[BANK OF AMERICA LOGO]
Exhibit 10.1
LOAN AGREEMENT
This Agreement dated as of December 23, 2004, is among Bank of America, N.A.
(the "Bank"), California Water Service Group ("Borrower 1"), CWS Utility
Services ("Borrower 2"), New Mexico Water Service Company ("Borrower 3"),
Washington Water Service Company ("Borrower 4") and Hawaii Water Service Company
("Borrower 5") (Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Borrower 5
are sometimes referred to collectively as the "Borrowers" and individually as
the "Borrower").
1. FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
1.1 Line of Credit Amount.
(a) During the availability period described below, the Bank will provide a
line of credit to the Borrowers. The amount of the line of credit (the
"Facility No. 1 Commitment") is Ten Million and 00/100 Dollars
($10,000,000.00).
(b) This is a revolving line of credit. During the availability period, the
Borrowers may repay principal amounts and reborrow them.
(c) The Borrowers agree not to permit the principal balance outstanding to
exceed the Facility No. 1 Commitment. If the Borrowers exceed this
limit, the Borrowers will immediately pay the excess to the Bank upon
the Bank's demand.
1.2 Availability Period. The line of credit is available between the date
of this Agreement and April 30, 2007, or such earlier date as the
availability may terminate as provided in this Agreement (the "Facility
No. 1 Expiration Date").
1.3 Repayment Terms.
(a) The Borrowers will pay interest on December 31, 2004, and then on the
same day of each month thereafter until payment in full of any
principal outstanding under this facility.
(b) The Borrowers will repay in full any principal, interest or other
charges outstanding under this facility no later than the Facility No.
1 Expiration Date. Any interest period for an optional interest rate
(as described below) shall expire no later than the Facility No. 1
Expiration Date.
1.4 Interest Rate.
(a) The interest rate is a rate per year equal to the Bank's Prime Rate
minus the Applicable Margin as defined below.
(b) The Prime Rate is the rate of interest publicly announced from time to
time by the Bank as its Prime Rate. The Prime Rate is set by the Bank
based on various factors, including the Bank's costs and desired
return, general economic conditions and other factors, and is used as a
reference point for pricing some loans. The Bank may price loans to its
customers at, above, or below the Prime Rate. Any change in the Prime
Rate shall take effect at the opening of business on the day specified
in the public announcement of a change in the Bank's Prime Rate.
1.5 Optional Interest Rates. Instead of the interest rate based on the rate
stated in the paragraph entitled "Interest Rate" above, the Borrowers
may elect the optional interest rates listed below for this Facility
No. 1 during interest periods agreed to by the Bank and the Borrowers.
The optional interest rates shall be subject to the terms and
conditions described later in this Agreement. Any principal amount
bearing interest at an optional rate under this Agreement is referred
to as a "Portion." The following optional interest rates are available:
(a) The LIBOR Rate plus the Applicable Margin as defined below.
1.6 Applicable Margin. The Applicable Margin shall be the following amounts
per annum, based upon the Debt to Capitalization Ratio (as defined
below) as calculated on a consolidated basis from Borrower 1's most
recent financial statement received by the Bank as required in the
Covenants section; provided, however, that until the Bank receives the
first financial statement, such amounts shall be those indicated for
pricing level 1 set forth below:
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Applicable Margin
(in percentage points per annum)
Pricing Level Ratio Prime Rate - LIBOR Rate +
- --------------------------------------------------------------------------------
1 less than 0.50:1.00 1.000 0.775
2 equal to or greater than 0.750 0.900
0.50:1.00 and
less than 0.55:1.00
3 equal to or greater than 0.625 1.025
0.55:1.00 and
less than 0.60:1.00
4 equal to or greater than 0.500 1.150
0.60:1.00
"Debt to Capitalization Ratio" means the ratio of Funded Debt to the sum of Net
Worth plus Funded Debt. "Funded Debt" means all outstanding liabilities for
borrowed money and other interest-bearing liabilities of Borrower 1, including
current and long-term debt. "Net Worth" means the value of Borrower 1's total
assets (including leaseholds and leasehold improvements and reserves against
assets) less its total liabilities, including but not limited to accrued and
deferred income taxes.
The Applicable Margin shall be in effect from the date the most recent financial
statement is received by the Bank until the date the next financial statement is
received; provided, however, that if the Borrowers fail to timely deliver the
next financial statement, the Applicable Margin from the date such financial
statement was due until the date such financial statement is received by the
Bank shall be the highest pricing level set forth above.
1.7 Letters of Credit.
(a) During the availability period, at the request of the Borrowers, the
Bank will issue standby letters of credit with a maximum maturity of
three hundred sixty-five (365) days but not to extend more than three
hundred sixty five (365) days beyond the Facility No. 1 Expiration
Date. The standby letters of credit may include a provision providing
that the maturity date will be automatically extended each year for an
additional year unless the Bank gives written notice to the contrary.
(b) The amount of the letters of credit outstanding at any one time
(including the drawn and unreimbursed amounts of the letters of credit)
may not exceed Five Million and 00/100 Dollars ($5,000,000.00).
(c) In calculating the principal amount outstanding under the Facility No.
1 Commitment, the calculation shall include the amount of any letters
of credit outstanding, including amounts drawn on any letters of credit
and not yet reimbursed.
(d) The Borrowers agree:
(i) Any sum drawn under a letter of credit may, at the option of
the Bank, be added to the principal amount outstanding under
this Agreement. The amount will bear interest and be due as
described elsewhere in this Agreement.
(ii) If there is a default under this Agreement, to immediately
prepay and make the Bank whole for any outstanding letters of
credit.
(iii) The issuance of any letter of credit and any amendment to a
letter of credit is subject to the Bank's written approval and
must be in form and content satisfactory to the Bank and in
favor of a beneficiary acceptable to the Bank.
(iv) To sign the Bank's form Application and Agreement for
Commercial Letter of Credit or Application and Agreement for
Standby Letter of Credit, as applicable.
