1
================================================================================
EXHIBIT 10.7
LOAN AGREEMENT
Between
CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY
And
SOUTHERN CALIFORNIA WATER COMPANY
---------------------------
Dated as of December 1, 1996
---------------------------
relating to
$8,000,000
California Pollution Control Financing Authority
Water Distribution Facilities Revenue Bonds
(Southern California Water Company Project)
1996 Series A
================================================================================
2
TABLE OF CONTENTS
Page
----
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS............................................................2
SECTION 1.2. NUMBER AND GENDER..............................................................2
SECTION 1.3. ARTICLES, SECTIONS, ETC........................................................2
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE AUTHORITY...............................................2
SECTION 2.2. REPRESENTATIONS OF THE BORROWER................................................3
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO CONSTRUCT THE PROJECT.............................................5
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS.........................6
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND.......................................6
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF
BORROWER TO COMPLETE...........................................................7
SECTION 3.5. INVESTMENT OF MONEYS IN FUNDS..................................................7
SECTION 3.6. SPECIAL TAX CERTIFICATIONS.....................................................8
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
SECTION 4.1. LOAN OF BOND PROCEEDS..........................................................8
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE.................................8
SECTION 4.3. UNCONDITIONAL OBLIGATION......................................................10
SECTION 4.4. ASSIGNMENT OF AUTHORITY'S RIGHTS..............................................10
SECTION 4.5. AMOUNTS REMAINING IN FUNDS....................................................10
i
3
Page
----
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. POWER TO ESTABLISH CHARGES AND COLLECT AMOUNTS................................11
SECTION 5.2. RIGHT OF ACCESS TO THE PROJECT................................................11
SECTION 5.3. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE;
ASSIGNMENTS...................................................................11
SECTION 5.4. RECORDS AND FINANCIAL STATEMENTS OF BORROWER..................................13
SECTION 5.5. MAINTENANCE AND REPAIR; TAXES; UTILITY AND OTHER
CHARGES; INSURANCE.............................................................14
SECTION 5.6. TAX-EXEMPT STATUS OF BONDS....................................................14
SECTION 5.7. NOTICE AND CERTIFICATES TO TRUSTEE............................................15
SECTION 5.8. CONTINUING DISCLOSURE.........................................................15
SECTION 5.9. QUALIFICATION IN CALIFORNIA ..................................................16
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT.............................................................16
SECTION 6.2. REMEDIES ON DEFAULT...........................................................17
SECTION 6.3. AGREEMENT TO PAY ATTORNEY'S FEES AND EXPENSES.................................18
SECTION 6.4. NO REMEDY EXCLUSIVE...........................................................18
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER....................................18
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS....................................18
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS................................................19
SECTION 7.3. MANDATORY PREPAYMENT..........................................................19
SECTION 7.4. AMOUNT OF PREPAYMENT..........................................................19
SECTION 7.5. NOTICE OF PREPAYMENT..........................................................19
ii
4
Page
----
ARTICLE VIII
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF AUTHORITY....................................................20
SECTION 8.2. EXPENSES......................................................................20
SECTION 8.3. INDEMNIFICATION...............................................................20
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES.......................................................................21
SECTION 9.2. SEVERABILITY..................................................................22
SECTION 9.3. EXECUTION OF COUNTERPARTS.....................................................22
SECTION 9.4. AMENDMENTS, CHANGES AND MODIFICATIONS.........................................22
SECTION 9.5. GOVERNING LAW.................................................................22
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE............................................22
SECTION 9.7. TERM OF THE AGREEMENT.........................................................22
SECTION 9.8. BINDING EFFECT................................................................23
EXHIBIT A DESCRIPTION OF THE PROJECT..................................................A-1
iii
5
THIS LOAN AGREEMENT, dated as of December 1, 1996, by and between the
CALIFORNIA POLLUTION CONTROL FINANCING AUTHORITY, a public instrumentality and
political subdivision of the State of California (the "Authority"), and SOUTHERN
CALIFORNIA WATER COMPANY, a corporation organized and existing under the laws of
the State of California (the "Borrower"),
WITNESSETH
WHEREAS, the Authority is a public instrumentality and political
subdivision of the State of California, organized and existing under the
California Pollution Control Financing Authority Act, being Division 27 of the
California Health and Safety Code, as amended and supplemented (the "Act"); and
WHEREAS, the Act authorizes the Authority to issue its revenue bonds for
the purpose of paying all or any part of the costs of a "project" as defined in
the Act; and
WHEREAS, the Borrower has requested that the Authority issue bonds to
finance certain water distribution facilities located throughout the State of
California, as more particularly described in Exhibit A hereto (the "Project"),
which qualify as a "project" under the Act; and
WHEREAS, the Authority after due investigation and deliberation has
adopted its resolution approving said request and authorizing the making of a
loan to the Borrower for the payment of the Cost of the Project (as defined in
the Indenture); and
WHEREAS, the Authority proposes to issue its California Pollution
Control Financing Authority Water Distribution Facilities Revenue Bonds
(Southern California Water Company Project) 1996 Series A (the "Bonds"), in the
aggregate principal amount of $8,000,000 upon the terms and conditions set forth
herein; and
WHEREAS, the Authority will enter into an Indenture of Trust dated as of
December 1, 1996 (the "Indenture"), with Chemical Trust Company of California,
as trustee thereunder pursuant to which the Bonds will be issued;
WHEREAS, payment of the Bonds is secured by the Municipal Bond Insurance
Policy specified in the Indenture;
NOW, THEREFORE, in consideration of the premises and the respective
representations and covenants herein contained, the parties hereto agree as
follows:
1
6
ARTICLE I
DEFINITIONS
SECTION 1.1. DEFINITION OF TERMS. Unless the context otherwise requires,
the terms used in this Agreement shall have the meanings specified in Section
1.01 of the Indenture, as originally executed or as they may from time to time
be supplemented or amended as provided therein.
SECTION 1.2. NUMBER AND GENDER. The singular form of any word used
herein, including the terms defined in Section 1.01 of the Indenture, shall
include the plural, and vice versa. The use herein of a word of any gender shall
include all genders.
SECTION 1.3. ARTICLES, SECTIONS, ETC. Unless otherwise specified,
references to Articles, Sections and other subdivisions of this Agreement are to
the designated Articles, Sections and other subdivisions of this Agreement as
originally executed. The words "hereof," "herein," "hereunder" and words of
similar import refer to this Agreement as a whole. The headings or titles of the
several articles and sections, and the table of contents appended to copies
hereof, shall be solely for convenience of reference and shall not affect the
meaning, construction or effect of the provisions hereof.
ARTICLE II
REPRESENTATIONS
SECTION 2.1. REPRESENTATIONS OF THE AUTHORITY. The Authority makes the
following representations as the basis for its undertakings herein contained:
(a) The Authority is a public instrumentality and political subdivision
of the State. Under the provisions of the Act, the Authority has the power to
enter into the transactions contemplated by this Agreement and to carry out its
obligations hereunder. By proper action, the Authority has been duly authorized
to execute, deliver and duly perform this Agreement.
(b) To pay the Cost of the Project, the Authority will issue the Bonds,
which will mature, bear interest and be subject to redemption as provided in the
Indenture.
(c) The Bonds will be issued under and secured by the Indenture,
pursuant to which the Authority's interest in this Agreement (except certain
rights of the Authority to payment for expenses and indemnification) will be
pledged to the Trustee as security for payment of the principal of, premium, if
any, and interest on the Bonds.
(d) The Authority has not pledged and will not pledge its interest in
this Agreement for any purpose other than to secure the Bonds under the
Indenture.
2
7
(e) The Authority is not in default under any of the provisions of the
laws of the State of California which default would affect its existence or its
powers referred to in subsection (a) of this Section 2.1.
(f) The Authority has found and determined and hereby finds and
determines that all requirements of the Act with respect to the issuance of the
Bonds and the execution of this Agreement have been complied with and that
paying the Cost of the Project by issuing the Bonds and entering into this
Agreement will be in furtherance of the purposes of the Act.
(g) On October 30, 1995, the Authority adopted its resolution approving
the issuance of the Bonds, and a public hearing with respect to the Bonds and
the Project was held in accordance with the provisions of the Code. The meetings
of the Authority on such date were held in accordance with the applicable
provisions of Article 9 of Chapter 1 of Division 3 of Title 2 of the California
Government Code, as amended.
