EXHIBIT 10.27
GUARANTY AGREEMENT
Dated as of February 23, 2001
of
CONNECTICUT WATER SERVICE, INC.
Re: $2,000,000 10.2% Senior Notes
of
Barnstable Water Company
TABLE OF CONTENTS
Page
SECTION 1. GUARANTEE.................................................... 1
SECTION 2. PAYMENT UPON CERTAIN EVENTS.................................. 1
SECTION 3. WAIVERS; OBLIGATION UNCONDITIONAL............................ 2
SECTION 4. COLLECTION EXPENSES.......................................... 3
SECTION 5. NO SUBROGATION UNTIL PAYMENT IN FULL......................... 3
SECTION 6. REPRESENTATIONS AND WARRANTIES............................... 3
SECTION 7. GUARANTOR COVENANTS.......................................... 3
SECTION 8. REQUIRED PURCHASE OF NOTES ON GUARANTOR CHANGE OF CONTROL.... 14
SECTION 9. DEFINITIONS.................................................. 15
SECTION 10. JURISDICTION AND SERVICE IN RESPECT OF GUARANTOR............. 18
SECTION 11. SUCCESSORS AND ASSIGNS....................................... 19
SECTION 12. NOTICES...................................................... 19
SECTION 13. GOVERNING LAW................................................ 19
SECTION 14. AMENDMENTS, WAIVERS AND CONSENTS............................. 19
1
GUARANTY AGREEMENT
AGREEMENT dated as of February 23, 2001 by Connecticut Water
Service, Inc., a Connecticut corporation (the "Guarantor").
RECITALS OF THE GUARANTOR
A. The Guarantor owns 100% of the outstanding shares of common
stock of Barnstable Holding Company, a Massachusetts corporation (the "Prior
Guarantor") which, in turn, owns 100% of the outstanding shares of common stock
of Barnstable Water Company, a Massachusetts corporation (the "Company").
B. The Company entered into a Note Agreement dated as of February
15, 1991 (the "Note Agreement") with Indianapolis Life Insurance Company (the
"Note Purchaser") providing for the sale by the Company of its $2,000,000
principal amount 10.2% Senior Notes due February 15, 2011 (the "Notes").
C. Capitalized terms used but not defined herein shall have the
meanings assigned in the Note Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants herein contained and to give effect to the terms of the Consent and
Waiver dated as of December 21, 2000 by Indianapolis Life Insurance Company (the
"Holder") in favor of the Company, the Prior Guarantor and the Guarantor and to
induce every future holder of the Notes to purchase the Notes, it is hereby
agreed as follows:
SECTION 1. GUARANTEE.
The Guarantor hereby unconditionally guarantees to each holder of
any Note (collectively "Noteholders" and individually a "Noteholder") (1) the
due and punctual payment at maturity, whether at stated maturity, by
acceleration, by notice of prepayment or otherwise, of the principal of and
premium, if any, and interest on the Notes in accordance with the terms and
conditions thereof and of the Note Agreement, and (2) the prompt performance and
compliance by the Company with each of its other obligations under the Note
Agreement.
SECTION 2. PAYMENT UPON CERTAIN EVENTS.
The Guarantor agrees that, if any of the following events occurs,
i.e.,
(a) the entry of a decree or order by a court having jurisdiction
in the premises for relief under any bankruptcy or similar law or laws for the
relief of debtors in respect of the Guarantor, or adjudging the Guarantor a
bankrupt or insolvent, or approving as properly filed a petition seeking
reorganization, adjustment or composition of or in respect of the Guarantor
under the Federal Bankruptcy Code or any other applicable Federal or state law,
or appointing a custodian, receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of or for the Guarantor or any
substantial part of its property, or ordering the winding up or liquidation of
its affairs, and the continuance of any such decree or order unstayed and in
effect for a period of 60 consecutive days; or
(b) the commencement by the Guarantor of a voluntary case, or the
institution by it of proceedings to be adjudicated a bankrupt or insolvent, or
the consent by it to the institution of bankruptcy or insolvency proceedings
against it, or the filing by it of a petition or answer or consent seeking
reorganization, arrangement or relief under the Federal Bankruptcy Code or any
other applicable Federal or state law, or the consent or acquiescence by it to
the filing of any such petition or to the appointment of or taking possession by
a custodian, receiver, liquidator, assignee, trustee, sequestrator (or other
similar official) of the Guarantor or any substantial part of its property, or
the making by it of an assignment for the benefit of creditors, or the admission
by it in writing of its inability or its failure to pay its debts generally as
they become due, or the taking of corporate action by the Guarantor in
furtherance of any such action;
the Guarantor will forthwith pay to the Noteholders, without demand or notice
and whether or not there has been any other default under the Note Agreement or
the Notes, the whole amount of the principal of the Notes then outstanding and
any unpaid interest thereon, and, to the extent not prohibited by applicable
law, an amount as liquidated damages for the loss of the bargain evidenced
hereby (and not as a penalty) equal to the Make Whole Amount.
SECTION 3. WAIVERS; OBLIGATION UNCONDITIONAL.
The Guarantor assents to all the terms, covenants and conditions of
the Notes and the Note Agreement, and irrevocably waives presentation, demand
for payment, or protest, of any of the Notes, any and all notice of any such
presentation, demand or protest, notice of any Default or Event of Default under
the Note Agreement, notice of acceptance of this guarantee or of the terms and
provisions hereof by any Noteholder, any requirement of diligence or promptness
on the part of any Noteholder in the enforcement of rights under the provisions
hereof, of the Note Agreement or of the Notes, or any right to require any
Noteholder to proceed first against the Company. The obligations of the
Guarantor hereunder shall be unconditional irrespective of the genuineness,
validity, regularity or enforceability of the Note Agreement or of the Notes or
of any other circumstance which might otherwise constitute a legal or equitable
discharge of a surety or guarantor. The obligations of the Guarantor hereunder
shall not be affected by:
(a) the recovery of any judgment against the Company, or by the
levy of any writ or process of execution under any such judgment, or by
any action or proceeding taken by any Noteholder, either under the Notes
or under the Note Agreement for the enforcement thereof, or hereof, or in
the exercise of any right or power given or conferred thereby, or hereby,
or
(b) any delay, failure or omission upon the part of any Noteholder
to enforce any of the rights or powers given or conferred hereby or by the
Note Agreement, or by any delay, failure or omission upon the part of any
Noteholder to enforce any right of any Noteholder against the Company, or
by any action by any Noteholder in granting
2
indulgence to the Company, or in waiving or acquiescing in any Default or
Event of Default upon the part of the Company under the Notes or under the
Note Agreement, or
(c) the consolidation or merger of the Company with or into any
other corporation or corporations or any sale, lease or other disposition
of the Company's properties as an entirety or substantially as an entirety
to any other corporation, or
(d) any other act or delay or failure to act, or by any other
thing, which mayor might in any manner or to any extent vary the risk of
the Guarantor hereunder;
it being the purpose and intent of the parties hereto that the obligations of
the Guarantor hereunder shall be absolute and unconditional under any and all
circumstances, and shall not be discharged except by payment as herein provided,
and then only to the extent of such payment or payments.
SECTION 4. COLLECTION EXPENSES.
In the event that the Guarantor shall be required to make any
payment to any Noteholder pursuant to this Agreement, it shall, in addition to
such payment, pay to such Noteholder such further amount as shall be sufficient
to cover the costs and expenses of collection, including a reasonable
compensation to attorneys, and any expenses or liabilities incurred by any
Noteholder hereunder. The covenants contained in this Agreement may be enforced
by any Noteholder.
SECTION 5. NO SUBROGATION UNTIL PAYMENT IN FULL.
No payment by the Guarantor pursuant to the provisions hereof to any
Noteholder shall entitle the Guarantor, by subrogation to the rights of the
holders of the Notes in respect of which such payment is made or otherwise, to
any payment by the Company or out of the property of the Company, except after
payment in full of the entire principal of and premium, if any, and interest on
the Notes, or provision for such payment satisfactory to the holders of the
Notes.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Guarantor represents and warrants that all representations set
forth in the form of Closing Certificate of the Guarantor attached hereto as
Schedule A are true and correct as of the date hereof.
SECTION 7. GUARANTOR COVENANTS.
From and after the date hereof and continuing so long as any amount
remains unpaid on any Note:
7.1 Corporate Existence, Etc. The Guarantor will preserve and keep
in full force and effect, and will cause each Significant Subsidiary to preserve
and keep in full force and effect, its corporate existence and all licenses,
permits and franchises necessary to the proper
3
conduct of its business, provided that the foregoing shall not prevent any
transaction permitted by Section 7.7.
