which inventory
shall be subject to verification by the Company and the Company shall determine
which items it shall take and shall provide the City with similar items upon the
termination or expiration of this Agreement. The City shall sell all or a
portion the equipment and vehicles
39
<PAGE>
listed in Schedule Y (as well as any other vehicles or equipment that the City
and the Company agree to transfer) upon the terms and conditions agreed to by
and between the City and the Company prior to the Commencement Date or authorize
the use of such vehicles and equipment for the Term of this Agreement provided
similar vehicles are provided to the City upon the termination or expiration of
this Agreement.
The City shall sell to the Company (i) all vehicles listed on
subsection A of Schedule Y and (ii) all furniture, equipment, tools, radios and
other personalty listed on subsection E of Schedule Y, for the total amount of
$140,875, which will be payable by the Company to the City upon the issuance of
the Authority Indebtedness. The vehicles listed in subsection B of Schedule Y
will be leased to the Company by the City, for a term that ends upon the
termination of the City's lease of these vehicles with the Authority, for an
amount equal to the City's payments due under the Authority lease. Upon the end
of the lease, the Company shall have the option to purchase these vehicles from
the City for the fair market value of the vehicles at that time, less any lease
payments made. The vehicles listed in subsection C of Schedule Y have been
sold by the City to the Company for $57,500, which amount will be due in five
equal annual payments beginning on July 1, 1999. The vehicles listed in
subsection D of Schedule Y will be made available to the Company for no charge.
In consideration for the use of these vehicles, the Company agrees to provide
vehicles to the City of the same or similar make and age to the vehicles listed
in subsection D of Schedule Y at the conclusion of the Term of the Agreement.
40
<PAGE>
SECTION 6.6. Maintenance Management Program. The Company shall maintain
a comprehensive maintenance program for all functions of the System.
The maintenance management program shall:
Seek to ensure efficiency, long-term reliability and conservation of
capital investment in accordance with industry standards, if any;
Be otherwise in accordance with industry standards; local, State and
Federal codes; manufacturer's equipment recommendations;
Be documented; and
With the cooperation of the City, as applicable, provide enforcement of
existing equipment warranties or guarantees and maintain all warranties
on new equipment purchased after the Commencement Date of the
Agreement.
Any modifications or major maintenance affecting the appearance of the
facilities in the System which are visible to the public shall be performed only
after receipt of the prior written approval of the City.
The obligations of the Company to maintain the System and to have a
comprehensive maintenance program with respect to the System shall not obligate
the Company to improve the System beyond the Initial Facilities. The Initial
Facilities will be improved by the Ongoing Capital Improvements and the
Additional Capital Improvements (if any). By way of example, the obligations
under 6.16(a)(iii) and 6.17(d) with respect to the disposal of sludges shall not
impose an obligation to remedy conditions in existence as of the Commencement
Date except to the extent included as Ongoing Capital Improvements. Similarly,
the Company obligations with respect to having a comprehensive maintenance
program for storm drain pipes and other pipes and mains will depend upon the
ability
41
<PAGE>
of the Company to locate said pipes and mains by above-surface means.
The responsibility for the cost to maintain and/or repair pipes from the manhole
to the residence shall be as is required by the current City ordinance as in
effect on the Commencement Date.
SECTION 6.7. Software Program. The Company, in consultation with the
City, shall develop a computerized program to satisfy its billing obligations
hereunder. Upon the termination or expiration of this Agreement, the Company
shall provide all data with respect to the System to the City and shall identify
to the City all software programs and licenses utilized by the Company.
SECTION 6.8. Testing and Laboratory Analysis. The Company, at its sole
cost and expense, shall perform, or cause to be performed, all laboratory
sampling and analysis and reporting, as necessary for compliance with all
Federal, State, local or other water distribution regulations and requirements
having the force of law, as well as that which is customary for process (i.e.
corrosion control) monitoring and control.
Sampling and testing procedures shall conform to the current edition of
Standard Methods for the Examination of Water and Wastewater or be in accordance
with the testing requirements of the applicable regulations or Permits. All
testing, with the exception of process control testing, shall be performed by a
State certified laboratory and the Company shall prepare from the data received
from the testing laboratory for all applicable regulations or Permits monitoring
and operating reports and shall deliver such results to the appropriate State
and regulatory agencies.
Testing for the Water System (but not individual customers) shall
include, but not be limited to, coliform determinations, pH,
42
<PAGE>
color, sodium, hardness, iron, manganese, lead, copper, heavy metals, THMs,
VOCs, corrosiveness, alkalinity, magnesium, calcium, turbidity, fluoride,
cryptosporidium, and giardia lamblia cysts and all other tests required or to be
required by the DEP or the EPA. The number, frequency and location of tests
shall be in accordance with the applicable provisions of the regulations,
including the Lead and Copper Rule, 40 CFR 141, et seq, as the same may be
amended or supplemented from time to time.
SECTION 6.9. Reporting Requirements. (a)The Company shall comply with
all reporting requirements related to its operations and the operation,
maintenance and management of the System, as mandated by Federal, State and
local laws, regulations, and Permits.
(b) The Company shall provide comprehensive monthly, year-to-date and
annual reports in a format reasonably satisfactory to the City and regulatory
agencies for each function or activity of the System, including, but not limited
to:
Operating parameters laboratory analysis, maintenance plans and
activities including conditions of the System, water quality results,
water produced or purchased vs. water sold, manpower utilization,
repairs, service calls and responses and other relevant information;
and
Safety reports regarding accidents, injuries, and damages to City
property and other relevant information.
(c) The Company shall maintain up-to-date financial records as they
apply to the Services rendered under the terms of this Agreement. All records
shall be kept in a manner that will enable the City to comply with State
municipal accounting procedures.
(d) The Company shall provide the City with its periodic financial
reports as they apply to the Services rendered under the
43
<PAGE>
terms of this Agreement. At a minimum, such reports shall include the following:
(i) Monthly reports on or before the twenty-fifth (25th) Day of each
month with respect to the prior month and on or before twenty-fifth (25th) Day
after the end of each Contract Year a cumulative report as of the end of each
prior Contract Year as follows: a summary account activity report showing the
aggregate balance of accounts receivable from customers at the end of the
preceding month, billings to customers for the preceding month, collections from
customers during the preceding month, adjustments to customers' accounts and
separate aggregate balances of accounts receivable of the City and accounts
receivable of the Company as of the preceding month. The report shall provide a
breakdown of classes of users and components of billings, collections and
adjustments.
(ii) On or before each April 25, July 25, October 25 and January 25, a
quarterly detailed accounts receivable trial balance showing the individual
customers and their respective account balances as of the preceding March 31,
June 30, September 30 and December 31, respectively, as reconciled with the
ending balance of accounts receivables in the summary account activity report
submitted pursuant to Section 6.9(d)(i).
(iii) The Company shall deliver a year-end report to the City
consisting of a compilation of the monthly and quarterly reports set forth above
and an analysis of all Revenues received and disbursed pursuant hereto and
pursuant to the Revenue Agreement as well as analysis of any adjustments to the
Service Fee or Rates as described herein certified by an officer of the Company
and
44
<PAGE>
delivered to the City within thirty (30) Days of the end of each Contract Year.
(iv) The Company shall provide such other reports as may be reasonably
requested from time to time by the City.
SECTION 6.10. Staffing. (a) The Company shall provide a staff of
qualified and experienced employees who have direct experience in operating,
maintaining and managing water and wastewater systems similar in nature and
character to the System and shall provide such additional third party support as
may be needed to perform its duties and obligations hereunder. Said third
parties shall be equally qualified for the particular services to be performed
and shall not have any direct claim against the City whatsoever. The Company
shall at all times maintain the necessary number of employees, staff and
third-party contractors to operate, maintain and manage the System in accordance
with this Agreement and to adequately maintain and operate the System in good
repair and working order. In order to supply the appropriate staff for the
provision of the Services, the Company shall lease Leased Employees from the
City for the Employee Lease Payments. Any such persons who are so employed,
although remaining as employees of the City shall nevertheless work under the
direct management and supervision of the Company either on the operation of the
System or otherwise within a fifteen (15) mile radius of the City. The City,
shall be obligated to pay the Leased Employees including all overtime and also
pay all benefits, insurance, dues, uniform costs, taxes and other related
expenses with respect thereto in a timely manner. The Company shall wire the
amount needed by the City (which has not otherwise been paid directly by the
Company) to make such payments
45
<PAGE>
within twenty four (24) hours of its receipt of notice of the amount due from
the City. The use of such employees by the Company in the performance of the
Services shall in no way relieve or excuse the Company from performing the
Services in accordance with the terms of this Agreement or from any liability
resulting from its failure to so perform as provided hereunder.
(b) The City shall be responsible for the discipline of the Leased
Employees pursuant to law and the existing collective bargaining agreements (if
any). The City shall identify on Schedule M each Leased Employee by date of
hire, position, bargaining unit and other information deemed reasonably
necessary by the Company. The City shall also set forth on Schedule M the
discipline protocol applicable to the Leased Employees or to each group of
Leased Employees (grouped by bargaining unit or otherwise as identified by the
City). The City shall be responsible for notifying the Company promptly of any
changes in the applicable collective bargaining agreements and/or discipline
protocols.
(c) In meeting the Company's obligations under Section 6.10(a), the
Company shall be entitled to hire persons it deems appropriate to replace any
Leased Employee whose employment by the City terminates. The Company shall also
be entitled to hire such other personnel as the Company believes reasonably
necessary in order to meet its obligations under this Agreement; provided
however that the Company shall submit Cost Substantiation to the City with
respect to such hires.
(d) The Company shall provide: (i) qualified management, supervisory,
technical, laboratory, operating personnel and personnel with licenses as
required by the State for the operation
46
<PAGE>
of the System; (ii) a resident manager for Day-to-Day supervision; (iii)
specialists, as may be necessary, in water quality control, instrumentation,
troubleshooting, emergency management and similar circumstances; and (iv) office
and clerical support staff as necessary.
(e) The Company shall provide, or arrange for the Guarantor to provide,
technical support consisting of on-call backup advice and water quality
expertise, control, management, maintenance and plant repair to assist the
operational staff and ensure performance of the obligations hereunder.
(f) The Company shall provide and maintain an organizational chart that
lists job classification, the number of staff proposed for the transition phase
and for the full time operation. The organization chart, which may be revised at
the discretion of the Company consistent with the operation, maintenance and
management of the System in accordance with this Agreement, shall indicate the
staffing for the System, including laboratory/testing personnel and the licensed
individuals/positions necessary to satisfy regulatory requirements and to
provide operations and maintenance Services in a responsible professional
manner. The Company shall notify the City of any proposed material revisions to
staffing and/or personnel for the System and the City shall have the right to
review and comment upon any such proposed revisions. The Company shall in good
faith consider any comments provided by the City, and shall respond to the City
in writing regarding any such comments.
The City shall forward all complaints about the Company's and/or the
City's employees or staff in writing to the Company, who shall address such
complaints with the offending employee or staff
47
<PAGE>
in an appropriate and timely manner. If the basis for any such complaint is not
corrected to the reasonable satisfaction of the City, the City shall have the
right to request the Company to replace any such personnel interacting with City
and/or City officials and/or the public.
(g) The Company shall provide ongoing training programs for all
personnel in operations and maintenance procedures, management, laboratory and
process control, QA/QC, right-to-know, safety, etc. as required for proper
performance of their duties and for professional development.
(h) The Company's technical support group shall also provide assistance
in the investigation, development and implementation of modifications in the
water treatment processes as may be appropriate or necessary for regulatory
compliance, worker safety or process improvement (i.e. corrosion control
technologies, disinfections, substitutions for certain chemicals, etc.).
SECTION 6.11. Licenses. The Company shall acquire and hold, or cause
its personnel to acquire and hold, all required Federal, State and local
approvals, licenses and certifications necessary to operate, maintain and manage
the System required to be obtained by the Company in accordance with this
Agreement. In accordance with N.J.S.A. 58:11-64 et seq. and N.J.A.C. 7:10A-1.14,
the minimum class of license required is a C-2 license for the Wastewater System
and a T-4 and W-4 licenses for the Water System.
SECTION 6.12. Compliance with Laws, Regulations and Permits. (a) After
the Commencement Date, the Company shall comply with SDWA, RCRA, CERCLA (as
operator), OSHA, POSHA and any and all other applicable local, State and Federal
laws, codes, ordinances and
48
<PAGE>
regulations as they pertain to the System. The Company shall pay all regulatory
fines and penalties, without limitations, assessed against the City, the
Authority and/or the Company for the Company's non-compliance therewith.
(b) The Company shall, where applicable, comply with, satisfy, and pay
all costs or fees (but not remediation) associated with, all regulatory
requirements pertaining to the above, including, but not limited to, public
notification in the event of non-compliance with drinking water standards,
including those associated with the Lead and Copper Rule.
(c) All repairs and/or improvements to the System shall be made by the
Company in accordance with existing City ordinances for work in the City and
other municipalities' ordinances as may be required for work outside the City.
(d) The Company shall comply with the provisions of all City Contracts,
including the payment of all fees and charges associated therewith.
(e) The City is the named permittee for various Permits. The Company
shall be responsible for obtaining, including filling out required application
forms, supplying required data and payment of required fees, and maintaining all
necessary existing and/or additionally required Federal, State and local
Permits, licenses and other governmental or private party approvals for the
operation of the System and the equipment owned by the City and used in
connection with the System. All additional Permits and approvals shall be in the
name of the City as the permittee; however, the Company shall comply with all
requirements pertaining thereto in accordance with this Agreement.
49
<PAGE>
(f) The City shall comply with SDWA, RCRA, CERCLA (as operator), OSHA,
POSHA and any and all other applicable local, State and Federal laws, codes,
ordinances and regulations as they pertain to the System. The City shall pay all
regulatory fines and penalties, without limitations, assessed against the
Company and/or the City for the City's non-compliance therewith.
SECTION 6.13. Safety and Security. The Company shall provide for and
maintain security and safety for the System as it deems appropriate. Fences,
when reasonably required, shall be maintained in neat order and structural
integrity. Gates, access points and doors, when reasonably required, shall be
kept locked, structures shall be protected from unauthorized entry and security
alarms, when reasonably required, shall be maintained.
The Company shall conduct all operations, maintenance and management of
any facilities in compliance with applicable health and safety regulations,
including, but not limited to: OSHA, general industry regulations, including
requirements for confined space entry, respiratory protection and hazard
communication; EPA regulations (applicable to water and wastewater systems) on
emergency planning and notification under CERCLA, 40 CFR 355; and EPA
regulations on hazardous chemical reporting and community right-to-know, 40 CFR
370, and any other applicable regulations as may be enacted during the Term of
this Agreement.
SECTION 6.14. Continuity of Service. The Company shall cooperate in
good faith with the City's agents, contractors and subcontractors and shall
provide for the orderly transition of Services from the City and/or its
contractors to the Company
50
<PAGE>
without interruption or disruption of Services and without adverse impacts to
the users of the System or to the City.
The Company and the City shall make such provisions as are necessary to
ensure that no portion of the System shall be shut down for any period of time
due to strikes, lock-outs or labor problems.
In the event of a labor action, stoppage or dispute that disrupts or
prevents the Company's employees or its subcontractors' employees from entering
upon and working on any part of the System, the Company shall (subject to the
following paragraph) at its sole cost, seek appropriate legal injunctions,
remedies, or court orders. In any event, the Company shall continue to operate
the System through the use of office personnel, management or other resources at
its disposal. The Company shall always maintain operation of the System to
protect the Health, Safety and Welfare of the users of the System and the
residents of the City.
In the event of a labor action, stoppage or dispute that disrupts or
prevents the City's employees or its subcontractors' employees from entering
upon and working on any part of the System, the City shall, at its sole cost,
seek appropriate legal injunctions, remedies, or court orders.
SECTION 6.15. Emergency Situations. The Company shall promptly respond
to all customer problems and (within two (2) hours to) all emergencies relating
to the System and shall maintain at all times during the Term of this Agreement
a toll-free twenty-four (24) hour telephone number where users of the System can
report any emergencies from anywhere within the City.
51
<PAGE>
The Company shall immediately notify the City of any activity, problem
or circumstance that it becomes aware of that threatens the Health, Safety and
Welfare of the users of the System or the residents of the City. In an emergency
affecting the safety of persons or property, the Company shall act, at its
discretion, to prevent or contain threatened damage, injury or loss and the
Company shall be reimbursed for any costs incurred in connection therewith by an
adjustment to the Service Fee and the execution of an amendment to this
Agreement.
In the event of damage or destruction of the potable water facilities
or any emergency which, in the reasonable judgment of the Company, is likely to
result in material loss or damage to the System or constitute a material threat
to human health or safety, the Company may suspend operation of the System.
Emergency repairs as are necessary to mitigate, contain or reduce such loss,
damage or threat to human health or safety shall be done in consultation with
the City. Notification of emergency/non-compliance events within the System
shall be in accordance with Permit requirements and an emergency plan to be
developed by the Company and submitted to and approved by the City and the DEP
and any subsequent amendments or modifications thereto.
The Company shall respond to emergencies and unusual circumstances in
accordance with applicable regulations and requirements and with such personnel
and equipment as necessary to maintain or restore the operations of the System
in a timely manner with the least possible disruption or inconvenience to the
users of the System.
52
<PAGE>
SECTION 6.16. Provisions Specific to Water System. (a) General. (i) The
Company shall furnish complete and accurate records and regulatory reports in a
format acceptable to the City and to the DEP.
(ii) The Company shall perform periodic testing of the Water System,
including, without limitation, testing of the meters and AMR equipment installed
in the Water System in accordance with prudent industry and utility practice.
Process meters shall be calibrated in accordance with manufacturer requirements.
All generators shall be exercised at least on a weekly basis provided that the
Company shall use its best efforts to schedule such exercising at times to
minimize inconvenience to residents of the City resulting from noise.
(iii) All sludges, scum, grit, screenings, trash and refuse generated
by or resulting from the operations or maintenance of the Water System shall be
disposed of in accordance with applicable regulations pertaining thereto.
(iv) The levels of the storage reservoirs and storage tanks, if any,
shall be monitored and controlled to ensure proper pressures for satisfactory
service and fire fighting capabilities within the Water System.
(v) All hydrants shall be flushed at least once a year and the
condition of, and maintenance performed on, the hydrants shall be recorded. All
hydrants found to be broken or inoperable shall be bagged and shall promptly be
replaced or repaired.
(vi) All water mains that become frozen or break shall be repaired or
replaced so as to minimize disruption of customer service.
53
<PAGE>
(vii) All inoperable, inaccurate or broken water meters shall be
promptly replaced upon discovery.
(viii) Routine maintenance of the Water System shall include: routine
painting and repairs of structures, both interior and exterior; upon discovery,
removal and replacement of broken or inoperable valves critical to the safe
operation of the Water System and/or hydrants; repair of main and service
breaks; calibration of instrumentation on a twice a year basis; hydrant flushing
(once a year) and maintenance; removal and replacement of broken, inaccurate or
inoperable customer meters; reading of meters as required for billing purposes;
disposal of all sludges, scums, screenings, grit, debris, trash, etc. from the
Water System; sampling, testing analysis, reporting, billing and collections;
and all else necessary therefor or incidental thereto to protect the Health,
Safety and Welfare of the users of the Water System and as required by industry
standards and utility practices.
(b) Water Quality Standards. The Company shall comply with the SDWA and
all other Federal, State and local regulations concerning safe drinking water
standards during the Term of this Agreement. The Company agrees to indemnify and
hold the City and the Authority harmless from any fines or penalties assessed by
the applicable regulatory agencies during the Term of the Agreement for any and
all violations committed by the Company, its agents, servants or employees and
from any fees or costs incurred as a result of failure to comply with
regulations concerning safe drinking water standards.
(c) Bulk Water Sales. The Company shall seek to sell excess water from
the Water System to the extent same is available on such
54
<PAGE>
terms and conditions as it deems appropriate with the consent of the City as
permitted by the Water Act.
SECTION 6.17. Provisions Specific to Wastewater System. (a) All
wastewater generated within the City is conveyed via interceptor sewer
facilities to the wastewater treatment plant of MCUA where same is treated in
accordance with an existing contract.
The Company shall comply with all provisions of said contract,
including the payment of all fees and charges associated therewith. The Company
shall also operate the Wastewater System in conformance
with all requirements of said contract, including prohibited discharges and
sampling and laboratory analysis associated with industrial pretreatment
compliance and monitoring programs as required.
The MCUA contract contains provisions for surcharges and penalties
against industry for industrial pretreatment non-compliance. Existing municipal
ordinances allow for the initiation of enforcement action against violations of
said ordinances, which are tied to the MCUA regulations. The City shall assist
the Company in enforcement actions against such violators.
In addition to the base rates, the contract with the MCUA contains a
provision for a surcharge for increased loadings. The MCUA periodically
increases its rates in order to meet its budgetary requirements. Such increases
are considered Uncontrollable Circumstances for purposes of this Agreement.
(b) All pumping stations shall be inspected and maintained on a basis
predicated on the manufacturer's recommendations and field conditions unique to
the individual facility. A log shall be maintained of all inspections, services
performed, problems
55
<PAGE>
encountered and other data as appropriate to the industry standards and
regulations. The standby power for those stations so equipped shall be exercised
at least weekly.
(c) The Company shall develop and implement a program to be performed
throughout the Term of this Agreement for the identification, isolation and,
where cost-effective or required to protect the structural integrity of system
components, correction of infiltration/inflow into the Wastewater System. Where
said correction would constitute a Capital Improvement that would impact the
projected rate structure (e.g. replacement of an entire line as opposed to
grouting isolated leaks or elimination of a cross connection), same shall be
charged, designed and performed as an Additional Capital Improvement in
accordance with this Agreement.
(d) All sludges, scum, grit, screenings, trash and refuse generated by
or resulting from the operations of the Wastewater System shall be disposed of
in accordance with applicable regulations pertaining thereto for a total annual
cost per Contract Year of thirty thousand dollars ($30,000) provided that no
additional amount may be expended without the written consent of an Authorized
Representative of the City, which additional amount shall be paid by the City as
an increase to the Fixed Service Fee, from the Project Fund or from the City
directly.
(e) All sewer mains shall be inspected every three (3) years and jetted
and/or otherwise cleaned as needed such that same are maintained free of
blockages.
(f) All future pumping stations shall be inspected and maintained on a
daily basis predicated on the manufacturer's recommendations and field
conditions unique to the individual
56
<PAGE>
facility. A log shall be maintained of all inspections, services performed,
problems encountered and other data as appropriate to the industry standards and
regulations. The standby power for those stations so equipped shall be exercised
at least weekly.
(g) Maintenance, repair and replacement of facilities shall also
include, but not be limited to, the following: disposal of all sludges, sand,
grit, screenings, grease, debris, trash, etc. resulting from maintenance and
operation of facilities; periodic inspection of manholes and mains (once every
three (3) years) and cleaning, as needed and catch basins (once every year)
except in problem areas which shall be on as-needed basis; identification,
isolation and, where economic, correction of infiltration and inflow; routine
painting and repairs of structures; repairs of main breaks, including bypass
pumping as required; removal of system blockages; calibration of instrumentation
and meters on a twice yearly basis; and sampling, testing, analysis, reporting,
billing and collections; and all else necessary therefore or incidental thereto
to protect the Health, Safety and Welfare of the customers and as required by
industry standards and utility practices.
(h) All improvement, repair or maintenance items required for the
Wastewater System shall be charged, designed and performed as Capital
Improvements if they conform to the definition of same set forth herein.
SECTION 6.18. Operations Committee. The City and the Company shall
establish an Operations Committee, consisting of the Business Administrator of
the City, the Public Works/Municipal Utilities Director of the City and two (2)
employees of the Company or its affiliated companies (at least one of whom must
be an officer of
57
<PAGE>
the Company), which shall meet, with a frequency to be determined by the
parties, to discuss issues related to the operation, maintenance and management
of the System; to receive and review reports; and to confer generally as a means
of enhancing communication between the City and the Company. In addition to such
meetings, representatives of the Company shall be available to meet with the
Mayor, City Business Administrator and members of the governing body of the City
or their authorized representatives, as reasonably requested by the City.
SECTION 6.19. Unbilled Services. The Company shall provide, during the
Term of this Agreement, unbilled Services to the City Facilities and Non-Profit
Facilities so long as the use of such City Facilities and/or Non-profit
Facilities does not materially change. The Company shall install meters for the
measurement of such unbilled water and wastewater Services. The City shall not
be required to pay any hydrant fee or any other water service related fees, or
any wastewater related fees, during the Term of this Agreement, except as
otherwise provided herein. The City shall not commit to provide any unbilled
Services to any users after the Commencement Date without the prior written
consent of the Company, provided, however, that such consent shall not be
unreasonably withheld for any public use similar in kind and scope to municipal
public users that receive unbilled water and wastewater Services as of the
Commencement Date. For purposes of this Section, except for the City Facilities,
unbilled Services do not include costs associated with any repairs required to
be made to the System which would, but for this Section, otherwise be the
responsibility of such Users of the System. City Facilities shall not be billed
for
58
<PAGE>
labor costs for any System employees, including Leased Employees, in connection
with any repairs or improvements. Costs to be billed to the City are subject to
Cost Substantiation and the prior approval of the Authorized Representative of
the City
SECTION 6.20. Billing and Collections. (a)On and after the Commencement
Date, the Company, as agent for the City, shall be responsible for the
preparation, delivery, maintenance and collection of all bills and invoices to
the customers of the System and all costs and expenses associated therewith. All
bills shall comply with the provisions of this Agreement. The Company shall
design the format and content (which shall be reasonably acceptable to the City)
of the bills for the Services. All payments shall be applied to the wastewater
bill first (oldest to most recent) and the water bill second (oldest to most
recent). In all cases, interest shall be credited first.
(b) The City shall cooperate with the Company in all collection matters
and shall use its statutory powers pertaining to any and all remedies granted to
municipalities for purposes of collection, including the imposition of interest
and penalties on unpaid fees and charges, the imposition of liens for such
unpaid fees, charges, penalties and interest and the termination of services.
The Company, in addition to other monies paid to the City pursuant to the terms
hereof, shall reimburse the City for any and all reasonable costs and expenses
incurred by the City in connection with the use of its statutory powers and
remedies to enforce such collections. The Company may terminate services to
any customer of the System not in compliance with their obligation to pay the
established Rates in accordance with their terms.
59
<PAGE>
(c) The Company shall promptly (on the same day when possible or within
one (1) Business Day) respond to all customer billing and collection questions,
problems and inquiries and shall maintain a toll free telephone number for
customers of the Water System to handle such questions, problems and inquires,
as well as any emergencies, as may arise. The Company shall provide the City,
upon request, with a copy of the Company's written policy in dealing with
customer service and complaints relating to billing and collection matters.
(d) The City shall provide space for a collection office in a City
municipal building where customers of the System may pay their bills during
normal business hours Monday through Friday. The Company shall provide a person
to handle collections at such time in such office.
(e) The Company shall conduct at least quarterly readings to the extent
possible of all customers' usages and shall bill such customers accordingly.
60
<PAGE>
ARTICLE VII.
CAPITAL IMPROVEMENTS TO THE SYSTEM
SECTION 7.1. Ongoing Capital Improvements. The Company shall design
and obtain Permits for the Ongoing Capital Improvements to the extent that they
have not already been designed or permitted. The cost of the Ongoing Capital
Improvements (including design, permitting, construction and financing) shall be
the responsibility of the City to be paid for with the proceeds of the Authority
Series B Indebtedness and the investment income thereon. The Ongoing Capital
Improvements shall be completed and placed in service within three (3) Years
from the Commencement Date pursuant to the existing contracts the City has for
such projects. For any Ongoing Capital Improvements not currently under
contract, the Company shall provide the City with (a) a statement of work with
sufficient detail to enable a third party to evaluate the cost thereof, (b) a
firm price quotation for permit, design and construction (which firm price
quotation shall be in the case of contracts) determined, unless the Authorized
Representative of the City specifies otherwise, by soliciting bids from
qualified bidders and multiplying those bids by a factor of one and one-tenth
(1.10) plus the Company's documented direct labor costs times a factor of two
(2)), (c) an estimated completion schedule, and (d) a drawdown schedule. The
Authority shall disburse, or cause to be disbursed, the funds for the Ongoing
Capital Improvements upon the approval of the City pursuant to the terms of the
Authority Series B Bond Resolution and provide for the cost therefor from the
proceeds of the Authority Series B Indebtedness. The City shall have the right
61
<PAGE>
to review and approve the design and specifications and construction performed
for the Ongoing Capital Improvements. The Company shall be paid a fee to serve
as general contractor for the Ongoing Capital Improvements equal to one-tenth
(.1) times the cost of construction thereof plus the Company's direct labor
costs (not otherwise paid by the Employee Lease Payment) times a factor of two
(2). Such fee shall be paid in the same manner as the Ongoing Capital
Improvements.
SECTION 7.2. Additional Capital Improvements to the System. Additional
Capital Improvements, in addition to the Ongoing Capital Improvements, may be
necessary as a result of (a) Uncontrollable Circumstances, (b) a request by the
City or (c) a proposal by the Company.
For any Additional Capital Improvements described in Section 7.2(a) or
(c), the Company shall present to the City, in writing, a request for such
Additional Capital Improvements consisting of (a) a statement of work with
sufficient detail to enable a third party to evaluate the cost thereof, (b) a
firm price quotation for permit, design and construction (which firm price
quotation shall be (in the case of contracts) determined, unless the Authorized
Representative of the City specifies otherwise, by soliciting bids from
qualified bidders and multiplying those bids by a factor of one and one-tenth
(1.10) plus the Company's documented direct labor costs times a factor of two
(2)), (c) an estimated completion schedule, (d) a drawdown schedule, (e) interim
financing terms, if necessary, and (f) an estimate of the effect, if any, of the
Additional Capital Improvements on the Fixed Service Fee and the Rates.
62
<PAGE>
For any Additional Capital Improvements described in Section 7.2(b),
the City shall present to the Company, in writing, a request for such Additional
Capital Improvements and the Company shall provide the City with (a) a statement
of work with sufficient detail to enable a third party to evaluate the cost
thereof, (b) a firm price quotation for permit, design and construction (which
firm price quotation shall be (in the case of contracts) determined by
soliciting bids from qualified bidders and multiplying those bids by a factor of
one and one-tenth (1.10) plus the Company's documented direct labor costs times
a factor of two (2)), (c) an estimated completion schedule, (d) a drawdown
schedule,(e) interim financing terms, if necessary, and (f) an estimate of the
effect, if any, of the Additional Capital Improvements on the Fixed Service Fee
and the Rates provided, however, that in the event of any emergency Capital
Improvements required to protect the Health, Safety or Welfare of the users of
the System or the residents of the City, the Company may contact the Authorized
Representative of the City who may authorize such Capital Improvements without
satisfying the requirements of this Section 7.2.
The City shall finance such Additional Capital Improvements to the
extent not otherwise payable from the Capital Improvement Fund by issuing its
bonds or notes or through the issuance of certain bonds or notes through the
Authority (THE "ADDITIONAL INDEBTEDNESS") or through the issuance of Authority
Series B Indebtedness which shall not constitute Additional Indebtedness
provided that in no event shall the Authority be obligated to issue any such
bonds or notes or Authority Series B Indebtedness for this purpose. The Company
shall assist the City in making necessary
63
<PAGE>
applications, meeting with appropriate agencies or other parties and otherwise
assisting the City as is necessary to secure said financing.
