EXHIBIT 10.13
CREDIT AGREEMENT
THIS AGREEMENT ("Agreement") is entered into as of June 30, 1996, by and
between SUBURBAN WATER SYSTEMS, a California corporation ("Borrower"), and XXXXX
FARGO BANK, NATIONAL ASSOCIATION ("Bank").
RECITAL
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Borrower has requested from Bank the credit accommodations described below
(each, a "Credit" and collectively, the "Credits"), and Bank has agreed to
provide the Credits to Borrower on the terms and conditions contained herein;
NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, Bank and Borrower hereby agree as follows:
ARTICLE I
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THE CREDITS
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SECTION 1.1. LINE OF CREDIT A.
(a) Line of Credit A. Subject to the terms and conditions of this
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Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including December 1, 1996, not to exceed at any time the aggregate
principal amount of Four Million Dollars ($4,000,000.00) ("Line of Credit A");
provided, however, that at no time shall the outstanding principal balance of
the Line of Credit A, when combined with the outstanding principal balance of
the $6,000,000.00 revolving line of credit provided by Bank to Southwest Water
Company, a Delaware corporation ("Southwest") pursuant to that certain Credit
Agreement between Southwest and Bank dated as of December 2, 1992, as amended
("Southwest/Xxxxx Fargo Credit Agreement") (said $6,000,000.00 line of credit
provided by Bank to Southwest pursuant to the Southwest/Xxxxx Fargo Credit
Agreement, as same may be modified, extended and renewed from time to time, may
be referred to as the "Southwest/Xxxxx Fargo Line of
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Credit"), exceed SIX MILLION DOLLARS ($6,000,000.00) in the aggregate. The
proceeds of the initial advance under Line of Credit A shall be used to fund a
loan by Borrower to Southwest which will be used by Southwest to repay
indebtedness of Southwest to Bank under the Southwest/Xxxxx Fargo Line of
Credit. After the initial advance, proceeds of advances under Line of Credit A
shall be used for Borrower's working capital requirements. Borrower's
obligation to repay advances under Line of Credit A shall be evidenced by a
promissory note substantially in the form of Exhibit A attached hereto ("Line of
Credit A Note"), all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to time during the
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term of Line of Credit A borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in Line of Credit A Note; provided however, that
the total outstanding borrowings under Line of Credit A shall not at any time
exceed the maximum principal amount available thereunder, as set forth above.
SECTION 1.2. LINE OF CREDIT B.
(a) Line of Credit B. Subject to the terms and conditions of this
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Agreement, Bank hereby agrees to make advances to Borrower from time to time up
to and including June 30, 1997, not to exceed at any time the aggregate
principal amount of Four Million Dollars ($4,000,000.00) ("Line of Credit B");
provided, however, that at no time shall the outstanding principal balance of
the Line of Credit B, when combined with the outstanding principal balance of
the $6,000,000.00 revolving commitment provided by Bank to Southwest pursuant to
that certain Credit Agreement between Southwest and Bank (which is referred to
therein as "First Interstate Bank of California") dated as of December 22, 1992,
as amended ("Southwest/First Interstate Credit Agreement") (said $6,000,000.00
revolving commitment provided by Bank to Southwest pursuant to the
Southwest/First Interstate Credit Agreement, as same may be modified, extended
and renewed from time to time, may be referred to as the "Southwest/First
Interstate
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Line of Credit"), exceed SIX MILLION DOLLARS ($6,000,000.00) in the aggregate.
The proceeds of the initial advance under Line of Credit B shall be used to fund
a loan by Borrower to Southwest which will be used by Southwest to repay
indebtedness of Southwest to Bank under the Southwest/First Interstate Line of
Credit. After the initial advance, proceeds of advances under Line of Credit B
shall be used for Borrower's working capital requirements. Borrower's
obligation to repay advances under Line of Credit B shall be evidenced by a
promissory note substantially in the form of Exhibit B attached hereto ("Line of
Credit B Note"), all terms of which are incorporated herein by this reference.
(b) Borrowing and Repayment. Borrower may from time to time during the
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term of Line of Credit B borrow, partially or wholly repay its outstanding
borrowings, and reborrow, subject to all of the limitations, terms and
conditions contained herein or in Line of Credit B Note; provided however, that
the total outstanding borrowings under Line of Credit B shall not at any time
exceed the maximum principal amount available thereunder, as set forth above.
SECTION 1.3. INTEREST/FEES.
(a) Interest. The outstanding principal balances of Line of Credit A and
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Line of Credit B shall bear interest at the rates of interest set forth in the
Line of Credit A Note and the Line of Credit B Note, respectively.
(b) Computation and Payment. Interest shall be computed on the basis of a
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360-day year, actual days elapsed. Interest shall be payable at the times and
place set forth in the Line of Credit A Note and the Line of Credit B Note
(collectively, "Notes").
(c) Commitment Fee. Borrower shall pay to Bank a non-refundable
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commitment fee for Line of Credit A and Line of Credit B equal to $1,500.00,
which fee shall be due and payable in full on the date Borrower executes this
Agreement.
