Document:

EX-4.22

 

Exhibit 4.22

AGREEMENT NO. DWSRF 200103-C

PROJECT LOAN AGREEMENT

BETWEEN THE STATE OF CONNECTICUT AND

UNIONVILLE WATER COMPANY

UNDER THE DRINKING WATER STATE REVOLVING FUND

(DWSRF) PROGRAM

     THIS AGREEMENT, made and concluded at Hartford, Connecticut, this 19th
day of April, 2004 by and between the State of Connecticut (the
“State”), acting herein by and through the Commissioner of the Department of
Environmental Protection (“DEP”) and the Commissioner of the Department of
Public Health (“DPH”) and Unionville Water Company (the “Recipient”), a private
corporation duly organized and validly existing under the laws of the State of
Connecticut, and constituting an “Eligible Public Water System” (as defined
herein),

WITNESSETH, THAT

     WHEREAS, Sections 22a-475 to 483, inclusive of the Connecticut General
Statutes, as amended (the “Act”) provide that the State may make loans to
municipalities or Eligible Public Water Systems to finance the planning,
design, development, construction, repair, extension, improvement, remodeling,
alteration, rehabilitation, reconstruction or acquisition of “Public Water
Systems” (as defined below);

     WHEREAS, the Recipient has applied for a Project Loan from the State to
finance the design and planning phase and/or the development, construction,
repair, extension, improvement, remodeling, alteration, rehabilitation,
reconstruction or acquisition of the Public Water System.

     NOW THEREFORE, KNOW YE THAT:

     THE STATE AND THE RECIPIENT MUTUALLY AGREE:

Section I. Definitions

     Section 1.1. For the purposes of this Agreement, the following words and
terms shall have the respective meanings set forth as follows:

     “Account” means the account established by the Recipient in the Tax Exempt
Bond Fund as required by Section 4.4 hereof.

     “Advance” means each disbursement of Project Loan proceeds as set forth in
Section 4.4 hereof.

 

 

     “Audit” means an accounting and certification of all Eligible Project
Costs incurred in accordance with the approved plans and specifications
pursuant to Section 7.6 of this Agreement.

     “Bonds” means any obligation issued by the State, the proceeds of which
are used to fund the Project Loan from the State to the Recipient.

     “Clean Water Fund” means the fund created under Section 22a-477 of the
Act.

     “Code” means the Internal Revenue Code of 1986, as amended.

     “The Commissioner of DEP” means the Commissioner of The Department of
Environmental Protection of the State.

     “The Commissioner of DPH” means the Commissioner of the Department of
Public Health of the State.

     “Continuing Disclosure Agreement” means a Continuing Disclosure Agreement
from the Recipient, entered into in connection with the issuance of the Bonds,
relating to the Recipient’s obligations under the Rule, if required to be
delivered by the State pursuant to Section 7.11 hereof, substantially in the
form attached hereto as Exhibit I.

     “Debt Service Reserve Fund” means the account held by State Street Bank
and Trust Company, as agent of the State, required to be funded by the
Recipient in accordance with Section 6.9 hereof.

     “DWSRF” means the Drinking Water Federal Revolving Loan Account created as
an account in the Clean Water Fund of the State pursuant to the Act.

     “DPUC” means the Department of Public Utility Control of the State.

     “Eligible Loan Amount” means Eligible Project Costs.

     “Eligible Project Costs” means the total costs of the Project determined
by the Commissioner of DEP and the Commissioner of DPH to be necessary and
reasonable, minus Funds From Other Sources. The Eligible Project Costs shall
include the payment or reimbursement of the costs of all labor, materials,
machinery and equipment, lands, property rights and easements, interest on
Interim Funding Obligations, Project Loan Obligations and bond anticipation
notes, including the costs of issuance thereof, plans and specifications,
surveys or estimates of costs and revenues, engineering and legal services,
auditing and administrative expenses, and all other expenses approved by the
Commissioner of DEP and the Commissioner of DPH, which are incident to all or
part of the Project. Eligible Project Costs do not include the payment or
reimbursement of the costs of : (1) purchase of lands, property rights and
easements to the extent that such purchase(s) are not integral to the Project
and are not otherwise consistent with the

Page 2 of 26

 

objectives of the Federal Act; (2) any labor associated with monitoring,
operation and maintenance; and (3) any expense that is not eligible for funding
under the Federal Act.

     “Eligible Public Water System” means a water company, as defined in
Connecticut General Statutes Section 25-32a, provided such water company serves
at least fifteen service connections used by year-round residents or regularly
serves at least twenty-five year round residents. An eligible public water
system also includes nonprofit noncommunity water systems (as such term is
defined under federal law) and to the extent permitted by federal law,
recipients of assistance for projects that will result in the creation of a
community water system (as such term is defined under federal law).

     “Event of Default” means an event of default specified in Section 9.1 of
this Agreement.

     “Federal Act” means the Federal Safe Drinking Water Act, as amended.

     “Funds From Other Sources” means amounts contributed by the Recipient from
any source whatsoever other than the DWSRF for the purpose of paying the
Recipient’s share of Total Project Costs. For purposes of this definition,
“paying” shall mean expenditures by the Recipient for the purchase of goods,
materials and services utilized in planning, designing and constructing the
Project, and specifically excludes any repayments made pursuant to a Project
Loan or a Project Loan Obligation.

     “Interim Funding Obligation” means a note or other obligation delivered by
the Recipient in anticipation of a Project Loan Obligation in substantially the
form as Exhibit II to this Agreement.

     “Program Income” means any investment income accrued on any Advance of the
Project Loan during the period it is deposited in the Recipient’s Account
established within the Tax Exempt Bond Fund.

     “Project” means the planning, design, development, construction, repair,
extension, improvement, remodeling, alteration, rehabilitation, reconstruction
or acquisition of the Public Water System by the Recipient as described in
Section 2.1 of this Agreement.

     “Project Loan” means the loan in the amount set forth in Section 2.2 of
this Agreement from the DWSRF of the State made to the Recipient pursuant to
Section 4.1 of this Agreement to finance a portion of the Eligible Project
Costs.

     “Project Loan Obligation” means a note or other obligation issued by the
Recipient to evidence the permanent financing of the Project Loan in
substantially the form of Exhibit III to this Agreement.

     “Public Water System” means a system for the provision to the public of
water for human consumption through pipes or other constructed conveyances,
serving at least fifteen service connections or twenty-five or more persons
year round and nonprofit noncommunity water systems and otherwise as defined
for purposes of the Federal Act, as amended or superseded.

Page 3 of 26

 

     “Rule” means Rule 15c2-12 promulgated by the Securities and Exchange
Commission pursuant to the Securities Exchange Act of 1934, as amended.

     “Scheduled Completion Date” means May 15, 2003 or such earlier date should
the Project be completed sooner than anticipated or such later date as the
Commissioner of DEP and the Commissioner of DPH may otherwise determine,
provided however, in no event shall such date be later than the date of
completion of the Project.

     “Security Agreement” means a security agreement, if required by and as
described in this Agreement, from the Recipient to the State securing the
Recipient’s obligations under this Agreement, the Interim Funding Obligation
and the Project Loan Obligation. For the purposes of this Agreement, the term
“Security Agreement” means that certain Collateral Assignment of Water Service
Charges and Right to Receive Water Service Expense Assessments and Security
Agreement, dated as of the June 3, 2004, between the State and the Recipient.

     “Tax Exempt Bond Fund” means the Tax Exempt Proceeds Fund Inc., created
pursuant to Connecticut General Statutes Section 3-24a, as amended, currently
managed by Reich & Tang L.P. 600 Fifth Avenue, New York, NY 10020, and
administered through the Office of the Treasurer of the State. As set forth in
Section 4.4 hereof, each Recipient must have an Account within the Tax Exempt
Bond Fund to receive funding from the DWSRF.

     “Total Project Costs” means the total costs paid or incurred by the
Recipient for the Project, including but not limited to Eligible Project Costs.

Section II. The Project

     Section 2.1. Project Description. The Project, the water main
interconnection with MDC, shall consist of the installation of approximately
7,800 feet of water main, meter pit and appurtenances from the terminus of the
MDC system at Farmington Avenue to Unionville Water Company’s water system at
Colton Street, Farmington.

     Section 2.2 Costs of Project. The amount of the estimated Total Project
Costs and Eligible Project Costs and sources of payment for such costs are set
forth below:

	 	 	 	 	 
	Total Project Costs:
	 	$	1,850,000.00	 
	Less Funds From Other Sources:
	 	$	50,000.00	 
	Eligible Project Costs:
	 	$	1,800,000.00	 
	Project Loan:
	 	$	1,800,000.00	 

Page 4 of 26

 

(See attached Project Budget, attached as Exhibit IV hereto, for complete
breakdown of estimated Total Project Costs.)

Section III. [RESERVED]

Section IV. The Loan

     Section 4.1. The Loan Commitment. Subject to the terms and conditions of
this Agreement, the State agrees to lend to the Recipient, and the Recipient
agrees to borrow from the State, an amount not to exceed the Project Loan
amount as set forth in Section 2.2 hereof. The amount of the Project Loan shall
equal the Eligible Project Costs. The Recipient’s obligation to repay the
Project Loan shall be a general obligation of the Recipient issued on a parity
basis with any outstanding senior indebtedness of the Recipient, except as
otherwise provided in this Agreement. The Recipient shall provide as Exhibit V
hereto a list of any outstanding senior indebtedness of the Recipient including
outstanding balances, if any, which would take priority over the Recipient’s
obligation to repay the Project Loan to the State. The Recipient shall issue a
note or other obligation evidencing its obligation to repay the Project Loan to
the State in the form specified in Exhibit II and /or Exhibit III hereto. The
State’s obligation to make the Project Loan shall terminate 30 days from the
date of this Agreement, unless the conditions precedent to funding the Project
Loan set forth in Section 6.1 of this Agreement are satisfied by that date.

     Section 4.2. Increase in Loan Commitment.

     (a) Subject to the terms and conditions of this Agreement and the approval
of the State Bond Commission and to the extent permitted by federal law, the
State shall increase the amount of the Project Loan to the Recipient upon
written evidence from the Recipient to the State that the actual amount of
Eligible Project Costs exceeds the estimated Eligible Project Costs set forth
in Section 2.2 of this Agreement. The revised amount of the Project Loan shall
be calculated in the same manner as provided in Sections 2.2 and 4.1 hereof.

     (b) Upon the approval of the State to increase the amount of the Project
Loan pursuant to this section, Section 2.2 of this Agreement shall be amended
in writing signed by the Commissioner of DEP and the Commissioner of DPH and
the Recipient to reflect such an increase in the Project Loan.

     Section 4.3. The Interim Funding Obligations and Project Loan.

     (a) The Recipient will execute and deliver one or more Project Loan
Obligations to evidence its obligation to repay the Project Loan, in the form
specified in Section 6.1 hereof. In anticipation of the issuance of any
Project Loan Obligation, the Recipient will execute and deliver one or more
Interim Funding Obligations, in the form specified in Section 6.1 hereof, under
which the Recipient may draw up to the amount of the Project Loan as set forth
in Section 2.2 of this Agreement. Such draws shall be made in accordance with
Section 4.4 of this Agreement. Any increase in the amount of the Project Loan
as provided in Sections 4.1 and 4.2(a) of this Agreement shall be evidenced by
the execution and delivery by the Recipient of an additional or amended

Page 5 of 26

 

Interim Funding Obligation or Project Loan Obligation evidencing such increase.
Each Interim Funding Obligation shall mature no later than six months
following the Scheduled Completion Date, shall bear interest at the rate of
3.56%     per annum on the unpaid principal balance of each Project Loan
Advance from the date of each such Project Loan Advance, shall be payable as to
principal and interest on maturity, shall be dated and shall contain such terms
and conditions as are required by law. Any Interim Funding Obligation may be
renewed when due by the issuance of an Interim Funding Obligation in an amount
sufficient to refund the principal due on the prior Interim Funding Obligation
and to provide that the unpaid interest on all prior Project Loan Advances
shall continue to accrue from the date of each such prior Project Loan Advance.