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(v) To pay any issuance and/or other fees that the Bank notifies
the Borrowers will be charged for issuing and processing
letters of credit for the Borrowers.
(vi) To allow the Bank to automatically charge any Borrower's
checking account for applicable fees, discounts, and other
charges.
2. OPTIONAL INTEREST RATES
2.1 Optional Rates. Each optional interest rate is a rate per year.
Interest will be paid on December 31, 2004, and then on the same day of
each month thereafter until payment in full of any principal
outstanding under this facility. No Portion will be converted to a
different interest rate during the applicable interest period. Upon the
occurrence of an event of default under this Agreement, the Bank may
terminate the availability of optional interest rates for interest
periods commencing after the default occurs. At the end of each
interest period, the interest rate will revert to the rate stated in
the paragraph(s) entitled "Interest Rate" above, unless the Borrowers
have designated another optional interest rate for the Portion.
2.2 LIBOR Rate. The election of LIBOR Rates shall be subject to the
following terms and requirements:
(a) The interest period during which the LIBOR Rate will be in effect will
be one or two weeks, one month, two months, three months, four months,
five months, six months, seven months, eight months, nine months, ten
months, eleven months or twelve months. The first day of the interest
period must be a day other than a Saturday or a Sunday on which the
Bank is open for business in New York and London and dealing in
offshore dollars (a "LIBOR Banking Day"). The last day of the interest
period and the actual number of days during the interest period will be
determined by the Bank using the practices of the London inter-bank
market.
(b) Each LIBOR Rate Portion will be for an amount not less than One Hundred
Thousand and 00/100 Dollars ($100,000.00).
(c) The "LIBOR Rate" means the interest rate determined by the following
formula, rounded upward to the nearest 1/100 of one percent. (All
amounts in the calculation will be determined by the Bank as of the
first day of the interest period.)
LIBOR Rate = London Inter-Bank Offered Rate
------------------------------
(1.00 - Reserve Percentage)
Where,
(i) "London Inter-Bank Offered Rate" means the average per annum
interest rate at which U.S. dollar deposits would be offered
for the applicable interest period by major banks in the
London inter-bank market, as shown on the Telerate Page 3750
(or any successor page) at approximately 11:00 a.m. London
time two (2) London Banking Days before the commencement of
the interest period. If such rate does not appear on the
Telerate Page 3750 (or any successor page), the rate for that
interest period will be determined by such alternate method as
reasonably selected by the Bank. A "London Banking Day" is a
day on which the Bank's London Banking Center is open for
business and dealing in offshore dollars.
(ii) "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.
(d) The Borrowers shall irrevocably request a LIBOR Rate Portion no later
than 12:00 noon Pacific time on the LIBOR Banking Day preceding the day
on which the London Inter-Bank Offered Rate will be set, as specified
above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at
least three days before the LIBOR Rate takes effect.
(e) The Bank will have no obligation to accept an election for a LIBOR Rate
Portion if any of the following described events has occurred and is
continuing:
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(i) Dollar deposits in the principal amount, and for periods equal
to the interest period, of a LIBOR Rate Portion are not
available in the London inter-bank market; or
(ii) The LIBOR Rate does not accurately reflect the cost of a LIBOR
Rate Portion.
(f) Each prepayment of a LIBOR 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.
(g) The prepayment fee shall be in an amount sufficient to compensate the
Bank for any loss, cost or expense incurred by it as a result of the
prepayment, including any loss of anticipated profits and any loss or
expense arising from the liquidation or reemployment of funds obtained
by it to maintain such Portion or from fees payable to terminate the
deposits from which such funds were obtained. The Borrowers shall also
pay any customary administrative fees charged by the Bank in connection
with the foregoing. For purposes of this paragraph, the Bank shall be
deemed to have funded each Portion by a matching deposit or other
borrowing in the applicable interbank market, whether or not such
Portion was in fact so funded.
3. FEES AND EXPENSES
3.1 Fees.
(a) Unused Commitment Fee. The Borrowers agree to pay a fee on any
difference between the Facility No. 1 Commitment and the amount of
credit they actually use, determined by the average of the daily amount
of credit outstanding during the specified period. The fee will be
calculated at the following percentage points per annum, based upon the
Debt to Capitalization Ratio (as defined in Paragraph 1.6 above). The
calculation of credit outstanding shall not include the undrawn amount
of letters of credit. The Debt to Capitalization Ratio will be
calculated in the manner described in Paragraph 1.6 of this Agreement;
provided, however, that until the Bank receives the first financial
statement, the fee will be calculated at the percentage points
indicated for fee level 1 set forth below:
Applicable Fee
Fee Level Ratio (in percentage points per annum)
- --------------------------------------------------------------------------------
1 less than 0.55:1.00 .125
2 equal to or greater than .250
0.55:1.00 and
less than 0.60:1.00
3 equal to or greater than .375
0.60:1.00
This fee is due on January 1, 2005, and on the same day of each
following quarter until the expiration of the availability period.
The Applicable Fee shall be in effect from the date the most recent
financial statement is received by the Bank until the date the next
financial statement is received; provided, however, that if the
Borrowers fail to timely deliver the next financial statement, the
Applicable Fee from the date such financial statement was due until the
date such financial statement is received by the Bank shall be the
highest fee level set forth above.
(b) Late Fee. To the extent permitted by law, the Borrowers agree to pay a
late fee in an amount not to exceed four percent (4%) of any payment
that is more than fifteen (15) days late. The imposition and payment of
a late fee shall not constitute a waiver of the Bank's rights with
respect to the default.
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3.2 Expenses. The Borrowers agree to immediately repay the Bank for
expenses that include, but are not limited to, filing, recording and
search fees, appraisal fees, title report fees, and documentation fees.
3.3 Reimbursement Costs. The Borrowers agree to reimburse the Bank for any
expenses it incurs in the preparation of this Agreement and any
agreement or instrument required by this Agreement. Expenses include,
but are not limited to, reasonable attorneys' fees, including any
allocated costs of the Bank's in-house counsel to the extent permitted
by applicable law.
