Exhibit 4.2
LOAN AGREEMENT
BETWEEN
PENNSYLVANIA ECONOMIC DEVELOPMENT FINANCING AUTHORITY
(THE "ISSUER")
AND
THE YORK WATER COMPANY
(THE "COMPANY")
DATED AS OF APRIL 1, 2004
TABLE OF CONTENTS
ARTICLE I DEFINITIONS AND CERTAIN RULES OF INTERPRETATION ......................... 2
SECTION 1.1. Definitions ....................................................... 2
SECTION 1.2. Certain Rules of Interpretation ................................... 7
ARTICLE II REPRESENTATIONS ........................................................ 8
SECTION 2.1. Representations and Findings of Issuer ............................ 8
SECTION 2.2. Representations by the Company .................................... 10
ARTICLE III THE PROJECT ........................................................... 12
SECTION 3.1. Acquisition and Construction ...................................... 12
SECTION 3.2. Construction Fund ................................................. 13
SECTION 3.3. Establishment of Completion Date .................................. 14
ARTICLE IV LOAN AND REPAYMENT; OPERATION OF PROJECT ............................... 15
SECTION 4.1. Loan of Bond Proceeds ............................................. 15
SECTION 4.2. Repayment of Loan ................................................. 15
SECTION 4.3. Operation ......................................................... 15
SECTION 4.4. Insurance ......................................................... 15
SECTION 4.5. Maintenance and Repair ............................................ 16
SECTION 4.6. Right to Discontinue Operation of Project ......................... 16
SECTION 4.7. Insurance and Condemnation Awards ................................. 16
SECTION 4.8. Workers' Compensation Coverage .................................... 16
SECTION 4.9. Taxes, Claims for Labor and Materials, Compliance with Laws ....... 16
SECTION 4.10. Issuer's Limited Liability ....................................... 17
SECTION 4.11. Right of Inspection .............................................. 17
ARTICLE V ISSUANCE OF BONDS; SECURITY; INVESTMENTS ................................ 18
SECTION 5.1. Issuance of Bonds ................................................. 18
SECTION 5.2. Security for the Bonds ............................................ 18
SECTION 5.3. Reserved .......................................................... 18
SECTION 5.4. Investment of Funds ............................................... 18
ARTICLE VI COMPANY OBLIGATIONS; PROVISIONS FOR PAYMENT; COVENANTS ................. 18
SECTION 6.1. Company Approval of Issuance of Bonds ............................. 18
SECTION 6.2. Refunding of Bonds ................................................ 19
SECTION 6.3. Redemption of Bonds ............................................... 19
SECTION 6.4. Installment Loan Payments ......................................... 19
SECTION 6.5. Administrative Expenses ........................................... 20
SECTION 6.6. Payments to Issuer and Local XXX .................................. 21
SECTION 6.7. Obligations of the Company Absolute and Unconditional ............. 21
SECTION 6.8. Option to Prepay Amounts Under Loan Agreement in Certain Events ... 21
SECTION 6.9. Company's Performance Under Indenture ............................. 22
SECTION 6.10. Covenants Regarding Tax Exemption ................................ 22
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SECTION 6.11. Company's Option to Remarket Bonds Purchased in Lieu of Redemption 22
SECTION 6.12. Nondiscrimination - Sexual Harassment ............................ 23
ARTICLE VII PARTICULAR AGREEMENTS ................................................. 23
SECTION 7.1. Indemnified Party's Release and Indemnification Provisions ........ 23
SECTION 7.2. Maintenance of Corporate Existence ................................ 24
SECTION 7.3. Financial Information ............................................. 25
SECTION 7.4. Agreement of Issuer Not to Assign or Pledge ....................... 26
SECTION 7.5. Reference to Bonds Ineffective after Bonds Paid ................... 26
SECTION 7.6. Assignment, Sale or Lease of Project .............................. 27
SECTION 7.7. Amendment of Loan Agreement or Indenture .......................... 28
SECTION 7.8. Waiver of Vendor's Lien ........................................... 28
SECTION 7.9. Limitations on Indebtedness ....................................... 28
SECTION 7.10. Limitation on Liens .............................................. 29
SECTION 7.11. Dividends, Stock Purchases ....................................... 30
SECTION 7.12. Termination of Pension Plans ..................................... 31
ARTICLE VIII EVENTS OF DEFAULT AND REMEDIES ....................................... 31
SECTION 8.1. Defaults and Remedies ............................................. 31
SECTION 8.2. Annulment of Acceleration ......................................... 33
SECTION 8.3. Agreement to Pay Attorneys' Fees and Expenses ..................... 33
SECTION 8.4. General Enforcement Provisions .................................... 33
SECTION 8.5. Notice of Default ................................................. 34
SECTION 8.6. Unassigned Issuer's Rights ........................................ 34
ARTICLE IX MISCELLANEOUS .......................................................... 34
SECTION 9.1. Term of Loan Agreement ............................................ 34
SECTION 9.2. Notices ........................................................... 34
SECTION 9.3. Benefit of Parties ................................................ 35
SECTION 9.4. Severability ...................................................... 36
SECTION 9.5. Counterparts ...................................................... 36
SECTION 9.6. Captions .......................................................... 36
SECTION 9.7. Law Governing Construction of Loan Agreement ...................... 36
SECTION 9.8. Payments on Non-Business Days ..................................... 36
SECTION 9.9. Payments to be Sufficient to Meet DTC Requirements ................ 36
SECTION 9.10. Reserved ......................................................... 36
SECTION 9.11. Limitation of Liability; No Personal Liability ................... 36
Exhibit A - Project Description
Exhibit B - Nondiscrimination/Sexual Harassment Clause
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LOAN AGREEMENT
This Loan Agreement dated as of April 1, 2004, between the Pennsylvania
Economic Development Financing Authority (the "Issuer"), a public
instrumentality of the Commonwealth of Pennsylvania and a public body corporate
and politic organized and existing under the Pennsylvania Economic Development
Financing Law, as amended (the "Act") of the Commonwealth of Pennsylvania (the
"Commonwealth"), and The York Water Company, a Pennsylvania corporation (the
"Company"),
WITNESSETH:
WHEREAS, the Issuer is empowered by the provisions of the Act to enter
into agreements providing for the financing of the acquisition, construction and
equipping of industrial, commercial and specialized enterprises for the public
for purposes of alleviating unemployment, maintaining employment at a high level
and encouraging economic development in the Commonwealth of Pennsylvania and
promoting the health, safety and general welfare of the people of the
Commonwealth of Pennsylvania within the meaning of the Act, including water
utility facilities; and
WHEREAS, the Issuer has determined to issue its Exempt Facility Revenue
Bonds, (York Water Company Project) (the "Bonds") pursuant to the Indenture
(hereinafter defined) to provide funds to loan to the Company for the financing
of costs associated with the construction of a water intake pumping station
adjacent to the Susquehanna River and a water main pipeline, together with
related pumps, fittings, valves and other water infrastructure system
improvements, all for the purpose of providing an additional source of surface
water supply to meet the needs of the Company's residential, commercial and
industrial customers (the "Project"), and paying some or all of costs of
issuance of the Bonds; and
WHEREAS, the Issuer has authorized the issuance of $7,300,000 aggregate
principal amount of the Bonds designated "Series A of 2004" (the "Series A
Bonds") which will fund a portion of the costs of the Project; and
WHEREAS, the Issuer will enter into this Loan Agreement with the Company,
under the terms of which the Company will agree to repay the loan of the
proceeds of the Bonds by paying to the Issuer moneys sufficient to pay the
principal of, and premium (if any) and interest on the Bonds as the same become
due and payable and to pay certain administrative expenses in connection with
the Bonds; and
WHEREAS, as security for the payment of said Bonds, the Issuer will assign
and pledge to Manufacturers and Traders Trust Company, as trustee (the
"Trustee") under the terms of the Trust Indenture dated as of April 1, 2004 (the
"Indenture") certain rights, title and interest of the Issuer in (i) this Loan
Agreement (except for the indemnification rights and expense reimbursement
rights contained herein), and (ii) all amounts on deposit from time to time in
the various funds created in, and subject to the conditions set forth in, the
Indenture; and
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NOW THEREFORE, in consideration of the covenants and agreements herein
made, and subject to the conditions herein set forth, the Issuer and the
Company, intending to be legally bound, covenant and agree as follows:
ARTICLE I
Definitions And Certain Rules Of Interpretation
SECTION 1.1. Definitions.
All words and terms as used in this Loan Agreement shall have the
same meanings given such words and terms in the Indenture, unless the context or
use clearly indicates another or different meaning or intent. In addition, the
terms defined in the recitals to this Loan Agreement shall have the meanings set
forth therein and the following words and terms as used in this Loan Agreement
shall have the following meanings, unless the context or use clearly indicates
another or different meaning or intent:
"Capitalized Lease" shall mean any lease, the obligation for Rentals
with respect to which is required to be capitalized on a balance sheet of the
lessee in accordance with generally accepted accounting principles.
"Capitalized Rentals" shall mean as of the date of any determination
the amount at which the aggregate Rentals due and to become due under all
Capitalized Leases under which the Company is a lessee would be reflected as a
liability on a balance sheet of the Company.
"Consolidated Current Assets" and "Consolidated Current Liabilities"
shall mean such assets and liabilities of the Company and its subsidiaries on a
consolidated basis as shall be determined in accordance with generally accepted
accounting principles to constitute current assets and current liabilities,
respectively.
"Costs of Issuance" means all costs and expenses incurred by the
Issuer, the Local XXX or the Company in connection with the issuance and sale of
the Series A Bonds or Additional Bonds, including without limitation (i) fees
and expenses of accountants, attorneys, engineers, credit enhancers and
financial advisors, (ii) materials, supplies, and printing and engraving costs,
(iii) recording and filing fees, (iv) rating agency fees, (v) the initial and
first year's annual fees and expenses (including, without limitation, counsel
fees and expenses) of the Trustee, (vi) any underwriters' discount or fee and
expenses and (vii) the Issuer's issuance fee and administrative and overhead
expenses as provided in Section 6.6 of this Loan Agreement.
"County" means the County of York, a political subdivision of the
Commonwealth.
"Department" means the Department of Community and Economic
Development of the Commonwealth.
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"Default" shall mean any event or condition, the occurrence of which
would, with the lapse of time or the giving of notice, or both, constitute an
Event of Default as defined in Section 8.1 hereof.
"Environmental Legal Requirement" shall mean any applicable law
relating to public health, safety or the environment, including, without
limitation, relating to releases, discharges or emissions to air, water, land or
groundwater, to the withdrawal or use of groundwater, to the use and handling of
polychlorinated biphenyls or asbestos, to the disposal, treatment, storage or
management of solid or hazardous wastes or to exposure to toxic or hazardous
materials, to the handling, transportation, discharge or release of gaseous or
liquid substances and any regulation, order, notice or demand issued pursuant to
such statute or ordinance, in each case applicable to the Property of the
Company or the operation, construction or modification of any thereof, including
without limitation the following: the Clean Air Act, the Federal Water Pollution
Control Act, the Safe Drinking Water Act, the Toxic Substances Control Act, the
Comprehensive Environmental Response Compensation and Liability Act as amended
by the Superfund Amendments and Reauthorization Act of 1986, the Resource
Conservation and Recovery Act as amended by the Solid and Hazardous Waste
Amendments of 1984, the Occupational Safety and Health Act, the Emergency
Planning and Community Right-to-Know Act of 1986, the Solid Waste Disposal Act,
the Pennsylvania Safe Drinking Water Act and any other state statutes addressing
similar matters, and any state statute providing for financial responsibility
for cleanup or other actions with respect to the release or threatened release
of hazardous substances and any state nuisance statute.