     (b) Within six months of the Scheduled Completion Date, the Recipient will
execute and deliver a Project Loan Obligation which shall be dated no later
than the date of such delivery. The amount of the Project Loan Obligation
shall not be less than the total of all Project Loan Advances made by the
Scheduled Completion Date and accrued interest thereon, minus any amounts
repaid to the State. The Project Loan Obligation shall bear interest at the
rate of 3.56% per annum on the unpaid principal balance and shall be payable as
to principal and interest as provided in Section 4.5(a) hereof. The execution
and delivery of the Project Loan Obligation will constitute a refunding of the
Interim Funding Obligation and accrued interest thereon and the Project Loan
Obligation shall be issued in an amount which does not exceed the Project Loan
as set forth in Sections 2.2 and 4.1 hereof. Subsequent to the issuance and
delivery of the Project Loan Obligation, the Recipient may issue and refund
additional Interim Funding Obligations under which it may draw any undisbursed
Project Loan amounts in accordance with Section 4.4 and 7.6 of this Agreement.
Any such Interim Funding Obligation may be refunded, and any increase in the
Project Loan may be funded, by the issuance and delivery of a subsequent
Project Loan Obligation.

     (c) Interest on any Interim Funding Obligation and the Project Loan
Obligation shall be computed on the basis of a year of 360 days and twelve
30-day months.

     Section 4.4. Disbursement of Project Loan Proceeds. Prior to any
disbursements, the Recipient must establish an Account with the Tax Exempt Bond
Fund. The Account is the sole instrument by which the Recipient will receive
its Project Loan proceeds from the State. Proceeds of the Project Loan shall
be disbursed as an Advance and wired by the State to the Account upon the
written request thereof, in substantially the form as Exhibit VI attached
hereto and made a part hereof, from the Recipient to DEP on behalf of the State
accompanied by evidence that such amounts have been incurred by or on behalf of
the Recipient for the payment of Total Project Costs. Each such request from
the Recipient shall indicate (a) the total amount of the costs incurred for the
Project which have not been included in any prior Advance request and, if
applicable, with evidence that such costs have been paid to the appropriate
third parties, (b) the total amount of such costs which are Eligible Project
Costs, and (c) the amount of the Project Loan Advance. Provided the Recipient
submits such request and evidence on or before noon of the second business day
of the month, the State agrees that it shall wire payment of the Project Loan
Advance up to the amount determined by the Commissioner of DPH and the
Commissioner of DEP to be an Eligible Project Cost, to the Account by the
thirteenth business day of such month. Upon receipt of the Project Loan
Advance up to the amount determined by the Commissioner of DPH and the
Commissioner of DEP to be an Eligible Project Cost, if such costs have not
already been paid by the Recipient, the

Page 6 of 26

 

Recipient shall immediately disburse such Advance to the appropriate third
party and shall present the State with evidence of such payment by the end of
the next business day. Each time a deposit is made to the Account, the
Recipient will receive a deposit notice from the Tax Exempt Bond Fund
evidencing the Account and the amount of the deposit. As soon as feasible
following the disbursement of each Advance, the State shall send to the
Recipient a spreadsheet evidencing as of the date of each Advance, the date and
amount of each Project Loan Advance, the date and amount of principal repaid by
the Recipient on all Project Loan Advances, the principal balance remaining
unpaid by the Recipient on all Project Loan Advances, and the interest accrued
on all Project Loan Advances. Such spreadsheet shall be shared with DPH on a
regular basis and will constitute the endorsement to Schedule 1 of the Interim
Funding Obligation.

     Section 4.5. Required Repayment of Obligations.

     (a) Except as otherwise provided herein and in the Act with respect to the
Interim Funding Obligation, the Recipient shall repay each Project Loan
Obligation (i) in monthly installments commencing not later than one month
after the Scheduled Completion Date, or (ii) in one single installment
representing 1/20 of total principal, not later than one year from the
Scheduled Completion Date and monthly installments thereafter, provided,
however, the last installment of principal on any Project Loan Obligation shall
be payable not later than twenty (20) years from the Scheduled Completion Date.
Interest on each Project Loan Obligation shall be paid in arrears on each
principal repayment date. Monthly installments of principal may be
substantially equal or may be in amounts which substantially equalize the
aggregate amount of principal and interest due on each monthly installment due
date, except that on the first repayment date all accrued interest shall be
paid.

     (b) If any Audit required pursuant to Section 7.6 hereof reveals that the
actual Eligible Project Costs are less than the amount set forth in Section
2.2, the Recipient shall, as soon as practicable, but not less than 90 days
after the State notifies the Recipient in writing of the results of the Audit,
repay the difference between the Project Loan received and the Project Loan it
would have received if the audited Eligible Project Cost figure had been used
to calculate the Project Loan. Any such repayment shall be applied first to
reduce the outstanding amount of any Interim Funding Obligations and second to
repayment of any Project Loan Obligation in the manner described in Section 4.6
hereof.

     Section 4.6. Optional Prepayment of Principal.

     (a) The Recipient may, at any time, and from time to time, prepay any
Interim Funding Obligation in whole or in part in any amount, together with
accrued interest to the date of such prepayment on the principal amount
prepaid. Prepayments shall be applied against Project Loan Advances which have
been outstanding the longest.

     (b) The Recipient may, at any time, and from time to time, prepay any
Project Loan Obligation in whole or in part, together with accrued interest to
the date of such prepayment on the amount prepaid. Prepayments shall be
applied to the principal of the Project Loan Obligation in the

Page 7 of 26

 

inverse order of maturity of the installments of principal due thereon or in
such other order as may be acceptable to the Recipient and the State.

     Section 4.7. Method of Payments. All payments of principal and interest
on any Interim Funding Obligation or any Project Loan Obligation shall be made
by the Recipient by check or draft, or by wire transfer, with Agreement No.
DWSRF 200103-C noted thereon payable to the Treasurer, State of Connecticut at:
State of Connecticut, Office of the Treasurer, 55 Elm Street, Hartford,
Connecticut 06106, Attn: DWSRF Financial Administrator or to such other place
as the State shall designate in writing to the Recipient.

     Section 4.8. Delivery of Security Agreement. Concurrently with the
delivery of each Interim Funding Obligation and the Project Loan Obligation, if
required pursuant to Section 6.1 hereof, the Recipient will execute and deliver
to the State the Security Agreement in the form specified in Section 6.1 hereof
granting to the State a Security Agreement and security interest on the Project
and/or other assets of the Recipient, as specified in Section 6.1 hereof.
Except as otherwise provided in Section 6.1 hereof, the Security Agreement
shall grant to the State a lien and security interest on the property covered
thereby on a parity basis with the outstanding senior indebtedness identified
on Exhibit V.

     Section 4.9. No Defense or Set-Off. The obligations of the Recipient to
make payments on the Interim Funding Obligations and the Project Loan
Obligation shall be absolute and unconditional without defense or set-off by
reason of any default by the State under this Agreement or under any other
agreement between the Recipient and the State or for any other reason,
including without limitation, destruction of or damage to the Project,
condemnation of the Project, commercial frustration of purpose or any other
dispute with the State or failure of the State to pay the Recipient amounts
which may be due to the Recipient other than under this Agreement. It is the
intention of the parties hereto that the payments required hereunder will be
paid in full when due without any delay or diminution whatsoever.

Section V. Representations and Warranties

     The Recipient hereby makes the following representations and warranties to
the State as of the date hereof, which representations and warranties will
survive the delivery of the Interim Funding Obligations and the Project Loan
Obligation and the making of the Project Loan.

     Section 5.1. Existence and Power. The Recipient is, and, except as
provided in Section 7.4 hereof, will continue to be, a corporation duly
organized and validly existing under the laws of the State of Connecticut and
qualified to do business in the State, and has the corporate power and
authority to execute and deliver this Agreement and, if applicable, to execute
and deliver the Interim Funding Obligation, the Project Loan Obligation, and
the Security Agreement and to perform its obligations hereunder and thereunder.

     Section 5.2. Authority; Regulatory Approvals. The execution and delivery
by the Recipient of this Agreement and, if applicable, the Interim Funding
Obligation, the Project Loan Obligation,

Page 8 of 26

 

and the Security Agreement have been duly authorized by the Recipient in
conformity with all applicable laws, its articles of incorporation and bylaws,
and all corporate proceedings or authorizations for the execution and delivery
of this Agreement and, if applicable, the Interim Funding Obligation, the
Project Loan Obligation and the Security Agreement remain in full force and
effect and have not been modified or otherwise revised which would negate the
Recipient’s ability to conform with this Agreement and to perform any of its
obligations under this Agreement, the Interim Funding Obligation, the Project
Loan Obligation, and the Security Agreement. The Recipient has received, or
will receive prior to any Advance hereunder, all required federal and/or State
regulatory approvals and consents necessary for the Recipient to enter into
and, deliver and perform this Agreement and, if applicable, the Interim Funding
Obligation, the Project Loan Obligation and the Security Agreement, including
appropriate approvals or pending and/or actual orders from DPH and/or DPUC, if
required.

     Section 5.3. Validity. This Agreement is, and, if applicable, each of
the Interim Funding Obligation, the Project Loan Obligation and the Security
Agreement, upon the execution and delivery hereof and thereof and the
disbursement of an Advance of the Project Loan, will be, the legal, valid, and
binding obligation of the Recipient enforceable against it in accordance with
their respective terms.

     Section 5.4. Litigation. No litigation of any nature is now pending or,
to the best of the Recipient’s knowledge, threatened which would restrain or
enjoin the execution or delivery of this Agreement and, if applicable, the
Interim Funding Obligation, the Project Loan Obligation, and the Security
Agreement, the payment of interest or principal hereunder or thereunder, the
collection of rates and charges or other amounts to pay the same or in any
manner questioning the Recipient’s ability to undertake the Project or its
authority for the execution or delivery of, and performance of its obligations
under, this Agreement and, if applicable, the Interim Funding Obligation, the
Project Loan Obligation and the Security Agreement or affecting the validity
hereof and thereof.

     Section 5.5. Events of Default. No Event of Default specified in Section
9.1 hereof, and no event which with the lapse of time or the giving of notice
or both would become an Event of Default, has occurred and is continuing. The
execution, delivery and performance by the Recipient of this Agreement, the
undertaking by the Recipient of the Project and the execution and delivery by
the Recipient of the Interim Funding Obligation, the Project Loan Obligation
and the Security Agreement will not result in an event of default, or an event
which with the lapse of time or the giving of notice or both would become such
an event of default, under any contract, agreement, security agreement or other
obligation to which the Recipient is a party or which affects any material
properties or assets of the Recipient.

     Section 5.6. Expenditure of Project Loan by Recipient. The Recipient
reasonably expects to complete the Project on or prior to the Scheduled
Completion Date and agrees that all monies received by the Recipient from the
Project Loan will be expended to pay the costs of the Project.

     Section 5.7. (a) Priority of Security Agreement. If applicable, and
except as otherwise provided herein, the lien and security interest granted
under the Security Agreement shall be a lien

Page 9 of 26

 

on the property subject thereto on a parity basis with the outstanding senior
indebtedness identified on Exhibit V.

     Section 5.8 The Provisions of Financial Information. Complete and
accurate copies of the Recipient’s most recent financial statements as of the
date of this Agreement have been delivered to the State. All financial
statements were prepared in all material respects in conformity with generally
accepted accounting principles, except as otherwise noted therein, and fairly
represent in all material respects the respective consolidated financial
position and the consolidated results of operations and cash flows for each of
the periods covered thereby of the Recipient at the respective dates thereof.
Since the date of the most recent financial statement, both audited and
unaudited, there has occurred no event with respect to the Recipient which has
resulted, or is reasonably likely to result, in a material adverse effect upon
the financial condition, operations or assets of the Recipient. The Recipient
agrees to provide financial statements at least in substantially the same form
each fiscal year, as described in Section 7.13, until the loans under this
Agreement are repaid in full.

Section VI. Conditions Precedent

     The obligation of the State to make the Project Loan is subject to the
following conditions precedent.

