Document:

Exhibit 4.1.6

SUBURBAN WATER SYSTEMS

TO

U.S. BANK NATIONAL ASSOCIATION,

TRUSTEE

FIFTH
AMENDMENT AND SUPPLEMENT TO

INDENTURE OF MORTGAGE AND DEED OF TRUST

DATED OCTOBER 1, 1986

[This instrument is an
amendment to an Indenture which is a mortgage of both real and personal
property, including chattels, and also constitutes, among other things, a
security agreement creating a security interest in personal property.  Such Indenture contains after-acquired
property provisions.]

 

 

THIS FIFTH
AMENDMENT AND SUPPLEMENT TO INDENTURE OF MORTGAGE AND DEED OF TRUST DATED
OCTOBER 1, 1986 (the “Fifth Amendment”),
is made and entered into as of October 20, 2006, by and between SUBURBAN WATER SYSTEMS, a California corporation formerly
known as Southwest Suburban Water (herein, the “Company”),
and U.S. BANK NATIONAL ASSOCIATION, a
national banking association, as trustee (herein, the “Trustee”),
with respect to the following:

A.            The Company executed and
delivered that certain Indenture of Mortgage and Deed of Trust dated October 1,
1986 ( the “Original Indenture”) to Security Pacific
National Bank, a national banking association, predecessor to Bank of America
NT & SA, predecessor trustee to U.S. Bank Trust National Association
(originally named First Trust of California, National Association), predecessor
to the Trustee.  The Original Indenture
was recorded on November 17, 1986, as Instrument No. 86-1574184 in the Official
Records of the County of Los Angeles, State of California, and was recorded on
November 17, 1986, as Instrument No. 86-563570 in the Official Records of
the County of Orange, State of California.

B.            The Original Indenture was
amended pursuant to that certain First Amendment and Supplement to Indenture of
Mortgage and Deed of Trust Dated October 1, 1986 (the “First
Amendment”), dated as of February 7, 1990, and recorded on April 12,
1990, as Instrument No. 90-694089 in the Official Records of the County of Los
Angeles, State of California, and was recorded on May 8, 1990, as Instrument
No. 90-241742 in the Official Records of the County of Orange, State of
California, and further amended pursuant to that certain Second Amendment and
Supplement to Indenture of Mortgage and Deed of Trust Dated October 1, 1986
(the “Second Amendment”), dated as of January
24, 1992, and recorded on February 14, 1992, as Instrument No. 92-260829 in the
Official Records of the County of Los Angeles, State of California, and was
recorded on February 14, 1992, as Instrument No. 92-091620 in the official
records of the County of Orange, State of California, and further amended
pursuant to that certain Third Amendment and Supplement to Indenture of
Mortgage and Deed of Trust Dated October 1, 1986 (the “Third
Amendment”), dated as of October 9, 1996, and recorded on October
18, 1996, as Instrument No. 96-1696870 in the Official Records of the County of
Los Angeles, State of California, and was recorded on October 18, 1996, as
Instrument No. 199650531190 in the official records of the County of Orange,
State of California, and further amended pursuant to that certain Fourth
Amendment and Supplement to Indenture of Mortgage and Deed of Trust Dated
October 1, 1986 (the “Fourth Amendment”),
dated as of October 19, 2004, and recorded on October 19, 2004, as Instrument
No. 04-2682597 in the Official Records of the County of Los Angeles, State of
California, and recorded on October 19, 2004, as Instrument No. 2004000939642
in the Official Records of the County of Orange, State of California.  The Original Indenture, as amended and
supplemented by the First Amendment, the Second Amendment, the Third Amendment,
and the Fourth Amendment, is hereinafter referred to as the “Existing
Indenture,” and the Existing Indenture, as amended and supplemented by this
Fifth Amendment, is hereinafter referred to as the “Indenture.”

C.            The Company has requested
that the Trustee enter into this Fifth Amendment setting forth the terms and
conditions of the issuance of certain Bonds in the aggregate principal amount
of $10,000,000, which Bonds shall be issued as “Series E” under and pursuant to
the Indenture.  Proceeds from the Series “E”
Bonds will be used to repay the maturing Series “C” Bonds in the entire $8
million amount outstanding on October 20, 2006, the date of the Series “E” Bond
closing.  The remaining $2 million proceeds
will be used for general corporate purposes.

D.            The Company has duly authorized the creation,
execution and delivery of the Series E Bonds, and all things have been done
which are necessary to make the Series E Bonds, when executed by the Company and
authenticated and delivered by the Trustee under the Indenture and duly issued
by the Company, the valid and binding obligations of the Company, and to
constitute the Indenture a valid

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mortgage and deed of trust and a security agreement and contract for
the security of the Bonds (including, without limitation, the Series E Bonds),
in accordance with the terms of the Bonds and the Indenture.  In addition, all other instruments and
actions required pursuant to law and pursuant to the requirements of the Existing
Indenture for the Trustee to execute and deliver this Fifth Amendment have been
duly delivered or taken.