7.2 Taxes, Claims for Labor and Materials, Compliance with Laws.
The Guarantor will promptly pay and discharge, and will cause each Significant
Subsidiary promptly to pay and discharge, all lawful taxes, assessments and
governmental charges or levies imposed upon the Guarantor or such Significant
Subsidiary, respectively, or upon or in respect of all or any part of the
property or business of the Guarantor or such Significant Subsidiary, all trade
accounts payable in accordance with usual and customary business tells, and all
claims for work, labor or materials, which if paid might become a Lien upon
any property of the Guarantor or such Significant Subsidiary; provided the
Guarantor or such Significant Subsidiary shall not be required to pay any such
tax, assessment, charge, levy, account payable or claim if (i) the validity,
applicability or amount thereof is being contested in good faith by appropriate
actions or proceedings which will prevent the forfeiture or sale of any property
of the Guarantor or such Significant Subsidiary or any material interference
with the use thereof by the Guarantor or such Significant Subsidiary, and (ii)
the Guarantor or such Significant Subsidiary shall set aside on its books,
reserves deemed by it to be adequate with respect thereto. The Guarantor will
promptly comply and will cause each Significant Subsidiary to promptly comply
with all laws, ordinances or governmental rules and regulations to which it is
subject including, without limitation, the Occupational Safety and Health Act of
1970, as amended, ERISA and all laws, ordinances, governmental rules and
regulations relating to environment, protection in all applicable jurisdictions,
the violation of which could materially and adversely affect the properties,
business, prospects, profits or condition of the Guarantor and its Significant
Subsidiaries or would result in any Lien not pellitted under Section 7.4.
7.3 Limitations on Current Debt and Funded Debt. (a) The Guarantor
will not, and will not permit CWC or any Significant Subsidiary to, create,
assume or incur or in any manner become liable in respect of any Current Debt or
Funded Debt, except:
(1) unsecured Funded Debt and Funded Debt secured by Liens
permitted by Section 7.4(g), provided that at the time of issuance
thereof and after giving effect thereto and to the application of
the proceeds thereof:
(i) the aggregate of all Group Funded Debt and Group
Current Debt shall not exceed 65% of the sum of Total
Capitalization plus Consolidated Current Debt;
(ii) the Net Income Available for Fixed Charges in any
consecutive 12 of the 15 calendar months immediately preceding
any date of determination thereof shall have equaled at least
175% of Pro Forma Fixed Charges; and
(iii) CWC would be pellitted to incur $1.00 of
additional Funded Debt under the provisions of Section
7.3(b)(1) of this Agreement.
4
(2) any refinancing of Funded Debt issued and outstanding
pursuant to Section 7.3(a)(I) (without increase in principal amount
from the amount outstanding on the date of such refinancing);
(3) unsecured Current Debt, provided that at the time of
issuance thereof and after giving effect thereto and to the
application of the proceeds thereof:
(i) the aggregate of all Group Funded Debt and Group
Current Debt shall not exceed 65% of the sum of Total
Capitalization plus Consolidated Current Debt; and
(ii) CWC would be permitted to incur $1.00 of
additional Current Debt under the provisions of Section
7.3(b)(3) of this Agreement;
(4) Current Debt or Funded Debt of CWC or a
Significant Subsidiary to the Guarantor or to a Wholly-owned
Significant Subsidiary.
(b) The Guarantor will not permit CWC to create, assume or incur
or in any manner become liable in respect of any Current Debt or Funded
Debt, except:
(1) Funded Debt of CWC, provided, that at the time of
issuance thereof and after giving effect thereto and to the
application of the proceeds thereof:
(i) the aggregate of all Funded Debt of CWC and
Current Debt of CWC shall not exceed 65% of the sum of Total
Capitalization plus aggregate Current Debt of CWC; and
(ii) the Guarantor would be permitted to incur $1.00 of
additional Funded Debt under the provisions of Section
7.3(a)(I) of this Agreement;
(2) Any refinancing of Funded Debt of CWC issued and
outstanding pursuant to Section 7.3(b)(I) (without increase in
principal amount from the amount outstanding on the date of such
refinancing);
(3) unsecured Current Debt of CWC, provided that at the time
of issuance thereof and after giving effect thereto and to the
application of the proceeds thereof.
(i) the aggregate of all Funded Debt of CWC and
Current Debt of CWC shall not exceed 65% of the sum of Total
Capitalization plus aggregate Current Debt of CWC, and
(ii) the Guarantor would be permitted to incur $1.00 of
additional Current Debt under the provisions of Section
7.3(a)(3) of this Agreement, and
5
(4) Current Debt or Funded Debt of CWC to the Guarantor or
to a Wholly-owned Significant Subsidiary.
(c) Any corporation which becomes a Significant Subsidiary after
the date hereof shall for all purposes of this Section 7.3 be deemed to
have created, assumed or incurred at the time it becomes a Significant
Subsidiary all Funded Debt of such corporation existing immediately after
it becomes a Significant Subsidiary.
7.4 Limitation on Liens. The Guarantor will not, and will not
permit any Significant Subsidiary to, create or incur, or suffer to be incurred
or to exist, any Lien on its or their property or assets, whether now owned or
hereafter acquired, or upon any income or profits therefrom, or transfer any
property for the purpose of subjecting the same to the payment of obligations in
priority to the payment of its or their general creditors, or acquire or agree
to acquire, or permit any Significant Subsidiary to acquire, any property or
assets upon conditional sales agreements or other title retention devices,
except:
(a) Liens for property taxes and assessments or governmental
charges or levies and Liens securing claims or demands of mechanics and
materialmen, provided that payment thereof is not at the time required by
Section 7.2;
(b) Liens of or resulting from any judgment or award, the time for
the appeal or petition for rehearing of which shall not have expired, or
in respect of which the Guarantor or a Significant Subsidiary shall at any
time in good faith be prosecuting an appeal or proceeding for a review and
in respect of which a stay of execution pending such appeal or proceeding
for review shall have been secured;
(c) Liens incidental to the conduct of business or the ownership
of properties and assets (including Liens in connection with worker's
compensation, unemployment insurance and other like laws, warehousemen's
and attorneys' liens and statutory landlords' liens) and Liens to secure
the performance of bids, tenders or trade contracts, or to secure
statutory obligations, surety or appeal bonds or other Liens of like
general nature incurred in the ordinary course of business and not in
connection with the borrowing of money, provided in each case, the
obligation secured is not overdue or, if overdue, is being contested in
good faith by appropriate actions or proceedings;
(d) minor survey exceptions or minor encumbrances, easements or
reservations, or rights of others for rights-of-way, utilities and other
similar purposes, or zoning or other restrictions as to the use of real
properties which are necessary for the conduct of the activities of the
Guarantor and its Significant Subsidiaries or which customarily exist on
properties of corporations engaged in similar activities and similarly
situated and which do not in any event materially impair their use in the
operation of the business of the Guarantor and its Significant
Subsidiaries;
(e) Liens securing Indebtedness of a Significant Subsidiary to the
Guarantor or to another Significant Subsidiary;
(f) Liens existing as of January 31, 2001 and reflected on
Schedule B attached hereto; and
6
(g) Liens incurred after the First Closing Date given to secure
the payment of the purchase price incurred in connection with the
acquisition of fixed assets useful and intended to be used in carrying on
the business of the Guarantor or a Significant Subsidiary, including Liens
existing on such fixed assets at the time of acquisition thereof or at the
time of acquisition by the Guarantor or a Significant Subsidiary of any
business entity then owning such fixed assets, whether or not such
existing Liens were given to secure the payment of the purchase price of
the fixed assets to which they attach so long as they were not incurred,
extended or renewed in contemplation of such acquisition, provided that
(i) the Lien shall attach solely to the fixed assets acquired or
purchased; (ii) at the time of acquisition of such fixed assets, the
aggregate amount remaining unpaid on all Indebtedness secured by Liens on
such fixed assets whether or not assumed by the Guarantor or a Significant
Subsidiary shall not exceed an amount equal to 65% (or 100% in the case
of Capitalized Leases) of the lesser of the total purchase price or fair
market value at the time of acquisition of such fixed assets (as
determined in good faith by the Guarantor), and (iii) all such
Indebtedness shall have been incurred within the applicable limitations
provided in Section 7.3(a)(1) or Section 7.3 (a)(2).
