exv4w24



 





Exhibit 4.24



 




California Water Service Company




Thirteenth Supplement to Note Agreement




Dated as of August 31, 2006





			
		 	Re:  $20,000,000 6.02% Series O Senior Notes





Due August 31, 2031



 




 









 





Thirteenth Supplement to Note Agreement




Dated as of

August 31, 2006




To the Purchaser named in

Schedule A hereto




Ladies and Gentlemen:




     This Thirteenth Supplement to Note Purchase Agreement (the “Thirteenth Supplement") is between
California Water Service Company (the “Company") whose address is 1720 North First Street, San
Jose, California 95112 and the institutional investor named on Schedule A attached hereto (the
“Purchaser").



     Reference is hereby made to that certain Note Agreement dated as of March 1, 1999 (the “Note
Agreement") between the Company and the Purchaser. All capitalized terms not otherwise defined
herein shall have the same meaning as specified in the Note Agreement. Reference is further made
to Section 4.3 thereof which requires that, prior to the delivery of any Additional Notes, the
Company and each Additional Purchaser shall execute and deliver a Supplement.



     The Company hereby agrees with the Purchaser named on Schedule A hereto as follows:



     1. The Company has authorized the issue and sale of $20,000,000 aggregate principal amount of
its 6.02% Series O Senior Notes due August 31, 2031 (the “Series O Notes"). The Series O Notes,
together with the Series B Notes initially issued pursuant to the Note Agreement, the Series C
Notes issued pursuant to the First Supplement to Note Agreement dated as of October 1, 2000, the
Series D Notes issued pursuant to the Second Supplement to Note Agreement dated as of September 1,
2001, the Series E Notes issued pursuant to the Third Supplement to Note Agreement dated as of May
1, 2002, the Series F Notes issued pursuant to the Fourth Supplement to Note Agreement dated as of
August 15, 2002, the Series G Notes issued pursuant to the Fifth Supplement to Note Agreement dated
as of November 1, 2002, the Series H Notes issued pursuant to the Sixth Supplement to Note
Agreement dated as of December 1, 2002, the Series I Notes issued pursuant to the Seventh
Supplement to Note Agreement dated as of May 1, 2003, the Series J Notes issued pursuant to the
Amended and Restated Eighth Supplement to Note Agreement dated as of May 1, 2003, the Series K
Notes issued pursuant to the Ninth Supplement to Note Agreement dated as of February 15, 2003, the
Series L Notes issued pursuant to the Tenth Supplement to Note Agreement dated as of February 15,
2003, the Series M Notes issued pursuant to the Eleventh Supplement to Note Agreement dated as of
November 3, 2003, the Series N Notes issued pursuant o the Twelfth Supplement to Note Agreement
dated as of October 24, 2003 and each Series of Additional Notes which may from time to time be
issued pursuant to the provisions of Section 1.4 of the



 









 






Note Agreement, are
collectively referred to as the “Notes” (such term shall also include any such notes issued in
substitution therefor pursuant to Section 9.2 of the Note Agreement). The Series O Notes shall be
substantially in the form set out in Exhibit 1 hereto with such changes therefrom, if any, as may
be approved by the Purchaser and the Company.



     2. Subject to the terms and conditions hereof and as set forth in the Note Agreement and on
the basis of the representations and warranties hereinafter set forth, the Company agrees to issue
and sell to the Purchaser, and the Purchaser agrees to purchase from the Company, Series O Notes in
the principal amount set forth opposite the Purchaser’s name on Schedule A hereto at a price of
100% of the principal amount thereof on the closing date hereafter mentioned.



     3. Delivery of the $20,000,000 in aggregate principal amount of the Series O Notes will be
made at the offices of Chapman and Cutler LLP, 111 West Monroe Street, Chicago, Illinois 60603-4080
against payment therefor in Federal Reserve or other funds current and immediately available at the
principal office of Bank of America, ABA No. 121000358, Account No. 14872 00230, Account Name:
California Water Service Company General Account, in the amount of the purchase price at 11:00
A.M., San Francisco, California time, on August 31, 2006 or such later date (not later than
September 8, 2006) as shall mutually be agreed upon by the Company and the Purchaser of the Series
O Notes (the “Closing Date").



     4. Prepayment of Notes.



     (a) Required Prepayments. No prepayments are required to be made with respect to the Series O
Notes prior to the expressed maturity date thereof other than prepayments made in connection with
an acceleration of the Series O Notes pursuant to the provisions of Section 6.3 of the Note
Agreement.



     (b) Optional Prepayment with Premium. Upon compliance with Section 4(d) below the Company
shall have the privilege, at any time and from time to time, of prepaying the outstanding Notes of
any Series, either in whole or in part (but if in part then in a minimum principal amount of
$100,000) by payment of the principal amount of the Notes of such Series, or portion thereof to be
prepaid, and accrued interest thereon to the date of such prepayment, together with a premium equal
to the Make-Whole Amount, determined as of five Business Days prior to the date of such prepayment
pursuant to this Section 4(b).



     (c) Optional Prepayment at Par in the Event of Condemnation. In the event a Material
Condemnation shall have occurred with respect to any property of the Company or a Restricted
Subsidiary, then upon compliance with Section 4(d) below the Company shall have the privilege of
applying the proceeds of any condemnation award received in connection with such Material
Condemnation to the prepayment of the principal amount of the Notes of any Series then outstanding,
or any portion thereof to the extent of such proceeds, together with accrued interest thereon to
the date of such prepayment. Any optional prepayment made pursuant to this Section 4(c) shall be
without premium.



 









 





     (d) Notice of Optional Prepayments. The Company will give notice of any prepayment of the
Notes pursuant to Section 4(b) or 4(c) to each Holder of Notes to be prepaid not less than 30 days
nor more than 60 days before the date fixed for such optional prepayment specifying (a) such date,
(b) the Section of this Thirteenth Supplement under which the prepayment is to be made, (c) the
principal amount of the Holder’s Notes to be prepaid on such date, (d) whether a premium may be
payable, (e) the date when the premium, if any, will be calculated, (f) the estimated premium,
together with a reasonably detailed computation of such estimated premium, and (g) the accrued
interest applicable to the prepayment. Such notice of prepayment shall also certify all facts, if
any, which are conditions precedent to any such prepayment. Notice of prepayment having been so
given, the aggregate principal amount of the Notes to be prepaid specified in such notice, together
with accrued interest thereon and the premium, if any, payable with respect thereto shall become
due and payable on the prepayment date specified in said notice. Not later than two Business Days
prior to the prepayment date specified in such notice, the Company shall provide each Holder of a
Note to be prepaid written notice of the premium, if any, payable in connection with such
prepayment and, whether or not any premium is payable, a reasonably detailed computation of the
Make-Whole Amount.