(d) Unused Commitment Fee. Borrower shall pay to Bank a fee equal to one-
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half percent (.50%) per annum (computed on the basis of a 360-day year, actual
days elapsed) on the average daily unused amount of Line of Credit A, which fee
shall be
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calculated on a quarterly basis by Bank and shall be due and payable by Borrower
in arrears within thirty (30) days after each billing is sent by Bank.
SECTION 1.4. COLLECTION OF PAYMENTS. Borrower authorizes Bank to collect
all interest and fees due under each Credit by charging Borrower's demand
deposit account number 4919-041608 with Bank, or any other demand deposit
account maintained by Borrower with Bank, for the full amount thereof. Should
there be insufficient funds in any such demand deposit account to pay all such
sums when due, the full amount of such deficiency shall be immediately due and
payable by Borrower.
SECTION 1.5. GUARANTY. All indebtedness of Borrower to Bank shall be
guaranteed by Southwest in the principal amount of EIGHT MILLION DOLLARS
($8,000,000.00), as evidenced by and subject to the terms of a continuing
guaranty in form and substance satisfactory to Bank.
ARTICLE II
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REPRESENTATIONS AND WARRANTIES
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Borrower makes the following representations and warranties to Bank, which
representations and warranties shall survive the execution of this Agreement and
shall continue in full force and effect until the full and final payment, and
satisfaction and discharge, of all obligations of Borrower to Bank subject to
this Agreement.
SECTION 2.1. LEGAL STATUS. Borrower is a corporation, duly organized and
existing and in good standing under the laws of the State of California, and is
qualified or licensed to do business (and is in good standing as a foreign
corporation, if applicable) in all jurisdictions in which such qualification or
licensing is required or in which the failure to so qualify or to be so licensed
could have a material adverse effect on Borrower. Southwest owns one hundred
percent (100%) of the stock of Borrower.
SECTION 2.2. AUTHORIZATION AND VALIDITY. This Agreement, the Notes, and
each other document, contract and instrument required hereby or at any
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time hereafter delivered to Bank in connection herewith (collectively, the "Loan
Documents") have been duly authorized, and upon their execution and delivery in
accordance with the provisions hereof will constitute legal, valid and binding
agreements and obligations of Borrower or the party which executes the same,
enforceable in accordance with their respective terms.
SECTION 2.3. NO VIOLATION. The execution, delivery and performance by
Borrower of each of the Loan Documents and Borrower's use of the proceeds of the
Credits do not violate any provision of any law or regulation, or contravene any
provision of the Articles of Incorporation or By-Laws of Borrower, or result in
any breach of or default under any contract, obligation, indenture or other
instrument to which Borrower is a party or by which Borrower may be bound. The
execution, delivery and performance by Southwest of its guaranty hereunder do
not violate any provision of any law or regulation, or contravene any provision
of the Articles of Incorporation or By-Laws of Southwest, or result in any
breach of or default under any contract, obligation, indenture or other
instrument to which Southwest is a party or by which Southwest may be bound.
SECTION 2.4. LITIGATION. There are no pending, or to the best of
Borrower's knowledge threatened, actions, claims, investigations, suits or
proceedings by or before any governmental authority, arbitrator, court or
administrative agency which could have a material adverse effect on the
financial condition or operation of Borrower other than those disclosed by
Borrower to Bank in writing prior to the date hereof.
SECTION 2.5. CORRECTNESS OF FINANCIAL STATEMENT. The financial statement
of Borrower dated May 31,1996, a true copy of which has been delivered by
Borrower to Bank prior to the date hereof, (a) is complete and correct and
presents fairly the financial condition of Borrower, (b) discloses all
liabilities of Borrower that are required to be reflected or reserved against
under generally accepted accounting principles, whether liquidated or
unliquidated, fixed or contingent, and
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(c) has been prepared in accordance with generally accepted accounting
principles consistently applied. Since the date of such financial statement
there has been no material adverse change in the financial condition of
Borrower, nor has Borrower mortgaged, pledged, granted a security interest in or
otherwise encumbered any of its assets or properties except in favor of Bank or
as otherwise permitted by Bank in writing.
SECTION 2.6. INCOME TAX RETURNS. Borrower has no knowledge of any
pending assessments or adjustments of its income tax payable with respect to any
year.
SECTION 2.7. NO SUBORDINATION. There is no agreement, indenture,
contract or instrument to which Borrower is a party or by which Borrower may be
bound that requires the subordination in right of payment of any of Borrower's
obligations subject to this Agreement to any other obligation of Borrower.
SECTION 2.8. PERMITS, FRANCHISES. Borrower possesses, and will hereafter
possess, all permits, franchises and licenses required and rights to all
trademarks, trade names, patents, and fictitious names, if any, necessary to
enable it to conduct the business in which it is now engaged in compliance with
applicable law.
