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EXHIBIT 10.11H
REIMBURSEMENT AGREEMENT
Dated as of January 8, 2003
By and Between
SOUTHWEST WATER COMPANY
(the "Borrower")
and
BANK OF AMERICA, N.A.
(the "Bank")
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TABLE OF CONTENTS
Article I. DEFINITIONS....................................... 1
1.01 Definitions.................................. 1
1.02 Accounting Terms and Determinations.......... 4
Article II. LETTER OF CREDIT.................................. 4
2.01 Issuance of the Letter of Credit............. 4
2.02 Scheduled Termination Date................... 5
2.03 Reimbursement for Draws Upon the
Letter of Credit............................. 5
2.04 Obligation to Pay Unconditional.............. 5
Article III. FEES; PAYMENTS; CHANGES IN CIRCUMSTANCES.......... 6
3.01 Letter of Credit Fees........................ 6
3.02 Transaction Fees............................. 7
3.03 Computation of Fees and Interest............. 7
3.04 Payments by the Borrower..................... 7
3.05 Direct Debit................................. 7
3.06 Payment Due on Non-Business Day to be
Made on Next Business Day.................... 7
3.07 Increased Costs.............................. 8
Article IV. REPRESENTATIONS AND WARRANTIES.................... 8
4.01 Existence and Power.......................... 8
4.02 Authorization; No Contravention.............. 8
4.03 Authority of Officers........................ 9
4.04 Governmental Approvals....................... 9
4.05 Taxes........................................ 9
4.06 Financial Information........................ 9
4.07 Binding Effect............................... 9
4.08 No Default................................... 10
4.09 Litigation................................... 10
4.10 Compliance with Other Agreements and
Applicable Laws.............................. 10
Article V. CONDITIONS........................................ 11
5.01 Conditions Precedent to the Issuance of
the Letter of Credit......................... 11
Article VI. AFFIRMATIVE COVENANTS............................. 11
6.01 Credit Agreement Covenants................... 11
6.02 Further Assurances........................... 12
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Article VII. EVENTS OF DEFAULT................................. 12
7.01 Events of Default............................ 12
7.02 Remedies..................................... 14
7.03 Rights Not Exclusive......................... 14
Article VIII. MISCELLANEOUS..................................... 14
8.01 Notices...................................... 14
8.02 Binding Agreement; Third Parties............. 15
8.03 Participations............................... 15
8.04 No Waivers................................... 16
8.05 Payment of Expenses.......................... 16
8.06 Indemnity.................................... 17
8.07 Amendment and Modification of
Agreement, Waivers........................... 18
8.08 Severability................................. 19
8.09 Arbitration.................................. 19
8.10 Governing Law................................ 21
8.11 Table of Contents and Captions............... 21
8.12 Counterparts................................. 21
Exhibit A Letter of Credit
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REIMBURSEMENT AGREEMENT
This Reimbursement Agreement dated as of January 8, 2003, is entered into
by and between SOUTHWEST WATER COMPANY, a Delaware corporation (the "Borrower")
and BANK OF AMERICA, N.A., a national banking association organized and existing
under the laws of the United States of America (the "Bank").
WHEREAS, pursuant to that certain Service Contract for the Design,
Construction, Financing and Operation of the San Juan Basin Desalter Project
dated September 3, 2002 (the "Service Contract") between the Capistrano Valley
Water District, Orange County, California (the "District") and ECO Resources,
Inc., a Texas corporation (the "Company"), the Company has agreed to pay certain
daily delay liquidated damages under certain circumstances as set forth in the
Service Contract.
WHEREAS, the Borrower, the parent corporation of the Company, has entered
into that certain Service Contract Guaranty Agreement dated September 3, 2002
(the "Guaranty") pursuant to which Borrower has guaranteed the obligations of
the Company to the District under the Service Contract.
WHEREAS, to support payment of the liquidated damages under the Services
Contract, the Borrower has requested that the Bank issue its irrevocable
direct-pay letter of credit, in substantially the form of Exhibit A hereto, for
the benefit of the District.