E.             The Company redeemed 100% of
the issued and outstanding Series A Bonds.

F.             The Company will pay all
principal and accrued interest payable on 100% of the issued and outstanding
Series C Bonds concurrently with and out of the proceeds of sale of the Series
E Bonds pursuant to this Fifth Amendment.

AMENDMENT

IN
CONSIDERATION of the foregoing recitals and pursuant to the
authority granted under Section 13.01 of the Indenture [Supplemental Indentures
Without Consent of Bondholders], the Company and the Trustee agree that the
Existing Indenture shall be amended in the following respects.

1.             DEFINITIONS.

All terms used in this Fifth
Amendment with initial capital letters and not defined herein shall have the
meanings given in the Existing Indenture.

2.             ORIGINAL ISSUANCE OF SERIES E
BONDS.

There is hereby added to
the Existing Indenture a new Article, to be entitled Article XIX, and which
shall read in its entirety as follows:

“ARTICLE XIX

TERM AND ISSUE OF SERIES E BONDS

Section 19.01.  Specific Title, Terms and Forms.  There
shall be a fifth series of Bonds entitled “First Mortgage Bonds, Series E 6.295%,
Due October 20, 2026” (herein called the “Series E Bonds”).  The forms thereof shall be substantially as
set forth in Article II with such insertions, omissions, substitutions and
variations as may be determined by the officers executing the same as evidenced
by their execution thereof to reflect the applicable terms of the Series E
Bonds established by this Article.  The
precise form of Series E Bonds shall be as set forth in an exhibit to the Bond
Purchase Agreement (the “Purchase Agreement”)
dated as of October 20, 2006, between the Company and the Purchaser named
therein pursuant to which the Series E Bonds are sold, and the Trustee is
authorized to refer to such Purchase Agreement when any Series E Bonds are
presented to the Trustee for authentication.

The Maturity of the
Series E Bonds shall be October 20, 2026, and the aggregate principal amount
thereof which may be authenticated and delivered and Outstanding is limited to
$10,000,000.

The Series E Bonds may be issued only as registered Bonds in
denominations of $1,000 and any multiple thereof.  The Series E Bonds shall bear interest from
the later of the initial issuance of the Series E Bonds or the most recent
Interest Payment Date to which interest has been paid or duly provided
for.  The Series E Bonds shall bear
interest payable semi-annually on April 1 and October 1 of each year (the
Interest Payment Dates of the Series E Bonds), at the rate of 6.295% per annum,
until the principal

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thereof shall be
paid or duly provided for; provided that
interest on any overdue principal, overdue Redemption Price, and (to the extent
permitted by applicable law) overdue interest, shall accrue at a rate equal to
the lesser of (a) the highest rate allowed by applicable law or (b) 7.295% per
annum.  Interest shall be computed on the
basis of a 360-day year of twelve 30-day months.

Notwithstanding the
provisions of Section 5.05 [Deposit of Redemption Price] or other provisions in
the Indenture to the contrary, the principal or the Redemption Price of, and
any applicable accrued and unpaid interest on, the Series E Bonds shall be
payable by depositing such amounts, before 12:00 noon, New York time, on the
Redemption Date or Maturity date, as the case may be, by federal funds bank
wire transfer, in the account of each Bondholder of the Series E Bonds in any
bank in the United States as may be designated in a written notice to the
Company by such Bondholder, or in such other manner as may be directed, or to
such other address in the United States as may be designated, in writing by
such Bondholder.  The address on Annex 1
to the Purchase Agreement with respect to the initial purchaser of the Series E
Bonds shall be deemed to constitute notice, direction or designation (as
appropriate) to the Company with respect to direct payments to such purchaser
as aforesaid.  With regard to any Series
E Bond, the bank designated pursuant to this paragraph with respect to such
Series E Bond shall be the Place of Payment in respect of such Series E Bond.

The Regular Record Date
referred to in Section 2.10 [Payment of Interest on Bonds, Interest Rights
Preserved] for the payment of the interest payable on the Series E Bonds, and
punctually paid or duly provided for, on any Interest Payment Date shall be the
20th day (whether or not a Business Day) of the calendar month next preceding
such Interest Payment Date.

If any payment due on, or
with respect to, any Series E Bonds shall fall due on a day other than a
Business Day, then such payment shall be made on the First Business Day
following the day on which such payment shall have so fallen due; provided that if all or any portion of such payment shall
consist of a payment of interest, for purposes of calculating such interest,
such payment shall not be deemed to have been originally due on such first
following Business Day, and such interest shall accrue and be payable only to
the Interest Payment Date.

