Exhibit 4.1
GOLDEN STATE WATER
COMPANY
$40,000,000
5.87% Senior Note due
December 20, 2028
NOTE PURCHASE AGREEMENT
Dated as of October 11,
2005
TABLE OF CONTENTS
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GOLDEN STATE WATER
COMPANY
630 East Foothill Blvd.
San Dimas, California 91773
October 11, 2005
5.87% Senior Note due
December 20, 2028
COBANK, ACB
5500 South Quebec Street
Greenwood Village, Colorado
80111
Attention: Communications and Energy
Banking Group
Ladies and Gentlemen:
Golden State Water Company, a
California corporation (the “Company”), agrees
with CoBank, ACB (the “Purchaser”) as
follows:
1.
AUTHORIZATION, SALE AND PURCHASE
OF NOTE.
Subject to the terms and conditions
of this Agreement, the Company will authorize, will issue and sell
to the Purchaser, and the Purchaser will purchase from the Company,
at the Closing provided for in Section 2, $40,000,000
aggregate principal amount of its 5.87% Senior Note due
December 20, 2028 (the “Note” ). The Note
shall be substantially in the form set out in Exhibit 1, with
such changes, if any, as may be approved by the Purchaser and the
Company. Certain capitalized terms used in this Agreement are
defined in Schedule A; references to a
“Schedule” or an “Exhibit” are, unless
otherwise specified, to a Schedule or an Exhibit attached
to this Agreement.
2.
CLOSING.
The sale and purchase of the Note to
be purchased by the Purchaser shall occur at the offices of
Sherman & Howard, LLC, 633 17th Street, Denver, Colorado
80302, at 11:00 p.m., (Mountain time), at a closing (the
“Closing” ) on October 11, 2005 or on such
other Business Day thereafter on or prior to October 15, 2005
as may be agreed upon by the Company and the Purchaser. At the
Closing the Company will deliver to the Purchaser the Note in a
form of a Note dated the date of the Closing in the
Purchaser’s name (or in the name of the Purchaser’s
nominee), against delivery by the Purchaser to the Company or its
order of immediately available funds in the amount of the purchase
price therefor by wire transfer of immediately available funds for
the account of the Company to Wells Fargo Bank, ABA
No. 121-000248, Account #4584-706535, Account Name: Golden
State Water Company, Ref: Note Purchase Agreement Proceeds. If at
the Closing the Company shall fail to tender the Note to the
Purchaser as provided above in this Section 2, or any of the
conditions specified in Section 3
shall not have been fulfilled to the
Purchaser’s satisfaction, the Purchaser shall, at the
Purchaser’s election, be relieved of all further obligations
under this Agreement, without thereby waiving any rights the
Purchaser may have by reason of such failure or such
nonfulfillment.
3.
CONDITIONS TO
CLOSING.
The Purchaser’s obligation to
purchase and pay for the Note to be sold to the Purchaser at the
Closing is subject to the fulfillment to the Purchaser’s
satisfaction, prior to or at the Closing, of the following
conditions:
3.1.
Representations and
Warranties.
The representations and warranties
of the Company in this Agreement shall be correct in all material
respects when made and at the time of the Closing as of the date
hereof and the Closing Date.
3.2.
Performance; No
Default.
The Company shall have performed and
complied with all agreements and conditions contained in this
Agreement required to be performed or complied with by it prior to
or at the Closing in all material respects and after giving effect
to the issue and sale of the Note, no Default or Event of Default
shall have occurred and be continuing.
3.3.
Compliance
Certificates.
(a)
Officer’s
Certificate . The Company
shall have delivered to the Purchaser an Officer’s
Certificate, dated the date of the Closing, certifying that the
conditions specified in Sections 3.1, 3.2 and 3.7 have been
fulfilled.
(b)
Secretary’s
Certificate . The Company
shall have delivered to the Purchaser a certificate certifying as
to the resolutions attached thereto and other corporate proceedings
relating to the authorization, execution and delivery of the Note
and the Agreement.
