AGREEMENT
BETWEEN
SUBURBAN WATER SYSTEMS
AND
THE CITY OF
WEST COVINA, CALIFORNIA
FOR THE ACQUISITION OF
THE CITY'S WATER UTILITY SYSTEM
TABLE OF CONTENTS
Page
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ARTICLE 1. Definitions and Statement of Purpose............................... 2
1.1 Statement of Purpose............................................... 2
1.2 Definitions........................................................ 2
ARTICLE 2. PROCEDURES FOR PURCHASE............................................ 4
2.1 Closing............................................................ 4
2.2 Closing Conveyances................................................ 4
2.3 Escrow and Escrow Agent............................................ 4
2.4 Closing Costs...................................................... 5
2.5 Certain Assets..................................................... 5
2.6 Plant 118.......................................................... 8
2.7 Xxxxxx Facilities.................................................. 8
ARTICLE 3. Purchase Price, ALLOCATION OF REVENUES and costs................... 9
3.1 Purchase of Water System........................................... 9
3.2 Purchase Price..................................................... 9
3.3 Allocation of Costs................................................ 9
3.4 Allocation of Revenues............................................. 10
3.5 Adjustments Outside of Escrow...................................... 10
3.6 Possession......................................................... 10
3.7 Claims............................................................. 11
ARTICLE 4. Water rates and Service Provisions................................. 11
4.1 City Rates......................................................... 11
4.2 Water Rates and Billing By Company................................. 11
4.3 Fire Hydrant Services.............................................. 12
4.4 Connections or Main Extensions Subsequent to Closing............... 12
4.5 Capital Additions.................................................. 12
4.6 Water Supply From Company Subsequent to Closing.................... 13
4.7 Reclaimed Water.................................................... 13
ARTICLE 5. Conditions to Obligations.......................................... 13
5.1 Statutory Prerequisites............................................ 13
5.2 Defeasance of Water Revenue Bonds.................................. 14
5.3 Approval of Property, Books and Records............................ 15
5.4 Consents........................................................... 15
5.5 Easements.......................................................... 15
5.6 Franchises to Operate.............................................. 16
5.7 Other Approvals.................................................... 16
5.8 Title Approval and Commitment...................................... 16
5.9 Absence of Certain Events.......................................... 17
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5.10 Lender Matters..................................................... 17
5.11 Accuracy of Representations and Warranties......................... 18
ARTICLE 6. Representations and Warranties of the City......................... 19
6.1 Political Existence................................................ 19
6.2 Authorization...................................................... 19
6.3 No Breach.......................................................... 19
6.4 Financial Statements............................................... 20
6.5 Title to Assets.................................................... 20
6.6 Warranty to Preserve and Maintain.................................. 20
6.7 Contractual Freeze................................................. 21
6.8 Insurance.......................................................... 21
6.9 Pending Litigation................................................. 21
6.10 Transfer of Operational Authority.................................. 21
6.11 Compliance with Applicable Laws.................................... 21
6.12 Opinion of City Attorney........................................... 22
6.13 Indemnification.................................................... 23
6.14 Notice by City..................................................... 23
ARTICLE 7. Representations and Warranties of the Company...................... 24
7.1 Existence and Power................................................ 24
7.2 Authorization of Agreement......................................... 24
7.3 Agreement to Create No Default..................................... 24
7.4 Pending Litigation................................................. 24
7.5 Opinion of Company Attorney........................................ 25
ARTICLE 8. Covenants of the Company........................................... 25
8.1 Local Telephone Lines.............................................. 25
8.2 Indemnification.................................................... 25
8.3 Holding Costs to Customers......................................... 26
8.4 Property Taxes..................................................... 26
ARTICLE 9. Covenants of the city.............................................. 26
9.1 Performance........................................................ 26
9.2 Books and Records.................................................. 26
9.3 Conduct of Business................................................ 27
9.4 Taxes and Fees..................................................... 27
9.5 Accounts Payable................................................... 27
9.6 Utilities.......................................................... 27
ARTICLE 10. Miscellaneous...................................................... 27
10.1 Company's and City's Liability for Fees............................ 27
10.2 Survival of Representations and Warranties......................... 28
10.3 Bulk Sales......................................................... 28
10.4 Notices............................................................ 28
10.5 Section Headings................................................... 29
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10.6 Governing Law...................................................... 29
10.7 Entire Agreement and Amendment..................................... 29
10.8 Expense of Litigation.............................................. 29
10.9 Counterparts....................................................... 30
10.10 Effectiveness...................................................... 30
10.11 Interest........................................................... 30
10.12 Severability....................................................... 30
10.13 City Employees..................................................... 30
10.14 Exclusive Negotiating Agreement and LOI............................ 30
10.15 Indemnities........................................................ 31
10.16 Escrow Agent Not to be Concerned................................... 31
10.17 Brokers............................................................ 31
10.18 Arm's Length Transaction........................................... 31
10.19 Further Instruments................................................ 31
10.20 Exhibits To Be Added............................................... 32
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EXHIBIT 10.16
AGREEMENT BETWEEN SUBURBAN WATER SYSTEMS AND THE CITY OF
WEST COVINA, CALIFORNIA FOR THE ACQUISITION OF THE
CITY'S WATER UTILITY SYSTEM
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THIS AGREEMENT (the "Agreement") is made and entered into this 1st day
of February, 2000, by and between SUBURBAN WATER SYSTEMS, a California
corporation (the "Company") and THE CITY OF WEST COVINA, CALIFORNIA, a municipal
corporation (the "City"), with respect to the following:
RECITALS
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A. The City is a municipal corporation operating a municipal water
utility system pursuant to California Public Utilities Code (S) 10001, et seq.,
as amended (the "Code"), as modified, with respect to the City, by the special
legislation contained in Code (S) 10061.3.
B. The Company is a California corporation and a public utility water
corporation regulated by the California Public Utilities Commission ("CPUC")
providing retail water service to customers in portions of Los Angeles and
Orange Counties, California.
C. The Company is willing and able to deliver retail water service to
the City's current and future water customers.
D. The parties have entered into a letter of intent dated August 3,
1999, as amended on September 9, 1999 (collectively, the "LOI"), setting out the
principal terms upon which the Company shall acquire the water utility system of
the City.
E. As required by the special legislation covering the sale, on
December 7, 1999, a majority of those customers of the City's water system
located within the City and casting ballots voted in favor of the sale based
upon the terms and conditions set forth in the LOI. On such date, the City
Council certified such vote and approved the sale.
F. The City has determined to sell and the Company wishes to purchase
the entire City water system. The City and the Company enter into this
Agreement to carry out such purchase and sale.
AGREEMENT
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NOW, THEREFORE, for good and valuable consideration described herein,
the receipt and adequacy of which are hereby acknowledged, the City and the
Company agree as follows:
ARTICLE 1.
DEFINITIONS AND STATEMENT OF PURPOSE
1.1 Statement of Purpose. The City is entering into this Agreement for
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the benefit of the Customers, as defined below, by divesting itself of the Water
System, as defined below, and its operation in order to stabilize rates and
assure water availability, quality and delivery to Customers.
1.2 Definitions. The following definitions shall apply to the following
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terms as used herein:
(a) "Capital Additions" -- water system additions, improvements and
replacements which are or upon completion will become a part of the Water
System, whether built by the City or dedicated by a developer.
(b) "City's Water Rates" or "Rates" -- the rates in effect on
February 1, 2000 for water service provided by the Water System as approved by
the City Council and attached hereto as Exhibit A.
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(c) "Closing" -- the consummation of the sale of the Water System, as
defined below, pursuant to Section 2.1.
(d) "Closing Date" -- the date upon which the Closing occurs pursuant
to Section 2.1.
(e) "Customer Service Connection" -- the point of connection of the
customer's piping with the meter and service pipe of the Water System, but not
including the meter (meter box and meter keystop service).
(f) "Customer Service Deposits" -- funds, if any, collected by the
City as security for the payment of bills for water service.
(g) "Customers" -- all persons, firms, associations, corporations and
governmental authorities supplied or entitled to be supplied with water service
for compensation through the Water System on the Date of this Agreement, and
those added prior to and after the Closing.
(h) "Date of this Agreement" -- the Date of this Agreement identified
in the first paragraph hereof.
(i) "LOI" -- has the meaning set forth in Recital D.
(j) "Purchase Price" -- the purchase price payable by the Company for
the Water System at the Closing pursuant to Section 3.2 below.
(k) "Reclaimed Water" -- non-potable water which cannot be used for
human consumption but which is of sufficient quality to be used for irrigation
purposes.
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(l) "Water Revenue Bonds" -- all outstanding bonds or certificates of
participation issued by the City (i) payable from revenues arising from the
operation of the Water System, (ii) constituting a lien or encumbrance on such
revenues or on the property of the Water System, and/or (iii) which have terms
limiting the ability of the City to sell or convey the Water System or either
the Walnut Portion or West Covina Portion thereof. Water Revenue Bonds do not
include the City's participation agreement with Walnut Valley Water District and
Valencia Heights Water Company, which participation agreement shall be treated
pursuant to Section 2.5 of this Agreement.
(m) "Water System" -- all water mains and related appurtenances,
pumping stations, reservoirs, service lines, meters, hydrants, equipment, real
property, easements, and permits and all other assets of whatsoever kind,
regardless of whether located within or outside the City's municipal limits,
which are, or in the future would be, part of the transmission, storage and
distribution system utilized to provide water service to the Customers generally
as set out on the City's June 30, 1998 balance sheet attached hereto as Exhibit
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B (the "Balance Sheet"). The term "Water System" excludes (a) Customer Service
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Connections which are and shall remain the property of Customers, (b) cash and
accounts receivable and Customer Service Deposits (which shall remain the
property of the City or the Customers, as applicable), (c) liabilities incurred
prior to the Closing Date, contingent or otherwise, which shall remain the
responsibility of the City except as expressly provided herein to the contrary,
(d) vehicles and tools used in the operation of the Water System (which shall
remain the property of the City) and (e) the City's inventory of pipe, meters,
meter boxes, fire hydrants and other parts used by the City in the operation of
the Water System (which inventory shall remain the property of the City). The
Water System shall include, and there shall be transferred to the Company on the
Closing Date, copies of books and records relating to the Water System as
reasonably requested by the Company and all capital stock (i.e., water rights)
of Covina Irrigating Company owned by the City and the City's connection,
through the Upper District, to the Metropolitan Water District. The Water System
also includes, without limitation, each asset which, pursuant to Section 2.5
below, is to be transferred to the Company.