     Section 6.1. Conditions Precedent to the Obligations of the State. Prior
to making the Project Loan, the Recipient shall deliver to the State, if
applicable, the following:

     (a) plans and specifications prepared for the Project (if the
Project is a construction project), approved by the Commissioner of DPH,
and with the concurrence of DPUC, and with approval of the Commissioner
of DEP for consistency with financial requirements of the Connecticut
General Statues and regulations and resolutions thereto;

     (b) written assurance, satisfactory to the Commissioner of DEP and
the Commissioner of DPH, that the Recipient will undertake and complete
the Project with due diligence;

     (c) written assurance satisfactory to the Commissioner of DEP and
the Commissioner of DPH that the Recipient will own the Project and will
operate and maintain the Project for a period and in a manner
satisfactory to DEP and DPH (if the Project is a construction project)
after completion of the Project;

     (d) all applications and other documents and information required by
the Commissioner of DEP, the Commissioner of DPH and DPUC;

     (e) evidence that all Recipients are legally required to complete
their respective portions of such Project (if the Project is to be owned
or maintained by more than one Recipient);

Page 10 of 26

 

     (f) evidence that the Recipient has established the Account required
by Section 4.4 hereof;

     (g) evidence that the Recipient has available to it or has made
arrangements satisfactory to the Commissioner of DEP and the Commissioner
of DPH to obtain any applicable Funds From Other Sources referred to in
Section 2.2 hereof to pay that portion of all Total Project Costs for
which it is legally obligated and which are not met by the Project Loan;

     (h) written assurance to the Commissioner of DEP, the Commissioner
of DPH and DPUC that the Recipient has adequate legal, institutional,
technical, managerial and financial capability to ensure compliance with
the requirements of applicable federal law, except to the extent
otherwise permitted by federal law;

     (i) written assurance that the Recipient will comply with the Audit
requirements of Section 7.6 of this Agreement;

     (j) A Security Agreement, in a form satisfactory to the State,
covering all water service charges, fees, fines and other assessments
levied against the members of the Recipient and such other income,
accounts and/or collateral satisfactory to the State which shall be on a
parity with the senior obligation identified on Exhibit V.

     (k) evidence that the Recipient is in compliance with the
requirements of the Act, the Federal Act and all other applicable State
and federal laws and regulations pertaining to the Project, including,
but not limited to, the outstanding submittals identified in Exhibit VII
to this Agreement; and

     (l) establishment of the account for the Debt Service Reserve Fund
as required by Section 6.9 hereof.

     The execution and delivery of this Agreement by the Recipient to the State
constitute the written assurances required by clauses (b), (c), (h) and (i)
above. The forms of the Interim Funding Obligation and Project Loan Obligation
to be delivered by the Recipient shall be as specified in this Agreement and in
the forms of such Obligations attached hereto as Exhibits II and III.

     Section 6.2. Evidence of Corporate Action. Prior to the making of the
Project Loan, the Recipient shall deliver to the State evidence of all
corporate action taken by the Recipient to authorize the execution and delivery
of this Agreement and, if applicable, the Interim Funding Obligation, the
Project Loan Obligation and the Security Agreement and the borrowing hereunder,
certified by an authorized officer of the Recipient, and such other papers and
documents as the Commissioner of DEP and the Commissioner of DPH may reasonably
request, including evidence that the Recipient has received all required
regulatory approvals.

Page 11 of 26

 

     Section 6.3. Opinion of Counsel. Prior to the disbursement of the
initial Project Loan Advance pursuant to each Interim Funding Obligation and
prior to the delivery of any Project Loan Obligation, the Recipient shall
deliver to the State a written opinion from counsel for the Recipient,
satisfactory to the State, substantially in the form of Exhibit VIII hereto, to
the effect that (a) the execution, delivery and performance by the Recipient of
this Agreement and, as applicable, the Interim Funding Obligation, the Project
Loan Obligation and the Security Agreement have been duly authorized by all
necessary corporate action, (b) this Agreement and, if applicable, the Security
Agreement constitute a legal, valid and binding obligation of the Recipient
enforceable against it in accordance with their respective terms, (c) as
applicable, the Interim Funding Obligation and the Project Loan Obligation,
when executed and delivered and upon disbursement of an Advance of the Project
Loan, will constitute a legal, valid and binding obligation of the Recipient
enforceable against it in accordance with their respective terms, and (d) the
Recipient has received all required regulatory approvals.

     Section 6.4. Reserved

     Section 6.5. Officer’s Certificate. Prior to the delivery of each
Interim Funding Obligation and Project Loan Obligation, the State shall have
received from the Recipient a certificate of a duly authorized officer
confirming the representations set forth herein as if made on the date of such
certificate, substantially in the form of Exhibit IX to this Agreement and each
of such representations shall have been deemed to have been confirmed on the
date of each Advance.

     Section 6.6. No Event of Default. Prior to the delivery of each Interim
Funding Obligation and Project Loan Obligation and the payment of any Advance,
no Event of Default and no event which with the lapse of time or the giving of
notice or both would become such an Event of Default, shall have occurred and
be continuing.

     Section 6.7. Insurance. Prior to making the Project Loan, the Recipient
shall have provided evidence that it has in force such insurance, including,
but not limited to, general liability insurance, property and casualty
insurance, flood insurance, key man insurance, disability insurance, and
builders risk insurance, if applicable, in sufficient amounts to protect its
interests in the Project and otherwise in such amounts and with such coverage
as is customary with companies in the same or similar business and as may be
reasonably satisfactory to the State. The Recipient shall pay when due the
premiums thereon in order to maintain such insurance in full force and effect.
The Recipient will provide written evidence that each policy required to be
maintained by the Recipient hereunder shall provide thirty (30) days’ written
minimum cancellation notice to the State.

     Section 6.8. Compliance with Federal and State Requirements. The
Recipient shall at all times comply with all applicable federal and State laws
and regulations pertaining to the Project. The Recipient agrees to comply with
the regulations adopted pursuant to Section 22a-482 of the Connecticut General
Statutes, as amended, and to comply with all provisions thereof except as may
be waived by the Commissioner of DEP and the Commissioner of DPH.

     Section 6.9 Obligation to Fund Debt Service Reserve Fund. The Recipient
shall be obligated to deposit with U.S. Bank National Association, as agent of
the State, or with another

Page 12 of 26

 

bank or financial institution satisfactory to the State, in an amount of money
equal to the maximum annual debt service obligation scheduled to be due with
respect to the Project Loan in any year subsequent to the year in which the
1/20th principal payment of Section 4.5(a) is due and payable. Such amount
shall be funded from sources other than proceeds of the Project Loan and shall
be held in the Debt Service Reserve Fund for the benefit of the Recipient but
pledged to the State to secure the Recipient’s obligation to pay amounts due
with respect to the Project Loan. The Recipient agrees to pay $4,726.35 on
each debt service payment date to the Debt Service Reserve Fund, until the Debt
Service Reserve Fund contains the maximum annual debt service amount, said
amount constituting a 24 month funding schedule. Failure to make the foregoing
monthly payment to the Debt Service Reserve Fund shall be an Event of Default.
The State shall be entitled to draw amounts from the Debt Service Reserve Fund,
any time and from time to time, in the event that an Event of Default under
Section 9.1 hereof shall have occurred. Such amounts so drawn shall be applied
to pay amounts due and unpaid under the Project Loan from the Recipient
(including amounts then due and payable pursuant to exercise of remedies under
Section 9.2 hereof). Prior to the occurrence of an Event of Default, amounts
on deposit in the Debt Service Reserve Fund may be invested for the benefit of
the Recipient in such obligations and securities as shall be determined by the
Recipient and agreed to by the State. The Recipient shall be obligated to
maintain the amount on deposit in the Debt Service Reserve Fund at the required
level and shall be obligated to promptly restore any amount withdrawn by the
State or to restore any investment losses accrued to the Debt Service Reserve
Fund. Amounts held in the Debt Service Reserve Fund in excess of the amount
required hereunder shall, at the direction of the Recipient, (i) be applied to
pay amounts then due and payable under the Interim Funding Obligation or the
Project Loan Obligation or (ii) not more than once every six months, be
disbursed to the Recipient. If at any time the amount on deposit in the Debt
Service Reserve Fund is equal to the amount then due and payable with respect
to the Project Loan, the Recipient or the State may direct that such amount
shall be applied to prepay the Project Loan in full. The Recipient may provide
a surety bond or other security instrument in lieu of a cash deposit, from a
provider and upon terms satisfactory to the State, in the amount required to be
on deposit in the Debt Service Reserve Fund.

Section VII. Agreements of The Recipient

     Section 7.1. Construction. The Recipient will undertake and complete the
Project in accordance with the final plans and specifications developed and
approved by the Commissioner of DEP and the Commissioner of DPH, no later than
the Scheduled Completion Date, unless such date is otherwise extended by the
Commissioner of DEP and the Commissioner of DPH.

     Section 7.2. Inspection of Project By State. The Recipient shall allow
the State, the DEP and the DPH and any of their officers, agents or employees
to come onto its property from time to time for the purpose of monitoring
progress of the Project.

     Section 7.3. Maintenance of Project. Subject to section 7.4 hereof, the
Recipient will operate and maintain the Project properly after completion of
construction, will own such Project and will comply with all existing statutes,
rules and regulations applicable to the operation of the Project for the design
life of the Project. Notwithstanding Section 10.5 of this Agreement, the

Page 13 of 26

 

covenant contained in this Section 7.3 shall survive the making of the Project
Loan and payment in full of the Interim Funding Obligation and the Project Loan
Obligation for the design life of the Project.

     Section 7.4. Maintenance of Corporate Existence. Until payment in full
of the Interim Funding Obligation and Project Loan Obligation, the Recipient
shall maintain its existence as a corporation validly existing and duly
qualified to do business under the laws of the State; provided, however, that
the Recipient may dissolve or otherwise dispose of all or substantially all of
its assets and may consolidate with or merge into another corporation or entity
or permit another corporation or entity to consolidate or merge into it, so
long as: (i) the surviving, resulting or transferee corporation or entity, if
other than the Recipient, is qualified to do business under the laws of the
State and assumes all of the Recipient’s obligations under this Agreement and,
as applicable, the Interim Funding Obligation, the Project Loan Obligation and
the Security Agreement; (ii) all applicable regulatory approvals of DPH and
DPUC, as applicable, have been obtained; (iii) the Commissioner of DEP and the
Commissioner of DPH have consented to such transaction; and (iv) the net worth
of such surviving corporation or entity is not less than the net worth of the
Recipient immediately prior to such transaction.

     Section 7.5. Use of Proceeds.

     (a) The Recipient will use the proceeds of the Project Loan solely to pay,
or reimburse itself for paying, Eligible Project Costs. The Recipient shall
promptly disburse the proceeds of such Project Loan after it receives notice
that such proceeds have been deposited in the Recipient’s Account.

     (b) The amount of any Program Income accumulated in the Account by the
Recipient shall be treated as DWSRF money which the Recipient shall pay to the
State upon demand and which may be used by the State at its own discretion to
fund any DWSRF project.

     Section 7.6. Completion of Project; Audit.

     (a) Prior to the Scheduled Completion Date and the issuance of a Project
Loan Obligation, the Recipient shall engage an independent public accountant to
prepare and deliver to the State an Audit and statement of the Project. The
Audit shall be undertaken at the expense of the Recipient but may be considered
an Eligible Project Cost, shall be performed in accordance with generally
accepted auditing standards and shall identify any expenditures made by the
Recipient that are not in compliance with terms of this Agreement. The
statement shall describe Eligible Project Costs by category which have not yet
been paid and an estimate of their amounts and their anticipated date of
payment. Such costs shall include any known or anticipated claims, even if the
amount cannot be reasonably ascertained, and a description of each claim, the
possible amounts of each claim, possible payment dates, and the anticipated
means of resolving each claim.

     (b) The Audit shall be submitted to the State no later than 90 days after
the Scheduled Completion Date. Within 60 days after such submission, the State
shall review the Audit and inform the Recipient of the amount of the projected
Project Loan Obligation, and any accrued

Page 14 of 26

 

interest on any outstanding Interim Funding Obligation. This interest, unless
paid by the Recipient from other funds of the Recipient, will be advanced as
part of the Project Loan Obligation. No additional amount so advanced shall
cause the Project Loan to be exceeded. The Project Loan Obligation may be
issued prior to the completion of the Audit in an amount agreed to by the State
and the Recipient.

     (c) Any Eligible Project Costs (i) which can be reasonably estimated, (ii)
which are scheduled for disbursement within one year from the Scheduled
Completion Date and (iii) which have not been advanced to pay costs of the
Project, but will not cause the amount of the Project Loan to be exceeded, may
be included in the Project Loan Obligation, and advanced to the Recipient, upon
such conditions as the State shall impose, and held by the Recipient and
applied as provided in Sections 4.4 and 7.5 hereof, except that the Recipient
shall disburse proceeds from the Account only and promptly after it has
completed a request (similar to a request for an Advance as provided in Section
4.4) and received approval of such request from the State.