3.4.
Opinion of
Counsel.
The Purchaser shall have received an
opinion, dated the date of the Closing from
O’Melveny & Myers LLP, counsel for the Company, in
form and substance satisfactory to counsel for Purchaser (and the
Company hereby instructs its counsel to deliver such opinion to the
Purchaser).
3.5.
Purchase Permitted by Applicable
Law, etc.
On the date of the Closing the
Purchaser’s purchase of the Note shall (i) be permitted
by the laws and regulations of each jurisdiction to which the
Purchaser is subject, and (ii) not subject the Purchaser to
any tax, penalty or liability under or pursuant to any applicable
law or regulation, which law or regulation was not in effect on the
date hereof. If requested by the Purchaser, the Purchaser shall
have received an Officer’s Certificate
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certifying as to such matters of
fact as the Purchaser may reasonably specify to enable the
Purchaser to determine whether such purchase is so
permitted.
3.6.
Payment of Special Counsel
Fees.
Without limiting the provisions of
Section 14.1, the Company shall have paid on or before the
Closing the reasonable fees, charges and disbursements of the
Purchaser’s special counsel up to a maximum amount of $25,000
to the extent reflected in a statement of such counsel rendered to
the Company at least one Business Day prior to the
Closing.
3.7.
Changes in Corporate
Structure.
The Company shall not have changed
its jurisdiction of incorporation or been a party to any merger or
consolidation and shall not have succeeded to all or any
substantial part of the liabilities of any other entity, at any
time following the date of the most recent financial statements
referred to in Section 4.5.
3.8.
Proceedings and
Documents.
All corporate proceedings taken in
connection with the transactions contemplated by this Agreement and
all documents and instruments necessary to the consummation thereof
shall be reasonably satisfactory in form and substance to the
Purchaser and the Purchaser’s special counsel, and the
Purchaser and the Purchaser’s special counsel shall have
received all such counterpart originals or certified or other
copies of such documents as the Purchaser or they may reasonably
request.
4.
REPRESENTATIONS AND WARRANTIES OF
THE COMPANY.
The Company represents and warrants
to the Purchaser that:
4.1.
Organization; Power and
Authority.
The Company is a corporation duly
organized, validly existing and in good standing under the laws of
the State of California, and is duly qualified as a foreign
corporation and is in good standing in each jurisdiction in which
the conduct of its business or the ownership of leasing of its
Properties makes such qualification or registration necessary,
other than those jurisdictions as to which the failure to be so
qualified or in good standing could not reasonably be expected to
have a Material Adverse Effect. The Company has all requisite
corporate power and corporate authority to conduct its business, to
own and lease its Properties and to execute and deliver this
Agreement and the Note and to perform the provisions hereof and
thereof. The chief executive offices of the Company are located in
San Dimas, California. All outstanding capital stock of Company is
duly authorized, validly issued, fully paid and non-assessable, and
no holder thereof has any enforceable right of rescission under any
applicable state or federal securities or other Laws. The Company
is in compliance with all Laws and other legal requirements
applicable to its business, has obtained all authorizations,
consents, approvals, orders, licenses and permits from, and has
accomplished all filings, registrations and qualifications with, or
obtained exemptions from any of the foregoing from, any
Governmental Agency that are necessary for the transaction of its
business, except as disclosed in the
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Company’s filings with the
Securities and Exchange Commission after January 1, 2003 until
the date hereof or where the failure so to comply with Laws and
other legal requirements applicable to its business, obtain
authorizations, etc., file, register, qualify or obtain exemptions
could not reasonably be expected to have a Material Adverse
Effect.
4.2.
Authorization,
etc.
