EXHIBIT 10.11
CREDIT AGREEMENT
between
SOUTHWEST WATER COMPANY
and
BANK OF AMERICA, N.A.
July 30, 1999
TABLE OF CONTENTS
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PAGE(S)
ARTICLE I............................................................... 1
SECTION 1.01. Defined Terms............................................ 1
SECTION 1.02. Other Definitional Provisions............................ 5
ARTICLE II.............................................................. 5
SECTION 2.01. The Revolving Loans...................................... 6
(a) The Revolving Commitment................................... 6
(b) Making the Revolving Loans................................. 6
(c) Reduction of the Revolving Commitment...................... 6
(d) Revolving Note............................................. 6
SECTION 2.02. Mandatory Repayment...................................... 6
SECTION 2.03. Interest Computation and Payment......................... 7
ARTICLE III............................................................. 7
SECTION 3.01. Use of Proceeds.......................................... 7
SECTION 3.02. [Intentionally Omitted].................................. 7
SECTION 3.03. Payments................................................. 7
SECTION 3.04. Payment on Non-Business Days............................. 7
SECTION 3.05. Reduced Return........................................... 7
SECTION 3.06. Indemnities.............................................. 8
SECTION 3.07. Funding Sources.......................................... 8
ARTICLE IV.............................................................. 8
SECTION 4.01. Conditions Precedent to Initial Loan..................... 8
SECTION 4.02. Conditions Precedent to Each Borrowing................... 9
ARTICLE V............................................................... 10
SECTION 5.01. Representations and Warranties........................... 10
(a) Organization............................................... 10
(b) Authorization; No Conflict................................. 10
(c) Governmental Consents...................................... 10
(d) Validity................................................... 11
(e) Financial Condition........................................ 11
(f) Litigation................................................. 11
(g) Employee Benefit Plans..................................... 11
(h) Disclosure................................................. 11
(i) Environmental Matters...................................... 11
(j) Employee Matters........................................... 12
(k) Solvency................................................... 12
(l) Title to Properties........................................ 12
(m) Tax Returns................................................ 12
(n) Compliance with Other Agreements and Applicable Laws....... 13
ARTICLE VI.............................................................. 13
SECTION 6.01. Affirmative Covenants.................................... 13
(a) Financial Information...................................... 13
(b) Notices and Information.................................... 14
(c) Corporate Existence, Etc................................... 15
(d) Payment of Taxes and Claims................................ 15
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(e) Maintenance of Properties; Insurance....................... 16
(f) Inspection................................................. 16
(g) Compliance with Laws Etc................................... 16
(h) Hazardous Waste Studies.................................... 16
(i) Year 2000 Compliance....................................... 16
SECTION 6.02. Negative Covenants....................................... 17
(a) Leverage Ratio............................................. 17
(b) Consolidated Tangible Net Worth............................ 17
(c) Consolidated Net Profit.................................... 17
(d) EBITDA Coverage Ratio...................................... 17
(e) Liens Etc.................................................. 17
(f) Debt....................................................... 18
(g) Consolidation, Merger or Dissolution....................... 18
(h) Loans, Investments, Secondary Liabilities.................. 18
(i) Asset Sales................................................ 19
(j) Hostile Tender Offers...................................... 19
(k) Distributions.............................................. 20
(l) Transactions with Affiliates............................... 20
(m) Books and Records.......................................... 20
(n) Restructure................................................ 20
ARTICLE VII............................................................. 20
SECTION 7.01. Events of Default........................................ 20
ARTICLE VIII............................................................ 23
SECTION 8.01. Amendments, Etc.......................................... 23
SECTION 8.02. Notices, Etc............................................. 23
SECTION 8.03. Right of Setoff: Security Interest in Deposit Accounts.. 23
SECTION 8.04. No Waiver; Remedies...................................... 24
SECTION 8.05. Costs and Expenses....................................... 24
SECTION 8.06. Participations........................................... 24
SECTION 8.07. Effectiveness: Binding Effect............................ 24
SECTION 8.08. Governing Law............................................ 24
SECTION 8.09. Arbitration.............................................. 24
(a) Arbitration................................................ 24
(b) Governing Rules............................................ 25
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. 25
(d) Arbitrator Qualification and Powers; Awards................ 25
(e) Judicial Review............................................ 26
(f) Real Property Collateral, Judicial Reference............... 26
(g) Miscellaneous.............................................. 26
SECTION 8.10. Waiver of Notices........................................ 26
SECTION 8.11. Entire Agreement......................................... 27
SECTION 8.12. Separability of Provisions............................... 27
SECTION 8.13. Execution in Counterparts................................ 27
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Schedules
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5.01(f) - Litigation
5.01(i) - Environmental Matters
6.02(e) - Liens
Exhibits
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A - Form of Note
B - Form of Legal Opinion
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CREDIT AGREEMENT
This Credit Agreement dated as of July 30, 1999 is entered into
between SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower") and
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BANK OF AMERICA, N.A. (the "Bank").
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RECITALS
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WHEREAS, the Borrower has requested that the Bank extend certain
credit facilities to the Borrower in the place of Xxxxx Fargo Bank, National
Association; and
WHEREAS, the Bank is willing to extend such credit facilities to the
Borrower on the terms and conditions set forth below.
NOW THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Defined Terms. As used in this Agreement, the
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following terms have the following meanings:
"Agreement": This Credit Agreement, as amended, supplemented or
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modified from time to time.
"Bank": As set forth in the introductory paragraph of this Agreement.
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"Borrower": As set forth in the introductory paragraph of this
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Agreement.
"Borrowing": As defined in Section 2.01.
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"Business Day": Has the meaning set forth in the Revolving Note.
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"Capital Leases": As applied to any Person, any lease of any property
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(whether real, personal or mixed) by that Person as lessee which would, in
accordance with GAAP, be required to be accounted for as a capital lease on the
balance sheet of that Person.
"Change of Control": Shall be deemed to have occurred at such times
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as: (a) a "person" or "group" (within the meaning of Sections 13(d) and
14(d)(2) of the Securities Act of 1934), becomes the "beneficial owner" (as
defined in Rule 13d-3 under the Securities Exchange Act of 1934), directly or
indirectly, of more than thirty percent (30%) of the total voting power of all
classes of stock then outstanding of Borrower normally entitled to vote in the
election of directors; or (b) the Borrower shall fail to own directly one
hundred percent (100%) of the issued and outstanding common stock of Suburban,
NMUI or ECO or shall lose voting control of Suburban's, NMUI's or ECO's issued
and outstanding common stock. A change of control shall not include a transfer
of NMUI's operating assets through a condemnation or sale in lieu of
condemnation.
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"Commitment": The Bank's obligation to make Loans to the Borrower
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pursuant to Article II in the amount or amounts referred to therein.
"Consolidated EBITDA" means, for any period of Borrower and its
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Subsidiaries on a consolidated basis, Consolidated Net Profit for such period,
plus interest expense (net of capitalized interest expense) and provision for
income taxes for such period, plus depreciation and amortization for such
period.
"Consolidated Liabilities": At any date of determination, the total
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liabilities of the Borrower and its Subsidiaries on a consolidated basis
determined in accordance with GAAP (including, without limitation, (1) any
balance sheet liability with respect to a Pension Plan recognized pursuant to
Financial Accounting Standards Board Statements 87 or 88 and (2) any withdrawal
liability under Section 4201 of ERISA with respect to a withdrawal from a
Multiemployer Plan, as such liability may be set forth in a notice of withdrawal
liability under Section 4219 (and as adjusted from time to time subsequent to
the date of such notice) less (1) deferred taxes, (2) contributions in aid of
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construction ("CIAC"), (3) unamortized investment tax credits, (4) deferred
revenue on CIAC, and (5) deposits for CIAC for capital improvement projects.
"Consolidated Net Profit" means, in respect of any period of the
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Borrower and its Subsidiaries, the consolidated net profit after taxes of the
Borrower and its Subsidiaries as such would appear on the consolidated statement
of earnings of Borrower and its Subsidiaries prepared in accordance with GAAP,
consistently applied, minus nonrecurring or extraordinary income.
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"Consolidated Tangible Net Worth": At any date of determination, the
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sum of the capital stock and additional paid-in capital plus retained earnings
(or minus accumulated deficit) of the Borrower and its consolidated Subsidiaries
minus (i) treasury stock, (ii) intangible assets (including, without limitation,
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franchises, patents, patent applications, trademarks, brand names, goodwill,
purchased contracts, water rights and deferred charges (including unamortized
debt discount and expense and organization costs) and research and development
expenses) and (iii) receivables, advances, loans and all other amounts due from
employees, officers, shareholders and/or affiliates (excluding Borrower's
wholly-owned Subsidiaries), on a consolidated basis determined in conformity
with GAAP.
"Debt": As applied to any Person, (i) all indebtedness for borrowed
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money, (ii) that portion of obligations with respect to Capital Leases which is
properly classified as a liability on a balance sheet in conformity with GAAP,
(iii) notes payable and drafts accepted representing extensions of credit
whether or not representing obligations for borrowed money, (iv) any obligation
owed for all or any part of the deferred purchase price of property or services
which purchase price is (y) due more than six months from the date of incurrence
of the obligation in respect thereof, or (z) evidenced by a note or similar
written instrument; (v) all indebtedness secured by any Lien on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that person; (vi) reimbursement obligations under letters of credit;
and (vii) other contingent liabilities.
"Distribution": With respect to any Person shall mean that such
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Person has paid any dividend or returned any capital to, its stockholders or
equity holders as such or authorized or made any other distribution, payment or
delivery of property or cash to its stockholders or
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equity holders as such, or redeemed, retired, purchased, or otherwise acquired,
directly or indirectly, for consideration, any shares of any class of its
capital stock or equity interests (or any options, warrants or rights issued by
such Person with respect to its capital stock or equity interests), or set aside
any funds for any of the foregoing purposes, or shall have permitted any of its
Subsidiaries to purchase or otherwise acquire for a consideration any shares of
any class of the capital stock or any equity interests of such Person (or any
options, warrants or rights issued by such Person with respect to its capital
stock or equity interests). Without limiting the foregoing, "Distributions" with
respect to any Person shall also include all payments made or required to be
made by such Person with respect to any stock appreciation rights plans, equity
incentive or the setting aside of any funds for the foregoing purposes.
"Dollars and $": Dollars in lawful currency of the United States of
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America.
"EBITDA Coverage Ratio" means, for any period of Borrower and its
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Subsidiaries on a consolidated basis, Consolidated EBITDA divided by the sum of
the total interest expense plus current portion of long-term Debt plus current
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portion of advances for construction plus Distributions.
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"ECO": ECO Resources, Inc., a Texas corporation.
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"Employee Benefit Plan": Any Pension Plan, any employee welfare
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benefit plan, or any other employee benefit plan which is described in Section
3(3) of ERISA and which is maintained for employees of the Borrower or any ERISA
Affiliate of the Borrower.
"ERISA": The Employee Retirement Income Security Act of 1974, as
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amended to the date hereof and from time to time hereafter.
"ERISA Affiliate": As applied to any Person, any trade or business
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(whether or not incorporated) which is a member of a group of which that Person
is a member and which is under common control within the meaning of Section
414(b) and (c) of the Internal Revenue Code.
"GAAP": Generally accepted accounting principles set forth in the
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opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession or any public commission having regulatory responsibility over the
Borrower or any Subsidiary.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
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amended to the date hereof and from time to time hereafter and any successor
statute.
"Lien": Any lien, mortgage, deed of trust, pledge, security interest,
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charge or encumbrance of any kind (including any conditional sale or other title
retention agreement, any lease in the nature thereof, and any agreement to give
any security interest).