     (d) Any Eligible Project Costs which are not funded by the Project Loan
Obligation may be funded by a subsequent Interim Funding Obligation or Project
Loan Obligation, provided that no such Interim Funding Obligation or Project
Loan Obligation or Advance shall cause the aggregate amount of Project Loan
Advances to exceed the Project Loan. The Commissioner of DEP and the
Commissioner of DPH shall establish a new Scheduled Completion Date for the
portion of the Project related to such Eligible Project Costs. Any other
Eligible Project Costs not funded hereunder may be funded under subsection (e)
below.

     (e) Any Eligible Project Costs which would cause the amount of the Project
Loan to be exceeded may be funded through the execution of a new Project Loan
Agreement and the delivery of a new Interim Funding Obligation or a new Project
Loan Obligation, as the case may be, to the extent permitted by federal law and
after approval by the State Bond Commission as provided in Section 4.2, if
required. The Commissioner of DEP and the Commissioner of DPH shall establish
a new Scheduled Completion Date for the portion of the Project related to such
Eligible Project Costs. The State may require that any such subsequent Interim
Funding Obligation be permanently funded by the issuance of a new Project Loan
Obligation issued no later than six months after the new Scheduled Completion
Date.

     (f) Notwithstanding any section of this Agreement to the contrary, the
term of any Project Loan Obligation issued in accordance with subsections (d)
and (e) of Section 7.6 hereof shall not exceed twenty (20) years from the
original Scheduled Completion Date contained in the first Project Loan
Agreement. Repayment of principal and interest on any such Project Loan
Obligation shall commence within one month from the date of issue of the
Project Loan Obligation. In any case where any subsequent Project Loan
Obligation has been issued pursuant to subsections (d) and (e) of this Section
7.6, the Recipient agrees to cause to be prepared and delivered to the State a
supplemental Audit in the same manner as provided in subsections (a) and (b)
above on or before the issuance of such subsequent Project Loan Obligations
and, except as provided in this subsection, all the provisions of subsections
(a), (b), (c), (d), and (e) above shall be followed in connection with the
issuance of any such Project Loan Obligation.

Page 15 of 26

 

     (g) The Recipient further agrees that the auditors of Public Accounts of
the State, appointed pursuant to Section 2-89 of the Connecticut General
Statutes, shall have access to all records and accounts of the Recipient
concerning the Project and that it shall maintain project accounts in
accordance with generally accepted accounting principles. To provide such
access the Recipient agrees that it shall preserve all of its records and
accounts concerning the Project for a period of three (3) years after the Audit
required under Section 7.6 of this Agreement is delivered to the State.

     Section 7.7. Tax Compliance. The Recipient agrees and covenants that it
shall at all times do and perform all acts and things reasonably requested by
the State to ensure that interest paid on the Bonds (if issued on a basis which
permits the exclusion from gross income of interest thereon for purposes of
federal income taxation) shall, for purposes of federal income taxation, be
excludable from the gross income of the recipients thereof under the Code. The
State and the Recipient acknowledge that the Recipient is a private for profit
corporation, which owns and operates the Project and related facilities, and is
engaged in the sale of water. It is not the intent of this section to effect
the Recipient’s status, ownership or operations.

     Section 7.8. Nondiscrimination. PURSUANT TO PROVISIONS OF CONNECTICUT
GENERAL STATUTES SEC. 4a-60 and 4a-60a.

     (a) Every contract to which the State or any political subdivision of the
State other than a municipality is a party shall contain the following
provisions: (1) The contractor agrees and warrants that in the performance of
the contract such contractor will not discriminate or permit discrimination
against any person or group of persons on the grounds of race, color, religious
creed, age, marital status, national origin, ancestry, sex, mental retardation
or physical disability, including, but not limited to, blindness, unless it is
shown by such contractor that such disability prevents performance of the work
involved, in any manner prohibited by the laws of the United States or of the
state of Connecticut. The contractor further agrees to take affirmative action
to insure that applicants with job-related qualifications are employed and that
employees are treated when employed without regard to their race, color,
religious creed, age, marital status, national origin, ancestry, sex, mental
retardation, or physical disability, including, but not limited to, blindness,
unless it is shown by such contractor that such disability prevents performance
of the work involved; (2) the contractor agrees, in all solicitations or
advertisements for employees placed by or on behalf of the contractor, to state
that it is an “affirmative action-equal opportunity employer” in accordance
with regulations adopted by the commission; (3) the contractor agrees to
provide each labor union or representative of workers with which such
contractor has a collective bargaining agreement or other contract or
understanding and each vendor with which such contractor has a contract or
understanding, a notice to be provided by the commission, advising the labor
union or worker’s representative of the contractor’s commitments under this
section, and to post copies of the notice in conspicuous places available to
employees and applicants for employment; (4) the contractor agrees to comply
with each provision of this section and Conn. Gen. Stat. Sections 46a-68e and
46a-68f and with each regulation or relevant order issued by said commission
pursuant to Conn. Gen. Stat. Sections 46a-56, as amended by Section 5 of Public
Act 89-253, 46a-68e and 46a-68f; (5) the contractor agrees to provide the
commission on human rights

Page 16 of 26

 

and opportunities with such information requested by the commission, and permit
access to pertinent books, records and accounts, concerning the employment
practices and procedures of the contractor as relate to the provisions of this
section and section 46a-56. If the contract is a public works contract, the
contractor agrees and warrants that he will make good faith efforts to employ
minority business enterprises as subcontractors and suppliers of materials on
such public works project.

     (b) For the purposes of this section, “minority business enterprise” means
any small contractor or supplier of materials fifty-one per cent or more of the
capital stock, if any, or assets of which is owned by a person or persons: (1)
who are active in the daily affairs of the enterprise, (2) who have the power
to direct the management and policies of the enterprise and (3) who are members
of a minority, as such term is defined in subsection (a) of Conn. Gen. Stat.
Section 32-9n; and “good faith” means that degree of diligence which a
reasonable person would exercise in the performance of legal duties and
obligations. “Good faith efforts” shall include, but not be limited to, those
reasonable initial efforts necessary to comply with statutory or regulatory
requirements and additional or substituted efforts when it is determined that
such initial efforts will not be sufficient to comply with such requirements.

     For purposes of this Section, “Commission” means the Commission on Human
Rights and Opportunities.

     For purposes of this section, “Public works contract” means any agreement
between any individual, firm or corporation and the state or any political
subdivision of the state other than a municipality for construction,
rehabilitation, conversion, extension, demolition or repair of a public
building, highway or other changes or improvements in real property, or which
is financed in whole or in part by the state, including, but not limited to,
matching expenditures, grants, loans, insurance or guarantees.

     (c) Determination of the contractor’s good faith efforts shall include but
shall not be limited to the following factors: The contractor’s employment and
subcontracting policies, patterns and practices; affirmative advertising,
recruitment and training; technical assistance activities and such other
reasonable activities or efforts as the commission may prescribe that are
designed to ensure the participation of minority business enterprises in public
works projects.

     (d) The contractor shall develop and maintain adequate documentation, in a
manner prescribed by the commission, of its good faith efforts.

     (e) The contractor shall include the provisions of subsection (a) of this
section in every subcontract or purchase order entered into in order to fulfill
any obligation of a contract with the State and such provisions shall be
binding on a subcontractor, vendor or manufacturer unless exempted by
regulations or orders of the Commission. The contractor shall take such action
with respect to any such subcontract or purchase order as the Commission may
direct as a means of enforcing such provisions including sanctions for
noncompliance in accordance with Conn. Gen. Stat. Section 46a-56; provided, if
such contractor becomes involved in, or is threatened with, litigation with a
subcontractor or vendor as a result of such direction by the Commission, the

Page 17 of 26

 

contractor may request the state of Connecticut to enter into any such
litigation or negotiation prior thereto to protect the interests of the state
and the state may so enter.

     (f) Every contract to which the State or any political subdivision of the
state other than a municipality is a party shall contain the following
provisions: (1) The contractor agrees and warrants that in the performance of
the contract such contractor will not discriminate or permit discrimination
against any person or group of persons on the grounds of sexual orientation, in
any manner prohibited by the laws of the United States or of the state of
Connecticut, and that employees are treated when employed without regard to
their sexual orientation; (2) the contractor agrees to provide each labor union
or representative of workers with which such contractor has a collective
bargaining agreement or other contract or understanding and each vendor with
which such contractor has a contract or understanding, a notice to be provided
by the commission on human rights and opportunities advising the labor union or
workers’ representative of the contractor’s commitments under this section, and
to post copies of the notice in conspicuous places available to employees and
applicants for employment; (3) the contractor agrees to comply with each
provision of this section and with each regulation or relevant order issued by
the Commission pursuant to Section 46a-56 of the general statutes; (4) the
contractor agrees to provide the commission on human rights and opportunities
with such information requested by the commission, and permit access to
pertinent books, records and accounts, concerning the employment practices and
procedures of the contractor which relate to the provisions of this section and
section 46a-56 of the general statutes.

     (g) The contractor shall include the provisions of section (f) in every
subcontract or purchase order entered into in order to fulfill any obligation
of a contract with the state and such provisions shall be binding on a
subcontractor, vendor or manufacturer unless exempted by regulations or orders
of the commission. The contractor shall take such action with respect to any
such subcontract or purchase order as the commission may direct as a means of
enforcing such provisions including sanctions for noncompliance in accordance
with section 46a-56 of the general statutes; provided, if such contractor
becomes involved in, or is threatened with, litigation with a subcontractor or
vendor as a result of such direction by the commission, the contractor may
request the state of Connecticut to enter into any such litigation or
negotiation prior thereto to protect the interests of the state and the state
may so enter.

     The contractor agrees to comply with the regulations referred to in
sections 4a-60 and 4a-60a of the Connecticut General Statutes as they exist on
the date of this contract and as they may be adopted or amended from time to
time during the term of this contract and any amendments thereto.

     Section 7.9. Executive Orders of the Governor. This contract is subject
to the provisions of Executive Order No. Three of Governor Thomas J. Meskill,
promulgated June 16, 1971 and, as such, this contract may be canceled,
terminated or suspended by the State Labor Commissioner for violation of or
noncompliance with said Executive Order No. Three or any State or federal law
concerning nondiscrimination, notwithstanding that the Labor Commissioner is
not a party to this contract. The parties of this contract, as part of the
consideration hereof, agree that said Executive Order No. Three is incorporated
herein by reference and made a part hereof. The parties agree to abide by said
Executive Order and agree that the State Labor Commissioner shall have
continuing

Page 18 of 26

 

jurisdiction in respect to contract performance in regard to nondiscrimination,
until the contract is completed or terminated prior to completion. The
contractor agrees, as part of the consideration hereof, that this contract is
subject to the Guidelines and Rules issued by the State Labor Commissioner to
implement Executive Order No. Three, and that it will not discriminate in its
employment practices or policies, will file reports as required and will fully
cooperate with the State and the State Labor Commissioner. This contract is
subject to the provisions of Executive Order No. Seventeen of Governor Thomas
J. Meskill promulgated February 15, 1973, and, as such, this contract may be
canceled, terminated, or suspended by the contracting agency or the State Labor
Commissioner for violation of or noncompliance with said Executive Order No.
Seventeen, notwithstanding that the Labor Commissioner is not a party to this
contract. The parties to this contract, as part of the consideration hereof,
agree that Executive Order No. Seventeen is incorporated herein by reference
and made a part hereof. The parties agree to abide by said Executive Order and
agree that the contracting agency and the State Labor Commissioner shall have
joint and several continuing jurisdiction in respect to contract performance in
regard to listing all employment openings with the Connecticut State Employment
Service. This contract is subject to the provisions of Executive Order No.
Sixteen of Governor John G. Rowland promulgated August 4, 1999, and, as such,
this contract may be canceled, terminated or suspended by the State for
violation of or noncompliance with said Executive Order No. Sixteen. The
parties to this contract, as part of the consideration hereof, agree that
Executive Order No. Sixteen is incorporated herein by reference and made a part
hereof and agree that a requirement for compliance with Executive Order No.
Sixteen shall be included in any subcontracts or other compliance that may
result from the contract.

     Section 7.10. Indemnification. To the extent permitted by law, the
Recipient agrees to indemnify and hold the State, its officials, agents and
employees harmless from and against any and all claims, suits, actions, costs,
demands and damages resulting from the performance or non-performance by the
Recipient or any of its officers, agents, or employees, of the Recipient’s
obligations under this Agreement, as it may be amended or supplemented from
time to time. It is further understood that such indemnity shall not be
limited by any insurance coverage herein required.

