Document:

exv10w1

 

Exhibit 10.1

Assignment and Assumption Agreement

(Black Warrior Trust)

     This Assignment and Assumption Agreement (“Assignment”) is entered into effective as of July
31, 2007, by Dominion Resources, Inc., a Virginia corporation (“DRI”), and HighMount Exploration &
Production Alabama LLC, a Delaware limited liability company (“HM”).

Recitals 

     Reference is made to the following agreements:

	 	A.	 	Trust Agreement of Dominion Resources Black Warrior Trust among Dominion
Black Warrior Basin, Inc. (“DBWB”), DRI, Mellon Bank (DE) National
Association and Bank of America (successor to NationsBank of Texas, N.A.)
dated May 31, 1994 (as amended, the “Trust Agreement”).
	 
	 	B.	 	Administrative Services Agreement entered into effective as of June 1, 1994,
between DRI and Dominion Resources Black Warrior Trust (as amended, the
“Administrative Services Agreement”).

     As of the date of this Agreement and prior to the execution of this Assignment, HM has
acquired all of the outstanding stock and other equity interests in DBWB, resulting in DBWB
becoming a wholly owned subsidiary of HM.

     Pursuant to this Assignment DRI desires to assign to HM all rights, title, interest,
obligations and benefits of DRI under the Trust Agreement and Administrative Services Agreement
and HM desires to assume all obligations of DRI under the Trust Agreement and Administrative
Services Agreement.

     In consideration of covenants and agreements set forth herein and other good and valuable
consideration, DRI and HM agree as follows:

	 	1.	 	Assignment. DRI assigns and transfers to HM all rights, title,
interest, obligations
and benefits of DRI under the Trust Agreement and Administrative Services
Agreement.
	 
	 	2.	 	Assumption. HM assumes and agrees to pay and perform all obligations of
DRI
under the Administrative Services Agreement and all obligations of DRI under
the Trust Agreement, including without limitation those under Article X.
	 
	 	3.	 	No Warranty. PURSUANT TO THIS ASSIGNMENT DRI DOES NOT MAKE, AND
HEREBY EXPRESSLY DISCLAIMS, ANY EXPRESSED OR IMPLIED REPRESENTATION OR WARRANTY REGARDING THE TRUST AGREEMENT,
THE ADMINISTRATIVE SERVICES AGREEMENT OR THE OBLIGATIONS ASSUMED BY HM PURSUANT TO SECTION 2 ABOVE.
THE PRECEDING SENTENCE SHALL NOT, HOWEVER, LIMIT OR MODIFY THE TERMS, RIGHTS
OR OBLIGATIONS OF DRI, HM OR ANY OF THEIR AFFILIATES UNDER ANY SEPARATE AGREEMENT BETWEEN ANY OF SUCH PARTIES.

 

 

	 	4.	 	Third Party Beneficiary. The Trustee (as such term is defined in the Trust
Agreement) shall be a third party beneficiary of the assumption set forth in
Section 2 above and shall have the right to enforce such assumption without the
joinder of DRI.
	 
	 	5.	 	Miscellaneous. This Assignment shall be governed by and construed in
accordance the laws of the State of Texas, exclusive of its conflicts of laws rules
and principles. This Assignment may be executed in multiple counterparts, all of
which shall constitute but one and the same instrument. This Assignment may not
be amended or modified other than pursuant to a written instrument executed by
DRI and HM; provided, Section 2 above may not be amended or modified
without also obtaining the written consent of the Trustee. Each of DRI and HM
shall have the right to provide a copy or counterpart of this Assignment to the
trustee of the Dominion Resources Black Warrior Trust.

2

 

Executed as of the date first above stated.

	 	 	 	 	 
	 	DOMINION RESOURCES, INC.

 	 
	 	By:  	

/s/ Duane C. Radtke
 	 
	 	Name:  	Duane C. Radtke 	 
	 	Title:  	Executive Vice President 	 
	 
	 	HIGHMOUNT EXPLORATION & PRODUCTION

ALABAMA LLC

 	 
	 	By:  	/s/ Kenneth J. Zinghini 	 
	 	Name:  	Kenneth J. Zinghini  	 
	 	Title:  	Assistant Secretary 	 

3exv10w16

 

Exhibit 10.16

LOAN AGREEMENT

This Agreement dated as of May 30, 2007, is among Bank of America, N.A. (the “Bank”), California
Water Service Group (“Borrower 1”), CWS Utility Services (“Borrower 2”), New Mexico Water Service
Company (“Borrower 3”), Washington Water Service Company (“Borrower 4”), and Hawaii Water Service
Company, Inc. (“Borrower 5”). (Borrower 1, Borrower 2, Borrower 3, Borrower 4 and Borrower 5 are
sometimes referred to collectively as the “Borrowers” and individually as the “Borrower”).

	1.	 	FACILITY NO. 1: LINE OF CREDIT AMOUNT AND TERMS
	 
	1.1	 	Line of Credit Amount.
	 
	(a)	 	During the availability period described below, the Bank will provide a line of credit to the
Borrowers. The amount of the line of credit (the “Facility No. 1 Commitment”) is Twenty
Million and 00/100 Dollars ($20,000,000.00).
	 
	(b)	 	This is a revolving line of credit. During the availability period, the Borrowers may repay
principal amounts and reborrow them.
	 
	(c)	 	The Borrowers agree not to permit the principal balance outstanding to exceed the Facility
No. 1 Commitment. If the Borrowers exceed this limit, the Borrowers will immediately pay the
excess to the Bank upon the Bank’s demand.

1.2 Availability Period. The line of credit is available between the date of this
Agreement and April 30, 2012, or such earlier date as the availability may terminate as provided in
this Agreement (the “Facility No. 1 Expiration Date”).

1.3 Repayment Terms.

	(a)	 	The Borrowers will pay interest on May 31, 2007, and then on the last day of each month
thereafter until payment in full of any principal outstanding under this facility.
	 
	(b)	 	The Borrowers will repay in full any principal, interest or other charges outstanding under
this facility no later than the Facility No. 1 Expiration Date. Any interest period for an
optional interest rate (as described below) shall expire no later than the Facility No. 1
Expiration Date.

1.4 Interest Rate.

	(a)	 	The interest rate is a rate per year equal to the Bank’s Prime minus 1.5 percentage points.
	 
	(b)	 	The Prime Rate is the rate of interest publicly announced from time to time by the Bank as
its Prime Rate. The Prime Rate is set by the Bank based on various factors, including the
Bank’s costs and desired return, general economic conditions and other factors, and is used as
a reference point for pricing some loans. The Bank may price loans to its customers at,
above, or below the Prime Rate. Any change in the Prime Rate shall take effect at the opening
of business on the day specified in the public announcement of a change in the Bank’s Prime
Rate.

1.5 Optional Interest Rates. Instead of the interest rate based on the rate stated in the
paragraph entitled “Interest Rate” above, the Borrowers may elect the optional interest rates
listed below for this Facility No. 1 during interest periods agreed to by the Bank and the
Borrowers. The optional interest rates shall be subject to the terms and conditions described
later in this Agreement. Any principal amount bearing interest at an optional rate under this
Agreement is referred to as a “Portion.” The following optional interest rates are available:

	(a)	 	The LIBOR Rate plus 0.25 percentage point.

 

 

	1.6	 	Letters of Credit.
	 
	(a)	 	During the availability period, at the request of the Borrowers, the Bank will issue standby
letters of credit with a maximum maturity of three hundred sixty-five (365) days but not to
extend more than three hundred sixty-five (365) days beyond the Facility No. 1 Expiration
Date. The standby letters of credit may include a provision providing that the maturity date will be automatically extended each year for an additional
year unless the Bank gives written notice to the contrary.
	 
	(b)	 	The amount of the letters of credit outstanding at any one time (including the drawn and
unreimbursed amounts of the letters of credit) may not exceed Five Million and 00/100 Dollars
($5,000,000.00).
	 
	(c)	 	In calculating the principal amount outstanding under the Facility No. 1 Commitment, the
calculation shall include the amount of any letters of credit outstanding, including amounts
drawn on any letters of credit and not yet reimbursed.
	 
	(d)	 	The Borrowers agree:

	 	(i)	 	Any sum drawn under a letter of credit may, at the option of the Bank, be added
to the principal amount outstanding under this Agreement. The amount will bear interest
and be due as described elsewhere in this Agreement.
	 
	 	(ii)	 	If there is a default under this Agreement, to immediately deposit cash
collateral with the Bank as required under Section B.2 (Deposit Events.) of each Bank
form Application and Agreement for Standby Letter of Credit signed by any one or more of
the Borrowers.
	 
	 	(iii)	 	The issuance of any letter of credit and any amendment to a letter of credit is
subject to the Bank’s written approval and must be in form and content satisfactory to
the Bank and in favor of a beneficiary acceptable to the Bank.
	 