The execution and delivery by
Company of this Agreement and the Note and payment of the
Obligations have been duly authorized by all necessary corporate
action and do not and will not:
(a)
Require any consent or approval not
heretofore obtained of any shareholder, security holder or creditor
of the Company;
(b)
Violate or conflict with any
provision of the Company’s articles of incorporation or
bylaws;
(c)
Result in or require the creation or
imposition of any Lien ( other than pursuant to the Loan
Documents) or Right of Others upon or with respect to any Property
now owned or leased or hereafter acquired by the
Company;
(d)
Violate any Requirement of Law
applicable to the Company;
(e)
Result in a breach of or constitute
a default under, or cause or permit the acceleration of any
obligation owed under, any indenture or loan or credit agreement or
any other Contractual Obligation to which the Company is a party or
by which the Company or any of its Property is bound or
affected;
and the Company is not in violation
of, or default under, any Requirement of Law or Contractual
Obligation, or any indenture, loan or credit agreement described in
Section 4.2(e), in any respect that could reasonably be
expected to have a Material Adverse Effect.
4.3.
No Governmental Approvals
Required.
Except as previously obtained or
made, no authorization, consent, approval, order, license or permit
from, or filing, registration or qualification with, any
Governmental Agency is or will be required to authorize or permit
under applicable Laws the execution and delivery by the Company of
the Agreement and the Note and payment of the
Obligations.
4.4.
Subsidiary.
The only Subsidiary of the Company
is a wholly owned Subsidiary of the Company, California Cities
Water Company, Inc., a California corporation.
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4.5.
Financial
Statements.
The Company has delivered to the
Purchaser (a) the audited consolidated financial statements of
the Company and its Subsidiary for the Fiscal Year ended
December 31, 2004 and (b) the consolidated financial
statements of the Company and its Subsidiary for the Fiscal
Quarters ended March 31, 2005 and June 30, 2005. Such
financial statements fairly present in all material respects the
financial condition, results of operations and changes in financial
position as of such dates and for such periods in conformity with
GAAP consistently applied.
4.6.
No Other Liabilities, No Material
Adverse Changes.
As of the Closing Date, the Company
does not have any material liability or material contingent
liability required under GAAP to be reflected or disclosed, and not
reflected or disclosed, in the financial statements described in
Section 4.5, other than liabilities and
contingent liabilities arising in the ordinary course of business
since the date of such financial statements, or that could not be
reasonably expected to have a Material Adverse Effect. As of the
Closing Date, no circumstance or event has occurred that could
reasonably be expected to have a Material Adverse Effect since
December 31, 2004.
4.7.
Intangible Assets.
The Company owns, or possesses the
right to use to the extent necessary in its business, all material
trademarks, trade names, copyrights, patents, patent rights,
computer software, licenses and other Intangible Assets that are
used in the conduct of its business as now operated, and no such
Intangible Asset, to the best knowledge of Company, conflicts with
the valid trademark, trade name, copyright, patent, patent right or
Intangible Asset of any other Person, except, in any such case, to
the extent that could not reasonably be expected to have a Material
Adverse Effect. Schedule 4.7 sets forth all patents,
patent applications, trademarks, trade names and trade styles used
by Company at any time within the five (5) year period ending
on the Closing Date.
4.8.
Binding
Obligations.
Each of this Agreement and the Note
will, when executed and delivered by Company, constitute the legal,
valid and binding obligation of the Company, enforceable against
Company in accordance with its terms, except as enforcement may be
limited by Debtor Relief Laws or equitable principles relating to
the granting of specific performance and other equitable remedies
as a matter of judicial discretion.
4.9.
No Default.
No event has occurred and is
continuing that is a Default or Event of Default.
4.10.
Regulation U; Investment Company
Act.
No part of the proceeds of the Note
hereunder will be used to purchase or carry, or to extend credit to
others for the purpose of purchasing or carrying, any Margin Stock
in
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violation of Regulation U. The
Company is not or is not required to be registered as an
“investment company” under the Investment Company Act
of 1940.