NOW, THEREFORE, in consideration of the premises and in order to induce the
Bank to issue the Letter of Credit, and intending to be legally bound hereby,
the Borrower and the Bank hereby agree as follows:
ARTICLE I
DEFINITIONS
1.01 Definitions. In addition to the terms defined in the Whereas clauses
above and elsewhere in this Agreement, the
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following terms used in this Agreement and in any exhibits hereto shall, unless
the context otherwise requires, have the following meanings:
"Agreement" means this Reimbursement Agreement, as it may be amended and
supplemented from time to time.
"Business Day" means any day other than a Saturday, Sunday, legal holiday
or a day on which banking institutions in California are authorized or required
to close.
"Change of Control" shall have the meaning set forth in the Credit
Agreement.
"Closing Date" means the date on which all conditions precedent under
Paragraph 5.01 have been satisfied or have been waived by the Bank.
"Code" means the Internal Revenue Code of 1986, as amended.
"Credit Agreement" means that certain Credit Agreement dated as of July 30,
1999, as amended, between the Borrower and the Bank, as the same may be further
amended, modified, renewed and restated from time to time.
"Default," means an event which with the giving of notice or lapse of time,
or both, would constitute an Event of Default.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and the rules and regulations issued thereunder as from time to time in
effect.
"Event of Default" means any of the events specified in Paragraph 7.01.
"Governmental Authority" means any government, foreign or domestic, and any
political subdivision thereof, any court or any foreign or domestic, federal,
state, municipal or other department, commission, board, bureau, agency, public
authority or instrumentality.
"Governmental Requirement" means any law, ordinance, order, rule or
regulation of a Governmental Authority.
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"Indebtedness" means for any Person calculated on a consolidated basis in
accordance with generally accepted accounting principles (a) all indebtedness of
such Person for borrowed money or for the deferred purchase price of property;
(b) all direct or indirect guaranties of such Person in respect of, and all
obligations (contingent or otherwise) of such Person to purchase or otherwise
acquire, or otherwise to assure a creditor against loss in respect of,
indebtedness of any other Person; and (c) all obligations of such Person as
lessee under leases which have been or should be in accordance with generally
accepted accounting principles recorded as capital leases. In calculating
Indebtedness, no amount shall be included more than once in the aggregate of the
above described amounts.
"Indemnified Parties" means and includes the Bank, its parent, subsidiaries
and affiliated companies, assignees of any of Bank's interests in this
Agreement, or any of its affiliates, and officers, directors, employees and
agents of each of them.
"Letter of Credit" means the letter of credit, substantially in the form of
Exhibit A hereto, issued pursuant to Paragraph 2.01(a) and any letter of credit
issued in substitution therefor pursuant to the terms of this Agreement, as such
Letter of Credit may be amended, renewed or extended from time to time.
"Person" means any individual, firm, partnership, joint venture,
corporation, association, business enterprise, trust, governmental authority or
other entity whether acting in an individual, fiduciary or other capacity.
"Plan" means an employee benefit plan or pension plan covered by ERISA.
"Prime Rate" means the rate of interest publicly announced from time to
time by the Bank, as its prime rate. The Prime Rate is a rate set by the Bank
based upon 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.
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"Scheduled Termination Date" means the date of termination of the Letter of
Credit, being initially January 8, 2004.
"Subsidiary" means a corporation of which shares of stock having ordinary
voting power (other than stock having such power only by reason of the happening
of a contingency) to elect a majority of the board of directors or other
managers of such corporation are at the time owned, directly or indirectly
through one or more intermediaries, or both, by the Borrower.
1.02 Accounting Terms and Determinations. Unless otherwise specified
herein, all accounting terms used herein shall be interpreted, all accounting
determinations hereunder shall be made, and all financial statements required to
be delivered hereunder shall be prepared in accordance with, generally accepted
accounting principles as in effect from time to time and consistently applied.
ARTICLE II
LETTER OF CREDIT
2.01 Issuance of the Letter of Credit.
(a) Subject to the terms and conditions of this Agreement, the Bank
hereby agrees on the Closing Date, upon the request of the Borrower evidenced by
its execution and delivery of this Agreement, to issue its Letter of Credit in
favor of the District for the account of the Borrower. The Letter of Credit
shall be in a face amount not exceeding Three Million Four Hundred Thirty
Thousand Dollars ($3,430,000).