The City shall have the right to review and approve the design, bid
plans and specifications, bids received, construction performed and payments
made for the Additional Capital Improvements. The City may engage a qualified
engineer for purposes of fulfilling this need at the City's cost. In all cases,
the City reserves the right to design and institute any and all Capital
Improvements and not utilize the services of the Company for such purposes.
SECTION 7.3. Design and Performance Standards. All Capital Improvements
to the System shall adhere to the standards of the Guarantor, generally accepted
water and sewer industry standards and practices, and the following design and
performance standards:
(a) A minimum design life of twenty (20) Years for above-ground Capital
Improvements and fifty (50) Years for underground System components.
(b) Reliability criteria as defined in EPA document "Design Criteria
for Mechanical, Electrical and Fluid System and Component Reliability" published
in 1974, and as updated, for the appropriate reliability class of treatment
works.
SECTION 7.4. Termination of Additional Capital Improvements. With
respect to Additional Capital Improvements to the System agreed to by the City,
should the City later decide not to proceed with such Additional Capital
Improvements, the Company shall be entitled to recover reasonable design and
estimating costs incurred as a result of any such Additional Capital
Improvements; provided
64
<PAGE>
any claim by the Company for such costs is made within ninety (90) Days after
notification by the City of the decision not to proceed. The Company shall
provide Cost Substantiation of all expenses related to Capital Improvements
constructed or acquired by the Company pursuant to this Agreement.
SECTION 7.5. Capital Improvement Fund. All funds, and investment income
thereon, held in the Capital Improvement Fund shall be utilized by the Company
to pay for Capital Improvements to the System in order to maintain the integrity
of the System and, to the extent available, to provide for all or a portion of
the cost of any Additional Capital Improvements or, to the extent necessary, any
Ongoing Capital Improvements.
SECTION 7.6. Submission of Draws; Procedures. (a) As payments are
required for Capital Improvements under this Agreement, the Company shall
prepare and assemble the following Draw Papers and submit them to the Trustee
for the Authority Series B Indebtedness or System Trustee, as applicable.
(b) On or before 10:00 a.m. on each Draw Date, the Company shall advise
the Trustee for the Authority Series B Indebtedness or System Trustee, as
applicable (with a copy to the City), in writing of the aggregate amount of
funds needed for disbursement to pay the Capital Improvements costs. An amount
equal to the lesser of (x) such aggregate amount of funds needed, OR (y) the
amount of funds available in the Capital Improvement Fund or Project Fund in the
Project Fund or Capital Improvement Fund, as applicable, and applied to the
payment of the Capital Improvements costs or a portion thereof.
65
<PAGE>
(c) The Company shall cause the Trustee for the Authority Series B
Indebtedness or System Trustee, as applicable to make payments to the
contractors or other third parties for the Capital Improvements or a portion
thereof in the amount of the appropriate advance therefor from the Project Fund
or Capital Improvement Fund, as applicable, upon acceptance of the Capital
Improvements or a portion thereof, as the case may be, but only after the
Trustee or System Trustee has received the Draw Papers.
(d) For any final payment of the costs relating to the Ongoing Capital
Improvements, the Company shall submit a certificate of completion and
acceptance in substantially the form attached hereto as Schedule W signed by the
Company with the Draw Papers. Notwithstanding the foregoing, any such
certificate of completion and acceptance shall state that it is given without
prejudice to any rights against third parties that exist at the date of any such
certificate of completion and acceptance or that may subsequently come into
being. If, upon the completion or abandonment of the acquisition, construction,
renovation and installation of the Ongoing Capital Improvements, any surplus
funds shall remain on deposit with the Trustee for the Authority Series B
Indebtedness that are not required to provide for the payment of the costs
relating to the Ongoing Capital Improvements, such funds shall be deposited and
applied as provided in the Authority Series B Bond Resolution.
66
<PAGE>
ARTICLE VIII.
RATES, REVENUES, SERVICE FEE AND ADJUSTMENTS
SECTION 8.1. Rates, Fees and Other Charges. The City has established
the Rates and City Fees for the use of the System. Such Rates and City Fees
shall be subject to change only as permitted by Section 8.5.
SECTION 8.2. Revenues. The Company shall collect all of the Revenues
beginning on the Commencement Date and ending on the termination or expiration
of the Agreement. All such Revenues shall be immediately deposited in the
Revenue Fund.
SECTION 8.3. Service Fee. The Company shall receive (a) the Fixed
Service Fee in monthly installments on the first business Day of each month
commencing on the Commencement Date and (b) the Variable Service Fee annually on
first business Day of the second month following the end of each Contract Year
and following the completion of the annual reports required by Sections
6.9(d)(iii) of this Agreement provided that the portion of the Variable Service
Fee described in paragraph (b) of such definition shall not be paid to the
Company unless the City first receives a Variable Franchise Fee in an amount at
least equal to the Minimum Variable Franchise Fee provided such Service Fees do
not violate the provisions of Section 4.3.
SECTION 8.4. Adjustments to the Service Fee. (a) Notwithstanding
anything herein to the contrary, during the first five (5) Contract Years, the
Company shall only be entitled to receive payment of the Service Fee to the
extent that funds are available therefor under the Revenue Agreement. Upon the
fifth anniversary of the Agreement, the Company shall permanently finance
67
<PAGE>
all unpaid Fixed Service Fees and all unpaid Variable Service Fees as described
in paragraph (a) of such definition (including interest thereon) from the first
five (5) Contract Years over the remaining Term of the Agreement. The resulting
debt service shall be added to the Fixed Service Fee to create a new Fixed
Service Fee for Contract Years six (6) through twenty (20).
(b) If, in any of the Contract Years six (6) through twenty (20) the
Company does not receive its Fixed Service Fee or the Variable Service Fee as
described in paragraph (a) of such definition, the unpaid amount shall be added
to the Fixed Service Fee for the subsequent Contract Year to create a new Fixed
Service Fee. Any amounts due at the end of the term of this Agreement shall be
paid to the Company within ninety (90) Days of the end of such Term.
(c) If the Company incurs increased operating, maintenance or
management costs or expenses or other costs (that would not otherwise be the
responsibility of the Company hereunder) resulting from Uncontrollable
Circumstances or a request by the City to do something that is not otherwise the
responsibility of the Company hereunder, there shall be an adjustment to the
Fixed Service Fee to provide for such increased costs.
(d) If the total annual cost for salaries and benefits for any
Contract Year for those persons providing the Services (including Leased
Employees and employees of the Company or its subcontractors) is greater than
the Employee Lease Payment for the applicable Contract Year, the Fixed Service
Fee for the subsequent Contract Year shall be increased to reimburse the Company
for the increased costs associated with such salaries and benefits. If the
68
<PAGE>
total annual cost for salaries and benefits for any Contract Year for those
persons providing the Services (including Leased Employees and employees of the
Company or its subcontractors) is less than the Employee Lease Payment for the
applicable Contract Year, the excess Employee Lease Payment shall be reimbursed
to the City.
(e) If the actual fee charged by MCUA for any Contract Year is greater
than the MCUA Fee for the applicable Contract Year, the Fixed Service Fee for
the subsequent Contract Year shall be increased to reimburse the Company for the
increased costs associated with the increase in the MCUA Fee. If the actual fee
charged by MCUA for any Contract Year is less than the MCUA Fee for the
applicable Contract Year, the excess MCUA Fee shall be reimbursed to the City.
(f) If, on the first business Day of the second month of each Contract
Year the Company does not receive the amount due to it under paragraph (b) of
the definition of Variable Service Fee, such amount shall remain outstanding
(without interest) until the subsequent first business Day of the second month
of the subsequent Contract Year, when such amount shall be paid if funds are
available as described herein. This amount shall continue to be due and payable
until funds are available on the first business Day of the second month of any
Contract Year. Any amount not paid for the Variable Service Fee described in
paragraph (b) of the definition to Variable Service Fee as of the end of the
Term of the Agreement shall no longer be due to the Company.
(g) For any adjustment to the Fixed Service Fee, the Company shall
present to the City the Cost Substantiation for such
69
<PAGE>
adjustment in the Fixed Service Fee and, in the case of the seventh (7th)
Contract Year, the Company shall utilize the first eleven (11) months of such
adjustments for the prior Contract Year and for each Contract Year thereafter
shall use a twelve (12) month period beginning one (1) month prior to the
applicable Contract Year.
(h) In connection with all adjustments to the Fixed Service Fee, the
Company shall circulate a revised Schedule H to the parties hereto.
SECTION 8.5. Adjustments to the Rates. (a) During the first five (5)
Contract Years, there shall be no increases in the Rates except as described in
the Rate schedule attached as Schedule T, or as otherwise determined by the
City. Upon the fifth (5th) anniversary of the Agreement, the Rates shall
automatically increase or decrease each year to provide additional Revenues or
less Revenues to pay for the increases or decreases in the Fixed Service Fee,
the debt service on Additional Capital Improvements, and/or as otherwise
required to ensure sufficient funds to meet the City's obligations hereunder and
the requirements of the Revenue Agreement. Nothing herein, shall however, limit
the City's ability to unilaterally increase (but not decrease) the Rates from
time to time as it deems appropriate. Any adjustment to the Rates shall require
a corresponding adjustment to the blended annual percentage increase in the
Rates as described in Schedule T. In connection with all Rate changes other than
as set forth in Schedule T, the Company shall circulate a new Schedule T to the
parties hereto
(b) For any adjustment to the Rates (other than as set forth in the
rate schedule attached hereto or as unilaterally imposed by
70
<PAGE>
the City), the Company shall present to the City the Cost Substantiation for
such adjustment in the Rates.
(c) Notwithstanding anything herein to the contrary, the City shall
increase the Rates, as necessary, to meet all of the requirements of the
Authority Bond Resolutions and the requirements of Section 5.2.
71
<PAGE>
ARTICLE IX.
DEFAULT AND TERMINATION
SECTION 9.1. General Provisions. In the event of breach of this
Agreement, the right to recover damages shall ordinarily constitute an adequate
remedy. During the Term of this Agreement, this Agreement may be terminated
prior to its stated expiration date by the City or the Company on the terms and
conditions set forth in this Article IX and as otherwise specified in this
Agreement. The rights of the City and the Company to terminate this Agreement
shall be strictly construed in accordance with the provisions of this Article
IX.
SECTION 9.2. Termination by the City. (a) The following events shall
give the City the right to terminate this Agreement:
(i) the failure of the Company to perform or observe any of its
material covenants, agreements, obligations and/or duties created by this
Agreement;
(ii) a determination that any representation, warranty or covenant made
by the Company shall prove to be false and/or misleading in any material
respect;
(iii) the commencement of any bankruptcy, insolvency, liquidation
and/or similar proceeding against the Company and/or any of its subsidiaries
and/or related companies which materially and adversely affects the Company's
ability to perform its duties or obligations under this Agreement; the consent
by the Company and/or any of its subsidiaries and/or related companies or the
Guarantor, to the appointment of and/or taking possession by a receiver,
liquidator, assignee, trustee and/or custodian of the Company and/or any of its
subsidiaries and/or related companies or the Guarantor, and/or any substantial
part of their respective assets which materially and adversely affects the
Company's or the Guarantor's ability to perform its duties or obligations under
this Agreement, the Guarantor Performance Guaranty Agreement and/or the
Guarantor Bond Guaranty Agreement, as applicable; the making by the Company
and/or any of its subsidiaries and/or related companies or
72
<PAGE>
the Guarantor, of any assignment for the benefit of creditors that would
materially and adversely affect the Company's or Guarantor's ability to perform
its duties or obligations under this Agreement, the Guarantor Performance
Guaranty Agreement and the Bond Guaranty; and/or the failure by the Company
and/or any of its subsidiaries and/or related companies or the Guarantor, to
generally pay its debts as they come due; or
(iv) the failure of the Company to make any payment due and payable
under this Agreement, unless payment is made within thirty (30) Days after
demand thereof is received by the Company that any such payment is overdue.
(v) a determination by any court, agency and/or other entity with
competent jurisdiction that any of the Primary Financing Documents is
unenforceable and/or prohibited by law, or a determination that the governing
body of the City is legally prohibited from enacting any resolution or ordinance
establishing the Rates for the supply of Services to the customers of the System
that are required to be established by the City in accordance with
the provisions hereof.
(b) Upon the happening of any event described in Section 9.2(a)(i), the
City shall provide written notice to the Company setting forth in detail the
alleged failure and/or deficiency of
73
<PAGE>
the Company. The Company shall have thirty (30) Days after receipt of such
written notice from the City to cure and/or correct such failure and/or
deficiency or to deliver to the City a written notice alleging that no such
event described in Section 9.2(a)(i) has occurred and setting forth in detail
its reasoning as to why no such event has occurred. In the event that the
Company does not cure and/or correct such failure and/or deficiency within said
thirty (30) Day period or deliver to the City the written notice described in
the preceding sentence within said thirty (30) Day period, the City shall
provide the Company with a second written notice affording the Company an
additional fifteen (15) Days to cure and/or correct such failure and/or
deficiency. If the Company fails to cure and/or correct the failure and/or
deficiency within such fifteen (15) Day period, the City may terminate the
Agreement by providing written notice thereof to the Authorized Representative
of the Company.
(c) Upon the happening of any event described in Section 9.2(a)(ii),
(iii), (iv) or (v), the City shall have the right to immediately terminate this
Agreement upon thirty (30) Days prior written notice to the Company. The City
and the Company specifically agree that this Agreement shall terminate
immediately after the thirty (30) Days from the receipt of such written notice
to the Company.
(d) If the City terminates this Agreement in accordance with the
provisions of this Section 9.2(b) or (c), the City shall owe the Company the
cost and/or debt service on any indebtedness incurred by the Company for any
Capital Improvements. If the City terminates this Agreement due to the
occurrence of an event as
74
<PAGE>
described in Section 9.2(a)(v), the City shall also owe the Company any Service
Fees that have been earned but not paid to the Company, the unamortized amount
of the debt service on the deferred Service Fee as described in Section 8.4(a)
and any expenses or other amounts owed to the Company that were to be added to
the subsequent Year's Service Fee. In the event that the Company has failed to
maintain the System in good working order, subject to normal wear and tear,
consistent with industry practice, then the Company shall pay for the cost of
repairs by the City and in all events, except for those described in Section
9.2(a)(v), the Company shall pay the reasonable costs of procuring the services
of a new company.
(e) If the City terminates this Agreement for any reason, it shall
defease the Authority Series C Indebtedness and provide for the release of the
Guarantor Bond Guaranty and the Company shall, if the termination occurs
pursuant to Section 9.2(a)(i), (ii), (iii) or (iv), reimburse the City for the
costs associated with such defeasance including the incremental increase in debt
service resulting from the issuance of new bonds or notes to effectuate such
defeasance.
(f) In addition to any other monetary remedies provided herein, the
City shall be entitled to pursue a cause of action against the Company for any
and all actual damages suffered by the City as a result of any default by the
Company, plus reasonable attorneys' fees.
SECTION 9.3. Termination by the Company. (a) The following events shall
give the Company the right to terminate this Agreement:
75
<PAGE>
(i) the failure of the City to perform or observe any of its material
covenants, agreements, obligations and/or duties created by this Agreement;
(ii) a determination that any representation, warranty and/or covenant
made by the City shall prove to be false and/or misleading in any material
respect;
(iii) the failure by the City to make any payment required to be made
by the City pursuant to the terms of this Agreement within thirty (30) Days of
its receipt of notice from the Company that any such payment was not paid when
due; and
(iv) a determination by any court, agency and/or other entity with
competent jurisdiction that this Agreement is unenforceable and/or prohibited by
law, or a determination that the governing body of the City is legally
prohibited from enacting any resolution or ordinance establishing the Rates for
the supply of Services to the customers of the System that are required to be
established by the City in accordance with the provisions hereof.
(b) Upon the happening of any event described in Section 9.3(a)(i)
above, the Company shall provide written notice to the City setting forth in
detail the alleged failure and/or deficiency of the City. The City shall have
thirty (30) Days after receipt of such written notice from the Company to cure
and/or correct such failure and/or deficiency or to deliver to the Company a
written notice alleging that no such event described in Section 9.3(a)(i) has
occurred and setting forth in detail its reasoning as to why no such event has
occurred. In the event that the City does not cure and/or correct such failure
and/or deficiency within said thirty (30) Day period or deliver to the Company
the written notice
76
<PAGE>
described in the preceding sentence within said thirty (30) Day period, the
Company shall provide the City with a second written notice affording the City
an additional fifteen (15) Days to cure and/or correct such failure and/or
deficiency. If the City fails to cure and/or correct the failure and/or
deficiency within such fifteen (15) Day period, the Company may terminate the
Agreement by providing written notice thereof to the Authorized Representative
of the City.
(c) Upon the happening of any event described in Section 9.3(a)(ii),
(iii) or (iv), the Company shall have the right to terminate this Agreement upon
thirty (30) Days prior written notice to the City. The Company and City
specifically agree that this Agreement shall terminate immediately after thirty
(30) Days from the receipt of such written notice by the City.
(d) If the Company terminates this Agreement in accordance with the
provisions of this Section 9.3(b) or (c), the City shall owe the Company any
Service Fees that have been earned but not paid to the Company, the unamortized
amount of the debt service on deferred Service Fee as described in Section
8.4(a), any expenses or other amounts owed to the Company that were to be added
to the subsequent Year's Service Fee and the cost and/or debt service on and
indebtedness incurred by the Company on the Guaranty or any Capital
Improvements. In the event that the Company has failed to maintain the System in
good working order, subject to normal wear and tear, consistent with industry
practice, then the Company shall pay for the cost of repairs by the City.
(e) If the Company terminates this Agreement in accordance with the
provisions of this Section 9.3, the City shall defease the
77
<PAGE>
Authority Series C Indebtedness and provide for the release of the Guarantor
Bond Guaranty.
(f) In addition to any other monetary remedies provided herein, the
Company shall be entitled to pursue a cause of action against the City for any
and all actual damages suffered by the Company as a result of any default by the
City, plus reasonable attorneys' fees.
SECTION 9.4. No Consequential Damages. Neither party shall be liable
for any special, consequential, indirect, punitive, incidental or similar
damages relating in any way to this Agreement.
SECTION 9.5. Continuity of Service upon Termination. In the event of
termination of this Agreement, the Company shall provide for continuity of the
Services over a six (6) month period of transition of operations back to the
City or hire another company designated by the City as of the earlier to occur
of the expiration or termination of the Agreement. Upon expiration or
termination of this Agreement, the Company shall restore the System to equal or
better condition than described in the Initial Facilities' inventory subject to
ordinary wear and tear consistent with industry standards. The City shall pay
the Company a fee for the provisions of the Services during this transition
period equal to a pro rata share of the Service Fee for the immediately
preceding one Year period.
SECTION 9.6. Enforcement Rights of the Authority. Notwithstanding
anything herein or in the Primary Financing Documents to the contrary, the
Authority shall have the right to seek the enforcement in a court of competent
jurisdiction or
78
<PAGE>
otherwise of any and all rights it has under the Primary Financing Documents
including, but not limited to, the right to receive amounts necessary to provide
for the payment of the Authority Indebtedness and the Authority Administrative
Expenses.
SECTION 9.7. Effect of Termination. Upon any termination of this
Agreement, (i) the City shall assume all obligations of the Company hereunder to
operate, manage, maintain and improve the System itself for the remaining Term
of this Agreement, (ii) the Revenues shall remain subject to the pledge of the
applicable Authority Bond Resolutions, and (iii) the City Bond Guaranty shall
remain in full force and effect. For purposes hereof, notwithstanding any
termination of this Agreement, the City shall continue to establish and collect
the Rates, City Fees and charges for each Contract Year, as required under
Article VIII and shall provide for the debt service on all Outstanding Authority
Indebtedness.
79
<PAGE>
ARTICLE X.
MISCELLANEOUS
SECTION 10.1. Insurance. The Company shall not commence the performance of
the Services under this Agreement until it has provided insurance of the types
and in such amounts as set forth herein and such other insurance as shall be
reasonably requested by the Authority prior to the issuance of the Authority
Indebtedness provided such insurance is commercially reasonable and such
insurance has been approved by the City nor shall the Company allow any
subcontractor to work on its subcontract until all similar insurance required of
the subcontractor has been so obtained and approved or the Company has
determined that the Company's insurance is sufficient to cover the actions of
the subcontractor. The Company shall maintain such insurance in full force and
effect for the Term of this Agreement.
The insurance policies provided by the Company at its expense and more
particularly described hereafter shall prior to the issuance of the Authority
Indebtedness provided such issuance is irrevocably available and specifically
designate the City, the Authority, the Trustee and the System Trustee as
additional insureds to the extent of the negligent acts, errors or omissions of
the Company and shall further contain such provisions as shall indemnify and
hold harmless the City, the Authority, the Trustee and the System Trustee and
their respective officials, officers, members, employees, consultants and
agents, pursuant to the terms and requirements set forth herein.
The Company shall be solely responsible (subject to Section 10.3(f)) for
all injuries to persons or property (other than to the
80
<PAGE>
extent such costs are paid by worker's compensation insurance) occurring on
account of the performance of Services hereunder, regardless who is performing
the Services.
Certificates, in triplicate, from the insurance carrier, stating the limits
of liability and the expiration date for each policy and type of coverage shall
be filed with the City before the Contract Date and the Authority and Trustee
before the Authority Indebtedness is issued. The certificates shall contain the
following express obligation:
"This is to certify that the policies of insurance described herein have
been issued to the insured for whom this certificate is executed and are in
force at this time. In the event of cancellation or material change in a
policy affecting the certificate holder, thirty (30) Days prior written
notice shall be given the certificate holder except in the event of a
cancellation for failure to pay the insurance premium wherein ten (10) days
prior written notice shall be given to the certificate holder"
Such certificates shall specifically refer to this Agreement and article,
and the following paragraphs in accordance with which the insurance is being
furnished, and state that such insurance is as required by such paragraphs of
this Agreement.
All insurance coverage shall be with acceptable insurance companies only
which possess an A.M. Best Company rating of at least A+. All insurance policies
herein required of the Company shall be written by a company duly authorized and
licensed to do business in the State and be executed by some agent therein duly
licensed as an agent in said State.
Insurance shall include the type of insurance specified below in not less
than the amounts stated. Neither approval by the City, the Authority, the System
Trustee nor the Trustee nor a failure to disapprove insurance furnished by the
Company, shall release the
81
<PAGE>
Company from full responsibility for liability, damages and accidents as set
forth herein.
The Company shall take out and maintain during the Term of this Agreement
the following types of insurance in an amount, for each policy, not less than
the amounts stated:
(a) Commercial General Liability Insurance
(i) The Company shall maintain during the Term of this Agreement such
commercial general liability insurance as shall protect it against claims
for damages resulting from bodily injury, including wrongful death and
property damages, which may arise from the performance of Services
hereunder regardless of by whom performed. The minimum acceptable limits of
liability to be provided by such insurance shall be as follows:
Bodily Injury Limits and Property Damage - $1,000,000 each
occurrence/$2,000,000 aggregate.
Products liability and completed operations - $2,000,000 aggregate.
Personal injury liability - $2,000,000 aggregate.
(ii) The commercial general liability insurance required by the
preceding subparagraph shall include the following extensions of coverage:
(A) The coverage shall be provided under a commercial general
liability form of policy or similar thereto.
(B) XCU Coverage - If the Agreement requires any work procedures
involving blasting, excavating, tunneling or other underground work,
the liability coverage shall include standard blasting or explosion
coverage, standard collapse coverage and standard underground
coverage, commonly referred to as XCU property damage liability
coverage with limits of $1,000,000 CSL.
82
<PAGE>
(C) Contractual liability coverage shall be included.
(D) Protective liability coverage shall be included to
protect the Company against claims arising out of operations
performed by its subcontractors.
(b) Worker's Compensation and Employer's Liability Insurance in accordance
with the requirements of the laws of the State and all other applicable laws and
regulations. If any class of employees engaged in hazardous work cannot be
protected by workmen's compensation and liability insurance, the Company shall
provide adequate insurance for each class of employees.
The Company shall take out and maintain during the Term of this Agreement
the applicable statutory Worker's Compensation Insurance with an insurance
company authorized to write such insurance covering all of its employees, and in
the case of any work sublet, the Company shall require the subcontractor
similarly to provide statutory Worker's Compensation Insurance for the latter's
employees. The Company shall take out and maintain during the Term of this
Agreement, Employer's Liability Insurance with a minimum limit of $1,000,000
with an insurance company authorized to write such insurance and the Company
shall require each of its subcontracts similarly to maintain Employer's
Liability Insurance on its employees.
(c) Automobile Liability and Property Damage Insurance
The Company shall take out and maintain during the Term of the Agreement
such Automobile Liability Insurance as shall protect it against claims for
damages resulting from bodily injury, including wrongful death and property
damage, which may arise from the operations of any owned, hired or non-owned
automobiles used by or
83
<PAGE>
for it in any capacity in connection with the performance of Services hereunder.
The minimum acceptable limits of liability to be provided by such Automobile
Liability Insurance shall be as follows:
Bodily Injury Limits and Property Damage - $5,000,000 each
occurrence/annual aggregate by the Company (or $1,000,000 each occurrence/annual
aggregate by each subcontractor).
(d) Excess Liability Insurance - $10,000,000.
(e) Professional Liability Insurance in the case of any consulting
engineering firm hired by the Company, in an amount not less than $2,000,000.
The Company shall require each of its subcontractors to take out and
maintain during the life of its subcontracts the same insurance coverage
required of the Company under Section 10.1(a), (b) and (c), including the
extensions of coverage required under Section 10.1(a)(ii) naming the City, the
Authority, the Trustee and the System Trustee as additional insureds thereon
unless the Company has determined that its insurance coverage is sufficient to
cover the actions of the subcontractor. Each subcontractor shall furnish to the
Company (2) copies of a certificate of insurance and such certificate shall
contain the same information required hereinabove. The Company shall furnish one
(1) copy of the certificate to each of the City, the Authority, the Trustee and
the System Trustee.
All insurance policies shall have a minimum deductible of $10,000 unless
otherwise approved by the City.
If the Company derives insurance proceeds to cover any liabilities under
this Agreement, the Company shall have no claim
84
<PAGE>
against the City for such amounts provided that the City did not cause the
events that result in the claim against the applicable insurance company.
If at any time the Company fails to maintain any of the foregoing policies,
or if a company issuing any such policy shall become unsatisfactory to any of
the City, the Authority, the Trustee or the System Trustee, the Company shall,
upon notice to that effect from such party, promptly obtain a new policy, submit
the same to the City, the Authority, the Trustee and the System Trustee for
their approval and submit a certificate of insurance as described above. Failure
of the Company to take out and/or maintain or the taking out and/or maintenance
of any required insurance, shall not relieve the Company of any liability under
the Agreement.
The City shall maintain insurance on the System during the Term of this
Agreement substantially similar in kind, scope and amount as that maintained by
the Company as of the Commencement Date. If any damage occurs to the System
during the Term of this Agreement that is an insured risk under the policies
described in this Section 10.1, the Company agrees that its policies provide the
primary coverage and should be used as the first basis of recovery. The Company,
however, may request the City to file a claim under its insurance policy or
policies for any amounts not covered under the policies maintained by the
Company, and if insurance proceeds are paid to the City for such amounts, the
City shall reimburse the Company but solely from such proceeds for the actual,
documented cost it incurs, subject to Cost Substantiation, to repair the damage
to the System in an amount not to exceed such insurance
85
<PAGE>
proceeds. Each of the Authority, the Trustee and the System Trustee shall be
included as an additional insured under all of the policies of the City and the
Company described in this Section 10.1.
SECTION 10.2. Performance Bonds.
(a) The Company shall provide, or cause the subcontractor to provide, to
the City a performance bond for construction of Capital Improvements equal to
100% of the proposed construction cost. The construction performance bond shall
be provided by an insurance company that (i) has a minimum rating of "A" in the
latest revision of the A.M. Best Company's Insurance Report; (ii) is in the
United States Treasury Department's annual listing of surety companies in the
Federal Register and (iii) is properly registered and licensed to conduct
business in the State.
(b) The Company shall be responsible throughout the Term of this
Agreement for monitoring the financial condition of any surety company issuing
bonds and for making inquiries no less often than semiannually to confirm that
such surety company maintains at least the minimum rating level specified in
Section 10.2(a). In the event the rating of any surety company falls below such
minimum level, the Company shall promptly notify the City of such event and
shall promptly furnish a substitute or an additional bond of a surety company
whose rating and other qualifications satisfy all of the above requirements,
unless the City agrees to accept an alternative method of assurance. Upon timely
notice by the Company of such an event, the City shall not unreasonably withhold
its approval of such assurance.
86
<PAGE>
(c) So long as the Guarantor has a credit rating of at least "A" from
Standard & Poor's Corporation or Moody's Investors Service, it will not be
necessary to obtain a performance bond pursuant to Section 10.2(a).
SECTION 10.3. Indemnification.
Notwithstanding anything to the contrary in this Agreement:
(a) To the extent permitted by law, the Company shall indemnify, defend and
hold harmless the City, the Authority, their elective and/or appointed officers
and their duly authorized agents, members, professionals, servants and
employees, including without limitation, the Trustee and the System Trustee,
from any costs, expenses or liabilities (including costs and expenses or
liabilities to third parties) which are caused by or arise from the Company's
breach of the Primary Financing Documents or the negligent or willful acts or
omissions of the Company or its agents, servants, employees or subcontractors in
connection with the operation, maintenance or management and improvement of the
System during the Term of this Agreement provided such cost, expense or
liabilities do not arise as a result of negligent or willful acts or omissions
of the City or in the case of the Authority are not caused by the negligence or
willful acts or omissions of the City.
(b) To the extent permitted by law, the City shall indemnify, defend and
hold harmless the Company, and the Authority, their elective and/or appointed
officers and their duly authorized agents, members, professionals, servants and
employees, including without limitation the Trustee and the System Trustee, for
any costs, expenses or
87
<PAGE>
liabilities (including costs and expenses or liabilities to third parties or
amounts owed to the Federal Government or the State pursuant to Section 4.3(d))
which are caused by or arise from the City's breach of the Primary Financing
Documents or the negligent or willful acts or omissions of the City or its
agents, servants, employees in connection with the ownership of the System
during the Term of this Agreement provided such cost, expense or liabilities do
not arise as a result of negligent or willful acts or omissions of the Company.
(c) To the extent permitted by law, the Company shall indemnify, defend and
hold harmless the City, the Authority their elective and/or appointed officers,
members and its duly authorized agents, members, professionals, servants and
employees, including without limitation the Trustee and the System Trustee, from
any fines or penalties assessed by the regulatory agencies during the Term of
this Agreement as a result of any and all violations of applicable laws or
Permits committed by the Company, its agents, servants or employees. The Company
shall have no obligation to indemnify the City for any fines or penalties
assessed for conditions that pre-exist the Commencement Date and that
constitute, lead to, or result in violations of any current Federal, State or
local water quality laws or regulations. The City shall disclose to the Company
and the Authority any and all such conditions known to the City as soon as
practicable.
(d) To the extent permitted by law, the City shall indemnify, defend
and hold harmless the Company and the Authority, and their elective and/or
appointed officers and their duly authorized agents, members, professionals,
servants and employees, including without limitation, the Trustee and the System
Trustee, from any
88
<PAGE>
and all fines or penalties assessed by the appropriate regulatory agencies or
other losses or damages suffered during the Term of this Agreement or with
respect to the Authority, during the term of the Primary Financing Documents as
a result of any and all violations of applicable laws and Permits committed by
the City, its agents, servants or employees and for all conditions which existed
prior to the Commencement Date and which constitute, lead to, or result in
violations of any Federal, State or local laws or regulations in effect on the
Commencement Date.