     (e) Application of Prepayments. In the case of each partial prepayment of the Notes pursuant
to the provisions of Section 4(b) or 4(c), the principal amount of the Notes of the Series to be
prepaid shall be allocated among all of the Notes of such Series at the time outstanding in
proportion, as nearly as practicable, to the respective unpaid principal amounts thereof.



     (f) Direct Payment. Notwithstanding anything to the contrary contained in the Note Agreement,
this Thirteenth Supplement or the Notes, in the case of any Note owned by any Holder that is a
Purchaser, Additional Purchaser or any other Institutional Holder which has given written notice to
the Company requesting that the provisions of this Section 4(f) shall apply, the Company will
punctually pay when due the principal thereof, interest thereon and premium, if any, due with
respect to said principal, without any presentment thereof, directly to such Holder at its address
set forth herein or such other address as such Holder may from time to time designate in writing to
the Company or, if a bank account with a United States bank is so designated for such Holder, the
Company will make such payments in immediately available funds to such bank account, marked for
attention as indicated, or in such other manner or to such other account in any United States bank
as such Holder may from time to time direct in writing.



     (g) Make Whole Amount. The term “Make-Whole Amount” means, with respect to any Series O Note,
an amount equal to the excess, if any, of the Discounted Value of the Remaining Scheduled Payments
with respect to the Called Principal of such Note over the amount of such Called Principal,
provided that the Make-Whole Amount may in no event be less than zero. For the purposes of
determining the Make-Whole Amount, the following terms have the following meanings:




     “Called Principal” means, with respect to any Series O Note, the principal of such Note
that is to be prepaid pursuant to Section 4(b) or has become or is declared to be
immediately due and payable pursuant to Section 6.3 of the Note Agreement, as the context
requires.



 









 






     “Discounted Value” means, with respect to the Called Principal of any Series O Note,
the amount obtained by discounting all Remaining Scheduled Payments with respect to such
Called Principal from their respective scheduled due dates to the Settlement Date with
respect to such Called Principal, in accordance with accepted financial practice and at a
discount factor (applied on the same periodic basis as that on which interest on the Series
O Notes is payable) equal to the Reinvestment Yield with respect to such Called Principal.




     “Reinvestment Yield” means, with respect to the Called Principal of any Series O Note,
0.50%, plus the yield to maturity implied by (i) the yields reported, as of 10:00 A.M. (New
York City time) on the fifth Business Day preceding the Settlement Date with respect to such
Called Principal, on the display page of the Bloomberg Financial Markets Services Screen PX1
or the equivalent screen provided by Bloomberg Financial Markets Commodities News for
actively traded U.S. Treasury securities having a maturity equal to the Remaining Average
Life of such Called Principal as of such Settlement Date, or (ii) if such yields are not
reported as of such time or the yields reported as of such time are not ascertainable, the
Treasury Constant Maturity Series Yields reported, for the latest day for which such yields
have been so reported as of the second Business Day preceding the Settlement Date with
respect to such Called Principal, in Federal Reserve Statistical Release H.15 (519) (or any
comparable successor publication) for actively traded U.S. Treasury securities having a
constant maturity equal to the Remaining Average Life of such Called Principal as of such
Settlement Date. Such implied yield will be determined, if necessary, by (a) converting
U.S. Treasury bill quotations to bond-equivalent yields in accordance with accepted
financial practice and (b) interpolating linearly between (1) the actively traded U.S.
Treasury security with the maturity closest to and greater than the Remaining Average Life
and (2) the actively traded U.S. Treasury security with the maturity closest to and less
than the Remaining Average Life.




     “Remaining Average Life” means, with respect to any Called Principal, the number of
years (calculated to the nearest one-twelfth year) obtained by dividing (i) such Called
Principal into (ii) the sum of the products obtained by multiplying (a) the principal
component of each Remaining Scheduled Payment with respect to such Called Principal by (b)
the number of years (calculated to the nearest one-twelfth year) that will elapse between
the Settlement Date with respect to such Called Principal and the scheduled due date of such
Remaining Scheduled Payment.




     “Remaining Scheduled Payments” means, with respect to the Called Principal of any
Series O Note, all payments of such Called Principal and interest thereon that would be due
after the Settlement Date with respect to such Called Principal if no payment of such Called
Principal were made prior to its scheduled due date, provided that if such Settlement Date
is not a date on which interest payments are due to be made under the terms of the Series O
Notes, then the amount of the next succeeding scheduled interest payment will be reduced by
the amount of interest accrued to such Settlement Date and required to be paid on such
Settlement Date pursuant to Section 4(b) hereof or Section 6.3 of the Note Agreement.



 









 






     “Settlement Date” means, with respect to the Called Principal of any Series O Note, the
date on which such Called Principal is to be prepaid pursuant to Section 4(b) hereof or has
become or is declared to be immediately due and payable pursuant to Section 6.3 of the Note
Agreement, as the context requires.



5. Closing Conditions.




     (a) Conditions. The obligation of the Purchaser to purchase the Series O Notes on the Closing
Date shall be subject to the performance by the Company of its agreements hereunder which by the
terms hereof are to be performed at or prior to the time of delivery of the Series O Notes and to
the following further conditions precedent:




     (i) Closing Certificate. Such Purchaser shall have received a certificate dated the
Closing Date, signed by the President or a Vice President of the Company, the truth and
accuracy of which shall be a condition to such Purchaser’s obligation to purchase the Series
O Notes proposed to be sold to such Purchaser and to the effect that (1) the representations
and warranties of the Company set forth in Exhibit 2 hereto are true and correct on and with
respect to the Closing Date, (2) the Company has performed all of its obligations hereunder
which are to be performed on or prior to the Closing Date, and (3) no Default or Event of
Default has occurred and is continuing.




     (ii) Compliance Certificate. Such Purchaser shall have received a certificate dated
the Closing Date, signed by the Senior Financial Officer of the Company stating that such
officer has reviewed the provisions of the Note Agreement and this Thirteenth Supplement and
setting forth the information and computation (in sufficient detail) required in order to
establish whether the Company is in compliance with Section 5.6 of the Note Agreement on the
Closing Date.




     (iii) Legal Opinions. Such Purchaser shall have received from Gibson, Dunn & Crutcher
LLP, counsel for the Company, John S. Tootle, General Counsel for the Company, and Chapman
and Cutler LLP, special counsel for the Purchaser, their opinions dated the Closing Date, in
form and substance satisfactory to such Purchaser, and covering the matters set forth
respectively in Exhibits 3, 4 and 5 hereto.




     (iv) Regulatory Approval. Prior to the Closing Date, the issue and sale of the Series
O Notes shall have been duly authorized or approved by appropriate order of the Public
Utilities Commission of the State of California (the “Commission"). Such order shall be
final and in full force and effect and not subject to any appeal, hearing, rehearing or
contest. All conditions contained in any such order which are to be fulfilled on or prior
to the issuance of the Series O Notes shall have been fulfilled. The Company shall have
delivered to the Purchaser and its special counsel a certified copy of such order and the
application therefor.