"Excepted Encumbrances" shall mean any of the following:
(a) liens for taxes, assessments or governmental charges not
delinquent and liens for workers' compensation awards and similar obligations
not delinquent and undetermined liens or charges incidental to construction;
(b) any liens securing Indebtedness neither assumed nor guaranteed
by the Company on which it customarily pays interest, existing in or relating to
real estate acquired by the Company for transmission, distribution or
right-of-way purposes;
(c) easements or reservations in any Property of the Company created
for the purpose of roads, railroads, railroad side tracks, water and gas
transmission and distribution mains, conduits, water power rights of the
Commonwealth of Pennsylvania or others, building and use restrictions and
defects of title to, or leases of, any parts of the Property of the Company
which do not in the opinion of the Company's counsel materiality impair the use
of the Property as an entirety in the operation of the business of the Company;
(d) undetermined liens and charges incidental to current
construction, including mechanics', laborers', materialmen's and similar liens
not delinquent;
(e) any obligations or duties affecting the Property of the Company
to any municipality or public authority with respect to any franchise, grant,
license, permit or certificate;
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(f) rights reserved to or vested in any municipality or public
authority to control or regulate any Property of the Company or to use such
Property in a manner which does not materially impair the use of such Property
for the purposes for which it is held by the Company; or
(g) judgments in course of appeal or otherwise in contest and
secured by sufficient bond or security.
"Excepted Property" shall mean (a) cash, bonds, stocks, obligations
and other Securities; (b) choses in action, accounts and bills receivable,
judgments and other evidences of Indebtedness and contracts, leases and
operating agreements; (c) stock in trade, merchandise, equipment, apparatus,
materials or supplies manufactured or acquired for the purpose of sale and/or
resale in the usual course of business or consumable in the operation of any of
the Properties of the Company or held for the purpose of repairing or replacing
(in whole or in part) any rolling stock, business, motor coaches, trucks,
automobiles or other vehicles or aircraft; (d) timber, gas, oil, minerals
(including developed and undeveloped natural gas reserves and natural gas in
underground storage or otherwise), mineral rights and royalties; (e) materials
or products generated, manufactured, produced or purchased by the Company for
sale, distribution or use in the ordinary course of its business; (f) rolling
stock, buses, motor coaches, trucks, automobiles and other vehicles and all
aircraft; and (g) the Company's franchise to be a corporation.
"Funded Debt" of any Person shall mean (a) all Indebtedness for
borrowed money or which has been incurred in connection with the acquisition of
assets in each case having a final maturity of one or more than one year from
the date of origin thereof (or which is renewable or extendible at the option of
the obligor for a period or periods more than one year from the date of origin),
including all payments in respect thereof that are required to be made within
one year from the date of any determination of Funded Debt, whether or not
included in Consolidated Current Liabilities, (b) all Capitalized Rentals, and
(c) all Guaranties of Indebtedness of others.
"Guaranties" by any Person shall mean all obligations (other than
endorsements in the ordinary course of business of negotiable instruments for
deposit or collection) of such Person guaranteeing or in effect, guaranteeing
any Indebtedness, dividend or other obligation, of any other Person (the
"primary obligor") in any manner, whether directly or indirectly, including,
without limitation, all obligations incurred through an agreement, contingent or
otherwise, by such Person: (a) to purchase such Indebtedness or obligation or
any Property or assets constituting security therefor, (b) to advance or supply
funds (1) for the purchase or payment of such Indebtedness or obligation, (2) to
maintain working capital or other balance sheet condition or, otherwise to
advance or make available funds for the purchase or payment of such Indebtedness
or obligation, or (c) to lease Property or to purchase Securities or other
Property or services primarily for the purpose of assuring the owner of such
Indebtedness or obligation of the ability of the primary obligor to make payment
of the Indebtedness or obligation, or (d) otherwise to assure the owner of the
Indebtedness or obligation of the primary obligor against loss in respect
thereof. For the purposes of all computations made under this Agreement, a
Guaranty in respect of any Indebtedness for borrowed money shall be deemed to be
Indebtedness equal to the principal amount of such Indebtedness for borrowed
money which has been guaranteed, and a
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Guaranty in respect of any other obligation or liability or any dividend shall
be deemed to be Indebtedness equal to the maximum aggregate amount of such
obligation, liability or dividend.
"Indebtedness" of any Person shall mean and include all obligations
of such Person which in accordance with generally accepted accounting principles
shall be classified upon a balance sheet of such Person as liabilities of such
Person, and in any event shall include all (a) obligations of such Person for
borrowed money or which has been incurred in connection with the acquisition of
Property or assets, (b) obligations secured by any lien or other charge upon
Property or assets owned by such Person, even though such Person has not assumed
or become liable for the payment of such obligations, (c) obligations created or
arising under any conditional sale or other title retention agreement with
respect to Property acquired by such Person, notwithstanding the fact that the
rights and remedies of the seller, lender or lessor under such agreement in the
event of default are limited to repossession or sale of Property, and (d)
Capitalized Rentals under any Capitalized Lease. For the purpose of computing
the "Indebtedness" of any Person, there shall be excluded any particular
Indebtedness to the extent that, upon or prior to the maturity thereof, there
shall have been deposited with the proper depositary in trust the necessary
funds (or evidences of such Indebtedness, if permitted by the instrument
creating such Indebtedness) for the payment, redemption or satisfaction of such
Indebtedness; and thereafter such funds and evidences of Indebtedness so
deposited shall not be included in any computation of the assets of such Person.
"Indemnified Parties" means the Issuer, the Trustee, the Paying
Agent and any of their respective officers, directors, members, commissioners,
employees, agents, servants and any other person acting for or on behalf of the
Issuer, the Trustee or the Paying Agent.
"Installment Loan Payment(s)" means payments required to be made by
the Company to pay the Debt Service on the Bonds, as provided for in Section
6.4(b), (c), (d) and (f) of this Loan Agreement, including the principal of,
premium, if any (whether at stated maturity, upon redemption prior to stated
maturity, or upon acceleration of stated maturity), and interest on the Bonds
when due.
"Loan Agreement" means this Loan Agreement, and all amendments and
supplements hereto.
"Local XXX" means the York County Industrial Development Authority,
a governmental entity of the Commonwealth in its capacity as an applicant
sponsor for the Project.
"Plant Account" shall mean the plant account under the Pennsylvania
Public Utilities Commission Uniform System of Accounts for Water Utilities dated
November 21, 1946, as the same may be amended from time to time.
"Project" means the facilities described in the recitals hereto and
"Exhibit A" to this Loan Agreement, as amended from time to time as provided
herein, and which are being financed with the proceeds of the Bonds.
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"Project Costs" means all costs incurred by the Company, whether
before or after issuance of the Bonds, with respect to the acquisition,
construction and installation of the Project, including but not limited to, the
following items:
(i) Obligations incurred or assumed for labor, materials and
equipment (including obligations payable to the Company for expenditures
made or costs incurred by the Company);
(ii) Costs of any performance, payment, or surety bonds and
insurance deemed necessary or appropriate by the Company;
(iii) Costs of engineering and other services, including the
costs incurred or assumed for preliminary design and development, surveys,
estimates and plans and specifications, and for supervising construction
and performing all other duties required by or consequent upon proper
construction;
(iv) Costs which the Company shall be required to pay under
the terms of any contract or contracts in connection with the
construction, acquisition and installation of the Project;
(v) Amounts which are required to be paid for taxes,
assessments and other similar charges payable during the period of
construction;
(vi) Expenses incurred in seeking to enforce any remedy
against any contractor, subcontractor or other provider of labor,
materials, equipment or services, in respect of any default, breach or
dispute relating to the Project;
(vii) Sums required to reimburse the Company for advances made
for any of the above items, and for any other costs incurred for work done
or caused to be done by the Company which are properly chargeable to the
Project;
(viii) Capitalized interest with respect to the Project;
(ix) To the extent authorized by the Act, costs of all other
items related to the acquisition, construction and installation of the
Project; and
(x) All Costs of Issuance.
"Property" shall mean any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Rentals" shall mean and include all fixed rents (including as such
all payments which the lessee is obligated to make to the lessor on termination
of the lease or surrender of the Property) payable by the Company, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of
any amounts required to be paid by the Company (whether or not designated as
rents or additional rents) on account of maintenance, repairs, insurance, taxes
and similar charges. Fixed rents under any so-called "percentage leases" shall
be computed
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solely on the basis of the minimum rents, if any, required to be paid by the
lessee regardless of sales volume or gross revenues.
"Seasonal Indebtedness" as of the date of any determination thereof
shall mean (a) all Indebtedness for money borrowed other than Funded Debt and
(b) Guaranties of Seasonal Indebtedness of others.
"Security" or "Securities" shall have the same meaning as in Section
2(1) of the Securities Act of 1933, as amended.
"Unassigned Issuer's Rights" means all of the rights of the Issuer
to receive insurance under Section 4.4 hereof, to inspect the Project under
Section 4.11 hereof, to receive payments and to be reimbursed for attorney's and
other fees and expenses under Sections 6.6 and 8.3 hereof, to be held harmless
and indemnified under Section 7.1 hereof, to receive information under Section
7.3, and, to the extent provided in this Agreement, to give or withhold consent
to or approval of amendments, modifications, and terminations of this Agreement.
"Voting Stock" shall mean Securities of any class or classes, the
holders of which are ordinarily, in the absence of contingencies, entitled to
elect a majority of the corporate directors (or Persons performing similar
functions).
SECTION 1.2. Certain Rules of Interpretation.
(a) The definitions set forth in Article I and in the Indenture
shall be equally applicable to both the singular and plural forms of the terms
therein defined and shall cover all genders.
(b) "Herein," "hereby," "hereunder," "hereof," "hereinbefore,"
"hereinafter" and other equivalent words refer to this Loan Agreement and not
solely to the particular Article, Section or Subdivision hereof in which such
word is used.
(c) Reference herein to an article number (e.g., Article IV) or a
section number (e.g., Section 6.2) shall be construed to be a reference to the
designated article number or section number hereof unless the context or use
clearly indicates another or different meaning or intent.
(d) Words of the masculine gender shall mean and include correlative
words of the feminine and neuter genders and words importing the singular number
shall mean and include the plural number and vice versa.
(e) Words importing persons shall include firms, associations,
partnerships (including limited partnerships), trusts, corporations and other
legal entities, including public bodies, as well as natural persons.
(f) Any headings preceding the text of the several Articles and
Sections of this Loan Agreement, and any table of contents appended to copies
hereof, shall be solely for
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convenience of reference and shall not constitute a part of this Loan Agreement,
nor shall they affect its meaning, construction or effect.
(g) References to statutes or regulations are to be construed as
including all statutory or regulatory provisions consolidating, amending or
replacing the statute or regulation referred to; and references to agreements
and other contractual instruments shall be deemed to include any exhibits and
appendices attached thereto and all amendments, supplements and other
modifications to such instruments, but only to the extent such amendments,
supplements and other modifications are not prohibited by the terms of this Loan
Agreement.
(h) Whenever in this Loan Agreement, the Issuer, the Company or the
Trustee is named or referred to, it shall include, and shall be deemed to
include, its respective successors and assigns whether so expressed or not. All
of the covenants, stipulations, obligations and agreements by or on behalf of,
and other provisions for the benefit of, the Issuer, the Company and the Trustee
contained in this Loan Agreement shall inure to the benefit of such respective
successors and assigns, bind and shall, inure to the benefit of any officer,
board, commission, authority, agency or instrumentality to whom or to which
there shall be transferred by or in accordance with law any right, power or duty
of the Issuer or of its successors or assigns, the possession of which is
necessary or appropriate in order to comply with any such covenants,
stipulations, obligations, agreements or other provisions of this Loan
Agreement.
(i) Every "request," "order," "demand," "application,"
"appointment," "notice," "statement," "certificate," "consent," "direction" or
similar action hereunder by persons referred to herein shall, unless the form
thereof is specifically provided, be in writing and signed by an Authorized
Representative of the person giving it.
ARTICLE II
Representations
SECTION 2.1. Representations and Findings of Issuer.