(h) The Authority has taken proper action to allocate to the Bonds a
share of the State of California ceiling on private activity bonds for the 1995
calendar which is available to the Authority pursuant to Section 146 of the
Code, in an amount at least equal to the $8,000,000 aggregate principal amount
of the Bonds. Issuance of the Bonds will not violate any provisions of Section
146 of the Code.
(i) No member, officer or other official of the Authority has any
interest whatsoever in the Borrower or in the transactions contemplated by this
Agreement.
SECTION 2.2. REPRESENTATIONS OF THE BORROWER. The Borrower makes the
following representations as the basis for its undertakings herein contained:
(a) The Borrower is a corporation duly formed under the laws of the
State, is in good standing in said State and has the corporate power to enter
into and has duly authorized, by proper corporate action, the execution and
delivery of this Agreement, the contract of purchase executed by it in
connection with the sale of the Bonds (the "Contract of Purchase"), and all
other documents contemplated hereby to be executed by the Borrower.
(b) This Agreement and the Contract of Purchase have been duly
authorized, executed and delivered by the Borrower and constitute legal, valid
and binding obligations of the Borrower, enforceable in accordance with its
terms, except as limited by bankruptcy, insolvency, reorganization, moratorium
or other similar laws or judicial decisions affecting the rights of creditors
generally and by judicial discretion in the exercise of equitable remedies.
(c) Neither the execution and delivery of this Agreement and the
Contract of Purchase, the consummation of the transactions contemplated hereby
and thereby, nor the fulfillment of or compliance with the terms and conditions
hereof and thereof, conflict with or result in a breach of any of the terms,
conditions or provisions of the Borrower's articles of incorporation or bylaws
or of any corporate actions or of any agreement or instrument to which the
Borrower is now a party or by which it is bound, or constitute a default (with
due notice or the passage of time or both) under any of the foregoing, or result
in the creation or imposition of any prohibited lien, charge or encumbrance
3
8
whatsoever upon any of the property or assets of the Borrower under the terms of
any instrument or agreement to which the Borrower is now a party or by which it
is bound.
(d) The Borrower has not been served with and, to the knowledge of the
Borrower there is no action, suit, proceeding, inquiry or investigation by or
before any court, governmental agency or public board or body pending or
threatened against the Borrower which (i) affects or seeks to prohibit, restrain
or enjoin the issuance, sale or delivery of the Bonds or the loaning of the
proceeds of the Bonds to the Borrower or the execution and delivery of this
Agreement and the Contract of Purchase or the Indenture, (ii) affects or
questions the validity or enforceability of the this Agreement and the Contract
of Purchase, the Bonds or the Indenture, (iii) questions the exclusion of
interest on the Bonds from gross income for federal income tax purposes, (iv)
questions the power or authority of the Borrower to carry out the transactions
contemplated by, or to perform its obligations under, this Agreement, the
Contract of Purchase, the Bonds or the Indenture, or the powers of the Borrower
to own, acquire, equip or operate the Project, or (v) which, if adversely
determined, would materially impair its right to carry on business substantially
as now conducted or as now contemplated to be conducted, or would materially
adversely affect its financial condition.
(e) The Borrower is not in default under any document, instrument or
commitment to which the Borrower is a party or to which it or any of its
property is subject which default would or could affect the ability of the
Borrower to carry out its obligations under this Agreement and the Contract of
Purchase.
(f) Any certificate signed by the Borrower or an Authorized Borrower
Representative and delivered pursuant to this Agreement or the Contract of
Purchase or the Indenture shall be deemed a representation and warranty by the
Borrower to the Authority and the Trustee as to the statements made therein.
(g) The estimated Cost of the Project is as set forth in Exhibit A
hereto and has been determined in accordance with sound engineering principles
and generally accepted accounting principles.
(h) The Project consists of those facilities described in Exhibit A
hereto and the Borrower shall make no changes to the Project or to the operation
thereof which would adversely affect the qualification of the Project under the
Act or impair the Tax-exempt status of the Bonds. In particular, the Borrower
has complied and shall comply with all requirements set forth in the Tax
Certificate which is hereby incorporated by reference herein. The Borrower
intends to utilize the Project as water distribution facilities until the
principal of, the premium, if any, and the interest on the Bonds shall have been
paid.
(i) The Project consists of water mains and related water distribution
facilities as described in the Tax Certificate.
(j) The economic useful life of the Project is as set forth in the Tax
Certificate.
4
9
(k) To the best knowledge of the Borrower, no member, officer or other
official of the Authority has any interest whatsoever in the Borrower or in the
transactions contemplated by this Agreement.
(l) The Borrower has and will have title to the Project sufficient to
carry out the purposes of this Agreement.
(m) At the time of submission of an application to the Authority for
financial assistance in connection with the Project and on the date on which the
Authority took action on such application, permanent financing for the Project
had not otherwise been obtained or arranged.
(n) All certificates, approvals, permits and authorizations with respect
to the construction of the Project of agencies of applicable local governments,
the State of California and the federal government, which are required to be
obtained as of the date of this Agreement, have been obtained, and the Borrower
has no reason to believe that any other such certificates, approvals, permits or
authorizations with respect to the construction of the Project will not be
obtained in due course.
(o) No event has occurred and no condition exists which would constitute
an Event of Default or which, with the passing of time or with the giving of
notice or both. would become such an Event of Default.
ARTICLE III
CONSTRUCTION OF THE PROJECT; ISSUANCE OF THE BONDS
SECTION 3.1. AGREEMENT TO CONSTRUCT THE PROJECT. The Borrower agrees
that it will acquire, construct and install, or complete or cause the completion
of the acquisition, construction and installation of the Project, and will
acquire, construct and install or cause the acquisition, construction and
installation of all other facilities and real and personal property deemed
necessary for the operation of the Project, substantially in accordance with the
plans and specifications prepared therefor by the Borrower and approved by the
Authority, including any and all supplements, amendments and additions or
deletions thereto or therefrom, it being understood that the approval of the
Authority shall not be required for changes in such plans and specifications
which do not materially alter the purpose and description of the Project as set
forth in Exhibit A hereto.
In the event that the Borrower desires to amend or supplement the
Project, and such amendment or supplement materially alters the purpose and
description of the Project as described in Exhibit A hereto, and the Authority
approves of such amendment or supplement, which approval will not be
unreasonably withheld, the Authority will enter into, and will instruct the
Trustee to consent to, such amendment or supplement upon receipt of:
(i) a certificate of the Authorized Borrower Representative describing
in detail the proposed changes and stating that they will not have the effect of
disqualifying the Project as a facility that may be financed pursuant to the
Act;
5
10
(ii) a copy of the proposed form of amended or supplemented Exhibit A
hereto; and
(iii) an opinion of Bond Counsel that such proposed changes will not
affect the Tax-exempt status of interest on the Bonds.
SECTION 3.2. AGREEMENT TO ISSUE BONDS; APPLICATION OF BOND PROCEEDS. To
provide funds to finance the Cost of the Project, the Authority agrees that it
will issue under the Indenture, sell and cause to be delivered to the purchasers
thereof, the Bonds, bearing interest and maturing as provided in the Indenture,
subject to the Borrower's final approval of the interest rates. The Authority
will thereupon deposit the proceeds received from the sale of the Bonds as
provided in the Indenture.
SECTION 3.3. DISBURSEMENTS FROM THE CONSTRUCTION FUND. (a) The Borrower
will authorize and direct the Trustee, upon compliance with Section 3.03 of the
Indenture, to disburse the moneys in the Construction Fund to or on behalf of
the Borrower only for the following purposes, subject to the provisions of
Section 3.5 hereof.
(i) Payment to the Borrower of such amounts, if any, as shall be
necessary to reimburse the Borrower in full for all advances and payments made
by it, at any time prior to or after the delivery of the Bonds, in connection
with (A) the preparation of plans and specifications for the Project (including
any preliminary study or planning of the Project or any aspect thereof) and ~)
subject to any limitation imposed by subsection ~) hereof, the acquisition,
construction and installation of the Project.