Section 19.02.  Exchangeability. 
Subject to Section 2.08 [Registration, Transfer and Exchange], all
Series E Bonds shall be fully interchangeable, and, upon surrender at the
office or agency of the Company which the Company maintains pursuant to Section
6.02 [Maintenance of Office or Agency], shall be exchangeable for other Series
E Bonds of a different authorized denomination or denominations, as requested
by the Holder surrendering the same.  The
Company will execute, and the Trustee shall authenticate and deliver, Series E
Bonds whenever the same are required for any such exchange.

Section 19.03.  Redemption.

A.            The Series E Bonds are subject to redemption, in whole
or in part, before their Maturity in the following events and in the manner
provided in Article V [Redemption of Bonds] (unless a different manner is set
forth in this Section 19.03, in which case the provisions of this Section shall
control):

(1)           at any time after issuance, at the option of the
Company evidenced by a Board Resolution, in an amount not less than 5% of the
aggregate principal amount of the Series E Bonds Outstanding in the case of a
partial redemption, at a Redemption Price equal to 100% of the principal amount
of the Series E Bonds to be redeemed, together with the Make Whole Surcharge at
such time (as shall be calculated by Purchaser which calculations shall be set
forth in an Officers’ Certificate delivered to each Holder of Series E Bonds
and to the Trustee two (2) Business Days prior to the Redemption Date) and
interest accrued and unpaid to the Redemption Date, on a Redemption Date
specified by the

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Company
in compliance with Section 5.02 [Election to Redeem; Notice to Trustee], except
that notice of the Redemption Date and other matters specified in Section 5.02
[Election to Redeem; Notice to Trustee] shall be given not less than 30 nor
more than 60 days prior to the Redemption Date specified by the Company.  The Company shall obtain from Purchaser a
calculation of the estimated Make Whole Surcharge and interest due three (3)
business days prior to the Redemption Date. 
A final determination of the Make Whole Surcharge will be recalculated in
agreement with Purchaser on the Redemption Date; and

(2)           from moneys received by the
Trustee as a result of a major casualty or condemnation as provided in Articles
VII [Possession and Release of Property] and VIII [Application of Trust
Moneys], at a Redemption Price equal to 100% of the principal amount of Bonds
to be redeemed, together with the Make Whole Surcharge at such time (provided
that in the case of any redemption resulting from a major casualty event,
such Make Whole Surcharge shall be calculated without the additional amount required
by paragraph B of the definition of such term) and together with interest
accrued and unpaid to the Redemption Date, and on a Redemption Date that is the
first date for which notice of redemption can be given by the Trustee as
provided in Article V [Redemption of Bonds]. 
For purposes of this Section 19.03, a “major” casualty or condemnation
is one in which either or both of (i) the compensation for, or proceeds of
sale of, any part of the Trust Estate Taken by Eminent Domain, or (ii) the
proceeds of insurance upon any part of the Trust Estate, is equal to or greater
than $10,000,000.

B.            Notwithstanding the last sentence of the first
paragraph of Section 5.04 [Notice of Redemption] and the first sentence of the
second paragraph of Section 1.04 [Notices to Bondholders, Waiver], the giving
of notice of redemption to each Holder of a Series E Bond, as provided in
Section 5.04, shall be a condition precedent to the Company’s right to
redeem Series E Bonds in accordance with the foregoing clauses A(1) and A(2) of
this Section 19.03.  Any notice of redemption
to any Holder of Series E Bonds for a redemption pursuant to clause A(1) of
this Section 19.03 shall be accompanied by an Officers’ Certificate as to the
estimated Make Whole Surcharge due in connection with such redemption
(calculated as if the date of such notice were the date of such redemption)
setting forth the details of such computation.

C.            Notwithstanding the provisions of Section 5.03
[Selection by Trustee of Bonds to Be Redeemed], if there is more than one
Holder of the Series E Bonds, the aggregate principal amount of each required
or optional partial redemption of the Series E Bonds shall be allocated in
units of $1,000 or multiples thereof among the Holders of the Series E Bonds at
the time Outstanding in proportion, as nearly as practicable, to the respective
unpaid principal amounts of the Series E Bonds then Outstanding held by each such
Holder of Series E Bonds, with adjustments, to the extent practicable, to
equalize for any prior redemptions not in such proportion.

D.            Notwithstanding the second sentence of Section 5.06
[Bonds Payable on Redemption Date] or the provisions of Section 5.07 [Bonds
Redeemed in Part], no Holder of any Series E Bond shall be required to
surrender such Bond to any Person, or to file, or cause to be filed, with the
Trustee any agreement or certificate required by Section 5.07, prior to
receiving any payment thereon or in respect thereof; provided,
however, that upon payment of the principal or Redemption Price in
full, and accrued and unpaid interest on and all other amounts in respect of
such Series E Bond, the Holder thereof shall promptly thereafter surrender such
Series E Bond to the Company.  Any such
Series E Bond so surrendered shall be cancelled and shall not be reissued, and
no new Series E Bond shall be issued in lieu of such surrendered Series E Bond.