(b) The request for issuance of the Letter of Credit shall constitute
a representation and warranty by the Borrower that as of the date of such
request the representations and warranties set forth in Article IV are true and
correct and that no Default or Event of Default has occurred and is continuing.
(c) Subject to the terms and conditions of this Agreement, the Bank
hereby agrees, at the request of the Borrower, and subject to the written
consent of the District, to amend the Letter of Credit to reflect any reductions
in the
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Stated Amount of the Letter of Credit and/or any assignments of the Service
Contract.
2.02 Scheduled Termination Date. The initial Scheduled Termination Date
shall be January 8, 2004 and shall be automatically extended each year
thereafter for an additional one year unless the Bank gives written notice to
the Borrower and the District at least 120 days prior to the then current
Scheduled Termination Date of its intention not to extend the Scheduled
Termination Date beyond the current Scheduled Termination Date.
2.03 Reimbursement for Draws Upon the Letter of Credit. The Borrower agrees
to reimburse the Bank, on each date that any amount drawn upon the Letter of
Credit is honored by the Bank, for the amount of such drawing. Any other amount
drawn under the Letter of Credit and any amount not paid when due under this
Agreement shall bear interest until paid in full at a rate per annum equal to
the sum of the Prime Rate plus four percentage points (4%).
2.04 Obligation to Pay Unconditional.
(a) The Borrower's obligations to reimburse the Bank as provided
herein is absolute, unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, under all circumstances whatsoever,
including without limitation the following circumstances except as may be the
result of the gross negligence or willful misconduct of the Bank:
(i) any lack of validity or enforceability of the Letter of
Credit or the Service Contract (provided payments are actually made
under the Letter of Credit);
(ii) any amendment or waiver of or any consent to departure from
all or any of such documents;
(iii) the existence of any claim, set-off, defense or other right
which the Borrower may have at any time against the Company, the
District, or any other Person (other than the
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Bank), whether in connection with this Agreement, the Service Contract
or any unrelated transaction;
(iv) payment by the Bank under the Letter of Credit against
presentation of a sight draft or certificate which complies in all
material respects with the terms of the Letter of Credit but does not
strictly comply therewith;
(v) any demand, statement or any other document presented under
the Letter of Credit proving to be forged, fraudulent, invalid or
insufficient in any respect or any statement therein being untrue or
inaccurate in any respect whatsoever; or
(vi) any other circumstance, happening or omission whatsoever
which is similar to any of the foregoing.
ARTICLE III
FEES; PAYMENTS; CHANGES IN CIRCUMSTANCES
3.01 Letter of Credit Fee. The Borrower shall pay to the Bank a letter of
credit fee equal to two percent (2%) per annum of the Stated Amount of the
Letter of Credit (as defined therein) and as reduced from time to time. The
letter of credit fee shall accrue from the Closing Date to the date the Letter
of Credit expires and shall be payable quarterly in advance commencing on the
date of issuance of the Letter of Credit and quarterly thereafter.
3.02 Transaction Fees. The Borrower shall pay to the Bank:
(a) on the date of each drawing under the Letter of Credit, a
transaction fee in amount equal to Two Hundred Fifty Dollars ($250) and, if
required, a wire transfer fee of Thirty-Five Dollars ($35.00); and
(b) on the date of any amendment to or transfer of the Letter of
Credit, an amendment or transfer fee in an amount
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equal to Two Thousand Five Hundred Dollars ($2,500.00).
3.03 Computation of Fees and Interest. All computations of fees and
interest under this Agreement shall be made on the basis of a three hundred
sixty (360) day year and actual days elapsed (which results in a higher interest
and higher fees than if a three hundred sixty-five (365) day year were used).
Interest shall accrue during each period during which interest is computed from
but excluding the first day thereof to and including the last day thereof.
3.04 Payments by the Borrower.
(a) On the date of the Bank's honoring of each drawing under the
Letter of Credit, the Borrower shall before 5:00 p.m. (California time) make an
amount equal to the amount of such drawing available to the Bank by payment in
immediately available funds.