(ii) Payment for labor, services, materials and supplies used by or
furnished to the Borrower to improve the site and to acquire and construct the
Project, as provided in the plans, specifications and work orders therefor;
payment of the costs of acquiring, constructing and installing utility services
or other related facilities; payment of the costs of acquiring all real and
personal property deemed necessary to construct the Project; and payment of the
miscellaneous expenses incidental to any of the foregoing items.
(iii) Payment of the fees, if any, of architects, engineers, legal
counsel and supervisors expended in connection with the acquisition and
construction of the Project.
(iv) Payment of taxes, including property taxes, assessments and other
charges, if any, payable during the period of construction with respect to the
Project, or reimbursement thereof, if paid by the Borrower.
(v) Payment of expenses incurred in seeking to enforce any remedy
against any contractor or subcontractor in respect of any default under a
contract relating to the acquisition, construction or installation of the
Project.
(vi) Interest paid during the Construction Period and properly allocable
to the Project, to the extent of the portion of the Project which has not been
completed as of the date of accrual of any such interest costs and other
interest paid in respect of the Bonds.
6
11
(vii) Payment of any other Cost of the Project permitted by the Tax
Certificate but not including any Costs of Issuance).
(b) All moneys remaining in the Construction Fund after the Completion
Date and after payment or provision for payment of all other items provided for
in the preceding subsection (a) of this Section, shall be used in accordance
with Section 3.03 of the Indenture.
Each of the payments referred to in this Section 3.3 shall be made upon
receipt by the Trustee of a written requisition in the form prescribed by
Section 3.03 of the Indenture, signed by the Authorized Borrower Representative.
SECTION 3.4. ESTABLISHMENT OF COMPLETION DATE; OBLIGATION OF BORROWER TO
COMPLETE. As soon as the Project is completed, the Authorized Borrower
Representative, on behalf of the Borrower, shall evidence the Completion Date by
providing a certificate to the Trustee and the Authority stating the Cost of the
Project and further stating that (i) construction of the Project has been
completed substantially in accordance with the plans, specifications and work
orders therefor, as such may be amended or supplemented from time to time as
provided for herein, and all labor, services, materials and supplies used in
construction have been paid for, and (Ii) all other facilities necessary in
connection with the Project have been acquired, constructed and installed in
accordance with the plans and specifications and work orders therefor and all
costs and expenses incurred in connection therewith have been paid.
Notwithstanding the foregoing, such certificate may state that it is given
without prejudice to any rights of the Borrower against third parties for the
payment of any amount not then due and payable which exist at the date of such
certificate or which may subsequently exist.
At the time such certificate is delivered to the Trustee, moneys
remaining in the Construction Fund (other than moneys relating to provisional
payments permitted by Section 3.3), including any earnings resulting from the
investment of such moneys, shall be used as provided in Section 3.03 of the
Indenture.
In the event the moneys in the Construction Fund available for payment
of the Cost of the Project should be insufficient to pay the costs thereof in
full, the Borrower agrees to pay directly, or to deposit in the Construction
Fund moneys sufficient to pay, any costs of completing the Project in excess of
the moneys available for such purpose in the Construction Fund. The Authority
makes no express or implied warranty that the moneys deposited in the
Construction Fund and available for payment of the Cost of the Project, under
the provisions of this Agreement, will be sufficient to pay all the amounts
which may be incurred for the Project. The Borrower agrees that if, after
exhaustion of the moneys in the Construction Fund, the Borrower should pay, or
deposit moneys in the Construction Fund for the payment of, any portion of the
Cost of the Project pursuant to the provisions of this Section, it shall not be
entitled to any reimbursement therefor from the Authority, from the Trustee or
from the holders of any of the Bonds, nor shall it be entitled to any diminution
of the amounts payable under Section 4.2 hereof.
SECTION 3.5. INVESTMENT OF MONEYS IN FUNDS. Any moneys in any fund held
by the Trustee shall, at the written request of the Authorized Borrower
Representative, be invested or
7
12
reinvested by the Trustee as provided in the Indenture. Such investments shall
be held by the Trustee and shall be deemed at all times a part of the fund from
which such investments were made, and the interest accruing thereon, and any
profit or loss realized therefrom, except as otherwise provided in the Indenture
shall be credited or charged to such fund.
SECTION 3.6. SPECIAL TAX CERTIFICATIONS. The Borrower confirms the
representations set forth in, and covenants that it will comply with the
requirements and conditions of, the Tax Certificate, incorporated in its
entirety herein by reference. The Borrower covenants and agrees that it will not
use or permit the use by any person of any of the funds provided by the
Authority hereunder or any other of its funds, directly or indirectly, or direct
the Trustee to invest any funds held by it under the Indenture or this
Agreement, in such manner as would, or enter into, or allow any 1'related
person" (as defined in Section 144(a)(3) of the Code) to enter into, any
arrangement, formal or informal, that would, cause any Bond to be an "arbitrage
bond" within the meaning of Section 148(a) of said Code. The Borrower
acknowledges having read Sections 5.07 and 6.06~of the Indenture and agrees to
perform all duties imposed upon it by such Sections 5.07 and 6.06 of the
Indenture and by the Tax Certificate. Insofar as said Sections 5.07 and 6.06 of
the Indenture and the Tax Certificate impose duties and responsibilities on the
Borrower, they are specifically incorporated herein by reference, except to the
extent that they may be amended or modified upon the Opinion of Bond Counsel
that any such amendment or modification will not adversely affect the Tax-exempt
status of the Bonds.
ARTICLE IV
LOAN OF PROCEEDS; REPAYMENT PROVISIONS
SECTION 4.1. LOAN OF BOND PROCEEDS. The Authority covenants and agrees,
upon the terms and conditions in this Agreement, to make a loan to the Borrower
for the purpose of financing the Cost of the Project. Pursuant to said covenant
and agreement, the Authority will issue the Bonds upon the terms and conditions
contained in this Agreement and the Indenture and will cause the Bond proceeds
to be applied as provided in Article III of the Indenture. Such proceeds shall
be disbursed in accordance with the Indenture and Section 3.3 hereof.
SECTION 4.2. REPAYMENT AND PAYMENT OF OTHER AMOUNTS PAYABLE. To secure
and provide for the repayment of the loan made hereunder, the Borrower hereby
agrees to make the payments required by this Section as Repayment Installments
on such loan.
(a) The Borrower covenants and agrees to pay to the Trustee as a
Repayment Installment on the loan to the Borrower from Bond proceeds pursuant to
Section 4.1 hereof, on each date provided in or pursuant to the Indenture for
the payment of principal (whether at maturity or upon redemption or
acceleration) of, premium, if any, and/or interest on the Bonds, until the
principal of, premium, if any, and interest on the Bonds shall have been fully
paid or provision for the payment thereof shall have been made in accordance
with the Indenture, in immediately available funds, for deposit in the Bond
Fund, a sum equal to the amount payable on such interest or principal payment or
redemption or acceleration date as principal of (whether at maturity or upon
redemption or acceleration), premium, if any, and interest on the Bonds as
provided in the Indenture.
8
13
Each payment made pursuant to this Section 4.2(a) shall at all times be
sufficient to pay the total amount of interest and principal (whether at
maturity or upon redemption or acceleration) and premium, if any, payable on the
Bonds on the date of payment of principal or interest, as the case may be;
provided that any amount held by the Trustee in the Bond Fund on any due date
for a Repayment Installment hereunder shall be credited against the installment
due on such date to the extent available for such purpose; and provided further
that, subject to the provisions of this paragraph, if at any time the Borrower
determines that amounts held by the Trustee in the Bond Fund are sufficient to
pay all of the principal of and interest and premium, if any, on the Bonds as
such payments become due, the Borrower shall be relieved of any obligation to
make any further payments under the provisions of this Section. Notwithstanding
the foregoing, if on any date the amount held by the Trustee in the Bond Fund is
insufficient to make any required payments of principal of (whether at maturity
or upon redemption or acceleration) and interest and premium, if any, on the
Bonds as such payments become due, the Borrower shall forthwith pay such
deficiency as a Repayment Installment hereunder.
