EXHIBIT 10.14
CREDIT AGREEMENT
SOUTHWEST WATER COMPANY
AND
MELLON BANK, N.A.
AUGUST 29, 1996
TABLE OF CONTENTS
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PAGE(S)
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ARTICLE I DEFINITIONS............................................ 1
SECTION 1.01. Defined Terms.......................................... 1
SECTION 1.02. Other Definitional Provisions.......................... 6
ARTICLE II THE CREDIT............................................. 7
SECTION 2.01. The Revolving Loans.................................... 7
(a) The Revolving Commitment......................... 7
(b) Making the Revolving Loans....................... 7
(c) Reduction of the Revolving Commitment............ 7
(d) Revolving Note................................... 8
SECTION 2.02. Repayment.............................................. 8
(a) Mandatory Repayments............................. 8
(b) Optional Prepayment.............................. 8
SECTION 2.03. Interest Rate and Payment Dates........................ 8
(a) Payment.......................................... 8
(b) Interest Rate.................................... 9
(c) Rate Periods..................................... 9
(d) Interest After Maturity.......................... 9
(e) Selection, Conversion or Renewal of Rate Options. 9
(f) Prime Rate Fallback.............................. 10
SECTION 2.04. Commitment Fee......................................... 10
ARTICLE III GENERAL PROVISIONS CONCERNING THE
LOANS.................................................. 10
SECTION 3.01. Use of Proceeds........................................ 10
SECTION 3.02. Computation of Interest and Fees....................... 10
(a) Calculations..................................... 11
(b) Determination by Bank............................ 11
SECTION 3.03. Payments............................................... 11
SECTION 3.04. Payment on Non-Business Days........................... 11
SECTION 3.05. Reduced Return......................................... 11
SECTION 3.06. Indemnities and Losses................................. 11
(a) Indemnities...................................... 11
(b) Funding Losses................................... 12
SECTION 3.07. Funding Sources........................................ 12
SECTION 3.08. Requirements of Law.................................... 13
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ARTICLE IV CONDITIONS OF LENDING.................................. 13
SECTION 4.01. Conditions Precedent to Initial Loans.................. 13
SECTION 4.02. Conditions Precedent to Each Borrowing................. 14
ARTICLE V REPRESENTATIONS AND WARRANTIES......................... 15
SECTION 5.01. Representations and Warranties......................... 15
(a) Organization..................................... 15
(b) Authorization; No Conflict....................... 15
(c) Governmental Consents............................ 15
(d) Validity......................................... 16
(e) Financial Condition.............................. 16
(f) Litigation....................................... 16
(g) Employee Benefit Plans........................... 16
(h) Disclosure....................................... 16
(i) Environmental Matters............................ 17
(j) Employee Matters................................. 17
(k) Solvency......................................... 17
(l) Title to Properties.............................. 17
(m) Tax Returns...................................... 18
(n) Compliance with Other Agreements and
Applicable Laws.................................. 18
ARTICLE VI COVENANTS.............................................. 18
SECTION 6.01. Affirmative Covenants.................................. 18
(a) Financial Information............................ 18
(b) Notices and Information.......................... 19
(c) Corporate Existence, Etc......................... 20
(d) Payment of Taxes and Claims...................... 21
(e) Maintenance of Properties; Insurance............. 21
(f) Inspection....................................... 21
(g) Compliance with Laws Etc......................... 21
(h) Hazardous Waste Studies.......................... 21
SECTION 6.02. Negative Covenants..................................... 22
(a) Leverage Ratio................................... 22
(b) Consolidated Tangible Net Worth.................. 22
(c) Consolidated Net Profit.......................... 22
(d) Liens Etc........................................ 22
(e) Debt............................................. 22
(f) Consolidation, Merger or Dissolution............. 23
(h) Loans, Investments, Secondary Liabilities........ 23
(i) Asset Sales...................................... 23
(j) Hostile Tender Offers............................ 24
-ii-
(k) Distributions................................... 24
(l) Transactions with Affiliates.................... 24
(m) Books and Records and Inspections............... 24
(n) Restructure..................................... 24
ARTICLE VII EVENTS OF DEFAULT...................................... 24
SECTION 7.01. Events of Default...................................... 24
ARTICLE VIII MISCELLANEOUS.......................................... 27
SECTION 8.01. Amendments, Etc........................................ 27
SECTION 8.02. Notices, Etc........................................... 27
SECTION 8.03. Right of Setoff: Security Interest in Deposit
Accounts............................................... 28
SECTION 8.04. No Waiver; Remedies.................................... 28
SECTION 8.05. Costs and Expenses..................................... 28
SECTION 8.06. Participations......................................... 28
SECTION 8.07. Effectiveness: Binding Effect.......................... 29
SECTION 8.08. Governing Law; Choice of Forum; Service of
Process; Jury Trial Waiver............................. 29
SECTION 8.09. Waiver of Notices...................................... 30
SECTION 8.10. Waiver of Counterclaims................................ 30
SECTION 8.11. Entire Agreement....................................... 30
SECTION 8.12. Separability of Provisions............................. 30
SECTION 8.13. Execution in Counterparts.............................. 30
Schedules
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5.01(f) Ligitation
5.01(i) Environmental Matters
6.02(d) Liens
Exhibits
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A - Form of Note
B - Form of Legal Opinion
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CREDIT AGREEMENT
This Credit Agreement dated as of August 29, 1996 is entered into among
SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower") and MELLON
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BANK, N.A. (the "Bank"). The Borrower and the Bank agree as follows:
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ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the following
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terms have the following meanings:
"Agreement": This Credit Agreement, as amended, supplemented or modified
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from time to time.
"Bank": As set forth in the introductory paragraph of this Agreement.
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"Borrower": As set forth in the introductory paragraph of this Agreement.
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"Borrowing": As defined in Section 2.01.
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"Business Day": Any day on which the Bank is open for business at the
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location where the Note is payable unless otherwise stated.
"Capital Leases": As applied to any Person, any lease of any property
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(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"Change of Control": Shall be deemed to have occurred at such times as: (a)
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a "person" or "group" (within the meaning of Sections 13(d) and 14(d)(2) of the
Securities Act of 1934), becomes the "beneficial owner" (as defined in Rule 13d-
3 under the Securities Exchange Act of 1934), directly or indirectly, of more
than thirty percent (30%) of the total voting power of all classes of stock then
outstanding of Borrower normally entitled to vote in the election of directors;
or (b) the Borrower shall fail to own directly one hundred percent (100%) or
more of the issued and outstanding common stock of Suburban, NMUI or ECO or
shall lose voting control of Suburban's, NMUI's or ECO's issued and outstanding
common stock.
"Commitment": The Bank's obligation to make Loans to the Borrower pursuant
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to Article II in the amount or amounts referred to therein.
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"Consolidated Liabilities": At any date of determination, the total
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liabilities of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP (including, without limitation, (1) any
balance sheet liability with respect to a Pension Plan recognized pursuant to
Financial Accounting Standards Board Statements 87 or 88 and (2) any withdrawal
liability under Section 4201 of ERISA with respect to a withdrawal from a
Multiemployer Plan, as such liability may be set forth in a notice of withdrawal
liability under Section 4219 (and as adjusted from time to time subsequent to
the date of such notice)).
"Consolidated Tangible Net Worth": At any date of determination, the sum of
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the capital stock and additional paid-in capital plus retained earnings (or
minus accumulated deficit) of the Borrower and its consolidated Subsidiaries
minus (i) treasury stock, (ii) intangible assets (including, without limitation,
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franchises, patents, patent applications, trademarks, brand names, goodwill,
purchased contracts, water rights and deferred charges (including unamortized
debt discount and expense and organization costs) and research and development
expenses) and (iii) receivables, advances, loans and all other amounts due from
employees, officers, shareholders and/or affiliates, on a consolidated basis
determined in conformity with GAAP.
"Debt": As applied to any Person, (i) all indebtedness for borrowed money,
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(ii) that portion of obligations with respect to Capital Leases which is
properly classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
which purchase price is (y) due more than six months from the date of incurrence
of the obligation in respect thereof, or (z) evidenced by a note or similar
written instrument and (v) all indebtedness secured by any Lien on any property
or asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that person.
"Distribution": With respect to any Person shall mean that such Person has
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declared or paid any dividend or returned any capital to, its stockholders or
equity holders as such or authorized or made any other distribution, payment or
delivery of property or cash to its stockholders or equity holders as such, or
redeemed, retired, purchased, or otherwise acquired, directly or indirectly, for
consideration, any shares of any class of its capital stock or equity interests
(or any options, warrants or rights issued by such Person with respect to its
capital stock or equity interests), or set aside any funds for any of the
foregoing purposes, or shall have permitted any of its Subsidiaries to purchase
or otherwise acquire for a consideration any shares of any class of the capital
stock or any equity interests of such Person (or any options, warrants or rights
issued by such Person with respect to its capital stock or equity interests).
Without limiting the foregoing, "Distributions" with respect to any Person shall
also include all payments made or required to be made by such Person with
respect to any stock appreciation rights plans, equity incentive or the setting
aside of any funds for the foregoing purposes.
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"Dollars and $": Dollars in lawful currency of the United States of
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America.
"ECO": ECO Resources, Inc., a Texas corporation.
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"Employee Benefit Plan": Any Pension Plan, any employee welfare benefit
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plan, or any other employee benefit plan which is described in Section 3(3) of
ERISA and which is maintained for employees of the Borrower or any ERISA
Affiliate of the Borrower.
"ERISA": The Employee Retirement Income Security Act of 1974, as amended to
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the date hereof and from time to time hereafter.
"ERISA Affiliate": As applied to any Person, any trade or business (whether
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or not incorporated) which is a member of a group of which that Person is a
member and which is under common control within the meaning of Section 414(b)
and (c) of the Internal Revenue Code.