"Loans": Loans made to the Borrower pursuant to Section 2.01.
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"Loan Documents": This Agreement, the Revolving Note and each
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agreement, document, instrument and guarantee required by the Bank in connection
with this Agreement and/or the credit extended hereunder.
"Maturity Date": July 31, 2001.
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"Mellon": means Mellon Bank, N.A.
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"Multiemployer Plan": A "multiemployer plan" as defined in Section
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4001(a)(3) of ERISA which is maintained for employees of the Borrower or any
ERISA Affiliate of the Borrower.
"NAIC" means National Association of Insurance Companies.
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"NMUI": New Mexico Utilities, Inc., a New Mexico corporation.
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"Pension Plan": Any employee plan which is subject to Section 412 of
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the Internal Revenue Code and which is maintained for employees of the Borrower
or any ERISA Affiliate of the Borrower, other than a Multiemployer Plan.
"Person": An individual, partnership, corporation, limited liability
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company, business trust, joint stock company, trust, unincorporated association,
joint venture, governmental authority or other entity of whatever nature.
"Potential Event of Default": A condition or event which, after
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notice or lapse of time or both, would constitute an Event of Default if that
condition or event were not cured or removed within any applicable grace or cure
period.
"Regulations G, T, U and X": Regulations G, T, U and X, respectively,
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promulgated by the Board of Governors of the Federal Reserve System, as amended
from time to time, and any successors thereto.
"Revolving Commitment": The amount of $4,000,000 as such amount may
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be reduced pursuant to Section 2.01(c).
"Revolving Loans": As defined in Section 2.01(a).
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"Revolving Note": As defined in Section 2.01(d).
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"S.E.C.": The United States Securities and Exchange Commission and
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any successor institution or body which performs the functions or substantially
all of the functions thereof.
"Solvent": When used with respect to any Person that as of the date
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as to which the Person's solvency is to be measured:
(i) the fair saleable value of its assets is in excess of the total
amount of its liabilities (including contingent liabilities) as
they become absolute and matured;
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(ii) it has sufficient capital to conduct its business; and
(iii) it is able to meet its debts as they mature.
"Subsidiary": A corporation of which shares of stock having ordinary
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voting power (other than stock having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation are at the time owned, directly, or indirectly
through one or more intermediaries, or both, by the Borrower.
"Suburban": Suburban Water Systems, a California corporation.
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"Suburban Loan Documents" means that Credit Agreement dated as of the
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date hereof between the Bank and Suburban, and each agreement, document,
instrument and guarantee required by the Bank in connection with such Credit
Agreement and/or the credit extended thereunder.
"Termination Event": (i) a "Reportable Event" described in Section
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4043 of ERISA and the regulations issued thereunder (other than a "Reportable
Event" not subject to the provision for 30-day notice to the Pension Benefit
Guaranty Corporation under such regulations) with respect to any Pension Plan,
or (ii) the withdrawal of the Borrower or any of its ERISA Affiliates from a
Pension Plan during a plan year in which it was a "substantial employer" as
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defined in Section 4001(a)(2) of ERISA, or (iii) the filing of a notice of
intent to terminate a Pension Plan or the treatment of a Pension Plan amendment
as a termination under Section 4041 of ERISA, or (iv) the institution of
proceedings to terminate a Pension Plan by the Pension Benefit Guaranty
Corporation under Section 4042 of ERISA, or (v) any other event or condition
which might constitute grounds under ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan under Section 4042 of
ERISA, or (vi) the imposition of a lien with respect to any Pension Plan
pursuant to Section 412(n) of the Internal Revenue Code.
SECTION 1.02. Other Definitional Provisions.
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(a) All terms defined in this Agreement shall have the defined
meanings when used in the Revolving Note or any certificate or other document
made or delivered pursuant hereto.
(b) As used herein and in the Revolving Note, and any certificate
or other document made or delivered pursuant hereto, accounting terms not
defined in subsection 1.01, and accounting terms partly defined in subsection
1.01 to the extent not defined, shall have the respective meanings given to them
under GAAP.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
(d) So long as the Borrower does not have any Subsidiaries,
references to a Subsidiary or Subsidiaries in this Agreement shall be deemed to
be deleted.
ARTICLE II
5
THE CREDIT
SECTION 2.01. The Revolving Loans.
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(a) The Revolving Commitment. The Bank agrees, on the terms and
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conditions hereinafter set forth, to make loans ("Revolving Loans") to the
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Borrower from time to time during the period from the date hereof to and
including the Maturity Date in an aggregate amount not to exceed the Revolving
Commitment, as such amount may be reduced pursuant to Section 2.01(c). Within
the limits of the Revolving Commitment and prior to the Maturity Date, the
Borrower may borrow, repay, and reborrow subject to the terms of this Agreement.
(b) Making the Revolving Loans. The Borrower may borrow under the
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Revolving Commitment on any Business Day, provided that the Borrower shall give
the Bank notice pursuant to the terms of the Note specifying (i) the amount of
the proposed Borrowing and (ii) the requested date of the Borrowing. Upon
satisfaction of the applicable conditions set forth in Article IV, the proceeds
of all such Loans will then be made available to the Borrower by the Bank by
crediting the account of the Borrower on the books of the Bank, or as otherwise
directed by the Borrower.
(c) Reduction of the Revolving Commitment. The Borrower shall have
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the right, upon at least two Business Days' notice to the Bank, to terminate in
whole or reduce in part the unused portion of the Revolving Commitment, without
premium or penalty, provided that each partial reduction shall be in the
aggregate amount of $100,000 or an integral multiple thereof and that such
reduction shall not reduce the Revolving Commitment to an amount less than the
amount outstanding hereunder on the effective date of the reduction. Such
notice shall be irrevocable and such reduction shall not be reinstated.
(d) Revolving Note. The Loans made by the Bank pursuant hereto shall
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be evidenced by a promissory note of the Borrower, substantially in the form of
Exhibit A, with any appropriate insertions (the "Revolving Note"), payable to
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the order of the Bank and representing the obligation of the Borrower to pay the
aggregate unpaid principal amount of all Revolving Loans made by the Bank, with
interest thereon as prescribed in Section 2.03. The Bank is hereby authorized to
record in its books and records and on any schedule annexed to the Revolving
Note, the date and amount of each Revolving Loan made by the Bank, the date and
amount of each payment of principal thereof, and the applicable interest rate,
and any such recordation shall constitute prima facie evidence of the accuracy
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of the information so recorded; provided that failure by the Bank to effect such
recordation shall not affect the Borrower's obligations hereunder. Prior to the
transfer of a Revolving Note, the Bank shall record such information on any
schedule annexed to and forming a part of such Revolving Note.
SECTION 2.02. Mandatory Repayment.. The aggregate principal amount
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of the Revolving Loans outstanding on the Maturity Date, together with accrued
interest thereon, shall be due and payable in full on the Maturity Date. If at
any time the aggregate outstanding Borrowings exceed the Revolving Commitment
then in effect, the Borrower shall immediately repay the excess to the Bank
without penalty or premium.
SECTION 2.03. Interest Computation and Payment. The outstanding
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principal balance of the Revolving Loans shall bear interest at the rates of
interest set forth in the Revolving Note. Interest shall be computed on the
basis of a 360-day year, actual days elapsed. Interest shall be payable at the
times and place set forth in the Revolving Note.
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ARTICLE III
GENERAL PROVISIONS CONCERNING THE LOANS
SECTION 3.01. Use of Proceeds. The proceeds of the initial Loan
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hereunder shall be used to pay off obligations owing to Xxxxx Fargo Bank,
National Association under that certain Amended and Restated Credit Agreement
dated December 23, 1997, as amended. The proceeds of subsequent Loans hereunder
shall be used by the Borrower (i) for general corporate purposes, working
capital and acquisitions of the Borrower and its wholly-owned Subsidiaries, and
(ii) to finance capital additions to the water utility and other operations of
the Borrower and its wholly-owned Subsidiaries.
SECTION 3.02. [Intentionally Omitted]
SECTION 3.03. Payments. Borrower authorizes Bank to collect all
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principal, interest and fees due under this Agreement and the Revolving Note by
charging Borrower's demand deposit account number 00000-00000 with Bank, or any
other demand deposit account maintained by Borrower with Bank, for the full
amount thereof. Should there be insufficient funds in any such demand deposit
account to pay all such sums when due, the full amount of such deficiency shall
be immediately due and payable by Borrower.
SECTION 3.04. Payment on Non-Business Days. Whenever any payment to
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be made hereunder or under the Revolving Note shall be stated to be due on a day
which is not a Business Day, such payment may be made on the next succeeding
Business Day, and with respect to payments of principal, interest thereon shall
be payable at the then applicable rate during such extension.
SECTION 3.05. Reduced Return. If the Bank shall have determined that
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any applicable law, regulation, rule or regulatory requirement generally
applicable to banks located in California and (collectively in this Section 3.05
"Requirement") regarding capital adequacy, or any change therein, or any change
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in the interpretation or administration thereof by any United States federal or
state governmental authority, central bank or comparable agency charged with the
interpretation or administration thereof, or compliance by the Bank with any
request or directive regarding capital adequacy (whether or not having the force
of law) of any such authority, central bank or comparable agency, has or would
have the effect of reducing the rate of return on the Bank's capital as a
consequence of its Commitment and obligations hereunder to a level below that
which would have been achieved but for such Requirement, change or compliance
(taking into consideration the Bank's policies with respect to capital adequacy)
by an amount deemed by the Bank to be material (which amount shall be determined
by the Bank's reasonable allocation of the aggregate of such reductions
resulting from such events), then from time to time, within five (5) Business
Days after demand by the Bank, the Borrower shall pay to the Bank such
additional amount or amounts as will compensate the Bank for such reduction.
The Bank does not presently have knowledge of any new Requirement or any pending
change in any existing Requirement which would result in such additional amounts
being owed.
SECTION 3.06. Indemnities. Whether or not the transactions
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contemplated hereby shall be consummated, the Borrower agrees to indemnify, pay
and hold the Bank, and the shareholders, officers, directors, employees and
agents of the Bank ("Indemnified Persons"), harmless from and against any and
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all claims, liabilities, losses, damages, costs and
7
expenses (whether or not any of the foregoing Indemnified Persons is a party to
any litigation), including, without limitation, reasonable attorneys' fees and
costs (including, without limitation, the reasonable estimate of the allocated
cost of in-house legal counsel and staff) and costs of investigation, document
production, attendance at a deposition, or other discovery, prior to the
assumption of defense by the Borrower, with respect to or arising out of any
proposed acquisition by the Borrower or any of its Subsidiaries of any Person or
any securities (including a self-tender), this Agreement or any use of proceeds
hereunder, or any claim, demand, action or cause of action being asserted
against the Borrower or any of its Subsidiaries (collectively, the "Indemnified
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Liabilities"), provided that the Borrower shall have no obligation hereunder
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with respect to Indemnified Liabilities arising from the gross negligence or
willful misconduct of any such Indemnified Persons. If any claim is made, or any
action, suit or proceeding is brought, against any Indemnified Person pursuant
to this Section, the Indemnified Person shall notify the Borrower within thirty
(30) days of the Bank being notified in writing of any such claim or the
commencement of such action, suit or proceeding, and the Borrower will assume
the defense of such action, suit or proceeding, employing counsel selected by
Borrower's insurance carrier, or selected by the Borrower and reasonably
satisfactory to the Indemnified Person, and pay the fees and expenses of such
counsel. This covenant shall survive termination of this Agreement and payment
of the outstanding Revolving Note for a period of six (6) years.