     (v) Related Transactions. The Company shall have consummated the sale of the entire
principal amount of the Series O Notes scheduled to be sold on the Closing Date pursuant to
this Thirteenth Supplement.



 









 






     (vi) Satisfactory Proceedings. All proceedings taken in connection with the
transactions contemplated by this Thirteenth Supplement, and all documents necessary to the
consummation thereof, shall be satisfactory in form and substance to such Purchaser and such
Purchaser’s special counsel, and such Purchaser shall have received a copy (executed or
certified as may be appropriate) of all legal documents or proceedings taken in connection
with the consummation of said transactions.




     (vii) Purchase Permitted By Applicable Law. On the Closing Date, the purchase of
Series O Notes shall (a) be permitted by the laws and regulations of each jurisdiction to
which the Purchaser is subject, without recourse to provisions (such as Section 1405(a)(8)
of the New York Insurance Law) permitting limited investments by insurance companies without
restriction as to the character of the particular investment, (b) not violate any applicable
law or regulation (including, without limitation, Regulation U, T or X of the Board of
Governors of the Federal Reserve System) and (c) 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, such
Purchaser shall have received an Officer’s Certificate certifying as to such matters of fact
as such Purchaser may reasonably specify to enable such Purchaser to determine whether such
purchase is so permitted.




     (viii) Payment of Special Counsel Fees. The Company shall have paid, on or before the
Closing Date, the fees, charges and disbursements of the Purchaser’s special counsel
referred to in (iii) above, to the extent reflected in a statement of such counsel rendered
to the Company at least one Business Day prior to the Closing Date.




     (ix) Private Placement Number. A Private Placement Number issued by Standard & Poor’s
CUSIP Service Bureau (in cooperation with the Securities Valuation Office of the National
Association of Insurance Commissioners) shall have been obtained for the Series O Notes.



     (b) The obligation of the Company to deliver the Series O Notes hereunder is subject to the
conditions that (i) the Commission shall have authorized the issuance and sale by the Company of
the Series O Notes at the price herein provided and said authorization shall be in full force and
effect and (ii) the entire principal amount of the Series O Notes scheduled to be sold on the
Closing Date pursuant to this Thirteenth Supplement shall have been tendered by the Purchaser. If
the condition specified in this Section 5(b) shall not have been fulfilled prior to or on the
Closing Date, this Thirteenth Supplement and all the obligations of the Company hereunder, except
as provided in Section 9.4 of the Note Agreement, may be cancelled by the Company.



     (c) If on the Closing Date the Company fails to tender to the Purchaser the Series O Notes to
be issued to the Purchaser on such date or if the conditions specified in Section 5(a) have not
been fulfilled, the Purchaser may thereupon elect to be relieved of all further obligations under
this Thirteenth Supplement. Without limiting the foregoing, if the conditions specified in Section
5(a) have not been fulfilled, such Purchaser may waive compliance by the Company with any such
condition to such extent as such Purchaser may in its sole discretion determine.



 









 




Nothing in this Section 5(c) shall operate to relieve the Company of any of its obligations
hereunder or to waive the Purchaser’s rights against the Company.




     6. The Purchaser represents and warrants that the representations and warranties set forth in
Section 3.2 of the Note Agreement are true and correct on the date hereof with respect to the
Series O Notes purchased by the Purchaser.



     7. The Company and the Purchaser agree to be bound by and comply with the terms and provisions
of the Note Agreement as if such Purchaser were an original signatory to the Note Agreement.



[Remainder of page left intentionally blank.]




 









 





     The execution hereof shall constitute a contract between the Company and the Purchaser for the
uses and purposes hereinabove set forth, and this agreement may be executed in any number of
counterparts, each executed counterpart constituting an original but all together only one
agreement.





 







California Water Service Company





			
	By	 	
 
Name: Marty Kropelnicki
Title: Vice President, Chief Financial Officer and Treasurer










 









 





Accepted as of August 31, 2006




	 	 	 	 	 
	 	Teachers Insurance and

      Annuity Association of America

 	 
	 	By:  	 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 



 









 





Information Relating to the Purchaser




	 	 	 
	 

	 	Principal Amount of Series
	Name and Address of Purchaser

	 	O Notes to Be Purchased
	 
	 	 
	Teachers Insurance and Annuity Association of America

	 	$20,000,000
	730 Third Avenue

	 	 
	New York, New York 10017
	 	 






Payments



All payments on or in respect of the certificate shall be made in immediately available funds on
the due date by electronic funds transfer (identifying as California Water Service Company,
Series 2006-O) through the Automated Clearing House System to:



JPMorgan Chase Bank, N.A.

ABA No. 021-000-021

Account No. 900-9-000200

Account Name: Teachers Insurance and Annuity Association of America

For Further Credit to the Account Number: G07040

Reference: California Water Service Company, Series 2006-0

Reference: Due August 31, 2031/6.02% P&I Breakdown:




Payment Notices



All notices with respect to payments and prepayments of the Series O Notes shall be sent to:



Teachers Insurance and Annuity Association of America

730 Third Avenue

New York, New York 10017

Attention: Securities Accounting Division

Phone: (212) 916-4109

Facsimile: (212) 916-6955



With a copy to:



JPMorgan Chase Bank, N.A.

P.O. Box 35308

Newark, New Jersey 07101



Contemporaneous written confirmation of any electronic funds transfer shall be sent to the above
addresses setting forth (1) the full name, private placement number, interest rate and maturity
date of the Series O Notes, (2) allocation of payment between principal, interest, Make-Whole
Amount, other premium or any special payment and (3) the name and address of the bank from which
such electronic funds transfer was sent.




Schedule A

(to Supplement)




 









 





Notices and Communications



All notices and communications, including notices with respect to payments and prepayments, shall
be delivered or mailed to:



Teachers Insurance and Annuity Association of America

8500 Andrew Carnegie Blvd.

Charlotte, North Carolina 28262

Attention: Fixed Income and Real Estate

Telephone: (704) 988-4277 (Marina Mavrakis)

                   (704) 988-1000 (General Number)

Facsimile: (704) 595-0577



Taxpayer Identification Number: 13-1624203




A-2









 





[Form of Series O Note]



This Note has not been registered with the Securities and Exchange Commission under the
Securities Act of 1933, as amended, and any sale, transfer, pledge or other disposition thereof may
be made only (1) in a transaction registered under said Act or (2) if an exemption from
registration under said Act is available.




California Water Service Company




6.02% Series O Senior Note

Due August 31, 2031




PPN 130789 Q@ 2




					
	 	 	 	 	 
	No.
	 	 