"GAAP": Generally accepted accounting principles set forth in the opinions
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and pronouncements of the Accounting Principles Board of the American Institute
of Certified Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other statements by such other
entity as may be approved by a significant segment of the accounting profession
or any public commission having regulatory responsibility over the Borrower or
any Subsidiary.
"Interest Rate Options": Has the meaning set forth in Section 2.03(b)
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hereof.
"Internal Revenue Code": The Internal Revenue Code of 1986, as amended to
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the date hereof and from time to time hereafter and any successor statute.
"Lien": Any lien, mortgage, deed of trust, pledge, security interest,
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charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Libor Rate": For any day for any proposed or existing Rate Segment
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corresponding to a Rate Period shall mean the rate per annum determined by Bank
to be the rate per annum obtained by dividing (the resulting quotient to be
rounded upward to the nearest 1/16 of 1%) (A) the rate of interest (which shall
be the same for each day in such Rate Period) estimated in good faith by Bank in
accordance with its usual procedures (which determination shall be conclusive)
to be the average of the rates per annum for deposits in United States dollars
offered to major money center banks in the London interbank market at
approximately 11:00 a.m., London time, two London Business Days prior to the
first day of such Rate Period for delivery on the first day of such Rate Period
in amounts comparable to such Rate Segment (or, if there are no such comparable
amounts actively traded, the smallest
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amounts actively traded) and have maturities comparable to such Rate Period by
(B) a number equal to 1.00 minus the Libor Rate Reserve Percentage for such day.
The "Libor Rate" may also be expressed by the following formula:
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[average of rates offered to major]
[money banks in the London inter-]
Libor Rate = [bank market estimated by the Bank]
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[1.00 - Libor Rate Reserve Percentage]
"Libor Rate Reserve Percentage": For any day shall mean the percentage
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(rounded upward to the nearest 1/16 of 1%), as determined in good faith by Bank
(which determination shall be conclusive) as representing for such day the
maximum effective reserve requirement (including, without limitation,
supplemental, marginal and emergency requirements ) for member banks of the
Federal Reserve System with respect to eurocurrency funding (currently referred
to as "Eurocurrency Liabilities") of any maturity. Each Libor Rate shall be
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adjusted automatically as of the effective date of any change in the Libor Rate
Reserve Percentage.
"Loans": Loans made to the Borrower pursuant to Section 2.01.
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"Loan Documents": This Agreement, the Note(s) and each security agreement,
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deed of trust, mortgage, guarantee and other document, required by the Bank in
connection with this Agreement and/or the credit extended hereunder.
"London Business Day": A day for dealing in deposits in United States
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dollars by and among banks in the London interbank market.
"Maturity Date": July 15, 1997.
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"Multiemployer Plan": A "multiemployer plan" as defined in Section
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4001(a)(3) of ERISA which is maintained for employees of the Borrower or any
ERISA Affiliate of the Borrower.
"Note" and "Notes": The Revolving Note(s).
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"NMUI": New Mexico Utilities, Inc., a New Mexico corporation.
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"Pension Plan": Any employee plan which is subject to Section 412 of the
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Internal Revenue Code and which is maintained for employees of the Borrower or
any ERISA Affiliate of the Borrower, other than a Multiemployer Plan.
"Person": An individual, partnership, corporation, limited liability
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company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
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"Portion": "Prime Rate Portion" shall mean at any time the part, including
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the whole, of the unpaid principal amount of the Note bearing interest at such
time under the Prime Rate Option, in accordance with the first sentence of
Section 2.03(d) hereof, or in accordance with Section 2.03(f) hereof. "Libor
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Rate Portion" shall mean at any time, the part, including the whole, of the
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unpaid principal amount of the Note bearing interest at such time under the
Libor Rate Option or in accordance with the second sentence of Section 2.03(d)
hereof.
"Potential Event of Default": A condition or event which, after notice or
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lapse of time or both, would constitute an Event of Default if that condition or
event were not cured or removed within any applicable grace or cure period.
"Prime Rate": The interest rate per annum announced from time to time by
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Bank as its Prime Rate. The Prime Rate may be greater or less than other
interest rates charged by Bank to other borrowers and is not solely based or
dependent upon the interest rate which Bank may charge any particular borrower
or class of borrowers. Information concerning the Prime Rate may be obtained
from the Bank.
"Rate Period": As defined in Section 2.03(c).
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"Rate Segment": Of the Libor Rate Portion at any time shall mean the entire
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principal amount of such Portion to which at such time there is applicable a
particular Rate Period beginning on a particular day and ending on another
particular day. (By definition, each Portion is at all times composed of an
integral number of discrete Rate Segments, each corresponding to a particular
Rate Period, and the sum of the principal amounts of all Rate Segments of a
particular Portion at any time equals the principal amount of such Portion at
such time).
"Regulation G, T, U and X": Regulations G, T, U and X, respectively,
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promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"Revolving Commitment": The amount of $6,000,000 as such amount may be
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reduced pursuant to Section 2.01(c).
"Revolving Loans": As defined in Section 2.01(a).
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"Revolving Note": As defined in Section 2.01(d).
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"S.E.C.": The United States Securities and Exchange Commission and any
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successor institution or body which performs the functions or substantially all
of the functions thereof.
"Solvent": When used with respect to any Person that as of the date as to
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which the Person's solvency is to be measured:
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(i) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities) as they
become absolute and matured;
(ii) it has sufficient capital to conduct its business; and
(iii) it is able to meet its debts as they mature.
"Standard Notice": An irrevocable notice provided to the Bank on a Business
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Day which is:
(i) at least one Business Day in advance in the case of selection of,
conversion to or renewal of the Prime Rate Option or prepayment of
any Prime Rate Portion; and
(ii) at least three London Business Days in advance in the case of
selection of, conversion to or renewal of the Libor Rate Option or
prepayment of any Libor Rate Portion.
Standard Notice must be provided no later than 12:00 p.m., Los Angeles time, on
the last day permitted for such notice.
"Subsidiary": A corporation of which shares of stock having ordinary voting
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power (other than stock having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other managers of
such corporation are at the time owned, directly, or indirectly through one or
more intermediaries, or both, by the Borrower.
"Suburban": Suburban Water Systems, a California corporation.
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"Termination Event": (i) a "Reportable Event" described in Section 4043 of
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ERISA and the regulations issued thereunder (other than a "Reportable Event" not
subject to the provision for 30-day notice to the Pension Benefit Guaranty
Corporation under such regulations) with respect to any Pension Plan, or (ii)
the withdrawal of the Borrower or any of its ERISA Affiliates from a Pension
Plan during a plan year in which it was a "substantial employer" as defined in
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Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of intent to
terminate a Pension Plan or the treatment of a Pension Plan amendment as a
termination under Section 4041 of ERISA, or (iv) the institution of proceedings
to terminate a Pension Plan by the Pension Benefit Guaranty Corporation under
Section 4042 of ERISA, or (v) any other event or condition which might
constitute grounds under ERISA for the termination of, or the appointment of a
trustee to administer, any Pension Plan under Section 4042 of ERISA, or (vi) the
imposition of a lien with respect to any Pension Plan pursuant to Section 412(n)
of the Internal Revenue Code.
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SECTION 1.02. Other Definitional Provisions.
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(a) All terms defined in this Agreement shall have the defined meanings when
used in the Notes or any certificate or other document made or delivered
pursuant hereto.
(b) As used herein and in the Notes, and any certificate or other document
made or delivered pursuant hereto, accounting terms not defined in subsection
1.01, and accounting terms partly defined in subsection 1.01 to the extent not
defined, shall have the respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not to
any particular provision of this Agreement, and section, subsection, schedule
and exhibit references are to this Agreement unless otherwise specified.
(d) So long as the Borrower does not have any Subsidiaries, references to a
Subsidiary or Subsidiaries in this Agreement shall be deemed to be deleted.
ARTICLE II
THE CREDIT
SECTION 2.01. The Revolving Loans.
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(a) The Revolving Commitment. The Bank agrees, on the terms and conditions
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hereinafter set forth, to make loans ("Revolving Loans") to the Borrower from
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time to time during the period from the date hereof to and including the
Maturity Date in an aggregate amount not to exceed the Revolving Commitment, as
such amount may be reduced pursuant to Section 2.01(c). Each borrowing under
this Section (a "Borrowing") shall be in a minimum amount of $1.00; provided
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that every selection of, conversion to or renewal of the Libor Rate Option shall
be in a minimum principal amount of $250,000 or an integral multiple of $50,000
above such amount. Within the limits of the Revolving Commitment and prior to
the Maturity Date, the Borrower may borrow, repay pursuant to Section 2.02(b)
and reborrow under this Section.
(b) Making the Revolving Loans. The Borrower may borrow under the
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Revolving Commitment on any Business Day, provided that the Borrower shall give
the Bank Standard Notice specifying (i) the amount of the proposed Borrowing and
(ii) the requested date of the Borrowing. Upon satisfaction of the applicable
conditions set forth in Article IV, the proceeds of all such Loans will then be
made available to the Borrower by the Bank by crediting the account of the
Borrower on the books of the Bank, or as otherwise directed by the Borrower.
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The Standard Notice may be given in writing (including facsimile
transmission) signed by one (1) authorized officer or orally, but if the
Standard Notice is provided orally, Borrower shall same day confirm the oral
Standard Notice in writing (including facsimile transmission) no later than 2:00
p.m., Los Angeles time, and any conflict regarding a written or oral notice and
the Bank's books and records applicable to the same Borrowing shall be
conclusively determined by the Bank's books and records. The Bank shall not
incur any liability to the Borrower in acting upon any oral or written notice of
Borrowing which the Bank believes in good faith to have been given by a Person
duly authorized to borrow on behalf of the Borrower.