4.11.
Tax Liability.
The Company has filed all tax
returns which are required to be filed, and has paid, or made
provision for the payment of, all taxes with respect to the
periods, Property or transactions covered by said returns, or
pursuant to any assessment received by the Company, except
(a) such taxes, if any, as are being contested in good faith
by appropriate proceedings and as to which adequate reserves have
been established and maintained and (b) immaterial taxes so
long as no material Property of Company is at impending risk of
being seized, levied upon or forfeited.
4.12.
Employee Matters.
There is no strike, work
stoppage or labor dispute with any union or group of employees
pending or, to the best knowledge of the Company overtly threatened
involving Company that individually or in the aggregate could
reasonably be expected to have a Material Adverse
Effect.
4.13.
Fiscal Year.
The Company operates on a fiscal
year ending on December 31.
4.14.
Solvency.
After giving effect to this
Agreement (including after giving effect to delivery of the Note
under this Agreement as of the Closing Date), the Company shall be
Solvent.
5.
REPRESENTATIONS OF THE
PURCHASER.
5.1.
Purchase for
Investment.
The Purchaser represents that the
Note represents a loan by the Purchaser. The Purchaser further
represents and warrants to the Company that it is an
“accredited investor” within the meaning of
Rule 501 (a) under the Securities Act of 1933 and is
acquiring the Note for investment for its own account, with no
intention of dividing its participation with others or reselling or
otherwise distributing the same in violation of the Securities Act
of 1933 or applicable state securities laws. The Purchaser
understands that the Note has not been registered under the
Securities Act and may be resold only if registered pursuant to the
provisions of the Securities Act or if an exemption from
registration is available, except under circumstances where neither
such registration nor such an exemption is required by law, and
that the Company is not required to register the Note or to permit
the resale of the Note. The Company may place an appropriate legend
on the Note concerning the restrictions set forth in this
Article 5.
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5.2.
Source of Funds.
The Purchaser represents, as to each
source of funds (a “Source”) to be used by the
Purchaser to pay the purchase price of the Note to be purchased by
the Purchaser hereunder, that the Source does not include assets of
any employee benefit plan, other than a plan exempt from the
coverage of ERISA. As used in this Section 5.2, the term
“employee benefit plan” shall have the meaning assigned
to such term in Section 3 of ERISA.
6.
INFORMATION AS TO
COMPANY.
6.1.
Financial and Business
Information.
The Company shall deliver to the
Purchaser:
(a)
Quarterly Statements
— within 60 days after the end
of each quarterly fiscal period in each fiscal year of the Company
(other than the last quarterly fiscal period of each such fiscal
year), duplicate copies of,
(i)
a consolidated balance sheet of the
Company and its Subsidiaries as at the end of such quarter,
and
(ii)
consolidated statements of income,
changes in shareholders’ equity and cash flows of the Company
and its Subsidiaries, for such quarter and (in the case of the
second and third quarters) for the portion of the fiscal year
ending with such quarter, setting forth in each case in comparative
form the figures for the corresponding periods in the previous
fiscal year, all in reasonable detail, prepared in accordance with
GAAP applicable to quarterly financial statements generally, and
certified by a Senior Financial Officer as fairly presenting, in
all material respects, the financial position of the Company and
its Subsidiaries on and their results of operations and cash flows,
subject to changes resulting from year-end adjustments,
provided that delivery within the time period specified
above of copies of the Company’s Quarterly Report on
Form 10-Q prepared in compliance with the requirements
therefor and filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this
Section 6.1(a);
(b)
Annual Statements
— within 100 days after the
end of each fiscal year of the Company, duplicate copies
of,
(i)
a consolidated balance sheet of the
Company and its Subsidiaries, as at the end of such year,
and
(ii)
consolidated statements of income,
changes in shareholders’ equity and cash flows of the Company
and its Subsidiaries, for such year,
setting forth in each case in
comparative form the figures for the previous fiscal year, all in
reasonable detail, prepared in accordance with GAAP, and
accompanied by an opinion thereon of independent certified public
accountants of recognized national standing, which opinion shall
state that such financial statements present fairly, in all
material respects, the financial position of the Company and its