     Section 7.11. Continuing Disclosure; Official Statement. The Recipient
shall provide or cause to be provided to the State and/or directly to
information repositories such annual financial information, operating data
regarding the Project, audited financial statements and any other financial
information as may be required by the State, in its sole judgment, to comply
with the Rule in connection with the issuance of Bonds. The obligation of the
Recipient pursuant to this Section 7.11 shall include the execution of a
Continuing Disclosure Agreement and/or other certifications related hereto, in
each case when requested by the State based on applicable requirements and
materiality standards under the Rule.

     Further, the Recipient agrees to provide to the State such information
with respect to the Recipient as may be requested by the State for inclusion in
an appendix to the State’s official statement or other offering documents
relating to the offering and sale of Bonds.

Page 19 of 26

 

     Section 7.12. Financial Covenants. The Recipient agrees to comply with
the following financial covenants set forth in Exhibit X, attached hereto and
made a part hereof, for the term of the Project Loan, unless otherwise agreed
by the State, to the extent that the Recipient is capable of so complying under
any applicable regulations or DPUC orders.

     Section 7.13. Reports. The Recipient shall deliver to the State:

     (a) audited annual financial statements of the Recipient, together with
the auditor’s report thereon, within 120 days after the end of each fiscal year
of the Recipient (or within such other period as may be agreed to by the
State);

     (b) unaudited quarterly financial statements of the Recipient, within 60
days after the end of each fiscal quarter of the Recipient (or within such
other period as may be agreed to by the State); and

     (c) together with the financial statements required by subsections (a) and
(b) of this Section 7.13, an officer’s certificate evidencing compliance with
the Financial Covenants referred to in Section 7.12 hereof and stating to the
effect that no Event of Default specified in Section 9.1 hereof, and no event
which with the lapse of time or the giving of notice or both would become an
Event of Default, has occurred or is then continuing.

     (d) copies of any material notice or other material communication received
by the Recipient from any third party in connection with any outstanding senior
indebtedness of the Recipient, promptly after such notice or other
communication is received by the Recipient.

Section VIII. Agreements Of The State

     Section 8.1. Audit and Project Loan. Upon receipt of the Audit and
statement provided for in Section 7.6, the State will review such Audit and
statement and within 60 days notify the Recipient in writing of the following:
(a) the amount of Eligible Project Costs expended for the Project, including
any adjustments to the amount of Eligible Project Costs, if applicable, the
amount of the Project Loan disbursed to the Recipient, and the amount by which
the Project Loan disbursed exceeds or is less than the amount of the Project
Loan which the Recipient was entitled to receive under this Agreement for
Eligible Project Costs; (b) the amount of the projected Project Loan
Obligation, as provided in Subsection 7.6(b); and (c) the amount of estimated
Eligible Project Costs to be incurred upon payment of all estimated Project
costs, including any adjustments to the amount of Eligible Project Costs, if
applicable, and the amount by which the Project Loan exceeds or is less than
the amount of such estimated Eligible Project Costs. If such Audit
demonstrates that the Recipient received disbursements of the Project Loan in
excess of what it was entitled to receive pursuant to this Agreement, the
Recipient shall repay the State such excess amounts pursuant to Section 4.5
hereof. If the Project Loan received is less than the amount the Recipient was
entitled to receive pursuant to this Agreement, the State shall promptly
process a request for an Advance of the unpaid portion of the Project Loan but
not in excess of the Project Loan. If such Audit and statement demonstrate
that the Project Loan is less than the amount of Eligible Project Costs to be

Page 20 of 26

 

incurred upon payment of all estimated Project costs, the State shall as soon
as practicable increase the Project Loan pursuant to Section 4.2 hereof.

Section IX. Defaults

Section 9.1. Events of Default. An event of default shall be deemed to exist
under this Agreement and the Interim Funding Obligation or Project Loan
Obligation upon the occurrence of any of the following events or conditions:

     (a) Default in the payment of the principal of the Interim Funding
Obligation or Project Loan Obligation when the same shall be due and payable;
or

     (b) Default in the payment of the interest on the Interim Funding
Obligation or Project Loan Obligation when the same shall be due and payable;
or

     (c) Failure to make payments required by Section 6.9 when the same shall
be due or payable;

     (d) The failure to restore amounts required to be on deposit in the Debt
Service Reserve Fund within fifteen (15) days of notice from the bank holding
the Debt Service Reserve Fund that the amount on deposit in such fund is less
than the amount required pursuant to Section 6.9 of this Agreement, or

     (e) The occurrence and continuance of an event of default under the
Security Agreement; or

     (f) Failure by the Recipient to observe or perform any covenant contained
in Section 7.4 or 7.12 of this Agreement; or

     (g) Failure by the Recipient to observe or perform any other covenant
contained in this Agreement and the continuance thereof for a period of thirty
(30) days unless the Recipient notifies the State in writing within such thirty
(30) day period that for some reason beyond its control it is unable to observe
or perform such covenant, in which case no event of default shall occur if the
Recipient is proceeding in good faith and with due diligence to correct such
failure, or complete the Audit, as the case may be, but shall occur at the time
the Recipient fails to so proceed; or

     (h) Any representation or warranty made by the Recipient herein, or any
statement, certificate or other data furnished by the Recipient or any of its
agents in connection with the Project proves to be incorrect in any material
respect as of the making or furnishing thereof and the Recipient fails to
correct such failure within thirty (30) days after written notice to the
Recipient by the State; or

     (i) The Recipient shall (1) apply for or consent to the appointment of a
receiver, trustee or liquidator of all or a substantial part of any of its
assets; (2) be unable, or admit in writing its inability to pay debts as they
mature; (3) file or permit the filing of any petition, arrangement,

Page 21 of 26

 

reorganization, or the like under any insolvency or bankruptcy law, or the
adjudication as a bankrupt, or the making of an assignment for the benefit of
creditors or the consenting to any form of arrangement for the satisfaction,
settlement or delay of debt or the appointment of a receiver of all or any part
of its properties; or (4) any action shall be taken by the Recipient for the
purposes of effecting any of the foregoing.

     Sections 9.2. Remedies.

     If an Event of Default shall occur and be continuing, then the State:

     (a) may declare by notice to the Recipient that the principal of and
interest accrued on any outstanding Interim Funding Obligation and Project Loan
Obligation or its responsibility for repayment of the Project Loan, as
evidenced by its Project Loan Obligation is immediately due and payable,
whereupon the same shall be due and payable automatically without further
notice or demand of any kind;

     (b) shall be entitled to exercise any remedy available to it at law or in
equity, including, but not limited to, all applicable statutory remedies as may
be available under the laws of the State with respect to water companies, such
as the ability to order the acquisition of a water company by a suitable public
or private entity pursuant to Section 16-262n to 16-262q, inclusive, of the
Connecticut General Statutes;

     (c) reserved;

     (d) shall be entitled to exercise all rights and remedies available under
the Security Agreement, including foreclosing the lien of the Security
Agreement;

     (e) shall have the right to have access to and inspect all books and
records of the Recipient;

     (f) shall be entitled to such injunctive relief upon the occurrence and
continuance of a breach by the Recipient of any agreement contained in Section
7.3 of this Agreement if an Event of Default has occurred and is continuing,
the parties recognizing that such breach shall result in irreparable injury to
the State which does not have an adequate remedy at law; and

     (g) shall be entitled to apply all amounts then on deposit in the Debt
Service Reserve Fund toward payment of amounts then due and payable with
respect to the Project Loan, including amounts then due and payable as a result
of any declaration pursuant to Section 9.2(a) hereof.

     No remedy provided in this Agreement or in the Security Agreement is
intended to be exclusive of any other remedy or remedies permitted hereby or
thereby.

Section X. Miscellaneous

     Section 10.1. Waivers.

Page 22 of 26

 

     (a) The Recipient hereby waives diligence, presentment, demand, protest
and notice of dishonor.

     (b) The State shall not be deemed to have waived any of its rights under
this Agreement or the Interim Funding Obligation or Project Loan Obligation or
Security Agreement unless such waiver be in writing and signed by the
Commissioner of DEP and the Commissioner of DPH on behalf of the State. No
delay or omission on the part of the State in exercising any right under this
Agreement or the Interim Funding Obligation or Project Loan Obligation or
Security Agreement shall operate as a waiver of such right or any other right.
A waiver on any one occasion shall not be construed as a bar to or waiver of
any future default. All rights and remedies of the State under this Agreement
or the Interim Funding Obligation or Project Loan Obligation or Security
Agreement shall be cumulative and may be exercised singularly or concurrently.

     Section 10.2. Notices. Any notice from one party to the other party, in
order for such notice to be binding thereon, shall:

     (a) be in writing addressed to:

     (i) when the State is to receive such notice:

	 	 	Department of Environmental Protection

79 Elm Street

Hartford, Connecticut 06106

Attention: Clean Water Fund Administration
	 
	 	 	and
	 
	 	 	Department of Public Health

410 Capitol Avenue

Hartford, Connecticut 06106

Attention: Drinking Water Division, Drinking Water State Revolving Fund Administrator.
	 
	 	 	with a copy to:
	 
	 	 	Office of the Treasurer

55 Elm Street

Hartford, Connecticut 06106

Attention: Clean Water Fund Administrator

     (ii) when the Recipient is to receive such notice:

	 	 	Unionville Water Company

30 Mill Street

Unionville, Connecticut 06085

Attn: David C. Benoit, Vice President/CFO and Treasurer

Page 23 of 26

 

	 	 	with copies to:
	 
	 	 	Bond Counsel, Murtha Cullina LLP

185 Asylum Street, CityPlace I

Hartford, Connecticut 06103

Attn: Joseph P. Fasi, Esq.

     (b) be delivered in person, by overnight delivery or be mailed United
States Postal Service “Certified Mail” to the address recited herein as being
the address of the party to receive such notice; and

     (c) contain complete and accurate information in sufficient detail to
properly and adequately identify and describe the subject matter thereof.

     The term “notice” as used herein, shall be construed to include but not be
limited to any request, demand, authorization, direction, waiver, and/or
consent of the party as well as any document(s) provided, permitted, or
required for the making or ratification of any change, revision, addition to or
deletion from the document, contract, or agreement in which this “notice”
specification is contained.

     Any party hereto may designate alternate persons (by name, title and
affiliation) to which such notice(s) is (are) to be addressed; and/or alternate
locations to which the delivery of such notice(s) is (are) to be made, provided
notice of such designation is given as provided herein.

     Section 10.3. Expenses. The Recipient will pay all reasonable expenses
of the State arising out of the enforcement of this Agreement, the Interim
Funding Obligation, the Project Loan Obligation and the Security Agreement
(including without limitation reasonable counsel fees).

     Section 10.4. Connecticut Law. This Agreement and the rights and
obligations of the parties hereunder and under the Interim Funding Obligation
and Project Loan Obligation shall be governed by, and construed in accordance
with, the laws of the State of Connecticut.

     Section 10.5. Survival of Representations, Warranties and Covenants.
Except as otherwise provided herein, all representations, warranties, covenants
and agreements contained in this Agreement and the Interim Funding Obligation
and Project Loan Obligation and Security Agreement or made in writing in
connection with this Agreement shall survive the execution and delivery of this
Agreement and the Interim Funding Obligation and Project Loan Obligation and
Security Agreement and shall continue in full force and effect until all
amounts payable on account of the Interim Funding Obligation and Project Loan
Obligation and Security Agreement and this Agreement shall have been paid in
full and this Agreement shall have terminated.

     Section 10.6. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the Recipient, the State and their
respective successors or assigns. Except as provided in this Agreement, the
rights and obligations of the Recipient shall not be assigned

Page 24 of 26

 

without the prior written consent of the State. Except as provided in this
Agreement, the rights and obligations of the State shall not be assigned
without the prior written consent of the Recipient, however, such rights and
obligations of the State, including the loan made pursuant to this Agreement,
and such right to receive any payments under this Agreement, any Interim
Funding Obligation and any Project Loan Obligation and the Security Agreement
may be assigned by the State without the written consent of such Recipient for
the purpose of pledging such amounts or the right to receive such amounts to
the bondholders of revenue bonds (including the Bonds) to be issued by the
State.

     Section 10.7. Incorporation of Other Documents. The Recipient’s
application for a Project Loan filed with the Commissioner of DEP and the
Commissioner of DPH in connection with the Project are incorporated herein and
made a part hereof as if they were fully set forth herein.