4. DISBURSEMENTS, PAYMENTS AND COSTS
4.1 Disbursements and Payments.
(a) Each payment by the Borrowers will be made in U.S. Dollars and
immediately available funds by direct debit to a deposit account as
specified below or, for payments not required to be made by direct
debit, by mail to the address shown on the Borrowers' statement or at
one of the Bank's banking centers in the United States.
(b) Each disbursement by the Bank and each payment by the Borrowers will be
evidenced by records kept by the Bank. In addition, the Bank may, at
its discretion, require the Borrowers to sign one or more promissory
notes.
4.2 Requests for Credit; Equal Access by all Borrowers. If there is more
than one Borrower, any Borrower (or a person or persons authorized by
any one of the Borrowers), acting alone, can borrow up to the full
amount of credit provided under this Agreement. Each Borrower will be
liable for all extensions of credit made under this Agreement to any
other Borrower.
4.3 Telephone and Telefax Authorization.
(a) The Bank may honor telephone or telefax instructions for advances or
repayments or for the designation of optional interest rates and
telefax requests for the issuance of letters of credit given, or
purported to be given, by any one of the individuals authorized to sign
loan agreements on behalf of any of the Borrowers, or any other
individual designated by any one of such authorized signers.
(b) Advances will be deposited in and repayments will be withdrawn from
account number 14878-03863 owned by Borrower 1 or such other of the
Borrowers' accounts with the Bank as designated in writing by the
Borrowers.
(c) The Borrowers will indemnify and hold the Bank harmless from all
liability, loss, and costs in connection with any act resulting from
telephone or telefax instructions the Bank reasonably believes are made
by any individual authorized by the Borrowers to give such
instructions. This paragraph will survive this Agreement's termination,
and will benefit the Bank and its officers, employees, and agents.
4.4 Direct Debit (Pre-Billing).
(a) The Borrowers agree that the Bank will debit deposit account number
14878-03863 owned by Borrower 1 or such other of the Borrowers'
accounts with the Bank as designated in writing by the Borrowers (the
"Designated Account") on the date each payment of principal and
interest and any fees from the Borrowers become due (the "Due Date").
(b) Prior to each Due Date, the Bank will mail to the Borrowers a statement
of the amounts that will be due on that Due Date (the "Billed Amount").
The bill will be mailed a specified number of calendar days prior to
the Due Date, which number of days will be mutually agreed from time to
time by the Bank and the Borrowers. The calculations in the bill will
be made on the assumption that no new extensions of credit or payments
will be made between the date of the billing statement and the Due
Date, and that there will be no changes in the applicable interest
rate.
(c) The Bank will debit the Designated Account for the Billed Amount,
regardless of the actual amount due on that date (the "Accrued
Amount"). If the Billed Amount debited to the Designated Account
differs from the Accrued Amount, the discrepancy will be treated as
follows:
(i) If the Billed Amount is less than the Accrued Amount, the
Billed Amount for the following Due Date will be increased by
the amount of the discrepancy. The Borrowers will not be in
default by reason of any such discrepancy.
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(ii) If the Billed Amount is more than the Accrued Amount, the
Billed Amount for the following Due Date will be decreased by
the amount of the discrepancy.
Regardless of any such discrepancy, interest will continue to accrue
based on the actual amount of principal outstanding without
compounding. The Bank will not pay the Borrowers interest on any
overpayment.
(d) The Borrowers will maintain sufficient funds in the Designated Account
to cover each debit. If there are insufficient funds in the Designated
Account on the date the Bank enters any debit authorized by this
Agreement, the Bank may reverse the debit.
(e) The Borrowers may terminate this direct debit arrangement at any time
by sending written notice to the Bank at the address specified at the
end of this Agreement. If the Borrowers terminate this arrangement,
then the principal amount outstanding under this Agreement will at the
option of the Bank bear interest at a rate per annum which is 0.5
percentage point higher than the rate of interest otherwise provided
under this Agreement.
4.5 Banking Days. Unless otherwise provided in this Agreement, a banking
day is a day other than a Saturday, Sunday or other day on which
commercial banks are authorized to close, or are in fact closed, in the
state where the Bank's lending office is located, and, if such day
relates to amounts bearing interest at an offshore rate (if any), means
any such day on which dealings in dollar deposits are conducted among
banks in the offshore dollar interbank market. All payments and
disbursements which would be due on a day which is not a banking day
will be due on the next banking day. All payments received on a day
which is not a banking day will be applied to the credit on the next
banking day.
4.6 Interest Calculation. Except as otherwise stated in this Agreement, all
interest and fees, if any, will be computed on the basis of a 360-day
year and the actual number of days elapsed. This results in more
interest or a higher fee than if a 365-day year is used. Installments
of principal which are not paid when due under this Agreement shall
continue to bear interest until paid.
4.7 Default Rate. Upon the occurrence of any default under this Agreement,
all amounts outstanding under this Agreement, including any interest,
fees or costs which are not paid when due, will at the option of the
Bank bear interest at a rate which is 2.0 percentage points higher than
the rate of interest otherwise provided under this Agreement. This may
result in compounding of interest. This will not constitute a waiver of
any default.
5. CONDITIONS
Before the Bank is required to extend any credit to the Borrowers under this
Agreement, it must receive any documents and other items it may reasonably
require, in form and content acceptable to the Bank, including any items
specifically listed below.
5.1 Authorizations. If any Borrower or any guarantor is anything other than
a natural person, evidence that the execution, delivery and performance
by such Borrower and/or such guarantor of this Agreement and any
instrument or agreement required under this Agreement have been duly
authorized.
5.2 Governing Documents. If required by the Bank, a copy of each Borrowers'
organizational documents.
5.3 Payment of Fees. Payment of all fees and other amounts due and owing to
the Bank, including without limitation payment of all accrued and
unpaid expenses incurred by the Bank as required by the paragraph
entitled "Reimbursement Costs."