(c) Reduction of the Revolving Commitment. The Borrower shall have the
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right, upon at least two Business Days' notice to the Bank, to terminate in
whole or reduce in part the unused portion of the Revolving Commitment, without
premium or penalty, provided that each partial reduction shall be in the
aggregate amount of $100,000 or an integral multiple thereof and that such
reduction shall not reduce the Revolving Commitment to an amount less than the
amount outstanding hereunder on the effective date of the reduction. Such notice
shall be irrevocable and such reduction shall not be reinstated.
(d) Revolving Note. The Loans made by the Bank pursuant hereto shall be
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evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A, with any appropriate insertions (the "Revolving Note"), payable to
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the order of the Bank and representing the obligation of the Borrower to pay the
aggregate unpaid principal amount of all Revolving Loans made by the Bank, with
interest thereon as prescribed in Section 2.03. The Bank is hereby authorized to
record in its books and records and on any schedule annexed to the Revolving
Note, the date and amount of each Revolving Loan made by the Bank, and the date
and amount of each payment of principal thereof, and in the case of Libor Rate
Option Loans, the Libor Rate, the Libor Rate Portion, and the Rate Period with
respect thereto, and any such recordation shall constitute prima facie evidence
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of the accuracy of the information so recorded; provided that failure by the
Bank to effect such recordation shall not affect the Borrower's obligations
hereunder. Prior to the transfer of a Revolving Note, the Bank shall record
such information on any schedule annexed to and forming a part of such Revolving
Note.
SECTION 2.02. Repayment.
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(a) Mandatory Repayments. The aggregate principal amount of the Revolving
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Loans outstanding on the Maturity Date, together with accrued interest thereon,
shall be due and payable in full on the Maturity Date. If at any time the
aggregate outstanding Borrowings exceed the Revolving Commitment then in effect,
the Borrower shall immediately repay the excess to the Bank without penalty or
premium.
(b) Optional Prepayment. Borrower shall have the right at its option from
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time to time to prepay the Prime Rate Portion in whole or in part without
penalty or premium. Borrower shall have no right to prepay any part of the
Libor Rate Portion at any time without the prior written consent of Bank except
that Borrower may prepay any part of
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any Rate Segment at the expiration of the Rate Period corresponding to such Rate
Segment. Prepayments shall be made by giving the Bank Standard Notice thereof
(which shall be irrevocable), specifying the date, and amount and type of
prepayment, and upon such date the amount so specified, accrued interest
thereon, and any amounts payable under Section 3.06(b) hereof shall be due and
payable.
SECTION 2.03. Interest Rate and Payment Dates.
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(a) Payment. The principal balance of the Note shall be paid in accordance
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with the terms set forth in the Note. Accrued interest on the Prime Rate
Portion shall be due and payable on the last day of each month commencing on
August 31, 1996. Interest on each Rate Segment of the Libor Rate Portion which
has a Rate Period equal to or less than three months shall be due and payable on
the last day of the corresponding Rate Period. Interest on each Rate Segment of
the Libor Rate Portion which has a Rate Period greater than three months shall
be due and payable on the third and sixth month anniversary date of the first
day of the corresponding Rate Period, if any, and on the last day of the
corresponding Rate Period. After maturity of any part of a Note (by
acceleration or otherwise), interest on such part of the Note shall be due and
payable ON DEMAND.
(b) Interest Rate. The unpaid principal amount of the Note shall bear
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interest for each day until due on one or more bases selected by Borrower from
among the interest rate options (the "Interest Rate Options") set forth below.
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Borrower understands and agrees: (i) that Bank may in its sole discretion from
time to time determine that the right of Borrower to select, convert to or renew
the Prime Rate Option or the Libor Rate Option is not available and (ii) that
subject to the provisions hereof Borrower may select any number of Options to
apply simultaneously to different parts of the unpaid principal amount of the
Note and may select any number of Rate Segments to apply simultaneously to
different parts of the Libor Rate Portion.
Available Interest Rate Options
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Prime Rate Option: A rate per annum for each day equal to the Prime Rate.
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Libor Rate Option: A rate per annum for each day equal to the Libor Rate for
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such day plus one and one-half (1.5) percentage points.
(c) Rate Periods. At any time when Borrower selects, converts to or renews
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the Libor Rate Option, Borrower shall fix a period (the "Rate Period") which
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shall be one, two, three or six months, which shall be acceptable to Bank in
Bank's sole discretion, during which the Libor Rate Option shall apply to the
corresponding Rate Segment; provided, that Borrower may not elect a Rate Period
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which will end after the Maturity Date. Bank's right to payment of principal
and interest under the Note shall in no way be affected by the fact that one or
more Rate Periods may be in effect.
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Interest Rate Options shall be selected in a manner which shall ensure
that Borrower shall be able to make scheduled payments of principal under the
Note without incurring liability under Section 3.06(b) below; provided, however,
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that in the event that Borrower prepays any Rate Segment bearing interest under
the Libor Rate Portion in order to make a scheduled payment of principal under
the Note, Borrower shall indemnify the Bank as provided in Section 3.06(b)
below.
(d) Interest After Maturity. After the principal amount of any part of the
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Prime Rate Portion shall have become due and payable, such amount shall bear
interest for each day until paid (before and after judgment) at a rate per annum
(based on a year of 360 days and actual days elapsed) which for each day shall
be the greater of (a) two (2) percentage points above the Prime Rate Option on
the day such amount become due, and (b) two (2) percentage points above the
Prime Rate Option, such interest rate to change automatically from time to time
effective as of the effective date of each change in the Prime Rate. After the
principal amount of any part of the Libor Rate Portion shall have become due and
payable, such amount shall bear interest for each day until paid (before and
after judgment) (a) until the end of the applicable then current Rate Period at
a rate per annum two (2) percentage points above the Libor Rate Option otherwise
applicable to such part, and (b) thereafter in accordance with the previous
sentence.
(e) Selection, Conversion or Renewal of Rate Options. Subject to the other
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provisions hereof, Borrower may select any Interest Rate Option to apply to the
borrowings evidenced by the Note. Subject to the other provisions hereof,
Borrower may convert any part of the unpaid principal amount of the Note from
either Interest Rate Option to the other Interest Rate Option: (a) at any time
with respect to the conversion from the Prime Rate Option to the Libor Rate
Option and (b) at the expiration of any Rate Period with respect to conversion
from or renewals of the Libor Rate Option as to the Rate Segment corresponding
to such expiring Rate Period. Whenever Borrower desires to select, convert or
renew the Libor Rate Option, Borrower shall give Bank Standard Notice thereof
(which shall be irrevocable), specifying the date, amount and type of the
proposed new Rate Option. If such notice has been duly given, and if Bank in
its sole discretion approves the proposed selection, conversion or renewal, on
and after the date specified in such notice, interest shall be calculated upon
the unpaid principal amount of the Note taking into account such selection,
conversion or renewal.
(f) Prime Rate Fallback. If any Rate Period expires, any part of the Rate
-------------------
Segment corresponding to such Rate Period which has not been converted or
renewed in accordance with Section 2.03(e) hereof automatically shall be
converted to the Prime Rate Option. If Borrower fails to select, or if Bank
fails to approve an Interest Rate Option to apply to the borrowings evidenced by
the Note, such borrowings shall be deemed to be at the Prime Rate Option. If at
any time the Bank shall have determined in good faith (which determination shall
be conclusive) that the accrual of interest at the Libor Rate Option has been
made unascertainable, impractical or unlawful by compliance by the Bank in good
faith with any law (including common law), constitution, statute, treaty,
regulation, rule, ordinance, order, injunction, writ, decree or award of any
government or political subdivision or any
10
agency, authority, bureau, central bank, commission, department or
instrumentality of either, or any court, tribunal, grand jury or arbitrator, in
each case whether foreign or domestic, or administration thereof by any official
body charged with the interpretation or administration thereof or with any
request or directive of any such authority, the outstanding principal amount of
the Note subject to the Libor Rate Option shall accrue interest at the Prime
Rate Option and the Borrower shall not have the right to select the Libor Rate
Option.
SECTION 2.04. Commitment Fee. Borrower shall pay to Bank a fee for the
--------------
Revolving Commitment equal to one-half of one percent (0.5%) per annum of the
daily unused balance of the Revolving Commitment, calculated on a calendar
quarter basis, which fee shall be due and payable by Borrower to Bank, or
debited to Borrower's account with Bank, if so maintained, not later than ten
(10) days after billing is sent by Bank.
ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
SECTION 3.01. Use of Proceeds. The proceeds of the Loans hereunder shall
---------------
be used by the Borrower (i) for general corporate purposes and working capital
of the Borrower and its Subsidiaries, (ii) to finance capital additions to the
water utility and other operations of the Borrower and its Subsidiaries and
(iii) to prepay existing Debt.
SECTION 3.02. Computation of Interest and Fees.
--------------------------------
(a) Calculations. Interest in respect of the Prime Rate Option Loans shall
------------
be calculated on the basis of a 360 day year for the actual days elapsed. Any
change in the interest rate on a Prime Rate Loan resulting from a change in the
Prime Rate shall become effective as of the opening of business on the day on
which such change in the Prime Rate shall become effective. Interest in respect
of the Libor Rate Option Loans, and any fees payable hereunder, shall be
calculated on the basis of a 360 day year for the actual days elapsed.
(b) Determination by Bank. Each determination of an interest rate or fee
---------------------
by the Bank pursuant to any provision of this Agreement shall be conclusive and
binding on the Borrower in the absence of manifest error.
SECTION 3.03. Payments. The Borrower shall make each payment of
--------
principal, interest and fees hereunder and under the Notes, without setoff or
counterclaim, not later than 12:00 p.m. (Los Angeles time) on the day when due
in lawful money of the United States of America to the Bank at the office of the
Bank designated in writing in immediately available funds.