     Section 10.8. Severability. If any provision of this Agreement is
declared invalid by a final judgment of a court with competent jurisdiction,
the remaining provisions of this Agreement shall continue to bind the parties.

     Section 10.9. Amendment. This Agreement shall not be modified or amended
except upon a written instrument executed by both parties hereto.

Page 25 of 26

 

AGREEMENT NO. DWSRF 200103-C

PROJECT LOAN AGREEMENT

     IN WITNESS WHEREOF, the parties hereto have caused this Project Loan Agreement
to be duly executed as of the day and year first above written.

	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	STATE OF CONNECTICUT
	 
	 	 	 	 	 	 	 	 
	WITNESSES:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Jill Kentfield

	 	 	 	By
	 	/s/
	 	J. Robert Galvin
                 Date: 2/13/04
	
 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	J. Robert Galvin, M.D., M.P.H.
	

	 	 	 	 	 	 	 	COMMISSIONER
	/s/ Nancy Nicolescu

	 	 	 	 	 	 	 	PUBLIC HEALTH
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	STATE OF CONNECTICUT
	 
	 	 	 	 	 	 	 	 
	WITNESSES:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Carmen Colon

	 	 	 	By
	 	/s/
	 	Arthur J. Rocque, Jr.
          Date: 4/19/04
	
 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	Arthur J. Rocque, Jr.
	

	 	 	 	 	 	 	 	COMMISSIONER
	/s/ Christine Kaiser

	 	 	 	 	 	 	 	ENVIRONMENTAL

PROTECTION
	 
	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	UNIONVILLE WATER
	WITNESSES:	 	 	 	 	 	COMPANY
	 
	 	 	 	 	 	 	 	 
	/s/ Patricia Rodgers

	 	 	 	By
	 	/s/
	 	David C. Benoit
                 Date: 1/28/04
	
 	 	 	 	 	 	
 
	

	 	 	 	 	 	 	 	David C. Benoit
	

	 	 	 	 	 	 	 	VICE PRESIDENT,
	/s/ Juliana Duran

	 	 	 	 	 	 	 	CHIEF FINANCIAL OFFICER

AND TREASURER

	 	 	 	 	 	 	 
	APPROVED AS TO FORM AND LEGALITY	 	 	 	 
	 
	 	 	 	 	 	 
	Associate Attorney General	 	 	 	 
	 
	 	 	 	 	 	 
	By:

	 	/s/ William B. Gundling
	 	 	
   Date:5/27/04
	

	 	
 	 	 	 	 

Page 26 of 26EX-4.23

 

Exhibit 4.23

COLLATERAL ASSIGNMENT OF WATER SERVICE CHARGES AND

RIGHT TO RECEIVE WATER SERVICE EXPENSE ASSESSMENTS AND

SECURITY AGREEMENT

          THIS
AGREEMENT (“Security Agreement”) is made as of this
3rd day of June,
2004 by and between Unionville Water Company having an office and place of
business at Unionville, Connecticut (“Borrower” or “Debtor”) and THE STATE OF
CONNECTICUT, acting through the Commissioner of the Department of Public Health
and the Commissioner of the Department of Environmental Protection (“Lender” or
“Secured Party”).

ARTICLE I: DEFINITIONS

For the purposes of this Agreement, the following terms shall have the
following definitions:

          Section 1.1 - Water Charges. All payments from customers of the Borrower
for water services provided to said customers, payable to Borrower under the
Corporate By-laws of the Debtor, other agreements or applicable law.

          Section 1.2 - Loan Documents.

          (a) A certain Interim Funding Obligation of even date herewith made by
Borrower and payable to Lender in the maximum principal amount not to exceed
One Million Eight Hundred Thousand Dollars ($1,800,000) together with any
extensions, renewals and replacements thereof (including any Project Loan
Obligation (as defined in the Project Loan Agreement) delivered in accordance
with the Project Loan Agreement), a copy of which is attached hereto as Exhibit
B, and which covenants, terms and conditions are incorporated into and made a
part hereof (referred to herein as the “Note”)

          (b) A certain Project Loan Agreement No. DWSRF 200103-C dated April 19,
2004 (the “Project Loan Agreement”) made by and between Lender and Borrower,
together with any exhibits thereto, are hereby incorporated herein by
reference.

          (c) Intentionally left blank.

          (d) This Agreement secures repayment of the maximum principal amount not
to exceed One Million Eight Hundred Thousand Dollars ($1,800,000) together with
any extensions, renewals and replacements thereof.

          (e) A certain Custodial Agreement, dated February 26, 2004 made by and
between Lender and Borrower and accepted by U. S. Bank National Association, as
escrow agent, together with any exhibits thereto, are hereby incorporated
herein by reference.

          (f) Financing Statement (UCC-1).

          Section 1.3 - Corporate By-laws. Corporate By-laws of the Borrower,
dated October 31, 2002, and all exhibits and schedules thereto, as the same may
be amended or supplemented from time to time.

 

 

          Section 1.4 - Collateral. The following property rights of Borrower,
whether presently existing or hereafter created, arising or acquired:

          (a) All Water Charges, including fees, fines and other assessments levied
against the customers of Borrower provided water services by Borrower (“Water
Service Charges”),

          (b) To the extent permitted by law, Borrower’s rights and authority to
levy Water Service Charges (including to pay all obligations under the Note and
other Loan Documents), to enforce the payment of the same and to collect the
same,

          (c) All liens, both statutory and by covenant, which secure unpaid Water
Service Charges,

          (d) All other cash, credits, income, accounts receivable, rents and
profits received by or on behalf of Borrower, including, but not limited to,
Unionville Water Company Escrow Account at U. S. Bank National Association,
including replacements and substitutions therefor,

          (e) Secured Party shall have a continuing lien in, on and to all of the
Collateral, the products and proceeds thereof, additions and accessions
thereto, and replacements and substitutions therefor.

          Section 1.5 - Parity Obligations. Are preexisting obligations of the
Borrower to the Farmington Savings Bank which the Lender’s indebtedness is
secured on a parity basis (pari passu) with respect to the Collateral. The
Farmington Savings Bank obligations secured on a parity to the Borrower’s
obligation to the State consists of the Borrower’s obligation pursuant to a
“Revolving and Term Loan and Security Agreement dated as of April 11, 1991,” as
amended, by and between the Borrower and Farmington Savings Bank, a bank
corporation then organized under the laws of the State of Connecticut.

ARTICLE II: AGREEMENTS OF BORROWER

          Section 2.1 - Representation by Borrower. Borrower represents and
warrants that:

          (a) Borrower is, and at all times hereafter shall be, a stock corporation
duly organized, existing and in good standing under the laws of the State of
Connecticut.

          (b) The undersigned officer of the Borrower has all requisite power and
authority to execute and deliver the Loan Documents and this Agreement.
Borrower has the right
and power and is duly authorized and empowered to enter into, execute,
deliver and perform the Loan Documents and this Agreement.

          (c) Borrower has not executed any prior assignment or pledge of the
Collateral, nor are its rights encumbered with respect to the Collateral,
except for the Parity Obligations.

- 2 -

 

          (d) Borrower has and at all times hereafter shall have good, indefeasible
and merchantable title to and ownership of the Collateral, free and clear of
all liens, claims, security interests and encumbrances except those of Lender
and the Parity Obligations.

          (e) The execution, delivery or performance by Borrower of the Loan
Documents and this Agreement shall not, by the lapse of time, by giving of
notice or otherwise, constitute a violation of any applicable law or a breach
of any provision contained in the Corporate By-laws or any agreement,
instrument or document to which Borrower is now or hereafter becomes a party by
which it is or may become bound.

          (f) Borrower’s right to collect the Collateral is valid and enforceable
and unmodified except as limited by the Corporate By-laws and to the best of
Borrower’s knowledge determined after reasonable due diligence, no customer has
any defenses to any claim by Borrower for Water Service Charges.

          (g) The Corporate By-laws are valid and enforceable.

          (h) Borrower has not done anything inconsistent with the terms of this
Security Agreement which might prevent Lender from or limit Lender in
exercising its rights herein granted.

          (i) Secured party has and will continue to have a first priority perfected
security interest in the Collateral subject to no other liens or encumbrances,
except the Parity Obligations

          Section 2.2 - Nondiscrimination. THIS CONTRACT IS SUBJECT TO THE
PROVISIONS OF EXECUTIVE ORDER NO. THREE OF GOVERNOR

     (a) Thomas J. Meskill promulgated June 16, 1971 and as such, this
contract may be canceled, terminated or suspended by the State Labor
Commissioner for violation of or noncompliance with said Executive Order No.
Three or any state or federal law concerning nondiscrimination, notwithstanding
that the State Labor Commissioner is not a party to this contract. The parties
to this contract, as part of the consideration hereof, agree that said
Executive Order No. Three is incorporated herein by reference and made a part
hereof. The parties agree to abide by said Executive Order and agree that the
State Labor Commissioner shall have continuing jurisdiction in respect to
contract performance in regard to nondiscrimination, until the contract is
completed or terminated prior to completion. The contractor agrees, as part
consideration hereof, that this contract is subject to the Guidelines and Rules
issued by the State Labor Commissioner to implement Executive Order No. Three,
and that it will not discriminate in its employment practices or policies, will
file all reports as required, and will fully cooperate with the State of
Connecticut and the State Labor Commissioner.

     (b) This contract is subject to the provisions of Executive Order No.
Seventeen of Governor Thomas J. Meskill promulgated February 15, 1973 and as
such, this contract may be canceled, terminated or suspended by the contracting
agency or the State Labor Commissioner for violation or noncompliance with
said Executive Order No. Seventeen, notwithstanding that the State Labor
Commissioner may not be a party to this contract. The parties to this contract
as

- 3 -

 

part of consideration hereof, agree that the Executive Order Seventeen is
incorporated herein by reference and made a part hereof. The parties agree to
abide by said Executive Order and agree that the contracting agency and the
State Labor Commissioner shall have joint and several continuing jurisdiction
in respect to contract performance in regard to listing all employment openings
with the Connecticut State Employment Service.

     (c) This contact is subject to the provisions of Executive Order No.
Sixteen of Governor John G. Rowland promulgated August 4, 1999, and as such,
this contract may be canceled, terminated or suspended by the state for
violation of or noncompliance with said Executive Order No. Sixteen. The
parties to this contract, as part of consideration hereof, agree that Executive
Order No. Sixteen is incorporated herein by reference and made a part hereof
and agree that a requirement for compliance with Executive Order No. Sixteen
shall be included in any subcontracts or other compliance that may result from
the contract.

ARTICLE III: SECURITY INSTRUMENT

          Section 3.1 - Grant of Security Interest. In order to secure the prompt
payment to Lender of the sums due under the Loan Documents and the prompt, full
and faithful performance of Borrower’s obligations under said Loan Documents
and this Agreement, Borrower hereby grants, transfers, and assigns to Lender,
its successors and assigns, a present first priority and continuing security
interest in the Collateral for the purpose of securing payment of all sums now
or at any time hereafter due Lender as evidenced by the Loan Documents and the
performance and discharge of each and every obligation, covenant and agreement
contained in the Loan Documents and in this Agreement within the meaning of the
Uniform Commercial Code.

          Section 3.2 - Execution and Filing. At the request of the Lender,
Borrower will join with Lender in executing one or more financial statements,
continuation statements, or other appropriate filings pursuant to the Uniform
Commercial Code applicable to the Collateral in form reasonably satisfactory to
the Lender and will pay all costs and expenses incurred by Lender in connection
with the preparation and filing in all public offices wherever and whenever
filing or recording is reasonably deemed by the Lender to be necessary or
desirable, whether or not Borrower has executed such statements.

          Borrower will take all action requested by Lender which may be reasonable
and necessary to better perfect, continue, evidence, preserve, protect and
validate the security interest of Lender or to enable Lender as Secured Party
to exercise and enforce its rights hereunder,
including but not limited to (i) executing one or more documents or
instruments, and (ii) delivering to Lender, endorsed or with appropriate
assignment, any and all Collateral paper or documents.

          Section 3.3 - Use of Copies of Financing Statement or Security Agreement.
Borrower hereby authorizes Lender to file a carbon, photographic or other
reproduction of this Agreement or a financing statement in all places where
necessary to perfect Lender’s security interest in the Collateral to the extent
permitted by law. Such filing shall be effective for all purposes as if the
document filed were an original.