The Water System consists of two components for purposes of this sale.
One component consists of those portions of the Water System located outside of
the geographical boundaries of the City and includes approximately 2,800
Customer Service Connections (the "Walnut Portion") as set out on the system map
attached hereto as Exhibit C. The other component consists of those portions of
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the Water System located inside of the geographical boundaries of the City and
includes approximately 4,200 Customer Service Connections (the "West Covina
portion") as set out on the system map attached hereto as Exhibit D. As part of
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this sale, the Company is purchasing all Water System assets of both the Walnut
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Portion and the West Covina Portion, except as specified to the contrary in this
subsection (m) and in Section 2.5 below.
Other terms used in this Agreement and defined at various places in
this Agreement shall have the meanings given to such terms in the definitions
thereof.
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ARTICLE 2.
PROCEDURES FOR PURCHASE
2.1 Closing. The City agrees to sell and transfer to the Company, and the
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Company agrees to purchase and pay for, the Water System. Except as otherwise
expressly set forth herein, the Water System shall be free and clear of all
liens, claims and encumbrances. The sale of the Water System shall occur on or
before February 25, 2000. If, however, the parties are unable to close on such
date, the parties shall use all reasonable efforts to close as soon thereafter
as possible.
2.2 Closing Conveyances. The Closing shall be held on the Closing Date at
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a mutually acceptable location in Los Angeles County or Orange County. At the
Closing, the City shall deliver to the Company such deeds, bills of sale,
assignments, easements, and other instruments of transfer or conveyance
(including those provided for in Section 2.5) as may be necessary to vest in the
Company all of the City's title to the Water System. All such transfer documents
shall be prepared by the attorneys for the Company and shall be in form and
substance satisfactory to the City and the Company. The City shall draft the
necessary documentation for the defeasance of the Water Revenue Bonds, and all
transfer documents relating to real property and interests therein or releasing
or reconveying the lien securing the Water Revenue Bonds shall be satisfactory
to the Company and Chicago Title Company ("Chicago" or "Escrow Agent"). At the
Closing, the Company shall also deliver to Escrow Agent the relevant Purchase
Price and the reimbursement due to the City pursuant to Section 5.1 below (if
not previously delivered to the City) in immediately available funds and each
party shall deliver to Escrow Agent all other documents to be delivered by
either party to the other pursuant to this Agreement. Promptly following such
deliveries, the Escrow Agent shall record or file all documents to be recorded
or filed, shall issue the policy of title insurance provided for in Section 5.8,
shall, except as set forth in Section 5.2, deliver the Purchase Price to the
City and shall deliver to the parties all other documents to be delivered to the
parties pursuant to this Agreement. All documents to be delivered and the
Purchase Price shall be deemed delivered concurrently.
2.3 Escrow and Escrow Agent. The Closing of the transaction provided for
-----------------------
herein shall be effected through a sale escrow (the "Escrow") to be established
at Chicago as "Escrow Agent," 00000 Xxx Xxxxxx Xxxxxx, Xxxxxx, Xxxxxxxxxx 00000.
The provisions of this Agreement shall also constitute escrow instructions to
Escrow Agent. In addition, the parties agree to promptly execute and deliver to
Escrow Agent such supplemental instructions and such Escrow Agent's general
terms and conditions as shall not be inconsistent with the terms and provisions
of this Agreement and as shall be requested by Escrow Agent.
Escrow shall be opened by delivery of fully executed counterparts of
this Agreement to Escrow Agent within three (3) business days after the
execution and delivery of this Agreement by the parties. All deliveries
required to be made pursuant to this Agreement shall be made through the Escrow
and all deliveries shall be made at the Closing.
2.4 Closing Costs. Except as expressly provided to the contrary herein,
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the City shall pay all costs incurred to satisfy all conditions for which the
City is responsible. The Company shall pay all Escrow Agent's fees and costs,
the title insurance premium, any and all additional
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premiums or costs required for ALTA coverage and for any title endorsements
requested by the Company, for all recording and filing fees, for all costs
incurred to satisfy all conditions for which the Company is responsible and
those costs to be paid by the Company pursuant to Section 5.1. Any additional
closing costs shall be paid by the party which causes such costs to be incurred
or in accordance with Southern California escrow practice if one party is not
clearly responsible for a particular cost. The Company shall deposit at Closing,
in addition to the Purchase Price, the Company's share of closing costs pursuant
to this Section and not paid outside of Escrow. The City's share of such closing
costs, to the extent not paid outside of Escrow, shall be deducted by Escrow
Agent from the Purchase Price prior to delivery of the Purchase Price to the
City. The Company agrees that all title and escrow work with respect to the
Water System being performed by Chicago at the request of the Company shall be
paid for by the Company.
2.5 Certain Assets. For the purposes of the sale of the Water System it
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is agreed that:
(a) Grand Avenue Pipeline. The City is a party to a certain Grand
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Avenue Pipeline Participation Agreement dated November 14, 1988 (the
"Participation Agreement"), pursuant to which a certain pipeline (the "Grand
Avenue Line") was constructed by a non-profit corporation formed by one of the
parties to the Participation Agreement. The City and the Company agree that the
City's interest under the Participation Agreement (the "Interest") is an asset
of the Water System. In connection with the Interest, the parties shall proceed
as follows:
(i) Each of Walnut Valley Water District ("Walnut Valley") and
Valencia Heights Water Company ("Valencia"), the other parties to the
Participation Agreement, had a right of first refusal to purchase a portion of
the Interest. Valencia has, by letter to the City dated September 30, 1999,
declined to purchase its portion of the Interest upon a sale thereof by the
City. The City has, by letter dated January 7, 2000 and in form and substance
satisfactory to the Company, notified Walnut Valley in writing that:
(A) The City proposes to sell the Interest to the Company as
a part of the Water System on the terms and conditions set forth in this
Agreement;
(B) The portion of the Purchase Price allocated to the
Interest is $2,946,143;
(C) Valencia has declined to exercise its right of first
refusal and that Walnut Valley has indicated its intention to acquire the entire
Interest;
(D) Subject to Walnut Valley confirming its exercise of its
right of first refusal, payment for the Interest will be in cash in the amount
of $2,946,143 payable into the Escrow on the Closing Date against delivery of a
mutually approved assignment and assumption agreement with Walnut Valley.
The form and substance of the notice was approved in advance by the Company.
Walnut Valley has exercised its right of first refusal by letter dated January
24, 2000. A copy of such letter shall be furnished to the Company.
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(ii) Assuming that Walnut Valley timely and properly confirms the
exercise of its right of first refusal by deposit of such funds into Escrow,
then:
(A) Concurrently with the Closing, the City shall sell and
assign the interest to Walnut Valley for $2,946,143; and
(B) The Purchase Price paid by the Company shall be reduced
by $2,946,143 (to $8,553,857).
(iii) If Walnut Valley declines to confirm its exercise of the
right of first refusal and fails to complete the purchase of the Interest at the
time and in the manner set forth in the City's notice, then:
(A) At the Closing, the City shall assign to the Company all
right, title and interest of the City in the Interest and the Company shall
assume all obligations of the City pursuant to the Participation Agreement
accruing subsequent to the Closing Date. The Company shall not assume any
obligation with respect to any bonds or other financing issued by the City with
respect to the facilities which are the subject of the Participation Agreement.
The assignment and assumption agreement shall be in form and substance
reasonably satisfactory to the City and the Company.
(B) The Company shall cooperate with the City as reasonably
requested by the City in effecting such transfer, but such cooperation covenant
shall not require the Company to bear any costs which are the responsibility of
the City or to assume any obligations in addition to those to be assumed by the
Company pursuant to this Agreement.
(C) There shall be no reduction in the Purchase Price
provided for in Sections 2.5 and 3.1.
(D) The Company agrees that any issues between the City and
Walnut Valley as to bond payments relating to the Grand Avenue Line are between
the City and Walnut Valley only, are outside the scope of this Agreement and are
not to involve the Company.
(iv) The City is a party to a reimbursement agreement associated
with the Participation Agreement pursuant to which the City pays to Walnut
Valley the sum of approximately $23,000 per year (the "District Payment").
Responsibility for the District Payment shall be assumed by the Company as a
part of the purchase of the Water System if but only if the Company acquires the
City's Interest.
(b) Xxxxxxx Pump Station. Included within the Water System is a
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pumping station (the "Xxxxxxx Facility") located within Xxxxxxx Park, a public
park owned and operated by the City. As a part of the sale of the Water System,
the City shall:
(i) Convey the Xxxxxxx Facility (without the real property) to
the Company by means of a xxxx of sale;
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(ii) Grant to the Company an exclusive easement to use, maintain
and operate the Xxxxxxx Facility in its present location;
(iii) Grant to the Company a non-exclusive easement to operate,
maintain, repair, replace, etc. any service line located within Xxxxxxx Park and
running to or from the Xxxxxxx Facility; and
(iv) Confirm the Company's rights as a franchisee to use the
public right of way in Xxxxxxx Way.
Such xxxx of sale and easement agreements shall be prepared by the Company at
its cost and shall be subject to the approval of the City, not to be
unreasonably withheld or delayed. The area encompassed by the easement
described in clause (ii) shall be sufficient in size to encompass the Xxxxxxx
Facility and building enclosure, to permit repair and replacement thereof and to
permit vehicular access from the adjacent public street. The easement provided
for in clause (iii) shall be sufficient to reasonably accommodate all permitted
activities with respect to such service line. The Company shall prepare all
legal descriptions and depictions required with respect to such easements, at
the expense of the Company.
(c) Fire Hydrants. Without limiting the generality of the
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definition thereof, the Water System shall include all fire hydrants owned and
served by the City as of the Closing Date. All such fire hydrants (and the
pipelines serving such hydrants) shall be transferred to the Company by means of
a xxxx of sale. To the extent that any such hydrant is not located in a public
right-of-way, the City shall, (i) to the extent such hydrant is located in an
area covered by a single purpose easement, assign such easement to the Company
and (ii) to the extent such hydrant is located in a general utility easement
area, grant to the Company an easement to maintain such hydrant and pipeline in
such easement area. All such instruments shall be prepared by the Company at its
expense and shall be subject to the approval of the City, not to be unreasonably
withheld or delayed.