Subsidiaries and their results of operations and cash flows and
have been
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prepared in conformity with GAAP,
and that the examination of such accountants in connection with
such financial statements has been made in accordance with
generally accepted auditing standards, and that such audit provides
a reasonable basis for such opinion in the circumstances,
provided that the delivery within the time period specified
above of the Company’s Annual Report on Form 10-K for
such fiscal year prepared in accordance with the requirements
therefor and filed with the Securities and Exchange Commission
shall be deemed to satisfy the requirements of this
Section 6.1(b);
(c)
Notice of Default or Event of
Default — promptly,
and in any event within five days after a Responsible Officer
becoming aware of the existence of any Default or Event of Default,
a written notice specifying the nature and period of existence
thereof and what action the Company is taking or proposes to take
with respect thereto;
(d)
ERISA Matters
— promptly, and in any event
within five days after a Responsible Officer becoming aware of any
of the following, a written notice setting forth the nature thereof
and the action, if any, that the Company or an ERISA Affiliate
proposes to take with respect thereto:
(i)
with respect to any Plan, any
reportable event, as defined in section 4043(b) of ERISA
and the regulations thereunder, for which notice thereof has not
been waived pursuant to such regulations as in effect on the date
hereof; or
(ii)
the taking by the PBGC of steps to
institute, or the threatening by the PBGC of the institution of,
proceedings under section 4042 of ERISA for the termination
of, or the appointment of a trustee to administer, any Plan, or the
receipt by the Company or any ERISA Affiliate of a notice from a
Multiemployer Plan that such action has been taken by the PBGC with
respect to such Multiemployer Plan; or
(iii)
any event, transaction or condition
that could result in the imposition of any Lien on any of the
rights, properties or assets of the Company or any ERISA Affiliate
pursuant to Title I or IV of ERISA, if such liability or Lien,
taken together with any other such Liens then existing, would
reasonably be expected to have a Material Adverse Effect;
and
(e)
Requested Information
— with reasonable promptness,
such other data and information relating to the business,
operations, affairs, financial condition, annual budget, assets or
properties of the Company or relating to the ability of the Company
to perform its obligations hereunder and under the Note as from
time to time may be reasonably requested by the
Purchaser.
Information required to be delivered
pursuant to this Section 6.1 (to the extent any such documents
are included in materials otherwise filed with the Securities and
Exchange Commission) shall be deemed to have been delivered on the
date on which the Company provides notice to Purchaser that such
information has been posted on the Company’s website at the
website address listed on the signature page hereof or another
website identified in such notice and accessible to the Purchaser
without charge; provided that the Company shall provide the
Purchaser with paper copies if requested to do so by
Purchaser.
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6.2.
Inspection.
The Company shall permit the
representatives of the Purchaser:
(a)
No Default
— if no Default or Event of
Default then exists, at the expense of the Purchaser and upon
reasonable prior notice to the Company, to visit the principal
executive office of the Company, to discuss the affairs, finances
and accounts of the Company with the Company’s officers, and,
with the consent of the Company (which consent will not be
unreasonably withheld) to visit the other offices and properties of
the Company, all at such reasonable times and as often as may be
reasonably requested in writing; provided, however, that
unless the Company otherwise agrees, the Purchaser may only conduct
an on-site inspection of the Company following the Closing twice in
any fiscal year; and
(b)
Default — if a Default or Event of Default then
exists, at the reasonable expense of the Company and upon
reasonable prior notice to the Company, to visit and inspect any of
the offices or properties of the Company, and, to the extent
permitted by applicable Law, to examine all its books of account,
records, reports and other papers, to make copies and extracts
therefrom, and to discuss its affairs, finances and accounts with
its officers and independent public accountants (and by this
provision the Company authorizes said accountants to discuss the
affairs, finances and accounts of the Company), all at such times
and as often as may be reasonably requested; provided that
the Company may, if so chooses, be present at or participate in any
such discussion.