	 	(iv)	 	To sign the Bank’s form Application and Agreement for Commercial Letter of Credit
or Application and Agreement for Standby Letter of Credit, as applicable.
	 
	 	(v)	 	To pay any issuance and/or other fees that the Bank notifies the Borrowers will
be charged for issuing and processing letters of credit for the Borrowers.
	 
	 	(vi)	 	To allow the Bank to automatically charge any Borrower’s checking account for
applicable fees, discounts, and other charges.

2. OPTIONAL INTEREST RATES

2.1 Optional Rates. Each optional interest rate is a rate per year. Interest will be paid
on May 31, 2007, and then on the last day of each month thereafter until payment in full of any
principal outstanding under this Agreement. No Portion will be converted to a different interest
rate during the applicable interest period. Upon the occurrence of an event of default under this
Agreement, the Bank may terminate the availability of optional interest rates for interest periods
commencing after the default occurs. At the end of each interest period, the interest rate will
revert to the rate stated in the paragraph(s) entitled “Interest Rate” above, unless the Borrowers
have designated another optional interest rate for the Portion.

2.2 LIBOR Rate. The election of LIBOR Rates shall be subject to the following terms and
requirements:

	(a)	 	The interest period during which the LIBOR Rate will be in effect will be one or two weeks,
one month, two months, three months, four months, five months, six months, seven months, eight
months, nine months, ten months, eleven months or twelve months. The first day of the
interest period must be a day other than a Saturday or a Sunday on which banks are open for
business in New York and London and dealing in offshore dollars (a “LIBOR Banking Day”). The
last day of the interest period and the actual number of days during the interest period will
be determined by the Bank using the practices of the London inter-bank market.
	 
	(b)	 	Each LIBOR Rate Portion will be for an amount not less than One Hundred Thousand and 00/100
Dollars ($100,000.00).

 

 

	(c)	 	The “LIBOR Rate” means the interest rate determined by the following formula. (All amounts
in the calculation will be determined by the Bank as of the first day of the interest period.)

	 	Where,
	 
	 	(i)	 	“London Inter-Bank Offered Rate” means for any applicable interest period, the
rate per annum equal to the British Bankers Association LIBOR Rate (“BBA LIBOR”), as
published by Reuters (or other commercially available source providing quotations of BBA
LIBOR as selected by the Bank from time to time) at approximately 11:00 a.m. London time
two (2) London Banking Days before the commencement of the interest period for U.S.
Dollar deposits (for delivery on the first day of such interest period) with a term
equivalent to such interest period. If such rate is not available at such time for any
reason then the rate for that interest period will be determined by such alternate
method as reasonably selected by the Bank. A “London Banking Day” is a day on which
banks in London are open for business and dealing in offshore dollars.
	 
	 	(ii)	 	“Reserve Percentage” means the total of the maximum reserve percentages for
determining the reserves to be maintained by member banks of the Federal Reserve System
for Eurocurrency Liabilities, as defined in Federal Reserve Board Regulation D, rounded
upward to the nearest 1/100 of one percent. The percentage will be expressed as a
decimal, and will include, but not be limited to, marginal, emergency, supplemental,
special, and other reserve percentages.

	(d)	 	The Borrowers shall irrevocably request a LIBOR Rate Portion no later than 12:00 noon Pacific
time on the LIBOR Banking Day preceding the day on which the London Inter-Bank Offered Rate
will be set, as specified above. For example, if there are no intervening holidays or weekend
days in any of the relevant locations, the request must be made at least three days before the
LIBOR Rate takes effect.
	 
	(e)	 	The Bank will have no obligation to accept an election for a LIBOR Rate Portion if any of the
following described events has occurred and is continuing:

	 	(i)	 	Dollar deposits in the principal amount, and for periods equal to the interest
period, of a LIBOR Rate Portion are not available in the London inter-bank market; or
	 
	 	(ii)	 	The LIBOR Rate does not accurately reflect the cost of a LIBOR Rate Portion.

	(f)	 	Each prepayment of a LIBOR Rate Portion, whether voluntary, by reason of acceleration or
otherwise, will be accompanied by the amount of accrued interest on the amount prepaid and a
prepayment fee as described below. A “prepayment” is a payment of an amount on a date earlier
than the scheduled payment date for such amount as required by this Agreement.
	 
	(g)	 	The prepayment fee shall be equal to the amount (if any) by which

	 	(i)	 	the additional interest which would have been payable on the amount prepaid had
it not been paid until the last day of the interest period, using the Initial Money
Market Funds Rate, exceeds
	 
	 	(ii)	 	the interest rate which would have been recoverable by the Bank by reinvesting
the amount prepaid for the period starting on the date on which it was prepaid and
ending on the last day of the interest period, using the Subsequent Money Market Funds
Rate.
	 
	 	The following definitions will apply to the calculation of the prepayment fee:
	 
	 	“Money Market” means one or more wholesale rate markets available to the Bank, including the
LIBOR, Eurodollar, and SWAP rate markets as applicable and available, or such other
appropriate Money Market as determined by the Bank in its sole discretion.

 

 

	 	“Initial Money Market Funds Rate” means the fixed interest rate per annum, determined solely
by the Bank on the date that the Borrowers request the LIBOR Rate Portion, as the rate at
which the Bank would be able to borrow funds in the Money Market in the amount of the LIBOR
Rate Portion and with an interest period equal to the interest period of the LIBOR Rate
Portion.
	 
	 	“Subsequent Money Market Funds Rate” means the fixed interest rate per annum, determined
solely by the Bank on the date of the prepayment, as the rate at which the Bank would be able
to reinvest funds in the Money Market in the prepaid amount of the LIBOR Rate Portion for a
period of time approximating the period starting on the date of the prepayment and ending on
the last day of the original interest period of the LIBOR Rate Portion.
	 
	 	The Bank may adjust the Initial Money Market Funds Rate and the Subsequent Money Market Funds
Rate to reflect the compounding, accrual basis, or other costs of the LIBOR Rate Portion.
The rates shall include adjustments for reserve requirements, federal deposit insurance, and
any other similar adjustment which the Bank deems appropriate. Each of the rates is the
Bank’s estimate only, and the Bank is under no obligation to actually purchase or match funds
for any transaction or reinvest any prepayment. The rates are not fixed by or related in any
way to any rate the Bank quotes or pays for deposits accepted through its branch system. The
rates will be based on information from either the Telerate or Reuters information services,
The Wall Street Journal, or other information sources the Bank deems appropriate.

3. FEES AND EXPENSES

3.1 Fees.

	(a)	 	Periodic Commitment Fee. The Borrowers agree to pay a periodic commitment fee in
the amount of Four Thousand Four Hundred Dollars ($4,400).
	 
	 	 	This fee is due on the date of the Agreement, and on May 31st of 2008 and May
31st of each year thereafter until the expiration of the availability period.
	 
	(b)	 	Late Fee. To the extent permitted by law, the Borrowers agree to pay a late fee in
an amount not to exceed four percent (4%) of any payment that is more than fifteen (15) days
late. The imposition and payment of a late fee shall not constitute a waiver of the Bank’s
rights with respect to the default.

3.2 Expenses. The Borrowers agree to immediately repay the Bank for expenses that include,
but are not limited to, reasonable filing, recording and search fees, appraisal fees, title report
fees, and documentation fees, in each case promptly following the presentation of an invoice for
the expenses.

3.3 Reimbursement Costs. The Borrowers agree to reimburse the Bank for all reasonable
expenses it incurs in the preparation of this Agreement and any agreement or instrument required by
this Agreement. Expenses include, but are not limited to, reasonable attorneys’ fees, including
any allocated costs of the Bank’s in-house counsel to the extent permitted by applicable law.

4. DISBURSEMENTS, PAYMENTS AND COSTS

4.1 Disbursements and Payments.

	(a)	 	Each payment by the Borrowers will be made in U.S. Dollars and immediately available funds by
direct debit to a deposit account as specified below or, for payments not required to be made
by direct debit, by mail to the address shown on the Borrowers’ statement or at one of the
Bank’s banking centers in the United States.
	 
	(b)	 	Each disbursement by the Bank and each payment by the Borrowers will be evidenced by records
kept by the Bank. In addition, the Bank may, at its discretion, require the Borrowers to sign
one or more promissory notes.

4.2 Requests for Credit; Equal Access by all Borrowers. If there is more than one
Borrower, any Borrower (or a person or persons authorized by any one of the Borrowers), acting
alone, can borrow up to the full amount of credit provided under this Agreement. In addition to
each Borrower’s liability for all extensions of credit made to it under this Agreement, Borrower 1
will be liable for all extensions of credit made under this Agreement to any other Borrower.

	4.3	 	Telephone and Telefax Authorization.
	 
	(a)	 	The Bank may honor telephone or telefax instructions for advances or repayments or for the
designation of optional interest rates and telefax requests for the issuance of letters of
credit given, or purported to be given, by

 

 

	 	 	any one of the individuals authorized to sign loan
agreements on behalf of any of the Borrowers, or any other individual designated by any one of
such authorized signers.
	 