5.4 Good Standing. Certificates of good standing for each Borrower from its
state of formation and from any other state in which such Borrower is
required to qualify to conduct its business.
5.5 Insurance. Evidence of insurance coverage, as required in the
"Covenants" section of this Agreement.
6. REPRESENTATIONS AND WARRANTIES
When the Borrowers sign this Agreement, and until the Bank is repaid in full,
the Borrowers make the following representations and warranties. Each request
for an extension of credit constitutes a renewal of these representations and
warranties as of the date of the request:
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6.1 Formation. Each Borrower is duly formed and existing under the laws of
the state or other jurisdiction where organized.
6.2 Authorization. This Agreement, and any instrument or agreement required
hereunder, are within each Borrower's powers, have been duly
authorized, and do not conflict with any of its organizational papers.
6.3 Enforceable Agreement. This Agreement is a legal, valid and binding
agreement of each Borrower, enforceable against each Borrower in
accordance with its terms, and any instrument or agreement required
hereunder, when executed and delivered, will be similarly legal, valid,
binding and enforceable.
6.4 Good Standing. In each state in which each Borrower does business, each
Borrower is properly licensed, in good standing, and, where required,
in compliance with fictitious name statutes.
6.5 No Conflicts. This Agreement does not conflict with any law, agreement,
or obligation by which any Borrower is bound.
6.6 Financial Information. All financial and other information that has
been or will be supplied to the Bank is sufficiently complete to give
the Bank accurate knowledge of the Borrowers' (and any guarantor's)
financial condition, including all material contingent liabilities.
Since the date of the most recent financial statement provided to the
Bank, there has been no material adverse change in the business
condition (financial or otherwise), operations, properties or prospects
of any Borrower (or any guarantor).
6.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or
threatened against any Borrower which, if lost, would impair such
Borrower's financial condition or ability to repay the loan, except as
have been disclosed in writing to the Bank.
6.8 Permits, Franchises. Each Borrower possesses all permits, memberships,
franchises, contracts and licenses required and all trademark rights,
trade name rights, patent rights, copyrights and fictitious name rights
necessary to enable it to conduct the business in which it is now
engaged.
6.9 Other Obligations. No Borrower is in default on any obligation for
borrowed money, any purchase money obligation or any other material
lease, commitment, contract, instrument or obligation, except as have
been disclosed in writing to the Bank.
6.10 Tax Matters. No Borrower has any knowledge of any pending assessments
or adjustments of its income tax for any year and all taxes due have
been paid, except as have been disclosed in writing to the Bank.
6.11 No Event of Default. There is no event which is, or with notice or
lapse of time or both would be, a default under this Agreement.
6.12 Insurance. Each Borrower has obtained, and maintained in effect, the
insurance coverage required in the "Covenants" section of this
Agreement.
7. COVENANTS
The Borrowers agree, so long as credit is available under this Agreement and
until the Bank is repaid in full:
7.1 Use of Proceeds. To use the proceeds of Facility No. 1 only for working
capital, permitted acquisitions and general corporate purposes and to
bridge capital expenditures.
7.2 Financial Information. To provide the following financial information
and statements in form and content acceptable to the Bank, and such
additional information as requested by the Bank from time to time:
(a) Within ninety (90) days of the fiscal year end, the annual financial
statements of Borrower 1. These financial statements must be audited
(with an opinion satisfactory to the Bank) by a Certified Public
Accountant acceptable to the Bank. The statements shall be prepared on
a consolidated and consolidating basis.
(b) Within sixty (60) days of the period's end, Borrower 1's quarterly
financial statements certified and dated by an authorized financial
officer. These financial statements may be company-prepared. The
statements shall be prepared on a consolidated and consolidating basis.
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(c) Copies of the Form 10-K Annual Report and the Form 10-Q Quarterly
Report for Borrower 1 within ten (10) days after the date of filing
with the Securities and Exchange Commission.
(d) Within the periods provided in (a) and (b) above, a compliance
certificate of the Borrowers signed by an authorized financial officer
of the Borrowers and setting forth (i) the computation (on a
consolidated basis) of the Debt to Capitalization Ratio (as defined in
Paragraph 1.6 above) 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 there exists as of
the date of the certificate, any default under this Agreement and, if
any such default exists, specifying the nature thereof and the action
the Borrowers are taking and propose to take with respect thereto.
(e) The annual financial projections of Borrower 1 covering a time period
acceptable to the Bank and specifying the assumptions used in creating
the projections. These projections shall be provided to the Bank by
April 30th of each year.
7.3 Out of Debt Periods and Reduction of Debt Periods.
(a) Out of Debt Periods. Not to permit the passage of any period
of twenty-four (24) consecutive months during which the
Borrowers fail to repay in full the advances outstanding under
Facility No. 1 for a period of at least thirty (30)
consecutive days.
(b) Reduction of Debt Periods. Not to permit the passage of any
period of twelve (12) consecutive months during which the
Borrowers fail to reduce the amount of advances outstanding
under Facility No. 1 to not more than Five Million Dollars
($5,000,000) for a period of at least thirty (30) consecutive
days.
For purposes of this paragraph, "advances" does not include undrawn amounts of
outstanding letters of credit.
7.4 Other Debts. Not to have outstanding or incur any direct or contingent
liabilities or lease obligations (other than those to the Bank), or
become liable for the liabilities of others, without the Bank's written
consent. This does not prohibit:
(a) Acquiring goods, supplies, or merchandise on normal trade credit.
(b) Endorsing negotiable instruments received in the usual course of
business.
(c) Obtaining surety bonds in the usual course of business.
(d) Liabilities, lines of credit and leases in existence on the date of
this Agreement disclosed in writing to the Bank.
(e) Additional debts and lease obligations for the acquisition of fixed
assets, to the extent permitted under Paragraph 7.5(d) of this
Agreement.
(f) Additional debts assumed in connection with acquisitions permitted
under Paragraph 7.8(b) of this Agreement.