7.5 Limitation on Sale and Leaseback. The Guarantor will not, and
will not permit any Significant Subsidiary to, enter into any arrangement
whereby the Guarantor or any Significant Subsidiary shall sell or transfer any
property owned by the Guarantor or any Significant Subsidiary to any Person
other than the Guarantor or a Significant Subsidiary and thereupon the Guarantor
or any Significant Subsidiary shall lease or intend to lease, as lessee, the
same property unless such sale and leaseback would be permitted by Sections 7.3,
7.4 and 7.7.
7.6 Investments. The Guarantor will not, and will not permit any
Significant Subsidiary to, make any Investments, other than:
(a) Investments by (i) the Guarantor in and to the Restricted
Group, including any Investment in a corporation which, after giving
effect to such investment, will become a member of the Restricted Group
and (ii) any Significant Subsidiary in and to another Significant
Subsidiary, including any Investment in a corporation which after giving
effect to such Investment will become a Significant Subsidiary;
(b) Investments by the Guarantor or any Significant Subsidiary in
(i) the acquisition of fixed assets used and useful and intended to be
used or consumed in carrying on the business of the Restricted Group; or
(ii) any Investment described in paragraphs (a) through (f), inclusive, of
Section 5.l0 of the Note Agreement;
(c) Investments by the Guarantor in direct obligations of the
United States of America or any agency or instrumentality of the United
States of America, the payment or guarantee of which constitutes a full
faith and credit obligation of the United States of America, in either
case, maturing in five years or less from the date of acquisition thereof;
(d) Investments by the Guarantor in certificates of deposit
maturing within three years from the date of issuance thereof, issued by a
bank or trust company organized under the laws of the United States or any
state thereof, having capital, surplus
7
and undivided profits aggregating at least $100,000,000 and whose
long-term certificates of deposit are, at the time of acquisition thereof
by the Guarantor, rated AA or better by Standard & Poor's Corporation or
Aa or better by Moody's Investors Service, Inc.;
(e) Investments by the Guarantor in debt Securities issued by
corporations organized under the laws of the United States or any state
thereof maturing in three years or less from the date of acquisition
thereof which, at the time of acquisition by the Guarantor, is accorded a
rating of A or better by S&P or Moody's;
(f) Investments by the Guarantor in general obligations of any
state or political subdivision of any state maturing in three years or
Less from the date of acquisition thereof which, at the time of
acquisition by the Guarantor, is accorded a rating of AA or better by S&P
or Aa or better by Moody's;
(g) loans or advances in the usual and ordinary course of business
to officers, directors and employees for expenses (including moving
expenses related to a transfer) incidental to carrying on the business of
the Guarantor or any Significant Subsidiary; and
(h) receivables arising from the sale of goods and services in the
ordinary course of business of the Guarantor and its Significant
Subsidiaries.
In valuing any Investments for the purpose of applying the
limitations set forth in this Section 7.6, such investments shall be taken at
the original cost thereof, without allowance for any subsequent write-offs or
appreciation or depreciation therein, but less any amount repaid or recovered on
account of capital or principal.
For purposes of this Section 7.6, at any time when a corporation
becomes a Significant Subsidiary, all Investments of such corporation at such
time shall be deemed to have been made by such corporation, as a Significant
Subsidiary, at such time.
7.7 Mergers and Consolidations. (a) The Guarantor will not, and
will not permit any Significant Subsidiary to, consolidate with or be a party to
a merger with any other corporation, provided, however, that:
(1) any Significant Subsidiary may merge or consolidate with
or into the Guarantor or any Wholly-owned Significant Subsidiary or
any entity which after giving effect to such merger or consolidation
would become a Significant Subsidiary so long as in any merger or
consolidation involving the Guarantor, the Guarantor shall be the
surviving or continuing corporation; and
(2) the Guarantor may consolidate or merge with any other
corporation if (i) the surviving or continuing corporation (the "New
Guarantor") shall be a corporation organized and existing under the
laws of the United States of America or any State thereof or the
District of Columbia, (ii) the New Guarantor shall expressly and
unconditionally assume, by an instrument in writing the due and
punctual performance or observance of every covenant of this
Agreement to be performed or observed by the Guarantor, (iii) the
Guarantor shall have delivered to the holders of the Notes a
certificate of a responsible officer of
8
the Guarantor and an opinion of counsel, each stating that such
consolidation or merger complies with the provisions of this Section
7.7(2) and that all conditions precedent relating to such
transaction provided for in this Section 7.7(2) have been met and
(iv) at the time of such consolidation or merger and after giving
effect thereto, no Default or Event of Default shall have occurred
and be continuing.
(b) The Guarantor will not permit CWC to consolidate with or be
party to a merger with any other corporation unless CWC is the surviving
or continuing corporation and the Guarantor shall have caused CWC to have
delivered to the holders of the Notes a certificate of a responsible
officer of CWC stating that at the time of such consolidation or merger
and after giving effect thereto, no Default or Event of Default shall have
occurred and be continuing.
7.8 Sale of Assets; Issuance or Sale of Subsidiary Stock.
(a) Except as otherwise permitted by Section 7.7, the Guarantor
will not, and will not permit any Significant Subsidiary to, sell, lease
or otherwise dispose of more than an insubstantial part (as defined in
paragraph (f) of this Section 7.8) of the assets of the Guarantor and its
Significant Subsidiaries (other than in the ordinary course of business)
(a "Disposition") unless an amount at least equal to 25% of the net
proceeds of such Disposition received by the Guarantor or such Significant
Subsidiary is, within three months of the date of such Disposition, (i)
used to prepay the Notes in accordance with Section 2.2 of the Note
Agreement, or (ii) used to purchase Notes from the holders thereof in
accordance with the provisions of Section 5.13 of the Note Agreement or
(iii) invested in Investments permitted by Section 7.6; provided that (x)
any Significant Subsidiary may sell, lease or otherwise dispose of more
than an insubstantial part of its assets to the Guarantor or any
Wholly-owned Significant Subsidiary, and (y) Barlaco may lease more than
an insubstantial part of its assets to the Company pursuant to the
provisions of the Real Estate Lease.
(b) The Guarantor will not permit any Significant Subsidiary to
issue or sell any shares of stock of any class (including as "stock" for
the purposes of this Section 7.8, any warrants, rights or options to
purchase or otherwise acquire stock or other Securities exchangeable for
or convertible into stock) of such Significant Subsidiary to any Person
other than the Guarantor or a Wholly-owned Significant Subsidiary, except
for the purpose of qualifying directors, or except in satisfaction of the
validly pre-existing preemptive rights of minority shareholders in
connection with the simultaneous issuance of stock to the Guarantor and/or
a Significant Subsidiary whereby the Guarantor and/or such Significant
Subsidiary maintain their same proportionate interest in such Significant
Subsidiary.
(c) The Guarantor will not sell, transfer or otherwise dispose of
any shares of stock of any Significant Subsidiary (except to qualify
directors), and will not permit any Significant Subsidiary to sell,
transfer or otherwise dispose of (except to the Guarantor or a
Wholly-owned Significant Subsidiary) any shares of stock of any other
Significant Subsidiary, unless:
9
(1) simultaneously with such sale, transfer, or disposition,
all shares of stock of such Significant Subsidiary at the time owned
by the Guarantor and by every other Significant Subsidiary shall be
sold, transferred or disposed of as an entirety;
(2) the Board of Directors of the Guarantor shall have
determined, as evidenced by a resolution thereof, that the proposed
sale, transfer or disposition of said shares of stock is in the best
interests of the Guarantor;
(3) said shares of stock are sold, transferred or otherwise
disposed of to a Person, for a cash consideration and on terms
reasonably deemed by the Board of Directors to be adequate and
satisfactory;
(4) the Significant Subsidiary being disposed of shall not
have any continuing investment in the Guarantor or any other
Significant Subsidiary not being simultaneously disposed of;
(5) such sale or other disposition does not involve more
than an insubstantial part (as hereinafter defined) of the assets of
the Guarantor and its Significant Subsidiaries.
(d) Notwithstanding any contrary provisions of this
Guaranty, the Guarantor shall at all times own 100% of the
outstanding common stock of CWC and at least 95% of the outstanding
common stock of the Company.