(d) Sites For Future Improvements. The Water System shall also
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include all, if any, sites acquired and owned by the City for future use of the
Water System. Title to all such sites shall be transferred to the Company by
quitclaim deed on the Closing Date.
(e) Intertie. The City is a party to a certain Agreement For An
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Emergency Intertie dated March 16, 1976 with Walnut Valley, as amended in 1978
the "Intertie." The Intertie is a part of the Water System and shall be assigned
to the Company at the Closing. The Company shall also assume all obligations of
the City under the Intertie accruing from and after the Closing Date. The form
and substance of such assignment and assumption shall be subject to the
reasonable approval of each of the City and the Company. Such assignment and
assumption agreement shall be prepared by the attorneys for the Company, at its
expense. The City shall have no responsibility to obtain any consent or approval
of Walnut Valley to such assignment and assumption. Any such consent or approval
shall be the sole responsibility of the Company, and failure to obtain such
consent shall not relieve the Company of its obligations hereunder.
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2.6 Plant 118. The City and the Company jointly developed a certain
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pumping station commonly known as "Plant 118." The Company owns the real
property on which Plant 118 is located. Each of the Company and the City own
one-half (1/2) of the building located thereon and each owns the pumping
equipment located in its one-half of the building. The City's one-half of the
building and pumping equipment is included in the Water System, and on the
Closing Date the City shall transfer to the Company, by xxxx of sale, the City's
one-half of the building and pumping equipment.
2.7 Xxxxxx Facilities. Included within the Water System are certain
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facilities developed by Xxxxxx Development and consisting of two water
reservoirs, a service line to the reservoirs and a branch or loop line (the
"Xxxxxx Facilities"). The City has accepted the reservoirs, the service line and
the branch line but has not accepted the developer's irrevocable offer of
dedication of the large open space area in which the Xxxxxx Facilities are
located. The City and Company agree that:
(a) On the Closing Date, the City shall transfer title to the
reservoirs, service line and branch line to the Company by means of a xxxx of
sale.
(b) The City shall, prior to the Closing Date, accept or otherwise
obtain sufficient rights in and to the open space area to enable the City, on
the Closing Date, to grant or assign to the Company (i) an exclusive easement as
to the portion of such open space area on which the reservoirs are located and
(ii) a non-exclusive easement as to the areas in which the service line and
branch line are located.
(c) On the Closing Date, the City shall execute, acknowledge and
deliver to the Company the easements described in subsection (b) above.
(d) Within two (2) years after the Closing Date, the City shall (i)
accept or otherwise acquire legal title to the entire open space area, (ii) at
the Company's expense, prepare and process a parcel map to constitute the area
containing the reservoirs as a separate legal parcel and (iii) transfer such
legal parcel to the Company by grant deed.
The xxxx of sale, easements and grant deed shall be prepared by the
Company at its expense and shall be subject to the approval of the City, not to
be unreasonably withheld or delayed. The parcel map shall be prepared and
processed by the City, but the size and configuration of the reservoir parcel
shall be subject to the approval of the Company, not to be unreasonably withheld
or delayed. The Company shall also reimburse the City for all reasonable fees
and costs incurred to prepare and process the parcel map, with such
reimbursement to be made periodically not more frequently than monthly within
ten (10) days after delivery to the Company of documentary evidence as to the
costs and fees incurred reasonably satisfactory to the Company.
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ARTICLE 3.
PURCHASE PRICE, ALLOCATION OF REVENUES AND COSTS
3.1 Purchase of Water System. The City hereby agrees to sell to the
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Company for the Purchase Price and, except as otherwise expressly set forth
herein, free and clear of all liens, claims and encumbrances, and the Company
hereby agrees to purchase from the City, the Water System, which includes, among
other things, all real property described on Exhibit E, all easements described
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on Exhibit F, all tangible personal property (including but not limited to
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mains, hydrants, all other operating facilities and distribution system)
described on Exhibit G, all intangible property (leases, permits, licenses,
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etc.) described on Exhibit H and those assets provided for in Section 2.5 to be
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transferred to the Company. Title to and possession of the Water System shall be
delivered to the Company on the Closing Date.
3.2 Purchase Price. The Purchase Price shall be Eleven Million Five
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Hundred Thousand Dollars ($11,500,000.00), payable as provided in Sections 2.2
and 5.2 and subject to adjustment as provided in Section 2.5. There shall be no
adjustments to the Purchase Price for Capital Additions to the Water System
prior to the Closing or for accumulated depreciation prior to Closing. There
shall be no adjustment to the purchase price on account of the prorations,
adjustments and allocations provided for in Sections 3.3 and 3.4, all of which
shall be handled outside of Escrow.
3.3 Allocation of Costs. As of the Closing Date, the parties shall cause
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Southern California Edison Company and Southern California Gas Company to read
all meters serving the Water System and, in each case, to render final bills to
the City and to switch the xxxxxxxx for such services to the Company at the
Closing Date. The parties shall give the same notice to all water suppliers to
the City.
The City shall be responsible for all utilities usage by the Water
System through the Closing Date and for the cost of all water purchased by the
City through the Closing Date. The City shall also be responsible for all costs
of operating the Water System, including employee compensation and related
costs, through the Closing Date.
The Company shall be responsible for all utilities costs with respect
to the Water System subsequent to the Closing Date and shall supply, at its
expense, all water necessary to operate the Water System subsequent to the
Closing Date. As to all other costs of operating the Water System, including
but not limited to the Company's employee compensation and related costs, the
Company shall be responsible for all such costs incurred subsequent to the
Closing Date. All xxxxxxxx to the City's Customers for the period which
includes the Closing Date shall be pursuant to the City's normal billing cycle.
3.4 Allocation of Revenues. Consistent with the last sentence of Section
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3.3, all xxxxxxxx to the City's Customers for the period which includes the
Closing Date shall be by the Company but pursuant to the City's normal billing
cycle. All revenue on such xxxxxxxx (i.e., those which include the Closing Date)
shall be allocated and paid, upon collection by the Company, between the City
and the Company based upon the number of days prior to and including the
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Closing Date (to the City) and the number of days thereafter (to the Company).
Bad debts shall be allocated and charged to the City and the Company in the same
manner, when such debts are determined to be uncollectible.
The City and the Company contemplate that the Company will xxxx
Customers for all water service rendered by the Water System for the billing
period which includes the Closing Date. In the event, however, that the Company
is unable to implement such xxxxxxxx immediately following the Closing Date, the
City shall, upon request by the Company, perform such xxxxxxxx for the Company
for up to three (3) two (2) month billing cycles subsequent to the Closing Date.
Such bills shall be prepared based upon information supplied by the Company, and
the Company shall reimburse the City for all costs incurred by the City to
prepare and deliver such bills. Such costs shall include the allocated
compensation costs of the City's employees who prepare such bills, the postage
costs incurred to deliver such bills to such Customers and the direct and
indirect overhead of the City in performing such service for the Company.
3.5 Adjustments Outside of Escrow. The prorations and adjustments
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provided for in Sections 3.3 and 3.4 shall be made by the City and the Company
outside of the Escrow. The only proration to be made in Escrow shall be real
property taxes and assessments, if any, with respect to the Water System. Such
proration shall be made by Escrow Agent based upon the latest available
information provided by the City and the Company. Any proration in favor of the
City shall be deposited by the Company in Escrow at the Closing in addition to
the Purchase Price for the Water System. Any proration in favor of the Company
shall reduce the Purchase Price payable by the Company for the Water System. To
the extent that any adjustment, allocation or proration provided for in this
Section cannot be effected at or prior to the Closing Date, the parties shall
make such adjustment, allocation or proration as promptly as practicable
thereafter.
3.6 Possession. Possession of the entire Water System shall be delivered
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to the Company on the Closing Date. Such delivery of possession shall include
delivery of all keys to all facilities comprising a part of the Water System.
3.7 Claims. Any liability claims against or involving the Water System
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and arising out of occurrences on or prior to the Closing Date shall be the
responsibility of the City. All liability claims arising out of occurrences
thereafter shall be the responsibility of the Company. Each party shall hold the
other harmless under Sections 6.13 and 8.2 from and against all claims for which
the indemnifying party is responsible.
ARTICLE 4.
WATER RATES AND SERVICE PROVISIONS
4.1 City Rates.
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(a) Except as provided in subsection (b) below, the City shall,
between the Date of this Agreement and the Closing Date, maintain in effect the
City's Rates (as set forth on Exhibit A) without change.
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(b) Notwithstanding subsection (a) above, the City shall, effective
as of the Closing Date, (i) decrease the commodity portion of the City's Rates
applicable to Customers located within the boundaries of the City by 15.0% and
(ii) decrease the commodity portion of the City's rates applicable to all other
Customers by 0.2%. The City shall make no other changes to the City's Rates.
4.2 Water Rates and Billing By Company.
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(a) From and after the Closing Date, the Company shall:
(i) As to those Customers located within the boundaries of the
City, maintain in effect the City's Rates (after the reduction effected pursuant
to Section 4.1(b), for a period of four (4) years subsequent to the Closing Date
without increase in such Rates but with the addition of the 1.4% CPUC surcharge
described in clause (ii) below.
(ii) As to those Customers located outside of the boundaries of
the City, maintain in effect the City's Rates (after the reduction effected
pursuant to Section 4.1(b), for a period of four (4) years subsequent to the
Closing Date without increase in such Rates. However, subsequent to the Closing
Date the charges to such Customers may be increased by a CPUC surcharge
(currently approximately 1.4% of Customer bills) designed to cover certain
operating expenses of the CPUC.
(iii) Advise the CPUC by advice letter of the additional
geographical area to be served. Moreover, and subject to CPUC approval, the
Company shall include the entire Purchase Price in the Company's rate base. The
Company and the City recognize that, pursuant to an order of the CPUC issued on
October 21, 1999 (the "Order"), the Company's advice letter to the CPUC must
justify the reasonableness of the reduced City's Rates and that such reduced
City's Rates require the approval of the CPUC. The Company shall obtain such
CPUC approval and shall use its best efforts to obtain such approval before the
Closing Date.
(iv) As to all Customers of the Water System, provide service of
a quality and level at least equal to that provided by the City prior to the
Closing. The quality of the water provided shall meet all federal and state
requirements, and all water service shall be in accordance with the rules and
regulations of the CPUC.