7.
PREPAYMENT OF THE
NOTE.
7.1.
Optional Prepayments with
Redemption Premium.
The Company may, at its option, upon
notice as provided below, prepay at any time all, or from time to
time any part of, the Note, in an amount not less than $1,000,000
in the case of a partial prepayment, at 100% of the principal
amount so prepaid, plus the Redemption Premium determined for the
prepayment date with respect to such principal amount as provided
in Section 7.3. The Company will give the Purchaser written
notice of each optional prepayment under this Section 7.1 not
less than 3 days and not more than 60 days prior to the date fixed
for such prepayment. Each such notice shall specify such date, the
aggregate principal amount of the Note to be prepaid on such date,
and the interest to be paid on the prepayment date with respect to
such principal amount being prepaid. By noon (Mountain time) on the
date for such prepayment, the Purchaser shall notify the Company of
its calculation of the amount of the Redemption Premium due on such
date.
7.2.
Maturity; Surrender,
etc.
In the case of each prepayment of
the Note pursuant to this Section 7, the principal amount of
the Note to be prepaid shall mature and become due and payable on
the date fixed for such prepayment, together with interest on such
principal amount accrued to such date and the applicable Redemption
Premium. From and after such date, unless the Company shall fail to
pay such principal amount when so due and payable, together with
the interest and Redemption Premium as aforesaid, interest on such
principal amount shall cease to accrue.
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7.3.
Redemption
Premium.
The term “Redemption
Premium” means, with respect to the Note, an amount
calculated by Purchaser in good faith and in a commercially
reasonable manner as follows:
(A)
Purchaser will determine the
difference between: (1) the rate provided by Purchaser to the
Company on the date the rate on the Note was fixed as its cost to
fund the loan represented by the Note in the manner set forth in
the methodology provided by Purchaser to the Company on such date;
minus (2) the rate estimated by Purchaser on the date
of calculation to be its cost, less dealer concessions and other
issuance costs, to fund a new fixed rate loan in accordance with
the methodology used by the Purchaser for loans to other borrowers
on the date the Note is repaid having the same fixed rate period
and repayment characteristics as the balance of the Note being
repaid. If such difference is negative, then for purposes of the
remaining calculations, such difference shall be deemed to be
zero.
(B)
Add ½ of 1% to such difference
(such that the minimum result shall at all times be ½ of
l%).
(C)
Divide the result determined in
(B) above by the number of times interest is payable during
the year.
(D)
For each interest period (or portion
thereof) during which interest was scheduled to accrue at the fixed
rate of the Note, multiply the amount determined in (C) above
by the principal balance scheduled to have been outstanding during
such period (such that there is a calculation for each interest
period during which the amount repaid was scheduled to have been
outstanding at the fixed rate).
(E)
Determine the present value of each
calculation made under (D) above based upon the scheduled time
that interest on the amount repaid would have been payable and a
discount rate equal to the rate set forth in
(A)(2) above.
(F)
Add all of the calculations made
under (E) above. The result is the Redemption
Premium.
(G)
Purchaser’s determination of
the Redemption Premium shall be presumed to be correct in the
absence of manifest error.
Nothing contained herein shall
prevent CoBank from funding its loans in any manner as CoBank may,
in its sole discretion, elect, and the surcharges provided for
herein shall not be increased or decreased based on the actual
methods chosen by CoBank to fund or hedge the loan being
repaid.
8.
AFFIRMATIVE
COVENANTS.
The Company covenants that so long
as any portion of the Note is outstanding:
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8.1.
Insurance.