(e) The Guarantor shall not permit CWC to sell, transfer or
otherwise dispose of more than an insubstantial part (as defined in
Paragraph (f) of this Section 7.8) of its assets ( other than in its
ordinary course of business) (a "CWC Disposition") unless (i) an
amount at least equal to 75% of the net proceeds of such CWC
Disposition received by CWC is, within three months of the date of
such CWC Disposition, used to prepay the Notes at any applicable
prepayment premium, on a pro rata basis, in accordance with Section
2.2 of the Note Agreement, or (ii) an amount at least equal to 75%
of the net proceeds of such CWC Disposition received by CWC were or
are, within ten months of the date of such CWC Disposition, applied
to the acquisition of fixed assets useful and intended to be used in
the operation of the business of CWC and having a fair market value
(as determined in good faith by the Board of Directors of the
Company) at least equal to that of the assets so disposed of.
(f) (i) For purposes Sections 7.8(a) and (c), a sale,
transfer or other disposition shall be deemed to be more than an
"insubstantial part" of the assets of the Guarantor and its
Significant Subsidiaries if the fair market value of the assets to
be sold, transferred or otherwise disposed of (determined in good
faith by a resolution adopted by the Board of Directors of the
Guarantor), together with the fair market value of all other assets
previously disposed of during the immediately preceding 12-month
period ending on the date of such sale, transfer or other
disposition, exceeds $100,000; (ii) for purposes of Section 7.8(e),
a sale, transfer or other disposition by CWC shall be deemed to be
more than an "insubstantial part" of the assets of CWC if the fair
market value of the assets to be sold,
10
transferred or otherwise disposed of (determined in good faith by a
resolution adopted by the Board of Directors of CWC), together with
the fair market value of all other assets sold, transferred or
otherwise disposed of in the immediately preceding 12-month period
ending on the date of such sale, transfer or other disposition,
exceeds $500,000; provided that the sale, transfer or other
disposition by CWC of any Class III Land shall not be subject to the
requirements of Section 7.8(e).
7.9 Guaranties. The Guarantor will not, and will not permit any
Significant Subsidiary to, become or be liable in respect of any Guaranty except
Guaranties by the Guarantor which are limited in amount to a stated maximum
dollar exposure or which constitute Guaranties of obligations incurred by the
Company or any Significant Subsidiary in compliance with the provisions of this
Agreement.
7.10 Use of Real Property.
(a) The Guarantor will not, and will not permit any member of the
Restricted Group to, use, sell, lease or otherwise dispose of any of its
real property in a manner which could impair in any material respect the
business of the Company as a corporation principally engaged in the
storage, transmission and sale of water for domestic, industrial and
commercial uses, and activities related thereto (the "Company's
Business").
(b) Prior to any change in use by any Significant Subsidiary
(other than Barlaco) of any of its real property (including a Disposition
to any other Person), the Guarantor will furnish or cause to be furnished
to each holder of the Notes a hydrological assessment of the property in
view of the proposed use by a Hydrogeologist stating that the proposed use
could not reasonably be expected to impair in any material respect the
Company's Business.
"Hydrogeologist" shall mean a hydrogeologist who is (i) certified by
the National Water Well Association as a certified groundwater professional, or
(ii) a member of the American Institute of Professional Geologists having
appropriate academic and work experience in hydrogeology or (iii) a member of
the American Institute of Hydrology having appropriate academic and work
experience in hydrology.
7.11 Purchase of Notes. Neither the Guarantor nor any Significant
Subsidiary or Affiliate, directly or indirectly, may purchase or make any offer
to purchase any Notes unless an offer has been made to purchase Notes, pro rata,
from all holders of the Notes at the same time and upon the same terms. In case
the Guarantor purchases or otherwise acquires any Notes, such Notes shall
immediately thereafter be cancelled and no Notes shall be issued in substitution
therefor. Without limiting the foregoing, upon the purchase or other acquisition
of any Notes by the Guarantor, any Significant Subsidiary or any Affiliate, such
Notes shall no longer be outstanding for purposes of any section of the Note
Agreement relating to the taking by the holders of the Notes of any actions with
respect thereto, including, without limitation, Section 6.3, Section 6.4 and
Section 7.1 of the Note Agreement.
7.12 Transactions with Affiliates. The Guarantor will not, and will
not permit any Significant Subsidiary to, enter into or be a party to any
transaction or arrangement with any
11
Affiliate (including, without limitation, the purchase from, sale to or exchange
of property with, or the rendering of any service by or for, any Affiliate),
except in the ordinary course of and pursuant to the reasonable requirements of
the Guarantor's or such Significant Subsidiary's business and upon fair and
reasonable terms no less favorable to the Guarantor or such Significant
Subsidiary than would obtain in a comparable arm's-length transaction with a
Person other than an Affiliate; provided that notwithstanding the foregoing, the
Guarantor may permit the Company and Barlaco to be parties to the Real Estate
Lease.
7.13 Reports. The Guarantor will keep, and will cause CWC and each
Significant Subsidiary to keep, proper books of record and account in which full
and correct entries will be made of all dealings or transactions of, or in
relation to, the business and affairs of the Guarantor or such Significant
Subsidiary, in accordance with GAAP consistently applied (except for changes
disclosed in the financial statements furnished to the Note Purchaser pursuant
to this Section 7.13 and concurred in by the independent public accountants
referred to in Section 7.13(b) hereof), and will furnish to the Note Purchaser
so long as it is the holder or any Note and to each other Institutional Holder
of the then outstanding Notes (in duplicate if so specified below or otherwise
requested):
(a) Quarterly Statements. As soon as available and in any event
within 75 days after the end of the first quarterly fiscal period and
within 60 days after the end of each other quarterly fiscal period of each
fiscal year, copies of:
(1) consolidated balance sheets of the Guarantor and its
consolidated subsidiaries as of the close of such quarterly fiscal
period, setting forth in comparative form the consolidated figures
for the fiscal year then most recently ended,
(2) consolidated statements of income of the Guarantor and
its consolidated subsidiaries for such quarterly fiscal period and
for the portion of the fiscal year ending with such quarterly fiscal
period, in each case setting forth in comparative form the
consolidated figures for the corresponding periods of the preceding
fiscal year, and
(3) consolidated statements of cash flows of the Guarantor
and its consolidated subsidiaries for the portion of the fiscal year
ending with such quarterly fiscal period, setting forth in
comparative form the consolidated figures for the corresponding
period of the preceding fiscal year,
all in reasonable detail prepared in conformity with GAAP and certified as
complete and correct by an authorized financial officer of the Guarantor;
(b) Annual Statements. As soon as available and in any event
within 120 days after the close of each fiscal year of the Guarantor,
copies of:
(1) consolidated balance sheets of the Guarantor and its
consolidated subsidiaries as of the close of such fiscal year, and
12
(2) consolidated statements of income and retained earnings
and cash flows of the Guarantor and its consolidated subsidiaries
for such fiscal year,
in each case setting forth in comparative form the consolidated figures
for the preceding fiscal year, all in reasonable detail and accompanied by
a report thereon of a firm of independent public accountants of recognized
national standing selected by the Guarantor to the effect that the
consolidated financial statements present fairly, in all material
respects, the consolidated financial position of the Guarantor and its
consolidated subsidiaries as of the end of the fiscal year being reported
on and the consolidated results of the operations and cash flows for said
year in conformity with GAAP and that the examination of such accountants
in connection with such financial statements has been conducted in
accordance with generally accepted auditing standards and included such
tests of the accounting records and such other auditing procedures as said
accountants deemed necessary in the circumstances;
(c) Audit Reports. Promptly upon receipt thereof, one copy of each
interim or special audit made by independent accountants of the books of
the Guarantor or any Significant Subsidiary and any management letter
received from such accountants;
(d) SEC and Other Reports. Promptly upon their becoming available,
one copy of each financial statement, report, notice or proxy statement
sent by the Guarantor to common stockholders generally and of each regular
or periodic report, and any registration statement or prospectus filed by
the Guarantor or CWC with any securities exchange or the Securities and
Exchange Commission or any successor agency, and copies of any material
orders in any material proceedings to which the Guarantor, CWC or any
Significant Subsidiary is a party, issued by any governmental agency,
Federal or state, having jurisdiction over the Guarantor, CWC or any
Significant Subsidiary;
(e) Officer's Certificates. Within the periods provided in
paragraphs (a) and (b) above, a certificate of an authorized financial
officer of the Guarantor stating that such officer has reviewed the
provisions of this Agreement and setting forth: (i) the information and
computations (in sufficient detail) required in order to establish whether
the Guarantor was in compliance with the requirements of Section 7.2
through Section 7.12 at the end of the period covered by the financial
statements then being furnished, and (ii) whether there existed as of the
date of such financial statements and whether, to the best of such
officer's knowledge, there exists on the date of the certificate or
existed at any time during the period covered by such financial statements
any default under any of the terms or provisions of this Agreement and, if
any such condition or event exists on the date of the certificate,
specifying the nature and period of existence thereof and the action the
Company is taking and proposes to take with respect thereto;
(f) Accountants' Certificates. Within the period provided in
paragraph (b) above, a certificate of the accountants who render an
opinion with respect to such financial statements, stating that they have
reviewed this Agreement and stating further whether, in making their
audit, such accountants have become aware of any default under any of the
terms or provisions of this Agreement insofar as any such terms or
provisions
13
pertain to or involve accounting matters or determinations, and if any
such condition or event then exists, specifying the nature and period of
existence thereof;
(g) Requested Information. With reasonable promptness, such other
data and information as the Note Purchaser or any such Institutional
Holder may reasonably request;
(h) Alternative Financial Statements. Within the respective
periods provided in paragraphs (a) and (b) above, financial statements of
the character and for the dates and periods as in said paragraphs (a) and
(b) provided covering the Guarantor, CWC and the Significant Subsidiaries
if any subsidiary or subsidiaries of the Guarantor (other than CWC and
the Significant Subsidiaries) individually or in the aggregate constitute
more than 10% of the aggregate assets (determined in accordance with GAAP)
of the Guarantor and its consolidated subsidiaries or contribute
individually or in the aggregate more than 10% of net income (determined
in accordance with GAAP) of the Guarantor and its consolidated
subsidiaries; and
(i) The Guarantor may comply with the requirements of paragraphs
(a) and (b) of this Section 7.13 by providing each Institutional Holder of
the Notes with a copy of the Guarantor's SEC Reports on Form 10-K (in the
case of paragraph (b)) and the applicable quarterly reports on Form 10-Q
(in the case of paragraph (a)), so long as such Forms 10-K and l0-Q
contain substantially the same financial information described in clauses
(a) and (b) above and in the case of clause (b), the auditors opinion.