The Issuer hereby confirms its findings and represents that:
(a) Organization. The Issuer is a public body corporate and politic
established in the Commonwealth pursuant to the laws of the Commonwealth
including the Act. Under the Act, the Issuer has the power to enter into the
Indenture, this Loan Agreement and the Underwriting Agreement and to carry out
its obligations thereunder and hereunder and to issue the Bonds to finance a
portion of the Project Costs.
(b) Pending Litigation. To the knowledge of the Issuer, there are no
actions, suits, proceedings, inquiries or investigations pending or threatened
against or affecting the Issuer in any court or before any governmental
authority or arbitration board or tribunal, which involve the possibility of
materially and adversely affecting the transactions contemplated by the
Financing Documents or which, in any way, would adversely affect the validity or
enforceability
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of the Financing Documents or the ability of the Issuer to perform its
obligations under the Financing Documents.
(c) Economic Findings. Based on representations and information
furnished to the Issuer by or on behalf of the Company and the Local XXX, the
Issuer has found that the Company is engaged in industrial, commercial and/or
specialized activities in the Commonwealth requiring substantial capital and
creating or maintaining substantial employment opportunities, that the Company's
operations contribute to economic growth and the creation or maintenance of
employment opportunities in the Commonwealth, that the Company is financially
responsible to assume its obligations prescribed by this Loan Agreement and the
Act and that the Project will constitute facilities for the furnishing of water
within the meaning of Section 142(a)(4) of the Code.
(d) Public Purpose Findings. Based on representations and
information furnished to the Issuer by or on behalf of the Company, the Issuer
has found that (i) the Project will promote the health, safety and general
welfare of the people of the Commonwealth and the public purposes of the Act by
alleviating unemployment and maintaining employment at a high level and creating
and developing business opportunities in the Commonwealth and aiding in the
provision of water; (ii) the interests in land and other property which is part
of the Project is located within the boundaries of the Commonwealth and within
the boundaries of the County, which organized the Local XXX; and (iii) the
Project will constitute a "project" within the meaning of the Act.
(e) Private Activity Bond Allocations. The Issuer has received a
Preliminary Allocation of the tax-exempt private activity bond authority of the
Commonwealth in an aggregate amount at least equal to the aggregate principal
amount of the Series A Bonds from the Department which certifies the preliminary
approval of such allocation for the Project as required by Section 146 of the
Code. Simultaneously with the issuance of the Series A Bonds, the Issuer shall
request a Final Allocation from the Department which request will automatically
convert the Preliminary Allocation to a Final Allocation of the Commonwealth's
private activity bond authority to the Project.
(f) Project Approvals. The Project has been approved by (1) the
Local XXX, (2) the Governor or Lieutenant Governor of the Commonwealth as the
"applicable elected representative," as that term is defined under the Code, of
the Issuer after a public hearing held upon reasonable public notice, as
required by the Code, and (3) the Issuer by adoption of resolutions including
the Bond Resolution as required by the Act.
(g) No Other Pledges. The Issuer has not and will not pledge the
income and Revenues derived from this Loan Agreement or its other interests in
this Loan Agreement or the Indenture other than pursuant to and as set forth in
the Indenture.
(h) No Conflicts. The execution, delivery and performance by the
Issuer of this Loan Agreement and the Indenture and the issuance of the Bonds
will not conflict with or create a breach of or default under the Act or other
applicable law or any agreement or instrument to which the Issuer is a party or
by which it is bound.
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(i) Agreements Are Legal and Authorized. The adoption of the Bond
Resolution, the issuance and sale of the Bonds and the execution and delivery by
the Issuer of the Financing Documents, and the compliance by the Issuer with all
of the provisions of each thereof and of the Bonds, (i) are within the powers
and authority of the Issuer, (ii) have been done in full compliance with the
provisions of the Act, are legal and will not conflict with or constitute on the
part of the Issuer a violation of or a breach of or default under, or result in
the creation of any lien, charge or encumbrance upon any property of the Issuer
(other than as contemplated by this Loan Agreement and the Indenture) under the
provisions of, any by-law or other agreement or instrument to which the Issuer
is a party or by which the Issuer is bound, or any license, judgment, decree,
law, statute, order, rule or regulation of any court or governmental agency or
body having jurisdiction over the Issuer or any of its activities or properties
and (iii) have been duly authorized by all necessary action on the part of the
Issuer.
(j) Governmental Consents. Neither the nature of the Issuer nor any
of its activities or properties, nor any relationship between the Issuer and any
other Person, nor any circumstance in connection with the offer, issue, sale or
delivery of any of the Bonds is such as to require the consent, approval or
authorization of, or the filing, registration or qualification with, any
governmental authority on the part of the Issuer in connection with the
execution, delivery and performance of the Financing Documents or the offer,
issue, sale or delivery of the Bonds, other than those already obtained as of
the Issue Date; provided, however, no representation is made herein as to
compliance with the securities or "blue sky" laws of any jurisdiction.
(k) No Defaults. No event has occurred and no condition exists with
respect to the Issuer which would constitute an "Event of Default" as defined in
the Indenture or which, with the lapse of time or with the giving of notice or
both, would become an "Event of Default" under the Indenture.
(l) Limited Obligations. The Bonds shall be limited obligations of
the Issuer and shall be payable by the Issuer solely out of the Revenues. The
Bonds shall never be payable out of any other funds of the Issuer except the
Revenues. Neither the faith and credit nor the taxing power of the Commonwealth,
the Issuer, or any other political corporation, subdivision or agency thereof is
pledged to the payment of the principal of and premium, if any, or interest on
such Bonds.
(m) Requirements Satisfied. All requirements and conditions
specified in the Act and all other laws and regulations applicable to the
adoption of the Bond Resolution, the execution and delivery of this Loan
Agreement and the Indenture, and the issuance and delivery of the Bonds will be
fulfilled prior to the initial delivery of the Bonds to the purchasers thereof.
SECTION 2.2. Representations by the Company.
The Company makes the following representations as the basis for the
undertakings on its part herein contained:
(a) Corporate Organization and Power. The Company (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the Commonwealth, and
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(ii) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its business as now
being conducted and as presently proposed to be conducted.
(b) Pending Litigation. Except as set forth in the Company's Annual
Report on Form 10-K for the year ended December 31, 2002, there are no actions,
suits, proceedings, inquiries or investigations pending, or to the knowledge of
the Company threatened, against or affecting the Company in any court or before
any governmental authority or arbitration board or tribunal which involve the
possibility of materially and adversely affecting the transactions contemplated
by the Financing Documents or which, in any way, would adversely affect the
validity or enforceability of the Bonds or the Financing Documents or the legal
ability of the Company to perform its obligations under this Loan Agreement.
(c) Agreements Are Valid and Authorized. The execution and delivery
by the Company of this Loan Agreement and the compliance by the Company with all
of the provisions hereof (i) are within the corporate power of the Company, (ii)
will not conflict with or result in any breach of any of the provisions of, or
constitute a default under, any material agreement, charter document, by-law or
other material instrument to which the Company is a party or by which it may be
bound, or any license, judgment, decree, law, statute, order, rule or regulation
of any court or governmental agency or body having jurisdiction over the Company
or any of its activities or properties, and (iii) have been duly authorized by
all necessary action on the part of the Company. This Agreement, upon the due
execution and delivery thereof by the Company and the Issuer, will be a valid
and binding obligation of the Company enforceable in accordance with its terms,
except as limited by bankruptcy, insolvency, reorganization, moratorium or other
laws or equitable principles of general application relating to or affecting the
enforcement of creditors' rights generally.
(d) Governmental Consents. No actions by the Company in connection
with the execution, delivery and performance by the Company of this Loan
Agreement is such as to require the consent, approval or authorization of, or
the filing, registration or qualification with, any governmental authority on
the part of the Company, other than those already obtained as of the Issue Date;
provided, however, no representation is made herein as to compliance with the
securities or "blue sky" laws of any jurisdiction.
(e) No Defaults. No event has occurred and no condition exists with
respect to the Company that would constitute an "Event of Default" under the
Indenture or which, with the lapse of time or with the giving of notice or both,
would become an "Event of Default" under the Indenture.
(f) Tax Documents. The representations and statements made by the
Company in the Tax Documents are true and correct.
(g) Project Benefits. The acquisition, construction, development,
design, equipping, testing and installing of the Project, as provided under this
Loan Agreement, will promote the employment and the health, safety and general
welfare of the residents of the Commonwealth by promoting the continuation and
expansion of gainful employment
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opportunities for such residents, will aid in the provision of water, and will
not cause, directly or indirectly, the removal, either in whole or in part, of a
plant, facility or establishment from one area of the Commonwealth to another.
The Plant and other fixed property which is part of the Project is located
within the boundaries of the County and has a substantial connection with the
County. The Project is a "project" within the meaning of the Act and will be
operated as such. The Project consists of land or property of a character
subject to allowance for depreciation under Section 167 of the Code and
constitutes "facilities for the furnishing of water" within the meaning of
Section 142(a)(4) of the Code.
(h) Operation of Project. The Company presently intends to use or
operate the Project (or cause the Project to be operated) in a manner consistent
with the Act for the provision and supply of water until the date on which the
Bonds have been fully paid and knows of no reason why the Project will not be so
used or operated.
(i) Tax Information. The information furnished by the Company and
used by the Issuer in preparing the tax certificate and information return
pursuant to the Code is accurate and complete in all material respects as of the
date of original issuance and delivery of the Bonds. The proceeds of the Bonds
will not exceed the Project Costs. The Costs of Issuance financed with proceeds
of the Bonds, including any bond discount on the sale of the Bonds, will not
exceed 2% of the proceeds of the Bonds.
(j) Commencement of Project. Prior to the adoption of the Bond
Resolution (i.e., January 29, 2004), no properties included in the Project, that
are to be financed with the proceeds of the Bonds, had been acquired by the
Company or any Related Person (as defined in the Code), and no physical work on
the Project had been commenced by the Company or any Related Person, except to
the extent permitted in such Bond Resolution.
(k) Disqualified Contractors. The Company is not a Disqualified
Contractor.
ARTICLE III
The Project
SECTION 3.1. Acquisition and Construction.
The Company (a) has acquired, or has the requisite legal power to
acquire, all interests in land required for construction of the Project, and
shall construct, install, equip and improve the Project with all reasonable
dispatch and in accordance with the description thereof in Exhibit A attached
hereto and applicable law, (b) shall procure or cause to be procured all permits
and licenses necessary for the prosecution of the work, and (c) shall pay when
due all costs and expenses incurred in connection with that acquisition,
construction, installation, equipment and improvement from funds made available
therefor in accordance with this Loan Agreement or otherwise. The Company will
revise Exhibit A and such supplemental information from time to time as
necessary to reflect material additions to, deletions from and changes in the
Project and will notify the Issuer and the Trustee in writing of such
modifications so that the
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Issuer and the Trustee will be able to ascertain the nature, location and
estimated cost of the Project. It is understood that the Project is the property
of the Company and that any contracts made by the Company with respect thereto
and any work to be done on the Project is to be done by the Company in its own
behalf and not as agent or contractor for the Issuer or the Trustee.
In the event that Exhibit A hereto is to be amended or supplemented
in accordance with the provisions of Section 9.3 of the Indenture, the Issuer
will enter into, and will instruct the Trustee to consent to, an amendment of or
supplement to Exhibit A hereto upon receipt by the Issuer and Trustee of:
(i) a certificate of an Authorized Company Representative
describing in detail the proposed changes; and
(ii) a copy of the proposed form of amendment or supplement to
Exhibit A hereto and such other documents, certificates and showings as
may be required by counsel rendering the opinion in clause (iii) of this
paragraph; and
(iii) an opinion of Bond Counsel to the effect that such
amendment complies with the requirements of this Section 3.1, is in proper
form for execution and delivery by the Issuer and will not adversely
affect the validity of the Bonds or the exemption from federal income
taxes of the interest thereon.