SECTION 3.04. Payment on Non-Business Days. Whenever any payment to be
----------------------------
made hereunder or under the Notes shall be stated to be due on a day which is
not a Business Day, such payment may be made on the next succeeding Business
Day, and
11
with respect to payments of principal, interest thereon shall be payable at the
then applicable rate during such extension.
SECTION 3.05. Reduced Return. If the Bank shall have determined that any
--------------
applicable law, regulation, rule or regulatory requirement generally applicable
to banks located in California and Pennsylvania (collectively in this Section
3.05 "Requirement") regarding capital adequacy, or any change therein, or any
-----------
change in the interpretation or administration thereof by any United States
federal or state governmental authority, central bank or comparable agency
charged with the interpretation or administration thereof, or compliance by the
Bank with any request or directive regarding capital adequacy (whether or not
having the force of law) of any such authority, central bank or comparable
agency, has or would have the effect of reducing the rate of return on the
Bank's capital as a consequence of its Commitment and obligations hereunder to a
level below that which would have been achieved but for such Requirement, change
or compliance (taking into consideration the Bank's policies with respect to
capital adequacy) by an amount deemed by the Bank to be material (which amount
shall be determined by the Bank's reasonable allocation of the aggregate of such
reductions resulting from such events), then from time to time, within five (5)
Business Days after demand by the Bank, the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.
The Bank does not presently have knowledge of any new Requirement or any pending
change in any existing Requirement which would result in such additional amounts
being owed.
SECTION 3.06. Indemnities and Losses.
----------------------
(a) Indemnities. Whether or not the transactions contemplated hereby shall
-----------
be consummated, the Borrower agrees to indemnify, pay and hold the Bank, and the
shareholders, officers, directors, employees and agents of the Bank
("Indemnified Person"), harmless from and against any and all claims,
-------------------
liabilities, losses, damages, costs and expenses (whether or not any of the
foregoing Indemnified Persons is a party to any litigation), including, without
limitation, reasonable attorneys' fees and costs (including, without limitation,
the reasonable estimate of the allocated cost of in-house legal counsel and
staff) and costs of investigation, document production, attendance at a
deposition, or other discovery, prior to the assumption of defense by the
Borrower, with respect to or arising out of any proposed acquisition by the
Borrower or any of its Subsidiaries of any Person or any securities (including a
self-tender), this Agreement or any use of proceeds hereunder, or any claim,
demand, action or cause of action being asserted against the Borrower or any of
its Subsidiaries (collectively, the "Indemnified Liabilities"), provided that
-----------------------
the Borrower shall have no obligation hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of any such
Indemnified Persons. If any claim is made, or any action, suit or proceeding is
brought, against any Indemnified Person pursuant to this Section, the
Indemnified Person shall notify the Borrower within thirty (30) days of the Bank
being notified in writing of any such claim or the commencement of such action,
suit or proceeding, and the Borrower will assume the defense of such action,
suit or proceeding, employing counsel selected by Borrower's insurance carrier,
or selected by the Borrower and reasonably satisfactory to the Indemnified
Person, and pay the fees and expenses of such
12
counsel. This covenant shall survive termination of this Agreement and payment
of the outstanding Notes for a period of six (6) years.
(b) Funding Losses. The Borrower agrees to indemnify the Bank and to hold
--------------
the Bank harmless from any loss or expense including, but not limited to, any
such loss or expense arising from interest or fees payable by the Bank to
lenders of funds obtained by it in order to maintain its Libor Rate Option Loans
hereunder, which the Bank may sustain or incur as a consequence of (i) payment,
prepayment or conversion of any part of any Rate Segment of the Libor Rate
Portion on a day other than the last day of the corresponding Rate Period
(whether or not any such payment is pursuant to demand by Bank under the Note
and whether or not any such payment, prepayment or conversion is consented to by
Bank, unless Bank shall have expressly waived such indemnity in writing); (ii)
default by the Borrower in making a conversion or continuation after the
Borrower has given a notice thereof, (iii) default by the Borrower in making any
payment after the Borrower has given a notice of payment, (iv) attempt by
Borrower to revoke in whole or part any irrevocable notice given pursuant to
Section 2.03(e) hereof; or (v) breach of or default by any obligor in the
performance or observance of any covenant or condition in the Note, any separate
security, guarantee or suretyship agreement between Bank and any obligor, or any
other document executed and delivered to Bank by any obligor in connection with
the indebtedness evidenced by the Note. If Bank sustains any such loss or
expense, it shall from time to time notify Borrower of the amount determined in
good faith by Bank (which determination shall be conclusive) to be necessary to
indemnify Bank for such loss or expense. Such amount shall be due and payable
by Borrower within five (5) Business Days after demand. This covenant shall
survive termination of this Agreement and payment of the outstanding Notes.
SECTION 3.07. Funding Sources. Nothing in this Agreement shall be deemed
---------------
to obligate the Bank to obtain the funds for any Loan in any particular place or
manner or to constitute a representation by the Bank that it has obtained or
will obtain the funds for any Loan in any particular place or manner.
SECTION 3.08. Requirements of Law. In the event that any law, regulation
-------------------
or directive generally applicable to banks located in California or Pennsylvania
or any change therein or in the interpretation or application thereof or
compliance by the Bank with any request or directive (whether or not having the
force of law) from any United States federal or state central bank or other
governmental authority, agency or instrumentality:
(a) does or shall impose, modify or hold applicable any reserve, assessment
rate, special deposit, compulsory loan or other requirement (collectively in
this Section 3.08 "Requirements") against assets held by, or deposits or other
------------
liabilities in or for the account of, advances or loans by, or other credit
extended by, or any other acquisition of funds by, any office of the Bank which
are not otherwise included in the determination of any Libor Rate at the last
Borrowing, conversion or continuation date of a Loan;
(b) does or shall impose, modify or hold applicable any of the Requirements
against Commitments to extend credit;
13
(c) does or shall impose on the Bank any other condition;
and the result of any of the foregoing is to increase the cost to the Bank of
making, renewing or maintaining its Revolving Commitment, or the Libor Rate
Option Loans or to reduce any amount receivable thereunder (which increase or
reduction shall be determined by the Bank's reasonable allocation of the
aggregate of such cost increases or reduced amounts receivable resulting from
such events), then, in any such case, the Borrower shall pay to the Bank, within
five (5) Business Days of its demand, any additional amounts necessary to
compensate the Bank for such additional cost or reduced amount receivable as
determined by the Bank with respect to Sections 3.05 and 3.08 of this Agreement.
If the Bank becomes entitled to claim any additional amounts pursuant to this
Section, it shall notify the Borrower of the event by reason of which it has
become so entitled. Such notice shall contain a statement incorporating the
calculation as to any additional amounts payable pursuant to the foregoing
sentence, and such statement submitted by the Bank to the Borrower shall be
conclusive in the absence of manifest error. The Bank does not presently have
knowledge of any new Requirement or any pending change in any existing
Requirement which would result in such additional amounts being owed. To the
extent that the Bank recovers under either Section 3.05 or Section 3.08 of this
Agreement, the Bank shall not be entitled to duplicative recovery under the
other of Sections 3.05 or 3.08.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Initial Loans. The obligation of
-------------------------------------
the Bank to make its initial Loan is subject to the conditions precedent that:
(a) The Bank shall have received on or before the day of the initial
Borrowing the following, each dated prior to or as of such day, in form and
substance satisfactory to the Bank:
(i) The Note(s) issued by the Borrower to the order of the Bank;
(ii) Copies of the Articles, Certificate of Incorporation, partnership
agreement or other organizational document of the Borrower, certified as of a
recent date by the Secretary of State of its state of formation or
incorporation;
(iii) Copies of the Bylaws, if any, of the Borrower, certified by the
Secretary or an Assistant Secretary of the Borrower;
(iv) Copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, in form and substance satisfactory to the
Bank, approving the Loan Documents and the Borrowings hereunder;
14
(v) An incumbency certificate executed by the Secretary or an
Assistant Secretary of the Borrower or equivalent document, certifying the names
and signatures of the officers of the Borrower or other Persons authorized to
sign the Loan Documents and the other documents to be delivered hereunder;
(vi) Executed copies of all Loan Documents;
(vii) Opinion from Borrower's counsel substantially in the form of
Exhibit B hereto;
(b) The Bank shall have completed its due diligence review of the Borrower,
and the scope and results thereof shall be satisfactory to Bank in its
discretion;
(c) All information previously furnished by Borrower to Bank shall be true
and correct in all material respects;
(d) All fees required to be paid at closing shall have been paid; and
(e) All corporate and legal proceedings and all instruments and documents in
connection with the transactions contemplated by this Agreement shall be
reasonably satisfactory in content, form and substance to the Bank and its
counsel, and the Bank and such counsel shall have received any and all further
information and documents which the Bank or such counsel may reasonably have
requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities.
SECTION 4.02. Conditions Precedent to Each Borrowing. The obligation of
--------------------------------------
the Bank to make a Loan on the occasion of each Borrowing (including the initial
Borrowing) shall be subject to the further conditions precedent that on the date
of such Borrowing (a) the following statements shall be true and the Bank shall
have received the notice required by Section 2.01(b), which notice shall be
deemed to be a certification by the Borrower that:
(i) The representations and warranties contained in Section 5.01
are correct on and as of the date of such Borrowing as though made
on and as of such date,
(ii) No event has occurred and is continuing, or would result from
such Borrowing, which constitutes an Event of Default or Potential
Event of Default; and
(iii) Nothing shall have occurred and the Bank shall not have
become aware of any fact or condition not previously known, which
the Bank shall
15
determine has, or could reasonably be expected to have, a material
adverse effect on the rights or remedies of the Bank, or on the
ability of the Borrower to perform its obligations to the Bank or
which has, or could reasonably be expected to have, a materially
adverse effect on the performance, business, property, assets,
condition (financial or otherwise) or prospects of Borrower and
its Subsidiaries taken as a whole; and
(iv) All Loan Documents are in full force and effect,
and (b) the Bank shall have received such other approvals, opinions or documents
as the Bank may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. The Borrower represents and
------------------------------
warrants as follows:
(a) Organization. The Borrower and each of its Subsidiaries is duly
------------
organized, validly existing and in good standing under the laws of the state of
its incorporation. The Borrower and each of its Subsidiaries is also duly
authorized, qualified and licensed in all applicable jurisdictions, and under
all applicable laws, regulations, ordinances or orders of public authorities, to
carry on its business in the locations and in the manner presently conducted;
except that ECO is not yet qualified in the State of New Mexico.