	 	August ___, 2006
	 	 	 	 	 
	$	 	 	 	 






     California Water Service Company, a California corporation (the “Company"), for value
received, hereby promises to pay to



or registered assigns

on the thirty-first day of August, 2031,

the principal amount of




Dollars ($____________)



and to pay interest (computed on the basis of a 360-day year of twelve 30-day months) on the
principal amount from time to time remaining unpaid hereon at the rate of 6.02% per annum from the
date hereof until maturity, payable semiannually on the last day of each February and August in
each year (commencing on the first of such dates after the date hereof) and at maturity. The
Company agrees to pay interest on overdue principal (including any overdue required or optional
prepayment of principal) and premium, if any, and (to the extent legally enforceable) on any
overdue installment of interest, at the rate of 8.02% per annum after the due date, whether by
acceleration or otherwise, until paid. Both the principal hereof and interest hereon are payable
at the principal office of the Company in San Jose, California in coin or currency of the United
States of America which at the time of payment shall be legal tender for the payment of public and
private debts.




     This Note is one of a series of Notes (the “Notes") issued pursuant to the Thirteenth
Supplement (the “Thirteenth Supplement") to the Note Agreement dated as of March 1, 1999 (as from
time to time amended and supplemented, the “Note Agreement"), between the Company,



Exhibit 1

(to Supplement)




 









 




the Purchaser named therein and Additional Purchasers of Notes from time to time issued
pursuant to any Supplement to the Note Agreement. This Note and the holder hereof are entitled
equally and ratably with the holders of all other Notes of all Series from time to time outstanding
under the Note Agreement to all the benefits provided for thereby or referred to therein. Each
holder of this Note will be deemed, by its acceptance hereof, to have made the representation set
forth in Section 3.2 of the Note Agreement, provided that such holder may (in reliance upon
information provided by the Company, which shall not be unreasonably withheld) make a
representation to the effect that the purchase by such holder of any Note will not constitute a
non-exempt prohibited transaction under Section 406(a) of ERISA.




     This Note and the other Notes outstanding under the Note Agreement may be declared due prior
to their expressed maturity dates, all in the events, on the terms and in the manner and amounts as
provided in the Note Agreement.



     The Notes are not subject to prepayment or redemption at the option of the Company prior to
their expressed maturity dates except on the terms and conditions and in the amounts and with the
premium, if any, set forth in the Note Agreement.



     This Note is registered on the books of the Company and is transferable only by surrender
thereof at the principal office of the Company duly endorsed or accompanied by a written instrument
of transfer duly executed by the registered holder of this Note or its attorney duly authorized in
writing. Payment of or on account of principal, premium, if any, and interest on this Note shall
be made only to or upon the order in writing of the registered holder.



     This Note shall be construed and enforced in accordance with, and the rights of the parties
shall be governed by, the law of the State of California excluding choice-of-law principles of the
law of such State that would require the application of the laws of a jurisdiction other than such
State.





 







California Water Service Company





			
	By	
 

	 	Name:	
 

	 	Title:	
 











E-1-2









 





Representations and Warranties




     The Company represents and warrants to the Purchaser that:



     1. Corporate Organization, Subsidiaries. The Company is duly organized and existing and in
good standing under and by virtue of the laws of the State of California and is duly authorized and
empowered to own and operate its properties and to carry on its business, all as and in the places
where such properties are now owned and operated and such business is conducted. The Company has
no Subsidiaries.



     2. Corporate Authority. The Company has full corporate power and corporate authority to sell
and issue the Series O Notes. The issuance and sale of the Series O Notes and the execution and
delivery of the Thirteenth Supplement will have been duly authorized by the Board of Directors of
the Company and by the Public Utilities Commission of the State of California (the “Commission")
prior to the Closing Date, and no other action is required to be taken by, and no consents or
approvals are required to be obtained from, the shareholders of the Company or any public body or
bodies, and no other corporate action of the Company is requisite to such issue and sale.



     3. Business and Property. The Purchaser has heretofore been furnished with a copy of the
Company Information which generally sets forth the principal properties of the Company and the
business conducted and proposed to be conducted by the Company.



     4. Indebtedness. Annex A attached hereto correctly describes all Current Debt, Funded Debt
and Capitalized Leases of the Company outstanding on June 30, 2006.



     5. Financial Statements and Reports. The Company has furnished the Purchaser with a copy of
its audited financial reports for 2003, 2004 and 2005 hereinafter called the “Company Reports,” and
a copy of Form 10-K filed by California Water Service Group (“CWSG”) hereinafter called the “CWSG
10-K” with the Securities and Exchange Commission for 2005, together with all reports or documents
required to be filed by CWSG pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of
1934, as amended, since the filing of the CWSG 10-K. The financial statements contained in the
foregoing Company Reports, the CWSG 10-K, the Quarterly Reports and such other reports and
documents were prepared in accordance with generally accepted accounting principles upon a
consistent basis and are complete and correct and the balance sheets included therein fairly
present the financial condition of the Company or CWSG, as the case may be, as at the respective
dates thereof and the Statements of Income, Common Shareholders’ Equity and Cash Flows included
therein fairly present the results of the operations of the Company for the periods covered
thereby, subject in the case of unaudited statements to normal year-end adjustments.



     6. Material Contracts. The Company has no contracts or commitments, whether contingent or
other, which are material to the Company and which were not made in the ordinary course of
business. Certain material contracts related to water supply are listed in Annex B hereto. The
Company has no contracts or commitments, contingent or other, which materially and adversely affect
or in the future may (so far as the Company can foresee) materially and



Exhibit 2

(to Supplement)




 









 





adversely affect the Company or its business, property, assets, operations or condition, financial
or other. As of December 31, 2005, there were no material liabilities of the Company (other than
those under contracts entered into in the normal and ordinary course of business), actual,
contingent or accrued, which were not reflected in the Company Reports and CWSG 10-K except for (i)
liability in respect of uncompleted construction work under open contracts in connection with the
Company’s construction program and (ii) the obligations of the Company to contribute to a pension
plan, an employees’ savings plan and a health and welfare plan.



     7. No Material Adverse Change. (a) There has been no change in the condition of the Company,
financial or other, from that set forth or reflected in the Company Information, other than changes
which may have occurred in the ordinary course of business or by reason of ordinary dividends paid
or declared or outstanding First Mortgage Bonds redeemed by the Company in accordance with their
terms, and no such changes in the ordinary course of business have been material adverse changes.



     (b) Since December 31, 2005, neither the business, operations, properties nor assets of the
Company have been adversely affected in any material way by any casualties such as fire, windstorm,
riot, strike, explosion, accident, flood, earthquake, lockout, sabotage, activities of armed
forces, act of God or the public enemy or condemnation of properties by the United States
government or any municipal governmental agency, authority or body.