(e) The Company expressly assumes and covenants to perform all of the
Authority's covenants and obligations regarding operation, maintenance,
management and improvement of the System, but not including any of the
Authority's payment obligations under the Authority Bond Resolutions, it being
the intention of the parties hereto that the parties shall look solely to the
Company or the City for the performance of any obligations of the Authority
related to the System, this Agreement and Revenue Agreement. The Company and the
City shall conform to, use, improve and operate the System in accordance with
all the terms, covenants and conditions of this Agreement and will do no act
which will result in a violation of any terms, covenants and conditions of this
Agreement, any Financing Document or any other document to which the Authority
is a party in connection with the System.
The Authority shall have no liability to the Company or the Guarantor,
or any party claiming by or through the Company or the Guarantor, by reason of
any act, omission or default of the City under the Lease Agreement, this
Agreement, any Primary Financing Document, or any other document to which the
Authority is a party
89
<PAGE>
in connection with the System, it being understood that if the Authority shall
fail to fulfill any of its obligations hereunder or under any other Financing
Document and if such failure is caused by the failure of the City to comply with
its obligations, then the Authority shall have no obligation or liability by
reason of such failure by the City.
The Authority shall have no liability to the City, or any party claiming by
or through the City, by reason of any act, omission or default of the Company or
the Guarantor under this Agreement, any Primary Financing Document or any other
document to which the Authority, the Company or the Guarantor is a party in
connection with the System, it being understood that if the Authority shall fail
to fulfill any of its obligations hereunder, or under any other document, and if
such failure is caused by the failure of the Company or the Guarantor to comply
with its obligations under this Agreement, any Financing Document or any other
document to which the Authority is a party in connection with the System, then
the Authority shall have no obligation or liability by reason of such failure by
the Company or the Guarantor.
No property or assets of the Authority or the Authority's
commissioners, agents, professionals, members, directors or employees shall be
subject to levy, execution or other enforcement procedure for the satisfaction
of the Company's and/or the City's remedies under or with respect to this
Agreement or any other document. The Company and the City agree that no
deficiency judgment or other judgment for money damages shall in any event be
entered by either the City or the Company, or any person or entity
90
<PAGE>
claiming by or through the City or the Company, against the Authority or the
Authority's commissioners, professionals, agents, members, directors or
employees personally in any action.
To the extent permitted by law, the Company and the City shall indemnify
and save harmless the Authority, its principals, members, officers, employees,
agents, professionals, contractors, invitees, licensees, successors and assigns
against and from all liabilities, claims and demands, including, without
limitation, death or property loss or damage of any kind, together with
reasonable attorneys' fees, which may be imposed upon or incurred by or asserted
against the Authority whether by reason of any of the following occurrences
during the Term of this Agreement or otherwise:
(i) any work or thing done in, on or about the System or any part
thereof by the City, the Company, or their respective agents, employees,
contractors, subtenants, licensees or invitees;
(ii) any use, non-use, possession, occupation, ownership, condition,
operation, maintenance, management or improvement of the System or any
party thereof by the City, the Company, or their respective agents,
employees, contractors, subtenants, licensees or invitees;
(iii) any negligence on the part of the City, the Company, or their
respective agents, employees, contractors, subtenants, licensees or
invitees;
(iv) any accident, injury or damage to any person or property
occurring in or on the System or any part thereof;
(v) any failure on the part of the Company or the Guarantor to perform
or comply with any of the covenants, agreements, terms,
91
<PAGE>
provisions, conditions, or limitations contained in this Agreement or any other
Financing Document on its part to be performed or complied with; or
(vi) any failure on the part of the City to perform or comply with any
of the covenants, agreements, terms, provisions, conditions or limitations
contained in this Agreement or any other document on its part to be
performed on complied with.
The aforesaid indemnification shall survive any termination or expiration
of this Agreement and any other document between or among any of these parties.
In case any action or proceeding is brought against the Authority by reason
of any such claim(s), the Company, the Guarantor and the City upon written
notice from the Authority shall at the Company's, the Guarantor's and the City's
expense (expenses to be allocated pro rata based upon the ultimate outcome of a
determination as to liability) resist or defend such action or proceeding by
counsel approved by the Authority in writing.
The Authority and the members, agents, contractors and employees of the
Authority shall not be liable for any claims for injury or damage to persons or
loss of or damage to property (including any disappearance or theft of property
and any loss or interruption of business) sustained by the Company and/or the
City, any person claiming through the Company and or the City, or sustained by
any other person, resulting from any fire, accident, occurrence or condition in
or upon the System.
It is expressly understood and agreed by and between the parties to this
Agreement that the Company and the City, as their interests appear herein, shall
assume all risk of damage to its
92
<PAGE>
property, equipment and fixtures occurring in or about the System, whatever the
cause of such damage or casualty.
(f) The City shall indemnify and hold harmless the Authority, the Company,
its subcontractor and sub-subcontractors for costs, expenses or liabilities
(including costs and expenses or liabilities to third parties but excluding
legal expenses) which are caused by or arise from acts or omissions by City
employees (including Leased Employees) performing work under this Agreement. As
part of fulfilling its obligations hereunder, the City agrees that its
obligation to indemnify the Authority, the Company, its subcontractor and
sub-subcontractors shall apply to, but not be limited to, actions or other
claims brought by the City's own employees, agents, contractors or
subcontractors. The City's duty to indemnify and hold harmless the Company, its
subcontractor and sub-subcontractors shall exclude only those instances where
the liability, loss, injury, death, damage or harm is due to the sole negligence
of any of the Company, its subcontractor or sub-subcontractors.
(g) Each party's indemnification shall include the reimbursement to the
other of all legal fees and expenses reasonably incurred, unless it is
determined that such other party bears responsibility for the claims asserted.
SECTION 10.4. Access to System and Records. The City shall have the right
from time to time or at any time, upon reasonable notice, to inspect the System
and/or the operation thereof by the Company.
The Company shall permit twenty-four (24) hour per Day access to the System
by City personnel. Visits may be made at any time by
93
<PAGE>
an Authorized Representative of the City. Keys for the facilities or structures
in the System shall be provided to the City by the Company in accordance with
the Company's existing physical security plan and key control program. It is
understood that all visitors shall comply with the Company's operating and
safety procedures.
The City shall have the right to continuously monitor and review the
performance of the System, including any facilities therein, and the operation,
maintenance and management thereof by the Company and, if the City so chooses,
the City shall be entitled to hire a consulting engineer and/or other consultant
at the sole cost and expense of the City for purposes of conducting such
monitoring and review activities.
The Company shall keep such records of all billing and collection data and
information relating to the System, as prudent industry practice shall require
and as otherwise required by the provisions of this Agreement. The City shall
have continuous access (on a read only basis) to all billing and collection data
required to be kept by the Company in accordance with this Agreement. The
Company shall be obligated to provide the City, upon reasonable request, with
copies of all operating data, accounting, financial and other information kept
by the Company in its performance of its obligations hereunder. In addition, the
Company shall provide a computer to the City, whereby the City can obtain access
to all billing and collection data (on a read only basis) of the Company's
electronic data via modem.
The City, through its consulting engineer, and at the sole cost and expense
of the City may perform an annual inspection in
94
<PAGE>
the System, which shall be scheduled with the Company at least one (1) week in
advance of such inspection.
The City shall permit the Company reasonable access to all City records
concerning historical and/or other data related to the System.
SECTION 10.5. Authority to Contest. In the event of the imposition of fines
or penalties against any party for violation of permits, applicable laws or
regulations, the party on which such fines or penalties are imposed shall be
given full authority to contest such violations and the other party shall assist
such party in all such proceedings.
SECTION 10.6. Enforcement. The failure on the part of any party to enforce
any provision of this Agreement shall not be construed as a waiver of its right
to enforce such provision in the future.
SECTION 10.7. Assignment. The Services to be rendered hereunder by the
Company are personal and shall not be assigned by any act of the Company or by
operation of law, except to other affiliates of the Guarantor and Utility
Service Affiliates, Inc. It is contemplated by the parties that immediately
subsequent to the execution of this Agreement by the parties hereto, the Company
will assign this Agreement and the Revenue Agreement to Utility Service
Affiliates (Perth Amboy), Inc. pursuant to the assign and acceptance agreement
attached as Schedule AA.
95
<PAGE>
SECTION 10.8. Affirmative Action. During the performance of this Agreement,
the Company and the City shall conform with the following requirements:
(a) The City, the Company, its subcontractor, or the sub-subcontractor
where applicable, shall not discriminate against any employee or applicant for
employment because of age, race, creed, color, national origin, ancestry,
marital status, sex, affectional or sexual orientation. The Company shall take
affirmative action to ensure that such applicants are recruited and employed,
and that employees are treated during employment, without regard to their age,
race, creed, color, national origin, ancestry, marital status, sex, affectional
or sexual orientation. Such action shall include, but not be limited to the
following: employment, upgrading, demotion, or transfer; recruitment or
recruitment advertising; layoff or termination, rates of pay or other forms of
compensation; and selection for training, including apprenticeship. The City
and/or the Company, where applicable agrees to post in conspicuous places,
available to employees and applicants for employment, notices to be provided by
the public agency compliance officer setting forth provisions of this
nondiscrimination clause.
(b) The City, the Company, its subcontractor or the sub-subcontractor,
where applicable, shall, in all solicitations or advertisements for employees
placed by or on behalf of the City or the Company, state that all qualified
applicants shall receive consideration for employment with respect to the System
without regard to age, race, creed, color, national origin, ancestry, marital
status, sex, affectional or sexual orientation.
96
<PAGE>
(c) The City, the Company, the subcontractor or the sub-subcontractor,
where applicable, shall send to each labor union or representative or worker
with which it has a collective bargaining agreement or other contract or
understanding, a notice, to be provided by the agency contracting officer
advising the labor union or representative or worker of the City's and/or the
Company's, as applicable, commitment under the affirmative action laws and shall
post copies of such notice in conspicuous places available to employees and
applicants for employment.
(d) The City, the Company, the subcontractor or the sub-subcontractor,
where applicable, agrees to comply with the regulations promulgated by the State
treasurer pursuant to P.L. 1975, c.127, as amended and supplemented from time to
time, and with the Americans with Disabilities Act.
(e) The City, the Company, the subcontractor or the sub-subcontractor,
where applicable, agrees to attempt in good faith to employ minority and female
workers consistent with the applicable County of Middlesex (THE "COUNTY")
employment goals prescribed by N.J.A.C. 17:27-5.2 promulgated by the State
treasurer pursuant to P.L. 1975, c.127, as amended and supplemented from time to
time, or in accordance with a binding determination of the applicable County
employment goals determined by the affirmative action office pursuant to
N.J.A.C. 17:27-5.2 promulgated by the State treasurer pursuant to P.L. 1975,
c.127, as amended and supplemented from time to time.
(f) The City, the Company, the subcontractor or the sub-subcontractor,
where applicable, agrees to inform in writing appropriate recruitment agencies
in the area, including employment
97
<PAGE>
agencies, placement bureaus, colleges, universities and labor unions, that it
does not discriminate on the basis of age, creed, color, national origin,
ancestry, marital status, sex, affectional or sexual orientation, and that it
shall discontinue the use of any recruitment agency which engages in direct or
indirect discriminatory practices.
(g) The City, the Company, any subcontractor or sub-subcontractor,
where applicable, agrees to revise any of its testing procedures, if necessary,
to assure that all personnel testing conforms with the principles of job-related
testing, as established by the statutes and court decisions of the State, and
applicable Federal court decisions.
(h) The City, the Company, any subcontractors, or sub-subcontractor where
applicable, shall furnish such reports or other documents to the affirmative
action office as may be requested by the office from time to time in order to
carry out the purposes of the regulations, and public agencies shall furnish
such information as may be requested by the affirmative action office for
conducting a compliance investigation pursuant to subchapter 10 of the State
administrative code (N.J.A.C. 17:27).
SECTION 10.9. Entire Agreement. This Agreement contains the entire
agreement between the parties hereto relating to the operation, maintenance and
management of and improvement to the System and supersedes all previous or
contemporaneous communications, representations or agreements. This Agreement
may be modified only by written amendment signed by the parties hereto.
98
<PAGE>
SECTION 10.10. Notices. All notices given pursuant to the terms of this
Agreement shall be in writing and delivered in person or transmitted by
certified mail, return receipt requested, postage prepaid.
Notices required to be given to the Company shall be addressed as follows:
Utility Service Affiliates (Perth Amboy), Inc. c/o
Utility Service Affiliates, Inc.
1500 Ronson Road
Iselin, New Jersey
Attn: President
Phone: (732) 634-1500
Facsimile: (732) 750-5981
Notices required to be given to the City shall be addressed as follows:
City of Perth Amboy
260 High Street
Perth Amboy, NJ 08861-4491
Attn: Business Administrator
Phone: (732) 826-0290
Facsimile: (732) 826-1160
Notices required to be given to the Authority shall be addressed as
follows:
Middlesex County Improvement Authority
101 Interchange Plaza
Cranbury, NJ 08512
Attn: Chairperson
Phone: (609) 655-5141
Facsimile: (609) 655-4748
SECTION 10.11. Application of Law. This Agreement shall be governed in
accordance with the laws of the State.
SECTION 10.12. Relationship. The relationship of the Company to the City
and the Authority is that of independent contractor and not one of employment.
None of the employees or agents of the Company shall be considered employees of
the City or the Authority. For the purposes of all Federal, State and local laws
and
99
<PAGE>
regulations, the Company shall exercise primary management and operational
decision-making on behalf of the City or the Authority. Nothing contained herein
shall be construed to place the parties in the relationship of partners or joint
venturers and neither party shall have the power to obligate or bind the other
party in any manner whatsoever.
SECTION 10.13. Public Relations. The Company shall develop, with the advice
and consent of the City, a communications, publicity and community relations
program in order to keep the City and the customers of the System informed about
the operation, maintenance, improvement and management of the System. The
Company shall deal in a professional manner with community groups concerned with
any aspect of the operation of the System. The Company shall prepare written
summaries of all formal meetings with the City and/or community groups and
provide the City with a copy. In connection with the initial public relations
efforts, the Company shall employ an outside consultant, subject to the approval
of the Mayor of the City for a cost of up to one hundred thousand dollars
($100,000). The Company shall be entitled to be reimbursed from the Revenues for
one half (1/2) of the cost of such consultant as an additional Fixed Service Fee
in the first Contract Year.
SECTION 10.14. Notice of Litigation. In the event the Company, the City or
the Authority receives notice of or undertakes the defense or the prosecution of
any actions, claims, suits, administrative or arbitration proceedings or
investigations in connection with the System, the party receiving such notice or
undertaking such defense or prosecution shall give the other parties timely
notice of such proceedings and shall inform the
100
<PAGE>
other parties in advance of all hearings regarding such proceedings.
SECTION 10.15. Uncontrollable Circumstances. If an Uncontrollable
Circumstance occurs causing change in the operations of the System or the
operational costs, the Company shall prepare a report to be submitted to the
City and the City's consulting engineer that describes the cause of the changes,
the extent of the changes, the anticipated duration of the changes, the cost
impact (increase or decrease) of the changes, and the duration of time that such
anticipated cost increases or decreases shall be in effect.
SECTION 10.16. Dispute Resolution. Any disputes arising under this
Agreement that cannot be resolved to the mutual satisfaction of the City and the
Company shall be referred to the Operations Committee. If a dispute cannot be
resolved by the Operations Committee either party to this Agreement may file
with the State Superior Court, which has appropriate jurisdiction, a request for
an order for appropriate relief to the dispute. The court may take such action
as it may deem necessary to facilitate the expeditious resolution of the dispute
and an expeditious response to the request, including ordering the parties to
undertake a dispute resolution or mediation process. The court shall use, as it
deems necessary, the services of a financial expert in the area of the water and
wastewater service contracts in its analysis of this Agreement and the issues
before it. Within ninety (90) days after the filing of a request, the court
shall either grant the request or deny the request. If the request is granted,
the court shall
101
<PAGE>
order such relief measures or remedies as it deems appropriate and necessary.
SECTION 10.17. No Third Party Rights. This Agreement shall not provide any
third parties with any remedy, claim, liability, reimbursement, cause of action
or other right in excess of those existing without reference to this Agreement.
The parties acknowledge and agree that the Company is desirous of entering into
a subcontract for the operation, maintenance and management of the Wastewater
System. In the event the Company enters into a subcontract for the operation,
maintenance and management of the Wastewater System, this paragraph shall not
apply to the subcontractor, which shall not be treated as a "third party."
SECTION 10.18. No Set-Off. The obligation of the City or the Company to
make payments hereunder shall not be subject to diminution by reason of any
set-off, abatement, counterclaim or any other reason.
SECTION 10.19. Payments and Interest. All payments due under this
Agreement shall be due and payable when indicated or, if not otherwise stated,
within thirty (30) Days of invoice or statement. The City and the Company shall
be entitled to interest on all amounts not paid within fifteen (15) Days of the
due date, at a rate equal to eight per centum (8%) per annum calculated based on
the number of Days such amounts remain unpaid after fifteen (15) Days after the
due date thereof. This includes interest due on Service Fees that are not paid
(but have accrued) during any Contract Year and after the end of the fifth (5th)
Contract Year.
SECTION 10.20. Cost Substantiation. Except as specifically set forth herein
or in any Financing Document by reference to a
102
<PAGE>
schedule, all amounts to be paid to the City and/or the Authority
shall be subject to Cost Substantiation.
SECTION 10.21. Public Notices. The City shall issue all public notices
associated with non-compliance with regulatory requirements for drinking water
standards, if and as required, and the Company shall prepare such notice(s) in
compliance with the applicable regulations, submit such to the City and pay all
costs incurred by the City associated therewith and shall provide all necessary
support that the City may reasonably require.
SECTION 10.22. Survival Notwithstanding anything herein to the contrary,
the provisions of Sections 2.2(b), 5.2, 6.16(b), 9.6, 9.7, 10.3, 10.16, 10.17,
10.18 and 10.19 shall survive the expiration and/or termination of this
Agreement.
SECTION 10.23. Amendment. This Agreement may be amended upon the mutual
written consent of the parties hereto. The Company and/or any affiliate,
including the Guarantor, agrees to cooperate with the City in connection with
any interlocal services agreement that the City may enter into with any other
party for the provision of services for the operation, maintenance and
management of a water or wastewater system pursuant to the New Jersey Interlocal
Services Act, N.J.S.A. 40:8A-1 et. seq. subject to the negotiation of
appropriate amendments to this Agreement to reflect any increased Services
and/or any expansion of the System and any approvals required by the Acts.
SECTION 10.24. Headings. The Article and Section headings in this Agreement
are inserted for convenience of reference only and are not intended to define or
limit the scope of any provision of this Agreement.
103
<PAGE>
SECTION 10.25. Pipeline Lease Amendment. The City and the Company shall
execute the amendment to the pipeline lease agreement in substantially the form
attached hereto as Schedule Z prior to the issuance of the Authority
Indebtedness.
SECTION 10.26. Combined Sewer Overflow. The City reserves the right to
direct the Company to take proposals or otherwise negotiate with a subcontractor
for the construction, operation and maintenance of netting chambers to address
the City's combined Sewer Overflow problem. Such costs shall be treated as an
additional expense to the City to be added to the Company's Fixed Service Fee.
SECTION 10.27. Settlement of Litigation. The parties shall execute the
settlement agreement in substantially the form attached hereto as Schedule B
prior to the issuance of the Authority Indebtedness.
SECTION 10.28. Non-Waiver. It is understood and agreed that nothing
contained in this Agreement shall be construed as a waiver on the part of the
parties hereto of any right not explicitly waived in this Agreement.
SECTION 10.29. Severability. Except as set forth herein, in the event any
provision of this Agreement shall be held invalid or unenforceable by any court
of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision.
SECTION 10.30. Counterparts. This Agreement may be simultaneously executed
in several counterparts, each of which shall be an original and all of which
shall constitute but one and the same instrument.
104
<PAGE>
IN WITNESS WHEREOF, the parties have hereunto set their hands
and fixed their seals as of the date first above written.
ATTEST: CITY OF PERTH AMBOY
/s/ ELAINE M. KICZULA By: /s/ JOSEPH VAS
- --------------------------- ----------------------------------
ELAINE M. KICZULA, Clerk JOSEPH VAS, Mayor
ATTEST: UTILITY SERVICE AFFILIATES, INC.
/s/ DENNIS G. SULLIVAN By: /s/ J. RICHARD TOMPKINS
- --------------------------- ----------------------------------
DENNIS G. SULLIVAN, J. RICHARD TOMPKINS, President
Secretary
ATTEST: MIDDLESEX COUNTY IMPROVEMENT
AUTHORITY
/s/ RALPH MOCCI By: /s/ LEONARD J. ROSEMAN
- --------------------------- ----------------------------------
RALPH MOCCI, Secretary LEONARD J. ROSEMAN, Chairperson
CONSENTED TO BY: MIDDLESEX WATER COMPANY,
ATTEST: AS GUARANTOR
/s/ MARION F. REYNOLDS By: /s/ J. RICHARD TOMPKINS
- --------------------------- ----------------------------------
MARION F. REYNOLDS, Vice J. RICHARD TOMPKINS, President and
President, Treasurer and Chairman of the Board
Secretary
105
<PAGE>
SCHEDULE A
FORM OF CITY BOND GUARANTY AGREEMENT
<PAGE>
DRAFT IV
11/17/98
CITY BOND GUARANTY AGREEMENT
DATED AS OF _______ ___, 1998
<PAGE>
THIS CITY BOND GUARANTY AGREEMENT (hereinafter the "City Bond City Bond
Guaranty Agreement") among THE CITY OF PERTH AMBOY (the "City"), a municipal
corporation of the State of New Jersey, the MIDDLESEX COUNTY IMPROVEMENT
AUTHORITY (the "Authority"), a public body corporate and politic of the State of
New Jersey and AMBOY NATIONAL BANK a stat banking corporation as trustee (the
"Trustee").
W I T N E S S E T H
WHEREAS, The Authority has been duly created by resolution of the Board
of Chosen Freeholders of the County of Middlesex, New Jersey (the "County"), as
a public body corporate and politic of the State of New Jersey pursuant to the
provisions of the County Improvement Authorities Law, constituting Chapter 183
of the Pamphlet Laws of 1960, of the State of New Jersey (the "Improvement
Authorities Law"); and
WHEREAS, the Authority is authorized pursuant to the terms of the
Improvement Authorities Law to provide within the County for public facilities,
as that term is defined in the Improvement Authorities Law; and
WHEREAS, the City currently owns and operates a water supply,
transmission and distribution system (the "Water System") and a wastewater
collection system (the "Wastewater System" and together with the Water System,
the "System"), all for the residents of and other System users in the City (the
"Users"); and
WHEREAS, the City has determined that the System needs substantial
upgrading and improving in order to continue to supply water and provide
wastewater collection services to the Users; and
WHEREAS, pursuant to the Improvement Authorities Law, specifically
Section 34 thereof (N.J.S.A. 40:37A-77), the City may, by ordinance, without any
referendum or public or competitive bidding, sell, lease, lend, grant or convey
to the Authority or permit the Authority to use, maintain or operate as part of
any public facility any real or personal property which may be necessary or
useful and convenient for the purpose of the Authority; and
WHEREAS, the City has determined that the improvement and expansion of
its System can best be accomplished to serve the interests of its residents and
customers by leasing the System and selling a franchise to operate the System to
the Authority pursuant to that certain "Lease and Franchise Acquisition
Agreement" to be dated as of the first day of the month of the issuance of the
hereinafter defined Authority Indebtedness (together with any amendments thereof
or supplements thereto in accordance with the terms thereof, the "Lease
Agreement") and by jointly entering into an operating agreement to be dated as
of the first day of the month of the issuance of the hereinafter defined
Authority Indebtedness
A-1
<PAGE>
(the "Agreement") among the City, the Authority and the Utility Services
Affiliates, Inc., (the "Company") a subsidiary of Middlesex Water Company; and
WHEREAS, the City and the Authority have determined to proceed with the
leasing of the System, the selling of the franchise to operate the System and
the financing of, among other things, improvements to the System; and
WHEREAS, the City, pursuant to the Improvement Authorities Law
specifically Section 12 and 35 thereof (N.J.S.A. 40:37A-55(i) and 78) as well as
the New Jersey Wastewater Treatment Public-Private Contracting Act (the
"Wastewater Act"), specifically Section 22 thereof (N.J.S.A. 58:27-22), the New
Jersey Water Supply Public-Private Contracting Act (the "Water Act"),
specifically Section 22 thereof (N.J.S.A. 58:26-22), constituting Chapter 208 of
the Pamphlet Laws of 1973 of the State of New Jersey, has previously authorized
the execution of the Agreement; and
WHEREAS, the Authority intends to provide for the refinancing of
certain debt of the City attributable to and for certain capital improvements to
the System all as described in the Agreement (the "Project") and provide the
financing for the Project through the issuance of the Guaranteed Authority
Indebtedness (as defined in the Guaranty Ordinance defined below); and
WHEREAS, the Guaranteed Authority Indebtedness will be issued pursuant
to the terms of the Improvement Authorities Law, other applicable law and the
Authority Series A Bond Resolution and Authority Series B Bond Resolution, as
applicable; and
WHEREAS, in order to provide inducement to the prospective purchasers
of such Guaranteed Authority Indebtedness to purchase the same and to provide
additional security to the holders thereof in addition to the revenues generated
by the System and payable pursuant to the Agreement, in accordance with the
terms of Section 37 of the Improvement Authorities Law, and in addition to a
bond insurance policy issued by _____________________. (the "Bond Insurer") the
City desires to provide a guaranty of the timely payment of the principal of and
interest on such Guaranteed Authority Indebtedness to be issued by the Authority
for or with respect to the Project; and
WHEREAS, the City adopted an ordinance on September 9, 1998 entitled,
"An Ordinance of the City of Perth Amboy, in the County of Middlesex, New
Jersey, Guarantying Certain Bonds and/or Notes of the Middlesex County
Improvement Authority, Authorizing a Guaranty Agreement, a Lease and Franchise
Acquisition Agreement, a Continuing Disclosure Agreement, a Revenue Collection
and Disbursement Agreement and an Operating Agreement in Connection with the
Improvement and Enhancement of the City's Water and Wastewater Systems, Amending
the City Code in Order to Change the Rates and Fees to be Charged for the
Provision of Water and Sewer Services and Combining the City's Water and Sewer
Utilities Into
A-2
<PAGE>
One Utility for all Purposes Including the Local Budget Law," (the "Guaranty
Ordinance") pursuant to which the City agreed to guaranty the Guaranteed
Authority Indebtedness and authorize, execute and deliver this Agreement;
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Authority, the City and the
Trustee and its successors and assigns, do mutually covenant, promise and agree
as follows (Capitalized terms shall, unless stated otherwise, have the meaning
assigned to such terms in the preambles hereof and the Guaranty Ordinance):
Section 1. Pursuant to the provisions of the Improvement Authorities
Law and the Guaranty Ordinance, the City hereby agrees to fully, unconditionally
and irrevocably guaranty the punctual payment of the principal of (including
sinking fund installments, if any) and the interest on the Guaranteed Authority
Indebtedness. For purposes of this City Bond Guaranty Agreement, the aggregate
principal amount of Guaranteed Authority Indebtedness Outstanding (as defined in
the Bond Resolution) may not exceed $42,000,000. The full faith and credit of
the City are hereby pledged for the full and punctual performance of this
guaranty, and if necessary the City shall levy ad valorem taxes upon all of the
taxable property within the jurisdiction of the City without limitation as to
rate or amount in order to make any such payments (the "City Guaranty"). The
Bond Insurer is hereby designated as a third-party beneficiary of the City
Guaranty.
Section 2. The Authority agrees to apply or cause the Trustee to apply
the proceeds derived from the sale of the Bonds for Costs (as defined in the
Improvement Authorities Law), including the payment by the Authority for the
refunding of the Outstanding City Indebtedness, the financing of the Ongoing
Capital Improvements, all costs of issuance and required reserves, all in
accordance with the terms of and as defined in the Agreement, the Authority
Series A Bond Resolution and Authority Series B Bond Resolution.
Section 3. It is hereby found, determined and declared by the City
that:
(a) This City Bond Guaranty Agreement may be entered into
notwithstanding any statutory or other debt limitation, including particularly
any limitation or requirement under or pursuant to the Local Bond Law, as
amended, N.J.S.A. 40A:2-1 et seq., however, the aggregate principal amount of
the Guaranteed Authority Indebtedness which shall be entitled to the benefits of
the City Guaranty pursuant to the terms hereof, being an amount not in excess of
$42,000,000, shall be reflected in the debt statements of the City in the manner
provided in the Improvement Authorities Law, particularly N.J.S.A. 40:37A-80.
(b) The principal amount of the Guaranteed Authority Indebtedness which
shall be entitled to the benefits of the City Guaranty pursuant to the terms
hereof and which shall be included in the gross debt of the City shall be
deducted from, and shall constitute a deduction from, such gross debt under and
for all
A-3
<PAGE>
purposes of the Local Bond Law (i) from and after the time of issuance
of the Guaranteed Authority Indebtedness until the end of the fiscal year
beginning next after the completion of the acquisition or construction of the
project being financed from the proceeds of the Guaranteed Authority
Indebtedness, and (ii) in any annual debt statement which is required to be
filed pursuant to the Local Bond Law, as of the end of such fiscal year or any
subsequent fiscal year if the revenues or other receipts or moneys of the
Authority relative to the System in such year are sufficient to pay its expenses
of operation and maintenance, including the expenses of administration of the
System, in such year and all amounts which are payable in such year on account
of the principal of, interest, and redemption premium, if any, on the Guaranteed
Authority Indebtedness, all bonds of the City or any county or other
municipality issued as provided in N.J.S.A. 40:37A-79, and all bonds of the
Authority issued under the Improvement Authorities Law, or shall be deducted as
otherwise permitted by law.
(c) In order to allow the City to determine its ability to deduct the
Guaranteed Authority Indebtedness from the City's gross debt, the Authority
shall provide the City with advance notice of the sale and issuance of all bonds
by the Authority pursuant to the Improvement Authorities Law, and of any other
circumstances which would cause the Guaranteed Authority Indebtedness or the
City Guaranty or the City Bond Guaranty Agreement to be included in the gross
debt of the City or which would prevent the deduction of the Guaranteed
Authority Indebtedness or the City Guaranty or City Bond Guaranty Agreement from
the gross debt of the City, as described above. Said advance notice shall be
directed to the Business Administrator of the City and received not less than
ten (10) days prior to the sale of such obligations or the occurrence of such
circumstance described herein.
(d) A supplemental debt statement of the City was duly made by the
Chief Financial Officer of the City and filed in the office of the Clerk of the
City, and a complete executed duplicate thereof was filed in the office of the
Director of the Division of Local Government Services of the State of New
Jersey, and such debt statement shows that while the gross debt of the City, as
defined in the Local Bond Law, has been increased by the amount of Guaranteed
Authority Indebtedness issued by the Authority, upon satisfaction of the
conditions set forth in N.J.S.A. 40:37A-80, in accordance with the provisions of
the Improvement Authorities Law, the net debt of the City shall not be
increased, and the obligation of the City which is authorized by or incurred
pursuant to the City Guaranty and the terms hereof is permitted notwithstanding
any statutory debt or other limitations, including particularly any limitation
of the Local Bond Law, which exception to statutory limitations is contained in
the Improvement Authorities Law.
A-4
<PAGE>
Section 4. The obligations of the City hereunder are unconditional.