In addition, the Borrower agrees to provide for the issuance of, and
cause to be delivered to the Trustee on the Issue Date, the Bond Insurance
Policy to secure the payment of principal of and interest on the Bonds as set
forth in the Indenture. If at any time after the Bonds are issued, the Borrower
does not intend or will be unable to make a Repayment Installment due hereunder,
it shall notify the Bond Insurer of its failure or inability to make such
payment not less than two (2) days prior to the date on which such payment is
due.
(b) The Borrower also agrees to pay to the Trustee until the principal
of, premium, if any, and interest on the Bonds shall have been fully paid or
provision for the payment thereof shall have been made as required by the
Indenture, in accordance with the letter proposal of the Trustee presented and
agreed to by the Borrower prior to the issuance of the Bonds, (i) the annual fee
of the Trustee for its ordinary services rendered as trustee, and its ordinary
expenses incurred under the Indenture, as and when the same become due, (ii) the
reasonable fees, charges and expenses of the Trustee, as registrar, as provided
in the Indenture, as and when the same become due, (iii) the reasonable fees,
charges and expenses of the Trustee, as paying agent, for the necessary
extraordinary services rendered by it and extraordinary expenses incurred by it
under the Indenture, as and when the same become due, (iv) the cost of printing
any Bonds required to be furnished by the Authority, expenses of collection,
just and reasonable compensation to the Trustee for its services and the
services of counsel, agents and employees by it properly engaged and employed,
and all other expenses and liabilities reasonably incurred in connection with
the Bonds and the Project, and (v) any amounts required to be deposited in the
Rebate Fund to comply with the provisions of Section 3.6 hereof and Sections
5.07 and 6.06 of the Indenture. The Trustee shall submit written invoices to the
Borrower regarding all of the foregoing fees and expenses of the Trustee.
(c) The Borrower also agrees to pay, (i) at the time of Bond closing,
all expenses required to be paid by the Borrower under the terms of the Contract
of Purchase, including the premium and all costs related to the Bond Insurance
Policy, and the Authority's administrative fee in the amount of one-half of one
percent of the original principal amount of the Bonds (less any amounts
previously paid by the Borrower to the Authority); (ii) on or after the date of
Bond closing, on the request of the Authority, the Authority's Small Business
Assistance Fund fee pursuant to Section 44548(a) of the
9
14
California Health and Safety Code, in the amount calculated by the Authority;
and (~) all reasonable expenses of the Authority related to the Project which
are not otherwise required to be paid by the Borrower under the terms of this
Agreement; provided that the Authority shall have obtained the prior written
approval of the Authorized Borrower Representative for any expenditures other
than those provided for herein or in the Contract of Purchase.
(d) In the event the Borrower should fall to make any of the payments
required by subsections (a) through (c) of this Section, such payments shall
continue as obligations of the Borrower until such amounts shall have been fully
paid. The Borrower agrees to pay overdue payments under subsection (a) above,
together with interest thereon until paid, to the extent permitted by law, at
the rate of interest per annum borne by the Bonds or, if less, at the maximum
rate permitted by law. Interest on overdue payments required under subsection
(a) above shall be paid to Bondholders as provided in the Indenture.
SECTION 4.3. UNCONDITIONAL OBLIGATION. The obligations of the Borrower
to make the payments required by Section 4.2 hereof and to perform and observe
the other agreements on its part contained herein shall be absolute and
unconditional, irrespective of any defense or any rights of set-off, recoupment
or counterclaim it might otherwise have against the Authority, and during the
term of this Agreement, the Borrower shall pay absolutely net the payments to be
made on account of the loan as prescribed in Section 4.2 and all other payments
required hereunder, free of any deductions and without abatement, diminution or
set-off. Until such time as the principal of, premium, if any, and interest on
the Bonds shall have been fully paid, or provision for the payment thereof shall
have been made as required by the Indenture, the Borrower (i) will not suspend
or discontinue any payments provided for in Section 4.2 hereof; (;1) will
perform and observe all of its other covenants contained in this Agreement; and
(ill) except as provided in Article VII hereof, will not terminate this
Agreement for any cause, including, without limitation, failure to complete the
Project, the occurrence of any act or circumstances that may constitute failure
of consideration, destruction of or damage to the Project, commercial
frustration of purpose, any change in the tax or other laws of the United States
of America or of the State of California or any political subdivision or either
of these, or any failure of the Authority or the Trustee to perform and observe
any covenant, whether express or implied, or any duty, liability or obligation
arising out of or connected with this Agreement or the Indenture, except to the
extent permitted by this Agreement.
SECTION 4.4. ASSIGNMENT OF AUTHORITY'S RIGHTS. As security for the
payment of the Bonds, the Authority will assign to the Trustee the Authority's
rights under this Agreement, including the right to receive payments hereunder
(except the right of the Authority to receive certain payments, if any, with
respect to expenses and indemnification under Sections 4.2~) and (c), 6.3, 8.2
and 8.3 hereof), and the Authority hereby directs the Borrower to make the
payments required hereunder (except such payments for expenses and
indemnification) directly to the Trustee. The Borrower hereby assents to such
assignment and agrees to make payments directly to the Trustee without defense
or set-off by reason of any dispute between the Borrower and the Authority or
the Trustee.
SECTION 4.5. AMOUNTS REMAINING IN FUNDS. It is agreed by the parties
hereto that after payment in full of (i) the Bonds, or after provision for such
payment shall have been made as provided in the Indenture, (ii) the fees,
charges and expenses of the Trustee, paying agents and the
10
15
Authority in accordance with the Indenture and (ill) all other amounts required
to be paid under this Agreement and the Indenture including, without limitation,
amounts required to be paid from the Rebate Fund, any amounts remaining in any
fund held by the Trustee under the Indenture shall belong to the Borrower and be
paid to the Borrower by the Trustee.
ARTICLE V
SPECIAL COVENANTS AND AGREEMENTS
SECTION 5.1. POWER TO ESTABUSH CHARGES AND COLLECT AMOUNTS. The Borrower
has, and shall maintain as long as any Bonds are Outstanding, the lawful power
to establish charges and cause to be collected amounts with respect to the
Project.
SECTION 5.2. RIGHT OF ACCESS TO THE PROJECT. The Borrower agrees that
during the term of this Agreement the Authority, the Trustee and the duly
authorized agents of either of them shall have the right at all reasonable times
during normal business hours, upon reasonable notice to the Borrower, to enter
upon the site of the Project to examine and inspect the Project; provided,
however, that this right is subject to federal and State laws and regulations
applicable to the site of the Project and may be exercised only for the purpose
of carrying out the duties of the Authority and the Trustee, respectively,
hereunder and under the Indenture. The rights of access hereby reserved to the
Authority and the Trustee may be exercised only after such agent shall have
executed release of liability and secrecy agreements if requested by the
Borrower in the form then currently used by the Borrower, and nothing contained
in this Section or in any other provision of this Agreement shall be construed
to entitle the Authority or the Trustee to any information or inspection
involving the confidential know-how of the Borrower.
SECTION 5.3. THE BORROWER'S MAINTENANCE OF ITS EXISTENCE; ASSIGNMENTS.
(a) To the extent permitted or required by law and its articles of
incorporation, the Borrower agrees that during the term of this Agreement it
will maintain its existence as a corporation, will continue to maintain its
status as a corporation in good standing in the State, will not dissolve or
otherwise dispose of all or substantially all of its assets and will not combine
or consolidate with or merge into another person or permit one or more persons
to consolidate with or merge into it; provided, however, that if the Borrower
has obtained the prior written consent of the Authority, which consent shall not
be unreasonably withheld, the Borrower may so combine, consolidate with, or
merge into another person legally existing under the laws of one of the states
of the United States, or permit one or more persons to consolidate with or merge
into it, or sell or otherwise transfer to another person all or substantially
all of its assets as an entity and thereafter dissolve. The consent of the
Authority shall be given within 30 days after written evidence acceptable to the
Authority is provided by the Borrower to demonstrate that (i) the surviving,
resulting or transferee person, as the case may be, assumes and agrees in
writing to pay and perform all of the obligations of the Borrower hereunder,
(ii) the surviving, resulting or transferee person, as the case may be,
qualifies to do business in the State, (iii) the resulting or transferee person
shall have a net worth (as determined in accordance with generally accepted
accounting principles) immediately after such consolidation, merger, sale or
transfer greater than or equal to 95 % of the net worth of the Borrower at the
end of the fiscal quarter immediately preceding the effective date of
11
16
such consolidation, merger, sale or transfer, and (iv) the credit rating on the
Bonds, as determined by the bond rating service then rating the Bonds, shall
remain at the same rating level, or a higher rating level, as the rating level
of the Bonds immediately prior to the effective date of such consolidation,
merger, sale or transfer. If the Authority does not act within 30 days after
such written evidence is received, such consent shall be deemed to be given.