The Company will maintain liability,
casualty and other insurance (subject to customary deductibles and
retentions and which may include self-insurance) with responsible
insurance companies in such amounts and against such risks as is
carried by responsible companies engaged in similar businesses and
owning similar assets.
8.2.
Payment of Taxes.
The Company will pay and discharge
promptly all taxes, assessments and governmental charges or levies
imposed upon it, upon its Property or any part thereof and upon its
respective income or profits or any part thereof, except that
Company shall not be required to pay or cause to be paid
(a) any tax, assessment, charge or levy that is not yet past
due, or is being contested in good faith by appropriate proceedings
so long as the relevant entity has established and maintains
adequate reserves for the payment of the same or (b) any
immaterial tax, assessment, governmental charge or levy so long as
no material Property of Company is at impending risk of being
seized, levied upon or forfeited.
8.3.
Corporate Existence,
etc.
(a)
The Company will at all times
preserve and maintain its existence in its jurisdiction of
organization.
(b)
The Company will also at all times
preserve and maintain all material authorizations, rights,
franchises, privileges, consents, approvals, orders, licenses,
permits or registrations from any Governmental Agency that are
necessary for the transaction of its business and qualify to
transact business in each jurisdiction in which such qualification
is necessary in view of the business or the ownership or leasing of
its Properties, except where the failure to so preserve, maintain
or qualify could not reasonably be expected to have a Material
Adverse Effect.
8.4.
Acquire Non-voting Participation
Certificates in Purchaser.
Acquire non-voting participation
certificates in Purchaser in such amounts and at such times as the
Purchaser may require in accordance with its bylaws and capital
plan (as each may be amended from time to time), except that the
maximum amount of such certificates that the Company may be
required to purchase in connection with the loan made by Purchaser
hereunder may not exceed the maximum amount permitted by the bylaws
of the Purchaser at the time the Note is entered into or is renewed
or refinanced by Purchaser. The rights and obligations of the
parties with respect to such certificates and any patronage or
other distributions made by the Purchaser shall be governed by the
Purchaser’s bylaws.
9.
NEGATIVE
COVENANTS.
The Company covenants that so long
as any portion of the Note is outstanding, or any other Obligation
remains unpaid, that the Company shall not, unless the Purchaser
otherwise consents:
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9.1.
Disposition of
Property.
In any fiscal year make one or more
Dispositions of Property with a book value of more than a
Substantial Portion, whether such Property is now owned or
hereafter acquired, including Dispositions pursuant to any order of
any Governmental Agency in an eminent domain proceeding and any
settlement of any such proceeding unless, within one year of the
occurrence of such Disposition, the Company applies the Net
Proceeds of such Disposition to one or more of the
following:
(1)
the optional redemption of all or a
portion of the Note as provided in Section 7; or
(2)
the payment or other retirement of a
portion of Indebtedness incurred or assumed by the Company which
ranks pari passu with the Note); or
(3)
the purchase of Public Utility
Property (other than Property of the Company involved in such
Disposition), as determined by the Board of Directors of the
Company whose determination shall be conclusive and evidenced in a
resolution of the Board of Directors.
9.2.
Liens on Property; Permitted
Encumbrances.
Create, issue, assume, guarantee or
suffer to exist any Indebtedness secured by any Lien of any nature
upon any of its Properties, whether now owned or hereafter
acquired, except:
(a)
Liens existing on the Closing Date
and disclosed in Schedule 9.2 and any
renewals/extensions, refinancings or amendments thereof, provided
that the obligations secured or benefited thereby are not increased
(other than for premiums or other payments required to be paid in
connection therewith and the expenses incurred in connection
therewith);
(b)
Liens under the Loan Documents;
and
(c)
Permitted Encumbrances,
without, in each case, effectively
providing that the Note (together with, if the Company shall so
determine, any other Indebtedness of the Company ranking pari passu
with the Note) shall be secured equally and ratably with such
Indebtedness.