Failure on the part of the Authority or the Trustee in any instance or under any
circumstances to observe or fully perform any obligation assumed by or imposed
upon either the Authority or the Trustee by this City Bond Guaranty Agreement or
by law, as applicable, shall not relieve the City from making any payment or
fully performing any other obligations imposed by this City Bond Guaranty
Agreement.
Section 5. The Authority will keep, or cause to be kept, proper books
of record and account in which complete and correct entries shall be made of its
transactions relating to the Project and which, together with all other books
and papers of the Authority, shall at all reasonable times and upon reasonable
advance notice be subject to inspection.
Section 6. The Authority Series A Bond Resolution and Authority Series
B Bond Resolution shall further provide that if, on a date fifty-five (55) days
prior to any Interest Payment Date or Principal Payment Date (hereinafter "Debt
Service Payment Date"), the available funds on deposit in the Interest Account
or the Principal Account of the Debt Service Fund (after taking into account any
moneys earmarked for transfer therein from the Revenue Fund) are insufficient to
provide for the payment of the principal of (including sinking fund
installments, if any) and interest on the applicable Guaranteed Authority
Indebtedness on such Debt Service Payment Date, the Trustee shall notify the
City and the Authority in writing no later than 3:00 p.m. on the date which is
two (2) business days after such fifty-five (55) days prior to such Debt Service
Payment Date of the amount which is necessary to provide for the full payment of
the principal of (including sinking fund installments, if any) and interest on
the applicable Guaranteed Authority Indebtedness on such Debt Service Payment
Date. The City shall acknowledge receipt of such notice in writing within two
(2) Business days, which notice shall also reference the amount to be raised by
the City from any source to satisfy such deficiency prior to any such Debt
Service Payment Date. If the deficiency is not cured thirty (30) days prior to
the next ensuing Debt Service Payment Date, the Trustee shall so notify the City
within two (2) business days thereafter and the City shall acknowledge receipt
thereof within two (2) business days, and, no later than two (2) business days
prior to such Debt Service Payment Date, the City shall make payment in
immediately available funds to the Trustee of the amount of such deficiency in
the Debt Service Fund (as defined in the Authority Series A Bond Resolution
and/or Authority Series B Bond Resolution, as applicable). Such City payment
shall be deposited by the Trustee into the applicable Debt Service Fund, as and
to the extent provided in the Authority Series A Bond Resolution and/or
Authority Series B Bond Resolution, as applicable. Notwithstanding any other
provisions of this City Bond Guaranty Agreement to the contrary, failure of the
Trustee to give
A-5
<PAGE>
the City notice as provided herein shall not relieve the City of its obligation
to make payment to the Trustee under the terms of the City Guaranty, provided,
however, that nothing herein shall be construed as a waiver of the City's right
to proceed against the Trustee for the City's damages, if any, arising from the
failure to give timely notice to the City. The Authority by execution hereof
covenants and agrees to provide to the City the notices set forth herein.
Section 7. When notice has been provided, as described above, the City
shall take all necessary actions to make payment of an amount which, when added
to the amounts which are on deposit in the funds and accounts established and
created under the Authority Series A Bond Resolution and/or Authority Series B
Bond Resolution, as applicable, and available to pay the principal of and
interest on the applicable Guaranteed Authority Indebtedness, is sufficient to
pay the principal of (including sinking fund installments, if any) and/or
interest on any Guaranteed Authority Indebtedness. Such actions shall include
the adoption of an emergency appropriation or an emergency temporary
appropriation and the funding of such appropriation in accordance with the
requirements of the Local Budget Law, N.J.S.A. 40A:4-1 et seq. the levy of
unlimited ad valorem taxes or any other actions that are legally permitted to be
taken to meet the requirements of such City Guaranty (including the adoption of
a bond ordinance pursuant to the provisions of the Local Bond Law, N.J.S.A.
40A:2-1 et seq.).
Section 8. The obligations of the City under this City Bond Guaranty
Agreement shall be absolute and unconditional and shall remain in full force and
effect until the entire principal of (including sinking fund installments, if
any) and interest on the Guaranteed Authority Indebtedness shall have been paid
or duly provided for in accordance with the provisions of the Authority
Series A Bond Resolution and/or Authority Series B Bond Resolutions, as
applicable. The obligations of the City hereunder shall not be affected,
modified or impaired upon the occurrence from time to time of any event,
including without limitation any of the following, whether or not with notice
to, or the consent of, the City:
(a) The waiver, compromise, settlement, release or termination
of any or all of the obligations, covenants or agreements of the
Authority which are contained in the Authority Series A Bond
Resolution, the Authority Series B Bond Resolution, the Lease
Agreement, the Agreement, this City Bond Guaranty Agreement or any
other agreement which is executed and delivered for or with respect to
the Guaranteed Authority Indebtedness (collectively, the "Primary
Financing Documents"), or of the payment, performance or observance
thereof;
A-6
<PAGE>
(b) The failure to give notice to the City of the occurrence
of an event of default under the provisions of the Primary Financing
Documents;
(c) The transfer, assignment or mortgaging or the purported
transfer, assignment or mortgaging of all or any part of the interest
of the Authority in the System;
(d) The extension of the time for payment of the principal of
(including sinking fund installments, if any) or interest on the
Guaranteed Authority Indebtedness or of the time for performance of any
obligations, covenants or agreements under or arising out of the
Primary Financing Documents;
(e) The modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the
Primary Financing Documents;
(f) The taking, suffering or the omission of any of the
actions referred to in the Primary Financing Documents;
(g) Any failure, omission, delay or lack on the part of the
Authority to enforce, assert or exercise any right, power or remedy
conferred on the Authority in the Primary Financing Documents or any
other act or acts on the part of the Authority or any of the holders
from time to time of the Guaranteed Authority Indebtedness;
(h) The voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment or other
similar proceedings affecting the Authority or any party to the Primary
Financing Documents or any of the assets of any of them, or any
allegation or contest of the validity of the Primary Financing
Documents;
(i) To the extent permitted by law, any event or action that
would, in the absence of this clause, result in the release or
discharge by operation of law of the City from the performance or
observance of any obligation, covenant or agreement contained in the
Primary Financing Documents;
(j) The default or failure of the City fully to perform any of
its obligations set forth in the Primary Financing Documents; or
A-7
<PAGE>
(k) The destruction, non-use or non-availability of the
System.
Section 9. No set-off, counterclaim, reduction, or diminution of any
obligation, or any defense of any kind or nature (other than performance by the
City of its obligations hereunder) which the City has or may have against the
Authority, or against any holder of the Guaranteed Authority Indebtedness, shall
be available to the City hereunder against the Authority or anyone succeeding to
the Authority's interest.
Section 10. The City further guarantees that all payments made with
respect to the Guaranteed Authority Indebtedness will, when made, be final and
agrees that if such payment is recovered from or repaid by or on behalf of the
Authority or the holders of the Guaranteed Authority Indebtedness, in whole or
in part in any bankruptcy, insolvency or similar proceeding instituted by or
against the Authority, the City Guaranty shall continue to be fully applicable
to such liabilities to the same extent as though the payment so recovered or
repaid had never been originally made on such liabilities.
Section 11. In the event of a default in payment of the principal of
(including sinking fund installments, if any) or interest on the Guaranteed
Authority Indebtedness, when and as the same shall become due, whether at the
stated maturity thereof or otherwise, the Authority or any party to whom the
Authority's rights have been assigned may proceed to enforce its rights
hereunder and may proceed first and directly against the City under the terms of
this City Bond Guaranty Agreement without proceeding against or exhausting any
other remedies which it may have and without resorting to any other security
held by the Authority. All moneys recovered pursuant to this City Bond Guaranty
Agreement shall be applied in accordance with the provisions of the Primary
Financing Documents.
Section 12. This City Bond Guaranty Agreement shall terminate after
payment in full of the principal of (including sinking fund installments, if
any) and interest on the Guaranteed Authority Indebtedness has been made or
provision for the payment of same has been made in accordance with the terms of
the Authority Series A Bond Resolution and/or Authority Series B Bond
Resolution, as applicable.
Section 13. This agreement may be executed in any number of
counterparts, each of which shall be executed by the Authority and by the City
and all of which shall be regarded for all purposes as one original and shall
constitute and be but one and the same.
Section 14. This City Bond Guaranty Agreement may not be assigned by
the City or the Authority without the prior written
A-8
<PAGE>
consent of the parties hereto; provided, however, that the City hereby
acknowledges and consents to the irrevocable assignment of the City Guaranty by
the Authority to the Trustee for the benefit of the holders of the Guaranteed
Authority Indebtedness as and to the extent provided in the Authority Series A
Bond Resolution and/or Authority Series B Bond Resolution, as applicable.
Section 15. The Authority may at any time, with the prior written
consent of the City, issue additional bonds or project notes for purposes of
refunding all or any part of the Guaranteed Authority Indebtedness, which
additional bonds or project notes shall be guaranteed by the City, in accordance
with the provisions of the Authority Series A Bond Resolution and/or Authority
Series B Bond Resolution, as applicable.
Whenever the consent of the City is required pursuant to the provisions
of the Primary Financing Documents, such consent of the City may be given by
written instrument executed by an authorized City representative unless such
consent is otherwise required by law to be evidenced by an ordinance or
resolution duly adopted by the City.
Section 16. All notices and submissions required hereunder shall be
given to the following, or their successors, by facsimile transmission (with
written confirmation of receipt), followed by hard copy sent by certified or
registered mail, personal delivery or recognized overnight delivery:
(a) To the City: City of Perth Amboy
260 High Street
Perth Amboy, NJ 08861-4491
Attn: Business Administrator
(b) To the Authority: Middlesex County Improvement Auth.
101 Interchange Plaza
Cranbury, NJ 08512
Attn: Executive Director
(c) To the Trustee: Amboy National Bank
3590 Route 9 South
Old Bridge, NJ 08857
Attn: Peggy Anne Dembowski
With a copy to the
System Trustee: First Union National Bank
21 South Street
Morristown, NJ 07960
A-9
<PAGE>
and with a copy to the
Bond Insurer:
Each party shall give notice from time to time to the other parties, in
the manner specified herein, of any change of the identity or address of anyone
listed herein.
Section 17. As used herein, "resolution" shall mean an act or
regulation of a governing body which is reduced to writing and which may be
finally passed at the meeting at which it was introduced.
Section 18. If any one or more of the covenants or agreements in this
City Bond Guaranty Agreement to be performed on the part of the Authority and
the City should be contrary to law, then such covenant or covenants, agreement
or agreements, shall be deemed severable from the remaining covenants and
agreements and shall in no way affect the validity of the other provisions of
this City Bond Guaranty Agreement.
Section 19. Any repayment to the City of amounts paid hereunder shall
be subordinate to the payment of all amounts due under the Authority Series A
Bond Resolution and/or Authority Series B Bond Resolution to the holders of the
Guaranteed Authority Indebtedness and/or the Authority and shall not be subject
to acceleration.
Section 20. This City Bond Guaranty Agreement shall not be modified or
amended without the express, written consent of all parties hereto and the Bond
Insurer.
A-10
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first written above.
CITY OF PERTH AMBOY
BY:_________________________________
JOSEPH VAS, MAYOR
MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
BY:_________________________________
LEONARD J. ROSEMAN, CHAIRMAN
AMBOY NATIONAL BANK, AS TRUSTEE
BY:_________________________________
NAME:_______________________________
TITLE:______________________________
A-11
<PAGE>
SCHEDULE B
FORM OF CITY CONTINUING DISCLOSURE AGREEMENT
<PAGE>
DRAFT IV
11/17/98
-----------------------------------------------------------------
CITY CONTINUING DISCLOSURE AGREEMENT
AMONG
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY,
CITY OF PERTH AMBOY
AND
AMBOY NATIONAL BANK, AS TRUSTEE
DATED AS OF _________ __, 1998
-----------------------------------------------------------------
<PAGE>
CITY CONTINUING DISCLOSURE AGREEMENT
THIS CITY CONTINUING DISCLOSURE AGREEMENT (the "City Continuing
Disclosure Agreement"), made and entered into as of _________ __, 1998 by and
among THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY (the "Authority"), a public
body corporate and politic of the State of New Jersey, the CITY OF PERTH AMBOY
(the "City"), a public body corporate and politic of the State of New Jersey and
AMBOY NATIONAL BANK, a state banking corporation organized under the laws of the
State of New Jersey (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Authority is issuing its Utility System Revenue
Bonds (Perth Amboy Franchise Acquisition Project), Series 1998A and Series
1998B) in the aggregate principal amount of $__________ and $__________,
respectively (together, the Bonds") on the date hereof; and
WHEREAS, the Bonds are being issued pursuant to two general bond
resolutions of the Authority each adopted on _________ ___, _____, as amended
and supplemented (the "Authority Bond Resolutions"); and
WHEREAS, the Trustee has duly accepted the trusts imposed upon
it by the Authority Bond Resolutions as Trustee for the Holders from time to
time of the Bonds; and
WHEREAS, the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended and supplemented
(codified as of the date hereof at 15 U.S.C. 77 et seq.) (the "Securities
Exchange Act") has adopted amendments to Rule 15c2-12 (codified at 17 C.F.R.
ss.240.15c2-12) ("Rule 15c2-12") effective July 3, 1995 which generally prohibit
a broker, dealer, or municipal securities dealer from purchasing or selling
municipal securities, such as the Bonds, unless such broker, dealer or municipal
securities dealer has reasonably determined that an issuer of municipal
securities or an "Obligated Person" (as defined in Rule 15c2-12) has undertaken
in a written agreement or contract for the benefit of holders of such securities
to provide certain annual financial information and operating data and notices
of the occurrence of certain material events to various information
repositories; and
WHEREAS, the Authority and the City have determined and have so
represented in the Preliminary Official Statement dated __________ ___, ___ (the
"Preliminary Official Statement") that each is an "Obligated Person" with
respect to the Bonds within the meaning of Rule 15c2-12 and, in order to enable
the "participating underwriters" within the meaning of Rule 15c2-12 to purchase
the
B-1
<PAGE>
Bonds, is therefore required to cause the delivery of the respective information
described in this City Continuing Disclosure Agreement to the municipal
securities marketplace for the period of time specified in this City Continuing
Disclosure Agreement; and
WHEREAS, on __________ ___, _____ the Authority entered into a
contract of purchase with A.G. Edwards & Sons, Inc., on behalf of itself and
certain other investment banking firms (the "Underwriter"), for the purchase of
the Bonds; and
WHEREAS, the execution and delivery of this City Continuing
Disclosure Agreement have been duly authorized by the Authority, the City and
the Trustee, respectively, and all conditions, acts and things necessary to have
happened, or to have been performed or required to exist precedent to the
execution and delivery of this City Continuing Disclosure Agreement, do exist,
have happened and have been performed in regular form, time and manner; and
WHEREAS, the Authority, the City and the Trustee are entering
into this City Continuing Disclosure Agreement for the benefit of the Holders of
the Bonds.
NOW, THEREFORE, for and in consideration of the promises and of
the mutual representations, covenants and agreements herein set forth, the
Authority, the City and the Trustee, each binding itself, its successors and
assigns, do mutually promise, covenant and agree as follows:
B-2
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1. Terms Defined in Recitals. The following terms
shall have the meaning set forth in the recitals hereto:
Authority
Authority Bond Resolutions
Bonds
City Continuing Disclosure Agreement
Preliminary Official Statement
Rule 15c2-12
SEC
Securities Exchange Act
City
Trustee
Underwriter
Section 1.2. Additional Definitions. The following additional
terms shall have the meanings specified below:
"Bondholder" or "Holder" or any similar term, when used with
reference to a Bond or Bonds, means any person who shall be the registered owner
of any Outstanding Bond, including Holders of beneficial interests in the Bonds.
"Business Day" means any day other than (a) a Saturday or
Sunday, (b) a day on which commercial banks in New York, New York or the city or
cities in which are located the principal corporate trust offices of the Trustee
are authorized or required by law to close or (c) a day on which the New York
Stock Exchange is closed.
"City Data" means the financial and operating information on the
City of Perth Amboy of the type included in the Final Official Statement in
Exhibit ___ entitled "__________________".
"City Financial Statements" means the audited financial
statements of the City for each Fiscal Year and includes balance sheets,
statements of changes in fund balances and statements of current funds,
revenues, expenditures and other charges or statements which convey similar
information.
"Disclosure Event" means any event described in subsection 2.2
of this City Continuing Disclosure Agreement.
"Disclosure Event Notice" means the notice to the Repositories
and the MSRB as provided in subsection 2.5.
"Disclosure Representative" means the authorized officer of the
Authority or his or her designee, or such other officer or employee as the
Authority shall designate in writing to the
B-3
<PAGE>
Dissemination Agent, if the Authority has appointed or engaged a Dissemination
Agent, from time to time.
"Dissemination Agent" means the Trustee acting in its capacity
as Dissemination Agent under this City Continuing Disclosure Agreement, or any
successor Dissemination Agent designated in writing by the Authority and which
has filed with the Authority a written acceptance of such designation.
"Final Official Statement" means the final Official Statement of
the Authority dated __________ __, _____ pertaining to the Bonds.
"Fiscal Year" means the fiscal year of the City, as applicable.
As of the date of this City Continuing Disclosure Agreement, the Fiscal Year of
the City begins on July 1 of each calendar year and closes on June 30 of such
calendar year.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America, consistently applied.
"GAAS" means generally accepted auditing standards as in effect
from time to time in the United States of America, consistently applied.
"MSRB" means the Municipal Securities Rulemaking Board. The
address of the MSRB as of the date of this City Continuing Disclosure Agreement
is:
1818 N Street, NW, Suite 800
Washington, DC 20036-2491
"National Repository" means a "nationally recognized municipal
securities information repository" within the meaning of Rule 15c2-12. As of the
date of this City Continuing Disclosure Agreement, the National Repositories
designated by the SEC in accordance with Rule 15c2-12 are:
(a) Bloomberg Municipal Repositories
P.O. Box 840
Princeton, New Jersey 08542-0840
Telecopies: (609) 279-5962
Telephone: (609) 279-3200
Internet: [email protected]
(b) Kenny Information Services, Inc.
ATTN: Kenny Repository Services
65 Broadway, 16th Floor
New York, New York 10006
Telephone: (212) 770-4595
B-4
<PAGE>
(c) Thomas Municipal Library
395 Hudson Street; 3rd Floor
New York, New York 10014
Telecopier: (212) 989-2078
Telephone: (212) 807-3814
(d) DPC Data Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Telephone: (201) 346-0701
Telecopier: (201) 947-0107
"Repository" means each National Repository and each State
Repository.
"State" means the State of New Jersey.
"State Repository" means any public or private repository or
entity designated by the State as a state information depository for purposes of
Rule 15c2-12. As of the date of this City Continuing Disclosure Agreement, there
is no State Repository.
Section 1.3. Capitalized Terms Not Defined Herein. Capitalized
terms not defined herein shall have the meanings assigned to them in Section 101
of the respective Authority Bond Resolutions.
Section 1.4. Interpretation. Words of masculine gender include
correlative words of the feminine and neuter genders. Unless the context shall
otherwise indicate, words importing the singular include the plural and vice
versa, and words importing persons include corporations, associations,
partnerships (including limited partnerships), trusts, firms and other legal
entities, including public bodies, as well as natural persons. Articles and
Sections referred to by number mean the corresponding Articles and Sections of
this City Continuing Disclosure Agreement. The terms "hereby", "hereof",
"hereto", "herein", "hereunder" and any similar terms as used in this City
Continuing Disclosure Agreement, refer to this City Continuing Disclosure
Agreement as a whole unless otherwise expressly stated.
As the context shall require, all words importing the singular
number shall include the plural number; the disjunctive term "or" shall be
interpreted conjunctively as required to insure that the Authority perform any
obligations mentioned in the passage in which such term appears.
The headings of this City Continuing Disclosure Agreement are
for convenience only and shall not define or limit the provisions hereof.
B-5
<PAGE>
ARTICLE 2
CONTINUING DISCLOSURE COVENANTS AND REPRESENTATIONS
Section 2.1. Continuing Disclosure Covenants and Representations
of the City. The City agrees that it will provide, or shall cause the
Dissemination Agent to provide:
(a) Not later than one-hundred eighty (180) days after the end
of each Fiscal Year of the City, commencing with the Fiscal Year of the City
ending on June 30, 1999 the City Financial Statements and the City Data to each
Repository;
(b) Not later than fifteen (15) days prior to the date specified
in subsection 2.1(a), a copy of the City's Financial Statements and the City
Data to the Dissemination Agent;
(c) If audited City Financial Statements are not submitted as
part of the filing set forth in subsection 2.1(a), the City will submit
unaudited financial statements with such filing, and will subsequently submit
audited City Financial Statements when and if available, to each Repository.
(d) In a timely manner, to each National Repository or to the
MSRB and to the appropriate State Repository, if any, notice of a failure by the
City to provide the City Financial Statements and the City Data within the
period described in subsection 2.1(a).
Section 2.2. Continuing Disclosure Covenants and Representations
of the Authority. The Dissemination Agent will provide in a timely manner, to
each National Repository or to the MSRB, and to the appropriate State
Repository, if any, notice of any of the following events with respect to the
Bonds, if material (each, a "Disclosure Event"):
(a) Principal and interest payment delinquencies on
the Bonds;
(b) Non-payment related defaults;
(c) Unscheduled draws on debt service reserves
reflecting financial difficulties;
(d) Unscheduled draws on credit enhancements
reflecting financial difficulties;
(e) Substitution of credit or liquidity providers,
or their failure to perform;
(f) Adverse tax opinions or events affecting the
tax-exempt status of the security;
B-6
<PAGE>
(g) Modifications to rights of security holders;
(h) Bond calls;
(i) Defeasances;
(j) Release, substitution, or sale of property
securing repayment of the securities; and
(k) Rating changes;
Section 2.3. Continuing Disclosure Representations. The City
represents and warrants that:
(a) the City Financial Statements shall be prepared according to
GAAP, and
(b) the City Financial Statements which are audited shall be
audited by an independent certified public accountant in accordance with GAAS.
Section 2.4. Form of Filings. (a) The City Financial Statements
and the City Data may be submitted as a single document
or as separate documents comprising a package.
(b) Any or all of the items which must be included in the City
Financial Statements and the City Data may be incorporated by reference from
other documents, including official statements delivered in connection with
other financings issued on behalf of the City which have been submitted to each
of the Repositories or filed with the SEC. If the document incorporated by
reference is a final official statement, it must be available from the MSRB. The
City shall clearly identify each such other document so incorporated by
reference.
(c) The City Financial Statements and the City Data for any
Fiscal Year containing any modified operating data or financial information (as
contemplated by Section 4.9 and 4.10) for such Fiscal Year shall explain, in
narrative form, the reasons for such modification and the effect of such
modification on the City Financial Statements or City Data being provided for
such Fiscal Year.
Section 2.5. Responsibilities, Duties, Immunities and
Liabilities of the Dissemination Agent.
(a) It shall be the responsibility of the Dissemination Agent to
determine the occurrence of a Disclosure Event. If the Dissemination Agent has
determined it necessary to report the occurrence of a Disclosure Event, the
Dissemination Agent shall file promptly a notice of such occurrence with each
National
B-7
<PAGE>
Repository or with the MSRB and the State Repository (the "Disclosure Event
Notice") in the form provided by the Authority; provided, that the Disclosure
Event Notice pertaining to the occurrence of a Disclosure Event described in
clauses 2.2(h) (optional or special redemptions of the Bonds) or 2.2(i)
(defeasances) need not be given under this subsection any earlier than the time
when the notice (if any) of such Disclosure Event shall be given to Holders of
affected Bonds as provided in the Authority Bond Resolutions. The obligation of
the Dissemination Agent to provide the notices to the Repositories or the MSRB,
as the case may be, under this City Continuing Disclosure Agreement are in
addition to, and not in substitution of, any of the obligations of the Trustee
to provide notices of Events of Default to Holders under the Authority Bond
Resolutions. The Dissemination Agent shall file a copy of each Disclosure Event
Notice with the Trustee, (if the Trustee is not the Dissemination Agent) for
informational purposes only.
(b) The Dissemination Agent shall determine each year prior to
the date for providing the City Financial Statements and the City Data the name
and address of each National Repository and each State Repository, if any.
(c) The Dissemination Agent shall:
(i) Upon receiving the applicable City Financial
Statements and the City Data, file the same with each Repository
as soon as practicable and thereafter file a written report with
the Authority certifying that the applicable City Financial
Statements and the City Data which have been provided to it have
been filed with each Repository pursuant to this City Continuing
Disclosure Agreement, stating the date it was provided and
listing all the Repositories to which it was provided; and
(ii) if the Dissemination Agent has not received the
City Financial Statements or City Data from the City by the date
set forth in subsections 2.1(b) immediately send written notice
of such failure to the Authority, the City and the Trustee.
Section 2.6. Appointment, Removal, and Resignation of the
Dissemination Agent, Indemnification.
(a) The Authority hereby appoints the Trustee to act as
Dissemination Agent under this City Continuing Disclosure Agreement to assist it
in carrying out its obligations under this City Continuing Disclosure Agreement.
The Authority may, from time to time, discharge any such Dissemination Agent,
and appoint a successor Dissemination Agent, such discharge to be effective on
B-8
<PAGE>
the date of the appointment of a successor Dissemination Agent following notice
of same to the City.
(b) The Dissemination Agent shall have only such duties as are
specifically set forth in this City Continuing Disclosure Agreement, and the
City agrees to indemnify and save the Dissemination Agent and the Authority, its
officers, directors, employees and agents harmless against any loss, expense and
liabilities which it may incur arising out of or in the exercise or performance
of its powers and duties hereunder, including the costs and expenses (including
attorneys fees) of defending against any claim of liability, but excluding
liabilities due to the Dissemination Agent's or the Authority's negligence or
wilful misconduct. The obligations of the City under this subsection shall
survive resignation or removal of the Dissemination Agent and payment of the
Bonds.
(c) The Dissemination Agent, or any successor thereto, may at
any time resign and be discharged of its duties and obligations hereunder by
giving not less than thirty (30) days written notice to the Authority. Such
resignation shall take effect on the date specified in such notice.
Section 2.7. Responsibilities, Duties, Immunities and
Liabilities of the Trustee.
(a) Article X of the Authority Bond Resolutions is hereby made
applicable to this City Continuing Disclosure Agreement as if the duties of the
Trustee under this City Continuing Disclosure Agreement were (solely for this
purpose) set forth in the Authority Bond Resolutions.
Section 2.8. Additional Persons Obligated under Rule 15c2-12.
The Authority agrees that it will cause any other person who becomes an
"Obligated Person" as such term is defined in Rule 15c2-12 to perform all of the
duties of the Authority herein.
B-9
<PAGE>
ARTICLE 3
DEFAULTS AND REMEDIES
Section 3.1. Disclosure Default. The occurrence and continuation
of a failure by the Authority or the City to observe, perform or comply with any
covenant, condition or agreement on its part to be observed or performed in this
City Continuing Disclosure Agreement and such failure shall remain uncured for a
period of thirty (30) days after written notice thereof has been given to the
Authority and the City by the Trustee or any Bondholder shall constitute a
default hereunder.
Section 3.2. Remedies on Default.
(a) The Trustee may, at the request of the Underwriter or the
Holders of at least twenty-five percent (25%) in aggregate principal amount of
Outstanding Bonds and after the Trustee has been indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements, and against all loss, liability and expenses, or any
Bondholder, for the equal benefit and protection of all Bondholders similarly
situated, may take whatever action at law or in equity against the Authority or
the City and any of the officers, agents and employees of the Authority or the
City which is necessary or desirable to enforce the specific performance and
observance of any obligation, agreement or covenant of the Authority or the City
under this City Continuing Disclosure Agreement and may compel the Authority or
the City or any such officers, agents or employees, except for the Dissemination
Agent, to perform and carry out their duties under this City Continuing
Disclosure Agreement; provided, that no person or entity shall be entitled to
recover monetary damages hereunder under any circumstances.
(b) In case the Trustee or any Bondholder shall have proceeded
to enforce its rights under this City Continuing Disclosure Agreement and such
proceedings shall have been discontinued or abandoned for any reason or shall
have been determined adversely to the Trustee or any Bondholder, as the case may
be, then and in every such case the Authority, the City or the Trustee and any
Bondholder, as the case may be, shall be restored respectively to their several
positions and rights hereunder, and all rights, remedies and powers of the
Authority, the City or the Trustee and any Bondholder shall continue as though
not such proceeding had been taken.
(c) A default under this City Continuing Disclosure Agreement
shall not be deemed an Event of Default under the Authority Bond Resolutions,
and the sole remedy under this City Continuing Disclosure Agreement in the event
of any failure by the Authority to comply with this City Continuing Disclosure
Agreement shall be as set forth in subsection 3.2(a) of this City Continuing
Disclosure Agreement.
B-10
<PAGE>
ARTICLE 4
MISCELLANEOUS
Section 4.1. Purposes of the City Continuing Disclosure
Agreement. This City Continuing Disclosure Agreement is being executed and
delivered by the Authority, the City and the Trustee for the benefit of the
Bondholders and in order to assist the Underwriter in complying with clause
(b)(5) of Rule 15c2-12.
Section 4.2. Third-Party Beneficiaries: The Bondholders. Each
Bondholder is hereby recognized as being a third-party beneficiary hereunder and
each may enforce, for the equal benefit and protection of all Bondholders
similarly situated, any such right, remedy or claim conferred, given or granted
hereunder in favor of the Trustee.
Section 4.3. Indemnified Parties. To the extent permitted by
Law, the City agrees to indemnify and hold harmless the Trustee, the
Dissemination Agent, the Authority and the Underwriter, and each person, if any,
who has the power, directly or indirectly, to direct or cause the direction of
the management and policies of each and any purchase of the Bonds through the
ownership of voting securities, by contract or otherwise (collectively called
the "Indemnified Parties"), against any and all losses, claims, damages,
liabilities or expenses whatsoever caused by such entity's failure to perform or
observe any of its obligations, agreements or covenants under the terms of this
City Continuing Disclosure Agreement, but only if and insofar as such losses,
claims, damages, liabilities or expenses are caused by any such failure of the
City to perform. In case any action shall be brought against the Indemnified
Parties based upon this City Continuing Disclosure Agreement and in respect of
which indemnity may be sought against the City, the Indemnified Parties shall
promptly notify the City in writing. Upon receipt of such notification, the City
shall promptly assume the defense of such action, including the retention of
counsel, the payment of all expenses in connection with such action and the
right to negotiate and settle any such action on behalf of such party. Any
Indemnified Party shall have the right to employ separate counsel in any such
action and to participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of such Indemnified Party unless the
employment of such counsel has been specifically authorized by the City or
unless by reason of conflict of interest determined by the written opinion of
counsel to any such party, it is advisable for such party to be represented by
separate counsel, to be retained by the City in which case the fees and expenses
of such separate counsel shall be borne by the City. The City shall not be
liable for any settlement of any such action effected without its written
consent, but if settled with the written consent of the City or if there be a
final judgment of the plaintiff in any such action with or without written
consent,
B-11
<PAGE>
the City agree to indemnify and hold harmless the Indemnified Parties from and
against any loss or liability by reason of such settlement or judgment. Nothing
in this paragraph shall require or obligate the City to indemnify or hold
harmless the Indemnified Parties from or against any loss, claim, damage,
liability or expense caused by any negligence, recklessness or intentional
misconduct of the Indemnified Parties in connection with such entity's
performance of its obligations, agreements and covenants under this City
Continuing Disclosure Agreement.