SECTION 3.07. Funding Sources. Nothing in this Agreement shall be
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deemed to obligate the Bank to obtain the funds for any Loan in any particular
place or manner or to constitute a representation by the Bank that it has
obtained or will obtain the funds for any Loan in any particular place or
manner.
ARTICLE IV
CONDITIONS OF LENDING
SECTION 4.01. Conditions Precedent to Initial Loan. The obligation
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of the Bank to make its initial Loan is subject to the conditions precedent
that:
(a) The Bank shall have received on or before the day of the initial
Borrowing the following, each dated prior to or as of such day, in form and
substance satisfactory to the Bank:
(i) The Revolving Note issued by the Borrower to the order of
the Bank;
(ii) Copies of the Articles, Certificate of Incorporation,
partnership agreement or other organizational document of the Borrower,
certified as of a recent date by the Secretary of State of its state of
formation or incorporation;
(iii) Copies of the Bylaws, if any, of the Borrower, certified
by the Secretary or an Assistant Secretary of the Borrower;
(iv) Copies of resolutions of the Board of Directors or other
authorizing documents of the Borrower, in form and substance satisfactory to the
Bank, approving the Loan Documents and the Borrowings hereunder;
(v) An incumbency certificate executed by the Secretary or an
Assistant Secretary of the Borrower or equivalent document, certifying the names
and signatures of the
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officers of the Borrower or other Persons authorized to sign the Loan Documents
and the other documents to be delivered hereunder;
(vi) Executed copies of all Loan Documents;
(vii) Opinion from Borrower's counsel substantially in the
form of Exhibit B hereto;
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(b) The Bank shall have completed its due diligence review of the
Borrower, and the scope and results thereof shall be satisfactory to Bank in its
discretion;
(c) All information previously furnished by Borrower to Bank shall
be true and correct in all material respects;
(d) All fees required to be paid at closing shall have been paid;
(e) All corporate and legal proceedings and all instruments and
documents in connection with the transactions contemplated by this Agreement
shall be reasonably satisfactory in content, form and substance to the Bank and
its counsel, and the Bank and such counsel shall have received any and all
further information and documents which the Bank or such counsel may reasonably
have requested in connection therewith, such documents where appropriate to be
certified by proper corporate or governmental authorities; and
(f) Nothing shall have occurred and the Bank shall not have become
aware of any fact or condition not previously known, which the Bank shall
determine has, or could reasonably be expected to have, a material adverse
effect on the rights or remedies of the Bank, or on the ability of the Borrower
to perform its obligations to the Bank or which has, or could reasonably be
expected to have, a materially adverse effect on the performance, business,
property, assets, condition (financial or otherwise) or prospects of Borrower
and its Subsidiaries taken as a whole.
SECTION 4.02. Conditions Precedent to Each Borrowing. The obligation
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of the Bank to make a Loan on the occasion of each Borrowing (including the
initial Borrowing) shall be subject to the further conditions precedent that on
the date of such Borrowing (a) the following statements shall be true and the
Bank shall have received the notice required by Section 2.01(b), which notice
shall be deemed to be a certification by the Borrower that:
(i) The representations and warranties
contained in Section 5.01 are correct on and as of
the date of such Borrowing as though made on and
as of such date,
(ii) No event has occurred and is continuing, or
would result from such Borrowing, which
constitutes an Event of Default or Potential Event
of Default; and
(iii) Nothing shall have occurred and the Bank
shall not have become aware of any fact or
condition not previously known, which the Bank
shall determine has, or could reasonably be
expected to have, a material adverse effect on the
rights or remedies of the Bank, or on the ability
of the Borrower to perform
9
its obligations to the Bank or which has, or could
reasonably be expected to have, a material adverse
effect on the performance, business, property,
assets, condition (financial or otherwise) or
prospects of Borrower and its Subsidiaries taken
as a whole; and
(iv) All Loan Documents are in full force and effect,
and (b) the Bank shall have received such other approvals, opinions or documents
as the Bank may reasonably request.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
SECTION 5.01. Representations and Warranties. The Borrower
------------------------------
represents and warrants as follows:
(a) Organization. The Borrower and each of its Subsidiaries is
------------
duly organized, validly existing and in good standing under the laws of the
state of its incorporation. The Borrower and each of its Subsidiaries is also
duly authorized, qualified and licensed in all applicable jurisdictions, and
under all applicable laws, regulations, ordinances or orders of public
authorities, to carry on its business in the locations and in the manner
presently conducted.
(b) Authorization; No Conflict. The execution, delivery and
--------------------------
performance by the Borrower of the Loan Documents, and the making of Borrowings
hereunder, are within the Borrower's corporate powers, have been duly authorized
by all necessary corporate action, do not contravene (i) the Borrower's charter,
by-laws or other organizational document or (ii) any law or regulation
(including, without limitation, Regulations G, T, U and X and regulations of
public utility commissions or similar regulatory authorities) binding on or
affecting the Borrower or its properties, and will not constitute an event of
default under any material agreement to which Borrower is a party or by which
its assets or properties may be bound.
(c) Governmental Consents. No authorization or approval or other
---------------------
action by, and no notice to or filing with, any governmental authority or
regulatory body (except routine reports required pursuant to the Securities
Exchange Act of 1934, as amended (if such act is applicable to the Borrower),
which reports will be made in the ordinary course of business) is required for
the due execution, delivery and performance by the Borrower of the Loan
Documents.
(d) Validity. The Loan Documents are the binding obligations of
--------
the Borrower or other executing Person, if any, enforceable in accordance with
their respective terms; except in each case as such enforceability may be
limited by bankruptcy, insolvency, reorganization, liquidation, moratorium or
other similar laws of general application and equitable principles relating to
or affecting creditors' rights.
(e) Financial Condition. The balance sheets of the Borrower and
-------------------
its consolidated Subsidiaries as at March 31, 1999,and the related consolidated
statements of income and changes in common stockholders' equity of the Borrower
and its consolidated Subsidiaries for the fiscal three months then ended, copies
of which have been furnished to the
10
Bank, fairly present the financial condition of the Borrower and its
consolidated Subsidiaries as at such dates and the results of the operations of
the Borrower and its consolidated Subsidiaries for the period ended on such
date, all in accordance with GAAP, consistently applied, and since March 31,
1999 there has been no material adverse change in the business, operations,
properties, assets or condition (financial or otherwise) of the Borrower and its
Subsidiaries, taken as a whole.
(f) Litigation. Except as set forth in the Form 10-Q dated March 31,
----------
1999, and on Schedule 5.01(f) hereto, there is no known pending or threatened
----------------
action or proceeding affecting the Borrower or any of its Subsidiaries before
any court, governmental agency or arbitrator, which may materially adversely
affect the consolidated financial condition or operations of the Borrower or
which may have a material adverse effect on the Borrower's ability to perform
its obligations under the Loan Documents, having regard for its other financial
obligations.
(g) Employee Benefit Plans. The Borrower and each of its ERISA
----------------------
Affiliates is in compliance in all material respects with any applicable
provisions of ERISA and the regulations and published interpretations thereunder
with respect to all Employee Benefit Plans. No Termination Event has occurred
with respect to any Pension Plan. The excess of the actuarial present value of
all benefit liabilities under all Pension Plans (excluding in such computation
Pension Plans with assets greater than benefit liabilities) over the fair market
value of the assets allocable to such benefit liabilities are not greater than
five percent (5%) of Consolidated Tangible Net Worth. For purposes of the
preceding sentence, the term "benefit liabilities" shall have the meaning
specified in Section 4001 of ERISA.
(h) Disclosure. No representation or warranty of the Borrower
----------
contained in this Agreement or any other document, certificate or written
statement furnished to the Bank by or on behalf of the Borrower for use in
connection with the transactions contemplated by this Agreement contains any
known untrue statement of a material fact or omits to state a known material
fact (known to the Borrower in the case of any document not furnished by it)
necessary in order to make the statements contained herein or therein not
misleading. There is no fact known to the Borrower (other than matters of a
general economic nature) which materially adversely affects the business,
operations, property, assets or condition (financial or otherwise) of the
Borrower and its Subsidiaries, taken as a whole, which has not been disclosed
herein or in such other documents, certificates and statements furnished to the
Bank for use in connection with the transactions contemplated hereby.
(i) Environmental Matters. Except as set forth in Schedule 5.01(i)
--------------------- ----------------
hereto, neither the Borrower nor any Subsidiary, nor any of their respective
officers, employees, representatives or agents, nor, to the best of their
knowledge, any other person, has treated, stored, processed, discharged,
spilled, or otherwise disposed of any substance defined as hazardous or toxic by
any applicable federal, state or local law, rule, regulation, order or
directive, or any waste or by-product thereof, at any real property or any other
facility owned, leased or used by the Borrower or any Subsidiary, in violation
of any applicable statutes, regulations, ordinances or directives of any
governmental authority or court, which violations may result in liability to the
Borrower or any Subsidiary or any of their respective officers, employees,
representatives, agents or shareholders in an amount exceeding $500,000 for all
such violations; and the unresolved violations set forth in said Schedule
5.01(i) will not result in liability to the Borrower or any Subsidiary or any of
their respective officers, employees, representatives, agents or shareholders in
an amount exceeding $500,000 for all such
11
unresolved violations. Except as set forth in said Schedule, no employee or
other person has made a claim or demand against the Borrower or any Subsidiary
based on alleged damage to health caused by any such hazardous or toxic
substance or by any waste or by-product thereof; and the unsatisfied claims or
demands against the Borrower or any Subsidiary set forth in said Schedule
5.01(i) will not result in uninsured liability to the Borrower or any Subsidiary
or any of their respective officers, employees, representatives, agents or
shareholders in an amount exceeding $250,000 in excess of reserves on the books
of the Borrower for all such unsatisfied claims or demands. Except as set forth
in said Schedule 5.01(i), neither the Borrower nor any Subsidiary has been
charged by any governmental authority with improperly using, handling, storing,
discharging or disposing of any such hazardous or toxic substance or waste or
by-product thereof or with causing or permitting any pollution of any body of
water; and the outstanding related charges set forth in said Schedule 5.01(i)
will not result in liability to the Borrower or any Subsidiary or any of their
respective officers, employees, representatives, agents or shareholders in an
amount exceeding $500,000 for all such outstanding charges.
(j) Employee Matters. There is no known strike or work stoppage in
----------------
existence or threatened involving the Borrower or its Subsidiaries that may
materially adversely affect the consolidated financial condition or operations
of the Borrower or that may have a material adverse effect on the Borrower's
ability to perform its obligations under the Loan Documents, having regard for
its other financial obligations.
(k) Solvency. Borrower and each of its Subsidiaries is Solvent.
--------
(l) Title to Properties. Borrower and each of its Subsidiaries has
-------------------
good and marketable title to or interests in all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Bank and such others as are
permitted under Section 6.02(e) hereof.
(m) Tax Returns. Borrower and each of its Subsidiaries has filed, or
-----------
caused to be filed, in a timely manner all tax returns, reports and declarations
which are required to be filed by it (without requests for extension except as
previously disclosed in writing to Bank). All information in such tax returns,
reports and declarations is complete and accurate in all material respects.
Borrower and each of its Subsidiaries has paid or caused to be paid all taxes
due and payable or claimed due and payable in any assessment received by it,
except taxes the validity of which are being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower or its
Subsidiaries and with respect to which adequate reserves have been set aside on
its books. Adequate provision has been made for the payment of all accrued and
unpaid Federal, State, county, local, foreign and other taxes whether or not yet
due and payable and whether or not disputed.