(v) The Company shall not file for rate increases for the West
Covina Portion or the Walnut Portion to be effective earlier then four (4) years
after the Closing Date. If the CPUC requires the Company to increase the rates
provided for in Section 4.1(b) above effective prior to the end of such four
(4) year period, from the date of the increase to the end of the four (4) year
period the Company shall take such action as shall be legally permitted and
which shall provide to the City's Customers (both within and outside of the
City's boundaries) the same economic benefit as if the CPUC had not required
such increase(s).
(b) The City is not liable for, nor does it guarantee payment of, any
amounts charged by the Company to Customers, except to the extent that the City
is provided water service by the Company for its own use or on its own behalf.
The Company shall not be
11
precluded from adjusting customer billing periods from the bi-monthly billing
period used by the City to the monthly billing used by the Company.
(c) The provisions of subsections (a) and (b) above shall be subject
to all CPUC policies and practices as to water service provided by CPUC
regulated water purveyors.
4.3 Fire Hydrant Services. Subject to Section 4.6, from and after the
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Closing Date, the Company, without additional charge, shall provide water for
fire protection in the Water System. The Company will maintain all fire hydrants
and install others as reasonably required by fire agencies.
4.4 Connections or Main Extensions Subsequent to Closing. After the
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Closing, all applicable rules and orders of the CPUC and other agencies having
jurisdiction of the Water System or the Company shall govern present and future
Customer connections and main extensions to the Water System.
4.5 Capital Additions. Pending the Closing, the City is authorized to
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continue to completion all additions, betterments and improvements commenced by
the City prior to the Date of this Agreement. Such pending work (i.e., Capital
Additions currently in process at the Date of this Agreement) is set forth on
Exhibit I and is approved by the Company. The City further agrees that between
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the Date of this Agreement and the Closing Date it will consult with the Company
and obtain the written approval of the Company prior to commencing any
additional betterments or improvements. Subsequent to the Date of this
Agreement, the City will not approve any main extensions without the prior
written approval of the Company. All main extensions to which the City has title
as of the close of sale of the Water System shall be transferred to the Company
as a part of the Water System. All main extensions to which the City receives
title after the close of sale of the Water System shall be transferred to the
Company upon receipt of title thereto by the City.
4.6 Water Supply From Company Subsequent to Closing. After the Closing,
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water service shall be provided by the Company in the Water System, also subject
to the approval of the CPUC and all applicable rules and orders of the CPUC and
other agencies having jurisdiction thereof. Water provided by the Company shall
be available at the pressure which is normally available but not less than that
which may be required by State and Federal regulatory agencies. The Company
EXPRESSLY does not guarantee a supply of water for fire protection to ANY of its
Customers (whether within the Walnut Portion or the West Covina Portion), and
makes no warranty or guarantee whatsoever in this Agreement with respect to the
quantity or quality of water for fire protection available in the Water System.
4.7 Reclaimed Water. The City and the Company acknowledge that BKK, the
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City and certain other Customers located within the area served by the Water
System desire to obtain Reclaimed Water for irrigation purposes. In the event
that the City and/or such Customers desire to obtain or construct a delivery
system for such Reclaimed Water within the area served by the Water System, the
City shall in writing offer to the Company the opportunity to participate in
such delivery system on an equitable basis, including the rate for reclaimed
water delivered, to be determined at the time of planning for such delivery
system. The Company may participate, on
12
the basis offered and at the same rate(s) set forth in the proposal delivered to
the Company, by accepting such offer by written notice to the City within thirty
(30) days after receipt of such offer, and if the Company so elects to
participate, the customers for such delivery system shall become Customers of
the Water System as to such Reclaimed Water. If the Company declines to
participate or does not accept the City's offer within such thirty (30) day
period, the City and/or such Customers shall be free to install such delivery
system and obtain Reclaimed Water therefrom without objection or challenge by
the Company. If the Company declines to participate or fails to timely accept
such offer, the Company waives all rights which it may have to object to or
challenge such Reclaimed Water delivery system. If the Company declines to
participate or fails to timely accept such offer, the City shall not offer the
opportunity to participate to third parties on terms more favorable to such
third parties than those offered to the Company.
ARTICLE 5.
CONDITIONS TO OBLIGATIONS
The obligation of the parties to close the purchase and sale
transaction shall be contingent on satisfaction of each of the following
conditions.
5.1 Statutory Prerequisites. The City has obtained special legislation,
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codified as Section 10061.3 of the Code (the "Special Statute"), permitting the
sale to the Company of the entire Water System without compliance with Section
10061 et seq. of the Code and subject to (i) approval of such sale by a majority
of the City Council and (ii) approval of such sale by a majority of those West
Covina Portion Customers returning ballots based upon a mail ballot sent to all
West Covina Portion Customers along with information as to the sale as specified
in the Special Statute. In connection with the sale of the Water System:
(A) The City prepared a ballot and information notice which met
the requirements of the Special Statute, mailed or caused to be mailed such
ballot and notice to all West Covina Customers and held a City Council meeting
to tabulate the ballots returned as required by the Special Statute. The
tabulation indicated approval of the sale by more than the required majority of
West Covina Customers returning ballots.
(B) The ballot and information notice were approved by the
Company. The Company shall reimburse to the City all out-of-pocket costs
incurred by the City in complying with clause (A) above. Such costs shall
include the fees and costs of a consultant retained by the City to prepare,
distribute, collect and tabulate the ballot and notice, mailing and printing
costs and the costs and fees of the City's legal counsel with respect to such
ballot and notice process. Payment of such costs shall be made, if not made
prior thereto, on the Closing Date as provided for in Section 2.2.
(C) By executing and delivering this Agreement, the City
represents and warrants that the City Council has approved the sale of the Water
System to the Company upon the terms and at the Purchase Price set forth herein.
There shall not have been any amendment to, modification of, rescission of or
repeal of such approval prior to the Closing Date unless the
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Company fails to obtain the CPUC approval described in Section 4.2 prior to
Closing or otherwise fails to perform hereunder in some material respect.
(D) At the Closing, the City shall deliver a certificate
executed by the Public Services Director and the City Clerk of the City
certifying:
(1) That each of the factual statements set forth in
clauses (A) and (B) above is accurate and each action described in such clauses
(A) and (B) has in fact been taken.
(2) The number of ballots received by the City from the
West Covina Portion Customers, the number of ballots voted in favor of the
within sale and the number of ballots voted against the within sale.
(3) The resolutions adopted by the City Council with
respect to clauses (A), (B) and (D) (2) above and attaching copies of such
resolutions to such certificate.
The certificate shall be prepared by the attorneys for the Company and shall be
subject to the approval of the City and the Company, in each case not to be
unreasonably withheld or delayed.
5.2 Defeasance of Water Revenue Bonds. The City shall defease, or pay and
---------------------------------
satisfy all Water Revenue Bonds as set forth in this Section. The City will make
available to the Company for inspection and copying prior to the Closing Date
documentary evidence that all steps necessary to defease such Water Revenue
Bonds have been taken as of or prior to the Closing Date. The City shall also
provide to the Company on the Closing Date a written agreement to indemnify and
hold the Company harmless from any claims, loss or damage, including expenses
and reasonable attorneys' fees, sustained as a result of failure to effectively
retire all Water Revenue Bonds. The indemnity agreement to be delivered at the
Closing shall be in the form attached hereto as Schedule 1. It is expressly
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agreed that the Water Revenue Bonds are to be defeased prior to or concurrently
with the Closing, that the Water Revenue Bonds are not to constitute a lien,
claim or encumbrance on the Water System acquired by the Company, or any portion
thereof, and that the Water Revenue Bonds and any obligations or liabilities
relating thereto are not assumed by the Company in any respect.
5.3 Approval of Property, Books and Records.
---------------------------------------
(a) The City shall allow the Company to inspect all books, records,
contracts and property of the City constituting or relating to the Water System,
which said inspection may be undertaken by the Company at a time convenient to
the Company and the City prior to the Closing Date. The City further agrees to
permit the Company and its representatives full access to the City's property
and records constituting or relating to the Water System at any time prior to
the Closing Date during normal business hours and to supply all information
concerning the Water System and its affairs as the Company may reasonably
request.
(b) The Company shall, in its sole but reasonable discretion before
the Closing Date, approve the financial condition of the Water System and the
physical condition of the assets comprising the Water System.
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(c) The City and the Company acknowledge that the City has used
Xxxxxxx-Xxxxxxxxx Engineering as the City's outside civil engineering firm. The
City hereby consents to retention by the Company of such firm in connection with
the Water System, or any portion thereof, after the Closing and, to the extent
of the City's ability to do so, waives any actual or apparent conflict of
interest which such firm might otherwise have due to its prior retention by the
City.
5.4 Consents. All necessary consents, if any, for the assignment or
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transfer of all contracts, leases, licenses, easements and permits which form a
part of or relate to the Water System shall be obtained by the City and shall be
in form and substance reasonably satisfactory to the Company, unless the Company
agrees to specifically waive such requirement with respect to one or more of the
contracts, licenses, leases, easements or permits.
5.5 Easements. The City shall provide to the Company easements which are
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in form and substance reasonably satisfactory to the Company for all water
mains, reservoir access, facilities and appurtenances which are a part of the
Water System and which are not located on public rights-of-way or in easements
assigned to the Company. The Company will assist the City in its attempt to
acquire such easements to the extent that such easements do not exist at the
Date of this Agreement, and the obligations of the Company hereunder shall be
contingent upon its ability to acquire transferable property rights for all of
the City's watermains, reservoir access, facilities and appurtenances not
located on public rights of way. Prior to the Closing, the City shall also amend
the existing water franchise agreement previously granted by the City to the
Company to include the use of the streets and other public places of the City
incident thereto as reasonably necessary for the Company to operate the West
Covina Portion of the Water System and without change in the terms, conditions
and franchise fee rate thereof. The covenants of the City contained in this
Section shall include those easements and other rights to be granted or assigned
pursuant to Section 2.5 above.
5.6 Franchises to Operate. At or before the Closing Date, the Company
---------------------
shall either (a) receive a water franchise agreement from the City of Walnut
sufficient for the Company to operate the Walnut Portion without fee or charge
to the Company by the City of Walnut or (b) receive a letter from the City
Manager of the City of Walnut providing, in substance, that no such franchise
agreement is required for the Company to operate the Walnut Portion of the Water
System.