(g) Additional obligations of any Borrower consisting of first mortgage
bonds or unsecured senior notes substantially similar in structure to
those certain first mortgage bonds and unsecured senior notes that are
obligations of California Water Service Company and are outstanding as
of the date of this Agreement.
7.5 Other Liens. Not to create, assume, or allow any security interest or
lien (including judicial liens) on property any Borrower now or later
owns, except:
(a) Liens and security interests in favor of the Bank.
(b) Liens for taxes not yet due.
(c) Liens outstanding on the date of this Agreement disclosed in writing to
the Bank.
(d) Additional purchase money security interests in assets acquired after
the date of this Agreement, if the total principal amount of debts
secured by such liens does not exceed Two Million Five Hundred Thousand
Dollars ($2,500,000) in the aggregate at any one time for all of the
Borrowers.
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(e) Liens securing first mortgage bonds permitted under the preceding
paragraph.
7.6 Maintenance of Assets.
(a) Not to sell, assign, lease, transfer or otherwise dispose of any part
of any Borrower's business or any Borrower's assets except in the
ordinary course of such Borrower's business. It is provided, however,
that this negative covenant shall not be deemed to prohibit sales by
Borrower 2 of those certain parcels of real property previously
transferred or sold to Borrower 2 by CWSC because such parcels were not
essential to the regulated water operations of CWSC.
(b) Not to sell, assign, lease, transfer or otherwise dispose of any assets
for less than fair market value, or enter into any agreement to do so.
(c) Not to enter into any sale and leaseback agreement covering any of its
fixed assets.
(d) To maintain and preserve all rights, privileges, and franchises the
Borrowers now have.
(e) To make any repairs, renewals, or replacements to keep the Borrowers'
properties in good working condition.
7.7 Loans. Not to make any loans, advances or other extensions of credit to
any individual or entity, except for:
(a) Existing extensions of credit disclosed to the Bank in writing.
(b) Extensions of credit to the Borrowers' current subsidiaries.
(c) Extensions of credit in the nature of accounts receivable or notes
receivable arising from the sale or lease of goods or services in the
ordinary course of business to non-affiliated entities.
7.8 Additional Negative Covenants. Not to, without the Bank's written
consent:
(a) Enter into any consolidation, merger, or other combination, or become a
partner in a partnership, a member of a joint venture, or a member of a
limited liability company.
(b) Acquire or purchase a business or its assets for a consideration,
including assumption of direct or contingent debt, in excess of Five
Million Dollars ($5,000,000) in the aggregate. It is provided however,
that this negative covenant does not apply to acquisitions by Borrower
3 (including, without limitation, any acquisition of Independent
Utility Company) for an aggregate consideration, including assumption
of direct or contingent debt, not in excess of Seven Hundred Fifty
Thousand Dollars ($750,000).
(c) Engage in any business activities substantially different from each
Borrower's present business.
(d) Liquidate or dissolve any Borrower's business.
(e) Voluntarily suspend any Borrower's business for more than seven (7)
days in any three hundred sixty-five (365) day period.
7.9 Notices to Bank. To promptly notify the Bank in writing of:
(a) Any lawsuit over Five Million and 00/100 Dollars ($5,000,000.00)
against any Borrower (or any guarantor).
(b) Any substantial dispute between any governmental authority and any
Borrower (or any guarantor).
(c) Any event of default under this Agreement, or any event which, with
notice or lapse of time or both, would constitute an event of default.
(d) Any material adverse change in any Borrower's (or any guarantor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
(e) Any change in any Borrower's name, legal structure, place of business,
or chief executive office if such Borrower has more than one place of
business.
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(f) Any actual contingent liabilities of any Borrower (or any guarantor),
and any such contingent liabilities which are reasonably foreseeable,
where such liabilities are in excess of Five Million and 00/100 Dollars
($5,000,000.00) in the aggregate.
7.10 General Business Insurance. To maintain insurance as is usual for the
business each Borrower is in.
7.11 Compliance with Laws. To comply with the laws (including any fictitious
or trade name statute), regulations, and orders of any government body
with authority over any Borrower's business.
7.12 ERISA Plans. Promptly during each year, to pay and cause any
subsidiaries to pay contributions adequate to meet at least the minimum
funding standards under ERISA with respect to each and every Plan; file
each annual report required to be filed pursuant to ERISA in connection
with each Plan for each year; and notify the Bank within ten (10) days
of the occurrence of any Reportable Event that might constitute grounds
for termination of any capital Plan by the Pension Benefit Guaranty
Corporation or for the appointment by the appropriate United States
District Court of a trustee to administer any Plan. "ERISA" means the
Employee Retirement Income Security Act of 1974, as amended from time
to time. Capitalized terms in this paragraph shall have the meanings
defined within ERISA.
7.13 Books and Records. To maintain adequate books and records.
7.14 Audits. To allow the Bank and its agents to inspect each Borrower's
properties and examine, audit, and make copies of books and records at
any reasonable time. If any of the Borrowers' properties, books or
records are in the possession of a third party, the Borrowers authorize
that third party to permit the Bank or its agents to have access to
perform inspections or audits and to respond to the Bank's requests for
information concerning such properties, books and records.
7.15 Cooperation. To take any action reasonably requested by the Bank to
carry out the intent of this Agreement.
7.16 Mandatory Prepayment; Early Termination. To immediately repay the
entire principal balance of this Agreement, together with interest, any
fees (including any prepayment fees) and any other amounts due
hereunder, and not obtain any further credit hereunder upon the
occurrence of the following event: Facility No. 1 of the Loan Agreement
dated as of the date hereof between CWSC and the Bank, as now in effect
or as hereafter renewed, amended, restated or superseded (the "Other
Credit Facility"), terminates for any reason, including, without
limitation, termination of the Other Credit Facility at the request of
CWSC, termination resulting from failure by the Bank to renew the Other
Credit Facility, or termination as otherwise provided under the Other
Credit Facility.