	(b)	 	Advances will be deposited in and repayments will be withdrawn from account number
14878-03863 owned by Borrower 1 or such other of the Borrowers’ accounts with the Bank as
designated in writing by the Borrowers.
	 
	(c)	 	The Borrowers will indemnify and hold the Bank harmless from all liability, loss, and costs
in connection with any act resulting from telephone or telefax instructions the Bank
reasonably believes are made by any individual authorized by the Borrowers to give such
instructions. This paragraph will survive this Agreement’s termination, and will benefit the
Bank and its officers, employees, and agents.
	 
	4.4	 	Direct Debit (Pre-Billing).
	 
	(a)	 	The Borrowers agree that the Bank will debit deposit account number 14878-03863 owned by
Borrower 1 or such other of the Borrowers’ accounts with the Bank as designated in writing by
the Borrowers (the “Designated Account”) on the date each payment of principal and interest
and any fees from the Borrowers become due (the “Due Date”).
	 
	(b)	 	Prior to each Due Date, the Bank will mail to the Borrowers a statement of the amounts that
will be due on that Due Date (the “Billed Amount”). The bill will be mailed a specified
number of calendar days prior to the Due Date, which number of days will be mutually agreed
from time to time by the Bank and the Borrowers. The calculations in the bill will be made on
the assumption that no new extensions of credit or payments will be made between the date of
the billing statement and the Due Date, and that there will be no changes in the applicable
interest rate.
	 
	(c)	 	The Bank will debit the Designated Account for the Billed Amount, regardless of the actual
amount due on that date (the “Accrued Amount”). If the Billed Amount debited to the
Designated Account differs from the Accrued Amount, the discrepancy will be treated as
follows:

	 	(i)	 	If the Billed Amount is less than the Accrued Amount, the Billed Amount for the
following Due Date will be increased by the amount of the discrepancy. The Borrowers
will not be in default by reason of any such discrepancy.
	 
	 	(ii)	 	If the Billed Amount is more than the Accrued Amount, the Billed Amount for the
following Due Date will be decreased by the amount of the discrepancy.
	 
	 	Regardless of any such discrepancy, interest will continue to accrue based on the actual
amount of principal outstanding without compounding. The Bank will not pay the Borrowers
interest on any overpayment.

	(d)	 	The Borrowers will maintain sufficient funds in the Designated Account to cover each debit.
If there are insufficient funds in the Designated Account on the date the Bank enters any
debit authorized by this Agreement, the Bank may reverse the debit.
	 
	(e)	 	The Borrowers may terminate this direct debit arrangement at any time by sending written
notice to the Bank at the address specified at the end of this Agreement. If the Borrowers
terminate this arrangement, then the principal amount outstanding under this Agreement will at
the option of the Bank bear interest at a rate per annum which is 0.5 percentage point higher
than the rate of interest otherwise provided under this Agreement.

4.5 Banking Days. Unless otherwise provided in this Agreement, a banking day is a day
other than a Saturday, Sunday or other day on which commercial banks are authorized to close, or
are in fact closed, in the state where the Bank’s lending office is located, and, if such day
relates to amounts bearing interest at an offshore rate (if any), means any such day on which
dealings in dollar deposits are conducted among banks in the offshore dollar interbank market. All
payments and disbursements which would be due on a day which is not a banking day will be due on
the next banking day. All payments received on a day which is not a banking day will be applied to
the credit on the next banking day.

4.6 Interest Calculation. Except as otherwise stated in this Agreement, all interest and
fees, if any, will be computed on the basis of a 360-day year and the actual number of days
elapsed. This results in more interest or a higher fee than if a 365-day year is used.
Installments of principal which are not paid when due under this Agreement shall continue to bear
interest until paid.

4.7 Default Rate. Upon the occurrence of any default or after maturity or after judgement
has been rendered on any obligation under this Agreement, all amounts outstanding under this
Agreement, including any interest, fees, or costs

 

 

which are not paid when due, will at the option
not constitute a waiver of any default. The Bank will notify the Borrowers of its decision to
exercise its option to impose the default rate, and the Bank’s notice will set forth the date on
which the default rate became or will become effective.

	5.	 	CONDITIONS

Before the Bank is required to extend any credit to the Borrowers under this Agreement, it must
receive any documents and other items it may reasonably require, in form and content acceptable to
the Bank, including any items specifically listed below.

5.1 Authorizations. If any Borrower or any guarantor is anything other than a natural
person, evidence that the execution, delivery and performance by such Borrower and/or such
guarantor of this Agreement and any instrument or agreement required under this Agreement have been
duly authorized.

5.2 Governing Documents. If required by the Bank, a copy of the Borrowers’ organizational
documents.

5.3 Payment of Fees. Payment of all fees and other amounts due and owing to the Bank,
including without limitation payment of all accrued and unpaid expenses incurred by the Bank as
required by the paragraph entitled “Reimbursement Costs.”

5.4 Good Standing. Certificates of good standing for each Borrower from its state of
formation and from any other state in which such Borrower is required to qualify to conduct its
business.

5.5 Insurance. Evidence of insurance coverage, as required in the “Covenants” section of
this Agreement.

6. REPRESENTATIONS AND WARRANTIES

When the Borrowers sign this Agreement, and until the Bank is repaid in full, the Borrowers make
the following representations and warranties. Each request for an extension of credit constitutes
a renewal of these representations and warranties as of the date of the request:

6.1 Formation. If any Borrower is anything other than a natural person, it is duly formed
and existing under the laws of the state or other jurisdiction where organized.

6.2 Authorization. This Agreement, and any instrument or agreement required hereunder, are
within each Borrower’s powers, have been duly authorized, and do not conflict with any of its
organizational papers.

6.3 Enforceable Agreement. This Agreement is a legal, valid and binding agreement of each
Borrower, enforceable against each Borrower in accordance with its terms, and any instrument or
agreement required hereunder, when executed and delivered, will be similarly legal, valid, binding
and enforceable.

6.4 Good Standing. In each state in which each Borrower does business, it is properly
licensed, in good standing, and, where required, in compliance with fictitious name statutes except
where (other than in respect of its jurisdiction of organization) its failure to be so could not
reasonably be expected to have a material adverse effect on its business condition (financial or
otherwise) or ability to repay this credit.

6.5 No Conflicts. This Agreement does not conflict with any law, material agreement, or
material obligation by which any Borrower is bound.

6.6 Financial Information. All financial and other information that has been or will be
supplied to the Bank is sufficiently complete to give the Bank accurate knowledge of Borrowers 1’s
(and any guarantor’s) financial condition, including all material contingent liabilities. Since
the date of the most recent financial statement provided to the Bank, there has been no material
adverse change in the business condition (financial or otherwise), operations, properties or
prospects of Borrower 1 (or any guarantor).

6.7 Lawsuits. There is no lawsuit, tax claim or other dispute pending or threatened
against any Borrower which, if lost, would impair such Borrower’s financial condition or ability to
repay the loan, except as have been disclosed in writing to the Bank.

 

 

6.8 Permits, Franchises. Each Borrower possesses all permits, memberships, franchises,
contracts and licenses required and all trademark rights, trade name rights, patent rights,
copyrights and fictitious name rights necessary to enable it to conduct the business in which it is
now engaged.

6.9 Other Obligations. No Borrower is in default on any obligation for borrowed money, any
purchase money obligation or any other material lease, commitment, contract, instrument or
obligation, except as have been disclosed in writing to the Bank.

6.10 Tax Matters. No Borrower has any knowledge of any pending assessments or adjustments
of its income tax for any year and all taxes due have been paid, except as have been disclosed in
writing to the Bank or as are being contested in good faith and by appropriate proceedings
diligently conducted and as to which adequate reserves are being maintained on the books of such
Borrower in accordance with GAAP.

6.11 No Event of Default. There is no event which is, or with notice or lapse of time or
both would be, a default under this Agreement.

6.12 Insurance. Each Borrower has obtained, and maintained in effect, the insurance
coverage required in the “Covenants” section of this Agreement.

6.13 ERISA Plans.

	(a)	 	Each Plan (other than a multiemployer plan) is in compliance in all material respects with
the applicable provisions of ERISA, the Code and other federal or state law except where
failure to be in compliance could not reasonably be expected to have a material adverse effect
on the Borrowers’ business condition (financial or otherwise) or ability to repay this credit.
Each Plan has received a favorable determination letter from the IRS and to the best
knowledge of each Borrower, nothing has occurred which would cause the loss of such
qualification. Each Borrower has fulfilled its obligations, if any, under the minimum funding
standards of ERISA and the Code with respect to each Plan, and has not incurred any liability
with respect to any Plan under Title IV of ERISA where such liability could reasonably be
expect to have a material adverse effect on the Borrowers’ business condition (financial or
otherwise) or ability to repay this credit.
	 