5.7 Other Approvals. The Company and the City shall receive all consents,
---------------
approvals and authorizations of all governmental bodies, authorities and
agencies, if any, having jurisdiction over the transaction provided for in this
Agreement, free of conditions or restrictions which would impair the ability of
either party to consummate the transaction contemplated by this Agreement in
accordance with its terms.
5.8 Title Approval and Commitment. Approval by the Company of the title to
-----------------------------
the real property and real property interests (and all operating facilities
therein or thereon) included in the Water System and the written commitment of
Chicago to issue, upon the closing, a policy of CLTA Owner's title insurance in
favor of the Company, insuring title to such real property and real property
interests (and all operating facilities therein or thereon) in the Company with
a
15
liability amount equal to the Purchase Price, plus costs of defense as permitted
by such policy, subject only to such matters as are approved by the Company.
Promptly upon the execution of this Agreement, the Company (with the City's
consent, which hereby is given) shall cause Chicago to issue and deliver to the
Company a preliminary title report (the "PTR") with respect to all real property
and real property interests included in the Water System, together with legible
copies of all exceptions described therein. The PTR and exceptions shall be
subject to the approval of the Company, which approval shall not be unreasonably
withheld and shall be deemed given unless the Company shall disapprove the PTR
and exceptions by written notice to the City and Escrow Agent within thirty (30)
days after receipt by the Company of the entire PTR and exceptions. Such notice
shall specify with particularity the item or items disapproved. For the purposes
of this provision, the Company shall not be entitled to disapprove (a) the
standard printed exceptions to the PTR form, (b) real property taxes a lien not
delinquent, (c) the lien of the Water Revenue bonds (which shall be released or
reconveyed at or prior to Closing) and (d) any lien, claim or encumbrance
created or suffered by the Company. If the Company timely and properly
disapproves the PTR and exceptions, the City shall, within fifteen (15) days
after receipt of such notice, notify the Company and Escrow Agent in writing
whether the City elects to remove or cure the item(s) disapproved. If the City
so elects to remove or cure such disapproved item(s), it shall proceed to do so
and shall complete such removal and cure to the reasonable satisfaction of the
Company and Chicago at least ten (10) days prior to the Closing. If the City
elects not to remove or cure such item(s) or makes no written election within
such time period, the Company shall have thirty (30) days from receipt of the
City's election or the expiration of the fifteen (15) day period, as applicable,
to either (i) elect to accept title with such disapproved item(s) or (ii) elect
to terminate this Agreement. Promptly following approval by the Company of title
to the real property and real property interests included in the Water System,
the Company (with City's consent, hereby given) shall cause Chicago to issue and
deliver to the Company the written commitment provided for in this Section
subject only to the exceptions approved (or disapproved but accepted) by the
Company. Upon the closing, the Company (with the City's consent) at the expense
of the Company, shall cause Chicago to issue to the Company a policy of title
insurance in accordance with the commitment.
5.9 Absence of Certain Events. There shall not have occurred any damage to
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or destruction of any material portion of the Water System between the Date of
this Agreement and the Closing Date. For this purpose, a "material portion"
shall mean a portion or portions of the Water System with an aggregate repair or
replacement cost of $100,000 or more. However, in the event of the occurrence of
damage to or destruction of a material portion of the Water System, the Company
may, by written notice to the City and Escrow Agent given within thirty (30)
days after receipt by the Company of written notice of such occurrence, elect to
waive the satisfaction of this condition and proceed to close the purchase. In
such event the City shall, at the election of the Company, either (a) repair or
replace the damaged or destroyed property(ies) prior to the Closing (if such
repair or replacement can be accomplished prior to the Closing), (b) assign to
the Company at the Closing all rights of the City to the proceeds of all
insurance maintained by the City with respect to such damaged or destroyed
property or (c) transfer the damaged property to the Company in its then
condition, with a reduction in the Purchase Price equal to the mutually agreed
cost of repair or replacement.
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5.10 Lender Matters. The Company shall have obtained (a) financing in an
--------------
amount equal to the Purchase Price from a lender selected by the Company and
upon terms and provisions satisfactory to the Company and such lender and (b)
all consents to the purchase by the Company of the Water System and/or such new
financing required by all existing credit agreements to which the Company and/or
the Company's parent are parties and which require such consent prior to such
purchase and/or new financing.
5.11 Accuracy of Representations and Warranties.
------------------------------------------
(a) All representations and warranties of the City and all
representations and warranties of the Company shall be accurate as of the Date
of this Agreement and the Closing Date and all covenants of the City and the
Company to be performed by the Closing Date shall have been performed by the
Closing Date or waived.
(b) The Company shall be responsible to satisfy those conditions set
forth in Sections 5.3, 5.6, 5.7 (to the extent of approvals, consents and
authorizations required due to the Company's operations), 5.8, 5.10 and 5.11(a)
(to the extent of representations, warranties and covenants of the Company). The
City shall be responsible to satisfy those conditions set forth in Sections 5.1,
5.2, 5.4, 5.5, 5.7 (to the extent of approvals, consents and authorizations
required due to the City's operations) and 5.11(a) (to the extent of
representations, warranties and covenants of the City).
(c) Each party shall use its respective best efforts to satisfy each
condition for which such party is responsible. Nothing herein, however, shall
require either party to pay any expense or to assume any obligation in addition
to those expenses and obligations which such party agrees to pay or assume
pursuant to the provisions of this Agreement. Moreover, nothing in this section
or this Agreement shall be deemed or construed to limit any approval right or
other right given to either party with respect to satisfaction of any condition,
except that any approval required shall not be unreasonably withheld. Each party
agrees to cooperate as reasonably requested by the other in connection with the
satisfaction of the conditions set forth in each of such Sections.
(d) The conditions set forth in Sections 5.2, 5.3, 5.5, 5.6, 5.8, 5.9
and 5.10 have been included for the benefit of the Company. The conditions set
forth in Sections 5.1, 5.4, 5.7 and 5.11 (for the City as to the
representations, warranties and covenants of the Company and for the Company as
to the representations, warranties and covenants of the City) have been included
for the benefit of both the City and the Company. As to those conditions which
are solely for the benefit of the Company, only the Company can waive the
satisfaction thereof. As to those conditions which are for the benefit of both
the City and the Company, any waiver thereof, to be effective, must, except as
to Section 5.11, be by both parties. As to any waiver of Section 5.11, each
party may waive only the accuracy of a representation and warranty of the other
party or the breach of a covenant by the other party. Any waiver of a condition
pursuant to this Article must be in a written notice to the other party and to
Escrow Agent.
(e) In the event of failure of any of the conditions set forth in
Sections 5.1 through 5.11, a party for whose benefit such condition is included
shall have the right to terminate
17
this Agreement. Such termination shall be effected by written notice from the
terminating party to the other party and to Escrow Agent given promptly
following the failure of such condition and, in any event, prior to the Closing
Date. In the event that this Agreement is terminated pursuant to this subsection
(e), this Agreement shall terminate on the third (3rd) business day following
the date of such termination notice (unless such failed condition is satisfied
within such period). Upon such termination, Escrow Agent shall promptly return
to each party all funds and instruments deposited by such party; the Company
shall bear the escrow cancellation fee; each party shall bear all fees and costs
incurred by it in the negotiation and preparation of this Agreement and in
performing its respective obligations hereunder through the date of termination;
the Company shall return to the City all information and documents provided by
the City with respect to the Water System; and except as provided herein,
neither party shall have any further rights or obligations pursuant to this
Agreement. Pending any such termination, each party shall diligently pursue its
obligations hereunder.
ARTICLE 6.
REPRESENTATIONS AND WARRANTIES OF THE CITY
The City represents and warrants to the Company as follows:
6.1 Political Existence. The City is a duly constituted, validly existing
-------------------
municipal corporation, in good standing, and authorized to do business under the
laws of the State of California. The City has all necessary power and authority
to execute and deliver this Agreement and to perform its obligations hereunder.
6.2 Authorization. The execution and delivery of this Agreement, and all
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other instruments and documents contemplated hereunder, and the performance by
the City of its obligations and duties hereunder and thereunder have been duly
authorized by the City Council of the City. Those persons executing and
delivering this Agreement and such other instruments on behalf of the City are
duly authorized to so execute and deliver on behalf of the City.
6.3 No Breach.
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(a) The execution, delivery and performance of this Agreement do not
and will not constitute a breach or violation of or a default under any
ordinances or the governing code of the City or any other agreement, contract,
mortgage or other instrument to which the City or its properties are bound, nor
will such execution, delivery and performance result in the creation of any
lien, charge or encumbrance upon any property or assets of the City, nor will
such actions violate any statute, ordinance, regulation, judgment, order or
ruling to which the City or its properties are subject, except for such
exceptions as are specifically stated in the opinion of the City Attorney and as
are reasonably approved by the Company.
(b) Without limiting the generality of the foregoing, the City
specifically represents and warrants that (i) the City has full power and
authority to sell to the Company reservoir R-2 in the Walnut Portion ("R-2"),
(ii) no consent to or approval of such sale is required from the United States
government or any agency thereof and (iii) the City is entitled to retain all
18
amounts paid by the Company to the City for R-2. The City agrees specifically
that it shall indemnify, defend and hold the Company harmless from any and all
claims by the United States (or any agency thereof) to any portion of the
Purchase Price and any and all claims to the effect that the United States (or
any agency thereof) has any interest in R-2 or any claim or lien thereon.
(c) The City represents and warrants that it does not collect and
therefore does not have any customer deposits to transfer to the Company.
(d) The City shall not, prior to the Closing Date, reduce the City's
Rates for water service, except as provided in Section 4.1 above.
6.4 Financial Statements. The Balance Sheet accurately and completely sets
--------------------
forth the assets of and the liabilities of the Water System as of the date of
the Balance Sheet. There have been no material adverse changes in the financial
condition or business of the Water System since the date of the Balance Sheet.
All assets set forth in Exhibits E, F, G and H are used and useful in the
----------------------
operation of the Water System. Exhibits E, F, G and H were compiled jointly by
----------------------
the City and the Company, and the City does not warrant the accuracy or
completeness of such Exhibits. However, employees of the City familiar with the
Water System have reviewed (without independent investigation) such Exhibits
and, on the basis of their knowledge, the City is not aware of any omissions
from or inaccuracies in such Exhibits. If, however, it is determined after the
Closing that any asset of the Water System was not included in the appropriate
Exhibit and was not transferred to the Company, the City shall promptly transfer
the same to the Company without additional charge by means of an appropriate
conveyance (grant deed, xxxx of sale or assignment) in form and substance
reasonably satisfactory to the City and the Company.