SECTION 2.9. ERISA. Borrower is in compliance in all material respects
with all applicable provisions of the Employee Retirement Income Security Act of
1974, as amended or recodified from time to time ("ERISA"); Borrower has not
violated, in any material respect, any provision of any defined benefit employee
pension plan (as defined in ERISA) maintained or contributed to by Borrower
(each, a "Plan"); no Reportable Event as defined in ERISA has occurred and is
continuing with respect to any Plan maintained by Borrower; Borrower has met its
minimum funding requirements under ERISA with respect to each Plan; and each
Plan will be able to fulfill its benefit obligations as they come due in
accordance with the Plan documents.
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SECTION 2.10. OTHER OBLIGATIONS. Borrower is not in default on any
obligation for borrowed money, any purchase money obligation or any other
material lease, commitment, contract, instrument or obligation.
SECTION 2.11. ENVIRONMENTAL MATTERS. Except as disclosed by Borrower to
Bank in writing prior to the date hereof, Borrower is in compliance in all
material respects with all applicable Federal or state environmental, hazardous
waste, health and safety statutes, and any rules or regulations adopted pursuant
thereto, which govern or affect any of Borrower's operations and/or properties,
including without limitation, the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, the Superfund Amendments and
Reauthorization Act of 1986, the Federal Resource Conservation and Recovery Act
of 1976, the Federal Toxic Substances Control Act and the California Health and
Safety Code, as any of the same may be amended, modified or supplemented from
time to time. None of the operations of Borrower is the subject of any Federal
or state investigation evaluating whether any remedial action involving a
material expenditure is needed to respond to a release of any toxic or hazardous
waste or substance into the environment. Borrower has no material contingent
liability in connection with any release of any toxic or hazardous waste or
substance into the environment.
SECTION 2.12. APPROVALS. All required registrations with, or consents or
approvals of, or notices to or other action by, any governmental authority or
agency or other person or entity with respect to the execution, delivery and
performance by Borrower of this Agreement and the use of the proceeds of the
Credits have been made, given or taken as the case may be. All required
registrations with, or consents or approvals of, or notices to or other action
by, any governmental authority or agency or other person or entity with respect
to the execution, delivery and performance by Southwest of its guaranty
hereunder have been made, given or taken as the case may be.
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ARTICLE III
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CONDITIONS
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SECTION 3.1. CONDITIONS OF INITIAL EXTENSION OF CREDIT. The obligation
of Bank to grant any of the Credits is subject to the fulfillment to Bank's
satisfaction of all of the following conditions:
(a) Approval of Bank Counsel. All legal matters incidental to the
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granting of each of the Credits shall be satisfactory to Bank's counsel.
(b) Documentation. Bank shall have received, in form and substance
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satisfactory to Bank, each of the following, duly executed:
(i) This Agreement and the Notes.
(ii) Corporation Resolution: Borrowing.
(iii) Certificates of Incumbency from Borrower and Southwest.
(iv) Continuing Guaranty from Southwest.
(v) Corporate Resolution Authorizing Guaranty from Southwest.
(vi) Letter of understanding between Bank, Borrower and Southwest confirming
that borrowings by Southwest under the Southwest/Xxxxx Fargo Line of
Credit and the Southwest/First Interstate Line of Credit are restricted
in accordance with Sections 1.1 and 1.2 herein.
(vii) Such other documents as Bank may require under any other Section of
this Agreement.
(c) Legal Opinion. Bank shall have received, from counsel to Borrower
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acceptable to Bank, a legal opinion in form and substance satisfactory to Bank.
(d) Approval Documents. Borrower shall have delivered to Bank such
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documents as Bank may require to assure Bank that Borrower has the right, power
and authority to enter into this Agreement and the other Loan Documents and to
perform all obligations of Borrower hereunder and thereunder.
(e) Financial Condition. There shall have been no material adverse change,
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as determined by Bank, in the financial condition or business of Borrower or any
guarantor hereunder, nor any material decline, as determined by Bank, in the
market value of a substantial or material portion of the assets of Borrower or
any guarantor hereunder.
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SECTION 3.2. CONDITIONS OF EACH EXTENSION OF CREDIT. The obligation of
Bank to make each extension of credit requested by Borrower hereunder shall be
subject to the fulfillment to Bank's satisfaction of each of the following
conditions:
(a) Compliance. The representations and warranties contained herein and in
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each of the other Loan Documents shall be true on and as of the date of the
signing of this Agreement and on the date of each extension of credit by Bank
pursuant hereto, with the same effect as though such representations and
warranties had been made on and as of each such date, and on each such date, no
Event of Default as defined herein, and no condition, event or act which with
the giving of notice or the passage of time or both would constitute such an
Event of Default, shall have occurred and be continuing or shall exist.
(b) Documentation. Bank shall have received all additional documents which
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may be required in connection with such extension of credit.