Section 4.4. Additional Information. Nothing in this City
Continuing Disclosure Agreement shall be deemed to prevent the Authority or the
City from (a) disseminating any other information, using the means of
dissemination set forth in this City Continuing Disclosure Agreement or any
other means of communication, or (b) including any other information in any City
Financial Statements or City Data or any Disclosure Event Notice, in addition to
that which is required by this City Continuing Disclosure Agreement. If the
Authority and the City choose to include any information in any City Financial
Statements or City Data or any Disclosure Event Notice in addition to that which
is specifically required by this City Continuing Disclosure Agreement, the
Authority and the City shall have no obligation under this City Continuing
Disclosure Agreement to update such information or include it in any future City
Financial Statements or City Data or any future Disclosure Event Notice.
Section 4.5. Notices. All notices required to be given or
authorized to be given by any party pursuant to this City Continuing Disclosure
Agreement shall be in writing and shall be sent by registered or certified mail
(as well as by facsimile, in the case of the Trustee) to, in the case of the
Authority, 101 Interchange Plaza, Cranbury, NJ 08512, Att: Chairman; in the case
of the City, 318 Perth Amboy Avenue, Perth Amboy, New Jersey 07029 Att: Chief
Financial Officer; and in the case of the Trustee, its principal corporate trust
office at Amboy National Bank, 3590 Route 9 South, Old Bridge, New Jersey 08857,
Att: Corporate Trust Department.
Section 4.6 Assignments. This City Continuing Disclosure
Agreement may not be assigned by any party without the consent of the others
and, as a condition to any such assignment, only upon the assumption in writing
of all of the obligations imposed upon such party by this City Continuing
Disclosure Agreement.
Section 4.7. Severability. If any provision of this City
Continuing Disclosure Agreement shall be held or deemed to be or shall, in fact,
be illegal, inoperative or unenforceable, the same shall not affect any other
provision or provisions herein
B-12
<PAGE>
contained or render the same invalid, inoperative or unenforceable to any extent
whatever.
Section 4.8. Execution of Counterparts. This City Continuing
Disclosure Agreement may be simultaneously executed in several counterparts,
each of which shall be an original and all of which shall constitute but one and
the same instrument. The parties hereto may sign the same counterpart or each
party hereto may sign a separate counterpart.
Section 4.9. Amendments, Changes and Modifications.
(a) Except as otherwise provided in this City Continuing
Disclosure Agreement, subsequent to the initial issuance of the Bonds and prior
to their payment in full (or provision for payment thereof having been made in
accordance with the provisions of the applicable Authority Bond Resolutions),
this City Continuing Disclosure Agreement may not be effectively amended,
changed, modified, altered or terminated without the written consent of the
Trustee.
(b) Without the consent of any Bondholders, the Authority, the
City and the Trustee at any time and from time to time may enter into any
amendments or modifications to this City Continuing Disclosure Agreement for any
of the following purposes:
(i) to add to covenants and agreements of the Authority
and the City hereunder for the benefit of the Bondholders, or to
surrender any right or power conferred upon the Authority or the
City by this City Continuing Disclosure Agreement;
(ii) to modify the contents, presentation and format of
the City Financial Statements and City Data from time to time to
conform to changes in accounting or disclosure principles or
practices and legal requirements followed by or applicable to
the Authority and the City, or to reflect changes in the
identity, nature or status of the Authority or the City or in
the business, structure or operations of the Authority or the
City or any mergers, consolidations, acquisitions or
dispositions made by or affecting the Authority or the City;
provided that any such modification shall comply with the
requirements of Rule 15c2-12 as then in effect at the time of
such modification;
(iii) to cure any ambiguity, to correct or supplement
any provision hereof which may be inconsistent with any other
provision hereof, or to include any other provisions with
respect to matters or questions arising under this City
Continuing Disclosure Agreement which, in each case,
B-13
<PAGE>
comply with Rule 15c2-12 as then in effect at the time of
such modification; or
(iv) to assure continued compliance with Rule 15c2-12
pursuant to the provisions of subsection 4.10 hereof,
provided, that prior to approving any such amendment or modification, the
Trustee and the Authority determine that such amendment or modification does not
adversely affect the interests of the Holders of the Bonds in any material
respect.
(c) Upon entering into any amendment or modification required or
permitted by this City Continuing Disclosure Agreement, the Dissemination Agent
shall deliver, to each of the Repositories written notice of any such amendment
or modification.
(d) The Authority and the Trustee shall be entitled to rely
exclusively upon an opinion of counsel nationally recognized as expert in
Federal securities law acceptable to the Authority to the effect that such
amendments or modifications comply with the conditions and provisions of this
Section 4.9.
Section 4.10. Amendments Required by Rule 15c2-12. The
Authority, the City and the Trustee each recognize that the provisions of this
City Continuing Disclosure Agreement are intended to enable the Underwriter to
comply with Rule 15c2-12. If, as a result of a change in Rule 15c2-12 or in the
interpretation thereof, a change in this City Continuing Disclosure Agreement
shall be permitted or necessary to assure continued compliance with Rule 15c2-12
and upon delivery by the Underwriter of an opinion of counsel nationally
recognized as expert in Federal securities law acceptable to the Authority to
the effect that such amendments shall be permitted or necessary to assure
continued compliance by the Underwriter with Rule 15c2-12 as so amended or
interpreted, then the Authority, the City and the Trustee shall, amend this City
Continuing Disclosure Agreement to comply with and be bound by any such
amendment to this City Continuing Disclosure Agreement to the extent necessary
or desirable to assure compliance with the provisions of Rule 15c2-12 and
provide the written notice of such amendment as required by subsection 4.9(c)
hereof.
Section 4.11. Miscellaneous. The Authority and the Underwriter
may rely upon the representation of the City hereunder in connection with the
issuance of the Bonds. The City covenants that it has never failed to comply
with any continuing disclosure obligation.
Section 4.12. Governing law. This City Continuing Disclosure
Agreement shall be governed exclusively by and construed in accordance with the
applicable laws of the United States of America and the State of New Jersey.
B-14
<PAGE>
Section 4.13. Termination of Continuing Disclosure Obligations.
The continuing obligation of the Authority and the City under Section 2.1 and
2.2, respectively, hereof to provide the City Financial Statements and the City
Data and any Disclosure Event Notice, as applicable, and to comply with the
other requirements of said Section shall terminate if and when either (a) the
Bonds are no longer Outstanding in accordance with the terms of the Authority
Bond Resolutions or (b) the Authority and the City no longer remain an
"Obligated Person" (as defined in Rule 15c2- 12(f)(10)) with respect to the
Bonds and in either event, only after the Authority delivers, or causes the
Dissemination Agent to deliver, to each of the Repositories written notice to
such effect.
Section 4.13. Binding Effect. This City Continuing Disclosure
Agreement shall inure to the benefit of and shall be binding upon the Authority,
the City and the Trustee and their respective successor and assigns.
B-15
<PAGE>
IN WITNESS WHEREOF, THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY,
THE CITY OF PERTH AMBOY AND AMBOY NATIONAL BANK, have caused this City
Continuing Disclosure Agreement to be executed in their respective names as of
the date first above written.
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
BY: ______________________________
LEONARD J. ROSEMAN, CHAIRMAN
CITY OF PERTH AMBOY
BY: ______________________________
JOSEPH VAS, MAYOR
AMBOY NATIONAL BANK, AS TRUSTEE
BY: _______________________________
B-16
<PAGE>
SCHEDULE C
CITY CONTRACTS
1. Collective Bargaining Units:
a. Collective Bargaining Agreement with Blue Collar Union
b. Collective Bargaining Agreement with White Collar Union
c. Collective Bargaining Agreement with Blue Collar
Superintendents Union
d. Collective Bargaining Agreement with Blue Collar
Supervisors Union
e. Collective Bargaining Agreement with White Collar
Supervisors Union
2. SFY 1999 Annual Contracts for various commodities particular to
the water and sewer utilities:
a. Hydrated Lime - Bellefonte Lime Co.
b. Plumbing Supplies specific to Water Utility - Water Supply
Company
c. Sodium Hypochlorite - The Chloramone Co.
d. General Plumbing Supplies - Central Jersey Supply Co.
3. SFY 1999 Annual Contracts for various services particular to the
water and sewer utilities:
a. Catch Basin Grit Removal - AWT Environmental Services,
Inc.
b. Wet Well Grit Removal - AWT Environmental Services, Inc.
c. Sanitary & Storm Sewer Repair and Rehabilitation - B & W
Construction Co.
d. Well to Well Pump Service Contract - A.C. Schultes, Inc.
e. Industries Testing & Sampling - Garden State Labs, Inc.
f. Volatile Organic Compounds Testing - Garden State Labs,
Inc.
C-1
<PAGE>
g. Security Guard Services for Runyon Watershed and Florida
Grove Reservoir - CFS Services, Inc.
4. Professional Service Contracts:
a. Engineering services in connection with Runyon Watershed
groundwater contamination, water supply management, South
Amboy - Killam Associates
b. Auditing and preparation of financial statements - O'Neill
& Lang
5. Capital Improvement Projects:
a. Sheridan Street Outfall wetlands mitigation - Jacobs
Environmental, Inc. for engineering services
b. Rudyk Park and Sheridan Street Outfall Rehabilitation
Project - Jacobs Environmental, Inc. for engineering
services
c. Runyon Water Treatment Plant Improvement Project - Killam
Associates for engineering and contract management
services, and Scafar Contracting, Inc. for construction.
d. Amboy Avenue Pump Station Replacement Project - Post
Buckley for engineering construction management, and
Scafar Contracting, Inc. for construction
e. State Street Pump Station Replacement Project - Post
Buckley for engineering construction management, and
Scafar Contracting, Inc. for construction
f. Front Street Pump Station Replacement Project - Carr
Engineering Associates for engineering design services,
Post Buckley for engineering construction management
services, and Spectraserv, Inc. for construction
g. Stage II/III Treatment Works Application for Combined
Sewer Outfall Netting Chambers design and bid
specifications - Camp Dresser & McKee for engineering
design services
h. WRLA Water Distribution Improvements - Carr Engineering
Associates for engineering and construction management
services
C-2
<PAGE>
SCHEDULE D
CITY FACILITIES
1. City Hall 260 High Street
2. Police Headquarters High & Fayette Streets
3. Municipal Court High & Fayette Streets
4. Municipal Garage Complex 599 Fayette Street
5. Fire Department Headquarters 376 High Street
6. Sewage Disposal Plant Sadowski Parkway
7. Front Street Pump Station Front Street
8. State Street Pump Station State Street
9. Amboy Avenue Wet Wall Amboy Avenue
10. Memorial Fire House 934 Convery Boulevard
11. Garfield Hose and Humane
Fire Company 615 Amboy Avenue
12. Reservoir 676 Florida Grove Road
13. Water Works Building 590 Smith Street
14. Runyon Watershed Old Water Works Road, Old
Bridge
15. Recreation Department Building 56 Brighton Avenue
16. Public Library 196 Jefferson Street
17. Edward J. Patten Public
Welfare Center Fayette & Read Streets
18. code Enforcement Building 436 Market Street
19. Olive Street Community Center 1 Olive Street
20. Harold D. Runyon Pistol Range Smith Street
21. Animal Shelter Clement & Fayette Streets
22. Electrical Bureau Building 592/598 Smith Street
D-1
<PAGE>
23. State and James Fire Building 626 State Street
24. Fire Department First Aid Squad 366 High Street
25. Surveyor Governor's Office High Street
26. Kearny Cottage Kearny Avenue
27. Little League Complex
(Veterans Memorial Park) Convery Boulevard
28. Marina Facilities Building Front Street
29. Armesen Square New Brunswick Avenue
30. Five Corners Fountain Smith & State Streets
31. Train Station Parking Lot Smith Street
32. Washington Park New Brunswick Avenue
33. Lucey Center Park Williams Street
34. Hall Avenue & State Street Park Hall Avenue & State
35. Dalton Park Chamberlain Avenue
36. Francis Street Park Francis Street
D-2
<PAGE>
SCHEDULE E
CITY FEES
1. Sewer Connection Fees as Outlined in Section 365-27 of the City of
Perth Amboy Administrative Code.
2. Sewer Treatment Charges as Outlined in Section 365-29 of the City
of Perth Amboy Administrative Code.
3. Private Fire Services as Outlined in Section 418-5 of the City of
Perth Amboy Administrative Code.
4. Service and Replacement Fees as Outlined in Section 418-6 of the
City of Perth Amboy Administrative Code.*
5. Water Connection Fees as Outlined in Section 418-7 of the City of
Perth Amboy Administrative Code.
* Fees Not Included in Revenues; to be Used to Directly Reimburse
Company and/or City for Services Described Therein.
E-1
<PAGE>
S
SCHEDULE F
EMPLOYEE LEASE PAYMENT
CONTRACT
YEAR AMOUNT
---- ------
1 $2,532,000*
2 2,279,000
3 2,152,000
4 2,026,000
5 1,899,000
6 1,646,000
7 1,393,000
8 1,434,000
9 1,477,000
10 1,522,000
11 1,567,000
12 1,614,000
13 1,662,000
14 1,713,000
15 1,764,000
16 1,817,000
17 1,871,000
18 1,928,000
19 1,985,000
20 2,045,000
21 2,106,350*
* To be prorated during a short first and last Contract Year.
F-1
<PAGE>
SCHEDULE G
FIXED FRANCHISE FEE
CONTRACT
YEAR FEE
---- ---
1 $4,500,000
2 4,500,000
3 4,500,000
4 4,500,000
5 4,500,000
6 1,100,000
7 1,100,000
8 1,100,000
9 1,100,000
10 1,100,000
11 1,100,000
12 1,100,000
13 1,100,000
14 1,100,000
15 1,100,000
16 1,100,000
17 1,100,000
18 1,100,000
19 1,100,000
20 1,100,000
21 1,100,000*
* To be prorated during a short last Contract Year.
G-1
<PAGE>
SCHEDULE H
FIXED SERVICE FEE
YEAR AMOUNT
---- ------
1 $6,473,000*
2 6,446,000
3 6,467,000
4 6,531,000
5 6,597,000
6 7,091,000
7 6,970,000
8 7,148,000
9 7,331,000
10 7,519,000
11 7,712,000
12 7,910,000
13 8,116,000
14 8,326,000
15 8,543,000
16 8,765,000
17 8,995,000
18 9,231,000
19 9,473,000
20 9,724,000
21 $9,981,000*
* To be prorated during short first and last years.
H-1
<PAGE>
SCHEDULE I
FORM OF GUARANTOR BOND GUARANTY AGREEMENT
<PAGE>
DRAFT IV
11/17/98
GUARANTOR BOND GUARANTY AGREEMENT
DATED AS OF _______ ___, 1998
I-1
<PAGE>
THIS GUARANTOR BOND GUARANTY AGREEMENT (hereinafter the "Guarantor Bond
Guaranty Agreement") among MIDDLESEX WATER COMPANY (the "Guarantor"), a
__________ corporation, the MIDDLESEX COUNTY IMPROVEMENT AUTHORITY (the
"Authority"), a public body corporate and politic of the State of New Jersey and
AMBOY NATIONAL BANK a state banking corporation as trustee (the "Trustee").
W I T N E S S E T H
WHEREAS, The Authority has been duly created by resolution of the Board
of Chosen Freeholders of the County of Middlesex (the "County"), New Jersey (the
"Authority"), as a public body corporate and politic of the State of New Jersey
pursuant to the provisions of the County Improvement Authorities Law,
constituting Chapter 183 of the Pamphlet Laws of 1960, of the State of New
Jersey (the "Improvement Authorities Law"); and
WHEREAS, the Authority is authorized pursuant to the terms of the
Improvement Authorities Law to provide within the County for public facilities,
as that term is defined in the Improvement Authorities Law; and
WHEREAS, the City of Perth Amboy (the "City") currently owns and
operates a water supply, transmission and distribution system (the "Water
System") and a wastewater collection system (the "Wastewater System" and
together with the Water System, the "System"), all for the residents of and
other System users in the Guarantor (the "Users"); and
WHEREAS, the City has determined that the System needs substantial
upgrading and improving in order to continue to supply water and provide
wastewater collection services to the Users; and
WHEREAS, pursuant to the Improvement Authorities Law, specifically
Section 34 thereof (N.J.S.A. 40:37A-77), the City may, by ordinance, without any
referendum or public or competitive bidding, sell, lease, lend, grant or convey
to the Authority or permit the Authority to use, maintain or operate as part of
any public facility any real or personal property which may be necessary or
useful and convenient for the purpose of the Authority; and
WHEREAS, the City has determined that the improvement and expansion of
its System can best be accomplished to serve the interests of its residents and
customers by leasing the System and selling a franchise to operate the System to
the Authority pursuant to that certain "Lease and Franchise Acquisition
Agreement" to be dated as of the first day of the month of the issuance of the
hereinafter defined Authority Indebtedness (together with any amendments thereof
or supplements thereto in accordance with the terms thereof, the "Lease
Agreement") and by jointly entering into an operating agreement to be dated as
of the first day of the month of the issuance of the hereinafter defined
Authority
I-2
<PAGE>
Indebtedness (the "Agreement") among the Guarantor, the Authority and Utility
Services Affiliates, Inc., (the "Company") a subsidiary of Middlesex Water
Company; and
WHEREAS, the City and the Authority have determined to proceed with the
leasing of the System, the selling of the franchise to operate the System and
the financing of, among other things, improvements to the System; and
WHEREAS, the City, pursuant to the Improvement Authorities Law
specifically Section 12 and 35 thereof (N.J.S.A. 40:37A-55(i) and 78), as well
as the New Jersey Wastewater Treatment Public-Private Contracting Act (the
"Wastewater Act"), specifically, Section 22 thereof (N.J.S.A. 58:27-22), the New
Jersey Water Supply Public-Private Contracting Act (the "Water Act"),
specifically Section 22 thereof (N.J.S.A. 58:26-22), constituting Chapter 208 of
the Pamphlet Laws of 1973 of the State of New Jersey, has previously authorized
the execution of the Agreement; and
WHEREAS, the Authority intends to finance the first six years of the
Fixed Franchise Fee, an operating reserve fund [, a bond reserve fund] and the
costs of issuing the hereinafter defined Authority Series C Indebtedness (the
"Project") through the issuance of a series of bonds of the Authority in an
aggregate principal amount not to exceed $27,500,000, "Utility System Revenue
Bond (Perth Amboy Franchise Acquisition Project), Series 1998C" (the "Authority
Series C Indebtedness"); and
WHEREAS, the Authority Series C Indebtedness will be issued pursuant to
the terms of the Improvement Authorities Law, other applicable law and the
Authority's "Resolution Authorizing the Issuance of Utility System Revenue Bonds
and/or Notes (Perth Amboy Franchise Acquisition Project), Series 1998C of The
Middlesex County Improvement Authority" adopted on ________ ___, 1998 (together
with any amendments thereof or supplements thereto in accordance with the terms
thereof, the "Authority Series C Bond Resolution"); and
WHEREAS, in order to provide inducement to the prospective purchasers
of such Authority Series C Indebtedness to purchase the same and to provide
additional security to the holders thereof in addition to the revenues generated
by the System and payable pursuant to the Agreement, in accordance with the
terms of Section 37 of the Improvement Authorities Law, and in addition to a
bond insurance policy issued by _____________________. (the "Bond Insurer") the
Guarantor desires to provide a guaranty of the timely payment of the principal
of and interest on such Authority Series C Indebtedness to be issued by the
Authority for or with respect to the Project; and
NOW, THEREFORE, in consideration of the promises and the mutual
covenants and agreements set forth herein, the Authority, the Guarantor and the
Trustee and its successors and assigns, do mutually covenant,
I-3
<PAGE>
promise and agree as follows (Capitalized terms shall, unless stated otherwise,
have the meaning assigned to such terms in the preambles hereof, the Agreement
and the Authority Series C Bond Resolution (as defined in the Agreement)):
Section 1. The Guarantor hereby agrees to fully, unconditionally and
irrevocably guaranty the punctual payment of the principal of (including sinking
fund installments, if any) and the interest on the Authority Series C
Indebtedness and any other bonds issued pursuant to the Authority Series C Bond
Resolution (the "Bonds"). For purposes of this Guarantor Bond Guaranty
Agreement, the aggregate principal amount of Bonds Outstanding (as defined in
the Authority Series C Bond Resolution) may not exceed $27,500,000. The full
faith and credit of the Guarantor are hereby pledged for the full and punctual
performance of this guaranty (the "Guarantor Bond Guaranty"). The Bond Insurer
is hereby designated as a third-party beneficiary of the Guarantor Bond
Guaranty.
Section 2. The Authority agrees to apply or cause the Trustee for the
Authority Series C Indebtedness to apply the proceeds derived from the sale of
the Bonds for Costs (as defined in the Improvement Authorities Law), including
the payment by the Authority for the Costs of the Project, all in accordance
with the terms of and as defined in the Agreement and the Authority Series C
Bond Resolution.
Section 3. The obligations of the Guarantor hereunder are
unconditional. Failure on the part of the Authority or the Trustee in any
instance or under any circumstances to observe or fully perform any obligation
assumed by or imposed upon either the Authority or the Trustee by this Guarantor
Bond Guaranty Agreement or by law, as applicable, shall not relieve the
Guarantor from making any payment or fully performing any other obligations
imposed by the Guarantor Bond Guaranty Agreement.
Section 4. The Authority will keep, or cause to be kept, proper books
of record and account in which complete and correct entries shall be made of its
transactions relating to the Project and which, together with all other books
and papers of the Authority, shall at all reasonable times and upon reasonable
advance notice be subject to inspection.
Section 5. The Authority Series C Bond Resolution shall further
provide that if, on a date fifty-five (55) days prior to any Interest Payment
Date or Principal Payment Date (hereinafter "Debt Service Payment Date"), the
available funds on deposit in the Interest Account or the Principal Account of
the Debt Service Fund (after taking into account any moneys earmarked for
transfer therein from the Revenue Fund) are insufficient to provide for the
payment of the principal of (including sinking fund installments, if any) and
interest on the Bonds on such Debt Service Payment Date, the Trustee shall
notify the Guarantor and the Authority in writing no later than 3:00 p.m. on the
date which is two (2) business days after such fifty-five (55) days prior to
such Debt Service Payment Date of the amount which is necessary to provide for
the full payment of the principal of (including sinking fund installments, if
any) and interest on the Bonds on such Debt Service Payment Date. The Guarantor
shall acknowledge receipt of such
I-4
<PAGE>
notice in writing within two (2) business days, which notice shall also
reference the amount to be raised by the Guarantor from any source to satisfy
such deficiency prior to any such Debt Service Payment Date. If the deficiency
is not cured thirty (30) days prior to the next ensuing Debt Service Payment
Date, the Trustee shall so notify the Guarantor within two (2) business days
thereafter and the Guarantor shall acknowledge receipt thereof within two (2)
business days, and, no later than two (2) business days prior to such Debt
Service Payment Date, the Guarantor shall make payment in immediately available
funds to the Trustee of the amount of such deficiency in the Debt Service Fund
(as defined in the Authority Series C Bond Resolution). Such Guarantor payment
shall be deposited by the Trustee into the Debt Service Fund, as and to the
extent provided in the Authority Series C Bond Resolution. Notwithstanding any
other provisions of this Guarantor Bond Guaranty Agreement to the contrary,
failure of the Trustee to give the Guarantor notice as provided herein shall not
relieve the Guarantor of its obligation to make payment to the Trustee under the
terms of the Guarantor Bond Guaranty, provided, however, that nothing herein
shall be construed as a waiver of the Guarantor's right to proceed against the
Trustee for the Guarantor's damages, if any, arising from the failure to give
timely notice to the Guarantor. The Authority by execution hereof covenants and
agrees to provide to the Guarantor the notices set forth herein.
Section 6. The obligations of the Guarantor under this Guarantor Bond
Guaranty Agreement shall be absolute and unconditional and shall remain in full
force and effect until the entire principal of (including sinking fund
installments, if any) and interest on the Bonds shall have been paid or duly
provided for in accordance with the provisions of the Authority Series C Bond
Resolution. The obligations of the Guarantor hereunder shall not be affected,
modified or impaired upon the occurrence from time to time of any event,
including without limitation any of the following, whether or not with notice
to, or the consent of, the Guarantor:
(a) The waiver, compromise, settlement, release or termination
of any or all of the obligations, covenants or agreements of the
Authority which are contained in the Authority Series C Bond
Resolution, the Lease Agreement, the Agreement, this Guarantor Bond
Guaranty Agreement or any other agreement which is executed and
delivered for or with respect to the Bonds (collectively, the "Primary
Financing Documents"), or of the payment, performance or observance
thereof;
(b) The failure to give notice to the Guarantor of the
occurrence of an event of default under the provisions of the Primary
Financing Documents;
(c) The transfer, assignment or mortgaging or the purported
transfer, assignment or mortgaging of all or any part of the interest
of the Authority in the System;
I-5
<PAGE>
(d) The extension of the time for payment of the principal of
(including sinking fund installments, if any) or interest on the Bonds
or of the time for performance of any obligations, covenants or
agreements under or arising out of the Primary Financing Documents;
(e) The modification or amendment (whether material or
otherwise) of any obligation, covenant or agreement set forth in the
Primary Financing Documents;
(f) The taking, suffering or the omission of any of the
actions referred to in the Primary Financing Documents;
(g) Any failure, omission, delay or lack on the part of the
Authority to enforce, assert or exercise any right, power or remedy
conferred on the Authority in the Primary Financing Documents or any
other act or acts on the part of the Authority or any of the holders
from time to time of the Bonds;
(h) The voluntary or involuntary liquidation, dissolution,
sale or other disposition of all or substantially all of the assets,
marshalling of assets and liabilities, receivership, insolvency,
bankruptcy, assignment for the benefit of creditors, reorganization,
arrangement, composition with creditors or readjustment or other
similar proceedings affecting the Authority or any party to the Primary
Financing Documents or any of the assets of any of them, or any
allegation or contest of the validity of the Primary Financing
Documents;
(i) To the extent permitted by law, any event or action that
would, in the absence of this clause, result in the release or
discharge by operation of law of the Guarantor from the performance or
observance of any obligation, covenant or agreement contained in the
Primary Financing Documents;
(j) The default or failure of the Guarantor fully to perform
any of its obligations set forth in the Primary Financing Documents; or
(k) The destruction, non-use or non-availability of the
System.
Section 7. No set-off, counterclaim, reduction, or diminution of any
obligation, or any defense of any kind or nature (other than performance by the
Guarantor of its obligations hereunder) which the Guarantor has or may have
against the Authority, or against any holder of the Bonds, shall be available to
the Guarantor hereunder against the Authority or anyone succeeding to the
Authority's interest.
Section 8. The Guarantor further guarantees that all payments made with
respect to the Bonds will, when made, be final and agrees that if
I-6
<PAGE>
such payment is recovered from or repaid by or on behalf of the Authority or the
holders of the Bonds, in whole or in part in any bankruptcy, insolvency or
similar proceeding instituted by or against the Authority, the Guarantor Bond
Guaranty shall continue to be fully applicable to such liabilities to the same
extent as though the payment so recovered or repaid had never been originally
made on such liabilities.
Section 9. In the event of a default in payment of the principal of
(including sinking fund installments, if any) or interest on the Bonds, when and
as the same shall become due, whether at the stated maturity thereof or
otherwise, the Authority or any party to whom the Authority's rights have been
assigned may proceed to enforce its rights hereunder and may proceed first and
directly against the Guarantor under the terms of this Guarantor Bond Guaranty
Agreement without proceeding against or exhausting any other remedies which it
may have and without resorting to any other security held by the Authority. All
moneys recovered pursuant to this Guarantor Bond Guaranty Agreement shall be
applied in accordance with the provisions of the Primary Financing Documents.
Section 10. This Guarantor Bond Guaranty Agreement shall terminate
after payment in full of the principal of (including sinking fund installments,
if any) and interest on the Bonds has been made or provision for the payment of
same has been made in accordance with the terms of the Authority Series C Bond
Resolution.
Section 11. This agreement may be executed in any number of
counterparts, each of which shall be executed by the Authority and by the
Guarantor and all of which shall be regarded for all purposes as one original
and shall constitute and be but one and the same.
Section 12. This Guarantor Bond Guaranty Agreement may not be assigned
by the Guarantor (except to a related entity rated at least "A" by Moody's
Investors Service and/or Standard and Poor's Corporation) or the Authority
without the prior written consent of the parties hereto; provided, however, that
the Guarantor hereby acknowledges and consents to the irrevocable assignment of
the Guarantor Bond Guaranty by the Authority to the Trustee for the benefit of
the holders of the Bonds as and to the extent provided in the Authority Series C
Bond Resolution.
Section 13. The Authority may at any time, with the prior written
consent of the Guarantor, issue additional bonds or project notes for purposes
of refunding all or any part of the Bonds, which additional bonds or project
notes shall be guaranteed by the Guarantor, in accordance with the provisions of
the Authority Series C Bond Resolution.
Whenever the consent of the Guarantor is required pursuant to the
provisions of the Primary Financing Documents, such consent of the Guarantor may
be given by written instrument executed by an authorized
I-7
<PAGE>
Guarantor representative unless such consent is otherwise required by law to be
evidenced by an ordinance or resolution duly adopted by the Guarantor.
Section 14. All notices and submissions required hereunder shall be
given to the following, or their successors, by facsimile transmission (with
written confirmation of receipt), followed by hard copy sent by certified or
registered mail, personal delivery or recognized overnight delivery:
(a) To the Guarantor: City of Perth Amboy
260 High Street
Perth Amboy, NJ 08861-4491
Attn: Business Administrator
(b) To the Authority: Middlesex County Improvement Auth.
101 Interchange Plaza
Cranbury, NJ 08512
Attn: Executive Director
(c) To the Trustee: Amboy National Bank
3590 Route 9 South
Old Bridge, NJ 08857
Attn: Corporate Trust Department
With a copy to the
System Trustee: First Union National Bank
21 South Street
Morristown, NJ 07960
Attn: Corporate Trust Department
With a copy to the
Bond Insurer:
Each party shall give notice from time to time to the other parties, in
the manner specified herein, of any change of the identity or address of anyone
listed herein.
Section 15. If any one or more of the covenants or agreements in this
Guarantor Bond Guaranty Agreement to be performed on the part of the Authority
and the Guarantor should be contrary to law, then such covenant or covenants,
agreement or agreements, shall be deemed severable from the remaining covenants
and agreements and shall in no way affect the validity of the other provisions
of this Guarantor Bond Guaranty Agreement.
I-8
<PAGE>
Section 16. Any repayment to the Guarantor of amounts paid hereunder
shall be subordinate to the payment of all amounts due under the Authority
Series C Bond Resolution to the Bondholders and/or the Authority and shall not
be subject to acceleration.
Section 17. This Guarantor Bond Guaranty Agreement shall not be
modified or amended without the express, written consent of all parties hereto
and the Bond Insurer.
I-9
<PAGE>
IN WITNESS WHEREOF, the parties have executed this agreement as of the
date first written above.