- 4 -

 

ARTICLE IV: BORROWER’S COVENANTS

          Section 4.1 - Corporation Duties. Borrower shall not do or omit to do
any thing or act which would result in any customer serviced by Borrower having
any defense, counterclaim, or set-off, to Borrower’s right to collect the
Collateral.

          Section 4.2 - Budget for Repayment. Borrower will, in establishing
budgets for the corporation, include a separate item in each budget established
for the repayment of sums due under the Loan Documents and any other payments
due to Lender under this Agreement in an amount which shall be no less than the
amount of such payments that will become due to Lender during the period for
which such budget is established. Borrower will not propose, maintain, or
establish any budget in an amount less than the reasonable costs of discharging
all of Borrower’s obligations plus all payments due under the Project Loan
Agreement and this Agreement.

          Section 4.3 - No Assignment or Security Interest. Except for the Parity
Obligations, Borrower shall not make any other assignment of the Collateral or
grant any other security interest in the Collateral whether such assignment or
security interest is senior or junior to the rights created by this Agreement.
Except for Parity Obligations, Borrower shall not create, assume or suffer to
exist any mortgage, deed of trust, pledge, security interest, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or other), or
preference, priority, or other security agreement or preferential arrangement,
charge, or encumbrance of any kind or nature whatsoever on the Collateral
including, without limitation, any conditional sale or other title retention
agreement, any financing lease having substantially the same economic effect as
any of the foregoing, and the filing or recording of any financing statement or
other instrument under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence or give notice of any of the foregoing. Borrower shall
at its cost and expense take all necessary measures to defend the rights of
Lender in and to the Collateral.

          Section 4.4 - Additional Debt.
Borrower will not in any manner whatsoever incur or assume any
indebtedness, other than trade debt, without first obtaining the permission of
Lender in writing.

          Section 4.5 - Collection of Water Service Assessment and other
Collateral. Borrower will not require payment of Water Service Charges or any
other Collateral more than thirty (30) days in advance of the time when they
are due and payable, except in the case of any acceleration of water service
assessments under the Corporate By-laws or applicable law made by Borrower in
the course of collecting Water Service Charges.

          Section 4.6 - Amendments to the Corporate By-laws. Borrower will not
amend or permit to be amended any portion of the Corporate By-laws pertaining
to the following without first obtaining the approval of the Department of
Public Utility Control (“DPUC”) if such approval is otherwise required by law:

          (a) Assessments, assessment liens, or subordination of assessment liens.

          (b) Voting rights.

- 5 -

 

          (c) Reserves for maintenance, repair and replacement of water distribution
system.

          (d) The responsibility for maintenance and repair.

          (e) Reallocation of interests in the water distribution system except for
reallocation of Water Charges by agreement of the majority of the members.

          (f) Expansion or contraction of the area served by the corporation.

          (g) Insurance or fidelity bonds.

          (h) Leasing of all or any portion of the water distribution system.

          (i) Restoration or repair of any portion of the water distribution system
after hazard damage or partial condemnation in a manner other than that
specified in the Corporate By-laws.

          (j) Dissolution or merger of the Borrower.

          (k) Any provision that expressly benefits mortgage holders, insurers, or
guarantors.

          Section 4.7 - Actions. Intentionally left blank.

          Section 4.8 - Maintenance of Accounts. Intentionally left blank.

          Section 4.9 - Financial Statements.
Borrower shall furnish, without expense to Lender, within ninety (90) days
following the end of Borrower’s fiscal year, statements prepared in accordance
with generally accepted accounting principles consistently applied by a
Certified Public Accountant, satisfactory to Lender and in such detail as
Lender may reasonably require, including a balance sheet and income and
expenses statement. Such financial statements shall be prepared, consistent at
least with the standards for a “review” as that term is used in the reporting
standards of the “AICPA”. Borrower shall also furnish to Lender quarterly
accounts receivable reports certified to be true, accurate and complete by the
then acting President or Treasurer of the Borrower and any other financial
reports or statements which it is required to furnish or in fact furnishes to
owners or mortgagees of homes or which Lender may reasonably request. Borrower
shall also furnish such other financial information as Lender shall require
from time to time. The acceptance of Lender of such other forms of audit or
financial statements or waiver of any or all of the requirements, shall not
constitute a waiver, release or discharge or these requirements nor does this
requirement impose any liability on Lender to require the Borrower’s compliance
or for failure to impose compliance herewith.

          Section 4.10 - Insurance. Borrower, at its sole cost and expense, shall
maintain insurance on all real property which is owned by the Borrower and on
all personal property of Borrower, including but not limited to any tangible
items of Collateral against loss by fire and other casualty with such coverages
in such amounts as are acceptable to Lender. Borrower shall cause Lender to be
named as a loss payee under such policies. Borrower shall provide Lender

- 6 -

 

with a
certificate evidencing such insurance and shall claim no cancellation or
material change without thirty (30) days advance written notice to Lender. In
case of loss payments to Lender under any insurance policy, the amount of
insurance money received shall be applied either on the indebtedness secured
hereby (in which event failure to repair or rebuild shall not be an event of
default), or in rebuilding and restoring the damaged property, including the
replacement or repair of all tangible Collateral. Borrower shall also maintain
liability insurance on the corporate property.

          Section 4.11 - Inspection. Borrower will at all times keep at its
principle office accurate and complete records of income (both received and
receivable) and of its application of income received. Lender (by any of its
officers, employees, or agents), shall have the right, at any time or times
during business hours, to inspect the books and records of Borrower to verify
the amount and condition or any other matter relating to the Collateral, and to
discuss the affairs, business, finances, and accounts of Borrower with its
officers, employees, or manager.

          Section 4.12 - Maintenance of Accounts. Borrower will at all times be
the sole owner of each and every item of Collateral and defend the Collateral
against the claims and demands of others, except as otherwise provided herein.

          Section 4.13 - Notices. In accordance with Section 7.7 of this Agreement, Borrower will give
Lender notice of (i) any change in (A) its name, identity or business
structure, (B) the location of its principle executive office or any other
place of business, or (C) the location of its books and records concerning any
of its accounts or the Collateral, and (ii) any substantial loss or
depreciation in the value of any of the Collateral, and (iii) such other
information as to the Collateral Lender may request.

          Section 4.14 - Further Assurances. Borrower will, from time to time, at
its expense, execute, deliver, file and record any statement, assignment,
instrument, document, agreement or other paper and take any other action
(including any filings of financial or continuation statements under the
Uniform Commercial Code applicable to the Collateral) that from time to time
may be necessary or reasonably deemed appropriate by Lender, in order to
create, preserve, perfect, confirm or validate the security interest of Lender
created hereby or to enable Lender to obtain the full benefits of this
Agreement, or to enable Lender to exercise and enforce any of its rights,
powers, and remedies hereunder with respect to any of the Collateral.

ARTICLE V: DEFAULT AND LENDER’S REMEDIES

          Section 5.1 - Default. Upon the happening of any one or more of the
following events of default, Lender shall have all of the rights and remedies
contained in this Article in addition to any rights and remedies contained in
the Loan Documents, this Security Agreement or available under applicable law:

          (a) Default in the payment of any installment of principle or interest or
both as set forth in the Note.

- 7 -

 

          (b) Failure and neglect of Borrower to perform, keep or observe any term,
provision, condition, covenant, warranty or representation contained in this
Agreement or in any Loan Document which is required to be performed, kept or
observed by Borrower.

          (c) If Borrower becomes insolvent, or unable to meet its debts as they
mature, or is generally not paying its debts, or involved as a debtor pursuant
to the United States bankruptcy laws or if Borrower is adjudged to be bankrupt
or insolvent, or is subject to an action or proceeding to any other law
relating to relief of debtors, readjustment, composition, arrangement,
reorganization or extension of indebtedness, or should a judgment lien,
execution or similar process be levied against Borrower or any property of
Borrower and any of the aforesaid not be released or otherwise vacated within a
period of sixty (60) days.

          (d) If any material statements, report or certificate made or delivered by
Borrower or any of its officers, employees, or agents to Lender is not true and
correct.

          (e) If Borrower defaults under the terms of any note or other agreement
between Borrower and Lender whether or not related to the transaction
documented in this Agreement.

          (f) Upon the assignment, conveyance, transfer, lease or encumbrance of the
assets of Borrower, or the assignment, conveyance, transfer, merger or
consolidation of Borrower, or liens attaching to the Collateral (other than
liens for taxes not yet due and payable).

          (g) Upon the failure of or dissolution of Borrower as a stock corporation.

          (h) Upon Borrower’s (i) abandoning or terminating the Project, (ii)
creating any material amendment to the Corporate By-laws or regulations of
Borrower without consent of DPUC in accordance with Section 5.6 hereof.

          (i) Upon Borrower, directly or indirectly, creating, incurring, assuming,
guaranteeing or otherwise becoming or remaining directly or indirectly liable
with respect to any indebtedness, other than trade debt, without first
obtaining the permission of Lender in writing.

          Section 5.2 - Right to Collect Water Service Charges and Other Items of
Collateral. Upon the happening of any event of default under the Loan
Documents, Lender may, at its option, without notice and without regard to the
adequacy of any security for the indebtedness hereby secured, in person or by
agent, with or without bringing any action, suit, or proceeding, collect the
Water Service Charges and other items of Collateral, withholding from the Water
Service Charges and other items of Collateral actually collected such sums as
may then be due to Lender under the terms of the Note and this Agreement
including sums past due and unpaid costs and expenses of operation and
collection, including reasonable attorney’s fees, fees of agents and, if Lender
exercises the powers contained in this Section with its own employees, an
amount equal to the customary fees charged for similar services by unaffiliated
managers in the area where the Borrower is located, and remitting the balance,
if any, to Borrower. Lender may also exercise all rights that Borrower may have
to collect Water Service Charges and other items of Collateral, including, but
not limited to bringing actions against serviced home owners and others, and
imposing and foreclosing liens on serviced homes all in its own name, in the
name of Borrower or otherwise. Lender may also, to the extent necessary to

- 8 -

 

cause the Water Service Charges and other items of Collateral to be sufficient
to pay all sums due under the Loan Documents and this Agreement, exercise all
powers granted to Borrower under the Corporate By-laws and applicable law to
establish budgets for Borrower, assess Water Service Charges and other items of
Collateral and impose special assessments. Lender shall not be accountable for
more monies than it actually receives as Water Service Charges and other items
of Collateral nor shall it be liable for failure to collect Water Service
Charges and other items of Collateral for any reason whatsoever.

          All such sums collected and other amounts collected in respect of
Collateral shall apply first, to the payment of all costs, expenses and
attorney fees incurred by Lender in connection therewith or in connection with
any other remedial action; second, to the payment of interest due on said Note;
third, to the payment of principle on said Note; and fourth, to the
payment to Borrower or its successors or assigns, or as a court of
competent jurisdiction may direct, of any surplus then remaining from such
proceeds.

          The provisions of this section shall be subject to the terms and
conditions of the Parity Obligations.

          Section 5.3 - Assistance in Collection. From and after any event of
default, Borrower shall facilitate, in all reasonable ways, any action taken by
Lender under this Article and Borrower shall, upon demand by Lender, execute a
written notice to each home owner and mortgagee directing that Water Service
Charges and other items of Collateral be paid to Lender to its designee.

          Borrower shall, upon request of Lender, assemble the Collateral and
maintain or disburse it into possession of Lender at such place or places
Lender may designate.

          In addition to, and not by way of limitation of, any other power which
Borrower has vested in Lender or any designee of Lender as set forth in this
Agreement, from and after the happening of any event of default, Borrower
hereby constitutes and appoints Lender or any representative who Lender may
designate as Borrower’s agent to endorse the name of Borrower on any notes,
acceptances, checks, drafts, money orders or other evidence of payment that
constitutes Water Service Charges and other Collateral.

          All acts by Lender or its designee performed pursuant to the power granted
in this Article are hereby ratified and approved and neither Lender nor its
designee shall be liable for any acts of commission or omission, except gross
negligence or willful misconduct. This power, being coupled with an interest,
is irrevocable until all sums due under the Loan Documents are paid in full.

          Section 5.4 - Costs, Expenses and Attorney’s Fees. Borrower will
reimburse Lender for all reasonable expenses incurred by Lender arising out of
this transaction, including, without limitation, any attorneys’ fees, costs,
filing or recording fees, court costs, and other related costs reasonably
necessary to the following:

          (a) Documenting, negotiating, and perfecting this transaction or
protecting Lender and the interest and lien created in favor of Lender under
the Loan Documents or this Agreement.