(b) Authorization; No Conflict. The execution, delivery and performance by
--------------------------
the Borrower of the Loan Documents, and the making of Borrowings hereunder, are
within the Borrower's corporate powers, have been duly authorized by all
necessary corporate action, do not contravene (i) the Borrower's charter, by-
laws or other organizational document or (ii) any law or regulation (including
Regulations G, T, U and X) binding on or affecting the Borrower or its
properties, and will not constitute an event of default under any material
agreement to which Borrower is a party or by which its assets or properties may
be bound.
(c) Governmental Consents. No authorization or approval or other action
---------------------
by, and no notice to or filing with, any governmental authority or regulatory
body (except routine reports required pursuant to the Securities Exchange Act of
1934, as amended (if such act is applicable to the Borrower), which reports will
be made in the ordinary course of business) is required for the due execution,
delivery and performance by the Borrower of the Loan Documents.
16
(d) Validity. The Loan Documents are the binding obligations of the
--------
Borrower or other executing Person, if any, enforceable in accordance with their
respective terms; except in each case as such enforceability may be limited by
bankruptcy, insolvency, reorganization, liquidation, moratorium or other similar
laws of general application and equitable principles relating to or affecting
creditors' rights.
(e) Financial Condition. The balance sheets of the Borrower and its
-------------------
consolidated Subsidiaries as at December 31, 1995 and June 30, 1996, and the
related consolidated statements of income and changes in common stockholders'
equity of the Borrower and its consolidated Subsidiaries for the fiscal year and
fiscal three months then ended, copies of which have been furnished to the Bank,
fairly present the financial condition of the Borrower and its consolidated
Subsidiaries as at such dates and the results of the operations of the Borrower
and its consolidated Subsidiaries for the respective periods ended on such
dates, all in accordance with GAAP, consistently applied, and since June 30,
1996 there has been no material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(f) Litigation. Except as set forth in the Form 10-K dated December 31,
----------
1995, and on Schedule 5.01(f) hereto, there is no known pending or threatened
action or proceeding affecting the Borrower or any of its Subsidiaries before
any court, governmental agency or arbitrator, which may materially adversely
affect the consolidated financial condition or operations of the Borrower or
which may have a material adverse effect on the Borrower's ability to perform
its obligations under the Loan Documents, having regard for its other financial
obligations.
(g) Employee Benefit Plans. The Borrower and each of its ERISA Affiliates
----------------------
is in compliance in all material respects with any applicable provisions of
ERISA and the regulations and published interpretations thereunder with respect
to all Employee Benefit Plans. No Termination Event has occurred with respect
to any Pension Plan. The excess of the actuarial present value of all benefit
liabilities under all Pension Plans (excluding in such computation Pension Plans
with assets greater than benefit liabilities) over the fair market value of the
assets allocable to such benefit liabilities are not greater than five percent
(5%) of Consolidated Tangible Net Worth. For purposes of the preceding
sentence, the term "benefit liabilities" shall have the meaning specified in
Section 4001 of ERISA.
(h) Disclosure. No representation or warranty of the Borrower contained in
----------
this Agreement or any other document, certificate or written statement furnished
to the Bank by or on behalf of the Borrower for use in connection with the
transactions contemplated by this Agreement contains any known untrue statement
of a material fact or omits to state a known material fact (known to the
Borrower in the case of any document not furnished by it) necessary in order to
make the statements contained herein or therein not misleading. There is no fact
known to the Borrower (other than matters of a general economic nature) which
materially adversely affects the business, operations, property, assets or
condition (financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole,
17
which has not been disclosed herein or in such other documents, certificates and
statements furnished to the Bank for use in connection with the transactions
contemplated hereby.
(i) Environmental Matters. Except as set forth in Schedule 5.01(i) hereto,
--------------------- ----------------
neither the Borrower nor any Subsidiary, nor any of their respective officers,
employees, representatives or agents, nor, to the best of their knowledge, any
other person, has treated, stored, processed, discharged, spilled, or otherwise
----------
disposed of any substance defined as hazardous or toxic by any applicable
federal, state or local law, rule, regulation, order or directive, or any waste
or by-product thereof, at any real property or any other facility owned, leased
or used by the Borrower or any Subsidiary, in violation of any applicable
statutes, regulations, ordinances or directives of any governmental authority or
court, which violations may result in liability to the Borrower or any
Subsidiary or any of their respective officers, employees, representatives,
agents or shareholders in an amount exceeding $500,000 for all such violations;
and the unresolved violations set forth in said Schedule 5.01(i) will not result
in liability to the Borrower or any Subsidiary or any of their respective
officers, employees, representatives, agents or shareholders in an amount
exceeding $500, 000 for all such unresolved violations. Except as set forth in
said Schedule, no employee or other person has made a claim or demand against
the Borrower or any Subsidiary based on alleged damage to health caused by any
such hazardous or toxic substance or by any waste or by-product thereof; and the
unsatisfied claims or demands against the Borrower or any Subsidiary set forth
in said Schedule 5.01(i) will not result in uninsured liability to the Borrower
or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $250,000 in
excess of reserves on the books of the Borrower for all such unsatisfied claims
or demands. Except as set forth in said Schedule 5.01(i), neither the Borrower
nor any Subsidiary has been charged by any governmental authority with
improperly using, handling, storing, discharging or disposing of any such
hazardous or toxic substance or waste or by-product thereof or with causing or
permitting any pollution of any body of water; and the outstanding related
charges set forth in said Schedule 5.01(i) will not result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $500,000 for all
such outstanding charges.
(j) Employee Matters. There is no known strike or work stoppage in
----------------
existence or threatened involving the Borrower or its Subsidiaries that may
materially adversely affect the consolidated financial condition or operations
of the Borrower or that may have a material adverse effect on the Borrower's
ability to perform its obligations under the Loan Documents, having regard for
its other financial obligations.
(k) Solvency. Borrower and each of its Subsidiaries is Solvent.
--------
(l) Title to Properties. Borrower and each of its Subsidiaries has good
-------------------
and marketable title to or interests in all of its properties and assets subject
to no liens, mortgages, pledges, security interests, encumbrances or charges of
any kind, except those granted to Bank and such others as are permitted under
Section 6.02(d) hereof.
18
(m) Tax Returns. Borrower and each of its Subsidiaries has filed, or
-----------
caused to be filed, in a timely manner all tax returns, reports and declarations
which are required to be filed by it (without requests for extension except as
previously disclosed in writing to Bank). All information in such tax returns,
reports and declarations is complete and accurate in all material respects.
Borrower and each of its Subsidiaries has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it,
except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or its
Subsidiary and with respect to which adequate reserves have been set aside on
its books. Adequate provision has been made for the payment of all accrued and
unpaid Federal, State, county, local, foreign and other taxes whether or not yet
due and payable and whether or not disputed.
(n) Compliance with Other Agreements and Applicable Laws. Neither Borrower
----------------------------------------------------
nor any of its Subsidiaries is in default in any material respect under, or in
violation in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment (including, but not limited to
any such agreement involving the debts or investments of Borrower or liens upon
its assets) to which it is a party or by which it or any of its assets are bound
and Borrower and each of its Subsidiaries is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or local
governmental authority.