The Company recognizes that since the Project has been or will be
acquired, constructed and equipped by the Company and by contractors and
suppliers selected by the Company in accordance with the plans and
specifications, the Issuer makes no representation or warranty, express or
implied, with respect to the merchantability, condition or workmanship of any
part of the Project or its suitability for the Company's purposes or the extent
to which proceeds derived from the sale of the Bonds will pay the costs to be
incurred in connection therewith.
SECTION 3.2. Construction Fund.
The Construction Fund shall be drawn on and used by the Company to
pay the Costs of Issuance of the Bonds to the extent not paid from the
settlement account pursuant to Section 2.1 of the Indenture and to pay other
Project Costs when due and payable.
Moneys in the Construction Fund shall be disbursed to the Company,
or such other Person as may be designated, on requisitions substantially in the
form of Exhibit C to the Indenture signed by the Authorized Company
Representative and delivered to the Trustee, stating with respect to each
payment to be made:
(1) The amount and general purpose of such disbursement; and
(2) That each obligation mentioned therein (i) has been
properly incurred, (ii) is a proper charge against the Construction
Fund in accordance with
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the provisions of this Loan Agreement, the Tax Documents and the
Indenture, and (iii) has not been the basis of any previous
requisition.
The Trustee shall rely fully on any such requisition delivered
pursuant to this Section and shall not be required to make any investigation in
connection therewith.
All moneys remaining in the Construction Fund after all Project
Costs have been paid or provided for shall at the written direction of the
Company be used in accordance with Section 3.3 hereof.
If moneys in the Construction Fund are not sufficient to pay all
Project Costs, the Company nonetheless shall complete the Project in accordance
with Exhibit A attached hereto (as revised and amended in accordance with this
Loan Agreement) and shall pay all such additional Project Costs. The Company
shall not be entitled to any reimbursement for any such additional Project Costs
from the Issuer, the Trustee, or any Registered Owner; nor shall it be entitled
to any abatement, diminution or postponement of the Installment Loan Payments or
other amounts payable hereunder.
SECTION 3.3. Establishment of Completion Date.
As soon as practicable after the completion of construction of the
Project, the Company shall furnish to the Trustee a certificate signed by an
Authorized Company Representative stating (i) that construction of the Project
described in Exhibit A hereto (as revised and amended in accord with this Loan
Agreement) has been completed, and (ii) any portion of the Project Costs which
has not yet then been paid. Such certificate may state that it is given without
prejudice to any rights against third parties which exist at the date of such
certificate or which may subsequently come into being.
Moneys (including investment proceeds) remaining in the Construction
Fund on the date of such certificate may be used, at the written direction of an
Authorized Company Representative for the payment, in accordance with the
provisions of this Loan Agreement, of any Project Costs not then paid as
specified in such certificate. The Company agrees that any moneys (including
investment proceeds) remaining in the Construction Fund on the date of the
aforesaid certificate and not so set aside for the payment of such Project Costs
shall be transferred or disbursed in accordance with Section 1.142-2 of the
Regulations, or any successor thereto and that the Company shall give specific
instructions to the Trustee as to the transfer or disbursement of such funds and
certify that such transfer or disbursement complies with the provisions of
Section 1.142-2 of the Regulations or any successor thereto at such time. The
Company acknowledges that these provisions generally require that a portion of
the Bonds be redeemed, or defeased to the first call date (with appropriate
notice to the Internal Revenue Service), within 90 days of the earlier of (i)
the date on which the Company determines that the Project will not be completed
or (ii) the date on which the Project is Placed-in-Service (as defined in the
Tax Agreement).
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ARTICLE IV
Loan And Repayment; Operation Of Project
SECTION 4.1. Loan of Bond Proceeds.
To provide funds for the financing of Costs of Issuance and Project
Costs, the Issuer will issue the Bonds upon the terms and conditions contained
in this Loan Agreement and the Indenture and will loan the proceeds thereof to
the Company by causing the Bond proceeds to be applied as provided in Article V
hereof. The Company shall pay all Costs of completing the Project to the extent
that such Costs exceed the loan proceeds, including interest earnings, available
therefor.
SECTION 4.2. Repayment of Loan.
The Company will repay the loan of the Bond proceeds by making the
payments required by Article VI hereof.
SECTION 4.3. Operation.
The Company shall acquire, construct, install, operate and maintain
the Project in such manner as to comply in all material respects with the Act
and all applicable requirements of federal, state and local laws and the
regulations, rules and orders of any federal, state or local agency, board,
commission or court having jurisdiction over the Project or the operation
thereof, including without limitation applicable zoning, planning, building and
environmental laws, regulations, rules and orders; provided that the Company
shall be deemed in compliance with this Section so long as it is acting with due
diligence to correct any violations of any of the foregoing or contesting in
good faith any such requirement by appropriate legal proceedings. The Company
shall pay all costs and expenses of operation and maintenance of the Project,
including all applicable taxes. During such period as the Project is operated in
accordance with the provisions of this Loan Agreement, the Company will, within
the design capabilities thereof, cause the Project to be operated and maintained
in accordance with all applicable, valid and enforceable rules and regulations;
provided, that the Company reserves the right to contest in good faith any such
rules or regulations or the application thereof to the Project. It is understood
and agreed that the Issuer shall have no duties or responsibilities whatsoever
with respect to the operation or maintenance of the Project, or the performance
of the Project for its designed purposes.
SECTION 4.4. Insurance.
Subject to the provisions of Section 4.6 hereof, the Company agrees
to maintain, or cause to be maintained, all necessary insurance with respect to
the Project in accordance with its customary insurance practices and the
practices of Persons operating similar facilities, which may include
self-insurance. All costs of maintaining insurance with respect to the Project
shall be paid by the Company, and the Issuer and the Trustee shall have no
obligation or liability in this regard. All general liability insurance policies
relating to the Project site or facilities shall name the Authority and the
Trustee as additional insureds as their interests may appear.
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SECTION 4.5. Maintenance and Repair.
Subject to the provisions of Section 4.6 hereof, the Company agrees
that it will (i) maintain, or cause to be maintained, the Project and all of its
other properties in as reasonably safe condition as its operations shall permit
and (ii) maintain, or cause to be maintained, the Project and all of its other
properties in good repair and in good operating condition, ordinary wear and
tear excepted, making from time to time all necessary repairs thereto and
renewals and replacements thereof material to the integrity of the water system
or to the provision of adequate service to the Company's customers. All costs of
operating and maintaining the Project and all of its other properties shall be
paid by the Company, and the Issuer shall have no obligation or liability in
this regard.
SECTION 4.6. Right to Discontinue Operation of Project.
Although the Company intends to operate, or cause to be operated,
the Project for its designed purposes until the date on which no Bonds are
Outstanding, subject to the provisions of Section 6.10 hereof, the Company is
not required by this Loan Agreement to operate, or cause to be operated, any
portion of the Project after the Company shall deem in its sole discretion that
such continued operation is not advisable and in such event it is not prohibited
by this Loan Agreement from selling, leasing or retiring all or any such portion
of the Project. Subject to the provisions of Section 6.10 hereof, the net
proceeds from such sale, lease or other disposition, if any, shall belong to,
and may be used for any lawful purpose by, the Company. Upon discontinuance of
operation of the Project in accordance with this Section 4.6, the Company shall
be discharged from its obligations to insure, maintain and repair the Project or
to cause the Project to be insured, maintained and repaired as set forth in
Sections 4.4 and 4.5 hereof.
SECTION 4.7. Insurance and Condemnation Awards.
Subject to the provisions of Sections 4.4 and 6.10 hereof, the net
proceeds of any insurance or condemnation award as a result of the destruction
or condemnation of the Project or any portion thereof shall belong to, and may
be used for any lawful purpose by, the Company.
SECTION 4.8. Workers' Compensation Coverage.
Throughout the term of this Loan Agreement, the Company shall
comply, or cause compliance, with applicable workers' compensation laws of the
Commonwealth.
SECTION 4.9. Taxes, Claims for Labor and Materials, Compliance with
Laws.
(a) The Company will promptly pay and discharge all lawful taxes,
assessments and governmental charges or levies imposed upon the Company or upon
or in respect of all or any part of the Property or business of the Company, all
trade accounts payable in accordance with usual and customary business terms,
and all claims for work, labor or materials, which if unpaid might become a lien
or charge upon any Property of the Company including the Installment Loan
Payments; provided the Company shall not be required to pay any
16
such tax, assessment, charge, levy, account payable or claim if (1) the
validity, applicability or amount thereof is being contested in good faith by
appropriate actions or proceedings which will prevent the forfeiture or sale of
any Property of the Company or any material interference with the use thereof by
the Company, and (2) the Company shall set aside on its books, reserves deemed
by it to be adequate with respect thereto.
(b) The Company will promptly comply with all laws, ordinances or
governmental rules and regulations to which it is subject, including without
limitation, the Occupational Safety and Health Act of 1970, the Employees
Retirement Income Security Act of 1974, as amended, and all Environmental Legal
Requirements, the violation of which would materially and adversely affect the
Properties, business, prospects, profits or condition (financial or otherwise)
of the Company or would result in any lien or charge upon any Property of the
Company, subject, however, to the Company's right to contest in good faith the
application of any such laws, rules or regulations to the Company or its
operations so long as such contest does not result in a material threat to the
operation of the Company's water system or its ability to make the payments due
hereunder.
SECTION 4.10. Issuer's Limited Liability.
It is recognized that the Issuer's only source of funds with which
to carry out its commitments under the Bonds or this Loan Agreement will be from
the proceeds from the sale of the Bonds, the Installment Loan Payments, or from
any available income or earnings derived therefrom, or from any funds which
otherwise might be made available by the Company; and it is expressly agreed
that the Issuer shall have no liability, obligation, or responsibility with
respect to this Loan Agreement or the Project except to the extent of funds
available from such sources. If, for any reason, the proceeds from the sale of
the Bonds are not sufficient to pay all the costs of completing the acquisition,
construction and installation of the Project, the Company shall complete the
acquisition, construction and installation of the Project, and the Company shall
pay such costs from its own funds, but it shall not be entitled to reimbursement
therefor, or to any diminution in or postponement of any payments required to be
made by the Company hereunder.
SECTION 4.11. Right of Inspection.
Subject to reasonable security and safety regulations and upon
reasonable notice, the Issuer and the Trustee, and their respective agents and
representatives, shall have the right during normal business hours to inspect
the Project and the books and records of the Company pertaining to the Project;
provided, however, that this right is subject to federal, state and local laws
and regulations applicable to the site of the Project. The right of access
hereby reserved to the Issuer and the Trustee may be exercised only after such
agent or representative shall have executed release of liability and secrecy
agreements (to the extent permitted by law, in the case of an Issuer
representative) if requested by the Company in the form then currently used by
the Company, and nothing contained in this Section or in any other provision of
this Loan Agreement shall be construed to entitle the Issuer or the Trustee to
any information or inspection involving the confidential expertise of the
Company.
17
ARTICLE V
Issuance Of Bonds; Security; Investments
SECTION 5.1. Issuance of Bonds.
In order to provide funds to finance the acquisition, construction
and installation of the Project, the Issuer, concurrently with the execution of
this Loan Agreement, will sell, issue and deliver to the initial purchasers
thereof the Bonds, all in accordance with the Indenture. The Issuer will
thereupon cause the accrued interest, if any, received upon the delivery of the
Bonds to be deposited in the Debt Service Fund and the balance of the proceeds
received from the sale of the Bonds to be deposited in the Construction Fund.
SECTION 5.2. Security for the Bonds.
The obligations of the Company under this Loan Agreement, including
specifically the obligation to pay Installment Loan Payments and Administrative
Expenses and its obligations under Article VI hereof shall be direct general
obligations of the Company. Prior to or simultaneously with the issuance of the
Bonds, the Issuer will assign to the Trustee under the terms of the Indenture
all of the Issuer's right, title, and interest in and to this Loan Agreement
including specifically the Installment Loan Payments but excepting all
Unassigned Issuer's Rights.