(b) Any payment received after 5:00 p.m. (California time) shall be
deemed to have been received on the next Business Day.
3.05 Direct Debit
(a) The Borrower agrees that interest and principal payments and any
fees will be deducted automatically on the due date from the Borrower's account
number 14599-07501, or such other of the Borrower's account with the Bank as
designated in writing by the Borrower. The Bank shall promptly, upon receipt of
notice from the District of a drawing under the Letter of Credit, notify the
Borrower of the amount of such drawing and any fees incurred in connection
therewith.
(b) The Borrower will maintain sufficient funds in the account on the
dates the Bank enters debits authorized by this Agreement to cover each debit.
If there are insufficient funds in the account on the date the Bank enters any
debit authorized by this Agreement, the debit will be reversed.
3.06 Payment Due on Non-Business Day to be Made on Next Business Day. If
any sum becomes payable pursuant to this Agreement on a day which is not a
Business Day, the date for payment thereof shall be extended, without penalty,
to the next
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succeeding Business Day, and such extended time shall be included in the
computation of interest and fees.
3.07 Increased Costs. If after the date hereof any change in any law or
regulation or in the interpretation thereof by any court or administrative or
Governmental Authority charged with the administration thereof shall either (i)
impose, modify or deem applicable any reserve, special deposit, assessment or
insurance fee or similar requirement against letters of credit issued by the
Bank or (ii) impose on the Bank any other condition relating to this Agreement
or the Letter of Credit or affect the calculations relating to the Bank's
capitalization, and the result of any event referred to in clause (i) or (ii)
shall be to increase the cost to the Bank of issuing or maintaining the Letter
of Credit or funding amounts drawn thereunder, then, upon demand by the Bank,
the Borrower shall immediately pay to the Bank, from time to time as specified
by the Bank, additional amounts which shall be sufficient to compensate the Bank
for such increased cost from the date of such change, together with interest on
each such amount from the date demanded until payment in full thereof at the
Prime Rate plus two percent (2%). A certificate setting forth with reasonable
explanations such increased cost incurred by the Bank as a result of any event
mentioned in clause (i) or (ii) of this paragraph, submitted by the Bank to the
Borrower, shall be conclusive, absent manifest error, as to the amount thereof.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
The Borrower represents and warrants that:
4.01 Existence and Power. The Borrower is a corporation duly formed and
existing under the law of the State of Delaware and has all governmental
licenses, authorizations, consents and approvals required to carry on its
business as now conducted.
4.02 Authorization; No Contravention. The execution and delivery and
performance by the Borrower of this Agreement, the Guaranty and the other
related documents to which it is a party is within the Borrower's powers, has
been duly authorized by all necessary action and does not contravene, or
constitute a
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default under, any provision of applicable law or regulation or of its
organizational papers or of any agreement, judgment, injunction, order, decree
or other instrument binding upon the Borrower in any material respect or result
in the creation or imposition of any lien or encumbrance on any asset of the
Borrower.
4.03 Authority of Officers. The officers of the Borrower who will execute
this Agreement and who have executed all other documents, instruments and
agreements required to be delivered or contemplated hereunder or under the
Service Contract are or will be duly authorized to execute the same.
4.04 Governmental Approvals. No order, permission, consent, approval,
license or authorization by registration or filing with, or exemption by, any
Governmental Authority is required by the Borrower to authorize, or is required
by any Borrower in connection with, the execution, delivery and performance by
the Borrower of this Agreement or under any document required under the Service
Contract to which it is a party or the taking by the Borrower of any action
hereby or thereby contemplated, except as have been granted and which are in
full force and effect.
4.05 Taxes. The Borrower and each of its Subsidiaries has filed all tax
returns and reports required to be filed and has paid all taxes shown to be due
and payable on such returns and has paid all tax assessments, fees and other
governmental charges upon it or its properties, income or assets otherwise due
and payable except those presently payable without penalty or interest and
further except those which are being contested in good faith by appropriate
proceedings diligently conducted, and for which adequate reserves have been set
aside in accordance with generally accepted accounting principles.