(n) Compliance with Other Agreements and Applicable Laws. Neither
----------------------------------------------------
Borrower nor any of its Subsidiaries is in default in any material respect
under, or in violation in any material respect of any of the terms of, any
agreement, contract, instrument, lease or other commitment (including, but not
limited to any such agreement involving the debts or investments of Borrower or
liens upon its assets) to which it is a party or by which it or any of its
assets are bound and Borrower and each of its Subsidiaries is in compliance in
all material respects with all applicable provisions of laws, rules,
regulations, licenses, permits, approvals and orders of any foreign, Federal,
State or local governmental authority.
12
ARTICLE VI
COVENANTS
SECTION 6.01. Affirmative Covenants. So long as any Revolving Note
---------------------
shall remain unpaid or the Bank shall have any Commitment hereunder, the
Borrower will, unless the Bank shall otherwise consent in writing:
(a) Financial Information. Furnish to the Bank:
---------------------
(i) as soon as available, but in any event within 120 days
after the end of each fiscal year of the Borrower, (1) a copy of the
Borrower's annual report to shareholders containing the audited
consolidated balance sheets of itself and its consolidated
Subsidiaries as at the end of each fiscal year and the related
consolidated statements of income and changes in common stockholders'
equity (or comparable statement) employed in the business and changes
in financial position and cash flow for such year, in each case
prepared in accordance with GAAP, setting forth in each case in
comparative form the figures for the previous year, accompanied by an
unqualified report and opinion thereon of independent certified public
accountants acceptable to the Bank and, if prepared, such accountants'
letter to management, and (2) a copy of the Borrower prepared
consolidating financial statements prepared in connection with each of
the statements provided in subpart (1) above; and
(ii) as soon as available, but in any event within forty-five
(45) days after the end of each fiscal quarter, the Borrower's
unaudited consolidated and consolidating balance sheets of itself and
its consolidated Subsidiaries as at the end of such period and the
related unaudited consolidated and consolidating statements of income
and changes in common stockholders' equity (or comparable statement)
and changes in financial position and cash flow for such period and
year to date, setting forth in each case in comparative form the
figures as at the end of the previous fiscal year as to the balance
sheet and the figures for the previous corresponding period as to the
other statements, certified by a duly authorized officer of the
Borrower as being fairly stated in all material respects subject to
year end adjustments; all such financial statements to be complete and
correct in all material respects and to be prepared in reasonable
detail acceptable to the Bank and in accordance with GAAP applied
consistently throughout the periods reflected therein (except as
approved by such accountants and disclosed therein and except for the
exclusion of certain information and footnote disclosures omitted
pursuant to the rules and regulations of the S.E.C.); and
(iii) as soon as available, copies of all reports which the
Borrower sends to any of its security holders, and copies of all
reports and registration statements which the Borrower or any
Subsidiary files with the S.E.C. or any national securities exchange;
and
(iv) (a) together with each delivery of financial statements of
Borrower and its Subsidiaries pursuant to subdivision (i) above, a
certificate, executed by the Borrower's chairman of the board (if an
officer) or its president or one of its
13
vice presidents or by its chief financial officer stating that the
signers have reviewed the terms of this Agreement and have made, or
caused to be made under their supervision, a review in reasonable
detail of the transactions and condition of Borrower and its
Subsidiaries during the accounting period covered by such financial
statements and that such review has not disclosed the existence during
or at the end of such accounting period, and that the signers do not
have knowledge of the existence as at the date of such certificate, of
any condition or event that constitutes an Event of Default or
Potential Event of Default, or, if any such condition or event existed
or exists, specifying the nature and period of existence thereof and
what action Borrower has taken, is taking and proposes to take with
respect thereto; and (b) together with each delivery of financial
statements of Borrower and its Subsidiaries pursuant to subdivision
(i) and (ii) above, a certificate demonstrating in reasonable detail
compliance during and at the end of the applicable accounting periods
with the restrictions contained in Section 6.02 hereof.
(b) Notices and Information. Deliver to the Bank:
-----------------------
(i) promptly upon any officer of the Borrower obtaining
knowledge (a) of any condition or event which constitutes an Event of
Default or Potential Event of Default, (b) that any Person has given
any notice to the Borrower or any Subsidiary of the Borrower or taken
any other action with respect to a claimed default or event or
condition of the type referred to in Section 7.01(e), (c) of the
institution of any litigation involving an alleged liability
(including possible forfeiture of property) of the Borrower or any of
its Subsidiaries equal to or greater than $500,000 which is not,
except for deductibles and self insurance reserves, fully covered by
insurance maintained by Borrower or any adverse determination in any
litigation involving a potential liability of the Borrower or any of
its Subsidiaries equal to or greater than $500,000 which is not,
except for deductibles and self insurance reserves, fully covered by
insurance maintained by Borrower or (d) of a material adverse change
in the business, operations, properties, assets or condition
(financial or otherwise) of the Borrower and its Subsidiaries, taken
as a whole, an officers' certificate specifying the nature and period
of existence of any such condition or event, or specifying the notice
given or action taken by such holder or Person and the nature of such
claimed default, Event of Default, Potential Event of Default, event
or condition, and what action the Borrower has taken, is taking and
proposes to take with respect thereto;
(ii) promptly upon becoming aware of the occurrence of any (a)
Termination Event, or (b) non-exempt "prohibited transaction", as such
term is defined in Section 4975 of the Internal Revenue Code or a
transaction prohibited by Section 406 of ERISA, in connection with any
Employee Benefit Plan or any trust created thereunder, a written
notice specifying the nature thereof, what action the Borrower has
taken, is taking or proposes to take with respect thereto, and, when
known, any action taken or threatened by the Internal Revenue Service,
the Department of Labor, or the Pension Benefit Guaranty Corporation
with respect thereto;
(iii) with reasonable promptness copies of (a) all notices
received by the Borrower or any of its ERISA Affiliates of the Pension
Benefit Guaranty
14
Corporation's intent to terminate any Pension Plan or to have a
trustee appointed to administer any Pension Plan and (b) all notices
received by the Borrower or any of its ERISA Affiliates from a
Multiemployer Plan sponsor concerning the imposition or amount of
withdrawal liability pursuant to Section 4202 of ERISA;
(iv) promptly, and in any event within 30 days after receipt
thereof, a copy of any notice, summons, citation, directive, letter or
other form of communication from any governmental authority or court
in any way concerning any action or omission on the part of the
Borrower or any of its Subsidiaries in connection with any substance
defined as toxic or hazardous by any applicable federal, state or
local law, rule, regulation, order or directive or any waste or
byproduct thereof, or concerning the filing of a lien upon, against or
in connection with the Borrower, its Subsidiaries, or any of their
leased or owned real or personal property, in connection with a
Hazardous Substance Superfund or a Post-Closure Liability Fund as
maintained pursuant to (S) 9507 of the Internal Revenue Code; and
(v) promptly, and in any event within 30 days after request,
such other information and data with respect to the Borrower or any of
its Subsidiaries as from time to time may be reasonably requested by
the Bank and is reasonably available to Borrower.
(c) Corporate Existence, Etc. At all times preserve and keep in full
-------------------------
force and effect its and its Subsidiaries' corporate existence and rights,
licenses and franchises material to its business and those of each of its
Subsidiaries; provided, however, that the corporate existence of any such
-------- -------
Subsidiary (except Suburban) may be terminated if such termination is in the
best interest of the Borrower and is not materially disadvantageous to the
holder of any Revolving Note.
(d) Payment of Taxes and Claims. Pay, and cause each of its
---------------------------
Subsidiaries to pay, all taxes, assessments and other governmental charges
imposed upon it or any of its properties or assets or in respect of any of its
franchises, business, income or property before any penalty or interest accrues
thereon, and all claims (including, without limitation, claims for labor,
services, materials and supplies) for sums which have become due and payable and
which by law have or may become a lien upon any of its properties or assets,
prior to the time when any penalty or fine shall be incurred with respect
thereto; provided that no such charge or claim need be paid if being contested
in good faith by appropriate proceedings promptly instituted and diligently
conducted and if such reserve or other appropriate provision, if any, as shall
be required in conformity with GAAP shall have been made therefor.
(e) Maintenance of Properties; Insurance. Maintain or cause to be
------------------------------------
maintained in good repair, working order and condition all material properties
used or useful in the business of the Borrower and its Subsidiaries and from
time to time will make or cause to be made all appropriate repairs, renewals and
replacements thereof. The Borrower will maintain or cause to be maintained, with
financially sound and reputable insurers, insurance with respect to its
properties and business and the properties and business of its Subsidiaries
against loss or damage of the kinds customarily insured against by corporations
of established reputation engaged in the same or similar businesses and
similarly situated, of such types and in such amounts as are customarily carried
under similar circumstances by such other corporations.
15
The Borrower will comply with any other insurance requirement set forth in any
other Loan Document.
(f) Inspection. Permit any authorized representatives designated by
----------
the Bank to visit and inspect any of the properties of the Borrower or any of
its Subsidiaries, including its and their financial and accounting records, and
to make copies and take extracts therefrom, and to discuss its and their
affairs, finances and accounts with its and their officers and independent
public accountants, all at such reasonable times during normal business hours
and as often as may be reasonably requested.
(g) Compliance with Laws Etc. Exercise, and cause each of its
-------------------------
Subsidiaries to exercise, all due diligence in order to comply with the
requirements of all applicable laws, rules, regulations and orders of any
governmental authority, including, without limitation, all rules and regulations
of public utility commissions or similar regulatory authorities, and all
environmental laws, rules, regulations and orders, noncompliance with which
would materially adversely affect the business, properties, assets, operations
or condition (financial or otherwise) of the Borrower and its Subsidiaries,
taken as a whole.
(h) Hazardous Waste Studies. Promptly, and in any event within thirty
-----------------------
(30) days after submission, provide the Bank with copies of all such
investigations, studies, samplings and testings as may be requested by any
governmental or regulatory authority relative to any substance defined as
hazardous or toxic by any applicable federal, state or local law, rule,
regulation, order or directive, or any waste or by-product thereof, at or
affecting any real property or any facility owned, leased or used by the
Borrower or any Subsidiary. The foregoing shall not include sampling and
testing of water, waste water and effluent conducted by the Subsidiaries of
Borrower on periodic bases as a normal part of their water delivery and
wastewater treatment businesses.
(i) Year 2000 Compliance. Perform all acts reasonably necessary to
---------------------
ensure that Borrower and any business in which Borrower holds a substantial
interest, become Year 2000 Compliant in a timely manner. Such acts shall
include, without limitation, performing a comprehensive review and assessment of
all of Borrower's systems and adopting a detailed plan, with itemized budget,
for the remediation, monitoring and testing of such systems. As used herein,
"Year 2000 Compliant" shall mean, in regard to any entity, that all software,
-------------------
hardware, firmware, equipment, goods or systems utilized by or material to the
business operations or financial condition of such entity, will properly perform
date sensitive functions before, during and after the year 2000. Borrower
shall, immediately upon request, provide to Bank such certifications or other
evidence of Borrower's compliance with the terms hereof as Bank may from time to
time require.
SECTION 6.02. Negative Covenants. So long as any Revolving Note
------------------
shall remain unpaid or the Bank shall have any Commitment hereunder, the
Borrower will not, without the written consent of the Bank:
(a) Leverage Ratio. At any time, permit the ratio of Consolidated
--------------
Liabilities to Consolidated Tangible Net Worth to be more than 2.30:1.00.
(b) Consolidated Tangible Net Worth. At any time, permit Consolidated
-------------------------------
Tangible Net Worth to be less than $28,500,000.