6.5 Title to Assets. The City has good and merchantable title to all
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assets comprising the Water System, subject only to the lien of the Water
Revenue Bonds and those related to the Grand Avenue Line. The City will convey
title to all real property and real property interests included in the Water
System free and clear of all liens, claims and encumbrances, by deed, except in
the case of easements, the conveyance of which may be by grant in a form
satisfactory as to form and content to the Company and Chicago. As to all other
assets, conveyance shall be made by instruments appropriate thereto and
reasonably satisfactory to the Company as to form and content. Neither any
review by the Company of the City's books and records pertaining to or the
assets comprising the Water System nor any title insurance obtained by the
Company with respect to the assets comprising the Water System shall relieve the
City from liability for the inaccuracy of the representation contained in this
Section.
6.6 Warranty to Preserve and Maintain. The City shall, between the Date of
---------------------------------
this Agreement and the Closing Date, operate, maintain and preserve the Water
System in a careful and proper manner, and deliver the same to the Company in as
good condition as it now is, reasonable wear and tear expected. Between the Date
of this Agreement and the Closing Date, the City shall operate the Water System
in the same manner as operated on the Date of this Agreement. As set out in
Section 5.9, all risk of loss or damage prior to the Closing to the Water System
or any part thereof by fire, tornado, windstorm, explosion or any other casualty
whatsoever shall be assumed by the City.
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6.7 Contractual Freeze. The City shall not enter into any contractual
------------------
agreements prior to the Closing which relate to the Water System or the
provision of water service thereby without the Company's written consent except
in connection with normal and usual commitments in the ordinary course of
business for the purchase of materials, services and supplies, which such
commitments shall be terminable upon not more than thirty (30) days written
notice unless otherwise approved by the Company.
6.8 Insurance. The City shall continue to maintain its current insurance
---------
or self-insurance coverage on the Water System through and including the Closing
Date, after which time all insurance coverage with respect to the Water System
shall be the obligation of the Company.
6.9 Pending Litigation. To the best of the City's knowledge without
------------------
independent investigation, there are no actions, suits or proceedings pending or
threatened against the City, its properties, or the assets constituting the
Water System, at law or in equity, before or by any federal, state, county,
municipal or other government court, department, commission, board, bureau,
agency or instrumentality in which an adverse judgment, assessment or liability
would have a material adverse effect on the City's title to any of the assets
comprising the Water System, the rights of the City or the Company to own and
operate the Water System, or the ability of the City to execute and deliver this
Agreement or to perform its obligations under this Agreement or the other
agreements contemplated hereunder.
6.10 Transfer of Operational Authority. The City shall use its best
---------------------------------
efforts to transfer to the Company all licenses, permits, and other
authorizations, if any, necessary to operate the Water System in the manner and
method in which operated prior to the Closing Date.
6.11 Compliance with Applicable Laws. To the best knowledge of the City,
-------------------------------
without independent investigation, and except as disclosed in written materials
(the "Materials") supplied by Xxxxx & Xxxxxx, legal counsel to the City, to
Xxxxxx & Xxxxxxx, legal counsel to the Company, the Water System, and all
facilities and other components thereof, comply with all applicable federal and
state statutes, laws and other requirements, including but not limited to all
statutes, laws, regulations, rulings and other governmental pronouncements and
requirements dealing with or regulating (a) the quality of water delivered by
the Water System, (b) the operation, maintenance and repair of the Water System
and the various facilities and other assets comprising the Water System, (c)
provision of water service to the City's Customers and the charges therefor and
(d) the presence, use, discharge, storage or release of all materials (whether
solid, liquid or gaseous) determined by any governmental authority to be
hazardous or dangerous to persons or property.
For the purposes of the Materials, responsibility for any fines or
penalties resulting from any action or inaction by the City with respect to the
Water System shall remain with the City, all testing required subsequent to the
Closing Date shall be the responsibility of the Company and responsibility for
any other matters shall be as agreed by the City and the Company, applying the
other provisions of this Agreement.
20
6.12 Opinion of City Attorney. The City shall deliver to the Company at
------------------------
the Closing an opinion of the City Attorney for the City, dated the Closing Date
and in form and substance reasonably satisfactory to the Company, to the effect
that:
(a) The City is a duly constituted, validly existing municipal
corporation, in good standing, and authorized to do business under the laws of
the State of California. The City has all necessary power and authority to
execute and deliver this Agreement and all other agreements provided for herein
and to perform its obligations hereunder and thereunder.
(b) All consents, approvals and authorizations of all governmental
bodies, authorities, agencies and citizens which are required for the execution
and delivery by the City of this Agreement and all other agreements provided for
herein and for the City's performance of its obligations pursuant to this
Agreement and all other agreements provided for herein have been received, free
from any conditions and restrictions. All statutory prerequisites to the sale of
the Water System to the Company on the terms described herein have been fully
complied with. Without limiting the generality of the foregoing, all
requirements of the Code and the Special Statute applicable to the sale of the
Water System provided for herein have been complied with.
(c) The execution and delivery of this Agreement and all agreements
contemplated hereunder by the City and the consummation of the transactions
contemplated hereby and thereby are within the corporate power of the City, have
been duly authorized by all necessary action on behalf of the City, and this
Agreement has been duly executed by the City, and constitutes the valid and
binding obligation of the City enforceable in accordance with its terms. Those
persons executing and delivering this Agreement on behalf of the City are duly
authorized to so execute and deliver on behalf of the City.
(d) The deeds, easements, bills of sale and all other instruments of
conveyance delivered by the City to the Company at the Closing are legally valid
and enforceable by the Company in accordance with their respective terms and
conditions and are effective to convey to the Company all of the City's right,
title and interest in the Water System, free and clear of all liens, claims and
encumbrances.
(e) The execution, delivery and performance of this Agreement and all
other agreements provided for herein by the City do not and will not constitute
a breach or violation of or a default under any ordinances or the governing code
of the City or, to the best of her knowledge, any other agreement, contract,
mortgage or other instrument to which the City or its properties are bound nor,
to the best of her knowledge, will such execution, delivery and performance by
the City result in the creation of any lien, charge or encumbrance upon any
property or assets of the City, nor will such actions violate any statue,
ordinance, regulation, judgment, order or ruling to which the City or its
properties are subject.
(f) To the best of her knowledge, but without independent
investigation, there are no actions, suits or proceedings pending or threatened
against the City, its properties, or the assets constituting the Water System,
at law or in equity, before or by any federal, state, county, municipal or other
governmental court, department, commission, board, bureau, agency or
instrumentality in which an adverse judgment, assessment or liability would have
a material
21
adverse effect on the City's title to any of the assets comprising the Water
System, the rights of the City or the Company to own and operate the Water
System, or the ability of the City to execute and deliver this Agreement or the
other agreements provided for herein or to perform its obligations under this
Agreement and the other agreements contemplated hereunder.
6.13 Indemnification. The City shall indemnify, defend and hold harmless
---------------
the Company from and against any and all claims, causes of action (whether
administrative or judicial), liabilities, losses, damages, fines, penalties,
costs and expenses of any kind or nature whether current, deferred or contingent
(including, but not limited to, court costs and reasonable attorneys' fees)
which arise out of or are in connection with:
(a) The City's breach, nonperformance, or nonfulfillment of any
representation, warranty, covenant, or obligation of the City under this
Agreement, including but not limited to those in Sections 3.3, 3.4, 3.5, 3.6 and
3.7;
(b) The failure of the City to comply with any statutes, regulations,
codes or ordinances (including, but not limited to, any and all environmental or
public health laws) applicable to the Water System and the operation thereof
through the Closing Date, including items disclosed in the Materials subject to
the second paragraph of Section 6.11;
(c) Any actions, transactions, failure to act, and any negligence or
willful misconduct by the City, its employees, agents and independent
contractors in the ownership, use, maintenance or operation of the Water System
prior to the Closing;
(d) The employment by the City of those city employees engaged in the
management, operation, maintenance and repair of the Water System through the
Closing Date, including but not limited to all claims by such employees
resulting from transfer to another position as of the Closing Date; and
(e) Any placement, discharge, release or maintenance by the City of
hazardous material or hazardous waste in the City's operation of the Water
System.
6.14 Notice by City. In the event that, during the period from the Date of
--------------
this Agreement through the Closing Date, (a) there occurs any casualty to the
Water System or any facility or other significant asset thereof, or (b) the City
receives notice or knowledge of any lawsuit, claim, legal notice, notice of
violation or any other event which will or may result in the inaccuracy of any
representation or warranty by the City or the breach of any covenant by the City
contained herein, then, in any such event, the City shall promptly notify the
Company in writing of the occurrence and nature of such event or occurrence. The
City shall include with such notice a copy of any summons, complaint, notice,
claim or other writing received by the City and constituting, or received by the
City in connection with, such event or occurrence. Following the delivery of any
such notice, the City shall cooperate with the Company as reasonably requested
in connection with the review or examination of such event or occurrence and the
determination of whether such event or occurrence renders inaccurate any
representation or warranty by the City.
22
ARTICLE 7.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the City as follows:
7.1 Existence and Power. The Company is a California Corporation duly
-------------------
organized and validly existing under the laws of the State of California, has
full power and authority to own and use its properties and to transact the
business in which it is engaged and, subject to the grant of the water franchise
agreements described herein and receipt of all requisite approvals as described
herein, it will have the authority to purchase, own and operate the Water
System.
7.2 Authorization of Agreement. The Board of Directors of the Company has
--------------------------
duly authorized the execution and delivery of this Agreement and the performance
by the Company of its obligations pursuant to this Agreement, all as provided
herein, and no other approvals or authorizations other than those specified
herein are necessary or required for the execution and delivery of this
Agreement by the Company or the performance by the Company of its obligations
hereunder. Those persons executing and delivering this Agreement on behalf of
the Company are duly authorized to so execute and deliver on behalf of the
Company.
7.3 Agreement to Create No Default. Subject to Section 5.10, the execution
------------------------------
and delivery of this Agreement by the Company and the performance by the Company
of its obligations herein contained do not, and will not as of the Closing Date,
result in any breach of any of the terms, conditions or provisions of or
constitute a default under any indenture, agreement or other instrument to which
the Company is a party or by which it may be bound or affected.