Within 10 business days of the consummation of the merger (other than a
merger involving the Borrower and any wholly-owned subsidiary of the Borrower)
or other transaction, the Borrower shall provide the Authority with counterpart
copies of the merger instruments, or other documents constituting the
transaction, including (A) copies of the instruments of assumption referred to
in (i) above, and (B) evidence of qualification as referred to in (ii) above.
The Borrower shall also at such time provide the Authority with an opinion of
counsel satisfactory to the Authority that the Borrower has complied with all of
the provisions of this Section 5.3(a). In the case of a merger involving the
Borrower and any wholly-owned subsidiary of the Borrower, the Borrower shall
send the Authority a notice of such merger within 10 business days after its
completion, together with an opinion of counsel as described in the preceding
sentence. The Borrower shall provide the Authority with at least 30 days'
written notice prior to the consummation of any merger or other transaction
described in (iii) above. At such time the Borrower shall provide the Authority
with drafts of the documents of assumption and the legal opinion referred to
above, and with copies of pro forma financial statements showing expected
compliance with the requirements of (iii) above. The Borrower agrees to provide
such other information as the Authority may reasonably request in order to
assure compliance with this Section 5.3(a).
Notwithstanding any other provisions of this Section 5.3(a), the
Borrower need not comply with any of the provisions of Section 5.3(a) above if,
at the time of such merger, combination, sale of assets, dissolution or
reorganization, the Bonds will be defeased as provided in Article X of the
Indenture.
(b) The rights and obligations of the Borrower under this Agreement may
be assigned by the Borrower to any person m whole or in part, subject, however,
to each of the following conditions:
(i) No assignment other than pursuant to subsection (a) of this
Section shall relieve the Borrower from primary liability for any of its
obligations hereunder, and in the event of any assignment not pursuant
to subsection (a) of this Section the Borrower shall continue to remain
primarily liable for the payments specified in Section 4.2 hereof and
for performance and observance of the other agreements on its part
herein provided to be performed and observed by it.
(ii) Any assignment from the Borrower shall retain for the
Borrower such rights and interests as will permit it to perform its
obligations under this Agreement, and any assignee from the Borrower
shall assume in writing the obligations of the Borrower hereunder to the
extent of the interest assigned.
(iii) The Borrower shall give the Authority thirty-days notice
of any assignment, (other than pursuant to subsection (a) above) and
shall, within thirty days after delivery of any assignment, furnish or
cause to be furnished to the Authority and the Trustee a true and
12
17
complete copy of each such assignment together with an instrument of
assumption, and an Opinion of Counsel satisfactory to the Authority that
the Borrower has complied with the provisions of this Section 5.3(b).
SECTION 5.4. RECORDS AND FINANCIAL STATEMENTS OF BORROWER. The Borrower
shall deliver to the Trustee and, to the extent requested in writing, to the
Authority, the following:
(a) As soon as available, but in no event more than one-hundred and
twenty (120) days after the end of each fiscal year, copies of the Borrower's
statements of operation for such fiscal year, financial statements of cash flows
for such fiscal year, all prepared in accordance with generally accepted
accounting principles applicable to the Borrower, and setting forth in each case
in comparative form the figures for the previous fiscal year. All financial
statements shall be certified by independent certified public accountants of
national standing, showing the financial condition of the Borrower at the close
of such fiscal year and the results of Project operations during such fiscal
year;
(b) Simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a certificate of an Authorized Borrower
Representative stating whether there exists on the date of such certificate any
circumstance known to the Borrower that, with the passage of time or the giving
of notice constitutes or would constitute an Event of Default and, if any
circumstance known to the Borrower that, with the passage of time or the giving
of notice constitutes or would constitute an Event of Default exists, setting
forth the details thereof and the action which the Borrower is taking or
proposes to take with respect thereto (this certificate shall always be
delivered to the Authority);
(c) Simultaneously with the delivery of each set of financial statements
referred to in clause (a) above, a statement (for so long as such statements are
routinely provided by the independent public accountant certifying the financial
statements in Section 5.4(a) to its clients) of the firm of independent public
accountants which reported on such statements advising that nothing has come to
their attention to cause them to believe that there existed on the date of such
statements any Event of Default; provided, that failure to obtain and deliver
such a certificate shall not be a default under Article VI;
(d) Forthwith upon the occurrence of any circumstance known to the
Borrower that, with the passage of time or the giving of notice, constitutes or
would constitute an Event of Default, a certificate of an Authorized Borrower
Representative setting forth the details thereof and the action which the
Borrower is taking or proposes with respect thereto; provided that a cure of any
occurrence for which notice pursuant to this clause should be given will cure
any failure of the notice provisions of this clause;
(e) From time to time, such additional information regarding the
financial position or business operations of the Borrower, as the Trustee or the
Authority may reasonably request; and
13
18
(f) At the same time as the financial statements are delivered pursuant
to clause (a) above, a certificate of an Authorized Borrower Representative
stating that all routine and major maintenance to the Project has been
performed.
SECTION 5.5. MAINTENANCE AND REPAIR; TAXES; UTILITY AND OTHER CHARGES;
INSURANCE. The Borrower agrees to maintain, to the extent permitted or required
by applicable law and regulation, the Project, or cause the Project to be so
maintained, during the term of this Agreement (i) in as reasonably safe
condition as its operations shall permit and (ii) in good repair and in good
operating condition, ordinary wear and tear excepted, mailing from time to time
all necessary repairs thereto and renewals and replacements thereof.
The Borrower agrees to pay or cause to be paid during the term of this
Agreement all taxes, governmental charges of any kind lawfully assessed or
levied upon the Project or any part thereof, including any taxes levied against
the Project which, if not paid, will become a charge on the receipts from the
Project prior to or on a parity with the charge thereon and the pledge or
assignment thereof to be created therefrom or under this Agreement, all utility
and other charges incurred in the operation, maintenance, use, occupancy and
upkeep of the Project and all assessments and charges lawfully made by any
governmental body for public improvements that may be secured by a lien on the
Project, provided that with respect to special assessments or other governmental
charges that may lawfully be paid in installments over a period of years, the
Borrower shall be obligated to pay only such installments as are required to be
paid during the term of this Agreement. The Borrower may, at the Borrower's
expense and in the Borrower's name, in good faith, contest any such taxes,
assessments and other charges and, in the event of any such contest, may permit
the taxes, assessments or other charges so contested to remain unpaid during
that period of such contest and any appeal therefrom unless by such nonpayment
the Project or any part thereof will be subject to loss or forfeiture.
The Borrower agrees that it will keep, or cause to be kept (i) the
Project insured against such risks and in such amounts and for such occurrences
as similar properties are usually insured by companies similarly situated
against loss or damage of the kinds usually insured against by companies
similarly situated, either by means of policies issued by reputable insurance
companies or, at Borrower's election, partially or wholly by means of an
adequate self-insurance program, and (ii) insurance against all direct or
contingent loss or liability for personal injury, death or property damage
occasioned by the operation of the Project, which insurance may be a part of the
policy or policies of insurance customarily maintained by the Borrower in
connection with its general property and liability insurance upon all of the
plants and properties operated by it (including such deductibles as may be
provided in said policies).
SECTION 5.6. TAX-EXEMPT STATUS OF BONDS. It is the intention of the
parties hereto that interest on the Bonds shall be and remain Tax-exempt and to
that end the covenants and agreements of the Authority and the Borrower in this
Section are for the benefit of the Trustee and each and every holder of the
Bonds.
The Borrower represents and warrants that substantially all of the
proceeds of the Bonds will be used with respect to the Project as more
specifically set forth in the Tax Certificate.