16
(c) Consolidated Net Profit. At the end of any fiscal quarter of the
-----------------------
Borrower, permit Consolidated Net Profit, determined on a four quarter rolling
basis, to be less than $1.00.
(d) EBITDA Coverage Ratio. At the end of any fiscal quarter of
---------------------
Borrower, permit the EBITDA Coverage Ratio, determined on a four quarter rolling
basis, to be less than 1.25:1.0.
(e) Liens Etc. Create or suffer to exist, or permit any of its
---------
Subsidiaries to create or suffer to exist, any Lien upon or with respect to any
of its properties, whether now owned or hereafter acquired, or assign, or permit
any of its Subsidiaries to assign, any right to receive income, in each case to
secure any Debt of any Person other than (i) Liens in favor of the Bank; (ii)
Liens reflected on the financial statements referred to in Section 5.01(e)
hereof and other Liens existing on the date hereof and set forth in Schedule
--------
6.02(e) hereto; (iii) purchase money Liens upon or in any equipment acquired or
-------
held by the Borrower or any Subsidiary in the ordinary course of business up to
a maximum of $500,000 to secure the purchase price of such equipment or to
secure indebtedness incurred solely for the purpose of financing the acquisition
of such equipment: (iv) Liens existing on property acquired by the Borrower or
any Subsidiary, and all refundings and extensions of any such Liens, and (v)
Liens, deposits and/or pledges made to secure the performance of operating
leases; provided that the principal amount of Debt secured by any such Lien
permitted hereunder shall not exceed an amount equal to (x) one hundred percent
(100%) of the cost of the real property subject to such lien or security
interest or (y) one hundred percent (100%) of the cost of the personal property
subject to such lien or security interest, and further provided that none of
such liens or security interests shall extend to other assets of the Borrower or
its Subsidiaries. The Bank acknowledges that (A) Suburban has an existing first
mortgage indenture encumbering substantially all of its assets to secure three
series (A, B and C) of first mortgage bonds and (B) NMUI has an existing first
mortgage indenture encumbering substantially all of its assets to secure its
Series A and Series B first mortgage bonds.
(f) Debt. Create, incur, assume or permit to exist, or permit any
----
Subsidiary to create, incur, assume or permit to exist, any indebtedness or
liabilities resulting from borrowings, loans or advances, whether matured or
unmatured, liquidated or unliquidated, joint or several, secured or unsecured,
except for (i) Debt incurred pursuant to this Agreement and the other Loan
Documents, (ii) Debt incurred pursuant to the Suburban Loan Documents; (iii)
Debts, revolving lines of credit and lease obligations of Borrower existing as
of, and disclosed to Bank prior to, the date of this Agreement (including
$4,000,000 of unsecured debt of the Borrower to Mellon, $4,000,000 of unsecured
debt of Suburban to Mellon, and $4,000,000 of unsecured debt of NMUI to First
Security Bank), (iv) secured indebtedness for purchase money financing of
equipment which is permitted under Section 6.02(e)(iii) not to exceed an
aggregate of $500,000, (v) unsecured funded bank debt not to exceed an aggregate
of $20,000,000 at any time (including, without limitation, unsecured funded bank
debt incurred pursuant to the Loan Documents and the Suburban Loan Documents and
unsecured funded bank debt to Mellon as described in clause (iii) above) and
(vi) intercompany Debt between Borrower and its wholly-owned Subsidiaries or
between such wholly-owned Subsidiaries.
(g) Consolidation, Merger or Dissolution. (i) Consolidate with or
------------------------------------
merge into any other Person, unless Borrower is the surviving entity and no
event has occurred and is continuing, or would result from such consolidation or
merger, which constitutes an Event of Default or Potential Event of Default,
(ii) wind up, liquidate or dissolve or (iii) agree to do any of the foregoing.
17
(h) Loans, Investments, Secondary Liabilities. Make or permit to
-----------------------------------------
remain outstanding, or permit any Subsidiary to make or permit to remain
outstanding, any loan or advance to, or guarantee, induce or otherwise become
contingently liable, directly or indirectly, in connection with the obligations,
stock or dividends of, or own, purchase or acquire any stock, obligations or
securities of or any other interest in, or make any capital contribution to, any
other Person, except that the Borrower and its Subsidiaries may:
(i) own, purchase or acquire certificates of deposit issued by
a bank, commercial paper rated Moody's P-1, municipal bonds rated
Xxxxx'x XX or better, direct obligations of the United States of
America or its agencies, and obligations guaranteed by the United
States of America;
(ii) continue to own the existing capital stock of the
Borrower's Subsidiaries and make new purchases of the capital stock of
other entities as long as such new investments do not exceed in the
aggregate Five Million Dollars ($5,000,000) outstanding at any one
time, without the Bank's prior written approval;
(iii) endorse negotiable instruments for deposit or collection
or similar transactions in the ordinary course of business;
(iv) allow the Borrower's wholly-owned Subsidiaries to make or
permit to remain outstanding advances from the Borrower's wholly-owned
Subsidiaries to the Borrower;
(v) make or permit to remain outstanding loans or advances to
the Borrower's wholly-owned Subsidiaries or enter into or permit to
remain outstanding guarantees in connection with the obligations of
the Borrower's wholly-owned Subsidiaries; provided, however, that any
-------- -------
outstanding loans or advances by Borrower to its wholly-owned
Subsidiaries shall be evidenced by negotiable promissory notes, in
form and substance satisfactory to Bank, and which notes shall provide
for the assignment thereof to the Bank as collateral security for the
repayment of the Loans and any other obligations of the Borrower
hereunder upon the demand of the Bank;
(vi) make or permit to remain outstanding loans and advances to
any of its officers, shareholders or affiliates or enter into or
permit to remain outstanding guarantees in connection with the
obligations of its officers, shareholders or affiliates, in an
aggregate amount for all such loans, advances and guarantees not
exceeding $100,000 in addition to the loans outstanding and reflected
on the Borrower's financial statements dated March 31, 1999;
(vii) guaranty the indebtedness of Suburban under the Suburban
Loan Documents;
(viii) guaranty the indebtedness of Suburban under that certain
Credit Agreement between Suburban and Mellon dated as of the date
hereof in a maximum amount at any one time not to exceed $4,000,000
for principal, plus all interest thereon and costs and expenses
pertaining to the enforcement of the guaranty and/or the collection of
such indebtedness; and
18
(ix) guaranty the unsecured bank indebtedness of NMUI in a
maximum amount at any one time not to exceed $4,000,000 for principal,
plus all interest thereon and all costs and expenses pertaining to the
enforcement of the guaranty and/or the collection of such
indebtedness.
(i) Asset Sales. Convey, sell, lease, transfer or otherwise dispose
-----------
of, or permit any Subsidiary to convey, sell, lease, transfer or otherwise
dispose of, in one transaction or a series of transactions, all or any part of
its or its Subsidiary's business, property or fixed assets outside the ordinary
course of business, whether now owned or hereafter acquired, except that the
Borrower and its Subsidiaries may convey, sell, lease, transfer or otherwise
dispose of business, property or fixed assets for consideration which in the
aggregate does not exceed $500,000 per year. The foregoing covenant shall not
extend to any property taken by eminent domain by any governmental authority or
other person or entity having the power of eminent domain or to any sale in lieu
of condemnation to a governmental authority or other person or entity having the
power of eminent domain made after threat of condemnation by such governmental
authority or other person or entity, or to the pending sale by Suburban of that
certain parcel of real estate commonly known as 00000 Xxxx Xxxxxxxxxx Xxxxxx, Xx
Xxxxxx, Xxxxxxxxxx, which property was the site of the former headquarters
facility of Borrower and Suburban.
(j) Hostile Tender Offers. Make any offer to purchase or acquire, or
---------------------
consummate a purchase or acquisition of, five percent (5%) or more of the
capital stock of any publicly held corporation or other publicly held business
entity, unless the board of directors of such corporation or business entity has
notified the Borrower that it invites or does not oppose such offer or purchase.
(k) Distributions. Upon the occurrence and during the continuance of
-------------
an Event of Default or Potential Event of Default, authorize, declare or pay, or
permit any of its Subsidiaries to authorize, declare or pay, any Distributions.
(l) Transactions with Affiliates. Neither Borrower nor any of its
----------------------------
Subsidiaries shall enter into any transaction for the purchase, sale or exchange
of property or the rendering of any service to or by any affiliate, except in
the ordinary course of and pursuant to the reasonable requirements of Borrower's
or its Subsidiary's business and upon fair and reasonable terms no less
favorable to the Borrower or its Subsidiary than Borrower or its Subsidiary
would obtain in a comparable arm's length transaction with an unaffiliated
person.
(m) Books and Records. Borrower will, and will cause each of its
-----------------
Subsidiaries to, keep proper books of record and account in which full, true and
correct entries in conformity with GAAP and all requirements of applicable law
shall be made of all dealings and transactions in relation to its business and
activities.
(n) Restructure. Make any change in Borrower's financial restructure,
-----------
the principal nature of Borrower's business operations (taken as a whole), or
the date of its fiscal year.