4.06 Financial Information. The financial statements of the Borrower and
its consolidated Subsidiaries dated as of September 30, 2002, and the
information and other data furnished by the Borrower to the Bank fairly and
accurately reflect the financial condition of the Borrower and its consolidated
Subsidiaries as of the date and for the periods indicated therein and have been
prepared in conformity with generally accepted accounting principles.
4.07 Binding Effect. This Agreement constitutes valid and
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binding agreement of Borrower, enforceable against Borrower in accordance with
its terms, subject to the effect of applicable bankruptcy and other similar laws
affecting the rights of creditors generally and the effect of equitable
principles whether applied in an action at law or a suit in equity.
4.08 No Default. No material Default or any Event of Default has occurred
and is continuing or would result from the obligations incurred by the Borrower
hereunder or by the actions contemplated hereby.
4.09 Litigation. There are no suits, proceedings, claims or disputes
pending or, to the knowledge of the Borrower, threatened against or affecting
the Borrower or its property, the adverse determination of which might in any
material respect affect the Borrower's financial condition or operations or
impair the Borrower's ability to perform its obligations hereunder, under the
Service Contract or under any instrument or agreement required hereunder or
thereunder.
4.10 Compliance with Other Agreements and Applicable Laws. Neither Borrower
nor any of the its Subsidiaries is in default in any material respect under, or
in violation in any material respect of any of the terms of, any agreement,
contract, instrument, lease or other commitment (including, but not limited to
any such agreement involving the debts or investments of Borrower or liens upon
its assets) to which it is a party or by which it or any of its assets are bound
and Borrower and each of its Subsidiaries is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals, and orders of any Governmental Authority.
The representations and warranties contained in this Article IV shall be
deemed to be made by the Borrower on the date of execution of this Agreement.
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ARTICLE V
CONDITIONS
5.01 Conditions Precedent to the Issuance of the Letter of Credit. The
obligation of the Bank to issue the Letter of Credit is subject to the condition
precedent that on or before the Closing Date the Bank shall have received the
following, in form and detail satisfactory to the Bank:
(a) evidence that the execution, delivery and performance by the
Borrower of this Agreement and any instrument or agreement required under this
Agreement have been duly authorized;
(b) certificate of good standing from the Borrower from its state of
incorporation, certified as of a recent date by the Secretary of State of its
state of incorporation;
(c) copy of the executed Service Contract and all other documents
executed or delivered in connection therewith as Bank may reasonably require;
(d) the fees required by Paragraph 3.01;
(e) such other evidence, documents, instruments, approvals or
opinions as the Bank may reasonably request to establish the due execution of
the transactions contemplated by this Agreement.
ARTICLE VI
AFFIRMATIVE COVENANTS
The Borrower covenants and agrees, that as long as the Letter of Credit is
outstanding and until the full and final payment of all indebtedness of the
Borrower incurred hereunder, unless the Bank shall otherwise consent in writing:
6.01 Creditor Agreement Covenants. Borrower agrees to perform each and
every covenant contained in Sections 6.01 and 6.02, inclusive, of the Credit
Agreement. The above referenced covenants are hereby incorporated by reference
into this
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Agreement as in effect on the date hereof and as such covenants may be further
amended, modified, waived, or in any way changed; provided, however, if the
Credit Agreement is terminated for any reason, Borrower will still comply with
the above-referenced covenants as they exist on the date of termination, unless
otherwise agreed to in writing by the Bank.
6.02 Further Assurances. The Borrower will execute and deliver to the Bank
all such documents, instruments and agreements (other than as specifically
required by this Agreement) and do all such other acts and things as may be
reasonably requisite to enable the Bank to exercise and enforce its rights
hereunder.