	(b)	 	There are no claims, lawsuits or actions (including by any governmental authority), and there
has been no prohibited transaction or violation of the fiduciary responsibility rules, with
respect to any Plan which has resulted or could reasonably be expected to result in a material
adverse effect.
	 
	(c)	 	With respect to any Plan subject to Title IV of ERISA:

	 	(i)	 	No reportable event has occurred under Section 4043(c) of ERISA for which the
PBGC requires 30-day notice.
	 
	 	(ii)	 	No action by the Borrowers or any ERISA Affiliate to terminate or withdraw from
any Plan has been taken and no notice of intent to terminate a Plan has been filed under
Section 4041 of ERISA.
	 
	 	(iii)	 	No termination proceeding has been commenced with respect to a Plan under
Section 4042 of ERISA, and no event has occurred or condition exists which might
constitute grounds for the commencement of such a proceeding.

	(d)	 	The following terms have the meanings indicated for purposes of this Agreement:

	 	(i)	 	“Code” means the Internal Revenue Code of 1986, as amended from time to time.
	 
	 	(ii)	 	“ERISA” means the Employee Retirement Income Security Act of 1974, as amended
from time to time.
	 
	 	(iii)	 	“ERISA Affiliate” means any trade or business (whether or not incorporated)
under common control with the Borrowers within the meaning of Section 414(b) or (c) of
the Code.
	 
	 	(iv)	 	“PBGC” means the Pension Benefit Guaranty Corporation.
	 
	 	(v)	 	“Plan” means a pension, profit-sharing, or stock bonus plan intended to qualify
under Section 401(a) of the Code, maintained or contributed to by any Borrower or any
ERISA Affiliate, including any multiemployer plan within the meaning of Section
4001(a)(3) of ERISA.

 

 

7. COVENANTS

The Borrowers agree, so long as credit is available under this Agreement and until the Bank is
repaid in full:

7.1 Use of Proceeds. To use the proceeds of Facility No. 1 only for working capital,
permitted acquisitions, general corporate purposes and to bridge capital expenditures.

7.2 Financial Information. To provide the following financial information and statements
in form and content acceptable to the Bank, and such additional information as requested by the
Bank from time to time. The Bank reserves the right, upon written notice to the Borrowers, to
require the Borrowers and their subsidiaries to deliver financial information and statements to the
Bank more frequently than otherwise provided below, and to use such additional information and
statements to measure any applicable financial covenants in this Agreement.

	(a)	 	Within ten (10) days after the date of filing with the Securities and Exchange Commission
(“SEC”), the annual financial statements of Borrower 1, certified and dated by an authorized
financial officer. These financial statements must be audited (with an opinion satisfactory
to the Bank) by a Certified Public Accountant acceptable to the Bank. The statements shall be
prepared on a consolidated, consolidating and unconsolidated basis.
	 
	(b)	 	Within ten (10) days after the date of filing with the SEC, quarterly financial statements of
Borrower 1 (other than the last fiscal quarter of any fiscal year), certified and dated by an
authorized financial officer. These financial statements may be company-prepared. The
statements shall be prepared on a consolidated, consolidating and unconsolidated basis.
	 
	(c)	 	Within the same time periods that the annual and quarterly financial statements are required
under subparagraphs (a) and (b) immediately above, a compliance certificate of Borrower 1
signed by an authorized financial officer, and setting forth (i) the information and
computations (on a consolidated basis and in sufficient detail) of the Debt to Capitalization
Ratio (as defined in Paragraph 7.3 below) and the Interest Coverage Ratio (as defined in
Paragraph 7.4 below) to establish compliance with those financial covenants at the end of the
period covered by the financial statements then being furnished and (ii) whether there existed
as of the date of such financial statements and whether there exists as of the date of the
certificate, any default under this Agreement and, if any such default exists, specifying the
nature thereof and the action Borrower 1 is taking and proposes to take with respect thereto.
	 
	(d)	 	Copies of the Form 10-K Annual Report and Form 10-Q Quarterly Report for Borrower 1 within
ten (10) days after the date of filing with the SEC, provided that all such reports shall be
deemed delivered when delivered to the SEC and posted to EDGAR.
	 
	(e)	 	The annual financial projections of Borrower 1 covering the forthcoming fiscal year and
specifying the assumptions used in creating the projections. The projections shall be
provided to the Bank by April 30th of each year.
	 
	7.3	 	Debt to Capitalization Ratio. With respect to Borrower 1, to maintain on a
consolidated basis a Debt to Capitalization Ratio not exceeding 0.667:1.0.
	 
	 	 	“Debt to Capitalization Ratio” means the ratio of Funded Debt to the sum of Net Worth plus
Funded Debt.
	 
	 	 	“Funded Debt” of any person shall mean (i) all Indebtedness of such person for borrowed money
or which have been incurred in connection with the acquisition of assets in each case having
a final maturity of one or more than one year from the date of origin thereof (or which is
renewable or extendible at the option of the obligor for a period or periods more than one
year from the date of origin), including all payments in respect thereof that are required to
be made within one year from the date of any determination of Funded Debt, whether or not the
obligation to make such payments shall constitute a current liability of the obligor under
GAAP, (ii) all Capitalized Rentals of such person, and (iii) all guaranties by such person of
Funded Debt of others.
	 
	 	 	“Indebtedness” of a person means all obligations of such person which in accordance with GAAP
shall be classified upon a balance sheet of such person as liabilities of such person, and in
any event shall include all (i) obligations of such person for borrowed money or which has
been incurred in connection with the acquisition of property or assets, (ii) obligations
secured by any lien upon property or assets owned by such person, even though such person has
not assumed or become liable for the payment of such obligations, (iii) obligations created
or arising under any conditional sale or other title retention agreement with respect to
property acquired by such person, notwithstanding the fact that the rights and remedies of
the seller, lender or lessor under such agreement in the event of default are limited to
repossession or sale of property, (iv) Capitalized Rentals and

 

 

	 	 	
(v) guaranties of obligations
of others of the character referred to in this definition. Notwithstanding the foregoing,
	 	 	the term ‘Indebtedness’ as it relates to Borrower 1 shall not include obligations of Borrower
1 with respect to advances for construction from third parties.
	 
	 	 	“Capitalized Rentals” of any person shall mean as of the date of any determination thereof
the amount at which the aggregate Rentals due and to become due under all capitalized leases
under which such person is a lessee would be reflected as a liability on a consolidated
balance sheet of such person.
	 
	 	 	“Rentals” shall mean and include as of the date of any determination thereof all fixed
payments (including as such all payments which the lessee is obligated to make to the lessor
on termination of the lease or surrender of the property) payable by a person, as lessee or
sublessee under a lease of real or personal property, but shall be exclusive of any amounts
required to be paid by such person (whether or not designated as rents or additional rents)
on account of maintenance, repairs, insurance, taxes and similar charges. Fixed rents under
any so-called “percentage leases” shall be computed solely on the basis of the minimum rents,
if any, required to be paid by the lessee regardless of sales volume or gross revenues.
	 
	 	 	“Net Worth” means the value of consolidated total assets (including leaseholds and leasehold
improvements and reserves against assets) less total liabilities, including but not limited
to accrued and deferred income taxes
	 
	7.4	 	Interest Coverage Ratio. With respect to Borrower 1, to maintain on a consolidated
basis an Interest Coverage Ratio of at least 2.5:1.0.
	 
	 	 	“Interest Coverage Ratio” means, as of any date of determination, the ratio of (a) EBITDA for
the period of the four prior fiscal quarters ending on such date to (b) Interest Charges for
such period.
	 
	 	 	“EBITDA” means, for any period, for Borrower 1 on a consolidated basis, an amount
equal to net income for such period plus (a) the following to the extent deducted in
calculating such net income: (i) Interest Charges for such period, (ii) the provision for
Federal, state, local and foreign income taxes payable by Borrower 1 for such period, (iii)
depreciation and amortization expense for such period, (iv) other extraordinary losses of
Borrower 1 reducing such net income which do not represent a cash item in such period or any
future period and minus (b) the following to the extent included in calculating such
net income: (i) Federal, state, local and foreign income tax credits of Borrower 1 for such
period and (ii) all extraordinary non-cash gains and non-cash items increasing net income for
such period.
	 
	 	 	“Interest Charges” means, for any period, for Borrower 1 on a consolidated basis, the sum of
(a) all interest, premium payments, debt discount, fees, charges and related expenses of
Borrower 1 in connection with borrowed money to the extent treated as interest in accordance
with GAAP, and (b) the portion of rent expense of Borrower 1 with respect to such period
under capital leases that is treated as interest in accordance with GAAP.
	 
	 	 	This ratio will be calculated at the end of each reporting period for which the Bank requires
financial statements using the results of the twelve-month period ending with that reporting
period.