ARTICLE VII
EVENTS OF DEFAULT
19
SECTION 7.01. Events of Default. If any of the following events
-----------------
("Events of Default") shall occur and be continuing:
--------------------
(a) Borrower shall fail to pay within three (3) days of the date when
due, any principal, interest, fees or other amounts payable under any of the
Loan Documents; or
(b) Any representation or warranty made by the Borrower herein or by
the Borrower (or any of its officers) in connection with the Loan Documents
shall prove to have been incorrect in any material respect when made; or
(c) Borrower shall fail to perform or observe any term, any
affirmative or negative covenant, including, but not limited to, those covenants
set forth in Sections 6.01 and 6.02 hereof, or any other agreement contained in
this Agreement on its part to be performed or observed (other than those
referred to in subsections (a) and (b) above); and with respect to any such
default which by its nature can be cured, such default shall continue for a
period of twenty (20) days from its occurrence; or
(d) The Borrower or any of its Subsidiaries shall default in the
performance of or compliance with any term contained in any Loan Document other
than this Agreement and such default shall not have been remedied or waived
within any applicable grace period in such Loan Document or in (c) above; or
(e) an Event of Default shall occur under the Suburban Loan Documents;
or
(f) (i) The Borrower or any of its Subsidiaries shall (A) fail to pay
any principal of, or premium or interest on, any Debt (including, without
limitation, Debt owing to Mellon), the aggregate outstanding principal amount of
which is at least $100,000 (excluding Debt evidenced by the Revolving Note),
when due (whether by scheduled maturity, required prepayment, acceleration,
demand or otherwise) and such failure shall continue after the applicable grace
period, if any, specified in the agreement or instrument relating to such Debt,
or (B) fail to perform or observe any term, covenant or condition on its part to
be performed or observed under any agreement or instrument relating to any such
Debt or material to the performance, business, property, assets, condition
(financial or otherwise) or prospects of the Borrower and its Subsidiaries taken
as a whole, when required to be performed or observed, and such failure shall
continue after the applicable grace period, if any, specified in such agreement
or instrument; or
(g) (i) The Borrower or any of its Subsidiaries shall commence any
case, proceeding or other action (A) under any existing or future law of any
jurisdiction, domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for relief entered
with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or
seeking reorganization, arrangement, adjustment, winding-up, liquidation,
dissolution, composition or other relief with respect to it or its debts, or (B)
seeking appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Borrower or any
of its Subsidiaries shall make a general assignment for the benefit of its
creditors; or (ii) there shall be commenced against the Borrower or any of its
Subsidiaries any case, proceeding or other action of a nature referred to in
clause (i) above which (A) results in the entry of an order for relief or any
such adjudication or appointment or (B) remains undismissed, undischarged or
unbonded for a period of sixty (60) days (Bank may, in its discretion, cease
making Revolving Loans during the pendency of such action or
20
proceeding); or (iii) there shall be commenced against the Borrower or any of
its Subsidiaries any case, proceeding or other action seeking issuance of a
warrant of attachment, execution, distraint or similar process against all or
any substantial part of its assets which results in the entry of an order for
any such relief which shall not have been vacated, discharged, or stayed or
bonded pending appeal within sixty (60) days from the entry thereof (Bank may,
in its discretion, cease making Revolving Loans during the pendency of such
action or proceeding); or (iv) the Borrower or any of its Subsidiaries shall
take any action in furtherance of, or indicating its consent to, approval of, or
acquiescence in, any of the acts set forth in clauses (i), (ii) and (iii) above;
or (v) the Borrower or any of its Subsidiaries shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as they
become due;
(h) One or more judgments or decrees shall be entered against the
Borrower or any of its Subsidiaries involving in the aggregate a liability (not
paid or fully covered by insurance or reserves) equal to or greater than
$250,000 and all such judgments or decrees shall not have been vacated,
discharged, or stayed or bonded pending appeal within thirty (30) days from the
entry thereof; or
(i) (i) The Borrower or any of its ERISA Affiliates fails to make
full payment when due of all material amounts which, under the provisions of any
Pension Plan or Section 412 of the Internal Revenue Code, the Borrower or any of
its ERISA Affiliates is required to pay as contributions thereto and such
development is not remedied or reversed within fifteen (15) days after the
Borrower knows of such development;
(ii) any material accumulated funding deficiency occurs or
exists, whether or not waived, with respect-to any Pension Plan and such
development is not remedied or reversed within fifteen (15) days after the
Borrower knows of such development;
(iii) the excess of the actuarial present value of all benefit
liabilities under all Pension Plans over the fair market value of the assets of
such Pension Plans (excluding in such computation Pension Plans with assets
greater than benefit liabilities) allocable to such benefit liabilities are
greater than five percent (5%) of Consolidated Tangible Net Worth and such
development is not remedied or reversed within fifteen (15) days after the
Borrower knows of such development;
(iv) the Borrower or any of its ERISA Affiliates enters into any
transaction which has as its principal purpose the evasion of liability under
Subtitle D of Title IV of ERISA:
(v) (A) Any Pension Plan maintained by the Borrower or any of
its ERISA Affiliates shall be terminated within the meaning of Title IV of ERISA
in a distress termination, or (B) a trustee shall be appointed by an appropriate
United States district court in accordance with Section 4042 of ERISA to
administer any Pension Plan, or (C) the Pension Benefit Guaranty Corporation (or
any successor thereto) shall institute proceedings to terminate any Pension Plan
or to appoint a trustee to administer any Pension Plan in accordance with
Section 4042 of ERISA, or (D) the Borrower or any of its ERISA Affiliates shall
withdraw (under Section 4063 of ERISA) from a Pension Plan, if as of the date of
the event listed in subclauses (A)-(D) above or any subsequent date, either the
Borrower or its ERISA Affiliates has any material liability (such liability to
include, without limitation, any liability to the Pension Benefit Guaranty
Corporation, or any successor thereto, or to any other party under Sections
4062, 4063 or 4064 of ERISA or any other provision of law) resulting from or
otherwise associated with the events listed in subclauses (A)-(D) above;
21
(vi) As used in this subsection 7.01(h) the term "accumulated
funding deficiency" has the meaning specified in Section 412 of the Internal
Revenue Code, and the term "benefit liabilities" has the meaning specified in
Section 4001 of ERISA;
(j) There shall be instituted against the Borrower or any Subsidiary,
or against any guarantor, any proceeding for which forfeiture of any property
with a value of $250,000 or more is a potential penalty and such proceeding
remains undismissed, undischarged or unbonded for a period of thirty (30) days
from the date the Borrower knows of such proceeding;
(k) A Change of Control shall have occurred; or
(l) The mortgage bonds of Suburban or NMUI shall fail to maintain a
NAIC rating of 1 or 2.
Then, (i) upon the occurrence of any Event of Default described in
clause 7.01(g) above, the Commitment shall immediately terminate and all Loans
hereunder with accrued interest thereon, and all other amounts owing under the
Loan Documents shall automatically become due and payable, and (ii) upon the
occurrence of any other Event of Default, the Bank may, by notice to the
Borrower, declare the Commitment to be terminated forthwith, whereupon the
Commitment shall immediately terminate; and, by notice to the Borrower, declare
the Loans hereunder, with accrued interest thereon, and all other amounts owing
under the Loan Documents to be due and payable forthwith, whereupon the same
shall immediately become due and payable. Bank shall have all rights, powers
and remedies available under each of the Loan Documents, or accorded by law,
including, without limitation, the right to resort to any or all security for
any credit accommodation from the Bank subject hereto and to exercise any or all
of the rights of a beneficiary or secured party pursuant to applicable law. All
rights, powers and remedies of Bank in connection with each of the Loan
Documents may be exercised at any time by Bank and from time to time after the
occurrence of an Event of Default, are cumulative and not exclusive, and shall
be in addition to any other rights, powers or remedies provided by law or
equity. Except as expressly provided above in this Section, presentment,
demand, protest and all other notices of any kind are hereby expressly waived.
Notwithstanding any other provision of this Agreement, including Section 8.02,
notices to the Borrower under this Section shall be communicated in writing
(including telex or facsimile transmissions).
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
---------------
provision of the Loan Documents nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Bank, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
SECTION 8.02. Notices, Etc. Except as otherwise set forth in this
------------
Agreement, all notices and other communications provided for hereunder shall be
in writing (including facsimile communication) and mailed certified mail, return
receipt requested or sent by facsimile
22
or delivered, if to the Borrower, at its address set forth on the signature page
hereof; and if to the Bank, at its address set forth on the signature page
hereof; or, as to each party, at such other address as shall be designated by
such party in a written notice to the other parties. All such notices and
communications shall be effective upon personal delivery or upon receipt when
sent by facsimile, or on the date of receipt or refusal indicated on the return
receipt if sent by certified mail, except that notices and communications to the
Bank pursuant to Article II or VII shall not be effective until received by the
Bank.
SECTION 8.03. Right of Setoff: Security Interest in Deposit
----------------------------------------------
Accounts. Upon and only after the occurrence of any Event of Default not cured
--------
within any applicable grace period, the Bank is hereby authorized by the
Borrower, at any time and from time to time, without notice, (a) to set off
against, and to appropriate and apply to the payment of, the obligations and
liabilities of the Borrower under the Loan Documents (whether matured or
unmatured, fixed or contingent or liquidated or unliquidated) any and all
amounts owing by the Bank to the Borrower (whether payable in Dollars or any
other currency, whether matured or unmatured, and, in the case of deposits,
whether general or special, time or demand and however evidenced) and (b)
pending any such action, to the extent necessary, to hold such amounts as
collateral to secure such obligations and liabilities and to return as unpaid
for insufficient funds any and all checks and other items drawn against any
deposits so held as the Bank in its sole discretion may elect. The Borrower
hereby grants to the Bank a security interest in all deposits and accounts
maintained with the Bank and with any other financial institution. The Bank is
authorized to debit any account maintained with it by the Borrower for any
amount of principal, interest or fees which are then due and owing to the Bank.
SECTION 8.04. No Waiver; Remedies. No failure on the part of either
-------------------
party hereto to exercise, and no delay in exercising, any right under any of the
Loan Documents shall operate as a waiver thereof; nor shall any single or
partial exercise of any right under any of the Loan Documents preclude any other
or further exercise thereof or the exercise of any other right. The remedies
herein provided are cumulative and not exclusive of any remedies provided by
law.
SECTION 8.05. Costs and Expenses. Borrower shall pay to Bank
------------------
immediately upon demand the full amount of all costs and expenses, including
reasonable attorneys' fees (to include outside counsel fees and all allocated
costs of Bank's in-house counsel), incurred by Bank in connection with (a) the
negotiation and preparation of this Agreement and each other of the Loan
Documents, and the preparation of any amendments and waivers hereto and thereto,
(b) the enforcement of Bank's rights and/or the collection of any amounts which
become due to Bank under any of the Loan Documents (including, without
limitation, in appellate, bankruptcy, insolvency, liquidation, reorganization,
moratorium or other similar proceedings) or the restructuring of the Loan
Documents, and (c) the prosecution or defense of any action in any way related
to any of the Loan Documents, including, without limitation, any action for
declaratory relief.
SECTION 8.06. Participations. The Bank may sell, assign, transfer,
--------------
negotiate or grant participations to other financial institutions in all or part
of the obligations of the Borrower outstanding under the Loan Documents,
provided that any such sale, assignment, transfer, negotiation or participation
shall be in compliance with the applicable federal and state securities laws;
and provided further that any assignee or transferee agrees to be bound by the
terms and conditions of this Agreement. The Bank may, in connection with any
actual or
23
proposed assignment or participation, disclose to the actual or proposed
assignee or participant, any information relating to the Borrower or any of its
Subsidiaries.
SECTION 8.07. Effectiveness: Binding Effect. This Agreement shall
-----------------------------
become effective when it shall have been executed by the Borrower and the Bank
and thereafter shall be binding upon and inure to the benefit of the Borrower,
the Bank and their respective successors and assigns, except that the Borrower
shall not have the right to assign its rights hereunder or any interest herein
without the prior written consent of the Bank.
SECTION 8.08. Governing Law. The validity, interpretation and
-------------
enforcement of this Agreement and the other Loan Documents and any dispute
arising out of the relationship between the parties hereto, whether in contract,
tort, equity or otherwise, shall be governed by the internal laws of the State
of California (without giving effect to principles of conflicts of law).
SECTION 8.09. Arbitration.
-----------
(a) Arbitration. Upon the demand of any party, any Dispute shall be
-----------
resolved by binding arbitration (except as set forth in (e) below) in accordance
with the terms of this Agreement. A "Dispute" shall mean any action, dispute,
claim or controversy of any kind, whether in contract or tort, statutory or
common law, legal or equitable, now existing or hereafter arising under or in
connection with, or in any way pertaining to, any of the Loan Documents, or any
past, present or future extensions of credit and other activities, transactions
or obligations of any kind related directly or indirectly to any of the Loan
Documents, including without limitation, any of the foregoing arising in
connection with the exercise of any self-help, ancillary or other remedies
pursuant to any of the Loan Documents. Any party may by summary proceedings
bring an action in court to compel arbitration of a Dispute. Any party who
fails or refuses to submit to arbitration following a lawful demand by any other
party shall bear all costs and expenses incurred by such other party in
compelling arbitration of any Dispute.
(b) Governing Rules. Arbitration proceedings shall be administered by
---------------
the American Arbitration Association ("AAA") or such other administrator as the
parties shall mutually agree upon in accordance with the AAA Commercial
Arbitration Rules. All Disputes submitted to arbitration shall be resolved in
accordance with the Federal Arbitration Act (Title 9 of the United States Code),
notwithstanding any conflicting choice of law provision in any of the Loan
Documents. The arbitration shall be conducted at a location in the County of
Los Angeles, California selected by the AAA or other administrator. If there is
any inconsistency between the terms hereof and any such rules, the terms and
procedures set forth herein shall control. All statutes of limitation
applicable to any Dispute shall apply to any arbitration proceeding. All
discovery activities shall be expressly limited to matters directly relevant to
the Dispute being arbitrated. Judgment upon any award rendered in an
arbitration may be entered in any court having jurisdiction; provided however,
that nothing contained herein shall be deemed to be a waiver by any party that
is a bank of the protections afforded to it under 12 U.S.C. (S)91 or any similar
applicable state law.