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants. So long as any Note shall remain
---------------------
unpaid or the Bank shall have any Commitment hereunder, the Borrower will,
unless the Bank shall otherwise consent in writing:
(a) Financial Information. Furnish to the Bank:
---------------------
(i) as soon as available, but in any event within 120 days after the
end of each fiscal year of the Borrower, (1) a copy of the Borrower's annual
report to shareholders containing the consolidated balance sheets of itself and
its consolidated Subsidiaries as at the end of each fiscal year and the related
consolidated statements of income and changes in common stockholders' equity (or
comparable statement) employed in the business and changes in financial position
and cash flow for such year, setting forth in each case in comparative form the
figures for the previous year, accompanied by an unqualified report and opinion
thereon of independent certified public accountants acceptable to the Bank and,
if prepared, such accountants' letter to management, and (2) a copy of the
Borrower prepared consolidating financial statements prepared in connection with
each of the statements provided in subpart (1) above;
19
(ii) as soon as available, but in any event within forty-five (45) days
after the end of each fiscal quarter, the Borrower's unaudited consolidated and
consolidating balance sheets of itself and its consolidated Subsidiaries as at
the end of such period and the related unaudited consolidated and consolidating
statements of income and changes in common stockholders' equity (or comparable
statement) and changes in financial position and cash flow for such period and
year to date, setting forth in each case in comparative form the figures as at
the end of the previous fiscal year as to the balance sheet and the figures for
the previous corresponding period as to the other statements, certified by a
duly authorized officer of the Borrower as being fairly stated in all material
respects subject to year end adjustments; all such financial statements to be
complete and correct in all material respects and to be prepared in reasonable
detail acceptable to the Bank and in accordance with GAAP applied consistently
throughout the periods reflected therein (except as approved by such accountants
and disclosed therein); and
(iii) as soon as available, copies of all reports which the Borrower sends
to any of its security holders, and copies of all reports and registration
statements which the Borrower or any Subsidiary files with the S.E.C. or any
national securities exchange; and
(iv) (a) together with each delivery of financial statements of Borrower
and its Subsidiaries pursuant to subdivision (i) above, a certificate, executed
by the Borrower's chairman of the board (if an officer) or its president or one
of its vice presidents or by its chief financial officer stating that the
signers have reviewed the terms of this Agreement and have made, or caused to be
made under their supervision, a review in reasonable detail of the transactions
and condition of Borrower and its Subsidiaries during the accounting period
covered by such financial statements and that such review has not disclosed the
existence during or at the end of such accounting period, and that the signers
do not have knowledge of the existence as at the date of such certificate, of
any condition or event that constitutes an Event of Default or Potential Event
of Default, or, if any such condition or event existed or exists, specifying the
nature and period of existence thereof and what action Borrower has taken, is
taking and proposes to take with respect thereto; and (b) together with each
delivery of financial statements of Borrower and its Subsidiaries pursuant to
subdivision (i) and (ii) above, a certificate demonstrating in reasonable detail
compliance during and at the end of the applicable accounting periods with the
restrictions contained in Section 6.02 hereof;
20
(b) Notices and Information. Deliver to the Bank:
-----------------------
(i) promptly upon any officer of the Borrower obtaining knowledge (a)
of any condition or event which constitutes an Event of Default or Potential
Event of Default, (b) that any Person has given any notice to the Borrower or
any Subsidiary of the Borrower or taken any other action with respect to a
claimed default or event or condition of the type referred to in Section
7.01(e), (c) of the institution of any litigation involving an alleged liability
(including possible forfeiture of property) of the Borrower or any of its
Subsidiaries equal to or greater than $500,000 which is not, except for
deductibles and self insurance reserves, fully covered by insurance maintained
by Borrower or any adverse determination in any litigation involving a potential
liability of the Borrower or any of its Subsidiaries equal to or greater than
$500,000 which is not, except for deductibles and self insurance reserves, fully
covered by insurance maintained by Borrower or (d) of a material adverse change
in the business, operations, properties, assets or condition (financial or
otherwise) of the Borrower and its Subsidiaries, taken as a whole, an officers'
certificate specifying the nature and period of existence of any such condition
or event, or specifying the notice given or action taken by such holder or
Person and the nature of such claimed default, Event of Default, Potential Event
of Default, event or condition, and what action the Borrower has taken, is
taking and proposes to take with respect thereto;
(ii) promptly upon becoming aware of the occurrence of any (a)
Termination Event, or (b) non-exempt "prohibited transaction", as such term is
defined in Section 4975 of the Internal Revenue Code or a transaction prohibited
by Section 406 of ERISA, in connection with any Employee Benefit Plan or any
trust created thereunder, a written notice specifying the nature thereof, what
action the Borrower has taken, is taking or proposes to take with respect
thereto, and, when known, any action taken or threatened by the Internal Revenue
Service, the Department of Labor, or the Pension Benefit Guaranty Corporation
with respect thereto;
(iii) with reasonable promptness copies of (a) all notices received by
the Borrower or any of its ERISA Affiliates of the Pension Benefit Guaranty
Corporation's intent to terminate any Pension Plan or to have a trustee
appointed to administer any Pension Plan and (b) all notices received by the
Borrower or any of its ERISA Affiliates from a Multiemployer Plan sponsor
concerning the imposition or amount of withdrawal liability pursuant to Section
4202 of ERISA;
21
(iv) promptly, and in any event within 30 days after receipt thereof, a
copy of any notice, summons, citation, directive, letter or other form of
communication from any governmental authority or court in any way
concerning any action or omission on the part of the Borrower or any of its
Subsidiaries in connection with any substance defined as toxic or hazardous
by any applicable federal, state or local law, rule, regulation, order or
directive or any waste or byproduct thereof, or concerning the filing of a
lien upon, against or in connection with the Borrower, its Subsidiaries, or
any of their leased or owned real or personal property, in connection with
a Hazardous Substance Superfund or a Post-Closure Liability Fund as
maintained pursuant to (S) 9507 of the Internal Revenue Code; and
(v) promptly, and in any event within 30 days after request, such other
information and data with respect to the Borrower or any of its
Subsidiaries as from time to time may be reasonably requested by the Bank
and is reasonably available to Borrower.
(c) Corporate Existence, Etc. At all times preserve and keep in full force
-------------------------
and effect its and its Subsidiaries' corporate existence and rights, licenses
and franchises material to its business and those of each of its Subsidiaries;
provided, however, that the corporate existence of any such Subsidiary may be
-------- -------
terminated if such termination is in the best interest of the Borrower and is
not materially disadvantageous to the holder of any Note.
(d) Payment of Taxes and Claims. Pay, and cause each of its Subsidiaries
---------------------------
to pay, all taxes, assessments and other governmental charges imposed upon it or
any of its properties or assets or in respect of any of its franchises,
business, income or property before any penalty or interest accrues thereon, and
all claims (including, without limitation, claims for labor, services, materials
and supplies) for sums which have become due and payable and which by law have
or may become a lien upon any of its properties or assets, prior to the time
when any penalty or fine shall be incurred with respect thereto; provided that
no such charge or claim need be paid if being contested in good faith by
appropriate proceedings promptly instituted and diligently conducted and if such
reserve or other appropriate provision, if any, as shall be required in
conformity with GAAP shall have been made therefor.
(e) Maintenance of Properties; Insurance. Maintain or cause to be
------------------------------------
maintained in good repair, working order and condition all material properties
used or useful in the business of the Borrower and its Subsidiaries and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other
22
corporations. The Borrower will comply with any other insurance requirement set
forth in any other Loan Document.
(f) Inspection. Permit any authorized representatives designated by the
----------
Bank to visit and inspect any of the properties of the Borrower or any of its
Subsidiaries, including its and their financial and accounting records, and to
make copies and take extracts therefrom, and to discuss its and their affairs,
finances and accounts with its and their officers and independent public
accountants, all at such reasonable times during normal business hours and as
often as may be reasonably requested.
(g) Compliance with Laws Etc. Exercise, and cause each of its Subsidiaries
-------------------------
to exercise, all due diligence in order to comply with the requirements of all
applicable laws, rules, regulations and orders of any governmental authority,
including, without limitation, all rules and regulations of public utility
commissions or similar regulatory authorities, and all environmental laws,
rules, regulations and orders, noncompliance with which would materially
adversely affect the business, properties, assets, operations or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken as a whole.
(h) Hazardous Waste Studies. Promptly, and in any event within thirty (30)
-----------------------
days after submission, provide the Bank with copies of all such investigations,
studies, samplings and testings as may be requested by any governmental or
regulatory authority relative to any substance defined as hazardous or toxic by
any applicable federal, state or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at or affecting any real property
or any facility owned, leased or used by the Borrower or any Subsidiary. The
foregoing shall not include sampling and testing of water, waste water and
effluent conducted by the Subsidiaries of Borrower on periodic bases as a normal
part of their water delivery and wastewater treatment businesses.
SECTION 6.02. Negative Covenants. So long as any Note shall remain unpaid
------------------
or the Bank shall have any Commitment hereunder, the Borrower will not, without
the written consent of the Bank:
(a) Leverage Ratio. At any time, permit the ratio of Consolidated
--------------
Liabilities to Consolidated Tangible Net Worth to be more than 3.00:1.00.
(b) Consolidated Tangible Net Worth. At any time, permit Consolidated
-------------------------------
Tangible Net Worth to be less than $25,500,000.
(c) Consolidated Net Profit. At the end of any fiscal quarter of the
-----------------------
Borrower, permit Consolidated Net Profit, determined on a four quarter rolling
basis, to be less than $1.00.
(d) Liens Etc. Create or suffer to exist, or permit any of its
---------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to
23
assign, any right to receive income, in each case to secure any Debt of any
Person other than (i) Liens in favor of the Bank; (ii) Liens reflected on the
financial statements referred to in Section 5.01(e) hereof and other Liens
existing on the date hereof and set forth in Schedule 6.02(d) hereto; (iii)
purchase money Liens upon or in any property acquired or held by the Borrower or
any Subsidiary in the ordinary course of business to secure the purchase price
of such property or to secure indebtedness incurred solely for the purpose of
financing the acquisition of such property: (iv) Liens existing on property
acquired by the Borrower or any Subsidiary, and all refundings and extensions of
any such Liens, and (v) Liens, deposits and/or pledges made to secure the
performance of operating leases; provided that the principal amount of Debt
secured by any such Lien permitted hereunder shall not exceed an amount equal to
(x) one hundred percent (100%) of the cost of the real property subject to such
lien or security interest or (y) one hundred percent (100%) of the cost of the
personal property subject to such lien or security interest, and further
provided that none of such liens or security interests shall extend to other
assets of the Borrower or its Subsidiaries. The Bank acknowledges that (A)
Suburban has an existing first mortgage indenture encumbering substantially all
of its assets to secure two series (A and B) of first mortgage bonds and that
Suburban proposes to issue a third series (C) of first mortgage bonds in a
principal amount of $8,000,000 and (B) NMUI has an existing first mortgage
indenture encumbering substantially all of its assets to secure its Series A
first mortgage bonds and proposes to issue Series B bonds in a principal amount
of $4,000,000.
(e) Debt. Create, incur, assume or permit to exist, or permit any
----
Subsidiary to create, incur, assume or permit to exist, any indebtedness or
liabilities resulting from borrowings, loans or advances, whether matured or
unmatured, liquidated or unliquidated, joint or several, secured or unsecured,
except for (i) Debt incurred pursuant to this Agreement and the other Loan
Documents, (ii) Debts, revolving lines of credit and lease obligations of
Borrower existing as of, and disclosed to Bank prior to the date of this
Agreement, including two existing lines of credit with ▇▇▇▇▇ Fargo Bank,
National Association, (iii) secured indebtedness for purchase money financing of
equipment which is permitted under Section 6.02(d)(iii) not to exceed an
aggregate of $500,000, (iv) $8,000,000 of unsecured debt of Suburban to ▇▇▇▇▇
Fargo Bank, National Association pursuant to two lines of credit, (v) the new
Suburban Series C first mortgage bonds described in subsection (d) above, and
(vi) the new NMUI Series B first mortgage bonds described in subsection (d)
above.