ARTICLE VII
EVENTS OF DEFAULT
7.01 Events of Default. The following events shall constitute "Events of
Default";
(a) Non-Payment. The Borrower shall fail to pay within three (3) days
of the date when due any amount of principal, interest, fee or other
amount payable by it hereunder;
(b) Representation or Warranties. Any representation or warranty made
by the Borrower in this Agreement or which is contained in any certificate,
financial statement or other document delivered at any time pursuant hereto or
in connection with any transaction contemplated hereby shall prove to have been
incorrect in any material respect when made or deemed to be made;
(c) Other Defaults. The Borrower shall fail to observe or perform any
material term, provision, covenant, agreement or obligation contained in this
Agreement not specifically mentioned in this Paragraph 7.01 and, with respect to
any such default which by its nature can be cured, such default shall continue
for a period of twenty (20) days from its occurrence;
(d) Voluntary Bankruptcy; Insolvency. The Borrower shall (i) suspend
or discontinue its business, or (ii) make an
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assignment for the benefit of creditors, or (iii) generally not be paying its
debts as such debts become due, or (iv) admit in writing its inability to pay
its debts as they become due, or (v) file a voluntary petition in bankruptcy, or
(vi) become insolvent (however such insolvency shall be evidenced), or (vii)
file any petition or answer seeking for itself any bankruptcy reorganization,
arrangement, composition, readjustment of debt, liquidation or dissolution or
similar relief under any present or future statute, law or regulation of any
jurisdiction, or (viii) petition or apply to any tribunal for any receiver,
custodian or trustee for any substantial part of its property;
(e) Involuntary Proceedings. An involuntary case or other proceeding
shall be commenced against the Borrower seeking liquidation, reorganization or
other relief with respect to it or its debts under any bankruptcy, insolvency or
other similar law now or hereafter in effect or seeking the appointment of a
trustee, receiver, liquidator, custodian or other similar official of it or any
substantial part of its property, and such involuntary case or other proceeding
shall remain undismissed and unstayed for a period of sixty (60) days;
(f) Judgments. Any judgment or decree is issued in an amount
exceeding Two Hundred Fifty Thousand Dollars ($250,000) not covered by insurance
against the Borrower or against any of its property;
(g) ERISA. Any Plan termination or any full or partial withdrawal
from a Plan or Plans shall occur which could result in a material liability of
the Borrower to the Pension Benefit Guaranty Corporation;
(h) Material Adverse Change. A material adverse change occurs in the
Borrower's financial condition, properties or prospects, or ability to repay any
obligations hereunder;
(i) Other Bank Agreements. The Borrower fails to meet the material
conditions of, or fails to perform any material obligation under any other
agreement the Borrower has with the Bank or any affiliate of the Bank and, with
respect to any such default which by its nature can be cured, such default shall
continue for a period of twenty (20) days from its occurrence;
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(j) Termination of Credit Agreement. The Credit Agreement is
terminated, cancelled or no longer in effect for any reason; or
(k) Change of Control. A Change of Control shall have occurred.
7.02 Remedies. If any Event of Default shall have occurred:
(a) The obligation of the Bank to issue, extend, amend or renew the
Letter of Credit, if the Letter of Credit has not yet been issued, extended,
amended or renewed, shall terminate; and/or
(b) The Bank may declare all amounts due hereunder (together with
accrued interest thereon) to be, and such amounts shall thereupon become, due
and payable without presentment, demand, protest or notice of any kind, all of
which are hereby waived by the Borrower; and/or
(c) The Borrower will at the request of the Bank immediately pay to
the Bank an amount equal to the aggregate amount which could be drawn under the
Letter of Credit to be held by the Bank in a cash collateral account as security
for the Indebtedness hereunder and the Borrower agree that such funds may be
applied against the Indebtedness hereunder as the same becomes due and payable;
and/or
(d) The Bank may exercise all rights and remedies available to it by
law or in equity.
7.03 Rights Not Exclusive. The rights provided for in this Article are
cumulative and are not exclusive of any other rights, powers, privileges or
remedies provided by law or in equity.
ARTICLE VIII
MISCELLANEOUS
8.01 Notices. All notices, requests and other communications to any party
hereunder shall be in writing
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(including cable or telex) and shall be given to such party at its address or
facsimile number set forth below or such other address or facsimile number as
such party may hereafter specify by notice to the Bank and the Borrower:
If to the Borrower:
Southwest Water Company
225 North Barranca Avenue, Suite 200
West Covina, California 91791-1605
Attn: Thomas C. Tekulve
Vice President, Finance
If to the Bank:
Bank of America, N.A.