7.4 Pending Litigation. To the best of the Company's knowledge without
------------------
independent investigation, there are no actions, suits or proceedings pending or
threatened against the Company or its properties, in law or in equity, before or
by any federal, state, county, municipal or other government court, department,
commission, board, bureau, agency or instrumentality in which an adverse
judgment, assessment or liability would have a material adverse effect on the
rights of the Company to own and to operate the Water System or the ability of
the Company to execute and deliver this Agreement and perform its obligations
under this Agreement.
7.5 Opinion of Company Attorney. The Company shall deliver to the City at
---------------------------
the Closing an opinion of Xxxxxx & Xxxxxxx, counsel to the Company, dated the
Closing Date and in form and substance reasonably satisfactory to the City, to
the effect that:
(a) The Company is a California corporation duly incorporated and
validly existing under the laws of the State of California. Subject to the grant
of the water franchise agreements and other approvals, consents and
authorizations provided for herein, the Company has the authority to purchase,
own and operate the Water System.
(b) The Board of Directors of the Company has duly authorized the
execution and delivery of this Agreement by the Company and the performance by
the Company of its
23
obligations pursuant to this Agreement. No other corporate authorization is
required for the execution and delivery by the Company of this Agreement or the
performance by the Company of its obligations under this Agreement. Those
persons who have executed and delivered this Agreement on behalf of the Company
have been duly authorized to so execute and deliver on behalf of the Company.
(c) To the knowledge of such counsel, and subject to the satisfaction
of the condition set forth in Section 5.10, the execution and delivery of this
Agreement by the Company and the performance by the Company of its obligations
herein will not result in the breach of or in a default under any Material
Agreement, as defined in such opinion, to which the Company or its properties
are bound.
ARTICLE 8.
COVENANTS OF THE COMPANY
The Company covenants with the City as follows:
8.1 Local Telephone Lines. The Company shall maintain at all times after
---------------------
the Closing Date local telephone lines which will enable the City's Customers to
contact the Company by telephone without charge.
8.2 Indemnification. The Company shall indemnify, defend and hold harmless
---------------
the City from and against any and all claims, causes of action (whether
administrative or judicial), liabilities, losses, damages, fines, penalties,
costs or expenses of any kind or nature (including, but not limited to, court
costs and reasonable attorney's fees) which arise out of or are in connection
with:
(a) The Company's breach, nonperformance, or nonfulfillment of any
representation, warranty, covenant, or obligation of the Company under this
Agreement, including but not limited to those in Sections 3.3, 3.4, 3.5 and 3.7;
(b) The failure by the Company to comply with applicable statutes,
regulations, codes or ordinances (including, but not limited to, any and all
environmental or public health laws) in the operation of the Water System
subsequent to the Closing;
(c) Any actions, transactions, failure to act, and any negligence or
willful misconduct by its employees, agents and independent contractors in the
ownership, use, maintenance or operation of the Water System subsequent to the
Closing Date; and
(d) Any placement, discharge, release or maintenance by the Company
of hazardous materials or hazardous waste in the Company's operation of the
Water System. For this purpose, the Company specifically acknowledges that the
Company has elected not to perform a Phase I Environmental Assessment with
respect to the Water System or any portion thereof.
24
8.3 Holding Costs to Customers. For a period of four (4) years subsequent
--------------------------
to the Closing Date, the Company shall provide water service to the Customers at
costs to the Customers not in excess of the reduced rates provided for in
Section 4.1.
8.4 Property Taxes. The Company shall pay all real and personal property
--------------
taxes and assessments assessed against the Water System from and after the
Closing Date.
ARTICLE 9.
COVENANTS OF THE CITY
The City covenants with the Company as follows:
9.1 Performance. The City shall perform its obligations under all
-----------
contracts, leases, licenses, easements and permits which form a part of the
Water System without default until the Closing Date.
9.2 Books and Records. The City shall deliver to the Company on the
-----------------
Closing Date copies of all books and records of the City, held or controlled by
the City or its agents relating to the Water System, including but not limited
to customer lists, billing/collection history, technical information,
distribution system maps, continuing property records, hydrant records, valve
records, customer service records, monthly reports submitted to state agencies,
maintenance records on tanks, mains and services, and all other records and
documents relating to the Water System.
9.3 Conduct of Business. Until the Closing Date, the City shall not,
-------------------
without the written consent of the Company, dispose of or encumber any of the
assets comprising the Water System except (a) for transactions in the ordinary
course of business and (b) as provided in Section 2.5(a). Pending the Closing,
the City shall operate and maintain the Water System in the ordinary course of
business, consistent with good past business practices.
9.4 Taxes and Fees. The City agrees not to impose after the Closing Date
--------------
any taxes, franchise fees, license fees, or other similar charges or assessments
on the Company relating to the operation of the Water System and the use of the
public rights-of-way within the City for the operation of such system other than
lawful fees for street excavation or encroachment permits, building permits, and
real and personal property taxes and assessments and the extension of the
Company's franchise agreement to cover the West Covina Portion of the Water
System.
9.5 Accounts Payable. The City shall pay and satisfy in full all accounts
----------------
payable relating to the Water System which are accrued or accruable as of the
Closing Date if they represent services or goods received by the City prior to
the Closing Date. The City agrees to indemnify and hold the Company harmless for
all accounts payable relating to the Water System which are accrued or accruable
as of the Closing Date.
9.6 Utilities. The City shall pay all utility charges for which the City
---------
is responsible pursuant to Section 3.3 as soon as practicable after the Closing,
but in no event later than sixty
25
(60) days after the Closing. The City agrees to indemnify and hold the Company
harmless from all liability with respect to all utility charges and accounts
payable for which the City is responsible pursuant to Sections 3.3, 9.5 and this
Section 9.6.
ARTICLE 10.
MISCELLANEOUS
10.1 Company's and City's Liability for Fees. The Company and the City
---------------------------------------
will each be responsible for all fees and charges of their respective
accountants, technical consultants (except as provided in clause (B) of Section
5.1), appraisers, attorneys, and other advisors employed with respect to the
transactions provided for herein, whether or not the transactions provided for
herein take place.
10.2 Survival of Representations and Warranties. All agreements,
------------------------------------------
representations, and warranties contained in this Agreement shall, to the extent
applicable, apply as of the Closing Date and shall survive the Closing,
notwithstanding any investigation or other due diligence performed by either
party hereto.
10.3 Bulk Sales. It is the opinion of both parties that the Bulk Sales Law
----------
of the State of California does not apply to this transaction. Should any claim
or legal proceeding be made or commenced by a creditor of the City based on the
applicability of said Bulk Sales Law to this transaction, the City shall
indemnify and hold harmless the Company from and against any and all claims of
such creditors under the Bulk Sales Law.
10.4 Notices. All notices, requests, demands, approvals, consents,
-------
waivers, or other communications required or permitted to be given hereunder
shall be in writing and shall be deemed to have been duly given if personally
delivered or mailed by registered or certified mail, return receipt requested,
postage prepaid, addressed to the mailing addresses set forth below (or to such
other addresses as the parties hereto may from time to time designate in writing
in a notice given in the same manner):
Suburban Water Systems:
0000 X. Xxxxxx Xxxxx Xxxxx
Xxxxxx, XX 00000-0000
Attn: President
Fax: (000) 000-0000
with a copy to:
Xxxxxx & Xxxxxxx
000 Xxxx Xxxxxx Xxxxx, Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attn: Xxxxx X. Xxxxxxx, Esq.
Fax: (000) 000-0000
26
City of West Covina:
0000 X. Xxxxxx Xxxxxx Xxxxx
P.O. Box 1440
West Covina, CA 91793
Attn: Xx. Xxxx Xxxxxxx
Fax: (000) 000-0000
with a copy to:
Xxxxx & Xxxxxx
000 Xxxxx Xxxxxxxxx, Xxxxx 0000
Xxxxx Xxxx, XX 00000
Attn: Xxxxxxxxx Xxxxxx, Esq.
Fax: (000) 000-0000
Notices which are personally delivered shall be effective upon delivery.
Notices sent by registered or certified mail as provided herein and properly
addressed and sent postage prepaid shall be effective on the date of delivery or
refusal indicated on the return receipt. Each party may also send notices by
facsimile transmission. Any notices sent by facsimile transmission shall be
effective upon acknowledgment of receipt of a legible copy thereof. Each party
may change its address for notices by written notice given in the manner
provided in this Section.
10.5 Section Headings. All article and section headings herein are
----------------
inserted for convenience of reference only and shall not control, affect or
modify the meaning or construction of any of the terms or provisions hereof.
10.6 Governing Law. This Agreement shall be governed by, enforced under,
-------------
and interpreted in accordance with, the laws of the State of California.
10.7 Entire Agreement and Amendment. This Agreement and the Exhibits and
------------------------------
Schedule hereto set forth the entire understanding reached between the parties
hereto with respect to the transactions contemplated hereby. Any previous
agreements or understandings between the parties hereto regarding the subject
matter hereof are merged into and superseded by this Agreement. This Agreement
may not be amended except by a written instrument executed by the parties
hereto. All Exhibits and the Schedule are incorporated into and made a part of
this Agreement by this reference.
10.8 Expense of Litigation. If either party incurs any expense, including
---------------------
reasonable attorneys' fees, in connection with any action or proceeding,
including any arbitration proceeding, instituted by either party by reason of
any default or alleged default of the other party hereunder, to seek damages, to
prevent a breach or continued breach of this Agreement, to determine the rights
and obligations of the parties hereunder or in which this Agreement is asserted
as a defense, the party prevailing in such action or proceeding shall be
entitled to recover its reasonable expenses from the other party, including
expenses of investigation and enforcement.
27
10.9 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original but all of which
together shall be deemed a single instrument. It shall not be necessary for both
parties to execute the same counterpart(s) of this Agreement for this Agreement
to become effective.
10.10 Effectiveness. This Agreement shall become effective upon the last
-------------
execution and delivery of this Agreement by the City and the Company.
10.11 Interest. Any amount due from either party to the other party
--------
hereunder which is not paid when due shall bear interest at the rate of seven
percent (7%) per annum from the date due until payment in full.