SECTION 5.3. Reserved.
SECTION 5.4. Investment of Funds.
The Issuer hereby gives its express written authority to the Company
as provided in the Indenture to direct the investment of the Construction Fund,
Debt Service Fund or any other Fund held by the Trustee pursuant to the
Indenture.
ARTICLE VI
Company Obligations; Provisions For Payment; Covenants
SECTION 6.1. Company Approval of Issuance of Bonds.
The governing body of the Issuer has adopted the Bond Resolution
authorizing the execution of this Loan Agreement and the Indenture and the
issuance of the Bonds. The Company hereby approves the Bond Resolution and the
Indenture. It is hereby agreed that the foregoing approval of the Bond
Resolution and the Indenture constitutes the acknowledgment and agreement of the
Company that the Bonds, when issued, sold and delivered as provided in the Bond
Resolution and the Indenture, will be issued in accordance with and in
compliance with this Loan Agreement, notwithstanding any other provisions of
this Loan Agreement or any other contract or agreement to the contrary. Any
Registered Owner is entitled to rely fully and unconditionally on the foregoing
approval. Notwithstanding any provisions of this Loan
18
Agreement or any other contract or agreement to the contrary, the Company's
approval of the Bond Resolution and the Indenture shall be the Company's
agreement that all covenants and provisions in this Loan Agreement and the
Indenture affecting the Company shall, upon the delivery of the Bonds and the
Indenture, become valid and binding covenants and obligations of the Company so
long as the Bonds, premium, if any, and the interest thereon are outstanding and
unpaid. Particularly, the obligation of the Company to pay, promptly when due,
all Installment Loan Payments specified in this Loan Agreement and the Indenture
shall be absolute and unconditional, and said obligation may be enforced as
provided in this Loan Agreement and the Indenture.
SECTION 6.2. Refunding of Bonds.
After the issuance of any Bonds, the Issuer shall not refund any of
the Bonds or change or modify the Bonds in any way, except as provided for in
the Indenture, without the prior written approval of an Authorized Company
Representative; nor shall the Issuer redeem any Bonds prior to the maturity date
except upon the written request of an Authorized Company Representative, unless
such redemption is required or permitted by the Indenture without such request.
SECTION 6.3. Redemption of Bonds.
The Issuer, upon the written request of the Company (and provided
that the affected Bonds are subject to redemption prior to maturity at the
option of the Issuer or the Company, and provided that such request is received
in sufficient time prior to the date upon which such redemption is proposed),
shall promptly take or cause to be taken all action that may be necessary under
the applicable redemption provisions to effect such redemption prior to
maturity, to the full extent of funds either made available for such purpose by
the Company or already on deposit in the Debt Service Fund and available for
such purpose. The redemption of any Outstanding Bonds prior to maturity at any
time shall not relieve the Company of its absolute and unconditional obligation
to pay each remaining Installment Loan Payment with respect to any Outstanding
Bonds, as specified in the Indenture. If a redemption of Bonds is required
pursuant to the provisions of the Indenture, the Company agrees as provided
herein to promptly make Installment Loan Payments sufficient to pay the
principal of, premium, if any, and interest on the Bonds due on such redemption
date.
SECTION 6.4. Installment Loan Payments.
(a) The Company hereby covenants and agrees to make the Installment
Loan Payments, as hereinafter provided in subsections (b), (c), (d) and (f) of
this Section, to the Trustee, on behalf of the Issuer, in accordance with this
Loan Agreement.
(b) The Company shall make Installment Loan Payments, subject to the
limitations of subsection (e) below of this Loan Agreement, in immediately
available funds directly to the Trustee for deposit in the Debt Service Fund at
least two Business Days before each day on which any payment of Debt Service
shall become due (whether at maturity or upon redemption or acceleration or
otherwise) in an amount which, together with other money held by
19
the Trustee under the Indenture and available therefor, will enable the Trustee
to make such payment in full when due.
(c) In the event the Company should fail to make any of the payments
required in this Section, the item or installment so in default shall continue
as an obligation of the Company until the amount in default shall have been
fully paid, and the Company agrees to pay the same with interest thereon, to the
extent permitted by law, from the date when such payment was due as provided in
the Indenture.
(d) If, subsequent to a date on which the Company is obligated to
pay the Installment Loan Payments (subject to the provisions of Article X of the
Indenture), losses (net of gains) shall be incurred in respect of any
investments, or any other event has occurred causing the money in the Debt
Service Fund, together with any other money then held by the Trustee and
available for the purpose, to be less than the amount sufficient at the time of
such occurrence or other event to pay, in accordance with the provisions of the
Indenture, all Debt Service due and payable or to become due and payable, the
Trustee shall notify the Company of such fact and thereafter the Company, as and
when required for purposes of such Debt Service Fund, shall pay in immediately
available funds to the Trustee for deposit in the Debt Service Fund the amount
of any such deficiency.
(e) Notwithstanding the foregoing, it is the intention of the
parties hereto to conform strictly to the usury laws now in force in the
Commonwealth, and any provision for any payment contained herein and in the
Bonds shall be held to be subject to reduction to the amount allowed under said
usury laws as now or hereafter construed by the courts having jurisdiction.
(f) The Company further agrees that in the event payment of the
principal of and the interest on the Bonds is accelerated upon the occurrence of
an Event of Default under the Indenture, all amounts payable under Section
6.4(b) for the remainder of the term hereof (other than interest not yet due)
shall be immediately due and payable.
(g) Any amount held in the Debt Service Fund on any payment date
specified in subsection (b) above and not previously credited against
Installment Loan Payments or designated for payments due on particular Bonds,
shall be credited against the Installment Loan Payments required to be made by
the Company on such date.
SECTION 6.5. Administrative Expenses.
The Company shall pay, or cause to be paid, an amount equal to the
reasonable fees and charges of the Trustee for services rendered as Trustee
under the Indenture and its reasonable expenses incurred as Trustee under the
Indenture, including reasonable fees and expenses of its counsel. The Trustee's
right to receive its reasonable fees, charges and expenses hereunder shall be
secured by a lien on moneys held by it in the Debt Service Fund and, upon an
Event of Default hereunder, the Trustee shall have a right of payment prior to
the payment of the owners of the Bonds as provided in Section 8.11 of the
Indenture.
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SECTION 6.6. Payments to Issuer and Local XXX.
The Company shall pay or cause to be paid all of the Issuer's and
Local IDA's reasonable, actual out-of-pocket expenses and costs in connection
with the issuance of the Bonds, including, without limitation, all financing,
legal, printing, and other expenses and all Costs of Issuance incurred in
issuing the Bonds (including the fees and expenses of bond counsel and the
Issuer's financial advisor) and the Issuer's fee of .20% of the principal amount
of the Bonds for issuing the Bonds. Also, in the future the Company shall pay to
the Issuer upon receipt of statements therefor from time to time, such amounts
as are necessary to pay or reimburse the Issuer and the Local XXX for their
reasonable and necessary expenses and costs attributable to the Bonds and the
Project.
SECTION 6.7. Obligations of the Company Absolute and Unconditional.
The obligations of the Company to make the payments required and to
perform the covenants contained in Sections 6.4, 6.5, 6.6, 6.10, 7.1 and 8.3 and
to perform and observe the other agreements on its part contained herein shall
be absolute and unconditional and shall not be subject to diminution by set-off,
counterclaim, abatement or otherwise. Until payment of all Debt Service relating
to the Bonds has been made, the Company (a) will not suspend or discontinue any
payments provided for in this Loan Agreement, except to the extent the same have
been prepaid, (b) will perform and observe all its other agreements contained
herein, and (c) except as provided in Section 9.1, will not terminate this Loan
Agreement for any cause, including, without limiting the generality of the
foregoing, any acts or circumstances that may constitute failure of
consideration, sale, loss, eviction or constructive eviction, destruction of or
damage to the Project, commercial frustration of purpose, any change in the tax
or other laws of the United States of America or of the Commonwealth or any
political subdivision of either, or any failure of the Issuer to perform and
observe any agreement, whether express or implied, or any duty, liability or
obligation arising out of or in connection herewith or with the Indenture.
Nothing contained in this Section shall be construed to release the Issuer from
the performance of any of the agreements on its part herein contained and in the
event the Issuer shall fail to perform any such agreement on its part, the
Company may take such action as the Company may deem necessary to perform or
compel performance, provided that no such action shall violate the agreements on
the part of the Company contained in this Loan Agreement or postpone or diminish
the amounts required to be paid by the Company pursuant to this Loan Agreement.
Upon the issuance and delivery of the Bonds to the initial purchasers thereof,
the Company shall have received, and the Issuer shall have given, full and
complete consideration for the Company's obligation hereunder to make
Installment Loan Payments.
SECTION 6.8. Option to Prepay Amounts Under Loan Agreement in
Certain Events.
The Company shall have, and is hereby granted, the option to prepay
the amounts required to be paid by the Company under Section 6.4(b) in whole or
in part and to direct the Trustee to redeem the Bonds in whole or in part, as
the case may be, if the Company determines to exercise any optional redemption
rights under the terms of the Bonds or if any of the events described in Article
V of the Indenture requiring the redemption of Bonds shall have occurred.
21
The Company may at any time deliver money, and/or Government Obligations, to the
Trustee with instructions to the Trustee to hold such money, and/or Government
Obligations, pursuant to Article X of the Indenture in connection with a
discharge of the Indenture. The Issuer agrees that, at the request at any time
of the Company, it will cooperate with the Company to cause the Bonds or any
portion thereof to be redeemed, or to cause the Indenture to be discharged, to
the extent permitted by the Indenture.
SECTION 6.9. Company's Performance Under Indenture.
The Company agrees, for the benefit of the Owners, to do and perform
all acts and things contemplated in the Indenture to be done or performed by it
and to not interfere with the exercise of the power and authority granted to the
Trustee in the Indenture. The Company further agrees to aid in furnishing any
documents, certificates or opinions that may be required under the Indenture.
SECTION 6.10. Covenants Regarding Tax Exemption.
It is the intention of the Company and the Issuer that the interest
on the Bonds be excludable from the gross income of the holders thereof for
federal income tax purposes by reason of Section 103(a) of the Code, except for
any Bond for any period that such Bond is owned by a person who is a
"substantial user" of the Project or a "related person" within the meaning of
Section 147(a) of the Code, and that substantially all of the proceeds of the
Bonds will be used to provide facilities for the furnishing of water within the
meaning of Section 142(a)(4) of the Code and any Regulations promulgated with
respect thereto. To that end, the Company and the Issuer (to the extent
reasonably within the control of the Issuer) covenant with each other to refrain
from any action which would adversely affect, or to take such action to assure,
the treatment of the Bonds as obligations described in Section 103(a) of the
Code, the interest on which is not includable in the gross income of the holders
thereof (other than the income of a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the Code) for purposes
of federal income taxation. None of the covenants and agreements herein
contained shall require either the Company or the Issuer to enter an appearance
or intervene in any administrative, legislative or judicial proceeding in
connection with any changes in applicable laws, rules or regulations or in
connection with any decisions of any court or administrative agency or other
governmental body affecting the taxation of interest on the Bonds.
SECTION 6.11. Company's Option to Remarket Bonds Purchased in Lieu
of Redemption.
Pursuant to Section 5.5 of the Indenture, the Company is given the
right to purchase Bonds in lieu of redemption. In the event the Company
exercises such option with respect to Bonds which have been called for
redemption under Section 5.1 of the Indenture, the Company (or any Person acting
on its behalf) (i) will not remarket such Bonds as tax exempt bonds without
first obtaining an opinion of Bond Counsel that the interest on the Bonds to be
remarketed is not includable in the gross income of the owners thereof for
federal income tax purposes except for interest on any Bond for any period
during which such Bond is owned by a
22
person who is a "substantial user" of the Project or any person considered to be
related to such person within the meaning of Section 147(a) of the Code, and
(ii) will not remarket such Bonds until the Company delivers to the Issuer and
the Trustee an opinion of counsel, not unsatisfactory to the Issuer and Trustee
in their reasonable judgment, that none of the Bonds or this Loan Agreement are
subject to registration under the Securities Act of 1933, as amended.