- 9 -

 

          (b) Enforcing and exercising any of the rights contained in the Loan
Documents or this Agreement or at law or in equity, before or after default,
against Borrower or third parties. Performing due diligence inquiry and
providing, if any, amendments, modifications, waivers and consents in
connection with the Loan Documents or this Agreement.

          (c) Any claim and the prosecution of defense thereof arising out of or in
any way connected with the Note, Loan Documents and this Agreement.

          Section 5.5 - Specific
Performance. In addition to, and not in limitation of, any other rights which Lender
may have under this Agreement, Lender may, after default and until all sums due
under the Loan Documents are paid in full, apply to any court of competent
jurisdiction for specific performance or other equitable relief, it being
understood with respect to equitable remedies sought that there may be no
adequate remedy at law.

          Section 5.6 - Self-Help. In the event of any default in the performance
of any of Borrower’s covenants or agreements herein, Lender, may at its option,
perform the same, and the cost thereof with interest at the rate set forth in
the Note, shall immediately be due from Borrower to Lender and secured by this
Agreement.

          Section 5.7 - Limitation on Duty of Lender in Respect of Collateral.
Lender shall have no fiduciary or other responsibility or duty to Borrower with
respect to the holding, maintenance or transmittal of the Collateral delivered
to or otherwise in the possession of Lender, or any third party permitted
hereby or the Project Loan Agreement, except for the duty of reasonable care
required by Section 9-207(1) of the Connecticut Uniform Commercial Code; it
being understood that “reasonable care” shall be deemed to be such care that
Lender exercises in the transmittal, care, holding, preservation and custody of
its own property of a similar nature. Notwithstanding the foregoing, Lender
shall have (1) no responsibility with respect to the risk of accidental loss or
damage to Collateral in its possession provided that Lender has exercised
reasonable care in the custody thereof, (2) no obligation to provide insurance
for or in respect of the Collateral, and (3) no responsibility for Collateral
not in its possession or a bailee on its behalf.

ARTICLE VI: LIMITATIONS

          Section 6.1 - Borrower’s Right to Collect Water Service Charges. So long
as there is no event of default under this Agreement, Borrower shall have the
right to collect Water Service Charges, but shall not require payment of Water
Service Charges more then thirty (30) days prior to accrual unless accelerated
by Borrower under the terms of the Corporate By-laws or applicable law.

          Section 6.2 - Release on Payment. Upon the payment in full of all
indebtedness evidenced by the Loan Documents or secured by this Agreement,
Lender shall furnish to Borrower, in proper form, a release of this Agreement
and any financing statements furnished under this Agreement and this Agreement
shall become and be void and of no effect.

- 10 -

 

ARTICLE VII: MISCELLANEOUS PROVISIONS

          Section 7.1 - No Waiver.
Lender may take or release other security, may release any party primarily
or secondarily liable for any indebtedness secured hereby, may grant
extensions, renewals, or indulgences with respect to such indebtedness and may
apply any other security thereof held by it for the satisfaction of such
indebtedness without prejudice to any of its rights hereunder. Nothing herein
contained and no act done or omitted by Lender pursuant to the powers and
rights granted it herein, shall be deemed to be a waiver by Lender of its
rights and remedies hereunder or under the Note, and this Agreement is made and
accepted without prejudice to any of the rights and remedies possessed by
Lender under the terms thereof.

          The right of Lender to collect said indebtedness and to enforce any other
security therefor held by it may be exercised by Lender either prior to,
simultaneously with, or subsequent to any action taken by it hereunder. Any
failure by Lender to insist upon the strict performance by Borrower of any of
the terms and provisions hereof shall not be deemed a waiver of any of the
terms and provisions hereof, and Lender may thereafter insist upon strict
performance.

          Section 7.2 - No Obligation on Lender. Lender shall not be obligated to
perform or discharge any obligation of Borrower under the Corporate By-laws or
applicable law or under or by reason of this Agreement and Borrower hereby
agrees to indemnify Lender against, and hold it harmless from, any and all
liability, loss or damage which it may or might incur under the Corporate
By-laws or applicable law or under, or by reason of this Agreement and from any
and all claims and demands whatsoever which may be asserted against it by
reason of any alleged obligation or undertaking on its part to perform or
discharge any of the obligations of Borrower under the Corporate By-laws or
applicable law or under, or by reason of this Agreement. Should Lender incur
any such liability, loss, or damage under the Corporate By-laws or applicable
law or under or by reason of this Agreement, or in defense against any such
claims or demands, the amount thereof, including costs, expenses, attorney’s
fees, together with interest thereon at the rate set forth in the Note, shall
be secured hereby and Borrower shall reimburse Lender therefor immediately upon
demand.

          Section 7.3 - Participations. Intentionally left blank.

          Section 7.4 - Successors and Assigns. This Agreement shall be binding on
Borrower and its successors and assigns and shall inure to the benefit of
Lender and its successors and assigns.

          Section 7.5 - Modification in Writing. This Agreement may not be
changed, waived, discharged or terminated orally, but only by an agreement in
writing signed by the party or parties against whom enforcement of any change,
waiver, discharge or termination is sought.

          Section 7.6 - Remedies Cumulative.
Upon default, Lender may, at its option, exercise its rights under this
Agreement for any portion of the debt or any other sums secured thereby which
are then due and payable, subject to the continuing lien of this Agreement for
the balance not then due, but nothing in this Section shall impair or affect
any right or remedy which

- 11 -

 

Lender might now or hereafter have, were it not for
this Section, but the right herein given shall be in addition to others which
Lender may have hereunder.

          Section 7.7 - Notices. Any notice, demand or written instrument required
or permitted to be given, made or sent under this Agreement shall be in
writing, signed by or on behalf of the party giving the same and shall be
addressed to the address set forth below and delivered by hand, by United
States certified or registered mail, return receipt requested, or by overnight
express delivery.

	 	 	 	 	 
	

	 	To Lender:
	 	Department of Public Health
	

	 	 	 	410 Capitol Avenue
	

	 	 	 	Hartford, CT 06106
	

	 	 	 	Attention: Water Supply Section,
	

	 	 	 	                  Drinking Water State
	

	 	 	 	                  Revolving Fund Administrator
	

	 	 	 	 
	

	 	 	 	and
	

	 	 	 	 
	

	 	 	 	Department of Environmental Protection
	

	 	 	 	79 Elm Street
	

	 	 	 	Hartford, CT 06106
	

	 	 	 	Attention:Clean Water Fund
	

	 	 	 	                 Administration
	

	 	 	 	 
	

	 	with copy to:
	 	Office of the Treasurer
	

	 	 	 	55 Elm Street
	

	 	 	 	Hartford, CT 06106
	

	 	 	 	Attention:Clean Water Fund
	

	 	 	 	                 Administrator
	

	 	 	 	 
	

	 	To Borrower:
	 	Unionville Water Company
	

	 	 	 	30 Mill Street
	

	 	 	 	Unionville, Connecticut 06085
	

	 	 	 	Attn: David C. Benoit, Vice President/CFO and Treasurer
	

	 	 	 	 
	

	 	with copies to:
	 	Bond Counsel, Murtha Cullina LLP
	

	 	 	 	185 Asylum Street, CityPlace I
	

	 	 	 	Hartford, Connecticut 06103
	

	 	 	 	Attn: Joseph P. Fasi, Esq.

Either may change its address set forth in this Section by giving notice to the
other party in accordance with this Section. Each such notice shall be
effective (i) if hand delivered (including
by overnight express mail or similar delivery service), upon the physical
delivery thereof or (ii) if given by registered or certified mail, return
receipt requested, upon execution of the return receipt or the refusal to
acknowledge such receipt.

- 12 -

 

          Section 7.8 - Partial Invalidity. The invalidity of one or more of the
phrases, sentences, clauses or sections of this Agreement shall not affect the
validity of the remaining portions of this Agreement.

          Section 7.9 - Governing Law. This Agreement and all rights and
obligations hereunder, including matters of construction, validity and
performance shall be governed by the laws of the State of Connecticut.

          Section 7.10 - Commercial Transaction. BORROWER ACKNOWLEDGES THAT THE
TRANSACTION OF WHICH THIS SECURITY AGREEMENT IS A PART IS A COMMERCIAL
TRANSACTION, AND HEREBY VOLUNTARILY AND KNOWINGLY WAIVES ITS RIGHT TO NOTICE
AND HEARING UNDER CHAPTER 903a OF THE CONNECTICUT GENERAL STATUTES, OR AS
OTHERWISE ALLOWED BY ANY STATE OR FEDERAL LAW WITH RESPECT TO ANY PREJUDGMENT
REMEDY WHICH LENDER MAY DESIRE TO USE. FURTHER, THE BORROWER HEREBY WAIVES TO
THE EXTENT PERMITTED BY LAW, THE BENEFITS OF ALL VALUATION, APPRAISEMENT,
HOMESTEAD, EXEMPTION, STAY, REDEMPTION, AND MORATORIUM LAWS, NOW IN FORCE OR
WHICH MAY HEREAFTER BECOME LAW.

          Section 7.11 - Gender. In this Agreement, the use of any gender shall
include the other genders and either the singular or the plural shall include
the other.

          Section 7.12 - Captions. The captions contained in this Agreement are
for convenience and reference only and in no way define, describe, extend or
limit the scope of this Agreement or the intent of any of the provisions
hereof.

          Section 7.13 - Construction. Each provision of this Agreement and of the
Loan Documents has been mutually negotiated, prepared, and drafted and, in
connection with the construction of any provision thereof or deletion
therefrom, no consideration shall be given to the issue of which party actually
prepared, drafted, requested, or negotiated same.

          Section 7.14 - Counterparts.
This Agreement may be executed by one or more of the parties to this
Agreement in any number of separate counterparts and all of said counterparts
taken together shall be deemed to constitute one and the same instrument.

          Section 7.15 - Entire Agreement. This Agreement and the Loan Documents
and instruments executed and/or delivered in connection therewith, as
applicable, constitute the entire agreement between the parties hereto, and
supersedes all prior or contemporaneous agreements, communications and
understandings, both written or oral, with respect to the subject matter of
this Agreement.

- 13 -

 

COLLATERAL ASSIGNMENT OF WATER SERVICE CHARGES AND

RIGHT TO RECEIVE WATER SERVICE EXPENSE ASSESSMENTS AND

SECURITY AGREEMENT

     IN WITNESS WHEREOF, the parties hereto have caused this Security Agreement
to be signed, sealed and dated as of the first day mentioned above.

	 	 	 	 	 	 	 
	

	 	 	 	 	 	STATE OF CONNECTICUT
	 
	 	 	 	 	 	 
	WITNESSES:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Jill Kentfield

	 	 	 	By
	 	/s/ J. Robert Galvin    Date: 2/13/04
	
 

	 	 	 	 	 	
 

	

	 	 	 	 	 	J. Robert Galvin, M.D., M.P.H.
	

	 	 	 	 	 	COMMISSIONER
	/s/ Nancy Nicolescu

	 	 	 	 	 	PUBLIC HEALTH
	 

	 	 	 	 	 	STATE OF CONNECTICUT
	 
	 	 	 	 	 	 
	WITNESSES:
	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	/s/ Carmen Colon

	 	 	 	By
	 	/s/ Arthur J. Rocque, Jr.    Date: 4/19/04
	
 

	 	 	 	 	 	
 

	

	 	 	 	 	 	Arthur J. Rocque, Jr.
	

	 	 	 	 	 	COMMISSIONER
	/s/ Christine Kaiser

	 	 	 	 	 	ENVIRONMENTAL

PROTECTION
	 
	 	 	 	 	 	 
	

	 	 	 	 	 	BORROWER:
	

	 	 	 	 	 	UNIONVILLE WATER
	WITNESSES:

	 	 	 	 	 	COMPANY
	 
	 	 	 	 	 	 
	/s/ Patricia E. Rodgers

	 	 	 	By
	 	/s/ David C. Benoit    Date: 1/28/04
	
 

	 	 	 	 	 	
 

	

	 	 	 	 	 	David C. Benoit
	

	 	 	 	 	 	VICE PRESIDENT,
	/s/ Juliana Duran

	 	 	 	 	 	CHIEF FINANCIAL OFFICER

AND TREASURER

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00069-of-00352.parquet"}]]