E.             The Series E Bonds may be redeemed from
Trust Moneys, as provided in Section 8.04 [Retirement of Bonds], including from
moneys received by the Trustee as a result of casualty or condemnation, as
provided in Articles VII [Possession and Release of Property] and VIII
[Application of

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Trust Moneys], but
only at the time, in the manner and at the Redemption Price specified in
clauses (A)(1) and (A)(2) of this Section 19.03.  If the Series E Bonds shall be redeemed under
Section  19.03.A(2), then said Series E Bonds shall be redeemed pro rata
with the Series B Bonds, the Series D Bonds, and any other Bonds having the
benefit of a redemption provision substantially identical to that contained in 19.03.A(2),
in proportion, as nearly as practicable, to the respective unpaid principal
amounts of all such Bonds Outstanding on the Redemption Date.

Section 19.04.  Payment of Optional Redemption Price. 
If the giving of notice of optional redemption shall have been completed
as required in Article V [Redemption of Bonds], the Series E Bonds or portions
of such Series E Bonds specified in such notice shall become due and payable on
the Redemption Date at the applicable Redemption Price set forth in Section 19.03.  On and after the Redemption Date (unless the
Company shall default in the payment of such Bonds on the Redemption Date)
interest on the Series E Bonds or the portions of the Series E Bonds so called
for redemption shall cease to accrue.

If any Holder of any
Series E Bond which is redeemed in part only shall present such Bonds to the
Company, the Company shall execute and the Trustee shall authenticate and
deliver to such Holder, at the expense of the Company, a new Series E Bond or
Bonds in aggregate principal amount equal to the unredeemed portion of the
Series E Bond so presented.

Section 19.05.  Authentication and Delivery. 
Upon the execution and delivery of this Fifth Amendment, the Company
shall execute and deliver to the Trustee, and the Trustee shall authenticate,
the Series E Bonds and deliver them to the purchasers thereof as instructed by
the Company.

Prior to the delivery by
the Trustee of the Series E Bonds there shall be filed with the Trustee
original executed counterparts of this Fifth Amendment, the Purchase Agreement,
the Title Policies or commitments for issuance thereof and evidence of
recording of this Fifth Amendment in the land records of Los Angeles and Orange
Counties, California.

3.             CERTAIN
AMENDMENTS TO DEFINITIONS.

(a)           Make Whole Surcharge Definitions.  Section 1.01
[Definitions] of the Existing Indenture is hereby amended by adding the
following definition of Make Whole Surcharge for the Series E Bonds and
the following related definitions:

“Make Whole
Surcharge” means,
with respect to any Series E Bond, an amount determined as follows:

To determine the surcharge designed to compensate CoBank for any actual
or imputed funding losses incurred by CoBank as a result of the repayment,
CoBank will:

(A)          Determine the difference between:  (1) the rate estimated by CoBank on the date
the rate was fixed to be its cost to fund the loan on that day in the manner
set forth in its then current methodology; minus (2) the rate estimated by
CoBank on the date the surcharge is calculated to be its cost, less dealer
concessions and other issuance costs, to fund a new fixed rate loan in
accordance with its then current methodology having the same fixed rate period
and repayment characteristics as the balance being repaid.  If such difference is negative,

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then for purposes of the remaining calculations, such difference shall
be deemed to be zero.

(B)           Add 1⁄2 of 1% to such difference (such that the
minimum result shall at all times be 1⁄2 of 1%).

(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, 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 shall be the Make Whole Surcharge.

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.”

(b)           Definition of Place of Payment.  The definition
of “Place of Payment” in Section 1.01 [Definitions] of the Existing Indenture
is hereby amended to read, in its entirety, as follows:

“Place of Payment” means, (a)
when used with respect to the Series B Bonds (except as provided in clause (d)
below), the place for payment of the principal, Make Whole Amount, if any, and
interest upon the Series B Bonds designated in Section 16.01; (b) when used
with respect to the Series D Bonds (except as provided in clause (d) below),
the place for payment of the principal, Make Whole Amount, if any, and interest
upon the Series D Bonds designated in Section 18.01; (c) when used with respect
to the Series E Bonds (except as provided in clause (d) below), the place for
payment of the principal, Make Whole Surcharge, if any, and interest upon the
Series E Bonds designated in Section 19.01; and (d) with respect to any
exchange of Series B Bonds pursuant to Section 16.02 [Exchangeability]; with respect
to any exchange of Series D Bonds pursuant to Section 18.02
[Exchangeability]; with respect to any exchange of Series E Bonds pursuant to
Section 19.02 [Exchangeability]; and with respect to Bonds of any other series,
means a city or any political subdivision thereof in which the Company is by
this Indenture required to maintain an office or agency pursuant to
Section 6.02 [Maintenance of Office or Agency].”