9.3.
Merger, Consolidation,
etc.
The Company shall not consolidate
with or merge with any other corporation, except mergers and
consolidations of a Subsidiary into the Company (with the Company
as the surviving entity), or convey, transfer or lease
substantially all of its assets in a single transaction or series
of transactions to any Person unless:
(a)
the successor formed by such
consolidation or the survivor of such merger or the Person that
acquires by conveyance, transfer or lease substantially all of the
assets of the
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Company as an entirety, as the case
may be, shall be a Solvent corporation organized and existing under
the laws of the United States or any State thereof (including the
District of Columbia), and, if the Company is not such corporation,
such corporation shall have executed and delivered to the Purchaser
its assumption of the due and punctual performance and observance
of each covenant and condition of this Agreement and the Note;
and
(b)
immediately after giving effect to
such transaction, no Default or Event of Default shall have
occurred and be continuing; and
(c)
the Total Indebtedness to
Capitalization Ratio of the Company, its Subsidiaries and of such
other corporation, on a consolidated basis, is not more than .6667
to 1 at the end of the fiscal quarter immediately preceding the
merger after giving effect to the merger, consolidation or sale and
any changes in Total Indebtedness since the end of such quarter
(exclusive of any adjustments to Total Capitalization relating to
transaction costs and accounting adjustments resulting from such
transaction); and
(d)
the Total Indebtedness to EBITDA
Ratio of the Company, its Subsidiaries and of such other
corporation, on a consolidated basis, is not greater than 8:1 for
the 12 month period preceding the end of the quarter preceding such
merger, after giving effect to the merger, consolidation or sale
and any changes in Total Indebtedness since the end of such
quarter; and
(e)
the successor or survivor entity has
agreed to conduct the principal business of the successor or
survivor entity as a regulated water/wastewater public utility
under the laws of one or more states of the United
States.
9.4.
Change in
Business.
Cease to conduct its principal
business as a regulated water/wastewater public utility under the
laws of one or more states of the United States of
America.
9.5.
Transactions with
Affiliates.
The Company will not enter into or
be a party to, any transaction or arrangement with any Affiliate
(including without limitation, the purchase from, sale to or
exchange of Property with, or the rendering of any service by or
for, any Affiliate), except upon fair and reasonable terms no less
favorable in any material respect to the Company than would be
obtained in a comparable arm’s length transaction with a
Person other than an Affiliate or as otherwise may be permitted by
applicable Law.
9.6
Restrictions on Sale and
Leaseback Transactions.
Enter into any arrangement with any
Person providing for a Sale and Leaseback, unless the Net Proceeds
of such sale are at least equal to the value of such Property, as
determined by the Board of Directors of the Company, whose
determination shall be conclusive and evidenced in a resolution of
the Board of Directors, and the Company would be entitled, pursuant
to Section 9.2 to incur Indebtedness secured by a Lien on the
Property to be leased without equally and ratably securing the
Note. In no event may the value of Property subject to a Sale and
Leaseback, as determined by the Board of Directors of the Company
as
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provided herein, together with the
amount of Permitted Capital Indebtedness outstanding on the date of
any such Sale and Leaseback exceed a Substantial Portion of the
Property of the Company and its Subsidiaries on a consolidated
basis.
10.
FINANCIAL
COVENANTS.
10.1.
Indebtedness.
The Company covenants and agrees
that it will not create, incur or assume any Indebtedness, if an
Event of Default has occurred and is continuing or if, after giving
effect thereto.
(a)
the Total Indebtedness to
Capitalization Ratio of the Company and its Subsidiaries, on a
consolidated basis, would be more than .6667 to 1 at the end of the
fiscal quarter immediately preceding such creation, occurrence or
assumption; or
(b)
the Total Indebtedness to EBITDA
Ratio of the Company and its Subsidiaries, on a consolidated basis,
would be greater than 8:1 for the 1