7.5 Other Debts. Not to have outstanding or incur any direct or contingent liabilities or
lease obligations (other than those to the Bank), or become liable for the liabilities of others,
without the Bank’s written consent. This does not prohibit:

	(a)	 	Acquiring goods, supplies, or merchandise on normal trade credit.

 

 

	(b)	 	Endorsing negotiable instruments received in the usual course of business.
	 
	(c)	 	Obtaining surety bonds in the usual course of business.
	 
	(d)	 	Liabilities, lines of credit and leases in existence on the date of this Agreement
disclosed in writing to the Bank.
	 
	(e)	 	Additional debts and lease obligations for the acquisition of fixed assets, to the
extent permitted under Paragraph 7.6(d) of this Agreement.
	 
	(f)	 	Additional debts assumed in connection with acquisitions permitted under Paragraph 7.9(b) of
this Agreement.
	 
	(g)	 	Additional obligations of any Borrower consisting of first mortgage bonds or unsecured
senior notes substantially similar in amount and structure to those certain first mortgage bonds and unsecured senior
notes that are obligations of California Water Service Company (“CWSC”) and are outstanding as of the date of
this Agreement.
	 
	(h)	 	Operating leases entered into the ordinary course of business.
	 
	(i)	 	Contingent obligations in respect of customary indemnification and purchase price adjustment
obligations incurred in connection with asset sales permitted by this Agreement.
	 
	(j)	 	Contingent liabilities granted in favor of title insurers in the ordinary course of business.

7.6 Other Liens. Not to create, assume, or allow any security interest or lien (including
judicial liens) on property any Borrower now or later owns, except:

	(a)	 	Liens and security interests in favor of the Bank.
	 
	(b)	 	Liens for taxes not yet delinquent.
	 
	(c)	 	Liens outstanding on the date of this Agreement disclosed in writing to the Bank.
	 
	(d)	 	Additional purchase money security interests in assets acquired after the date of this
Agreement, if the total principal amount of debts secured by such liens does not exceed Two Million Five Hundred
Thousand Dollars ($2,500,000) at any one time for all of the Borrowers.
	 
	(e)	 	Liens securing first mortgage bonds permitted under the preceding paragraph
	 
	(f)	 	Landlord’s, carriers’, warehousemen’s, mechanics’, materialmen’s, repairmen’s or other like
liens arising in the ordinary course of business which are not overdue for a period of more
than thirty (30) days or which are being contested in good faith and by appropriate
proceedings diligently conducted, if adequate reserves with respect thereto are maintained on
the books of the Borrowers.
	 
	(g)	 	Pledges or deposits in the ordinary course of business in connection with workers’
compensation, unemployment insurance and other social security legislation, other than any
lien imposed by ERISA.
	 
	(h)	 	Deposits to secure the performance of bids, trade contracts and leases, statutory
obligations, surety bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business.
	 
	(i)	 	Easements, rights-of-way, restrictions and other similar encumbrances affecting real property
which, in the aggregate, are not substantial in amount, and which do not in any case
materially detract from the value of the property subject thereto or materially interfere with
the ordinary conduct of the business of the Borrowers.
	 
	(j)	 	Liens securing judgments for the payment of money not constituting an event of default
hereunder or securing appeal or other surety bonds related to such judgments.
	 
	(k)	 	Liens arising solely by virtue of any statutory or common law provisions relating to banker’s
liens, rights of set-off or similar rights and remedies as to deposit accounts or other funds
maintained with a creditor depository institution.

7.7 Maintenance of Assets.

 

 

	(a)	 	Not to sell, assign, lease, transfer or otherwise dispose of any part of any Borrower’s
business or any Borrower’s assets except in the ordinary course of such Borrower’s business and except for such
dispositions as may be necessary in connection with remedial actions taken by the Borrowers
to remedy certain Plans, as disclosed to the Bank prior to the date of this Agreement.

        .
	 
	(b)	 	Not to sell, assign, lease, transfer or otherwise dispose of any assets for less than fair
market value, or enter into any agreement to do so.
	 
	(c)	 	Not to enter into any sale and leaseback agreement covering any of their fixed assets.
	 
	(d)	 	To maintain and preserve all rights, privileges, and franchises the Borrowers now have,
except to the extent the failure to do so could not be reasonably expected to have a material adverse effect on the
Borrowers’ business condition (financial or otherwise) or ability to repay this credit.
	 
	(e)	 	To make any repairs, renewals, or replacements to keep the Borrowers’ properties in good
working condition (ordinary wear and tear excluded).

7.8 Loans. Not to make any loans, advances or other extensions of credit to any individual
or entity, except for:

	(a)	 	Existing extensions of credit disclosed to the Bank in writing.
	 
	(b)	 	Extensions of credit to the Borrowers’ current subsidiaries.
	 
	(c)	 	Extensions of credit in the nature of accounts receivable or notes receivable arising from
the sale or lease of goods or services in the ordinary course of business to non-affiliated
entities.

7.9 Additional Negative Covenants. Not to, without the Bank’s written consent:

	(a)	 	Enter into any consolidation, merger, or other combination, or become a partner in a
partnership, a member of a joint venture, or a member of a limited liability company.
	 
	(b)	 	Acquire or purchase a business or its assets for a consideration for a consideration,
including assumption of direct or contingent debt, in excess of Ten Million Dollars
($10,000,000) in the aggregate in each fiscal year. Before making any such acquisition, the
Borrowers must obtain the prior, effective written consent or approval of the board of
directors or equivalent governing body of the business being acquired.
	 
	(c)	 	Engage in any business activities substantially different from each Borrower’s present
business.
	 
	(d)	 	Liquidate or dissolve any Borrower’s business.
	 
	(e)	 	Voluntarily suspend any Borrower’s business for more than seven (7) days in any thirty
(365) day period.

7.10 Notices to Bank. To promptly notify the Bank in writing of:

	(a)	 	Any lawsuit over Five Million and 00/100 Dollars ($5,000,000.00) against any Borrower (or any
guarantor).
	 
	(b)	 	Any substantial dispute between any governmental authority and any Borrower (or any
guarantor).
	 
	(c)	 	Any event of default under this Agreement, or any event which, with notice or lapse of time
or both, would constitute an event of default.
	 
	(d)	 	Any material adverse change in any Borrower’s (or any guarantor’s) business condition
(financial or otherwise), operations, properties or prospects, or ability to repay the credit.
	 
	(e)	 	Any change in any Borrower’s name, legal structure, place of business, or chief executive
office if such Borrower has more than one place of business.
	 
	(f)	 	Any actual contingent liabilities of any Borrower (or any guarantor), and any such contingent
liabilities which are reasonably

 

 

	 	 	foreseeable, where such liabilities are in excess of Five
Million and 00/100 Dollars ($5,000,000.00) in the aggregate.

7.11 General Business Insurance. To maintain insurance as is usual for the business each
Borrower is in.

7.12 Compliance with Laws. To comply with the laws (including any fictitious or trade name
statute), regulations, and orders of any government body with authority over any Borrower’s
business, except to the extent that the failure to do so could not reasonably be expected to have a
material adverse effect on the Borrowers’ business condition (financial or otherwise) or ability to
repay this credit. The Bank shall have no obligation to make any advance to any Borrower except in
compliance with all applicable laws and regulations and the Borrowers shall fully cooperate with
the Bank in complying with all such applicable laws and regulations.

7.13 ERISA Plans. Promptly during each year, to pay and cause any subsidiaries to pay
contributions adequate to meet at least the minimum funding standards under ERISA with respect to
each and every Plan; file each annual report required to be filed pursuant to ERISA in connection
with each Plan for each year; and notify the Bank within ten (10) days of the occurrence of any
Reportable Event that might constitute grounds for termination of any capital Plan by the Pension
Benefit Guaranty Corporation or for the appointment by the appropriate United States District Court
of a trustee to administer any Plan. “ERISA” means the Employee Retirement Income Security Act of
1974, as amended from time to time. Capitalized terms in this paragraph shall have the meanings
defined within ERISA.

7.14 ERISA Plans-Notices. With respect to a Plan subject to Title IV of ERISA, to give
prompt written notice to the Bank of:

	(a)	 	The occurrence of any reportable event under Section 4043(c) of ERISA for which the PBGC
requires 30-day notice.
	 
	(b)	 	Any action by any Borrower or any ERISA Affiliate to terminate or withdraw from a Plan or the
filing of any notice of intent to terminate under Section 4041 of ERISA.
	 
	(c)	 	The commencement of any proceeding with respect to a Plan under Section 4042 of ERISA.

7.15 Books and Records. To maintain adequate books and records.

7.16 Audits. To allow the Bank and its agents to inspect each Borrower’s properties and
examine, audit, and make copies of books and records at any reasonable time. If any of the
Borrowers’ properties, books or records are in the possession of a third party, the Borrowers
authorize that third party to permit the Bank or its agents to have access to perform inspections
or audits and to respond to the Bank’s requests for information concerning such properties, books
and records.