7.14 CWC. The Guarantor shall cause CWC to maintain at all times
CWC Tangible Net Worth of not less than $50,000,000.
SECTION 8. REQUIRED PURCHASE OF NOTES ON GUARANTOR CHANGE OF CONTROL.
In the event that a Guarantor Change of Control shall occur or the
Guarantor shall have knowledge of any impending Guarantor Change of Control, the
Guarantor shall give written notice thereof (a "Guarantor Notice") promptly
(and in any event within three business days thereafter) to each holder of the
Notes then outstanding. The Guarantor Notice shall (i) describe in reasonable
detail the facts and circumstances giving rise to such Guarantor Change of
Control, (ii) offer to purchase, on a date (the "Change of Control Purchase
Date") which shall be not less than 30 days nor more than 60 days after the date
of the Guarantor Notice, all of the Notes held by such holder, at a price equal
to 100% of the principal amount of Notes so to be prepaid, accrued interest
thereon to the Change of Control Purchase Date, together with the then
applicable Make-Whole Amount, (iii) request such holder to notify the Guarantor
in writing, not less than 10 days prior to the Change of Control Purchase Date,
of its acceptance or rejection of such offer, (iv) inform such holder that, upon
its receipt of the Guarantor Notice, failure to reject such offer in writing on
or before the l0th day prior to the Change of Control Purchase Date shall be
deemed acceptance of such offer and (v) set forth the respective names and
addresses of, and principal amounts of the Notes held by, any other holders of
the Notes then outstanding. Not less than two business days prior to the Change
of Control Purchase Date, the Guarantor shall
14
provide each holder of the Notes with a reasonably detailed computation of the
Make-Whole Amount.
The Guarantor covenants and agrees that it will on the Change of
Control Purchase Date purchase, or cause to be purchased, all of the Notes held
by each holder of the Notes then outstanding which has accepted the purchase
offer in accordance with this Section 8, by payment of the principal amount of
such Notes, together with interest accrued on the unpaid principal amount of
such Notes to the Change of Control Purchase Date and the then applicable Make-
Whole Amount.
For purposes of this Section 8, the following terms shall have the
meanings ascribed thereto below:
"Control Group" shall mean any related Persons constituting a
"group" for the purposes of Section l3(d) of the Securities Exchange Act of
1934, as amended (other than the Designated Shareholders).
"Guarantor Change of Control" shall mean the occurrence after the
date of this Guaranty of any event which results in either (i) the legal or
beneficial ownership of more than 35% of the outstanding shares of Voting Stock
of the Guarantor being owned by any Person or Control Group, or (ii) any Person
or Control Group having the power to elect, appoint or cause the election or
appointment of, at least a majority of the members of the Board of Directors of
the Guarantor through beneficial ownership of capital stock of the Guarantor or
otherwise.
SECTION 9. DEFINITIONS.
In addition to the terms defined in the Note Agreement or elsewhere
in this Agreement, and unless the context otherwise requires, the terms
hereinafter set forth when used herein shall have the following meanings and the
following definitions shall be equally applicable to both the singular and
plural forms of any of the terms herein defined:
"Barlaco" shall mean Barlaco, Inc., a Massachusetts corporation.
"Class III Land" shall mean any land designated as Class III land by
the Connecticut Department of Health.
"Consolidated Net Income" for any period shall mean the gross
revenues of the Guarantor and its consolidated subsidiaries for such period less
all expenses and other proper charges (including taxes on income), determined on
a consolidated basis after eliminating earnings or losses attributable to
outstanding Minority Interests, but excluding in any event:
(a) any gains or losses on the sale or other disposition of
Investments or fixed or capital assets, and any taxes on such excluded
gains and any tax deductions or credits on account of any such excluded
losses;
(b) the proceeds of any life insurance policy;
15
(c) net earnings and losses of any consolidated subsidiary accrued
prior to the date it became a consolidated subsidiary;
(d) net earnings and losses of any corporation (other than a
consolidated subsidiary), substantially all the assets of which have been
acquired in any manner by the Guarantor or any consolidated subsidiary,
realized by such corporation prior to the date of such acquisition;
(e) net earnings and losses of any corporation (other than a
consolidated subsidiary) with which the Guarantor or a consolidated
subsidiary shall have consolidated or which shall have merged into or with
the Guarantor or a consolidated subsidiary prior to the date of such
consolidation or merger;
(f) net earnings of any business entity (other than a consolidated
subsidiary) in which the Guarantor or any consolidated subsidiary has an
ownership interest unless such net earnings shall have actually been
received by the Guarantor or such consolidated subsidiary in the form of
cash distributions;
(g) any portion of the net earnings of any consolidated subsidiary
which for any reason is unavailable for payment of dividends to the
Guarantor or any other consolidated subsidiary;
(h) earnings resulting from any reappraisal, revaluation or
write-up of assets;
(i) any deferred or other credit representing any excess of the
equity in any Subsidiary at the date of acquisition thereof over the
amount invested in such Subsidiary;
(j) any gain arising from the acquisition of any Securities of the
Guarantor or any consolidated subsidiary; and
(k) any reversal of any contingency reserve, except to the extent
that provision for such contingency reserve shall have been made from
income arising during such period.
"Consolidated Net Tangible Assets" shall mean as of the date of any
determination thereof the total amount of all Tangible Assets of the Guarantor
and its consolidated subsidiaries after deducting therefrom all Restricted
Investments and all items which in accordance with GAAP would be included on the
liability and equity side of a consolidated balance sheet, except deferred
income taxes, deferred investment tax credits, capital stock of any class,
surplus and Funded Debt of the Guarantor and its consolidated subsidiaries.
"Consolidated Tangible Net Worth" shall mean as of the date of any
determination thereof Consolidated Net Tangible Assets less all outstanding
Funded Debt, deferred income taxes and deferred investment tax credits of the
Guarantor and its consolidated subsidiaries.
"CWC" shall mean The Connecticut Water Company, a Connecticut
corporation and a subsidiary of the Guarantor.
16
"CWC Net Tangible Assets" shall mean as of the date of any
determination thereof the total amount of all CWC Tangible Assets after
deducting therefrom all Restricted Investments and all items which in accordance
with GAAP would be included on the liability and equity side of a consolidated
balance sheet, except deferred income taxes, deferred investment tax credits,
capital stock of any class, surplus and Funded Debt of CWC and its subsidiaries.
"CWC Tangible Assets" shall mean as of the date of any determination
thereof the total amount of all assets of CWC and its subsidiaries (less
depreciation, depletion and other properly deductible valuation reserves) after
deducting good will, patents, trade names, trade marks, copyrights, franchises,
experimental expense, organization expense, unamortized debt discount and
expense, deferred assets other than prepaid insurance and prepaid taxes, the
excess of cost of shares acquired over book value of related assets and such
other assets as are properly classified as "intangible assets" in accordance
with GAAP.