ARTICLE IV
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AFFIRMATIVE COVENANTS
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Borrower covenants that so long as Bank remains committed to extend credit
to Borrower pursuant hereto, or any liabilities (whether direct or contingent,
liquidated or unliquidated) of Borrower to Bank under any of the Loan Documents
remain outstanding, and until payment in full of all obligations of Borrower
subject hereto, Borrower shall, unless Bank otherwise consents in writing:
SECTION 4.1. PUNCTUAL PAYMENTS. Punctually pay all principal, interest,
fees or other liabilities due under any of the Loan Documents at the times and
place and in the manner specified therein, and immediately upon demand by Bank,
the
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amount by which the outstanding principal balance of any of the Credits at any
time exceeds any limitation on borrowings applicable thereto.
SECTION 4.2. ACCOUNTING RECORDS. Maintain adequate books and records in
accordance with generally accepted accounting principles consistently applied,
and permit any representative of Bank, at any reasonable time, to inspect, audit
and examine such books and records, to make copies of the same, and to inspect
the properties of Borrower.
SECTION 4.3. FINANCIAL STATEMENTS. Provide to Bank all of the following,
in form and detail satisfactory to Bank:
(a) not later than 60 days after and as of the end of each fiscal quarter,
a financial statement of Borrower, prepared by Borrower, to include balance
sheet and income statement;
(b) not later than 120 days after and as of the end of each fiscal year, an
audited consolidated financial statement of Southwest, prepared by a certified
public accountant acceptable to Bank, to include balance sheet, income
statement, statement of cash flows and a statement of retained earnings,
together with such consolidating information as Bank may reasonably require;
(c) not later than 60 days after and as of the end of each quarter, a
financial statement of Southwest, prepared by Southwest, to include balance
sheet and income statement;
(d) contemporaneously with each quarterly financial statement of Southwest
required hereby, a certificate of the chief financial officer of Southwest that
said financial statements are accurate;
(e) contemporaneously with each quarterly financial statement of Borrower
required hereby and with each annual consolidated financial statement of
Southwest required hereby, a certificate of the chief financial officer of
Borrower that said financial statements are accurate and that there exists no
Event of Default nor any condition, act or event which with the giving of notice
or the passage of time would constitute an
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Event of Default, together with a calculation of Total Debt and Bondable
Capacity as those terms are defined in section 4.8(c);
(f) from time to time such other information as Bank may reasonably
request.
SECTION 4.4. COMPLIANCE. Preserve and maintain all licenses, permits,
governmental approvals, rights, privileges and franchises necessary for the
conduct of its business; and comply with the provisions of all documents
pursuant to which Borrower is organized and/or which govern Borrower's continued
existence and with the requirements of all laws, rules, regulations and orders
of any governmental authority applicable to Borrower and/or its business.
SECTION 4.5. INSURANCE. Maintain and keep in force insurance of the
types and in amounts customarily carried in lines of business similar to that of
Borrower, including but not limited to fire, extended coverage, public
liability, flood, property damage and workers' compensation, with all such
insurance carried with companies and in amounts satisfactory to Bank, and
deliver to Bank from time to time at Bank's request schedules setting forth all
insurance then in effect.
SECTION 4.6. FACILITIES. Keep all properties useful or necessary to
Borrower's business in good repair and condition, and from time to time make
necessary repairs, renewals and replacements thereto so that such properties
shall be fully and efficiently preserved and maintained.
SECTION 4.7. TAXES AND OTHER LIABILITIES. Pay and discharge when due any
and all indebtedness, obligations, assessments and taxes, both real or personal,
including without limitation Federal and state income taxes and state and local
property taxes and assessments, except such (a) as Borrower may in good faith
contest or as to which a bona fide dispute may arise, and (b) for which Borrower
has made provision, to Bank's reasonable satisfaction, for eventual payment
thereof in the event Borrower is obligated to make such payment.
SECTION 4.8. FINANCIAL CONDITION. Maintain Borrower's financial
condition as follows using generally accepted accounting principles consistently
applied
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and used consistently with prior practices (except to the extent modified by the
definitions herein) , with compliance determined commencing with Borrower's
financial statements for the period ending May 31, 1996:
(a) Net income after taxes not less than $1.00 on an annual basis,
determined as of each fiscal year end.
(b) EBITDA Coverage Ratio not less than 1.5 to 1.0 as of each fiscal year
end, with "EBITDA" defined as net profit before tax plus interest expense (net
of capitalized interest expense), depreciation expense and amortization expense,
and with "EBITDA Coverage Ratio" defined as EBITDA divided by the aggregate of
total interest expense plus the prior period current maturity of long-term debt
and the prior period current maturity of subordinated debt.
(c) Total Debt not greater than Bondable Capacity ($32,693,000 at June 30,
1996) calculated as of the end of each quarter, with "Total Debt" defined as
bank debt plus bonds issued under that certain Indenture of Mortgage and Deed of
Trust dated October 1, 1986, as supplemented and amended by the first Amendment
and Supplement to Indenture of Mortgage and Deed of Trust dated February 7, 1990
("First Amendment") and the Second Amendment and Supplement to Indenture of
Mortgage and Deed of Trust dated January 24, 1992, and as to be further
supplemented by a Third Amendment and Supplement to Indenture of Mortgage and
Deed of Trust by Borrower and Bank of America, as Trustee, for the purpose of
creating the Series C Bonds (collectively, "Indenture"). "Bondable Capacity" is
defined as a dollar amount equal to the sum of:
(i) the Adjusted Amount of Bondable Property; plus
(ii) Trust Moneys; plus
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(iii) the Amount of Property Additions not previously included in any
Summary Certificate of Bondable Capacity; less
(iv) the amount of Retirements not previously included in any Summary
Certificate of Bondable Capacity; less
(v) $3,250,000 as provided in the First Amendment.