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4.             REPLACEMENT
OF MUTILATED, DESTROYED, LOST AND STOLEN BONDS.

The proviso in lines 5
through 7 of the first paragraph of Section 2.09 [Mutilated, Destroyed, Lost
and Stolen Bonds] of the Existing Indenture is hereby amended to add thereto
the words “or Series E Bond” immediately after the words “Series D Bond.”

5.             COVENANTS.

In consideration of and
in connection with the issuance of the Series E Bonds, the Company makes the
following additional covenants in favor of the Series E Bondholders (but not
the Series A Bondholders, the Series B Bondholders, the Series C Bondholders,
the Series D Bondholders, or the Bondholders of any subsequent series of Bonds,
if any).

(a)           Redemption of Series E Bonds.  If Bonds
having the benefit of a redemption provision substantially identical to that
contained in Section 3.03A(3) shall be redeemed under Section 3.03A(3), then
Series E Bonds shall be redeemed pro rata with
the Bonds having the benefit of a redemption provision substantially identical
to that contained in Section 3.03A(3) in proportion, as nearly as practicable,
to the respective unpaid principal amount of all such Bonds outstanding on the
Redemption Date.

(b)           Financial Reports to Series E Bondholders. 
Article VI [Covenants] of the Existing Indenture is hereby amended by
adding thereto a new Section, to be entitled Section 6.18 and to read in its
entirety as follows:

“Section 6.18.  Financial Reports to Series E Bondholders.  For so long as any of the Series E Bonds are
Outstanding, the Company shall furnish to each of the Series E Bondholders at
their addresses for notices pursuant to Section 1.04 [Notices to Bondholders;
Waiver] all financial statements and information, notices, reports and other
information required pursuant to, and otherwise comply with each of, the
provisions of Section 4.1 (together with any successor provision, and as such
provision or successor provision may be amended from time to time), of the
Purchase Agreement pursuant to which the Series E Bonds were originally sold,
which provisions are incorporated by reference herein, mutatis
mutandis, with the same effect as if set forth therein.”

(c)           Dividend Covenant.  Section 6.14 [Payment of
Dividends] of the Existing Indenture is hereby amended by adding the following
to the end of the first paragraph thereof:

“In addition to the foregoing, for so long as
any of the Series E Bonds are Outstanding the Company will not declare or make
or incur any liability to make any Distribution in respect of the common stock
of the Company if, immediately after giving effect to the proposed
Distribution, the aggregate amount of Distributions in respect of its common
stock made during the period subsequent to December 31, 2003 would exceed:  the sum of (a) $24,077,000.00, plus (b) 95%
of the aggregate Net Income (or 100% of Net Income if Net Income shall be a
deficit) accrued subsequent to December 31, 2003.”

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(d)           No Change in Business.  Article VI
[Covenants] of the Existing Indenture is hereby amended by adding thereto a new
Section 6.19, reading in its entirety as follows:

“Section
6.19.  No Change in Business.

The Company shall not 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.  In the event that the Company shall engage in
a consolidation, merger, conveyance, transfer or lease transaction pursuant to
the provisions of Section 12.01 and 12.02 of the Indenture, the Company agrees
that any surviving or successor entity will be a regulated water/wastewater
public utility under the laws of one or more states of the United States of
America.”

6.             POWERS EXERCISABLE
NOTWITHSTANDING DEFAULT.

(a)           Section 7.04.  Section 7.04 [Powers
Exercisable Notwithstanding Default] of the Existing Indenture, as previously
amended and restated by the Fourth Amendment, is hereby amended to read, in its
entirety, as follows:

“While in possession of all or substantially
all of the Trust Estate (other than any cash and securities constituting part
of the Trust Estate and deposited with the Trustee), the Company may exercise
the powers conferred upon it in the Sections of this Article even though it is
prohibited from doing so while a Default exists as provided therein, if (i) the
Holders of not less than 66-2/3% in principal amount of each of the following
series of Bonds then Outstanding, the Series B Bonds, the Series D Bonds, and
the Series E Bonds, and (ii) the Holders of not less than 66-2/3% in principal
amount of all other Bonds then Outstanding (as a group), in each case by Act of
such Bondholders, shall consent to such action, in which event none of the
instruments required to be furnished to the Trustee under any of such Sections
as a condition to the exercise of such powers need state that no Default exists
as provided therein.”