"CWC Tangible Net Worth" shall mean as of the date of any
determination thereof CWC Net Tangible Assets less all outstanding Funded Debt,
deferred income taxes and deferred investment tax credits of CWC and its
subsidiaries.
"Disposition" is defined in Section 7.8(a).
"Fixed Charges" for any period shall mean on a consolidated basis
the sum of (i) all Rentals (other than Rentals on Capitalized Leases) payable
during such period by the Guarantor and its consolidated subsidiaries and (ii)
all interest and all amortization of debt discount and expense on all
Indebtedness (including the interest component of Rentals on Capitalized Leases)
of the Guarantor and its consolidated subsidiaries. Computations of Fixed
Charges on a pro forma basis for Indebtedness having a variable interest rate
shall be calculated at the rate in effect on the date of any determination.
"Group Current Debt" shall mean Current Debt of the Guarantor and
its consolidated subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Group Funded Debt" shall mean Funded Debt of the Guarantor and its
consolidated subsidiaries, determined on a consolidated basis eliminating
intercompany items.
"Guaranty" shall mean this Guaranty Agreement as the same may from
time to time be amended or modified.
"Minority Interests" shall mean any shares of stock of any class of
a consolidated subsidiary (other than directors' qualifying shares as required
by law) that are not owned by the Guarantor and/or one or more of its
consolidated subsidiaries. Minority Interests shall be valued by valuing
Minority Interests constituting preferred stock at the voluntary or involuntary
liquidating value of such preferred stock, whichever is greater, and by valuing
Minority Interests constituting common stock at the book value of capital and
surplus applicable thereto adjusted, if necessary, to reflect any changes from
the book value of such common stock required by the foregoing method of valuing
Minority Interests in preferred stock.
17
"Net Income Available for Fixed Charges" for any period shall mean
the sum of (i) Consolidated Net Income during such period plus (to the extent
deducted in determining Consolidated Net Income), (ii) all provisions for any
Federal, state or other income taxes made by the Guarantor and its consolidated
subsidiaries during such period and (iii) Fixed Charges of the Guarantor and its
consolidated subsidiaries during such period.
"Pro Forma Fixed Charges" for any period shall mean, as of the date
of any determination thereof, the maximum aggregate amount of Fixed Charges
which would have become payable by the Guarantor and its consolidated
subsidiaries in such period determined on a pro forma basis giving effect as of
the beginning of such period to the incurrence of any Funded Debt (including
Capitalized Rentals) and the concurrent retirement of outstanding Funded Debt or
Current Debt or termination of any Capitalized Leases.
"Real Estate Lease" shall mean that certain real estate lease
between Barlaco, as lessor, and the Company, as lessee, executed by the parties
thereto as of November 1, 1991, with a term beginning January 1, 1991.
"Restricted Group" shall mean collectively the Guarantor, its
consolidated subsidiaries and affiliates.
"Significant Subsidiary" shall mean the Prior Guarantor, the Company
and Barlaco and any subsidiary of the Prior Guarantor, the Company and Barlaco
(i) which is organized under the laws of the United States or any State thereof;
(ii) which conducts substantially all of its business and has substantially all
of its assets within the United States; and (iii) of which more than 80% (by
number of votes) of the Voting Stock is beneficially owned, directly or
indirectly, by the Prior Guarantor, the Company and Barlaco.
"Tangible Assets" shall mean as of the date of any determination
thereof the total amount of all assets of the Guarantor and its consolidated
subsidiaries (less depreciation, depletion and other properly deductible
valuation reserves) after deducting good will, patents, trade names, trade
marks, copyrights, franchises, experimental expense, organization expense,
unamortized debt discount and expense, deferred assets other than prepaid
insurance and prepaid taxes, the excess of cost of shares acquired over book
value of related assets and such other assets as are properly classified as
"intangible assets" in accordance with GAAP.
"Total Capitalization" shall mean, at any date of determination
thereof, the sum of (i) the aggregate principal amount of all Group Funded Debt
then outstanding plus Consolidated Tangible Net Worth as of such date.
"Wholly-owned Significant Subsidiary" shall mean a Significant
Subsidiary of which all of the issued and outstanding shares of common stock
(except shares required as directors' qualifying shares) and all Funded Debt and
Current Debt shall be owned by the Guarantor and/or one or more of its
Wholly-owned Significant Subsidiaries.
SECTION 10. JURISDICTION AND SERVICE IN RESPECT OF GUARANTOR.
The Guarantor hereby irrevocably submits to the jurisdiction of the
courts of the Commonwealth of Massachusetts and of the courts of the United
States of America having
18
jurisdiction in the Commonwealth of Massachusetts for the purpose of any legal
action or proceeding in any such court with respect to, or arising out of, this
Agreement. The Guarantor hereby designates and appoints the Secretary of State
of Massachusetts, and its successors as the Guarantor's lawful agent in the
Commonwealth of Massachusetts upon which may be served and which may accept and
acknowledge, for and on behalf of the Guarantor, all process in any action, suit
or proceeding that may be brought against the Guarantor in any of the courts
referred to in this Section, and agrees that such service of process, or the
acceptance or acknowledgment thereof by said agent, shall be valid, effective
and binding in every respect. If any Noteholder shall cause process to be served
upon the Guarantor by being served upon such agent, a copy of such process shall
also be mailed to the Guarantor by United States registered mail, first class
postage prepaid, at 47 Old Yarmouth Road, Hyannis, Massachusetts 02601-0326,
Attention: President or to such other address as the Guarantor may in writing
designate to the Note Purchaser or to a subsequent Noteholder.
SECTION 11. SUCCESSORS AND ASSIGNS.
All covenants and agreements contained in this Agreement by or on
behalf of the Guarantor shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the Note Purchaser and each and
every Noteholder.
SECTION 12. NOTICES.
All communications provided for hereunder shall be in writing and,
if to you, delivered or mailed prepaid by registered or certified mail or
overnight air courier, or by facsimile communication, in each case addressed to
you at 699 Walnut Street, Suite 1700, Des Moines, Iowa 50305 or such other
address as you or the subsequent holder of any Note initially issued to you may
designate to the Company in writing, and if to the Company, delivered or mailed
by registered or certified mail or overnight air courier, or by facsimile
communication, to the Company at 93 West Main Street, Clinton, CT 06413,
Attention: President or to such other address as the Company may in writing
designate to you or to a subsequent holder of the Note initially issued to you;
provided, however, that a notice to you by overnight air courier shall only be
effective if delivered to you at the street address designated above, and a
notice to you by facsimile communication shall only be effective if made by
confirmed transmission to you at [fax], or, in either case, as you or a
subsequent holder of any Note initially issued to you may designate to the
Company in writing.
SECTION 13. GOVERNING LAW.
This Agreement and all rights arising hereunder shall be governed by
and construed in accordance with Massachusetts law.
SECTION 14. AMENDMENTS, WAIVERS AND CONSENTS.
14.1 Consent Required. Any term, covenant, agreement or condition
of this Agreement may, with the consent of the Guarantor, be amended or
compliance therewith may be waived (either generally or in a particular instance
and either retroactively or prospectively), if the Guarantor shall have obtained
the consent in writing of the holders of at least 66-2/3% in aggregate principal
amount of outstanding Notes; provided that without the written consent of
19
the holders of all of the Notes then outstanding, no such waiver, modification,
alteration or amendment shall be effective which will reduce the scope of the
guaranty set forth in this Agreement or amend the requirements of Section 1,
Section 2, Section 3, Section 8 or this Section 14.
14.2 Solicitation of Noteholders. So long as there are any Notes
outstanding, the Guarantor will not solicit, request or negotiate for or with
respect to any proposed waiver or amendment of any of the provisions of this
Agreement or the Notes unless each Noteholder (irrespective of the amount of
Notes then owned by it) shall be informed thereof by the Guarantor and shall be
afforded the opportunity of considering the same and shall be supplied by the
Guarantor with sufficient information to enable it to make an informed decision
with respect thereto. The Guarantor will not, directly or indirectly, pay or
cause to be paid any remuneration, whether by way of supplemental or additional
interest, fee or otherwise, to any Noteholder as consideration for or as an
inducement to entering into by any Noteholder of any waiver or amendment of any
of the terms and provisions of this Agreement unless such remuneration is
concurrently offered, on the same terms, ratably to all Noteholders then
outstanding.