SECTION 6.12. Nondiscrimination - Sexual Harassment.
The Company hereby accepts and agrees to be bound by the
Nondiscrimination - Sexual Harassment clause set forth in Exhibit B attached
hereto.
ARTICLE VII
Particular Agreements
SECTION 7.1. Indemnified Party's Release and Indemnification
Provisions.
The Company agrees, whether or not the transactions contemplated by
this Loan Agreement and the Indenture shall be consummated:
(a) to pay, and save the Indemnified Parties harmless against
liability for the payment of, all reasonable out-of-pocket expenses arising in
connection with said contemplated transactions, including the reasonable fees
and expenses of counsel to the Indemnified Parties; and
(b) to defend, protect, indemnify and save the Indemnified Parties
harmless from and against all liability, losses, damages, costs, reasonable
expenses (including reasonable counsel fees), taxes, causes of action, suits,
claims, demands and judgments of any nature or form, by or on behalf of any
Person arising in any manner from the transactions of which this Loan Agreement
or the Indenture is a part or arising in any manner in connection with the
Project or the financing or refinancing of the Project, and, without limiting
the generality of the foregoing, arising from (i) the issuance, offering, sale,
or delivery of the Bonds, the Indenture, the Underwriting Agreement and this
Loan Agreement and the obligations imposed on the Issuer hereby and thereby and
the Trustee's performance of its obligations under the Indenture; or the design,
construction, installation, operation, use, occupancy, maintenance, or ownership
of the Project; (ii) any written statements or representations made or given by
the Company or any of its officers or employees to the Indemnified Parties or
any underwriters or purchasers of any of the Bonds, with respect to the Issuer,
the Company, the Project, the Bonds or the Underwriting Agreement, including,
but not limited to, statements or representations of facts, financial
information, or corporate affairs; (iii) damage to property or any injury to or
death of any person that may be occasioned by any cause whatsoever pertaining to
the Project; (iv) any breach or default on the part of the Company in the
performance of any of its obligations under this Loan Agreement; (v) any
violation of contract, agreement or restriction by the Company relating to the
Project; or (vi) any violation of law, ordinance or regulation by or permitted
by the Company affecting the Project or any part thereof or the ownership or
occupancy or use thereof.
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In the event that any action or proceeding is brought against any
Indemnified Party by reason of any such claim, such action or proceeding shall
be defended against by counsel to the Company, unless the Indemnified Party
shall determine, upon advice of counsel to the Indemnified Party, that the
Indemnified Party's interests conflict with the interests of Company, in which
event the Indemnified Party may select its own counsel. In the event such
defense is by counsel to the Indemnified Party on behalf of the Indemnified
Party, the Company shall indemnify the Indemnified Party for reasonable costs of
counsel to the Indemnified Party allocated to such defense and charged to the
Indemnified Party. The Company, upon notice from the Indemnified Party, shall
resist and defend such an action or proceeding on behalf of the Indemnified
Party. The Indemnified Party shall provide the Company prompt written notice of
any claim or suit with respect to which it has a right of indemnity hereunder,
but the failure to provide such notice shall not limit or impair the rights of
any Indemnified Party hereunder except to the extent that such failure causes
actual damage or loss to the Company. The Indemnified Party shall, at the
Company's expense, provide all reasonable assistance requested by the Company in
its defense and/or settlement of any such claim or suit. Neither party shall
settle or pay any such claim or suit without the prior written consent of the
other party, which shall not be unreasonably withheld.
The provisions of this Section shall not apply to any claim or
liability to the extent resulting from the Indemnified Party's acts of gross
negligence, bad faith, fraud or deceit or for any claim or liability which the
Company was not given the opportunity to contest (except as set forth in the
preceding paragraph), due to the gross negligence of the Indemnified Party.
The Company also agrees to pay the expenses (including reasonable
attorneys' fees) of any Indemnified Party in enforcing this Section 7.1. The
provisions of this Section shall survive the payment of the Bonds, the
termination of this Loan Agreement, the termination of the Indenture, and, as to
the Trustee, the removal or resignation of the Trustee.
SECTION 7.2. Maintenance of Corporate Existence.
The Company agrees that during the term of this Loan Agreement it
will maintain its corporate existence, will not dissolve or otherwise dispose of
all or substantially all of its assets and will not consolidate with or merge
into another corporation; provided, however, that the Company may, without
violating the agreement contained in this Section, consolidate with or merge
into another corporation, or sell or otherwise transfer to another corporation
all or substantially all of its assets as an entirety and thereafter dissolve,
if (a) the Issuer consents in writing, (b) the surviving, resulting or
transferee corporation, as the case may be, assumes in a writing delivered to
the Trustee all of the obligations of the Company herein and under the Tax
Documents, is duly qualified to do business in the Commonwealth and is not a
Disqualified Contractor, (c) at the time of such consolidation or merger and
after giving effect thereto, no Default or Event of Default shall have occurred
and be continuing, (d) after giving effect to such consolidation or merger the
surviving corporation would be permitted to incur at least $1.00 of additional
Funded Debt under the provisions of Section 7.9 hereof, and (e) the provisions
of Section 7.6 are satisfied.
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SECTION 7.3. Financial Information.
The Company will keep proper books of record and account in which
full and correct entries will be made of all dealings or transactions of or in
relation to the business and affairs of the Company, in accordance with
generally accepted accounting principles consistently maintained (except for
changes disclosed in the financial statements furnished pursuant to this Section
7.3 and concurred in by the independent public accountants referred to herein),
and will furnish to the Trustee and upon request, to the Issuer:
(a) Quarterly Statements. As soon as available and in any event
within 45 days after the end of each quarterly fiscal period (except the last)
of each fiscal year, duplicate copies of:
(1) a consolidated balance sheet of the Company as of the
close of such quarter setting forth in comparative form the
consolidated figures for the corresponding period of the preceding
fiscal year,
(2) consolidated statements of income and shareholders'
investment of the Company for such quarterly period, setting forth
in comparative form the consolidated figures for the corresponding
period of the preceding fiscal year, and
(3) consolidated statements of cash flows of the Company for
the portion of the fiscal year ending with such quarter, setting
forth in comparative form the consolidated figures for the
corresponding period of the preceding fiscal year,
all in reasonable detail and certified as complete and correct, by an authorized
financial officer of the Company;
(b) Annual Statements. As soon as available and in any event within
120 days after the close of each fiscal year of the Company, duplicate copies
of:
(1) a consolidated balance sheet of the Company as of the
close of such fiscal year,
(2) consolidated statements of income and shareholders'
investment and cash flows of the Company for such fiscal year,
in each case setting forth in comparative form the consolidated figures for the
preceding fiscal year, all in reasonable detail and accompanied by an opinion
thereon of a firm of independent public accountants of recognized national
standing selected by the Company to the effect that the consolidated financial
statements have been prepared in accordance with generally accepted accounting
principles consistently applied (except for changes in application in which such
accountants concur) and present fairly, in all material respects, the financial
condition of the Company and that the examination of such accountants in
connection with such financial statements has been made in accordance with
generally accepted auditing standards and
25
accordingly, includes such tests of the accounting records and such other
auditing procedures as were considered necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of the
Company;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement sent by
the Company to stockholders generally and of each regular or periodic report,
and any registration statement or prospectus filed by the Company with any
securities exchange or the Securities and Exchange Commission or any successor
agency, and copies of any orders in any proceedings substantially affecting the
financial condition of the Company to which the Company is a party, issued by
any governmental agency, Federal or state, having jurisdiction over the Company;
(e) Officers' Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial officer
of the Company stating that he has reviewed the provisions of this Agreement and
setting forth: (1) the information and computations (in sufficient detail)
required in order to establish whether the Company was in compliance with the
requirements of Sections 7.9 through 7.12, inclusive, at the end of the period
covered by the financial statements then being furnished, and (2) whether there
existed as of the date of such financial statements and whether, to the best of
his knowledge, there exists on the date of the certificate or existed at any
time during the period covered by such financial statements any Default or Event
of Default and, if any such condition or event exists on the date of the
certificate, specifying the nature and period of existence thereof and the
action the Company is taking and proposes to take with respect thereto.
To the extent not furnished pursuant to the foregoing provisions of
this Section 7.3, the Company agrees to furnish to the Issuer and Trustee,
copies of the annual financial statements and other information filed with
Nationally Recognized Municipal Securities Information Repositories pursuant to
the Company's continuing disclosure undertaking referred to in the Underwriting
Agreement. Such statements and other information shall be filed with the
Authority and the Trustee within ten (10) days of the filings made pursuant to
such continuing disclosure undertaking.
SECTION 7.4. Agreement of Issuer Not to Assign or Pledge.
Except for the assignment and pledge described in the Indenture, the
Issuer agrees that it will not attempt to further assign, pledge, transfer or
convey its interest in or create any assignment, pledge, lien, charge or
encumbrance of any form or nature with respect to the rights and interests
herein described.
SECTION 7.5. Reference to Bonds Ineffective after Bonds Paid.
Upon payment of all Debt Service due relating to the Bonds, and
payment of all fees and charges of the Issuer and the Trustee, all as provided
in Article X of the Indenture, all references herein to the Bonds and the
Trustee shall be ineffective and neither the Issuer, the
26
Trustee nor the holders of any of the Bonds shall thereafter have any rights
hereunder and the Company shall have no further obligation hereunder, saving and
excepting those that shall have theretofore vested and remain unsatisfied and
any right of the Issuer or the Trustee to indemnification under Section 7.1 and
payment of fees under Section 8.3, which rights shall survive the payment of all
Debt Service due relating to the Bonds and the termination of this Loan
Agreement and the Indenture.
SECTION 7.6. Assignment, Sale or Lease of Project.
(a) The Company shall not assign this Loan Agreement or any interest
of the Company herein, either in whole or in part, without the prior written
consent of the Trustee, which consent shall be given if the following conditions
are fulfilled;
(i) The assignee assumes in writing all of the obligations of
the Company hereunder;
(ii) The assignee provides the Trustee with an opinion of
counsel satisfactory to the Trustee to the effect that neither the validity nor
the enforceability of this Loan Agreement shall be adversely affected by such
assignment;
(iii) The Project shall continue in the opinion of Bond
Counsel to be a "project" as such term is defined in the Act after such
assignment;
(iv) Such assignment shall not, in the opinion of Bond
Counsel, have an adverse effect on the exclusion from gross income for federal
income tax purposes of interest on the Bonds;
(v) The assignee shall not be a Disqualified Contractor; and
(vi) Consent by the Issuer, which consent shall not be
unreasonably withheld.
(b) The Company may, subject to the provisions of Section 6.10,
lease the Project, in whole or in part, to one or more other Persons, provided
that:
(i) No such lease shall relieve the Company from its
obligations under this Loan Agreement;
(ii) In connection with any such lease the Company shall
retain such rights of interests as will permit it to comply with its obligations
under this Loan Agreement;
(iii) No such lease shall impair materially the accomplishment
of the purposes of the Act to be accomplished by operation of the Project as
herein provided;
(iv) Any such lease shall require the lessee to operate the
Project as a "project" under the Act as long as the Bonds are outstanding;
27
(v) In the case of a lease to a new lessee or an assignment of
an existing lease to a new lessee of substantially all of the Project, such new
lessee: (A) shall not be a Disqualified Contractor; and (B) shall have been
approved by the Issuer (such approval not to be unreasonably withheld); and
(vi) The lessees under any such leases, shall be subject to
the applicable terms and conditions of Section 6.10.