8. DEFAULT AND REMEDIES
If any of the following events of default occurs, the Bank may do one or more of
the following: declare the Borrowers in default, stop making any additional
credit available to the Borrowers, and require the Borrowers to repay their
entire debt immediately and without prior notice. If an event which, with notice
or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional
credit under this Agreement. In addition, if any event of default occurs, the
Bank shall have all rights, powers and remedies available under any instruments
and agreements required by or executed in connection with this Agreement, as
well as all rights and remedies available at law or in equity. If an event of
default occurs under the paragraph entitled "Bankruptcy," below, with respect to
any Borrower, then the entire debt outstanding under this Agreement will
automatically be due immediately.
8.1 Failure to Pay. The Borrowers fail to make a payment under this
Agreement when due.
8.2 Other Bank Agreements. Any default occurs under any other agreement any
Borrower (or any Obligor) or any of the Borrowers' related entities or
affiliates has with the Bank or any affiliate of the Bank. For purposes
of this Agreement, "Obligor" shall mean any guarantor or any party
pledging collateral to the Bank.
8.3 Cross-default. Any default occurs under any agreement in connection
with any credit any Borrower (or any Obligor) or any of the Borrowers'
related entities or affiliates has obtained from anyone else or which
any Borrower (or any Obligor) or any of the Borrowers' related entities
or affiliates has guaranteed, or any default occurs under that certain
Loan Agreement dated as of the date hereof between the Bank and CWSC,
as now in effect and as hereafter amended, restated, renewed, or
superseded.
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8.4 False Information. Any Borrower or any Obligor has given the Bank false
or misleading information or representations.
8.5 Bankruptcy. Any Borrower, any Obligor, or any general partner of any
Borrower or of any Obligor files a bankruptcy petition, a bankruptcy
petition is filed against any of the foregoing parties, or any
Borrower, any Obligor, or any general partner of any Borrower or of any
Obligor makes a general assignment for the benefit of creditors.
8.6 Receivers. A receiver or similar official is appointed for a
substantial portion of any Borrower's or any Obligor's business, or the
business is terminated, or, if any Obligor is anything other than a
natural person, such Obligor is liquidated or dissolved.
8.7 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more
trade creditors against any Borrower or any Obligor in an aggregate
amount of Five Million and 00/100 Dollars ($5,000,000.00) or more in
excess of any insurance coverage.
8.8 Judgments. Any judgments or arbitration awards are entered against any
Borrower or any Obligor, or any Borrower or any Obligor enters into any
settlement agreements with respect to any litigation or arbitration, in
an aggregate amount of Five Million and 00/100 Dollars ($5,000,000.00)
or more in excess of any insurance coverage.
8.9 Material Adverse Change. A material adverse change occurs, or is
reasonably likely to occur, in any Borrower's (or any Obligor's)
business condition (financial or otherwise), operations, properties or
prospects, or ability to repay the credit.
8.10 Government Action. Any government authority takes action that the Bank
believes materially adversely affects any Borrower's or any Obligor's
financial condition or ability to repay.
8.11 Default under Related Documents. Any default occurs under any guaranty,
subordination agreement, security agreement, deed of trust, mortgage,
or other document required by or delivered in connection with this
Agreement or any such document is no longer in effect, or any guarantor
purports to revoke or disavow the guaranty.
8.12 ERISA Plans. Any one or more of the following events occurs with
respect to a Plan of any Borrower subject to Title IV of ERISA,
provided such event or events could reasonably be expected, in the
judgment of the Bank, to subject any Borrower to any tax, penalty or
liability (or any combination of the foregoing) which, in the
aggregate, could have a material adverse effect on the financial
condition of such Borrower:
(a) A reportable event shall occur under Section 4043(c) of ERISA with
respect to a Plan.
(b) Any Plan termination (or commencement of proceedings to terminate a
Plan) or the full or partial withdrawal from a Plan by any Borrower or
any ERISA Affiliate.
8.13 Other Breach Under Agreement. A default occurs under any other term or
condition of this Agreement not specifically referred to in this
Article. This includes any failure or anticipated failure by any
Borrower (or any other party named in the Covenants section) to comply
with the financial covenants set forth in this Agreement, whether such
failure is evidenced by financial statements delivered to the Bank or
is otherwise known to the Borrowers or the Bank.
8.14 Restrictive Covenant. Borrower 1 directly or indirectly agrees to any
arrangement whereby the ability of any of its subsidiaries to pay
dividends to Borrower 1 is restricted.
8.15 Debt to Capitalization Ratio. The Debt to Capitalization Ratio, as
defined in Paragraph 1.6 above and as calculated on a consolidated
basis from Borrower 1's most recent financial statement received by the
Bank as required under the Covenants section above, exceeds 0.667:1.0.
9. ENFORCING THIS AGREEMENT; MISCELLANEOUS
9.1 GAAP. Except as otherwise stated in this Agreement, all financial
information provided to the Bank and all financial covenants will be
made under generally accepted accounting principles, consistently
applied.
9.2 California Law. This Agreement is governed by California state law.
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9.3 Successors and Assigns. This Agreement is binding on the Borrowers' and
the Bank's successors and assignees. The Borrowers agree that they may
not assign this Agreement without the Bank's prior consent. The Bank
may sell participations in or assign this loan, and may exchange
financial information about the Borrowers with actual or potential
participants or assignees. If a participation is sold or the loan is
assigned, the purchaser will have the right of set-off against the
Borrowers.
9.4 Arbitration and Waiver of Jury Trial
(a) This paragraph concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute,
including but not limited to controversies or claims that arise out of
or relate to: (i) this agreement (including any renewals, extensions or
modifications); or (ii) any document related to this agreement
(collectively a "Claim"). For the purposes of this arbitration
provision only, the term "parties" shall include any parent
corporation, subsidiary or affiliate of the Bank involved in the
servicing, management or administration of any obligation described or
evidenced by this agreement.
(b) At the request of any party to this agreement, any Claim shall be
resolved by binding arbitration in accordance with the Federal
Arbitration Act (Title 9, U. S. Code) (the "Act"). The Act will apply
even though this agreement provides that it is governed by the law of a
specified state.