14.3 Effect of Amendment or Waiver. Any such amendment or waiver
shall apply equally to all of the Noteholders and shall be binding upon them,
upon each future Noteholder and upon the Guarantor, whether or not such Note
shall have been marked to indicate such amendment or waiver. No such amendment
or waiver shall extend to or affect any obligation not expressly amended or
waived or impair any right consequent thereon.
20
The execution hereof by you shall constitute a contract between us
for the uses and purposes hereinabove set forth, and this Guaranty may be
executed in any number of counterparts, each executed counterpart constituting
an original but all together only one agreement.
CONNECTICUT WATER SERVICE, INC.
By: /s/: David C. Benoit
---------------------------
David C. Benoit
Vice President
Accepted as of February 23, 2001
INDIANAPOLIS LIFE INSURANCE COMPANY
By AmerUs Capital Management,
as authorized agent
By: /s/: Roger D. Fors
--------------------
Its Roger D. Fors
V.P. Investment Management & Research
21
SCHEDULE A
REPRESENTATIONS AND WARRANTIES
The Guarantor represents and warrants to you as follows:
1. Subsidiaries. Annex 1 attached hereto states the name of each
of the Guarantor's consolidated subsidiaries, its jurisdiction of incorporation
and the percentage of its Voting Stock owned by the Guarantor or its
subsidiaries. The Guarantor and each consolidated subsidiary has good and
marketable title to all of the shares it purports to own of the stock of each
consolidated subsidiary, free and clear in each case of any Lien. All such
shares have been duly issued and are fully paid and non-assessable.
2. Corporate Organization and Authority. The Guarantor, CWC and
each Significant Subsidiary:
(a) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation;
(b) has all requisite power and authority and all necessary licenses and
permits to own and operate its properties and to carry on its
business as now conducted and as presently proposed to be conducted;
and
(c) is duly licensed or qualified and is in good standing as a foreign
corporation in each jurisdiction wherein the nature of the business
transacted by it or the nature of the property owned or leased by it
makes such licensing or qualification necessary.
3. Financial Statements. The December 31, 2000 financial
statements of the Guarantor and its consolidated subsidiaries are true and
complete in all material aspects.
4. Indebtedness. The financial statements referred to in
Paragraph 3 correctly describe all Current Debt, Funded Debt and Capitalized
Leases of the Guarantor and its consolidated subsidiaries outstanding as of the
date thereof.
5. Full Disclosure. Neither the Guaranty nor any other written
statement furnished by the Guarantor to you in connection with the negotiation
of the Consent and Waiver of the Guaranty contains any untrue statement of a
material fact or omits a material fact necessary to make the statements
contained therein or herein not misleading. There is no fact peculiar to the
Guarantor, CWC, and its Significant Subsidiaries which the Guarantor has not
disclosed to you in writing or in public filings with the Securities and
Exchange Commission which materially affects adversely nor, so far as the
Guarantor can now foresee, will materially affect adversely the properties,
business, prospects, profits or condition (financial or otherwise) of the
Guarantor, CWC, or its Significant Subsidiaries, taken as a whole.
6. Pending Litigation. Except as may be disclosed pursuant to
Paragraph 5, there are no proceedings pending or, to the knowledge of the
Guarantor, threatened against or affecting the Guarantor, CWC, or its
Significant Subsidiaries in any court or before any governmental authority or
arbitration board or tribunal which involve the possibility of
materially and adversely affecting the properties, business, prospects, profits
or condition (financial or otherwise) of the Guarantor, CWC, and its Significant
Subsidiaries taken as a whole.
7. Title to Properties. The Guarantor and CWC each has good and
marketable title in fee simple (or its equivalent under applicable law) to all
material parcels of real property and has good title to all the other material
items of property it purports to own except as sold or otherwise disposed of in
the ordinary course of business and except for Liens permitted by the Guaranty.
8. Patents and Trademarks. The Company, CWC and each Significant
Subsidiary owns or possesses all the patents, trademarks, trade names, service
marks, copyright, licenses and rights with respect to the foregoing necessary
for the present and planned future conduct of its business, without any known
conflict with the rights of others.
9. Guaranty is Legal and Authorized. Compliance by the Guarantor
with all of the provisions of the Guaranty
(a) is within the corporate powers of the Guarantor;
(b) will not violate any provisions of any law or any order of any
court or governmental authority or agency and will not conflict with or result
in any breach of any of the terms, conditions or provisions, or constitute a
default under the Certificate of Incorporation or By-laws of the Guarantor or
any indenture or other agreement or instrument to which the Guarantor is a party
or by which it may be bound or result in the imposition of any Liens or
encumbrances on any property of the Guarantor; and
(c) has been duly authorized by proper corporate action on the
part of the Guarantor (no action by the stockholders of the Guarantor being
required by law, by the Certificate of Incorporation or By-laws of the Guarantor
or otherwise), executed and delivered by the Guarantor and the Guaranty
constitutes the legal, valid and binding obligation, contract and agreement of
the Guarantor enforceable in accordance with its terms.
10. No Defaults. No Default or Event of Default has occurred and
is continuing. Neither the Guarantor nor CWC is in default in the payment of
principal or interest on any Funded Debt or Current Debt or is in default under
any instrument or instruments or agreements under and subject to which any
Funded Debt or Current Debt has been issued and no event has occurred and is
continuing under the provisions of any such instrument or agreement which with
the lapse of time or the giving of notice, or both, would constitute an event of
default thereunder.
11. Governmental Consent. No approval, consent or withholding of
objection on the part of any regulatory body, state, Federal or local, is
necessary in connection with the execution and delivery by the Guarantor of the
Guaranty or compliance by the Guarantor with any of the provisions of the
Guaranty.
12. Taxes. All tax returns required to be filed by the Guarantor,
CWC or any Significant Subsidiaries in any jurisdiction have, in fact, been
filed, and all taxes, assessments,
A-2
SCHEDULER
LIENS EXISTING AS OF JANUARY 31, 2001
NONE
ANNEX L
SUBSIDIARIES OF THE GUARANTOR
Percentage of Common Stock
Owned by the Guarantor and
Name of Subsidiary Jurisdiction of Incorporation each Other Subsidiary
- ------------------ ----------------------------- ---------------------
The Connecticut Water Company Connecticut 100%
Chester Realty, Inc. Connecticut 100%
Connecticut Water Utility Svc. Connecticut 100%
Connecticut Water Emergency Svc. Connecticut 100%
Gallup Water Service, Inc. Connecticut 100%
Crystal Water Utilities Connecticut 100%
Corporation
Crystal Water Co. of Danielson Connecticut 100%
Barnstable Holding Company Connecticut 100%
Barnstable Water Company Massachusetts
BARLACO Massachusetts
ANNEX l
(to Exhibit A)
EXHIBIT 10.27
BARNSTABLE WATER COMPANY
SECOND AMENDMENT
Dated as of February 23, 2001
To
NOTE AGREEMENT
Dated as of February 15, 1991
Re: $2,000,000 10.2% Senior Notes
Due February 15, 2011
SECOND AMENDMENT TO NOTE AGREEMENT
THIS SECOND AMENDMENT dated as of February 23, 2001 (the or this "Second
Amendment") to the Note Agreement dated as of February 15, 1991 is between
BARNSTABLE WATER COMPANY, a Massachusetts corporation (the "Company"), and
INDIANAPOLIS LIFE INSURANCE COMPANY (the "Noteholder").
RECITALS:
A. The Company and the Noteholder have heretofore entered into that
certain Note Agreement dated as of February 15, 1991, as amended by that certain
Amendment Agreement dated as of June 1, 1992 (as so amended, the "Note
Agreement"). The Company has heretofore issued the $2,000,000 10.2% Senior Notes
Due February 15, 2011 (the "Notes") pursuant to the Note Agreement.
B. The Company and the Noteholder now desire to amend the Note Agreement
in the respects, but only in the respects, hereinafter set forth.
C. Capitalized terms used herein shall have the respective meanings
ascribed thereto in the Note Agreement unless herein defined or the context
shall otherwise require.
D. All requirements of law have been fully complied with and all other
acts and things necessary to make this Second Amendment a valid, legal and
binding instrument according to its terms for the purposes herein expressed have
been done or performed.
Now, THEREFORE, upon the full and complete satisfaction of the conditions
precedent to the effectiveness of this Second Amendment set forth in Section 3.1
hereof, and in consideration of good and valuable consideration the receipt and
sufficiency of which is hereby acknowledged, the Company and the Noteholder do
hereby agree as follows:
SECTION 1. AMENDMENTS.