(c) The Company shall not sell, assign or otherwise dispose of
(whether in one transaction or in a series of transactions) its interest in the
Project or any material portion thereof, other than is permitted by Section
7.6(a) and other than leases permitted under Section 7.6(b) or undertake or
permit the demolition or removal of the Project or any material portion thereof
without the prior written consent of the Issuer; provided that the Company shall
be permitted to sell, transfer, assign or otherwise dispose of or remove any
portion of the Project which is retired or replaced in the ordinary course of
business.
SECTION 7.7. Amendment of Loan Agreement or Indenture.
No amendment, change, addition to, or waiver of any of the
provisions of this Loan Agreement or the Indenture shall be made except pursuant
to Article IX of the Indenture.
SECTION 7.8. Waiver of Vendor's Lien.
Notwithstanding anything in this Loan Agreement to the contrary, it
is the intention of the parties hereto that no vendor's lien and/or privilege,
mortgage, resolutory condition, right of rescission or stipulation for the
benefit of a third party shall be created by execution of this Loan Agreement,
and if any such lien, privilege, condition, or benefit should be deemed to have
been created by execution of this Loan Agreement, they are expressly released,
renounced, waived and abandoned by the parties hereto.
SECTION 7.9. Limitations on Indebtedness.
(a) The Company will not have outstanding, or in any manner be
liable in respect of, any Indebtedness, except the following:
(1) current operating liabilities and current or other
obligations (other than for borrowed money) incurred in the ordinary
course of business;
(2) Seasonal Indebtedness, provided that such Seasonal
Indebtedness has not existed for a period of at least 30 consecutive
days in the twelve preceding months; and
(3) Funded Debt (including the Bonds) in an amount not in
excess of 60% of the Plant Account on the books of the Company at
any one time outstanding.
28
(b) The renewal, extension or refunding of any Funded Debt issued or
incurred in accordance with the limitations of this Section 7.9 shall constitute
the issuance of additional Funded Debt, which is, in turn, subject to the
limitations of the applicable provisions of this Section 7.9, but any
Indebtedness paid or defeased from the proceeds of additional Funded Debt may be
excluded from outstanding Indebtedness for purposes of this Section 7.9.
(c) Subject to compliance with this Section 7.9, nothing contained
in this Agreement shall prohibit the Company from having the Issuer issue in the
future additional series of Bonds or incurring other types of Funded Debt.
SECTION 7.10. Limitation on Liens.
(a) The Company will not create or incur, or suffer to be incurred
or to exist, any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind on its Property or assets, whether now owned or hereafter
acquired, or upon any income or profits therefrom, or transfer any Property for
the purpose of subjecting the same to the payment of obligations in priority to
the payment of its or their general creditors, or acquire or agree to acquire
any Property or assets upon conditional sales agreements or other title
retention devices, except Excepted Encumbrances; provided, however, that this
requirement shall not be applicable to, nor prevent:
(1) the pledging by the Company of its assets as security for
the payment of any tax, assessment or other similar charge demanded
of the Company by any governmental authority or public body as long
as the Company in good faith contests its liability to pay the same,
or as security to be deposited with any governmental authority or
public body for any purpose at any time required by law or,
governmental regulation as a condition to the transaction of any
business or the exercise of any privilege, license or right; or
(2) the pledging by the Company of any assets for the purpose
of securing a stay or discharge or for any other purpose in the
course of any legal proceeding in which the Company is a party; or
(3) making good faith deposits in connection with tenders,
contracts or leases to which the Company is a party; or
(4) the pledging by the Company of its revenues to the
Pennsylvania Infrastructure Investment Authority pursuant to that
certain Loan Agreement dated as of August 24, 1999 in order to
secure a loan in the original aggregate principal amount of $800,000
made by such Authority to the Company, such loan having an
outstanding principal balance of approximately $652,100 as of
December 31, 2003.
(b) In the event any Property or assets of the Company are subject
to a lien or charge not otherwise permitted by Section 7.10(a) above, the
Company will make effective provision whereby the Bonds shall (so long as any
other Indebtedness shall be so secured) be secured (along with any other
Indebtedness similarly entitled to be equally and ratably secured)
29
by a direct lien (on all the Property, other than Excepted Property, owned by
the Company just prior to the time such other lien shall have become a lien on
any of the Property of the Company) prior to the lien or liens securing any and
all such other Indebtedness. Compliance with the provisions of this paragraph
shall not be deemed to constitute a waiver of, or consent to, any violation of
Section 7.10(a).
(c) The Company covenants that, so long as any Bonds shall be
outstanding under the Indenture, if, upon any consolidation or merger of the
Company with or into any other corporation, or upon any sale or conveyance of
all or substantially all of the Property of the Company as an entirety, or upon
any acquisition by the Company of the Property of another corporation
substantially as an entirety or upon any merger of any other corporation into
the Company, any of the Property (other than Excepted Property) owned by the
Company just prior thereto, would thereupon become subject to any lien (other
than Excepted Encumbrances), the Company, prior to such consolidation, merger,
sale, conveyance or acquisition, will take appropriate action whereby the Bonds
shall (so long as such Property shall be subject to such lien) be secured (along
with any other Indebtedness similarly entitled to be equally and ratably
secured) by a direct lien on such portion of the Property of the Company prior
to all other liens, other than Excepted Encumbrances and other than any liens
existing thereon just prior to such consolidation, merger, sale, conveyance or
acquisition.
(d) Any mortgage created pursuant to the requirements of paragraphs
(b) or (c) above shall contain reasonable and customary provisions for the
enforcement of the lien thereby created and for the release of, or substitution
for, the Property so mortgaged. Such direct lien shall be evidenced by an
appropriate instrument or instruments executed and delivered to the Trustee.
SECTION 7.11. Dividends, Stock Purchases.
The Company will not, except as hereinafter provided:
(a) Declare or pay any dividends, either in cash or Property, on any
shares of its capital stock of any class (except dividends or other
distributions payable solely in shares of capital stock of the Company,
including the portion of dividends reinvested in shares of the Company's common
capital stock under the Company's Optional Dividend Reinvestment Plan); or
(b) Directly or indirectly, purchase, redeem or retire any shares of
its capital stock of any class or any warrants, rights or options to purchase or
acquire any shares of its capital stock (other than in exchange for or out of
the net proceeds to the Company from the substantially concurrent issue or sale
of other shares of capital stock of the Company or warrants, rights or options
to purchase or acquire any shares of its capital stock); or
(c) Make any other payment or distribution, either directly or
indirectly, in respect of its capital stock; or
30
(d) Make any payment, distribution, conveyance or transfer of any
Property to any subsidiary or affiliate;
(such declarations or payments of dividends, purchases, redemptions or
retirements of capital stock and warrants, rights or options, and all such other
distributions, conveyances and transfers being herein collectively called
"Restricted Payments"), if after giving effect thereto the aggregate amount of
Restricted Payments made during the period from and after December 31, 1982 to
and including the date of the making of the Restricted Payment in question,
would exceed the sum of (1) $1,500,000 plus (2) earned surplus of the Company,
on a non-consolidated basis, accumulated after December 31, 1982, determined
without any deduction on account of such Restricted Payments, provided, however,
that notwithstanding the foregoing, in no event shall the Company make any
distribution, conveyance or transfer to any subsidiary or affiliate of any
Property constituting the Plant Account.
The Company will not declare any dividend which constitutes a
Restricted Payment payable more than 60 days after the date of declaration
thereof.
For the purposes of this Section 7.11, the amount of any Restricted
Payment declared, paid or distributed in Property of the Company shall be deemed
to be the greater of the book value or fair market value (as determined in good
faith by the Board of Directors of the Company) of such Property at the time of
the making of the Restricted Payment in question.
SECTION 7.12. Termination of Pension Plans.
The Company will not permit any employee benefit plan maintained by
it to be terminated in a manner which could result in the imposition of a lien
on any Property of the Company pursuant to Section 4068 of the Employee
Retirement Income Security Act of 1974, as amended.
ARTICLE VIII
Events Of Default And Remedies
SECTION 8.1. Defaults and Remedies.
(a) The Company is advised and recognizes that the Issuer will
assign all of its right, title, and interest in and to all of the Installment
Loan Payments required to be made pursuant to this Loan Agreement, and the right
to receive and collect same, to the Trustee under the Indenture. All rights of
the Issuer (other than Unassigned Issuer's Rights) against the Company arising
under this Loan Agreement or the Indenture may be enforced by the Trustee, or
the Registered Owners of the Bonds, to the extent provided in the Indenture,
without making the Issuer a party.
(b) The following shall constitute an "Event of Default" hereunder:
31
(i) Payment of any Installment Loan Payment is not made when
due and payable and such failure shall continue for one Business Day; or
(ii) Payment of any amount due under this Loan Agreement other
than Installment Loan Payments is not made when due and payable and such failure
shall continue for fifteen (15) Business Days after the Trustee shall have given
written notice to the Company specifying such default; or
(iii) Failure to pay the principal of or interest on any
Indebtedness of the Company for borrowed money, as and when the same shall
become due and payable by the lapse of time, by declaration, by call for
redemption or otherwise, and such default shall continue beyond the period of
grace, if any, allowed with respect thereto; or
(iv) Default or the happening of any event shall occur under
any indenture, agreement, or other instrument under which any Indebtedness of
the Company for borrowed money may be issued and such default or event shall
continue for a period of time sufficient to permit the acceleration of the
maturity of any Indebtedness of the Company outstanding thereunder; or
(v) Default shall occur in the observance or performance of
any covenant or agreement contained in Sections 7.9 through 7.12 hereof;
(vi) Subject to Section 7.1(c) of the Indenture relating to
force majeure, failure by the Company to observe or perform any other covenant,
condition or agreement on its part to be observed or performed under the
Indenture or the Loan Agreement, other than as referred to in subsections (i)
through (v) inclusive above, for a period of 60 days after written notice,
specifying such failure and requesting that it be remedied, is given to the
Company by the Issuer or the Trustee; provided, however, that if the failure
stated in the notice is such that is can be remedied but not within such 60-day
period, it shall not constitute an Event of Default if the default, in the
judgment of the Trustee in reliance upon advice of counsel, is correctable
without material adverse effect on the Bondholders and if corrective action is
instituted by the Company, within such period and is diligently pursued until
the default is remedied; or
(vii) Final judgment or judgments for the payment of money
aggregating in excess of $250,000 is or are outstanding against the Company or
against any Property or assets of the Company and any one of such judgments has
remained unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a
period of 60 days from the date of its entry; or
(viii) The occurrence of an Event of Default under the
Indenture.
(c) Upon the occurrence of an Event of Default, the Trustee (or in
the case of an Event of Default arising out of Unassigned Issuer's Rights, the
Issuer) shall have the power to proceed with any right or remedy granted by the
Constitution and laws of the Commonwealth, as it may deem best, including
without limitation any suit, action or special proceeding in equity or at law,
including mandamus proceedings, for the specific performance of any agreement,
32
obligation or covenant contained herein or for the enforcement of any proper
legal or equitable remedy as the Trustee shall deem most effectual to protect
the rights of the Registered Owners, including without limitation, acceleration
of all amounts payable hereunder; provided, however, any such proceedings shall
be subject to the provisions of Section 7.1(c) of the Indenture relating to
force majeure. Upon the occurrence of an Event of Default under Section
7.1(a)(ii) of the Indenture and upon the occurrence of any other Event of
Default under the Indenture pursuant to the terms of which the Trustee shall
have declared the Bonds immediately due and payable, then all payments required
to be made by the Company under Section 6.4(b) (other than interest not yet
accrued) shall become immediately due and payable.
(d) Any amounts collected for non-payment of amounts described in
Section 6.4 hereof pursuant to actions taken under this Section shall be paid
into the Debt Service Fund and applied in accordance with the provisions of the
Indenture.