All capitalized terms used in this section 4.8(c) shall have the meanings given
to them in the Indenture in effect on the date hereof, unless otherwise defined
herein.
SECTION 4.9. LITIGATION. Promptly give notice in writing to Bank of any
litigation pending or threatened against Borrower in excess of $500,000.00.
SECTION 4.10. NOTICE TO BANK. Promptly (but in no event more than five
(5) days after the occurrence of each such event or matter) give written notice
to Bank in reasonable detail of: (a) the occurrence of any Event of Default, or
any condition, event or act which with the giving of notice or the passage of
time or both would constitute an Event of Default; (b) any change in the name or
the organizational structure of Borrower; (c) the occurrence and nature of any
Reportable Event or Prohibited Transaction, each as defined in ERISA, or any
funding deficiency with respect to any Plan; (d) any termination or cancellation
of any insurance policy which Borrower is required to maintain, or any uninsured
or partially uninsured loss through liability or property damage, or through
fire, theft or any other cause affecting Borrower's property in excess of an
aggregate of $250,000; or (e) the commencement of any legal, judicial or
administrative proceeding which seeks a determination that Borrower is
unauthorized to perform any obligation under this Agreement or any of the other
Loan Documents.
SECTION 4.11. APPROVALS. Obtain all consents and approvals from any
governmental authority or agency or other person or entity as may be required
for Borrower to perform its obligations hereunder.
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ARTICLE V
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NEGATIVE COVENANTS
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Borrower further covenants that so long as Bank remains committed to extend
credit to Borrower pursuant hereto, or any liabilities (whether direct or
contingent, liquidated or unliquidated) of Borrower to Bank under any of the
Loan Documents remain outstanding, and until payment in full of all obligations
of Borrower subject hereto, Borrower will not without Bank's prior written
consent:
SECTION 5.1. USE OF FUNDS. Use any of the proceeds of any of the Credits
except for the purposes stated in Article I hereof.
SECTION 5.2. OTHER INDEBTEDNESS. Create, incur, assume or permit to
exist any indebtedness or liabilities resulting from borrowings, loans or
advances, whether secured or unsecured, matured or unmatured, liquidated or
unliquidated, joint or several, except for (a) the liabilities of Borrower to
Bank, and (b) any other liabilities of Borrower existing as of, and disclosed to
Bank in writing prior to, the date hereof, and (c) the $8,000,000 of Series C
First Mortgage Bonds on the terms heretofore submitted by Borrower to Bank.
SECTION 5.3. MERGER, CONSOLIDATION, TRANSFER OF ASSETS. Merge into or
consolidate with any other entity; make any substantial change in the nature of
Borrower's business as conducted as of the date hereof; acquire all or
substantially all of the assets of any other entity, except for acquisitions of
assets which do not include stock, partnership interests or limited liability
memberships, and which do not involve acquired assets with a value (based on the
consideration paid therefor) in excesss of $250,000.00 in the aggregate for all
such acquisitions during any fiscal year; nor sell, lease, transfer or otherwise
dispose of all or a substantial or material portion of Borrower's assets except
in the ordinary course of its business.
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SECTION 5.4. GUARANTIES. Guarantee or become liable in any way as
surety, endorser (other than as endorser of negotiable instruments for deposit
or collection in the ordinary course of business), accommodation endorser or
otherwise for, nor pledge or hypothecate any assets of Borrower as security for,
any liabilities or obligations of any other person or entity, except for (a) any
of the foregoing in favor of Bank, and (b) any of the foregoing existing as of
and disclosed to Bank in writing prior to the date hereof.
SECTION 5.5. LOANS, ADVANCES, INVESTMENTS. Make any loans or advances to
or investments in any person or entity, except for (a) any of the foregoing
existing as of, and disclosed to Bank in writing prior to, the date hereof, and
(b) advances by Borrower to Southwest in the ordinary course of business so long
as outstanding advances by Borrower to Southwest do not exceed $3,000,000.00 in
the aggregate at any time; provided, however, that for the purpose of
calculating the $3,000,000.00 of permitted outstanding advances to Southwest,
the outstanding balances of the loans to Southwest which are funded by the
initial advance under each Credit hereunder (collectively, "Initial Southwest
Loans") shall be excluded.
SECTION 5.6. DIVIDENDS, DISTRIBUTIONS. Declare or pay any dividend or
distribution either in cash, stock or any other property on Borrower's stock now
or hereafter outstanding, nor redeem, retire, repurchase or otherwise acquire
any shares of any class of Borrower's stock now or hereafter outstanding, except
for dividends allowed by the terms of the Indenture.