(c) Arbitration proceedings will be determined in accordance with the Act,
the applicable rules and procedures for the arbitration of disputes of
JAMS or any successor thereof ("JAMS"), and the terms of this
paragraph. In the event of any inconsistency, the terms of this
paragraph shall control.
(d) The arbitration shall be administered by JAMS and conducted, unless
otherwise required by law, in any U. S. state where real or tangible
personal property collateral for this credit is located or if there is
no such collateral, in the state specified in the governing law section
of this agreement. All Claims shall be determined by one arbitrator;
however, if Claims exceed Five Million Dollars ($5,000,000), upon the
request of any party, the Claims shall be decided by three arbitrators.
All arbitration hearings shall commence within ninety (90) days of the
demand for arbitration and close within ninety (90) days of
commencement and the award of the arbitrator(s) shall be issued within
thirty (30) days of the close of the hearing. However, the
arbitrator(s), upon a showing of good cause, may extend the
commencement of the hearing for up to an additional sixty (60) days.
The arbitrator(s) shall provide a concise written statement of reasons
for the award. The arbitration award may be submitted to any court
having jurisdiction to be confirmed and enforced.
(e) The arbitrator(s) will have the authority to decide whether any Claim
is barred by the statute of limitations and, if so, to dismiss the
arbitration on that basis. For purposes of the application of the
statute of limitations, the service on JAMS under applicable JAMS rules
of a notice of Claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this arbitration provision or whether a Claim is
arbitrable shall be determined by the arbitrator(s). The arbitrator(s)
shall have the power to award legal fees pursuant to the terms of this
agreement.
(f) This paragraph does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate
judicial or non-judicial foreclosure against any real or personal
property collateral; (iii) exercise any judicial or power of sale
rights, or (iv) act in a court of law to obtain an interim remedy, such
as but not limited to, injunctive relief, writ of possession or
appointment of a receiver, or additional or supplementary remedies.
(g) The procedure described above will not apply if the Claim, at the time
of the proposed submission to arbitration, arises from or relates to an
obligation to the Bank secured by real property. In this case, all of
the parties to this agreement must consent to submission of the Claim
to arbitration. If both parties do not consent to arbitration, the
Claim will be resolved as follows: The parties will designate a referee
(or a panel of referees) selected under the auspices of JAMS in the
same manner as arbitrators are selected in JAMS administered
proceedings. The designated referee(s) will be appointed by a court as
provided in California Code of Civil Procedure Section 638 and the
following related sections. The referee (or presiding referee of the
panel) will be an active attorney or a retired judge. The award that
results from the decision of the referee(s) will be entered as a
judgment in the court that appointed the referee, in accordance with
the provisions of California Code of Civil Procedure Sections 644 and
645.
(h) The filing of a court action is not intended to constitute a waiver of
the right of any party, including the suing party, thereafter to
require submittal of the Claim to arbitration.
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(i) By agreeing to binding arbitration, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury in respect
of any Claim. Furthermore, without intending in any way to limit this
agreement to arbitrate, to the extent any Claim is not arbitrated, the
parties irrevocably and voluntarily waive any right they may have to a
trial by jury in respect of such Claim. This provision is a material
inducement for the parties entering into this agreement.
9.5 Severability; Waivers. If any part of this Agreement is not
enforceable, the rest of the Agreement may be enforced. The Bank
retains all rights, even if it makes a loan after default. If the Bank
waives a default, it may enforce a later default. Any consent or waiver
under this Agreement must be in writing.
9.6 Attorneys' Fees. The Borrowers shall reimburse the Bank for any
reasonable costs and attorneys' fees incurred by the Bank in connection
with the enforcement or preservation of any rights or remedies under
this Agreement and any other documents executed in connection with this
Agreement, and in connection with any amendment, waiver, "workout" or
restructuring under this Agreement. In the event of a lawsuit or
arbitration proceeding, the prevailing party is entitled to recover
costs and reasonable attorneys' fees incurred in connection with the
lawsuit or arbitration proceeding, as determined by the court or
arbitrator. In the event that any case is commenced by or against any
Borrower under the Bankruptcy Code (Title 11, United States Code) or
any similar or successor statute, the Bank is entitled to recover costs
and reasonable attorneys' fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in
such a case. As used in this paragraph, "attorneys' fees" includes the
allocated costs of the Bank's in-house counsel.
9.7 Joint and Several Liability. This paragraph shall apply if two or more
Borrowers sign this Agreement:
(a) Each Borrower agrees that it is jointly and severally liable to the
Bank for the payment of all obligations arising under this Agreement,
and that such liability is independent of the obligations of the other
Borrower(s). Each obligation, promise, covenant, representation and
warranty in this Agreement shall be deemed to have been made by, and be
binding upon, each Borrower, unless this Agreement expressly provides
otherwise. The Bank may bring an action against any Borrower, whether
an action is brought against the other Borrower(s).
(b) Each Borrower agrees that any release which may be given by the Bank to
the other Borrower(s) or any guarantor will not release such Borrower
from its obligations under this Agreement.
(c) Each Borrower waives any right to assert against the Bank any defense,
setoff, counterclaim, or claims which such Borrower may have against
the other Borrower(s) or any other party liable to the Bank for the
obligations of the Borrowers under this Agreement.
(d) Each Borrower waives any defense by reason of any other Borrower's or
any other person's defense, disability, or release from liability. The
Bank can exercise its rights against each Borrower even if any other
Borrower or any other person no longer is liable because of a statute
of limitations or for other reasons.
(e) Each Borrower agrees that it is solely responsible for keeping itself
informed as to the financial condition of the other Borrower(s) and of
all circumstances which bear upon the risk of nonpayment. Each Borrower
waives any right it may have to require the Bank to disclose to such
Borrower any information which the Bank may now or hereafter acquire
concerning the financial condition of the other Borrower(s).