SECTION 8.2. Annulment of Acceleration.
If, in compliance with the requirements of Section 7.2 of the
Indenture, the Trustee shall annul an acceleration declared due to any Event of
Default under the Indenture, such annulment shall be deemed to also rescind any
acceleration of all payments required under Section 6.4. In case of any such
annulment, or in case any proceeding taken by the Trustee on account of any such
Event of Default shall have been discontinued or abandoned or determined
adversely, then and in every such case the Issuer, the Company, the Trustee and
the Registered Owners shall be restored to their former positions and rights
hereunder, but no such annulment shall extend to any subsequent or other Event
of Default or impair any right consequent thereon.
SECTION 8.3. Agreement to Pay Attorneys' Fees and Expenses.
In the event the Company should default under any of the provisions
of this Loan Agreement and the Issuer or the Trustee should employ attorneys or
incur other expenses for the collection of payments required hereunder or the
enforcement of performance or observance of any obligation or agreement on the
part of the Company herein contained, the Company agrees that it will upon
demand therefore pay to the Issuer or the Trustee the reasonable fees and
expenses of such attorneys and such other expenses so incurred by the Issuer or
the Trustee.
SECTION 8.4. General Enforcement Provisions.
(a) The terms of this Loan Agreement may be enforced as to one or
more breaches either separately or cumulatively.
(b) No remedy conferred upon or reserved to the Issuer, the Trustee,
or the Registered Owners of the Bonds in this Loan Agreement is intended to be
exclusive of any other available remedy or remedies, but each and every such
remedy shall be cumulative and shall be in addition to every other remedy now or
hereafter existing at law or in equity or by statute. No delay or omission to
exercise any right or power accruing upon any default, omission, or failure of
performance hereunder shall impair any such right or power or shall be construed
to be a waiver thereof, but any such right and power may be exercised from time
to time and as often as
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may be deemed expedient. In the event any provision contained in this Loan
Agreement should be breached by the Company and thereafter duly waived, such
waiver shall be limited to the particular breach so waived and shall not be
deemed to waive any other breach of this Loan Agreement. No waiver by any party
of any breach by any other party of any of the provisions of this Loan Agreement
shall be construed as a waiver of any subsequent breach, whether of the same or
of a different provision of this Loan Agreement.
SECTION 8.5. Notice of Default.
The Company shall notify the Trustee and the Issuer in writing
immediately if it becomes aware of the occurrence of any Event of Default
hereunder or of any fact, condition or event which, with the giving of notice or
passage of time or both, would become an Event of Default.
SECTION 8.6. Unassigned Issuer's Rights.
Notwithstanding any other provision hereof, upon the occurrence of
an Event of Default arising out of Unassigned Issuer's Rights, the Issuer
reserves the right to exercise or refrain from exercising remedies under the
Loan Agreement with respect to such Event of Default and such Event of Default
may not be waived or annulled without the prior written consent of the Issuer.
ARTICLE IX
Miscellaneous
SECTION 9.1. Term of Loan Agreement.
Subject to all provisions hereof which expressly state that the same
shall survive termination hereof, this Loan Agreement shall terminate when
payment of all Debt Service relating to the Bonds shall have been made and all
fees, indemnities, expenses and charges of the Issuer, Local XXX and the Trustee
have been fully paid or provision satisfactory to such parties made for such
payment.
SECTION 9.2. Notices.
All notices, approvals, consents, requests and other communications
hereunder shall be in writing and shall be deemed to have been given when
delivered by hand or overnight courier service or mailed by first class
registered or certified mail, return receipt requested, postage prepaid, or sent
by telecopy and addressed as follows:
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(a) to the Company, to:
The York Water Company
000 Xxxx Xxxxxx Xxxxxx
Xxxx, XX 00000
Attention: President
Telecopy No. (000) 000-0000
(b) to the Issuer, to:
Pennsylvania Economic Development Financing Authority
Department of Community and Economic Development
Commonwealth Keystone Building
000 Xxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxxxxx, XX 00000
Attention: Program Manager
Telecopy No. (000) 000-0000
(c) to the Trustee, to:
Manufacturers and Traders Trust Company
000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Corporate Trust Department
Telecopy No. (000) 000-0000
A duplicate copy of each notice, approval, consent, request or other
communication given hereunder by the Issuer, the Company or the Trustee to any
one of the others shall also be given to all of the others at the address
furnished from time to time. The Issuer, the Company and the Trustee may, by
notice given hereunder, designate any further or different addresses to which
subsequent notices, approvals, consents, requests or other communications shall
be sent or persons to whose attention the same shall be directed.
SECTION 9.3. Benefit of Parties.
This Loan Agreement is made for the exclusive benefit of the Issuer,
the Trustee, the Registered Owners, the Beneficial Owners, the Company and their
respective successors and assigns herein permitted, and not for any other third
party or parties; and nothing in this Loan Agreement, expressed or implied, is
intended to confer upon any party or parties other than the Issuer, the Trustee,
the Registered Owners, the Beneficial Owners, the Company and their respective
successors and assigns herein permitted, any rights or remedies under or by
reason of this Loan Agreement.
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SECTION 9.4. Severability.
If any provision hereof shall be held invalid or unenforceable by
any court of competent jurisdiction, such holding shall not invalidate or render
unenforceable any other provision hereof.
SECTION 9.5. Counterparts.
This Loan Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
SECTION 9.6. Captions.
The captions and headings herein are for convenience only and in no
way define, limit or describe the scope or intent of any provisions hereof.
SECTION 9.7. Law Governing Construction of Loan Agreement.
This Loan Agreement shall be governed by, and construed in
accordance with, the laws of the Commonwealth.
SECTION 9.8. Payments on Non-Business Days.
If any payment required hereunder is due on a date that is not a
Business Day, payment shall be made on the next succeeding Business Day with the
same force and effect as if made on the date fixed for such payment, and no
interest shall accrue on such amount for the period after such date.
SECTION 9.9. Payments to be Sufficient to Meet DTC Requirements.
The Company hereby acknowledges that the Bonds are intended to be
issued in book-entry form through DTC and that DTC has certain timing
requirements and notice requirements. The Company hereby agrees to make payments
and give notices in a manner sufficient to comply from time to time with the DTC
requirements, for so long as the Bonds are in book-entry form at DTC.
SECTION 9.10. Reserved.
SECTION 9.11. Limitation of Liability; No Personal Liability.
(a) In the exercise of the powers of the Issuer or the Trustee
hereunder or under the Indenture, including without limitation the application
of moneys and the investment of funds, neither the Issuer or the Trustee nor
their members, directors, officers, employees, attorneys or agents shall be
accountable to the Company for any action taken or omitted by any of them in
good faith and without gross negligence and with the belief that it is
authorized or within
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the discretion or rights or powers conferred. The Issuer and the Trustee and
their members, directors, officers, employees, attorneys and agents shall be
protected in acting upon any paper or document believed to be genuine, and any
of them may conclusively rely upon the advice of counsel and may (but need not)
require further evidence of any fact or matter before taking any action. In the
event of any default by the Issuer hereunder, the liability of the Issuer to the
Company shall be enforceable only out of the Issuer's interest under this Loan
Agreement and there shall be no other recourse for damages by the Company
against the Issuer, its members, directors, officers, employees, attorneys and
agents, or any of the property now or hereafter owned by it or them. All
covenants, obligations and agreements of the Issuer contained in this Loan
Agreement or the Indenture shall be effective to the extent authorized and
permitted by applicable law. No such covenant, obligation or agreement shall be
deemed to be a covenant, obligation or agreement of any present or future
member, director, officer, employee, attorney or agent of the Issuer, and no
official executing the Bonds shall be liable personally on the Bonds or be
subject to any personal liability or accountability by reason of the issuance
thereof or by reason of the covenants, obligations or agreements of the Issuer
contained in this Loan Agreement or the Indenture.
(b) No claim shall be made by the Company or any of the Company's
affiliates against the Issuer or the Trustee or any of their affiliates,
directors, employees, attorneys or agents for any special, indirect,
consequential or punitive damages in respect of any breach or wrongful conduct
(whether or not the claim therefore is based on contract, tort or duty imposed
by law), in connection with, arising out of or in any way related to the
transactions contemplated by this Loan Agreement, the Indenture or the other
financing arrangements entered into in connection with the Project, or any act
or omission or event occurring in connection therewith; and the Company hereby
waives, releases and agrees not to xxx upon any such claim for any such damages,
whether or not accrued and whether or not known or suspected to exist in its
favor.
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IN WITNESS WHEREOF, the Issuer and the Company have caused this Loan
Agreement to be executed in their respective names by their authorized officers
or representatives and their respective seals to be affixed hereto and have
caused its execution hereof to be attested by its authorized officer, all as of
the date first above written.
PENNSYLVANIA ECONOMIC DEVELOPMENT
FINANCING AUTHORITY
By: /s/ XXXXXXX X. XXXXXX
------------------------------------
Executive Director
[Seal]
Attest:
By: /s/ XXXXX X. XXXXXXXX
------------------------------------
Assistant Secretary
THE YORK WATER COMPANY
By: /s/ XXXXXXX X. XXXXX
------------------------------------
Title: President and Chief Executive
Officer
------------------------------
[Seal]
Attest:
By: /s/ XXXXXX X. XXXXXXX
------------------------------------
Assistant Secretary
38
EXHIBIT A
PROJECT DESCRIPTION
Project to be financed:
Construction of a water intake pumping station adjacent to the Susquehanna River
(the "Intake Pumping Station") and a water main pipeline (the "Main") running a
distance of approximately 15 miles from the Intake Pumping Station to an outfall
location on the edge of the Company's Lake Xxxxxx along Iron Stone Hill Road, in
York Township, York County, together with related pumps, fittings, valves and
other water infrastructure system improvements, all for the purpose of providing
an additional source of surface water supply to meet the needs of the Company's
residential, commercial and industrial customers.
EXHIBIT B
NONDISCRIMINATION/SEXUAL HARASSMENT CLAUSE
During the term of the contract, Contractor agrees as follows:
1. In the hiring of any employee(s) for the manufacture of supplies,
performance of work, or any other activity required under the contract or any
subcontract, the Contractor, subcontractor, or any person acting on behalf of
the Contractor or subcontractor shall not, by reason of gender, race, creed, or
color, discriminate against any citizen of this Commonwealth who is qualified
and available to perform the work to which the employment relates.
2. Neither the contractor nor any subcontractor nor any person on
their behalf shall in any manner discriminate against or intimidate any employee
involved in the manufacture or supplies, the performance of work, or any other
activity required under the contract on account of gender, race, creed, or
color.
3. Contractors and subcontractors shall establish and maintain a
written sexual harassment policy and shall inform their employees of this
policy. The policy must contain a notice that sexual harassment will not be
tolerated and employees who practice it will be disciplined.
4. Contractors shall not discriminate by reason of gender, race,
creed, or color against any subcontractor or supplier who is qualified to
perform the work to which the contracts relate.
5. The Contractor of each subcontractor shall furnish all necessary
employment documents and records to and permit access to their books, records,
and accounts by the contracting agency and the Bureau of Contract Administration
and Business Development, for purposes of investigation, to ascertain compliance
with provisions of this Nondiscrimination/Sexual Harassment Clause. If the
Contractor or any subcontractor does not possess documents or records reflecting
the necessary information requested, the Contractor or subcontractor shall
furnish such information on reports forms supplied by the contracting agency or
the Bureau of Contract Administration and Business Development.
6. The Contractor shall include the provisions of this
Nondiscrimination/Sexual Harassment Clause in every subcontract so that such
provisions will be binding upon each subcontractor.
7. The Commonwealth may cancel or terminate the contract, and all
money due or to become due under the contract may be forfeited for a violation
of the terms and conditions of this Nondiscrimination/Sexual Harassment Clause.
In addition, the agency may proceed with debarment or suspension and may place
the Contractor in the Contractor Responsibility file.