7.17 Cooperation. To take any action reasonably requested by the Bank to carry out the
intent of this Agreement.

7.18 Mandatory Prepayment; Early Termination. To immediately repay the entire principal
balance of Facility No. 1 of this Agreement, together with interest, any fees (including any
prepayment fees) and any other amounts due hereunder, and not obtain any further credit hereunder,
upon the occurrence of the following event: Facility No. 1 of the Loan Agreement dated as of the
date hereof between CWSC and the Bank, as now in effect or as hereafter renewed, amended, restated
or superseded (the “Other Credit Facility”), terminates for any reason, including, without
limitation, termination of the Other Credit Facility at the request of the CWSC, termination
resulting from failure by the Bank to renew the Other Credit Facility, or termination as otherwise
provided under the Other Credit Facility.

8. DEFAULT AND REMEDIES

If any of the following events of default occurs, the Bank may do one or more of the following:
declare the Borrowers in default, stop making any additional credit available to the Borrowers, and
require the Borrowers to repay their entire debt immediately and without prior notice. If an event
which, with notice or the passage of time, will constitute an event of default has occurred and is
continuing, the Bank has no obligation to make advances or extend additional credit under this
Agreement. In addition, if any event of default occurs, the Bank shall have all rights, powers and
remedies available under any instruments and agreements required by or executed in connection with
this Agreement, as well as all rights and remedies available at law or in equity. If an event of
default occurs under the paragraph entitled “Bankruptcy,” below, with respect to any Borrower, then
the entire debt outstanding under this Agreement will automatically be due immediately.

8.1 Failure to Pay. The Borrowers fail to make a payment of principal under this Agreement
when due, or fail to make a payment of interest, any fee or other sum under this Agreement within
five (5) days after the date when due.

 

 

8.2 Other Bank Agreements. Any default occurs under any other agreement any Borrower (or
any Obligor) or any of the Borrowers’ related entities or affiliates has with the Bank or any
affiliate of the Bank. For purposes of this Agreement, “Obligor” shall mean any guarantor or any
party pledging collateral to the Bank.

8.3 Cross-default. Any default occurs under any agreement in connection with any credit
the Borrowers (or any Obligor) or any of the Borrowers’ related entities or affiliates has obtained
from anyone else or which any Borrower (or any Obligor) or any of the Borrowers’ related entities
or affiliates has guaranteed guaranteed in the amount of Five Million Dollars ($5,000,000) or more
in the aggregate, or any default occurs under that certain Loan Agreement dated as of the date
hereof between the Bank and CWSC, as now in effect and as hereafter amended, restated, renewed, or
superseded.

8.4 False Information. Any Borrower or any Obligor has given the Bank false or misleading
information or representations.

8.5 Bankruptcy. Any Borrower, any Obligor, or any general partner of any Borrower or of
any Obligor files a bankruptcy petition, a bankruptcy petition is filed against any of the
foregoing parties, or any Borrower, any Obligor, or any general partner of any Borrower or of any
Obligor makes a general assignment for the benefit of creditors.

8.6 Receivers. A receiver or similar official is appointed for a substantial portion of
any Borrower’s or any Obligor’s business, or the business is terminated, or, if any Obligor is
anything other than a natural person, such Obligor is liquidated or dissolved.

8.7 Lawsuits. Any lawsuit or lawsuits are filed on behalf of one or more trade creditors
against any Borrower or any Obligor in an aggregate amount of Five Million and 00/100 Dollars
($5,000,000.00) or more in excess of any insurance coverage.

8.8 Judgments. Any final judgments or arbitration awards are entered against any Borrower
or any Obligor, or any Borrower or any Obligor enters into any settlement agreements with respect
to any litigation or arbitration, in an aggregate amount of Ten Million and 00/100 Dollars
($10,000,000.00) or more in excess of any insurance coverage.

8.9 Material Adverse Change. A material adverse change occurs, or is reasonably likely to
occur, in any Borrower’s (or any Obligor’s) business condition (financial or otherwise),
operations, properties or prospects, or ability to repay the credit.

8.10 Government Action. Any government authority takes action that the Bank believes
materially adversely affects any Borrower’s or any Obligor’s financial condition or ability to
repay.

8.11 Default under Related Documents. Any default occurs under any guaranty, subordination
agreement, security agreement, deed of trust, mortgage, or other document required by or delivered
in connection with this Agreement or any such document is no longer in effect, or any guarantor
purports to revoke or disavow the guaranty.

8.12 ERISA Plans. Any one or more of the following events occurs with respect to a Plan of
any Borrower subject to Title IV of ERISA, provided such event or events could reasonably be
expected, in the judgment of the Bank, to subject any Borrower to any tax, penalty or liability (or
any combination of the foregoing) which, in the aggregate, could have a material adverse effect on
the financial condition of such Borrower:

	(a)	 	A reportable event shall occur under Section 4043(c) of ERISA with respect to a Plan.
	 
	(b)	 	Any Plan termination (or commencement of proceedings to terminate a Plan) or the full or
partial withdrawal from a Plan by any Borrower or any ERISA Affiliate.

8.13 Other Breach Under Agreement. A default occurs under any other term or condition of
this Agreement not specifically referred to in this Article. This includes any failure or
anticipated failure by any Borrower (or any other party named in the Covenants section) to comply
with the financial covenants set forth in this Agreement, whether such failure is evidenced by
financial statements delivered to the Bank or is otherwise known to the Borrowers or the Bank. If
the breach is capable of being remedied, the breach will not be considered an event of default
under this Agreement for a period of thirty (30) days after the date on which the Bank gives
written notice of the breach to the Borrowers.

8.14 Restrictive Covenant. Borrower 1 directly or indirectly agrees to any arrangement
whereby the ability of any of its subsidiaries to pay dividends to Borrower 1 is restricted.

 

 

9. ENFORCING THIS AGREEMENT; MISCELLANEOUS

9.1 GAAP. Except as otherwise stated in this Agreement, all financial information provided
to the Bank and all financial covenants will be made under generally accepted accounting
principles, consistently applied.

9.2 California Law. This Agreement is governed by California law.

9.3 Successors and Assigns. This Agreement is binding on the Borrowers’ and the Bank’s
successors and assignees. The Borrowers agree that they may not assign this Agreement without the
Bank’s prior consent. The Bank may sell participations in or assign this loan, and may exchange
information about the Borrowers (including, without limitation, any information regarding any
hazardous substances) with actual or potential participants or assignees. If a participation is
sold or the loan is assigned, the purchaser will have the right of set-off against the Borrowers.

9.4 Dispute Resolution Provision. This paragraph, including the subparagraphs below, is
referred to as the “Dispute Resolution Provision.” This Dispute Resolution Provision is a material
inducement for the parties entering into this agreement.

	(a)	 	This Dispute Resolution Provision concerns the resolution of any controversies or claims
between the parties, whether arising in contract, tort or by statute, including but not
limited to controversies or claims that arise out of or relate to: (i) this agreement
(including any renewals, extensions or modifications); or (ii) any document related to this
agreement (collectively a “Claim”). For the purposes of this Dispute Resolution Provision
only, the term “parties” shall include any parent corporation, subsidiary or affiliate of the
Bank involved in the servicing, management or administration of any obligation described or
evidenced by this agreement.
	 
	(b)	 	At the request of any party to this agreement, any Claim shall be resolved by binding
arbitration in accordance with the Federal Arbitration Act (Title 9, U.S. Code) (the “Act”).
The Act will apply even though this agreement provides that it is governed by the law of a
specified state.
	 
	(c)	 	Arbitration proceedings will be determined in accordance with the Act, the then-current rules
and procedures for the arbitration of financial services disputes of the American Arbitration
Association or any successor thereof (“AAA”), and the terms of this Dispute Resolution
Provision. In the event of any inconsistency, the terms of this Dispute Resolution Provision
shall control. If AAA is unwilling or unable to (i) serve as the provider of arbitration or
(ii) enforce any provision of this arbitration clause, the Bank may designate another
arbitration organization with similar procedures to serve as the provider of arbitration.
	 
	(d)	 	The arbitration shall be administered by AAA and conducted, unless otherwise required by law,
in any U.S. state where real or tangible personal property collateral for this credit is
located or if there is no such collateral, in the state specified in the governing law section
of this agreement. All Claims shall be determined by one arbitrator; however, if Claims
exceed Five Million Dollars ($5,000,000), upon the request of any party, the Claims shall be
decided by three arbitrators. All arbitration hearings shall commence within ninety (90) days
of the demand for arbitration and close within ninety (90) days of commencement and the award
of the arbitrator(s) shall be issued within thirty (30) days of the close of the hearing.
However, the arbitrator(s), upon a showing of good cause, may extend the commencement of the
hearing for up to an additional sixty (60) days. The arbitrator(s) shall provide a concise
written statement of reasons for the award. The arbitration award may be submitted to any
court having jurisdiction to be confirmed and have judgment entered and enforced.
	 