MIDDLESEX WATER COMPANY
BY:_____________________________________
J. RICHARD TOMPKINS, PRESIDENT AND
CHAIRMAN OF THE BOARD
MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
BY:_____________________________________
LEONARD J. ROSEMAN, CHAIRMAN
AMBOY NATIONAL BANK, AS TRUSTEE
BY:_____________________________________
NAME:___________________________________
TITLE:__________________________________
I-10
<PAGE>
SCHEDULE J
FORM OF GUARANTOR CONTINUING DISCLOSURE AGREEMENT
<PAGE>
GUARANTOR CONTINUING DISCLOSURE AGREEMENT
THIS GUARANTOR CONTINUING DISCLOSURE AGREEMENT (the "Guarantor
Continuing Disclosure Agreement"), made and entered into as of _________ __,
1998 by and among THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY (the "Authority"),
a public body corporate and politic of the State of New Jersey, the MIDDLESEX
WATER COMPANY a __________ corporation (the "Guarantor") and AMBOY NATIONAL
BANK, a state banking corporation organized under the laws of the State of New
Jersey (the "Trustee").
W I T N E S S E T H:
WHEREAS, the Authority is issuing its Utility System Revenue
Bonds (Perth Amboy Franchise Acquisition Project), Series 1998C) in the
aggregate principal amount of $__________ (the "Series 1998C Bonds") on the date
hereof; and
WHEREAS, the Bonds are being issued pursuant to a general bond
resolutions of the Authority adopted on _________ ___, _____, as amended and
supplemented (the "Authority Series C Bond Resolution"); and
WHEREAS, the Trustee has duly accepted the trusts imposed upon
it by the Authority Series C Bond Resolution as Trustee for the Holders from
time to time of the Bonds; and
WHEREAS, the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended and supplemented
(codified as of the date hereof at 15 U.S.C. 77 et seq.) (the "Securities
Exchange Act") has adopted amendments to Rule 15c2-12 (codified at 17 C.F.R.
ss.240.15c2-12) ("Rule 15c2-12") effective July 3, 1995 which generally prohibit
a broker, dealer, or municipal securities dealer from purchasing or selling
municipal securities, such as the Bonds, unless such broker, dealer or municipal
securities dealer has reasonably determined that an issuer of municipal
securities or an "Obligated Person" (as defined in Rule 15c2-12) has undertaken
in a written agreement or contract for the benefit of holders of such securities
to provide certain annual financial information and operating data and notices
of the occurrence of certain material events to various information
repositories; and
WHEREAS, the Authority and the Guarantor have determined and
have so represented in the Preliminary Official Statement dated __________ ___,
___ (the "Preliminary Official Statement") that each is an "Obligated Person"
with respect to the Bonds within the meaning of Rule 15c2-12 and, in order to
enable the "participating underwriters" within the meaning of Rule 15c2-12 to
purchase the Bonds, is therefore required to cause the delivery of the
respective information described in this Guarantor Continuing Disclosure
Agreement to the municipal securities marketplace for the period of time
specified in this Guarantor Continuing Disclosure Agreement; and
J-2
<PAGE>
WHEREAS, on __________ ___, _____ the Authority entered into a
contract of purchase with _______________(the "Underwriter"), for the purchase
of the Bonds; and
WHEREAS, the execution and delivery of this Guarantor Continuing
Disclosure Agreement have been duly authorized by the Authority, the Guarantor
and the Trustee, respectively, and all conditions, acts and things necessary to
have happened, or to have been performed or required to exist precedent to the
execution and delivery of this Guarantor Continuing Disclosure Agreement, do
exist, have happened and have been performed in regular form, time and manner;
and
WHEREAS, the Guarantor is a publicly owned and regulated
utility; and
WHEREAS, the Authority, the Guarantor and the Trustee are
entering into this Guarantor Continuing Disclosure Agreement for the benefit of
the Holders of the Bonds.
NOW, THEREFORE, for and in consideration of the promises and of
the mutual representations, covenants and Guarantor Continuing Disclosure
Agreements herein set forth, the Authority, the Guarantor and the Trustee, each
binding itself, its successors and assigns, do mutually promise, covenant and
agree as follows:
J-3
<PAGE>
ARTICLE 1
DEFINITIONS
Section 1.1. Terms Defined in Recitals. The following terms
shall have the meaning set forth in the recitals hereto:
Authority
Authority Series C Bond Resolution
Bonds
Guarantor
Guarantor Continuing Disclosure Agreement
Preliminary Official Statement
Rule 15c2-12
SEC
Securities Exchange Act
Trustee
Underwriter
Section 1.2. Additional Definitions. The following
additional terms shall have the meanings specified below:
"Bondholder" or "Holder" or any similar term, when used with
reference to a Bond or Bonds, means any person who shall be the registered owner
of any Outstanding Bond, including Holders of beneficial interests in the Bonds.
"Business Day" means any day other than (a) a Saturday or
Sunday, (b) a day on which commercial banks in New York, New York or the city or
cities in which are located the principal corporate trust offices of the Trustee
are authorized or required by law to close or (c) a day on which the New York
Stock Exchange is closed.
"Disclosure Event" means any event described in subsection 2.2
of this Guarantor Continuing Disclosure Agreement.
"Disclosure Event Notice" means the notice to the Repositories
and the MSRB as provided in subsection 2.5.
"Disclosure Representative" means the authorized officer of the
Authority or his or her designee, or such other officer or employee as the
Authority shall designate in writing to the Dissemination Agent, if the
Authority has appointed or engaged a Dissemination Agent, from time to time.
"Dissemination Agent" means the Trustee acting in its capacity
as Dissemination Agent under this Guarantor Continuing Disclosure Agreement, or
any successor Dissemination Agent designated in writing by the Authority and
which has filed with the Authority a written acceptance of such designation.
"Final Official Statement" means the final Official Statement of
the Authority dated __________ __, _____ pertaining to the Bonds.
J-4
<PAGE>
"Fiscal Year" means the fiscal year of the Guarantor, as
applicable. As of the date of this Guarantor Continuing Disclosure Agreement,
the Fiscal Year of the Guarantor begins on _______ __ of each calendar year and
closes on ________ __ of such calendar year.
"GAAP" means generally accepted accounting principles as in
effect from time to time in the United States of America, consistently applied.
"GAAS" means generally accepted auditing standards as in effect
from time to time in the United States of America, consistently applied.
"Guarantor Financial Statements" means the audited financial
statements of the Guarantor for each Fiscal Year on file with___________________
______________________________.
"MSRB" means the Municipal Securities Rulemaking Board. The
address of the MSRB as of the date of this Guarantor Continuing
Disclosure Agreement is:
1818 N Street, NW, Suite 800
Washington, DC 20036-2491
"National Repository" means a "nationally recognized municipal
securities information repository" within the meaning of Rule 15c2-12. As of the
date of this Guarantor Continuing Disclosure Agreement, the National
Repositories designated by the SEC in accordance with Rule 15c2-12 are:
(a) Bloomberg Municipal Repositories
P.O. Box 840
Princeton, New Jersey 08542-0840
Telecopies: (609) 279-5962
Telephone: (609) 279-3200
Internet: [email protected]
(b) Kenny Information Services, Inc.
ATTN: Kenny Repository Services
65 Broadway, 16th Floor
New York, New York 10006
Telephone: (212) 770-4595
(c) Thomas Municipal Library
395 Hudson Street; 3rd Floor
New York, New York 10014
Telecopier: (212) 989-2078
Telephone: (212) 807-3814
J-5
<PAGE>
(d) DPC Data Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Telephone: (201) 346-0701
Telecopier: (201) 947-0107
"Repository" means each National Repository and each State
Repository.
"State" means the State of New Jersey.
"State Repository" means any public or private repository or
entity designated by the State as a state information depository for purposes of
Rule 15c2-12. As of the date of this Guarantor Continuing Disclosure Agreement,
there is no State Repository.
Section 1.3. Capitalized Terms Not Defined Herein. Capitalized
terms not defined herein shall have the meanings assigned to them in Section 101
of the Authority Series C Bond Resolution.
Section 1.4. Interpretation. Words of masculine gender include
correlative words of the feminine and neuter genders. Unless the context shall
otherwise indicate, words importing the singular include the plural and vice
versa, and words importing persons include corporations, associations,
partnerships (including limited partnerships), trusts, firms and other legal
entities, including public bodies, as well as natural persons. Articles and
Sections referred to by number mean the corresponding Articles and Sections of
this Guarantor Continuing Disclosure Agreement. The terms "hereby", "hereof",
"hereto", "herein", "hereunder" and any similar terms as used in this Guarantor
Continuing Disclosure Agreement, refer to this Guarantor Continuing Disclosure
Agreement as a whole unless otherwise expressly stated.
As the context shall require, all words importing the singular
number shall include the plural number; the disjunctive term "or" shall be
interpreted conjunctively as required to insure that the Authority perform any
obligations mentioned in the passage in which such term appears.
The headings of this Guarantor Continuing Disclosure Agreement
are for convenience only and shall not define or limit the provisions hereof.
J-6
<PAGE>
ARTICLE 2
CONTINUING DISCLOSURE COVENANTS AND REPRESENTATIONS
Section 2.1. Continuing Disclosure Covenants and
Representations of the Guarantor. The Guarantor agrees that it will
provide, or shall cause the Dissemination Agent to provide:
(a) Not later than one-hundred eighty (180) days after the end
of each Fiscal Year of the Guarantor, commencing with the Fiscal Year of the
Guarantor ending on __________ __, ____the Guarantor Financial Statements to
each Repository;
(b) Not later than fifteen (15) days prior to the date specified
in subsection 2.1(a), a copy of the Guarantor's Financial Statements to the
Dissemination Agent;
(c) If audited Guarantor Financial Statements are not submitted
as part of the filing set forth in subsection 2.1(a), the Guarantor will submit
unaudited financial statements with such filing, and will subsequently submit
audited Guarantor Financial Statements when and if available, to each
Repository.
(d) In a timely manner, to each National Repository or to the
MSRB and to the appropriate State Repository, if any, notice of a failure by the
Guarantor to provide the Guarantor Financial Statements within the period
described in subsection 2.1(a).
Section 2.2. Continuing Disclosure Covenants and Representations
of the Authority. The Authority agrees that it will provide, or shall cause the
Dissemination Agent to provide in a timely manner, to each National Repository
or to the MSRB, and to the appropriate State Repository, if any, notice of any
of the following events with respect to the Bonds, if material (each, a
"Disclosure Event"):
(a) Principal and interest payment delinquencies on the
Bonds;
(b) Non-payment related defaults;
(c) Unscheduled draws on debt service reserves
reflecting financial difficulties;
(d) Unscheduled draws on credit enhancements reflecting
financial difficulties;
(e) Substitution of credit or liquidity providers, or
their failure to perform;
(f) Modifications to rights of security holders;
J-7
<PAGE>
(g) Bond calls;
(h) Defeasances;
(i) Release, substitution, or sale of property securing
repayment of the securities; and
(j) Rating changes;
Section 2.3. Form of Filings. (a) The Guarantor Financial
Statements may be submitted as a single document or as separate documents
comprising a package.
(b) Any or all of the items which must be included in the
Guarantor Financial Statements may be incorporated by reference from other
documents, including official statements delivered in connection with other
financings issued on behalf of the Guarantor which have been submitted to each
of the Repositories or filed with the SEC. If the document incorporated by
reference is a final official statement, it must be available from the MSRB. The
Guarantor shall clearly identify each such other document so incorporated by
reference.
(c) The Guarantor Financial Statements for any Fiscal Year
containing any modified operating data or financial information (as contemplated
by Section 4.9 and 4.10) for such Fiscal Year shall explain, in narrative form,
the reasons for such modification and the effect of such modification on the
Guarantor Financial Statements being provided for such Fiscal Year.
Section 2.4. Responsibilities, Duties, Immunities and
Liabilities of the Dissemination Agent.
(a) It shall be the responsibility of the Dissemination Agent to
determine the occurrence of a Disclosure Event. If the Dissemination Agent has
determined it necessary to report the occurrence of a Disclosure Event, the
Dissemination Agent shall file promptly a notice of such occurrence with each
National Repository or with the MSRB and the State Repository (the "Disclosure
Event Notice") in the form provided by the Authority; provided, that the
Disclosure Event Notice pertaining to the occurrence of a Disclosure Event
described in clauses 2.2(h) (optional or special redemptions of the Bonds) or
2.2(i) (defeasances) need not be given under this subsection any earlier than
the time when the notice (if any) of such Disclosure Event shall be given to
Holders of affected Bonds as provided in the Authority Series
C Bond Resolution. The obligation of the Dissemination Agent to provide the
notices to the Repositories or the MSRB, as the case may be, under this
Guarantor Continuing Disclosure Agreement are in addition to, and not in
substitution of, any of the obligations of the Trustee to provide notices of
Events of Default to Holders under the Authority Series C Bond Resolution. The
Dissemination Agent shall file a copy of each Disclosure Event Notice with the
Trustee (if the Trustee is not the Dissemination Agent) for informational
purposes only.
J-8
<PAGE>
(b) The Dissemination Agent shall determine each year prior to
the date for providing the Guarantor Financial Statements the name and address
of each National Repository and each State Repository, if any.
(c) The Dissemination Agent shall:
(i) Upon receiving the applicable Guarantor Financial
Statements, file the same with each Repository as soon as
practicable and thereafter file a written report with the
Authority certifying that the applicable Guarantor Financial
Statements which have been provided to it have been filed with
each Repository pursuant to this Guarantor Continuing Disclosure
Agreement, stating the date it was provided and listing all the
Repositories to which it was provided; and
(ii) if the Dissemination Agent has not received the
Guarantor Financial Statements from the City by the date set
forth in subsections 2.1(b) immediately send written notice of
such failure to the Authority, the Guarantor and the Trustee.
Section 2.5. Appointment, Removal, and Resignation of the
Dissemination Agent, Indemnification.
(a) The Authority hereby appoints the Trustee to act as
Dissemination Agent under this Guarantor Continuing Disclosure Agreement to
assist it in carrying out its obligations under this Guarantor Continuing
Disclosure Agreement. The Authority may, from time to time, discharge any such
Dissemination Agent, and appoint a successor Dissemination Agent, such discharge
to be effective on the date of the appointment of a successor Dissemination
Agent following notice of same to the Guarantor.
(b) The Dissemination Agent shall have only such duties as are
specifically set forth in this Guarantor Continuing Disclosure Agreement, and
the Guarantor agrees to indemnify and save the Dissemination Agent and the
Authority, its officers, directors, employees and agents harmless against any
loss, expense and liabilities which it may incur arising out of or in the
exercise or performance of its powers and duties hereunder, including the costs
and expenses (including attorneys fees) of defending against any claim of
liability, but excluding liabilities due to the Dissemination Agent's or the
Authority's negligence or wilful misconduct. The obligations of the Guarantor
under this subsection shall survive resignation or removal of the Dissemination
Agent and payment of the Bonds.
(c) The Dissemination Agent, or any successor thereto, may at
any time resign and be discharged of its duties and obligations hereunder by
giving not less than thirty (30) days written notice to the Authority. Such
resignation shall take effect on the date specified in such notice.
J-9
<PAGE>
Section 2.6. Responsibilities, Duties, Immunities and
Liabilities of the Trustee.
(a) Article X of the Authority Series C Bond Resolution is
hereby made applicable to this Guarantor Continuing Disclosure Agreement as if
the duties of the Trustee under this Guarantor Continuing Disclosure Agreement
were (solely for this purpose) set forth in the Authority Series C Bond
Resolution.
Section 2.7. Additional Persons Obligated under Rule 15c2-12.
The Authority agrees that it will cause any other person who becomes an
"Obligated Person" as such term is defined in Rule 15c2-12 to perform all of the
duties of the Authority herein.
J-10
<PAGE>
ARTICLE 3
DEFAULTS AND REMEDIES
Section 3.1. Disclosure Default. The occurrence and continuation
of a failure by the Authority or the Guarantor to observe, perform or comply
with any covenant, condition or agreement on its part to be observed or
performed in this Guarantor Continuing Disclosure Agreement and such failure
shall remain uncured for a period of thirty (30) days after written notice
thereof has been given to the Authority and the Guarantor by the Trustee or any
Bondholder shall constitute a default hereunder.
Section 3.2. Remedies on Default.
(a) The Trustee may, at the request of the Underwriter or the
Holders of at least twenty-five percent (25%) in aggregate principal amount of
Outstanding Bonds and after the Trustee has been indemnified to its satisfaction
against any and all costs and expenses, outlays and counsel fees and other
reasonable disbursements, and against all loss, liability and expenses, or any
Bondholder, for the equal benefit and protection of all Bondholders similarly
situated, may take whatever action at law or in equity against the Authority or
the Guarantor and any of the officers, agents and employees of the Authority or
the Guarantor which is necessary or desirable to enforce the specific
performance and observance of any obligation, agreement or covenant of the
Authority or the Guarantor under this Guarantor Continuing Disclosure Agreement
and may compel the Authority or the Guarantor or any such officers, agents or
employees, except for the Dissemination Agent, to perform and carry out their
duties under this Guarantor Continuing Disclosure Agreement; provided, that no
person or entity shall be entitled to recover monetary damages hereunder under
any circumstances.
(b) In case the Trustee or any Bondholder shall have proceeded
to enforce its rights under this Guarantor Continuing Disclosure Agreement and
such proceedings shall have been discontinued or abandoned for any reason or
shall have been determined adversely to the Trustee or any Bondholder, as the
case may be, then and in every such case the Authority, the Guarantor or the
Trustee and any Bondholder, as the case may be, shall be restored respectively
to their several positions and rights hereunder, and all rights, remedies and
powers of the Authority, the Guarantor or the Trustee and any Bondholder shall
continue as though not such proceeding had been taken.
(c) A default under this Guarantor Continuing Disclosure
Agreement shall not be deemed an Event of Default under the Authority Series C
Bond Resolution, and the sole remedy under this Guarantor Continuing Disclosure
Agreement in the event of any failure by the Authority to comply with this
Guarantor Continuing Disclosure Agreement shall be as set forth in subsection
3.2(a) of this Guarantor Continuing Disclosure Agreement.
J-11
<PAGE>
ARTICLE 4
MISCELLANEOUS
Section 4.1. Purposes of the Guarantor Continuing Disclosure
Agreement. This Guarantor Continuing Disclosure Agreement is being executed and
delivered by the Authority, the Guarantor and the Trustee for the benefit of the
Bondholders and in order to assist the Underwriter in complying with clause
(b)(5) of Rule 15c2-12.
Section 4.2. Third-Party Beneficiaries: The Bondholders.
Each Bondholder is hereby recognized as being a third-party beneficiary
hereunder and each may enforce, for the equal benefit and protection of
all Bondholders similarly situated, any such right, remedy or claim
conferred, given or granted hereunder in favor of the Trustee.
Section 4.3. Indemnified Parties. To the extent permitted by
Law, the Guarantor agrees to indemnify and hold harmless the Trustee, the
Dissemination Agent, the Authority and the Underwriter, and each person, if any,
who has the power, directly or indirectly, to direct or cause the direction of
the management and policies of each and any purchase of the Bonds through the
ownership of voting securities, by contract or otherwise (collectively called
the "Indemnified Parties"), against any and all losses, claims, damages,
liabilities or expenses whatsoever caused by such entity's failure to perform or
observe any of its obligations, agreements or covenants under the terms of this
Guarantor Continuing Disclosure Agreement, but only if and insofar as such
losses, claims, damages, liabilities or expenses are caused by any such failure
of the Guarantor to perform. In case any action shall be brought against the
Indemnified Parties based upon this Guarantor Continuing Disclosure Agreement
and in respect of which indemnity may be sought against the Guarantor, the
Indemnified Parties shall promptly notify the Guarantor in writing. Upon receipt
of such notification, the Guarantor shall promptly assume the defense of such
action, including the retention of counsel, the payment of all expenses in
connection with such action and the right to negotiate and settle any such
action on behalf of such party. Any Indemnified Party shall have the right to
employ separate counsel in any such action and to participate in the defense
thereof, but the fees and expenses of such counsel shall be at the expense of
such Indemnified Party unless the employment of such counsel has been
specifically authorized by the Guarantor or unless by reason of conflict of
interest determined by the written opinion of counsel to any such party, it is
advisable for such party to be represented by separate counsel, to be retained
by the Guarantor in which case the fees and expenses of such separate counsel
shall be borne by the Guarantor. The Authority shall not be liable for any
settlement of any such action effected without its written consent, but if
settled with the written consent of the Guarantor or if there be a final
judgment of the plaintiff in any such action with or without written consent,
the Guarantor agrees to indemnify and hold harmless the Indemnified Parties from
and against any loss or liability by reason of such settlement or judgment.
Nothing in this paragraph shall require or obligate the Guarantor to indemnify
or hold harmless the Indemnified
J-12
<PAGE>
Parties from or against any loss, claim, damage, liability or expense caused by
any negligence, recklessness or intentional misconduct of the Indemnified
Parties in connection with such entity's performance of its obligations,
agreements and covenants under this Guarantor Continuing Disclosure Agreement.
Section 4.4. Additional Information. Nothing in this Guarantor
Continuing Disclosure Agreement shall be deemed to prevent the Authority or the
Guarantor from (a) disseminating any other information, using the means of
dissemination set forth in this Guarantor Continuing Disclosure Agreement or any
other means of communication, or (b) including any other information in any
Guarantor Financial Statements or any Disclosure Event Notice, in addition to
that which is required by this Guarantor Continuing Disclosure Agreement. If the
Authority and the Guarantor choose to include any information in any Guarantor
Financial Statements or any Disclosure Event Notice in addition to that which is
specifically required by this Guarantor Continuing Disclosure Agreement, the
Authority and the Guarantor shall have no obligation under this Guarantor
Continuing Disclosure Agreement to update such information or include it in any
future Guarantor Financial Statements or any future Disclosure Event Notice.
Section 4.5. Notices. All notices required to be given or
authorized to be given by any party pursuant to this Guarantor Continuing
Disclosure Agreement shall be in writing and shall be sent by registered or
certified mail (as well as by facsimile, in the case of the Trustee) to, in the
case of the Authority, 101 Interchange Plaza, Cranbury, NJ 08512, Att: Chairman;
in the case of the Guarantor, 1500 Ronson Road, Iselin, New Jersey 08830 Att:
Chief Financial Officer; and in the case of the Trustee, its principal corporate
trust office at Amboy National Bank, 3590 Route 9 South, Old Bridge, New Jersey
08857, Att: Corporate Trust Department.
Section 4.6 Assignments. This Guarantor Continuing Disclosure
Agreement may not be assigned by any party without the consent of the others
and, as a condition to any such assignment, only upon the assumption in writing
of all of the obligations imposed upon such party by this Guarantor Continuing
Disclosure Agreement.
Section 4.7. Severability. If any provision of this Guarantor
Continuing Disclosure Agreement shall be held or deemed to be or shall, in fact,
be illegal, inoperative or unenforceable, the same shall not affect any other
provision or provisions herein contained or render the same invalid, inoperative
or unenforceable to any extent whatever.
Section 4.8. Execution of Counterparts. This Guarantor
Continuing Disclosure Agreement may be simultaneously executed in several
counterparts, each of which shall be an original and all of which shall
constitute but one and the same instrument. The parties hereto may sign the same
counterpart or each party hereto may sign a separate counterpart.
J-13
<PAGE>
Section 4.9. Amendments, Changes and Modifications.
(a) Except as otherwise provided in this Guarantor Continuing
Disclosure Agreement, subsequent to the initial issuance of the Bonds and prior
to their payment in full (or provision for payment thereof having been made in
accordance with the provisions of the Authority Series C Bond Resolution), this
Guarantor Continuing Disclosure Agreement may not be effectively amended,
changed, modified, altered or terminated without the written consent of the
Trustee.
(b) Without the consent of any Bondholders, the Authority, the
Guarantor and the Trustee at any time and from time to time may enter into any
amendments or modifications to this Guarantor Continuing Disclosure Agreement
for any of the following purposes:
(i) to add to covenants and agreements of the Authority
and the Guarantor hereunder for the benefit of the Bondholders,
or to surrender any right or power conferred upon the Authority
or the Guarantor by this Guarantor Continuing Disclosure
Agreement;
(ii) to modify the contents, presentation and format of
the Guarantor Financial Statements and Guarantor Data from time
to time to conform to changes in accounting or disclosure
principles or practices and legal requirements followed by or
applicable to the Authority and the Guarantor, or to reflect
changes in the identity, nature or status of the Authority or
the Guarantor or in the business, structure or operations of the
Authority or the Guarantor or any mergers, consolidations,
acquisitions or dispositions made by or affecting the Authority
or the Guarantor; provided that any such modification shall
comply with the requirements of Rule 15c2-12 as then in effect
at the time of such modification;
(iii) to cure any ambiguity, to correct or supplement
any provision hereof which may be inconsistent with any other
provision hereof, or to include any other provisions with
respect to matters or questions arising under this Guarantor
Continuing Disclosure Agreement which, in each case, comply with
Rule 15c2-12 as then in effect at the time of such modification;
or
(iv) to assure continued compliance with Rule 15c2-12
pursuant to the provisions of subsection 4.10 hereof,
provided, that prior to approving any such amendment or modification, the
Trustee and the Authority determine that such amendment or modification does not
adversely affect the interests of the Holders of the Bonds in any material
respect.
(c) Upon entering into any amendment or modification required or
permitted by this Guarantor Continuing Disclosure Agreement, the
J-14
<PAGE>
Dissemination Agent shall deliver to each of the Repositories written notice of
any such amendment or modification.
(d) The Authority and the Trustee shall be entitled to rely
exclusively upon an opinion of counsel nationally recognized as expert in
Federal securities law acceptable to the Authority to the effect that such
amendments or modifications comply with the conditions and provisions of this
Section 4.9.
Section 4.10. Amendments Required by Rule 15c2-12. The
Authority, the Guarantor and the Trustee each recognize that the provisions of
this Guarantor Continuing Disclosure Agreement are intended to enable the
Underwriter to comply with Rule 15c2-12. If, as a result of a change in Rule
15c2-12 or in the interpretation thereof, a change in this Guarantor Continuing
Disclosure Agreement shall be permitted or necessary to assure continued
compliance with Rule 15c2-12 and upon delivery by the Underwriter of an opinion
of counsel nationally recognized as expert in Federal securities law acceptable
to the Authority to the effect that such amendments shall be permitted or
necessary to assure continued compliance by the Underwriter with Rule 15c2-12 as
so amended or interpreted, then the Authority, the Guarantor and the Trustee
shall, amend this Guarantor Continuing Disclosure Agreement to comply with and
be bound by any such amendment to this Guarantor Continuing Disclosure Agreement
to the extent necessary or desirable to assure compliance with the provisions of
Rule 15c2-12 and provide the written notice of such amendment as required by
subsection 4.9(c) hereof.
Section 4.11. Miscellaneous. The Authority and the Underwriter
may rely upon the representation of the Guarantor hereunder in connection with
the issuance of the Bonds. The Guarantor covenants that it has never failed to
comply with any continuing disclosure obligation.
Section 4.12. Governing law. This Guarantor Continuing
Disclosure Agreement shall be governed exclusively by and construed in
accordance with the applicable laws of the United States of America and the
State of New Jersey.
Section 4.13. Termination of Continuing Disclosure Obligations.
The continuing obligation of the Authority and the Guarantor under Section 2.1
and 2.2, respectively, hereof to provide the Guarantor Financial Statements and
any Disclosure Event Notice, as applicable, and to comply with the other
requirements of said Section shall terminate if and when either (a) the Bonds
are no longer Outstanding in accordance with the terms of the Authority Series C
Bond Resolution or (b) the Authority and the Guarantor no longer remain an
"Obligated Person" (as defined in Rule 15c2-12(f)(10)) with respect to the Bonds
and in either event, only after the Authority delivers, or causes the
Dissemination Agent to deliver, to each of the Repositories written notice to
such effect.
J-15
<PAGE>
Section 4.13. Binding Effect. This Guarantor Continuing
Disclosure Agreement shall inure to the benefit of and shall be binding upon the
Authority, the Guarantor and the Trustee and their respective successor and
assigns.
J-16
<PAGE>
IN WITNESS WHEREOF, THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY,
THE MIDDLESEX WATER COMPANY AND _______________________, have caused this
Guarantor Continuing Disclosure Agreement to be executed in their respective
names as of the date first above written.
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
BY: ______________________________________
LEONARD J. ROSEMAN, CHAIRMAN
MIDDLESEX WATER COMPANY
BY: ______________________________________
J. RICHARD TOMPKINS, PRESIDENT AND
CHAIRMAN OF THE BOARD
AMBOY NATIONAL BANK, AS TRUSTEE
BY: ______________________________________
J-17
<PAGE>
SCHEDULE K
FORM OF GUARANTOR PERFORMANCE GUARANTY AGREEMENT
<PAGE>
DRAFT IV
11/17/98
GUARANTOR PERFORMANCE GUARANTY AGREEMENT
DATED AS OF _______ ___, 1998
K-1
<PAGE>
GUARANTOR PERFORMANCE GUARANTY AGREEMENT
THIS GUARANTOR PERFORMANCE GUARANTY AGREEMENT (the "Guarantor
Performance Guaranty Agreement") among MIDDLESEX WATER COMPANY (the
"Guarantor"), a __________ corporation, the CITY OF PERTH AMBOY, a public body
corporate and politic of the State of New Jersey (the "State"), the MIDDLESEX
COUNTY IMPROVEMENT AUTHORITY (the "Authority"), a public body corporate and
politic of the State and AMBOY NATIONAL BANK a state banking corporation, as
trustee (the "Trustee");
WITNESSETH
WHEREAS, the City and the Authority have entered into an
Agreement dated as of _________ ___, 1998 entitled "Agreement Between the City
of Perth Amboy, in the County of Middlesex, New Jersey, The Middlesex County
Improvement Authority and Utility Service Affiliates, Inc., a Subsidiary of
Middlesex Water Company for Operation, Maintenance and Management Services for
the City's Water System and Wastewater System" (the "Agreement") with Utility
Service Affiliates, Inc. (the "Company"), a subsidiary of the Guarantor for the
operation, maintenance and management and, in certain instances, improvement of
the City's wastewater and water system (the "System"); and
WHEREAS, the City and the Authority have required the Company
under the Agreement to provide this guaranty (the "Performance Guaranty") from
the Guarantor pursuant the Agreement; and
WHEREAS, the Guarantor acknowledges that the City and the
Authority would not enter into the Agreement unless the Guarantor provided this
Performance Guaranty and the Guarantor shall receive benefit because of the
Agreement; and
WHEREAS, the Guarantor is willing to provide such Performance
Guaranty;
NOW THEREFORE, as an inducement to the City and the Authority to
enter into the Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Guarantor agrees
as follows:
(1) The Guarantor hereby guarantees the full and prompt
performance by the Company of all the Company's obligations under the Agreement
when due (the "Obligations") in accordance with the terms and conditions
contained herein.
(2) The Guarantor further guarantees that in the event the
Company fails to duly and properly perform and satisfy when due any and
all of its Obligations under the Agreement, Guarantor shall, upon written demand
of the City, with notice to the Authority, setting forth the specific failure of
the Company, promptly perform and satisfy those Obligations set forth in such
demand.