     8. Title to Properties. The Company is engaged in the business of a public utility water
company serving all or a portion of the California cities and communities listed in the 2005
Company Report and paragraph 9 hereof. The Company has good and merchantable title, subject only
to the lien of the Mortgage Indenture and to current tax and assessment liens, rights-of-way,
easements and certain minor liens, encumbrances, clouds or defects in title which do not materially
affect the use thereof, to all the material water distribution facilities (including, without
limitation, transmission and distribution mains, pump stations, wells, storage tanks and
reservoirs) and other material units of property used in its business except as follows:




     (a) some of the offices, but not its principal office, are in leased premises and some
wells, well sites and other minor distribution facilities are rented; and




     (b) several wells are located on property which the Company does not own but in which
it has an easement for the location of such wells;


and except as to easements and rights-of-way and certain parcels of land (not exceeding for said
parcels of land an aggregate book value of $1,000,000) with respect to which there is a possibility
of reverter if the property ceases to be used for public utility purposes, and, except that the
greater portion of its transmission and distribution systems is located in public highways and
streets and in rights-of-way owned by the Company over lands of others, the Company’s title thereto
is fee simple. Except for parcels of land having an aggregate book value of not more than
$1,000,000, the Company has good and merchantable title to all its other property and assets
subject only to the lien of the Mortgage Indenture and the lien of the Dominguez Mortgage Indenture
and to current tax and assessment liens and minor liens and encumbrances which do not materially
affect the use thereof. All of the properties of the Company are located in the


E-2-2









 





State of California and substantially all of the properties of the Company used or useful in its
public utility business are subject to the Mortgage Indenture. As used herein, the term “Dominguez
Mortgage Indenture” means the Trust Indenture dated as of August 1, 1954, as supplemented from time
to time, between the Company, as successor to Dominguez Water Company (“Dominguez") and U.S. Bank,
as Trustee, which provides a lien on properties owned by Dominguez immediately prior to the merger
described in paragraph 9 hereof which lien secures $9,000,000 in aggregate principal amount of
Dominguez bonds which were assumed by the Company upon the merger.




     9. Franchises. The Company has, in its judgment, adequate franchises and permits without
burdensome restrictions (other than those typically contained in franchises and permits of this
type) to allow the Company to conduct the business in which it is engaged.



     The Company has two classes of franchises to install and operate water pipes and mains under
public streets and highways:




     (a) so-called “constitutional” franchises obtained by virtue of the provisions of
Article XI, Section 19, of the California Constitution, as in effect prior to 1911; and




     (b) franchises granted pursuant to statutory authority.



     The Company believes, based on the previous advice of outside regulatory counsel (which is
itself based upon the assumption of the accuracy of information obtained by the Company from
sources believed to be reliable) that the following cities served by the Company were all
incorporated prior to 1911:



	 	 	 	 	 
	Bakersfield

	 	Marysville
	 	South San Francisco
	Chico

	 	Oroville
	 	Stockton
	Dixon

	 	Redondo Beach
	 	Visalia
	Hermosa Beach

	 	Salinas
	 	Willows
	King City

	 	San Mateo	 	 
	Livermore

	 	Selma	 	 





that water distribution systems were constructed and service furnished to the inhabitants of
each by various predecessors of the Company prior to 1911, and that there were no public water
works owned or controlled by the municipality in any of them prior to 1911), that the Company has a
“constitutional” franchise in each of the above cities and under such constitutional franchise has
a perpetual right which was not repealed by the repeal of Article XI, Section 19, of the California
Constitution to continue to occupy public streets of each of said cities with its pipes and mains
and to lay down additional pipes and mains in said streets for the supplying of water, subject to
reasonable regulation by the respective municipalities. The Company also believes, based on the
advice of such outside regulatory counsel, that this right is not limited to streets in which pipes
or mains were laid prior to 1911 but extends at least to all streets in the said municipalities as
they existed at the date of repeal of the constitutional provision in 1911 and probably also
extends to territory incorporated into each respective city after such repeal, although this latter
question remains somewhat in doubt in the absence of a final decision of the courts thereon. The
Company holds either by assignment or as original grantee franchises


E-2-3









 





granted under statutory authority by the Counties of Kern, Los Angeles, San Joaquin, Santa Clara
and Monterey, the Cities of Montebello, Torrance, Cupertino, Sunnyvale, Los Altos, Mountain View,
Bakersfield, Commerce, San Carlos, Rolling Hills Estates and Thousand Oaks, and the Towns of Los
Altos Hills and Atherton. The Company’s franchises from the Cities of Palos Verdes Estates, Menlo
Park, Woodside and Rancho Palos Verdes terminated in 1977, 1993, 1994 and 2003, respectively.
While none of the Cities and the Company have executed a new franchise agreement, the Company has
made and will continue to make franchise payments to each of the Cities in accordance with the
provisions of the prior franchise. In other areas where the Company has no franchise, the Company
or its predecessors have distributed water for many years and, to the Company’s knowledge, no
question has ever been raised as to the right to make such distribution and to maintain all pipes
and mains necessary therefor.




     On May 25, 2000, Dominguez Service Corporation was merged into the Company and subsequently
Dominguez and its subsidiaries were also merged into the Company (collectively, the “merger"). The
Company acquired in the Dominguez merger operations in the following cities, counties, townships or
localities that Dominguez previously served:



	 	 	 	 	 
	Bodfish

	 	Kern County
	 	Los Angeles County
	Carson

	 	Kernville
	 	Lucerne
	Compton

	 	Lake Hughes
	 	Mountain Shadows
	Duncans Mills

	 	Lakeland
	 	Onyx
	Fremont Valley

	 	Lancaster
	 	Squirrel Valley
	Guerneville

	 	Leona Valley
	 	Torrance
	Harbor City

	 	Long Beach
	 	Wofford Heights





Water distribution systems were constructed and service furnished to the inhabitants of the
localities currently known as Carson, Compton, Harbor City, Long Beach and Torrance by various
predecessors of the Company prior to 1911 and the Company believes that it has a prior right to
operate in these locations which right was not extinguished by the incorporation of these cities
subsequent to 1911. Except as noted below, Dominguez has no franchises from these cities and has
made no franchise payments to them and, to the Company’s knowledge, no question has ever been
raised as to the right to make water distribution and to maintain all pipes and mains necessary
therefor.




     As to the remaining localities, Dominguez has received written franchise agreements which are
in full force and effect and has paid all franchise fees to date, with the exception of Compton, as
to which the franchise expired without renewal in 1994. Dominguez continued to provide water
services to Compton subsequent to the expiration of the franchise, and to pay franchise fees, and
to the Company’s knowledge no question has ever been raised as to the right to make such
distribution and to maintain all pipes and mains necessary therefor. However, as of May 2003, the
County of Los Angeles cancelled its Dominguez franchise and incorporated the franchise territory
into the Company’s Los Angeles County franchise.



E-2-4









 





     10. Condition of Assets. The physical assets of the Company are in sound operating condition,
there are no material arrears in the maintenance of any such physical assets which could reasonably
be expected to have a material adverse effect on the Company and the Company believes that its
sources of water are adequate to meet its requirements for the foreseeable future.