	(e)	 	The arbitrator(s) will give effect to statutes of limitation in determining any Claim and may
dismiss the arbitration on the basis that the Claim is barred. For purposes of the application
of any statutes of limitation, the service on AAA under applicable AAA rules of a notice of Claim is the equivalent of the filing of a lawsuit. Any
dispute concerning this arbitration provision or whether a Claim is arbitrable shall be
determined by the arbitrator(s), except as set forth at subparagraph (j) of this Dispute
Resolution Provision. The arbitrator(s) shall have the power to award legal fees pursuant to
the terms of this agreement.
	 
	(f)	 	The procedure described above will not apply if the Claim, at the time of the proposed
submission to arbitration, arises from or relates to an obligation to the Bank secured by real
property. In this case, all of the parties to this agreement must consent to submission of
the Claim to arbitration.
	 
	(g)	 	To the extent any Claims are not arbitrated, to the extent permitted by law the Claims shall
be resolved in court by a judge without a jury, except any Claims which are brought in
California state court shall be determined by judicial reference as described below.

 

 

	(h)	 	Any Claim which is not arbitrated and which is brought in California state court will be
resolved by a general reference to a referee (or a panel of referees) as provided in
California Code of Civil Procedure Section 638. The referee (or presiding referee of the
panel) shall be a retired Judge or Justice. The referee (or panel of referees) shall be
selected by mutual written agreement of the parties. If the parties do not agree, the referee
shall be selected by the Presiding Judge of the Court (or his or her representative) as
provided in California Code of Civil Procedure Section 638 and the following related sections.
The referee shall determine all issues in accordance with existing California law and the
California rules of evidence and civil procedure. The referee shall be empowered to enter
equitable as well as legal relief, provide all temporary or provisional remedies, enter
equitable orders that will be binding on the parties and rule on any motion which would be
authorized in a trial, including without limitation motions for summary judgment or summary
adjudication . The award that results from the decision of the referee(s) will be entered as a
judgment in the court that appointed the referee, in accordance with the provisions of
California Code of Civil Procedure Sections 644(a) and 645. The parties reserve the right to
seek appellate review of any judgment or order, including but not limited to, orders
pertaining to class certification, to the same extent permitted in a court of law.
	 
	(i)	 	This Dispute Resolution Provision does not limit the right of any party to: (i) exercise
self-help remedies, such as but not limited to, setoff; (ii) initiate judicial or non-judicial
foreclosure against any real or personal property collateral; (iii) exercise any judicial or
power of sale rights, or (iv) act in a court of law to obtain an interim remedy, such as but
not limited to, injunctive relief, writ of possession or appointment of a receiver, or
additional or supplementary remedies. The filing of a court action is not intended to
constitute a waiver of the right of any party, including the suing party, thereafter to
require submittal of the Claim to arbitration or judicial reference.
	 
	(j)	 	Any arbitration, judicial reference or trial by a judge of any Claim will take place on an
individual basis without resort to any form of class or representative action (the “Class
Action Waiver”). Regardless of anything else in this Dispute Resolution Provision, the
validity and effect of the Class Action Waiver may be determined only by a court or referee
and not by an arbitrator. The parties to this Agreement acknowledge that the Class Action
Waiver is material and essential to the arbitration of any disputes between the parties and is
nonseverable from the agreement to arbitrate Claims. If the Class Action Waiver is limited,
voided or found unenforceable, then the parties’ agreement to arbitrate shall be null and void
with respect to such proceeding, subject to the right to appeal the limitation or invalidation
of the Class Action Waiver. The Parties acknowledge and agree that under no circumstances
will a class action be arbitrated.
	 
	(k)	 	By agreeing to binding arbitration or judicial reference, the parties irrevocably and
voluntarily waive any right they may have to a trial by jury as permitted by law in respect of
any Claim. Furthermore, without intending in any way to limit this Dispute Resolution
Provision, to the extent any Claim is not arbitrated or submitted to judicial reference, the
parties irrevocably and voluntarily waive any right they may have to a trial by jury to the
extent permitted by law in respect of such Claim. This waiver of jury trial shall remain in
effect even if the Class Action Waiver is limited, voided or found unenforceable. WHETHER THE
CLAIM IS DECIDED BY ARBITRATION, BY JUDICIAL REFERENCE, OR BY TRIAL BY A JUDGE, THE PARTIES
AGREE AND UNDERSTAND THAT THE EFFECT OF THIS AGREEMENT IS THAT THEY ARE GIVING UP THE RIGHT TO
TRIAL BY JURY TO THE EXTENT PERMITTED BY LAW.

9.5 Severability; Waivers. If any part of this Agreement is not enforceable, the rest of
the Agreement may be enforced. The Bank retains all rights, even if it makes a loan after default.
If the Bank waives a default, it may enforce a later default. Any consent or waiver under this
Agreement must be in writing.

9.6 Attorneys’ Fees. The Borrowers shall reimburse the Bank for any reasonable costs and
attorneys’ fees incurred by the Bank in connection with the enforcement or preservation of any
rights or remedies under this Agreement and any other documents executed in connection with this Agreement, and in connection with any amendment,
waiver, “workout” or restructuring under this Agreement. In the event of a lawsuit or arbitration
proceeding, the prevailing party is entitled to recover costs and reasonable attorneys’ fees
incurred in connection with the lawsuit or arbitration proceeding, as determined by the court or
arbitrator. In the event that any case is commenced by or against the Borrowers under the
Bankruptcy Code (Title 11, United States Code) or any similar or successor statute, the Bank is
entitled to recover costs and reasonable attorneys’ fees incurred by the Bank related to the
preservation, protection, or enforcement of any rights of the Bank in such a case. As used in this
paragraph, “attorneys’ fees” includes the allocated costs of the Bank’s in-house counsel.

9.7 Joint and Several Liability. This paragraph shall apply if two or more Borrowers sign
this agreement:

	(a)	 	Each Borrower agrees that it is jointly and severally liable to the Bank for the payment of
all obligations arising under this Agreement, and that such liability is independent of the
obligations of the other Borrower(s). Each obligation, promise, covenant, representation and
warranty in this Agreement shall be deemed to have been

 

 

	 	 	made by, and be binding upon, each
Borrower, unless this Agreement expressly provides otherwise. The Bank may bring an action
against any Borrower, whether an action is brought against the other Borrower(s).
	 
	(b)	 	Each Borrower agrees that any release which may be given by the Bank to the other Borrower(s)
or any guarantor will not release such Borrower from its obligations under this Agreement.
	 
	(c)	 	Each Borrower waives any right to assert against the Bank any defense, setoff, counterclaim,
or claims which such Borrower may have against the other Borrower(s) or any other party liable
to the Bank for the obligations of the Borrowers under this Agreement.
	 
	(d)	 	Each Borrower waives any defense by reason of any other Borrower’s or any other person’s
defense, disability, or release from liability. The Bank can exercise its rights against each
Borrower even if any other Borrower or any other person no longer is liable because of a
statute of limitations or for other reasons.
	 
	(e)	 	Each Borrower agrees that it is solely responsible for keeping itself informed as to the
financial condition of the other Borrower(s) and of all circumstances which bear upon the risk
of nonpayment. Each Borrower waives any right it may have to require the Bank to disclose to
such Borrower any information which the Bank may now or hereafter acquire concerning the
financial condition of the other 

Borrower(s).
	 
	(f)	 	Each Borrower waives all rights to notices of default or nonperformance by any other Borrower
under this Agreement. Each Borrower further waives all rights to notices of the existence or
the creation of new indebtedness by any other Borrower and all rights to any other notices to
any party liable on any of the credit extended under this Agreement.
	 
	(g)	 	The Borrowers represent and warrant to the Bank that each will derive benefit, directly and
indirectly, from the collective administration and availability of credit under this
Agreement. The Borrowers agree that the Bank will not be required to inquire as to the
disposition by any Borrower of funds disbursed in accordance with the terms of this Agreement.
	 
	(h)	 	Until all obligations of the Borrowers to the Bank under this Agreement have been paid in
full and any commitments of the Bank or facilities provided by the Bank under this Agreement
have been terminated, each Borrower (a) waives any right of subrogation, reimbursement,
indemnification and contribution (contractual, statutory or otherwise), including without
limitation, any claim or right of subrogation under the Bankruptcy Code (Title 11, United
States Code) or any successor statute, which such Borrower may now or hereafter have against
any other Borrower with respect to the indebtedness incurred under this Agreement; (b) waives
any right to enforce any remedy which the Bank now has or may hereafter have against any other
Borrower, and waives any benefit of, and any right to participate in, any security now or
hereafter held by the Bank.
	 