SECTION 5.7. PLEDGE OF ASSETS. Mortgage, pledge, grant or permit to
exist a security interest in, or lien upon, all or any portion of Borrower's
assets now owned or hereafter acquired, except for (a) any of the foregoing in
favor of Bank, and (b) any of the foregoing which is existing as of, and
disclosed to Bank in writing prior to, the date hereof, and (c) the lien on real
property created by the Indenture.
SECTION 5.8. PARTNERSHIPS. Become a general partner in any partnership
or a joint venturer in any joint venture.
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ARTICLE VI
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EVENTS OF DEFAULT
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SECTION 6.1. The occurrence of any of the following shall constitute an
"Event of Default" under this Agreement:
(a) Borrower shall fail to pay within three (3) days of the date when due
any principal, interest, fees or other amounts payable under any of the Loan
Documents.
(b) Any financial statement or certificate furnished to Bank in connection
with, or any representation or warranty made by Borrower or any other party
under this Agreement or any other Loan Document shall prove to be incorrect,
false or misleading in any material respect when furnished or made.
(c) Any default in the performance of or compliance with any obligation,
agreement or other provision contained herein or in any other Loan Document
(other than those referred to in subsections (a) and (b) above), and with
respect to any such default which by its nature can be cured, such default shall
continue for a period of thirty (30) days from its occurrence, except that in
the case of defaults which by their nature can be cured under the following
sections of this Agreement, such defaults shall continue for a period of thirty
(30) days from the date Bank gives Borrower written notice thereof: Borrower's
failure to maintain adequate books and records in accordance with generally
accepted accounting principles as required by Section 4.2; Borrower's delivery
of financial statements to Bank under Section 4.3 which are not in form or
detail satisfactory to Bank; Borrower's failure to maintain insurance in
accordance with Section 4.5; Borrower's failure to maintain its properties in
accordance with Section 4.6; and Borrower's failure to make a provision to
Bank's satisfaction for payment of a disputed obligation in accordance with
Section 4.7.
(d) Any default in the payment or performance of any obligation, or any
defined event of default, under the terms of any contract or instrument (other
than any of the Loan Documents) pursuant to which Borrower or any guarantor
hereunder has
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incurred any debt or other liability to any person or entity, including Bank,
including without limitation the occurrence of any event of default under the
Southwest/Xxxxx Fargo Credit Agreement or the Southwest/First Interstate Credit
Agreement; provided however, that in the case of a default under the terms of
indebtedness to a person or entity other than Bank, any cure period applicable
to such default has expired, and such indebtedness is in excess of $500,000 in
the aggregate for all such uncured defaults by Borrower and any guarantor
combined.
(e) The filing of a notice of judgment lien against Borrower or any
guarantor hereunder; or the recording of any abstract of judgment against
Borrower or any guarantor hereunder in any county in which Borrower or such
guarantor has an interest in real property; or the service of a notice of levy
and/or of a writ of attachment or execution, or other like process, against the
assets of Borrower or any guarantor hereunder; or the entry of a judgment
against Borrower or any guarantor hereunder; provided, however, that such
judgments, judgment liens, levies, writs, executions and other process involve
judgments or claims in excess of $100,000 in the aggregate for Borrower and any
guarantor combined, and such judgments or claims, as the case may be, are not
insured against pending appeal in a manner reasonably satisfactory to Bank
(which insurance may consist of a bond or other insurance coverage as long as it
is reasonably satisfactory to Bank), or satisfied within twenty (20) days after
the creation thereof or at least five (5) days prior to the date on which any
assets could be lawfully sold in satisfaction thereof.
(f) Borrower or any guarantor hereunder shall become insolvent, or shall
suffer or consent to or apply for the appointment of a receiver, trustee,
custodian or liquidator of itself or any of its property (except that as set
forth below with respect to an involuntary petition or proceeding pursuant to
the Bankruptcy Code as defined below or any other applicable state or federal
law relating to bankruptcy, reorganization or other relief for debtors, as long
as such petition or proceeding is opposed, Borrower shall have sixty (60) days
from its commencement to have such petition or proceeding
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dismissed), or shall generally fail to pay its debts as they become due, or
shall make a general assignment for the benefit of creditors; Borrower or any
guarantor hereunder shall file a voluntary petition in bankruptcy, or seeking
reorganization, in order to effect a plan or other arrangement with creditors or
any other relief under the Bankruptcy Reform Act, Title 11 of the United States
Code, as amended or recodified from time to time ("Bankruptcy Code"), or under
any state or Federal law granting relief to debtors, whether now or hereafter in
effect; or any involuntary petition or proceeding pursuant to the Bankruptcy
Code or any other applicable state or Federal law relating to bankruptcy,
reorganization or other relief for debtors is filed or commenced against
Borrower or any guarantor hereunder and such involuntary petition or proceeding
is unopposed or is not dismissed within sixty (60) days of its commencement (it
is acknowledged that in accordance with Section 3.2(a) herein, Bank would have
no obligation to make new advances to Borrower during such time period), or
Borrower or any guarantor hereunder shall file an answer admitting the
jurisdiction of the court and the material allegations of any involuntary
petition; or Borrower or such guarantor shall be adjudicated a bankrupt, or an
order for relief shall be entered against Borrower or any guarantor hereunder by
any court of competent jurisdiction under the Bankruptcy Code or any other
applicable state or Federal law relating to bankruptcy, reorganization or other
relief for debtors.