     11. Pending Litigation, Proceedings. (a) Other than as disclosed in the Company Reports,
there are no actions, suits or proceedings pending at law or in equity or before or by any federal,
state, municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, or, to the knowledge of the Company, threatened against or
affecting the Company not adequately covered by insurance or for which reserves adequate in the
Company’s judgment have not been established which involve, in the opinion of the Company, a
reasonable possibility of judgments or liabilities exceeding $500,000 in the aggregate net of
insurance, or which may, in the opinion of the Company result in any material adverse change in the
business or properties or in the condition, financial or other, of the Company, or the ability of
the Company to perform its obligations under the Thirteenth Supplement or the Series O Notes.



     (b) There are no proceedings pending or, to the knowledge of the Company, threatened against
the Company before or by any federal, state or municipal commission, board or other administrative
agency, which materially and adversely affect the water rates of the Company presently in effect.



     (c) The Company is not in default with respect to any order, writ, injunction or decree of any
court, or any federal, state or municipal commission, board or other administrative agency and the
Company has complied with all applicable statutes and regulations of the United States of America
and of any state, municipality or agency of any thereof, in respect of the conduct of its business
known or believed by the Company to be applicable thereto, the failure to comply with which could
reasonably be expected to have a material adverse effect on the Company or its properties.



     12. No Condemnation Proceedings. Since January 1, 1995, no elections have been held or other
actions taken authorizing the commencement of proceedings for condemnation of any of the properties
of the Company. However, from time to time there are expressions of interest made by public
bodies, elected or appointed municipal officials, persons seeking political position or citizens
groups urging acquisition of the Company’s facilities in one or more of the communities served by
the Company. The Company does not believe that any acquisition by a city or municipality of its
properties by condemnation or threat thereof would be adverse to the holder of the Series O Notes.



     13. No Burdensome Restrictions. The Company is not subject to any burdensome corporate
restrictions in its Articles of Incorporation, By-Laws or otherwise, which materially and adversely
affect or in the future may (so far as the Company can foresee) materially and adversely affect the
Company or its business, property, assets, operations or condition, financial or other.



E-2-5









 





     14. Regulatory Status, Approval. (a) The Company is not a registered holding company or a
subsidiary of a registered holding company and the Company is not required to register under the
Public Utility Holding Company Act of 2005, as amended. The Company is subject to the jurisdiction
of the Commission.



     (b) No consent of, approval or authorization by, filing or registration with, or notice to any
governmental or public authority or agency is required for the issuance, sale or delivery of the
Series O Notes or the execution, delivery or performance of the Thirteenth Supplement, other than
the authorization of the Commission, which authorization has been duly obtained, is in full force
and effect and is not subject to any appeal, hearing, rehearing or contest. All conditions
contained in any such authorization which were to be fulfilled on or prior to the issuance of the
Series O Notes have been fulfilled. The Company has furnished to your special counsel true,
correct and complete copies of said authorization and all applications heretofore filed with or
submitted to the Commission in connection with its action to obtain said authorization.



     15. No Defaults, Compliance with Other Instruments. The Company is not in default under any
outstanding indentures, contracts or agreements which are material to the Company including,
without limitation, the Mortgage Indenture; and on the Closing Date there will not exist any
condition which would be a default under any such indenture, contract or agreement. The execution
and delivery of the Thirteenth Supplement, the consummation of the transactions therein provided
for and compliance with the provisions of the Thirteenth Supplement and the Series O Notes by the
Company will not violate or result in any breach of the terms, conditions or provisions of, or
constitute a default under, its Articles of Incorporation, By-Laws or any indenture, mortgage, deed
of trust, bank loan or credit agreement, or other material agreement or instrument to which the
Company is a party or by which the Company may be bound, nor will such acts result in the violation
of any applicable law, rule, regulation or order applicable to the Company of any court or
governmental authority having jurisdiction in the premises or in the creation or imposition of any
lien, charge or encumbrance of any nature whatsoever, upon any property or assets of the Company.



     16. Leases. The Company has the right to, and does, enjoy peaceful and undisturbed possession
under all material leases to which it is a party or under which it is operating. All such leases
are valid, subsisting and in full force and effect, and the Company is not in default under any
thereof and no event has occurred and is continuing, and no condition exists that, after notice or
passage of time or both could become a material default under any such Lease.



     17. Use of Proceeds. The Company will use the gross proceeds derived from the sale of the
Series O Notes under the Thirteenth Supplement to refinance existing Indebtedness and for general
corporate purposes. None of the transactions contemplated in the Thirteenth Supplement (including,
without limitation thereof, the use of the proceeds from the sale of the Series O Notes) will
violate or result in a violation of Section 7 of the Securities Exchange Act of 1934, as amended,
or any regulations issued pursuant thereto, including without limitation, Regulations U, T and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Chapter II. The Company does not
own or intend to carry or purchase any “margin stock” within the meaning of said Regulation U,
including margin stock originally issued by it. None of the



E-2-6









 






proceeds from the sale of the Series O Notes will be used to purchase or carry (or refinance any
borrowing the proceeds of which were used to purchase or carry) any margin stock.



     18. ERISA. (a) The fair market value of all assets under all “employee pension benefit plans”
(as such term is defined in Section 3(2) of ERISA), maintained by the Company, as from time to time
in effect, as of December 31, 2005, the last annual valuation date, was exceeded by the actuarial
present value of all benefits vested under the Plans by $7,400,000.



     (b) Neither any of the Plans nor any of the trusts created thereunder, nor any trustee or
administrator thereof, has engaged in a “prohibited transaction,” as such term is defined in
Section 4975 of the Code which could subject the Plans or any of them, any such trust, or any
trustee or administrator thereof, or any disqualified person with respect to the Plans to the tax
or penalty on prohibited transactions imposed by said Section 4975, except that, with respect to
any actions or omissions of administrators, trustees, other fiduciaries, parties in interest or
disqualified persons of or in respect to the Plans (other than employees of the Company), the
Company has no knowledge that any of such persons has committed a prohibited transaction, nor has
the Company participated knowingly in or knowingly undertaken to conceal a prohibited transaction
with or by any of such persons nor enabled any of them to commit a prohibited transaction.



     (c) Neither any of the Plans subject to Title IV of ERISA nor any trusts related to such plans
have been terminated, nor have there been any Reportable Events, as that term is defined in Section
4043 of ERISA (as modified by the regulations thereunder), in respect of those plans since the
effective date of ERISA.



     (d) Neither any of the Plans which are subject to Section 302 of ERISA nor any trusts related
to such plans have incurred any “accumulated funding deficiency,” as such term is defined in said
Section 302 (whether or not waived), since the effective date of ERISA.



     (e) The consummation of the transactions provided for in the Thirteenth Supplement and
compliance by the Company with the provisions thereof and the Series O Notes issued thereunder will
not involve any prohibited transaction within the meaning of ERISA or Section 4975 of the Code.