10.12 Severability. In the event that any portion of this Agreement is
------------
determined to be illegal, void or unenforceable in total or as applied to any
particular circumstance(s) by a court of competent jurisdiction or in any
arbitration proceeding, such provision shall be enforced as to any other
circumstance where not so illegal, void or unenforceable and such determination
shall not affect the validity or enforceability of any other provision of this
Agreement.
10.13 City Employees. The Company shall not be required to hire any City
--------------
employees engaged in the operation of the Water System. The City shall
indemnify, defend and hold the Company harmless from and against any and all
claims and actions brought by City employees arising out of or resulting from or
alleged to arise out of or result from the sale of the Water System to the
Company.
10.14 Exclusive Negotiating Agreement and LOI. The City and the Company
---------------------------------------
have previously executed and delivered a certain Exclusive Negotiating Agreement
dated as of August 3, 1998 (as amended, the "Exclusive Agreement") and the LOI.
Upon execution and delivery of this Agreement, this Agreement shall supersede,
in their entireties, the Exclusive Agreement and the LOI, and such Exclusive
Agreement and LOI shall each terminate.
10.15 Indemnities. The obligations of the indemnifying party under each
-----------
and every indemnification and hold harmless provision contained in this
Agreement shall survive the Closing or any termination of this Agreement to and
until the last to occur of (a) the last date permitted by law for the bringing
of any claim or action with respect to which indemnification may be claimed by
the indemnified party against the indemnifying party under such provision or (b)
the date on which any claim or action for which indemnification may be claimed
under such provision is fully and finally resolved and, if applicable, any
compromise thereof or judgment or award thereon is paid in full by the
indemnifying party and the indemnified party is reimbursed by the indemnifying
party for any amounts paid by the indemnified party in compromise thereof or
upon a judgment or award thereon and in defense of such action or claim,
including reasonable attorneys' fees incurred. Payment shall not be a condition
precedent to recovery upon any indemnification provision contained in this
Agreement.
10.16 Escrow Agent Not to be Concerned. The provisions of Sections 1.1,
--------------------------------
3.3, 3.4, 3.6, 3.7, 4.1 through 4.7, 6.13, 8.1, 8.2, 9.4, 9.5, 9.6, 10.3, 10.13,
10.14 and 10.18 are strictly
28
between the City and the Company, and Escrow Agent need not be concerned with
such provisions.
10.17 Brokers. Each of the City and the Company shall be responsible for
-------
any fee or commission payable to any broker, finder or agent retained by it in
connection with the transaction provided for in this Agreement. Each of the City
and the Company shall indemnify, defend and hold the other harmless from and
against all claims for a fee or commission with respect to the transaction
described in this Section made by any broker, finder or agent claiming through
the indemnifying party. Payment shall not be a condition precedent to recovery
upon the foregoing indemnification provision. Each indemnifying party shall
defend the indemnified party against all claims for which indemnification is
available pursuant to this Section with legal counsel appointed by the liability
carrier for the indemnifying party or otherwise reasonably satisfactory to the
indemnified party.
10.18 Arm's Length Transaction. The purchase and sale provided for in this
------------------------
Agreement is the result of a negotiated and arm's length sale of the Water
System. In connection with the negotiation and execution of this Agreement, each
party has been represented and advised by such attorneys, accountants and other
professional advisors as such party desired, all of whom were selected and
retained by the retaining party.
10.19 Further Instruments. Each of the parties shall, upon the request of
-------------------
the other party, promptly execute (and acknowledge if required) and deliver such
other and further instruments as shall reasonably be required to carry out the
purpose and intent of this Agreement. Such instruments shall be prepared by the
party requesting the same at its cost and expense. Nothing in this Section shall
be deemed or construed to require any party to assume or discharge any
obligation in addition to or other than those which such party expressly agrees
to assume or discharge pursuant to this Agreement.
10.20 Exhibits To Be Added. To the extent that any Exhibits described
--------------------
herein are not completed and included with this Agreement at execution, such
Exhibits shall be supplied during the escrow and shall be subject to the
approval of both parties.
29
IN WITNESS WHEREOF, the parties have executed this Agreement for the
Acquisition of the City's Water Utility System as of the date first written
above.
SUBURBAN WATER SYSTEMS,
a California corporation
By:/s/ XXXXXXX X. XXXXX
--------------------
Title: President
---------
By:/s/ XXXXXX X. XXXXX
-------------------
Title: V.P. Finance and CFO
---------------------
"Company"
CITY OF WEST COVINA, a Municipal
corporation
ATTEST:
By:/s/ XXXXX XXXXX By: /s/ XXXXXXX XXXXXX
--------------------- ---------------------------
City Clerk Mayor
"City"
APPROVED AS TO FORM:
By:/s/ XXXXXXXXX MARBYN
---------------------
City Attorney
30
PENDING CAPITAL ADDITIONS TO WATER SYSTEM
-----------------------------------------
None.
EXHIBIT I
Exhibits to Acquisition Agreement
---------------------------------
Exhibit Content Responsibility
--------- ------- --------------
A Current City Water Rates City
B June 30, 1998 Water System Balance Sheet City
C System Map - Walnut Portion City
D System Map - West Covina Portion City
E Real Property Company
F Easements Company
G Tangible Personal Property City
H Intangible Personal Property City
I Pending Capital Additions to Water System City
Sched. 1 Indemnity re Water Revenue Bonds Done
iv
AGREEMENT TO INDEMNIFY (the "Agreement")
----------------------------------------
WHEREAS, Suburban Water Systems (the "Company") and the City of West
Covina, California (the "City") have entered into that certain agreement (the
"Contract"), dated February 1, 2000, for the sale of certain water utility
assets (the "Assets"); and
WHEREAS, the City has in the past caused to be issued certain water
revenue bonds (the "Bonds"), at __%, due September 1, 2010, which constitute a
lien or encumbrance on some or all of the Assets subject to the Contract, and
the full redemption and payoff of which is required to release the lien or
encumbrance on the Assets; and
WHEREAS, the City has represented in the Contract that prior to, or
concurrently with, but no later than the Closing Date pursuant to the Contract,
it will establish an escrow for the payment and redemption of the Bonds in full,
pay all charges to the Bond trustee(s), provide and send out all required
notices, complete all required paperwork, fully satisfy and defease all claims
of the holders of the Bonds (the "Bondholders"), act in a manner such that all
Bondholders have no further claim in equity or law with respect to the Bonds and
the Bond issuance and satisfaction, and otherwise act to successfully fulfill
all legal obligations it has with respect to the Bonds;
The Company and the City hereby agree as follows:
1. Intent of the Agreement. It is the intent of the parties to this
------------------------
Agreement that the Company, its parent company, subsidiaries, officers,
directors, employees, shareholders, agents, affiliates, representatives, and
successors in interest (collectively, "Indemnitees"), shall not bear any costs
---
whatsoever, direct or indirect, under any conditions, resulting from any claims
--- ---
by any person or party, arising from or under the obligations City has incurred
---
by issuing the Bonds. In the event of any dispute over the terms and meaning of
this Agreement, such disputed terms or meaning shall be construed in a manner
that strictly fulfills the intent of the Agreement.
2. Persons to be Indemnified. City agrees to and shall indemnify
--------------------------
Indemnitees pursuant to this Agreement.
3. Promise to Defend Against Third Party Claims. City shall
--------------------------------------------
indemnify, defend, and hold harmless Indemnitees against any and all
liabilities, demands, claims, costs, losses, damages, recoveries, settlements,
and expenses (including, but not limited to, interest, penalties, attorneys'
fees, accounting fees, expert witness fees, costs, and expenses) incurred by
Indemnitees ("Losses"), known or unknown, contingent or otherwise, directly or
indirectly arising from or related to (i) any suits, actions, and claims arising
from the Bond issuance and retirement; (ii) the contracts and agreements
relating to the Bond issuance and retirement, and any related agreements; and
(iii) the contracts and agreements made pursuant to the Contract and this
Agreement.
4. No time Limitations on Survival of Representations, Warranties,
---------------------------------------------------------------
and Agreements. All representations, warranties, and agreements in this
--------------
Agreement and those made in the Contract which reasonably relate to the terms,
spirit, and intent of this Agreement, shall survive indefinitely until, by their
respective terms, they are no longer operative or are otherwise limited by any
applicable statute of limitations. All statements in any certificate, schedule,
or exhibit delivered by the City under this Agreement or in the Contract which
reasonably relate to the terms, spirit, and intent of this Agreement, or in
connection with the transactions contemplated by this Agreement, shall
constitute representations and warranties by the City under this Agreement.
5. Failure to Defend; Settlement. In the event the City fails to
-----------------------------
defend Indemnitees against any claim(s) according to the intent and terms of
this Agreement and the Contract, and if Indemnitees choose to, in good faith and
upon reasonable terms, settle any claim(s) brought or asserted against them, or
any of them, then such settlement(s) shall be conclusive against the City as
indemnifiable Losses.
6. Counsel Representation, Review, and Participation. The City and
-------------------------------------------------
the Company agree that each has been represented by legal counsel, and that this
Agreement is the result of a negotiated compromise between them. The City and
the Company and their respective counsel have participated fully in the review
and revision of this Agreement. Any rule of construction to the effect that
ambiguities are to be resolved against the drafting party or the Indemnitees
shall not apply in interpreting this Agreement or those terms in the Contract
which reasonably relate to the terms, spirit, and intent of this Agreement.
7. Severability. If a court or an arbitrator of competent
------------
jurisdiction holds any provision of this Agreement to be illegal, unenforceable,
or invalid in whole or in part for any reason, the validity and enforceability
of the remaining provisions, or portions of them, will not be affected, unless
the essential purpose of the intent of the Agreement, as stated in paragraph 1
above, would be defeated by the loss of the illegal, unenforceable, or invalid
provision.
8. Incorporation of Contract by Reference. All the provisions of the
---------------------------------------
Contract not inconsistent with the intent and terms of this Agreement are
incorporated herein by reference.
2
IN WITNESS WHEREOF, the parties have executed this Agreement to
Indemnify as of the date first written above.
SUBURBAN WATER SYSTEMS,
a California corporation
By_______________________________
Title:___________________________
By_______________________________
Title:___________________________
"Company"
CITY OF WEST COVINA, a Municipal corporation
ATTEST:
By____________________________ By_______________________________
City Clerk Mayor
"City"
APPROVED AS TO FORM:
By____________________________
for the City Attorney
3