14
19
The Authority covenants and agrees that it has not taken and will not
take any action which results in interest paid on the Bonds not being Tax-exempt
to the holders of the Bonds, and the Borrower covenants and agrees that it has
not taken or permitted to be taken and will not take or permit to be taken any
action which will cause the interest on the Bonds not to be Tax-exempt to the
holders thereof; provided that neither the Borrower nor the Authority shall have
violated these covenants if the interest on any of the Bonds becomes taxable to
a person solely because such person is a "substantial user" of the Project or a
"related person" within the meaning of Section 147(a) of the Code; and provided
further that none of the covenants and agreements herein contained shall require
either the Borrower or the Authority to enter an appearance or intervene in any
administrative, legislative or judicial proceeding in connection with any
changes in applicable laws, rules or regulations or in connection with any
decisions of any court or administrative agency or other governmental body
affecting the taxation of interest on the Bonds.
SECTION 5.7. NOTICE AND CERTIFICATES TO TRUSTEE. The Borrower hereby
agrees to provide the Trustee with the following:
(a) On or before the fifth business day following June 30 and December
31 of each year (commencing June 30, 1997) in which any of the Bonds are
outstanding a certificate of an officer of the Borrower that: (i) all payments
required under this Agreement have been made and (ii) any applicable third party
credit support will continue in full force during the succeeding twelve months,
or explaining why not;
(b) Within one hundred twenty (120) days of the end of the fiscal year
of the Borrower, (i) a certificate of an officer of the Borrower to the effect
that to the best of such officer's knowledge, there exists no event of default
or potential default (which exists or which has previously occurred) and (ii)
the audited annual report of the Borrower;
(c) Upon knowledge of an Event of Default under this Agreement or the
Indenture, notice of such Event of Default, such notice to include a description
of the nature of such event and what steps are being taken to remedy such Event
of Default; and
(d) At the time of filing the certificates referred to in (a) above, a
written disclosure of any significant change known to the Borrower that occurs
which would adversely impact the Trustee's ability to perform its duties under
the Indenture, or of any conflicts which may result because of other business
dealings between the Trustee and the Borrower.
SECTION 5.8. CONTINUING DISCLOSURE. The Borrower hereby covenants and
agrees that it will comply with and carry out all of the provisions of the
Continuing Disclosure Agreement. Notwithstanding any other provision of this
Loan Agreement, failure of the Borrower to comply with the Continuing Disclosure
Agreement shall not be considered an Event of Default hereunder; however, the
Trustee shall at the request of any Participating Underwriter (as defined in the
Continuing Disclosure Agreement) or the Holders of at least 25 % aggregate
principal amount in Outstanding Bonds (upon receipt of satisfactory
indemnification), or any Bondholder or Beneficial Owner may take such actions as
may be necessary and appropriate, including seeking specific performance by
court order, to cause the Borrower to comply with its obligations under this
Section. For purposes of this Section, "Beneficial Owner" means any person which
has the power, directly or
15
20
indirectly, to vote or consent with respect to, or to dispose of ownership of,
any Bonds (including persons holding Bonds through nominees, depositories or
other intermediaries).
SECTION 5.9. QUALIFICATION IN CALIFORNIA. The Borrower agrees that
throughout the term of this Agreement it, or any successor or assignee as
permitted by Section 5.3, will be qualified to do business in the State.
ARTICLE VI
EVENTS OF DEFAULT AND REMEDIES
SECTION 6.1. EVENTS OF DEFAULT. Any one of the following which occurs
and continues shall constitute an Event of Default:
(a) failure by the Borrower to pay any amounts required to be paid under
Section 4.2(a) hereof which failure causes an Event of Default under the
Indenture;
(b) failure of the Borrower to observe and perform any covenant,
condition or agreement on its part required to be observed or performed by this
Agreement, other than making the payments referred to in (a) above, which
continues for a period of 30 days after written notice, which notice shall
specify such failure and request that it be remedied, given to the Borrower by
the Authority or the Trustee, unless the Authority and the Trustee shall agree
in writing to an extension of such time; provided, however, that if the failure
stated in the notice cannot be corrected within such period, the Authority and
the Trustee will not unreasonably withhold their consent to an extension of such
time if corrective action is instituted within such period and diligently
pursued until the default is corrected; or
(c) an Act of Bankruptcy of the Borrower.
The provisions of subsection (b) of this Section are subject to the
limitation that the Borrower shall not be deemed in default if and so long as
the Borrower is unable to carry out its agreements hereunder by reason of
strikes, lockouts or other industrial disturbances; acts of public enemies;
orders of any kind of the government of the United States or of the State of
California or any of their departments, agencies or officials, or any civil or
military authority; insurrections; riots; epidemics; landslides; lightning;
earthquake; fife; hurricanes; storms; floods; washouts; droughts; arrests;
restraint of government and people; civil disturbances; explosions; breakage or
accident to machinery, transmission pipes or canals; partial or entire failure
of utilities; or any other cause or event not reasonably within the control of
the Borrower; it being agreed that the settlement of strikes, lockouts and other
industrial disturbances shall be entirely within the discretion of the Borrower,
and the Borrower shall not be required to make settlement of strikes, lockouts
and other industrial disturbances by acceding to the demands of the opposing
party or parties when such course is, in the judgment of the Borrower,
unfavorable to the Borrower. This limitation shall not apply to any default
under subsections (a) or (c) of this Section.
16
21
SECTION 6.2. REMEDIES ON DEFAULT. Whenever any Event of Default shall
have occurred and shall continue:
(a) The Trustee, by written notice to the Borrower, shall declare the
unpaid balance of the loan payable under Section 4.2(a) of this Agreement to be
due and payable immediately, if concurrently with or prior to such notice the
unpaid principal amount of the Bonds shall have been declared to be due and
payable. Upon any such declaration such amount shall become and shall be
immediately due and payable as set forth in Section 7.01 of the Indenture.
(b) The Trustee may have access to and may inspect, examine and make
copies of the books and records and accounts, data and federal income tax and
other tax returns of the Borrower.
(c) The Authority or the Trustee may take whatever action at law or in
equity as may be necessary or desirable to collect the payments and other
amounts then due and thereafter to become due or to enforce performance and
observance of any obligation, agreement or covenant of the Borrower under this
Agreement. Nothing in Section 4.4 of this Agreement shall be deemed to limit the
rights of the Authority under this Section 6.2(c); provided that, the Authority
will not exercise any remedies, with respect to any of the Authority's rights
assigned to the Trustee pursuant to Section 4.4 of this Agreement unless, in the
Authority's reasonable judgment and after written request to the Trustee, the
Trustee has failed to enforce such rights.
In case the Trustee or the Authority shall have proceeded to enforce its
rights under this Agreement and such proceedings shall have been discontinued or
abandoned for any reason or shall have been determined adversely to the Trustee
or the Authority, then, and in every such case, the Borrower, the Trustee and
the Authority shall be restored respectively to their several positions and
rights hereunder, and all rights, remedies and powers of the Borrower, the
Trustee and the Authority shall continue as though no such action had been
taken.
The Borrower covenants that, in case an Event of Default shall occur
with respect to the payment of any Repayment Installment payable under Section
4.2(a) hereof, then, upon demand of the Trustee, the Borrower will pay to the
Trustee the whole amount that then shall have become due and payable under said
Section, with interest, to the extent permitted by law, on the amount then
overdue at the rate of interest per annum borne by the Bonds until such amount
has been paid.
In case the Borrower shall fall forthwith to pay such amounts upon such
demand, the Trustee shall be entitled and empowered to institute any action or
proceeding at law or in equity for the collection of the sums so due and unpaid,
and may prosecute any such action or proceeding to judgment or final decree, and
may enforce any such judgment or final decree against the Borrower and collect
in the manner provided by law the moneys adjudged or decreed to be payable.