K-2
<PAGE>
(3) The obligations of the Guarantor under this Performance
Guaranty (i) shall be absolute, irrevocable and unconditional under any and all
circumstances without regard to the genuineness, validity, legality or
enforceability of the Agreement (unless the City or the Authority, their
successors or assigns, assert any claim or defense based on any alleged
invalidity, illegality or unenforceability of the Agreement or any term thereof)
or of any term thereof, or lack of power or authority of any party (other than
the City or the Authority) to enter into the Agreement, or any substitution,
release or exchange of any other guaranty of or any security for the
Obligations, and irrespective of any other circumstances which might otherwise
constitute a legal or equitable discharge or defense of a surety or guarantor,
(ii) are in no way conditional upon any attempt to enforce performance or
compliance by the Company and (iii) shall remain in full force and effect until
the performance by the Company of all of its performance and payment Obligations
under the Agreement. This Performance Guaranty shall continue to be effective or
be automatically reinstated, as the case may be, if at any time any payment by
or on behalf of the Company or the Guarantor in respect of the Obligations is
rescinded or must otherwise be restored by the City or the Authority to the
Company or such Guarantor, as the case may be, or any assignee of the City or
the Authority for any reason whatsoever, including, but not limited to, any
proceedings in bankruptcy or reorganization, as though such payment had not been
made and the Guarantor agrees that it shall indemnify the City and the Authority
on demand for all costs and expenses (including, without limitation, fees and
expenses of counsel) incurred by the City and the Authority in connection with
any such rescission or restoration. Without limiting the generality of the
foregoing, the obligations of the Guarantor shall not be affected, reduced,
modified or impaired upon the happening from time to time of any of the
following events, whether or not with notice to or the consent of Guarantor:
(a) the failure to give notice to Guarantor of the
occurrence of a default by the Company under the terms and
provisions of the Agreement;
(b) the modification or amendment (in accordance with
the terms of the Agreement) (whether material or otherwise) of
any obligation, covenant or agreement set forth in the
Agreement;
(c) any failure, omission, delay by or lack on the part
of the City and the Authority to assert or exercise any right,
power or remedy conferred on the City or the Authority in the
Agreement or this Performance Guaranty;
(d) the voluntary or involuntary liquidation,
dissolution, sale or other disposition of all or substantially
all of the City's, the Authority's and/or the Company's assets,
the marshaling of the City's, the Authority's and/or the
Company's assets and liabilities, the receivership, insolvency,
bankruptcy, assignment for the benefit of creditors,
reorganization, arrangement, composition with creditors, or
K-3
<PAGE>
readjustments of, or other similar proceedings affecting the
City, the Authority and/or the Company or the Guarantor or any
of the assets of any of them;
(e) the assignment (in accordance with the terms of the
Agreement) of any right, title or interest of the City or the
Authority in the System or the Agreement to any other person,
including, without limitation, any person providing financing to
the City or the Authority and any entity purchasing an interest
in the System pursuant to a leverage lease or similar
arrangement; or
(f) any other cause or circumstance, foreseen or
unforeseen, whether similar or dissimilar to any of the
foregoing;
it being the intent of Guarantor that its obligations hereunder
shall not be discharged except by payment for and/or performance
of the Company's Obligations, and then only to the extent of
such payment or performance.
(4) Guarantor hereby waives diligence, presentment, demand of
payment, protest and all notices whatsoever, including, without limitation,
notice of (1) any alteration or modification of the Agreement, provided such
alteration or modification has been duly executed by the Company, (2) the City's
or the Authority's acceptance and reliance on this Performance Guaranty and (3)
notice of default or demand in the case of default, provided such notice or
demand has been given to or made upon the Company, and any requirement that the
City exhaust any right, power or remedy or proceed against the Company under the
Agreement or any other agreement or instrument referred to herein or therein or
against any other person under any other guarantee of, or security for, any of
the Obligations.
(5) If a demand, in accordance with Section 2 of this
Performance Guaranty, is made upon the Guarantor and the Guarantor duly and
properly performs the obligations of the Company set forth in the demand, then
(a) after satisfaction in full of all of the Obligations, the Guarantor shall be
subrogated to the rights of the Company against the City and the Authority, and
(b) the City and the Authority shall suspend the pursuit of any remedy against
the Company in respect of any such Obligations which have been fully satisfied
by Guarantor hereunder;
(6) The Guarantor hereby represents and warrants that:
(a) it is a corporation duly organized and existing
under the laws of the State of New Jersey and qualified to do
business therein; it is not in default under any provisions of
the laws of said state or under its certificate of
incorporation; it has corporate power under said laws and under
its certificate of incorporation to enter into and perform all
agreements on its part herein contained; it has, by proper
K-4
<PAGE>
corporate action, duly authorized the entering into and the
execution and delivery of this Performance Guaranty; and
entering into this Performance Guaranty and performance
hereunder is not an event of default or otherwise contrary to
any obligation by which it is bound; and this Performance
Guaranty has been duly and validly executed and delivered by the
Guarantor and constitutes its legal, valid and binding
obligation, enforceable in accordance with its terms (except as
such enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
rights of creditors of Guarantor generally); and
(b) there is no action or proceeding pending or
threatened against it before any court or administrative agency
that could reasonable adversely affect its ability to perform
its Obligations under this Performance Guaranty and all
authorizations, consents and approvals of governmental bodies or
agencies required in connection with the execution and delivery
of this Performance Guaranty or in connection with the
performance of its obligations hereunder have been obtained as
required hereunder or by law.
(7) This Performance Guaranty shall be governed by the laws of
the State of New Jersey, and the Guarantor hereby agrees to service of process
in the State of New Jersey for any claim or controversy arising out of this
Performance Guaranty or relating to any breach and to submit to the exclusive
jurisdiction of any court of competent jurisdiction in the State.
(8) This Performance Guaranty shall be binding upon and
enforceable against the Guarantor, its successors and assigns, and is for the
benefit of the City and the Authority, their successors, agents and assigns.
K-5
<PAGE>
IN WITNESS WHEREOF, the Guarantor, the City, the Authority and
the Trustee has executed this instrument the day and year first above written.
ATTEST: MIDDLESEX WATER COMPANY,
AS GUARANTOR
- --------------------------- -------------------------------
MARION REYNOLDS, VICE J. RICHARD TOMPKINS, PRESIDENT
PRESIDENT, TREASURER AND CHAIRMAN OF THE BOARD
AND SECRETARY
ATTEST: CITY OF PERTH AMBOY
- --------------------------- --------------------------------
ELAINE M. KICZULA, CLERK JOSEPH VAS, MAYOR
ATTEST: MIDDLESEX COUNTY IMPROVEMENT
AUTHORITY
- --------------------------- --------------------------------
RALPH MOCCI, SECRETARY LEONARD J. ROSEMAN, CHAIRMAN
ATTEST: AMBOY NATIONAL BANK,
AS TRUSTEE
By: _______________________ By: _______________________________
Name: _____________________ Name:______________________________
Title: ____________________ Title: ____________________________
K-6
<PAGE>
SCHEDULE L
INITIAL FACILITIES
The facilities currently comprising the water and wastewater
Systems of the City of Perth Amboy consist of the following:
5. Runyon Watershed, consisting of approximately 1,250 acres, 8
million gallons of water per day, treatment plant, two dams, a
recharge reservoir of 75 acres, production wells and piping;
6. A 40 million gallon covered roof reservoir on Florida Grove
Road in the City;
7. The Albert Street standpipe, the storage capacity of 1 million
gallons;
8. The Water Utility Distribution Maintenance Shop and Garage,
located on Smith Street in the City;
9. Two functioning Raritan River crossings, one currently in use
by the City, and one leased to the Middlesex Water Company;
10. Transmission pipelines, consisting of:
(a) A 16" main, approximately 12.5 miles long, serving
customers in the Township of Old Bridge and the
Borough of Sayreville;
(b) A 24" and a 30" transmission main, both of which
extend to the City a distance of approximately 8.5
miles
11. Approximately 59 miles of water distribution mains and a
similar amount of sewer collection mains, 700 fire hydrants
and 1100 sewer catch basins; and
12. The sewer system, consisting of 18 combined sewer out falls, a
main pumping station rated at 12.5 million gallons per day and
3 lift stations.
L-1
<PAGE>
<TABLE>
SCHEDULE M
LEASED EMPLOYEES
<CAPTION>
Date of
Title Name Hire Union
----- ---- ---- -----
<S> <C> <C> <C>
Director of PW/MU Jimenez, Luis 3/30/87 Management
Laborer Allen, Alfred 1/8/90 Blue Collar
Covington, Charles 7/15/91 Blue Collar
DeLeon, Pablo 11/16/97 Blue Collar
Fernandez, Benjamin 2/16/89 Blue Collar
Leon, Hector 10/20/97 Blue Collar
Rivera, William 8/19/95 Blue Collar
Vega, Jose 3/2/92 Blue Collar
Supervisor Water Aviles, Alberto 5/2/83 Blue Supv.
Zawisktowski, Joseph 9/27/71 Blue Supv.
Water Repairer Cruz, Catalino 1/21/85 Blue Collar
Deak, Alan 4/25/88 Blue Collar
Lund, Robert 4/20/89 Blue Collar
Mroczkowski, Kenneth 8/23/88 Blue Collar
Santiago, Mario 6/28/82 Blue Collar
Supv. Accountant David, Acela 11/23/87 Blue Collar
W Plant Operator Donnelly, Brian 6/8/88 Blue Collar
Chief Clerk Olexa, Rose Ann 10/1/79 White Supv.
Water Res Attend. Kurtz, Michael 11/22/76 Blue Collar
Rios, Andy 7/9/91 Blue Collar
Prin. Acct. Clerk Morales, Annette 1/28/85 White Collar
Prin. Water Shed Pejakovich, Danilo 10/29/73 Blue Supt.
SWT Plant Oper. Porcaro, Joseph 4/7/86 Blue Collar
Walters, Clynton 7/12/82 Blue Collar
Super WT Rep Rivera, Epifano 7/16/84 Blue Supv.
Meter Reader Burns, Thomas 3/11/85 Blue Collar
Meter Repairer Stek, Charles 10/15/74 Blue Collar
</TABLE>
M-1
<PAGE>
<TABLE>
<CAPTION>
Date of
Title Name Hire Union
----- ---- ---- -----
<S> <C> <C> <C>
Asst Watershed Supt Tanko, Leon 8/15/83 Blue Supt.
Equip. Operator Wild, Francis 8/4/86 Blue Collar
Cashier Ziembra, Dolores 7/15/91 White Collar
Sr. Clerk Typist Bergman, Gerd 8/19/95 White Collar
Laborer Bosques Jr., Pablo 5/16/83 Blue Collar
Filter Operator Cameron, Rodney 9/15/86 Blue Collar
Silva, Edwardo 4/1/85 Blue Collar
Equipment Operator Delibero, Vincent 9/14/81 Blue Collar
Super Main Repairer Diaz, Juventino 3/13/79 Blue Supv.
Pumping Station
Operator Febles, Guilermo 11/17/88 Blue Collar
Sewer Plant
Repairer Feliciano, Robert 11/23/81 Blue Collar
Sewer Plant
Operator Klempa, Gregory 12/14/82 Blue Collar
Super Sewer Maint LaRosa, Joseph 8/16/73 Blue Supv.
Sewer Superintendent Olexa, Michael 1/9/67 Blue Supt.
</TABLE>
The City agrees that it will not hire additional employees for positions
held by Leased Employees. Nothing shall prevent the City from transferring a
Leased Employee to a job not held by a Leased Employee and not covered by this
Agreement. Likewise, nothing shall prevent a Leased Employee from applying for
and accepting a transfer to a job not held by a Leased Employee and not covered
by this Agreement.
The discipline protocol for all Leased Employees shall be governed by the
applicable Civil Service Regulations and by the Collective Bargaining Agreements
in effect between the City and the Unions. The following disciplinary protocols
are currently in effect:
1. BLUE COLLAR UNION, AFSCME, LOCAL 2633
M-2
<PAGE>
ARTICLE 37
DISCIPLINE AND DISCHARGE
An employee may be disciplined or discharged for just cause. Employees
shall have the opportunity to be represented by the Union when such employees is
advised of disciplinary action being taken against him/her.
A copy of all disciplinary actions shall be sent to the Union President.
2. WHITE COLLAR UNION, AFSCME, LOCAL 2270
ARTICLE 36
DISCIPLINE AND DISCHARGE
An employee may be disciplined or discharged for just cause. Employees
shall have the opportunity to be represented by the Union when such employee is
advised of disciplinary or discharge action being taken against him or her.
3. BLUE COLLAR SUPERINTENDENTS UNION EMPLOYEES SERVICE UNION, LOCAL 702
ARTICLE 33
DISCIPLINE AND DISCHARGE
Employees may be disciplined or discharged for just case and shall have the
opportunity to be represented by the Union when advised of such disciplinary or
discharge action.
A copy of all disciplinary actions shall be sent to the Union
Representative.
4. BLUE COLLAR SUPERVISORS UNION, PUBLIC EMPLOYEES SERVICE UNION,
LOCAL 702
ARTICLE 33
DISCIPLINE AND DISCHARGE
An Employee may be disciplined or discharged for just cause. Employees
shall have the opportunity to be represented by the Union when such employee is
advised of disciplinary or discharge action being taken against him/her.
A copy of all disciplinary actions shall be sent to the Union
Representative.
M-3
<PAGE>
5. WHITE COLLAR SUPERVISORS UNION, PUBLIC EMPLOYEES SERVICE UNION,
LOCAL 702
ARTICLE 33
DISCIPLINE AND DISCHARGE
Employees may be disciplined or discharged for just cause and shall have
the opportunity to be represented by the Union when advised of such disciplinary
or discharge action. A copy of all disciplinary actions shall be sent to the
Union representative.
The City shall be responsible for notifying the Company promptly of any
changes in its applicable Collective Bargaining Agreements and/or discipline
protocols. The City shall also provide the Company with copies of all applicable
Collective Bargaining Agreements, any changes to said Agreements and/or
discipline protocols.
In the event a Leased Employee engages in conduct which, int he Company's
judgment, warrants, discipline, the Company shall promptly report such conduct
to the City. If after consultation between the Company and City, it is
determined by the Company that disciplinary action is warranted, the City will
administer the appropriate discipline in accordance with its obligations under
any applicable Collective Bargaining Agreement.
In the event a disciplinary incident warrants immediate action, the Company
is authorized to have any Leased Employee removed from the workplace until such
time that a final decision on disciplinary action can be made.
The City is solely responsible for determining and administering its own
discipline. In the event that any disciplinary action results in a Leased
Employee filing a grievance or arbitration, the City is solely responsible for
participating in and administering the grievance/arbitration. The Company agrees
to provide any reasonable support needed to assist the City in the
grievance/arbitration process.
M-4
<PAGE>
SCHEDULE N
MCUA FEES
CONTRACT
YEAR AMOUNT
-------- -----------
1 $1,700,000*
2 1,751,000
3 1,804,000
4 1,858,000
5 1,913,000
6 1,971,000
7 2,030,000
8 2,091,000
9 2,154,000
10 2,218,000
11 2,285,000
12 2,353,000
13 2,424,000
14 2,497,000
15 2,571,000
16 2,649,000
17 2,728,000
18 2,810,000
19 2,894,000
20 2,981,000
21 3,070,000*
- ----------
* Amount to be Prorated during a short first and last Contract Year.
N-1
<PAGE>
SCHEDULE O
NON-PROFIT FACILITIES
NAME LOCATION
------ ----------
1. Beth Israel Congregation 164 Jefferson Street
2. Bethel Christian Church 188 Hall Avenue
3. Christian Church Mt. Carmel-
Assembly of God 282 King Street
4. Church of God in Christ 361 High Street
5. Congregation Shaarey Tefiloh 15 Market Street
6. First Baptist Church of
Perth Amboy High & Market Streets
7. First Presbyterian Church of
Perth Amboy 250 High Street
8. Glad Tidings Assembly 463 Amboy Avenue
9. Grade Lutheran Church 600 New Brunswick Ave.
10. Holy Spirit Catholic Church 496 Penn Street
11. Holy Trinity Catholic Church 331 Kirkland Place
12. Hungarian Reformed Church 255 Goodwin Street
13. Jehovah's Witnesses 255 Goodwin Street
14. John Calvin Magyar Reformed Church 493 Amboy Avenue
15. Our Lady of Hungary Catholic Church 697 Cortland
16. Perth Amboy English S.D.A. Church 411 Neville Street
17. Perth Amboy Hungarian S.D.A. Church Alpine & Francis St.
18. Perth Amboy Spanish S.D.A. Church 258 State Street
19. St. Cyril & Methodist National
Catholic Church 598 Jacques Street
20. St. Demetrios Greek Orthodox Church Sadowski Pkwy & Wisteria
21. St. James A.M.E. Zion Church 68 Commerce Street
O-1
<PAGE>
NAME LOCATION
------ ----------
22. St. John's Firt Hungarian
Lutheran Church 662 Amboy Avenue
23. Deliverance Tabernacle Pulaski Ave. & State St.
24. Our Lady of Fatima Church 380 Smith Street
25. Iglesia Christian Bethel Church 197 Hall Avenue
26. Iglesia Pentecostal Cruz
Del Calvary 189 Gordon Street
27. Magyar S.D.A. Church 331 Kirkland Place
28. Magyar Reformed Church 145 Broad Street
29. St. John's Greek Catholic Church 145 Broad Street
30. St. Mary's Catholic Church 104 Center Street
31. St. Michael's Byzantine
Catholic Church 401 Hall Avenue
32. St. Nicholas Byzantine
Catholic Church 320 Washington Street
33. St. Paul's Evangelical
Reformed Church 68 Brighton Avenue
34. St. Paul's Evangelical
Reformed Church 231 Brighton Avenue
35. St. Peter's Episcopal Church 183 Rector Street
36. St. Spiridon Russian
Orthodox Church 649 Charles Street
37. St. Stephen's Chatholic Church 490 State Street
38. Second Baptist Church 101 Broad Street
39. Seventh Day Adventist
Spanish Church 260 State Street
40. Simpson United Methodist Church 331 High Street
41. Temple Baptist Church 495 Pfeiffer Blvd.
O-2
<PAGE>
NAME LOCATION
------ ----------
42. Temple Beth Mordecai 224 High Street
43. Ukrainian Catholic Church
of the Assumption 684 Alta Vista Place
44. Alpine Cemetery Amboy Avenue
45. St. Mary's Cemetery Amboy Avenue
46. St. Peter's Cemetery Kearney Avenue
47. St. Nicholas Cemetery Florida Grove Road
48. Ukrainian Cemetery Florida Grove Road
49. Jewish Cemetery Florida Grove Road
50. Italian Tripoli Club Johnstone Street
51. Elk's Lodge New Brunswick Avenue
52. P.R.A.H.D. First Street
53. V.F.W. Brace Avenue
54. American Legion Smith Street
55. Knights of Columbus High Street
O-3
<PAGE>
SCHEDULE P
ONGOING CAPITAL IMPROVEMENTS
A. WATER SYSTEM
1. Previously City authorized Water System capital improvements:
a. Ordinance #553-91 providing for acquisition of various equipment,
machinery and vehicles for the water utility, lagoon
modifications, and the construction and installation of
improvements to the water system, including a sludge handling
project and reservoir construction, together with other purposes
necessary, appurtenant or incidental thereto or therefor;
b. Ordinance #598-92 providing for the purchase and installation of
one pilot style meter on the 30" River Main Crossing, 2 butterfly
valves at Runyon Water Facility, a 1 MGD service pump, 2 high
efficiency motors on existing pumps at the South Amboy Booster
Station, the replacement of two booster pumps and the
refurbishment of the 16" Main at Runyon Water Facility, the
conversion to hypochlorite disinfectant and the environmental
disposal of primer, and the installation of various improvements
to the Standpipe Project, all such improvements for the City
Sewer Utility, together with other purposes necessary,
appurtenant or incidental thereto or therefor;
c. Ordinance #773-95 providing for improvements to the City's Water
Distribution System, including projects designed to increase
flows within the distributio system, eliminate dead ends,
increase the minimum size of the mains and reestablish the
control offered by the Alert Street standpipe, including all work
and materials necessary therefor and incidental thereto; and
P-1
<PAGE>
d. Ordinance #873-96 providing for the improvements to the Runyon
Water Treatment Plant, including the acquisition and installation
of water clarifiers, filters and a water tower, and also
including all work and materials necessary and incidental to the
water delivery system improvements.
e. Ordinance #947-98 providing for several improvements to (a)
Runyon Watershed deep run reservoir safe yield analysis; (b)
Runyon Water Treatment Plant engineering design and study; (c)
Maurer Road Water Distribution Project - construction of new
water supply main from State Street to supply point for Chevron
water service; (d) design and construction of Amboy Avenue -
Maurer Road water main loop; and (e) Runyon Treatment Plant
improvements.
2. Additional Capital Improvement Program:
a. Replacement of all meters within first three years of Agreement
and again 10 years from date of installation provided the City
consents to such additional meter acquisition; and
b. Improvements to upgrade the City's Water Distribution System
within first 5 years of Agreement.
B. WASTEWATER SYSTEM
1. Previously City authorized but unfunded Wastewater System Capital
Improvements:
a. Ordinance #394-85 providing for the acquisition, construction and
installation of the Marine Combined Sewer Overflow Abatement
System including the Budapest sewer separation, rehabilitation of
the State Street and Front Street Pump Stations, and
rehabilitations of diversion chambers and tidegate installations;
reconstruction of Second Street outfall; and Step 3 Program
consisting of sewer improvements, construction and furnishing
prefabricated 30 MGD pump
P-2
<PAGE>
station, main pump station construction and site improvements and
main pump station and force main meter pit;
b. Ordinance #439-87 providing for the various capital improvements
to the sewer utility consisting of, but not limited to, the
acquisition and installation of various items of equipment,
acquisition or motor vehicle (truck), and construction of sewers,
and anything incidentally relating thereto.
c. Ordinance #554-91 providing for the acquisition of various
equipment, machinery and vehicles for the sewer utility and the
installation of improvements to and the rehabilitation of
manholes, storm sewers and pumping stations, together with other
purposes necessary appurtenant or incidental thereto or therefor;
d. Ordinance #599-92 providing for various improvements to the Spa
Springs Brook Channel and to the drainage system pipes and
ditches at Discharge Point 901 at outer Smith Street, the removal
of underground tanks at Front Street and State Street Lift
Stations, the purchase and installation of a gas fired boiler and
surface fuel tank at the Main Pumping Station, the installation
of a pipe line connection with the State Street Sewer Line, the
installation of a separate storm sewer line at Herber Street and
Vincent Place, the replacement/repair of the storm discharge line
from the diversion chamber to the discharge head wall at
Discharge Point 007, Fayette Street and the replacement of an
underground pump station at the Amboy Avenue Lift Station,
together with other purposes necessary appurtenant or incidental
thereto or therefor;
e. Ordinance #723-94 providing engineering costs required to
eliminate dry weather overflows and solids/floatables reduction
from the City's Sewer System
P-3
<PAGE>
f. Ordinance #772-95 providing for construction of a new Amboy
Avenue force main to replace deteriorated main, from pump station
to Thomas Street; and replacement of slip lining of the Thomas
Street interceptor sewer, each including all work and materials
necessary therefor and incidental thereto; and
g. Ordinance #801-95 providing for the replacement of the motor of
the sewage pump at main pumping station with natural gas driven
motor in order to save energy costs, including all work and
materials necessary therefor and incidental thereto.
2. Additional Capital Improvement Program:
a. Improvements to the wastewater system to eliminate solids and
floatables;
b. Replace sewer main at the State Street S-turn in the vicinity of
High Street and Buckingham Avenue.
c. Silzer Avenue Sewer Improvements.
d. Improvements to the Amboy Avenue Pumping Station.
P-4
<PAGE>
SCHEDULE Q
OUTSTANDING CITY INDEBTEDNESS
1980 Sewer Improvement Bonds ..................................... $ 119,000
1988 Sewer Improvement Bonds ..................................... $ 460,000
1993 Sewer Improvement Bonds ..................................... $7,431,000
1993 Water Improvement Bonds ..................................... $3,832,000
Q-1
<PAGE>
SCHEDULE R
PERMITS
Permit Number Description
------------- -----------
#5006 NJDEP Water Allocation Permit
#0085472 NJDEP Water Discharge Permit
#1216001 NJDEP Water Operation Permit
R-1
<PAGE>
SCHEDULE S
DRAW PAPERS
Requisition No. ___
_________________________
_________________________
________________ ____ ___________
Attention: Corporate Trust Department
Re: The Middlesex County Improvement Authority
City of Perth Amboy Utility System Revenue Bonds
(Perth Amboy Franchise Acquisition Project) Series 1998B
--------------------------------------------------------
Dear Sirs:
Pursuant to (i) Section 7.6 of that certain "Agreement Between the City of
Perth Amboy, in the County of Middlesex, New Jersey, the Middlesex County
Improvement Authority and Utility Service Affiliates, Inc., a Subsidiary of
Middlesex Water Company for Operation, Maintenance and Management Services for
the City's Water System and Wastewater System" dated as of _______ ___, 1998
(the "Agreement") by and among The Middlesex County Improvement Authority (the
"Authority"), the City of Perth Amboy, New Jersey (the "City") and Utility
Service Affiliates, Inc.(the "Company"), a subsidiary of Middlesex Water
Company, and (ii) [Section ____ of the Authority's bond resolution entitled
"RESOLUTION AUTHORIZING THE ISSUANCE OF UTILITY SYSTEM REVENUE BONDS AND/OR
NOTES (PERTH AMBOY FRANCHISE ACQUISITION PROJECT) SERIES B OF THE MIDDLESEX
COUNTY IMPROVEMENT AUTHORITY", duly adopted by the Authority on __________ ___,
1998, as amended and supplemented, ________________, as Trustee for the holders
of the captioned bonds (the "Bonds"),] [Section __ of the revenue collection and
disbursement agreement dated as of ________ __, ____ among ___________, _______,
as System Trustee] is hereby requested to pay from moneys on deposit in the
[Project Fund] [Capital Improvement Fund] the sum of $_______________, which
amount shall be payable to
[___________________________________________________________________________ for
__________________________________________________ services]
[the Company for reimbursement of Costs previously paid by the Company to
_______________________________________________________________________ for
__________________________________________________ services]
incurred in connection with the acquisition, construction, renovation or
installation of the Capital Improvements described as follows:
S-1
<PAGE>
Such payment obligation has been properly incurred, is an item of the cost
of such Capital Improvements or portion thereof, is a proper charge against the
[Project Fund] [Capital Improvement Fund], and has not been the basis of any
previous withdrawal. Attached hereto is a bill, invoice, receipt or other
evidence that payment of the cost of the Capital Improvements or portion thereof
is due or has been paid by or on behalf of the Company.
Very truly yours,
UTILITY SERVICE AFFILIATES, INC.
Dated:__________
By:
----------------------------------
Authorized Officer
Approved by City:
By:
---------------------------------
Authorized Officer
Approved as to form by Authority:
By:
---------------------------------
Authorized Officer
S-2
<PAGE>
SCHEDULE T
RATES
Blended Annual
Year Percentage Increase
------ -------------------
1 0.00%
2 0.00%
3 1.10%
4 1.11%
5 1.13%
6 4.74%
7 4.75%
8 4.76%
9 4.77%
10 4.78%
11 4.79%
12 4.80%
13 4.81%
14 4.82%
15 4.83%
16 4.84%
17 4.85%
18 0.00%
19 0.00%
20 0.00%
T-1
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
CITY OF PERTH AMBOY
WATER AND SEWER PRIVATIZATION INITIATIVE
- ------------------------------------------------------------------------------------------------------------------------------------
SUMMARY OF RATE INCREASES
- ------------------------------------------------------------------------------------------------------------------------------------
Water Meters Sewer Meters
- ------------------------------------------------------------------------------------------------------------------------------------
Year 5/8" 3/4" 1" 1 1/2" 2" 3" 4" 6" 8" 10" Residential Commercial Industrial Monitoring Fees
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
2 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
3 0.00% 0.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 0.00% 2.50% 2.50% 2.50%
- ----------------------------------------------------------------------------------------------------------------------------------
4 0.00% 0.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 0.00% 2.50% 2.50% 2.50%
- ----------------------------------------------------------------------------------------------------------------------------------
5 0.00% 0.00% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 2.50% 0.00% 2.50% 2.50% 2.50%
- ----------------------------------------------------------------------------------------------------------------------------------
6 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
7 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
8 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
9 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
10 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
11 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
12 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
13 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
14 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
15 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
16 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
17 4.00% 4.00% 4.00% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 5.75% 4.00% 5.75% 5.75% 5.75%
- ----------------------------------------------------------------------------------------------------------------------------------
18 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
19 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
20 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%
- ----------------------------------------------------------------------------------------------------------------------------------
T-2
</TABLE>
<PAGE>
SCHEDULE U
DESCRIPTION OF WASTEWATER SYSTEM
The City operates a combined sewer collection system, consisting of
approximately 59 miles of sewer mains as more fully described in Schedule D. It
also consists of 1,100 storm water catch basins and 18 storm water out falls.
The City maintains 3 lift stations and a main pumping station located on Second
Street, at Sadowski Parkway, which is rated at 12.5 million gallons per day and
which pumps City sewerage to the Middlesex County Utility Authority's Sayreville
Treatment Plant for final disposition.
U-1
<PAGE>
SCHEDULE V
DESCRIPTION OF CITY'S WATER SYSTEM
The Perth Amboy Water system consists of approximately 59 miles of City
distribution mains with 8.5 miles of transmission pipelines with a permit
capacity of 8 million gallons per day located in the Runyon Watershed, primarily
in the Township of Old Bridge, with facilities more specifically described in
Schedule D.
V-1
<PAGE>
SCHEDULE W
CERTIFICATE OF COMPLETION AND ACCEPTANCE
The undersigned, being an Authorized Representative of the Utility Service
Affiliates, Inc. (the "Company"), a subsidiary of Middlesex Water Company, under
that certain "Agreement Between the City of Perth Amboy, in the County of
Middlesex, New Jersey, The Middlesex County Improvement Authority and Utility
Service Affiliates, Inc., a Subsidiary of Middlesex Water Company for Operation,
Maintenance and Management Services for the City's Water System and Wastewater
System" dated as of ________ __, 1998 (the "Agreement") by and among the
Company, The Middlesex County Improvement Authority (the "Authority") and the
City of Perth Amboy, New Jersey (the "City"), HEREBY CERTIFY on behalf of the
Company in connection with the Ongoing Capital Improvement described on Schedule
A attached hereto to be acquired, constructed, renovated and installed under the
Agreement, that such Ongoing Capital Improvements has been acquired,
constructed, renovated and installed pursuant to and in accordance with said
Agreement, and have been accepted by the Company and are now available for use
by the Company in accordance with the terms of the Agreement and the Authority
Series B Bond Resolution (as defined in the Agreement).
[The proceeds in the Project Fund previously available for draws made under
the Agreement have been fully disbursed for costs of the Ongoing Capital
Improvements.]
[Moneys remain on deposit in the Project Fund created under the Authority
Series B Bond Resolution after payment of all Ongoing Capital Improvements.
Attached hereto is a schedule indicating when and how much of the remaining
moneys are to be applied as stated in the Authority Series B Bond Resolution.]
UTILITY SERVICE AFFILIATES, INC.
Dated:__________
By:
----------------------------------
Authorized Officer
Approved by City:
By:
---------------------------------
Authorized Officer
W-1
<PAGE>
Approved as to form only (without
any representations or warranty
with respect to the costs)
THE MIDDLESEX COUNTY IMPROVEMENT AUTHORITY
By: ------------------------------
Authorized Officer
DATED: _________________
W-2
<PAGE>
SCHEDULE X
MINIMUM VARIABLE FRANCHISE FEE
Contract
Year Amount
-------- ---------
1 $130,457*
2 394,367
3 604,782
4 679,496
5 418,806
6 225,394
7 99,420
8 581,950
9 483,651
10 661,141
11 794,083
12 687,718
13 882,996
14 950,343
15 968,825
16 872,795
17 875,313
18 792,310
19 621,386
20 358,843
21 349,900*
- ----------
* Prorated for the first and twenty first Contract Years.