675 Anton Boulevard, 2nd Floor
Costa Mesa, California 92626
Attn: Jamie Harney
Vice President
Each such notice, request or other communication shall be effective when
received at the addresses specified in this Paragraph.
8.02 Binding Agreement; Third Parties.
(a) This Agreement shall be binding upon and inure to the benefit of
the Borrower and the Bank and their respective successors and assigns, provided
that the Borrower may not assign or transfer any of its rights under this
Agreement without the prior written consent of the Bank, which consent shall not
be unreasonably withheld or delayed.
(b) This Agreement shall not be construed so as to confer any right
or benefit upon any Person other than the parties to this Agreement and their
respective successors and assigns.
8.03 Participations. The Bank may at any time sell, assign, grant
participations in, or otherwise transfer to any other Person (each a
"Participant") all or part of the obligations of the Borrower under this
Agreement. The Borrower agrees that each such disposition will give rise to a
direct
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obligation of the Borrower to the Participant. The Borrower authorizes the Bank
and each Participant, upon the occurrence of an Event of Default, to proceed
directly by right of setoff, banker's lien, or otherwise, against any assets of
the Borrower which may be in the hands of the Bank or such Participant,
respectively. The Borrower authorizes the Bank to disclose to any prospective
Participant and any Participant any and all information in the Bank's possession
concerning the Borrower, this Agreement.
8.04 No Waivers. No failure or delay by the Bank in exercising any right,
power or privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. The rights and
remedies herein provided shall be cumulative and not exclusive of any rights or
remedies provided by law.
8.05 Payment of Expenses.
(a) The Borrower agrees:
(i) to pay or reimburse the Bank for all of its reasonable
out-of-pocket costs, attorneys' fees and expenses (including, without
limitation, allocated costs of in-house counsel) incurred in
connection with the preparation, review and execution of, and any
amendment, supplement or modification to, this Agreement, the Letter
of Credit, and any other document prepared in connection herewith or
therewith and the consummation of the transactions contemplated hereby
and thereby;
(ii) to pay the Bank's reasonable costs and expenses incurred in
connection with the administration of this Agreement, including title
insurance, recording and escrow charges, fees for appraisal, audit
charges, and any other reasonable fees and costs for services,
regardless of whether such services are furnished by the Bank's
employees or agents or independent contractors.
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(iii) to pay or reimburse the Bank for all reasonable costs and
out-of-pocket expenses incurred in connection with the enforcement or
preservation of any rights under this Agreement, the Letter of Credit,
and any other document prepared in accordance herewith or therewith or
any refinancing or restructuring of this Agreement or such other
documents in the nature of a "work-out", including, out-of-pocket fees
and disbursements of counsel to the Bank (including without
limitation, allocated out-of-pocket costs of in-house counsel), and
including any costs and attorneys fees incurred in any arbitration
proceeding.
(b) The obligations of the Borrower in this paragraph shall
survive repayment of all disbursements made under the Letter of Credit and all
other amounts payable hereunder.
(c) In the event that any party hereto shall incur legal fees
and costs in connection with the actual or threatened breach of any provision
hereof, or to enforce any right or remedy hereunder, such party shall be
entitled to recover such fees and costs from the breaching party. In the event
that an action or arbitration proceeding is brought in connection with this
Agreement the prevailing party shall be entitled to recover from the losing
party in addition to any money judgment or other relief, such actual attorney's
fees (including allocated costs of staff counsel), disbursements and costs as
may be incurred by the prevailing party instituting or defending such litigation
or arbitration, together with such reasonable costs and expenses as may be
allowed by the court or arbitrator. In the event that any case is commenced by
or against the 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 (including allocated costs of in-house counsel)
incurred by the Bank related to the preservation, protection or enforcement of
any rights of the Bank in such case.