In case proceedings shall be pending for the bankruptcy or for the
reorganization of the Borrower under the federal bankruptcy laws or any other
applicable law, or in case a receiver or trustee shall have been appointed for
the property of the Borrower or in the case of any other similar judicial
proceedings relative to the Borrower, or the creditors or property of the
Borrower, then the Trustee shall be entitled and empowered, by intervention in
such proceedings or otherwise, to file and prove a claim or claims for the whole
amount owing and unpaid pursuant to this Agreement and,
17
22
in case of any judicial proceedings, to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee allowed in such judicial proceedings relative to the Borrower,
its creditors or its property, and to collect and receive any moneys or other
property payable or deliverable on any such claims, and to distribute such
amounts as provided in the Indenture after the deduction of its charges and
expenses. Any receiver, assignee or trustee in bankruptcy or reorganization is
hereby authorized to make such payments to the Trustee, and to pay to the
Trustee any amount due it for compensation and expenses, including expenses and
fees of counsel incurred by it up to the date of such distribution.
SECTION 6.3. AGREEMENT TO PAY ATTORNEYS' FEES AND EXPENSES. In the event
the Borrower should default under any of the provisions of this Agreement and
the Authority or the Trustee should employ attorneys or incur other expenses for
the collection of the payments due under this Agreement or the enforcement of
performance or observance of any obligation or agreement on the part of the
Borrower herein contained, the Borrower agrees to pay to the Authority or the
Trustee the reasonable fees of such attorneys and such other expenses so
incurred by the Authority or the Trustee.
SECTION 6.4. NO REMEDY EXCLUSIVE. No remedy herein conferred upon or
reserved to the Authority or the Trustee is intended to be exclusive of any
other available remedy or remedies, but each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at law or in equity or by statute. No
delay or omission to exercise any right or power accruing upon any default shall
impair any such right or power or shall be construed to be a waiver thereof, but
any such right and power may be exercised from time to time and as often as may
be deemed expedient. In order to entitle the Authority or the Trustee to
exercise any remedy reserved to it in this Article, it shall not be necessary to
give any notice, other than such notice as may be herein expressly required.
Such rights and remedies as are given the Authority hereunder shall also extend
to the Trustee, and the Trustee and the holders of the Bonds shall be deemed
third party beneficiaries of all covenants and agreements herein contained.
SECTION 6.5. NO ADDITIONAL WAIVER IMPLIED BY ONE WAIVER. In the event
any agreement or covenant contained in this Agreement should be breached by the
Borrower and thereafter waived by the Authority or the Trustee, such waiver
shall be limited to the particular breach so waived and shall not be deemed to
waive any other breach hereunder.
ARTICLE VII
PREPAYMENT
SECTION 7.1. REDEMPTION OF BONDS WITH PREPAYMENT MONEYS. By virtue of
the assignment of the rights of the Authority under this Agreement to the
Trustee as is provided in Section 4.4 hereof, the Borrower agrees to and shall
pay directly to the Trustee any amount permitted or required to be paid by it
under this Article VII. The Trustee shall use the moneys so paid to it by the
Borrower to redeem the Bonds on the date set for such redemption pursuant to
Section 7.5 hereof.
18
23
SECTION 7.2. OPTIONS TO PREPAY INSTALLMENTS. The Borrower shall have the
option to prepay the amounts payable under Section 4.2 hereof with respect to
the Bonds, in whole or in part, by paying to the Trustee, for deposit in the
Bond Fund, the amount set forth in Section 7.4 hereof, under circumstances set
forth in Section 4.01(a) of the Indenture. The Borrower shall notify the Trustee
and the Authority in writing of its election to prepay the amounts payable
hereunder and direct the Trustee to cause the Bonds to be redeemed on a date
specified, which shall be at least 45 days after the date of such notice.
SECTION 7.3. MANDATORY PREPAYMENT. The Borrower shall have and hereby
accepts the obligation to prepay Repayment Installments with respect to the
Bonds to the extent mandatory redemption of the Bonds is required pursuant to
Section 4.01(1,) of the Indenture and upon the occurrence of any of the
following events:
(i) all or substantially all of the properties of the Borrower shall be
sold or taken through the exercise of the right of eminent domain or the right
to purchase by any municipal or governmental body or agency; or
(ii) a Determination of Taxability.
In the case of any of the events stated in this Section 7.3, the
Borrower must satisfy its obligation by prepaying within 180 days after such
event, such prepayment date to be specified in writing by the Borrower to the
Trustee and the Authority at least 45 days in advance.
The amount payable by the Borrower m the event of a prepayment required
by this Section shall be determined as set forth in Section 7.4 and shall be
deposited in the Bond Fund.
SECTION 7.4. AMOUNT OF PREPAYMENT. In the case of a prepayment of the
entire amount due hereunder with respect to the Bonds pursuant to Section 7.2 or
7.3 hereof, the amount to be paid shall be a sum sufficient, together with other
funds and the yield on any securities deposited with the Trustee and available
without reinvestment for such purpose, to pay (1) the principal of all Bonds
outstanding on the redemption date specified in the notice of redemption, plus
interest accrued and to accrue to the payment or redemption date of the Bonds,
plus premium, if any, required pursuant to the Indenture, (2) all reasonable and
necessary fees and expenses of the Authority, the Trustee and any paying agent
accrued and to accrue through final payment of the Bonds and (3) all other
liabilities of the Borrower accrued and to accrue with respect to the Bonds
under this Agreement.
In the case of partial prepayment of the Repayment Installments, the
amount payable shall be a sum sufficient, together with other funds deposited
with the Trustee and available without reinvestment for such purpose, to pay the
principal amount of and premium, if any, and accrued interest on the Bonds to be
redeemed, as provided in the Indenture, and to pay the expenses of redemption of
the Bonds.
SECTION 7.5. NOTICE OF PREPAYMENT. To exercise an option granted in or
to perform an obligation required by this Article VII, the Borrower shall give
written notice at least fifteen (15) days prior to the last day by which the
Trustee is permitted to give notice of redemption pursuant to
19
24
Section 4.03 of the Indenture to the Authority and the Trustee specifying the
date upon which any prepayment will be made. If the Borrower fails to give such
notice of a prepayment required by this Section 7.5, such notice may be given by
the Authority, by the Trustee or by any holder or holders of 10% or more in
aggregate principal amount of the Bonds outstanding. The Authority and the
Trustee, at the request of the Borrower or any such Bondholder, shall forthwith
take all steps necessary under the applicable provisions of the Indenture
(except that neither the Authority nor the Trustee shall be required to make
payment of any money required for such redemption) to effect redemption of all
or part of the then outstanding Bonds, on the earliest practicable date
thereafter on which such redemption may be made under applicable provisions of
the indenture.
ARTICLE VIII
NON-LIABILITY OF AUTHORITY; EXPENSES; INDEMNIFICATION
SECTION 8.1. NON-LIABILITY OF AUTHORITY. The Authority shall not be
obligated to pay the principal of, or premium, if any, or interest on the Bonds,
except from Revenues. The Borrower hereby acknowledges that the Authority's sole
source of moneys to repay the Bonds will be provided by the payments made by the
Borrower pursuant to this Agreement, together with other Revenues, including
investment income on certain funds and accounts held by the Trustee under the
Indenture, and hereby agrees that if the payments to be made hereunder shall
ever prove insufficient to pay all principal of, and premium, if any, and
interest on the Bonds as the same shall become due (whether by maturity,
redemption, acceleration or otherwise), then upon written notice from the
Trustee, the Borrower shall pay such amounts as are required from time to time
to prevent any deficiency or default in the payment of such principal, premium,
if any, or interest, including, but not limited to, any deficiency caused by
acts, omissions, nonfeasance or malfeasance on the part of the Trustee, the
Borrower, the Authority or any third party.
SECTION 8.2. EXPENSES. The Borrower covenants and agrees to pay and to
indemnify the Authority and the Trustee against all costs and charges, including
reasonable fees and disbursements of attorneys, accountants, consultants and
other experts, incurred in good faith in connection with this Agreement, the
Bonds or the Indenture.