	(i)	 	Each Borrower waives any right to require the Bank to proceed against any other Borrower or
any other person; proceed against or exhaust any security; or pursue any other remedy.
Further, each Borrower consents to the taking of, or failure to take, any action which might
in any manner or to any extent vary the risks of the Borrowers under this Agreement or which,
but for this provision, might operate as a discharge of the Borrowers.

9.8 One Agreement. This Agreement and any related security or other agreements required by
this Agreement, collectively:

	(a)	 	represent the sum of the understandings and agreements between the Bank and the Borrowers
concerning this credit;
	 
	(b)	 	replace any prior oral or written agreements between the Bank and the Borrowers concerning
this credit; and
	 
	(c)	 	are intended by the Bank and the Borrowers as the final, complete and exclusive statement of
the terms agreed to by them.

In the event of any conflict between this Agreement and any other agreements required by this
Agreement, this Agreement will prevail. Any reference in any related document to a “promissory
note” or a “note” executed by the Borrowers and dated as of the date of this Agreement shall be
deemed to refer to this Agreement, as now in effect or as hereafter amended, renewed, or restated.

9.9 Indemnification. The Borrowers will indemnify and hold the Bank harmless from any
loss, liability, damages, judgments, and costs of any kind relating to or arising directly or
indirectly out of (a) this Agreement or any document

 

 

required hereunder, (b) any credit extended or
committed by the Bank to the Borrowers hereunder, and (c) any litigation or proceeding related to
or arising out of this Agreement, any such document or any such credit; provided, however, that the
Borrowers shall have no such obligation to indemnify or hold the Bank harmless to the extent such
loss, liability, damages, judgments or costs result from the gross negligence or willful misconduct
of the Bank, its officers, agents or employees. This indemnity includes but is not limited to
attorneys’ fees (including the allocated cost of in-house counsel). This indemnity extends to the
Bank, its parent, subsidiaries and all of their directors, officers, employees, agents, successors,
attorneys, and assigns. This indemnity will survive repayment of the Borrowers’ obligations to the
Bank. All sums due to the Bank hereunder shall be obligations of the Borrowers, due and payable
immediately without demand.

9.10 Notices. Unless otherwise provided in this Agreement or in another agreement between
the Bank and the Borrowers, all notices required under this Agreement shall be personally delivered
or sent by first class mail, postage prepaid, or by overnight courier, to the addresses on the
signature page of this Agreement, or sent by facsimile to the fax numbers listed on the signature
page, or to such other addresses as the Bank and the Borrowers may specify from time to time in
writing. Notices and other communications shall be effective (i) if mailed, upon the earlier of
receipt or five (5) days after deposit in the U.S. mail, first class, postage prepaid, (ii) if
telecopied, when transmitted, or (iii) if hand-delivered, by courier or otherwise (including
telegram, lettergram or mailgram), when delivered.

9.11 Headings. Article and paragraph headings are for reference only and shall not affect
the interpretation or meaning of any provisions of this Agreement.

9.12 Counterparts. This Agreement may be executed in as many counterparts as necessary or
convenient, and by the different parties on separate counterparts each of which, when so executed,
shall be deemed an original but all such counterparts shall constitute but one and the same
agreement.

9.13 Prior Agreement Superseded. This Agreement supersedes the Loan Agreement entered into
as of December 23, 2004, between the Bank and the Borrowers, and any credit outstanding thereunder
shall be deemed to be outstanding under this Agreement.

9.14 Treatment of Certain Information; Confidentiality. The Bank agrees to maintain the
confidentiality of the

Information (as defined below), except that Information may be disclosed (a) to its affiliates and
to its and its affiliates’ respective partners, directors, officers, employees, agents, advisors
and representatives (it being understood that the persons to whom such disclosure is made will be
informed of the confidential nature of such Information and instructed to keep such Information
confidential), (b) to the extent requested by any regulatory authority purporting to have
jurisdiction over it (including any self-regulatory authority), (c) to the extent required by
applicable laws or regulations or by any subpoena or similar legal process, (d) to any other party
hereto, (e) in connection with the exercise of any remedies under this Agreement or any other loan
document required under or executed in connection with this Agreement or any action or proceeding
relating to this Agreement or any other loan document required under or executed in connection with
this Agreement or the enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Paragraph 9.14, to (i) any assignee
of or participant in, or any prospective assignee of or participant in, any of its rights or
obligations under this Agreement or (ii) any actual or prospective counterparty (or its advisors)
to any swap or derivative transaction relating the Borrowers and their obligations, (g)
with the consent of the Borrowers or (h) to the extent such Information (x) becomes publicly
available other than as a result of a breach of this paragraph or (y) becomes available to the Bank
or any of its affiliates on a nonconfidential basis from a source other than the Borrowers.

For purposes of this paragraph, “Information” means all information received from any Borrower or
any of the Borrowers’ subsidiaries relating to any Borrower or any of the Borrowers’ subsidiaries
or any of their respective businesses, other than any such information that is available to the
Bank on a nonconfidential basis prior to disclosure by any Borrower or any subsidiary of any
Borrower. Any person required to maintain the confidentiality of Information as provided in this
paragraph shall be considered to have complied with its obligation to do so if such person has
exercised the same degree of care to maintain the confidentiality of such Information as such
person would accord to its own confidential information.

The Bank acknowledges that (a) the Information may include material non-public information
concerning any Borrower or a subsidiary of any Borrower as the case may be, (b) it has developed
compliance procedures regarding the use of material non-public information and (c) it will handle
such material non-public information in accordance with applicable law, including United States
federal and state securities laws.

 

 

	 	 	 	 	 	 	 	 	 
	Borrower:

	 	 	 	Bank:	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	California Water Service Group	 	Bank of America, N.A.
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/
	 	By:
	 	/s/	 	 
	 

	 	 
	 	 	 	 	 	 
	 

	 	Martin Kropelnicki, Vice President,
Chief Financial Officer and Treasurer
	 	 	 	John C. Plecque, Senior Vice President	 	 
	 
	 	 	 	 	 	 	 	 
	Borrower:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	CWS Utility Services	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Martin Kropelnicki, Vice President,
Chief Financial Officer and Treasurer	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Borrower:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	New Mexico Water Service Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Martin Kropelnicki, Vice President,
Chief Financial Officer and Treasurer	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Borrower:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Washington Water Service Company	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Martin Kropelnicki, Vice President,
Chief Financial Officer and Treasurer	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Borrower:
	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	Hawaii Water Service Company, Inc.	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	By:

	 	/s/	 	 	 	 	 	 
	 

	 	 	 	 	 	 	 	 
	 

	 	Martin Kropelnicki, Vice President,
Chief Financial Officer and Treasurer	 	 	 	 	 	 

	 	 	 
	Address where notices to the Borrowers are to be sent:

	 	Address where notices to the Bank are to be sent:
	 
	 	 
	1720 North First Street

	 	Pasadena — Attn: Notice Desk
	San Jose, CA 95112

	 	CA9-702-05-71
	101 S. Marengo Avenue, 5th Floor
	 	 
	Pasadena, CA 91101-2428
	 	 

Affiliate Sharing Notice. Notice to Individual Borrowers, Guarantors and Pledgors
(“Obligors”): From time to time Bank of America, N.A. (the “Bank”) may share information about the
Obligor’s experience with Bank of America Corporation (or any successor company) and its
subsidiaries and affiliated companies (the “Affiliates”). The Bank may also share with the
Affiliates credit-related information contained in any applications, from credit reports and
information it may obtain about the Obligor from outside sources. If the Obligor is an individual,
the Obligor may instruct the Bank not to share this information with the Affiliates. The Obligor
can make this election by (1) calling the Bank at 1.888.341.5000, (2) visiting the Bank online at
www.bankofamerica.com, selecting “Privacy & Security,” and then selecting “Set Your Privacy
Preferences,” or (3) contacting the Obligor’s client manager or local banking center. To help the
Bank complete the Obligor’s request, the Obligor should include the Obligor’s name, address, phone
number, account number(s) and social security number. If the Obligor makes this election, certain
products or services may not be made available to the Obligor. This request will apply to
information from applications, consumer reports and other outside sources only, and may take six to
eight weeks to be fully effective. Through the normal course of doing business, including
servicing the Obligor’s accounts and better serving the Obligor’s financial needs, the Bank will
continue to share transaction and account experience information, as well as other general
information among the Affiliates. The Bank may change this policy from time to time. Visit our
website, www.bankofamerica.com, for the latest policy.

USA Patriot Act Notice. Federal law requires all financial institutions to obtain, verify
and record information that identifies each person who opens an account or obtains a loan. The
Bank will ask for each Borrower’s legal name, address, tax ID number or social security number and
other identifying information. The Bank may also ask for additional information or documentation
or take other actions reasonably necessary to verify the identity of the Borrowers, guarantors or
other related persons.

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