(g) There shall exist or occur any event or condition which Bank in good
faith believes materially impairs, or is substantially likely to materially
impair, the prospect of payment or performance by Borrower of its obligations
under any of the Loan Documents; provided, however, that the existence or
occurrence of any such event or condition shall not constitute an Event of
Default under this paragraph (g) unless Borrower fails to cure such event or
condition within forty-five (45) days of written notice from Bank to Borrower of
the existence thereof.
(h) The dissolution or liquidation of Borrower or any guarantor hereunder;
or Borrower or any such guarantor, or any of their directors, stockholders or
members,
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shall take action seeking to effect the dissolution or liquidation of Borrower
or such guarantor.
(i) Any change in ownership of Borrower during the term of this Agreement.
SECTION 6.2. REMEDIES. Upon the occurrence of any Event of Default: (a)
all indebtedness of Borrower under each of the Loan Documents, any term thereof
to the contrary notwithstanding, shall at Bank's option and without notice
become immediately due and payable without presentment, demand, protest or
notice of dishonor, all of which are hereby expressly waived by Borrower; (b)
the obligation, if any, of Bank to extend any further credit under any of the
Loan Documents shall immediately cease and terminate; and (c) Bank shall have
all rights, powers and remedies available under each of the Loan Documents, or
accorded by law, including without limitation the right to resort to any or all
security for any of the Credits and to exercise any or all of the rights of a
beneficiary or secured party pursuant to applicable law. All rights, powers and
remedies of Bank may be exercised at any time by Bank and from time to time
after the occurrence of an Event of Default, are cumulative and not exclusive,
and shall be in addition to any other rights, powers or remedies provided by law
or equity.
ARTICLE VII
-----------
MISCELLANEOUS
-------------
SECTION 7.1. NO WAIVER. No delay, failure or discontinuance of Bank in
exercising any right, power or remedy under any of the Loan Documents shall
affect or operate as a waiver of such right, power or remedy; nor shall any
single or partial exercise of any such right, power or remedy preclude, waive or
otherwise affect any other or further exercise thereof or the exercise of any
other right, power or remedy. Any waiver, permit, consent or approval of any
kind by Bank of any breach of or default
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under any of the Loan Documents must be in writing and shall be effective only
to the extent set forth in such writing.
SECTION 7.2. NOTICES. All notices, requests and demands which any party
is required or may desire to give to any other party under any provision of this
Agreement must be in writing delivered to each party at the following address:
BORROWER: SUBURBAN WATER SYSTEMS
0000 X. Xxxxxx Xxxxx Xx.
Xxxxxx, XX 00000
Attn: Chief Financial Officer
BANK: XXXXX FARGO BANK, NATIONAL ASSOCIATION
FLAIR INDUSTRIAL PARK REGIONAL
COMMERCIAL BANKING XXXXXX
0000 Xxxxx Xxxxx, Xxxxx 000
Xx Xxxxx, XX 00000
or to such other address as any party may designate by written notice to all
other parties. Each such notice, request and demand shall be deemed given or
made as follows: (a) if sent by hand delivery, upon delivery; (b) if sent by
mail, upon the earlier of the date of receipt or three (3) days after deposit in
the U.S. mail, first class and postage prepaid; and (c) if sent by telecopy,
upon receipt.
SECTION 7.3. COSTS, EXPENSES AND ATTORNEYS' FEES. Borrower shall pay to
Bank immediately upon demand the full amount of all payments, advances, charges,
costs and expenses, including reasonable attorneys' fees (to include outside
counsel fees and all allocated costs of Bank's in-house counsel), incurred by
Bank in connection with the following (except that in the case of (b) below,
only Bank's reasonable attorneys' fees, to include outside counsel fees and
allocated costs of Bank's in-house counsel, shall be reimbursed by Borrower):
(a) the negotiation and preparation of this Agreement and the other Loan
Documents, (b) Bank's continued administration hereof and thereof, (c) the
preparation of any amendments and waivers hereto and thereto, (d) the
enforcement of Bank's rights and/or the collection of any
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amounts which become due to Bank under any of the Loan Documents, and (e) the
prosecution or defense of any action in any way related to any of the Loan
Documents, including without limitation, any action for declaratory relief, and
including any of the foregoing incurred in connection with any bankruptcy
proceeding relating to Borrower.