SECTION 8.3. INDEMNIFICATION. The Borrower releases the Authority and
the Trustee from, and covenants and agrees that neither the Authority nor the
Trustee shall be liable for, and covenants and agrees, to the extent permitted
by law, to indemnify and hold harmless the Authority and the Trustee and their
directors, officers, employees and agents from and against, any and all losses,
claims, damages, liabilities or expenses, of every conceivable kind, character
and nature whatsoever arising out of, resulting from or in any way connected
with (1) the Project, or the conditions, occupancy, use, possession, conduct or
management of, or work done in or about, or from the planning, design,
acquisition, installation or construction of the Project or any part thereof;
(2) the issuance of any Bonds or any certifications, covenants or
representations made in connection therewith and the carrying out of any of the
transactions contemplated by the Bonds and this Agreement; (3) the Trustee's
acceptance or administration of the trusts under the Indenture, or the exercise
or performance of any of its powers or duties under the Indenture; or (4) any
untrue statement or alleged untrue statement of any material fact or omission or
alleged omission to state a
20
25
material fact necessary to make the statements made, in light of the
circumstances under which they were made, not misleading, in any continuing
disclosure documents, official statement or other offering circular utilized by
the Authority or any underwriter or placement agent in connection with the sale
of any Bonds; provided that such indemnity shall not be required for damages
that result from negligence or willful misconduct on the part of the party
seeking such indemnity. The indemnity required by this Section shall be only to
the extent that any loss sustained by the Authority or the Trustee exceeds the
net proceeds the Authority or the Trustee receives from any insurance carried
with respect to the loss sustained. The Borrower further covenants and agrees,
to the extent permitted by law, to pay or to reimburse the Authority and the
Trustee and their officers, employees and agents for any and all costs,
reasonable attorneys fees, liabilities or expenses incurred in connection with
investigating, defending against or otherwise in connection with any such
losses, claims, damages, liabilities, expenses or actions, except to the extent
that the same arise out of the negligence or willful misconduct of the party
claiming such payment or reimbursement. The provisions of this Section shall
survive the retirement of the Bonds or the removal or resignation of the
Trustee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. NOTICES. All notices, certificates or other communications
shall be deemed sufficiently given on the second day following the day on which
the same have been mailed by certified mall, postage prepaid, addressed to the
Authority, the Borrower or the Trustee as the case may be, as follows:
To the Authority: California Pollution Control Financing Authority
915 Capitol Mall, Suite 466
Sacramento, California 95814
Attention: Executive Director
To the Borrower: Southern California Water Company
630 East Foothill Boulevard
San Dimas, CA 91773
Attention: Treasurer
To the Trustee: Chemical Trust Company of California
101 California Street, Suite 2725
San Francisco, CA 94111
Attention: Corporate Trust Department
A duplicate copy of each notice, certificate or other communication
given hereunder by either the Authority or the Borrower to the other shall also
be given to the Trustee and the Bond Insurer. The Authority, the Borrower and
the Trustee may, by notice given hereunder, designate any different addresses to
which subsequent notices, certificates or other communications shall be sent.
21
26
SECTION 9.2. SEVERABILITY. If any provision of this Agreement shall be
held or deemed to be, or shall in fact be, illegal, inoperative or
unenforceable, the same shall not affect any other provision or provisions
herein contained or render the same invalid, inoperative, or unenforceable to
any extent whatever.
SECTION 9.3. EXECUTION OF COUNTERPARTS. This Agreement may be
simultaneously executed in several counterparts, each of which shall be an
original and all of which shall constitute but one and the same instrument;
provided, however, that for purposes of perfecting a security interest in this
Agreement to the Trustee under Article 9 of the California Uniform Commercial
Code, only the counterpart delivered, pledged and assigned to the Trustee shall
be deemed the original.
SECTION 9.4. AMENDMENTS, CHANGES AND MODIFICATIONS. Except as otherwise
provided in this Agreement or the Indenture, subsequent to the initial issuance
of Bonds and prior to their payment in full, or provision for such payment
having been made as provided in the Indenture, this Agreement may not be
effectively amended, changed, modified, altered or terminated by the Authority
and the Borrower without the written consent of the Trustee and the Bond
Insurer.
Notice of any such amendment to this Agreement or the Indenture shall be
promptly delivered to any rating agency then maintaining a rating on the Bonds.
SECTION 9.5. GOVERNING LAW. This Agreement shall be governed exclusively
by and construed in accordance with the applicable laws of the State. This
Agreement shall also be enforceable in the State and any action arising out of
this Agreement shall be filed and maintained in the Sacramento County Superior
Court, Sacramento, California; provided that the Authority may waive the
requirement of venue. The parties agree that the terms and conditions of this
Agreement supersede those of all previous agreements between the parties with
respect to the subject matter hereto, and that this Agreement, together with the
documents refereed to in this Agreement, contains the entire agreement between
the parties hereto. In the event of a dispute between the parties under this
Agreement, the losing party in such dispute shall pay all costs and expenses
incurred by the prevailing party in connection therewith, including but not
limited to attorneys fees.
SECTION 9.6. AUTHORIZED BORROWER REPRESENTATIVE. Whenever under the
provisions of this Agreement the approval of the Borrower is required or the
Borrower is required to take some action at the request of the Authority, such
approval or such request shall be given on behalf of the Borrower by the
Authorized Borrower Representative, and the Authority and the Trustee shall be
authorized to act on any such approval or request and neither party hereto shall
have any complaint against the other or against the Trustee as a result of any
such action taken.
SECTION 9.7. TERM OF THE AGREEMENT. This Agreement shall be in full
force and effect from the date hereof and shall continue in effect as long as
any of the Bonds are outstanding or the Trustee holds any moneys under the
Indenture, whichever is later provided, however, that the rights of the Trustee
and the Authority under Sections 8.2 and 8.3 hereof shall survive the
termination of this Agreement, the retirement of the Bonds and the removal or
resignation of the
22
27
Trustee. All representations and certifications by the Borrower as to all
matters affecting the Tax-exempt status of the Bonds shall survive the
termination of this Agreement.
SECTION 9.8. BINDING EFFECT. This Agreement shall inure to the benefit
of and shall be binding upon the Authority, the Borrower and their respective
successors and assigns; subject, however, to the limitations contained in
Section 5.3 hereof.
23
28
IN WITNESS WHEREOF, the California Pollution Control Financing Authority
has caused this Agreement to be executed in its name and its seal to be hereunto
affixed and attested by its duly authorized officers, and Southern California
Water Company has caused this Agreement to be executed in its name and its seal
to be hereunto affixed by its duly authorized officers, all as of the date first
above written.
CALIFORNIA POLLUTION CONTROL
FINANCING AUTHORITY
By Matt Fong, Chairman
By:_________________________________
[SEAL]
Attest:
_______________________________
Executive Director
SOUTHERN CALIFORNIA WATER
COMPANY
By:_________________________________
Vice President and Treasurer
[SEAL]
Attest:
_______________________________
Secretary
29
IN WITNESS WHEREOF, the California Pollution Control Financing Authority
has caused this Agreement to be executed in its name and its seal to be hereunto
affixed and attested by its duly authorized officers, and Southern California
Water Company has caused this Agreement to be executed in its name and its seal
to be hereunto affixed by its duly authorized officers, all as of the date first
above written.
CALIFORNIA POLLUTION CONTROL
FINANCING AUTHORITY
By Matt Fong, Chairman
By:_________________________________
[SEAL]
Attest:
_______________________________
Executive Director
SOUTHERN CALIFORNIA WATER
COMPANY
By:_________________________________
Vice President and Treasurer
[SEAL]
Attest:
_______________________________
Secretary
30
EXHIBIT A
DESCRIPTION OF THE PROJECT
The Project includes the acquisition, construction and installation of
water mains facilities and appurtenances thereto, situated at the following
locations throughout the State and acquired at the following respective costs:
Location
- --------
(a) in Bell, Los Angeles County, California; facilities located at:
1,200 feet of water mains on Atlantic, from Florence to Brompton,
3,100 feet of water mains on Gage, from Wilcox to Atlantic,
3,800 feet of water mains on Gage, from Atlantic to California,
(b) in Culver City, Los Angeles County, California; facilities located at:
810 feet of water mains on Jefferson, from Dobson to Sepulveda,
850 feet of water mains on Berryman, from McDonald to Port,
864 feet of water mains on Berryman, from McDonald to Port,
(c) in Walnut Park, Los Angeles County, California; facilities located at:
1,075 feet of water mains on Hickory, from Firestone to 83rd Street,
(d) in South Gate, Los Angeles County, California; facilities located at:
900 feet of water mains on Harding, from alley to Center,
(e) in Artesia, Los Angeles County, California; facilities located at:
300 feet of water mains in the alley east of Gridley, south of Ashworth
TOTAL $8,000,000
A-1