(c) No Waiver; Provisional Remedies, Self-Help and Foreclosure. No
----------------------------------------------------------
provision hereof shall limit the right of any party to exercise self-help
remedies such as setoff, foreclosure against or sale of any real or personal
property collateral or security, or to obtain provisional or ancillary remedies,
including without limitation injunctive relief, sequestration, attachment,
garnishment or the appointment of a receiver, from a court of competent
jurisdiction
24
before, after or during the pendency of any arbitration or other proceeding. The
exercise of any such remedy shall not waive the right of any party to compel
arbitration or reference hereunder.
(d) Arbitrator Qualifications and Powers; Awards. Arbitrators must be
--------------------------------------------
active members of the California State Bar or retired judges of the state or
federal judiciary of California, with expertise in the substantive laws
applicable to the subject matter of the Dispute. Arbitrators are empowered to
resolve Disputes by summary rulings in response to motions filed prior to the
final arbitration hearing. Arbitrators (i) shall resolve all Disputes in
accordance with the substantive law of the state of California, (ii) may grant
any remedy or relief that a court of the state of California could order or
grant within the scope hereof and such ancillary relief as is necessary to make
effective any award, and (iii) shall have the power to award recovery of all
costs and fees, to impose sanctions and to take such other actions as they deem
necessary to the same extent a judge could pursuant to the Federal Rules of
Civil Procedure, the California Rules of Civil Procedure or other applicable
law. Any Dispute in which the amount in controversy is $5,000,000 or less shall
be decided by a single arbitrator who shall not render an award of greater than
$5,000,000 (including damages, costs, fees and expenses). By submission to a
single arbitrator, each party expressly waives any right or claim to recover
more than $5,000,000. Any Dispute in which the amount in controversy exceeds
$5,000,000 shall be decided by majority vote of a panel of three arbitrators;
provided however, that all three arbitrators must actively participate in all
hearings and deliberations.
(e) Judicial Review. Notwithstanding anything herein to the contrary,
---------------
in any arbitration in which the amount in controversy exceeds $25,000,000, the
arbitrators shall be required to make specific, written findings of fact and
conclusions of law. In such arbitrations (A) the arbitrators shall not have the
power to make any award which is not supported by substantial evidence or which
is based on legal error, (B) an award shall not be binding upon the parties
unless the findings of fact are supported by substantial evidence and the
conclusions of law are not erroneous under the substantive law of the state of
California, and (C) the parties shall have in addition to the grounds referred
to in the Federal Arbitration Act for vacating, modifying or correcting an award
the right to judicial review of (1) whether the findings of fact rendered by the
arbitrators are supported by substantial evidence, and (2) whether the
conclusions of law are erroneous under the substantive law of the state of
California. Judgment confirming an award in such a proceeding may be entered
only if a court determines the award is supported by substantial evidence and
not based on legal error under the substantive law of the state of California.
(f) Real Property Collateral; Judicial Reference. Notwithstanding
--------------------------------------------
anything herein to the contrary, no Dispute shall be submitted to arbitration if
the Dispute concerns indebtedness secured directly or indirectly, in whole or in
part, by any real property unless (i) the holder of the mortgage, lien or
security interest specifically elects in writing to proceed with the
arbitration, or (ii) all parties to the arbitration waive any rights or benefits
that might accrue to them by virtue of the single action rule statute of
California, thereby agreeing that all indebtedness and obligations of the
parties, and all mortgages, liens and security interests securing such
indebtedness and obligations, shall remain fully valid and enforceable. If any
such Dispute is not submitted to arbitration, the Dispute shall be referred to a
referee in accordance with California Code of Civil Procedure Section 638 et
seq., and this general reference agreement is intended to be specifically
enforceable in accordance with said Section 638. A referee with the
qualifications required herein for arbitrators shall be selected pursuant to the
AAA's selection procedures. Judgment upon the decision rendered by a referee
shall be
25
entered in the court in which such proceeding was commenced in accordance with
California Code of Civil Procedure Sections 644 and 645.
(g) Miscellaneous. To the maximum extent practicable, the AAA, the
-------------
arbitrators and the parties shall take all action required to conclude any
arbitration proceeding within 180 days of the filing of the Dispute with the
AAA. No arbitrator or other party to an arbitration proceeding may disclose the
existence, content or results thereof, except for disclosures of information by
a party required in the ordinary course of its business, by applicable law or
regulation, or to the extent necessary to exercise any judicial review rights
set forth herein. If more than one agreement for arbitration by or between the
parties potentially applies to a Dispute, the arbitration provision most
directly related to the Loan Documents or the subject matter of the Dispute
shall control. This arbitration provision shall survive termination, amendment
or expiration of any of the Loan Documents or any relationship between the
parties.
SECTION 8.10. Waiver of Notices. Borrower hereby expressly waives
-----------------
demand, presentment, protest and notice of protest and notice of dishonor with
respect to any and all instruments, included in or evidencing any of the
obligations, and any and all other demands and notices of any kind or nature
whatsoever with respect to the obligations and this Agreement, except such as
are expressly provided for herein. No notice to or demand on Borrower which
Bank may elect to give shall entitle Borrower to any other or further notice or
demand in the same, similar or other circumstances.
SECTION 8.11. Entire Agreement. This Agreement with Exhibits and
----------------
Schedules and the other Loan Documents embody the entire agreement and
understanding between the parties hereto and supersede all prior agreements and
understandings relating to the subject matter hereof.
SECTION 8.12. Separability of Provisions. In case any one or more of
--------------------------
the provisions contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
SECTION 8.13. Execution in Counterparts. This Agreement may be
-------------------------
executed in any number of counterparts and by different parties hereto in
separate counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
26
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
BANK OF AMERICA, N.A. SOUTHWEST WATER COMPANY
By: /s/ XXXX X. XXXXXXXXX By: /s/ XXXXXX X. XXXXXXX
------------------------------- ------------------------------------
Name: Xxxx X. Xxxxxxxxx Name: Xxxxxx X. Xxxxxxx
Title: Vice President Title: Vice President - Finance
By: /s/ XXXXXXX X. XXXX
------------------------------------
Name: Xxxxxxx X. Xxxx
Title: Corporate Controller
Address: Address:
Los Angeles Regional Commercial 225 North Barranca Avenue, Suite 000
Xxxxxxx Xxxxxx Xxxx Xxxxxx, Xxxxxxxxxx 00000-0000
000 Xxxxx Xxxxxx Xxxxxx Attention: Xxxxxx X. Xxxxxxx
Mezzanine Level Vice President - Finance
Xxx Xxxxxxx, Xxxxxxxxxx 00000 Facsimile: (000) 000-0000
Attention: Xxxx X. Xxxxxxxxx
Title: Vice President
Facsimile (000) 000-0000
27
SCHEDULE 5.01(f) - LITIGATION
-----------------------------
None other than as reported on Form 10-Q of Borrower for quarter ended March 31,
1999, and Form 10-K of Borrower for year ended December 31, 1998.
28
SCHEDULE 5.01(i) - ENVIRONMENTAL MATTERS
----------------------------------------
See Form 10-Q of Borrower for quarter ended March 31, 1999, and Form 10-K of
Borrower for year ended December 31, 1998.
29
SCHEDULE 6.02(e) - LIENS
------------------------
None except as disclosed in the audited consolidated financial statements of
Borrower for the fiscal year ended December 31, 1998.
30
EXHIBIT A
REVOLVING NOTE
$4,000,000 Los Angeles, California
July 30, 1999
FOR VALUE RECEIVED, the undersigned SOUTHWEST WATER COMPANY, a Delaware
corporation ("Borrower") promises to pay to the order of BANK OF AMERICA, N.A.
("Bank") at its office at 000 Xxxxx Xxxxxx Xxxxxx, Xxxxxxxxx Xxxxx, Xxx Xxxxxxx,
Xxxxxxxxxx, or at such other place as the holder hereof may designate, in lawful
money of the United States of America and in immediately available funds, the
principal sum of Four Million Dollars ($4,000,000), or so much thereof as may be
advanced and be outstanding, with interest thereon, to be computed on each
advance from the date of its disbursement (computed on the basis of a 360-day
year and actual days elapsed, which results in more interest than if a 365-day
year were used) either (i) at a fluctuating rate per annum equal to the
Reference Rate minus one quarter (0.25) of a percentage point in effect from
time to time, or (ii) at an optional rate per annum determined by Bank to be one
and one-quarter (1.25%) percentage points above Bank's IBOR in effect on the
first day of the applicable IBOR Rate Term. When interest is determined in
relation to the Reference Rate, each change in the rate of interest hereunder
shall become effective on the opening of business on the day specified in the
public announcement of a change in Bank's Reference Rate. With respect to each
IBOR option selected hereunder, Bank is hereby authorized to note the date,
principal amount, interest rate and applicable IBOR Rate Term thereto and any
payments made thereon on Bank's books and records (either manually or by
electronic entry) and/or on any schedule attached to this Note, which notations
shall be prima facie evidence of the accuracy of the information noted.
A. DEFINITIONS:
As used herein, the following terms shall have the meanings set forth after
each:
1. "Business Day" means any day except a Saturday, Sunday or any other
day designated as a holiday under Federal or California statute or regulation,
or for amounts bearing interest at an offshore rate, a Business Day is any day
except a Saturday, Sunday or any other day designated as a holiday under Federal
or California statute or regulation on which Bank is open for business in
California and dealing in offshore dollars.
2. "IBOR Rate Portion" means a portion of the principal amount
outstanding under this Note which is bearing interest at a rate related to IBOR.
No IBOR Rate Portion shall be less than Two Hundred Fifty Thousand Dollars
($250,000).
3. "IBOR Rate Term" means a period commencing on a Business Day and
continuing for no shorter than one (1) month and no longer than six (6) months,
as designated by Borrower, during which all or a portion of the outstanding
principal balance of this Note bears interest determined in relation to Bank's
IBOR; provided however, that no IBOR Rate Term shall extend beyond the scheduled
Maturity Date hereof. The last day of the interest period will be determined by
Bank using the offshore dollar inter-bank market. If any IBOR Rate Term would
end on a day which is not a Business Day, then such IBOR Rate Term shall be
extended to the next succeeding Business Day.
i
4. "IBOR Rate" means the interest rate determined by the following
formula, rounded upward, if necessary, to the nearest 1/100 of one percent.
(All amounts in the calculation will be determined by Bank as of the first day
of the interest period.)
IBOR Rate = IBOR Base Rate
--------------------------------------------
(1.00 - Reserve Percentage)
(a) "IBOR Base Rate" means the interest rate at which Bank's Grand
Cayman Branch, Grand Cayman, British West Indies, would offer U.S.
dollar deposits for the applicable interest period to other major
banks in the offshore dollar inter-bank market.
(b) "Reserve Percentage" means the total of the maximum reserve
percentages for determining the reserves to be maintained by member
banks of the Federal Reserve System for Eurocurrency Liabilities, as
defined in Federal Reserve Board Regulation D, rounded upward to the
nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency,
supplemental, special, and other reserve percentages.
5. "Reference Rate" means the rate of interest publicly announced from
time to time by Bank in San Francisco, California, as its Reference Rate. The
Reference Rate is set by Bank based on various factors, including Bank's costs
and desired return, general economic conditions and other factors, and is used
as a reference point for pricing some loans. Bank may price loans to its
customers at, above or below the Reference Rate.