     19. Taxes. All Federal, state and local taxes and assessments due from the Company have been
(a) fully paid or adequately provided for on the books of the Company in accordance with generally
accepted accounting principles or (b) are being contested in good faith by the Company. The
Company has not been given notice of any examination of the Federal income tax returns of the
Company by the Internal Revenue Service subsequent to the examinations of the returns for tax years
2002 and 2003.



       20. Compliance with Laws. To the best of the Company’s knowledge, after due
inquiry, the Company is in compliance with all applicable Federal, state, or local laws, statutes,
rules, regulations or ordinances relating to public health, safety or the environment, including,
without limitation, relating to releases, discharges, emissions or disposals to air, water, land or
ground water, to the withdrawal or use of ground water, to the use, handling or disposal of



E-2-7









 






polychlorinated biphenyls (PCB’s), asbestos or urea formaldehyde, to the treatment, storage,
disposal or management of hazardous substances (including, without limitation, petroleum, its
derivatives, by-products or other hydrocarbons), and to exposure to hazardous substances, the
failure to comply with which could reasonably be expected to have a material adverse effect on the
Company or its properties. Except as disclosed in the 2005 CWSG 10-K, the Company does not know of
any liability of the Company under the Comprehensive Environmental Response, Compensation and
Liability Act of 1980, as amended by the Superfund Amendments and Reauthorization Act of 1986 (42
U.S.C. Section 9601 et seq.) with respect to any property now or heretofore owned or leased by the
Company.



     21. Full Disclosure. The financial statements referred to in the Thirteenth Supplement do
not, nor does the Thirteenth Supplement, the Company Information or any written statement
(including without limitation the 2005 Company Report and the 2005 CWSG 10-K) furnished by the
Company to you in connection with the negotiation of the sale of the Series O Notes, contain any
untrue statement of a material fact or, taken together, omit a material fact necessary to make the
statements contained therein or herein not misleading. There is no fact which the Company has not
disclosed to you in writing which materially affects adversely nor, so far as the Company can now
foresee, will materially affect adversely the properties, business, prospects, profits or condition
(financial or otherwise) of the Company or the ability of the Company to perform its obligations
under the Note Agreement, the Thirteenth Supplement or the Series O Notes.



     22. Private Offering. Neither the Company, directly or indirectly, nor to its knowledge any
agent on its behalf has offered or will offer the Series O Notes or any similar Security or has
solicited or will solicit an offer to acquire the Series O Notes or any similar Security from or
has otherwise approached or negotiated or will approach or negotiate in respect of the Series O
Notes or any similar Security with any Person other than the Purchaser and not more than ten (10)
other institutional investors, each of whom was offered a portion of the Series O Notes at private
sale for investment. Neither the Company, directly or indirectly, nor any agent on its behalf has
offered or will offer the Series O Notes or any similar Security or has solicited or will solicit
an offer to acquire the Series O Notes or any similar Security from any Person so as to cause the
issuance and sale of the Series O Notes not to be exempt from the provisions of Section 5 of the
Securities Act of 1933, as amended.



     23. Foreign Assets Control Regulations, Etc. Neither the sale of the Series O Notes by the
Company hereunder nor its use of the proceeds thereof will violate the Trading with the Enemy Act,
as amended, or any of the foreign assets control regulations of the United States Treasury
Department (31 CFR, Subtitle B, Chapter V, as amended) or any enabling legislation or executive
order relating thereto. Without limiting the foregoing, the Company (a) is not and will not become
a person whose property or interests in property are blocked pursuant to Section 1 of Executive
Order 13224 of September 23, 2001 Blocking Property and Prohibiting Transactions With Persons Who
Commit, Threaten to Commit, or Support Terrorism (66 Fed. Reg. 49079 (2001)) or (b) does not and
will not engage in any Material dealings or transactions, or is otherwise associated, with any such
person.



     The Company is in compliance in all material respects with the Uniting and Strengthening
America by Providing Appropriate Tools Required to Intercept and Obstruct



E-2-8









 






Terrorism (USA Patriot Act of 2001, as heretofore amended, renewed and updated). No part of
the proceeds from the sale of the Series O Notes hereunder will be used, directly or indirectly,
for any payment to any governmental official or employee, political party, official of a political
party, candidate for political office or anyone else acting in an official capacity, in order to
obtain, retain or direct business, in violation of the United States Foreign Corrupt Practices Act
of 1977, as amended.



E-2-9









 





Current Debt, Funded Debt and Capitalized Leases 

as of September 30, 2003





	1.	 	Current Debt
	 
	 	 	None.
	 
	2.	 	Funded Debt
	 
	 	 	$18,100,000 First Mortgage Bonds, Series CC due November 1, 2020.
	 
	 	 	$3,400,000 First Mortgage Bonds, Series J due 2023 (formerly Dominguez Water Company).
	 
	 	 	$5,000,000 First Mortgage Bonds, Series K due 2012 (formerly Dominguez Water Company).
	 
	 	 	$20,000,000 Series A Senior Notes due November 1, 2025.
	 
	 	 	$20,000,000 Series B Senior Notes due November 1, 2028.
	 
	 	 	$20,000,000 Series C Senior Notes due November 1, 2030.
	 
	 	 	$20,000,000 Series D Senior Notes due November 1, 2031.
	 
	 	 	$20,000,000 Series E Senior Notes due May 1, 2032.
	 
	 	 	$20,000,000 Series F Senior Notes due November 1, 2017.
	 
	 	 	$20,000,000 Series G Senior Notes due November 1, 2022.
	 
	 	 	$20,000,000 Series H Senior Notes due December 1, 2022.
	 
	 	 	$10,000,000 Series I Senior Notes due May 1, 2023.
	 
	 	 	$10,000,000 Series J Senior Notes due May 1, 2018.
	 
	 	 	$10,000,000 Series K Senior Notes due June 30, 2010.
	 
	 	 	$10,000,000 Series L Senior Notes due March 1, 2018.
	 
	 	 	$20,000,000 Series M Senior Notes due November 1, 2013.
	 
	 	 	$20,000,000 Series N Senior Notes due December 1, 2013.
	 
	 	 	$2,491,000 California Department of Water Resources Loans maturing 2011 to 2032.





Annex A

(to Exhibit 2)




 









 






	3.	 	Capitalized Leases
	 
	 	 	None.





E-2-2









 





Material Water Supply Contracts





	1.	 	Water Supply Contract, as amended, between the Company and the County of Butte relating to
the Company’s Oroville District.
	 
	2.	 	Water Supply Contract between the Company and Kern County Water Agency relating to the
Company’s Bakersfield District.
	 
	3.	 	Water Supply Contract, as amended, between the Company and Stockton East Water District
relating to the Company’s Stockton District.
	 