X-1
<PAGE>
SCHEDULE Y
VEHICLES AND EQUIPMENT
<PAGE>
SCHEDULE Y
VEHICLES AND EQUIPMENT
A. WATER VEHICLES
1991 Chevy Utility Truck Odom Reading-009269 5,000.00
VIN-1GBJR33K2MF306486
1993 Ford 150 P/U Odom Reading-33404 4,000.00
VIN-2FTEF15YOPCA73980
1987 GMC Siera 2500 Utility Truck Odom Reading-30012 1,000.00
VIN-GTFR24Z3HF720955
1986 GMC Sierra Dump Odom Reading-022413 2,500.00
VIN-1GDL7D1BXGV506931
1989 Ford F Series Dump Odom Reading-22983 6,500.00
VIN-2FDLF47GOKCA75729
1983 GMC 7000 Dump Odom Reading-15137 5,000.00
VIN-GDM7D1E5DV531584
1987 John Deere 210C Front End Loader w/Backhoe 14,500.00
SER-T0210CA739719
1986 GMC Sierra 2500 Utility Truck Odom Reading-71531 3,000.00
VIN-2GTEC24N9G1526429
1993 Chevy 4x4 Odom Reading-24084 4,000.00
VIN-1GNCT18WXP0153702
1987 GMC Stake Body Odom Reading-39763 2,500.00
VIN-1GDHR34N7HS518778
1992 Chevy 4x4 3,250.00
VIN-1GNCT18W9N0158936
1990 Hyster Forklift 5,500.00
SER-DFD4895V
Y-1
<PAGE>
1980 Ford F800 Dump Cap. 5-6 Odom Reading-31967 2,000.00
VIN-F82KVJJ8609
1993 Melrose Bobcat Front End Loader 7,500.00
SER-510125817
1993 Case Front End Loader 621B 25,000.00
SER-SER-JAKC028020
John Deere 310A Front End Loader w/Backhoe 2,500.00
SER-346335T
1992 Chevy 4x4 Odom Reading-068466 4,000.00
VIN-1GNCT18W3N0158706
1993 Chevy Van Odom Reading-12087 3,500.00
VIN-2GCEG25Z8P4143683
Subtotal Water Vehicles: $101,250.00
- ----------------------- -----------
B. WATER VEHICLES LEASED FROM MCIA
1996 Ford Explorer
VIN-1FMCU2YXXTUD26823
John Deere 310E Front End Loader w/Backhoe
SER-T0310EX834714
C. WASTEWATER VEHICLES
1998 Ford 250 Truck Odom Reading-62848 1,500.00
VIN-2FDHF27Y3FCA93232
1992 Chevy Van Odom Reading-013501 5,000.00
VIN-2GCEG255Z7N4154848
1992 Ford L8000 Sewer Vacuum Truck Odom Reading--16595 25,000.00
VIN-1FDYR82A2NVA07566
1985 Ford 800 Truck Odom Reading--029145 7,500.00
VIN-1FDXK84N1FVA32783
Y-2
<PAGE>
1988 Dodge Wagon 4x4 Odom Reading-39683 3,000.00
VIN-3B4GW02Y4JM839502
1993 Ford P/U Odom Reading-29989 7,500.00
VIN-1FTEF15Y8PNA66866
1985 Ford Dump Odom Reading-36567 1,000.00
VIN-DKF37GOFCA1422
1990 GMC Vandura 3500 Odom Reading-001736 7,000.00
VIN-2GDHG31K3M4501324
Subtotal Wastewater Vehicles: $57,500.00
- ---------------------------- ----------
D. WASTEWATER VEHICLES LEASED FROM MCIA
1996 Ford F350 Odom Reading-8669
VIN-1FDJW35H1TEB29872
1995 Ford F350 Dump Odom Reading-9951
VIN-2FDKF38G33SCA51266
1995 Ford Truck w/IMT 2200Ser Boom Crane & Dump Odom Reading-17722
VIN-1FDLF47G7SEA50661
VEHICLE VALUE RECAP:
WATER VEHICLES $101,250.00
WASTEWATER VEHICLES $ 57,500.00
TOTAL $158,750.00
Y-3
<PAGE>
PETER COSTANZO
- --------------------------------------------------------------------------------
auctioneers inc.
FURNITURE & ELECTRONICS
EXECUTIVE DESK 100.00
IBM 433 SX/S COMPUTER 250.00
XEROX COPY MACHINE W/ DOCUMENT FEEDER 1,250.00
---------
METAL DESKS W/ RETURNS [email protected] 130.00
IBM TYPEWRITER 75.00
DRAFTING TABLE 150.00
UTILITY CABINET WOOD 50.00
LOT-CABINET PARTS 75.00
SHELVING UNIT 75.00
WOOD DP DESKS [email protected] 150.00
4DR FILE CABINETS [email protected] 300.00
WORKBENCHES [email protected] 225.00
6DR FILE CABINET 75.00
UTILITY CABINET METAL [email protected] 300.00
WORK BENCH 75.00
UTILITY CABINETS W/ SINK [email protected] 225.00
---------
$3,505.00
Y-4
<PAGE>
PETER COSTANZO
- --------------------------------------------------------------------------------
auctioneers inc.
UTILITY DESK 75.00
PACKARD BELL COMPUTER & MONITOR 350.00
IBM TYPEWRITER [email protected] 150.00
WELBUILT STOVE 200.00
IBM SELECT II TYPEWRITER 100.00
MONROE COPY MACHINE 200.00
METAL MICA DESKS W/ RETURNS [email protected] 150.00
DRAFTING TABLE 150.00
MULTIPLE DRAWER FLAT FILE [email protected] 300.00
4DR FILE CABINETS [email protected] 350.00
AIR CONDITIONERS [email protected] 150.00
WOOD DESKS W/ RETURNS [email protected] 375.00
WOOD 2 DR LATTERAL [email protected] 250.00
STORAGE UNIT W/ COUNTER TOP [email protected] 150.00
IBM TERMINAL COMPUTER MONITORS [email protected] 200.00
IBM MAINFRAME 500.00
---------
IBM SELECTRIC II 100.00
3DR LATTERAL [email protected] 270.00
SENTRY SAFE [email protected] 250.00
IBM TYPEWRITER 75.00
LOT-BURSTER FORMS 150.00
RECEPTION COUNTER 100.00
OMRON PRINTER 50.00
I-0 TERMINAL COMPUTER MONITOR [email protected] 150.00
---------
TOTAL FURNITURE & ELECTRONICS 8,300.00
Y-5
<PAGE>
December 7, 1998
MOBILE RADIOS
-------------
Motorola Mobile Radios 15 Units
Motorola Station Base
Motorola Walkie Talkies 3 Units
Midland Mobile Radio
Midland Walkie Talkies 2 Units
There were other radios located in vehicles not on supplied list
TOTAL MOBILE RADIOS 7,500.00
COMPRESSOR
----------
1993 INGERSOLL-RAND COMPRESSOR ON TRAILER 4,500.00
Ser - 218092UJC309
1987 INGERSOLL-RAND COMPRESSOR ON TRAILER 3,750.00
Ser - 15986OU7923
1980 INGERSOLL-RAND COMPRESSOR ON TRAILER 1,500.00
Ser - 115441U480919
TOTAL COMPRESSORS 9,750.00
Y-6
<PAGE>
TOOLS AND EQUIPMENT
-------------------
CHE WATER PUMP 200.00
WHEELER PIPE CUTTER 100.00
GREASE PUMP 50.00
PLOW ATTACHMENT - MEYER 750.00
CHE WATER PUMP 200.00
GORDON RUPP WATER PUMP 200.00
HOMELITE WATER PUMP 200.00
WHEELER PIPE CUTTER 100.00
JACK HAMMER 350.00
JACK HAMMER 250.00
RIDGID 535 PIPE THREADER 1000.00
CP JACK HAMMER 350.00
CP JACK HAMMER 350.00
GORDON RUPP WATER PUMP 250.00
GORDON RUPP WATER PUMP 250.00
GREASE PUMP 50.00
METROTECH PIPE LOCATOR 175.00
TOLEDO VALVE CONTROL 75.00
MAQSAND BLASTER 1000.00
BLACKHAWK BENCH GRINDER 100.00
GYM LOCKERS (15) 100.00
INGERSOLL-RAND JACK HAMMER 350.00
Y-7
<PAGE>
HOMELITE PIPE CUTTER 150.00
BINKS STATIONARY AIR COMPRESSOR 350.00
PUBLIC SAFETY LIGHT BAR 50.00
SPEED AIRE STATIONARY AIR COMPRESSOR 350.00
LINCOLN ARC WELDER 375.00
WALKER TURNER DRILL PRESS 150.00
STANLEY BENCH GRINDER 100.00
HEIN WERNER FLOOR JACK 275.00
GYM LOCKERS (17) 100.00
HOMELITE PIPE CUTTER 200.00
MILWAUKEE CUT OFF SAW 75.00
MILWAUKEE HAMMER DRILL 100.00
HOMELITE CHAINSAW 100.00
CARRIER AIR CONDITIONER 50.00
GORMAN RUPP WATER PUMP 2,000.00
FORD MOWER ATTACHMENT 300.00
FORD MOWER ATTACHMENT 300.00
CRAFTSMAN RIDER MOWER 250.00
KENDALL GREASE PUMP 50.00
DAYTON POWER WASHER 250.00
BENNETT FUEL PUMP 200.00
RIDGID PIPE VISE 100.00
DAYTON METER PUMP 300.00
Y-8
<PAGE>
VANGUARD METER PUMP 200.00
VANGUARD METER PUMP 200.00
CHE WATER PUMP 200.00
HOMELITE PORTABLE GENERATOR 350.00
TOTAL TOOLS AND EQUPMENT $14,075.00
Y-9
<PAGE>
SCHEDULE Z
AMENDMENT TO A PIPELINE LEASE AGREEMENT
BETWEEN MIDDLESEX WATER COMPANY
AND
THE CITY OF PERTH AMBOY
DATED AS OF __________, ____
This Agreement (hereinafter referred to as the "First Amendment") made
this ____ day of _______, 1998 between Middlesex Water Company, a corporation
and public utility, organized under the laws of the State of New Jersey, having
its principal office at 1500 Ronson Road, Iselin, New Jersey 08830 (thereinafter
referred to as "Middlesex" or "Tenant") and the City of Perth Amboy, a municipal
corporation having its principal office at Perth Amboy City Hall, High Street,
Perth Amboy, New Jersey (hereinafter referred to as the "City").
BACKGROUND
WHEREAS, Middlesex and the City have an agreement for the lease by the
City to Middlesex of water transmission lines and appurtenances, dated as of
January 9, 1987 ("lease Agreement") and have agreed to amend that Lease
Agreement; and
WHEREAS, there is currently pending in the Superior Court of New Jersey,
Law Division, Middlesex County, a certain lawsuit entitled "Chevron USA, Inc.
and Middlesex Water Company v. City of Perth Amboy, et al.", Docket No.
L-2747-93, in which Middlesex is a plaintiff (hereinafter referred to as
"Lawsuit"); and
WHEREAS, there are currently pending before the New Jersey Board of Public
Utilities ("BPU") two administrative proceedings instituted by Middlesex
entitled "Middlesex Water Co. v. City of Perth Amboy", Docket No. BPUWE9310042
(Administrative Proceeding No. 12), and "In the Matter of the Petition of
Middlesex Water Company for Approval of a Municipal Consent to Serve Certain
Customers in Perth Amboy", Docket No. WE97100783 (Administrative Proceeding No.
2); and
WHEREAS, the City and Middlesex have agreed to resolve the Lawsuit and the
Administrative Proceedings on terms set forth in the Settlement Agreement
annexed hereto, such terms to amend the Lease Agreement; and
WHEREAS, the City and Middlesex (through a subsidiary) have agreed to
enter into an agreement for operation, maintenance and management services for
the City's water system and wastewater system ("Service Agreement"), which
Service Agreement has been submitted to the BPU for approval; and
Z-1
<PAGE>
WHEREAS, the terms of the settlement of the litigation, including this
First Amendment to the Lease Agreement, are intended to be conditioned upon
execution of the Service Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
1. The Lease Agreement is hereby amended by adding the following
provision.
In addition to other rights of Tenant, as set forth in this Lease
Agreement and the Service Agreement, Tenant shall have the right to
purchase for the sum of $500,000 the Demised Premises and System
including the right to use any and all easements and/or rights-of-way,
including rights in public streets, all as described in Exhibit A
annexed to this Lease Agreement. Thus, such right may be exercised
between July 1, 2011 and June 30, 2012.
2. Except as modified by this First Amendment, the Lease Agreement shall
remain in effect and unchanged.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
MIDDLESEX WATER COMPANY
ATTEST:
By:
----------------------------------
- ---------------------------------- J. Richard Tompkins
Marion F. Reynolds Chairman of the Board
Vice President, Secretary and President
and Treasurer
CITY OF PERTH AMBOY
ATTEST:
By:
----------------------------------
- ---------------------------------- Joseph Vas, Mayor
Elaine M. Kiczula, Clerk
Z-2
<PAGE>
SCHEDULE AA
ASSIGNMENT AND ACKNOWLEDGMENT
AA-1
<PAGE>
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT dated ____________, 1999 executed and delivered by Utility
Service Affiliates, Inc., a New Jersey corporation ("Assignor") for ten dollars
and other good and valuable consideration (receipt of which is hereby
acknowledged) evidences and effects the absolute and irrevocable assignment to
Utility Service Affiliates (Perth Amboy), Inc., a New Jersey corporation (the
"Assignee") of all the right, title and interest of Assignor in and under that
certain Agreement Between the City of Perth Amboy, in the County of Middlesex,
New Jersey, the Middlesex County Improvement Authority and Utility Service
Affiliates, Inc., a subsidiary of Middlesex Water Company, for Operation,
Maintenance and Management Services for the City's Water System and Wastewater
System (the "Operating Agreement"), and in and under the Revenue Agreement (as
defined in the Operating Agreement).
IN WITNESSETH WHEREOF, Assignor has caused thereto its duly authorized
officers to set his hand and affix its seal this ______ day of ______, 199__.
UTILITY SERVICE AFFILIATES, INC.
By:
----------------------------------
J. Richard Tompkins, President
STATE OF NEW JERSEY )
COUNTY OF )
On the __________ day of _________________, 199__, before me personally
came J. Richard Tompkins, President, to me known, who, being by me duly sworn,
did depose and say that he resides at __________________; that he is the
President of Utility Service Affiliates, Inc., the corporation described in and
which executed the foregoing instrument; that he knows the seal of said
corporation; that the seal affixed to said instrument in such corporate seal;
that it was so affixed by order of the board of directors of said corporation
and that he signed his name thereto by like order.
----------------------------------
- -----------------------------
Commission Expiry Date
AA-2
<PAGE>
THIS ACCEPTANCE of Assignment by Assignee hereby evidences and accepts the
above Assignment by Assignor and further evidences Assignee's undertaking to
discharge all duties and obligations and to receive all benefits and emoluments
as the assignee of Assignor in and under the Operating Agreement and the Revenue
Agreement.
IN WITNESS WHEREOF, Assignee has caused its thereto duly authorized
officer to set his hand and affix its deal this _____ day of _______, 199__.
UTILITY SERVICE AFFILIATES
(PERTH AMBOY), INC.
By:
----------------------------------
J. Richard Tompkins, President
STATE OF NEW JERSEY )
COUNTY OF )
On the ______ day of __________, 199__, before me personally came J.
Richard Tompkins, President, to me known, who, being by me duly sworn, did
depose and say that he resides at _____________; that he is the President of
Utility Service Affiliates, Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation and that he
signed his name thereto by like order.
----------------------------------
- -----------------------------
Commission Expiry Date
AA-3
<PAGE>
SCHEDULE BB
SETTLEMENT AGREEMENT
BB-1
<PAGE>
SETTLEMENT AGREEMENT
THIS AGREEMENT, made this 8th day of December, 1998, by and between THE
CITY OF PERTH AMBOY (hereinafter referred to as "City") and MIDDLESEX WATER
COMPANY, a public utility corporation of the State of New Jersey, with offices
at 1500 Ronson Road, Iselin, New Jersey 08830 (hereinafter referred to as
"Middlesex").
WITNESSETH:
WHEREAS, Middlesex and the City have been engaged in negotiations
concerning a proposed "Service Agreement" under which Middlesex, through a
subsidiary, will be retained to operate, manage and maintain the City's water
and wastewater systems on the terms and conditions to be set forth in said
Agreement;
WHEREAS, there is currently pending in the Superior Court of New Jersey,
Law Division Middlesex County, a certain lawsuit entitled "Chevron USA, Inc. and
Middlesex Water Company v. City of Perth Amboy, et al." Docket No. L-2747-93, in
which Middlesex is a plaintiff (hereinafter referred to as "Lawsuit");
WHEREAS, the Lawsuit involves various claims by Middlesex against the City
for monetary damages;
WHEREAS, there are currently pending before the New Jersey Board of Public
Utilities ("BPU") two administrative proceedings instituted by Middlesex
"Middlesex Water Co. v. City of Perth Amboy", Docket No. BPUWE9310042
(Administrative Proceeding No. 1), and "In the Matter of the Petition of
Middlesex Water Company for Approval of a Municipal Consent to Serve Certain
CUstomers in Perth Amboy", Docket No. WE97100783 (Administrative Proceeding No.
2);
WHEREAS, Administrative Proceeding No. 1 arises out of a petition by
Middlesex to
<PAGE>
the BPU for a determination that it has a lawful right to serve a facility in
Perth Amboy owned and operated by Chevron and that Municipal consent authorizing
it to do so was conferred by the City;
WHEREAS, the BPU issued a Decision and Order in Administrative Proceeding
No. 1 on July 30, 1997, holding that Middlesex had lawful authority to serve the
Chevron USA Inc. (Chevron) facility, but remanding the matter to the Office of
Administrative Law ("OAL") for a determination as to the duration and
exclusivity of such authority;
WHEREAS, the remand is presently pending before the OAL, and no
determination has yet been rendered on the issues forming the subject matter of
the remand;
WHEREAS, Administrative Proceeding No. 2 arises out of a petition by
Middlesex to the BPU for authorization to serve certain other customers in the
City of Perth Amboy pursuant to consents granted by the City;
WHEREAS, in the context of their discussions concerning the "Service
Agreement", the parties hereto believe it would be desirable for the lawsuit to
be dismissed and for the two administrative proceedings to be amicably resolved
in the manner set forth herein without the necessity of further adversarial
proceedings;
WHEREAS, the City, as an inducement to Middlesex to dismiss the lawsuit,
and as an integral part of the consideration for such dismissal, has agreed to
adopt appropriate ordinances or resolutions formally granting Middlesex consent
to serve the Chevron facility at issue in Administrative Proceeding No. 1 and
consent to serve the various Perth Amboy customers identified in Administrative
Proceeding No. 2;
WHEREAS, The City has also agreed as an integral part of the consideration
for
2
<PAGE>
Middlesex's agreement to dismiss the lawsuit, to enter into an amendment to
a certain "Pipeline Lease Agreement" with Middlesex dated January 9, 1987, so as
to grant Middlesex the right, upon the terms, conditions and price specified in
said amendment, to purchase the water transmission lines and appurtenances
described in and forming the subject matter of said "Pipeline Lease Agreement";
NOW THEREFORE, for and in consideration of the mutual covenants and
agreements of the parties and for One Dollar and other good and valuable
consideration, it is hereby agreed as follows:
1. The City shall adopt appropriate ordinances or resolutions that,
consistent with the terms of this Settlement Agreement, formally grant and
invest Middlesex with consent to furnish water service to the Chevron facility
in the City of Perth Amboy which is the subject to Administrative Proceeding No.
1, as well as the specific geographic areas within the City of Perth Amboy
occupied by the customers served by Middlesex which are the subject of
Administrative Proceeding No. 2 (the "Other Perth Amboy Customers").
2. It is agreed and understood that before any ordinance or resolution
adopted by the City can lawfully constitute a valid franchise, that BPU approval
of such ordinance must be obtained. The City shall fully cooperate with
Middlesex in connection with any further proceedings before the BPU seeking
approval of the subject ordinances or resolutions. Consistent therewith,
Middlesex shall simultaneously seek approval of City's consents. The parties
agree that the franchise rights granted Middlesex to provide service in the City
of Perth Amboy shall, upon BPU approval, solely derive from and be governed by
this settlement agreement and the municipal consent provided for herein without
reference to the BPU Decision
3
<PAGE>
and Order 0f July 30, 1997 and that this settlement agreement, that consent and
the BPU approval of such consent shall supercede that Decision and Order.
3. It is further agreed and understood that the municipal consents to be
embodied in the ordinances or resolutions shall expressly grant Middlesex the
City's consent to serve the specific areas within Perth Amboy occupied by
Chevron and the Other Perth Amboy Customers and that the rights conferred by the
municipal consent shall terminate as to any properties served by Middlesex now
developed for industrial use, upon re-development of such properties for
residential use, commercial use or other type of industrial use substantially
different from its present use and as to any properties now developed for
commercial use upon redevelopment of such properties for industrial or
residential use.
4. The City and Middlesex acknowledge and agree that: a) Chevron has agreed
to purchase forty percent of Chevron's total annual water supply needs,
consistent with a certain "Stipulation of Settlement" between the City and
Chevron dated August 21, 1996, which are incorporated herein by reference, b)
such agreement the City and Chevron is lawful and enforceable, and c) Middlesex
shall not interfere with agreement.
5. The City further agrees that consistent with the "Stipulation of
Settlement", the City shall not compel or induce Chevron to increase its water
purchases from the City to a level in excess of 40% of its annual water needs
through the use of its municipal powers (other than operation of its water
utility) by offering Chevron benefits such as tax relief or abatements, but this
shall not limit the City in enacting future lawful water rate schedules provided
that, the rates applicable to Chevron are uniformly applicable to relatively
high volume industrial use customers in the same rate class. It is agreed and
understood that the City shall consent to
4
<PAGE>
Middlesex having the authority to supply Chevron up to that sixty percent of its
annual water requirements and that upon BPU approval of such consent, Middlesex
is free to sell said 60% of Chevron's water requirements to Chevron pursuant to
that authorization.
6. In addition to all of the foregoing obligations of the City under this
Agreement, and in connection with the Service Agreement (which has been
submitted the BPU for approval), the City shall also execute an amendment to a
certain "Pipeline Lease Agreement" dated January 9, 1987, in conformity with
Exhibit A, annexed hereto and made part hereof, so as to grant Middlesex the
right to purchase, upon the terms, conditions and the price set forth therein,
the water transmission line and appurtenances forming the subject matter of the
aforesaid "Pipeline lease Agreement".
7. In consideration for the City's agreement and undertaking to adopt the
ordinances or resolutions referred to herein and to execute the amendment to the
"Pipeline Lease Agreement", Middlesex agrees to dismiss the lawsuit pending
before the Middlesex County Superior Court with prejudice and to amend the
petitions filed in the two administrative proceedings for the purpose of seeking
BPU approval of the ordinances or resolutions to be adopted by the City
hereunder in lieu of the affirmative relief previously requested in the two
administrative proceedings and in lieu of the authority granted by the BPU
Decision and Order in Administrative Proceeding Number 1, dated July 30, 1997.
8. It is agreed and understood, however, that the dismissal of the lawsuit
is expressly contingent upon: (a) the City having first adopted appropriate
municipal resolutions or ordinances consistent with the Settlement Agreement
formally consenting to Middlesex's provision of water service to Chevron and the
Other Perth Amboy Customers; (b) the City's
5
<PAGE>
execution of the amendment to the "Pipeline Lease Agreement"; (c) the execution
by both parties of the "Service Agreement"; and (d) formal ratification of all
the foregoing by the City Council of the City of Perth Amboy. All actions listed
in this paragraph may be contingent upon Middlesex's dismissal of the lawsuit
pending before the Middlesex County Superior Court with prejudice, and the BPU
terminating Administrative Proceeding Number 1 and Administrative Proceeding 2
in a manner consistent herewith. The City shall, upon request provide written
confirmation of the completion of contingencies listed herein.
9. In the event that any of the forgoing conditions have not been
satisfied, Middlesex shall have no obligation to dismiss the Superior Court
lawsuit.
10. This Settlement Agreement shall be privileged, null and void and of no
force and effect unless the terms and conditions subject to the BPU's
jurisdiction and the municipal consents anticipated therein are approved in
their entirety and without modification or condition, other than requirements of
ministerial acts such as provision of information, by the BPU, and all
contingencies are fully satisfied.
11. The Agreement shall be construed in accordance with the law of the
State of New Jersey.
IN WITNESS WHEREOF, the parties hereto have caused this document to be
signed by their properly authorized corporate officers and caused their proper
corporate seals to be affixed hereto, the date and year first above written.
6
<PAGE>
ATTEST: CITY OF PERTH AMBOY
By:
- -------------------------------- ------------------------------
ATTEST: MIDDLESEX WATER COMPANY
By:
- ----------------------------- ------------------------------
7
<PAGE>
EXHIBIT A
<PAGE>
AMENDMENT TO A PIPELINE LEASE AGREEMENT
BETWEEN MIDDLESEX WATER COMPANY
AND THE
CITY OF PERTH AMBOY
DATED AS OF JANUARY 9, 1987
This Agreement (hereinafter referred to as the "First Amendment") made this
_____ day of _____, 1998 between Middlesex Water Company, a corporation and
public utility, organized under the laws of the State of New Jersey, having its
principal office 1500 Ronson Road, Iselin, New Jersey 08830 (hereinafter
referred to as "Middlesex" or "Tenant") and the City of Perth Amboy, a municipal
corporation having its principal office at Perth Amboy City Hall, High Street
Perth Amboy, New Jersey, (hereinafter referred to as the "City").
BACKGROUND
WHEREAS, Middlesex and the City have and agreement for the lease by the
City to Middlesex of water transmission lines and appurtenances, dated as of
January 9, 1987 ("Lease Agreement") and have agreed to amend that Lease
Agreement; and
WHEREAS, there is currently pending in the Superior Court of New Jersey,
Law Division, Middlesex County, a certain lawsuit entitled "Chevron USA, Inc.
and Middlesex is a plaintiff (hereinafter referred to as "Lawsuit"); and
WHEREAS, there are currently pending before the New Jersey Board of Public
Utilities ("BPU") two administrative proceedings instituted by Middlesex
entitled "Middlesex Water Co. v. City of Perth Amboy", Docket No. BPU WE9310042
(Administrative Proceeding No. 1), and "In the Matter of the Petition of
Middlesex Water Company for Approval of a Municipal Consent
Page 1 of 3 (Exhibit A to Settle Agreement)
<PAGE>
to Serve Certain Customers in Perth Amboy", Docket No. WE971007893
(Administrative Proceeding No. 2); and
WHEREAS, the City and Middlesex have agreed to resolve the Lawsuit and the
Administrative Proceedings on terms set forth in the Settlement Agreement
annexed hereto, such terms to amend the Lease Agreement; and
WHEREAS, the City and Middlesex (through a subsidiary) have agreed to enter
into an agreement for operation, maintenance and management services for the
City's water system and wasterwater system ("Service Agreement"), which Service
Agreement has been submitted to the BPU for approval; and
WHEREAS, the terms of the settlement of the litigation, including this
First Amendment to the Lease Agreement, are intended to be conditioned upon
execution of the Service Agreement.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants herein contained, the parties agree as follows:
1. The Lease Agreement is hereby amended by adding the following provision:
In addition to other rights of Tenant, as set forth in this Lease Agreement
and the Service Agreement, Tenant shall have the right to purchase for the sum
of $500,000 the Demised Premises and System including the right to use any and
all easements and/or rights-of-way, including rights in public streets, all as
described in Exhibit A annexed to this Lease Agreement. This right may be
exercised within six months before or within six months after the end of the
last renewal period of the Lease Agreement. Thus, such right may be exercised
between July 1, 2011 and June 30, 2012.
Page 2 of 3 (Exhibit A to Settlement Agreement)
<PAGE>
2. Except as modified by this First Amendment, the Lease Agreement shall
remain in effect and unchanged.
IN WITNESS WHEREOF, the parties have caused this Agreement to be duly
executed as of the day and year first written above.
ATTEST: MIDDLESEX WATER COMPANY
By:
- ----------------------------- ------------------------------
Marion F. Reynolds J. Richard Tompkins
Vice President, Secretary Chairman of the Board and
& Treasurer President
ATTEST: CITY OF PERTH AMBOY
By:
- ----------------------------- ------------------------------
Elaine M. Kiczula Joseph Vas
Clerk Mayor
Page 3 of 3 (Exhibit A to Settlement Agreement)
ASSIGNMENT AND ACCEPTANCE
THIS ASSIGNMENT dated December 8, 1998 executed and delivered by Utility
Service Affiliates, Inc., a New Jersey corporation ("Assignor") for ten dollars
and other good and valuable consideration (receipt of which is hereby
acknowledged) evidences and effects the absolute and irrevocable assignment to
Utility Service Affiliates (Perth Amboy), Inc., a New Jersey corporation (the
"Assignee") of all the right, title and interest of Assignor in and under that
certain Agreement Between the City of Perth Amboy, in the County of Middlesex,
New Jersey, the Middlesex County Improvement Authority and Utility Service
Affiliates, Inc., a subsidiary of Middlesex Water Company, for Operation,
Maintenance and Management Services for the City's Water System and Wastewater
System (the "Operating Agreement"), and in and under the Revenue Agreement (as
defined in the Operating Agreement).
IN WITNESSETH WHEREOF, Assignor has caused thereto its duly authorized
officers to set his hand and affix its seal this 8th day of December, 1998.
UTILITY SERVICE AFFILIATES, INC.
By: /s/ J. RICHARD TOMPKINS
----------------------------------
J. Richard Tompkins, President
STATE OF NEW JERSEY )
COUNTY OF MIDDLESEX )
On the 8th day of December, 1998, before me personally came J. Richard
Tompkins, President, to me known, who, being by me duly sworn, did depose and
say that he resides at Colts Neck, New Jersey; that he is the President of
Utility Service Affiliates, Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument in such corporate seal; that it was so
affixed by order of the board of directors of said corporation and that he
signed his name thereto by like order.
/s/ J. RICHARD TOMPKINS
-----------------------------------
/s/ PETER D. HUTCHEON
- ------------------------------
Commission Expiry Date
Peter D. Hutcheon
Attorney at Law of New Jersey
<PAGE>
THIS ACCEPTANCE of Assignment by Assignee hereby evidences and accepts the
above Assignment by Assignor and further evidences Assignee's undertaking to
discharge all duties and obligations and to receive all benefits and emoluments
as the assignee of Assignor in and under the Operating Agreement and the Revenue
Agreement.
IN WITNESS WHEREOF, Assignee has caused its thereto duly authorized
officer to set his hand and affix its seal this 8th day of December, 1998.
UTILITY SERVICE AFFILIATES
(PERTH AMBOY), INC.
By: /s/ J. RICHARD TOMPKINS
----------------------------------
J. Richard Tompkins, President
STATE OF NEW JERSEY )
COUNTY OF MIDDLESEX )
On the 8th day of December, 1998, before me personally came J. Richard
Tompkins, President, to me known, who, being by me duly sworn, did depose and
say that he resides at Colts Neck, New Jersey; that he is the President of
Utility Service Affiliates, Inc., the corporation described in and which
executed the foregoing instrument; that he knows the seal of said corporation;
that the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation and that he
signed his name thereto by like order.
/s/ J. RICHARD TOMPKINS
-----------------------------------
/s/ PETER D. HUTCHEON
- ------------------------------
Commission Expiry Date
Peter D. Hutcheon
Attorney at Law of New Jersey