(f) Each Borrower waives all rights to notices of default or nonperformance
by any other Borrower under this Agreement. Each Borrower further
waives all rights to notices of the existence or the creation of new
indebtedness by any other Borrower and all rights to any other notices
to any party liable on any of the credit extended under this Agreement.
(g) The Borrowers represent and warrant to the Bank that each will derive
benefit, directly and indirectly, from the collective administration
and availability of credit under this Agreement. The Borrowers agree
that the Bank will not be required to inquire as to the disposition by
any Borrower of funds disbursed in accordance with the terms of this
Agreement.
(h) Until all obligations of the Borrowers to the Bank under this Agreement
have been paid in full and any commitments of the Bank or facilities
provided by the Bank under this Agreement have been terminated, each
Borrower (a) waives any right of subrogation, reimbursement,
indemnification and contribution (contractual, statutory or otherwise),
including without limitation, any claim or right of subrogation under
the Bankruptcy Code (Title 11, United States Code) or any successor
statute, which such Borrower may now or hereafter have against any
other Borrower with respect to the indebtedness incurred under this
Agreement; (b) waives any right to enforce any remedy which the Bank
now has or may hereafter have against any other Borrower, and waives
any benefit of, and any right to participate in, any security now or
hereafter held by the Bank.
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(i) Each Borrower waives any right to require the Bank to proceed against
any other Borrower or any other person; proceed against or exhaust any
security; or pursue any other remedy. Further, each Borrower consents
to the taking of, or failure to take, any action which might in any
manner or to any extent vary the risks of the Borrowers under this
Agreement or which, but for this provision, might operate as a
discharge of the Borrowers.
9.8 One Agreement. This Agreement and any related security or other
agreements required by this Agreement, collectively:
(a) represent the sum of the understandings and agreements between the Bank
and the Borrowers concerning this credit;
(b) replace any prior oral or written agreements between the Bank and the
Borrowers concerning this credit; and
(c) are intended by the Bank and the Borrowers as the final, complete and
exclusive statement of the terms agreed to by them.
In the event of any conflict between this Agreement and any other agreements
required by this Agreement, this Agreement will prevail. Any reference in any
related document to a "promissory note" or a "note" executed by the Borrowers
and dated as of the date of this Agreement shall be deemed to refer to this
Agreement, as now in effect or as hereafter amended, renewed, or restated.
9.9 Indemnification. The Borrowers will indemnify and hold the Bank
harmless from any loss, liability, damages, judgments, and costs of any
kind relating to or arising directly or indirectly out of (a) this
Agreement or any document required hereunder, (b) any credit extended
or committed by the Bank to the Borrowers hereunder, and (c) any
litigation or proceeding related to or arising out of this Agreement,
any such document or any such credit; provided, however, that the
Borrowers shall have no such obligation to indemnify or hold the Bank
harmless to the extent such loss, liability, damages, judgments or
costs result from the gross negligence or willful misconduct of the
Bank, its officers, agents or employees. This indemnity includes but is
not limited to attorneys' fees (including the allocated cost of
in-house counsel). This indemnity extends to the Bank, its parent,
subsidiaries and all of their directors, officers, employees, agents,
successors, attorneys, and assigns. This indemnity will survive
repayment of the Borrowers' obligations to the Bank. All sums due to
the Bank hereunder shall be obligations of the Borrowers, due and
payable immediately without demand.
9.10 Notices. Unless otherwise provided in this Agreement or in another
agreement between the Bank and the Borrowers, all notices required
under this Agreement shall be personally delivered or sent by first
class mail, postage prepaid, or by overnight courier, to the addresses
on the signature page of this Agreement, or sent by facsimile to the
fax numbers listed on the signature page, or to such other addresses as
the Bank and the Borrowers may specify from time to time in writing.
Notices and other communications shall be effective (i) if mailed, upon
the earlier of receipt or five (5) days after deposit in the U.S. mail,
first class, postage prepaid, (ii) if telecopied, when transmitted, or
(iii) if hand-delivered, by courier or otherwise (including telegram,
lettergram or mailgram), when delivered.
9.11 Headings. Article and paragraph headings are for reference only and
shall not affect the interpretation or meaning of any provisions of
this Agreement.
9.12 Counterparts. This Agreement may be executed in as many counterparts as
necessary or convenient, and by the different parties on separate
counterparts each of which, when so executed, shall be deemed an
original but all such counterparts shall constitute but one and the
same agreement.
9.13 Prior Agreement Superseded. This Agreement supersedes the Business Loan
Agreement entered into as of February 28, 2003, between the Bank and
the Borrowers, and any credit outstanding thereunder shall be deemed to
be outstanding under this Agreement.
9.14 Commitment Expiration. The Bank's commitment to extend credit under
this Agreement will expire on December 24, 2004, unless this Agreement
and any documents required by this Agreement have been signed and
returned to the Bank on or before that date.
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This Agreement is executed as of the date stated at the top of the first page.
Borrower: Bank:
California Water Service Group Bank of America, N.A.
By: /Richard D. Nye/ By: /John C. Plecque/
-------------------------------- -------------------------
Richard D. Nye, Vice President, Chief John C. Plecque,
Financial Officer and Treasurer Senior Vice President
Borrower:
CWS Utility Services
By: /Richard D. Nye/
--------------------------------
Richard D. Nye, Vice President, Chief
Financial Officer and Treasurer
Borrower:
New Mexico Water Service Company
By: /Richard D. Nye/
--------------------------------
Richard D. Nye, Vice President, Chief
Financial Officer and Treasurer
Borrower:
Washington Water Service Company
By: /Richard D. Nye/
--------------------------------
Richard D. Nye, Vice President, Chief
Financial Officer and Treasurer
Borrower:
Hawaii Water Service Company, Inc.
By: /Richard D. Nye/
--------------------------------
Richard D. Nye, Vice President, Chief
Financial Officer and Treasurer
Address where notices to the Address where notices to the
Borrower are to be sent: Bank are to be sent:
1720 North First Street 315 Montgomery Street, 13th Floor
San Jose, CA 95112 San Francisco, CA 94104
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