(f) Consolidation, Merger or Dissolution. (i) Consolidate with or merge
------------------------------------
into any other Person, (ii) wind up, liquidate or dissolve or (iii) agree to do
any of the foregoing.
(h) Loans, Investments, Secondary Liabilities. Make or permit to remain
-----------------------------------------
outstanding, or permit any Subsidiary to make or permit to remain outstanding,
any loan or advance to, or guarantee, induce or otherwise become contingently
liable, directly or indirectly, in connection with the obligations, stock or
dividends of, or own, purchase or acquire any stock, obligations or securities
of or any other interest in, or make any capital contribution to, any other
Person, except that the Borrower and its Subsidiaries may:
24
(i) own, purchase or acquire certificates of deposit issued by a
bank, commercial paper rated Moody's P-1, municipal bonds rated ▇▇▇▇▇'▇ ▇▇ or
better, direct obligations of the United States of America or its agencies, and
obligations guaranteed by the United States of America;
(ii) continue to own the existing capital stock of the Borrower's
Subsidiaries and make new purchases of the capital stock of other entities as
long as such new investments do not exceed in the aggregate Five Million Dollars
($5,000,000) outstanding at any one time;
(iii) endorse negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business;
(iv) allow the Borrower's Subsidiaries to make or permit to
remain outstanding advances from the Borrower's Subsidiaries to the Borrower;
(v) make or permit to remain outstanding loans or advances to the
Borrower's Subsidiaries or enter into or permit to remain outstanding guarantees
in connection with the obligations of the Borrower's Subsidiaries; provided,
--------
however, that any outstanding loans or advances by Borrower to its Subsidiaries
-------
shall be evidenced by negotiable promissory notes, in form and substance
satisfactory to Bank, and which notes shall provide for the assignment thereof
to the Bank as collateral security for the repayment of the Loans and any other
obligations of the Borrower hereunder upon the demand of the Bank;
(vi) make or permit to remain outstanding loans and advances to any of
its officers, shareholders or affiliates or enter into or permit to remain
outstanding guarantees in connection with the obligations of its officers,
shareholders or affiliates, in an aggregate amount for all such loans, advances
and guarantees not exceeding $100,000 in addition to the loans outstanding and
reflected on the Borrower's financial statements dated December 31, 1995;
(vii) guaranty the indebtedness of Suburban under that certain Credit
Agreement between Suburban and ▇▇▇▇▇ Fargo Bank, National Association dated as
of June 30, 1996 in a maximum amount at any one time not to exceed $8,000,000
for principal, plus all interest thereon and costs and expenses pertaining to
the enforcement of the guaranty and/or the collection of such indebtedness; and
(viii) guaranty the indebtedness of NMUI under that certain Loan
Agreement between NMUI and Sunwest Bank of Albuquerque dated
25
as of January 25, 1995 in a maximum amount at any one time not to
exceed $4,000,000 for principal, plus all interest thereon and all
costs and expenses pertaining to the enforcement of the guaranty and/or
the collection of such indebtedness.
(i) Asset Sales. Convey, sell, lease, transfer or otherwise dispose of, or
-----------
permit any Subsidiary to convey, sell, lease, transfer or otherwise dispose of,
in one transaction or a series of transactions, all or any part of its or its
Subsidiary's business, property or fixed assets outside the ordinary course of
business, whether now owned or hereafter acquired, except that the Borrower and
its Subsidiaries may convey, sell, lease, transfer or otherwise dispose of
business, property or fixed assets for consideration which in the aggregate does
not exceed $500,000 per year. The foregoing convenant shall not extend to any
property taken by eminent domain by any governmental authority or other person
or entity having the power of eminent domain or to any sale in lieu of
condemnation to a governmental authority or other person or entity having the
power of eminent domain made after threat of condemnation by such governmental
authority or other person or entity.
(j) Hostile Tender Offers. Make any offer to purchase or acquire, or
---------------------
consummate a purchase or acquisition of, five percent (5%) or more of the
capital stock of any publicly held corporation or other publicly held business
entity, unless the board of directors of such corporation or business entity has
notified the Borrower that it invites or does not oppose such offer or purchase.
(k) Distributions. Upon the occurrence and during the continuance of an
-------------
Event of Default or Potential Event of Default, authorize, declare or pay, or
permit any of its Subsidiaries to authorize, declare or pay, any Distributions.
(l) Transactions with Affiliates. Neither Borrower nor any of its
----------------------------
Subsidiaries shall enter into any transaction for the purchase, sale or exchange
of property or the rendering of any service to or by any affiliate, except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
or its Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or its Subsidiary than Borrower or its Subsidiary
would obtain in a comparable arm's length transaction with an unaffiliated
person.
(m) Books and Records. Borrower will, and will cause each of its
-----------------
Subsidiaries to, keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of applicable law
shall be made of all dealings and transactions in relation to its business and
activities.
(n) Restructure. Make any change in Borrower's financial restructure, the
-----------
principal nature of Borrower's business operations (taken as a whole), or the
date of its fiscal year.
26
ARTICLE VII
EVENTS OF DEFAULT
SECTION 7.01. Events of Default. If any of the following events ("Events
----------------- ------
of Default") shall occur and be continuing:
----------
(a) Borrower shall fail to pay within three (3) days of the date when due,
any principal, interest, fees or other amounts payable under any of the Loan
Documents; or
(b) Any representation or warranty made by the Borrower herein or by the
Borrower (or any of its officers) in connection with the Loan Documents shall
prove to have been incorrect in any material respect when made; or
(c) Borrower shall fail to perform or observe any term, any affirmative or
negative covenant, including, but not limited to, those covenants set forth in
Sections 6.01 and 6.02 hereof, or any other agreement contained in this
Agreement on its part to be performed or observed (other than those referred to
in subsections (a) and (b) above); and with respect to any such default which by
its nature can be cured, such default shall continue for a period of twenty (20)
days from its occurrence; or
(d) The Borrower or any of its Subsidiaries shall default in the performance
of or compliance with any term contained in any Loan Document other than this
Agreement and such default shall not have been remedied or waived within any
applicable grace period in such Loan Document or in (c) above; or
(e) (i) The Borrower or any of its Subsidiaries shall (A) fail to pay any
principal of, or premium or interest on, any Debt, the aggregate outstanding
principal amount of which is at least $100,000 (excluding Debt evidenced by the
Notes), when due (whether by scheduled maturity, required prepayment,
acceleration, demand or otherwise) and such failure shall continue after the
applicable grace period, if any, specified in the agreement or instrument
relating to such Debt, or (B) fail to perform or observe any term, covenant or
condition on its part to be performed or observed under any agreement or
instrument relating to any such Debt or material to the performance, business,
property, assets, condition (financing or otherwise) or prospects of the
Borrower and its Subsidiaries taken as a whole, when required to be performed or
observed, and such failure shall continue after the applicable grace period, if
any, specified in such agreement or instrument; or
(f) (i) The Borrower or any of its Subsidiaries shall commence any case,
proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
27
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days; or (iii) there shall be commenced
against the Borrower or any of its Subsidiaries any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint or
similar process against all or any substantial part of its assets which results
in the entry of an order for any such relief which shall not have been vacated,
discharged, or stayed or bonded pending appeal within sixty (60) days from the
entry thereof; or (iv) the Borrower or any of its Subsidiaries shall take any
action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clauses (i), (ii) and (iii) above;
or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due; or
(g) One or more judgments or decrees shall be entered against the Borrower
or any of its Subsidiaries involving in the aggregate a liability (not paid or
fully covered by insurance or reserves) equal to or greater than $250,000 and
all such judgments or decrees shall not have been vacated, discharged, or stayed
or bonded pending appeal within thirty (30) days from the entry thereof; or
(h) (i) The Borrower or any of its ERISA Affiliates fails to make full
payment when due of all material amounts which, under the provisions of any
Pension Plan or Section 412 of the Internal Revenue Code, the Borrower or any of
its ERISA Affiliates is required to pay as contributions thereto and such
development is not remedied or reversed within fifteen (15) days after the
Borrower knows of such development;
(ii) any material accumulated funding deficiency occurs or exists,
whether or not waived, with respect-to any Pension Plan and such development is
not remedied or reversed within fifteen (15) days after the Borrower knows of
such development;
(iii) the excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the assets of
such Pension Plans (excluding in such computation Pension Plans with assets
greater than benefit liabilities) allocable to such benefit liabilities are
greater than five percent (5%) of Consolidated Tangible Net Worth and such
development is not remedied or reversed within fifteen (15) days after the
Borrower knows of such development;
(iv) the Borrower or any of its ERISA Affiliates enters into any
transaction which has as its principal purpose the evasion of liability under
Subtitle D of Title IV of ERISA:
(v) (A) Any Pension Plan maintained by the Borrower or any of its ERISA
Affiliates shall be terminated within the meaning of Title IV of ERISA in a
distress
28
termination, or (B) a trustee shall be appointed by an appropriate United States
district court in accordance with Section 4042 of ERISA to administer any
Pension Plan, or (C) the Pension Benefit Guaranty Corporation (or any successor
thereto) shall institute proceedings to terminate any Pension Plan or to appoint
a trustee to administer any Pension Plan in accordance with Section 4042 of
ERISA, or (D) the Borrower or any of its ERISA Affiliates shall withdraw (under
Section 4063 of ERISA) from a Pension Plan, if as of the date of the event
listed in subclauses (A)-(D) above or any subsequent date, either the Borrower
or its ERISA Affiliates has any material liability (such liability to include,
without limitation, any liability to the Pension Benefit Guaranty Corporation,
or any successor thereto, or to any other party under Sections 4062, 4063 or
4064 of ERISA or any other provision of law) resulting from or otherwise
associated with the events listed in subclauses (A)-(D) above;
(vi) As used in this subsection 7.01(h) the term "accumulated funding
deficiency" has the meaning specified in Section 412 of the Internal Revenue
Code, and the term "benefit liabilities" has the meaning specified in Section
4001 of ERISA;
(i) There shall be instituted against the Borrower or any Subsidiary, or
against any guarantor, any proceeding for which forfeiture of any property is a
potential penalty and such proceeding remains undismissed, undischarged or
unbonded for a period of thirty (30) days from the date the Borrower knows of
such proceeding; or
(j) A Change of Control shall have occurred;
Then, (i) upon the occurrence of any Event of Default described in clause
(f) above, the Commitment shall immediately terminate and all Loans hereunder
with accrued interest thereon, and all other amounts owing under the Loan
Documents shall automatically become due and payable, and (ii) upon the
occurrence of any other Event of Default, the Bank may, by notice to the
Borrower, declare the Commitment to be terminated forthwith, whereupon the
Commitment shall immediately terminate; and, by notice to the Borrower, declare
the Loans hereunder, with accrued interest thereon, and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Bank shall have all rights, powers and
remedies available under each of the Loan Documents, or accorded by law,
including, without limitation, the right to resort to any or all security for
any credit accommodation from the Bank subject hereto and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of Bank in connection with each of the Loan
Documents may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity. Except as expressly provided above in this Section, presentment, demand,
protest and all other notices of any kind are hereby expressly waived.