B. INTEREST:
1. Payment of Interest. Interest accrued on this Note shall be payable
-------------------
on the first day of each month, commencing September 1, 1999.
2. Selection of Interest Rate Options. At any time any portion of this
----------------------------------
Note bears interest determined in relation to Bank's IBOR, it may be continued
by Borrower at the end of the IBOR Rate Term applicable thereto so that all or a
portion thereof bears interest determined in relation to the Reference Rate or
in relation to Bank's IBOR for a new IBOR Rate Term designated by Borrower. At
any time any portion of this Note bears interest determined in relation to the
Reference Rate, Borrower may convert all or a portion thereof so that it bears
interest determined in relation to Bank's IBOR for a IBOR Rate Term designated
by Borrower. At the time each advance is requested hereunder or Borrower wishes
to select the IBOR option for all or a portion of the outstanding principal
balance hereof, and at the end of each IBOR Rate Term, Borrower shall give Bank
notice specifying (a) the interest rate option selected by Borrower, (b) the
principal amount subject thereto, and (c) if the IBOR option is selected, the
length of the applicable IBOR Rate Term. Any such notice may be given by
telephone so long as, with respect to each IBOR selection, such notice is given
to Bank prior to 10:00 a.m., California time, on the first day of the IBOR Rate
Term. For each IBOR option requested hereunder, Bank will quote the applicable
IBOR Rate to Borrower at approximately 10:00 a.m., California time, on the first
day of the IBOR Rate Term. If Borrower does not immediately accept the rate
quoted by Bank, any subsequent acceptance by Borrower shall be subject to a re-
determination by Bank of the applicable IBOR Rate; provided however, that if
Borrower fails
ii
to accept any such rate by 11:00 a.m., California time, on the Business Day such
quotation is given, then the quoted rate shall expire and Bank shall have no
obligation to permit a IBOR option to be selected on such day. If no specific
designation of interest is made at the time any advance is requested hereunder
or at the end of any IBOR Rate Term, Borrower shall be deemed to have made a
Reference Rate interest selection for such advance or the principal amount to
which such IBOR Rate Term applied.
3. Additional IBOR Provisions.
--------------------------
(a) If Bank at any time shall determine that for any reason adequate and
reasonable means do not exist for ascertaining Bank's IBOR, then Bank shall
promptly give notice thereof to Borrower. If such notice is given and until
such notice has been withdrawn by Bank, than (i) no new IBOR option may be
selected by Borrower, and (ii) any portion of the outstanding principal balance
hereof which bears interest determined in relation to Bank's IBOR, subsequent to
the end of the IBOR Rate Term applicable thereto, shall bear interest determined
in relation to the Reference Rate.
(b) If any law, treaty, rule, regulation or determination of a court or
governmental authority or any change therein or in the interpretation or
application thereof (each, a "Change in Law") shall make it unlawful for Bank
(i) to make IBOR options available hereunder, or (ii) to maintain interest
rates based on Bank's IBOR, then in the former event, any obligation of Bank to
make available such unlawful IBOR options shall immediately be cancelled, and in
the latter event, any such unlawful IBOR-based interest rates then outstanding
shall be converted, at Bank's option, so that interest on the portion of the
outstanding principal balance subject thereto is determined in relation to the
Reference Rate; provided however, that if any such Change in Law shall permit
any IBOR-based interest rates to remain in effect until the expiration of the
IBOR Rate Term applicable thereto, then such permitted IBOR-based interest rates
shall continue in effect until the expiration of such IBOR Rate Term. Upon the
occurrence of any of the foregoing events, Borrower shall pay to Bank
immediately upon demand such amounts as may be necessary to compensate Bank for
any fines, fees, charges, penalties or other costs incurred or payable by Bank
as a result thereof and which are attributable to any IBOR options made
available to Borrower hereunder, and any reasonable allocation made by Bank
among its operations shall be conclusive and binding upon Borrower.
(c) If any Change in Law or compliance by Bank with any request or
directive (whether or not having the force of law) from any central bank or
other governmental authority shall:
(i) subject Bank to any tax, duty or other charge with respect to any
IBOR options, or change the basis of taxation of payments to Bank of
principal, interest, fees or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income of
Bank); or
(ii) impose, modify or hold applicable any reserve, special deposit,
compulsory loan or similar requirement against assets held by,
deposits or other liabilities in or for the account of advances or
loans by, or any other acquisition of funds by any office of Bank; or
(iii) impose on Bank any other condition;
iii
and the result of any of the foregoing is to increase the cost to Bank of
making, renewing or maintaining any IBOR options hereunder and/or to reduce any
amount receivable by Bank in connection therewith, then in any such case,
Borrower shall pay to Bank immediately upon demand such amounts as may be
necessary to compensate Bank for any additional costs incurred by Bank and/or
reductions in amounts received by Bank which are attributable to such IBOR
options. In determining which costs incurred by Bank and/or reductions in
amounts received by Bank are attributable to any IBOR options made available to
Borrower hereunder, any reasonable allocation made by Bank among its operations
shall be conclusive and binding upon Borrower.
4. Default Interest. During the continuance of an Event of Default, the
----------------
outstanding principal balance of this Note shall bear interest until paid in
full at an increased rate per annum (computed on the basis of a 360-day year and
actual days elapsed, which results in more interest than if a 365-day year were
used) equal to two percent (2%) above the rate of interest from time to time
applicable to this Note.
C. BORROWING AND REPAYMENT:
1. Borrowing and Repayment. Borrower may from time to time during the
-----------------------
term of this Note borrow, partially or wholly repay its outstanding borrowings,
and re-borrow, subject to all of the limitations, terms and conditions of this
Note and of any document executed in connection with or governing this Note;
provided however, that the total outstanding borrowings under this Note shall
not at any time exceed the principal amount stated above. The unpaid principal
balance of this obligation at any time shall be the total amounts advanced
hereunder by the holder hereof less the amount of principal payments made hereon
by or for Borrower, which balance may be endorsed hereon from time to time by
the holder. The outstanding principal balance of this Note shall be due and
payable in full on the "Maturity Date" (as defined in the Credit Agreement).
2. Advances. Advances hereunder, to the total amount of the principal
--------
sum stated above, may be made by the holder at the oral or written request of
(a) Xxxxx X. Xxxxxxx, Xxxxx X. Xxxxxxxx, Xxxxxx X. Xxxxxxx , Xxxxxxx X. Xxxx or
Xxxxxx Xxxx-Xxxxx, any one acting alone, who are authorized to request advances
and direct the disposition of any advances until written notice of the
revocation of such authority is received by the holder at the office designated
above, or (b) any person, with respect to advances deposited to the credit of
any account of Borrower with the holder, which advances, when so deposited,
shall be conclusively presumed to have been made to or for the benefit of
Borrower regardless of the fact that persons other than those authorized to
request advances may have authority to draw against such account. The holder
shall have no obligation to determine whether any person requesting an advance
is or has been authorized by Borrower.
3. Application of Payments. Each payment made on this Note shall be
-----------------------
credited first, to any interest then due and second, to the outstanding
principal balance hereof. Unless instructed otherwise by Borrower, all payments
credited to principal shall be applied first, to the outstanding principal
balance of this Note which bears interest determined in relation to the
Reference Rate, if any, and second, to the outstanding principal balance of this
Note which bears interest determined in relation to Bank's IBOR, with such
payments applied to the oldest IBOR Rate Term first.
4. Prepayment.
----------
iv
(a) Reference Rate. Borrower may prepay principal on any portion of this
--------------
Note which bears interest determined in relation to the Reference Rate at any
time, in any amount and without penalty.
(b) IBOR. Each prepayment of an IBOR Rate Portion, whether voluntary, by
----
reason of acceleration or otherwise, will be accompanied by the amount of
accrued interest on the amount prepaid, and a prepayment fee as described
below. A "prepayment" is a payment of an amount on a date earlier than the
scheduled payment date for such amount as required by this Agreement. The
prepayment fee shall be equal to the amount (if any) by which:
(i) the additional interest which would have been payable
during the interest period on the amount prepaid had it not been
prepaid, exceeds
(ii) the interest which would have been recoverable by Bank
by placing the amount prepaid on deposit in the domestic certificate
of deposit market, the eurodollar deposit market, or other appropriate
money market selected by Bank for a period starting on the date on
which it was prepaid and ending on the last day of the interest period
for such Portion (or the scheduled payment date for the amount
prepaid, if earlier).
Bank will have no obligation to accept an election of an IBOR
Rate Portion if any of the following described events has occurred and is
continuing:
(i) Dollar deposits in the principal amount, and for
periods equal to the IBOR Rate Term, of an IBOR Rate Portion are not
available in the offshore dollar inter-bank market; or
(ii) the IBOR Rate does not accurately reflect the cost of
an IBOR Rate Portion.
Borrower acknowledges that prepayment of such amount may result in Bank
incurring additional costs, expenses and/or liabilities, and that it is
difficult to ascertain the full extent of such costs, expenses and/or
liabilities. Borrower, therefore, agrees to pay the above-described prepayment
fee and agrees that said amount represents a reasonable estimate of the
prepayment costs, expenses and/or liabilities of Bank. If Borrower fails to pay
any prepayment fee when due, the amount of such prepayment fee shall thereafter
bear interest until paid at a rate per annum two percent (2%) above the
Reference Rate in effect from time to time (computed on the basis of a 360-day
year, actual days elapsed).
D. EVENTS OF DEFAULT:
This Note is made pursuant to and is subject to the terms and conditions of
that certain Credit Agreement between Borrower and Bank dated as of July 30,
1999, as amended from time to time, including, without limitation, those terms
relating to arbitration of Disputes (the "Credit Agreement"). Any default in
the payment or performance of any obligation under this Note, or any defined
event of default under the Credit Agreement, shall constitute an "Event of
Default" under this Note.
E. MISCELLANEOUS:
v
1. Remedies. Upon the occurrence of any Event of Default, the holder of
--------
this Note, at the holder's option, without notice upon the occurrence of an
Event of Default pursuant to Section 7.01(g) of the Credit Agreement, and with
notice upon the occurrence of any other Event of Default, may declare all sums
of principal and interest outstanding hereunder to be immediately due and
payable without presentment, demand, protest or notice of dishonor, all of which
are expressly waived by Borrower, and the obligation, if any, of the holder to
extend any further credit hereunder shall immediately cease and terminate.
Borrower shall pay to the holder immediately upon demand the full amount of all
payments, advances, charges, costs and expenses, including reasonable attorneys'
fees (to include outside counsel fees and all allocated costs of the holder's
in-house counsel), incurred by the holder in connection with the enforcement of
the holder's rights and/or the collection of any amounts which become due to the
holder under this Note, and the prosecution or defense of any action in any way
related to this Note, including without limitation, any action for declaratory
relief, and including any of the foregoing incurred in connection with any
bankruptcy proceeding relating to Borrower.
2. Obligations Joint and Several. Should more than one person or entity
-----------------------------
sign this Note as a Borrower, the obligations of each such Borrower shall be
joint and several.
3. Governing Law. This Note shall be governed by and construed in
-------------
accordance with the laws of the State of California.
iv
4. Defined Terms. All capitalized terms not herein defined shall have
-------------
the meanings given to them in the Credit Agreement.
"Borrower"
SOUTHWEST WATER COMPANY,
a Delaware corporation
By: /s/XXXXXX X. XXXXXXX
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Xxxxxx X. Xxxxxxx
Vice President - Finance
By: /s/XXXXXXX X. XXXX
------------------------------------------
Xxxxxxx X. Xxxx
Corporate Controller
vii