	4.	 	Agreement between the City of Hawthorne and the Company.
	 
	5.	 	Settlement Agreement and Master Water Sales Contract between the City and County of San
Francisco and Certain Suburban Purchasers.
	 
	6.	 	Supplement to Settlement Agreement and Master Water Sales Contract between the Company and
the City and County of San Francisco relating to the Company’s Bear Gulch District.
	 
	7.	 	Supplement to Settlement Agreement and Master Water Sales Contract between the Company and
the City and County of San Francisco relating to the Company’s San Carlos District.
	 
	8.	 	Supplement to Settlement Agreement and Master Water Sales Contract between the Company and
the City and County of San Francisco relating to the Company’s San Mateo District.
	 
	9.	 	Supplement to Settlement Agreement and Master Water Sales Contract between the Company and
the City and County of San Francisco relating to the Company’s South San Francisco District.
	 
	10.	 	Water Supply Contract between the Company and Santa Clara Valley Water District relating to
the Company’s Los Altos District.
	 
	11.	 	Water Supply Contract between the Company and Pacific Gas and Electric Company related to the
Company’s Oroville District.
	 
	12.	 	Water Supply Contract between the Company and Alameda County Flood Control and Water
Conservation District related to the Company’s Livermore District.
	 
	13.	 	Northeast Bakersfield Water Agreement, as amended, between the City of Bakersfield and the
Company.
	 
	14.	 	Water Supply Contract 99-73 between the City of Bakersfield and the Company.





Annex B

(to Exhibit 2)




 









 





Description of Closing Opinion

of Counsel to the Company




     The closing opinion of Gibson, Dunn & Crutcher LLP, counsel for the Company, which is called
for by Section 5(a)(iii) of the Thirteenth Supplement, shall be dated the Closing Date and
addressed to the Purchaser, shall be satisfactory in scope and form to the Purchaser and shall be
to the effect that:




     1. The Company is a validly existing corporation in corporate good standing under the
laws of California.




     2. The execution, delivery and the performance by the Company of the Note Agreement,
the Thirteenth Supplement and the Notes have been duly authorized by all requisite corporate
action on the part of the Company. The Company has duly executed and delivered, the
Thirteenth Supplement and the Notes.




     3. Each of the Note Agreement, as supplemented by the Thirteenth Supplement and the
Notes constitutes a valid and binding agreement of the Company, enforceable against the
Company in accordance with their terms.




     4. The execution and delivery by the Company of the Thirteenth Supplement and the Notes
(i) do not, and will not, violate the Articles of Incorporation or By-Laws of the Company,
and (ii) do not, and will not, breach the terms of any agreement identified to us in a
certificate (attached hereto) by the Company as being material to which the Company is a
party, based solely on our review of such agreements.




     5. Assuming the accuracy of the representations and warranties of the Company and the
Purchaser and the compliance by them with their agreements contained in the Note Agreement
and the Thirteenth Supplement, no registration of the Notes under the Securities Act of
1933, as amended, and no qualification of the Thirteenth Supplement under the Trust
Indenture Act of 1939, as amended, is required for the sale and delivery of the Notes to the
Purchaser on the date hereof or for the resales of the Purchaser in the manner contemplated
by the Thirteenth Supplement, it being understood that we express no opinion as to any
subsequent resale of the Notes.


The opinion of Gibson, Dunn & Crutcher LLP shall be subject to customary exceptions and
limitations. With respect to matters of fact on which such opinion is based, such counsel shall be
entitled to rely on appropriate certificates of public officials and officers of the
Company.




Exhibit 3

(to Supplement)




 









 





Description of General Counsel Closing Opinion




     The closing opinion of John S. Tootle, General Counsel for the Company, which is called for by
Section 5(a)(iii) of the Thirteenth Supplement, shall be dated the Closing Date and addressed to
the Purchaser, shall be satisfactory in scope and form to the Purchaser and shall be to the effect
that:



To the best of such counsel’s knowledge, no consent or approval by,
or any notification of or filing with, any court, public body or
authority of the State of California is required to be obtained or
effected by the Company in connection with the execution, delivery
and performance by the Company of the Note Documents or the issuance
or sale of the Notes, except for the authorization of the California
Public Utilities Commission, which authorization has been duly
obtained and is in full force and effect.


The opinion of General Counsel shall be subject to customary exceptions and limitations. With
respect to matters of fact on which such opinion is based, such counsel shall be entitled to rely
on appropriate certificates of public officials.




Exhibit 4

(to Supplement)




 









 





Description of Special Counsel’s Closing Opinion




     The closing opinion of Chapman and Cutler LLP, special counsel to the Purchaser, called for by
Section 5(a)(iii) of the Thirteenth Supplement, shall be dated the Closing Date and addressed to
the Purchaser, shall be satisfactory in form and substance to the Purchaser and shall be to the
effect that:




     1. The Company is a corporation, validly existing and in good standing under the laws
of the State of California and has the corporate power and the corporate authority to
execute and deliver the Thirteenth Supplement and to issue the Series O Notes.




     2. The Note Agreement and the Thirteenth Supplement have been duly authorized by all
necessary corporate action on the part of the Company, have been duly executed and delivered
by the Company and constitute the legal, valid and binding contract of the Company
enforceable in accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance and similar laws affecting creditors’ rights generally, and general principles of
equity (regardless of whether the application of such principles is considered in a
proceeding in equity or at law).




     3. The Series O Notes have been duly authorized by all necessary corporate action on
the part of the Company, have been duly executed and delivered by the Company and constitute
the legal, valid and binding obligations of the Company enforceable in accordance with their
terms, subject to bankruptcy, insolvency, fraudulent conveyance and similar laws affecting
creditors’ rights generally, and general principles of equity (regardless of whether the
application of such principles is considered in a proceeding in equity or at law).




     4. The issuance, sale and delivery of the Series O Notes under the circumstances
contemplated by the Thirteenth Supplement do not, under existing law, require the
registration of the Series O Notes under the Securities Act of 1933, as amended, or the
qualification of an indenture under the Trust Indenture Act of 1939, as amended.



     The opinion of Chapman and Cutler LLP shall also state that the opinion of Gibson, Dunn &
Crutcher LLP is satisfactory in scope and form to Chapman and Cutler LLP and that, in their
opinion, the Purchaser is justified in relying thereon.



     In rendering the opinion set forth in paragraph 1 above, Chapman and Cutler LLP may rely, as
to matters referred to in paragraph 1, solely upon an examination of the Articles of Incorporation
certified by, and a certificate of good standing of the Company from, the Secretary of State of the
State of California, the By-laws of the Company and the general business corporation law of the
State of California.



     With respect to matters of fact upon which such opinion is based, Chapman and Cutler LLP may
rely on appropriate certificates of public officials and officers of the Company and upon
representations of the Company and the Purchaser delivered in connection with the issuance and sale
of the Series O Notes.