Notwithstanding any other provision of this Agreement, including Section 8.02,
notices to the Borrower under this Section shall be communicated in writing
(including telex or facsimile transmissions).
29
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision of
---------------
the Loan Documents nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Bank, and then such waiver or consent shall be effective only in the specific
instance and for the specific purpose for which given.
SECTION 8.02. Notices, Etc. Except as otherwise set forth in this
------------
Agreement, all notices and other communications provided for hereunder shall be
in writing (including facsimile communication) and mailed certified mail, return
receipt requested or sent by facsimile or delivered, if to the Borrower, at its
address set forth on the signature page hereof; and if to the Bank, at its
address set forth on the signature page hereof; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other parties. All such notices and communications shall be effective upon
personal delivery or upon receipt when sent by facsimile, or on the date of
receipt or refusal indicated on the return receipt if sent by certified mail,
except that notices and communications to the Bank pursuant to Article II or VII
shall not be effective until received by the Bank.
SECTION 8.03. Right of Setoff: Security Interest in Deposit Accounts.
-------------------------------------------------------
Upon and only after the occurrence of any Event of Default not cured within any
applicable grace period, the Bank is hereby authorized by the Borrower, at any
time and from time to time, without notice, (a) to set off against, and to
appropriate and apply to the payment of, the obligations and liabilities of the
Borrower under the Loan Documents (whether matured or unmatured, fixed or
contingent or liquidated or unliquidated) any and all amounts owing by the Bank
to the Borrower (whether payable in Dollars or any other currency, whether
matured or unmatured, and, in the case of deposits, whether general or special,
time or demand and however evidenced) and (b) pending any such action, to the
extent necessary, to hold such amounts as collateral to secure such obligations
and liabilities and to return as unpaid for insufficient funds any and all
checks and other items drawn against any deposits so held as the Bank in its
sole discretion may elect. The Borrower hereby grants to the Bank a security
interest in all deposits and accounts maintained with the Bank and with any
other financial institution. The Bank is authorized to debit any account
maintained with it by the Borrower for any amount of principal, interest or fees
which are then due and owing to the Bank.
SECTION 8.04. No Waiver; Remedies. No failure on the part of either party
-------------------
hereto to exercise, and no delay in exercising, any right under any of the Loan
Documents shall operate as a waiver thereof; nor shall any single or partial
exercise of any right under any of the Loan Documents preclude any other or
further exercise thereof or the exercise of any other right. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
30
SECTION 8.05. Costs and Expenses. Borrower shall pay to Bank immediately
------------------
upon demand the full amount of all costs and expenses, including reasonable
attorneys' fees (to include outside counsel fees and all allocated costs of
Bank's in-house counsel), incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and each other of the Loan
Documents, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents (including, without
limitation, in appellate, bankruptcy, insolvency, liquidation, reorganization,
moratorium or other similar proceedings) or the restructuring of the Loan
Documents, and (c) the prosecution or defense of any action in any way related
to any of the Loan Documents, including, without limitation, any action for
declaratory relief.
SECTION 8.06. Participations. The Bank may sell, assign, transfer,
--------------
negotiate or grant participations to other financial institutions in all or part
of the obligations of the Borrower outstanding under the Loan Documents,
provided that any such sale, assignment, transfer, negotiation or participation
shall be in compliance with the applicable federal and state securities laws;
and provided further that any assignee or transferee agrees to be bound by the
terms and conditions of this Agreement. The Bank may, in connection with any
actual or proposed assignment or participation, disclose to the actual or
proposed assignee or participant, any information relating to the Borrower or
any of its Subsidiaries.
SECTION 8.07. Effectiveness: Binding Effect. This Agreement shall become
-----------------------------
effective when it shall have been executed by the Borrower and the Bank and
thereafter shall be binding upon and inure to the benefit of the Borrower, the
Bank and their respective successors and assigns, except that the Borrower shall
not have the right to assign its rights hereunder or any interest herein without
the prior written consent of the Bank.
SECTION 8.08. Governing Law; Choice of Forum; Service of Process; Jury
--------------------------------------------------------
Trial Waiver.
------------
(a) The validity, interpretation and enforcement of this Agreement and the
other Loan Documents and any dispute arising out of the relationship between the
parties hereto, whether in contract, tort, equity or otherwise, shall be
governed by the internal laws of the State of California (without giving effect
to principles of conflicts of law).
(b) Borrower and Bank irrevocably consent and submit to the non-exclusive
jurisdiction of the state courts of the County of Los Angeles and the United
States District Court for the Central District of California and waive any
objection based on venue or forum non conveniens with respect to any action
----- --- ----------
instituted therein arising under this Agreement or any of the other Loan
Documents or in any way connected with or related or incidental to the dealings
of the parties hereto in respect of this Agreement or any of the other Loan
Documents or the transactions related hereto or thereto, in each case whether
now existing or hereafter arising, and whether in contract, tort, equity or
otherwise, and agree that any dispute with respect to any such matters shall be
heard only in the courts described above.
31
(c) Borrower hereby waives personal service of any and all process upon it
and consents that all such service of process may be made by certified mail
(return receipt requested) directed to its address set forth on the signature
pages hereof and service so made shall be deemed to be completed on the date of
receipt or refusal indicated on the return receipt or, at Bank's option, by
service upon Borrower in any other manner provided under the rules of any such
courts. Within thirty (30) days after such service, Borrower shall appear in
answer to such process, failing which Borrower shall be deemed in default and
judgment may be entered by Bank against Borrower for the amount of the claim and
other relief requested.
(d) BORROWER AND BANK EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY
CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (a) ARISING UNDER THIS AGREEMENT OR ANY
OF THE OTHER LOAN DOCUMENTS OR (b) IN ANY WAY CONNECTED WITH OR RELATED OR
INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT OF THIS AGREEMENT OR
ANY OF THE OTHER LOAN DOCUMENTS OR THE TRANSACTIONS RELATED HERETO OR THERETO IN
EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND WHETHER IN CONTRACT,
TORT, EQUITY OR OTHERWISE. BORROWER AND BANK EACH HEREBY AGREES AND CONSENTS
THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED BY COURT
TRIAL WITHOUT A JURY AND THAT BORROWER OR BANK MAY FILE AN ORIGINAL COUNTERPART
OF A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF
THE PARTIES HERETO TO THE WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Bank shall not have any liability to Borrower (whether in tort,
contract, equity or otherwise) for losses suffered by Borrower in connection
with, arising out of, or in any way related to the transactions or relationships
contemplated by this Agreement, or any act, omission or event occurring in
connection herewith, unless it is determined by a final and non-appealable
judgment or court order binding on Bank, that the losses were the result of acts
or omissions constituting gross negligence or willful misconduct. In any such
litigation, Bank shall be entitled to the benefit of the rebuttable presumption
that it acted in good faith and with the exercise of ordinary care in the
performance by it of the terms of this Agreement.
SECTION 8.09. Waiver of Notices. Borrower hereby expressly waives demand,
-----------------
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments, included in or evidencing any of the obligations,
and any and all other demands and notices of any kind or nature whatsoever with
respect to the obligations and this Agreement, except such as are expressly
provided for herein. No notice to or demand on Borrower which Bank may elect to
give shall entitle Borrower to any other or further notice or demand in the
same, similar or other circumstances.
SECTION 8.10. Entire Agreement. This Agreement with Exhibits and Schedules
----------------
and the other Loan Documents embody the entire agreement and understanding
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between the parties hereto and supersede all prior agreements and understandings
relating to the subject matter hereof.
SECTION 8.11. Separability of Provisions. In case any one or more of the
--------------------------
provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 8.12. Execution in Counterparts. This Agreement may be executed
-------------------------
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
MELLON BANK, N.A. SOUTHWEST WATER COMPANY
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇ By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
----------------------- ----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Vice President Title: President and Chief Executive
Officer
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
----------------------------------
Name: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Vice President Finance
Chief Financial Officer
Address: Address:
Middle Market Banking ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Suite 3800 Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ Vice President Finance
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇ Chief Financial Officer
Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇ Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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