(b)           Section 8.07.  Section 8.07 [Powers
Exercisable Notwithstanding Default] of the Existing Indenture, is hereby
amended to read, in its entirety, as follows:

“While in possession of all or substantially
all of the Trust Estate (other than any cash and securities constituting part
of the Trust Estate and deposited with the Trustee), the Company may do any of
the things enumerated in Sections 8.02 [Withdrawal on Basis of Bondable
Capacity] to 8.06 [Amounts under $100,000], inclusive, which it is prohibited
from doing while a Default exists as provided therein, if (i) the Holders of
not less than 66-2/3% in principal amount of each of the following series of
Bonds then Outstanding: the Series B Bonds, the Series D Bonds, and the Series
E Bonds, and (ii) the Holders of not less than 66-2/3% in principal amount of
all other Bonds then Outstanding (as a group), in each case by Act of such
Bondholders, shall consent to such action, in which event any Certificate filed
under any of said

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Sections shall omit any statement to the effect that no Default exists
as provided thereunder.”

7.             EVENTS OF DEFAULT.

Section 9.01 [Events of
Default] of the Existing Indenture is hereby amended by adding thereto a new
subsection 9.01.F, to read in its entirety as follows:

“F.           “Event of Default” with respect to the Series E
Bonds only means any one of the events specified in clause A of this Section
9.01 or any one of the following events (whatever the reason for such event and
whether it shall be voluntary or involuntary or be effected by operation of law
or pursuant to any judgment, decree or order of any court or any order, rule or
regulation of any administrative or governmental body):

(1)           Principal or Premium Payments – the Company
fails to make any payment of principal or Make Whole Surcharge on any Series E
Bond when such payment is due,

(2)           Interest Payments – the Company
fails to make any payment of interest on any Series E Bond within 5 days after
the date such payment is due,

(3)           Particular Covenant Defaults – the Company
fails to perform or observe any covenant contained in Section 6.06, Section
6.09, Section 6.14, the last sentence of Section 6.12, or Article XII,

(4)           Other Defaults – the Company fails to
comply with any other provision of this Indenture or the Purchase Agreement
pursuant to which the Series E Bonds were sold, and such failure continues for
more than 30 days after such failure shall first become known to any officer of
the Company;

(5)           Warranties or Representations – any warranty
or representation by the Company or by Southwest Water Company, a Delaware
corporation, contained in this Indenture, the Purchase Agreement pursuant to
which the Series E Bonds were sold or in any instrument or certificate
furnished by the Company in compliance with this Indenture or the Purchase
Agreement pursuant to which the Series E Bonds were sold is false or incorrect
in any material respect on the date as of which made,

(6)           Default on Indebtedness – the Company
fails to make any payment due on any indebtedness for borrowed money
(including, without limitation, Bonds of any other series) in an amount
aggregating in excess of $1,000,000, or any event shall occur or any conditions
shall exist in respect of any such indebtedness of the Company, or under any
agreement securing or relating to such indebtedness, the effect of which is (i)
to cause (or permit any Holder of such indebtedness or a trustee to cause) such
indebtedness, or a portion thereof, to become due prior to its

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stated maturity or prior to its regularly scheduled date or dates of
payment or (ii) to permit a trustee to elect a majority of the directors on the
Board of Directors of the Company, and

(7)           Undischarged Final Judgments – a final
judgment or judgments for the payment of money aggregating in excess of
$100,000 is or are outstanding against the Company and any one of such
judgments has been outstanding for more than thirty (30) days from the date of
its entry and has not been discharged in full or stayed.”

8.             CONDEMNATION OF ENTIRE TRUST
ESTATE.

The parenthetical
phrase in lines 5 and 6 of Section 8.10 [Condemnation of Entire Trust Estate]
of the Existing Indenture is hereby amended in its entirety to read as follows:

“(other than the Series B Bonds, which shall only be redeemable
pursuant to Section 16.03 [Redemption], the Series D Bonds, which shall only be
redeemable pursuant to Section 18.03 [Redemption]), and the Series E Bonds,
which shall only be redeemable pursuant to Section 19.03 [Redemption]).”

9.             INCIDENTS OF SALE.

Section 9.05.A [Incidents
of Sale] of the Existing Indenture is hereby amended to read, in its entirety,
as follows:

“A.  the principal, the Make Whole Amount, the Make
Whole Surcharge or other premium, if any, and accrued interest on all
Outstanding Secured Bonds, if not previously due, shall at once become and be
immediately due and payable,”

10.          NOTICE OF DEFAULTS.

Section 10.02.  [Notice of Defaults] of the Existing
Indenture is hereby amended and restated to read in its entirety as follows:

“Within 90 days after the Trustee shall have
actual knowledge of any Default hereunder, the Trustee shall transmit by mail
to all Bondholders entitled to receive reports pursuant to Section 11.03.C [Reports
by Trustee], if operative, and if Section 11.03.C is not operative, to all
Registered Holders of Bonds as their names and addresses appear in the Bond
Register, notice of such Default hereunder known to the Trustee, unless such
Default shall have been cured or waived; PROVIDED, HOWEVER, that, except in the
case of a Default in the payment of the principal of (or premium, if any) or
interest on any Bond or in the payment of any sinking or purchase fund
installment, and except for notice to the Holders of Series B Bonds, Series D
Bonds, or Series E Bonds, which shall not be withheld in any event, the Trustee
shall be protected in withholding such notice if and so long as the board of directors,
the executive committee or a trust committee of directors and/or Responsible
Officers of the Trustee in good faith determine that

 11
 

 

 

the withholding of such notice is in the interests of the Bondholders;
PROVIDED, FURTHER, that in the case of any Default of the character specified
in Section 9.01.A(3) [Events of Default], except as specified in the
next succeeding provision, no such notice to Bondholders shall be given until
at least 30 days after the occurrence thereof; and, PROVIDED, FURTHER, that in
the case of any Default with respect to the Series B Bonds, Series D Bonds, or
Series E Bonds, the Trustee shall give written notice thereof to the Holders
of, respectively, Series B Bonds, Series D Bonds, or Series E Bonds, as
their names and addresses appear in the Bond Register, promptly after the
Trustee has actual knowledge of such Default.

11.          SUPPLEMENTAL INDENTURES WITH CONSENT OF BONDHOLDERS.

The proviso in lines 4
through 7 of the second to last paragraph of Section 13.02 [Supplemental
Indentures with the Consent of Bondholders] of the Existing Indenture is hereby
amended and restated in its entirety to read as follows:

“, PROVIDED, HOWEVER, that the Trustee shall not at any time make any
such determination with respect to the Series B Bonds, Series D Bonds, or
Series E Bonds, respectively, without the prior written consent of the
Holders of a majority in principal amount of, respectively, the Series B Bonds,
Series D Bonds, or Series E Bonds, as the case may be, Outstanding at such
time.”

12.          EFFECTIVE DATE.

As used herein, the
Effective Date of this Fifth Amendment shall be that date upon which an
executed and acknowledged counterpart of this Fifth Amendment is recorded in
the Offices of the County Recorders of Los Angeles and Orange Counties, California.

13.          INDENTURE IN EFFECT.

The Company and the
Trustee agree and acknowledge that the Existing Indenture, as amended and
supplemented by this Fifth Amendment, remains in full force and effect in
accordance with its terms.

14.          COMPANY COVENANT TO PAY TRUSTEE FEES.

By its signature hereto,
the Company covenants and agrees to pay the reasonable fees and costs of the
Trustee incurred or charged in connection with the review and execution of this
Fifth Amendment and all other instruments described in Recital D to this Fifth
Amendment.

15.          COUNTERPARTS AND INCLUSIONS IN INDENTURE.

This Fifth Amendment may
be executed in two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute a single instrument.  Upon recordation of this Fifth Amendment in
the Offices of the County Recorders of Los Angeles and Orange Counties,
California, this Fifth Amendment shall be and become a part of the Indenture
and shall be construed as a part thereof. 
By its signature hereto, the Trustee authorizes the Company to record
executed and acknowledged counterparts of this Fifth Amendment in the Offices
of the County Recorders of Los Angeles and Orange Counties, California.

 12
 

 

 

16.          SEPARABILITY CLAUSE.

In case any provision in
this Fifth Amendment shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions, and of the other
provisions of the Indenture, shall not in any way be affected or impaired
thereby.

17.          GOVERNING LAW.

THIS FIFTH AMENDMENT SHALL BE
CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF
CALIFORNIA.

IN
WITNESS WHEREOF,
the parties hereto have caused this Fifth Amendment and Supplement to Indenture
of Mortgage and Deed of Trust Dated October 1, 1986, to be duly executed, with
the Company’s corporate seal to be hereunto affixed and attested, all as of the
day and year first above written.

	
  

  	
   

  	
  SUBURBAN WATER SYSTEMS,

  
	
   

  	
   

  	
  Mortgagor

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Michael O. Quinn

  	
   

  
	
   

  	
   

  	
   

  	
  Michael O. Quinn

  
	
   

  	
   

  	
   

  	
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ John A. Brettl

  	
   

  
	
   

  	
   

  	
   

  	
  John A. Brettl

  
	
   

  	
   

  	
   

  	
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  U.S. BANK NATIONAL ASSOCIATION,

  
	
   

  	
   

  	
  As Trustee,

  
	
   

  	
   

  	
  Mortgagee

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By

  	
  /s/ Julia Hommel

  	
   

  
	
   

  	
   

  	
   

  	
  Authorized Officer

  

 

 13Exhibit
10.17.1.1

FIRST
AMENDMENT TO

MASTER LOAN AGREEMENT

THIS FIRST AMENDMENT TO MASTER LOAN AGREEMENT (this
“Amendment”) is entered into as of November 6, 2006, between MONARCH UTILITIES I L.P., a Texas limited partnership (the “Company”),
and CoBANK, ACB,  a federally chartered instrumentality of the
United States (“CoBank”).