SECTION 7.4. SUCCESSORS, ASSIGNMENT. This Agreement shall be binding
upon and inure to the benefit of the heirs, executors, administrators, legal
representatives, successors and assigns of the parties; provided however, that
Borrower may not assign or transfer its interest hereunder without Bank's prior
written consent. Bank reserves the right to sell, assign, transfer, negotiate
or grant participations in all or any part of, or any interest in, Bank's rights
and benefits under each of the Loan Documents. In connection therewith, Bank
may disclose all documents and information which Bank now has or may hereafter
acquire relating to any of the Credits, Borrower or its business, any guarantor
hereunder or the business of such guarantor, or any collateral required
hereunder.
SECTION 7.5. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the other
Loan Documents constitute the entire agreement between Borrower and Bank with
respect to the Credits and supersede all prior negotiations, communications,
discussions and correspondence concerning the subject matter hereof. This
Agreement may be amended or modified only by a written instrument executed by
each party hereto.
SECTION 7.6. NO THIRD PARTY BENEFICIARIES. This Agreement is made and
entered into for the sole protection and benefit of the parties hereto and their
respective permitted successors and assigns, and no other person or entity shall
be a third party beneficiary of, or have any direct or indirect cause of action
or claim in connection with this Agreement or any other of the Loan Documents to
which it is not a party.
SECTION 7.7. TIME. Time is of the essence of each and every provision of
this Agreement and each other of the Loan Documents.
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SECTION 7.8. SEVERABILITY OF PROVISIONS. If any provision of this
Agreement shall be prohibited by or invalid under applicable law, such provision
shall be ineffective only to the extent of such prohibition or invalidity
without invalidating the remainder of such provision or any remaining provisions
of this Agreement.
SECTION 7.9. COUNTERPARTS. This Agreement may be executed in any number
of counterparts, each of which when executed and delivered shall be deemed to be
an original, and all of which when taken together shall constitute one and the
same Agreement.
SECTION 7.10. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of California.
SECTION 7.11. ARBITRATION.
(a) Arbitration. Upon the demand of any party, whether made before the
-----------
institution of any judicial proceeding or not more than 30 days after service of
a complaint, third party complaint, cross-claim, counterclaim or any answer
thereto or any amendment to any of the above, any Dispute shall be resolved by
binding arbitration (except as set forth in (e) below) in accordance with the
terms of this Agreement. A "Dispute" shall mean any action, dispute, claim or
controversy of any kind, whether in contract or tort, statutory or common law,
legal or equitable, now existing or hereafter arising under or in connection
with, or in any way pertaining to, any of the Loan Documents, or any past,
present or future extensions of credit and other activities, transactions or
obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who
fails or refuses to submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any Dispute.
-22-
(b) Governing Rules. Arbitration proceedings shall be administered by the
---------------
American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in the County of
Los Angeles, State of California, selected by the AAA or other administrator.
If there is any inconsistency between the terms hereof and any such rules, the
terms and procedures set forth herein shall control. All statutes of limitation
applicable to any Dispute shall apply to any arbitration proceeding. All
discovery activities shall be expressly limited to matters directly relevant to
the Dispute being arbitrated. Judgment upon any award rendered in an
arbitration may be entered in any court having jurisdiction; provided however,
that nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. (S)91 or any similar
applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction before, after or during the pendency of any arbitration or other
proceeding. The exercise of any such remedy shall not waive the right of any
party to compel arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
--------------------------------------------
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall
-23-
resolve all Disputes in accordance with the substantive law of the state of
California, (ii) may grant any remedy or relief that a court of the state of
California could order or grant within the scope hereof and such ancillary
relief as is necessary to make effective any award, and (iii) shall have the
power to award recovery of all costs and fees, to impose sanctions and to take
such other actions as they deem necessary to the same extent a judge could
pursuant to the Federal Rules of Civil Procedure, the California Rules of Civil
Procedure or other applicable law. Any Dispute in which the amount in
controversy is $5,000,000 or less shall be decided by a single arbitrator who
shall not render an award of greater than $5,000,000 (including damages, costs,
fees and expenses). By submission to a single arbitrator, each party expressly
waives any right or claim to recover more than $5,000,000. Any Dispute in which
the amount in controversy exceeds $5,000,000 shall be decided by majority vote
of a panel of three arbitrators; provided however, that all three arbitrators
must actively participate in all hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary, in
---------------
any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (A) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (B) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (C) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (1) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (2) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court
-24-
determines the award is supported by substantial evidence and not based on legal
error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding anything
--------------------------------------------
herein to the contrary, no Dispute shall be submitted to arbitration if the
Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be entered in the court in which such proceeding was commenced in
accordance with California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
-------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall
-25-
control. This arbitration provision shall survive termination, amendment or
expiration of any of the Loan Documents or any relationship between the parties.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the day and year first written above.
XXXXX FARGO BANK,
SUBURBAN WATER SYSTEMS NATIONAL ASSOCIATION
By: /s/ XXXXX X. XXXXXXXX By: /s/ XXXXX XXXXXXX
------------------------------------ -----------------------------
Vice President
Title: Secretary
---------------------------------
By: /s/ XXXXXX X. XXXXX
------------------------------------
Title: Vice President Finance & CFO
---------------------------------
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