1.1. Subsections (d), (e), (g), (k), (m), (n), (o) and (p),
respectively, of Section 6.1 of the Note Agreement shall be and are hereby
amended in their entirely to read as follows:
"(d) Default shall be made in the payment when due (whether by
lapse of time, by declaration, by call for redemption or otherwise) of the
principal of or interest on any Funded Debt or Current Debt (other than
the Notes) of (i) the Guarantor, the Company or any Restricted Subsidiary
or (ii) CWC (insofar as such Funded Debt or Current Debt of CWC is
outstanding in an aggregate principal amount of at least $5,000,000), and
such default shall continue beyond the period of grace, if any, allowed
with respect thereto; or
(e) Default or the happening of any event shall occur under any
indenture, agreement or other instrument under which any Funded Debt or
Current Debt of the Guarantor, the Company, any Restricted Subsidiary or
CWC may be issued and such default or event shall continue for a period of
time sufficient to permit the acceleration of the maturity of any Funded
Debt or Current Debt of (i) the Guarantor, the Company or any Restricted
Subsidiary or (ii) CWC (insofar as such Funded Debt or Current Debt of CWC
is outstanding in an aggregate principal amount of at least $5,000,000),
outstanding thereunder; or
(g) Default shall occur in the observance or performance of any
covenant or agreement contained in Sections 7.3 through 7.8, both
inclusive, or Section 7.10 or Section 7.14 or Section 8 of the Guaranty;
or
(k) Any representation or warranty made by Guarantor in the
Guaranty, or made by the Guarantor or CWC in any statement or certificate
furnished by the Guarantor or CWC, as the case maybe, pursuant thereto or
hereto, is untrue in any material respect as of the date of the issuance
or making thereof; or
(m) (i) Final judgment or judgments for the payment of money
aggregating in excess of $100,000 is or are outstanding against the
Guarantor, the Company or any Restricted Subsidiary or against any
property or assets of either and anyone of such judgments has remained
unpaid, unvacated, unbonded or unstayed by appeal or otherwise for a
period of 60 days from the date of its entry or (ii) final judgment or
judgments for the payment of money aggregating in excess of $1,000,000 is
or are outstanding against CWC or against any property or assets of CWC
and anyone of such judgments has remained unpaid, unvacated, unbonded or
unstayed by appeal or otherwise for a period of 60 days from the date of
its entry; or
(n) A custodian, liquidator, trustee or receiver is appointed for
the Guarantor, the Company, any Restricted Subsidiary or CWC or for the
major part of the property of either and is not discharged within 60 days
after such appointments; or
(o) The Guarantor, the Company, any Restricted Subsidiary or CWC
becomes insolvent or bankrupt, is generally not paying its debts as they
become due or makes an assignment for the benefit of creditors, or the
Guarantor, the Company, any Restricted Subsidiary or CWC applies for or
consents to the appointment of a custodian, liquidator, trustee or
receiver for the Guarantor, the Company, such Restricted Subsidiary or CWC
or for the major part of the property of any such Person; or
(p) Bankruptcy, reorganization, arrangement or insolvency
proceedings, or other proceedings for relief under any bankruptcy or
similar law or laws for the relief of debtors, are instituted by or
against the Guarantor, the
2
Company, any Restricted Subsidiary or CWC and, if instituted against the
Guarantor, the Company, any Restricted Subsidiary or CWC, as the case may
be, are consented to or are not dismissed within 60 days after such
institution."
1.2. The following definitions set forth in Section 8.1 of the Note
Agreement shall be and are hereby amended in their entirety to read as follows:
"Guarantor" shall mean Connecticut Water Service, Inc., a
Connecticut corporation of which the Company is an indirect subsidiary and
any Person who succeeds to all or substantially all, of the assets and
business of Connecticut Water Service, Inc.
"Guaranty" shall mean the Guaranty Agreement dated as of February
23, 2001 from the Guarantor in favor of the Purchaser, as the same may
from time to time be amended or modified.
1.3. The following shall be added as a new definition in
alphabetical order to Section 8.1 of the Note Agreement:
"CWC" shall mean The Connecticut Water Company, a Connecticut
corporation and a direct subsidiary of the Guarantor and any Person who
succeeds to all or substantially all, of the assets and business of The
Connecticut Water Company.
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
2.1. To induce the Noteholder to execute and deliver this Second
Amendment (which representations shall survive the execution and delivery of
this Second Amendment), the Company represents and warrants to the Noteholder
that:
(a) this Second Amendment has been duly authorized, executed and
delivered by it and this Second Amendment constitutes the legal, valid and
binding obligation, contract and agreement of the Company enforceable
against it in accordance with its terms, except as enforcement may be
limited by bankruptcy, insolvency, reorganization, moratorium or similar
laws or equitable principles relating to or limiting creditors' rights
generally;
(b) the Note Agreement, as amended by this Second Amendment,
constitutes the legal, valid and binding obligation, contract and
agreement of the Company enforceable against it in accordance with its
terms, except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally;
(c) the execution, delivery and performance by the Company of this
Second Amendment (i) has been duly authorized by all requisite corporate
action and, if required, shareholder action, (ii) does not require the
consent or approval of any governmental or
3
regulatory body or agency, and (iii) will not (A) violate (1) any
provision of law, statute, rule or regulation or its certificate of
incorporation or bylaws, (2) any order of any court or any rule,
regulation or order of any other agency or government binding upon it, or
(3) any provision of any material indenture, agreement or other instrument
to which it is a party or by which its properties or assets are or may be
bound, or (B) result in a breach or constitute (alone or with due notice
or lapse of time or both) a default under any indenture, agreement or
other instrument referred to in clause (iii)(A)(3) of this Section 2.1(c);
and
(d) as of the date hereof and after giving effect to this Second
Amendment, no Default or Event of Default has occurred which is
continuing.
SECTION 3. CONDITIONS TO EFFECTIVENESS OF THIS SECOND AMENDMENT.
3.1. This Second Amendment shall not become effective until, and
shall become effective when, each and every one of the following conditions
shall have been satisfied:
(a) executed counterparts of this Second Amendment, duly executed
by the Company and the Noteholder, shall have been delivered to the
Noteholder;
(b) the Noteholder shall have received a copy of the resolutions
of the Board of Directors of the Company authorizing the execution,
delivery and performance by the Company of this Second Amendment,
certified by its Secretary or an Assistant Secretary;
(c) the representations and warranties of the Company set forth
in Section 2 hereof are true and correct on and with respect to the date
hereof; and
(d) the Noteholder shall have received the favorable opinion of
counsel to the Company as to the matters set forth in Sections 2.1(a),
2.1(b) and 2.1(c) hereof, which opinion shall be in form and substance
satisfactory to the Noteholder.
Upon receipt of all of the foregoing, this Second Amendment shall become
effective.
SECTION 4. PAYMENT OF NOTEHOLDER'S COUNSEL FEES AND EXPENSES.
4.1. The Company agrees to pay upon demand, the reasonable fees and
expenses of Chapman and Cutler, counsel to the Noteholder, in connection with
the negotiation, preparation, approval, execution and delivery of this Second
Amendment.
SECTION 5. MISCELLANEOUS.
5.1. This Second Amendment shall be construed in connection with
and as part of the Note Agreement, and except as modified and expressly amended
by this Second Amendment, all terms, conditions and covenants contained in the
Note Agreement and the Notes are hereby ratified and shall be and remain in full
force and effect.
4
5.2. Any and all notices, requests, certificates and other
instruments executed and delivered after the execution and delivery of this
Second Amendment may refer to the Note Agreement without making specific
reference to this Second Amendment but nevertheless all such references shall
include this Second Amendment unless the context otherwise requires.
5.3. The descriptive headings of the various Sections or parts of
this Second Amendment are for convenience only and shall not affect the meaning
or construction of any of the provisions hereof.
5.4. This Second Amendment shall be governed by and construed in
accordance with Massachusetts law.
5
5.5. The execution hereof by you shall constitute a contract
between us for the uses and purposes hereinabove set forth, and this Second
Amendment may be executed in any number of counterparts, each executed
counterpart constituting an original, but all together only one agreement.
BARNSTABLE WATER COMPANY
By: /s/ David C. Benoit
------------------------
David C. Benoit
Its Vice President and CFO
-------------------------
Accepted and Agreed to:
INDIANAPOLIS LIFE INSURANCE COMPANY
By: AmerUs Capital Management,
as authorized agent
By: /s/ Timothy S. Reimer
------------------------
Timothy S. Reimer
Its Senior Vice President Investment Strategy
-----------------------------------------