BACKGROUND

CoBank
and the Company are parties to an Amended and Restated Master Loan Agreement
dated as of September 12, 2005 (the “MLA”). The parties now desire to amend the
MLA.

NOW, THEREFORE, for good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:

SECTION 1.         Definitions.  All capitalized terms used
in this Amendment and not otherwise defined herein shall have the meanings
given to those terms in the MLA.

SECTION 2.         Amendments.

(A)          Debt.
Section 6.02 of the MLA is hereby amended to add the
following sentence at the end thereof:  “For
purposes hereof, accounts payable to ECO Resources, Inc. for services rendered
to the Company in the ordinary course of the Company’s business and which are
paid by the Company on a regular basis (“ECO Accounts”) shall be considered to
be accounts payable and not debt.

(B)          Payments
of Debt to Southwest. Section 6.08(B) is hereby amended and
restated to read as follows: “(B) make any payments on any debt owing to
Southwest or any subsidiary of Southwest.”

(C)          Financial
Covenants.  Article 7
of the MLA is hereby amended and restated in its entirety to read as follows:

Unless otherwise agreed
to in writing by CoBank, while this Agreement is in effect:

SECTION
7.01.          Debt Service Coverage
Ratio. The Company and its consolidated Subsidiaries shall
have for each fiscal year of the Company, a Debt Service Coverage Ratio of not
less than 1.20 to 1:00.

SECTION
7.02.          Total Debt to EBITDA Ratio.
The Company and its consolidated Subsidiaries shall have a
ratio of Total Debt at the end of each fiscal year of the Company to EBITDA for
each fiscal year of the Company of not greater than 10 to 1.

SECTION
7.03.          Total Debt to
Capitalization Ratio.  The Company and its consolidated Subsidiaries
shall have at the end of each fiscal quarter of the Company, a ratio of Total
Debt to Total Capitalization of not more than .65 to 1.00.

 

SECTION
7.04.          Fiscal Year. The
Company will not change its fiscal year.

(B)          Definitions.

(1)           Debt
Service Coverage Ratio. The definition of “Debt Service
Coverage Ratio” is hereby amended to add the following sentence at the end
thereof: “Notwithstanding the foregoing: (1) in calculating net income,
management fees shall be excluded as long as such fees are not paid by the
Company; and (2) ECO Accounts shall not be considered to be Long-Term Debt.”

(2)          
EBITDA.  The definition
of “EBITDA” is hereby amended to add the following sentence at the end thereof:
“Notwithstanding the foregoing, in calculating EBITDA management fees shall be
excluded from operating expenses as long as such fees are not paid by the
Company.”

(3)           ECO
Accounts. There is hereby added in alphabetical order, a
definition of ECO Accounts reading as follows: “ECO Accounts shall have the
meaning set forth in Section 6.02 of the Agreement.

(4)           Total
Debt. The definition of “Total Debt” is hereby amended to add
the following sentence at the end thereof: “In calculating Total Debt: (1) all
long-term debt and other loans and advances from Southwest (other than loans
and advances for construction) shall be included; and (2) ECO Accounts shall be
excluded.”

SECTION 3.         Representations and Warranties.  The Company represents and warrants that: (A)
no consent, permission, authorization, order or license of any governmental
authority or of any party to any agreement to which the Company is a party or
by which it or any of its property may be bound or affected, is necessary in
connection with the execution, delivery, performance or enforcement of this
Amendment; (B) the Company is in compliance with all of the terms of the Loan
Documents and no Default or Event of Default exists; and (C) this Amendment has
been duly authorized, executed and delivered by the Company, and creates legal,
valid, and binding obligations of the Company which are enforceable in
accordance with their terms, except to the extent that enforceability may be
limited by applicable bankruptcy, insolvency or similar Laws affecting the
rights of creditors generally.

SECTION 4.         Confirmation.  Except as amended hereby, the
MLA shall remain in full force and effect as written.

IN WITNESS WHEREOF, the parties
have caused this Amendment to be executed by their duly authorized officers as
of the date shown above.

 

	
  CoBANK, ACB

  	
   

  	
  MONARCH UTILITIES I L.P.

  
	
   

  	
   

  	
  a Texas limited
  partnership

  
	
   

  	
   

  	
   

  	
  By: Texas Water
  Services Group, LLC

  
	
   

  	
   

  	
   

  	
  a Texas limited
  liability company

  
	
   

  	
   

  	
   

  	
  Its: General Partner

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Title:

  	
   

  	
   

  	
  Title:

  	
   

  

 

 

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