8.06 Indemnity.
(a) The Borrower agrees to indemnify and hold the Indemnified Parties
harmless from and against all liabilities,
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claims, actions, damages, costs and expenses (including all legal fees and
expenses of counsel to the Indemnified Parties) arising out of or resulting from
the Indemnified Parties' performance of any act permitted under this Agreement
(excluding gross negligence or willful misconduct of any Indemnified Party); or
breach of any representation or warranty made or given by the Borrower or any
obligation of Borrower contained in this Agreement; or any claim or cause of
action of any kind by any party that the Indemnified Parties are liable for any
act or omission committed or made by the Borrower or any other person or entity
(except the Bank) in connection with the ownership, operation or development of
the Project, whether on account of any theory of derivative liability,
comparative negligence or otherwise. Upon demand by the Indemnified Parties,
Borrower shall defend any action or proceeding brought against the Indemnified
Parties arising out of or alleging any claim or cause of action covered by this
indemnity, all at Borrower's own cost and by counsel to be approved by the
Indemnified Parties in the exercise of their reasonable judgment. In the
alternative, the Indemnified Parties may elect to conduct its own defense, and
Borrower shall pay the reasonable expenses thereof. The provisions of this
paragraph shall survive the termination of this Agreement.
(b) The Borrower agrees to save, indemnify and hold harmless the
Indemnified Parties from and against any and all losses, claims, damages and
liabilities (including liabilities for penalties) resulting from any litigation
brought in connection with the issuance or sale of the Bonds, unless such
liability shall be due to gross negligence or willful misconduct on the part of
any Indemnified Party.
(c) The Indemnified Parties shall not in any way be responsible for
performance by the Trustee or any paying agent for the Bonds of its obligations
to the Borrower, nor for the form, sufficiency, correctness, genuineness,
authority of person signing, falsification or legal effect of any documents
called for under the Letter of Credit if such documents on their face appear to
be in order.
8.07 Amendment and Modification of Agreement, Waivers. No modification or
waiver of any provision of this Agreement or any other document, instrument or
agreement required, referred to or contemplated hereunder, nor consent to any
departure by the
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Borrower, or the Bank therefrom shall in any event be effective unless the same
shall be in writing and then such waiver or consent shall be effective only in
the specific instance and for the purpose for which given. No notice to or
demand on either party in any case shall entitle such party to any other or
further notice or demand in the same, similar or other circumstances.
8.08 Severability. In case any one or more of the provisions contained in
this Agreement or any document, instrument, or agreement required hereunder
should be declared invalid, illegal or unenforceable in any respect, the
validity, legality and enforceability of the remaining provisions contained
herein or therein shall not in any way be affected or impaired thereby.
8.09 Arbitration.
(a) This paragraph concerns the resolution of any controversies or
claims between the Borrower and the Bank, 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").
(b) At the request of the Borrower or the Bank, 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 rules and procedures for the arbitration of financial services disputes
of JAMS/Endispute, LLC, a Delaware limited liability company 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 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 California. All Claims
shall be determined by one arbitrator; however, if Claims exceed Five Million
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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 the Borrower or the
Bank to: (i) exercise self-help remedies, such as but not limited to, setoff;
(ii) initiate judicial or nonjudicial 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 located in California. In this
case, both the Borrower and the Bank 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 Borrower and the Bank will designate a referee (or a
panel of referees) selected under the auspices of JAMS in the same manner as
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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 the
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 the Borrower or the Bank, including the suing party,
thereafter to require submittal of the Claim to arbitration.
(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.
8.10 Governing Law. This Agreement and the rights and obligations of the
parties under this Agreement shall be governed by, and construed and interpreted
in accordance with, the laws of the State of California.
8.11 Table of Contents and Captions. The table of contents and captions
contained in this Agreement are for convenience of reference only and shall not
limit or define the provisions of this Agreement or affect the interpretation or
construction thereof.
8.12 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
[INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their proper and duly authorized officers as of
the day and year first above written.
BANK:
BANK OF AMERICA, N.A.
By: /s/ JAMIE HARNEY
--------------------
Name: Jamie Harney
Title: Vice President
BORROWER:
SOUTHWEST WATER COMPANY
By: /s/ THOMAS C. TEKULVE
-------------------------
Name: Thomas C. Tekulve
Title: Vice President - Finance
By: /s/ RICHARD J. SHIELDS
--------------------------
Name: Richard J. Shields
Title: Chief Financial Officer
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